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Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.12pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.19pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-0.06pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+3
negatively+3
litigation+2
losses+2
negative+2
Positive rising
opportunities+2
despite+2
profitability+1
successful+1
favoring+1
Risk Factors (Item 1A)
23,427 words
ITEM 1A. RISK FACTORS
An investment in Darling involves substantial risks. In consultation with your financial, tax and legal advisors, you should carefully consider, among other matters, the following risks described in, as well as the other information contained in or incorporated by reference into, this report. If any of the events described in the following risk factors actually occur, our business, financial condition, prospects or results of operations could be materially adversely affected, the market price of our common stock could decline and you may lose all or part of your investment in the common stock. The risks and uncertainties described below are not the only risks we face. Additional risks and uncertainties that are not currently known or that are currently deemed to be immaterial may also materially and adversely affect our business operations and financial condition or the market price of our common stock. The risks described below also include forward-looking statements and our actual results may differ substantially from those discussed in these forward-looking statements. See the section entitled “Forward-Looking Statements” in this report.
Summary of Risk Factors
The following is a summary of some of the risks and uncertainties that could materially and affect our business, operating results, financial condition and the actual outcome of matters as to which forward-looking statements are made in this report. In addition to the summary below, you should carefully review the detailed risk factors discussed later in this section.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
losses+3
idle+2
negative+1
adverse+1
restructuring+1
Positive rising
benefit+4
greater+1
good+1
leading+1
MD&A (Item 7)
14,705 words
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth below under the heading “Forward Looking Statements” and in Item 1A of this report under the heading “Risk Factors.”
Fiscal Year 2025 Overview
The Company is a global developer and producer of sustainable natural ingredients from edible and inedible bio-nutrients, creating a wide range of ingredients and customized specialty solutions for customers in the pharmaceutical, food, pet food, feed, industrial, fuel, bioenergy and fertilizer industries. With operations on five continents, the Company collects and transforms all aspects of animal by-product streams into useable and specialty ingredients, such as collagen, edible fats, feed-grade fats, animal proteins and meals, plasma, pet food ingredients, organic fertilizers, yellow grease, fuel feedstocks, agriculture-based biofuels, natural casings and hides. The Company also recovers and converts recycled oils (used cooking oil and animal fats) into valuable fuel and feed ingredients and collects and processes residual bakery products into feed ingredients. In addition, the Company provides environmental services, such as grease trap collection and disposal services to food service establishments. The Company sells its products through a global network and operates within three industry segments: Feed Ingredients, Food Ingredients and Fuel Ingredients.
Risks and uncertainties that may affect, or have affected, our business, operating results and financial condition include, but are not limited to, the following:
• The prices of many of our products are subject to significant volatility associated with commodities markets;
• Our business is dependent on the procurement of raw materials, which is a competitive aspect of our business;
• The DGD Joint Venture subjects us to a number of risks;
• Our renewable energy businesses, including the DGD Joint Venture, are highly dependent on government programs, incentives and regulatory frameworks, which are subject to change and uncertainty;
• We are highly dependent on natural gas, diesel fuel and electricity, the prices of which can be volatile, and such dependency could materially adversely affect our business;
• A significant percentage of our revenue is attributable to a limited number of suppliers and customers;
• Certain of our operating facilities are highly dependent upon a single or a few suppliers;
• We face risks associated with our international activities, which could negatively affect our sales to customers in foreign countries and our operations and assets in such countries;
• Seasonal factors and weather, including the physical impacts of climate related changes, can impact the availability, quality and volume of raw materials that we process and negatively affect our operations;
• If we or our customers are the subject of product liability or other claims or product recalls, we may incur significant and unexpected costs and our business reputation could be adversely affected;
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• In certain markets we are highly dependent upon a single operating facility and various events beyond our control could cause an interruption in the operation of our facilities, which could adversely affect our business in those markets;
• We may incur losses and additional costs as a result of our hedging transactions;
• Media campaigns related to feed and food ingredient production or fuel production present reputational and other risks;
• An impairment in the carrying value of our goodwill or other intangible assets may have a material adverse effect on our results of operations;
• Our operations are subject to extensive and evolving environmental, health and safety laws and regulations, and we could incur significant costs to comply with these requirements or be subject to sanctions or held liable for damages, including environmental damages;
• Our business may be negatively impacted by the occurrence of any disease correctly or incorrectly linked to animals;
• Our business may be affected by the impact of animal related disease, such as BSE, and by other food safety or food regulatory issues;
• P andemics, epidemics or disease outbreaks, may disrupt our business, including, among other things, our supply chain and production processes, each of which could materially affect our operations, liquidity, financial condition and results of operations;
• We may be subject to work stoppages at our operating facilities, which could cause interruptions in the manufacturing or distribution of our products;
• Certain U.S. multiemployer defined benefit pension plans to which we contribute are underfunded and these plans may require minimum funding contributions or we may be subject to liabilities due to a termination of, or our withdrawal from, such plans;
• Our substantial indebtedness could adversely affect our financial condition;
• Despite our existing level of indebtedness, we and our subsidiaries could substantially increase our indebtedness, which could further exacerbate the risks to our financial condition described above;
• We may not generate sufficient cash to service all of our debt and may be forced to take other actions to satisfy our debt obligations, which may not be successful;
• Our ability to make payments on our debt depends in part on the performance of our subsidiaries, including our non-guarantor subsidiaries, and their ability to transfer funds to members of our group liable to make payments on our debt;
• The market price of our common stock has been and may continue to be volatile, which could cause the value of your investment to decline;
• Our ability to pay any dividends on our common stock may be limited and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock;
• Future sales of our common stock or the issuance of other equity may adversely affect the market price of our common stock;
• Our common stock is an equity security and is subordinate to our existing and future indebtedness;
• The issuance of shares of preferred stock could adversely affect holders of common stock, which may negatively impact your investment;
• We may incur material costs and liabilities in complying with government regulations;
• Downturns and volatility in global economies and commodity and credit markets could materially adversely affect our business, results of operations and financial condition;
• We may not successfully identify and complete acquisitions or joint ventures on favorable terms or achieve anticipated synergies relating to any acquisitions or joint ventures, and such acquisitions or joint ventures could result in unknown liabilities, unforeseen operating difficulties and expenditures and require significant management resources;
• Our business may be adversely impacted by fluctuations in foreign currency exchange rates, which could affect our ability to comply with our financial covenants;
• Large capital projects can take many years to complete, and market conditions could deteriorate over time, negatively impacting project returns;
• Changes in consumer preference could negatively impact our business;
• If we experience difficulties or a significant disruption in our information systems or if we fail to implement new systems and software successfully, our business could be materially adversely affected;
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• Increased information technology security threats and more sophisticated computer crime pose a risk to our systems, networks, products and services, while data privacy and cybersecurity laws continue to proliferate presenting heightened regulatory risk;
• Artificial intelligence could subject the Company to loss through various internal and external risks;
• Our success is dependent on our key personnel;
• We could have a material weakness in our internal control over financial reporting that would require remediation;
• Changes in our tax rates or exposure to additional income tax liabilities could impact our profitability;
• Litigation or regulatory proceedings may materially adversely affect our business, results of operations and financial condition;
• Our European pension funds may require minimum funding contributions;
• The insurance coverage that we maintain may not cover, or fully cover, all operational risks, and if the number or severity of claims for which we are self-insured increases, if we are required to accrue or pay additional amounts because the claims prove to be more severe than our recorded liabilities, if our insurance premiums increase or if we are unable to obtain insurance at acceptable rates or at all, our financial condition and results of operations may be materially adversely affected;
• We may divest certain of our brands or businesses from time to time, which could adversely affect us;
• Terrorist attacks or acts of war may cause damage or disruption to us and our employees, facilities, information systems, security systems, suppliers and customers, which could materially and adversely affect our net sales, costs and expenses and financial condition;
• We may be unable to protect our intellectual property rights;
• Our products, processes, methods, and equipment may infringe upon the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products;
• The healthcare reform legislation in the United States and its implementing regulations could impact the healthcare benefits we are required to provide our employees in the United States and cause our compensation costs to increase, potentially reducing our net income and adversely affecting our cash flows;
• We may incur significant charges and experience disruptions or losses of customer and/or supplier relationships in the event we close or divest all or part of a manufacturing plant or facility; and
• We may not be able to achieve our climate, sustainability or other such goals, targets or objectives.
Risks Related to our Business
The prices of many of our products are subject to significant volatility associated with commodities markets.
Our principal finished products in our Feed Ingredients segment include MBM, PM, BFT, YG, PG, BBP and hides, which are commodities. We also manufacture and sell a number of other products that are derived from animal by-products and many of which are commodities or compete with commodities. The prices of these commodities are quoted on, or derived from prices quoted on, established commodity markets. Accordingly, our results of operations will be affected by fluctuations in the prevailing market prices of these finished products or of other commodities that may be substituted for our products by our customers. Historically, market prices for commodity grains, fats and food stocks have fluctuated in response to a number of factors, including global changes in supply and demand resulting from changes in local and global economic conditions, global government agriculture programs, energy policies of U.S. and foreign governments, and international agricultural trading policies, the impact of disease outbreaks on protein sources and the potential effect on supply and demand, as well as weather conditions during the growing and harvesting seasons. A significant decrease in the market price of any of our products or of other commodities that may be substituted for our products would have a material adverse effect on our results of operations and cash flow. Furthermore, rapid and material changes in finished goods prices, including competing agricultural-based alternative ingredients, generally have an immediate and, often times, material impact on the Company’s gross margin and profitability resulting from the lapse of time between the procurement of the raw materials and the sale of the finished goods. Increases in the market prices of raw materials would require us to raise prices for our premium, value-added and branded products to avoid margin deterioration. We may not be able to implement future price increases in response to increases in the market prices of raw materials, and any such price increases may have adverse impacts on future sales volumes. Our results of operations could be materially and adversely affected in the future by this volatility. Furthermore, an increased preference by meat processors for alternative feed ingredients, such as all vegetable diets in the case of poultry producers, could negatively impact the prices of certain of our finished products that would need to be sold to alternative markets and destinations.
The prices available for the Company’s Food Ingredients segment’s collagen, edible fats and natural casings products are influenced by other competing ingredients, including plant-based and synthetic hydrocolloids and artificial casings. In the
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collagen operation, in particular, the cost of the Company’s animal-based raw material moves in relationship to the selling price of the finished goods. The processing time for the Food Ingredients segment’s collagen and casings is generally 30 to 60 days, which is substantially longer than the Company’s Feed Ingredients segment’s animal by-products operations. Consequently, the Company’s gross margin and profitability in this segment can be influenced by the movement of finished goods prices during the period from when the raw materials were procured until the finished goods are sold.
The Company’s Fuel Ingredients segment, which converts fats and oils into biofuels (including renewable diesel and SAF), organic sludge and food waste into biogas, and fallen stock into low-grade energy sources, is impacted by world energy prices for oil, electricity and natural gas, as well as potential competition from the adoption of non-rendered feedstock in biofuel markets.
The Company’s results of operations in its Feed, Food and Fuel Ingredients segments are also impacted by U.S. and foreign tariffs and trade restrictions that affect trade flows, supply and demand and market prices for the Company’s raw materials and finished products.
Our business is dependent on the procurement of raw materials, which is a competitive aspect of our business.
Our management believes that the most competitive aspect of our business is the procurement of raw materials rather than the sale of finished products. Many of our raw materials are derived directly or indirectly from animal by-products, which results in the following challenges:
• In North America, consolidation within the meat processing industry has resulted in bigger and more efficient slaughtering operations, the majority of which utilize “captive” rendering (rendering operations integrated with the meat or poultry packing operation).
• Concurrently, there has been limited to no growth in the number of small U.S. meat processors, which have historically been a dependable source of supply for non-captive or independent U.S. renderers, such as us.
• The slaughter rates in the U.S. and international meat processing industry are subject to decline during poor economic conditions when consumers generally reduce their consumption of protein, and as a result, during such periods of decline, the availability, quantity and quality of raw materials available to independent renderers, such as us, decreases. In addition, raw material volumes are subject to decline due to government regulations limiting animal production.
• In addition, the Company has seen an increase in the use of used cooking oil in the production of biofuels, which has increased competition for the collection of used cooking oil from restaurants and other food service establishments and contributed to an increase in the frequency and magnitude of theft of used cooking oil in the United States.
• Furthermore, a decline in the general performance of the global economy (including a decline in consumer confidence and inflation) and an inability of consumers and companies to obtain credit in the financial markets could have a negative impact on our raw material volume, such as through the forcedclosure of any of our raw material suppliers. A significant decrease in available raw materials or a closure of a significant number of raw material suppliers could materially and adversely affect our business, results of operations and financial condition, including the carrying value of certain of our assets.
The rendering industry is highly fragmented and both the rendering and bakery residual industries are very competitive. We compete with other rendering businesses and alternative methods of disposal of animal by-products, bakery residue and used cooking oil provided by trash haulers, waste management companies and biofuel companies, as well as the alternative of illegal disposal. See Item 1. “ Competition. ” In addition, U.S. restaurants experience theft of used cooking oil, the frequency and magnitude of which increases with the rise in value of used cooking oil. Depending on market conditions, we either charge a collection fee to offset a portion of the cost incurred in collecting raw material, collect on a no pay/no charge basis or pay for the raw material. To the extent suppliers of raw materials look to alternate methods of disposal, whether as a result of our collection fees being deemed too expensive, the payments we offer being deemed too low or otherwise, our raw material supply and/or collection fee revenues will decrease, which could materially and adversely affect our business, results of operations and financial condition. In addition, the amount of raw material acquired, which has a direct impact on the amount of finished goods produced, can also have a material effect on our gross margin reported, as the Company has a substantial amount of fixed operating costs. In addition, we utilize an extensive vehicle fleet to collect and transport raw material, for which we compete with other industries for qualified drivers, which from time to time are in short supply. Our failure to hire and retain a sufficient number of truck drivers to operate our fleet could negatively impact our ability to collect and transport raw materials in an efficient and cost-effective manner.
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A majority of the Company’s U.S. volume of animal by-product raw materials, including its significant U.S. accounts, and substantially all of the Company’s U.S. bakery feed raw materials, are acquired on a “formula basis,” which allows us to adjust our costs of materials based on changes in the price of our finished products, and are in most cases set forth in contracts with our suppliers. Such contracts generally provide for multi-year terms. The formulas provided in these contracts are reviewed and modified during their term and upon renewal of the contracts to maintain acceptable risk allocations between us and our suppliers related to movements in commodity prices. Changes to these formulas or the inability to renew such contracts could have a material adverse effect on our business, results of operations and financial condition. A majority of the Company’s Canadian volume of animal by-product raw materials are acquired on a monthly fixed-price basis with suppliers, while the remainder are acquired on a “formula basis.” A majority of Darling Ingredients International’s volume of animal by-product raw materials are acquired at spot or quarterly fixed prices.
The DGD Joint Venture subjects us to a number of risks.
In January 2011, one of our wholly-owned subsidiaries, entered into a limited liability company agreement (as subsequently amended, the “DGD LLC Agreement”) with a wholly-owned subsidiary of Valero to form the DGD Joint Venture, which was formed to design, engineer, construct and operate the DGD St. Charles Plant. Since that time, the DGD Joint Venture has completed several expansion projects and currently operates the DGD St. Charles Plant and the DGD Port Arthur Plant. As of January 3, 2026, under the equity method of accounting, we had an investment in the DGD Joint Venture of approximately $2.1 billion included on the Consolidated Balance Sheet. Nonetheless, the DGD Joint Venture may not continue to be profitable, may not continue to make distributions or allow us to continue to make a return on our investment, or could result in a negative return on our investment.
The DGD Joint Venture’s operations are conducted through a joint venture with Valero. Accordingly, we share control with our joint venture partner over certain economic, legal and business interests of the DGD Joint Venture, who may have economic, business, o r legal interests, opportunities, or goals that are inconsistent with, or different from, our opportunities, goals, and interests, or may have different liquidity needs or financial condition characteristics than our own, be subject to different legal or contractual obligations than we are, or be unable to meet their obligations. For instance, while we share certain management rights with our joint venture partner under the DGD LLC Agreement, we do not have full control of every aspect of the DGD Joint Venture’s business and certain significant decisions concerning the DGD Joint Venture require certain approvals from our joint venture partner, including, among others, the acquisition or disposition of assets above a certain value threshold, making certain changes to the DGD Joint Venture’s business plan, raising debt or equity capital, the DGD Joint Venture’s distribution policy, and entering into particular transactions. Failure by us or our joint venture partner to adequately manage the risks associated with the DGD Joint Venture and any differences in views among us and our joint venture partner could prevent or delay actions that are in the best interests of us or the DGD Joint Venture and could have a material adverse effect on our, or the DGD Joint Venture’s, financial condition, results of operations and liquidity. Furthermore, our equity in net income of the DGD Joint Venture, which is based on our 50% interest in the unconsolidated earnings of the standalone DGD Joint Venture financial statements, may not always match our joint venture partner’s consolidated results and presentation. In addition, the DGD LLC Agreement limits our ability to freely transfer or sell our interest in the DGD Joint Venture.
The DGD Joint Venture is subject to and dependent on governmental energy policies and programs, such as the National Renewable Fuel Standard Program (“RFS”) and low carbon fuel standards (“LCFS”) (such as those in place in the state of California), which positively impact the demand for and price of renewable diesel. Any changes to, a failure to enforce or a discontinuation of any of these programs could have a material adverse effect on the DGD Joint Venture. Further, these programs are regularly subject to expirations and renewals which, at any time, could be delayed or not renewed, and other administrative and political review which could result in limitations or other policy adjustments by the respective administrations overseeing them. See the section entitled “Risk Factors - Risks Related to our Business-Our renewable energy businesses, including the DGD Joint Venture, are highly dependent on government programs, incentives and regulatory frameworks, which are subject to change and uncertainty.”
Additionally, there may be new entrants into the biofuels industry or new technologies developed that could meet demand for lower-carbon transportation fuels and modes of transportation in a more efficient or less costly manner than our technologies and products, which could also have a material adverse effect on the DGD Joint Venture. For instance, several other companies have made, or announced interest in making, investments in biofuel projects. Should these projects develop, the DGD Joint Venture would face competition from them for feedstocks and customers, which could strain margins on the products it sells and limit the growth and profitability of the DGD Joint Venture. It is not possible at this time to predict the ultimate form, timing, or extent of any such developments; however, a reduction in the demand for the DGD Joint Venture’s products as a result of any of the foregoing events could materially and adversely affect our business, financial condition, results of operations, and liquidity.
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The DGD Joint Venture’s production plants are its principal operating assets and are subject to planned and unplanneddowntime and interruptions. Its operations could also be subject to significant interruption if one of its plants were to experience a major accident or mechanical failure, be damaged by severe weather or natural disasters (such as hurricanes) or man-made disasters (such as cybersecurity incidents or acts of terrorism), or otherwise be forced to shut down or curtail operations. If any of its plants, or related pipelines or terminals, were to experience an interruption in operations, our earnings could be materially and adversely affected (to the extent not recoverable through insurance) because of lost productivity and repair and other costs.
In addition, the operation of a joint venture such as this involves a number of risks that could harm our business and result in the DGD Joint Venture not performing as expected, such as:
• problems integrating or developing operations, personnel, technologies or products;
• the unanticipatedbreakdown or failure of equipment or processes, including any unforeseen issues that may arise in connection with the operation of the DGD Facilities or completion and startup of any expansion or capital projects or the possibility of equipment failure as a result of materials degradation;
• the inaccuracy of our assumptions about prices or demand for the biofuels (including renewable diesel and SAF) that the DGD Joint Venture produces;
• unforeseen engineering or environmental issues, including new or more stringent environmental regulations affecting operations;
• unforeseen capital contributions required under the DGD LLC Agreement;
• the inaccuracy of our assumptions about the timing and amount of anticipated revenues and operating costs including feedstock prices;
• the diversion of management time and resources;
• difficulties in obtaining and maintaining permits and other regulatory issues, potential license revocations and changes in legal requirements;
• adverse changes in government policies, programs and/or mandates around the world that benefit biofuels, including, without limitation, reductions, dilutions or terminations of government credits, incentives and/or subsidies for biofuels or programs or mandates requiring biofuel use;
• changes in supply and demand for biofuels, including potential overproduction of biofuels against demand resulting in diminished returns and potential dilution of government credits, incentives and/or subsidies;
• difficulties in establishing and maintaining relationships with suppliers and end user customers;
• the risk that one or more competitive new biofuel (including renewable diesel and SAF) plants are constructed that use different technologies from the DGD Joint Venture and result in the marketing of products that are more effective as a substitute for carbon-based fuels or less expensive than the products marketed by the DGD Joint Venture;
• U.S. and foreign tariffs, trade restrictions and nationalistic protections in biofuel policies favoring local production over imports could impact prices, margins and end market opportunities for the biofuels the DGD Joint Venture produces;
• U.S. and foreign tariffs on biofuels and biofuel feedstocks could also have an inverse effect where biofuel imports into certain countries could be beneficially positioned from a margin standpoint over local production;
• performance below expected levels of output or efficiency;
• disruptions in the ability of the pipelines, vessels, or railroads to transport feedstocks or products because of weather events (such as hurricanes), accidents, derailment, collision, fire, explosion, government regulations, or third-party actions;
• reliance by the DGD Joint Venture on Valero and its adjacent refinery facility for many services and processes;
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• possible impairment of the acquired assets, including intangible assets, in connection with the occurrence of any other risks associated with the DGD Joint Venture;
• possible third-party claims of intellectual property infringement;
• inability to source sufficient feedstocks for the operation or having to increase utilization of feedstocks that produce lower margin product; and
• being forced to sell our equity interests in the DGD Joint Venture pursuant to buy/sell provisions in the DGD LLC Agreement such that we would no longer continue to realize the benefits of the DGD Joint Venture.
If any of these risks described above were to materialize and the operations of the DGD Joint Venture were significantly disrupted, it could have a material adverse effect on our business, financial condition and results of operations.
Our renewable energy businesses, including the DGD Joint Venture, are highly dependent on government programs, incentives and regulatory frameworks, which are subject to change and uncertainty.
Demand for and profitability of our biofuels (including renewable diesel and SAF), biogases and green electricity, including those of DGD, depend in significant part on government programs, mandates, tax credits and incentives in the U.S. and other jurisdictions, including renewable fuel standards, low carbon fuel programs and clean fuel tax credits. These programs are complex, subject to frequent legislative, regulatory and administrative change, and dependent on agency interpretation, guidance enforcement priorities and funding.
