Darling Ingredients (DAR) 10-Q 2019 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549

FORM 10-Q

	(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended	September 28, 2019
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934
	For the transition period from _______ to _______

Commission File Number   001-13323

DARLING INGREDIENTS INC.

(Exact name of registrant as specified in its charter) 

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

 5601 N MacArthur Blvd., Irving, Texas     75038

(Address of principal executive offices)     (Zip Code)

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

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

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

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

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

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

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of Exchange Act.			☐

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

There were 163,710,998 shares of common stock, $0.01 par value, outstanding at October 31, 2019.

DARLING INGREDIENTS INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 2019

TABLE OF CONTENTS   

		Page No.
	PART I:  FINANCIAL INFORMATION
Item 1.	FINANCIAL STATEMENTS
	Consolidated Balance Sheets	3
	September 28, 2019 (unaudited) and December 29, 2018
	Consolidated Statements of Operations (unaudited)	4
	Three and Nine Months Ended September 28, 2019 and September 29, 2018
	Consolidated Statements of Comprehensive Income/(loss) (unaudited)	5
	Three and Nine Months Ended September 28, 2019 and September 29, 2018
	Consolidated Statement of Stockholders' Equity (unaudited)	6
	Nine Months Ended September 28, 2019 and September 29, 2018
	Consolidated Statements of Cash Flows (unaudited)	8
	Nine Months Ended September 28, 2019 and September 29, 2018
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	43
Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	64
Item 4.	CONTROLS AND PROCEDURES	66
	PART II:  OTHER INFORMATION
Item 1.	LEGAL PROCEEDINGS	67
Item 1A.	RISK FACTORS	67
Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	67
Item 6.	EXHIBITS	68
	Signatures	69

2

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 28, 2019 and December 29, 2018

(in thousands, except share data)

	September 28, 2019			December 29, 2018
ASSETS	(unaudited)
Current assets:
Cash and cash equivalents	$	69,122		$	107,262
Restricted cash	159			107
Accounts receivable, net	355,006			385,737
Inventories	353,003			341,028
Prepaid expenses	46,378			35,247
Income taxes refundable	4,952			6,462
Other current assets	25,061			22,099
Total current assets	853,681			897,942
Property, plant and equipment, less accumulated depreciation of    $1,370,145 at September 28, 2019 and $1,246,095 at December 29, 2018	1,714,768			1,687,858
Intangible assets, less accumulated amortization of    $459,996 at September 28, 2019 and $423,575 at December 29, 2018	537,360			595,862
Goodwill	1,212,313			1,229,159
Investment in unconsolidated subsidiaries	447,689			410,177
Operating lease right-of-use assets	119,063			—
Other assets	46,179			53,375
Deferred income taxes	13,846			14,981
	$	4,944,899		$	4,889,354
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	61,092		$	7,492
Accounts payable, principally trade	192,010			219,479
Income taxes payable	10,404			4,043
Current operating lease liabilities	35,223			—
Accrued expenses	297,164			309,484
Total current liabilities	595,893			540,498
Long-term debt, net of current portion	1,559,809			1,666,940
Long-term operating lease liabilities	83,754			—
Other non-current liabilities	113,222			115,032
Deferred income taxes	219,329			231,063
Total liabilities	2,572,007			2,553,533
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.01 par value; 250,000,000 shares authorized;         168,433,009 and 168,098,177 shares issued at September 28, 2019         and at December 29, 2018, respectively	1,684			1,681
Additional paid-in capital	1,556,792			1,536,157
Treasury stock, at cost; 4,314,935 and 3,437,579 shares at        September 28, 2019 and at December 29, 2018, respectively	(64,633		)	(47,756		)
Accumulated other comprehensive loss	(342,846		)	(304,539		)
Retained earnings	1,157,496			1,087,505
Total Darling's stockholders’ equity	2,308,493			2,273,048
Noncontrolling interests	64,399			62,773
Total stockholders' equity	$	2,372,892		$	2,335,821
	$	4,944,899		$	4,889,354

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

3

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Three and nine months ended September 28, 2019 and September 29, 2018

(in thousands, except per share data)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Net sales	$	842,049		$	812,576		$	2,504,477		$	2,534,596
Costs and expenses:
Cost of sales and operating expenses	652,923			647,929			1,948,552			1,978,729
Loss (gain) on sale of assets	(2,669		)	172			(20,845		)	472
Selling, general and administrative expenses	83,549			67,447			249,569			232,907
Restructuring and impairment charges	—			—			—			14,965
Depreciation and amortization	80,407			78,842			239,057			235,915
Total costs and expenses	814,210			794,390			2,416,333			2,462,988
Equity in net income/(loss) of Diamond Green Diesel	32,020			(2,630		)	94,390			109,655
Operating income	59,859			15,556			182,534			181,263
Other expense:
Interest expense	(19,359		)	(20,080		)	(60,088		)	(66,220		)
Debt extinguishment costs	—			—			(12,126		)	(23,509		)
Foreign currency gain/(loss)	466			(2,106		)	(654		)	(7,082		)
Gain/(loss) on disposal of subsidiaries	—			3,038			—			(12,500		)
Other expense, net	(2,614		)	(2,786		)	(7,158		)	(4,103		)
Total other expense	(21,507		)	(21,934		)	(80,026		)	(113,414		)
Equity in net loss of other unconsolidated subsidiaries	(665		)	(162		)	(1,087		)	(57		)
Income/(loss) before income taxes	37,687			(6,540		)	101,421			67,792
Income tax expense/(benefit)	10,850			(1,403		)	23,900			3,992
Net income/(loss)	26,837			(5,137		)	77,521			63,800
Net income attributable to noncontrolling interests	(1,116		)	(900		)	(7,530		)	(2,952		)
Net income/(loss) attributable to Darling	$	25,721		$	(6,037	)	$	69,991		$	60,848
Basic income/(loss) per share	$	0.16		$	(0.04	)	$	0.42		$	0.37
Diluted income/(loss) per share	$	0.15		$	(0.04	)	$	0.42		$	0.37

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

4

DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME/(LOSS)

Three and nine months ended September 28, 2019 and September 29, 2018

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Net income/(loss)	$	26,837		$	(5,137	)	$	77,521		$	63,800
Other comprehensive income/(loss), net of tax:
Foreign currency translation	(47,626		)	(5,584		)	(36,186		)	(65,126		)
Pension adjustments	859			668			2,576			2,001
Natural gas swap derivative adjustments	—			—			—			22
Soybean meal derivative adjustments	—			3			—			3
Corn option derivative adjustments	553			(40		)	575			(1,198		)
Heating oil derivative adjustments	(1,683		)	—			450			—
Foreign exchange derivative adjustments	(4,944		)	309			(5,430		)	309
Total other comprehensive income/(loss), net of tax	(52,841		)	(4,644		)	(38,015		)	(63,989		)
Total comprehensive income/(loss)	$	(26,004	)	$	(9,781	)	$	39,506		$	(189	)
Comprehensive income attributable to noncontrolling interests	1,120			(538		)	7,822			1,981
Comprehensive income/(loss) attributable to Darling	$	(27,124	)	$	(9,243	)	$	31,684		$	(2,170	)

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

5

DARLING INGREDIENTS INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Unaudited)

Nine months ended September 28, 2019

(in thousands, except share data)

	Common Stock
	Number of Outstanding Shares		$.01 par Value		Additional Paid-In Capital		Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings		Stockholders' equity attributable to Darling			Non-controlling Interest			Total Stockholders' Equity
Balances at December 29, 2018	164,660,598		$	1,681	$	1,536,157	$	(47,756	)	$	(304,539	)	$	1,087,505	$	2,273,048		$	62,773		$	2,335,821
Net income	—		—		—		—			—			18,012		18,012			1,628			19,640
Pension liability adjustments, net of tax	—		—		—		—			858			—		858			—			858
Foreign exchange derivative adjustment, net of tax	—		—		—		—			(1,937		)	—		(1,937		)	—			(1,937		)
Foreign currency translation adjustments	—		—		—		—			(6,645		)	—		(6,645		)	1,759			(4,886		)
Stock-based compensation	—		—		10,403		—			—			—		10,403			—			10,403
Treasury stock	(223,294	)	—		—		(5,089		)	—			—		(5,089		)	—			(5,089		)
Issuance of common stock	311,502		3		1,886		—			—			—		1,889			—			1,889
Balances at March 30, 2019	164,748,806		$	1,684	$	1,548,446	$	(52,845	)	$	(312,263	)	$	1,105,517	$	2,290,539		$	66,160		$	2,356,699
Net income	—		—		—		—			—			26,258		26,258			4,786			31,044
Deductions to noncontrolling interest	—		—		—		—			—			—		—			(5,751		)	(5,751		)
Pension liability adjustments, net of tax	—		—		—		—			859			—		859			—			859
Heating oil derivative adjustment, net of tax	—		—		—		—			2,133			—		2,133			—			2,133
Corn option derivative adjustment, net of tax	—		—		—		—			22			—		22			—			22
Foreign exchange derivative adjustment, net of tax	—		—		—		—			1,451			—		1,451			—			1,451
Foreign currency translation adjustments	—		—		—		—			17,797			—		17,797			(1,471		)	16,326
Stock-based compensation	—		—		3,849		—			—			—		3,849			—			3,849
Treasury stock	(131	)	—		—		(3		)	—			—		(3		)	—			(3		)
Issuance of common stock	375		—		6		—			—			—		6			—			6
Balances at June 29, 2019	164,749,050		$	1,684	$	1,552,301	$	(52,848	)	$	(290,001	)	$	1,131,775	$	2,342,911		$	63,724		$	2,406,635
Net income	—		—		—		—			—			25,721		25,721			1,116			26,837
Deductions to noncontrolling interest	—		—		—		—			—			—		—			(445		)	(445		)
Pension liability adjustments, net of tax	—		—		—		—			859			—		859			—			859
Heating oil derivative adjustment, net of tax	—		—		—		—			(1,683		)	—		(1,683		)	—			(1,683		)
Corn option derivative adjustment, net of tax	—		—		—		—			553			—		553			—			553
Foreign exchange derivative adjustment, net of tax	—		—		—		—			(4,944		)	—		(4,944		)	—			(4,944		)
Foreign currency translation adjustments	—		—		—		—			(47,630		)	—		(47,630		)	4			(47,626		)
Stock-based compensation	—		—		4,372		—			—			—		4,372			—			4,372
Treasury stock	(653,931	)	—		—		(11,785		)	—			—		(11,785		)	—			(11,785		)
Issuance of common stock	22,955		—		119		—			—			—		119			—			119
Balances at September 28, 2019	164,118,074		$	1,684	$	1,556,792	$	(64,633	)	$	(342,846	)	$	1,157,496	$	2,308,493		$	64,399		$	2,372,892

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

6

DARLING INGREDIENTS INC. AND SUBSIDIARIES

Consolidated Statements of Stockholders’ Equity (Unaudited) (Continued)

Nine months ended September 29, 2018

(in thousands, except share data)

	Common Stock
	Number of Outstanding Shares		$.01 par Value		Additional Paid-In Capital		Treasury Stock			Accumulated Other Comprehensive Loss			Retained Earnings			Stockholders' equity attributable to Darling			Non-controlling Interest			Total Stockholders' Equity
Balances at December 30, 2017	164,653,437		$	1,679	$	1,515,614	$	(44,063	)	$	(209,524	)	$	981,227		$	2,244,933		$	82,764		$	2,327,697
Adjustment to initially apply FASB ASC No. 2018-02 Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income	—		—		—		—			(4,782		)	4,782			—			—			—
Net income	—		—		—		—			—			97,305			97,305			770			98,075
Deductions to noncontrolling interests	—		—		—		—			—			—			—			(10,173		)	(10,173		)
Pension liability adjustments, net of tax	—		—		—		—			667			—			667			—			667
Natural gas swap derivative adjustment, net of tax	—		—		—		—			22			—			22			—			22
Corn option derivative adjustment, net of tax	—		—		—		—			(1,605		)	—			(1,605		)	—			(1,605		)
Foreign currency translation adjustments	—		—		—		—			16,778			—			16,778			517			17,295
Stock-based compensation	—		—		8,527		—			—			—			8,527			—			8,527
Treasury stock	(159,758	)	—		—		(2,962		)	—			—			(2,962		)	—			(2,962		)
Issuance of common stock	153,983		1		1,695		—			—			—			1,696			—			1,696
Balances at March 31, 2018	164,647,662		$	1,680	$	1,525,836	$	(47,025	)	$	(198,444	)	$	1,083,314		$	2,365,361		$	73,878		$	2,439,239
Net income/(loss)	—		—		—		—			—			(30,420		)	(30,420		)	1,282			(29,138		)
Deductions to noncontrolling interests	—		—		—		—			—			—			—			(482		)	(482		)
Pension liability adjustments, net of tax	—		—		—		—			666			—			666			—			666
Corn option derivative adjustment, net of tax	—		—		—		—			447			—			447			—			447
Foreign currency translation adjustments	—		—		—		—			(76,787		)	—			(76,787		)	(50		)	(76,837		)
Stock-based compensation	—		—		4,219		—			—			—			4,219			—			4,219
Treasury stock	(21,389	)	—		—		(378		)	—			—			(378		)	—			(378		)
Issuance of common stock	27,636		1		294		—			—			—			295			—			295
Balances at June 30, 2018	164,653,909		$	1,681	$	1,530,349	$	(47,403	)	$	(274,118	)	$	1,052,894		$	2,263,403		$	74,628		$	2,338,031
Net income/(loss)	—		—		—		—			—			(6,037		)	(6,037		)	900			(5,137		)
Deductions to noncontrolling interests	—		—		—		—			—			—			—			(13,229		)	(13,229		)
Pension liability adjustments, net of tax	—		—		—		—			668			—			668			—			668
Corn option derivative adjustment, net of tax	—		—		—		—			(40		)	—			(40		)	—			(40		)
Soybean meal derivative adjustment, net of tax	—		—		—		—			3			—			3						3
Foreign exchange derivative adjustment, net of tax	—		—		—		—			309			—			309			—			309
Foreign currency translation adjustments	—		—		—		—			(4,146		)	—			(4,146		)	(1,438		)	(5,584		)
Stock-based compensation	—		—		374		—			—			—			374			—			374
Treasury stock	(14,499	)	—		—		(293		)	—			—			(293		)	—			(293		)
Issuance of common stock	18,518		—		201		—			—			—			201			—			201
Balances at September 29, 2018	164,657,928		$	1,681	$	1,530,924	$	(47,696	)	$	(277,324	)	$	1,046,857		$	2,254,442		$	60,861		$	2,315,303

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

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DARLING INGREDIENTS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine months ended September 28, 2019 and September 29, 2018

(in thousands)

(unaudited)

	September 28, 2019			September 29, 2018
Cash flows from operating activities:
Net Income	$	77,521		$	63,800
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	239,057			235,915
Loss (gain) on disposal of property, plant, equipment and other assets	(20,845		)	472
Loss on disposal of subsidiaries	—			12,500
Asset impairment	—			2,907
Gain on insurance proceeds from insurance settlements	(1,371		)	(1,253		)
Deferred taxes	(4,765		)	(15,708		)
Increase (decrease) in long-term pension liability	1,122			(375		)
Stock-based compensation expense	18,543			13,606
Write-off deferred loan costs	4,721			8,163
Deferred loan cost amortization	4,435			6,265
Equity in net income of Diamond Green Diesel and other unconsolidated subsidiaries	(93,303		)	(109,598		)
Distributions of earnings from Diamond Green Diesel and other unconsolidated subsidiaries	57,118			27,418
Changes in operating assets and liabilities, net of effects from acquisitions:
Accounts receivable	20,388			9,657
Income taxes refundable/payable	8,058			(9,838		)
Inventories and prepaid expenses	(34,371		)	(25,960		)
Accounts payable and accrued expenses	(19,799		)	(23,004		)
Other	6,173			4,731
Net cash provided by operating activities	262,682			199,698
Cash flows from investing activities:
Capital expenditures	(245,092		)	(213,726		)
Acquisitions, net of cash acquired	(1,431		)	(51,301		)
Investment in unconsolidated subsidiary	(2,000		)	(10,000		)
Proceeds from sale of investment in subsidiaries	—			82,805
Gross proceeds from disposal of property, plant and equipment and other assets	15,402			3,361
Proceeds from insurance settlement	1,371			1,253
Payments related to routes and other intangibles	(3,150		)	(1,253		)
Net cash used by investing activities	(234,900		)	(188,861		)
Cash flows from financing activities:
Proceeds from long-term debt	511,985			623,698
Payments on long-term debt	(566,107		)	(661,268		)
Borrowings from revolving credit facility	325,485			386,436
Payments on revolving credit facility	(332,884		)	(362,463		)
Net cash overdraft financing	27,858			3,361
Deferred loan costs	(7,027		)	(9,668		)
Issuance of common stock	39			182
Repurchase of common stock	(11,740		)	—
Minimum withholding taxes paid on stock awards	(3,247		)	(2,215		)
Distributions to noncontrolling interests	(4,500		)	(8,005		)
Net cash used by financing activities	(60,138		)	(29,942		)
Effect of exchange rate changes on cash	(5,732		)	(6,238		)
Net decrease in cash, cash equivalents and restricted cash	(38,088		)	(25,343		)
Cash, cash equivalents and restricted cash at beginning of period	107,369			106,916
Cash, cash equivalents and restricted cash at end of period	$	69,281		$	81,573
Supplemental disclosure of cash flow information:
Accrued capital expenditures	$	3,978		$	(5,295	)
Cash paid during the period for:
Interest, net of capitalized interest	$	49,727		$	58,731
Income taxes, net of refunds	$	21,475		$	28,682
Non-cash operating activities
Operating lease right of use asset obtained in exchange for new lease liabilities	$	16,425		$	—
Non-cash financing activities
Debt issued for assets	$	—		$	24

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

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DARLING INGREDIENTS INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 28, 2019

(unaudited)

(1) General

The accompanying consolidated financial statements for the three and nine month periods ended September 28, 2019 and September 29, 2018, have been prepared by Darling Ingredients Inc., a Delaware corporation (“Darling”, and together with its subsidiaries, the “Company”) in accordance with generally accepted accounting principles in the United States (“GAAP”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”).  The information furnished herein reflects all adjustments (consisting only of normal recurring accruals) that are, in the opinion of management, necessary to present a fair statement of the financial position and operating results of the Company as of and for the respective periods. However, these operating results are not necessarily indicative of the results expected for a full fiscal year. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted pursuant to such rules and regulations.  However, management of the Company believes, to the best of their knowledge, that the disclosures herein are adequate to make the information presented not misleading.  The accompanying consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Form 10-K for the fiscal year ended December 29, 2018. 

(2) Summary of Significant Accounting Policies

(a) Basis of Presentation

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

(b) Fiscal Periods

The Company has a 52/53 week fiscal year ending on the Saturday nearest December 31.  Fiscal periods for the consolidated financial statements included herein are as of September 28, 2019, and include the 13 and 39 weeks ended September 28, 2019, and the 13 and 39 weeks ended September 29, 2018.

(c) Cash, Cash Equivalents and Restricted Cash

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

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

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	September 28, 2019		December 29, 2018
Cash and cash equivalents	$	69,122	$	107,262
Restricted cash	159		107
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flow	$	69,281	$	107,369

(d) Accounts Receivable and Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from customers’ non-payment of trade accounts receivable owed to the Company.  These trade receivables arise in the ordinary course of business from sales of raw material, finished product or services to the Company’s customers.  The estimate of allowance for doubtful accounts is based upon the Company’s bad debt experience, prevailing market conditions, and aging of trade accounts receivable, among other factors.  If the financial condition of the Company’s customers deteriorates, resulting in the customers’ inability to pay the Company’s receivables as they come due, additional allowances for doubtful accounts may be required.

The Company has entered into agreements with third party banks to factor certain of the Company's trade receivables in order to enhance working capital by turning trade receivables into cash faster. Under these agreements, the Company sells certain selected customers trade receivables to the third party banks without recourse for cash less a nominal fee. For the three months ended September 28, 2019 and September 29, 2018, the Company sold approximately $53.1 million and $32.3 million of its trade receivables and incurred approximately $0.3 million and $0.2 million in fees, which are recorded as interest expense, respectively. For the nine months ended September 28, 2019 and September 29, 2018, the Company sold approximately $136.3 million and $82.9 million of its trade receivables and incurred approximately $0.8 million and $0.4 million in fees, which are recorded as interest expense, respectively.

(e) Revenue Recognition

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

(f) Foreign Currency Translation and Remeasurement

Foreign currency translation is included as a component of accumulated other comprehensive loss and reflects the adjustments resulting from translating the foreign currency denominated financial statements of foreign subsidiaries into U.S. dollars. The functional currency of the Company's foreign subsidiaries is the currency of the primary economic environment in which the entity operates, which is generally the local currency of the country. Accordingly, assets and liabilities of the foreign subsidiaries are translated into U.S. dollars at fiscal period end exchange rates, including intercompany foreign currency transactions that are of long-term investment nature. Income and expense items are translated at average exchange rates occurring during the period. Changes in exchange rates that affect cash flows and the related receivables or payables are recognized as transaction gains and losses in determining net income. The Company incurred net foreign currency translation losses of approximately $36.5 million and $64.2 million for the nine months ended September 28, 2019 and September 29, 2018, respectively.

