UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------------------------
FORM 8-K/A
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 30, 1996
DARLING INTERNATIONAL INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-24620 36-2495346
(State of Incorporation) (Commission (I.R.S. Employer
File Number) Identification
Number)
251 O'Connor Ridge Blvd.
Suite 300
Irving, Texas 75038
(Address of principal executive offices) (Zip Code)
(972) 717-0300
(Registrant's telephone number, including area code)
Exhibit Index located at Page 20
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS
(a) Financial Statements of Businesses Acquired
(i) Report of Independent Public Accountants
(ii) Combined Balance Sheets - December 31, 1995 and August 29, 1996
(unaudited)
(iii) Combined Statements of Operations f or the Year Ended December 31,
1995, the Eight Fiscal Months Ended August 27, 1995 (unaudited) and
the Eight Fiscal Months Ended August 29, 1996(unaudited)
(iv) Combined Statements of Stockholders' Equity for the Year
Ended December 31, 1995 and the Eight Fiscal Months Ended
August 29, 1996 (unaudited)
(v) Combined Statements of Cash Flows for the Year Ended
December 31, 1995, the Eight Fiscal Months Ended August 27,
1995 (unaudited) and the Eight Fiscal Months Ended August
29, 1996 (unaudited)
(vi) Notes to Combined Financial Statements
(b) Pro Forma Financial Information
(i) Introduction
(ii) Pro Forma Condensed Consolidated Balance Sheet - August 29, 1996
(unaudited)
(iii) Pro Forma Condensed Consolidated Statement of Operations for the
Eight Months Ended August 29, 1996 (unaudited)
(iv) Pro Forma Condensed Consolidated Statements of Operations for the
Year Ended December 31, 1995 (unaudited)
(v) Notes to Pro Forma Combined Financial Statements (unaudited)
(c) Exhibits
23 Consent of Deloitte & Touche, LLP
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
International Processing Corporation and
International Transportation Service, Inc.:
We have audited the accompanying combined balance sheet of International
Processing Corporation and International Transportation Services, Inc.
(collectively, the "Companies") as of December 31, 1995 and the related combined
statements of operations, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the combined financial position of the Companies at December 31, 1995
and the results of their operations and their cash flows for the year then ended
in conformity with generally accepted accounting principles.
DELOITTE AND TOUCHE LLP
Atlanta, Georgia
March 22, 1996
(August 29, 1996 as to Note 13)
INTERNATIONAL PROCESSING CORPORATION AND
INTERNATIONAL TRANSPORTATION SERVICE, INC.
COMBINED BALANCE SHEETS
(In thousands)
December 31, August 29,
1995 1996
------------- ----------
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and equivalents $ 450 $ 804
Notes and accounts receivable 3,837 5,435
Inventories 845 1,610
Other current assets 276 157
------ ------
Total current assets 5,408 8,006
PROPERTY, PLANT, AND EQUIPMENT - Net 14,064 16,172
INTANGIBLE ASSETS - Net of accumulated amortization of $229
as of December 31, 1995 and $76 (unaudited) as of August 29, 1996 328 357
OTHER ASSETS 347 173
------ ------
$20,147 $24,708
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $ 6,835 $10,123
Line of credit 506 -
Accrued expenses 1,420 1,873
Current portion of long-term debt 1,278 1,062
------ ------
Total current liabilities 10,039 13,058
DEFERRED TAXES 35 -
LONG-TERM DEBT - Less current portion:
Kane Miller covenant not to compete 300 300
Notes payable to former International Bakerage shareholders 1,200 1,200
Other 1,967 874
------ ------
Total long-term debt 3,467 2,374
STOCKHOLDERS' EQUITY:
Common stock, $1.00 par value; 3,000,000 authorized;
1,750,000 shares issued 1,750 1,750
Common stock, $100 par value; 500 shares authorized;
15 shares issued and outstanding 2 2
Additional paid-in capital 5,163 5,163
Retained earnings 891 3,561
Treasury stock at cost; 2,500,000 shares (1,200) (1,200)
------ ------
Total stockholders' equity 6,606 9,276
------ ------
$20,147 $24,708
====== ======
See notes to combined financial statements.
