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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 29, 1996
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
0-24620
DARLING INTERNATIONAL 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)
251 O'Connor Ridge Blvd.
Suite 300
Irving, Texas 75038
(Address of principal executive offices) (Zip Code)
(214) 717-0300
(Registrant's telephone number, including area code)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
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 report(s)), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
The number of shares outstanding of the Registrant's common stock, $0.01
par value, as of August 12, 1996 was 5,148,984.
<PAGE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 29, 1996
TABLE OF CONTENTS
Page No.
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets -
June 29, 1996 and December 30, 1995 (unaudited ......................3
Consolidated Statements of Operations (unaudited) -
Three Months and Six Months Ended June 29, 1996 and July 1, 1995 ....4
Consolidated Statements of Cash Flows (unaudited) -
Six Months Ended June 29, 1996 and July 1, 1995 .....................5
Notes to Consolidated Financial Statements (unaudited) ................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ...................................9
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ....................................................13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................. 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K .....................................14
Signatures .........................................................16
Index to Exhibits................................................... 17
Page 2
<PAGE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED BALANCE SHEETS
June 29, 1996 and December 30, 1995
(in thousands, except shares and per share data)
<CAPTION>
June 29, 1996 December 30, 1995
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................... $ 9,962 $ 11,649
Accounts receivable, principally trade, less allowance
of $122 in 1996 and $147 in 1995 .................... 33,971 30,230
Inventories ............................................. 11,758 11,584
Prepaid expenses ........................................ 2,570 2,963
Deferred income tax assets .............................. 3,828 4,281
Other ................................................... 852 3,394
-------- --------
Total current assets ........................... 62,941 64,101
Property, plant and equipment, less accumulated depreciation
of $44,435 at June 29, 1996 and $34,198 at December 30, 1995 158,023 155,065
Collection routes and contracts, less accumulated amortization
of $3,978 at June 29, 1996 and $7,854 at December 30, 1995 . 47,590 42,893
Other assets ................................................. 11,830 4,003
-------- --------
$280,384 $266,062
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ....................... $ 8,000 $ 9,060
Accounts payable, principally trade ..................... 20,302 17,378
Accrued expenses ........................................ 20,834 20,831
Accrued interest ........................................ 3,954 3,896
-------- --------
Total current liabilities ...................... 53,090 51,165
Long-term debt, less current portion ......................... 114,742 117,096
Other noncurrent liabilities ................................. 20,301 15,233
Deferred income taxes ........................................ 29,310 27,735
-------- --------
Total liabilities .............................. 217,443 211,229
-------- --------
Stockholders' equity
Common stock, $.01 par value;
10,000,000 shares authorized;
5,147,509 and 5,085,510 shares issued ............... 51 51
Additional paid-in capital .............................. 33,608 33,045
Retained earnings ....................................... 29,282 21,737
-------- --------
Total stockholders' equity ..................... 62,941 54,833
-------- --------
Contingencies (note 4)
$280,384 $266,062
======== ========
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
Page 3
<PAGE>
<TABLE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months and six months ended June 29, 1996 and July 1, 1995
(in thousands, except per share data)
<CAPTION>
Three Months Ended Six Months Ended
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net sales $114,253 $105,658 $223,994 $212,248
------- ------- ------- -------
Costs and expenses:
Cost of sales and operating expenses 91,071 83,555 178,606 166,960
Selling, general and administrative expenses 7,450 6,537 14,621 12,529
Depreciation and amortization 6,509 5,589 12,626 10,873
------- ------- ------- -------
Total costs and expenses 105,030 95,681 205,853 190,362
------- ------- ------- -------
Operating profit 9,223 9,977 18,141 21,886
------- ------- ------- -------
Other income (expense):
Interest expense (3,089) (3,383) (6,094) (6,832)
Other, net (4) 109 428 65
------- ------- ------- -------
Total other income (expense) (3,093) (3,274) (5,666) (6,767)
------- ------- ------- -------
Income before income taxes 6,130 6,703 12,475 15,119
Income tax expense 2,517 2,270 4,930 5,637
------- ------- ------- -------
Net earnings $ 3,613 $ 4,433 $ 7,545 $ 9,482
====== ====== ====== ======
Primary earnings per common share $ 0.65 $ 0.84 $ 1.36 $ 1.83
====== ====== ====== ======
Fully diluted earnings per common share $ 0.65 $ 0.83 $ 1.36 $ 1.78
====== ====== ====== ======
<FN>
The accompanying notes are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
Page 4
<PAGE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 29, 1996 and July 1, 1995
(in thousands)
<CAPTION>
SIX MONTHS ENDED
June 29, July 1,
1996 1995
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net earnings ........................................................... $ 7,545 $ 9,482
