SECURITIES AND EXCHANGE COMMISSION

Washington, DCD.C. 20549



(Mark One)
~~/X/~~ ☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended ~~September 30, 2017~~	July 1, 2023
	OR

~~/ /~~ ☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______



Delaware		36-2495346
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification Number)

~~251 O'Connor Ridge Blvd., Suite 300~~
~~Irving, Texas~~	~~75038~~
~~(Address of principal executive offices)~~	~~(Zip Code)~~

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock $0.01 par value per share	DAR	New York Stock Exchange	(“NYSE”)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X ☒ No ~~____~~☐

Indicate by check mark whether the Registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files). Yes X ☒ No ~~___~~☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company”~~company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No X ☒

There were ~~164,681,819~~159,491,100 shares of common stock, $0.01 par value, outstanding at ~~November 2, 2017~~.

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

~~September 30, 2017~~July 1, 2023 and December 31, ~~2016~~2022

(in thousands, except share data)


	September 30, 2017			December 31, 2016				July 1, 2023		December 31, 2022
ASSETS	(unaudited)						ASSETS	(unaudited)
Current assets:							Current assets:
Cash and cash equivalents	$	110,146		$	114,564		Cash and cash equivalents	$	111,541	$	127,016
Restricted cash	282			293			Restricted cash	299		315
Accounts receivable, net	414,947			388,397
Accounts receivable, less allowance for bad debts of $12,912 at July 1, 2023 and $11,889 at December 31, 2022							Accounts receivable, less allowance for bad debts of $12,912 at July 1, 2023 and $11,889 at December 31, 2022	746,638		676,573
Inventories	375,098			330,815			Inventories	825,130		673,621
Prepaid expenses	39,272			29,984			Prepaid expenses	116,540		85,665
Income taxes refundable	5,370			7,479			Income taxes refundable	22,621		18,583
Other current assets	17,101			21,770			Other current assets	53,188		56,324
Total current assets	962,216			893,302			Total current assets	1,875,957		1,638,097
Property, plant and equipment, less accumulated depreciation of $1,019,845 at September 30, 2017 and $842,186 at December 31, 2016	1,621,867			1,515,575
Intangible assets, less accumulated amortization of $364,842 at September 30, 2017 and $301,187 at December 31, 2016	697,908			711,927
Property, plant and equipment, less accumulated depreciation of $2,219,926 at July 1, 2023 and $2,054,928 at December 31, 2022							Property, plant and equipment, less accumulated depreciation of $2,219,926 at July 1, 2023 and $2,054,928 at December 31, 2022	2,774,526		2,462,082
Intangible assets, less accumulated amortization of $685,911 at July 1, 2023 and $623,101 at December 31, 2022							Intangible assets, less accumulated amortization of $685,911 at July 1, 2023 and $623,101 at December 31, 2022	1,074,604		865,122
Goodwill	1,298,266			1,225,893			Goodwill	2,566,169		1,970,377
Investment in unconsolidated subsidiaries	290,028			292,717			Investment in unconsolidated subsidiaries	2,214,312		1,926,395
Operating lease right-of-use assets							Operating lease right-of-use assets	196,554		186,141
Other assets	47,018			43,613			Other assets	246,032		136,268
Deferred income taxes	17,219			14,990			Deferred income taxes	25,085		17,888
	$	4,934,522		$	4,698,017			$	10,973,239	$	9,202,370
LIABILITIES AND STOCKHOLDERS’ EQUITY							LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:							Current liabilities:
Current portion of long-term debt	$	18,215		$	23,247		Current portion of long-term debt	$	88,085	$	69,846
Accounts payable, principally trade	213,592			180,895			Accounts payable, principally trade	427,066		472,491
Income taxes payable	21,974			4,913			Income taxes payable	29,821		44,851
Current operating lease liabilities							Current operating lease liabilities	48,381		49,232
Accrued expenses	292,483			242,796			Accrued expenses	420,196		432,023
Total current liabilities	546,264			451,851			Total current liabilities	1,013,549		1,068,443
Long-term debt, net of current portion	1,734,176			1,727,696			Long-term debt, net of current portion	4,458,797		3,314,969
Long-term operating lease liabilities							Long-term operating lease liabilities	149,165		141,703
Other non-current liabilities	96,354			96,114			Other non-current liabilities	339,270		298,933
Deferred income taxes	353,041			346,134			Deferred income taxes	561,895		481,832
Total liabilities	2,729,835			2,621,795			Total liabilities	6,522,676		5,305,880
Commitments and contingencies							Commitments and contingencies
Stockholders’ equity:							Stockholders’ equity:
Common stock, $0.01 par value; 250,000,000 shares authorized; 167,843,895 and 167,641,415 shares issued at September 30, 2017 and at December 31, 2016, respectively	1,678			1,676
Common stock, $0.01 par value; 250,000,000 shares authorized; 174,317,233 and 173,593,099 shares issued at July 1, 2023 and December 31, 2022, respectively							Common stock, $0.01 par value; 250,000,000 shares authorized; 174,317,233 and 173,593,099 shares issued at July 1, 2023 and December 31, 2022, respectively	1,743		1,736
Additional paid-in capital	1,512,726			1,499,431			Additional paid-in capital	1,680,188		1,660,084
Treasury stock, at cost; 3,185,406 and 3,028,857 shares at September 30, 2017 and at December 31, 2016, respectively	(43,155		)	(40,909		)
Treasury stock, at cost; 14,827,327 and 13,623,503 shares at July 1, 2023 and December 31, 2022, respectively							Treasury stock, at cost; 14,827,327 and 13,623,503 shares at July 1, 2023 and December 31, 2022, respectively	(624,852)		(554,451)
Accumulated other comprehensive loss	(224,092		)	(340,006		)	Accumulated other comprehensive loss	(212,561)		(383,874)
Retained earnings	875,498			852,802			Retained earnings	3,523,712		3,085,528
Total Darling's stockholders’ equity	2,122,655			1,972,994			Total Darling's stockholders’ equity	4,368,230		3,809,023
Noncontrolling interests	82,032			103,228			Noncontrolling interests	82,333		87,467
Total stockholders' equity	$	2,204,687		$	2,076,222		Total stockholders' equity	4,450,563		3,896,490
	$	4,934,522		$	4,698,017			$	10,973,239	$	9,202,370

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

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three and ~~nine~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022

(in thousands, except per share data)

(unaudited)


	Three Months Ended				Six Months Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Net sales	$	1,757,621	$	1,650,188	$	3,548,793	$	3,016,522
Costs and expenses:
Cost of sales and operating expenses	1,359,702		1,231,507		2,726,675		2,252,084
Loss/(gain) on sale of assets	259		(1,055)		(68)		(1,444)
Selling, general and administrative expenses	136,751		107,776		272,217		209,808
Restructuring and asset impairment charges	896		8,557		5,420		8,557
Acquisition and integration costs	1,706		5,358		8,728		9,131
Change in fair value of contingent consideration	(7,499)		—		(7,499)		—
Depreciation and amortization	122,086		93,113		238,092		172,359
Total costs and expenses	1,613,901		1,445,256		3,243,565		2,650,495
Equity in net income of Diamond Green Diesel	212,964		73,680		307,301		145,484
Operating income	356,684		278,612		612,529		511,511

Other expense:
Interest expense	(70,193)		(24,008)		(120,492)		(39,611)

Foreign currency gain/(loss)	2,490		(4,412)		7,494		(5,512)

Other income/(expense), net	5,079		(302)		11,238		(1,044)
Total other expense	(62,624)		(28,722)		(101,760)		(46,167)

Equity in net income of other unconsolidated subsidiaries	1,849		2,272		1,969		3,632
Income before income taxes	295,909		252,162		512,738		468,976

Income tax expense	40,712		47,333		67,686		73,416

Net income	255,197		204,829		445,052		395,560

Net income attributable to noncontrolling interests	(2,814)		(2,833)		(6,868)		(5,511)

Net income attributable to Darling	$	252,383	$	201,996	$	438,184	$	390,049

Basic income per share	$	1.58	$	1.25	$	2.74	$	2.41
Diluted income per share	$	1.55	$	1.23	$	2.69	$	2.37

Three Months Ended Nine Months Ended
September 30,
2017 October 1,
2016 September 30,
2017 October 1,
2016
Net sales $ 937,681
$ 853,856
$ 2,714,101
$ 2,510,838
Costs and expenses:

Cost of sales and operating expenses 744,028
671,167
2,134,419
1,947,175
Selling, general and administrative expenses 83,141
76,508
256,589
234,135
Acquisition and integration costs —
—
—
401
Depreciation and amortization 77,202
70,653
221,306
212,440
Total costs and expenses 904,371
818,328
2,612,314
2,394,151
Operating income 33,310
35,528
101,787
116,687

Other expense:

Interest expense (22,531 ) (23,867 ) (66,657 ) (71,748 )
Foreign currency gain/(loss) (2,055 ) 354
(4,430 ) (2,241 )
Other expense, net (1,447 ) (2,007 ) (5,103 ) (5,685 )
Total other expense (26,033 ) (25,520 ) (76,190 ) (79,674 )

Equity in net income of unconsolidated subsidiaries 7,703
18,138
16,669
37,633
Income before income taxes 14,980
28,146
42,266
74,646

Income tax expense/(benefit) 6,296
(744 ) 15,856
9,102

Net income 8,684
28,890
26,410
65,544

Net income attributable to noncontrolling interests (923 ) (196 ) (3,671 ) (3,772 )

Net income attributable to Darling $ 7,761
$ 28,694
$ 22,739
$ 61,772

Basic income per share $ 0.05
$ 0.17
$ 0.14
$ 0.38
Diluted income per share $ 0.05
$ 0.17
$ 0.14
$ 0.37

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

~~DARLING INGREDIENTS INC. AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME~~

~~Three and nine months~~ ~~ended~~ ~~September 30, 2017~~ ~~and~~ ~~October 1, 2016~~

~~(in thousands)~~

~~(unaudited)~~

Three Months Ended Nine Months Ended
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Net income $ 8,684
$ 28,890
$ 26,410
$ 65,544
Other comprehensive income/(loss), net of tax:
Foreign currency translation 46,211
(5,839 ) 111,002
43,684
Pension adjustments 759
727
2,278
2,104
Natural gas swap derivative adjustments 22
—
22
—
Corn option derivative adjustments 850
734
(1,121 ) 1,255
Total other comprehensive income/(loss), net of tax 47,842
(4,378 ) 112,181
47,043
Total comprehensive income $ 56,526
$ 24,512
$ 138,591
$ 112,587
Comprehensive income/(loss) attributable to noncontrolling interests 109
(94 ) (62 ) 1,211
Comprehensive income attributable to Darling $ 56,417
$ 24,606
$ 138,653
$ 111,376

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

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME/(LOSS)

~~Nine~~Three and six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022

(in thousands)

(unaudited)

September 30,
2017 October 1,
2016
Cash flows from operating activities:
Net Income $ 26,410
$ 65,544
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 221,306
212,440
Loss/(gain) on disposal of property, plant, equipment and other assets (537 ) 873
Gain on insurance proceeds from insurance settlements —
(356 )
Deferred taxes (14,242 ) (5,223 )
Increase/(decrease) in long-term pension liability 1,574
(1,105 )
Stock-based compensation expense 14,710
7,953
Write-off deferred loan costs 443
292
Deferred loan cost amortization 6,581
8,393
Equity in net income of unconsolidated subsidiaries (16,669 ) (37,633 )
Distributions of earnings from unconsolidated subsidiaries 26,600
26,317
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable (5,311 ) (3,058 )
Income taxes refundable/payable 18,332
1,432
Inventories and prepaid expenses (31,058 ) (11,368 )
Accounts payable and accrued expenses 39,937
27,438
Other (19,294 ) (11,377 )
Net cash provided by operating activities 268,782
280,562
Cash flows from investing activities:
Capital expenditures (196,446 ) (168,224 )
Acquisitions, net of cash acquired (12,144 ) (8,511 )
Investment in unconsolidated subsidiary (4,750 ) —
Gross proceeds from disposal of property, plant and equipment and other assets 4,953
4,492
Proceeds from insurance settlement 3,301
1,537
Payments related to routes and other intangibles (5,635 ) —
Net cash used by investing activities (210,721 ) (170,706 )
Cash flows from financing activities:
Proceeds from long-term debt 24,069
28,765
Payments on long-term debt (94,250 ) (128,364 )
Borrowings from revolving credit facility 142,000
83,000
Payments on revolving credit facility (147,327 ) (93,028 )
Net cash overdraft financing 2,590
—
Deferred loan costs (1,177 ) —
Issuance of common stock 22
143
Repurchase of common stock —
(5,000 )
Minimum withholding taxes paid on stock awards (2,140 ) (1,843 )
Acquisition of noncontrolling interest (429 ) —
Distributions to noncontrolling interests (2,513 ) (885 )
Net cash used by financing activities (79,155 ) (117,212 )
Effect of exchange rate changes on cash 16,676
(943 )
Net decrease in cash and cash equivalents (4,418 ) (8,299 )
Cash and cash equivalents at beginning of period 114,564
156,884
Cash and cash equivalents at end of period $ 110,146
$ 148,585
Supplemental disclosure of cash flow information:
Accrued capital expenditures $ (3,532 ) $ (3,302 )
Cash paid during the period for:
Interest, net of capitalized interest $ 58,219
$ 62,395
Income taxes, net of refunds $ 13,719
$ 14,018
Non-cash financing activities
Debt issued for assets $ 3
$ 10
Contribution of assets to unconsolidated subsidiary $ —
$ 2,674


	Three Months Ended				Six Months Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Net income	$	255,197	$	204,829	$	445,052	$	395,560
Other comprehensive income/(loss), net of tax:
Foreign currency translation adjustments	82,592		(93,855)		138,809		(90,473)
Pension adjustments	327		428		654		857
Commodities derivative adjustments	(17,662)		24,462		3,462		2,404
Interest rate swap adjustments	9,606		—		10,326		—
Foreign exchange derivative adjustments	9,271		(20,719)		14,891		8,716
Total other comprehensive income/(loss), net of tax	84,134		(89,684)		168,142		(78,496)
Total comprehensive income	$	339,331	$	115,145	$	613,194	$	317,064
Comprehensive income attributable to noncontrolling interests	301		2,687		3,697		6,232
Comprehensive income attributable to Darling	$	339,030	$	112,458	$	609,497	$	310,832

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

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Six months ended July 1, 2023 and July 2, 2022

(in thousands, except share data)

(unaudited)


	Common Stock
	Number of Outstanding Shares	$0.01 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 December 31, 2022	159,969,596	$	1,736	$	1,660,084	$	(554,451)	$	(383,874)	$	3,085,528	$	3,809,023	$	87,467	$	3,896,490
Net income	—	—		—		—		—		185,801		185,801		4,054		189,855

Deductions to noncontrolling interests	—	—		—		—		—		—		—		(3,441)		(3,441)
Addition to noncontrolling interests	—	—		—		—		—		—		—		1,643		1,643
Pension adjustments, net of tax	—	—		—		—		327		—		327		—		327
Commodities derivative adjustments, net of tax	—	—		—		—		21,124		—		21,124		—		21,124
Interest rate swap adjustments, net of tax	—	—		—		—		720		—		720		—		720
Foreign exchange derivative adjustments, net of tax	—	—		—		—		5,620		—		5,620		—		5,620
Foreign currency translation adjustments	—	—		—		—		56,875		—		56,875		(658)		56,217
Issuance of non-vested stock	—	—		47		—		—		—		47		—		47
Stock-based compensation	—	—		11,806		—		—		—		11,806		—		11,806
Treasury stock	(1,039,462)	—		—		(60,510)		—		—		(60,510)		—		(60,510)
Issuance of common stock	633,972	6		1,695		—		—		—		1,701		—		1,701
Balances at April 1, 2023	159,564,106	$	1,742	$	1,673,632	$	(614,961)	$	(299,208)	$	3,271,329	$	4,032,534	$	89,065	$	4,121,599
Net income	—	—		—		—		—		252,383		252,383		2,814		255,197
Distribution of noncontrolling interest earnings	—	—		—		—		—		—		—		(9,036)		(9,036)

Addition to noncontrolling interests	—	—		—		—		—		—		—		2,003		2,003
Pension adjustments, net of tax	—	—		—		—		327		—		327		—		327
Commodities derivative adjustments, net of tax	—	—		—		—		(17,662)		—		(17,662)		—		(17,662)
Interest rate swap adjustments, net of tax	—	—		—		—		9,606		—		9,606		—		9,606
Foreign exchange derivative adjustments, net of tax	—	—		—		—		9,271		—		9,271		—		9,271
Foreign currency translation adjustments	—	—		—		—		85,105		—		85,105		(2,513)		82,592
Issuance of non-vested stock	—	—		46		—		—		—		46		—		46
Stock-based compensation	—	—		6,186		—		—		—		6,186		—		6,186
Treasury stock	(164,362)	—		—		(9,891)		—		—		(9,891)		—		(9,891)
Issuance of common stock	90,162	1		324		—		—		—		325		—		325
Balances at July 1, 2023	159,489,906	$	1,743	$	1,680,188	$	(624,852)	$	(212,561)	$	3,523,712	$	4,368,230	$	82,333	$	4,450,563

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

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Six months ended July 1, 2023 and July 2, 2022

(in thousands, except share data)

(unaudited)


	Common Stock
	Number of Outstanding Shares	$0.01 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	160,792,004	$	1,717	$	1,627,816	$	(374,721)	$	(321,690)	$	2,347,838	$	3,280,960	$	66,825	$	3,347,785

Net income	—	—		—		—		—		188,053		188,053		2,678		190,731


Pension adjustments, net of tax	—	—		—		—		429		—		429		—		429
Commodities derivative adjustments, net of tax	—	—		—		—		(22,058)		—		(22,058)		—		(22,058)
Foreign exchange derivative adjustments, net of tax	—	—		—		—		29,435		—		29,435		—		29,435
Foreign currency translation adjustments	—	—		—		—		2,515		—		2,515		867		3,382
Issuance of non-vested stock	5,000	—		18		—		—		—		18		—		18
Stock-based compensation	—	—		6,305		—		—		—		6,305		—		6,305
Treasury stock	(938,113)	—		—		(64,185)		—		—		(64,185)		—		(64,185)
Issuance of common stock	1,644,866	17		3,791		—		—		—		3,808		—		3,808
Balances at April 2, 2022	161,503,757	$	1,734	$	1,637,930	$	(438,906)	$	(311,369)	$	2,535,891	$	3,425,280	$	70,370	$	3,495,650
Net income	—	—		—		—		—		201,996		201,996		2,833		204,829

Pension adjustments, net of tax	—	—		—		—		428		—		428		—		428
Commodities derivative adjustments, net of tax	—	—		—		—		24,462		—		24,462		—		24,462
Foreign exchange derivative adjustments, net of tax	—	—		—		—		(20,719)		—		(20,719)		—		(20,719)
Foreign currency translation adjustments	—	—		—		—		(93,709)		—		(93,709)		(146)		(93,855)
Issuance of non-vested stock	—	—		30		—		—		—		30		—		30
Stock-based compensation	—	—		7,016		—		—		—		7,016		—		7,016
Treasury stock	(751,432)	—		—		(52,811)		—		—		(52,811)		—		(52,811)
Issuance of common stock	108,586	1		1,492		—		—		—		1,493		—		1,493
Balances at July 2, 2022	160,860,911	$	1,735	$	1,646,468	$	(491,717)	$	(400,907)	$	2,737,887	$	3,493,466	$	73,057	$	3,566,523

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

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended July 1, 2023 and July 2, 2022

(in thousands)

(unaudited)


	July 1, 2023		July 2, 2022
Cash flows from operating activities:
Net Income	$	445,052	$	395,560
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	238,092		172,359
Gain on sale of assets	(68)		(1,444)

Asset impairment	—		8,557
Change in fair value of contingent consideration	(7,499)		—
Gain on insurance proceeds from insurance settlements	(13,836)		—
Deferred taxes	34,202		35,674
Increase/(decrease) in long-term pension liability	480		(547)
Stock-based compensation expense	18,085		13,369


Deferred loan cost amortization	3,138		2,207
Equity in net income of Diamond Green Diesel and other unconsolidated subsidiaries	(309,270)		(149,116)
Distributions of earnings from Diamond Green Diesel and other unconsolidated subsidiaries	103,794		1,631
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	24,397		(47,046)
Income taxes refundable/payable	(24,551)		(28,834)
Inventories and prepaid expenses	(22,301)		(95,199)
Accounts payable and accrued expenses	(94,080)		72,351
Other	10,065		(18,487)
Net cash provided by operating activities	405,700		361,035
Cash flows from investing activities:
Capital expenditures	(234,307)		(151,478)
Acquisitions, net of cash acquired	(1,079,083)		(1,235,537)
Investment in Diamond Green Diesel	(75,000)		(239,750)
Investment in other unconsolidated subsidiaries	(27)		—

Loan repayment from Diamond Green Diesel	25,000		—

Gross proceeds from disposal of property, plant and equipment and other assets	2,733		2,161
Proceeds from insurance settlement	13,836		—
Payments related to routes and other intangibles	(1,517)		(179)
Net cash used in investing activities	(1,348,365)		(1,624,783)
Cash flows from financing activities:
Proceeds from long-term debt	807,956		1,663,612
Payments on long-term debt	(83,616)		(23,600)
Borrowings from revolving credit facility	1,415,916		777,902
Payments on revolving credit facility	(1,063,516)		(937,921)
Net cash overdraft financing	16,673		12
Deferred loan costs	(9)		(10,707)

Repurchase of common stock	(52,941)		(65,887)
Minimum withholding taxes paid on stock awards	(15,558)		(45,836)

Distributions to noncontrolling interests	(4,824)		—
Net cash provided by financing activities	1,020,081		1,357,575
Effect of exchange rate changes on cash	16,535		(16,059)
Net increase in cash, cash equivalents and restricted cash	93,951		77,768
Cash, cash equivalents and restricted cash at beginning of period	150,168		69,072
Cash, cash equivalents and restricted cash at end of period	$	244,119	$	146,840

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

DARLING INGREDIENTS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

~~September 30, 2017~~July 1, 2023

(unaudited)


~~(1)~~	~~General~~

(1)General

The accompanying consolidated financial statements for the three and ~~nine~~six month periods ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~,July 2, 2022, have been prepared by Darling Ingredients Inc., a Delaware corporation (“Darling”, and together with its subsidiaries, the “Company” or “we”, “us” or “our”) in accordance with generally accepted accounting principles in the United States (“GAAP”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The information furnished herein reflects all adjustments (consisting only of normal recurring accruals) that are, in the opinion of management, necessary to present a fair statement of the financial position and operating results of the Company as of and for the respective periods. However, these operating results are not necessarily indicative of the results expected for a full fiscal year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations. However, management of the Company believes, to the best of their knowledge, that the disclosures herein are adequate to make the information presented not misleading. The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Form 10-K for the fiscal year ended December 31, ~~2016~~. 2022.


~~(2)~~	~~Summary of Significant Accounting Policies~~

(2)Summary of Significant Accounting Policies


~~(a)~~	~~Basis of Presentation~~

(a)Basis of Presentation

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


~~(b)~~	~~Fiscal Periods~~

(b)Fiscal Periods

The Company has a 52/52/53 week fiscal year ending on the Saturday nearest December 31.31. Fiscal periods for the consolidated financial statements included herein are as of ~~September 30, 2017~~,July 1, 2023, and include the 13 and 3926 weeks ended ~~September 30, 2017~~,July 1, 2023, and the 13 and 3926 weeks ended ~~October~~July 2, 2022.

