Provides update on Value Creation Plan
Highlights board and senior management team additions
TORONTO--(BUSINESS WIRE)--
SunOpta Inc. ("SunOpta") (NASDAQ:STKL) (TSX:SOY), a leading global
company focused on organic, non-genetically modified and specialty
foods, today announced financial results for the fourth quarter and
fiscal year ended December 31, 2016.
"Significant progress has been made identifying the immediate strategic
actions that support our Value Creation Plan," said David Colo,
President and Chief Executive Officer. "We have worked diligently
evaluating all aspects of the business, defining initial actions and
building the team and processes to execute our strategic plan to drive
long-term shareholder value. As we implement the four pillars of our
strategic plan, we will refine our product portfolio, improve execution,
broaden our sales effort and build a sustainable platform for profitable
growth. We believe SunOpta is well positioned to benefit from the
growing trend for healthier foods and we are building the platform for
long-term achievement of our strategic goals and increased returns for
shareholders."
Colo continued, "Fourth quarter results were below our expectations,
driven by the exit of non-core business lines, impairment charges, and
sales softness in beverage and fruit that also impacted production
volumes. We believe these results are not in any way reflective of the
true earnings power of our Company. Through our Value Creation Plan, we
are taking aggressive action to improve our operating performance and
deliver improved results in 2017 and beyond."
All amounts are expressed in U.S. dollars and results are reported in
accordance with U.S. GAAP, except where specifically noted.
Fourth Quarter 2016 Highlights:
-
Revenues of $297.5 million for the fourth quarter of 2016, versus
$316.4 million in the fourth quarter of 2015, a decrease of 6.0%
versus the prior year period.
-
Loss from continuing operations of $33.5 million or $0.41 per diluted
common share in the fourth quarter of 2016, compared to a loss from
continuing operations of $13.6 million or $0.16 per diluted common
share in the fourth quarter of 2015.
-
Adjusted loss1 of $7.3 million or $0.08 per diluted common
share during the fourth quarter of 2016, compared to adjusted earnings
of $2.4 million or $0.03 per diluted common share during the fourth
quarter of 2015.
-
Adjusted EBITDA¹ of $9.4 million or 3.2% of revenues for the fourth
quarter of 2016, versus $18.2 million or 5.8% of revenues in the
fourth quarter of 2015.
Fiscal 2016 Highlights
-
Revenues of $1,346.7 million for fiscal 2016, versus $1,145.1 million
in fiscal 2015, an increase of 17.6%.
-
Loss from continuing operations of $50.6 million or $0.61 per diluted
common share, compared to loss from continuing operations of $3.0
million or $0.04 per diluted common share during the same period in
2015.
-
Adjusted earnings1 per diluted common share were $5.8
million or $0.07 per diluted common share for fiscal 2016, compared to
$19.0 million or $0.26 per diluted common share during fiscal 2015.
-
Adjusted EBITDA¹ of $81.7 million, or 6.1% of revenues for the full
year, versus $62.2 million, or 5.4% of revenues in the same period of
2015.
Recent Board of Directors and Senior Management Enhancements
Highlighted
The Company has made significant progress enhancing corporate governance
and the senior management team. On January 23, 2017, the Company
announced that veteran industry executive Gregg Tanner joined the Board
of Directors. Additionally, on February 6, 2017, the Company announced
the appointment of David Colo as President and Chief Executive Officer.
The Company has also named Colin Smith to the position of Chief
Operating Officer for the Consumer Products segment.
Value Creation Plan Update
As announced on October 7, 2016, SunOpta, with the assistance of
Oaktree, is conducting a thorough review of the Company's operations,
management and governance, with the objective of maximizing the
Company's ability to deliver long-term value to its shareholders.
Through this review, management and the Board have developed a Value
Creation Plan built on four pillars: portfolio optimization, operational
excellence, go-to-market effectiveness and process sustainability.
The Company is currently targeting implementation of $30 million of
productivity driven annualized EBITDA1 enhancements and $20
million of working capital efficiencies to be implemented over the
coming 12 to 18 months. In the near-term, we expect these benefits to be
offset by structural investments the Company is making in the areas of
quality, sales, marketing, operations and engineering resources.
