Darling Ingredients Inc. Reports Fourth Quarter and Fiscal Year 2023 Results

February 27, 2024

Data Table

Darling Ingredients Inc. Segment Financial Tables
(in thousands, unaudited)

Data Table

Three Months Ended December 30, 2023 (unaudited)Feed IngredientsFood IngredientsFuel IngredientsCorporateTotal
Net sales$          1,045,642$            423,836$            144,605$                   -$          1,614,083
Cost of sales and operating expenses 755,062 311,163 111,427 - 1,177,652
Gross Margin 290,580 112,673 33,178 - 436,431
Loss (gain) on sale of assets 1 (8,243) (40) - (8,282)
Selling, general and administrative expenses 77,281 30,195 6,714 18,430 132,620
Restructuring and asset impairment charges 3,934 9,199 - - 13,133
Acquisition and integration costs - - - 1,726 1,726
Change in fair value of contingent consideration 5,167 - - - 5,167
Depreciation and amortization 98,400 26,655 8,480 4,394 137,929
Equity in net income of Diamond Green Diesel - - 4,690 - 4,690
Segment operating income/(loss)$             105,797$              54,867$              22,714$          (24,550)$             158,828
Equity in net income of other unconsolidated subsidiaries1,508---1,508
Segment income/(loss)$             107,305$              54,867$              22,714$          (24,550)$             160,336
Segment EBITDA$             213,298$              90,721$              26,504$          (18,430)$             312,093
DGD adjusted EBITDA (Darling's Share)--38,816-38,816
Combined adjusted EBITDA$             213,298$              90,721$              65,320$          (18,430)$             350,909

Data Table

Three Months Ended December 31, 2022Feed IngredientsFood IngredientsFuel IngredientsCorporateTotal
Net sales$          1,216,073$            387,733$            164,277$                   -$          1,768,083
Cost of sales and operating expenses 950,778 294,417 134,093 - 1,379,288
Gross Margin 265,295 93,316 30,184 - 388,795
Loss (gain) on sale of assets 169 (117) 14 - 66
Selling, general and administrative expenses 73,736 28,073 3,769 16,142 121,720
Restructuring and asset impairment charges - 21,109 - - 21,109
Acquisition and integration costs - - - 2,738 2,738
Depreciation and amortization 91,282 14,722 8,606 2,774 117,384
Equity in net income of Diamond Green Diesel - - 123,448 - 123,448
Segment operating income/(loss)$             100,108$              29,529$            141,243$          (21,654)$             249,226
Equity in net loss of other unconsolidated subsidiaries (831) - - - (831)
Segment income/(loss)$               99,277$              29,529$            141,243$          (21,654)$             248,395
Segment EBITDA$             191,390$              65,360$              26,401$          (16,142)$             267,009
DGD adjusted EBITDA (Darling's Share)--145,984-145,984
Combined adjusted EBITDA$             191,390$              65,360$            172,385$          (16,142)$             412,993

Data Table

Twelve Months Ended December 30, 2023 (unaudited)Feed IngredientsFood IngredientsFuel IngredientsCorporateTotal
Net sales$          4,472,592$         1,752,065$            563,423$                   -$          6,788,080
Cost of sales and operating expenses3,385,8591,310,581446,620-5,143,060
Gross Margin1,086,733441,484116,803-1,645,020
Loss (gain) on sale of assets 814 (8,144) (91) - (7,421)
Selling, general and administrative expenses 310,363 128,464 23,543 80,164 542,534
Restructuring and asset impairment charges 4,026 14,527 - - 18,553
Acquisition and integration costs - - - 13,884 13,884
Change in fair value of contingent consideration (7,891) (7,891)
Depreciation and amortization 360,249 94,991 34,466 12,309 502,015
Equity in net income of Diamond Green Diesel - - 366,380 - 366,380
Segment operating income/(loss)$             419,172$            211,646$            425,265$        (106,357)$             949,726
Equity in net income of other unconsolidated subsidiaries5,011---5,011
Segment income/(loss)$             424,183$            211,646$            425,265$        (106,357)$             954,737
Segment EBITDA$             775,556$            321,164$              93,351$          (80,164)$          1,109,907
DGD adjusted EBITDA (Darling's Share)--501,987-501,987
Combined adjusted EBITDA$             775,556$            321,164$            595,338$          (80,164)$          1,611,894

