Importantdisclosuresappearonthelastpageofthisreport.

TheHenryFund

HenryB.TippieSchoolofManagementJackSmith[jsmith198@uiowa.edu] DarlingIngredients,Inc.(DAR) April17,2019Energy–RenewableFuels StockRating HOLD

InvestmentThesis TargetPrice $27–29WeissueaholdratingforDarlingIngredientsbecauseourmodelshavefoundthatDarling’sstockhasa29%upsideoveritscurrentpriceof$21.77.DiamondGreenDieselisplanningasignificantexpansionofitsfacilities,allowingittoincreaseitsproductioncapacityofrenewabledieselto675milliongallonsperyear, up from its current level of 275million gallons per year. Demand forrenewablediesel,particularlyinCaliforniaandtherestoftheUnitedStates,shouldgrowtomeetthisexpansion,allowingDiamondGreenDieseltoemergeasoneoftheworldleadersintherenewabledieselmarket.Darling’sequityinthe net income of Diamond Green Diesel will be an important driver ofearningsgoingforward.DriversofThesis• TheDiamondGreenDieseljointventurehasbeenprofitablerecentlyand

isplanningtogrowsignificantlyinthenextthreeyears,soitispoisedtogainmarketshareinanindustrywithhighpotential

• Recovery in the pricing environment of Feed Fats & Proteins markets

shouldallowDarling’sFeedIngredientssegmentrevenuetogrowbymorethan8%peryearinourforecastperiod

RiskstoThesis• Darling’sFuel Ingredientsoperationsaregrowing,butthatmaynotbea

greatideaasthebiodieselindustryisfacingsubstantialchallenges

• Webelievethatrenewabledieselcansustaingrowthwithouttheblenderstax credit in effect; if the industry does struggle without governmentsubsidysimilarlytothebiodiesel industry,thenU.S.CongressreinstatingtheBTCmaybeimportanttoDiamondGreenDiesel’sprofitability

HenryFundDCF $48.30HenryFundDDM $28.14RelativeMultiple $8.63PriceData CurrentPrice $21.7752wkRange $16.50–22.31Consensus1yrTarget $24.57KeyStatistics MarketCap(B) $3.59SharesOutstanding(M) 164.80WACC 6.16%ThreeYearWeeklyBeta 0.94DividendYield 0.00%EV/EBITDA 12.60Price/Earnings(TTM) 34.92Price/Earnings(2019E) 33.70Price/Book(2019E) 1.50EV/EBITDA(2019E) 12.60Profitability OperatingMargin 2.81%GrossMargin 21.86%ReturnonEquity(TTM) 4.55%

EarningsEstimatesYear 2016 2017 2018 2019E 2020E 2021EEPS $0.62 $0.78 $0.62 $0.64 $0.82 $1.00

growth 29.2% 25.8% –20.5% 3.2% 28.1% 22.0%Consensus $0.56 $0.22 $0.38 $0.89 $1.03

12MonthPerformance CompanyDescription

Darling Ingredients, Inc. produces sustainablenatural ingredients from edible and inediblenutrients. They compete globally in a variety ofindustries,fromfoodstuffstobiodieselandmore.Darling also competes in renewable dieselmarkets with its Diamond Green Diesel jointventure with Valero. Darling conducts themajority of its business in North America,althoughitsEuropeanmarkethasgrowninrecentyears.

33.7

12.612.0 10.8

17.8 16.0

0

10

20

30

P/E EV/EBITDA

Source:Bloomberg

DAR ADM NESTE-FI

-20%

-10%

0%

10%

20%

30%

A M J J A S O N D J F M

DAR S&P500Source:YahooFinance

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EXECUTIVESUMMARY

WeissueaholdratingforDarlingIngredientsbecauseourmodels indicate that the stock is currently undervalued.The target price of $28.14 provided by our DDMmodelshowsthatthestockhasanupsideof29%fromitscurrentpriceof$21.77.Darling’searnings inthenearfuturewilldepend largely upon the growth and profitability of theDiamond Green Diesel joint venture. Diamond GreenDiesel is currently planning to expand its facilities andincreaseitsrenewabledieselproductioncapacity,andweexpectdemandforrenewabledieseltogrowalongwithit.Regarding Darling’s operating revenue, its FeedIngredients segment was held back in 2018 by adversepricingconditionsintheFeedFatsandProteinsmarkets,but we expect that these markets will rebound andDarling’sanimal feedoperationswillperformwell in thenear future. These factors have influenced theassumptions of our models, leading them to determinethat Darling’s stock should be valued higher than itscurrentmarketprice.

COMPANYDESCRIPTION

DarlingIngredients, Inc., isa“developerandproducerofsustainable natural ingredients from edible and inediblebio-nutrients.”1Theyconvertanimalby-products,residualbakeryproducts,andrecycledoils intofinishedproductssuch as gelatin, fats, proteins, grease, natural casings,organic fertilizers, and renewable fuel.1 Their productscompeteacrossfivecontinentsinindustriessuchasfood,animal feed, pet food, bioenergy, pharmaceuticals, andmore.1 The company’s operating segments are FeedIngredients,FoodIngredients,andFuelIngredients.

Datasource:DAR10-KandHenryFundestimates

ThischartclearlyshowsthattheFeedIngredientssegmentisDarling’sprimaryoperatingsegment,as60%ofitstotalrevenue is attributable to this segment. The FeedIngredients segment’s net sales were $1,952 million in2018, which is down 5.9% from $2,074million in 2015.FeedIngredientshashadtheweakestgrowthrateofthethree segments over the last few years. The FoodIngredients segmenthasaverageda20.5%grossmarginand a 4.8% net margin over the last four fiscal years,meaning Food Ingredients has theworstmargins of thethree segments. Of Darling Ingredients’ $3,387 milliontotalnetsalesin2018,only$296millionwasattributedtoFuel Ingredients, the smallest of the three segments.However, this segment’s revenue in 2018wasup29.7%fromits2015levelof$228million,meaningitisshowingthe strongest growth of the three segments. FuelIngredientsisalsothesegmentwiththehighestmargins,withagrossmarginaveraging22.8%ofsales.Performancemetrics indicate that Fuel Ingredients is Darling’s bestsegment right now, while its two biggest segments arerelativelysluggish.1

Datasource:DAR10-KandHenryFundestimates

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These graphs show Darling’s revenue broken down bygeographicregion.TheydemonstratethatthemajorityofDarling’s operations happen in North America, and thisfact is expected to be true again in 2019. However,Europe’sshareofthepiegrewby6%from2015to2019,indicatingthatDarling’sEuropeanoperationsaregrowingfasterthaninanyothergeographicalmarkets.Weexpectthis is due to Darling’s growth in its Fuel Ingredientssegment coupledwithbiofuelmarket trends: ineffectivegovernmentpolicyanddwindlingconsumerdemandintheUnited States, traditionally one of the world leaders inbiofuel production and consumption, have inhibited theworldwide growth of biodiesel, and global biodieseldemand is now being driven largely by Europeanconsumers and supportive policies from the EuropeanUnion.4

FeedIngredients

Thecompany’sFeedIngredientsoperatingsegmentturnsanimal by-products and used cooking oil into fats,proteins,andother ingredients foruse in livestock feed.TheFeedIngredientssegmentprimarilyoperatesinNorthAmerica, although its finishedproteinproducts andoils,cattlehides,andorganicfertilizersarealsocompetitiveinEurope, and its processing of blood into plasma andhemoglobinisprovidedinEurope,China,andAustraliainadditiontoNorthAmerica.Thecompanyreportsresultsinsix different subdivisions within the Feed Ingredientssegment: Fats, Proteins,Other Rendering,Used CookingOil,Bakery,andOther.1

TheFats,Proteins,OtherRendering,andUsedCookingOildivisions are part of the company’s Animal By-Productsoperations,whichareconductedinNorthAmericaundertheDarlingandRothsaybrandsandinternationallyunderthe Sonacbrand. Theseoperations collect beef, poultry,andporkby-productsfromgrocerystores,butchershops,slaughterhouses, and restaurants, andprocess theseby-productsintofinishedprotein,oil,andmeatproductswithan elaborate grinding, cooking, and blending process.These operations also provide grease trap services torestaurantsandgrocerystores,andcollectusedcookingoiltoprocessitintoananimalfeedadditive.1

The Bakery division of this segment represents thecompany’s Bakery By-Products operations,which collectresidualmaterials frombakeriesanduses themtomake

CookieMeal®, a common ingredient in chicken and pigfeed. TheOther division of this segment represents thebusinessconductedbythecompany’sNatureSafebrand,including converting proteins into organic fertilizers andprocessingcattlehidesandhogskins.1Thefollowingchartsshowtherevenueofthissegmentbrokendownintoitssixreportablesubdivisions.

Datasource:DAR10-KandHenryFundestimates

The Feed Ingredients segment is Darling’s largestoperating segment, accounting for about 60% of thecompany’stotalnetsales.Thesechartsshowusthatabouttwo-thirdsofthesegment’srevenueiscomprisedofFatsand Proteins.1 Clearly, feed fats & proteins are a veryprominent part of Darling’s business, and they areexpectedtomakeup40%ofthecompany’stotalrevenuein2019basedonourforecasts.ThesechartsalsoshowthedeclineoftheBakerydivisionovertheyears,anditsshareof the segment is being replacedbyAnimalBy-Productsoperations. We have accounted for this trend in ourforecasts,withBakerysalesprojectedtodeclineby2%peryear while the other divisions of the Feed Ingredientssegment grow by at least 5% per year. This segment,

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particularly the Fats and Proteins divisions, will beimportanttomonitorgoingforwardbecauseitiscurrentlythe largest driver of the company’s total operatingrevenue.

FoodIngredients

Darling’sFoodIngredientsoperatingsegmentturnsanimalby-products into ingredientsforuse infoodproductsforhumanconsumers.TheFoodIngredientssegmentisledbyRousselot, a France-basedbranddedicated toproducinggelatin and collagen for food, nutrition, andpharmaceuticals. The segment also includes theNetherlands-based brands Sonac and CTH. Sonacprocesses bone, heparin, and edible fat for a variety ofindustries including food, pharmaceutical, feed, and petfood, while CTH primarily deals in natural casings forsausagemanufacturers.18Darlingacquiredthesebrandsin2014aspartofitsexpansionintonewmarkets(2014wasalsothefirstyearthatDarlingreportedaFoodIngredientsoperatingsegment,andthefirstyearthatDarlingreportedanyoperationsoutsideofNorthAmerica).1As such, thissegment primarily operates in Europe, although itsproducts and services related to gelatin and sausagecasingsarealsoavailabletoChinaandtheAmericas.1

In terms of performance, profitability, and companysentiment, the Food Ingredients segment certainlyappears to be on the backburner. Darling’smost recentearnings call briefly addressed its collagenproducts, butspentmuchmore time on its fats, proteins, and biofueloperations.5AsFeedIngredientsisthecompany’slargestsegment and Fuel Ingredients is the company’s fastest-growingsegment,itisunderstandablethatthissegment,theonewiththelowestmargins,doesnotmeritthesamedegreeofattention.WeshouldexpectFoodIngredientstobe the company’s lowest priority going forward, and assuch,ourrevenueforecastsprojectthissegmenttogrowatonly4%peryear.

FuelIngredients

Darling’sFuelIngredientssegmentprocessesfats,oils,andwasteintobiofuelsandbioenergy.InNorthAmerica,theyoperateundertheDar-ProandRothsaybrands,convertinganimal fats and recycled cooking oil into biodiesel. InEurope,thecompanymakesbiogasoutoffoodwastewithits Ecoson brand and converts fallen stock and animal

waste into low-gradeenergywith itsRendacbrand.Thissegment also includes the Diamond Green Diesel jointventure, although DGD’s operations are considered aninvestment in an unconsolidated subsidiary and do notfactor into the Fuel Ingredients segment’s revenuenumbers.1

Thissegmenthasshownthestrongestgrowthinrevenuelately,with total revenuegrowthof29.7%from2015to2018.Ithasalsoshownthebestprofitability, includingagrossmarginof22.8%ofsegmentsalesoverthelastfouryears.Basedonthisperformance,andhowmuchof thelatest earnings call was spent talking about Darling’senergyoperations,5webelieve that theFuel Ingredientssegmentisamajorfocalpointinthecompany’sstrategyfor the near future, and have accordingly forecastedgrowth of this segment’s revenues. However, we havekeptthosegrowthforecastsconservative,accountingfortheuncertainfutureofbiodieselmarkets.Weforecast8%growthinFuelIngredientsrevenuein2019,theyearofourforecastperiodinwhicheconomicconditionsmaybethemost favorable for fuel operations, but this growth ratefalls to just 2% for 2021 and beyond, due to concernsabouttheeconomyandthebiodieselindustry.

