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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 30, 2024
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) 
Delaware36-2495346
 (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 classTrading Symbol(s)Name of each exchange on which registered
Common stock $0.01 par value per shareDARNew 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 filerAccelerated 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 159,779,553 shares of common stock, $0.01 par value, outstanding at May 2, 2024.



DARLING INGREDIENTS INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 30, 2024
 
 
TABLE OF CONTENTS   

 
 
  Page No.
  
   
 
 
  
   
 
  
   
 
  
   
 
   
   
 48
   
   
   
  
   
 
2





DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
March 30, 2024 and December 30, 2023
(in thousands, except share data)
March 30,
2024
December 30,
2023
ASSETS(unaudited)
Current assets:
Cash and cash equivalents$145,473 $126,502 
Restricted cash4,086 292 
Accounts receivable, less allowance for bad debts of $15,936 at
   March 30, 2024 and $15,208 at December 30, 2023
623,936 626,008 
Accounts receivable due from related party - Diamond Green Diesel 172,283 
Inventories687,485 758,739 
Prepaid expenses97,619 105,657 
Income taxes refundable32,464 23,599 
Other current assets28,247 42,586 
Total current assets1,619,310 1,855,666 
Property, plant and equipment, less accumulated depreciation of $2,431,378 at
   March 30, 2024 and $2,360,342 at December 30, 2023
2,910,335 2,935,185 
Intangible assets, less accumulated amortization of $523,801 at
   March 30, 2024 and $748,646 at December 30, 2023
1,057,123 1,075,892 
Goodwill2,498,457 2,484,502 
Investment in unconsolidated subsidiaries2,378,531 2,251,629 
Operating lease right-of-use assets215,880 205,539 
Other assets246,561 234,960 
Deferred income taxes16,572 17,711 
 $10,942,769 $11,061,084 
LIABILITIES AND STOCKHOLDERS’ EQUITY  
Current liabilities:  
Current portion of long-term debt$103,075 $60,703 
Accounts payable, principally trade343,388 425,588 
Income taxes payable11,657 15,522 
Current operating lease liabilities59,480 55,325 
Accrued expenses449,694 440,999 
Total current liabilities967,294 998,137 
Long-term debt, net of current portion4,362,856 4,366,370 
Long-term operating lease liabilities161,296 154,903 
Other non-current liabilities303,927 349,809 
Deferred income taxes464,406 498,174 
Total liabilities6,259,779 6,367,393 
Commitments and contingencies
Stockholders’ equity:  
     Common stock, $0.01 par value; 250,000,000 shares authorized; 174,853,704 and
        174,427,981 shares issued at March 30, 2024 and December 30, 2023, respectively
1,749 1,744 
Additional paid-in capital1,712,349 1,697,787 
     Treasury stock, at cost; 15,074,147 and 14,894,192 shares at
       March 30, 2024 and December 30, 2023, respectively
(636,916)(629,008)
Accumulated other comprehensive loss(298,464)(198,346)
Retained earnings3,814,411 3,733,254 
Total Darling's stockholders’ equity4,593,129 4,605,431 
Noncontrolling interests89,861 88,260 
 Total stockholders' equity4,682,990 4,693,691 
 $10,942,769 $11,061,084 
 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 30, 2024 and April 1, 2023
(in thousands, except per share data)
(unaudited)


 
Three Months Ended
 March 30,
2024
April 1,
2023
Net sales$1,420,299 $1,791,172 
Costs and expenses:  
Cost of sales and operating expenses1,116,666 1,366,973 
Gain on sale of assets(574)(327)
Selling, general and administrative expenses139,143 135,466 
Restructuring and asset impairment charges 4,524 
Acquisition and integration costs4,054 7,022 
Change in fair value of contingent consideration(25,249) 
Depreciation and amortization127,509 116,006 
Total costs and expenses1,361,549 1,629,664 
 Equity in net income of Diamond Green Diesel
78,419 94,337 
Operating income137,169 255,845 
Other expense:  
Interest expense(62,876)(50,299)
Foreign currency gain236 5,004 
Other income, net8,656 6,159 
Total other expense(53,984)(39,136)
Equity in net income of other unconsolidated subsidiaries2,310 120 
Income before income taxes85,495 216,829 
Income tax expense3,907 26,974 
Net income81,588 189,855 
Net income attributable to noncontrolling interests(431)(4,054)
Net income attributable to Darling$81,157 $185,801 
Basic income per share$0.51 $1.16 
Diluted income per share$0.50 $1.14 

