Investment in Unconsolidated Subsidiary

3 Months Ended

Apr. 01, 2023

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.

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


(in thousands)	March 31, 2023		December 31, 2022
Assets:
Total current assets	$	1,485,372	$	1,304,805
Property, plant and equipment, net	3,840,139		3,866,854
Other assets	80,310		61,665
Total assets	$	5,405,821	$	5,233,324
Liabilities and members' equity:
Total current portion of long term debt	$	217,282	$	217,066
Total other current liabilities	298,893		515,023
Total long term debt	767,802		774,783
Total other long term liabilities	17,103		17,249
Total members' equity	4,104,741		3,709,203
Total liabilities and members' equity	$	5,405,821	$	5,233,324


	Three Months Ended
(in thousands)	March 31, 2023		March 31, 2022
Revenues:
Operating revenues	$	1,680,050	$	980,692
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	1,421,404		807,572
Depreciation, amortization and accretion expense	58,607		26,492
Total costs and expenses	1,480,011		834,064
Operating income	200,039		146,628
Other income/(expense)	2,041		(11)
Interest and debt expense, net	(13,406)		(3,009)
Net income	$	188,674	$	143,608

As of April 1, 2023, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $2,055.7 million on the consolidated balance sheet. The Company has recorded equity in net income from the DGD Joint Venture of approximately $94.3 million and $71.8 million for the three months ended April 1, 2023 and April 2, 2022, 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 March 31, 2023 and March 31, 2022, the DGD Joint Venture recorded approximately $246.0 million and $155.8 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 April 1, 2023 and April 2, 2022, respectively, the Company made $75.0 million and $164.75 million capital contributions to the DGD Joint Venture. In the three months ended April 1, 2023 and April 2, 2022, the Company received no dividend distributions from the DGD Joint Venture, respectively. As of April 1, 2023, the DGD Joint Venture has borrowings outstanding of $100.0 million under their unsecured revolving credit facility.

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