CompanyAnalysis

DarlingIngredientshastraditionallymadeitsmoneyintheAnimalFeedmarket,butitsfocusisquicklyshiftingtowardenergyproductsandservicesatthis juncture, judgingbythe amount of attention dedicated to Diamond GreenDieselandthe fuelsegment in themost recentearningscall.5Thecompanyishighlydiversifiedacrossavarietyofindustries, including its recent efforts in the renewablefuel area. Darling seems to benefit from its recentexpansion into more geographic markets in terms of agreater volume of sales, although this change has alsointroduced certain risks such as changing currencyexchange rates. The company reports that they make“limited”useofderivativesforhedgingpurposes,1sotheyare somewhatexposed to the riskof currencyexchangeratechanges.

Darlingmayalsobenefitfrombeingsomewhatuniqueandbeing positioned in so many different product markets,but its recent shifts toward energy operations couldsubject them togreater risks regarding the industryandtheoverall economy. Thebiodiesel industrymaynot be

Page5

abletosustainitself,especiallyaslongastheblenderstaxcreditisnotineffect,anditshouldbeadverselyaffectedintheeventofaneconomicslowdownorrecession.Givenouroutlookonthisindustryandtheeconomy,wewouldbewaryof thecompany investing toomuch inbiodieseloperations.Darlingmaybebetterofftofocusongrowthinrenewabledieselandinfoodandfeedingredients,andtobecarefulnottogetcaughtupinanindustrycurrentlyfacingsignificantchallengestoitsviability.

RECENTDEVELOPMENTS

2018Q4EarningsReport

DarlingreleaseditsForm10-Kforthefiscalyear2018onFebruary 27, 2019, and hosted its earnings call thefollowing day. They reported $3,387million in total netsales in 2018 (down 7.5% from 2017), as well as $95.2millioninoperatingincome(down30.4%from2017)andEPSof$0.62pershare(down20.5%from2017).Darling’sreported revenuemissed estimates by 4.6% and its EPSnumbersmissedestimatesby11.1%inthefourthquarterof2018.5,17

AsCEORandallStuewenotedontheFebruary28earningscall,thecompanyfaceddifficultconditionsin2018duetoacombinationofglobaltradeconflicts,foreignexchangerates, and downward pressure on prices in the fats andproteinsmarkets.5Indeed,thecompanyreportsinits10-K that overall revenue in the Fats division of the FeedIngredientssegmentwasdown12.88%in2018relativeto2017, despite an increase in sales volume ofmore than5%.1 Additionally, the Diamond Green Diesel plant inNorco, LA, had to temporarily shut down to replace adamagedpart.Thesubsequentdowntimewentonlongerthanexpected,andDarling’sperformancetookahitasaresult.11 However, the company is confident that thesechallengesareonlytemporary,andthattheiroperationsarestrongandwillsoonberewardedintermsofrevenueandearnings.5

Based on the conversation in the earnings call, thecompanydefinitely appears to be heavily focusedon itsFuel Ingredients segment. While we believe thatrenewableenergy is currentlyaverypromising industry,biodieselisoneareaoftheindustrythatwearerelativelyskeptical of its prospects. Our model projects that thegrowthofFuelIngredientsrevenuewillbe8%in2019and

taper off to 2% in a couple years, so it is likely lessoptimistic about this operating segment than Darling’smanagementis.

DiamondGreenDiesel

DiamondGreenDiesel isDarling Ingredients’50/50 jointventure with Valero Energy Corporation into thedevelopment of renewable diesel fuel. DGD convertsanimalfats,usedcookingoil, inediblecornoil,andotheringredientsintoarenewabledieselwithasmallercarbonfootprint thanconventionaldiesel fuel.ThecombinationofDarling’s supply chainof ingredients andbionutrientswithValero’sresourcesandexpertiseforfuelrefiningandengineering creates a sustainablebusinesswithefficientoperationsinrenewablefuelproduction.5,6

Diamond Green Diesel has expanded to a productioncapacityof275milliongallonsof renewablediesel asof2018.InNovember2018,Valeroannouncedthatplanshadbeen approved to further expand DGD’s capacity. Theyintendtobuildadditionalfacilitiesadjacenttotheexistingplant in Norco, LA, and if everything goes to plan, theprojectwillbefinishedbytheendof2021andDiamondGreenDiesel’scapacitywillbeupto675milliongallons.6,7DarlingexpectsthatthisprojectcanbefundedcompletelybyDiamondGreenDiesel’scashflowsandwillnotrequireanyexpendituresbyDarling.1

The results of this joint venture show up as part of theEquity in Net Income of Unconsolidated Subsidiariesaccount of the income statement, and not at all in thecompany’s revenue decomposition. The lack of detail inthewaythesefinancialshavebeenreportedcouldmakeithardtoaccuratelyforecastDiamondGreenDiesel’simpactonDarling’sfinancialstatementsandvaluation.However,theDGD jointventureseems tobeamajor focusof thecompanyand shouldbeaprominent factordeterminingDarling’s performance going forward. This will be animportant subject to monitor closely and continuallyreevaluateourmodels’assumptionsregardingDGD.

INDUSTRYTRENDS

Although Darling Ingredients is highly diversified innumerous different industries and product lines, itsmanagement focus seems to be primarily on bioenergyandfeedfatsandproteins.Aswealreadymentioned,theFeedIngredientssegmentisresponsibleforamajorityof

Page6

Darling’stotalrevenue,andFatsandProteinsaccountforamajorityofthatsegment’srevenue.Therefore,itissafeto say that feed fats and proteins markets will have asignificant influence on Darling’s performance. On theother hand, energy operations have been the fastest-growing area of the company lately, and managementseems driven to continue expansion in this area, so thebioenergy and renewable diesel industries will beimportant to Darling’s growth potential in the comingyears.

FeedFats&Proteins

In2018,thecompanyfacedastagnantmarketforitsfeedproteinproductsanddownwardpressureonthepricesofitsfeedfatsproducts.1,5Darling’snetsalesin2018wereuponly3%from2017intheProteinsdivisionandweredownmore than 12% from 2017 in the Fats division, whichcontributed to the company’s Feed Ingredients segmentsalesandoveralltotalnetsalesalsobeingdownrelativeto2017.However,asanimalhusbandryisexpectedtogrowto meet demand for meat and dairy products, andawarenessandpriority toward thenutritionprovided toanimalsgrow,thisindustryispoisedtoreboundwellinourforecastperiod,8thereforewehaveprojectedrevenuetoincreasein2019by10%intheFatsdivisionand12%intheProteins division. Darling’s declining numbers in manyrevenue accounts belie the fact that some of theseaccountswereactuallygrowingintermsofsalesvolume.Thecompanyisconfidentthatconditionsinthisindustryare getting better and their revenues should begin toreflect their volume growth,5 and we agree with theirpositiveoutlookontheFeedIngredientssegment.

Bioenergy

Recent trends and our forward outlook are not veryfavorableforbiodiesel.Oneimportantfactorencouragingbiofuelproductionhasbeentheblenderstaxcredit,ataxbenefitaffordedtocompaniesthatblendrenewablefuelswith petroleum fuels for sale and consumption.Productionofbiofuelsisgenerallymorecostlythanthatofpetroleumfuels,sothetaxcreditprovidesanopportunityfor biofuel blends to be pricedmore competitivelywithconventional fuels. Early last year, the BTC wasretroactivelyapprovedapplicable to2017,butnoactionhasbeentakensincethenandtheefforttoextendtheBTCgoingforwardseemstohavestalled.10DarlingCEORandall

Stuewe noted that the company’s 2018 earnings wouldhavebenefitedbyabout$90millionhadtheBTCstillbeenineffect,5soitisapparentthatthetaxcreditisasignificantfactorforcompaniesinAmericanbiofuelmarkets.Indeed,onestudyhasfoundthatbiodieselproducerswouldhaveaverageda25centlosspergallonproducedin2017iftheyhadnotbeenproppedupbytheBTC.19Wehavereasontobelieve that biodiesel operations will not be profitableenough to survive long-term without the blenders taxcredit,whichhasnotbeenineffectforthelast15monthsandmaynotbereinstatedbyCongress.

EuropehasseenastrongermarketforbiofuelsthanNorthAmerica recently due to supportive policies, but thesepoliciesaresettoexpirein2020andthelandscapeafterthat is uncertain.9 Despite a respectable showing inEurope, overall worldwide biofuel production has seenmodest growth and looks to be fallingwell short of theInternational Energy Agency’s Sustainable DevelopmentScenariotargets.9

Wehavealsoexpressedsomeconcernsaboutbiodiesel’slong-term viability due to its limited environmentalbenefit.Biofuelsaretypicallyconsumedinamixturewithpetroleum fuel, so the consumption of biodiesel stillresultsintheburningoffossilfuels.Tothisend,itappearsthat amore popular and effectivemethod for reducingcarbon emissions is to improve the efficiency of vehicleengines.Makingvehiclesmorefuel-efficient,includingthedevelopmentofelectriccars,seemspoisedtooutpacethegrowth of alternative fuels as the market’s answer toharmful fossil fuel emissions. All in all, the future ofbiodieselmarketsdoesnotlookverypromising.

RenewableDiesel

Renewable diesel is generally made with the same rawmaterialsasbiodiesel,butitisproducedbytheprocessofhydrotreatment rather than esterification.20 This meansthatrenewablediesel,unlikebiodiesel,isabletobemadewith the same chemical composition as conventionaldiesel fuel, which gives it certain advantages overbiodiesel. Renewable diesel is considered a “drop-in”alternativetopetroleumdieselbecauseitcanbeproducedinthesamefacilitiesandcombustedinthesameenginesastheconventionalfossilfueldiesel.Also,it’sbeenwidelyapproved that heavy-duty diesel engines can use 100%renewablediesel.20Wesee renewabledieselasabetter

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option than biodiesel because it converts the sameingredients into a finished product that has greaterpotentialtoreplacefossilfueldieselratherthantoonlybeblendedwithfossilfueldiesel.

Research indicates that combusting renewable dieselreduces emissions by as much as 85% relative toconventional diesel.20 Considering its potential to fuelengines independent of fossil fuels as opposed to beingmixedwith fossil fuels,weexpect that renewabledieselprovidesanenvironmentalimprovementoverbiodieselaswell. This environmental benefit would explain whyCalifornia is embracing renewable diesel in an effort tomeet its Low Carbon Fuel Standards.20 Demand forrenewable diesel is growing in the United States andparticularly inCalifornia,sothestateisallocatingmoneytoinvestinrenewabledieselproductionfacilitiessothatdemand doesn’t outpace supply. As mentioned earlier,DiamondGreenDieselplanstomakeasimilarinvestmentand increase its annual production capacity from 275million gallons to 675million gallons. California expectsthat itsdemand for renewablediesel couldgrow toonebilliongallonsperyearby2031;forreference,Nesteistheworld leader in the renewabledieselmarketwith about680milliongallonsproducedperyear,andtotalrenewabledieselproductionintheUnitedStatesiscurrentlyatabout200 million gallons per year.20 Therefore, we seetremendouspotentialforgrowthinthisindustry.

The aforementioned blenders tax credit applies torenewabledieselaswellasbiodiesel,sothesamequestionabout the importance of government subsidy onprofitabilitymayariseforrenewabledieseltoo.However,Darling reported selected financial information for theDiamondGreenDieseljointventureinNote2oftheNotestoConsolidatedFinancialStatementsinits10-K.ThisdatashowedthatDGDreportednetincomeof$56.5millionin2017,whichdoesn’tincludeanyeffectoftheblenderstaxcredit, and net income of $319.6million in 2018,whichincludes a $160million adjustment related to the 2017retroactive reinstatement of the BTC. From thisinformation,wegatherthatDiamondGreenDieselwouldhave been profitable for each of the last two yearsregardlessof theeffectsattributable to theblenders taxcredit.TheindustrywouldcertainlybenefitfromtheBTCifitdoesgetreinstated,butwearemuchmoreoptimisticthatrenewabledieselcangetalongwithoutgovernmentsubsidythanwearefortheprospectsofbiodiesel.

