|
| Equity in net income of Diamond Green Diesel | (149,082) | | (366,380) | |
| Equity in net income of other unconsolidated subsidiaries | (11,994) | | (5,011) | |
| Net income attributable to noncontrolling interests | 6,965 | | 12,663 | |
| Adjusted EBITDA (Non-GAAP) | $ | 789,890 | | $ | 1,109,907 | |
| | |
| Foreign currency exchange impact (1) | 1,334 | | — | |
| Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) | $ | 791,224 | | $ | 1,109,907 | |
| | |
| DGD Adjusted EBITDA (Darling's Share) (Non-GAAP) | $ | 289,945 | | $ | 501,987 | |
| | |
| Combined Adjusted EBITDA (Non-GAAP) | $ | 1,079,835 | | $ | 1,611,894 | |
(1) The average rates used in this calculation were the average rates for the fiscal year ended December 28, 2024 of €1.00:$1.08, R$1.00:$0.19 and C$1.00:$0.73 as compared to the average rates for the fiscal year ended December 30, 2023 of €1.00:USD$1.08, R$1.00:$0.20 and C$1.00:$0.74, respectively.
The discussion and analysis of our financial condition and results of operations for the year ended December 30, 2023 compared to the year ended December 31, 2022 are included in Item 7. Management's Discussion and Analysis of Financial Condition and Results in our 2023 Form 10-K and is incorporated herein by reference.
FINANCING, LIQUIDITY, AND CAPITAL RESOURCES
Indebtedness
Certain Debt Outstanding at December 28, 2024. On December 28, 2024, debt outstanding under the Amended Credit Agreement, the Company’s 6% notes, the Company’s 5.25% Notes and the Company’s 3.625% Notes consists of the following (in thousands):
| | | | | |
| Senior Notes: | |
| 6 % Notes due 2030 | $ | 1,000,000 | |
| Less unamortized deferred loan costs net of bond premiums | (5,605) | |
| Carrying value of 6% Notes due 2030 | $ | 994,395 | |
| |
| 5.25 % Notes due 2027 | $ | 500,000 | |
| Less unamortized deferred loan costs | (2,322) | |
| Carrying value of 5.25% Notes due 2027 | $ | 497,678 | |
| |
| 3.625 % Notes due 2026 - Denominated in euros | $ | 536,733 | |
| Less unamortized deferred loan costs | (1,542) | |
| Carrying value of 3.625% Notes due 2026 | $ | 535,191 | |
| |
| Amended Credit Agreement: | |
| Term A-1 facility | $ | 397,000 | |
| Less unamortized deferred loan costs | (366) | |
| Carrying value of Term A-1 facility | $ | 396,634 | |
| |
| Term A-2 facility | $ | 471,875 | |
| Less unamortized deferred loan costs | (509) | |
| Carrying value of Term A-2 facility | $ | 471,366 | |
| |
| Term A-3 facility | $ | 297,750 | |
| Less unamortized deferred loan costs | (560) | |
| Carrying value of Term A-3 facility | $ | 297,190 | |
| |
| Term A-4 facility | $ | 481,250 | |
| Less unamortized deferred loan costs | (664) | |
| Carrying value of Term A-4 facility | $ | 480,586 | |
| |
| Revolving Credit Facility: | |
| Maximum availability | $ | 1,500,000 | |
| Ancillary facilities | 72,717 | |
| Borrowings outstanding | 267,000 | |
| Letters of credit issued | 672 | |
| Availability | $ | 1,159,611 | |
| |
Other Debt | $ | 101,958 | |
At December 28, 2024, the U.S. dollar strengthened as compared to the euro at December 30, 2023. Using the euro based debt outstanding at December 28, 2024 and comparing the closing balance sheet rates at December 28, 2024 to those at December 30, 2023, the U.S. dollar debt balances of euro based debt decreased by $32.1 million, at December 28, 2024. The closing balance sheet rate used in this calculation was the actual fiscal closing balance sheet rate at December 28, 2024 of €1.00:USD$1.042200 as compared to the closing balance sheet rate at December 30, 2023 of €1.00:USD$1.105000.
Senior Secured Credit Facilities. 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 Amended Credit Agreement provides for senior secured credit facilities in the aggregate principal amount of $3.725 billion, which matures on December 9, 2026 and is comprised of (i) the Company’s $525.0 million term loan B facility, (ii) the Company’s $400.0 million term A-1 facility, (iii) the Company’s $500.0 million term A-2 facility, (iv) the Company’s $300.0 million term A-3 facility, (v) the Company’s $500.0 million term A-4 facility and (vi) the Company’s $1.5 billion five-year revolving credit facility (up to $150.0 million of which will be available for a letter of credit sub-limit and $50.0 million of which will be available for a swingline sub-limit) (collectively, the “Senior Secured Credit Facilities”). The Amended Credit Agreement also permits Darling and the other borrowers thereunder to incur ancillary facilities provided by any revolving lender party to the Senior Secured Credit Facilities (with certain restrictions). Up to $1.46 billion of the revolving credit facility is available to be borrowed by Darling, Darling
Canada, Darling NL, Darling Ingredients International Holding B.V. (“Darling BV”), Darling GmbH, and Darling Belgium in U.S. dollars, Canadian dollars, euros, Sterling and other currencies to be agreed and available to each applicable lender. The remaining $40.0 million must be borrowed in U.S. dollars only by Darling. The revolving credit facility will mature on December 9, 2026. The revolving credit facility will be used for working capital needs, general corporate purposes and other purposes not prohibited by the Amended Credit Agreement. For more information regarding the Amended Credit Agreement see Note 10 of Notes to Consolidated Financial Statements included herein.
•As of December 28, 2024, the Company had availability of $1,159.6 million under the revolving credit facility, taking into account an aggregate of $267.0 million in outstanding borrowings, $72.7 million of ancillary facilities and letters of credit issued of $0.7 million.
•As of December 28, 2024, the Company has borrowed all $400.0 million under the terms of the term A-1 facility and has repaid $3.0 million, which when repaid by the Company cannot be reborrowed. The term A-1 facility borrowings are repayable in quarterly installments of 0.25% of the aggregate principle amount of the relevant term A-1 facility on the last day of each March, June, September and December of each year commencing on the last day of such month falling on or after the last day of the first full fiscal quarter following the second anniversary of December 9, 2021 and continuing until the last day of such quarterly period ending immediately prior to the term A-1 facility maturity date of December 9, 2026 and one final installment in the amount of the term A-1 facility then outstanding, due and payable on December 9, 2026.
•As of December 28, 2024, the Company has borrowed all $500.0 million under the terms of the term A-2 facility and has repaid $28.1 million, which when repaid by the Company cannot be reborrowed. The term A-2 facility borrowings are repayable in quarterly installments of 0.625% of the aggregate principle amount of the relevant term A-2 facility on the last day of each March, June, September and December of each year commencing on the last day of such month falling on or after the last day of the first full fiscal quarter following the borrowings or September 30, 2022 and continuing until the last day of such quarterly period ending March 31, 2025, and quarterly installments of 1.25% of the aggregate principle amount of the relevant term A-2 facility due and payable on the last day of each March, June, September and December of each year commencing on the last day of such month falling on or after the last day of the first full fiscal quarter ending June 30, 2025 and continuing until the last day of such quarterly period ending immediately prior to the term A-2 facility maturity date of December 9, 2026 and one final installment in the amount of the term A-2 facility then outstanding, due and payable on December 9, 2026.
•As of December 28, 2024, the Company has borrowed all $300.0 million under the terms of the term A-3 facility and has repaid $2.3 million, which when repaid by the Company cannot be reborrowed. The term A-3 facility borrowings are repayable in quarterly installments of 0.25% of the aggregate principle amount of the relevant term A-3 facility on the last day of each March, June, September and December of each year commencing on the last day of such month falling on or after the last day of the first full fiscal quarter following the second anniversary of December 9, 2021 and continuing until the last day of such quarterly period ending immediately prior to the term A-3 facility maturity date of December 9, 2026 and one final installment in the amount of the term A-3 facility then outstanding, due and payable on December 9, 2026.
•As of December 28, 2024, the Company has borrowed all $500.0 million under the terms of the term A-4 facility and has repaid $18.8 million, which when repaid by the Company cannot be reborrowed. The term A-4 facility borrowings are repayable in quarterly installments of 0.625% of the aggregate principle amount of the relevant term A-4 facility on the last day of each March, June, September and December of each year commencing on the last day of such month falling on or after the last day of the first full fiscal quarter following the borrowings or termination date and continuing until the last day of such quarterly period ending March 31, 2025, and quarterly installments of 1.25% of the aggregate principle amount of the relevant term A-4 facility due and payable on the last day of each March, June, September and December of each year commencing on the last day of such month falling on or after the last day of the first full fiscal quarter ending June 30, 2025 and continuing until the last day of such quarterly period ending immediately prior to the term A-4 facility maturity date of December 9, 2026 and one final installment in the amount of the term A-4 facility then outstanding, due and payable on December 9, 2026.
•As of December 28, 2024, the Company had repaid all $525.0 million it had borrowed under the terms of the term loan B facility, none of which can be reborrowed.
•The interest rate applicable to any borrowings under the revolving credit facility will equal (i) the adjusted term secured overnight financing rate (SOFR) for U.S. dollar borrowings or the adjusted euro interbank rate (EURIBOR) for euro borrowings or the adjusted daily simple Sterling overnight index average (SONIA) for British pound
borrowings, in each case plus 1.75% per annum or (ii) the base rate or the adjusted term SOFR for a one-month interest period for U.S. dollar borrowings or the 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, in each case plus 0.75% per annum, and in each case of clauses (i) and (ii), 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-1 facility and term A-3 facility will equal the adjusted term SOFR plus 1.875% per annum subject to certain step-ups and step-downs based on the Company’s total leverage ratio with a minimum of 1.50%. The interest rate applicable to any borrowing under the term A-2 facility and term A-4 facility will equal the adjusted term SOFR plus 1.75% per annum subject to certain step-ups and step-downs based on the Company’s total leverage ratio with a minimum of 1.00%.
6% Senior Notes due 2030. On June 9, 2022, Darling issued and sold $750.0 million aggregate principal amount of 6% Senior Notes due 2030 (the “6% Initial Notes”). The 6% Initial Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of June 9, 2022 (the “6% Base Indenture”), among Darling, the subsidiary guarantors party thereto from time to time, and Truist Bank, as trustee. On August 17, 2022, Darling issued an additional $250.0 million in aggregate principal amount of its 6% Senior Notes due 2030 (the “add-on notes” and, together with the 6% Initial Notes, the “6% Notes”). The add-on notes and related guarantees, which were offered in a private offering, were issued as additional notes under the 6% Base Indenture, as supplemented by a supplemental indenture, dated as of August 17, 2022 (the “supplemental indenture” and, together with the 6% Base Indenture, the “6% Indenture”). The add-on notes have the same terms as the 6% Initial Notes (other than issue date and issue price) and, together with the 6% Initial Notes, constitute a single class of securities under the 6% Indenture. The 6% Notes are guaranteed on a senior unsecured basis by Darling and all of Darling's restricted subsidiaries (other than foreign subsidiaries) that are borrowers under or that guarantee the Senior Secured Credit Facilities. For a description of the terms of the 6% Notes see Note 10 of Notes to Consolidated Financial Statements included herein.
5.25% Senior Notes due 2027. On April 3, 2019, Darling issued and sold $500.0 million aggregate principal amount of 5.25% Senior Notes due 2027 (the “5.25% Notes”). The 5.25% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of April 3, 2019 (the “5.25% Indenture”), among Darling, the subsidiary guarantors party thereto from time to time, and Regions Bank, as trustee. The 5.25% Notes are guaranteed on a senior unsecured basis by Darling and all of Darling's restricted subsidiaries (other than foreign subsidiaries) that are borrowers under or that guarantee the Senior Secured Credit Facilities. For a description of the terms of the 5.25% Notes see Note 10 of Notes to Consolidated Financial Statements included herein.
3.625% Senior Notes due 2026. On May 2, 2018, Darling Global Finance B.V. issued and sold €515.0 million aggregate principal amount of 3.625% Senior Notes due 2026 (the “3.625% Notes”). The 3.625% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of May 2, 2018 (the “3.625% Indenture”), among Darling Global Finance B.V., Darling, the subsidiary guarantors party thereto from time to time, Citibank, N.A., London Branch, as trustee and principal paying agent, and Citigroup Global Markets Deutschland AG, as principal registrar. The 3.625% Notes are guaranteed on a senior unsecured basis by Darling and all of Darling's restricted subsidiaries (other than any foreign subsidiary or any receivable entity) that guarantee the Senior Secured Credit Facilities. For a description of the terms of the 3.625% Notes see Note 10 of Notes to Consolidated Financial Statements included herein.
Other debt consists of U.S., European, Canadian and Chinese overdraft ancillary facilities, U.S., European and Brazilian finance lease obligations and note arrangements in the U.S., Brazil, China and Europe that are not part of the Amended Credit Agreement, 6% Notes, 5.25% Notes or 3.625% Notes.
The classification of long-term debt in the Company’s December 28, 2024 Consolidated Balance Sheet is based on the contractual repayment terms of the 6% Notes, the 5.25% Notes, the 3.625% Notes and debt issued under the Amended Credit Agreement.
As a result of the Company’s borrowings under its Amended Credit Agreement, the 6% Indenture, the 5.25% Indenture and the 3.625% Indenture, the Company is highly leveraged. Investors should note that, in order to make scheduled payments on the indebtedness outstanding under the Amended Credit Agreement, the 6% Notes, the 5.25% Notes and the 3.625% Notes, and otherwise, the Company will rely in part on a combination of dividends, distributions and intercompany loan repayments from the Company’s direct and indirect U.S. and foreign subsidiaries. The Company is prohibited under the Amended Credit Agreement from entering (or allowing such subsidiaries to enter) into contractual limitations on the Company’s subsidiaries’ ability to declare dividends or make other payments or distributions to the Company. The Company has also attempted to structure the Company’s consolidated indebtedness in such a way as to maximize the Company’s ability to move cash from the Company’s subsidiaries to Darling or another subsidiary that will have fewer limitations on the ability to
make upstream payments, whether to Darling or directly to the Company’s lenders as a Guarantor. Nevertheless, applicable laws under which the Company’s direct and indirect subsidiaries are formed may provide limitations on such dividends, distributions and other payments. In addition, regulatory authorities in various countries where the Company operates or where the Company imports or exports products may from time to time impose import/export limitations, foreign exchange controls or currency devaluations that may limit the Company’s access to profits from the Company’s subsidiaries or otherwise negatively impact the Company’s financial condition and therefore reduce the Company’s ability to make required payments under the Amended Credit Agreement, the 6% Notes, the 5.25% Notes and the 3.625% Notes, or otherwise. In addition, fluctuations in foreign exchange values may have a negative impact on the Company’s ability to repay indebtedness denominated in U.S. or Canadian dollars or euros. See “Risk Factors - Our business may be adversely impacted by fluctuations in foreign currency exchange rates, which could affect our ability to comply with our financial covenants” and “- Our ability to repay our indebtedness depends in part on the performance of our subsidiaries, including our non-guarantor subsidiaries, and their ability to make payments” in Item 1A of this Annual Report on Form 10-K for the fiscal year ended December 28, 2024.
As of December 28, 2024, the Company is in compliance with all financial covenants under the Amended Credit Agreement, and believes it is in compliance with all of the other covenants contained in the Amended Credit Agreement, the 6% Indenture, the 5.25% Indenture and the 3.625% Indenture.
Working Capital and Capital Expenditures
On December 28, 2024, the Company had working capital of $395.9 million and its working capital ratio was 1.38 to 1 compared to working capital of $857.5 million and a working capital ratio of 1.86 to 1 on December 30, 2023. At December 28, 2024, the Company had unrestricted cash of $76.0 million and funds available under the revolving credit facility of $1.16 billion, compared to unrestricted cash of $126.5 million and funds available under the revolving credit facility of $832.5 million at December 30, 2023. The Company diversifies its cash investments by limiting the amounts deposited with any one financial institution.
Net cash provided by operating activities was $839.3 million and $899.3 million for the fiscal years ended December 28, 2024 and December 30, 2023, respectively, a decrease of $60.0 million due primarily to a decrease in net income that more than offset an increase in cash from working capital. Cash used in investing activities was $498.9 million during fiscal year 2024, compared to $1,675.5 million in fiscal year 2023, a decrease in cash used of $1,176.6 million, primarily due to a decrease in acquisitions and capital expenditures. Net cash provided/(used) in financing activities was $(399.6) million during fiscal year 2024, compared to $876.3 million in fiscal year 2023, a decrease in net cash provided of $1,275.9 million, primarily due to lower debt borrowings that were used to fund acquisitions in the prior year.
Capital expenditures of $332.5 million were made during fiscal year 2024 as compared to $555.5 million in fiscal year 2023, a decrease of $(223.0) million. The Company expects to incur capital expenditures of approximately $400 million in fiscal year 2025, including compliance, replacement and expansion projects. The Company intends to finance these costs using cash flows from operations. Capital expenditures related to compliance with environmental regulations were $67.4 million in fiscal year 2024, $64.8 million in fiscal year 2023 and $54.7 million in fiscal year 2022.
Accrued Insurance and Pension Plan Obligations
Based upon the annual actuarial estimate, current accruals and claims paid during fiscal year 2024, the Company has accrued approximately $21.2 million as of December 28, 2024 that it expects will become due during the next twelve months in order to meet obligations related to the Company’s self-insurance reserves and accrued insurance obligations, which are included in current accrued expenses at December 28, 2024. The self-insurance reserve is composed of estimated liability for claims arising for workers’ compensation, auto liability, general liability and medical claims liability. The self-insurance reserve liability and medical claims liability are determined annually, based upon a third-party actuarial estimate. The actuarial estimate may vary from year to year, due to changes in costs of health care, the pending number of claims and other factors beyond the control of management of the Company.
Based upon current actuarial estimates, the Company expects to make payments of approximately $0.4 million in order to meet minimum pension funding requirements to its domestic plans in fiscal year 2025. In addition, the Company expects to make payments of approximately $3.4 million under its foreign pension plans in fiscal year 2025. The minimum pension funding requirements are determined annually, based upon a third-party actuarial estimate. The actuarial estimate may vary from year to year, due to fluctuations in return on investments or other factors beyond the control of management of the Company or the administrator of the Company’s pension funds. No assurance can be given that the minimum pension funding requirements will not increase in the future. The Company has made required and tax deductible discretionary contributions to its domestic pension plans in fiscal year 2024 and fiscal year 2023 of approximately $0.4 million and $0.2 million, respectively.
Additionally, the Company has made required and tax deductible discretionary contributions to its foreign pension plans in fiscal year 2024 of approximately $3.3 million, as compared to $4.1 million in contributions in fiscal year 2023.
The U.S. Pension Protection Act of 2006 (“PPA”) went into effect in January 2008. The stated goal of the PPA is to improve the funding of U.S. pension plans. U.S. plans in an under-funded status are required to increase employer contributions to improve the funding level within PPA timelines. Volatility in the world equity and other financial markets could have a material negative impact on U.S. pension plan assets and the status of required funding under the PPA. The Company participates in various U.S. multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts. These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants. The Company’s contributions to each individual U.S. multiemployer plan represent less than 5% of the total contributions to each such plan. Based on the most currently available information, the Company has determined that, if a withdrawal were to occur, withdrawal liabilities on two of the U.S. plans in which the Company currently participates could be material to the Company. With respect to the other U.S. multiemployer pension plans in which the Company participates and which are not individually significant, five plans have certified as critical or red zone, as defined by the PPA. The Company has withdrawal liabilities recorded on four U.S. multiemployer plans in which it participated. As of December 28, 2024, the Company has an aggregate accrued liability of approximately $4.4 million representing the present value of scheduled withdrawal liability payments on the remaining multiemployer plans that have given notices of withdrawals. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could require additional funding under the PPA, the amounts could be material.
