Investment in Unconsolidated Subsidiary

9 Months Ended

Sep. 28, 2019

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 (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 (the “DGD Facility”), which as a result of the recent expanded capacity is now capable of processing approximately 20,000 barrels per day of input feedstock to produce renewable diesel fuel and certain other co-products, and is 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 DGD Joint Venture’s recently approved expansion project to construct a new, parallel facility located next to the existing facility.

In 2019, the Company continued to evaluate operational developments and the impact of anticipated significant expansion of the DGD Joint Venture. This evaluation was impactful to the consideration of how the Company most appropriately reflects its share of equity income from the DGD Joint Venture. Based on the Company's analysis, it was determined that the DGD Joint Venture has evolved into an integral and integrated part of the Company's ongoing operations. The Company determined this justifies a more meaningful and transparent presentation of equity in net income of the DGD

Joint Venture as a component of the Company's operating income. As a result, the Company has reclassified its equity in net income of the DGD Joint Venture to operating income for all periods presented.

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



(in thousands)	September 30, 2019		December 31, 2018
Assets:
Total current assets	$	193,457	$	186,258
Property, plant and equipment, net	653,463		576,384
Other assets	30,587		24,601
Total assets	$	877,507	$	787,243
Liabilities and members' equity:
Total current portion of long term debt	$	293	$	189
Total other current liabilities	47,373		40,619
Total long term debt	8,859		8,485
Total other long term liabilities	4,409		539
Total members' equity	816,573		737,411
Total liabilities and members' equity	$	877,507	$	787,243



	Three Months Ended						Nine Months Ended
(in thousands)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Revenues:
Operating revenues	$	262,118		$	104,811		$	859,647		$	407,121
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	183,022			103,794			633,109			169,632
Depreciation, amortization and accretion expense	15,242			6,516			38,574			18,890
Total costs and expenses	198,264			110,310			671,683			188,522
Operating income	63,854			(5,499		)	187,964			218,599
Other income	506			556			1,781			1,348
Interest and debt expense, net	(320		)	(318		)	(965		)	(637		)
Net income	$	64,040		$	(5,261	)	$	188,780		$	219,310

As of September 28, 2019 under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $408.3 million on the consolidated balance sheet. The Company has recorded an equity in net income of approximately $32.0 million and an equity in net loss of $2.6 million for the three months ended September 28, 2019 and September 29, 2018, respectively. The Company has recorded an equity in net income of approximately $94.4 million and $109.7 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. In February 2018, the blender tax credits for calendar year 2017 were retroactively reinstated by the U.S. Congress. Fiscal 2019 results do not include any blenders tax credits, while in the first nine months of fiscal 2018, the DGD Joint Venture recorded approximately $160.4 million for the 2017 reinstated blenders tax credits. The DGD Joint Venture recorded the blenders tax credits in the first quarter of fiscal 2018 as a reduction of total costs and expenses in the above table. The biodiesel blenders tax credits have not been reinstated for fiscal 2018 or fiscal 2019. In the nine months ended September 28, 2019, the Company received dividend distributions of approximately $55.4 million from the DGD Joint Venture. In addition, in October 2019, the Company received a dividend distribution of approximately $12.1 million 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.