MARKETSANDCOMPETITION

Source:YahooFinance

ThischartshowsthereturnsofselectedstocksrelevanttoDarlingoverthelast12months.ItcomparesDarlingtotheS&P 500, its Diamond Green Diesel partner Valero, andcompetitors Tyson Foods, Archer-Daniels-Midland, andRenewableEnergyGroup.WecanseethatDarling’sstockhas outperformed the market, as well as each of thechosen companies with the exception of RenewableEnergyGroup.

PeerComparisons

InadditiontoDarlingIngredients,someofthekeyplayersintheAnimalFeedmarketsincludeTysonFoods,Archer-Daniels-Midland,Cargill,andOmegaProtein.

GrossMargin

EPS2018

P/ETTM

Revenue2018

DAR 21.86% 0.62 35.6 $3.4BTSN 15.56% 6.10 12.1 $40.7BADM 7.89% 3.50 13.3 $64.3BCargill 10.63% - - $116BOmega 29.14% - - $342M

Source:Factset&Bloomberg

Manyoftheparticipantsinthisareaappeartobeprimarilyinfoodstuffsandhavebranchedoutintotheanimalfeedspace,indicatingthatitisrelativelyeasytotransitionintothismarket from a slightly different business. Also, oneaspect of a commodity-product sort of market is thatdifferentiation among the companies’ products is quitedifficult, and that competitive advantage is usuallyachievedthroughefficiencyofoperationsratherthanthe

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nature of the products. These notes about Animal Feedmarketsleadustobelievethatthethreatofnewentrantstotheindustryandthecompetitionwithintheindustryareratherhigh,andthatfirmsaregenerallypricetakersratherthanpricemakers.Ontheotherhand,Darlingstatesthatits sources of animal by-product raw materials includerestaurantsandgrocerystores,indicatingthatthenumberof potential suppliers forDarling’s business is very, veryhigh.1Cargillcertainlylookswellpositionedinthisindustryduetoitssizeifnothingelse,butthewinnerinthisspacemayjustbewhoevercangetthemostoutoftheirmarginsas competitive advantage related to theproducts in themarketislimited.Atthispoint,theleadersingrossmarginareOmegaProteinat29.14%andDarlingat21.86%.

Bioenergyhasdeveloped to try to replace fossil fuels aspeoplehavebecomemoreawareoffossilfuels’damagingeffectsontheworld’senvironment.Somekeyplayerswehave chosen in the bioenergy space include Darling,Valero,Neste,andRenewableEnergyGroup.

GrossMargin

EPS2018

P/ETTM

Revenue2018

DAR 21.86% $0.62 35.6 $3.4BVLO 6.59% $7.37 11.4 $117B

NESTE-FI 13.8% €4.50 29.8 €14.9BREGI 6.66% $6.34 4.3 $2.4B

Source:Factset

Darling and Valero compete together in this spacewiththeir Diamond Green Diesel joint venture. NesteCorporation is a Finnish energy company that wasoriginally established for petroleum operations, but hassince become the world leader in renewable dieselproduction.12 Renewable Energy Group, Inc. is based inAmes,IA,andproducesrenewablefuelsandchemicals.13This market seems fairly available for any company ineitherenergyoragriculturalcommoditiestoenter;DarlingandValerojoiningthemarkettogetherisagoodexampleof this.Relative to theAnimal Feed industry, alternativefuelisayoungerandlessdevelopedindustrywithinwhichthereismuchgreaterpotentialforcompaniestoinnovateand differentiate themselves based on their products.However,biofuelproductswillalsohavegreaterthreatofsubstitutes asnew innovations in alternative fuels couldreplace less effective products; for example, ethanolmarkets have stagnated since 2010 while biodiesel hasgrown,andnowrenewabledieselisemergingasabetter

alternative to biodiesel. This industry also has a lessreliable demand base, as the overall demand for fuel ingeneralcouldbediminishedbythedevelopmentofhybridand electric vehicle engines and other answers toenvironmental concerns. Another question for thisindustry would be the extent to which it is capable ofdeveloping on its own, or how important governmentincentives and subsidies are to its growth. Thebiodieselindustrymaynotbeviablelong-termifitcannotimproveits profitability or sustain its own growth withoutgovernment assistance. The same may be true ofrenewable diesel, but we are more optimistic thatrenewabledieselcangrowregardlessoftaxcredits.

Nesteappearstobeinthebestpositioninthisindustry,asit is a strong brand located in the strongest region forrenewable fuel. It currently leads the world in marketsharewithabout680milliongallonsofrenewabledieselproducedperyear,andasitappearstobeoutperformingitscompetitorswithagrossmarginof13.8%,itshouldbeabletocontinueleadingthewayinthismarket.However,DiamondGreenDieselcombinesDarling’ssupplychainoffeedstockswithValero’sexpertiseinrefining,engineering,andfuelmarketing,avaluablecombinationforrenewablediesel operations.5 Diamond Green Diesel has beenprofitable in recent years and is planning an expansionprojectthatwillmorethandoubleitsproductioncapacity,so theyarepoised to catchupwithNesteas renewabledieseldemandgrows.

ECONOMICOUTLOOK

SomeeventsinMarch2019havechangedourshort-termeconomic outlook from optimistic to uncertain.AnnualizedrealGDPgrowthinthefourthquarterof2018was reported at 2.2%, down from 3.4% in the thirdquarter. This led us to adjust our short-term real GDPgrowthforecasts from3%downto2.5%.Treasuryyieldshave trended downward throughoutMarch. The spreadbetweenthe2-yearand10-yearyieldshasnarrowedfrom0.21%atthebeginningofMarchto0.14%asofMarch29,whichmatches the narrowest spread to date in 2019.14Also,the10-yearyieldfellbelowthe1-yearyieldonMarch22,ayieldcurveinversionthatsetoffeconomicconcernsand drove the stock market lower. The most recentConsumerConfidenceIndexwasreportedat124.1,downfrom131.4 inFebruary,15andweprojectthat itwillstayaround this level in the comingmonths.Our short-term

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forecastalsoprojectthatthepriceofWTILightcrudewillstay in the low 60s. After a tumultuous end to 2018, itappearedthattheeconomywasreboundingwellinearly2019, but recent developments have reignited concernsaboutapossibleeconomicslowdown.

This news is not particularly favorable for Darling’s FuelIngredients segment. Theoverall healthof theeconomyinfluencesfueldemand,aspeoplewill likelyspendmorefreelyduringaboombutwill reduce their travelandbemore conservative with their energy usage in hardertimes.Thistrendisillustratedinthefollowingchart,whichgraphs fuel spending in the United States from 1999 to2013,withtheshadedareasrepresentingrecessions.

Source:FederalReserveBankofSt.Louis

Also, asbiofuels are largely consumed inamixturewithpetroleum fuels, they could be considered acomplementary product of oil and should see increaseddemandifoildemandincreases.Indeed,studiesshowthatworldwide biofuel production should be expected toincrease as oil prices rise.16 We originally forecastedDarling’sFuelIngredientsrevenuetogrowby20%in2019when we thought the economic conditions would befavorableforthecompany’sfueloperations,butnowthatthenear future looksmoreuncertain,wehaveadjustedthisprojectiondownwardto8%.

Ourlonger-termeconomicforecastsatthisjunctureareabitmorecautious.Despitethereboundoftheeconomyinearly2019,we recognize that thisbull runmay soonbeoverandarecessionmaybejustaroundthecorner.Ifaneconomic downturn does come soon, demand forDarling’sFuelIngredientsproductswouldlikelysufferwithit.Weareuncertainastowhenthismayhappen,butweproject that theFuel Ingredientssegment is likelybetterpositioned to succeed in 2019 than it will be in thefollowingyearsduetoeconomicconditions.

CATALYSTSFORGROWTH

ThebiggestcatalystforDarling’sgrowthrevolvesarounditsinterestintheDiamondGreenDieseljointventure.Thisbusinessmaybeonthecuttingedgeofrenewablediesel,an industry that shows potential to grow in the nearfuture. That explains why Darling and Valero havecommittedtosignificantlyexpandingDGD’sfacilitiesandincreasing its fuel production capacity by nearly 150%.Darling’s performance going forward will likely dependverymuchonthedevelopmentsofDiamondGreenDiesel.Another factor driving Darling’s earnings will be theperformanceoftheFeedIngredientssegment,particularlyinfatsandproteinsmarkets.

INVESTMENTPOSITIVES

•The Diamond Green Diesel joint venture with Valeropromises to expand quickly. We expect that thisexpansionwillbemetwithdemandandprofitability,soDiamond Green Diesel should be the main driver ofDarling’searningsgoingforward.

•We see a likely recovery in the pricing conditions forDarling’s Feed Fats & Proteins products, which wouldimprove the profitability of the company’s animal by-productsoperations.

INVESTMENTNEGATIVES

•DiamondGreenDieselwould’vebeenprofitableforthelasttwoyearsregardlessoftheblenderstaxcredit,andourmodelassumesthatitcancontinuetobeprofitablewithout the taxcredit ineffect. If that turnsout tobeincorrect,thepossiblerenewaloftheblenderstaxcreditmaybeimportanttoDarling’searnings.

• The Fuel Ingredients segment is growing as companymanagement seems to be shifting its operating focustoward biodiesel. However, we express concerns thatmore activity in this industrymaymake Darlingmorevulnerable toadownturn in theoverall economy,andthat the upside in this industry going forwardmay belimited.

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VALUATION

WebuiltaDCF/EPmodel,aDividendDiscountModel,andaRelativeMultiplemodeltoestimatethevalueofDarlingIngredients’ stock. Our Relative P/E analysis gives us apriceof$8.63,butwedonotfavorthismethodbecauseDarling is a unique business, highly diversified across avariety of industries, and therefore does not have anyclearly comparable peers. Our DCF/EP method yields atargetpriceof$48.30,andourDividendDiscountModelgives us a price of $28.14, based on the theoreticaldividend Darling could afford to pay in 2023 given ourestimatesofEPS,ROE,andcontinuingvaluegrowth.Webelieve that the DDM method is a better reflection ofDarling’s value. The DDM method is based on EPSestimates, which include equity in net income ofunconsolidatedsubsidiaries,whereastheDCF/EPmethodis based on operating profit and does not include theeffects of Diamond Green Diesel income, the mostimportantfactorofDarling’sbusinessgoingforward.Thistargetpriceof$28.14ishigherthanthecurrent(asofApril17, 2019) market price of $21.77, therefore we havedecidedonaholdrating.

RevenueDecomposition

WewereabletoforecastDarling’ssalesbasedonaveragesandtrendsintherevenuedecompositiondatareportedinthe 10-K in recent years. We found in Item 7 of thecompany’s 10-K that much of the variation in net salesgrowth has been attributed to prices and currencyexchangerates,whereasthegrowthratesofsalesvolumehavebeenmuchmorestableinrecentyears.Thefollowingtablereflectsthedatafrom2018asanexample.

Fats Proteins UCO BakeryNetsales2017 648.3 816.1 185.5 209.8

Increase(decrease)duetosalesvolume 34.7 55.9 5.6 (13.6)

Increase(decrease)duetofinishedproductprices (85.9) 16.2 (13.5) 5.0

Increase(decrease)duetocurrencyexchangerates 4.8 12.4 – –

Otherchange (37.2) (57.7) (10.9) (21.0)Netsales2018 564.7 842.9 166.7 180.2

Datasource:Company10-K

Basedonthelastfewyearsofthis information,wehaveapproximatedthegrowthratesofsalesvolumeat6%forFats, 5% for Proteins, 2-3% for Used Cooking Oil, and

negative4%fortheBakerydivision.Afteraccountingforprice changes by adding 2%, our Henry Fund consensusestimate of the CPI inflation rate, we arrived at ourprojectedgrowthratesforeachofthesedivisions.Theseprojectionsassumethattheexpectedneteffectofforeignexchangeratechangesinanygivenyearshouldbeneutral.WethenincreasedthegrowthratesofFatsandProteinsbased on the positive prospects of the Feed Fats &Proteins industry, leaving us with 2019 growth rates of10%inFats,12%inProteins,5%inUsedCookingOil,and–2%inBakery.

