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(1)	General

(2)	Summary of Significant Accounting Policies

(a)	Basis of Presentation

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

(b)	Fiscal Periods

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

(c)	Cash, Cash Equivalents and Restricted Cash

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

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

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		March 28, 2020			December 29, 2018
Cash and cash equivalents		$	76,339		$	72,935
Restricted cash		106			110
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flow		$	76,445		$	73,045

(d)	Accounts Receivable and Allowance for Doubtful Accounts

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

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

(e)	Revenue Recognition

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

(f)	Foreign Currency Translation and Remeasurement

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

(g)	Leases

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

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

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

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

(h)	Use of Estimates

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

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

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

(i)	Reclassifications

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

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(j)	Earnings Per Share

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

	Net Income per Common Share (in thousands, except per share data)
	Three Months Ended
					March 28, 2020											March 30, 2019
	Income				Shares			Per Share				Income				Shares			Per Share
Basic:
Net Income attributable to Darling	$	85,510			163,474			$	0.52			$	18,012			164,855			$	0.11
Diluted:
Effect of dilutive securities:
Add: Option shares in the money and dilutive effect of non-vested stock awards					6,749											6,127
Less: Pro forma treasury shares					(2,296	)										(2,322	)
Diluted:
Net income attributable to Darling	$	85,510			167,927			$	0.51			$	18,012			168,660			$	0.11

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

(3)	Investment in Unconsolidated Subsidiaries

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

In 2019, the 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.

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

(in thousands)		March 31, 2020			December 31, 2019
Assets:
Total current assets		$	821,602		$	668,026
Property, plant and equipment, net		779,961			713,489
Other assets		30,446			30,710
Total assets		$	1,632,009		$	1,412,225
Liabilities and members' equity:
Total current portion of long term debt		$	496		$	341
Total other current liabilities		70,758			75,802
Total long term debt		8,936			8,742
Total other long term liabilities		4,273			4,422
Total members' equity		1,547,546			1,322,918
Total liabilities and members' equity		$	1,632,009		$	1,412,225

		Three Months Ended
(in thousands)		March 31, 2020			March 31, 2019
Revenues:
Operating revenues		$	358,615		$	302,718
Expenses:
Total costs and expenses less depreciation, amortization and accretion expense		151,347			243,063
Depreciation, amortization and accretion expense		11,774			11,418
Total costs and expenses		163,121			254,481
Operating income		195,494			48,237
Other income		461			641
Interest and debt expense, net		(315		)	(324		)
Net income		$	195,640		$	48,554

As of March 28, 2020 under the equity method of accounting, the Company has an investment in the DGD Joint Venture of approximately $773.8 million on the consolidated balance sheet. The Company has recorded an equity in net income of approximately $97.8 million and $24.3 million for the three months ended March 28, 2020 and March 30, 2019, respectively. In December 2019, the blender tax credits for calendar year 2018 and 2019 were retrospectively approved by the U.S. Congress. In addition, blenders tax credits were extended for calendar years 2020, 2021 and 2022. For the three months ended March 31, 2019, the DGD Joint Venture results do not include any blenders tax credits, while in the three months of fiscal 2020, the DGD Joint Venture recorded approximately $80.0 million of blenders tax credits. In the three months ended March 28, 2020, the Company received no dividend distributions from the DGD Joint Venture. In April 2020, the DGD Joint Venture made dividend distributions to each partner in the amount of approximately $125.0 million.

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

(4)	Acquisitions and Dispositions

In December 2019, the Company began to consolidate EnviroFlight, LLC due to a loan issued by the Company, which    resulted in more control by the Company based on variable interest entity literature. In January 2020, the Company acquired the other 50% minority interest in EnviroFlight, LLC from the other joint venture partner for approximately $8.8 million, along with the purchase of intellectual property of approximately $3.4 million for a total of approximately $12.2 million, thereby increasing the Company's ownership interest in EnviroFlight, LLC to 100%.

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(5)	Inventories

A summary of inventories follows (in thousands):

        

	March 28, 2020				December 28, 2019
Finished product	$	215,422			$	199,799
Work in process	87,291				81,841
Raw material	38,416				41,964
Supplies and other	40,303				39,353
	$	381,432			$	362,957

(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):    

	March 28, 2020				December 28, 2019
Indefinite Lived Intangible Assets
Trade names	$	52,407			$	52,733
	52,407				52,733
Finite Lived Intangible Assets:
Routes	363,150				382,263
Permits	475,266				483,593
Non-compete agreements	3,036				3,840
Trade names	65,670				65,670
Royalty, consulting, land use rights and leasehold	23,905				20,737
	931,027				956,103
Accumulated Amortization:
Routes	(166,126		)		(169,050		)
Permits	(277,136		)		(272,213		)
Non-compete agreements	(2,441		)		(3,111		)
Trade names	(34,528		)		(32,890		)
Royalty, consulting, land use rights and leasehold	(5,424		)		(5,178		)
	(485,655		)		(482,442		)
Total Intangible assets, less accumulated amortization	$	497,779			$	526,394

Gross intangible routes, permits, trade names, non-compete agreements and other intangibles partially decreased in fiscal 2020 as a result of approximately $5.5 million of fully amortized asset retirements with the remainder of the decrease as a result of foreign currency translation. Amortization expense for the three months ended March 28, 2020 and March 30, 2019, was approximately $18.2 million and $18.4 million, respectively.