(g) Leases

The Company accounts for leases in accordance with Accounting Standard Codification (“ASC”) Topic 842, leases. The Company determines if an arrangement is a lease at inception for which the Company recognizes the right-of-use (“ROU”) asset and a lease liability at the lease commencement date. For operating leases, the lease liability is initially and subsequently measured at the present value of the unpaid lease payments at the lease commencement date. In determining the lease liability, the Company applies a discount rate to the minimum

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lease payments within each lease. ASC 842 requires the Company to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. To estimate the Company's incremental borrowing rate over various terms, a comparable market yield curve consistent with the Company's credit quality is determined. The lease term for all of the Company's leases include the noncancellable period of the lease plus any additional periods covered by either a Company option to extend the lease that the Company is reasonably certain to exercise or when a triggering event occurs. The Company has elected to not recognize a ROU asset and lease liability with an initial term of 12 months or less at lease commencement. Current operating leases are included on the Company's balance sheet as a ROU asset, current operating lease liabilities and long-term operating lease liabilities. For finance leases, the lease liability is initially measured in the same manner and date as for the operating leases, and is subsequently measured at amortized cost using the effective interest method. Finance leases are included in property, plant and equipment, current portion of long-term debt and long-term debt, net of current portion, but are not significant to the Company.

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

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

As a result of adopting the new lease standard, the Company recognized additional operating liabilities of approximately $134.4 million with a corresponding ROU asset of approximately $135.7 million as of December 30, 2018.

(h) Reclassifications

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

(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.

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	Net Income/(loss) per Common Share (in thousands, except per share data)
	Three Months Ended
			September 28, 2019							September 29, 2018
	Income		Shares		Per Share		Loss			Shares	Per Share
Basic:
Net Income (loss) attributable to Darling	$	25,721	164,747		$	0.16	$	(6,037	)	164,656	$	(0.04	)
Diluted:
Effect of dilutive securities:
Add: Option shares in the money and dilutive effect of non-vested stock awards			5,725							—
Less: Pro forma treasury shares			(2,206	)						—
Diluted:
Net income (loss) attributable to Darling	$	25,721	168,266		$	0.15	$	(6,037	)	164,656	$	(0.04	)

	Net Income per Common Share (in thousands, except per share data)
	Nine Months Ended
			September 28, 2019						September 29, 2018
	Income		Shares		Per Share		Income		Shares		Per Share
Basic:
Net Income attributable to Darling	$	69,991	164,846		$	0.42	$	60,848	164,784		$	0.37
Diluted:
Effect of dilutive securities:
Add: Option shares in the money and dilutive effect of non-vested stock awards			5,885						1,690
Less: Pro forma treasury shares			(2,278	)					(700	)
Diluted:
Net income attributable to Darling	$	69,991	168,453		$	0.42	$	60,848	165,774		$	0.37

For the three months ended September 28, 2019 and September 29, 2018, respectively, 839,979 and 3,774,610 outstanding stock options were excluded from diluted income per common share as the effect was antidilutive. For the three months ended September 28, 2019 and September 29, 2018, respectively, 462,841 and 2,258,646 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 28, 2019 and September 29, 2018, respectively, 641,399 and 2,773,030 outstanding stock options were excluded from diluted income per common share as the effect was antidilutive. For the nine months ended September 28, 2019 and September 29, 2018, respectively, 557,900 and 1,448,719 shares of non-vested stock and stock equivalents were excluded from diluted income per common share as the effect was antidilutive.

(3) Investment in Unconsolidated Subsidiaries

On January 21, 2011, a wholly-owned subsidiary of Darling entered into a limited liability company agreement with a wholly-owned subsidiary of Valero Energy Corporation (“Valero”) to form Diamond Green Diesel Holdings LLC (the “DGD Joint Venture”). The DGD Joint Venture is owned 50% / 50% with Valero and was formed to design, engineer, construct and operate a renewable diesel plant (the “DGD Facility”), which as a result of the recent expanded capacity is now capable of processing approximately 20,000 barrels per day of input feedstock to produce renewable diesel fuel and certain other co-products, and is located adjacent to Valero's refinery in Norco, Louisiana. The DGD Joint Venture reached mechanical completion and began the production of renewable diesel in late June 2013. Effective May 1, 2019, the limited liability company agreement was amended and restated for the purpose of updating the agreement in certain respects, including to remove certain provisions that were no longer relevant and to add new provisions relating to the DGD Joint Venture’s recently approved expansion project to construct a new, parallel facility located next to the existing facility.

In 2019, the Company continued to evaluate operational developments and the impact of anticipated significant expansion of the DGD Joint Venture. This evaluation was impactful to the consideration of how the Company most appropriately reflects its share of equity income from the DGD Joint Venture. Based on the Company's analysis, it was determined that the DGD Joint Venture has evolved into an integral and integrated part of the Company's ongoing operations. The Company determined this justifies a more meaningful and transparent presentation of equity in net income of the DGD

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Joint Venture as a component of the Company's operating income. As a result, the Company has reclassified its equity in net income of the DGD Joint Venture to operating income for all periods presented.

Selected financial information for the Company's DGD Joint Venture is as follows (in thousands):

(in thousands)	September 30, 2019		December 31, 2018
Assets:
Total current assets	$	193,457	$	186,258
Property, plant and equipment, net	653,463		576,384
Other assets	30,587		24,601
Total assets	$	877,507	$	787,243
Liabilities and members' equity:
Total current portion of long term debt	$	293	$	189
Total other current liabilities	47,373		40,619
Total long term debt	8,859		8,485
Total other long term liabilities	4,409		539
Total members' equity	816,573		737,411
Total liabilities and members' equity	$	877,507	$	787,243

	Three Months Ended						Nine Months Ended
(in thousands)	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Revenues:
Operating revenues	$	262,118		$	104,811		$	859,647		$	407,121
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense	183,022			103,794			633,109			169,632
Depreciation, amortization and accretion expense	15,242			6,516			38,574			18,890
Total costs and expenses	198,264			110,310			671,683			188,522
Operating income	63,854			(5,499		)	187,964			218,599
Other income	506			556			1,781			1,348
Interest and debt expense, net	(320		)	(318		)	(965		)	(637		)
Net income	$	64,040		$	(5,261	)	$	188,780		$	219,310

As of September 28, 2019 under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $408.3 million on the consolidated balance sheet. The Company has recorded an equity in net income of approximately $32.0 million and an equity in net loss of $2.6 million for the three months ended September 28, 2019 and September 29, 2018, respectively. The Company has recorded an equity in net income of approximately $94.4 million and $109.7 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. In February 2018, the blender tax credits for calendar year 2017 were retroactively reinstated by the U.S. Congress. Fiscal 2019 results do not include any blenders tax credits, while in the first nine months of fiscal 2018, the DGD Joint Venture recorded approximately $160.4 million for the 2017 reinstated blenders tax credits. The DGD Joint Venture recorded the blenders tax credits in the first quarter of fiscal 2018 as a reduction of total costs and expenses in the above table. The biodiesel blenders tax credits have not been reinstated for fiscal 2018 or fiscal 2019. In the nine months ended September 28, 2019, the Company received dividend distributions of approximately $55.4 million from the DGD Joint Venture. In addition, in October 2019, the Company received a dividend distribution of approximately $12.1 million from the DGD Joint Venture.

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

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(4) Acquisitions and Dispositions

In October 2018, the Company acquired substantially all of the assets of Triple - T Foods - Arkansas, Inc. including a wet pet food ingredient operation in Springdale, Arkansas and a cold storage operation in Rogers, Arkansas. The Company finalized the working capital amount in the first quarter of 2019, which resulted in insignificant adjustments to previously disclosed amounts.

(5) Inventories

A summary of inventories follows (in thousands):

        

	September 28, 2019		December 29, 2018
Finished product	$	199,764	$	176,184
Work in process	80,313		78,501
Raw material	35,852		32,502
Supplies and other	37,074		53,841
	$	353,003	$	341,028

(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):    

	September 28, 2019			December 29, 2018
Indefinite Lived Intangible Assets
Trade names	$	52,241		$	53,472
	52,241			53,472
Finite Lived Intangible Assets:
Routes	377,686			386,724
Permits	479,823			486,359
Non-compete agreements	3,808			3,784
Trade names	65,670			72,570
Royalty, consulting, land use rights and leasehold	18,128			16,528
	945,115			965,965
Accumulated Amortization:
Routes	(159,318		)	(145,702		)
Permits	(261,970		)	(238,123		)
Non-compete agreements	(2,959		)	(2,501		)
Trade names	(31,253		)	(33,242		)
Royalty, consulting, land use rights and leasehold	(4,496		)	(4,007		)
	(459,996		)	(423,575		)
Total Intangible assets, less accumulated amortization	$	537,360		$	595,862

Gross intangible routes, permits, trade names, non-compete agreements and other intangibles partially decreased in fiscal 2019 as a result of approximately $13.4 million of fully amortized asset retirements. Amortization expense for the three and nine months ended September 28, 2019 and September 29, 2018, was approximately $18.5 million, $18.3 million and $55.3 million and $56.7 million, respectively.

(7) Goodwill

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

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	Feed Ingredients			Food Ingredients			Fuel Ingredients			Total
Balance at December 29, 2018
Goodwill	$	791,966		$	335,701		$	117,867		$	1,245,534
Accumulated impairment losses	(15,914		)	(461		)	—			(16,375		)
	776,052			335,240			117,867			1,229,159
Goodwill acquired during year	396			91			—			487
Foreign currency translation	(3,740		)	(10,280		)	(3,313		)	(17,333		)
Balance at September 28, 2019
Goodwill	788,622			325,512			114,554			1,228,688
Accumulated impairment losses	(15,914		)	(461		)	—			(16,375		)
	$	772,708		$	325,051		$	114,554		$	1,212,313

(8) Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

	September 28, 2019		December 29, 2018
Compensation and benefits	$	90,275	$	91,851
Accrued income, ad valorem, and franchise taxes	28,578		31,366
Accrued operating expenses	63,138		62,247
Customer deposits	10,970		30,741
Other accrued expense	104,203		93,279
	$	297,164	$	309,484

(9) Leases

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). The Company adopted the new standard on December 30, 2018 and is using the effective date as the Company's date of initial application and consequently, financial information will not be updated and the disclosures required under the this ASU will not be provided for dates and periods before December 30, 2018. The Company has elected the package of expedients, which permits the Company not to reassess under the new standard the Company's prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter not being applicable to the Company.

The Company leases certain real and personal property under non-cancelable operating leases. In addition, the Company leases a large portion of the Company's fleet of tractors, all of its rail cars, some IT equipment and other transportation equipment. The Company's office leases include certain lease and non-lease components, where the Company has elected to exclude the non-lease components from the calculation of the lease liability and ROU asset. The Company has finance leases, which are not significant to the Company and not separately disclosed in detail.

The components of operating lease expense included in cost of sales and operating expenses and selling, general and administrative expenses were as follows (in thousands):

	Three months ended		Nine months ended
	September 28, 2019		September 28, 2019
Operating lease expense	$	11,589	36,417
Short-term lease costs	4,903		10,653
Total lease cost	$	16,492	$	47,070

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Other information (in thousands, except lease terms and discount rates):

	Nine Months Ended
	September 28, 2019
Cash paid for amounts included in the measurement lease liabilities
Operating cash flows from operating leases	$	35,325
	As of September 28, 2019
Operating right-of-use assets, net	$	119,063
Operating lease liability, current	$	35,223
Operating lease liability, non-current	83,754
Total operating lease liabilities	$	118,977
Weighted average remaining lease term - operating leases	6.6 years
Weighted average discount rate - operating leases	4.69		%

Future annual minimum lease payments and capital lease commitments as of September 28, 2019 were as follows (in thousands):

Period Ending Fiscal	Operating Leases			Capital Leases
2019 (excluding the nine months ended September 28, 2019)	$	11,140		$	20
2020	38,842			154
2021	26,818			6
2022	17,239			6
2023	12,729			—
Thereafter	31,572			—
	$	138,340		$	186
Less amounts representing interest	$	(19,363	)	(7		)
Lease obligations included in current and long-term liabilities	$	118,977		$	179

The Company adopted ASU 2016-02 on December 30, 2018 as noted above. The following disclosure is provided for periods prior to adoption. Future annual minimum lease payments and capital lease commitments as of December 29, 2018 were as follows (in thousands):

Period Ending Fiscal	Operating Leases		Capital Leases
2019	$	46,316	$	271
2020	34,403		152
2021	22,252		6
2022	13,091		6
2023	8,478		—
Thereafter	28,219		—
	$	152,759	$	435
Less amounts representing interest			(20		)
Capital lease obligation included in current and long-term debt			$	415

(10) Debt

Debt consists of the following (in thousands): 

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	September 28, 2019			December 29, 2018
Amended Credit Agreement:
Revolving Credit Facility ($32.1 million denominated in euro at December 29, 2018)	$	24,000		$	32,105
Term Loan A ($14.0 million and $29.8 million denominated in CAD at September 28, 2019 and December 29, 2018, respectively)	14,005			68,080
Less unamortized deferred loan costs	(57		)	(381		)
Carrying value Term Loan A	13,948			67,699
Term Loan B	495,000			495,000
Less unamortized deferred loan costs	(8,048		)	(9,024		)
Carrying value Term Loan B	486,952			485,976
5.375% Senior Notes due 2022 with effective interest of 5.72%	—			500,000
Less unamortized deferred loan costs	—			(4,876		)
Carrying value 5.375% Senior Notes due 2022	—			495,124
5.25% Senior Notes due 2027 with effective interest of 5.47%	500,000			—
Less unamortized deferred loan costs	(6,674		)	—
Carrying value 5.25% Senior Notes due 2027	493,326			—
3.625% Senior Notes due 2026 - Denominated in euro with effective interest of 3.83%	563,178			590,499
Less unamortized deferred loan costs - Denominated in euro	(7,086		)	(8,160		)
Carrying value 3.625% Senior Notes due 2026	556,092			582,339
Other Notes and Obligations	46,583			11,189
	1,620,901			1,674,432
Less Current Maturities	61,092			7,492
	$	1,559,809		$	1,666,940

As of September 28, 2019, the Company had outstanding debt under a term loan facility denominated in Canadian dollars of CAD$18.6 million. See below for discussion relating to the Company's debt agreements. In addition, as of September 28, 2019, the Company had capital lease obligations denominated in Canadian dollars included in debt. The total Canadian dollar finance lease obligation was approximately CAD$0.2 million.

As of September 28, 2019, the Company had outstanding debt under the Company's 3.625% Senior Notes due 2026 denominated in euros of €515.0 million. See below for discussion relating to the Company's debt agreements. In addition, at September 28, 2019, the Company had capital lease obligations denominated in euros included in debt. The total euro finance lease obligations was less than approximately €0.1 million.

As of September 28, 2019, the Company had other notes and obligations that consist of various overdraft facilities of approximately $31.3 million, a China working capital line of credit of approximately $12.5 million and other debt of approximately $2.8 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 18, 2017, the Company, and certain of its subsidiaries entered into an amendment (the “Fifth Amendment”) with its lenders to the Amended Credit Agreement. Among other things, the Fifth Amendment (i) refinanced the term B loans under the Amended Credit Agreement with new term B loans in an aggregate principal amount of $525.0 million with a maturity date of December 18, 2024; (ii) adjusted the applicable margin pricing on borrowings under the term B loan; (iii) modified certain of the negative covenants to increase the allowances for certain actions, including debt and investments; and (iv) made other updates and changes.

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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 (i) 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 of the term B loans; (ii) reset the amortization schedule of the term A loans to their original schedule; (iii) adjusted the applicable margin pricing grid on borrowings under the term A Loan and revolving credit facility which adjusts based on the Company's total leverage ratio as set forth in the Amended Credit Agreement; (iv) eliminated the secured leverage ratio financial maintenance covenant so that from and after the effective date of the Fourth Amendment the Company’s financial covenants consist of maintaining of total leverage ratio not to exceed 5.50 to 1.00 and maintaining an interest coverage ratio of not less than 3.00 to 1.00; (v) modified certain of the negative covenants to include a senior leverage ratio incurrence-based test and to increase the allowances for certain actions, including debt, investments and restricted payments; and (vi) made other updates and changes.

The Company's Amended Credit Agreement provides for senior secured credit facilities in the aggregate principal amount of $1.88 billion comprised of (i) the Company's $350.0 million term loan A facility, (ii) the Company's $525.0 million 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 $948.3 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 Darling Ingredients Germany Holding GmbH 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. 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 term loan A facility and the revolving loan facility will equal either LIBOR/euro interbank offered rate/CDOR plus 2.00% per annum or base rate/Canadian prime rate plus 1.00% 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 the base rate plus 1.00% or LIBOR plus 2.00%.

As of September 28, 2019, the Company had $24.0 million outstanding under the revolver at base rate plus a margin of 1.00% per annum for a total of 6.00% per annum. The Company had $495.0 million outstanding under the term loan B facility at LIBOR plus a margin of 2.00% per annum for a total of 4.12% per annum. The Company had CAD$18.6 million outstanding under the term loan A facility at CDOR plus a margin of 2.00% per annum for a total of 4.0272%. As of September 28, 2019, the Company had availability of $926.9 million under the Amended Credit Agreement taking into account amounts borrowed, ancillary facilities and letters of credit issued of $3.6 million. The Company also has foreign bank guarantees that are not part of the Company's Amended Credit Agreement in the amount of approximately $11.3 million at September 28, 2019.

3.625% Senior Notes due 2026. On May 2, 2018, Darling Global Finance B.V. issued and sold €515.0 million aggregate principal amount of 3.625% Senior Notes due 2026 (the “3.625% Notes”). The 3.625% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of May 2, 2018 (the “3.625% Indenture”), among Darling Global Finance B.V., Darling, the subsidiary guarantors party thereto from time to time, Citibank, N.A., London Branch, as trustee and principal paying agent, and Citigroup Global Markets Deutschland AG, as principal registrar. The 3.625% Notes are guaranteed on a senior unsecured basis by Darling and all of Darling's restricted subsidiaries (other than any foreign subsidiary or any receivable entity) that guarantee the Senior Secured Credit Facilities.

5.25% Senior Notes due 2027. On April 3, 2019, Darling issued and sold $500.0 million aggregate principal amount of 5.25% Senior Notes due 2027 (the “5.25% Notes”). The 5.25% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of April 3, 2019 (the “5.25% Indenture”), among Darling, the subsidiary guarantors party thereto from time to time, and Regions Bank, as trustee. The gross proceeds from the sale of the Notes, together with cash on hand, were used to refinance all of the Company's 5.375% Senior Notes due 2022, by cash tender offer for and redemption of those notes, to pay the discount of the initial purchasers and to pay the other fees and expenses related to the offering of the 5.25% Notes.

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The 5.25% Notes will mature on April 15, 2027. Darling will pay interest on the 5.25% Notes on April 15 and October 15 of each year, commencing on October 15, 2019. Interest on the 5.25% Notes accrues from April 3, 2019 at a rate of 5.25% per annum and is payable in cash. The 5.25% Notes are guaranteed on a senior unsecured basis by Darling and all of Darling's restricted subsidiaries (other than foreign subsidiaries). In addition, the Company capitalized $7.0 million of deferred loan costs for the issuance of the 5.25% Notes in the second quarter of 2019.

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 Company retired the 5.375% Notes in the second quarter of 2019 using the proceeds from the issuance of the 5.25% Notes and incurred charges of approximately $12.1 million in debt extinguishment charges including the write-off of deferred loan costs.

As of September 28, 2019, 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 5.25% Indenture and the 3.625% Indenture.

(11) Income Taxes

The Company has provided income taxes for the three and nine month periods ended September 28, 2019 and September 29, 2018, based on its estimate of the effective tax rate for the entire 2019 and 2018 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, 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 have access to its offshore earnings with no material U.S. tax impact. Therefore, the Company does not consider earnings from its foreign subsidiaries to be permanently reinvested offshore.

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 28, 2019, the Company had $4.1 million of gross unrecognized tax benefits and $0.8 million of related accrued interest and penalties. It is reasonably possible within the next twelve months that the Company’s gross unrecognized tax benefits may decrease by up to $0.2 million, excluding interest and penalties, primarily due to potential settlements and expiration of certain statutes of limitations.

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 tax year.

(12)   Other Comprehensive Income/(Loss)

The Company follows FASB authoritative guidance for reporting and presentation of comprehensive income/(loss) and its components.  Other comprehensive income/(loss) is derived from adjustments that reflect pension adjustments, natural gas swap adjustments, corn option adjustments, soybean meal adjustments, foreign exchange forward adjustments and foreign currency translation adjustments.

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In the first nine months of fiscal 2019, 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.

