Welcome to the Darling International's Q4 and year-end 2007 conference call. Your host for today's call is Randal Stuewe, Chairman and Executive Chief Officer of Darling International and Mr. John Muse, Executive Vice President, Administration and Finance. After speakers' opening remarks, there will be a question and answer session. (Operator Instructions) I would now like to turn the call over to Mr. Brad Phillips, Treasurer of Darling International. Please go ahead, sir.

Good morning, ladies and gentlemen. Thank you for joining us to review Darling's fourth quarter and full fiscal 2007 earnings results. We issued our 2007 fourth quarter and year end earnings results as yesterday afternoon and if you do not have a copy the release can be found on our website at www.darlingii.com. Randal Stuewe, our Chairman and CEO, will begin today's call with an overview of our fourth quarter and full year financial performance and some of the trends that impacted our results. John Muse, Executive Vice President, Finance and Administration, will then provide you with some additional details about our financial results. Randy will conclude the prepared portion of the call with some general remarks about the business, after which time we will be happy to answer your questions. Before we begin, I would like to remind everyone that this conference call contains certain forward-looking statements under the Private Securities Litigation Reform Act of 1995 and are subject to certain risks and uncertainties regarding the business operations of Darling and the industry in which it operates. These statements are identified by words such as may, will, begin, look forward, expect, believe, intend, anticipate, should, estimate, continue and other words referring to events to occur or circumstances to occur in the future. These statements reflect Darling's current view of current events and are based on its assessment of and are subject to a variety of risks and uncertainties beyond its control, including business and economic conditions in its existing markets that can cause actual results to differ materially from those projected in such forward-looking statements. Other risks and uncertainties regarding Darling, its business and the industry in which it operates are referenced from time to time in the company's filings with the Securities and Exchange Commission. Darling is under no obligation to and expressly disclaims any such obligations to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise. With that, I would now like to turn the call over to Randy.

Thanks Brad. Good morning, everybody, and thanks for joining us today. It's my pleasure to welcome you to our conference call to discuss our recently released financial results for the fourth quarter and for our year ending 2007. We are very pleased to report a solid finish to our fiscal year 2007, as we achieved record net income of $44.5 million or $0.56 per share. We leveraged the momentum we build throughout the year and capped it off with a record fourth quarter EBITDA. Key contributors impacting our successful year were strong raw material volumes, higher finished product prices, the inclusion of full year of operations for national byproducts and the resulting synergies, and continued customer growth in the restaurant services segment. Let me provide you with some high level detail on the fourth quarter. Our earnings improvement was primarily the result of higher finished product prices and stronger than expected raw material volumes. Additionally, we received the needed clarification from the IRS to be able to realize a $1.2 million gain from the alternative fuel mixture tax credit. This resulted from our prior use of fats and grease in our boilers at our plants. However, this increase was partially offset by a $2.2 million charge, related to the company's decision to settle a litigation matter involving a contract dispute. For the year, the company benefited from significantly higher finished product prices as the corresponding commodities remained strong throughout the year. These higher prices are indicative of tightening grain and oil seeds situations driven primarily by a combination of things. First, new global bio-fuel demands, second growing consumption from China and India and third weather related issues that affected various grain producing regions throughout the world. Interestingly enough, our fats prices were relatively flat after the first quarter but the…

Thanks, Randy, and good morning to everyone. Net income for the fourth quarter of 2007 increased to $14.4 million or $0.18 per share as compared to $6.1 million or $0.07 a share for the 2006 comparable period. The $8.3 million increase in net income for the fourth quarter resulted primarily from significant higher prices for finished products and a $1.2 million gain over recording of income received under the Alternative Fuel Mixture Credits, which was partially offset by $2.2 million charge related to the company's settlement of the litigation matter involving a contract dispute. The company also reported net sales of $175.4 million for the quarter as compared to $128.1 million for the fourth quarter of 2006. The majority of the $47 million increase in sales is attributable to higher finished product prices and the purchase of finished products for resale. Operating income for the fourth quarter of 2007 was $25.2 million as compared to $11.4 million for the fourth quarter of '06. At the segment level, rendering generated net sales of $128.4 million for the fourth quarter as compared to $90.5 million in the fourth quarter of '06. The Restaurant Services business generated sales of $47.1 million as compared to $37.7 million in the fourth quarter of '06. Now, turning to the year ended December 29, 2007; Darling reported net income of $45.5 million or $0.56 per share as compared to a net income of $5.1 million or $0.07 per share for the 2006 comparable period. The $40.4 million increase resulted primarily from four areas; one, higher finished product prices, second, resulting synergies from the full year integration of national byproducts, increased raw material volume and lastly a $2.2 million gain on completing the sale of a judgment against a service provider in 2007. However, these gains were partially…