(7)	Goodwill

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

	Feed Ingredients			Food Ingredients			Fuel Ingredients			Total
Balance at December 28, 2019
Goodwill	$	793,457		$	329,654		$	116,555		$	1,239,666
Accumulated impairment losses	(15,914		)	(461		)	—			(16,375		)
	777,543			329,193			116,555			1,223,291
Foreign currency translation	(14,675		)	(2,811		)	(3,213		)	(20,699		)
Balance at March 28, 2020
Goodwill	778,782			326,843			113,342			1,218,967
Accumulated impairment losses	(15,914		)	(461		)	—			(16,375		)
	$	762,868		$	326,382		$	113,342		$	1,202,592

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(8)	Accrued Expenses

 

Accrued expenses consist of the following (in thousands):

 

	March 28, 2020				December 28, 2019
Compensation and benefits	$	84,112			$	107,324
Accrued ad valorem, and franchise taxes	25,614				30,231
Accrued operating expenses	62,678				67,194
Other accrued expense	135,284				106,642
	$	307,688			$	311,391

(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
	March 28, 2020			March 30, 2019
Operating lease expense	$	11,509		$	12,317
Short-term lease costs	6,245			3,053
Total lease cost	$	17,754		$	15,370

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

	Three Months Ended
	March 28, 2020			March 30, 2019
Cash paid for amounts included in the measurement lease liabilities
Operating cash flows from operating leases	$	12,456		$	12,029
	March 28, 2020			December 28, 2019
Operating right-of-use assets, net	$	123,859		$	124,726
Operating lease liability, current	$	37,472		$	37,805
Operating lease liability, non-current	91,250			91,424
Total operating lease liabilities	$	128,722		$	129,229
Weighted average remaining lease term - operating leases	6.61 years			6.46 years
Weighted average discount rate - operating leases	4.53		%	4.55		%

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Future annual minimum lease payments and capital lease commitments as of March 28, 2020 are as follows (in thousands):

Period Ending Fiscal	Operating Leases			Capital Leases
2020 (excluding the three months ended March 28, 2020)	$	37,556		$	86
2021	34,526			16
2022	24,218			16
2023	19,628			10
2024	13,552			8
Thereafter	26,298			1
	$	155,778		$	137
Less amounts representing interest	$	(27,056	)	(7		)
Lease obligations included in current and long-term liabilities	$	128,722		$	130

(10)	Debt

Debt consists of the following (in thousands): 

	March 28, 2020				December 28, 2019
Amended Credit Agreement:
Revolving Credit Facility ($2.8 million denominated in CAD at March 28, 2020 and $11.0 million denominated in euro at March 28, 2020)	$	157,848			$	39,000
Term Loan B	495,000				495,000
Less unamortized deferred loan costs	(7,341		)		(7,696		)
Carrying value Term Loan B	487,659				487,304
5.25% Senior Notes due 2027 with effective interest of 5.47%	500,000				500,000
Less unamortized deferred loan costs	(6,310		)		(6,494		)
Carrying value 5.25% Senior Notes due 2027	493,690				493,506
3.625% Senior Notes due 2026 - Denominated in euro with effective interest of 3.83%	566,861				574,096
Less unamortized deferred loan costs - Denominated in euro	(6,653		)		(6,982		)
Carrying value 3.625% Senior Notes due 2026	560,208				567,114
Other Notes and Obligations	51,850				62,501
	1,751,255				1,649,425
Less Current Maturities	86,397				90,996
	$	1,664,858			$	1,558,429

As of March 28, 2020, the Company had outstanding debt under a revolving credit facility denominated in Canadian dollars of CAD$4.0 million. See below for discussion relating to the Company's debt agreements. In addition, as of March 28, 2020, the Company had capital lease obligations denominated in Canadian dollars included in debt. The total Canadian dollar finance lease obligation was approximately CAD$0.1 million.

As of March 28, 2020, the Company had outstanding debt under a revolving credit facility denominated in euros of €10.0 million and 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 March 28, 2020, 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 March 28, 2020, the Company had other notes and obligations that consist of various overdraft facilities of approximately $32.2 million, a China working capital line of credit of approximately $19.1 million and other debt of approximately $0.6 million.

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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.

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 March 28, 2020, the Company had $35.0 million outstanding under the revolver at base rate plus a margin of 1.00% per annum for a total of 4.25% per annum and $109.0 million outstanding under the revolver at LIBOR plus a margin of 2.00% per annum for a total of 3.3616% 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 3.61% per annum. The Company had CAD$4.0 million outstanding under the revolver at CDOR plus a margin of 2.00% per annum for a total of 3.4891%. The Company had €10.0 million at LIBOR plus a margin of 2.00% per annum for a total of 2.00% per annum. As of March 28, 2020, the Company had availability of $795.9 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 $10.1 million at March 28, 2020.

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”),

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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 5.25% Notes are guaranteed on a senior unsecured basis by Darling and all of Darling's restricted subsidiaries (other than foreign subsidiaries).

As of March 28, 2020, 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 month periods ended March 28, 2020 and March 30, 2019, based on its estimate of the effective tax rate for the entire 2020 and 2019 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 March 28, 2020, the Company had $8.1 million of gross unrecognized tax benefits and $0.6 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 $3.9 million, excluding interest and penalties. The possible change in unrecognized tax benefits relates to the resolution of an uncertain tax position upon the restructuring of certain subsidiaries.

