(Mark One) | ||
X
|
ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
|
For the fiscal year ended
January 1, 2011
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TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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||
For the transition period from _______________ to _______________
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Delaware
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36-2495346
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(State or other jurisdiction
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(I.R.S. Employer
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of incorporation or organization)
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Identification No.)
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251 O'Connor Ridge Blvd., Suite 300
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Irving, Texas
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75038
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Name of Exchange on Which Registered
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Common Stock $0.01 par value per share
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New York Stock Exchange (“NYSE”)
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Large accelerated filer
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X
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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||||||
(Do not check if a smaller reporting company)
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Page No.
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PART I.
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||
Item 1.
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BUSINESS
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4
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Item 1A.
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RISK FACTORS
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12
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Item 1B.
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UNRESOLVED STAFF COMMENTS
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27
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Item 2.
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PROPERTIES
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27
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Item 3.
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LEGAL PROCEEDINGS
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29
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Item 4.
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(REMOVED AND RESERVED)
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29
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PART II.
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||
Item 5.
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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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30
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Item 6.
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SELECTED FINANCIAL DATA
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33
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Item 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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35
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Item 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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62
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Item 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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64
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Item 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
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108
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Item 9A.
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CONTROLS AND PROCEDURES
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108
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Item 9B.
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OTHER INFORMATION
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109
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PART III.
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||
Item 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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110
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Item 11.
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EXECUTIVE COMPENSATION
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110
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Item 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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110
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Item 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
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110
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Item 14.
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PRINCIPAL ACCOUNTING FEES AND SERVICES
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110
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PART IV.
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||
Item 15.
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EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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111
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SIGNATURES
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116
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Fiscal
2010
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Fiscal
2009
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Fiscal
2008
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|||||||||||||||||||||||
Continuing operations:
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|||||||||||||||||||||||||
Rendering
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$ | 536,935 | 74.1 | % | $ | 458,573 | 76.7 | % | $ | 585,108 | 72.5 | % | |||||||||||||
Restaurant Services
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177,750 | 24.5 | 139,233 | 23.3 | 222,384 | 27.5 | |||||||||||||||||||
Bakery
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10,224 | 1.4 | – | – | – | – | |||||||||||||||||||
Total
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$ | 724,909 | 100.0 | % | $ | 597,806 | 100.0 | % | $ | 807,492 | 100.0 | % |
·
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The Food and Drug Administration
("FDA"), which regulates food and feed safety. Effective August 1997, the FDA promulgated a rule prohibiting the use of mammalian proteins, with some exceptions, in feeds for cattle, sheep and other ruminant animals (21 CFR 589.2000, referred to herein as the "BSE Feed Rule") to prevent further spread of BSE, commonly referred to as "mad cow disease." With respect to BSE in the U.S., on October 26, 2009, the FDA began enforcing new regulations intended to further reduce the risk of spreading BSE ("Enhanced BSE Rule"). These new regulations included changes to prohibit the use of tallow having more than a certain percentage of impurities in feed for cattle or other ruminant animals, and prohibiting the use of brain and spinal cord material from cattle aged 30 months and older or the carcasses of such cattle, if the brain and spinal cord are not removed, in the feed or food for all animals. Company management believes the Company is in compliance with the provisions of these rules.
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·
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The
United States Department of Agriculture
("USDA"), which regulates collection and production methods. Within the USDA, two agencies exercise direct regulatory oversight of the Company's activities:
|
|
–
Animal and Plant Health Inspection Service
("APHIS") certifies facilities and claims made for exported materials and establishes and enforces import requirements for live animals and animal products, and
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·
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The
U.S. Environmental Protection Agency
("EPA"), which regulates air and water discharge requirements, as well as local and state agencies governing air and water discharge.
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·
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State Departments of Agriculture
, which regulate animal by-product collection and transportation procedures and animal feed quality.
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·
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The
United States Department of Transportation
("USDOT"), as well as local and state agencies, which regulate the operation of the Company's commercial vehicles.
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·
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Occupational Safety and Health Administration, the main federal agency charged with the enforcement of safety and health legislation.
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·
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The
Securities and Exchange Commission
("SEC"), which regulates securities and information required in annual and quarterly reports filed by publicly traded companies.
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·
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The FDA, which regulates food and feed safety;
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·
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The USDA, including its agencies APHIS and FSIS, which regulates collection and production methods:
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·
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The EPA, which regulates air and water discharge requirements, as well as local and state agencies, which monitor air and water discharges;
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·
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State Departments of Agriculture, which regulate animal by-product collection and transportation procedures and animal feed quality;
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·
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The USDOT, as well as local and state transportation agencies, which regulate the operation of the Company’s commercial vehicles;
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·
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The Occupational Safety and Health Administration, which is the main federal agency charged with the enforcement of safety and health legislation; and
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·
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The SEC, which regulates securities and information required in annual and quarterly reports filed by publically traded companies.
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·
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problems integrating or developing operations, personnel, technologies or products;
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·
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the breakdown or failure of equipment or processes;
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·
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the failure of the end product to perform as anticipated;
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·
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unforeseen engineering and environmental issues;
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·
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the inaccuracy of the Company's assumptions about the timing and amount of anticipated costs and revenues;
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·
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the diversion of management time and resources;
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·
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obtaining permits and other regulatory issues, license revocation and changes in legal requirements;
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·
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insufficient experience with the technologies and markets involved;
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·
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difficulties in establishing relationships with suppliers and end user customers;
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·
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unanticipated cost overruns;
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·
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risks commonly associated with the start-up of "greenfield" projects;
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·
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performance below expected levels of output or efficiency;
|
·
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reliance on Valero and its adjacent refinery facility for many services and processes;
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·
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subsequent impairment of the acquired assets, including intangible assets; and
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·
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being bought out and not realizing the benefits of the Joint Venture.
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·
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a substantial portion of the Company's cash flows from operations will be dedicated to the payment of principal and interest on the Company's indebtedness and will not be available for other purposes, including investment in the Company's operations, future business opportunities or strategic acquisitions, capital expenditures and other general corporate purposes;
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·
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it may limit the Company's flexibility in planning for, or reacting to, changes in its business and the industry in which it operates;
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·
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the Company may be more highly leveraged than some of its competitors, which may place the Company at a competitive disadvantage;
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·
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it could make the Company more vulnerable to downturns in general economic or industry conditions or in the Company's business;
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·
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it may limit, along with the financial and other restrictive covenants in the agreements governing the Company's indebtedness, the Company's ability in the future to obtain financing, the Company's ability to refinance any of its indebtedness, or the Company's ability to dispose of assets or borrow money for its working capital requirements, capital expenditures, acquisitions, debt service requirements and general corporate or other purposes on commercially reasonable terms or at all; and
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·
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it may make it more difficult for the Company to satisfy its obligations with respect to its indebtedness.
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·
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actual or anticipated fluctuations in commodities prices;
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·
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actual or anticipated variations in the Company's results;
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·
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the Company's earnings releases and financial performance;
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·
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changes in financial estimates or buy/sell recommendations by securities analysts;
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·
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the integration of Griffin's business, the effect of the Merger on the Company's business going forward and the Company's ability to realize growth opportunities as a result therefrom;
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·
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the Company's ability to repay its debt;
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·
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the Company's access to financial and capital markets to refinance its debt or its ability to repay indebtedness under the Company's Senior Secured Credit Facilities and its Senior Unsecured Notes;
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·
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the effect of future sales of substantial amounts of the Company's common stock;
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·
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performance of the Company's joint venture investments;
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·
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the Company’s dividend policy;
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·
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market conditions in the industry and the general state of the securities markets;
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·
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investor perceptions of the Company and the industry and markets in which it operates;
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·
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governmental legislation or regulation;
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·
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currency and exchange rate fluctuations; and
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·
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general economic and market conditions, such as recessions or significant inflation.
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ITEM 1.B
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UNRESOLVED STAFF COMMENTS
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ITEM 2.
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PROPERTIES
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LOCATION
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DESCRIPTION
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Bastrop, TX
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Rendering/Yellow Grease
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Bellevue, NE
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Rendering/Yellow Grease
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Berlin, WI
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Rendering/Yellow Grease
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Blue Earth, MN
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Rendering/Yellow Grease
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Boise, ID
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Rendering/Yellow Grease
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Butler, KY
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Rendering/Yellow Grease
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Clinton, IA
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Rendering/Yellow Grease
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Coldwater, MI
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Rendering/Yellow Grease
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Collinsville, OK
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Rendering/Yellow Grease
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Columbus, IN
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Rendering/Yellow Grease
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Dallas, TX
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Rendering/Yellow Grease
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Denver, CO
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Rendering/Yellow Grease
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Des Moines, IA
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Rendering/Yellow Grease
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Detroit, MI
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Rendering/Yellow Grease/Trap
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East Dublin, GA
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Rendering/Yellow Grease
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E. St. Louis, IL
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Rendering/Yellow Grease/Trap
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Ellenwood, GA
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Rendering/Yellow Grease
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Fresno, CA
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Rendering/Yellow Grease
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Houston, TX
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Rendering/Yellow Grease/Trap
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Jackson, MS
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Rendering/Yellow Grease
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Kansas City, KS
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Rendering/Yellow Grease/Trap
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Los Angeles, CA
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Rendering/Yellow Grease/Trap
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Mason City, IL
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Rendering/Yellow Grease
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Newark, NJ
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Rendering/Yellow Grease/Trap
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Newberry, IN
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Rendering/Yellow Grease
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Russellville, KY
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Rendering/Yellow Grease
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San Francisco, CA (1)
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Rendering/Yellow Grease/Trap
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Sioux City, IA
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Rendering/Yellow Grease
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Starke, FL
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Rendering/Yellow Grease
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Tacoma, WA (1)
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Rendering/Yellow Grease/Trap
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Tampa, FL
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Rendering/Yellow Grease
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Turlock, CA
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Rendering/Yellow Grease
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Union City, TN
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Rendering/Yellow Grease
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Wahoo, NE
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Rendering/Yellow Grease
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Wichita, KS
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Rendering/Yellow Grease/Trap
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Cincinnati, OH
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Hides
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Denver, CO
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Edible Meat and Tallow
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Fairfax, MO
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Protein Blending
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Grand Island, NE (1)
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Pet Food
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Henderson, KY
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Fertilizer Blending
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Kansas City, KS
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Protein Blending
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Kansas City, MO
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Hides
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Kendallville, IN
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Specialty Rendering
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Lexington, NE
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Rendering & Protein Blending
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Lynn Center, IL
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Protein Blending
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Omaha, NE (2)
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Rendering
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Omaha, NE
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Protein Blending
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Omaha, NE (2)
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Technical Tallow
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Quincy, FL
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Hides
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Alma, GA
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Yellow Grease/Trap
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Calhoun, GA
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Yellow Grease/Trap
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Chicago, IL
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Yellow Grease/Trap
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Cleveland, OH
|
Yellow Grease/Trap
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Ft. Lauderdale, FL (2)
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Yellow Grease/Trap
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Holden, LA
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Yellow Grease/Trap
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Indianapolis, IN
|
Yellow Grease/Trap
|
Little Rock, AK
|
Yellow Grease/Trap
|
No. Las Vegas, NV
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Yellow Grease/Trap
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San Diego, CA (1)
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Trap
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Santa Ana, CA (1)
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Trap
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Smyrna, GA
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Trap
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Tampa, FL (2)
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Yellow Grease/Trap
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Albertville, AL (1)
|
Bakery Feed
|
Butler, KY (1)
|
Bakery Feed
|
Doswell, VA
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Bakery Feed/Yellow Grease
|
Henderson, KY (1)
|
Bakery Feed
|
Honey Brook, PA
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Bakery Feed
|
Marshville, NC
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Bakery Feed/Yellow Grease
|
Memphis, TN (1)
|
Bakery Feed
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North Baltimore, OH
|
Bakery Feed
|
Watts, OK (1)
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Bakery Feed/Yellow Grease
|
Butler, KY
|
Biodiesel
|
ITEM 3.
|
LEGAL PROCEEDINGS
|
ITEM 4.
|
(Removed and Reserved)
|
ITEM 5.
|
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Market Price
|
||||
Fiscal Quarter
|
High
|
Low
|
||
2010:
|
||||
First Quarter
|
$ 9.13
|
$ 7.48
|
||
Second Quarter
|
$ 9.69
|
$ 7.25
|
||
Third Quarter
|
$ 8.59
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$ 7.02
|
||
Fourth Quarter
|
$ 13.59
|
$ 8.31
|
||
2009:
|
||||
First Quarter
|
$ 6.39
|
$ 2.94
|
||
Second Quarter
|
$ 8.24
|
$ 4.14
|
||
Third Quarter
|
$ 8.13
|
$ 6.33
|
||
Fourth Quarter
|
$ 8.39
|
$ 6.80
|
||
·
|
the number of securities to be issued upon the exercise of outstanding options and granted non-vested stock;
|
·
|
the weighted-average exercise price of the outstanding options and granted non-vested stock; and
|
·
|
the number of securities that remain available for future issuance under the plans.
|
Plan Category
|
(a)
Number of securities
to be issued upon
exercise of
outstanding
options, warrants
and rights
|
(b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
(c)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
|
Equity compensation plans approved
by security holders
|
1,397,022 (1)
|
$ 5.87
|
1,933,217
|
Equity compensation plans not
approved by security holders
|
–
|
–
|
–
|
Total
|
1,397,022
|
$ 5.87
|
1,933,217
|
(1)
|
Includes shares underlying options that have been issued and granted non-vested stock pursuant to the Company’s 2004 Omnibus Incentive Plan (the “2004 Plan”) as approved by the Company’s stockholders.
