XML 35 R20.htm IDEA: XBRL DOCUMENT
v3.19.3.a.u2

Income Taxes | 12 Months Ended
--- | ---
Dec. 28, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES On December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act” or “U.S. tax reform”) significantly revised the U.S. corporate income tax by, among other things, lowering the statutory corporate rate from 35% to 21%, eliminating certain deductions, limiting interest expense deductions, enhancing the option for claiming accelerated depreciation deductions through 2026, imposing a mandatory one-time tax on accumulated earnings of foreign subsidiaries (also referred to as the toll charge or transition tax), and changing how foreign earnings are subject to U.S. tax. Due to the timing of the Tax Act and the substantial changes it brings, the Securities and Exchange Commission (“SEC”) staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118), which provided registrants a measurement period to report the impact of the new U.S. tax law. During the measurement period, provisional amounts for the effects of the tax law were recorded to the extent a reasonable estimate could be made. The effects of the Tax Act on Darling include two major categories: (i) mandatory deemed repatriation, and (ii) remeasurement of deferred taxes. As described further below, we recorded a provisional net tax benefit of $75.0 million for the impact of the Tax Act in the year ended December 30, 2017. Below is a brief description of the two categories of effects from U.S. tax reform and its impact on the Company: (i) Mandatory deemed repatriation - under the Tax Act, a company’s accumulated foreign earnings are deemed to be repatriated into the U.S. The Company recorded a provisional estimate in fiscal 2017 of federal and state tax related to deemed repatriation in the amount of approximately $26.2 million. However, the Company had an existing U.S. deferred tax liability associated with foreign earnings that were not permanently reinvested outside the U.S. in the amount of $38.3 million. It is now expected that these foreign earnings can be repatriated to the U.S. without any additional U.S. tax above the amount accrued related to the mandatory deemed repatriation. Accordingly, the Company released the entire $38.3 million liability. This $38.3 million release combined with the $26.2 million amount related the mandatory deemed repatriation resulted in the Company recognizing a net provisional tax benefit of $12.1 million for this item. (ii) Remeasurement of deferred taxes - under the Tax Act, the U.S. corporate income tax rate was reduced from 35% to 21%. Accordingly, Darling remeasured the Company's net U.S. deferred tax liability as of December 30, 2017 using the new 21% federal rate, which resulted in a provisional tax benefit in fiscal 2017 of $62.9 million. The Company has significant net operating loss carryforwards to offset the mandatory one-time repatriation; therefore, the Company reduced its deferred tax asset related to its net operating loss carryforwards rather than incurring a toll charge liability for which a cash payment would otherwise be required. Also, in December 2017, Belgium and France enacted tax law changes resulting in a tax benefit of approximately $13.9 million. This amount is comprised of a benefit of approximately $4.4 million from the re-measurement of net deferred tax liabilities due to a reduction in the corporate tax rate in each country. Additionally, Belgium enacted a new provision increasing its participation exemption to 100%, which generally allows tax-free dividends to be received from subsidiaries resulting in a tax benefit of approximately $9.6 million. During fiscal 2018, as information was collected, analyzed and guidance was issued by the U.S. Treasury Department, the IRS and other standard setting bodies in respect to the Tax Act, the Company made adjustments to the provisional amounts recorded in fiscal 2017. An adjustment of approximately $1.7 million of additional tax benefit was made in respect to the impact of the mandatory deemed repatriation, which reduced the effective tax rate by approximately 1.4%. The accounting for the tax effects of the Tax Act has been completed as of December 29, 2018. In December 2018, the Netherlands enacted tax law changes resulting in a tax benefit in fiscal 2018 of approximately $8.4 million due to the re-measurement of net deferred tax liabilities as a result of a phased in reduction of the corporate income tax rate. U.S. and foreign income from operations before income taxes are as follows (in thousands):
