UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
|
|
For the quarterly period ended |
|
|
|
|
|
OR |
|
|
|
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission file number:
(Exact name of registrant as specified in its charter)
|
|
|
Not Applicable |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
|
|
|
|
|
|
( |
|
(Address of principal executive offices) |
|
(Registrant's telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
| Accelerated filer ☐ | |
| Non-accelerated filer ☐ | Smaller reporting company |
| (Do not check if a smaller reporting company) | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No
Securities registered pursuant to Section 12(b) of the Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
|
|
|
|
|
|
The Toronto Stock Exchange |
The number of the registrant's common shares outstanding as of May 3, 2024 was
SUNOPTA INC.
FORM 10-Q
For the Quarterly Period Ended March 30, 2024
TABLE OF CONTENTS
Basis of Presentation
Except where the context otherwise requires, all references in this Quarterly Report on Form 10-Q ("Form 10-Q") to the "Company," "SunOpta," "we," "us," "our" or similar words and phrases are to SunOpta Inc. and its subsidiaries, taken together.
In this report, all currency amounts presented are expressed in thousands of United States ("U.S.") dollars ("$"), except per share amounts, unless otherwise stated.
Forward-Looking Statements
This Form 10-Q contains forward-looking statements that are based on management's current expectations and assumptions and involve a number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as "anticipate," "estimate," "target," "intend," "project," "potential," "predict," "continue," "believe," "expect," "can," "could," "would," "should," "may," "might," "plan," "will," "budget," "forecast," the negatives of such terms, and words and phrases of similar impact and include, but are not limited to, references to future financial and operating results, plans, objectives, expectations, and intentions; our expectations regarding the future profitability of our business, including anticipated results of operations, revenue trends, gross margin profile and cash flows; the expected impact of the inflationary cost environment on our business, including raw material, packaging, labor, energy, fuel and transportation costs; the expected impact of pricing actions on sales volumes and gross margins; the expected impact of cost containment measures and productivity initiatives; our expectations regarding customer demand, consumer preferences, competition, sales pricing, availability and pricing of raw material inputs, and timing and cost to complete capital expansion projects; our ability to successfully execute on our capital investment plans, and the viability of those plans; disruptions or inefficiencies in the supply chain; the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing; the anticipated sufficiency of future cash flows to enable the payments of interest and repayment of debt, working capital needs, planned capital expenditures; and our ability to obtain additional financing or issue additional debt or equity securities; our intentions related to the potential sale of selected businesses, operations, or assets; our estimates for losses and related insurance recoveries associated with the recall of specific frozen fruit products initiated in the second quarter of 2023; the outcome of litigation to which we may, from time to time, be a party; and other statements that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on certain assumptions, expectations and analyses we make in light of our experience and our interpretation of current conditions, historical trends and expected future developments, as well as other factors that we believe are appropriate in the circumstances. Whether actual results and developments will be consistent with and meet our expectations and predictions is subject to many risks and uncertainties, including those set forth under Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 30, 2023, under Item 1A. "Risk Factors" of this report, and in our other filings with the U.S. Securities and Exchange Commission and the Canadian Securities Administrators.
| SUNOPTA INC. | 3 | March 30, 2024 Form 10-Q |
All forward-looking statements made herein are qualified by these cautionary statements, and our actual results or the developments we anticipate may not be realized. Our forward-looking statements are based only on information currently available to us and speak only as of the date on which they are made. We do not undertake any obligation to publicly update our forward-looking statements, whether written or oral, after the date of this report for any reason, even if new information becomes available or other events occur in the future, except as may be required under applicable securities laws. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report.
| SUNOPTA INC. | 4 | March 30, 2024 Form 10-Q |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SunOpta Inc.
Consolidated Statements of Operations
For the quarters ended March 30, 2024 and April 1, 2023
(Unaudited)
(All dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
| Quarter ended | ||||||
| March 30, | April 1, | |||||
| 2024 | 2023 | |||||
| $ | $ | |||||
| (note 1) | ||||||
| Revenues (note 14) | ||||||
| Cost of goods sold | ||||||
| Gross profit | ||||||
| Selling, general and administrative expenses | ||||||
| Intangible asset amortization | ||||||
| Other expense (income), net | ( |
) | ||||
| Foreign exchange gain | ( |
) | ( |
) | ||
| Operating income | ||||||
| Interest expense, net | ||||||
| Earnings (loss) from continuing operations before income taxes | ( |
) | ||||
| Income tax expense (benefit) (note 10) | ( |
) | ||||
| Earnings (loss) from continuing operations | ( |
) | ||||
| Earnings (loss) from discontinued operations, net of tax (note 2) | ( |
) | ||||
| Net earnings | ||||||
| Dividends and accretion on preferred stock | ( |
) | ( |
) | ||
| Earnings attributable to common shareholders | ||||||
| Basic and diluted earnings (loss) per share (note 11) | ||||||
| Earnings (loss) from continuing operations | ( |
) | ||||
| Earnings (loss) from discontinued operations | ( |
) | ||||
| Earnings attributable to common shareholders | ||||||
| Weighted-average common shares outstanding (000s) (note 11) | ||||||
| Basic | ||||||
| Diluted |
(See accompanying notes to consolidated financial statements)
| SUNOPTA INC. | 5 |
March 30, 2024 Form 10-Q |
SunOpta Inc.
Consolidated Balance Sheets
As at March 30, 2024 and December 30, 2023
(Unaudited)
(All dollar amounts expressed in thousands of U.S. dollars)
| March 30, 2024 | December 30, 2023 | |||||
| $ | $ | |||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | ||||||
| Accounts receivable, net of allowance for credit losses of $ |
||||||
| Inventories (note 4) | ||||||
| Prepaid expenses and other current assets | ||||||
| Income taxes recoverable | ||||||
| Current assets held for sale (note 2) | ||||||
| Total current assets | ||||||
| Restricted cash (note 5) | ||||||
| Property, plant and equipment, net | ||||||
| Operating lease right-of-use assets | ||||||
| Intangible assets, net | ||||||
| Goodwill | ||||||
| Other assets | ||||||
| Total assets | ||||||
| LIABILITIES | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | ||||||
| Notes payable (note 6) | ||||||
| Current portion of long-term debt (note 7) | ||||||
| Current portion of operating lease liabilities | ||||||
| Total current liabilities | ||||||
| Long-term debt (note 7) | ||||||
| Operating lease liabilities | ||||||
| Deferred income taxes | ||||||
| Total liabilities | ||||||
| Series B-1 Preferred Stock (note 8) | ||||||
| SHAREHOLDERS' EQUITY | ||||||
| Common shares, |
||||||
| Additional paid-in capital | ||||||
| Accumulated deficit | ( |
) | ( |
) | ||
| Accumulated other comprehensive income | ||||||
| Total shareholders' equity | ||||||
| Total liabilities and shareholders' equity | ||||||
| Commitments and contingencies (note 13) |
(See accompanying notes to consolidated financial statements)
| SUNOPTA INC. | 6 |
March 30, 2024 Form 10-Q |
SunOpta Inc.
Consolidated Statements of Shareholders' Equity
As at and for the quarters ended March 30, 2024 and April 1, 2023
(Unaudited)
(All dollar amounts expressed in thousands of U.S. dollars)
| Accumulated | ||||||||||||||||||
| other | ||||||||||||||||||
| Additional | Accumulated | comprehensive | ||||||||||||||||
| Common shares | paid-in capital | deficit | income | Total | ||||||||||||||
| 000s | $ | $ | $ | $ | $ | |||||||||||||
| Balance at December 30, 2023 | ( |
) | ||||||||||||||||
| Employee stock purchase plan | - | - | - | |||||||||||||||
| Stock incentive plan | ( |
) | - | - | ||||||||||||||
| Withholding taxes on stock-based awards | - | - | ( |
) | - | - | ( |
) | ||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||
| Net earnings | - | - | - | - | ||||||||||||||
| Dividends on preferred stock | - | - | - | ( |
) | - | ( |
) | ||||||||||
| Accretion on preferred stock | - | - | - | ( |
) | - | ( |
) | ||||||||||
| Balance at March 30, 2024 | ( |
) | ||||||||||||||||
| Accumulated | ||||||||||||||||||
| other | ||||||||||||||||||
| Additional | Accumulated | comprehensive | ||||||||||||||||
| Common shares | paid-in capital | deficit | income | Total | ||||||||||||||
| 000s | $ | $ | $ | $ | $ | |||||||||||||
| Balance at December 31, 2022 | ( |
) | ||||||||||||||||
| Exchange of Series B-1 Preferred Stock, net of share issuance costs of $ |
- | - | - | |||||||||||||||
| Employee stock purchase plan | - | - | - | |||||||||||||||
| Stock incentive plan | ( |
) | - | - | ||||||||||||||
| Withholding taxes on stock-based awards | - | - | ( |
) | - | - | ( |
) | ||||||||||
| Stock-based compensation | - | - | - | - | ||||||||||||||
| Net earnings | - | - | - | - | ||||||||||||||
| Dividends on preferred stock | - | - | - | ( |
) | - | ( |
) | ||||||||||
| Accretion on preferred stock | - | - | - | ( |
) | - | ( |
) | ||||||||||
| Balance at April 1, 2023 | ( |
) | ||||||||||||||||
(See accompanying notes to consolidated financial statements)
| SUNOPTA INC. | 7 |
March 30, 2024 Form 10-Q |
SunOpta Inc.
Consolidated Statements of Cash Flows
For the quarters ended March 30, 2024 and April 1, 2023
(Unaudited)
(Expressed in thousands of U.S. dollars)
| Quarter ended | ||||||
| March 30, | April 1, | |||||
| 2024 | 2023 | |||||
| $ | $ | |||||
| (note 1) | ||||||
| CASH PROVIDED BY (USED IN) | ||||||
| Operating activities | ||||||
| Net earnings | ||||||
| Earnings (loss) from discontinued operations | ( |
) | ||||
| Earnings (loss) from continuing operations | ( |
) | ||||
| Items not affecting cash: | ||||||
| Depreciation and amortization | ||||||
| Amortization of debt issuance costs | ||||||
| Deferred income taxes | ( |
) | ||||
| Stock-based compensation | ||||||
| Gain on sale of smoothie bowls product line (note 3) | ( |
) | ||||
| Other | ( |
) | ||||
| Changes in operating assets and liabilities, net of divestitures (note 12) | ( |
) | ||||
| Net cash provided by operating activities of continuing operations | ||||||
| Net cash used in operating activities of discontinued operations | ( |
) | ( |
) | ||
| Net cash provided by operating activities | ||||||
| Investing activities | ||||||
| Additions to property, plant and equipment | ( |
) | ( |
) | ||
| Proceeds received from sale of smoothie bowls product line (note 3) | ||||||
| Net cash used in investing activities of continuing operations | ( |
) | ( |
) | ||
| Net cash provided by (used in) investing activities of discontinued operations | ( |
) | ||||
| Net cash provided by (used in) investing activities | ( |
) | ||||
| Financing activities | ||||||
| Increase in borrowings under revolving credit facilities | ||||||
| Repayment of long-term debt | ( |
) | ( |
) | ||
| Borrowings of long-term debt | ||||||
| Proceeds from notes payable (note 6) | ||||||
| Repayment of notes payable (note 6) | ( |
) | ( |
) | ||
| Proceeds from the exercise of stock options and employee share purchases | ||||||
| Payment of withholding taxes on stock-based awards | ( |
) | ( |
) | ||
| Payment of cash dividends on preferred stock | ( |
) | ( |
) | ||
| Payment of share issuance costs | ( |
) | ||||
| Net cash provided by (used in) financing activities of continuing operations | ( |
) | ||||
| Net cash provided by financing activities of discontinued operations | ||||||
| Net cash provided by (used in) financing activities | ( |
) | ||||
| Increase in cash, cash equivalents and restricted cash in the period | ||||||
| Cash, cash equivalents and restricted cash, beginning of the period | ||||||
| Cash, cash equivalents and restricted cash, end of the period | ||||||
| Non-cash investing and financing activities (note 12) |
(See accompanying notes to consolidated financial statements)
| SUNOPTA INC. | 8 |
March 30, 2024 Form 10-Q |
| SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
1. Significant Accounting Policies
Basis of Presentation
These interim consolidated financial statements of SunOpta Inc. (the "Company" or "SunOpta") have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended, and in accordance with United States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for interim financial information. Accordingly, these condensed interim consolidated financial statements do not include all of the disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included and all such adjustments are of a normal, recurring nature. Operating results for the quarter ended March 30, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 28, 2024 or for any other period. The interim consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared on a basis consistent with the annual consolidated financial statements for the year ended December 30, 2023. For further information, refer to the consolidated financial statements, and notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2023.
Reclassification of Discontinued Operations
As described in note 2, on October 12, 2023, the Company completed the divestiture of its frozen fruit business ("Frozen Fruit"). As a result, the operating results and cash flows of Frozen Fruit for the quarter ended April 1, 2023, have been reclassified as discontinued operations on the consolidated statements of operations and cash flows. In addition, the information disclosed in these notes to the unaudited consolidated financial statements is presented on a continuing operations basis, with comparative period information recast to reflect Frozen Fruit as discontinued operations.
Segment Information
The Company manages its continuing operations on a company-wide basis, rather than at a product category or business unit level, thereby making determinations as to the allocation of resources as one operating and reportable segment. The Company's Chief Executive Officer, who has been identified as the Chief Operating Decision Maker ("CODM"), is supported by a centralized management team based on functional area, including sales, marketing, supply chain, and research and development, as well as finance, IT and administration. Only the CODM has overall responsibility and accountability for the profitability and cash flows of the Company. Using financial information at the consolidated level, the CODM makes key operating decisions, including approving annual operating plans, expanding into new markets or product categories, pursuing business acquisitions or divestitures, and initiating major capital expenditure programs. In addition, the CODM determines the allocation of resources and capital investments to optimize operations and maximize opportunities for the Company as a whole without regard to specific product categories or business units. The CODM also uses consolidated information to assess performance against the annual operating plan and to set company-wide incentive compensation targets. The majority of the Company's products are shelf-stable packaged food and beverage products and share similar customers and distribution. Refer to note 14 for a disaggregation of the Company's revenues by product category.
Fiscal Year
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023- 09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09.
| SUNOPTA INC. | 9 | March 30, 2024 Form 10-Q |
SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07.
2. Discontinued Operations
Divestiture of Frozen Fruit
On October 12, 2023 (the "Closing Date"), the Company, together with its subsidiaries Sunrise Growers, Inc. ("Sunrise Growers"), Sunrise Growers Mexico, S. de R.L. de C.V. ("Sunrise Mexico") and SunOpta Mx, S.A. de C.V. ("SunOpta Mexico"), completed the sale of certain assets and liabilities of Frozen Fruit pursuant to the terms of an Asset Purchase Agreement ("APA") with Natures Touch Mexico, S. de R.L. de C.V. and Nature's Touch Frozen Fruits, LLC (the "Purchasers"). At the Closing Date, the estimated aggregate purchase price comprised cash consideration of $
The estimated aggregate purchase price is subject to post-closing adjustments based on a determination of the final net working capital and resulting aggregate purchase price as of the Closing Date (the "Closing Statement"), with adjustments to the aggregate purchase price determined on a separate and individual basis for each of Sunrise Growers, Sunrise Mexico and SunOpta Mexico. Any downward adjustment will be deducted from the principal amount of the Seller Promissory Notes entered into by Sunrise Growers and/or SunOpta Mexico, as the case may be, in an amount up to $
| SUNOPTA INC. | 10 | March 30, 2024 Form 10-Q |
SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
The table below presents the major components of the results of discontinued operations reported in the consolidated statement of operations for the quarters ended March 30, 2024 and April 1, 2023.
| Quarter ended | ||||||
| March 30, | April 1, | |||||
| 2024 | 2023 | |||||
| $ | $ | |||||
| Revenues | ||||||
| Cost of goods sold(1) | ||||||
| Selling, general and administrative expenses(2) | ||||||
| Intangible asset amortization | ||||||
| Other expense (income), net(3) | ( |
) | ||||
| Foreign exchange gain | ( |
) | ( |
) | ||
| Interest expense | ||||||
| Earnings (loss) from discontinued operations before income taxes | ( |
) | ||||
| Income tax benefit | ( |
) | ( |
) | ||
| Earnings (loss) from discontinued operations | ( |
) |
(1) For the quarter ended March 30, 2024, cost of goods sold reflects the write down in the carrying value of the frozen fruit inventory that was not acquired by the Purchasers to its estimated net realizable value.
(2) For the quarter ended March 30, 2024, selling, general and administrative expenses include additional severance costs for former employees of Frozen Fruit not ultimately retained by the Purchasers, as well as the true-up of pre-divestiture profit- sharing bonuses payable to certain Mexican employees of Frozen Fruit.
(3) For the quarter ended March 30, 2024, other expense mainly related to an additional self-insured retention amount paid by the Company in connection with the settlement of certain claims related to the recall of specific frozen fruit products initiated in the second quarter of 2023 (see note 13), partially offset by gains on the settlement of certain pre-existing legal matters related to Frozen Fruit.
As at March 30, 2024 and December 30, 2023, current assets held for sale included on the consolidated balance sheets reflects the remaining carrying value of the frozen fruit inventory that was not acquired by the Purchasers.
3. Sale of Assets
On March 4, 2024, the Company completed the sale of the net assets related to its smoothie bowls product line, including inventories and equipment, for a purchase price of $
4. Inventories
| March 30, 2024 | December 30, 2023 | |||||
| $ | $ | |||||
| Raw materials and work-in-process | ||||||
| Finished goods | ||||||
| Inventory reserves | ( |
) | ( |
) | ||
| SUNOPTA INC. | 11 | March 30, 2024 Form 10-Q |
SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
5. Restricted Cash
Restricted cash relates to certain bank accounts in Mexico that were retained following the divestiture of Frozen Fruit, which are subject to a judicial hold in connection with a litigation matter. Restricted cash has been classified as non-current on the consolidated balance sheets as at March 30, 2024 and December 30, 2023, as the Company cannot predict the timing of when this matter may be resolved.
6. Notes Payable
The Company finances certain purchases of trade goods and services through third-party extended payables facilities. Under these facilities, third-party intermediaries advance the amount of the scheduled payment to the supplier based on the invoice due date and issue a short-term note payable to the Company for the face amount of the supplier invoice. Interest accrues on the note payable from the contractual payment date of the supplier invoice to the extended due date of the note payable, as specified by the negotiated terms of each facility. The Company does not maintain any form of security with the third-party intermediaries. As at March 30, 2024 and December 30, 2023, the Company had outstanding principal payment obligations to the third-party intermediaries of $
7. Long-Term Debt
| March 30, 2024 | December 30, 2023 | |||||
| $ | $ | |||||
| Term loan facility | ||||||
| Revolving credit facility | ||||||
| Less: Unamortized debt issuance costs | ( |
) | ( |
) | ||
| Total credit facilities | ||||||
| Finance lease liabilities | ||||||
| Total debt | ||||||
| Less: current portion | ||||||
| Total long-term debt |
Credit Facilities
On December 8, 2023, the Company entered into a five-year Credit Agreement (the "Credit Agreement") providing for
| SUNOPTA INC. | 12 | March 30, 2024 Form 10-Q |
SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
As at March 30, 2024, the Company was in compliancewith all financial and non-financial covenants under the Credit Agreement.
8. Series B-1 Preferred Stock
As at March 30, 2024, the Company's subsidiary, SunOpta Foods Inc. ("SunOpta Foods"), had
In the first quarter of 2024, the Company paid cash dividends on the Series B-1 Preferred Stock of $
As at March 30, 2024, the Company had
9. Stock-Based Compensation
Special Awards
On January 2, 2024, the Company granted special one-time awards of
| SUNOPTA INC. | 13 | March 30, 2024 Form 10-Q |
SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
| Stock Options | PSUs | |||||
| Grant-date stock price | $ | $ | ||||
| Exercise price | $ | |||||
| Dividend yield | ||||||
| Expected volatility(a) | ||||||
| Risk-free interest rate(b) | ||||||
| Expected life (in years)(c) |
(a) Determined based on the historical volatility of the Common Shares over the expected life of the stock options and performance period of the PSUs.
(b) Determined based on U.S. Treasury yields with a remaining term equal to the expected life of the stock options and performance period of the PSUs.
(c) Determined based on the mid-point of vesting (three years) and expiration (ten years) for the stock options and the performance period for the PSUs.
The aggregate grant-date fair value of the stock options, RSUs and PSUs awarded to Mr. Kocher was determined to be $
10. Income Taxes
Income taxes were recognized at an effective rate of
| SUNOPTA INC. | 14 | March 30, 2024 Form 10-Q |
SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
11. Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share were calculated as follows (shares in thousands):
| Quarter ended | ||||||
| March 30, | April 1, | |||||
| 2024 | 2023 | |||||
| Numerator | ||||||
| Earnings (loss) from continuing operations | $ | $ | ( |
) | ||
| Less: dividends and accretion on preferred stock | ( |
) | ( |
) | ||
| Earnings (loss) from continuing operations attributable to common shareholders | ( |
) | ||||
| Earnings (loss) from discontinued operations | ( |
) | ||||
| Earnings attributable to common shareholders | $ | $ | ||||
| Denominator | ||||||
| Basic weighted-average number of shares outstanding | ||||||
| Dilutive effect of the following: | ||||||
| Stock options, restricted stock units and performance share units(1) | ||||||
| Series B-1 Preferred Stock(2) | ||||||
| Diluted weighted-average number of shares outstanding | ||||||
| Basic and Diluted Earnings (Loss) Per Share | ||||||
| Earnings (loss) from continuing operations | $ | $ | ( |
) | ||
| Earnings (loss) from discontinued operations | ( |
) | ||||
| Earnings attributable to common shareholders | $ | $ | ||||
(1) For the quarter ended April 1, 2023,
(2) For the quarters ended March 30, 2024 and April 1, 2023, it was more dilutive to assume the Series B-1 Preferred Stock was not converted into Common Shares and, therefore, the numerator of the diluted earnings per share calculation was not adjusted to add back the dividends and accretion on the Series B-1 Preferred Stock and the denominator was not adjusted to include the
| SUNOPTA INC. | 15 | March 30, 2024 Form 10-Q |
SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
12. Supplemental Cash Flow Information
| Quarter ended | ||||||
| March 30, | April 1, | |||||
| 2024 | 2023 | |||||
| $ | $ | |||||
| Changes in Operating Assets and Liabilities, Net of Divestitures | ||||||
| Accounts receivable | ( |
) | ( |
) | ||
| Inventories | ( |
) | ||||
| Accounts payable and accrued liabilities | ||||||
| Other operating assets and liabilities | ( |
) | ||||
| ( |
) | |||||
| Non-Cash Investing and Financing Activities | ||||||
| Change in additions to property, plant and equipment included in accounts payable and accrued liabilities | ( |
) | ( |
) | ||
| Change in accrued dividends on preferred stock | ( |
) | ||||
| Promissory note receivable from sale of smoothie bowls product line (see note 3) | ( |
) | ||||
| Change in short-term note receivable from divestiture of Frozen Fruit (see note 2) | ||||||
| Paid in kind interest on Seller Promissory Notes | ( |
) | ||||
| Change in accrued withholding taxes on stock-based awards included in accounts payable and accrued liabilities | ||||||
| Change in proceeds receivable from divestiture of sunflower business(1) |
(1) Reflects the settlement of the final working capital adjustment related to the divestiture of the Company's sunflower business in October 2022, which is included in investing activities of discontinued operations on the consolidated statement of cash flows for the quarter ended April 1, 2023.
