Investment in Unconsolidated Subsidiary

9 Months Ended

Sep. 26, 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”) 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 and is currently capable of processing approximately 20,000 barrels per day of input feedstock to produce renewable diesel fuel and certain other co-products. 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 ongoing 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.

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


(in thousands)	September 30, 2020		December 31, 2019
Assets:
Total current assets	$	465,669	$	668,026
Property, plant and equipment, net	1,039,802		713,489
Other assets	32,813		30,710
Total assets	$	1,538,284	$	1,412,225
Liabilities and members' equity:
Total current portion of long term debt	$	506	$	341
Total other current liabilities	98,618		75,802
Total long term debt	8,839		8,742
Total other long term liabilities	3,875		4,422
Total members' equity	1,426,446		1,322,918
Total liabilities and members' equity	$	1,538,284	$	1,412,225


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Revenues:
Operating revenues	$	346,276	$	262,118	$	1,000,717	$	859,647
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	153,406		183,022		462,364		633,109
Depreciation, amortization and accretion expense	10,772		15,242		33,660		38,574
Total costs and expenses	164,178		198,264		496,024		671,683
Operating income	182,098		63,854		504,693		187,964
Other income	415		506		1,076		1,781
Interest and debt expense, net	(315)		(320)		(947)		(965)
Net income	$	182,198	$	64,040	$	504,822	$	188,780

As of September 26, 2020, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $713.2 million on the consolidated balance sheet. The Company has recorded an equity in net income of approximately $91.1 million and $32.0 million for the three months ended September 26, 2020 and September 28, 2019, respectively. The Company has recorded an equity in net income of approximately $252.4 million and $94.4 million for the nine months ended September 26, 2020 and September 28, 2019, respectively. In December 2019, the blender tax credits for calendar year 2018 and 2019 were retroactively reinstated by the U.S. Congress. In addition, blenders tax credits were extended for calendar years 2020, 2021 and 2022. For the three and nine months ended September 30, 2019, the DGD Joint Venture results do not include any blenders tax credits, while in the three and nine months ended September 30, 2020, the DGD Joint Venture recorded approximately $79.9 million and $232.1 million of blenders tax credits, respectively. In the nine months ended September 26, 2020, the Company received dividend distributions of approximately $205.2 million from the DGD Joint Venture.

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