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SIDLEY AUSTIN LLP

1501 K STREET, N.W.

WASHINGTON, DC 20005

+1 202 736 8000

+1 202 736 8711 FAX

   
     

+1 202 736 8387

SBARROS@SIDLEY.COM

   AMERICA • ASIA PACIFIC • EUROPE   

November 1, 2024

VIA EDGAR CORRESPONDENCE

Ms. Melissa Gilmore

Division of Corporation Finance

United States Securities and Exchange Commission

Mail Stop 4628

100 F Street, N.E.

Washington, DC 20549-4628

 

Re:

Darling Ingredients Inc.

Form 10-K for the Fiscal Year Ended December 30, 2023

Filed February 28, 2024

Form 8-K Furnished July 25, 2024

File No. 001-13323

Dear Ms. Gilmore:

On behalf of Darling Ingredients Inc., a Delaware corporation (the “Company”), we are submitting the following responses to the SEC Staff’s comments made in its letter of October 21, 2024 (the “Comment Letter”) addressed to the Company in connection with the Company’s Form 10-K filed on February 28, 2024 (the “2023 Form 10-K”), and the Company’s Form 8-K furnished on July 25, 2024 (the “Form 8-K”).

For convenience, the Staff’s comments have been reproduced in bold text in this letter with the Company’s responses thereto below each corresponding comment.

Form 10-K for the Fiscal Year Ended December 30, 2023

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Financing, Liquidity, and Capital Resources Indebtedness, page 62

 

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1. We note your disclosure on page 64 that certain debt is guaranteed by Darling and certain of Darling’s subsidiaries, but the summarized financial information pursuant to Rule 13-01(a)(4) of Regulation S-X has been omitted. Please tell us your consideration for providing such summarized financial information or explain to us and disclose in future filings if you meet any of the conditions pursuant to Rule 13- 01(a)(4)(vi) of Regulation S-X.

Historically, the Company had publicly registered notes which required footnote disclosures pursuant to Rule 3-10 of Regulation S-X. In fiscal year 2019, the Company’s publicly registered notes were paid off leaving the Company only with notes that were privately issued pursuant to Rule 144A and thus were not required to be registered. While not required, the Company disclosed summarized financial information pursuant to Rule 13-01(a)(4) of Regulation S-X in its Form 10-K through fiscal year 2021. Starting in fiscal year 2022, since the Company’s only remaining notes were privately issued pursuant to Rule 144A, the summarized financial information pursuant to Rule 13-01(a)(4) of Regulation S-X has been omitted from our disclosures.

Form 10-K for the Fiscal Year Ended December 30, 2023

Consolidated Statements of Operations, page 82

2. Please revise future filings to indicate on the face of the statement of operations parenthetically that cost of sales excludes depreciation and amortization. Refer to SAB Topic 11.B for guidance. Additionally, consider disclosing the types of expenses that you include in the cost of sales and operating expenses line item and the types of expenses that you include in the selling, general and administrative expenses line item within your MD&A discussion.

As requested by the Staff, the Company revised its presentation on the face of the Statement of Operations in its Q3 2024 Press Release furnished as Exhibit 99.1 to the Company’s Form 8-K filed on October 24, 2024 and plans to revise its presentation on the face of the Statement of Operations in its Q3 2024 10-Q expected to be filed on November 6, 2024, as well as all future filings, to parenthetically disclose that cost of sales and other operating expenses excludes depreciation and amortization as presented below:

 

     Three Months Ended      Nine Months Ended  
     September 28,
2024		      September 30,
2023		      September 28,
2024		      September 30,
2023		  

Cost of sales and operating expenses (excludes depreciation and amortization, shown separately below)

      1,108,319        1,238,733        3,353,406        3,965,408  

 

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An example of how this presentation would have looked on the face of the Company’s Statement of Operations in its most recently filed Form 10-K for the fiscal year ended December 30, 2023 is presented below:

