Business Acquisitions

9 Months Ended

Sep. 29, 2012

Business Combinations [Abstract]

Business Combination Disclosure Text Block

2. Business acquisitions

WGI Heavy Metals, Incorporated

On August 29, 2012, Opta Minerals paid $14,098 in cash to acquire approximately 94% of the outstanding common shares of WGI Heavy Metals, Incorporated (“WGI”), pursuant to an offer by Opta Minerals to acquire all of the outstanding common shares of WGI for Cdn $0.60 cash per share. The fair value of the remaining outstanding common shares of WGIamounted to $870based on the terms of the offer. The fair value of the remaining outstanding common shares has been included in accrued liabilities,asOpta Minerals had commenced a compulsory acquisition of the outstanding common shares of WGI not tendered to the offer. The compulsory acquisitionis expected to be completed on or about November 8, 2012, following whichOpta Minerals will own100% of WGI.WGI's principal business is the processing and sale of industrial abrasive minerals, and the sourcing, assembly and sale of ultra-high pressure water jet cutting machine replacement parts and components.This acquisition complements Opta Minerals' existing product portfolio and expands product line offerings to new and existing customers.

The acquisition of WGI has been accounted for as a business combination under the acquisition method of accounting. The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date.The amounts recognized for the assets acquired and liabilities assumed are provisional due to the short duration since the acquisition date to obtain the information necessary to complete the valuation process for intangible assets and property, plant and equipment. The Company expects to finalize these amounts no later than one year from the acquisition date.

	Amounts
	Recognized as
	of Acquisition
	Date
	$
Cash and cash equivalents	2,454
Accounts receivable(1)	4,922
Inventories	7,404
Other current assets	111
Property, plant and equipment	4,991
Intangible assets(2)	630
Deferred income tax	290
Accounts payable and accrued liabilities	(5,056)
Bank indebtedness and long-term debt	(551)
Other long-term liabilities	(227)
Total consideration	14,968

(1)       Includes trade accounts receivable with a fair value of $4,365. The gross contractual amount of trade accounts receivable was $5,097, of which $732 is expected to be uncollectible.

(2)       Intangible assets principally consistof acquired customer and other relationships, which are being amortized over their estimated useful lives of approximately 15 years.

The acquired assets, assumed liabilities and results of operations of WGI have been included in the Opta Minerals operating segment since the date of acquisition. The revenues and lossesof WGI attributable to SunOpta Inc. that are included in the consolidated statement of operations for the period from the acquisition date to September 29, 2012 were $2,286 and $105, respectively.

Babco Industrial Corp.

On February 10, 2012, Opta Minerals acquired all of the outstanding common shares of Babco Industrial Corp. (“Babco”), located in Regina, Saskatchewan. Babco is an industrial processor of petroleum coke.This acquisition complements Opta Minerals' existing product portfolio and provides for additional product line offerings to new and existing customers in the region.

This transaction has been accounted for as a business combination under the acquisition method of accounting. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as well as the consideration transferred to effect the acquisition as of the acquisition date.

	Amounts
	Recognized as
	of Acquisition
	Date
	$
Net assets acquired
Accounts receivable(1)	467
Inventories	372
Other current assets	20
Property, plant and equipment	4,909
Goodwill(2)	7,675
Intangible assets(3)	9,347
Accounts payable and accrued liabilities	(692)
Deferred income taxes	(2,808)
Long-term debt(4)	(1,145)
	18,145
Consideration
Cash consideration	17,530
Contingent consideration(5)	615
	18,145

(1)       The fair value of accounts receivable acquired is equal to the gross contractual amount receivable.

(2)       Goodwill is calculated as the difference between the acquisition-date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. None of the goodwill is expected to be deductible for tax purposes. The goodwill recorded represents (i) synergies and economies of scale expected to result from combining the operations of Opta Minerals and Babco, (ii)the value of the going-concern element of Babco's existing business (that is, the higher rate of return on the assembled net assets versus if Opta Minerals had acquired all of the net assets separately), and (iii) the value of Babco's assembled workforce that does not qualify for separate recognition as an intangible asset.

(3)       Intangible assets consist of acquired customer relationships, which are being amortized over their estimated useful lives of approximately 15 years.

(4)       In conjunction with the acquisition, Opta Minerals fully repaid Babco's existing banking facilities.

(5)       Represents the fair value of contingent consideration payments of up to approximately$1,300 if Babco achieves certain earnings before interest, taxes, depreciation and amortization(“EBITDA”) targets over the next five years. The fair value of the contingent consideration was measured using a discounted cash flow analysis based on level 3 inputs, which included a forecasted EBITDA growth rate of2.5% and a risk-adjusted discount rate of 18.0%.

In addition to the recognition of the fair values of the assets acquired and liabilities assumed at the acquisition date, Opta Minerals determined that in connection with its subsequent amalgamationwith Babcoduring the quarter ended June 30, 2012, it was more likely than not that the combined company would be able to realize a portion of Opta Minerals' pre-existing non-capital loss carryforwards. As a result, Opta Minerals released $990 of a valuation allowance against its deferred tax assets, resulting in a corresponding deferred tax benefit (before non-controlling interest) recognized in the provision for income taxesfor the three quarters endedSeptember 29, 2012.

The acquired assets (including goodwill), assumed liabilities and results of operations of Babco have been included in the Opta Minerals operating segment since the date of acquisition. The revenues and earnings of Babco attributable to SunOpta Inc. that are included in the consolidated statement of operations for the period from the acquisition date to September 29, 2012 were $8,667 and $1,545, respectively.

Proforma consolidated results of operations (unaudited)

The following table presents unaudited proforma consolidated results of operations for the quarter and three quarters endedSeptember 29, 2012 and October 1, 2011, as if the acquisitions of WGI and Babco hadoccurred as of January 2, 2011.

		Quarter ended		Three quarters ended
		September 29, 2012	October 1, 2011	September 29, 2012	October 1, 2011
		$	$	$	$
Pro forma revenues		284,632	269,955	843,509	817,635
Pro forma earnings attributable to SunOpta Inc.		4,836	3,609	18,235	13,635
Pro forma earnings per share
	Basic	0.07	0.06	0.28	0.21
	Diluted	0.07	0.05	0.27	0.20

The proforma consolidated results of operations were prepared using the acquisition method of accounting and are based on unaudited historical financial information of the Company, WGI and Babco. The pro forma information reflects primarily the following pro forma adjustments:

• incremental amortization expense related to the fair value of the identifiable intangible assets acquired;
• additional depreciation expense related to the fair value adjustment to property, plant and equipment acquired;
• additional interest costs associated with an increase in borrowings under Opta Minerals' non-revolving term credit facility, which wereused to finance the acquisitions;
• exclusion of acquisition-related transaction costs incurred by Opta Minerals from pro forma earnings for the quarter and three quarters endedSeptember 29, 2012, and the inclusion of those costs in pro forma earnings for the quarter and three quarters endedOctober 1, 2011; and
• consequential tax effects of the preceding adjustments.

The proforma information is not necessarily indicative of what the Company's consolidated results of operations actually would have been had the acquisitions of WGI and Babco been completed on January 2, 2011. In addition, the proforma information does not purport to project the future results of operations of the Company.