Company Quick10K Filing
Darling Ingredients
Price19.80 EPS1
Shares168 P/E28
MCap3,335 P/FCF13
Net Debt1,491 EBIT144
TEV4,826 TEV/EBIT34
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-03-28 Filed 2020-05-06
10-K 2019-12-28 Filed 2020-02-25
10-Q 2019-09-28 Filed 2019-11-06
10-Q 2019-06-29 Filed 2019-08-07
10-Q 2019-03-30 Filed 2019-05-08
10-K 2018-12-29 Filed 2019-02-27
10-Q 2018-09-29 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-09
10-K 2017-12-30 Filed 2018-02-27
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-07-01 Filed 2017-08-09
10-Q 2017-04-01 Filed 2017-05-11
10-K 2016-12-31 Filed 2017-02-28
10-Q 2016-10-01 Filed 2016-11-10
10-Q 2016-07-02 Filed 2016-08-11
10-Q 2016-04-02 Filed 2016-05-12
10-K 2016-01-02 Filed 2016-03-01
10-Q 2015-10-03 Filed 2015-11-12
10-Q 2015-07-04 Filed 2015-08-13
10-Q 2015-04-04 Filed 2015-05-14
10-K 2015-01-03 Filed 2015-03-04
10-Q 2014-09-27 Filed 2014-11-06
10-Q 2014-06-28 Filed 2014-08-07
10-Q 2014-03-29 Filed 2014-05-08
10-K 2013-12-28 Filed 2014-02-26
10-Q 2013-09-28 Filed 2013-11-07
10-Q 2013-06-29 Filed 2013-08-08
10-Q 2013-03-30 Filed 2013-05-09
10-K 2012-12-29 Filed 2013-02-27
10-Q 2012-09-29 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-10
10-K 2011-12-31 Filed 2012-02-29
10-Q 2011-10-01 Filed 2011-11-10
10-Q 2011-07-02 Filed 2011-08-11
10-Q 2011-04-02 Filed 2011-05-12
10-K 2011-01-01 Filed 2011-03-02
10-Q 2010-10-02 Filed 2010-11-10
10-Q 2010-07-03 Filed 2010-08-12
10-Q 2010-04-03 Filed 2010-05-13
10-K 2010-01-02 Filed 2010-03-03
8-K 2020-05-06 Earnings, Exhibits
8-K 2020-05-05 Shareholder Vote, Exhibits
8-K 2020-03-02 Officers, Exhibits
8-K 2020-02-25 Earnings, Exhibits
8-K 2020-01-15 Regulation FD, Exhibits
8-K 2020-01-02 Other Events, Exhibits
8-K 2019-11-06 Earnings, Exhibits
8-K 2019-09-09 Other Events, Exhibits
8-K 2019-08-07 Earnings, Exhibits
8-K 2019-05-14 Regulation FD, Exhibits
8-K 2019-05-08 Earnings, Exhibits
8-K 2019-05-07 Shareholder Vote
8-K 2019-05-01 Enter Agreement, Exhibits
8-K 2019-04-02 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2019-03-28 Other Events, Exhibits
8-K 2019-03-27 Other Events, Exhibits
8-K 2019-03-19 Regulation FD, Exhibits
8-K 2019-02-27 Earnings, Exhibits
8-K 2018-11-07 Other Events, Exhibits
8-K 2018-11-05 Earnings, Other Events, Exhibits
8-K 2018-11-05 Officers, Exhibits
8-K 2018-10-11 Regulation FD, Exhibits
8-K 2018-10-05 Other Events, Exhibits
8-K 2018-08-08 Earnings, Exhibits
8-K 2018-05-21 Other Events, Exhibits
8-K 2018-05-16 Regulation FD, Exhibits
8-K 2018-05-09 Earnings, Exhibits
8-K 2018-05-08 Shareholder Vote
8-K 2018-05-02 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-04-25 Other Events, Exhibits
8-K 2018-04-23 Other Events, Exhibits
8-K 2018-02-27 Earnings, Exhibits
8-K 2018-01-15 Officers, Exhibits