Additionally, during 2017, the Company anticipates incurring
non-structural third-party consulting support, severance, and recruiting
costs. The plan also calls for increased investment in capital upgrades
at several manufacturing facilities to enhance food safety and
manufacturing efficiencies. Over time, the Company expects these
investments to yield additional improvement in EBITDA1 beyond
the $30 million of initial productivity-driven savings. Recent progress
on each of the four pillars of the Value Creation Plan is highlighted
below:
Portfolio Optimization
The focus of the portfolio optimization pillar is to simplify the
business, investing where structural advantages exist, while exiting
businesses or product lines where the Company is not effectively
positioned. During the fourth quarter of 2016, the Company announced the
closing of its San Bernardino, California juice facility, which is
expected to be $4 million accretive to EBITDA1 in 2017.
Following that initial announcement, the Company continued to evaluate
its portfolio which resulted in the following additional actions:
-
Closure of the Company's soy extraction (ingredient) facility in
Heuvelton, New York, transferring production to the Company's
Alexandria, Minnesota facility
-
Exited certain varieties of specialty soy and sunflower, as well as
frozen edamame
-
Exited a non-core vegetable brokerage operation
-
Launched a global organic ingredients portfolio strategy review, which
is identifying incremental large ingredient categories for further
investment. The incremental growth opportunities include new
geographies, new products and new processing capabilities.
During the fourth quarter the Company recognized non-cash impairment
charges of $1.2 million associated with the Heuvelton facility closure,
and $3.4 million of inventory and other reserves to reflect the exit of
non-core business lines. The Company intends to continue to proactively
manage its business portfolio to identify opportunities to drive EBITDA1
growth.
Operational Excellence
The focus of the operational excellence pillar is to ensure food quality
and safety, coupled with improved operational performance and
efficiency. These efforts are expected to generate productivity
improvements in manufacturing, procurement and logistics. With the
assistance of third-party consulting support, the Company has identified
a number of broad-based savings opportunities we expect to implement and
realize over 2017 and 2018. Recent activities include:
-
Launched network-wide upgrades to worker safety and food quality
programs, with the goal of becoming the leader in safety and quality
across the healthy food industry
-
Launched a productivity enhancement program that is systematically
evaluating all manufacturing facilities, supply chain, and procurement
processes to identify productivity cost savings opportunities. As a
result of these efforts, the Company is targeting $30 million in
annualized EBITDA1 improvements to be implemented over the
next 12 to 18 months.
-
Rolled out the "SunOpta Plant Management System," which consists of a
standardized set of operating processes, KPIs, and continuous
improvement methodologies that will provide improved consistency and
productivity performance across the manufacturing network
-
Launched a working capital optimization program that is targeting $20
million of cash flow enhancements
Go-to-Market Effectiveness
The focus of the Go-to-Market effectiveness pillar is to optimize
customer and product mix in existing sales channels, and identify and
penetrate new high-potential sales channels. The Company expects efforts
under this pillar to improve revenue growth and profitability over time.
Early in 2017, the Company re-aligned its go-to-market approach, hiring
key talent to lead foodservice and retail sales, as well as adding new
marketing resources. The Company also launched a sales force
effectiveness program that has already started to generate results.
Recent highlights include:
-
Hired a new SVP of Foodservice Sales and a SVP of Beverages and Snacks
-
Secured new business wins in Healthy Beverage, Healthy Fruit and
Global Ingredients
-
Selectively adjusted pricing to enhance margins
Process Sustainability
The focus of process sustainability is to ensure the Company has the
infrastructure, systems and skills to sustain the business improvements
and value captured from the Value Creation Plan. In February 2017, the
Company initiated an organizational redesign focused on streamlining and
simplifying the business, investing in systems and processes to ensure
each function has the tools in place to achieve its goals. Recent
initiatives include:
-
Developed a plan to increase capital engineering, plant engineering,
and process engineering capabilities that is targeted to enhance food
safety, product flow and productivity performance
-
Created a centralized Consumer Products supply chain team to manage
sales and operations planning ("S&OP"), warehousing, and distribution
-
Launched a comprehensive S&OP program to improve supply/demand
planning, which is expected to reduce inventory while improving
customer service
-
Initiated a program to push centralized cost accounting resources into
manufacturing facilities to improve the accuracy of
manufacturing-related financial data
Fourth Quarter 2016 Results
Revenues for the fourth quarter of 2016 were $297.5 million, a decrease
of 6.0% compared to $316.4 million in the fourth quarter of 2015.
Excluding the impact on revenues for the fourth quarter of 2016 of
changes in commodity-related pricing and foreign exchange rates,
estimated impact of the recall of certain sunflower kernel products
based on shortfall against anticipated volumes, estimated impact on west
coast pouch operations as a result of a fire at a third-party facility,
and business acquisitions and associated product rationalizations,
revenues in the fourth quarter of 2016 decreased by 0.9% compared with
the fourth quarter of 2015. This decrease in revenues reflected lower
volumes of specialty raw materials driven by a reduction in contracted
acres, as well as a sharp decline in retail market demand for frozen
fruit products. In addition, sales of aseptic beverage products and
specialty bars were consistent with the prior year due to customer
turnover and the ramp-up of new product offerings.
The Consumer Products segment generated revenues from external customers
of $164.9 million during the fourth quarter of 2016, a decrease of 4.6%
compared to $172.9 million in the fourth quarter of 2015. Excluding the
impact of business acquisitions and associated product rationalizations
and the fire at a third-party facility, revenues in Consumer Products
decreased 2.2% compared to the fourth quarter of 2015 largely reflecting
an 8.2% decline in sales of frozen fruit.
The Global Ingredients segment generated revenues from external
customers of $132.6 million, a decline of 7.6% compared to $143.5
million in the fourth quarter of 2015. Excluding the impact on revenues
of changes in commodity-related pricing and foreign exchange rates,
Global Ingredients revenue increased 0.7% in the fourth quarter of 2016,
compared with the fourth quarter of 2015 reflecting a 4.1% decline in
domestic sourcing from lower volumes of specialty raw materials driven
by a planned reduction in contracted acres and lower sales, offset by
3.7% growth in internationally sourced organic ingredients.
Gross profit was $17.0 million for the fourth quarter of 2016, compared
to $25.2 million for the fourth quarter of 2015. As a percentage of
revenues, gross profit for the fourth quarter of 2016 was 5.7% compared
to 8.0% in the fourth quarter of 2015. The gross profit percentage for
the fourth quarter of 2016 would have been approximately 7.9%, excluding
the impact of costs related to aging reserves and low margin sales to
reduce inventory exposures mainly on specialty grain varieties the
Company is exiting, an inventory reserve for certain consumer-packaged
products due to quality-related issues, the acquisition accounting
adjustment related to Sunrise's inventory sold in the fourth quarter of
2016, and lost margin caused by the recall of certain sunflower kernel
products.
Operating loss¹ was $10.0 million, or 3.3% of revenues, compared to an
operating loss of $1.7 million, or 0.6% of revenues in the fourth
quarter of 2015. The increase in operating loss year-over-year is
attributable to lower gross profit, as well as a $1.3 million increase
in selling, general and administrative expenses ("SG&A"), mainly
reflecting external advisory costs associated with the strategic review
and Value Creation Plan of $3.6 million, partially offset by lower
compensation and other administrative costs. The operating income
percentage for the fourth quarter of 2016 would have been approximately
0.2%, excluding the items mentioned above that impacted gross profit,
and costs associated with the strategic review and Value Creation Plan.
During the fourth quarter of 2016, the Company recognized a non-cash
goodwill impairment charge of $17.5 million, related to its sunflower
operations.
Adjusted EBITDA¹ was $9.4 million or 3.2% of revenues in the fourth
quarter of 2016, compared to $18.2 million or 5.8% of revenues in the
fourth quarter of 2015.
The Company reported a loss from continuing operations for the fourth
quarter of 2016 of $33.5 million, or $0.41 per diluted common share,
compared to a loss from continuing operations of $13.6 million, or $0.16
per diluted common share during the fourth quarter of 2015. Adjusted
loss¹ in the fourth quarter was $7.3 million or $0.08 per diluted common
share, compared to Adjusted earnings¹ of $2.4 million or $0.03 per
diluted common share in the fourth quarter of 2015. Please refer to the
discussion and table below under "Non-GAAP Measures - Adjusted Earnings
and Adjusted Loss".
Fiscal 2016 Results
Revenues for fiscal 2016 were $1,346.7 million, up 17.6% compared to
fiscal 2015 mainly due to the acquisition of Sunrise. Revenue was
negatively impacted by approximately $14.9 million during fiscal 2016
due to the recall of certain sunflower products and a fire at a
third-party contract manufacturing facility. Excluding the impact on
revenues for the year ended December 31, 2016 of business acquisitions
and associated product rationalizations, changes in commodity-related
pricing and foreign exchange rates, the estimated impact of the
sunflower recall and estimated impact of the fire on west coast pouch
operations, revenues increased 1.0% in 2016, compared with 2015. This
increase in revenues reflected higher demand for organic ingredients and
growth in aseptic beverage volumes with the added output from the
Company's Allentown, Pennsylvania facility and new product launches,
partially offset by lower volumes of specialty raw materials driven by a
reduction in contracted acres and lower retail market demand for frozen
fruit in the fourth quarter of 2016.
The Consumer Products segment generated revenues from external customers
of $772.4 million during fiscal 2016, an increase of 44.6% compared to
$534.2 million in fiscal 2015. Excluding the impact of business
acquisitions and associated product rationalizations and the fire at a
third-party facility, revenues in Consumer Products increased 1.6%
compared to fiscal 2015 largely reflecting growth within the Healthy
Beverages platform.
The Global Ingredients segment generated revenues from external
customers of $574.3 million, a decline of 6.0% compared to $610.9
million in fiscal 2015. Excluding the impact on revenues of changes in
commodity-related pricing and foreign exchange rates, Global Ingredients
revenue increased 0.2% in fiscal 2016, compared to fiscal 2015
reflecting a 15.9% decline in domestic sourcing from lower volumes of
specialty raw materials driven by a planned reduction in contracted
acres and lower sales, offset by 13.6% growth in internationally sourced
organic ingredients.
Gross profit was $126.0 million for fiscal 2016, compared with $110.4
million for fiscal 2015. As a percentage of revenues, gross profit for
fiscal 2016 was 9.4% compared to 9.6% in 2015. The gross profit
percentage for fiscal 2016 would have been approximately 10.9%,
excluding the impact of an acquisition accounting adjustment related to
Sunrise inventory sold in fiscal 2016, aging reserves and low margin
sales to reduce inventory exposures mainly on specialty grain varieties
the Company is exiting, an inventory reserve for certain
consumer-packaged products due to quality-related issues, start-up costs
related to the ramp-up of production at the Company's Allentown aseptic
facility, and lost margin caused by the recall of certain sunflower
kernel products.
Operating income¹ in fiscal 2016 was $14.7 million, or 1.1% of revenues,
compared to $21.3 million, or 1.9% of revenues in fiscal 2015. The
operating income percentage for fiscal 2016 would have been
approximately 3.2%, excluding the items mentioned above that impacted
gross profit, and the impact of legal costs mainly related to the Plum
dispute, which totaled $1.9 million year to date, and external advisory
costs associated with the strategic review and Value Creation Plan.
Other expense in fiscal 2016 includes an asset impairment charge of
$11.5 million associated with the Company's decision to exit the San
Bernardino juice facility and the Heuvelton soy facility, $9.0 million
reflecting the settlement of the Plum dispute, $2.2 million related to
consolidation of the Company's frozen fruit processing facilities
following the Sunrise acquisition, $3.7 million of severance and
rationalization costs related to the departure of Rik Jacobs as
President and CEO in November 2016, certain facility closures, workforce
rationalization initiatives and employee retention costs, and $2.8
million reflecting the voluntary withdrawal of certain consumer-packaged
products and voluntary recall of certain sunflower kernel products.
