Investment in Unconsolidated Subsidiary

9 Months Ended

Oct. 01, 2022

Equity Method Investments and Joint Ventures [Abstract]

Investment in Unconsolidated SubsidiariesOn 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, 2022		December 31, 2021
Assets:
Total current assets	$	933,332	$	686,294
Property, plant and equipment, net	3,292,831		2,710,747
Other assets	46,736		51,514
Total assets	$	4,272,899	$	3,448,555
Liabilities and members' equity:
Total current portion of long term debt	$	115,506	$	165,092
Total other current liabilities	316,345		295,860
Total long term debt	332,794		344,309
Total other long term liabilities	16,973		17,531
Total members' equity	3,491,281		2,625,763
Total liabilities and members' equity	$	4,272,899	$	3,448,555


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Revenues:
Operating revenues	$	1,470,036	$	401,900	$	3,906,614	$	1,405,392
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	1,229,371		281,848		3,311,608		804,939
Depreciation, amortization and accretion expense	31,793		10,991		89,602		34,673
Total costs and expenses	1,261,164		292,839		3,401,210		839,612
Operating income	208,872		109,061		505,404		565,780
Other income	1,215		113		1,926		524
Interest and debt expense, net	(3,259)		(1,272)		(9,534)		(2,376)
Net income	$	206,828	$	107,902	$	497,796	$	563,928

As of October 1, 2022, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $1,749.6 million on the consolidated balance sheet. The Company has recorded equity in net income from the DGD Joint Venture of approximately $103.4 million and $54.0 million for the three months ended October 1, 2022 and October 2, 2021, respectively. The Company has recorded equity in net income from the DGD Joint Venture of approximately $248.9 million and $282.0 million for the nine months ended October 1, 2022 and October 2, 2021, respectively. In December 2019, the blender tax credits were extended for calendar years 2020, 2021 and 2022. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act ( the “IR Act”), as part of the IR Act, the blender tax credits were extended as is until December 31, 2024. After 2024, the Clean Fuels Production Credit (the “CFPC”) becomes effective from 2025 through 2027. Under the CFPC, on-road transportation fuel receives a base credit of $1.00 per gallon of renewable diesel multiplied by the fuel's emission reduction percentage as long as it is produced at a qualifying facility and it meets prevailing wage requirements and apprenticeship requirements. In contrast to the blenders tax credits, the CFPC requires that production must take place in the United States. For the three months ended September 30, 2022 and September 30, 2021, the DGD Joint Venture recorded approximately $190.3 million and $61.7 million of blenders tax credits, respectively. For the nine months ended September 30, 2022 and September 30, 2021, the DGD Joint Venture recorded approximately $544.6 million and $224.6 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 nine months ended October 1, 2022 and October 2, 2021, respectively, the Company made $239.8 million and $25.0 million capital contributions to the DGD Joint Venture. In the nine months ended October 1, 2022 and October 2, 2021, the Company received $90.5 million and no dividend distributions from the DGD Joint Venture, respectively.

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