29th Annual ROTH Conference March 2017 - s3.amazonaws.com · 29th Annual ROTH Conference March 2017...
50
29 th Annual ROTH Conference March 2017 Randall C. Stuewe, Chairman and CEO Patrick C. Lynch, EVP Chief Financial Officer Melissa Gaither, VP IR and Global Communications
Transcript of 29th Annual ROTH Conference March 2017 - s3.amazonaws.com · 29th Annual ROTH Conference March 2017...
29th Annual ROTH ConferenceMarch 2017
Randall C. Stuewe, Chairman and CEOPatrick C. Lynch, EVP Chief Financial Officer
Melissa Gaither, VP IR and Global Communications
2
This presentation contains “forward-looking” statements regarding the business operations and prospects of Darling Ingredients Inc., including its Diamond GreenDiesel joint venture, and industry factors affecting it. These statements are identified by words such as “believe,” “anticipate,” “expect,” “estimate,” “intend,”“could,” “may,” “will,” “should,” “planned,” “potential,” “continue,” “momentum,” “assumption,” and other words referring to events that may occur in the future.These statements reflect Darling Ingredient’s current view of future events and are based on its assessment of, and are subject to, a variety of risks anduncertainties beyond its control, each of which could cause actual results to differ materially from those indicated in the forward-looking statements. These factorsinclude, among others, existing and unknown future limitations on the ability of the Company's direct and indirect subsidiaries to make their cash flow available tothe Company for payments on the Company's indebtedness or other purposes; global demands for bio-fuels and grain and oilseed commodities, which haveexhibited volatility, and can impact the cost of feed for cattle, hogs and poultry, thus affecting available rendering feedstock and selling prices for the Company’sproducts; reductions in raw material volumes available to the Company due to weak margins in the meat production industry as a result of higher feed costs,reduced consumer demand or other factors, reduced volume from food service establishments, or otherwise; reduced demand for animal feed; reduced finishedproduct prices, including a decline in fat and used cooking oil finished product prices; changes to worldwide government policies relating to renewable fuels andgreenhouse gas emissions that adversely affect programs like the Renewable Fuel Standards Program (RFS2), low carbon fuel standards (LCFS) and tax credits forbiofuels both in the Unites States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations to foodor food additives; the occurrence of Bird Flu including, but not limited to H5N1 flu, bovine spongiform encephalopathy (or "BSE"), porcine epidemic diarrhea("PED") or other diseases associated with animal origin in the United States or elsewhere; unanticipated costs and/or reductions in raw material volumes related tothe Company’s compliance with the existing or unforeseen new U.S. or foreign regulations (including, without limitation, China) affecting the industries in which theCompany operates or its value added products (including new or modified animal feed, Bird Flu, PED or BSE or similar or unanticipated regulations); risks associatedwith the renewable diesel plant in Norco, Louisiana owned and operated by a joint venture between Darling Ingredients and Valero Energy Corporation, includingpossible unanticipated operating disruptions and issues related to the announced expansion project; difficulties or a significant disruption in our informationsystems or failure to implement new systems and software successfully, including our ongoing enterprise resource planning project; risks relating to possible thirdparty claims of intellectual property infringement; increased contributions to the Company’s pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawalevent; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraineor elsewhere; uncertainty regarding the likely exit of the U.K. from the European Union; and/or unfavorable export or import markets. These factors, coupled withvolatile prices for natural gas and diesel fuel, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies,disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence and discretionary spending, including the inabilityof consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could negatively impact the Company's results ofoperations. Among other things, future profitability may be affected by the Company’s ability to grow its business, which faces competition from companies thatmay have substantially greater resources than the Company. The Company’s announced share repurchase program may be suspended or discontinued at any timeand purchases of shares under the program are subject to market conditions and other factors, which are likely to change from time to time. Other risks anduncertainties regarding Darling Ingredients Inc., its business and the industries in which it operates are referenced from time to time in the Company’s filings withthe Securities and Exchange Commission. Darling Ingredients Inc. is under no obligation to (and expressly disclaims any such obligation to) update or alter itsforward-looking statements whether as a result of new information, future events or otherwise.
Safe Harbor Statement
3
Soap &Fertilizer
Darling & Company was founded in Chicago in 1882 by Ira Darling, in partnership with the Swift family, tomeet the needs of the growing meat-packing industry
4
Fertilizer & Feed
Soap & Fertilizer
Incorporated in the state of Delaware in 1962,name was changed to Darling-Delaware Inc.
Followed by 80 years of USA growth - 1962
5
Developed our corporate mission statement to reflect our unique position, best-in-class service and ‘green’ expertise to our supplier network:
“North America’s oldest, largest and most innovative recycling solutions company serving the food industry.”
Feed, Fuel, and Fertilizer
Fertilizer & Feed
Soap &Fertilizer
Company changed name toDarling International Inc. in 1993, and began beingpublically traded in 1994
6
Southeastern
Maintenance &
Construction
2003 2006 2008 2010 2016
Tuck-In
Acquisitions
Platform
Acquisitions /
Investments
2011 2012 2013 2014
J&R
Rendering
National By-Products
Grease Collection &
Trap Servicing Assets
201520092007
Bosland
NetherlandsCustom
Blenders
RVO
BioPur,
LLC
Feed, Fertilizer, Fuel, Food and
Pharmaceuticals
Feed, Fertilizerand Fuel
Fertilizer& Feed
Soap &Fertilizer
Darling Ingredients Inc., has created the only global platform creating sustainable ingredients from protein products with over 200 facilities on 5 continents employing 10,000 people.