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization ....................................... 12,626 10,873
Deferred income tax expense ......................................... 234 1,613
Loss on sales of assets ............................................. 144 106
Changes in assets and liabilities net of effects from acquisition:
Accounts receivable ............................................. (1,335) (314)
Inventories and prepaid expenses ................................ 1,734 1,393
Accounts payable and accrued expenses ........................... 1,585 68
Accrued interest ................................................ 57 (750)
Other ........................................................... (1,270) (257)
-------- --------
Net cash provided by operating activities .................... 21,320 22,214
-------- --------
Cash flows from investing activities:
Payments for purchase of equipment ..................................... (11,505) (10,714)
Other capital expenditures ............................................. (288) (1,763)
Payments for routes .................................................... (87) (4,013)
Cash received upon purchase of stock of Standard Tallow ................ 2,375 --
Proceeds from sale of property, plant and equipment
and other assets ..................................................... 185 327
-------- --------
Net cash used in investing activities ......................... (9,320) (16,163)
-------- --------
Cash flows from financing activities:
Proceeds from long-term debt ........................................... 14,719 94,640
Payments on long-term debt ............................................. (28,899) (95,356)
Contract payments ...................................................... (71) (63)
Deferred loan costs .................................................... -- (740)
Issuance of common stock ............................................... 564 723
-------- --------
Net cash used in financing activities ......................... (13,687) (796)
-------- --------
Net increase (decrease) in cash and cash equivalents ........................ (1,687) 5,255
Cash and cash equivalents at beginning of period ............................ 11,649 5,068
-------- --------
Cash and cash equivalents at end of period .................................. $ 9,962 $ 10,323
======== ========
<FN>
Supplemental Cash Flow Information: See Note 3.
The accompanying notes are an integral part
of these consolidated financial statements.
</FN>
</TABLE>
Page 5
<PAGE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 29, 1996
(unaudited)
(1) GENERAL
The accompanying consolidated financial statements for the three month
and six month periods ended June 29, 1996 and July 1, 1995 have been
prepared by Darling International Inc. (Company) without audit, pursuant
to the rules and regulations of the Securities and Exchange Commission
(SEC). The information furnished herein reflects all adjustments
(consisting only of normal recurring accruals) which are, in the opinion
of management, necessary to present a fair statement of the operating
results of the Company for the respective periods. Certain information
and footnote disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles have
been omitted pursuant to such rules and regulations. However, management
of the Company believes that the disclosures herein are adequate to make
the information presented not misleading. The accompanying consolidated
financial statements should be read in conjunction with the consolidated
financial statements contained in the Company's Form 10-K/A for the
fiscal year ended December 30, 1995.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.
(b) Fiscal Periods
The Company has a 52/53 week fiscal year ending on the Saturday
nearest December 31. Fiscal periods for the consolidated financial
statements included herein are for the 52 weeks ended December 30,
1995, the 13 and 26 weeks ended June 29, 1996, and the 13 and 26
weeks ended July 1, 1995.
(c) Earnings Per Common Share
Primary earnings per common share is computed by dividing net
earnings attributable to outstanding common stock by the weighted
average number of common stock shares outstanding during the
period increased by dilutive common equivalent shares (stock
options) determined using the treasury stock method. Primary
weighted average equivalent shares are determined based on the
average market price exceeding the exercise price of the stock
options. Fully diluted weighted average equivalent shares are
determined based on the higher of the average or ending market
price exceeding the exercise price of the stock options.
Page 6
<PAGE>
(3) SUPPLEMENTAL CASH FLOW INFORMATION
During the six months ended June 29, 1996, non-cash investing and
financing activities included the purchase of 100% of the common stock of
Standard Tallow Company for $10,400,000. Assets acquired, liabilities
assumed, and consideration paid for this acquisition are as follows:
Fair value of assets acquired, less cash $20,297,000
Liabilities assumed and incurred (12,272,000)
Issuance of notes payable (10,400,000)
-------------
Cash received upon purchase $( 2,375,000)
=============
(4) CONTINGENCIES
(a) Environmental
Chula Vista
The Company is the owner of an undeveloped property located in
Chula Vista, California (the 'Site'). A rendering plant was operated
on the Site until 1982. From 1959 to 1978, a portion of the Site was
used as an industrial waste disposal facility which was closed
pursuant to Closure Order No. 80-06 issued by the State of California
Regional Water Quality Control Board for the San Diego Region (the
'RWQCB'). The Site has been listed by the State of California as a
site for which expenditures for removal and remedial actions may be
made by the State pursuant to the California Hazardous Substances
Account Act, California Health & Safety Code Section 25300 et seq.