DARLING INGREDIENTS INC. AND SUBSIDIARIES

Consolidated Statement of Operations

Three years ended December 30, 2023

(In thousands, except per share data)

 

     December 30,
2023		      December 31,
2022		      January 1,
2021		  

Cost of sales and operating expenses (excludes depreciation and amortization, shown separately below)

      5,143,060        5,002,609        3,499,385  

As requested by the Staff, the Company also plans to revise its presentation within its MD&A discussion section in its Q3 2024 10-Q expected to be filed on November 6, 2024, as well as all future filings, to disclose the types of expenses that it includes in the cost of sales and operating expenses line item and the types of expenses it includes in the selling, general and administrative expenses line item below its quarterly and year-to-date segment table presentation as presented below:

 

  (1)

Cost of sales and operating expenses includes the cost of raw materials, collection costs of the raw materials and factory expenses including direct labor.

 

  (2)

Selling, general and administrative expenses include payroll related costs including incentive pay and stock compensation, insurance related costs, professional fees, IT related costs, travel costs and other costs.

Form 10-K for the Fiscal Year Ended December 30, 2023

Note 23. Related Party Transactions, page 133

3. We note your related party transaction disclosures related to sales to the DGD Joint Venture. Please identify on the face of your consolidated statements of operations the amounts of the related party transactions and balances in future filings pursuant to Rule 4-08(k) of Regulation S-X.

 

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As requested by the Staff, the Company revised its presentation on the face of the Statement of Operations in its Q3 2024 Press Release furnished as Exhibit 99.1 to the Company’s Form 8-K filed on October 24, 2024 and plans to revise its presentation on the face of the Statement of Operations in its Q3 2024 10-Q expected to be filed on November 6, 2024, as well as all future filings, to disclose the amount of related party sales to Diamond Green Diesel pursuant to Rule 4-08(k) of Regulation S-X as presented below:

 

     Three Months Ended      Nine Months Ended  
     September 28,
2024		      September 30,
2023		      September 28,
2024		      September 30,
2023		  

Net sales to third parties

    $  1,157,075      $  1,348,602      $ 3,551,392      $  4,233,769  

Net sales to related party - Diamond Green Diesel

      264,816        276,602        746,090        940,228  
  

 

 

     

 

 

     

 

 

     

 

 

  

Total net sales

      1,421,891        1,625,204        4,297,482        5,173,997  

An example of how this presentation would have looked on the face of the Company’s Statement of Operations in its most recently filed Form 10-K for the fiscal year ended December 30, 2023 is presented below:

DARLING INGREDIENTS INC. AND SUBSIDIARIES

Consolidated Statement of Operations

Three years ended December 30, 2023

(In thousands, except per share data)

 

     December 30,
2023		      December 31,
2022		      January 1,
2021		  

Net sales to third parties

    $ 5,460,259      $  5,390,707      $ 4,219,714  

Net sales to related party - Diamond Green Diesel

      1,327,821        1,141,497        521,655  
  

 

 

     

 

 

     

 

 

  

Total net sales

      6,788,080        6,532,204        4,741,369  

Form 8-K Furnished July 25, 2024

Exhibit 99.1, page 1

4. We note you present Segment EBITDA and Combined adjusted EBITDA for each segment in the press release. We also note your disclosure of segment income on a consolidated basis. Please note a segment measure of profitability not considered your measure of profitability under ASC 280 is considered a non-GAAP financial measure and subject to the guidance in Item 10(e) of Regulation S-K. In this regard, please reconcile the differences between the non-GAAP financial measures and the comparable GAAP measure, tell us how management uses these measures, and revise to disclose why management believes these measures are useful to investors. Refer to Item 10(e)(1)(i)(B) of Regulation S-X and Question 103.02 of the Staff’s Compliance and Disclosure Interpretations on Non-GAAP Financial Measures for guidance.