13. Commitments and Contingencies
Legal Proceedings
Various current and potential claims and litigation arising in the ordinary course of business are pending against the Company. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable that may be incurred in connection with any such currently pending matter. In the Company's opinion, the eventual resolution of such matters, either individually or in the aggregate, is not expected to have a material impact on the Company's financial position, results of operations, or cash flows. However, litigation is inherently unpredictable and resolutions or dispositions of claims or lawsuits by settlement or otherwise could have an adverse impact on the Company's financial position, results of operations, and cash flows for the reporting period in which any such resolution or disposition occurs.
Product Recall
On June 21, 2023, the Company announced its subsidiary, Sunrise Growers Inc., had issued a voluntary recall of specific frozen fruit products linked to pineapple provided by a third-party supplier due to possible contamination by Listeria monocytogenes. Sunrise Growers Inc. is a component of the operations of Frozen Fruit. In connection with the divestiture of Frozen Fruit, the recall-related costs and estimated insurance recoveries are included in the loss from discontinued operations in the consolidated statements of operations. As at March 30, 2024 and December 30, 2023, estimated insurance recoveries, net of the Company's self-insured retention amount, of $
| SUNOPTA INC. | 16 | March 30, 2024 Form 10-Q |
SunOpta Inc. Notes to Consolidated Financial Statements For the quarters ended March 30, 2024 and April 1, 2023 (Unaudited) (All tabular amounts expressed in thousands of U.S. dollars, except per share amounts) |
14. Disaggregation of Revenue
The principal products that comprise the Company's product categories are as follows:
| Category | Principal Products |
| Beverages and broths | Plant-based beverages utilizing oat, almond, soy, coconut, rice, hemp, and other bases, including Dream® and West Life™ brands; oat-based creamers, including SOWN® brand; ready-to-drink protein shakes; packaged teas and concentrates; meat and vegetable broths and stocks. |
| Fruit snacks | Ready-to-eat fruit snacks made from apple purée and juice concentrate in bar, bit, twist, strip and sandwich formats; cold pressed fruit bars. |
| Ingredients | Liquid and powder ingredients utilizing oat, soy and hemp bases. |
| Smoothie bowls | Ready-to-eat fruit smoothie and chia bowls topped with frozen fruit. |
Revenue disaggregated by product category is as follows:
| Quarter ended | ||||||
| March 30, | April 1, | |||||
| 2024 | 2023 | |||||
| $ | $ | |||||
| Product Category | ||||||
| Beverages and broths(1) | ||||||
| Fruit snacks | ||||||
| Ingredients(1) | ||||||
| Smoothie bowls(2) | ||||||
| Total revenues |
(1) For the quarter ended April 1, 2023, the Company reclassified certain product sales that were previously reported in Beverages and Broths to Ingredients to conform with the current year presentation.
(2) Revenues reported for the quarter ended March 30, 2024, reflect sales of smoothie bowls prior to March 4, 2024 (see note 3).
15. Subsequent Event
Amendment to Series B-1 Preferred Stock Dividend Rights
| SUNOPTA INC. | 17 | March 30, 2024 Form 10-Q |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Financial Information
The following Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the interim consolidated financial statements, and notes thereto, for the quarter ended March 30, 2024 contained under Item 1 of this Quarterly Report on Form 10-Q and in conjunction with the annual consolidated financial statements, and notes thereto, contained in the Annual Report on Form 10-K for the fiscal year ended December 30, 2023 (the "Form 10-K"). Unless otherwise indicated herein, the discussion and analysis contained in this MD&A includes information available to May 8, 2024.
Certain statements contained in this MD&A may constitute forward-looking statements as defined under securities laws. Forward-looking statements may relate to our future outlook and anticipated events or results and may include statements regarding our future financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes, plans and objectives. In some cases, forward-looking statements can be identified by terms such as "anticipate," "estimate," "target," "intend," "project," "potential," "predict," "continue," "believe," "expect," "can," "could," "would," "should," "may," "might," "plan," "will," "budget," "forecast," or other similar expressions concerning matters that are not historical facts, or the negative of such terms are intended to identify forward-looking statements; however, the absence of these words does not necessarily mean that a statement is not forward-looking. To the extent any forward-looking statements contain future-oriented financial information or financial outlooks, such information is being provided to enable a reader to assess our financial condition, material changes in our financial condition, our results of operations, and our liquidity and capital resources. Readers are cautioned that this information may not be appropriate for any other purpose, including investment decisions.
Forward-looking statements contained in this MD&A are based on certain factors and assumptions regarding expected growth, results of operations, performance, and business prospects and opportunities. While we consider these assumptions to be reasonable based on information currently available, they may prove to be incorrect. These factors are more fully described in the "Risk Factors" section at Item 1A of the Form 10-K and Item 1A of Part II of this report.
Forward-looking statements contained in this commentary are based on our current estimates, expectations, and projections, which we believe are reasonable as of the date of this report. Forward-looking statements are not guarantees of future performance or events. You should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. Other than as required under securities laws, we do not undertake to update any forward- looking information at any particular time. Neither we nor any other person assumes responsibility for the accuracy and completeness of these forward-looking statements, and we hereby qualify all our forward-looking statements by these cautionary statements.
Unless otherwise noted herein, all currency amounts in this MD&A are expressed in U.S. dollars. All tabular dollar amounts are expressed in thousands of U.S. dollars, except per share amounts.
Overview
We operate as a manufacturer for leading natural and private label brands and also produce our own brands, including SOWN®, Dream® and West LifeTM. Our consumer product portfolio includes plant-based beverages and creamers, nutritional beverages, teas, and broths packaged in shelf-stable formats, together with fruit snacks, which are sold through retail, club, foodservice and e-commerce channels. We also produce liquid and dry ingredients for internal use and for sale to other food and beverage manufacturers.
On March 4, 2024, we completed the sale of the net assets related to our smoothie bowls product line and exited the category.
Fiscal 2024 Outlook
Building on our first quarter of 2024 performance, we are projecting higher year-over-year revenues for fiscal 2024 driven by organic volume growth from our beverages and snacks categories, partially offset by the impact of our exit from the smoothie bowls category. We anticipate an improved gross margin profile on a reported basis, compared with the prior year, reflecting higher production volumes and plant utilization to support sales, together with lower start-up costs and improved operating efficiencies at our Midlothian, Texas, facility. The resulting increase in gross profit, together with stable selling, general and administrative ("SG&A") spending as a percentage of revenue, is expected to drive year-over-year operating income growth and improved cash flows.
| SUNOPTA INC. | 18 | March 30, 2024 Form 10-Q |
Consolidated Results of Operations for the Quarters Ended March 30, 2024 and April 1, 2023
| March 30, | April 1, | |||||||||||
| 2024 | 2023 | Change | Change | |||||||||
| For the quarter ended | $ | $ | $ | % | ||||||||
| Revenues | 182,848 | 154,969 | 27,879 | 18.0% | ||||||||
| Cost of goods sold | 151,101 | 130,890 | 20,211 | 15.4% | ||||||||
| Gross profit | 31,747 | 24,079 | 7,668 | 31.8% | ||||||||
| Gross margin(1) | 17.4% | 15.5% | 1.9% | |||||||||
| Operating expenses | ||||||||||||
| Selling, general and administrative expenses | 22,988 | 23,069 | (81 | ) | -0.4% | |||||||
| Intangible asset amortization | 446 | 446 | - | 0.0% | ||||||||
| Other expense (income), net | (1,800 | ) | 42 | (1,842 | ) | * | ||||||
| Foreign exchange gain | (51 | ) | (11 | ) | (40 | ) | -363.6% | |||||
| Total operating expenses | 21,583 | 23,546 | (1,963 | ) | -8.3% | |||||||
| Operating income | 10,164 | 533 | 9,631 | 1806.9% | ||||||||
| Interest expense, net | 6,050 | 5,664 | 386 | 6.8% | ||||||||
| Earnings (loss) from continuing operations before income taxes | 4,114 | (5,131 | ) | 9,245 | * | |||||||
| Income tax expense (benefit) | 277 | (2,304 | ) | 2,581 | 112.0% | |||||||
| Earnings (loss) from continuing operations | 3,837 | (2,827 | ) | 6,664 | * | |||||||
| Earnings (loss) from discontinued operations | (1,417 | ) | 4,204 | (5,621 | ) | * | ||||||
| Net earnings(2),(3) | 2,420 | 1,377 | 1,043 | 75.7% | ||||||||
| Dividends and accretion on preferred stock | (433 | ) | (704 | ) | 271 | 38.5% | ||||||
| Earnings attributable to common shareholders(4) | 1,987 | 673 | 1,314 | 195.2% |
* Percentage not meaningful due to figures being positive and negative.
(1) Gross margin is a measure of gross profit (equal to revenues less cost of goods sold) as a percentage of revenues. We use a measure of adjusted gross margin that excludes non-capitalizable start-up costs included in cost of goods sold that are incurred in connection with capital expansion projects. Start-up costs have had a significant impact on the comparability of reported gross margins, which may obscure trends in our margin performance.
We use the measure of adjusted gross margin to evaluate the underlying profitability of our revenue-generating activities within each reporting period. We believe that disclosing this non-GAAP measure provides investors with a meaningful, consistent comparison of our profitability measure for the periods presented. However, the non-GAAP measure of adjusted gross margin should not be considered in isolation or as a substitute for gross margin calculated based on gross profit determined in accordance with U.S. GAAP. The following table presents a reconciliation of adjusted gross margin from reported gross margin calculated in accordance with U.S. GAAP.
| March 30, | April 1, | ||||||
| For the quarter ended | 2024 | 2023 | |||||
| Reported gross margin | 17.4% | 15.5% | |||||
| Start-up costs(a) | 0.2% | 3.7% | |||||
| Adjusted gross margin | 17.5% | 19.3% | |||||
Note: percentages may not add due to rounding.
(a) Represents incremental direct costs incurred in connection with plant expansion projects and new product introductions before the project or product reaches normal production levels, including costs for the hiring and training of additional personnel, fees for outside services, travel costs, and plant- and production-related expenses. For the first quarter of 2024, start-up costs related to the ramp-up of production on a third line at our plant-based beverage facility in Midlothian, Texas, together with an expansion of our ingredient extraction operations at our Modesto, California, facility. For the first quarter of 2023, start-up costs included in cost of goods sold mainly related to the ramp-up of production on the first two lines at our Midlothian, Texas, facility.
| SUNOPTA INC. | 19 | March 30, 2024 Form 10-Q |
(2) When assessing our financial performance, we use an internal measure of adjusted earnings from continuing operations that excludes specific items recognized in other income or expense, and other unusual items that are identified and evaluated on an individual basis, which due to their nature or size, we would not expect to occur as part of our normal business on a regular basis. We believe that the identification of these excluded items enhances the analysis of the financial performance of our business when comparing those operating results between periods, as we do not consider these items to be reflective of normal business operations. The following table presents a reconciliation of adjusted earnings from continuing operations from earnings (loss) from continuing operations which we consider to be the most directly comparable U.S. GAAP financial measure.
| March 30, 2024 | April 1, 2023 | |||||||||||
| Per | Per | |||||||||||
| Share | Share | |||||||||||
| For the quarter ended | $ | $ | $ | $ | ||||||||
| Earnings (loss) from continuing operations | 3,837 | (2,827 | ) | |||||||||
| Dividends and accretion on preferred stock | (433 | ) | (704 | ) | ||||||||
| Earnings (loss) from continuing operations attributable to common shareholders | 3,404 | 0.03 | (3,531 | ) | (0.03 | ) | ||||||
| Adjusted for: | ||||||||||||
| Gain on sale of smoothie bowls product line(a) | (1,800 | ) | - | |||||||||
| Start-up costs(b) | 327 | 6,425 | ||||||||||
| Business development costs(c) | - | 731 | ||||||||||
| Other | - | 42 | ||||||||||
| Net income tax on adjusting items(d) | - | (1,873 | ) | |||||||||
| Adjusted earnings from continuing operations | 1,931 | 0.02 | 1,794 | 0.02 | ||||||||
(a) Reflects the pre-tax gain on sale of the smoothie bowls product line, which is recorded in other income.
(b) For the first quarter of 2024, start-up costs related to the ramp-up of production on a third line at our plant-based beverage facility in Midlothian, Texas, together with an expansion of our ingredient extraction operations at our Modesto, California, facility, and are recorded in cost of goods sold. For the first quarter of 2023, start-up costs mainly related to the ramp-up of production on the first two lines at our Midlothian, Texas, facility, and are recorded in cost of goods sold ($5.8 million) and SG&A expenses ($0.6 million).
(c) Represents third-party costs associated with business development activities, which are inclusive of costs related to the evaluation, execution, and integration of external acquisitions and divestitures, internal expansion projects, and other strategic initiatives. For the first quarter of 2023, business development costs related to the divestiture of our frozen fruit business ("Frozen Fruit"), which was completed in October 2023. These costs are recorded in SG&A expenses.
(d) Reflects the tax effect of the adjustments to earnings calculated based on the statutory tax rates applicable in the tax jurisdiction of the underlying adjustment, net of deferred tax valuation allowances.
We believe that investors' understanding of our financial performance is enhanced by disclosing the specific items that we exclude to compute adjusted earnings from continuing operations. However, adjusted earnings from continuing operations is not, and should not be viewed as, a substitute for earnings (loss) from continuing operations prepared under U.S. GAAP. Adjusted earnings from continuing operations is presented solely to allow investors to more fully understand how we assess our financial performance.
(3) We use a measure of adjusted EBITDA from continuing operations when assessing the performance of our operations, which we believe is useful to investors' understanding of our operating profitability because it excludes non-operating expenses, such as interest and income taxes, and non-cash expenses, such as depreciation, amortization, and stock-based compensation, as well as other unusual items that affect the comparability of operating performance. We also use this measure to assess operating performance in connection with our employee incentive programs. We define adjusted EBITDA from continuing operations as earnings (loss) from continuing operations before interest, income taxes, depreciation, amortization, and stock-based compensation, and excluding other unusual items as identified in the determination of adjusted earnings from continuing operations (refer above to footnote (2)). The following table presents a reconciliation of adjusted EBITDA from continuing operations from earnings (loss) from continuing operations, which we consider to be the most directly comparable U.S. GAAP financial measure.
| SUNOPTA INC. | 20 | March 30, 2024 Form 10-Q |
| March 30, 2024 | April 1, 2023 | |||||
| For the quarter ended | $ | $ | ||||
| Earnings (loss) from continuing operations | 3,837 | (2,827 | ) | |||
| Income tax expense (benefit) | 277 | (2,304 | ) | |||
| Interest expense, net | 6,050 | 5,664 | ||||
| Depreciation and amortization | 8,576 | 7,050 | ||||
| Stock-based compensation | 5,299 | 3,892 | ||||
| Adjusted for: | ||||||
| Gain on sale of smoothie bowls product line(a) | (1,800 | ) | - | |||
| Start-up costs(b) | 327 | 6,425 | ||||
| Business development costs(c) | - | 731 | ||||
| Other | - | 42 | ||||
| Adjusted EBITDA from continuing operations | 22,566 | 18,673 |
(a)-(c) Refer to footnote (2) above.
Although we use adjusted EBITDA from continuing operations as a measure to assess the performance of our business and for the other purposes set forth above, this measure has limitations as an analytical tool, and should not be considered in isolation, or as a substitute for an analysis of our results of operations as reported in accordance with U.S. GAAP. Some of these limitations are:
• adjusted EBITDA from continuing operations does not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness;
• adjusted EBITDA from continuing operations does not include the payment or recovery of income taxes, which is a necessary element of our operations;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA from continuing operations does not reflect any cash requirements for such replacements; and
• adjusted EBITDA from continuing operations does not include non-cash stock-based compensation, which is an important component of our total compensation program for employees and directors.
Because of these limitations, adjusted EBITDA from continuing operations should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by not viewing adjusted EBITDA from continuing operations in isolation, and specifically by using other U.S. GAAP and non-GAAP measures, such as revenues, gross profit, operating income, earnings (loss) from continuing operations, and adjusted earnings from continuing operations to measure our operating performance. Adjusted EBITDA from continuing operations is not a measurement of financial performance under U.S. GAAP and should not be considered as an alternative to our results of operations or cash flows from operations determined in accordance with U.S. GAAP, and our calculation of adjusted EBITDA from continuing operations may not be comparable to the calculation of a similarly titled measure reported by other companies.
(4) In order to evaluate our results of operations, we use certain non-GAAP measures that we believe enhance an investor's ability to derive meaningful period-over-period comparisons and trends from our results of operations. For example, as described above under footnote (1), we evaluate our adjusted gross margins on a basis that excludes the impact of start-up costs. In addition, we exclude specific items from our reported results that due to their nature or size, we do not expect to occur as part of our normal business on a regular basis. These items are identified above under footnote (2), and in the discussion of our results of operations below. These non-GAAP measures are presented solely to allow investors to more fully assess our results of operations and should not be considered in isolation of, or as substitutes for an analysis of our results as reported under U.S. GAAP.
| SUNOPTA INC. | 21 | March 30, 2024 Form 10-Q |
Revenues for the quarter ended March 30, 2024 increased by 18.0% to $182.8 million from $155.0 million for the quarter ended April 1, 2023. The change in revenues from the first quarter of 2023 to the first quarter of 2024 was due to the following:
| $ | % | |||||
| 2023 revenues | 154,969 | |||||
| Volume/Mix | 36,438 | 23.5% | ||||
| Price | (7,704 | ) | -5.0% | |||
| Exit from smoothie bowls | (855 | ) | -0.6% | |||
| 2024 revenues | 182,848 | 18.0% |
Note: percentages may not add due to rounding.
For the quarter ended March 30, 2024, the 18.0% increase in revenues reflected a favorable volume/mix impact of 23.5%, partially offset by a 5.0% overall price reduction due to the pass-through of lower commodity costs for certain raw materials, together with a 0.6% revenue loss related to our exit from the smoothie bowls category in March 2024. The favorable volume/mix reflected sales volume growth for oat milks and creamers, protein shakes, broths, teas, and fruit snacks, partially offset by softer demand for other varieties of plant-based milks.
Gross profit increased $7.6 million, or 31.8%, to $31.7 million for the quarter ended March 30, 2024, compared with $24.1 million for the quarter ended April 1, 2023. Gross margin for the quarter ended March 30, 2024 was 17.4% compared to 15.5% for the quarter ended April 1, 2023, an increase of 190 basis points.
For the first quarter of 2024, we incurred start-up costs included in cost of goods sold of $0.3 million (0.2% gross margin impact) related to ramp-up of production on a third line at our plant-based beverage facility in Midlothian, Texas, together with an expansion of our ingredient extraction operations at our Modesto, California, facility. For the first quarter of 2023, we incurred start-up costs of $5.8 million (3.7% gross margin impact), mainly related to the ramp-up of production on the first two lines at our Midlothian, Texas, facility. Excluding the impact of start-up costs, adjusted gross margin for the quarter ended March 30, 2024 was 17.5% compared to 19.3% for the quarter ended April 1, 2023, a decrease of 180 basis points. See footnote (1) to the "Consolidated Results of Operations for the Quarters Ended March 30, 2024 and April 1, 2023" table for a reconciliation of adjusted gross margin from gross margin calculated in accordance with U.S. GAAP.
The 180-basis point decrease in adjusted gross margin reflected the impact of incremental depreciation of new production equipment related to capital expansion projects completed in 2023 ($1.7 million or 0.9% gross margin impact), together with higher inventory reserves in the first quarter of 2024, partially offset by higher sales and production volumes for beverages, broths and fruit snacks driving improved plant utilization.
Operating income increased $9.7 million to $10.2 million for the quarter ended March 30, 2024, compared with $0.5 million for the quarter ended April 1, 2023. The increase in operating income reflected higher gross profit, as described above, together with a gain on sale of the smoothie bowls product line of $1.8 million. Additionally, we recognized lower employee variable compensation accruals in the first quarter of 2024, compared with the first quarter of 2023, together with lower business development costs related to the divestiture of Frozen Fruit in October 2023. These factors were partially offset by higher stock- based compensation expense, mainly due to the accelerated vesting of certain previously granted awards in connection with the retirement of our former Chief Executive Officer ("CEO").
(Further details on the changes in revenue, gross profit and operating income are provided in the rollforward tables below.)
Net interest expense increased by $0.4 million to $6.1 million for the quarter ended March 30, 2024, compared with $5.7 million for the quarter ended April 1, 2023, which reflected the impact of higher market interest rates, partially offset by lower average outstanding debt in the first quarter of 2024 following the divestiture of Frozen Fruit.
Income taxes were recognized at an effective rate of 6.7% for the quarter ended March 30, 2024, compared with 44.9% recognized for the quarter ended April 1, 2023. The change in the effective tax rate was primarily driven by the recognition of a full valuation allowance against U.S. deferred tax assets in excess of deferred tax liabilities beginning in the second quarter of 2023, based on our assessment that the related tax benefits were no longer more likely than not to be realized in the future.
| SUNOPTA INC. | 22 | March 30, 2024 Form 10-Q |
Earnings from continuing operations for the quarter ended March 30, 2024 were $3.8 million, compared with a loss of $2.8 million for the quarter ended April 1, 2023. Diluted earnings per share from continuing operations attributable to common shareholders (after dividends and accretion on preferred stock) was $0.03 for the quarter ended March 30, 2024, compared with a diluted loss per share of $0.03 for the quarter ended April 1, 2023.
We recognized a loss from discontinued operations related to Frozen Fruit of $1.4 million (diluted loss per share of $0.01) for the quarter ended March 30, 2024, compared with earnings of $4.2 million (diluted earnings per share of $0.04) for the quarter ended April 1, 2023. Refer to note 2 to the unaudited consolidated financial statements included in this report for additional details.