DAR 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risks
Item 4. Controls and Procedures
Part Ii: Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex311-20200328.htm
EX-31.2 ex312-20200328.htm
EX-32 ex32-20200328.htm

Darling Ingredients Earnings 2020-03-28

Balance SheetIncome StatementCash Flow
151296302012201420172020
Assets, Equity
1.61.30.90.60.2-0.12012201420172020
Rev, G Profit, Net Income
151185202012201420172020
Ops, Inv, Fin

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
 
 
 (Mark One)      
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
 
 For the quarterly period ended
March 28, 2020
 
OR
 
 
 
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
 
SECURITIES EXCHANGE ACT OF 1934
 
  For the transition period from _______ to _______
 
Commission File Number   001-13323

DARLING INGREDIENTS INC.
(Exact name of registrant as specified in its charter) 
Delaware
 
 
36-2495346
 (State or other jurisdiction     
 
 
(I.R.S. Employer
of incorporation or organization)   
 
Identification Number)
 5601 N MacArthur Blvd., Irving, Texas     75038
(Address of principal executive offices)     (Zip Code)

Registrant's telephone number, including area code:  (972) 717-0300

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock $0.01 par value per share
DAR
New York Stock Exchange
(“NYSE”)
 
    Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.       Yes      No
 
    Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).        Yes      No 

 Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
 
 
 
 
 
 
Accelerated filer    
 
 
 
 
 
 
 
 
 
 
 
Non-accelerated filer 
 
 
 
Smaller reporting company       
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Emerging growth company
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of Exchange Act.
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No 
 
There were 161,857,964 shares of common stock, $0.01 par value, outstanding at April 30, 2020.




DARLING INGREDIENTS INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 28, 2020
 
 
TABLE OF CONTENTS   

 
 
 
 
Page No.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  51
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2






DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
March 28, 2020 and December 28, 2019
(in thousands, except share data)
 
March 28,
2020
 
December 28,
2019
ASSETS
(unaudited)
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
76,339

 
$
72,935

Restricted cash
106

 
110

Accounts receivable, less allowance for bad debts of $9,606
    at March 28, 2020 and $8,802 at December 28, 2019
397,700

 
406,338

Inventories
381,432

 
362,957

Prepaid expenses
45,107

 
46,599

Income taxes refundable
3,106

 
3,317

Other current assets
26,270

 
25,032

Total current assets
930,060

 
917,288

Property, plant and equipment, less accumulated depreciation of
   $1,480,244 at March 28, 2020 and $1,438,388 at December 28, 2019
1,764,120

 
1,802,411

Intangible assets, less accumulated amortization of
   $485,655 at March 28, 2020 and $482,442 at December 28, 2019
497,779

 
526,394

Goodwill
1,202,592

 
1,223,291

Investment in unconsolidated subsidiaries
802,184

 
689,354

Operating lease right-of-use assets
123,859

 
124,726

Other assets
42,653

 
47,400

Deferred income taxes
14,532

 
14,394

 
$
5,377,779

 
$
5,345,258

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

Current liabilities:
 

 
 

Current portion of long-term debt
$
86,397

 
$
90,996

Accounts payable, principally trade
211,596

 
239,252

Income taxes payable
8,593

 
8,895

Current operating lease liabilities
37,472

 
37,805

Accrued expenses
307,688

 
311,391

Total current liabilities
651,746

 
688,339

Long-term debt, net of current portion
1,664,858

 
1,558,429

Long-term operating lease liabilities
91,250

 
91,424

Other non-current liabilities
111,145

 
115,785

Deferred income taxes
250,338

 
247,931

Total liabilities
2,769,337

 
2,701,908

Commitments and contingencies


 


Stockholders’ equity:
 

 
 

     Common stock, $0.01 par value; 250,000,000 shares authorized;
        169,076,043 and 168,620,314 shares issued at March 28, 2020
        and at December 28, 2019, respectively
1,691