The components of other comprehensive income/(loss) and the related tax impacts for the three and nine months ended September 28, 2019 and September 29, 2018 are as follows (in thousands):

	Three Months Ended
	Before-Tax						Tax (Expense)						Net-of-Tax
	Amount						or Benefit						Amount
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Defined benefit pension plans
Amortization of prior service cost/(benefit)	$	9		$	9		$	(2	)	$	(3	)	$	7		$	6
Amortization of actuarial loss	1,146			888			(294		)	(226		)	852			662
Total defined benefit pension plans	1,155			897			(296		)	(229		)	859			668
Soybean meal option derivatives
Loss/(gain) reclassified to net income	—			(4		)	—			1			—			(3		)
Gain/(loss) activity recognized in other comprehensive income/(loss)	—			8			—			(2		)	—			6
Total soybean meal option derivatives	—			4			—			(1		)	—			3
Corn option derivatives
Loss/(gain) reclassified to net income	206			(563		)	(54		)	147			152			(416		)
Gain/(loss) activity recognized in other comprehensive income/(loss)	542			507			(141		)	(131		)	401			376
Total corn option derivatives	748			(56		)	(195		)	16			553			(40		)
Heating oil derivatives
Gain/(loss) activity recognized in other comprehensive income/(loss)	(2,268		)	—			585			—			(1,683		)	—
Total heating oil derivatives	(2,268		)	—			585			—			(1,683		)	—
Foreign exchange derivatives
Loss/(gain) reclassified to net income	1,178			—			(362		)	—			816			—
Gain/(loss) activity recognized in other comprehensive income/(loss)	(8,405		)	468			2,645			(159		)	(5,760		)	309
Total foreign exchange derivatives	(7,227		)	468			2,283			(159		)	(4,944		)	309
Foreign currency translation	(48,954		)	(5,749		)	1,328			165			(47,626		)	(5,584		)
Other comprehensive income/(loss)	$	(56,546	)	$	(4,436	)	$	3,705		$	(208	)	$	(52,841	)	$	(4,644	)

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	Nine Months Ended
	Before-Tax						Tax (Expense)						Net-of-Tax
	Amount						or Benefit						Amount
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Defined benefit pension plans
Amortization of prior service cost/(benefit)	$	27		$	26		$	(7	)	$	(7	)	$	20		$	19
Amortization of actuarial loss	3,439			2,664			(883		)	(682		)	2,556			1,982
Total defined benefit pension plans	3,466			2,690			(890		)	(689		)	2,576			2,001
Natural gas swap derivatives
Loss/(gain) reclassified to net income	—			14			—			(3		)	—			11
Gain/(loss) activity recognized in other comprehensive income/(loss)	—			15			—			(4		)	—			11
Total natural gas swap derivatives	—			29			—			(7		)	—			22
Soybean meal option derivatives
Loss/(gain) reclassified to net income	—			(4		)	—			1			—			(3		)
Gain/(loss) activity recognized in other comprehensive income/(loss)	—			8			—			(2		)	—			6
Total soybean meal option derivatives	—			4			—			(1		)	—			3
Corn option derivatives
Loss/(gain) reclassified to net income	169			(1,554		)	(44		)	404			125			(1,150		)
Gain/(loss) activity recognized in other comprehensive income/(loss)	609			(65		)	(159		)	17			450			(48		)
Total corn option derivatives	778			(1,619		)	(203		)	421			575			(1,198		)
Heating oil derivatives
Gain/(loss) activity recognized in other comprehensive income/(loss)	606			—			(156		)	—			450			—
Total heating oil derivatives	606			—			(156		)	—			450			—
Foreign exchange derivatives
Loss/(gain) reclassified to net income	1,465			—			(473		)	—			992			—
Gain/(loss) activity recognized in other comprehensive income/(loss)	(9,485		)	468			3,063			(159		)	(6,422		)	309
Total foreign exchange derivatives	(8,020		)	468			2,590			(159		)	(5,430		)	309
Foreign currency translation	(37,695		)	(66,407		)	1,509			1,281			(36,186		)	(65,126		)
Other comprehensive income/(loss)	$	(40,865	)	$	(64,835	)	$	2,850		$	846		$	(38,015	)	$	(63,989	)

The following table presents the amounts reclassified out of each component of other comprehensive income/(loss), net of tax for the three and nine months ended September 28, 2019 and September 29, 2018 as follows (in thousands):

21

	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018			Statement of Operations Classification
Derivative instruments
Soybean meal derivatives	$	—		$	4		$	—		$	4		Net sales
Foreign exchange contracts	(1,178		)	—			(1,465		)	—			Net sales
Natural gas swap derivatives	—			—			—			(14		)	Cost of sales and operating expenses
Corn option derivatives	(206		)	563			(169		)	1,554			Cost of sales and operating expenses
	(1,384		)	567			(1,634		)	1,544			Total before tax
	416			(148		)	517			(402		)	Income taxes
	(968		)	419			(1,117		)	1,142			Net of tax
Defined benefit pension plans
Amortization of prior service cost	$	(9	)	$	(9	)	$	(27	)	$	(26	)	(a)
Amortization of actuarial loss	(1,146		)	(888		)	(3,439		)	(2,664		)	(a)
	(1,155		)	(897		)	(3,466		)	(2,690		)	Total before tax
	296			229			890			689			Income taxes
	(859		)	(668		)	(2,576		)	(2,001		)	Net of tax
Total reclassifications	$	(1,827	)	$	(249	)	$	(3,693	)	$	(859	)	Net of tax

(a) These items are included in the computation of net periodic pension cost. See Note 14 Employee Benefit Plans for additional information.

The following table presents changes in each component of accumulated other comprehensive income/(loss) as of September 28, 2019 as follows (in thousands):

	Nine Months Ended September 28, 2019
	Foreign Currency			Derivative			Defined Benefit
	Translation			Instruments			Pension Plans			Total
Accumulated Other Comprehensive Income/(loss) December 29, 2018, attributable to Darling, net of tax	$	(270,081	)	$	1,081		$	(35,539	)	$	(304,539	)
Other comprehensive loss before reclassifications	(36,186		)	(5,522		)	—			(41,708		)
Amounts reclassified from accumulated other comprehensive loss	—			1,117			2,576			3,693
Net current-period other comprehensive income/(loss)	(36,186		)	(4,405		)	2,576			(38,015		)
Noncontrolling interest	292			—			—			292
Accumulated Other Comprehensive loss September 28, 2019, attributable to Darling, net of tax	(306,559		)	$	(3,324	)	$	(32,963	)	$	(342,846	)

(13)    Stockholders' Equity

Fiscal 2019 Long-Term Incentive Opportunity Awards (2019 LTIP). On January 25, 2019, the Compensation Committee (the “Committee”) of the Company's Board of Directors adopted the 2019 LTIP pursuant to which they awarded certain of the Company's key employees, 610,953 stock options and 305,195 performance share units (the “PSUs”) under the Company's 2017 Omnibus Incentive Plan. The stock options 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”), as calculated in accordance with the terms of the award agreement, relative to the average ROCE of the Company's performance peer group companies, with the earned award to be determined in the first quarter of fiscal 2022, 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 depending on the Company's ROCE relative to that of the performance peer group companies and is also subject to the application of a total shareholder return (“TSR”) cap/collar modifier depending on the Company's TSR during the performance period relative to that of the performance peer group companies.

During the third quarter of fiscal 2019, the Company repurchased approximately $11.7 million of its common stock in the open market. As of September 28, 2019, the Company has approximately $188.3 million remaining under the share repurchase program initially approved in August 2017 and subsequently extended to August 13, 2020. Subsequent to the third quarter, the Company repurchased approximately $7.5 million of its common stock in the open market.

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(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 ended September 28, 2019 and September 29, 2018 includes the following components (in thousands):

	Pension Benefits						Pension Benefits
	Three Months Ended						Nine Months Ended
	September 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Service cost	$	664		$	762		$	2,025		$	2,340
Interest cost	1,698			1,603			5,122			4,844
Expected return on plan assets	(1,816		)	(2,053		)	(5,452		)	(6,176		)
Amortization of prior service cost	9			9			27			26
Amortization of net loss	1,146			888			3,439			2,664
Net pension cost	$	1,701		$	1,209		$	5,161		$	3,698

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 28, 2019, the Company expects to contribute approximately $4.2 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 months ended September 28, 2019 and September 29, 2018 of approximately $2.7 million and $2.8 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 2 of the plans in which the Company currently participates could be material to the Company, with 1 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, 5 plans have certified as critical or red zone, 2 plans have certified as endangered or yellow zone as defined by the Pension Protection Act of 2006.

The Company has received notices of withdrawal liability from 5 U.S. multiemployer plans in which it participated. As of September 28, 2019, the Company has an aggregate accrued liability of approximately $6.1 million representing the present value of scheduled withdrawal liability payments under these multiemployer plans. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could require additional funding under the Pension Protection Act of 2006, the amounts could be material.

(15) Derivatives

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.

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The Company makes limited use of derivative instruments to manage cash flow risks related to natural gas usage, diesel fuel usage, inventory, forecasted sales and foreign currency exchange rates. The Company does not use derivative instruments for trading purposes.  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 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 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 28, 2019, the Company had corn option contracts and foreign exchange forward and option contracts outstanding that qualified and were designated for hedge accounting as well as corn forward contracts and foreign currency forward contracts that did not qualify and were not designated for hedge accounting.

Entities are required to report all derivative instruments in the statement of financial position at fair value. The accounting for 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 gain or loss on the derivative instrument is reported initially as a component of other comprehensive income (outside of earnings) and is subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amounts excluded from the assessment of hedge effectiveness are reported in earnings immediately. If the derivative instrument is not designated as a hedge, the gain or loss is recognized in earnings in the period of change.

Cash Flow Hedges

In the first nine months of fiscal 2019, 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 2020. As of September 28, 2019, some of the contracts have been settled while the remaining contract positions and activity are not significant to the Company. At September 28, 2019, the aggregate fair value of these corn option contracts was approximately $0.8 million. As of December 29, 2018 there were no outstanding amounts. These amounts are included in other current assets on the balance sheet, with an offset recorded in accumulated other comprehensive income. The Company may enter into corn option contracts in the future from time to time.

In fiscal 2018 and the first nine months of fiscal 2019, the Company entered into foreign exchange forward and option contracts that are considered 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 2022. At September 28, 2019 and December 29, 2018, the aggregate fair value of these foreign exchange contracts was approximately $0.9 million and $1.6 million, respectively. The September 28, 2019 amounts are included in other current assets, accrued expense and other assets on the balance sheet, with an offset recorded in accumulated other comprehensive loss. The December 29, 2018 amounts are included in other current assets, accrued expense and noncurrent liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss.

As of September 28, 2019, the Company had the following outstanding forward and option contract amounts that were entered into to hedge foreign currency transactions in currencies other than the functional currency and forecasted transactions in currencies other than the functional currency (in thousands):

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Functional Currency		Contract Currency
Type	Amount	Type	Amount
Brazilian real	29,897	Euro	6,609
Brazilian real	1,105,749	U.S. dollar	309,020
Euro	65,145	U.S. dollar	72,542
Euro	24,654	Polish zloty	108,000
Euro	5,019	Japanese yen	601,153
Euro	15,147	Chinese renminbi	119,722
Euro	13,471	Australian dollar	21,850
Euro	5,677	British pound	5,138
Polish zloty	21,214	Euro	4,829
British pound	288	Euro	326
British pound	43	U.S. dollar	54
Japanese yen	229,604	U.S. dollar	2,130
U.S. dollar	634	Japanese yen	68,000
U.S. dollar	38,598	Euro	35,000

The Company estimates the amount that will be reclassified from accumulated other comprehensive loss at September 28, 2019 into earnings over the next 12 months will be approximately $0.7 million. As of September 28, 2019, 0 amounts have been reclassified into earnings as a result of the discontinuance of cash flow hedges.

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 ended September 28, 2019 and September 29, 2018 (in thousands):

		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 28, 2019			September 29, 2018			September 28, 2019			September 29, 2018
Foreign exchange	Foreign currency loss	$	95		$	(1,389	)	$	1,632		$	(3,216	)
Foreign exchange	Net sales	1,244			3,652			1,306			3,652
Foreign exchange	Cost of sales and operating expenses	(567		)	(880		)	(661		)	(880		)
Foreign exchange	Selling, general and administrative expense	1,915			359			2,437			3,354
Corn options and futures	Net sales	881			294			619			748
Corn options and futures	Cost of sales and operating expenses	(2,509		)	(403		)	(1,866		)	(709		)
Heating Oil swaps and options	Cost of sales and operating expenses	—			—			(506		)	—
Total		$	1,059		$	1,633		$	2,961		$	2,949

At September 28, 2019, the Company had forward purchase agreements in place for purchases of approximately $39.3 million of natural gas and diesel fuel.  These forward purchase agreements have no net settlement provisions and the Company intends to take physical delivery of the underlying product.  Accordingly, the forward purchase agreements 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.

(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 28, 2019 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. 

25

			Fair Value Measurements at September 28, 2019 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	$	4,844	$	—	$	4,844	$	—
Total Assets	$	4,844	$	—	$	4,844	$	—
Liabilities:
Derivative instruments	$	4,172	$	—	$	4,172	$	—
5.25% Senior notes	525,000		—		525,000		—
3.625% Senior notes	597,138		—		597,138		—
Term loan A	13,935		—		13,935		—
Term loan B	496,238		—		496,238		—
Revolver debt	23,640		—		23,640		—
Total Liabilities	$	1,660,123	$	—	$	1,660,123	$	—

			Fair Value Measurements at December 29, 2018 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	$	4,307	$	—	$	4,307	$	—
Total Assets	$	4,307	$	—	$	4,307	$	—
Liabilities:
Derivative instruments	$	3,235	$	—	$	3,235	$	—
5.375% Senior notes	495,000		—		495,000		—
3.625% Senior notes	585,303		—		585,303		—
Term loan A	67,739		—		67,739		—
Term loan B	492,525		—		492,525		—
Revolver debt	31,623		—		31,623		—
Total Liabilities	$	1,675,425	$	—	$	1,675,425	$	—

Derivative assets and liabilities consist of the Company’s corn future contracts and foreign currency contracts, which represents 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 15 (Derivatives) for 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 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 of the senior notes, term loan A, term loan B and revolver debt is based on market quotation from third-party banks.

(17) Contingencies 

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 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.

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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 28, 2019 and December 29, 2018, the reserves for insurance, environmental, litigation and tax contingencies reflected on the balance sheet in accrued expenses and other non-current liabilities were approximately $66.8 million and $66.6 million, respectively.  The Company has insurance recovery receivables of approximately $26.1 million as of September 28, 2019 and December 29, 2018, related to the insurance contingencies. The Company's management believes these reserves for contingencies are reasonable and sufficient based upon present governmental regulations and information currently available to management; however, there can be no assurance that final costs related to these contingencies will not exceed current estimates. The Company believes that the likelihood is remote that any additional liability from the lawsuits and claims that may not be covered by insurance would have a material effect on the Company's financial position, results of operations or cash flows.

Lower Passaic River Area. In December 2009, the Company, along with numerous other entities, received notice from the United States Environmental Protection Agency (“EPA”) that the Company (as alleged successor-in-interest to The Standard Tallow Corporation) is considered a potentially responsible party (a “PRP”) with respect to alleged contamination in the lower 17-mile area of the Passaic River which is part of the Diamond Alkali Superfund Site located in Newark, New Jersey. The Company’s designation as a PRP is based upon the operation of former plant sites located in Newark and Kearny, New Jersey by The Standard Tallow Corporation, an entity that the Company acquired in 1996. In 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 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 Passaic River area at an estimated cost of $1.38 billion. The EPA letter makes no demand on the Company and lays out a framework for remedial design/remedial action implementation in which the EPA will first seek funding from major PRPs. The letter indicates that the EPA has 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 EPA has already offered early cash out settlements to 20 of the other PRPs and has stated that other parties who did not discharge any of the 8 contaminants of concern identified in the ROD (the “COCs”) may also be eligible for cash out settlements and has begun a settlement analysis using a third-party allocator. The Company is participating in this allocation process as it 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 COCs. 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 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 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 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 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 Passaic River. The Company's ultimate liability, if any, for investigatory costs, remedial costs and/or natural resource damages in connection with the 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 Corporation plant sites contributed any of the 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

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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 agreed to work toward the execution of a definitive agreement to relocate the facility to a different location in Fresno. In September 2019, the Company and the City of Fresno entered into a Disposition and Development Agreement (the “DADA”) pursuant to which the Company has agreed, subject to the terms and conditions contained in the DADA, to relocate the facility to a new facility, construction of which is currently anticipated to be completed during the second half of 2021. As a condition to the Company’s obligation to relocate the facility, the Concerned Citizens of West Fresno will enter into an agreement to stay the aforementioned litigation until such time as the relocation is complete, at which time they will dismiss the litigation with prejudice. Management believes that any disruption to its operations in Fresno resulting from the litigation, relocation or otherwise, would not have a material effect on the Company's financial condition, results of operations or cash flows.

(18) Business Segments

The Company sells its products domestically and internationally, operating within 3 industry segments: Feed Ingredients, Food Ingredients and Fuel Ingredients. The measure of segment 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 corporate 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

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

Food Ingredients

Food Ingredients consists principally of (i) the collagen business conducted by Darling Ingredients International under the Rousselot name, (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, which primarily consists of an edible fat business.

Fuel Ingredients

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

Business Segments (in thousands):

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	Feed Ingredients			Food Ingredients			Fuel Ingredients		Corporate			Total
Three Months Ended September 28, 2019
Net Sales	$	496,978		$	276,467		$	68,604	$	—		$	842,049
Cost of sales and operating expenses	379,792			214,643			58,488		—			652,923
Gross Margin	117,186			61,824			10,116		—			189,126
Loss/(gain) on sale of assets	(2,429		)	(253		)	13		—			(2,669		)
Selling, general and administrative expenses	47,319			22,811			912		12,507			83,549
Depreciation and amortization	50,182			19,743			7,895		2,587			80,407
Equity in net income of Diamond Green Diesel	—			—			32,020		—			32,020
Segment operating income/(loss)	22,114			19,523			33,316		(15,094		)	59,859
Equity in net loss of other unconsolidated subsidiaries	(665		)	—			—		—			(665		)
Segment income/(loss)	21,449			19,523			33,316		(15,094		)	59,194
Total other expense												(21,507		)
Income before income taxes												$	37,687

	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Three Months Ended September 29, 2018
Net Sales	$	482,744		$	265,208		$	64,624		$	—		$	812,576
Cost of sales and operating expenses	383,739			210,730			53,460			—			647,929
Gross Margin	99,005			54,478			11,164			—			164,647
Loss/(gain) on sale of assets	107			(33		)	98			—			172
Selling, general and administrative expenses	39,702			21,843			(2,822		)	8,724			67,447
Depreciation and amortization	47,321			19,697			9,370			2,454			78,842
Equity in net loss of Diamond Green Diesel	—			—			(2,630		)	—			(2,630		)
Segment operating income/(loss)	11,875			12,971			1,888			(11,178		)	15,556
Equity in net loss of other unconsolidated subsidiaries	(162		)	—			—			—			(162		)
Segment income/(loss)	11,713			12,971			1,888			(11,178		)	15,394
Total other expense													(21,934		)
Loss before income taxes													$	(6,540	)

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	Feed Ingredients			Food Ingredients			Fuel Ingredients		Corporate			Total
Nine Months Ended September 28, 2019
Net Sales	$	1,480,244		$	830,466		$	193,767	$	—		$	2,504,477
Cost of sales and operating expenses	1,143,606			643,091			161,855		—			1,948,552
Gross Margin	336,638			187,375			31,912		—			555,925
Loss (gain) on sale of assets	(7,343		)	(13,518		)	16		—			(20,845		)
Selling, general and administrative expense	142,615			68,129			583		38,242			249,569
Depreciation and amortization	148,271			59,115			24,055		7,616			239,057
Equity in net income of Diamond Green Diesel	—			—			94,390		—			94,390
Segment operating income/(loss)	53,095			73,649			101,648		(45,858		)	182,534
Equity in net loss of other unconsolidated subsidiaries	(1,087		)	—			—		—			(1,087		)
Segment income/(loss)	52,008			73,649			101,648		(45,858		)	181,447
Total other expense												(80,026		)
Income before income taxes												$	101,421
Segment assets at September 28, 2019	$	2,592,298		$	1,307,422		$	789,692	$	255,487		$	4,944,899

	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Nine Months Ended September 29, 2018
Net Sales	$	1,467,365		$	847,457		$	219,774		$	—		$	2,534,596
Cost of sales and operating expenses	1,123,196			684,962			170,571			—			1,978,729
Gross Margin	344,169			162,495			49,203			—			555,867
Loss (gain) on sale of assets	526			(244		)	190			—			472
Selling, general and administrative expense	131,914			67,894			(4,056		)	37,155			232,907
Restructuring and impairment charges	—			14,965			—			—			14,965
Depreciation and amortization	140,933			60,725			26,378			7,879			235,915
Equity in net income of Diamond Green Diesel	—			—			109,655			—			109,655
Segment operating income/(loss)	70,796			19,155			136,346			(45,034		)	181,263
Equity in net loss of other unconsolidated subsidiaries	(57		)	—			—			—			(57		)
Segment income/(loss)	70,739			19,155			136,346			(45,034		)	181,206
Total other expense													(113,414		)
Income before income taxes													$	67,792
Segment assets at December 29, 2018	$	2,566,106		$	1,401,291		$	761,817		$	160,140		$	4,889,354

(19) Revenue

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 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 following tables presents the Company revenues disaggregated by geographic area and major product types by reportable segment for the three months ended September 28, 2019 and September 29, 2018 (in thousands):

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	Three Months Ended September 28, 2019
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	411,566	$	53,483	$	11,176	$	476,225
Europe	76,526		150,647		57,428		284,601
China	6,413		43,447		—		49,860
South America	—		13,154		—		13,154
Other	2,473		15,736		—		18,209
Net sales	$	496,978	$	276,467	$	68,604	$	842,049
Major product types
Fats	$	150,018	$	33,186	$	—	$	183,204
Used cooking oil	45,793		—		—		45,793
Proteins	196,912		—		—		196,912
Bakery	51,570		—		—		51,570
Other rendering	40,444		—		—		40,444
Food ingredients	—		221,091		—		221,091
Bioenergy	—		—		57,428		57,428
Biofuels	—		—		11,176		11,176
Other	12,241		22,190		—		34,431
Net sales	$	496,978	$	276,467	$	68,604	$	842,049

	Nine Months Ended September 28, 2019
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area
North America	$	1,223,253	$	157,097	$	26,530	$	1,406,880
Europe	235,381		450,106		167,237		852,724
China	14,318		133,368		—		147,686
South America	—		37,944		—		37,944
Other	7,292		51,951		—		59,243
Net sales	$	1,480,244	$	830,466	$	193,767	$	2,504,477
Major product types
Fats	$	438,436	$	99,109	$	—	$	537,545
Used cooking oil	136,498		—		—		136,498
Proteins	603,110		—		—		603,110
Bakery	141,641		—		—		141,641
Other rendering	122,581		—		—		122,581
Food ingredients	—		666,235		—		666,235
Bioenergy	—		—		167,237		167,237
Biofuels	—		—		26,530		26,530
Other	37,978		65,122		—		103,100
Net sales	$	1,480,244	$	830,466	$	193,767	$	2,504,477

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	Three Months Ended September 29, 2018
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area Revenues
North America	$	388,088	$	45,538	$	8,616	$	442,242
Europe	81,381		146,872		56,008		284,261
China	11,199		43,185		—		54,384
South America	—		11,579		—		11,579
Other	2,076		18,034		—		20,110
Net sales	$	482,744	$	265,208	$	64,624	$	812,576
Major product types
Fats	$	142,453	$	39,172	$	—	$	181,625
Used cooking oil	38,863		—		—		38,863
Proteins	216,316		—		—		216,316
Bakery	44,638		—		—		44,638
Other rendering	27,519		—		—		27,519
Food ingredients	—		206,504		—		206,504
Bioenergy	—		—		56,008		56,008
Biofuels	—		—		8,616		8,616
Other	12,955		19,532		—		32,487
Net sales	$	482,744	$	265,208	$	64,624	$	812,576

	Nine Months Ended September 29, 2018
	Feed Ingredients		Food Ingredients		Fuel Ingredients		Total
Geographic Area Revenues
North America	$	1,186,866	$	135,803	$	40,668	$	1,363,337
Europe	251,495		490,133		179,106		920,734
China	23,279		132,578		—		155,857
South America	—		35,839		—		35,839
Other	5,725		53,104		—		58,829
Net sales	$	1,467,365	$	847,457	$	219,774	$	2,534,596
Major product types
Fats	$	423,148	$	122,806	$	—	$	545,954
Used cooking oil	123,555		—		—		123,555
Proteins	641,178		—		—		641,178
Bakery	135,871		—		—		135,871
Other rendering	87,860		—		—		87,860
Food ingredients	—		657,793		—		657,793
Bioenergy	—		—		179,106		179,106
Biofuels	—		—		40,668		40,668
Other	55,753		66,858		—		122,611
Net sales	$	1,467,365	$	847,457	$	219,774	$	2,534,596

Revenue from Contracts with Customers

The Company has 2 primary revenue streams. Finished product revenues are recognized when control of the promised finished product is transferred to the Company's customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the finished product. Service revenues are recognized when the service occurs.