We realized earnings attributable to common shareholders of $2.0 million (diluted earnings per share of $0.02) for the quarter ended March 30, 2024, compared with earnings attributable to common shareholders of $0.7 million (diluted earnings per share of $0.01) for the quarter ended April 1, 2023. Earnings attributable to common shareholders included dividends and accretion on our Series B-1 Preferred Stock of $0.4 million and $0.7 million in the first quarters of 2024 and 2023, respectively.
Adjusted earnings from continuing operations for the quarter ended March 30, 2024 were $1.9 million, or $0.02 earnings per diluted share, compared with adjusted earnings from continuing operations of $1.8 million, or $0.02 earnings per diluted share, for the quarter ended April 1, 2023.
Adjusted EBITDA from continuing operations increased $3.9 million, or 20.8%, for the quarter ended March 30, 2024 to $22.6 million, compared with $18.7 million for the quarter ended April 1, 2023.
Adjusted earnings from continuing operations and adjusted EBITDA from continuing operations are non-GAAP financial measures. See footnotes (2) and (3) to the "Consolidated Results of Operations for the Quarters Ended March 30, 2024 and April 1, 2023" table for a reconciliation of adjusted earnings from continuing operations and adjusted EBITDA from continuing operations from earnings (loss) from continuing operations, which we consider to be the most directly comparable U.S. GAAP financial measure.
Rollforward of Revenue, Gross Profit and Operating Income
| For the quarter ended | March 30, 2024 | April 1, 2023 | Change | % Change | ||||||||
| Revenues | $ | 182,848 | $ | 154,969 | $ | 27,879 | 18.0% | |||||
| Gross profit | 31,747 | 24,079 | 7,668 | 31.8% | ||||||||
| Gross margin | 17.4% | 15.5% | 1.9% | |||||||||
| Operating income | $ | 10,164 | $ | 533 | $ | 9,631 | 1806.9% | |||||
| Operating margin | 5.6% | 0.3% | 5.3% |
Revenues
The table below explains the $27.8 million increase in revenues from $155.0 million for the first quarter of 2023 to $182.8 million for the first quarter of 2024:
| Revenues for the quarter ended April 1, 2023 | $154,969 |
| Sales volume growth for oat milks and creamers, protein shakes, broths, teas, and oat-based ingredients, partially offset by softer demand for other varieties of plant-based milks, together with the impact of lower pass-through sales pricing to customers to match lower costs for certain raw materials | 21,783 |
| Sales volume growth for fruit snacks due to the addition of new production and packaging capacity in 2023 to meet unfilled demand | 6,951 |
| Impact of the exit from the smoothie bowls category in March 2024 | (855) |
| Revenues for the quarter ended March 30, 2024 | $182,848 |
| SUNOPTA INC. | 23 | March 30, 2024 Form 10-Q |
Gross Profit
The table below explains the $7.6 million increase in gross profit of from $24.1 million for the first quarter of 2023 to $31.7 million for the first quarter of 2024:
| Gross profit for the quarter ended April 1, 2023 | $24,079 |
| Decrease in start-up costs related to capital expansion projects | 5,427 |
| Higher sales and production volumes for beverages, broths and fruit snacks, partially offset by higher inventory reserves | 3,909 |
| Incremental depreciation related to capital expansion projects | (1,668) |
| Gross profit for the quarter ended March 30, 2024 | $31,747 |
Operating Income
The table below explains the $9.7 million increase in operating income from $0.5 million for the first quarter of 2023 to $10.2 million for the first quarter of 2024:
| Operating income for the quarter ended April 1, 2023 | $533 |
| Increase in gross profit, as explained above | $7,668 |
| Gain on sale of the smoothie bowls product line, together with lower employee variable compensation accruals and lower business development costs following the divestiture of Frozen Fruit in 2023 | 3,370 |
| Higher stock-based compensation expense, mainly due to the accelerated vesting of certain previously granted awards in connection with the retirement of our former Chief Executive Officer | (1,407) |
| Operating income for the quarter ended March 30, 2024 | $10,164 |
Liquidity and Capital Resources
On December 8, 2023, we entered into a five-year Credit Agreement providing for a $180.0 million term loan credit facility (the "Term Loan Credit Facility") and an $85.0 million revolving credit facility (the "Revolving Credit Facility") (collectively, the "Credit Facilities"). As at March 30, 2024, $177.8 million remained outstanding under the Term Loan Credit Facility and we had utilized $37.9 million of the $85 million Revolving Credit Facility, including $5.9 million in letters of credit. For more information on our Credit Facilities, see note 7 to the unaudited consolidated financial statements included in this report.
In connection with our efforts to extend payment terms with our major suppliers to enhance cash flows, we are financing certain purchases of goods and services through extended payables facilities, by which third-party intermediaries settle the supplier invoice on the contractual due date and issue us a short-term note payable for the face amount of the invoice, which we repay, together with interest, at a later date. As at March 30, 2024 and December 30, 2023, we had $16.6 million and $17.6 million principal amount outstanding under these facilities. With the flexibility provided by our Credit Facilities, our intention is to reduce our reliance on these facilities in 2024 and to settle all remaining outstanding notes payable. Proceeds from, and repayments of the notes payable associated with these facilities are reported as financing cash flows on our consolidated statements of cash flows.
From time to time, as part of our ongoing efforts to improve working capital efficiency, we utilize, at our sole discretion, supply chain finance ("SCF") programs offered by some of our major customers that allows us to sell our receivables from the customers to such customers' financial institutions, on a non-recourse basis, in order to be paid earlier than our payment terms with the customer provide at a discount rate that leverages those customers' favorable credit ratings. Utilizing our customers' SCF programs reduces our accounts receivable balances, improves our cash flows, and reduces the cost of servicing these receivables with our revolving credit facility. All operating cash flows from accounts receivable are reported consistently in our consolidated statements of cash flows regardless of whether they are associated with a SCF program.
| SUNOPTA INC. | 24 | March 30, 2024 Form 10-Q |
On April 17, 2024, we announced the elimination of the dividend rights attached to the shares of Series B-1 Preferred Stock of our subsidiary, SunOpta Foods Inc., effective from and after December 31, 2023 (see note 15 to the unaudited consolidated financial statements included in this report.). The elimination of the cumulative dividend of 8.0% per year will result in annual savings of $1.2 million.
For the quarter ended March 30, 2024, we incurred capital expenditures of $7.5 million. For fiscal 2024, we estimate total capital expenditures of approximately $15 million for discretionary investments in growth and productivity projects, and approximately $10 million to $15 million of non-discretionary maintenance projects. We are funding our capital expenditures using operating cash flows and borrowings under our Revolving Credit Facility. In addition, in the second quarter of 2024, we are adding approximately $25 million of finance lease right-of-use assets related to the expansion of our ingredient extraction operations at our Modesto, California, facility.
We believe that our operating cash flows, including the selective use of customer SCF programs to improve collection terms, and proceeds from the sale of our smoothie bowls product line, together with our Credit Facilities and lease financing, will be adequate to meet our operating, investing, and financing needs for the foreseeable future, including the 12-month period following the issuance of our financial statements. However, in order to finance significant investments in our existing businesses, or significant business acquisitions, if any, that may arise in the future, we may need additional sources of cash that we could attempt to obtain through a combination of additional bank or subordinated financing, a private or public offering of debt or equity securities, or the issuance of common stock. There can be no assurance that these types of financing would be available at all or, if so, on terms that are acceptable to us.
Cash Flows
Summarized cash flow information for the periods ended March 30, 2024 and April 1, 2023 is as follows:
| For the quarter ended | |||||||||
| March 30, | April 1, | ||||||||
| 2024 | 2023 | Change | |||||||
| $ | $ | $ | |||||||
| Net cash flows provided by (used in): | |||||||||
| Continuing operations: | |||||||||
| Operating activities | 7,402 | 6,664 | 738 | ||||||
| Investing activities | (4,212 | ) | (25,395 | ) | 21,183 | ||||
| Financing activities | (5,558 | ) | 18,731 | (24,289 | ) | ||||
| Discontinued operations | 4,167 | 231 | 3,936 | ||||||
Operating Activities of Continuing Operations
Cash provided by operating activities of continuing operations increased $0.7 million from the first quarter of 2023 to the first quarter of 2024. The increase in cash provided mainly reflected improved profitability driven by revenue volume growth and favorable plant utilization, together with lower start-up costs related to our Midlothian, Texas, facility, partially offset by higher inventories in the first quarter of 2024 to support continuing revenue growth and replenish safety stocks.
Investing Activities of Continuing Operations
Cash used in investing activities of continuing operations decreased $21.2 million from the first quarter of 2023 to the first quarter of 2024, which mainly reflected lower capital expenditures related to the completion of certain major capital projects in 2023, including the construction of our new plant-based beverage facility in Midlothian, Texas. In addition, in the first quarter of 2024, we received cash proceeds of $3.3 million from the sale of the smoothie bowls product line, with a further $3.0 million receivable on August 1, 2024.
Financing Activities of Continuing Operations
Cash used in financing activities of continuing operations was $5.6 million for the first quarter of 2024, which reflected repayments of long-term debt related to completed capital projects, compared with cash provided of $18.7 million for the first quarter of 2023, which reflected net borrowings of long-term debt to finance capital expenditures.
| SUNOPTA INC. | 25 | March 30, 2024 Form 10-Q |
Discontinued Operations
Net cash provided by discontinued operations increased $3.9 million from the first quarter of 2023 to the first quarter of 2024, which reflected proceeds of $6.3 million from the remaining short-term note receivable related to the Frozen Fruit divestiture, partially offset by the settlement of pre-divestiture obligations.
Critical Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, related revenues and expenses, and disclosure of gain and loss contingencies at the date of the financial statements. The estimates and assumptions made require us to exercise our judgment and are based on historical experience and various other factors that we believe to be reasonable under the circumstances. We continually evaluate the information that forms the basis of our estimates and assumptions as our business and the business environment generally changes.
There have been no material changes to the critical accounting estimates disclosed under the heading "Critical Accounting Estimates" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," of the Form 10-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
For quantitative and qualitative disclosures about market risk, see Part II, Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," of the Form 10-K. There have been no material changes to our exposures to market risks since December 30, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management has established disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within time periods specified in the Securities and Exchange Commission's rules and forms. Such disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), we conducted an evaluation of our disclosure controls and procedures (as such term is defined under Rule 13a-15(e) promulgated under the Exchange Act) as of the end of the period covered by this quarterly report. Based on this evaluation, our CEO and our CFO concluded that our disclosure controls and procedures were effective as of March 30, 2024.
Changes in Internal Control Over Financial Reporting
Our management, with the participation of our CEO and CFO, has evaluated whether any change in our internal control over financial reporting (as such term is defined under Rule 13a-15(f) promulgated under the Exchange Act) occurred during the quarter ended March 30, 2024. Based on that evaluation, management concluded that there were no changes in our internal control over financial reporting during the quarter ended March 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
| SUNOPTA INC. | 26 | March 30, 2024 Form 10-Q |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
For a discussion of legal proceedings, see note 13 to the unaudited consolidated financial statements included under Part I, Item 1 of this report.
Item 1A. Risk Factors
Certain risks associated with our operations are discussed in Item 1A "Risk Factors" of our Annual Report on Form 10-K for the year ended December 30, 2023. There have been no material changes to the previously reported risk factors as of the date of this quarterly report. Our previously reported risk factors should be carefully reviewed in connection with an evaluation of our Company.
Item 5. Other Information
During the quarter ended March 30, 2024, none of our directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.
Item 6. Exhibits
The following exhibits are included as part of this report.
Exhibit | Description |
Employment Agreement, effective February 26, 2024, between SunOpta Inc. and Justin Kobler. | |
Employment Agreement, effective March 25, 2024, between SunOpta Inc. and Lauren McNamara. | |
|
|
101.INS* | XBRL Instance Document - the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document |
Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
† Indicates management contract or compensatory plan or arrangement.
* Filed herewith.
| SUNOPTA INC. | 27 | March 30, 2024 Form 10-Q |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| SUNOPTA INC. |
|
|
Date: May 8, 2024 | /s/ Greg Gaba |
| Greg Gaba |
| Chief Financial Officer (Authorized Signatory and Principal Financial Officer) |
| SUNOPTA INC. | 28 | March 30, 2024 Form 10-Q |
| Exhibit 10.1 |
PERFORMANCE SHARE UNIT AWARD AGREEMENT
This Performance Share Unit Award Agreement (the "Agreement") is entered into as of January 2, 2024 between SunOpta Inc., a Canadian corporation (the "Company"), and Brian W. Kocher (the "Recipient").
On January 2, 2024 (the "Award Date") the Company's Board of Directors or the Compensation Committee of the Board of Directors (the "Board") authorized the grant of performance share units to Recipient pursuant to the terms of this Agreement. Recipient desires to accept the award subject to the terms and conditions of this Agreement. This award is not, and shall not be deemed to be, granted under or subject to the terms of the Company's Amended 2013 Stock Incentive Plan or any other plan. This award is granted pursuant to the terms of the Executive Employment Agreement dated December 1, 2023 between the Company and Recipient (the "Employment Agreement") and in the event of any inconsistency between this Agreement and the Employment Agreement as to timing of vesting or any other provision, the terms of the Employment Agreement shall control and apply.
NOW, THEREFORE, the parties agree as follows:
1. Award. The Company grants to Recipient 577,616 performance share units ("PSUs"), which represents 200% of Recipient's target amount of PSUs, with respect to the Company's common shares ("Common Shares"). Subject to the terms and conditions of this Agreement, the Company shall issue to Recipient the number of Common Shares of the Company corresponding to the number of PSUs determined under this Agreement based on (a) the performance of the Company as described in Section 2 and (b) Recipient's continued employment through the vesting date pursuant to Section 3.
2. Performance Conditions. The vesting of the PSUs, if vesting occurs at all, is dependent on the Company's total shareholder return (the "TSR") performance relative to the Russell 3000 Food and Beverage companies designated for comparison by the Board, as noted in the table below (the "Hurdles") during the three-year period commencing on January 1, 2024 and continuing through December 31, 2026 (the "Performance Period"), subject to the Recipient's continued employment until April 15, 2027 (the "Vesting Date").
A percentage of the PSUs shall vest upon achievement of the applicable Hurdle in accordance with the table below. Achievement of the Hurdle shall be determined by calculating the TSR for the Company and each of the companies in the Russell 3000 Food and Beverage designated index using a 20-trading day average closing price as of December 31, 2026. The following parameters shall apply to the calculation: dividends and cash equivalent distributions for a company shall be considered reinvested; any company that ceases trading during the Performance Period shall be excluded from the beginning and ending calculation (e.g. acquired companies and financial distressed companies).
|
Percentile Hurdle |
Portion of PSUs |
|
Less than 25th percentile |
0% |
|
25th percentile |
25% |
|
50th percentile |
100% |
|
75th percentile |
125% |
|
90th or more percentile |
200% |
| Exhibit 10.1 |
If none of the Hurdles are met, none of the PSUs will vest. If the 25th percentile Hurdle is met, only 25% of the PSUs will vest. If the 50th percentile Hurdle is met, 100% of the PSUs will vest. If the 90th percentile or above Hurdle is met, 200% of the PSUs will vest. Performance shall be interpolated between the Hurdles (i.e. between 25th and 50th percentile, 50th and 75th percentile, and 75th and 90th percentile).
In the event the Company is acquired during the Performance Period and the Company's Common Shares cease to be publicly traded as a result of such acquisition, relative TSR for purposes of determining achievement of the Hurdle will be calculated for the Company and the comparison companies as of the date the Company's Common Shares cease to be publicly traded, based on the 20-trading day average closing price prior to the last trading date rather than December 31, 2026.
All vested PSUs shall be settled by the Company as soon as reasonably practicable following the Vesting Date, subject to continued employment through the Vesting Date pursuant to Section 3 (except as provided in Section 3.2 or 3.3), and all unvested PSUs shall be forfeited and cancelled.
3. Employment Condition.
3.1 Payout. In order to receive a payout of shares under this Agreement, Recipient must be employed by the Company continuously from the Award Date through the Vesting Date, except as provided in Sections 3.2 or 3.3 below. For purposes of this Agreement, Recipient is considered to be employed by the Company if Recipient is employed by the Company or any parent or subsidiary of the Company (an "Employer").
3.2 Total Disability. If Recipient's employment with the Company is terminated at any time prior to the Vesting Date because of Total Disability (as defined in the Employment Agreement), any PSUs that are vested as of the Termination Date (as defined in the Employment Agreement), shall be settled in accordance with the terms of this Agreement.
3.3 Death. If Recipient's employment with the Company is terminated at any time prior to the Vesting Date because of death, any PSUs that are vested as of the Termination Date (as defined in the Employment Agreement), shall be settled in accordance with the terms of this Agreement.
3.4 Change in Control. If a Change in Control (as defined in the Employment Agreement) occurs and Recipient's employment with the Company is terminated by the Company (or its successor) without Cause or by Recipient with Good Reason at any time within 12 months following the Change in Control and prior to the end of the Performance Period, a number of unvested PSUs as to which the applicable Hurdle has been satisfied as of the date of Change in Control multiplied by a fraction, the numerator of which is the number of days during the Performance Period Recipient is employed by the Company and the denominator is the total number of days in the Performance Period shall immediately vest as of the date of employment termination and any such PSUs that vest in accordance with this Section 3.4 shall be settled in accordance with the terms of this Agreement, provided that Recipient executes and delivers a release of claims in accordance with this Section 3.4. Recipient shall not be entitled to receive any shares with respect to any PSUs as to which the applicable Hurdle performance requirements have not been satisfied as of the Change in Control.
| Exhibit 10.1 |
3.5 Other Terminations. If Recipient's employment by the Company is terminated at any time before the Vesting Date and none of Sections 3.2, 3.3 or 3.4 applies to such termination, Recipient shall not be entitled to receive any shares under this Agreement.
4. Payment. As soon as practicable following the Vesting Date, the Board shall determine the number, if any, of Common Shares, issuable pursuant to this Agreement. Subject to applicable tax withholding, such shares shall be issued to Recipient as soon as practicable following the Vesting Date. No fractional shares shall be issued and the number of shares deliverable shall be rounded down to the nearest whole share, and any remaining fractional shares shall be paid in cash. Notwithstanding anything hereinabove to the contrary, if Section 3.5 requires an earlier award payout, a similar process shall be followed in accordance with the timing identified therein.
5. Tax Withholding.
5.1 If Recipient is a U.S. or Canadian taxpayer, Recipient acknowledges that on the date that shares underlying the PSUs are issued to Recipient, the fair market value of the Common Shares will be treated as ordinary compensation income for federal and state and provincial income tax purposes and employment tax purposes (including FICA in the U.S. and EI and CPP in Canada), and that the Company will be required to withhold taxes on these income amounts pursuant to Section 5.2 below. The Company will inform employees in other countries of the tax treatment of the PSUs and withholding requirements.
5.2 Prior to any relevant taxable or tax withholding event, as applicable, Recipient agrees to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all federal, state and other tax withholding obligations. In this regard, Recipient authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy applicable withholding obligations by one or a combination of the following:
(a) withholding from Recipient's other cash compensation paid by the Company and/or the Employer; or
(b) withholding from proceeds of the sale of Common Shares acquired upon vesting/settlement of the PSUs either through a voluntary sale or through a mandatory sale arranged by the Company on Recipient's behalf pursuant to this authorization; or
(c) withholding in Common Shares to be issued upon vesting/settlement of the PSUs or, if the PSUs are settled in whole or part in cash, withholding the cash to be paid in settlement.
5.3 If the withholding obligation is satisfied by withholding in Common Shares, for tax purposes, Recipient is deemed to have been issued the full number of Common Shares subject to the vested PSUs, notwithstanding that a number of the Common Shares are held back solely for the purpose of paying the withholding.
| Exhibit 10.1 |
5.4 Recipient agrees to pay to the Company or the Employer any amount the Company or the Employer may be required to withhold or account for as a result of this award that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the shares or the proceeds of the sale of shares if Recipient fails to comply with these obligations.
6. Stock Splits, Stock Dividend; Mergers, Etc.
6.1 If the outstanding Common Shares of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares, dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Company in the number and kind of shares subject to the PSUs, so that Recipient's proportionate interest before and after the occurrence of the event is maintained, relative to other shareholders of the Common Shares. Notwithstanding the foregoing, the Company shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Company. Any such adjustments made by the Company shall be conclusive. For the avoidance of doubt, this provision is intended to put the Recipient in the same position with respect to each PSU as if Recipient owned a share of common stock immediately prior to such event.
6.2 Mergers, Reorganizations, Etc. If, while any unvested PSUs are outstanding, there shall occur a merger, consolidation, amalgamation or plan of exchange, in each case involving the Company pursuant to which outstanding Common Shares are converted into cash or other stock, securities or property (each, a "Transaction"), (i) all outstanding PSUs as to which the applicable Hurdle performance requirement set forth in Section 2 has not been satisfied as of the closing of the Transaction shall be forfeited and cancelled and (ii) the Board of Directors, may, in its sole discretion, provide that the remaining PSUs shall be treated in accordance with any of the following alternatives:
(a) The remaining PSUs shall be converted into performance share units to acquire stock of the surviving or acquiring corporation in the Transaction (unless otherwise accelerated as determined by the Board of Directors in its sole discretion) and shall be subject to continued employment of Recipient by the Company or any acquiring or surviving company through such vesting date, with the amount and type of shares subject thereto to be conclusively determined by the Board of Directors, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of common shares of the Company following the Transaction, and disregarding fractional shares, and the performance measures adjusted to reflect the circumstances of the Company or any acquiring or surviving corporation as conclusively determined by the Board of Directors;
(b) The remaining PSUs shall be cancelled effective immediately prior to the consummation of the Transaction, and, in full consideration of the cancellation, the surviving company shall pay to Recipient upon the completion of the Performance Period, with payment subject to continued employment of Recipient by the Company or any acquiring or surviving company through such date, an amount in cash, for each remaining PSU, equal to the value, as determined by the Board of Directors, of the Common Shares subject to the unvested PSUs at the time of closing of the Transaction, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of Common Shares of the Company following the Transaction or other consideration paid in the Transaction to holders of Common Shares of the Company; or
| Exhibit 10.1 |
(c) The remaining PSUs shall become vested in full and all unissued shares subject to the PSUs shall be issued immediately prior to the consummation of the Transaction.
7. Section 409A. The award granted pursuant to this Agreement is intended to be compliant with Section 409A of the Internal Revenue Code ("Section 409A") and shall be interpreted consistent with such intent. The Company may amend this Agreement, adopt policies or procedures or take other actions, including with retroactive effect, that the Company determines are necessary or appropriate to exempt the award from the application of Section 409A or to comply with the requirements of Section 409A. Notwithstanding the foregoing, the Company makes no representation or warranty to Recipient with regard to the application of Section 409A to any amounts payable pursuant to this Agreement and shall in no event be obligated to mitigate or indemnify for any taxes otherwise imposed on Recipient as a result of application of Section 409A.