 



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 30, 2024 and April 1, 2023
(in thousands)
(unaudited)

Three Months Ended
 March 30, 2024April 1, 2023
Net income$81,588 $189,855 
Other comprehensive income/(loss), net of tax:  
Foreign currency translation adjustments(64,670)56,217 
Pension adjustments262 327 
Commodities derivative adjustments(31,758)21,124 
Interest rate swap adjustments4,077 720 
Foreign exchange derivative adjustments(6,859)5,620 
Total other comprehensive income/(loss), net of tax(98,948)84,008 
Total comprehensive income/(loss)$(17,360)$273,863 
Comprehensive income attributable to noncontrolling interests
1,601 3,396 
Comprehensive income/(loss) attributable to Darling$(18,961)$270,467 





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

5



DARLING INGREDIENTS INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Three months ended March 30, 2024 and April 1, 2023
(in thousands, except share data)
(unaudited)
Common Stock
Number of Outstanding Shares
$0.01 par Value
Additional Paid-In CapitalTreasury StockAccumulated Other Comprehensive LossRetained EarningsStockholders' equity attributable to DarlingNon-controlling InterestsTotal Stockholders' Equity
Balances at December 30, 2023159,533,789 $1,744 $1,697,787 $(629,008)$(198,346)$3,733,254 $4,605,431 $88,260 $4,693,691 
Net income— — — — — 81,157 81,157 431 81,588 
Pension adjustments, net of tax— — — — 262 — 262 — 262 
Commodities derivative adjustments, net of tax— — — — (31,758)— (31,758)— (31,758)
Interest rate swap adjustments, net of tax— — — — 4,077 — 4,077 — 4,077 
Foreign exchange derivative adjustments, net of tax— — — — (6,859)— (6,859)— (6,859)
Foreign currency translation adjustments
— — — — (65,840)— (65,840)1,170 (64,670)
Issuance of non-vested stock— — 47 — — — 47 — 47 
Stock-based compensation— — 12,789 — — — 12,789 — 12,789 
Treasury stock(179,955)— — (7,908)— — (7,908)— (7,908)
Issuance of common stock425,723 5 1,726 — — — 1,731 — 1,731 
Balances at March 30, 2024159,779,557 $1,749 $1,712,349 $(636,916)$(298,464)$3,814,411 $4,593,129 $89,861 $4,682,990 


Common Stock
Number of Outstanding Shares
$0.01 par Value
Additional Paid-In CapitalTreasury StockAccumulated Other Comprehensive LossRetained EarningsStockholders' equity attributable to DarlingNon-controlling InterestsTotal Stockholders' Equity
Balances at December 31, 2022159,969,596 $1,736 $1,660,084 $(554,451)$(383,874)$3,085,528 $3,809,023 $87,467 $3,896,490 
Net income— — — — — 185,801 185,801 4,054 189,855 
Distribution of noncontrolling interest earnings
— — — — — — — (3,441)(3,441)
Addition to noncontrolling interests— — — — — — — 1,643 1,643 
Pension adjustments, net of tax— — — — 327 — 327 — 327 
Commodities derivative adjustments, net of tax— — — — 21,124 — 21,124 — 21,124 
Interest rate swap adjustments, net of tax— — — — 720 — 720 — 720 
Foreign exchange derivative adjustments, net of tax— — — — 5,620 — 5,620 — 5,620 
Foreign currency translation adjustments
— — — — 56,875 — 56,875 (658)56,217 
Issuance of non-vested stock— — 47 — — — 47 — 47 
Stock-based compensation— — 11,806 — — — 11,806 — 11,806 
Treasury stock(1,039,462)— — (60,510)— — (60,510)— (60,510)
Issuance of common stock633,972 6 1,695 — — — 1,701 — 1,701 
Balances at April 1, 2023159,564,106 $1,742 $1,673,632 $(614,961)$(299,208)$3,271,329 $4,032,534 $89,065 $4,121,599 