Data Table

Twelve Months Ended December 31, 2022Feed IngredientsFood IngredientsFuel IngredientsCorporateTotal
Net sales$          4,539,000$         1,459,630$            533,574$                   -$          6,532,204
Cost of sales and operating expenses 3,473,506 1,102,250 426,853 - 5,002,609
Gross Margin 1,065,494 357,380 106,721 - 1,529,595
Gain on sale of assets (3,426) (1,008) (60) - (4,494)
Selling, general and administrative expenses 258,781 101,681 13,690 62,456 436,608
Restructuring and asset impairment charges 8,557 21,109 - - 29,666
Acquisition and integration costs - - - 16,372 16,372
Depreciation and amortization 295,249 59,029 29,500 10,943 394,721
Equity in net income of Diamond Green Diesel - - 372,346 - 372,346
Segment operating income/(loss)$             506,333$            176,569$            435,937$          (89,771)$          1,029,068
Equity in net income of other unconsolidated subsidiaries5,102---5,102
Segment income/(loss)$             511,435$            176,569$            435,937$          (89,771)$          1,034,170
Segment EBITDA$             810,139$            256,707$              93,091$          (62,456)$          1,097,481
DGD adjusted EBITDA (Darling's Share)--443,487-443,487
Combined adjusted EBITDA$             810,139$            256,707$            536,578$          (62,456)$          1,540,968

Data Table

Segment EBITDA consists of segment income (loss), less equity in net income/loss from unconsolidated subsidiaries, less equity in net income of Diamond Green Diesel, plus depreciation and amortization, acquisition and integration costs, restructuring and asset impairment charges, change in fair value of contingent consideration, plus Darling's share of DGD Adjusted EBITDA.

Data Table

Darling Ingredients Inc. and Subsidiaries: Consolidated Balance Sheets
December 30, 2023 and December 31, 2022

Data Table

December 30, 2023December 31, 2022
ASSETS(unaudited)
Current assets:
Cash and cash equivalents$                           126,502$                           127,016
Restricted cash 292 315
Accounts receivable, net 626,008 559,695
Accounts receivable due from related party - 172,283 116,878
Diamond Green Diesel
Inventories 758,739 673,621
Prepaid expenses 105,657 85,665
Income taxes refundable 23,599 18,583
Other current assets 42,586 56,324
Total current assets 1,855,666 1,638,097
Property, plant and equipment, net 2,935,185 2,462,082
Intangible assets, net 1,075,892 865,122
Goodwill 2,484,502 1,970,377
Investment in unconsolidated subsidiaries 2,251,629 1,926,395
Operating lease right-of-use assets 205,539 186,141
Other assets 234,960 136,268
Deferred income taxes 17,711 17,888
$                      11,061,084$                        9,202,370
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt$                             60,703$                             69,846
Accounts payable, principally trade 425,588 472,491
Income taxes payable 15,522 44,851
Current operating lease liabilities 55,325 49,232
Accrued expenses 440,999 432,023
Total current liabilities 998,137 1,068,443
Long-term debt, net of current portion 4,366,370 3,314,969
Long-term operating lease liabilities 154,903 141,703
Other non-current liabilities 349,809 298,933
Deferred income taxes 498,174 481,832
Total liabilities 6,367,393 5,305,880
Commitments and contingencies
Stockholders' equity:
     Common stock, $0.01 par value; 1,744 1,736
     Additional paid-in capital 1,697,787 1,660,084
     Treasury stock, at cost (629,008) (554,451)
     Accumulated other comprehensive loss (198,346) (383,874)
     Retained earnings 3,733,254 3,085,528
Total Darling's stockholders' equity 4,605,431 3,809,023
Noncontrolling interests 88,260 87,467
Total Stockholders' Equity 4,693,691 3,896,490
$                      11,061,084$                        9,202,370