 
1,686

Additional paid-in capital
1,575,854

 
1,560,897

     Treasury stock, at cost; 7,218,079 and 4,845,203 shares at
       March 28, 2020 and at December 28, 2019, respectively
(135,104
)
 
(75,022
)
Accumulated other comprehensive loss
(384,491
)
 
(321,847
)
Retained earnings
1,485,615

 
1,400,105

Total Darling's stockholders’ equity
2,543,565

 
2,565,819

Noncontrolling interests
64,877

 
77,531

 Total stockholders' equity
$
2,608,442

 
$
2,643,350

 
$
5,377,779

 
$
5,345,258

 The accompanying notes are an integral part of these consolidated financial statements.

3



DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 28, 2020 and March 30, 2019
(in thousands, except per share data)
(unaudited)


 
 
Three Months Ended
 
March 28,
2020
 
March 30,
2019
Net sales
$
852,842

 
$
835,104

Costs and expenses:
 

 
 

Cost of sales and operating expenses
646,908

 
650,913

Loss/(gain) on sale of assets
61

 
(4,250
)
Selling, general and administrative expenses
96,193

 
85,003

Depreciation and amortization
84,671

 
79,164

Total costs and expenses
827,833

 
810,830

 Equity in net income of Diamond Green Diesel
97,820

 
24,277

Operating income
122,829

 
48,551

 
 
 
 
Other expense:
 

 
 

Interest expense
(19,090
)
 
(19,876
)
Foreign currency gain/(loss)
1,664

 
(732
)
Other expense, net
(1,881
)
 
(2,525
)
Total other expense
(19,307
)
 
(23,133
)
 
 
 
 
Equity in net income/(loss) of other unconsolidated subsidiaries
869

 
(504
)
Income before income taxes
104,391

 
24,914

 
 
 
 
Income tax expense
18,300

 
5,274

 
 
 
 
Net income
86,091

 
19,640

 
 
 
 
Net income attributable to noncontrolling interests
(581
)
 
(1,628
)
 
 
 
 
Net income attributable to Darling
$
85,510

 
$
18,012

 
 
 
 
Basic income per share
$
0.52

 
$
0.11

Diluted income per share
$
0.51

 
$
0.11



 



The accompanying notes are an integral part of these consolidated financial statements.

4



DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
Three months ended March 28, 2020 and March 30, 2019
(in thousands)
(unaudited)


 
Three Months Ended
 
March 28, 2020
 
March 30, 2019
Net income
$
86,091

 
$
19,640

Other comprehensive income/(loss), net of tax:
 
 
 
Foreign currency translation
(65,236
)
 
(4,886
)
Pension adjustments
648

 
858

Corn option derivative adjustments
136

 

Heating oil derivative adjustments
10,870

 

Foreign exchange derivative adjustments
(9,151
)
 
(1,937
)
Total other comprehensive loss, net of tax
(62,733
)
 
(5,965
)
Total comprehensive income
$
23,358

 
$
13,675

Comprehensive income attributable to noncontrolling interests
492

 
3,387

Comprehensive income attributable to Darling
$
22,866

 
$
10,288







The accompanying notes are an integral part of these consolidated financial statements.


5




DARLING INGREDIENTS INC. AND SUBSIDIARIES
  
Consolidated Statements of Stockholders’ Equity (Unaudited)
Three months ended March 28, 2020 and March 30, 2019
(in thousands, except share data)

 
Common Stock
 
 
 
 
 
 
 
 
Number of Outstanding Shares
$.01 par Value
Additional Paid-In Capital
Treasury Stock
Accumulated Other Comprehensive Loss
Retained Earnings
Stockholders' equity attributable to Darling
Non-controlling Interest
Total Stockholders' Equity
Balances at December 28, 2019
163,775,111