INTERNATIONAL PROCESSING CORPORATION AND
INTERNATIONAL TRANSPORTATION SERVICE, INC.
COMBINED STATEMENTS OF OPERATIONS
(In thousands)
Eight Fiscal Months Ended
Year Ended ----------------------------------
December 31, August 27, August 29,
1995 1995 1996
----------------------------------
(Unaudited)
NET SALES $55,851 $33,398 $55,522
OPERATING COSTS AND EXPENSES:
Cost of goods sold 48,193 29,916 45,912
General and administrative 4,864 2,271 3,810
------ ------ ------
Total operating costs and expenses 53,057 32,187 49,722
------ ------ ------
OPERATING INCOME
2,794 1,211 5,800
OTHER INCOME (EXPENSE):
Interest expense (372) (316) (215)
Other income 53 165 135
------ ------ ------
Total other income (expense) (319) (151) (80)
------ ------ ------
NET INCOME $ 2,475 $ 1,060 $ 5,720
====== ====== ======
See notes to combined financial statements.
INTERNATIONAL PROCESSING CORPORATION AND
INTERNATIONAL TRANSPORTATION SERVICE, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
BALANCE - December 25, 1994 $1,752 $5,163 $ (784) $(1,200) $4,931
Net income 2,475 2,475
Distributions - - (800) - (800)
----- ----- ----- ------ -----
BALANCE - December 31, 1995 1,752 5,163 891 (1,200) 6,606
Net income (unaudited) 5,720 5,720
Distributions (unaudited) - - (3,050) - (3,050)
----- ----- ----- ------ -----
BALANCE - August 29, 1996 (unaudited) $1,752 $5,163 $3,561 $(1,200) $9,276
===== ===== ===== ====== =====
See notes to combined financial statements.
INTERNATIONAL PROCESSING CORPORATION AND
INTERNATIONAL TRANSPORTATION SERVICE, INC.
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
Eight Fiscal Months Ended
Year Ended ----------------------------------
December 31, August 27, August 29,
1995 1995 1996
----------------------------------
(Unaudited)
OPERATING ACTIVITIES:
Net income $ 2,475 $ 1,061 $ 5,720
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 3,102 2,052 2,230
Gain on disposal of fixed assets (9) 4
Changes in assets and liabilities which provide (use) cash:
Notes and accounts receivable (718) (67) (1,598)
Inventories 217 (148) (765)
Intangibles and other assets 320 218 143
Accounts payable and accrued expenses 759 (45) 3,331
Deferred taxes (2) (35)
------ ------ ------
Total adjustments 3,669 2,010 3,310
------ ------ ------
Net cash provided by operating activities 6,144 3,071 9,030
INVESTING ACTIVITIES:
Proceeds from disposal of fixed assets 15 14
Capital expenditures (3,256) (2,213) (4,235)
------ ------ ------
Net cash used in investing activities (3,241) (2,213) (4,221)
FINANCING ACTIVITIES:
(Decrease) increase in borrowings under line-of-credit (856) 141 (506)
(Decrease) increase in overdrafts (395) (373) 361
Repayments of long-term debt (807) (723) (1,260)
Distributions (800) (3,050)
------ ------ ------
Net cash used in financing activities (2,858) (955) (4,455)
------ ------ ------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS 45 (97) 354
CASH AND EQUIVALENTS - Beginning of period 405 405 450
------ ------ ------
CASH AND EQUIVALENTS - End of period $ 450 $ 308 $ 804
------ ------ ------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest $ 473 $ 345 $ 279
====== ====== ======
See notes to combined financial statements.
INTERNATIONAL PROCESSING CORPORATION, INC. AND
INTERNATIONAL TRANSPORTATION SERVICE, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1995
(Information as of August 29, 1996 and for the fiscal eight-months ended August
29, 1996 and August 27, 1995 is unaudited)
1. BUSINESS DESCRIPTION
International Processing Corporation, Inc. ("IPC") manufactures and sells
Dried Bakery Product, an animal-feed ingredient produced from grain-based
food by-products.
International Transportation Service, Inc. ("ITS") is a common carrier
primarily engaged in providing transportation services for IPC.
Food By-Products Recycling, Inc. ("FBR"), a wholly owned subsidiary of
ITS, acquires raw materials in the Chicago, Illinois metro area. This raw
material is either sold to a third party or to its affiliate, IPC for
processing.
