Discontinued Operations

12 Months Ended

Jan. 02, 2021

Discontinued Operations and Disposal Groups [Abstract]

3. Discontinued Operations

Tradin Organic

On December 30, 2020 (the "Closing Date"), the Company completed the divestiture of its organic ingredient sourcing and production business, Tradin Organic, by selling all of the Company's interests and rights in The Organic Corporation B.V. and Tradin Organics USA LLC to Amsterdam Commodities N.V. (the "Purchaser"), pursuant to a Master Purchase Agreement, dated November 25, 2020, among the Company, the Purchaser, and the other parties thereto (the "Transaction"). The global operations of Tradin Organic included its organic and non-GMO ingredient sourcing operations centered in Amsterdam, The Netherlands, and Scott's Valley, California, together with its consumer-packaged premium juice co-manufacturing business, and its cocoa, sunflower, sesame, and avocado ingredient processing facilities located in the Netherlands, Bulgaria, and Ethiopia. Together with the Company's former soy and corn business (see note 4), Tradin Organic comprised the Company's Global Ingredients operating segment.

In connection with the Transaction, the Company and the Purchaser entered into a Supply Agreement as of the Closing Date, whereby the Company may continue to purchase specified organic ingredients from Tradin Organic for use in the Company's plant-based and fruit-based operations. The initial term of Supply Agreement is for five years and is renewable for one-year periods thereafter. The products are to be supplied at competitive market prices based on the landed cost to Tradin Organic of the underlying commodities. The Supply Agreement does not impose any minimum purchase commitments on the Company but does require the Company to purchase substantially all of its requirements for the specified products from Tradin Organic, which totaled approximately $20 million during the year ended January 2, 2021.

As of the Closing Date, the Company received cash consideration from the Transaction of $373.7 million (€305.1 million), net of cash acquired and debt assumed by the Purchaser and subject to certain post-closing adjustments, translated using the closing rate of exchange of euros to U.S. dollars on December 29, 2020. The Company realized a cash loss of $12.7 million on a foreign currency forward contract that it entered into to economically hedge the exchange rate risks on the euro-denominated cash consideration between the date of the Master Purchase Agreement and the Closing Date. The Company recorded this loss in other expense from continuing operations in the statement of operations for the year ended January 2, 2021, as the loss is not considered a direct operating item of the discontinued operations of Tradin Organic.

In connection with the Transaction, on December 31, 2020, the Company repaid in full the approximately $72 million of outstanding borrowings under the Dutch subfacility of the Company's Global Credit Facility as of the Closing Date. In addition, on December 31, 2020, the Company utilized $233.3 million of the cash consideration from the Transaction to redeem all of its outstanding 9.5% senior secured second lien notes due October 2022 (including accrued interest and premium paid on redemption of $9.8 million in total) and repaid approximately $60 million of other outstanding borrowings under its Global Credit Facility. (See note 14.)

The following table presents the major classes of assets and liabilities of Tradin Organic included as part of discontinued operations as at the Closing Date and December 28, 2019:

	December 30, 2020	December 28, 2019
	$	$
Assets
Cash and cash equivalents	6,037	1,370
Accounts receivable	50,025	49,627
Inventories	155,829	169,984
Other current assets	15,424	15,427
Total current assets	227,315	236,408

Property, plant and equipment	25,787	24,875
Goodwill	25,320	24,424
Intangible assets	6,291	7,746
Other long-term assets	2,566	2,494
Total long-term assets	59,964	59,539

Total assets	287,279	295,947

Liabilities
Bank indebtedness	296	3,870
Accounts payable and accrued liabilities	39,218	44,430
Other current liabilities	2,239	3,344
Total current liabilities	41,753	51,644

Long-term debt	6,087	6,364
Other long-term liabilities	1,869	2,379
Total long-term liabilities	7,956	8,743

Total liabilities	49,709	60,387

As of the Closing Date, the Company recognized the following pre-tax gain on sale of Tradin Organic in discontinued operations:

	$
Cash consideration	373,709
Less: costs to sell	(15,636)
Net proceeds	358,073

Total assets sold	287,279
Total liabilities sold	(49,709)
Net assets sold	237,570
Less: non-controlling interests	(1,544)
Add: accumulated other comprehensive loss	10,229
Carrying amount of net assets sold	246,255

Pre-tax gain on sale	111,818

The following table reconciles the major components of the results of discontinued operations to the amounts reported in the consolidated statements of operations for the years ended January 2, 2021, December 28, 2019 and December 29, 2018:

	January 2, 2021	December 28, 2019	December 29, 2018
	$	$	$
Revenues	503,036	468,426	476,880
Cost of goods sold	441,277	418,676	423,941
Selling, general and administrative expenses⁽¹⁾	26,953	27,737	25,731
Intangible asset amortization	1,451	1,859	1,887
Other expense (income), net	(782)	591	(2,417)
Foreign exchange loss (gain)	3,142	(1,147)	(62)
Interest expense⁽²⁾	2,409	1,912	1,285
Earnings before gain of sale	28,586	18,798	26,515
Pre-tax gain on sale	111,818	—	—
Earnings from discontinued operations before income taxes	140,404	18,798	26,515
Provision for income taxes	15,885	6,322	8,188
Earnings (loss) attributable to non-controlling interests	(301)	154	62
Earnings from discontinued operations	124,820	12,322	18,265

(1) Selling, general and administrative expenses exclude management fees charged by SunOpta Corporate Services and include stock-based compensation expense attributable to employees of Tradin Organic.

(2) Interest expense reflects interest on debt directly attributable to Tradin Organic including borrowings by Tradin Organic under the Dutch subfacility of the Company's Global Credit Facility.