Thanks, John. Before we open the call up to your questions, I would like to close with a few additional comments. Let me reiterate that we are all proud of our results for 2007. It was a very good year for Darling. As I mentioned earlier in the call the company recorded record earnings, coupled with our fourth quarter earnings per share of $0.18. We hope to continue to be build on the significant momentum we have created to carry us into 2008. We were able to reduce our debt by more than $39 million and as a result, we are proud to post a strong balance sheet that will better position us to grow or invest in new business opportunities. And finally, we are led by a strong management team and a group of dedicated employees that are committed to maximizing opportunities and delivering shareholder value. We are now ready to take your questions, so I'll turn it over to the operator to facilitate the Q&A session.

(Operator Instructions) Our first question comes from Tyson Bauer from Wealth Monitors International. Please proceed with your question.

Good morning gentlemen, another great quarter and a great year.

Thanks, Tyson.

A couple quick questions as we look forward in doing modeling. Can you give us a sense of what your volume outlooks are for rendering and restaurants and on top of that, we had a recent announcement of another mad cow situation in Canada, which in 2003 when it caused hysteria. Now it doesn't even make the newspaper, basically until you get to page seven. Are we at a state now that that the procedures are in place and you don't have that public fear anymore of that disease?

Well, let's deal with the questions kind of in order here. Volume wise Tyson, we saw the cattle slaughter for fourth quarter was a little bit less than third, which is pretty typical with the seasonality, but yet, year-over-year 2007 was up about 10,000 head a week. But still, about 18,000 head a week behind where we were pre-Mad Cow. There's been no secret that the cattle production economics have been somewhat challenged out there, at least on the slaughter side for some period of time here. That said we've seen pretty good volumes stronger than we would have thought given the economics that were at least apparent to us. But the majority of our growth has come out of both the mortality side and the hog slaughter side in the Mid West. The hog slaughter side as you can imagine has just been running extremely full. I guess what I can comment on is we have seen that trend continue on into early 2008. I think everybody has read the same articles I have, possibly some of the production and the placements team backed off both on the cattle side and the hog side being challenged by higher grain cost. I think it would be inevitable not to say that we are going to see animal economics challenged here as we go in with these higher grain prices into late summer next fall here, until the consumer price side can react to the higher input cost that are ahead of us. On the Mad Cow side, I mean the Canadian thing, I guess I would characterize as a non-event. But at the end of the day it's still not the kind of news that we like out there such that our regulators have to pay attention to possibly what's happening north of the border here. But, you are right in your assessment that it doesn't get much attention here anymore.

Couple of real quick ones. How much of a lag affect is there between the spot price increases that we are seeing almost on a daily basis as opposed to a recognition on your financial sheets. Is that about couple of weeks, thirty days, what it's that about, John?

It depends, Tyson on whether you are forward sold or selling spot here. I think as we watch the Board run up on soybean oil and then soybean meal. We have been pretty well sold in the sense of just managing our logistics our team has done a really nice job, but how does that translate through the financial somewhere in that three to six week range when it starts to translate through.

Okay and last topic. Are you seeing an increase exports to Europe given the currency imbalance and they are much more developed on the bio-fuels than we are at this point? And then lastly have you had any benefit of seeing meat and bone meal or blood meal being used in a wider application for fertilizer?

I will start with the last question. The answer is no, I haven't been exposed to that yet it doesn't mean it's not happening. The export side is, yeah, we are seeing it pick up for a whole number of reasons and it's been very, very beneficial to our export oriented locations again we are seeing the Pacific Rim countries import meat and bone meal start to re-import the fats and oils. We are seeing Europe pick up yellow grease to be blended into their bio-fuels industry, we are seeing South America and Mexico import heavily on the yellow grease side. What you seeing right now with the higher global commodity prices and to a degree somewhat offset by the weak dollar is some creativity and you are starting to find yourself back in customers and formulas and locations that we haven't seen for a long time. So, it's very encouraging from our side.