DGD Joint Venture
The DGD Joint Venture currently operates the DGD Facilities, with a combined renewable fuel (including renewable diesel and SAF) production capacity of approximately 1.2 billion gallons per year. Renewable diesel is a low-carbon transportation fuel that is interchangeable with diesel produced from petroleum and is produced at the DGD Facilities using an advanced hydroprocessing-isomerization process licensed from UOP LLC, known as the Ecofining™ Process, and a pretreatment process developed by the Desmet Ballestra Group, to convert fats (animal fats, used cooking oils, distillers corn oil and vegetable oils) into renewable diesel, renewable naphtha and other light end renewable hydrocarbons. The DGD Joint Venture was formed in January 2011 to design, engineer, construct and operate the DGD St. Charles Plant, which reached mechanical completion and began production of renewable diesel and certain other co-products in late June 2013. In October 2021, the DGD Joint Venture completed an expansion of the DGD St. Charles Plant that increased its renewable diesel production capability to up to 750 million gallons per year of renewable diesel, as well as separating renewable naphtha (approximately 30 million gallons) and other light end renewable hydrocarbons for sale into low carbon fuel markets. Additionally, in November 2022 the DGD Joint Venture completed the construction of the DGD Port Arthur Plant, with a capacity to produce 470 million gallons per year of renewable diesel and 20 million gallons per year of renewable naphtha and having similar logistics flexibilities as those of the DGD St. Charles Plant. Furthermore, in November 2024, the DGD Joint Venture completed a capital project at the DGD Port Arthur Plant to provide the plant with the capability to upgrade approximately fifty percent (50%) of its current 470 million gallon annual production capacity to SAF.
On May 1, 2019, Darling through its wholly owned subsidiary Darling Green Energy LLC, (“Darling Green”), and Diamond Alternative Energy, LLC, a wholly owned subsidiary of Valero (“Diamond Alternative” and together with Darling Green, the “DGD Lenders”) entered into a revolving loan agreement (the “2019 DGD Loan Agreement”) with the DGD Joint Venture, pursuant to which the DGD Lenders committed to making loans available to the DGD Joint Venture in the amount of $50.0 million with each lender committed to $25.0 million of the total commitment. Any borrowings by the DGD Joint Venture under the 2019 DGD Loan Agreement were at the applicable annum rate equal to the sum of (a) the LIBO Rate (meaning Reuters BBA Libor Rates Page 3750) on such day plus (b) 2.50%. On June 15, 2023, the DGD Lenders entered into a new revolving loan agreement (the “2023 DGD Loan Agreement”) with the DGD Joint Venture that replaced and superseded in its entirety the 2019 DGD Loan Agreement and pursuant to which the DGD Lenders have committed to making loans available to the DGD Joint Venture in the total amount of $200.0 million with each lender committed to $100.0 million of the total commitment. Any borrowings by the DGD Joint Venture under the 2023 DGD Loan Agreement are at the applicable annum rate equal to the sum of (a) Term SOFR on such day plus (b) 2.50%. The 2023 DGD Loan Agreement expires on June 15, 2026. In December 2022, the DGD Joint Venture borrowed all $50.0 million available under the 2019 DGD Loan Agreement, including the Company’s full $25.0 million commitment, which was repaid in fiscal 2023. In January 2024, the DGD Joint Venture borrowed all $200.0 million available under the 2023 DGD Loan Agreement, including the Company’s full $100.0 million commitment, which was repaid in March 2024. The DGD Joint Venture paid interest to the Company for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 of approximately $1.6 million, $0.6 million and $0.6 million, respectively. As of December 28, 2024 and December 30, 2023, zero was owed to Darling Green under the 2023 DGD
Loan Agreement. This note receivable amount when outstanding is included in other current assets on the balance sheet and is included in investing activities on the cash flow statement.
On June 23, 2023, the DGD Joint Venture entered into an amended and restated credit agreement consisting of a $400.0 million senior, unsecured revolving credit facility, with CoBank ACB acting as lead arranger and the administrative agent for the lending group, which is comprised of Farm Credit System institutions. The revolving credit facility matures June 23, 2026 and is non-recourse to the joint venture partners. As of December 28, 2024, the DGD Joint Venture had no borrowings outstanding under this unsecured revolving credit facility.
Based on the sponsor support agreements executed in connection with the initial construction of the DGD St. Charles Plant, the Company contributed a total of approximately $111.7 million for completion of the DGD St. Charles Plant, and each partner has subsequently made $618.8 million in additional capital contributions to the DGD Joint Venture. As of December 28, 2024, under the equity method of accounting the Company has an investment in the DGD Joint Venture of approximately $2.2 billion included on the Consolidated Balance Sheet.
The Company’s original investment in DGD has expanded since 2011 to the point that it is now integral to how the Company operates its business. Darling traditionally collected and converted used cooking oil and animal fats into feed ingredients which were sold on a caloric value to feed animals as well as for industrial technical uses. Over the past decade, the world’s increasing focus on climate change and greenhouse gas has provided a new finished market for the Company’s finished fats ingredients. With Darling’s significant fats ownership, this has and continues to transform how the Company operates. In each of fiscal 2022, 2023 and 2024, a large portion of Darling’s total U.S. finished fats products were sold to the DGD Facilities as feedstock for production of renewable diesel and, beginning in fiscal 2024, SAF. In 2024, 2023 and 2022, DGD was the Company’s largest finished product customer in terms of total net sales, with the Company recording total net sales to DGD in those years of $968.9 million, $1.3 billion and $1.1 billion, respectively.
From a procurement, production and distribution standpoint, DGD has become integral to Darling’s base business. DGD is integrated to the Company’s operations via the combined vertical operating structure from collecting raw fats, to processing collected fats at Darling facilities worldwide to transporting the refined fats to the DGD Facilities as feedstock. The Darling supply chain has become more efficient and sustainable with transparency for verification to obtain full value to low carbon intensity markets. The development of the low carbon markets in North America and Europe has influenced how Darling operates its core business and has also been a driver for the recent DGD expansions, which are making DGD much more relevant to Darling’s earnings. Since 2011 when construction began on DGD, Darling has invested substantially to increase its U.S. railcar fleet to efficiently manage nationwide transportation of Darling fats to DGD. Additionally, Darling acquired an Iowa location on the Mississippi River that further enhances the ability of the Company’s Midwest network of facilities to collect and deliver feedstocks to DGD via water, rail or truck from a centralized location. In fiscal 2022, Darling acquired both Valley Proteins and FASA, each of which supply additional feedstocks to DGD. Darling has also stepped up collection efforts by providing indoor used cooking oil collection units in exchange for extended collection contracts at restaurant establishments and has moved to more of a centralized digital marketing effort with restaurant chains and franchise groups and invested in internet search engine key words to improve visibility with restaurants. The Company also includes DGD in marketing efforts to emphasize environmental sustainability that restaurants participate in when their used cooking oil is collected by Darling. From a production standpoint, Darling now isolates used cooking oil from other fats to preserve identification to qualify for a higher carbon intensity value. As a result, the Company includes its equity in net income of the DGD Joint Venture as operating income.
Financial Impact of Significant Debt Outstanding
The Company has a substantial amount of indebtedness, which could make it more difficult for us to satisfy our obligations to our financial lenders and our contractual and commercial commitments, limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements on commercially reasonable terms or at all, require us to use a substantial portion of our cash flows from operations to pay principal and interest on our indebtedness instead of other purposes, thereby reducing the amount of our cash flows from operations available for working capital, capital expenditures, acquisitions and other general corporate purposes, increase our vulnerability to adverse economic, industry and business conditions, expose us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest, limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, place us at a competitive disadvantage compared to other, less leveraged competitors, and/or increase our cost of borrowing.
Cash Flows and Liquidity Risks
Management believes that the Company’s cash flows from operating activities consistent with the level generated in fiscal year 2024, unrestricted cash and funds available under the Amended Credit Agreement, will be sufficient to meet the Company’s working capital needs and maintenance and compliance-related capital expenditures, scheduled debt and interest payments, income tax obligations, and other contemplated needs through the next twelve months. Numerous factors could have adverse consequences to the Company that cannot be estimated at this time, such as negative impacts from the Russia-Ukraine war, the Israeli-Palestinian conflict and other Middle Eastern conflicts and those other factors discussed below under the heading “Forward Looking Statements”. These factors, coupled with volatile prices for natural gas and diesel fuel, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could negatively impact the Company’s results of operations in fiscal year 2025 and thereafter. The Company reviews the appropriate use of unrestricted cash periodically. As of the date of this report, no decision has been made as to non-ordinary course material cash usages at this time; however, potential usages could include: opportunistic capital expenditures and/or acquisitions and joint ventures; investments relating to the Company’s renewable energy strategy, including, without limitation, potential investments in additional renewable diesel or SAF projects; investments in response to governmental regulations relating to human and animal food safety or other regulations; unexpected funding required by the legislation, regulation or mass termination of multiemployer plans; and paying dividends or repurchasing stock, subject to limitations under the Amended Credit Agreement, the 6% Indenture, the 5.25% Indenture and the 3.625% Indenture, as well as suitable cash conservation to withstand adverse commodity cycles. The Company’s Board of Directors approved a share repurchase program of up to an aggregate of $500.0 million of the Company’s Common Stock depending on market conditions. The repurchases may be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market. The program runs through August 13, 2026, unless further extended or shortened by the Board of Directors. During fiscal year 2024, the Company repurchased approximately $34.3 million, including commissions, of its common stock in the open market. As of December 28, 2024, the Company had approximately $494.9 million remaining in its share repurchase program.
Each of the factors described above has the potential to adversely impact the Company’s liquidity in a variety of ways, including through reduced raw materials availability, reduced finished product prices, reduced sales, potential inventory buildup, increased bad debt reserves, potential impairment charges and/or higher operating costs.
Sales prices for many of the principal products that the Company sells are typically influenced by sales prices for agricultural-based ingredients, the prices of which are based on established commodity markets and are subject to volatile changes. Any decline in these prices has the potential to adversely impact the Company’s liquidity. Any of a decline in raw material availability, a decline in agricultural-based alternative ingredients prices, increases in energy prices or the impact of U.S. and foreign regulation or tariffs (including, without limitation, China), changes in foreign exchange rates, imposition of currency controls and currency devaluations has the potential to adversely impact the Company’s liquidity. A decline in commodities prices, a rise in energy prices, a slowdown in the U.S. or international economy, high inflation rates or other factors, could cause the Company to fail to meet management's expectations or could cause liquidity concerns.
OFF BALANCE SHEET OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS
Based upon the underlying purchase agreements, the Company has commitments to purchase $299.7 million of commodity products, consisting of approximately $141.8 million of finished and raw material products and approximately $128.7 million of natural gas and diesel fuel and approximately $29.2 million of other commitments during the next five years, which are not included in liabilities on the Company’s balance sheet at December 28, 2024. The Company intends to take physical delivery of the commodities under the forward purchase agreements and accordingly, these contracts are not subject to the requirements of fair value accounting because they qualify as normal purchases. The commitments will be recorded on the balance sheet of the Company when delivery of these commodities or products occurs and ownership passes to the Company during the remainder of fiscal 2025 and through fiscal 2029, in accordance with accounting principles generally accepted in the United States.
The Company’s off-balance sheet contractual obligations and commercial commitments as of December 28, 2024 relate to letters of credit, foreign bank guarantees, forward purchase agreements and employment agreements. The Company has excluded these items from the balance sheet in accordance with U.S. GAAP.
The following table summarizes the Company’s other commercial commitments, including both on- and off-balance sheet arrangements that are part of the Amended Credit Agreement and other foreign bank guarantees that are not a part of the Amended Credit Agreement at December 28, 2024 (in thousands):
| | | | | |
| Other commercial commitments: | |
| Standby letters of credit | $ | 672 | |
| Standby letters of credit (ancillary facility) | 40,768 | |
| Foreign bank guarantees | 11,057 | |
| Total other commercial commitments: | $ | 52,497 | |
CRITICAL ACCOUNTING POLICIES
The Company follows certain significant accounting policies when preparing its consolidated financial statements. A complete summary of these policies is included in Note 1 of Notes to Consolidated Financial Statements included herein.
Certain of the policies require management to make significant and subjective estimates or assumptions regarding uncertainties, including the business and economic uncertainty resulting from the Russia-Ukraine war, the Israeli-Palestinian conflict and other Middle Eastern conflicts and the high interest rate and inflationary cost environment, and as a result, such estimates may deviate from actual results and significantly impact our financial results. In particular, management makes estimates regarding fair value of the Company’s reporting units and future cash flows with respect to assessing potential impairment of both long-lived assets and goodwill and pension liabilities. Each of these estimates is discussed in greater detail in the following discussion.
Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting when the activities acquired have been determined to be a business. The consideration transferred in a business combination is measured at fair value, which is determined as the sum of the acquisition-date fair values of the assets transferred, liabilities incurred by the Company and any equity interests issued by the Company. The consideration transferred is allocated to the tangible and intangible assets acquired and liabilities assumed at their estimated fair value on the acquisition date. The excess of fair value is recorded as goodwill. The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of acquisition. Acquisition costs are expensed as incurred.
Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates. Depending on the acquisition size, the Company determines the fair values using the assistance of a valuation expert who assists the Company primarily using the cost, market and income approaches and using estimates of future revenue and cash flows, raw material and sales volumes, discount rates and the selection of comparable companies. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of the acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the Consolidated Statement of Operations.
Long-Lived Assets
The Company reviews the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset, or related asset group, may not be recoverable from estimated future undiscounted cash flows. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of the asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset or asset group. In fiscal 2024, there were no events or changes in circumstances requiring an impairment. In fiscal 2023, the Company’s management decided to close or transfer operations for three feed segment locations in the U.S. for optimization opportunities. As a result, the Company incurred asset impairment charges to its feed segment long-lived assets of approximately $2.9 million in fiscal 2023. In addition to charges incurred in fiscal 2022, the Company incurred additional asset impairment charges in fiscal 2023 related to the Peabody, Massachusetts, plant closure of approximately $1.8 million. In fiscal 2022, the Company’s management reviewed our global network of collagen plants for optimization opportunities and decided to close our Peabody, Massachusetts, plant in 2023. As a result, the Company incurred long-lived asset impairment charges to its food segment long-lived assets of approximately $18.4 million in fiscal 2022. In addition, in the second quarter of fiscal 2022, the Company lost a large raw material customer at a
plant location in Canada that resulted in a long-lived asset impairment charge in the feed segment of approximately $8.6 million.
Goodwill and Indefinite Lived Intangible Assets Valuation
Goodwill and indefinite-lived intangible assets are tested annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. When assessing the recoverability of goodwill and other indefinite lived intangible assets, the Company may first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit, including goodwill, or other indefinite lived intangible assets are less than its carrying amount. The qualitative evaluation is an assessment of multiple factors, including the current operating environment, financial performance and market considerations. The Company may elect to bypass this qualitative assessment for some or all of its reporting units or other indefinite lived intangible assets and perform a quantitative test, based on management's judgment. If the Company chooses to bypass the qualitative assessment, it performs the quantitative approach to impairment testing by comparing the fair value of the Company’s reporting units to their respective carrying amounts and records an impairment charge for the amount by which the carrying amounts exceeds the fair value; however, the loss recognized if any will not exceed the total amount of goodwill allocated to that reporting unit.
In fiscal 2024, the Company performed a quantitative approach to valuing goodwill and indefinite-lived intangible assets at October 26, 2024 and as a result determined the fair values of the Company’s reporting units containing goodwill and indefinite lived intangible assets exceeded the related carrying values. However, based on the Company’s annual impairment testing at October 26, 2024, the fair value of two of the Company’s six reporting units had a fair value that was not substantially in excess of their carrying values. The fair value of these reporting units was determined to be between 20% - 30% in excess of the carrying value with goodwill of approximately $1.3 billion as of December 28, 2024. The Company determined the fair value of reporting units with the assistance of a valuation expert who assisted the Company primarily using the Income Approach to determine the fair value of the Company’s reporting units. Key assumptions that impacted the discounted cash flow model were raw material and sales volumes, gross margins, terminal growth rates and discount rates. It is possible, depending upon a number of factors that are not determinable at this time or within the control of the Company, that the fair value of these two reporting units could decrease in the future and result in an impairment to goodwill. The Company’s management believes the biggest risk to these reporting units is decreasing finished product prices impacting gross margins and an economic slowdown that would impact raw material suppliers. In fiscal 2023, the Company performed a quantitative approach to valuing goodwill and indefinite-lived intangible assets at October 28, 2023 and as a result determined that fair values of the Company’s reporting units containing goodwill exceeded the related carrying values. In fiscal 2022, the Company performed a qualitative impairment analysis for its annual goodwill and indefinite-lived intangible assets at October 29, 2022. Based on the Company’s annual impairment testing at October 29, 2022, we concluded it is more likely than not that the fair values of the Company’s reporting units containing goodwill exceeded the related carrying value. In fiscal 2022, the Company’s management reviewed our global network of collagen plants for optimization opportunities and decided to close our Peabody, Massachusetts, plant in 2023. As a result of the restructuring, the Company incurred a goodwill impairment charge in the food segment of approximately $2.7 million. Goodwill was approximately $2.3 billion and $2.5 billion at December 28, 2024 and December 30, 2023, respectively.
Pension Liability
The Company has retirement and pension plans covering a substantial number of its domestic and foreign employees. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on plan assets, rate of increase in employee compensation levels, mortality rates and trends in health care costs. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of net periodic benefit cost recorded in future periods.
The discount rate applied to the Company’s pension liability is the interest rate used to calculate the present value of the pension benefit obligation. The weighted average discount rate was 4.84% at December 28, 2024 and 4.62% at December 30, 2023, respectively. The projected net periodic benefit cost for fiscal year 2025 would increase by approximately $0.6 million if the discount rate was 0.5% lower at a weighted average of 4.34%. The projected net periodic benefit cost for fiscal year 2025 would decrease by approximately $0.7 million if the discount rate was 0.5% higher at a weighted average of 5.34%.
NEW ACCOUNTING PRONOUNCEMENTS
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures, which requires new disclosures providing further detail of a Company’s income statement expense line items. This ASU is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosure, but does not expect this update to have a material impact on the Company’s consolidated financial statements other than additional information that is provided in the footnote disclosure.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, which expands the disclosures required in an entity's income tax rate reconciliation table and disclosure of income taxes paid both in U.S. and foreign jurisdictions. The amendments are effective for fiscal years beginning after December 15, 2024 and should be applied prospectively. Early adoption is permitted. The Company is currently evaluating this ASU, but does not expect this update to have a material impact on the Company’s consolidated financial statements other than additional information that is provided in the footnote disclosure.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) Improvements to Reportable Segment Disclosures. The amendment requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment's profit or loss and assets. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024 and should be applied retrospectively. Early adoption is permitted. The Company adopted this ASU in 2024 and the adoption did not have an impact on the Company’s consolidated financial statements other than additional information that is provided in the footnote disclosure.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K includes “forward-looking” statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements. Statements that are not statements of historical facts are forward looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “guidance,” “outlook,” “project,” “planned,” “contemplate,” “potential,” “possible,” “proposed,” “intend,” “believe,” “anticipate,” “expect,” “may,” “will,” “would,” “should,” “could,” and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts included in this report are forward looking statements, including, without limitation, the statements under the sections entitled “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Legal Proceedings” and located elsewhere herein regarding industry prospects, the Company’s financial position and the Company’s use of cash. Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. The Company cautions readers that any such forward-looking statements it makes are not guarantees of future performance and that actual results may differ materially from anticipated results or expectations expressed in its forward-looking statements as a result of a variety of factors, including many that are beyond the Company’s control.