Programs like RFS and LCFS, compliance and tax credits for biofuels and mandates for biofuel use, both in the United States and abroad, are subject to revision and change which may impact the demand for our finished products and margins. Support from the programs and credits plays an important role in the makeup of margins for the DGD Joint Venture, and, accordingly, we are exposed to volatility in the market price of these credits, including LCFS credits and RINs (which act as compliance credits under the RFS). We cannot predict the future prices of RINs, LCFS credits or other credits, nor can we predict changes or continued implementation of policies that support these programs.
The EPA created the RFS program pursuant to the Energy Policy Act of 2005 and the Energy Independence and Security Act of 2007. Under the RFS program, the EPA is required by statute to set annual quotas for the volume of renewable fuels that must be blended into petroleum-based transportation fuels consumed in the U.S. 14 months prior to the compliance year. The quotas are set by class of renewable fuel (e.g., biomass-based diesel, cellulosic biofuel, advanced biofuel, and total renewable fuel) and are collectively referred to as the renewable volume obligation (“RVO”). The RVO must be met by obligated parties, who are the producers and importers of the petroleum-based transportation fuels consumed in the U.S. Obligated parties demonstrate compliance annually by retiring the appropriate number of renewable identification numbers (“RINs”) associated with each class of renewable fuel to satisfy their RVO. A RIN is a compliance credit that is assigned to each gallon of qualifying renewable fuel produced in, or imported into, the U.S. under the RFS program. RINs are obtained by blending those renewable fuels into petroleum based transportation fuels, and obligated parties can also achieve compliance by purchasing RINs in the open market.
Pursuant to the requirements established by the Energy Independence and Security Act of 2007, the finalized 2010 RFS regulation mandated the domestic use of biomass-based diesel (biodiesel, renewable diesel or renewable jet fuel) of 1.0 billion gallons in 2012 and a minimum of 1.0 billion gallons of biomass-based diesel for subsequent years. This amount is subject to increase by the Administrator of the EPA. The volume mandates for 2022 were 2.76 billion gallons for biomass-based diesel, 5.63 billion RINs for advanced biofuel, and 20.63 billion RINs for total renewable fuel.
In June of 2023, the EPA published a final rule that established required RFS volumes for 2023, 2024, and 2025. For biomass-based diesel, the EPA set 2.82 billion gallons for 2023, 3.04 billion gallons for 2024, and 3.35 billion gallons for 2025. For the advanced biofuel category, the EPA set 5.94 billion RINs for 2023, 6.54 billion RINs for 2024, and 7.33 billion RINs for 2025. For total renewable fuel, the EPA set 20.94 billion RINs for 2023, 21.54 billion RINs for 2024, and 22.33 billion RINs for 2025.
For RFS compliance purposes, RINs satisfy the biomass-based diesel requirement, the overall advanced biofuel requirement, and the total renewable fuel requirement. In order to generate a RIN, each type of fuel from each type of feedstock is required to reduce greenhouse gas (“GHG”) emissions by levels specified in the regulation. The EPA has determined that biodiesel or renewable diesel produced from waste oils, fats, and greases exceed the 50% threshold established by the regulation to generate advanced biofuel and biomass-based diesel RINs.
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In January 2025, the Clean Fuels Production Credit (“CFPC”) introduced under the IR Act became effective through 2027, and replaced the blender tax credit that was in effect in prior years. Under the CFPC, non-aviation transportation fuel receives a tax credit equal to either $0.20/gallon or $1.00/gallon (adjusted for inflation each calendar year) multiplied by the fuel’s emission reduction percentage. In order to start with the $1.00 per gallon baseline, the fuel must be produced at a qualifying facility that meets the prevailing wage and apprenticeship requirements before being sold in a certain manner. Under the CFPC, SAF receives a tax credit equal to either $0.35/gallon or $1.75/gallon (adjusted for inflation each calendar year) multiplied by the fuel’s emission reduction percentage. In order to start with the $1.75 per gallon baseline, SAF must be produced in the United States at a qualifying facility that meets the prevailing wage and apprenticeship requirements before being sold for use in an aircraft. In contrast to the blender tax credit, the CFPC requires that production of eligible fuels must take place in the United States. On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted in the U.S. The OBBBA extended the CFPC for two years through 2029 and, beginning in 2026, reduces the maximum credit rate for SAF to $1.00/gallon (adjusted for inflation each calendar year) and specifies that transportation fuels must be derived from feedstocks produced or grown in the U.S., Mexico or Canada to be eligible.
Government incentives related to renewable fuels were material to our results of operations in fiscal 2025, so any legal challenges or changes to, a failure to enforce, reductions in the mandated volumes under, or suspending or discontinuing any of these programs could have a negative impact on our business and results of operations.
For example, the transition from the blender tax credit to the CFPC on January 1, 2025 introduced a number of risks that could negatively impact the results of operations of the DGD Joint Venture and cause a material and adverse impact to the Company. These include, but are not limited to: credit eligibility and compliance risks for failure to satisfy qualification, prevailing wage and apprenticeship and other certification and documentation requirements which could reduce credit values or void credits; regulatory risks because the U.S. Treasury has yet to provide final CFPC regulations, and credits earned since January 1, 2025 must be determined based on currently available information from Treasury; and credit transfer risks, including the development of markets to sell the credits, the strength of any such markets and the viability of the credits with respect to discounts to credit values on sales, and potential Company indemnities with respect to credit sales which introduce the risk of reimbursing buyers for any later credit adjustments including potential penalties, interest and tax gross-ups which could be material.
We are highly dependent on natural gas, diesel fuel and electricity, the prices of which can be volatile, and such dependency could materially adversely affect our business.
Our operations are highly dependent on the use of natural gas, diesel fuel and electricity and a disruption in any of them could have a material adverse effect on the business and results of operations of the affected facility. We consume significant volumes of natural gas to operate boilers in our plants, which generate steam to heat raw materials, and natural gas prices represent a significant cost of facility operations included in cost of sales. We also consume significant volumes of diesel fuel to operate our fleet of vehicles used to collect raw materials, and diesel fuel prices represent a significant component of cost of collection expenses included in cost of sales. Prices for both natural gas and diesel fuel can be volatile, partially due to conflicts around the world, such as the ongoing Russian-Ukraine war and conflicts in the Middle East, and inflation, and therefore, represent an ongoing challenge to our operating results. Despite our efforts to manage these costs and hedge our exposure to changes in fuel prices through our formula pricing, and from time to time, derivatives, a material increase in prices for natural gas and/or diesel fuel over a sustained period of time could materially adversely affect our business, results of operations and financial condition. We also require a significant amount of electricity in operating certain of our facilities, a significant increase in the cost of which could have a material adverse effect on the business and results of operations of the affected facility. Additionally, the availability of natural gas, diesel fuel and electricity can be affected by numerous events such as weather (e.g., hurricanes and periods of considerable heat or cold), pipeline and other logistics interruptions, electric grid outages, cybersecurity incidents, intermittent electricity generation, hostilities, sanctions and supply and demand imbalances.
A significant percentage of our revenue is attributable to a limited number of suppliers and customers.
In fiscal year 2025, the Company’s top ten customers for finished products accounted for approximately 40% of product sales. In addition, the Company’s top ten raw material suppliers accounted for approximately 27% of its raw material supply in the same period. Disruptions or modifications to, or termination of, our relationship with any of our significant suppliers or customers, or financial difficulties experienced by any of our suppliers or customers that lead to curtailment or termination of their operations, could cause our businesses to suffer significant financial losses and could have a material adverse effect on our business, earnings, financial condition and/or cash flows.
Certain of our operating facilities are highly dependent upon a single or a few suppliers.
Certain of our operating facilities are highly dependent on one or a few suppliers. Should any of these suppliers choose alternate methods of disposal, cease their operations, have their operations interrupted by casualty, curtail their operations or
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otherwise cease using our collection services, these operating facilities may be materially and adversely affected, which could materially and adversely affect our business, results of operations and financial condition.
We face risks associated with our international activities, which could negatively affect our sales to customers in foreign countries and our operations and assets in such countries.
We conduct foreign operations in Europe, South America, Canada, Asia and Australia. While we expect that our geographical diversity reduces our exposure to risks in any one country or part of the world, it also subjects us to various risks and uncertainties relating to international sales and operations, including:
• imposition of tariffs, quotas, trade barriers and other trade protection measures imposed by the United States or foreign countries, or retaliatory trade protection measures, impacting import costs in the U.S. or foreign countries of poultry, beef and pork products, gelatin and collagen products, fats and oils, biofuels, and/or any of the Company’s other finished products, and related uncertainty and volatility in U.S. and global financial and economic conditions and commodity markets, declining consumer confidence, significant inflation and diminished expectations for the economy, as well as the imposition of operating, import or export licensing requirements;
• issues associated with intellectual property protections for the Company’s products and operations, such as defense of our intellectual property in foreign countries and/or, as the Company expands globally, use of our intellectual property on competing products in certain countries where our intellectual property is not registered;
• imposition of border restrictions by foreign countries with respect to the import of poultry, beef and pork products due to animal disease or other perceived health or safety issues;
• change in existing trade agreements, such as the United States-Mexico-Canada Agreement (“USMCA”), which could negatively impact our business;
• impact of currency exchange rate fluctuations between the U.S. dollar and foreign currencies, particularly the euro, the Brazilian real, the Canadian dollar, the Chinese renminbi, the British pound, the Japanese yen, the Australian dollar and the Polish zloty, which may reduce the U.S. dollar value of the revenues, profits and cash flows we receive from non-U.S. markets or of our assets in non-U.S. countries or increase our supply costs, as measured in U.S. dollars in those markets;
• exchange controls and other limits on our ability to import raw materials, import or export finished products or to repatriate earnings from overseas, such as exchange controls in effect in China, that may limit our ability to repatriate earnings from foreign countries;
• different regulatory structures (including creditor rights that may be different than in the United States) and unexpected changes in regulatory environments (including, without limitation, in China), including changes resulting in potentially adverse tax consequences or imposition of onerous trade restrictions, price controls, industry controls, animal and human food safety controls, employee welfare schemes or other government controls;
• political or economic instability, social or labor unrest or changing macroeconomic conditions (such as high inflation rates) or other changes in political, economic or social conditions in the respective jurisdictions;
• changes in tax laws or to tax rates in any of the jurisdictions in which we operate and adverse outcomes from tax audits;
• compliance with, and enforcement of, a variety of complex U.S. and non-U.S. laws, treaties and regulations, including, without limitation, anti-bribery and anti-corruption laws such as the U.S. Foreign Corrupt Practices Act (the “FCPA”), the U.K. Bribery Act of 2010, anti-corruption laws of the EU Member States, the Brazilian corporate anti-corruption law and similar anti-corruption legislation in many jurisdictions in which we or our joint venture partners operate, as well as economic and trade sanctions enforced by the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”), the European Union (“EU”) institutions, the EU Member States’ authorities, or other governmental entities; and
• distribution costs, disruptions in shipping or reduced availability or increased costs of freight transportation, including, without limitation, due to strikes or port closures which could impact movement of raw materials and finished products.
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These risks and uncertainties could jeopardize or limit our ability to transact business in one or more of our international markets or in other developing markets and may have a material adverse effect on our business, results of operations, cash flows and financial condition. In addition, from time to time certain of our international operations make contractual prepayments to raw material suppliers in the ordinary course of business, which may subject the Company to financial risk should any such supplier experience financial difficulties (e.g., bankruptcy) or cease operations.
Seasonal factors and weather, including the physical impacts of climate related changes, can impact the availability, quality and volume of raw materials that we process and negatively affect our operations.
There is global concern that carbon dioxide and other GHG in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency of extreme weather and natural disasters. We are subject to physical, operational, transitional and financial risks associated with any such climate related changes and global, regional and local weather conditions, as well as legal, regulatory and market responses to climate change. Certain jurisdictions in which we operate have either imposed, or are considering imposing, new or increasingly stringent legal and regulatory requirements to reduce or mitigate the potential effects of climate change, including regulation and reduction of GHG and potential carbon pricing programs. These new or increasingly stringent legal or regulatory requirements could result in significantly increased costs of compliance and additional investments in facilities and equipment, and reduced raw material supplies in areas where these requirements limit or eliminate livestock operations. Our risk management process includes assessment of climate related regulatory risks, but we may be unable to predict the scope, nature and timing of any new or increasingly stringent environmental laws and regulations or the ultimate impact of such laws and regulations on our business or financial results. We continue to monitor existing and proposed laws and regulations in the jurisdictions in which we operate and consider actions we may take to potentially mitigate the unfavorable impact, if any, of such laws or regulations.
Furthermore, there is legislation (and additional legislation has been introduced) regulating practices related to the causes and impacts of climate change as well as supply chain control and compliance with human rights. For example, in December 2022 the EU adopted Directive (EU) 2022/2464, also known as the Corporate Sustainability Reporting Directive (“CSRD”), which requires reporting on sustainability-related issues. In addition, in June 2024 the EU adopted Directive (EU) 2024/1760, also known as the Corporate Sustainability Due Diligence Directive (“CSDDD”), which requires risk-based supply chain due diligence and certain activities in the supply chain. In addition, there has been increased state-level legislation in the U.S., like California’s SB 261, which mandates certain companies doing business in California to disclose climate-related financial risks, and SB 253, which requires reporting of corporate greenhouse gas emissions. In both the EU and California the regulations have been delayed pending amendments and legal challenges, which increases the uncertainty around final impacts to the Company. The Company continues to monitor proposed changes to these and other proposed legislative and regulatory requirements related to sustainability issues in state and national jurisdictions. Compliance with CSRD, CSDDD, California’s SB 261 and SB 253, and other proposed or adopted legislative and regulatory requirements related to sustainability issues may require expenditures that could materially adversely affect our business, results of operations and financial condition. There has also been increased focus from our stakeholders, including consumers, customers, suppliers, employees and investors, on our sustainability practices. We expect that stakeholder expectations with respect to sustainability will continue to progress, which may necessitate additional resources to monitor, report on, and adjust our operations.
The quantity of raw materials available to us is impacted by seasonal factors, including holidays, when raw material volumes decline, and cold weather, which can impact the collection of raw materials. Warm weather can also adversely affect the quality of raw materials processed and our yield on production due to more rapid degradation. In addition to seasonal impacts, depending on the location of our facilities and those of our suppliers, our operations could be subject to weather impacts, including the physical impacts of climate changes, changes in rainfall patterns, water shortages, changing sea levels, changing storm patterns and intensities and changing temperature levels. Physical damage, flooding, excessive snowfall or drought resulting from changing climate patterns could adversely impact our costs and business operations, the availability and costs of our raw materials, and the supply and demand for our end products. These effects could be material to our results of operations, liquidity or capital resources. The quality and volume of the finished products that we are able to produce could be negatively impacted by unseasonable or severe weather or unexpecteddeclines in the volume of raw materials available during holidays, which in turn could have a material adverse effect on our business, results of operations and financial condition. In addition, severe weather events may also impact our ability to collect or process raw materials or to transport finished products.
If we or our customers are the subject of product liability or other claims or product recalls, we may incur significant and unexpected costs and our business reputation could be adversely affected.
We and our customers for whom we manufacture products may be exposed to product liability or other claims, product recalls and adverse public relations if consumption or use of our products is alleged to cause injury or illness to humans or animals. In addition, we and our customers may be subject to product liability or other claims, product recalls, and adverse public relations resulting from developments relating to the discovery of unauthorizedadulterations to food additives or other products or from allegations that our food ingredients or other products were mislabeled, were not produced in accordance with
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the customer’s specifications, contract requirements or regulatory standards and/or have not performed adequately in the end product, even where food safety or other product safety is not a concern. In some cases, we indemnify our customers for product liability and other claims related to our products. Product recalls in one jurisdiction may result in product recalls in other jurisdictions, as is the case in the EU, where the European Commission and the EU Member States exchange information about recalls. Our insurance may not cover or be adequate to cover all liabilities we incur in connection with product liability and/or other claims, whether or not legitimate, or product recalls, whether voluntary or mandatory, and we may not be able to maintain our existing insurance or obtain comparable insurance at a reasonable cost for such matters. A judgment against us or against one of our customers for whom we manufacture or provide products on a product liability or other claim, or our or their agreement to settle a product liability or other claim, or a product recall, could also result in substantial and unexpected expenditures, which would reduce operating income and cash flow. In addition, even if product liability or other claimsagainst us or our customers for whom we manufacture products are not successful or are not fully pursued, defending these claims would likely be costly and time-consuming and may require significant management attention.
Product liability or other claims, product recalls or any other events that cause consumers to no longer associate our brands or those of our customers for whom we manufacture products with high quality and safety may result in adverse publicity and negatively impact our reputation and the value of our and their brands and lead to decreased demand for our products. In addition, as a result of any such claimsagainst us or product recalls, we may be exposed to claims by our customers for damage to their reputations and brands. Product liability or other claims and product recalls may also lead to increased scrutiny or investigations by federal, state and foreign regulatory agencies of our operations and could have a material adverse effect on our brands, business, reputation, results of operations and financial condition.
In recent years the EU has adopted new mechanisms to allow (and encourage) claims by consumers, including in collective litigation forms. The civil liability risks in Europe in relation to misleading advertising are material and increasing. On December 8, 2024, Directive (EU) 2024/2853, the EU’s revised Product Liability Directive (“PLD”), which must be transposed into national legislation of the EU Member States by December 9, 2026, introduced a number of significant changes that increase liability risks for companies distributing their products to EU consumers. Direct civil enforcement before EU institutions or courts is not available, but EU law requires EU Member States to enhance consumer protection at the national level by requiring every EU Member State to allow consumer representative bodies to take civil claims on behalf of consumers for breaches of certain EU consumer laws.
In certain markets we are highly dependent upon a single operating facility and various events beyond our control could cause an interruption in the operation of our facilities, which could adversely affect our business in those markets.
Our facilities are subject to various federal, state, provincial and local laws, rules and regulations including environmental and other permitting requirements of the countries in which we operate and our facilities are located. Periodically, these permits may be reviewed and subject to amendment or withdrawal. Applications for an extension or renewal of various permits may be subject to challenge by community and environmental groups and others. In the event of a casualty, condemnation, work stoppage, permitting withdrawal or delay, severe weather event, cyber-attack or other unscheduledshutdown involving one of our facilities, in a majority of our markets we would utilize a nearby operating facility to continue to serve our customers in the affected market; however, in certain markets we do not have alternate operating facilities. If any of these events occur in such markets, we may experience an interruption in our ability to service our customers and to procure raw materials, and potentially an impairment of the value of that facility. Any of these circumstances may materially and adversely affect our business and results of operations in those markets. In addition, after an operating facility affected by such an event or unscheduledshutdown is restored, customers who in the interim choose to use alternative disposal services may not return to use our services.
We may incur losses and additional costs as a result of our hedging transactions.
Darling and the DGD Joint Venture have used and may continue to use commodity derivative instruments in the future to hedge their exposures to various types of financial risk. If these instruments are not effective or increase Darling’s or the DGD Joint Venture’s exposure to unexpected events or risks, Darling or the DGD Joint Venture may incur losses. In addition, both Darling or the DGD Joint Venture may be required to incur additional costs in connection with any future regulation of derivative instruments applicable to either or both.
Media campaigns related to feed and food ingredient production or fuel production present reputational and other risks.
Individuals or organizations can use social media platforms to publicize inappropriate or inaccurate stories or perceptions about the feed and food ingredient production industries, fuel production industry or our Company. Such practices could cause damage to the reputations of our Company and/or the feed and food ingredient production industries or fuel production industry in general. This damage could adversely affect our financial results.
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An impairment in the carrying value of our goodwill or other intangible assets may have a material adverse effect on our results of operations.
As of January 3, 2026, the Company had approximately $2.5 billion of goodwill. We are required to annually test goodwill to determine if impairment has occurred, as well as whenever events or changes in circumstances indicate that impairment may have occurred. If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the reporting unit, including goodwill, and the fair value of the reporting unit, including goodwill, in the period the determination is made. The testing of goodwill for impairment requires us to make significant estimates about our future performance and cash flows, as well as other assumptions. These estimates and assumptions can be affected by numerous factors, including changes in economic, industry or market conditions, changes in business operations or regulation, or changes in competition. Changes in these factors, or changes in actual performance compared with estimates of our future performance, may affect the fair value of goodwill, which may result in an impairment charge. We cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill become impaired, there may be a material adverse effect on our results of operations.
Risks Related to Legal and Regulatory Compliance
Our operations are subject to extensive and evolving environmental, health and safety laws and regulations, and we could incur significant costs to comply with these requirements or be subject to sanctions or held liable for damages, including environmental damages.
Our operations subject us to stringent environmental, health and safety requirements in the various jurisdictions where we operate, including those governing air emissions and odor, wastewater discharges, storm water discharges, the management, storage and disposal of materials in connection with our facilities, occupational health and safety, facility registrations, certifications and inspections, Current Good Manufacturing Practices (“cGMP”), product packaging and labeling and our handling of hazardous materials and wastes, such as gasoline and diesel fuel used by our trucking fleet and operations. Failure to comply with these requirements could have significant consequences, including operational restrictions, recalls, penalties, injunctive relief, remediation, claims for personal injury and property and natural resource damages, other claims and negative publicity. Our operations require the control of air emissions and/or odor from various sources. Our operations also require treatment and permitted discharge of storm water and wastewater to publicly owned treatment works and/or the environment via surface waters or land application. We have incurred significant capital and operating expenditures to comply with environmental requirements, including for the upgrade of wastewater treatment facilities, and may continue to incur such costs in the future. Separately, we could also be subject to odor related claims, damages, violations and/or penalties in connection with our operations, including potential class action odor litigation.
We could be responsible for the remediation of environmental contamination and may be subject to associated liabilities and claims for personal injury and property and natural resource damages. We own or operate numerous properties, have been in business for many years and have acquired and disposed of properties and businesses over that time. During that time, we or other owners or operators may have generated or disposed of wastes or stored or handled other materials that are or may be considered hazardous or may have polluted the soil, surface water or groundwater at or around our facilities. Under some environmental laws, such as the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 in the United States (“CERCLA”), also known as the Superfund law, responsibility for the cost of cleanup of a contaminated site can be imposed upon current or former site owners and operators, or upon any party that sent waste to the site, regardless of the lawfulness of the activities that led to the contamination. Similar laws outside the United States impose liability for environmental cleanup, often under the polluter pays theory of liability but also based upon ownership in some circumstances. Such laws may require us to face extensive costs or penalties that would have a material adverse effect on our financial condition and results of operations. For example, we have received notices from the EPA relating to alleged sediment contamination in Newtown Creek in New York and alleged river sediment contamination in the Lower Passaic River area of New Jersey, and are party to a lawsuit filed by Occidental Chemical Corporation in which it seeks contribution for various investigative and cleanup costs it has incurred in connection with the alleged sediment contamination in the Lower Passaic River area of New Jersey. See Item 3. “ Legal Proceedings ” for additional information about the Lower Passaic River matter.