Fair enough. Thanks a lot gentleman.

Thank you. Our next question comes from Farha Aslam from Stephens Inc. Please proceed with your question.

Good morning.

Good morning Farha.

Congratulations on a great quarter. Could you provide us some detail on what that McDonalds announcement means for your business? Are you doing business with McDonalds currently? And kind of what's that translate into for volumes?

I'll take a stab at it. I can only comment very limited on that because of confidentiality there. Darling was a supplier and is a supplier or a vendor to the McDonald system. We are a significant supplier to the system, but we were to a degree an unknown supplier or vendor in the process today. We work through a two-year process with the McDonald's team in order to gain vendor certification or vendor acceptance to be now, if you were certified or proved to acknowledge as a provider of service and recognized provider of service to their entire system. And that gains you more visibility to the system. And to us it's an entry ticket to the dance and will allow us to develop the rest of the locations that we don't have today. So, it's a very positive and a very difficult meal ticket to earn, and one that I'm very proud of our team for being persistent and finally getting there.

That's great. Could you share with us what you anticipate for that restaurant services division volume? Do you anticipate a slowdown in food service?

We have seen a small volume reduction in our restaurant services side. As far as is grease pick ups part of is seasonality in the fourth quarter that you see, the post holiday go on diet plan here a little bit. I think part of it is a slowdown in your casual dining events that are happening there. I also think that entire oil prices or fresh oil prices are encouraging more efficient use of the products and you've seen here, it's a significant cost for most of these restaurants and I think there will be a little more vigilant in their uses now, but I think you're looking at the same numbers we're looking at. We would tell you that the majority of your veg oil that's generated and the used cooking oil side comes from the deep fat frying applications, which tend to come out of the more QSR side, and we've not seen a slowdown there because if the dollar is going to go somewhere, it will probably move out of casual dining down to QSR. So we have seen a little bit of slowdown. We're trying to figure out if it's really seasonality or whether there is a true economic trend happening underneath it.

Thank you. And then, you said that your pricing was trailing the underlying commodities, the grains and the veg oils. Is there a natural trend we should look for? Is there sort of a six-month lag historically that we can follow?

But, there's a couple things developing here that are kind of interesting, and historically the animal fats have been a discount to the veg oil, the soybean oil complex by typically $0.03 to $0.11 a pound. And it was kind of, you always sold animal fats at $0.03 under, and if they got to $0.11 under, you tried not to sell it or store it or buy it. We've now seen animal fats move up to around $0.40 -- $0.38 to $0.40, but you've also seen soybean oil move up to $0.65 to $0.66, and so the spread has widened out, substantially more than historically we've ever seen. And I think that the learning's from this are twofold. One, the food oils, which the biofuels industry continues to try to pull from, they're taking refined or semi-refined soybean oil, canola oil into those processes. They're competing with a very in-elastic consumer, the consumer being, wanting food and they'll pay whatever it takes to keep the food from going into the fuel side. Where animal fats traditionally and proven by the kind of the economic lay out that I just gave you pretty much can only go into animal feeds for the lower quality ones, the higher quality ones can end up somewhat in the chemical industry, but there is less of those than there are that end up into the animal feeds. So we are seeing a real elasticity lag here as what we are showing is that very few if any animal fats, are going into the biofuel arena today and that's what's even more encouraging to us, because it allows us to make the argument that we are really not in that food-versus-fuel debate with our animal fat feed stocks supply.

Thank you very much.

Thanks a lot.

Thank you. Our next question comes from Dan Mannes from Avondale Partners. Please proceed with your question.

Good morning, everybody.

Good morning, Dan.

A couple of questions for you, I was actually going to ask you same thing on the yellow grease front where it looked at Restaurant Services was a bit weaker. So when you look at that, you said maybe some seasonality, maybe a bit of a weakness in the casual dining, but the QSRs are still providing some more unit volumes or is that decreasing as well?

I don't know that we have got it down to that level of detail. I mean if it is clear that our volumes offer a few percentage points there to be attributed to one segment or another, I don't have that detail. But it's more of a gut feel for you than anything, Dan.

No problem. And I mean I understood. And then moving on actually to the biofuel demand, you were mentioning obviously most of your fats are still going to the traditional buyers whether it be all your chemical or feed fats. But are you seeing an uptake in fat demand from the biofuel guys who are trying to blend it and just try to deflate the incredibly high cost of soybean oil today.

