America’s leading provider of rendering, recycling and recovery solutions to the nation’s food industry …converting waste streams into sustainable feed and fuel ingredients.” Exhibit 99.1 |
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. This presentation also contains information about Darling’s adjusted EBITDA, adjusted net income and adjusted earnings per share, which are not measures derived in accordance with GAAP and which exclude components that are important to understanding Darling’s financial performance. Investors should recognize that these non-GAAP measures might not be comparable to similarly titled measures of other companies. These measures should be considered in addition to, and not as a substitute for or superior to, any measure of performance, cash flows or liquidity prepared in accordance with accounting principles generally accepted in the United States. 2 |
Founded in 1882 and headquartered in Dallas, TX Approximately 3,300 employees Listed on the NYSE (DAR) LARGEST renderer with over 130 locations nationwide in 42 states LARGEST bakery waste recycler in the United States LARGEST waste cooking oil recovery business in the country LARGEST grease trap maintenance business in the U.S. One of LARGEST private fleets of tractors, trucks and trailers in U.S. – over 5,000 units Seeking DOE approval to begin construction of LARGEST animal fat to hydrocarbon facility in the world with Valero Energy Corporation as our partner. Converting Waste Inputs into “Value-Added” Ingredients to Feed and Fuel 3 WE are America’s Leading Provider of Rendering, Recycling and Recovery Solutions to the Nation’s Food Industry |
Our Platform Rendering Cooking of non-edible meat products (beef, pork, poultry) into usable ingredients Collection and processing of spent cooking oil to produce ingredients for animal feed or bio-fuel Cooking Oil Removal Grease trap cleaning and wastewater disposal Industrial line-jetting Sell indoor & outdoor grease collection equipment Environmental Services/Equipment Sales Collection of dough, ingredients and sub-standard finished products to produce high-calorie ingredients for animal feed Bakery Feed Key Suppliers End Products o Slaughter houses o Grocery stores o Food service preparation o Animal mortalities o Animal fats o Meat and bone meal o Poultry meals Key Suppliers End Products o Restaurant chains o Grocery stores o Food processing facilities o Yellow grease Key Suppliers End Products o Commercial bakeries o Snack food companies o High-calorie animal feed ingredients Key Customers o Restaurants o Grocery stores o Commercial and industrial (malls, hospitals) 4 |
Rendering…. Our Core Business Source: NRA/Harvard Risk Assessment, Supplier Relations U.S. Raw material volumes expected to increase o Meat production to feed the world o Strong exports to China and India o Integrated meat processers selectively moving to outsource rendering activities o Consumer expectations of leaner meat products Finished product prices increasing o Global bio-fuel mandates o A growing global population o Chinese consumption of soybeans and corn Animal and food by-product recycling industry is “mission critical” in the food supply chain Most efficient and environmentally sound disposal alternative...reduces greenhouse gas (GHG) ~70 billion pounds of inedible by-products generated annually Rendering Industry Rendering Industry Growth Drivers 5 Rendering – turing this... ….into this |
