Revenue
Gross profit
Gross margin
Adjusted Gross margin (1)
Operating income
Earnings (loss) from continuing operations attributable to common shareholders
Earnings (loss) per share from continuing operations attributable to common shareholders
Loss from discontinued operations
Loss per share from discontinued operations
Adjusted earnings from continuing operations (2)
Adjusted earnings from continuing operations per diluted share(1)
Adjusted EBITDA from continuing operations (3)
Total assets
Total debt
Working capital (4)
Net cash flows from operating activities of continuing operations
Net cash flows from investing activities of continuing operations
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 30, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 001-34198
SUNOPTA INC.
(Exact Name of Registrant as Specified in Its Charter)
CANADA
(Jurisdiction of Incorporation)
Not Applicable
(I.R.S. Employer Identification No.)
7078 Shady Oak Road
Eden Prairie, Minnesota, 55344
(Address of Principal Executive Offices)
(952) 820-2518
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares
Common Shares
Trading Symbol(s)
STKL
SOY
Name of each exchange on which registered
The Nasdaq Stock Market LLC
Toronto Stock Exchange
Securities registered pursuant Section to 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
No
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. Yes
No
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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See definitions of large accelerated filer, accelerated filer, smaller reporting company, and
emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
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 has filed a report on and attestation to its management s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. Yes
No
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrants executive officer during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
Aggregate market value of the common equity held by non-affiliates of the registrant, computed using the closing price of $6.69 as
reported on the NASDAQ Global Select Market for the registrants common shares on July 1, 2023, the last business day of the registrants
most recently completed second fiscal quarter, was approximately $650 million. Common shares beneficially owned by Oaktree Capital
Group, LLC and held by reporting directors and officers of the registrant have been excluded from this calculation because such persons
may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
The number of shares of the registrants common stock outstanding as of February 23, 2024 was 116,033,695.
Documents Incorporated by Reference: Portions of the SunOpta Inc. Definitive Proxy Statement for the 2024 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
SUNOPTA INC.
FORM 10-K
For the year ended December 30, 2023
TABLE OF CONTENTS
Basis of Presentation
Forward-Looking Statements
PART I
Item 1
Item 1A
Item 1B
Item 1C
Item 2
Item 3
Item 4
PART II
Item 5
Item 6
Item 7
Item 7A
Item 8
Item 9
Item 9A
Item 9B
Item 9C
PART III
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Managements Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 10
Item 11
Item 12
Item 13
Item 14
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
PART IV
Item 15
Item 16
Exhibits, Financial Statement Schedules
Form 10-K Summary
2
2
4
9
18
18
19
19
19
20
20
21
42
42
42
43
44
44
45
45
45
46
46
46
46
SUNOPTA INC.
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December 30, 2023 Form 10-K
Basis of Presentation
Except where the context otherwise requires, all references in this Annual Report on Form 10-K for the fiscal year ended
December 30, 2023 (Form 10-K) to SunOpta, the Company, 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-K contains forward-looking statements that are based on managements 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, and gross margin profile; 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. Accordingly, there are important factors that could cause our actual results to differ materially from
our expectations and predictions. We believe these factors include, but are not limited to, the impact of global economic
conditions, including inflation, interest rates, and energy availability; the potential for economic disruption due to geopolitical
events and health crises; our ability to increase pricing to offset, or partially offset, inflationary pressures on the cost of our
products; issues affecting our supply chain and procurement of raw materials, including fluctuations in the cost and availability
of raw and packaging materials; labor shortages, employee turnover, and labor cost increases; business interruptions due to
weather events, natural disasters, other unexpected events or public health crises; the potential loss of one or more of our key
customers; our ability to identify, interpret and react to changes in consumer preferences and demand; our ability to effectively
respond to competitive factors, including product innovations of our competitors; a failure to realize some or all of the
anticipated benefits from our capital investment plans; a failure to successfully integrate or divest businesses, operations, or
assets; impairments of long-lived assets or goodwill; a failure of our internal control over financial reporting; occurrence of
product recall and withdrawal events; results of litigation and other legal proceedings; changes in government regulations and
policies; infringements of our intellectual property; risks associated with our information technology systems, including the
threat of data breaches and cyber-attacks; the impacts of severe weather events, natural disasters, and climate change on the
supply and cost of raw and packaging materials, as well as energy, fuel and water; the availability and pricing of non-GMO
and organic ingredients; global economic and financial conditions on availability of financing and interest rates; the effects of
increased debt levels and service obligations on our ability to borrow or the cost of any such additional borrowing on our
ability to react to certain economic and industry conditions; and other risks described herein under Part I, Item 1A Risk
Factors.
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
SUNOPTA INC.
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December 30, 2023 Form 10-K
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.
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December 30, 2023 Form 10-K
Item 1. Business
The Company
PART I
SunOpta Inc. was organized under the laws of Canada in 1973. We operate as a manufacturer for leading natural and private
label brands and also produce our own propriety brands, including SOWN®, Dream® and West Life. The core of our product
portfolio is a range of plant-based beverages, including oat, almond, soy, coconut and rice milks and creamers, which have a
favorable climate profile relative to traditional dairy milks in terms of lower carbon emissions and water usage. Our plant-
based offerings include non-genetically modified (non-GMO), organic, and gluten-free products. Our consumer products
portfolio also includes protein shakes, teas, broths, and fruit snacks. In October 2023, we completed the divestiture of our
commodity-based frozen fruit business (Frozen Fruit), in order to focus on value-add products in plant-based and healthy
snack categories (see below Divestiture of Frozen Fruit).
We sell our products through various distribution channels including private label products to retail customers; branded
products under co-manufacturing agreements to other branded food companies for their distribution; and our own branded
products to retail and foodservice customers. In addition, we also produce liquid and dry ingredients for internal use and for
sale to other food and beverage manufacturers.
Our employees and production facilities are principally located in the U.S., as well as Canada. Our corporate headquarters is
located in Eden Prairie, Minnesota, together with our innovation center and pilot plant.
Divestiture of Frozen Fruit
On October 12, 2023, we completed the sale of certain assets and liabilities of Frozen Fruit, which included owned facilities of
Frozen Fruit located in Edwardsville, Kansas, and Jacona, Mexico. In December 2023, we completed the liquidation of a leased
frozen fruit facility located in Oxnard, California. These transactions represent our exit from the processing, packaging and
selling of individually quick frozen fruit for retail, foodservice and industrial applications and completes our strategic
optimization plan for our non-core, commodity-based businesses, which included the divestiture of our sunflower business
(Sunflower) in October 2022. Frozen Fruit and Sunflower have been classified as discontinued operations.
Customers and Competition
We sell our products through various distribution channels, including foodservice operators, grocery retailers and club stores,
branded food companies, and food manufacturers, located principally in the U.S. We generally conduct our business with
customers based on purchase orders or pursuant to contracts that are terminable by either party following a designated notice
period. However, some of our contracts may extend for several years and/or include volume purchase commitments. A
relatively limited number of customers account for a large percentage of our revenues. In 2023, our ten largest customers
accounted for approximately 80% of our revenues from continuing operations.
We compete with major branded and private-label food manufacturers that have significantly greater resources and brand
recognition than we do. However, we believe that the strategic locations of our manufacturing and distribution facilities, our
in-house processing and packaging capabilities, and our innovation center and pilot plant, allows us to compete effectively. For
sales of private label and co-manufactured products, the principal competitive factors are product quality, reliability of service,
innovation, and price. For sales of our own branded products, the principal competitive factors are consumer brand recognition
and loyalty, product quality, promotion, and price.
Raw Materials
Our raw materials primarily consist of ingredients and packaging materials. Principal ingredients used in our products include
oats, almonds, soybeans, coconut, apple and sugar. For critical raw materials, we identify and qualify alternate sources of
supply, where possible. Ingredients are subject to fluctuations in market price caused by weather, growing and harvesting
conditions, market conditions, including inflationary cost increases, and other factors beyond our control. Where possible, we
mitigate market price volatility by entering into annual purchase arrangements with our suppliers and by incorporating pass-
through pricing adjustment clauses into our contracts with customers. The costs of raw materials used in our products also
fluctuate due to energy costs, fuel prices, labor availability, and freight and storage demand. Volatility in the cost of our raw
materials can adversely affect our performance, as price changes may lag behind changes in costs, and we are not always able
to adjust our pricing to reflect changes in raw material costs due to competitive pressures.
SUNOPTA INC.
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December 30, 2023 Form 10-K
We rely on our packaging suppliers to ensure delivery of often unique, portable, and convenient consumer packaging formats.
In our plant-based beverage processing facilities, we specialize in the use of Tetra Pak processing and packaging equipment in
a variety of package sizes, and an array of opening types and extended shelf-life options. Over 95% of our packaging by weight
is recyclable, and we are committed to working with our suppliers to innovate and develop new packaging technologies to
further reduce the impact on the environment, while maintaining the quality and safety of our products.
Natural gas and electricity are the primary sources of energy used to power our plants and processing equipment, and water is
the principal ingredient in many of our products and is essential to our production processes.
Diesel fuel is used in connection with the distribution of our products, and we rely on third-party transportation providers to
deliver raw materials, as well as our products to our customers.
Seasonality
Overall, the demand for most of our products does not typically fluctuate significantly in any particular season; however, broth
sales are generally higher in the first and fourth quarters of each year.
Product Development
Our 24,000 square foot innovation center and pilot plant located in Eden Prairie, Minnesota, supports our product development
team of 21 highly trained and experienced food scientists and technologists that are dedicated to the development of innovative
food and beverage offerings and addressing product development opportunities for our customers. These opportunities include
new and custom formulations, innovations in packaging formats, and new production processes and applications. Applications
and technical support provided to our customers include all aspects of product development from concept to commercial launch,
as well as ongoing manufacturing and processing support.
Trademarks
We market our own consumer brands under trademarks that we own, including SOWN, Dream and West Life. While we
consider these trademarks to be valuable to the marketing and sale of our proprietary brands, we do not consider any trademark
to be of such material importance that its absence would cause a material disruption of our business.
Human Capital
Our Human Capital Management strategy is based on our goal of Putting the YOU in SunOpta. We develop employee
programs, benefits, and compensation to align with four pillars of well-being: physical, financial, social, and emotional.
Examples of these initiatives are:
Offering a competitive compensation and benefit package that includes choices for each employee to select which
works best for them. Our comprehensive benefits package includes health insurance, company-paid life, accident, and
disability insurance, 401(k), employee stock purchase plan, paid time off, paid parental and maternity leave programs,
flexible schedules, and a tuition reimbursement program. In 2023, we implemented two additional paid personal
holidays for our regular, full-time employees called You Days, which can be taken in recognition of an employees
birthday and work anniversary date. In addition, we added a mental health benefit that provides faster access to care
at the individual level of need for employees and their families. As part of our focus on financial wellness, we
announced expedited access to our 401(k) plan, beginning in 2024 so employees can realize the benefits of planning
for retirement with employer match earlier in their tenure.
We believe it is key to give back to the communities in which we live and work as evidenced by our community
service and volunteerism program, which we refer to as SunOpta Cares. This program provides 24 hours of paid
time off for our employees to volunteer with community programs that align with their values. Throughout the year,
employees have several opportunities to donate talent and gifts to local charitable organizations.
Talent management and growth is instrumental in developing a sustainable workforce. We provide various
opportunities for our employees to learn and grow within SunOpta through individual development plans, on-the-job
training, special project assignments, monthly safety training and regular leader led learning sessions. In 2023, we
expanded the Foundational Manager Program to all of our plant locations. This offering was created for managers and
supervisors with a focus on cross-functional leadership, effective communication, leading through change, influencing
with integrity, negotiating, and creative problem solving. We are committed to identifying and developing the talents
of our next generation leaders. On an annual basis, we conduct talent assessments across the organization and
SUNOPTA INC.
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December 30, 2023 Form 10-K
succession planning for our most critical roles within the organization to identify high potential employees, gaps in
capabilities or skills, and bench strength. In 2023, we had the first cohort of the Leadership Impact Program.
Participants at the SVP and VP level gathered quarterly throughout the year to focus on leadership skills, strategy,
professional growth and completed capstone projects to further the business.
We believe in the power of diversity. We provide training regarding diversity, equity and inclusion for employees to
better understand how we can all work together, and be better, by embracing our differences. We foster inclusion by
recognizing and supporting activities and initiatives representative of our workforce such as celebrations of Black
History month, Hispanic Heritage month, PRIDE, National Native American Heritage month, and our Womens
Leadership Program. We continue to foster our Hispanic and Womens Employee Resource Groups by offering
programming for awareness, education and collaboration.
We encourage our employees to be guided by our MVBs (Most Valued Behaviors) of speed, dedication, problem solving,
passion, entrepreneurship, and customer centricity. We have a peer recognition program which allows employees to recognize
others who are demonstrating our MVBs. Our leaders also recognize employees through our quarterly awards program.
SunOpta conducts an organizational health survey two times each year to check the pulse of our workforce and look for areas
of improvement through the lens of all our employees. We engage in communication efforts such as quarterly town halls and
monthly all-company huddles that we believe help employees feel they are a part of SunOpta as a whole, not just their individual
department or location.
As of December 31, 2023, we employed 1,174 full-time employees in North America. Our average employee has over four
years of service. In 2023, our voluntary turnover was 20% (down from 22% in 2022) across the Company. We continue to
focus on increasing employee retention by implementing retention programs and initiatives to increase employee engagement.
Employee health and safety is paramount to our success. In addition to our safety training and initiatives at our manufacturing
facilities, we track our Total Recordable Incident Rate (TRIR) which ended the year at 1.02, compared to a goal of 1.3.
Environmental, Social and Governance
We are committed to incorporating environmental, social and governance (ESG) principles into our business strategies and
organizational culture. The Corporate Governance Committee of our Board of Directors provides oversight on ESG matters.
Details on our ESG commitments and progress are set out
in our most recent ESG report (available at
sunopta.com/sustainability), which shall not be deemed to be a part of this Form 10-K or incorporated into any of our other
filings made with the U.S. Securities and Exchange Commission (the SEC) or Canadian Securities Administrators (the
CSA).
Regulations
We are subject to a wide range of governmental regulations and policies in the U.S. and Canada. These laws, regulations and policies
are implemented, as applicable in each jurisdiction, on the national, federal, state, provincial, and local levels. For example, we are
affected by laws and regulations related to seed, fertilizer, and pesticides; the purchasing, harvesting, transportation, and
warehousing of agricultural products; the processing, packaging, and sale of food and beverages, including wholesale operations;
and product labeling and marketing, food safety and food defense. We are also affected by government-sponsored price supports,
acreage set aside programs, and a number of environmental regulations.
U.S. Regulations
Our activities in the U.S. are subject to regulation by various governmental agencies, including the Food and Drug Administration
(FDA), the Federal Trade Commission (FTC), the Environmental Protection Agency (EPA), the U.S. Department of
Agriculture (USDA), Occupational Safety and Health Administration (OSHA), and the Departments of Commerce and Labor,
as well as voluntary regulation by other bodies. Various state and local agencies also regulate our activities.
USDA National Organic Program and Similar Regulations
We manufacture and distribute a number of organic products that are subject to the standards set forth in the Organic Foods
Production Act and the regulations adopted thereunder by the National Organic Standards Board. In addition, our organic products
may be subject to various state regulations. We believe that we are in material compliance with the organic regulations applicable
to our business, and we maintain an organic testing and verification process. Generally, organic food products are produced using:
agricultural management practices intended to promote and enhance ecosystem health;
SUNOPTA INC.
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December 30, 2023 Form 10-K
ingredients produced without genetically engineered seeds or crops, sewage sludge, long-lasting pesticides, herbicides,
or fungicides; and
food processing practices intended to protect the integrity of the organic product and disallow irradiation, genetically
modified organisms, or synthetic preservatives.
After becoming certified, organic operations must retain records concerning the production, harvesting, and handling of
agricultural products that are to be sold as organic for a period of five years. Any organic operation found to be in violation of
the USDA organic regulations is subject to potential enforcement actions, which can include financial penalties or suspension
or revocation of their organic certificate.
Food Safety, Labeling and Packaging Regulations
As a manufacturer and distributor of food products, we are subject to the Federal Food, Drug and Cosmetic Act, the Fair
Packaging and Labeling Act and regulations promulgated thereunder by the FDA and the FTC. This regulatory framework
governs the manufacture (including composition and ingredients), labeling, packaging, and safety of food in the U.S. state and
local statutes and regulations may impose additional food safety, labeling, and packaging requirements. For instance, the
California Safe Drinking Water and Toxic Enforcement Act of 1986 (commonly referred to as Proposition 65) requires, with
a few exceptions, that a specific warning appear on any consumer product sold in California that contains a substance, above
certain levels, listed by that state as having been found to cause cancer or birth defects. We believe we are in material
compliance with state and local statutes and regulations as they apply to our business.
Environmental Regulations
We are also subject to various U.S. federal, state, and local environmental regulations. Some of the key environmental regulations
in the U.S. include, but are not limited to, the following:
Air quality regulations air quality is regulated by the EPA and certain city/state air pollution control groups. Emission
reports are filed annually.
Waste treatment/disposal regulations solid waste is either disposed of by a third-party or, in some cases, we have a
permit to haul and apply the sludge to land. Agreements exist with local city sewer districts to treat waste at specified
levels of Biological Oxygen Demand (BOD), Total Suspended Solids (TSS) and other constituents. This can
require weekly/monthly reporting as well as annual inspection.
Sewer regulations we have agreements with the local city sewer districts to treat waste at specified limits of BOD
and TSS. This requires weekly/monthly reporting as well as annual inspection.
Hazardous chemicals regulations various reports are filed with local, city, and state emergency response agencies to
identify potential hazardous chemicals being used in our U.S. facilities.
Storm-water all of our U.S. facilities are inspected annually and must comply with an approved storm-water plan to
protect water supplies.
Employee Safety Regulations
We are subject to certain safety regulations, including OSHA regulations. These regulations require us to comply with certain
manufacturing safety standards to protect our employees from accidents. We believe that we are in material compliance with
all employee safety regulations applicable to our business.
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December 30, 2023 Form 10-K
Canadian Regulations
In Canada, the sale of food is regulated under various federal and provincial laws, principally (but not limited to) the Safe Food for
Canadians Act (SFCA), the Food and Drugs Act (FADA), the Canada Consumer Product Safety Act (CCPSA), the Canadian
Food Inspection Agency Act (CFIAA) and the Canadian Environmental Protection Act, 1999 (CEPA), along with their
supporting regulations. The following is a summary of each of these statutes to the extent that they apply or potentially apply to the
Company and its operations:
Safe Food for Canadians Regulations (SFCR) (under the SFCA) the SFCR came into effect on January 15, 2019, and
consolidated 14 sets of existing food regulations into a single set of regulations which governs all imported, exported, or
inter-provincially traded food products. Some provisions of the SFCA and SFCR also apply intra-provincially. Notably,
SFCR replaced the Organic Products Regulations, 2009, the Processed Products Regulations and, to the extent that they
related to food products, the Consumer Packaging and Labeling Act and its supporting regulations. Principal elements of
the SCFR that may impact the Company include licensing requirements, preventative controls, traceability
requirements, commodity-specific requirements, reporting requirements and timelines, an export certificate request
process, packaging and labeling requirements to ensure food safety and prevent false or misleading labeling, regulation
of the use of grades and grade names, standards of identity and expansion of the certification process for organic
products, and other requirements. Timelines for complying with the SFCR requirements vary by food, activity, and size
of the food business.
Food and Drug Regulations (under the FADA) food and drugs are subject to specific regulatory requirements, including
composition (such as food additives, fortification, and food standards), packaging, labeling, advertising, and marketing,
and licensing requirements. New requirements regarding nutrition and ingredient labeling and food color were introduced
in 2016. In 2022, the Government of Canada, with support from the Canadian Food Inspection Agency (the CFIA),
amended the Food and Drug Regulations to update the requirements for labelling pre-packaged food products. The
amendments to the Food and Drug Regulations are part of the CFIAs initiative to modernize Canadas food labelling
system.
Canadian Food Inspection Agency Act (CFIAA) the CFIAA grants power to the CFIA, which is tasked with the
administration and enforcement of certain Canadian food legislation. By virtue of the CFIAA and the SFCA, the CFIA
has the power to inspect and, if deemed necessary, recall certain products, including fresh fruit and vegetables,
processed foods, and organic foods, if the Minister of Health believes that such products pose a risk to the public,
animal or plant health.
Substance Regulations various regulations under CEPA regulate the importation and use of certain substances in
Canada. For example, prior to the importation and use in products, the importer must ensure that all ingredients are
found on the Domestic Substances List (DSL) maintained by Environment and Climate Change Canada. In the event
that an ingredient is not found on the DSL, then subject to the amount of the substance imported into Canada and used
in products sold in Canada, a filing may become necessary under the New Substances Notification Regulations.
Canada Consumer Product Safety Act (CCPSA) the CCPSA provides oversight and regulation of consumer
products with respect to manufacturers, importers, and retailers. It includes, without limitation, the ability to require
product recalls, mandatory incident reporting, document retention requirements, increased fines and penalties, and
packaging and labeling requirements. While the CCPSA does not apply to food, it does apply to its packaging with
respect to safety. It is possible that there will be amendments introduced to the FADA, to capture the essence of the
regulatory oversight found in the CCPSA. We have no way of anticipating if and when that may occur.
Environmental Compliance
As described above, we are subject to environmental regulations in the U.S. and Canada. Our business also requires that we have
certain permits from various state, provincial and local authorities related to air quality, water consumption and treatment,
stormwater discharge, solid waste, land spreading and hazardous waste. We are committed to meeting all applicable environmental
compliance requirements.
Intellectual Property
The nature of a number of our products and processes requires that we create and maintain patents, trade secrets and trademarks.
Our policy is to protect our technology, brands, and trademarks by, among other things, filing patent applications for technology
relating to the development of our business in the U.S. and in selected foreign jurisdictions, registering trademarks in the U.S.,
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December 30, 2023 Form 10-K
Canada and selected foreign jurisdictions where we sell products, and maintaining confidentiality agreements with outside
parties and employees.
Our continued success depends, in part, on our ability to protect our products, trade names and technology under U.S. and
international patent laws and other intellectual property laws. We believe that we own or have sufficient rights to use all of the
proprietary technology, information and trademarks necessary to manufacture and market our products; however, there is
always a risk that patent applications relating to our products or technologies will not result in patents being issued, or, if issued,
will be later challenged by a third party, or that current or additional patents will not afford protection against competitors with
similar technology.
We also rely on trade secrets and proprietary know-how and confidentiality agreements to protect certain technologies and
processes. However, even with these steps taken, our outside partners and contract manufacturers could gain access to our
proprietary technology and confidential information. All employees are required to adhere to internal policies, which are
intended to further protect our technologies, processes, and trade secrets.
Available Information
Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act), are
available free of charge on our website at www.sunopta.com as soon as reasonably practicable after we file such information
electronically with, or furnish it to, the SEC and the CSA.
Additionally, the SEC and CSA maintain internet sites that contain reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC and CSA, which can be found at http://www.sec.gov and
http://www.sedarplus.ca, respectively.
Item 1A. Risk Factors
Our business, financial condition and results of operations are subject to various risks and uncertainties, including those
described below and elsewhere in this report. We believe the most significant of these risks and uncertainties are described
below, any of which could adversely affect our business, financial condition and results of operations, as well as our cash flows,
liquidity, stock price and/or reputation, and could cause actual results to differ materially from the results contemplated by the
forward-looking statements contained in this report. There may be additional risks and uncertainties not presently known to us
or that we currently consider immaterial. Consequently, you should not consider the following to be a complete discussion of
all possible risks or uncertainties applicable to our business. These risk factors should be read in conjunction with the other
information in this report and in the other documents that we file from time to time with the SEC and the CSA.
Risks Related to Our Company, Business and Operations
Deterioration of global economic conditions, an economic recession, periods of inflation, or economic uncertainty in our
key markets may adversely affect customer and consumer spending, as well as demand for our products
Global economic conditions can be uncertain and volatile. Our business and results of operations have in the past been, and
may continue to be, adversely affected by changes in global economic conditions including inflation, interest rates, consumer
spending rates, energy availability and costs, the negative impacts caused by public health crises, such as the COVID-19
pandemic, as well as the potential impacts of geopolitical events, and the effect of governmental initiatives to manage economic
conditions. As global economic conditions continue to be volatile or economic uncertainty remains, trends in consumer
spending also remain unpredictable and subject to reductions due to credit constraints and uncertainties about the future. Most
of our products are purchased by our customers based on end-user demand from consumers. Some of the factors that may
influence consumer spending include general economic conditions, high levels of unemployment, health crises, higher
consumer debt levels, reductions in net worth based on market declines and uncertainty, home foreclosures and reductions in
home values, fluctuating interest rates and credit availability, fluctuating fuel and other energy costs, fluctuating commodity
prices, inflationary pressure, tax rates, and general uncertainty regarding the overall future economic environment. Unfavorable
economic conditions may lead customers and consumers to delay or reduce purchases of our products and could present
challenges in collecting our account receivables on a timely basis. Customer demand for our products may not reach our targets
or may decline as distributors and retailers seek to reduce inventory positions if there is an economic downturn or economic
uncertainty in our key markets. Economic cycles and related fluctuations in customer demand may have a material adverse
effect on our business, financial condition, and results of operations.
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December 30, 2023 Form 10-K
We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw and packaging materials,
labor, energy, fuel and distribution costs, which may impact our business, financial condition, and results of operations
In recent years, we have experienced elevated commodity and supply chain costs, including the costs of raw materials,
packaging, labor, energy, fuel, freight and other inputs necessary for the production and distribution of our products, and we
expect elevated levels of inflation to continue in 2024. Many of these materials and costs are subject to price fluctuations from
a number of factors, including, but not limited to, market conditions, geopolitical events, demand for raw materials, weather,
growing and harvesting conditions, energy and fuel costs, currency fluctuations, and other factors beyond our control.
Our attempts to offset these cost pressures, such as through increases in the selling prices of some of our products, may not be
successful. Higher product prices may result in lower sales volumes. Consumers may shift to lower priced product offerings,
or may forego some purchases altogether, during an economic downturn or times of increased inflationary pressure. To the
extent that our efforts to offset cost inflation through price increases, and/or through cost containment measures and
productivity initiatives, are not sufficient to offset these increased costs adequately or in a timely manner, and/or if they result
in significant decreases in sales volume, our business, financial condition and results of operations may be materially and
adversely affected.
If we do not manage our supply chain effectively, our operating results may be adversely affected
Our supply chain is complex and critical to our ability to manufacture, move, and sell products. We rely on third-party suppliers
for our raw materials and packaging, as well as the distribution of our products. The inability of any of these suppliers to deliver
or perform for us in a timely or cost-effective manner could cause our operating costs to rise and our margins to fall. Many of
our products are perishable and require timely processing and transportation to our customers. Additionally, many of our
products can only be stored for a limited amount of time before they spoil and cannot be sold. We must continually monitor
our inventory and product sales mix against forecasted demand to reduce the risk of not having adequate supplies to meet
consumer demand or the risk of having too much inventory that may reach its expiration date. General macroeconomic and
conditions, geopolitical events and health crises have increased the challenges of managing our supply chain, and these factors
could continue to cause unpredictable supply chain interruptions or other adverse effects on our supply chain. If we are unable
to manage our supply chain effectively and ensure that our products are available to meet consumer demand, our operating
costs could increase and our margins could decline, which could have a material adverse effect on our business, financial
condition, and results of operations.
