Darling Ingredients Inc.

Good morning and welcome to the Darling Ingredients, Inc. conference call to discuss the company's second quarter 2020 results. After the speaker's prepared remarks, there will be a question and answer period and instructions to ask a question will be given at that time. Today's call is being recorded. I would now like to turn the call over to Mr. Jim Stark. Please go ahead.

Thank you and welcome to the Darling Ingredients earnings call. Participants on the call this morning are Randall C. Stewie, our chairman and chief executive officer, Brad Phillips, our chief financial officer, and John Bullock, our chief strategy officer. There is a slide presentation available, and you can find that presentation on the investor page under the events and presentations link on our corporate website. During this call, we will be making forward-looking statements, which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in yesterday's press release, in the comments made during this conference call, and in the risk factors section of our Form 10-K, 10-Q, and other reported filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now, I would like to turn the call over to Randy.

Thanks, Jim. Good morning, everybody. Thanks for joining us. When we were hosting our first quarter earnings call in May, we were in the middle of some of the most uncertain times I have witnessed in my career. And I have to say that our global management team pulled together and orchestrated a solid operational and financial performance for the second quarter. The quarter's results would not have been achieved without all our essential workers globally doing their part as well. While COVID-19 continues to be a significant threat, our team has adopted operating procedures and tactics that allow us to service our suppliers, ship our customers, and keep our employees safe. For the second quarter of 2020, combined adjusted EBITDA of $195.2 million was admirable given the volatility in our health, nutrient, fuel, and service markets. Driving this performance were strong results in our feed segment. The $85.2 million in EBITDA was the best quarter we have had in the last three years and was done on flat raw material volumes to a year ago and volumes 4% lower than Q1 of this year. For most of the quarter, we had higher fat and protein prices, which were mostly the results of disruptions in slaughterhouses. Fat and protein prices have pulled off their highs now from the second quarter. The food segment, despite COVID-19 causing disruptions to both consumer purchasing and production capabilities, turned in a good performance, similar to a year ago period when you removed the gain on the sale of assets in 2019. As you saw our announcement in mid-July, we have commissioned the collagen peptide production facility at Ghent, Belgium, and commissioned the expansion project at Angoulême, France. We have seen a pickup in collagen peptide or peptin sales and anticipate a better second half 2020 for this product group. The fuel segment performance was a little better than a year ago, but weaker on a sequential basis, We made the decision to idle our biodiesel plants for the majority of the second quarter in the U.S. and Canada because of the poor margin environment. Our EcoSun and Rendac businesses were stronger in the second quarter to offset the biodiesel plants not running. We have since restarted our biodiesel production as it is marginally profitable to produce biodiesel. DGD achieved $1.91 EBITDA per gallon margin, or $69.1 million, which is Darling's share of DGD EBITDA in the second quarter. The energy market had a significant price decline, affecting the selling price of renewable diesel. Coming into the quarter, we have seen prices improve to where the EBITDA stock margin is averaging between 235 to 240 per gallon. As noted in our release yesterday, the DGD aboard approved and distributed another $80 million in cash distribution to each of the JV partners in accordance with the distribution policy of DGD. For 2020, Darling has received $205 million in distributions from DGD, and I would also like to add that counting the first dollar we received from DGD, Darling has been the recipient of approximately $413 million of cash distributions. For the first half of a pandemic year, Darling has generated $408.5 million of combined adjusted EBITDA for the company, and we believe that we can contribute to produce solid results for the balance of 2020. Also, as we noted yesterday in the release, Darling Ingredients Board has approved the replenishing the company's previously announced share repurchase program back to $200 million of availability and have extended the term of the program. Now, with that, I'd like to hand the call over to Brad to take us through a few financial highlights, and I will follow up with some additional outlook for the rest of the year. Brad?