 

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As requested by the Staff, the Company will revise its earnings press releases beginning with its Q4 2024 release to provide tables that reconcile the difference between non-GAAP financial measures and the comparable GAAP measures as they relate to Segment Adjusted EBITDA and Combined Adjusted EBITDA for each segment. Since this change will not be implemented until the Q4 2024 release, the Company prepared a reconciliation table related to its Q2 2024 segment tables as an example of such a presentation that it plans to utilize in its Q4 2024 press release as presented below:

Darling Ingredients Inc.

Segment Financial Tables

(in thousands, unaudited)

 

     Feed
Ingredients		     Food
Ingredients		      Fuel
Ingredients		     Corporate     Total  

Three Months Ended June 29, 2024

            

Total net sales

    $ 934,147     $ 378,841      $ 142,304     $ —      $ 1,455,292  

Cost of sales and operating expenses

      737,871       276,760        113,790       —        1,128,421  
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

Gross margin

      196,276       102,081        28,514       —        326,871  
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

Loss (gain) on sale of assets

      205       37        (20 )      —        222  

Selling, general and administrative expenses

      74,015       28,844        8,409       18,463       129,731  

Restructuring and asset impairment charges

      —        —         —        —        —   

Acquisition and integration costs

      —        —         —        1130       1,130  

Change in fair value of contingent consideration

      (33,122 )      —         —        —        (33,122 ) 

Depreciation and amortization

      86,444       27,372        8,723       2,066       124,605  

Equity in net income of Diamond Green Diesel

      —        —         44,197       —        44,197  

Segment operating income/(loss)

    $ 68,734     $ 45,828      $ 55,599     $ (21,659 )    $ 148,502  

Equity in net income of other unconsolidated subsidiaries

      3017       —         —        —        3,017  
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

Segment income/(loss)

    $ 71,751     $ 45,828      $ 55,599     $ (21,659 )    $ 151,519  
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

Reconciliation of Segment income/(loss) to (Non-GAAP) Segment

Adjusted EBITDA and (Non-GAAP) Combined Adjusted EBITDA:

 

 

  

Segment income/(loss)

    $ 71,751     $ 45,828      $ 55,599     $ (21,659 )      151,519  

Acquisition and integration costs

      —        —         —        1130       1,130  

Change in fair value of contingent consideration

      (33,122 )      —         —        —        (33,122 ) 

Depreciation and amortization

      86,444       27,372        8,723       2,066       124,605  

Equity in net income of Diamond Green Diesel

      —        —         (44,197 )      —        (44,197 ) 

Equity in net income of other unconsolidated subsidiaries

      (3017 )      —         —        —        (3,017 ) 
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

Segment Adjusted EBITDA (Non-GAAP)

      $122,056       $73,200        $20,125     $ (18,463 )    $ 196,918  

DGD Adjusted EBITDA (Darling’s Share) (Non-GAAP)

      —        —         76,642       —        76,642  
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

Combined Adjusted EBITDA (Non-GAAP)

      $122,056       $73,200        $96,767     $ (18,463 )    $ 273,560  
  

 

 

    

 

 

     

 

 

    

 

 

    

 

 

  

 

  •  

See calculation of DGD Adjusted EBITDA below the DGD Statement of Operations

 

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Diamond Green Diesel Joint Venture

Operating Financial Results

For the Three and Six Months Ended June 30, 2024 and June 30, 2023

(in thousands, unaudited)

 

     Three Months Ended     Six Months Ended  
     June 30, 2024     June 30, 2023     $ Change
Favorable
(Unfavorable)		     June 30, 2024     June 30, 2023     $ Change
Favorable
(Unfavorable)		  

Revenues:

             

Operating revenues

    $ 1,184,076     $ 2,246,111     $ (1,062,035 )    $  2,595,191     $ 3,926,161     $ (1,330,970 ) 

Expenses:

             

Total costs and expenses less lower of cost or market inventory valuation adjustment and depreciation, amortization and accretion expense

      1,014,927       1,751,315       736,388       2,174,283       3,172,719       998,436  

Lower of cost or market (LCM) inventory valuation adjustment

      15,866       —        (15,866 )      37,504       —        (37,504 ) 