Technical consultants retained by the Company have conducted
various investigations of the environmental conditions at the
Site and, in 1996, requested that the RWQCB issue a 'no further
action' letter with respect to the Site. The RWQCB has not yet taken
any formal action in response to such request.
Certain persons owning properties in proximity to the Site
('Claimants') have asserted that groundwater under their properties
is contaminated and that such contamination may have migrated
from the Site. The Company is currently investigating these
allegations.
Blue Earth
On April 12, 1996, the Company announced the following: that its
Blue Earth, Minnesota rendering plant is under investigation by the
Minnesota office of the U.S. Attorney for alleged violations of
compliance and reporting procedures under federal water law occurring
prior to 1993; and, that in late March 1996, the Company's Chief
Executive Officer and Board of Directors had been made aware of those
alleged violations. The Company has advised federal and state
authorities about the information discovered to date and is
continuing to investigate this matter. The Company has cooperated
with the government's investigation from the outset and is committed
to full cooperation with such authorities in discovering, reporting
and resolving any discrepancies that may have occurred. Additionally,
the Company believes its Blue Earth plant is currently in compliance
with federal and state laws. The Company is presently unable to
estimate any potential penalties it may incur as a result of this
matter.
Page 7
<PAGE>
(b) Litigation
Petruzzi
An antitrust class action suit was filed in 1986 by Petruzzi IGA
Supermarkets in the United States District Court for the Middle
District of Pennsylvania (the "Class Action Suit") seeking damages
from the Company. On September 14, 1995, the Company entered into a
settlement agreement providing for the disposal of all claims in the
Class Action Suit. The settlement agreement was approved by the
District Court on December 20, 1995. The District Court has yet to
rule on the petitions for attorneys' fees.
Other Litigation
The Company is also a party to several other lawsuits, claims and
loss contingencies incidental to its business.
The Company has established reserves for environmental and other loss
contingencies as a result of the matters discussed above. The accrued
expenses and other noncurrent liabilities classifications in the
Company's consolidated balance sheets include reserves for insurance,
environmental and litigation contingencies of $15,409,000 and $16,325,000
at June 29, 1996 and December 30, 1995, respectively.
Although the ultimate liability cannot be determined with certainty,
management of the Company believes that reserves for environmental
contingencies are reasonable and sufficient based upon present
governmental regulations and information currently available to
management. The Company estimates the range of possible losses related to
environmental and litigation matters, based on certain assumptions, is
between $6,200,000 and $15,300,000, excluding any potential penalties the
Company may incur related to the Blue Earth plant. There can be no
assurance, however, that final costs will not exceed current estimates.
The Company believes that any additional liability relative to such
lawsuits and claims which would not be covered by insurance, although
potentially material to the results of operations in one year, would not
have a material adverse effect on the Company's financial position.
Page 8
<PAGE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 29, 1996
PART I
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion summarizes information with respect to the
liquidity and capital resources of the Company at June 29, 1996 and factors
affecting its results of operations for the three months and six months ended
June 29, 1996 and the comparable periods ended July 1, 1995.
RESULTS OF OPERATIONS
Three Months Ended June 29, 1996 Compared to Three Months Ended July 1, 1995
GENERAL
The Company recorded net earnings to common shareholders of $3.6
million for the second quarter of the fiscal year ending December 28, 1996
("Fiscal 1996"), as compared to net earnings of $4.4 million for the second
quarter of the fiscal year ended December 30, 1995 ("Fiscal 1995"). Operating
profit decreased from $10.0 million in the second quarter of Fiscal 1995 to $9.2
million in the second quarter of Fiscal 1996. Interest expense decreased from
$3.4 million in the second quarter of Fiscal 1995 to $3.1 million in the second
quarter of Fiscal 1996.