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 30, 2024 and April 1, 2023
(in thousands)
(unaudited)
 March 30,
2024
April 1,
2023
Cash flows from operating activities:  
Net Income$81,588 $189,855 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization127,509 116,006 
Gain on sale of assets(574)(327)
Change in fair value of contingent consideration(25,249) 
Gain on insurance proceeds from insurance settlements (8,836)
Deferred taxes(30,572)14,956 
Increase in long-term pension liability504 236 
Stock-based compensation expense12,836 11,853 
                  Deferred loan cost amortization1,395 1,621 
                  Equity in net income of Diamond Green Diesel and other unconsolidated subsidiaries(80,729)(94,457)
Changes in operating assets and liabilities, net of effects from acquisitions:  
Accounts receivable181,243 14,733 
Income taxes refundable/payable(12,542)(13,030)
Inventories and prepaid expenses69,885 (25,726)
Accounts payable and accrued expenses(58,004)(35,254)
Other(3,382)16,796 
Net cash provided by operating activities263,908 188,426 
Cash flows from investing activities:  
Capital expenditures(93,775)(111,327)
      Acquisitions, net of cash acquired(109,938)(1,079,083)
  Investment in Diamond Green Diesel(90,000)(75,000)
      Loan to Diamond Green Diesel(100,000) 
      Loan repayment from Diamond Green Diesel100,000  
        Gross proceeds from disposal of property, plant and equipment and other assets2,756 1,302 
Proceeds from insurance settlement 8,836 
Payments related to routes and other intangibles(2)(1,517)
Net cash used in investing activities(290,959)(1,256,789)
Cash flows from financing activities:  
Proceeds from long-term debt3,036 807,363 
Payments on long-term debt(15,549)(19,259)
Borrowings from revolving credit facility584,755 687,452 
Payments on revolving credit facility(558,986)(243,829)
Net cash overdraft financing41,977 148 
Deferred loan costs (31)
Issuance of common stock437  
Repurchase of common stock (43,794)
Minimum withholding taxes paid on stock awards(6,905)(15,297)
Net cash provided by financing activities48,765 1,172,753 
Effect of exchange rate changes on cash6,471 7,281 
Net increase in cash, cash equivalents and restricted cash28,185 111,671 
Cash, cash equivalents and restricted cash at beginning of period264,450 150,168 
Cash, cash equivalents and restricted cash at end of period$292,635 $261,839 

The accompanying notes are an integral part of these consolidated financial statements.
7


DARLING INGREDIENTS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements
March 30, 2024
(unaudited)

(1)General

The accompanying consolidated financial statements for the three month periods ended March 30, 2024 and April 1, 2023, have been prepared by Darling Ingredients Inc., a Delaware corporation (“Darling”, and together with its subsidiaries, the “Company” or “we”, “us” or “our”) 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 30, 2023. 

(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’s 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 30, 2024, and include the 13 weeks ended March 30, 2024, and the 13 weeks ended April 1, 2023.

(c)    Cash and Cash Equivalents

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 shown on the Consolidated Balance Sheet as of March 30, 2024, primarily represented acquisition consideration hold-back amounts that are part of the purchase price set aside in escrow in the Company’s name for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. At December 30, 2023, restricted cash primarily represented amounts set aside as collateral for foreign construction projects and U.S. environmental claims and was insignificant to the Company. Restricted cash included in other long term assets on the Consolidated Balance Sheet as of March 30, 2024 and December 30, 2023, primarily represented acquisition consideration hold-back amounts that are part of the purchase price set aside in escrow in the Company’s name for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. A reconciliation of cash, cash equivalents,
8


and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statement of Cash flows is as follows (in thousands):

March 30, 2024December 30, 2023
Cash and cash equivalents$145,473 $126,502 
Restricted cash4,086 292 
Restricted cash included in other long-term assets143,076 137,656 
Total cash, cash equivalents and restricted cash shown in the statement of cash flows$292,635 $264,450 

(d)    Accounts Receivable Factoring

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 third party banks without recourse for cash less a nominal fee. For the three months ended March 30, 2024 and April 1, 2023, the Company sold approximately $137.4 million and $161.4 million of its trade receivables and incurred approximately $2.2 million and $2.0 million in fees, respectively, which are recorded as interest expense.