See Note 12 of Notes to Consolidated Financial Statements for information regarding the material features of the 2004 Plan.
|
ITEM 6.
|
SELECTED FINANCIAL DATA
|
Fiscal 2010
|
Fiscal 2009
|
Fiscal 2008
|
Fiscal 2007
|
Fiscal 2006
|
|
Fifty-two
Weeks Ended
January 1,
2011 (l)
|
Fifty-two
Weeks Ended
January 2,
2010 (k)
|
Fifty-three
Weeks Ended
January 3,
2009 (j)
|
Fifty-two
Weeks Ended
December 29,
2007
|
Fifty-two
Weeks Ended
December 30,
2006 (i)
|
|
(dollars in thousands, except per share data) |
Statement of Operations Data:
|
||||||||||||||||||||
Net sales
|
$ | 724,909 | $ | 597,806 | $ | 807,492 | $ | 645,313 | $ | 406,990 | ||||||||||
Cost of sales and operating expenses
|
531,648 | 440,111 | 614,708 | 483,453 | 321,416 | |||||||||||||||
Selling, general and administrative expenses (a)
|
68,042 | 61,062 | 59,761 | 57,999 | 45,649 | |||||||||||||||
Depreciation and amortization
|
31,908 | 25,226 | 24,433 | 23,214 | 20,686 | |||||||||||||||
Acquisition costs | 10,798 | 468 | - | - | - | |||||||||||||||
Goodwill impairment (b)
|
- | - | 15,914 | - | - | |||||||||||||||
Operating income
|
82,513 | 70,939 | 92,676 | 80,647 | 19,239 | |||||||||||||||
Interest expense (c)
|
8,737 | 3,105 | 3,018 | 5,045 | 7,184 | |||||||||||||||
Other (income)/expense, net (d), (e)
|
3,433 | 955 | (258 | ) | 570 | 4,682 | ||||||||||||||
Income from continuing operations before income taxes
|
70,343 | 66,879 | 89,916 | 75,032 | 7,373 | |||||||||||||||
Income tax expense
|
26,100 | 25,089 | 35,354 | 29,499 | 2,266 | |||||||||||||||
Net Income
|
$ | 44,243 | $ | 41,790 | $ | 54,562 | $ | 45,533 | $ | 5,107 | ||||||||||
Basic earnings per common share (f)
|
$ | 0.53 | $ | 0.51 | $ | 0.67 | $ | 0.56 | $ | 0.07 | ||||||||||
Diluted earnings per common share (f)
|
$ | 0.53 | $ | 0.51 | $ | 0.66 | $ | 0.56 | $ | 0.07 | ||||||||||
Weighted average shares outstanding (f)
|
82,854 | 82,142 | 81,685 | 81,091 | 74,310 | |||||||||||||||
Diluted weighted average shares outstanding (f)
|
83,243 | 82,475 | 82,246 | 81,916 | 75,259 | |||||||||||||||
Other Financial Data:
|
||||||||||||||||||||
Adjusted EBITDA (g)
|
$ | 114,421 | $ | 96,165 | $ | 133,023 | $ | 103,861 | $ | 39,925 | ||||||||||
Depreciation
|
26,328 | 21,398 | 19,266 | 18,332 | 16,134 | |||||||||||||||
Amortization
|
5,580 | 3,828 | 5,167 | 4,882 | 4,552 | |||||||||||||||
Capital expenditures (h)
|
24,720 | 23,638 | 31,006 | 15,552 | 11,800 | |||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||
Working capital
|
$ | 30,756 | $ | 75,100 | $ | 67,446 | $ | 34,385 | $ | 17,865 | ||||||||||
Total assets
|
1,382,258 | 426,171 | 394,375 | 351,338 | 320,806 | |||||||||||||||
Current portion of long-term debt
|
3,009 | 5,009 | 5,000 | 6,250 | 5,004 | |||||||||||||||
Total long-term debt less current portion
|
707,030 | 27,539 | 32,500 | 37,500 | 78,000 | |||||||||||||||
Stockholders’ equity
|
464,296 | 284,877 | 236,578 | 200,984 | 151,325 | |||||||||||||||
(a)
|
Included in selling, general and administrative expenses is a loss on a legal settlement of approximately $2.2 million offset by a gain on a separate legal settlement of approximately $1.0 million in fiscal 2007.
|
(b)
|
Includes a goodwill impairment charge of $15.9 million in the fourth quarter of fiscal 2008.
|
(c)
|
Included in interest expense for fiscal 2010 is approximately $3.1 million for bank financing fees paid as a result of the acquisition of Griffin.
|
(d)
|
Included in other (income)/expense in fiscal 2010 and fiscal 2006 is a write-off of deferred loan costs of approximately $0.9 million and $2.6 million, respectively for the early termination of previous senior credit agreements. In addition, in fiscal 2006 other (income)/expense include early retirement fees of approximately $1.9 million for the early retirement of senior subordinated notes.
|
(e)
|
Included in other (income)/expense in fiscal 2010 is a write-off of property for fire and casualty losses of approximately $1.0 million for losses incurred in plant fires at two plant locations.
|
(f)
|
The Company has prepared fiscal 2010 and fiscal 2009 earnings per share computations and retrospectively only revised the Company’s comparative prior period computations for fiscal 2008 and 2007 to include in basic and diluted earnings per share non-vested and restricted share awards considered participating securities as a result of the Company’s January 4, 2009 adoption of the provisions of the Financial Accounting Standards Board’s (“FASB”) authoritative guidance pertaining to whether instruments granted in share-based payment transactions are participating securities prior to vesting and therefore, need to be included in the earnings allocation in computing earnings per share under the two class method.
|
(g)
|
Adjusted EBITDA is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance and is not intended to be a presentation in accordance with generally accepted accounting principles (GAAP). Since EBITDA is not calculated identically by all companies, the presentation in this report may not be comparable to those disclosed by other companies.
Adjusted EBITDA is calculated below and represents, for any relevant period, net income/(loss) plus depreciation and amortization, goodwill and long-lived asset impairment, interest expense, (income)/loss from discontinued operations, net of tax, income tax provision and other income/(expense). The Company believes adjusted EBITDA is a useful measure for investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the Company's industry. In addition, management believes that adjusted EBITDA is useful in evaluating the Company's operating performance compared to that of other companies in its industry because the calculation of adjusted EBITDA generally eliminates the effects of financing, income taxes and certain non-cash and other items that may vary for different companies for reasons unrelated to overall operating performance. As a result, the Company’s management uses adjusted EBITDA as a measure to evaluate performance and for other discretionary purposes. However, adjusted EBITDA is not a recognized measurement under U.S. GAAP, should not be considered as an alternative to net income as a measure of operating results or to cash flow as a measure of liquidity, and is not intended to be a presentation in accordance with GAAP. Also, since adjusted EBITDA is not calculated identically by all companies, the presentation in this report may not be comparable to those disclosed by other companies.
In addition to the foregoing, management also uses or will use adjusted EBITDA to measure compliance with certain financial covenants under the Company’s Senior Secured Credit Facilities and Senior Unsecured Notes. The amounts shown below for adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities and Senior Unsecured Notes, as those definitions permit further adjustments to reflect certain other non-cash charges.
|
(dollars in thousands)
|
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
December 29,
2007
|
December 30,
2006
|
|||||||||||||||
Net income
|
$ | 44,243 | $ | 41,790 | $ | 54,562 | $ | 45,533 | $ | 5,107 | ||||||||||
Depreciation and amortization
|
31,908 | 25,226 | 24,433 | 23,214 | 20,686 | |||||||||||||||
Goodwill impairment
|
- | - | 15,914 | - | - | |||||||||||||||
Interest expense
|
8,737 | 3,105 | 3,018 | 5,045 | 7,184 | |||||||||||||||
Income tax expense
|
26,100 | 25,089 | 35,354 | 29,499 | 2,266 | |||||||||||||||
Other, net
|
3,433 | 955 | (258 | ) | 570 | 4,682 | ||||||||||||||
Adjusted EBITDA
|
$ | 114,421 | $ | 96,165 | $ | 133,023 | $ | 103,861 | $ | 39,925 | ||||||||||
(h)
|
Excludes the capital assets acquired as part of the Merger of Griffin and from Nebraska By-Products, Inc. of approximately $243.7 million in fiscal 2010. Excludes the capital assets acquired as part of acquiring substantially all of the assets of National By-Products, LLC ("NBP") of approximately $51.9 million in fiscal 2006 and API Recycling’s used cooking oil collection business of $3.4 million in fiscal 2008. Also excludes the capital assets acquired in fiscal 2009 from Boca Industries, Inc. and Sanimax USA, Inc. of approximately $8.0 million.
|
(i)
|
Fiscal 2006 includes 33 weeks of contribution from the acquired NBP assets
|
(j)
|
Fiscal 2008 includes 19 weeks of contribution from the API Recycling used cooking oil collection business.
|
(k)
|
Fiscal 2009 includes 45 weeks of contribution from the acquired assets of Boca Industries, Inc. and does not include any contribution from assets acquired from Sanimax USA, Inc. as the acquisition occurred on December 31, 2009.
|
(l)
|
Fiscal 2010 includes 2 weeks of contribution from the Griffin assets and 31 weeks of contribution from the assets of Nebraska By-Products, Inc.
|
ITEM 7.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
·
|
Significantly higher finished product prices for BFT and YG as compared to fiscal 2009 are a sign of improving U.S. and world economies and increased global demand for BFT and YG for use in bio-fuels in fiscal 2010. These higher prices were offset somewhat by lower MBM prices in fiscal 2010 as compared to fiscal 2009. Finished product prices were favorable to the Company’s sales revenue, but this favorable result was partially offset by the negative impact on raw material cost, due to the Company's formula pricing arrangements with raw material suppliers, which index raw material cost to the prices of finished product derived from the raw material. The financial impact of finished goods prices on sales revenue and raw material cost is summarized below in Results of Operations. Comparative sales price information from the Jacobsen index, an established trading exchange publisher used by management, is listed below in Summary of Key Indicators.
|
·
|
Higher raw material volumes were collected from suppliers during fiscal 2010 as compared to fiscal 2009. Management believes the positive effect of the integration of current and prior year acquisition activity excluding the effects of the acquisition of Griffin and improving conditions in the food service industry contributed to the increase in raw material volumes collected by the Company during fiscal 2010 as compared to fiscal 2009. The financial impact of higher raw material volumes is summarized below in Results of Operations.
|
·
|
Energy prices for natural gas costs declined during fiscal 2010 as compared to fiscal 2009, but were more than offset by an increase in diesel fuel costs during fiscal 2010 as compared to fiscal 2009.
|
·
|
The acquisition of Griffin is the largest and most significant acquisition Darling has undertaken. Although Darling expects that Griffin’s business will operate to a significant extent on an independent basis and that it will not require significant integration going forward for the Company to continue the operations of Griffin’s business, this may not prove to be the case. See the risk factor entitled "The Company’s efforts to combine Darling’s business and Griffin’s business may not be successful" on page 14 for more information.
|
·
|
Integration of smaller current and prior year acquisition activity and improving conditions in the food service industry contributed to the increased raw material volumes collected by the Company in fiscal 2010 as compared to fiscal 2009. No assurance can be given that increased activity in the food service industry or the U.S. and global economies will continue in the future. If further economic instability were to occur in the future there could be a negative impact on the Company’s ability to obtain raw materials for the Company's operations.
|
·
|
Finished product prices for BFT and YG commodities increased during fiscal 2010 as compared to fiscal 2009. No assurance can be given that this increase in commodity prices for BFT and YG will continue in the future, as commodity prices are volatile by their nature. A future decrease in commodity prices could have a significant impact on the Company’s earnings in fiscal 2011 and into future periods.
|
·
|
The Company consumes significant volumes of natural gas to operate boilers in its plants, which generate steam to heat raw material. Natural gas prices represent a significant cost of factory operation included in cost of sales. The Company also consumes significant volumes of diesel fuel to operate its fleet of tractors and trucks used to collect raw material. Diesel fuel prices represent a significant component of cost of collection expenses included in cost of sales. Diesel fuel prices were higher during fiscal 2010 as compared to the same period of fiscal 2009. These prices can be volatile and there can be no assurance that these prices will not increase further in the near future, thereby representing an ongoing challenge to the Company’s operating results for future periods. A material increase in energy prices for natural gas and diesel fuel over a sustained period of time could materially adversely affect the Company’s business, financial condition and results of operations.
|
·
|
As previously noted, prices for the Company’s finished products may be impacted by worldwide government policies relating to renewable fuels and greenhouse gas emissions, and programs such as RFS2 and tax credits for bio-fuels both in the U.S. and abroad may positively impact the demand for the Company’s finished products. See the risk factor entitled "The Company’s business may be affected by energy policies of U.S. and foreign governments," on page 14, for more information regarding RFS2 and how changes to these worldwide government policies could have a negative impact on the Company’s business and results of operations.
|
·
|
Effective August 1997, the FDA promulgated the BSE Feed Rule prohibiting the use of mammalian proteins, with some exceptions, in feeds for cattle, sheep and other ruminant animals. The intent of this rule is to prevent the spread of BSE, commonly referred to as "mad cow disease." As previously noted, the FDA has amended the BSE Feed Rule, which the FDA began enforcing on October 26, 2009. Management has followed this proposed amendment throughout its history in order to assess and minimize the impact of its implementation on the Company. See the risk factor entitled "The Company's business may be affected by the impact of BSE and other food safety issues," beginning on page 16, for more information about BSE, including the Final BSE Rule, and other food safety issues and their potential effects on the Company, including the potential effects of additional government regulations, finished product export restrictions by foreign governments, market price fluctuations for finished goods, reduced demand for beef and beef products by consumers and increases in operating costs resulting from BSE-related concerns.
|
·
|
Changes in finished product prices and quality down grades,
|
·
|
Higher raw material volumes, and
|
·
|
Two weeks of contribution from the acquisition of Griffin.
|
·
|
Acquisition costs and expenses from current year acquisitions,
|
·
|
Increased costs due to current and prior year acquisition activity other than Griffin,
|
· |
Higher payroll and incentive-related benefits, and
|
·
|
Higher energy costs, primarily related to diesel fuel.
|
·
|
Finished product commodity prices,
|
·
|
Raw material volume,
|
·
|
Production volume and related yield of finished product,
|
·
|
Energy prices for natural gas quoted on the NYMEX index and diesel fuel,
|
·
|
Collection fees and collection operating expense, and
|
·
|
Factory operating expenses.