Creating the only global platform
7
...better nutrition evolves and meat becomes a staple in the global diet
Source: Food & Agriculture Organization of the
United Nations; Organization for Economic
Competitionand Development (forecast)
Global Population Growth
Source: Company, based on various population data reports
8
Global Meat Production 2016 per USDA
13.7 m MT
14.3 m MT
22.3 m MT
North America
14.8 m MT
5.2 m MT
17.8 m MT
South America 2.7 m MT
.5 m MT
2.1 m MT
Asia/Australia
7.7 m MT
23.4 m MT
10.6 m MT
Europe
6.7 m MT
54.9 m MT
China
13.4 m MT
Global Meat Production, 2006-2016
USDA (mmt)
Beef Pork Poultry
4.1 m MT
0.0 m MT
3.9 m MT
India
258 million mt – Global and growing…
34%
SWINE
By-products
66%
Meat
40%
POULTRY
By-products
60%
Meat
42%
BEEF
By-products
58%
Meat
999Global meat consumption produces significant by-products that must be safely handled
• 284 million tons of meat produced globally
• ~100 million tons of meat by-products globally
• Darling Ingredients processes ~10 million tons of world’s meat by-products...
Darling Ingredients is the global leader in converting meat protein by-products into sustainable ingredients
for Food, Feed, and Fuel
...creating a tremendous opportunity for growth!
DAR
10
Processed 1.08 million metric
tons of raw material in 2016.
Processed 1.18 million metric
tons of raw material in 2016.
Processed 7.97 million metric tons
of raw material in 2016.
Restaurant Services
Creating a diversified and unique portfolio
A business model of identified and managed risk
70%
20%
5%5%
FEED
Spread Managed Margin
Commodity Exposed
Shared Margin
Fee for Service
100%
FOOD
Spread Managed Margin
100%
FUEL
Fee for Service
Fee for Service
• Competition
• Government regulations
Commodity Exposed
• Fat pricing
• Soy meal pricing
• Corn Price
Spread Managed Margin
• Raw material availability
• Food demand
• Pharma demand
SharedMargin
• Fat price
• Poultry meal pet food spread
price
BUSINESS DRIVERS
12
FEEDFOOD
FUEL (2)
Commodity Prices
Corn
Palm Oil
Soybean Meal
Raw Meat Availability
Beef
Pork
Chicken
Currency
Euro
RMB
CAD
REAL
Global Business Influencers
EBITDA
Margin
Adjusted
EBITDA (1)
(1) Has impact of inventory step-up in 1st and 2nd quarter of 2014
(2) Fuel Segment shows blenders’ tax credit earned in 4th quarter of 2014 and 2015. In
2016 the blenders’ tax credit is earned prospectively and reported in quarterly earnings.
With predictable margins and spreads
$28.0
$32.3$28.7
$39.1 $38.6 $37.4
$25.3
$30.0
10.4%11.4%
10.7%
14.4%15.6%
13.7%
9.7%10.7%
0%
5%
10%
15%
20%
25%
30%
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
$30.0
$35.0
$40.0
$45.0
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
$75.5 $75.9 $76.5
$54.4$58.3
$83.5$78.9 $73.9
1
13.8% 14.3% 14.6%
11.5% 12.2%
15.4% 14.8%13.7%
0%
5%
10%
15%
20%
25%
30%
$0.0
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
$70.0
$80.0
$90.0
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
$9.1 $8.6$7.0
$19.2
$13.0 $13.8 $12.9
$18.0
16.0%18.5%
11.8%
29.4%23.4% 22.2% 21.4%
26.2%
0%
10%
20%
30%
40%
50%
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
Q12015
Q22015
Q32015
Q42015
Q12016
Q22016
Q32016
Q42016
13
FOOD
FEED
FUEL
Our business segments
o A producer of crude
porcine heparin
o Sonac food-grade fat has processing facilities in Germany & the Netherlands
o Laru & Vada brands are Europe’s largest producers of high-quality edible fats for baking and frying
o Leading global supplier of gelatin and hydrolyzed collagen
o 13 production facilities selling to 75+ countries
oGelatin used for Pharma, food,binding agents for processed meats
o Produces Peptan®, collagen peptides for health and beauty markets
Financials (2016)
o Net Sales: $1,062 mm (31% of total)
o EBITDA margin: 13.0%
o Adjusted EBITDA: $131 mm
oCTH supplies natural casings and meat products to the food and meat industries
o A leader in porcine bone degreasing
in Europe—supports Rousselot
o Leading producer of edible glues
o A global leader in bone ash for china production
14
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
Non-GAAP EBITDA MarginFood
Key Drivers– Q4/YTD 2016
• Rousselot recovered in Q4 from Q3 with solid performance in China
• Rousselot consistent year over year
• Sonac edible fats volumes softer but margins consistent
• CTH casings business delivering consistent performance on growing supply source and improved supply chain
15
EBITDA Bridge Q3-2016 to Q4-2016(millions)
Food Segment
$30.0 $30.7 $8.1
$25.3
$16.0
0
10
20
30
40
50
Cost of Sales
($1.8)
Volumes Other
($16.9)
FX Impact
($0.7)
Adjusted EBITDA
EBITDA Q4 16
EBITDA Q3 16
Price / Yield
14.4%15.6%
13.7%
9.7% 10.7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Q42015
Q12016
Q22016
Q32016
Q42016
US$ and metric tons
(millions)
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Revenue $272.1 $1,094.9 $247.9 $272.1 $262.0 $279.9 $1,061.9
Gross Margin 62.9 231.4 62.3 57.8 50.7 56.7 227.5
Gross Margin % 23.1% 21.1% 25.1% 21.3% 19.3% 20.3% 21.4%
Operating Income 23.3 61.2 21.9 19.7 7.9 11.7 61.2
EBITDA $39.1 $128.1 $38.6 $37.4 $25.3 $30.0 $131.3
Raw Material Processed(million metric tons)
0.26 1.07 0.27 0.27 0.26 0.28 1.08
16
o 13 plant, 4 continent system
o Producing and marketing gelatin globally
o Pharma and food focused system
o Market projected to grow 2-3% per year
RousselotGelatinProduction
Rousselot – A global leader
Enhances skin texture and tone
o One of the world’s leading collagen peptides brands
o Produced at dedicated Rousselot factories in France and Brazil; sold globally
o Unique bioactive protein:
Sports nutrition/health supplements
Promotes healthy aging
Benefits joint & bone health
17A rapidly growing market –Collagen peptides for a healthy lifestyle
18
Sonac is the largest producer of edible animal fats in Europe
• Processing, refinement and packaging of pork and goose fat
• Schmalz (spreadable fat for breads, frying, baking)
• Producer of high-quality frying oils and fats for human consumption
Edible fats
Film coating
19
o Halal dedicated gelatin production
o Wenzhou Gelatin China expansion
o CTH sheep casing sorting workshop in China
o Gelatin expansions in China, USA, Brazil
o Expanded Peptan production--Fish
o Halal dedicated gelatin production
o Canadian edible animal fats
2016
2017
Pill coatings
Confectionaries
Binding agents
Gelatinfor binding, texturizing,
gelling, smoothness, foaming, stabilizing, filming, emulsifying, reducing fat content..