What Does Rendering Do? Average Jacobsen Index Prices (at the specified delivery point) Kills pathogenic organisms o Pathogens that may threaten human and animal health thrive on perishable organic materials Protects the environment Recycles nutrients: o For use in animal feed and in fertilizer o Prevents loading of soil with nitrogen and phosphorus Recycles carbon: o Rendering captures carbon and nitrogen to avoid greenhouse gas emissions o Rendering captures many times more carbon than it emits from its processes Recycles energy: o Captures the energy in the raw materials and packages it into stable products that can be stored, transported and used easily o All rendered products contain significant amounts of energy o Fats, greases and oils are nature’s way of concentrating and storing energy o Whether energy is measured in calories or as BTU, it is still energy Provides control, verification and traceability to regulatory agencies and the public that condemned or expired meat products are not re-used as human food The industry does all of this within hours of receiving raw materials, versus the weeks or months it takes some popular alternative methods 6 |
Average Jacobsen Index Prices (at the specified delivery point) What’s Available to the Rendering Industry to Recycle? Wastes generated by the meat and food processing industries Source Amount (million pounds) On-farm and pre-slaughter 3,702.4 Inedible byproducts removed at slaughter 39,047.6 Downstream Fat, bone and trim from processing 23,850.7 Expired meat from retail stores 3,960.4 Total 70,561.1 7 Source: USDA 2009 data |
Source and Potential Volumes of Animal Byproducts Available for Rendering Specie Weights in million pounds Farm & pre-slaughter losses 1 Slaughter losses 2 Meat processing losses 3,4 Grocery store losses 4 Total Beef 1,932.2 17,115.0 7,083.8 1,350.8 27,481.8 Pork 981.6 7,878.8 4,891.5 1,013.1 14,765.0 Lamb 64.1 214.2 119.2 30.7 428.2 Chickens 598.5 12,398.0 10,649.5 1,289.4 24,935.4 Turkey 126.0 1,441.6 1,106.8 276.3 2,950.7 Totals 3,702.4 39,047.6 23,850.7 3,960.4 70,561.1 Source: USDA 2009, data 1 USDA on-farm mortality and pre-slaughter data. 2 Calculated from USDA data for total live weight at slaughter minus carcass weights. 3 Calculated from USDA data for meat available at retail subtracted from carcass weights, adjusted for import and export data. 4 USDA Supermarket losses studies. 8 We estimate 40-50% of tonnage is available to non-integrated rendering companies |
Rendering: Producing Sustainable Green Ingredients for Feed and Fuel Rendering Animal Fats Pet Food Poultry Feed Hog Feed Animal Feed Pet Food Renewable Fuels Soap Fertilizer Lubricants Textiles Plastics Shampoo Emulsifiers Cleaners Creams Esters Paints Plastics Lubricants Inks Glues Solvents Antifreeze Explosives Rubber Plastics Tires Lubricants Finished Products Component By-Products Component By-Products Applications Linoleic Acid Oleic Acid Glycerine Stearic Acid Leather 9 Shoes Garment Auto Industry Animal Proteins Hides |
Restaurant Services: Producing Sustainable Green Ingredients for Feed and Fuel Animal Feed Rubber Plastics Tires Lubricants Lubricants Textiles Plastics Cleaners Chemical uses Industrial uses Boiler fuel Biodiesel Green diesel Energy Finished Products Renewable Fuels Recovery of Used Cooking Oil 10 |
Bakery Waste Recycling Global Bakery Industry Revenue ($ millions) Bakery Industry 5-10% of “scrape” rate and growing Additional food safety regulations and traceability should help “scrape” rates grow Top tier food processors committed to stringent sustainability initiatives require reliable company to pick up and ensure product does not go to landfill or get into food chain DAR real estate allows for new growth opportunities Finished product prices increasing o 100% tied to corn o Priced as ingredient to poultry feed o Ethanol and Chinese demand will drive continued corn price firmness $351 billion U.S. bakery industry provides billions of pounds of inedible bakery waste each year Service wholesale baking, snacks, cookies and crackers Distribution centers are growing in importance Commercial Baking Growth Drivers Source: IBIS World 11 |
Bakery: Producing Sustainable Green Ingredients for Feed Packaging is burned for fuel Raw Dough, Baked Goods, Snack Items Dried and Standardized Cookie Meal 12 |