|
Avg. Price
Fiscal 2010
|
Avg. Price
Fiscal 2009
|
Increase/
(Decrease)
|
%
Increase/
(Decrease)
|
|
Rendering Segment:
|
||||
MBM (Illinois)
|
$297.35/ton
|
$338.09/ton
|
$ (40.74)/ton
|
(12.1)%
|
Feed Grade PM (Carolina)
|
$366.89/ton
|
$390.04/ton
|
$ (23.15)/ton
|
(5.9)%
|
Pet Food PM (Southeast)
|
$606.55/ton
|
$626.39/ton
|
$ (19.84)/ton
|
(3.2)%
|
BFT (Chicago)
|
$ 33.43/cwt
|
$ 25.21 /cwt
|
$ 8.22/cwt
|
32.6%
|
PG (Southeast)
|
$ 29.01/cwt
|
$ 23.44 /cwt
|
$ 5.57/cwt
|
23.8%
|
Restaurant Services Segment:
|
||||
YG (Illinois)
|
$ 26.89/cwt
|
$ 20.73 /cwt
|
$ 6.16/cwt
|
29.7%
|
Bakery Segment:
|
||||
BBP (Chicago)
|
$143.57/ton
|
$135.70/ton
|
$ 7.87/ton
|
5.8%
|
Rendering
|
Restaurant
Services
|
Bakery
|
Corporate
|
Total
|
||||||||||||||||
Increase in finished product prices
|
$ | 39.7 | $ | 33.6 | $ | – | $ | – | $ | 73.3 | ||||||||||
Increase in net sales due to acquisition
of Griffin
|
17.5 | – | 10.2 | – | 27.7 | |||||||||||||||
Increase in raw material volume
|
20.8 | 3.6 | – | – | 24.4 | |||||||||||||||
Increase/(decrease) in yield
|
3.2 | (0.5 | ) | – | – | 2.7 | ||||||||||||||
Purchases of finished product for resale
|
(1.6 | ) | 2.6 | – | – | 1.0 | ||||||||||||||
Increase/(decrease) in other sales
|
(2.1 | ) | 0.1 | – | – | (2.0 | ) | |||||||||||||
Product transfers
|
0.8 | (0.8 | ) | – | – | – | ||||||||||||||
$ | 78.3 | $ | 38.6 | $ | 10.2 | $ | – | $ | 127.1 |
Rendering
|
Restaurant
Services
|
Bakery
|
Corporate
|
Total
|
||||||||||||||||
Increase in raw material costs
|
$ | 35.6 | $ | 15.7 | $ | – | $ | – | $ | 51.3 | ||||||||||
Increase in cost of sales and operating
expense due to acquisition of Griffin
|
11.8 | – | 8.0 | – | 19.8 | |||||||||||||||
Increase/(decrease) in other
|
10.0 | 3.1 | – | 13.1 | ||||||||||||||||
Increase in raw material volume
|
4.4 | 0.9 | – | – | 5.3 | |||||||||||||||
Increase/(decrease) in energy costs
primarily diesel fuel
|
2.1 | 1.0 | – | 0.1 | 3.2 | |||||||||||||||
Purchases of finished product for resale
|
(2.1 | ) | 0.9 | – | – | (1.2 | ) | |||||||||||||
Product transfers
|
0.8 | (0.8 | ) | – | – | – | ||||||||||||||
$ | 62.6 | $ | 20.8 | $ | 8.0 | $ | 0.1 | $ | 91.5 |
Rendering
|
Restaurant
Services
|
Bakery
|
Corporate
|
Total
|
||||||||||||||||
Payroll and related benefits expense
|
$ | 0.8 | $ | 0.5 | $ | – | $ | 2.7 | $ | 4.0 | ||||||||||
Increases in selling, general and
administrative expense from two weeks
of contribution related to Griffin
|
1.0 | – | 0.4 | 0.9 | 2.3 | |||||||||||||||
Increase/(decrease) in other
|
0.1 | 0.8 | – | (0.3 | ) | 0.6 | ||||||||||||||
$ | 1.9 | $ | 1.3 | $ | 0.4 | $ | 3.3 | $ | 6.9 |
·
|
Lower raw material volumes, and
|
·
|
Lower finished product prices.
|
·
|
Lower raw material costs,
|
·
|
Lower energy costs, primarily related to natural gas and diesel fuel, and
|
·
|
Prior year goodwill impairment.
|
·
|
Finished product commodity prices,
|
·
|
Raw material volume,
|
·
|
Production volume and related yield of finished product,
|
·
|
Energy prices for natural gas quoted on the NYMEX index and diesel fuel,
|
·
|
Collection fees and collection operating expense, and
|
·
|
Factory operating expenses.
|
Rendering
|
Restaurant
Services
|
Corporate
|
Total
|
|||||||||||||
Decrease in finished product prices
|
$ | (59.0 | ) | $ | (40.5 | ) | $ | – | $ | (99.5 | ) | |||||
Decrease in raw material volume
|
(64.3 | ) | (9.8 | ) | – | (74.1 | ) | |||||||||
Other sales (decreases)/increases
|
(24.6 | ) | 4.7 | – | (19.9 | ) | ||||||||||
Purchases of finished product for resale
|
(8.7 | ) | (2.1 | ) | – | (10.8 | ) | |||||||||
Decrease in yield
|
(4.5 | ) | (0.9 | ) | – | (5.4 | ) | |||||||||
Product transfers
|
34.6 | (34.6 | ) | – | – | |||||||||||
$ | (126.5 | ) | $ | (83.2 | ) | $ | – | $ | (209.7 | ) |
Rendering
|
Restaurant
Services
|
Corporate
|
Total
|
|||||||||||||
Decrease in raw material costs
|
$ | (56.4 | ) | $ | (25.6 | ) | $ | – | $ | (82.0 | ) | |||||
Decreases in energy costs, primarily natural gas
and diesel fuel
|
(24.4 | ) | (3.1 | ) | (0.3 | ) | (27.8 | ) | ||||||||
Other expense (decreases)/increases
|
(28.8 | ) | 0.9 | 1.2 | (26.7 | ) | ||||||||||
Decrease in raw material volume
|
(19.7 | ) | (2.8 | ) | – | (22.5 | ) | |||||||||
Purchases of finished product for resale
|
(10.6 | ) | (1.8 | ) | – | (12.4 | ) | |||||||||
Multi-employer pension plans mass withdrawal
termination
|
(3.2 | ) | – | – | (3.2 | ) | ||||||||||
Product transfers
|
34.6 | (34.6 | ) | – | – | |||||||||||
$ | (108.5 | ) | $ | (67.0 | ) | $ | 0.9 | $ | (174.6 | ) |
Rendering
|
Restaurant
Services
|
Corporate
|
Total
|
|||||||||||||
Other expense (decreases)/increases
|
$ | (0.2 | ) | $ | (0.2 | ) | $ | 1.7 | $ | 1.3 | ||||||
Consulting fees
|
– | – | 0.6 | 0.6 | ||||||||||||
Payroll and related benefits expense
|
0.8 | 0.8 | (1.1 | ) | 0.5 | |||||||||||
Bad debt expense (decreases)/ increases
|
(0.8 | ) | (0.5 | ) | 0.2 | (1.1 | ) | |||||||||
$ | (0.2 | ) | $ | 0.1 | $ | 1.4 | $ | 1.3 |
·
|
The Credit Agreement provides for senior secured credit facilities (the “Senior Secured Facilities”) in the aggregate principal amount of $625.0 million comprised of a five-year revolving loan facility of $325.0 million (approximately $75.0 million of which will be available for a letter of credit sub-facility and $15.0 million of which will be available for a swingline sub-facility) and a six-year term loan facility of $300.0 million.
|
·
|
The $325.0 million revolving credit facility has a term that matures on December 17, 2015. As of January 1, 2011, the Company had an aggregate of $160.0 million outstanding under the revolving loan facility. On February 4, 2011, the Company repaid all $160.0 million of the revolving loan facility that was outstanding with the proceeds from its $307 million common stock public
offering which was consummated on February 2, 2011.
|
·
|
As of January 1, 2011, the Company has borrowed all $300.0 million under the term loan facility, which provides for scheduled quarterly amortization payments of $0.75 million over a six-year term ending with a final installment in the amount of all term loans then outstanding due and payable on December 17, 2016. The Company has the right to prepay the term loan without penalty, but any amounts that have been repaid may not be reborrowed. As of January 1, 2011, the Company had an aggregate of $300.0 million principal outstanding under the term loan facility. On February 8, 2011, the Company repaid $140.0 million of the term loan facility that was outstanding with the proceeds from its $307 million common stock public offering which was consummated on February 2, 2011.
|
·
|
With respect to any revolving facility loan, i) an alternate base rate means a rate per annum equal to the greatest of (a) the prime rate (b) the federal funds effective rate (as defined in the Credit Agreement) plus ½ of 1% and (c) the adjusted London Inter-Bank Offer Rate ("LIBOR") for a month interest period plus 1%, plus in each case, a margin determined by reference to a pricing grid under the Credit Agreement and adjusted according to the Company’s adjusted leverage ratio, and, ii) Eurodollar rate loans bear interest at a rate per annum based on the then applicable LIBOR multiplied by the statutory reserve rate plus a margin determined by reference to a pricing grid and adjusted according to the Company’s adjusted leverage ratio. With respect to an alternate base rate loan that is a term loan, at no time shall the alternate base rate be less than 2.50% per annum, plus the term loan alternate base rate margin of 2.50%. With respect to a LIBOR loan that is a term loan, at no time shall the LIBOR rate applicable to the term loans (before giving effect to any adjustment for reserve requirements) be less than 1.50% per annum, plus the term loan LIBOR margin of 3.50%.
|
·
|
The Credit Agreement contains various customary representations and warranties by the Company, which include customary use of materiality, material adverse effect and knowledge qualifiers. The Credit Agreement also contains (a) certain affirmative covenants that impose certain reporting and/or performance obligations on the Company, (b) certain negative covenants that generally prohibit, subject to various exceptions, the Company from taking certain actions, including, without limitation, incurring indebtedness, making investments, incurring liens, paying dividends, and engaging in mergers and consolidations, sale leasebacks and sales of assets, (c) financial covenants such as maximum total leverage ratio and a minimum fixed charge coverage ratio and (d) customary events of default (including a change of control). Obligations under the Credit Agreement may be declared due and payable upon the occurrence of such customary events of default.
|
·
|
The Notes will mature on December 15, 2018. The Company will pay interest on June 15 and December 15 of each year, commencing on June 15, 2011. Interest on the Notes will accrue at a rate of 8.5% per annum and be payable in cash.
|
·
|
The Company is not required to make any mandatory redemption or sinking fund payments with respect to the Notes. If a Change of Control (as defined in the Indenture) occurs, unless the Company has exercised its right to redeem all the Notes as described below, each holder will have the right to require the Company to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder’s Notes at a purchase price in cash equal to 101% of the principal amount of the Notes, plus accrued and unpaid interest, if any, to the date of purchase, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date. If the Company or its subsidiaries engage in certain Asset Dispositions (as defined in the Indenture), the Company generally must, within specific periods of time, either prepay, repay or repurchase certain of its or its restricted subsidiaries’ indebtedness or make an offer to purchase a principal amount of the Notes and certain other debt equal to the excess net cash proceeds, or invest the net cash proceeds from such sales in additional assets. The purchase price of the Notes will be 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. The Company may at any time and from time to time purchase Notes in the open market or otherwise.
|
·
|
The Company may redeem some or all of the Notes at any time prior to December 15, 2014, at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus accrued and unpaid interest to the redemption date and an Applicable Premium (as defined below) as of the date of redemption subject to the rights of holders on the relevant record date to receive interest due on the relevant interest payment date. The "Applicable Premium" means, with respect to any Note on any redemption date, the greater of: (a) 1.0% of the principal amount of such Note; and (b) the excess, if any, of (i) the present value at such redemption date of (A) the redemption price of such Note at December 15, 2014 (such redemption price being set forth in the table below), plus (B) all required interest payments due on such Note through December 15, 2014 (excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the applicable treasury rate as of such redemption date plus 50 basis points; over (ii) the principal amount of such Note.
|
·
|
On and after December 15, 2014, the Company may redeem all or, from time to time, a part of the Notes (including any additional Notes) upon not less than 30 nor more than 60 days’ notice, at the following redemption prices (expressed as a percentage of principal amount), plus accrued and unpaid interest on the Notes, if any, to the applicable redemption date (subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve-month period beginning on December 15 of the years indicated below:
|
·
|
In addition, until December 15, 2013, the Company may, at its option, redeem up to 35% of the original principal amount of the Notes and any issuance of additional Notes with the net cash proceeds of one or more equity offerings at a redemption price equal to 108.5% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, subject to the right of holders of record on the relevant record date to receive interest due on the relevant interest payment date; provided that at least 65% of the original principal amount of the Notes and any issuance of additional Notes remains outstanding immediately after each such redemption; provided further that the redemption occurs within 90 days after the closing of such equity offering.
|
·
|
The Indenture contains covenants limiting Darling's ability and the ability of its restricted subsidiaries to, among other things incur additional indebtedness or issue preferred stock; pay dividends on or make other distributions or repurchase of Darling's capital stock or make other restricted payments; create restrictions on the payment of dividends or other amounts from Darling’s restricted subsidiaries to Darling or Darling’s other restricted subsidiaries; make loans or investments; enter into certain transactions with affiliates; create liens; designate Darling’s subsidiaries as unrestricted subsidiaries; and sell certain assets or merge with or into other companies or otherwise dispose of all or substantially all of Darling's assets.
|
·
|
Holders of the Notes have the benefit of registration rights. In connection with the issuance of the Notes, Darling and the Guarantors entered into a registration rights agreement (the "Notes Registration Rights Agreement") with the representative of the Initial Purchasers. Darling and the Guarantors have agreed to consummate a registered exchange offer for the Notes within 270 days after the date of the Merger. Darling and the Guarantors have agreed to file and keep effective for a certain time period a shelf registration statement for the resale of the Notes if an exchange offer cannot be effected and under certain other circumstances. Darling will be required to pay additional interest on the Notes if it fails to timely comply with its obligations under the Notes Registration Rights Agreement until such time as it complies.
|
·
|
The Indenture also provides for customary events of default, including, without limitation, payment defaults, covenant defaults, cross acceleration defaults to certain other indebtedness in excess of specified amounts, certain events of bankruptcy and insolvency and judgment defaults in excess of specified amounts. If any such event of default occurs and is continuing under the Indenture, the Trustee or the holders of at least 25% in principal amount of the total outstanding Notes may declare the principal, premium, if any, interest and any other monetary obligations on all the then outstanding Notes issued under the Indenture to be due and payable immediately.