In addition, future developments, such as more aggressive enforcement policies, new laws or discoveries of currently unknown contamination conditions, may also require expenditures that may have a material adverse effect on our business and financial condition. For example, regulations are emerging regarding per- and polyfluoroalkyl substances (“PFAS”) continue to evolve due to potential health and environmental risks. In the U.S., the EPA has designated perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”) – as “hazardous substances” under CERCLA and adopted the primary drinking water standards for certain PFAS, with which public water systems must comply by 2029. The EPA is also advancing regulations to list certain PFAS as hazardous constituents under the Resource Conservation and Recovery Act (RCRA). EU legislators are taking steps to adopt a comprehensive legislative measure simultaneously restricting a large number of PFAS. In February 2023, the European Chemical Agency (“ECHA”) published a proposal to restrict 10,000+ PFAS under Annex XVII of
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Regulation (EC) No. 1907/2006 concerning the registration, evaluation, authorization and restriction of Chemicals (“REACH”). ECHA’s committees for Risk Assessment and Socio-Economic Analysis have been evaluating the proposal based on a sector-based approach to address the specificities of such substances, and a consolidated opinion will be sent to the European Commission, which will make the ultimate decision in consultation with the EU Member States. While Darling does not manufacture or use PFAS, the raw materials we process could contain PFAS as could the influent waters from city supply services and/or production wells. If PFAS is contained in these sources, it could persist in the outputs of our production, including wastewater treatment discharges, wastewater-derived residuals, and/or finished products. New or expanded regulation, enforcement actions, remediation obligations, product impacts or private litigation related to PFAS could result in material costs, operational disruptions or reputational harm.
In addition, increasing efforts to control emissions of GHG may impact our operations although the regulatory landscape is evolving. We operate in certain jurisdictions subject to the Paris Agreement, which mandates reduced GHG emissions in certain participating countries. However, at the federal level in the U.S., there have been certain changes. On February 12, 2026, the EPA repealed the 2009 endangerment finding, which was the legal basis for regulating GHG emissions under the Clean Air Act. The EPA also repealed all federal GHG emission standards for light-, medium-, and heavy-duty vehicles. However, it remains uncertain how these repeals will affect existing and future federal regulation of GHG emissions, and whether the EPA may revise, repeal or retain regulations that were based on the prior finding. While we await certainty on the effect of these repeals, state-level initiatives and the international focus on reporting of and reductions in GHG emissions, as well as investor and stakeholder expectations, may still require us to incur additional capital and operational expenditures to remain in compliance, which could impact our business, results of operations, and financial condition. The EPA has also proposed to eliminate its Greenhouse Gas Reporting Program for most industries, which would remove mandatory facility-level reporting requirements for several of our facilities. However, EPA regulations limiting exhaust emissions have become more restrictive, and the National Highway Traffic Safety Administration and the EPA have adopted regulations that govern fuel efficiency and GHG emissions. Compliance with these and similar regulations could increase the cost of new fleet vehicles and increase our operating expenses. In addition, compliance with future GHG regulations may require expenditures that could materially adversely affect our business, results of operations and financial condition.
We have approximately 15,000 employees world-wide and are subject to a wide range of local, provincial and national laws and regulations governing the health and safety of workers, including, for example, OSHA in the United States. We could be subject to potential fines and civil and, in egregious cases, criminal actions if we are found to be in violation of worker health and safety laws in any of these jurisdictions. Further, as such laws and regulations change, we may sometimes be required to commit to unplanned capital expenditures in order to continue to comply with workplace safety requirements at our facilities. In addition, we operate and maintain an extensive vehicle fleet to transport products to and from customer locations. Our fleets and drivers are subject to federal, state, local and foreign laws and licensing requirements applicable to commercial fleets, their cargo and their hours and methods of operation. Failure to comply with these laws and regulations in any location could materially adversely affect our business, results of operations, financial condition and reputation.
Risks Related to Global Disease Outbreaks or Pandemics
Our business may be negatively impacted by the occurrence of any disease correctly or incorrectly linked to animals.
The emergence of diseases such as swine influenza viruses (collectively known as “Swine Flu”) and highly pathogenic strains of avian influenza (collectively known as “Bird Flu”) and severe acute respiratory syndrome (“SARS”), including SARS-coronavirus 2, that are in or associated with animals and have the potential to also threaten humans has created concern that such diseases could spread and cause a regional or global pandemic. As of the date of this report, various strains of Bird Flu have been and continue to be reported in wild fowl and commercial poultry in Europe, North America, the Middle East and parts of Asia, and rare cases of human infection, including fatalities, have been reported.
In addition, other diseases that are highly contagious within a species, but do not affect other animals and are not transmissible to humans, such as the porcine epidemic diarrhea virus and African Swine Fever (“ASF”), may significantly impact production of the susceptible livestock or animal species in a country or region. ASF is a viral and highly contagious disease of pigs and wild boar, for which no cures or approved vaccines are available in the United States as of the date of this report. In the past few years, ASF has become widespread in multiple Chinese, Vietnamese and Philippine provinces and has been reported in Cambodia, Laos, Myanmar, Timor-Leste, Indonesia, Malaysia, and Thailand in South East Asia and the People's Democratic Republic of Korea, the Republic of Korea, Mongolia, Bhutan and India. In April 2021, the Chinese Ministry of Agriculture and Rural Affairs (“MARA”) issued the “Work plan for Regional Prevention and Control of African Swine Fever and Other Major Animal Diseases (Trial)”, which divided the entire country into five regions (South-Central, Eastern, Northern, South-West, and North-west). Pig movement is restricted and ASF-free zones were created. Only pigs from ASF-free zones, breeding pigs and piglets are allowed to move beyond their respective region. Such restrictions on the movement of pigs from one region to another may affect slaughter numbers within certain regions and thereby reduce volumes of raw material supplied to our locations that, within the same region, process blood and make collagen from pork skins.
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Additionally, the perception, real or implied, that blood meal and dried plasma powder may contribute to the spread of ASF, resulted in a temporary ban on the use of porcine plasma in pork feed which negatively affected demand for our products as ingredients in porcine animal feed in China. This ban has now been lifted and porcine plasma is once again allowed to be used in pork feed provided that certain newly established guidelines are met. ASF has also been reported in Eastern Europe since 2007. The disease has been detected in both domestic and feral pigs in several EU (primarily Eastern European) Member States in the past years, and the EU has taken measures to address the spread of ASF. In particular, based on the epidemiological situation of ASF, the areas affected by ASF in relevant EU Member States have been listed as restricted zones I, II and III in Annex I to the Commission Implementing Regulation (EU) 2023/594, as amended. The Implementing Regulation provides special control measures for ASF based on Regulation (EU) 2016/429 (“Animal Health Law”). On July 28, 2021, ASF was confirmed in the Dominican Republic and subsequently in Haiti on September 30, 2021. As a result of the occurrence of ASF in North America, the Animal and Plant Health Inspection Service (“APHIS”), on September 24, 2021, submitted plans to the WOAH for the declaration of a new ASF protection zone in Puerto Rico and the U.S. Virgin Islands. Although ASF has not been detected in Puerto Rico or the U.S. Virgin Islands, establishing such an ASF protection zone will add to existing efforts to prevent ASF from spreading into the United States and protect exports of pork related products. Because Puerto Rico and the U.S. Virgin Islands are territories of the U.S., export markets will close to all live pigs, pork meat and pork by-products produced in the U.S. if ASF finds its way into Puerto Rico or the U.S. Virgin Islands. Fortunately, the WOAH has established procedures for countries to recognize protection zones and limit bans of affected products to the protection zone and allow trade to continue with regions of the country outside of the protection zone. As of the date of this report, ASF has not been reported in the United States, Canada or South America. ASF does not infect humans and is not considered a food safety hazard. In addition, any reports, proven or perceived, that implicate animal feed or feed ingredients, including but not limited to animal by-products, as contributing to the spread of ASF or other contagious diseases could negatively affect demand for our products as ingredients in animal feeds in the affected country or region.
Although no global disease pandemic among humans has been linked to Bird Flu or other emerging diseases as of the date of this report, governments may be pressured to address these concerns, including by executive action such as temporarily closing certain businesses, including meat and animal processing facilities, within jurisdictions suspected of contributing to the spread of such diseases or by legislative or other policy action, such as prohibiting imports of animals, meat and animal by-products from countries or regions where the disease is detected or suspected. If any disease is correctly or incorrectly linked to animals and has a negative impact on meat or poultry consumption or animal production in any jurisdiction in which we operate, such occurrence could have a material negative impact on the volume of raw materials available to us or the demand for our finished products.
Our business may be affected by the impact of animal related disease, such as BSE, and by other food safety or food regulatory issues.
The FDA has put in place restrictions to prevent the spread of BSE, and certain foreign governments have also restricted exports of beef and beef products from the United States following the detection of BSE in the United States in December 2003. The sixth case of BSE was reported in a six-year-old mixed-breed beef cow in August, 2018, which was the second case of BSE since the WOAH characterized the United States’ BSE status as one of “negligible risk” in 2013. The seventh and most recent case of BSE was announced in May 2023 by the U.S. Department of Agriculture (“USDA”). According to the announcement, the animal was tested as part of USDA’s routine surveillance of cattle that are deemed unsuitable for slaughter. As such, this animal never entered slaughter channels and at no time presented a risk to the food supply or to human health in the United States. On May 24, 2022, the WOAH characterized Canada's BSE status as one of “negligible risk”. On December 17, 2021 the Canadian Food Inspection Agency confirmed a case of atypical BSE in an 8.5 year old cow in Alberta. However, the Canadian Food Inspection Agency reported zero cases of BSE in 2023. While these latest cases in the United States and Canada and previous cases were the atypical or sporadic form of BSE, which is not spread via feed and, therefore, did not affect the “negligible BSE risk” status of either country, continued concern about BSE in countries in which we operate now or in the future, may result in additional regulatory and market related challenges that may affect our operations or increase our operating costs.
With respect to human food, pet food and animal feed safety in the United States, the FDA Food Safety Modernization Act (“FSMA”) gives the FDA various authorities and directs the FDA to promulgate new regulations pursuant to the FSMA, as described in the section entitled “ Business—Regulations ” included in this report.
As a producer of meat-centric food products, our business depends on the continued availability of animal by-products and the acceptance of our products in human food, pet food, animal feed and fuel markets, and we are subject to risks associated with the outbreak of disease in pork, beef livestock, and poultry flocks, including Foot-and-Mouth Disease, Bird Flu, Salmonella and BSE. The outbreak of disease could adversely affect our supply of raw materials, increase the cost of production, and reduce operating margins. Additionally, the outbreak of disease may hinder our ability to market and sell products. We have developed business continuity plans for various disease scenarios, but these plans may not be effective in eliminating the negative effects of any such diseases on our operating results.
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We have followed regulations enacted under the FDA Food Safety Modernization Act (“FSMA”), as described in the section entitled “ Business—Regulations ” included in this report, throughout the rulemaking process and have implemented cGMPs, food safety plans and other procedures at our domestic facilities, which we believe comply with the applicable final rules for preventive controls for human food and animal feed. Similar procedures have been implemented at our foreign facilities for compliance with the Foreign Supplier Verification Programs rule. Such rulemaking and implementation of compliant procedures could, among other things, limit our ability to import necessary raw materials or finished products or require us to amend certain of our other operational policies and procedures. Unforeseen issues and requirements may arise as the FDA implements and enforces these and other final rules or promulgates other new regulations provided for by the FSMA or under new FDA policies put forward under the Trump Administration under the Food, Drug, and Cosmetic Act. For example, the Trump Administration is focused on efforts to remove certain chemicals, including food additives and color additives, from food products, and intends to propose rulemaking to change the regulatory pathway for generally recognized as safe (“GRAS”) substances in food, including by potentially eliminating the possibility for self-affirmation of the safety of such ingredients. In addition, the FDA has promoted and updated databases of information regarding contaminant levels in food, including tolerances, action levels and guidance levels. We may be required to comply with new laws and regulations, including those focused on our products, components of our products or labeling, which may increase costs or otherwise adversely impact our business.
The FDA has also established a Reportable Food Registry (“RFR”) pursuant to the Food and Drug Administration Amendments Act of 2007, and has defined a reportable food, which the manufacturer or distributor would be required to report in the RFR, to include materials used as ingredients in animal feeds and pet foods if there is a reasonable probability that the use of, or exposure to, such materials will cause seriousadverse health consequences or death to humans or animals. Finalization of the RFR guidance documents and potential additional requirements relating to the RFR may impose additional requirements on us.
According to the “Compliance Policy Guide Sec. 690.800, Salmonella in Food for Animals,” any finished pet food contaminated with any species of Salmonella will be considered adulterated, and the FDA believes regulatory action is warranted in cases involving such pet foods because of the heightened risk to humans given the high likelihood of direct human contact with pet food. Finished animal feeds intended for pigs, poultry and other farmed animals, however, will be considered to be adulterated only if the feed is contaminated with a species of Salmonella that is considered to be pathogenic for the animal species for which the feed is intended. Any pathogen, such as Salmonella , that is correctly or incorrectly associated with our finished products could have a negative impact on the demand for our finished products and could have a material adverse effect on our business, reputation, results of operations or financial condition.
As a result of our international operations, we could be adversely affected by additional non-U.S. regulations regarding BSE and other food safety issues. For example, an enforceable ban on the feeding of restricted animal material to ruminant animals is in place in Australia as part of a comprehensive national program to prevent the entry and establishment of the BSE agent in Australia and inspections and audits are undertaken to ensure compliance. In addition, in the EU, harmonized rules have been adopted for the prevention, control and eradication of transmissible spongiform encephalopathies (“TSEs”), which includes BSE, in Regulation (EC) No 999/2001, as amended (“TSE Regulation”), and in Regulation (EC) No 1069/2009, as amended (“Animal By-Products Regulation”) and the creation or expansion of other food and feed hygiene regulations. The TSE Regulation establishes a similar “feed ban” which prohibits the use of certain animal proteins, including processed animal protein (“PAP”) and MBM, in feed for ruminants according to which only certain animal proteins considered to be safe (such as fishmeal) can be used, but under very strict conditions. Since 1994, a ban on feeding MBM to ruminants has been in place in the EU and expanded in 2001, with the prohibition of feeding all PAP to all farmed animals, subject to certain limited exceptions. In 2009, the BSE-related feed ban was supplemented with the prohibition of intra-species recycling for all food-producing animals. Other animal-derived products besides PAP, such as collagen derived from non-ruminants and hydrolyzed proteins derived from parts of non-ruminants or ruminant hides and skins, were not included in the feed ban. The feed ban has been lifted for pig and poultry PAP in the feed of aquaculture animals, and insect PAP (a new source of animal protein) in the feed of aquaculture animals. In 2021, the European Commission relaxed the “feed ban” to allow the feeding of non-ruminant farmed animals with insect PAP, reauthorize the feeding of poultry with pig PAP, the feeding of pigs with poultry PAP and allow the use of ruminant derived gelatin in feeds for non-ruminant farmed animals.
Darling Ingredients International may profit from the possible lifting of the ban for pigs and poultry, however, the introduction of changes to the feed ban and further restriction may adversely affect Darling Ingredients International, possibly restricting the allowed use of some of their products. The TSE Regulation applies to the production and placing on the market of live animals and products of animal origin on the EU market. The BSE status of EU Member States, non-EU members of the European Economic Area and other countries or regions (“Third Countries”) is to be determined by classification made by the WOAH into one of three BSE risk categories identified in the Regulation ( i.e ., negligible risk, controlled risk or undetermined risk), which are informed by risk assessments and surveillance monitoring. According to the Commission Decision of June 29, 2007, as amended, Greece is the only EU Member State classified as having a controlled BSE risk. The other EU Member
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States are classified as having a negligible BSE risk. Also, the United Kingdom (with the exception of Northern Ireland), as a former a member of the EU is classified as controlled BSE risk. A change in the BSE status of one or more EU Member States may have a negative impact on Darling Ingredients International. Under EU legislation, imported products from outside the EU must meet the same safety standards as products produced in EU Member States. The TSE Regulation imposes strict import requirements related to TSEs for live animals and animal by-products, which depend on the BSE status of Third Countries.
The Animal By-Products Regulation establishes rules intended to prevent the outbreak of certain diseases such as BSE. A BSE outbreak or other event viewed as hazardous to animal or human health could also lead to the adoption of more stringent rules on the use and disposal of animal by-products, which could require Darling Ingredients International to change its production processes and could have a material adverse effect on our business, results of operations or financial condition.
In addition, EU legislation applicable to the agri-food sector could create additional compliance requirements and enforcement risks for us. For example, Regulation (EU) 2019/1381, as amended (“Food Transparency Regulation”), strengthenstransparency requirements in EU food law. The European Food Safety Authority (“EFSA”) must disclose scientific data, studies and other information supporting applications, including supplementary information supplied by applicants. EFSA is also tasked with establishing and managing a publicly accessible database of studies commissioned or carried out by business operators to support an application or notification in relation to which it must provide a scientific output. Business operators must notify EFSA of protected and detailed information concerning any study commissioned or carried out by them to support an application or a notification. Any potential disclosure of unfavorable studies and data as well as EFSA’s ultimate decision-making power to determine what constitutes confidential information (and therefore subject or not to transparency obligations) may result in adverse publicity, negatively impact our reputation and/or require us to disclose commercially sensitive information and data. In addition, Regulation (EC) 2017/625, as amended (“Official Controls Regulation”) requires that the EU Member States verify compliance with agri-food chain rules through official controls. To deterfraudulent practices, the Official Controls Regulation introduces more stringent rules for financial penalties, imposed by EU Member States, as well as new provisions to protect whistle-blowers to encourage and facilitate the reporting of non-compliance. More stringent and higher financial penalties may potentially result in significant and unexpected costs and enhanced provisions regarding whistle-blowers may result in more regulatory investigations and enforcement actions, both of which could have a material adverse effect on our business.
Pandemics, epidemics or disease outbreaks may disrupt our business, including, among other things, our supply chain and production processes, each of which could materially affect our operations, liquidity, financial condition and results of operations.
The actual or perceived effects of a disease outbreak, epidemic, pandemic or similar widespread public health concern could negatively affect our operations, liquidity, financial condition and results of operations.
The spread of pandemics, epidemics or disease outbreaks may disrupt our third-party business partners’ ability to meet their obligations to us which may negatively affect our operations. These third parties include those who supply our raw materials and other necessary operating materials and logistics and transportation services providers. Ports and other channels of entry may be closed or operate at only a portion of capacity, as workers may be prohibited or otherwise unable to report to work, and means of transporting products within regions or countries may be limited for the same reason. Furthermore, transport restrictions related to quarantines or travel bans could be put in place and global supply may become constrained, each of which may cause the price of certain raw materials used in our products to increase and/or we may experience disruptions to our operations. In addition, any such outbreaks may affect the prices and demand for our finished products.
Workforce limitations and travel restrictions resulting from pandemics, epidemics or disease outbreaks and related government actions may affect many aspects of our business. If a significant percentage of our workforce is unable to work, including because of illness or travel or government restrictions in connection with pandemics or disease outbreaks, our operations and financial reporting capabilities may be negatively affected. In addition, pandemics or disease outbreaks could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect our raw material supply and our customers’ demand for our finished products.
Our efforts to manage and mitigate these factors may be unsuccessful, and the effectiveness of these efforts depends on factors beyond our control, including the duration and severity of any pandemic, epidemic or disease outbreak, as well as third-party actions taken to contain its spread and mitigate public health effects .
The risks described above also apply to the DGD Joint Venture and its business and operations.
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Risks Related to our Labor Force
We may be subject to work stoppages at our operating facilities, which could cause interruptions in the manufacturing or distribution of our products.
While we currently have no international, national or multi-plant union contracts, as of January 3, 2026 approximately 14% of Darling’s U.S. employees, 51% of Canadian employees and 66% of Darling Ingredients International’s employees were covered by various collective bargaining agreements. Furthermore, local laws and regulations in certain jurisdictions in which we operate provide for worker groups with prescribed powers and rights with regard to working conditions, wages and similar matters. In jurisdictions where such groups do not exist, labor organizing activities could result in additional employees becoming unionized and higher ongoing labor costs. Darling’s collective bargaining agreements expire at varying times over the next five years. In contrast, Darling Ingredients International’s collective bargaining agreements generally have one to two year terms, while Canadian agreements generally have terms up to three years. Some of our collective bargaining agreements have already expired and are in the process of being renegotiated, but we may not be able to negotiate the terms of any expiring or expired agreement in a manner acceptable to us. If our workers were to engage in a strike, work stoppage, slowdown or other collective action in the future in any of our locations, we could experience a significant disruption of our operations, which could have a material adverse effect on our business, results of operations and financial condition. We may also be subject to general country strikes or work stoppages unrelated to our business or collective bargaining agreements that could have a direct or indirect adverse effect on our business, results of operation or financial condition.
Certain U.S. multiemployer defined benefit pension plans to which we contribute are underfunded and these plans may require minimum funding contributions or we may be subject to liabilities due to a termination of, or our withdrawal from, such plans.
We participate in various U.S. multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts. These plans are not administered by us and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants. Based upon the most currently available information, certain of these multiemployer plans are or may be at risk of being underfunded due partially to a decline in the value of the assets supporting these plans, a reduction in the number of actively participating members for whom employer contributions are required and the level of benefits provided by the plans. In addition, the U.S. Pension Protection Act, which went into effect in January 2008, requires underfunded pension plans to improve their funding ratios within prescribed intervals based on the level of their underfunding. As a result, our required contributions to these plans may increase in the future. Furthermore, under current law, a termination of, our voluntary withdrawal from or a mass withdrawal of all contributing employers from any underfunded multiemployer defined benefit plan to which we contribute would require us to make payments to the plan for our proportionate share of such multiemployer plan’s unfunded vested liabilities, which could be significant and have an adverse effect on our financial condition. Also, if a multiemployer defined benefit plan fails to satisfy certain minimum funding requirements, the Internal Revenue Service (“IRS”) may impose a nondeductible excise tax of 5% on the amount of the accumulated funding deficiency for those employers not contributing their allocable share of the minimum funding to the plan. Requirements to pay increased contributions, withdrawal liability and excise taxes could negatively impact our liquidity and results of operations.
