Investment in Unconsolidated Subsidiary

6 Months Ended

Jul. 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)	June 30, 2023		December 31, 2022
Assets:
Total current assets	$	1,623,715	$	1,304,805
Property, plant and equipment, net	3,828,093		3,866,854
Other assets	88,305		61,665
Total assets	$	5,540,113	$	5,233,324
Liabilities and members' equity:
Total current portion of long term debt	$	102,935	$	217,066
Total other current liabilities	378,589		515,023
Total long term debt	760,700		774,783
Total other long term liabilities	16,568		17,249
Total members' equity	4,281,321		3,709,203
Total liabilities and members' equity	$	5,540,113	$	5,233,324


	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Revenues:
Operating revenues	$	2,246,111	$	1,455,886	$	3,926,161	$	2,436,578
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	1,751,315		1,274,665		3,172,719		2,082,237
Depreciation, amortization and accretion expense	58,315		31,317		116,922		57,809
Total costs and expenses	1,809,630		1,305,982		3,289,641		2,140,046
Operating income	436,481		149,904		636,520		296,532
Other income	2,121		722		4,162		711
Interest and debt expense, net	(12,674)		(3,266)		(26,080)		(6,275)
Net income	$	425,928	$	147,360	$	614,602	$	290,968

As of July 1, 2023, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $2,144.0 million on the consolidated balance sheet. The Company has recorded equity in net income from the DGD Joint Venture of approximately $213.0 million and $73.7 million for the three months ended July 1, 2023 and July 2, 2022, respectively. The Company has recorded equity in net income from the DGD Joint Venture of approximately $307.3 million and $145.5 million for the six months ended July 1, 2023 and July 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 up to $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 June 30, 2023 and June 30, 2022, the DGD Joint Venture recorded approximately $387.5 million and $198.4 million of blenders tax credits, respectively. For the six months ended June 30, 2023 and June 30, 2022, the DGD Joint Venture recorded approximately $633.5 million and $354.2 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 six months ended July 1, 2023 and July 2, 2022, respectively, the Company made $75.0 million and $239.75 million capital contributions to the DGD Joint Venture. In the six months ended July 1, 2023 and July 2, 2022, the Company received $101.4 million and zero dividend distributions from the DGD Joint Venture, respectively. As of July 1, 2023, the DGD Joint Venture has borrowings outstanding of $50.0 million under their unsecured revolving credit facility. On July 18, 2023, the Company received approximately $62.2 million as a dividend distribution 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.