a natural protein source
Growing our Food ingredients segment
20
o Converting commercial bakery and snack food residuals into Cookie Meal®,a high-energy corn replacement for animal feed(poultry and aquaculture)
o Leaders in North America
o Used cooking oil removal, for animal feed and biofuel production
o 1 billion pounds collected annually
o Grease trap services
o Collecting and land applying nutrients from the food processing industry
o JV with Intrexon
o Unique process to convert insect larvae into proteins used in animal and aquaculture feed
Financials (2016)
oNet Sales: $2,089 mm (61% of total)
o EBITDA margin: 14.1%
oAdjusted EBITDA: $295 mm
o A leadingOrganic Fertilizer Business in the USA
North American Restaurant Services
o #2 Blood processor in the world
o Plants on 4 continents
o Producing Hemoglobin powder for aquaculture
o Plasma powder for feed
Our Global Rendering Business
o 115 locations in USA,
Canada, and Europe
o #1 in North America
o #2 in Europe—C3 production
o 7.97 million tonnes processed in 2016
o Significant pet food ingredient business in USA and Europe
o Poultry proteins
o Wet pet foods
Feed segment – Nutrients for growth
Key Drivers– Q4/YTD 2016
21
Non-GAAP EBITDA MarginFeed
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
EBITDA Bridge Q3-2016 to Q4-2016(millions)
Feed Segment
$73.9$74.3
$26.0
$78.9
0
20
40
60
80
100
EBITDA Q3 16
($15.6)
VolumesPrice / Yield
($11.5) ($3.5)
Cost of Sales
Other FX Impact
Adjusted EBITDA
($0.4)
EBITDA Q4 16
• Global raw material volumes continued strong - up 7% year over year
• Global fat prices steady with strong global demand driven by biofuels
• Protein markets marginally softer in Q4 vs. Q3• USA rendering impacted by weak MBM pricing
in Q4 but nice recovery in early Q1 2017• Two new USA rendering plants fully on line in
Q4 and contributing as predicted• Wet pet food plants on plan during Q4• Overall nice momentum going into 2017
11.5% 12.2%
15.4% 14.8%13.7%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Q42015
Q12016
Q22016
Q32016
Q42016
US$ and metric tons
(millions)
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Revenue $472.2 $2,074.3 $476.2 $543.0 $531.4 $538.5 $2,089.1
Gross Margin 96.7 460.9 103.5 126.8 117.8 116.2 464.3
Gross Margin % 20.5% 22.2% 21.7% 23.4% 22.2% 21.6% 22.2%
Operating Income 10.1 116.5 13.9 41.4 35.2 25.3 115.8
EBITDA (1) $54.4 $282.3 $58.3 $83.5 $78.9 $73.9 $294.6
Raw Material Processed (million metric tons)
1.89 7.45 1.97 1.97 1.97 2.06 7.97
(1) Does not include Unconsolidated Subsidiaries EBITDA.
22
• Completed 2 new wet and frozen pet food plants in Nebraska & Kentucky (US)
• Completed expansion of our Zhejiang blood plant…now China’s largest
Global Pet Industry4% annual growth in 2015;
by 2019 - $91 billion
• Pet ownership increases with urbanpopulation rise
• Rise in disposable incomes • Increased awareness for pet safety and health;pets are family
• Built 2 new rendering plants
• Netherlands de-hiding facility
• Maquoketa Iowa blood expansion
• Qionglai China blood expansion
o Completed Bosland, Netherlands acquisition
• Approved expansions and new plants
– New blood plant in Europe
– New poultry rendering plant in USA
– Expansion of Los Angeles, CA plant
2015
2016
2017
Source: http://www.multibriefs.com/briefs/exclusive/pet_
businesses_will_prosper.html#.VzZ2RYQrK70 and petfoodindustry.com
Source: http://aquaculturenorthamerica.com/News/fao-releases-%E2%80%9Cworld-review-of-fisheries-
and-aquaculture-for-/
(Aquaculture uses pet-grade poultry meal as protein source)
23
Arkansas Rendering
Paducah, KYRavenna, NE
Ohio Rendering
New USA plants –Pet and aqua-grade production
Changchun
Siping
ZhejiangQionglai
Luohe
Maquoketa
Bad Bramstedt
Usnice
Spilamberto
Maryborough
Bovine Porcine Mixed
Maryborough
Qionglai
Siping
LuoheUsniceBad BramstedtLoenen
Maquoketa
Loenen
24
o Recently expanded
Zhejiang to China’s
largest blood plant
o Approved plans to
expand Qionglai
o New plant in Europe
o Approved dryer
expansion Iowa
610 630 670 670
700 710 735
708690 710 735 755
785
China Pork Herd (mm head)
Region Plants
EUR 4
USA 1
CHI 5
AUS 1
Source: Company stats on China business
08
09
10
11
12
13
14
15
16
17
18
19
20
Growing our global blood business
25
ZhejiangQionglai
New blood plants - China
o Collect animal fats and used cooking oils from restaurants, supermarkets, hospitality and other food industry customers
o Recycled material converted into biodiesel DAR PRO Bioenergy – 1st plant built in USA Rothsay Biodiesel - 1st plant built in Canada
End Markets
o Renewable fuels
o Biofuels
o Green electricity
o Green gas
o European disposal rendering – operates multiple facilities and a specialized collection fleet of approx. 300 trucks in Europe to collect and safely process mortalities and slaughter designated unfit for animal feed (Category 1 & 2)
o Largest industrial digestion operation in the Netherlands; organic residuals converted into biogas for renewable electricity, and process manure intobiophosphate used as fertilizer
Financials (2016)
oNet Sales: $247 mm (7% of total)
oEBITDA margin: 23.4%
oAdjusted EBITDA: $58 mm
Excludes DGD
26Fuel segment – Energy for today’s world
Key Drivers– Q4/YTD 2016
• Consistent and improving segment performance year over year
• Rendac performance improved aided by strong volumes in Q4 and year end tariff recovery
• Segment includes final settlement of $3.1 million on business interruption claim for the bio-phosphate plant fire in Dec. 2015
• Canadian biodiesel improved year over year
Non-GAAP EBITDA Margin
Fuel
27
Note: Cost of Sales includes raw material costs, collection costs and factory costs.