On December 27, 1993, Atlanta Processing B ("APB") and its affiliated
companies and International Bakerage, Inc. ("IB") and its affiliated
company merged with each predecessor shareholder group receiving a 50%
interest in IPC and ITS. The merger has been accounted similar to a joint
venture based on the historical costs of the predecessor companies.
2. SIGNIFICANT ACCOUNTING POLICIES
ACCOUNTING PERIODS - Accounting periods are 52-53 week periods ending on
the last Sunday in December. The fiscal year ended December 31, 1995
contained 53 weeks. Fiscal months are four- or five-week periods ending on
the last Sunday in each month.
COMBINATION - International Processing Corporation and International
Transportation Service, Inc. (collectively, the "Companies"), having
common ownership and significant business interdependence, are included in
these combined financial statements. All intercompany balances and
transactions have been eliminated in combination.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
CASH AND CASH EQUIVALENTS - For purposes of the statement of cash flows,
the Companies consider all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
INVENTORIES - Inventories are stated at the lower of cost or market. Cost
is determined by the first-in, first-out method.
PROPERTY, PLANT, AND EQUIPMENT - Property, plant, and equipment is stated
at cost. Depreciation is generally computed on a straight-line basis over
the estimated useful lives of the assets which range from 3 to 40 years.
INTANGIBLE ASSETS - Intangible assets, which principally consist of
noncompete agreements, are amortized over their contractual lives ranging
from one to six years.
INCOME TAXES - IPC elected to be treated as an S Corporation under the
Internal Revenue Code ("IRC"); therefore, no provision for federal income
taxes has been recorded. State income taxes have been provided only for
states not recognizing the S Corporation status. ITS and FBR have not
elected to be treated as an S Corporations under the IRC. The Companies
provide deferred taxes resulting from timing differences between financial
and taxable income, as applicable.
UNAUDITED INTERIM FINANCIAL STATEMENTS - The financial statements as of
August 29, 1996 and for the fiscal eight months ended August 29, 1996 and
August 27, 1995 were prepared on the same basis as the audited combined
financial statements and, in the opinion of management, include all
adjustments consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial position and results of operations
for these periods. Operating results for the interim periods included
herein are not necessarily indicative of the results that may be expected
for the entire year.
3. CONCENTRATION OF CREDIT RISK
In April 1994, FBR entered into a six-year contractual arrangement on a
post-petition basis with We-Toast, a nonrelated entity, which emerged from
bankruptcy in June 1994. Under the agreement, FBR sells raw materials to
We-Toast which processes the raw materials and sells the finished product
in the marketplace. We-Toast's customers are instructed to remit their
payments directly to the Companies. The Companies apply a portion of the
receipts to balances due the Companies and remit the difference to
We-Toast. At December 31, 1995, the Companies had trade receivables from
the sale of raw materials to We-Toast of $89,000 and notes receivable and
other advances of $735,000 (the noncurrent portion of $244,000 is included
in other assets). The notes provide for interest at 2% over the prime rate
and mature in years 1997 to 1999. All receivables are secured by
We-Toast's property, plant, and equipment which is considered by
management to have value to the Companies in excess of the amounts due.
During 1995, owners of We-Toast disputed certain of the amounts due.
Management believes all amounts are collectible and the ultimate
resolution will not have a material effect on the Companies' financial
position.
4. INVENTORIES
Inventories consist of the following (in thousands):
August 29,
December 31, 1996
1995 (unaudited)
Raw materials $ 467 $1,171
Finished goods 320 378
Other 58 61
---- -----
$ 845 $1,610
==== =====
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following (in thousands):
Land $ 657
Buildings and improvements 2,948
Machinery and equipment 26,662
Leasehold improvements 499
-------
30,766
Less accumulated depreciation 16,702
-------
$ 14,064
======
Property, plant, and equipment includes a capitalized lease as follows at
(in thousands):
Land $ 362
Buildings and improvements 1,334
Machinery and equipment 1,805
------
3,501
Less accumulated depreciation 1,555
------
$ 1,946
======
6. OVERDRAFT
Included in accounts payable are a book overdraft of approximately
$294,000 at December 31, 1995 and $654,000 at August 29, 1996 (unaudited).
