Investment in Unconsolidated Subsidiary

3 Months Ended

Mar. 28, 2020

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated Subsidiaries

On January 21, 2011, a wholly-owned subsidiary of Darling entered into a limited liability company agreement with a wholly-owned subsidiary of Valero Energy Corporation (“Valero”) to form Diamond Green Diesel Holdings LLC (the “DGD Joint Venture”). The DGD Joint Venture is owned 50% / 50% with Valero and was formed to design, engineer, construct and operate a renewable diesel plant (the “DGD Facility”), which as a result of the recent expanded capacity is now capable of processing approximately 20,000 barrels per day of input feedstock to produce renewable diesel fuel and certain other co-products, and is located adjacent to Valero's refinery in Norco, Louisiana. The DGD Joint Venture reached mechanical completion and began the production of renewable diesel in late June 2013. Effective May 1, 2019, the limited liability company agreement was amended and restated for the purpose of updating the agreement in certain respects, including to remove certain provisions that were no longer relevant and to add new provisions relating to the DGD Joint Venture’s recently approved expansion project to construct a new, parallel facility located next to the existing facility.

In 2019, the Company continued to evaluate operational developments and the impact of anticipated significant expansion of the DGD Joint Venture. This evaluation was impactful to the consideration of how the Company most appropriately reflects its share of equity income from the DGD Joint Venture. Based on the Company's analysis, it was determined that the DGD Joint Venture has evolved into an integral and integrated part of the Company's ongoing operations. The Company determined this justifies a more meaningful and transparent presentation of equity in net income of the DGD Joint Venture as a component of the Company's operating income. As a result, the Company has reclassified its equity in net income of the DGD Joint Venture to operating income for all periods presented.

Selected financial information for the Company's DGD Joint Venture is as follows (in thousands):



(in thousands)	March 31, 2020		December 31, 2019
Assets:
Total current assets	$	821,602	$	668,026
Property, plant and equipment, net	779,961		713,489
Other assets	30,446		30,710
Total assets	$	1,632,009	$	1,412,225
Liabilities and members' equity:
Total current portion of long term debt	$	496	$	341
Total other current liabilities	70,758		75,802
Total long term debt	8,936		8,742
Total other long term liabilities	4,273		4,422
Total members' equity	1,547,546		1,322,918
Total liabilities and members' equity	$	1,632,009	$	1,412,225



	Three Months Ended
(in thousands)	March 31, 2020			March 31, 2019
Revenues:
Operating revenues	$	358,615		$	302,718
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	151,347			243,063
Depreciation, amortization and accretion expense	11,774			11,418
Total costs and expenses	163,121			254,481
Operating income	195,494			48,237
Other income	461			641
Interest and debt expense, net	(315		)	(324		)
Net income	$	195,640		$	48,554

As of March 28, 2020 under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $773.8 million on the consolidated balance sheet. The Company has recorded an equity in net income of approximately $97.8 million and $24.3 million for the three months ended March 28, 2020 and March 30, 2019, respectively. In December 2019, the blender tax credits for calendar year 2018 and 2019 were retrospectively approved by the U.S. Congress. In addition, blenders tax credits were extended for calendar years 2020, 2021 and 2022. For the three months ended March 31, 2019, the DGD Joint Venture results do not include any blenders tax credits, while in the three months of fiscal 2020, the DGD Joint Venture recorded approximately $80.0 million of blenders tax credits. In the three months ended March 28, 2020, the Company received no dividend distributions from the DGD Joint Venture. In April 2020, the DGD Joint Venture made dividend distributions to each partner in the amount of approximately $125.0 million.

In addition to the DGD Joint Venture, the Company has investments in other unconsolidated subsidiaries that are insignificant to the Company.