EBITDA Bridge Q3-2016 to Q4-2016(millions)
Adjusted EBITDA Margins for normalized blenders tax credit
in Pro forma EBITDA and in Revenues for 2015 would represent:23.3% Q4 15
Fuel Segment
$18.0 $18.4 $4.2
$12.9
$5.5
0
5
10
15
20
25
($3.6)
VolumesPrice /
Yield
EBITDA
Q3 16
($0.4)
EBITDA
Q4 16
FX ImpactAdjusted
EBITDA
Other
($0.6)
Cost of
Sales
29.4%
23.4% 22.2%21.4%
26.2%
0%
5%
10%
15%
20%
25%
30%
35%
Q42015
Q12016
Q22016
Q32016
Q42016
US$ and metric tons
(millions)
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Revenue $65.4 $228.2 $55.6 $62.3 $60.4 $68.8 $247.1
Gross Margin 20.2 51.1 14.9 15.6 14.2 19.9 64.6
Gross Margin % 30.9% 22.4% 26.8% 25.0% 23.5% 28.9% 26.1%
Operating Income 12.5 17.2 6.1 6.6 6.0 10.5 29.2
EBITDA (1) $19.2 $43.9 $13.0 $13.8 $12.9 $18.0 $57.7
Raw Material Processed *(million metric tons)
0.31 1.17 0.28 0.30 0.29 0.31 1.18
(1) Does not include DGD EBITDA.
* Excludes raw material processed at the DGD joint venture.
28
2013 2014 2015 2016 2017 2018
DAR Share of EBITDA $16.50 $81.60 $88.50 $87.20
Production
(Gallons in millions)51.1 127.3 158.8 158.1
Capacity
(Gallons in millions)137 160 160 160 160 275
o 50/50 JV with Valero
o The low cost producer of biomass-based diesel to US market – true multi-feedstock capable
o Initial cost to build PP&E $380mm for 137mm gallons
o Expanded capacity to 160mm gallons in 2014
o Expansion to 275mm gallons in Q2 2018. Total cost estimated at 190.0 million.
o Will be 100% LCFS capable with improved logistics by 2018
Providing outstanding returns for DAR and Valero shareholders
o Current total debt in JV stands at $73.4 million. Cash on Balance Sheet of $166.9 million end of 2016 at DGD.
Diamond Green Diesel – a gem of an ingredient
-40
-20
0
20
40
60
80
100 2013 201620152014
2013 YG/UCO
Price$34.57/cwt
2014 YG/UCO
Price$28.95/cwt
2016 YG/UCO
Price$23.77/cwt
2015 YG/UCO
Price$21.95/cwt
.0274 x 4.55mm= $(12.30)
.0562 x 4.55mm= $(25.29)
.0182 x 4.55mm= $8.28
.07 x 4.55mm= $(31.50)
$16.5 $87.2$88.5$81.6
$-12.30
$8.28
$-31.50$-25.29
DGD UCO(Darling’s share EBITDA)
2012 YG/UCO
Price$37.31/cwt
Compared
to
DGD provides a “hedge” on the commodity exposure of Darling’s USA fats
30
o LCFS (State) is separate rule from RFS2 (Federal)
o Mandates reduction of carbon intensity in transportation fuels (in effect in California, Oregon, parts of Canada and other countries)
o California has mandated a 10% reduction by 2020, to help reduce carbon dioxide emissions
o LCFS measurements begin at source
o Darling’s biodiesel and renewable diesel can be used to satisfy the LCFS requirements
o We produce the feedstocks with highest green premium
o This additional demand for low carbon fuels will increase the value of the fats and oils we produce
o DGD will reach new expanded production to service LCFS
Carbon intensity is lifecycle emissions (“well-to-wheels”), referring to
how much total pollution is generated in the production, transport, storage and
use of a transportation fuel. http://www.deq.state.or.us/aq/cleanFuel/qa.htm
(“Released” refers to GHG a plant
emits from the daily operation).
“Captured” represents the equivalent
GHG that would have been released if
the raw material had been landfilled,
composted, incinerated or left on open
land, vs rendering process)
* Gooding, C.H. 2012. Data for the Carbon
Footprinting of Rendering Operations. Journal of
Industrial Ecology. Vol 16, No.2.
Carbon intensity of
our plant processes
BiofuelMandates Globally
http://globalrfa.org/biofuels-map/
https://www.arb.ca.gov/homepage.htm
LCFS Illustrative Fuel Pathway Carbon Intensity – as of 09/17/2015
Our strategy is:
To be THE Recognized Global Leader
in the production, development and marketing of
sustainable protein & nutrient-derived
ingredients.FOOD
FEEDFUEL
INGREDIENTS for a growing population.
We will build, acquire and develop businesses within geographies where
we can achieve a sustainable Top 3 market position within 5 years.
32
oview the world with a long-term horizon
o see meat production grow at or above population growth
oexpand, build and acquire facilities within these protein growth geographies
omaintain our strong model, generating predictable cash
o reduce our debt and keep a strong balance sheet
odeploy capital with a 15-20% ROCE
o invest in new technologies and processes to make world-class value added ingredients
omaintain and grow our global marketshare
o be socially responsible throughout our journey
odevelop people to support our growth!