7. COMMITMENTS AND CONTINGENCIES
The Companies are defendants or plaintiffs in various legal actions which
have arisen in the normal course of business. In the opinion of
management, the ultimate resolution of these matters will not have a
materially adverse effect on the Companies' financial position, results of
operations, or liquidity.
LEASES - The Companies leases certain production facilities and equipment.
Lease agreements usually provide that the Companies pay applicable taxes,
maintenance, insurance, and other operating expenses.
At December 31, 1995, the future minimum lease payments under the
Companies' capitalized lease obligation (see Note 9) were as follows (in
thousands):
Capitalized Total Minimum Lease
Lease Obligation Interest Obligation
1996 $ 460 $ 50 $ 510
1997 485 17 502
---- ---- ------
$ 945 $ 67 $ 1,012
==== ==== ======
At December 31, 1995, future minimum rental commitments under
noncancelable operating leases were as follows (in thousands):
1996 $ 1,439
1997 877
1998 762
1999 745
2000 and after 2,262
------
$ 6,085
======
Rental expense for all operating leases was $1,915,000 for the year ended
December 31, 1995.
The Companies have a lease line of credit with a bank which allows the
Companies to lease equipment with an aggregate cost of $1,000,000 over
base lease terms of 36 to 48 months. At December 31, 1995, the Companies
had utilized $313,637 of the line of credit. Availability of the remaining
line of credit expires in June 1996. The line of credit agreement contains
an early termination provision at the one-year anniversary date.
8. LINE OF CREDIT
The Companies have a line of credit arrangement with a bank which allows
the Companies to borrow up to $2,000,000 at the prime rate (8.5% at
December 31, 1995). At December 31, 1995, $506,210 was outstanding. The
principal is due in May 1996, while the interest is paid monthly. The
Companies are subject to certain financial and operating covenants under
the credit arrangement including maintenance of certain financial ratios
and restrictions on the payment of dividends. The line is secured by the
Companies' assets, excluding real property.
9. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
December 31, August 29,
1995 1996
------------ -----------
(Unaudited)
Capitalized lease obligation (see Note 7), issued on July 1, 1977, is payable in
annual installments through 1997. The obligation requires semi-annual
interest payments at 7%, which is sufficient to service the lessor's
underlying bond indebtedness and allows the Companies the option to
purchase the underlying assets at any time for the amount of $100 plus an
amount equal to the remaining bond indebtedness and redemption expenses, if
applicable $ 945 $ 485
Notes payable to a bank, collateralized by receivables, machinery, and
equipment, payable in monthly installments of principal, plus interest on the
balance at rates ranging from 6.96% to prime. At December 31, 1995, the bank's
prime rate was 8.50% 688 531
Note payable to Kane-Miller Corp. at 8.0%, payable quarterly. Annual payments of
principal are dependent upon a calculation, based upon earnings, with the
entire principal due December 27, 2003 1,350 900
Notes payable at 8% interest, payable quarterly, to certain former International
Bakerage, Inc. shareholders in connection with the redemption of IB common
stock. Annual payments of principal are dependent upon a calculation, based
upon earnings with the remaining principal due December 27, 2003 1,200 1,200
Obligation in connection with covenants not to compete with annual payments of
$100,000 for five years and $10,000 for four years 430 320
Note payable to Graybill Farms at 12.0% with annual payments of $16,000 each,
beginning in 1995 32 -
Loan payable to stockholders bearing interest at 8%, due on demand from and
after December 28, 2003 100 -
------- -------
4,745 3,436
Less current maturities 1,278 1,062
------- -------
Long-term debt $3,467 $2,374
======= =======
The aggregate maturities of long-term debt as of December 31, 1995 are
summarized as follows (in thousands):
1996 $ 1,278
1997 1,104
1998 491
1999 329
2000 and after 1,543
------
$ 4,745
======
Based on the borrowing rates currently available to the Company for bank
loans with similar terms and average maturities, the fair value of total
debt at December 31, 1995 is estimated to be approximately $5,140,000.
10. PENSION PLAN
The Companies have a noncontributory defined benefit pension plan covering
all nonunion employees and certain union employees who meet minimum age
and hours of service requirements. The benefits are based on years of
service and the employee's compensation level. Funding is limited to
amounts that are available for deduction under the Internal Revenue Code.
