Darling Ingredients Earnings 2020-09-26

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

dar-20200926

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


	(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	September 26, 2020
	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______

Commission File Number 001-13323

DARLING INGREDIENTS INC.

(Exact name of registrant as specified in its charter)


Delaware									36-2495346
(State or other jurisdiction									(I.R.S. Employer
of incorporation or organization)									Identification Number)

5601 N MacArthur Blvd., Irving, Texas 75038

(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (972) 717-0300

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock $0.01 par value per share	DAR	New York Stock Exchange	(“NYSE”)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period

for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of Exchange Act.

☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were 162,068,484 shares of common stock, $0.01 par value, outstanding at October 28, 2020.

DARLING INGREDIENTS INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 26, 2020

TABLE OF CONTENTS


		Page No.
	PART I: FINANCIAL INFORMATION

Item 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets	3
	September 26, 2020 (unaudited) and December 28, 2019

	Consolidated Statements of Operations (unaudited)	4
	Three and Nine Months Ended September 26, 2020 and September 28, 2019

	Consolidated Statements of Comprehensive Income/(Loss) (unaudited)	5
	Three and Nine Months Ended September 26, 2020 and September 28, 2019

	Consolidated Statement of Stockholders' Equity (unaudited)	6
	Nine Months Ended September 26, 2020 and September 28, 2019

	Consolidated Statements of Cash Flows (unaudited)	8
	Nine Months Ended September 26, 2020 and September 28, 2019

	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	43

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	64

Item 4.	CONTROLS AND PROCEDURES	66


	PART II: OTHER INFORMATION

Item 1.	LEGAL PROCEEDINGS	67

Item 1A.	RISK FACTORS	67

Item 6.	EXHIBITS	68

	Signatures	69

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 26, 2020 and December 28, 2019

(in thousands, except share data)


	September 26, 2020		December 28, 2019
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	65,845	$	72,935
Restricted cash	110		110
Accounts receivable, less allowance for bad debts of $10,491 at September 26, 2020 and $8,802 at December 28, 2019	373,583		406,338
Inventories	406,805		362,957
Prepaid expenses	52,359		46,599
Income taxes refundable	3,940		3,317
Other current assets	28,532		25,032
Total current assets	931,174		917,288
Property, plant and equipment, less accumulated depreciation of $1,604,081 at September 26, 2020 and $1,438,388 at December 28, 2019	1,789,172		1,802,411
Intangible assets, less accumulated amortization of $532,124 at September 26, 2020 and $482,442 at December 28, 2019	474,793		526,394
Goodwill	1,239,343		1,223,291
Investment in unconsolidated subsidiaries	742,875		689,354
Operating lease right-of-use assets	142,269		124,726
Other assets	45,598		47,400
Deferred income taxes	15,762		14,394
	$	5,380,986	$	5,345,258
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	26,185	$	90,996
Accounts payable, principally trade	206,998		239,252
Income taxes payable	19,013		8,895
Current operating lease liabilities	40,973		37,805
Accrued expenses	330,385		311,391
Total current liabilities	623,554		688,339
Long-term debt, net of current portion	1,448,019		1,558,429
Long-term operating lease liabilities	105,821		91,424
Other non-current liabilities	102,559		115,785
Deferred income taxes	265,844		247,931
Total liabilities	2,545,797		2,701,908
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 250,000,000 shares authorized; 169,578,370 and 168,620,314 shares issued at September 26, 2020 and at December 28, 2019, respectively	1,696		1,686
Additional paid-in capital	1,589,479		1,560,897
Treasury stock, at cost; 7,511,271 and 4,845,203 shares at September 26, 2020 and at December 28, 2019, respectively	(143,826)		(75,022)
Accumulated other comprehensive loss	(325,608)		(321,847)
Retained earnings	1,652,179		1,400,105
Total Darling's stockholders’ equity	2,773,920		2,565,819
Noncontrolling interests	61,269		77,531
Total stockholders' equity	$	2,835,189	$	2,643,350
	$	5,380,986	$	5,345,258

The accompanying notes are an integral part of these consolidated financial statements.