On March 27, 2020, the CARES Act (the “Act”) was enacted in response to the COVID-19 pandemic. In addition, governments around the world have enacted or implemented various forms of tax relief measures in response to the economic conditions in the wake of COVID-19. The Company is evaluating the impact of the Act and changes to income tax laws and regulations in other jurisdictions and currently does not expect they will materially impact the Company.

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

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gas swap adjustments, corn option adjustments, soybean meal adjustments, foreign exchange forward adjustments and foreign currency translation adjustments.

In the first three months of fiscal 2020, 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 months ended March 28, 2020 and March 30, 2019 are as follows (in thousands):

	Three Months Ended
	Before-Tax						Tax (Expense)						Net-of-Tax
	Amount						or Benefit						Amount
	March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019			March 28, 2020			March 30, 2019
Defined benefit pension plans
Amortization of prior service cost/(benefit)	$	8		$	9		$	(2	)	$	(3	)	$	6		$	6
Amortization of actuarial loss	854			1,146			(212		)	(294		)	642			852
Total defined benefit pension plans	862			1,155			(214		)	(297		)	648			858
Corn option derivatives
Loss/(gain) reclassified to net income	300			—			(75		)	—			225			—
Gain/(loss) activity recognized in other comprehensive income/(loss)	(119		)	—			30			—			(89		)	—
Total corn option derivatives	181			—			(45		)	—			136			—
Heating oil derivatives
Gain/(loss) activity recognized in other comprehensive income/(loss)	14,494			—			(3,624		)	—			10,870			—
Total heating oil derivatives	14,494			—			(3,624		)	—			10,870			—
Foreign exchange derivatives
Loss/(gain) reclassified to net income	(412		)	—			129			—			(283		)	—
Gain/(loss) activity recognized in other comprehensive income/(loss)	(12,920		)	(2,934		)	4,052			997			(8,868		)	(1,937		)
Total foreign exchange derivatives	(13,332		)	(2,934		)	4,181			997			(9,151		)	(1,937		)
Foreign currency translation	(65,887		)	(5,393		)	651			507			(65,236		)	(4,886		)
Other comprehensive income/(loss)	$	(63,682	)	$	(7,172	)	$	949		$	1,207		$	(62,733	)	$	(5,965	)

The following table presents the amounts reclassified out of each component of other comprehensive income/(loss), net of tax for the three months ended March 28, 2020 and March 30, 2019 as follows (in thousands):

	Three Months Ended
	March 28, 2020			March 30, 2019			Statement of Operations Classification
Derivative instruments
Foreign exchange contracts	$	412		$	—		Net sales
Corn option derivatives	(300		)	—			Cost of sales and operating expenses
	112			—			Total before tax
	(54		)	—			Income taxes
	58			—			Net of tax
Defined benefit pension plans
Amortization of prior service cost	$	(8	)	$	(9	)	(a)
Amortization of actuarial loss	(854		)	(1,146		)	(a)
	(862		)	(1,155		)	Total before tax
	214			297			Income taxes
	(648		)	(858		)	Net of tax
Total reclassifications	$	(590	)	$	(858	)	Net of tax

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(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 March 28, 2020 as follows (in thousands):

		Three Months Ended March 28, 2020
		Foreign Currency			Derivative			Defined Benefit
		Translation			Instruments			Pension Plans			Total
Accumulated Other Comprehensive Income/(loss) December 28, 2019, attributable to Darling, net of tax		$	(282,338	)	$	(5,505	)	$	(34,004	)	$	(321,847	)
Other comprehensive loss before reclassifications		(65,236		)	1,913			—			(63,323		)
Amounts reclassified from accumulated other comprehensive loss		—			(58		)	648			590
Net current-period other comprehensive income/(loss)		(65,236		)	1,855			648			(62,733		)
Noncontrolling interest		(89		)	—			—			(89		)
Accumulated Other Comprehensive loss March 28, 2020, attributable to Darling, net of tax		(347,485		)	$	(3,650	)	$	(33,356	)	$	(384,491	)

Fiscal 2020 Long-Term Incentive Opportunity Awards (2020 LTIP). On January 6, 2020, the Compensation Committee (the “Committee”) of the Company's Board of Directors adopted the 2020 LTIP pursuant to which they awarded certain of the Company's key employees, 550,934 stock options and 224,481 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 2023, 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 first quarter of fiscal 2020, the Company repurchased approximately $55.0 million of its common stock in the open market. As of March 28, 2020, the Company has approximately $125.8 million remaining under the share repurchase program initially approved in August 2017 and subsequently extended to August 13, 2020.

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 months ended March 28, 2020 and March 30, 2019 includes the following components (in thousands):

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	Pension Benefits
	Three Months Ended
	March 28, 2020			March 30, 2019
Service cost	$	755		$	678
Interest cost	1,428			1,710
Expected return on plan assets	(2,039		)	(1,819		)
Amortization of prior service cost	8			9
Amortization of net loss	854			1,146
Net pension cost	$	1,006		$	1,724

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 March 28, 2020, the Company expects to contribute approximately $4.7 million to its pension plans to meet funding requirements during the next twelve months. Additionally, the Company has made tax deductible discretionary and required contributions to its pension plans for the three months ended March 28, 2020 and March 30, 2019 of approximately $0.8 million and $0.9 million, respectively.  