Depreciation, amortization and accretion expense

      61,910       58,315       (3,595 )      127,200       116,922       (10,278 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Total costs and expenses

      1,092,703       1,809,630       716,927       2,338,987       3,289,641       950,654  

Operating income

      91,373       436,481       (345,108 )      256,204       636,520       (380,316 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Other income

      6,058       2,121       3,937       9,278       4,162       5,116  

Interest and debt expense, net

      (9,037 )      (12,674 )      3,637       (20,279 )      (26,080 )      5,801  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Income before income tax expense

      88,394       425,928       (337,534 )      245,203       614,602       (369,399 ) 

Income tax benefit

      —        —        —        (29 )      —        29  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Net income

    $ 88,394     $ 425,928     $ (337,534 )    $ 245,232     $ 614,602     $ (369,370 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Reconciliation of DGD operating income to (Non-GAAP) DGD Adjusted EBITDA:

 

          

Operating income

    $ 91,373     $ 436,481     $ (345,108 )    $ 256,204     $ 636,520     $ (380,316 ) 

Depreciation, amortization and accretion expense

      61,910       58,315       (3,595 )      127,200       116,922       (10,278 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

DGD Adjusted EBITDA

      153,283       494,796       341,513       383,404       753,442       370,038  

Darling’s Share 50%

      50 %      50 %        50 %      50 %   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

DGD Adjusted EBITDA (Darling’s Share)

    $ 76,642     $ 247,398     $ 170,757     $ 191,702     $ 376,721     $ 185,019  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Additionally, the Company plans to disclose how management uses non-GAAP measures and will disclose why management believes these measures are useful to investors as outlined below:

Segment Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to segment income (loss), as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to segment income (loss), but rather as a measure of the segment’s operating performance. Segment Adjusted EBITDA consists of segment income (loss), less equity in net income 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 and the change in fair value of contingent consideration. Management

 

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believes that Segment Adjusted EBITDA is useful in evaluating the segment’s operating performance because the calculation of Segment Adjusted EBITDA generally eliminates non-cash and certain other items for reasons unrelated to overall operating performance and also believes this information is useful to investors.

Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance. Since EBITDA (generally, net income plus interest expense, taxes, depreciation and amortization) is not calculated identically by all companies, the presentation in this report may not be comparable to EBITDA or Adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated above and represents for any relevant period, net income/(loss) plus depreciation and amortization, restructuring and asset impairment charges, acquisition and integration costs, change in fair value of contingent consideration, foreign currency loss/(gain), net income/(loss) attributable to non-controlling interests, interest expense, income tax provision, other income/(expense) and equity in net (income)/loss of unconsolidated subsidiaries. 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, non-cash and certain other items that may vary for different companies for reasons unrelated to overall operating performance and also believes this information is useful to investors.

The Company’s management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary purposes. 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, 6% Notes, 5.25% Notes and 3.625% Notes that were outstanding at September 28, 2024. However, the amounts shown above for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities, 6% Notes, 5.25% Notes and 3.625% Notes, as those definitions permit further adjustments to reflect certain other nonrecurring costs, 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.

DGD Adjusted EBITDA is not reflected in the Adjusted EBITDA or the Pro forma Adjusted EBITDA to Foreign Currency. DGD Adjusted EBITDA is not a recognized accounting measure under GAAP; it should not be considered as an alternative to net income or equity in net income of Diamond Green Diesel, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity and is not intended to be a presentation in accordance with GAAP. The Company calculates DGD Adjusted EBITDA by taking DGD’s operating income plus DGD’s depreciation, amortization and accretion expense. Management believes that DGD Adjusted EBITDA is useful in evaluating the Company’s operating performance because the

 

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calculation of DGD Adjusted EBITDA generally eliminates non-cash and certain other items at DGD unrelated to overall operating performance and also believes this information is useful to investors. The Company calculates Darling’s Share of DGD Adjusted EBITDA by taking DGD Adjusted EBITDA and then multiplying by 50% to get Darling’s Share of DGD’s Adjusted EBITDA.