33
2016 2017 2018
2 USA wet pet plants
USA gelatin expansion
China gelatin expansion
China blood expansion
USA Bakery Feeds plant
Netherlands acquisition
Netherlands de-hiding facility
2 USA rendering plants
China blood expansion
China gelatin expansion
New China gelatin plant
New Euro blood plant
USA rendering expansions
First EnviroFlight plant
DGD expansion
New USA rendering plants
West coast biofuel
South China blood
Euro rendering acquistion
New Euro digester
Potential to add $100-$125 million NEW EBITDA
between 2016 and 2018 meeting our ROCE hurdles
34
North America
• New rendering plants
• Blood plant expansion • Fertilizer expansion • Gelatin expansion
• Bolt on acquisition
• Black Soldier Flies
Europe
• New blood plant • New Ecoson plant
• Geographic expansion
• Gelatin expansion
• Organic fertilizer expansion
• Wet pet food expansion
• Bolt on acquisitions
China
• Enter core rendering
• New and expansion of blood plants
• New and expansion of gelatin plants
Australia
• Enter core rendering
• Blood expansion
South America
• Enter core rendering• Blood entry
• Gelatin expansion
Canada
• Bakery Feeds plant
• Poultry expansion
• Edible rendering acquisition
• Wet pet food entryDAR GLOBAL
GROWTH
• New plants
• Expansion
• Acquisition
• New products
35
Creating sustainable food, feed and fuel ingredients for a growing population
DAR—A GLOBAL GROWTHPLATFORMFORGENERATIONS TO COME
36
37
2016 Overview
• Net income of $102.3 million, or $0.62 per
GAAP diluted share
• Revenue of $3.398 billion
• Adjusted EBITDA of $441.9 million
• DGD joint venture EBITDA - $87.2 million
(Darling’s share)
Key Deliverables in 2016
• Reduced debt by $169.7 million
• Improved leverage ratio from 4.32 to 3.69
• Improved Working Capital by $31.8 million
• Lowered SG&A by $8.6 million
• Deployed $243.5 million in capex
• Bought back $5.0 million of stock in fiscal
2016
• Amended and extended credit agreement
• Commissioned 4 new factories
US$ (millions) except per share price Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Revenue 809.7$ 3,397.4$ 779.6$ 877.3$ 853.9$ 887.3$ 3,398.1$
Gross Margin 179.8 743.4 180.7 200.2 182.7 192.8 756.4
Gross Margin % 22.2% 21.9% 23.2% 22.8% 21.4% 21.7% 22.3%
Operating Income 32.7 142.6 26.7 54.5 35.5 35.4 152.1
EBITDA(1) 102.7 412.5 98.9 124.0 106.2 112.8 441.9
EBITDA Margin % 12.7% 12.1% 12.7% 14.1% 12.4% 12.7% 13.0%
Net income attributable to Darling 84.4$ 78.5$ 1.1$ 32.0$ 28.7$ 40.5$ 102.3$
Earnings per share (fully diluted) 0.52$ 0.48$ 0.01$ 0.19$ 0.17$ 0.25$ 0.62$
(1) Does not inlcude Unconsolidated Subsidiaries EBITDA.
Consolidated Earnings
38Note: See slide 17 for information regarding Darling’s use of Non-GAAP measures.
Adjusted EBITDA
(1) Foreign currency exchange rates held constant for comparable quarters (€1.00:USD$1.117 rate October 1, 2016 quarter; €1.00:USD $1.108 rate January 2, 2016 twelve months).
Adjusted EBITDA and Pro Forma Adjusted EBITDA
(US$ in thousands) December 31, October 1, December 31, January 2,
2016 2016 2016 2016
Net income/(loss) attributable to Darling $ 40,541 $ 28,694 $ 102,313 $ 78,531
Depreciation and amortization 77,468 70,653 289,908 269,904
Interest expense 22,439 23,867 94,187 105,530
Income tax expense/(benefit) 6,213 (744) 15,315 13,501
Foreign currency (gain)/loss (387) (354) 1,854 4,911
Other expense, net (1,819) 2,007 3,866 6,839
Equity in net (income)/loss of unconsolidated subsidiaries (32,746) (18,138) (70,379) (73,416)
Net income attributable to noncontrolling interests 1,139 196 4,911 6,748
Adjusted EBITDA $ 112,848 $ 106,181 $ 441,975 $ 412,548
Acquisition and integration-related expenses - - 401 8,299
Pro forma Adjusted EBITDA (Non-GAAP) $ 112,848 $ 106,181 $ 442,376 $ 420,847
Foreign currency exchange impact (1) 2,481 - 1,980 -
Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) $ 115,329 $ 106,181 $ 444,356 $ 420,847
DGD Joint Venture Adjusted EBITDA (Darling's Share) $ 36,721 $ 22,543 $ 87,224 $ 88,494
Three Months Ended - Sequential Twelve Months Ended - Year over Year
Balance Sheet Highlights
Leverage Ratios
39
December 31, 2016 ActualCredit
Agreement
Total Debt to EBITDA: 3.69 5.50
Debt Summary
(US$, in thousands) December 31, 2016 January 2, 2016
Cash (includes restricted cash of $293K) 114,857$ 157,215$
Accounts receivable 388,397 371,392
Total Inventories 330,815 344,583
Net working capital 441,451 490,120
Net property, plant and equipment 1,515,575 1,508,167
Total assets 4,698,017$ 4,760,619$
Total debt 1,750,943$ 1,931,017$
Shareholders' equity 2,076,222$ 1,974,610$
(US$, in thousands) December 31, 2016 January 2, 2016
Amended Credit Agreement
Revolving Credit Facility 5,280$ 9,358$
Term Loan A 119,020 275,629
Term Loan B 577,202 581,726
5.375% Senior Notes due 2022 492,333 491,048
4.750% Euro Senior Notes due 2022 534,884 550,207
Other Notes and Obligations 22,224 23,049
Total Debt: 1,750,943$ 1,931,017$
Balance Sheet Highlights and Debt Summary
Target debt reduction of $150 million in 2016: year-end target total debt leverage ratio below 3.90
– Paid down debt by $169.7 million in 2016
– Improved leverage ratio from 4.32 to 3.69
– S&P and Moody’s outlook improved to stable
Working Capital utilization improvement target of $20 million over 2015
– Improved working capital by $31.8 million over 2015
– Year over year improvement target remains at $20.0 million
CAPEX spend was $243.5 million in 2016
SG&A targeted at $82 to $83 million/quarter run rate in 2017: Q4 at $79.8 million
Commissioned two new USA Rendering Plants in 2016
Two Wet Pet Food plants beginning to contribute
Broke ground on new blood plant in Germany and new digester facility in Belgium
DGD diesel expansion engineering complete and is set to come on line 2Q 2018
40
2016 Strategy – “Delever and Grow”
Creating sustainable food, feed and fuel ingredients for a growing population
(1) Has impact of inventory step-up in 1st and 2nd quarter in 2014.