These charges were partially offset by the $1.7 million gain on
settlement of the contingent consideration obligation related to the
acquisition of Niagara Natural in 2015.
Adjusted EBITDA¹ was $81.7 million or 6.1% of revenues in fiscal 2016,
compared to $62.2 million or 5.4% of revenues in fiscal 2015.
The Company reported a loss from continuing operations for fiscal 2016
of $50.6 million, or $0.61 per diluted common share, compared to a loss
from continuing operations of $3.0 million, or $0.04 per diluted common
share during fiscal 2015. Adjusted earnings were $5.8 million or $0.07
per diluted common share for fiscal 2016, compared to $19.0 million or
$0.26 per diluted common share during fiscal 2015. Please refer to the
discussion and table below under "Non-GAAP Measures - Adjusted Earnings
and Adjusted Loss".
Balance Sheet
At December 31, 2016 SunOpta's balance sheet reflected total assets of
$1,129.6 million and total debt of $432.6 million. Total debt declined
approximately $113.7 million from the end of the third quarter of 2016
as a result of $79.0 million in net proceeds generated from the issuance
of preferred stock, as well as approximately $36.0 million in cash
generated from operations. At December 31, 2016 leverage was
approximately 5 times Adjusted EBITDA¹ on a trailing four quarter
adjusted basis, after eliminating the negative impact on EBITDA from the
San Bernardino juice facility.
During the second quarter of 2016, the Company announced a voluntary
recall of certain roasted sunflower kernel products produced at its
Crookston, Minnesota facility. For fiscal 2016, estimated losses of
$40.0 million were recognized in relation to the recall reflecting the
amount of losses that have been determined to-date to be both probable
and reasonably estimable. The Company carries general liability and
product recall insurance with aggregate limits of $47.0 million, and it
expects to recover recall-related costs through these policies, less
applicable deductibles and subject to coverage limits. As the Company
continues to work with its customers and insurance providers to
substantiate claims received, it may need to revise its estimates in
subsequent periods.
Conference Call with accompanying presentation
SunOpta plans to host a conference call at 9:00 A.M. Eastern time on
Wednesday, March 1, 2017, to discuss the fourth quarter financial
results. After opening remarks, there will be a question and answer
period. This conference call can be accessed via a link on SunOpta's
website at www.sunopta.com
under the "Investors" section. To listen to the live call over the
Internet, please go to SunOpta's website at least 15 minutes early to
register, download and install any necessary audio software.
Additionally, the call may be accessed with the toll free dial-in number
1 (877) 312-9198 or International dial-in number 1 (631) 291-4622. If
you are unable to listen live, the conference call will be archived and
can be accessed for approximately 90 days on the Company's website.
¹ See discussion of non-GAAP measures
About SunOpta Inc.
SunOpta Inc. is a leading global company focused on organic,
non-genetically modified ("non-GMO") and specialty foods. SunOpta
specializes in the sourcing, processing and packaging of organic and
non-GMO food products, integrated from seed through packaged products;
with a focus on strategic vertically integrated business models.
SunOpta's organic and non-GMO food operations revolve around value-added
grain, seed, fruit and vegetable based product offerings, supported by a
global sourcing and supply infrastructure.
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, our ability to implement the four pillars and
achieve the objectives of our strategic Value Creation Plan, $30 million
of annualized EBITDA enhancements and $20 million of cash flow from
working capital optimization over the next 12 to 18 months, the amount
of EBITDA improvement expected to be generated from the closure of our
San Bernardino, CA facility and the anticipated insurance recoveries
associated with the sunflower recall. Generally, forward-looking
statements do not relate strictly to historical or current facts and are
typically accompanied by words such as "will", "believe", "continue",
"expects", "intend", "becoming", "anticipate", "confident", "can",
"should", "would", "may", "plans", "estimate", "project", "potential",
"intention", "might", "predict" or other similar terms and phrases
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, continued
consumer interest in health and wellness, ability to maintain product
pricing levels, current customer demand, planned facility and
operational expansions, closures and divestitures, competitive
intensity, cost rationalization, product development initiatives, and
alternative potential uses for our capital resources. 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, risks associated with acquisitions generally such as the
failure to retain key management and employees, issues or delays in the
successful integration of the operations, systems and personnel of
recently acquired businesses with those of the Company, incurring or
experiencing unanticipated costs and/or delays or difficulties, future
levels of revenues being lower than expected, costs being higher than
expected, inability to realize synergies to the extent anticipated and
conditions affecting the frozen fruit industry generally; failure or
inability to implement growth strategies in a timely manner; changes in
the level of capital investment; local and global political and economic
conditions; consumer spending patterns and changes in market trends;
decreases in customer demand; delayed or unsuccessful product
development efforts; potential product recalls; working capital
management and continuous improvement initiatives; availability and
pricing of raw materials and supplies; potential covenant breaches under
our credit facilities; 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. The Company undertakes no obligation to publicly correct or
update the forward looking statements in this document, in other
documents, or on its website to reflect future events or circumstances,
except as may be required under applicable securities laws.
|
SunOpta Inc.
|
Consolidated Statements of Operations
|
For the quarters and years ended December 31, 2016 and January 2,
2016 |
(Unaudited)
|
(Expressed in thousands of U.S. dollars, except per share amounts)
|
|
|
|
Quarter ended
|
|
Year ended
|
|
|
December 31, 2016
|
|
January 2, 2016 |
|
December 31, 2016
|
|
January 2, 2016 |
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
297,539
|
|
|
316,378
|
|
|
1,346,731
|
|
|
1,145,134
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
280,496
|
|
|
291,148
|
|
|
1,220,779
|
|
|
1,034,772
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
17,043
|
|
|
25,230
|
|
|
125,952
|
|
|
110,362
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
26,005
|
|
|
24,723
|
|
|
98,681
|
|
|
85,754
|
|
Intangible asset amortization
|
|
2,810
|
|
|
2,846
|
|
|
11,282
|
|
|
4,951
|
|
Other expense, net
|
|
5,569
|
|
|
7,758
|
|
|
28,292
|
|
|
12,151
|
|
Goodwill impairment
|
|
17,540
|
|
|
-
|
|
|
17,540
|
|
|
-
|
|
Foreign exchange loss (gain)
|
|
(1,817
|
)
|
|
(595
|
)
|
|
1,243
|
|
|
(1,641
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing operations before the following
|
|
(33,064
|
)
|
|
(9,502
|
)
|
|
(31,086
|
)
|
|
9,147
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
8,527
|
|
|
12,498
|
|
|
43,275
|
|
|
15,669
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations before income taxes
|
|
(41,591
|
)
|
|
(22,000
|
)
|
|
(74,361
|
)
|
|
(6,522
|
)
|
|
|
|
|
|
|
|
|
|
Recovery of income taxes
|
|
(8,165
|
)
|
|
(8,228
|
)
|
|
(23,797
|
)
|
|
(3,390
|
)
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
(33,426
|
)
|
|
(13,772
|
)
|
|
(50,564
|
)
|
|
(3,132
|
)
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes and
non-controlling interest
|
|
-
|
|
|
(16,516
|
)
|
|
(570
|
)
|
|
(19,475
|
)
|
|
|
|
|
|
|
|
|
|
Loss
|
|
(33,426
|
)
|
|
(30,288
|
)
|
|
(51,134
|
)
|
|
(22,607
|
)
|
|
|
|
|
|
|
|
|
|
Earnings (loss) attributable to non-controlling interests
|
|
50
|
|
|
(220
|
)
|
|
54
|
|
|
(136
|
)
|
|
|
|
|
|
|
|
|
|
Loss attributable to SunOpta Inc.
|
|
(33,476
|
)
|
|
(30,068
|
)
|
|
(51,188
|
)
|
|
(22,471
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - basic
|
|
|
|
|
|
|
|
|
- from continuing operations
|
|
(0.41
|
)
|
|
(0.16
|
)
|
|
(0.61
|
)
|
|
(0.04
|
)
|
- from discontinued operations
|
|
-
|
|
|
(0.19
|
)
|
|
(0.01
|
)
|
|
(0.27
|
)
|
|
|
(0.41
|
)
|
|
(0.35
|
)
|
|
(0.62
|
)
|
|
(0.31
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share - diluted
|
|
|
|
|
|
|
|
|
- from continuing operations
|
|
(0.41
|
)
|
|
(0.16
|
)
|
|
(0.61
|
)
|
|
(0.04
|
)
|
- from discontinued operations
|
|
-
|
|
|
(0.19
|
)
|
|
(0.01
|
)
|
|
(0.27
|
)
|
|
|
(0.41
|
)
|
|
(0.35
|
)
|
|
(0.62
|
)
|
|
(0.31
|
)
|
|
SunOpta Inc.
|
Consolidated Balance Sheets
|
As at December 31, 2016 and January 2, 2016 |
(Unaudited)
|
(Expressed in thousands of U.S. dollars)
|
|
|
|
December 31, 2016
|
|
January 2, 2016 |
|
|
$
|
|
$
|
|
|
|
|
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
|
1,251
|
|
|
2,274
|
|
Accounts receivable
|
|
157,369
|
|
|
117,412
|
|
Inventories
|
|
368,482
|
|
|
371,223
|
|
Prepaid expenses and other current assets
|
|
19,794
|
|
|
20,088
|
|
Current income taxes recoverable
|
|
2,801
|
|
|
21,728
|
|
Current assets held for sale
|
|
-
|
|
|
64,330
|
|
Total current assets
|
|
549,697
|
|
|
597,055
|
|
|
|
|
|
|
Property, plant and equipment
|
|
162,239
|
|
|
176,513
|
|
Goodwill
|
|
223,611
|
|
|
241,690
|
|
Intangible assets
|
|
183,524
|
|
|
195,008
|
|
Deferred income taxes
|
|
1,045
|
|
|
958
|
|
Other assets
|
|
9,442
|
|
|
7,979
|
|
|
|
|
|
|
Total assets
|
|
1,129,558
|
|
|
1,219,203
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Current liabilities
|
|
|
|
|
Bank indebtedness
|
|
201,494
|
|
|
159,773
|
|
Accounts payable and accrued liabilities
|
|
173,745
|
|
|
151,831
|
|
Customer and other deposits
|
|
2,543
|
|
|
5,322
|
|
Income taxes payable
|
|
5,661
|
|
|
1,720
|
|
Other current liabilities
|
|
1,016
|
|
|
1,521
|
|
Current portion of long-term debt
|
|
2,079
|
|
|
1,773
|
|
Current portion of long-term liabilities
|
|
5,500
|
|
|
5,243
|
|
Current liabilities held for sale
|
|
-
|
|
|
52,486
|
|
Total current liabilities
|
|
392,038
|
|
|
379,669
|
|
|
|
|
|
|
Long-term debt
|
|
229,008
|
|
|
321,222
|
|
Long-term liabilities
|
|
15,354
|
|
|
17,809
|
|
Deferred income taxes
|
|
44,561
|
|
|
74,324
|
|
Total liabilities
|
|
680,961
|
|
|
793,024
|
|
|
|
|
|
|
Series A Preferred Stock
|
|
79,184
|
|
|
-
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
SunOpta Inc. shareholders' equity
|
|
|
|
|
Common shares
|
|
300,426
|
|
|
297,987
|
|
Additional paid-in capital
|
|
25,522
|
|
|
22,327
|
|
Retained earnings
|
|
53,838
|
|
|
106,838
|
|
Accumulated other comprehensive loss
|
|
(13,104
|
)
|
|
(6,113
|
)
|
|
|
366,682
|
|
|
421,039
|
|
Non-controlling interests
|
|
2,731
|
|
|
5,140
|
|
Total equity
|
|
369,413
|
|
|
426,179
|
|
|
|
|
|
|
Total equity and liabilities
|
|
1,129,558
|
|
|
1,219,203
|
|
|
|
|
|
|
|
|
|
|
SunOpta Inc.
