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Darling International Inc. (DAR), which is engaged in providing the recovery and recycle solutions for the American food industry, reported dismal fourth-quarter 2012 results. Darling posted earnings per share of 24 cents, a penny short of the year-ago earnings. Also, earnings lagged behind the Zacks Consensus Estimate of 30 cents by 20.0%. The decline in earnings was a result of lower input volumes and finished products prices.

Earnings in 2012 came in at $1.11 per share, decreasing 24.5% year over year. This was a result of lower input raw material volumes, lower finished fat selling prices and increased pay-roll expenses.

Revenue: In the fourth quarter of 2012, total sales were $424.9 million, down 1.4% from $430.9 million reported a year ago. Sales also lagged the Zacks Consensus Estimate of $430.0 million, primarily resulting from lower volumes in the Bakery segment as well as lower selling prices for its finished products in the Rendering segment.

In 2012, sales were $1.70 billion, down 5.3% from $1.80 billion in 2011. Lower selling prices of Darling’s finished goods and lower volumes of its input materials pulled down the sales.

Costs/Margins: In the quarter, cost of sales decreased 0.2% to $314.1 million, mainly due to a decrease in the cost of raw materials of the Rendering segment. A decrease in the input raw material volumes also brought about the decline.

SG&A expenses increased 8.5% to $38.9 million as a result of increased pay-roll expenses. Operating margin reached 11.6%, declining 210 basis points from 13.7% in the year-ago comparable quarter.

Balance Sheet/Cash Flow: Exiting the fourth quarter 2012, Darling’s cash and cash equivalents were roughly $103.2 million, against $87.7 million in the preceding quarter. Long-term debt was recorded at $250.1 million, constant as the previous quarter.

For the fourth quarter, cash flow from operations amounted to $51.1 million, compared with $67.0 million in the year-ago comparable quarter. Also, for 2012, Darling’s cash flow from operations was $249.5 million against $240.9 million in 2011.

Outlook: Management expects raw material prices and volumes to rise in the near future. It also expects the 2013 capital expenditure to be roughly $100.0 million. Also, the expected tax rate for 2013 hovers around 38.4%.

The stock currently bears a Zacks Rank #3 (Hold). Other stocks worth a look in the industry are Monsanto Company (MON - Analyst Report), Rentech Nitrogen Partners (RNF - Snapshot Report) and The Scotts Miracle-Gro Company (SMG - Snapshot Report); each carrying a Zacks Rank #2 (Buy).

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