Lessdetailwasavailableabout therecentgrowthof theFood Ingredients and Fuel Ingredients segments. Usingchangeinrawmaterialprocessedasaproxyforchangeinsalesvolume,andadding2%toaccountforinflation,weestimatedtheFoodsegment’sgrowthrateat4%.FortheFuelIngredientssegment,weuseddifferentgrowthratesfor2019andtheyearsbeyond2019becauseweestimatethatthissegmentwillbethemostsensitivetotheoverallstate of the economy. As mentioned before, we haveadjustedour2019Fuel Ingredientssegmentgrowthratedownto8%sinceoureconomicoutlookhasbecomelessoptimistic. Given our uncertainty about the economicconditionsbeyondthisyearandourskepticismregardingthefutureofthebiodieselindustry,ourforecastedgrowthofthissegmentdwindlesto2%bytheendoftheforecastperiod.

IncomeStatement&BalanceSheet

When possible, we used the revenue decomposition toestimateaccountsontheincomestatementaswell.Totalcostof saleswasbasedon thedifferencebetween totalnet salesand the sumof thegrossmarginsof the threeoperatingsegments,whichwereprojectedtobeginat22%ofFeedIngredientssales,21%ofFoodIngredientssales,and 22.5% of Fuel Ingredients sales based on historicaldata. Selling, general, and administrative expenseswereprojectedtobeginat8%ofFeedIngredientssales,9%ofFood Ingredientssales,and3%ofFuel Ingredientssales,plus an additional 1.25% of total sales to account forcorporateexpensesunrelatedtoanyoperatingsegment.

We have estimated 2019 capital expenditures at $300millionbasedonthecompany’sestimateprovidedinthe10-K, and we have grown this figure by 5% annuallythroughout the forecast period, consistent with our CV

Page11

growth rate.Basedon information fromthe10-K forms,wehaveestimatedthataccumulateddepreciationshouldgrow by 77% of the “Depreciation and amortization”account on the income statement, so we have addedcapital expenditures and subtracted this depreciationestimatefromthepreviousyear’sendingnetPP&Etofindthe new net PP&E for each year. We have decided toforecast gross intangible assets as constant rather thanassume that Darling will make acquisitions during theforecast period, and have forecasted accumulatedamortization based on the estimated amortizationscheduleprovidedinthe10-K.Weforecastedthecurrentportion of long-term debt based on the debt maturityscheduleprovidedinthe10-K,asshownbelow.Weexpectthat the company’s cash flows should be sufficient toservicetheseobligations.

Source:Company10-K

Someincomestatementandbalancesheetaccountswereforecastedasaconstantpercentageofthemostrelevantaccount,whetherthatbenetsales,netPP&E,taxexpense,or something else, to be as consistent as possible withhistoricaldata.

WACC

IncalculatingDarling’scostofequityforuseintheDDMmodel and for calculating WACC, we used the 10-yearTreasuryyield(2.558%asofApril16,2019)torepresenttherisk-freerate,usedtheHenryFundconsensusmarketriskpremiumof4.95%,andusedBloombergtocalculateabetaof0.939basedonweeklyreturnsoverthelastthreeyears. We estimated Darling’s pre-tax cost of debt at5.16%becausetheir interestexpensein2018was5.16%oftotaldebtreportedonthebalancesheet.Basedontheirmarket capitalization of $3.59 billion and their value ofdebtandoperatingleasesof$1.81billion,wedeterminedthat theappropriateweights forWACCcalculationwere66.52%equityand33.48%debt.Thesenumbersledustoaresultingweighted-averagecostofcapitalof6.16%.

DiamondGreenDiesel

Oneassumptiontokeepacloseeyeongoing forward isthe“Equityinnetincomeofunconsolidatedsubsidiaries”account of the income statement. The effect of theDiamondGreenDieseljointventureonDarling’sfinancialperformance is classified in this account. The accountmeasured $159.2million in 2018, approximately half ofDiamond Green Diesel’s reported net income of $319.6million(whichincludesa$160millionadjustmentrelatedtotheretroactiveapplicationoftheblenderstaxcredit).We have forecasted this account under the assumptionthattheblenderstaxcreditwillnotbereinstated.Firstwesubtractedhalfofthe$160millionBTCadjustmentfrom$159.2million to get $79.2, our approximation of what2018equityinnetincomeofunconsolidatedsubsidiarieswouldhavebeenwithoutanyeffectof theblenders taxcredit. We then grew this number by 10% per year, aconservative estimate of how quickly Diamond GreenDiesel’soperationsmaygrowinthenearfuture.Theonlyexception is in 2022, the year after the DGD facilityexpansionproject isexpectedtoconclude, inwhichcasewe projected a 75% uptick in this account due to themagnitudeoftheexpansion.

At this point, there is limited informationwithwhich toprojectexactlywhatthegrowthofthisaccountwill looklike.Inthefirstquarterof2019,Valerowillbeginreportinga “renewable diesel” operating segment to reflectDiamond Green Diesel’s performance, so this may be agood place to look formore detailed information goingforward. But as of their 10-K in 2018, they have notreportedspecificdatarelatedtoDGD.The“equityinnetincome of unconsolidated subsidiaries” account will beone area in particular that should be continuallyreevaluatedasnewsaboutDiamondGreenDieselcomesoutandthenatureofthebusinesschanges.

KEYSTOMONITOR

The biggest key to monitor going forward will bedevelopmentsregardingDiamondGreenDiesel.Thejointventure has approved a large expansion plan which isexpectedtobecompletedin2021.Inthemeantime,newsaboutthisproject,aswellastrendsinDGD’stargetmarketandtheimpactofDGD’sperformanceonDarling’sincomestatement,willbeimportanttofollowandmayinfluencesome assumptions of ourmodels in pivotalways.Other

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factors to keep tabs on would include the Feed Fats &Proteinsmarkets, whichmake up a prominent share ofDarling’stotalrevenue,aswellasthestateoftheoveralleconomy and how it affects Darling’s Fuel Ingredientsoperations.

REFERENCES

1. DarlingIngredients10-Khttps://ir.darlingii.com/sec-filings?cat=1&year=20162. Factset3. Bloomberg4. FreedoniaGrouphttps://www.freedoniagroup.com/industry-study/world-

biofuels-3179.htm5. MotleyFool–DarlingEarningsCallTranscripthttps://www.fool.com/earnings/call-

transcripts/2019/02/28/darling-ingredients-inc-dar-q4-2018-earnings-confe.aspx

6. DARPROBioenergywebsitehttps://www.darpro-bioenergy.com7. BiofuelsDigesthttps://www.biofuelsdigest.com/bdigest/2018/11/06/val

ero-approves-expansion-of-diamond-green-diesel-to-675-million-gallons-per-year/

8. PBIGrouphttps://precisionbusinessinsights.com/market-

reports/global-feed-fats-and-proteins-market/9. InternationalEnergyAgencyhttps://www.iea.org/tcep/transport/biofuels/10. Reutershttps://www.reuters.com/article/us-usa-biodiesel-

credit/u-s-biodiesel-lobby-drops-effort-to-adjust-1-per-gallon-tax-credit-idUSKCN1IQ34J

11. NGTNewshttps://ngtnews.com/diamond-green-diesel-plant-facing-

downtime-due-to-damaged-catalyst12. Nestewebsitehttps://www.neste.com/neste-70-years-finnish-oil-

refiner-worlds-largest-producer-renewable-diesel13. RenewableEnergyGroupwebsitehttps://regi.com/products-services/products/bioheat14. DailyTreasuryyieldshttps://www.treasury.gov/resource-center/data-chart-

center/interest-rates/pages/TextView.aspx?data=yieldYear&year=2019

15. ConsumerConfidenceIndex

https://www.conference-board.org/data/consumerconfidence.cfm

16. StudyonBiofuelProductionandOilPriceshttps://ageconsearch.umn.edu/bitstream/205312/2/AAE

A%205%20-%2026_R.pdf17. YahooFinance18. CTHwebsite

https://www.cth.biz/about-cth/legacy/19. FTIBiodieselstudy

https://www.fticonsulting.com/insights/reports/biodiesel-industry-impacts-economy-environment-energy-security

20. Gladsteinhttps://www.gladstein.org/the-potential-and-challenges-of-renewable-diesel-fuel-for-heavy-duty-vehicles/

21. FederalReserveBankofSt.Louishttps://fred.stlouisfed.org/series/DFULRC1A027NBEA

IMPORTANTDISCLAIMER

HenryFundreportsarecreatedbystudentsenrolledintheAppliedSecuritiesManagementprogramattheUniversityofIowa’sTippieCollegeofBusiness.Thesereportsprovidepotential employers and other interested parties anexample of the analytical skills, investment knowledge,andcommunicationabilitiesofourstudents.HenryFundanalystsarenotregisteredinvestmentadvisors,brokersorofficially licensed financialprofessionals. The investmentopinion contained in this report does not represent anoffer or solicitation to buy or sell any of theaforementionedsecurities.Unlessotherwisenoted,factsand figures included in this report are from publiclyavailable sources. This report is not a completecompilation of data, and its accuracy is not guaranteed.Fromtimetotime,theUniversityofIowa,itsfaculty,staff,students, or the Henry Fund may hold an investmentpositioninthecompaniesmentionedinthisreport.

DarlingIngredients,IncKeyAssumptionsofValuationModel

TickerSymbol DARCurrentSharePrice $21.77CurrentModelDate 4/17/19FiscalYearEnd Dec.31

Pre-TaxCostofDebt 5.16%Beta(3-yearweekly) 0.939Risk-FreeRate 2.558%EquityRiskPremium 4.95%CVGrowthofNOPLAT 5.00%CVGrowthofEPS 5.00%CurrentDividendYield -MarginalTaxRate 21%EffectiveTaxRate -

DarlingIngredients,Inc Currency USDRevenueDecomposition Scale Thousands

FiscalYearsEndingDec.31 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023ETotalNetSales 3,391,255 3,391,928 3,662,251 3,387,726 3,788,908 4,053,495 4,310,261 4,587,835 4,888,031Growth -14.29% 0.02% 7.97% -7.50% 11.84% 6.98% 6.33% 6.44% 6.54%BusinessSegments:FeedIngredientsNetsales 2,074,333 2,089,145 2,239,492 1,952,555 2,284,488 2,485,702 2,686,469 2,905,941 3,145,847Growth -14.34% 0.71% 7.20% -12.81% 17.00% 8.81% 8.08% 8.17% 8.26%Fats 539,800 574,600 648,300 564,790 621,269 677,183 731,358 789,866 853,056Growth -18.09% 6.45% 12.83% -12.88% 10.00% 9.00% 8.00% 8.00% 8.00%Proteins 828,500 769,400 816,100 842,878 944,023 1,047,866 1,152,653 1,267,918 1,394,710Growth -15.44% -7.13% 6.07% 3.28% 12.00% 11.00% 10.00% 10.00% 10.00%OtherRendering 244,000 269,100 286,200 129,273 276,228 304,420 332,472 363,138 396,664Growth - 10.29% 6.35% -54.83% 113.68% 10.21% 9.21% 9.22% 9.23%UsedCookingOil 154,000 165,100 185,500 166,634 174,966 183,714 192,900 202,545 212,672Growth -19.08% 7.21% 12.36% -10.17% 5.00% 5.00% 5.00% 5.00% 5.00%Bakery 217,900 220,400 209,800 180,227 176,622 173,090 169,628 166,236 162,911Growth -1.71% 1.15% -4.81% -14.10% -2.00% -2.00% -2.00% -2.00% -2.00%Other 90,100 90,500 93,600 68,753 91,380 99,428 107,459 116,238 125,834Growth - 0.44% 3.43% -26.55% 32.91% 8.81% 8.08% 8.17% 8.26%GrossMargin 460,931 464,287 494,724 453,857 502,587 548,097 593,710 643,666 698,378Growth -17.19% 0.73% 6.56% -8.26% 10.74% 9.06% 8.32% 8.41% 8.50%Segmentincome 117,974 116,261 129,951 82,843 137,069 149,142 161,188 174,356 188,751Growth -39.22% -1.45% 11.78% -36.25% 65.46% 8.81% 8.08% 8.17% 8.26%Segmentassetsatendoffiscalyear - 2,464,509 2,614,545 2,566,106 2,642,283 2,778,599 2,935,884 3,164,249 3,418,916FoodIngredientsNetsales 1,088,727 1,055,725 1,156,976 1,139,126 1,184,691 1,232,079 1,281,362 1,332,616 1,385,921Growth -12.79% -3.03% 9.59% -1.54% 4.00% 4.00% 4.00% 4.00% 4.00%GrossMargin 225,165 227,502 236,401 221,267 248,785 259,353 270,367 281,848 293,815Growth 2.88% 1.04% 3.91% -6.40% 12.44% 4.25% 4.25% 4.25% 4.25%Segmentincome 61,238 61,212 56,409 33,768 47,388 49,283 51,254 53,305 55,437Growth 127.87% -0.04% -7.85% -40.14% 40.33% 4.00% 4.00% 4.00% 4.00%Segmentassetsatendoffiscalyear - 1,414,409 1,499,027 1,401,291 1,385,777 1,443,569 1,510,864 1,612,905 1,726,055FuelIngredientsNetsales 228,195 247,058 265,783 296,045 319,729 335,715 342,429 349,278 356,263Growth -20.39% 8.27% 7.58% 11.39% 8.00% 5.00% 2.00% 2.00% 2.00%GrossMargin 51,134 64,592 55,275 65,519 71,939 75,704 77,389 79,111 80,872Growth -11.50% 26.32% -14.42% 18.53% 9.80% 5.23% 2.23% 2.23% 2.23%Segmentincome 89,054 99,078 42,028 195,087 119,125 129,439 139,697 219,472 238,625Growth 4.70% 11.26% -57.58% 364.18% -38.94% 8.66% 7.93% 57.11% 8.73%Segmentassetsatendoffiscalyear -657,637 688,890 761,817 884,208 933,435 990,074 1,071,166 1,161,767