(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 in accrued expenses and recognized when control of the promised finished product is transferred to the Company's customer.  See Note 20 (Revenue) to the Company's Consolidated Financial Statements included herein.

(f)    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 30, 2024April 1, 2023
 IncomeSharesPer ShareIncomeSharesPer Share
Basic:      
Net Income attributable to Darling$81,157 159,812 $0.51 $185,801 160,145 $1.16 
Diluted:      
Effect of dilutive securities:      
Add: Option shares in the money and dilutive effect of non-vested stock awards 3,053   3,419  
Less: Pro forma treasury shares (960)  (747) 
Diluted:      
Net income attributable to Darling$81,157 161,905 $0.50 $185,801 162,817 $1.14 
For the three months ended March 30, 2024 and April 1, 2023, respectively, no outstanding stock options were excluded from diluted income per common share as the effect would be antidilutive. For the three months ended March 30, 2024 and April 1, 2023, respectively, 576,692 and 333,085 shares of non-vested stock and stock equivalents were excluded from diluted income per common share as the effect was antidilutive.

9


(g)    Out-of-Period Adjustment

During the quarter ended March 30, 2024, the Company determined the inventory balance at its recently acquired Gelnex subsidiary was overstated by approximately $25.1 million at December 30, 2023. The overstatement was the result of an error in calculating the elimination of deferred profit in inventory on intercompany product sales from South America.

During the first quarter of fiscal 2024, the Company recorded an adjustment to earnings of approximately $17.9 million, net of tax. The Company assessed the impact of this out-of-period adjustment and concluded that it was not material to the financial statements previously issued for any interim or annual period during 2023, and the adjustment during the quarter ended March 30, 2024 is not expected to be material to the annual financial statements for fiscal 2024. The out-of-period adjustment is included in the Food Ingredients segment results.

(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.

As a result of the Russia-Ukraine war, the Israeli-Palestinian conflict and the current inflationary environment, we have evaluated the potential impact to the Company's operations and for any indicators of potential triggering events that could indicate certain of the Company's assets may be impaired. Through the three months ended March 30, 2024, the Company has not observed any impairments of the Company's assets or a significant change in their fair value due to the Russia-Ukraine war, the Israeli-Palestinian conflict or inflation.

(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 (“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, 2024December 31, 2023
Assets:
Total current assets$1,814,038 $1,877,430 
Property, plant and equipment, net3,870,508 3,838,800 
Other assets102,279 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 liabilities302,519 417,918 
Total long term debt729,756 737,097 
Total other long term liabilities17,331 16,996 
Total members' equity4,608,277 4,355,277 
Total liabilities and members' equity$5,786,825 $5,805,927 
10



Three Months Ended
(in thousands)March 31, 2024March 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 expense1,159,356 1,421,404 
Lower of cost or market (LCM) inventory valuation adjustment21,638  
Depreciation, amortization and accretion expense
65,290 58,607 
Total costs and expenses1,246,284 1,480,011 
Operating income164,831 200,039 
Other income3,220 2,041 
Interest and debt expense, net(11,242)(13,406)
Income before income tax expense156,809 188,674 
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.

(4)    Acquisitions

Miropasz Group

On January 31, 2024, a wholly-owned international subsidiary of the Company acquired all of the shares of the Miropasz Group (the “Miropasz Acquisition”), a rendering company in Poland that is now in our Feed Ingredients segment, for a cash purchase price of approximately €105.6 million (approximately $114.3 million USD at the exchange rate of €1.0:USD$1.082198 on the closing date). In addition, the Company incurred a liability of approximately €7.0 million (approximately $7.6 million USD at the exchange rate on the closing date) for acquisition consideration hold-back amount that is part of the purchase price set aside in escrow in the Company's name for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. The hold-back amount represents a noncash investing activity during the period of acquisition. The Company recorded assets and liabilities on a preliminary basis consisting of property, plant and equipment of approximately $21.2 million, identifiable intangibles which includes routes and immaterial land use rights of approximately $34.9 million with a weighted average life of 17 years, other net assets of approximately $2.4 million which includes cash, working capital and net debt, and goodwill of approximately $63.4 million. Due to the complexity of acquiring
11


foreign entities, the Company is still assessing the provisional amounts recorded for assets acquired and liabilities assumed including possible future purchase price adjustments to property, plant and equipment, intangible assets and taxes, and thus the final determination of the value of assets acquired and liabilities assumed may result in retrospective adjustment to the assets acquired and liabilities assumed with a corresponding adjustment to goodwill. Goodwill is expected to strengthen the Company's base Feed Ingredients business and is nondeductible for tax purposes.