$
1,686

$
1,560,897

$
(75,022
)
$
(321,847
)
$
1,400,105

$
2,565,819

$
77,531

$
2,643,350

Net income





85,510

85,510

581

86,091

Deductions to noncontrolling interests


3,271




3,271

(13,146
)
(9,875
)
Pension liability adjustments, net of tax




648


648


648

Heating oil derivative adjustment, net of tax




10,870


10,870


10,870

Corn option derivative adjustment, net of tax




136


136


136

Foreign exchange derivative adjustment, net of tax




(9,151
)

(9,151
)

(9,151
)
Foreign currency translation adjustments




(65,147
)

(65,147
)
(89
)
(65,236
)
Issuance of non-vested stock
8,000


40




40


40

Stock-based compensation


10,778




10,778


10,778

Treasury stock
(2,372,876
)


(60,082
)


(60,082
)

(60,082
)
Issuance of common stock
447,729

5

868




873


873

Balances at March 28, 2020
161,857,964

$
1,691

$
1,575,854

$
(135,104
)
$
(384,491
)
$
1,485,615

$
2,543,565

$
64,877

$
2,608,442




 
Common Stock
 
 
 
 
 
 
 
 
Number of Outstanding Shares
$.01 par Value
Additional Paid-In Capital
Treasury Stock
Accumulated Other Comprehensive Loss
Retained Earnings
Stockholders' equity attributable to Darling
Non-controlling Interest
Total Stockholders' Equity
Balances at December 29, 2018
164,660,598

$
1,681

$
1,536,157

$
(47,756
)
$
(304,539
)
$
1,087,505

$
2,273,048

$
62,773

$
2,335,821

Net income





18,012

18,012

1,628

19,640

Pension liability adjustments, net of tax




858


858


858

Foreign exchange derivative adjustment, net of tax




(1,937
)

(1,937
)

(1,937
)
Foreign currency translation adjustments




(6,645
)

(6,645
)
1,759

(4,886
)
Stock-based compensation


10,403




10,403


10,403

Treasury stock
(223,294
)


(5,089
)


(5,089
)

(5,089
)
Issuance of common stock
311,502

3

1,886




1,889


1,889

Balances at March 30, 2019
164,748,806

$
1,684

$
1,548,446

$
(52,845
)
$
(312,263
)
$
1,105,517

$
2,290,539

$
66,160

$
2,356,699




The accompanying notes are an integral part of these consolidated financial statements.


6



DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 28, 2020 and March 30, 2019
(in thousands)
(unaudited)
 
March 28,
2020
 
March 30,
2019
Cash flows from operating activities:
 
 
 
Net Income
$
86,091

 
$
19,640

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
84,671

 
79,164

Loss (gain) on disposal of property, plant, equipment and other assets
61

 
(4,250
)
Gain on insurance proceeds from insurance settlements

 
(845
)
Deferred taxes
6,377

 
(2,901
)
Increase (decrease) in long-term pension liability
(264
)
 
646

Stock-based compensation expense
10,818

 
10,327

Write-off deferred loan costs

 
27

Deferred loan cost amortization
1,416

 
1,574

Equity in net income of Diamond Green Diesel and other unconsolidated subsidiaries
(98,689
)
 
(23,773
)
Changes in operating assets and liabilities, net of effects from acquisitions:
 
 
 
Accounts receivable
487

 
11,692

Income taxes refundable/payable
348

 
7,270

Inventories and prepaid expenses
(24,999
)
 
(5,063
)
Accounts payable and accrued expenses
(16,790
)
 
(43,016
)
Other
(14,981
)
 
(1,891
)
Net cash provided by operating activities
34,546

 
48,601

Cash flows from investing activities:
 
 
 
Capital expenditures
(61,599
)
 
(84,269
)
       Acquisitions, net of cash acquired

 
(1,431
)
Gross proceeds from disposal of property, plant and equipment and other assets
379

 
7,868

Proceeds from insurance settlement

 
845

Payments related to routes and other intangibles
(3,416
)
 
(2,778
)
Net cash used by investing activities
(64,636
)
 