Fats and Proteins. Fats and Proteins include the Company's global activities related to the collection and processing of beef, poultry and pork animal by-products into finished products of non-food grade oils, food grade fats and protein meal. Fats and proteins net sales are recognized when the Company ships the finished product to the customer and control has been transferred.

Used Cooking Oil. Used cooking oil includes collection and processing of used cooking oil into finished products of non-food grade fats. Used cooking oil net sales are recognized when the Company ships the finished product to the customer and control has been transferred.

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Bakery. Bakery includes collection and processing of bakery residuals into finished product including Cookie Meal®, an animal feed ingredient primarily used in poultry and swine rations. Bakery net sales are recognized when the Company ships the finished product to the customer and control has been transferred.

Other Rendering. Other rendering include hides, pet food products, and service charges. Hides and pet food net sales are recognized when the Company ships the finished product to the customer and control has been transferred. Service revenues are recognized when the service has occurred.

Food Ingredients. Food ingredients includes collection and processing of pigskin, hide, bone and fish into finished product. Also includes harvesting, sorting and selling of hog and sheep casings as well as harvesting, purchasing and processing of hog, sheep and beef meat for pet food industry. Collagen and CTH meat and casings net sales are recognized when the Company ships the finished product to the customer and control has been transferred.

Bioenergy. Bioenergy includes Ecoson, which converts organic sludge and food waste into biogas and Rendac, which collects fallen stock and animal waste for a fee and processes these materials into fats and meals that can only be used as low grade energy or fuel for boilers and cement kilns. Net sales are recognized when the finished product is shipped to the customer and control has been transferred. Service revenues are recognized in net sales when the service has occurred.

Biofuels. Biofuels includes the North American processing of rendered animal fats, recycled cooking oils and third party additives to produce diesel fuel. Biofuel net sales are recognized when the finished product is shipped to the customer and control has been transferred.

Other. Other includes grease trap collection and environmental services to food processors in the Feed Ingredients segment and Sonac Bone and Sonac Heparin in the Food Ingredients segment. Net sales are recognized when the Company ships the finished product to the customer. Service revenues are recognized when the service has occurred.

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 2019 under these long-term supply contracts was approximately $24.2 million, with the remaining performance obligations to be recognized in future periods (generally 5 years) of approximately $297.6 million.

(20) 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 28, 2019 and September 29, 2018, the Company has recorded sales to the DGD Joint Venture of approximately $47.3 million and $23.9 million, respectively. For the nine months ended September 28, 2019 and September 29, 2018, the Company recorded sales to the DGD Joint Venture of approximately $149.5 million and $90.8 million, respectively. At September 28, 2019 and December 29, 2018, the Company has $8.6 million and $8.0 million in outstanding receivables due from the DGD Joint Venture, respectively. In addition, the Company has eliminated approximately $6.8 million of additional sales for the three months ended September 28, 2019 to defer the Company's portion of profit of approximately $1.0 million on those sales relating to inventory assets remaining on the DGD Joint Venture's balance sheet at September 28, 2019.

Revolving Loan Agreement

On May 1, 2019, Darling through its wholly owned subsidiary Darling Green Energy LLC, (“Darling Green”), and Diamond Alternative Energy, LLC, a wholly owned subsidiary of Valero (“Diamond Alternative” and together with Darling Green, the “DGD Lenders”), entered into a revolving loan agreement (the “DGD Loan Agreement”) with the DGD Joint Venture. The DGD Lenders have committed to making loans available to the DGD Joint Venture in the total amount of $50.0 million with each lender committed to $25.0 million of the total commitment. Any borrowings by the DGD Joint Venture under the DGD Loan Agreement are 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 DGD Loan Agreement matures

33

on April 29, 2020, unless extended by agreement of the parties. The DGD Loan Agreement replaces a similar agreement with lower commitment levels that expired on December 31, 2018. As of September 28, 2019, 0 amounts are owed to Darling Green under the DGD Loan Agreement.

(21)    New Accounting Pronouncements

In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This ASU amends Subtopic 350-40, Intangibles - Goodwill and Other Internal - Use Software, which will align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019 and for interim periods therein, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted the new accounting standard effective December 30, 2018 and the adoption did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU amends Subtopic 715-20, Compensation - Retirement Benefits - Defined Benefit Plans - General, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. The standard is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard.

In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurements. This ASU amends Topic 820, Fair Value Measurement, which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures. The standard is effective for fiscal years beginning after December 15, 2019 and for interim periods therein, with early adoption permitted. The Company is currently evaluating the impact of this standard.

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 with disclosure on a prospective basis. The Company adopted this ASU on December 30, 2018 and the initial adoption of this ASU did not have a material impact on the Company's 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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Under ASU 2016-13, existing guidance on reporting credit losses for trade and other receivables and available for sale debt securities will be replaced with a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. This ASU is effective for fiscal years beginning after December 15, 2019 and interim periods therein. The Company is currently evaluating the impact of this standard.

34

(22)     Guarantor Financial Information

The Company's 5.25% Notes and 3.625% Notes (see Note 10) 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 3.625% Notes and is discussed further below, or any receivables entity): Darling National, Griffin and its subsidiary Craig Protein, Darling AWS LLC, Darling Global Holdings Inc., Darling Northstar LLC, EV Acquisition, LLC, Rousselot Inc., Rousselot Dubuque Inc., Sonac USA LLC and Rousselot Peabody Inc. In addition, the 3.625% 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 3.625% Notes, fully and unconditionally guaranteed the 5.25% Notes and 3.625% 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 5.25% Notes or the 3.625% 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 28, 2019 and December 29, 2018, 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 ended September 28, 2019 and September 29, 2018. 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 euro-denominated notes such as the 3.625% Notes and therefore does not have any substantial operations or assets.

Condensed Consolidated Balance Sheet

As of September 28, 2019

(in thousands)

	Parent			Guarantors			Non-guarantors		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	542		$	26		$	68,554	$	—		$	69,122
Restricted cash	103			—			56		—			159
Accounts receivable	42,305			682,090			500,072		(869,461		)	355,006
Inventories	26,939			94,192			231,872		—			353,003
Income taxes refundable	1,544			—			3,408		—			4,952
Prepaid expenses	18,671			2,042			25,665		—			46,378
Other current assets	6,034			(2,057		)	37,856		(16,772		)	25,061
Total current assets	96,138			776,293			867,483		(886,233		)	853,681
Investment in subsidiaries	5,056,589			1,366,517			844,043		(7,267,149		)	—
Property, plant and equipment, net	426,046			510,433			778,289		—			1,714,768
Intangible assets, net	45,820			178,145			313,395		—			537,360
Goodwill	49,902			490,748			671,663		—			1,212,313
Investment in unconsolidated subsidiaries	12,878			—			434,811		—			447,689
Operating lease right-of-use asset	71,528			30,954			16,581		—			119,063
Other assets	36,165			145			48,143		(38,274		)	46,179
Deferred taxes	—			—			13,846		—			13,846
	$	5,795,066		$	3,353,235		$	3,988,254	$	(8,191,656	)	$	4,944,899
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	24,509		$	5		$	53,350	$	(16,772	)	$	61,092
Accounts payable	889,921			35,446			136,093		(869,450		)	192,010
Income taxes payable	(862		)	—			11,266		—			10,404
Current operating lease liability	19,220			10,225			5,778		—			35,223
Accrued expenses	103,571			28,667			164,936		(10		)	297,164
Total current liabilities	1,036,359			74,343			371,423		(886,232		)	595,893
Long-term debt, net of current portion	1,027,553			13			570,517		(38,274		)	1,559,809
Long-term operating lease liability	53,459			20,262			10,033		—			83,754
Other noncurrent liabilities	79,126			—			34,096		—			113,222
Deferred income taxes	99,986			—			119,343		—			219,329
Total liabilities	2,296,483			94,618			1,105,412		(924,506		)	2,572,007
Total stockholders’ equity	3,498,583			3,258,617			2,882,842		(7,267,150		)	2,372,892
	$	5,795,066		$	3,353,235		$	3,988,254	$	(8,191,656	)	$	4,944,899

35

Condensed Consolidated Balance Sheet

As of December 29, 2018

(in thousands)

	Parent			Guarantors			Non-guarantors		Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	995		$	32		$	106,235	$	—		$	107,262
Restricted cash	103			—			4		—			107
Accounts receivable	56,113			619,628			461,005		(751,009		)	385,737
Inventories	23,752			83,261			234,015		—			341,028
Income taxes refundable	2,851			—			3,611		—			6,462
Prepaid expenses	12,890			2,936			19,421		—			35,247
Other current assets	2,680			(1,418		)	20,837		—			22,099
Total current assets	99,384			704,439			845,128		(751,009		)	897,942
Investment in subsidiaries	4,880,193			1,366,126			844,044		(7,090,363		)	—
Property, plant and equipment, net	375,824			503,130			808,904		—			1,687,858
Intangible assets, net	50,132			200,936			344,794		—			595,862
Goodwill	49,506			490,748			688,905		—			1,229,159
Investment in unconsolidated subsidiary	13,969			—			396,208		—			410,177
Other assets	39,395			138			13,842		—			53,375
Deferred income taxes	—			—			14,981		—			14,981
	$	5,508,403		$	3,265,517		$	3,956,806	$	(7,841,372	)	$	4,889,354
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	3,558		$	5		$	3,929	$	—		$	7,492
Accounts payable	783,406			24,388			162,678		(750,993		)	219,479
Income taxes payable	(10		)	—			4,053		—			4,043
Accrued expenses	107,572			33,387			168,541		(16		)	309,484
Total current liabilities	894,526			57,780			339,201		(751,009		)	540,498
Long-term debt, net of current portion	1,019,130			18			647,792		—			1,666,940
Other noncurrent liabilities	78,589			—			36,443		—			115,032
Deferred income taxes	95,710			—			135,353		—			231,063
Total liabilities	2,087,955			57,798			1,158,789		(751,009		)	2,553,533
Total stockholders’ equity	3,420,448			3,207,719			2,798,017		(7,090,363		)	2,335,821
	$	5,508,403		$	3,265,517		$	3,956,806	$	(7,841,372	)	$	4,889,354

36

Condensed Consolidated Statements of Operations

For the three months ended September 28, 2019

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net sales	$	164,488		$	330,655		$	403,749		$	(56,843	)	$	842,049
Cost and expenses:
Cost of sales and operating expenses	130,498			273,238			306,030			(56,843		)	652,923
Gain on sale of assets	(86		)	(2,343		)	(240		)	—			(2,669		)
Selling, general and administrative expenses	41,225			12,319			30,005			—			83,549
Depreciation and amortization	15,071			25,317			40,019			—			80,407
Total costs and expenses	186,708			308,531			375,814			(56,843		)	814,210
Equity in net income of Diamond Green Diesel	—			—			32,020			—			32,020
Operating income/(loss)	(22,220		)	22,124			59,955			—			59,859
Interest expense	(13,862		)	(52		)	(5,445		)	—			(19,359		)
Foreign currency losses	(30		)	(4		)	500			—			466
Other expense, net	(2,026		)	(431		)	(157		)	—			(2,614		)
Equity in net income/(loss) of other unconsolidated subsidiaries	(1,172		)	—			507			—			(665		)
Earnings in investments in subsidiaries	52,697			—			—			(52,697		)	—
Income/(loss) before taxes	13,387			21,637			55,360			(52,697		)	37,687
Income tax expense/(benefit)	(12,334		)	6,472			16,712			—			10,850
Net income attributable to noncontrolling interests	—			—			(1,116		)	—			(1,116		)
Net income/(loss) attributable to Darling	$	25,721		$	15,165		$	37,532		$	(52,697	)	$	25,721

Condensed Consolidated Statements of Operations

For the nine months ended September 28, 2019

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net sales	$	481,645		$	986,390		$	1,206,999		$	(170,557	)	$	2,504,477
Cost and expenses:
Cost of sales and operating expenses	384,408			813,491			921,210			(170,557		)	1,948,552
Gain on sale of assets	(44		)	(7,331		)	(13,470		)	—			(20,845		)
Selling, general and administrative expenses	129,218			35,042			85,309			—			249,569
Depreciation and amortization	43,668			76,594			118,795			—			239,057
Total costs and expenses	557,250			917,796			1,111,844			(170,557		)	2,416,333
Equity in net income of Diamond Green Diesel	—			—			94,390			—			94,390
Operating income/(loss)	(75,605		)	68,594			189,545			—			182,534
Interest expense	(42,967		)	(108		)	(17,013		)	—			(60,088		)
Debt extinguishment costs	(12,126		)	—			—			—			(12,126		)
Foreign currency losses	(31		)	(3		)	(620		)	—			(654		)
Other income/(expense), net	(4,878		)	(2,407		)	127			—			(7,158		)
Equity in net income/(loss) of other unconsolidated subsidiaries	(3,090		)	—			2,003			—			(1,087		)
Earnings in investments in subsidiaries	176,004			—			—			(176,004		)	—
Income/(loss) before taxes	37,307			66,076			174,042			(176,004		)	101,421
Income tax expense/(benefit)	(32,684		)	15,571			41,013			—			23,900
Net income attributable to noncontrolling interests	—			—			(7,530		)	—			(7,530		)
Net income/(loss) attributable to Darling	$	69,991		$	50,505		$	125,499		$	(176,004	)	$	69,991

37

Condensed Consolidated Statements of Operations

For the three months ended September 29, 2018

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net sales	$	136,460		$	328,148		$	410,936		$	(62,968	)	$	812,576
Cost and expenses:
Cost of sales and operating expenses	108,008			274,159			328,730			(62,968		)	647,929
Loss (gain) on sale of assets	(29		)	(12		)	213			—			172
Selling, general and administrative expenses	34,967			7,457			25,023			—			67,447
Restructuring and impairment charges	—			—			—			—			—
Depreciation and amortization	12,036			25,322			41,484			—			78,842
Total costs and expenses	154,982			306,926			395,450			(62,968		)	794,390
Equity in net loss of Diamond Green Diesel	—			—			(2,630		)	—			(2,630		)
Operating income/(loss)	(18,522		)	21,222			12,856			—			15,556
Interest expense	(13,823		)	190			(6,447		)	—			(20,080		)
Debt extinguishment costs	—			—			—			—			—
Foreign currency gains/(losses)	(4		)	(2		)	(2,100		)	—			(2,106		)
Loss on sale of subsidiary	—			—			3,038			—			3,038
Other income/(expense), net	(1,791		)	(656		)	(339		)	—			(2,786		)
Equity in net income/(loss) of other unconsolidated subsidiaries	(732		)	—			570			—			(162		)
Earnings in investments in subsidiaries	28,438			—			—			(28,438		)	—
Income/(loss) before taxes	(6,434		)	20,754			7,578			(28,438		)	(6,540		)
Income tax expense/(benefit)	(397		)	179			(1,185		)	—			(1,403		)
Net income attributable to noncontrolling interests	—			—			(900		)	—			(900		)
Net income/(loss) attributable to Darling	$	(6,037	)	$	20,575		$	7,863		$	(28,438	)	$	(6,037	)

Condensed Consolidated Statements of Operations

For the nine months ended September 29, 2018

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net sales	$	391,281		$	1,021,248		$	1,302,210		$	(180,143	)	$	2,534,596
Cost and expenses:
Cost of sales and operating expenses	306,298			821,220			1,031,354			(180,143		)	1,978,729
Loss (gain) on sale of assets	(230		)	(227		)	929			—			472
Selling, general and administrative expenses	115,138			32,719			85,050			—			232,907
Restructuring and impairment charges	—			—			14,965			—			14,965
Depreciation and amortization	34,672			77,555			123,688			—			235,915
Total costs and expenses	455,878			931,267			1,255,986			(180,143		)	2,462,988
Equity in net income of Diamond Green Diesel	—			—			109,655			—			109,655
Operating income/(loss)	(64,597		)	89,981			155,879			—			181,263
Interest expense	(42,380		)	7,193			(31,033		)	—			(66,220		)
Debt extinguishment costs	(15,635		)	—			(7,874		)	—			(23,509		)
Foreign currency gains/(losses)	(441		)	(96		)	(6,545		)	—			(7,082		)
Loss on sale of subsidiary	(15,538		)	—			3,038			—			(12,500		)
Other income/(expense), net	(15,405		)	(172		)	11,474			—			(4,103		)
Equity in net income/(loss) of other unconsolidated subsidiaries	(1,807		)	—			1,750			—			(57		)
Earnings in investments in subsidiaries	207,477			—			—			(207,477		)	—
Income/(loss) before taxes	51,674			96,906			126,689			(207,477		)	67,792
Income tax expense/(benefit)	(9,174		)	5,706			7,460			—			3,992
Net income attributable to noncontrolling interests	—			—			(2,952		)	—			(2,952		)
Net income/(loss) attributable to Darling	$	60,848		$	91,200		$	116,277		$	(207,477	)	$	60,848

38

Condensed Consolidated Statements of Comprehensive Income/(Loss)

For the three months ended September 28, 2019

(in thousands)

	Parent		Guarantors		Non-guarantors			Eliminations			Consolidated
Net income/(loss)	$	26,837	$	15,165	$	37,532		$	(52,697	)	$	26,837
Other comprehensive income/(loss), net of tax:
Foreign currency translation	1,328		—		(48,954		)	—			(47,626		)
Pension adjustments	767		—		92			—			859
Corn option derivative adjustments	553		—		—			—			553
Heating oil derivative adjustments	—		—		(1,683		)	—			(1,683		)
Foreign exchange derivative adjustments	—		—		(4,944		)	—			(4,944		)
Total other comprehensive income/(loss), net of tax	2,648		—		(55,489		)	—			(52,841		)
Total comprehensive income/(loss)	29,485		15,165		(17,957		)	(52,697		)	(26,004		)
Total comprehensive loss attributable to noncontrolling interest	—		—		1,120			—			1,120
Total comprehensive income/(loss) attributable to Darling	$	29,485	$	15,165	$	(19,077	)	$	(52,697	)	$	(27,124	)

Condensed Consolidated Statements of Comprehensive Income/(Loss)

For the nine months ended September 28, 2019

(in thousands)

	Parent		Guarantors		Non-guarantors			Eliminations			Consolidated
Net income/(loss)	$	77,521	$	50,505	$	125,499		$	(176,004	)	$	77,521
Other comprehensive income/ (loss), net of tax:
Foreign currency translation	1,509		—		(37,695		)	—			(36,186		)
Pension adjustments	2,300		—		276			—			2,576
Corn option derivative adjustments	575		—		—			—			575
Heating oil derivative adjustments	—		—		450			—			450
Foreign exchange derivative adjustments	—		—		(5,430		)	—			(5,430		)
Total other comprehensive income/(loss), net of tax	4,384		—		(42,399		)	—			(38,015		)
Total comprehensive income/(loss)	81,905		50,505		83,100			(176,004		)	39,506
Total comprehensive income attributable to noncontrolling interest	—		—		7,822			—			7,822
Total comprehensive income/(loss) attributable to Darling	$	81,905	$	50,505	$	75,278		$	(176,004	)	$	31,684

39

Condensed Consolidated Statements of Comprehensive Income/(Loss)

For the three months ended September 29, 2018

(in thousands)

	Parent			Guarantors		Non-guarantors			Eliminations			Consolidated
Net income/(loss)	$	(5,137	)	$	20,575	$	7,863		$	(28,438	)	$	(5,137	)
Other comprehensive income/(loss), net of tax:
Foreign currency translation	165			—		(5,749		)	—			(5,584		)
Pension adjustments	565			—		103			—			668
Soybean meal derivative adjustments	3			—		—			—			3
Corn option derivative adjustments	(40		)	—		—			—			(40		)
Foreign exchange derivative adjustment	—			—		309			—			309
Total other comprehensive income/(loss), net of tax	693			—		(5,337		)	—			(4,644		)
Total comprehensive income/(loss)	(4,444		)	20,575		2,526			(28,438		)	(9,781		)
Total comprehensive income attributable to noncontrolling interest	—			—		(538		)	—			(538		)
Total comprehensive income/(loss) attributable to Darling	$	(4,444	)	$	20,575	$	3,064		$	(28,438	)	$	(9,243	)

