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Value Creation Plan
6 Months Ended
Jun. 29, 2019
Restructuring and Related Activities [Abstract]  
Value Creation Plan [Text Block]
5 .

Value Creation Plan

Overview

In the fourth quarter of 2016, the Company conducted a thorough review of its operations, management and governance, with the objective of maximizing the Company’s ability to deliver long-term value to its shareholders. As a product of this review, the Company developed a Value Creation Plan built on four pillars: portfolio optimization, operational excellence, go-to-market effectiveness, and process sustainability. In addition to the sale of the Company’s soy and corn business (as described in note 4) and related cost reduction measures, other actions taken under the Value Creation Plan have included the rationalization of certain of the Company’s operations and facilities, including the closure of the Company’s juice facility in San Bernardino, California, in the fourth quarter of 2016, the exit from flexible resealable pouch and nutrition bar product lines and operations initiated in the fourth quarter of 2017, and the consolidation of roasted snack operations and related disposal of the Company’s roasting facility in Wahpeton, North Dakota, in the second quarter of 2018, as well as other cost savings initiatives. In addition, other actions taken to-date under the Value Creation Plan include investments in certain of the Company’s operations and facilities to enhance food safety and quality and to improve production efficiencies, as well as investments in personnel, processes and tools.

Costs Incurred Under the Value Creation Plan

The following table summarizes costs incurred under the Value Creation Plan for the two quarters ended June 29, 2019 and June 30, 2018:

Employee
Asset recruitment, Consulting
impairments retention and fees and
and facility termination temporary
closure costs(a) costs(b) labor costs Total
$ $ $ $
June 29, 2019
Balance payable, December 29, 2018(1) 477 436 —   913
Costs incurred and charged to expense 308 2,947 278 3,533
Cash payments, net (483 ) (3,886 ) ( 278 ) ( 4,647 )
Non-cash adjustments 2,102 —   2,102
Balance payable, June 29, 2019(1) 302 1,599 —   1,901
June 30, 2018
Balance payable (receivable), December 31, 2017 ( 700 ) 4,427 —   3,727
Costs incurred and charged to expense 1,867 557 410 2,834
Cash receipts (payments), net 607 ( 4,115 ) ( 110 ) ( 3,618 )
Non-cash adjustments ( 1,255 ) —   ( 1,255 )
Balance payable, June 30, 2018 519 869 300   1,688

(1)

Balance payable as at June 29, 2019 was included in accounts payable and accrued liabilities on the consolidated balance sheet.


(a)

Asset impairments and facility closure costs

For the two quarters ended June 29, 2019, costs incurred included costs to dismantle and move equipment from the Company’s soy extraction facility, in Heuvelton, New York, which was closed in December 2016. As at June 29, 2019, the balance payable represented the remaining lease obligation (net of sublease rentals) related to the Company’s former nutritional bar facility, which was vacated in March 2018. The lease and sublease on this facility extend to December 2020.

For the two quarters ended June 30, 2018, costs incurred included the remaining lease obligation related to the former nutrition bar facility, and an impairment loss related to the disposal of the Company’s roasting facility in Wahpeton, North Dakota. Net cash receipts reflected proceeds on the sale of nutrition bar equipment.

(b)

Employee recruitment, retention and termination costs

For the two quarters ended June 29, 2019, costs incurred included severance benefits related to employee terminations, including the Company’s former President and Chief Executive Officer ("CEO") in February 2019 and headcount reductions related to cost rationalizations associated with the sale of the soy and corn business, net of the reversal of $ 2.1   million of previously recognized stock-based compensation related to forfeited awards of terminated employees. In addition, costs incurred included recruitment costs related to the Company’s CEO transition, accrued retention bonuses for certain employees who remain employed by the Company through specified retention dates, and the reimbursement of employee relocation costs. As at June 29, 2019, the balance payable included severance benefits payable to certain employees through salary continuance extending up to 24 months, as well as accrued retention costs.

For the two quarters ended June 30, 2018, costs incurred represented severance benefits to terminated employees, and cash payments included retention bonuses that were paid out to certain employees.

The following table summarizes costs incurred since the inception of the Value Creation Plan to June 29, 2019:

Employee
Asset recruitment, Consulting
impairments retention and fees and
and facility termination temporary
closure costs costs labor costs Total
$ $ $ $
Costs incurred and charged to expense 34,960 17,928 21,257 74,145
Cash payments, net ( 10,161 ) ( 18,854 ) ( 21,257 ) ( 50,272 )
Non-cash adjustments ( 24,497 ) 2,525 —   ( 21,972 )
Balance payable, June 29, 2019 302 1,599 —   1,901

For the quarters and two quarters ended June 29, 2019 and June 30, 2018, costs incurred and charged to expense were recorded in the consolidated statement of operations as follows:

Quarter ended Two quarters ended
June 29, 2019 June 30, 2018 June 29, 2019 June 30, 2018
$ $ $ $
Cost of goods sold(1) —   —   100
Selling, general and administrative expenses(2) 954 300 1,157 613
Other expense(3) 721 339 2,376 2,121
1,675   639   3,533   2,834  

(1)

For the two quarters ended June 30, 2018, inventory write-downs and facility closure costs recorded in cost of goods sold were allocated to the Consumer Products operating segment.

(2)

Professional fees and employee retention, recruitment and relocation costs recorded in selling general and administrative expenses were allocated to Corporate Services.

(3)

For the quarter ended June 29, 2019, costs recorded in other expense, such as employee termination and recruitment costs, and asset impairment, facility closure and lease termination costs, were allocated as follows: Global Ingredients reportable segment – $ 0.1   million (June 30, 2018 – $ 0.3   million); Consumer Products operating segment – $ 0.5   million (June 30, 2018 – $ nil  ); and Corporate Services – $ 0.1   million (June 30, 2018 – $ nil  ). For the two quarters ended June 29, 2019, costs recorded in other expense were allocated as follows: Global Ingredients reportable segment – $ 0.3   million (June 30, 2018 – $ 0.7   million); Consumer Products operating segment – $ 1.3   million (June 30, 2018 – $ 1.3   million); and Corporate Services – $ 0.8   million (June 30, 2018 – $ 0.1   million).