The Company considers all short-term highly liquid instruments, with an original maturity of three months or less, to be cash equivalents. Cash balances are recorded net of book overdrafts when a bank right-of-offset exists. All other book overdrafts are recorded in accounts payable and the change in the related balance is reflected in operating activities on the Consolidated Statement of Cash Flows. In addition, the Company has bank overdrafts, which are considered a form of short-term financing with changes in the related balance reflected in financing activities in the Consolidated Statement of Cash Flows. Restricted cash shown on the Consolidated Balance Sheet as of July 1, ~~2016~~.2023 and December 31, 2022, 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 long term assets on the Consolidated Balance Sheet as of July 1, 2023 and December 31, 2022, primarily represents acquisition consideration hold-back amounts that are part of the purchase price set aside in escrow in the Company's name for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. A reconciliation of cash, cash equivalents, and restricted cash reported within the Consolidated Balance Sheets that sum to the total of same such amounts shown in the Consolidated Statement of Cash flows is as follows (in thousands):


~~(c)~~	~~Revenue Recognition~~


	July 1, 2023		December 31, 2022
Cash and cash equivalents	$	111,541	$	127,016
Restricted cash	299		315
Restricted cash included in other long-term assets	132,279		22,837
Total cash, cash equivalents and restricted cash shown in the statement of cash flows	$	244,119	$	150,168

(d) Accounts Receivable Factoring

The Company has entered into agreements with third party banks to factor certain of the Company's trade receivables in order to enhance working capital by turning trade receivables into cash faster. Under these agreements, the Company sells certain selected customers’ trade receivables to third party banks without recourse for cash less a nominal fee. For the three months ended July 1, 2023 and July 2, 2022, the Company sold approximately $130.6 million and $145.0 million of its trade receivables and incurred approximately $1.7 million and $0.7 million in fees, respectively, which are recorded as interest expense. For the six months ended July 1, 2023 and July 2, 2022, the Company sold approximately $292.0 million and $271.3 million of its trade receivables and incurred approximately $3.7 million and $1.1 million in fees, which are recorded as interest expense.

(e) Revenue Recognition

The Company recognizes revenue on sales when ~~products~~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 ~~shipped and~~recognized when the ~~customer takes ownership and assumes risk of loss.~~service occurs. Certain customers may be required to prepay prior to shipment in order to maintain payment protection related to certain foreign and domestic sales. These amounts are recorded as unearned revenue in accrued expenses and recognized when control of the ~~products have shipped~~promised finished product is transferred to the Company's customer. See Note 20 (Revenue) to the Company's Consolidated Financial Statements included herein.

(f) Use of Estimates

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

If it is at least reasonably possible that the estimate of ~~loss. The Company recognizes service revenue in~~ the ~~fiscal month~~effect on the ~~service occurs.~~


~~(d)~~	~~Foreign Currency Translation and Remeasurement~~

~~Foreign currency translation is included as a component of accumulated other comprehensive loss and reflects the adjustments resulting from translating the foreign currency denominated~~ financial statements of ~~foreign subsidiaries into U.S. dollars. The functional currency~~a condition, situation, or set of circumstances that exist at the date of the financial statements will change in the near term due to one or more future confirming events, and the effect of the change would be material to the financial statements, the Company will disclose the nature of the uncertainty and include an indication that it is at least reasonably possible that a change in the estimate will occur in the near term. If the estimate involves certain loss contingencies, the disclosure will also include an estimate of the probable loss or range of loss or state that an estimate cannot be made.

As a result of the Russia-Ukraine war 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 ~~foreign subsidiaries is~~assets may be impaired. Through the ~~currency~~six months ended July 1, 2023, the Company has not observed any impairments of the ~~primary economic environment~~Company's assets or a significant change in ~~which~~their fair value due to the ~~entity operates,~~Russia-Ukraine war or inflation.

(g) Out-of-Period Correction

During the quarter ended July 1, 2023, the Company determined the fair value of the contingent consideration liability recorded related to the FASA Group of approximately R$867.5 million (approximately $168.1 million USD at the exchange rate in effect on the closing date of the acquisition) was overstated in the initial

purchase price allocation.The error was the result of the use of an incorrect fair value model under the income approach to determine fair value of the contingent consideration liability upon acquisition.Utilizing assistance from external valuation experts and the use of a monte-carlo simulation, the Company determined during the quarter ended July 1, 2023 the acquisition date fair value of the contingent payment was R$428.2 million (approximately $83.0 million USD at the exchange rate in effect on the closing date of the acquisition) representing the probability weighted present value of the expected payment to be made under the agreement using the income approach.This resulted in an overstatement of the fair value of the contingent consideration liability of approximately $85.1 million on the acquisition date.

The Company assessed the impact of this error and concluded that it was not material to the financial statements previously issued for any interim or annual period and the correction of the error during the quarter ended July 1, 2023 is not material to the second quarter 2023 financial statements and is not expected to be material to the annual financial statements for fiscal 2023.The correction of the fair value of the contingent consideration liability at the acquisition date was recorded as an immaterial out-of-period correction during the quarter ended July 1, 2023 with the offset to the balance sheet recorded as a reduction to goodwill of approximately $85.1 million, which is ~~generally~~included in the local currency of the country. Accordingly, assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at fiscal period end exchange rates, including intercompany foreign currency transactions that are of long-term investment nature. Income and expense items are translated at average exchange rates occurring during the period. ChangesFeed Ingredients segment.

(h) Reclassifications

in exchange rates that affect cash flows and the related receivables or payables are recognized as transaction gains and losses in determining net income. The Company incurred net foreign currency translation gains of approximately $114.7 million and approximately $46.2 million for the nine months ended September 30, 2017 and October 1, 2016, respectively.

Certain immaterial prior year amounts have been reclassified to conform to current year presentation.


~~(e)~~	~~Earnings Per Share~~

(i) Earnings Per Share

Basic income per common share is computed by dividing net income attributable to Darling by the weighted average number of common shares including non-vested and restricted shares outstanding during the period. Diluted income per common share is computed by dividing net income attributable to Darling by the weighted average number of common shares outstanding during the period increased by dilutive common equivalent shares determined using the treasury stock method.


	Net Income per Common Share (in thousands, except per share data)
	Three Months Ended
			July 1, 2023					July 2, 2022
	Income		Shares	Per Share		Income		Shares	Per Share
Basic:
Net Income attributable to Darling	$	252,383	159,810	$	1.58	$	201,996	161,632	$	1.25
Diluted:
Effect of dilutive securities:
Add: Option shares in the money and dilutive effect of non-vested stock awards			3,308					3,781
Less: Pro forma treasury shares			(748)					(668)
Diluted:
Net income attributable to Darling	$	252,383	162,370	$	1.55	$	201,996	164,745	$	1.23


	Net Income per Common Share (in thousands, except per share data)
	Six Months Ended
			July 1, 2023					July 2, 2022
	Income		Shares	Per Share		Income		Shares	Per Share
Basic:
Net Income attributable to Darling	$	438,184	159,978	$	2.74	$	390,049	161,514	$	2.41
Diluted:
Effect of dilutive securities:
Add: Option shares in the money and dilutive effect of non-vested stock awards			3,363					3,879
Less: Pro forma treasury shares			(748)					(720)
Diluted:
Net income attributable to Darling	$	438,184	162,593	$	2.69	$	390,049	164,673	$	2.37

Net Income per Common Share (in thousands, except per share data)
Three Months Ended
September 30, 2017 October 1, 2016
Income Shares Per Share Income Shares Per Share
Basic:
Net Income attributable to Darling $ 7,761
164,735
$ 0.05
$ 28,694
164,653
$ 0.17
Diluted:

Effect of dilutive securities:

Add: Option shares in the money and dilutive effect of non-vested stock awards
4,759

1,717

Less: Pro forma treasury shares
(2,313 )

(934 )
Diluted:

Net income attributable to Darling $ 7,761
167,181
$ 0.05
$ 28,694
165,436
$ 0.17

Net Income per Common Share (in thousands, except per share data)
Nine Months Ended
September 30, 2017 October 1, 2016
Income Shares Per Share Loss Shares Per Share
Basic:
Net Income attributable to Darling $ 22,739
164,734
$ 0.14
$ 61,772
164,574
$ 0.38
Diluted:

Effect of dilutive securities:

Add: Option shares in the money and dilutive effect of non-vested stock awards
3,645

1,222

Less: Pro forma treasury shares
(1,751 )

(642 )
Diluted:

Net income attributable to Darling $ 22,739
166,628
$ 0.14
$ 61,772
165,154
$ 0.37

For the three months ended~~September 30, 2017~~ July 1, 2023 and ~~October 1, 2016~~,July 2, 2022, respectively, ~~212,525 and 1,228,334~~no outstanding stock options were excluded from diluted income per common share as the effect ~~was~~would be antidilutive. For the three months ended~~September 30, 2017~~ July 1, 2023 and ~~October 1, 2016~~,July 2, 2022, respectively, ~~437,897~~478,289 and ~~887,413 shares of non-vested stock and stock equivalents were excluded from diluted income per common share as the effect was antidilutive.~~

For the nine months ended September 30, 2017 and October 1, 2016, respectively, 723,052 and 1,122,165 outstanding stock options were excluded from diluted income per common share as the effect was antidilutive. For the nine months ended September 30, 2017 and October 1, 2016, respectively, 650,758 and 812,780249,564 shares of non-vested stock and stock equivalents were excluded from diluted income per common share as the effect was antidilutive.


~~(3)~~	~~Acquisition of Noncontrolling Interest~~

~~During~~For the third quarter of fiscal 2017, the Company, through a wholly-owned international subsidiary, acquired the minority interest in one of its international subsidiaries for approximately $19.1 million, including transaction costs. Except for an insignificant amount, the actual funding was accrued and will occur per the terms of the share purchase agreement underlying the transaction.


~~(4)~~	~~Inventories~~

~~A summary of inventories follows (in thousands):~~

September 30, 2017 December 31, 2016
Finished product $ 184,778
$ 156,542
Work in process 100,147
87,284
Raw material 37,609
39,859
Supplies and other 52,564
47,130
$ 375,098
$ 330,815

~~In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2015-11, Simplifying the Measurement of Inventory. This ASU amends Topic 330,~~ ~~Inventory~~. The ASU simplifies the measurement of inventory by requiring certain inventory to be measured at the lower of cost and net realizable value. The adoption of this standard on January 1, 2017 did not have a material impact on the Company's consolidated financial statements.


~~(5)~~	~~Intangible Assets~~

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

September 30, 2017 December 31, 2016
Indefinite Lived Intangible Assets
Trade names $ 54,629
$ 51,687
54,629
51,687
Finite Lived Intangible Assets:

Routes 401,919
374,989
Permits 511,210
493,311
Non-compete agreements 3,985
3,638
Trade names 76,618
76,033
Royalty, consulting, land use rights and leasehold 14,389
13,456
1,008,121
961,427
Accumulated Amortization:
Routes (129,504 ) (105,934 )
Permits (201,656 ) (170,165 )
Non-compete agreements (2,244 ) (1,788 )
Trade names (28,343 ) (21,042 )
Royalty, consulting, land use rights and leasehold (3,095 ) (2,258 )
(364,842 ) (301,187 )
Total Intangible assets, less accumulated amortization $ 697,908
$ 711,927

Gross intangible routes, permits, trade names, non-compete agreements and other intangibles partially decreased in fiscal 2017 as a result of approximately $6.7 million of asset retirements and also increased due to acquired intangibles of approximately $9.0 million and the remaining increase is due to foreign currency translation. Amortization expense for the three and nine monthssix months ended ~~September 30, 2017~~July 1, 2023 and ~~October~~July 2, 2022, respectively, no outstanding stock options were excluded from diluted income per common share as the effect would be antidilutive. For the six months ended July 1, ~~2016,~~2023 and July 2, 2022, respectively, 450,248 and 248,051 shares of non-vested stock and stock equivalents were excluded from diluted income per common share as the effect was ~~approximately $20.0 million, $19.6 million and $58.4 million and $58.4 million, respectively.~~antidilutive.


~~(6)~~	~~Goodwill~~

~~Changes~~(3) Investment in ~~the carrying amount of goodwill (in thousands):~~Unconsolidated Subsidiaries

Feed Ingredients Food Ingredients Fuel Ingredients Total
Balance at December 31, 2016
Goodwill $ 813,621
$ 317,008
$ 111,178
$ 1,241,807
Accumulated impairment losses (15,914 ) —
—
(15,914 )
797,707
317,008
111,178
1,225,893
Goodwill acquired during year 1,880
—
—
1,880
Foreign currency translation 34,308
24,086
12,099
70,493
Balance at September 30, 2017

Goodwill 849,809
341,094
123,277
1,314,180
Accumulated impairment losses (15,914 ) —
—
(15,914 )
$ 833,895
$ 341,094
$ 123,277
$ 1,298,266


~~(7)~~	~~Investment in Unconsolidated Subsidiaries~~

On January 21, 2011,, a wholly-owned subsidiary of Darling entered into a limited liability company agreement with a wholly-owned subsidiary of Valero Energy Corporation (“Valero”) to form Diamond Green Diesel Holdings LLC ~~(the~~(“DGD” or the “DGD Joint Venture”). The DGD Joint Venture is owned 50% / 50% with Valero and was formed to design, engineer, construct and operate a renewable diesel plant (the “DGD Facility”), which is capable of processing approximately 12,000 barrels per day of input feedstock to produce renewable diesel fuel and certain other co-products, and is located adjacent to Valero's refinery in Norco, Louisiana. TheValero.

Selected financial information for the Company's DGD Joint Venture ~~reached mechanical completion and began~~is as follows:


(in thousands)	June 30, 2023		December 31, 2022
Assets:
Total current assets	$	1,623,715	$	1,304,805
Property, plant and equipment, net	3,828,093		3,866,854
Other assets	88,305		61,665
Total assets	$	5,540,113	$	5,233,324
Liabilities and members' equity:
Total current portion of long term debt	$	102,935	$	217,066
Total other current liabilities	378,589		515,023
Total long term debt	760,700		774,783
Total other long term liabilities	16,568		17,249
Total members' equity	4,281,321		3,709,203
Total liabilities and members' equity	$	5,540,113	$	5,233,324


	Three Months Ended				Six Months Ended
(in thousands)	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
Revenues:
Operating revenues	$	2,246,111	$	1,455,886	$	3,926,161	$	2,436,578
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	1,751,315		1,274,665		3,172,719		2,082,237
Depreciation, amortization and accretion expense	58,315		31,317		116,922		57,809
Total costs and expenses	1,809,630		1,305,982		3,289,641		2,140,046
Operating income	436,481		149,904		636,520		296,532
Other income	2,121		722		4,162		711
Interest and debt expense, net	(12,674)		(3,266)		(26,080)		(6,275)
Net income	$	425,928	$	147,360	$	614,602	$	290,968

As of July 1, 2023, under the ~~production~~equity method of ~~renewable diesel~~accounting, the Company has an investment in ~~late June 2013.~~

~~On May 31, 2011,~~ the DGD Joint Venture ~~and Diamond Green Diesel LLC, a wholly-owned subsidiary~~ of approximately $2,144.0 million on the consolidated balance sheet. The Company has recorded equity in net income from the DGD Joint Venture ~~(“Opco”), entered into (i) a facility agreement (the “Facility Agreement”) with Diamond Alternative Energy, LLC, a wholly-owned subsidiary~~ of ~~Valero (the “Lender”),~~approximately $213.0 million and ~~(ii) a loan agreement (the “Loan Agreement”) with~~$73.7 million for the ~~Lender, which provided~~three months ended July 1, 2023 and July 2, 2022, respectively. The Company has recorded equity in net income from the DGD Joint Venture ~~with a~~ 14 ~~year multiple advance term loan facility~~ of approximately $~~221.3~~$307.3 million ~~(the “JV Loan”) to support~~ and $145.5 million for the ~~design, engineering~~six months ended July 1, 2023 and ~~construction~~July 2, 2022, respectively. In December 2019, the blender tax credits were extended for calendar years 2020, 2021 and 2022. On August 16, 2022, the U.S. government enacted the Inflation Reduction Act ( the “IR Act”). As part of the ~~DGD Facility, which~~IR Act, the blender tax credits were extended as is ~~now in production. The Facility Agreement~~until December 31, 2024. After 2024, the Clean Fuels Production Credit (the “CFPC”) becomes effective from 2025 through 2027. Under the CFPC, on-road transportation fuel receives a base credit of up to $1.00 per gallon of renewable diesel multiplied by the fuel's emission reduction percentage as long as it is produced

at a qualifying facility and the Loan Agreement prohibit the Lender from assigning all or any portion of the Facility Agreement or the Loan Agreement to unaffiliated third parties. Opco has also pledged substantially all of its assetsit meets prevailing wage requirements and apprenticeship requirements. In contrast to the ~~Lender,~~blenders tax credits, the CFPC requires that production must take place in the United States. For the three months ended June 30, 2023 and June 30, 2022, the DGD Joint Venture recorded approximately $387.5 million and $198.4 million of blenders tax credits, respectively. For the six months ended June 30, 2023 and June 30, 2022, the DGD Joint Venture recorded approximately $633.5 million and $354.2 million of blenders tax credits, respectively. The blenders tax credits are recorded as a reduction of cost of sales by the DGD Joint Venture. In the six months ended July 1, 2023 and July 2, 2022, respectively, the Company made $75.0 million and $239.75 million capital contributions to the DGD Joint Venture. In the six months ended July 1, 2023 and July 2, 2022, the Company received $101.4 million and zero dividend distributions from the DGD Joint Venture, respectively. As of July 1, 2023, the DGD Joint Venture has ~~pledged all~~borrowings outstanding of ~~Opco's equity interests to~~$50.0 million under their unsecured revolving credit facility. On July 18, 2023, the ~~Lender, until~~Company received approximately $62.2 million as a dividend distribution from the ~~JV Loan has been paid in full and the JV Loan has terminated in accordance with its terms.~~DGD Joint Venture.

In addition to the DGD Joint Venture, the Company has investments in other unconsolidated subsidiaries that are insignificant to the Company. ~~Selected~~

(4) Acquisitions

Gelnex

On March 31, 2023, the Company acquired all of the shares of Gelnex, a leading global producer of collagen products (the “Gelnex Acquisition”). The Gelnex Acquisition includes a network of five processing facilities in South America and one in the United States. The initial purchase price of approximately $1.2 billion was comprised of an initial cash payment of approximately $1.1 billion, which consisted of a payment of approximately R$4.3 billion Brazilian real (approximately $855.1 million USD at the exchange rate of R$5.0812:USD$1.00 on the closing date) and a payment of approximately $243.5 million in USD, and is subject to various post-closing adjustments in accordance with the stock purchase agreement. In addition, the Company incurred a liability of approximately $104.1 million for acquisition consideration hold-back amounts that are part of the purchase price set aside in escrow in the Company's name for possible indemnification claims by the Company, which amounts will be paid to the sellers in the future if no claims arise. The hold-back amount represents a noncash investing activity during the period of acquisition. The Gelnex Acquisition gives us immediate capacity to serve the growing needs of our collagen customers and the growing gelatin market. The initial purchase price was financed by borrowing all of the Company's term A-3 facility of $300.0 million and term A-4 facility of $500.0 million, with the remainder coming through revolver borrowings under the Company's Amended Credit Agreement.

The following table summarizes the preliminary estimated fair value of the assets acquired and the liabilities assumed in the Gelnex Acquisition as of March 31, 2023 (in thousands) inclusive of all measurement period adjustments recorded:


Accounts receivable	$	81,000
Inventories	141,066
Other current assets	3,502
Property, plant and equipment	127,769
Identifiable intangible assets	283,951
Goodwill	630,669
Operating lease right-of-use assets	134
Other assets	2,703
Deferred tax asset	857
Accounts payable	(15,059)
Current operating lease liabilities	(26)
Current portion of long-term debt	(44,692)
Accrued expenses	(18,888)
Long-term debt, net of current portion	(1,407)
Long-term operating lease liabilities	(123)
Deferred tax liability	(8,310)
Other noncurrent liabilities	(19)
Purchase price, net of cash acquired	$	1,183,127
Less hold-back	104,145
Cash paid for acquisition, net of cash acquired	$	1,078,982

As the Gelnex Acquisition occurred on the last business day of the first quarter, and the Company preliminarily allocated the purchase price of the acquisition to the assets acquired and liabilities assumed based on their estimated fair values on a provisional basis using methods based on historical experience, with the excess of the purchase price over the aggregate provisional fair values recorded as goodwill.

The above amounts are provisional in nature and are subject to change during the measurement period if additional information about the facts and circumstances that existed at the acquisition date becomes available. The Company is in the ongoing process of conducting a valuation of all the assets acquired and liabilities assumed related to the acquisition including identifiable intangible assets, personal and real property, deferred taxes and others, including possible future purchase price adjustments related to working capital and taxes. The Company has engaged third party valuation experts to assist in the determination of the fair value of assets acquired and liabilities assumed using the income, market or cost approaches (or a combination thereof).

The $630.7 million of goodwill from the Gelnex Acquisition, which is expected to strengthen the Company's gelatin business and expand its ability to service increased demand of its collagen customer base, is assigned to the Food Ingredients segment. Of the preliminary goodwill booked in the Gelnex Acquisition approximately $506.4 million is expected to be deductible for tax purposes. The identifiable intangibles of $284.0 million have preliminarily been recorded as other intangible assets. Due to the fact that the Company is in the process of conducting a valuation of all the assets acquired, certain other disclosures regarding the type and weighted average life of intangibles is not known at this time and will be updated when the information becomes available.

The final fair value of the net assets acquired may result in adjustments to these assets and liabilities, including goodwill, which may be significant. If new information is obtained about facts and circumstances that existed at the acquisition date, the Company will adjust its measurement of provisional amounts recorded, thus the final determination of the values presented in the above table of assets acquired and liabilities assumed may result in retrospective adjustments to the values presented with a corresponding adjustment to goodwill. During the second quarter ended July 1, 2023 immaterial amounts have been adjusted to goodwill.

The amount of net sales and net income (loss) from the Gelnex Acquisition included in the Company's consolidated statement of operations for both the three and six months ended July 1, 2023 were $91.2 million and $(19.1) million, respectively. The Company incurred acquisition costs related to the Gelnex Acquisition for the three and six months ended July 1, 2023 of approximately $0.1 million and $5.9 million, respectively.

FASA Group

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

The Company initially paid approximately R$2.9 billion Brazilian real in cash (approximately $562.6 million USD at the exchange rate in effect on the closing date of the acquisition) for all the shares of the FASA Group, subject to certain post closing adjustments and a contingent payment based on future earnings growth in accordance with the terms set forth in the stock purchase agreement. Under the stock purchase agreement, such contingent payment could range from R$0 to a maximum of R$1.0 billion if future earnings growth reaches certain levels over a three-year period. The Company completed an initial analysis as of the acquisition date for this contingency and recorded a liability of approximately R$867.5 million (approximately $168.1 million USD at the exchange rate in effect on the closing date of the acquisition) representing the present value of the maximum contingency under the income approach.

As disclosed in Note 2(g), as a result of the immaterial out-of-period correction identified during the quarter ended July 1, 2023, utilizing assistance from external valuation experts and the use of a Monte Carlo model, the Company determined the acquisition date fair value of the contingent consideration was R$428.2 million (approximately $83.0 million USD at the exchange rate in effect on the closing date of the acquisition) representing the probability weighted present value of the expected payment to be made under the agreement using the income approach, resulting in an overstatement of the fair value of the contingent consideration liability of approximately $85.1 million. The immaterial out-of-period correction reduced the acquisition date fair value of contingent consideration liability and goodwill

associated with the FASA Acquisition by approximately $85.1 million during the quarter ended July 1, 2023.The Company will analyze the contingent consideration liability using a Monte Carlo model each quarter and any change in fair value will be recorded through operating income as changes in fair value of contingent consideration including the accretion of the change in the long-term liability.

The hold-back and contingent consideration amounts represent a noncash investing activity during the period of acquisition. The Company initially financed the FASA Acquisition by borrowing approximately $515.0 million of revolver borrowings under the Company's Amended Credit Agreement, with the remainder coming from cash on hand. During the fourth quarter of fiscal 2022, the Company made immaterial working capital adjustments and made a cash payment for working capital purchase price adjustment per the stock purchase agreement of approximately $7.1 million with an offset to goodwill. The Company obtained new information about facts and circumstances that existed at the acquisition date during the first and second quarter of 2023 that resulted in measurement period adjustments to increase property, plant and equipment by approximately $81.5 million, decrease intangible assets by approximately $41.7 million, decrease goodwill by approximately $21.5 million, increase deferred tax liabilities by approximately $16.0 million and increase other assets and liabilities by approximately $2.3 million, with the net impact of the adjustments to the consolidated statement of operations being immaterial.