The Company participates in various multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts.  These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants.   The Company's contributions to each multiemployer plan represent less than 5% of the total contributions to each such plan. Based on the most currently available information, the Company has determined that, if a withdrawal were to occur, withdrawal liabilities on two of the plans in which the Company currently participates could be material to the Company, with one of these material plans certified as critical or red zone. With respect to the other multiemployer pension plans in which the Company participates and which are not individually significant, five plans have certified as critical or red zone, two 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 five U.S. multiemployer plans in which it participated. As of March 28, 2020, the Company has an aggregate accrued liability of approximately $5.5 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.

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 and option contracts are entered into to mitigate the foreign exchange rate risk for transactions designated in a currency other than the local functional currency. At March 28, 2020, 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

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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 fiscal 2019 and fiscal 2020, 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 fourth quarter of fiscal 2021. At March 28, 2020 and December 28, 2019, the aggregate fair value of these corn option contracts was approximately $0.8 million and $0.4 million, respectively. 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 2019 and fiscal 2020, 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 March 28, 2020 and December 28, 2019, the aggregate fair value of these foreign exchange contracts was approximately $10.4 million and $1.3 million, respectively. The March 28, 2020 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 28, 2019 amounts are included in other current assets, accrued expense and noncurrent assets on the balance sheet, with an offset recorded in accumulated other comprehensive gain.

As of March 28, 2020, 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
Type	Amount			Type	Amount
Brazilian real	38,179			Euro	8,100
Brazilian real	1,055,921			U.S. dollar	292,149
Euro	59,386			U.S. dollar	65,693
Euro	18,314			Polish zloty	80,500
Euro	8,992			Japanese yen	1,076,265
Euro	10,967			Chinese renminbi	84,048
Euro	16,514			Australian dollar	27,850
Euro	5,977			British pound	5,248
Polish zloty	24,133			Euro	5,264
British pound	37			Euro	40
British pound	108			U.S. dollar	126
Japanese yen	137,644			U.S. dollar	1,271
U.S. dollar	932			Japanese yen	103,000
U.S. dollar	49,766			Euro	45,000

The Company estimates the amount that will be reclassified from accumulated other comprehensive loss at March 28, 2020 into earnings over the next 12 months will be approximately $6.6 million. As of March 28, 2020, no 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 months ended March 28, 2020 and March 30, 2019 (in thousands):

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				Loss or (Gain) Recognized in Income on Derivatives Not Designated as Hedges
				Three Months Ended
Derivatives not designated as hedging instruments		Location		March 28, 2020			March 30, 2019
Foreign exchange		Foreign currency loss		$	(1,295	)	$	1,871
Foreign exchange		Net sales		730			296
Foreign exchange		Cost of sales and operating expenses		(887		)	(245		)
Foreign exchange		Selling, general and administrative expense		5,724			873
Corn options and futures		Net sales		855			350
Corn options and futures		Cost of sales and operating expenses		(1,841		)	(873		)
Heating Oil swaps and options		Cost of sales and operating expenses		—			(506		)
Total				$	3,286		$	1,766

At March 28, 2020, the Company had forward purchase agreements in place for purchases of approximately $36.2 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.

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 March 28, 2020 and are categorized using the fair value hierarchy under FASB authoritative guidance.  The fair value hierarchy has three levels based on the reliability of the inputs used to determine the fair value. 

				Fair Value Measurements at March 28, 2020 Using
				Quoted Prices in Active Markets for Identical Assets			Significant Other Observable Inputs			Significant Unobservable Inputs
(In thousands of dollars)	Total			(Level 1)			(Level 2)			(Level 3)
Assets:
Derivative instruments	$	5,712		$	—		$	5,712		$	—
Total Assets	$	5,712		$	—		$	5,712		$	—
Liabilities:
Derivative instruments	$	14,612		$	—		$	14,612		$	—
5.25% Senior notes	470,000			—			470,000			—
3.625% Senior notes	513,122			—			513,122			—
Term loan B	482,625			—			482,625			—
Revolver debt	146,799			—			146,799			—
Total Liabilities	$	1,627,158		$	—		$	1,627,158		$	—

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				Fair Value Measurements at December 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	$	4,140		$	—		$	4,140		$	—
Total Assets	$	4,140		$	—		$	4,140		$	—
Liabilities:
Derivative instruments	$	1,593		$	—		$	1,593		$	—
5.25% Senior notes	531,850			—			531,850			—
3.625% Senior notes	605,327			—			605,327			—
Term loan B	497,475			—			497,475			—
Revolver debt	38,805			—			38,805			—
Total Liabilities	$	1,675,050		$	—		$	1,675,050		$	—

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. 

(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.

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 March 28, 2020 and December 28, 2019, the reserves for insurance, environmental, litigation and tax contingencies reflected on the balance sheet in accrued expenses and other non-current liabilities were approximately $69.7 million and $70.5 million, respectively.  The Company has insurance recovery receivables of approximately $26.2 million as of March 28, 2020 and December 28, 2019, 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

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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 eight contaminants of concern identified in the ROD (the “COCs”) may also be eligible for cash out settlements and conducted a settlement analysis using a third-party allocator. The Company participated 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. In November 2019, the Company received a cash out settlement offer from the EPA in the amount of $0.6 million ($0.3 million for each of the former plant sites in question) for liabilities relating to the lower 8.3 miles of the lower Passaic River area. The Company has accepted this settlement offer, which is now subject to the EPA's administrative approval process, which includes publication and a public comment period. 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. Furthermore, in the event the settlement with the EPA described above is consummated, it could preclude certain of the claims alleged by OCC against the Company. The Company's ultimate liability, if any, for investigatory costs, remedial costs and/or natural resource damages in connection with the lower 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.