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three and nine months ended September 26, 2020 and September 28, 2019

(in thousands, except per share data)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net sales	$	850,569	$	842,049	$	2,552,084	$	2,504,477
Costs and expenses:
Cost of sales and operating expenses	638,368		652,923		1,917,623		1,948,552
Loss/(gain) on sale of assets	122		(2,669)		210		(20,845)
Selling, general and administrative expenses	89,993		83,549		276,379		249,569


Depreciation and amortization	85,730		80,407		253,711		239,057
Total costs and expenses	814,213		814,210		2,447,923		2,416,333
Equity in net income of Diamond Green Diesel	91,099		32,020		252,411		94,390
Operating income	127,455		59,859		356,572		182,534

Other expense:
Interest expense	(18,793)		(19,359)		(55,803)		(60,088)
Debt extinguishment costs	—		—		—		(12,126)
Foreign currency gain/(loss)	(1,239)		466		(709)		(654)

Other expense, net	(1,912)		(2,614)		(5,278)		(7,158)
Total other expense	(21,944)		(21,507)		(61,790)		(80,026)

Equity in net income/(loss) of other unconsolidated subsidiaries	906		(665)		2,467		(1,087)
Income before income taxes	106,417		37,687		297,249		101,421

Income tax expense	4,812		10,850		43,058		23,900

Net income	101,605		26,837		254,191		77,521

Net income attributable to noncontrolling interests	(480)		(1,116)		(2,117)		(7,530)

Net income attributable to Darling	$	101,125	$	25,721	$	252,074	$	69,991

Basic income per share	$	0.62	$	0.16	$	1.55	$	0.42
Diluted income per share	$	0.61	$	0.15	$	1.51	$	0.42

The accompanying notes are an integral part of these consolidated financial statements.

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

Three and nine months ended September 26, 2020 and September 28, 2019

(in thousands)

(unaudited)


	Three Months Ended				Nine Months Ended
	September 26, 2020		September 28, 2019		September 26, 2020		September 28, 2019
Net income	$	101,605	$	26,837	$	254,191	$	77,521
Other comprehensive income/(loss), net of tax:
Foreign currency translation	37,854		(47,626)		(7,243)		(36,186)
Pension adjustments	648		859		1,943		2,576


Corn option derivative adjustments	(2,518)		553		(578)		575
Heating oil derivative adjustments	1,494		(1,683)		3,424		450
Foreign exchange derivative adjustments	1,412		(4,944)		(2,060)		(5,430)
Total other comprehensive income/(loss), net of tax	38,890		(52,841)		(4,514)		(38,015)
Total comprehensive income/(loss)	$	140,495	$	(26,004)	$	249,677	$	39,506
Comprehensive income attributable to noncontrolling interests	456		1,120		1,364		7,822
Comprehensive income/(loss) attributable to Darling	$	140,039	$	(27,124)	$	248,313	$	31,684

The accompanying notes are an integral part of these consolidated financial statements.

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Nine months ended September 26, 2020 and September 28, 2019

(in thousands, except share data)

(unaudited)


	Common Stock
	Number of Outstanding Shares	$0.01 par Value		Additional Paid-In Capital		Treasury Stock		Accumulated Other Comprehensive Loss		Retained Earnings		Stockholders' equity attributable to Darling		Non-controlling Interests		Total Stockholders' Equity
Balances at December 28, 2019	163,775,111	$	1,686	$	1,560,897	$	(75,022)	$	(321,847)	$	1,400,105	$	2,565,819	$	77,531	$	2,643,350
Net income	—	—		—		—		—		85,510		85,510		581		86,091

Deductions to noncontrolling interests	—	—		3,271		—		—		—		3,271		(13,146)		(9,875)
Pension liability adjustments, net of tax	—	—		—		—		648		—		648		—		648

Heating oil derivative adjustment, net of tax	—	—		—		—		10,870		—		10,870		—		10,870
Corn option derivative adjustment, net of tax	—	—		—		—		136		—		136		—		136
Foreign exchange derivative adjustment, net of tax	—	—		—		—		(9,151)		—		(9,151)		—		(9,151)
Foreign currency translation adjustments	—	—		—		—		(65,147)		—		(65,147)		(89)		(65,236)
Issuance of non-vested stock	8,000	—		40		—		—		—		40		—		40
Stock-based compensation	—	—		10,778		—		—		—		10,778		—		10,778
Treasury stock	(2,372,876)	—		—		(60,082)		—		—		(60,082)		—		(60,082)
Issuance of common stock	447,729	5		868		—		—		—		873		—		873
Balances at March 28, 2020	161,857,964	$	1,691	$	1,575,854	$	(135,104)	$	(384,491)	$	1,485,615	$	2,543,565	$	64,877	$	2,608,442
Net income	—	—		—		—		—		65,439		65,439		1,056		66,495
Deductions to noncontrolling interest	—	—		—		—		—		—		—		(299)		(299)
Pension liability adjustments, net of tax	—	—		—		—		647		—		647		—		647
Heating oil derivative adjustment, net of tax	—	—		—		—		(8,940)		—		(8,940)		—		(8,940)
Corn option derivative adjustment, net of tax	—	—		—		—		1,804		—		1,804		—		1,804
Foreign exchange derivative adjustment, net of tax	—	—		—		—		5,679		—		5,679		—		5,679
Foreign currency translation adjustments	—	—		—		—		20,779		—		20,779		(640)		20,139
Issuance of non-vested stock	—	—		55		—		—		—		55		—		55
Stock-based compensation	—	—		4,693		—		—		—		4,693		—		4,693
Treasury stock	(72,540)	—		—		(1,572)		—		—		(