In addition to those factors discussed under the heading “Risk Factors” in Item 1A of this report and elsewhere in this report, and in the Company’s other public filings with the SEC, important factors that could cause actual results to differ materially from the Company’s expectations include: existing and unknown future limitations on the ability of the Company’s direct and indirect subsidiaries to make their cash flow available to the Company for payments on the Company’s indebtedness or other purposes; reduced demands or prices for biofuels, biogases or renewable electricity; global demands for grain and oilseed commodities, which have exhibited volatility, and can impact the cost of feed for cattle, hogs and poultry, thus affecting available rendering feedstock and selling prices for the Company’s products; reductions in raw material volumes available to the Company due to weak margins in the meat production industry as a result of higher feed costs, reduced consumer demand, reduced volume due to government regulations affecting animal production or other factors, reduced volume from food service establishments, or otherwise; reduced demand for animal feed; reduced finished product prices, including a decline in fat, used cooking oil, protein or collagen (including, without limitation, collagen peptides and gelatin) finished product prices; changes to government policies around the world relating to renewable fuels and GHG emissions that adversely affect prices, margins or markets (including for the DGD Joint Venture), including programs like renewable fuel standards, low carbon fuel standards (“LCFS”), renewable fuel mandates and tax credits for biofuels or loss or diminishment of tax credits due to failure to satisfy any eligibility requirements, including, without limitation, in relation to the blenders tax credit or CFPC; climate related adverse results, including with respect to the Company’s climate goals, targets or commitments; possible product recall resulting from
developments relating to the discovery of unauthorized adulterations to food or food additives or products which do not meet specifications, contract requirements or regulatory standards; the occurrence of 2009 H1N1 flu (initially known as Swine Flu), highly pathogenic strains of avian influenza (collectively known as Bird Flu), SARS, BSE, PED or other diseases associated with animal origin in the U.S. or elsewhere, such as the outbreak of ASF in China and elsewhere; the occurrence of pandemics, epidemics or disease outbreaks, such as the COVID-19 outbreak; unanticipated costs and/or reductions in raw material volumes related to the Company’s compliance with the existing or unforeseen new U.S. or foreign (including, without limitation, China) regulations (including new or modified animal feed, Bird Flu, SARS, PED, BSE or ASF or similar or unanticipated regulations) affecting the industries in which the Company operates or its value added products; risks associated with the DGD Joint Venture, including possible unanticipated operating disruptions and a decline in margins on the products produced by the DGD Joint Venture; risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers and other trade protections by foreign countries; tax changes, such as global minimum tax measures, or issues related to administration, guidance and/or regulations associated with biofuel policies, including CFPC, and risks associated with the qualification and sale of such credits; difficulties or a significant disruption (including, without limitation, due to cyber-attack) in the Company’s information systems, networks or the confidentiality, availability or integrity of our data or failure to implement new systems and software successfully; risks relating to possible third-party claims of intellectual property infringement; increased contributions to the Company’s pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawal event; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraine or elsewhere, including the Russia-Ukraine war and the Israeli-Palestinian conflict and other associated or emerging conflicts in the Middle East; uncertainty regarding the exit of the U.K. from the European Union; uncertainty regarding any administration changes in the U.S. or elsewhere around the world, including, without limitation, impacts to trade, tariffs and/or policies impacting the Company (such as biofuel policies and mandates); and/or unfavorable export or import markets. These factors, coupled with volatile prices for natural gas and diesel fuel, inflation rates, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could cause actual results to vary materially from the forward-looking statements included in this report or negatively impact the Company’s results of operations. Among other things, future profitability may be affected by the Company’s ability to grow its business, which faces competition from companies that may have substantially greater resources than the Company. The Company’s announced share repurchase program may be suspended or discontinued at any time and purchases of shares under the program are subject to market conditions and other factors, which are likely to change from time to time. The Company cautions readers that all forward-looking statements speak only as of the date made, and the Company undertakes no obligation to update any forward looking statements, whether as a result of changes in circumstances, new events or otherwise.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risks affecting the Company include exposures to changes in prices of the finished products the Company sells, interest rates on debt, availability of raw material supplies and the price of natural gas and diesel fuel used in the Company’s plants. Raw materials available to the Company are impacted by seasonal factors, including holidays, when raw material volume declines; warm weather, which can adversely affect the quality of raw material processed and finished products produced; and cold weather, which can impact the collection of raw material. Most of the Company’s finished products are commodities that are generally sold at prices prevailing at the time of sale. Additionally, with acquisition of foreign entities we are exposed to foreign currency exchange risks, imposition of currency controls and the possibility of currency devaluation.
The Company makes limited use of derivative instruments to manage cash flow risks related to interest rates, natural gas usage, diesel fuel usage, inventory, forecasted sales and foreign currency exchange rates. The Company does not use derivative instruments for trading purposes. Interest rate swaps are entered into with the intent of managing overall borrowing costs by reducing the potential impact of increases in interest rates on floating-rate long-term debt. Heating oil swaps and options are entered into with the intent of managing the overall cost of diesel fuel usage by reducing the potential impact of seasonal weather demands on diesel fuel that increases diesel fuel prices. Soybean meal forward contracts and options are entered into with the intent of managing the impact of changing prices for poultry meal sales. Corn options and future contracts are entered into with the intent of managing U.S. forecasted sales of BBP by reducing the impact of changing prices. Foreign currency forward contracts and options are entered into to mitigate the foreign exchange rate risk for transactions designated in a currency other than the local functional currency. The Company intends to take physical delivery of the commodities under certain of the Company’s natural gas and diesel fuel instruments and accordingly, these contracts are not subject to the requirements of fair value accounting because they qualify as normal purchases as defined in FASB authoritative guidance.
At December 28, 2024, the Company had foreign currency options and forward contracts, interest rate swaps and corn options and forward contracts outstanding that qualified and were designated for hedge accounting as well as corn options and forward contracts and foreign currency forward contracts that did not qualify and were not designated for hedge accounting.
In fiscal 2023, the Company entered into interest rate swaps that are designated as cash flow hedges. The notional amount of these swaps totaled $900.0 million. Under the contracts, the Company is obligated to pay a weighted average rate of 4.007% while receiving the 1-month SOFR rate. Under the terms of the interest rate swaps, the Company hedged a portion of its variable rate debt into the first quarter of 2026. At December 28, 2024, the aggregate fair value of these interest rate swaps was approximately $4.2 million. These amounts are included in other current assets, other assets, accrued expenses and noncurrent liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss.
In fiscal 2023, the Company also entered into cross currency swaps that are designated as cash flow hedges. The notional amount of these swaps was €519.2 million. Under the contracts, the Company is obligated to pay a 4.6% euro denominated fixed rate while receiving a weighted average U.S. dollar fixed rate of 5.799%. Under the terms of the cross currency swaps, the Company hedged its intercompany notes receivable into the first quarter of 2025. Accordingly, changes in the fair value of the cash flow hedge are initially recorded as gains and/or losses as a component of accumulated other comprehensive loss. We immediately reclassify from accumulated other comprehensive loss to earnings an amount to offset the remeasurement recognized in earnings associated with the respective intercompany loan. Additionally, we reclassify amounts from accumulated other comprehensive loss associated with the interest rate differential between the U.S. dollar and euro to interest expense. At December 28, 2024, the aggregate fair value of these cross currency swaps was approximately $22.2 million. These amounts are included in other current assets on the balance sheet, with an offset recorded in accumulated other comprehensive loss.
In fiscal 2024, fiscal 2023 and fiscal 2022, the Company entered into foreign exchange option and forward contracts that are considered cash flow hedges. Under the terms of the foreign exchange contracts, the Company hedged a portion of its forecasted sales in currencies other than the functional currency through the fourth quarter of fiscal 2026. At December 28, 2024, the aggregate fair value of these foreign exchange contracts was approximately $32.6 million. These amounts are included in other assets, accrued expenses and noncurrent liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss.
In fiscal 2024 and fiscal 2022, the Company entered into corn option and forward contracts that are considered cash flow hedges. Under the terms of the corn option and forward contracts the Company hedged a portion of its forecasted sales of BBP into the second quarter of fiscal 2025. At December 28, 2024, the aggregate fair value of the corn contracts was $0.1 million. These amounts are included in other current assets and accrued expenses on the balance sheet, with an offset recorded in accumulated other comprehensive loss.
In fiscal 2023 and fiscal 2022, the Company entered into soybean meal forward contracts to hedge a portion of its forecasted poultry meal sales. At December 28, 2024, there are no outstanding soybean meal forward contracts designated as cash flow hedges.
At December 28, 2024, the Company had the following outstanding forward contracts that were entered into to hedge the future payments of intercompany notes, and foreign currency transactions in currencies other than the functional currency and forecasted transactions in currencies other than the functional currency (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Functional Currency | | Contract Currency | | Range of | U.S. |
| Type | Amount | | Type | Amount | | Hedge rates | Equivalent |
| Brazilian real | 515,922 | | | Euro | 80,054 | | | 5.66 - 7.12 | $ | 83,233 | |
| Brazilian real | 2,864,438 | | | U.S. dollar | 506,181 | | | 5.09 - 7.29 | 506,181 | |
| Euro | 37,123 | | | U.S. dollar | 39,104 | | | 1.04 - 1.09 | 39,104 | |
| Euro | 87,275 | | | Polish zloty | 373,446 | | | 4.26 - 4.30 | 90,958 | |
| Euro | 10,875 | | | Japanese yen | 1,753,983 | | | 159.72 - 163.31 | 11,334 | |
| Euro | 25,413 | | | Chinese renminbi | 195,569 | | | 7.60 - 7.79 | 26,485 | |
| Euro | 18,141 | | | Australian dollar | 29,770 | | | 1.64 - 1.67 | 18,906 | |
| Euro | 4,075 | | | British pound | 3,384 | | | 0.82 - 0.83 | 4,247 | |
| | | | |
| Polish zloty | 47,915 | | | Euro | 11,211 | | | 4.27 - 4.28 | 11,682 | |
| Polish zloty | 469 | | | U.S. dollar | 116 | | | 4.06 | 116 | |
| British pound | 346 | | | Euro | 416 | | | 0.83 | 433 | |
| British pound | 247 | | | U.S. dollar | 312 | | | 1.26 | 312 | |
| Japanese yen | 23,557 | | | U.S. dollar | 154 | | | 152.97 | 154 | |
| U.S. dollar | 71 | | | Japanese yen | 10,807 | | | 153.29 | 71 | |
| U.S. dollar | 562,340 | | | Euro | 519,182 | | | 1.08 | 562,340 | |
| | | | |
| Australian dollar | 478 | | | U.S. dollar | 305 | | | 0.64 | 305 | |
| | | | | | | $ | 1,355,861 | |
The above foreign currency contracts had an aggregate fair value of approximately $14.3 million and are included in other current assets, accrued expenses and noncurrent liabilities at December 28, 2024.
The Company had corn option and forward contracts that are marked to market with the changes in the fair value recorded to earnings because they did not qualify for hedge accounting at December 28, 2024. These contracts have an aggregate fair value of approximately $1.0 million and are included in other current assets and accrued expenses at December 28, 2024.
At December 28, 2024, the Company had forward purchase agreements in place for purchases of approximately $128.7 million of natural gas and diesel fuel and approximately $29.2 million of other commitments during the next three years. As of December 28, 2024, the Company had forward purchase agreements in place for purchases of approximately $141.8 million of finished and raw material products during the next five years.
Interest Rate Sensitivity
At December 28, 2024, the Company’s fixed rate debt obligations consist of the 6% Notes, the 5.25% Notes, the 3.625% Notes and other immaterial debt that accrue interest at an annual weighted average fixed rate of approximately 5.39%. As of December 28, 2024, the Company has long-term debt of approximately $1.9 billion that is subject to variable interest rates under the Company’s Senior Secured Credit Facilities. Of this variable rate debt, $900.0 million has been fixed through the first quarter of fiscal 2026 at a weighted average rate of 4.007% as a result of our entry into interest swap transactions. This leaves approximately $956.1 million over the next year that will be subject to changing interest rates and the Company estimates that a 1% increase in interest rates will increase the Company’s annual interest expense by approximately $9.6 million.
Foreign Exchange
The Company has significant international operations and is subject to certain opportunities and risks, including currency fluctuations. As a result, the Company is affected by changes in foreign currency exchange rates, particularly with respect to the euro, Brazilian real, Canadian dollar, Australian dollar, Chinese renminbi, Polish zloty, British pound and Japanese yen.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.
DARLING INGREDIENTS INC. AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Darling Ingredients Inc.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Darling Ingredients Inc. and subsidiaries (the Company) as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income/(loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 28, 2024, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 28, 2024 and December 30, 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 28, 2024, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 25, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Sufficiency of audit evidence over net sales
As discussed in Note 22 to the consolidated financial statements, total net sales were $5.7 billion for the year-ended December 28, 2024.
We identified the evaluation of the sufficiency of audit evidence over net sales as a critical audit matter. The Company’s business operations are conducted through a global network of over 260 locations across five continents. Net sales are recognized primarily from the sale of tangible products at these Company locations around the world. Evaluating the sufficiency of audit evidence obtained required especially subjective auditor judgment because of the geographical dispersion of the Company’s net sales generating activities. This included determining the Company locations at which procedures were performed and the supervision and review of procedures performed at those locations.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over net sales, including the determination of the Company locations at which those procedures were to be performed. At each Company location where procedures were performed, we:
•evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s net sales processes, including the Company’s controls over the accurate recording of amounts
•assessed the recorded net sales for certain locations by selecting a sample of transactions and comparing the amounts recognized to underlying documentation, including contracts with customers and shipping documentation
•assessed the recorded net sales for certain locations by performing a software-assisted data analysis to test relationships among certain revenue transactions.
We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.
Assessment of the carrying value of goodwill
As discussed in Notes 1 and 7 to the consolidated financial statements, the goodwill balance as of December 28, 2024 was $2.3 billion. The Company performs goodwill testing annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. In 2024, the Company performed a quantitative assessment to compare the fair value of the Company’s reporting units to their respective carrying amounts. The Company estimates the fair value of the reporting units primarily using an income approach and, if the carrying amount exceeds the estimated fair value, an impairment charge is recorded. Based on the Company’s annual impairment testing, the fair value of two of the Company’s six reporting units was not substantially in excess of their carrying values.
We identified the assessment of the carrying value of goodwill for these reporting units as a critical audit matter. Evaluating the estimated fair values of these reporting units involved a high degree of subjective auditor judgment. Specifically, the raw material volume and gross margin assumptions to determine the fair value of these reporting units were challenging to audit as minor changes to those assumptions could have a significant effect on the assessment of the carrying value of goodwill. Additionally, the audit effort associated with the evaluation of these assumptions required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. For these reporting units, we:
•evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s goodwill impairment assessment process, including controls related to the raw material volume and gross margin assumptions
•evaluated the raw material volume and gross margin assumptions by comparing them to historical raw material volumes and gross margins, respectively
•obtained external commodity pricing market data and budgets approved by the Board of Directors and compared them to the inputs used in the Company’s development of gross margins
•compared the Company’s historical raw material volume and gross margin forecasts to actual results for these reporting units to assess the Company’s ability to accurately forecast.
We also involved valuation professionals with specialized skills and knowledge, who assisted in performing sensitivity analyses over the raw material volume and gross margin assumptions to assess their impact on the Company’s determination that the fair value of the reporting units exceeded its respective carrying value.
/s/ KPMG LLP
We have served as the Company’s auditor since 1989.
Dallas, Texas
February 25, 2025
DARLING INGREDIENTS INC. AND SUBSIDIARIES
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Darling Ingredients Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited Darling Ingredients Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 28, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 28, 2024 and December 30, 2023, the related consolidated statements of operations, comprehensive income/(loss), stockholders’ equity, and cash flows for each of the years in the three-year period ended December 28, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 25, 2025 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired Miropasz during 2024, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 28, 2024, Miropasz’s internal control over financial reporting associated with total assets of $140.3 million and net sales of $88.1 million included in the consolidated financial statements of the Company as of and for the year ended December 28, 2024. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Miropasz.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Form 10-K. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
Dallas, Texas
February 25, 2025
DARLING INGREDIENTS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 28, 2024 and December 30, 2023
(in thousands, except share and per share data)
| | | | | | | | | | | |
ASSETS | December 28,
2024 | | December 30,
2023 |
| Current assets: | | | |
| Cash and cash equivalents | $ | | | | $ | | |
| Restricted cash | | | | | |
Accounts receivable, less allowance for credit losses of $ at December 28, 2024 and $ at December 30, 2023 | | | | | |
| Accounts receivable due from related party - Diamond Green Diesel | | | | | |
| Inventories | | | | | |
| Prepaid expenses | | | | | |
| Income taxes refundable | | | | | |
| Other current assets | | | | | |
| Total current assets | | | | | |
| | | |
| Property, plant and equipment, net | | | | | |
| Intangible assets, net | | | | | |
| Goodwill | | | | | |
| Investment in unconsolidated subsidiaries | | | | | |
| Operating lease right-of-use assets | | | | | |
| Other assets | | | | | |
| Deferred income taxes | | | | | |
| | $ | | | | $ | | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Current portion of long-term debt | $ | | | | $ | | |
| Accounts payable, principally trade | | | | | |
| Income taxes payable | | | | | |
| Current operating lease liabilities | | | | | |
| Accrued expenses | | | | | |
| Total current liabilities | | | | | |
| | | |
| Long-term debt, net of current portion | | | | | |
| Long-term operating lease liabilities | | | | | |
| Other noncurrent liabilities | | | | | |
| Deferred income taxes | | | | | |
| Total liabilities | | | | | |
| | | |
| Commitments and contingencies | | | |
| | | |
| Stockholders’ equity: | | | |
Common stock, $ par value; shares authorized, and shares issued at December 28, 2024 and December 30, 2023, respectively | | | | | |
| Additional paid-in capital | | | | | |
Treasury stock, at cost; and shares at December 28, 2024 and December 30, 2023, respectively | () | | | () | |
| Accumulated other comprehensive loss | () | | | () | |
| Retained earnings | | | | | |
| Total Darling's stockholders’ equity | | | | | |
| Noncontrolling interests | | | | | |
| Total stockholders’ equity | | | | | |
| $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
DARLING INGREDIENTS INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three years ended December 28, 2024
(in thousands, except per share data)
| | | | | | | | | | | | | | | | | |
| | December 28,
2024 | | December 30,
2023 | | December 31,
2022 |
| Net sales to third parties | $ | | | | $ | | | | $ | | |
| Net sales to related party - Diamond Green Diesel | | | | | | | | |
| Total net sales | | | | | | | | |
| Costs and expenses: | | | | | |
| Cost of sales and operating expense (excludes depreciation and amortization, shown separately below) | | | | | | | | |
| Gain on sale of assets | () | | | () | | | () | |
| Selling, general and administrative expenses | | | | | | | | |
| Restructuring and asset impairment charges | | | | | | | | |
| Depreciation and amortization | | | | | | | | |
| Acquisition and integration costs | | | | | | | | |
| Change in fair value of contingent consideration | () | | | () | | | | |
| Total costs and expenses | | | | | | | | |
| Equity in net income of Diamond Green Diesel | | | | | | | | |
| Operating income | | | | | | | | |
| | | | | |
| Other expense: | | | | | |
| Interest expense | () | | | () | | | () | |
| | |
| Foreign currency gain/(loss) | () | | | | | | () | |
| | |
| Other income/(expense), net | | | | | | | () | |
| Total other expense | () | | | () | | | () | |
| | | | | |
| Equity in net income of other unconsolidated subsidiaries | | | | | | | | |
| Income before income taxes | | | | | | | | |
| | | | | |
| Income tax expense/(benefit) | () | | | | | | | |
| | | | | |
| Net income | | | | | | | | |
| | | | | |
| Net income attributable to noncontrolling interests | () | | | () | | | () | |
| | | | | |
| Net income attributable to Darling | $ | | | | $ | | | | $ | | |
| | | | | |
| Net income per share: | | | | | |
| Basic | $ | | | | $ | | | | $ | | |
| Diluted | $ | | | | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
DARLING INGREDIENTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)
Three years ended December 28, 2024
(in thousands)
| | | | | | | | | | | | | | | | | |
| | December 28,
2024 | | December 30,
2023 | | December 31,
2022 |
| Net income | $ | | | | $ | | | | $ | | |
| Other comprehensive income/(loss), net of tax: | | | | | |
| Foreign currency translation | () | | | | | | () | |
| Pension adjustments | | | | | | | | |
| Commodity derivative adjustments | () | | | | | | | |
| Foreign exchange derivative adjustments | () | | | | | | | |
| Interest rate swap derivative adjustments | | | | | | | | |
| Total other comprehensive income/(loss), net of tax | () | | | | | | () | |
| Total comprehensive income/(loss) | () | | | | | | | |
Comprehensive income attributable to noncontrolling interests | | | | | | | | |
| Comprehensive income/(loss) attributable to Darling | $ | () | | | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
DARLING INGREDIENTS INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
Three years ended December 28, 2024
(in thousands, except share data)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Common Stock | | | | | | | |
| Number of Outstanding Shares | $ par Value | Additional Paid-In Capital | Treasury Stock | Accumulated Other Comprehensive Loss | Retained Earnings | Stockholders' equity attributable to Darling | Non-controlling Interests | Total Stockholders' Equity |
| Balances at January 1, 2022 | | | $ | | | $ | | | $ | () | | $ | () | | $ | | | $ | | | $ | | | $ | | |
| | | | | | |
| Net income | — | | — | | — | | — | | — | | | | | | | | | |
| Acquisition of noncontrolling interests | — | | — | | — | | — | | — | | — | | — | | | | | |
| Distribution of noncontrolling interest earnings | — | | — | | — | | — | | — | | — | | — | | () | | () | |
| | | | | | |
| Pension adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Commodity derivative adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Foreign exchange derivative adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Foreign currency translation adjustments | — | | — | | — | | — | | () | | — | | () | | () | | () | |
| Issuance of non-vested stock | | | — | | | | — | | — | | — | | | | — | | | |
| Stock-based compensation | — | | — | | | | — | | — | | — | | | | — | | | |
| Treasury stock | () | | — | | — | | () | | — | | — | | () | | — | | () | |
| Issuance of common stock | | | | | | | — | | — | | — | | | | — | | | |
| Balances at December 31, 2022 | | | $ | | | $ | | | $ | () | | $ | () | | $ | | | $ | | | $ | | | $ | | |
| | | | | | |
| Net income | — | | — | | — | | — | | — | | | | | | | | | |
| | | | | | |
| Distribution of noncontrolling interest earnings | — | | — | | — | | — | | — | | — | | — | | () | | () | |
| Additions to noncontrolling interests | — | | — | | — | | — | | — | | — | | — | | | | | |
| Pension adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Commodity derivative adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Interest rate swap adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Foreign exchange derivative adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Foreign currency translation adjustments | — | | — | | — | | — | | | | — | | | | () | | | |
| Issuance of non-vested stock | — | | — | | | | — | | — | | — | | | | — | | | |
| Stock-based compensation | — | | — | | | | — | | — | | — | | | | — | | | |
| Treasury stock | () | | — | | — | | () | | — | | — | | () | | — | | () | |
| Issuance of common stock | | | | | | | — | | — | | — | | | | — | | | |
| Balances at December 30, 2023 | | | $ | | | $ | | | $ | () | | $ | () | | $ | | | $ | | | $ | | | $ | | |
| | | | | | |
| Net income | — | | — | | — | | — | | — | | | | | | | | | |
| Distribution of noncontrolling interest earnings | — | | — | | — | | — | | — | | — | | — | | () | | () | |
| | | | | | |
| Pension adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Commodity derivative adjustments, net of tax | — | | — | | — | | — | | () | | — | | () | | — | | () | |
| Interest rate swap adjustments, net of tax | — | | — | | — | | — | | | | — | | | | — | | | |
| Foreign exchange derivative adjustments, net of tax | — | | — | | — | | — | | () | | — | | () | | — | | () | |
| Foreign currency translation adjustments | — | | — | | — | | — | | () | | — | | () | | | | () | |
| Issuance of non-vested stock | — | | — | | | | — | | — | | — | | | | — | | | |
| Stock-based compensation | — | | — | | | | — | | — | | — | | | | — | | | |
| Treasury stock | () | | — | | — | | () | | — | | — | | () | | — | | () | |
| Issuance of common stock | | | | | | | — | | — | | — | | | | — | | | |
| Balances at December 28, 2024 | | | $ | | | $ | | | $ | () | | $ | () | | $ | | | $ | | | $ | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
DARLING INGREDIENTS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three years ended December 28, 2024
(in thousands)
| | | | | | | | | | | | | | | | | |
| | December 28,
2024 | | December 30,
2023 | | December 31,
2022 |
| Cash flows from operating activities: | | | | | |
| Net income | $ | | | | $ | | | | $ | | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | | | | | | | | |
| Deferred income taxes | () | | | () | | | | |
| Gain on sale of assets | () | | | () | | | () | |
| | |
| Asset impairment | | | | | | | | |
| Change in fair value of contingent consideration | () | | | () | | | | |
| Gain on insurance proceeds from insurance settlement | () | | | () | | | | |
| Increase/(Decrease) in long-term pension liability | | | | () | | | () | |
| Stock-based compensation expense | | | | | | | | |
| | |
| Write-off deferred loan costs | | | | | | | | |
| Deferred loan cost amortization | | | | | | | | |
| Equity in net income of Diamond Green Diesel and other unconsolidated subsidiaries | () | | | () | | | () | |
| Distributions of earnings from Diamond Green Diesel and other unconsolidated subsidiaries | | | | | | | | |
Changes in operating assets and liabilities, net of effects from acquisitions: | | | | | |
| Accounts receivable | | | | () | | | () | |
| Income taxes refundable/payable | () | | | () | | | () | |
| Inventories and prepaid expenses | | | | | | | () | |
| Accounts payable and accrued expenses | () | | | () | | | | |
| Other | () | | | | | | () | |
| Net cash provided by operating activities | | | | | | | | |
| Cash flows from investing activities: | | | | | |
| Capital expenditures | () | | | () | | | () | |
| Acquisitions, net of cash acquired | () | | | () | | | () | |
| Investment in Diamond Green Diesel | () | | | () | | | () | |
| Investment in other unconsolidated subsidiaries | () | | | () | | | | |
| Loan to Diamond Green Diesel | () | | | | | | () | |
| Loan repayment from Diamond Green Diesel | | | | | | | | |
| | |
| Gross proceeds from sale of property, plant and equipment and other assets | | | | | | | | |
| Proceeds from insurance settlement | | | | | | | | |
| Payments related to routes and other intangibles | () | | | () | | | () | |
| Net cash used in investing activities | () | | | () | | | () | |
| Cash flows from financing activities: | | | | | |
| Proceeds from long-term debt | | | | | | | | |
| Payments on long-term debt | () | | | () | | | () | |
| Borrowings from revolving credit facility | | | | | | | | |
| Payments on revolving credit facility | () | | | () | | | () | |
| Net cash overdraft financing | | | | () | | | | |
| Acquisition hold-back payments | () | | | () | | | | |
| Deferred loan costs | | | | () | | | () | |
| Issuance of common stock | | | | | | | | |
| Repurchase of common stock | () | | | () | | | () | |
| Minimum withholding taxes paid on stock awards | () | | | () | | | () | |
| | |
| Distributions to noncontrolling interests | () | | | () | | | () | |
| Net cash provided/(used) in financing activities | () | | | | | | | |
| Effect of exchange rate changes on cash flows | | | | | | | | |
| Net increase/(decrease) in cash, cash equivalents and restricted cash | () | | | | | | | |
| Cash, cash equivalents and restricted cash at beginning of year | | | | | | | | |
| Cash, cash equivalents and restricted cash at end of year | $ | | | | $ | | | | $ | | |
The accompanying notes are an integral part of these consolidated financial statements.
