Darling Ingredients(DAR) - 2026 Q4 - Annual Report

Financial Obligations and Risks - The company faces covenants in its senior notes and credit agreements that may limit its ability to finance future operations and implement business strategies [170]. - The company may not generate sufficient cash to service all of its debt obligations, which could force it to take alternative actions that may not be successful [172]. - If cash flows and capital resources are insufficient, the company could be forced to reduce or delay investments and capital expenditures [173]. - The performance of the company's subsidiaries significantly affects its ability to make debt payments, with legal and contractual restrictions potentially limiting cash flow availability [176]. - Future acquisitions could lead to increased indebtedness and potential undisclosed liabilities, which may adversely affect the company's financial condition [195]. - Changes in tax rates or exposure to additional income tax liabilities could adversely affect profitability, with potential impacts from differing statutory tax rates and changes in tax laws [214]. Market and Economic Conditions - The market price of the company's common stock has been volatile, which could affect the value of investments [178]. - Downturns in global economies and volatility in commodity and credit markets could materially adversely affect the company's business and financial condition [193]. - Large capital projects may take years to complete, and changing market conditions could negatively impact expected returns, affecting financial results [199]. - The company is exposed to risks of increased interest rates due to variable interest rates on certain debts, which could negatively impact net income and cash flows [175]. Regulatory and Compliance Risks - The company may incur material costs and liabilities in complying with government regulations across various jurisdictions [189]. - The company is subject to evolving cybersecurity and data privacy regulations, including the GDPR and CCPA, which could impose significant compliance costs and penalties for noncompliance [206][208]. - The EU AI Act, effective in August 2024, may require substantial investments to ensure compliance, potentially increasing costs and deployment timelines for AI systems [209]. - The company is subject to various lawsuits and regulatory proceedings that may materially affect business operations and financial condition, with potential significant costs associated with litigation [215]. Operational and Strategic Challenges - The company is exploring acquisitions and joint ventures, including a proposed joint venture with Tessenderlo Group NV, but may face challenges in identifying suitable candidates or completing transactions on favorable terms [194]. - Disruptions in information systems could result in significant operational challenges, loss of sales, and increased costs, adversely affecting financial performance [202]. - The company relies on key personnel for its success, and challenges in attracting and retaining skilled employees could materially impact its operations and financial condition [212]. - There may be material weaknesses in internal controls over financial reporting, which could harm public confidence and require remediation efforts, including potential restatements of financials [213]. Market and Product Risks - The company faces risks from changing consumer preferences in the food and pet food industries, which could lead to reduced demand and price reductions for its products [200]. - The company may face challenges in protecting intellectual property rights, which could impair competitiveness and limit future revenue [221]. - Legal claims regarding intellectual property infringement could result in significant costs and prevent the sale of products, adversely affecting business operations [222]. Insurance and Liability Risks - Insurance coverage may not fully cover operational risks, and increased claims or inability to obtain insurance at acceptable rates could adversely affect financial condition [218]. - European pension funds may require minimum funding contributions, and stricter national requirements could necessitate significant resource expenditure for compliance [216][217]. Financial Instruments and Currency Risks - The Company has long-term debt of approximately $1.5 billion, with a portion of $900.0 million fixed through interest rate swaps at a weighted average rate of 3.656% until the second quarter of 2027 [379]. - A 1% increase in interest rates is estimated to increase the Company's annual interest expense by approximately $10.4 million [379]. - The Company has significant exposure to foreign currency exchange risks, particularly with the euro, Brazilian real, and other currencies [380]. - The Company uses derivative instruments to manage cash flow risks related to interest rates, natural gas, diesel fuel, and foreign currency exchange rates [369]. - The aggregate fair value of foreign exchange contracts was approximately $17.6 million as of January 3, 2026 [376]. - The aggregate fair value of commodity option and forward contracts marked to market was approximately $1.2 million as of January 3, 2026 [377].