Condensed Consolidated Statements of Comprehensive Income/(Loss)

For the nine months ended September 29, 2018

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net income/(loss)	$	63,800		$	91,200		$	116,277		$	(207,477	)	$	63,800
Other comprehensive income/(loss), net of tax:
Foreign currency translation	1,281			(53,387		)	(13,020		)	—			(65,126		)
Pension adjustments	1,696			—			305			—			2,001
Natural gas swap derivative adjustments	22			—			—			—			22
Soybean meal derivative adjustments	3			—			—			—			3
Corn option derivative adjustments	(1,198		)	—			—			—			(1,198		)
Foreign exchange derivative adjustments	—			—			309			—			309
Total other comprehensive income, net of tax	1,804			(53,387		)	(12,406		)	—			(63,989		)
Total comprehensive income/(loss)	65,604			37,813			103,871			(207,477		)	(189		)
Total comprehensive loss attributable to noncontrolling interest	—			—			1,981			—			1,981
Total comprehensive income/(loss) attributable to Darling	$	65,604		$	37,813		$	101,890		$	(207,477	)	$	(2,170	)

40

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 28, 2019

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income/(loss)	$	77,521		$	50,505		$	125,499		$	(176,004	)	$	77,521
Earnings in investments in subsidiaries	(176,004		)	—			—			176,004			—
Other operating cash flows	189,575			(2,763		)	(1,651		)	—			185,161
Net cash provided by operating activities	91,092			47,742			123,848			—			262,682
Cash flows from investing activities:
Capital expenditures	(88,639		)	(61,337		)	(95,116		)	—			(245,092		)
Acquisitions	(1,157		)	—			(274		)	—			(1,431		)
Investment in subsidiaries and affiliates	(2,393		)	(393		)	—			786			(2,000		)
Note receivable from affiliates	38,274			—			(38,274		)	—			—
Gross proceeds from sale of property, plant and equipment and other assets	380			12,223			2,799			—			15,402
Proceeds from insurance settlements	—			1,371			—			—			1,371
Payments related to routes and other intangibles	(131		)	—			(3,019		)	—			(3,150		)
Net cash used in investing activities	(53,666		)	(48,136		)	(133,884		)	786			(234,900		)
Cash flows from financing activities:
Proceeds for long-term debt	500,000			—			11,985			—			511,985
Payments on long-term debt	(545,872		)	(5		)	(20,230		)	—			(566,107		)
Borrowings from revolving facilities	176,000			—			149,485			—			325,485
Payments on revolving facilities	(152,000		)	—			(180,884		)	—			(332,884		)
Net cash overdraft financing	5,951			—			21,907			—			27,858
Deferred loan costs	(7,027		)	—			—			—			(7,027		)
Issuances of common stock	39			—			—			—			39
Repurchase of treasury stock	(11,740		)	—			—			—			(11,740		)
Contributions from parent	—			393			393			(786		)	—
Minimum withholding taxes paid on stock awards	(3,230		)	—			(17		)	—			(3,247		)
Distributions to noncontrolling interests	—			—			(4,500		)	—			(4,500		)
Net cash provided/(used) in financing activities	(37,879		)	388			(21,861		)	(786		)	(60,138		)
Effect of exchange rate changes on cash	—			—			(5,732		)	—			(5,732		)
Net decrease in cash, cash equivalents and restricted cash	(453		)	(6		)	(37,629		)	—			(38,088		)
Cash, cash equivalents and restricted cash at beginning of period	1,098			32			106,239			—			107,369
Cash, cash equivalents and restricted cash at end of period	$	645		$	26		$	68,610		$	—		$	69,281

41

Condensed Consolidated Statements of Cash Flows

For the nine months ended September 29, 2018

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income/(loss)	$	63,800		$	91,200		$	116,277		$	(207,477	)	$	63,800
Earnings in investments in subsidiaries	(207,477		)	—			—			207,477			—
Other operating cash flows	187,663			(49,424		)	(2,341		)	—			135,898
Net cash provided/(used) by operating activities	43,986			41,776			113,936			—			199,698
Cash flows from investing activities:
Capital expenditures	(75,282		)	(65,079		)	(73,365		)	—			(213,726		)
Acquisitions	(51,301		)	—			—			—			(51,301		)
Investment in subsidiaries and affiliates	(10,000		)	(198,880		)	—			198,880			(10,000		)
Proceeds from sale of investment in subsidiary	80,000			—			2,805			—			82,805
Note receivable from affiliates	—			217,880			(217,880		)	—			—
Gross proceeds from sale of property, plant and equipment and other assets	1,282			843			1,236			—			3,361
Proceeds from insurance settlements	750			503			—			—			1,253
Payments related to routes and other intangibles	(246		)	—			(1,007		)	—			(1,253		)
Net cash used in investing activities	(54,797		)	(44,733		)	(288,211		)	198,880			(188,861		)
Cash flows from financing activities:
Proceeds for long-term debt	—			—			623,698			—			623,698
Payments on long-term debt	(10,090		)	—			(651,178		)	—			(661,268		)
Borrowings from revolving credit facility	238,000			—			148,436			—			386,436
Payments on revolving credit facility	(215,000		)	—			(147,463		)	—			(362,463		)
Net cash overdraft financing	—			—			3,361			—			3,361
Deferred loan costs	(824		)	—			(8,844		)	—			(9,668		)
Issuances of common stock	182			—			—			—			182
Contributions from parent	—			—			198,880			(198,880		)	—
Minimum withholding taxes paid on stock awards	(2,152		)	—			(63		)	—			(2,215		)
Distributions to noncontrolling interests	—			—			(8,005		)	—			(8,005		)
Net cash provided by financing activities	10,116			—			158,822			(198,880		)	(29,942		)
Effect of exchange rate changes on cash	—			—			(6,238		)	—			(6,238		)
Net decrease in cash, cash equivalents and restricted cash	(695		)	(2,957		)	(21,691		)	—			(25,343		)
Cash, cash equivalents and restricted cash at beginning of period	1,827			2,993			102,096			—			106,916
Cash, cash equivalents and restricted cash at end of period	$	1,132		$	36		$	80,405		$	—		$	81,573

42

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

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 29, 2018, filed with the SEC on February 27, 2019 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.

Overview

The Company 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 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 recycled oils (used cooking oil and animal fats) into valuable feed and fuel ingredients, 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. 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 and pork animal by-products in North America and Europe into non-food grade oils and protein meals, (ii) the collection and processing of bakery residuals in North America into Cookie Meal®, which is predominantly used in poultry and swine rations, (iii) the collection and processing of used cooking oil in North America into non-food grade fats, (iv) the collection and processing of porcine and bovine blood in China, Europe, North America and Australia into blood plasma powder and hemoglobin, (v) the processing of selected portions of slaughtered animals into a variety of meat products for use in pet food, (vi) the processing of cattle hides and hog skins in North America, (vii) the production of organic fertilizers using protein produced from the Company’s animal by-products processing activities in North America and Europe; and (viii) the provision of grease trap services to food service establishments. 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 production of biodiesel and renewable diesel, 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 collagen in Europe, China, South America and North America, (ii) the collection and processing of porcine and bovine intestines into natural casings in Europe, China and North America, (iii) the extraction and processing of porcine mucosa into crude heparin in Europe, (iv) the collection and refining of animal fat into food grade fat in Europe, and (v) the processing of bones to bone chips for the collagen industry and bone ash. 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 (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 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, recycled greases, used cooking oil, inedible corn oil, soybean oil, or other feedstocks that become economically and commercially viable into renewable diesel (the “DGD Joint Venture”) as described in Note 3 to the Company's Consolidated Financial Statement for the period ended September 28, 2019 included herein, (ii) the conversion of animal fats and recycled greases into biodiesel in North America, (iii) the conversion of organic sludge and food waste into biogas in Europe, (iv) the collection and conversion of fallen stock and certain animal by-products pursuant to applicable E.U. regulations into low-grade energy sources to be used in industrial applications, and (v) the processing of manure into natural bio-phosphate in Europe.

43

Corporate Activities principally include unallocated corporate overhead expenses, acquisition-related expenses, interest expense net of interest income, and other non-operating income and expenses.

Business and Regulatory Developments

African Swine Fever (“ASF”) is a viral and highly contagious disease of pigs and wild boar, for which no cures or approved vaccines are available as of the date of this report. In early August 2018, ASF was reported in domestic pig herds located in Northeast China and has since become widespread, infecting multiple Chinese and Vietnamese provinces and has been reported in Cambodia, Laos, Myanmar, The Philippines and Timor-Leste in South East Asia and the People's Democratic Republic of Korea, Republic of Korea and Mongolia in East Asia. Measures to control the disease include, amongst others, bans on feeding kitchen food waste to pigs, marketing only swine tested and certified negative for the virus, depopulating infected herds, biosecurity regimes, restricting the movement of pigs out of infected zones or regions and export bans of live pigs. The restrictions in transportation have created serious dislocations in pork supplies and resulted in strong reduction of slaughter numbers and thereby volumes of raw material supplied to our locations in China that process blood and make collagen from pork skins. Additionally, the perception, real or implied, that blood meal and dried plasma powder may contribute to the spread of ASF, resulted in a temporary ban on the use of porcine plasma in pork feed which negatively affected demand for our products as ingredients in porcine animal feed in China. This ban has now been lifted and porcine plasma is once again allowed to be used in pork feed provided that certain newly established guidelines are met. ASF has also been reported in Eastern Europe since 2007, predominantly in wild boar and to a limited extent in domestic pigs. It has recently spread over long distance to Western Europe, where since September 2018 numerous cases have been detected in wild boar in Belgium. As of the date of this report, this spread has been restricted to wild animals only. As of the date of this report, ASF has not been reported in North or South America. In the United States, the Animal and Plant Health Inspection Service (APHIS) has implemented a surveillance plan for AFS to strengthen detection capabilities, enhance outbreak preparedness and support claims that ASF is not present in the United States. ASF does not infect humans and is not considered a food safety hazard. For a more detailed discussion of animal diseases and other factors that can impact the Company’s business and results of operations, see the Risk Factor discussion in Item 1A of Part I of the Company’s Annual Report on Form 10-K for the fiscal year ended December 29, 2018.

Operating Performance Indicators

The Company is exposed to certain risks associated with a business that is influenced by agricultural-based commodities. These risks are further described in Item 1A of Part I, “Risk Factors” included in the Company’s Form 10-K for the fiscal year ended December 29, 2018.

The Company’s Feed Ingredients segment animal by-products, bakery residuals, used cooking oil recovery, and blood operations are each influenced by prices for agricultural-based alternative ingredients such as corn oil, soybean oil, soybean meal, and palm oil. In these operations, the costs of the Company's raw materials change with, or in certain cases are indexed to, the selling price or the anticipated selling price of the finished goods produced from the acquired raw materials and/or in some cases, the price spread between various types of finished products. The Company believes that this methodology of procuring raw materials generally establishes a relatively stable gross margin upon the acquisition of the raw material. Although the costs of raw materials for the Feed Ingredients segment are generally based upon actual or anticipated finished goods selling prices, rapid and material changes in finished goods prices, including competing agricultural-based alternative ingredients, generally have an immediate, and often times, material impact on the Company’s gross margin and profitability resulting from the brief lapse of time between the procurement of the raw materials and the sale of the finished goods. In addition, the volume of raw material acquired, which has a direct impact on the amount of finished goods produced, can also have a material effect on the gross margin reported, as the Company has a substantial amount of fixed operating costs.

The Company’s Food Ingredients segment collagen and natural casings products are influenced by other competing ingredients including plant-based and synthetic hydrocolloids and artificial casings. In the collagen operation, the cost of the Company's animal-based raw material moves in relationship to the selling price of the finished goods. The processing time for the Food Ingredients segment collagen and casings is generally 30 to 60 days, which is substantially longer than the Company's Feed Ingredients segment animal by-products operations. Consequently, the Company’s gross margin and profitability in this segment can be influenced by the movement of finished goods prices from the time the raw materials were procured until the finished goods are sold.

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.

44

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, Brazilian real, Chinese renminbi, Canadian dollar, 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.

In 2019, the Company continued to evaluate operational developments and the impact of anticipated significant expansion of the DGD Joint Venture. This evaluation was impactful to the consideration of how the Company most appropriately reflects its share of equity income from the DGD Joint Venture. Based on the Company's analysis, it was determined that the DGD Joint Venture has evolved into an integral and integrated part of the Company's ongoing operations. The Company determined this justifies a more meaningful and transparent presentation of equity in net income of the DGD Joint Venture as a component of the Company's operating income. As a result, the Company has reclassified its equity in net income of the DGD Joint Venture to operating income for all periods presented. Prior to the third quarter ended September 28, 2019, the equity in Diamond Green Diesel was presented below the operating income line in the Company’s published results.  Commencing with the third quarter of 2019, the Company is including its equity in earnings of Diamond Green Diesel in operating income for all periods presented.

Results of Operations

Three Months Ended September 28, 2019 Compared to Three Months Ended September 29, 2018

Operating Performance Metrics

Operating performance metrics which management routinely monitors as an indicator of operating performance include:

• Finished product commodity prices

• Segment results

• Foreign currency exchange

• Corporate activities

• Non-U.S. GAAP measures

These indicators and their importance are discussed below.

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 (the “Jacobsen”), an established North American trading exchange price publisher. The Jacobsen reports industry sales from the prior day's activity by product. Included on the Jacobsen 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., the Company regularly monitors the Jacobsen for MBM, PM, FM, BFT, YG and corn because it provides a daily indication of the Company's U.S. revenue performance against business plan benchmarks. In Europe, the Company regularly monitors Thomson Reuters (“Reuters”) to track the competing commodities palm oil and soy meal.

45

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 quarter of fiscal 2019, 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 quarter of fiscal 2019, compared to average Jacobsen and Reuters prices for the third quarter of fiscal 2018 are as follows:

	Avg. Price 3rd Quarter 2019	Avg. Price 3rd Quarter 2018	Increase/(Decrease)	% Increase/(Decrease)
Jacobsen:
MBM (Illinois)	$ 216.29/ton	$ 264.78/ton	$ (48.49)/ton	(18.3	)%
Feed Grade PM (Mid-South)	$ 234.60/ton	$ 268.13/ton	$ (33.53)/ton	(12.5	)%
Pet Food PM (Mid-South)	$ 411.77/ton	$ 556.48/ton	$ (144.71)/ton	(26.0	)%
Feather meal (Mid-South)	$ 333.43/ton	$ 453.58/ton	$ (120.15)/ton	(26.5	)%
BFT (Chicago)	$ 30.50/cwt	$   27.70/cwt	$ 2.80/cwt	10.1	%
YG (Illinois)	$ 24.53/cwt	$   22.19/cwt	$  2.34/cwt	10.5	%
Corn (Illinois)	$ 4.16/bushel	$ 3.53/bushel	$ 0.63/bushel	17.8	%
Reuters:
Palm Oil (CIF Rotterdam)	$ 533.00/MT	$ 566.00/MT	$ (33.00)/MT	(5.8	)%
Soy meal (CIF Rotterdam)	$ 339.00/MT	$ 391.00/MT	$ (52.00)/MT	(13.3	)%

The following table shows the average Jacobsen and Reuters prices for the third quarter of fiscal 2019, compared to the average Jacobsen and Reuters prices for the second quarter of fiscal 2019.

	Avg. Price 3rd Quarter 2019	Avg. Price 2nd Quarter 2019	Increase/(Decrease)	% Increase/(Decrease)
Jacobsen:
MBM (Illinois)	$ 216.29/ton	$ 227.10/ton	$ (10.81)/ton	(4.8	)%
Feed Grade PM (Mid-South)	$ 234.60/ton	$ 238.16/ton	$ (3.56)/ton	(1.5	)%
Pet Food PM (Mid-South)	$ 411.77/ton	$ 584.53/ton	$ (172.76)/ton	(29.6	)%
Feather meal (Mid-South)	$ 333.43/ton	$ 346.41/ton	$ (12.98)/ton	(3.7	)%
BFT (Chicago)	$ 30.50/cwt	$   29.20/cwt	$     1.30/cwt	4.5	%
YG (Illinois)	$ 24.53/cwt	$   22.40/cwt	$   2.13/cwt	9.5	%
Corn (Illinois)	$ 4.16/bushel	$ 3.97/bushel	$ 0.19/bushel	4.8	%
Reuters:
Palm Oil (CIF Rotterdam)	$ 533.00/MT	$ 515.00/MT	$ 18.00/MT	3.5	%
Soy meal (CIF Rotterdam)	$ 339.00/MT	$ 347.00/MT	$ (8.00)/MT	(2.3	)%

Segment Results

Segment operating income for the three months ended September 28, 2019 was $59.9 million, which reflects an increase of $44.3 million or 284.0% as compared to the three months ended September 29, 2018.

46

 

(in thousands, except percentages)	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Three Months Ended September 28, 2019
Net Sales	$	496,978		$	276,467		$	68,604		$	—		$	842,049
Cost of sales and operating expenses	379,792			214,643			58,488			—			652,923
Gross Margin	117,186			61,824			10,116			—			189,126
Gross Margin %	23.6		%	22.4		%	14.7		%	—		%	22.5		%
Loss (gain) on sale of assets	(2,429		)	(253		)	13			—			(2,669		)
Selling, general and administrative expenses	47,319			22,811			912			12,507			83,549
Depreciation and amortization	50,182			19,743			7,895			2,587			80,407
Equity in net income of Diamond Green Diesel	—			—			32,020			—			32,020
Segment operating income/(loss)	22,114			19,523			33,316			(15,094		)	59,859
Equity in net loss of other unconsolidated subsidiaries	(665		)	—			—			—			(665		)
Segment income/(loss)	21,449			19,523			33,316			(15,094		)	59,194

(in thousands, except percentages)	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Three Months Ended September 29, 2018
Net Sales	$	482,744		$	265,208		$	64,624		$	—		$	812,576
Cost of sales and operating expenses	383,739			210,730			53,460			—			647,929
Gross Margin	99,005			54,478			11,164			—			164,647
Gross Margin %	20.5		%	20.5		%	17.3		%	—		%	20.3		%
Loss (gain) on sale of assets	107			(33		)	98			—			172
Selling, general and administrative expenses	39,702			21,843			(2,822		)	8,724			67,447
Depreciation and amortization	47,321			19,697			9,370			2,454			78,842
Equity in net loss of Diamond Green Diesel	—			—			(2,630		)	—			(2,630		)
Segment operating income/(loss)	11,875			12,971			1,888			(11,178		)	15,556
Equity in net loss of other unconsolidated subsidiaries	(162		)	—			—			—			(162		)
Segment income/(loss)	11,713			12,971			1,888			(11,178		)	15,394

Feed Ingredients Segment

Raw material volume. Overall, in the three months ended September 28, 2019, the raw material processed by the Company's Feed Ingredients segment totaled 2.19 million metric tons. Compared to the three months ended September 29, 2018, overall raw material volume processed in the Feed Ingredients segment increased approximately 0.9%.

Sales. During the three months ended September 28, 2019, net sales for the Feed Ingredients segment were $497.0 million as compared to $482.7 million during the three months ended September 29, 2018, an increase of approximately $14.3 million or 3.0%. Net sales for fats were approximately $150.0 million and $142.4 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Protein net sales were approximately $196.9 million and $216.3 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Other rendering net sales, which include hides, pet food and service charges, were approximately $40.4 million and $27.5 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Total rendering net sales were approximately $387.3 million and $386.2 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Used cooking oil net sales were approximately $45.9 million and $38.9 million for the three months ended September 28, 2019 and September 29, 2018, respectively. Bakery net sales were approximately $51.6 million and $44.7 million for the three months ended September 28, 2019 and September 29, 2018, respectively, and other sales, which includes trap services, net sales were approximately $12.2 million and $12.9 million for the three months ended September 28, 2019 and September 29, 2018, respectively.

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

47

	Fats			Proteins			Other Rendering			Total Rendering			Used Cooking Oil		Bakery		Other			Total
Net sales three months ended September 29, 2018	$	142.4		$	216.3		$	27.5		$	386.2		$	38.9	$	44.7	$	12.9		$	482.7
Increase/(decrease) in sales volumes	2.8			3.0			—			5.8			5.2		0.6		—			11.6
Increase/(decrease) in finished product prices	5.9			(19.6		)	—			(13.7		)	1.8		6.3		—			(5.6		)
Increase/(decrease) due to currency exchange rates	(1.1		)	(2.8		)	(0.1		)	(4.0		)	—		—		—			(4.0		)
Other change	—			—			13.0			13.0			—		—		(0.7		)	12.3
Total change	7.6			(19.4		)	12.9			1.1			7.0		6.9		(0.7		)	14.3
Net sales three months ended September 28, 2019	$	150.0		$	196.9		$	40.4		$	387.3		$	45.9	$	51.6	$	12.2		$	497.0

Margins. In the Feed Ingredients segment for the three months ended September 28, 2019, the gross margin percentage increased to 23.6% as compared to 20.5% for the same period of fiscal 2018. The increase is primarily due to the prior year acquisition of Triple - T Foods in October 2018, higher margins on fat sales due to an increase in fat prices and a negative impact on Chinese inventories relating to ASF recorded in fiscal 2018.

Segment operating income. Feed Ingredients operating income for the three months ended September 28, 2019 was $22.1 million, an increase of $10.2 million or 85.7% as compared to the three months ended September 29, 2018. This was due to the acquisition of Triple - T Foods in October 2018, higher fat and bakery sales, and gains on the sale of fixed assets that more than offset higher selling, general and administrative costs, higher operating costs due to the addition of several new facilities and partial multiemployer pension withdrawal charges.

