Investment in Unconsolidated Subsidiary

12 Months Ended

Jan. 02, 2021

INVESTMENT IN UNCONSOLIDATED SUBSIDIARIES

On January 21, 2011 a wholly-owned subsidiary of Darling entered into a limited liability company agreement with Valero to form 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 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 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)	December 31, 2020		December 31, 2019
Assets:
Total current assets	$	383,557	$	668,026
Property, plant and equipment, net	1,238,726		713,489
Other assets	36,082		30,710
Total assets	$	1,658,365	$	1,412,225
Liabilities and members' equity:
Total current portion of long term debt	$	517	$	341
Total other current liabilities	99,787		75,802
Total long term debt	8,705		8,742
Total other long term liabilities	3,758		4,422
Total members' equity	1,545,598		1,322,918
Total liabilities and member's equity	$	1,658,365	$	1,412,225


	Year Ended December 31,
(in thousands)	2020		2019		2018
Revenues:
Operating revenues	$	1,267,477	$	1,217,504	$	677,663
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	592,781		438,672		329,636
Depreciation, amortization and accretion expense	44,882		50,767		29,434
Operating income	629,814		728,065		318,593
Other income	1,636		2,121		1,919
Interest and debt expense, net	(1,260)		(1,282)		(955)
Net income	$	630,190	$	728,904	$	319,557

As of January 2, 2021, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $772.8 million on the consolidated balance sheet and has recorded approximately $315.1 million, $364.5 million and $159.8 million in equity in net income of Diamond Green Diesel for the years ended January 2, 2021, December 28, 2019 and December 29, 2018, respectively. Biodiesel blenders registered with the Internal Revenue Service are currently eligible for a tax incentive in the amount of $1.00 per gallon of renewable

diesel blended with petroleum diesel to produce a mixture containing at least 0.1% diesel fuel. In December 2019, the blenders tax credit was reinstated by the U.S. Congress retroactively for calendar year 2018 and 2019 and extended for calendar years 2020 through 2022. In February 2018, the blenders tax credits for calendar year 2017 were retroactively reinstated by the U.S. Congress. In fiscal 2020, the DGD Joint Venture recorded approximately $287.9 million in blenders tax credits. In fiscal 2019, the DGD Joint Venture recorded approximately $274.7 million for 2019 blenders tax credits and approximately $155.9 million for 2018 blenders tax credits. In fiscal 2018, the DGD Joint Venture recorded approximately $160.4 million for the 2017 reinstated blenders tax credits. In addition, the Company received $205.2 million, $67.5 million and $65.0 million for each of the years ended January 2, 2021, December 28, 2019 and December 29, 2018, in dividend distributions 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.