Risks Related to our Indebtedness
Our substantial indebtedness could adversely affect our financial condition.
As of January 3, 2026, our total debt, including trade debt, was approximately $3.9 billion. We also had undrawn commitments available for additional debt under our revolving credit facility of up to approximately $1.3 billion (after giving effect to approximately $601.2 million of revolver borrowing, $0.8 million of outstanding letters of credit and $73.6 million of ancillary facilities). Our substantial indebtedness could have important consequences, including:
• increasing the difficulty of satisfying our contractual and commercial commitments because of our obligations to our financial lenders;
• limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements on commercially reasonable terms or at all;
• diverting a substantial portion of our cash flows from operations to pay principal and interest on our debt instead of for other purposes, thereby reducing the amount of our cash flows from operations available for working capital, capital expenditures, acquisitions and other general corporate purposes;
• increasing our vulnerability to adverse economic, industry and business conditions;
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• exposing us to the risk of increased interest rates as certain of our debt has a variable rate of interest and as we refinance our debt that has a fixed rate of interest, which could increase our debt service obligations and negatively impact our net income and cash flows;
• increasing our exposure to changes in foreign exchange rate conversion to functional currency;
• limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
• placing us at a competitive disadvantage compared to other, less leveraged competitors; and
• increasing our cost of borrowing.
In addition, the indentures that govern our senior notes and the credit agreement governing our senior secured credit facilities contain covenants that limit our ability to engage in activities that may be in our long-term best interest. These covenants may negatively impact our ability to finance future operations, implement our business strategy, fund our capital needs or engage in other business activities that may be in our interest. Our failure to comply with those covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our funded debt. See Item 7. “ Management Discussion and Analysis of Financial Condition and Results of Operations ” - “ Senior Secured Credit Facilities ,” “ 6% Senior Notes due 2030, ” “ 5.25% Senior Notes due 2027 ” and “ 4.5% Senior Notes due 2032 .”
Despite our existing level of indebtedness, we and our subsidiaries could substantially increase our indebtedness, which could further exacerbate the risks to our financial condition described above.
The indentures that govern our senior notes do not directly restrict our indebtedness. The credit agreement governing the senior secured credit facilities restricts our indebtedness, but these restrictions are subject to significant qualifications and exceptions, and the additional debt that we and our subsidiaries could incur in compliance with these restrictions could be substantial. To the extent that we or our subsidiaries increase our indebtedness, the risks associated with our indebtedness, including our possible inability to service our debt, could intensify. See Item 7. “ Management Discussion and Analysis of Financial Condition and Results of Operations ” - “ Senior Secured Credit Facilities, ” “ 6% Senior Notes due 2030, ” “ 5.25% Senior Notes due 2027 ” and “ 4.5% Senior Notes due 2032 .”
We may not generate sufficient cash to service all of our debt and may be forced to take other actions to satisfy our debt obligations, which may not be successful.
Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. We might not maintain sufficient cash flows from operating activities to pay the principal, premium, if any, and interest on our debt when due.
If our cash flows and capital resources are insufficient to service our debt obligations and to meet our other cash needs, we could be forced to reduce or delay investments and capital expenditures, dispose of material assets or operations, seek additional debt or equity capital, or restructure or refinance our debt. We may not be able to effect any such alternative measures on commercially reasonable terms or at all and, even if successful, such alternative actions may not allow us to meet our scheduled debt service obligations and our other cash needs. The credit agreement governing our senior secured credit facilities restricts our ability to use the proceeds from the disposition of assets, debt incurrence or sales of equity to repay other debt. We may not be able to consummate any such dispositions or to obtain debt or equity proceeds in amounts sufficient to service our debt obligations, and we may be restricted under the credit agreement from using any such amounts to service other debt obligations.
If we cannot make scheduled payments under any of the agreements governing our debt, we would default under such agreements, which could allow lenders under any credit facilities to terminate their commitments to loan money and could allow the applicable lenders or other debt holders to declare all outstanding principal and interest of such debt to be immediately due and payable, and, in the case of secured debt, to forecloseagainst the assets securing such debt and apply the proceeds from such foreclosure to repay amounts owed to them. Any of these events would likely in turn trigger cross-acceleration or cross-default provisions in our other debt instruments, which would allow the creditors under those instruments to exercise similar rights. If any of these actions are taken, we could be forced into restructuring, bankruptcy or liquidation.
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Our ability to make payments on our debt depends in part on the performance of our subsidiaries, including our non-guarantor subsidiaries, and their ability to transfer funds to members of our group liable to make payments on our debt.
We conduct a significant portion of our operations through our subsidiaries, a number of which operate outside the United States. Accordingly, repayment of our debt depends, to a significant extent, on the generation of cash flow by our subsidiaries and their ability to make such cash available to us. Unless they are guarantors of the debt, our subsidiaries do not have any obligation to pay amounts due on the debt or to make funds available for that purpose. Under certain circumstances, legal and contractual restrictions may limit our ability to obtain cash from our subsidiaries. For example, our subsidiaries that are organized under the laws of, and operate in, China currently have substantial regulatory restrictions on their ability to make cash available to us. While the credit agreement governing the senior secured credit facilities and potentially, the agreements governing certain of our other debt will limit the ability of certain of our subsidiaries to incur consensual restrictions on their ability to make other intercompany payments to us, these limitations are subject to certain significant qualifications and exceptions.
Risks Related to our Common Stock
The market price of our common stock has been and may continue to be volatile, which could cause the value of your investment to decline.
The market price of our common stock has been subject to volatility and, in the future, the market price of our common stock could fluctuate widely in response to numerous factors, many of which are beyond our control. In addition to the risk factors discussed in this report, the price and volume volatility of our common stock may be affected by:
• actual or anticipated fluctuations in ingredient prices;
• actual or anticipated variations in our operating results;
• our earnings releases and financial performance;
• changes in financial estimates or buy/sell recommendations by securities analysts;
• our ability to repay our debt;
• our access to financial and capital markets to refinance our debt;
• performance of our joint venture investments, including the DGD Joint Venture;
• our dividend policy;
• market conditions in the industry and the general state of the securities markets;
• investor perceptions of us and the industry and markets in which we operate;
• currency and exchange rate fluctuations that impact our earnings and balance sheet; and
• general economic and market conditions, such as U.S. or global reactions to economic developments, including regional recessions, inflation, currency devaluations or political unrest.
Our ability to pay any dividends on our common stock may be limited and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have not paid any dividends on our common stock since January 3, 1989 and we have no current plans to do so. Subject to certain limitations in the credit agreement governing our senior secured credit facilities, our current financing arrangements permit us to pay dividends and distributions. For example, our senior secured credit facilities restrict our ability to make payments of dividends in cash if certain coverage ratios are not met. Even if such coverage ratios are met, any determination to pay cash dividends on our common stock will be at the discretion of our board of directors and will be based upon our financial condition, operating results, capital requirements, plans for expansion, business opportunities, restrictions
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imposed by any of our financing arrangements, provisions of applicable law and any other factors that our board of directors determines are relevant at that point in time.
Future sales of our common stock or the issuance of other equity may adversely affect the market price of our common stock.
We are not restricted from issuing additional common stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. The issuance of additional shares of our common stock or convertible securities, including our outstanding options, or otherwise, will dilute the ownership interest of our common stockholders.
Sales of a substantial number of shares of our common stock or other equity-related securities in the public market could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities. We cannot predict the effect that future sales of our common stock or other equity-related securities would have on the market price of our common stock.
Our common stock is an equity security and is subordinate to our existing and future indebtedness.
Shares of our common stock are equity interests and do not constitute debt. As such, the shares of common stock will rank junior to all of our debt, including our trade debt, and to other non-equity claims on us and our assets available to satisfyclaims on us, including claims in bankruptcy, liquidation or similar proceedings. Certain of our existing debt restricts, and future indebtedness may restrict, payment of dividends on the common stock.
Unlike indebtedness, where principal and interest customarily are payable on specified due dates, in the case of common stock, (i) dividends are payable only when and if declared by our board of directors or a duly authorized committee of the board of directors and (ii) as a corporation, we are restricted under applicable Delaware law to making dividend payments and redemption payments only from legally available assets. Further, under our certificate of incorporation, there are no restrictions on our business or operations or on our ability to incur indebtedness or engage in any transactions arising as to our common stock, subject only to the voting rights available to stockholders generally.
In addition, our rights to participate in the assets of any of our subsidiaries upon any liquidation or reorganization of any subsidiary will be subject to the prior claims of that subsidiary’s creditors (except to the extent we may ourselves be a creditor of that subsidiary), including that subsidiary’s trade creditors and our creditors who have obtained or may obtain guarantees from the subsidiaries. As a result, our common stock will be subordinated to our and our subsidiaries’ obligations and liabilities, which currently include borrowings and guarantees. See Item 7. “ Management Discussion and Analysis of Financial Condition and Results of Operations ” - “ Senior Secured Credit Facilities ,” “6 % Senior Notes due 2030, ” “ 5.25% Senior Notes due 2027 ” and “4.5 % Senior Notes due 2032 .”
The issuance of shares of preferred stock could adversely affect holders of common stock, which may negatively impact your investment.
Our board of directors is authorized to cause us to issue classes or series of preferred stock without any action on the part of our stockholders. The board of directors also has the power, without stockholder approval, to set the terms of any such classes or series of preferred shares that may be issued, including the designations, preferences, limitations and relative rights senior to the rights of our common stock with respect to dividends or upon the liquidation, dissolution or winding up of our business and other terms. If we issue preferred shares in the future that have a preference over the common stock with respect to the payment of dividends or upon liquidation, dissolution or winding up, or if we issue preferred shares with voting rights that dilute the voting power of the common stock, the rights of holders of the common stock or the market price of the common stock could be adversely affected. As of the date of this report, we have no outstanding shares of preferred stock but we have available for issuance 1,000,000 authorized but unissued shares of preferred stock.
General Risks Related to our Company
We may incur material costs and liabilities in complying with government regulations.
We are subject to the rules and regulations of various governmental agencies in the United States, the EU, Brazil, Canada, China and the other countries in which Darling Ingredients International operates. These include rules and regulations administered by governmental agencies at the supranational, federal, state, provincial or local level. See Item 1. " Business - Regulations " for a listing of certain governmental agencies to which we are subject.
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The applicable rules, regulations and guidance promulgated by these and other agencies, which are likely to change over time, affect our operations and may influence our operating results at one or more facilities. Furthermore, the loss of or failure to obtain necessary federal, state, provincial or local permits and registrations at one or more of our facilities could halt or curtail operations at impacted facilities, which could result in impairment charges related to the affected facility and otherwise adversely affect our operating results. In addition, our failure to comply with applicable rules, regulations and guidance, including obtaining or maintaining required operating certificates or permits, could subject us to: (i) administrative penalties and injunctive relief; (ii) civil remedies, including fines, injunctions and product recalls; and/or (iii) adverse publicity. As a result, we may incur material costs and liabilities in connection with these rules, regulations and guidance.
Because of our international operations throughout much of the world, we could be adversely affected by violations of the FCPA and similar anti-bribery laws, as well as laws and regulations governing international transactions (such as the regulations administered by OFAC). Recent years have seen a substantial increase in the global enforcement of anti-corruption laws and economic sanctions laws and regulations. Our operations outside the United States, including in developing countries, could increase the risk of such violations. In addition, we may enter into joint ventures with joint venture partners who are domiciled in areas of the world with anti-bribery laws, regulations and business practices that differ from those in the United States. There is risk that our joint venture partners will violate the FCPA and other anti-bribery and anti-corruption laws and regulations, as well as OFAC and economic sanctions. While our policies mandate compliance with such laws and sanctions, our internal control policies and procedures may not always protect us from violations committed by our employees, joint venture partners or agents. Violations of the FCPA or other anti-bribery laws, or of OFAC or other economic sanctions laws, or allegations of such violations, could result in lengthy investigations and possibly disrupt our business, lead to criminal and/or civil legal proceedings brought by governmental agencies and/or third parties, result in material fines and legal and other costs and have a material adverse effect on our reputation, business, results of operations, cash flows and financial condition.
Given the competitive nature of our industry, we could be adversely affected by violations of various countries’ antitrust, competition and consumer protection laws. These laws generally prohibit companies and individuals from engaging in anticompetitive and unfair business practices, and our internal control policies and procedures may not protect us from violations or reckless or criminal acts committed by our employees, joint venture partners or agents.
Downturns and volatility in global economies and commodity and credit markets could materially adversely affect our business, results of operations and financial condition.
Our results of operations are materially affected by the conditions of the global economies and the credit, commodities and stock markets. Among other things, we may be adversely impacted if our domestic and international customers and suppliers are not able to access sufficient capital to continue to operate their businesses or to operate them at prior levels. High inflation, adverse changes in interest rates, a decline in consumer confidence or changing patterns in the availability and use of disposable income by consumers can negatively affect both our suppliers and customers. Declining discretionary consumer spending or the loss or impairment of a meaningful number of our suppliers or customers could lead to declines in either raw material availability or customer demand. Any tightening in credit supply could negatively affect our customers’ ability to pay for our products on a timely basis or at all and could result in a requirement for additional bad debt reserves. Although many of our customer contracts are formula-based, continued volatility in the commodities markets could negatively impact our revenues and overall profits. Counterparty risk on finished product sales can also impact revenue and operating profits when customers either are unable to obtain credit or refuse to take delivery of finished products due to market price declines.
We may not successfully identify and complete acquisitions or joint ventures on favorable terms or achieve anticipated synergies relating to any acquisitions or joint ventures, and such acquisitions or joint ventures could result in unknown liabilities, unforeseen operating difficulties and expenditures and require significant management resources.
We regularly review potential acquisitions of complementary businesses, services or products and evaluate joint venture opportunities, including the announced and proposed joint venture with Tessenderlo Group NV to combine the Company’s and Tessenderlo Group NV’s respective collagen and gelatin business units. However, we may be unable to identify suitable acquisition candidates or joint venture partners in the future. Even if we identify appropriate acquisition candidates or joint venture partners, we may be unable to complete or finance such acquisitions or joint ventures on favorable terms, if at all. In addition, the process of integrating an acquired business, service or product into our existing business and operations or forming a joint venture may result in unforeseen operating difficulties and expenditures. Integration of an acquired company or formation of a joint venture also may require significant management resources that otherwise would be available for the ongoing development of our business. Moreover, we may not realize the anticipated benefits of any acquisition, joint venture or strategic alliance and such transactions may not generate anticipated financial results. Future acquisitions could also require us to incur indebtedness, assume contingent liabilities or amortize expenses related to intangible assets, any of which could harm our business and/or negatively impact our results of operations. Finally, acquisitions and joint
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ventures may be structured in such a manner that would result in the assumption of unknown liabilities not disclosed by the counterparty or uncovered during pre-acquisition due diligence.
Our business may be adversely impacted by fluctuations in foreign currency exchange rates, which could affect our ability to comply with our financial covenants.
We carry out transactions in foreign currencies, primarily the euro, the Canadian dollar, the Chinese renminbi, the Brazilian real, the British pound, the Japanese yen, the Australian dollar and the Polish zloty. To the extent possible, we attempt to match revenues and expenses in each of the currencies in which we operate. However, we will still be exposed to currency fluctuations when we translate the results of our overseas operations into U.S. dollars, our reporting currency, in the preparation of our consolidated financial statements, which may affect our U.S. dollar-denominated results of operations and financial condition even if our underlying operations and financial condition, in local currency terms, remain unchanged. The currency hedging instruments we utilize from time to time to help protect us from adverse fluctuations in currency exchange rates may not successfully protect us from more pronounced swings in such exchange rates. Further, by utilizing these instruments we potentially forego any benefits that result from favorable fluctuations in exchange rates.
We also face risks arising from the possible future imposition of exchange controls and currency devaluations. Exchange controls may limit our ability to convert foreign currencies into U.S. dollars or to remit dividends and other payments by our foreign subsidiaries located in, or business conducted within, a country imposing such controls. Currency devaluations would result in a diminished value of funds denominated in the currency of the country instituting the devaluation.
Any fluctuations in exchange rates or the imposition of exchange controls or currency devaluation may adversely impact our ability to comply with the financial and other covenants under the documents governing our indebtedness, which could affect our ability to incur additional indebtedness, pay dividends, make investments or take other actions that might be in our best interest. Should our international operations continue to expand, they will represent a larger part of our business and such exchange rate fluctuations may have a greater impact on our business, financial condition and results of operations.
Large capital projects can take many years to complete, and market conditions could deteriorate over time, negatively impacting project returns.
We, including the DGD Joint Venture, may engage in capital projects based on the forecasted project economics and level of return on the capital to be employed in the project. Large-scale projects take many years to complete, and market conditions can change from our forecast. As a result, we may be unable to fully realize our expected returns, which could negatively impact our financial condition, results of operations, and cash flows.
Changes in consumer preference could negatively impact our business.
The food and pet food industries in general are subject to changing consumer trends, demands and preferences. Trends within the food and pet food industries change often, and failure to identify and react to changes in these trends could lead to, among other things, reduced demand and price reductions for our products or those of our customers for whom we manufacture products, and could have an adverse effect on our financial results.
If we experience difficulties or a significant disruption in our information systems or if we fail to implement new systems and software successfully, our business could be materially adversely affected.
We depend on information systems throughout our business to collect and process data that is critical to our operations and accurate financial reporting. Among other things, these information systems process incoming customer orders and outgoing supplier orders, manage inventory, and allow us to efficiently collect raw materials and distribute products, process and bill shipments to and collect cash from our customers, respond to customer and supplier inquiries, contribute to our overall internal control processes and compliance with laws and regulations around the world, maintain records of our property, plant and equipment, record and pay amounts due vendors and other creditors and manage our human resource function.
If we were to experience a disruption in our information systems that involve interactions with suppliers and customers, it could result in a loss of raw material supplies, sales and customers and/or increased costs, which could have a material adverse effect on our business, financial condition and results of operations. In addition, any such disruption could adversely affect our ability to meet our financial reporting obligations. We may also encounter difficulties in developing and implementing new systems or maintaining and upgrading existing systems and software. Such difficulties may lead to significant expenses or losses due to unexpected additional costs required to implement or maintain systems, disruption in business operations, loss of sales or profits, or required reimbursement of third parties for damages, and, as a result, may have a material adverse effect on our results of operations and financial condition. We could also experience impairment of our reputation if any of these events were to occur.
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Increased information technology security threats and more sophisticated computer crime pose a risk to our systems, networks, products and services, while data privacy and cybersecurity laws continue to proliferate presenting heightened regulatory risk.
We rely upon our information systems and networks in connection with a variety of business activities, and we collect and store sensitive data. Increased security threats to information systems and more sophisticated computer crime pose a risk to the security of our systems and networks and the confidentiality, availability and integrity of our data. We are the subject of cyber-attacks from time to time, and must invest resources to protect our systems and defendagainst and respond to incidents. A failure of or breach in technology security could expose us and our customers and suppliers to risks of misuse of information or systems, the compromising of confidential information, manipulation and destruction of data, defective products, production downtimes and operating disruptions, which in turn could adversely affect our reputation, competitive position, business and results of operations. In addition, such breaches in security could result in litigation, regulatory action and potential liability and the costs and operational consequences of implementing further data protection measures.
Cyber-attacks could be attempted on any of the Company’s external surfaces, such as internet access points or operational technology. Threat actors may gain access to the Company’s protected data, information and/or access credentials to initiate cyber-attacks or to sell or expose Company information using various schemes, including social engineering, phishing and/or artificial intelligence (“AI”), including deepfakes, as well as through data breaches, whether intentional or unintentional, including as a result of malicious insiders, insider errors, third parties who access the Company’s information, data transfers and/or data classification. The Company may face additional cybersecurity risks with respect to operational technologies, including those of acquired entities or assets. Cyber-attacks on operational technology surfaces could be initiated by threat actors or malicious insiders. Pathways for cyber-attacks or incidents on operational technology or in other parts of our networks or systems could also be initiated by a third party, such as a vendor or consultant, intentionally or unintentionally, who uses a compromised device to access our operational technology and transfers the compromise, such as malware or a virus. Cyber-attacks on operational technology could include attacks on various systems such as industrial control systems (ICS) or supervisory control and data acquisition (SCADA) systems for various purposes, such as control of operations, and can spread systemically beyond the point of entry due to the interconnectivity of such systems internally and with the internet. Cyber risks with legacy systems (including legacy systems inherited in acquisitions) could include structural weaknesses or vulnerabilities, and challenges with patches and upgrades necessary to defendagainstthreat actors. Threat actors who penetrate the Company’s information systems may attempt to install malicious code (such as malware or ransomware) to gain control of systems, data, or information for the purpose of extracting a ransom; shutting down operations; initiating an equipment override to cause a fire, hazardous release or explosion; or exposing confidential or proprietary information. Cyber-attacks can also be executed within the various supply chains in which the Company operates, which could impact the availability of raw materials, transport of finished goods, port operations, markets, prices or product demand.
Furthermore, we are subject to complex and evolving laws and regulations regarding cybersecurity, privacy, know-your-customer requirements, data protection, cross-border data movement and other matters. Principles concerning the appropriate scope of consumer and commercial privacy vary considerably in different jurisdictions, and regulatory and public expectations regarding the definition and scope of consumer and commercial privacy may remain fluid. It is possible that these laws may be interpreted and applied by various jurisdictions in a manner inconsistent with our current or future practices or inconsistent with one another. If personal, confidential or proprietary information of customers or employees in our possession is mishandled or misused, we may face regulatory, reputational and operational risks which could have an adverse effect on our financial condition and results of operations. For example, the General Data Protection Regulation (“GDPR”) imposes stringent data protection requirements with respect to (among other things):
• accountability and transparency requirements, requiring controllers to demonstrate and record compliance with the GDPR and to provide detailed information to individuals regarding the processing of their personal data;
• requirements to process personal data lawfully, including specific requirements for obtaining valid consent where consent is the lawful basis for processing;
• obligations to comply with various data protection rights which can be exercised by individuals;
• an obligation to report certain personal data breaches to the competent data protection supervisory authority without unduedelay (and no later than 72 hours) and to affected individuals; and
• obligations relating to international transfer of personal data.