You know I wouldn't say this is an absolute, but I could probably count the number of loads that have gone to bio-fuels from the Darlings system on one hand.

Okay. I mean it's interesting and we see well over $100 or maybe 200 million down of bio-diesel capacity to coming online, relatively assuming that is reputed to use primarily animal fats. I mean have you seen pre-buying for those or I guess wading into your prior comment the answer is probably not?

We continue to get the calls, but the technology that and when we described our feed stock quality is -- we haven't sold them anything and everybody continues to call but nothing is traded.

Okay. And actually I guess correlated to that is, when talk about your own opportunity in the bio-fuel business and given the technology that exist for dealing with really low quality of fat. I guess you sort of highlighted may be the opportunity to move more towards the renewable diesel type product. And obviously you mentioned in our opening comments that you are concern partnering. I guess what I am asking for is how do you view the maturity of that technology and the opportunity in renewable diesel given maybe its nascence currently?

We spend a lot of time looking at both methyl ester and renewable diesel we made of secrets to that. We are confident that we can make either product, the question becomes as everyone knows the bio-diesel or methyl ester made from animal fats, there is always been discussion of the cold-flow issues, meaning what happens when the temperate drops does that turn to gel over peanut butter or clog our filters and the answer is yes, and most of your distribution channels out there today in the sense of your domestic distributors of petroleum products really are not keen on handling high cold-flow temperate type of products. So, from a demand perspective it would say than to us than the renewable diesel process is more fungible in a sense that you can control both cetane cold-flow and it could become pipeline ready take out some of those distribution costs. What we are seeing right now, is, and what's been symbolic of our patience is that with the Energy Security Act that was passed in late last fall, there was the establishment of the renewal fuel standard, portfolio standard or however you want to refer to it. It says by 2009, the petroleum industry is going to have to acquire either biodiesel or advance bio-fuels, which renewable diesel qualifies under both, in order to put into their system. And what I guess, we would reference is that the petroleum companies are now starting to wake up to that fact and thus we may get that technology endorsement that will boost into the renewable diesel area that would continue to bring that technology on through the full commercialization. That technology is commercialized in Porvo, Finland with the Neste group. There is a plant in Finland that getting ready to, not in Finland, in Italy to start up. So, I mean the technology, we would view the technology risk on renewable diesel to be there, but to be fairly low, because it's a very well-known process in the petroleum industry.

Okay. And then the last thing just on the tax credit front, I mean how much of a [deeding] items do you view that to be or do you view the support to be [broad] that it will move ahead regardless or I guess the last point of it is the RFS enough of an incentive that even if you didn't have the tax credit extension, this could still work for you?

Well, the kind of nirvana would be having both the mandates and the subsidy. You saw that the House passed their new bill last night, or yesterday, that once again will move over to the Senate, extending both the subsidies and taking out the co-processing version that the likelihood of that moving forward in the Senate is anybody's guess because of the pay-go rules that are there. So then you fall back and say will the tax title work be put into the farm bill, and yeah, it's hidden in there too. So I think at the end of the day we're going to get the extensions. Whether it happens in a week, a month, or six months, I think at the end of the day the odds are favoring that you're going to continue to put the subsidies in place.

Great. Well, congratulations on a good quarter and look forward to seeing what you guys decide to do.

Thanks, Dan.

Thank you. And our next question comes from Dean Haskell from Morgan Joseph. Please proceed with your question.

Thank you very much. Again congratulations, gentlemen on a great quarter, great year.

Thanks, Dean.

A couple of questions. The fuel credit of $1.2 million that was booked in the fourth quarter, was that in the full year of '07? What was the time span that that credit accumulated?

The credit started in October of '05, but the bulk of the credit was achieved in '07 and we had very little because of where fat prices had moved up in the fourth quarter of '07, most of that credit related to grease that was burned during the first, second, and third quarter of '07.

Okay. Would you expect a similar credit of about $1 million, give or take, to be booked in '08?

Dean if you look at where fat prices are today, even though natural gas continues to move up, you would not be burning fats even with the credits.

Yeah, I mean the simple math --

It is not economical.