| December 28, 2019 |  | December 29, 2018 |  | December 30, 2017
United States | $ | 260,867 |  |  | $ | 82,146 |  |  | $ | 179 |
Foreign | 119,567 |  |  | 35,829 |  |  | 64,021 |
Income from operations before income taxes | $ | 380,434 |  |  | $ | 117,975 |  |  | $ | 64,200 |
Income tax expense attributable to income from continuing operations before income taxes consists of the following (in thousands):
| December 28, 2019 |  | December 29, 2018 |  | December 30, 2017
Current: |  |  |  |  |
Federal | $ | (162 | ) |  | $ | (330 | ) |  | $ | 274 |
State | 341 |  |  | (3 | ) |  | (80 | )
Foreign | 37,117 |  |  | 27,935 |  |  | 31,256 |
Total current | 37,296 |  |  | 27,602 |  |  | 31,450 |
Deferred: |  |  |  |  |  |  |
Federal | 13,465 |  |  | 4,803 |  |  | (76,056 | )
State | 11,804 |  |  | (2,216 | ) |  | 622 |
Foreign | (3,098 | ) |  | (18,158 | ) |  | (25,170 | )
Total deferred | 22,171 |  |  | (15,571 | ) |  | (100,604 | )
| $ | 59,467 |  |  | $ | 12,031 |  |  | $ | (69,154 | )
Income tax expense for the years ended December 28, 2019, December 29, 2018 and December 30, 2017, differed from the amount computed by applying the statutory U.S. federal income tax rate to income from continuing operations before income taxes as a result of the following (in thousands):
| December 28, 2019 |  | December 29, 2018 |  | December 30, 2017
Computed "expected" tax expense | $ | 79,891 |  |  | $ | 24,775 |  |  | $ | 22,470 |
Change in valuation allowance | 38 |  |  | 9,700 |  |  | 1,609 |
Non-deductible compensation expenses | 3,950 |  |  | 2,305 |  |  | 1,898 |
Deferred tax on unremitted foreign earnings | 1,505 |  |  | (31 | ) |  | 641 |
Sub-Part F income | 1,122 |  |  | 3,361 |  |  | 6,284 |
Foreign rate differential | 7,246 |  |  | 658 |  |  | (8,292 | )
Change in uncertain tax positions | 1,736 |  |  | 3,419 |  |  | (1,080 | )
State income taxes, net of federal benefit | 5,686 |  |  | (1,813 | ) |  | (1,012 | )
Biofuel tax incentives | (46,007 | ) |  | (18,489 | ) |  | — |
Change in tax law |  |  |  |  |
One-time U.S. transition tax | — |  |  | (1,654 | ) |  | 26,243 |
Deferred tax effects | 1,352 |  |  | (8,363 | ) |  | (115,169 | )
Other, net | 2,948 |  |  | (1,837 | ) |  | (2,746 | )
| $ | 59,467 |  |  | $ | 12,031 |  |  | $ | (69,154 | )
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 28, 2019 and December 29, 2018 are presented below (in thousands):
| December 28, 2019 |  | December 29, 2018
Deferred tax assets: |  |  |
Loss contingency reserves | $ | 11,193 |  |  | $ | 9,007 |
Employee benefits | 12,236 |  |  | 10,791 |
Pension liability | 13,049 |  |  | 12,882 |
Intangible assets amortization, including taxable goodwill | 1,485 |  |  | 1,566 |
Interest expense carryforwards | 12,361 |  |  | 16,871 |
Tax loss carryforwards | 80,195 |  |  | 103,618 |
Tax credit carryforwards | 5,653 |  |  | 5,108 |
Operating lease liabilities | 33,549 |  |  | — |
Inventory | 5,185 |  |  | 8,583 |
Accrued liabilities and other | 13,677 |  |  | 12,291 |
Total gross deferred tax assets | 188,583 |  |  | 180,717 |
Less valuation allowance | (24,759 | ) |  | (27,942 | )
Net deferred tax assets | 163,824 |  |  | 152,775 |
Deferred tax liabilities: |  |  |
Intangible assets amortization, including taxable goodwill | (157,332 | ) |  | (152,841 | )
Property, plant and equipment depreciation | (144,911 | ) |  | (164,011 | )
Investment in DGD Joint Venture | (54,287 | ) |  | (44,857 | )
Operating lease assets | (32,233 | ) |  | — |
Tax on unremitted foreign earnings | (6,139 | ) |  | (5,648 | )
Other | (2,459 | ) |  | (1,500 | )
Total gross deferred tax liabilities | (397,361 | ) |  | (368,857 | )
Net deferred tax liability | $ | (233,537 | ) |  | $ | (216,082 | )
Amounts reported on Consolidated Balance Sheets: |  |  |
Non-current deferred tax asset | $ | 14,394 |  |  | $ | 14,981 |
Non-current deferred tax liability | (247,931 | ) |  | (231,063 | )
Net deferred tax liability | $ | (233,537 | ) |  | $ | (216,082 | )