If we face labor shortages or increased labor costs, our business, financial condition, and results of operations could be
adversely affected
Labor is a primary component of operating our business. Our ability to achieve our operating goals depends on our ability to
identify, hire, train, and retain qualified employees. We compete with other companies both within and outside of our industry
for talented employees. If we are unable to hire and retain employees capable of performing at a high-level, our ability to
efficiently operate our manufacturing facilities and overall business could be adversely affected. Our ability to meet our labor
needs while controlling labor costs is subject to external factors, such as employment levels, prevailing wage rates, minimum
wage legislation, changing demographics, health and other insurance costs, and governmental labor and employment
requirements. In addition, a sustained labor shortage or increased turnover rates within our employee base could lead to
increased costs, such as increased overtime to meet demand, costs to hire and train new employees, and increased wage rates
and employee benefits to attract and retain employees. An overall labor shortage, lack of skilled labor, increased turnover, labor
inflation, and changes in applicable employment laws and regulations, could lead to increased labor costs and/or reduced
operating efficiencies, which could have a material adverse impact on our business, financial condition, and results of
operations.
An interruption at one or more of our manufacturing facilities could negatively affect our business, and our business
continuity plan may prove inadequate
We own or lease, manage and operate a number of manufacturing, processing, packaging, storage and office facilities. We may
be unable to accept and fulfill customer orders as a result of disasters, health crises (such as the COVID-19 pandemic), business
interruptions, or other similar events. Some of our inventory and manufacturing facilities are located in areas that are susceptible
to harsh weather, and the production of certain of our products is concentrated in a few geographic areas. Although we have a
business continuity plan, our plan might not address all of the issues we may encounter in the event of a disaster or other
unanticipated issues. Our business interruption insurance may not adequately compensate us for losses that may occur from
any of the foregoing. In the event that a disaster, or other catastrophic event were to destroy any part of any of our facilities or
interrupt our operations for any extended period of time, or if harsh weather or health crises prevent us from producing and/or
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December 30, 2023 Form 10-K
delivering products in a timely manner, our business, financial condition and results of operations could be materially and
adversely affected.
Our customers generally are not obligated to continue purchasing products from us
Many of our customers buy from us under short-term, binding purchase orders. As a result, these customers are not committed
to maintain or increase their sales volumes or orders for the products supplied by us. Decreases in our customers sales volumes
or orders for products supplied by us may have a material adverse effect on our business, financial condition and results of
operations. In addition, some customer buying decisions are based on a periodic bidding process. Our sales volume may
decrease if our offer is too high and rejected. Alternatively, we risk reducing our margins if our offer is successful but less than
our desired price point. Either of these outcomes may adversely affect our results of operations.
Loss of a key customer could materially reduce revenues and earnings
Our relationships with our key customers are critical to the success of our business and our results of operations. For the year
ended December 30, 2023, our ten largest customers accounted for approximately 80% of revenues from continuing operations.
The loss, decrease or cancellation of business with any of our large customers could materially and adversely affect our
business, financial condition, and results of operations.
We operate in a highly competitive industry
We operate businesses in the highly competitive food industry in North America. We compete with large U.S. and international
food ingredient and consumer-packaged food companies. These competitors may have financial resources larger than ours and
may be able to benefit from economies of scale, pricing advantages, long-standing customer relationships, and greater resources
for product innovation, and marketing and promotional activities. In addition, we may have to compete for limited supplies of
certain raw materials with competitors having greater resources and stronger supplier relationships than we have. If we are
unable to effectively respond to these competitive factors or if the competition in any of our product markets results in price
reductions or decreased demand for our products, our business, financial condition and results of operations may be materially
and adversely affected.
Product innovations by our competitors could make our food products less competitive
Our competitors include major food manufacturers and consumer-packaged food companies. Many of these companies are
engaged in the development of food ingredients and packaged food products and frequently introduce new products into the
market. If our competitors introduce products that are more appealing to the tastes and dietary habits of consumers or considered
to be of higher quality or value than our products, our sales and market share could decline, which may have a material adverse
effect on our profitability.
Consumer food preferences are difficult to predict and may change
Our success depends, in part, on our ability to predict, identify, and interpret the tastes and dietary habits of consumers and to
offer products to our customers that appeal to those preferences on a timely and affordable basis. Consumer preferences and
trends change based on a number of factors, including product taste and nutrition, food allergies, sustainability values, and
animal welfare concerns. Our failure to anticipate and respond to changing consumer preferences on a timely basis could result
in reduced demand and price decreases for our products, which could have a material adverse effect on our business, financial
condition, and results of operations.
We may not realize some or all of the anticipated benefits of our capital investment plans in the anticipated time frame or
at all
We have recently completed the largest capital expansion in our companys history, which included the construction of our
new plant-based beverage facility in Midlothian, Texas. Our capital investment plans often require a substantial amount of
management, operational, and financial resources, which may divert our attention and resources from existing businesses,
potentially disrupting our operations and adversely affecting our relationships with customers and suppliers. In addition, delays
and unexpected costs in connection with the completion of capital expansion projects, or changes in demand and pricing for
our products may occur that could result in us not realizing all or any of the anticipated benefits of our capital investment plans
on our expected timetable or at all, and there can be no assurance that any benefits we realize from our capital investments will
be sufficient to offset the costs that we may incur.
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December 30, 2023 Form 10-K
Our operations are subject to the general risks associated with acquisitions and divestitures
We regularly review strategic opportunities to grow our business through acquisitions of complementary businesses or assets.
Additionally, we have made several significant divestitures in recent years that aligned with our strategic priority of optimizing
our non-core, commodity-based businesses and focusing on value-add opportunities. Potential risks associated with these
transactions include the inability to consummate a transaction on favorable terms, the diversion of managements attention
from other business concerns, the potential loss of key employees and customers of current or acquired companies, the inability
to integrate or divest operations successfully, the possible assumptions of unknown liabilities, potential disputes with buyers
or sellers, potential impairment charges, and the inherent risks in entering markets or lines of business in which the Company
has limited or no prior experience. Any or all of these risks could have a material and adverse impact on our business, financial
condition, and results of operations. In addition, acquisitions outside the U.S. or Canada may present unique challenges and
increase our exposure to the risks associated with foreign operations.
In October 2023, we completed the sale of certain assets and liabilities of Frozen Fruit to Natures Touch Mexico, S. de R.L. de
C.V. and Natures Touch Frozen Fruits, LLC (the Purchasers) for an estimated aggregate purchase price of approximately
$141 million. The estimated aggregate purchase price is subject to post-closing adjustments based on a determination of the
final net working capital as of the closing date of the transaction on October 12, 2023. Our estimate of the final net working
capital allocation, which is recognized as part of the loss from discontinued operations in the consolidated statement of
operations for the year ended December 30, 2023, 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 Asset Purchase Agreement. A change in the aggregate purchase price could have a material
impact on our consolidated results of operations, financial condition and cash flows.
In addition, a portion of the aggregate purchase price was in the form of secured seller promissory notes due in three years and
with a stated principal amount of $20.0 million in the aggregate (the Seller Promissory Notes) that the Company entered into
with the Purchasers and Natures Touch Frozen Foods, LLC (collectively the Loan Parties). The Seller Promissory Notes are
secured by a second-priority lien on certain assets of Frozen Fruit acquired by the Purchasers. While we assessed the Seller
Promissory Notes to be collectible as at December 30, 2023, a deterioration in the liquidity of the Loan Parties could impact
the collectability of the Seller Promissory Notes.
Impairment charges related to long-lived assets or goodwill could adversely impact our financial condition and results of
operations
As at December 30, 2023, we had $319.9 million of property, plant and equipment, $105.9 million of operating lease right-of-
use assets, and $21.9 million of intangible assets, as well as $4.0 million of goodwill. In addition, prior to fiscal 2019, we
recognized accumulated impairment losses of $213.8 million related to goodwill that arose from business acquisitions.
We perform impairment assessments for our long-lived assets annually, or at any time when events occur that could affect the
value of these assets. If the results of such assessments were to show that the carrying value of our long-lived assets was not
recoverable and the fair value of these assets was less than the carrying value, we would be required to recognize a charge for
impairment, and the amount of the impairment charge could be material. Factors which could result in an impairment of a long-
lived assets include, but are not limited to, reduced demand or pricing for our products due to increased competition, the loss
of a significant customer or market share, or a current expectation that, more likely than not, a long-lived asset may be disposed
of before the end of its previously estimated useful life.
Likewise, we perform an annual impairment test for goodwill, or at any time when events occur that could indicate that more
likely than not the carrying value of a reporting unit exceeds its fair value. Indicators of goodwill impairment include, but are
not limited to, a decline in general economic conditions, an increased competitive environment in which a reporting unit
operates, a negative trend in the financial performance and cash flows of the reporting unit, and a more-likely-than-not
expectation of selling or disposing of all, or a portion, of a reporting unit.
For the year ended December 30, 2023, on a continuing operations basis, we did not recognize any impairment charges related
to our long-lived assets or goodwill. Within discontinued operations, we incurred a pre-tax loss on the sale of Frozen Fruit of
$119.8 million, of which a significant portion was comprised of the carrying value of the long-lived assets of the business.
Future impairments of long-lived assets and/or goodwill could materially and adversely impact our business, financial
condition, and results of operations.
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December 30, 2023 Form 10-K
If we lose the services of our key executives, our business could suffer
Our prospects depend to a significant extent on the continued service of our key executives, and our continued growth depends
on our ability to identify, recruit, and retain key management personnel. We do not typically carry key person life insurance on
our executive officers. If we lose the services of our key executives or fail to identify, recruit, and retain key management
personnel, our business, financial condition and results of operations may be materially and adversely impacted.
Failure of our internal control over financial reporting could harm our business and financial results
Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal
control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for
external purposes in accordance with United States generally accepted accounting principles. Because of its inherent
limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or
detect a misstatement of our financial statements or fraud. Any failure to maintain an effective system of internal control over
financial reporting could limit our ability to report our financial results accurately and in a timely manner, or to detect and
prevent fraud. A significant financial reporting failure or material weakness in internal control over financial reporting could
cause a loss of investor confidence and/or a decline in the market price of our stock. In connection with the preparation of our
consolidated financial statements as of and for the fiscal year ended December 31, 2022, we identified a material weakness in
our internal control over financial reporting. This material weakness was remediated during the fiscal year ended December
30, 2023. The identified material weakness and associated remediation efforts are further described in Part II, Item 9A of this
Form 10-K. Even after any identified material weaknesses have been remediated, investors may lose confidence in our reported
financial information and the market price of our common shares may decline.
Risks Related to Litigation and Government Regulations
Product recalls and withdrawals and product liability claims could have a material adverse effect on our business
We sell products for human consumption, which involves risks such as product contamination or spoilage, misbranding,
product tampering, and other adulteration of food products. Consumption of a contaminated, spoiled, tampered, or adulterated
product may result in personal illness or injury. Under certain circumstances, we may be required to recall or withdraw products,
which may be costly and time consuming, and may require the diversion of managements time and resources from business
operations. The costs of a recall or withdrawal may include product destruction costs, temporary plant closings, and compliance
or remediation costs. In addition, a product recall or withdrawal may cause us to lose future revenues from, or relationships
with, one or more material customers, and the impact of the recall or withdrawal could affect our customers willingness to
continue to purchase related or unrelated products from us or could otherwise hinder our ability to grow our business with those
customers. Further, we could be subject to claims or lawsuits relating to an actual or alleged illness or injury, and we could
incur liabilities that are not insured or that exceed our insurance coverage. Even if product liability claims against us are not
successful or fully pursued, these claims could be costly and time consuming to defend against, and the negative publicity
surrounding any such claims could adversely affect our reputation. Any of these events could have a material and adverse effect
on our business, results of operations, financial condition and cash flows.
In the second quarter of 2023, we announced our 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. To date, we have recognized losses of $7.3 million related to this recall, net of estimated insurance recoveries
of $4.8 million. We may incur additional losses related to this recall that are unforeseen at this time and we may need to revise
our insurance estimate as we work with our insurance providers to substantiate the losses incurred to date. In addition, in the
third quarter of 2023, we withdrew specific batches of aseptically-packaged product from a customer due to the discovery of a
faulty seal that was traced to an equipment misconfiguration by a third-party service provider. The equipment issue was
identified and resolved in the third quarter of 2023, and none of the withdrawn product made it into the consumer marketplace.
We have recognized losses of $3.4 million related to the withdrawal, net of expected recoveries from the service provider. Our
recovery estimate may need to be revised as we work with the service provider to substantiate our losses.
Potential liabilities and costs from litigation could adversely affect our business
We are, or may become, party to various lawsuits and claims arising in the normal course of business, which may include
lawsuits or claims relating to commercial contracts, product recalls, product liability, the marketing and labeling of products,
employment matters, environmental matters, data protection, intellectual property, and other aspects of our business. There is
no guarantee that we will be successful in defending ourselves in these actions and we could incur substantial costs and fees in
defending ourselves or in asserting our rights in these actions. The results of litigation and other legal proceedings are inherently
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December 30, 2023 Form 10-K
unpredictable and resolutions or dispositions of lawsuits and claims by settlement or otherwise could have a material adverse
effect on our business, results of operations, financial condition and cash flows.
New laws or regulations or changes in existing laws or regulations could adversely affect our business
The food industry is subject to a variety of federal, state, local, and foreign laws and regulations, including, but not limited to,
those related to food safety, food labeling, and environmental matters. Governmental regulations also affect taxes and levies,
healthcare costs, energy usage, and labor issues, all of which may have a direct or indirect effect on our business or those of
our customers or suppliers. Changes in these laws or regulations, or the introduction of new laws or regulations, could increase
the costs of doing business for the Company, our customers, or suppliers, or restrict our actions, causing our results of operations
to be adversely affected.
Risks Related to Intellectual Property and Information Technology
We rely on protection of our intellectual property and proprietary rights
Our success depends in part on our ability to protect our intellectual property rights. We rely primarily on patent, copyright,
trademark, and trade secret laws to protect our proprietary technologies. Our policy is to protect our technology by, among
other things, filing patent applications for technology relating to the development of our business in the U.S. and in selected
foreign jurisdictions. Our trademarks and brand names are registered in the U.S., Canada, and other jurisdictions. We intend to
keep these filings current and seek protection for new trademarks to the extent consistent with business needs. We also rely on
trade secrets and proprietary know-how and confidentiality agreements to protect certain of the technologies and processes that
we use. The failure of any patents, trademarks, trade secrets or other intellectual property rights to provide protection to our
technologies would make it easier for our competitors to offer similar products, which could result in lower revenues and/or
margins and could have a material adverse effect on our business, financial condition and results of operations.
Our business operations could be disrupted if our information technology systems fail to perform adequately or are breached
The efficient operation of our business depends on our information technology systems to process, transmit, and store electronic
information. We rely on our information technology systems, including the internet, to effectively manage our business data,
supply chain, order entry and fulfillment, and other business processes. Information technology systems are also integral to our
internal and external financial reporting. Furthermore, a significant portion of the communications between, and storage of
personal data of, our personnel, customers and suppliers depends on information technology. Our information technology
systems, some of which are dependent on services provided by third parties, may be susceptible to physical or electronic break-
in, damage, disruption, or shutdown due to computer viruses, hacker attacks, and other cybersecurity risks, hardware failures,
telecommunications failures, user errors or malfeasance, catastrophic events, natural disasters, fires, or other factors which may
be beyond our control. Furthermore, the rapid evolution and increased adoption of artificial intelligence technologies may
intensify our cybersecurity risks. If we are unable to anticipate, prevent, or adequately respond to and resolve these failures,
disruptions or breaches, our business may be materially disrupted, and we may suffer other adverse consequences such as
significant data loss, financial or reputational damage or penalties, legal claims or proceedings, remediation costs, or loss of
revenues or customers. Consequently, any failure or breach of our information technology systems could have a material
adverse effect on our business, financial condition and results of operations.
Risks Related to Weather, Climate Change, and Other External Factors
Adverse weather conditions and natural disasters could impose costs on our business
Ingredients for our products are vulnerable to adverse weather conditions and natural disasters, including windstorms,
hurricanes, earthquakes, floods, droughts, fires, and temperature and precipitation extremes, some of which are recurring but
difficult to predict, as well as crop disease and infestation. Severe weather conditions may occur with higher frequency or may
be less predictable in the future due to the effects of climate change. Unfavorable growing and harvesting conditions could
reduce both crop size and crop quality. In extreme cases, entire harvests may be lost in some geographic areas. Adverse weather
conditions or natural disasters may adversely affect our supply of raw materials or prevent or impair our ability to ship products
as planned. These factors may increase raw material acquisition and production costs, decrease our sales volumes and revenues,
and lead to additional charges to earnings, which could have a material adverse effect on our business, financial condition, and
results of operations.
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December 30, 2023 Form 10-K
Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business,
financial condition and results of operations
Long-term climate change impacts on global temperatures, weather patterns, and the frequency and severity of extreme weather
and natural disasters may negatively impact the price or availability of ingredients and packaging materials (such as corrugated
cardboard) that are necessary for our products. We may also be subjected to decreased availability of and/or less favorable
pricing for water, which could adversely impact our manufacturing operations.
There is an increased focus by U.S. federal, state and local regulatory and legislative bodies, as well as foreign bodies, regarding
environmental policies relating to climate change, regulating greenhouse gas emissions, energy policies, and sustainability.
Increased compliance costs and expenses due to the impacts of climate change and additional legal or regulatory requirements
regarding climate change may cause disruptions in, or an increase in the costs associated with, the running of our manufacturing
facilities and our business, as well as increase distribution and supply chain costs. In addition, compliance with any such legal
or regulatory requirements may require us to make significant changes in our business operations and strategy, which will
likely require us to devote substantial time and attention to these matters and cause us to incur additional costs. Even if we
make changes to align ourselves with such legal or regulatory requirements, we may still be subject to significant penalties or
potential litigation if such laws and regulations are interpreted and applied in a manner inconsistent with our practices. The
effects of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact
on our business and results of operations.
Additionally, we might fail to effectively address increased attention from customers, consumers, investors, activists and other
stakeholders on climate change and related environmental sustainability matters. Such failure, or the perception that we have
failed to act responsibly regarding climate change, whether or not valid, could result in adverse publicity and negatively affect
our business and reputation. In addition, customers and consumers may choose to stop purchasing our products or purchase
products from another company or a competitor, and our business, financial condition and results of operations may be
materially and adversely affected.
Furthermore, we may from time to time establish and publicly announce goals and commitments to reduce our impact on the
environment. Our ability to achieve any stated goal or commitment is subject to numerous factors and conditions, many of
which are outside of our control. Examples of such factors include evolving regulatory requirements affecting sustainability
standards or disclosures, the development of new environmental technologies to address climate change, and the availability
of financing to support climate-related projects. In addition, we may determine that it is in the best interest of our company and
our shareholders to prioritize other business investments over the achievement of our current environmental goals and
commitments based on economic conditions, changes in our business strategy, or pressure from investors or other stakeholders.
If we fail to achieve or are perceived to have failed or been delayed in achieving, or improperly report our progress toward
achieving our goals and commitments, it could negatively affect customer and consumer preference for our products or investor
confidence in our business, as well as expose us to enforcement actions and litigation.
Our business may be adversely affected by the availability of non-GMO and organic commodities and ingredients
Our ability to ensure a continuing supply of non-GMO and organic ingredients at competitive prices depends on many factors
beyond our control, including the number and size of farms that grow non-GMO and organic crops. The non-GMO and organic
raw materials that we use in the production of our products, including, among others grains, nuts, fruits, sweeteners, and
flavorings, are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, water scarcity,
temperature extremes, frosts, earthquakes, and pestilences. Natural disasters and adverse weather conditions can reduce crop
size and crop quality, which in turn could reduce our supplies of and/or increase the price of non-GMO and organic raw
materials. If our supplies of non-GMO and organic raw materials are reduced, we may not be able to find enough supplemental
supply sources on favorable terms, if at all, which could impact our ability to supply product to our customers and adversely
affect our business, financial condition, and results of operations.
Risks Related to Our Indebtedness and Liquidity
Increases in interest rates may negatively impact our cost of borrowing and access to capital financing
To address inflation, the U.S. Federal Reserve implemented tighter monetary policies beginning in 2022, causing interest rates
to rise significantly, which negatively impacted the cost of borrowing on our variable rate debt beginning in 2022. As at
December 30, 2023, we had approximately $212 million of variable rate debt outstanding under our credit agreement. We
expect interest rates to remain at elevated levels in 2024, and we continue to be exposed to further changes in interest rates,
which could have a material negative impact on our business, financial condition, results of operations and cash flows.
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December 30, 2023 Form 10-K
Our level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations
As at December 30, 2023, we have a significant amount of indebtedness outstanding as a result of the capital investments we
have made in recent years. The level of our indebtedness and the degree to which we are leveraged could adversely affect our
business, financial condition, and results of operations, including, without limitation, increasing our exposure to interest rate
fluctuations and impairing our ability to obtain additional financing for working capital, capital expenditures, debt service
requirements, acquisitions, or other general corporate purposes. In addition, we may have to use a substantial portion of our
cash flow to pay principal and interest on our indebtedness, which may reduce the funds available to us for other purposes. If
we do not generate sufficient cash flows to satisfy our debt service obligations, we may have to undertake alternative financing
plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital expenditures, or seeking to raise
additional capital. A high level of indebtedness and leverage could also make us more vulnerable to economic downturns and
adverse industry conditions and may compromise our ability to capitalize on business opportunities, and to react to competitive
pressures as compared to our competitors.
Our debt and equity agreements restrict how we may operate our business, and our business may be materially and adversely
affected if these restrictions prevent us from implementing our business plan
The agreements governing our debt and preferred equity instruments contain restrictive covenants that limit the discretion of
our management with respect to certain business matters. These covenants place restrictions on, among other things, our ability
to obtain additional debt financing or preferred equity, to create other liens, to complete a merger, amalgamation, or
consolidation, to make certain distributions or make certain payments, investments and guarantees and to sell or otherwise
dispose of certain assets. These restrictions may hinder our ability to execute on our growth strategy or prevent us from
implementing parts of our business plan.
Our business could be materially and adversely affected if we are unable to meet the financial covenants of our credit
agreement
Our credit agreement requires us to maintain a minimum fixed charge coverage ratio and a maximum consolidated total net
leverage ratio. Our ability to comply with the financial covenants under the credit agreement will depend on the success of our
businesses, our operating results, and our ability to achieve our financial forecasts. Various risks, uncertainties and events
beyond our control could affect our ability to comply with the financial covenants and terms of the credit agreement. Failure
to comply with the financial covenants and other terms could result in an event of default and the acceleration of amounts
owing under the credit agreement unless we are able to negotiate a waiver. The lenders could condition any such waiver on an
amendment to the credit agreement on terms, including, but not limited to, the payment of consent fees, which may be
unfavorable to us. If we fail to comply with the financial covenants and we are unable to negotiate a covenant waiver or replace
or refinance the credit agreement on favorable terms, our business, financial condition and results of operations could be
materially and adversely impacted.
We may require additional capital, which may not be available on favorable terms or at all
Our working capital requirements, capital investment plans, and our ability to acquire complementary businesses or assets often
require significant financial resources. Our ability to raise capital, through debt or equity financing, is directly related to our
ability to both continue to grow our revenues and improve the profitability of our operations. Debt or equity financing may not
be available to us on favorable terms or at all. In addition, any potential debt financing could adversely affect our financial
condition and increase our exposure to interest rate changes, while any potential equity financing would dilute our current
shareholders and may result in a decrease in our share price if we are unable to realize adequate returns.
Our ability to maintain current levels of working capital may be adversely affected if we are unable to utilize supply chain
financing (SCF) programs to accelerate payment terms for certain customers
To improve working capital efficiency, we utilize SCF programs offered by some of our major customers that allow us to
monetize our receivables from those customers earlier than our payment terms would provide. To the extent that these various
SCF programs were terminated, our financial condition, cash flows, and liquidity could be adversely affected by higher working
capital levels due to delays in collecting accounts receivables. If working capital is negatively impacted by the termination of
these programs, and we are unable to secure alternative financing sources, we may have to increase our debt borrowings, along
with the associated interest expense.
SUNOPTA INC.
16
December 30, 2023 Form 10-K
Risks Related to Significant Investors and Shareholder Activism
Our significant investor may have interests that conflict with those of our debtholders and other stakeholders
As at December 30, 2023, Oaktree Capital Management L.P., a private equity investor (together with its affiliates, Oaktree)
held an approximately 20% voting interest in the Company and has nominated two members of our Board of Directors. The
interests of Oaktree may differ from the interests of our other stakeholders in material respects. For example, Oaktree may have
an interest in directly or indirectly pursuing acquisitions, divestitures, financings, or other transactions that, in their judgment,
could enhance their other equity investments, even though such transactions might involve risks to us, including risks to our
liquidity and financial condition. Oaktree is in the business of making or advising on investments in companies, including
businesses that may directly or indirectly compete with certain portions of our business. Oaktree may also pursue acquisition
opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available
to us.
Our other large investors do not have specific rights beyond those of smaller holders of our common shares. However, a
concentration of ownership within our large investors could potentially be disadvantageous to, or conflict with, interests of our
debtholders or smaller shareholders. In addition, if any significant shareholder were to sell or otherwise transfer all or a large
percentage of its holdings, we could find it difficult to raise capital, if needed, through the sale of additional equity securities.
Our business could be negatively impacted as a result of shareholder activism or an unsolicited takeover proposal or a proxy
contest
In recent years, proxy contests and other forms of shareholder activism have been directed against numerous public companies.
If a proxy contest or an unsolicited takeover proposal is made with respect to us, we could incur significant costs in defending
the Company, which would have an adverse effect on our financial results. Shareholder activists may also seek to involve
themselves in the governance, strategic direction, and operations of the Company. Such proposals may disrupt our business
and divert the attention of our management and employees, and any perceived uncertainties as to our future direction resulting
from such a situation could result in the loss of potential business opportunities, be exploited by our competitors, cause concern
to our current or potential customers, and make it more difficult to attract and retain qualified personnel and business partners,
all of which could adversely affect our business. In addition, actions of activist shareholders may cause significant fluctuations
in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the
underlying fundamentals and prospects of our business.
Risks Related to Ownership of our Common Shares
Our share price is subject to significant volatility
Our share price may be highly volatile compared to larger public companies, which increases the chance of larger than normal
price swings that could reduce predictability in the price of our common shares and impair investment decisions. In addition,
price and volume trading volatility in the stock markets can have a substantial effect on our share price, frequently for reasons
other than our operating performance. These broad market fluctuations could adversely affect the market price of our common
shares.
Periods of volatility in the overall market and the market price of a companys securities is often followed by securities class
action litigation alleging material misstatements or omissions in disclosures provided to shareholders. Such litigation, if
instituted against us, could result in substantial costs and a diversion of our managements attention and resources.