DARLING INGREDIENTS INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
NOTE 1.
locations across continents within business segments, Feed Ingredients, Food Ingredients and Fuel Ingredients. Comparative segment revenues and related financial information are presented in Note 21 to the consolidated financial statements.
(b)SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1)
(2)
(3)
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
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 Statements 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 Statements of Cash Flows. Restricted cash shown on the Consolidated Balance Sheet as of December 28, 2024, primarily represents the current portion of 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. Restricted cash as of December 30, 2023, primarily represented amounts set aside as collateral for foreign construction projects and U.S. environmental claims and were insignificant to the Company. Restricted cash included in other assets as of December 28, 2024 and December 30, 2023, primarily represents the long-term 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.
| $ | | | | Restricted cash | | | | | |
| Restricted cash included in other long-term assets | | | | | |
| Total cash, cash equivalents and restricted cash shown in the statement of cash flows | | $ | | | $ | | |
(5)
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 will sell certain selected customers trade receivables to the third-party banks without recourse for cash less a nominal fee. For the years ended December 28, 2024, December 30, 2023 and December 31, 2022, the Company sold approximately $ million, $ million and $ million, respectively of its trade receivables and incurred approximately $ million, $ million and $ million in fees, respectively.
(6)
(7)
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
Maintenance and repairs are charged to expense as incurred, and expenditures for major renewals and improvements are capitalized.
Intangible Assets
Intangible assets with indefinite lives, and therefore, not subject to amortization, consist of trade names acquired in the acquisition of Griffin Industries Inc. on December 17, 2010 (which was subsequently converted to a limited liability company) and its subsidiaries (“Griffin”) and trade names acquired in the acquisition of its Darling Ingredients International business on January 7, 2014. Intangible assets subject to amortization consist of: 1) collection routes which are made up of groups of suppliers of raw materials in similar geographic areas from which the Company derives collection fees and a dependable source of raw materials for processing into finished products; 2) customer relationships representing groups of collagen finished product customers in our food segment; 3) permits that represent licensing of operating plants that have been acquired, giving those plants the ability to operate; 4) non-compete agreements that represent contractual arrangements with former competitors whose businesses were acquired; 5) trade names; and 6) royalty, product development, consulting, land use rights and leasehold agreements. Amortization expense is calculated using the straight-line method over the estimated useful lives of the assets ranging from: to years for collection routes; to years for customer relationships; to years for permits; to years for non-compete agreements; and to years for trade names. Royalties, product development, patents, consulting, land use rights and leasehold agreements are generally amortized over the term of the agreement.
(8)
In fiscal 2023, the Company recorded asset impairment charges related to the feed segment and food segment long-lived assets of approximately $ million and $ million, respectively. In fiscal 2022, the Company recorded asset impairment charges related to its food segment long-lived assets of approximately $ million and feed segment long-lived assets of approximately $ million. See Note 18 to the consolidated financial statements.
(9)
In fiscal 2022, the Company performed a qualitative impairment analysis for its annual goodwill and indefinite-lived
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
(10) Leases
months or less at lease commencement. 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 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.
(11)
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
(13)
| | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | | | | | | | | | | | |
| Diluted: | | | | | | | | | | | |
| Effect of dilutive securities | | | | | | | | | | | |
Add: Option shares in the money and dilutive effect of nonvested stock | — | | | — | | | — | | | — | | | — | | | — | |
| Less: Pro-forma treasury shares | — | | () | — | | | — | | () | — | | | — | | () | — | |
| Diluted: | | | | | | | | | | | |
| Net income attributable to Darling | $ | | | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
There were outstanding stock options excluded in fiscal 2024, 2023 and 2022 from diluted income per common share as the effect was antidilutive. For fiscal 2024, 2023 and 2022, respectively, , and shares of non-vested stock were excluded from diluted income per common share as the effect was antidilutive.
(14)
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
Total stock-based compensation recognized in the Consolidated Statements of Operations for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 was approximately $ million, $ million and $ million, respectively, which is included in selling, general and administrative expenses, and the related income tax benefit recognized was approximately $ million, $ million and $ million, respectively. See Note 13 for further information on the Company’s stock-based compensation plans.
(15)
As a result of the Russia-Ukraine war, the Israeli-Palestinian conflict and other Middle Eastern conflicts 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. As of December 28, 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 and other Middle Eastern conflicts or inflation.
(16)
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.
The Company recorded an adjustment to earnings of approximately $ 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 material to the annual financial statements for fiscal 2024. The out-of-period adjustment is included in the Food Ingredients segment results.
(17) Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximates fair value due to the short maturity of these instruments. The Company’s % Senior Notes due 2030, % Senior Notes due 2027, % Senior Notes due 2026, term loans and revolver borrowings outstanding at December 28, 2024, as described in Note 10 have a fair value based on market valuation from third-party banks. The carrying amount for the Company’s other debt is not deemed to be significantly different than the fair value. See Note 17 for financial instruments' fair values.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
(19)
(20) Related Party Transactions
The Company has 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 Company has related party sale transactions and loan transactions with the DGD Joint Venture. See Note 23 for further information on the Company’s related party transactions.
(21)
The Company incurred net foreign currency translation gains/(losses) of approximately $() million, $ million and $() million in fiscal 2024, 2023 and 2022, respectively.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
(23)
NOTE 2.
% / % with Valero.
| $ | | | | Total current assets | | | | | |
| Property, plant and equipment, net | | | | | |
| Other assets | | | | | |
| Total assets | | $ | | | $ | | |
| Liabilities and members' equity: | | | |
| Revolver | | $ | | | $ | | |
| Total current portion of long term debt | | | | | |
| Total other current liabilities | | | | | |
| Total long term debt | | | | | |
| Total other long term liabilities | | | | | |
| Total members' equity | | | | | |
| Total liabilities and member's equity | | $ | | | $ | | |
| | | | | | | | | | | | | | |
| | Year Ended December 31, |
| (in thousands) | | 2024 | 2023 | 2022 |
| Revenues: | | | | |
| Operating revenues | | $ | | | $ | | | $ | | |
| Expenses: | | | | |
| Total costs and expenses less lower of cost or market inventory valuation adjustment and depreciation, amortization and accretion expense | | | | | | | |
| Lower of cost or market (LCM) inventory valuation adjustment | | | | | | | |
| Depreciation, amortization and accretion expense | | | | | | | |
| Operating income | | | | | | | |
| Other income | | | | | | | |
| Interest and debt expense, net | | () | | () | | () | |
| Income before income tax expense | | $ | | | $ | | | $ | | |
| Income tax expense | | | | | | | |
| Net income | | $ | | | $ | | | $ | | |
As of December 28, 2024, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $ billion on the Consolidated Balance Sheet. The Company has recorded approximately $ million, $ million and $ million in equity in net income of Diamond Green Diesel for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively. In December 2019, the blenders tax credit of $ per gallon was extended for calendar years 2020, 2021 and 2022. On August
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
NOTE 3.
million (approximately $ million USD at the exchange rate of €1.0:USD$ on the closing date). In addition, the Company incurred a liability of approximately € million (approximately $ million USD at the exchange rate on the closing date) for an 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. During the third quarter of fiscal 2024, the Company received approximately $ million from the sellers as a reduction of the purchase price and other immaterial adjustments. The Company recorded assets and liabilities consisting of property, plant and equipment of approximately $ million, identifiable intangibles which includes routes and immaterial land use rights of approximately $ million with a weighted average life of years, other net assets of approximately $ million which includes cash, working capital and net debt, and goodwill of approximately $ million. Goodwill is expected to strengthen the Company’s base Feed Ingredients business and is nondeductible for tax purposes.
The amount of net sales and net income from the Miropasz Acquisition included in the Company’s Consolidated Statement of Operations for the year ended December 28, 2024 were $ million and $ million, respectively.
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 processing facilities in South America and in the United States. The initial purchase price of approximately $ billion was comprised of an initial cash payment of approximately $ billion, which consisted of a payment of approximately R$ billion Brazilian real (approximately $ million USD at the exchange rate of R$:USD$1.00 on the closing date) and a payment of approximately $ 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 $ million for an 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
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
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):
| | Inventories | | |
| Other current assets | | |
| Property, plant and equipment | | |
| Identifiable intangible assets | | |
| Goodwill | | |
| Operating lease right-of-use assets | | |
| Other assets | | |
| Deferred tax asset | | |
| Accounts payable | () | |
| Current portion of long-term debt | () | |
| Current operating lease liabilities | () | |
| Accrued expenses | () | |
| Long-term debt, net of current portion | () | |
| Long-term operating lease liabilities | () | |
| Deferred tax liability | () | |
| Other noncurrent liabilities | () | |
| Purchase price, net of cash acquired | $ | | |
| Less hold-back | | |
| Cash paid for acquisition, net of cash acquired | $ | | |
The $ million of goodwill from the Gelnex Acquisition, which is expected to strengthen the Company’s collagen business and expand its ability to service increased demand of its collagen customer base, is assigned to the Food Ingredients segment. Of the goodwill booked in the Gelnex Acquisition approximately $ million is deductible for tax purposes. The identifiable intangible assets include $ million in customer relationships with a weighted average life of years and $ million in trade name with a life of years for a total weighted average life of approximately years.
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 rendering plants and an additional 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$ billion Brazilian Real in cash (approximately $ million USD at the exchange rate of R$:USD$1.00 on the closing date) for all the shares of the FASA Group, subject to certain post closing adjustments and a contingent payment based on future earnings growth in accordance with the terms set forth in the stock purchase agreement. Under the stock purchase agreement, such contingent payment could range from R$ to a maximum of R$ 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
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
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 $ million of revolver borrowings under the 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 a working capital purchase price adjustment per the stock purchase agreement of approximately $ 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):
| | Inventories | | |
| Other current assets | | |
| Property, plant and equipment | | |
| Identifiable intangible assets | | |
| Goodwill | | |
| Operating lease right-of-use assets | | |
| Other assets | | |
| Deferred tax asset | | |
| Accounts payable | () | |
| Current portion of long-term debt | () | |
| Accrued expenses | () | |
| Long-term debt, net of current portion | () | |
| Long-term operating lease liabilities | () | |
| Deferred tax liability | () | |
| Other noncurrent liabilities | () | |
| Non-controlling interests | () | |
| Purchase price, net of cash acquired | $ | | |
| Less hold-back | | |
| Less contingent consideration | | |
| Cash paid for acquisition, net of cash acquired | $ | | |
The $ 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 $ million in collection routes with a life of years and $ million in trade name with a life of years for a total weighted average life of approximately years.
Valley Proteins
On May 2, 2022, the Company acquired all of the shares of Valley Proteins, pursuant to a stock purchase agreement dated December 28, 2021 (the “Valley Acquisition”). The Valley Acquisition includes a network of major rendering plants and used cooking oil facilities throughout the southern, southeast and mid-Atlantic regions of the U.S. The Company initially paid approximately $ billion in cash for the Valley Acquisition, which was subject to various post-closing adjustments in accordance with the stock purchase agreement. During the third and fourth quarters of fiscal 2022, the Company made immaterial working capital adjustments and made a cash payment for a working capital purchase price adjustment per the stock purchase agreement of approximately $ million with an offset to goodwill. The Company initially financed the Valley Acquisition by borrowing all of the Company’s delayed draw term A-1 facility of $ million and delayed draw term A-2 facility of $ million, with the remainder coming through revolver borrowings under the Amended Credit Agreement.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | Inventories | | |
| Other current assets | | |
| Property, plant and equipment | | |
| Identifiable intangible assets | | |
| Goodwill | | |
| Operating lease right-of-use assets | | |
| Other assets | | |
| Deferred tax asset | | |
| Accounts payable | () | |
| Current portion of long-term debt | () | |
| Current operating lease liabilities | () | |
| Accrued expenses | () | |
| Long-term debt, net of current portion | () | |
| Long-term operating lease liabilities | () | |
| Other noncurrent liabilities | () | |
| Purchase price, net of cash acquired | $ | | |
The $ million of goodwill from the Valley 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. For U.S. income tax purposes, the Valley Acquisition is treated as a purchase of substantially all the assets of Valley Proteins; therefore, almost all of the goodwill is deductible for tax purposes. The identifiable intangible assets include $ million in collection routes with a life of years and $ million in permits with a life of years for a total weighted average life of approximately years.
| | $ | | | | Net income | | | | | |
The Company notes that pro forma results of operations for the Miropasz Acquisition and the acquisitions discussed below have not been presented because the effect of each acquisition individually or in the aggregate is not deemed material to revenues, total assets and net income of the Company for any period presented.
On February 25, 2022, a wholly-owned international subsidiary of the Company acquired all of the shares of Group Op de Beeck, a Belgium digester, organic and industrial waste processing company, that is now included in our Fuel Ingredients segment, for an initially estimated purchase price of approximately $ million, plus or minus various closing adjustments in accordance with the stock purchase agreement. Initially, the Company paid approximately $ million in cash consideration. In the second quarter of fiscal 2022, the Company paid an additional $ million for purchase price adjustments related to working capital and estimated future construction costs for a total purchase price of approximately $ million. The Company recorded assets and liabilities consisting of property, plant and equipment of approximately $ million, intangible assets of approximately $ million, goodwill of approximately $ million and other net liabilities of approximately $() million including working capital and net debt. The identifiable intangibles have a weighted average life of years.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
million, $ million and $ million for the twelve months ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively, primarily related to the above disclosed acquisitions.
Additionally, the Company made other immaterial acquisitions in fiscal 2024 and fiscal 2022.
NOTE 4.
| | $ | | | | Work in process | | | | | |
| Raw material | | | | | |
| Supplies and other | | | | | |
| | $ | | | | $ | | |
The Company’s work in process represents inventory in the Food Ingredients segment that is in various stages of processing.