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 at the exchange rate of R$5.16:USD$1.00 (in thousands), as adjusted for the immaterial out of period correction disclosed in Note 2(g) and inclusive of all measurement adjustments recorded:


Accounts receivable	$	76,640
Inventories	43,058
Other current assets	33,327
Property, plant and equipment	224,384
Identifiable intangible assets	119,477
Goodwill (1)	301,937
Operating lease right-of-use assets	583
Other assets	62,388
Deferred tax asset	2,315
Accounts payable	(15,920)
Current portion of long-term debt	(18,680)
Accrued expenses	(38,708)
Long-term debt, net of current portion	(41,926)
Long-term operating lease liabilities	(583)
Deferred tax liability	(95,653)
Other noncurrent liabilities	(503)
Non-controlling interests	(21,704)
Purchase price, net of cash acquired	$	630,432
Less hold-back	21,705
Less contingent consideration (1)	82,984
Cash paid for acquisition, net of cash acquired	$	525,743

(1) As disclosed in Note 2(g), the immaterial out-of-period correction made during the quarter ended July 1, 2023 resulted in a reduction of goodwill and contingent consideration liability recorded associated with the FASA Acquisition of approximately $85.1 million.

The $301.9 million of goodwill from the FASA Acquisition, which is expected to strengthen the Company's base business and expand its ability to provide additional low carbon intensity feedstocks to fuel the growing demand for renewable diesel, was assigned to the Feed Ingredients segment and is nondeductible for tax purposes. The identifiable intangible assets include $108.5 million in routes with a life of 12 years and $10.9 million in trade name with a life of 5 years for a total weighted average life of approximately 11.4 years.

The amount of net sales and net income (loss) from the FASA Acquisition included in the Company's consolidated statement of operations for the three and six months ended July 1, 2023 were $90.3 million and $183.8 million and $(2.7) million and $1.8 million, respectively.

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 18 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 $1.177 billion in cash for the Valley Acquisition, subject to various post-closing adjustments in accordance with the stock purchase agreement. During the third quarter 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 $6.0 million with an offset to goodwill. The initial purchase price was financed by borrowing all of the Company's term A-1 facility of $400.0 million and term A-2 facility of $500.0 million, with the remainder coming through revolver borrowings under the Company's Amended Credit Agreement.

The following table summarizes the final fair value of the assets acquired and the liabilities assumed in the Valley Acquisition as of May 2, 2022 (in thousands) inclusive of all measurement period adjustments recorded:


Accounts receivable	$	68,558
Inventories	58,246
Other current assets	13,825
Property, plant and equipment	409,405
Identifiable intangible assets	389,200
Goodwill	358,298
Operating lease right-of-use assets	16,380
Other assets	14,164
Deferred tax asset	1,075
Accounts payable	(47,615)
Current portion of long-term debt	(2,043)
Current operating lease liabilities	(4,779)
Accrued expenses	(66,034)
Long-term debt, net of current portion	(5,995)
Long-term operating lease liabilities	(11,601)
Other noncurrent liabilities	(19,436)
Purchase price, net of cash acquired	$	1,171,648

The $358.3 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 expected to be deductible for tax purposes. The identifiable intangible assets include $292.1 million in collection routes with a life of 15 years and $97.1 million in permits with a life of 15 years for a total weighted average life of approximately 15 years.

The amount of net sales and net income from the Valley Acquisition included in the Company's consolidated statement of operations for the three and six months ended July 1, 2023 were $199.9 million and $426.3 million and $4.1 million and $3.6 million, respectively.

As a result of the Gelnex Acquisition, the FASA Acquisition and the Valley Acquisition, effective March 31, 2023, August 1, 2022 and May 2, 2022, respectively, the Company began including the operations of these acquisitions in the Company's consolidated financial statements. The following table presents selected pro forma information, for comparative purposes, assuming the ~~Company's DGD Joint Venture~~ Gelnex Acquisition, the FASA Acquisition and the Valley Acquisition had occurred on January 2, 2022 for the periods presented (in thousands):


	Three Months Ended				Six Months Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Net sales	$	1,757,621	$	1,927,083	$	3,647,060	$	3,705,923
Net income	255,197		200,668		448,019		371,706

The Company notes that pro forma results of operations for the additional acquisitions discussed below have not been presented because the effect of each acquisition individually or in the aggregate is not deemed material to net sales, 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 $91.7 million, plus or minus various closing adjustments in accordance with the stock purchase agreement. Initially, the Company paid approximately $71.3 million in cash consideration. In the second quarter of fiscal 2022, the Company paid an additional $4.2 million for purchase price adjustments related to working capital and estimated future construction costs for a total purchase price of approximately $75.5 million. The Company recorded assets and liabilities consisting of property, plant and equipment of approximately $28.1 million, intangible assets of approximately $27.2 million, goodwill of approximately $29.6 million and other net liabilities of approximately $9.4 million including working capital and net debt.

Additionally, the Company completed other immaterial acquisitions in the first six months of fiscal 2023 and 2022.

On November 2, 2022, the Company announced that we entered into a definitive agreement to purchase Polish rendering company, Miropasz Group for approximately €110.0 million, subject to post-closing adjustments. The transaction is subject to customary approvals, including the receipt of regulatory approval and is anticipated to close in the third quarter of 2023.

The Company incurred acquisition costs and integration costs of approximately $1.7 million and $5.4 million for the three months ended July 1, 2023 and July 2, 2022, respectively. The Company incurred acquisition and integration costs of approximately $8.7 million and $9.1 million for the six months ended July 1, 2023 and July 2, 2022, respectively.

(5) Inventories

A summary of inventories follows (in thousands):


	July 1, 2023		December 31, 2022
Finished product	$	480,025	$	384,289
Work in process	138,034		100,790
Raw material	68,387		69,164
Supplies and other	138,684		119,378
	$	825,130	$	673,621

(6) Intangible Assets

The gross carrying amount of intangible assets not subject to amortization and intangible assets subject to amortization

is as follows (in thousands):

(in thousands) September 30, 2017 December 31, 2016
Assets:
Total current assets $ 218,357
$ 268,734
Property, plant and equipment, net 390,723
354,871
Other assets 5,482
12,164
Total assets $ 614,562
$ 635,769
Liabilities and members' equity:
Total current portion of long term debt $ 17,023
$ 17,023
Total other current liabilities 32,924
23,200
Total long term debt 40,986
53,753
Total other long term liabilities 443
418
Total members' equity 523,186
541,375
Total liabilities and member's equity $ 614,562
$ 635,769


	July 1, 2023		December 31, 2022
Indefinite Lived Intangible Assets:
Trade names	$	52,203	$	51,639
	52,203		51,639
Finite Lived Intangible Assets:
Routes	753,442		781,286
Permits	560,416		557,083
Non-compete agreements	695		695
Trade names	77,400		76,549
Royalty, consulting, land use rights and leasehold	20,382		20,971
Other intangible assets	295,977		—
	1,708,312		1,436,584
Accumulated Amortization:
Routes	(221,628)		(196,108)
Permits	(389,854)		(368,005)
Non-compete agreements	(617)		(563)
Trade names	(57,999)		(53,486)
Royalty, consulting, land use rights and leasehold	(5,242)		(4,939)
Other intangible assets	(10,571)		—
	(685,911)		(623,101)
Total Intangible assets, less accumulated amortization	$	1,074,604	$	865,122

Three Months Ended Nine Months Ended
(in thousands) September 30, 2017 September 30, 2016 September 30, 2017 September 30, 2016
Revenues:
Operating revenues $ 175,585
$ 141,656
$ 451,768
$ 345,650
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense 154,446
96,569
395,743
244,643
Depreciation, amortization and accretion expense 6,733
7,445
22,867
20,370
Total costs and expenses 161,179
104,014
418,610
265,013
Operating income 14,406
37,642
33,158
80,637
Other income 408
114
959
199
Interest and debt expense, net (455 ) (1,406 ) (2,306 ) (6,148 )
Net income $ 14,359
$ 36,350
$ 31,811
$ 74,688

~~As of~~ ~~September 30, 2017~~ ~~under the equity method of accounting, the Company has an investment~~Gross intangible assets changed due to net acquisition activity in the ~~DGD Joint Venture~~first six months of fiscal 2023 by approximately $245.0 million and the remaining change is due to foreign currency translation and retirements. Other intangibles represent the preliminary amounts recorded in the Gelnex Acquisition. Amortization expense for the three months ended July 1, 2023 and July 2, 2022, was approximately $33.3 million and $21.0 million, respectively, and for the six months ended July 1, 2023 and July 2, 2022 was approximately $59.5 million and $37.5 million, respectively.

(7) Goodwill

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


	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Balance at December 31, 2022
Goodwill	$	1,556,855	$	320,807	$	143,379	$	2,021,041
Accumulated impairment losses	(15,914)		(3,170)		(31,580)		(50,664)
	1,540,941		317,637		111,799		1,970,377
Goodwill acquired during year	3,247		626,202		—		629,449


Measurement period adjustments	(21,271)		4,467		(66)		(16,870)
Out-of-period correction (1)	(85,144)		—		—		(85,144)
Foreign currency translation	34,190		31,628		2,539		68,357
Balance at July 1, 2023
Goodwill	1,487,877		983,104		145,852		2,616,833
Accumulated impairment losses	(15,914)		(3,170)		(31,580)		(50,664)
	$	1,471,963	$	979,934	$	114,272	$	2,566,169

(1) As disclosed in Note 2(g), the immaterial out-of-period correction made during the quarter ended July 1, 2023 resulted in a reduction of goodwill recorded associated with the FASA Acquisition of approximately ~~$261.6~~$85.1 million, onwhich is included in the ~~consolidated balance sheet and has recorded an equity net gain~~Feed Ingredients segment.

(8) Accrued Expenses

Accrued expenses consist of ~~approximately $15.9 million and $37.3 million for~~ the nine months ended September 30, 2017 and October 1, 2016, respectively. In the first quarter of fiscal 2017, the Company received a dividend distribution of $25.0 million from the DGD Joint Venture. Additionally, the biodiesel blenders tax credit expired on December 31, 2016, as a result the DGD Joint Venture fiscal 2017 results do not include any blenders tax credits, while fiscal 2016 included blenders tax credits.following (in thousands):


	July 1, 2023		December 31, 2022
Compensation and benefits	$	134,677	$	145,048

Accrued operating expenses	101,476		97,128

Other accrued expense	184,043		189,847
	$	420,196	$	432,023


~~(8)~~	~~Debt~~

(9) Debt

Debt consists of the following (in thousands):


	July 1, 2023		December 31, 2022
Amended Credit Agreement:
Revolving Credit Facility ($212.9 million and $32.0 million denominated in € at July 1, 2023 and December 31, 2022, respectively)	$	491,921	$	135,028

Term A-1 facility	400,000		400,000
Less unamortized deferred loan costs	(635)		(722)
Carrying value Term A-1 facility	399,365		399,278

Term A-2 facility	487,500		493,750
Less unamortized deferred loan costs	(902)		(1,034)
Carrying value Term A-2 facility	486,598		492,716

Term A-3 facility	300,000		—
Less unamortized deferred loan costs	(964)		—
Carrying value Term A-3 facility	299,036		—

Term A-4 facility	496,875		—
Less unamortized deferred loan costs	(1,168)		—
Carrying value Term A-4 facility	495,707		—

Term Loan B	200,000		200,000
Less unamortized deferred loan costs	(981)		(1,302)
Carrying value Term Loan B	199,019		198,698

6% Senior Notes due 2030 with effective interest of 6.12%	1,000,000		1,000,000
Less unamortized deferred loan costs net of bond premium	(6,841)		(7,228)
Carrying value 6% Senior Notes due 2030	993,159		992,772

5.25% Senior Notes due 2027 with effective interest of 5.47%	500,000		500,000
Less unamortized deferred loan costs	(3,694)		(4,127)
Carrying value 5.25% Senior Notes due 2027	496,306		495,873

3.625% Senior Notes due 2026 - Denominated in euro with effective interest of 3.83%	562,329		549,814
Less unamortized deferred loan costs - Denominated in euro	(3,274)		(3,728)
Carrying value 3.625% Senior Notes due 2026	559,055		546,086

Other Notes and Obligations	126,716		124,364
	4,546,882		3,384,815
Less Current Maturities	88,085		69,846
	$	4,458,797	$	3,314,969

September 30, 2017 December 31, 2016
Amended Credit Agreement:
Revolving Credit Facility ($5.3 million denominated in euro at December 31, 2016) $ —
$ 5,280
Term Loan A ($64.8 million and $76.9 million denominated in CAD at September 30, 2017 and December 31, 2016, respectively) 108,053
120,103
Less unamortized deferred loan costs (814 ) (1,083 )
Carrying value Term Loan A 107,239
119,020

Term Loan B 537,500
583,500
Less unamortized deferred loan costs (4,874 ) (6,298 )
Carrying value Term Loan B 532,626
577,202

5.375% Senior Notes due 2022 with effective interest of 5.72% 500,000
500,000
Less unamortized deferred loan costs (6,655 ) (7,667 )
Carrying value 5.375% Senior Notes due 2022 493,345
492,333

4.75% Senior Notes due 2022 - Denominated in euro with effective interest of 5.10% 608,318
543,840
Less unamortized deferred loan costs - Denominated in euro (8,769 ) (8,956 )
Carrying value 4.75% Senior Notes due 2022 599,549
534,884

Other Notes and Obligations 19,632
22,224
1,752,391
1,750,943
Less Current Maturities 18,215
23,247
$ 1,734,176
$ 1,727,696

As of September 30, 2017, the Company had outstanding debt under a term loan facility denominated in Canadian dollars of CAD$80.6 million. See below for discussion relating to the Company's debt agreements. In addition, as of

September 30, 2017, the Company had capital lease obligations denominated in Canadian dollars included in debt. The current and long-term capital lease obligation was approximately CAD$0.9 million and CAD$0.5 million, respectively.

~~As of September 30, 2017,~~July 1, 2023, the Company had outstanding debt under the ~~Company's 4.75% Senior Notes due 2022~~revolving credit facility denominated in euros of ~~€515.0 million. See below for discussion relating to~~€195.0 million and outstanding debt under the Company's ~~debt agreements.~~3.625% Senior Notes due 2026 denominated in euros of

€515.0 million. In addition, at ~~September 30, 2017,~~July 1, 2023, the Company had ~~capital~~finance lease obligations denominated in euros ~~included in debt. The current~~of approximately €7.8 million.

As of July 1, 2023, the Company had other notes and ~~long-term~~obligations of $126.7 million that consist of various overdraft facilities of approximately $41.3 million, Brazilian notes of approximately $48.5 million, a China working capital ~~lease obligation was~~line of credit of approximately ~~€0.3~~$5.1 million and ~~€0.1~~other debt of approximately $31.8 million, ~~respectively.~~including U.S. finance lease obligations of approximately $4.2 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, ~~(the Former Credit Agreement),~~ 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.

Effective December 16, 2016, the Company, and certain of its subsidiaries entered into an amendment (the “Fourth Amendment”) with its lenders to the Amended Credit Agreement. Among other things, the Fourth Amendment extended the maturity date of the term A loans and revolving credit facility loans under the Amended Credit Agreement from September 27, 2018 to December 16, 2021, subject to a 91-day “springing” adjustment if the term B loans are outstanding 91 days prior to the maturity date (January 6, 2021) of the term B loans.

The Company's Amended Credit Agreement provides for senior secured credit facilities in the aggregate principal amount of $2.65 billion comprised of (i) the Company's $350.0 million term loan A facility, (ii) the Company's $1.3 billion term loan B facility and (iii) the Company's $1.0 billion five-year revolving loan facility (approximately $150.0 million of which is available for a letter of credit sub-facility and $50.0 million of which is available for a swingline sub-facility) (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 $500.0 million of the revolving loan facility is available to be borrowed by (x) Darling in U.S. dollars, Canadian dollars, euros and other currencies to be agreed and available to each applicable lender, (y) Darling Canada in Canadian dollars and (z) Darling NL, Darling Ingredients International Holding B.V. (“Darling BV”) and CTH Germany GmbH (“CTH”) in U.S. dollars, Canadian dollars, euros and other currencies to be agreed and available to each applicable lender. The revolving loan facility and term loan A facility will mature on December 16, 2021, subject to a 91-day “Springing” adjustment if the term B loans are outstanding 91 days prior to the maturity date (January 6, 2021) of the term B loans. The revolving loan facility will be used for working capital needs, general corporate purposes and other purposes not prohibited by the Amended Credit Agreement.

The interest rate applicable to any borrowings under the revolving credit facility equals the adjusted term ~~loan A facility and~~secured overnight financing rate (SOFR) for U.S. dollar borrowings or the ~~revolving loan facility will equal either LIBOR/~~adjusted euro interbank ~~offered rate/~~rate (EURIBOR) for euro borrowings or the adjusted daily simple Sterling overnight index average (SONIA) for British pound borrowings or CDOR for Canadian dollar borrowings plus ~~2.00%~~1.375% per annum or base ~~rate/~~rate or the adjusted term SOFR for U.S. dollar borrowings or Canadian prime rate for Canadian dollar borrowings or the adjusted daily simple European short term rate (ESTR) for euro borrowings or the adjusted daily SONIA rate for British pound borrowings plus ~~1.00%~~0.375% per annum subject to certain step-ups or step-downs based on the Company's total leverage ratio. The interest rate applicable to any borrowing under the term A-1 facility and term A-3 facility equals the adjusted term SOFR plus a minimum of 1.50% per annum subject to certain step-ups based on the Company's total leverage ratio. The interest rate applicable to any borrowing under the term A-2 facility and term A-4 facility equals the adjusted term SOFR plus 1.375% per annum subject to certain step-ups or step-downs based on the Company's total leverage ratio. The interest rate applicable to any borrowings under the term loan B facility ~~will equal (a) for U.S. dollar term loans, either~~equals the base rate plus ~~1.50%~~1.00% or LIBOR plus 2.50%, and (b) for euro term loans, the euro interbank offered rate plus 2.75%, in each case subject to a step-down based on Darling’s total leverage ratio. For term loan B loans, the LIBOR rate shall not be less than 0.75%2.00%.

As of ~~September 30, 2017,~~July 1, 2023, the Company had ~~$43.3~~(i) $44.0 million outstanding under the revolving credit facility at base rate plus a margin of 0.375% per annum for a total of 8.625% per annum, (ii) $235.0 million outstanding under the revolver at SOFR plus a margin of 1.375% per annum for a total of 6.5775% per annum, (iii) $400.0 million outstanding under the term ~~loan A~~A-1 facility at SOFR plus a margin of 1.50% per annum for a total of 6.7025% per annum, (iv) $487.5 million outstanding under the term A-2 facility at SOFR plus a margin of 1.375% per annum for a total of 6.5775% per annum, (v) $300.0 million outstanding under the term A-3 facility at SOFR plus a margin 1.50% per annum for a total of 6.7025% per annum, (vi) $496.9 million outstanding under the term A-4 facility at SOFR plus a margin 1.375% per annum for a total of 6.5775% per annum, (vii) $200.0 million outstanding under the term B facility at LIBOR plus a margin of 2.00% per annum for a total of ~~3.24%~~7.15% per ~~annum. The Company had $525.5~~annum and (viii) €195.0 million outstanding under the ~~term loan B~~revolving credit facility at ~~LIBOR~~EURIBOR plus a margin of ~~2.50%~~1.375% per annum for a total of 3.74% per annum and $12.0 million outstanding under the term loan B facility at base rate plus a margin of 1.50% per annum for a total of 5.75% per annum. The Company had CAD$80.6 million outstanding under the term loan A facility at CDOR plus a margin of 2.00% per annum for a total of 3.3947%4.7630% per annum. As of ~~September 30, 2017,~~July 1, 2023, the Company had ~~unused capacity~~revolving credit facility availability of ~~$976.0~~$956.0 million, under the Amended Credit Agreement taking into account amounts borrowed, ancillary facilities of $48.3 million and letters of credit issued of ~~$24.0~~$3.9 million. The Company also ~~has~~had foreign bank guarantees of approximately $13.0 million and U.S. bank guarantees of approximately $10.9 million that are not part of the Company's Amended Credit Agreement ~~in the amount of approximately $12.2 million~~ at ~~September 30, 2017.~~July 1, 2023.

~~5.375 % Senior Notes due 2022.~~ On January 2, 2014, Darling Escrow Corporation, a wholly-owned subsidiary of Darling, issued and sold $500.0 million aggregate principal amount of its 5.375% Notes due 2022 (the “5.375% Notes”). The 5.375% Notes, which were offered in a private offering in connection with the Company's acquisition in January 2014 of its Darling Ingredients International business from VION Holding, N.V. (the “VION Acquisition”), were issued pursuant to a 5.375% Notes Indenture, dated as of January 2, 2014 (the “Original 5.375% Indenture”) (as supplemented, the “5.375% Indenture”), among Darling Escrow Corporation, the subsidiary guarantors party thereto from time to time, and U.S. Bank National Association, as trustee (the “5.375% Trustee”).

~~4.75 % Senior Notes due 2022.~~ On June 3, 2015, Darling Global Finance B.V. (the “4.75% Issuer”), a wholly-owned subsidiary of Darling, issued and sold €515.0 million aggregate principal amount of the 4.75% Senior Notes due 2022 (the “4.75% Notes”). The 4.75% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of June 3, 2015 (the “4.75% Indenture”), among the 4.75% Issuer, Darling, the subsidiary guarantors party thereto from time to time, Citibank, N.A., London Branch, as trustee (the “4.75% Trustee”) and principal paying agent, and Citigroup Global Markets Deutschland AG, as principal registrar.

As of ~~September 30, 2017,~~July 1, 2023, the Company believes it is in compliance with all of the financial covenants under the Amended Credit Agreement, as well as all of the other covenants contained in the Amended Credit Agreement, the ~~5.375% Indenture~~6% Senior Notes due 2030, the 5.25% Senior Notes due 2027 and the ~~4.75% Indenture.~~ 3.625% Senior Notes due 2026.


~~(9)~~	~~Income Taxes~~

(10) Other Noncurrent Liabilities

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


	July 1, 2023		December 31, 2022
Accrued pension liability	$	22,656	$	22,538
Reserve for self-insurance, litigation, environmental and tax matters	87,915		76,685
Long-term acquisition hold-backs	134,969		26,113
Long-term contingent consideration (1)	87,329		169,903
Other	6,401		3,694
	$	339,270	$	298,933

(11) Income Taxes

The Company has provided income taxes for the three and ~~nine~~six month periods ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016,~~July 2, 2022, based on its estimate of the effective tax rate for the entire ~~2017~~2023 and ~~2016~~2022 fiscal years. The Company’s estimated annual effective tax rate is based on forecasts of income by jurisdiction, permanent differences between book and tax ~~income, including Subpart F~~ income, the relative proportion of income and losses by jurisdiction, and statutory income tax rates. Discrete events such as the assessment of the ultimate outcome of tax audits, audit settlements, recognizing previously unrecognized tax benefits due to the lapsing of statutes of limitation, recognizing or derecognizing deferred tax assets due to projections of income or loss and changes in tax laws are recognized in the period in which they occur.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company expects to indefinitely reinvest the earnings of its foreign subsidiaries outside of the United States and has generally not provided deferred income taxes on the accumulated earnings of its foreign subsidiaries except for the accumulated earnings of certain joint venture companies.

The Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets. In making this determination, the Company considers all available positive and negative evidence and makes certain assumptions. The Company considers, among other things, its deferred tax liabilities, the overall business environment, its historical earnings and losses, current industry trends and its outlook for future years.

Unrecognized tax benefits represent the difference between tax positions taken or expected to be taken in a tax return and the benefits recognized for financial statement purposes. As of ~~September 30, 2017,~~July 1, 2023 and July 2, 2022, the Company had ~~$2.9~~$19.1 million and $12.1 million, respectively of gross unrecognized tax benefits and ~~$1.6~~$1.3 million and $1.2 million, respectively of related accrued interest and penalties. ~~An indemnity receivable of $3.3 million has been recorded for the uncertain~~The Company's gross unrecognized tax ~~positions related~~benefits are not expected to ~~the VION Acquisition. It is reasonably possible~~decrease significantly within the next twelve ~~months~~months.