NET SALES
The Company collects and processes renderable animal by-products (fat,
bones and offal) and restaurant grease to produce finished products of tallow,
meat and bone meal and yellow grease. Raw material available to non-captive
renderers is limited and therefore causes competition among renderers who bid
for suppliers' materials. The amount of raw material processed directly affects
the amount of finished goods produced.
Net sales include the sales of produced and purchased finished goods.
During the second quarter of Fiscal 1996, net sales increased by $8.6 million
(8.1%) to $114.3 million as compared to $105.7 million during the second quarter
of Fiscal 1995.
This increase in sales in the second quarter of Fiscal 1996 was due
primarily to a 13.1% increase in the volume of raw materials processed and a 32%
increase in meat and bone meal prices, and was partially offset by a slight
decrease in sales prices of fats and oils combined with a decrase in sales of
purchased finished goods compared to a year earlier.
Page 9
<PAGE>
COST OF SALES AND OPERATING EXPENSES
Cost of sales and operating expenses includes prices paid to raw
material suppliers, the costs of product purchased for resale, and the costs to
collect and process the raw material. The Company utilizes both fixed and
formula pricing methods for the purchase of raw materials. Fixed prices are
adjusted as needed for changes in competition and significant changes in
finished goods market conditions, while formula prices are calculated as a
percentage of finished goods markets and, therefore, are adjusted more promptly
than material purchased on the fixed pricing methodology.
During the second quarter of Fiscal 1996, cost of sales and operating
expenses increased by $7.5 million (9.0%) to $91.1 million as compared to $83.6
million during the second quarter of Fiscal 1995. Cost of sales grew due to
greater volumes of raw material purchased and higher raw material prices paid,
correlating to increased prices for fats and oils and meat and bone meal, and
were offset somewhat by decreases in product purchased for resale. Operating
expenses increased as a result of collecting and processing higher volumes of
material, higher steam expense attributable to increased natural gas prices, and
expenses attributable to CleanStar expansion.
SELLING, GENERAL AND ADMINISTRATIVE COSTS
Selling, general and administrative costs were $7.5 million during the
second quarter of Fiscal 1996, a $1.0 million increase from $6.5 million for the
second quarter of Fiscal 1995. The increase in costs was primarily attributable
to increases in compensation and related costs, product development costs, and
legal and professional fees.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization charges increased by $0.9 million to $6.5
million during the second quarter of Fiscal 1996 as compared to $5.6 million
during the second quarter of Fiscal 1995. This increase was due to additional
depreciation on fixed asset additions.
INTEREST EXPENSE
Interest expense decreased by $0.3 million from $3.4 million during the
second quarter of Fiscal 1995 to $3.1 million during the second quarter of
Fiscal 1996.
INCOME TAXES
The tax expense of $2.5 million for the second quarter of Fiscal 1996
consists of $2.0 million of federal tax expense and $0.5 million for various
state taxes. Tax expense for the second quarter of Fiscal 1995 was $2.3 million.
CAPITAL EXPENDITURES
The Company made normal recurring capital expenditures of $6.3 million
during the second quarter of Fiscal 1996 compared to capital expenditures of
$5.8 million during the second quarter of Fiscal 1995. In addition, the Company
acquired 100% of the stock of Standard Tallow Company for $10.4 million during
the second quarter of Fiscal 1996.
Page 10
<PAGE>
Six Months Ended June 29, 1996 Compared to Six Months Ended July 1, 1995
GENERAL
The Company recorded net earnings to common shareholders of $7.5
million for the first six months of Fiscal 1996, as compared to net earnings of
$9.5 million for the first six months of Fiscal 1995. Operating profit decreased
from $21.9 million in the first six months of Fiscal 1995 to $18.1 million in
the first six months of Fiscal 1996. Interest expense decreased from $6.8
million in the first six months of Fiscal 1995 to $6.1 million in the first six
months of Fiscal 1996.
NET SALES
During the first six months of Fiscal 1996, net sales increased by $11.8
million (5.6%) to $224.0 million as compared to $212.2 million during the first
six months of Fiscal 1995.
This increase in sales in the first six months of Fiscal 1996 was due
primarily to a 13.6% increase in the volume of raw materials processed and a 28%
increase in meat and bone meal prices, and was partially offset by a 6% decrease
in sales prices of fats and oils combined with a decrease in sales of purchased
finished goods as compared to a year earlier.