Data Table

Darling Ingredients Inc. and Subsidiaries: Consolidated Operating Results
For the Three and Twelve Months Ended Dec. 30, 2023 and Dec. 31, 2022
(in thousands, except per share data)           

Data Table

Darling Ingredients Inc. and Subsidiaries: Consolidated Statement of Cash Flows
For the Twelve Months Ended December 30, 2023 and December 31, 2022
(in thousands)

Data Table

(unaudited)December 30, 2023December 31, 2022
Cash flows from operating activities:
Net income$     660,389$    747,092
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 502,015 394,721
Gain on sale of assets (7,421) (4,494)
Asset impairment 4,734 29,666
Deferred taxes (22,241) 46,734
Change in fair value of contingent consideration (7,891) -
Decrease in long-term pension liability (1,040) (7,037)
Stock-based compensation expense 33,156 25,005
Write-off deferred loan costs 653 -
Deferred loan cost amortization 6,216 4,984
Equity in net income of Diamond Green Diesel and other unconsolidated subsidiaries (371,391) (377,448)
Distributions of earnings from Diamond Green Diesel and other unconsolidated subsidiaries 168,277 95,546
Changes in operating assets and liabilities, net of effects from acquisitions:
     Accounts receivable (10,832) (56,543)
     Income taxes refundable/payable (39,933) (3,495)
     Inventories and prepaid expenses 49,582 (130,170)
     Accounts payable and accrued expenses (82,939) 65,936
     Other 17,929 (16,758)
Net cash provided by operating activities 899,263 813,739
Cash flows from investing activities:
Capital expenditures (555,480) (391,309)
Acquisitions, net of cash acquired (1,093,183) (1,772,437)
Investment in Diamond Green Diesel (75,000) (264,750)
Investment in other unconsolidated subsidiaries (27) -
Loan to Diamond Green Diesel - (50,000)
Loan repayment from Diamond Green Diesel 25,000 50,000
Gross proceeds from sale of property, plant and equipment and other assets 10,748 13,442
Proceeds from insurance settlement 14,014 -
Payments related to routes and other intangibles (1,524) (1,492)
Net cash used in investing activities (1,675,452) (2,416,546)
Cash flows from financing activities:
Proceeds from long-term debt 817,101 1,934,885
Payments on long-term debt (319,367) (63,078)
Borrowings from revolving credit facility 2,666,360 1,873,795
Payments on revolving credit facility (2,194,902) (1,897,280)
Net cash overdraft financing (9,780) 24,069
Acquisition hold-back payments (3,793) -
Deferred loan costs (9) (16,780)
Repurchase of common stock (52,941) (125,531)
Minimum withholding taxes paid on stock awards (17,296) (46,944)
Distributions to noncontrolling interests (9,081) (4,532)
Net cash provided by financing activities 876,292 1,678,604
Effect of exchange rate changes on cash flows 14,179 5,299
Net increase in cash, cash equivalents and restricted cash 114,282 81,096
Cash, cash equivalents and restricted cash at beginning of period 150,168 69,072
Cash, cash equivalents and restricted cash at end of period$     264,450$    150,168

Data Table

Diamond Green Diesel Joint Venture: Condensed Consolidated Balance Sheets
December 31, 2023 and December 31, 2022
(in thousands)

Data Table

December 31, 2023December 31, 2022
Assets:
Total current assets$     1,877,430$     1,304,805
Property, plant and equipment, net3,838,8003,866,854
Other assets89,69761,665
Total assets$     5,805,927$     5,233,324
Liabilities and members' equity:
Total current portion of long term debt$        278,639$        217,066
Total other current liabilities417,918515,023
Total long term debt737,097774,783
Total other long term liabilities16,99617,249
Total members' equity4,355,2773,709,203
Total liabilities and members' equity$     5,805,927$     5,233,324

Data Table

Diamond Green Diesel Joint Venture: Operating Financial Results
For the Three and Twelve Months Ended December 31, 2023 and 2022
(in thousands)