Gelnex

On March 31, 2023, the Company acquired all of the shares of Gelnex, a leading global producer of collagen products (the “Gelnex Acquisition”). The Gelnex Acquisition includes a network of five processing facilities in South America and one in the United States. The initial purchase price of approximately $1.2 billion was comprised of an initial cash payment of approximately $1.1 billion, which consisted of a payment of approximately R$4.3 billion Brazilian real (approximately $853.3 million USD at the exchange rate of R$5.08:USD$1.00 on the closing date) and a payment of approximately $243.5 million in USD, and is subject to various post-closing adjustments in accordance with the stock purchase agreement. In addition, the Company incurred a liability of approximately $104.1 million for acquisition consideration hold-back amounts that are part of the purchase price set aside in escrow in the Company's name for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. The hold-back amount represents a noncash investing activity during the period of acquisition. The Gelnex Acquisition gives us immediate capacity to serve the growing needs of our collagen customers and the growing gelatin market. The initial purchase price was financed by borrowing all of the Company's term A-3 facility of $300.0 million and term A-4 facility of $500.0 million, with the remainder coming through revolver borrowings under the Company's Amended Credit Agreement. During the third quarter of fiscal 2023, the Company made a cash payment for working capital purchase price adjustment per the stock purchase agreement of approximately $14.1 million with an offset to goodwill. The Company obtained new information about facts and circumstances that existed at the acquisition date during the first quarter of fiscal 2024 that resulted in measurement period adjustments to increase property, plant and equipment by approximately $13.7 million, decrease intangible assets by approximately $9.5 million, decrease goodwill by approximately $9.1 million, increase deferred tax liabilities by approximately $5.1 million, increase deferred tax assets by approximately $8.1 million and a decrease in other assets and liabilities of approximately $0.1 million.

The following table summarizes the final fair value of the assets acquired and the liabilities assumed in the Gelnex Acquisition as of March 31, 2023 (in thousands):

Accounts receivable$81,025 
Inventories140,865 
Other current assets3,143 
Property, plant and equipment169,205 
Identifiable intangible assets339,500 
Goodwill542,572 
Operating lease right-of-use assets134 
Other assets2,703 
Deferred tax asset9,067 
Accounts payable(15,059)
Current operating lease liabilities(26)
Current portion of long-term debt(44,692)
Accrued expenses(18,826)
Long-term debt, net of current portion(1,407)
Long-term operating lease liabilities(123)
Deferred tax liability(12,870)
Other noncurrent liabilities(19)
Purchase price, net of cash acquired$1,195,192 
Less hold-back104,145 
Cash paid for acquisition, net of cash acquired$1,091,047 

The $542.6 million of goodwill from the Gelnex Acquisition, which is expected to strengthen the Company's gelatin business and expand its ability to service increased demand of its collagen customer base, is assigned to the Food
12


Ingredients segment. Of the goodwill booked in the Gelnex Acquisition approximately $425.0 million is expected to be deductible for tax purposes. The identifiable intangible assets include $331.0 million in customer relationships with a weighted average life of 11.4 years and $8.5 million in trade name with a life of 5 years for a total weighted average life of approximately 11.3 years.

The amount of net sales and net income (loss) from the Gelnex Acquisition included in the Company's consolidated statement of operations for the three months ended March 30, 2024 was $65.9 million and $(36.1) million, respectively.