Our debt instruments restrict, and our future debt instruments may restrict, our ability to pay dividends to our shareholders,
and we do not currently intend to pay any cash dividends on our common shares in the foreseeable future; therefore, our
shareholders may not be able to receive a return on their common shares until their shares are sold
We have never paid or declared any cash dividends on our common shares, and we do not currently anticipate paying any cash
dividends on our common shares in the foreseeable future. Any future payment of dividends will be dependent on factors such
as covenant restrictions, cash on hand, or achieving and maintaining profitability, the financial requirements to fund growth,
our general financial condition, and other factors we may consider appropriate in the circumstances. Until we pay dividends,
which we may never do, our shareholders will not receive a return on their common shares until their shares are sold, and any
return will depend on the ability to sell their shares at a price higher than they paid to acquire them.
SUNOPTA INC.
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December 30, 2023 Form 10-K
The future issuance of additional common shares in connection with the exchange of convertible preferred stock, vesting
of equity-based awards, participation in our employee stock purchase plan and issuance of additional securities could dilute
the value of our common shares
We have unlimited common shares authorized but unissued. Our articles of amalgamation authorize us to issue these common
shares, and we may also issue options, rights, warrants and appreciation rights relating to common shares for consideration and
on terms and conditions established by our Board of Directors in its sole discretion.
The exchange of outstanding convertible preferred stock, vesting of equity-based awards, participation in our employee stock
purchase plan, and issuance of additional securities in connection with acquisitions or otherwise could result in dilution in the
value of our common shares and the voting power represented thereby. Furthermore, to the extent common shares are issued
pursuant to the exchange of outstanding convertible preferred stock, vesting of equity-based awards, participation in our
employee stock purchase plan, and issuance of additional securities, our share price may decrease due to the additional amount
of common shares available in the market. The subsequent sales of these shares could encourage short sales by our shareholders
and others, which could place further downward pressure on our share price.
If securities or industry research analysts do not publish or cease publishing research or reports about our business or if
they issue unfavorable commentary or downgrade our common shares, our share price and trading volume could decline
The trading market for our common shares relies in part on the research and reports that securities and industry research analysts
publish about us, our industry, our competitors and our business. We do not have any control over these analysts. Our share
price and trading volumes could decline if one or more securities or industry analysts downgrade our common shares, issue
unfavorable commentary about us, our industry or our business, cease to cover our Company or fail to regularly publish reports
about us, our industry, or our business.
A portion of our assets and certain of our directors are located outside of the U.S.; it may be difficult to effect service of
process and enforce legal judgments upon us and certain of our directors
A portion of our assets and certain of our directors are located outside of the U.S. As a result, it may be difficult to effect service
of process within the U.S. and enforce judgment of a U.S. court obtained against us and certain of our directors. Particularly,
our stakeholders may not be able to:
effect service of process within the U.S. on us or certain of our directors;
enforce judgments obtained in U.S. courts against us or certain of directors based upon the civil liability provisions of
the U.S. federal securities laws;
enforce, in a court outside of the U.S., judgments of U.S. courts based on the civil liability provisions of the U.S.
federal securities laws; or
bring an original action in a court outside of the U.S. to enforce liabilities against us or any of our executive officers
and directors based upon the U.S. federal securities laws.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Our cybersecurity program is strategically crafted to achieve the paramount goals of identifying, protecting, detecting, and
responding to all potential risks and threats. Employing a defense-in-depth strategy, we proactively identify, investigate, and
resolve vulnerabilities and security incidents in a timely manner.
Continuous improvement is integral to our cybersecurity approach. Regular assessments, conducted with the expertise of
external security firms against international standards, allow us to quantify our programs effectiveness. The insights gained
from these assessments serve as a foundation for continuous improvement efforts. Outcomes are reported to our Audit
Committee for transparency and accountability. We rely on services from a variety of third-party providers to supply things
such as cloud storage and networks. On an annual basis, we review these providers to assess their risk profiles. We rely on
SUNOPTA INC.
18
December 30, 2023 Form 10-K
these third parties to have their own cybersecurity programs commensurate with their risk, and we cannot ensure in all
circumstances that their efforts will be successful.
Despite facing directed attacks, our systems have withstood such challenges without material interruptions to our business
operations. Recognizing the potential impact of significant disruptions, we remain steadfast in our commitment to fortify our
systems against evolving threats. Any significant disruption to our ability to transact business could adversely affect our
business performance as well as our reputation. Refer to Item 1A Risk Factors Our business operations could be disrupted
if our information technology systems fail to perform adequately or are breached.
Heading our cybersecurity program is our Chief Information Officer (CIO). Our CIO has over 30 years of experience in
Software Engineering and Information Technology/Cybersecurity and is supported by skilled professionals from our
Information Technology team. This seasoned team provides regular updates to our Enterprise Risk Management Steering
Committee (the ERM), composed of our Chief Executive Officer, Chief Financial Officer, Chief Administrative Officer, and
other members of our senior leadership. Our Audit Committee and Board of Directors receive regular reports from the ERM,
as well as directly from our CIO on a quarterly basis. These reports cover various cybersecurity matters, including risk
assessments, mitigation strategies, areas of emerging risks, incidents and industry trends, and other areas of importance.
Furthermore, our Board of Directors takes a proactive stance in overseeing our annual enterprise risk assessment. This
comprehensive evaluation encompasses key risks, including those associated with security, technology, and cybersecurity
threats, demonstrating our commitment to robust governance and risk management.
Item 2. Properties
Our leased executive offices, innovation center and pilot plant are located in Eden Prairie, Minnesota. The table below lists the
location, description and ownership our production facilities. We believe our owned and leased facilities are suitable for our
operations and provide sufficient capacity to meet our requirements for the foreseeable future.
Owned/Leased
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Noncancellable
Lease Term End
Date
April 2027(1)
September 2037(2)
May 2029(3)
May 2027
December 2026(4)
Location
Alexandria, Minnesota
Alexandria, Minnesota
Allentown, Pennsylvania
Midlothian, Texas
Modesto, California
Omak, Washington
St. Davids, Ontario
Facility Description
Aseptic beverage processing
Ingredient processing
Aseptic beverage processing
Aseptic beverage processing
Aseptic beverage and ingredient processing
Fruit snack processing
Fruit snack processing
(1) Lease includes two five-year renewal options.
(2) Lease includes three five-year renewal options.
(3) Lease includes one remaining five-year renewal option.
(4) Lease includes a three-year renewal option.
Item 3. Legal Proceedings
For a discussion of legal proceedings, see note 17 of the consolidated financial statements included in Item 15 of this Form 10-
K.
Item 4. Mine Safety Disclosures
Not Applicable.
SUNOPTA INC.
19
December 30, 2023 Form 10-K
PART II
Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common shares are listed in U.S. dollars on The Nasdaq Stock Market LLC under the symbol STKL, and in Canadian
dollars on the Toronto Stock Exchange (TSX) under the symbol SOY.
As at December 30, 2023, we had approximately 332 shareholders of record. We have never paid cash dividends on our
common stock and do not anticipate paying dividends in the foreseeable future. Our future dividend policy will depend on our
results of operations, financial condition and capital requirements, restrictions of debt and equity agreements to which we are
a party, and other factors considered relevant by our Board of Directors. The receipt of cash dividends by U.S. shareholders
from a Canadian corporation, such as we are, may be subject to Canadian withholding tax.
Shareholder Return Performance Graph
This performance graph shall not be deemed filed for purposes of Section 18 of the Exchange Act or incorporated by
reference into any filing of SunOpta under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be
expressly set forth by specific reference in such filing.
The following graph compares the five-year cumulative shareholder return on our common shares to the cumulative total return
of the S&P/TSX Composite and the NASDAQ Industrial Indices for the period which commenced December 31, 2018.
12/31/2018
12/31/2019
12/30/2020
12/31/2021
12/31/2022
12/31/2023
SunOpta Inc.
Nasdaq Industrial Index
S&P/TSX Composite Index
100.00
100.00
100.00
64.84
127.77
120.72
303.91
194.05
122.58
180.99
211.15
149.23
219.79
137.14
136.30
142.45
176.82
147.37
Assumes that $100.00 was invested in our common shares and in each index on December 31, 2018.
Item 6. [Reserved]
SUNOPTA INC.
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December 30, 2023 Form 10-K
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Financial Information
This Managements Discussion and Analysis of Financial Condition and Results of Operations (MD&A) section provides
analysis of our operations and financial position for the fiscal year ended December 30, 2023 and includes information available
to February 28, 2024, unless otherwise indicated herein. It is supplementary information and should be read in conjunction
with the consolidated financial statements included elsewhere in this report.
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 this Form 10-K.
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, protein shakes, teas,
and broths packaged in shelf-stable formats, together with fruit snacks and smoothie bowls, which are sold through retail and
foodservice channels. We also produce liquid and dry ingredients for internal use and for sale to other food and beverage
manufacturers.
On February 23, 2024, we entered into an agreement to sell the assets related to our smoothie bowl product line, which is
expected to close on March 4, 2024.
Fiscal Year
We operate on a fiscal calendar that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday
closest to December 31. Fiscal years 2023, 2022 and 2021 were each 52-week periods ending on December 30, 2023, December
31, 2022 and January 1, 2022, respectively.
SUNOPTA INC.
21
December 30, 2023 Form 10-K
Recent Developments
Divestiture of Frozen Fruit
On October 12, 2023, we completed the sale of certain assets and liabilities of our frozen fruit business (Frozen Fruit) for an
aggregate purchase price of approximately $141 million, subject to closing working capital adjustments. This transaction
represents our exit from the processing, packaging and selling of individually quick frozen fruit for retail, foodservice and
industrial applications. The divestiture of Frozen Fruit completes our strategic optimization plan for our non-core, commodity-
based businesses, which included the divestiture of our sunflower business (Sunflower) in October 2022, in order to focus
on value-add products in plant-based and healthy snack categories. Beginning in the third quarter of 2023, Frozen Fruit and
Sunflower met the criteria for reporting as discontinued operations. As a result, the information in this MD&A is presented on
a continuing operations basis, with all periods presented recast to reflect the reporting of Frozen Fruit and Sunflower as
discontinued operations. For further information regarding the divestiture of Frozen Fruit and discontinued operations, see note
2 to the consolidated financial statements included in Item 15 of this Form 10-K.
Segment Change
In connection with the divestiture of Frozen Fruit and the management changes described below, we changed our internal
organization and reporting structures beginning in the third quarter of 2023 and began operating as one segment. As a result,
the information in this MD&A is presented on a consolidated basis for all periods presented. For further information regarding
the change in our segment structure, see note 1 to the consolidated financial statements included in Item 15 of this Form 10-K.
Management Changes
Effective October 9, 2023 and October 13, 2023, respectively, Michael Buick, Senior Vice President and General Manager of
Plant-Based Foods and Beverages and Scott Huckins, Chief Financial Officer (CFO) and General Manager of Fruit-Based
Foods and Beverages left the Company. With their departures, we eliminated the position of General Manager and adopted a
centralized functional structure reporting directly to the Chief Executive Officer (CEO). Effective October 13, 2023, Greg
Gaba, our former Vice President Corporate Finance and Deputy CFO, was appointed CFO of the Company.
Effective January 2, 2024, Brian Kocher was appointed CEO of the Company in connection with the retirement of our former
CEO, Joseph Ennen.
New Credit Agreement
As described below under the heading Liquidity and Capital Resources, on December 8, 2023, we entered into a new credit
agreement providing for a new $180 million term loan credit facility and a new $85 million revolving credit facility (the New
Credit Agreement). The New Credit Agreement has a term of five years and replaces our former asset-based credit facilities.
Global Economic Conditions and Inflationary Cost Environment
Our businesses continue to be exposed to the effects of the current global macroeconomic environment, including elevated
inflation, higher interest rates, and shifts in consumer demand.
Inflation Inflation in 2023 declined from the highs in 2022 but remained elevated. We expect this inflationary
environment to continue throughout 2024. We believe that we will be able to continue to mitigate the impact of
inflationary cost increases for raw materials, packaging, labor, energy, fuel, and transportation through pricing actions
we took with our customers in 2022 that mostly remained in effect in 2023, and further pricing actions that we may
implement as needed. However, the effect of our customers passing on higher prices to end consumers has impacted
and may continue to impact the level of consumption of our products. As a result, we continue to identify opportunities
to improve our own operational efficiencies and achieve cost savings in order to offset inflationary impacts and
maintain our profit margins.
Interest Rates Loans under our credit agreement bear interest at a variable rate, and the interest rate on our
outstanding indebtedness has increased as market interest rates have risen, starting in the second half of 2022. These
higher interest rates have led to an increase in our interest expense in 2023, which we expect will continue in 2024.
Consumer Demand Current economic conditions have reduced household savings and resulted in changes in
consumer spending patterns, with a shift to lower-cost retailers and product alternatives, together with a streamlining
SUNOPTA INC.
22
December 30, 2023 Form 10-K
of purchases. As a result, some of the categories we serve have experienced a softening of demand, which negatively
impacted our sales volumes and mix in 2023. These consumption trends may continue to have an impact on our
business.
Fiscal 2024 Outlook
For fiscal 2024, we are projecting higher revenues driven by organic volume growth from our beverages and snacks categories,
partially offset by the impact of our planned exit from smoothie bowls. We anticipate an improved gross margin profile on a
reported basis, 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 SG&A spending as a percentage of revenue, is expected to drive operating income growth and improved cash flows.
Consolidated Results of Operations for Fiscal Years 2023 and 2022
For the year ended
Revenues
Cost of goods sold
Gross profit
Gross margin(1)
December 30,
2023
$
December 31,
2022
$
Change
$
Change
%
630,297
541,680
88,617
591,395
491,665
38,902
50,015
6.6%
10.2%
99,730
(11,113)
-11.1%
14.1%
16.9%
Operating expenses
Selling, general and administrative expenses
Intangible asset amortization
Other expense, net
Foreign exchange loss (gain)
Total operating expenses
Operating income
Interest expense, net
Earnings (loss) from continuing operations before income
Income tax expense
Earnings (loss) from continuing operations
Loss from discontinued operations
Net loss(2),(3)
Dividends and accretion on preferred stock
Loss attributable to common shareholders(4)
78,000
1,784
455
110
80,349
8,268
26,909
(18,641)
3,269
(21,910)
(153,108)
(175,018)
(1,981)
(176,999)
-2.8%
-0.6%
0.0%
-72.4%
*
-1.8%
(469)
-
(1,196)
217
(1,448)
(9,665)
-53.9%
13,753
(23,418)
2,373
104.5%
*
264.8%
(25,791)
(144,386)
*
-1655.4%
(170,177)
1,128
-3515.3%
36.3%
78,469
1,784
1,651
(107)
81,797
17,933
13,156
4,777
896
3,881
(8,722)
(4,841)
(3,109)
(7,950)
(169,049)
-2126.4%
* 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. In recent years, we have undergone the largest capital expansion in
our companys history, including the construction of our new plant-based beverage facility in Midlothian, Texas. As a
result, start-up costs have had a significant impact on the comparability of reported gross margins in 2023 and 2022, which
may obscure trends in our margin performance. Additionally, our measure of adjusted gross margin may exclude 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 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
SUNOPTA INC.
23
December 30, 2023 Form 10-K
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.
For the year ended
Reported gross margin
Start-up costs(a)
Product withdrawal costs(b)
Adjusted gross margin
Note: percentages may not add due to rounding.
December 30,
2023
14.1%
3.0%
0.5%
17.6%
December 31,
2022
16.9%
1.0%
-
17.8%
(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 2023,
start-up costs included in cost of goods sold related to the ramp-up of production at our new plant-based beverage
facility in Midlothian, Texas, and the start-up of new extrusion and high-speed packaging lines at our fruit snacks
facility in Omak, Washington. For 2022, start-up costs included in cost of goods sold related to the hiring and training
of new employees for the Midlothian facility, together with the integration of the acquired Dream and West Life
brands.
(b) Reflects costs, net of expected recoveries, related to the withdrawal of specific batches of aseptically-packaged product
due to a faulty seal caused by an equipment misconfiguration by a third-party service provider. The equipment issue
was identified and resolved in the third quarter of 2023, and none of the withdrawn product made it into the consumer
marketplace.
(2) When assessing our financial performance, we use an internal measure of adjusted earnings/loss 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 (loss) from net earnings (loss),
which we consider to be the most directly comparable U.S. GAAP financial measure. In addition, we have prepared this
table in columnar format to present the effects of discontinued operations on our consolidated results for the periods
presented. We believe this presentation assists investors in assessing the financial performance of our continuing
operations.
SUNOPTA INC.
24
December 30, 2023 Form 10-K
For the year ended
December 30, 2023
Net loss
Dividends and accretion on preferred stock
Loss attributable to common shareholders
Adjusted for:
Loss on divestiture of discontinued operations(a)
Start-up costs(b)
Frozen fruit inventory reserves(c)
Exit from frozen fruit processing facility(d)
Product withdrawal and recall costs(e)
Business development costs(f)
Loss on extinguishment of debt(g)
Severance costs(h)
Other(i)
Net income tax on adjusting items(j)
Change in valuation allowance for deferred tax
assets(k)
Adjusted earnings (loss)
For the year ended
December 31, 2022
Net earnings (loss)
Dividends and accretion on preferred stock
Earnings (loss) attributable to common shareholders
Adjusted for:
Loss on divestiture of discontinued operations(a)
Start-up costs(b)
Sale of frozen fruit processing facility(l)
Business development costs(f)
Exit from fruit ingredient processing facility(m)
Other(i)
Net income tax on adjusting items(j)
Adjusted earnings
Continuing
Operations
Per
Share
$
$
Discontinued
Operations
Per
Share
$
$
Consolidated
Per
Share
$
$
(21,910)
(1,981)
(23,891)
(0.21)
(153,108)
-
(153,108)
(1.34)
(175,018)
(1,981)
(176,999)
(1.55)
-
20,249
-
-
3,440
2,390
1,584
897
471
-
119,821
-
12,900
10,014
2,500
-
-
1,016
1,136
-
119,821
20,249
12,900
10,014
5,940
2,390
1,584
1,913
1,607
-
3,978
9,118
0.08
-
(5,721)
(0.05)
3,978
3,397
0.03
Continuing
Operations
Per
Share
$
$
Discontinued
Operations
Per
Share
$
$
Consolidated
Per
Share
$
$
3,881
(3,109)
772
-
6,028
-
1,170
577
1,074
(2,326)
7,295
0.01
0.07
(8,722)
-
(8,722)
31,468
-
(2,544)
-
-
(202)
(18,303)
1,697
(0.08)
0.02
(4,841)
(3,109)
(7,950)
31,468
6,028
(2,544)
1,170
577
872
(20,629)
8,992
(0.07)
0.08
(a) For 2023, reflects the pre-tax loss on the divestiture of Frozen Fruit, which is recorded in loss from discontinued
operations. For 2022, reflects the pre-tax loss on the divestiture of Sunflower of $23.2 million, together with a loss of
$8.2 million on the settlement of the purchase price allocation related to the 2020 divestiture of our global ingredients
business, Tradin Organic, which are recorded in loss from discontinued operations.
(b) For 2023, start-up costs included the ramp-up of production at our new plant-based beverage facility in Midlothian,
Texas, the start-up of new extrusion and high-speed packaging lines at our fruit snacks facility in Omak, Washington,
and professional fees related to productivity initiatives within our manufacturing operations, which are recorded in
cost of goods sold ($18.7 million) and SG&A expenses ($1.5 million). For 2022, start-up costs mainly related to the
hiring and training of new employees for the Midlothian facility, and the integration of the Dream and West Life
brands, which are recorded in cost of goods sold ($5.7 million) and SG&A expenses ($0.3 million).
SUNOPTA INC.
25
December 30, 2023 Form 10-K
(c) For 2023, reflects inventory reserves recognized in connection with the divestiture of Frozen Fruit, which are recorded
in loss from discontinued operations.
(d) For 2023, reflects asset impairment charges and contract cancellation costs related to the exit from our Oxnard,
California, frozen fruit processing facility in connection with the divestiture of Frozen Fruit, which are recorded in
loss from discontinued operations.
(e) For 2023, reflects costs, net of expected recoveries, of $3.4 million related to the withdrawal of specific batches of
aseptically-packaged product due to a faulty seal caused by an equipment misconfiguration by a third-party service
provider, which are recorded in cost of goods sold, as well as the self-insured retention amount of $2.5 million under
our insurance policies related to the recall of specific frozen fruit products initiated in the second quarter of 2023,
which is recorded in loss from discontinued operations.
(f) 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 2023, business development costs related to the divestiture of Frozen Fruit, and, for
2022, these costs related to the divestitures of Frozen Fruit and Sunflower, together with our inaugural Investor Day
held in June 2022. These costs are recorded in SG&A expenses.
(g) For 2023, we recognized a loss on the extinguishment of debt in connection with the refinancing of our credit
agreement in December 2023, which is recorded in interest expense, net.
(h) For 2023, reflects employee severance costs of $0.9 million recognized in connection with the consolidation of our
continuing operations following the divestiture of Frozen Fruit, which are recorded in SG&A expenses, as well as
severance costs of $1.0 million for employees of Frozen Fruit that did not transfer as part of the divestiture, which are
recorded in loss from discontinued operations.
(i) For 2023, other includes a $0.4 million loss on a foreign exchange hedge in connection with the divestiture of Frozen
Fruit, which is recorded in other expense. For 2023 and 2022, other also reflects reserves for legal settlements and
gains and losses on the disposal of assets, which are recorded in other expense/income and loss from discontinued
operations.
(j) 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. In addition, for 2022, includes
$12.9 million of tax benefits resulting from the settlement of the purchase price allocation related to the divestiture of
Tradin Organic.
(k) For 2023, reflects an increase to the valuation allowance for U.S. deferred tax assets recognized in the second quarter
of 2023, based on an assessment of the future realizability of the related tax benefits.
(l) For 2022, reflects the gain on sale of a previously owned frozen fruit processing facility, net of exit costs, which is
recorded in loss from discontinued operations.
(m) For 2022, reflects exit costs related to a former fruit ingredient processing facility, which are recorded in other expense.
We believe that investors understanding of our financial performance is enhanced by disclosing the specific items that we
exclude to compute adjusted earnings (loss). However, adjusted earnings (loss) is not, and should not be viewed as, a
substitute for net earnings (loss) prepared under U.S. GAAP. Adjusted earnings (loss) is presented solely to allow investors
to more fully understand how we assess our financial performance.
(3) We use a measure of adjusted EBITDA 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 as net earnings (loss)
before interest, income taxes, depreciation, amortization, and stock-based compensation, and excluding other unusual
items as identified in the determination of adjusted earnings (loss) (refer above to footnote (2)). The following table
presents a reconciliation of adjusted EBITDA from net earnings (loss), which we consider to be the most directly
comparable U.S. GAAP financial measure. In addition, as described above in footnote (2), we have prepared this table in
SUNOPTA INC.
26
December 30, 2023 Form 10-K
columnar format to present the effects of discontinued operations on our consolidated results for the periods presented. We
believe this presentation assists investors in assessing the financial performance of our continuing operations.
For the year ended
December 30, 2023
Net loss
Income tax expense (benefit)
Interest expense, net
Depreciation and amortization
Stock-based compensation
Adjusted for:
Loss on divestiture of discontinued operations(a)
Start-up costs(b)
Frozen fruit inventory reserves(c)
Exit from frozen fruit processing facility(d)
Product withdrawal and recall costs(e)
Business development costs(f)
Severance costs(h)
Other(i)
Adjusted EBITDA
For the year ended
December 31, 2022
Net earnings (loss)
Income tax expense (benefit)
Interest expense, net
Depreciation and amortization
Stock-based compensation
Adjusted for:
Loss on divestiture of discontinued operations(a)
Start-up costs(b)
Sale of frozen fruit processing facility(l)
Business development costs(f)
Exit from fruit ingredient processing facility(m)
Other(i)
Adjusted EBITDA
(a)-(m) Refer to footnote (2) above.
Continuing
Operations
$
Discontinued
Operations
$
Consolidated
$
(21,910)
3,269
26,909
31,039
11,778
-
20,249
-
-
3,440
2,390
897
471
78,532
(153,108)
(167)
554
8,886
-
119,821
-
12,900
10,014
2,500
-
1,016
1,136
3,552
(175,018)
3,102
27,463
39,925
11,778
119,821
20,249
12,900
10,014
5,940
2,390
1,913
1,607
82,084
Continuing
Operations
$
Discontinued
Operations
$
Consolidated
$
3,881
896
13,156
23,047
13,830
-
6,028
-
1,170
577
1,074
63,659
(8,722)
(16,154)
1,578
14,626
-
31,468
-
(2,544)
-
-
(202)
20,050
(4,841)
(15,258)
14,734
37,673
13,830
31,468
6,028
(2,544)
1,170
577
872
83,709
Although we use adjusted EBITDA 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 does not reflect interest expense, or the cash requirements necessary to service interest
payments on our indebtedness;
adjusted EBITDA does not include the payment or recovery of income taxes, which is a necessary element of our
operations;
SUNOPTA INC.
27
December 30, 2023 Form 10-K
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 does not reflect any cash requirements for such
replacements; and
adjusted EBITDA 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 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
in isolation, and specifically by using other U.S. GAAP and non-GAAP measures, such as revenues, gross profit, operating
income, net earnings/loss, and adjusted earnings/loss to measure our operating performance. Adjusted EBITDA 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 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 investors
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 and other unusual items. 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.
Revenues for the year ended December 30, 2023 increased by 6.6% to $630.3 million from $591.4 million for the year ended
December 31, 2022. The change in revenues from 2022 to 2023 was due to the following:
2022 revenues
Price
Volume/Mix
2023 revenues
$
591,395
17,841
21,061
630,297
%
3.0%
3.6%
6.6%
For the year ended December 30, 2023, the 6.6% increase in revenues reflected a 3.6% increase in pricing mainly reflecting
the wrap-around benefit of pricing actions taken with customers in 2022 to offset inflationary cost increases, together with a
favorable volume/mix impact of 3.0%. The favorable volume/mix impact reflected sales volume growth for plant-based milks
and creamers (oat, coconut and soy flavors), 330-milliliter protein shakes, and teas, together with higher sales volumes for fruit
snacks and smoothie bowls. These factors were partially offset by lower external ingredient sales due to a customer transferring
part of its business to a second-source supplier and increased internal demand for oat base, together with softer demand for
almond and rice milks, and lower broth volumes.
Gross profit decreased $11.1 million, or 11.1%, to $88.6 million for the year ended December 30, 2023, compared with $99.7
million for the year ended December 31, 2022. Gross margin for the year ended December 30, 2023 was 14.1% compared to
16.9% for the year ended December 31, 2022, a decrease of 280 basis points.
For the year ended December 30, 2023, we incurred start-up costs included in cost of goods sold of $18.7 million (3.0% gross
margin impact) related to our new plant in Midlothian, Texas, and new extrusion and high-speed packaging lines at our fruit
snacks facility in Omak, Washington, compared with $5.8 million (1.0% gross margin impact) of start-up costs incurred in
2022. Additionally, in 2023, we incurred incremental costs, net of expected recoveries, of $3.4 million (0.5% gross margin
impact) related to the withdrawal of specific batches of aseptically-packaged product due to a faulty seal caused by an
equipment misconfiguration by a third-party service provider. Excluding the impact of these costs, adjusted gross margin for
the year ended December 30, 2023 was 17.6% compared to 17.8% for the year ended December 31, 2022, a decrease of 20
basis points. See footnote (1) to the Consolidated Results of Operations for Fiscal Years 2023 and 2022 table for a
reconciliation of adjusted gross margin from gross margin calculated in accordance with U.S. GAAP.