|
Notes:
|
||
8.5% Senior Notes due 2018
|
$
250,000
|
|
Credit Agreement:
|
||
Term Loan
|
$
300,000
|
|
Revolving Credit Facility:
|
||
Maximum availability
|
$ 325,000
|
|
Borrowings outstanding
|
160,000
|
|
Letters of credit issued
|
23,383
|
|
Availability
|
$
141,617
|
Total
|
Less than
1 Year
|
1 – 3
Years
|
3 – 5
Years
|
More than
5 Years
|
||||||||||||||||
Contractual obligations(a):
|
||||||||||||||||||||
Long-term debt obligations (b)
|
$ | 710,000 | $ | 3,000 | $ | 5,250 | $ | 166,750 | $ | 535,000 | ||||||||||
Operating lease obligations (c)
|
58,806 | 14,355 | 18,696 | 8,910 | 16,845 | |||||||||||||||
Estimated interest payable (d)
|
284,016 | 42,669 | 84,902 | 79,979 | 76,466 | |||||||||||||||
Purchase commitments (e)
|
21,003 | 21,003 | – | – | – | |||||||||||||||
Pension funding obligation (f)
|
2,049 | 2,049 | – | – | – | |||||||||||||||
Other obligations
|
39 | 9 | 20 | 10 | – | |||||||||||||||
Total
|
$ | 1,075,913 | $ | 83,085 | $ | 108,868 | $ | 255,649 | $ | 628,311 |
(a)
|
The above table does not reflect uncertain tax positions of approximately $0.1 million because the timing of the cash settlement cannot be reasonably estimated.
|
(b)
|
See Note 9 to the consolidated financial statements. In February 2011, approximately $300.0 million of the outstanding debt was repaid from the proceeds of a public stock offering of 24,193,548 shares of the Company’s common stock.
|
(c)
|
See Note 8 to the consolidated financial statements.
|
(d)
|
Interest payable was calculated using the current rate for term, revolver, senior notes and current rates on other liabilities that existed as of January 1, 2011.
|
(e)
|
Purchase commitments were determined based on specified contracts for natural gas, diesel fuel and finish product purchases.
|
(f)
|
Pension funding requirements are determined annually based upon a third party actuarial estimate. The Company expects to make approximately $2.0 million in required contributions to its pension plan in fiscal 2011. The Company is not able to estimate pension funding requirements beyond the next twelve months. The accrued pension benefit liability was approximately $18.1 million at the end of Fiscal 2010. The Company knows that one of the multi-employer pension plans that has not terminated to which it contributes and which is not administered by the Company was under-funded as of the latest available information, and while the Company has no ability to calculate a possible current liability for the under-funded multi-employer plan to which the Company contributes, the amounts could be material.
|
Other commercial commitments:
|
|
Standby letters of credit
|
$
23,383
|
Total other commercial commitments:
|
$
23,383
|
Total
|
Less than
1 Year
|
1 – 3
Years
|
3 – 5
Years
|
More than
5 Years
|
||||||||||||||||
Long-term debt:
|
||||||||||||||||||||
Fixed rate
|
$ | 250,039 | $ | 9 | $ | 20 | $ | 10 | $ | 250,000 | ||||||||||
Average interest rate
|
8.50 | % | 5.75 | % | 5.75 | % | 5.75 | % | 8.50 | % | ||||||||||
Variable rate
|
460,000 | 3,000 | 5,250 | 166,750 | 285,000 | |||||||||||||||
Average interest rate
|
4.50 | % | 5.00 | % | 5.00 | % | 3.62 | % | 5.00 | % | ||||||||||
Total
|
$ | 710,039 | $ | 3,009 | $ | 5,270 | $ | 166,760 | $ | 535,000 |
Page
|
||
Report of Independent Registered Public Accounting Firm on Consolidated Financial
Statements
|
65
|
|
Report of Independent Registered Public Accounting Firm on Internal Control Over
Financial Reporting
|
66
|
|
Consolidated Balance Sheets -
|
||
January 1, 2011 and January 2, 2010
|
67
|
|
Consolidated Statements of Operations -
|
||
Three years ended January 1, 2011
|
68
|
|
Consolidated Statements of Stockholders’ Equity
and Comprehensive Income(Loss) -
|
||
Three years ended January 1, 2011
|
69
|
|
Consolidated Statements of Cash Flows -
|
||
Three years ended January 1, 2011
|
71
|
|
Notes to Consolidated Financial Statements
|
72
|
|
ASSETS
|
January 1,
2011
|
January 2,
2010
|
||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 19,202 | $ | 68,182 | ||||
Restricted cash
|
373 | 397 | ||||||
Accounts receivable, less allowance for bad debts of $2,134
at January 1, 2011 and $2,148 at January 2, 2010
|
87,455 | 45,572 | ||||||
Escrow receivable | 16,267 | – | ||||||
Inventories
|
45,606 | 19,057 | ||||||
Income taxes refundable
|
1,474 | 605 | ||||||
Other current assets
|
8,833 | 5,348 | ||||||
Deferred income taxes
|
6,376 | 7,216 | ||||||
Total current assets
|
185,586 | 146,377 | ||||||
Property, plant and equipment, net
|
393,420 | 151,982 | ||||||
Intangible assets, less accumulated amortization of $56,689
|
||||||||
at January 1, 2011 and $51,109 at January 2, 2010
|
390,954 | 40,298 | ||||||
Goodwill
|
376,263 | 79,085 | ||||||
Other assets
|
36,035 | 8,429 | ||||||
$ | 1,382,258 | $ | 426,171 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt
|
$ | 3,009 | $ | 5,009 | ||||
Accounts payable, principally trade
|
70,123 | 18,746 | ||||||
Accrued expenses
|
81,698 | 47,522 | ||||||
Total current liabilities
|
154,830 | 71,277 | ||||||
Long-term debt, net of current portion
|
707,030 | 27,539 | ||||||
Other noncurrent liabilities
|
50,760 | 36,143 | ||||||
Deferred income taxes
|
5,342 | 6,335 | ||||||
Total liabilities
|
917,962 | 141,294 | ||||||
Commitments and contingencies
|
||||||||
Stockholders’ equity:
|
||||||||
Common stock, $.01 par value; 150,000,000 and 100,000,000
shares authorized, 93,014,691 and 82,629,970 shares issued
|
||||||||
at January 1, 2011 and January 2, 2010, respectively
|
930 | 826 | ||||||
Additional paid-in capital
|
290,106 | 157,343 | ||||||
Treasury stock, at cost; 455,020 and 403,280 shares at
January 1, 2011 and January 2, 2010, respectively
|
( 4,340 | ) | ( 3,855 | ) | ||||
Accumulated other comprehensive loss
|
( 20,988 | ) | ( 23,782 | ) | ||||
Retained earnings
|
198,588 | 154,345 | ||||||
Total stockholders’ equity
|
464,296 | 284,877 | ||||||
$ | 1,382,258 | $ | 426,171 |
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Net sales
|
$ | 724,909 | $ | 597,806 | $ | 807,492 | ||||||
Costs and expenses:
|
||||||||||||
Cost of sales and operating expenses
|
531,648 | 440,111 | 614,708 | |||||||||
Selling, general and administrative expenses
|
68,042 | 61,062 | 59,761 | |||||||||
Depreciation and amortization
|
31,908 | 25,226 | 24,433 | |||||||||
Acquisition costs | 10,798 | 468 | – | |||||||||
Goodwill impairment
|
– | – | 15,914 | |||||||||
Total costs and expenses
|
642,396 | 526,867 | 714,816 | |||||||||
Operating income
|
82,513 | 70,939 | 92,676 | |||||||||
Other income/(expense):
|
||||||||||||
Interest expense
|
( 8,737 | ) | ( 3,105 | ) | ( 3,018 | ) | ||||||
Other, net
|
(3,433 | ) | (955 | ) | 258 | |||||||
Total other income/(expense)
|
( 12,170 | ) | ( 4,060 | ) | ( 2,760 | ) | ||||||
Income from operations before
income taxes
|
70,343 | 66,879 | 89,916 | |||||||||
Income taxes
|
26,100 | 25,089 | 35,354 | |||||||||
Net income
|
$ | 44,243 | $ | 41,790 | $ | 54,562 | ||||||
Net income per share:
|
||||||||||||
Basic
|
$ | 0.53 | $ | 0.51 | $ | 0.67 | ||||||
Diluted
|
$ | 0.53 | $ | 0.51 | $ | 0.66 | ||||||
Common Stock
|
|||||||||
Number of
Outstanding
Shares
|
$.01 par
Value
|
Additional
Paid-In
Capital
|
Treasury
Stock
|
Accumulated
Other
Compre-
hensive Loss
|
Retained
Earnings
|
Total
Stockholders’
Equity
|
Balances at December 29, 2007
|
81,362,100 | $ | 815 | $ | 152,264 | $ | (1,547 | ) | $ | (8,598 | ) | $ | 58,050 | $ | 200,984 | |||||||||||||
Net income
|
– | – | – | – | – | 54,562 | 54,562 | |||||||||||||||||||||
Unrecognized net actuarial
loss of defined benefit plans:
|
||||||||||||||||||||||||||||
Pension liability
adjustments, net of tax
|
– | – | – | – | (20,386 | ) | – | (20,386 | ) | |||||||||||||||||||
Interest rate swap derivative
adjustment, net of tax
|
– | – | – | – | (937 | ) | – | (937 | ) | |||||||||||||||||||
Total comprehensive income
|
– | – | – | – | – | – | 33,239 | |||||||||||||||||||||
Adjustment effect of actuarially
determined pension liabilities
measurement adoption,
net of tax
|
– | – | – | – | 71 | (57 | ) | 14 | ||||||||||||||||||||
Issuance of non-vested stock
|
50,558 | 1 | 702 | – | – | – | 703 | |||||||||||||||||||||
Stock-based compensation
|
– | – | (127 | ) | – | – | – | (127 | ) | |||||||||||||||||||
Tax benefits associated with
stock-based compensation
|
– | – | 2,308 | – | – | – | 2,308 | |||||||||||||||||||||
Treasury stock
|
(218,728 | ) | – | – | (2,301 | ) | – | – | (2,301 | ) | ||||||||||||||||||
Issuance of common stock
|
574,052 | 6 | 1,752 | – | – | – | 1,758 | |||||||||||||||||||||
Balances at January 3, 2009
|
81,767,982 | $ | 822 | $ | 156,899 | $ | (3,848 | ) | $ | (29,850 | ) | $ | 112,555 | $ | 236,578 |
Net income
|
– | – | – | – | – | 41,790 | 41,790 | |||||||||||||||||||||
Unrecognized net actuarial
loss of defined benefit plans:
|
||||||||||||||||||||||||||||
Pension liability
adjustments, net of tax
|
– | – | – | – | 5,229 | – | 5,229 | |||||||||||||||||||||
Interest rate swap derivative
adjustment, net of tax
|
– | – | – | – | 702 | – | 702 | |||||||||||||||||||||
Natural gas swap derivative
adjustment, net of tax |
– | – | – | – | 137 | – | 137 | |||||||||||||||||||||
Total comprehensive income
|
– | – | – | – | – | – | 47,858 | |||||||||||||||||||||
Issuance of non-vested stock
|
307,558 | 3 | 901 | – | – | – | 904 | |||||||||||||||||||||
Stock-based compensation
|
– | – | (720 | ) | – | – | – | (720 | ) | |||||||||||||||||||
Tax benefits associated with
stock-based compensation
|
– | – | (39 | ) | – | – | – | (39 | ) | |||||||||||||||||||
Treasury stock
|
(2,186 | ) | – | – | (7 | ) | – | – | (7 | ) | ||||||||||||||||||
Issuance of common stock
|
153,336 | 1 | 302 | – | – | – | 303 | |||||||||||||||||||||
Balances at January 2, 2010
|
82,226,690 | $ | 826 | $ | 157,343 | $ | (3,855 | ) | $ | (23,782 | ) | $ | 154,345 | $ | 284,877 |
Common Stock
|
|||||||||
Number of
Outstanding
Shares
|
$.01 par
Value
|
Additional
Paid-In
Capital
|
Treasury
Stock
|
Accumulated
Other
Compre-
hensive Loss
|
Retained
Earnings
|
Total
Stockholders’
Equity
|
Net income
|
– | – | – | – | – | 44,243 | 44,243 | |||||||||||||||||||||
Unrecognized net actuarial
loss of defined benefit plans:
|
||||||||||||||||||||||||||||
Pension liability
adjustments, net of tax
|
– | – | – | – | 2,346 | – | 2,346 | |||||||||||||||||||||
Interest rate swap
derivative
adjustment,
net of tax
|
– | – | – | – | 507 | – | 507 | |||||||||||||||||||||
Natural gas swap derivative
adjustment, net of tax
|
– | – | – | – | (59 | ) | – | (59 | ) | |||||||||||||||||||
Total comprehensive income
|
– | – | – | – | – | – | 47,037 | |||||||||||||||||||||
Issuance of non-vested stock
|
254,220 | 3 | 2,401 | – | – | – | 2,404 | |||||||||||||||||||||
Stock-based compensation
|
– | – | 94 | – | – | – | 94 | |||||||||||||||||||||
Tax benefits associated with
stock-based compensation
|
– | – | 234 | – | – | – | 234 | |||||||||||||||||||||
Treasury stock
|
(51,740 | ) | – | – | (485 | ) | – | – | (485 | ) | ||||||||||||||||||
Issuance of common stock
|
10,130,501 | 101 | 130,034 | – | – | – | 130,135 | |||||||||||||||||||||
Balances at January 1, 2011
|
92,559,671 | $ | 930 | $ | 290,106 | $ | (4,340 | ) | $ | (20,988 | ) | $ | 198,588 | $ | 464,296 |
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Cash flows from operating activities:
|
||||||||||||
Net income
|
$ | 44,243 | $ | 41,790 | $ | 54,562 | ||||||
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||||||||||||
Depreciation and amortization
|
31,908 | 25,226 | 24,433 | |||||||||
Deferred income taxes
|
2,402 | 14,652 | ( 12,428 | ) | ||||||||
Loss/(gain) on sale of assets
|
51 | ( 294 | ) | ( 141 | ) | |||||||
Increase/(decrease) in long-term pension liability
|
1,353 | ( 11,974 | ) | 6,784 | ||||||||
Stock-based compensation expense
|
2,146 | 768 | 800 | |||||||||
Write-off deferred loan costs
|
851 | – | – | |||||||||
Goodwill impairment
|
– | – | 15,914 | |||||||||
Changes in operating assets and liabilities, net
of effects from acquisitions:
|
||||||||||||
Restricted cash
|
24 | 52 | ( 16 | ) | ||||||||
Accounts receivable
|
(6,276 | ) | ( 5,148 | ) | 18,977 | |||||||
Escrow receivable | (16,267 | ) | – | – | ||||||||
Income taxes refundable
|
(869 | ) | 10,643 | ( 11,248 | ) | |||||||
Inventories and prepaid expenses
|
( 4,661 | ) | 4,286 | ( 398 | ) | |||||||
Accounts payable and accrued expenses
|
23,727 | ( 369 | ) | ( 6,884 | ) | |||||||
Other
|
2,878 | (446 | ) | 1,595 | ||||||||
Net cash provided by operating activities
|
81,510 | 79,186 | 91,950 | |||||||||
Cash flows from investing activities:
|
||||||||||||
Capital expenditures
|
( 24,720 | ) | ( 23,638 | ) | ( 31,006 | ) | ||||||
Acquisitions, net of cash acquired
|
( 758,182 | ) | ( 33,987 | ) | ( 15,876 | ) | ||||||
Gross proceeds from sale of property, plant and equipment
and other assets
|
624 | 1,913 | 1,101 | |||||||||
Payments related to routes and other intangibles
|
( 1,367 | ) | – | ( 6,609 | ) | |||||||
Net cash used in investing activities
|
( 783,645 | ) | ( 55,712 | ) | ( 52,390 | ) | ||||||
Cash flows from financing activities:
|
||||||||||||
Proceeds from long-term debt
|
550,000 | 48 | – | |||||||||
Payments on long-term debt
|
( 32,509 | ) | ( 5,000 | ) | ( 6,250 | ) | ||||||
Net proceeds from revolver borrowings | 160,000 | – | – | |||||||||
Contract payments
|
– | ( 72 | ) | ( 176 | ) | |||||||
Deferred loan costs
|
( 24,020 | ) | ( 946 | ) | ( 67 | ) | ||||||
Issuance of common stock
|
35 | 11 | 303 | |||||||||
Minimum withholding taxes paid on stock awards
|
( 585 | ) | ( 108 | ) | ( 1,199 | ) | ||||||
Excess tax benefits from stock-based compensation
|
234 | ( 39 | ) | 2,308 | ||||||||
Net cash provided/(used) in financing activities
|
653,155 | ( 6,106 | ) | ( 5,081 | ) | |||||||
Net increase/(decrease) in cash and cash equivalents
|
(48,980 | ) | 17,368 | 34,479 | ||||||||
Cash and cash equivalents at beginning of year
|
68,182 | 50,814 | 16,335 | |||||||||
Cash and cash equivalents at end of year
|
$ | 19,202 | $ | 68,182 | $ | 50,814 | ||||||
Supplemental disclosure of cash flow information:
|
||||||||||||
Cash paid during the year for:
|
||||||||||||
Interest
|
$ | 7,743 | $ | 2,687 | $ | 3,016 | ||||||
Income taxes, net of refunds
|
$ | 28,114 | $ | 2,244 | $ | 44,246 | ||||||
NOTE 1.