GeographicSegments:NorthAmerica 1,951,421 1,817,659 1,937,027 1,817,001 2,027,066 2,160,513 2,297,369 2,445,316 2,605,321Europe 1,066,779 1,225,397 1,372,750 1,225,461 1,392,424 1,499,793 1,594,796 1,697,499 1,808,571China 234,978 218,480 209,780 210,657 231,123 243,210 258,616 275,270 293,282SouthAmerica 62,035 55,089 60,111 53,206 49,256 48,642 51,723 55,054 58,656Other 76,042 75,303 82,583 81,401 89,039 101,337 107,757 114,696 122,201

DarlingIngredients,Inc Currency USDIncomeStatement Scale Thousands

FiscalYearsEndingDec.31 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023EOperations:Netsales 3,397,446 3,398,115 3,662,251 3,387,726 3,788,908 4,053,495 4,310,261 4,587,835 4,888,031Costofsales&operatingexpenses 2,654,025 2,641,734 2,875,851 2,647,083 2,965,596 3,170,342 3,368,795 3,583,209 3,814,966Selling,general&administrativeexpenses 322,574 314,005 347,487 309,264 340,971 358,994 376,022 394,107 413,310Depreciation&amortization 269,904 289,908 302,100 321,192 337,572 345,586 355,365 366,789 379,761Acquisition&integrationcosts 8,299 401 - - - - - - -Goodwillimpairment - - - 14,965 - - - - -Totalcosts&expenses 3,254,802 3,246,048 3,525,438 3,292,504 3,644,139 3,874,922 4,100,182 4,344,105 4,608,037Operatingincome(loss) 142,644 152,067 136,813 95,222 144,769 178,574 210,078 243,729 279,994

Interestexpense 105,530 94,187 88,926 86,429 86,429 89,859 92,461 95,358 100,285Debtextinguishmentcosts - - - (23,509) - - - - -Foreigncurrencygains(losses) (4,911) (1,854) (6,898) (6,431) - - - - -Lossondisposalofsubsidiaries - - - (12,545) - - - - -Otherincome(expense),net (6,839) (3,866) (5,293) (7,562) (5,683) (6,080) (6,465) (6,882) (7,332)Totalotherincome(expense) (117,280) (99,907) (101,117) (136,476) (92,112) (95,939) (98,926) (102,240) (107,617)Equityinnetincome(loss)ofunconsolidatedsubsidiaries 73,416 70,379 28,504 159,229 87,152 95,867 105,454 184,544 202,999Income(loss)fromoperationsbeforeincometaxes 98,780 122,539 64,200 117,975 139,809 178,502 216,606 326,034 375,375

Incometaxes 13,501 15,315 (69,154) 12,031 29,360 37,485 45,487 68,467 78,829Netincome(loss) 85,279 107,224 133,354 105,944 110,449 141,016 171,119 257,567 296,546Netloss(income)attributabletononcontrollinginterests (6,748) (4,911) (4,886) (4,448) (5,067) (6,250) (7,353) (8,531) (9,800)NetincomeattributabletoDarlingIngredientsInc 78,531 102,313 128,468 101,496 105,382 134,766 163,766 249,036 286,747Netearnings(loss)pershare-basic 0.48 0.62 0.78 0.62 0.64 0.81 0.99 1.50 1.72#ofsharesoutstanding 167,100 164,600 164,752 164,789 165,331 165,553 165,793 166,049 166,321Annualdividendspershare - - - - - - - - -

DarlingIngredients,Inc Currency USDBalanceSheet Scale Thousands

FiscalYearsEndingDec.31 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023EASSETSCurrentassets:Cash&cashequivalents 156,884 114,564 106,774 107,262 196,745 308,854 444,497 604,915 799,797Restrictedcash 331 293 142 107 115 123 132 141 152Accountsreceivable,gross 381,124 396,487 399,892 393,567 426,252 456,018 484,904 516,131 549,903Lessallowanceforbaddebts 9,732 8,090 8,045 7,830 9,472 10,134 10,776 11,470 12,220Accountsreceivable,net 371,392 388,397 391,847 385,737 416,780 445,884 474,129 504,662 537,683Inventories 344,583 330,815 358,183 341,028 375,102 401,296 426,716 454,196 483,915Prepaidexpenses 36,175 29,984 38,326 35,247 37,889 40,535 43,103 45,878 48,880Incometaxesrefundable 11,963 7,479 4,509 6,462 5,872 7,497 9,097 13,693 15,766Othercurrentassets 10,460 21,770 56,664 22,099 30,311 32,428 34,482 36,703 39,104Deferredincometaxes - - - - - - - - -Totalcurrentassets 931,788 893,302 956,445 897,942 1,062,814 1,236,617 1,432,155 1,660,188 1,925,297

Property,plant&equipment,net 1,508,167 1,515,575 1,645,822 1,687,858 1,727,928 1,776,827 1,833,946 1,898,805 1,971,041Intangibleassets,gross 1,035,068 1,013,114 1,060,336 1,019,437 1,060,336 1,060,336 1,060,336 1,060,336 1,060,336Lessaccumulatedamortization-intangibleassets 252,719 301,187 383,836 423,575 499,675 575,275 650,275 724,275 798,275Intangibleassets,net 782,349 711,927 676,500 595,862 560,661 485,061 410,061 336,061 262,061Goodwill 1,233,102 1,225,893 1,301,093 1,229,159 1,229,159 1,229,159 1,229,159 1,229,159 1,229,159Investmentinunconsolidatedsubsidiaries 247,238 292,717 302,038 410,177 497,329 593,196 698,650 883,194 1,086,193Otherassets 70,606 43,613 62,284 53,375 60,623 64,856 68,964 73,405 78,208Deferredincometaxes 16,352 14,990 14,043 14,981 32,296 41,234 50,036 75,314 86,712Totalassets 4,789,602 4,698,017 4,958,225 4,889,354 5,170,809 5,426,950 5,722,971 6,156,127 6,638,671

LIABILITIESANDSTOCKHOLDERS'EQUITYCurrentliabilities:Currentportionoflong-termdebt 47,244 23,247 16,143 7,492 3,027 100,239 500,026 208 22,507Accountspayable,principallytrade 149,998 180,895 217,417 219,479 189,445 202,675 215,513 229,392 244,402Incometaxespayable 6,679 4,913 12,300 4,043 11,744 14,994 18,195 27,387 31,532Accruedexpenses 239,825 242,796 313,623 309,484 284,168 304,012 323,270 344,088 366,602Deferredincometaxes - - - - - - - - -Totalcurrentliabilities 443,746 451,851 559,483 540,498 488,384 621,920 1,057,003 601,074 665,042

Long-termdebt,netofcurrentportion 1,912,756 1,727,696 1,698,050 1,666,940 1,737,855 1,691,052 1,347,394 1,942,667 2,021,046Othernoncurrentliabilities 97,809 96,114 106,287 115,032 109,878 117,551 124,998 133,047 141,753Deferredincometaxes 360,681 346,134 266,708 231,063 280,889 287,871 299,023 311,126 328,671Totalliabilities 2,814,992 2,621,795 2,630,528 2,553,533 2,617,007 2,718,394 2,828,418 2,987,914 3,156,512

Commonstockequity 1,490,454 1,501,107 1,517,293 1,537,838 1,553,216 1,568,749 1,584,436 1,600,280 1,616,283Treasurystock,atcost 34,316 40,909 44,063 47,756 55,684 63,728 71,891 80,172 88,575Accumulatedothercomprehensiveincome(loss) (335,918) (340,006) (209,524) (304,539) (209,524) (209,524) (209,524) (209,524) (209,524)Retainedearnings(accumulateddeficit) 750,489 852,802 981,227 1,087,505 1,197,954 1,338,970 1,510,089 1,767,655 2,064,202TotalDarlingIngredientsInc.'sstockholders'equity(deficit) 1,870,709 1,972,994 2,244,933 2,273,048 2,485,962 2,634,466 2,813,110 3,078,239 3,382,386Noncontrollinginterests 103,901 103,228 82,764 62,773 67,840 74,090 81,443 89,973 99,773Totalstockholders'equity(deficit) 1,974,610 2,076,222 2,327,697 2,335,821 2,553,802 2,708,556 2,894,553 3,168,212 3,482,159Totalliabilitiesandstockholders'equity 4,789,602 4,698,017 4,958,225 4,889,354 5,170,809 5,426,950 5,722,971 6,156,127 6,638,671

DarlingIngredients,Inc Currency USDHistoricalCashFlowStatement Scale Thousands

FiscalYearsEndingDec.31 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Netincome(loss) 54,562 41,790 44,243 169,418 130,770 108,967 68,311 85,279 107,224 133,354Adjustmentstoreconcilenetincometocashoperatingactivities:Depreciation&amortization 24,433 25,226 31,908 78,909 85,371 98,787 269,517 269,904 289,908 302,100Deferredincometaxes (12,428) 14,652 2,402 24,702 10,338 24,593 (21,216) 7,807 (11,532) (98,805)Loss(gain)onsaleofassets (141) (294) 51 622 1,099 (1,245) (2,437) 1,311 1,744 (237)Loss(gain)oninsuranceproceedsfrominsurancesettlement - - - - (4,272) (1,981) (1,550) (561) (356) (1,427)Increase(decrease)inlong-termpensionliability 6,784 (11,974) 1,353 (895) 2,790 (9,010) 9,593 (4,811) (430) 2,383Stock-basedcompensationexpense 800 768 2,146 3,932 8,904 9,433 20,807 8,995 10,330 17,598Write-offdeferredloancosts - - 851 4,920 725 - 4,330 10,633 528 766Deferredloancostamortization - - - 3,324 3,042 3,451 9,949 10,155 11,171 8,736Goodwillimpairment 15,914 - - - - - - - - -Equityinnetloss(income)ofunconsolidatedsubsidiary - - - 1,572 2,662 (7,660) (65,609) (73,416) (70,379) (28,504)Distributionsofearningsfromunconsolidatedsubsidiary - - - - - - - 26,589 26,317 26,761Unrealizedloss(gain)onforeigncurrencyhedge - - - - - (27,516) - - - -Changesinoperatingassetsandliabilities:Restrictedcash (16) 52 24 8 - - - - - -Accountsreceivable 18,977 (5,148) (6,276) (10,086) (2,324) 4,424 982 8,214 (22,796) 3,482Escrowreceivable - - (16,267) 16,267 - - - - - -Incometaxesrefundable/payable (11,248) 10,643 (869) (15,568) 17,845 (15,316) (22,451) 12,377 2,839 9,360Inventories&prepaidexpenses (398) 4,286 (4,661) (5,760) (15,168) 2,059 (11,194) 34,536 15,343 (15,022)Accountspayable&accruedexpenses (6,884) (369) 23,727 (29,083) 3,923 8,521 (31,223) (11,449) 39,286 73,386Otheroperatingassets&liabilities 1,595 (446) 2,878 (1,418) 3,832 13,214 47,363 35,785 (8,161) (23,344)Netcashflowsfromoperatingactivities 91,950 79,186 81,510 240,864 249,537 210,721 275,172 421,348 391,036 410,587

