Investment in Unconsolidated Subsidiary

9 Months Ended

Sep. 30, 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)	September 30, 2023		December 31, 2022
Assets:
Total current assets	$	1,641,934	$	1,304,805
Property, plant and equipment, net	3,831,367		3,866,854
Other assets	94,149		61,665
Total assets	$	5,567,450	$	5,233,324
Liabilities and members' equity:
Total current portion of long term debt	$	228,365	$	217,066
Total other current liabilities	391,027		515,023
Total long term debt	744,451		774,783
Total other long term liabilities	16,408		17,249
Total members' equity	4,187,199		3,709,203
Total liabilities and members' equity	$	5,567,450	$	5,233,324


	Three Months Ended				Nine Months Ended
(in thousands)	September 30, 2023		September 30, 2022		September 30, 2023		September 30, 2022
Revenues:
Operating revenues	$	1,430,666	$	1,470,036	$	5,356,827	$	3,906,614
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	1,257,766		1,229,371		4,430,485		3,311,608
Depreciation, amortization and accretion expense	55,118		31,793		172,040		89,602
Total costs and expenses	1,312,884		1,261,164		4,602,525		3,401,210
Operating income	117,782		208,872		754,302		505,404
Other income	2,701		1,215		6,863		1,926
Interest and debt expense, net	(11,705)		(3,259)		(37,785)		(9,534)
Net income	$	108,778	$	206,828	$	723,380	$	497,796

As of September 30, 2023, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $2,096.9 million on the consolidated balance sheet. The Company has recorded equity in net income from the DGD Joint Venture of approximately $54.4 million and $103.4 million for the three months ended September 30, 2023 and October 1, 2022, respectively. The Company has recorded equity in net income from the DGD Joint Venture of approximately $361.7 million and $248.9 million for the nine months ended September 30, 2023 and October 1, 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 September 30, 2023 and September 30, 2022, the DGD Joint Venture recorded approximately $266.4 million and $190.3 million of blenders tax credits, respectively. For the nine months ended September 30, 2023 and September 30, 2022, the DGD Joint Venture recorded approximately $900.0 million and $544.6 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 nine months ended September 30, 2023 and October 1, 2022, respectively, the Company made $75.0 million and $239.8 million capital contributions to the DGD Joint Venture. In the nine months ended September 30, 2023 and October 1, 2022, the Company received $163.6 million and $90.5 million dividend distributions from the DGD Joint Venture, respectively. As of September 30, 2023, the DGD Joint Venture has borrowings outstanding of $200.0 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.