Combined Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance. Combined Adjusted EBITDA consists of Adjusted EBITDA plus DGD Adjusted EBITDA (Darling’s Share). When Combined Adjusted EBITDA is presented by segment, Combined Adjusted EBITDA consists of Segment Adjusted EBITDA plus DGD Adjusted EBITDA (Darling’s Share). Management believes that Combined Adjusted EBITDA is useful in evaluating the Company’s operating performance compared to that of other companies in its industry because the calculation of Combined Adjusted EBITDA generally eliminates the effects of financing, income taxes, non-cash and certain other items that may vary for different companies for reasons unrelated to overall operating performance and also believes this information is useful to investors.

Form 8-K Furnished July 25, 2024

Exhibit 99.2, page 3

5. We note you present non-GAAP financial measures of Feed Ingredients EBITDA, Food Ingredients EBITDA, Fuel Ingredients EBITDA, the respective segment adjusted EBITDA, and segment adjusted EBITDA margin in the Earnings Report Presentation before or without discussing the most directly comparable GAAP measures as segment adjusted EBITDA numbers are presented before the directly comparable GAAP measures, and segment adjusted EBITDA margins are presented without the directly comparable GAAP measures. Please revise your future disclosures to present GAAP measures with equal or greater prominence and include a reconciliation to the most directly comparable GAAP measures. Also rename the respective segment EBITDA to segment adjusted EBITDA as EBITDA is “earnings before interest, taxes, depreciation and amortization”. Refer to Items 10(e)(1)(i)(A)- (B) of Regulation S-K and Questions 102.10, 103.01, and 103.02 of the Division of Corporation Finance’s Compliance & Disclosure Interpretations on Non-GAAP Financial Measures for guidance.

 

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The Company will revise its earnings slide presentations beginning with its Q4 2024 release to present GAAP measures with equal or greater prominence and include a reconciliation of the most directly comparable GAAP measures. Since these changes will not be implemented until the Q4 2024 earnings slide presentation, the Company prepared the revised reconciliation table related to its Q2 2024 earnings as an example of such a presentation that it plans to utilize in its Q4 2024 earnings slide presentation as presented below:

 

Financial Performance

           Q2 2024  

Total Net Sales

       $ 1,455.3 million  

Net Income

       $ 78.9 million  

EPS Diluted

       $ 0.49  

Combined Adjusted EBITDA

       $ 273.6 million  
     Segment Income (Loss)      Combined Adjusted
EBITDA
(by Segment)		  
     Q2 2024      Q2 2024  

Feed Ingredients Segment

    $  34.3 million      $ 122.1 million  

Food Ingredients Segment

    $  30.3 million      $ 73.2 million  

Fuel Ingredients Segment

    $  13.7 million      $ 96.8 million  

See reconciliation of Segment Income (Loss) to (Non-GAAP) Combined Adjusted EBITDA (by Segment) on the respective segment ingredients pages attached

Additionally, as requested by the Staff, the Company will revise its earnings slide presentations beginning with its Q4 2024 release to provide tables that reconcile the difference between non-GAAP financial measures and the comparable GAAP measures as they relate to the Feed Ingredients, Food Ingredients and Fuel Ingredients segments and the respective Segment Adjusted EBITDA.

 

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Presented below is a revised reconciliation of the Feed Segment that reconciles from segment income to Segment Adjusted EBITDA for Q2 2024 that the Company plans to follow the format of in its Q4 2024 earnings slide presentation as well as all future earnings slide presentations:

 

US $ (in millions, unaudited)

    Q2 2024     Q2 2023     YTD 2024     YTD 2023  

Net Sales

    $ 934,147     $ 1,141,661     $ 1,823,995     $ 2,379,155  

Cost of sales & operating expenses

      737,871       876,413       1,443,640       1,826,485  
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross margin

    $ 196,276     $ 265,248     $ 380,355     $ 552,670  
  

 

