Employee Benefit Plans

12 Months Ended

Dec. 30, 2023

Employee Benefit Plans [Abstract]

EMPLOYEE BENEFIT PLANS

EMPLOYEE BENEFIT PLANS

The Company has retirement and pension plans covering a substantial number of its domestic and foreign employees.  Most retirement benefits are provided by the Company under separate final-pay noncontributory and contributory defined benefit and defined contribution plans for all salaried and hourly employees (excluding those covered by union-sponsored plans) who meet service and age requirements. Although various defined benefit formulas exist for employees, generally these are based on length of service and earnings patterns during employment. Effective January 1, 2012, the Company’s Board of Directors authorized the Company to proceed with the restructuring of its domestic retirement benefit program to include the closing of Darling’s domestic salaried and hourly defined benefit plans to new participants as well as the freezing of service and wage accruals thereunder effective December 31, 2011 (a curtailment of these plans for financial reporting purposes) and the enhancing of benefits under the Company’s domestic defined contribution plans. The Company-sponsored domestic hourly union plan has not been curtailed; however, several locations of the Company-sponsored domestic hourly union plan have been curtailed as a result of collective bargaining renewals for those sites.

The Company maintains defined contribution plans both domestically and at its foreign entities. The Company’s matching portion and annual employer contributions to the Company’s domestic defined contribution plans for

fiscal 2023, 2022 and 2021 were approximately $17.6 million, $10.1 million and $10.9 million, respectively. The Company’s matching portion and annual employer contributions to the Company’s foreign defined contribution plans for fiscal 2023, 2022 and 2021 were approximately $10.2 million, $8.6 million and $9.6 million, respectively.

The Company recognizes the over-funded or under-funded status of the Company’s defined benefit post-retirement plans as an asset or liability in the Company’s balance sheet, with changes in the funded status recognized through comprehensive income/(loss) in the year in which they occur. The Company uses the month-end date of December 31 as the measurement date for all of the Company’s defined benefit plans, which is the closest month-end to the Company’s fiscal year-end. The following table sets forth the plans’ funded status for the Company’s domestic and foreign defined benefit plans and amounts recognized in the Company’s Consolidated Balance Sheets based on the measurement date (December 31, 2023 and December 31, 2022) (in thousands):

    

	December 30, 2023		December 31, 2022
Change in projected benefit obligation:
Projected benefit obligation at beginning of period	$	167,546	$	225,808
Service cost	2,714		3,149
Interest cost	7,836		5,231
Employee contributions	340		353
Actuarial (gain)/loss	3,662		(52,490)
Benefits paid	(9,962)		(9,919)
Effect of settlement	(1,138)		(476)
Special termination benefit recognized	—		38
Other	1,356		(4,148)
Projected benefit obligation at end of period	172,354		167,546
Change in plan assets:
Fair value of plan assets at beginning of period	147,766		188,718
Actual return on plan assets	13,312		(33,841)
Employer contributions	4,254		5,570
Employee contributions	340		353
Benefits paid	(9,962)		(9,919)
Effect of settlement	(1,138)		(476)
Other	840		(2,639)
Fair value of plan assets at end of period	155,412		147,766
Funded status	(16,942)		(19,780)
Net amount recognized	$	(16,942)	$	(19,780)
Amounts recognized in the consolidated balance    sheets consist of:
Noncurrent assets	$	4,928	$	3,910
Current liability	(1,149)		(1,152)
Noncurrent liability	(20,721)		(22,538)
Net amount recognized	$	(16,942)	$	(19,780)
Amounts recognized in accumulated other    comprehensive loss consist of:
Net actuarial loss	$	19,432	$	22,176
Prior service cost	(501)		101
Net amount recognized  (a)	$	18,931	$	22,277

(a) Amounts do not include deferred taxes of $4.5 million and $5.6 million at December 30, 2023 and December 31, 2022, respectively.