As a result of the Gelnex Acquisition, effective March 31, 2023, the Company began including the operations of the Gelnex Acquisition in the Company's consolidated financial statements. The following table presents selected pro forma information, for comparative purposes, assuming the Gelnex Acquisition had occurred on January 1, 2023, for the periods presented (in thousands):

Three Months Ended
April 1, 2023
Net sales$1,889,439 
Net income192,634 

FASA Group

On August 1, 2022, the Company acquired all of the shares of the FASA Group, the largest independent rendering company in Brazil, pursuant to a stock purchase agreement dated May 5, 2022 (the “FASA Acquisition”). The FASA Group, with its 14 rendering plants and an additional two plants under construction at the time of acquisition, will supplement the Company's global supply of waste fats, making it a leader in the supply of low-carbon waste fats and oils.

The Company initially paid approximately R$2.9 billion Brazilian real in cash (approximately $562.6 million USD at the exchange rate of R$5.16:USD$1.00 on the closing date) for all the shares of the FASA Group, subject to certain post-closing adjustments and a contingent payment based on future earnings growth in accordance with the terms set forth in the stock purchase agreement. Under the stock purchase agreement, such contingent payment could range from R$0 to a maximum of R$1.0 billion if future earnings growth reaches certain levels over a three-year period. The Company completed an analysis as of the acquisition date for this contingency and recorded a liability of approximately R$428.2 million (approximately $83.0 million USD at the exchange rate in effect on the closing date of the acquisition) representing the present value of the contingency utilizing assistance from external valuation experts and the use of a Monte Carlo model representing the probability weighted present value of the expected payment to be made under the agreement using the income approach. The Company analyzes the contingent consideration liability using a Monte Carlo model each quarter and any change in fair value is recorded through operating income as changes in fair value of contingent consideration.

The hold-back and contingent consideration amounts represent noncash investing activities during the period of acquisition. The Company initially financed the FASA Acquisition by borrowing approximately $515.0 million of revolver borrowings under the Company's Amended Credit Agreement, with the remainder coming from cash on hand. During the fourth quarter of fiscal 2022, the Company made a cash payment for working capital purchase price adjustment per the stock purchase agreement of approximately $7.1 million with an offset to goodwill.

The following table summarizes the final fair value of the assets acquired and the liabilities assumed in the FASA Acquisition as of August 1, 2022 (in thousands):

13


Accounts receivable$76,640 
Inventories43,058 
Other current assets33,327 
Property, plant and equipment224,384 
Identifiable intangible assets119,477 
Goodwill301,937 
Operating lease right-of-use assets583 
Other assets62,388 
Deferred tax asset2,315 
Accounts payable(15,920)
Current portion of long-term debt(18,680)
Accrued expenses(38,708)
Long-term debt, net of current portion(41,926)
Long-term operating lease liabilities(583)
Deferred tax liability(95,653)
Other noncurrent liabilities(503)
Non-controlling interests(21,704)
Purchase price, net of cash acquired$630,432 
Less hold-back21,705 
Less contingent consideration82,984 
Cash paid for acquisition, net of cash acquired$525,743 

The $301.9 million of goodwill from the FASA Acquisition, which is expected to strengthen the Company's base business and expand its ability to provide additional low carbon intensity feedstocks to fuel the growing demand for renewable diesel, was assigned to the Feed Ingredients segment and is nondeductible for tax purposes. The identifiable intangible assets include $108.6 million in routes with a weighted average life of 12 years and $10.9 million in trade name with a life of 5 years for a total weighted average life of approximately 11.4 years.

The Company notes that pro forma results of operations discussed above does not include the Miropasz Acquisition or other acquisitions individually or in the aggregate as those acquisitions are not deemed material to net sales, total assets and net income of the Company for any period presented.

Additionally, the Company completed other immaterial acquisitions in the first three months of fiscal 2023.

