Sienna Resources

Darling Ingredients Delivers Another Record Quarter

09 August 2022

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

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.

      

Segment Financial Tables (in thousands)

(unaudited)

 
 

Feed Ingredients

Food Ingredients

Fuel Ingredients

Corporate

Total

Three Months Ended July 2, 2022

     

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

      
      
 

Feed Ingredients

Food Ingredients

Fuel Ingredients

Corporate

Total

Three Months Ended July 3, 2021

     

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

      
      

Segment Financial Tables (in thousands) continued

(unaudited)

 
 

Feed Ingredients

Food Ingredients

Fuel Ingredients

Corporate

Total

Six Months Ended July 2, 2022

     

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

      
      
 

Feed Ingredients

Food Ingredients

Fuel Ingredients

Corporate

Total

Six Months Ended July 3, 2021

     

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

      

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:

   

Cash and cash equivalents

 

$                           146,730

$                             68,906

Restricted cash

 

110

166

Accounts receivable, net

 

574,727

469,092

Inventories

 

578,402

457,465

Prepaid expenses

 

77,065

53,711

Income taxes refundable

 

27,330

1,075

Other current assets

 

57,462

38,599

Total current assets

 

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:

   

Current portion of long-term debt

 

$                             32,695

$                             24,407

Accounts payable, principally trade

 

414,584

307,118

Income taxes payable

 

28,452

32,310

Current operating lease liabilities

 

45,498

38,168

Accrued Expenses

 

398,598

350,681

Total current liabilities

 

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

Total liabilities

 

4,460,163

2,785,943

Commitments and contingencies

   

Stockholders' equity:

   

     Common stock, $0.01 par value;

 

1,735

1,717

Additional paid-in capital

 

1,646,468

1,627,816

     Treasury stock, at cost

 

(491,717)

(374,721)

Accumulated other comprehensive loss

 

(400,907)

(321,690)

Retained earnings

 

2,737,887

2,347,838

Total Darling's stockholders' equity

 

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

    
 

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

 

$        451,519

 

$    3,016,522

 

$    2,245,385

 

$        771,137

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

 

$            5,414

 

$       390,049

 

$       348,348

 

$          41,701

              

Basic income per share:

 

$             1.25

 

$             1.21

 

$              0.04

 

$             2.41

 

$             2.14

 

$              0.27

Diluted income per share:

 

$             1.23

 

$             1.17

 

$              0.06

 

$             2.37

 

$             2.08

 

$              0.29

              

Number of diluted common shares:

 

164,745

 

167,597

   

164,673

 

167,673

  
              
              

                                                                           

  

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)

  

Distributions 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)

 

Acquisitions, 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

       
       

Diamond Green Diesel Joint Venture
Condensed Consolidated Balance Sheets
June 30, 2022 and December 31, 2021
(in thousands)

 
    

June 30,

 

December  31,

    

2022

 

2021

Assets:

  

 (unaudited)

  
 

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

Revenues:

 

2022

 

2021

 

(Unfavorable)

  

2022

 

2021

 

(Unfavorable)

 

Operating revenues

 

$     1,455,886

 

$        571,859

 

$          884,027

  

$  2,436,578

 

$ 1,003,492

 

$  1,433,086

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

 

31,317

 

11,995

 

(19,322)

  

57,809

 

23,682

 

(34,127)

  

accretion expense

             

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

 

$        (104,216)

  

$     290,968

 

$    456,026

 

$    (165,058)

                

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

   

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.

  

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.

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.

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.}

Contact:

Suann Guthrie

 

VP, Investor Relations, Sustainability & Communications

 

469) 214-8202; This email address is being protected from spambots. You need JavaScript enabled to view it. 

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