(79,765
)
Cash flows from financing activities:
 
 
 
Proceeds from long-term debt
8,264

 
2,138

Payments on long-term debt
(8,638
)
 
(10,974
)
Borrowings from revolving credit facility
219,933

 
156,829

Payments on revolving credit facility
(100,782
)
 
(138,147
)
Net cash overdraft financing
(9,594
)
 
14,525

Issuance of common stock
67

 
12

Repurchase of common stock
(55,044
)
 

Minimum withholding taxes paid on stock awards
(4,328
)
 
(3,190
)
Acquisition of noncontrolling interest
(8,784
)
 

Distributions to noncontrolling interests
(688
)
 

Net cash provided by financing activities
40,406

 
21,193

Effect of exchange rate changes on cash
(6,916
)
 
(1,575
)
Net increase (decrease) in cash, cash equivalents and restricted cash
3,400

 
(11,546
)
Cash, cash equivalents and restricted cash at beginning of period
73,045

 
107,369

Cash, cash equivalents and restricted cash at end of period
$
76,445

 
$
95,823

Supplemental disclosure of cash flow information:
 
 
 
Accrued capital expenditures
$
(1,630
)
 
$
(8,623
)
Cash paid during the period for:
 
 
 
Interest, net of capitalized interest
$
5,863

 
$
21,602

Income taxes, net of refunds
$
11,453

 
$
2,894

Non-cash operating activities
 
 
 
 Operating lease right of use asset obtained in exchange for new lease liabilities
$
9,121

 
$
4,794

Non-cash financing activities
 
 
 
Debt issued for assets
$
21

 
$



The accompanying notes are an integral part of these consolidated financial statements.

7



DARLING INGREDIENTS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
March 28, 2020
(unaudited)

(1)
General

The accompanying consolidated financial statements for the three month periods ended March 28, 2020 and March 30, 2019, have been prepared by Darling Ingredients Inc., a Delaware corporation (“Darling”, and together with its subsidiaries, the “Company”) in accordance with generally accepted accounting principles in the United States (“GAAP”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The information furnished herein reflects all adjustments (consisting only of normal recurring accruals) that are, in the opinion of management, necessary to present a fair statement of the financial position and operating results of the Company as of and for the respective periods. However, these operating results are not necessarily indicative of the results expected for a full fiscal year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations.  However, management of the Company believes, to the best of their knowledge, that the disclosures herein are adequate to make the information presented not misleading.  The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Form 10-K for the fiscal year ended December 28, 2019. 

(2)
Summary of Significant Accounting Policies

(a)
Basis of Presentation

The consolidated financial statements include the accounts of Darling and its consolidated subsidiaries. Noncontrolling interests represent the outstanding ownership interest in the Company's consolidated subsidiaries that are not owned by the Company. In the accompanying Consolidated Statements of Operations, the noncontrolling interest in net income of the consolidated subsidiaries is shown as an allocation of the Company's net income and is presented separately as “Net income attributable to noncontrolling interests.” In the Company's Consolidated Balance Sheets, noncontrolling interests represent the ownership interests in the Company consolidated subsidiaries' net assets held by parties other than the Company. These ownership interests are presented separately as “Noncontrolling interests” within “Stockholders' Equity.” All intercompany balances and transactions have been eliminated in consolidation.

(b)
Fiscal Periods

The Company has a 52/53 week fiscal year ending on the Saturday nearest December 31.  Fiscal periods for the consolidated financial statements included herein are as of March 28, 2020, and include the 13 weeks ended March 28, 2020, and the 13 weeks ended March 30, 2019.

(c)
Cash, Cash Equivalents and Restricted Cash

The Company considers all short-term highly liquid instruments, with an original maturity of three months or less, to be cash equivalents. Cash balances are recorded net of book overdrafts when a bank right-of-offset exists. All other book overdrafts are recorded in accounts payable and the change in the related balance is reflected in operating activities on the Consolidated Statement of Cash Flows. In addition, the Company has bank overdrafts, which are considered a form of short-term financing with changes in the related balance reflected in financing activities in the Consolidated Statement of Cash Flows.