At December 28, 2019, the Company had net operating loss carryforwards for federal income tax purposes of approximately $106.8 million, $44.6 million of which begin to expire in 2020 through 2036 and $62.2 million of which can be carried forward indefinitely. As a result of the change in ownership which occurred pursuant to the May 2002 recapitalization, utilization of approximately $0.7 million of the federal net operating loss carryforwards is limited to approximately $0.7 million per year for the remaining life of the net operating losses. The Company had a capital loss carry forward for federal income tax purposes of approximately $21.1 million, which expires in 2023 and can only be used in future years in which the Company recognizes capital gains. The Company had interest expense carryforwards of approximately $52.4 million and $25.1 million for federal and state income tax purposes, which may be carried forward indefinitely. The Company had approximately $248.2 million of net operating loss carryforwards for state income tax purposes, $239.0 million of which expire in 2020 through 2039 and $9.2 million of which can be carried forward indefinitely. The Company had foreign net operating loss carryforwards of about $151.6 million, $68.6 million of which expire in 2020 through 2037 and $83.0 million of which can be carried forward indefinitely. Also at December 28, 2019, the Company had U.S. federal and state tax credit carryforwards of approximately $1.3 million, and tax credit carryforwards with respect to its foreign tax jurisdictions of approximately $4.3 million. As of December 28, 2019, the Company had a valuation allowance of $7.8 million due to uncertainties in respect to its ability to utilize its U.S. (federal and state) net operating loss, capital loss and tax credit carryforwards. The Company also had a valuation allowance of $16.9 million due to uncertainties in its ability to utilize foreign net operating loss carryforwards, tax credit carryforwards and other foreign deferred tax assets. At December 28, 2019, the Company had unrecognized tax benefits of approximately $7.8 million. During fiscal 2017, the Company entered into a settlement agreement with the Darling Ingredients International business seller in which an indemnity receivable of $3.0 million was collected and the Company generally accepted responsibility for any remaining tax liabilities in pre-acquisition tax years. All of the unrecognized tax benefits would favorably impact the Company's effective tax rate if recognized. The Company believes it is reasonably possible that unrecognized tax benefits could change by $3.9 million in the next twelve months. The possible change in unrecognized tax benefits relates to the resolution of an uncertain tax position upon liquidation of certain subsidiaries. The Company recognizes accrued interest and penalties, as appropriate, related to unrecognized tax benefits as a component of income tax expense. As of December 28, 2019, interest and penalties related to unrecognized tax benefits were $0.6 million. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
| December 28, 2019 |  | December 29, 2018
Balance at beginning of Year | $ | 5,777 |  |  | $ | 2,384 |
Change in tax positions related to current year | 3,887 |  |  | 237 |
Change in tax positions related to prior years | (233 | ) |  | 3,649 |
Change in tax positions due to settlement with tax authorities | (1,354 | ) |  | — |
Expiration of the Statute of Limitations | (267 | ) |  | (493 | )
Balance at end of year | $ | 7,810 |  |  | $ | 5,777 |
In fiscal 2019, the Company's major taxing jurisdictions are U.S. (federal and state), Belgium, Brazil, Canada, China, France, Germany and the Netherlands. The Company is subject to regular examination by various tax authorities. Although the final outcome of these examinations is not yet determinable, the Company does not anticipate that any of the examinations will have a significant impact on the Company's results of operations or financial position. The statute of limitations for the Company's major jurisdictions is open for varying periods, but is generally closed through the 2010 tax year. Many of the Company's operations are conducted outside the United States. As a result of the Tax Act and the mandatory repatriation, the Company expects to have access to its offshore earnings with minimal to no additional U.S. tax impact. Therefore, the Company does not consider these earnings to be permanently reinvested offshore. As of December 28, 2019, a deferred tax liability of approximately $6.1 million has been recorded for any incremental taxes, including foreign withholding taxes, that are estimated to be incurred when those earnings are distributed to the U.S. in future years.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration