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SunOpta Announces Second Quarter 2010 Results

August 10,2010

TORONTO, Aug. 10, 2010 (GLOBE NEWSWIRE) -- SunOpta Inc. ("SunOpta" or "the Company") (Nasdaq:STKL) (TSX:SOY), a leading global company focused on natural, organic and specialty foods and natural health products, today announced financial results for the period ended July 3, 2010. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted. Please note that as a result of the June 2010 sale of the Company's Food Distribution assets, all results from operations related to this business have been excluded from operating results and are now reported as discontinued operations for all comparable periods.

For the second quarter of 2010 the Company realized revenues of $235.9 million versus second quarter 2009 revenues of $216.1 million, a year over year increase of 9.2%. Revenues in SunOpta Foods were $212.7 million, an increase of 5.5% versus the second quarter of 2009. After adjusting for movements in foreign exchange rates and commodity prices, revenues in SunOpta Foods increased approximately 6.9% versus the second quarter of 2009, reflecting continued momentum in the natural and organic foods sector.  All operating segments realized increased revenues and operating income1 year over year.   

For the second quarter of 2010 the Company reported net income on a GAAP basis of $20.5 million or $0.31 per diluted common share versus net income in the second quarter of 2009 of $1.8 million or $0.03 per diluted common share. Included in the results of the second quarter was a gain on the sale of the Canadian Food Distribution assets of $13.8 million or $0.21 per diluted common share.

Earnings from operations1 for the second quarter of 2010 were $6.7 million or $0.10 per diluted common share. Earnings from operations1 for the second quarter include additional pre-tax costs of approximately $1.3 million, including legal and professional fees and costs related to ongoing facility and operational rationalizations.

Operating income1 increased to $11.8 million or 5.0% of revenues versus operating income1 in the prior year of $4.6 million or 2.1% of revenues. Operating income1 in SunOpta Foods increased to $12.8 million or 6.0% of revenues versus $6.8 million or 3.4% in the prior year.

EBITDA1 for the second quarter of 2010, excluding the benefits of one-time gain items and contributions from discontinued operations increased 75% to $15.8 million versus $9.0 million in 2009, indicative of the improved operating performance realized in the business.

For the year to date period ended July 3, 2010 the Company has realized revenues of $453.3 million versus year to date second quarter 2009 revenues of $407.4 million, a year over year increase of 11.3%. Revenues in SunOpta Foods for the period were $411.6 million, an increase of 8.8% versus the first half of 2009. After adjusting for movements in foreign exchange rates and commodity prices, the increase in food revenues remained constant at approximately 8.8% versus the first half of 2009. Year to date all operating segments have realized increased revenues and operating income1 versus the prior year.   

Year to date the Company has realized net income on a GAAP basis of $25.1 million or $0.38 per diluted common share versus net income in 2009 of $0.1 million or $0.00 per diluted common share.   Included in the year to date results was a gain on the sale of the Canadian Food Distribution assets of $13.8 million or $0.21 per diluted common share.

Earnings from operations1 for the first half of 2010 were $11.3 million or $0.17 per diluted common share. Earnings from operations in the first half also include additional pre-tax costs of approximately $3.6 million, including legal and professional fees and costs related to ongoing facility and operational rationalizations.   

Year to date the Company has realized operating income1 of $20.8 million or 4.6% of revenues versus operating income1 in the prior year of $3.0 million or 0.7% of revenues. Operating income1 in SunOpta Foods increased to $24.2 million or 5.9% of revenues versus $8.8 million or 2.3% in the prior year.

The Company has realized EBITDA1 through the six month period ended July 3, 2010 of $29.2 million versus $11.7 million in the prior year, an increase of 150%, excluding the benefit of one-time items and the benefit of discontinued operations.

At July 3, 2010 the Company's balance sheet reflects a current working capital ratio of 1.71 to 1.00, long-term debt to equity ratio of 0.33 to 1.00 and total debt to equity ratio of 0.43 to 1.00. During the second quarter the Company generated cash from continuing operations of $16.6 million versus $11.0 million in the prior year, due primarily to increased earnings from operating activities. At July 3, 2010 the Company has total assets of $500.8 million and a net book value of $3.84 per outstanding share.

At quarter-end, the Company is in compliance with all banking covenants.

Steve Bromley, President and Chief Executive Officer of SunOpta commented, "We are very pleased with our second quarter and year to date results which are indicative of numerous initiatives which have been implemented, centered on improving operating results within our core business segments while at the same time improving our return on assets employed. We continue to focus on these core operating processes and believe that the initiatives are having the expected positive effect on our results. At the same time our balance sheet has also improved significantly with lower debt levels and improved return on net assets employed. Our continued focus on margin improvement and asset management combined with strong consumer interest in health and wellness positions our Company for long-term success."  

The Company plans to host a conference call at 10:00 a.m. Eastern Time on Wednesday, August 11th, 2010 to discuss these results and recent corporate developments. The conference call can be accessed via a link at the Company's website at www.sunopta.com. Additionally, the call may be accessed with the toll free dial-in number 1-877-312-9198 or 631-291-4622. A replay number can also be accessed between August 11th and 18th with the toll free dial-in number 1–800-642-1687 or 706-645-9291 followed by pass code: 86530032#.

About SunOpta Inc.

SunOpta Inc. is an operator of high-growth ethical businesses, focusing on integrated business models in the natural and organic food and natural health markets. The Company has three business units: the SunOpta Foods, which specializes in sourcing, processing and distribution of natural and organic food products integrated from seed through packaged products; Opta Minerals Inc. (TSX:OPM) (66.4 % owned by SunOpta), a producer, distributor, and recycler of environmentally friendly industrial materials; and SunOpta BioProcess Inc. which engineers and markets proprietary steam explosion technology systems for the bio-fuel, pulp and food processing industries. SunOpta believes that each of these business units has proprietary products and services that give it a solid competitive advantage in its sector.

The SunOpta Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3958

Forward-Looking Statements

Certain statements included in this press release may be considered "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation, which are based on information available to us on the date of this release. These forward-looking statements include, but are not limited to, management's expectations regarding improving our operating results and return on assets employed and our continued focus on margin improvement. The terms and phrases "improving", "continue", "remain confident", "positions", and other similar terms and phrases are intended to identify these forward looking statements. Forward looking statements are based on information available to us on the date of this release and are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors the Company believes are appropriate in the circumstances including, but not limited to, general economic conditions, consumer trends, preferences and spending patterns, product pricing levels, current customer demand, competitive intensity, cost rationalization and product development initiatives,. Whether actual timing and results will agree with expectations and predications of the Company is subject to many risks and uncertainties including, but not limited to, global economic conditions, consumer spending patterns and changes in market trends, decreases in customer demand, potential failure of product development, working capital management and continuous improvement initiatives, availability and pricing of raw materials and supplies, and other risks described from time to time under "Risk Factors" in the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q (available at www.sec.gov). Consequently all forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized.

SunOpta Inc.
Consolidated Statements of Operations
For the quarter ended July 3, 2010 and June 30, 2009
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 
 
 
Quarter ended
July 3, 
Quarter ended
June 30,
 
 2010
$
2009 
 $
%
change
    
Revenues 235,939 216,099 9.2%
    
Cost of goods sold 197,351 187,748 5.1%
    
Gross profit 38,588 28,351 36.1%
    
Warehousing and distribution expenses1,122 974 15.2%
Selling, general and administrative expenses24,764 22,364 10.7%
Intangible asset amortization1,144 1,085 5.4%
Other (income) expense, net(65) 116 156.0%
Foreign exchange gain(193) (672) 71.3%
    
Earnings from continuing operations before the following 11,816 4,484 163.5%
    
Interest expense, net2,618 3,470 (24.6%)
    
Earnings from continuing operations before income taxes9,198 1,014 807.1%
Provision for income taxes1,895 388 
388.4%
    
Earnings from continuing operations for the period7,303 626 1,066.6%
    
Discontinued operations    
(Loss) earnings from discontinued operations, net of taxes(460) 920 (150.0%)
Gain on sale of discontinued operations, net of taxes13,809 -- n/m
    
Earnings from discontinued operations13,349 920 1,351.0%
 
Earnings for period
20,652 1,546  1,235.8%
Earnings (loss) for the period attributable to non-controlling interests186 (234) 179.5%
 
Earnings for the period attributable to SunOpta Inc.
20,466 1,780 
1,049.8%
    
Earnings per share for the period – basic    
-from continuing operations0.11 0.01 
-from discontinued operations0.21 0.02 
 0.32 0.03 
    
Earnings per share for the period – diluted    
-from continuing operations0.11 0.01 
-from discontinued operations0.20 0.02 
 0.31 0.03 
 
SunOpta Inc.
Consolidated Statements of Operations
For the two quarters ended July 3, 2010 and June 30, 2009
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 
 
 
Two quarters
ended July 3, 
Two quarters
ended June 30,
 
 2010
$
2009 
 $
% change
    
Revenues 453,310 407,416 11.3%
    
Cost of goods sold 377,953 354,892 6.5%
    
Gross profit 75,357 52,524 43.5%
    
Warehousing and distribution expenses2,192 1,998 9.7%
Selling, general and administrative expenses51,556 44,744 15.2%
Intangible asset amortization2,319 2,283 1.6%
Other expense (income), net250 (72) (447.2%)
Foreign exchange (gain) loss(1,499) 501 (399.2%)
    
Earnings from continuing operations before the following 20,539 3,070 569.0%
    
Interest expense, net5,739 6,341 (9.5%)
    
Earnings (loss) from continuing operations before income taxes14,800 (3,271) 552.5%
Provision for (recovery of) income taxes3,930 (1,061) 
 
470.4%
    
Earnings (loss) from continuing operations for the period10,870 (2,210) 591.9%
    
Discontinued operations    
Earnings from discontinued operations, net of taxes614 1,777 (65.5%)
Gain on sale of discontinued operations, net of taxes13,809 -- n/m
    
Earnings from discontinued operations14,423 1,777 711.6%
 
Earnings (loss) for the period
25,293 (433) 
n/m
 
Earnings (loss) for the period attributable to non-controlling interests
214 (556) 
138.5%
    
Earnings for the period attributable to SunOpta Inc.25,079 123 n/m
    
Earnings (loss) per share for the period – basic    
-from continuing operations0.16 (0.03) 
-from discontinued operations0.22 0.03 
 0.38 0.00 
    
Earnings (loss) per share for the period – diluted    
-from continuing operations0.16 (0.03) 
-from discontinued operations0.22 0.03 
 0.38 0.00 
 
SunOpta Inc.
Consolidated Balance Sheets
As at July 3, 2010 and December 31, 2009
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 
  July 3, December 31,
 2010
$
 2009
$
   
Assets  
   
Current assets   
Cash and cash equivalents38,355 20,706
Accounts receivable99,684 78,790
Inventories146,599 157,547
Prepaid expenses and other current assets 9,079 10,100
Current income taxes recoverable-- 442
Deferred income taxes5,172 5,457
Current assets held for sale-- 36,774
 298,889 309,816
   
Property, plant and equipment 106,379 106,066
Goodwill30,491 31,431
Intangible assets50,718 55,541
Deferred income taxes 10,758 14,734
Other assets3,539 2,876
Non-current assets held for sale -- 30,826
   
 500,774 551,290
Liabilities   
   
Current liabilities   
Bank indebtedness26,085 63,481
Accounts payable and accrued liabilities80,938 88,401
Customer and other deposits1,215 1,413
Incomes taxes payable1,079 --
Other current liabilities1,914 1,566
Current portion of long-term debt63,723 52,455
Current portion of long-term liabilities-- 683
Current liabilities held for sale-- 17,904
 174,954 225,903
   
Long-term debt 17,908 34,734
Long-term liabilities 2,611 2,760
Deferred income taxes13,010 12,708
Non-current liabilities held for sale -- 487
 208,483 276,592
   
Preferred shares of a subsidiary company28,387 28,187
   
Equity  
SunOpta Inc. shareholders' equity  
Capital stock 179,218 178,694
65,170,331 common shares (December 31, 2009 – 64,982,968)  
Additional paid in capital 11,064 7,934
Retained earnings59,225 34,146
Accumulated other comprehensive income 953 12,079
 250,460 232,853
Non-controlling interest13,444 13,658
Total equity263,904 246,511
   
 500,774 551,290
 
SunOpta Inc.
Consolidated Statements of Cash Flow
For the quarters ended July 3, 2010 and June 30, 2009
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 
 
 
Quarter ended
July 3,
2010
$
Quarter ended
June 30,
2009
$
   
Cash provided by (used in)  
   
Operating activities  
Earnings for the period attributable to SunOpta Inc.20,652 1,546
Earnings from discontinued operations13,349 920
Earnings from continuing operations7,303 626
   
Items not affecting cash  
Amortization4,003 4,390
Unrealized (gain) loss on foreign exchange(326) 291
Deferred income taxes-- 2,378
Other909 165
Changes in non-cash working capital4,728 3,107
Net cash flows from operating activities – continuing operations16,617 10,957
Net cash flows from operating activities – discontinued operations(607) 518
 16,010 11,475
Investing activities  
Increase in short-term investments-- 15,000
Purchases of property, plant and equipment, net(3,266) (4,103)
Payment of deferred purchase consideration(221) (1,000)
Purchase of patents, trademarks and other intangible assets(585) (138)
Other(131) (2,282)
Net cash flows from investing activities – continuing operations(4,203) 7,477
Net cash flows from investing activities – discontinued operations65,794 (152)
 61,591 7,325
Financing activities  
Decrease in line of credit facilities(58,182) (2,756)
Borrowings under long-term debt247 --
Proceeds from the issuance of common shares305 214
Repayment of long-term debt(3,067) (2,510)
Other(55) (8)
Net cash flows from financing activities – continuing operations(60,752) (5,060)
Net cash flows from financing activities – discontinued operations-- --
 (60,752) (5,060)
   
Foreign exchange (loss) gain on cash held in a foreign currency(834) 447
   
Increase in cash and cash equivalents during the period16,015 14,187
   
Discontinued operations cash activity included above:  
Add: Balance included at beginning of period-- (169)
Less: Balance included at end of period-- (197)
   
Cash and cash equivalents – beginning of the period22,340 7,574
   
Cash and cash equivalents – end of the period38,355 21,395
 
SunOpta Inc.
Condensed Consolidated Statements of Cash Flow
For the two quarters ended July 3, 2010 and June 30, 2009
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 
 
 
Two quarters ended
July 3,
2010
$
Two quarters ended
June 30, 2009
$
   
Cash provided by (used in)  
   
Operating activities  
Earnings (loss) for the period 25,293 (433)
Earnings from discontinued operations14,423 1,777
Earnings (loss) from continuing operations10,870 (2,210)
   
Items not affecting cash  
Amortization8,418 8,689
Unrealized gain on foreign exchange(1,418) (234)
Deferred income taxes1,125 485
Other660 (1,020)
Changes in non-cash working capital(18,033) 1,623
Net cash flows from operating activities – continuing operations1,622 7,333
Net cash flows from operating activities – discontinued operations53 (378)
 1,675 6,955
Investing activities  
Increase in short-term investments-- (1,500)
Purchases of property, plant and equipment, net(9,417) (8,618)
Payment of deferred purchase consideration(721) (1,500)
Purchase of patents, trademarks and other intangible assets(627) (202)
Other165 (2,232)
Net cash flows from investing activities – continuing operations(10,600) (14,052)
Net cash flows from investing activities – discontinued operations65,633 (225)
 55,033 (14,277)
Financing activities  
(Decrease) increase in line of credit facilities(34,796) 9,246
Borrowings under long-term debt247 716
Proceeds from the issuance of common shares512 412
Repayment of long-term debt(4,169) (6,529)
Other(243) 61
Net cash flows from financing activities – continuing operations(38,449) 3,906
Net cash flows from financing activities – discontinued operations-- --
 (38,449) 3,906
   
Foreign exchange (loss) gain on cash held in a foreign currency(627) 253
   
Increase (decrease) in cash and cash equivalents during the period17,632 (3,163)
   
Discontinued operations cash activity included above:  
Add: Balance included at beginning of period17 800
Less: Balance included at end of period-- (197)
   
Cash and cash equivalents – beginning of the period20,706 23,955
   
Cash and cash equivalents – end of the period38,355 21,395
 
SunOpta Inc.
Segmented Information
For the quarter ended July 3, 2010 and June 30, 2009
Unaudited
(Expressed in thousands of U.S. dollars)
 
 Quarter ended
July 3, 2010
  SunOpta
Foods
$
 
Opta Minerals
 $
SunOpta BioProcess
 $
 
Corporate
$
 
Consolidated
$
      
Total revenues from external customers 
212,744
 
21,141
 
2,054
 
--
 
235,939
       
Segment Operating Income12,8171,719(326)(2,459)11,751
 
SunOpta Foods has the following segmented reporting:
  
 Quarter ended
July 3, 2010
  Grains and Foods
$
 
 Ingredients
$
 
 Fruit Group
$
International Foods Group
$
 SunOpta Foods
$
      
Total revenues from external customers92,08817,64841,35261,656212,744
      
Segment Operating Income7,1883,0061,3051,31812,817
  
 Quarter ended
June 30, 2009
  SunOpta
Foods
$
 Opta Minerals
 $
SunOpta BioProcess
 $
 
Corporate
$
 
Consolidated
$
      
Total revenues from external customers 
201,640
 
14,340
 
119
 
--
 
216,099
      
Segment Operating Income 6,847 (109) (837) (1,301) 4,600
 
SunOpta Foods has the following segmented reporting:
  
 Quarter ended
June 30, 2009
  Grains and Foods
$
 
 Ingredients
$
 
 Fruit Group
$
International Foods Group
$
 SunOpta Foods
$
      
Total revenues from external customers 
89,717
 
16,213
 
39,859
 
55,851
 
201,640
      
Segment Operating Income 5,213 1,890 623 (879) 6,847
 
(Segment Operating Income is defined as "Earnings before the following" excluding the impact of "other expense (income), net")
 
SunOpta Inc.
Segmented Information
For the two quarters ended July 3, 2010 and June 30, 2009
Unaudited
(Expressed in thousands of U.S. dollars)
 
 Two quarters ended
July 3, 2010
  SunOpta
Foods
$
 Opta Minerals
 $
SunOpta BioProcess
 $
 
Corporate
$
 
Consolidated
$
      
Total revenues from external customers 
411,562
 
39,072
 
2,676
 
--
 
453,310
       
Segment Operating Income24,2153,432(823)(6,035)20,789
 
SunOpta Foods has the following segmented reporting:
  
 Two quarters ended
July 3, 2010
  Grains and Foods
$
 
 Ingredients
$
 
 Fruit Group
$
International Foods Group
$
 SunOpta Foods
$
      
Total revenues from external customers170,93335,79884,652120,179411,562
      
Segment Operating Income12,2047,2183,1601,63324,215
  
 Two quarters ended
June 30, 2009
  SunOpta
Foods
$
 Opta Minerals
 $
SunOpta BioProcess
 $
 
Corporate
$
 
Consolidated
$
      
Total revenues from external customers 
378,219
 
29,065
 
132
 
--
 
407,416
      
Segment Operating Income 8,764 (861) (1,594) (3,311) 2,998
 
SunOpta Foods has the following segmented reporting:
  
 Two quarters ended
June 30, 2009
  Grains and Foods
$
 
 Ingredients
$
 
 Fruit Group
$
International Foods Group
$
 SunOpta Foods
$
      
Total revenues from external customers 
164,056
 
29,753
 
77,461
 
106,949
 
378,219
      
Segment Operating Income 9,148 2,712 (534) (2,562) 8,764
 
(Segment Operating Income is defined as "Earnings before the following" excluding the impact of "other expense (income), net")

Non-GAAP Measures

In addition to reporting financial results in accordance with generally accepted accounting principles ("GAAP"), the Company provides information regarding Operating Income, Earnings before interest, taxes, depreciation and amortization ("EBITDA") and Earnings from Operations as additional information about its operating results, which are not measures in accordance with GAAP. The Company believes that these non-GAAP measures assist investors and analysts in comparing performance across reporting periods on a consistent basis by excluding items that are not indicative of the Company's core operating performance. The non-GAAP measures of operating income, EBITDA, and earnings from operations should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. 