Environmental Enforcement Matter. In February 2020, the Company entered into a Joint Consent Order with the Office of the Attorney General of the State of New Jersey (the “New Jersey AG”) resolving all but the penalty portion of a suit filed by the New Jersey AG in the Superior Court of New Jersey, Essex County, Chancery Division, Docket No. C-188-19, in which the New Jersey AG sought injunctive relief and penalties related to various alleged violations relating to emissions from the Company’s Newark, New Jersey facility. We are currently working with the New Jersey AG to resolve the penalty portion of the claim, which may exceed $100,000. Even though we expect this matter will have no material effect on our financial position, results of operations or liquidity, we are reporting this proceeding to comply with SEC regulations, which require us to disclose certain information about proceedings arising under federal, state, or local provisions regulating the discharge of materials into the environment or protecting the environment if we reasonably believe that such proceedings may result in monetary sanctions of $100,000 or more.

(18)	Business Segments

The Company sells its products domestically and internationally, operating within three 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.

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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):

 

	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Three Months Ended March 28, 2020
Net Sales	$	512,625		$	270,294		$	69,923		$	—		$	852,842
Cost of sales and operating expenses	388,453			205,430			53,025			—			646,908
Gross Margin	124,172			64,864			16,898			—			205,934
Loss on sale of assets	50			2			9			—			61
Selling, general and administrative expense	53,947			25,476			1,654			15,116			96,193
Depreciation and amortization	53,521			20,305			8,092			2,753			84,671
Equity in net income of Diamond Green Diesel	—			—			97,820			—			97,820
Segment operating income/(loss)	16,654			19,081			104,963			(17,869		)	122,829
Equity in net income of other unconsolidated subsidiaries	869			—			—			—			869
Segment income/(loss)	17,523			19,081			104,963			(17,869		)	123,698
Total other expense													(19,307		)
Income before income taxes													$	104,391
Segment assets at March 28, 2020	$	2,613,292		$	1,314,436		$	1,181,241		$	268,810		$	5,377,779

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	Feed Ingredients			Food Ingredients			Fuel Ingredients			Corporate			Total
Three Months Ended March 30, 2019
Net Sales	$	495,819		$	279,164		$	60,121		$	—		$	835,104
Cost of sales and operating expenses	386,859			214,004			50,050			—			650,913
Gross Margin	108,960			65,160			10,071			—			184,191
Loss/(gain) on sale of assets	(4,391		)	114			27			—			(4,250		)
Selling, general and administrative expense	48,831			21,887			(754		)	15,039			85,003
Depreciation and amortization	49,369			19,511			7,798			2,486			79,164
Equity in net income of Diamond Green Diesel	—			—			24,277			—			24,277
Segment operating income/(loss)	15,151			23,648			27,277			(17,525		)	48,551
Equity in net loss of other unconsolidated subsidiaries	(504		)	—			—			—			(504		)
Segment income/(loss)	14,647			23,648			27,277			(17,525		)	48,047
Total other expense													(23,133		)
Income before income taxes													$	24,914
Segment assets at December 28, 2019	$	2,653,363		$	1,345,526		$	1,087,701		$	258,668		$	5,345,258

(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 March 28, 2020 and March 30, 2019 (in thousands):

	Three Months Ended March 28, 2020
	Feed Ingredients			Food Ingredients			Fuel Ingredients			Total
Geographic Area
North America	$	427,463		$	46,415		$	5,400		$	479,278
Europe	80,443			158,587			64,523			303,553
China	2,423			39,956			—			42,379
South America	—			10,586			—			10,586
Other	2,296			14,750			—			17,046
Net sales	$	512,625		$	270,294		$	69,923		$	852,842
Major product types
Fats	$	163,284		$	33,476		$	—		$	196,760
Used cooking oil	47,608			—			—			47,608
Proteins	195,980			—			—			195,980
Bakery	47,101			—			—			47,101
Other rendering	47,164			—			—			47,164
Food ingredients	—			214,793			—			214,793
Bioenergy	—			—			64,523			64,523
Biofuels	—			—			5,400			5,400
Other	11,488			22,025			—			33,513
Net sales	$	512,625		$	270,294		$	69,923		$	852,842

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	Three Months Ended March 30, 2019
	Feed Ingredients			Food Ingredients			Fuel Ingredients			Total
Geographic Area Revenues
North America	$	410,237		$	48,813		$	5,710		$	464,760
Europe	79,998			151,652			54,411			286,061
China	2,952			46,937			—			49,889
South America	—			12,669			—			12,669
Other	2,632			19,093			—			21,725
Net sales	$	495,819		$	279,164		$	60,121		$	835,104
Major product types
Fats	$	144,876		$	35,138		$	—		$	180,014
Used cooking oil	45,406			—			—			45,406
Proteins	205,813			—			—			205,813
Bakery	45,656			—			—			45,656
Other rendering	41,254			—			—			41,254
Food ingredients	—			221,908			—			221,908
Bioenergy	—			—			54,411			54,411
Biofuels	—			—			5,710			5,710
Other	12,814			22,118			—			34,932
Net sales	$	495,819		$	279,164		$	60,121		$	835,104

Revenue from Contracts with Customers

The Company has two 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.

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.