Food Ingredients Segment

Raw material volume. Overall, for the three months ended September 28, 2019, the raw material processed by the Company's Food Ingredients segment totaled 260,000 metric tons. As compared to the three months ended September 29, 2018, overall raw material volume processed in the Food Ingredients segment decreased by approximately 9.2%.

Sales. Overall sales increase in the Food Ingredients segment primarily due to higher average sales prices primarily resulting from higher values for collagen sales.

Margins. In the Food Ingredients segment for the three months ended September 28, 2019, the gross margin percentage increased to 22.4% as compared to 20.5% during the comparable period of fiscal 2018. The increase is primarily due to improved margins from the growth of the collagen business which more than offset lower casing and edible fat margins.

Segment operating income. Food Ingredients operating income was $19.5 million for the three months ended September 28, 2019, an increase of $6.5 million or 50.0% as compared to the three months ended September 28, 2018. The increase is primarily due to improved results in the collagen markets of all regions. The Company's edible fat margins were lower because of lower volumes processed resulting from export of raw materials to Asian food markets due to ASF as compared to the same period in fiscal 2018. The casing business also delivered lower earnings due to lower margins resulting from lower sales prices as compared to the same period in fiscal 2018.

Fuel Ingredients Segment

Raw material volume. Overall, in the three months ended September 28, 2019, the raw material processed by the Company's Fuel Ingredients segment totaled 308,000 metric tons. As compared to the three months ended September 29, 2018, overall raw material volume processed in the Fuel Ingredients segment increased by approximately 6.2%.

Sales. Overall sales increased in the Fuel Ingredients segment primarily due to higher sales volumes.

Margins. In the Fuel Ingredients segment (exclusive of the equity contribution from the DGD Joint Venture) for the three months ended September 28, 2019, the gross margin percentage decreased to 14.7% as compared to 17.3% for the comparable period of fiscal 2018. The decrease is primarily related to lower finished product prices in fiscal 2019 as compared to fiscal 2018.

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Segment operating income. The Company's Fuel Ingredients segment operating income (inclusive of the equity contribution from DGD Joint Venture) for the three months ended September 28, 2019 was $33.3 million, an increase of $31.4 million or 1,652.6% as compared to the same period in fiscal 2018. The increase is primarily due to current year net income at the DGD Joint Venture from higher capacity as compared to a net loss in the prior year period at the DGD Joint Venture, which more than offset the business interruption gain recorded at Rendac in fiscal 2018.

Foreign Currency Exchange

During the third quarter of fiscal 2019, the euro weakened against the U.S. dollar as compared to the same period in fiscal 2018. Using actual results for the three months ended September 28, 2019 and using the prior year's average currency rate for the three months ended September 29, 2018, foreign currency translation would result in an increase in operating income of approximately $3.1 million. The average rates assumptions used in this calculation were the actual fiscal average rate for the three months ended September 28, 2019 of €1.00:USD$1.11 and CAD$1.00:USD$0.76 as compared to the average rate for the three months ended September 29, 2018 of €1.00:USD$1.16 and CAD$1.00:USD$0.76, respectively.

Corporate Activities

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $12.5 million during the three months ended September 28, 2019, compared to $8.7 million during the three months ended September 29, 2018, an increase of $3.8 million. The increase is primarily due to an increase in performance based compensation expense. 

Depreciation and Amortization.  Depreciation and amortization charges increased slightly by $0.1 million to $2.6 million during the three months ended September 28, 2019, as compared to $2.5 million during the three months ended September 29, 2018.

Interest Expense. Interest expense was $19.4 million during the three months ended September 28, 2019, compared to $20.1 million during the three months ended September 29, 2018, a decrease of $0.7 million. The decrease is primarily due to lower interest costs from the refinance of the Company's €515 million Senior Notes from 4.75% to 3.625% in the second quarter of fiscal 2018, the refinance of the Company's $500 million Senior Notes from 5.375% to 5.25% in April 2019 and lower interest from the Term loan A and Term loan B notes from debt payoffs and lower interest rates.

Foreign Currency Losses.  Foreign currency gains were $0.5 million for the three months ended September 28, 2019 as compared to foreign currency losses of $2.1 million for the three months ended September 29, 2018. The gain in foreign currency is due primarily to gains on the revaluation of non-functional currency liabilities as compared to losses in the same period in fiscal 2018.

Gain on disposal of subsidiaries. No gains or losses were recorded in the three months ended September 28, 2019, as compared to a gain on sale of subsidiary from the liquidation of a majority owned foreign joint venture in the three months ended September 29, 2018.

Other Expense, net. Other expense was $2.6 million in the three months ended September 28, 2019, compared to other expense of $2.8 million for the three months ended September 29, 2018. The decrease in other expense was primarily due to a decrease in casualty losses that more than offset an increase in the non-service component of pension expense as compared to the same period in fiscal 2018.

Equity in Net Loss in Investment of Other Unconsolidated Subsidiaries. This primarily represents the Company's pro rata share of the net losses of its domestic unconsolidated subsidiary other than the DGD Joint Venture that more than offset net income from foreign unconsolidated subsidiaries.

Income Taxes. The Company recorded income tax expense of $10.9 million for the three months ended September 28, 2019, compared to $1.4 million of income tax benefit recorded in the three months ended September 29, 2018, an increase of $12.3 million. The effective tax rate for the three months ended September 28, 2019 was 28.8%. The effective tax rate for the three months ended September 28, 2019 differed from the statutory rate of 21% due to the relative mix of earnings among jurisdictions with different tax rates (including foreign withholding taxes and state income taxes) and compensation related expenses not deductible for tax purposes. The effective tax rate for the three months ended September 29, 2018 was 21.5%. The effective tax rate for the three months ended September 29, 2018 differed slightly from the statutory rate of 21% due to the relative mix of earnings among jurisdictions with different tax rates (including foreign withholding taxes and state income

49

taxes), losses that provided no tax benefit, and discrete items. The Company's effective tax rate excluding discrete items is 29.8% for the three months ended September 28, 2019, compared to 28.8% for the three months ended September 29, 2018.

Non-U.S. GAAP Measures

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 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 EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated below and represents for any relevant period, net income/(loss) plus depreciation and amortization, goodwill and long-lived asset impairment, 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.  

As a result, 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, 5.25% Notes and 3.625% Notes that were outstanding at September 28, 2019.  However, the amounts shown below for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities, 5.25% Notes and 3.625% Notes, as those definitions permit further adjustments to reflect certain other non-recurring costs, non-cash charges and cash dividends from the DGD Joint Venture. Additionally, the Company evaluates the impact of foreign exchange on operating cash flow, which is defined as segment operating income (loss) plus depreciation and amortization.

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

Third Quarter 2019 As Compared to Third Quarter 2018

	Three Months Ended
(dollars in thousands)	September 28, 2019			September 29, 2018
Net income/(loss) attributable to Darling	$	25,721		$	(6,037	)
Depreciation and amortization	80,407			78,842
Interest expense	19,359			20,080
Income tax expense/(benefit)	10,850			(1,403		)
Foreign currency loss/(gain)	(466		)	2,106
Other expense/(income), net	2,614			2,786
Loss/(gain) on disposal of subsidiaries	—			(3,038		)
Equity in net (income)/loss of Diamond Green Diesel	(32,020		)	2,630
Equity in net loss of unconsolidated subsidiaries	665			162
Net income attributable to non-controlling interests	1,116			900
Darling's Adjusted EBITDA	$	108,246		$	97,028
Foreign currency exchange impact (1)	3,088			—
Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP)	$	111,334		$	97,028
DGD Joint Venture Adjusted EBITDA (Darling's Share)	$	39,548		$	509
Darling plus Darling's share of DGD Joint Venture Adjusted EBITDA	$	147,794		$	97,537

(1) The average rates assumption used in this calculation was the actual fiscal average rate for the three months ended September 28, 2019 of €1.00:USD$1.11 and CAD$1.00:USD$0.76 as compared to the average rate for the three months ended September 29, 2018 of €1.00:USD$1.16 and CAD$1.00:USD$0.76, respectively.

For the three months ended September 28, 2019, the Company generated Adjusted EBITDA of $108.2 million, as compared to $97.0 million in the same period in fiscal 2018.

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On a Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) basis, the Company generated $111.3 million in the three months ended September 28, 2019, as compared to a Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) of $97.0 million in the same period in fiscal 2018.

DGD Joint Venture Adjusted EBITDA (Darling's share) is not reflected in the Adjusted EBITDA or the Pro forma Adjusted EBITDA to Foreign Currency. See Note 3 to the Company's Consolidated Financial Statements included herein for financial information regarding the DGD Joint Venture.

Nine Months Ended September 28, 2019 Compared to Nine Months Ended September 29, 2018

Operating Performance Metrics

Operating performance metrics which management routinely monitors as an indicator of operating performance include:

• Finished product commodity prices

• Segment results

• Foreign currency exchange

• Corporate activities

• Non-U.S. GAAP measures

These indicators and their importance are discussed below.

Finished Product Commodity Prices  

During the first nine months of fiscal 2019, 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 months of fiscal 2019, compared to average Jacobsen and Reuters prices for the first nine months of fiscal 2018 are as follows:

	Avg. Price First Nine Months 2019	Avg. Price First Nine Months 2018	Increase/(Decrease)	% Increase/(Decrease)
Jacobsen:
MBM (Illinois)	$ 231.13/ton	$ 272.27/ton	$ (41.14)/ton	(15.1	)%
Feed Grade PM (Mid-South)	$ 247.34/ton	$ 267.95/ton	$ (20.61)/ton	(7.7	)%
Pet Food PM (Mid-South)	$ 560.27/ton	$ 690.76/ton	$ (130.49)/ton	(18.9	)%
Feather meal (Mid-South)	$ 375.89/ton	$ 467.78/ton	$ (91.89)/ton	(19.6	)%
BFT (Chicago)	$ 28.90/cwt	$   26.52/cwt	$ 2.38/cwt	9.0	%
YG (Illinois)	$ 22.55/cwt	$   20.83/cwt	$  1.72/cwt	8.3	%
Corn (Illinois)	$ 3.94/bushel	$ 3.65/bushel	$ 0.29/bushel	7.9	%
Reuters:
Palm Oil (CIF Rotterdam)	$ 533.00/MT	$ 631.00/MT	$ (98.00)/MT	(15.5	)%
Soy meal (CIF Rotterdam)	$ 346.00/MT	$ 417.00/MT	$ (71.00)/MT	(17.0	)%

Segment Results

Segment operating income for the nine months ended September 28, 2019 was $182.5 million, which reflects an increase of $1.2 million or 0.7% as compared to the nine months ended September 29, 2018.

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(in thousands, except percentages)	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Nine Months Ended September 28, 2019
Net Sales	$	1,480,244		$	830,466		$	193,767		$	—		$	2,504,477
Cost of sales and operating expenses	1,143,606			643,091			161,855			—			1,948,552
Gross Margin	336,638			187,375			31,912			—			555,925
Gross Margin %	22.7		%	22.6		%	16.5		%	—		%	22.2		%
Loss (gain) on sale of assets	(7,343		)	(13,518		)	16			—			(20,845		)
Selling, general and administrative expenses	142,615			68,129			583			38,242			249,569
Depreciation and amortization	148,271			59,115			24,055			7,616			239,057
Equity in net income in Diamond Green Diesel	—			—			94,390			—			94,390
Segment operating income/(loss)	53,095			73,649			101,648			(45,858		)	182,534
Equity in net loss of other unconsolidated subsidiaries	(1,087		)	—			—			—			(1,087		)
Segment income/(loss)	52,008			73,649			101,648			(45,858		)	181,447

(in thousands, except percentages)	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Nine Months Ended September 29, 2018
Net Sales	$	1,467,365		$	847,457		$	219,774		$	—		$	2,534,596
Cost of sales and operating expenses	1,123,196			684,962			170,571			—			1,978,729
Gross Margin	344,169			162,495			49,203			—			555,867
Gross Margin %	23.5		%	19.2		%	22.4		%	—		%	21.9		%
Loss (gain) on sale of assets	526			(244		)	190			—			472
Selling, general and administrative expenses	131,914			67,894			(4,056		)	37,155			232,907
Restructuring and impairment charges	—			14,965			—			—			14,965
Depreciation and amortization	140,933			60,725			26,378			7,879			235,915
Equity in net income of Diamond Green Diesel	—			—			109,655			—			109,655
Segment operating income/(loss)	70,796			19,155			136,346			(45,034		)	181,263
Equity in net loss of other unconsolidated subsidiaries	(57		)	—			—			—			(57		)
Segment income/(loss)	70,739			19,155			136,346			(45,034		)	181,206

Feed Ingredients Segment

Raw material volume. Overall, in the nine months ended September 28, 2019, the raw material processed by the Company's Feed Ingredients segment totaled 6.53 million metric tons. Compared to the nine months ended September 29, 2018, overall raw material volume processed in the Feed Ingredients segment increased approximately 5.4%.

Sales. During the nine months ended September 28, 2019, net sales for the Feed Ingredients segment were $1,480.2 million as compared to $1,467.4 million during the nine months ended September 29, 2018, an increase of approximately $12.8 million or 0.9%. Net sales for fats were approximately $438.4 million and $423.1 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. Protein net sales were approximately $603.1 million and $641.2 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. Other rendering net sales, which include hides, pet food and service charges, were approximately $122.6 million and $87.8 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. Total rendering net sales were approximately $1,164.1 million and $1,152.1 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. Used cooking oil net sales were approximately $136.5 million and $123.6 million for the nine months ended September 28, 2019 and September 29, 2018, respectively. Bakery net sales were approximately $141.6 million and $135.9 million for the nine months ended September 28, 2019 and September 29, 2018, respectively, and other sales, which includes trap services and, for 2018, industrial residual services, net sales were approximately $38.0 million and $55.8 million for the nine months ended September 28, 2019 and September 29, 2018, respectively.

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The increase 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 nine months ended September 29, 2018	$	423.1		$	641.2		$	87.8		$	1,152.1		$	123.6		$	135.9		$	55.8		$	1,467.4
Increase/(decrease) in sales volumes	14.7			31.5			—			46.2			14.0			(1.4		)	—			58.8
Increase/(decrease) in finished product prices	5.7			(55.3		)	—			(49.6		)	(0.9		)	7.1			—			(43.4		)
Increase/(decrease) due to currency exchange rates	(5.1		)	(14.3		)	(0.5		)	(19.9		)	(0.2		)	—			(0.1		)	(20.2		)
Other change (1)	—			—			35.3			35.3			—			—			(17.7		)	17.6
Total change	15.3			(38.1		)	34.8			12.0			12.9			5.7			(17.8		)	12.8
Net sales nine months ended September 29, 2019	$	438.4		$	603.1		$	122.6		$	1,164.1		$	136.5		$	141.6		$	38.0		$	1,480.2

(1) The decrease in other net sales is primarily a result of the sale of the Company's industrial residuals business in May 2018.

Margins. In the Feed Ingredients segment for the nine months ended September 28, 2019, the gross margin percentage decreased to 22.7% as compared to 23.5% for the same period of fiscal 2018. The decrease is primarily due to lower protein finished product prices and higher factory costs from the addition of several new facilities.

Segment operating income. Feed Ingredients operating income for the nine months ended September 28, 2019 was $53.1 million, a decrease of $17.7 million or (25.0)% as compared to the nine months ended September 29, 2018. This was primarily due to a decrease in protein finished product sales prices, lower spreads in poultry pet grade products and higher factory, depreciation and amortization costs from the addition of several new facilities and partial multiemployer pension withdrawal charges.

Food Ingredients Segment

Raw material volume. Overall, for the nine months ended September 28, 2019, the raw material processed by the Company's Food Ingredients segment totaled 809,000 metric tons. As compared to the nine months ended September 29, 2018, overall raw material volume processed in the Food Ingredients segment decreased by approximately 16.0%.

Sales. Overall sales decreased in the Food Ingredients segment primarily due to lower edible fat sales caused by lower competing fats markets and lower casings sales prices primarily resulting from lower volumes. The Company was able to service the customers impacted by the closure of the Argentina collagen plant by increasing sales from its other collagen locations.

Margins. In the Food Ingredients segment for the nine months ended September 28, 2019, the gross margin percentage increased to 22.6% as compared to 19.2% during the comparable period of fiscal 2018. The increase is primarily due to improved margins from the growth of the collagen business and the closure of the Argentina collagen plant which more than offset lower casing and edible fat margins.

Segment operating income. Food Ingredients operating income was $73.6 million for the nine months ended September 28, 2019, an increase of $54.4 million or 283.3% as compared to the nine months ended September 29, 2018. The increase is primarily due to improved results in the collagen markets, a gain on sale of assets in China and no restructuring and impairment charges in the current year as compared to the same period in fiscal 2018 when the Company closed its Argentina collagen plant.

Fuel Ingredients Segment

Raw material volume. Overall, in the nine months ended September 28, 2019, the raw material processed by the Company's Fuel Ingredients segment totaled 929,000 metric tons. As compared to the nine months ended September 29, 2018, overall raw material volume processed in the Fuel Ingredients segment increased by approximately 24.4%.

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Sales. Overall sales decreased in the Fuel Ingredients segment primarily due to no blenders tax credits recorded in fiscal 2019 in North America, lower diesel and RIN values in the North American market in fiscal 2019 as compared to the prior year and lower volumes at Rendac in the Company's bioenergy business because of conversion of some raw materials to the Feed segment activities.

Margins. In the Fuel Ingredients segment (exclusive of the equity contribution from the DGD Joint Venture) for the nine months ended September 28, 2019, the gross margin percentage decreased to 16.5% as compared to 22.4% for the comparable period of fiscal 2018. The decrease is primarily related to the 2017 blenders tax credits recorded in the first quarter of 2018 as compared to no blenders tax credits recorded in fiscal 2019 and lower diesel and RIN values in North America in fiscal 2019 as compared to fiscal 2018.

Segment operating income. The Company's Fuel Ingredients segment operating income (inclusive of the equity contribution from DGD Joint Venture) for the nine months ended September 28, 2019 was $101.6 million, a decrease of $34.7 million or (25.5)% as compared to the same period in fiscal 2018. The decrease in earnings is primarily related to the 2017 blenders tax credits booked in the first quarter of 2018 as compared to no blenders tax credits booked in fiscal 2019.

Foreign Currency Exchange

During the first nine months of fiscal 2019, the euro and Canadian dollar weakened against the U.S. dollar as compared to the same period in fiscal 2018. Using actual results for the nine months ended September 28, 2019 and using the prior year's average currency rate for the nine months ended September 29, 2018, foreign currency translation would result in an increase in operating income of approximately $14.7 million. The average rates assumptions used in this calculation were the actual fiscal average rate for the nine months ended September 28, 2019 of €1.00:USD$1.12 and CAD$1.00:USD$0.75 as compared to the average rate for the nine months ended September 29, 2018 of €1.00:USD$1.20 and CAD$1.00:USD$0.78, respectively.

Corporate Activities

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $38.2 million during the nine months ended September 28, 2019, compared to $37.2 million during the nine months ended September 29, 2018, an increase of $1.0 million. The increase is due to an increase in performance based compensation. 

Depreciation and Amortization.  Depreciation and amortization charges decreased slightly by $0.3 million to $7.6 million during the nine months ended September 28, 2019, as compared to $7.9 million during the nine months ended September 29, 2018.  The decrease is due to certain of the Company's office and computer equipment assets becoming fully depreciated in fiscal 2018.

Interest Expense. Interest expense was $60.1 million during the nine months ended September 28, 2019, compared to $66.2 million during the nine months ended September 29, 2018, a decrease of $6.1 million. The decrease is primarily due to the refinance of the Company's €515 million Senior Notes from 4.75% to 3.625% in the second quarter of fiscal 2018.

Debt Extinguishment costs. Debt extinguishment costs were $12.1 million during the nine months ended September 28, 2019, compared to $23.5 million in the nine months ended September 29, 2018. The decrease was due to lower tender and redemption premiums and write-off of deferred loan costs on the 5.375% Senior Notes as compared to the 4.75% Senior Notes extinguished in fiscal 2018.

Foreign Currency Losses.  Foreign currency losses were $0.7 million for the nine months ended September 28, 2019 as compared to $7.1 million for the nine months ended September 29, 2018. The decrease is due primarily to less losses on the revaluation of non-functional currency liabilities as compared to the same period in fiscal 2018.

Loss on disposal of subsidiaries. No gains or losses were recorded in the nine months ended September 28, 2019 as compared to a loss on sale of subsidiary, which represents the loss recorded on the sale of a domestic subsidiary during the nine months ended September 29, 2018 that more than offset a gain recorded on the liquidation of a majority owned foreign joint venture.

Other Expense, net. Other expense was $7.2 million in the nine months ended September 28, 2019, compared to other expense of $4.1 million for the nine months ended September 29, 2018. The increase in other expense was primarily due to an increases in casualty losses and in the non-service component of pension expense in the nine months ended September 28, 2019 as compared to the same period in fiscal 2018.

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Equity in Net loss in Investment of Other Unconsolidated Subsidiaries. This primarily represents the Company's pro rata share of the net losses of its domestic unconsolidated subsidiary other than the DGD Joint Venture that more than offset net income from foreign unconsolidated subsidiaries.

Income Taxes. The Company recorded income tax expense of $23.9 million for the nine months ended September 28, 2019, compared to $4.0 million of income tax expense recorded in the nine months ended September 29, 2018, an increase of $19.9 million. The effective tax rate for the nine months ended September 28, 2019 was 23.6%. The effective tax rate for the nine months ended September 28, 2019 differed from the statutory rate of 21% due to the relative mix of earnings among jurisdictions with different tax rates (including foreign withholding taxes and state income taxes), compensation related expenses not deductible for tax purposes and discrete items, including the favorable settlement of an audit and recognition of a deferred tax asset for which no tax benefit had previously been recorded. The effective tax rate for the nine months ended September 29, 2018 was 5.9%. The effective tax rate for the nine months ended September 29, 2018 differed from the statutory rate of 21% due primarily to the retroactive reenactment of the biofuel tax incentive for 2017 during the first quarter of 2018 offset by the impact of certain losses, including the Company's sale of its Terra Renewal Services industrial residuals business and the shut-down of its Hurlingham, Argentina plant, that provided no tax benefit. The Company's effective tax rate excluding the biofuel tax incentive and other discrete items is 27.9% for the nine months ended September 28, 2019, compared to 27.8% for the nine months ended September 29, 2018.