Dean we still got I think around $700,000 out on the balance sheet that we are still waiting to bring back with yellow grease at $0.30 FOB. The plants here you take 60% of that to $18 at the burner tip minus the $4 rebate, we are paying quite a bit less than $14 at the burner tip for natural gas right now. So I think and unless you are predicting which are holding towards the natural gas is going to go up radically we are probably not going to be burning much fat in '08.

I'm long on that gas, but not to the double digit range. No thank you. Don't hold me to that. Second question for John. Now that you've got some debt paid down, what did you feel is your optimal debt capital structure?

We have always said that we did like to go much more than 2.5 to 2.7 to 1 debt-to-EBITDA. So, I think we would continue to look at that. Obviously, what we are looking at today is a 0.5 to 1 debt-to-EBITDA. So, as Randy had said in his remarks, we have a strong balance sheet now. We have a revolver where we will have over $100 million credit availability to us and we are positioned well to evaluate wherever we want to go from an investment standpoint or what we want to do with as we go forward.

Okay, John and the 2008 R&M CapEx and then total CapEx expected for the year.

Well, in '07 we came out with $15.6 million CapEx. We do have some projects that we are looking at we would expect that to be a little higher but not anything substantial in '08.

So, CapEx total and CapEx R&M is going to be about the same give or take $17 million.

In the $15 million to $20 million range would be a good range I believe.

Okay. And then one last question for Randy. We have this nice run up in commodity prices, we expect that to continue probably through into '09 and possibly even into '010. In your history in the past what has cycle peak operating margins been and what would you suspect that to fall out on this cycle?

What kind of profit margins?

Yeah, operating margins.

I am not sure I know how to answer that Dean.

Well, somewhere between zero and a 100. Okay Randy, no I appreciate I am putting you on a spot and you guys --

You just put me on the spot, and I'm not going to be in the business of prognosticating commodities much past next week let alone to '09 and '010.

Okay. Again great quarter and the margins were great. We look forward to a great '08 and great '09. Thanks.

Thanks.

Thank you. And our next question comes from William Bremer from Maxim Group. Please proceed with your question.

Gentlemen congratulations on a great quarter, great year. It seems as though my colleagues have done a great job of pin pointing the company and analyzing it. I am going to take it a little bit broader on that. I know the company doesn't currently hedge against commodity prices. Just wondering if may be with the ramp that we've had and the continued ramp that we are seeing is that possibly in the cards going forward to possibly reopen and to reanalyze that? That's the first one and second on a broader base the current recall. I think it's close to 143 million pounds largest in US history. Can you comment on that how that affects the business at all?

Well, I think, this is Randy. I'll take the first one William. Hedging this business using the correlated commodities has been something I've been a student of and studying for a lot of years and given my background and growing up in agriculture. This year would have been a classic example to never have done that. And the reason is, when like I said, traditional the fats and oils have traded 3 to 11 under bean oil and had we been comfortable locking in what we would have considered to be a reasonable earnings stream under this business you would have probably sold soybean oil somewhere around $0.38 to $0.40. And when you were trading slightly under that earlier this summer, and now all of a sudden you've seen the spread widen up to the point where the correlation of the food oils and food commodities versus our inputs has never been in this zone at least to my knowledge. And so, hedging this thing would be -- if you're blowing at that and you could probably get it right, but I think it's just too risky right now, given to where the relationships are with our products. We've seen meat and bone meal go from $50 a ton under soybean meal to $30 to $40 a ton over. So, the basis or the differentials on these things are well beyond speculative in nature. The second answer to you is that the Westland/Hallmark recall there is no hiding on our behalf here. The LA Times did have our truck on the front cover of the newspaper. And yes, that was a customer of ours in our California operations. The recall is something that is still underway. I can tell you that from my knowledge of it and from the people around me telling me what's going on there has been very little product come back at least into the channels that we are aware of at this time. That's about all I can comment on that.

Alright, guys. Thank you so much.

Thank you. (Operator Instructions) And our next question comes from Bill Baldwin from Baldwin Anthony Securities. Please proceed with your question.

Good morning, gentlemen. My questions have actually already been asked and so I'll just go back into the queue here and listen.

Thank you, sir. And at this time there appears to be no more questions. Mr. Phillips, I'll turn the call back over to you for closing remarks.

Okay. Thanks, everybody. I appreciate your joining us today and we appreciate your continued interest in Darling and we look forward to updating you on our progress here when we release our first quarter earnings this May. So have a good one.