|
GENERAL
|
(a)
|
NATURE OF OPERATIONS
|
(b)
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
(1)
|
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.
|
(2)
|
Fiscal Year
The Company has a 52/53 week fiscal year ending on the Saturday nearest December 31. Fiscal years for the consolidated financial statements included herein are for the 52 weeks ended January 1, 2011, the 52 weeks ended January 2, 2010, and the 53 weeks ended January 3, 2009.
|
(3)
|
Cash and Cash Equivalents
The Company considers all short-term highly liquid instruments, with an original maturity of three months or less, to be cash equivalents.
|
(4)
|
Accounts Receivable and Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses resulting from customers’ non-payment of trade accounts receivable owed to the Company. These trade receivables arise in the ordinary course of business from sales of raw material, finished product or services to the Company’s customers. The estimate of allowance for doubtful accounts is based upon the Company’s bad debt experience, prevailing market conditions, and aging of trade accounts receivable, among other factors. If the financial condition of the Company’s customers deteriorates, resulting in the customers’ inability to pay the Company’s receivables as they come due, additional allowances for doubtful accounts may be required.
|
(5)
|
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method.
|
(6)
|
Long Lived Assets
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation is computed by the straight-line method over the estimated useful lives of assets: 1) Buildings and improvements, 15 to 30 years;
2) Machinery and equipment, 3 to 10 years; and 3) Vehicles, 2 to 6 years.
Maintenance and repairs are charged to expense as incurred and expenditures for major renewals and improvements are capitalized.
|
|
Intangible Assets
Intangible assets with indefinite lives, and therefore not subject to amortization, consist of trade names acquired in the acquisition of Griffin. Intangible assets subject to amortization consist of: 1) collection routes which are made up of groups of suppliers of raw materials in similar geographic areas from which the Company derives collection fees and a dependable source of raw materials for processing into finished products; 2) permits that represent licensing of operating plants that have been acquired, giving those plants the ability to operate; 3) non-compete agreements that represent contractual arrangements with former competitors whose businesses were acquired; 4) trade names; and 5) royalty, consulting and leasehold agreements. Amortization expense is calculated using the straight-line method over the estimated useful lives of the assets ranging from: 5-20 years for collection routes; 11-20 years for permits; 3-7 years for non-compete covenants; and 15 years for trade names. Royalty, consulting and leasehold agreements are amortized over the term of the agreement.
|
(7)
|
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of
The Company reviews the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset, or related asset group, may not be recoverable from estimated future undiscounted cash flows. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of the asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the fourth quarter of fiscal 2008, due to lower commodity markets and the loss of certain large raw material suppliers, the Company performed testing of all its long-lived assets for impairment based on future undiscounted cash flows and concluded that its long-lived assets were not impaired. In fiscal 2009 and fiscal 2010 no triggering event occurred requiring that the Company perform testing of all of its long-lived assets for impairment.
|
(8)
|
Goodwill
Goodwill and indefinite lived assets are tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company follows a two-step process for testing impairment. First, the fair value of each reporting unit is compared to its carrying value to determine whether an indication of impairment exists. If impairment is indicated, then the fair value of the reporting unit’s goodwill is determined by allocating the unit’s fair value of its assets and liabilities (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination. The amount of impairment for goodwill is measured as the excess of its carrying value over its implied fair value.
|
|
In fiscal 2008, the fair value of the Company’s reporting units containing goodwill did not exceed the related carrying values; consequently, the Company recorded an impairment of approximately $15.9 million for the year ended January 3, 2009. In fiscal 2009 and fiscal 2010, the fair values of the Company’s reporting units containing goodwill exceeded the related carrying value. Goodwill was approximately $376.3 million and $79.1 million at January 1, 2011 and January 2, 2010, respectively. See Note 6 for further information on the Company’s goodwill.
|
(9)
|
Environmental Expenditures
Environmental expenditures incurred to mitigate or prevent environmental impacts that have yet to occur and that otherwise may result from future operations are capitalized. Expenditures that relate to an existing condition caused by past operations and that do not contribute to current or future revenues are expensed or charged against established environmental reserves. Reserves are established when environmental impacts have been identified which are probable to require mitigation and/or remediation and the costs are reasonably estimable.
|
(10)
|
Income Taxes
The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
|
|
The Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. The Company considers, among other things, its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends and its outlook for future years. Although the Company is unable to carryback any of its net operating losses, based upon recent favorable operating results and future projections, certain net operating losses can be carried forward and utilized and other deferred tax assets will be realized. |
(11)
|
Earnings per Share
On January 4, 2009, the Company adopted the provisions of Financial Accounting Standards Board ("FASB") authoritative guidance, which addresses determinations as to whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share under the two-class method. Non-vested and restricted share awards granted to the Company's employees and non-employee directors contain non-forfeitable dividend rights and, therefore, are considered participating securities.
Basic income per common share is computed by dividing net income by the weighted average number of common shares including non-vested and restricted shares outstanding during the period. Diluted income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the period increased by dilutive common equivalent shares determined using the treasury stock method.
|
January 1,
|
January 2, |
January 3,
|
||||||||||||
2011 | 2010 | 2009 | ||||||||||||
Income
|
Shares |
Per-
Share
|
Income
|
Shares |
Per-
Share
|
Income | Shares |
Per-
Share
|
||||||
Basic:
|
||||||||||||||
Net income
|
$44,243
|
82,854
|
$0.53
|
$41,790
|
82,142
|
$0.51
|
$54,562
|
81,685
|
$0.67
|
|||||
Diluted:
|
||||||||||||||
Effect of dilutive securities
|
||||||||||||||
Add: Option shares in the money and
|
||||||||||||||
dilutive effect of nonvested stock
|
–
|
778
|
–
|
–
|
778
|
–
|
–
|
969
|
–
|
|||||
Less: Pro-forma treasury shares
|
–
|
(389)
|
–
|
–
|
(445)
|
–
|
–
|
(408)
|
–
|
|||||
Diluted:
|
||||||||||||||
Net income
|
$44,243
|
83,243
|
$0.53
|
$41,790
|
82,475
|
$0.51
|
$54,562
|
82,246
|
$0.66
|
|||||
|
For fiscal 2010, 2009 and 2008, respectively, 87,843, 32,000 and 24,000 outstanding stock options were excluded from diluted income per common share as the effect was antidilutive. For fiscal 2010 non-vested stock of 75,714 shares were excluded from diluted income per common share as the effect was antidilutive.
|
(12)
|
Stock Based Compensation
The Company recognizes compensation expense in an amount equal to the fair value of the share-based payments (e.g., stock options and non-vested and restricted stock) granted to employees or by incurring liabilities to an employee or other supplier (a) in amounts based, at least in part, on the price of the entity’s shares or other equity instruments, or (b) that require or may require settlement by issuing the entity’s equity shares or other equity instruments.
Total stock-based compensation recognized in the statements of operations for the years ended January 1, 2011, January 2, 2010 and January 3, 2009 was approximately $2.8 million, $1.2 million and $1.1 million, respectively, which is included in selling, general and administrative costs, and the related income tax benefit recognized was approximately $1.1 million, $0.5 million and $0.3 million, respectively. See Note 12 for further information on the Company’s stock-based compensation plans.
The benefits of tax deductions in excess of recognized compensation cost are reported as a financing cash flow. For the year ended January 1, 2011 the Company recognized $0.2 million as an increase in financing cash flows and for the year ended January 2, 2010 the Company recognized less than $0.1 million of such tax expenses, which were recorded as a decrease in financing cash flows. For the year ended January 3, 2009, the Company recognized $2.3 million in such tax deductions, which were recorded as an increase in financing cash flows and a reduction in operating cash flows.
|
(13)
|
Use of Estimates
The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
|
If it is at least reasonably possible that the estimate of the effect on the financial statements of a condition, situation, or set of circumstances that exist at the date of the financial statements will change in the near term due to one or more future confirming events and the effect of the change would be material to the financial statements, the Company will disclose the nature of the uncertainty and include an indication that it is at least reasonably possible that a change in the estimate will occur in the near term. If the estimate involves certain loss contingencies the disclosure will also include an estimate of the probable loss or range of loss or state that an estimate cannot be made.
|
(14)
|
Financial Instruments
The carrying amount
of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates fair value due to the short maturity of these instruments. Based upon quoted market price the Company's senior notes described in Note 9 has a fair value of approximately $260.6 million compared to a carrying amount of $250.0 million at January 1, 2011. The Company’s term loans and revolver as described in Note 9 have a fair value based on rates the Company believes it would pay for debt of the same remaining maturity. The Company’s term loan had a fair value of approximately $30.2 million compared to a carrying amount of $32.5 million at January 2, 2010. The carrying amount of the Company’s term loan and revolver approximates the fair value at January 1, 2011. The carrying amount for the Company’s other debt is not deemed to be significantly different than the amount recorded and all other financial instruments have been recorded at fair value as disclosed in Note 15.
|
(15)
|
Derivative Instruments
The Company makes limited use of derivative instruments to manage cash flow risks related to interest expense, natural gas usage, diesel fuel usage and inventory. The Company does not use derivative instruments for trading purposes. Interest rate swaps are entered into with the intent of managing overall borrowing costs by reducing the potential impact of increases in interest rates on floating-rate long-term debt. Natural gas swaps and options are entered into with the intent of managing the overall cost of natural gas usage by reducing the potential impact of seasonal weather demands on natural gas that increases natural gas prices. Heating oil swaps are entered into with the intent of managing the overall cost of diesel fuel usage by reducing the potential impact of seasonal weather demands on diesel fuel that increases diesel fuel prices. Inventory swaps and options are entered into with the intent of managing seasonally high concentrations of MBM, PM, BFT, PG, YG and BBP inventories by reducing the potential impact of decreasing prices. At January 1, 2011, the Company had natural gas swaps outstanding that qualified and were designated for hedge accounting as well as natural gas swaps, options and heating oil swaps that did not qualify and were not designated for hedge accounting.
Entities are required to report all derivative instruments in the statement of financial position at fair value. The accounting for changes in the fair value (i.e., gains or losses) of a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on the reason for holding the instrument. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair value, cash flows or foreign currencies. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside of earnings) and is subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness as well as the ineffective portion of the gain or loss is reported in earnings immediately. If the derivative instrument is not designated as a hedge, the gain or loss is recognized in earnings in the period of change.
|
(16)
|
Revenue Recognition
The Company recognizes revenue on sales when products are shipped and the customer takes ownership and assumes risk of loss. Certain customers may be required to prepay prior to shipment in order to maintain payment protection against certain foreign and domestic sales. These amounts are recorded as unearned revenue and recognized when the products have shipped and the customer takes ownership and assumes risk of loss. The Company has formula arrangements with certain suppliers whereby the charge or credit for raw materials is tied to published finished product commodity prices after deducting a fixed processing fee incorporated into the formula and is recorded as a cost of sale by line of business. The Company recognizes revenue related to grease trap servicing in the month the trap service occurs.
|
(17)
|
Related Party Transactions
Darling through its wholly-owned subsidiary Griffin Industries, Inc., leases two real properties located in Butler, Kentucky and real properties located in each of Jackson, Mississippi and Henderson, Kentucky from Martom Properties, LLC, an entity owned in part by Martin W. Griffin, the Company’s Executive Vice President – Chief Operations Officer – Griffin Industries. See Note 8 for further information on the Company's leases.
|
(18)
|
Reclassification
Certain prior year amounts have been reclassified to conform to the current year presentation.
|
(19)
|
Subsequent Events
The Company has evaluated subsequent events from the end of the most recent fiscal year through the date the consolidated financial statements were issued.
|
NOTE 2.