Restricted cash represents amounts required to be set aside to cover self-insurance claims and collateral for environmental claims. The following table provides a reconciliation of cash, cash equivalents and restricted cash on the consolidated balance sheet that sum to the total of the same amounts shown in the Consolidated Statement of Cash Flows (in thousands):


8



 
 
March 28, 2020
December 29, 2018
Cash and cash equivalents
 
$
76,339

$
72,935

Restricted cash
 
106

110

Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flow
 
$
76,445

$
73,045



(d)
Accounts Receivable and Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from customers’ non-payment of trade accounts receivable owed to the Company.  These trade receivables arise in the ordinary course of business from sales of raw material, finished product or services to the Company’s customers.  The estimate of allowance for doubtful accounts is based upon the Company’s bad debt experience adjusted for differences in asset-specific risk characteristic, current economic conditions, and forecasts of future economic conditions.  If the financial condition of the Company’s customers deteriorates, resulting in the customers’ inability to pay the Company’s receivables as they come due, additional allowances for doubtful accounts may be required.

The Company has entered into agreements with third party banks to factor certain of the Company's trade receivables in order to enhance working capital by turning trade receivables into cash faster. Under these agreements, the Company sells certain selected customers trade receivables to the third party banks without recourse for cash less a nominal fee. For the three months ended March 28, 2020 and March 30, 2019, the Company sold approximately $84.5 million and $32.5 million of its trade receivables and incurred approximately $0.4 million and $0.2 million in fees, which are recorded as interest expense, respectively.

(e)
Revenue Recognition

The Company recognizes revenue on sales when control of the promised finished product is transferred to the Company's customers in an amount that reflects the consideration the Company expects to be entitled to in exchange for the finished product. Service revenues are recognized when the service occurs.  Certain customers may be required to prepay prior to shipment in order to maintain payment protection related to certain foreign and domestic sales.  These amounts are recorded as unearned revenue and recognized when control of the promised finished product is transferred to the Company's customer.  See Note 19 to the consolidated financial statements.

(f)
Foreign Currency Translation and Remeasurement

Foreign currency translation is included as a component of accumulated other comprehensive loss and reflects the adjustments resulting from translating the foreign currency denominated financial statements of foreign subsidiaries into U.S. dollars. The functional currency of the Company's foreign subsidiaries is the currency of the primary economic environment in which the entity operates, which is generally the local currency of the country. Accordingly, assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at fiscal period end exchange rates, including intercompany foreign currency transactions that are of long-term investment nature. Income and expense items are translated at average exchange rates occurring during the period. Changes in exchange rates that affect cash flows and the related receivables or payables are recognized as transaction gains and losses in determining net income. The Company incurred net foreign currency translation losses of approximately $65.1 million and $6.6 million for the three months ended March 28, 2020 and March 30, 2019, respectively.

(g)
Leases

The Company accounts for leases in accordance with Accounting Standard Codification (“ASC”) Topic 842, leases. The Company determines if an arrangement is a lease at inception for which the Company recognizes the right-of-use (“ROU”) asset and a lease liability at the lease commencement date. For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. In determining the lease liability, the Company applies a discount rate to the minimum lease payments within each lease. ASC 842 requires the Company to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a

9



similar economic environment. To estimate the Company's incremental borrowing rate over various terms, a comparable market yield curve consistent with the Company's credit quality is determined. The lease term for all of the Company's leases include the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise or when a triggering event occurs. The Company has elected to not recognize a ROU asset and lease liability with an initial term of 12 months or less at lease commencement. Current operating leases are included on the Company's balance sheet as a ROU asset, current operating lease liabilities and long-term operating lease liabilities. For finance leases, the lease liability is initially measured in the same manner and date as for the operating leases, and is subsequently measured at amortized cost using the effective interest method. Finance leases are included in property, plant and equipment, current portion of long-term debt and long-term debt, net of current portion, but are not significant to the Company.