The Company incurred acquisition costs and integration costs of approximately $4.1 million and $7.0 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

(5)    Inventories

A summary of inventories follows (in thousands):


    
 March 30, 2024December 30, 2023
Finished product$410,765 $448,245 
Work in process98,678 110,299 
Raw material53,082 68,188 
Supplies and other124,960 132,007 
 $687,485 $758,739 

(6)    Intangible Assets

The gross carrying amount of intangible assets not subject to amortization and intangible assets subject to amortization
is as follows (in thousands):

    
14


 March 30, 2024December 30, 2023
Indefinite Lived Intangible Assets:  
Trade names$51,927 $52,507 
 51,927 52,507 
Finite Lived Intangible Assets:  
Routes753,869 746,868 
Customer relationships339,161 359,111 
Permits327,516 559,483 
Non-compete agreements295 395 
Trade names85,537 85,561 
Royalty, consulting, land use rights and leasehold22,619 20,613 
 1,528,997 1,772,031 
Accumulated Amortization:
Routes(233,943)(241,960)
Customer relationships(35,349)(29,270)
Permits(182,237)(407,713)
Non-compete agreements(256)(345)
Trade names(66,135)(63,660)
Royalty, consulting, land use rights and leasehold(5,881)(5,698)
(523,801)(748,646)
Total Intangible assets, less accumulated amortization$1,057,123 $1,075,892 

Gross intangible assets changed due to net acquisition and retirement activity in the first three months of fiscal 2024 by approximately $25.4 million and $246.0 million, respectively, and the remaining change is due to foreign exchange impact. Amortization expense for the three months ended March 30, 2024 and April 1, 2023, was approximately $28.0 million and $26.1 million, respectively.

(7)    Goodwill

Changes in the carrying amount of goodwill (in thousands):

 Feed IngredientsFood IngredientsFuel IngredientsTotal
Balance at December 30, 2023   
Goodwill$1,487,236 $900,707 $147,223 $2,535,166 
Accumulated impairment losses(15,914)(3,170)(31,580)(50,664)
 1,471,322 897,537 115,643 2,484,502 
Goodwill acquired during year63,398   63,398 
Measurement period adjustments (9,147) (9,147)
Foreign currency translation(17,099)(20,581)(2,616)(40,296)
Balance at March 30, 2024   
Goodwill1,533,535 870,979 144,607 2,549,121 
Accumulated impairment losses(15,914)(3,170)(31,580)(50,664)
 $1,517,621 $867,809 $113,027 $2,498,457 

(8)    Accrued Expenses

Accrued expenses consist of the following (in thousands):

 March 30, 2024December 30, 2023
Compensation and benefits
$140,583 $156,357 
Accrued operating expenses
78,278 86,278 
Other accrued expense
230,833 198,364 
 $449,694 $440,999 
15



(9)    Debt

Debt consists of the following (in thousands):
March 30, 2024December 30, 2023
Amended Credit Agreement:  
Revolving Credit Facility ($175.0 million and $82.9 million denominated in € at March 30, 2024 and December 30, 2023, respectively)
$634,960 $610,875 
Term A-1 facility399,000 400,000 
Less unamortized deferred loan costs(501)(546)
Carrying value Term A-1 facility398,499 399,454 
Term A-2 facility478,125 481,250 
Less unamortized deferred loan costs(705)(771)
Carrying value Term A-2 facility477,420 480,479 
Term A-3 facility299,250 300,000 
Less unamortized deferred loan costs(765)(832)
Carrying value Term A-3 facility298,485 299,168 
Term A-4 facility487,500 490,625 
Less unamortized deferred loan costs(918)(1,002)
Carrying value Term A-4 facility486,582 489,623 
6% Senior Notes due 2030 with effective interest of 6.12%
1,000,000 1,000,000 
Less unamortized deferred loan costs net of bond premium(6,237)(6,441)
Carrying value 6% Senior Notes due 2030
993,763 993,559 
5.25% Senior Notes due 2027 with effective interest of 5.47%
500,000 500,000 
Less unamortized deferred loan costs(3,020)(3,249)
Carrying value 5.25% Senior Notes due 2027
496,980 496,751 
3.625% Senior Notes due 2026 - Denominated in euro with effective interest of 3.83%
556,200 569,075 
Less unamortized deferred loan costs - Denominated in euro(2,427)(2,763)
Carrying value 3.625% Senior Notes due 2026
553,773 566,312 
Other Notes and Obligations125,469 90,852 
4,465,931 4,427,073 
Less Current Maturities103,075 60,703 
$4,362,856 $4,366,370 

As of March 30, 2024, the Company had outstanding debt under the revolving credit facility denominated in euros of €162.0 million and outstanding debt under the Company's 3.625% Senior Notes due 2026 denominated in euros of €515.0 million. In addition, at March 30, 2024, the Company had finance lease obligations denominated in euros of approximately €7.7 million.