Environmental Services #1 Grease Trap Maintenance and Cleaning Service Operates in 35 major markets Significant synergies with our rendering and grease plants Approximately 33,000 customers with ample customer bundling opportunities Municipalities are driving increased regulation and enforcement Positioned as a “Branded” player Used Cooking Oil Storage Tank Systems Premium service offered in conjunction with COR Leading equipment provider for used cooking oil collection Installed inside or outside, this self-contained storage system offers a clean, efficient and safe storage and collection option 13 (low cost wastewater disposal) |
Grease Trap Maintenance Wastewater is collected from Food Service Establishments Solids are filtered Solid waste is Land filled Fuel Animal Feed 14 Brown grease is recovered |
A Platform of Value and Opportunity Green Diesel Joint Venture Positive Industry Fundamentals Growth and Margin Expansion Opportunities Strong Financial Performance & Cash Flow Generation Attractive Business Model with Solid Risk Management #1 Platform Across the Food Recycling Spectrum 15 1 6 5 2 3 4 |
Inputs Key Driver – Animal Production 33 million cattle (49% of live weight not used for human food) 110 million hogs (44% not used for human food) 8-9 billion chickens (37% not used for human food) 245 million turkeys (36% not used for human food) o World population growth o U.S. is most efficient animal producer o Highest quality product in the world U.S. Protein Production (million pounds) U.S. Animal Agriculture Annual Processing Volume Producing approximately 68 Billion pounds of raw material 0 10,000 20,000 30,000 40,000 50,000 1970 1977 1984 1991 1998 2005 2012 2019 Poultry Beef Pork 1970 – 2009 CAGR: 3.8% 1970–2009 CAGR: 0.5% 1970–2009 CAGR: 1.2% Source: Equity Research, USDA 16 1 Positive Industry Fundamentals |
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 OTHER ADVANCED BIOFUEL 0.2 0.3 0.5 0.75 1.0 1.5 2.0 2.5 3.0 3.5 3.5 3.5 4.0 BIOMASS BASED DIESEL 1.15 0.8 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 CELLULOSIC BIOFUEL 0.1 0.25 0.5 1.0 1.75 3.0 4.25 5.5 7.0 8.5 10.5 13.5 16.0 CORN BASED ETHANOL 12.0 12.6 13.2 13.8 14.4 15.0 15.0 15.0 15.0 15.0 15.0 15.0 15.0 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 Inputs Key Driver – Commodity Momentum o Biomass-based Diesel (BMD) cannot be less than 1 billion gallon/year beginning 2012 o Only Renewable Diesel and Biodiesel can fulfill BMD requirement o BMD can fulfill Other Advanced Biofuel requirement While the agriculture complex is near historical highs, it is not supply-constrained but is demand- driven by global BIOFUEL mandates and strong Chinese demand Fuel mandates for ethanol and bio-mass fuels continue to be implemented here and abroad Renewable Fuel Standard 2 is our driver in the United States Tightening “Fossil” crude oil supplies are constructive No room in S&D for supply interruption globally for any crop Advanced Biofuels Source: EPA RFS2 17 1 Positive Industry Fundamentals |
Corn Prices: “Firm for the Future” 1 Positive Industry Fundamentals World Bio Fuel Demand South America becomes Primary World Supplier U.S. Drought 1995/1996 Prod: 7.374 Billion bushels Carryout: 426 Million bushels 2008 Commodity Speculation Run ---------Billions of annual bushels--------- CORN NON-ETHANOL SURPLUS SUPPLY DEMAND NO ETHANOL 99/00 9.4 9.0 0.4 00/01 9.9 9.2 0.7 01/02 9.5 9.1 0.4 02/03 9.0 8.5 0.5 03/04 10.1 9.0 1.1 04/05 11.8 9.3 2.5 05/06 11.1 9.6 1.5 06/07 10.5 9.1 1.4 07/08 12.5 9.0 3.5 08/09 12.0 8.5 3.5 09/10 13.1 8.5 4.6 10/11 12.5 7.7 4.8 Source: DTN Commodity Service CBOT Corn Chart - 1980 thru Present 18 |
Darling’s National Platform – A superior Platform to Assist Customers Nationwide Network of over 130 facilities from coast to coast Breadth to service national accounts Footprint that allows Darling to grow organically and acquisitively Darling International Griffin Industries Griffin locations only Darling and Griffin locations Darling locations only 2 #1 Platform Across the Food Recycling Spectrum 19 |