On August 16, 2022, the U.S. government enacted the IR Act that includes tax incentives for energy and climate initiatives, among other provisions. The blender tax credits, which are refundable excise tax credits, have been extended two years through December 31, 2024. After 2024, the ~~Company’s gross unrecognized~~CFPC, a transferable income tax ~~benefits may decrease by up~~credit, becomes effective from 2025 through 2027. We are assessing these tax incentives, which could materially change our pre-tax or after-tax amounts and impact our tax rate in future years. We will continue to ~~$1.9 million, excluding interest~~evaluate the applicability and ~~penalties, primarily due to potential settlements and expiration~~effect of ~~certain statutes of limitations.~~the IR Act as more guidance is issued.

The Company’s major taxing jurisdictions include the United States (federal and state), Canada, the Netherlands, Belgium, Brazil, Germany, France and China. The Company is subject to regular examination by various tax authorities and 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 tax jurisdictions is open for varying periods, but is generally closed through the ~~2010~~2013 tax year.


~~(10)~~	~~Other Comprehensive Income~~

~~The Company follows FASB authoritative guidance for reporting and presentation of comprehensive income and its components.~~ (12) Other ~~comprehensive income (loss) is derived from adjustments that reflect pension adjustments, corn option adjustments and foreign currency translation adjustments.~~ Comprehensive Income/(Loss)

The components of other comprehensive ~~income~~ income/(loss) and the related tax impacts for the three and ~~nine months~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 are as follows (in thousands):

Three Months Ended
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Defined benefit pension plans
Amortization of prior service cost/(benefit) $ 9
$ 8
$ (3 ) $ (2 ) $ 6
$ 6
Amortization of actuarial loss 1,204
1,168
(451 ) (447 ) 753
721
Amortization of settlement —
—
—
—
—
—
Total defined benefit pension plans 1,213
1,176
(454 ) (449 ) 759
727
Natural gas swap derivatives
Gain/(loss) activity recognized in other comprehensive income (loss) 36
—
(14 ) —
22
—
Total natural gas swap derivatives 36
—
(14 ) —
22
—
Corn option derivatives
Loss/(gain) reclassified to net income (1,352 ) (861 ) 525
334
(827 ) (527 )
Gain/(loss) activity recognized in other comprehensive income (loss) 2,740
2,060
(1,063 ) (799 ) 1,677
1,261
Total corn option derivatives 1,388
1,199
(538 ) (465 ) 850
734

Foreign currency translation 46,211
(5,839 ) —
—
46,211
(5,839 )

Other comprehensive income (loss) $ 48,848
$ (3,464 ) $ (1,006 ) $ (914 ) $ 47,842
$ (4,378 )


	Three Months Ended
	Before-Tax				Tax (Expense)				Net-of-Tax
	Amount				or Benefit				Amount
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Defined benefit pension plans

Amortization of prior service (cost)/benefit	$	—	$	6	$	—	$	(2)	$	—	$	4
Amortization of actuarial loss	434		570		(107)		(146)		327		424

Total defined benefit pension plans	434		576		(107)		(148)		327		428




Soybean meal option derivatives
Reclassified to earnings	(166)		124		42		(31)		(124)		93
Activity recognized in other comprehensive income/(loss)	(163)		(144)		41		37		(122)		(107)
Total soybean meal option derivatives	(329)		(20)		83		6		(246)		(14)
Corn option derivatives
Reclassified to earnings	(653)		7,238		165		(1,839)		(488)		5,399
Activity recognized in other comprehensive income/(loss)	597		726		(150)		(184)		447		542
Total corn option derivatives	(56)		7,964		15		(2,023)		(41)		5,941
Heating oil derivatives
Activity recognized in other comprehensive income/(loss)	(23,292)		24,847		5,917		(6,312)		(17,375)		18,535
Total heating oil derivatives	(23,292)		24,847		5,917		(6,312)		(17,375)		18,535
Interest swap derivatives
Reclassified to earnings	(990)		—		251		—		(739)		—
Activity recognized in other comprehensive income/(loss)	13,867		—		(3,522)		—		10,345		—
Total interest swap derivatives	12,877		—		(3,271)		—		9,606		—
Foreign exchange derivatives
Reclassified to earnings	(7,459)		(6,280)		2,539		2,055		(4,920)		(4,225)
Activity recognized in other comprehensive income/(loss)	21,515		(25,091)		(7,324)		8,597		14,191		(16,494)
Total foreign exchange derivatives	14,056		(31,371)		(4,785)		10,652		9,271		(20,719)

Foreign currency translation	82,696		(95,562)		(104)		1,707		82,592		(93,855)

Other comprehensive income/(loss)	$	86,386	$	(93,566)	$	(2,252)	$	3,882	$	84,134	$	(89,684)

Nine Months Ended
Before-Tax Tax (Expense) Net-of-Tax
Amount or Benefit Amount
September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Defined benefit pension plans
Amortization of prior service cost/(benefit) $ 27
$ 22
$ (8 ) $ (7 ) $ 19
$ 15
Amortization of actuarial loss 3,610
3,502
(1,351 ) (1,338 ) 2,259
2,164
Amortization of settlement —
(123 ) —
48
—
(75 )
Total defined benefit pension plans 3,637
3,401
(1,359 ) (1,297 ) 2,278
2,104
Natural gas swap derivatives
Gain/(loss) activity recognized in other comprehensive income (loss) 36
—
(14 ) —
22
—
Total natural gas swap derivatives 36
—
(14 ) —
22
—
Corn option derivatives
Loss/(gain) reclassified to net income (3,750 ) (3,204 ) 1,455
1,243
(2,295 ) (1,961 )
Gain/(loss) activity recognized in other comprehensive income (loss) 1,918
5,255
(744 ) (2,039 ) 1,174
3,216
Total corn option derivatives (1,832 ) 2,051
711
(796 ) (1,121 ) 1,255

Foreign currency translation 111,002
43,684
—
—
111,002
43,684

Other comprehensive income (loss) $ 112,843
$ 49,136
$ (662 ) $ (2,093 ) $ 112,181
$ 47,043


	Six Months Ended
	Before-Tax				Tax (Expense)				Net-of-Tax
	Amount				or Benefit				Amount
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Defined benefit pension plans
Amortization of prior service (cost)/benefit	$	—	$	11	$	—	$	(3)	$	—	$	8
Amortization of actuarial loss	868		1,140		(214)		(291)		654		849

Total defined benefit pension plans	868		1,151		(214)		(294)		654		857




Soybean meal option derivatives
Reclassified to earnings	(504)		(317)		128		81		(376)		(236)
Activity recognized in other comprehensive income/(loss)	(87)		(24)		22		6		(65)		(18)
Total soybean meal option derivatives	(591)		(341)		150		87		(441)		(254)
Corn option derivatives
Reclassified to earnings	(1,537)		11,345		390		(2,882)		(1,147)		8,463
Activity recognized in other comprehensive income/(loss)	1,627		(10,159)		(412)		2,581		1,215		(7,578)
Total corn option derivatives	90		1,186		(22)		(301)		68		885
Heating oil derivatives
Activity recognized in other comprehensive income/(loss)	5,140		2,377		(1,305)		(604)		3,835		1,773
Total heating oil derivatives	5,140		2,377		(1,305)		(604)		3,835		1,773
Interest swap derivatives
Reclassified to earnings	866		—		(220)		—		646		—
Activity recognized in other comprehensive income/(loss)	12,976		—		(3,296)		—		9,680		—
Total interest swap derivatives	13,842		—		(3,516)		—		10,326		—
Foreign exchange derivatives
Reclassified to earnings	(12,273)		(7,351)		4,176		2,415		(8,097)		(4,936)
Activity recognized in other comprehensive income/(loss)	34,844		20,331		(11,856)		(6,679)		22,988		13,652
Total foreign exchange derivatives	22,571		12,980		(7,680)		(4,264)		14,891		8,716

Foreign currency translation	139,555		(92,901)		(746)		2,428		138,809		(90,473)

Other comprehensive income/(loss)	$	181,475	$	(75,548)	$	(13,333)	$	(2,948)	$	168,142	$	(78,496)

The following table presents the amounts reclassified out of each component of other comprehensive ~~income~~ income/(loss), net of tax for the three and ~~nine months~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 as follows (in thousands):


	Three Months Ended						Nine Months Ended								Three Months Ended				Six Months Ended
	September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016			Statement of Operations Classification		July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022		Statement of Operations Classification
Derivative instruments														Derivative instruments
Soybean meal option derivatives														Soybean meal option derivatives	$	166	$	(124)	$	504	$	317	Net sales
Foreign exchange contracts														Foreign exchange contracts	7,459		6,280		12,273		7,351		Net sales

Corn option derivatives	$	1,352		$	861		$	3,750		$	3,204		Cost of sales and operating expenses	Corn option derivatives	653		(7,238)		1,537		(11,345)		Cost of sales and operating expenses
Interest swaps														Interest swaps	990		—		(866)		—		Foreign currency Gain/(loss) and interest expense
	1,352			861			3,750			3,204			Total before tax		9,268		(1,082)		13,448		(3,677)		Total before tax
	(525		)	(334		)	(1,455		)	(1,243		)	Income taxes		(2,997)		(185)		(4,474)		386		Income taxes
	827			527			2,295			1,961			Net of tax		6,271		(1,267)		8,974		(3,291)		Net of tax
Defined benefit pension plans														Defined benefit pension plans
Amortization of prior service cost	$	(9	)	$	(8	)	$	(27	)	$	(22	)	(a)	Amortization of prior service cost	$	—	$	(6)	$	—	$	(11)	(a)
Amortization of actuarial loss	(1,204		)	(1,168		)	(3,610		)	(3,502		)	(a)	Amortization of actuarial loss	(434)		(570)		(868)		(1,140)		(a)
Amortization of settlement	—			—			—			123			(a)

	(1,213		)	(1,176		)	(3,637		)	(3,401		)	Total before tax		(434)		(576)		(868)		(1,151)		Total before tax
	454			449			1,359			1,297			Income taxes		107		148		214		294		Income taxes
	(759		)	(727		)	(2,278		)	(2,104		)	Net of tax		(327)		(428)		(654)		(857)		Net of tax
Total reclassifications	$	68		$	(200	)	$	17		$	(143	)	Net of tax	Total reclassifications	$	5,944	$	(1,695)	$	8,320	$	(4,148)	Net of tax


~~(a)~~	~~These items are included in the computation of net periodic pension cost. See Note 12 Employee Benefit Plans for additional information.~~

(a)These items are included in the computation of net periodic pension cost. See Note 14 (Employee Benefit Plans) to the Company's Consolidated Financial Statement included herein for additional information.

The following table presents changes in each component of accumulated other comprehensive ~~income~~ income/(loss) as of ~~September 30, 2017~~July 1, 2023 as follows (in thousands):


	Six Months Ended July 1, 2023
	Foreign				Defined
	Currency		Derivative		Benefit
	Translation		Instruments		Pension Plans		Total
Accumulated Other Comprehensive loss December 31, 2022, attributable to Darling, net of tax	$	(374,368)	$	7,176	$	(16,682)	$	(383,874)
Other comprehensive loss before reclassifications	138,809		37,653		—		176,462
Amounts reclassified from accumulated other comprehensive loss	—		(8,974)		654		(8,320)

Net current-period other comprehensive income	138,809		28,679		654		168,142
Noncontrolling interest	(3,171)		—		—		(3,171)
Accumulated Other Comprehensive loss July 1, 2023, attributable to Darling, net of tax	$	(232,388)	$	35,855	$	(16,028)	$	(212,561)

Nine Months Ended September 30, 2017
Foreign Currency Derivative Defined Benefit
Translation Instruments Pension Plans Total
Accumulated Other Comprehensive Income (loss) December 31, 2016, attributable to Darling, net of tax $ (308,910 ) $ 2,468
$ (33,564 ) $ (340,006 )
Other comprehensive gain before reclassifications 111,002
(2,295 ) —
108,707
Amounts reclassified from accumulated other comprehensive income/(loss) —
1,196
2,278
3,474
Net current-period other comprehensive income 111,002
(1,099 ) 2,278
112,181
Noncontrolling interest (3,733 ) —
—
(3,733 )
Accumulated Other Comprehensive Income (loss) September 30, 2017, attributable to Darling, net of tax (194,175 ) $ 1,369
$ (31,286 ) $ (224,092 )

~~(11)~~ (13) Stockholders' Equity

~~In March 2016, the FASB issued ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting. This ASU amends Topic 718,~~ ~~Compensation - Stock Compensation~~, which simplifies several aspects of the accounting for share-based payments, including immediate recognition of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows for the excess tax benefit and employee taxes paid when an employer withholds shares for tax-withholding purposes. The Company adopted this standard in the quarter ended April 1, 2017 and prior periods were not recasted. The impact of the adoption resulted in the following:

Fiscal ~~2017~~2023 Long-Term Incentive Opportunity Awards ~~(2017~~(2023 LTIP). On ~~February 6, 2017,~~January 3, 2023, the Compensation Committee (the “Committee”) of the Company's Board of Directors adopted the ~~2017~~2023 LTIP pursuant to which they awarded certain of the Company's key employees, ~~956,809~~118,208 restricted stock ~~options~~units and ~~559,388~~177,299 performance share units (the “PSUs”) under the Company's 2017 Omnibus Incentive Plan. The restricted stock ~~options~~units vest 33.33% on the first, second and third anniversaries of the grant date. The PSUs are tied to a three-year forward-looking performance period and will be earned based on the Company's average return on ~~capital employed (ROCE)~~gross investment (“ROGI”), as calculated in accordance with the terms of the award agreement, relative to the average ~~ROCE~~ROGI of the Company's performance peer group companies, with the earned award to be determined in the first quarter of fiscal ~~2020,~~2026, after the final results for the relevant performance period are determined. The PSUs were granted at a target of 100%, but each PSU will reduce or increase (up to 225%) depending on the Company's ~~ROCE~~ROGI relative to that of the performance peer group companies and is also subject to the application of a total shareholder return ~~(TSR)~~(“TSR”) cap/collar modifier depending on the Company's TSR during the performance period relative to that of the performance peer group companies. On May 11, 2023, the Committee awarded 4,432 restricted stock units and 6,648 PSUs to a newly hired executive officer, which

will have the same performance period and terms as those issued to the other participants on January 3, 2023. In addition, ~~certain~~on May 11, 2023, the Committee granted the newly hired executive officer a one-time grant of 44,304 restricted stock units that will vest in three equal installments on the first, second and third anniversaries of the ~~PSUs have a two-year holding requirement after vesting before~~grant.

As previously announced, the ~~PSUs are settled in shares of the Company's Common Stock.~~

~~On August 7, 2017, the Company's~~Company’s Board of Directors approved ~~the extension for an additional two years of its previously announced~~a share repurchase program ofin August 2017, then refreshed and increased the program on December 9, 2021 up to an aggregate of ~~$100.0~~$500.0 million of the Company's ~~common stock~~Common Stock depending on market ~~conditions.~~conditions, and extended the program to August 13, 2024. During the first six months of fiscal 2023, $52.9 million of Common Stock was repurchased under the share repurchase program. As of July 1, 2023, the Company had approximately $321.6 million remaining under the share repurchase program.

~~(12)~~ (14) Employee Benefit Plans

The Company has retirement and pension plans covering a substantial number of its domestic and foreign employees. Most retirement benefits are provided by the Company under separate final-pay noncontributory and contributory defined benefit and defined contribution plans for all salaried and hourly employees (excluding those covered by union-sponsored plans) who meet service and age requirements. Although various defined benefit formulas exist for employees, generally these are based on length of service and earnings patterns during employment. Effective January 1, 2012, the Company's Board of Directors authorized the Company to proceed with the restructuring of its domestic retirement benefit program to include the closing of Darling's salaried and hourly defined benefit plans to new participants as well as the freezing of service and wage accruals thereunder effective December 31, 2011 (a curtailment of these plans for financial reporting purposes) and the enhancing of benefits under the Company's domestic defined contribution plans. The Company-sponsored domestic hourly union plan has not been curtailed; however, several locations of the Company-sponsored domestic hourly union plan have been curtailed as a result of collective bargaining renewals for those sites.

Net pension cost for the three and ~~nine months~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 includes the following components (in thousands):

Pension Benefits Pension Benefits
Three Months Ended
Nine Months Ended
September 30,
2017 October 1,
2016
September 30,
2017 October 1,
2016
Service cost $ 759
$ 599
$ 2,244
$ 1,921
Interest cost 1,672
1,702
5,020
5,217
Expected return on plan assets (1,799 ) (1,886 ) (5,377 ) (5,661 )
Amortization of prior service cost 9
8
27
22
Amortization of net loss 1,204
1,168
3,610
3,502
Curtailment gain —
(62 ) —
(1,285 )
Settlement gain —
—
—
(123 )
Net pension cost $ 1,845
$ 1,529
$ 5,524
$ 3,593

The Company's funding policy for employee benefit pension plans is to contribute annually not less than the minimum amount required nor more than the maximum amount that can be deducted for federal and foreign income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date, but also for those expected to be earned in the future. Based on actuarial estimates at ~~September 30, 2017,~~July 1, 2023, the Company expects to contribute approximately ~~$4.6~~$3.7 million to its pension plans to meet funding requirements during the next twelve months. Additionally, the Company has made tax deductible discretionary and required contributions to its pension plans for the ~~nine~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 of approximately ~~$2.6~~$1.6 million and ~~$2.9~~$1.5 million, respectively.

The Company participates in various 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 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 plans in which the Company currently participates could be material to the Company, with one of these material plans certified as critical or red zone. With respect to the other multiemployer pension plans in which the Company participates and which are not individually significant, ~~six~~five plans have certified as critical or red zone and one plan has certified as endangered ~~or yellow zone~~ as defined by the Pension Protection Act of 2006.

The Company currently has ~~received notices of~~ withdrawal ~~liability from two~~liabilities recorded on four U.S. multiemployer plans in which it participated. During the second quarter of fiscal 2023, the Company was notified by one of their multiemployer plans that an additional partial withdrawal liability was incurred and the Company also received a notification that another one of its multiemployer plans liabilities was being reduced. As a result of these events, the Company recorded an additional liability of approximately $2.8 million. As of ~~September 30, 2017,~~July 1, 2023, the Company has an aggregate accrued liability of approximately ~~$1.8~~$6.6 million representing the present value of scheduled withdrawal liability payments ~~under these~~on the multiemployer ~~plans.~~plans that have given notice of withdrawal. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could requireadditional funding under the Pension Protection Act of 2006, the amounts could be material.

The Company’s operations are exposed to market risks relating to commodity prices that affect the Company’s cost of raw materials, finished product prices, ~~and~~ energy costs and the risk of changes in interest rates and foreign currency exchange rates.

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. Natural gas swaps and options are entered into with the intent of managing the overall cost of natural gas usage by reducing the potential impact of seasonal weather demands on natural gas that increases natural gas prices. 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 forwards 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 bakery by-products (“BBP”) by reducing the impact of changing prices. Foreign currency forward and option contracts are entered into to mitigate the foreign exchange rate risk for transactions designated in a currency other than the local functional currency.

At ~~September 30, 2017,~~July 1, 2023, the Company had ~~natural gas swap~~soybean meal forward and option contracts, foreign exchange forward and option contracts and ~~corn option contracts~~interest rate swaps outstanding that qualified and were designated for hedge accounting as well as corn ~~option and~~ forward contracts, soybean meal forward and option contracts and foreign currency forward ~~contracts and soybean meal option~~ contracts that did not qualify and were not designated for hedge accounting.

~~Entities~~In the first six months of fiscal 2023 and 2022, the Company's DGD Joint Venture entered into heating oil derivatives that were deemed to be cash flow hedges. As a result, the Company has accrued the other comprehensive income/(loss) portion belonging to Darling with an offset to the investment in DGD as required by FASB ASC Topic 323.

In the first quarter and second quarter of fiscal 2023, the Company entered into interest rate swaps that are ~~required~~designated as cash flow hedges. The notional amount of these swaps totaled $900.0 million. Under the contracts, the Company is obligated to ~~report all derivative instruments~~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 July 1, 2023, the aggregate fair value of these interest rate swaps was approximately $13.3 million. These amounts are included in other current assets and other assets on the ~~statement~~balance sheet, with an offset recorded in accumulated other comprehensive loss.

In the first quarter of ~~financial position at fair value.~~fiscal 2023, the Company also entered into cross currency swaps that are designated as cash flow hedges. The ~~accounting for~~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 ~~(i.e., gains or losses)~~ of ~~a derivative instrument depends on whether it has been designated and qualifies as part of a hedging relationship and, if so, on~~ the reason for holding the instrument. If certain conditions are met, entities may elect to designate a derivative instrument as a hedge of exposures to changes in fair value, cash flows or foreign currencies. If the hedged exposure is a cash flow ~~exposure, the effective portion of the gain~~ hedge are initially recorded as gains and/or ~~loss on the derivative instrument is reported initially~~losses as a component of accumulated other comprehensive ~~income (outside of earnings) and is subsequently reclassified into~~loss. We immediately reclassify from accumulated other comprehensive loss to earnings ~~when~~an amount to offset the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness, as well as the ineffective portion of the gain or loss, are reported in earnings immediately. If the derivative instrument is not designated as a hedge, the gain or loss isremeasurement recognized in earnings associated with the respective intercompany loan. Additionally, we reclassify amounts from accumulated other comprehensive income/(loss) associated with the interest rate differential between the U.S. dollar and a Euro to interest expense. At July 1, 2023, the aggregate fair value of these cross currency swaps was approximately $4.1 million. These amounts are included in other current assets and other non-current liabilities on the ~~period of change.~~balance sheet, with an offset recorded in accumulated other comprehensive loss.

~~Cash Flow Hedges~~

In the first nine months of fiscal 2017, the Company entered into natural gas swap contracts that are considered cash flow hedges. Under the terms of the natural gas swap contracts, the Company fixed the expected purchase cost of a portion

of its U.S. plants' forecasted natural gas usage into the first quarter of fiscal 2018. As of September 30, 2017, some of the contracts have expired and settled according to the contracts while the remaining contract positions and activity are disclosed below.

In fiscal ~~2016 and the first nine months of fiscal 2017,~~2022, the Company entered into corn option contracts on the Chicago Board of Trade that are designated as cash flow hedges. Under the terms of the corn option contracts, the Company hedged a portion of its U.S. forecasted sales of BBP into the second quarter of fiscal 2023. There are not any open designated corn option contracts at July 1, 2023. At July 1, 2023 and December 31, 2022, the aggregate fair value of these corn option contracts was approximately zero and $0.9 million, respectively. The amounts outstanding as of December 31, 2022 are included in other current assets on the balance sheet, with an offset recorded in accumulated other comprehensive loss.

In fiscal 2022 and fiscal 2023, the Company entered into foreign exchange forward and option contracts that are designated as cash flow hedges. Under the terms of the foreign exchange contracts, the Company hedged a portion of its forecasted collagen sales in currencies other than the functional currency through the fourth quarter of fiscal ~~2018. As~~2024. At July 1, 2023 and December 31, 2022, the aggregate fair value of ~~September 30, 2017, some~~these foreign exchange contracts was approximately $33.6 million and $13.8 million, respectively. These amounts are included in other current assets,

accrued expenses, other assets and other non-current liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss.

In fiscal 2022 and fiscal 2023, the Company entered into soybean meal option contracts to hedge a portion of its forecasted poultry meal sales into the fourth quarter of fiscal 2023. At July 1, 2023 and December 31, 2022, the aggregate fair value of the soybean meal contracts ~~have been settled while~~was approximately $0.1 million and $0.6 million, respectively. These amounts are included in other current assets and accrued expenses on the ~~remaining contract positions and activity are disclosed below. From time to time, the Company may enter into corn option contracts~~balance sheet, with an offset recorded in ~~the future.~~accumulated other comprehensive loss.