NOTE 5.
| | $ | | | | Buildings and improvements | | | | | |
| Machinery and equipment | | | | | |
| Vehicles | | | | | |
| Aircraft | | | | | |
| Construction in process | | | | | |
| | | | | |
| Accumulated depreciation | () | | | () | |
| $ | | | | $ | | |
million, $ million and $ million, respectively.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
NOTE 6.
| | $ | | | | | | | | | |
| Finite Lived Intangible Assets: | | | |
| Collection routes | | | | | |
| Customer relationships | | | | | |
| Permits | | | | | |
| Non-compete agreements | | | | | |
| Trade names | | | | | |
| Royalty, product development, patents, consulting, land use rights and leasehold | | | | | |
| | | | | | |
| Accumulated Amortization: | | | |
| Collection routes | () | | | () | |
| Customer relationships | () | | | () | |
| Permits | () | | | () | |
| Non-compete agreements | () | | | () | |
| Trade names | () | | | () | |
| Royalties, product development, patents, consulting, land use rights and leasehold | () | | | () | |
| () | | | () | |
| Total Intangible assets, less accumulated amortization | $ | | | | $ | | |
Gross intangible collection routes, customer relationships, permits, trade names, non-compete agreements and other intangibles changed primarily due to acquisitions and retirements of approximately $ million and $ million, respectively, and the remaining change is due to foreign currency exchange impact. Amortization expense for the three years ended December 28, 2024, December 30, 2023 and December 31, 2022, was approximately $ million, $ million and $ million, respectively. Amortization expense for the next five fiscal years is estimated to be $ million, $ million, $ million, $ million and $ million.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
NOTE 7.
| $ | | | $ | | | $ | | | | Accumulated impairment losses | () | | () | | () | | () | |
| | | | | | | | |
| Goodwill acquired during year | | | | | | | | |
| |
| |
| Measurement period adjustments | () | | () | | () | | () | |
| Out-of-period correction | () | | | | | | () | |
| Foreign currency translation | | | | | | | | |
| Balance at December 30, 2023 | | | | |
| Goodwill | | | | | | | | |
| Accumulated impairment losses | () | | () | | () | | () | |
| | | | | | | | | |
| Goodwill acquired during year | | | | | | | | |
| |
| |
| Measurement period adjustments | | | () | | | | () | |
| |
| Foreign currency translation | () | | () | | () | | () | |
| Balance at December 28, 2024 | | | | |
| Goodwill | | | | | | | | |
| Accumulated impairment losses | () | | () | | () | | () | |
| | $ | | | $ | | | $ | | | $ | | |
million based on the relative fair value of the Peabody plant.
NOTE 8.
| | $ | | | |
|
|
|
Accrued operating expenses | | | | | |
|
|
|
| Short-term acquisition hold-backs (Note 3) | | | | | |
| Short-term contingent consideration (Note 17) | | | | | |
Other accrued expense | | | | | |
| | $ | | | | $ | | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
NOTE 9.
| $ | | | $ | | | | Short-term lease costs | | | | | | |
| Total lease cost | $ | | | $ | | | $ | | |
Other information (in thousands, except lease terms and discount rates):
| | | | | | | | | | | |
| Year Ended |
| December 28, 2024 | December 30, 2023 | December 31, 2022 |
| Cash paid for amounts included in the measurement lease liabilities: | | | |
| Operating cash flows from operating leases | $ | | | $ | | | $ | | |
| | | |
| Operating right-of-use assets, net | $ | | | $ | | | |
| | | |
| Operating lease liabilities, current | $ | | | $ | | | |
| Operating lease liabilities, non-current | | | | | |
| Total operating lease liabilities | $ | | | $ | | | |
| | | |
| Weighted average remaining lease term - operating leases | years | years | |
| Weighted average discount rate - operating leases | | % | | % | |
| $ | | | | 2026 | | | | |
| 2027 | | | | |
| 2028 | | | | |
| 2029 | | | | |
| Thereafter | | | | |
| Total undiscounted lease payments | | | | |
| Less amounts representing interest | () | | () | |
| Lease obligations included in current and long-term liabilities | | | | |
The Company’s finance lease assets are included in property, plant and equipment and the finance lease obligations are included in the Company’s current and long-term debt obligations on the Consolidated Balance Sheet.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
NOTE 10.
and $ million denominated in € at December 28, 2024 and December 30, 2023, respectively)$ | | | | $ | | | | | | |
| Term A-1 facility | | | | | |
| Less unamortized deferred loan costs | () | | | () | |
| Carrying value Term A-1 facility | | | | | |
| | | |
| Term A-2 facility | | | | | |
| Less unamortized deferred loan costs | () | | | () | |
| Carrying value Term A-2 facility | | | | | |
| | | |
| Term A-3 facility | | | | | |
| Less unamortized deferred loan costs | () | | | () | |
| Carrying value Term A-3 facility | | | | | |
| | | |
| Term A-4 facility | | | | | |
| Less unamortized deferred loan costs | () | | | () | |
| Carrying value Term A-4 facility | | | | | |
| | | |
% Senior Notes due 2030 with effective interest of % | | | | | |
| Less unamortized deferred loan costs net of bond premiums | () | | | () | |
Carrying value % Senior Notes due 2030 | | | | | |
| | | |
% Senior Notes due 2027 with effective interest of % | | | | | |
| Less unamortized deferred loan costs | () | | | () | |
Carrying value % Senior Notes due 2027 | | | | | |
| | | |
% Senior Notes due 2026 - Denominated in euro with effective interest of % | | | | | |
| Less unamortized deferred loan costs - Denominated in euro | () | | | () | |
Carrying value % Senior Notes due 2026 | | | | | |
| | | |
| Other Notes and Obligations | | | | | |
| | | | | |
| Less Current Maturities | | | | | |
| $ | | | | $ | | |
As of December 28, 2024, the Company had outstanding debt under the revolving credit facility denominated in euros and € million outstanding debt under the Company’s % Senior Notes due 2026 denominated in euros. See below for discussion relating to the Company’s debt agreements. In addition, at December 28, 2024, the Company had finance lease obligations denominated in euros of approximately € million.
As of December 28, 2024, the Company had other notes and obligations of approximately $ million that consist of various overdraft facilities of approximately $ million, a China working capital line of credit of approximately $ million, Brazilian notes of approximately $ million and other debt of approximately $ million, including U.S. finance lease obligations of approximately $ million.
Senior Secured Credit Facilities. 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 Amended Credit Agreement has been subsequently amended, the most recent of which was the Ninth Amendment on September 6, 2022. The Amended Credit Agreement provides for senior secured credit facilities in
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
The interest rate applicable to any borrowings under the revolving credit facility will equal (i) the adjusted term secured overnight financing rate (SOFR) for U.S. dollar borrowings or the adjusted euro interbank rate (EURIBOR) for euro borrowings or the adjusted daily simple Sterling overnight index average (SONIA) for British pound borrowings, in each case plus % per annum or (ii) the base rate or the adjusted term SOFR for a one-month interest period for U.S. dollar borrowings or the 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, in each case plus % per annum, and in each case of clauses (i) and (ii), 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-1 facility and term A-3 facility will equal the adjusted term SOFR plus % per annum subject to certain step-ups and step-downs based on the Company’s total leverage ratio with a minimum of %. The interest rate applicable to any borrowing under the term A-2 facility and term A-4 facility will equal the adjusted term SOFR plus % per annum subject to certain step-ups and step-downs based on the Company’s total leverage ratio with a minimum of %.
As of December 28, 2024, the Company had (i) $ million outstanding under the revolver at SOFR plus a margin of % per annum for a total of % per annum, (ii) $ million outstanding under the term A-1 facility at SOFR plus a margin of % per annum for a total of % per annum, (iii) $ million outstanding under the term A-2 facility at SOFR plus a margin of % per annum for a total of % per annum, (iv) $ million outstanding under the term A-3 facility at SOFR plus a margin % per annum for a total of % per annum, and (v) $ million outstanding under the term A-4 facility at SOFR plus a margin % per annum for a total of % per annum. As of December 28, 2024, the Company had revolving credit facility availability of $ million, taking into account amounts borrowed, ancillary facilities of $ million and letters of credit issued of $ million. The Company also has foreign bank guarantees of approximately $ million that are not part of the Company’s Amended Credit Agreement at December 28, 2024.
The Amended Credit Agreement contains various customary representations and warranties by the Company, which include customary use of materiality, material adverse effect and knowledge qualifiers. The Amended Credit Agreement also contains (a) certain affirmative covenants that impose certain reporting and/or performance obligations on Darling and its restricted subsidiaries, (b) certain negative covenants that generally prohibit, subject to various exceptions, Darling and its restricted subsidiaries from taking certain actions, including, without limitation, incurring indebtedness, making investments, incurring liens, paying dividends and engaging in mergers and consolidations, sale and leasebacks and asset dispositions, (c) financial covenants, which include a maximum total leverage ratio and a minimum interest coverage ratio and (d) customary events of default (including a change of control) for financings of this type. Obligations under the Senior Secured Credit Facilities may be declared due and payable upon the occurrence and during the continuance of customary events of default.
% Senior Notes due 2030. On June 9, 2022, Darling issued and sold $ million aggregate principal amount of % Senior Notes due 2030 (the “% Initial Notes”). The % Initial Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of June 9, 2022 (the “% Base Indenture”), among Darling, the subsidiary guarantors party thereto from time to time, and Truist Bank, as trustee. The gross proceeds from the offering, together with cash on hand, were used to repay the Company’s outstanding revolver borrowings and for general corporate purposes, including to pay the discount of the initial purchasers and to pay the other fees and expenses related to the offering. On August 17, 2022, Darling issued an additional $ million in aggregate principal amount of its % Senior Notes due 2030 (the “add-on notes” and, together with the % Initial
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
The % Notes will mature on June 15, 2030. Darling pays interest on the % Notes on June 15 and December 15 of each year. Interest on the % Notes accrues at a rate of % per annum and is payable in cash. The % Notes are guaranteed by Darling and all of Darling’s restricted subsidiaries (other than foreign subsidiaries) that are borrowers under or that guarantee the Senior Secured Credit Facilities (collectively, the “% Guarantors”). The % Notes and the guarantees thereof are senior unsecured obligations of Darling and the % Guarantors and rank equally in right of payment to all of Darling’s and the % Guarantors’ existing and future senior indebtedness. The % Indenture contains covenants limiting Darling's ability and the ability of its restricted subsidiaries to grant liens to secure indebtedness and merge with or into other companies or otherwise dispose of all or substantially all of Darling's assets. The Company capitalized approximately $ million of deferred loan costs as of December 31, 2022 in connection with the % Notes.
Other than for extraordinary events such as a change of control, Darling is not required to make mandatory redemption or sinking fund payments on the % Notes. The % Notes are redeemable, in whole or in part, at any time on or after June 15, 2025 at the redemption prices specified in the % Indenture. Darling may redeem the % Notes in whole, but not in part, at any time prior to June 15, 2025, at a redemption price equal to 100% of the principal amount of the % Notes redeemed, plus an Applicable Premium as specified in the % Indenture.
% Senior Notes due 2026. On May 2, 2018, Darling Global Finance B.V. (the “% Issuer”), a wholly-owned subsidiary of Darling, issued and sold € million aggregate principal amount of % Senior Notes due 2026 (the “% Notes”). The % Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of May 2, 2018 (the “% Indenture”), among Darling Global Finance B.V., Darling, the subsidiary guarantors party thereto from time to time, Citibank, N.A., London Branch, as trustee and principal paying agent, and Citigroup Global Markets Deutschland AG, as principal registrar. The gross proceeds of the offering, together with borrowings under the Company’s revolving credit facility, were used to refinance all of the Company’s previous % Notes by cash tender offer and redemption of those notes and to pay any applicable premiums for the refinancing, to pay the commission of the initial purchasers of the % Notes and to pay the other fees and expenses related to the offering.
The % Notes will mature on May 15, 2026. The % Issuer pays interest on the % Notes on May 15 and November 15 of each year. Interest on the % Notes accrues at a rate of % per annum and is payable in cash. The % Notes are guaranteed by Darling and all of Darling’s restricted subsidiaries (other than any foreign subsidiary or any receivable entity) that guarantee the Senior Secured Credit Facilities (collectively, the “% Guarantors”). The % Notes and the guarantees thereof are senior unsecured obligations of the % Issuer and the % Guarantors and rank equally in right of payment to all of the % Issuer's and the % Guarantors’ existing and future senior indebtedness. The % Indenture contains covenants limiting Darling’s ability and the ability of its restricted subsidiaries (including the % Issuer) to, among other things: incur additional indebtedness or issue preferred stock; pay dividends on or make other distributions or repurchases of Darling’s capital stock or make other restricted payments; make loans or investment; grant liens to secure indebtedness; designate Darling’s subsidiaries as unrestricted subsidiaries; and sell certain assets or merge with or into other companies or otherwise dispose of substantially all of Darling’s assets.
Other than for extraordinary events such as a change of control and defined assets sales, the % Issuer is not required to make mandatory redemption or sinking fund payments on the % Notes. The % Notes became redeemable from May 15, 2023, in whole or in part, at any time at their face value.
% Senior Notes due 2027. On April 3, 2019, Darling issued and sold $ million aggregate principal amount of % Senior Notes due 2027 (the “% Notes”). The % Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of April 3, 2019 (the “% Indenture”), among Darling, the subsidiary guarantors party thereto from time to time, and Regions Bank, as trustee. The gross proceeds from the sale of the Notes, together with cash on hand, were used to refinance all of the Company’s
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
The % Notes will mature on April 15, 2027. Darling pays interest on the % Notes on April 15 and October 15 of each year. Interest on the % Notes accrues at a rate of % per annum and is payable in cash. The % Notes are guaranteed by Darling and all of Darling's restricted subsidiaries (other than foreign subsidiaries) that are borrowers under or that guarantee the Senior Secured Credit Facilities (collectively, the “% Guarantors”). The % Notes and the guarantees thereof are senior unsecured obligations of Darling and the % Guarantors and rank equally in right of payment to all of the Darling’s and the % Guarantors’ existing and future senior indebtedness. The % Indenture contains covenants limiting Darling’s ability and the ability of its restricted subsidiaries to, grant liens to secure indebtedness and merge with or into other companies or otherwise dispose of all or substantially all of Darling's assets.
Other than for extraordinary events such as a change of control, Darling is not required to make mandatory redemption or sinking fund payments on the % Notes. The % Notes became redeemable from April 15, 2024, in whole or in part, at any time at their face value.
As of December 28, 2024, the Company is in compliance with all of the financial covenants under the Amended Credit Agreement, and believes it is in compliance with all of the other covenants contained in the Amended Credit Agreement, the % Indenture, the % Indenture and the % Indenture.
| | 2026 | | |
| 2027 | | |
| 2028 | | |
| 2029 | | |
| thereafter | | |
| $ | | |
NOTE 11.
| | $ | | | | Reserve for self-insurance, litigation, environmental and tax matters (Note 20) | | | | | |
| Long-term acquisition hold backs (Note 3) | | | | | |
| Long-term contingent consideration (Note 17) | | | | | |
| Other | | | | | |
| | $ | | | | $ | | |
NOTE 12.
) | | $ | | | | $ | | | | Foreign | | | | | | | | |
| Income before income taxes | $ | | | | $ | | | | $ | | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | $ | () | | | State | | | | | | | | |
| Foreign | | | | | | | | |
| Total current | | | | | | | | |
| Deferred: | | | | | |
| Federal | () | | | () | | | | |
| State | () | | | () | | | | |
| Foreign | | | | | | | () | |
| Total deferred | () | | | () | | | | |
| $ | () | | | $ | | | | $ | | |
| | $ | | | | $ | | | | | |
| Change in valuation allowance | | | | | | | () | |
| Non-deductible compensation expenses | | | | | | | | |
| Deferred tax on unremitted foreign earnings | | | | | | | | |
| | |
| Foreign rate differential | | | | | | | | |
| Withholding taxes | () | | | () | | | () | |
| Change in uncertain tax positions | () | | | () | | | | |
| State income taxes, net of federal benefit | () | | | () | | | | |
| Biofuel tax incentives | () | | | () | | | () | |
| Global intangible low taxed income | | | | | | | | |
| Change in contingent payment liability | () | | | () | | | | |
| Change in tax law | | | | () | | | () | |
| | |
| Equity compensation windfall | () | | | () | | | () | |
| Other, net | () | | | | | | | |
| $ | () | | | $ | | | | $ | | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | Employee benefits | | | | | |
| Pension liability | | | | | |
|
| Interest expense carryforwards | | | | | |
| Tax loss carryforwards | | | | | |
| Tax credit carryforwards | | | | | |
| Operating lease liabilities | | | | | |
| Inventory | | | | | |
| Accrued liabilities and other | | | | | |
| Total gross deferred tax assets | | | | | |
| Less valuation allowance | () | | | () | |
| Net deferred tax assets | | | | | |
| | | |
| Deferred tax liabilities: | | | |
| Intangible assets amortization, including tax deductible goodwill | () | | | () | |
| Property, plant and equipment depreciation | () | | | () | |
| Investment in DGD Joint Venture | () | | | () | |
| Operating lease assets | () | | | () | |
| Tax on unremitted foreign earnings | () | | | () | |
| Other | () | | | () | |
| Total gross deferred tax liabilities | () | | | () | |
| Net deferred tax liability | $ | () | | | $ | () | |
| | | |
| Amounts reported on Consolidated Balance Sheets: | | | |
| Non-current deferred tax asset | $ | | | | $ | | |
| Non-current deferred tax liability | () | | | () | |
| Net deferred tax liability | $ | () | | | $ | () | |
At December 28, 2024, the Company had net operating loss carryforwards for federal income tax purposes of approximately $ billion which can be carried forward indefinitely. The Company had interest expense carryforwards of approximately $ million and $ million for federal and state income tax purposes, which may be carried forward indefinitely. The Company had approximately $ million of net operating loss carryforwards for state income tax purposes, $ million of which expire in 2025 through 2044 and $ million of which can be carried forward indefinitely. The Company had foreign net operating loss carryforwards of approximately $ million, $ million of which expire in 2025 through 2038 and $ million of which can be carried forward indefinitely. Also at December 28, 2024, the Company had U.S. federal and state tax credit carryforwards of approximately $ million. As of December 28, 2024, the Company also had a valuation allowance of $ million due to uncertainties in its ability to utilize certain of its state net operating loss and credit carryforwards, foreign net operating loss carryforwards and other foreign deferred tax assets.
At December 28, 2024, the Company had unrecognized tax benefits of approximately $ million. All of the unrecognized tax benefits would favorably impact the Company’s effective tax rate if recognized. The Company does not believe that unrecognized tax benefits will change in the next twelve months. 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, 2024, interest and penalties related to unrecognized tax benefits were $ million.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | Change in tax positions related to current year | () | | | () | |
| Change in tax positions related to prior years | | | | () | |
| Change in tax positions due to settlement with tax authorities | | | | | |
| Expiration of the statute of limitations | | | | () | |
| Balance at end of year | $ | | | | $ | | |
In fiscal 2024, the Company’s major taxing jurisdictions are U.S. (federal and state), Belgium, Brazil, Canada, China, France, Germany, the Netherlands and Poland. 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 2013 tax year.
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, 2024, a deferred tax liability of approximately $ 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.
On August 16, 2022 the U.S. government enacted the IR Act that includes a new 15% alternative minimum tax based upon financial statement income (“book minimum tax”), a 1% excise tax on stock buybacks and tax incentives for energy and climate initiatives, among other provisions. The provisions of the IR Act are generally effective for periods after December 31, 2022 with no impact to our income tax provision or net deferred tax assets. The blender tax credits, which are refundable excise tax credits, expired on December 31, 2024. The CFPC, a transferable income tax credit, becomes effective from 2025 through 2027. We are currently assessing these tax incentives which could materially change our tax rate in future years. We will continue to evaluate the applicability and effect of the IR Act as more guidance is issued.
countries. While it is not expected that the U.S. will enact legislation to adopt Pillar 2, certain countries in which the Company operates have adopted Pillar 2 legislation or are in the process of introducing legislation to implement Pillar 2. Although the framework provides model rules for applying the minimum tax, countries may enact Pillar 2 differently than the model rules and on different timelines and may adjust their domestic tax incentives in response to Pillar 2. Since the Company does not have significant operations in foreign jurisdictions with tax rates below the 15% minimum, Pillar 2 did not have a material impact in 2024; however, we are evaluating the potential consequences of Pillar 2 on our longer-term financial position.
NOTE 13.
million of the Company’s Common Stock depending on market conditions and extended to August 13, 2026. During fiscal 2024, fiscal 2023 and fiscal 2022, the Company repurchased approximately $ million, $ million and $ million, including commissions, of its common stock in the open market, respectively. As of December 28, 2024, the Company has approximately $ million remaining under the share repurchase program.
On May 9, 2017, the shareholders approved the Company’s 2017 Omnibus Incentive Plan (the “2017 Omnibus Plan”). The 2017 Omnibus Plan replaced the Company’s 2012 Omnibus Incentive Plan (the “2012 Omnibus Plan”) for future grants. Under the 2017 Omnibus Plan, the Company can grant stock options, stock appreciation rights, non-vested and restricted stock (including performance stock), restricted stock units (including performance units), other stock-based awards, non-employee director awards, dividend equivalents and cash-based awards. Initially, there were up to common shares available under the 2017 Omnibus Plan for grants to
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
At December 28, 2024, $ million of total future equity-based compensation expense (determined using the Black-Scholes option pricing model and Monte Carlo model for non-vested stock grants with performance based incentives) related to outstanding non-vested options and stock awards is expected to be recognized over a weighted average period of years.
The following is a summary of stock-based compensation awards granted and/or outstanding during the years ended December 28, 2024, December 30, 2023 and December 31, 2022.