Diverse Raw Material Suppliers Diverse mix of beef, pork and poultry raw materials and the largest recycler of bakery waste and cooking oil Darling collects raw materials from: o Protein processors o Grocery stores o Butcher shops o Food service establishments o Bakeries Processing plants generally within 150 miles of supplier facilities Spoke and hub transfer station concept supports plant network Darling’s relationship with its top suppliers averages over 20 years The collection, processing and pricing of raw materials is key to Darling’s success 20 2 #1 Platform Across the Food Recycling Spectrum |
Strong Rationale for Griffin Acquisition Balances Raw Material Sources Strategic Rationale Completed missing link in national footprint Diversification of raw materials supply Acquired leading bakery recycling business Collectively formed leading used cooking oil recovery system Provides us with additional feedstock for Valero “Green Diesel” joint venture Synergy opportunities and growth platform Well run, highly profitable and strong management team Evaluating 338(H)10 election Darling 2009 Griffin 2009 Pro Forma 2009 Cooking Oil 12% Beef/Pork 77% Poultry 47% Bakery 31% Poultry 11% Beef/Pork 10% Cooking Oil 12% Poultry 29% Beef/Pork 40% Bakery 21% Cooking Oil 11% Source: Company Management Highly Diversified Business Platform 21 2 #1 Platform Across the Food Recycling Spectrum |
Attractive Business Model “Formula” basis: fixed margin processing relationship with suppliers “Non-formula” basis: suppliers either paid a fixed price, not paid, or charged for the expense of collection Finished product— Value Addition Raw material procurement Raw material volume Product yield Natural gas and diesel prices Processing & collecting expenditures We create value added ingredients from our inputs Products are substitutes for corn, soybean oil and soybean meal Quantity of raw material collected from Rendering, Bakery and Restaurant Services suppliers Feed stock available to convert into finished goods Yield on production (production volume / raw material volume) impacted by: o Quality of raw material o Type of raw material Exposure to natural gas used for cooking and drying of material o Mitigated by ability to burn fats Exposure to fuel prices through use of diesel fuel for trucks and tractor-trailers Pricing formulas generally protect against natural gas and fuel price fluctuations Labor cost Replacement capex and equipment maintenance Fuel and utilities Other operating expenses Key Metrics 3 Attractive Business Model with Solid Risk Management 22 |
Built-In Margin and Risk Management Tools Darling Procurement Darling Formula Pricing Example Industry has evolved to a shared risk procurement model Pricing protocols reduce exposure to commodity price fluctuation and provide minimum margins Raw materials procured under two main pricing arrangements: o Formula based Rendering (~70% of total raw material volume) o Used cooking oil (~45% of total raw material volume) o Bakery waste is 100% formula tied to corn Non-formula business generally has a service fee o Require supplier to pay Darling for waste removal service o Adjusted to ensure collection costs are covered Product Finished price Total yield Animal Fats $30.00cwt 26% Protein Meals $15.00cwt 22% Note: Yield is based on individual supplier’s historical yields and is adjusted as needed Product Finished price Total yield Value Animal Fats $30.00cwt 26% $7.80 Protein Meals $15.00cwt 22% $3.30 Finished product sales value $11.10 Darling conversion cost with Energy adjuster ($6.00) Darling fixed margin ($1.50) Total processing cost ($7.50) (Charge) / Rebate to supplier per cwt $3.60 Source: Company Management Note: When finished product sales value covers Darling’s cost and fixed spread, a rebate to the supplier is generated. Conversely, when the finished product sales value is less than Darling’s cost and fixed spread, the supplier is charged for the difference. Indicative Formula Terms Theoretical Finished Product Sales Value Theoretical Darling (Charges)/Rebate to Supplier 23 3 Attractive Business Model with Solid Risk Management |