|
ACQUISITIONS AND DISPOSITIONS
|
January 1,
2011
|
January 2,
2010
|
|||||||
Net sales
|
$ | 1,339,589 | $ | 1,123,108 | ||||
Income from continuing operations
|
133,184 | 91,299 | ||||||
Net income
|
85,344 | 57,062 | ||||||
Earnings per share
|
||||||||
Basic
|
$ | 0.92 | $ | 0.62 | ||||
Diluted
|
$ | 0.91 | $ | 0.61 |
Cash
|
$ | 350 | ||
Accounts receivable
|
35,607 | |||
Inventory
|
22,623 | |||
Other current assets
|
2,558 | |||
Other assets
|
3,103 | |||
Deferred tax asset
|
2,555 | |||
Identifiable intangibles
|
349,775 | |||
Property and equipment
|
234,115 | |||
Goodwill
|
291,153 | |||
Accounts payable
|
(46,583 | ) | ||
Accrued expenses
|
(12,219 | ) | ||
Other liabilities
|
(11,004 | ) | ||
Purchase price
|
$ | 872,033 |
NOTE 3.
|
INVENTORIES
|
January 1,
2011
|
January 2,
2010
|
|||||||
Finished product
|
$ | 40,927 | $ | 16,211 | ||||
Supplies and other
|
4,679 | 2,846 | ||||||
$ | 45,606 | $ | 19,057 |
NOTE 4.
|
PROPERTY, PLANT AND EQUIPMENT
|
January 1,
2011
|
January 2,
2010
|
|||||||
Land
|
$ | 44,864 | $ | 18,386 | ||||
Buildings and improvements
|
110,988 | 52,059 | ||||||
Machinery and equipment
|
336,856 | 244,962 | ||||||
Vehicles
|
91,015 | 56,221 | ||||||
Aircraft
|
11,650 | – | ||||||
Construction in process
|
36,312 | 3,919 | ||||||
631,685 | 375,547 | |||||||
Accumulated depreciation
|
(238,265 | ) | (223,565 | ) | ||||
$ | 393,420 | $ | 151,982 |
NOTE 5.
|
INTANGIBLE ASSETS
|
|
January 1, 2011
|
January 2, 2010
|
||||||
Indefinite Lived Intangible Assets
|
||||||||
Trade Names
|
$ | 92,002 | $ | – | ||||
92,002 | – | |||||||
Finite Lived Intangible Assets:
|
||||||||
Routes
|
$ | 96,938 | $ | 68,028 | ||||
Permits
|
251,413 | 20,500 | ||||||
Non-compete agreements
|
6,012 | 2,491 | ||||||
Trade Names
|
539 | – | ||||||
Royalty, consulting and leasehold
|
739 | 388 | ||||||
355,641 | 91,407 |
Accumulated Amortization:
|
||||||||
Routes
|
(48,361 | ) | (44,731 | ) | ||||
Permits
|
(5,563 | ) | (3,725 | ) | ||||
Non-compete agreements
|
(2,417 | ) | (2,329 | ) | ||||
Trade Names
|
(2 | ) | – | |||||
Royalty, consulting and leasehold
|
(346 | ) | (324 | ) | ||||
(56,689 | ) | ( 51,109 | ) | |||||
Total Intangible assets, less
accumulated amortization
|
$ | 390,954 | $ | 40,298 |
NOTE 6.
|
GOODWILL
|
Rendering
|
Restaurant
Services
|
Bakery
|
Total
|
|||||||||||||
Balance at January 2, 2010
|
||||||||||||||||
Goodwill
|
$ | 65,557 | $ | 29,442 | $ | – | $ | 94,999 | ||||||||
Accumulated impairment losses
|
(13,864 | ) | (2,050 | ) | – | (15,914 | ) | |||||||||
51,693 | 27,392 | – | 79,085 | |||||||||||||
Goodwill acquired during year
|
242,806 | 2,910 | 51,462 | 297,178 | ||||||||||||
Impairment losses
|
– | – | – | – | ||||||||||||
Balance at January 1, 2011
|
||||||||||||||||
Goodwill
|
308,363 | 32,352 | 51,462 | 392,177 | ||||||||||||
Accumulated impairment losses
|
(13,864 | ) | (2,050 | ) | – | (15,914 | ) | |||||||||
$ | 294,499 | $ | 30,302 | $ | 51,462 | $ | 376,263 |
NOTE 7.
|
ACCRUED EXPENSES
|
January 1,
2011
|
January 2,
2010
|
|||||||
Compensation and benefits
|
$ | 24,920 | $ | 17,159 | ||||
Utilities and sewage
|
5,106 | 3,781 | ||||||
Accrued income, ad valorem, and franchise taxes
|
2,374 | 3,233 | ||||||
Reserve for self insurance, litigation, environmental
and tax matters (Note 17)
|
9,042 | 5,087 | ||||||
Medical claims liability
|
4,193 | 4,230 | ||||||
Griffin Transaction step up in basis (Note 2) | 13,639 | – | ||||||
Other accrued expense
|
22,424 | 14,032 | ||||||
$ | 81,698 | $ | 47,522 |
NOTE 8.
|
LEASES
|
Period Ending Fiscal
|
Operating Leases
|
|||
2011
|
$ | 14,355 | ||
2012
|
10,745 | |||
2013
|
7,951 | |||
2014
|
5,377 | |||
2015
|
3,533 | |||
Thereafter
|
16,845 | |||
Total
|
$ | 58,806 |
NOTE 9.
|
DEBT
|
|
Credit Agreement
|
Year
|
Percentage
|
|
2014
|
104.250%
|
|
2015
|
102.125%
|
|
2016 and thereafter
|
100.000%
|
January 1,
2011
|
January 2,
2010
|
|||||||
Senior Notes
|
||||||||
8.5% Senior Notes due 2018
|
$ | 250,000 | $ | – | ||||
Credit Agreement and Former Credit Agreement:
|
||||||||
Term Loan
|
$ | 300,000 | $ | 32,500 | ||||
Revolving Credit Facility:
|
||||||||
Maximum availability
|
$ | 325,000 | $ | 125,000 | ||||
Borrowings outstanding
|
160,000 | – | ||||||
Letters of credit issued
|
23,383 | 15,852 | ||||||
Availability
|
$ | 141,617 | $ | 109,148 |
January 1,
2011
|
January 2,
2010
|
|||||||
Credit Agreement:
|
||||||||
Revolving Credit Facility
|
$ | 160,000 | $ | – | ||||
Term Loan
|
300,000 | 32,500 | ||||||
8.5% Senior Notes due 2018
|
250,000 | – | ||||||
Other Notes
|
39 | 48 | ||||||
710,039 | 32,548 | |||||||
Less Current Maturities
|
3,009 | 5,009 | ||||||
$ | 707,030 | $ | 27,539 |
Contractual
Debt Payment
|
||||
2011
|
$ | 3,009 | ||
2012
|
2,260 | |||
2013
|
3,010 | |||
2014
|
3,760 | |||
2015
|
163,000 | |||
thereafter
|
535,000 | |||
$ | 710,039 |
NOTE 10.
|
OTHER NONCURRENT LIABILITIES
|
|
Other noncurrent liabilities consist of the following (in thousands):
|
January 1,
2011
|
January 2,
2010
|
||||||
Accrued pension liability (Note 13)
|
$ | 18,068 | $ | 19,060 | |||
Reserve for self insurance, litigation, environmental and tax
matters (Note 17)
|
26,756 | 14,610 | |||||
Other | 5,936 | 2,473 | |||||
$ | 50,760 | $ | 36,143 |
NOTE 11.
|
INCOME TAXES
|
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Current:
|
||||||||||||
Federal
|
$ | 21,491 | $ | 11,741 | $ | 29,193 | ||||||
State
|
4,356 | 2,702 | 5,152 | |||||||||
Deferred:
|
||||||||||||
Federal and State
|
253 | 10,646 | 1,009 | |||||||||
$ | 26,100 | $ | 25,089 | $ | 35,354 |
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Computed “expected” tax expense
|
$ | 24,620 | $ | 23,408 | $ | 31,471 | ||||||
State income taxes
|
2,679 | 2,491 | 3,436 | |||||||||
Section 199 deduction
|
(2,079 | ) | (744 | ) | (1,257 | ) | ||||||
Non-deductible employee compensation
|
363 | 201 | 993 | |||||||||
Tax credits
|
(80 | ) | (441 | ) | (128 | ) | ||||||
Reversal of reserve for taxes
|
(52 | ) | (212 | ) | (19 | ) | ||||||
Other, net
|
649 | 386 | 858 | |||||||||
$ | 26,100 | $ | 25,089 | $ | 35,354 | |||||||
January 1,
2011
|
January 2,
2010
|
|||||||
Deferred tax assets:
|
||||||||
Net operating loss carryforwards
|
$ | 1,754 | $ | 2,196 | ||||
Loss contingency reserves
|
9,941 | 7,330 | ||||||
Employee benefits
|
3,453 | 3,070 | ||||||
Pension liability
|
12,623 | 14,088 | ||||||
Intangible assets amortization, including taxable goodwill
|
233 | 552 | ||||||
Other
|
6,705 | 4,290 | ||||||
Total gross deferred tax assets
|
34,709 | 31,526 | ||||||
Less valuation allowance
|
(45 | ) | (175 | ) | ||||
Net deferred tax assets
|
34,664 | 31,351 |
Deferred tax liabilities:
|
||||||||
Intangible assets amortization, including taxable goodwill
|
– | – | ||||||
Property, plant and equipment depreciation
|
(23,192 | ) | (21,788 | ) | ||||
Other
|
(10,438 | ) | (8,682 | ) | ||||
Total gross deferred tax liabilities
|
(33,630 | ) | (30,470 | ) | ||||
$ | 1,034 | $ | 881 |
NOTE 12.
|
STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION
|
Number of
shares
|
Weighted-avg.
exercise price
per share
|
Weighted-avg.
remaining
contractual life
|
|||||||
Options outstanding at January 2, 2010
|
810,205 | $3.75 | |||||||
Granted
|
77,722 | 8.21 | |||||||
Exercised
|
(20,905 | ) | 1.68 | ||||||
Forfeited
|
– | N/A | |||||||
Expired
|
– | N/A | |||||||
Options outstanding at January 1, 2011
|
867,022 | $4.20 |
4.5 years
|
||||||
Options exercisable at January 1, 2011
|
790,727 | $3.85 |
4.0 years
|
|
The fair value of each stock option grant under the Company's stock option plan was estimated on the date of grant using the Black Scholes option-pricing model with the following weighted average assumptions and results for fiscal 2010, 2009 and 2008.
|
Weighted Average
|
2010
|
2009
|
2008
|
|||||||
Expected dividend yield
|
0.0% | 0.0% | 0.0% | |||||||
Risk-free interest rate
|
2.73% | 2.31% | 3.24% | |||||||
Expected term
|
5.77 years
|
5.80 years
|
5.80 years
|
|||||||
Expected volatility
|
60.2% | 58.4% | 42.0% | |||||||
Fair value of options granted
|
$4.80 | $1.76 | $6.23 |
Non-Vested
Shares
|
Weighted Average
Grant Date
Fair Value
|
|||||||
Stock awards outstanding January 2, 2010
|
341,261 | $ | 4.02 | |||||
Shares granted
|
881,183 | 8.98 | ||||||
Shares vested
|
(216,336 | ) | 6.89 | |||||
Shares forfeited
|
– | – | ||||||
Stock awards outstanding January 1, 2011
|
1,006,108 | $ | 7.75 |
Restricted
Shares
|
Weighted Average
Grant Date
Fair Value
|
|||||
Stock awards outstanding January 2, 2010
|
79,532
|
$ |
5.03
|
|||
Restricted shares granted
|
14,616
|
8.21
|
||||
Restricted shares where the restriction lapsed
|
–
|
N/A
|
||||
Restricted shares forfeited
|
–
|
N/A
|
||||
Stock awards outstanding January 1, 2011
|
94,148
|
$ |
5.52
|
NOTE 13.
|
EMPLOYEE BENEFIT PLANS
|
January 1,
2011
|
January 2,
2010
|
|||||||
Change in projected benefit obligation:
|
||||||||
Projected benefit obligation at beginning of period
|
$ | 103,159 | $ | 96,539 | ||||
Service cost
|
1,056 | 984 | ||||||
Interest cost
|
5,959 | 5,767 | ||||||
Actuarial loss
|
4,996 | 3,768 | ||||||
Benefits paid
|
(3,794 | ) | (3,914 | ) | ||||
Other
|
– | 15 | ||||||
Projected benefit obligation at end of period
|
111,376 | 103,159 | ||||||
Change in plan assets:
|
||||||||
Fair value of plan assets at beginning of period
|
84,099 | 60,276 | ||||||
Actual return on plan assets
|
11,974 | 12,812 | ||||||
Employer contribution
|
1,029 | 14,925 | ||||||
Benefits paid
|
(3,794 | ) | (3,914 | ) | ||||
Fair value of plan assets at end of period
|
93,308 | 84,099 | ||||||
Funded status
|
(18,068 | ) | (19,060 | ) | ||||
Net amount recognized
|
$ | (18,068 | ) | $ | (19,060 | ) | ||
Amounts recognized in the consolidated balance
sheets consist of:
|
||||||||
Non-current liability
|
$ | (18,068 | ) | $ | (19,060 | ) | ||
Net amount recognized
|
$ | (18,068 | ) | $ | (19,060 | ) | ||
Amounts recognized in accumulated other
comprehensive loss consist of:
|
||||||||
Net actuarial loss
|
$ | 32,146 | $ | 35,866 | ||||
Prior service cost
|
264 | 375 | ||||||
Net amount recognized (a)
|
$ | 32,410 | $ | 36,241 | ||||
January 1,
2011
|
January 2,
2010
|
|||||||
Projected benefit obligation
|
$ | 111,376 | $ | 103,159 | ||||
Accumulated benefit obligation
|
103,946 | 96,082 | ||||||
Fair value of plan assets
|
93,308 | 84,099 |
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Service cost
|
$ | 1,056 | $ | 984 | $ | 1,067 | ||||||
Interest cost
|
5,959 | 5,767 | 5,442 | |||||||||
Expected return on plan assets
|
(6,389 | ) | (4,811 | ) | (6,603 | ) | ||||||
Net amortization and deferral
|
3,242 | 4,321 | 472 | |||||||||
Net pension cost
|
$ | 3,868 | $ | 6,261 | $ | 378 | ||||||
2010
|
2009
|
|||||||
Actuarial gains recognized:
|
||||||||
Reclassification adjustments
|
$ | 1,917 | $ | 2,558 | ||||
Actuarial (loss)/gain recognized during
the period
|
361 | 2,592 | ||||||
Prior service (cost) credit recognized:
|
||||||||
Reclassification adjustments
|
68 | 88 | ||||||
Prior service cost arising during the period
|
– | (9 | ) | |||||
$ | 2,346 | $ | 5,229 | |||||
2011
|
||||
Net actuarial loss
|
$ | 2,724 | ||
Prior service cost
|
90 | |||
$ | 2,814 | |||
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Discount rate
|
5.55% | 5.90% | 6.10% | |||||||||
Rate of compensation increase
|
4.16% | 4.08% | 4.08% |
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Discount rate
|
5.90% | 6.10% | 6.00% | |||||||||
Rate of increase in future compensation levels
|
4.08% | 4.08% | 4.10% | |||||||||
Expected long-term rate of return on assets
|
7.85% | 8.10% | 8.10% |
Plan Assets at
|
|||
Asset Category
|
January 1,
2011
|
January 2,
2010
|
|
Equity Securities
|
59.8%
|
61.1%
|
|
Debt Securities
|
40.2%
|
38.9%
|
|
Other
|
–
%
|
–
%
|
|
Total
|
100.0
%
|
100.0
%
|
Fixed Income
|
35% - 45%
|
|
Domestic Equities
|
45% - 55%
|
|
International Equities
|
7% - 13%
|
Quoted Prices in
|
Significant Other
|
Significant
|
||||||||||||||
Active Markets for
|
Observable
|
Unobservable
|
||||||||||||||
Total
|
Identical Assets
|
Inputs
|
Inputs
|
|||||||||||||
(In thousands of dollars)
|
Fair Value
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
||||||||||||
Balances as January 2, 2010
|
||||||||||||||||
Fixed Maturities:
|
||||||||||||||||
Long-term bonds
|
$ | 29,879 | $ | — | $ | 29,879 | $ | — | ||||||||
U.S. Government bonds
|
2,193 | — | 2,193 | — | ||||||||||||
Equity Securities:
|
||||||||||||||||
Common stocks
|
50,527 | — | 50,527 | — | ||||||||||||
Other equity interests
|
1,500 | — | 1,500 | — | ||||||||||||
Totals
|
$ | 84,099 | — | $ | 84,099 | $ | — | |||||||||
Balances as January 1, 2011
|
||||||||||||||||
Fixed Income:
|
||||||||||||||||
Long Term
|
$ | 32,734 | $ | 32,734 | $ | — | $ | — | ||||||||
Short Term
|
4,741 | 4,298 | 443 | — | ||||||||||||
Equity Securities:
|
||||||||||||||||
Domestic equities
|
45,465 | 45,465 | — | — | ||||||||||||
International equities
|
10,368 | 10,368 | — | — | ||||||||||||
Totals
|
$ | 93,308 | $ | 92,865 | $ | 443 | $ | — |
Year Ending
|
Pension Benefits
|
|
2011
|
$4,670
|
|
2012
|
4,760
|
|
2013
|
4,890
|
|
2014
|
5,380
|
|
2015
|
5,720
|
|
Years 2016 – 2020
|
33,340
|
NOTE 14.