8. No Right to Employment. Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to interfere in any way with the right of the Company to terminate Recipient's employment at any time for any reason, with or without cause. For the avoidance of doubt, this provision is intended to put the Recipient in the same position with respect to each PSU as if Recipient owned a share of common stock immediately prior to such event.
9. Clawback. This award and any stock issued pursuant to this award are subject to recovery under the Company's clawback policy or any law, government regulation or stock exchange listing requirement and will be subject to such deductions and clawback made pursuant to such policy, law, government regulation, or stock exchange listing requirement, all as determined by the Board of Directors or the Compensation Committee. The Company's current clawback policy is subject to revision by the Board or Compensation Committee at any time and from time to time.
10. Miscellaneous.
10.1 Entire Agreement; Amendment. This Agreement constitutes the entire agreements of the parties with regard to the subjects hereof and may be amended only by written agreement between the Company and Recipient.
10.2 Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States or Canadian mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: General Counsel, at its principal executive offices or to Recipient at the address of Recipient in the Company's records, or at such other address as such party may designate by ten (10) days' advance written notice to the other party.
| Exhibit 10.1 |
10.3 Assignment; Rights and Benefits. Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company's successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient's heirs, executors, administrators, successors and assigns.
10.4 Further Action. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
10.5 Administrative Error. In the event it is determined that an administrative error was made in the number of PSUs awarded to the Recipient, the Company shall have the right to revise the award previously issued to the Recipient to the correct amount.
10.6 Applicable Law. The terms and conditions of this Agreement will be interpreted under the laws of Minnesota, exclusive of choice of law rules. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys' fees to be set by the trial court and, upon any appeal, the appellate court.
10.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original.
| SUNOPTA INC. | RECIPIENT |
| By: /s/ Jill Barnett | /s/ Brian Kocher |
| Name: Jill Barnett | Brian W. Kocher |
| Title: Chief Administrative Officer |
| Exhibit 10.2 |
STOCK OPTION AWARD AGREEMENT
This Stock Option Award Agreement (this "Agreement") is entered into as of January 2, 2024 (the "Award Date") by and between SunOpta Inc., a Canadian corporation (the "Company"), and Brian W. Kocher (the "Optionee").
The Company and the Optionee agree as follows:
1. Grant. The Company hereby grants to the Optionee an option to purchase 230,804 common shares of the Company on the terms and conditions as set forth herein (the "Options"). The Options will not be treated as Incentive Stock Options as defined in Section 422 of the Internal Revenue Code of 1986, as amended, and are therefore Non-Statutory Stock Options. The Options are not, and shall not be deemed to be, granted under or subject to the Company's Amended 2013 Stock Incentive Plan or any other plan. The Options are granted pursuant to the terms of the Executive Employment Agreement dated December 1, 2023 between the Company and the Optionee (the "Employment Agreement") and in the event of any inconsistency between this Agreement and the Employment Agreement as to timing of vesting or any other provision, the terms of the Employment Agreement shall control and apply.
2. Exercise Price. The exercise price of the Option is $5.54 per share (the "Exercise Price").
3. Vesting. The Options will vest one-third on each anniversary of Optionee's first day of employment, subject to the Optionee's continued employment through each vesting date, except as otherwise provided in Section 6 or the Employment Agreement.
4. Time of Exercise of Option. Except as provided in Section 6, the Option may not be exercised prior to the vesting date set forth in Section 2. Following such date and until it expires or is terminated as provided in Sections 6 or 11, this Option may be exercised from time to time to purchase whole shares.
5. Expiration Date. The Options shall expire on January 2, 2034 unless earlier terminated pursuant to the provisions hereof (the "Expiration Date").
6. Termination of Employment.
6.1 General Rule. Except as provided in this Section 6 or the Employment Agreement, the Options may not be exercised unless at the time of exercise the Optionee is employed by the Company and shall have been so employed continuously from the Award Date through the end of the vesting period. For purposes of this Agreement, the Optionee is considered to be employed by the Company if the Optionee is employed by the Company or any parent or subsidiary of the Company (an "Employer").
6.2 Termination Generally. If the Optionee's employment by the Company terminates for any reason other than as provided in Sections 6.3 or 6.4 below, the Options may be exercised at any time before the Expiration Date or the expiration of 90 days after the date of termination, whichever is the shorter period, but only if and to the extent the Optionee was entitled to exercise the Option at the date of termination, and all unvested Options shall be forfeited and canceled.
| Exhibit 10.2 |
6.3 Total Disability. If the Optionee's employment with the Company is terminated at any time because of Total Disability (as defined in the Employment Agreement), any unvested Options shall immediately vest as of the date of termination and the Options may be exercised at any time before the Expiration Date or the expiration of 12 months after the date of termination, whichever is the shorter period.
6.4 Death. If the Optionee's employment with the Company is terminated at any time because of death, any unvested Options shall immediately vest as of the date of termination and the Options may be exercised at any time before the Expiration Date or the expiration of 12 months after the date of termination, whichever is the shorter period, and only by the Optionee's personal representative or the person or persons to whom the Optionee's rights under the Options shall pass by the Optionee's will or by the laws of descent and distribution of the state or country of domicile at the time of death.
6.5 Failure to Exercise Options. To the extent that following termination of employment, the Options are not exercised within the applicable periods described above (or the Employment Agreement, if applicable), all further rights to purchase shares pursuant to the Options shall cease and terminate.
7. Leave of Absence. Absence on leave approved by the Employer or on account of illness or disability shall not be deemed a termination or interruption of employment. Vesting of the Options shall continue during a medical, family or military leave of absence, whether paid or unpaid, and vesting of the Options shall be suspended during any other unpaid leave of absence.
8. Method of Exercise of Option; Tax Withholding. The Options may be exercised by notice from the Optionee to the Company through the Company's third-party administrator, which is currently Solium Shareworks, of the Optionee's binding commitment to purchase shares, specifying the number of shares the Optionee desires to purchase under the Options, which may not be more than 30 days after delivery of the notice, and, if required to comply with the Securities Act of 1933, containing a representation that it is the Optionee's intention to acquire the shares for investment and not with a view to distribution. On or before the date specified for completion of the purchase, the Optionee must pay the Company the full purchase price of those shares in cash or by certified check, or in whole or in part in common shares of the Company valued at fair market value. The fair market value of common shares provided in payment of the purchase price shall be the closing price of the common shares last reported on Nasdaq before the time payment in common shares are made or, if earlier, committed to be made, if the Common Stock is publicly traded, or another value of the common shares as specified by the Company. No shares shall be issued until full payment for the shares has been made, including all amounts owed for tax withholding. The Optionee shall, immediately upon notification of the amount due, if any, pay to the Company in cash or by certified check amounts necessary to satisfy any applicable federal, state and local tax withholding requirements. If additional withholding is or becomes required beyond any amount deposited before delivery of the electronic transfer of the shares, the Optionee shall pay such amount to the Company, in cash or by certified check, on demand. If the Optionee fails to pay the amount demanded, the Company or the Employer may withhold that amount from other amounts payable to the Optionee, including salary, subject to applicable law.
| Exhibit 10.2 |
9. Nontransferability. Except as provided in this Section 9 the Options are nonassignable and nontransferable by the Optionee, either voluntarily or by operation of law, and during the Optionee's lifetime, the Options are exercisable only by the Optionee. The Options may be transferred by will or by the laws of descent and distribution of the state or country of the Optionee's domicile at the time of death.
10. Stock Splits, Stock Dividends. If the outstanding common shares of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares, dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Company in (i) the number and kind of shares subject to the Options, or the unexercised portion thereof, and (ii) the Exercise Price per share, so that the Optionee's proportionate interest before and after the occurrence of the event is maintained. Notwithstanding the foregoing, the Company shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Company. Any such adjustments made by the Company shall be conclusive. For the avoidance of doubt, this provision is intended to put the Optionee in the same position with respect to each Option as immediately prior to such event.
11. Mergers, Etc. If, while any Options are outstanding, there shall occur a merger, consolidation, amalgamation, plan of exchange or other transaction, in each case involving the Company pursuant to which outstanding shares are converted into cash or other stock, securities or property (each, a "Transaction"), the Board of Directors, may, in its sole discretion, provide that the remaining outstanding Options shall be treated in accordance with any of the following alternatives:
(i) The remaining Options shall be converted into options to purchase stock of the surviving or acquiring corporation in the Transaction, which Options may not be exercised, in whole or in part, before the completion of the vesting period (unless otherwise accelerated as determined by the Board of Directors in its sole discretion) and shall be subject to continued employment of the Optionee by the Company or any acquiring or surviving company through such vesting date, for a total purchase price equal to the total price applicable to the unexercised portion of the Options, and with the amount and type of shares subject thereto and exercise price per share thereof to be conclusively determined by the Board of Directors, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of common shares of the Company following the Transaction in accordance with Treas. Reg. § 1.409A-1(b)(5)(v)(D), and disregarding fractional shares;
(ii) The remaining Options shall be cancelled effective immediately prior to the consummation of the Transaction, and, in full consideration of the cancellation, the Company or any acquiring or surviving company shall pay to the Optionee upon the vesting date (unless otherwise accelerated by the terms of the Employment Agreement or as determined by the Board of Directors in its sole discretion), subject to continued employment of the Optionee by the Company or any acquiring or surviving company through such date, an amount in cash, for each share subject to the Options, equal to the excess of (A) the value, as determined by the Board of Directors, of the property (including cash and securities) received by the holder of a common share of the Company as a result of the transaction over (B) the Exercise Price; or
| Exhibit 10.2 |
(iii) The remaining Options shall become exercisable for 100 percent of the shares subject to the Options effective as of the consummation of the Transaction, and the Board of Directors shall approve some arrangement by which the Optionee shall have a reasonable opportunity to exercise all such Options effective as of the consummation of the Transaction or otherwise realize the value of the Options, as determined by the Board of Directors. Any Options that are not exercised in accordance with procedures approved by the Board of Directors shall terminate.
In the event the Board of Directors opts that the remaining outstanding Options shall be treated in accordance with (i) above, then the surviving or acquiring corporation in the Transaction must agree to all relevant provisions of the Employment Agreement pertaining to the Options.
12. Conditions on Obligations. The Company shall not be obligated to issue common shares upon exercise of the Options if the Company is advised by its legal counsel that such issuance would violate applicable state or federal laws, including securities laws. The Company will use its reasonable best efforts to take steps required by state or federal law or applicable regulations in connection with issuance of shares upon exercise of the Options.
13. No Right to Employment. Nothing in this Agreement shall (i) confer upon the Optionee any right to be continued in the employment of an Employer or interfere in any way with the Employer's right to terminate the Optionee's employment at will at any time, for any reason, with or without cause, or to decrease the Optionee's compensation or benefits, or (ii) confer upon the Optionee any right to be retained or employed by the Employer or to the continuation, extension, renewal or modification of any compensation, contract or arrangement with or by the Employer.
14. Clawback. This award and any stock issued pursuant to this award are subject to recovery under the Company's clawback policy or any law, government regulation or stock exchange listing requirement and will be subject to such deductions and clawback made pursuant to such policy, law, government regulation, or stock exchange listing requirement, all as determined by the Board of Directors or the Compensation Committee. The Company's current clawback policy is subject to revision by the Board or Compensation Committee at any time and from time to time.
15. Successors of Company. This Agreement shall be binding upon and shall inure to the benefit of any successor of the Company but, except as provided herein, the Option may not be assigned or otherwise transferred by the Optionee.
| Exhibit 10.2 |
16. Rights as a Shareholder. The Optionee shall have no rights as a shareholder with respect to any shares of Common Stock until the date the Optionee becomes the holder or record of those shares. No adjustment shall be made for dividends or other rights for which the record date occurs before the date the Optionee becomes the holder of record.
17. Amendments. The Company may at any time amend this Agreement if the amendment does not adversely affect the Optionee and no amendment that does adversely affect the Optionee shall be valid or binding. Otherwise, this Agreement may not be amended without the written consent of the Optionee and the Company.
18. Governing Law; Jurisdiction and Venue. This Agreement will be interpreted under the laws of the state of Minnesota, exclusive of choice of law rules. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the state of Minnesota.
19. Complete Agreement. This Agreement and the Employment Agreement constitute the entire agreements between the Optionee and the Company, both oral and written concerning the matters addressed herein, and all prior agreements or representations concerning the matters addressed herein, whether written or oral, express or implied, are terminated and of no further effect.
20. Electronic Delivery of Prospectus. The Optionee consents to the electronic delivery of any prospectus and related documents relating to the Options in lieu of mailing or other form of delivery.
| SUNOPTA INC. | RECIPIENT |
| By: /s/ Jill Barnett | /s/ Brian Kocher |
| Name: Jill Barnett | Brian W. Kocher |
| Title: Chief Administrative Officer |
| Exhibit 10.3 |
RESTRICTED STOCK UNIT AWARD AGREEMENT
This Restricted Stock Unit Award Agreement (the "Agreement") is entered into as of January 2, 2024 (the "Award Date") by and between SunOpta Inc., a Canadian corporation (the "Company"), and Brian W. Kocher (the "Recipient").
IN CONSIDERATION of the mutual covenants and agreements set forth in this Agreement, the parties agree to the following:
1. Award and Terms of Restricted Stock Units. The Company awards to the Recipient 144,404 restricted stock units (the "Award"), subject to the restrictions, terms and conditions set forth in this Agreement and the Employment Agreement. This Award is not, and shall not be deemed to be, granted under or subject to the terms of the Company's Amended 2013 Stock Incentive Plan or any other plan. This Award is granted pursuant to the terms of the Executive Employment Agreement dated December 1, 2023 between the Company and the Recipient (the "Employment Agreement") and in the event of any inconsistency between this Agreement and the Employment Agreement as to timing of vesting or any other provision, the terms of the Employment Agreement shall control and apply.
(a) Rights under Restricted Stock Units. A restricted stock unit (an "RSU") represents the unfunded, unsecured right to require the Company to deliver to the Recipient one common share of the Company ("Common Shares") for each RSU.
(b) Vesting Dates. The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture. One-third of the RSUs shall vest on each of the first three (3) anniversaries of the Award Date (each, a "Vesting Date") if the Recipient is an employee of the Company on that Vesting Date and has been employed by the Company continuously from the Award Date to that Vesting Date.
(c) Termination of Employment. Except as provided in (i), (ii) and (iii) below and the Employment Agreement, if Recipient's employment by the Company is terminated at any time prior to the final Vesting Date, the Recipient shall not be entitled to receive any shares underlying any RSUs that are not vested as of the date of termination.
(i) Total Disability. If the Recipient's employment with the Company is terminated at any time prior to the final Vesting Date because of Total Disability (as defined in the Employment Agreement), all unvested RSUs shall immediately vest upon the determination of Total Disability and be settled in accordance with the terms of this Agreement.
(ii) Death. If the Recipient's employment with the Company is terminated at any time prior to the final Vesting Date because of death, all unvested RSUs shall immediately vest as of the date of death and be settled in accordance with the terms of this Agreement.
(iii) Termination without Cause or for Good Reason. If the Recipient's employment by the Company is terminated by the Company without Cause or by the Recipient for Good Reason at any time prior to the final Vesting Date, the RSUs shall be treated in accordance with Section 5.3 of the Employment Agreement. If a Release is not executed by the Recipient in accordance with the Employment Agreement or any other applicable provision of the Employment Agreement is not complied with by the Recipient prior to the effective date of the Release, the Recipient shall not be entitled to receive any shares underlying any RSUs that are not vested as of the date of employment termination. For the purposes of this Agreement, "Cause," "Good Reason" and "Release" shall have the meanings set forth in Employment Agreement.
| Exhibit 10.3 |
(d) Restrictions on Transfer. The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement. The Recipient may designate beneficiaries to receive any Common Shares to which the Recipient is entitled under this Agreement if the Recipient dies before delivery of such Common Shares by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Shares shall be delivered as directed by the personal representative of the Recipient's estate.
(e) No Voting Rights or Dividends. The Recipient shall have no rights as a shareholder with respect to the RSUs or the Common Shares underlying the RSUs until the underlying Common Shares are issued to the Recipient. The Recipient will not be entitled to receive cash payments representing any cash dividends paid with respect to the Common Stock underlying the RSUs.
(f) Delivery Date for the Shares Underlying the RSUs. Following each Vesting Date of the RSUs, the Company shall issue shares underlying the vested RSUs to the Recipient on a date determined by the Company within 60 days of such vesting; provided, however, that if the Recipient is obligated to deliver a Release in accordance with Section 1(c)(iii) and if the Recipient's Termination Date (as defined and determined pursuant to the Employment Agreement) occurs during the last 40 days of the calendar year, the payment shall in no event be made earlier than the first business day of the succeeding calendar year.
(g) Taxes and Tax Withholding.
(i) The Award is subject to applicable tax withholding. Prior to any relevant taxable or tax withholding event, as applicable, the Recipient agrees to make adequate arrangements satisfactory to the Company to satisfy all federal, state, provincial and other tax withholding obligations. In this regard, the Recipient authorizes the Company and its agents, at their discretion, to satisfy applicable withholding obligations by one or a combination of the following:
(1) withholding from the Recipient's other cash compensation paid by the Company; or
(2) withholding from proceeds of the sale of Common Shares acquired upon vesting/settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company on the Recipient's behalf pursuant to this authorization; or
(3) withholding in Common Shares to be issued upon vesting/settlement of the RSUs.
| Exhibit 10.3 |
(ii) If the withholding obligation is satisfied by withholding Common Shares, for tax purposes the Recipient will be deemed to have been issued the full number of Common Shares subject to the vested RSUs, notwithstanding that a number of the Common Shares are held back solely for the purpose of satisfying the withholding.
(iii) The Recipient agrees to pay to the Company any amount the Company may be required to withhold as a result of this award that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the shares or the proceeds of the sale of shares if the Recipient fails to comply with these obligations.
(iv) The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code of the United States can or will be made with respect to the RSUs.
(h) Stock Splits, Stock Dividends. If the outstanding Common Shares of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares, dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Company in the number and kind of shares subject to the RSUs so that the Recipient's proportionate interest before and after the occurrence of the event is maintained. Securities issued in respect of or exchanged for shares issued hereunder that are subject to restrictions (including vesting and forfeiture provisions) shall be subject to similar restrictions unless otherwise determined by the Board of Directors in its discretion. Notwithstanding the foregoing, the Company shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Company. Any such adjustments made by the Company shall be conclusive. For the avoidance of doubt, this provision is intended to put the Recipient in the same position with respect to each RSU as if Recipient owned a share of common stock immediately prior to such event.
(i) Mergers, Etc. If, while any unvested RSUs are outstanding, there shall occur a merger, consolidation, amalgamation or plan of exchange, in each case involving the Company pursuant to which outstanding Common Shares are converted into cash or other stock, securities or property (each, a "Transaction"), the Board of Directors, may, in its sole discretion, provide that the unvested RSUs shall be treated in accordance with any of the following alternatives:
(i) The RSUs shall be converted into restricted stock units to acquire stock of the surviving or acquiring corporation in the Transaction (with the vesting schedule applicable to the RSUs continuing with respect to the replacement award, unless otherwise accelerated as determined by the Board of Directors in its sole discretion), with the amount and type of shares subject thereto to be conclusively determined by the Board of Directors, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of shares following the Transaction, and disregarding fractional shares;
| Exhibit 10.3 |
(ii) The RSUs shall be cancelled effective immediately prior to the consummation of the Transaction, and, in full consideration of the cancellation, the Company or the surviving or acquiring company shall pay to the Recipient at the time the RSUs would otherwise have vested (unless otherwise accelerated by the terms of the Employment Agreement or as determined by the Board of Directors in its sole discretion), with payment subject to continued employment of the Recipient by the Company or any acquiring or surviving company through such vesting date, an amount in cash, for each unvested RSU, equal to the value, as determined by the Board of Directors, of the Common Shares subject to the unvested RSUs, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of Common Shares following the Transaction or other consideration paid in the transaction to holders of Common Shares; or
(iii) The RSUs shall become vested in full and all unissued shares subject to the RSUs shall be issued immediately prior to the consummation of the Transaction.
In the event the Board of Directors opts that the remaining RSUs shall be treated in accordance with (i) above, then the surviving or acquiring corporation in the Transaction must agree to all relevant provisions of the Employment Agreement pertaining to the RSUs.
(j) Clawback. This award and any stock issued pursuant to this award are subject to recovery under the Company's clawback policy or any law, government regulation or stock exchange listing requirement and will be subject to such deductions and clawback made pursuant to such policy, law, government regulation, or stock exchange listing requirement, all as determined by the Board of Directors or the Compensation Committee. The Company's current clawback policy is subject to revision by the Board or Compensation Committee at any time and from time to time.
2. Miscellaneous.
(a) Entire Agreement; Amendment. This Agreement and the Employment Agreement constitute the entire agreement of the parties with regard to the subjects hereof and may be amended only by written agreement between the Company and Recipient.
(b) Electronic Delivery. The Recipient consents to the electronic delivery of any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.
(c) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company's successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient's heirs, executors, administrators, successors and assigns.
(d) Further Action. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
| Exhibit 10.3 |
(e) Governing Law; Jurisdiction and Venue. This Agreement will be interpreted under the laws of the state of Minnesota, exclusive of choice of law rules. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the state of Minnesota.
(f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original.
| SUNOPTA INC. | RECIPIENT |
| By: /s/ Jill Barnett | /s/ Brian Kocher |
| Name: Jill Barnett | Brian W. Kocher |
| Title: Chief Administrative Officer |
| Exhibit 10.4 |
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is between SunOpta Inc. (such entity together with all past, present, and future parents, divisions, operating companies, subsidiaries, and affiliates are referred to collectively herein as "Company") and Justin Kobler ("Employee").
1. EMPLOYMENT
This Agreement commences February 26, 2024 ("Effective Date") and shall continue in effect until terminated by (a) Employee upon two month's written notice to Company, or (b) Company immediately upon written notice to Employee. Employment during the course of the Agreement shall be on an "at-will" basis, meaning that either party has the right to terminate the agreement for any reason, or for no reason, as stated herein. The Company also has the right to terminate the Agreement immediately for Cause (as defined in Section 7 below).
2. TITLE AND EXCLUSIVE SERVICES
(a) Title and Duties. Employee's title is Senior Vice-President, Supply Chain, and Employee will perform job duties that are usual and customary for this position.
(b) Exclusive Services. Employee shall not be employed or render services elsewhere during the employment period; provided, however, that Employee may participate in professional, civic or charitable organizations so long as such participation is unpaid and does not interfere with the performance of Employee's duties or conflict with Employee's obligations hereunder.