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The GDPR also provides for significant penalties for noncompliance, and data protection supervisory authorities have the power under the GDPR to (among other things) impose significant fines for seriousbreaches and obtain corrective or injunctive relief. Individuals also have a right to compensation as a result of an organization’s breach of the GDPR which has affected them, for financial or non-financial losses (e.g., distress). Additionally, we are subject to the general data protection law in Brazil, which has similar requirements and restrictions as GDPR, as well as potential penalties and other enforcement mechanisms for noncompliance.
Additionally, in the EU, the EU Network and Information Systems Security 2 Directive (“NIS2”) (and the implementing laws within national EU Member States), which apply to the Company, imposes stringent cybersecurity and incident reporting requirements on “essential” and “important” entities. The NIS2 empowers the EU Member States to define all rules regarding penalties applicable to infringements, provided that they are effective, proportionate, and dissuasive, and provides that any maximum fines set by Member States for “essential” entities should be at least 10 million euros or 2% of total worldwide annual revenue, whichever is higher. In addition to monetary fines, other sanctions may include (i) a temporary suspension on providing services in the EU (by suspending relevant authorizations/certifications); (ii) an order to make public certain elements of the infringement and/or inform customers; and (iii) injunctions to immediately ceaseinfringing conduct. Importantly, NIS2 also provides that senior members of staff can be held personally liable, and face administrative fines or be temporarily suspended from exercising managerial functions at the legal representative or chief executive officer level.
We may face difficulty in fully complying with these regulations and any failure to do so could subject us to significant monetary penalties, liabilities, and adverse publicity. In the United States, the California Consumer Privacy Act (“CCPA”), as amended by the California Privacy Rights Act (“CPRA”), is a far-reaching data privacy regime. In addition to California, several states have passed similar comprehensive data privacy laws, while other states continue to evaluate the enactment of data privacy and cybersecurity laws. California and other states are also expanding their laws to regulate the use of AI, including when AI is used to make decisions about individuals. These state laws and their regulations continue to evolve and be enacted at a rapid pace, which can make compliance difficult and costly. Additionally, the Federal Trade Commission (“FTC”) and many state attorneys general are interpreting existing federal and state consumer protection laws to apply to collection, use, dissemination and security of personal information. U.S. policymakers and regulators are also increasingly focused on the safe and trustworthy use of AI, with growing state-level adoption of AI-specific legislation, including in states such as Colorado, Utah and California. These developments may require changes to our business practices and increased compliance costs.
In addition, in August 2024, EU Regulation 2024/1689 on AI (“EU AI Act”) entered into force, with most rules going into effect in August 2026. The EU AI Act governs the development and deployment of AI placed on the EU market, used in the EU, or where the output is used or intended to be used within the EU. The EU AI Act aims to ensure the safe and ethical development of AI technologies, and establishes a risk-based regulatory framework, categorizing the use of AI systems into four levels according to the perceived level of risk. In case of non-compliance, the fine threshold is set at 35 million euros or 7% of total annual worldwide turnover, whichever is higher, and regulators have the power to remove non-compliant products from the EU market. Achieving compliance with the EU AI Act may require significant investments in adapting AI systems to meet regulatory requirements. This could include implementing enhanced data governance, ensuring human oversight, and providing detailed technical documentation, which may increase costs and deployment timelines.
The impact of these cybersecurity, privacy, and AI laws and orders on us and others in our industry is uncertain. We also may be required to expend significant resources to prepare for and comply with the evolving standards. We could be adversely affected if state, federal or international data privacy or cybersecurity laws or regulations are interpreted in a manner that would require changes in our business practices, or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, financial condition and results of operations.
Artificial intelligence could subject the Company to loss through various internal and external risks.
The pace of AI advancements (including generative AI) and its complex and dynamic regulatory environment subjects the Company to a variety of risks. This includes risks to the privacy and security of the Company’s data, such as unauthorized disclosures of data which could be used to the detriment of the Company. Other risks include incorrect AI outputs which risk damage to our business and results of operations due to decisions or actions premised on such incorrect outputs, or damages associated with AI outputs that infringe on a third-party’s intellectual property. Furthermore, use of third-party AI platforms and models creates operational dependencies and potential risks to our business and results of operations in the event of service disruptions. AI also introduces tools that could be used for malicious purposes, such as advanced deceitful communication methods used to harm the Company. AI also subjects the Company to potential competitive disadvantages in its business and missedinnovationopportunities.
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Our success is dependent on our key personnel.
Our success depends to a significant extent upon a number of key employees, including members of senior management. The loss of the services of one or more of these key employees could have a material adverse effect on our results of operations and prospects. We believe that our future success will depend in part on our ability to attract, motivate and retain skilled technical, managerial, marketing and sales personnel. Competition for these types of skilled personnel is intense and we may not be successful in attracting, motivating and retaining key personnel. Furthermore, our ability to do so has been and may continue to be impacted by challenges in the labor market, which has experienced and may continue to experience wage inflation, labor shortages, increased employee turnover, changes in availability of labor, including without limitation due to a shift toward remote work. The failure to hire and retain such personnel could materially adversely affect our business, results of operations and financial condition.
We could have a material weakness in our internal control over financial reporting that would require remediation.
Any future failures to maintain the effectiveness of our disclosure controls and procedures, including our internal control over financial reporting, could subject us to a loss of public confidence in our internal control over financial reporting and in the integrity of our financial statements and our public filings with the SEC and other governmental agencies, could harm our operating results or cause us to fail to meet our regulatory reporting obligations in a timely manner, and could require us to take corrective actions and remediations which could include a restatement of our financials.
Changes in our tax rates or exposure to additional income tax liabilities could impact our profitability.
We are subject to income taxes in the United States and in numerous other foreign jurisdictions. Significant judgment is required in determining our worldwide income tax provision, tax assets, and accruals for other taxes, and there are many transactions and calculations where the ultimate tax determination is uncertain. Our future effective tax rates could be adversely affected by changes in the mix of earnings by jurisdictions with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws or tax rates, such as the Section 45Z tax credit and implementation of the global minimum tax in the jurisdictions in which we operate. Furthermore, we are regularly subject to audit by tax authorities with respect to both income and other non-income taxes. Unfavorable audit results or tax rulings, or other changes resulting in significant additional tax liabilities, could have material adverse effects upon our earnings, cash flows, and financial condition.
Litigation or regulatory proceedings may materially adversely affect our business, results of operations and financial condition.
We are a party to various lawsuits, claims and loss contingencies arising in the ordinary course of business, including insured worker’s compensation, auto, and general liability claims, assertions by certain regulatory and governmental agencies related to various matters including labor and employment, employee benefits, occupational safety and health, wage and hour, compliance, sustainability, permitting requirements, environmental matters, including odor, air, wastewater and storm water discharges from the Company’s processing facilities and other federal, state and local issues, litigation involving tort, contract, statutory, labor, employment, and other claims, and tax matters. The outcome of litigation, particularly class action lawsuits, and regulatory proceedings is difficult to assess or quantify and could include injunctive or other such relief which impacts our ability to operate. Plaintiffs (including governmental agencies) in these types of lawsuits and proceedings may seek recovery of very large or indeterminate amounts, and the magnitude of the potential loss relating to such lawsuits or proceedings may remain unknown for substantial periods of time. The costs of responding to or defending future litigation or regulatory proceedings may be significant and any future litigation or regulatory proceedings may divert the attention of management away from our strategic objectives. There may also be adverse publicity associated with litigation or regulatory proceedings that may decrease customer confidence in our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation or regulatory proceedings may have a material adverse effect on our business, results of operations and financial condition. For more information related to our litigation and regulatory proceedings, see Item 3. “ Legal Proceedings. ”
Our European pension funds may require minimum funding contributions.
In the UK and the EU, pension funds are generally subject to the Institution for Occupational Retirement Provision Directive (Directive 2003/41/EC) (the “IORP Directive”) as implemented in the relevant EU Member States and under corresponding UK pension regulatory regimes. The IORP Directive provides for certain general solvency requirements but allows EU Member States discretion to impose specific national requirements. As a result, the solvency of EU pension funds is mostly regulated on a national level. On December 23, 2016, the new IORP Directive (“IORP Directive II”) was published on the Official Journal of the European Union and entered into force on January 12, 2017. Though IORP Directive II did not make substantive changes to the solvency requirements under the original IORP Directive, it did implement enhanced governance and
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risk management standards, requirements relating to cross-border activity and cross-border transfers and disclosure obligations owed to participating employees, among others. EU Member States were required to implement IORP Directive II into national legislation by January 13, 2019, although implementation and enforcement of IORP Directive II continue to vary across EU Member States. We could be adversely affected if EU Member States interpret or implement IORP Directive II in ways that negatively affect our business, financial condition and results of operations. It is also possible that some EU Member States will impose stricter requirements than currently provided for under IORP Directive II, which may require us to expend significant resources to prepare for and comply with differing standards. We could be adversely affected if these stricter or differing standards require changes in our business practices.
The insurance coverage that we maintain may not cover, or fully cover, all operational risks, and if the number or severity of claims for which we are self-insured increases, if we are required to accrue or pay additional amounts because the claims prove to be more severe than our recorded liabilities, if our insurance premiums increase or if we are unable to obtain insurance at acceptable rates or at all, our financial condition and results of operations may be materially adversely affected.
We maintain property, business interruption and casualty insurance but such insurance may not cover all of the risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond the limits, or outside the coverage, of our insurance policies, including liabilities for environmental remediation. Additionally, our worker’s compensation, auto and general liability policies contain significant deductibles or self-insured retentions. We develop bi-yearly and record quarterly an estimate of our projected insurance-related liabilities. We estimate the liabilities associated with the risks retained by us, in part, by considering historical claims experience, demographic and severity factors and other actuarial assumptions. Any actuarial projection of losses is subject to a degree of variability. If the number or severity of claims for which we are self-insured increases, we are required to accrue or pay additional amounts because the claims prove to be more severe than our original assessments, or we are unsuccessful obtaining insurance recoveries due to legal challenges by insurance carriers in relation to covered matters (such as business interruption) our financial condition and results of operations may be materially adversely affected. In addition, in the future, the types of insurance we obtain and the level of coverage we maintain may be inadequate or we may be unable to continue to maintain our existing insurance or obtain comparable insurance at a reasonable cost. Any such inadequacy of, or inability to obtain, insurance coverage could have a material adverse effect on our business, financial condition and results of operations. If an insurance carrier were to experience financial distress, insolvency or other circumstances that impair their ability to pay claims, we could be required to bear losses that would otherwise be covered under our insurance policies, which could have a material adverse effect on our financial condition and results of operations.
We may divest certain of our brands or businesses from time to time, which could adversely affect us.
We evaluate our business regularly and, from time to time, we may decide to divest ourselves of brands or businesses that do not meet our strategic objectives or do not meet our growth or profitability targets. Nonetheless, we may not be able to divest of a brand or business on favorable terms or without significant costs or that we will be able to achieve the anticipated benefits or cost savings from the divestitures. Any such divestitures may adversely affect our results of operations if we are unable to offset the dilutive impacts from the loss of revenue associated with the divested brands or businesses, or otherwise achieve the anticipated benefits or cost savings from the divestitures. Moreover, we may incur asset impairment charges related to divestitures that reduce our profitability. We also may determine that it is necessary to divest a brand or business but not find a market for such sale, which could result in the Company being forced to continue operation of the brand or business despite minimal or negative returns or to close the brand or business resulting in various fees and expenses and potential impairment charges.
Terrorist attacks or acts of war may cause damage or disruption to us and our employees, facilities, information systems, security systems, suppliers and customers, which could materially and adversely affect our net sales, costs and expenses and financial condition.
Terrorist attacks and other acts of war have contributed to economic instability in the United States and in certain other countries, and further acts of terrorism, bioterrorism, cyberterrorism, violence or war could affect the markets in which we operate, our business operations, our expectations and other forward-looking statements contained in this report. The potential for future terrorist attacks, responses to terrorist attacks and other acts of war or hostility, including the ongoing conflicts in the Middle East, Africa, North Korea and Ukraine, may cause economic and political uncertainties and cause our business to suffer in ways that cannot currently be predicted. Events such as those referred to above could cause or contribute to a general decline in investment valuations. In addition, terrorist attacks, particularly acts of bioterrorism, that directly impact our facilities or those of our suppliers or customers could have an impact on our sales, supply chain, production capability and costs and our ability to deliver our finished products.
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We may be unable to protect our intellectual property rights .
We maintain valuable patents, trademarks, service marks, copyrights, trade names, trade secrets, proprietary technologies and similar intellectual property, and consider our intellectual property to be of material value. Our efforts to protect our intellectual property and proprietary rights may not be sufficient. Patents may not be issued for any pending or future patent applications owned by or licensed to us, and the claims allowed under any issued patents may not be sufficiently broad to protect our technology. Any trademarks or issued patents owned by or licensed to us may be challenged, invalidated or circumvented, and the rights under these trademarks or patents may not provide us with competitive advantages. In addition, competitors may design around our technology or develop competing technologies. Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market position in such countries by utilizing our trademarks and/or technologies that are similar to those developed or licensed by us. If we do not obtain sufficient protection for our intellectual property, or if we are unable to effectively protect our intellectual property rights, our competitiveness could be impaired, which would limit our growth and future revenue. Any litigation to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others could result in substantial costs and diversion of resources and may not be successful.
Our products, processes, methods, and equipment may infringe upon the intellectual property rights of others, which may cause us to incur unexpected costs or prevent us from selling our products.
We have in the past and may in the future be subject to legal proceedings and claims in the ordinary course of our business, including claims of allegedinfringement of patents, trademarks and other intellectual property rights of third parties by us or our customers. Any such claims, whether or not meritorious, could result in costlylitigation and divert the efforts of our management. Moreover, should we be found liable for infringement, we may be required to enter into licensing agreements (which may not be available on acceptable terms or at all) or to pay damages and cease making or selling certain products or cease using certain trademarks with resultant losses in the brand equities and goodwill associated with such trademarks. Any of the foregoing could cause us to incur significant costs and prevent us from manufacturing or selling our products or utilizing our recognized trademarks and branding for our products and thereby materially adversely affect our business, results of operations and financial condition.
The healthcare reform legislation in the United States and its implementing regulations could impact the healthcare benefits we are required to provide our employees in the United States and cause our compensation costs to increase, potentially reducing our net income and adversely affecting our cash flows.
In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (collectively, the “ACA”), was signed into law in the United States. This healthcare reform legislation and its applicable implementing regulations contain provisions that could materially impact our healthcare costs, including the contributions we are required to make to our benefit plans. In particular, the requirement that we either offer our full-time employees healthcare coverage that satisfies the ACA’s affordability and minimum value standards or potentially be subject to a penalty became effective in calendar year 2015. In addition, beginning in 2016, we had to file information returns with the IRS regarding the health insurance coverage offered to our full-time employees in the prior calendar year and furnish to employees a statement that includes the same information provided to the IRS. Although we are no longer required to furnish to employees these statements (except at their request), we are still required to file the required returns with the IRS. While we have timely filed such returns and provided our employees with the required statements to date, failure to do so in the future could expose us to reporting penalties under applicable sections of the Internal Revenue Code. These provisions could reduce our net income and adversely affect our cash flows.
Since its enactment, the ACA has been subject to numerous legislative, regulatory and judicial changes. Although Congress has not repealed the ACA in its entirety, various provisions have been modified, delayed or repealed, including elimination of the federal individual mandate penalty and changes to employer- and insurer-related taxes, and premium subsidy levels have been expanded and extended through 2025. In addition, the ACA has been and continues to be subject to significant judicial challenges, including ongoing litigation regarding the requirement to provide certain preventive services without cost sharing. Future legislative, regulatory or judicial actions could further modify or invalidate portions of the ACA, which could affect the cost, structure or availability of health coverage and have an adverse effect on our business, financial condition and results of operations.
There is also uncertainty regarding any future healthcare reform that the administration or Congress may propose, if any, including whether any proposals will encompass or potentially alter the full-time employee healthcare coverage requirements and reporting obligations imposed on large employers like us. Any changes may likely take time to unfold, and we cannot predict the ultimate content, timing, or effect of any healthcare reform legislation or the impact of potential legislation or related proposals and policies on us. We cannot assure that healthcare coverage laws, as currently enacted or as
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repealed or amended in the future, will not adversely affect our business and financial results and we cannot predict how future federal or state legislative or administrative changes relating to healthcare reform will affect our business.
We may incur significant charges and experience disruptions or losses of customer and/or supplier relationships in the event we close or divest all or part of a manufacturing plant or facility.
We periodically assess our manufacturing operations in order to manufacture and distribute our products in the most efficient manner. Based on our assessments, we may make capital improvements to modernize certain units, move manufacturing or distribution capabilities from one plant or facility to another plant or facility, discontinue manufacturing or distributing certain products or close or divest all or part of a manufacturing plant or facility. The closure or divestiture of all or part of a manufacturing plant or facility could result in future charges and disruptions or losses of customer and/or supplier relationships that could be significant to our business, results of operations and financial condition.
We may not be able to achieve our climate, sustainability or other such goals, targets or objectives.
We have established, and expect to continue to establish, goals, targets, and other objectives related to climate, sustainability and other such matters, including, without limitation, reduction of our GHG emissions. Such statements reflect our current plans at the time they are made, and do not constitute a guarantee that they will be achieved. Our efforts to research, establish, accomplish, and accurately report on these goals, targets, and objectives could expose us to operational, reputational, financial, legal, and other risks. Our ability to achieve any stated goal, target, or objective is and will be subject to numerous factors and conditions, including, without limitation, available technology, costs and impacts, new or unforeseen climate events, operational challenges with GHG reduction work and changes in governmental incentives related to GHG reductions. Many of these factors and conditions are outside of our control, such as evolving regulatory or quasi-regulatory sustainability standards, differing requirements and the pace of changes in technology, and other factors that are not yet known. In addition, the methodologies and standards for collecting, calculating and estimating GHG emissions, reductions and avoidance are continuing to be developed and adapted, which could later necessitate changes or revisions to our goals, targets or objectives. Changes to our goals, targets or objectives may also be required due to other factors, such as the Company’s performance, cash flows, operational needs and objectives, or market factors.
We may face increased scrutiny from the investment community, other stakeholders, regulators, and the media related to our sustainability activities, including the goals, targets, and objectives that we announce, and our methodologies and timelines for pursuing them. If our sustainability practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, our reputation, ability to attract or retain employees, and attractiveness as an investment or business partner could be negatively impacted. Similarly, our failure or perceived failure to pursue or fulfill our goals, targets, and objectives, to comply with ethical, environmental, sustainability or other standards, regulations, or expectations, or to satisfy various reporting standards with respect to these matters, within the timelines that we announce, or at all, could have the same negative impacts, as well as expose us to government enforcement actions and private litigation. Even if we achieve the goals, targets, and objectives we set, we may not realize all of the benefits that we expected at the time such goals, targets, and objectives were established.
The Feed Ingredients operating segment includes the Company’s global activities related to (i) the collection and processing of beef, poultry and pork animal by-products in North America, Europe and South America into non-food grade oils and protein meals, (ii) the collection and processing of bakery residuals in North America into Cookie Meal®, which is predominantly used in poultry and swine rations, (iii) the collection and processing of used cooking oil in North America and South America into non-food grade fats, (iv) the collection and processing of porcine and bovine blood in China, Europe, North America and Australia into blood plasma powder and hemoglobin, (v) the processing of selected portions of slaughtered animals into a variety of meat products for use in pet food in Europe, North America and South America, (vi) the processing of cattle hides and hog skins in North America, (vii) the production of organic fertilizers using protein produced from the Company’s animal by-products processing activities in North America and Europe, (viii) the rearing and processing of black soldier fly larvae into specialty proteins and fats for use in animal feed and pet food in North America, and (ix) the provision of grease trap services to food service establishments in North America. Non-food grade oils and fats produced and marketed by the Company are principally sold to third parties to be used as ingredients in animal feed and pet food, as an ingredient for the production of agriculture-based biofuels (such as renewable diesel and SAF), or to the oleo-chemical industry to be used as an ingredient in a wide variety of industrial applications. Protein meals, blood plasma powder and hemoglobin produced and marketed by the Company are sold to third parties to be used as ingredients in animal feed, pet food and aquaculture.
The Food Ingredients operating segment includes the Company’s global activities related to (i) the purchase and processing of beef and pork bone chips, beef hides, pig skins, and fish skins into collagen in Europe, China, South America and North America, (ii) the collection and processing of porcine and bovine intestines into natural casings in Europe and China, (iii) the extraction and processing of porcine mucosa into crude heparin in Europe, (iv) the collection and refining of animal fat into food grade fat in Europe, and (v) the processing of bones to bone chips for the collagen industry and bone ash in Europe. Collagens produced and marketed by the Company are sold to third parties to be used as ingredients in the pharmaceutical, nutraceutical, food, pet food and technical (e.g., photographic) industries. Natural casings produced and marketed by the Company are sold to third parties to be used as an ingredient in the production of sausages and other similar food products.
The Fuel Ingredients operating segment includes the Company’s global activities related to (i) the Company’s share of the results of its equity investment in the DGD Joint Venture with Valero to convert animal fats, recycled greases, used cooking oil, inedible corn oil, soybean oil, or other feedstocks that become economically and commercially viable into renewable fuels/products, such as renewable diesel and SAF as described in Note 1 and Note 2 to the Company’s Consolidated Financial Statements for the period ended January 3, 2026 included herein, (ii) the conversion of organic sludge and food waste into biogas in Europe, (iii) the collection and conversion of fallen stock and certain animal by-products pursuant to applicable E.U. regulations into low-grade energy sources to be used in industrial applications, and (iv) the processing of manure into natural bio-phosphate in Europe.
Corporate Activities principally includes unallocated corporate overhead expenses, acquisition-related expenses, interest expense net of interest income, and other non-operating income and expenses.
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Economic Conditions and Uncertainties
Global Economic Conditions
We operate globally and have operations in numerous countries. As such, we are exposed to, and impacted by global macroeconomic factors, U.S. and foreign government policies, including tariff policies, and foreign exchange fluctuations. Global economic conditions continue to be highly volatile due to, among other things, the conflicts in Ukraine and the Middle East and their impacts on volatility in energy and other commodity prices, inflation, cost and supply chain pressures and availability, and disruption in banking systems and capital markets. Disturbances in world financial, credit, commodities and stock markets, including inflationary, deflationary and recessionary conditions, could have a negative impact on the Company’s results of operations. Any such disturbances or disruptions may also magnify the impact of other risks described in this Annual Report on Form 10-K for the fiscal year ended January 3, 2026.
