Investment in Unconsolidated Subsidiary

3 Months Ended

Mar. 30, 2024

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)	March 31, 2024		December 31, 2023
Assets:
Total current assets	$	1,814,038	$	1,877,430
Property, plant and equipment, net	3,870,508		3,838,800
Other assets	102,279		89,697
Total assets	$	5,786,825	$	5,805,927
Liabilities and members' equity:
Total current portion of long term debt	$	128,942	$	278,639
Total other current liabilities	302,519		417,918
Total long term debt	729,756		737,097
Total other long term liabilities	17,331		16,996
Total members' equity	4,608,277		4,355,277
Total liabilities and members' equity	$	5,786,825	$	5,805,927


	Three Months Ended
(in thousands)	March 31, 2024		March 31, 2023
Revenues:
Operating revenues	$	1,411,115	$	1,680,050
Expenses:
Total costs and expenses less lower of cost or market inventory valuation adjustment and depreciation, amortization and accretion expense	1,159,356		1,421,404
Lower of cost or market (LCM) inventory valuation adjustment	21,638		—
Depreciation, amortization and accretion expense	65,290		58,607
Total costs and expenses	1,246,284		1,480,011
Operating income	164,831		200,039
Other income	3,220		2,041
Interest and debt expense, net	(11,242)		(13,406)
Income before income tax expense	156,809		188,674
Income tax benefit	(29)		—
Net income	$	156,838	$	188,674

As of March 30, 2024, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $2,307.5 million on the consolidated balance sheet. The Company has recorded equity in net income from the DGD Joint Venture of approximately $78.4 million and $94.3 million for the three months ended March 30, 2024 and April 1, 2023, 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 March 30, 2024 and April 1, 2023, the DGD Joint Venture recorded approximately $331.1 million and $246.0 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 March 30, 2024 and April 1, 2023, respectively, the Company made $90.0 million and $75.0 million capital contributions to the DGD Joint Venture. In the three months ended March 30, 2024 and April 1, 2023, the Company received no dividend distributions from the DGD Joint Venture, respectively. As of March 30, 2024, 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.