The 20-basis point decrease in adjusted gross margin reflected the impact of incremental depreciation of new production
equipment for capital expansion projects ($8.5 million or 1.3% gross margin impact) and higher manufacturing costs, largely
offset by the wrap-around benefit of pricing actions taken in 2022 to recover input cost inflation, together with a favorable mix
SUNOPTA INC.
28
December 30, 2023 Form 10-K
shift in our ingredient operations, with increased internal use of oat base to support our beverage business and lower external
sales.
Operating income decreased $9.6 million to $8.3 million for the year ended December 30, 2023, compared with $17.9 million
for the year ended December 31, 2022. The decrease in operating income reflected lower gross profit, as described above,
together with higher business development and employee severance costs in connection with the divestiture of Frozen Fruit
and related consolidation of our continuing operations, partially offset by lower employee incentive compensation accruals and
variable stock-based compensation expense based on performance.
(Further details on the changes in revenue, gross profit and operating income are provided in the rollforward tables below.)
Net interest expense increased by $13.7 million to $26.9 million for the year ended December 30, 2023, compared with $13.2
million for the year ended December 31, 2022, resulting from an increase in average outstanding debt to finance capital
expansion projects, together with the impact of higher interest rates. Additionally, interest expense, net, includes a loss on the
extinguishment of debt of $1.6 million recognized in connection with the refinancing of our credit agreement in December
2023. Interest expense capitalized as part of the construction cost of property, plant and equipment was $0.3 million and $1.2
million in 2023 and 2022, respectively.
For the year ended December 30, 2023, we recognized income tax expense of $3.3 million on a pre-tax loss of $18.6 million,
reflecting the recognition of a full valuation allowance against U.S. deferred tax assets 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. For the year ended
December 31, 2022, we recognized income tax expense of $0.9 million on pre-tax earnings of $4.8 million.
Loss from continuing operations for the year ended December 30, 2023 was $21.9 million, compared with earnings of $3.9
million for the year ended December 31, 2022. Diluted loss per share from continuing operations attributable to common
shareholders (after dividends and accretion on preferred stock) was $0.21 for the year ended December 30, 2023, compared
with a diluted earnings per share of $0.01 for the year ended December 31, 2022.
We recognized a loss from discontinued operations of $153.1 million (diluted loss per share of $1.34) for the year ended
December 30, 2023, compared with a loss of $8.7 million (diluted loss per share of $0.08) for the year ended December 31,
2022. The loss from discontinued operations reflected a pre-tax loss on the divestiture of Frozen Fruit of $119.8 million in
2023, compared with a pre-tax loss on the divestiture of Sunflower of $23.2 million in 2022, together with an $8.2 million loss
recognized in 2022 on the settlement of the purchase price allocation related to the 2020 divestiture of our global ingredients
business, Tradin Organic. Before the losses on divestitures, the loss from discontinued operations was $33.5 million in 2023,
compared with earnings of $6.6 million in 2022, which mainly reflected a year-over-year decrease in the gross profit of Frozen
Fruit prior to the divestiture due to lower sales and production volumes as a result of softer retail consumption trends and lost
foodservice distribution. Additionally, in connection with the divestiture we recognized frozen fruit inventory reserves of $12.8
million and exit costs of $10.0 million related to the former Oxnard, California, facility of Frozen Fruit.
We realized a loss attributable to common shareholders of $177.0 million (diluted loss per share of $1.55) for the year ended
December 30, 2023, compared with a loss attributable to common shareholders of $8.0 million (diluted loss per share of $0.07)
for the year ended December 31, 2022. Loss attributable to common shareholders included dividends and accretion on our
Series B-1 preferred stock of $2.0 million and $3.1 million in 2023 and 2022, respectively.
On a consolidated basis, adjusted earnings for the year ended December 30, 2023 was $3.4 million, or $0.03 earnings per
diluted share, compared with adjusted earnings of $9.0 million, or $0.08 earnings per diluted share, for the year ended December
31, 2022. For the year ended December 30, 2023, adjusted earnings from continuing operations were $9.1 million, or $0.08
earnings per diluted share, compared with adjusted earnings of $7.3 million, or $0.07 earnings per diluted share, for the year
ended December 31, 2022.
On a consolidated basis, adjusted EBITDA was $82.1 million for the year ended December 30, 2023, compared with $83.7
million for the year ended December 31, 2022. Adjusted EBITDA from continuing operations increased $14.8 million, or
23.4%, to $78.5 million for the year ended December 30, 2023, compared with $63.7 million for the year ended December 31,
2022.
Adjusted earnings (loss) and adjusted EBITDA are non-GAAP financial measures. See footnotes (2) and (3) to the
Consolidated Results of Operations for Fiscal Years 2023 and 2022 table for a reconciliation of adjusted earnings (loss) and
adjusted EBITDA from net earnings (loss), which we consider to be the most directly comparable U.S. GAAP financial
measure.
SUNOPTA INC.
29
December 30, 2023 Form 10-K
Rollforward of Revenue, Gross Profit and Operating Income
For the year ended
Revenues
Gross profit
Gross margin
Operating income
Operating margin
Revenues
December 30,
2023
December 31,
2022
Change % Change
$
$
630,297 $
88,617
14.1%
8,268 $
1.3%
591,395 $
99,730
16.9%
17,933 $
3.0%
38,902
(11,113)
(9,665)
6.6%
-11.1%
-2.8%
-53.9%
-1.7%
The table below explains the $38.9 million increase in revenues from $591.4 million for the year ended December 31, 2022 to
$630.3 million for the year ended December 30, 2023:
Revenues for the year ended December 31, 2022
Sales volume growth for plant-based milks and creamers (oat, coconut and soy
flavors), 330-milliliter protein shakes, and teas, together with the wrap-around benefit
of pricing actions taken in 2022 to offset input cost inflation, partially offset by softer
demand for almond and rice milks, together with lower broth volumes
Higher sales volumes for fruit snacks and smoothie bowls
Lower external ingredient sales due to a customer transferring part of its business to a
second-source supplier and increased internal demand for oat base
Revenues for the year ended December 30, 2023
Gross Profit
$591,395
48,347
18,889
(28,334)
$630,297
The table below explains the $11.1 million decrease in gross profit from $99.7 million for the year ended December 31, 2022
to $88.6 million for the year ended December 30, 2023:
Gross profit for the year ended December 31, 2022
Increase in start-up costs related to capital expansion projects
Incremental depreciation related to capital expansion projects
Incremental costs, net of expected recoveries, related to the withdrawal of specific
batches of aseptically-packaged product due to a faulty seal caused by an equipment
misconfiguration by a third-party service provider
Higher sales pricing and volume growth, together with increased internal use of oat
base to support our beverage business, partially offset by higher manufacturing costs
Gross profit for the year ended December 30, 2023
$99,730
(12,968)
(8,494)
(3,430)
13,779
$88,617
SUNOPTA INC.
30
December 30, 2023 Form 10-K
Operating Income
The table below explains the $9.6 million decrease in operating income from $17.9 million for the year ended December 31,
2022 to $8.3 million for the year ended December 30, 2023:
Operating income for the year ended December 31, 2022
Decrease in gross profit, as explained above
Higher business development and employee severance costs in connection with the
divestiture of Frozen Fruit and related consolidation of our continuing operations,
together with a $0.4 million loss on a foreign exchange hedge in connection with
the divestiture of Frozen Fruit, partially offset by lower employee incentive
compensation accruals based on performance, together with lower reserves for legal
settlements and losses on asset disposals
Lower variable stock-based compensation expense based on performance, together
with increased forfeitures due to employee turnover
Operating income for the year ended December 30, 2023
Consolidated Results of Operations for Fiscal Years 2022 and 2021
$17,933
($11,113)
(603)
2,051
$8,268
For the year ended
Revenues
Cost of goods sold
Gross profit
Gross margin(1)
December 31,
2022
$
January 1,
2022
$
Change
$
Change
%
591,395
491,665
99,730
496,455
415,311
81,144
94,940
76,354
18,586
16.9%
16.3%
Operating expenses
Selling, general and administrative expenses
Intangible asset amortization
Other expense, net
Foreign exchange loss (gain)
Total operating expenses
Operating income
Interest expense, net
Earnings from continuing operations before income taxes
Income tax expense (benefit)
Earnings from continuing operations
Loss from discontinued operations
Net loss(2),(3)
Dividends and accretion on preferred stock
Loss attributable to common shareholders(4)
78,469
1,784
1,651
(107)
81,797
17,933
13,156
4,777
896
3,881
(8,722)
(4,841)
(3,109)
(7,950)
64,778
1,286
6,745
94
72,903
8,241
7,552
689
(4,854)
5,543
(6,715)
(1,172)
(4,197)
13,691
498
(5,094)
(201)
8,894
9,692
5,604
4,088
5,750
(1,662)
(2,007)
(3,669)
1,088
(5,369)
(2,581)
-48.1%
* Percentage not meaningful due to figures being positive and negative.
(1) The following table presents a reconciliation of adjusted gross margin from reported gross margin calculated in accordance
with U.S. GAAP (refer to footnote (1) to the Consolidated Results of Operations for Fiscal Years 2023 and 2022 table
regarding the use of this non-GAAP measure).
SUNOPTA INC.
31
December 30, 2023 Form 10-K
19.1%
18.4%
22.9%
0.6%
21.1%
38.7%
-75.5%
*
12.2%
117.6%
74.2%
593.3%
*
-30.0%
-29.9%
-313.1%
25.9%
For the year ended
Reported gross margin
Start-up costs(a)
Adjusted gross margin
Note: percentages may not add due to rounding.
December 31,
2022
16.9%
1.0%
17.8%
January 1,
2022
16.3%
0.1%
16.5%
(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 2022,
start-up costs included in cost of goods sold related to the hiring and training of new employees for our new plant-
based beverage facility in Midlothian, Texas, together with the integration of the acquired Dream and West Life
brands. For 2021, these costs mainly related to expansion projects within our plant-based beverage operations, as well
as the introduction of fruit smoothie bowls.
(2) The following table presents a reconciliation of adjusted earnings (loss) from net earnings (loss), which we consider to be
the most directly comparable U.S. GAAP financial measure (refer to footnote (2) to the Consolidated Results of
Operations for Fiscal Years 2023 and 2022 table regarding the use of this non-GAAP measure).
For the year ended
December 31, 2022
Net earnings (loss)
Dividends and accretion on preferred stock
Earnings (loss) attributable to common shareholders
Adjusted for:
Loss on divestiture of discontinued operations(a)
Start-up costs(b)
Sale of frozen fruit processing facility(c)
Business development costs(d)
Exit from fruit ingredient processing facility(e)
Other(f)
Net income tax on adjusting items(g)
Adjusted earnings
Continuing
Operations
Per
Share
$
$
Discontinued
Operations
Per
Share
$
$
Consolidated
Per
Share
$
$
3,881
(3,109)
772
-
6,028
-
1,170
577
1,074
(2,326)
7,295
0.01
0.07
(8,722)
-
(8,722)
31,468
-
(2,544)
-
-
(202)
(18,303)
1,697
(0.08)
0.02
(4,841)
(3,109)
(7,950)
31,468
6,028
(2,544)
1,170
577
872
(20,629)
8,992
(0.07)
0.08
SUNOPTA INC.
32
December 30, 2023 Form 10-K
For the year ended
January 1, 2022
Net earnings (loss)
Dividends and accretion on preferred stock
Earnings (loss) attributable to common shareholders
Adjusted for:
Business development costs(d)
Exit from fruit ingredient processing facility(e)
Exit from frozen fruit processing facility(h)
Facility closure costs(i)
Start-up costs(b)
Workforce reduction charges(j)
Other(f)
Net income tax on adjusting items(g)
Adjusted earnings (loss)
Continuing
Operations
Per
Share
$
$
Discontinued
Operations
Per
Share
$
$
Consolidated
Per
Share
$
$
5,543
(4,197)
1,346
6,209
5,504
-
1,063
745
-
47
(5,032)
9,882
0.01
0.09
(6,715)
-
(6,715)
-
-
1,432
-
-
499
214
(795)
(5,365)
(0.06)
(0.05)
(1,172)
(4,197)
(5,369)
6,209
5,504
1,432
1,063
745
499
261
(5,827)
4,517
(0.05)
0.04
(a) For 2022, reflects the pre-tax loss on the divestiture of Sunflower of $23.2 million, together with a loss of $8.2 million
on the settlement of the purchase price allocation related to the 2020 divestiture of our global ingredients business,
Tradin Organic, which are recorded in loss from discontinued operations.
(b) For 2022, start-up costs mainly related to the hiring and training of new employees for the Midlothian facility, and the
integration of the Dream and West Life brands, which are recorded in cost of goods sold ($5.7 million) and SG&A
expenses ($0.3 million). For 2021, start-up costs mainly related to expansion projects within our plant-based beverage
operations, as well as the introduction of fruit smoothie bowls, which are recorded in cost of goods sold.
(c) For 2022, reflects the gain on sale in August 2022 of a previously owned frozen fruit processing facility, net of exit
costs, which is recorded in loss from discontinued operations.
(d) For 2022, business development costs related to the divestitures of Frozen Fruit and Sunflower, together with our
inaugural Investor Day held in June 2022, which are recorded in SG&A expenses. For 2021, these costs are mainly
related to the integration of the Dream and West Life brands and project development activities related to our new
plant in Midlothian, Texas, which are recorded in cost of goods sold ($0.6 million) and SG&A expenses ($4.9 million),
together with professional fees incurred in connection with post-closing matters related to the 2020 divestiture of our
global ingredients business, Tradin Organic, which are recorded in other expense ($0.7 million).
(e) Reflects exit costs related to a former fruit ingredient processing facility. For 2022, these costs are recorded in other
expense, and, for 2021, these costs are recorded in cost of goods sold ($0.8 million) and other expense ($4.9 million).
(f) For 2022 and 2021, other includes reserves for legal settlements and gains and loss on the disposal of assets, which
are recorded in other income/expense and loss from discontinued operations.
(g) 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. In addition, for 2022, includes
$12.9 million of tax benefits resulting from the settlement of the purchase price allocation related to the divestiture of
Tradin Organic.
(h) For 2021, reflects costs to complete the exit from a former frozen fruit processing facility, which are recorded in loss
from discontinued operations.
(i) For 2021, facility closure costs mainly related to the relocation of our executive office and innovation center into Eden
Prairie, Minnesota, and the vacating of our former leased facility, which are recorded in other expense.
SUNOPTA INC.
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December 30, 2023 Form 10-K
(j) For 2021, represents employee termination costs related to workforce reduction actions in Frozen Fruit, which are
recorded in loss from discontinued operations.
(3) The following table presents a reconciliation of adjusted EBITDA from net earnings (loss), which we consider to be the
most directly comparable U.S. GAAP financial measure (refer to footnote (3) to the Consolidated Results of Operations
for Fiscal Years 2023 and 2022 table regarding the use of this non-GAAP measure).
For the year ended
December 31, 2022
Net earnings (loss)
Income tax expense (benefit)
Interest expense, net
Depreciation and amortization
Stock-based compensation
Adjusted for:
Loss on divestiture of discontinued operations(a)
Sale of frozen fruit processing facility(b)
Start-up costs(c)
Business development costs(d)
Exit from fruit ingredient processing facility(e)
Other(f)
Adjusted EBITDA
For the year ended
January 1, 2022
Net earnings (loss)
Income tax benefit
Interest expense, net
Depreciation and amortization
Stock-based compensation
Adjusted for:
Business development costs(d)
Exit from fruit ingredient processing facility(e)
Exit from frozen fruit processing facility(h)
Facility closure costs(i)
Start-up costs(c)
Workforce reduction charges(j)
Other(f)
Adjusted EBITDA
(a)-(j) Refer to footnote (2) above.
Continuing
Operations
$
Discontinued
Operations
$
Consolidated
$
3,881
896
13,156
23,047
13,830
-
-
6,028
1,170
577
1,074
63,659
(8,722)
(16,154)
1,578
14,626
-
31,468
(2,544)
-
-
-
(202)
20,050
(4,841)
(15,258)
14,734
37,673
13,830
31,468
(2,544)
6,028
1,170
577
872
83,709
Continuing
Operations
$
Discontinued
Operations
$
Consolidated
$
5,543
(4,854)
7,552
18,627
9,100
6,209
5,504
-
1,063
745
-
47
49,536
(6,715)
(1,574)
1,217
16,014
-
-
-
1,432
-
-
499
214
11,087
(1,172)
(6,428)
8,769
34,641
9,100
6,209
5,504
1,432
1,063
745
499
261
60,623
(4) Refer to footnote (4) to the Consolidated Results of Operations for Fiscal Years 2023 and 2022 table regarding the use
of certain other non-GAAP measures in the discussion of our results of operations below.
SUNOPTA INC.
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December 30, 2023 Form 10-K
Revenues for the year ended December 31, 2022 increased by 19.1% to $591.4 million from $496.5 million for the year ended
January 1, 2022. The change in revenues from 2021 to 2022 was due to the following:
2021 revenues
Price
Volume/Mix
Acquisition of Dream and West Life brands
Rationalization of fruit-based ingredients
2022 revenues
Note: percentages may not add due to rounding.
$
496,455
52,403
64,855
3,735
(26,053)
591,395
%
10.6%
13.1%
0.8%
-5.2%
19.1%
For the year ended December 31, 2022, the 19.1% increase in revenues reflected a 10.6% increase in pricing, a favorable
volume/mix impact of 13.1%, and 0.8% of incremental revenue in the first quarter of 2022 related to the acquisition of the
Dream and West Life brands in April 2021, partially offset by the impact of the rationalization of lower-margin fruit-based
ingredients in July 2021. The increase in pricing was driven by pricing actions taken with customers to offset inflationary cost
increases, while volume/mix was favorable mainly due to growth from our oat-based product offerings, almond beverages, and
teas, together with strong demand for fruit snacks and the introduction of smoothie bowls, partially offset by lower broth
demand.
Gross profit increased $18.6 million, or 22.9%, to $99.7 million for the year ended December 31, 2022, compared with $81.1
million for the year ended January 1, 2022. Gross margin for the year ended December 31, 2022 was 16.9% compared to 16.3%
for the year ended January 1, 2022, an increase of 60 basis points.
For the year ended December 31, 2022, we incurred start-up costs included in cost of goods sold of $5.8 million (1.0% gross
margin impact) mainly related to our new plant in Midlothian, Texas, and integration of the acquired Dream and West Life
brands, compared with $0.7 million (0.1% gross margin impact) of start-up costs incurred for the year ended January 1, 2022.
Excluding the impact of these costs, adjusted gross margin for the year ended December 31, 2022 was 17.8% compared to
16.5% for the year ended January 1, 2022, an increase of 130 basis points. See footnote (1) to the Consolidated Results of
Operations for Fiscal Years 2022 and 2021 table for a reconciliation of adjusted gross margin from gross margin calculated in
accordance with U.S. GAAP.
The 130-basis point increase in adjusted gross margin reflected the benefit of the rationalization of fruit-based ingredients
beginning in the second half of 2021, including the closure of our fruit ingredient processing facility, together with higher
production volumes and plant utilization within our plant-based beverage and fruit snack operations. These factors were
partially offset by the dilutive effect of pass-through pricing to recover cost inflation on raw materials and packaging, together
with the impacts of higher labor and utility costs, increased inventory reserves, and higher depreciation expense.
Operating income increased $9.7 million to $17.9 million for the year ended December 31, 2022, compared with $8.2 million
for the year ended January 1, 2022. The increase in operating income reflected higher gross profit, as described above, together
with lower facility closure and employee severance costs related to the exit from our former fruit ingredient processing facility
in 2021. These factors were partially offset by higher employee compensation costs, including incremental 2022 incentive plan
accruals based on performance, and a one-time bonus of $1.6 million recognized in the first quarter of 2022 to reward employees
for improved performance, partially offset by lower business development costs.
(Further details on the changes in revenue, gross profit and operating income are provided in the rollforward tables below.)
Net interest expense increased by $5.6 million to $13.2 million for the year ended December 31, 2022, compared with $7.6
million for the year ended January 1, 2022, reflecting an increase in outstanding debt to finance capital expansion projects and
fund working capital requirements, together with the impact of higher interest rates. Interest expense capitalized as part of the
construction cost of property, plant and equipment was $1.2 million in 2022 and immaterial 2021.
We recognized income tax expense of $0.9 million on pre-tax earnings from continuing operations of $4.8 million for the year
ended December 31, 2022, compared with an income tax benefit of $4.9 million on pre-tax earnings from continuing operations
of $0.7 million for the year ended January 1, 2022, which reflected the recognition of excess tax benefits on the vesting of
stock-based awards.
SUNOPTA INC.
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December 30, 2023 Form 10-K
Earnings from continuing operations for the year ended December 31, 2022 were $3.9 million, compared with $5.5 million for
the year ended January 1, 2022. Diluted earnings per share from continuing operations attributable to common shareholders
(after dividends and accretion on preferred stock) were $0.01 for each of the years ended December 31, 2022 and January 1,
2022.
We recognized a loss from discontinued operations of $8.7 million (diluted loss per share of $0.08) for the year ended December
31, 2022, compared with a loss of $6.7 million (diluted loss per share of $0.06) for the year ended January 1, 2022. The loss
from discontinued operations for the year ended December 31, 2022 included a pre-tax loss on the divestiture of Sunflower of
$23.2 million, together with an $8.2 million loss on the settlement of the purchase price allocation related to the 2020 divestiture
of our global ingredients business, Tradin Organic. Before the losses on divestitures, earnings from discontinued operations
were $6.6 million in 2022, compared with a loss of $8.3 million in 2021, which reflected an improved margin profile for Frozen
Fruit in 2022 from portfolio rationalizations, a reduced manufacturing cost base, and higher pricing for retail customers.
We realized a loss attributable to common shareholders of $8.0 million (diluted loss per share of $0.07) for the year ended
December 31, 2022, compared with a loss attributable to common shareholders of $5.4 million (diluted loss per share of $0.05)
for the year ended January 1, 2022. The loss attributable to common shareholders included dividends and accretion on preferred
stock of $3.1 million and $4.2 million in 2022 and 2021, respectively. The decline in preferred stock dividends and accretion
reflected the exchange of all of the shares of Series A preferred stock for shares of our common stock in February 2021.
Outstanding preferred stock since February 2021 consists entirely of our Series B-1 preferred stock.
On a consolidated basis, adjusted earnings for the year ended December 31, 2022 were $9.0 million, or $0.08 earnings per
diluted share, compared with adjusted earnings of $4.5 million, or $0.04 earnings per diluted share, for the year ended January
1, 2022. For the year ended December 31, 2022, adjusted earnings from continuing operations were $7.3 million, or $0.07
earnings per diluted share, compared with adjusted earnings of $9.9 million, or $0.09 earnings per diluted share, for the year
ended January 1, 2022.
On a consolidated basis, adjusted EBITDA increased $23.1 million, or 38.1%, for the year ended December 31, 2022 to $83.7
million, compared with $60.6 million for the year ended January 1, 2022. Adjusted EBITDA from continuing operations
increased $14.1 million, or 28.5%, to $63.7 million for the year ended December 31, 2022, compared with $49.5 million for
the year ended January 1, 2022.
Adjusted earnings (loss) and adjusted EBITDA are non-GAAP financial measures. See footnotes (2) and (3) to the
Consolidated Results of Operations for Fiscal Years 2022 and 2021 table for a reconciliation of adjusted earnings (loss) and
adjusted EBITDA from net earnings (loss), which we consider to be the most directly comparable U.S. GAAP financial
measure.
Rollforward of Revenue, Gross Profit and Operating Income
For the year ended
Revenues
Gross profit
Gross margin
Operating income
Operating margin
December 31,
2022
January 1,
2022
Change % Change
$
$
591,395 $
99,730
16.9%
17,933 $
3.0%
496,455 $
81,144
16.3%
8,241 $
1.7%
94,940
18,586
9,692
19.1%
22.9%
0.6%
117.6%
1.3%
SUNOPTA INC.
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December 30, 2023 Form 10-K
Revenues
The table below explains the $94.9 million increase in revenues from $496.5 million for the year ended January 1, 2022 to
$591.4 million for the year ended December 31, 2022:
Revenues for the year ended January 1, 2022
Benefit of pricing actions taken to offset input cost inflation, together with sales
volume growth for oat-based product offerings, almond beverages, and teas, partially
offset by lower broth demand
Higher sales volumes and pricing for fruit snacks and incremental revenue from the
introduction of smoothie bowls
Incremental revenue in the first quarter of 2022 related to the acquisition of the Dream
and West Life brands in April 2021
Impact of the rationalization of fruit-based ingredients in 2021
Revenues for the year ended December 31, 2022
Gross Profit
$496,455
88,417
28,841
3,735
(26,053)
$591,395
The table below explains the $18.6 million increase in gross profit from $81.1 million for the year ended January 1, 2022 to
$99.7 million for the year ended December 31, 2022:
Gross profit for the year ended January 1, 2022
Higher volumes and pricing for plant-based beverages and ingredients, including the
incremental contribution in the first quarter of 2022 from the acquisition of the Dream
and West Life brands in April 2021, partially offset by higher manufacturing plant
spend due to inflationary pressures on wage costs and utility rates, together with higher
inventory reserves, and incremental depreciation of new production equipment for
capital expansion projects
Impact of the rationalization of fruit-based ingredients in 2021, including the closure
of our fruit ingredient processing facility
Higher sales volumes and pricing for fruit snacks, together with increased production
volumes and plant efficiencies in our fruit snack operations
Increase in start-up costs related to our new plant in Midlothian, Texas, together with
the integration of the Dream and West Life brands
Gross profit for the year ended December 31, 2022
$81,144
14,818
4,407
4,394
(5,033)
$99,730
SUNOPTA INC.
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December 30, 2023 Form 10-K
Operating Income
The table below explains the $9.7 million increase in operating income from $8.2 million for the year ended January 1, 2022
to $17.9 million for the year ended December 31, 2022:
Operating income for the year ended January 1, 2022
Increase in gross profit, as explained above
Decrease in facility closure and employee severance costs related to the exit from
our former fruit ingredients processing facility in 2021
Higher employee compensation costs, including incremental 2022 incentive plan
accruals based on improved performance, together with costs related to our
inaugural 2022 Investor Day, partially offset by lower business development costs
Higher variable stock-based compensation expense based on improved
performance
Operating income for the year ended December 31, 2022
Liquidity and Capital Resources
$8,241
18,586
5,094
(9,258)
(4,730)
$17,933
Utilizing the net cash proceeds from the divestiture of Frozen Fruit, we were able to reduce our debt by approximately $78
million in the fourth quarter of 2023. The divestiture of the commodity-based frozen fruit business also serves to significantly
reduce our working capital needs, particularly in the first half of each fiscal year due to crop inventory builds. As a result, on
December 8, 2023, we refinanced and extended our credit facilities with our existing syndicate of lenders to provide a structure
that aligns with our more capital efficient value-add business model and the significant capital investments we have made in
recent years.