Energy Policies of U.S. and Foreign Governments
Prices for our finished products, including those of DGD, may be impacted by government policies around the world relating to renewable fuels and GHG. Programs like the U.S. National RFS and LCFS (such as those in place in the state of California) and tax credits for biofuels and mandates for biofuel use both in the United States and abroad, such as IR Acts’s 45Z and European Union’s renewable energy directive (RED III), are subject to revision and change which may impact the demand for and/or price of our finished products. Legal challenges or changes to, a failure to enforce, reductions in the mandated volumes under, or discontinuing, amending, modifying, or suspending of any of these programs could have a negative impact on our business and results of operations. However, such rules and the regulatory environment are continuing to evolve and change, and we cannot predict the ultimate effect that such changes may have on our business.
Risks Associated with Tariffs
We expect tariffs on products imported into the U.S. from Brazil, Canada, China, the European Union and Mexico, and other countries upon which tariffs may be imposed, to continue to be met with retaliatory tariffs from those countries, both of which (U.S. and foreign tariffs) could impact our consolidated results of operations as we export certain of our finished products to and from the U.S. While to date these tariffs have not had a material impact on our results of operations, the extent and duration of tariffs and the resulting impact on macroeconomic conditions and on our business are uncertain and may depend on various factors, including negotiations between the U.S. and affected countries, retaliation imposed by other countries, tariff exemptions, negative sentiment toward U.S. companies and products, and availability of lower cost inputs to our customers. In addition, on February 20, 2026, the Supreme Court of the United States declared some of the existing U.S. tariffs imposed on certain countries unlawful. It remains uncertain how this decision will affect the existing tariffs or whether additional tariffs will be imposed under other laws. Meanwhile, it is also unclear at this point in time as to whether a recovery of previously paid tariffs will be possible; however, if a recovery is possible, the Company and the Company’s DGD Joint Venture may have opportunities for meaningful recoveries. We will continue to evaluate the nature and extent of the impact to our business and consolidated results of operations and actions we can take to minimize their impact.
Climate Change
There is global concern that carbon dioxide and other GHG in the atmosphere may have an adverse impact on global temperatures, weather patterns and the frequency of extreme weather and natural disasters. We are subject to physical, operational, transitional and financial risks associated with climate change and global, regional and local weather conditions, as well as legal, regulatory and market responses to climate change. Certain jurisdictions in which we operate have either imposed, or are considering imposing, new or increasingly stringent legal and regulatory requirements to reduce or mitigate the potential effects of climate change, including regulation and reduction of GHG and potential carbon pricing programs. These new or increasingly stringent legal or regulatory requirements could result in significantly increased costs of compliance and additional investments in facilities and equipment, and reduced raw material supplies in areas where these requirements limit or eliminate livestock operations. While we assess climate related regulatory risks as part of our risk management process, we are unable to predict the scope, nature and timing of any new or increasingly stringent environmental laws and regulations and therefore cannot predict the ultimate impact of such laws and regulations on our business or financial results. We continue to monitor existing and proposed laws and regulations in the jurisdictions in which we operate and to consider actions we may take to potentially mitigate the unfavorable impact, if any, of such laws or regulations. Furthermore, there is legislation regulating corporate environmental, social and governance (“ESG”) practices, including practices related to the causes and impacts of climate change as well as supply chain control and compliance with human rights. These and emerging new rules, which apply to all large companies and to listed small and medium-sized enterprises, require companies to report on how sustainability issues (environmental, social, and governance) affect their business and about their own impact on people and the environment. There has also been increased focus from our stakeholders, including consumers, employees and investors, on our sustainability
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and ESG practices. We expect that stakeholder expectations with respect to sustainability and ESG expectations will continue to evolve, which may necessitate additional resources to monitor, report on, and adjust our operations.
For additional information on risk factors that could impact our results, please refer to “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K for the fiscal year ended January 3, 2026.
Operating Performance Indicators
The Company monitors the performance of its business segments using key financial metrics such as results of operations, non-GAAP measurements (Adjusted EBITDA), segment operating income, raw material processed, gross margin percentage, foreign currency translation, and corporate activities. The Company’s operating results can vary significantly due to changes in factors such as the fluctuation in commodity prices and energy prices, weather conditions, crop harvests, government policies and programs, changes in global demand, changes in standards of living, protein consumption, and global production of competing ingredients. Due to these unpredictable factors that are beyond the control of the Company, forward-looking financial or operational estimates are not provided. The Company is exposed to certain risks associated with a business that is influenced by agricultural-based commodities. These risks are further described in Item 1A of this report under the heading “Risk Factors.”
The Company’s Feed Ingredients segment animal by-products, bakery residuals, used cooking oil recovery, and blood operations are each influenced by prices for agricultural-based alternative ingredients such as corn oil, soybean oil, soybean meal, and palm oil. In these operations, the costs of the Company’s raw materials change with, or in certain cases are indexed to, the selling price or the anticipated selling price of the finished goods produced from the acquired raw materials and/or in some cases, the price spread between various types of finished products. The Company believes that this methodology of procuring raw materials generally establishes a relatively stable gross margin upon the acquisition of the raw material. Although the costs of raw materials for the Feed Ingredients segment are generally based upon actual or anticipated finished goods selling prices, rapid and material changes in finished goods prices, including competing agricultural-based alternative ingredients, generally have an immediate and often times, material impact on the Company’s gross margin and profitability resulting from the brief lapse of time between the procurement of the raw materials and the sale of the finished goods. In addition, the volume of raw material acquired, which has a direct impact on the amount of finished goods produced, can also have a material effect on the gross margin reported, as the Company has a substantial amount of fixed operating costs.
The Company’s Food Ingredients segment collagen and natural casings products are influenced by other competing ingredients including plant-based and synthetic hydrocolloids and artificial casings, as well as ag-based alternative ingredients. In the collagen operation, the cost of the Company’s animal-based raw material moves in relationship to the selling price of the finished goods. The processing time for the Food Ingredients segment collagen and casings is generally 30 to 60 days, which is substantially longer than the Company’s Feed Ingredients segment animal by-products operations. Consequently, the Company’s gross margin and profitability in this segment can be influenced by the movement of finished goods prices from the time the raw materials were procured until the finished goods are sold.
The Company’s Fuel Ingredients segment converts fats into renewable fuels/products, organic sludge and food waste into biogas, and fallen stock into low-grade energy sources. The Company’s gross margin and profitability in this segment are impacted by world energy prices for oil, electricity, natural gas and governmental subsidies.
The reporting currency for the Company’s financial statements is the U.S. dollar. The Company operates in over 15 countries and therefore, certain of the Company’s assets, liabilities, revenues and expenses are denominated in functional currencies other than the U.S. dollar, primarily in the Euro, Brazilian real, Chinese renminbi, Canadian dollar and Polish zloty. To prepare the Company’s consolidated financial statements, assets, liabilities, revenues, and expenses must be translated into U.S. dollars at the applicable exchange rate. As a result, increases or decreases in the value of the U.S. dollar against these other currencies will affect the amount of these items recorded in the Company’s consolidated financial statements, even if their value has not changed in the functional currency. This could have a significant impact on the Company’s results, if such increase or decrease in the value of the U.S. dollar relative to these other currencies is substantial.
Results of Operations
Fiscal Year Ended January 3, 2026 Compared to Fiscal Year Ended December 28, 2024
Fiscal 2025 includes an additional week of operations which occurs every five to six years. In Fiscal 2025 the additional week occurred in the fourth quarter and increased total net sales and operating income by approximately $122.1 million and $9.8 million, respectively.
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Operating Performance Metrics
Other operating performance metrics which management routinely monitors as an indicator of operating performance include:
• Finished product commodity prices
• Segment results
• Foreign currency exchange
• Corporate activities
• Non-U.S. GAAP measures
These indicators and their importance are discussed below.
Finished Product Commodity Prices
Prices for finished product commodities that the Company produces in the Feed Ingredients segment are reported each business day on the Jacobsen Index (the “Jacobsen”), an established North American trading price publisher. The Jacobsen reports industry sales from the prior day's activity by product. Included on the Jacobsen are reported prices for finished products such as MBM, PM and feather meal (“FM”), hides, BFT and YG and corn, which is a substitute commodity for the Company’s BBP, as well as a range of other branded and value-added products, which are products of the Company’s Feed Ingredients segment. In the United States and South America, the Company regularly monitors the Jacobsen for MBM, PM, FM, BFT, YG and corn because it provides a daily indication of the Company’s U.S. and Brazilian revenue performance against business plan benchmarks. In Europe and South America, the Company regularly monitors Thomson Reuters (“Reuters”) to track the competing commodities palm oil and soy meal.
Although the Jacobsen and Reuters provide useful metrics of performance, the Company’s finished products are commodities that compete with other commodities such as corn, soybean oil, palm oil complex, soybean meal and heating oil on nutritional and functional values. Therefore, actual pricing for the Company’s finished products, as well as competing products, can be quite volatile. In addition, neither the Jacobsen nor Reuters provides forward or future period pricing for the Company’s commodities. The Jacobsen and Reuters prices quoted below are for delivery of the finished product at a specified location. Although the Company’s prices generally move in concert with reported Jacobsen and Reuters prices, the Company’s actual sales prices for its finished products may vary significantly from the Jacobsen and Reuters because of production and delivery timing differences and because the Company’s finished products are delivered to multiple locations in different geographic regions which utilize alternative price indexes. In addition, certain of the Company’s premium branded finished products may sell at prices that may be higher than the closest product on the related Jacobsen or Reuters index. During fiscal year 2025, the Company’s actual sales prices by product trended with the disclosed Jacobsen and Reuters prices.
Average Jacobsen and Reuters prices (at the specified delivery point) for fiscal year 2025, compared to average Jacobsen and Reuters prices for fiscal year 2024 are as follows:
Avg. Price
Fiscal Year 2025
Avg. Price
Fiscal Year 2024
Increase/(Decrease)
Increase/(Decrease)
Jacobsen:
MBM (Illinois)
$ 288.42/ton
$ 302.89/ton
$ (14.47)/ton
Feed Grade PM (Mid-South)
$ 307.88/ton
$ 369.41/ton
$ (61.53)/ton
Pet Food PM (Mid-South)
$ 499.55/ton
$ 680.78/ton
$ (181.23)/ton
FM (Mid-South)
$ 338.92/ton
$ 452.40/ton
$ (113.48)/ton
BFT (Chicago)
$ 55.81/cwt
$ 46.12/cwt
$ 9.69/cwt
YG (Illinois)
$ 36.18/cwt
$ 34.89/cwt
$ 1.29/cwt
Corn (Illinois)
$ 4.42/bushel
$ 4.28/bushel
$ 0.14/bushel
Reuters:
Palm Oil (CIF Rotterdam)
Soy meal (CIF Rotterdam)
The following table shows the average Jacobsen and Reuters prices for the fourth quarter of fiscal year 2025, compared to the average Jacobsen and Reuters prices for the third quarter of fiscal year 2025.
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Avg. Price
4th Quarter
Avg. Price
3rd Quarter
Increase/(Decrease)
Increase/(Decrease)
Jacobsen:
MBM (Illinois)
$ 309.39/ton
$ 298.01/ton
$ 11.38/ton
Feed Grade PM (Mid-South)
$ 325.13/ton
$ 303.49/ton
$ 21.64/ton
Pet Food PM (Mid-South)
$ 490.01/ton
$ 485.11/ton
$ 4.90/ton
FM (Mid-South)
$ 341.92/ton
$ 313.04/ton
$ 28.88/ton
BFT (Chicago)
$ 51.76/cwt
$ 63.00/cwt
$ (11.24)/cwt
YG (Illinois)
$ 34.05/cwt
$ 39.91/cwt
$ (5.86)/cwt
Corn (Illinois)
$ 4.30/bushel
$ 4.08/bushel
$ 0.22/bushel
Reuters:
Palm Oil (CIF Rotterdam)
Soy meal (CIF Rotterdam)
Segment Results
Segment operating income for the fiscal year ended January 3, 2026 was $273.4 million, which reflects a decrease of $(194.8) million or (41.6)% as compared to the fiscal year ended December 28, 2024.
In thousands, except for percentages
Feed Ingredients
Food Ingredients
Fuel Ingredients
Corporate
Total
Fiscal Year Ended January 3, 2026
Total net sales
Cost of sales and operating expenses (1)
Gross Margin
Gross Margin %
Loss/(gain) on sale of assets
Selling, general and administrative expenses (2)
Restructuring and asset impairment charges
Depreciation and amortization
Acquisition and integration costs
Change in fair value of contingent consideration
Equity in net loss of Diamond Green Diesel
Segment operating income/ (loss)
Equity in net income of other unconsolidated subsidiaries
Segment income/(loss)
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In thousands, except for percentages
Feed Ingredients
Food Ingredients
Fuel Ingredients
Corporate
Total
Fiscal Year Ended December 28, 2024
Total net sales
Cost of sales and operating expenses (1)
Gross Margin
Gross Margin %
Gain on sale of assets
Selling, general and administrative expenses (2)
Restructuring and asset impairment charges
Depreciation and amortization
Acquisition and integration costs
Change in fair value of contingent consideration
Equity in net income of Diamond Green Diesel
Segment operating income/(loss)
Equity in net income of other unconsolidated subsidiaries
Segment income/(loss)
(1) Cost of sales and operating expenses includes the cost of raw materials, collection costs of the raw materials and factory expenses including direct labor.
(2) Selling, general and administrative expenses include payroll related costs including incentive pay and stock compensation, insurance related costs, professional fees, IT related costs, travel costs and other costs.
Feed Ingredients Segment
Raw material volume . In fiscal year 2025, the raw material processed by the Company’s Feed Ingredients segment totaled 12.68 million metric tons. Compared to fiscal year 2024, overall raw material volume processed in the Feed Ingredients segment increased approximately 1.7%.
Sales . The increase in total net sales for the Feed Ingredients segment was $314.5 million for the fiscal year ended January 3, 2026, as compared to the fiscal year ended December 28, 2024.
The increase in total net sales for the Feed Ingredients segment was primarily due to the following (in millions of dollars):
Fats
Proteins
Other Rendering
Total Rendering
Used Cooking Oil
Bakery
Other
Total
Total net sales year ended December 28, 2024
Increase/(decrease) in sales volumes
Increase/(decrease) in finished product prices
Increase/(decrease) due to currency exchange rates
Other change
Total change
Total net sales year ended January 3, 2026
Margins . In the Feed Ingredients segment for fiscal year 2025, the gross margin percentage was 23.2% as compared to 21.5% for fiscal year 2024. The increase in margin was primarily due to higher overall finished product prices as compared to fiscal 2024.
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Segment operating income . The Company’s Feed Ingredients segment operating income for fiscal year 2025 was $215.2 million, an increase of $11.2 million or 5.5% as compared to fiscal year 2024. The increase was primarily due to higher finished good fat prices, higher sales volumes and operational improvements that more than offset an increase in selling, general and administrative expenses, an increase in restructuring and impairment charges primarily related to the strategic realignment of our Enviroflight operations of approximately $29.2 million and an increase in contingent consideration as compared to fiscal year 2024.
Food Ingredients Segment
Raw material volume . In fiscal year 2025, the raw material processed by the Company’s Food Ingredients segment totaled 1.32 million metric tons. Compared to fiscal year 2024, overall raw material volume processed in the Food Ingredients segment increased approximately 7.0%.
Sales . Total net sales increased in the Food Ingredients segment primarily due to higher finished product sales volumes.
Margins . In the Food Ingredients segment for fiscal year 2025, the gross margin percentage increased to 27.7% as compared to 25.1% for fiscal year 2024. The increase in margin was primarily due to the impact of an out of period inventory expense adjustment of approximately $25.1 million to the prior year’s cost of sales and operating expenses.
Segment operating income . The Company’s Food Ingredients segment operating income was $151.8 million for fiscal year 2025, an increase of $7.1 million or 4.9% as compared to fiscal year 2024. The increase in operating income was primarily due to increased sales volumes and the impact of the out of period inventory expense adjustment to prior year’s cost of sales and operating expenses that more than offset the increase in restructuring and impairment charges primarily related to our natural casings business of approximately $25.6 million.
Fuel Ingredients Segment
Raw material volume . In fiscal year 2025, the raw material processed by the Company’s Fuel Ingredients segment, excluding the DGD Joint Venture, totaled 1.45 million metric tons. Compared to fiscal year 2024, overall raw material volume processed in the Fuel Ingredients segment decreased approximately (3.3)%.
Sales . Total net sales increased in the Fuel Ingredients segment primarily due to higher finished product prices and sales volumes.
Margins . In the Fuel Ingredients segment (exclusive of the equity contribution from the DGD Joint Venture) for fiscal year 2025, the gross margin percentage decreased slightly to 20.2% as compared to 20.8% for fiscal year 2024.
Segment operating income . The Company’s Fuel Ingredients segment operating income (inclusive of the equity contribution from the DGD Joint Venture) for fiscal year 2025 was $3.4 million, a decrease of $(193.8) million or (98.3)% as compared to fiscal year 2024. The decrease in earnings is due to a combination of factors. Most importantly, the renewable fuel industry experienced a significant change in the regulatory environment including issues related to the change from the blenders tax credit (BTC) to the producers tax credit (PTC) in the United States and tariffs on imported feedstocks, leading to a reduction in incentives and a decrease in margins. In addition, the DGD Joint Venture had lower sales volumes due to three catalyst turnarounds in both of its plants, and a decision to idle its smallest unit due to commercial reasons. In St. Charles, both units experienced turnarounds in the first quarter of fiscal 2025 and the business decided to keep the smaller unit (DGD1) idle following the turnaround due to a low-margin environment. Meanwhile, the unit at Port Arthur underwent a catalyst turnaround in the third quarter of fiscal 2025. Finally, the market mechanisms designed to counterbalance these challenges, including RINs, created through the RFS and state LCFS programs have been slow to react and were unable to offset the decrease in value due to the change from the BTC to the PTC.
Foreign Currency
During fiscal year 2025, the euro strengthened and the Brazilian real and the Canadian dollar weakenedagainst the U.S. dollar as compared to fiscal year 2024. Using actual results for fiscal year 2025 with the average foreign currency rates for fiscal year 2024 would result in a decrease in operating income of approximately $20.4 million for fiscal year 2025. The average rates used in this calculation were the average rates for fiscal year 2025 of €1.00:$1.13, R$1.00:$0.18 and C$1.00:$0.72 as compared to the average rates for fiscal year 2024 of €1.00:$1.08, R$1.00:$0.19 and C$1.00:$0.73, respectively.
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Corporate Activities
Selling, General and Administrative Expenses. Selling, general and administrative expenses were $74.6 million during fiscal year 2025, a $13.6 million increase from $61.0 million during fiscal year 2024. The increase is primarily due to an increase in the Company’s incentive based compensation and other payroll related benefits as compared to fiscal year 2024.
Depreciation and Amortization. Depreciation and amortization charges were approximately $6.3 million for fiscal year 2025 as compared to $8.7 million for fiscal year 2024. The decrease was due to certain assets becoming fully depreciated.
Acquisition and Integration Costs. Acquisition and integration costs were approximately $15.9 million during fiscal year 2025 as compared to $7.8 million during fiscal year 2024. These costs primarily related to the announced joint venture between the Company and the Tessenderlo Group NV for fiscal year 2025 as compared to costs related to the Gelnex acquisition, the Miropasz Group acquisition and other acquisitions for fiscal year 2024.
Interest Expense. Interest expense was $222.3 million for fiscal year 2025, compared to $253.9 million for fiscal year 2024, a decrease of approximately $31.6 million. The decrease in interest expense is primarily due to less interest on term loan A facilities due to lower interest paid on term loan debt as a result of the reduction of the term loan balances outstanding which slightly lowered our average debt outstanding during fiscal year 2025 as compared to fiscal year 2024.
Foreign Currency Loss. Foreign currency losses were $(0.4) million during fiscal year 2025, as compared to losses of approximately $(1.2) million for fiscal year 2024. The change in foreign currency losses was due primarily to a decrease in losses on the revaluation of non-functional currency assets and liabilities as compared to fiscal year 2024.
Other Income, net. Other income was $0.5 million for fiscal year 2025, compared to other income of $22.3 million in fiscal year 2024. The decrease in other income was primarily due to a decrease in casualty insurance gains and the impact of current year settlement losses from the termination of two of the Company’s domestic defined benefit pension plans that was partially offset by a gain from the sale of a portion of a minor international subsidiary as compared to fiscal year 2024.
Equity in Net Income of Other Unconsolidated Subsidiaries. The change in this line item is not significant and primarily represents the Company’s pro rata share of the net income from its foreign unconsolidated subsidiaries.
Income Taxes. The Company recorded an income tax benefit of $9.4 million for fiscal year 2025, compared to $38.3 million of income tax benefit recorded in fiscal year 2024, a decrease of $28.9 million, which was primarily due to a decrease in the benefit from biofuel tax incentives. The effective tax rate for fiscal year 2025 was (15.3)%. The effective tax rate for fiscal year 2025 differs from the statutory rate of 21% due primarily to biofuel tax incentives, losses that provided no tax benefit, change in tax law and recording a tax benefit in respect to a deductible outside basis difference that will reverse in the foreseeable future. The effective tax rate for fiscal year 2024 was (15.5)%. The effective tax rate for fiscal year 2024 differs from the statutory rate of 21% due primarily to biofuel tax incentives, the relative mix of earnings among jurisdictions with different tax rates, state income taxes, nontaxable change in FASA contingent consideration and losses that provided no tax benefit.
Non-U.S. GAAP Measures
Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income/(loss), as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance. Since EBITDA (generally, net income plus interest expense, taxes, depreciation and amortization) is not calculated identically by all companies, the presentation in this report may not be comparable to EBITDA or Adjusted EBITDA presentations disclosed by other companies. Adjusted EBITDA is calculated below and represents for any relevant period, net income/(loss) plus depreciation and amortization, restructuring and asset impairment charges, acquisition and integration costs, change in fair value of contingent consideration, foreign currency loss/(gain), net income/(loss) attributable to non-controlling interests, interest expense, income tax provision, other income/(expense), loss on early retirement of debt and equity in net (income)/loss of unconsolidated subsidiaries. Management believes that Adjusted EBITDA is useful in evaluating the Company's operating performance compared to that of other companies in its industry because the calculation of Adjusted EBITDA generally eliminates the effects of financing, income taxes, non-cash and certain other items that may vary for different companies for reasons unrelated to overall operating performance and also believes this information is useful to investors.