Effective December 31, 1994, the defined benefit plan was frozen and no
additional benefits will accrue. The plan has not been terminated.
Net periodic pension costs, included in general and administrative
expenses, are composed of the following at December 31, 1995 (in
thousands):
Interest cost on projected benefit obligation $ 28
Actual return on plan assets (30)
Curtailment gain (133)
-----
$ (135)
=====
The following table sets forth the plan's funded status at December 31,
1995 (in thousands):
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $356 $ 412
======
Projected benefit obligation $ 412
Plan assets at fair market value 436
------
Plan assets in excess of projected benefit obligation (24)
Unrecognized net gain 20
Unrecognized prior service cost 4
------
Accrued pension liability included in accounts payable
and accrued expenses $ -
======
Assumptions utilized were as follows:
Discount rate 7.25%
Expected long-term rate of return on assets 7.25%
Effective January 1, 1995, the APB profit sharing plan was rolled into a
401(k) and Profit Sharing Plan (the "Plan") under which substantially all
employees, who are at least 21 years old and have one year of service, are
eligible to participate. Participants are permitted to make contributions
of their salary to the Plan on a pre-tax salary reduction basis in
accordance with the provisions of Section 401(k) of the IRC. The Companies
may match contributions of participants at the discretion of the Board of
Directors. The participants' contributions vest immediately, while the
Companies' contributions vest gradually over six years. The Companies'
total contribution for the fiscal year ended December 31, 1995 was
$100,000.
11. RELATED PARTY TRANSACTIONS
The Companies participate in various insurance policies and employee
benefit programs and use administrative and professional services of
Kane-Miller Corp. (a company with substantial commonality of ownership).
This includes a Management Services Agreement which requires quarterly
payments of $100,000 for six years ending in 1999. The following amounts
have been recorded in the combined financial statements for transactions
between the Companies, Kane-Miller Corp., and related shareholders (in
thousands):
December 31,
1995
Balance Sheets:
Accrued expenses $ 210
Long-term debt, stock redemption 1,200
Long-term debt, covenant not to compete 400
Statements of Operations and Retained Earnings:
Cost of goods sold and selling, general and
administrative expenses 888
12. DISTRIBUTIONS
The stockholders have agreed that the Companies will distribute an amount
at least equal to 40% of taxable income as a result of the Companies' S
Corporation status. However, distributions are limited to 50% of net
income by debt covenants existing as of the balance sheet date.
13. SUBSEQUENT EVENTS
On August 29, 1996, 100% of the common stock of the Companies was acquired
by Darling International Inc.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited pro forma condensed consolidated balance sheet gives
effect to the acquisition of International Processing Corporation and
International Transportation Service, Inc. completed subsequent to August 29,
1996, which is considered to be significant. The unaudited pro forma condensed
consolidated statements of operations for the eight months ended August 29, 1996
and the year ended December 31, 1995 give effect to the Purchase Acquisition
(see Note 2) and Financing Transaction (see Note 3) as if it had occurred on
January 1, 1995.
The pro forma financial data do not purport to present the financial position or
results of operations of the Company as if the transactions to which they give
effect had actually occurred as of such dates, nor are they necessarily
indicative of the results of operations that may be achieved in the future.
The pro forma combined statements of operations should be read in conjunction
with the Notes to Pro Forma Combined Financial Statements and the historical
consolidated financial statements of the Registrant.
DARLING INTERNATIONAL INC.