The New Credit Agreement provides for a $180.0 million term loan credit facility (the New Term Loan Credit Facility) and
an $85.0 million revolving credit facility (the New Revolving Credit Facility) (collectively, the New Credit Facilities). We
used initial proceeds from the New Credit Facilities of $141.9 million to repay in full the amounts owing under our former
asset-based revolving and term loan credit facilities, and $56.0 million to repay and terminate certain finance lease obligations.
The New Credit Facilities have a term of five years and replace the former asset-based credit facilities. As at December 30,
2023, the $180 million New Term Loan Credit Facility was fully drawn and we had utilized $37.7 million of the $85 million
New Revolving Credit Facility, including $5.9 million in letters of credit. For more information on our New Credit Facilities,
including maturity dates, see note 10 to the consolidated financial statements included in Item 15 of this Form 10-K.
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. For the year ended December 30, 2023, we had principal borrowings of $102.0 million
under these facilities, of which $17.6 million principal amount remained outstanding as at December 30, 2023. With the
flexibility provided by our New Credit Facilities, our intention is to reduce our reliance on these facilities in 2024 and to settle
all remaining outstanding notes payable.
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.
As at December 30, 2023, we had approximately $86.3 million of purchase commitments related to inventories to be used in
our production processes over the next 12 months, which we intend to fund through operating cash flows, supplemented from
time to time with short-term borrowings under our New Revolving Credit Facility.
SUNOPTA INC.
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December 30, 2023 Form 10-K
We estimate additional capital expenditures in 2024 of approximately $15 million for other discretionary investments in growth
and productivity projects, and approximately $10 million to $15 million of non-discretionary maintenance projects. We also
anticipate the addition of approximately $25 million of finance lease right-of-use assets related to an expansion of our ingredient
extraction operations at our Modesto, California, facility. For 2024, our estimated capital expenditures directly related to
environmental projects are not expected to be material. We intend to fund our cash capital expenditures using operating cash
flows and the New Revolving Credit Facility.
We believe that our operating cash flows, including the selective use of customer SCF programs to improve collection terms,
together with our New Credit Facilities and access to committed 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. In addition, we may explore the sale of selected operations or assets from time to time to improve our
profitability, reduce our indebtedness, and/or improve our position to obtain additional financing.
Cash Flows
Summarized cash flow information for the years ended December 30, 2023, December 31, 2022 and January 1, 2022 is as
follows:
December 30,
2023
$
December 31,
2022
$
January 1,
2022
$
Change
2022 to
2023
$
2021 to
2022
$
Net cash flows provided by (used in):
Continuing operations:
Operating activities
Investing activities
Financing activities
Discontinued operations
Operating Activities of Continuing Operations
3,575
(46,519)
(48,337)
99,356
30,746
(120,957)
96,534
(5,871)
38,207
(77,390)
52,762
(13,603)
(27,171)
74,438
(144,871)
105,227
(7,461)
(43,567)
43,772
7,732
Cash provided by operating activities of continuing operations decreased $27.2 million from 2022 to 2023, which reflected the
impact of start-up costs related to our Midlothian, Texas, facility, higher cash interest expense on borrowings to finance capital
expenditures, and unrecovered product withdrawal and recall costs.
Cash provided by operating activities of continuing operations decreased $7.5 million from 2021 to 2022, which reflected an
increase in net working capital in 2022, due to the timing of payables and higher inventory levels to support the growth in our
fruit snacks operations, partially offset by improved operating performance in 2022.
Investing Activities of Continuing Operations
Cash used in investing activities of continuing operations decreased $74.4 million from 2022 to 2023, which reflected the
completion of certain major capital projects, including the construction of our new plant-based beverage facility in Midlothian,
Texas.
Cash used in investing activities of continuing operations increased $43.6 million from 2021 to 2022, reflecting the ramp-up
of construction activities at the Midlothian facility, together with the completion of our executive office and innovation center
in Eden Prairie, Minnesota in 2022. In addition, investing cash outflows in 2021 included $25.1 million paid to acquire the
Dream and West Life brand name intangible assets.
SUNOPTA INC.
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December 30, 2023 Form 10-K
Financing Activities of Continuing Operations
Cash used in financing activities of continuing operations increased $144.9 million from 2022 to 2023, which reflected the
repayment of approximately $78 million of debt following the divestiture of Frozen Fruit in 2023, together with reduced levels
of new borrowings in 2023 as major capital projects, including the Midlothian facility, were completed.
Cash provided by financing activities of continuing operations increased $43.8 million from 2021 to 2022, which mainly
reflected higher borrowings in 2022 to fund the ramp-up in construction activities related to major capital projects.
Cash Flows from Discontinued Operations
Net cash provided by discontinued operations increased $105.2 million from 2022 to 2023, which mainly reflected net cash
consideration of approximately $92 million received from the divestiture of Frozen Fruit in the fourth quarter of 2023, compared
with cash paid of $6.3 million in 2022 to settle the purchase price allocation and other post-closing matters in connection with
the 2020 divestiture of Tradin Organic.
Net cash used in discontinued operations decreased $7.7 million from 2021 to 2022, which reflected the $6.3 million settlement
of the Tradin Organic closing matters in 2022, compared with the payment of $13.4 million of transaction costs in 2021 related
to the Tradin Organic divestiture.
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. The use of estimates is pervasive throughout our financial statements. The
following are the accounting estimates which we believe to be most significant to our business.
Loss on Divestiture of Frozen Fruit
The estimated aggregate purchase price recognized in connection with the divestiture of Frozen Fruit is subject to post-closing
adjustments based on a determination of the final net working capital as of the closing date of the transaction on October 12,
2023. As at December 30, 2023, we recognized a $0.5 million post-closing adjustment based on our estimate of the final net
working capital allocation, which is recognized as part of the loss from discontinued operations in the consolidated statement
of operations for the year ended December 30, 2023. 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 Asset Purchase Agreement. A change in the aggregate purchase price
could have a material impact on our consolidated results of operations and financial condition.
Leases
Lease assets and liabilities are recognized and measured based on the present value of future lease payments over the lease
term. In measuring lease assets and liabilities, critical estimates and assumptions include the amount and timing of the future
lease payments based on the expected lease term, and the discount rate to apply to those future lease payments. We generally
use initial noncancelable lease term when determining the lease asset and liability. The discount rate used to determine the
present value of the future lease payments is the implicit rate in the lease if readily determinable. When that rate is not readily
determinable, we use our incremental borrowing rate, which we estimate using relevant interest rate yield curves and credit
spreads derived from available market data. See note 6 of the consolidated financial statements included in Item 15 of this
Form 10-K for disclosures related to leases, including weighted-average remaining lease terms and discount rates.
Long-Lived Assets
We evaluate long-lived assets, comprising property, plant and equipment, intangible assets and operating lease right-of-use
assets, for impairment if events or changes in circumstances indicate that the carrying amounts of these assets may not be
recoverable. Our evaluation is based on an assessment of potential indicators of impairment, such as an adverse change in the
business climate that could affect the value of an asset, the loss of a significant customer, current or forecasted operating or
cash flow losses that demonstrate continuing losses associated with the use of an asset, the introduction of a competing product
SUNOPTA INC.
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December 30, 2023 Form 10-K
that results in a significant loss of market share, and a current expectation that, more likely than not, a long-lived asset will be
disposed of before the end of its previously estimated useful life, such as a plan to exit a product line or business in the near
term.
Impairment exists when the carrying amount of a long-lived asset is not recoverable through undiscounted future cash flows
and its carrying value exceeds its estimated fair value. A discounted cash flow analysis is typically used to determine fair value
using estimates and assumptions that market participants would apply. Some of the estimates and assumptions inherent in a
discounted cash flow model include the amount and timing of the projected future cash flow to be generated from the use of
the long-lived asset and its eventual disposal, and the discount rate used to reflect the risks inherent in the future cash flows. A
change in any of these estimates and assumptions could produce a different fair value, which could have a material impact on
our results of operations. In addition, a long-lived assets expected useful life can increase estimation risk, as longer-lived assets
necessarily require longer-term cash flow forecasts. In connection with an impairment evaluation, we also reassess the
remaining useful life of an amortizable long-lived asset and modify it, as appropriate.
Based on our impairment assessment as of December 30, 2023, we did not identify any facts or circumstances that would
indicate that the carrying amounts of any of the long-lived assets related to our continuing operations were not recoverable.
Contingencies
We make estimates for payments that are contingent on the outcome of uncertain future events. These contingencies include
accrued but unpaid bonuses, tax-related matters, product recall-related claims and recoveries, and other claims or litigation. In
establishing our estimates, we consider historical experience with similar contingencies and the progress of each contingency,
as well as the recommendations of internal and external advisors and legal counsel. We re-evaluate all contingencies as
additional information becomes available; however, given the inherent uncertainties, the ultimate amount paid could differ
from our estimates.
Income Taxes
Our effective tax rate may differ from the statutory tax rates in the jurisdiction in which we operate and may vary from year to
year as a result of permanent differences, investment and other tax credits, the provision for income taxes at different rates in
foreign jurisdictions, enacted statutory tax rate increases or reductions in the year, changes due to foreign exchange, changes
in valuation allowance based on our recoverability assessments of deferred tax assets, and favorable or unfavorable resolution
of various tax examinations.
In making an estimate of our income tax liability, we first assess which items of income and expense are taxable in a particular
jurisdiction. This process involves a determination of the amount of taxes currently payable as well as the assessment of the
effect of temporary timing differences resulting from different treatment of items for accounting and tax purposes. These
differences in the timing of the recognition of income or the deductibility of expenses result in deferred income tax balances
that are recorded as assets or liabilities as the case may be on our balance sheet. We also estimate the amount of valuation
allowance to maintain relating to loss carry forwards and other balances that can be used to reduce future taxes payable. This
judgment is based on forecasted results in the jurisdiction and certain tax planning strategies and as a result actual results may
differ from forecasts. We assess the likelihood of the ultimate realization of these tax assets by looking at the relative size of
the tax assets in relation to the profitability of the businesses and the jurisdiction to which they can be applied, the number of
years based on managements estimate it will take to use the tax assets and any other special circumstances. If different
judgments had been used, our income tax liability could have been different from the amount recorded. In addition, the taxing
authorities of those jurisdictions upon audit may not agree with our assessment. Note 14 of the consolidated financial statements
included in Item 15 of this Form 10-K provides an analysis of the changes in the valuation allowance and the components of
our deferred tax assets.
While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could differ from
our accrued position. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be
recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements is provided in note 1 of the consolidated financial statements included
in Item 15 of this Form 10-K.
SUNOPTA INC.
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December 30, 2023 Form 10-K
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest rate risk
Variable and fixed rate borrowings carry different types of interest rate risk. Variable rate debt gives less predictability to
earnings and cash flows as interest rates change, while the fair value of fixed rate debt is affected by changes in interest rates.
As at December 30, 2023, we had approximately $212 million of variable rate debt, mainly comprised of our New Credit
Facilities, and approximately $53 million principal amount of fixed rate debt, comprised of finance lease obligations. A one
percent, or 100 basis-point, change in interest rates would have a pre-tax effect of approximately $2.1 million on our results of
operations and cash flows, based on current outstanding borrowings of variable rate debt, and the fair value of the fixed-rate
finance lease liabilities would increase or decrease by approximately $0.9 million.
Foreign currency risk
Following the divestiture of Frozen Fruit with its Mexican operations, our remaining operations, assets and customers are
principally located in the U.S. All of our U.S. subsidiaries use the U.S. dollar as their functional currency, and the U.S. dollar
is also our reporting currency. In addition, the functional and reporting currencies of our smaller Canadian operations are the
U.S. dollar. As at December 30, 2023, a 10% change in foreign exchange rates would not have a material impact on our
consolidated financial position, results of operations, or cash flows. In addition, U.S. and Canadian operations have limited
exposure to foreign currency transactions since sales and purchases are predominately made in U.S. dollars.
Price risk
Certain agricultural commodities and ingredients we use in the production of our products are exposed to market price risk,
including grains, nuts, sweeteners, and flavorings. In addition, other inputs, such as packaging materials, energy, fuel, storage,
and freight, are exposed to price fluctuations due to weather conditions, regulations, industry conditions, energy costs, fuel
prices, transportation and storage demands, or other factors that are beyond our control. In addition, as described above under
Recent Events, the impacts of global macroeconomic conditions have contributed to higher commodity inflation and input
costs over the past few years. We currently do not utilize derivative contracts to hedge our exposure to fluctuations in input
prices.
Changes in the prices of our products may lag changes in the costs to produce and ship our products due to contractual
restrictions in our revenue contracts with customers, or competitive pressures. If we are unable to increase our prices to offset
increasing costs, our gross margins, operating results, and cash flows could be materially affected.
Our ability to pass through higher input costs to our customers on a timely basis depends on how we go-to-market, that is
private label, co-manufacturing, or branded products. In our private label contracts, the timing of pass-through pricing
adjustments tends to lag impacts from cost inflation. As a result, with private label we have greater exposure to price risk,
including the impact of changing freight rates as these products are typically delivered to the customers. On the other hand, the
cost-plus pricing mechanisms built into most of our co-manufacturing arrangements generally result in our customers bearing
the majority of the raw material and packaging price risk. In addition, co-manufactured products are typically picked up by our
customers, so they bear the impact of changing freight rates. With our branded portfolio, we are exposed to price risks for input
costs, including raw materials, packaging, plant operating costs and freight, that we may not be able to fully recover through
price increases due to competitive factors, or be able to fully offset with compensating productivity gains.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements required by this item are set forth immediately following the signature page to this Form
10-K beginning on page F1 and are incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
SUNOPTA INC.
42
December 30, 2023 Form 10-K
Item 9A - 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
Commissions 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 its management to allow timely decisions regarding required disclosure.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial
Officer, 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 annual report. Based on this evaluation, our
Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective
as of December 30, 2023.
Managements Annual Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the
Companys financial reporting for external purposes in accordance with United States generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly,
even effective internal control over financial reporting can only provide reasonable assurance of achieving their control
objectives
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of the Companys annual or interim financial statements will not
be prevented or detected on a timely basis.
Management conducted an evaluation of the effectiveness of the internal control over financial reporting as of December 30,
2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in
Internal Control - Integrated Framework (2013). Based on the evaluation performed, management concluded that our internal
control over financial reporting was effective as of December 30, 2023 based on those criteria.
Our internal control over financial reporting as of December 30, 2023 has been audited by Ernst & Young LLP, Independent
Registered Public Accounting Firm, as stated in its report which contains an unqualified opinion on the effectiveness of our
internal control over financial reporting. This report appears herein.
Changes in Internal Control Over Financial Reporting
In the fourth quarter of 2022, management determined that we had a material weakness in our internal control over financial
reporting and disclosure controls and procedures related to the preparation and review of our consolidated income tax provision
and recognition of deferred tax assets in our financial statements for the year ended January 1, 2022. During fiscal 2023, we
improved our policies and procedures relating to enhancing our disclosure controls and procedures and internal controls related
to the accumulation and communication of information necessary to the accurate preparation of our consolidated income tax
provision and recognition of deferred tax assets, as well as strengthening our review controls over the reporting of income taxes
and our financial statements. During the fourth quarter of 2023, we successfully completed the testing necessary to conclude
that the remedial controls are operating effectively, and the material weakness has been remediated.
Except as noted above, there were no changes in our internal control over financial reporting during the quarter ended December
30, 2023 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
SUNOPTA INC.
43
December 30, 2023 Form 10-K
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of SunOpta Inc.
Opinion on Internal Control Over Financial Reporting
We have audited SunOpta Inc.s internal control over financial reporting as of December 30, 2023, based on criteria established
in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway (2013
framework) (the COSO criteria). In our opinion, SunOpta Inc. (the Company) maintained, in all material respects, effective
internal control over financial reporting as of December 30, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheets of the Company as of December 30, 2023 and December 31, 2022, the related
consolidated statements of operations, comprehensive loss, shareholders equity and cash flows for each of the three years in
the period ended December 30, 2023 and the related notes and our report dated February 28, 2024 expressed an unqualified
opinion thereon.
Basis for Opinion
The Companys management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Managements Annual
Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Companys internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A companys internal control over financial reporting is a process designed 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. A companys internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 28, 2024
SUNOPTA INC.
44
December 30, 2023 Form 10-K
Item 9B. Other Information
Insider Trading Arrangements
During the quarter ended December 30, 2023, none of our directors or officers adopted or terminated any Rule 10b5-1 trading
arrangement or non-Rule 10b5-1 trading arrangement.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required under this item is incorporated herein by reference to our Definitive Proxy Statement for the 2024
Annual Meeting of Shareholders to be filed with the Securities and Exchange Commission not later than 120 days after
December 30, 2023 (the 2024 Proxy Statement).
Item 11. Executive Compensation
The information required under this item is incorporated herein by reference from the 2024 Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Equity Compensation Plan Information
The following table provides information as at December 30, 2023, with respect to our common shares that may be issued
under the Companys stock incentive and employee share purchase plans:
Number of
Securities to be
Issued Upon
Exercise of
Outstanding
Options, Warrants,
and Rights
(a)
Weighted-Average
Exercise Price of
Outstanding
Options, Warrants
and Rights
(b)
Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column
(a))
(c)
4,545,342 (1)
-
960,061 (2)
5,505,403
$6.55 (3)
$3.36 (3)
$5.63 (3)
3,619,054
425,566
-
4,044,620
Plan Category
Equity compensation plans approved by
securities holders:
2013 Stock Incentive Plan
Employee Stock Purchase Plan
Equity compensation plans not approved by
securities holders
Total
(1) Represents common shares of the Company issuable in respect of 2,388,042 stock options, 599,724 restricted stock units
and 1,557,576 performance share units granted under the Companys 2013 Stock Incentive Plan.
(2) Represents common shares of the Company issuable in respect of a special one-time grant of stock options in connection
with the appointment of Joseph D. Ennen as Chief Executive Officer of the Company on April 1, 2019.
(3) Vested RSUs and PSUs entitle the holder to receive one common share per unit without payment of additional
consideration. Accordingly, these units are disregarded for purposes of computing the weighted-average exercise price.
SUNOPTA INC.
45
December 30, 2023 Form 10-K
The information related to the security ownership of certain beneficial owners and management required under this item is
incorporated herein by reference from the 2024 Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required under this item is incorporated herein by reference from the 2024 Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required under this item is incorporated herein by reference from the 2024 Proxy Statement.
Item 15. Exhibits and Financial Statement Schedules
The following documents are being filed as part of this annual report.
PART IV
1. Financial Statements. See Index to Consolidated Financial Statements set forth on page F1.
2. Financial Statement Schedules. All schedules for which provision is made in the applicable accounting requirements of
the Securities and Exchange Commission are not required or the required information has been included within the
financial statements or the notes thereto.
3. Exhibits. The list of exhibits in the Exhibit Index included in this annual report is incorporated herein by reference.
Item 16. Form 10-K Summary
The Company has chosen not to include an optional summary of the information required by this Form 10-K. For a reference
to information in the Form 10-K, investors should refer to the Table of Contents to this Form 10-K.
Exhibits
Description
EXHIBIT INDEX
2.1
3.1
3.2
3.3
3.4
Asset Purchase Agreement, dated as of October 12, 2023, among SunOpta Inc., Sunrise Growers
Mexico, S. de R.L. de C.V., SunOpta Mx, S.A. de C.V., Sunrise Growers, Inc., Nature's Touch Frozen
Fruits, LLC and Natures Touch Mexico, S. de R.L. de C.V. (incorporated by reference to Exhibit 2.1
the Companys Current Report on Form 8-K filed on October 17, 2023).
Amalgamation of Stake Technology Ltd. and 3754481 Canada Ltd. (formerly George F. Pettinos
(Canada) Limited) (incorporated by reference to Exhibit 3.1 to the Companys Annual Report on Form
10-KSB for the year ended December 31, 2000).
Certificate of Amendment, dated October 31, 2003, to change the Companys name from Stake
Technology Ltd. to SunOpta Inc. (incorporated by reference to Exhibit 3i(b) to the Companys Annual
Report on Form 10-K for the year ended December 31, 2003).
Articles of Amalgamation of SunOpta Inc. and Sunrich Valley Inc., Integrated Drying Systems Inc.,
Kettle Valley Dried Fruits Ltd., Pro Organics Marketing Inc., Pro Organics Marketing (East) Inc.,
4157648 Canada Inc. and 4198000 Canada Ltd., dated January 1, 2004 (incorporated by reference to
Exhibit 3i(c) to the Companys Annual Report on Form 10-K for the year ended December 31, 2003).
Articles of Amalgamation of SunOpta Inc. and 6319734 Canada Inc., 4157656 Canada Inc. and
Kofman-Barenholtz Foods Limited, dated January 1, 2005 (incorporated by reference to Exhibit 3i(d)
to the Companys Annual Report on Form 10-K for the year ended December 31, 2004).
SUNOPTA INC.
46
December 30, 2023 Form 10-K
Exhibits
Description
3.5
3.6
3.7
3.9
Articles of Amalgamation of SunOpta Inc. and 4307623 Canada Inc., dated January 1, 2006
(incorporated by reference to Exhibit 3i(e) to the Companys Annual Report on Form 10-K for the year
ended December 31, 2005).
Articles of Amalgamation of SunOpta Inc., 4208862 SunOpta Food Ingredients Canada Ltd., 4406150
Canada Inc. and 4406168 Canada Inc., dated January 1, 2007 (incorporated by reference to Exhibit 3i(f)
to the Companys Annual Report on Form 10-K for the year ended December 31, 2007).
Articles of Amalgamation of SunOpta Inc. and 4460596 Canada Inc., dated January 1, 2008
(incorporated by reference to Exhibit 3i(g) to the Companys Annual Report on Form 10-K for the year
ended December 31, 2007).
Certificate of Amendment, dated July 10, 2013, to authorize the directors to fix the number of directors
to be elected by the shareholders and to appoint one or more directors (incorporated by reference to
Exhibit 4.3 to the Companys Registration Statement on Form S-3 filed on July 3, 2014).
3.10
By-Law Number 15 of SunOpta Inc. (incorporated by reference to Exhibit 3.1 to the Companys Current
Report on Form 8-K filed on November 13, 2015).
4.1
4.2
4.3
4.4
4.5
4.6
4.7*
10.1
10.2
10.3
Form of Certificate representing Common Shares, no par value (incorporated by reference to Exhibit
4.9 to the Companys Registration Statement on Form S-8 filed on September 2, 2011).
Shareholder Rights Plan Agreement, dated November 10, 2015, between SunOpta Inc. and American
Stock Transfer & Trust Company, LLC, as rights agent (incorporated by reference to Exhibit 4.1 to the
Companys Current Report on Form 8-K filed on November 13, 2015).
Amended and Restated Shareholder Rights Plan Agreement, dated November 10, 2015, amended and
restated as of April 18, 2016, between SunOpta Inc. and American Stock Transfer & Trust Company,
LLC, as rights agent (incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form
8-K filed on April 20, 2016).
Second Amended and Restated Certificate of Incorporation of SunOpta Foods Inc., setting forth the
terms of its Series B Preferred Stock, which is exchangeable for Common Shares of SunOpta Inc.
(incorporated by reference to Exhibit 4.1 to the Companys Current Report on Form 8-K filed on April
28, 2020).
Articles of Amendment of SunOpta Inc., setting forth the terms of its Special Shares, Series 2
(incorporated by reference to Exhibit 4.2 to the Companys Current Report on Form 8-K filed on April
28, 2020).
Amended and Restated By-Law No. 14 of SunOpta Inc. dated May 24, 2023 (incorporated by reference
to Exhibit 4.1 to the Companys Quarterly Report on Form 10-Q filed on August 10, 2023).
Description of Registrants Securities Registered Under Section 12 of the Securities Exchange Act of
1934.
SunOpta Inc. 2002 Stock Option Plan, Amended and Restated May 2011 (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on May 24, 2011).
Stock Deferral Plan for Non-Employee Directors dated August 12, 2014 (incorporated by reference to
Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q filed on August 13, 2014).
Employment Agreement, effective March 29, 2019, between SunOpta Inc. and Joseph D. Ennen
(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on April
2, 2019).
SUNOPTA INC.
47
December 30, 2023 Form 10-K
Exhibits
Description
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
Subscription Agreement, dated April 15, 2020, between SunOpta Inc., SunOpta Foods Inc., Oaktree
Organics, L.P., Oaktree Huntington Investment Fund II, L.P., Engaged Capital, LLC, Engaged Capital
Flagship Master Fund, LP and Engaged Capital Co-Invest IV-A, LP. (incorporated by reference to
Exhibit 10.1 to the Companys Current Report on Form 8-K filed on April 20, 2020).
Exchange and Support Agreement, dated April 24, 2020, between SunOpta Inc., SunOpta Foods Inc.,
Engaged Capital Flagship Master Fund, LP, Engaged Capital, LLC and Engaged Capital Co-Invest IV-
A, LP, Oaktree Organics, L.P. and Oaktree Huntington Investment Fund II, L.P. and any person that
becomes a Holder of Preferred Stock, from time to time (incorporated by reference to Exhibit 10.2 to
the Companys Current Report on Form 8-K filed on April 28, 2020).
Voting Trust Agreement, dated April 24, 2020, between SunOpta Inc., SunOpta Foods Inc., the trustee
named therein, Oaktree Organics, L.P. and Oaktree Huntington Investment Fund II, L.P. and any other
Holder of Preferred Stock, from time to time (incorporated by reference to Exhibit 10.3 to the
Companys Current Report on Form 8-K filed on April 28, 2020).
Voting Trust Agreement, dated April 24, 2020, between SunOpta Inc., SunOpta Foods Inc., the trustee
named therein, Engaged Capital Flagship Master Fund, LP, Engaged Capital, LLC and Engaged Capital
Co-Invest IV-A, LP and any other Holder of Preferred Stock, from time to time (incorporated by
reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed on April 28, 2020).
Amended and Restated Investor Rights Agreement, dated April 24, 2020, between SunOpta Inc.,
SunOpta Foods Inc. and Oaktree Organics, L.P. and Oaktree Huntington Investment Fund II, L.P.
(incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form 8-K filed on April
28, 2020).
Form of Stock Option Award Agreement, dated May 5, 2022, between the Company and Joseph
Ennen (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed
on May 9, 2022.)
Form of Performance Share Unit Award Agreement, dated May 5, 2022, between the Company and
Joseph Ennen (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-
K filed on May 9, 2022.)
Amended 2013 Stock Incentive Plan (incorporated by reference to Exhibit A to the Company's
Definitive Proxy Statement on Schedule 14A filed on April 14, 2023).
Executive Employment Agreement made as of October 11, 2023 between Greg Gaba and SunOpta Inc.
(incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on
October 17, 2023).
Amendment No. 1 to Executive Employment Agreement made as of March 29, 2019 between Joe Ennen
and SunOpta Inc., dated as of December 5, 2023 (incorporated by reference to Exhibit 10.1 to the
Companys Current Report on Form 8-K filed on December 7, 2023).
Executive Employment Agreement made as of December 1, 2023 between Brian W. Kocher and
SunOpta Inc. (incorporated by reference to Exhibit 10.2 the Companys Current Report on Form 8-K
filed on December 7, 2023).
Form of Restricted Stock Unit Award Agreement, effective as of January 2, 2024, between Brian W.