3. COMPENSATION AND BENEFITS
(a) Base Salary. Employee shall be paid an annualized salary of Three Hundred Eighty-Five Thousand Dollars ($385,000.00) ("Base Salary"). The Base Salary shall be payable in accordance with the Company's regular payroll practices and pursuant to Company policy, which may be amended from time to time. Employee's performance and Base Salary will be reviewed from time to time and Company may adjust Employee's annual Base Salary in accordance with reasonable practices and Company policy.
(b) Short Term Incentive. Eligibility for the annual Short-Term Incentive is based upon a fifty percent (50%) target of Employee's Base Salary and is pursuant to the terms of the Short-Term Incentive Plan Document. Target percentages and plan terms are subject to change at the sole discretion of Company and its Board of Directors and are not a guarantee of compensation. For 2024, Employee's Short-Term Incentive will be prorated based on Employee's start date.
(c) Long Term Incentive. Employee is eligible for participation in the Long-Term Incentive Plan at a target of sixty-five percent (65%) of Employee's Base Salary pursuant to the terms of the Long-Term Incentive Plan Document. Target percentages and plan terms are subject to change at the sole discretion of Company and its Board of Directors and are not a guarantee of compensation.
(d) Signing Bonus. Employee will receive a signing bonus of $150,000 gross (less applicable taxes and withholdings) to be paid within thirty (30) days of Employee's start date. In the event Employee voluntarily terminates his employment with the Company for any reason whatsoever or if Employee's employment with the Company is terminated by SunOpta for "cause", Employee agrees to repay the Company 100% of the signing bonus is such termination occurs within 12 months of the payment date of such bonus, or 50% of the signing bonus if such termination occurs between 12 and 24 months of the payment date of such bonus.
| Exhibit 10.4 |
(e) Special Equity Grant. Employee will be awarded a one-time equity award of 30,000 restricted stock units (RSUs) within 30 days of Employee's start date. These RSUs will vest ratably (1/3) over a three-year period on each of the first three anniversaries of the grant date. All terms and conditions relating to these RSUs shall be in accordance with the Company's Amended 2013 Stock Incentive Plan.
(f) Relocation Bonus. The Company shall pay Employee US$100,000 gross (less applicable taxes and withholdings) in satisfaction of Employee's relocation expenses relating to relocation from Keller, Texas to the Eden Prairie, Minnesota area, payable within fifteen (15) days after the earlier of (i) Employee lists or offers his primary residence for sale, or (ii) Employee signs a real estate purchase agreement or lease for a primary residence in Minnesota. Employee agrees to relocate to Minnesota by June 30, 2024. In the event Employee voluntarily terminates his employment with the Company for any reason whatsoever or if Employee's employment with the Company is terminated by SunOpta for "cause", or Employee does not relocate by the agreed upon date, Employee agrees to repay the Company 100% of the signing bonus is such termination occurs within 12 months of the payment date of the bonus, or 50% of the signing bonus if such termination occurs between 12 and 24 months of the payment date of the bonus.
(g) Employment Benefit Plans. Employee may participate in all employee welfare benefit plans in which other similarly situated employees may participate, according to the terms of applicable policies and as stated in the Company's Benefits Guide.
(h) Paid Time Off. Employee shall be entitled to 200 hours (prorated for the first year based on the start date) of paid time-off in accordance with the Company's paid time-off policies, as in effect from time to time.
(i) Expenses. Company will reimburse Employee for business expenses consistent with past practices and pursuant to Company policy.
(j) Withholdings and Deductions. Company will deduct or withhold from any payment made or
benefit provided hereunder, including without limitation compensation specified in this Section 3, all federal, state and local taxes and other withholdings the Company is required or authorized by law to deduct or withhold therefrom or otherwise collect in connection with the wages and benefits provided in connection with the Employee's employment with the Company.
4. NONDISCLOSURE OF TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION
(a) For purposes of this Agreement, "Trade Secret" shall mean all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulae, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing that (i) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (ii) Company has taken efforts or measures that are reasonable in the circumstances to keep or maintain the secrecy of such information. Trade Secret as defined in this Paragraph is meant to be consistent with the definition of Trade Secret under the Minnesota Uniform Trade Secret Act ("MUTSA"), Minn. Stat. § 325C.01, and the Defend Trade Secrets Act of 2016 ("DTSA"), 18 U.S.C. § 1839.
| Exhibit 10.4 |
(b) For purposes of this Agreement, "Confidential Information" is defined as the confidential and proprietary information of Company, including without limitation: Company's marketing plans, growth strategies, target lists, performance goals, operational and programming strategies, specialized training expertise, employee development, engineering information, sales information, client and customer lists, business and employment contracts, representation agreements, pricing and ratings information, production and cost data, compensation and fee information, strategic business plans, budgets, financial statements, technological initiatives, proprietary research or software purchased or developed by Company, content distribution, and other information Company treats as confidential or proprietary (collectively the "Confidential Information"). As used in this Agreement, Confidential Information need not constitute a Trade Secret as defined in this Agreement or within the meaning of MUTSA or DTSA, but Confidential Information shall also include, without limitation, all Trade Secrets. Confidential Information shall also include information of third parties that was provided to Company subject to a confidentiality and/or nondisclosure agreement or which Company is otherwise obligated to treat as confidential or proprietary.
(c) During the term of Employee's employment by Company, Employee will have access to and become acquainted with various Trade Secrets and Confidential Information of Company, all of which are owned by Company and regularly used in the operation of Company's business. All Trade Secrets and Confidential Information and all files, records, documents, drawings, specifications, equipment, computer files, computer records, computer programs, and similar items relating to the business of Company, whether they are prepared by Employee or come into Employee's possession in any other way and whether or not they contain or constitute Trade Secrets owned by Company, are and shall remain the exclusive property of Company and shall not be removed from the premises of Company in any form or medium, or reproduced or distributed in any manner, under any circumstances whatsoever without the prior written consent of Company.
(d) Employee hereby promises, covenants, and agrees (i) to not use any Trade Secret, Confidential Information, or Intellectual Property (as used herein, "Intellectual Property" means rights that potentially exist under patent, copyright, trademark, or trade secrets law) for Employee's own use or for any purpose other than for providing services to Company; (ii) to not disclose any Trade Secret or Confidential Information to any person or entity except as approved in advance in writing by Company, which approval will be subject to Company's sole and absolute discretion; (iii) to use Employee's best efforts to protect the secrecy of and avoid disclosure or use of the Trade Secret or Confidential Information in order to prevent it from falling into the public domain or the possession of persons other than Employee, which efforts shall at a minimum include no less than a reasonable degree of care; (iv) to not sell, transfer, or in any manner disclose or give access to, the Trade Secret or Confidential Information, in whole or in part, to any third party without the prior written approval of Company, which approval will be subject to Company's sole and absolute discretion; (v) to notify Company in writing of any misuse or misappropriation of the Trade Secret, Confidential Information, or Intellectual Property which may come to Employee's attention; and (vi) not to use Company's Trade Secrets, Confidential Information, or Intellectual Property to willfully interfere with the relationship between Company and its employees, agents, representatives, or customers. The obligations in this Paragraph shall survive termination of Employee's employment with Company and continue for as long as such information qualifies as a Trade Secret.
(e) Employee acknowledges that such Trade Secrets and Confidential Information is proprietary and agrees not to disclose it to anyone outside Company. When employment ends, Employee will immediately return all Confidential Information to Company. Employee acknowledges and recognizes the highly competitive nature of the business of Company, the valuable Trade Secrets, Confidential Information, and Intellectual Property in such Employee's possession, and the customer goodwill associated with the ongoing business practice of Company. Accordingly, while nothing in this Agreement is intended to restrain Employee from lawfully engaging in a lawful profession, trade, or business of any kind after termination of employment with Company, Employee acknowledges that Employee's obligations to return and to not use or disclose any Trade Secrets or Intellectual Property owned by Company is subject to independent legal rights and duties that are not dependent on any covenants in this Agreement and which shall survive termination of Employee's employment and continue for as long as such information qualifies as a Company Trade Secret, as defined by law, or until the expiration or extinguishment of Company's registered or common law rights with respect to Company copyrights, patents, and trademarks.
| Exhibit 10.4 |
(f) In the event Employee is requested to disclose Trade Secrets or Confidential Information by subpoena, court order, or a lawful request or requirement of a federal or state regulatory or law enforcement agency, such disclosure shall not violate this Agreement; provided, however, that Employee shall promptly notify Company of the request or requirement prior to any disclosure so that Company may seek a protective order or take other appropriate action, and Employee shall cooperate with Company in its efforts to obtain a protective order or take such other actions, and provided, further, that if a protective order or other remedy is not obtained, Employee will disclose only that portion of the Trade Secrets or Confidential Information that is legally required to be disclosed and will make reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Trade Secrets or Confidential Information.
(g) Pursuant to 18 U.S.C. § 1833(b), Employee shall not be held criminally or civilly liable under any federal or state trade secret law for disclosure of a trade secret that is made: in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document filed in a lawsuit or other proceeding if such filing is made under seal.
(h) The terms of this Section 4 with respect to Company trade secrets shall survive the expiration or termination of this Agreement for any reason.
5. DUTY OF LOYALTY DURING EMPLOYMENT AND NON-SOLICITATION RESTRICTIVE COVENANTS
(a) Duty of Loyalty. Employee owes Company an undivided duty of loyalty during the term of Employee's employment by Company. During the term of Employee's employment by Company, to the extent that Employee has any business to transact on Employee's own account, similar to that entrusted to Employee by Company, Employee shall always give the preference to the business of Company. Pursuant to this duty of loyalty during Employee's employment, Employee shall not, directly or indirectly, self-deal or divert any business opportunities, solicit any employees or customers of Company for or on behalf of any third party person or entity, or engage or participate in or give preference to any business that is in competition in any manner whatsoever with the business of Company, or otherwise violate Employee's duty of loyalty to Company.
(b) Non-Interference. To preserve Company's Trade Secrets, Confidential Information, goodwill and legitimate business interests, Employee agrees that Employee will not, directly or indirectly, whether for his own account or for the account of any other individual, partnership, firm, corporation or other business organization (each a "Person") (other than Company) (i) (A) solicit in any capacity, encourage to terminate, or otherwise interfere with the relationship of, any individual who is, or was within the then-most recent twelve (12)-month period, employed by, or otherwise engaged to perform services for, Company, or (B) endeavor to entice away from Company any such individual; provided that general advertising not directed specifically at employees of Company shall not be deemed to violate this clause; or (ii) solicit in any capacity or encourage any Person who is, or was within the then-most recent twelve (12)-month period, a customer, vendor or supplier of Company, to terminate or reduce its relationship with Company.
| Exhibit 10.4 |
(c) Non-Solicitation. To further preserve Company's Confidential Information, goodwill, specialized training expertise, and legitimate business interests, Employee agrees that Employee will not, directly or indirectly, whether for his own account or for the account of any other Person, use any Confidential Information to solicit or endeavor to entice away from Company any Person who is, or was within the then-most recent twelve (12)-month period, a customer of Company. The non-interference and non-solicitation restrictive covenants in this Section shall apply during Employee's employment with Company and shall survive termination of Employee's for any reason (i) in the case of interference or solicitation by Employee through the use or disclosure of Trade Secrets, for as long as such information qualifies as a Trade Secret under MUTSA or DTSA; or (ii) in the case of interference or solicitation by Employee through the use or disclosure of non-Trade Secret Company Confidential Information, for (12) months after such employment ends.
6. OWNERSHIP OF MATERIALS
(a) Ownership and Assignment. Employee agrees that all inventions, improvements, discoveries, designs, technology, and works of authorship (including but not limited to computer software) made, created, conceived, or reduced to practice by Employee, whether alone or in cooperation with others, during Employee's employment with Company (including any period of such employment before this Agreement), together with all patent, trademark, copyright, trade secret, and other intellectual property rights related to any of the foregoing throughout the world, are among other things works made for hire (the "Works") and at all times are owned exclusively by Company, and in any event, Employee hereby assigns all ownership in such rights to Company. Employee understands that the Works may be modified or altered and expressly waives any rights of attribution or integrity or other rights in the nature of moral right (droit morale) for all uses of the Works. Employee agrees to provide written notification to Company of any Works covered by this Agreement, execute any documents, testify in any legal proceedings, and do all things necessary or desirable to secure Company's rights to the foregoing, including without limitation executing inventors' declarations and assignment forms, even if no longer employed by Company. Employee agrees that Employee shall have no right to reproduce, distribute copies of, perform publicly, display publicly, or prepare derivative works based upon the Works. Employee hereby irrevocably designates and appoints the Company as Employee's agent and attorney-in-fact, to act for and on Employee's behalf regarding obtaining and enforcing any intellectual property rights that were created by Employee during employment with Company and related to the performance of Employee's job. Employee agrees not to incorporate any intellectual property created by Employee prior to Employee's employment with Company, or created by any third party, into any Company work product. The assignment of Works under this Section 6 does not apply to an invention for which no equipment, supplies, facility, or trade secret information of Company was used and which invention was developed entirely on Employee's own time, so long as the invention does not: (i) relate directly to the business of the Company; (ii) relate to the Company's actual or demonstrably anticipated research or development, or (iii) result from any work performed by Employee for Company.
(b) Third Party Information. Employee shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Employee hereby indemnifies, holds harmless and agrees to defend Company and its officers, directors, partners, employees, agents and representatives from any breach of the foregoing covenant. Employee shall comply with all relevant policies and guidelines of Company in effect from time to time at the discretion of the Company, including regarding the protection of confidential information and intellectual property and potential conflicts of interest.
| Exhibit 10.4 |
7. TERMINATION.
In the event Employee is terminated without Cause, the Company Severance Pay Plan will apply. "Cause" shall mean (i) Employee's failure to perform materially his duties with respect to Company or its affiliates, (ii) the commission of an act that constitutes a felony under the laws of the United States or any individual State or under the laws of a foreign country, (iii) the commission of an act of fraud, embezzlement, sexual harassment, dishonesty, theft, or an intentional act or an act of moral turpitude that results in a material loss, damage or injury to the Company; (iv) any act or omission by Employee that is the result of misconduct, gross negligence or any other conduct or behavior that is, or may reasonably be expected to be, materially detrimental to the financial condition, business or reputation of Company or its affiliates, or (v) any material breach or violation by Employee of Company's code of ethics and business conduct or such other material policies as may be adopted by Company from time to time. Notwithstanding the foregoing provisions of this Section 7, Company will not be obligated to make any payments to Employee as part of the Company Severance Pay Plan unless: Employee has signed a release of claims in favor of Company and its affiliates and related entities, and their directors, officers, insurers, employees and agents, in a form prescribed by Company; all applicable rescission periods provided by law for releases of claims shall have expired and Employee shall have signed and not rescinded the release of claims; and Employee is in strict compliance with the terms of this Agreement and any other agreements with Company as of the dates of such payments.
8. NON-DISPARAGEMENT
During and at any time after Employee's employment with Company, Employee shall not, directly or indirectly, make any disparaging or negative comments or criticisms (whether of a professional or personal nature) regarding Company or Employee's relationship with Company or the termination of such relationship.
9. CONFLICTS OF INTEREST
Employee acknowledges familiarity with Company policies on conflicts of interest and warrants that Employee will fully comply with such policies. Employee shall certify compliance with the conflicts of interest policy from time to time as requested by the Company. Employee shall notify Company immediately in writing if there is any attempt to induce Employee to violate the conflicts of interest policy.
10. INDEMNIFICATION
Company shall defend and indemnify Employee for acts committed in the course and scope of employment. Employee shall indemnify Company for claims of any type concerning Employee's conduct outside the scope of employment, or the breach by Employee of this Agreement.
11. DISPUTE RESOLUTION
(a) Arbitration. This Agreement is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce. This Agreement applies to any dispute arising out of or related to Employee's employment with Company or termination of employment. Nothing contained in this Agreement shall be construed to prevent or excuse Employee from using the Company's existing internal procedures for resolution of complaints, and this Agreement is not intended to be a substitute for the use of such procedures. Except as it otherwise provides, this Agreement is intended to apply to the resolution of disputes that otherwise would be resolved in a court of law, and therefore this Agreement requires all such disputes to be resolved only by an arbitrator through a final and binding individual arbitration proceeding and not by way of court or jury trial or class action. Such disputes include without limitation disputes arising out of or relating to interpretation or application of this Agreement, including the enforceability, revocability or validity of this Agreement or any portion of this Agreement. This Agreement also applies, without limitation, to disputes regarding the employment relationship, trade secrets, unfair competition, compensation, breaks and rest periods, termination, or harassment and claims arising under the Uniform Trade Secrets Act, Civil Rights Act of 1964, Americans With Disabilities Act, Age Discrimination in Employment Act, Family Medical Leave Act, Fair Labor Standards Act, Employee Retirement Income Security Act, and state statutes, if any, addressing the same or similar subject matters, and all other state statutory and common law claims (excluding workers compensation, state disability insurance and unemployment insurance claims). Claims may be brought before an administrative agency but only to the extent applicable law permits access to such an agency notwithstanding the existence of an agreement to arbitrate. Such administrative claims include without limitation claims or charges brought before the Equal Employment Opportunity Commission (www.eeoc.gov), the U.S. Department of Labor (www.dol.gov), the National Labor Relations Board (www.nlrb.gov), the Office of Federal Contract Compliance Programs (www.dol.gov/esa/ofccp). Nothing in this Agreement shall be deemed to preclude or excuse a party from bringing an administrative claim before any agency in order to fulfill the party's obligation to exhaust administrative remedies before making a claim in arbitration. Disputes that may not be subject to pre-dispute arbitration agreement as provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) are excluded from the coverage of this Agreement.
| Exhibit 10.4 |
(b) Injunctive Relief. A party may apply to a court of competent jurisdiction for temporary or preliminary injunctive relief in connection with an arbitrable controversy, but only upon the ground that the award to which that party may be entitled may be rendered ineffectual without such provisional relief.
(c) This Section 11 is the full and complete agreement relating to the formal resolution of employment-related disputes. In the event any portion of this Section 11 is deemed unenforceable, the remainder of this Agreement will be enforceable.
(d) This Section 11 shall survive the expiration or termination of this Agreement for any reason.
| Employee Initials: _________ | Company Initials: ________ |
12. MISCELLANEOUS
(a) Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes any prior written or oral agreements or understandings between the parties. No modification shall be valid unless in writing and signed by the parties, relating to the subject matter of this Agreement, unless otherwise noted herein. If any provision of this Agreement shall, for any reason, be held unenforceable, such unenforceability shall not affect the remaining provisions hereof, except as specifically noted in this Agreement, or the application of such provisions to other persons or circumstances, all of which shall be enforced to the greatest extent permitted by law.
| Exhibit 10.4 |
(b) Reasonable Restrictions; Severability. Company and Employee agree that the restrictions contained in Sections 4, 5 and 6, are material terms of this Agreement, reasonable in scope and duration and are necessary to protect Company's Confidential Information, goodwill, specialized training expertise, and legitimate business interests. If any restrictive covenant is held to be unenforceable because of the scope, duration or geographic area, the parties agree that the court or arbitrator may reduce the scope, duration, or geographic area, and in its reduced form, such provision shall be enforceable. Should Employee violate the provisions of Sections 4, 5 or 6, then in addition to all other remedies available to Company, the duration of these covenants shall be extended for the period of time when Employee began such violation until Employee permanently ceases such violation. Employee agrees that no bond will be required if an injunction is sought to enforce any of the covenants previously set forth herein.
(c) Headings. The headings in this Agreement are inserted for convenience of reference only and shall not control the meaning of any provision hereof.
(d) Governing Law and Jurisdiction. This Agreement shall be governed in all respects by the internal laws of the State of Minnesota without regard to conflict of law provisions. Each of the Employee and the Company hereby consents to the personal jurisdiction of the state and federal courts located in Hennepin County, Minnesota for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants. Any arbitration proceeding arising from or relating to this Agreement shall take place in Hennepin County, Minnesota.
Upon full execution by all parties, this Agreement shall be effective on the Effective Date in Section 1.
| EMPLOYEE: | |
| /s/ Justin Kobler | Date: 02/13/2024 |
| Justin Kobler | |
| COMPANY: | |
| _/s/ Jill Barnett | Date: 02/13/2024 |
| Jill Barnett | |
| Chief Administrative Officer |
Exhibit 10.5
RESTRICTED STOCK UNIT AWARD AGREEMENT
This Restricted Stock Unit Award Agreement (the "Agreement") is entered into as of March 13, 2024 (the "Award Date") by and between SunOpta Inc., a Canadian corporation (the "Company"), and Brian W. Kocher (the "Recipient").
IN CONSIDERATION of the mutual covenants and agreements set forth in this Agreement, the parties agree to the following:
1. Award and Terms of Restricted Stock Units. The Company awards to the Recipient 74,000 restricted stock units (the "Award"), subject to the restrictions, terms and conditions set forth in this Agreement and the Employment Agreement. This Award is not, and shall not be deemed to be, granted under or subject to the terms of the Company's Amended 2013 Stock Incentive Plan or any other plan. This Award is granted pursuant to the terms of the Executive Employment Agreement dated December 1, 2023 between the Company and the Recipient (the "Employment Agreement") and in the event of any inconsistency between this Agreement and the Employment Agreement as to timing of vesting or any other provision, the terms of the Employment Agreement shall control and apply.
(a) Rights under Restricted Stock Units. A restricted stock unit (an "RSU") represents the unfunded, unsecured right to require the Company to deliver to the Recipient one common share of the Company ("Common Shares") for each RSU.
(b) Vesting Dates. The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture. One-third of the RSUs shall vest on each of the following dates: January 2, 2025, January 2, 2026 and January 2, 2027 (each, a "Vesting Date") if the Recipient is an employee of the Company on that Vesting Date and has been employed by the Company continuously from the Award Date to that Vesting Date.
(c) Termination of Employment. Except as provided in (i), (ii) and (iii) below and the Employment Agreement, if Recipient's employment by the Company is terminated at any time prior to the final Vesting Date, the Recipient shall not be entitled to receive any shares underlying any RSUs that are not vested as of the date of termination.
(i) Total Disability. If the Recipient's employment with the Company is terminated at any time prior to the final Vesting Date because of Total Disability (as defined in the Employment Agreement), all unvested RSUs shall immediately vest upon the determination of Total Disability and be settled in accordance with the terms of this Agreement.
(ii) Death. If the Recipient's employment with the Company is terminated at any time prior to the final Vesting Date because of death, all unvested RSUs shall immediately vest as of the date of death and be settled in accordance with the terms of this Agreement.