The amounts included in “Other” in the above table reflect the impact of foreign exchange translation for plans in Brazil, Belgium, Canada, France, Germany, Japan, Netherlands, Poland and United Kingdom. The Company’s domestic pension plan benefits comprise approximately 69% and 71% of the projected benefit obligation for fiscal 2023 and fiscal 2022, respectively. Additionally, the Company has made required and tax deductible discretionary

contributions to its domestic pension plans in fiscal 2023 and fiscal 2022 of approximately $0.2 million and $2.0 million, respectively. The Company made required and tax deductible discretionary contributions to its foreign pension plans in fiscal 2023 and fiscal 2022 of approximately $4.1 million and $3.6 million, respectively.

A significant component of the overall increase in the Company’s benefit obligation for the fiscal year ended December 31, 2023 was from the change in the weighted-average discount rates at the measurement dates, which decreased from 4.82% at December 31, 2022 to 4.62% at December 31, 2023.

Information for pension plans with accumulated benefit obligations in excess of plan assets is as follows (in thousands):

	December 30, 2023		December 31, 2022
Projected benefit obligation	$	110,719	$	110,039
Accumulated benefit obligation	108,262		107,807
Fair value of plan assets	88,939		86,441

The Company’s service cost component of net periodic pension cost is included in compensation costs while all components of net periodic pension cost other than the service cost component are included in the line item “Other income/(expense), net” in the Company’s Consolidated Statements of Operations.

Net pension cost includes the following components (in thousands):

	December 30, 2023		December 31, 2022		January 1, 2022
Service cost	$	2,714	$	3,149	$	3,127
Interest cost	7,836		5,231		4,816
Expected return on plan assets	(7,958)		(8,604)		(9,287)
Net amortization and deferral	1,724		2,257		4,253
Settlement	(58)		(22)		210
Special termination benefit recognized	—		38		—
Net pension cost	$	4,258	$	2,049	$	3,119

Weighted average assumptions used to determine benefit obligations were:

	December 30, 2023	December 31, 2022	January 1, 2022
Discount rate	4.62%	4.82%	2.40%
Rate of compensation increase	0.61%	0.55%	0.50%

Weighted average assumptions used to determine net periodic benefit cost for the employee benefit pension plans were:

	December 30, 2023	December 31, 2022	January 1, 2022
Discount rate	4.26%	0.68%	1.32%
Rate of increase in future compensation levels	0.57%	0.51%	0.52%
Expected long-term rate of return on assets	5.72%	4.75%	5.40%

Consideration was made to the long-term time horizon for the (U.S. and Canada's) plans' benefit obligations as well as the related asset class mix in determining the expected long-term rate of return.  Historical returns are also considered, over the long-term time horizon, in determining the expected return.  Considering the overall asset mix of approximately 33% equity and 67% fixed income with equity exposure on a declining trend since the implementation of the glide path for the U.S. plans, the Company believes it is reasonable to expect a long-term rate of return of 6.3% for the (U.S. and Canada's) plans' investments as a whole. The remaining foreign plans'

assets are principally invested under insurance contracts arrangements which have weighted average expected long-term rate of returns of 2.4%.

The investment objectives have been established in conjunction with a comprehensive review of the current and projected financial requirements.  The primary investment objectives are:  1) to have the ability to pay all benefit and expense obligations when due; 2) to maximize investment returns within reasonable and prudent levels of risk in order to minimize contributions; and 3) to maintain flexibility in determining the future level of contributions.

Investment results and changing discount rates are the most critical elements in achieving funding objectives; however, contributions are used as a supplemental source of funding as deemed appropriate.

The investment guidelines are based upon an investment horizon of greater than ten years; therefore, interim fluctuations are viewed with this perspective.  The strategic asset allocation is based on this long-term perspective and the plans' funded status.  However, because the participants’ average age is somewhat older than the typical average plan age, consideration is given to retaining some short-term liquidity.  Analysis of the cash flow projections of the plans indicates that benefit payments will continue to exceed contributions.  The results of a thorough asset-liability study completed during 2012 established a dynamic asset allocation glide path (the “Glide Path”) by which the U.S. plans' asset allocations are determined. The Glide Path designates intervals based on funded status which contain a corresponding allocation to equities/real assets and fixed income. As the U.S. plans' funded status improves, the allocations become more conservative, and the opposite is true when the funded status declines.