Growth and EBITDA Expansion Growth and Margin Expansion Opportunities 4 Growth and EBITDA Expansion Opportunities National footprint will provide customer growth opportunities and potential margin expansion Value-adding of product streams and new waste inputs Meaningful synergy opportunity Bakery business will continue to expand and provide new geographic opportunities for growth Continue historical trend of bolt-on acquisitions Solid history of successful integrations 24 |
Focus on Premium and Value Added Products Strategic Focus on Premium and Value-Added Products Premium Products Pricing Relative to Commodity Meals Griffin’s Focus on Value-Add and Branding of Ingredients Opportunity to move more of Darling’s products into Griffin’s premium/value-added products Differentiated and value-added products drive premium pricing Value-added products sell for a significant premium to commodity products Provides margin expansion for Darling Commodity Feed Grade Poultry Meal Griffin Pet – Grade Poultry Meal Griffin Poultry Meal (Flash Dried) Griffin Low Ash Poultry Meal Source: Company Management 25 Growth and Margin Expansion Opportunities 4 25% 57% +65% +75% +70% 2005 2009 |
Synergy….delivery of value Routing improvements (Florida, Georgia, Indiana, Ohio and Texas in 2011) o Closure of transfer stations & some small processing plants o Completed Florida integration in February, Georgia and Texas underway Scale and arbitrage of finished products to proper markets Realignment of our “Procurement and Services” organizations National footprint will assist in servicing national chain restaurants Back office efficiencies While limited overlap exists geographically, there is still significant opportunity to capture synergies over time 26 Growth and Margin Expansion Opportunities 4 |
A proven track record of growth… Dec 2004 Burrows Industries, Inc. dba Minuteman Pumping So CA July 2007 Ace Grease Service KC metro Oct 2005 Southeastern Maintenance & Construction Inc. FL, GA Dec 2009 Sanimax USA Great Lakes May 2006 National By- Products, LLC Midwest US 2004 2005 2006 2007 2008 2009 2010 Dec 2008 J&R Rendering, Inc. NYC metro Aug 2008 API Recycling, div of American Proteins Inc. GA Feb 2009 Boca Transport, Inc. GA June 2010 Nebraska By- Products NE, KS 27 On December 17, 2010 we acquired Griffin Industries for $840 million. Growth and Margin Expansion Opportunities 4 Since 2003, Darling has acquired and integrated 10 companies investing over $1.1 Billion |
Focus on Growing the Business… Leader in the bakery waste business o Geographic opportunity to build or buy o Traceability and no landfill requirement will drive growth o We sell 100% of output to our current rendering raw material suppliers creating long-term sustainable linkages o Current relationships with large commercial bakeries, food companies and snack food processors should create geographic opportunity for expansion Take advantage of the existing Darling footprint Growing the Bakery Business Growing Rendering & Grease Collection Darling is the leader in both rendering and grease collection o Geographic opportunity to build or buy o Probably 10-20 meaningful geographic candidates Various large-scale acquisition candidates o Succession driven o Timing unknown 28 Growth and Margin Expansion Opportunities 4 |
A Potential Game Changer…… Low quality animal fats to hydrocarbon Green Diesel Joint Venture 5 Proposed 50/50 JV with Valero subject to DOE Loan Located adjacent to Valero’s St. Charles Refinery Creates a new market for Darling’s feed stocks Represents significant margin opportunity Creates a natural hedge for Darling’s animal fat products and improves pricing dynamics Darling to commit $93 million of equity over the next three years and the JV received conditional commitment for a $241 million DOE loan on January 20, 2011 JV 10-year look back of ~$108 million of estimated average annual EBITDA Implementing next-generation renewable diesel technology to open a new market for fats and oils 29 |