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The Company’s management uses Adjusted EBITDA as a measure to evaluate performance and for other discretionary purposes. In addition to the foregoing, management also uses or will use Adjusted EBITDA to measure compliance with certain financial covenants under the Company’s Senior Secured Credit Facilities, 6% Notes, 5.25% Notes and 4.5% Notes that were outstanding at January 3, 2026. However, the amounts shown below for Adjusted EBITDA differ from the amounts calculated under similarly titled definitions in the Company’s Senior Secured Credit Facilities, 6% Notes, 5.25% Notes and 4.5% Notes, as those definitions permit further adjustments to reflect certain other nonrecurring costs, non-cash charges and cash dividends from the DGD Joint Venture. Additionally, the Company evaluates the impact of foreign exchange on operating cash flow, which is defined as segment operating income (loss) plus depreciation and amortization.
Pro forma Adjusted EBITDA to Foreign Currency is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance. Management believes Pro forma Adjusted EBITDA to Foreign Currency is useful in evaluating the Company’s operating performance on a constant currency basis and also believes this information is useful to investors.
DGD Adjusted EBITDA is not reflected in the Adjusted EBITDA or the Pro forma Adjusted EBITDA to Foreign Currency. DGD Adjusted EBITDA is not a recognized accounting measure under GAAP; it should not be considered as an alternative to net income or equity in net income of Diamond Green Diesel, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity and is not intended to be a presentation in accordance with GAAP. The Company calculates DGD Adjusted EBITDA by taking DGD’s operating income plus DGD’s depreciation, amortization and accretion expense. Management believes that DGD Adjusted EBITDA is useful in evaluating the Company’s operating performance because the calculation of DGD Adjusted EBITDA generally eliminates non-cash and certain other items at DGD unrelated to overall operating performance and also believes this information is useful to investors. The Company calculates Darling’s Share of DGD Adjusted EBITDA by taking DGD Adjusted EBITDA, net of discount and broker fees, and then multiplying by 50% to get Darling’s Share of DGD’s Adjusted EBITDA.
Combined Adjusted EBITDA is not a recognized accounting measurement under GAAP; it should not be considered as an alternative to net income, as a measure of operating results, or as an alternative to cash flow as a measure of liquidity. It is presented here not as an alternative to net income, but rather as a measure of the Company’s operating performance. Combined Adjusted EBITDA consists of Adjusted EBITDA plus DGD Adjusted EBITDA (Darling’s share). Management believes that Combined Adjusted EBITDA is useful in evaluating the Company's operating performance compared to that of other companies in its industry because the calculation of Combined Adjusted EBITDA generally eliminates the effects of financing, income taxes, non-cash and certain other items that may vary for different companies for reasons unrelated to overall operating performance and also believes this information is useful to investors.
Reconciliation of Net Income to (Non-GAAP) Adjusted EBITDA, to (Non-GAAP) Pro Forma Adjusted EBITDA to Foreign Currency and to (Non-GAAP) Combined Adjusted EBITDA
Fiscal Year 2025 as Compared to Fiscal Year 2024
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Fiscal Year Ended
(dollars in thousands)
January 3,
December 28,
Net income attributable to Darling
Depreciation and amortization
Interest expense
Income tax benefit
Restructuring and asset impairment charges
Acquisition and integration costs
Change in fair value of contingent consideration
Foreign currency losses
Other income, net
Debt extinguishment costs
Equity in net (income)/loss of Diamond Green Diesel
Equity in net income of other unconsolidated subsidiaries
Net income attributable to noncontrolling interests
Adjusted EBITDA (Non-GAAP)
Foreign currency exchange impact (1)
Pro forma Adjusted EBITDA to Foreign Currency (Non-GAAP)
DGD Adjusted EBITDA (Darling's Share) (Non-GAAP)
Combined Adjusted EBITDA (Non-GAAP)
(1) The average rates used in this calculation were the average rates for the fiscal year ended January 3, 2026 of €1.00:$1.13, R$1.00:$0.18 and C$1.00:$0.72 as compared to the average rates for the fiscal year ended December 28, 2024 of €1.00:USD$1.08, R$1.00:$0.19 and C$1.00:$0.73, respectively.
The discussion and analysis of our financial condition and results of operations for the year ended December 28, 2024 compared to the year ended December 30, 2023 are included in Item 7. Management's Discussion and Analysis of Financial Condition and Results in our 2024 Form 10-K and is incorporated herein by reference.
FINANCING, LIQUIDITY, AND CAPITAL RESOURCES
Indebtedness
Certain Debt Outstanding at January 3, 2026. On January 3, 2026, debt outstanding under the Amended Credit Agreement, the Company’s 6% notes, the Company’s 5.25% Notes and the Company’s 4.5% Notes consists of the following (in thousands):
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Senior Notes:
6 % Notes due 2030
Less unamortized deferred loan costs net of bond premiums
Carrying value of 6% Notes due 2030
5.25 % Notes due 2027
Less unamortized deferred loan costs
Carrying value of 5.25% Notes due 2027
4.5 % Notes due 2032 - Denominated in euros
Less unamortized deferred loan costs
Carrying value of 4.5% Notes due 2032
Amended Credit Agreement:
Term A facility
Less unamortized deferred loan costs
Carrying value of Term A facility
Revolving Credit Facility:
Maximum availability
Ancillary facilities
Borrowings outstanding
Letters of credit issued
Availability
Other Debt
At January 3, 2026, the U.S. dollar weakened as compared to the euro at December 28, 2024. Using the euro based debt outstanding at January 3, 2026 and comparing the closing balance sheet rates at January 3, 2026 to those at December 28, 2024, the U.S. dollar debt balances of euro based debt increased by $117.4 million, at January 3, 2026. The closing balance sheet rate used in this calculation was the actual fiscal closing balance sheet rate at January 3, 2026 of €1.00:USD$1.1750 as compared to the closing balance sheet rate at December 28, 2024 of €1.00:USD$1.0422.
Senior Secured Credit Facilities . On June 25, 2025, Darling, Darling International Canada Inc. (“Darling Canada”) and Darling International NL Holdings B.V. (“Darling NL”) and Darling Ingredients International Holding B.V. (“Darling Holding”) entered into a Third Amended and Restated Credit Agreement (the “Amended Credit Agreement”), which amended and restated the Company’s then existing Second Amended and Restated Credit Agreement dated January 6, 2014 (as amended from time to time, the “Previous Credit Agreement”), with the lenders from time to time party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, and the other agents party thereto. The Amended Credit Agreement refinanced the loans and commitments outstanding under the Previous Credit Agreement and provides for senior secured credit facilities in the aggregate principal amount of $2.9 billion comprised of (i) the Company’s $900.0 million six-year term A facility (partially comprised of $395.0 million term A-1 facility and $296.3 million term A-3 facility which, in each case, were cashlessly rolled from the Previous Credit Agreement) and (ii) the Company’s $2.0 billion five-year revolving credit facility (up to $50.0 million (as such amount may be increased to an amount not exceeding $150.0 million to the extent consented to by the applicable issuing banks) of which will be available for a letter of credit subfacility and up to $50.0 million of which will be 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). The revolving credit facility will be used for working capital needs, general corporate purposes and other purposes not prohibited by the Amended Credit Agreement. For more information regarding the Amended Credit Agreement see Note 11 of Notes to Consolidated Financial Statements included herein.
• As of January 3, 2026, the Company had availability of $1,324.5 million under the revolving credit facility, taking into account an aggregate of $601.2 million in outstanding borrowings, $73.6 million of ancillary facilities and letters of credit issued of $0.8 million.
• As of January 3, 2026, the Company has borrowed all $900.0 million under the terms of the term A facility and has repaid $4.5 million, which when repaid by the Company cannot be reborrowed. The term A facility borrowings are repayable in quarterly installments of 0.25% of the aggregate principle amount of the relevant term A facility on the
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last day of each March, June, September and December of each year commencing on the last day of such month falling on or after the last day of the first full fiscal quarter following June 25, 2025, the effective date of the initial borrowing, and continuing until the last day of such quarterly period ending immediately prior to the term A facility maturity date of June 25, 2031 and one final installment in the amount of the term A facility then outstanding, due and payable on June 25, 2031.
• The interest rate applicable to any borrowings under the revolving credit facility will equal (i) the Canadian Overnight Repo Rate Average (CORRA) for borrowings denominated in Canadian dollars or the adjusted term secured overnight financing rate (SOFR) for U.S. dollar borrowings or the adjusted euro interbank rate (EURIBOR) for euro borrowings or the adjusted daily simple Sterling overnight index average (SONIA) for British pound borrowings, in each case plus 1.50% per annum or (ii) the alternative base rate (ABR) for U.S. dollar borrowings or Canadian prime rate for Canadian dollar borrowings or the adjusted daily simple European short term rate (ESTR) for euro borrowings or the adjusted daily SONIA rate for British pound borrowings, in each case plus 0.50% per annum, and in each case of clauses (i) and (ii), subject to certain step-ups and step-downs based on the Company’s total leverage ratio. The interest rate applicable to any borrowing under the term A facility equals the adjusted term SOFR plus 1.75% per annum or ABR plus 0.75% subject to certain step-ups and step-downs based on the Company’s total leverage ratio with a minimum of 1.50% for SOFR borrowings and a minimum 0.50% for ABR borrowings.
4.5% Senior Notes due 2032. On June 24, 2025, Darling Global Finance B.V. (the “4.5% Issuer”), an indirect, wholly owned subsidiary of Darling, issued and sold €750.0 million aggregate principal amount of 4.5% Senior Notes due 2032 (the “4.5% Notes”). The 4.5% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of June 24, 2025 (the “4.5% Indenture”), among Darling Global Finance B.V., Darling, the subsidiary guarantors party thereto from time to time, GLAS Trust Company LLC, as trustee, principal paying agent and registrar. The gross proceeds of the offering, together with borrowings under the Company’s revolving credit facility, were used to (i) redeem the Company’s previous 3.625% senior notes and repay or otherwise refinance the Company’s Previous Credit Agreement, and (ii) pay costs, fees and expenses related to the refinancing . The 4.5% Notes are guaranteed by Darling and all of Darling's restricted subsidiaries (other than any foreign subsidiary or any receivable entity) that are borrowers under or guarantee the Senior Secured Facilities (collectively the “4.5% Guarantors”). For a description of the terms of the 4.5% Notes see Note 11 of Notes to Consolidated Financial Statements included herein.
6% Senior Notes due 2030. On June 9, 2022, Darling issued and sold $750.0 million aggregate principal amount of 6% Senior Notes due 2030 (the “6% Initial Notes”). The 6% Initial Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of June 9, 2022 (the “6% Base Indenture”), among Darling, the subsidiary guarantors party thereto from time to time, and Truist Bank, as trustee. On August 17, 2022, Darling issued an additional $250.0 million in aggregate principal amount of its 6% Senior Notes due 2030 (the “add-on notes” and, together with the 6% Initial Notes, the “6% Notes”). The add-on notes and related guarantees, which were offered in a private offering, were issued as additional notes under the 6% Base Indenture, as supplemented by a supplemental indenture, dated as of August 17, 2022 (the “supplemental indenture” and, together with the 6% Base Indenture, the “6% Indenture”). The add-on notes have the same terms as the 6% Initial Notes (other than issue date and issue price) and, together with the 6% Initial Notes, constitute a single class of securities under the 6% Indenture. The 6% Notes are guaranteed on a senior unsecured basis by Darling and all of Darling's restricted subsidiaries (other than foreign subsidiaries) that are borrowers under or that guarantee the Senior Secured Credit Facilities. For a description of the terms of the 6% Notes see Note 11 of Notes to Consolidated Financial Statements included herein.
5.25% Senior Notes due 2027. On April 3, 2019, Darling issued and sold $500.0 million aggregate principal amount of 5.25% Senior Notes due 2027 (the “5.25% Notes”). The 5.25% Notes, which were offered in a private offering, were issued pursuant to a Senior Notes Indenture, dated as of April 3, 2019 (the “5.25% Indenture”), among Darling, the subsidiary guarantors party thereto from time to time, and Regions Bank, as trustee. The 5.25% Notes are guaranteed on a senior unsecured basis by Darling and all of Darling's restricted subsidiaries (other than foreign subsidiaries) that are borrowers under or that guarantee the Senior Secured Credit Facilities. For a description of the terms of the 5.25% Notes see Note 11 of Notes to Consolidated Financial Statements included herein.
Other debt consists of U.S. and European overdraft ancillary facilities, U.S. and European finance lease obligations and note arrangements in the U.S., Brazil and Europe that are not part of the Amended Credit Agreement, 6% Notes, 5.25% Notes or 4.5% Notes.
The classification of long-term debt in the Company’s January 3, 2026 consolidated balance sheet is based on the contractual repayment terms of the 6% Notes, the 5.25% Notes, the 4.5% Notes and debt issued under the Amended Credit Agreement.
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As a result of the Company’s borrowings under its Amended Credit Agreement, the 6% Indenture, the 5.25% Indenture and the 4.5% Indenture, the Company is highly leveraged. Investors should note that, in order to make scheduled payments on the indebtedness outstanding under the Amended Credit Agreement, the 6% Notes, the 5.25% Notes and the 4.5% Notes, and otherwise, the Company will rely in part on a combination of dividends, distributions and intercompany loan repayments from the Company’s direct and indirect U.S. and foreign subsidiaries. The Company is prohibited under the Amended Credit Agreement, the 6% Indenture, the 5.25% Indenture and the 4.5% Indenture from entering (or allowing such subsidiaries to enter) into contractual limitations on the Company’s subsidiaries’ ability to declare dividends or make other payments or distributions to the Company. The Company has also structured the Company’s consolidated indebtedness in such a way as to maximize the Company’s ability to move cash from the Company’s subsidiaries to Darling or another subsidiary that will have fewer limitations on the ability to make upstream payments, whether to Darling or directly to the Company’s lenders as a Guarantor. Nevertheless, applicable laws under which the Company’s direct and indirect subsidiaries are formed may provide limitations on such dividends, distributions and other payments. In addition, regulatory authorities in various countries where the Company operates or where the Company imports or exports products may from time to time impose import/export limitations, foreign exchange controls or currency devaluations that may limit the Company’s access to profits from the Company’s subsidiaries or otherwise negatively impact the Company’s financial condition and therefore reduce the Company’s ability to make required payments under the Amended Credit Agreement, the 6% Notes, the 5.25% Notes and the 4.5% Notes, or otherwise. In addition, fluctuations in foreign exchange values may have a negative impact on the Company’s ability to repay indebtedness denominated in U.S. or Canadian dollars or euros. See “Risk Factors - Our business may be adversely impacted by fluctuations in foreign currency exchange rates, which could affect our ability to comply with our financial covenants” and “- Our ability to make payments on our debt depends in part on the performance of our subsidiaries, including our non-guarantor subsidiaries, and their ability to transfer funds to members of our group liable to make payments on our debt” in Item 1A of this Annual Report on Form 10-K for the fiscal year ended January 3, 2026.
As of January 3, 2026, the Company is in compliance with all financial covenants under the Amended Credit Agreement, and believes it is in compliance with all of the other covenants contained in the Amended Credit Agreement, the 6% Indenture, the 5.25% Indenture and the 4.5% Indenture.
Working Capital and Capital Expenditures
On January 3, 2026, the Company had working capital of $518.7 million and its working capital ratio was 1.50 to 1 compared to working capital of $395.9 million and a working capital ratio of 1.38 to 1 on December 28, 2024. At January 3, 2026, the Company had unrestricted cash of $88.7 million and funds available under the revolving credit facility of $1.32 billion, compared to unrestricted cash of $76.0 million and funds available under the revolving credit facility of $1.16 billion at December 28, 2024. The Company diversifies its cash investments by limiting the amounts deposited with any one financial institution.
Net cash provided by operating activities was $1,059.7 million and $839.3 million for the fiscal years ended January 3, 2026 and December 28, 2024, respectively, an increase of $220.4 million due primarily to an increase in distributions from unconsolidated subsidiaries. Net cash used in investing activities was $681.4 million during fiscal year 2025, compared to $498.9 million in fiscal year 2024, an increase in cash used of $182.5 million, primarily due to an increase in contributions to the DGD Joint Venture that more than offset a decrease in acquisitions. Net cash used in financing activities was $376.7 million during fiscal year 2025, compared to $399.6 million in fiscal year 2024, a decrease in net cash used of $22.9 million, primarily due to lower debt repayments that more than offset an increase in contingent consideration payments, acquisition of noncontrolling interests and acquisition holdback payments as compared to the prior year.
Capital expenditures of $380.5 million were made during fiscal year 2025 as compared to $332.5 million in fiscal year 2024, an increase of $48.0 million. The Company expects to incur capital expenditures of approximately $450 million in fiscal year 2026, including compliance, replacement and expansion projects. The Company intends to finance these costs using cash flows from operations. Capital expenditures related to compliance with environmental regulations were $89.7 million in fiscal year 2025, $67.4 million in fiscal year 2024 and $64.8 million in fiscal year 2023.
Accrued Insurance and Pension Plan Obligations
Based upon the annual actuarial estimate, current accruals and claims paid during fiscal year 2025, the Company has accrued approximately $22.3 million as of January 3, 2026 that it expects will become due during the next twelve months in order to meet obligations related to the Company’s self-insurance reserves and accrued insurance obligations, which are included in current accrued expenses at January 3, 2026. The self-insurance reserve is composed of estimated liability for claims arising for workers’ compensation, auto liability, general liability and medical claims liability. The self-insurance
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reserve liability and medical claims liability are determined annually, based upon a third-party actuarial estimate. The actuarial estimate may vary from year to year, due to changes in costs of health care, the pending number of claims and other factors beyond the control of management of the Company.
Based upon current actuarial estimates, the Company expects to make payments of approximately $0.5 million in order to meet minimum pension funding requirements to its domestic plans in fiscal year 2026. In addition, the Company expects to make payments of approximately $3.5 million under its foreign pension plans in fiscal year 2026. The minimum pension funding requirements are determined annually, based upon a third-party actuarial estimate. The actuarial estimate may vary from year to year, due to fluctuations in return on investments or other factors beyond the control of management of the Company or the administrator of the Company’s pension funds. No assurance can be given that the minimum pension funding requirements will not increase in the future. The Company has made required and tax deductible discretionary contributions to its domestic pension plans in fiscal year 2025 and fiscal year 2024 of approximately $0.3 million and $0.4 million, respectively. Additionally, the Company has made required and tax deductible discretionary contributions to its foreign pension plans of approximately $3.3 million in each of fiscal years 2025 and 2024.
The U.S. Pension Protection Act of 2006 (“PPA”) went into effect in January 2008. The stated goal of the PPA is to improve the funding of U.S. pension plans. U.S. plans in an under-funded status are required to increase employer contributions to improve the funding level within PPA timelines. Volatility in the world equity and other financial markets could have a material negative impact on U.S. pension plan assets and the status of required funding under the PPA. The Company participates in various U.S. multiemployer pension plans which provide defined benefits to certain employees covered by labor contracts. These plans are not administered by the Company and contributions are determined in accordance with provisions of negotiated labor contracts to meet their pension benefit obligations to their participants. The Company’s contributions to each individual U.S. multiemployer plan represent less than 5% of the total contributions to each such plan. Based on the most currently available information, the Company has determined that, if a withdrawal were to occur, withdrawal liabilities on two of the U.S. plans in which the Company currently participates could be material to the Company. With respect to the other U.S. multiemployer pension plans in which the Company participates and which are not individually significant, five plans have certified as critical or red zone, as defined by the PPA. The Company has withdrawal liabilities recorded on five U.S. multiemployer plans in which it participated. As of January 3, 2026, the Company has an aggregate accrued liability of approximately $4.3 million representing the present value of scheduled withdrawal liability payments on the remaining multiemployer plans that have given notices of withdrawals. While the Company has no ability to calculate a possible current liability for under-funded multiemployer plans that could terminate or could require additional funding under the PPA, the amounts could be material.
DGD Joint Venture
The DGD Joint Venture currently operates the DGD Facilities, with a combined renewable fuel (including renewable diesel and SAF) production capacity of approximately 1.2 billion gallons per year. Renewable diesel is a low-carbon transportation fuel that is interchangeable with diesel produced from petroleum and is produced at the DGD Facilities using an advanced hydroprocessing-isomerization process licensed from UOP LLC, known as the Ecofining™ Process, and a pretreatment process developed by the Desmet Ballestra Group, to convert fats (animal fats, used cooking oils, distillers corn oil and vegetable oils) into renewable diesel, renewable naphtha and other light end renewable hydrocarbons. The DGD Joint Venture was formed in January 2011 to design, engineer, construct and operate the DGD St. Charles Plant, which reached mechanical completion and began production of renewable diesel and certain other co-products in late June 2013. In October 2021, the DGD Joint Venture completed an expansion of the DGD St. Charles Plant that increased its renewable diesel production capability to up to 750 million gallons per year of renewable diesel, as well as separating renewable naphtha (approximately 30 million gallons) and other light end renewable hydrocarbons for sale into low carbon fuel markets. Additionally, in November 2022 the DGD Joint Venture completed the construction of the DGD Port Arthur Plant, with a capacity to produce 470 million gallons per year of renewable diesel and 20 million gallons per year of renewable naphtha and having similar logistics flexibilities as those of the DGD St. Charles Plant. Furthermore, in November 2024, the DGD Joint Venture completed a capital project at the DGD Port Arthur Plant to provide the plant with the capability to upgrade approximately fifty percent (50%) of its current 470 million gallon annual production capacity to SAF.