CashflowsfrominvestingactivitiesCapitalexpenditures (31,006) (23,638) (24,720) (60,153) (115,413) (118,307) (228,918) (229,848) (243,523) (274,168)Acquisitions,netofcashacquired (15,876) (33,987) (758,182) (1,754) (3,000) (734,075) (2,094,400) (377) (8,511) (12,144)Investmentinunconsolidatedsubsidiary - - - (23,305) (43,424) (44,959) - - - (4,750)Grossproceedsfromsaleofproperty,plant&equipment&otherassets 1,101 1,913 624 1,529 3,870 2,358 9,262 3,840 7,329 8,090Proceedsfrominsurancesettlement - - - - 4,272 1,981 1,550 561 1,537 6,054Paymentsrelatedtoroutes&otherintangibles (6,609) - (1,367) - (137) (2,423) (11,288) (3,845) (23) (7,135)Netcashflowsfrominvestingactivities (52,390) (55,712) (783,645) (83,683) (153,832) (895,425) (2,323,794) (229,669) (243,191) (284,053)

CashflowsfromfinancingactivitiesProceedsfromlong-termdebt - 48 550,000 - - 344,704 1,842,184 590,745 36,327 33,401Paymentsonlong-termdebt (6,250) (5,000) (32,509) (270,009) (30,032) (580) (333,762) (609,255) (204,428) (149,623)Borrowingsfromrevolvingcreditfacility - - 160,000 131,000 - 293,235 170,143 78,244 99,276 199,495Paymentsonrevolvingcreditfacility - - - (291,000) - (5,000) (351,589) (166,755) (104,028) (204,935)Netcashoverdraftfinancing - - - - - - 4,077 (1,261) 1,071 (714)Deferredloancosts (67) (946) (24,020) (399) - (13,320) (45,223) (17,310) (3,879) (6,717)Contractpayments (176) (72) - - - - - - - -Issuanceofcommonstock 303 11 35 293,117 72 840,558 416 171 188 22Repurchaseofcommonstock - - - - - - - (5,912) (5,000) -Minimumwithholdingtaxespaidonstockawards (1,199) (108) (585) (1,281) (4,084) (3,289) (10,026) (4,874) (1,843) (3,049)Addition(deductions)ofnoncontrollinginterest - - - - - - 1,201 (87) - (17,451)Distributionstononcontrollinginterests - - - - - - (4,272) (3,295) (1,552) (5,281)Netcashflowsfromfinancingactivities (5,081) (6,106) 653,155 (137,447) (31,392) 1,457,446 1,275,569 (139,978) (183,868) (154,852)

Effectofexchangeratechangesoncashflows - - - - - (5,134) 10,980 (3,601) (6,297) 20,528Netincrease(decrease)incash&cashequivalents 34,479 17,368 (48,980) 19,734 64,313 767,608 (762,073) 48,100 (42,320) (7,790)Cash&cashequivalentsatbeginningofyear 16,335 50,814 68,182 19,202 38,936 103,249 870,857 108,784 156,884 114,564Cash&cashequivalentsatendofyear 50,814 68,182 19,202 38,936 103,249 870,857 108,784 156,884 114,564 106,774

Cashflowsfromoperatingactivities:

DarlingIngredients,Inc Currency USDForecastedCashFlowStatements Scale Thousands

FiscalYearsEndingDec.31 2018 2019E 2020E 2021E 2022E 2023ECashflowsfromoperatingactivities:Netincome(loss) 105,944 110,449 141,016 171,119 257,567 296,546Adjustmentstoreconcilenetincometocashoperatingactivities:Depreciation&amortization 321,192 337,572 345,586 355,365 366,789 379,761Deferredincometaxes (36,583) 32,511 (1,956) 2,350 (13,175) 6,147Allowancefordoubtfulaccounts (215) 1,642 661 642 694 750Changesinoperatingassetsandliabilities:(-)Accountsreceivable,gross (6,325) 32,685 29,766 28,886 31,227 33,772(-)Inventories (17,155) 34,074 26,194 25,420 27,480 29,719(-)PrepaidExpenses (3,079) 2,642 2,646 2,568 2,776 3,002(+)Incometaxespayable (8,257) 7,701 3,250 3,201 9,192 4,145(+)Accountspayable 2,062 (30,034) 13,229 12,838 13,879 15,010(+)Accruedexpenses (4,139) (25,316) 19,844 19,257 20,818 22,515(-)Otheroperatingassets&liabilities (34,565) 8,212 2,117 2,054 2,221 2,402Netcashflowsfromoperatingactivities 441,128 356,912 460,908 505,845 592,060 655,979

CashflowsfrominvestingactivitiesCapitalexpenditures (321,896) (300,000) (315,000) (330,750) (347,288) (364,652)Changeingoodwill 71,934 - - - - -Changeinintangibles 40,899 (40,899) - - - -Changeinotherassets 8,909 (7,248) (4,233) (4,108) (4,441) (4,803)Netcashflowsfrominvestingactivities (200,154) (348,147) (319,233) (334,858) (351,729) (369,455)

CashflowsfromfinancingactivitiesChangeinlong-termdebt (31,110) 70,915 (46,804) (343,658) 595,273 78,379Changeinshort-termdebt (8,651) (4,465) 97,212 399,787 (499,818) 22,299Paymentofdividends - - - - - -Issuanceofcommonstock 20,545 15,378 15,532 15,687 15,844 16,003Repurchaseofcommonstock (3,693) (7,928) (8,045) (8,162) (8,282) (8,402)Changeinaccumulatedothercomprehensiveincome (95,015) 95,015 - - - -Otherfinancingactivities (122,562) (88,198) (87,462) (98,998) (182,931) (199,921)Netcashflowsfromfinancingactivities (240,486) 80,718 (29,566) (35,344) (79,913) (91,642)

Effectofexchangeratechangesoncashflows - - - - - -Netincrease(decrease)incash&cashequivalents 488 89,483 112,109 135,643 160,418 194,882Cash&cashequivalentsatbeginningofyear 106,774 107,262 196,745 308,854 444,497 604,915Cash&cashequivalentsatendofyear 107,262 196,745 308,854 444,497 604,915 799,797

DarlingIngredients,IncCommonSizeIncomeStatement Scale %ofnetsales

FiscalYearsEndingDec.31 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023EOperations:Netsales 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%Costofsales&operatingexpenses 78.12% 77.74% 78.53% 78.14% 78.27% 78.21% 78.16% 78.10% 78.05%Selling,general&administrativeexpenses 9.49% 9.24% 9.49% 9.13% 9.00% 8.86% 8.72% 8.59% 8.46%Depreciation&amortization 7.94% 8.53% 8.25% 9.48% 8.91% 8.53% 8.24% 7.99% 7.77%Acquisition&integrationcosts 0.24% 0.01% - - - - - - -Goodwillimpairment - - - - - - - - -Totalcosts&expenses 95.80% 95.52% 96.26% 97.19% 96.18% 95.59% 95.13% 94.69% 94.27%Operatingincome(loss) 4.20% 4.48% 3.74% 2.81% 3.82% 4.41% 4.87% 5.31% 5.73%

Interestexpense 3.11% 2.77% 2.43% 2.55% 2.28% 2.22% 2.15% 2.08% 2.05%Debtextinguishmentcosts 0.00% 0.00% 0.00% -0.69% - - - - -Foreigncurrencygains(losses) -0.14% -0.05% -0.19% -0.19% - - - - -Lossondisposalofsubsidiaries 0.00% 0.00% 0.00% -0.37% - - - - -Otherincome(expense),net -0.20% -0.11% -0.14% -0.22% -0.15% -0.15% -0.15% -0.15% -0.15%Totalotherincome(expense) -3.45% -2.94% -2.76% -4.03% -2.43% -2.37% -2.30% -2.23% -2.20%Equityinnetincome(loss)ofunconsolidatedsubsidiaries 2.16% 2.07% 0.78% 4.70% 2.30% 2.37% 2.45% 4.02% 4.15%Income(loss)fromoperationsbeforeincometaxes 2.91% 3.61% 1.75% 3.48% 3.69% 4.40% 5.03% 7.11% 7.68%

Incometaxes 0.40% 0.45% -1.89% 0.36% 0.77% 0.92% 1.06% 1.49% 1.61%Netincome(loss) 2.51% 3.16% 3.64% 3.13% 2.92% 3.48% 3.97% 5.61% 6.07%Netloss(income)attributabletononcontrollinginterests -0.20% -0.14% -0.13% -0.13% -0.13% -0.15% -0.17% -0.19% -0.20%NetincomeattributabletoDarlingIngredientsInc 2.31% 3.01% 3.51% 3.00% 2.78% 3.32% 3.80% 5.43% 5.87%Netearnings(loss)pershare-basic 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

DarlingIngredients,IncCommonSizeBalanceSheet Scale %ofnetsales

FiscalYearsEndingDec.31 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023EASSETSCurrentassets:Cash&cashequivalents 4.62% 3.37% 2.92% 3.17% 5.19% 7.62% 10.31% 13.19% 16.36%Restrictedcash 0.01% 0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%Accountsreceivable,gross 11.22% 11.67% 10.92% 11.62% 11.25% 11.25% 11.25% 11.25% 11.25%Lessallowanceforbaddebts 0.29% 0.24% 0.22% 0.23% 0.25% 0.25% 0.25% 0.25% 0.25%Accountsreceivable,net 10.93% 11.43% 10.70% 11.39% 11.00% 11.00% 11.00% 11.00% 11.00%Inventories 10.14% 9.74% 9.78% 10.07% 9.90% 9.90% 9.90% 9.90% 9.90%Prepaidexpenses 1.06% 0.88% 1.05% 1.04% 1.00% 1.00% 1.00% 1.00% 1.00%Incometaxesrefundable 0.35% 0.22% 0.12% 0.19% 0.15% 0.18% 0.21% 0.30% 0.32%Othercurrentassets 0.31% 0.64% 1.55% 0.65% 0.80% 0.80% 0.80% 0.80% 0.80%Deferredincometaxes - - - - - - - - -Totalcurrentassets 27.43% 26.29% 26.12% 26.51% 28.05% 30.51% 33.23% 36.19% 39.39%

Property,plant&equipment,net 44.39% 44.60% 44.94% 49.82% 45.60% 43.83% 42.55% 41.39% 40.32%Intangibleassets,gross 30.47% 29.81% 28.95% 30.09% 27.99% 26.16% 24.60% 23.11% 21.69%Lessaccumulatedamortization-intangibleassets 7.44% 8.86% 10.48% 12.50% 13.19% 14.19% 15.09% 15.79% 16.33%Intangibleassets,net 23.03% 20.95% 18.47% 17.59% 14.80% 11.97% 9.51% 7.33% 5.36%Goodwill 36.29% 36.08% 35.53% 36.28% 32.44% 30.32% 28.52% 26.79% 25.15%Investmentinunconsolidatedsubsidiaries 7.28% 8.61% 8.25% 12.11% 13.13% 14.63% 16.21% 19.25% 22.22%Otherassets 2.08% 1.28% 1.70% 1.58% 1.60% 1.60% 1.60% 1.60% 1.60%Deferredincometaxes 0.48% 0.44% 0.38% 0.44% 0.85% 1.02% 1.16% 1.64% 1.77%Totalassets 140.98% 138.25% 135.39% 144.33% 136.47% 133.88% 132.78% 134.18% 135.81%

LIABILITIESANDSTOCKHOLDERS'EQUITYCurrentliabilities:Currentportionoflong-termdebt 1.39% 0.68% 0.44% 0.22% 0.08% 2.47% 11.60% 0.00% 0.46%Accountspayable,principallytrade 4.42% 5.32% 5.94% 6.48% 5.00% 5.00% 5.00% 5.00% 5.00%Incometaxespayable 0.20% 0.14% 0.34% 0.12% 0.31% 0.37% 0.42% 0.60% 0.65%Accruedexpenses 7.06% 7.15% 8.56% 9.14% 7.50% 7.50% 7.50% 7.50% 7.50%Deferredincometaxes - - - - - - - - -Totalcurrentliabilities 13.06% 13.30% 15.28% 15.95% 12.89% 15.34% 24.52% 13.10% 13.61%

Long-termdebt,netofcurrentportion 56.30% 50.84% 46.37% 49.21% 45.87% 41.72% 31.26% 42.34% 41.35%Othernoncurrentliabilities 2.88% 2.83% 2.90% 3.40% 2.90% 2.90% 2.90% 2.90% 2.90%Deferredincometaxes 10.62% 10.19% 7.28% 6.82% 7.41% 7.10% 6.94% 6.78% 6.72%Totalliabilities 82.86% 77.15% 71.83% 75.38% 69.07% 67.06% 65.62% 65.13% 64.58%