Stock Option Awards. Stock options to purchase shares of Darling common stock can be granted from time to time by the Committee to certain of the Company’s employees as part of the Company’s LTIP. The Committee included stock options as part of the LTIP from fiscal 2016 to fiscal 2020, until they were replaced by RSUs beginning in fiscal 2021. For options granted by the Committee the exercise price is equal to the closing price of Darling common stock on the date of grant. Stock options generally vest % on the first, second and third anniversaries of the grant date. The Company generally only grants nonqualified stock options, which generally terminate years after the date of grant.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | years | | Granted | | | | | | | |
| Exercised | () | | | | | | |
| Forfeited | () | | | | | | |
| Expired | | | | | | | |
| Options outstanding at December 31, 2022 | | | | | | | years |
| Granted | | | | | | | |
| Exercised | () | | | | | | |
| Forfeited | () | | | | | | |
| Expired | | | | | | | |
| Options outstanding at December 30, 2023 | | | | | | | years |
| Granted | | | | | | | |
| Exercised | () | | | | | | |
| Forfeited | () | | | | | | |
| Expired | | | | | | | |
| Options outstanding at December 28, 2024 | | | | $ | | | | years |
| Options exercisable at December 28, 2024 | | | | $ | | | | years |
For the year ended December 28, 2024, the amount of cash received from the exercise of options was approximately $ million and the related tax benefit was approximately $ million. For the years ended December 30, 2023 and December 31, 2022 the amount of cash received from the exercise of options was less than $ million, respectively and the related tax benefit was approximately $ million and $ million, respectively. The total intrinsic value of options exercised for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 was approximately $ million, $ million and $ million, respectively. The fair value of shares vested for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 was approximately $ million, $ million and $ million, respectively. At December 28, 2024, the aggregate intrinsic value of options outstanding was approximately $ million and the aggregate intrinsic value of options exercisable was approximately $ million.
Non-Vested Stock and Restricted Stock Unit Awards. Prior to fiscal 2016, the Company granted non-vested stock and RSUs to participants in the LTIP. Starting in fiscal 2016, the Committee made changes to the LTIP and instead of non-vested stock and RSUs, the Company began to grant PSUs and stock options as part of the LTIP. In fiscal 2021, the Committee replaced the stock option component of the LTIP with RSUs. In addition, the Company grants individual non-vested stock and RSU awards to key employees from time to time at the discretion of the Committee, with each RSU equivalent to share of common stock and payable upon vesting in an equivalent number of shares of Darling common stock. For grants made under the 2017 Omnibus Plan, all non-vested stock and RSU awards generally vest ratably on the first three anniversary dates of the grant. Generally, upon voluntary termination of employment or termination for cause, non-vested stock and RSU awards that have not vested are forfeited; whereas, generally, upon death, disability, qualifying retirement or termination without cause, a pro-rata portion of the unvested non-vested stock and RSU awards will vest and be payable.
Fiscal 2024 LTIP RSU awards and Restricted Stock awards. In fiscal 2024, the Committee granted RSUs on January 3, 2024 under the Company’s 2024 LTIP. The Committee did not make any discretionary non-vested stock or RSU grants in fiscal 2024.
Fiscal 2023 LTIP RSU awards and Restricted Stock awards. In fiscal 2023, the Committee granted RSUs on January 3, 2023 under the Company’s 2023 LTIP. On May 11, 2023 and August 7, 2023, the Committee awarded and , respectively of RSUs under the Company’s 2023 LTIP to newly hired executive officers, which will have the same vesting dates and terms as those issued to the other participants on January 3, 2023. On May 11, 2023, the Committee granted one of the newly hired executive officers a one-time grant of RSUs as part of his employment package that will vest in three equal installments on the first, second and third anniversaries of the grant date.
Fiscal 2022 LTIP RSU awards and Restricted Stock awards. In fiscal 2022, the Committee granted RSUs on January 3, 2022 under the Company’s 2022 LTIP and a total of discretionary non-vested and RSU awards.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | Shares granted | | | | | |
| Shares vested | () | | | | |
| Shares forfeited | () | | | | |
| Stock awards outstanding December 31, 2022 | | | | | |
| Shares granted | | | | | |
| Shares vested | () | | | | |
| Shares forfeited | () | | | | |
| Stock awards outstanding December 30, 2023 | | | | | |
| Shares granted | | | | | |
| Shares vested | () | | | | |
| Shares forfeited | () | | | | |
| Stock awards outstanding December 28, 2024 | | | | $ | | |
Fiscal 2024 LTIP PSU Awards. On January 3, 2024, the Committee granted PSUs under the Company’s 2024 LTIP. The PSUs are tied to a three-year forward-looking performance period and will be earned based on the Company’s average return on gross investment (ROGI) relative to the average ROGI of the Company’s performance peer group companies, and then are subject to modification based on the Company’s total shareholder return (“TSR”) over the three-year performance period relative to the TSR of the Company’s performance peer group companies, with all calculations being done in accordance with the terms of the award agreement, and with the earned award to be determined in the first quarter of fiscal 2027, after the final results for the relevant performance period are determined.
Fiscal 2023 LTIP PSU Awards. On January 3, 2023, the Committee granted PSUs under the Company’s 2023 LTIP. On May 11, 2023 and August 7, 2023, the Committee awarded and , respectively, of PSUs under the 2023 LTIP to newly hired executive officers, which will have the same performance period and terms as those issued to the other participants on January 3, 2023. The PSUs are tied to a three-year forward-looking performance period and will be earned based on the Company’s average ROGI relative to the average ROGI of the Company’s performance peer group companies, and the Company’s TSR relative to the TSR of the Company’s performance peer group companies, with all calculations being done in accordance with the terms of the award agreement, and with the earned award to be determined in the first quarter of fiscal 2026, after the final results for the relevant performance period are determined.
Fiscal 2022 LTIP PSU Awards. On January 3, 2022, the Committee granted PSUs under the Company’s 2022 LTIP. The PSUs are tied to a three-year forward-looking performance period and will be earned based on the Company’s average ROGI, relative to the average ROGI of the Company’s performance peer group companies, and the Company’s TSR relative to the TSR of the Company’s performance peer group companies, with all calculations being done in accordance with the terms of the award agreement, and with the earned award to be determined in the first quarter of fiscal 2025, after the final results for the relevant performance period are determined.
Under the 2024 LTIP, 2023 LTIP and 2022 LTIP, PSUs were granted at target level; however, actual awards may vary between % and % of the target number of PSUs, depending on the performance level achieved. In addition, the number of PSUs earned may be reduced (up to %) or increased (capped at the maximum payout) based on the Company’s TSR over the performance period.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | Granted | | | | | |
| Additional PSU awards vested from performance | | | | | |
| Stock issued for PSUs | () | | | | |
| Forfeited | () | | | | |
| LTIP PSU awards outstanding December 31, 2022 | | | | $ | | |
| Granted | | | | | |
| Additional PSU awards vested from performance | | | | | |
| Stock issued for PSUs | () | | | | |
| Forfeited | () | | | | |
| LTIP PSU awards outstanding December 30, 2023 | | | | $ | | |
| Granted | | | | | |
| Additional PSU awards vested from performance | | | | | |
| Stock issued for PSUs | () | | | | |
| Forfeited | () | | | | |
| LTIP PSU awards outstanding December 28, 2024 | | | | $ | | |
%% | % | | Risk-free interest rate | | % | % | % |
| Expected term | | years | years | years |
| Expected volatility | | % | % | % |
Nonemployee Director Restricted Stock Unit and Deferred Stock Unit Awards. The Company has historically paid a portion of the annual compensation package provided to its non-employee directors in equity, which since fiscal 2014 has been in the form of restricted stock units. During fiscal 2024 and fiscal 2023, each non-employee director received $ of restricted stock units, while during fiscal 2022, each non-employee director received $ of restricted stock units, with directors appointed after the annual meeting receiving a prorated portion of such amount. The number of restricted stock units issued is calculated using the closing price of the Company’s stock on the date of grant. The award vests (and is no longer subject to forfeiture) on the first to occur of (i) the first anniversary of the grant date, (ii) the grantee’s separation from service as a result of death or disability, or (iii) a change of control. The award will become “payable” in shares of the Company’s stock in a single lump sum payment as soon as possible following a grantee’s separation from service, subject to a grantee’s right to elect earlier distributions under certain circumstances. If a grantee ceases to be a director for any reason other than death or disability prior to vesting, the grantee will receive a prorated amount of the award up to the date of separation. Beginning in fiscal 2022, non-employee directors may also elect to receive all or a portion of their cash fees in the form of deferred stock units (“DSUs”), which are payable in shares of the Company’s common stock.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | Shares granted | | | | | |
| Shares where the restriction lapsed | | | | | |
| Shares forfeited | | | | | |
| Stock awards outstanding December 31, 2022 | | | | | |
| Shares granted | | | | | |
| Shares where the restriction lapsed | () | | | | |
| Shares forfeited | () | | | | |
| Stock awards outstanding December 30, 2023 | | | | | |
| Shares granted | | | | | |
| Shares where the restriction lapsed | () | | | | |
| Shares forfeited | () | | | | |
| Stock awards outstanding December 28, 2024 | | | | $ | | |
NOTE 14.
| | $ | () | | | $ | | | | Amortization of actuarial gain/(loss) | | | | () | | | | |
| | |
| Amortization of prior service costs | | | | () | | | | |
| | |
| Amortization of settlement | () | | | | | | () | |
| Special termination benefits recognized | | | | () | | | | |
| Other | | | | | | | | |
| Total defined benefit pension plans | | | | () | | | | |
| | |
| | |
| | |
| | |
| Soybean meal option derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | | | | () | | | | |
| Total soybean meal derivatives | | | | () | | | | |
| Heating oil swap derivatives at DGD | | | | | |
| Activity recognized in other comprehensive income (loss) | () | | | | | | () | |
| Total heating oil derivatives | () | | | | | | () | |
| Corn option derivatives | | | | | |
| Reclassified to earnings | | | | () | | | | |
| Activity recognized in other comprehensive income (loss) | () | | | | | | () | |
| Total corn options | | | | () | | | | |
| Foreign exchange derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | | | | () | | | | |
| Total foreign exchange derivatives | | | | () | | | | |
| | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | | | | () | |
| Other comprehensive income/(loss) | $ | () | | | $ | () | | | $ | () | |
| Year Ended December 30, 2023 | | | | | |
| Defined Benefit Pension Plans | | | | | |
| Actuarial gain/(loss) recognized | $ | | | | $ | () | | | $ | | |
| Amortization of actuarial gain/(loss) | | | | () | | | | |
| | |
| Amortization of prior service costs | () | | | | | | () | |
| | |
| Amortization of settlement | () | | | | | | () | |
| | |
| Other | | | | | | | | |
| Total defined benefit pension plans | | | | () | | | | |
| | |
| | |
| | |
| | |
| Soybean meal option derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | () | | | | | | () | |
| Total soybean meal derivatives | () | | | | | | () | |
| Heating oil swap derivatives at DGD | | | | | |
| Activity recognized in other comprehensive income (loss) | | | | () | | | | |
| Total heating oil derivatives | | | | () | | | | |
| Corn option derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | | | | () | | | | |
| Total corn options | | | | () | | | | |
| Interest swap derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | | | | () | | | | |
| Total interest swap derivatives | | | | () | | | | |
| Foreign exchange derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | | | | () | | | | |
| Total foreign exchange derivatives | | | | () | | | | |
| Foreign currency translation | | | | () | | | | |
| Other comprehensive income/(loss) | $ | | | | $ | () | | | $ | | |
| Year Ended December 28, 2024 | | | | | |
| Defined Benefit Pension Plans | | | | | |
| Actuarial gain/(loss) recognized | $ | | | | $ | () | | | $ | | |
| Amortization of actuarial gain/(loss) | | | | () | | | | |
| | |
| Amortization of prior service costs | | | | () | | | | |
| | |
| Amortization of settlement | () | | | | | | () | |
| | |
| | |
| Total defined benefit pension plans | | | | () | | | | |
| Soybean meal option derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | | | | | | | | |
| Total soybean meal derivatives | () | | | | | | () | |
| Heating oil swap derivatives at DGD | | | | | |
| | |
| Activity recognized in other comprehensive income (loss) | () | | | | | | () | |
| Total heating oil derivatives | () | | | | | | () | |
| Corn option derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | | | | () | | | | |
| Total corn options | () | | | | | | () | |
| Interest swap derivatives | | | | | |
| Reclassified to earnings | () | | | | | | () | |
| Activity recognized in other comprehensive income (loss) | | | | () | | | | |
| Total interest swap derivatives | | | | () | | | | |
| Foreign exchange derivatives | | | | | |
| Reclassified to earnings | | | | () | | | | |
| Activity recognized in other comprehensive income (loss) | () | | | | | | () | |
| Total foreign exchange derivatives | () | | | | | | () | |
| Foreign currency translation | () | | | | | | () | |
| Other comprehensive income/(loss) | $ | () | | | $ | | | | $ | () | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| $ | | | $ | | | Total net sales | | Foreign exchange derivatives | () | | | | | | Total net sales |
| |
| Corn option derivatives | | | | | () | | Cost of sales and operating expenses |
| Interest rate swap derivatives | | | | | | | Foreign currency gain/(loss) and interest expense |
| | | | | () | | Total before tax |
| () | | () | | () | | Income taxes |
| | | | | () | | Net of tax |
| Defined benefit pension plans | | | | |
| Amortization of prior service cost | $ | () | | $ | | | $ | () | | (a) |
| Amortization of actuarial loss | () | | () | | () | | (a) |
| |
| Amortization of settlement | | | | | | | (a) |
| Special termination benefits recognized | | | | | () | | (a) |
| () | | () | | () | | Total before tax |
| | | | | | | Income taxes |
| () | | () | | () | | Net of tax |
| Total reclassifications | $ | | | $ | | | $ | () | | Net of tax |
(a)
) | $ | | | $ | () | | $ | () | | | Other comprehensive income before reclassifications | | () | | () | | | | () | |
| Amounts reclassified from accumulated other comprehensive income/(loss) | | | | () | | | | () | |
| | |
| Net current-period other comprehensive income/(loss) | | () | | () | | | | () | |
| Noncontrolling interest | | | | | | | | | |
| Accumulated Other Comprehensive income/(loss) December 28, 2024, attributable to Darling, net of tax | | $ | () | | $ | () | | $ | () | | $ | () | |
NOTE 15.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
The Company recognizes the over-funded or under-funded status of the Company’s defined benefit post-retirement plans as an asset or liability in the Company’s balance sheet, with changes in the funded status recognized through comprehensive income/(loss) in the year in which they occur. The Company uses the month-end date of December 31 as the measurement date for all of the Company’s defined benefit plans, which is the closest month-end to the Company’s fiscal year-end.
| | $ | | | | Plan acquisition | | | | | |
| Service cost | | | | | |
| Interest cost | | | | | |
| Employee contributions | | | | | |
| Plan combinations | | | | | |
|
| Actuarial (gain)/loss | () | | | | |
| Benefits paid | () | | | () | |
|
| Effect of settlement | () | | | () | |
|
| Other (gain)/loss | () | | | | |
| Projected benefit obligation at end of period | | | | | |
| | | |
| Change in plan assets: | | | |
| Fair value of plan assets at beginning of period | | | | | |
| Actual return on plan assets | | | | | |
| Employer contributions | | | | | |
| Employee contributions | | | | | |
| Plan combinations | | | | | |
| Benefits paid | () | | | () | |
| Effect of settlement | () | | | () | |
|
| Other gain/(loss) | () | | | | |
| Fair value of plan assets at end of period | | | | | |
| | | |
| Funded status | () | | | () | |
| Net amount recognized | $ | () | | | $ | () | |
| | | |
Amounts recognized in the consolidated balance
sheets consist of: | | | |
| Noncurrent assets | $ | | | | $ | | |
| Current liability | () | | | () | |
| Noncurrent liability | () | | | () | |
| Net amount recognized | $ | () | | | $ | () | |
| | | |
Amounts recognized in accumulated other
comprehensive loss consist of: | | | |
| Net actuarial loss | $ | | | | $ | | |
| Prior service cost | () | | | () | |
| Net amount recognized (a) | $ | | | | $ | | |
(a) million and $ million at December 28, 2024 and December 30, 2023, respectively.
The amounts included in “Other” in the above table reflect the impact of foreign currency exchange translation for plans in Brazil, Belgium, Canada, France, Germany, Japan, Netherlands, Poland and United Kingdom. The
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
A significant component of the overall decrease in the Company’s benefit obligation for the fiscal year ended December 31, 2024 was from the change in the Company's actuarial gain in the weighted-average discount rates at the measurement dates, which increased from % at December 31, 2023 to % at December 31, 2024.
| | $ | | | | Accumulated benefit obligation | | | | | |
| Fair value of plan assets | | | | | |
The Company’s service cost component of net periodic pension cost is included in compensation costs while all components of net periodic pension cost other than the service cost component are included in the line item “Other income/(expense), net” in the Company’s Consolidated Statements of Operations.
| | $ | | | | $ | | | | Interest cost | | | | | | | | |
| Expected return on plan assets | () | | | () | | | () | |
| Net amortization and deferral | | | | | | | | |
| | |
| Settlement | () | | | () | | | () | |
| Special termination benefit recognized | | | | | | | | |
| Net pension cost | $ | | | | $ | | | | $ | | |
% | % | | % | | Rate of compensation increase | % | | % | | % |
Weighted average assumptions used to determine net periodic benefit cost for the employee benefit pension plans were:
| | | | | | | | | | | | | | | | | |
| | December 28,
2024 | | December 30,
2023 | | December 31,
2022 |
| Discount rate | % | | % | | % |
| Rate of increase in future compensation levels | % | | % | | % |
| Expected long-term rate of return on assets | % | | % | | % |
Consideration was made to the long-term time horizon for the (U.S. and Canada’s) plans’ benefit obligations as well as the related asset class mix in determining the expected long-term rate of return. Historical returns are also considered, over the long-term time horizon, in determining the expected return. Considering the overall asset mix
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
The investment objectives have been established in conjunction with a comprehensive review of the current and projected financial requirements. The primary investment objectives are: 1) to have the ability to pay all benefit and expense obligations when due; 2) to maximize investment returns within reasonable and prudent levels of risk in order to minimize contributions; and 3) to maintain flexibility in determining the future level of contributions.
Investment results and changing discount rates are the most critical elements in achieving funding objectives; however, contributions are used as a supplemental source of funding as deemed appropriate.
The investment guidelines are based upon an investment horizon of greater than ; therefore, interim fluctuations are viewed with this perspective. The strategic asset allocation is based on this long-term perspective and the plans' funded status. However, because the participants’ average age is somewhat older than the typical average plan age, consideration is given to retaining some short-term liquidity. Analysis of the cash flow projections of the plans indicates that benefit payments will continue to exceed contributions. The results of a thorough asset-liability study completed during 2012 established the Glide Path by which the U.S. plans’ asset allocations are determined. The Glide Path designates intervals based on funded status which contain a corresponding allocation to equities/real assets and fixed income. As the U.S. plans' funded status improves, the allocations become more conservative, and the opposite is true when the funded status declines.
% - %| Equities | % - % |
The equity allocation is invested in stocks traded on one of the U.S. stock exchanges or in foreign companies whose stock is traded outside the U.S. and/or companies that conduct the major portion of their business outside the U.S. Securities convertible into such stocks, convertible bonds and preferred stock, may also be purchased. The portfolio may invest in American Depository Receipts (“ADR”). The majority of the equities are invested in mutual funds that are well-diversified among growth and value stocks, as well as large, mid, and small cap assets. This mix is balanced based on the understanding that large cap stocks are historically less volatile than small cap stocks: however, smaller cap stocks have historically outperformed larger cap stocks. The emerging markets portion of the equity allocation is held below % due to greater volatility in the asset class. Risk adjusted returns are the primary driver of allocation choices within these asset classes. The portfolio is well-diversified in terms of companies, industries and countries.
The diversified asset portion of the allocation will invest in securities with a goal to outpace inflation and preserve their value. The securities in this allocation may consist of inflation-indexed bonds, securities of real estate companies, commodity index-linked notes, fixed-income securities, securities of natural resource companies, master limited partnerships, publicly-listed infrastructure companies, and floating rate debt.
With of the U.S. plans approaching a funded status of around % in fiscal 2023, the investment strategy for these plans was changed from the Glide Path strategy into a liability driven investment strategy.