On May 1, 2019, Darling through its wholly owned subsidiary Darling Green Energy LLC, (“Darling Green”), and Diamond Alternative Energy, LLC, a wholly owned subsidiary of Valero (“Diamond Alternative” and together with Darling Green, the “DGD Lenders”) entered into a revolving loan agreement (the “2019 DGD Loan Agreement”) with the DGD Joint Venture, pursuant to which the DGD Lenders committed to making loans available to the DGD Joint Venture in the amount of $50.0 million with each lender committed to $25.0 million of the total commitment. Any borrowings by the DGD Joint Venture under the 2019 DGD Loan Agreement were at the applicable annum rate equal to the sum of (a) the LIBO Rate (meaning Reuters BBA Libor Rates Page 3750) on such day plus (b) 2.50%. On June 15, 2023, the DGD Lenders entered into a new
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revolving loan agreement (the “2023 DGD Loan Agreement”) with the DGD Joint Venture that replaced and superseded in its entirety the 2019 DGD Loan Agreement and pursuant to which the DGD Lenders have committed to making loans available to the DGD Joint Venture in the total amount of $200.0 million with each lender committed to $100.0 million of the total commitment. Any borrowings by the DGD Joint Venture under the 2023 DGD Loan Agreement are at the applicable annum rate equal to the sum of (a) Term SOFR on such day plus (b) 2.50%. The 2023 DGD Loan Agreement expires on June 15, 2026. In December 2022, the DGD Joint Venture borrowed all $50.0 million available under the 2019 DGD Loan Agreement, including the Company’s full $25.0 million commitment, which was repaid in fiscal 2023. In January 2024, the DGD Joint Venture borrowed all $200.0 million available under the 2023 DGD Loan Agreement, including the Company’s full $100.0 million commitment, which was repaid in March 2024. In November 2025, The DGD Joint Venture borrowed $50.0 million or $25.0 million of the Company's portion of the commitment, which was repaid in December 2025. The DGD Joint Venture paid interest to the Company for the years ended January 3, 2026, December 28, 2024 and December 30, 2023 of approximately $0.1 million, $1.6 million and $0.6 million, respectively. As of January 3, 2026 and December 28, 2024, zero was owed to Darling Green under the 2023 DGD Loan Agreement. This note receivable amount when outstanding is included in other current assets on the balance sheet and is included in investing activities on the cash flow statement.
On June 23, 2023, the DGD Joint Venture entered into an amended and restated credit agreement consisting of a $400.0 million senior, unsecured revolving credit facility, with CoBank ACB acting as lead arranger and the administrative agent for the lending group, which is comprised of Farm Credit System institutions. The revolving credit facility matures June 23, 2026 and is non-recourse to the joint venture partners. As of January 3, 2026, the DGD Joint Venture had no borrowings outstanding under this unsecured revolving credit facility.
Based on the sponsor support agreements executed in connection with the initial construction of the DGD St. Charles Plant, the Company contributed a total of approximately $111.7 million for completion of the DGD St. Charles Plant, and Darling has subsequently made $947.0 million in additional capital contributions to the DGD Joint Venture. As of January 3, 2026, under the equity method of accounting the Company has an investment in the DGD Joint Venture of approximately $2.1 billion included on the Consolidated Balance Sheet.
The Company’s original investment in DGD has expanded since 2011 to the point that it is now integral to how the Company operates its business. Darling traditionally collected and converted used cooking oil and animal fats into feed ingredients which were sold on a caloric value to feed animals as well as for industrial technical uses. Over the past decade, the world’s increasing focus on renewable energy sources, motivated by supporting agricultural economies and finding solutions for GHGs and climate change, has provided a new finished market for the Company’s finished fats ingredients. With Darling’s significant fats ownership, this has and continues to transform how the Company operates. In each of fiscal 2023, 2024 and 2025, a large portion of Darling’s total U.S. finished fats products were sold to the DGD Joint Venture as feedstock for renewable diesel and, beginning in fiscal 2024, SAF. In 2025, 2024 and 2023, DGD was the Company’s largest finished product customer in terms of total net sales, with the Company recording total net sales to DGD in those years of $1.2 billion, $1.0 billion and $1.3 billion, respectively.
From a procurement, production and distribution standpoint, DGD has become integral to Darling’s base business. DGD is integrated into the Company’s operations via the combined vertical operating structure from collecting raw fats, to processing collected fats at Darling facilities worldwide to transporting the refined fats to the DGD Facilities as feedstock. The Darling supply chain has become more efficient and sustainable with transparency for verification to obtain full value to low carbon intensity markets. The development of the low carbon markets in North America and Europe has influenced how Darling operates its core business and has also been a driver for the recent DGD expansions, which are making DGD much more relevant to Darling’s earnings. Since 2011 when construction began on DGD, Darling has invested substantially to increase its U.S. railcar fleet to efficiently manage nationwide transportation of Darling fats to DGD. Additionally, Darling acquired an Iowa location on the Mississippi River that further enhances the ability of the Company’s Midwest network of facilities to collect and deliver feedstocks to DGD via water, rail or truck from a centralized location. In fiscal 2022, Darling acquired both Valley Proteins and FASA, each of which supply additional feedstocks to DGD. Darling has also stepped up collection efforts by providing indoor used cooking oil collection units in exchange for extended collection contracts at eating establishments and has moved to more of a centralized digital marketing effort with restaurant chains and franchise groups and invested in internet search engine key words to improve visibility with restaurants. The Company also includes DGD in marketing efforts to emphasize environmental sustainability that restaurants participate in when their used cooking oil is collected by Darling. From a production standpoint, Darling now isolates used cooking oil from other fats to preserve identification to qualify for a lower carbon intensity value. As a result, the Company includes its equity in net income of the DGD Joint Venture as operating income.
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Financial Impact of Significant Debt Outstanding
The Company has a substantial amount of indebtedness, which could make it more difficult for us to satisfy our obligations to our financial lenders and our contractual and commercial commitments, limit our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions or other general corporate requirements on commercially reasonable terms or at all, require us to use a substantial portion of our cash flows from operations to pay principal and interest on our indebtedness instead of other purposes, thereby reducing the amount of our cash flows from operations available for working capital, capital expenditures, acquisitions and other general corporate purposes, increase our vulnerability to adverse economic, industry and business conditions, expose us to the risk of increased interest rates as certain of our borrowings are at variable rates of interest, limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate, place us at a competitive disadvantage compared to other, less leveraged competitors, and/or increase our cost of borrowing.
Cash Flows and Liquidity Risks
Management believes that the Company’s cash flows from operating activities consistent with the level generated in fiscal year 2025, unrestricted cash and funds available under the Amended Credit Agreement, will be sufficient to meet the Company’s working capital needs and maintenance and compliance-related capital expenditures, scheduled debt and interest payments, income tax obligations, and other contemplated needs through the next twelve months and beyond. Numerous factors could have adverse consequences to the Company that cannot be estimated at this time, such as negative impacts from U.S. or foreign government trade policies, the Russian-Ukraine war and the ongoing or emerging conflicts in the Middle East and those other factors discussed below under the heading “Forward Looking Statements”. These factors, coupled with volatile prices for natural gas and diesel fuel, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could negatively impact the Company’s results of operations in fiscal year 2026 and thereafter. The Company reviews the appropriate use of unrestricted cash periodically. As of the date of this report, other than the Company’s binding offer to acquire UPI Bovinos NewCo for approximately $114 million, no decision has been made as to non-ordinary course material cash usages at this time; however, potential usages could include: opportunistic capital expenditures and/or acquisitions and joint ventures; investments relating to the Company’s renewable energy strategy, including, without limitation, potential investments in additional renewable diesel or SAF projects; investments in response to governmental regulations relating to human and animal food safety or other regulations; unexpected funding required by the legislation, regulation or mass termination of multiemployer plans; and paying dividends or repurchasing stock, subject to limitations under the Amended Credit Agreement, the 6% Indenture, the 5.25% Indenture and the 4.5% Indenture, as well as suitable cash conservation to withstand adverse commodity cycles. See Note 3 Acquisitions for additional information about the UPI Bovinos NewCo binding offer.
The Company’s Board of Directors approved a share repurchase program of up to an aggregate of $500.0 million of the Company’s Common Stock depending on market conditions. The repurchases may be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market. The program runs through August 13, 2026, unless further extended or shortened by the Board of Directors. During fiscal year 2025, the Company repurchased approximately $34.7 million, including commissions, of its common stock in the open market. As of January 3, 2026, the Company had approximately $460.3 million remaining in its share repurchase program.
Each of the factors described above has the potential to adversely impact the Company’s liquidity in a variety of ways, including through reduced raw materials availability, reduced finished product prices, reduced sales, potential inventory buildup, increased bad debt reserves, potential impairment charges and/or higher operating costs.
Sales prices for many of the principal products that the Company sells are typically influenced by sales prices for agricultural-based ingredients, the prices of which are based on established commodity markets and are subject to volatile changes, and sales prices for the principal products that DGD sells are typically influenced by the demand and pricing of renewable diesel, which is dependent on governmental energy policies and programs and impacted by the value of RINS and LCFS credits stemming from such governmental energy policies and programs. Any decline in these prices has the potential to adversely impact the Company’s liquidity. Any of a decline in raw material availability, a decline in agricultural-based alternative ingredients prices, increases in energy prices or the impact of U.S. and foreign regulations and tariffs (including, without limitation, China), changes in foreign exchange rates, imposition of currency controls and currency devaluations has the potential to adversely impact the Company’s liquidity. A decline in commodities prices, adverse changes to governmental energy policies and programs, a rise in energy prices, a slowdown in the U.S. or international economy, high inflation rates or other factors, could cause the Company to fail to meet management's expectations or could cause liquidity concerns.
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OFF BALANCE SHEET OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS
Based upon the underlying purchase agreements, the Company has commitments to purchase $492.7 million of commodity products, consisting of approximately $195.6 million of finished and raw material products and approximately $261.1 million of natural gas and diesel fuel and approximately $36.0 million of other commitments during the next five years, which are not included in liabilities on the Company’s balance sheet at January 3, 2026. The Company intends to take physical delivery of the commodities under the forward purchase agreements and accordingly, these contracts are not subject to the requirements of fair value accounting because they qualify as normal purchases. The commitments will be recorded on the balance sheet of the Company when delivery of these commodities or products occurs and ownership passes to the Company during the remainder of fiscal 2025 and through fiscal 2029, in accordance with accounting principles generally accepted in the United States.
The Company’s off-balance sheet contractual obligations and commercial commitments as of January 3, 2026 relate to letters of credit, foreign bank guarantees, forward purchase agreements and employment agreements. The Company has excluded these items from the balance sheet in accordance with U.S. GAAP.
The following table summarizes the Company’s other commercial commitments, including both on- and off-balance sheet arrangements that are part of the Amended Credit Agreement and other foreign bank guarantees that are not a part of the Amended Credit Agreement at January 3, 2026 (in thousands):
Other commercial commitments:
Standby letters of credit
Standby letters of credit (ancillary facility)
Foreign bank guarantees
Total other commercial commitments:
CRITICAL ACCOUNTING POLICIES
The Company follows certain significant accounting policies when preparing its consolidated financial statements. A complete summary of these policies is included in Note 1 of Notes to Consolidated Financial Statements included herein.
Certain of the policies require management to make significant and subjective estimates or assumptions regarding uncertainties, including the business and economic uncertainty resulting from the Russian-Ukraine war and conflicts in the Middle East and the high interest rate and inflationary cost environment, and as a result, such estimates may deviate from actual results and significantly impact our financial results. In particular, management makes estimates regarding fair value of the Company’s reporting units and future cash flows with respect to assessing potential impairment of both long-lived assets and goodwill and pension liabilities. Each of these estimates is discussed in greater detail in the following discussion.
Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting when the activities acquired have been determined to be a business. The consideration transferred in a business combination is measured at fair value, which is determined as the sum of the acquisition-date fair values of the assets transferred, liabilities incurred by the Company and any equity interests issued by the Company. The consideration transferred is allocated to the tangible and intangible assets acquired and liabilities assumed at their estimated fair value on the acquisition date. The excess of fair value is recorded as goodwill. The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of acquisition. Acquisition costs are expensed as incurred.
Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates. Depending on the acquisition size, the Company determines the fair values using the assistance of a valuation expert who assists the Company primarily using the cost, market and income approaches and using estimates of future revenue and cash flows, raw material and sales volumes, discount rates and the selection of comparable companies. The Company’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, not to exceed one year from the date of the acquisition, the Company may record adjustments to the assets acquired and liabilities assumed, with a corresponding offset to goodwill if new information is obtained related to facts and circumstances that existed as of the acquisition date. After the measurement period, any subsequent adjustments are reflected in the Consolidated Statement of Operations.
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Long-Lived Assets
The Company reviews the carrying value of long-lived assets for impairment when events or changes in circumstances indicate that the carrying amount of an asset, or related asset group, may not be recoverable from estimated future undiscounted cash flows. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of the asset or asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset or asset group. In fiscal 2025, the Company’s management decided to strategically realign operations and classify a group of assets as assets held for sale due to the fact that they met the classification criteria. As a result, the Company incurred impairment charges of long-lived assets in its feed and food segments of approximately $30.0 million and $8.6 million, respectively. In fiscal 2024, there were no events or changes in circumstances requiring an impairment. In fiscal 2023, the Company’s management decided to close or transfer operations for three feed segment locations in the U.S. for optimization opportunities. As a result, the Company incurred asset impairment charges to its feed segment long-lived assets of approximately $2.9 million in fiscal 2023. In addition, the Company incurred additional asset impairment charges in fiscal 2023 related to the Peabody, Massachusetts, plant closure of approximately $1.8 million within the food segment.
Goodwill and Indefinite Lived Intangible Assets Valuation
Goodwill and indefinite-lived intangible assets are tested annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. When assessing the recoverability of goodwill and other indefinite lived intangible assets, the Company may first assess qualitative factors in determining whether it is more likely than not that the fair value of a reporting unit, including goodwill, or other indefinite lived intangible assets are less than its carrying amount. The qualitative evaluation is an assessment of multiple factors, including the current operating environment, financial performance and market considerations. The Company may elect to bypass this qualitative assessment for some or all of its reporting units or other indefinite lived intangible assets and perform a quantitative test, based on management's judgment. If the Company chooses to bypass the qualitative assessment, it performs the quantitative approach to impairment testing by comparing the fair value of the Company’s reporting units to their respective carrying amounts and records an impairment charge for the amount by which the carrying amounts exceeds the fair value; however, the loss recognized if any will not exceed the total amount of goodwill allocated to that reporting unit.
In fiscal 2025, the Company performed a quantitative approach to valuing goodwill and indefinite-lived intangible assets at October 25, 2025 and as a result determined the fair values of the Company’s reporting units containing goodwill and indefinite lived intangible assets exceeded the related carrying values. However, based on the Company’s annual impairment testing at October 25, 2025, the fair value of one of the Company’s six reporting units had a fair value that was not substantially in excess of their carrying values. The fair value of this reporting unit was determined to be between 20% - 30% in excess of the carrying value with goodwill of approximately $563.3 million as of January 3, 2026. The Company determined the fair value of reporting units with the assistance of a valuation expert who assisted the Company primarily using the Income Approach to determine the fair value of the Company’s reporting units. Key assumptions that impacted the discounted cash flow model were raw material and sales volumes, gross margins, terminal growth rates and discount rates. It is possible, depending upon a number of factors that are not determinable at this time or within the control of the Company, that the fair value of this one reporting unit could decrease in the future and result in an impairment to goodwill. The Company’s management believes the biggest risk to this reporting unit is decreasing finished product prices impacting gross margins and an economic slowdown that would impact raw material suppliers. Upon meeting the criteria for classification of certain of the Company’s assets as held for sale, the Company recorded goodwill charges in the feed segment and food segment of approximately $2.0 million and $17.0 million, respectively. In addition, the Company recorded indefinite lived intangible asset charges in the food segment of approximately $0.2 million. In fiscal 2024, the Company performed a quantitative approach to valuing goodwill and indefinite-lived intangible assets at October 26, 2024. Based on the Company’s annual impairment testing, the Company concluded the fair values of its reporting units containing goodwill and indefinite lived intangible assets exceeded the related carrying values. In fiscal 2023, the Company performed a quantitative approach to valuing goodwill and indefinite-lived intangible assets at October 28, 2023 and as a result determined that fair values of the Company’s reporting units containing goodwill exceeded the related carrying values. Goodwill was approximately $2.5 billion and $2.3 billion at January 3, 2026 and December 28, 2024, respectively.
Pension Liability
The Company has retirement and pension plans covering a substantial number of its domestic and foreign employees. Major assumptions used in the accounting for these employee benefit plans include the discount rate, expected return on plan
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assets, rate of increase in employee compensation levels, mortality rates and trends in health care costs. The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of net periodic benefit cost recorded in future periods.
The discount rate applied to the Company’s pension liability is the interest rate used to calculate the present value of the pension benefit obligation. The weighted average discount rate was 4.67% at January 3, 2026 and 4.84% at December 28, 2024. The projected net periodic benefit cost for fiscal year 2026 would increase by approximately $0.5 million if the discount rate was 0.5% lower at a weighted average of 4.17%. The projected net periodic benefit cost for fiscal year 2026 would decrease by approximately $0.1 million if the discount rate was 0.5% higher at a weighted average of 5.17%.
NEW ACCOUNTING PRONOUNCEMENTS
In November 2024, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to disaggregate any relevant expense caption presented on the face of the income statement within continuing operations or in the footnotes. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Adoption is either with a prospective method or a fully retrospective method of transition. Early adoption is permitted. The Company is currently evaluating this ASU to determine its impact on the Company’s disclosure, but does not expect this update to have a material impact on the Company’s consolidated financial statements other than additional information that will be provided in the footnote disclosure.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures. The ASU requires the annual financial statements to include consistent categories and greater disaggregation of information in the rate reconciliation, and income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for the Company's annual reporting periods beginning after December 15, 2024. Adoption is either with a prospective method or a fully retrospective method of transition. Early adoption is permitted. The Company adopted this ASU in 2025 using the prospective method and the adoption did not have an impact on the Company’s consolidated financial statements other than additional information that is provided in the footnote disclosure.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K includes “forward-looking” statements that are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the statements. Statements that are not statements of historical facts are forward looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as “estimate,” “guidance,” “outlook,” “project,” “planned,” “contemplate,” “potential,” “possible,” “proposed,” “intend,” “believe,” “anticipate,” “expect,” “may,” “will,” “would,” “should,” “could,” and similar expressions are intended to identify forward-looking statements. All statements other than statements of historical facts included in this report are forward looking statements, including, without limitation, the statements under the sections entitled “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Legal Proceedings” and located elsewhere herein regarding industry prospects, the Company’s financial position and the Company’s use of cash. Forward-looking statements are based on the Company’s current expectations and assumptions regarding its business, the economy and other future conditions. The Company cautions readers that any such forward-looking statements it makes are not guarantees of future performance and that actual results may differ materially from anticipated results or expectations expressed in its forward-looking statements as a result of a variety of factors, including many that are beyond the Company’s control.
In addition to those factors discussed under the heading “Risk Factors” in Item 1A of this report and elsewhere in this report, and in the Company’s other public filings with the SEC, important factors that could cause actual results to differ materially from the Company’s expectations include: existing and unknown future limitations on the ability of the Company’s direct and indirect subsidiaries to make their cash flow available to the Company for payments on the Company’s indebtedness or other purposes; reduced demands or prices for biofuels, biogases or renewable electricity; global demands for grain and oilseed commodities, which have exhibited volatility, and can impact the cost of feed for cattle, hogs and poultry, thus affecting available rendering feedstock and selling prices for the Company’s products; reductions in raw material volumes available to the Company due to weak margins in the meat production industry as a result of higher feed costs, reduced consumer demand, reduced volume due to government regulations affecting animal production or other factors, reduced volume from food service establishments, or otherwise; reduced demand for animal feed; reduced finished product prices, including a decline in fat, used cooking oil, protein or collagen (including, without limitation, collagen peptides and gelatin) finished product prices; changes to government policies around the world relating to renewable fuels and GHG emissions that adversely affect prices, margins or
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markets (including for the DGD Joint Venture), including programs like renewable fuel standards, LCFS, renewable fuel mandates and tax credits for biofuels or loss or diminishment of tax credits due to failure to satisfy any eligibility requirements, including, without limitation, in relation to the blenders tax credit or CFPC; climate related adverse results, including with respect to the Company’s climate goals, targets or commitments; possible product recall resulting from developments relating to the discovery of unauthorizedadulterations to food or food additives or products which do not meet specifications, contract requirements or regulatory standards; the occurrence of 2009 H1N1 flu (initially known as Swine Flu), highly pathogenic strains of avian influenza (collectively known as Bird Flu), SARS, BSE, PED or other diseases associated with animal origin in the U.S. or elsewhere, such as the outbreak of ASF in China and elsewhere; the occurrence of pandemics, epidemics or disease outbreaks; unanticipated costs and/or reductions in raw material volumes related to the Company’s compliance with the existing or unforeseen new U.S. or foreign (including, without limitation, China) regulations (including new or modified animal feed, Bird Flu, SARS, PED, BSE or ASF or similar or unanticipated regulations) affecting the industries in which the Company operates or its value added products; risks associated with the DGD Joint Venture, including possible unanticipated operating disruptions and/or a decline in margins on the products produced by the DGD Joint Venture; risks and uncertainties relating to international sales and operations, including imposition of tariffs, quotas, trade barriers and other trade protections by the U.S. or foreign countries; tax changes, such as global minimum tax measures, or issues related to administration, guidance and/or regulations associated with biofuel policies, including CFPC, and risks associated with the qualification and sale of such credits; difficulties or a significant disruption (including, without limitation, due to cyber-attack) in the Company’s information systems, networks or the confidentiality, availability or integrity of our data or failure to implement new systems and software successfully; risks relating to possible third-party claims of intellectual property infringement; increased contributions to the Company’s pension and benefit plans, including multiemployer and employer-sponsored defined benefit pension plans as required by legislation, regulation or other applicable U.S. or foreign law or resulting from a U.S. mass withdrawal event; bad debt write-offs; loss of or failure to obtain necessary permits and registrations; the potential for future terrorist attacks, responses to terrorist attacks and other acts of war or hostility, including the ongoing conflicts in the Middle East, Africa, North Korea and Ukraine; uncertainty regarding any administration changes in the U.S. or elsewhere around the world, including, without limitation, impacts to trade, tariffs and/or policies impacting the Company (such as biofuel policies and mandates); and/or unfavorable export or import markets. These factors, coupled with volatile prices for natural gas and diesel fuel, inflation rates, climate conditions, currency exchange fluctuations, general performance of the U.S. and global economies, disturbances in world financial, credit, commodities and stock markets, and any decline in consumer confidence and discretionary spending, including the inability of consumers and companies to obtain credit due to lack of liquidity in the financial markets, among others, could cause actual results to vary materially from the forward-looking statements included in this report or negatively impact the Company’s results of operations. Among other things, future profitability may be affected by the Company’s ability to grow its business, which faces competition from companies that may have substantially greater resources than the Company. The Company’s announced share repurchase program may be suspended or discontinued at any time and purchases of shares under the program are subject to market conditions and other factors, which are likely to change from time to time. The Company cautions readers that all forward-looking statements speak only as of the date made, and the Company undertakes no obligation to update any forward looking statements, whether as a result of changes in circumstances, new events or otherwise.