As of ~~September 30, 2017,~~July 1, 2023, the Company had the following designated and non-designated outstanding forward and option 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. All of these transactions are currently not designated for hedge accounting~~currency (in thousands):


Functional Currency		Contract Currency
Type	Amount	Type	Amount
Brazilian real	36,462	Euro	6,778
Brazilian real	3,073,819	U.S. dollar	742,803

Euro	26,862	U.S. dollar	29,329
Euro	33,017	Polish zloty	147,500
Euro	10,790	Japanese yen	1,661,510
Euro	20,614	Chinese renminbi	158,683
Euro	18,250	Australian dollar	29,691
Euro	4,842	British pound	4,162
Euro	35	Canadian dollar	50

Polish zloty	1,380	U.S. dollar	339
Polish zloty	31,858	Euro	7,170
British pound	69	Euro	81

Japanese yen	371,817	U.S. dollar	2,716
U.S. dollar	1,094	Japanese yen	156,000
U.S. dollar	562,340	Euro	519,182

Functional Currency Contract Currency
Type Amount Type Amount
Brazilian real 33,790
Euro 9,030
Brazilian real 80,286
U.S. dollar 24,430
Brazilian real 953
Mexican peso 5,472
Euro 82,573
U.S. dollar 97,985
Euro 7,463
Polish zloty 32,000
Euro 4,040
Japanese yen 526,400
Euro 60,758
Chinese renminbi 474,901
Euro 11,455
Australian dollar 17,200
Euro 2,281
British pound 2,000
Polish zloty 35,960
Euro 8,383
Japanese yen 40,395
U.S. dollar 362

The Company estimates the amount that will be reclassified from accumulated other comprehensive ~~gain~~loss at ~~September 30, 2017~~July 1, 2023 into earnings over the next 12 months for all cash flow hedges will be approximately ~~$2.2~~$49.7 million. As of ~~September 30, 2017,~~July 1, 2023, no amounts have been reclassified into earnings as a result of the discontinuance of cash flow hedges.

~~The following table presents the fair value of the Company’s derivative instruments under FASB authoritative guidance as of~~ ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016~~ ~~(in thousands):~~

Derivatives Designated Balance Sheet Asset Derivatives Fair Value
as Hedges Location September 30, 2017 December 31, 2016
Corn options Other current assets $ 2,876
$ 4,235
Corn options Other assets 106
—
Natural gas swaps Other current assets 82
—

Total asset derivatives designated as hedges $ 3,064
$ 4,235

Derivatives Not
Designated as
Hedges

Foreign currency contracts Other current assets $ 1,153
$ 8,939
Corn options and futures Other current assets 1,167
151
Soybean meal options Other current assets 64
—

Total asset derivatives not designated as hedges $ 2,384
$ 9,090

Total asset derivatives $ 5,448
$ 13,325

Derivatives Designated Balance Sheet Liability Derivatives Fair Value
as Hedges Location September 30, 2017 December 31, 2016
Natural gas swaps Accrued expenses $ 4
$ —

Total liability derivatives designated as hedges $ 4
$ —

Derivatives Not
Designated as
Hedges

Foreign currency contracts Accrued expenses $ 1,063
$ 608
Corn options and futures Accrued expenses 21
122

Total liability derivatives not designated as hedges $ 1,084
$ 730

Total liability derivatives $ 1,088
$ 730

~~The effect of the Company’s derivative instruments on the consolidated financial statements as of and for the~~ ~~three~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~October 1, 2016~~ ~~is as follows (in thousands):~~

Derivatives
Designated as
Cash Flow Hedges

Gain or (Loss)
Recognized in Other Comprehensive Income (“OCI”)
on Derivatives
(Effective Portion) (a)
Gain or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion) (b)
Gain or (Loss)
Recognized in Income
on Derivatives
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing) (c)
2017 2016 2017 2016 2017 2016
Corn options $ 2,740
$ 2,060
$ 1,352
$ 861
$ 1,655
$ 323
Natural gas swaps 36
—
—
—
34
—

Total $ 2,776
$ 2,060
$ 1,352
$ 861
$ 1,689
$ 323

~~The effect of the Company’s derivative instruments on the consolidated financial statements as of and for the nine months ended September 30, 2017 and October 1, 2016 is as follows (in thousands):~~

Derivatives
Designated as
Cash Flow Hedges
Gain or (Loss)
Recognized in Other Comprehensive Income (“OCI”)
on Derivatives
(Effective Portion) (a) Gain or (Loss)
Reclassified from
Accumulated OCI
into Income
(Effective Portion) (b) Gain or (Loss)
Recognized in Income
on Derivatives
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing) (c)
2017 2016 2017 2016 2017 2016
Corn options $ 1,918
$ 5,255
$ 3,750
$ 3,204
$ 350
$ 537
Natural gas swaps 36
—
—
—
34
—

Total $ 1,954
$ 5,255
$ 3,750
$ 3,204
$ 384
$ 537

The table below summarizes the effect of derivatives not designated as hedges on the Company's consolidated statements of operations for the three and ~~nine months~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022 (in thousands):


		Loss or (Gain) Recognized in Income on Derivatives Not Designated as Hedges
		Three Months Ended				Six Months Ended
Derivatives not designated as hedging instruments	Location	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022

Foreign exchange	Foreign currency loss/(gain)	$	(2,036)	$	35,025	$	(1,236)	$	42,492
Foreign exchange	Net sales	(306)		732		(977)		890
Foreign exchange	Cost of sales and operating expenses	(103)		(503)		(120)		(758)
Foreign exchange	Selling, general and administrative expenses	(2,673)		3,937		(4,058)		(2,587)
Corn options and futures	Net sales	1,111		850		1,382		(1,286)
Corn options and futures	Cost of sales and operating expenses	(2,191)		(2,384)		(2,608)		3,169


Heating Oil swaps and options	Selling, general and administrative expenses	—		—		49		—
Soybean meal	Net sales	525		—		308		—

Total		$	(5,673)	$	37,657	$	(7,260)	$	41,920

Loss or (Gain) Recognized in Income on Derivatives Not Designated as Hedges
Three Months Ended Nine Months Ended
Derivatives not designated as hedging instruments Location September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016

Foreign Exchange Foreign currency loss/(gain) $ 3,142
$ 1,871
$ 12,418
$ 5,954
Foreign Exchange Selling, general and administrative expense (2,118 ) (786 ) (3,107 ) (7,565 )
Corn options and futures Net sales 165
267
125
612
Corn options and futures Cost of sales and operating expenses (1,566 ) (997 ) (1,250 ) (1,610 )
Heating Oil swaps and options Net sales 492
323
492
476
Soybean Meal Net sales (131 ) —
(412 ) 7
Soybean Oil Net sales —
—
45
—
Total $ (16 ) $ 678
$ 8,311
$ (2,126 )

At ~~September 30, 2017~~,July 1, 2023, the Company had forward purchase agreements in place for purchases of approximately ~~$58.6~~$186.4 million of natural gas and diesel fuel. ~~These forward purchase agreements have no net settlement provisions and the~~The Company intends to take physical delivery of the ~~underlying product. Accordingly,~~commodities under the forward purchase agreements and accordingly, these contracts are not subject to the requirements of fair value accounting because they qualify ~~and the Company has elected to account for these~~ as normal ~~purchases as defined in the FASB authoritative guidance.~~purchases.

~~(14)~~ (16) Fair Value Measurements

FASB authoritative guidance defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The following table presents the Company’s financial instruments that are measured at fair value on a recurring and nonrecurring basis as of ~~September 30, 2017~~July 1, 2023 and are categorized using the fair value hierarchy under FASB authoritative guidance. The fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value.


			Fair Value Measurements at July 1, 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)
Assets
Derivative instruments	$	56,124	$	—	$	56,124	$	—
Total Assets	$	56,124	$	—	$	56,124	$	—

Liabilities
Derivative instruments	$	14,155	$	—	$	14,155	$	—
Contingent consideration	87,329		—		—		87,329
6% Senior notes	974,300		—		974,300		—
5.25% Senior notes	482,500		—		482,500		—
3.625% Senior notes	548,045		—		548,045		—
Term loan A-1	399,000		—		399,000		—
Term loan A-2	485,063		—		485,063		—
Term loan A-3	298,500		—		298,500		—
Term loan A-4	494,391		—		494,391		—
Term loan B	200,000		—		200,000		—
Revolver debt	484,542		—		484,542		—
Total Liabilities	$	4,467,825	$	—	$	4,380,496	$	87,329


			Fair Value Measurements at December 31, 2022 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)
Assets
Derivative instruments	$	20,324	$	—	$	20,324	$	—
Total Assets	$	20,324	$	—	$	20,324	$	—

Liabilities
Derivative instruments	$	5,406	$	—	$	5,406	$	—
Contingent consideration	169,903		—		—		169,903
6% Senior notes	977,200		—		977,200		—
5.25% Senior notes	485,700		—		485,700		—
3.625% Senior notes	533,155		—		533,155		—
Term loan A-1	398,000		—		398,000		—
Term loan A-2	488,813		—		488,813		—
Term loan B	199,000		—		199,000		—
Revolver debt	133,003		—		133,003		—
Total Liabilities	$	3,390,180	$	—	$	3,220,277	$	169,903

Fair Value Measurements at September 30, 2017 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)
Assets:
Derivative instruments $ 5,448
$ —
$ 5,448
$ —
Total Assets $ 5,448
$ —
$ 5,448
$ —

Liabilities:
Derivative instruments $ 1,088
$ —
$ 1,088
$ —
5.375% Senior notes 517,500
—
517,500
—
4.75% Senior notes 637,213
—
637,213
—
Term loan A 108,323
—
108,323
—
Term loan B 544,541
—
544,541
—
Total Liabilities $ 1,808,665
$ —
$ 1,808,665
$ —

Fair Value Measurements at December 31, 2016 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)
Assets:
Derivative instruments $ 13,325
$ —
$ 13,325
$ —
Total Assets $ 13,325
$ —
$ 13,325
$ —

Liabilities:
Derivative instruments $ 730
$ —
$ 730
$ —
5.375% Senior notes 520,300
—
520,300
—
4.75% Senior notes 575,111
—
575,111
—
Term loan A 120,403
—
120,403
—
Term loan B 593,347
—
593,347
—
Revolver debt 5,201
—
5,201
—
Total Liabilities $ 1,815,092
$ —
$ 1,815,092
$ —

Derivative assets and liabilities consist of the Company’s ~~soybean meal contracts, natural gas contracts,~~ corn option and future contracts, ~~and~~ foreign currency forward and option contracts, soybean meal forward contracts and interest rate swap contracts which ~~represents~~represent the difference

between observable market rates of commonly quoted intervals for similar assets and liabilities in active markets and the fixed swap rate considering the instruments term, notional amount and credit risk. See Note 1315 (Derivatives) to the Company's Consolidated Financial Statements included herein for ~~breakdown by instrument type.~~discussion on the Company's derivatives.

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 and as such have been excluded from the table above. ~~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.~~

The fair value of the senior notes, term loan A,A-1, term loan A-2, term loan A-3, term loan A-4, term loan B and revolver debt is based on market quotation from third-party banks. The carrying amount of the Company's other debt is not deemed to be significantly different from the fair value and all other instruments have been recorded at fair value.

The fair value measurement of the contingent consideration liability uses significant unobservable inputs (level 3). The changes in contingent consideration are due to the following:


~~(15)~~(in thousands of dollars)	~~Contingencies~~ Contingent Consideration
Balance as of December 31, 2022	$	169,903
Out-of-period correction (1)	(85,144)
Total included in earnings during period	(5,443)
Exchange rate changes	8,013
Balance as of July 1, 2023	$	87,329

(17) Restructuring and Asset Impairment Charges

In December 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. In addition to charges incurred in fiscal 2022, the Company incurred additional restructuring charges in the first six months of fiscal 2023 in the Food Segment for employee termination and retention costs of approximately $5.3 million. In addition, the Company incurred approximately $0.1 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 location in Europe.

The Company is a party to various lawsuits, claims and loss contingencies arising in the ordinary course of its business, including insured worker's compensation, auto, and general liability claims, assertions by certain regulatory and governmental agencies related to permitting requirements ~~and/or~~and environmental matters, including air, wastewater and storm water discharges from the Company’s processing facilities, litigation involving tort, contract, statutory, labor, employment, and other claims, and tax matters.

The Company’s workers compensation, auto and general liability policies contain significant deductibles or self-insured retentions. The Company estimates and accrues its expected ultimate claim costs related to accidents occurring during each fiscal year under these insurance policies and carries this accrual as a reserve until these claims are paid by the Company.

As a result of the matters discussed above, the Company has established loss reserves for insurance, environmental, litigation and tax contingencies. At ~~September 30, 2017~~July 1, 2023 and December 31, ~~2016~~,2022, the reserves for insurance, environmental, litigation and tax contingencies reflected on the balance sheet in accrued expenses and other non-current liabilities ~~were~~was approximately ~~$54.9~~$95.9 million and ~~$51.9~~$92.1 million, respectively. The Company has insurance recovery receivables reflected on the balance sheet in other current assets and other assets of approximately ~~$15.9~~$36.0 million as of ~~September 30, 2017~~July 1, 2023 and December 31, ~~2016,~~2022, 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 ~~Company)~~Corporation) is considered a potentially responsible party (a “PRP”) with respect to alleged contamination in the lower 17-mile area of the Passaic River ~~area~~(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 a former plant ~~site~~sites located in Newark and Kearny, New Jersey by The Standard Tallow ~~Company,~~Corporation, an entity that the Company acquired in 1996. In the letter, EPA requested that the Company join a group of other parties in funding a remedial investigation and feasibility study at the site. As of the date of this report, the Company has not agreed to participate in the funding group. In March 2016, the Company received another letter from the EPA notifying the Company that it had issued a Record of Decision (the “ROD”) selecting a remedy for the lower 8.3 miles of the ~~lower~~Lower Passaic River area at an estimated cost of $1.38 billion. The EPA letter ~~makes~~made no demand on the Company and ~~lays~~laid out a framework for remedial design/remedial action implementation inunder which the EPA ~~will~~would first seek funding from major PRPs. The letter ~~indicates~~indicated that the EPA ~~has~~had sent the letter to over 100 parties, which include large chemical and refining companies, manufacturing companies, foundries, plastic companies, pharmaceutical companies and food and consumer product companies. The Company asserts that it is not responsible for any liabilities of its former subsidiary The Standard Tallow Corporation, which was legally dissolved in 2000, and that, in any event, the Standard Tallow Corporation did not discharge any of the eight contaminants of concern identified in the ROD (the “COCs”). Subsequently, the EPA conducted a settlement analysis using a third-party allocator and offered early cash out settlements to those PRPs for whom the third-party allocator determined did not discharge any of the COCs. The Company participated in this allocation process, and in November 2019, received a cash out settlement offer from the EPA in the amount of $0.6 million ($0.3 million for each of the former plant sites in question) for liabilities relating to the lower 8.3 miles of the Lower Passaic River area. The Company accepted this settlement offer, and the settlement became effective on April 16, 2021 following the completion of the EPA's administrative approval process. In September 2021, the EPA released a ROD selecting an interim remedy for the upper nine miles of the Lower Passaic River at an expected additional cost of $441 million. In October 2022, the Company, along with other settling defendants, entered into a Consent Decree with the EPA pursuant to which the Company paid $0.3 million to settle liabilities for both of the former plant sites in question related to the upper nine miles of the Lower Passaic River.The Company paid this amount into escrow, as the settlement is subject to the EPA’s administrative approval process, which includes publication, a public comment period and court approval. On September 30, 2016, Occidental Chemical Corporation (“OCC”) entered into an agreement with the EPA to perform the remedial design for the cleanup plan for the lower 8.3 miles of the Lower Passaic River. On June 30, 2018, OCC filed a complaint in the United States District Court for the District of New Jersey against over 100 companies, including the Company, seeking cost recovery or contribution for costs under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) relating to various investigations and cleanups OCC has conducted or is conducting in connection with the Lower Passaic River. According to the complaint, OCC has incurred or is incurring costs which include the estimated cost to complete the remedial design for the cleanup plan for the lower 8.3 miles of the Lower Passaic River. OCC is also seeking a declaratory judgment to hold the defendants liable for their proper shares of future response costs, including the remedial action for the lower 8.3 miles of the Lower Passaic River. The Company, along with 40 of the other defendants, had previously received a release from OCC of its CERCLA contribution claim of $165 million associated with the costs to design the remedy for the lower 8.3 miles of the Lower Passaic River. Furthermore, the Company's settlements with the EPA described above could preclude certain of the claims alleged by OCC against the Company. The Company's ultimate liability, if any, for investigatory costs, remedial costs and/or natural resource damages in connection with the ~~lower~~Lower Passaic River area cannot be determined at this time; however, as of the date of this report, the Company has found no definitive evidence that the former Standard Tallow ~~Company~~Corporation plant ~~site~~sites contributed any of the ~~primary contaminants of concern~~COCs to the Passaic River and, therefore, there is nothing that leads the Company to believe that this matter will have a material effect on the Company's financial position, results of operations or cash flows.

~~Fresno Facility Permit Issue.~~ ~~The Company has been named as a defendant and a real party in interest in a lawsuit filed on April 9, 2012 in the Superior Court of the State of California, Fresno County, styled~~ ~~Concerned Citizens of West Fresno vs. Darling International Inc.~~ The complaint, as subsequently amended, alleges that the Company's Fresno facility is operating without a proper use permit and seeks, among other things, injunctive relief. The complaint had at one time also alleged that the Company's Fresno facility constitutes a continuing private and public nuisance, but the plaintiff has since amended the complaint to drop these allegations. The City of Fresno was also named as a defendant in the original complaint but has since had a judgment entered in its favor and is no longer a defendant in the lawsuit; however, in December 2013 the City of Fresno filed a motion to intervene as a plaintiff in this matter. The Superior Court heard the motion on February 4, 2014, and entered an order on February 18, 2014 denying the motion. Rendering operations have been conducted on the site since 1955, and the Company believes that it possesses all of the required federal, state and local permits to continue to operate the facility in the manner currently conducted and that its operations do not constitute a private or public nuisance. Accordingly, the Company intends to defend itself vigorously in this matter. Discovery has begun and this matter was scheduled for trial in July 2014; however, the parties have agreed to stay the litigation while they participate in a mediation process, which remains ongoing. In January 2017, the Company entered into a non-binding letter of intent with the City of Fresno pursuant to which the City and the Company will work toward the execution of a definitive agreement to relocate the facility to a different location in Fresno. Whether an agreement to relocate the facility ultimately gets executed is subject to the Company’s receipt of certain incentives and an agreement by the Concerned Citizens of West Fresno to settle and dismiss the aforementioned litigation. While management cannot predict the ultimate outcome of this matter, management does not believe the outcome will have a material effect on the Company's financial condition, results of operations or cash flows.

(19) Business Segments

The Company sells its products domestically and internationally, ~~and operates~~operating within three industry segments: Feed Ingredients, Food Ingredients and Fuel Ingredients. The measure of segment ~~profit~~ income/(loss) includes all revenues, operating expenses (excluding certain amortization of intangibles), and selling, general and administrative expenses incurred at all operating locations and excludes ~~general~~ corporate ~~expenses.~~activities.

Included in corporate activities are general corporate expenses and the amortization of certain intangibles. Assets of corporate activities include cash, unallocated prepaid expenses, deferred tax assets, prepaid pension, and miscellaneous other assets.

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, ~~and food residuals collection businesses, the Rothsay ingredients business,~~Darling Canada, and the ingredients and specialty products businesses conducted by Darling Ingredients International under the Sonac ~~name~~and FASA names (proteins, fats, and ~~plasma~~blood products) and (ii) the Company's bakery residuals business. Feed Ingredients operations process animal by-products and used cooking oil into fats, ~~protein~~proteins and hides.

Food Ingredients consists principally of (i) the ~~gelatin and~~ collagen ~~hydrolysates~~ business conducted by Darling Ingredients International under the Rousselot ~~name,~~and Gelnex names, (ii) the natural casings and meat-by-products business conducted by Darling Ingredients International under the CTH name and (iii) certain specialty products businesses conducted by Darling Ingredients International under the Sonac name.

The Company's Fuel Ingredients segment consists of (i) the Company's ~~biofuel business conducted under~~investment in the ~~Dar Pro®~~DGD Joint Venture and ~~Rothsay names~~ (ii) the bioenergy business conducted by Darling Ingredients International under the Ecoson and Rendac ~~names and (iii) the Company's investment in the DGD Joint Venture.~~names.

Business Segments (in thousands):


	Feed Ingredients		Food Ingredients		Fuel Ingredients		Corporate		Total
Three Months Ended July 1, 2023
Net Sales	$	1,141,661	$	476,093	$	139,867	$	—	$	1,757,621
Cost of sales and operating expenses	876,413		371,095		112,194		—		1,359,702
Gross Margin	265,248		104,998		27,673		—		397,919

Loss/(gain) on sale of assets	322		2		(65)		—		259
Selling, general and administrative expenses	77,406		33,684		4,971		20,690		136,751
Restructuring and asset impairment charges	—		896		—		—		896
Acquisition and integration costs	—		—		—		1,706		1,706
Change in fair value of contingent consideration	(7,499)		—		—		—		(7,499)
Depreciation and amortization	82,575		28,445		8,567		2,499		122,086
Equity in net income of Diamond Green Diesel	—		—		212,964		—		212,964
Segment operating income/(loss)	112,444		41,971		227,164		(24,895)		356,684

Equity in net income of other unconsolidated subsidiaries	1,849		—		—		—		1,849
Segment income/(loss)	114,293		41,971		227,164		(24,895)		358,533

Total other expense									(62,624)
Income before income taxes									$	295,909

The Company extends payment terms to its customers based on commercially acceptable practices. The term between invoicing and payment due date is not significant. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring finished products or performing services, which is generally based on an executed agreement or purchase order.

Most of the Company's products are shipped based on the customer specifications. Customer returns are infrequent and not material to the Company. Adjustments to net sales for sales deductions are generally recognized in the same period as the sale or when known. Customers in certain industries or countries may be required to prepay prior to shipment in order to maintain payment protection. These represent short-term prepayment from customers and are not material to the Company. The Company elected to treat shipping and handling as fulfillment costs, which will result in billed freight recorded in cost of sales and netted against freight costs. Sales, value-add, and other taxes collected concurrently with revenue-producing activities are excluded from revenue and booked on a net basis.