(2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week during 2014.
(3) Raw material process volumes for the first quarter 2014 have been adjusted to be consistent with the
presentation of the second quarter figures in 2014.
(A) Quarters 1, 2 and 3 revenues have been adjusted for re-class between sales and cost of sales in 2014.
42
Food Segment - Historical
US$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Revenue (A) $293.5 $331.4 $301.4 $322.0 $1,248.3 $270.2 $283.4 $269.2 $272.1 $1,094.9 $247.9 $272.1 $262.0 $279.9 $1,061.9
Gross Margin (1) 62.3 65.3 64.2 63.4 255.2 53.5 60.2 54.8 62.9 231.4 62.3 57.8 50.7 56.7 227.5
Gross Margin % (1) 21.2% 19.7% 21.3% 19.7% 20.4% 19.8% 21.2% 20.4% 23.1% 21.1% 25.1% 21.3% 19.3% 20.3% 21.4%
Operating Income/(Loss) (2) (12.1) 11.3 14.0 13.7 26.9 10.8 15.5 11.6 23.3 61.2 21.9 19.7 7.9 11.7 61.2
Adjusted Operating Income (1) 20.9 14.7 14 13.7 63.3 10.8 15.5 11.6 23.3 61.2 21.9 19.7 7.9 11.7 61.2
EBITDA (2) 5.3 30.9 32.6 31.4 100.2 28.0 32.3 28.7 39.1 128.1 38.6 37.4 25.3 30.0 131.3
Adjusted EBITDA (1) $38.3 $34.3 $32.6 $31.4 $136.6 $28.0 $32.3 $28.7 $39.1 $128.1 $38.6 $37.4 $25.3 $30.0 $131.3
Adjusted EBITDA/Revenue 13.0% 10.4% 10.8% 9.7% 10.9% 10.4% 11.4% 10.7% 14.4% 11.7% 15.6% 13.7% 9.7% 10.7% 12.4%
Raw Material Processed(millions of metric tons) 0.25 (3) 0.27 0.26 0.28 1.06 0.27 0.28 0.26 0.26 1.07 0.27 0.27 0.26 0.28 1.08
(1) Has impact of inventory step-up in 1st and 2nd quarter of 2014.
(2) Exclusive of non-cash inventory step-up and Darling Ingredients International 13th week during 2014.
(3) Raw material process volumes in 2014 have been adjusted to include additional blending materials.
(A) Quarters 1, 2 and 3 revenues have been adjusted for re-class between sales and cost of sales in 2014.
43Feed Segment - Historical
US$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015
Total
2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Revenue (A) $586.1 $622.1 $607.3 $606.0 $2,421.5 $547.5 $529.4 $525.2 $472.2 $2,074.3 $476.2 $543.0 $531.4 $538.5 $2,089.1
Gross Margin (1) 142.5 165.4 132.5 132.5 572.9 123.5 124.5 116.2 96.7 460.9 103.5 126.8 117.8 116.2 464.3
Gross Margin % (1) 24.3% 26.6% 21.8% 21.9% 23.7% 22.6% 23.5% 22.1% 20.5% 22.2% 21.7% 23.4% 22.2% 21.6% 22.2%
Operating Income (2) 37.5 74.7 46.4 33.6 192.2 35.4 35.4 35.6 10.1 116.5 13.9 41.4 35.2 25.3 115.8
Adjusted Operating Income (1) 52.3 76.2 46.4 33.6 208.5 35.4 35.4 35.6 10.1 116.5 13.9 41.4 35.2 25.3 115.8
EBITDA (2) 76.1 114.6 84.2 76.4 351.3 75.5 75.9 76.5 54.4 282.3 58.3 83.5 78.9 73.9 294.6
Adjusted EBITDA (1) $90.9 $116.1 $84.2 $76.4 $367.6 $75.5 $75.9 $76.5 $54.4 $282.3 $58.3 $83.5 $78.9 $73.9 $294.6
Adjusted EBITDA/Revenue 15.5% 18.7% 13.9% 12.6% 15.2% 13.8% 14.3% 14.6% 11.5% 13.6% 12.2% 15.4% 14.8% 13.7% 14.1%
Raw Material Processed (3)
(millions of metric tons) 1.73 1.73 1.73 1.92 7.11 1.87 1.83 1.86 1.89 7.45 1.97 1.97 1.97 2.06 7.97
44
2016 Finished Product Pricing 2017
Feed Segment Ingredients January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. Nov. Dec. Q4 Avg. Year Avg. January
Bleachable Fancy Tallow - Chicago Renderer / cwt $23.53 $27.10 $30.09 $27.07 $32.93 $32.81 $31.64 $32.57 $29.95 $28.00 $28.00 $28.59 $28.43 $32.00 $32.00 $30.77 $29.75 $32.00
Yellow Grease - Illinois / cwt $19.03 $20.89 $23.51 $21.25 $26.40 $27.56 $25.95 $26.77 $24.54 $23.86 $23.71 $24.01 $23.31 $22.76 $22.96 $23.05 $23.77 $23.42
Meat and Bone Meal - Ruminant - Illinois / ton $184.74 $198.38 $272.84 $220.98 $314.17 $305.00 $356.59 $328.26 $378.75 $325.98 $272.02 $325.56 $230.00 $219.88 $217.26 $223.24 $274.51 $258.03
Poultry By-Product Meal - Feed Grade - Mid South/ton $247.11 $235.00 $263.64 $249.10 $308.10 $296.79 $307.73 $305.58 $380.88 $392.83 $313.33 $364.37 $277.50 $277.50 $288.21 $281.43 $300.12 $290.00