|
DERIVATIVES
|
Derivatives Designated
|
Balance Sheet
|
Asset Derivatives Fair Value
|
||||||
as Hedges
|
Location
|
January 1, 2011
|
January 2, 2010
|
|||||
Natural gas swaps
|
Other current assets
|
$ 135
|
$ 228
|
|||||
Total derivatives designated as hedges
|
$ 135
|
$ 228
|
||||||
Derivatives not
Designated as
Hedges
|
||||||||
Natural gas swaps
|
Other current assets
|
$ 212
|
$ –
|
|||||
Heating oil swaps
|
Other current assets
|
81
|
84
|
|||||
Total derivatives not designated as hedges
|
$ 293
|
$ 84
|
||||||
Total asset derivatives
|
$ 428
|
$ 312
|
Derivatives Designated
|
Balance Sheet
|
Liability Derivatives Fair Value
|
||||
as Hedges
|
Location
|
January 1, 2011
|
January 2, 2010
|
|||
Interest rate swaps
|
Other noncurrent liabilities
|
$ –
|
$ 2,473
|
|||
Natural gas swaps
|
Accrued expenses
|
16
|
–
|
|||
Total derivatives designated as hedges
|
$ 16
|
$ 2,473
|
||||
Derivatives not
Designated as
Hedges
|
||||||
Inventory swaps
|
Accrued Expenses
|
$ –
|
$ 3
|
|||
Total derivates not designated as hedges
|
$ –
|
$ 3
|
||||
Total liability derivatives
|
$ 16
|
$ 2,476
|
||||
Derivatives
Designated as
Cash Flow Hedges
|
Gain or (Loss)
Recognized in OCI
on Derivatives
(Effective Portion) (a)
|
Gain or (Loss)
Reclassified From
Accumulated OCI
into Income
(Effective Portion) (b)
|
Gain or (Loss)
Recognized in Income
On Derivatives
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing) (c)
|
|||||||||
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
|||||||
Interest rate swaps
|
$ (723)
|
$ (482)
|
$ (1,551)
|
$ (1,629)
|
$ 41
|
$ (27)
|
||||||
Natural gas swaps
|
(257)
|
(186)
|
(161)
|
(409)
|
(13)
|
5
|
||||||
Total
|
$ (980)
|
$ (668)
|
$ (1,712)
|
$ (2,038)
|
$ 28
|
$ (22)
|
||||||
(a)
|
Amount recognized in accumulated OCI (effective portion) is reported as accumulated other comprehensive loss of approximately $1.0 million and approximately $0.7 million recorded net of taxes of approximately $0.4 million and approximately $0.3 million for the year ended January 1, 2011 and January 2, 2010, respectively.
|
(b)
|
Gains and (losses) reclassified from accumulated OCI into income (effective portion) for interest rate swaps and natural gas swaps is included in interest expense and cost of sales, respectively, in the Company’s consolidated statements of operations.
|
(c)
|
Gains and (losses) recognized in income on derivatives (ineffective portion) for interest rate swaps and natural gas swaps is included in other, net in the Company’s consolidated statements of operations.
|
NOTE 15.
|
FAIR VALUE MEASUREMENT
|
Fair Value Measurements at January 1, 2011 Using
|
|||||||
Quoted Prices in
|
Significant Other
|
Significant
|
|||||
Active Markets for
|
Observable
|
Unobservable
|
|||||
Identical Assets
|
Inputs
|
Inputs
|
|||||
(In thousands of dollars)
|
Total
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||
Derivative assets
|
$ 428
|
$ —
|
$ 428
|
$ —
|
|||
Derivative liabilities
|
(16)
|
—
|
(16)
|
—
|
|||
Total
|
$ 412
|
$ —
|
$ 412
|
$ —
|
NOTE 16.
|
CONCENTRATION OF CREDIT RISK
|
NOTE 17.
|
CONTINGENCIES
|
NOTE 18.
|
BUSINESS SEGMENTS
|
Year Ended
|
||||||||||||
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Rendering:
|
||||||||||||
Trade
|
$ | 536,935 | $ | 458,573 | $ | 585,108 | ||||||
Intersegment
|
15,333 | 16,216 | 50,832 | |||||||||
552,268 | 474,789 | 635,940 | ||||||||||
Restaurant Services:
|
||||||||||||
Trade
|
177,750 | 139,233 | 222,384 | |||||||||
Intersegment
|
28,774 | 13,126 | 10,118 | |||||||||
206,524 | 152,359 | 232,502 | ||||||||||
Bakery:
|
||||||||||||
Trade
|
10,224 | – | – | |||||||||
Intersegment
|
– | – | – | |||||||||
10,224 | – | – | ||||||||||
Eliminations
|
(44,107 | ) | (29,342 | ) | (60,950 | ) | ||||||
Total
|
$ | 724,909 | $ | 597,806 | $ | 807,492 |
Year Ended
|
||||||||||||
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Rendering
|
$ | 100,940 | $ | 94,446 | $ | 101,439 | ||||||
Restaurant Services
|
31,562 | 15,251 | 29,896 | |||||||||
Bakery
|
1,425 | – | – | |||||||||
Corporate Activities
|
(80,947 | ) | (64,802 | ) | (73,755 | ) | ||||||
Interest expense
|
(8,737 | ) | (3,105 | ) | (3,018 | ) | ||||||
Net income
|
$ | 44,243 | $ | 41,790 | $ | 54,562 |
January 1,
2011
|
January 2,
2010
|
|||||||
Rendering
|
$ | 925,249 | $ | 171,005 | ||||
Restaurant Services
|
76,945 | 65,184 | ||||||
Combined Rendering/Restaurant Services
|
100,525 | 100,173 | ||||||
Bakery
|
166,658 | – | ||||||
Corporate Activities
|
112,881 | 89,809 | ||||||
Total
|
$ | 1,382,258 | $ | 426,171 |
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Depreciation and amortization:
|
||||||||||||
Rendering
|
$ | 22,173 | $ | 16,648 | $ | 14,270 | ||||||
Restaurant Services
|
5,786 | 5,284 | 4,310 | |||||||||
Bakery
|
426 | – | – | |||||||||
Corporate Activities
|
3,523 | 3,294 | 5,853 | |||||||||
Total
|
$ | 31,908 | $ | 25,226 | $ | 24,433 | ||||||
Capital expenditures:
|
||||||||||||
Rendering
|
$ | 5,739 | $ | 5,071 | $ | 11,723 | ||||||
Restaurant Services
|
1,791 | 1,211 | 610 | |||||||||
Combined Rendering/Restaurant Services
|
13,901 | 13,384 | 15,776 | |||||||||
Bakery
|
165 | – | – | |||||||||
Corporate Activities
|
3,124 | 3,972 | 2,897 | |||||||||
Total (a)
|
$ | 24,720 | $ | 23,638 | $ | 31,006 |
(a)
|
Excludes the capital assets acquired as part of the acquisition of assets related to the Griffin Transaction and Nebraska Transaction in fiscal 2010 of approximately$243.7 million, the Sanimax Transaction and Boca Transaction in fiscal 2009 of approximately $8.0 million and the API Transaction in fiscal 2008 of approximately $3.4 million.
|
January 1,
2011
|
January 2,
2010
|
January 3,
2009
|
||||||||||
Domestic
|
$ | 653,909 | $ | 526,975 | $ | 675,257 | ||||||
Foreign
|
71,000 | 70,831 | 132,235 | |||||||||
Total
|
$ | 724,909 | $ | 597,806 | $ | 807,492 |
NOTE 19.
|
QUARTERLY FINANCIAL DATA (UNAUDITED AND IN THOUSANDS EXCEPT PER SHARE AMOUNTS):
|
Year Ended January 1, 2011
|
||||||||||||||||
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter (a)
|
|||||||||||||
Net sales
|
$ | 162,782 | $ | 166,210 | $ | 168,685 | $ | 227,232 | ||||||||
Operating income
|
19,583 | 18,914 | 19,318 | 24,698 | ||||||||||||
Income from operations
before income taxes
|
18,139 | 17,577 | 17,704 | 16,923 | ||||||||||||
Net income
|
11,478 | 11,371 | 11,382 | 10,012 | ||||||||||||
Basic earnings per share
|
0.14 | 0.14 | 0.14 | 0.12 | ||||||||||||
Diluted earnings per share
|
0.14 | 0.14 | 0.14 | 0.12 |
Year Ended January 2, 2010
|
||||||||||||||||
First
Quarter
|
Second
Quarter
|
Third
Quarter
|
Fourth
Quarter
|
|||||||||||||
Net sales
|
$ | 133,000 | $ | 155,298 | $ | 159,936 | $ | 149,572 | ||||||||
Operating income
|
8,763 | 20,276 | 25,396 | 16,504 | ||||||||||||
Income from operations
before income taxes
|
7,868 | 19,274 | 24,819 | 14,918 | ||||||||||||
Net income
|
4,810 | 11,699 | 16,073 | 9,208 | ||||||||||||
Basic earnings per share
|
0.06 | 0.14 | 0.20 | 0.11 | ||||||||||||
Diluted earnings per share
|
0.06 | 0.14 | 0.19 | 0.11 |
(a)
|
Included in net income in the fourth quarter of fiscal 2010 are costs incurred as part of the Griffin Transaction for consulting, legal and financing in the amount of approximately $13.7 million.
|
NOTE 20.
|
NEW ACCOUNTING PRONOUNCEMENTS
|
NOTE 21.
|
SUBSEQUENT EVENTS
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|
ITEM 9.A
|
CONTROLS AND PROCEDURES
|
•
|
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
|
•
|
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
|
•
|
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
|
ITEM 9.B
|
OTHER INFORMATION
|
ITEM 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|
ITEM 14.
|
PRINCIPAL ACCOUNTING FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
|
Page
|
||
(a)
|
Documents filed as part of this report:
|
(3)
|
Exhibits.
|
Exhibit No.
|
Document
|
2.1
|
Agreement and Plan of Merger, dated as of November 9, 2010, by and among Darling International Inc., DG Acquisition Corp., Griffin Industries, Inc. and Robert A. Griffin, in his capacity as the Shareholders’ Representative (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed November 9, 2010 and incorporated herein by reference).
|
3.1
|
Restated Certificate of Incorporation of the Company, as amended (filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed May 23, 2002 and incorporated herein by reference).
|
3.2
|
Certificate of Amendment of Restated Certificate of Incorporation of the Company (filed herewith).
|
3.3
|
Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 12, 2008 and incorporated herein by reference).
|
4.1
|
Specimen Common Stock Certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed May 27, 1994 and incorporated herein by reference).
|
4.2
|
Certificate of Designation, Preference and Rights of Series A Preferred Stock (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed May 23, 2002 and incorporated herein by reference).
|
4.3
|
Indenture, dated as of December 17, 2010, by and among Darling International Inc., Darling National LLC, and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
4.4
|
Supplemental Indenture, dated as of December 17, 2010, by and among Griffin Industries, Inc., Craig Protein Division, Inc. and U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
4.5
|
Form of Senior Indenture for Debt Securities of Darling International Inc. (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-3 filed November 17, 2010 and incorporated herein by reference).
|
4.6
|
Form of Subordinated Indenture for Debt Securities of Darling International Inc. (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-3 filed November 17, 2010 and incorporated herein by reference).
|
10.1 *
|
Form of Indemnification Agreement (filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed on May 27, 1994, and incorporated herein by reference).
|
10.2
|
Registration Rights Agreement, dated as of December 17, 2010, by and among Darling International Inc., the guarantors listed in Schedule 1 thereto, and J.P. Morgan Securities LLC,, as representative of the several initial purchasers named therein (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.3
|
Registration Rights Agreement, dated as of December 17, 2010, by and among Darling International Inc. and each of the stockholders named therein (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.4
|
Rollover Agreement, dated as of November 9, 2010, by and among Darling International Inc., certain investors named therein and Robert A. Griffin, in his capacity as the Investors’ Representative (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 9, 2010 and incorporated herein by reference).