Non-U.S. GAAP Measures

For a discussion of the reasons the Company's management believes the following Non-GAAP financial measures provide useful information to investors and the purposes for which the Company's management uses such measures, see “Results of Operations - Three Months Ended September 28, 2019 Compared to the Three Months Ended September 29, 2018 - Non-U.S. GAAP Measures.”

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

First Nine Months of Fiscal 2019 As Compared to First Nine Months of Fiscal 2018

	Nine Months Ended
(dollars in thousands)	September 28, 2019			September 29, 2018
Net income/(loss) attributable to Darling	$	69,991		$	60,848
Depreciation and amortization	239,057			235,915
Interest expense	60,088			66,220
Income tax expense/(benefit)	23,900			3,992
Restructuring and impairment charges	—			14,965
Foreign currency loss/(gain)	654			7,082
Other expense/(income), net	7,158			4,103
Debt extinguishment costs	12,126			23,509
Loss on disposal of subsidiaries	—			12,500
Equity in net (income)/loss of Diamond Green Diesel	(94,390		)	(109,655		)
Equity in net loss of unconsolidated subsidiaries	1,087			57
Net income attributable to non-controlling interests	7,530			2,952
Darling's Adjusted EBITDA	$	327,201		$	322,488
Foreign currency exchange impact (1)	14,749			—
Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP)	$	341,950		$	322,488
DGD Joint Venture Adjusted EBITDA (Darling's Share)	$	113,270		$	118,745
Darling plus Darling's share of DGD Joint Venture Adjusted EBITDA	$	440,471		$	441,233

(1) The average rates assumption used in this calculation was the actual fiscal average rate for the nine months ended September 28, 2019 of €1.00:USD$1.12 and CAD$1.00:USD$0.75 as compared to the average rate for the nine months ended September 29, 2018 of €1.00:USD$1.20 and CAD$1.00:USD$0.78, respectively.

For the nine months ended September 28, 2019, the Company generated Adjusted EBITDA of $327.2 million, as compared to $322.5 million in the same period in fiscal 2018.

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On a Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) basis, the Company generated $342.0 million in the nine months ended September 28, 2019, as compared to a Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP) of $322.5 million in the same period in fiscal 2018.

DGD Joint Venture Adjusted EBITDA (Darling's share) is not reflected in the Adjusted EBITDA or the Pro forma Adjusted EBITDA to Foreign Currency. See Note 3 to the Company's Consolidated Financial Statements included herein for financial information regarding the DGD Joint Venture.

FINANCING, LIQUIDITY AND CAPITAL RESOURCES

Credit Facilities

Indebtedness

Certain Debt Outstanding at September 28, 2019. On September 28, 2019, debt outstanding under the Company's Amended Credit Agreement, the Company's 5.25% Notes and the Company's 3.625% Notes consists of the following (in thousands):

        

Senior Notes:
5.25 % Notes due 2027	$	500,000
Less unamortized deferred loan costs	(6,674		)
Carrying value of 5.25% Notes due 2027	$	493,326
3.625 % Notes due 2026 - Denominated in euros	$	563,178
Less unamortized deferred loan costs	(7,086		)
Carrying value of 3.625% Notes due 2026	$	556,092
Amended Credit Agreement:
Term Loan A	$	14,005
Less unamortized deferred loan costs	(57		)
Carrying value of Term Loan A	13,948
Term Loan B	$	495,000
Less unamortized deferred loan costs	(8,048		)
Carrying value of Term Loan B	$	486,952
Revolving Credit Facility:
Maximum availability	$	1,000,000
Ancillary Facilities	45,490
Borrowings outstanding	24,000
Letters of credit issued	3,570
Availability	$	926,940
Other Debt	$	46,583

During the first nine months of fiscal 2019, the U.S. dollar strengthened as compared to the euro and weakened as compared to the Canadian dollar. Using the euro and Canadian dollar based debt outstanding at September 28, 2019 and comparing the closing balance sheet rates at September 28, 2019 to those at December 29, 2018, the U.S. dollar debt balances of euro based debt decreased by approximately $27.0 million and Canadian based debt increased by approximately $0.4 million, respectively, at September 28, 2019. The closing balance sheet rate assumptions used in this calculation were the actual fiscal closing balance sheet rate at September 28, 2019 of €1.00:USD$1.09355 and CAD$1.00:USD$0.754458 as compared to the closing balance sheet rate at December 29, 2018 of €1.00:USD$1.14660 and CAD$1.00:USD$0.735401, respectively.

Senior Secured Credit Facilities. On January 6, 2014, Darling, Darling International Canada Inc. (“Darling Canada”) and Darling International NL Holdings B.V. (“Darling NL”) entered into a Second Amended and Restated Credit Agreement (as subsequently amended, the “Amended Credit Agreement”), restating its then existing Amended and Restated Credit Agreement dated September 27, 2013, with the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents from time to time party thereto. Effective December 18, 2017, the Company, and

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certain of its subsidiaries entered into an amendment (the “Fifth Amendment”) with its lenders to the Amended Credit Agreement. Among other things, the Fifth Amendment (i) refinanced the term B loans under the Amended Credit Agreement with new term B loans in an aggregate principal amount of $525.0 million with a maturity date of December 18, 2024; (ii) adjusted the applicable margin pricing on borrowings under the term B loan; (iii) modified certain of the negative covenants to increase the allowances for certain actions, including debt and investments; and (iv) made other updates and changes. 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. For more information regarding the Amended Credit Agreement see Note 9 to the Company's Consolidated Financial Statements included herein.

• As of September 28, 2019, the Company had availability of $926.9 million under the revolving loan facility, taking into account that the Company had $24.0 million in outstanding borrowings, $45.5 million in ancillary facilities and letters of credit issued of $3.6 million.

• As of September 28, 2019, the Company has borrowed all $350.0 million under the term loan A facility and repaid approximately CAD$131.4 million and $200.0 million, which when repaid, cannot be reborrowed. The term loan A facility is repayable in quarterly installments which commenced on March 31, 2017 as follows: for the first eight quarters following December 16, 2016, 1.25% of the original principal amount of the term loan A facility outstanding on the Fourth Amendment date, for the ninth through sixteenth quarters following December 16, 2016, 1.875% of the original principal amount of the term loan A facility outstanding on the Fourth Amendment date, and for each quarterly installment after such sixteenth installment until December 16, 2021, 3.75% of the original principal amount of the term loan A facility outstanding on the Fourth Amendment date. The term loan A facility will mature on December 16, 2021.

• As of September 28, 2019, the Company has borrowed all $525.0 million under the terms of the term loan B facility and repaid approximately $30.0 million, which when repaid, cannot be reborrowed. The term loan B facility is repayable in quarterly installments of 0.25% of the aggregate principal amount of the relevant term loan B facility on the last day of each March, June, September and December of each year commencing on the last day of each month falling on or after the last day of the first full quarter following December 18, 2017, and continuing until the last day of each quarter period ending immediately prior to December 18, 2024; and one final installment in the amount of the relevant term loan B facility then outstanding, due on December 18, 2024. The term loan B facility will mature on December 18, 2024.

• The interest rate applicable to any borrowings under the term loan A facility and the revolving loan facility will equal either LIBOR/euro interbank offered rate/CDOR plus 2.00% per annum or base rate/Canadian prime rate plus 1.00% per annum, subject to certain step-downs or step-ups based on the Company's total leverage ratio. The interest rate applicable to any borrowings under the term loan B facility will equal the base rate plus 1.00% or LIBOR plus 2.00%.

5.25 % Senior Notes due 2027. On April 3, 2019, Darling issued and sold $500.0 million aggregate principal amount of 5.25% Senior Notes due 2027 (the “5.25% Notes”). The 5.25% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of April 3, 2019 (the “5.25% Indenture”), among Darling, the subsidiary guarantors party thereto from time to time, and Regions Bank, as trustee. The gross proceeds from the sale of the Notes, together with cash on hand, were used to refinance all of the Company's formerly outstanding 5.375% Senior Notes due 2022 (the “5.375% Notes”), by cash tender offer for and redemption of those notes, to pay the discount of the initial purchasers and to pay the other fees and expenses related to the offering of the 5.25% Notes. The refinancing of the 5.375% Notes was completed in the second quarter of 2019.

3.625% Senior Notes due 2026. On May 2, 2018, Darling Global Finance B.V. issued and sold €515.0 million aggregate principal amount of 3.625% Senior Notes due 2026 (the “3.625% Notes”). The 3.625% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of May 2, 2018, among Darling Global Finance B.V., Darling, the subsidiary guarantors party thereto from time to time, Citibank, N.A., London Branch, as trustee and principal paying agent, and Citigroup Global Markets Deutschland AG, as principal registrar. The gross proceeds of the offering, together with borrowings under the Company’s revolving credit facility, were used to refinance all of the Company's formerly outstanding 4.75% Senior Notes due 2022 (the “4.75% Notes”) by cash tender offer and redemption of those notes and to pay any applicable premiums for the refinancing, to pay the commission of the initial purchasers of the 3.625% Notes and to pay the other fees and expenses related to the offering. The refinancing of the 4.75% Notes was completed in the second quarter of 2018.

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Other debt consists of U.S, Canadian and European capital lease obligations, note arrangements in Brazil, China and European notes that are not part of the Company's Amended Credit Agreement, 5.25% Notes or 3.625% Notes.

The classification of long-term debt in the Company’s September 28, 2019 consolidated balance sheet is based on the contractual repayment terms of the 5.25% Notes, the 3.625% Notes and debt issued under the Amended Credit Agreement.

As a result of the Company's borrowings under its Amended Credit Agreement, the 5.25% Indenture and the 3.625% Indenture, the Company is highly leveraged. Investors should note that, in order to make scheduled payments on the indebtedness outstanding under the Amended Credit Agreement, the 5.25% Notes and the 3.625% Notes, and otherwise, the Company will rely in part on a combination of dividends, distributions and intercompany loan repayments from the Company's direct and indirect U.S. and foreign subsidiaries. The Company is prohibited under the Amended Credit Agreement, the 5.25% Indenture and the 3.625% Indenture from entering (or allowing such subsidiaries to enter) into contractual limitations on the Company's subsidiaries’ ability to declare dividends or make other payments or distributions to the Company. The Company has also attempted to structure the Company's consolidated indebtedness in such a way as to maximize the Company's ability to move cash from the Company's subsidiaries to Darling or another subsidiary that will have fewer limitations on the ability to make upstream payments, whether to Darling or directly to the Company's lenders as a Guarantor. Nevertheless, applicable laws under which the Company's direct and indirect subsidiaries are formed may provide limitations on such dividends, distributions and other payments. In addition, regulatory authorities in various countries where the Company operates or where the Company imports or exports products may from time to time impose import/export limitations, foreign exchange controls or currency devaluations that may limit the Company's access to profits from the Company's subsidiaries or otherwise negatively impact the Company's financial condition and therefore reduce the Company's ability to make required payments under the Amended Credit Agreement, the 5.25% Notes and the 3.625% Notes, or otherwise. In addition, fluctuations in foreign exchange values may have a negative impact on the Company's ability to repay indebtedness denominated in U.S. or Canadian dollars or euros. See “Risk Factors - Our business may be adversely impacted by fluctuations in exchange rates, which could affect our ability to comply with our financial covenants” and “ - Our ability to repay our indebtedness depends in part on the performance of our subsidiaries, including our non-guarantor subsidiaries, and their ability to make payments” in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2018 as filed with the SEC on February 27, 2019.

As of September 28, 2019, 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 5.25% Indenture and the 3.625% Indenture.

Working Capital and Capital Expenditures

On September 28, 2019, the Company had working capital of $257.8 million and its working capital ratio was 1.43 to 1 compared to working capital of $357.4 million and a working capital ratio of 1.66 to 1 on December 29, 2018.  As of September 28, 2019, the Company had unrestricted cash of $69.1 million and funds available under the revolving credit facility of $926.9 million, compared to unrestricted cash of $107.3 million and funds available under the revolving credit facility of $929.8 million at December 29, 2018. The Company diversifies its cash investments by limiting the amounts deposited with any one financial institution and invests primarily in government-backed securities.

Net cash provided by operating activities was $262.7 million for the first nine months ended September 28, 2019, as compared to net cash provided by operating activities of $199.7 million for the first nine months ended September 29, 2018, an increase of $63.0 million due primarily to an increase in net income of approximately $13.7 million, an increase in distributions from unconsolidated subsidiaries of approximately $29.7 million, changes in operating assets and liabilities that includes an increase in accounts receivable of approximately $10.7 million, an increase in income taxes refundable/payable of approximately $17.9 million, an increase in accounts payable and accrued expenses of approximately $3.2 million, and a decrease in inventories and prepaid expenses of approximately $8.4 million.  Cash used by investing activities was $234.9 million for the first nine months ended September 28, 2019, compared to $188.9 million for the first nine months ended September 29, 2018, an increase in cash used by investing activities of $46.0 million, primarily due to an increase in capital asset spending and no net proceeds from sale of subsidiaries offset by a decrease in cash paid for acquisitions.  Net cash used by financing activities was $60.1 million for the first nine months ended September 28, 2019, compared to net cash used by financing activities of $29.9 million for the first nine months ended September 29, 2018, an increase in net cash used by financing activities of $30.2 million, primarily due to an increase in net overall payments on long term debt and the repurchase of common stock under the Company's share repurchase program in the first nine months ended September 28, 2019 as compared to the first nine months ended September 29, 2018.

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Capital expenditures of $245.1 million were made during the first nine months of fiscal 2019, compared to $213.7 million in the first nine months of fiscal 2018, for a net increase of $31.4 million or 14.7%.  The Company expects to incur additional capital expenditures of approximately $55.0 million for the remainder of fiscal 2019 including new construction. The Company intends to finance these costs using cash flows from operations. Capital expenditures related to compliance with environmental regulations were $26.0 million and $22.5 million during the first nine months ended September 28, 2019 and September 29, 2018, respectively.

Accrued Insurance and Pension Plan Obligations

Based upon the annual actuarial estimate, current accruals and claims paid during the first nine months of fiscal 2019, the Company has accrued approximately $13.7 million it expects will become due during the next twelve months in order to meet obligations related to the Company’s self insurance reserves and accrued insurance obligations, which are included in current accrued expenses at September 28, 2019.  The self insurance reserve is composed of estimated liability for claims arising for workers’ compensation, and for auto liability and general liability claims.  The self insurance reserve liability is determined annually, based upon a third party actuarial estimate.  The actuarial estimate may vary from year to year due to changes in cost of health care, the pending number of claims or other factors beyond the control of management of the Company. 

Based upon current actuarial estimates, the Company expects to contribute approximately $0.9 million to its domestic pension plans in order to meet minimum pension funding requirements during the next twelve months.  In addition, the Company expects to make payments of approximately $3.3 million under its foreign pension plans in the next twelve months.  The minimum pension funding requirements are determined annually, based upon a third party actuarial estimate.  The actuarial estimate may vary from year to year due to fluctuations in return on investments or other factors beyond the control of management of the Company or the administrator of the Company’s pension funds.  No assurance can be given that the minimum pension funding requirements will not increase in the future.  The Company has made tax deductible discretionary and required contributions to its domestic pension plans for the first nine months ended September 28, 2019 of approximately $0.7 million. Additionally, the Company has made required and tax deductible discretionary contributions to its foreign pension plans for the first nine months ended September 28, 2019 of approximately $2.0 million.

The U.S. Pension Protection Act of 2006 (“PPA”) went into effect in January 2008.  The stated goal of the PPA is to improve the funding of U.S. pension plans.  U.S. plans in an under-funded status are required to increase employer contributions to improve the funding level within PPA timelines.  Volatility in the world equity and other financial markets could have a material negative impact on U.S. pension plan assets and the status of required funding under the PPA.  The Company participates in various U.S. multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts.  These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants. The Company's contributions to each individual U.S. multiemployer plan represent less than 5% of the total contributions to each such plan. Based on the most currently available information, the Company has determined that, if a withdrawal were to occur, withdrawal liabilities for two of the U.S. 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 under PPA guidelines. With respect to the other U.S. multiemployer pension plans in which the Company participates and which are not individually significant, five plans have certified as critical or red zone and two have certified as endangered or yellow zone as defined by the PPA. The Company has received notices of withdrawal liability from three U.S. multiemployer pension plans in which it participated. As a result, the Company has an accrued aggregate liability of approximately $6.1 million representing the present value of scheduled withdrawal liability payments under these multiemployer plans. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could require additional funding under the PPA, the amounts could be material.

DGD Joint Venture

The Company announced on January 21, 2011 that a wholly-owned subsidiary of Darling entered into a limited liability company agreement (as subsequently amended, the “DGD LLC Agreement”) with Valero to form the DGD Joint Venture. The DGD Joint Venture is owned 50% / 50% with Valero and was formed to design, engineer, construct and operate the DGD Facility, which as a result of its recently expanded capacity is now capable of processing approximately 20,000 barrels per day of input feedstock to produce renewable diesel fuel and certain other co-products, and is located adjacent to Valero's refinery in Norco, Louisiana. The DGD Joint Venture reached mechanical completion and began the production of renewable diesel in late June 2013. Effective May 1, 2019, the DGD LLC Agreement was amended and restated for the purpose of updating the agreement in certain respects, including to remove certain provisions that were no longer relevant and to add new provisions relating to the DGD Joint Venture’s recently approved expansion project to construct a new, parallel facility located next to the current facility, as further described below.

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On May 1, 2019, Darling, through its wholly owned subsidiary Darling Green Energy LLC, (“Darling Green”), and Diamond Alternative Energy, LLC, a wholly owned subsidiary of Valero (“Diamond Alternative” and together with Darling Green, the “DGD Lenders”) entered into a revolving loan agreement (the “DGD Loan Agreement”) with the DGD Joint Venture. The DGD Lenders have committed to make loans available to the DGD Joint Venture in the total amount of $50.0 million with each lender committed to $25.0 million of the total commitment. Any borrowings by the DGD Joint Venture under the DGD Loan Agreement are 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 DGD Loan Agreement matures on April 29, 2020, unless extended by agreement of the parties. The DGD Loan Agreement replaces a similar agreement with lower commitment levels that expired on December 31, 2018. As of September 28, 2019, no amounts are owed to the DGD Lenders under the DGD Loan Agreement.

Based on the sponsor support agreements executed in connection with the initial construction of the DGD Facility, the Company contributed a total of approximately $111.7 million for completion of the DGD Facility including the Company's portion of cost overruns and working capital funding. As of September 28, 2019, under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $408.3 million included on the consolidated balance sheet.

In August 2018, the DGD Joint Venture completed an expansion project that increased the DGD Facility's annual production capacity from 160 million gallons of renewable diesel to 275 million gallons and expanded outbound logistics for servicing the many developing low carbon fuel markets around North America and worldwide. In November 2018, the joint venture partners approved the DGD Joint Venture moving forward with another expansion project to construct a new, parallel facility (the “New Facility”) located next to the current facility. The New Facility is expected to grow the DGD Joint Venture’s annual production capacity by an additional 400 million gallons from the current capacity of 275 million gallons of renewable diesel to 675 million gallons of renewable diesel and provide the capability to separate naphtha for sale into low carbon fuel markets. In addition, the expansion project includes expanded inbound and outbound logistics for servicing the many developing low carbon fuel markets around North America and worldwide. The DGD Joint Venture estimates completion and startup of the New Facility in the fourth quarter of 2021, and the total cost of the expansion project, including the naphtha production and improved logistics capability, is estimated to be approximately $1.1 billion. Based on forecasted margins as of the date of this report, the expansion project is expected to be substantially funded by DGD Joint Venture cash flow; however, the DGD LLC Agreement provides that until such time as the New Facility is complete and operational, the joint venture partners shall be required to make capital contributions or, if they agree, loans, to the DGD Joint Venture should the excess available cash in the DGD Joint Venture, as determined on specified dates and in accordance with the provisions contained in the DGD LLC Agreement, fall below $50 million.

In April 2019, the joint venture partners adopted a distribution policy that, unless earlier terminated by the partners, will remain in place through the construction and completion of the New Facility. Pursuant to the distribution policy, the DGD Joint Venture will make quarterly distributions to the partners to the extent that distributable cash (as determined in accordance with the policy) exceeds $50 million and the DGD Joint Venture’s forward looking cash forecast. During the nine months ended September 28, 2019, the DGD Joint Venture made $55.4 million distributions to each of the partners. In October 2019, the DGD Joint Venture made dividend distributions to each partner in the amount of approximately $12.1 million.

The Company’s original investment in DGD has expanded since 2011 to the point that it is now integral to how Darling operates its business. Darling traditionally collected and converted used cooking oil and animal fats into feed ingredients which were sold on a caloric value to feed animals as well as for industrial technical uses. Over the past decade, the world’s increasing focus on climate change and greenhouse gas has provided a new finished market for the Company’s finished fats ingredients. With Darling’s significant fats ownership, this has and continues to transform how Darling operates. In 2018, a large portion of Darling’s total U.S. finished fats products were sold to the DGD Facility as feedstock for renewable diesel. This percentage is expected to noticeably increase both in 2019 and beyond due to the recent DGD capacity expansion completed in August 2018 and the even larger expansion to be finished in late 2021. In 2018, DGD was Darling’s largest finished product customer in terms of sales, with Darling recording sales of $131.8 million to DGD.

