2. Discontinued Operations

Divestiture of Frozen Fruit

On October 12, 2023, the Company entered into an Asset Purchase Agreement ("APA") with Natures Touch Mexico, S. de R.L. de C.V. and Nature's Touch Frozen Fruits, LLC (the "Purchasers") to sell to the Purchasers certain assets and liabilities of Frozen Fruit for an aggregate purchase price of approximately $141 million, subject to closing working capital adjustments (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 Company's 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 Company's 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.

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 a stated principal amount of $20.0 million in the aggregate (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 utilized the remaining cash consideration of $74.8 million to repay a portion of the outstanding borrowings under its revolving credit facilities (see note 8).

The estimated aggregate purchase price is subject to post-closing adjustments based on the final net working capital to be determined as of the Closing Date. Any downward adjustment to the aggregate purchase price will be deducted from the principal amount of the Seller Promissory Notes 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.

The Seller Promissory Notes bear interest at a rate per annum equal to the secured overnight financing rate, 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.

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, IT 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.

As at September 30, 2023, the Company determined that Frozen Fruit qualified for reporting as a discontinued operation held for sale. The Company recognized an estimated pre-tax loss on divestiture of $118.8 million to write down the carrying value of the net assets of the Transaction disposal group to fair value based on the estimated aggregate purchase price less estimated costs to sell. The estimated pre-tax loss on divestiture is recognized as part of the loss from discontinued operations in the consolidated statements of operations for the quarter and three quarters ended September 30, 2023. In addition, included in the assets held for sale as at September 30, 2023, are the carrying values of the Oxnard, California, facility and frozen fruit inventory that were not acquired by the Purchasers, as the Company’s plan for the divestiture of Frozen Fruit included the immediate liquidation of these assets, as they are not of use in the Company’s continuing operations.

The net assets of Frozen Fruit that have been reclassified and reported as held for sale on the consolidated balance sheets as at September 30, 2023 and December 31, 2022, are as follows:

	September 30, 2023		December 31, 2022
	$		$
Assets
Accounts receivable	16,644		15,358
Inventories	111,891		132,608
Other current assets	764		153
Property, plant and equipment, net	24,851		30,085
Operating lease right-of-use assets	715		3,803
Intangible assets, net	106,000		112,000
Loss on divestiture	(118,795	)	-
Total assets held for sale	142,070		294,007

Liabilities
Accounts payable and accrued liabilities	15,375		12,632
Operating lease liabilities	3,503		3,803
Total liabilities held for sale	18,878		16,435

The table below presents the major components of the results of discontinued operations reported in the consolidated statement of operations for the quarter and three quarters ended September 30, 2023 and October 1, 2022. The results of operations for the quarter and three quarters ended October 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.

	Quarter ended				Three quarters ended
	September 30, 2023		October 1, 2022		September 30, 2023		October 1, 2022
	$		$		$		$
Revenues	58,614		85,642		194,171		281,764
Cost of goods sold⁽¹⁾	68,760		79,391		202,443		263,041
Selling, general and administrative expenses⁽²⁾	2,370		2,788		7,347		8,304
Intangible asset amortization	2,000		2,166		6,000		6,498
Other expense (income), net⁽³⁾	5,885		(3,478	)	5,713		(2,608	)
Foreign exchange loss (gain)	912		696		(3,757	)	82
Interest expense⁽⁴⁾	840		441		1,392		1,160
Earnings (loss) before loss on divestiture	(22,153	)	3,638		(24,967	)	5,287
Loss on divestiture⁽⁵⁾	(118,795	)	(23,227	)	(118,795	)	(31,468	)
Loss from discontinued operations before income taxes	(140,948	)	(19,589	)	(143,762	)	(26,181	)
Income tax benefit	(805	)	(5,296	)	(636	)	(15,978	)
Loss from discontinued operations	(140,143	)	(14,293	)	(143,126	)	(10,203	)

(1) Cost of goods sold for the quarter and three quarters ended September 30, 2023, includes a $11.0 million charge to write down the 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 quarter and three quarters ended September 30, 2023, includes a $6.9 million impairment charge related to the equipment and operating lease right-of-use assets of the Oxnard, California, facility that was not acquired by the Purchasers. Other income for the quarter and three quarters ended October 1, 2022, includes a $3.8 million gain on the sale of a former frozen fruit facility sold in August 2022.

(4) Interest expense reflects interest on bank loans and other interest-bearing liabilities directly attributable to Frozen Fruit.

(5) For the quarter ended October 1, 2022, reflects the pre-tax loss on divestiture of $23.2 million recognized in the third quarter of 2022 on the classification of Sunflower as held for sale, and, for the three quarters ended October 1, 2022, reflects the pre-tax loss on divestiture of Sunflower, together with a loss of $8.2 million on the settlement of the purchase price allocation related to the 2020 divestiture of the Company's global ingredients business, Tradin Organic.