The following tables present the Company revenues disaggregated by geographic area and major product types by reportable segment for the three and six months ended July 1, 2023 and July 2, 2022 (in thousands):

Feed Ingredients Food Ingredients Fuel Ingredients Corporate Total
Nine Months Ended September 30, 2017
Net Sales $ 1,677,286
$ 847,897
$ 188,918
$ —
$ 2,714,101
Cost of sales and operating expenses 1,304,454
674,991
154,974
—
2,134,419
Gross Margin 372,832
172,906
33,944
—
579,682

Selling, general and administrative expense 134,444
77,480
5,732
38,933
256,589
Depreciation and amortization 134,933
55,291
22,472
8,610
221,306
Segment operating income/(loss) 103,455
40,135
5,740
(47,543 ) 101,787

Equity in net income of unconsolidated subsidiaries 763
—
15,906
—
16,669
Segment income/(loss) 104,218
40,135
21,646
(47,543 ) 118,456

Total other expense (76,190 )
Income before income taxes $ 42,266

Segment assets at September 30, 2017 $ 2,599,196
$ 1,497,310
$ 682,868
$ 155,148
$ 4,934,522


	Three Months Ended July 1, 2023
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	946,100	$	101,388	$	—	$	1,047,488
Europe	96,064		227,193		139,867		463,124
China	6,160		71,414		—		77,574
South America	90,293		54,493		—		144,786
Other	3,044		21,605		—		24,649
Net sales	$	1,141,661	$	476,093	$	139,867	$	1,757,621

Major product types
Fats	$	405,287	$	38,207	$	—	$	443,494
Used cooking oil	146,275		—		—		146,275
Proteins	435,956		—		—		435,956
Bakery	67,263		—		—		67,263
Other rendering	70,265		—		—		70,265
Food ingredients	—		412,307		—		412,307
Bioenergy	—		—		139,867		139,867

Other	16,615		25,579		—		42,194
Net sales	$	1,141,661	$	476,093	$	139,867	$	1,757,621


	Six Months Ended July 1, 2023
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	1,971,857	$	200,739	$	—	$	2,172,596
Europe	206,316		417,466		297,153		920,935
China	11,503		148,785		—		160,288
South America	183,832		65,277		—		249,109
Other	5,647		40,218		—		45,865
Net sales	$	2,379,155	$	872,485	$	297,153	$	3,548,793

Major product types
Fats	$	895,605	$	83,195	$	—	$	978,800
Used cooking oil	283,968		—		—		283,968
Proteins	883,103		—		—		883,103
Bakery	142,196		—		—		142,196
Other rendering	140,079		—		—		140,079
Food ingredients	—		731,448		—		731,448
Bioenergy	—		—		297,153		297,153

Other	34,204		57,842		—		92,046
Net sales	$	2,379,155	$	872,485	$	297,153	$	3,548,793

Feed Ingredients Food Ingredients Fuel Ingredients Corporate Total
Nine Months Ended October 1, 2016
Net Sales $ 1,550,539
$ 782,014
$ 178,285
$ —
$ 2,510,838
Cost of sales and operating expenses 1,202,404
611,151
133,620
—
1,947,175
Gross Margin 348,135
170,863
44,665
—
563,663

Selling, general and administrative expense 127,513
69,566
4,986
32,070
234,135
Acquisition and integration costs —
—
—
401
401
Depreciation and amortization 130,110
51,823
20,999
9,508
212,440
Segment operating income/(loss) 90,512
49,474
18,680
(41,979 ) 116,687

Equity in net income of unconsolidated subsidiaries 290
—
37,343
—
37,633
Segment income/(loss) 90,802
49,474
56,023
(41,979 ) 154,320

Total other expense (79,674 )
Income before income taxes $ 74,646

Segment assets at December 31, 2016 $ 2,464,509
$ 1,414,409
$ 657,637
$ 161,462
$ 4,698,017


	Three Months Ended July 2, 2022
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	1,028,244	$	91,381	$	—	$	1,119,625
Europe	132,247		186,865		110,660		429,772
China	6,932		64,326		—		71,258
South America	—		12,868		—		12,868
Other	2,924		13,741		—		16,665
Net sales	$	1,170,347	$	369,181	$	110,660	$	1,650,188

Major product types
Fats	$	498,914	$	53,178	$	—	$	552,092
Used cooking oil	152,737		—		—		152,737
Proteins	351,125		—		—		351,125
Bakery	89,593		—		—		89,593
Other rendering	64,123		—		—		64,123
Food ingredients	—		280,435		—		280,435
Bioenergy	—		—		110,660		110,660

Other	13,855		35,568		—		49,423
Net sales	$	1,170,347	$	369,181	$	110,660	$	1,650,188


	Six Months Ended July 2, 2022
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	1,784,082	$	175,281	$	—	$	1,959,363
Europe	246,710		368,875		242,742		858,327
China	13,568		130,633		—		144,201
South America	—		21,364		—		21,364
Other	5,425		27,842		—		33,267
Net sales	$	2,049,785	$	723,995	$	242,742	$	3,016,522

Major product types
Fats	$	867,308	$	105,442	$	—	$	972,750
Used cooking oil	247,633		—		—		247,633
Proteins	621,312		—		—		621,312
Bakery	168,104		—		—		168,104
Other rendering	121,667		—		—		121,667
Food ingredients	—		550,951		—		550,951
Bioenergy	—		—		242,742		242,742

Other	23,761		67,602		—		91,363
Net sales	$	2,049,785	$	723,995	$	242,742	$	3,016,522

Long-Term Performance Obligations. The Company from time to time enters into long-term contracts to supply certain volumes of finished products to certain customers. Revenue recognized to date in 2023 under these long-term supply contracts was approximately $92.3 million, with the remaining performance obligations to be recognized in future periods (generally four years) of approximately $929.1 million.

(21) Related Party Transactions

Raw Material Agreement

The Company entered into a Raw Material Agreement with the DGD Joint Venture in May 2011 pursuant to which the Company will offer to supply certain animal fats and used cooking oil at market prices, ~~up to the DGD Joint Venture's full operational requirement of feedstock,~~ but the DGD Joint Venture is not obligated to purchase the raw material offered by the Company. Additionally, the Company may offer other feedstocks to the DGD Joint Venture, such as inedible corn oil, purchased on a resale basis. For the three months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016,~~July 2, 2022, the Company ~~has~~ recorded sales to the DGD Joint Venture of approximately ~~$44.5~~ $325.0

million and ~~$42.4~~$295.7 million, respectively. For the ~~nine~~six months ended July 1, ~~2017~~2023 and July 2, ~~2016,~~2022, the Company ~~has~~ recorded sales to the DGD Joint Venture of approximately ~~$122.6~~$663.6 million and ~~$109.0~~$510.1 million, respectively. At ~~September 30, 2017~~July 1, 2023 and December 31, ~~2016,~~2022, the Company ~~has $6.9~~had $33.3 million and ~~$6.3~~$116.9 million in outstanding receivables due from the DGD Joint Venture, respectively. In addition, the Company has eliminated approximately ~~$6.1~~$38.4 million and $38.5 million of additional sales for the ~~three~~six months ended ~~September 30, 2017~~July 1, 2023 and July 2, 2022, respectively to defer the Company's portion of profit of approximately ~~$1.1~~$8.1 million and $10.1 million on those sales relating to inventory assets remaining on the DGD Joint Venture's balance sheet at ~~September 30, 2017.~~July 1, 2023 and July 2, 2022, respectively.

Revolving Loan Agreement

On ~~February 23, 2015,~~May 1, 2019, Darling, through its wholly owned subsidiary Darling Green Energy LLC, (“Darling Green”), and ~~a third party~~ 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 ~~“DGD~~“2019 DGD Loan Agreement”) with the DGD Joint Venture, ~~Opco. The~~pursuant to which the DGD Lenders ~~have~~ committed to making loans available to ~~Opco~~the DGD Joint Venture in the total amount of ~~$10.0~~$50.0 million, with each lender committed to ~~$5.0~~$25.0 million of the total commitment. Any borrowings by ~~Opco~~the DGD Joint Venture under the 2019 DGD Loan Agreement ~~are~~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%. ~~The~~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 ~~matures~~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 September 2022 and again 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. The Company received interest from the DGD Joint Venture for the three months ended July 1, 2023 and July 2, 2022 of approximately $0.1 million and $0.2 million, respectively and received interest from the DGD Joint Venture for the six months ended July 1, 2023 and July 2, 2022 of approximately $0.6 million and $0.4 million, respectively. As of July 1, 2023 and December 31, ~~2017, unless extended by agreement of the parties. As of September 30, 2017, no amounts are~~2022, zero and $25.0 million, respectively, was owed to Darling Green under the 2023 DGD Loan ~~Agreement.~~Agreement and the 2019 DGD Loan Agreement, as applicable. This note receivable amount is included in other current assets on the balance sheet and is included in investing activities on the cash flow statement.

Guarantee Agreements

In February 2020, in connection with the DGD Joint Venture’s expansion project at its Norco, LA facility, it entered into two agreements (the “IMTT Terminaling Agreements”) with International-Matex Tank Terminals (“IMTT”), pursuant to which the DGD Joint Venture will move raw material and finished product to and from the IMTT terminal facility by pipeline, thereby providing better logistical capabilities. As a condition to entering into the IMTT Terminaling Agreements, IMTT required that the Company and Valero guarantee their proportionate share, up to a maximum of approximately $50 million each, of the DGD Joint Venture’s obligations under the IMTT Terminaling Agreements (the “IMTT Guarantee”), subject to the conditions provided for in the IMTT Terminaling Agreements. The Company has not recorded any liability as a result of the IMTT Guarantee, as the Company believes the likelihood of having to make any payments under the IMTT Guarantee is remote.

In April 2021, in connection with the DGD Joint Venture’s expansion project at its Port Arthur, TX facility, it entered into two 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, GTL required that the Company and Valero guarantee their proportionate share, up to a maximum of approximately $160 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 20-year 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.

(22) Cash Flow Information

The following table sets forth supplemental cash flow information and non-cash transactions (in thousands):


	Six Months Ended
	July 1, 2023		July 2, 2022
Supplemental disclosure of cash flow information:
Change in accrued capital expenditures	$	(6,375)	$	(2,947)
Cash paid during the period for:
Interest, net of capitalized interest	$	105,420	$	33,791
Income taxes, net of refunds	$	87,966	$	72,377
Non-cash operating activities
Operating lease right of use asset obtained in exchange for new lease liabilities	$	46,549	$	41,554
Non-cash financing activities
Debt issued for assets	$	(50)	$	1,005

(23) New Accounting Pronouncements

~~In August 2017, the FASB issued ASU No. 2017-12, Targeted Improvement to Accounting for Hedging Activities. This ASU amends Topic 815,~~ ~~Derivatives and Hedging~~, which is intended to more closely align hedge accounting with companies' risk management strategies and simplify the application of hedge accounting. The guidance includes certain targeted improvements to ease the operational burden of applying hedge accounting. The ASU is effective for fiscal years beginning after December 15, 2018 and for interim periods therein with early adoption permitted. The Company ~~will be required to apply the guidance on a cumulative-effect basis with adjustment to retained earnings as of the beginning of the fiscal year of adoption. The Company is~~does not believe that any recently issued, but not yet effective, accounting standards if currently ~~evaluating the impact of this standard.~~

~~In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. This ASU amends Topic 715,~~ ~~Compensation - Retirement Benefits~~, which requires that an employer report the service cost component of net benefit costs to be disaggregated from all other components and reported in the same line item or items as other compensation costs. The other components of net benefit cost are required to be presented in the income statement separately from the service cost. The ASU is effective for fiscal years beginning after December 15, 2017 and for interim periods therein. The initial adoption of this ASU is not expected toadopted would have a material ~~impact~~effect on the ~~Company's~~accompanying consolidated financial statements.

~~In January 2017, the~~ ~~FASB~~ ~~issued~~ ~~ASU No. 2017-04 Simplifying the Test for Goodwill Impairment. This ASU amends Topic 350,~~ ~~Intangibles-Goodwill and Other~~, which will simplify the goodwill impairment calculation by eliminating Step 2 from the current goodwill impairment test. Under the new guidance, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of the assets and liabilities as if that reporting unit had been acquired in a business combination. This ASU is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. ~~The initial adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.~~

~~In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business. This ASU amends Topic 805,~~ ~~Business Combinations~~, which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. This ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. In order to be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. This ASU is effective for fiscal year beginning after December 15, 2017 and interim periods within those fiscal years. ~~The initial adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.~~

~~In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash. This ASU amends Topic 230,~~ ~~Statement of Cash Flows~~, which includes new guidance on the classification and presentation of restricted cash in the statement of cash flows in order to eliminate the discrepancies that currently exist in how companies present these changes. This ASU requires restricted cash to be included with cash and cash equivalents when explaining the changes in cash in the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. ~~The initial adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.~~

~~In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments. This ASU amends Topic 230,~~ ~~Statement of Cash Flows~~, which is intended to reduce the existing diversity in practice for classifying various types of cash flows including debt extinguishment costs, zero-coupon debt, contingent consideration related to business combinations, insurance proceeds, equity method distributions and beneficial interest in securitizations. This ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. ~~The initial adoption of this ASU is not expected to have a material impact on the Company's consolidated financial statements.~~

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Under the new ASU, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee‘s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under the new guidance lessor accounting is largely unchanged. The new lease guidance simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees (for capital and operating leases) and lessors (for sales-type, direct financing, and operating leases) must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. This ASU is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company is assessing the impact of this new standard, specifically on its consolidated balance sheets, and does not expect adoption to significantly change the recognition, measurement or presentation of lease expense within the consolidated statements of operations or cash flows.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), which will supersede nearly all existing revenue recognition guidance under GAAP. The new ASU introduces a new five-step revenue recognition model in which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In addition, this ASU requires disclosures sufficient to enable the users to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, including qualitative and quantitative disclosures about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. In July 2015, the FASB deferred the elective date of the standard by one year. This ASU allows for either full retrospective or modified retrospective adoption and will become effective for the Company for the fiscal years beginning after December 15, 2017. The Company has completed its assessment of this ASU to identify any potential changes in the amount and timing of revenue recognition for its current contracts and the expected impact on the Company's business processes, systems and controls. Based on this assessment, the Company has elected to adopt this standard on a modified retrospective basis beginning in fiscal 2018. The adoption will not change the timing of revenues as the Company's revenues have been determined to be recognized at a point in time and not over time. The Company has elected not to capitalize contract fulfillment costs as the recovery of such costs are for a period of less than one year's time and are not material to the Company. Additionally, the Company has elected to treat shipping and handling as fulfillment costs and to report sales taxes net, which will result in a reduction of revenue and a reduction of cost of sales for fiscal 2016 of approximately $155.1 million and expects the reduction of revenue and

cost of sales in fiscal 2017 to be similar to fiscal 2016 with no impact on overall earnings. The Company is currently reviewing the expanded incremental disclosures and the disaggregation of revenues disclosures as required under ASU No. 2014-09.

~~(19)~~ ~~Guarantor Financial Information~~

The Company's 5.375% Notes and 4.75% Notes (see Note 8) are guaranteed on a senior unsecured basis by the following Notes Guarantors, each of which is a 100% directly or indirectly owned subsidiary of Darling and which constitute all of Darling's existing restricted subsidiaries that are Credit Agreement Guarantors (other than Darling's foreign subsidiaries, Darling Global Finance B.V., which issued the 4.75% Notes and is discussed further below, or any receivables entity): Darling National, Griffin and its subsidiary Craig Protein, Darling AWS LLC, Terra Holding Company, Darling Global Holdings Inc., Darling Northstar LLC, TRS, EV Acquisition, Inc., Rousselot Inc., Rousselot Dubuque Inc., Sonac USA LLC and Rousselot Peabody Inc. In addition, the 4.75% Notes, which were issued by Darling Global Finance B.V., a wholly-owned indirect subsidiary of Darling, are guaranteed on a senior unsecured basis by Darling. The Notes Guarantors, and Darling in the case of the 4.75% Notes, fully and unconditionally guaranteed the 5.375% Notes and 4.75% Notes on a joint and several basis. The following financial statements present condensed consolidated financial data for (i) Darling, (ii) the combined Notes Guarantors, (iii) the combined other subsidiaries of the Company that did not guarantee the 5.375% Notes or the 4.75% Notes (the “Non-guarantors”), and (iv) eliminations necessary to arrive at the Company's consolidated financial statements, which include condensed consolidated balance sheets as of September 30, 2017 and December 31, 2016, and the condensed consolidated statements of operations, the condensed consolidated statements of comprehensive income/(loss) and the condensed consolidated statements of cash flows for the ~~three and nine months~~ ~~months ended~~ ~~September 30, 2017~~ ~~and~~ ~~October 1, 2016~~. Separate financial information is not presented for Darling Global Finance B.V. since it was formed as a special purpose finance subsidiary for the purpose of issuing the 4.75% Notes and therefore does not have any substantial operations or assets.

Parent Guarantors Non-guarantors Eliminations Consolidated
ASSETS
Cash and cash equivalents $ 1,258
$ 2,694
$ 106,194
$ —
$ 110,146
Restricted cash 103
—
179
—
282
Accounts receivable 35,722
242,553
386,776
(250,104 ) 414,947
Inventories 17,755
90,993
266,350
—
375,098
Income taxes refundable 1,914
—
3,456
—
5,370
Prepaid expenses 14,201
3,147
21,924
—
39,272
Other current assets 5,564
1,280
15,128
(4,871 ) 17,101
Total current assets 76,517
340,667
800,007
(254,975 ) 962,216
Investment in subsidiaries 4,387,119
1,152,677
849,848
(6,389,644 ) —
Property, plant and equipment, net 265,365
506,393
850,109
—
1,621,867
Intangible assets, net 18,068
267,541
412,299
—
697,908
Goodwill 21,860
551,837
724,569
—
1,298,266
Investment in unconsolidated subsidiaries 4,936
—
285,092
—
290,028
Other assets 32,574
329,178
185,603
(500,337 ) 47,018
Deferred taxes —
—
17,219
—
17,219
$ 4,806,439
$ 3,148,293
$ 4,124,746
$ (7,144,956 ) $ 4,934,522
LIABILITIES AND STOCKHOLDERS’ EQUITY

Current portion of long-term debt $ 116
$ —
$ 22,970
$ (4,871 ) $ 18,215
Accounts payable 253,921
31,824
163,082
(235,235 ) 213,592
Income taxes payable 5,853
373
15,748
—
21,974
Accrued expenses 87,159
28,478
191,715
(14,869 ) 292,483
Total current liabilities 347,049
60,675
393,515
(254,975 ) 546,264
Long-term debt, net of current portion 1,068,926
—
1,165,587
(500,337 ) 1,734,176
Other noncurrent liabilities 58,400
—
37,954
—
96,354
Deferred income taxes 136,430
—
216,611
—
353,041
Total liabilities 1,610,805
60,675
1,813,667
(755,312 ) 2,729,835
Total stockholders’ equity 3,195,634
3,087,618
2,311,079
(6,389,644 ) 2,204,687
$ 4,806,439
$ 3,148,293
$ 4,124,746
$ (7,144,956 ) $ 4,934,522

~~Condensed Consolidated Statements of Operations~~

~~For the nine months ended September 30, 2017~~

~~Condensed Consolidated Statements of Operations~~

~~Condensed Consolidated Statements of Comprehensive Income/(Loss)~~

~~Condensed Consolidated Statements of Cash Flows~~

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~The following~~ Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below under the heading “Forward Looking Statements” and elsewhere in this report, and under the heading “Risk Factors” in Part I, Item 1A in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016~~,2022, filed with the SEC on February ~~28, 2017~~27, 2023 and in the Company's other public filings with the SEC.

The following discussion should be read in conjunction with the unaudited consolidated financial statements and related notes thereto contained in this report.

~~The Company~~Darling Ingredients Inc. (“Darling”, and together with its subsidiaries, the “Company” or “we,” “us” or “our”) is a global developer and producer of sustainable natural ingredients from edible and inedible bio-nutrients, creating a wide range of ingredients and customized specialty solutions for customers in the pharmaceutical, food, pet food, feed, industrial, fuel, bioenergy and fertilizer industries. With operations on five continents, the Company collects and transforms all aspects of animal by-product streams into useable and specialty ingredients, such as ~~gelatin,~~collagen, edible fats, feed-grade fats, animal proteins and meals, plasma, pet food ingredients, organic fertilizers, yellow grease, fuel feedstocks, green energy, natural casings and hides. The Company also recovers and converts ~~used~~recycled oils (used cooking oil and ~~commercial bakery residuals~~animal fats) into valuable feed and ~~fuel~~feedstock and collects and processes residual bakery products into feed ingredients. In addition, the Company provides environmental services, such as grease trap collection and disposal services to food service ~~establishments, environmental services to food processors and sells restaurant cooking oil delivery and collection equipment.~~establishments. The Company sells its products domestically and internationally and operates within three industry segments: Feed Ingredients, Food Ingredients and Fuel Ingredients.

The Feed Ingredients operating segment includes the Company's global activities related to (i) the collection and processing of beef, poultry ~~fish~~ and pork animal by-products in North America, Europe and ~~Europe~~South America into non-food grade oils and protein ~~meals;~~meals, (ii) the collection and processing of bakery residuals in North America into Cookie Meal®, which is predominantly used in poultry and swine ~~rations;~~rations, (iii) the collection and processing of used cooking oil in North America and South America into non-food grade fats, ~~as well as the production and sale of cooking oil collection systems;~~ (iv) the collection and processing of porcine and bovine blood in China, Europe, North America and Australia into blood plasma powder and ~~hemoglobin;~~hemoglobin, (v) the processing of selected portions of slaughtered animals into a variety of meat products for use in pet food in Europe, North America and South America, (vi) the processing of cattle hides and hog skins in North America, ~~and cattle hides in Europe; (vi)~~(vii) the production of organic fertilizers using protein produced from the Company’s animal by-products processing activities in North America and ~~Europe;~~Europe, (viii) the rearing and ~~(vii)~~processing of black soldier fly larvae into specialty proteins for use in animal feed and pet food in North America, and (ix) the provision of grease trap services to food service establishments ~~and environmental services to food processors~~ in North America. Non-food grade oils and fats produced and marketed by the Company are principally sold to third parties to be used as ingredients in animal feed and pet food, as an ingredient for the production of ~~biodiesel~~renewable diesel and ~~renewable diesel,~~biodiesel, or to the oleo-chemical industry to be used as an ingredient in a wide variety of industrial applications. Protein meals, blood plasma powder and hemoglobin produced and marketed by the Company are sold to third parties to be used as ingredients in animal feed, pet food and aquaculture.

The Food Ingredients operating segment includes the Company's global activities related to (i) the purchase and processing of beef and pork bone chips, beef hides, pig skins, and fish skins into ~~gelatin and hydrolyzed~~ collagen in Europe, China, South America and North ~~America;~~America, (ii) the collection and processing of porcine and bovine intestines into natural casings in Europe, China and North ~~America;~~America, (iii) the extraction and processing of porcine mucosa into crude heparin in ~~Europe;~~Europe, (iv) the collection and refining of animal fat into food grade fat in ~~Europe;~~Europe, and (v) the processing of bones to bone chips for the ~~gelatin~~collagen industry and bone ~~ash. Gelatins~~ash in Europe. Collagens produced and marketed by the Company are sold to third parties to be used as ingredients in the pharmaceutical, nutraceutical, food, pet food and technical ~~(i.e.~~(e.g., photographic) industries. Natural casings produced and marketed by the Company are sold to third parties to be used as an ingredient in the production of sausages and other similar food products.

The Fuel Ingredients operating segment includes the Company's global activities related to (i) the ~~conversion~~Company’s share of the results of its equity investment in Diamond Green Diesel Holdings LLC, a joint venture with Valero Energy Corporation (“Valero”) to convert animal fats, ~~and~~ recycled greases, used cooking oil, inedible corn oil, soybean oil, or other feedstocks that become economically and commercially viable into ~~biodiesel~~renewable diesel (“DGD” or the “DGD Joint Venture”) as described in ~~North America;~~Note 3 (Investment in Unconsolidated Subsidiaries) to the Company's Consolidated Financial Statements for the period ended July 1, 2023 included herein, (ii) the conversion of organic sludge and food waste into biogas in ~~Europe;~~

~~renewable diesel as described in Note 7 to the Company's Consolidated Financial Statement for the period ended September 30, 2017 included herein.~~

~~Business~~Economic Conditions and ~~Regulatory Developments~~Uncertainties

We operate globally and have operations in numerous countries. As such, we are exposed to, and impacted by global macroeconomic factors, U.S. and foreign government policies and foreign exchange fluctuations. Global economic conditions continue to be ~~reported~~highly volatile due to, among other things, the conflict in ~~wild fowl~~Ukraine and ~~commercial poultry flocks across Europe, the Middle East, parts of Asia~~its impact on volatility in energy and other commodity prices, inflation, cost and supply chain pressures and availability, and disruption in ~~North America. New confirmed outbreaks of Bird Flu have been confirmed~~banking systems and capital markets. Disturbances in ~~commercial poultry flocks in Asia, Africa~~world financial, credit, commodities and Italy since August 1, 2017 but not in North America or other parts of Europe. On May 2, 2017, the first new cases of porcine epidemic diarrhea virus (“PEDV”) since September 2016 were reported on hog farms in Manitoba, Canada. The disease had spread to 89 commercial hog operations by October 12, 2017. On July 18, 2017,stock markets, including inflationary, deflationary and recessionary conditions and an eleven-year-old cow on an Alabama farm was confirmed positive with atypical bovine spongiform encephalopathy, which is commonly referred to as “mad cow” disease (“BSE”). This was the first such case since 2012 and the fifth case of BSE reportedincrease in the ~~U.S. The last four cases were all~~recent turmoil in the ~~atypical form. Confirmation of atypical BSE will not affect the “negligible BSE risk” status of~~world banking markets, could have a country because the World Organization for Animal Health (“OIE”) recognizes that atypical BSE can occur spontaneously in older cattle. For a more detailed discussion of these and other factors that cannegative impact on the Company’s ~~business and~~ results of ~~operations, see~~operations. Any such disturbances or disruptions may also magnify the ~~Risk Factors discussion~~impact of other risks described in ~~Item 1A of Part I of the Company’s~~this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2022, as filed with the SEC on February 27, 2023.