Commonstockequity 43.87% 44.17% 41.43% 45.39% 40.99% 38.70% 36.76% 34.88% 33.07%Treasurystock,atcost 1.01% 1.20% 1.20% 1.41% 1.47% 1.57% 1.67% 1.75% 1.81%Accumulatedothercomprehensiveincome(loss) -9.89% -10.01% -5.72% -8.99% -5.53% -5.17% -4.86% -4.57% -4.29%Retainedearnings(accumulateddeficit) 22.09% 25.10% 26.79% 32.10% 31.62% 33.03% 35.03% 38.53% 42.23%TotalDarlingIngredientsInc.'sstockholders'equity(deficit) 55.06% 58.06% 61.30% 67.10% 65.61% 64.99% 65.27% 67.10% 69.20%Noncontrollinginterests 3.06% 3.04% 2.26% 1.85% 1.79% 1.83% 1.89% 1.96% 2.04%Totalstockholders'equity(deficit) 58.12% 61.10% 63.56% 68.95% 67.40% 66.82% 67.15% 69.06% 71.24%Totalliabilitiesandstockholders'equity 140.98% 138.25% 135.39% 144.33% 136.47% 133.88% 132.78% 134.18% 135.81%

DarlingIngredients,Inc Currency USDValueDriverEstimation Scale Thousands

FiscalYearsEndingDec.31 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023ENOPLAT 104,353 114,908 24,724 98,919 170,533 164,041 195,240 222,912 274,772EBITA : 148,209 159,170 143,426 116,773 151,545 184,639 216,132 249,788 286,071Netsales 3,397,446 3,398,115 3,662,251 3,387,726 3,788,908 4,053,495 4,310,261 4,587,835 4,888,031Costofsalesandoperatingexpenses 2,654,025 2,641,734 2,875,851 2,647,083 2,965,596 3,170,342 3,368,795 3,583,209 3,814,966Selling,general,andadministrativeexpenses 322,574 314,005 347,487 309,264 340,971 358,994 376,022 394,107 413,310Depreciation&Non-goodwillamortization 269,904 289,908 302,100 321,192 337,572 345,586 355,365 366,789 379,761Acquisition&integrationcosts 8,299 401 - - - - - - -Impliedinterestonoperatingleases 5,565 7,103 6,613 6,586 6,776 6,065 6,053 6,058 6,077LessAdjustedTaxes: 26,177 31,077 40,223 (18,729) 13,523 18,642 23,242 13,701 17,445Incometaxexpense 34,573 42,889 22,470 24,775 29,360 37,485 45,487 68,467 78,829+taxshieldoninterestexpense 36,936 32,965 31,124 18,150 18,150 18,870 19,417 20,025 21,060-taxonotherincome 25,696 24,633 9,976 33,438 18,302 20,132 22,145 38,754 42,630+taxshieldonamortizedgoodwill - - - - - - - - --taxonnon-operatingincome - - - - - - - - -+taxshieldonnon-operatinglosses 2,394 1,353 1,853 1,588 1,194 1,277 1,358 1,445 1,540+taxshieldonforeigncurrencylosses 1,719 649 2,414 2,251 - - - - --taxonincomeofunconsolidatedsubsidiaries 25,696 24,633 9,976 33,438 18,302 20,132 22,145 38,754 42,630+taxshieldoninterestonoperatingleases 1,948 2,486 2,315 1,383 1,423 1,274 1,271 1,272 1,276PlusChangeinDeferredTaxes (17,678) (13,185) (78,479) (36,583) 32,511 (1,956) 2,350 (13,175) 6,147Beginningdeferredtaxes 362,007 344,329 331,144 252,665 216,082 248,593 246,637 248,987 235,812Endingdeferredtaxes 344,329 331,144 252,665 216,082 248,593 246,637 248,987 235,812 241,959

InvestedCapital 2,846,937 2,720,927 2,785,341 2,678,663 2,813,207 2,813,492 2,822,100 2,838,973 2,868,394NetOperatingWorkingCapital: 446,020 417,803 379,434 325,322 456,375 487,029 516,754 546,022 580,574Normalcash(2%ofnetsales) 67,949 67,962 73,245 67,755 75,778 81,070 86,205 91,757 97,761Accountsreceivable,net 371,392 388,397 391,847 385,737 416,780 445,884 474,129 504,662 537,683Inventories 344,583 330,815 358,183 341,028 375,102 401,296 426,716 454,196 483,915Prepaidexpenses 36,175 29,984 38,326 35,247 37,889 40,535 43,103 45,878 48,880Incometaxesrefundable 11,963 7,479 4,509 6,462 5,872 7,497 9,097 13,693 15,766Othercurrentoperatingassets 10,460 21,770 56,664 22,099 30,311 32,428 34,482 36,703 39,104Lessaccountspayable 149,998 180,895 217,417 219,479 189,445 202,675 215,513 229,392 244,402Lessaccruedexpenses 239,825 242,796 313,623 309,484 284,168 304,012 323,270 344,088 366,602Lessincometaxespayable 6,679 4,913 12,300 4,043 11,744 14,994 18,195 27,387 31,532NetPP&E: 1,508,167 1,515,575 1,645,822 1,687,858 1,727,928 1,776,827 1,833,946 1,898,805 1,971,041NetOtherOperatingAssets: 990,560 883,663 866,372 780,515 738,783 667,188 596,398 527,192 458,532Netintangibleassets 782,349 711,927 676,500 595,862 560,661 485,061 410,061 336,061 262,061CapitalizedPVofoperatingleases 137,605 128,123 127,588 131,278 117,499 117,271 117,373 117,726 118,262Otheroperatingassets 70,606 43,613 62,284 53,375 60,623 64,856 68,964 73,405 78,208OtherOperatingLiabilities: 97,809 96,114 106,287 115,032 109,878 117,551 124,998 133,047 141,753

NOPLAT 104,353 114,908 24,724 98,919 170,533 164,041 195,240 222,912 274,772BeginningInvestedCapital 3,098,118 2,846,937 2,720,927 2,785,341 2,678,663 2,813,207 2,813,492 2,822,100 2,838,973ROIC 3.37% 4.04% 0.91% 3.55% 6.37% 5.83% 6.94% 7.90% 9.68%NOPLAT 104,353 114,908 24,724 98,919 170,533 164,041 195,240 222,912 274,772ChangeinInvestedCapital (251,181) (126,011) 64,414 (106,678) 134,544 286 8,608 16,873 29,421FCF(NOPLAT--changeinIC) 355,534 240,918 (39,689) 205,597 35,989 163,755 186,632 206,039 245,351BeginningInvestedCapital 3,098,118 2,846,937 2,720,927 2,785,341 2,678,663 2,813,207 2,813,492 2,822,100 2,838,973ROIC 3.37% 4.04% 0.91% 3.55% 6.37% 5.83% 6.94% 7.90% 9.68%WACC 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16% 6.16%EP(BeginningIC*(ROIC--WACC) (115,613) (87,225) (168,461) (72,620) 5,564 (9,215) 21,967 49,108 99,930

DarlingIngredients,IncKeyManagementRatios

FiscalYearsEndingDec.31 2015 2016 2017 2018 2019E 2020E 2021E 2022E 2023E

LiquidityRatiosCurrentratio(currentassets/currentliabilities) 2.10 1.98 1.71 1.66 2.18 1.99 1.35 2.76 2.89Quickratio(cash&acctsreceivable/currentliabilities) 1.19 1.11 0.89 0.91 1.26 1.21 0.87 1.85 2.01Cashratio(cash/currentliabilities) 0.35 0.25 0.19 0.20 0.40 0.50 0.42 1.01 1.20

ActivityorAsset-ManagementRatiosInventoryturnover(costofsales/averageinventory) 7.11 7.82 8.35 7.57 8.28 8.17 8.14 8.14 8.13Accountsreceivableturnover(netsales/averageacctsreceivable) 8.70 8.94 9.39 8.71 9.44 9.40 9.37 9.37 9.38Accountspayableturnover(costofsales/averageacctspayable) 16.66 15.97 14.44 12.12 14.50 16.17 16.11 16.11 16.10Assetturnover(netsales/averagetotalassets) 0.68 0.72 0.76 0.69 0.75 0.76 0.77 0.77 0.76

FinancialLeverageRatiosDebt/Equityratio(totaldebt/totalstockholders'equity) 0.99 0.84 0.74 0.72 0.68 0.66 0.64 0.61 0.59Interestcoverage(operatingincome/interestexpense) 1.35 1.61 1.54 1.10 1.68 1.99 2.27 2.56 2.79Debt/Assetsratio(totaldebt/totalassets) 0.41 0.37 0.35 0.34 0.34 0.33 0.32 0.32 0.31

ProfitabilityRatiosGrossmargin((netsales–costofsales)/netsales) 21.88% 22.26% 21.47% 21.86% 21.73% 21.79% 21.84% 21.90% 21.95%Operatingmargin(operatingincome/netsales) 4.20% 4.48% 3.74% 2.81% 3.82% 4.41% 4.87% 5.31% 5.73%Netmargin(netincome/netsales) 2.51% 3.16% 3.64% 3.13% 2.92% 3.48% 3.97% 5.61% 6.07%Returnonassets(netincome/beginningtotalassets) 1.65% 2.24% 2.84% 2.14% 2.26% 2.73% 3.15% 4.50% 4.82%Returnonequity(netincome/beginningtotalstockholders'equity) 4.16% 5.43% 6.42% 4.55% 4.73% 5.52% 6.32% 8.90% 9.36%

PayoutPolicyRatiosDividendpayout - - - - - - - - -

DarlingIngredients,IncWeightedAverageCostofCapital(WACC)Estimation

Risk-freerate(10-yearTreasuryyield) 2.558%Beta 0.939Equityriskpremium 4.95%CostofEquity 7.21%

Pre-taxcostofdebt 5.16%Marginaltaxrate 0.21CostofDebt 4.08%

Sharesoutstanding 164,789,000Currentprice $21.77Marketvalueofequity 3,587,456,530

Shorttermdebt 7,492,000Longtermdebt 1,666,940,000PVofoperatingleases 131,278,102Totaldebt+PVleases 1,805,710,102Totalvalue 5,393,166,632Equityweight 66.52%Debtweight 33.48%

WACC 6.16%

DarlingIngredients,Inc Currency USDDiscountedCashFlow(DCF)andEconomicProfit(EP)ValuationModels Scale Thousands

(exceptper-sharedata)KeyInputs:CVGrowth 5.00%CVROIC 9.68%WACC 6.16%CostofEquity 7.21%

FiscalYearsEndingDec.31 2019E 2020E 2021E 2022E 2023E

DCFModelNOPLAT 170,533 164,041 195,240 222,912 274,772BeginningInvestedCapital 2,678,663 2,813,207 2,813,492 2,822,100 2,838,973EndingInvestedCapital 2,813,207 2,813,492 2,822,100 2,838,973 2,868,394ChangeinInvestedCapital 134,544 286 8,608 16,873 29,421ROIC 6.37% 5.83% 6.94% 7.90% 9.68%FCF 35,989 163,755 186,632 206,039 245,351CV 11,463,687Discountedcashflows 33,901 145,306 155,998 162,228 9,026,156PVofcashflows 9,523,590ExcessCash 39,507Noncontrollinginterests 62,773Short-termdebt 7,492Long-termdebt 1,666,940PVofOperatingLeases 131,278ValueofEquity 7,820,161Sharesoutstanding 165,331Valuepershare 47.30$Valueadjustedforpartialyear 48.30$EPModelBeginningInvestedCapital 2,678,663 2,813,207 2,813,492 2,822,100 2,838,973ROIC 6.37% 5.83% 6.94% 7.90% 9.68%EP 5,564 (9,215) 21,967 49,108 99,930CV 8,624,714PVofEP 5,241 (8,177) 18,361 38,666 6,790,835

PVofEconomicProfit 6,844,928BeginningInvestedCapital 2,678,663ValueofOperatingAssets 9,523,590ExcessCash 39,507Noncontrollinginterests 62,773Short-termdebt 7,492Long-termdebt 1,666,940PVofOperatingLeases 131,278ValueofEquity 7,820,161Sharesoutstanding 165,331Valuepershare 47.30$Valueadjustedforpartialyear 48.30$