 

    

 

 

    

 

 

    

 

 

  

Loss (gain) on sale of assets

      205       322       337       -20  

Selling, general and administrative expenses

      74,015       77,406       151,153       152,097  

Restructuring and asset impairment charges

      —        —        —        92  

Change in fair value of contingent consideration

      -33,122       -7,499       -58,371       -7,499  

Depreciation and amortization

      86,444       82,575       174,013       172,895  
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment operating income

      68,734       112,444       113,223       235,105  

Equity in net income of other unconsolidated subsidiaries

      3,017       1,849       5,327       1,969  
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment Income

    $ 71,751     $ 114,293     $ 118,550     $ 237,074  
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment Adjusted EBITDA

    $ 122,056     $ 187,520     $ 228,865     $ 400,593  
  

 

 

    

 

 

    

 

 

    

 

 

  

Raw material processed (mmts)

      3.1       3.1       6.2       6.3  

Reconciliation of Segment Income (Loss) to (Non-GAAP) Segment Adjusted EBITDA:

 

Segment Income

    $ 71,751     $ 114,293     $ 118,550     $ 237,074  

Equity in net income of other unconsolidated

      (3,017 )      (1,849 )      (5,327 )      (1,969 ) 

Restructuring and asset impairment charges

      —        —        —        92  

Change in fair value of contingent consideration

      (33,122 )      (7,499 )      (58,371 )      (7,499 ) 

Depreciation and amortization

      86,444       82,575       174,013       172,895  
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment Adjusted EBITDA

    $ 122,056     $ 187,520     $ 228,865     $ 400,593  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

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Presented below is a revised reconciliation of the Food Segment that reconciles from segment income to Segment Adjusted EBITDA for Q2 2024 that the Company plans to follow the format of in its Q4 2024 earnings slide presentation as well as all future earnings slide presentations:

 

US $ (in millions, unaudited)

    Q2 2024      Q2 2023      YTD 2024      YTD 2023  

Net Sales

    $ 378,841      $ 476,093      $ 770,123      $ 872,485  

Cost of sales & operating expenses

      276,760        371,095        574,905        661,210  
  

 

 

     

 

 

     

 

 

     

 

 

  

Gross margin

    $ 102,081      $ 104,998      $ 195,218      $ 211,275  
  

 

 

     

 

 

     

 

 

     

 

 

  

Loss (gain) on sale of assets

      37        2        -257        -19  

Selling, general and administrative expenses

      28,844        33,684        60,588        66,806  

Restructuring and asset impairment charges

      —         896        —         5,328  

Depreciation and amortization

      27,372        28,445        56,240        42,918  
  

 

 

     

 

 

     

 

 

     

 

 

  

Segment Income

    $ 45,828      $ 41,971      $ 78,647      $ 96,242  
  

 

 

     

 

 

     

 

 

     

 

 

  

Segment Adjusted EBITDA

    $ 73,200      $ 71,312      $ 134,887      $ 144,488  
  

 

 

     

 

 

     

 

 

     

 

 

  

Raw material processed (mts)

      304,700        331,300        604,500        595,600  

Reconciliation of Segment Income (Loss) to (Non-GAAP) Segment Adjusted EBITDA:

 

Segment Income

    $ 45,828      $ 41,971      $ 78,647      $ 96,242  

Restructuring and asset impairment charges

      —         896        —         5,328  

Depreciation and amortization

      27,372        28,445        56,240        42,918  
  

 

 

     

 

 

     

 

 

     

 

 

  

Segment Adjusted EBITDA

    $ 73,200      $ 71,312      $ 134,887      $ 144,488  
  

 

 

     

 

 

     

 

 

     

 

 

  

 

11

LOGO

 

Presented below is a revised reconciliation of the Fuel Segment that reconciles from segment income to Segment Adjusted EBITDA for Q2 2024 that the Company plans to follow the format of in its Q4 2024 earnings slide presentation as well as all future earnings slide presentations:

 

US $ (in millions, unaudited)

    Q2 2024     Q2 2023     YTD 2024     YTD 2023  

Net Sales

    $ 142,304     $ 139,867     $ 281,473     $ 297,153  

Cost of sales & operating expenses

      113,790       112,194       226,542       238,980  
  

 

 

    

 

 

    

 

 

    

 

 

  

Gross margin

    $ 28,514     $ 27,673     $ 54,931     $ 58,173  
  

 

 

    

 

 

    

 

 

    

 

 

  

Gain on sale of assets

      (20 )      (65 )      (432 )      (29 ) 

Selling, general & administrative expenses

      8,409       4,971       17,154       11,163  

Depreciation & amortization

      8,723       8,567       17,390       16,960  

Equity in net income of Diamond Green Diesel

      44,197       212,964       122,616       307,301  
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment Income

    $ 55,599     $ 227,164     $ 143,435     $ 337,380  
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment Adjusted EBITDA

    $ 20,125     $ 22,767     $ 38,209     $ 47,039  

DGD Adjusted EBITDA (Darling’s Share)

    $ 76,642     $ 247,398     $ 191,702     $ 376,721  
  

 

 

    

 

 

    

 

 

    

 

 

  

Combined Adjusted EBITDA

    $ 96,767     $ 270,165     $ 229,911     $ 423,760  
  

 

 

    

 

 

    

 

 

    

 

 

  

Raw material processed (mt)*

      362,000       346,500       718,900       696,200  

Reconciliation of Segment Income (Loss) to (Non-GAAP) Segment Adjusted EBITDA:

 

  

Segment Income

    $ 55,599     $ 227,164     $ 143,435     $ 337,380  

Depreciation and amortization

      8,723       8,567       17,390       16,960  

Equity in net income of Diamond Green Diesel

      (44,197 )      (212,964 )      (122,616 )      (307,301 ) 
  

 

 

    

 

 

    

 

 

    

 

 

  

Segment Adjusted EBITDA

    $ 20,125     $ 22,767     $ 38,209     $ 47,039  
  

 

 

    

 

 

    

 

 

    

 

 

  

Reconciliation of DGD Operating Income to (Non-GAAP) DGD Adjusted EBITDA:

 

    

Operating Income

    $ 91,373     $ 436,481     $ 256,204     $ 636,520  

Depreciation, amortization and accrued expense

      61,910       58,315       127,200       116,922  
  

 

 

    

 

 

    

 

 

    

 

 

  

DGD Adjusted EBITDA

      153,283       494,796       383,404       753,442  

Darling’s Share 50%

      50 %      50 %      50 %      50 % 
  

 

 

    

 

 

    

 

 

    

 

 

  

DGD Adjusted EBITDA (Darling’s Share)

    $ 76,642     $ 247,398     $ 191,702     $ 376,721  
  

 

 

    

 

 

    

 

 

    

 

 

  

 

12

LOGO

 

As requested by the Staff, the Company will also remove reference to Segment Adjusted EBITDA margin in the Feed Ingredients historical table, the Food Ingredients historical table and the Fuel Ingredients historical table on their respective pages in our earnings slide presentation. Presented below is an example of these three segment historical tables with the EBITDA margin removed from the Company’s Q2 2024 earnings slide presentation:

Feed Segment Historical Statistics

 

US$ (in millions)

    Q1-2023     Q2-2023     Q3-2023     Q4-2023     Total 2023     Q1-2024     Q2-2024  

Net Sales

    $ 1,237.5     $ 1,141.7     $ 1,047.8     $ 1,045.6     $ 4,472.6     $ 889.8     $ 934.1  