What is Diamond Green Diesel? 9,300 Barrel Per Day US$ million Total Project Cost ~ $427 Partners Capital $186 DOE Investment $241 Animal Fat 1.1 billion lbs Renewable Diesel LPG’s & Naphtha 136.7 million gallons 21.7 million gallons Annual Annual Source: Company Management Note: Total Project Cost include cost to construct of approximately $360 million, working capital, and other deal related costs (a portion of which may be returned at a later date). Joint Venture between Darling International & Valero Energy Corporation Ownership: 50/50 Management: Valero employees reporting to/directed by Joint Venture Board Renewable Diesel Plant Located next to Valero St. Charles Refinery; Norco, Louisiana 30 Green Diesel Joint Venture 5 |
Diamond Green Diesel – What are the Drivers of Profitability? 31 Renewable Fuel Standard Fuel Quality Ability To Process Low Cost Feedstock RFS2 requires a MINIMUM of 1 billion gallons of Biomass-based Diesel be blended annually in U.S. diesel pool Only two products can fulfill Biomass-based Diesel mandate – they are Renewable Diesel (or its co-products) and Biodiesel Requirement could be more than 1.0 billion gallons annually as Renewable Diesel also can fulfill the Other Advanced Biofuel Mandate Renewable Diesel is a true Hydrocarbon (just like diesel fuel) while Biodiesel is a methyl ester and is not a true hydrocarbon (containing an oxygen molecule) As a result Renewable Diesel can be distributed using the current petroleum distribution system, while Biodiesel requires truck or rail transport (as opposed to pipeline) and additional infrastructure investment Renewable Diesel has no cold flow issues like Biodiesel Diamond Green Diesel process allows for use of low quality fats and oils which traditionally price at substantial discount to feedstock which most Biodiesel processors must use Result is feedstock cost advantage of approximately $1.00/gallon Green Diesel Joint Venture 5 |
Annual Average Price / Gallon Why Darling is Investing $0.95 $1.06 $1.39 $1.44 $1.36 $1.23 $1.99 $2.46 $1.93 $2.32 $1.89 $1.81 $1.96 $2.25 $2.81 $3.12 $3.33 $4.04 $2.76 $3.20 $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Diamond Feedstock Cost Average Diesel Price Plus $1.10 Green Premium Source: Company Management Green Premium is a combination of Renewable Identification Numbers, Federal Tax Credit & wholesale price differential between #2 diesel fuel and Renewable Diesel 32 Implied Historical EBITDA (US$ million) $105 $83 $47 $74 $148 $213 $130 $150 $80 $67 Green Diesel Joint Venture 5 |
The ultimate built-in hedge! As corn gets cheaper, traditionally fat is cheaper and our earnings are impacted. Assuming petroleum pricing remains stable to higher… Cheaper Corn = Greater Earnings in the “green diesel” plant. 33 |
Overview of St. Charles Refinery Green Diesel Location 34 Green Diesel Joint Venture 5 |
Historical Financials Strong Financial Performance & Cash Flow Generation 6 Revenue (US$ millions) Capex (US$ millions) 1 EBITDA - Capex (US$ millions) EBITDA (US$ millions) Source: Company Management 1 Griffin capex includes capex and investments, including acquisitions. 35 $1143 $1489 $1123 $1340 $213 $308 $190 $237 $178 $237 $121 $176 $35 $71 $69 $61 |
36 Pro Forma: Balance Sheet Strong Financial Performance & Cash Flow Generation 6 Balance Sheet as of January 2011 (US $ in millions) 1/01/2011 Equity Adjustments Pro Forma Cash and cash equivalents $19.2 $19.2 Restricted cash 0.4 0.4 Accounts receivables, net 103.7 103.7 Inventories 45.6 45.6 Other current assets 16.7 16.7 Total current assets $185.6 $185.6 Property, plant and equipment, net 393.4 393.4 Collection route and contracts, net 391.0 391.0 Goodwill 376.3 376.3 Other assets 36.0 36.0 Total assets $1,382.3 $1,382.3 Current portion of long-term debt $3.0 $3.0 Accounts payable 70.1 70.1 Accrued expenses 81.7 81.7 Total current liabilities $154.8 $154.8 Long-term debt 707.0 (292.7) 414.3 Deferred income taxes 5.4 5.4 Other non-current liabilities 50.8 50.8 Total liabilities $918.0 $625.3 Stockholder's equity 464.3 292.7 757.0 Total liabilities and equity $1,382.3 $0.0 $1,382.3 Darling Combined Pro Forma |
The Original RECYCLING COMPANY…. Sustaining Innovating Renewing Q&A Q&A |