(iii) Termination without Cause or for Good Reason. If the Recipient's employment by the Company is terminated by the Company without Cause or by the Recipient for Good Reason at any time prior to the final Vesting Date, the RSUs shall be treated in accordance with Section 5.3 of the Employment Agreement. If a Release is not executed by the Recipient in accordance with the Employment Agreement or any other applicable provision of the Employment Agreement is not complied with by the Recipient prior to the effective date of the Release, the Recipient shall not be entitled to receive any shares underlying any RSUs that are not vested as of the date of employment termination. For the purposes of this Agreement, "Cause," "Good Reason" and "Release" shall have the meanings set forth in Employment Agreement.
(d) Restrictions on Transfer. The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement. The Recipient may designate beneficiaries to receive any Common Shares to which the Recipient is entitled under this Agreement if the Recipient dies before delivery of such Common Shares by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Shares shall be delivered as directed by the personal representative of the Recipient's estate.
(e) No Voting Rights or Dividends. The Recipient shall have no rights as a shareholder with respect to the RSUs or the Common Shares underlying the RSUs until the underlying Common Shares are issued to the Recipient. The Recipient will not be entitled to receive cash payments representing any cash dividends paid with respect to the Common Stock underlying the RSUs.
(f) Delivery Date for the Shares Underlying the RSUs. Following each Vesting Date of the RSUs, the Company shall issue shares underlying the vested RSUs to the Recipient on a date determined by the Company within 60 days of such vesting; provided, however, that if the Recipient is obligated to deliver a Release in accordance with Section 1(c)(iii) and if the Recipient's Termination Date (as defined and determined pursuant to the Employment Agreement) occurs during the last 40 days of the calendar year, the payment shall in no event be made earlier than the first business day of the succeeding calendar year.
(g) Taxes and Tax Withholding.
(i) The Award is subject to applicable tax withholding. Prior to any relevant taxable or tax withholding event, as applicable, the Recipient agrees to make adequate arrangements satisfactory to the Company to satisfy all federal, state, provincial and other tax withholding obligations. In this regard, the Recipient authorizes the Company and its agents, at their discretion, to satisfy applicable withholding obligations by one or a combination of the following:
(1) withholding from the Recipient's other cash compensation paid by the Company; or
(2) withholding from proceeds of the sale of Common Shares acquired upon vesting/settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company on the Recipient's behalf pursuant to this authorization; or
(3) withholding in Common Shares to be issued upon vesting/settlement of the RSUs.
(ii) If the withholding obligation is satisfied by withholding Common Shares, for tax purposes the Recipient will be deemed to have been issued the full number of Common Shares subject to the vested RSUs, notwithstanding that a number of the Common Shares are held back solely for the purpose of satisfying the withholding.
(iii) The Recipient agrees to pay to the Company any amount the Company may be required to withhold as a result of this award that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the shares or the proceeds of the sale of shares if the Recipient fails to comply with these obligations.
(iv) The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code of the United States can or will be made with respect to the RSUs.
(h) Stock Splits, Stock Dividends. If the outstanding Common Shares of the Company are hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares, dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Company in the number and kind of shares subject to the RSUs so that the Recipient's proportionate interest before and after the occurrence of the event is maintained. Securities issued in respect of or exchanged for shares issued hereunder that are subject to restrictions (including vesting and forfeiture provisions) shall be subject to similar restrictions unless otherwise determined by the Board of Directors in its discretion. Notwithstanding the foregoing, the Company shall have no obligation to effect any adjustment that would or might result in the issuance of fractional shares, and any fractional shares resulting from any adjustment may be disregarded or provided for in any manner determined by the Company. Any such adjustments made by the Company shall be conclusive. For the avoidance of doubt, this provision is intended to put the Recipient in the same position with respect to each RSU as if Recipient owned a share of common stock immediately prior to such event.
(i) Mergers, Etc. If, while any unvested RSUs are outstanding, there shall occur a merger, consolidation, amalgamation or plan of exchange, in each case involving the Company pursuant to which outstanding Common Shares are converted into cash or other stock, securities or property (each, a "Transaction"), the Board of Directors, may, in its sole discretion, provide that the unvested RSUs shall be treated in accordance with any of the following alternatives:
(i) The RSUs shall be converted into restricted stock units to acquire stock of the surviving or acquiring corporation in the Transaction (with the vesting schedule applicable to the RSUs continuing with respect to the replacement award, unless otherwise accelerated as determined by the Board of Directors in its sole discretion), with the amount and type of shares subject thereto to be conclusively determined by the Board of Directors, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of shares following the Transaction, and disregarding fractional shares;
(ii) The RSUs shall be cancelled effective immediately prior to the consummation of the Transaction, and, in full consideration of the cancellation, the Company or the surviving or acquiring company shall pay to the Recipient at the time the RSUs would otherwise have vested (unless otherwise accelerated by the terms of the Employment Agreement or as determined by the Board of Directors in its sole discretion), with payment subject to continued employment of the Recipient by the Company or any acquiring or surviving company through such vesting date, an amount in cash, for each unvested RSU, equal to the value, as determined by the Board of Directors, of the Common Shares subject to the unvested RSUs, taking into account the relative values of the companies involved in the Transaction and the exchange rate, if any, used in determining shares of the surviving corporation to be held by holders of Common Shares following the Transaction or other consideration paid in the transaction to holders of Common Shares; or
(iii) The RSUs shall become vested in full and all unissued shares subject to the RSUs shall be issued immediately prior to the consummation of the Transaction.
In the event the Board of Directors opts that the remaining RSUs shall be treated in accordance with (i) above, then the surviving or acquiring corporation in the Transaction must agree to all relevant provisions of the Employment Agreement pertaining to the RSUs.
(j) Clawback. This award and any stock issued pursuant to this award are subject to recovery under the Company's clawback policy or any law, government regulation or stock exchange listing requirement and will be subject to such deductions and clawback made pursuant to such policy, law, government regulation, or stock exchange listing requirement, all as determined by the Board of Directors or the Compensation Committee. The Company's current clawback policy is subject to revision by the Board or Compensation Committee at any time and from time to time.
2. Miscellaneous.
(a) Entire Agreement; Amendment. This Agreement and the Employment Agreement constitute the entire agreement of the parties with regard to the subjects hereof and may be amended only by written agreement between the Company and Recipient.
(b) Electronic Delivery. The Recipient consents to the electronic delivery of any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.
(c) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company's successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient's heirs, executors, administrators, successors and assigns.
(d) Further Action. The parties agree to execute such further instruments and to take such further action as may reasonably be necessary to carry out the intent of this Agreement.
(e) Governing Law; Jurisdiction and Venue. This Agreement will be interpreted under the laws of the state of Minnesota, exclusive of choice of law rules. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the state of Minnesota.
(f) Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original.
| SUNOPTA INC. | RECIPIENT |
| By: /s/ Jill Barnett | /s/ Brian Kocher |
| Name: Jill Barnett | Brian W. Kocher |
| Title: Chief Administrative Officer | |
| Exhibit 10.6 |
EMPLOYMENT AGREEMENT
This Employment Agreement (“Agreement”) is between SunOpta Inc. (such entity together with all past, present, and future parents, divisions, operating companies, subsidiaries, and affiliates are referred to collectively herein as “Company”) and Lauren McNamara (“Employee”).
1. EMPLOYMENT
This Agreement commences March 25, 2024 ("Effective Date") and shall continue in effect until terminated by (a) Employee upon two month's written notice to Company, or (b) Company immediately upon written notice to Employee. Employment during the course of the Agreement shall be on an "at-will" basis, meaning that either party has the right to terminate the agreement for any reason, or for no reason, as stated herein. The Company also has the right to terminate the Agreement immediately for Cause (as defined in Section 7 below).
2. TITLE AND EXCLUSIVE SERVICES
(a) Title and Duties. Employee's title is Senior Vice-President, Business Management, and Employee will perform job duties that are usual and customary for this position.
(b) Exclusive Services. Employee shall not be employed or render services elsewhere during the employment period; provided, however, that Employee may participate in professional, civic or charitable organizations so long as such participation is unpaid and does not interfere with the performance of Employee's duties or conflict with Employee's obligations hereunder.
3. COMPENSATION AND BENEFITS
(a) Base Salary. Employee shall be paid an annualized salary of Three Hundred Twenty-Five Thousand Dollars ($325,000.00) ("Base Salary"). The Base Salary shall be payable in accordance with the Company's regular payroll practices and pursuant to Company policy, which may be amended from time to time. Employee's performance and Base Salary will be reviewed from time to time and Company may adjust Employee's annual Base Salary in accordance with reasonable practices and Company policy.
(b) Short Term Incentive. Eligibility for the annual Short-Term Incentive is based upon a sixty percent (60%) target of Employee's Base Salary and is pursuant to the terms of the Short-Term Incentive Plan Document. Target percentages and plan terms are subject to change at the sole discretion of Company and its Board of Directors and are not a guarantee of compensation.
(c) Long Term Incentive. Employee is eligible for participation in the Long-Term Incentive Plan at a target of eighty-five percent (85%) of Employee's Base Salary pursuant to the terms of the Long-Term Incentive Plan Document. Target percentages and plan terms are subject to change at the sole discretion of Company and its Board of Directors and are not a guarantee of compensation.
(d) Special Equity Grant. Employee will be awarded a special one-time equity award of a number of restricted stock units (RSUs) determined by dividing $250,000 by the closing price of the Company's stock as reported on Nasdaq on the Effective Date. These RSUs will vest ratably (1/3) over a three-year period on each of the first three anniversaries of the grant date. All terms and conditions relating to these RSUs shall be in accordance with the Company's Amended 2013 Stock Incentive Plan.
| Exhibit 10.6 |
(e) Employment Benefit Plans. Employee may participate in all employee welfare benefit plans in which other similarly situated employees may participate, according to the terms of applicable policies and as stated in the Company's Benefits Guide.
(f) Paid Time Off. Employee shall be entitled to 200 hours (prorated for the first year based on the start date) of paid time-off in accordance with the Company's paid time-off policies, as in effect from time to time.
(g) Expenses. Company will reimburse Employee for business expenses consistent with past practices and pursuant to Company policy.
(h) Withholdings and Deductions. Company will deduct or withhold from any payment made or
benefit provided hereunder, including without limitation compensation specified in this Section 3, all federal, state and local taxes and other withholdings the Company is required or authorized by law to deduct or withhold therefrom or otherwise collect in connection with the wages and benefits provided in connection with the Employee's employment with the Company.
4. NONDISCLOSURE OF TRADE SECRETS AND OTHER CONFIDENTIAL INFORMATION
(a) For purposes of this Agreement, "Trade Secret" shall mean all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulae, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing that (i) derives independent economic value, actual or potential, from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (ii) Company has taken efforts or measures that are reasonable in the circumstances to keep or maintain the secrecy of such information. Trade Secret as defined in this Paragraph is meant to be consistent with the definition of Trade Secret under the Minnesota Uniform Trade Secret Act ("MUTSA"), Minn. Stat. § 325C.01, and the Defend Trade Secrets Act of 2016 ("DTSA"), 18 U.S.C. § 1839.
(b) For purposes of this Agreement, "Confidential Information" is defined as the confidential and proprietary information of Company, including without limitation: Company's marketing plans, growth strategies, target lists, performance goals, operational and programming strategies, specialized training expertise, employee development, engineering information, sales information, client and customer lists, business and employment contracts, representation agreements, pricing and ratings information, production and cost data, compensation and fee information, strategic business plans, budgets, financial statements, technological initiatives, proprietary research or software purchased or developed by Company, content distribution, and other information Company treats as confidential or proprietary (collectively the "Confidential Information"). As used in this Agreement, Confidential Information need not constitute a Trade Secret as defined in this Agreement or within the meaning of MUTSA or DTSA, but Confidential Information shall also include, without limitation, all Trade Secrets. Confidential Information shall also include information of third parties that was provided to Company subject to a confidentiality and/or nondisclosure agreement or which Company is otherwise obligated to treat as confidential or proprietary.
(c) During the term of Employee's employment by Company, Employee will have access to and become acquainted with various Trade Secrets and Confidential Information of Company, all of which are owned by Company and regularly used in the operation of Company's business. All Trade Secrets and Confidential Information and all files, records, documents, drawings, specifications, equipment, computer files, computer records, computer programs, and similar items relating to the business of Company, whether they are prepared by Employee or come into Employee's possession in any other way and whether or not they contain or constitute Trade Secrets owned by Company, are and shall remain the exclusive property of Company and shall not be removed from the premises of Company in any form or medium, or reproduced or distributed in any manner, under any circumstances whatsoever without the prior written consent of Company.
| Exhibit 10.6 |
(d) Employee hereby promises, covenants, and agrees (i) to not use any Trade Secret, Confidential Information, or Intellectual Property (as used herein, "Intellectual Property" means rights that potentially exist under patent, copyright, trademark, or trade secrets law) for Employee's own use or for any purpose other than for providing services to Company; (ii) to not disclose any Trade Secret or Confidential Information to any person or entity except as approved in advance in writing by Company, which approval will be subject to Company's sole and absolute discretion; (iii) to use Employee's best efforts to protect the secrecy of and avoid disclosure or use of the Trade Secret or Confidential Information in order to prevent it from falling into the public domain or the possession of persons other than Employee, which efforts shall at a minimum include no less than a reasonable degree of care; (iv) to not sell, transfer, or in any manner disclose or give access to, the Trade Secret or Confidential Information, in whole or in part, to any third party without the prior written approval of Company, which approval will be subject to Company's sole and absolute discretion; (v) to notify Company in writing of any misuse or misappropriation of the Trade Secret, Confidential Information, or Intellectual Property which may come to Employee's attention; and (vi) not to use Company's Trade Secrets, Confidential Information, or Intellectual Property to willfully interfere with the relationship between Company and its employees, agents, representatives, or customers. The obligations in this Paragraph shall survive termination of Employee's employment with Company and continue for as long as such information qualifies as a Trade Secret.
(e) Employee acknowledges that such Trade Secrets and Confidential Information is proprietary and agrees not to disclose it to anyone outside Company. When employment ends, Employee will immediately return all Confidential Information to Company. Employee acknowledges and recognizes the highly competitive nature of the business of Company, the valuable Trade Secrets, Confidential Information, and Intellectual Property in such Employee's possession, and the customer goodwill associated with the ongoing business practice of Company. Accordingly, while nothing in this Agreement is intended to restrain Employee from lawfully engaging in a lawful profession, trade, or business of any kind after termination of employment with Company, Employee acknowledges that Employee's obligations to return and to not use or disclose any Trade Secrets or Intellectual Property owned by Company is subject to independent legal rights and duties that are not dependent on any covenants in this Agreement and which shall survive termination of Employee's employment and continue for as long as such information qualifies as a Company Trade Secret, as defined by law, or until the expiration or extinguishment of Company's registered or common law rights with respect to Company copyrights, patents, and trademarks.
(f) In the event Employee is requested to disclose Trade Secrets or Confidential Information by subpoena, court order, or a lawful request or requirement of a federal or state regulatory or law enforcement agency, such disclosure shall not violate this Agreement; provided, however, that Employee shall promptly notify Company of the request or requirement prior to any disclosure so that Company may seek a protective order or take other appropriate action, and Employee shall cooperate with Company in its efforts to obtain a protective order or take such other actions, and provided, further, that if a protective order or other remedy is not obtained, Employee will disclose only that portion of the Trade Secrets or Confidential Information that is legally required to be disclosed and will make reasonable efforts to obtain reliable assurance that confidential treatment will be accorded the Trade Secrets or Confidential Information.
| Exhibit 10.6 |
(g) Pursuant to 18 U.S.C. § 1833(b), Employee shall not be held criminally or civilly liable under any federal or state trade secret law for disclosure of a trade secret that is made: in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or is made in a complaint or other document filed in a lawsuit or other proceeding if such filing is made under seal.
(h) The terms of this Section 4 with respect to Company trade secrets shall survive the expiration or termination of this Agreement for any reason.
5. DUTY OF LOYALTY DURING EMPLOYMENT AND NON-SOLICITATION RESTRICTIVE COVENANTS
(a) Duty of Loyalty. Employee owes Company an undivided duty of loyalty during the term of Employee's employment by Company. During the term of Employee's employment by Company, to the extent that Employee has any business to transact on Employee's own account, similar to that entrusted to Employee by Company, Employee shall always give the preference to the business of Company. Pursuant to this duty of loyalty during Employee's employment, Employee shall not, directly or indirectly, self-deal or divert any business opportunities, solicit any employees or customers of Company for or on behalf of any third party person or entity, or engage or participate in or give preference to any business that is in competition in any manner whatsoever with the business of Company, or otherwise violate Employee's duty of loyalty to Company.
(b) Non-Interference. To preserve Company's Trade Secrets, Confidential Information, goodwill and legitimate business interests, Employee agrees that Employee will not, directly or indirectly, whether for her own account or for the account of any other individual, partnership, firm, corporation or other business organization (each a "Person") (other than Company) (i) (A) solicit in any capacity, encourage to terminate, or otherwise interfere with the relationship of, any individual who is, or was within the then-most recent twelve (12)-month period, employed by, or otherwise engaged to perform services for, Company, or (B) endeavor to entice away from Company any such individual; provided that general advertising not directed specifically at employees of Company shall not be deemed to violate this clause; or (ii) solicit in any capacity or encourage any Person who is, or was within the then-most recent twelve (12)-month period, a customer, vendor or supplier of Company, to terminate or reduce its relationship with Company.
(c) Non-Solicitation. To further preserve Company's Confidential Information, goodwill, specialized training expertise, and legitimate business interests, Employee agrees that Employee will not, directly or indirectly, whether for his own account or for the account of any other Person, use any Confidential Information to solicit or endeavor to entice away from Company any Person who is, or was within the then-most recent twelve (12)-month period, a customer or employee of Company. The non-interference and non-solicitation restrictive covenants in this Section shall apply during Employee's employment with Company and shall survive termination of Employee's for any reason (i) in the case of interference or solicitation by Employee through the use or disclosure of Trade Secrets, for as long as such information qualifies as a Trade Secret under MUTSA or DTSA; or (ii) in the case of interference or solicitation by Employee through the use or disclosure of non-Trade Secret Company Confidential Information, for (12) months after such employment ends.
| Exhibit 10.6 |
6. OWNERSHIP OF MATERIALS
(a) Ownership and Assignment. Employee agrees that all inventions, improvements, discoveries, designs, technology, and works of authorship (including but not limited to computer software) made, created, conceived, or reduced to practice by Employee, whether alone or in cooperation with others, during Employee's employment with Company (including any period of such employment before this Agreement), together with all patent, trademark, copyright, trade secret, and other intellectual property rights related to any of the foregoing throughout the world, are among other things works made for hire (the "Works") and at all times are owned exclusively by Company, and in any event, Employee hereby assigns all ownership in such rights to Company. Employee understands that the Works may be modified or altered and expressly waives any rights of attribution or integrity or other rights in the nature of moral right (droit morale) for all uses of the Works. Employee agrees to provide written notification to Company of any Works covered by this Agreement, execute any documents, testify in any legal proceedings, and do all things necessary or desirable to secure Company's rights to the foregoing, including without limitation executing inventors' declarations and assignment forms, even if no longer employed by Company. Employee agrees that Employee shall have no right to reproduce, distribute copies of, perform publicly, display publicly, or prepare derivative works based upon the Works. Employee hereby irrevocably designates and appoints the Company as Employee's agent and attorney-in-fact, to act for and on Employee's behalf regarding obtaining and enforcing any intellectual property rights that were created by Employee during employment with Company and related to the performance of Employee's job. Employee agrees not to incorporate any intellectual property created by Employee prior to Employee's employment with Company, or created by any third party, into any Company work product. The assignment of Works under this Section 6 does not apply to an invention for which no equipment, supplies, facility, or trade secret information of Company was used and which invention was developed entirely on Employee's own time, so long as the invention does not: (i) relate directly to the business of the Company; (ii) relate to the Company's actual or demonstrably anticipated research or development, or (iii) result from any work performed by Employee for Company.
(b) Third Party Information. Employee shall not improperly use for the benefit of, bring to any premises of, divulge, disclose, communicate, reveal, transfer or provide access to, or share with Company any confidential, proprietary or non-public information or intellectual property relating to a former employer or other third party without the prior written permission of such third party. Employee hereby indemnifies, holds harmless and agrees to defend Company and its officers, directors, partners, employees, agents and representatives from any breach of the foregoing covenant. Employee shall comply with all relevant policies and guidelines of Company in effect from time to time at the discretion of the Company, including regarding the protection of confidential information and intellectual property and potential conflicts of interest.
7. TERMINATION.
In the event Employee is terminated without Cause, the Company Severance Pay Plan will apply. "Cause" shall mean (i) Employee's failure to perform materially his duties with respect to Company or its affiliates, (ii) the commission of an act that constitutes a felony under the laws of the United States or any individual State or under the laws of a foreign country, (iii) the commission of an act of fraud, embezzlement, sexual harassment, dishonesty, theft, or an intentional act or an act of moral turpitude that results in a material loss, damage or injury to the Company; (iv) any act or omission by Employee that is the result of misconduct, gross negligence or any other conduct or behavior that is, or may reasonably be expected to be, materially detrimental to the financial condition, business or reputation of Company or its affiliates, or (v) any material breach or violation by Employee of Company's code of ethics and business conduct or such other material policies as may be adopted by Company from time to time. Notwithstanding the foregoing provisions of this Section 7, Company will not be obligated to make any payments to Employee as part of the Company Severance Pay Plan unless: Employee has signed a release of claims in favor of Company and its affiliates and related entities, and their directors, officers, insurers, employees and agents, in a form prescribed by Company; all applicable rescission periods provided by law for releases of claims shall have expired and Employee shall have signed and not rescinded the release of claims; and Employee is in strict compliance with the terms of this Agreement and any other agreements with Company as of the dates of such payments.
| Exhibit 10.6 |
8. NON-DISPARAGEMENT
During and at any time after Employee's employment with Company, Employee shall not, directly or indirectly, make any disparaging or negative comments or criticisms (whether of a professional or personal nature) regarding Company or Employee's relationship with Company or the termination of such relationship.
9. CONFLICTS OF INTEREST
Employee acknowledges familiarity with Company policies on conflicts of interest and warrants that Employee will fully comply with such policies. Employee shall certify compliance with the conflicts of interest policy from time to time as requested by the Company. Employee shall notify Company immediately in writing if there is any attempt to induce Employee to violate the conflicts of interest policy.
10. INDEMNIFICATION
Company shall defend and indemnify Employee for acts committed in the course and scope of employment. Employee shall indemnify Company for claims of any type concerning Employee's conduct outside the scope of employment, or the breach by Employee of this Agreement.