Data Table

Three Months Ended (unaudited) $ ChangeTwelve Months Ended (unaudited) $ Change
December 31, 2023December 31, 2022Favorable (Unfavorable)December 31, 2023December 31, 2022Favorable (Unfavorable)
Revenues:
Operating revenues$     1,633,795$     1,594,552$  1,489,456$  6,990,622$5,501,166 $  1,489,456
Expenses:
Total costs and expenses
less lower of cost or market inventory valuation and depreciation, amortization and accretion expense 1,495,293 1,302,584 (1,311,586) 5,925,778 4,614,192 (1,311,586)
Lower of cost or market (LCM) inventory valuation adjustment 60,871 - (60,871) 60,871 - (60,871)
Depreciation, amortization and accretion expense 58,881 36,054 (105,265) 230,921 125,656 (105,265)
Total costs and expenses 1,615,045 1,338,638 (1,477,722) 6,217,570 4,739,848 (1,477,722)
Operating income  18,750 255,914 11,734 773,052 761,318 11,734
Other income 3,454 1,244 7,147 10,317 3,170 7,147
Interest and debt expense, net (12,072) (10,262) (30,061) (49,857) (19,796) (30,061)
Income before income tax expense 10,132 246,896 (11,180) 733,512 744,692 (11,180)
Income tax expense 752 (752) 752 (752)
Net income$            9,380$        246,896$      (11,932)$     732,760$    744,692$      (11,932)

Data Table

Darling Ingredients Inc. reports Adjusted EBITDA results, which is a Non-GAAP financial measure, as a compliment 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 to Foreign Currency
For the Three and Twelve Months Ended December 30, 2023 and December 31, 2022
(U.S. dollars in thousands)

Data Table

Three Months Ended (unaudited) Twelve Months Ended (unaudited)
Adjusted EBITDA December 30, 2023December 31, 2022December 30, 2023December 31, 2022
Net income attributable to Darling$                 84,516$          737,690$               647,726$          737,690
Depreciation and amortization 137,929 394,721 502,015 394,721
Interest expense 68,453 125,566 259,223 125,566
Income tax expense 7,246 146,626 59,568 146,626
Restructuring and asset impairment charges 13,133 29,666 18,553 29,666
Acquisition and integration costs 1,726 16,372 13,884 16,372
Change in fair value of contingent consideration 5,167 - (7,891) -
Foreign currency (gain) loss 206 11,277 (8,133) 11,277
Other (income) expense, net (2,825) 3,609 (16,310) 3,609
Equity in net income of Diamond Green Diesel (4,690) (372,346) (366,380) (372,346)
Equity in net (income) loss of other unconsolidated subsidiaries (1,508) (5,102) (5,011) (5,102)
Net income attributable to noncontrolling interests 2,740 9,402 12,663 9,402
          Adjusted EBITDA (Non-GAAP)$               312,093$       1,097,481$            1,109,907$       1,097,481
Foreign currency exchange impact  (7,932)* (10,830)**
          Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP)$               304,161$       1,097,481$            1,099,077$       1,097,481
DGD Joint Venture Adjusted EBITDA (Darling's Share)$                 38,816$          443,487$               501,987$          443,487
Darling plus Darling's share of DGD Joint Venture Adjusted EBITDA $               350,909$       1,540,968$            1,611,894$       1,540,968
(*) The average rate assumption used in this calculation were the actual average rate for the three months ended December 30, 2023 of €1.00:USD$1.07, R$1.00:USD$0.20 and CAD$1.00:USD$0.73, as compared to the average rate for the three months ended December 31, 2022 of €1.00:USD$1.02, R$1.00:USD$0.19 and CAD$1.00:USD$0.74, respectively.
(**) The average rate assumption used in this calculation were the actual average rate for the twelve months ended December 30, 2023 of €1.00:USD$1.08, R$1.00:USD$0.20 and CAD$1.00:USD$0.74, as compared to the average rate for the twelve months ended December 31, 2022 of €1.00:USD$1.05, R$1.00:USD$0.19 and CAD$1.00:USD$0.77, respectively.