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Discontinued Operations
 9 Months Ended
Sep. 25, 2021
Discontinued Operations and Disposal Groups [Abstract]  
Discontinued Operations Discontinued Operations
On August 28, 2021, the Company completed the previously announced sale of its lumber and newsprint facilities and certain related assets (the “Purchased Assets”) located in Ontario and Québec Canada, to GreenFirst for $232 million. At closing, the Company received $193 million in cash, approximately 28.7 million shares of GreenFirst’s common stock with a deemed fair value of $42 million and a credit note issued to the Company by GreenFirst in the amount of CDN $8 million (approximately $5 million after present value discount). The credit note may be offset against amounts owed by the Company to GreenFirst in the future for wood chip purchases, equally over the next 5 years. The GreenFirst shares will be held for a minimum of six months and accounted for at fair value, with changes in fair value recorded in the consolidated statement of income. See Note 10 — Fair Value Measurements for additional information.
The cash received at closing was preliminary and subject to final purchase price adjustments to be completed within 90 days following the close of the transaction. Driven primarily by lower inventory balances, the Company currently estimates the cash portion of the purchase price will be reduced by $8 million, from $193 million to $185 million. However, concurrently with purchase price adjustments, the Company and GreenFirst will settle other adjustments resulting from events related to the sale, expected to result in a net cash outflow by the Company of approximately $2 million to $3 million.
As of August 28, 2021, the carrying value of the Purchased Assets was $215 million. The Purchased Assets included six lumber facilities, a newsprint facility, inventory and certain real property, machinery, permits, leases, licenses, pension assets and liabilities and other related assets associated with the successful operations of these businesses. Other assets and liabilities, including accounts receivable, accounts payable, certain retained inventory and rights and obligations to softwood lumber duties, generated or incurred through the closing date, are excluded. Since 2017, the Company has paid a total of $112 million in duties. In connection with the sale, the Company recorded a preliminary gain on sale of $6 million, net of tax, inclusive of currently estimated purchase price adjustments. The preliminary net gain is included in the results of discontinued operations.
In connection with the transaction, the Company entered into a 20-year wood chip and residual fiber supply agreement with GreenFirst, securing supply for the Company’s operations at the Temiscaming plant. Additionally, the parties entered into a Transition Services Agreement ("TSA") whereby the Company will provide certain transitional services to GreenFirst, for a period of time following the closing of the transaction, not to exceed twelve months from such date. The TSA includes support related to information technology, accounting, treasury, human resources and payroll, tax, supply chain and procurement functions. Costs incurred by the Company associated with the TSA will be reimbursed by GreenFirst.

Income (loss) from discontinued operations is comprised of the following:
Three Months EndedNine Months Ended
September 25, 2021September 26, 2020September 25, 2021September 26, 2020
Net sales (a)$83,994 $100,440 $442,833 $258,356 
Cost of sales(68,224)(72,040)(237,912)(230,098)
Gross margin15,770 28,400 204,921 28,258 
Selling, general and administrative expenses and other (7,571)(9,901)(26,465)(24,860)
Operating income (loss) 8,199 18,499 178,456 3,398 
Interest expense (b)(1,973)(2,162)(7,290)(6,333)
Other non-operating income254 711 967 1,969 
Income (loss) from discontinued operations before income taxes6,480 17,048 172,133 (966)
Income tax benefit (expense)(4,239)(793)(66,777)952 
Income (loss) from discontinued operations, net of taxes$2,241 $16,255 $105,356 $(14)
Gain from sale of discontinued operations, pre-tax9,217 — 9,217 956 
Income tax expense on gain(2,822)(17)(2,822)(200)
Gain from sale of discontinued operations, net of tax (c)6,395 (17)6,395 756 
Income from Discontinued Operations$8,636 $16,238 $111,751 $742 

(a)    Net of intercompany sales of $8 million and $10 million for three months ended September 25, 2021 and September 26, 2020, respectively, and $31 million and $33 million for the nine months ended September 25, 2021 and September 26, 2020, respectively.

(b)    The Company has allocated interest expense to discontinued operations based on the total portion of debt not attributable to other operations repaid as a result of the transaction.

(c)    Also included in income from discontinued operations for the three and nine months ended September 26, 2020 is income/ (expense) of $(17) thousand and $756 thousand, respectively, from working capital adjustments that arose following the closing of the November 2019 sale of the Company’s Matane, Quebec pulp mill.

Other discontinued operations information is as follows:    
Three Months EndedNine Months Ended
September 25, 2021September 26, 2020September 25, 2021September 26, 2020
Depreciation and amortization$— $3,477 $3,172 $9,259 
Capital expenditures$2,119 $3,976 $7,933 $7,403 
    
The following table presents the major classes of assets and liabilities of discontinued operations that are classified as held for sale:
September 25, 2021December 31, 2020
Inventory $— $62,837 
Prepaid and other current assets— 9,725 
Total current assets— 72,562 
Property, plant and equipment, net— 97,151 
Other assets— 43,552 
   Total assets$— $213,265 
Accrued and other current liabilities$— $780 
Total current liabilities— 780 
Pension and Other Postretirement Benefits— 9,316 
Other long-term liabilities— 2,498 
Total liabilities$— $12,594 
As of September 25, 2021, collective bargaining agreements currently covering less than 40 unionized employees in Canada working in the lumber and newsprint operations had expired. The unionized employees have continued to work under the terms of the expired contracts while negotiations continue with GreenFirst. The Company is no longer a party to these negotiations.