Investment in Unconsolidated Subsidiary

9 Months Ended

Oct. 02, 2021

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 (“DGD” or 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 expansion of the existing facility.

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


(in thousands)	September 30, 2021		December 31, 2020
Assets:
Total current assets	$	365,354	$	383,557
Property, plant and equipment, net	2,192,808		1,238,726
Other assets	44,657		36,082
Total assets	$	2,602,819	$	1,658,365
Liabilities and members' equity:
Total current portion of long term debt	$	106,423	$	517
Total other current liabilities	228,657		99,787
Total long term debt	108,952		8,705
Total other long term liabilities	17,048		3,758
Total members' equity	2,141,739		1,545,598
Total liabilities and members' equity	$	2,602,819	$	1,658,365


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2021		September 30, 2020		September 30, 2021		September 30, 2020
Revenues:
Operating revenues	$	401,900	$	346,276	$	1,405,392	$	1,000,717
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	281,848		153,406		804,939		462,364
Depreciation, amortization and accretion expense	10,991		10,772		34,673		33,660
Total costs and expenses	292,839		164,178		839,612		496,024
Operating income	109,061		182,098		565,780		504,693
Other income	113		415		524		1,076
Interest and debt expense, net	(1,272)		(315)		(2,376)		(947)
Net income	$	107,902	$	182,198	$	563,928	$	504,822

As of October 2, 2021, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $1,072.6 million on the consolidated balance sheet. The Company has recorded equity in net income from the DGD Joint Venture of approximately $54.0 million and $91.1 million for the three months ended October 2, 2021 and September 26, 2020, respectively. The Company has recorded equity in net income from the DGD Joint Venture of approximately $282.0 million and $252.4 million for the nine months ended October 2, 2021 and September 26, 2020, 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 months ended September 30, 2021 and September 30, 2020, the DGD Joint Venture recorded approximately $61.7 million and $79.9 million of blenders tax credits, respectively. For the nine months ended September 30, 2021 and September 30, 2020, the DGD Joint Venture recorded approximately $224.6 million and $232.1 million of blenders tax credits, respectively. The blenders tax credits are recorded as a reduction of cost of sales by the DGD Joint Venture. In the three months ended October 2, 2021, the Company made a $25.0 million capital contribution to the DGD Joint Venture. In the three and nine months ended October 2, 2021, the Company did not receive any dividend distributions from the DGD Joint Venture. Subsequent to October 2, 2021, each partner made a capital contribution of approximately $37.75 million.

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