|
10.5
|
Credit Agreement, dated as of December 17, 2010, by and among, Darling International Inc., the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of Montreal, as Syndication Agent, and PNC Bank, N.A. and Goldman Sachs Bank USA, as Documentation Agents (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.6
|
Security Agreement, dated as of December 17, 2010, by and among Darling International Inc., its subsidiaries signatory thereto and any other subsidiary who may become a party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.7
|
Guaranty Agreement, dated as of December 17, 2010, by Griffin Industries, Inc., Darling National LLC and Craig Protein Division, Inc (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.8
|
Limited Liability Company Agreement, dated as of January 21, 2011, by and among Diamond Green Diesel Holdings LLC, Darling Green Energy LLC and Diamond Alternative Energy, LLC. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 21, 2011 and incorporated herein by reference).
|
10.9
|
Leases, dated July 1, 1996, between the Company and the City and County of San Francisco (filed pursuant to temporary hardship exemption under cover of Form SE).
|
10.10
|
Lease, dated November 24, 2003, between Darling International Inc. and the Port of Tacoma (filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed March 29, 2004, and incorporated herein by reference).
|
10.11
|
Ground Lease, dated as of December 17, 2010, by and between Martom Properties, LLC and Griffin Industries, Inc. (Butler, Kentucky) (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.12
|
Ground Lease, dated as of December 17, 2010, by and between Martom Properties, LLC and Griffin Industries, Inc. (Henderson, Kentucky) (filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.13 *
|
1994 Employee Flexible Stock Option Plan (filed as Exhibit 2 to the Company’s Revised Definitive Proxy Statement filed on April 20, 2001, and incorporated herein by reference).
|
10.14 *
|
Non-Employee Directors Stock Option Plan (filed as Exhibit 10.13 to the Company’s Registration Statement on Form S-1/A filed on June 5, 2002, and incorporated herein by reference).
|
10.15 *
|
Darling International Inc. 2004 Omnibus Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 11, 2005, and incorporated herein by reference).
|
10.16*
|
Amendment to Darling International Inc. 2004 Omnibus Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 22, 2007 and incorporated herein by reference).
|
10.17 *
|
Darling International Inc. Compensation Committee Long-Term Incentive Program Policy Statement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 22, 2005, and incorporated herein by reference).
|
10.18 *
|
Darling International Inc. Compensation Committee Executive Compensation Program Policy Statement adopted January 15, 2009 (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed January 21, 2009 and incorporated herein by reference).
|
10.19 *
|
Darling International Inc. Compensation Committee Amended and Restated Executive Compensation Program Policy Statement adopted January 8, 2010 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 14, 2010 and incorporated herein by reference).
|
10.20 *
|
Darling International Inc. Compensation Committee 2011 Amended and Restated Executive Compensation Program Policy Statement adopted February 3, 2011 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 9, 2011 and incorporated herein by reference).
|
10.21 *
|
Integration Success Incentive Award Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 15, 2006 and incorporated herein by reference).
|
10.22 *
|
2010 Special Incentive Program (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 17, 2010 and incorporated herein by reference).
|
10.23 *
|
Non-Employee Director Restricted Stock Award Plan (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 15, 2006 and incorporated herein by reference).
|
10.24 *
|
Amendment No. 1 to Non-Employee Director Restricted Stock Award Plan, effective as of January 15, 2009 (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed January 21, 2009 and incorporated herein by reference).
|
10.25 *
|
Amended and Restated Non-Employee Director Restricted Stock Award Plan, (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 28, 2011 and incorporated herein by reference).
|
10.26 *
|
Notice of Amendment to Grants and Awards, dated as of October 10, 2006 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 10, 2006 and incorporated herein by reference).
|
10.27 *
|
Amended and Restated Employment Agreement, dated as of January 1, 2009, between Darling International Inc. and Randall C. Stuewe (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 21, 2009, and incorporated herein by reference).
|
10.28 *
|
Employment Agreement, dated as of December 17, 2010, by and among Darling International Inc., Griffin Industries, Inc. and Robert A. Griffin (filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.29 *
|
Employment Agreement, dated as of December 17, 2010, by and among Darling International Inc., Griffin Industries, Inc. and Martin W. Griffin (filed as Exhibit 10.10 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.30 *
|
Form of Senior Executive Termination Benefits Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 29, 2007 and incorporated herein by reference).
|
10.31 *
|
Form of Addendum to Senior Executive Termination Benefits Agreement (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 12, 2008 and incorporated herein by reference).
|
10.32 *
|
Amended and Restated Senior Executive Termination Benefits Agreement dated, as of January 15, 2009, between Darling International Inc. and John O. Muse (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed January 21, 2009 and incorporated herein by reference).
|
DARLING INTERNATIONAL INC. | |||
By:
|
/s/ Randall C. Stuewe
|
||
Randall C. Stuewe
|
|||
Chairman of the Board and
|
|||
Chief Executive Officer
|
|||
Date:
|
March 2, 2011
|
Signature
|
Title
|
Date
|
||
/s/ Randall C. Stuewe
|
Chairman of the Board and
|
March 2, 2011
|
||
Randall C. Stuewe
|
Chief Executive Officer
|
|||
(Principal Executive Officer)
|
||||
/s/ John O. Muse
|
Executive Vice President –
|
March 2, 2011
|
||
John O. Muse
|
Finance and Administration
|
|||
(Principal Financial and Accounting Officer)
|
||||
/s/ O. Thomas Albrecht
|
Director
|
March 2, 2011
|
||
O. Thomas Albrecht
|
||||
/s/ C. Dean Carlson
|
Director
|
March 2, 2011
|
||
C. Dean Carlson
|
||||
/s/ Marlyn Jorgensen
|
Director
|
March 2, 2011
|
||
Marlyn Jorgensen
|
||||
/s/ Charles Macaluso
|
Director
|
March 2, 2011
|
||
Charles Macaluso
|
||||
/s/ John D. March
|
Director
|
March 2, 2011
|
||
John D. March
|
||||
/s/ Michael Urbut
|
Director
|
March 2, 2011
|
||
Michael Urbut
|
||||
2.1
|
Agreement and Plan of Merger, dated as of November 9, 2010, by and among Darling International Inc., DG Acquisition Corp., Griffin Industries, Inc. and Robert A. Griffin, in his capacity as the Shareholders’ Representative (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K filed November 9, 2010 and incorporated herein by reference).
|
3.1
|
Restated Certificate of Incorporation of the Company, as amended (filed as Exhibit 3.1 to the Company’s Registration Statement on Form S-1 filed May 23, 2002 and incorporated herein by reference).
|
3.2
|
Certificate of Amendment of Restated Certificate of Incorporation of the Company (filed herewith).
|
3.3
|
Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed December 12, 2008 and incorporated herein by reference).
|
4.1
|
Specimen Common Stock Certificate (filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-1 filed May 27, 1994 and incorporated herein by reference).
|
4.2
|
Certificate of Designation, Preference and Rights of Series A Preferred Stock (filed as Exhibit 4.2 to the Company’s Registration Statement on Form S-1 filed May 23, 2002 and incorporated herein by reference).
|
4.3
|
Indenture, dated as of December 17, 2010, by and among Darling International Inc., Darling National LLC, and U.S. Bank National Association, as trustee (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
4.4
|
Supplemental Indenture, dated as of December 17, 2010, by and among Griffin Industries, Inc., Craig Protein Division, Inc. and U.S. Bank National Association, as trustee (filed as Exhibit 4.2 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
4.5
|
Form of Senior Indenture for Debt Securities of Darling International Inc. (filed as Exhibit 4.3 to the Company’s Registration Statement on Form S-3 filed November 17, 2010 and incorporated herein by reference).
|
4.6
|
Form of Subordinated Indenture for Debt Securities of Darling International Inc. (filed as Exhibit 4.4 to the Company’s Registration Statement on Form S-3 filed November 17, 2010 and incorporated herein by reference).
|
10.1 *
|
Form of Indemnification Agreement (filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-1 filed on May 27, 1994, and incorporated herein by reference).
|
10.2
|
Registration Rights Agreement, dated as of December 17, 2010, by and among Darling International Inc., the guarantors listed in Schedule 1 thereto, and J.P. Morgan Securities LLC,, as representative of the several initial purchasers named therein (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.3
|
Registration Rights Agreement, dated as of December 17, 2010, by and among Darling International Inc. and each of the stockholders named therein (filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.4
|
Rollover Agreement, dated as of November 9, 2010, by and among Darling International Inc., certain investors named therein and Robert A. Griffin, in his capacity as the Investors’ Representative (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 9, 2010 and incorporated herein by reference).
|
10.5
|
Credit Agreement, dated as of December 17, 2010, by and among, Darling International Inc., the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bank of Montreal, as Syndication Agent, and PNC Bank, N.A. and Goldman Sachs Bank USA, as Documentation Agents (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.6
|
Security Agreement, dated as of December 17, 2010, by and among Darling International Inc., its subsidiaries signatory thereto and any other subsidiary who may become a party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.7
|
Guaranty Agreement, dated as of December 17, 2010, by Griffin Industries, Inc., Darling National LLC and Craig Protein Division, Inc (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.8
|
Limited Liability Company Agreement, dated as of January 21, 2011, by and among Diamond Green Diesel Holdings LLC, Darling Green Energy LLC and Diamond Alternative Energy, LLC. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 21, 2011 and incorporated herein by reference).
|
10.9
|
Leases, dated July 1, 1996, between the Company and the City and County of San Francisco (filed pursuant to temporary hardship exemption under cover of Form SE).
|
10.10
|
Lease, dated November 24, 2003, between Darling International Inc. and the Port of Tacoma (filed as Exhibit 10.3 to the Company’s Annual Report on Form 10-K filed March 29, 2004, and incorporated herein by reference).
|
10.11
|
Ground Lease, dated as of December 17, 2010, by and between Martom Properties, LLC and Griffin Industries, Inc. (Butler, Kentucky) (filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.12
|
Ground Lease, dated as of December 17, 2010, by and between Martom Properties, LLC and Griffin Industries, Inc. (Henderson, Kentucky) (filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.13 *
|
1994 Employee Flexible Stock Option Plan (filed as Exhibit 2 to the Company’s Revised Definitive Proxy Statement filed on April 20, 2001, and incorporated herein by reference).
|
10.14 *
|
Non-Employee Directors Stock Option Plan (filed as Exhibit 10.13 to the Company’s Registration Statement on Form S-1/A filed on June 5, 2002, and incorporated herein by reference).
|
10.15 *
|
Darling International Inc. 2004 Omnibus Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 11, 2005, and incorporated herein by reference).
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10.16*
|
Amendment to Darling International Inc. 2004 Omnibus Incentive Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 22, 2007 and incorporated herein by reference).
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10.17 *
|
Darling International Inc. Compensation Committee Long-Term Incentive Program Policy Statement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 22, 2005, and incorporated herein by reference).
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10.18 *
|
Darling International Inc. Compensation Committee Executive Compensation Program Policy Statement adopted January 15, 2009 (filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K filed January 21, 2009 and incorporated herein by reference).
|
10.19 *
|
Darling International Inc. Compensation Committee Amended and Restated Executive Compensation Program Policy Statement adopted January 8, 2010 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 14, 2010 and incorporated herein by reference).
|
10.20 *
|
Darling International Inc. Compensation Committee 2011 Amended and Restated Executive Compensation Program Policy Statement adopted February 3, 2011 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 9, 2011 and incorporated herein by reference).
|
10.21 *
|
Integration Success Incentive Award Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 15, 2006 and incorporated herein by reference).
|
10.22 *
|
2010 Special Incentive Program (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 17, 2010 and incorporated herein by reference).
|
10.23 *
|
Non-Employee Director Restricted Stock Award Plan (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed March 15, 2006 and incorporated herein by reference).
|
10.24 *
|
Amendment No. 1 to Non-Employee Director Restricted Stock Award Plan, effective as of January 15, 2009 (filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K filed January 21, 2009 and incorporated herein by reference).
|
10.25 *
|
Amended and Restated Non-Employee Director Restricted Stock Award Plan (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed February 28, 2011 and incorporated herein by reference).
|
10.26 *
|
Notice of Amendment to Grants and Awards, dated as of October 10, 2006 (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 10, 2006 and incorporated herein by reference).
|
10.27 *
|
Amended and Restated Employment Agreement, dated as of January 1, 2009, between Darling International Inc. and Randall C. Stuewe (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 21, 2009, and incorporated herein by reference).
|
10.28 *
|
Employment Agreement, dated as of December 17, 2010, by and among Darling International Inc., Griffin Industries, Inc. and Robert A. Griffin (filed as Exhibit 10.9 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.29 *
|
Employment Agreement, dated as of December 17, 2010, by and among Darling International Inc., Griffin Industries, Inc. and Martin W. Griffin (filed as Exhibit 10.10 to the Company’s Current Report on Form 8-K filed December 20, 2010 and incorporated herein by reference).
|
10.30 *
|
Form of Senior Executive Termination Benefits Agreement (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 29, 2007 and incorporated herein by reference).
|
10.31 *
|
Form of Addendum to Senior Executive Termination Benefits Agreement (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed December 12, 2008 and incorporated herein by reference).
|
10.32 *
|
Amended and Restated Senior Executive Termination Benefits Agreement dated, as of January 15, 2009, between Darling International Inc. and John O. Muse (filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K filed January 21, 2009 and incorporated herein by reference).
|
By:
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/s/ John F. Sterling
|
|
John F. Sterling
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||
Executive Vice President, General
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||
Counsel and Secretary
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||
Name
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Where Organized
|
|
Griffin Industries, Inc.
|
Kentucky
|
|
Craig Protein Division, Inc.
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Georgia
|
|
Darling National LLC
|
Delaware
|
|
Darling Green Energy LLC
|
Delaware
|
1.
|
I have reviewed this annual report on Form 10-K of Darling International Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
Date: March 2, 2011
|
|
/s/ Randall C. Stuewe | |
Randall C. Stuewe
|
|
Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K of Darling International Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
Date: March 2, 2011
|
|
/s/ John O. Muse | |
John O. Muse
|
|
Chief Financial Officer
|
/s/ Randall C. Stuewe | /a/ John O. Muse | |
Randall C. Stuewe
|
John O. Muse
|
|
Chief Executive Officer
|
Chief Financial Officer
|
|
Date: March 2, 2011
|
Date: March 2, 2011
|