As of March 30, 2024, the Company had other notes and obligations of $125.5 million that consist of various overdraft facilities of approximately $56.9 million, Brazilian notes of approximately $36.4 million, a China working capital line of credit of approximately $2.0 million and other debt of approximately $30.2 million, including U.S. finance lease obligations of approximately $4.3 million.

On January 6, 2014, Darling, Darling International Canada Inc. (“Darling Canada”) and Darling International NL Holdings B.V. (“Darling NL”) entered into a Second Amended and Restated Credit Agreement (as subsequently amended, the “Amended Credit Agreement”), restating its then existing Amended and Restated Credit Agreement dated September 27, 2013, with the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents from time to time party thereto.

The interest rate applicable to any borrowings under the revolving credit facility equals the adjusted term secured overnight financing rate (SOFR) for U.S. dollar borrowings or the adjusted euro interbank rate (EURIBOR) for euro
16


borrowings or the adjusted daily simple Sterling overnight index average (SONIA) for British pound borrowings or the Canadian dollar offered rate (CDOR) for Canadian dollar borrowings plus 1.50% per annum or base rate or the adjusted term SOFR for U.S. dollar borrowings or Canadian prime rate for Canadian dollar borrowings or the adjusted daily simple European short term rate (ESTR) for euro borrowings or the adjusted daily SONIA rate for British pound borrowings plus 0.50% per annum subject to certain step-ups or step-downs based on the Company's total leverage ratio. The interest rate applicable to any borrowing under the term A-1 facility and term A-3 facility equals the adjusted term SOFR plus 1.625% per annum subject to certain step-ups and step-downs based on the Company's total leverage ratio. The interest rate applicable to any borrowing under the term A-2 facility and term A-4 facility equals the adjusted term SOFR plus 1.50% per annum subject to certain step-ups or step-downs based on the Company's total leverage ratio.

As of March 30, 2024, the Company had (i) $460.0 million outstanding under the revolver at SOFR plus a margin of 1.50% per annum for a total of 6.93016% per annum, (ii) $399.0 million outstanding under the term A-1 facility at SOFR plus a margin of 1.625% per annum for a total of 7.05516% per annum, (iii) $478.1 million outstanding under the term A-2 facility at SOFR plus a margin of 1.50% per annum for a total of 6.93016% per annum, (iv) $299.3 million outstanding under the term A-3 facility at SOFR plus a margin 1.625% per annum for a total of 7.05516% per annum, (v) $487.5 million outstanding under the term A-4 facility at SOFR plus a margin 1.50% per annum for a total of 6.93016% per annum, (vi) €152.0 million outstanding under the revolving credit facility at EURIBOR plus a margin of 1.50% per annum for a total of 5.32957% per annum and (vii) €10.0 million outstanding under the revolving credit facility at ESTR plus a margin of 0.25% per annum for a total of 4.158% per annum. As of March 30, 2024, the Company had revolving credit facility availability of $811.1 million, under the Amended Credit Agreement taking into account amounts borrowed, ancillary facilities of $52.6 million and letters of credit issued of $1.4 million. The Company also had foreign bank guarantees of approximately $11.6 million and U.S. bank guarantees of approximately $10.7 million that are not part of the Company's Amended Credit Agreement at March 30, 2024.

As of March 30, 2024, the Company believes it is in compliance with all of the financial covenants under the Amended Credit Agreement, as well as all of the other covenants contained in the Amended Credit Agreement, the 6% Senior Notes due 2030, the 5.25% Senior Notes due 2027 and the 3.625% Senior Notes due 2026.

(10)    Other Noncurrent Liabilities
 
Other noncurrent liabilities consist of the following (in thousands):

 March 30, 2024December 30, 2023
Accrued pension liability$20,504 $20,721 
Reserve for self-insurance, litigation, environmental and tax matters77,420 100,354 
Long-term acquisition hold-backs143,113 137,913 
Long-term contingent consideration58,652 86,495 
Other4,238 4,326 
 $303,927 $349,809