Prices for our finished products, including those of DGD, may be impacted by worldwide government policies relating to renewable fuels and greenhouse gas emissions (“GHG”). Programs like the National Renewable Fuel Standard Program (“RFS”) and low carbon fuel standards (“LCFS”) (such as in the state of California) and tax credits for biofuels both in the United States and abroad are subject to revision and change which may impact the demand for our finished products. Legal challenges or changes to, a failure to enforce, reductions in the mandated volumes under, or discontinuing or suspension of any of these programs could have a negative impact on our business and results of operations. However, such rules and the regulatory environment are continuing to evolve and change, and we cannot predict the ultimate effect that such changes may have on our business.

There is a growing global concern that carbon dioxide and other GHG in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency of extreme weather and natural disasters. We are subject to physical, operational, transitional and financial risks associated with climate change and global, regional and local weather conditions, as well as legal, regulatory and market responses to climate change. Certain jurisdictions in which we operate have either imposed, or are considering imposing, new or increasingly stringent legal and regulatory requirements to reduce or mitigate the potential effects of climate change, including regulation and reduction of GHG and potential carbon pricing programs. These new or increasingly stringent legal or regulatory requirements could result in significantly increased costs of compliance and additional investments in facilities and equipment, and reduced raw material supplies in areas where these requirements limit or eliminate livestock operations. While we assess climate related regulatory risks as part of our risk management process, we are unable to predict the scope, nature and timing of any new or increasingly stringent environmental laws and regulations and therefore cannot predict the ultimate impact of such laws and regulations on our business or financial results. We continue to monitor existing and proposed laws and regulations in the jurisdictions in which we operate and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such laws or regulations. Furthermore, emerging legislation seeks to regulate corporate ESG practices, including practices related to the causes and impacts of climate change as well as supply chain control and compliance with human rights. These new rules, which apply to all large companies and to listed small and medium-sized enterprises, require companies to report on how sustainability issues (environmental, social, and governance) affect their business and about their own impact on people and the environment. There has also been increased focus from our stakeholders, including consumers, employees and investors, on our ESG practices. We expect that stakeholder expectations with respect to ESG expectations will continue to evolve rapidly, which may necessitate additional resources to monitor, report on, and adjust our operations.

For additional information on risk factors that could impact our results, please refer to “Risk Factors” in Part I, Item 1A of the Company's Form 10-K for the fiscal year ended December 31, 2022, as filed with the SEC on February 27, 2023.

The Company’s Fuel Ingredients segment converts fats into renewable diesel, organic sludge and food waste into biogas, and fallen stock into low-grade energy sources. The Company's gross margin and profitability in this segment are impacted by world energy prices for oil, electricity and natural ~~gas.~~gas, global feed stock prices and governmental subsidies.

The reporting currency for the Company's financial statements is the U.S. dollar. The Company operates in over 15 countries and therefore, certain of the Company's assets, liabilities, revenues and expenses are denominated in functional currencies other than the U.S. dollar, primarily in the ~~euro,~~Euro, Brazilian real, Chinese renminbi, Canadian dollar ~~Argentine peso, Japanese yen~~ and Polish zloty. To prepare the Company's consolidated financial statements, assets, liabilities, revenues, and expenses must be translated into U.S. dollars at the applicable exchange rate. As a result, increases or decreases in the value of the U.S. dollar against these other currencies will affect the amount of these items recorded in the Company's consolidated

financial statements, even if their value has not changed in the functional currency. This could have a significant impact on the Company's results, if such increase or decrease in the value of the U.S. dollar relative to these other currencies is substantial.

The Company monitors the performance of its business segments using key financial metrics such as results of operations, non-GAAP measurements (Adjusted EBITDA), segment operating income, raw material processed, gross margin percentage, foreign currency translation, and corporate activities. The Company’s operating results can vary significantly due to changes in factors such as the fluctuation in energy prices, weather conditions, crop harvests, government policies and programs, changes in global demand, changes in standards of living, protein consumption, and global production of competing ingredients. Due to these unpredictable factors that are beyond the control of the Company forward-looking financial or operational estimates are not provided.

Results of Operations

Finished Product Commodity Prices

Prices for finished product commodities that the Company produces in the Feed Ingredients segment are reported each business day on the Jacobsen ~~index~~Index (the “Jacobsen”), an established North American trading exchange price publisher. The Jacobsen reports industry sales from the prior day's activity by product. ~~The~~Included on the Jacobsen ~~includes~~are reported prices for finished products such as protein (primarily meat and bone meal (“MBM”), poultry meal (“PM”) and feather meal (“FM”)), hides, fats (primarily bleachable fancy tallow (“BFT”) and yellow grease (“YG”)) and corn, which is a substitute commodity for the Company's bakery by-product (“BBP”) as well as a range of other branded and value-added products, which are products of the Company's Feed Ingredients segment. In the ~~U.S.~~United States and South America, the Company regularly monitors the Jacobsen for MBM, PM, FM, BFT, YG and corn because ~~they provide~~it provides a daily indication of the Company's U.S. and Brazilian revenue performance against business plan benchmarks. In Europe and South America, the Company regularly monitors Thomson Reuters (“Reuters”) to track the competing commodities palm oil and soy meal.

Although the Jacobsen and Reuters provide useful metrics of performance, the Company's finished products are commodities that compete with other commodities such as corn, soybean oil, palm oil complex, soybean meal and heating oil on nutritional and functional values. Therefore, actual pricing for the Company's finished products, as well as competing products, can be quite volatile. In addition, neither the Jacobsen nor Reuters provides forward or future period pricing for the Company's commodities. The Jacobsen and Reuters prices quoted below are for delivery of the finished product at a specified location. Although the Company's prices generally move in concert with reported Jacobsen and Reuters prices, the Company's actual sales prices for its finished products may vary significantly from the Jacobsen and Reuters because of production and delivery timing differences and because the Company's finished products are delivered to multiple locations in different geographic regions which utilize alternative price indexes. In addition, certain of the Company's premium branded finished products may sell at prices that may be higher than the closest product on the related Jacobsen or Reuters index. During the ~~third~~second quarter of fiscal ~~2017,~~2023, the Company's actual sales prices by product trended with the disclosed Jacobsen and Reuters prices.

Average Jacobsen and Reuters prices (at the specified delivery point) for the ~~third~~second quarter of fiscal ~~2017,~~2023, compared to average Jacobsen and Reuters prices for the ~~third~~second quarter of fiscal ~~2016~~2022 are as follows:

The following table shows the average Jacobsen and Reuters prices for the ~~third~~second quarter of fiscal ~~2017,~~2023, compared to ~~the~~ average Jacobsen and Reuters prices for the ~~second~~first quarter of fiscal ~~2017.~~

Avg. Price

~~3rd~~
2nd Quarter

~~2017~~

2023

Avg. Price

~~2nd~~
1st Quarter

~~2017~~

2023

Increase/(Decrease)

Jacobsen:

MBM (Illinois)

$ ~~292.83/~~464.27/ton

$ ~~251.91/~~435.85/ton

$ ~~40.92/~~28.42/ton

~~16.2~~6.5

Feed Grade PM (Mid-South)

$ ~~285.14/~~485.56/ton

$ ~~284.90/~~406.94/ton

$ ~~0.24/~~78.62/ton

~~0.1~~19.3

Pet Food PM (Mid-South)

$ ~~577.02/~~934.67/ton

$ ~~688.91/~~743.75/ton

$ ~~(111.89)/~~190.92/ton

~~(16.2~~25.7

Feather meal (Mid-South)

$ ~~408.82/~~577.87/ton

$ ~~390.14/~~596.73/ton

$ ~~18.68/~~(18.86)/ton

~~4.8~~(3.2)

BFT (Chicago)

$ ~~35.36/~~56.61/cwt

$ ~~33.61/~~61.39/cwt

$ ~~1.75/~~(4.78)/cwt

~~5.2~~(7.8)

YG (Illinois)

$ ~~27.20/~~46.06/cwt

$ ~~25.64/~~51.10/cwt

$ ~~1.56/~~(5.04)/cwt

~~6.1~~(9.9)

Corn (Illinois)

$ ~~3.56/~~6.68/bushel

$ ~~3.73/~~6.84/bushel

$ ~~(0.17)~~(0.16)/bushel

~~(4.6~~(2.3)

Reuters:

Palm Oil (CIF Rotterdam)

$ ~~687.00/~~958.00/MT

$ ~~690.00/~~993.00/MT

$ ~~(3.00)~~(35.00)/MT

~~(0.4~~(3.5)

Soy meal (CIF Rotterdam)

$ ~~337.00/~~516.00/MT

$ ~~341.00/~~595.00/MT

$ ~~(4.00)~~(79.00)/MT

~~(1.2~~(13.3)

Segment operating income for the three months ended ~~September 30, 2017~~July 1, 2023 was ~~$33.3~~$356.7 million, which reflects ~~a decrease~~an increase of ~~$2.2~~$78.1 million or ~~(6.2)%~~28.0% as compared to the three months ended ~~October 1, 2016.~~July 2, 2022.


(in thousands, except percentages)	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Three Months Ended July 1, 2023
Net Sales	$	1,141,661		$	476,093		$	139,867		$	—		$	1,757,621
Cost of sales and operating expenses	876,413			371,095			112,194			—			1,359,702
Gross Margin	265,248			104,998			27,673			—			397,919

Gross Margin %	23.2		%	22.1		%	19.8		%	—		%	22.6		%

Loss/(gain) on sale of assets	322			2			(65)			—			259
Selling, general and administrative expenses	77,406			33,684			4,971			20,690			136,751
Restructuring and asset impairment charges	—			896			—			—			896
Acquisition and integration costs	—			—			—			1,706			1,706
Change in fair value of contingent consideration	(7,499)			—			—			—			(7,499)
Depreciation and amortization	82,575			28,445			8,567			2,499			122,086
Equity in net income of Diamond Green Diesel	—			—			212,964			—			212,964
Segment operating income/(loss)	112,444			41,971			227,164			(24,895)			356,684

Equity in net income of other unconsolidated subsidiaries	1,849			—			—			—			1,849
Segment income/(loss)	114,293			41,971			227,164			(24,895)			358,533

(in thousands, except percentages) Feed Ingredients Food Ingredients Fuel Ingredients Corporate Total
Three Months Ended October 1, 2016
Net Sales $ 531,413
$ 261,997
$ 60,446
$ —
$ 853,856
Cost of sales and operating expenses 413,602
211,318
46,247
—
671,167
Gross Margin 117,811
50,679
14,199
—
182,689

Gross Margin % 22.2 % 19.3 % 23.5 % — % 21.4 %

Selling, general and administrative expense 38,943
25,352
1,332
10,881
76,508
Depreciation and amortization 43,614
17,383
6,896
2,760
70,653
Segment operating income/(loss) 35,254
7,944
5,971
(13,641 ) 35,528

Equity in net income of unconsolidated subsidiaries (36 ) —
18,174
—
18,138
Segment income/(loss) 35,218
7,944
24,145
(13,641 ) 53,666

Feed Ingredients Segment

Raw material volume. ~~Overall, in~~ In the three months ended ~~September 30, 2017,~~July 1, 2023, the raw material processed by the Company's Feed Ingredients segment totaled ~~2.04~~approximately 3.1 million metric tons. Compared to the three months ended ~~October 1, 2016~~July 2, 2022, overall raw material volume processed in the Feed Ingredients segment increased approximately ~~3.8%.~~

Sales. The decrease in net sales for the Feed Ingredients segment was primarily due to the following (in millions of dollars):


	Fats		Proteins		Other Rendering		Total Rendering		Used Cooking Oil		Bakery		Other		Total
Net sales three months ended July 2, 2022	$	498.8	$	351.1	$	64.2	$	914.1	$	152.6	$	89.7	$	13.9	$	1,170.3
Increase (decrease) in sales volumes	43.7		59.6		—		103.3		39.9		(11.6)		—		131.6
Increase (decrease) in finished product prices	(138.3)		21.9		—		(116.4)		(45.7)		(10.8)		—		(172.9)
Increase (decrease) due to currency exchange rates	(0.2)		1.4		0.1		1.3		(0.5)		—		—		0.8
Other change	—		—		9.1		9.1		—		—		2.7		11.8
Total change	(94.8)		82.9		9.2		(2.7)		(6.3)		(22.4)		2.7		(28.7)
Net sales three months ended July 1, 2023	$	404.0	$	434.0	$	73.4	$	911.4	$	146.3	$	67.3	$	16.6	$	1,141.6

Fats Proteins Other Rendering Total Rendering Used Cooking Oil Bakery Other Total
Net sales three months ended October 1, 2016 $ 145.3
$ 205.4
$ 63.0
$ 413.7
$ 41.4
$ 53.8
$ 22.5
$ 531.4
Increase/(decrease) in sales volumes 8.1
7.5
—
15.6
0.5
(2.7 ) —
13.4
Increase/(decrease) in finished product prices 10.6
1.3
—
11.9
4.6
0.8
—
17.3
Increase/(decrease) due to currency exchange rates 2.0
4.6
2.2
8.8
0.1
—
—
8.9
Other change —
—
3.5
3.5
—
—
1.0
4.5
Total change 20.7
13.4
5.7
39.8
5.2
(1.9 ) 1.0
44.1
Net sales three months ended September 30, 2017 $ 166.0
$ 218.8
$ 68.7
$ 453.5
$ 46.6
$ 51.9
$ 23.5
$ 575.5

Raw material volume. In the three months ended September 30, 2017 as compared to the same period in fiscal 2016 due to higher payroll related benefits and higher depreciation from new plant locations that were not operating in the three months ended OctoberJuly 1, ~~2016 that more than offset increased raw material volumes and increased finished fat product prices.~~

Sales. ~~Overall~~ Net sales increased in the Food Ingredients segment ~~as a result of higher gelatin, edible fat and casing~~primarily due to the increased sales ~~volumes.~~recognized from the Gelnex Acquisition.

Margins. In the Food Ingredients segment for the three months ended ~~September 30, 2017,~~July 1, 2023, the gross margin percentage ~~increased~~decreased to ~~20.0%~~22.1% as compared to ~~19.3% during~~23.9% for the comparable period of fiscal ~~2016.~~2022. The ~~increase~~decrease was primarily due to ~~improved performances~~lower margins from the Gelnex Acquisition as a result of a step up of inventory value in ~~the China, South American and North American markets for gelatin and increased supply volumes and prices for edible fats.~~purchase accounting as compared to fiscal 2022.

Segment operating income. Food Ingredients operating income was ~~$15.0~~$42.0 million for the three months ended ~~September 30, 2017, an increase~~July 1, 2023, a decrease of ~~$7.1~~$9.0 million or ~~89.9%~~17.6% as compared to the three months ended ~~October 1, 2016.~~July 2, 2022. The ~~earnings~~decrease was primarily due to a decrease in margins and an increase in selling, general and administrative expenses and depreciation and amortization expense from the ~~gelatin business were up~~Gelnex Acquisition as compared to the prior year primarily due to improved performance in the Company's China, North American and South American markets. The Company's edible fat markets improved due to increased volumes and fat prices. The casings business delivered an improved performance due to higher supply volumes and higher demand for casings.fiscal 2022.

Raw material volume. ~~Overall, in~~ In the three months ended ~~September 30, 2017,~~July 1, 2023, the raw material processed by the Company's Fuel Ingredients segment totaled ~~284,000~~approximately 347,000 metric tons. ~~As compared~~Compared to the three months ended ~~October 1, 2016~~July 2, 2022, overall raw material volume processed in the Fuel Ingredients segment decreased by approximately ~~(2.2)%~~1.1%.

Sales. ~~Overall~~ Net sales increased in the Fuel Ingredients segment primarily due to ~~generally~~ higher ~~fat prices going to biofuels~~sales volumes in ~~the three months ended September 30, 2017 as compared to the same period in fiscal 2016.~~Europe.

Margins. In the Fuel Ingredients segment (exclusive of the equity contribution from the DGD Joint Venture) for the three months ended ~~September 30, 2017,~~July 1, 2023, the gross margin percentage decreased to ~~12.3%~~19.8% as compared to ~~23.5%~~22.1% for the comparable period of fiscal ~~2016. This~~2022. The decrease was primarily due to the ~~lack~~impact of ~~blenders tax credits~~decreases in ~~North America~~sales prices for our products sold into the energy markets that negatively impacted margins.

Segment operating income. The Company's Fuel Ingredients segment operating income (inclusive of the equity contribution from the DGD Joint Venture) for the three months ended ~~September 30, 2017~~July 1, 2023 was $227.2 million, an increase of $140.3 million or 161.4% as compared to the same period in fiscal ~~2016 and lower supply~~2022. The increase was primarily due to increased volumes ~~and curtailed operations~~from production at ~~Ecoson to address current regulatory requirements.~~

Selling, General and Administrative Expenses. Selling, general and administrative expenses were ~~$12.5~~approximately $20.7 million during the three months ended ~~September 30, 2017,~~July 1, 2023, compared to ~~$10.9~~approximately $15.8 million during the three months ended ~~October 1, 2016,~~July 2, 2022, an increase of ~~$1.6~~$4.9 million. The increase ~~was~~is primarily due to higher costs for corporate ~~payroll~~ related ~~benefits as compared to the three months ended October 1, 2016.~~ compensation and benefits.

~~Depreciation~~Acquisition and ~~Amortization.~~ ~~Depreciation~~Integration costs. Acquisition and ~~amortization charges increased slightly by $0.1 million to $2.9~~integration costs were approximately $1.7 million during the three months ended ~~September 30, 2017,~~July 1, 2023 as compared to $5.4 million for the same period in fiscal 2022. These costs decreased as we moved into the integration phase on the most recent acquisitions as compared to the prior year acquisition costs incurred on several acquisitions in the three months ended July 2, 2022.

Depreciation and Amortization. Depreciation and amortization charges were approximately $2.5 million for the three months ended July 1, 2023 as compared to $2.8 million for the three months ended July 2, 2022.

Interest Expense. Interest expense was $70.2 million during the three months ended ~~October 2, 2016. The increase was due to additions to the Company's corporate assets in the third quarter of fiscal 2017 as~~July 1, 2023, compared to ~~fiscal 2016.~~

Foreign Currency ~~Gains/(Losses)~~Gain/(Loss). Foreign currency ~~losses~~gains were ~~$2.1~~$2.5 million ~~during the three months ended September 30, 2017, as compared to no loss~~ for the three months ended ~~October~~July 1, ~~2016.~~2023 as compared to foreign currency losses of $4.4 million for the three months ended July 2, 2022. The increase in currency gains is due primarily to an increase in gains on the revaluation of an intercompany note as compared to losses from non-functional currency assets and liabilities in the same period of fiscal 2022.

Other Income/(Expense), net. Other income was $5.1 million in the three months ended July 1, 2023, compared to other expense of $(0.3) million for the three months ended July 2, 2022. The increase in other income was primarily due to ~~losses on non-designated foreign exchange hedge contracts~~casualty loss insurance proceeds received for the prior year Ward plant fire and an increase in interest income that was partially offset by an increase in the non-service component of pension expense and other miscellaneous non-operating expenses as compared to the same period in fiscal ~~2016.~~2022.

~~Other Income/Expense.~~ Other expense was $1.4 million in the three months ended September 30, 2017, compared to $2.0 million in the three months ended October 1, 2016. The decrease in other expense in the three months ended September 30, 2017 as compared to the same period in fiscal 2016 was primarily due to corn hedge ineffectiveness gains on the Company's cash flow hedges and an increase in interest income that more than offset a legal settlement charge.

Income Taxes. The Company recorded income tax expense of ~~$6.3~~$40.7 million for the three months ended ~~September 30, 2017,~~July 1, 2023, compared to ~~$0.7~~$47.3 million ~~of income tax benefit~~ recorded in the three months ended October 1, 2016, an increase of $7.0 million. The increase in tax expense is primarily due to the expiration of the biofuel tax incentives. The quarterly income tax expense is based on the Company’s estimate of its expected tax rate for the full year and any discrete items recognized during the period. The quarterly income tax expense for the three months ended September 30, 2017 and October 1, 2016 is calculated as the difference in the income tax provision for the nine months ended September 30, 2017 and October 1, 2016 and the income tax provision for the six months ended July 1, 2017 and July 2, ~~2016, respectively.~~

1, 2016 was impacted due to changes in the relative proportion of pre-tax income and losses by jurisdiction used in determining the Company’s estimated annual effective tax rate for the 2016 fiscal year.

Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company's operating performance. Since EBITDA (generally, net income plus interest ~~expenses,~~expense, taxes, depreciation and amortization) is not calculated identically by all companies, the presentation in this report may not be comparable to EBITDA or ~~adjusted~~Adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated below and represents for any relevant period, net income/(loss) plus depreciation and amortization, restructuring, acquisition and integration costs, goodwill and long-lived asset impairment, change in fair value of contingent consideration, interest expense, ~~(income)/loss from discontinued operations, net of tax,~~ income tax provision, other income/(expense) and equity in net (income)/loss of unconsolidated subsidiary. Management believes that Adjusted EBITDA is useful in evaluating the Company's operating performance compared to that of other companies in its industry because the calculation of Adjusted EBITDA generally eliminates the effects of financing, income taxes and certain non-cash and other items that may vary for different companies for reasons unrelated to overall operating performance.

AsPro forma Adjusted EBITDA to Foreign Currency is not a ~~result,~~recognized accounting measurement under GAAP. The Company evaluates the impact of foreign currency on its adjusted EBITDA. DGD Joint Venture Adjusted EBITDA (Darling's share) is not reflected in the Adjusted EBITDA or the Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP).

The Company’s management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary purposes. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance with certain financial covenants under the Company’s Senior Secured Credit Facilities, ~~5.375%~~6% Notes, 5.25% Notes and ~~4.75%~~3.625% Notes that were outstanding at ~~September 30, 2017.~~July 1, 2023. However, the amounts shown below for Adjusted EBITDA differ

DGD Joint Venture Adjusted EBITDA (Darling's share) is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income or equity in net income of Diamond Green Diesel, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity and is not intended to be a presentation in accordance with GAAP. The Company calculates DGD Joint Venture Adjusted EBITDA (Darling's share) by taking DGD's operating income plus DGD's depreciation, amortization and accretion expense and then multiplying by 50% to get Darling's share of DGD's EBITDA.

Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA and (Non-GAAP) Pro Forma Adjusted EBITDA


	Three Months Ended
(dollars in thousands)	July 1, 2023		July 2, 2022
Net income attributable to Darling	$	252,383	$	201,996
Depreciation and amortization	122,086		93,113
Interest expense	70,193		24,008
Income tax expense	40,712		47,333
Restructuring and asset impairment charges	896		8,557
Acquisition and integration costs	1,706		5,358
Change in fair value of contingent consideration	(7,499)		—
Foreign currency loss/(gain)	(2,490)		4,412
Other expense/(income), net	(5,079)		302

Equity in net income of Diamond Green Diesel	(212,964)		(73,680)
Equity in net income of other unconsolidated subsidiaries	(1,849)		(2,272)
Net income attributable to non-controlling interests	2,814		2,833
Darling's Adjusted EBITDA	$	260,909	$	311,960

Foreign currency exchange impact (1)	(1,550)		—
Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP)	$	259,359	$	311,960

DGD Joint Venture Adjusted EBITDA (Darling's Share)	$	247,398	$	90,611

Darling plus Darling's share of DGD Joint Venture Adjusted EBITDA	$	508,307	$	402,571

Finished Product Commodity Prices

During the first ~~nine~~six months of fiscal ~~2017,~~2023, the Company's actual sales prices by product trended with the disclosed Jacobsen and Reuters prices.

Average Jacobsen and Reuters prices (at the specified delivery point) for the first ~~nine~~six months of fiscal ~~2017,~~2023, compared to average Jacobsen and Reuters prices for the first ~~nine~~six months of fiscal ~~2016~~2022 are as follows:

First ~~Nine~~Six Months

Segment operating income for the ~~nine~~six months ended ~~September 30, 2017~~July 1, 2023 was ~~$101.8~~$612.5 million, which reflects ~~a decrease~~an increase of ~~$14.9~~$101.0 million or ~~(12.8)%~~19.7% as compared to the ~~nine~~six months ended October 1, 2016. Adjusting the segment operating income for the nine months ended October 1, 2016 to reflect the net change due to the acquisition and integration costs, operating income would have been $117.1 million in the nine months ended October 1, 2016.July 2, 2022.