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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 2020 under these long-term supply contracts was approximately $7.5 million, with the remaining performance obligations to be recognized in future periods (generally 4 years) of approximately $273.2 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 March 28, 2020 and March 30, 2019, the Company has recorded sales to the DGD Joint Venture of approximately $62.1 million and $51.2 million, respectively. At March 28, 2020 and December 28, 2019, the Company has $12.9 million and $17.8 million in outstanding receivables due from the DGD Joint Venture, respectively. In addition, the Company has eliminated approximately $5.7 million and $5.9 million of additional sales for the three months ended March 28, 2020 and March 30, 2019, respectively 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 March 28, 2020 and March 30, 2019, respectively.

Revolving Loan Agreement

On May 1, 2019, Darling through its wholly owned subsidiary Darling Green Energy LLC, (“Darling Green”), and Diamond Alternative Energy, LLC, a wholly owned subsidiary of Valero (“Diamond Alternative” and together with Darling Green, the “DGD Lenders”), entered into a revolving loan agreement (the “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 on April 29, 2021, unless extended by agreement of the parties. As of March 28, 2020, no amounts are owed to Darling Green under the DGD Loan Agreement.

Guarantee Agreement

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

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform Topic 848, Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The update provides optional guidance for a limited period of time to ease the potential burden in accounting for (or reorganizing the effects of) contract modifications on financial reporting, caused by reference rate reform. This ASU is effective for all entities as of March 12, 2020 through December 31, 2022. The adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

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In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. This ASU amends Topic 740 Income Taxes, which eliminates certain exceptions in accounting for income taxes, improves consistency in application and clarifies existing guidance. The standard is effective for fiscal years beginning 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. 2018-14, 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. While the adoption of this standard will impact the Company's disclosure, the Company does not expect it will materially impact the Company's consolidated financial statements.

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 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 adoption of this ASU did not 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 initial adoption of this ASU did not have a material impact on the Company's consolidated financial statements.

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 March 28, 2020 and December 28, 2019, 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 months ended March 28, 2020 and March 30, 2019. 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.

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Condensed Consolidated Balance Sheet

As of March 28, 2020

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	903		$	25		$	75,411		$	—		$	76,339
Restricted cash	103			—			3			—			106
Accounts receivable	47,852			663,967			545,669			(859,788		)	397,700
Inventories	24,028			97,781			259,623			—			381,432
Income taxes refundable	1,378			—			1,728			—			3,106
Prepaid expenses	17,927			2,281			24,899			—			45,107
Other current assets	4,950			(3,346		)	44,906			(20,240		)	26,270
Total current assets	97,141			760,708			952,239			(880,028		)	930,060
Investment in subsidiaries	5,509,606			1,283,699			844,042			(7,637,347		)	—
Property, plant and equipment, net	432,561			521,784			809,775			—			1,764,120
Intangible assets, net	42,993			163,064			291,722			—			497,779
Goodwill	49,902			490,748			661,942			—			1,202,592
Investment in unconsolidated subsidiaries	—			—			802,184			—			802,184
Operating lease right-of-use asset	72,161			30,475			21,223			—			123,859
Other assets	34,715			134			57,336			(49,532		)	42,653
Deferred taxes	—			—			14,532			—			14,532
	$	6,239,079		$	3,250,612		$	4,454,995		$	(8,566,907	)	$	5,377,779
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	50,004		$	11		$	56,622		$	(20,240	)	$	86,397
Accounts payable	887,354			23,026			160,990			(859,774		)	211,596
Income taxes payable	919			—			7,674			—			8,593
Current operating lease liability	19,774			10,592			7,106			—			37,472
Accrued expenses	97,602			26,190			183,910			(14		)	307,688
Total current liabilities	1,055,653			59,819			416,302			(880,028		)	651,746
Long-term debt, net of current portion	1,139,898			27			574,465			(49,532		)	1,664,858
Long-term operating lease liability	57,796			19,462			13,992			—			91,250
Other noncurrent liabilities	76,714			—			34,431			—			111,145
Deferred income taxes	131,000			—			119,338			—			250,338
Total liabilities	2,461,061			79,308			1,158,528			(929,560		)	2,769,337
Total stockholders’ equity	3,778,018			3,171,304			3,296,467			(7,637,347		)	2,608,442
	$	6,239,079		$	3,250,612		$	4,454,995		$	(8,566,907	)	$	5,377,779

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Condensed Consolidated Balance Sheet

As of December 28, 2019

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
ASSETS
Cash and cash equivalents	$	551		$	26		$	72,358		$	—		$	72,935
Restricted cash	103			—			7			—			110
Accounts receivable	51,097			702,945			518,614			(866,318		)	406,338
Inventories	26,893			86,609			249,455			—			362,957
Income taxes refundable	1,106			—			2,211			—			3,317
Prepaid expenses	20,888			2,241			23,470			—			46,599
Other current assets	5,399			(2,326		)	40,872			(18,913		)	25,032
Total current assets	106,037			789,495			906,987			(885,231		)	917,288
Investment in subsidiaries	5,365,956			1,366,635			844,043			(7,576,634		)	—
Property, plant and equipment, net	434,237			524,577			843,597			—			1,802,411
Intangible assets, net	44,404			170,581			311,409			—			526,394
Goodwill	49,902			490,748			682,641			—			1,223,291
Investment in unconsolidated subsidiary	—			—			689,354			—			689,354
Operating lease right-of-use asset	74,005			31,243			19,478			—			124,726
Other assets	35,456			134			61,974			(50,164		)	47,400
Deferred income taxes	—			—			14,394			—			14,394
	$	6,109,997		$	3,373,413		$	4,373,877		$	(8,512,029	)	$	5,345,258
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current portion of long-term debt	$	40,916		$	10		$	68,983		$	(18,913	)	$	90,996
Accounts payable	893,490			29,535			182,484			(866,257		)	239,252
Income taxes payable	(10		)	—			8,905			—			8,895
Current operating lease liability	20,454			10,510			6,841			—			37,805
Accrued expenses	116,758			32,861			161,833			(61		)	311,391
Total current liabilities	1,071,608			72,916			429,046			(885,231		)	688,339
Long-term debt, net of current portion	1,040,974			30			567,589			(50,164		)	1,558,429
Long-term operating lease liability	58,970			20,281			12,173			—			91,424
Other noncurrent liabilities	80,409			—			35,376			—			115,785
Deferred income taxes	122,109			—			125,822			—			247,931
Total liabilities	2,374,070			93,227			1,170,006			(935,395		)	2,701,908
Total stockholders’ equity	3,735,927			3,280,186			3,203,871			(7,576,634		)	2,643,350
	$	6,109,997		$	3,373,413		$	4,373,877		$	(8,512,029	)	$	5,345,258