COST OF SALES AND OPERATING EXPENSES
During the first six months of Fiscal 1996, cost of sales and operating
expenses increased $11.6 million (6.9%) to $178.6 million as compared to $167.0
million during the first six months of Fiscal 1995. Cost of sales grew due to
greater volumes of raw material purchased and higher raw material prices paid,
correlating to increased prices for fats and oils and meat and bone meal, and
were offset somewhat by decreases in product purchased for resale. Operating
expenses increased as a result of collecting and processing higher volumes of
material, higher steam expense attributable to increased natural gas prices, and
expenses attributable to CleanStar expansion.
SELLING, GENERAL AND ADMINISTRATIVE COSTS
Selling, general and administrative costs were $14.6 million during the
first six months of Fiscal 1996, a $2.1 million increase from $12.5 million for
the first six months of Fiscal 1995. The increase in costs was primarily
attributable to increases in compensation and related costs, product development
costs, and legal and professional fees.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization charges increased by $1.7 million to
$12.6 million during the first six months of Fiscal 1996 as compared to $10.9
million during the first six months of Fiscal 1995.
INTEREST EXPENSE
Interest expense decreased by $0.7 million from $6.8 million during the
first six months of Fiscal 1995 to $6.1 million during the first six months of
Fiscal 1996.
INCOME TAXES
The tax expense of $4.9 million for the first six months of Fiscal 1996
consists of $4.1 million of federal tax expense and $0.8 million for various
state taxes. Tax expense for the first six months of Fiscal 1995 was $5.6
million.
Page 11
<PAGE>
CAPITAL EXPENDITURES
The Company made normal recurring capital expenditures of $11.5 million
during the first six months of Fiscal 1996 compared to capital expenditures of
$10.7 million during the first six months of Fiscal 1995.
LIQUIDITY AND CAPITAL RESOURCES
Effective May 23, 1995, the Company entered into a Credit Agreement
(the "Credit Agreement") which provides for borrowings in the form of a Term
Loan Facility, Revolving Loan Facility and an Acquisition Line. As of June 29,
1996, the Company was in compliance with all provisions of the Credit Agreement.
The Term Loan Facility bears interest, payable monthly, at LIBOR
(5.3164% at June 29, 1996) plus a margin (0.875% at June 29, 1996) which floats
depending on the Company's compliance with certain financial covenants. The Term
Loan Facility is payable by the Company in quarterly installments of $3,000,000
commencing on October 1, 1995 through December 31, 1995, $2,000,000 commencing
on March 31, 1996 through December 31, 1999, and an installment of $6,000,000
due on March 31, 2000 with the remaining balance due on June 30, 2000. As of
June 29, 1996, $42,000,000 was outstanding under the Term Loan Facility.
The Revolving Loan Facility provides for borrowings up to a maximum of
$25,000,000 with sublimits available for letters of credit and a swingline.
Outstanding borrowings on the Revolving Line Facility bear interest, payable
monthly, at LIBOR (5.3164% at June 29, 1996) plus a margin (0.875% at June 29,
1996) or, for swingline advances, at a Base Rate (8.25% at June 29, 1996).
Additionally, the Company must pay a commitment fee equal to 0.375% on the
unused portion of the Revolving Loan Facility. The Revolving Loan Facility
matures on June 30, 2000. As of June 29, 1996, the Company had outstanding
irrevocable letters of credit aggregating $8,202,222.
The Acquisition Line provides for borrowings to a maximum of
$40,000,000. Outstanding borrowings on the Acquisition Line bear interest,
payable monthly, at LIBOR (5.3164% at June 29, 1996) plus a margin (1.0% at June
29, 1996). Availability for the borrowings on the Acquisition Line terminates on
June 30, 1997, and any outstanding borrowings convert to term debt on that date.
On May 8, 1996, the Company borrowed $10,400,000 against the Acquisition Line to
purchase 100% of the stock of Standard Tallow Company. As of June 29, 1996,
$10,400,000 was outstanding under the Acquisition Line.
The Company has Subordinated Notes outstanding with a face amount of
$69,976,000. The Subordinated Notes bear interest payable semi-annually at 11%
per annum until maturity, July 15, 2000.