Fixed Income	35% - 80%
Equities	20% - 65%

The equity allocation is invested in stocks traded on one of the U.S. stock exchanges or in foreign companies whose stock is traded outside the U.S. and/or companies that conduct the major portion of their business outside the U.S. Securities convertible into such stocks, convertible bonds and preferred stock, may also be purchased.  The portfolio may invest in American Depository Receipts (“ADR”). The majority of the equities are invested in mutual funds that are well-diversified among growth and value stocks, as well as large, mid, and small cap assets. This mix is balanced based on the understanding that large cap stocks are historically less volatile than small cap stocks: however, smaller cap stocks have historically outperformed larger cap stocks. The emerging markets portion of the equity allocation is held below 10% due to greater volatility in the asset class. Risk adjusted returns are the primary driver of allocation choices within these asset classes. The portfolio is well-diversified in terms of companies, industries and countries.

The diversified asset portion of the allocation will invest in securities with a goal to outpace inflation and preserve their value. The securities in this allocation may consist of inflation-indexed bonds, securities of real estate companies, commodity index-linked notes, fixed-income securities, securities of natural resource companies, master limited partnerships, publicly-listed infrastructure companies, and floating rate debt.

With two of the U.S. plans approaching a funded status of around 100% in fiscal 2023, the investment strategy for these two plans was changed from the Glide Path strategy into a liability driven investment strategy.

All investment objectives are expected to be achieved over a market cycle anticipated to be a period of five to seven years.  Reallocations are performed on a monthly basis to retain target allocation ranges. On a quarterly basis the plans' funded status will be recalculated to determine which Glide Path interval allocation is appropriate.

The following table presents fair value measurements for the Company’s defined benefit plans’ assets as categorized using the fair value hierarchy under FASB authoritative guidance (in thousands):

	Total		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(In thousands of dollars)	Fair Value		(Level 1)		(Level 2)		(Level 3)
Balances as of December 31, 2022
Fixed Income:
Long Term	$	23,028	$	23,028	$	—	$	—
Short Term	4,539		4,539		—		—
Equity Securities:
Domestic equities	33,369		33,369		—		—
International equities	23,465		23,465		—		—
Insurance contracts	16,713		—		14,970		1,743
Total categorized in fair value hierarchy	101,114		84,401		14,970		1,743
Other investments measured at NAV	46,652
Totals	$	147,766	$	84,401	$	14,970	$	1,743
Balances as of December 30, 2023
Fixed Income:
Long Term	$	91,921	$	91,921	$	—	$	—
Short Term	3,374		3,374		—		—
Equity Securities:
Domestic equities	22,429		22,429		—		—
International equities	19,011		19,011		—		—
Insurance contracts	18,677		—		16,659		2,018
Total categorized in fair value hierarchy	155,412		136,735		16,659		2,018
Other investments measured at NAV	—
Totals	$	155,412	$	136,735	$	16,659	$	2,018

The majority of the U.S. and Canada plan pension assets are invested in mutual funds; however, some assets are invested in pooled separate accounts (“PSA”) which have similar mutual fund counterparts. PSA accounts are generally used to access lower fund management expenses when compared to their mutual fund counterparts. The mutual funds are generally invested in institutional shares, retirement shares, or A-shares with no loads. The fair value of each mutual fund and PSA is based on the market value of the underlying investments. The U.S. pension plans PSA for fiscal 2022 utilized net asset value (“NAV”) per share (or its equivalent) to measure its investments, as a practical expedient in accordance with ASC Topic 820, Fair Value Measurements and have not been classified in the fair value hierarchy in the above table. The majority of the foreign pension assets are held under insurance contracts where the investment risk for the accumulated benefit obligation rests with the insurer, which the Company has no specific detailed asset information.

