Business Acquisitions

12 Months Ended

Dec. 29, 2012

Business Combinations [Abstract]

Business Combination Disclosure Text Block

2. Business Acquisitions

Acquisitions in Fiscal 2012

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 WGI amounted to $870 based on the terms of the offer. The fair value of the remaining outstanding common shares was included in accrued liabilities at the acquisition date, as Opta Minerals had commenced a compulsory acquisition of the outstanding common shares of WGI not tendered to the offer. The compulsory acquisition was completed on November 8, 2012, following which Opta Minerals owned100% 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 estimated fair values of the assets acquired and liabilities assumed as of the acquisition date. The amounts recognized for current assets acquired and current liabilities assumed are provisional and adjustments may occur as a result of obtaining more information regarding the valuation of these items. The Company expects to finalize these amounts no later than one year from the acquisition date.

	Provisional(1)	Adjusted(2)
	$	$
Cash and cash equivalents	2,454	2,454
Accounts and other receivables(3)	4,922	4,922
Inventories	7,404	7,329
Other current assets	111	111
Property, plant and equipment	4,991	5,386
Intangible assets	630	-
Goodwill(4)	-	217
Deferred income tax	290	383
Accounts payable and accrued liabilities	(5,056)	(5,056)
Bank indebtedness and long-term debt	(551)	(551)
Other long-term liabilities	(227)	(227)
Total consideration	14,968	14,968

(1)       Reflects the provisional amounts previously reported by the Company in its consolidated financial statements for the quarter ended September 29, 2012.

(2)Adjustments reflect additional information obtained in connection with the valuation of intangible assets and property, plant and equipment, as well as the consequential tax effects, as of the acquisition date. As these adjustments were not considered material to the Company's previously reported consolidated financial statements for the quarter ended September 29, 2012, the Company has not retrospectively adjusted those financial statements.

(3)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.

(4)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 WGI, (ii) the value of the going-concern element of WGI'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 WGI's assembled workforce that does not qualify for separate recognition as an intangible asset.

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 earnings of WGI attributable to SunOpta Inc. that are included in the consolidated statement of operations for the period from the acquisition date toDecember 29, 2012 were $10,225 and $32, 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 of Babco as of the 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 of 2.5% 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 amalgamation with Babco, 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 taxes for the year endedDecember 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 December 29, 2012 were $12,082 and $2,223, respectively.

Acquisitions in Fiscal 2011

On November 10, 2011, Opta Minerals acquired the outstanding members' interest of Inland RC, LLC (“Inland”), a manufacturer of pre-cast refractory shapes, injection lances, stirring lances and electric furnace deltas. Inland's results of operations have been included in the Opta Minerals operating segment since the date of acquisition. During fiscal 2012, Opta Minerals finalized the acquisition accounting for Inland. As the adjustments to the provisional amounts recorded as of the acquisition date were not considered material to the Company's previously reported consolidated financial statements, the Company has not retrospectively adjusted those financial statements.

On August 5, 2011, the Company acquired the assets and business of Lorton's Fresh Squeezed Juices, Inc. (“Lorton's”), an integrated producer of a variety of citrus-based products in both industrial and packaged formats. Lorton's results of operations have been included in the Consumer Products Group since the date of acquisition.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as well as the consideration transferred to effect the acquisitions of Inland and Lorton's, as of the respective acquisition dates.

			Inland	Lorton's
		Provisional	Final
		$	$	$
Net assets acquired:
	Current assets	470	470	1,672
	Property, plant and equipment	508	508	1,221
	Goodwill(1)	661	410	572
	Intangible assets(2)	249	249	469
	Current liabilities	(560)	(635)	(923)
	Deferred income tax liability	(130)	-	-
		1,198	1,002	3,011
Consideration:
	Cash consideration	658	658	2,500
	Contingent consideration	540	344	511
		1,198	1,002	3,011

(1)       The goodwill recognized is attributable primarily to expected synergies and assembled workforces of Inland and Lorton's. None of the goodwill is expected to be deductible for tax purposes.

(2)       Intangible assets consist of acquired customer relationships of Inland and Lorton's, which are being amortized over their estimated useful lives of approximately 15 years and seven years, respectively.

Acquisitions in Fiscal 2010

On December 14, 2010, the Company acquired the operating assets of Edner of Nevada, Inc. (“Edner”), a producer of nutritious portable foods such as nutrition bars and grains-based snack bars. Edner'sresults of operations have been included in the Consumer Products Group since the acquisition date.

On November 8, 2010, the Company acquired 100% of the outstanding shares of Dahlgren & Company, Inc. (“Dahlgren”), an integrated processor and global supplier of confection sunflower seed products including in-shell and kernel products, roasted sunflower and soy seeds, bird food, hybrid seed and other products. Dahlgren's results of operations have been included in the Grains and Foods Group since the acquisition date.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed, as well as the consideration transferred to effect the acquisitions of Edner and Dahlgren, as of the respective acquisition dates.

		Edner	Dahlgren
		$	$
Net assets acquired:
	Cash and cash equivalents	-	4,239
	Current assets	2,376	23,231
	Property, plant and equipment	1,418	12,402
	Goodwill(1)	2,346	15,940
	Intangible assets(2)	1,823	11,013
	Other long-term assets	-	624
	Current liabilities	(647)	(12,288)
	Deferred income tax liability	-	(7,670)
		7,316	47,491
Consideration:
	Cash consideration	4,000	46,303
	Contingent consideration	3,316	1,188
		7,316	47,491

(1)        The goodwill recognized is attributable primarily to expected synergies and assembled workforces of Edner and Dahlgren. None of the goodwill is expected to be deductible for tax purposes.

(2)       Intangible assets of consist principally of acquired customer relationships of Edner and Dahlgren, which are being amortized over their estimated useful lives of approximately seven years and 12 years, respectively.

Pro FormaConsolidatedResults of Operations (Unaudited)

The following table presents unaudited pro forma consolidated results of operations for the years ended December 29, 2012 and December 31, 2011, as if the acquisitions of WGI and Babco had occurred as of January 2, 2011, and the Inland and Lorton's acquisitions had occurred as of January 1, 2010.

		December 29, 2012	December 31, 2011
		$	$
Pro forma revenue		1,113,598	1,078,574
Pro forma earnings attributable to SunOpta Inc.		22,667	5,584
Pro forma earnings per share
	Basic	0.34	0.09
	Diluted	0.34	0.08

The pro forma consolidated results of operations were prepared using the acquisition method of accounting and are based on unaudited historical financial information of the Company and the respective acquired businesses. 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 directly used to finance the acquisitions; and
• consequential tax effects of the preceding adjustments.

The pro forma information is not necessarily indicative of what the Company's consolidated results of operations actually would have been had the WGI and Babco acquisitions and the Inland and Lorton's acquisitions been completed on January 2, 2011and January 1, 2010, respectively, nor does it purport to project the future results of operations of the Company.