Gross Margin

      287.4       265.2       243.5       290.6       1086.7       184.1       196.3  

Gross Margin %

      23.2 %      23.2 %      23.2 %      27.8 %      24.3 %      20.7 %      21.0 % 

Loss (Gain) on sale of assets

      (0.3 )      0.3       0.8       —        0.8       0.1       0.2  

SG&A

      74.7       77.4       81.0       77.3       310.4       77.1       74.0  

SG&A Margin %

      6.0 %      6.8 %      7.7 %      7.4 %      6.9 %      8.7 %      7.9 % 

Operating Income

      122.7       112.4       78.3       105.8       419.2       44.5       68.7  

Segment Adjusted EBITDA

    $ 213.1     $ 187.5     $ 161.7     $ 213.3     $ 775.6     $ 106.8     $ 122.1  

Raw Material Processed (mmts)

      3.2       3.1       3.1       3.1       12.5       3.1       3.1  

Food Segment Historical Statistics

 

US$ (in millions)

    Q1-2023     Q2-2023     Q3-2023     Q4-2023     Total 2023     Q1-2024     Q2-2024  

Net Sales

    $ 396.4     $ 476.1     $ 455.7     $ 423.8     $ 1,752.1     $ 391.3     $ 378.8  

Gross Margin

      106.3       105.0       117.5       112.7       441.5       93.1       102.1  

Gross Margin %

      26.8 %      22.1 %      25.8 %      26.6 %      25.2 %      23.8 %      26.9 % 

Loss (gain) on sale of assets

      —        —        0.1       (8.2 )      (8.2 )      (0.3 )      —   

SG&A

      33.1       33.7       31.5       30.2       128.5       31.7       28.8  

SG&A Margin %

      8.4 %      7.1 %      6.9 %      7.1 %      7.3 %      8.1 %      7.6 % 

Operating Income

      54.3       42.0       60.5       54.9       211.6       32.8       45.8  

Segment Adjusted EBITDA

    $ 73.2     $ 71.3     $ 86.0     $ 90.7     $ 321.2     $ 61.7     $ 73.2  

Raw Material Processed (mmts)

      0.26       0.33       0.32       0.30       1.22       0.30       0.30  

 

13

LOGO

 

Fuel Segment Historical Statistics

 

US$ (in millions)

    Q1-2023     Q2-2023     Q3-2023     Q4-2023     Total 2023     Q1-2024     Q2-2024  

Net Sales

    $ 157.3     $ 139.9     $ 121.7     $ 144.6     $ 563.4     $ 139.2     $ 142.3  

Gross Margin

      30.5       27.7       25.5       33.2       116.8       26.4       28.5  

Gross Margin %

      19.4 %      19.8 %      20.9 %      23.0 %      20.7 %      19.0 %      20.0 % 

Loss (gain) on sale of assets

      —        (0.1 )      —        —        (0.1 )      (0.4 )      —   

SG&A

      6.2       5.0       5.7       6.7       23.5       8.7       8.4  

Depreciation and amortization

      8.4       8.6       9.0       8.5       34.5       8.7       8.7  

Equity in net income of DGD

      94.3       213.0       54.4       4.7       366.4       78.4       44.2  

Operating Income

      110.2       227.2       65.2       22.7       425.3       87.8       55.6  

Segment Adjusted EBITDA

      24.3       22.8       19.8       26.5       93.4       18.1       20.1  

DGD Adjusted EBITDA (Darling’s Share)

      129.3       247.4       86.5       38.8       502.0       115.1       76.6  

Combined Adjusted EBITDA

    $ 153.6     $ 270.2     $ 106.3     $ 65.3     $ 595.3     $ 133.1     $ 96.8  

Raw Material Processed (mmts)

      0.35       0.35       0.34       0.37       1.41       0.36       0.36  

Additionally, as requested by the Staff, the Company will also rename the respective Segment EBITDA to Segment Adjusted EBITDA in all respective tables and presentations.

Should you have any questions regarding the foregoing, please contact the undersigned at (202) 736-8387.

Very truly yours,

 

  /s/ Sonia G. Barros
  Sonia G. Barros

 

Cc:

John F. Sterling, Executive Vice President - General Counsel and Secretary, Darling Ingredients, Inc.

Brian J. Fahrney, Sidley Austin LLP

 

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