The fair value measurement of plan assets using significant unobservable inputs (level 3) changed due to the following:

	Insurance
(in thousands of dollars)	Contracts
Balance as of January 1, 2022	$	2,982
Unrealized gains (losses) relating to instruments still held in the reporting period.	(1,055)
Purchases, sales, and settlements	—
Exchange rate changes	(184)
Balance as of December 31, 2022	1,743
Unrealized gains (losses) relating to instruments still held in the reporting period.	209
Purchases, sales, and settlements	—
Exchange rate changes	66
Balance as of December 30, 2023	$	2,018

Contributions

The Company’s funding policy for employee benefit pension plans is to contribute annually not less than the minimum amount required nor more than the maximum amount that can be deducted for federal income tax purposes.  Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future.

Based on current actuarial estimates, the Company expects to make payments of approximately $4.4 million to meet funding requirements for its domestic and foreign pension plans in fiscal 2024.

Estimated Future Benefit Payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid (in thousands): 

Year Ending	Pension Benefits
2024	$	11,896
2025	11,312
2026	11,512
2027	13,274
2028	13,459
Years 2029 – 2033	64,076

Multiemployer Pension Plans

The Company participates in various multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts in the United States.  These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants.  The FASB issued guidance requiring companies to provide additional disclosures related to individually significant multiemployer pension plans. The Company’s contributions to each individual multiemployer plan represent less than 5% of the total contributions to each such plan. Based on the most currently available information, the Company has determined that, if a withdrawal were to occur, withdrawal liabilities on two of the plans in which the Company currently participates could be material to the Company. The following table provides more detail on these significant multiemployer plans (contributions in thousands):

											Expiration
Pension	EIN Pension	Pension Protection Act Zone Status		FIP/RP Status Pending/	Contributions						Date of Collective Bargaining
Fund	Plan Number	2023	2022	Implemented	2023		2022		2021		Agreement
Western Conference of Teamsters Pension Plan	91-6145047 / 001	Green	Green	No	$	1,443	$	1,516	$	1,294	January 2026 (b)
Central States, Southeast and Southwest Areas Pension Plan (a)	36-6044243 / 001	Green	Red	Yes	714		899		811		April 2026 (c)
All other multiemployer plans					1,476		1,035		1,107
		Total Company Contributions			$	3,633	$	3,450	$	3,212

(a)     As of its most recent public filing, the Central States, Southeast and Southwest Areas Pension Plan (Central States) was in the critical or red zone. In January 2023, however, the Pension Benefit Guaranty Corporation provided $35.8 billion in Special Financial Assistance (SFA) funds to Central States under the American Rescue Plan Act of 2021. Due to this SFA funding, Central States is projected to now have zone status of green.

(b)     The Company has several processing plants that participate in the Western Conference of Teamsters Pension Plan under collective bargaining agreements that require minimum funding contributions. The agreements have expiration dates through January 1, 2026.

(c)     The Company has several processing plants that participate in the Central States, Southeast and Southwest Areas Pension Plan under collective bargaining agreements that require minimum funding contributions. Certain of these agreements have expired and are being negotiated with others having expiration dates through April 2, 2026.

With respect to the other multiemployer pension plans in which the Company participates and which are not individually significant, five plans have certified as critical or red zone, as defined by the Pension Protection Act of 2006. The Company’s portion of contributions to all plans amounted to $3.6 million, $3.5 million and $3.2 million for the years ended December 30, 2023, December 31, 2022 and January 1, 2022, respectively.

The Company has withdrawal liabilities recorded on four U.S. multiemployer plans in which it participated. As of December 30, 2023, the Company has an aggregate accrued liability of approximately $4.7 million representing the present value of scheduled withdrawal liability payments on the remaining multiemployer plans that have given notices of withdrawals. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could require additional funding under the Pension Protection Act of 2006, the amounts could be material.