DarlingIngredients,Inc Currency USDDividendDiscountModel(DDM)orFundamentalP/EValuationModel Scale Dollars/share

FiscalYearsEndingDec.31 2019E 2020E 2021E 2022E 2023E

EPS 0.64$ 0.81$ 0.99$ 1.50$ 1.72$

KeyAssumptionsCVgrowth 5.00%CVROE 9.36%CostofEquity 7.21%

FutureCashFlowsP/EMultiple(CVYear) 21.12EPS(CVYear) 1.72TheoreticalDividend 0.80FutureStockPrice 36.40DividendsPerShare - - - - -

DiscountedCashFlows - - - 27.56 -

IntrinsicValue 27.56$Valueadjustedforpartialyear 28.14$

DarlingIngredients,IncRelativeValuationModels

EPS EPS EV/EBITDATicker Company Price 2019E 2020E P/E19 P/E20 P/B19 19TSN TysonFoods $73.73 $5.93 $6.30 12.4 11.7 2.06 8.83ADM Archer-Daniels-Midland $43.02 $3.55 $3.77 12.1 11.4 1.27 10.79MFI-CA MapleLeafFoods $29.28 $1.26 $1.68 23.2 17.4 1.87 11.29NESTE-FI NesteCorporation $86.52 $4.85 $5.09 17.8 17.0 4.78 15.95VLO ValeroEnergy $89.78 $7.51 $11.45 12.0 7.8 1.77 6.11REGI RenewableEnergyGroup $22.95 $6.34 $1.59 3.6 14.4 1.46 3.96

Average 13.5 13.3 2.2 9.5

DAR DarlingIngredients,Inc $21.77 0.64 0.81 34.2 26.7 1.5 12.6

ImpliedValue:RelativeP/E(EPS19) $8.63RelativeP/E(EPS20) 10.83$RelativePrice/Book(19) 31.21$RelativeEV/EBITDA(19) 14.06$

PresentValueofOperatingLeaseObligations(2017) PresentValueofOperatingLeaseObligations(2016)

Operating OperatingFiscalYearsEndingDec.31 Leases FiscalYearsEndingDec.31 Leases2018 45,345 2017 39,4812019 39,414 2018 35,6532020 26,180 2019 31,0352021 14,770 2020 19,2582022 6,130 2021 7,421Thereafter 13,186 Thereafter 14,019TotalMinimumPayments 145,025 TotalMinimumPayments 146,867Less:Interest 17,437 Less:Interest 18,744PVofMinimumPayments 127,588 PVofMinimumPayments 128,123

CapitalizationofOperatingLeases CapitalizationofOperatingLeases

Pre-TaxCostofDebt 5.16% Pre-TaxCostofDebt 5.16%NumberYearsImpliedbyYear6Payment 2.2 NumberYearsImpliedbyYear6Payment 1.9

Lease PVLease Lease PVLeaseYear Commitment Payment Year Commitment Payment1 45,345 43,119 1 39,481 37,5432 39,414 35,640 2 35,653 32,2393 26,180 22,511 3 31,035 26,6864 14,770 12,077 4 19,258 15,7465 6,130 4,766 5 7,421 5,7706&beyond 6,130 9,474 6&beyond 7,421 10,138PVofMinimumPayments 127,588 PVofMinimumPayments 128,123

PresentValueofOperatingLeaseObligations(2018)

OperatingFiscalYearsEnding0.0496 Leases2019 46,3162020 34,4032021 22,2522022 13,0912023 8,478Thereafter 28,219TotalMinimumPayments 152,759Less:Interest 21,481PVofMinimumPayments 131,278

CapitalizationofOperatingLeases

Pre-TaxCostofDebt 5.16%NumberYearsImpliedbyYear6Payment 3.3

Lease PVLeaseYear Commitment Payment1 46,316 44,0432 34,403 31,1093 22,252 19,1344 13,091 10,7045 8,478 6,5926&beyond 8,478 19,697PVofMinimumPayments 131,278

EffectsofESOPExerciseandShareRepurchasesonCommonStockBalanceSheetAccountandNumberofSharesOutstanding

NumberofOptionsOutstanding(shares): 3,754,202AverageTimetoMaturity(years): 6.90ExpectedAnnualNumberofOptionsExercised: 544,087

CurrentAverageStrikePrice: 13.07$CostofEquity: 7.21%CurrentStockPrice: $21.77

2018 2019E 2020E 2021E 2022E 2023EIncreaseinSharesOutstanding: 544,087 544,087 544,087 544,087 544,087 544,087AverageStrikePrice: 13.07$ 13.07$ 13.07$ 13.07$ 13.07$ 13.07$IncreaseinCommonStockAccount: 7,111,220 7,111,220 7,111,220 7,111,220 7,111,220 7,111,220

ChangeinTreasuryStock 3,693,000 7,927,970 8,044,502 8,162,385 8,281,634 8,402,264ExpectedPriceofRepurchasedShares: 21.77$ 23.34$ 25.02$ 26.82$ 28.76$ 30.83$NumberofSharesRepurchased: 169,637 339,691 321,516 304,299 287,992 272,547

SharesOutstanding(beginningoftheyear) 164,752,000 165,126,450 165,330,846 165,553,418 165,793,206 166,049,301Plus:SharesIssuedThroughESOP 544,087 544,087 544,087 544,087 544,087 544,087Less:SharesRepurchasedinTreasury 169,637 339,691 321,516 304,299 287,992 272,547SharesOutstanding(endoftheyear) 165,126,450 165,330,846 165,553,418 165,793,206 166,049,301 166,320,841

VALUATIONOFOPTIONSGRANTEDINESOP

TickerSymbol DARCurrentStockPrice $21.77RiskFreeRate 2.56%CurrentDividendYield 0.00%AnnualizedSt.Dev.ofStockReturns 33.40%

Average Average B-S ValueRangeof Number Exercise Remaining Option ofOptionsOutstandingOptions ofShares Price Life(yrs) Price GrantedOptionsoutstanding@12/30/2017 3,754,202 13.07 6.90 12.40$ 46,559,917$Total 3,754,202 13.07$ 6.90 12.40$ 46,559,917$

Subtractthisamountfromyourvalueofoperatingassetstoarriveatthevalueofequity.

Darling Ingredients, IncSensitivityTests

BetaDCF Price 48.30 0.739 0.789 0.839 0.889 0.939 0.989 1.039 1.089 1.139

4.55% 211.68 138.04 101.17 79.02 64.25 53.69 45.77 39.60 34.664.65% 180.83 122.76 91.82 72.60 59.49 49.98 42.77 37.11 32.544.75% 157.53 110.35 83.93 67.04 55.31 46.69 40.08 34.85 30.624.85% 139.31 100.06 77.18 62.18 51.60 43.73 37.65 32.81 28.86

Equity Risk Premium 4.95% 124.66 91.40 71.33 57.91 48.30 41.07 35.45 30.94 27.255.05% 112.64 84.00 66.22 54.11 45.33 38.67 33.44 29.23 25.765.15% 102.60 77.61 61.72 50.72 42.65 36.47 31.60 27.65 24.395.25% 94.07 72.04 57.72 47.66 40.21 34.47 29.91 26.20 23.125.35% 86.75 67.13 54.14 44.90 38.00 32.64 28.36 24.86 21.94

Risk-free RateDCF Price 48.30 2.158% 2.258% 2.358% 2.458% 2.558% 2.658% 2.758% 2.858% 2.958%

4.36% 88.64 79.87 72.54 66.31 60.96 56.32 52.24 48.64 45.444.56% 81.63 74.03 67.59 62.08 57.29 53.11 49.41 46.13 43.194.76% 75.57 68.91 63.22 58.30 54.00 50.21 46.84 43.83 41.134.96% 70.28 64.41 59.33 54.91 51.02 47.57 44.49 41.72 39.23

Pre-tax Cost of Debt 5.16% 65.63 60.40 55.85 51.86 48.32 45.16 42.33 39.78 37.475.36% 61.50 56.82 52.71 49.09 45.85 42.96 40.35 37.99 35.845.56% 57.82 53.60 49.87 46.56 43.60 40.93 38.52 36.33 34.325.76% 54.51 50.68 47.29 44.26 41.53 39.06 36.82 34.78 32.915.96% 51.52 48.04 44.93 42.14 39.62 37.33 35.25 33.34 31.59

Net Sales 2019DCF Price 48.30 3,388,908 3,488,908 3,588,908 3,688,908 3,788,908 3,888,908 3,988,908 4,088,908 4,188,908

7,152 29.22 29.20 29.18 29.16 29.14 29.12 29.10 29.08 29.0627,152 34.01 33.99 33.97 33.95 33.93 33.91 33.89 33.87 33.8547,152 38.80 38.78 38.76 38.74 38.72 38.70 38.68 38.66 38.64

Equity in Net 67,152 43.58 43.57 43.55 43.53 43.51 43.49 43.47 43.45 43.43Income–DGD 87,152 48.37 48.35 48.33 48.32 48.30 48.28 48.26 48.24 48.22

2019 107,152 53.16 53.14 53.12 53.10 53.09 53.07 53.05 53.03 53.01127,152 57.95 57.93 57.91 57.89 57.87 57.85 57.84 57.82 57.80147,152 62.74 62.72 62.70 62.68 62.66 62.64 62.62 62.61 62.59167,152 67.53 67.51 67.49 67.47 67.45 67.43 67.41 67.39 67.37

Net Sales 2023DDM Price 28.14 4,488,031 4,588,031 4,688,031 4,788,031 4,888,031 4,988,031 5,088,031 5,188,031 5,288,031

122,999 15.86 15.67 15.49 15.31 15.12 14.94 14.76 14.57 14.39142,999 19.10 18.92 18.73 18.55 18.36 18.18 18.00 17.81 17.63162,999 22.35 22.17 21.98 21.80 21.61 21.43 21.25 21.06 20.88

Equity in Net 182,999 25.61 25.43 25.24 25.06 24.87 24.69 24.50 24.32 24.14Income–DGD 202,999 28.88 28.69 28.51 28.32 28.14 27.96 27.77 27.59 27.40

2023 222,999 32.15 31.97 31.78 31.60 31.41 31.23 31.04 30.86 30.67242,999 35.43 35.25 35.06 34.88 34.69 34.51 34.32 34.14 33.95262,999 38.71 38.53 38.34 38.16 37.97 37.79 37.60 37.42 37.23282,999 42.00 41.82 41.63 41.45 41.26 41.08 40.89 40.71 40.52

CV ROEDDM Price 28.14 5.36% 6.36% 7.36% 8.36% 9.36% 10.36% 11.36% 12.36% 13.36%

3.0% 13.95 16.74 18.77 20.31 21.53 22.51 23.32 23.99 24.573.5% 12.48 16.17 18.86 20.90 22.51 23.81 24.88 25.78 26.544.0% 10.55 15.42 18.98 21.68 23.80 25.52 26.93 28.12 29.124.5% 7.90 14.40 19.14 22.74 25.57 27.86 29.74 31.32 32.66

CV Growth 5.0% 4.06 12.92 19.37 24.28 28.14 31.25 33.82 35.97 37.805.5% -2.04 10.56 19.74 26.72 32.21 36.64 40.30 43.35 45.966.0% -13.19 6.25 20.42 31.19 39.67 46.50 52.14 56.86 60.876.5% -40.14 -4.15 22.06 41.99 57.67 70.33 80.75 89.49 96.927.0% -197.89 -65.08 31.64 105.22 163.07 209.76 248.23 280.48 307.89

Cost of EquityDDM Price 28.14 6.81% 6.91% 7.01% 7.11% 7.21% 7.31% 7.41% 7.51% 7.61%

0.92 18.55 17.52 16.59 15.75 14.99 14.29 13.65 13.06 12.521.12 22.59 21.33 20.20 19.18 18.25 17.40 16.62 15.90 15.241.32 26.62 25.14 23.81 22.60 21.50 20.50 19.58 18.74 17.961.52 30.65 28.95 27.41 26.02 24.76 23.61 22.55 21.58 20.68

EPS (CV year) 1.72 34.69 32.76 31.02 29.45 28.02 26.71 25.52 24.42 23.401.92 38.72 36.57 34.63 32.87 31.28 29.82 28.48 27.26 26.122.12 42.76 40.38 38.24 36.30 34.54 32.93 31.45 30.10 28.842.32 46.79 44.19 41.84 39.72 37.79 36.03 34.42 32.93 31.562.52 50.82 48.00 45.45 43.15 41.05 39.14 37.39 35.77 34.28