Pro Forma Condensed Consolidated Balance Sheet (unaudited)
August 29, 1996
(unaudited)
(in thousands, except shares and per share data)
Historical Financial
Statements
======================================
Pro Forma
Darling IPC Pro Forma Financial
ASSETS International & ITS Adjustments Statements
Current assets:
Cash and cash equivalents $ 10,935 $ 804 $ 11,739
Accounts receivable, principally trade 31,326 5,435 36,761
Inventories 10,206 1,610 11,816
Prepaid expenses 2,729 0 2,729
Deferred income tax assets 4,281 0 4,281
Other 853 157 (24) 986
---------- -------- --------- --------
Total Current Assets 60,330 8,006 (24) 68,312
Property, plant and equipment, less accumulated depreciation 158,614 16,172 (6,164) c 168,622
Collection routes and contracts, less accumulated amortization 46,955 357 10,984 d 58,296
Goodwill, less amortization 8,377 0 15,081 d 23,458
Other assets 4,238 173 4,411
---------- -------- --------- --------
Total Assets $ 278,514 $24,708 $ 19,877 $323,099
========== ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Current portion of long-term debt 8,000 1,062 (467) a 8,595
Accounts payable, principally trade 18,787 10,123 28,910
Accrued expenses 22,043 1,837 (397) a 23,483
Accrued interest 1,512 36 (31) a 1,517
---------- -------- --------- --------
Total Current Liabilities 50,342 13,058 (895) 62,505
Long-term debt, less current portion 112,742 2,374 27,435 b 142,551
Other noncurrent liabilities 20,145 0 2,613 f 22,758
Deferred income taxes 29,936 0 29,936
---------- -------- --------- --------
Total Liabilities 213,165 15,432 29,153 257,750
---------- -------- --------- --------
Stockholders' equity
Common stock, (5,149,349 actual Darling shares) 51 1,752 (1,752) e 51
Additional paid-in capital 33,632 5,163 (5,163) e 33,632
Retained earnings 31,666 3,561 (3,561) e 31,666
Treasury Stock 0 (1,200) 1,200 e 0
---------- -------- --------- --------
Total Stockholders' equity 65,349 9,276 (9,276) 65,349
---------- -------- --------- --------
Total Liabilities and Stockholder's equity $ 278,514 $24,708 $ 19,877 $323,099
========== ======= ======== ========
The accompanying notes are an integral part of these consolidated financial statements.
DARLING INTERNATIONAL INC.
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Eight Months Ended August 29,1996
(unaudited)
(in thousands, except shares and per share data)
Historical Financial
Statements
=======================
Pro Forma
Darling IPC Pro Forma Financial
International & ITS Adjustments Statements
Net Sales $299,985 $55,522 $355,507
Costs and expenses:
Cost of sales and operating expenses 239,754 43,961 283,715
Selling, general and administrative expenses 19,560 3,568 (270) b 22,858
Depreciation and amortization 16,768 2,193 907 a 19,868
-------- ------- ------- ---------
Total Costs and Expenses 276,082 49,722 637 326,441
-------- ------- ------ --------
Operating profit 23,903 5,800 (637) 29,066
-------- ------- ------ --------
Other income (expense):
Interest income (expense) (7,716) (215) (835) c (8,766)
Other, net 228 135 363
-------- ------- ------ --------
Total Other income (expense) (7,488) (80) (835) (8,403)
-------- ------- ------ --------
Income before income taxes 16,415 5,720 (1,472) 20,663
Income tax expense 6,487 0 1,624 d 8,111
-------- ------- ------ --------
Net Earnings $ 9,928 $5,720 ($3,096) $ 12,552
======== ======= ====== ========
Primary earnings per common share $1.79 $2.29
======== ========
Fully diluted earnings per common share $1.79 $2.29
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
DARLING INTERNATIONAL INC.
Pro Forma Condensed Consolidated Statement of Operations (unaudited)
For the Year Ended December 31, 1995
(unaudited)
(in thousands, except shares and per share data)
Historical Financial
Statements
=======================
Pro Forma
Darling IPC Pro Forma Financial
International & ITS Adjustments Statements
Net Sales $421,608 $55,851 $477,459
Costs and expenses:
Cost of sales and operating expenses 336,248 45,091 381,339
Selling, general and administrative expenses 26,675 4,864 (416) b 31,123
Depreciation and amortization 22,576 3,102 1,361 a 27,039
-------- ------- ------ --------
Total Costs and Expenses 385,499 53,057 945 439,501
-------- ------- ------ --------
Operating profit 36,109 2,794 (945) 37,959
-------- ------- ------ --------
Other income (expense):
Interest income (expense) (13,311) (372) (1,328) c (15,011)
Other, net 322 53 375
-------- ------- ------ --------
Total Other income (expense) (12,989) (319) (1,328) (14,636)
-------- ------- ------ --------
Income before income taxes 23,120 2,475 (2,273) 23,323
Income tax expense 8,740 0 356 d 9,096
-------- ------- ------- --------
Net Earnings $ 14,380 $ 2,475 ($2,628) $ 14,227
======== ======= ======= ========
Primary earnings per common share $2.70 $2.67
========= ===========
Fully diluted earnings per common share $2.67 $2.64
========= ===========
The accompanying notes are an integral part of these consolidated financial statements.