Poultry By-Product Meal - Pet Food - Mid South/ton $498.03 $497.50 $521.48 $506.31 $573.81 $505.83 $588.64 $557.81 $649.38 $596.30 $534.17 $593.47 $533.33 $551.25 $628.45 $571.09 $557.17 $648.68
Feathermeal - Mid South / ton $255.39 $244.88 $325.45 $277.21 $409.88 $319.05 $342.73 $358.91 $476.88 $452.61 $362.98 $432.57 $325.00 $344.25 $400.95 $356.91 $356.40 $455.00
2016 Cash Corn Pricing
Competing Ingredient for Bakery Feeds and Fats January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. Nov. Dec. Q4 Avg. Year Avg. January
Corn - Track Central IL #2 Yellow / bushel $3.58 $3.54 $3.52 $3.55 $3.63 $3.77 $3.85 $3.75 $3.28 $3.09 $3.10 $3.16 $3.28 $3.29 $3.32 $3.30 $3.44 $3.46
European Benchmark Pricing
2016 January February March Q1 Avg. April May June Q2 Avg. July August Sept. Q3 Avg. Oct. Nov. Dec. Q4 Avg. Year Avg. January
Palm oil - CIF Rotterdam / metric ton $565 $646 $686 $632 $720 $702 $684 $702 $648 $719 $749 $705 $718 $748 $789 $752 $697.75 $804
Soy meal - CIF Rotterdam / metric ton $339 $326 $320 $328 $341 $420 $465 $409 $439 $399 $372 $403 $363 $358 $360 $360 $375.08 $371
2016 Average Thomson Reuters Prices (USD)
2016 Average Jacobsen Prices (USD)
2016 Average Wall Street Journal Prices (USD)
Jacobsen, Wall Street Journal and Thomson Reuters
Historical Pricing
QTR. Over QTR. Year Over YearComparison Q3-2016 Q4-2016 % Q4-2015 Q4-2016 %
Average Jacobsen Prices (USD) Avg. Avg. Change Avg. Avg. Change
Bleachable Fancy Tallow - Chicago Renderer / cwt $28.59 $30.77 7.6% $21.18 $30.77 45.3%
Yellow Grease - Illinois / cwt $24.01 $23.05 -4.0% $17.86 $23.05 29.1%
Meat and Bone Meal - Ruminant - Illinois / ton $325.56 $223.24 -31.4% $249.29 $223.24 -10.4%
Poultry By-Product Meal - Feed Grade - Mid South / ton $364.37 $281.43 -22.8% $334.67 $281.43 -15.9%
Poultry By-Product Meal - Pet Food - Mid South / ton $593.47 $571.09 -3.8% $469.49 $571.09 21.6%
Feathermeal - Mid South / ton $432.57 $356.91 -17.5% $367.06 $356.91 -2.8%
Average Wall Street Journal Prices (USD)
Corn - Track Central IL #2 Yellow / bushel $3.16 $3.30 4.4% $3.64 $3.30 -9.3%
Average Thomson Reuters Prices (USD)
Palm oil - CIF Rotterdam / metric ton $705 $752 6.7% $563 $752 33.6%
Soy meal - CIF Rotterdam / metric ton $403 $360 -1.5% $352 $360 2.3%
4545
Feed, $438
Feed, $282
Food, $133
Food, $128
Fuel, $71
Fuel, $132
Corp, -$32 Corp, -$33
$57
$32$55
$29$72
-$100
$0
$100
$200
$300
$400
$500
$600
$700
2013 ProFormaEBITDA
UCO Bakery FX DGD Other 2015 ProFormaEBITDA
• 1 billion lbs. collected
• 70% Yield
• 65% Non-Formula
• Each $0.01 Fat Price change is $4.5m EBITDA
• UCO AVG. Pricing
• 2013: $34.5/cwt
• 2015: $21.8/cwt
Change: $12.7 x 4.5m
($57.0)
Shared Model
• 2013 corn $6.22/bu.
• 2015 corn $3.89/bu.
Change:($32.0)
Int’l Operations
• 2013 FX
• EUR 1.327
• CAD .972
• 2015 FX
• EUR 1.108
• CAD 0.774
Change ($55.0)
EBITDADarling’s Share
• 2013: $16.5
• 2015: $88.5
Change: $72.0
• Lower Protein + Fat value on Non-Formula basis
Change: ($29.0)
$610
$509
Note: Fuel segment includes Darling’s share of DGD EBITDA
cwt = 100 pounds, bu. = bushel
$ in millions
(A) Quarters 1, 2 and 3 revenues in 2014 have been adjusted for
re-class between sales and cost of sales.
46
(1) Exclusive of non-cash inventory step-up and Darling Ingredients International’s 13th week in 2014.
(2) Has impact of inventory step-up in 1st quarter and Darling Ingredients Int'l 13th week in 2014.
(3) Raw material process volumes for the first quarter 2014 have been adjusted to be consistent
with the presentation of the second quarter figures 2014.
(4) Pro forma Adjusted EBITDA includes blenders tax credit throughout full years in 2014 and 2015.