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Condensed Consolidated Statements of Operations

For the three months ended March 28, 2020

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net sales	$	180,919		$	310,301		$	405,025		$	(43,403	)	$	852,842
Cost and expenses:
Cost of sales and operating expenses	144,142			246,320			299,849			(43,403		)	646,908
Loss/(gain) on sale of assets	(38		)	63			36			—			61
Selling, general and administrative expenses	48,074			12,517			35,602			—			96,193
Depreciation and amortization	17,272			26,593			40,806			—			84,671
Total costs and expenses	209,450			285,493			376,293			(43,403		)	827,833
Equity in net income of Diamond Green Diesel	—			—			97,820			—			97,820
Operating income/(loss)	(28,531		)	24,808			126,552			—			122,829
Interest expense	(13,775		)	(58		)	(5,257		)	—			(19,090		)
Foreign currency gains/(losses)	(326		)	(24		)	2,014			—			1,664
Other expense, net	(1,540		)	(339		)	(2		)	—			(1,881		)
Equity in net income of other unconsolidated subsidiaries	—			—			869			—			869
Earnings in investments in subsidiaries	121,939			—			—			(121,939		)	—
Income/(loss) before taxes	77,767			24,387			124,176			(121,939		)	104,391
Income tax expense/(benefit)	(7,743		)	4,275			21,768			—			18,300
Net income attributable to noncontrolling interests	—			—			(581		)	—			(581		)
Net income/(loss) attributable to Darling	$	85,510		$	20,112		$	101,827		$	(121,939	)	$	85,510

Condensed Consolidated Statements of Operations

For the three months ended March 30, 2019

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net sales	$	160,230		$	329,991		$	403,911		$	(59,028	)	$	835,104
Cost and expenses:
Cost of sales and operating expenses	128,324			271,671			309,946			(59,028		)	650,913
Loss (gain) on sale of assets	68			(4,477		)	159			—			(4,250		)
Selling, general and administrative expenses	47,423			11,947			25,633			—			85,003
Depreciation and amortization	14,373			26,112			38,679			—			79,164
Total costs and expenses	190,188			305,253			374,417			(59,028		)	810,830
Equity in net income of Diamond Green Diesel	—			—			24,277			—			24,277
Operating income/(loss)	(29,958		)	24,738			53,771			—			48,551
Interest expense	(14,027		)	(32		)	(5,817		)	—			(19,876		)
Foreign currency losses	(4		)	—			(728		)	—			(732		)
Other income/(expense), net	(1,567		)	(1,212		)	254			—			(2,525		)
Equity in net income/(loss) of other unconsolidated subsidiaries	(891		)	—			387			—			(504		)
Earnings in investments in subsidiaries	54,627			—			—			(54,627		)	—
Income/(loss) before taxes	8,180			23,494			47,867			(54,627		)	24,914
Income tax expense/(benefit)	(9,832		)	4,973			10,133			—			5,274
Net income attributable to noncontrolling interests	—			—			(1,628		)	—			(1,628		)
Net income/(loss) attributable to Darling	$	18,012		$	18,521		$	36,106		$	(54,627	)	$	18,012

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Condensed Consolidated Statements of Comprehensive Income/(Loss)

For the three months ended March 28, 2020

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net income/(loss)	$	86,091		$	20,112		$	101,827		$	(121,939	)	$	86,091
Other comprehensive income/(loss), net of tax:
Foreign currency translation	651			(128,994		)	63,107			—			(65,236		)
Pension adjustments	518			—			130			—			648
Corn option derivative adjustments	136			—			—			—			136
Heating oil derivative adjustments	—			—			10,870			—			10,870
Foreign exchange derivative adjustments	—			—			(9,151		)	—			(9,151		)
Total other comprehensive income/(loss), net of tax	1,305			(128,994		)	64,956			—			(62,733		)
Total comprehensive income/(loss)	87,396			(108,882		)	166,783			(121,939		)	23,358
Total comprehensive loss attributable to noncontrolling interest	—			—			492			—			492
Total comprehensive income/(loss) attributable to Darling	$	87,396		$	(108,882	)	$	166,291		$	(121,939	)	$	22,866

Condensed Consolidated Statements of Comprehensive Income/(Loss)