DARLING INTERNATIONAL INC.
Notes to Pro Forma Combined Financial Statements (unaudited)
August 29, 1996
1. HISTORICAL
The historical balances represent the financial position and results of
operations of Darling International Inc. ("Registrant") and International
Processing Corporation ("IPC") and International Transportation Service,
Inc. ("ITS") for each of the indicated dates and periods.
2. PURCHASE ACQUISITIONS
The pro forma adjustments in the pro forma condensed consolidated
statement of operations for the eight months ended August 29, 1996 and the
year ended December 31, 1995 give effect to the acquisition of IPC and ITS
completed on August 29, 1996 which are considered to be significant. The
transactions are accounted for using the purchase method for business
combinations as if each had occurred on January 1, 1995.
On August 29, 1996, Darling International Inc. (the "Registrant") acquired
100% of the outstanding capital stock of International Processing
Corporation ("IPC") and International Transportation Service, Inc. ("ITS")
for $30.0 million. The purchase price was paid in cash and was determined
by agreement between the Registrant and IPC, ITS and the stockholders of
IPC and ITS (the "Sellers"). The Registrant funded $29.6 million of the
purchase price with funds financed under the Acquisition Facility pursuant
to the Credit Agreement among the Registrant, The First National Bank of
Boston, as agent, and Harris Trust and Savings Bank, as co-agent. The
remaining $400,000 of the purchase price was funded out of cash on hand.
3. PRO FORMA ADJUSTMENTS
The proforma adjustments reflected in the pro forma combined financial
statements give effect to the following:
Pro Forma Condensed Consolidated Balance Sheet:
a) To reflect the repayment of debt of IPC at the closing of the
acquisition with cash on hand and cash available through the line of
credit of the Registrant.
b) To reflect the acquisition debt incurred by the Registrant to fund the
purchase price.
c) To reflect the adjustment of property, plant and equipment to
replacement cost.
d) To reflect the following intangible assets:
(1) Goodwill with an amortization period of 30 years.
(2) Routes and customer contracts with an average life of 15 years.
e) To reflect the adjustment for the elimination of investment in IPC and
ITS upon closing of the acquisitions.
f) To reflect the management agreement to previous shareholders assumed
by the Registrant.
Pro Forma Condensed Consolidated Statements of Operations:
a) To reflect adjustments to depreciation and amortization to record the
amortization of goodwill and routes and customer contracts recorded in
connection with the Purchase Acquisition.
b) To eliminate management fee paid to previous shareholders.
c) To reflect interest expense on debt issued or assumed in connection
with acquired companies.
d) To reflect the computation of income taxes on pro forma net income at
the Registrant's effective rate.
4. PRO FORMA NET INCOME PER COMMON SHARE
Pro forma net income per common share is calculated by dividing pro forma
net income by the weighted average common and common equivalent shares of
the Registrant outstanding during the periods.
EXHIBIT INDEX
Exhibit Page
Number Description Number
- -------- ---------------- -------
23 Consent of Deloitte & Touche, LLP. .................... 23
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 INTERNATIONAL INC.
Date: November 13, 1996 By: John R. Witt
----------------------------
John R. Witt
Vice President and
Chief Financial Officer
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Post-Effective Amendment
No. 2 to Form S-1 Registration Statement on Form S-3 Registration Statement No.
33-79478, and Registration Statements No. 33-99868 and 33-99866 on Form S-8 of
Darling International Inc. of our report dated March 22, 1996 (August 29, 1996
as to Note 13), relating to the combined financial statements of International
Processing Corporation and International Transportation Service, Inc. as of and
for the year ended December 31, 1995, appearing in this Current Report on Form
8-K/A of Darling International Inc. dated August 30, 1996.
DELOITTE AND TOUCHE LLP
Atlanta, Georgia
November 13, 1996