The ROU asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any direct costs incurred less any lease incentives received. For operating leases, the ROU asset is subsequently measured throughout the lease term at the carrying amount of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of the lease incentives received. Some leases payments contain rent escalation clauses (including index-based escalations), initially measured using the index at the lease commencement date. The Company recognizes minimum rental expense on a straight-line basis based on the fixed components of the lease arrangement.

The Company uses the long-lived assets impairment guidance in ASC subtopic 360-10, Property, Plant and Equipment - Overall, to determine whether the ROU asset is impaired, and if so, the amount of the impairment loss to recognize. The Company monitors for events or changes in circumstances that require a reassessment of one of its leases. When a reassessment results in the remeasurement of a lease liability, a corresponding adjustment is made to the carrying amount of the corresponding ROU asset unless doing so would reduce the carrying amount of the ROU asset to an amount less than zero. In that case, the amount of the adjustment that would result in a negative ROU asset balance is recorded in the consolidated statement of operations.

(h)
Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

If it is at least reasonably possible that the estimate of the effect on the financial statements of a condition, situation, or set of circumstances that exist at the date of the financial statements will change in the near term due to one or more future confirming events, and the effect of the change would be material to the financial statements, the Company will disclose the nature of the uncertainty and include an indication that it is at least reasonably possible that a change in the estimate will occur in the near term.  If the estimate involves certain loss contingencies, the disclosure will also include an estimate of the probable loss or range of loss or state that an estimate cannot be made.

Many of the initial economic effects of the early stages of the global coronavirus disease (“COVID-19”) outbreak and the government-imposed movement and work restrictions designed to slow the pace of the outbreak occurred in the last month of the first quarter. The Company has not observed any impairments of the Company's assets or a significant change in the fair value of assets in the first quarter due to the COVID-19 pandemic.

(i)
Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation including reclassification of the Company's investment equity in net income of Diamond Green Diesel to operating income. See Note 3 for further discussion.


10



(j)
Earnings Per Share

Basic income per common share is computed by dividing net income attributable to Darling by the weighted average number of common shares including non-vested and restricted shares outstanding during the period.  Diluted income per common share is computed by dividing net income attributable to Darling by the weighted average number of common shares outstanding during the period increased by dilutive common equivalent shares determined using the treasury stock method.
 
Net Income per Common Share (in thousands, except per share data)
 
Three Months Ended
 
 
 
March 28, 2020
 
 
 
 
 
March 30, 2019
 
 
 
Income
 
Shares
 
Per Share
 
Income
 
Shares
 
Per Share
Basic:
 
 
 
 
 
 
 
 
 
 
 
Net Income attributable to Darling
$
85,510

 
163,474

 
$
0.52

 
$
18,012

 
164,855

 
$
0.11

Diluted:
 

 
 

 
 

 
 

 
 

 
 

Effect of dilutive securities:
 

 
 

 
 

 
 

 
 

 
 

Add: Option shares in the money and dilutive effect of non-vested stock awards
 

 
6,749

 
 

 
 

 
6,127

 
 

Less: Pro forma treasury shares
 

 
(2,296
)
 
 

 
 

 
(2,322
)
 
 

Diluted:
 

 
 

 
 

 
 

 
 

 
 

Net income attributable to Darling
$
85,510

 
167,927

 
$
0.51

 
$
18,012

 
168,660

 
$
0.11

 
 
 
 
 
 
 
 
 
 
 
 


For the three months ended March 28, 2020 and March 30, 2019, respectively, 551,877 and 466,841 outstanding stock options were excluded from diluted income per common share as the effect was antidilutive. For the three months ended March 28, 2020 and March 30, 2019, respectively, 406,502 and 391,800 shares of non-vested stock and stock equivalents were excluded from diluted income per common share as the effect was antidilutive.

(3)
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 Compan