11. DISPUTE RESOLUTION
(a) Arbitration. This Agreement is governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and evidences a transaction involving commerce. This Agreement applies to any dispute arising out of or related to Employee's employment with Company or termination of employment. Nothing contained in this Agreement shall be construed to prevent or excuse Employee from using the Company's existing internal procedures for resolution of complaints, and this Agreement is not intended to be a substitute for the use of such procedures. Except as it otherwise provides, this Agreement is intended to apply to the resolution of disputes that otherwise would be resolved in a court of law, and therefore this Agreement requires all such disputes to be resolved only by an arbitrator through a final and binding individual arbitration proceeding and not by way of court or jury trial or class action. Such disputes include without limitation disputes arising out of or relating to interpretation or application of this Agreement, including the enforceability, revocability or validity of this Agreement or any portion of this Agreement. This Agreement also applies, without limitation, to disputes regarding the employment relationship, trade secrets, unfair competition, compensation, breaks and rest periods, termination, or harassment and claims arising under the Uniform Trade Secrets Act, Civil Rights Act of 1964, Americans With Disabilities Act, Age Discrimination in Employment Act, Family Medical Leave Act, Fair Labor Standards Act, Employee Retirement Income Security Act, and state statutes, if any, addressing the same or similar subject matters, and all other state statutory and common law claims (excluding workers compensation, state disability insurance and unemployment insurance claims). Claims may be brought before an administrative agency but only to the extent applicable law permits access to such an agency notwithstanding the existence of an agreement to arbitrate. Such administrative claims include without limitation claims or charges brought before the Equal Employment Opportunity Commission (www.eeoc.gov), the U.S. Department of Labor (www.dol.gov), the National Labor Relations Board (www.nlrb.gov), the Office of Federal Contract Compliance Programs (www.dol.gov/esa/ofccp). Nothing in this Agreement shall be deemed to preclude or excuse a party from bringing an administrative claim before any agency in order to fulfill the party's obligation to exhaust administrative remedies before making a claim in arbitration. Disputes that may not be subject to pre-dispute arbitration agreement as provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Public Law 111-203) are excluded from the coverage of this Agreement.
| Exhibit 10.6 |
(b) Injunctive Relief. A party may apply to a court of competent jurisdiction for temporary or preliminary injunctive relief in connection with an arbitrable controversy, but only upon the ground that the award to which that party may be entitled may be rendered ineffectual without such provisional relief.
(c) This Section 11 is the full and complete agreement relating to the formal resolution of employment-related disputes. In the event any portion of this Section 11 is deemed unenforceable, the remainder of this Agreement will be enforceable.
(d) This Section 11 shall survive the expiration or termination of this Agreement for any reason.
| Employee Initials: _________ | Company Initials: ________ |
12. MISCELLANEOUS
(a) Entire Agreement. This Agreement contains the entire agreement of the parties and supersedes any prior written or oral agreements or understandings between the parties. No modification shall be valid unless in writing and signed by the parties, relating to the subject matter of this Agreement, unless otherwise noted herein. If any provision of this Agreement shall, for any reason, be held unenforceable, such unenforceability shall not affect the remaining provisions hereof, except as specifically noted in this Agreement, or the application of such provisions to other persons or circumstances, all of which shall be enforced to the greatest extent permitted by law.
(b) Reasonable Restrictions; Severability. Company and Employee agree that the restrictions contained in Sections 4, 5 and 6, are material terms of this Agreement, reasonable in scope and duration and are necessary to protect Company's Confidential Information, goodwill, specialized training expertise, and legitimate business interests. If any restrictive covenant is held to be unenforceable because of the scope, duration or geographic area, the parties agree that the court or arbitrator may reduce the scope, duration, or geographic area, and in its reduced form, such provision shall be enforceable. Should Employee violate the provisions of Sections 4, 5 or 6, then in addition to all other remedies available to Company, the duration of these covenants shall be extended for the period of time when Employee began such violation until Employee permanently ceases such violation. Employee agrees that no bond will be required if an injunction is sought to enforce any of the covenants previously set forth herein.
(c) Headings. The headings in this Agreement are inserted for convenience of reference only and shall not control the meaning of any provision hereof.
(d) Governing Law and Jurisdiction. This Agreement shall be governed in all respects by the internal laws of the State of Minnesota without regard to conflict of law provisions. Each of the Employee and the Company hereby consents to the personal jurisdiction of the state and federal courts located in Hennepin County, Minnesota for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants. Any arbitration proceeding arising from or relating to this Agreement shall take place in Hennepin County, Minnesota.
| Exhibit 10.6 |
Upon full execution by all parties, this Agreement shall be effective on the Effective Date in Section 1.
| EMPLOYEE: | |
| /s/ Lauren McNamara | Date: 03/29/2024 |
| Lauren McNamara | |
| COMPANY: | |
| /s/ Jill Barnett | Date: 03/29/2024 |
| Jill Barnett | |
| Chief Administrative Officer |
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian Kocher, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of SunOpta Inc. for the quarter ended March 30, 2024;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a -15(f) and 15d -15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Brian Kocher
Brian Kocher
Chief Executive Officer
SunOpta Inc.
Date: May 8, 2024
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Greg Gaba, certify that:
(1) I have reviewed this quarterly report on Form 10-Q of SunOpta Inc. for the quarter ended March 30, 2024;
(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
(4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a -15(f) and 15d -15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
(5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
/s/ Greg Gaba
Greg Gaba
Chief Financial Officer
SunOpta Inc.
Date: May 8, 2024
Exhibit 32
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the quarterly report of SunOpta Inc. (the “Company”) on Form 10-Q for the quarter ended March 30, 2024 as filed with the Securities and Exchange Commission (the “Report”), I, Brian Kocher, Chief Executive Officer of the Company, and I, Greg Gaba, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, that to our knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
A signed original of this written statement, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
Date: May 8, 2024
/s/ Brian Kocher
Brian Kocher
Chief Executive Officer
SunOpta Inc.
/s/ Greg Gaba
Greg Gaba
Chief Financial Officer
SunOpta Inc.
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and should not be deemed to be filed under the Exchange Act by the Company or the certifying officer.
Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands |
Mar. 30, 2024 |
Dec. 30, 2023 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Allowance for credit losses | $ 303 | $ 303 |
| Common Stock, No Par Value | $ 0 | $ 0 |
| Common Stock Shares Issued | 116,085,383 | 115,953,287 |
Consolidated Statements of Shareholders' Equity (Parentheticals) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 30, 2024 |
Apr. 01, 2023 |
|
| Statement of Stockholders' Equity [Abstract] | ||
| Share issuance costs | $ 0 | $ 87 |
Significant Accounting Policies |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Accounting Policies [Abstract] | |
| Significant Accounting Policies [Text Block] |
1. Significant Accounting Policies Basis of Presentation These interim consolidated financial statements of SunOpta Inc. (the "Company" or "SunOpta") have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended, and in accordance with United States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for interim financial information. Accordingly, these condensed interim consolidated financial statements do not include all of the disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included and all such adjustments are of a normal, recurring nature. Operating results for the quarter ended March 30, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 28, 2024 or for any other period. The interim consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared on a basis consistent with the annual consolidated financial statements for the year ended December 30, 2023. For further information, refer to the consolidated financial statements, and notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2023. Reclassification of Discontinued Operations As described in note 2, on October 12, 2023, the Company completed the divestiture of its frozen fruit business ("Frozen Fruit"). As a result, the operating results and cash flows of Frozen Fruit for the quarter ended April 1, 2023, have been reclassified as discontinued operations on the consolidated statements of operations and cash flows. In addition, the information disclosed in these notes to the unaudited consolidated financial statements is presented on a continuing operations basis, with comparative period information recast to reflect Frozen Fruit as discontinued operations. Segment Information The Company manages its continuing operations on a company-wide basis, rather than at a product category or business unit level, thereby making determinations as to the allocation of resources as one operating and reportable segment. The Company's Chief Executive Officer, who has been identified as the Chief Operating Decision Maker ("CODM"), is supported by a centralized management team based on functional area, including sales, marketing, supply chain, and research and development, as well as finance, IT and administration. Only the CODM has overall responsibility and accountability for the profitability and cash flows of the Company. Using financial information at the consolidated level, the CODM makes key operating decisions, including approving annual operating plans, expanding into new markets or product categories, pursuing business acquisitions or divestitures, and initiating major capital expenditure programs. In addition, the CODM determines the allocation of resources and capital investments to optimize operations and maximize opportunities for the Company as a whole without regard to specific product categories or business units. The CODM also uses consolidated information to assess performance against the annual operating plan and to set company-wide incentive compensation targets. The majority of the Company's products are shelf-stable packaged food and beverage products and share similar customers and distribution. Refer to note 14 for a disaggregation of the Company's revenues by product category. Fiscal Year The fiscal year of the Company consists of a 52- or 53-week period ending on the Saturday closest to December 31. Fiscal year 2024 is a 52-week period ending on December 28, 2024, with quarterly periods ending on March 30, 2024, June 29, 2024 and September 28, 2024. Fiscal 2023 was a 52-week period ending on December 30, 2023, with quarterly periods ending on April 1, 2023, July 1, 2023 and September 30, 2023. Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023- 09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07. |
Discontinued Operations |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Divestiture of Frozen Fruit [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discontinued Operations [Text Block] |
2. Discontinued Operations Divestiture of Frozen Fruit On October 12, 2023 (the "Closing Date"), the Company, together with its subsidiaries Sunrise Growers, Inc. ("Sunrise Growers"), Sunrise Growers Mexico, S. de R.L. de C.V. ("Sunrise Mexico") and SunOpta Mx, S.A. de C.V. ("SunOpta Mexico"), completed the sale of certain assets and liabilities of Frozen Fruit pursuant to the terms of an Asset Purchase Agreement ("APA") with Natures Touch Mexico, S. de R.L. de C.V. and Nature's Touch Frozen Fruits, LLC (the "Purchasers"). At the Closing Date, the estimated aggregate purchase price comprised cash consideration of $95.3 million; a short-term note receivable of $10.5 million, which was paid in five consecutive monthly installments of $2.1 million beginning 30 days following the Closing Date; secured seller promissory notes due in three years and with stated principal amounts of $15.0 million entered into by Sunrise Growers and $5.0 million entered into by SunOpta Mexico (the "Seller Promissory Notes"); and the assumption by the Purchasers of $15.7 million of accounts payable and accrued liabilities of Frozen Fruit. The estimated aggregate purchase price is subject to post-closing adjustments based on a determination of the final net working capital and resulting aggregate purchase price as of the Closing Date (the "Closing Statement"), with adjustments to the aggregate purchase price determined on a separate and individual basis for each of Sunrise Growers, Sunrise Mexico and SunOpta Mexico. Any downward adjustment will be deducted from the principal amount of the Seller Promissory Notes entered into by Sunrise Growers and/or SunOpta Mexico, as the case may be, in an amount up to $5.0 million in the aggregate, with any additional downward adjustment payable by the Company to the Purchasers in cash. The portion of any upward adjustment in the aggregate purchase price not paid to the Company by the Purchasers in cash will be added to the principal amount of the Seller Promissory Notes entered into by Sunrise Growers and/or SunOpta Mexico, as applicable. As at March 30, 2024 and December 30, 2023, the Company recorded a $0.5 million net receivable from the Purchasers based on the Company's estimate of the final net working capital and post-closing adjustments, which is included in other current assets on the consolidated balance sheets. However, this estimate may be subject to change, which could be material, as the parties are currently in the process of reconciling the final aggregate purchase price, including the resolution of certain disputed items in accordance with the procedures set forth in the APA. The Seller Promissory Notes bear interest at a rate per annum equal to the Secured Overnight Financing Rate ("SOFR"), determined quarterly in advance, plus a margin of 4.00% for the first year and 7.00% for the second and third years. Interest is payable quarterly in-kind. The Seller Promissory Notes mature on October 12, 2026, and outstanding principal and accrued and unpaid interest is payable on the maturity date. As at March 30, 2024 and December 30, 2023, the principal amount of the Seller Promissory Notes of $20.0 million, together with paid in kind interest of $0.7 million and $0.3 million, respectively, was recorded in other long-term assets on the consolidated balance sheets. As described above, the final principal amount of the Sellers Promissory Notes may change as a result of any upward or downward adjustment to the aggregate purchase price in connection with the resolution of the Closing Statement. As at March 30, 2024 and December 30, 2023, the Company had not recorded any allowance for credit losses related to the Seller Promissory Notes. The Seller Promissory Notes are secured by a second-priority lien on certain assets of Frozen Fruit acquired by the Purchasers. The table below presents the major components of the results of discontinued operations reported in the consolidated statement of operations for the quarters ended March 30, 2024 and April 1, 2023.
(1) For the quarter ended March 30, 2024, cost of goods sold reflects the write down in the carrying value of the frozen fruit inventory that was not acquired by the Purchasers to its estimated net realizable value. (2) For the quarter ended March 30, 2024, selling, general and administrative expenses include additional severance costs for former employees of Frozen Fruit not ultimately retained by the Purchasers, as well as the true-up of pre-divestiture profit- sharing bonuses payable to certain Mexican employees of Frozen Fruit. (3) For the quarter ended March 30, 2024, other expense mainly related to an additional self-insured retention amount paid by the Company in connection with the settlement of certain claims related to the recall of specific frozen fruit products initiated in the second quarter of 2023 (see note 13), partially offset by gains on the settlement of certain pre-existing legal matters related to Frozen Fruit. As at March 30, 2024 and December 30, 2023, current assets held for sale included on the consolidated balance sheets reflects the remaining carrying value of the frozen fruit inventory that was not acquired by the Purchasers. |
Sale of Assets |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Business Combination and Asset Acquisition [Abstract] | |
| Sale of Assets [Text Block] |
3. Sale of Assets On March 4, 2024, the Company completed the sale of the net assets related to its smoothie bowls product line, including inventories and equipment, for a purchase price of $6.3 million, subject to a final working capital adjustment. The purchase price comprised $3.3 million in cash and a $3.0 million secured promissory note, which matures on August 1, 2024, and is recorded in prepaid expenses and other current assets on the consolidated balance sheet as at March 30, 2024. The Company recognized a pre-tax gain on sale of $1.8 million, which is recorded in other income of continuing operations on the consolidated statement of operations for the quarter ended March 30, 2024. |
Inventories |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Inventories [Text Block] |
4. Inventories
|
Restricted Cash |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Restricted Cash [Abstract] | |
| Restricted Cash [Text Block] |
5. Restricted Cash Restricted cash relates to certain bank accounts in Mexico that were retained following the divestiture of Frozen Fruit, which are subject to a judicial hold in connection with a litigation matter. Restricted cash has been classified as non-current on the consolidated balance sheets as at March 30, 2024 and December 30, 2023, as the Company cannot predict the timing of when this matter may be resolved. |
Notes Payable |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Payables and Accruals [Abstract] | |
| Notes Payable [Text Block] |
6. Notes Payable The Company finances certain purchases of trade goods and services through third-party extended payables facilities. Under these facilities, third-party intermediaries advance the amount of the scheduled payment to the supplier based on the invoice due date and issue a short-term note payable to the Company for the face amount of the supplier invoice. Interest accrues on the note payable from the contractual payment date of the supplier invoice to the extended due date of the note payable, as specified by the negotiated terms of each facility. The Company does not maintain any form of security with the third-party intermediaries. As at March 30, 2024 and December 30, 2023, the Company had outstanding principal payment obligations to the third-party intermediaries of $16.6 million and $17.6 million in the aggregate, which is recorded as notes payable on the Company's consolidated balance sheets. Proceeds from, and repayments of the notes payable associated with, these facilities are reported as financing cash flows on the Company's consolidated statements of cash flows. |
Long-Term Debt |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Long-Term Debt [Text Block] |
7. Long-Term Debt
Credit Facilities On December 8, 2023, the Company entered into a five-year Credit Agreement (the "Credit Agreement") providing for (i) a $180.0 million term loan credit facility (the "Term Loan Credit Facility") and (ii) an $85.0 million revolving credit facility (the "Revolving Credit Facility" and together with the Term Loan Credit Facility, the "Credit Facilities"). The Revolving Credit Facility includes $30.0 million of borrowing capacity available for letters of credit and provides for borrowings of up to $10.0 million on same-day notice including in the form of swingline loans. As at March 30, 2024, $5.9 million in letters of credit were issued but undrawn under the Revolving Credit Facility. The Credit Facilities mature on December 8, 2028. Borrowings under the Term Loan Credit Facility are repayable in quarterly principal installments of $2.3 million from the fiscal quarter ending March 31, 2024 to the fiscal quarter ending December 31, 2025, $3.4 million from the fiscal quarter ending March 31, 2026 to the fiscal quarter ending December 31, 2027, and $4.5 million from the fiscal quarter ending March 31, 2028 to the fiscal quarter ending September 30, 2028, with the remaining principal balance of $121.5 million due on the maturity date. Borrowings under the Credit Facilities bear interest at a margin over various reference rates, including a base rate (as defined in the Credit Agreement) and SOFR, selected at the option of the Company. The margin for the Credit Facilities is set quarterly based on the consolidated total net leverage ratio for the preceding fiscal quarter and will range from 1.00% to 2.25% with respect to base rate loans and from 2.00% to 3.25% for SOFR loans. For the quarter ended March 30, 2024, the weighted- average interest rate on outstanding borrowings under the Credit Facilities was 8.20%. In addition, the Company is required to pay an undrawn fee under the Revolving Credit Facility quarterly based on the consolidated total net leverage ratio for the preceding fiscal quarter ranging from 0.20% to 0.40% on the undrawn revolving commitments thereunder. The Company is also required to pay customary letter of credit fees, to the extent letters of credit are issued and outstanding under the Revolving Credit Facility. As at March 30, 2024, the Company was in compliancewith all financial and non-financial covenants under the Credit Agreement. |
Series B-1 Preferred Stock |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Class of Stock Disclosures [Abstract] | |
| Series B-1 Preferred Stock [Text Block] |
8. Series B-1 Preferred Stock As at March 30, 2024, the Company's subsidiary, SunOpta Foods Inc. ("SunOpta Foods"), had 15,000 shares of Series B-1 Preferred Stock ("Series B-1 Preferred Stock") issued and outstanding with Oaktree Organics, L.P. and Oaktree Huntington Investment Fund II, L.P. (collectively, "Oaktree"). As at March 30, 2024, the aggregate liquidation preference of the Series B- 1 preferred stock was $15.2 million, or approximately $1,015 per share. The carrying value of the Series B-1 Preferred Stock, net of unamortized issuance costs, is being accreted to the liquidation preference through charges to accumulated deficit, which amounted to $0.1 million for the quarter ended March 30, 2024 (April 1, 2023 - $0.2 million). In the first quarter of 2024, the Company paid cash dividends on the Series B-1 Preferred Stock of $0.3 million related to the fourth quarter of 2023 and accrued dividends of $0.3 million for the first quarter of 2024, which are recorded in accounts payable and accrued liabilities on the consolidated balance sheet. For the first quarter of 2024, dividends on the Series B-1 Preferred Stock accrued daily at an annualized rate of 8.0% of the liquidation preference. Subsequent to the first quarter of 2024, the Company, SunOpta Foods, and Oaktree agreed to amend the terms of the Series B-1 Preferred Stock to eliminate the dividend rights (see note 15). At any time, Oaktree may exchange the Series B-1 Preferred Stock, in whole or in part, into the number of shares of the Company's common stock ("Common Shares") equal to, per share of Series B-1 Preferred Stock, the quotient of the liquidation preference divided by the exchange price of $2.50, while, at any time, SunOpta Foods may cause Oaktree to exchange all of their shares of Series B-1 Preferred Stock if the volume-weighted average price of the Common Shares during the then preceding 20 trading day period is greater than 200% of the exchange price then in effect. In addition, at any time on or after April 24, 2025, SunOpta Foods may redeem all of the Series B-1 Preferred Stock for an amount per share equal to the value of the liquidation preference at such time. As at March 30, 2024, the Company had 2,932,453 Special Shares, Series 2 issued and outstanding, all of which are held by Oaktree. The Special Shares, Series 2 serve as a mechanism for attaching exchanged voting rights to the Series B-1 Preferred Stock and entitle the holder thereof to one vote per Special Share, Series 2 on all matters submitted to a vote of the holder of the Common Shares, voting together as a single class, subject to certain exemptions. As a result of a permanent voting cap, the number of Special Shares, Series 2 issued to Oaktree at any time, when taken together with any other voting securities Oaktree then controls, cannot exceed 19.99% of the votes eligible to be cast by all security holders of the Company. |
Stock-Based Compensation |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-Based Compensation [Text Block] |
9. Stock-Based Compensation Special Awards On January 2, 2024, the Company granted special one-time awards of 144,404 restricted stock units ("RSUs"), 288,808 performance share units ("PSUs") and 230,804 stock options to Brian Kocher in connection with his appointment as the Company's Chief Executive Officer effective January 2, 2024. On March 13, 2024, the Company granted Mr. Kocher an additional 74,000 RSUs, equal to the number of Common Shares purchased by Mr. Kocher on the open market within the 75- day period after his employment began. The RSUs vest in three equal annual installments beginning on the first anniversary of the grant date, and each vested RSU entitles Mr. Kocher to receive one Common Share without payment of additional consideration. The vesting of the PSUs is dependent on the Company's total shareholder return ("TSR") performance relative to food and beverage companies in a designated index during the three-year period commencing January 1, 2024 and continuing through December 31, 2026, and subject to Mr. Kocher's continued employment with the Company through April 15, 2027. The TSR for the Company and each of the companies in the designated index will be calculated using a 20-trading day average closing price as of December 31, 2026. The percentage of vested PSUs may range from 0% to 200% based on the Company's achievement of predetermined TSR thresholds. Each vested PSU entitles Mr. Kocher to receive one Common Share without payment of additional consideration. The stock options vest ratably on each of the first through third anniversaries of the grant date and expire on the tenth anniversary of the grant date. Each vested stock option entitles Mr. Kocher to purchase one Common Share at an exercise price of $5.54, which was the closing price of the Common Shares on January 2, 2024. The weighted-average grant-date fair value of the RSUs was estimated to be $6.05 based on the closing prices of Common Shares on the dates of grant. A grant-date fair value of $3.47 was estimated for the stock options using the Black-Scholes option pricing model, and a grant-date fair value of $7.73 was estimated for the PSUs using a Monte Carlo valuation model. The following table summarizes the inputs to the Black-Scholes option-pricing and Monte Carlo valuation models:
(a) Determined based on the historical volatility of the Common Shares over the expected life of the stock options and performance period of the PSUs. (b) Determined based on U.S. Treasury yields with a remaining term equal to the expected life of the stock options and performance period of the PSUs. (c) Determined based on the mid-point of vesting (three years) and expiration (ten years) for the stock options and the performance period for the PSUs. The aggregate grant-date fair value of the stock options, RSUs and PSUs awarded to Mr. Kocher was determined to be $4.4 million, which will be recognized on a straight-line basis over the vesting period for the stock options and RSUs and the performance period for the PSUs. |
Income Taxes |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes [Text Block] |
10. Income Taxes Income taxes were recognized at an effective rate of 6.7% for the quarter ended March 30, 2024, compared with 44.9% recognized for the quarter ended April 1, 2023. The change in the effective tax rate was primarily driven by the recognition of a full valuation allowance against U.S. deferred tax assets in excess of deferred tax liabilities beginning in the second quarter of 2023, based on the Company's assessment that the related tax benefits were no longer more likely than not to be realized in the future. |
Earnings (Loss) Per Share |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (Loss) Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (Loss) Per Share [Text Block] |
11. Earnings (Loss) Per Share Basic and diluted earnings (loss) per share were calculated as follows (shares in thousands):
(1) For the quarter ended April 1, 2023, 3,092,596 potential common shares were excluded from the calculation of diluted loss per share due to their effect of reducing the loss per share from continuing operations. Dilutive potential common shares consist of stock options, RSUs, and certain contingently issuable PSUs. For the quarters ended March 30, 2024 and April 1, 2023, stock options and RSUs to purchase or receive 2,399,822 and 2,243,349 potential common shares, respectively, were anti-dilutive because the assumed proceeds exceeded the average market price of the Common Shares for the respective periods. (2) For the quarters ended March 30, 2024 and April 1, 2023, it was more dilutive to assume the Series B-1 Preferred Stock was not converted into Common Shares and, therefore, the numerator of the diluted earnings per share calculation was not adjusted to add back the dividends and accretion on the Series B-1 Preferred Stock and the denominator was not adjusted to include the 6,089,333 Common Shares issuable on an if-converted basis as at March 30, 2024 and April 1, 2023. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Cash Flow Information [Text Block] |
12. Supplemental Cash Flow Information
(1) Reflects the settlement of the final working capital adjustment related to the divestiture of the Company's sunflower business in October 2022, which is included in investing activities of discontinued operations on the consolidated statement of cash flows for the quarter ended April 1, 2023. |
Commitments and Contingencies |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitments and Contingencies [Text Block] |
13. Commitments and Contingencies Legal Proceedings Various current and potential claims and litigation arising in the ordinary course of business are pending against the Company. The Company believes it has established adequate accruals for liabilities that are probable and reasonably estimable that may be incurred in connection with any such currently pending matter. In the Company's opinion, the eventual resolution of such matters, either individually or in the aggregate, is not expected to have a material impact on the Company's financial position, results of operations, or cash flows. However, litigation is inherently unpredictable and resolutions or dispositions of claims or lawsuits by settlement or otherwise could have an adverse impact on the Company's financial position, results of operations, and cash flows for the reporting period in which any such resolution or disposition occurs. Product Recall On June 21, 2023, the Company announced its subsidiary, Sunrise Growers Inc., had issued a voluntary recall of specific frozen fruit products linked to pineapple provided by a third-party supplier due to possible contamination by Listeria monocytogenes. Sunrise Growers Inc. is a component of the operations of Frozen Fruit. In connection with the divestiture of Frozen Fruit, the recall-related costs and estimated insurance recoveries are included in the loss from discontinued operations in the consolidated statements of operations. As at March 30, 2024 and December 30, 2023, estimated insurance recoveries, net of the Company's self-insured retention amount, of $4.4 million and $4.8 million, respectively, are included in prepaid expenses and other current assets on the consolidated balance sheet, and recall-related costs of $0.2 million and $1.3 million, respectively, are included in accounts payable and accrued liabilities on the consolidated balance sheets. |
Disaggregation of Revenue |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue [Text Block] |
14. Disaggregation of Revenue The principal products that comprise the Company's product categories are as follows:
Revenue disaggregated by product category is as follows:
(1) For the quarter ended April 1, 2023, the Company reclassified certain product sales that were previously reported in Beverages and Broths to Ingredients to conform with the current year presentation. (2) Revenues reported for the quarter ended March 30, 2024, reflect sales of smoothie bowls prior to March 4, 2024 (see note 3). |
Subsequent Event |
12 Months Ended |
|---|---|
Dec. 30, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Event [Text Block] |
15. Subsequent Event Amendment to Series B-1 Preferred Stock Dividend Rights On April 17, 2024, the Company, SunOpta Foods and Oaktree entered into an Amending Agreement related to the elimination of the dividend rights attached to the Series B-1 Preferred Stock effective from and after December 31, 2023. The Series B-1 Preferred Stock previously paid a cumulative dividend of 8.0% per year that could be paid in-kind or in cash at the Company's option, which dividend would have increased from 8.0% to 10.0% per year and become payable only in cash at the end of the Company's third quarter in 2029. All other rights and obligations of the Company, SunOpta Foods, and Oaktree in connection with the Series B-1 Preferred Stock remain unchanged. The Company will account for the elimination of the dividend rights on a prospective basis beginning in the second quarter of 2024. |
Significant Accounting Policies (Policies) |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation [Policy Text Block] |
Basis of Presentation These interim consolidated financial statements of SunOpta Inc. (the "Company" or "SunOpta") have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated under the Securities Exchange Act of 1934, as amended, and in accordance with United States ("U.S.") generally accepted accounting principles ("U.S. GAAP") for interim financial information. Accordingly, these condensed interim consolidated financial statements do not include all of the disclosures required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included and all such adjustments are of a normal, recurring nature. Operating results for the quarter ended March 30, 2024 are not necessarily indicative of the results that may be expected for the full fiscal year ending December 28, 2024 or for any other period. The interim consolidated financial statements include the accounts of the Company and its subsidiaries and have been prepared on a basis consistent with the annual consolidated financial statements for the year ended December 30, 2023. For further information, refer to the consolidated financial statements, and notes thereto, included in the Company's Annual Report on Form 10-K for the fiscal year ended December 30, 2023. |
| Reclassification of Discontinued Operations [Policy Text Block] |
Reclassification of Discontinued Operations As described in note 2, on October 12, 2023, the Company completed the divestiture of its frozen fruit business ("Frozen Fruit"). As a result, the operating results and cash flows of Frozen Fruit for the quarter ended April 1, 2023, have been reclassified as discontinued operations on the consolidated statements of operations and cash flows. In addition, the information disclosed in these notes to the unaudited consolidated financial statements is presented on a continuing operations basis, with comparative period information recast to reflect Frozen Fruit as discontinued operations. |
| Segment Information [Policy Text Block] |
Segment Information The Company manages its continuing operations on a company-wide basis, rather than at a product category or business unit level, thereby making determinations as to the allocation of resources as one operating and reportable segment. The Company's Chief Executive Officer, who has been identified as the Chief Operating Decision Maker ("CODM"), is supported by a centralized management team based on functional area, including sales, marketing, supply chain, and research and development, as well as finance, IT and administration. Only the CODM has overall responsibility and accountability for the profitability and cash flows of the Company. Using financial information at the consolidated level, the CODM makes key operating decisions, including approving annual operating plans, expanding into new markets or product categories, pursuing business acquisitions or divestitures, and initiating major capital expenditure programs. In addition, the CODM determines the allocation of resources and capital investments to optimize operations and maximize opportunities for the Company as a whole without regard to specific product categories or business units. The CODM also uses consolidated information to assess performance against the annual operating plan and to set company-wide incentive compensation targets. The majority of the Company's products are shelf-stable packaged food and beverage products and share similar customers and distribution. Refer to note 14 for a disaggregation of the Company's revenues by product category. |
| Fiscal Year [Policy Text Block] |
Fiscal Year The fiscal year of the Company consists of a 52- or 53-week period ending on the Saturday closest to December 31. Fiscal year 2024 is a 52-week period ending on December 28, 2024, with quarterly periods ending on March 30, 2024, June 29, 2024 and September 28, 2024. Fiscal 2023 was a 52-week period ending on December 30, 2023, with quarterly periods ending on April 1, 2023, July 1, 2023 and September 30, 2023. |
| Recent Accounting Pronouncements [Policy Text Block] |
Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023- 09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-09. In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments' significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2023-07. |
Discontinued Operations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of discontinued operations, assets and liabilities held for sale [Table Text Block] |
(1) For the quarter ended March 30, 2024, cost of goods sold reflects the write down in the carrying value of the frozen fruit inventory that was not acquired by the Purchasers to its estimated net realizable value. (2) For the quarter ended March 30, 2024, selling, general and administrative expenses include additional severance costs for former employees of Frozen Fruit not ultimately retained by the Purchasers, as well as the true-up of pre-divestiture profit- sharing bonuses payable to certain Mexican employees of Frozen Fruit. (3) For the quarter ended March 30, 2024, other expense mainly related to an additional self-insured retention amount paid by the Company in connection with the settlement of certain claims related to the recall of specific frozen fruit products initiated in the second quarter of 2023 (see note 13), partially offset by gains on the settlement of certain pre-existing legal matters related to Frozen Fruit. |
Inventories (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||
| Schedule of inventory, current [Table Text Block] |
|
Long-Term Debt (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of line of credit facilities [Table Text Block] |
|
Stock-Based Compensation (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of share-based payment award, stock options, valuation assumptions [Table Text Block] |
(a) Determined based on the historical volatility of the Common Shares over the expected life of the stock options and performance period of the PSUs. (b) Determined based on U.S. Treasury yields with a remaining term equal to the expected life of the stock options and performance period of the PSUs. (c) Determined based on the mid-point of vesting (three years) and expiration (ten years) for the stock options and the performance period for the PSUs. |
Earnings (Loss) Per Share (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings (Loss) Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of basic and diluted earnings (loss) per share [Table Text Block] |
(1) For the quarter ended April 1, 2023, 3,092,596 potential common shares were excluded from the calculation of diluted loss per share due to their effect of reducing the loss per share from continuing operations. Dilutive potential common shares consist of stock options, RSUs, and certain contingently issuable PSUs. For the quarters ended March 30, 2024 and April 1, 2023, stock options and RSUs to purchase or receive 2,399,822 and 2,243,349 potential common shares, respectively, were anti-dilutive because the assumed proceeds exceeded the average market price of the Common Shares for the respective periods. (2) For the quarters ended March 30, 2024 and April 1, 2023, it was more dilutive to assume the Series B-1 Preferred Stock was not converted into Common Shares and, therefore, the numerator of the diluted earnings per share calculation was not adjusted to add back the dividends and accretion on the Series B-1 Preferred Stock and the denominator was not adjusted to include the 6,089,333 Common Shares issuable on an if-converted basis as at March 30, 2024 and April 1, 2023. |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Supplemental Cash Flow Elements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of cash flow, supplemental disclosures [Table Text Block] |
|
Disaggregation of Revenue (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 30, 2024 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disaggregation of Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of disaggregation of revenue [Table Text Block] |
(1) For the quarter ended April 1, 2023, the Company reclassified certain product sales that were previously reported in Beverages and Broths to Ingredients to conform with the current year presentation. (2) Revenues reported for the quarter ended March 30, 2024, reflect sales of smoothie bowls prior to March 4, 2024 (see note 3). |
Significant Accounting Policies (Narrative) (Details) |
3 Months Ended |
|---|---|
Mar. 30, 2024 | |
| Accounting Policies [Abstract] | |
| Operating cycle of company | The fiscal year of the Company consists of a 52- or 53-week period ending on the Saturday closest to December 31. Fiscal year 2024 is a 52-week period ending on December 28, 2024, with quarterly periods ending on March 30, 2024, June 29, 2024 and September 28, 2024. Fiscal 2023 was a 52-week period ending on December 30, 2023, with quarterly periods ending on April 1, 2023, July 1, 2023 and September 30, 2023. |
Discontinued Operations (Schedule of income statement disclosures) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 30, 2024 |
Apr. 01, 2023 |
|
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
| Earnings (loss) from discontinued operations | $ (1,417) | $ 4,204 |
| Divestiture of Frozen Fruit [Member] | ||
| Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||
| Revenues | 0 | 68,911 |
| Cost of goods sold | 553 | 64,787 |
| Selling, general and administrative expenses | 621 | 2,361 |
| Intangible asset amortization | 0 | 2,000 |
| Other expense (income), net | 427 | (7) |
| Foreign exchange gain | (101) | (2,200) |
| Interest expense | 23 | 148 |
| Earnings (loss) from discontinued operations before income taxes | (1,523) | 1,822 |
| Income tax benefit | (106) | (2,382) |
| Earnings (loss) from discontinued operations | $ (1,417) | $ 4,204 |
Sale of Assets (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 30, 2024 |
Apr. 01, 2023 |
|
| Business Combination and Asset Acquisition [Abstract] | ||
| Total consideration from sale of assets | $ 6,300 | |
| Proceeds from Divestiture of Businesses | 3,336 | $ 0 |
| Secured promissory note consideration | 3,000 | |
| Pre-tax gain on sale | $ 1,800 | $ 0 |
Inventories (Schedule of inventory, current) (Details) - USD ($) $ in Thousands |
Mar. 30, 2024 |
Dec. 30, 2023 |
|---|---|---|
| Inventory Disclosure [Abstract] | ||
| Raw materials and work-in-process | $ 54,785 | $ 52,419 |
| Finished goods | 44,214 | 37,606 |
| Inventory reserves | (6,999) | (6,810) |
| Total Inventory, Net | $ 92,000 | $ 83,215 |
Notes Payable (Narrative) (Details) - USD ($) $ in Thousands |
Mar. 30, 2024 |
Dec. 30, 2023 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Outstanding principal payment obligations | $ 16,648 | $ 17,596 |
Long-Term Debt (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Dec. 08, 2023 |
Mar. 30, 2024 |
|
| Debt Instrument [Line Items] | ||
| Line of credit facility, frequency of payments | The Credit Facilities mature on December 8, 2028. Borrowings under the Term Loan Credit Facility are repayable in quarterly principal installments of $2.3 million from the fiscal quarter ending March 31, 2024 to the fiscal quarter ending December 31, 2025, $3.4 million from the fiscal quarter ending March 31, 2026 to the fiscal quarter ending December 31, 2027, and $4.5 million from the fiscal quarter ending March 31, 2028 to the fiscal quarter ending September 30, 2028, with the remaining principal balance of $121.5 million due on the maturity date. | |
| New Credit Agreement [Member] | ||
| Debt Instrument [Line Items] | ||
| Line of credit facility, borrowing capacity, description | (i) a $180.0 million term loan credit facility (the "Term Loan Credit Facility") and (ii) an $85.0 million revolving credit facility (the "Revolving Credit Facility" and together with the Term Loan Credit Facility, the "Credit Facilities"). | |
| Line of credit facility, maximum borrowing capacity | $ 10.0 | |
| Line of credit facility, interest rate description | Borrowings under the Credit Facilities bear interest at a margin over various reference rates, including a base rate (as defined in the Credit Agreement) and SOFR, selected at the option of the Company. The margin for the Credit Facilities is set quarterly based on the consolidated total net leverage ratio for the preceding fiscal quarter and will range from 1.00% to 2.25% with respect to base rate loans and from 2.00% to 3.25% for SOFR loans. For the quarter ended March 30, 2024, the weighted- average interest rate on outstanding borrowings under the Credit Facilities was 8.20%. In addition, the Company is required to pay an undrawn fee under the Revolving Credit Facility quarterly based on the consolidated total net leverage ratio for the preceding fiscal quarter ranging from 0.20% to 0.40% on the undrawn revolving commitments thereunder. The Company is also required to pay customary letter of credit fees, to the extent letters of credit are issued and outstanding under the Revolving Credit Facility. | |
| Letter of Credit [Member] | ||
| Debt Instrument [Line Items] | ||
| Line of credit facility, maximum borrowing capacity | $ 30.0 | $ 5.9 |
Long-Term Debt (Schedule of long-term debt) (Details) - USD ($) $ in Thousands |
Mar. 30, 2024 |
Dec. 30, 2023 |
|---|---|---|
| Line of Credit Facility [Line Items] | ||
| Less: Unamortized debt issuance costs | $ (1,094) | $ (1,152) |
| Total credit facilities | 208,656 | 210,599 |
| Finance lease liabilities | 50,100 | 52,630 |
| Total debt | 258,756 | 263,229 |
| Less: current portion | 24,882 | 24,346 |
| Total long-term debt | 233,874 | 238,883 |
| Term loan facility [Member] | ||
| Line of Credit Facility [Line Items] | ||
| Total credit facilities | 177,750 | 180,000 |
| Revolving credit facilities [Member] | ||
| Line of Credit Facility [Line Items] | ||
| Total credit facilities | $ 32,000 | $ 31,751 |
Series B-1 Preferred Stock (Narrative) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 30, 2024 |
Apr. 01, 2023 |
|
| Temporary Equity [Line Items] | ||
| Dividends paid | $ 305 | $ 818 |
| Series B-1 Preferred Stock [Member] | Oaktree and Engaged [Member] | ||
| Temporary Equity [Line Items] | ||
| Preferred stock, shares issued | 15,000 | |
| Preferred stock, liquidation preference, value | $ 15,200 | |
| Preferred stock, liquidation preference per share | $ 1,015 | |
| Unamortized issuance costs | $ 100 | $ 200 |
| Dividends paid | 300 | |
| Accrued unpaid dividends | $ 300 | |
| Preferred stock, dividend payment terms | For the first quarter of 2024, dividends on the Series B-1 Preferred Stock accrued daily at an annualized rate of 8.0% of the liquidation preference. Subsequent to the first quarter of 2024, the Company, SunOpta Foods, and Oaktree agreed to amend the terms of the Series B-1 Preferred Stock to eliminate the dividend rights (see note 15). | |
| Series B-1 Preferred Stock [Member] | Oaktree [Member] | ||
| Temporary Equity [Line Items] | ||
| Preferred stock, convertible, terms | At any time, Oaktree may exchange the Series B-1 Preferred Stock, in whole or in part, into the number of shares of the Company's common stock ("Common Shares") equal to, per share of Series B-1 Preferred Stock, the quotient of the liquidation preference divided by the exchange price of $2.50, while, at any time, SunOpta Foods may cause Oaktree to exchange all of their shares of Series B-1 Preferred Stock if the volume-weighted average price of the Common Shares during the then preceding 20 trading day period is greater than 200% of the exchange price then in effect. | |
| Preferred stock, redemption terms | In addition, at any time on or after April 24, 2025, SunOpta Foods may redeem all of the Series B-1 Preferred Stock for an amount per share equal to the value of the liquidation preference at such time. | |
| Preferred stock, conversion price | $ 2.5 | |
| Special Shares, Series 2 [Member] | Oaktree [Member] | ||
| Temporary Equity [Line Items] | ||
| Preferred stock, shares issued | 2,932,453 | |
| Limit of voting rights | 19.99% | |
Stock-Based Compensation (Schedule of valuation assumptions) (Details) |
3 Months Ended |
|---|---|
|
Mar. 30, 2024
$ / shares
| |
| Stock Options [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Grant-date stock price | $ 5.54 |
| Exercise price | $ 5.54 |
| Dividend yield | 0.00% |
| Expected volatility | 65.60% |
| Risk-free interest rate | 3.90% |
| Expected life (in years) | 6 years |
| PSUs [Member] | |
| Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
| Grant-date stock price | $ 5.54 |
| Exercise price | |
| Dividend yield | 0.00% |
| Expected volatility | 58.40% |
| Risk-free interest rate | 4.10% |
| Expected life (in years) | 3 years |
Income Taxes (Narrative) (Details) |
3 Months Ended | |
|---|---|---|
Mar. 30, 2024 |
Apr. 01, 2023 |
|
| Income Tax Disclosure [Abstract] | ||
| Effective tax rate recognized | 6.70% | 44.90% |
Earnings (Loss) Per Share (Narrative) (Details) - shares |
3 Months Ended | |
|---|---|---|
Mar. 30, 2024 |
Apr. 01, 2023 |
|
| Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
| Potential common shares excluded from the calculation of diluted loss per share | 3,092,596 | |
| Stock options and RSUs [Member] | ||
| Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
| Potential common shares excluded from the calculation of diluted loss per share | 2,399,822 | 2,243,349 |
| Series B-1 preferred stock [Member] | ||
| Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | ||
| Common Shares issuable on an if-converted basis | 6,089,333 | 6,089,333 |
Commitments and Contingencies (Narrative) (Details) - Sunrise Growers Inc [Member] - Frozen fruit product recall [Member] - USD ($) $ in Millions |
Mar. 30, 2024 |
Dec. 30, 2023 |
|---|---|---|
| Commitments And Contingencies [Line Items] | ||
| Estimated insurance recoveries | $ 4.4 | $ 4.8 |
| Recall-related costs | $ 0.2 | $ 1.3 |
Disaggregation of Revenue (Schedule of disaggregation of revenue) (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Mar. 30, 2024 |
Apr. 01, 2023 |
|
| Disaggregation of Revenue [Line Items] | ||
| Total revenues | $ 182,848 | $ 154,969 |
| Beverages and broths [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total revenues | 146,465 | 124,931 |
| Fruit snacks [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total revenues | 29,409 | 22,458 |
| Ingredients [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total revenues | 4,668 | 4,419 |
| Smoothie bowls [Member] | ||
| Disaggregation of Revenue [Line Items] | ||
| Total revenues | $ 2,306 | $ 3,161 |
Subsequent Event (Narrative) (Details) |
1 Months Ended |
|---|---|
Apr. 17, 2024 | |
| Subsequent Event [Member] | |
| Subsequent Event [Line Items] | |
| Subsequent event description | On April 17, 2024, the Company, SunOpta Foods and Oaktree entered into an Amending Agreement related to the elimination of the dividend rights attached to the Series B-1 Preferred Stock effective from and after December 31, 2023. The Series B-1 Preferred Stock previously paid a cumulative dividend of 8.0% per year that could be paid in-kind or in cash at the Company's option, which dividend would have increased from 8.0% to 10.0% per year and become payable only in cash at the end of the Company's third quarter in 2029. All other rights and obligations of the Company, SunOpta Foods, and Oaktree in connection with the Series B-1 Preferred Stock remain unchanged. The Company will account for the elimination of the dividend rights on a prospective basis beginning in the second quarter of 2024. |
1*$29H51$+R'84>Q-XO 2>L95;X X
MG>"/0B\)R25(O"A(WG7_C]T/%-R/,Q.8AVGL/&$MJ,W8Z'87?K"-#;,[]DKV
M]@AU6^WHHD0._4U2KU>:@F><#L,'+Z HA6'@!6'B/)E4H;X+F.?4B(V6+K!/
M!E*8.UL;6M%83SQJ]%2)/-5#T-N:Z^YNR%\[A>H4^S3KWHW",?DPB29PYVQ1
M