Randall C. Stuewe, Chairman and CEO Brad Phillips, EVP Chief Financial Officer Melissa A. Gaither, VP IR and Global Communications
2 T his presentation contains “forward - looking” statements regarding the business operations and prospects of Darling Ingredients In c., including its Diamond Green Diesel joint venture, and industry factors affecting it. These statements are identified by words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,” “could,” “may,” “will,” “should,” “planned,” “potential,” “continue,” “momentum,” “assumption,” and other words referring to events that may occur in the future. These statements ref lec t 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 th e Company’s products; reductions in raw material volumes available to the Company due to weak margins in the meat production industry as a result of higher feed costs, reduced consumer demand or other factors, reduced volume from food service establishments, or otherwise; reduced demand for animal feed; reduced finished product prices, including a decline in fat and used cooking oil finished product prices; changes to worldwide government policies relating to renewable fuels and greenhouse gas emissions that adversely affect programs like the Renewable Fuel Standards Program (RFS2), low carbon fuel standards (LCFS) and tax credits for biofuels both in the Unites States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations to food or food additives; the occurrence of 2009 H1N1 flu (initially known as “Swine Flu”), highly pathogenic strains of avian influenza (co lle ctively known as “Bird Flu”), bovine spongiform encephalopathy (or "BSE"), porcine epidemic diarrhea ("PED") or other diseases associated with animal origin in the United States or elsewhere; unanticipated costs and/or reductions in raw material volumes related to the Company’s compliance with the existing or unforeseen new U.S. or foreign regulations (including, without limit ation, China) affecting the industries in which the Company operates or its value added products (including new or modified animal feed, Bird Flu, PED or BSE or similar or unanticipated regulations); risks associated with the renewable diesel plant in Norco, Louisiana owned and operated by a joint venture between Darling Ingredients and Valero Energy Corporation, including possible unanticipated operating disruptions and issues related to the announced expansion project; risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers and other trade protection measures imposed by foreign countries; difficulties or a significant disruption in our information systems or failure to implement new systems and software successfully, including our ongoing enterprise resource planning project; risks relating to possible third party claims of intellectual property infringement; increased contr ibutions to the Company’s pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawal event; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraine or elsewhere; uncertainty regarding the likely exit of the U.K. from the European Union; and/or unfavorable export or import markets. These factors, coupled with volatile prices for natural gas and diesel fuel, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could negatively impact the Company's results of operations. Among other things, future profitability may be affected by the Company’s ability to gro w 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 d iscontinued 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 Co mmission. 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.
3 Consolidated Earnings Q1 2018 Overview Total Q1 Q2 Q3 Q4 Total Q1 US$ (millions) except per share price 2016 2017 2017 2017 2017 2017 2018 Harsh winter weather in N. America impacted • Revenue $ 3,391.9 $ 878.5 $ 894.9 $ 936.3 $ 952.6 $ 3,662.3 $ 875.4 performance Gross Margin 756.6 190.5 195.7 193.8 206.8 786.8 197.3 Gross Margin % 22.3% 21.7% 21.9% 20.7% 21.7% 21.5% 22.5% Deflationary fat prices affected Feed segment. • SG&A 311.6 86.9 84.5 82.1 90.0 343.5 86.9 Formulas playing catch up while DGD benefits. SG&A Margin % 9.2% 9.9% 9.4% 8.8% 9.4% 9.4% 9.9% Sales volumes grew globally • Operating Income 154.7 32.5 38.2 34.4 36.1 141.2 31.8 Adj. EBITDA (2) 445.0 103.6 111.2 111.6 116.9 443.3 110.4 Earnings reflect impact of retroactive 2017 blenders • Adj. EBITDA Margin % 13.1% 11.8% 12.4% 11.9% 12.3% 12.1% 12.6% tax credit (BTC) in both the Fuel Segment and equity in unconsolidated subsidiaries Interest Expense (94.2) (21.7) (22.4) (22.5) (22.3) (88.9) (23.1) Foreign Currency gain/(loss) (1.9) (0.3) (2.1) (2.1) (2.4) (6.9) (1.5) DGD delivers solid quarter and pays off $53.7M of long • Other Expense (3) (6.5) (2.0) (4.0) (2.5) (1.3) (9.7) (2.6) term debt Equity in net income of unconsolidated 70.4 0.7 8.3 7.7 11.8 28.5 97.2 subsidiaries Euro Bonds refinanced in April reducing interest rate to • Income Tax (Expense)/Benefit (15.3) (1.8) (7.7) (6.3) 85.0 69.2 (3.7) 3.625% from 4.750% and extending maturity from Net income attributable to noncontrolling 2022 to 2026 (4.9) (1.6) (1.2) (0.9) (1.2) (4.9) (0.8) interests Net income attributable to Darling $ 102.3 $ 5.8 $ 9.1 $ 7.8 $ 105.7 $ 128.5 $ 97.3 Q1 2018 includes revenue recognition reclass for • billed freight moved to cost of sales per new revenue Earnings per share (fully diluted) $ 0.62 $ 0.04 $ 0.05 $ 0.05 $ 0.63 $ 0.77 $ 0.58 standard (1) Includes $12.6M of 2017 BTC and revenue recognition for Q1 2018 (2) Does not inlcude Unconsolidated Subsidiaries EBITDA. SG&A reflects performance compensation and (3) Rounding captured in Other Expense. • retirement provisions
First Quarter 2018 Financial Summary 4 Q1 2018 Overview Gross Profit and Margin • Net sales - $875.4 million – includes $12.6 million of 2017 BTC in the $ in millions Fuel Segment $220 $210 21.7% 22.5% $200 21.9% 20.7% • Net income - $97.3 million 21.7% $190 $197.3 $195.7 $206.8 $180 $193.8 $190.5 • EPS at $0.58 per diluted share $170 $160 $150 • Adjusted EBITDA - $110.4 million $140 1Q17 2Q17 3Q17 4Q17 1Q18 • DGD joint venture Adjusted EBITDA - $100.1 million (Darling’s share) (includes blenders tax credit from full year 2017) Gross Profit % Gross Margin Strong Free Cash Flow Generation Quarterly Adjusted EBITDA $ in millions $ in millions $140 $130 $116.9 $120 $111.2 $111.6 $110.4 $110 $103.6 $100 $116.9 $111.6 $110.4 $111.2 $103.6 $80 $90 $60 $77.8 $65.5 $62.3 $68.6 $70 $40 $53.8 $56.6 $45.7 $41.3 $43.0 $39.1 $20 $50 $0 1Q17 2Q17 3Q17 4Q17 1Q18 1Q 2017 2Q 2017 3Q 2017 4Q 2017 1Q 2018 Adjusted EBITDA is a Non-U.S. GAAP Measure (See slide 17) Adjusted EBITDA Capex Free Cash Flow (Adjusted EBITDA after Capex)
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