From a procurement, production and distribution standpoint, DGD has become integral to Darling’s base business. DGD is integrated to the Company’s operations via the combined vertical operating structure from collecting raw fats, to processing collected fats at Darling facilities nationwide to transporting the refined fats to the DGD facility as feedstock. The Darling supply chain has become more efficient and sustainable with transparency for verification to obtain full value to low carbon intensity markets. The development of the low carbon markets in North America and Europe has influenced how Darling operates its core business and has also been a driver for the recent DGD expansions, which are making DGD much more relevant to Darling’s earnings. Since 2011 when construction began on DGD, Darling has invested substantially to

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increase its U.S. railcar fleet to efficiently manage nationwide transportation of Darling fats to DGD. Additionally, Darling acquired an Iowa location on the Mississippi River that further enhances the Company's Midwest network of facilities the ability to collect and deliver feedstocks to DGD via water, rail or truck from a centralized location. Darling has also stepped up collection efforts by providing indoor used cooking oil collection units in exchange for extended collection contracts at eating establishments and has moved to more of a centralized digital marketing effort with restaurant chains and franchise groups and invested in internet search engine key words to improve visibility with restaurants. The Company also includes DGD in marketing efforts to emphasize environmental sustainability that restaurants participate in when their used cooking oil is collected by Darling. From a production standpoint, Darling now isolates used cooking oil from other fats to preserve identification to qualify for a higher carbon intensity value. As a result, the Company has reclassified its equity in net income of the DGD Joint Venture to operating income for all periods presented.

In September 2019, the Company announced that the DGD Joint Venture was initiating an advanced engineering and development cost review for construction of a new renewable diesel plant to be located in Port Arthur, Texas. The proposed facility under review would be designed to produce 400 million gallons of renewable diesel annually as well as 40 million gallons of renewable naphtha. The final investment decision on the project is expected in 2021, subject to further engineering, obtaining necessary permits, and approval by the boards of the Company and Valero. If the decision is made to move forward, new plant construction could begin in 2021, with expected operations commencing in 2024.

Financial Impact of Significant Debt Outstanding

The Company has a substantial amount of indebtedness, which could make it more difficult for the Company to satisfy its obligations to its financial lenders and its contractual and commercial commitments, limit the Company's ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements on commercially reasonable terms or at all, require the Company to use a substantial portion of its cash flows from operations to pay principal and interest on its indebtedness instead of other purposes, thereby reducing the amount of the Company's cash flows from operations available for working capital, capital expenditures, acquisitions and other general corporate purposes, increase the Company's vulnerability to adverse economic, industry and business conditions, expose the Company to the risk of increased interest rates as certain of the Company's borrowings are at variable rates of interest, limit the Company's flexibility in planning for, or reacting to, changes in the Company's business and the industry in which the Company operates, place the Company at a competitive disadvantage compared to other, less leveraged competitors, and/or increase the Company's cost of borrowing.

Cash Flows and Liquidity Risks

Management believes that the Company’s cash flows from operating activities consistent with the level generated in the first nine months of fiscal 2019, unrestricted cash and funds available under the Amended Credit Agreement, will be sufficient to meet the Company’s working capital needs and maintenance and compliance-related capital expenditures, scheduled debt and interest payments, income tax obligations, and other contemplated needs through the next twelve months. Numerous factors could have adverse consequences to the Company that cannot be estimated at this time, such as those factors discussed below under the heading “Forward Looking Statements”.  These factors, coupled with volatile prices for natural gas and diesel fuel, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could negatively impact the Company’s results of operations in fiscal 2019 and thereafter.  The Company reviews the appropriate use of unrestricted cash periodically.  As of the date of this report, no decision has been made as to non-ordinary course material cash usages at this time; however, potential usages could include:  opportunistic capital expenditures and/or acquisitions and joint ventures;  investments relating to the Company’s renewable energy strategy, including, without limitation, potential required funding obligations with respect to the DGD Joint Venture expansion project or potential investments in additional renewable diesel and/or biodiesel projects;  investments in response to governmental regulations relating to human and animal food safety or other regulations;  unexpected funding required by the legislation, regulation or mass termination of multiemployer plans; and paying dividends or repurchasing stock, subject to limitations under the Amended Credit Agreement, the 5.25% Notes and the 3.625% Notes, as well as suitable cash conservation to withstand adverse commodity cycles. In August 2015, the Company's Board of Directors approved a share repurchase program of up to an aggregate of $100.0 million of the Company's Common Stock depending on market conditions. The repurchases may be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market. The program initially approved by the Board of Directors was for a 24 month period; however, the Board has subsequently extended the program for an additional 36 month period and increased the amount of the program to $200.0 million. Accordingly, repurchases may occur through August 13, 2020, unless further extended or shortened by the Board of Directors. Since the inception of the share repurchase

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program, the Company has repurchased approximately $22.6 million of its common stock in open market purchases and, as of the date of the filing of this report, has $188.3 million remaining in its share repurchase program.

Each of the factors described above has the potential to adversely impact the Company's liquidity in a variety of ways, including through reduced raw materials availability, reduced finished product prices, reduced sales, potential inventory buildup, increased bad debt reserves, potential impairment charges and/or higher operating costs.

Sales prices for the principal products that the Company sells are typically influenced by sales prices for agricultural-based alternative ingredients, the prices of which are based on established commodity markets and are subject to volatile changes. Any decline in these prices has the potential to adversely impact the Company's liquidity. Any of a decline in raw material availability, a decline in agricultural-based alternative ingredients prices, increases in energy prices or the impact of U.S. and foreign regulation (including, without limitation, China), changes in foreign exchange rates, imposition of currency controls and currency devaluations has the potential to adversely impact the Company's liquidity. A decline in commodities prices, a rise in energy prices, a slowdown in the U.S. or international economy or other factors could cause the Company to fail to meet management's expectations or could cause liquidity concerns.

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

Based upon the underlying purchase agreements, the Company has commitments to purchase $99.1 million of commodity products consisting of approximately $58.8 million of finished products, approximately $39.3 million of natural gas and diesel fuel and approximately $1.0 million of other commitments during the next two years, which are not included in liabilities on the Company’s balance sheet at September 28, 2019.  These purchase agreements are entered into in the normal course of the Company’s business and are not subject to derivative accounting. The commitments will be recorded on the balance sheet of the Company when delivery of these commodities occurs and ownership passes to the Company during the remainder of fiscal 2019, in accordance with accounting principles generally accepted in the U.S.

The following table summarizes the Company’s other commercial commitments, including both on- and off-balance sheet arrangements that are part of the Company's Amended Credit Agreement and other foreign bank guarantees that are not a part of the Company's Amended Credit Agreement at September 28, 2019 (in thousands):

            

Other commercial commitments:
Standby letters of credit	$	3,570
Foreign bank guarantees	11,317
Total other commercial commitments:	$	14,887

CRITICAL ACCOUNTING POLICIES

The Company follows certain significant accounting policies when preparing its consolidated financial statements. A complete summary of these policies is included in the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2018, filed with the SEC on February 27, 2019.

Based on the Company’s annual impairment testing at October 27, 2018, the fair values of the Company’s reporting units containing goodwill exceeded the related carrying value.  However, based on the Company's annual impairment testing at October 28, 2018, the fair value of six of the Company's eight reporting units was less than 30% in excess of its carrying value and one reporting unit (Canada Fuel) was less than 10% of the estimated fair value with goodwill of approximately $30.1 million as of September 28, 2019, which was substantially less than the percentage by which the other reporting units with goodwill exceeded their carrying values. The Company determined the fair value of reporting units with the assistance of a valuation expert who assisted the Company primarily using the Income Approach to determine the fair value of the Company's reporting units. Key assumptions that impacted the discounted cash flow model were raw material volumes, gross margins, terminal growth rates and discount rates. It is possible, depending upon a number of factors that are not determinable at this time or within the control of the Company, that the fair value of these six reporting units could decrease in the future and result in an impairment to goodwill.  The amount of goodwill allocated to these six reporting units was approximately $795.4 million as of September 28, 2019.  The Company's management believes the biggest risk to these reporting units is decreasing finished product prices impacting gross margins and an economic slowdown that would impact raw material suppliers. As of September 28, 2019, there were no triggering events noted that would indicate that the goodwill allocated to any of the Company's reporting units is impaired.

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NEW ACCOUNTING PRONOUNCEMENTS

In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. This ASU amends Subtopic 350-40, Intangibles - Goodwill and Other Internal - Use Software, which will align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard is effective for fiscal years beginning after December 15, 2019 and for interim periods therein, with early adoption permitted. Implementation should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company adopted the new accounting standard effective December 30, 2018 and the adoption did not have a material impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans. This ASU amends Subtopic 715-20, Compensation - Retirement Benefits - Defined Benefit Plans - General, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans by removing and adding certain disclosures for these plans. The standard is effective for fiscal years ending after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard.

In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurements. This ASU amends Topic 820, Fair Value Measurement, which changes the disclosure requirements for fair value measurements by removing, adding and modifying certain disclosures. The standard is effective for fiscal years beginning after December 15, 2019 and for interim periods therein, with early adoption permitted. The Company is currently evaluating the impact of this standard.

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 with disclosure on a prospective basis. The Company adopted this ASU on December 30, 2018 and the initial adoption of this ASU did not have a material impact on the Company's 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 June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Under ASU 2016-13, existing guidance on reporting credit losses for trade and other receivables and available for sale debt securities will be replaced with a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. This ASU is effective for fiscal years beginning after December 15, 2019 and interim periods therein. The Company is currently evaluating the impact of this standard.

FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q includes “forward-looking” statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements.   Statements that are not statements of historical facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “project,” “planned,” “contemplate,” “potential,” “possible,” “proposed,” “intend,” “believe,” “anticipate,” “expect,” “may,” “will,” “would,” “should,” “could,” and similar expressions are intended to identify forward-looking statements.  All statements other than statements of historical facts included in this report are forward looking statements, including, without limitation, the statements under the section entitled

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“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry prospects, the Company’s financial position and the Company's use of cash.  Forward-looking statements are based on the Company's current expectations and assumptions regarding its business, the economy and other future conditions. The Company cautions readers that any such forward-looking statements it makes are not guarantees of future performance and that actual results may differ materially from anticipated results or expectations expressed in its forward-looking statements as a result of a variety of factors, including may that are beyond the Company's control.

In addition to those factors discussed elsewhere in this report and in the Company's other public filings with the SEC, important factors that could cause actual results to differ materially from the Company’s expectations include: existing and unknown future limitations on the ability of the Company's direct and indirect subsidiaries to make their cash flow available to the Company for payments on the Company's indebtedness or other purposes; global demands for bio-fuels and grain and oilseed commodities, which have exhibited volatility, and can impact the cost of feed for cattle, hogs and poultry, thus affecting available rendering feedstock and selling prices for the Company’s products; reductions in raw material volumes available to the Company due to weak margins in the meat production industry as a result of higher feed costs, reduced consumer demand or other factors, reduced volume from food service establishments, or otherwise; reduced demand for animal feed; reduced finished product prices, including a decline in fat and used cooking oil finished product prices;  changes to worldwide government policies relating to renewable fuels and greenhouse gas (“GHG”) emissions that adversely affect programs like the U.S. government's renewable fuel standard, low carbon fuel standards (“LCFS”) and tax credits for biofuels both in the United States and abroad; possible product recall resulting from developments relating to the discovery of unauthorized adulterations to food or food additives; the occurrence of 2009 H1N1 flu (initially known as “Swine Flu”), highly pathogenic strains of avian influenza (collectively known as “Bird Flu”), severe acute respiratory syndrome (“SARS”), bovine spongiform encephalopathy (or “BSE”), porcine epidemic diarrhea (“PED”) or other diseases associated with animal origin in the United States or elsewhere, such as the outbreak of African Swine Fever (“ASF”) in China and elsewhere; unanticipated costs and/or reductions in raw material volumes related to the Company’s compliance with the existing or unforeseen new U.S. or foreign (including, without limitation, China) regulations (including new or modified animal feed, Bird Flu, SARS, PED, BSE or ASF or similar or unanticipated regulations) affecting the industries in which the Company operates or its value added products; risks associated with the DGD Joint Venture, including possible unanticipated operating disruptions and issues relating to the announced expansion project; risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers and other trade protections imposed by foreign countries; difficulties or a significant disruption in the Company's information systems or failure to implement new systems and software successfully, including the Company's ongoing enterprise resource planning project; risks relating to possible third party claims of intellectual property infringement; increased contributions to the Company’s pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawal event; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; continued or escalated conflict in the Middle East, North Korea, Ukraine or elsewhere; uncertainty regarding the exit of the U.K. from the European Union; and/or unfavorable export or import markets.  These factors, coupled with volatile prices for natural gas and diesel fuel, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could cause actual results to vary materially from the forward-looking statements included in this report or negatively impact the Company's results of operations. Among other things, future profitability may be affected by the Company’s ability to grow its business, which faces competition from companies that may have substantially greater resources than the Company. The Company's announced share repurchase program may be suspended or discontinued at any time and purchases of shares under the program are subject to market conditions and other factors, which are likely to change from time to time. For more detailed discussion of these factors see the Risk Factors discussion in Item 1A of Part I of the Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2018. The Company cautions readers that all forward-looking statements speak only as of the date made, and the Company undertakes no obligation to update any forward-looking statements, whether as a result of changes in circumstances, new events or otherwise.

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Market risks affecting the Company include exposures to changes in prices of the finished products the Company sells, interest rates on debt, availability of raw material supplies and the price of natural gas and diesel fuel used in the Company's plants. Raw materials available to the Company are impacted by seasonal factors, including holidays, when raw material volume declines; warm weather, which can adversely affect the quality of raw material processed and finished products produced; and cold weather, which can impact the collection of raw material. Predominantly all of the Company’s finished products are commodities that are generally sold at prices prevailing at the time of sale. Additionally, with the

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acquisition of foreign entities we are exposed to foreign currency exchange risks, imposition of currency controls and the possibility of currency devaluation.

The Company makes limited use of derivative instruments to manage cash flow risks related to natural gas usage, diesel fuel usage, inventory, forecasted sales and foreign currency exchange rates. The Company does not use derivative instruments for trading purposes. 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 options are entered into with the intent of managing the impact of changing prices for poultry meal sales. Corn options and future contracts are entered into with the intent of managing U.S. forecasted sales of BBP by reducing the impact of changing prices. Foreign currency forward contracts are entered into to mitigate the foreign exchange rate risk for transactions designated in a currency other than the local functional currency. The interest rate swaps and the natural gas swaps are subject to the requirements of FASB authoritative guidance. Some of the Company's natural gas and diesel fuel instruments are not subject to the requirements of FASB authoritative guidance because some of the natural gas and diesel fuel instruments qualify as normal purchases as defined in FASB authoritative guidance. At September 28, 2019, the Company had corn option contracts and foreign exchange forward and option contracts outstanding that qualified and were designated for hedge accounting as well as corn forward contracts and foreign currency forward contracts that did not qualify and were not designated for hedge accounting.

In the first nine months of fiscal 2019, 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 2020. As of September 28, 2019, some of the contracts have been settled while the remaining contract positions and activity are not significant to the Company. At September 28, 2019, the aggregate fair value of these corn option contracts was approximately $0.8 million. These amounts are included in other current assets on the balance sheet, with an offset recorded in accumulated other comprehensive income. The Company may enter into corn option contracts in the future from time to time.

In fiscal 2018 and the first nine months of fiscal 2019, the Company entered into foreign exchange forward and option contracts that are considered 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 2022. As of September 28, 2019, the aggregate fair value of these foreign exchange contracts was approximately $0.9 million and is included in other current assets, other assets and other current liabilities on the balance sheet, with an offset recorded in accumulated other comprehensive loss.

As of September 28, 2019, the Company had the following outstanding forward and option contract amounts that were entered into to hedge foreign currency transactions in currencies other than the functional currency and forecasted transactions in currencies other than the functional currency (in thousands):

Functional Currency		Contract Currency		Range of	U.S.
Type	Amount	Type	Amount	Hedge rates	Equivalent
Brazilian real	29,897	Euro	6,609	4.24 - 4.70	$	7,187
Brazilian real	1,105,749	U.S. dollar	309,020	3.35 - 4.30	309,020
Euro	65,145	U.S. dollar	72,542	1.09 - 1.20	72,542
Euro	24,654	Polish zloty	108,000	4.34 - 4.41	26,960
Euro	5,019	Japanese yen	601,153	118.02 - 129.66	5,489
Euro	15,147	Chinese renminbi	119,722	7.83 - 8.00	16,564
Euro	13,471	Australian dollar	21,850	1.62	14,731
Euro	5,677	British pound	5,138	0.87 - 0.92	6,208
Polish zloty	21,214	Euro	4,829	4.39	5,289
British pound	288	Euro	326	0.88	354
British pound	43	U.S. dollar	54	1.25	54
Japanese yen	229,604	U.S. dollar	2,130	104.63 - 108.63	2,130
U.S. dollar	634	Japanese yen	68,000	107.19	634
U.S. dollar	38,598	Euro	35,000	1.1	38,598
					$	505,760

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The above foreign currency contracts that are not designated as hedges had an aggregate fair value of approximately $1.4 million and are included in other current assets and accrued expenses at September 28, 2019.

Additionally, the Company had corn forward contracts that are marked to market because they did not qualify for hedge accounting at September 28, 2019. These contracts have an aggregate fair value of approximately $2.1 million and are included in other current assets and accrued expenses at September 28, 2019.

As of September 28, 2019, the Company had forward purchase agreements in place for purchases of approximately $39.3 million of natural gas and diesel fuel and approximately $1.0 million of other commitments in fiscal 2019. As of September 28, 2019, the Company had forward purchase agreements in place for purchases of approximately $58.8 million of finished product in fiscal 2019.

Foreign Exchange

The Company now has significant international operations and is subject to certain opportunities and risks, including currency fluctuations. As a result, the Company is affected by changes in foreign currency exchange rates, particularly with respect to the euro, British pound, Canadian dollar, Australian dollar, Chinese renminbi, Brazilian real, Japanese yen.

Item 4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.  As required by Rule 13a-15(b) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), the Company's management, including the Chief Executive Officer and Chief Financial Officer, conducted an evaluation, as of the end of the period covered by this report, of the effectiveness of the design and operation of the Company's disclosure controls and procedures.  As defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, disclosure controls and procedures are controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.  Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on management’s evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting.  As required by Exchange Act Rule 13a-15(d), the Company’s management, including the Chief Executive Officer and Chief Financial Officer, also conducted an evaluation of the Company’s internal control over financial reporting to determine whether any change occurred during the quarter covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.  Based on that evaluation, there has been no change in the Company’s internal control over financial reporting during the last fiscal quarter of the period covered by this report other than SOX control changes related to the upgrade of accounting software in North America and at its international operations and the new controls as part of the Company's efforts to adopt ASU 2016-02 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

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DARLING INGREDIENTS INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 2019

PART II:  Other Information

Item 1.  LEGAL PROCEEDINGS

The information required by this Item 1 is contained within Note 17 on pages 26 through 28 of this Form 10-Q and is incorporated herein by reference.

Item 1A.  RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in the Company's Annual Report on Form 10-K for the year ended December 29, 2018, which could materially affect the Company's business, financial condition or future results. The risks described in this report and in the Company's Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that the Company currently deem to be immaterial also may materially adversely affect the Company's business, financial condition or future results.

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

On August 7, 2017, the Company's Board of Directors approved the extension for an additional two years of its previously announced share repurchase program of up to an aggregate of $100.0 million of the Company's Common Stock depending on market conditions. On November 6, 2018, the Board approved an increase in the share repurchase program from $100.0 million to $200.0 million and extended the term of the program for an additional year to August 13, 2020. Repurchases may occur through August 13, 2020, unless extended or shortened by the Board of Directors. During the third quarter of fiscal 2019, the Company repurchased approximately $11.7 million worth of its common stock in the open market. Subsequent to the third quarter of fiscal 2019, the Company repurchased approximately $7.5 million worth of its common stock in the open market.

The following table is a summary of equity securities purchased by the Company during the third quarter of fiscal 2019.

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.
July 2019:
June 30, 2019 through July 27, 2019	—		—	—	$	200,000,000
August 2019:
July 28, 2019 through August 24, 2019	—		—	—	200,000,000
September 2019:
August 25, 2019 through September 28, 2019	653,931	(3)	18.49	636,634	188,272,873
Total	653,931		18.49	636,634	$	188,272,873

(1) All shares purchased during the third quarter were acquired by the Company pursuant to the announced share repurchase program (other than shares withheld for taxes on restricted stock and exercised options and the strike price on exercised options).

(2) The average price paid per share is calculated on a trade date basis and excludes commissions.

(3) Includes 17,297 shares withheld for taxes on restricted stock and options.

(4) Represents purchases made during the quarter under the authorization from the Company's Board of Directors, as announced, to repurchase up to an aggregate of $200.0 million of the Company's common stock over the period ending August 13, 2020, unless extended or shortened by the Board of Directors.

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Item 6.  EXHIBITS

 The following exhibits are 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 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 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 28, 2019 and December 29, 2018; (ii) Consolidated Statements of Operations for the three and nine months ended September 28, 2019 and September 29, 2018; (iii) Consolidated Statements of Comprehensive Income for the three and nine months ended September 28, 2019 and September 29, 2018; (iv) Consolidated Statements of Stockholders' Equity for the three and nine months ended September 28, 2019; (v) Consolidated Statements of Cash Flows for the nine months ended September 28, 2019 and September 29, 2018; (vi) Notes to the Consolidated Financial Statements.
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		DARLING INGREDIENTS INC.
Date:	November 6, 2019	By:	/s/  Brad Phillips
			Brad Phillips
			Chief Financial Officer
			(Principal Financial Officer and Duly Authorized Officer)

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