(in thousands, except percentages)	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Six Months Ended July 1, 2023
Net Sales	$	2,379,155		$	872,485		$	297,153		$	—		$	3,548,793
Cost of sales and operating expenses	1,826,485			661,210			238,980			—			2,726,675
Gross Margin	552,670			211,275			58,173			—			822,118

Gross Margin %	23.2		%	24.2		%	19.6		%	—		%	23.2		%

Gain on sale of assets	(20)			(19)			(29)			—			(68)
Selling, general and administrative expenses	152,097			66,806			11,163			42,151			272,217
Restructuring and asset impairment charges	92			5,328			—			—			5,420
Acquisition and integration costs	—			—			—			8,728			8,728
Change in fair value of contingent consideration	(7,499)			—			—			—			(7,499)
Depreciation and amortization	172,895			42,918			16,960			5,319			238,092
Equity in net income of Diamond Green Diesel	—			—			307,301			—			307,301
Segment operating income/(loss)	235,105			96,242			337,380			(56,198)			612,529

Equity in net income of other unconsolidated subsidiaries	1,969			—			—			—			1,969
Segment income/(loss)	237,074			96,242			337,380			(56,198)			614,498

(in thousands, except percentages) Feed Ingredients Food Ingredients Fuel Ingredients Corporate Total
Nine Months Ended October 1, 2016
Net Sales $ 1,550,539
$ 782,014
$ 178,285
$ —
$ 2,510,838
Cost of sales and operating expenses 1,202,404
611,151
133,620
—
1,947,175
Gross Margin 348,135
170,863
44,665
—
563,663

Gross Margin % 22.5 % 21.8 % 25.1 % — % 22.4 %

Selling, general and administrative expense 127,513
69,566
4,986
32,070
234,135
Acquisition and integration costs —
—
—
401
401
Depreciation and amortization 130,110
51,823
20,999
9,508
212,440
Segment operating income/(loss) 90,512
49,474
18,680
(41,979 ) 116,687

Equity in net income of unconsolidated subsidiaries 290
—
37,343
—
37,633
Segment income/(loss) 90,802
49,474
56,023
(41,979 ) 154,320

Feed Ingredients Segment

Raw material volume. ~~Overall, in~~ In the ~~nine~~six months ended ~~September 30, 2017,~~July 1, 2023, the raw material processed by the Company's Feed Ingredients segment totaled ~~6.11~~approximately 6.3 million metric tons. Compared to the ~~nine~~six months ended ~~October 1, 2016~~July 2, 2022, overall raw material volume processed in the Feed Ingredients segment increased approximately ~~10.4%~~26.2%. The increase was primarily due to the Valley Acquisition and the FASA Acquisition.

Sales. During the nine months ended September 30, 2017 net sales for the Feed Ingredients segment were $1,677.3 million as compared to $1,550.5 million during the nine months ended October 1, 2016, an increase of approximately $126.8 million or 8.2%. Net sales for fats were approximately $484.4 million and $423.5 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. Protein net sales were approximately $612.7 million and $576.5 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. Other rendering net sales, which include hides, pet food and service charges, were approximately $215.8 million and $200.0 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. Total rendering net sales were approximately $1,312.9 million and $1,200.0 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. Used cooking oil net sales were approximately $136.1 million and $117.4 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. Bakery net sales were approximately $159.5 million and $164.7 million for the nine months ended September 30, 2017 and October 1, 2016, respectively, and other sales, which includes trap services, industrial residual services and organic fertilizer net sales were approximately $68.8 million and $68.4 million for the nine months ended September 30, 2017 and October 1, 2016, respectively.


	Fats		Proteins		Other Rendering		Total Rendering		Used Cooking Oil		Bakery		Other		Total
Net sales six months ended July 2, 2022	$	867.3	$	621.3	$	121.7	$	1,610.3	$	247.6	$	168.1	$	23.8	$	2,049.8
Increase (decrease) in sales volumes	153.3		177.4		—		330.7		62.2		(18.4)		—		374.5
Increase (decrease) in finished product prices	(124.8)		81.4		—		(43.4)		(24.5)		(7.5)		—		(75.4)
Increase (decrease) due to currency exchange rates	(0.2)		3.0		0.2		3.0		(1.3)		—		—		1.7
Other change	—		—		18.2		18.2		—		—		10.4		28.6
Total change	28.3		261.8		18.4		308.5		36.4		(25.9)		10.4		329.4
Net sales six months ended July 1, 2023	$	895.6	$	883.1	$	140.1	$	1,918.8	$	284.0	$	142.2	$	34.2	$	2,379.2

Segment operating ~~income~~.income. Feed Ingredients operating income for the ~~nine~~six months ended ~~September 30, 2017~~July 1, 2023 was ~~$103.5~~$235.1 million, ~~an increase~~a decrease of ~~$13.0~~$(53.2) million or ~~14.4%~~(18.5)% as compared to the ~~nine~~six months ended ~~October 1, 2016. Earnings for the Feed Ingredients segment were higher~~July 2, 2022. The decrease was primarily due to anthe lower overall ~~increase in sales volumes,~~ finished product prices and ~~higher raw material volumes~~an increase in selling, general and administrative expenses and depreciation and amortization from the Valley Acquisition and FASA Acquisition as compared to ~~the same period in~~ fiscal ~~2016.~~2022.

Raw material volume. ~~Overall, for~~ In the ~~nine~~six months ended ~~September 30, 2017,~~July 1, 2023, the raw material processed by the Company's Food Ingredients segment totaled ~~836,000~~approximately 596,000 metric tons. ~~As compared~~Compared to the ~~nine~~six months ended ~~October 1, 2016,~~July 2, 2022, overall raw material volume processed in the Food Ingredients segment increased by approximately ~~9.9%~~8.4%. The increase was primarily due to the Gelnex Acquisition.

Sales. ~~Overall~~ Net sales increased in the Food Ingredients segment ~~as a result of higher~~primarily due to the increased sales ~~volumes in both~~recognized from the ~~gelatin and casing businesses.~~Gelnex Acquisition.

Margins. In the Food Ingredients segment for the ~~nine~~six months ended ~~September 30, 2017,~~July 1, 2023, the gross margin percentage ~~decreased~~increased to ~~20.4%~~24.2% as compared to ~~21.8% during~~23.9% for the comparable period of fiscal ~~2016.~~2022. The ~~decrease~~increase was primarily due to increased sales of higher margin hydrolyzed collagen that was partially offset by lower margins from the Gelnex Acquisition as a result of ~~operational inefficiencies and macroeconomic factors~~a step up of inventory value in ~~the South American gelatin market.~~purchase accounting as compared to fiscal 2022.

Segment operating income. Food Ingredients operating income was ~~$40.1~~$96.2 million for the ~~nine~~six months ended ~~September 30, 2017, a decrease~~July 1, 2023, an increase of ~~$9.4~~$3.0 million or ~~(19.0)%~~3.2% as compared to the ~~nine~~six months ended ~~October 1, 2016.~~July 2, 2022. The ~~earnings in the gelatin business were down as compared to the prior year~~increase was primarily due to ~~lower earnings in the Company's South American gelatin business due to~~increased sales of higher margin ~~compression influenced by operating inefficiencies and macroeconomic factors. The casings business delivered improved performance due to overall high demand~~hydrolyzed collagen that ~~slightly~~more than offset lower ~~earnings~~margins from the Gelnex Acquisition and an increase in ~~the gelatin business. Additionally,~~ selling, general and administrative ~~expense~~expenses, an increase in ~~the Food Ingredients segment increased approximately $5.1 million primarily due to a reduction of currency hedge gains in the nine months ended September 30, 2017~~depreciation and amortization and restructuring and asset impairment costs as compared to ~~the same period in~~ fiscal ~~2016.~~2022.


					Page No.
			PART I: FINANCIAL INFORMATION

Item 1.			FINANCIAL STATEMENTS
			Consolidated Balance Sheets		3
			July 1, 2023 (unaudited) and December 31, 2022

			Consolidated Statements of Operations (unaudited)		4
			Three and Six Months Ended July 1, 2023 and July 2, 2022

			Consolidated Statements of Comprehensive Income/(Loss) (unaudited)		5
			Three and Six Months Ended July 1, 2023 and July 2, 2022

				~~Page No.~~
	~~PART I: FINANCIAL INFORMATION~~

~~Item 1.~~	~~FINANCIAL STATEMENTS~~
	~~Consolidated Balance Sheets~~	3
	~~September 30, 2017 (unaudited) and December 31, 2016~~

	Consolidated Statements of ~~Operations~~Stockholders' Equity (unaudited)	46
			~~Three and Nine~~Six Months Ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022

			~~Consolidated Statements of Comprehensive Income (unaudited)~~		5
	~~Three and Nine Months Ended September 30, 2017 and October 1, 2016~~

	Consolidated Statements of Cash Flows (unaudited)	68
			~~Nine~~Six Months Ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016~~July 2, 2022

			Notes to Consolidated Financial Statements (unaudited)		79

Item 2.			MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		3538


Item 3.			QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		5660


Item 4.			CONTROLS AND PROCEDURES		5862


			PART II: OTHER INFORMATION

Item 1.			LEGAL PROCEEDINGS		5964

Item 1A.			RISK FACTORS		5964

Item 2.			UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		64

Item 5.			OTHER INFORMATION		65

Item 6.			EXHIBITS		5965

			Signatures		6066



	September 30, 2017			October 1, 2016
Cash flows from operating activities:
Net Income	$	26,410		$	65,544
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	221,306			212,440
Loss/(gain) on disposal of property, plant, equipment and other assets	(537		)	873
Gain on insurance proceeds from insurance settlements	—			(356		)
Deferred taxes	(14,242		)	(5,223		)
Increase/(decrease) in long-term pension liability	1,574			(1,105		)
Stock-based compensation expense	14,710			7,953
Write-off deferred loan costs	443			292
Deferred loan cost amortization	6,581			8,393
Equity in net income of unconsolidated subsidiaries	(16,669		)	(37,633		)
Distributions of earnings from unconsolidated subsidiaries	26,600			26,317
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	(5,311		)	(3,058		)
Income taxes refundable/payable	18,332			1,432
Inventories and prepaid expenses	(31,058		)	(11,368		)
Accounts payable and accrued expenses	39,937			27,438
Other	(19,294		)	(11,377		)
Net cash provided by operating activities	268,782			280,562
Cash flows from investing activities:
Capital expenditures	(196,446		)	(168,224		)
Acquisitions, net of cash acquired	(12,144		)	(8,511		)
Investment in unconsolidated subsidiary	(4,750		)	—
Gross proceeds from disposal of property, plant and equipment and other assets	4,953			4,492
Proceeds from insurance settlement	3,301			1,537
Payments related to routes and other intangibles	(5,635		)	—
Net cash used by investing activities	(210,721		)	(170,706		)
Cash flows from financing activities:
Proceeds from long-term debt	24,069			28,765
Payments on long-term debt	(94,250		)	(128,364		)
Borrowings from revolving credit facility	142,000			83,000
Payments on revolving credit facility	(147,327		)	(93,028		)
Net cash overdraft financing	2,590			—
Deferred loan costs	(1,177		)	—
Issuance of common stock	22			143
Repurchase of common stock	—			(5,000		)
Minimum withholding taxes paid on stock awards	(2,140		)	(1,843		)
Acquisition of noncontrolling interest	(429		)	—
Distributions to noncontrolling interests	(2,513		)	(885		)
Net cash used by financing activities	(79,155		)	(117,212		)
Effect of exchange rate changes on cash	16,676			(943		)
Net decrease in cash and cash equivalents	(4,418		)	(8,299		)
Cash and cash equivalents at beginning of period	114,564			156,884
Cash and cash equivalents at end of period	$	110,146		$	148,585
Supplemental disclosure of cash flow information:
Accrued capital expenditures	$	(3,532	)	$	(3,302	)
Cash paid during the period for:
Interest, net of capitalized interest	$	58,219		$	62,395
Income taxes, net of refunds	$	13,719		$	14,018
Non-cash financing activities
Debt issued for assets	$	3		$	10
Contribution of assets to unconsolidated subsidiary	$	—		$	2,674



	September 30, 2017		December 31, 2016
Finished product	$	184,778	$	156,542
Work in process	100,147		87,284
Raw material	37,609		39,859
Supplies and other	52,564		47,130
	$	375,098	$	330,815



	September 30, 2017			December 31, 2016
Indefinite Lived Intangible Assets
Trade names	$	54,629		$	51,687
	54,629			51,687
Finite Lived Intangible Assets:
Routes	401,919			374,989
Permits	511,210			493,311
Non-compete agreements	3,985			3,638
Trade names	76,618			76,033
Royalty, consulting, land use rights and leasehold	14,389			13,456
	1,008,121			961,427
Accumulated Amortization:
Routes	(129,504		)	(105,934		)
Permits	(201,656		)	(170,165		)
Non-compete agreements	(2,244		)	(1,788		)
Trade names	(28,343		)	(21,042		)
Royalty, consulting, land use rights and leasehold	(3,095		)	(2,258		)
	(364,842		)	(301,187		)
Total Intangible assets, less accumulated amortization	$	697,908		$	711,927



	Nine Months Ended September 30, 2017
	Foreign Currency			Derivative			Defined Benefit
	Translation			Instruments			Pension Plans			Total
Accumulated Other Comprehensive Income (loss) December 31, 2016, attributable to Darling, net of tax	$	(308,910	)	$	2,468		$	(33,564	)	$	(340,006	)
Other comprehensive gain before reclassifications	111,002			(2,295		)	—			108,707
Amounts reclassified from accumulated other comprehensive income/(loss)	—			1,196			2,278			3,474
Net current-period other comprehensive income	111,002			(1,099		)	2,278			112,181
Noncontrolling interest	(3,733		)	—			—			(3,733		)
Accumulated Other Comprehensive Income (loss) September 30, 2017, attributable to Darling, net of tax	(194,175		)	$	1,369		$	(31,286	)	$	(224,092	)


	Pension Benefits				Pension Benefits
	Three Months Ended				Six Months Ended
	July 1, 2023		July 2, 2022		July 1, 2023		July 2, 2022
Service cost	$	683	$	798	$	1,358	$	1,626
Interest cost	1,961		1,312		3,917		2,632
Expected return on plan assets	(1,805)		(2,156)		(3,608)		(4,321)
Amortization of prior service cost	—		6		—		11
Amortization of actuarial loss	434		570		868		1,140


Net pension cost	$	1,273	$	530	$	2,535	$	1,088



Derivatives Designated	Balance Sheet	Asset Derivatives Fair Value
as Hedges	Location	September 30, 2017		December 31, 2016
Corn options	Other current assets	$	2,876	$	4,235
Corn options	Other assets	106		—
Natural gas swaps	Other current assets	82		—

Total asset derivatives designated as hedges		$	3,064	$	4,235

Derivatives Not Designated as Hedges
Foreign currency contracts	Other current assets	$	1,153	$	8,939
Corn options and futures	Other current assets	1,167		151
Soybean meal options	Other current assets	64		—

Total asset derivatives not designated as hedges		$	2,384	$	9,090

Total asset derivatives		$	5,448	$	13,325



Derivatives Designated	Balance Sheet	Liability Derivatives Fair Value
as Hedges	Location	September 30, 2017		December 31, 2016
Natural gas swaps	Accrued expenses	$	4	$	—

Total liability derivatives designated as hedges		$	4	$	—

Derivatives Not Designated as Hedges
Foreign currency contracts	Accrued expenses	$	1,063	$	608
Corn options and futures	Accrued expenses	21		122

Total liability derivatives not designated as hedges		$	1,084	$	730

Total liability derivatives		$	1,088	$	730



Derivatives Designated as Cash Flow Hedges	Gain or (Loss) Recognized in Other Comprehensive Income (“OCI”) on Derivatives (Effective Portion) (a)				Gain or (Loss) Reclassified from Accumulated OCI into Income (Effective Portion) (b)				Gain or (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (c)
	2017		2016		2017		2016		2017		2016
Corn options	$	2,740	$	2,060	$	1,352	$	861	$	1,655	$	323
Natural gas swaps	36		—		—		—		34		—

Total	$	2,776	$	2,060	$	1,352	$	861	$	1,689	$	323


~~(a)~~	Amount recognized in accumulated OCI (effective portion) is reported as accumulated other comprehensive income/(loss) of approximately $2.8 million and $2.1 million recorded net of taxes of approximately $(1.1) million and $(0.8) million as of September 30, 2017 and October 1, 2016, respectively.


~~(b)~~	Gains and (losses) reclassified from accumulated OCI into income (effective portion) for corn options are included in cost of sales, respectively, in the Company’s consolidated statements of operations.


~~(c)~~	~~Gains and (losses) recognized in income on derivatives (ineffective portion) for corn options are included in other income/ (expense), net in the Company’s consolidated statements of operations.~~



	Parent		Guarantors		Non-guarantors		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	1,258	$	2,694	$	106,194	$	—		$	110,146
Restricted cash	103		—		179		—			282
Accounts receivable	35,722		242,553		386,776		(250,104		)	414,947
Inventories	17,755		90,993		266,350		—			375,098
Income taxes refundable	1,914		—		3,456		—			5,370
Prepaid expenses	14,201		3,147		21,924		—			39,272
Other current assets	5,564		1,280		15,128		(4,871		)	17,101
Total current assets	76,517		340,667		800,007		(254,975		)	962,216
Investment in subsidiaries	4,387,119		1,152,677		849,848		(6,389,644		)	—
Property, plant and equipment, net	265,365		506,393		850,109		—			1,621,867
Intangible assets, net	18,068		267,541		412,299		—			697,908
Goodwill	21,860		551,837		724,569		—			1,298,266
Investment in unconsolidated subsidiaries	4,936		—		285,092		—			290,028
Other assets	32,574		329,178		185,603		(500,337		)	47,018
Deferred taxes	—		—		17,219		—			17,219
	$	4,806,439	$	3,148,293	$	4,124,746	$	(7,144,956	)	$	4,934,522
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	116	$	—	$	22,970	$	(4,871	)	$	18,215
Accounts payable	253,921		31,824		163,082		(235,235		)	213,592
Income taxes payable	5,853		373		15,748		—			21,974
Accrued expenses	87,159		28,478		191,715		(14,869		)	292,483
Total current liabilities	347,049		60,675		393,515		(254,975		)	546,264
Long-term debt, net of current portion	1,068,926		—		1,165,587		(500,337		)	1,734,176
Other noncurrent liabilities	58,400		—		37,954		—			96,354
Deferred income taxes	136,430		—		216,611		—			353,041
Total liabilities	1,610,805		60,675		1,813,667		(755,312		)	2,729,835
Total stockholders’ equity	3,195,634		3,087,618		2,311,079		(6,389,644		)	2,204,687
	$	4,806,439	$	3,148,293	$	4,124,746	$	(7,144,956	)	$	4,934,522



Senior Notes:
5.375 % Notes due 2022	$	500,000
Less unamortized deferred loan costs	(6,655		)
Carrying value of 5.375% Notes due 2022	$	493,345

4.75 % Notes due 2022 - Denominated in euros	$	608,318
Less unamortized deferred loan costs	(8,769		)
Carrying value of 4.75% Notes due 2022	$	599,549

Amended Credit Agreement:
Term Loan A	$	108,053
Less unamortized deferred loan costs	(814		)
Carrying value of Term Loan A	107,239

Term Loan B	$	537,500
Less unamortized deferred loan costs	(4,874		)
Carrying value of Term Loan B	$	532,626

Revolving Credit Facility:
Maximum availability	$	1,000,000
Borrowings outstanding	—
Letters of credit issued	24,017
Availability	$	975,983

Other Debt	$	19,632


Senior Notes:
6 % Notes due 2030	$	1,000,000
Less unamortized deferred loan costs net of bond premium	(6,841)
Carrying value of 6% Notes due 2030	$	993,159

5.25 % Notes due 2027	$	500,000
Less unamortized deferred loan costs	(3,694)
Carrying value of 5.25% Notes due 2027	$	496,306

3.625 % Notes due 2026 - Denominated in euros	$	562,329
Less unamortized deferred loan costs	(3,274)
Carrying value of 3.625% Notes due 2026	$	559,055

Amended Credit Agreement:
Term A-1 facility	$	400,000
Less unamortized deferred loan costs	(635)
Carrying value of Term A-1 facility	$	399,365

Term A-2 facility	$	487,500
Less unamortized deferred loan costs	(902)
Carrying value of Term A-2 facility	$	486,598

Term A-3 facility	$	300,000
Less unamortized deferred loan costs	(964)
Carrying value of Term A-3 facility	$	299,036

Term A-4 facility	$	496,875
Less unamortized deferred loan costs	(1,168)
Carrying value of Term A-4 facility	$	495,707

Term Loan B	$	200,000
Less unamortized deferred loan costs	(981)
Carrying value of Term Loan B	$	199,019

Revolving Credit Facility:
Maximum availability	$	1,500,000
Ancillary Facilities	48,253
Borrowings outstanding	491,921
Letters of credit issued	3,871
Availability	$	955,955

Other Debt	$	126,716


Other commercial commitments:
Standby letters of credit	$	3,871
Standby letters of credit (ancillary facility)	25,672
Foreign and domestic bank guarantees	23,871
Total other commercial commitments:	$	53,414


ISSUER PURCHASES OF EQUITY SECURITIES
Period	Total Number of Shares Purchased (1)		Average Price Paid per Share (2)	Total Number of Shares Purchased as part of Publicly Announced Plans or Programs (4)	Maximum Number (or Approximate Dollar Value) of Shares that may yet be Purchased Under the Plan or Programs at End of Period.
April 2023:
April 2, 2023 through April 29, 2023	194		58.30	—	$	330,728,221
May 2023:
April 30, 2023 through May 27, 2023	5,650		61.52	—	330,728,221
June 2023:
May 28, 2023 through July 1, 2023	158,518		62.13	153,202	321,584,728
Total	164,362	(3)	61.62	153,202	$	321,584,728



			~~31.1~~4.1			Second Supplemental Indenture, dated as of June 20, 2023, by and among Darling Ingredients Inc., the guarantors party thereto from time to time, and Citibank, N.A., London Branch, as trustee (filed herewith).
			4.2			Second Supplemental Indenture, dated as of June 20, 2023, by and among Darling Ingredients Inc., the guarantors party thereto from time to time, and Regions Bank, as trustee (filed herewith).
			4.3			Third Supplemental Indenture, dated as of June 20, 2023, by and among Darling Ingredients Inc., as issuer, the guarantors party thereto from time to time, and Truist Bank, as trustee (filed herewith).
			10.1			Non-Employee Director Compensation Program effective May 2023 (filed herewith).
			31.1			Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of Randall C. Stuewe, the Chief Executive Officer of the Company.
			31.2			Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, of ~~Patrick C. Lynch,~~Brad Phillips, the Chief Financial Officer of the Company.
			32			Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of Randall C. Stuewe, the Chief Executive Officer of the Company, and of ~~Patrick C. Lynch,~~Brad Phillips, the Chief Financial Officer of the Company.
			101			Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of ~~September 30, 2017~~July 1, 2023 and December 31, ~~2016;~~2022; (ii) Consolidated Statements of Operations for the three and ~~nine~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016;~~July 2, 2022; (iii) Consolidated Statements of Comprehensive ~~Income~~Income/(Loss) for the three and ~~nine~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October~~July 2, 2022; (iv) Consolidated Statements of Stockholders' Equity for the six months ended July 1, ~~2016; (iv)~~2023 and July 2, 2022; (v) Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September 30, 2017~~July 1, 2023 and ~~October 1, 2016; (v)~~July 2, 2022; (vi) Notes to the Consolidated Financial Statements.
			104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


		DARLING INGREDIENTS INC.


Date:	August 8, 2023	~~DARLING INGREDIENTS INC.~~By:	/s/ Brad Phillips
			Brad Phillips
			Chief Financial Officer
~~Date:~~	~~November 7, 2017~~	~~By:~~	~~/s/ Randall C. Stuewe~~
	~~Randall C. Stuewe~~
	~~Chairman~~(Principal Financial Officer and
	~~Chief Executive Officer~~ Duly Authorized Officer)