All investment objectives are expected to be achieved over a market cycle anticipated to be a period of five to . Reallocations are performed on a monthly basis to retain target allocation ranges. On a quarterly basis the plans’ funded status will be recalculated to determine which Glide Path interval allocation is appropriate.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | $ | | | | $ | | | | Short Term | | | | | | | | | | | |
| Equity Securities: | | | | | | | |
| Domestic equities | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| Insurance contracts | | | | | | | | | | | |
| Totals | $ | | | | $ | | | | $ | | | | $ | | |
| | | | | | | |
| Balances as of December 28, 2024 | | | | | | | |
| Fixed Income: | | | | | | | |
| Long Term | $ | | | | $ | | | | $ | | | | $ | | |
| Short Term | | | | | | | | | | | |
| Equity Securities: | | | | | | | |
| Domestic equities | | | | | | | | | | | |
| International equities | | | | | | | | | | | |
| Insurance contracts | | | | | | | | | | | |
| Totals | $ | | | | $ | | | | $ | | | | $ | | |
The majority of the U.S. and Canada plan pension assets are invested in mutual funds; however, some assets are invested in pooled separate accounts (“PSA”) which have similar mutual fund counterparts. PSA accounts are generally used to access lower fund management expenses when compared to their mutual fund counterparts. The mutual funds are generally invested in institutional shares, retirement shares, or A-shares with no loads. The fair value of each mutual fund and PSA is based on the market value of the underlying investments. The majority of the foreign pension assets are held under insurance contracts where the investment risk for the accumulated benefit obligation rests with the insurer, which the Company has no specific detailed asset information.
| | Unrealized gains (losses) relating to instruments still held in the reporting period. | | | |
| Purchases, sales, and settlements | | | |
| Exchange rate changes | | | |
| Balance as of December 30, 2023 | | | |
| Unrealized gains (losses) relating to instruments still held in the reporting period. | | | |
| Purchases, sales, and settlements | | | |
| Exchange rate changes | | () | |
| Balance as of December 28, 2024 | | $ | | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
Estimated Future Benefit Payments
| | 2026 | | |
| 2027 | | |
| 2028 | | |
| 2029 | | |
| Years 2030 – 2034 | | |
Multiemployer Pension Plans
The Company participates in various multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts in the United States. These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants. The FASB issued guidance requiring companies to provide additional disclosures related to individually significant multiemployer pension plans. The Company’s contributions to each individual multiemployer plan represent less than % of the total contributions to each such plan. Based on the most currently available information, the Company has determined that, if a withdrawal were to occur, withdrawal liabilities on two of the plans in which the Company currently participates could be material to the Company.
| $ | | | $ | | | December 2028 (b) | | Central States, Southeast and Southwest Areas Pension Plan (a) | 36-6044243 / 001 | Green | Green | Yes | | | | | | | December 2026 (c) |
| All other multiemployer plans | | | | | | | | | | | |
| | Total Company Contributions | $ | | | $ | | | $ | | | |
(a) As of its most recent public filing, the Central States, Southeast and Southwest Areas Pension Plan (Central States) was in the critical or red zone. In January 2023, however, the Pension Benefit Guaranty Corporation provided $35.8 billion in Special Financial Assistance (SFA) funds to Central States under the American Rescue Plan Act of 2021. Due to this SFA funding, Central States is projected to now have zone status of green.
(b)
(c)
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
The Company has withdrawal liabilities recorded on U.S. multiemployer plans in which it participated. As of December 28, 2024, the Company has an aggregate accrued liability of approximately $ million representing the present value of scheduled withdrawal liability payments on the remaining multiemployer plans that have given notices of withdrawals. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could require additional funding under the Pension Protection Act of 2006, the amounts could be material.
NOTE 16.
million. Under the contracts, the Company is obligated to pay a weighted average rate of % while receiving the 1-month SOFR rate. Under the terms of the interest rate swaps, the Company hedged a portion of its variable rate debt into the first quarter of 2026. At December 28, 2024, the aggregate fair value of these interest rate swaps was approximately $ million. These amounts are included in other current assets, other assets, accrued expenses and noncurrent liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss. At December 30, 2023, the aggregate fair value of these interest rate swaps was approximately $ million. These amounts are included in other current assets, accrued expenses and noncurrent liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss.
In fiscal 2023, the Company also entered into cross currency swaps that are designated as cash flow hedges. The notional amount of these swaps was € million. Under the contracts, the Company is obligated to pay a % euro denominated fixed rate while receiving a weighted average U.S. dollar fixed rate of %. Under the terms of the cross currency swaps, the Company hedged its intercompany notes receivable into the first quarter of 2025. Accordingly, changes in the fair value of the cash flow hedge are initially recorded as gains and/or losses as a component of accumulated other comprehensive loss. We immediately reclassify from accumulated other comprehensive loss to earnings an amount to offset the remeasurement recognized in earnings associated with the respective intercompany loan. Additionally, we reclassify amounts from accumulated other comprehensive loss associated with the interest rate differential between the U.S. dollar and euro to interest expense. At December 28, 2024, the aggregate fair value of these cross currency swaps was approximately $ million. These amounts are included in other current assets on the balance sheet, with an offset recorded in accumulated other comprehensive loss. At December 30, 2023, the aggregate fair value of these cross currency swaps was approximately $ million. These amounts are included in other current assets and noncurrent liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss.
In fiscal 2024, fiscal 2023 and fiscal 2022, the Company entered into foreign exchange option and forward contracts that are considered cash flow hedges. Under the terms of the foreign exchange contracts, the Company hedged a portion of its forecasted sales in currencies other than the functional currency through the fourth quarter of fiscal 2026. At December 28, 2024, the aggregate fair value of these foreign exchange contracts was approximately $ million. These amounts are included in other assets, accrued expenses and noncurrent liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss. At December 30, 2023, the aggregate fair value of these foreign exchange contracts was approximately $ million, respectively.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
The Company may enter into soybean meal forward contracts, natural gas swap contracts and heating oil swap and option contracts from time to time. There were no open designated soybean meal forward, natural gas swap or heating oil swap and option contracts entered into by the Company at December 28, 2024 and December 30, 2023, respectively.
At December 28, 2024, the Company had the following outstanding forward contract amounts that were entered into to hedge the future payments of intercompany note transactions, foreign currency transactions in currencies other than the functional currency and forecasted transactions in currencies other than the functional currency
| | Euro | | | | Brazilian real | | | | U.S. Dollar | | |
| Euro | | | | U.S. Dollar | | |
| Euro | | | | Polish zloty | | |
| Euro | | | | Japanese yen | | |
| Euro | | | | Chinese renminbi | | |
| Euro | | | | Australian dollar | | |
| Euro | | | | British pound | | |
| |
| Polish zloty | | | | Euro | | |
| Polish zloty | | | | U.S. dollar | | |
| British pound | | | | Euro | | |
| British pound | | | | U.S. dollar | | |
| Japanese yen | | | | U.S. dollar | | |
| U.S. dollar | | | | Japanese yen | | |
| U.S. dollar | | | | Euro | | |
| |
| Australian dollar | | | | U.S. dollar | | |
| |
| |
The above foreign currency contracts had an aggregate fair value of approximately $ million and are included in other current assets, accrued expenses and noncurrent liabilities at December 28, 2024.
The Company estimates the amount that will be reclassified from accumulated other comprehensive loss at December 28, 2024 into earnings over the next months will be approximately $ million. As of December 28, 2024, amounts have been reclassified into earnings as a result of the discontinuance of cash flow hedges.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| $ | () | | $ | | |
| Foreign exchange | | Total net sales | | | | () | | () | |
| Foreign exchange | | Cost of sales and operating expenses | | () | | () | | () | |
| Foreign exchange | | Selling, general and administrative expense | | | | () | | () | |
| Corn options and futures | | Net sales | | | | | | () | |
| Corn options and futures | | Cost of sales and operating expenses | | () | | () | | | |
| | | |
| | | |
| | | |
Heating oil swaps and options | | Selling, general and administrative expense | | | | | | | |
Soybean meal | | Total net sales | | | | | | () | |
| | | |
| Total | | | | $ | | | $ | () | | $ | | |
At December 28, 2024, the Company had forward purchase agreements in place for purchases of approximately $ million of natural gas and diesel fuel. The Company intends to take physical delivery of the commodities under the forward purchase agreements and accordingly, these contracts are not subject to the requirements of fair value accounting because they qualify as normal purchases.
NOTE 17.
| $ | | | $ | | | $ | | | | Total Assets | | | | | | | | |
| | | | |
| Liabilities | | | | |
| Derivative liabilities | | | | | | | | |
| Contingent consideration | | | | | | | | |
| Total Liabilities | $ | | | $ | | | $ | | | $ | | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| $ | | | $ | | | $ | | | | Total Assets | | | | | | | | |
| | | | |
| Liabilities | | | | |
| Derivative liabilities | | | | | | | | |
| Contingent consideration | | | | | | | | |
| Total Liabilities | $ | | | $ | | | $ | | | $ | | |
Derivative assets and liabilities consist of the Company’s corn option and future contracts, foreign currency forward and option contracts, interest rate swap contracts and cross currency swap contracts which represent the difference between the observable market rates of commonly quoted intervals for similar assets and liabilities in active markets and the fixed swap rate considering the instrument’s term, notional amount and credit risk. See Note 16 Derivatives for discussion on the Company’s derivatives.
The fair value measurement of contingent consideration liability uses significant unobservable inputs (level 3). We estimated the fair value of the FASA contingent consideration using a Monte Carlo simulation methodology from a third party that includes simulating the forecasted net income or earnings plus interest expense, taxes, depreciation and amortization (“EBITDA”) using a Geometric Brownian Motion in a risk-neutral framework. The assumptions used in the FASA contingent consideration analysis as of December 28, 2024 included the EBITDA forecast through the remaining term of the contingent consideration, an EBITDA discount rate, an EBITDA volatility, credit spread, risk-free rate and exchange rate. Significant increases and decreases in these inputs could result in a significantly lower or higher fair value measurement of the FASA contingent consideration.
| | Out of period correction | () | |
| Total included in earnings during period | () | |
| Exchange rate changes | | |
| Balance as of December 30, 2023 | | |
| Total included in earnings during period | () | |
| Exchange rate changes | () | |
| Balance as of December 28, 2024 | $ | | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| $ | | | $ | | | $ | | | | 5.25% Senior Notes | | | | | | | | |
| 3.625% Senior Notes | | | | | | | | |
| Term loan A-1 | | | | | | | | |
| Term loan A-2 | | | | | | | | |
| Term loan A-3 | | | | | | | | |
| Term loan A-4 | | | | | | | | |
| Revolver | | | | | | | | |
| Total Liabilities | $ | | | $ | | | $ | | | $ | | |
| | | | | | | | | | | | | | |
| | | Fair Value Measurements at December 30, 2023 Using |
| | Quoted Prices in
Active Markets for
Identical Assets | Significant Other
Observable
Inputs | Significant
Unobservable
Inputs |
| (In thousands of dollars) | Total | (Level 1) | (Level 2) | (Level 3) |
| Liabilities | | | | |
| 6% Senior Notes | $ | | | $ | | | $ | | | $ | | |
| 5.25% Senior Notes | | | | | | | | |
| 3.625% Senior Notes | | | | | | | | |
| Term loan A-1 | | | | | | | | |
| Term loan A-2 | | | | | | | | |
| Term loan A-3 | | | | | | | | |
| Term loan A-4 | | | | | | | | |
| Revolver | | | | | | | | |
| Total Liabilities | $ | | | $ | | | $ | | | $ | | |
The fair value of the senior notes, term loan A-1, term loan A-2, term loan A-3, term loan A-4 and revolver debt is based on market quotation from third-party banks. The carrying amount for the Company’s other debt is not deemed to be significantly different than the fair value and all other instruments have been recorded at fair value.
NOTE 18.
food segment locations. As a result, the Company incurred restructuring charges of approximately $ million, which included employee termination costs of approximately $ million and other restructuring costs of approximately $ million. In addition, the Company’s management decided to close feed segment location and transfer operations for optimization opportunities. The Company incurred restructuring charges of approximately $ million, which included employee termination costs of approximately $ million and other restructuring costs of approximately $ million.
In fiscal 2023, the Company’s management decided to close or transfer operations for optimization opportunities at feed segment locations in the U.S. As a result, the Company incurred asset impairment charges of approximately $ million and other closure restructuring costs of approximately $ million. Additionally in fiscal 2023, the Company incurred approximately $ million of employee termination costs in the Feed Segment related to closing down of a processing location in Europe and transferring the material to another processing
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
In fiscal 2022, the Company’s management reviewed our global network of collagen plants for optimization opportunities and decided to close our Peabody, Massachusetts, plant in 2023. As a result of the restructuring, the Company incurred asset impairment charges in the food segment of approximately $ million. In addition, in the second quarter of fiscal 2022, the Company lost a large raw material customer at a plant location in Canada that resulted in an asset impairment charge to the Company’s intangible assets of approximately $ million. The Company has recorded these impairments in the restructuring and asset impairment charges line in the Consolidated Statement of Operations.
NOTE 19.
%, % and % of our total net sales were to the DGD Joint Venture. No single customer accounted for more than 10% of our accounts receivable at December 28, 2024. At December 30, 2023, approximately %, respectively of our accounts receivable were due from the DGD Joint Venture. See Note 23 for additional discussion of the Company’s transactions with the DGD Joint Venture.
NOTE 20.
million and $ million, respectively. The Company has insurance recovery receivables reflected on the balance sheet in other assets of approximately $ million and $ million as of December 28, 2024 and December 30, 2023, related to the insurance contingencies. The Company’s management believes these reserves for contingencies are reasonable and sufficient based upon present governmental regulations and information currently available to management; however, there can be no assurance that final costs related to these contingencies will not exceed current estimates. The Company believes that the likelihood is remote that any additional liability from the lawsuits and claims that may not be covered by insurance would have a material effect on the Company’s financial position, results of operations or cash flows.
Lower Passaic River Area. In December 2009, the Company, along with numerous other entities, received notice from the United States Environmental Protection Agency (“EPA”) that the Company (as alleged successor-in-interest to The Standard Tallow Corporation) is considered a potentially responsible party (a “PRP”) with respect to alleged contamination in the lower 17-mile area of the Passaic River (the “Lower Passaic River”) which is part of the Diamond Alkali Superfund Site located in Newark, New Jersey. The Company’s designation as a PRP is based upon the operation of former plant sites located in Newark and Kearny, New Jersey by The Standard Tallow Corporation, an entity that the Company acquired in 1996. In March 2016, the Company received another letter
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
NOTE 21.
locations across continents within industry segments: Feed Ingredients, Food Ingredients and Fuel Ingredients. The Company's segments are determined as those operations whose results are reviewed regularly by the chief operating decision maker (“CODM”), who is the Company's Chief Executive Officer, in deciding how to allocate resources and assess performance. Each segment is organized and managed based upon the nature of the Company's markets and customers and consists of similar products and services.
The following is a description of each segment's business operations:
Feed Ingredients
Feed Ingredients consists principally of (i) the Company’s U.S. ingredients business, including the Company’s fats and proteins, used cooking oil, trap grease, the Company’s Canada ingredients business, and the ingredients and specialty products businesses conducted by Darling Ingredients International under the Sonac and FASA names
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| $ | | | $ | | | $ | | | $ | | | | Cost of sales and operating expenses | | | | | | | | | | |
| Gross Margin | | | | | | | | | | |
| | | | | |
| Gain on sale of assets | () | | () | | () | | | | () | |
| Selling, general and administrative expenses | | | | | | | | | | |
| Restructuring and asset impairment charges | | | | | | | | | | |
| Depreciation and amortization | | | | | | | | | | |
| Acquisition and integration costs | | | | | | | | | | |
| Change in fair value of contingent consideration | () | | | | | | | | () | |
| Equity in net income of Diamond Green Diesel | | | | | | | | | | |
| Segment operating income/(loss) | | | | | | | () | | | |
| | | | | |
| Equity in net income of other unconsolidated subsidiaries | | | | | | | | | | |
| Segment income/(loss) | | | | | | | () | | | |
| | | | | |
| Total other expense (b) | | | | | () | |
| Income before income taxes | | | | | $ | | |
| | | | | |
| Segment assets at December 28, 2024 | $ | | | $ | | | $ | | | $ | | | $ | | |
(a) Included in corporate activities are general corporate expenses and the amortization of intangibles. Assets of corporate activities include cash, unallocated prepaid expenses, deferred tax assets, prepaid pension, and miscellaneous other assets.
(b) Total other expense includes interest expense, foreign currency gain (loss) and other income (expense). Interest expense and foreign currency gain (loss) are separately disclosed on our Statement of Operations. Other income/(expense) consists of interest income of approximately $ million, casualty gain of approximately
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | | | | | | | | | | | | | | | | |
| Feed Ingredients | Food Ingredients | Fuel Ingredients | Corporate | Total |
| Fiscal Year Ended December 30, 2023 | | | | | |
| Total net sales | $ | | | $ | | | $ | | | $ | | | $ | | |
| Cost of sales and operating expenses | | | | | | | | | | |
| Gross Margin | | | | | | | | | | |
| | | | | |
| Loss/(gain) on sale of assets | | | () | | () | | | | () | |
| Selling, general and administrative expenses | | | | | | | | | | |
| Restructuring and asset impairment charges | | | | | | | | | | |
| Depreciation and amortization | | | | | | | | | | |
| Acquisition and integration costs | | | | | | | | | | |
| Change in fair value of contingent consideration | () | | | | | | | | () | |
| Equity in net income of Diamond Green Diesel | | | | | | | | | | |
| Segment operating income/(loss) | | | | | | | () | | | |
| | | | | |
| Equity in net income of other unconsolidated subsidiaries | | | | | | | | | | |
| Segment income/(loss) | | | | | | | () | | | |
| | | | | |
| Total other expense (c) | | | | | () | |
| Income before income taxes | | | | | $ | | |
| | | | | |
| Segment assets at December 30, 2023 | $ | | | $ | | | $ | | | $ | | | $ | | |
(c) Total other expense includes interest expense, foreign currency gain (loss) and other income (expense). Interest expense and foreign currency gain (loss) are separately disclosed on our Statement of Operations. Other income (expense) consists of interest income of approximately $ million, casualty gain of approximately $ million, other pension expense excluding service cost of approximately $() million and other expense of approximately $() million.
| | | | | | | | | | | | | | | | | |
| Feed Ingredients | Food Ingredients | Fuel Ingredients | Corporate | Total |
| Fiscal Year Ended December 31, 2022 | | | | | |
| Total net sales | $ | | | $ | | | $ | | | $ | | | $ | | |
| Cost of sales and operating expenses | | | | | | | | | | |
| Gross Margin | | | | | | | | | | |
| | | | | |
| Gain on sale of assets | () | | () | | () | | | | () | |
| Selling, general and administrative expenses | | | | | | | | | | |
| Restructuring and asset impairment charges | | | | | | | | | | |
| Acquisition and integration costs | | | | | | | | | | |
| Depreciation and amortization | | | | | | | | | | |
| Equity in net income of Diamond Green Diesel | | | | | | | | | | |
| Segment operating income/(loss) | | | | | | | () | | | |
| | | | | |
| Equity in net income of other unconsolidated subsidiaries | | | | | | | | | | |
| Segment income/(loss) | | | | | | | () | | | |
| | | | | |
| Total other expense (d) | | | | | () | |
| Income before income taxes | | | | | $ | | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| | $ | | | | $ | | | | Food Ingredients | | | | | | | | |
| Fuel Ingredients | | | | | | | | |
| Corporate | | | | | | | | |
| Total (a) | $ | | | | $ | | | | $ | | |
million, $ million and $ million, respectively.
| $ | | | | Europe | | | | |
| China | | | | |
| South America | | | | |
| Other | | | | |
| Total | $ | | | $ | | |
NOTE 22.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| $ | | | $ | | | $ | | | | Europe | | | | | | | | |
| China | | | | | | | | |
| South America | | | | | | | | |
| Other | | | | | | | | |
| Total net sales | $ | | | $ | | | $ | | | $ | | |
| | | | |
| Major product types | | | | |
| Fats | $ | | | $ | | | $ | | | $ | | |
| Used cooking oil | | | | | | | | |
| Proteins | | | | | | | | |
| Bakery | | | | | | | | |
| Other rendering | | | | | | | | |
| Food ingredients | | | | | | | | |
| Bioenergy | | | | | | | | |
| |
| Other | | | | | | | | |
| Total net sales | $ | | | $ | | | $ | | | $ | | |
| | | | | | | | | | | | | | |
| Year Ended December 30, 2023 |
| Feed Ingredients | Food Ingredients | Fuel Ingredients | Total |
| Geographic Area | | | | |
| North America | $ | | | $ | | | $ | | | $ | | |
| Europe | | | | | | | | |
| China | | | | | | | | |
| South America | | | | | | | | |
| Other | | | | | | | | |
| Total net sales | $ | | | $ | | | $ | | | $ | | |
| | | | |
| Major product types | | | | |
| Fats | $ | | | $ | | | $ | | | $ | | |
| Used cooking oil | | | | | | | | |
| Proteins | | | | | | | | |
| Bakery | | | | | | | | |
| Other rendering | | | | | | | | |
| Food ingredients | | | | | | | | |
| Bioenergy | | | | | | | | |
| |
| Other | | | | | | | | |
| Total net sales | $ | | | $ | | | $ | | | $ | | |
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
| $ | | | $ | | | $ | | | | Europe | | | | | | | | |
| China | | | | | | | | |
| South America | | | | | | | | |
| Other | | | | | | | | |
| Total net sales | $ | | | $ | | | $ | | | $ | | |
| | | | |
| Major product types | | | | |
| Fats | $ | | | $ | | | $ | | | $ | | |
| Used cooking oil | | | | | | | | |
| Proteins | | | | | | | | |
| Bakery | | | | | | | | |
| Other rendering | | | | | | | | |
| Food ingredients | | | | | | | | |
| Bioenergy | | | | | | | | |
| |
| Other | | | | | | | | |
| Total net sales | $ | | | $ | | | $ | | | $ | | |
Revenue from Contracts with Customers
The Company has primary revenue streams. Finished product revenues are recognized 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 in net sales when the service occurs.