Kocher and SunOpta Inc. (incorporated by reference to Exhibit 10.3 the Companys Current Report on
Form 8-K filed on December 7, 2023).
SUNOPTA INC.
48
December 30, 2023 Form 10-K
Exhibits
Description
10.16
10.17
10.18
10.19
Form of Stock Option Award Agreement, effective as of January 2, 2024, between Brian W. Kocher
and SunOpta Inc. (incorporated by reference to Exhibit 10.4 the Companys Current Report on Form 8-
K filed on December 7, 2023).
Form of Performance Share Unit Award Agreement, effective as of January 2, 2024, between Brian W.
Kocher and SunOpta Inc. (incorporated by reference to Exhibit 10.5 the Companys Current Report on
Form 8-K filed on December 7, 2023).
Credit Agreement, dated as of December 8, 2023, among SunOpta Inc., the other guarantors party
thereto, the lenders party thereto, Bank of America, N.A., as Administrative Agent, as an Issuing Bank,
as the Swingline Lender and as Collateral Agent (incorporated by reference to the Companys Current
Report on Form 8-K filed on December 14, 2023).
Amendment No. 1 to Executive Employment Agreement made as of April 10, 2017 between Chris
Whitehair and SunOpta Inc., dated as of February 13, 2024 (incorporated by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K filed on February 15, 2024).
10.20*
Employment Agreement, effective January 19, 2024, between SunOpta Inc. and Chad Hagen.
10.21*
SunOpta Inc. 2023 Short Term Incentive Plan.
10.22*
SunOpta Inc. 2023 Long Term Incentive Plan.
21*
23.1*
31.1*
31.2*
32*
97*
List of subsidiaries.
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
Certification by Brian Kocher, Chief Executive Officer, pursuant to Rule 13a 14(a) under the
Securities Exchange Act of 1934, as amended.
Certification by Greg Gaba, Chief Financial Officer, pursuant to Rule 13a 14(a) under the Securities
Exchange Act of 1934, as amended.
Certifications by Brian Kocher, Chief Executive Officer, and Greg Gaba, Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350.
SunOpta Inc. Clawback Policy
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
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+ Exhibits and schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. SunOpta will
furnish copies of the omitted exhibits and schedules to the Securities and Exchange Commission upon its request.
SUNOPTA INC.
49
December 30, 2023 Form 10-K
Indicates management contract or compensatory plan or arrangement.
* Filed herewith.
SUNOPTA INC.
50
December 30, 2023 Form 10-K
Pursuant to the requirements of Section 13 or 15(d) 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.
SIGNATURES
SUNOPTA INC.
/s/ Greg Gaba
Greg Gaba
Chief Financial Officer
Date: February 28, 2024
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
/s/ Brian Kocher
Brian Kocher
/s/ Greg Gaba
Greg Gaba
/s/ Dean Hollis
Dean Hollis
/s/ Albert Bolles
Albert Bolles
/s/ Rebecca Fisher
Rebecca Fisher
/s/ Katrina Houde
Katrina Houde
/s/ Leslie Starr
Leslie Starr
/s/ Diego Reynoso
Diego Reynoso
/s/ Mahes Wickramasinghe
Mahes Wickramasinghe
Title
Chief Executive Officer and Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date
February 28, 2024
February 28, 2024
Chair of the Board and Director
February 28, 2024
Director
Director
Director
Director
Director
Director
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
February 28, 2024
SUNOPTA INC.
51
December 30, 2023 Form 10-K
SunOpta Inc.
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Statements of Operations for the years ended December 30, 2023, December 31, 2022 and
January 1, 2022
Consolidated Statements of Comprehensive Loss for the years ended December 30, 2023, December 31,
2022 and January 1, 2022
Consolidated Balance Sheets as at December 30, 2023 and December 31, 2022
Consolidated Statements of Shareholders Equity as at and for the years ended December 30, 2023,
December 31, 2022 and January 1, 2022
Consolidated Statements of Cash Flows for the years ended December 30, 2023, December 31, 2022 and
January 1, 2022
Notes to Consolidated Financial Statements
Page
F2
F4
F5
F6
F7
F8
F9
SUNOPTA INC.
-F1-
December 30, 2023 Form 10-K
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of SunOpta Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of SunOpta Inc. (the Company) as of December 30, 2023 and
December 31, 2022, the related consolidated statements of operations, comprehensive loss, shareholders equity and cash flows
for each of the three years in the period ended December 30, 2023, and the related notes (collectively referred to as the
consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects,
the financial position of the Company at December 30, 2023 and December 31, 2022, and the results of its operations and its
cash flows for each of the three years in the period ended December 30, 2023 in conformity with U.S. generally accepted
accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Companys internal control over financial reporting as of December 30, 2023, based on criteria established in
Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission
(2013 framework), and our report dated February 28, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on
the Companys financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due
to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial
statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included
examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that
are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
SUNOPTA INC.
-F2-
December 30, 2023 Form 10-K
Revenue recognition under bill-and-hold arrangements
Description of the
Matter
As discussed in Note 1 to the consolidated financial statements, the Company enters into bill-and-hold
arrangements, whereby the Company produces and sells food and beverage products and control
transfers when the product is ready for physical transfer to the customer and the Company has a present
right to payment. Total revenues was $630.2 million for the year ended December 30, 2023, a portion
of which was for bill-and-hold arrangements.
We identified the evaluation of revenue recognized under bill-and-hold arrangements as a critical audit
matter because of the extent of additional audit effort required to test the incremental bill-and-hold
revenue recognition criteria. The incremental bill-and-hold revenue recognition criteria include the
evaluation of: 1) the reason for the bill and hold arrangement; 2) the identification of the product as
separately belonging to the customer; 3) the product being currently ready for physical transfer to the
customer; and 4) the Companys inability to use the product or direct it to another customer.
How We Addressed
the Matter in Our
Audit
We evaluated the design and tested the operating effectiveness of certain internal controls over the
Companys revenue recognition process, including controls related to the identification of bill-and-
hold revenue transactions and whether the criteria for revenue recognition have been met based on the
underlying agreements and transactions.
We examined the contracts with customers and evaluated the terms and conditions to determine
whether the reason for the bill-and-hold arrangement is substantive and whether certain revenue should
be recognized as bill-and-hold revenue. We further examined a sample of bill-and-hold revenue
transactions to assess the incremental bill-and-hold revenue recognition criteria. Specifically, we
inspected the certificate of analysis that evidences that product is ready for physical transfer and the
contract terms which evidence the Company has the right to present payment. To evaluate that the
Company does not have the ability to use the product or direct to another customer, we inspected
underlying documentation for the same sample of bill and hold transactions to determine legal title to
the product had transferred to the customer.
/s/ Ernst & Young LLP
We have served as the Companys auditor since 2021.
Minneapolis, Minnesota
February 28, 2024
SUNOPTA INC.
-F3-
December 30, 2023 Form 10-K
SunOpta Inc.
Consolidated Statements of Operations
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
Revenues (note 18)
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Intangible asset amortization (note 7)
Other expense, net
Foreign exchange loss (gain)
Operating income
Interest expense, net (note 10)
Earnings (loss) from continuing operations before income taxes
Income tax expense (benefit) (note 14)
Earnings (loss) from continuing operations
Loss from discontinued operations, net of tax (note 2)
Net loss
Dividends and accretion on preferred stock (note 11)
Loss attributable to common shareholders
Basic and diluted earnings (loss) per share (note 15)
Earnings (loss) from continuing operations
Loss from discontinued operations
Loss attributable to common shareholders
December 30,
2023
$
630,297
541,680
88,617
78,000
1,784
455
110
8,268
26,909
(18,641)
3,269
(21,910)
(153,108)
(175,018)
(1,981)
(176,999)
(0.21)
(1.34)
(1.55)
December 31,
2022
$
(note 1)
591,395
491,665
99,730
78,469
1,784
1,651
(107)
17,933
13,156
4,777
896
3,881
(8,722)
(4,841)
(3,109)
(7,950)
0.01
(0.08)
(0.07)
January 1,
2022
$
(note 1)
496,455
415,311
81,144
64,778
1,286
6,745
94
8,241
7,552
689
(4,854)
5,543
(6,715)
(1,172)
(4,197)
(5,369)
0.01
(0.06)
(0.05)
Weighted-average common shares outstanding (000s) (note 15)
Basic
Diluted
114,226
114,226
107,659
110,247
104,098
106,987
(See accompanying notes to consolidated financial statements)
SUNOPTA INC.
-F4-
December 30, 2023 Form 10-K
SunOpta Inc.
Consolidated Statements of Comprehensive Loss
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All dollar amounts expressed in thousands of U.S. dollars)
Earnings (loss) from continuing operations
Loss from discontinued operations
Net loss
Other comprehensive loss
Reclassification of accumulated currency translation adjustment
of discontinued operations
Other comprehensive loss
Comprehensive loss
December 30,
2023
$
December 31,
2022
$
(note 1)
(21,910)
(153,108)
(175,018)
3,881
(8,722)
(4,841)
January 1,
2022
$
(note 1)
5,543
(6,715)
(1,172)
(646)
(646)
-
-
-
-
(175,664)
(4,841)
(1,172)
(See accompanying notes to consolidated financial statements)
SUNOPTA INC.
-F5-
December 30, 2023 Form 10-K
SunOpta Inc.
Consolidated Balance Sheets
As at December 30, 2023 and December 31, 2022
(All dollar amounts expressed in thousands of U.S. dollars)
ASSETS
Current assets
Cash and cash equivalents
Accounts receivable, net of allowances for credit losses of $303 and $318, respectively
Inventories (note 3)
Prepaid expenses and other current assets
Income taxes recoverable
Current assets held for sale (note 2)
Total current assets
Restricted cash (note 4)
Property, plant and equipment, net (note 5)
Operating lease right-of-use assets (note 6)
Intangible assets, net (note 7)
Goodwill
Deferred income taxes (note 14)
Other long-term assets
Non-current assets held for sale (note 2)
Total assets
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (note 8)
Notes payable (note 9)
Income taxes payable
Current portion of long-term debt (note 10)
Current portion of operating lease liabilities (note 6)
Current liabilities held for sale (note 2)
Total current liabilities
Long-term debt (note 10)
Operating lease liabilities (note 6)
Deferred income taxes (note 14)
Non-current liabilities held for sale (note 2)
Total liabilities
Series B-1 preferred stock (note 11)
SHAREHOLDERS' EQUITY
Common shares, no par value, unlimited shares authorized,
115,953,287 shares issued (December 31, 2022 - 107,909,792)
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total shareholders' equity
Total liabilities and shareholders' equity
December 30, 2023 December 31, 2022
$
(note 1)
$
306
64,862
83,215
25,235
4,717
5,910
184,245
8,448
319,898
105,919
21,861
3,998
-
25,055
-
669,424
96,650
17,596
-
24,346
15,808
-
154,400
238,883
100,102
505
-
493,890
14,509
679
59,545
74,439
15,535
4,040
148,119
302,357
-
292,306
78,761
23,646
3,998
3,712
5,184
145,888
855,852
95,879
-
957
38,491
12,499
13,207
161,033
269,993
74,329
-
3,228
508,583
28,062
464,169
27,534
(332,687)
2,009
161,025
669,424
440,348
33,184
(155,688)
1,363
319,207
855,852
(See accompanying notes to consolidated financial statements)
SUNOPTA INC.
-F6-
December 30, 2023 Form 10-K
SunOpta Inc.
Consolidated Statements of Shareholders Equity
As at and for the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All dollar amounts expressed in thousands of U.S. dollars)
Balance at January 2, 2021
Exchange of Series A preferred stock, net of
share issuance costs of $287
Employee share purchase plan
Stock incentive plan
Withholding taxes on stock-based awards
Stock-based compensation
Net loss
Dividends on preferred stock
Accretion on preferred stock
Balance at January 1, 2022
Employee share purchase plan
Stock incentive plan
Withholding taxes on stock-based awards
Stock-based compensation
Net loss
Dividends on preferred stock
Accretion on preferred stock
Balance at December 31, 2022
Exchange of Series B preferred stock, net of
share issuance costs of $191 (note 11)
Employee share purchase plan
Stock incentive plan
Withholding taxes on stock-based awards
Stock-based compensation (note 13)
Net loss
Dividends on preferred stock (note 11)
Accretion on preferred stock (note 11)
Disposition of discontinued operations (note 2)
Additional
paid-in
capital
$
Accumulated
deficit
$
Accumulated
other com-
prehensive
income
$
Total
$
Common shares
$
000s
90,194
326,545
37,862
(142,369)
1,363
223,401
12,633
67
4,466
-
-
-
-
-
107,360
88
462
-
-
-
-
-
107,910
6,089
121
1,833
-
-
-
-
-
-
87,188
583
22,147
-
-
-
-
-
436,463
575
3,310
-
-
-
-
-
440,348
13,915
583
9,323
-
-
-
-
-
-
-
-
(15,004)
(8,718)
9,100
-
-
-
23,240
-
(2,257)
(1,629)
13,830
-
-
-
-
-
-
-
-
(1,172)
(3,477)
(720)
(147,738)
-
-
-
-
(4,841)
(2,436)
(673)
33,184
(155,688)
-
-
(8,024)
(9,404)
11,778
-
-
-
-
-
-
-
-
-
(175,018)
(1,428)
(553)
-
-
-
-
-
-
-
-
-
1,363
-
-
-
-
-
-
-
1,363
-
-
-
-
-
-
-
-
646
87,188
583
7,143
(8,718)
9,100
(1,172)
(3,477)
(720)
313,328
575
1,053
(1,629)
13,830
(4,841)
(2,436)
(673)
319,207
13,915
583
1,299
(9,404)
11,778
(175,018)
(1,428)
(553)
646
Balance at December 30, 2023
115,953
464,169
27,534
(332,687)
2,009
161,025
(See accompanying notes to consolidated financial statements)
SUNOPTA INC.
-F7-
December 30, 2023 Form 10-K
SunOpta Inc.
Consolidated Statements of Cash Flows
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All dollar amounts expressed in thousands of U.S. dollars)
CASH PROVIDED BY (USED IN)
Operating activities
Net loss
Loss from discontinued operations
Earnings (loss) from continuing operations
Items not affecting cash:
Depreciation and amortization
Amortization of debt issuance costs (note 10)
Deferred income taxes (note 14)
Stock-based compensation (note 13)
Loss on extinguishment of debt (note 10)
Impairment of long-lived assets
Other
Changes in operating assets and liabilities, net of divestitures (note 16)
Net cash provided by operating activities of continuing operations
Net cash provided by (used in) operating activities of discontinued operations
Net cash provided by (used in) operating activities
Investing activities
Additions to property, plant and equipment
Cash settlement of foreign currency forward contract (note 2)
Proceeds from sale of property, plant and equipment
Additions to intangible assets
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 (decrease) in borrowings under revolving credit facilities (note 10)
Borrowings of long-term debt (notes 6 and 10)
Repayment of long-term debt (notes 6 and 10)
Repayment of asset-based credit facilities (note 10)
Payment of debt issuance costs (note 10)
Proceeds from notes payable (note 9)
Repayment of notes payable (note 9)
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 (note 11)
Payment of common share issuance costs
Payment of preferred stock issuance costs
Net cash provided by (used in) financing activities of continuing operations
Net cash provided by (used in) financing activities of discontinued operations
Net cash provided by (used in) financing activities
Increase (decrease) in cash, cash equivalents and restricted cash during the year
Cash and cash equivalents, beginning of the year
Cash, cash equivalents and restricted cash, end of the year
Non-cash investing and financing activities (notes 6 and 16)
December 30,
2023
$
December 31,
2022
$
(note 1)
January 1,
2022
$
(note 1)
(175,018)
(153,108)
(21,910)
31,039
1,398
3,978
11,778
1,584
-
707
(24,999)
3,575
11,269
14,844
(46,125)
(394)
-
-
(46,519)
90,551
44,032
(15,863)
199,855
(95,303)
(141,880)
(3,297)
102,043
(84,447)
1,882
(9,404)
(1,732)
(191)
-
(48,337)
(2,464)
(50,801)
8,075
679
8,754
(4,841)
(8,722)
3,881
23,047
1,601
(296)
13,830
-
-
3,825
(15,142)
30,746
29,829
60,575
(125,139)
-
4,182
-
(120,957)
14,133
(106,824)
29,640
90,907
(20,085)
-
(735)
-
-
1,628
(1,629)
(2,436)
-
(756)
96,534
(49,833)
46,701
452
227
679
(1,172)
(6,715)
5,543
18,627
1,353
(4,562)
9,100
-
3,202
1,736
3,208
38,207
(59,639)
(21,432)
(54,617)
-
2,300
(25,073)
(77,390)
(17,060)
(94,450)
45,119
25,232
(8,502)
-
(2,561)
-
-
7,726
(8,718)
(5,247)
(287)
-
52,762
63,096
115,858
(24)
251
227
(See accompanying notes to consolidated financial statements)
SUNOPTA INC.
-F8-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
1. Significant Accounting Policies
Basis of Presentation
These consolidated financial statements include the accounts of SunOpta Inc. and those of its wholly-owned subsidiaries
(collectively, the Company or SunOpta) and have been prepared by the Company in United States (U.S.) dollars and in
accordance with U.S. generally accepted accounting principles (U.S. GAAP). All intercompany accounts and transactions
have been eliminated on consolidation.
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 years
2023, 2022 and 2021 were each 52-week periods ending on December 30, 2023, December 31, 2022 and January 1, 2022,
respectively. Fiscal year 2024 will be a 52-week period ending on December 28, 2024, with quarterly periods ending on March
30, 2024, June 29, 2024, and September 28, 2024.
Discontinued Operations
As described in note 2, on October 12, 2023, the Company completed the divestiture of its frozen fruit business (Frozen
Fruit). The divestiture of Frozen Fruit completes the Companys strategic optimization plan for its non-core, commodity-
based businesses, which included the divestiture of its sunflower business (Sunflower) in October 2022, in order to focus on
value-add products in plant-based and healthy snack categories. Beginning in the third quarter of 2023, Frozen Fruit and
Sunflower met the criteria for reporting as discontinued operations, and, as such, the operating results and cash flows of Frozen
Fruit and Sunflower for the years ended December 31, 2022 and January 1, 2022 have been reclassified to discontinued
operations on the consolidated statements of operations and cash flows, and the assets and liabilities of the Frozen Fruit disposal
group have been reclassified and reported as held for sale on the consolidated balance sheet as at December 31, 2022. In
addition, the information disclosed in these notes to the consolidated financial statements is presented on a continuing
operations basis, with comparative period information recast to reflect Frozen Fruit and Sunflower as discontinued operations.
Segment Information
In connection with the divestiture of Frozen Fruit, the Company changed its internal organization and reporting structures
beginning in the third quarter of 2023 and began operating as one segment. These changes included the elimination of the roles
and responsibilities of the former General Managers of the Company, who were previously identified as the segment managers
of the Companys former Plant-Based and Fruit-Based Foods and Beverages operating and reportable segments. With these
changes, the Companys Chief Executive Officer, who has been identified as the Chief Operating Decision Maker (CODM),
manages operations on a company-wide basis, rather than at a product category or business unit level. The 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. Following the
divestiture of its commodity-based businesses, the majority of the Companys products are shelf-stable packaged food and
beverage products and share similar customers and distribution. Refer to note 18 for a disaggregation of the Companys
revenues by product category.
Use of 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 in the consolidated financial statements and accompanying notes. Areas involving
SUNOPTA INC.
-F9-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
significant estimates and assumptions include: allowances for credit losses; inventory reserves; income tax liabilities and assets,
and related valuation allowances; provisions for loss contingencies related to claims and litigation; useful lives of property,
plant and equipment and intangible assets; expected lease terms and discount rates in measuring lease assets and liabilities;
expected future cash flows used in evaluating long-lived assets for impairment; and reporting unit fair values in testing goodwill
for impairment. The estimates and assumptions made require judgment on the part of management and are based on the
Companys historical experience and various other factors that are believed to be reasonable in the circumstances. Management
continually evaluates the information that forms the basis of its estimates and assumptions as the business of the Company and
the general business environment changes.
Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date (that is, an exit price). Fair value measurements are estimated based on
inputs categorized as follows:
Level 1 inputs include quoted prices (unadjusted) for identical assets or liabilities in active markets that are observable.
Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or
similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the
asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation
or other means.
Level 3 includes unobservable inputs that reflect the Companys own assumptions about what factors market
participants would use in pricing the asset or liability.
When measuring fair value, the Company maximizes the use of observable inputs and minimizes the use of unobservable
inputs.
Foreign Currency Transactions
Gains or losses resulting from transactions denominated in foreign currencies are included in foreign exchange gain/loss on the
consolidated statements of operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term deposits with an original maturity of 90 days or less. The Company
places its cash and cash equivalents with institutions of high creditworthiness.
Restricted Cash
Restricted cash consists of cash that is legally restricted as to withdrawal or usage.
Accounts Receivable
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for credit losses is an
estimate of the amount of probable losses in existing accounts receivable. The Company routinely assesses the financial strength
of its customers and believes that its accounts receivable credit risk exposure is limited. The Company closely monitors
receivable balances and estimates an allowance for credit losses based on historical collection experience, and account aging
analysis and trends, and evaluates the adequacy of the allowance each reporting period, considering individual customer
account reviews, write-offs recorded in the period, sales forecasts and trends, and current and expected economic and customer-
specific conditions. Account balances are charged off against the allowance when the Company determines the receivable will
not be recovered. As at December 30, 2023, two long-term customers represented approximately 33% and 14%, respectively,
SUNOPTA INC.
-F10-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
of the Companys consolidated accounts receivable balance. The Company does not believe it is exposed to any significant
credit risks with respect to these customers.
Inventories
Inventories are valued at the lower of cost and net realizable value on a first-in, first-out basis. Shipping and handling costs are
included in cost of goods sold on the consolidated statements of operations.
Property, Plant and Equipment
Property, plant and equipment assets are stated at cost, less accumulated depreciation. Cost includes capitalized interest on
borrowings during the construction of major capital projects. Depreciation begins when an asset is ready for its intended use.
Property, plant and equipment assets, other than land, are depreciated on a straight-line basis over the estimated useful lives of
the assets, as follows:
Buildings
Machinery and equipment
Enterprise software
Office furniture and equipment
Vehicles
Leases
20 - 40 years
5 - 20 years
3 - 5 years
3 - 7 years
3 - 7 years
At the lease commencement date, the Company recognizes a right-of-use lease asset for an amount equal to the lease liability,
less any lease incentives. The lease liability is determined based on the present value of future lease payments over the lease
term. The lease term includes the noncancellable term of the lease, together with periods covered by options to extend the lease
that the Company is reasonably certain to exercise. The discount rate used to determine the present value of the future lease
payments is the implicit rate in the lease if readily determinable. When that rate is not readily determinable, the Company
applies its incremental borrowing rate, which its estimated using relevant interest rate yield curves and credit spreads derived
from available market data. The Company excludes material non-lease components in determining the future lease payments.
Material leases with an initial term of 12 months or less are recorded on the balance sheet.
Intangible Assets
The Companys finite-lived intangible assets consist of brand names and customer relationships. Intangible assets are amortized
on a straight-line basis over their estimated useful lives, which are 15 years for brand names and 20 years for customer
relationships.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds
the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying
amount of an asset is not recoverable, the fair value of the asset is determined typically using an income approach (discounted
cash flow analysis). An impairment loss is recognized in earnings for any excess of the carrying amount of the asset over its
fair value.
Goodwill
Goodwill represents the excess in a business combination of the purchase price over the estimated fair value of the identifiable
net assets acquired. Goodwill is not amortized but is instead tested for impairment at the reporting unit level at least annually,
or whenever events or circumstances change between the annual impairment tests that would indicate the carrying amount of
SUNOPTA INC.
-F11-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
goodwill may be impaired. The Company performs its annual test for goodwill impairment in the fourth quarter of each fiscal
year. The Company can elect to qualitatively assess goodwill for impairment if it is more likely than not that the fair value of
a reporting unit exceeds its carrying value. If the Company elects to quantitatively assess goodwill, or it is not more likely than
not that the fair value of a reporting unit exceeds its carrying value, the Company estimates the fair value of each of its reporting
units using an income approach (discounted cash flow method). Goodwill impairment charges are recognized based on the
excess of a reporting units carrying amount over its fair value. Based on Companys qualitative assessment, it was determined
that goodwill was not impaired as at December 30, 2023.
Debt Issuance Costs
Costs incurred in connection with obtaining debt financing are deferred and amortized over the term of the financing
arrangement. Costs incurred to secure revolving credit facilities are recorded in other long-term assets. All other debt issuance
costs are recorded as a direct deduction from the related debt liability.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes whereby deferred income tax assets are
recognized for deductible temporary differences and operating loss carryforwards, and deferred income tax liabilities are
recognized for taxable temporary differences. Temporary differences are the differences between the amounts of assets and
liabilities recorded for income tax and financial reporting purposes.
Deferred income tax assets are recognized only to the extent that management determines that it is more likely than not that the
deferred income tax assets will be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment. The income tax expense or benefit is the income tax payable or recoverable for the
year plus or minus the change in deferred income tax assets and liabilities during the year.
The Company is subject to ongoing tax exposures, examinations and assessments in various jurisdictions. Accordingly, the
Company may incur additional income tax expense based upon the outcomes of such matters. In addition, when applicable, the
Company adjusts income tax expense to reflect the Companys ongoing assessments of such matters, which requires judgment
and can materially increase or decrease its effective rate as well as impact operating results. The evaluation of tax positions
taken or expected to be taken in a tax return is a two-step process, whereby (i) the Company determines whether it is more
likely than not that the tax positions will be sustained based on the technical merits of the position, and (ii) for those tax positions
that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that has a
greater than 50% likelihood of being realized upon ultimate settlement with the related tax authority.
Stock Incentive Plan
The Company maintains a stock incentive plan under which stock options and other stock-based awards may be granted to
selected employees and directors. The Company measures stock-based awards at fair value as of the date of grant.
Compensation expense is recognized on a straight-line basis over vesting period of the entire stock-based award, based on the
number of awards that ultimately vest. Upon exercise, stock-based awards are settled through the issuance of common shares
and are therefore treated as equity awards.
Revenue Recognition
The Company manufactures and sells food and beverage products to retailers, foodservice operators, branded food companies,
and other food manufacturers. The Company recognizes revenue when performance obligations under the terms of a contract
with a customer are satisfied, which is upon the transfer of control of the contracted goods. Except for goods sold under bill-and-
hold arrangements, control is transferred when title and physical possession of the product transfers to the customer, which is at
the point in time that product is shipped from the Companys facilities or delivered to a specified destination, depending on the
terms of the contract, and the Company has a present right to payment. Under bill-and-hold arrangements, whereby the Company
bills a customer for product to be delivered at a later date, control typically transfers when the product is ready for physical
transfer to the customer, and the Company has a present right to payment.
SUNOPTA INC.
-F12-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
A performance obligation is a promise within a contract to transfer distinct goods to the customer. A contract with a customer
may involve multiple products and/or multiple delivery dates, with the transfer of each product at each delivery date being
considered a distinct performance obligation, as each of the Companys products has standalone utility to the customer. In these
cases, the contracts transaction price is allocated to each performance obligation based on relative standalone selling prices and
recognized as revenue when each individual product is transferred to the customer.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the goods.