For the three months ended March 30, 2019

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Net income/(loss)	$	19,640		$	18,521		$	36,106		$	(54,627	)	$	19,640
Other comprehensive income/(loss), net of tax:
Foreign currency translation	507			—			(5,393		)	—			(4,886		)
Pension adjustments	767			—			91			—			858
Foreign exchange derivative adjustment	—			—			(1,937		)	—			(1,937		)
Total other comprehensive income/(loss), net of tax	1,274			—			(7,239		)	—			(5,965		)
Total comprehensive income/(loss)	20,914			18,521			28,867			(54,627		)	13,675
Total comprehensive income attributable to noncontrolling interest	—			—			3,387			—			3,387
Total comprehensive income/(loss) attributable to Darling	$	20,914		$	18,521		$	25,480		$	(54,627	)	$	10,288

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Condensed Consolidated Statements of Cash Flows

For the three months ended March 28, 2020

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income/(loss)	$	86,091		$	20,112		$	101,827		$	(121,939	)	$	86,091
Earnings in investments in subsidiaries	(121,939		)	—			—			121,939			—
Other operating cash flows	19,102			(3,545		)	(67,102		)	—			(51,545		)
Net cash provided/(used) by operating activities	(16,746		)	16,567			34,725			—			34,546
Cash flows from investing activities:
Capital expenditures	(14,829		)	(16,695		)	(30,075		)	—			(61,599		)
Investment in subsidiaries and affiliates	(13,534		)	—			—			13,534			—
Gross proceeds from sale of property, plant and equipment and other assets	87			129			163			—			379
Payments related to routes and other intangibles	(3,416		)	—			—			—			(3,416		)
Net cash provided/(used) in investing activities	(31,692		)	(16,566		)	(29,912		)	13,534			(64,636		)
Cash flows from financing activities:
Proceeds for long-term debt	—			—			8,264			—			8,264
Payments on long-term debt	(1		)	(2		)	(8,635		)	—			(8,638		)
Borrowings from revolving facilities	176,000			—			43,933			—			219,933
Payments on revolving facilities	(71,000		)	—			(29,782		)	—			(100,782		)
Net cash overdraft financing	3,084			—			(12,678		)	—			(9,594		)
Issuances of common stock	67			—			—			—			67
Repurchase of treasury stock	(55,044		)	—			—			—			(55,044		)
Contributions from parent	—			—			13,534			(13,534		)	—
Minimum withholding taxes paid on stock awards	(4,316		)	—			(12		)	—			(4,328		)
Acquisition of noncontrolling interest	—			—			(8,784		)	—			(8,784		)
Distributions to noncontrolling interests	—			—			(688		)	—			(688		)
Net cash provided/(used) in financing activities	48,790			(2		)	5,152			(13,534		)	40,406
Effect of exchange rate changes on cash	—			—			(6,916		)	—			(6,916		)
Net increase/(decrease) in cash, cash equivalents and restricted cash	352			(1		)	3,049			—			3,400
Cash, cash equivalents and restricted cash at beginning of period	654			26			72,365			—			73,045
Cash, cash equivalents and restricted cash at end of period	$	1,006		$	25		$	75,414		$	—		$	76,445

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Condensed Consolidated Statements of Cash Flows

For the three months ended March 30, 2019

(in thousands)

	Parent			Guarantors			Non-guarantors			Eliminations			Consolidated
Cash flows from operating activities:
Net income/(loss)	$	19,640		$	18,521		$	36,106		$	(54,627	)	$	19,640
Earnings in investments in subsidiaries	(54,627		)	—			—			54,627			—
Other operating cash flows	52,135			(2,881		)	(20,293		)	—			28,961
Net cash provided by operating activities	17,148			15,640			15,813			—			48,601
Cash flows from investing activities:
Capital expenditures	(34,303		)	(23,498		)	(26,468		)	—			(84,269		)
Acquisitions	(1,157		)	—			(274		)	—			(1,431		)
Gross proceeds from sale of property, plant and equipment and other assets	132			7,016			720			—			7,868
Proceeds from insurance settlements	—			845			—			—			845
Payments related to routes and other intangibles	—			—			(2,778		)	—			(2,778		)
Net cash used in investing activities	(35,328		)	(15,637		)	(28,800		)	—			(79,765		)
Cash flows from financing activities:
Proceeds for long-term debt	—			—			2,138			—			2,138
Payments on long-term debt	—			(2		)	(10,972		)	—			(10,974		)
Borrowings from revolving credit facility	50,000			—			106,829			—			156,829
Payments on revolving credit facility	(37,000		)	—			(101,147		)	—			(138,147		)
Net cash overdraft financing	8,350			—			6,175			—			14,525
Issuances of common stock	12			—			—			—			12
Minimum withholding taxes paid on stock awards	(3,190		)	—			—			—			(3,190		)
Net cash provided/(used) by financing activities	18,172			(2		)	3,023			—			21,193
Effect of exchange rate changes on cash	—			—			(1,575		)	—			(1,575		)
Net increase/(decrease) in cash, cash equivalents and restricted cash	(8		)	1			(11,539		)	—			(11,546		)
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	$	1,090		$	33		$	94,700		$	—		$	95,823

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•	Finished product commodity prices

•	Segment results

•	Foreign currency exchange

•	Corporate activities

•	Non-U.S. GAAP measures

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•	As of March 28, 2020, the Company had availability of $795.9 million under the revolving loan facility, taking into account that the Company had $157.8 million in outstanding borrowings, $45.5 million in ancillary facilities and letters of credit issued of $3.6 million.

•

As of March 28, 2020, 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 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%.

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(1)	All shares purchased during the first 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 102,246 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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