Fats. Fats include the Company’s global activities related to the collection and processing of beef, poultry and pork animal by-products into finished products of non-food grade oils and food grade fats. Fats net sales are recognized when the Company ships the finished product to the customer and control has been transferred.
Proteins. Proteins include the Company’s global activities related to the collection and processing of beef, poultry and pork animal by-products into finished products of protein meal. Proteins net sales are recognized when the Company ships the finished product to the customer and control has been transferred.
Used Cooking Oil. Used cooking oil includes collection and processing of used cooking oil into finished products of non-food grade fats. Used cooking oil net sales are recognized when the Company ships the finished product to the customer and control has been transferred.
Bakery. Bakery includes collection and processing of bakery residuals into finished product including Cookie Meal®, an animal feed ingredient primarily used in poultry and swine rations. Bakery net sales are recognized when the Company ships the finished product to the customer and control has been transferred.
Other Rendering. Other rendering includes hides, pet food products, and service charges. Hides and pet food net sales are recognized when the Company ships the finished product to the customer and control has been transferred. Service revenues are recognized in net sales when the service has occurred.
Food Ingredients. Food ingredients includes collection and processing of pigskin, hide, bone and fish into finished product. It also includes harvesting, sorting and selling of hog and sheep casings as well as harvesting, purchasing and processing of hog, sheep and beef meat for pet food industry. Collagen and CTH meat and casings net sales are recognized when the Company ships the finished product to the customer and control has been transferred.
Bioenergy. Bioenergy includes Ecoson, which converts organic sludge and food waste into biogas and Rendac, which collects fallen stock and animal waste for a fee and processes these materials into fats and meals that can only be used as low grade energy or fuel for boilers and cement kilns. Net sales are recognized when the finished
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
NOTE 23.
million, $ billion and $ billion, respectively. At December 28, 2024 and December 30, 2023, the Company has approximately $ million and $ million in outstanding receivables due from the DGD Joint Venture, respectively. In addition, the Company has eliminated additional sales of approximately $ million, $ million and $ million for the years ended December 28, 2024, December 30, 2023 and December 31, 2022, respectively to the DGD Joint Venture and deferred the Company’s portion of profit on those sales relating to inventory assets still remaining on the DGD Joint Venture's balance sheet at December 28, 2024, December 30, 2023 and December 31, 2022 of approximately $ million, $ million and $ million, respectively.
Revolving Loan Agreement
On May 1, 2019, Darling through its wholly owned subsidiary Darling Green Energy LLC, (“Darling Green”), and Diamond Alternative Energy, LLC, a wholly owned subsidiary of Valero (“Diamond Alternative” and together with Darling Green, the “DGD Lenders”) entered into a revolving loan agreement (the “2019 DGD Loan Agreement”) with the DGD Joint Venture, pursuant to which the DGD Lenders committed to making loans available to the DGD Joint Venture in the amount of $ million with each lender committed to $ million of the total commitment. Any borrowings by the DGD Joint Venture under the 2019 DGD Loan Agreement were at the applicable annum rate equal to the sum of (a) the LIBO Rate (meaning Reuters BBA Libor Rates Page 3750) on such day plus (b) %. On June 15, 2023, the DGD Lenders entered into a new revolving loan agreement (the “2023 DGD Loan Agreement”) with the DGD Joint Venture that replaced and superseded in its entirety the 2019 DGD Loan Agreement and pursuant to which the DGD Lenders have committed to making loans available to the DGD Joint Venture in the total amount of $ million with each lender committed to $ million of the total commitment. Any borrowings by the DGD Joint Venture under the 2023 DGD Loan Agreement are at the applicable annum rate equal to the sum of (a) Term SOFR on such day plus (b) %. The 2023 DGD Loan Agreement expires on June 15, 2026. In December 2022, the DGD Joint Venture borrowed all $ million available under the 2019 DGD Loan Agreement, including the Company’s full $ million commitment, which was repaid in fiscal 2023. In January 2024, the DGD Joint Venture borrowed all $ million available under the 2023 DGD Loan Agreement, including the Company’s full $ million commitment, which was repaid in March 2024. The DGD Joint Venture paid interest to the Company for the years ended December 28, 2024, December 30, 2023 and December 31, 2022 of approximately $ million, $ million and $ million, respectively. As of December 28, 2024 and December 30, 2023, was owed to Darling Green under the 2023 DGD Loan Agreement. This note receivable amount when outstanding is included in other current assets on the balance sheet and is included in investing activities on the cash flow statement.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
In April 2021, in connection with the DGD Joint Venture’s expansion project at its Port Arthur plant, the Company entered into agreements (the “GTL Terminaling Agreements”) with GT Logistics, LLC (“GTL”), pursuant to which the DGD Joint Venture will move raw material and finished product to and from the GTL terminal facility by pipeline, thereby providing better logistical capabilities. As a condition to entering into the GTL Terminaling Agreements, GLT required that the Company and Valero guarantee their proportionate share, up to a maximum of approximately $ million each, of the DGD Joint Venture’s obligations under the GTL Terminaling Agreements (the “GTL Guarantee”), subject to the conditions provided for in the GTL Terminaling Agreements. The maximum amount of the GTL Guarantee is reduced over the initial term of the GTL Terminaling Agreements as the termination fee under such agreements declines. The Company has not recorded any liability as a result of the GTL Guarantee, as the Company believes the likelihood of having to make any payments under the GTL Guarantee is remote.
NOTE 24.
) | | $ | | | | $ | | | | Cash paid during the year for: | | | | | |
| Interest, net of capitalized interest | $ | | | | $ | | | | $ | | |
| Income taxes, net of refunds | $ | | | | $ | | | | $ | | |
| Non-cash operating activities | | | | | |
| Operating lease right of use asset obtained in exchange for new lease liabilities | $ | | | | $ | | | | $ | | |
| Non-cash financing activities | | | | | |
| Debt issued for assets | $ | | | | $ | | | | $ | | |
NOTE 25.
DARLING INGREDIENTS INC.
Notes to Consolidated Financial Statements (continued)
PART II
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures.
As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. As defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, disclosure controls and procedures are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Based on management’s evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.
Internal Control over Financial Reporting.
(a) Management’s Annual Report on Internal Control over Financial Reporting. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Those rules define internal control over financial reporting as a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
•Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
•Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
•Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 28, 2024. In making this assessment, the Company’s management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) (2013).
Based on their assessment, management has concluded that the Company’s internal control over financial reporting was effective at the reasonable assurance level as of December 28, 2024.
During 2024, the Company acquired Miropasz. The Company is currently in the process of integrating the Miropasz Acquisition pursuant to the Sarbanes-Oxley Act of 2002. The Company is evaluating changes to processes, information technology systems and other components of internal controls over financial reporting as part of the ongoing integration
activities, and as a result, certain controls will be periodically changed. The Company believes, however, it will be able to maintain sufficient controls over the substantive results of its financial reporting throughout the integration process. Because of the timing of other recent acquisitions, the internal control over financial reporting of the Miropasz Acquisition has been excluded from management's assessment of the Company’s internal control over financial reporting for fiscal 2024, as permitted under SEC regulations. Miropasz represented approximately $140.3 million of the Company’s consolidated total assets as of December 28, 2024 and attributed approximately $88.1 million in net sales for the year ended December 28, 2024.
KPMG LLP, the registered public accounting firm that audited the Company’s financial statements, has issued an audit report on the effectiveness of internal control over financial reporting, which report is included herein.
(b) Attestation Report of the Registered Public Accounting Firm. The attestation report called for by Item 308(b) of Regulation S-K is incorporated herein by reference to Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting, included in Part II, Item 8. “Financial Statements and Supplementary Data” of this report.
(c) Changes in Internal Control over Financial Reporting. As required by Exchange Act Rule 13a-15(d), the Company’s management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any change occurred during the last fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Based on that evaluation there has been no change in the Company’s internal control over financial reporting during the last fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect the Company’s internal control over financial reporting. During fiscal 2024, the Company has implemented internal controls over financial reporting for the Gelnex Acquisition, which has materially affected, or is reasonably likely to materially affect the Company’s internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Rule 10b5-1 Plan Adoptions and Modifications
.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item with respect to Items 401, 405 and 407 of Regulation S-K will appear in the sections entitled “Election of Directors,” “Our Management - Executive Officers and Directors,” “Delinquent Section 16 (a) Reports” and “Corporate Governance-Committees of the Board - Audit Committee” included in the Company’s definitive Proxy Statement relating to the 2025 annual meeting of stockholders, which will be filed no later than 120 days after December 28, 2024, and such information is incorporated herein by reference.
The Company has adopted the Darling Ingredients Inc. Code of Conduct (“Code of Conduct”), which is applicable to all of the Company’s employees, including its senior financial officers, the Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller, Treasurer and General Counsel. A copy of the Company’s Code of Conduct has been posted on the “Investor” portion of our web site, at www.darlingii.com/investors. We intend to satisfy the disclosure requirements of the SEC regarding amendments to, or waivers from, the Code of Conduct by posting such information on the same web site.
We have an Insider Trading and Confidentiality Policy and procedures governing the purchase, sale and other dispositions of our securities by our directors, officers and employees, and have implemented processes for the Company, that we believe are reasonably designed to promote compliance with insider trading laws, rules and regulations, and listing standards applicable to us. A copy of our Insider Trading and Confidentiality Policy is filed as Exhibit 19.1 to this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will appear in the sections entitled “Executive Compensation,” “Compensation Committee Report” and “Corporate Governance - Compensation Committee Interlocks and Insider Participation” included in the Company’s definitive Proxy Statement relating to the 2025 annual meeting of stockholders, which will be filed no later than 120 days after December 28, 2024, and such information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
EQUITY COMPENSATION PLANS
The following table sets forth certain information as of December 28, 2024, with respect to the Company’s equity compensation plans (including individual compensation arrangements) under which the Company’s equity securities are authorized for issuance, aggregated by (i) all compensation plans previously approved by the Company’s security holders, and (ii) all compensation plans not previously approved by the Company’s security holders. The table includes:
•the number of securities to be issued upon the exercise of outstanding options and granted non-vested stock;
•the weighted-average exercise price of the outstanding options and granted non-vested stock; and
•the number of securities that remain available for future issuance under the plans.
| | | | | | | | | | | | | | |
| Plan Category | (a)
Number of securities
to be issued upon
exercise of
outstanding
options, warrants
and rights | (b)
Weighted-average
exercise price of
outstanding
options, warrants
and rights | (c)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a)) |
| Equity compensation plans approved by security holders | 3,395,034 | (1) | $28.32 | — |
| Equity compensation plans not approved by security holders | — | | — | — |
| Total | 3,395,034 | | $28.32 | — |
(1) Includes shares underlying options that have been issued and granted non-vested stock pursuant to the Company’s 2012 Omnibus Incentive Plan and 2017 Omnibus Incentive Plan, each as approved by the Company’s stockholders. See Note 13 of Notes to Consolidated Financial Statements included herein for information regarding the material features of the 2017 Omnibus Incentive Plan.
The information required by this Item with respect to Item 403 of Regulation S-K will appear in the section entitled “Security Ownership of Certain Beneficial Owners and Management” included in the Company’s definitive Proxy Statement relating to the 2025 annual meeting of stockholders, which will be filed no later than 120 days after December 28, 2024, and such information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item will appear in the sections entitled “Transactions with Related Persons, Promoters and Certain Control Persons” and “Corporate Governance - Independent Directors” included in the Company’s definitive Proxy Statement relating to the 2025 annual meeting of stockholders, which will be filed no later than 120 days after December 28, 2024, and such information is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item will appear in the section entitled “Ratification of Selection of Independent Registered Public Accountant” included in the Company’s definitive Proxy Statement relating to the 2025 annual meeting of stockholders, which will be filed no later than 120 days after December 28, 2024, and such information is incorporated herein by reference.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) Documents filed as part of this report:
(1) The following consolidated financial statements are included in Item 8.
All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.
(3) Exhibits
(With regard to applicable cross-references in the list of exhibits below, the Company’s Current, Quarterly and Annual Reports are filed with the Securities and Exchange Commission under File No. 001-13323).
| | | | | | | | |
| Exhibit No. |
| | |
| 3.1 | |
| | |
| 3.2 | |
| | |
| 4.1 | |
| | |
| 4.2 | Senior Notes Indenture, dated as of May 2, 2018, by and among Darling Global Finance B.V., Darling Ingredients Inc., the subsidiary guarantors party thereto from time to time, Citibank, N.A., London Branch, as trustee and principal paying agent, and Citigroup Global Markets Deutschland AG, as principal registrar (filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K filed May 2, 2018 and incorporated herein by reference). |
| | |
| 4.3 | |
| | |
| 4.4 | |
| | |
| 4.5 | |
| | |
| 4.6 | |
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| 4.7 | |
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| 4.8 | |
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| 4.9 | |
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| 4.10 | |
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| 4.11 | |
| | |
| 4.12 | |
| | |
| 10.1 | Second Amended and Restated Credit Agreement, dated as of January 6, 2014, by and among Darling International Inc., the other borrowers party thereto from time to time, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and the other agents from time to time party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 10, 2014 and incorporated herein by reference). |
| | | | | | | | |
| | |
| 10.2 | First Amendment to the Second Amended and Restated Credit Agreement, dated as of May 13, 2015, among the Company, as the parent borrower, the other subsidiary borrowers party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 15, 2015 and incorporated herein by reference). |
| | |
| 10.3 | Second Amendment to the Second Amended and Restated Credit Agreement, dated as of September 23, 2015, among the Company, as the parent borrower, the other subsidiary borrowers party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 25, 2015 and incorporated herein by reference). |
| | |
| 10.4 | Third Amendment to the Second Amended and Restated Credit Agreement, dated as of October 14, 2015, among the Company, as the parent borrower, the other subsidiary borrowers party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed October 14, 2015 and incorporated herein by reference). |
| | |
| 10.5 | Fourth Amendment to Second Amended and Restated Credit Agreement, dated as of December 16, 2016, by and among Darling Ingredients Inc., as the parent borrower, the other subsidiary borrowers party thereto, the subsidiary guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 20, 2016 and incorporated herein by reference). |
| | |
| 10.6 | Fifth Amendment to Second Amended and Restated Credit Agreement, dated as of December 18, 2017, by and among Darling Ingredients Inc., as the parent borrower, the other subsidiary borrowers party thereto, the subsidiary guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 20, 2017 and incorporated herein by reference). |
| | |
| 10.7 | Sixth Amendment to Second Amended and Restated Credit Agreement, dated as of September 18, 2020, by and among Darling Ingredients Inc., as the parent borrower, the other subsidiary borrowers party thereto, the subsidiary guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 23, 2020 and incorporated herein by reference). |
| | |
| 10.8 | Seventh Amendment to Second Amended and Restated Credit Agreement, dated as of December 9, 2021, by and among Darling Ingredients Inc., as the parent borrower, the other subsidiary borrowers party thereto, the subsidiary guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed December 13, 2021 and incorporated herein by reference). |
| | |
| 10.9 | Eighth Amendment to Second Amended and Restated Credit Agreement, dated as of March 2, 2022, by and among Darling Ingredients Inc., as the parent borrower, the other subsidiary borrowers party thereto, the subsidiary guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 4, 2022 and incorporated herein by reference). |
| | |
| 10.10 | Ninth Amendment to Second Amended and Restated Credit Agreement, dated as of September 6, 2022, by and among Darling Ingredients Inc., as the parent borrower, the other subsidiary borrowers party thereto, the subsidiary guarantors, JPMorgan Chase Bank, N.A., as administrative agent, and certain lenders party thereto (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 8, 2022 and incorporated herein by reference). |
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| 10.11 | |
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| 10.12 | |
| | |
| 10.13 | |
| | |
| 10.14 | |
| | | | | | | | |
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| 10.15 | |
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| 10.16 * | |
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| 10.17 * | |
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| 10.18 * | |
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| 10.19 * | |
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| 10.20 * | |
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| 10.21 * | |
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| 10.22 * | |
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| 10.23 * | |
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| 10.24 * | |
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| 10.25 * | |
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| 10.26 * | |
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| 10.27 * | |
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| 10.28 * | |
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| 10.29 * | |
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| 10.30 * | |
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| 10.31 * | |
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| 10.32 * | |
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| | | | | | | | |
| 10.33 * | |
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| 10.34 * | |
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| 19.1 | |
| | |
| 21 | |
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| 23.1 | |
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| 23.2 | |
| | |
| 31.1 | |
| | |
| 31.2 | |
| | |
| 32 | |
| | |
| 97.1 | |
| | |
| 99.1 | |
| | |
| 101 | Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of December 28, 2024 and December 30, 2023; (ii) Consolidated Statements of Operations for the years ended December 28, 2024, December 30, 2023 and December 31, 2022; (iii) Consolidated Statements of Comprehensive Income/(Loss) for the years ended December 28, 2024, December 30, 2023 and December 31, 2022; (iv) Consolidated Statements of Stockholders’ Equity for the years ended December 28, 2024, December 30, 2023 and December 31, 2022; (v) Consolidated Statements of Cash Flows for the years ended December 28, 2024, December 30, 2023 and December 31, 2022; and (vi) Notes to the Consolidated Financial Statements. |
| | |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| | |
| | The Exhibits are available upon request from the Company. |
| | |
| * | Management contract or compensatory plan or arrangement. |
ITEM 16. FORM 10-K SUMMARY
Not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | | | | |
| | | | DARLING INGREDIENTS INC. |
| | | | |
| | | By: | /s/ Randall C. Stuewe |
| | | | Randall C. Stuewe |
| | | | Chairman of the Board and |
| | | | Chief Executive Officer |
| | | | |
| | | Date: | February 25, 2025 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| | | | | | | | | | | | | | |
| Signature | | Title | | Date |
| | | | | |
| /s/ Randall C. Stuewe | | Chairman of the Board and | | February 25, 2025 |
| Randall C. Stuewe | | Chief Executive Officer | | |
| | | (Principal Executive Officer) | | |
| | | | | |
| /s/ Brad Phillips | | Chief Financial Officer | | February 25, 2025 |
| Brad Phillips | | (Principal Financial Officer) | | |
| | | | |
| /s/ Joseph Manzi | | Chief Accounting Officer | | February 25, 2025 |
| Joseph Manzi | | (Principal Accounting Officer) | | |
| | | | |
| /s/ Charles Adair | | Director | | February 25, 2025 |
| Charles Adair | | | | |
| | | | |
| /s/ Larry A. Barden | | Director | | February 25, 2025 |
| Larry A. Barden | | | | |
| | | | |
| /s/ Celeste A. Clark | | Director | | February 25, 2025 |
| Celeste A. Clark | | | | |
| | | | |
| /s/ Linda Goodspeed | | Director | | February 25, 2025 |
| Linda Goodspeed | | | | |
| | | | |
| /s/ Enderson Guimaraes | | Director | | February 25, 2025 |
| Enderson Guimaraes | | | | |
| | | | |
| /s/ Randy L. Hill | | Director | | February 25, 2025 |
| Randy L. Hill | | | | |
| | | | | |
| /s/ Gary W. Mize | | Director | | February 25, 2025 |
| Gary W. Mize | | | | |
| | | | |
| /s/ Kurt Stoffel | | Director | | February 25, 2025 |
| Kurt Stoffel | | | | |
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