Consideration is typically determined based on a fixed unit price for the quantity of product transferred. Certain contracts include
rebates and other forms of variable consideration. For contracts involving variable consideration, the Company estimates the
transaction price based on the amount of consideration to which it expects to be entitled. These estimates are determined based
on historical experience and the expected outcome of the variable consideration, and are updated as new information becomes
available, including actual claims paid, which indicate an estimate is not indicative of the expected results. Changes to these
estimates are recorded in the period the adjustment is identified. The Company does not typically grant customers a general right
of return for goods transferred but will generally accept returns of product for quality-related issues. The cost of satisfying this
promise of quality is accounted for as an assurance-type warranty obligation rather than variable consideration. The Companys
contracts do not typically include any significant payment terms, as payment is normally due shortly after the time of transfer.
Revenue contracts are typically represented by short-term, binding purchase orders from customers, identifying the quantity and
pricing for products to be transferred. Customer purchase orders may be issued under long-term master supply arrangements. On
their own, these master supply arrangements are typically not considered contracts for purposes of revenue recognition, as they
do not create enforceable rights and obligations regarding the quantity, pricing, or timing of goods to be transferred; however,
certain master supply agreements impose minimum purchase obligations on the part of the customers, which is considered a form
of variable consideration. Other master supply arrangements provide for the transfer of product on a bill-and-hold basis at the
specific request of the customer. As goods are produced under these bill-and-hold arrangements to meet individual customer
specifications, they are identifiable as belonging to the customer and cannot be directed to another customer.
The timing of the Companys revenue recognition, customer billings and cash collections, does not result in significant unbilled
receivables (contract assets) or customer advances (contract liabilities) on the consolidated balance sheet. Contract costs, such
as sales commissions, are generally expensed as incurred given the short-term nature of the associated contracts.
Advertising Costs
Advertising costs are expensed as incurred and are included in selling, general and administrative expenses.
Research and Development Costs
Research and development costs are expensed as incurred and are included in selling, general and administrative expenses. The
Companys research and development activities are directed towards custom product formulations, packaging innovations, and
production process improvements. The Companys research and development expenditures primarily consist of employee-
related compensation and supplies, as well as rental costs and depreciation expense related to the Companys innovation center
and pilot plant.
Earnings Per Share
Basic earnings per share is computed by dividing earnings available to common shareholders by the weighted-average number
of common shares outstanding during the year. Earnings attributable to common shareholders is computed by deducting
dividends and accretion on convertible preferred stock from net earnings. The potential diluted effect of stock options and other
stock-based awards is computed using the treasury stock method whereby the weighted-average number of common shares
used in the basic earnings per share calculation is increased to include the number of additional common shares that would
have been outstanding if the potential dilutive common shares had been issued at the beginning of the year. The potential
dilutive effect of convertible preferred stock is computed using the if-converted method whereby dividends and accretion on
the convertible preferred stock are added back to the numerator, and the common shares resulting from the assumed conversion
of the convertible preferred stock are included in the denominator of the diluted earnings per share calculation.
SUNOPTA INC.
-F13-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
Contingencies
In the normal course of business, the Company is subject to loss contingencies, such as accrued but unpaid bonuses, tax-related
matters, product recall-related claims and recoveries, and other claims or litigation. Accruals for loss contingencies are recorded
when the Company determines that it is both probable that a liability has been incurred and the amount of loss can be reasonably
estimated. If the estimate of the amount of the loss is a range and some amount within the range appears to be a better estimate
than any other amount within the range, that amount is accrued as a liability. If no amount within the range is a better estimate
than any other amount, the minimum amount of the range is accrued as a liability.
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.
2. Discontinued Operations
Divestiture of Frozen Fruit
On October 12, 2023, 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), entered into an Asset
Purchase Agreement (APA) with Natures Touch Mexico, S. de R.L. de C.V. and Natures Touch Frozen Fruits, LLC (the
Purchasers) to sell to the Purchasers certain assets and liabilities of Frozen Fruit (the Transaction). On October 12, 2023
(the Closing Date), the Company completed the Transaction in accordance with the terms of the APA. The Transaction
represents the Companys exit from the processing, packaging and selling of individually quick frozen fruit for retail,
foodservice and industrial applications. Frozen Fruit was previously identified as a reporting unit within the Companys former
Fruit-Based Foods and Beverages operating and reportable segment. Included with the Transaction are owned facilities of
Frozen Fruit located in Edwardsville, Kansas, and Jacona, Mexico. A leased frozen fruit facility located in Oxnard, California
and certain inventories of frozen fruit were not acquired by the Purchasers as part of the Transaction; however, the Companys
plan for the divestiture of Frozen Fruit included the immediate liquidation of these assets, as they have no use to the Companys
continuing operations.
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, payable 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. At the Closing Date, $20.5
million of the cash consideration was used to make required repayments of certain bank loans and other liabilities of Frozen
Fruit not assumed by the Purchasers. The Company realized a $0.4 million loss on a foreign currency forward contract entered
into to hedge the repayment of Mexican peso-denominated bank loans, which is included in other expense of continuing
operations. The Company utilized the remaining cash consideration of $74.8 million to repay a portion of the outstanding
borrowings under its credit agreement. As at December 30, 2023, $6.3 million of the short-term note receivable remained
outstanding, which is included in other current assets on the consolidated balance sheet.
SUNOPTA INC.
-F14-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
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 December 30, 2023, the
Company recorded a $0.5 million net receivable from the Purchasers based on the Companys estimate of the final net working
capital and post-closing adjustments, which is included in other current assets on the consolidated balance sheet. 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. The Seller Promissory Notes are measured at fair value on a nonrecurring
basis (Level 3 within the fair value hierarchy) and will be assessed for credit losses periodically. The Company determined that
the fair values of the Seller Promissory Notes approximate their principal values upon initial recognition and no premium or
discount was recognized. 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 December 30, 2023, the Company has 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 principal amount of the Seller Promissory Notes, together with accrued and unpaid in-kind interest, is
recorded in other long-term assets on the consolidated balance as at December 30, 2023.
On the Closing Date, the Company entered into post-closing transitional services agreements with the Purchasers to facilitate
an orderly transfer of the business operations. The services provided under the agreements include, but are not limited to,
information technology and financial shared services, payroll and benefits administration, supply chain transition services, and
contract manufacturing. These services terminate at various times up to nine months from the Closing Date and certain services
may be extended up to an additional three months. Internal labor and third-party costs incurred by the Company to provide
these services are recoverable from the Purchasers as incurred, including a mark-up on manufacturing services. Reverse
transition services to be provided by the Purchasers include, but are not limited to, support for the sell-through of the frozen
fruit inventory that was not acquired by the Purchasers, in exchange for a broker fee on sales of the retained inventory to third
parties.
The Company recognized a pre-tax loss on divestiture of $119.8 million, including costs to sell, related to the net assets of the
Transaction disposal group, which is recognized as part of the loss from discontinued operations in the consolidated statement
of operations for the year ended December 30, 2023.
SUNOPTA INC.
-F15-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar 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 each of the three years in the period ended December 30, 2023. The results of operations for the years ended
December 31, 2022 and January 1, 2022 include the results of Sunflower, which prior to the divestiture of Frozen Fruit did not
qualify on a quantitative basis for reporting as discontinued operations on a standalone basis.
Revenues
Cost of goods sold(1)
Selling, general and administrative expenses(2)
Intangible asset amortization
Other expense (income), net(3)
Foreign exchange loss (gain)
Interest expense, net(4)
Earnings (loss) before loss on divestiture
Pre-tax loss on divestiture(5)
Loss from discontinued operations before income taxes
Income tax benefit(6)
Loss from discontinued operations
December 30, 2023 December 31, 2022
$
343,267
320,143
10,843
8,498
(2,746)
(1,641)
1,578
6,592
(31,468)
(24,876)
(16,154)
(8,722)
$
200,029
211,467
8,683
6,000
10,112
(3,333)
554
(33,454)
(119,821)
(153,275)
(167)
(153,108)
January 1, 2022
$
316,169
299,593
11,821
8,664
2,145
1,018
1,217
(8,289)
-
(8,289)
(1,574)
(6,715)
(1) Cost of goods sold for the year ended December 30, 2023, includes a $12.9 million charge to write down the carrying value
of frozen fruit inventory that was not acquired by the Purchasers to its estimated net realizable value.
(2) For all periods presented, selling, general and administrative expenses exclude the allocation of corporate costs.
(3) Other expense for the year ended December 30, 2023, includes asset impairment charges and contract cancellation costs
of $10.0 million related to the Companys disposal of the Oxnard, California, facility that was not acquired by the
Purchasers. Other income for the year ended December 31, 2022, includes a $3.8 million gain on the sale of a former
frozen fruit facility sold in August 2022.
(4) Interest expense, net, reflects interest on bank loans and other interest-bearing liabilities directly attributable to Frozen
Fruit, net of interest income on tax refunds.
(5) For the year ended December 31, 2022, reflects the pre-tax loss of $23.2 million recognized on the divestiture of Sunflower,
together with a pre-tax loss of $8.2 million on the settlement of the purchase price allocation related to the 2020 divestiture
of the Companys global ingredients business, Tradin Organic.
(6) For the year ended December 31, 2022, includes $12.9 million of tax benefits resulting from the settlement of the purchase
price allocation related to divestiture of Tradin Organic.
SUNOPTA INC.
-F16-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
The table below presents the net assets of Frozen Fruit that have been reclassified and reported as held for sale on the
consolidated balance sheets as at December 30, 2023 and December 31, 2022.
Assets
Accounts receivable
Inventories(1)
Other current assets
Property, plant and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Total assets held for sale
Liabilities
Accounts payable and accrued liabilities
Operating lease liabilities
Total liabilities held for sale
December 30, 2023 December 31, 2022
$
$
-
5,910
-
-
-
-
5,910
-
-
-
15,358
132,608
153
30,085
3,803
112,000
294,007
12,632
3,803
16,435
(1) As at December 30, 2023, inventories held for sale reflect the remaining carrying value of the frozen fruit inventory that
was not acquired by the Purchasers.
3. Inventories
Raw materials and work-in-process
Finished goods
Inventory reserve
December 30, 2023 December 31, 2022
$
46,723
31,014
(3,298)
74,439
$
52,419
37,606
(6,810)
83,215
The change in the inventory reserve for the years ended December 30, 2023 and December 31, 2022 is comprised as follows:
Balance, beginning of year
Additions to reserve during the year
Reserves applied and inventories written off during the year
Balance, end of year
4. Restricted Cash
December 30, 2023 December 31, 2022
$
1,604
5,625
(3,931)
$
3,298
9,255
(5,743)
6,810
3,298
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 sheet as at December 30, 2023, as the Company cannot predict the timing of when this matter may be
resolved.
SUNOPTA INC.
-F17-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
5. Property, Plant and Equipment
The major components of property, plant and equipment as at December 30, 2023 and December 31, 2022 were as follows:
Land
Buildings
Machinery and equipment
Enterprise software
Office furniture and equipment
Vehicles
December 30, 2023
December 31, 2022
Cost
$
238
102,211
323,653
16,847
3,568
405
446,922
Accumulated
depreciation
$
-
21,641
95,254
8,156
1,715
258
127,024
Net book
value
$
238
80,570
228,399
8,691
1,853
147
319,898
Cost
$
238
104,835
271,877
22,717
3,719
492
403,878
Accumulated
depreciation
$
-
16,721
78,029
14,750
1,767
305
111,572
Net book
value
$
238
88,114
193,848
7,967
1,952
187
292,306
Interest expense capitalized as part of the construction cost of property, plant and equipment was $0.3 million and $1.2 million
for the years ended December 30, 2023 and December 31, 2022, respectively, and immaterial for the year ended January 1,
2022.
As at December 30, 2023, property, plant and equipment included construction in process assets of $33.3 million (December
31, 2022 $128.4 million) and $11.1 million (December 31, 2022 $8.8 million) of spare parts inventory.
Total depreciation expense included in cost of goods sold and selling, general and administrative expenses on the consolidated
statements of operations related to property, plant and equipment for the year ended December 30, 2023 was $29.3 million
(December 31, 2022 $21.3 million; January 1, 2022 $17.3 million).
6. Leases
The Company leases certain manufacturing plants, warehouses, offices, and machinery and equipment. At the lease
commencement date, the Company classifies a lease as a finance lease if it has the right to obtain substantially all of the
economic benefits from the right-of-use assets, otherwise the lease is classified as an operating lease. The Companys leases
have remaining noncancelable lease terms of less than one year to approximately 15 years, and typically require fixed monthly
rental payments that may be adjusted annually to give effect to inflation. Real estate leases typically provide the Company
options to extend the leases for up to 15 years. Finance leases for machinery and equipment typically include nominal purchase
options at the end of the lease term that are reasonably certain of being exercised at the lease commencement date. Machinery
and equipment operating leases typically include purchase options for the fair market value of the underlying asset at the end
of the lease term, which are uncertain of being exercised at the lease commencement date.
The following tables present supplemental information related to leases:
Lease Costs
Operating lease cost
Finance lease cost:
Depreciation of right-of-use assets
Interest on lease liabilities
Total finance lease cost
December 30, 2023 December 31, 2022
$
$
January 1, 2022
$
15,076
13,441
9,310
22,751
13,099
9,816
5,136
14,952
11,789
5,592
2,727
8,319
SUNOPTA INC.
-F18-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
Balance Sheet Classification
Operating leases:
Operating lease right-of-use assets
Current portion of operating lease liabilities
Operating lease liabilities
Total operating lease liabilities
Finance leases:
Property, plant and equipment, gross
Accumulated depreciation
Property, plant and equipment, net
Current portion of long-term debt
Long-term debt
Total finance lease liabilities
December 30, 2023 December 31, 2022
$
$
105,919
15,808
100,102
115,910
81,423
(18,319)
63,104
15,346
37,284
52,630
78,761
12,499
74,329
86,828
153,976
(18,168)
135,808
33,283
90,796
124,079
December 30, 2023 December 31, 2022
$
$
January 1, 2022
$
Cash Flow Information
Cash paid (received) for amounts included in measurement
of lease liabilities:
Operating cash flows from operating leases
Operating cash flows from finance leases
Financing cash flows from finance leases
Cash paid under finance leases(1)
Cash received under finance leases(2)
Right-of-use assets obtained in exchange for lease
liabilities:
Operating leases
Finance leases
Right-of-use assets and liabilities reduced through lease
terminations or modifications:
Operating leases
13,852
9,310
89,087
(6,568)
35,601
9,651
12,320
5,136
19,903
(58,764)
11,098
2,727
8,439
(13,626)
49,662
31,466
27,909
29,906
(914)
(4,060)
(2,261)
(1) Represents repayments under finance leases recorded as a reduction of the lease liability and reported in repayment of
long-term debt on the consolidated statements of cash flows. For the year ended December 30, 2023, lease repayments
include $56.0 million paid by the Company to terminate certain finance lease obligations and purchase the related
underlying right-of-use assets in connection with the refinancing of the Companys credit facilities on December 8, 2023
(see note 10). The difference of $4.4 million between the purchase price and the carrying amount of the finance lease
obligations is reported in additions to property, plant and equipment on the consolidated statement of cash flows for the
year ended December 30, 2023.
(2) Represents cash advances received by the Company under finance leases for the construction of right-of-use assets
controlled by the Company, which related to the buildouts of the Companys new plant-based beverage facility in
Midlothian, Texas, and the Companys executive office and innovation center located in Eden Prairie, Minnesota, as well
SUNOPTA INC.
-F19-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
as cash proceeds under sale and leaseback transactions accounted for as financings. Cash received under finance leases is
reported in borrowings of long-term debt on the consolidated statements of cash flows.
December 30, 2023 December 31, 2022
January 1, 2022
Other Information
Weighted-average remaining lease term (years):
Operating leases
Finance leases
Weighted-average discount rate:
Operating leases
Finance leases
Maturities of Lease Liabilities
2024
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Total lease liabilities
12.0
3.2
8.7%
7.9%
12.9
3.5
8.8%
8.2%
7.6
4.3
5.1%
6.6%
Operating leases
$
Finance leases
$
16,364
16,410
15,564
14,559
14,374
167,412
244,683
(128,773)
115,910
17,834
20,199
16,423
4,458
1,398
-
60,312
(7,682)
52,630
As at December 30, 2023, the Company had entered into a finance lease agreement to provide for approximately $25 million
of financing related to an expansion of the Companys ingredient extraction operations at its Modesto, California, facility,
which is expected to become operational during the first half of 2024. As this finance lease had not commenced as at December
30, 2023, no amount of underlying right-of-use assets, or lease liabilities, were recognized on the consolidated balance sheet
as of that date.
7. Intangible Assets
The gross carrying amounts and accumulated amortization of intangible assets as at December 30, 2023 and December 31,
2022 were as follows:
Brand names
Customer relationships
December 30, 2023
Net book
value
$
20,556
1,305
21,861
Accumulated
amortization
$
4,517
946
5,463
Cost
$
25,073
2,251
27,324
December 31, 2022
Net book
value
$
22,228
1,418
23,646
Accumulated
amortization
$
2,845
833
3,678
Cost
$
25,073
2,251
27,324
Amortization expense associated with intangible assets in each of the next five fiscal years and thereafter is as follows:
Amortization expense
2024
$
1,784
2025
$
1,784
2026
$
1,784
2027
$
1,784
2028 Thereafter
$
12,941
$
1,784
Total
$
21,861
SUNOPTA INC.
-F20-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
8. Accounts Payable and Accrued Liabilities
Accounts payable
Payroll and benefits
Accrued interest
Accrued severance costs
Accrued product recall-related costs (see note 17)
Dividends payable on preferred stock (see note 11)
Other accruals
9. Notes Payable
December 30, 2023 December 31, 2022
$
76,025
13,639
1,685
-
-
609
3,921
95,879
$
75,761
11,841
1,379
1,273
1,250
304
4,842
96,650
Commencing in 2023, the Company is financing 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 December 30, 2023, the Company had outstanding principal payment obligations to
the third-party intermediaries of $17.6 million in the aggregate, which is recorded as notes payable on the Companys
consolidated balance sheet. Proceeds from, and repayments of the notes payable associated with, these facilities are reported
as financing cash flows on the Companys consolidated statements of cash flows.
10. Long-Term Debt
Term loan facilities
Revolving credit facilities
Less: Unamortized debt issuance costs
Total credit facilities
Finance lease liabilities (see note 6)
Other
Total debt
Less: current portion
Total long-term debt
December 30, 2023 December 31, 2022
$
43,748
137,253
-
181,001
124,079
3,404
308,484
38,491
269,993
$
180,000
31,751
(1,152)
210,599
52,630
-
263,229
24,346
238,883
SUNOPTA INC.
-F21-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
Scheduled maturities of long-term debt, including finance lease liabilities, are as follows:
2024
2025
2026
2027
2028
Total gross maturities
Less: imputed interest on finance lease liabilities
Less: debt issuance costs
Total debt
Credit Facilities
$
26,834
29,199
29,923
17,958
168,149
272,063
(7,682)
(1,152)
263,229
On December 8, 2023, the Company entered into a new five-year Credit Agreement (the New Credit Agreement) providing
for (i) a $180.0 million term loan credit facility (the New Term Loan Credit Facility) and (ii) an $85.0 million revolving
credit facility (the New Revolving Credit Facility and together with the New Term Loan Credit Facility, the New Credit
Facilities). The New 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 December
30, 2023, $5.9 million in letters of credit were issued but undrawn under the New Revolving Credit Facility. The New Credit
Facilities terminate and replace the asset-based revolving and term loan credit obligations, commitments, liens and guaranties
under the Companys Second Amended and Restated Credit Agreement, dated as of December 31, 2020 (as amended, the
2020 Credit Agreement). The syndicate of lenders party to the New Credit Agreement is unchanged from the 2020 Credit
Agreement.
As at December 8, 2023, the Company used proceeds of $141.9 million from the New Credit Facilities to repay in full the
amounts owing under 2020 Credit Agreement, and $56.0 million to repay and terminate certain finance lease obligations (see
note 6). The Company incurred $2.2 million of debt issuance costs in connection with the New Credit Facilities, of which $1.2
million was allocated to the New Term Loan Credit Facility and recorded as a deduction to long-term debt, and $1.0 million
was allocated to the New Revolving Credit Facility and recorded as deferred financing costs in other long-term assets.
Capitalized debt issuance costs are being amortized to interest expense over the five-year term of the New Credit Agreement.
In addition, the Company incurred a loss on extinguishment of debt of $1.6 million, which reflected $1.1 million of third-party
costs incurred in connection with the New Term Loan Credit Facility, and the write-off of $0.5 million of unamortized deferred
financing costs related to the 2020 Credit Agreement due to a reduction in the credit commitments under the New Revolving
Credit Facility.
The New Credit Facilities mature on December 8, 2028. Borrowings under the New 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 New Credit Facilities bear interest at a margin over various reference rates, including a base rate (as
defined in the New Credit Agreement) and SOFR, selected at the option of the Company. The margin for the New Credit
Facilities will be 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. Prior to the completion of the
fiscal quarter ending March 31, 2024, the initial margins for the New Credit Facilities are 1.75% and 2.75% with respect to
base rate and SOFR loans, respectively. As at December 30, 2023, the interest rate on outstanding borrowings under the New
Credit Facilities was 8.22%. In addition, the Company is required to pay an undrawn fee under the New Revolving Credit
Facility quarterly based on the consolidated total net leverage ratio for the preceding fiscal quarter ranging from 0.20% to
SUNOPTA INC.
-F22-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
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 New Revolving Credit Facility.
All obligations under the New Credit Facilities are unconditionally guaranteed by the Company and substantially all of the
Companys existing and future direct and indirect wholly-owned material restricted subsidiaries organized in the U.S. and
Canada (the Subsidiary Guarantors) and, subject to certain exceptions and qualifications, such obligations are secured by
first priority security interest in substantially all of the tangible and intangible assets of the Company and Subsidiary Guarantors.
The New Credit Facilities contain a number of covenants that, among other things, restrict, subject to certain exceptions, the
Companys ability to: create liens on assets; sell assets and enter into sale and leaseback transactions; pay dividends, prepay
contractually subordinated indebtedness and make other restricted payments; incur additional indebtedness and make
guarantees; make investments, loans or advances, including acquisitions; engage in certain transactions with affiliates;
fundamentally change the character of the Companys business; enter into contractual obligations that restrict the ability of the
Company or any Subsidiary Guarantor to grant a lien on its assets in favor of the lenders and other secured creditors under the
New Credit Facilities; and engage in mergers or consolidations. In addition, the Company is required to (i) maintain a minimum
fixed charge coverage ratio of 1.20 to 1.00 as of the end of each quarterly test period and (ii) maintain a maximum consolidated
total net leverage ratio of 4.00 to 1.00 for each quarterly test period prior to the fiscal quarter ending December 31, 2024, 3.75
to 1.00 for each quarterly test period from the fiscal quarter ending December 31, 2024 through the fiscal quarter ending
September 30, 2025, and 3.50 to 1.00 for each quarterly test period for the fiscal quarter ending December 31, 2025 and
thereafter; provided that, if the Company consummates an acquisition for consideration in excess of $50 million in any quarterly
test period, then the maximum consolidated total net leverage ratio may, at the election of the Company (on no more than two
occasions), be increased to the lesser of (x) 4.25 to 1.00 and (y) the then applicable maximum consolidated leverage ratio plus
0.50 to 1.00, for the end of the four succeeding quarterly test periods.
The New Credit Facilities also contain certain customary affirmative covenants and events of default. As at December 30,
2023, the Company was in compliance with all covenants of the New Credit Agreement.
Interest Expense, Net
The components of interest expense, net are as follows:
Interest expense, net of capitalized interest (see note 5)
Amortization of debt issuance costs
Loss on extinguishment of debt
Interest income
Interest expense, net
11. Series B-1 Preferred Stock
December 30, 2023 December 31, 2022
$
11,889
1,601
-
(334)
13,156
$
24,422
1,398
1,584
(495)
26,909
January 1, 2022
$
6,462
1,353
-
(263)
7,552
On April 15, 2020, the Company and SunOpta Foods entered into a subscription agreement (the Series B Subscription
Agreement) with Oaktree Organics, L.P. and Oaktree Huntington Investment Fund II, L.P. (collectively, Oaktree) and
Engaged Capital, LLC, Engaged Capital Flagship Master Fund, LP and Engaged Capital Co-Invest IV-A, LP (collectively,
Engaged). On April 24, 2020, pursuant to the Series B Subscription Agreement, SunOpta Foods issued 15,000 shares of
Series B-1 Preferred Stock to each of Oaktree and Engaged for aggregate consideration of $30.0 million and 30,000 shares
total (the Series B-1 Preferred Stock). Preferred dividends accrue daily on the Series B-1 preferred stock at an annualized
rate of 8.0% of the liquidation preference prior to September 30, 2029, and 10.0% of the liquidation preference thereafter. For
the second quarter of 2020, SunOpta Foods elected to pay dividends on the Series B-1 preferred stock in kind and, as a result,
the aggregate liquidation preference increased to $30.4 million, or approximately $1,015 per share.
SUNOPTA INC.
-F23-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
On March 3, 2023, Engaged exercised their right to exchange all of their shares of Series B-1 Preferred Stock for 6,089,331
shares of the Companys common stock (Common Shares) at an exchange price of $2.50, together with a cash payment to
adjust for fractional Common Shares, plus accrued and unpaid dividends as of the date of exchange. The Common Shares
exchanged represented approximately 5.3% of the Companys issued and outstanding Common Shares on a post-exchange
basis. After the exchange, the exchanged shares of Series B-1 Preferred Stock previously held by Engaged were cancelled and
SunOpta Foods is no longer required to pay dividends on those shares. Upon the exchange, the Company derecognized the
$14.1 million carrying amount of the Series B-1 Preferred Stock previously held by Engaged, net of $1.1 million of unamortized
issuance costs, and recognized a corresponding amount for the Common Shares issued on exchange, less common share
issuance costs of $0.2 million.
In connection with the exchange of the Series B-1 Preferred Stock, the Company redeemed all Special Shares, Series 2, par
value $0.00001 per share, of the Company that were held by Engaged. 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 at December 30, 2023, SunOpta Foods had 15,000 shares of Series B-1 Preferred Stock issued and outstanding to Oaktree.
At any time, Oaktree may exchange the Series B-1 Preferred Stock, in whole or in part, into the number of 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, plus
accrued and unpaid dividends.
On May 19, 2023, the Company issued 2,932,453 Special Shares, Series 2 to Oaktree. 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.
In the first quarter of 2023, the Company paid cash dividends on the Series B-1 Preferred Stock of $0.6 million in the aggregate
to Oaktree and Engaged related to the fourth quarter of 2022, together with a cash dividend $0.2 million paid to Engaged for
the period from January 1, 2023 to March 3, 2023. In each of the second through fourth quarters of 2023, the Company paid a
quarterly cash dividend of $0.3 million to Oaktree on the Series B-1 Preferred Stock, and, as at December 30, 2023, the
Company accrued unpaid dividends to Oaktree of $0.3 million for the fourth quarter of 2023, which are recorded in accounts
payable and accrued liabilities on the consolidated balance sheet. The carrying value of the Series B-1 Preferred Stock, net of
unamortized issuance costs, is being accreted to the redemption value through charges to accumulated deficit, which amounted
to $0.6 million for the year ended December 30, 2023 (December 31, 2022 $0.7 million; January 1, 2022 $0.5 million).