Price	19.80	EPS	1
Shares	168	P/E	28
MCap	3,335	P/FCF	13
Net Debt	1,491	EBIT	144
TEV	4,826	TEV/EBIT	34
TTM 2019-09-28, in MM, except price, ratios

10-Q	2020-09-26	Filed 2020-11-03
10-Q	2020-06-27	Filed 2020-08-05
10-Q	2020-03-28	Filed 2020-05-06
10-K	2019-12-28	Filed 2020-02-25
10-Q	2019-09-28	Filed 2019-11-06
10-Q	2019-06-29	Filed 2019-08-07
10-Q	2019-03-30	Filed 2019-05-08
10-K	2018-12-29	Filed 2019-02-27
10-Q	2018-09-29	Filed 2018-11-06
10-Q	2018-06-30	Filed 2018-08-08
10-Q	2018-03-31	Filed 2018-05-09
10-K	2017-12-30	Filed 2018-02-27
10-Q	2017-09-30	Filed 2017-11-07
10-Q	2017-07-01	Filed 2017-08-09
10-Q	2017-04-01	Filed 2017-05-11
10-K	2016-12-31	Filed 2017-02-28
10-Q	2016-10-01	Filed 2016-11-10
10-Q	2016-07-02	Filed 2016-08-11
10-Q	2016-04-02	Filed 2016-05-12
10-K	2016-01-02	Filed 2016-03-01
10-Q	2015-10-03	Filed 2015-11-12
10-Q	2015-07-04	Filed 2015-08-13
10-Q	2015-04-04	Filed 2015-05-14
10-K	2015-01-03	Filed 2015-03-04
10-Q	2014-09-27	Filed 2014-11-06
10-Q	2014-06-28	Filed 2014-08-07
10-Q	2014-03-29	Filed 2014-05-08
10-K	2013-12-28	Filed 2014-02-26
10-Q	2013-09-28	Filed 2013-11-07
10-Q	2013-06-29	Filed 2013-08-08
10-Q	2013-03-30	Filed 2013-05-09
10-K	2012-12-29	Filed 2013-02-27
10-Q	2012-09-29	Filed 2012-11-08
10-Q	2012-06-30	Filed 2012-08-09
10-Q	2012-03-31	Filed 2012-05-10
10-K	2011-12-31	Filed 2012-02-29
10-Q	2011-10-01	Filed 2011-11-10
10-Q	2011-07-02	Filed 2011-08-11
10-Q	2011-04-02	Filed 2011-05-12
10-K	2011-01-01	Filed 2011-03-02
10-Q	2010-10-02	Filed 2010-11-10
10-Q	2010-07-03	Filed 2010-08-12
10-Q	2010-04-03	Filed 2010-05-13
10-K	2010-01-02	Filed 2010-03-03

8-K	2020-11-03
8-K	2020-09-18
8-K	2020-08-05
8-K	2020-05-06
8-K	2020-05-05
8-K	2020-03-02
8-K	2020-02-25
8-K	2020-01-15
8-K	2020-01-02
8-K	2019-11-06
8-K	2019-09-09
8-K	2019-08-07
8-K	2019-05-14
8-K	2019-05-08
8-K	2019-05-07
8-K	2019-05-01
8-K	2019-04-02
8-K	2019-03-28
8-K	2019-03-27
8-K	2019-03-19
8-K	2019-02-27
8-K	2018-11-07
8-K	2018-11-05
8-K	2018-11-05
8-K	2018-10-11
8-K	2018-10-05
8-K	2018-08-08
8-K	2018-05-21
8-K	2018-05-16
8-K	2018-05-09
8-K	2018-05-08
8-K	2018-05-02
8-K	2018-04-25
8-K	2018-04-23
8-K	2018-02-27
8-K	2018-01-15

EX-31.1	ex311-20200926.htm
EX-31.2	ex312-20200926.htm
EX-32	ex32-20200926.htm

DAR 10Q Quarterly Report

Darling Ingredients Earnings 2020-09-26