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