On June 29, 1996, the Company had working capital of $9.9 million and
its working capital ratio was 1.19 to 1, compared to working capital of $12.9
million and a working capital ratio of 1.25 to 1 on December 30, 1995. Net cash
provided by operating activities has decreased by $1.0 million from $22.2
million during the first six months of Fiscal 1995 to $21.3 million during the
first six months of Fiscal 1996. The Company believes that cash from operations
and current cash balances, together with the undrawn balance from the Company's
loan agreements, will be sufficient to satisfy the Company's planned capital
requirements.
Page 12
<PAGE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 29, 1996
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The information required by this item is included on pages 7 and 8 of this
report and is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The matters voted upon at the annual meeting of stockholders held on
June 7, 1996 were as follows:
(i) The election of six directors to serve until the next annual
meeting of stockholders or until their successors are elected
and qualified. The number of votes cast for and against the
election of each nominee, as well as the number of abstentions
and broker non-votes with respect to the election of each
nominee, were as follows:
Craig Scott Bartlett, Jr.
For 4,997,663 Against/Withheld 0 Abstain 0 Broker Non-votes 0
Kenneth A. Ghazey
For 4,997,663 Against/Withheld 0 Abstain 0 Broker Non-votes 0
Fredric J. Klink
For 4,997,663 Against/Withheld 0 Abstain 0 Broker Non-votes 0
Dennis B. Longmire
For 4,997,663 Against/Withheld 0 Abstain 0 Broker Non-votes 0
Denis J. Taura
For 4,997,663 Against/Withheld 0 Abstain 0 Broker Non-votes 0
Bruce Waterfall
For 4,997,663 Against/Withheld 0 Abstain 0 Broker Non-votes 0
Page 13
<PAGE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 29, 1996
PART II: OTHER INFORMATION (continued)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits No. Description
2* Settlement Agreement, dated December 29, 1993, relating to the
settlement of class action litigation styled IDS Life Insurance
Company, Inc., et al. v. Darling-Delaware Company, Inc., etal.,
Case No. 91 C 5166, in the United States District Court for the
Northern District of Illinois.
4.3* Indenture, dated December 29, 1993, between Darling
International Inc. and LaSalle National Bank, as Trustee,
with respect to the First Priority Senior Subordinated Notes
due July 15, 2000.
10.1*** Credit Agreement, dated as of May 23, 1995, among Darling
International Inc., the First National Bank of Boston, as
agent, Harris Trust and Savings Bank, as co-agent, and the
other lenders named therein.
10.2* Registration Rights Agreement, as amended.
10.3* Form of Indemnification Agreement.
10.4* Lease, dated November 30, 1993, between the Company and the
Port of Tacoma.
10.5* Sublease, dated September 4, 1968, between the Company and
Baker Commodities.
Management Contracts or Compensatory Plans
10.6* 1993 Flexible Stock Option Plan.
10.7* Amended and Restated Employment Agreement, dated December 29,
1993, between Darling International Inc. and Kenneth A.
Ghazey.
10.7(a)**** First Amendment to Amended and Restated Employment
Agreement, dated as of September 26, 1995, between Darling
International Inc. and Kenneth A. Ghazey.
10.8* Form of Executive Severance Agreement.
10.9* 1994 Employee Flexible Stock Option Plan.
10.10* Non-Employee Directors Stock Option Plan.
10.11** Employment Agreement, dated March 31, 1995, between Darling
International Inc. and Dennis B. Longmire.
11 Statement re computation of per share earnings.
* Incorporated by reference to the Registrant's Registration
Statements on Form S-1 filed July 15, 1994 (Registration No.
33-79478).
** Incorporated by reference to Form 10-Q filed May 8, 1995.
*** Incorporated by reference to Form 10-Q filed August 14, 1995.
**** Incorporated by reference to Form 10-Q filed November 13, 1995.
Page 14
<PAGE>
(b) REPORTS ON FORM 8-K
The Registrant filed the following Current Report on Form 8-K
during the quarter ended June 29, 1996:
Current Report on Form 8-K dated April 12, 1996 including
information regarding an investigation of its Blue Earth,
Minnesota rendering plant by the Minnesota office of the U.S.
Attorney for alleged violations of federal water law occurring
prior to 1993.
Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DARLING INTERNATIONAL INC.