Fuel Segment - Historical
US$ and metric tons
(millions)
Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015Total 2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
Revenue $66.7 $77.7 $70.0 $72.2 $286.6 $57.0 $46.5 $59.3 $65.4 $228.2 $55.6 $62.3 $60.4 $68.8 $247.1
Gross Margin 15.3 15.9 17.8 10.0 59.0 13.2 6.3 11.4 20.2 51.1 14.9 15.6 14.2 19.9 64.6
Gross Margin % 21.1% 20.5% 25.4% 13.9% 20.6% 23.1% 13.5% 19.2% 30.9% 22.4% 26.8% 25.0% 23.5% 28.9% 26.1%
Operating Income (1) 2.3 5.2 2.8 10.9 21.2 2.5 2.0 0.2 12.5 17.2 6.1 6.6 6.0 10.5 29.2
Adjusted Operating Income (2) 3.5 5.2 2.8 10.9 22.4 2.5 2.0 0.2 12.5 17.2 6.1 6.6 6.0 10.5 29.2
EBITDA (2) 9.7 11.1 11.5 16.9 49.2 9.1 8.6 7.0 19.2 43.9 13.0 13.8 12.9 18.0 57.7
Adjusted EBITDA (1) 10.9 11.1 11.5 16.9 50.4 9.1 8.6 7.0 19.2 43.9 13.0 13.8 12.9 18.0 57.7
Pro forma Adjusted EBITDA (4) $12.2 $12.3 $13.0 $12.8 $50.4 $10.2 $10.6 $9.1 $14.0 $43.9 $13.0 $13.8 $12.9 $18.0 $57.7
Adjusted EBITDA/Revenue 16.3% 14.3% 16.4% 23.4% 17.6% 16.0% 18.5% 11.8% 29.4% 19.2% 23.4% 22.2% 21.4% 26.2% 23.4%
Raw Material Processed *(millions of metric tons) 0.23 (3) 0.24 0.26 0.33 1.07 0.30 0.29 0.27 0.31 1.17 0.28 0.30 0.29 0.31 1.18
*Excludes raw material processed at the DGD joint venture.
Diamond Green Diesel (50% Joint Venture)
US$ (millions)Q1
2014
Q2
2014
Q3
2014
Q4
2014
Total
2014
Q1
2015
Q2
2015
Q3
2015
Q4
2015Total 2015
Q1
2016
Q2
2016
Q3
2016
Q4
2016
Total
2016
EBITDA (Darling's share) $9.1 $5.9 $2.9 $63.7 $81.6 $2.3 $7.9 ($8.3) $86.6 $88.5 $9.6 $18.3 $22.5 $36.7 $87.2
Pro forma Adjusted EBITDA (4) $22.9 $24.3 $12.5 $21.8 $81.6 $19.6 $30.2 $11.7 $27.0 $88.5 $9.6 $18.3 $22.5 $36.7 $87.2
47
• JV with Intrexon – April 2016
• Black soldier fly larvae for a sustainable, cost-effective and complete aquaculture feed source
• Larvae feed off limited-use waste streams*; produce frass which is used as a high-protein, low-fat feed ingredient – for aquaculture and animal feed
• Larvae is processed into meal that’s 40% protein/46% fat; oils can be extracted raising protein to over 70% (aquaculture feed)
• Targeted primarily as feed for aquaculture, reducing dependency on fish and fish oil as an aquaculture food source
• Frass can also be used as a natural, animal-safe fertilizer (N-P-K – 5%-3%-2%)
*uses co-products from ethanol production, breweries, and pre-consumer food waste
“We produce the insect proteins to feed the fish, to feed the people.”
48
Respecting the Environment
In a world of limited natural resources, we must strive to maximize their use. We give a second life to materials that would otherwise be discarded by turning them into food, feed or fuel ingredients, thus positively impacting our environment.
Optimizing Nutrition & Health
Lifestyle-related diseases are on the increase. Ingredients that can lower the use of salt, sugar and fat in our diets can make an important contribution to a healthier lifestyle. Nature provides a wide range of bio-functional ingredients that can have a positive effect on human and animal health. Our extensive R&D programs are continually looking for innovative ways to use our value added ingredients.
Giving Back to Communities
Our company is intrinsically tied to providing solutions for society's needs; we also place great importance on being a good neighbor to our local communities.
Visit closingtheloops.net for more information
about our sustainability efforts and commitment.
Our three pillars of social responsibility
Process USA Canada Europe China S. America Australia Total:
Rendering - (C3 By-products & UCO) 92 5 18 115
Bakery 10 10
Used Cooking Oil processing only 8 1 9
Disposal Rendering - (C1 & C2) 6 6
Food Grade Fat Processing 5 5
Blood Processing 1 4 5 1 11
Bone Processing 2 2
Bio Diesel 1 1 2
Renewable Diesel 1 1
Gelatin 2 4 4 3 13
Casings 4 1 5
Environmental Services 4 1 5
Fertilizer 1 1
Pet Food 3 1 4
Hides 3 3 6
126 6 49 10 3 1 195Under Construction:
49
European categories for rendering of animal by-products:
• C3 – food-grade material, for food and feed products
• C2 – unfit for food or animal feed, can be used as fertilizer
• C1 – must be destroyed; used to generate green energy
*
Note: List excludes administrative and dedicated sales offices.
* Includes transfer stations and blending facilities
Locations by Continent and Process
50
Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the Company’s operating
performance and is not intended to be a presentation in accordance with GAAP. Since EBITDA (generally, net income plus interest
expenses, taxes, depreciation and amortization) is not calculated identically by all companies, this presentation may not be
comparable to EBITDA or adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated in this
presentation and represents, for any relevant period, net income/(loss) plus depreciation and amortization, goodwill and long-lived
asset impairment, interest expense, (income)/loss from discontinued operations, net of tax, income tax provision, other
income/(expense) and equity in net loss of unconsolidated subsidiary. Management believes that Adjusted EBITDA is useful in
evaluating the Company’s operating performance compared to that of other companies in its industry because the calculation of
Adjusted EBITDA generally eliminates the effects of financing income taxes and certain non-cash and other items that may vary for
different companies for reasons unrelated to overall operating performance.
As a result, the Company’s management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary
purposes. However, Adjusted EBITDA is not a recognized measurement under GAAP, should not be considered as an alternative to
net income as a measure of operating results or to cash flow as a measure of liquidity, and is not intended to be a presentation in
accordance with GAAP. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance
with certain financial covenants under the Company’s Senior Secured Credit Facilities and 5.375% Notes and 4.75% Notes that
were outstanding at December 31, 2016. However, the amounts shown in this presentation for Adjusted EBITDA differ from the
amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities and 5.375% Notes and
4.75% Notes, as those definitions permit further adjustments to reflect certain other non-recurring costs and non-cash charges and
cash dividends from the DGD Joint Venture. Additionally, the Company evaluates the impact of foreign exchange on operating cash
flow, which is defined as segment operating income (loss) plus depreciation and amortization.