12. Common Shares
The Company is authorized to issue an unlimited number of Common Shares without par value and an unlimited number of
special shares without par value.
13. Stock-Based Compensation
On May 28, 2013, the Companys shareholders approved the 2013 Stock Incentive Plan, as amended (the 2013 Plan), which
permits the grant of a variety of stock-based awards, including stock options, restricted stock units (RSUs) and performance
share units (PSUs) to selected employees and directors of the Company. As at December 30, 2023, 3,619,054 securities
remained available for issuance under the 2013 Plan.
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022, stock-based compensation of $11.8 million,
$13.8 million and $9.1 million was recorded in selling, general and administrative expenses on the consolidated statements of
operations.
SUNOPTA INC.
-F24-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
Stock Options
Stock options granted to employees during the three-year period ended December 30, 2023, vest ratably on each of the first
through third anniversaries of the grant date and expire on the tenth anniversary of the grant date. Stock options granted by the
Company contain an exercise price that is equal to the closing market price of the shares on the day prior to the grant date. Any
consideration paid on the exercise of stock options is credited to capital stock.
The following table summarizes stock option activity for the year ended December 30, 2023:
Outstanding, beginning of year
Granted
Exercised
Forfeited
Expired
Outstanding, end of year
Exercisable, end of year
Stock options
3,920,600 $
534,657
(310,167)
(771,987)
(25,000)
3,348,103 $
2,125,112 $
Weighted-
average
exercise price
5.51
6.29
2.79
6.53
7.36
5.63
5.33
Weighted-
average
remaining
contractual
term (years)
Aggregate
intrinsic value
6.5 $
5.2 $
2,318
2,318
The total intrinsic value of stock options exercised during the year ended December 30, 2023 was $0.7 million.
The following table summarizes non-vested stock option activity during the year ended December 30, 2023:
Non-vested, beginning of year
Granted
Vested
Forfeited
Non-vested, end of year
Stock options
1,965,839 $
534,657
(786,033)
(491,472)
1,222,991 $
Weighted-
average grant-
date fair value
3.63
3.87
3.64
3.79
3.67
The weighted-average grant-date fair values of all stock options granted in the years ended December 30, 2023, December 31,
2022 and January 1, 2022, were $3.87, $3.49 and $8.10, respectively, using a Black-Scholes option pricing model with the
following assumptions:
Grant-date stock price
Dividend yield(a)
Expected volatility(b)
Risk-free interest rate(c)
Expected life of options (years)(d)
$
December 30, 2023 December 31, 2022
5.91
$
0%
61.6%
3.0%
6.0
6.29
0%
63.5%
4.1%
6.0
$
January 1, 2022
14.77
0%
61.7%
1.0%
6.0
(a) Determined based on expected annual dividend yield at the time of grant.
(b) Determined based on historical volatility of the Companys Common Shares over the expected life of the option.
(c) Determined based on the yield on U.S. Treasury zero-coupon issues with maturity dates equal to the expected life of
the option.
SUNOPTA INC.
-F25-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
(d) Determined based on the mid-point of vesting (one through three years) and expiration (10 years). The Company has
used the simplified method to determine the expected life of options due to insufficient historical exercise data to
provide a reasonable basis to estimate the expected life.
Total compensation costs related to non-vested stock option awards not yet recognized as an expense was $2.0 million as at
December 30, 2023, which will be amortized over a weighted-average remaining vesting period of 1.4 years.
The following table summarizes stock options outstanding and exercisable as at December 30, 2023:
$
$
Exercise price range
High
3.73
5.69
6.13
9.48
14.77
Low
3.25
3.74
5.70
6.14
9.49
Outstanding
options
1,016,553
278,998
1,402,892
327,235
322,425
3,348,103
Weighted-
average
remaining
(years)
Weighted-
contractual life average exercise
price
3.35
4.87
5.91
6.51
11.40
5.63
5.2 $
5.1
8.0
8.2
3.3
6.5 $
Weighted-
Exercisable average exercise
price
3.35
4.78
5.91
7.19
11.12
5.33
options
1,016,553 $
242,640
505,767
62,005
298,147
2,125,112 $
Restricted Stock Units
RSUs granted to employees vest ratably on each of the first through third anniversaries of the grant date and RSUs granted to
directors vest 100% on the first anniversary of the grant date. Each vested RSU entitles the employee or director to receive one
Common Share without payment of additional consideration. The weighted-average grant-date fair values of all RSUs granted
in the years ended December 30, 2023, December 31, 2022 and January 1, 2022, were $5.88, $6.40 and $13.54, respectively,
based on the closing price of the Common Shares on the grant dates.
The following table summarizes non-vested RSU activity during the year ended December 30, 2023:
Non-vested, beginning of year
Granted
Vested
Forfeited
Non-vested, end of year
RSUs
659,649 $
443,247
(380,577)
(122,595)
599,724 $
Weighted-
average grant-
date fair value
7.14
5.88
6.57
7.14
6.58
The total intrinsic value of RSUs that vested during the year ended December 30, 2023 was $2.7 million. Total compensation
costs related to non-vested RSU awards not yet recognized as an expense was $2.4 million as at December 30, 2023, which
will be amortized over a weighted-average remaining vesting period of 1.8 years.
Performance Share Units
The vesting of PSUs granted to employees under the Companys annual short-term incentive plans are dependent on the
Company achieving predetermined measures of adjusted earnings before interest, taxes, depreciation and amortization
(EBITDA) (the EBITDA PSUs). Each vested EBITDA PSU entitles the employee to receive one Common Share without
payment of additional consideration. The weighted-average grant-date fair values of the EBITDA PSUs granted during the
SUNOPTA INC.
-F26-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
years ended December 30, 2023, December 31, 2022 and January 1, 2022, were $6.96, $5.45 and $13.90, respectively, based
on the closing price of the Common Shares on the grant dates.
The following table summarizes non-vested EBITDA PSU activity during the year ended December 30, 2023:
Non-vested, beginning of year
Granted
Vested
Cancelled or forfeited
Non-vested, end of year
EBITDA PSUs
2,355,431 $
1,137,057
(2,299,700)
(191,892)
1,000,896 $
Weighted-
average grant-
date fair value
4.80
6.96
4.78
6.55
6.95
The total intrinsic value of EBITDA PSUs that vested during the year ended December 30, 2023 was $18.0 million.
Each reporting period, the number of unvested EBITDA PSUs that are expected to vest is redetermined and the aggregate
grant-date fair value of the redetermined number of EBITDA PSUs is amortized on a straight-line basis over the remaining
requisite service period less amounts previously recognized. As at December 30, 2023, the compensation cost not yet
recognized as an expense that are currently expected to vest was $2.3 million, which will be amortized over a weighted-average
remaining vesting period of 0.3 years.
The vesting of PSUs granted to employees under the Companys 2023, 2022 and 2021 long-term incentive plans (LTIP) are
dependent on the Companys total shareholder return (TSR) performance relative to food and beverage companies in a
designated index during a three-year performance period commencing on January 1 of the year of grant, and the employees
continued employment with the Company through the vesting date (the TSR PSUs). The TSR for the Company and each of
the companies in the designated index are calculated at the end of the applicable three-year performance period using a 20-
trading day average closing price as of December 31. The percentage of vested PSUs may range from 0% to 200% based on
the Companys achievement of predetermined TSR thresholds. Each vested PSU entitles the employee to receive one Common
Share without payment of additional consideration. None of the PSUs granted under the 2021 LTIP will vest as the Company
did not achieve the minimum TSR threshold as measured at December 31, 2023.
The grant-date fair values of TSR PSUs granted in the years ended December 30, 2023, December 31, 2022 and January 1,
2022, were $7.00, $8.48 and $23.40, respectively, using a Monte Carlo valuation model with the following assumptions:
Grant-date stock price
Dividend yield
Expected volatility(a)
Risk-free interest rate(b)
Expected life (in years)(c)
$
December 30, 2023 December 31, 2022
6.35 $
0%
55.5%
4.7%
2.5
5.91 $
0%
67.8%
2.8%
2.7
January 1, 2022
14.77
0%
76.9%
0.3%
2.7
(a) Determined based on the historical volatility of the Common Shares over the performance period of the PSUs.
(b) Determined based on U.S. Treasury yields with a remaining term equal to the performance period of the PSUs.
(c) Determined based on the performance period of the PSUs.
SUNOPTA INC.
-F27-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
The following table summarized non-vested TSR PSU activity during the year ended December 30, 2023:
Non-vested, beginning of year
Granted
Vested
Forfeited
Non-vested, end of year
TSR PSUs
594,873 $
405,212
-
(443,405)
556,680 $
Weighted-
average grant-
date fair value
10.07
7.00
-
8.61
9.00
Total compensation costs related to non-vested TSR PSU awards not yet recognized as an expense was $2.5 million as at
December 30, 2023, which will be amortized over a weighted-average remaining vesting period of 1.8 years.
Special Awards
On January 2, 2024, the Company granted special one-time awards of 144,404 RSUs, 288,808 TSR PSUs and 230,804 stock
options to Brian Kocher in connection with his appointment as the Companys Chief Executive Officer effective January 2,
2024. These awards represent sign-on inducement awards made outside of 2013 Plan. 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 Companys 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. Kochers 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 Companys 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.
Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan whereby employees can purchase common shares through payroll
deductions. For the year ended December 30, 2023, the Companys employees purchased 120,666 Common Shares (December
31, 2022 87,850; January 1, 2022 66,834) for total proceeds of $0.6 million (December 31, 2022 $0.6 million; January 1,
2022 $0.6 million). As at December 30, 2023, 425,566 Common Shares remained available to be granted under this plan.
SUNOPTA INC.
-F28-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
14. Income Taxes
The income tax expense (benefit) differs from the amount that would have resulted from applying the combined Canadian
federal and provincial statutory income tax rate to earnings (loss) from continuing operations before income taxes due to the
following:
Earnings (loss) from continuing operations before income taxes
Canadian statutory rate
Income tax expense (benefit) at statutory rate
Stock-based compensation
Change in valuation allowance
Disallowed executive compensation
Foreign tax rate differential
Change in enacted tax rates
Other
Income tax expense (benefit)
December 30,
2023
$
(18,641)
26.5%
(4,940)
(778)
5,911
2,372
107
90
507
3,269
December 31,
2022
$
4,777
26.5%
1,266
1,054
(471)
367
(156)
(9)
(1,155)
896
The components of earnings (loss) from continuing operations before income taxes are shown below:
Canada
U.S.
Earnings (loss) from continuing operations before income taxes
The components of income tax expense (benefit) are shown below:
December 30,
2023
$
(9,202)
(9,439)
(18,641)
December 31,
2022
$
(11,455)
16,232
4,777
January 1,
2022
$
689
26.5%
183
(4,714)
975
135
(73)
17
(1,377)
(4,854)
January 1,
2022
$
(10,522)
11,211
689
Current income tax expense (benefit):
Canada
U.S.
Deferred income tax expense (benefit):
Canada
U.S.
Income tax expense (benefit)
December 30,
2023
$
December 31,
2022
$
January 1,
2022
$
(32)
(677)
(709)
-
3,978
3,978
3,269
84
1,108
1,192
-
(296)
(296)
896
(9)
(283)
(292)
299
(4,861)
(4,562)
(4,854)
SUNOPTA INC.
-F29-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
Deferred income taxes of the Company are comprised of the following:
Loss and credit carryovers
Lease liabilities
Interest expense limitation (163j)
Inventory basis differences
Stock-based compensation
Right-of-use lease assets
Property, plant and equipment and intangible assets
Other
Less: valuation allowance
Deferred income tax asset (liability)
The components of the deferred income tax asset (liability) are shown below:
Canada
U.S.
Other
Deferred income tax asset (liability)
The components of the deferred income tax valuation allowance are as follows:
Balance, beginning of year
Increase (decrease) in valuation allowance
Balance, end of year
December 30, 2023 December 31, 2022
$
20,201
23,609
9,464
1,805
2,160
(23,071)
(28,088)
2,458
8,538
4,826
3,712
$
43,871
29,395
15,906
3,723
1,255
(28,285)
(18,537)
2,623
49,951
50,456
(505)
December 30, 2023 December 31, 2022
$
(325)
3,978
59
3,712
$
(325)
-
(180)
(505)
December 30, 2023 December 31, 2022
$
5,267
(441)
4,826
$
4,826
45,630
50,456
The following table details the Companys tax attributes as at December 30, 2023, primarily related to net operating losses, tax
credits and capital losses for which it has recorded deferred tax assets:
Gross attribute amount
Net attribute amount
Expiration years
Tax Attributes
Net operating losses - Canada
Net operating losses - U.S. Federal
Net operating losses - U.S. State
Net operating losses - Other
Federal credits - Canada
Federal credits - U.S.
State credits - U.S.
Federal capital loss - Canada
Total
$
2,123 $
145,989
103,009
167
-
-
-
27,838
$
563
30,658
5,613
50
255
2,833
211
3,688
43,871
2040-2041
2037 and indefinite
2027-2043 and indefinite
2028
N/A
2031-2043
2024-2026
N/A
SUNOPTA INC.
-F30-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
The Company records net deferred tax assets to the extent it believes these assets will more likely than not be realized. In making
such determinations, the Company considers all available positive and negative evidence, including future reversals of existing
temporary differences, projected future taxable income, tax planning strategies and recent financial operations. Based on this
evaluation, as at December 30, 2023, a valuation allowance of $50.5 million (December 31, 2022 $4.8 million) had been recorded
against certain assets to reduce the net benefit recorded in the consolidated financial statements.
As the undistributed earnings of the Companys non-Canadian affiliates and associated companies are considered to be indefinitely
reinvested, no provision for deferred taxes has been provided thereon.
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022, the Company did not identify any material
uncertain tax positions or recognize any related tax benefits. The Company believes it has adequately examined its tax positions
taken or expected to be taken in a tax return; however, amounts asserted by taxing authorities could differ from the Companys
positions. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the
future as revised estimates are made or the underlying matters are settled or otherwise resolved.
Consistent with its historical financial reporting, the Company has classified interest and penalties related to income tax
liabilities, when applicable, as part of interest expense in its consolidated statements of operations, and with the related liability
on the consolidated balance sheets.
The number of years with open tax audits varies depending on the tax jurisdiction. The Companys major taxing jurisdictions
are the U.S. (including multiple states) and Canada (Ontario). The Companys 2019 through 2022 tax years (and any tax year
for which available non-capital loss carryforwards were generated up to the amount of non-capital loss carryforward) remain
subject to examination by the Internal Revenue Service for U.S. federal tax purposes, and tax years 2016 through 2022 remain
subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other ongoing
audits in various other jurisdictions that are not considered material to the Companys consolidated financial statements.
SUNOPTA INC.
-F31-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
15. Earnings (Loss) Per Share
Basic and diluted earnings (loss) per share were calculated as follows (shares in thousands):
December 30, 2023 December 31, 2022
January 1, 2022
Numerator
Earnings (loss) from continuing operations
Less: dividends and accretion on preferred stock
Earnings (loss) from continuing operations attributable to
common shareholders
Loss from discontinued operations
Loss attributable to common shareholders
Denominator
Basic weighted-average number of shares outstanding
Dilutive effect of the following:
Stock options and restricted stock units(1)
Series B-1 Preferred Stock(2)
Diluted weighted-average number of shares outstanding
Basic Earnings (Loss) Per Share
Earnings (loss) from continuing operations
Loss from discontinued operations
Loss attributable to common shareholders
Diluted Earnings (Loss) Per Share
Earnings (loss) from continuing operations
Loss from discontinued operations
Loss attributable to common shareholders
$
$
$
$
$
$
(21,910) $
(1,981)
(23,891)
(153,108)
(176,999) $
3,881 $
(3,109)
772
(8,722)
(7,950) $
5,543
(4,197)
1,346
(6,715)
(5,369)
114,226
107,659
104,098
-
-
114,226
2,588
-
110,247
2,889
-
106,987
(0.21) $
(1.34)
(1.55) $
(0.21) $
(1.34)
(1.55) $
0.01 $
(0.08)
(0.07) $
0.01 $
(0.08)
(0.07) $
0.01
(0.06)
(0.05)
0.01
(0.06)
(0.05)
(1) For the year ended December 30, 2023, 1,273,093 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. In addition, for the years ended December
30, 2023, December 31, 2022 and January 1, 2022, stock options and RSUs to purchase or receive 2,192,677, 2,427,146
and 347,236 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 years ended December 30, 2023, December 31, 2022 and January 1, 2022, it was more dilutive to the earnings
(loss) per share from continuing operations to assume the Series B-1 Preferred Stock was not converted into Common
Shares and, therefore, the numerator of the diluted earnings (loss) 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
approximately 6,089,333, 12,178,667 and 12,178,677 Common Shares issuable on an if-converted basis as at December
30, 2023, December 31, 2022 and January 1, 2022, respectively.
SUNOPTA INC.
-F32-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
16. Supplemental Cash Flow Information
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
Estimated net working capital adjustment related to the
divestiture of Frozen Fruit (see note 2)
Change in short-term note receivable from divestiture
of Frozen Fruit (see note 2)
Seller Promissory Notes issued on the divestiture
of Frozen Fruit (see note 2)
Paid in kind interest on Seller Promissory Notes
Change in proceeds receivable from Sunflower divestiture(1)
Change in accrued transaction costs related to the
divestiture of Tradin Organic(2)
Change in accrued debt issuance costs
Cash Paid
Interest
Income taxes
December 30, 2023 December 31, 2022
$
$
January 1, 2022
$
(4,034)
(8,776)
(4,805)
(7,384)
(24,999)
(436)
(305)
(457)
(6,300)
(20,000)
(300)
385
-
-
24,032
569
(4,948)
(10,300)
(4,246)
4,352
(15,142)
(5,893)
(17,780)
23,499
3,382
3,208
(4,234)
-
3,638
(1,769)
-
-
-
-
(385)
-
-
11,093
847
-
-
-
-
-
(13,380)
(1,690)
5,520
3,632
(1) For the year ended December 30, 2023, reflects the settlement of the final working capital adjustment related to the
divestiture of Sunflower, with is included in investing activities of discontinued operations on the consolidated statement
of cash flows.
(2) For the year ended January 1, 2022, the settlement of transaction costs related to the divestiture of Tradin Organic is
included in investing activities of discontinued operations on consolidated statement of cash flows.
17. 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 Companys opinion, the eventual resolution of such
matters, either individually or in the aggregate, is not expected to have a material impact on the Companys 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 Companys financial position, results of operations,
and cash flows for the reporting period in which any such resolution or disposition occurs.
SUNOPTA INC.
-F33-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
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. For the year ended December 30, 2023, the Company
recognized charges of $0.9 million for customer returns of the recalled products, $3.0 million for inventory on-hand at the time
of the recall, and $3.4 million for the reimbursement of customer lost profits and consumer refunds and claims for damages
related to the recall. The Company is seeking to recover a portion of the recall-related costs through its insurance coverage, and
such recoveries are recorded in the period in which the recoveries are determined to be probable of realization. For the year
ended December 30, 2023, the Company recognized estimated insurance recoveries, net of deductibles, of $4.8 million. 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 statement of operations for the year ended December 30, 2023. As at
December 30, 2023, estimated insurance recoveries of $4.8 million are included in prepaid expenses and other current assets,
and $1.3 million of recall-related costs are included in accounts payable and accrued liabilities on the consolidated balance
sheet.
The Company expects to incur additional costs related to the recall during the first quarter of 2024, including product
warehousing, transportation and destruction costs, as well as administrative costs. The Company expects that these additional
costs will be generally covered under its insurance policies; however, as of the date of this filing, the Company cannot be
certain of its ability to recover recall-related costs through its insurance coverage or the extent of any such recovery.
Environmental Laws
The Company believes that, with respect to both its operations and real property, it is in material compliance with current
environmental laws. Based on known existing conditions and the Companys experience in complying with emerging
environmental issues, the Company is of the view that future costs relating to environmental compliance will not have a material
adverse effect on its consolidated financial position, but there can be no assurance that unforeseen changes in the laws or
enforcement policies of relevant governmental bodies, the discovery of changed conditions on the Companys real property or
in its operations, or changes in the use of such properties and any related site restoration requirements, will not result in the
incurrence of significant costs.
18. Disaggregation of Revenue, Geographic Information, and Major Customers
Disaggregation of Revenue
The principal products that comprise the Companys product categories are as follows:
Category
Beverages and broths
Fruit snacks
Principal Products
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.
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
Smoothie bowls
Liquid and powder ingredients utilizing oat, soy and hemp bases.
Ready-to-eat fruit smoothie and chia bowls topped with frozen fruit.
SUNOPTA INC.
-F34-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
Revenue disaggregated by product category is as follows:
Product Category
Beverages and broths(1)
Fruit Snacks
Ingredients(1), (2)
Smoothie bowls(3)
Total revenues
December 30, 2023 December 31, 2022
$
$
January 1, 2022
$
502,793
98,186
17,032
12,286
630,297
454,446
82,869
45,366
8,714
591,395
372,398
62,742
61,315
-
496,455
(1) For the year ended December 30, 2023, the Company reclassified certain product sales that were previously recorded in
Beverages and Broths to Ingredients to better reflect the nature of the product offerings. The comparative figures for the
years ended December 31, 2022 and January 1, 2022 have been conformed to the current year presentation.
(2) For the year ended January 1, 2022, ingredient revenues include $26.1 million from the production and sale of fruit-based
ingredients for industrial use prior to the Companys rationalization of the product line in July 2021.
(3) As described in note 19, on February 23, 2024, the Company entered into an agreement to sell the assets related to its
smoothie bowl product line.
Geographic Information
Revenues from external customers are attributed to countries based on the location of the customer. Revenues from external
customers by geographic area for the years ended December 30, 2023, December 31, 2022 and January 1, 2022 were as follows:
Revenues from External Customers
U.S.
Canada
Other
Total revenues from external customers
December 30, 2023 December 31, 2022
$
$
January 1, 2022
$
615,133
11,740
3,424
630,297
577,515
8,973
4,907
591,395
483,544
9,319
3,592
496,455
Long-lived assets consist of property, plant and equipment, net of accumulated depreciation, which are attributed to countries
based on the physical location of the assets. Long-lived assets by geographic area as at December 30, 2023 and December 31,
2022 were as follows:
Long-Lived Assets
U.S.
Canada
Total long-lived assets
December 30, 2023 December 31, 2022
$
$
317,830
2,068
319,898
290,266
2,040
292,306
SUNOPTA INC.
-F35-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
Major Customers
Customers accounting for more than 10% of the Companys consolidated revenues from continuing operations in any of the
past three fiscal years were as follows:
Customer A
Customer B
19. Subsequent Event
Sale of Assets
December 30, 2023 December 31, 2022
31%
14%
34%
8%
January 1, 2022
30%
13%
On February 23, 2024, the Company entered into an agreement to sell the assets related to its smoothie bowl product line for
proceeds of approximately $6.0 million. The transaction is expected to close on March 4, 2024. The sale of the smoothie bowl
product line will be reported in continuing operations in the first quarter of 2024.
20. Quarterly Results of Operations (unaudited)
The following table presents the unaudited consolidated results of operations of the Company for each of the quarters in the
years ended December 30, 2023 and December 31, 2022. The unaudited consolidated results of operations for all periods
presented below reflect Frozen Fruit and Sunflower as discontinued operations.
Revenues
Gross profit
Loss from continuing operations
Earnings (loss) from discontinued operations
Net earnings (loss)
Dividends and accretion of preferred stock
Earnings (loss) attributable to common shareholders
Basic and diluted earnings (loss) per share:
Loss from continuing operations
Earnings (loss) from discontinued operations
Earnings (loss) attributable to common shareholders(1)
First
Quarter
$
154,969
24,079
(2,827)
4,204
1,377
(704)
673
(0.03)
0.04
0.01
Fiscal 2023
Second
Quarter
$
141,163
18,629
(11,651)
(7,187)
(18,838)
(422)
(19,260)
(0.10)
(0.06)
(0.17)
Third
Quarter
$
152,541
20,268
(5,680)
(140,143)
(145,823)
(426)
(146,249)
(0.05)
(1.21)
(1.26)
Fourth
Quarter
$
181,624
25,641
(1,752)
(9,982)
(11,734)
(429)
(12,163)
(0.02)
(0.09)
(0.11)
SUNOPTA INC.
-F36-
December 30, 2023 Form 10-K
SunOpta Inc.
Notes to Consolidated Financial Statements
For the years ended December 30, 2023, December 31, 2022 and January 1, 2022
(All tabular dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
____________________________________________________________________________________________________
Revenues
Gross profit
Earnings (loss) from continuing operations
Earnings (loss) from discontinued operations
Net earnings (loss)
Dividends and accretion of preferred stock
Earnings (loss) attributable to common shareholders
Basic and diluted earnings (loss) per share:
Earnings from continuing operations
Earnings (loss) from discontinued operations
Earnings (loss) attributable to common shareholders(1)
Fiscal 2022
First
Quarter
$
139,517
23,769
1,021
3,547
4,568
(755)
3,813
0.00
0.03
0.04
Second
Quarter
$
148,065
27,013
928
543
1,471
(760)
711
0.00
0.01
0.01
Third
Quarter
$
144,023
25,132
2,359
(14,293)
(11,934)
(764)
(12,698)
0.01
(0.13)
(0.12)
Fourth
Quarter
$
159,790
23,816
(427)
1,481
1,054
(830)
224
(0.01)
0.01
0.00
(1) The sum of the individual per share amounts may not add due to rounding.
SUNOPTA INC.
-F37-
December 30, 2023 Form 10-K
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13a-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Brian Kocher, certify that:
(1)
(2)
(3)
(4)
I have reviewed this Annual Report on Form 10-K of SunOpta Inc.
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;
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;
The registrants 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.
b.
c.
d.
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;
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;
Evaluated the effectiveness of the registrants 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
Disclosed in this report any change in the registrants internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and
(5)
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
a.
b.
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 registrants ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrants internal control over financial reporting.
/s/ Brian Kocher
Brian Kocher
Chief Executive Officer
SunOpta Inc.
Date: February 28, 2024
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a)
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Greg Gaba, certify that:
(1)
(2)
(3)
(4)
I have reviewed this Annual Report on Form 10-K of SunOpta Inc.
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;
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;
The registrants 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.
b.
c.
d.
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;
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;
Evaluated the effectiveness of the registrants 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
Disclosed in this report any change in the registrants internal control over financial reporting that occurred
during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to materially affect, the registrants
internal control over financial reporting; and
(5)
The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal
control over financial reporting, to the registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):
a.
b.
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 registrants ability to record, process,
summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrants internal control over financial reporting.
/s/ Greg Gaba
Greg Gaba
Chief Financial Officer
SunOpta Inc.
Date: February 28, 2024
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32
In connection with the annual report of SunOpta Inc. (the Company) on Form 10-K for the year ended December 30, 2023,
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: February 28, 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 officers.
(1) Chair of Audit Committee
(2) Member of Audit Committee
(3) Chair of Corporate Governance Committee
(4) Member of Corporate Governance Committee
(5) Chair of Compensation Committee
(6) Member of Compensation Committee