Registrant
Date: August 12, 1996 By: Kenneth A. Ghazey
--------------------
Kenneth A. Ghazey
President and Chief Operating Officer
Date: August 12, 1996 By: John R. Witt
--------------------
John R. Witt
Vice President and Chief Financial Officer
(Principal Financial Officer)
Page 16
<PAGE>
DARLING INTERNATIONAL INC. AND SUBSIDIARIES
FORM 10-Q FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 29, 1996
INDEX TO EXHIBITS
Exhibits No. Description Page
2 * Settlement Agreement, dated December 29, 1993, relating to the
settlement of class action litigation styled IDS Life Insurance
Company, Inc., et al. v. Darling-Delaware Company, Inc., et al., Case
No. 91 C 5166, in the United States District Court for the Northern
District of Illinois.
4.3* Indenture, dated December 29, 1993, between Darling International Inc.
and LaSalle National Bank, as Trustee, with respect to the First
Priority Senior Subordinated Notes due July 15, 2000.
10.1*** Credit Agreement, dated as of May 23, 1995, among Darling
International Inc., the First National Bank of Boston, as agent,
Harris Trust and Savings Bank, as co-agent, and the other lenders
named therein.
10.2* Registration Rights Agreement, as amended.
10.3* Form of Indemnification Agreement.
10.4* Lease, dated November 30, 1993, between the Company and the Port of
Tacoma.
10.5* Sublease, dated September 4, 1968, between the Company and Baker
Commodities.
Management Contracts or Compensatory Plans
10.6* 1993 Flexible Stock Option Plan.
10.7* Amended and Restated Employment Agreement, dated December 29, 1993,
between Darling International Inc. and Kenneth A. Ghazey.
10.7(a)**** First Amendment to Amended and Restated Employment Agreement,
dated as of September 26, 1995, between Darling International Inc.
and Kenneth A. Ghazey.
10.8* Form of Executive Severance Agreement.
10.9* 1994 Employee Flexible Stock Option Plan.
10.10* Non-Employee Directors Stock Option Plan.
10.11** Employment Agreement, dated March 31, 1995, between Darling
International Inc. and Dennis B. Longmire.
11 Statement re computation of per share earnings . . . . . . . . . 18
* Incorporated by reference to the Registrant's Registration Statements
on Form S-1 filed July 15, 1994 (Registration No. 33-79478).
** Incorporated by reference to Form 10-Q filed May 8, 1995.
*** Incorporated by reference to Form 10-Q filed August 14, 1995.
**** Incorporated by reference to Form 10-Q filed November 13, 1995.
Page 17
<PAGE>
EXHIBIT 11
<TABLE>
Statement re Computation of Earnings Per Share
<CAPTION>
Three Months Ended Six Months Ended
--------------------------- ----------------------------
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
============= ============= ============= ==============
<S> <C> <C> <C> <C>
Earnings:
Net earnings available to common stock $3,613 $4,433 $7,545 $9,482
===== ===== ===== =====
Shares (Primary):
Weighted average number of
common shares outstanding 5,114 5,013 5,101 5,006
Additional shares assuming exercise of
stock options 404 234 435 188
----- ----- ----- -----
Average common shares outstanding
and equivalents 5,518 5,247 5,536 5,194
===== ===== ===== =====
Primary Earnings per common share $ 0.65 $ 0.84 $ 1.36 $ 1.83
===== ===== ===== =====
Shares (Fully Diluted):
Weighted average number of
common shares outstanding 5,114 5,013 5,101 5,006
Additional shares assuming exercise of
stock options 408 330 435 311
----- ----- ----- -----
Average common shares outstanding
and equivalents 5,522 5,343 5,536 5,317
===== ===== ===== =====
Fully Diluted Earnings per common share $ 0.65 $ 0.83 $ 1.36 $ 1.78
===== ===== ===== =====
</TABLE>
Page 18
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> JUN-29-1996
<CASH> 9,962
<SECURITIES> 0
<RECEIVABLES> 34,093
<ALLOWANCES> 122
<INVENTORY> 11,758
<CURRENT-ASSETS> 62,941
<PP&E> 202,458
<DEPRECIATION> 44,435
<TOTAL-ASSETS> 280,384
<CURRENT-LIABILITIES> 53,090
<BONDS> 114,742
0
0
<COMMON> 51
<OTHER-SE> 62,890
<TOTAL-LIABILITY-AND-EQUITY> 280,384
<SALES> 223,994
<TOTAL-REVENUES> 223,994
<CGS> 178,606
<TOTAL-COSTS> 205,853
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,094
<INCOME-PRETAX> 12,475
<INCOME-TAX> 4,930
<INCOME-CONTINUING> 7,545
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,545
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.36
</TABLE>