The Company defines Operating Income as "Earnings from continuing operations before the following" excluding the impact of "Other expense (income), net"; and EBITDA as Operating Income plus depreciation and amortization. The following is a tabular presentation of Operating Income and EBITDA, including a reconciliation to GAAP earnings for the period, which the Company believes to be the most directly comparable GAAP financial measure.

 
 
 
 
 Quarter ended
July 3,
2010
$
 
Quarter ended
June 30,
2009
$
   
Earnings from continuing operations for the period7,303 626
   
Provision for income taxes1,895 388
Interest expense, net2,618 3,470
Other (income) expense, net(65) 116
Operating income11,751 4,600
Depreciation and amortization4,003 4,390
Earnings before interest, taxes, depreciation
and amortization (EBITDA)
15,754 8,990
   
 
 
 Two quarters ended
July 3,
2010
$
Two quarters ended
June 30,
2009
$
   
Earnings (loss) from continuing operations for the period10,870 (2,210)
   
Provision for (recovery of) income taxes3,930 (1,061)
Interest expense, net5,739 6,341
Other expense (income), net250 (72)
Operating income20,789 2,998
Depreciation and amortization8,418 8,689
Earnings before interest, taxes, depreciation
and amortization (EBITDA)
29,207 11,687

Earnings from operations and diluted earnings from operations per share are non-GAAP measures. During the quarter and two quarters ended July 3, 2010, the Company recognized two gains and recorded specific expenses related to these gains. As a result, earnings for the period attributable to SunOpta Inc. and earnings per diluted share for the period are adjusted to arrive at adjusted earnings from operations1 per diluted share. The following is a tabular presentation of earnings from operations and earnings from operations per diluted common share, including a reconciliation to GAAP earnings for the period attributable to SunOpta Inc. and diluted earnings per share for the period, which the Company believes to be the most directly comparable GAAP financial measure.
 

 Quarter Ended
July 3, 2010
 Diluted earnings per share for the period
   
Earnings for the period attributable to
 SunOpta Inc.
$20,466$0.31
Adjusted for:  
Gain on sale of discontinued operations, net of income taxes(13,809)(0.21)
Gain on dilution of SunOpta BioProcess' ownership position in Xylitol Canada(1,242)(0.02)
Costs included in discontinued operations incurred as a result of the sale of the Canadian food distribution assets, net of income taxes of $3889020.01
Severance costs related to restructuring plan at our natural health products division, net of income taxes of $2234130.01
Earnings from operations$6,730$0.10
  
 Two Quarters Ended
July 3, 2010
 Diluted earnings per share
for the period
    
Earnings for the period attributable to
 SunOpta Inc.
$25,079$0.38
Adjusted for:  
Gain on sale of discontinued operations, net of income taxes(13,809)(0.21)
Gain on dilution of SunOpta BioProcess' ownership position in Xylitol Canada(1,242)(0.02)
Costs included in discontinued operations incurred as a result of the sale of the Canadian food distribution assets, net of income taxes of $3889020.01
Severance costs related to restructuring plan at our natural health products division, net of income taxes of $2234130.01
Earnings from operations$11,343$0.17

1 See discussion and reconciliation of Non-GAAP Measures

CONTACT: SunOpta Inc.
         Steve Bromley, President & CEO
         Eric Davis, Vice President & CFO
         Tony Tavares, Chief Operating Officer
         Susan Wiekenkamp, Information Officer
           susan.wiekenkamp@sunopta.com
           905-455-2528, ext 103
         www.sunopta.com

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