|
Consolidated Statements of Cash Flows
|
For the quarters and years ended December 31, 2016 and January 2,
2016 |
(Unaudited)
|
(Expressed in thousands of U.S. dollars)
|
|
|
|
Quarter ended
|
|
Year ended
|
|
|
December 31, 2016
|
|
January 2, 2016 |
|
December 31, 2016
|
|
January 2, 2016 |
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED BY (USED IN)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
|
|
|
|
|
|
|
Loss
|
|
(33,426
|
)
|
|
(30,288
|
)
|
|
(51,134
|
)
|
|
(22,607
|
)
|
Loss from discontinued operations attributable to SunOpta Inc. |
|
-
|
|
|
(16,516
|
)
|
|
(570
|
)
|
|
(19,475
|
)
|
Loss from continuing operations
|
|
(33,426
|
)
|
|
(13,772
|
)
|
|
(50,564
|
)
|
|
(3,132
|
)
|
|
|
|
|
|
|
|
|
|
Items not affecting cash:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
8,195
|
|
|
8,268
|
|
|
34,150
|
|
|
21,007
|
|
Acquisition accounting adjustment on inventory sold
|
|
1,596
|
|
|
4,000
|
|
|
15,000
|
|
|
4,000
|
|
Amortization and write-off of debt issuance costs
|
|
1,091
|
|
|
5,895
|
|
|
11,301
|
|
|
5,895
|
|
Deferred income taxes
|
|
(10,090
|
)
|
|
(4,735
|
)
|
|
(29,850
|
)
|
|
(4,038
|
)
|
Stock-based compensation
|
|
975
|
|
|
534
|
|
|
4,148
|
|
|
4,366
|
|
Unrealized loss (gain) on derivative instruments
|
|
717
|
|
|
677
|
|
|
(547
|
)
|
|
143
|
|
Fair value of contingent consideration
|
|
123
|
|
|
646
|
|
|
(1,158
|
)
|
|
884
|
|
Impairment of long-lived assets
|
|
1,222
|
|
|
-
|
|
|
13,257
|
|
|
-
|
|
Goodwill impairment
|
|
17,540
|
|
|
-
|
|
|
17,540
|
|
|
-
|
|
Other
|
|
(8
|
)
|
|
(626
|
)
|
|
335
|
|
|
990
|
|
Changes in non-cash working capital, net of businesses acquired
|
|
48,052
|
|
|
25,180
|
|
|
(12,891
|
)
|
|
(3,685
|
)
|
Net cash flows from operations - continuing operations
|
|
35,987
|
|
|
26,067
|
|
|
721
|
|
|
26,430
|
|
Net cash flows from operations - discontinued operations
|
|
-
|
|
|
(603
|
)
|
|
758
|
|
|
4,814
|
|
|
|
35,987
|
|
|
25,464
|
|
|
1,479
|
|
|
31,244
|
|
|
|
|
|
|
|
|
|
|
Investing activities
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
(7,757
|
)
|
|
(9,345
|
)
|
|
(22,560
|
)
|
|
(31,186
|
)
|
Acquisition of businesses, net of cash acquired
|
|
-
|
|
|
(470,994
|
)
|
|
-
|
|
|
(490,715
|
)
|
Other
|
|
254
|
|
|
(144
|
)
|
|
954
|
|
|
316
|
|
Net cash flows from investing activities - continuing operations
|
|
(7,503
|
)
|
|
(480,483
|
)
|
|
(21,606
|
)
|
|
(521,585
|
)
|
Net cash flows from investing activities - discontinued operations
|
|
-
|
|
|
(11
|
)
|
|
1,754
|
|
|
(1,235
|
)
|
|
|
(7,503
|
)
|
|
(480,494
|
)
|
|
(19,852
|
)
|
|
(522,820
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities
|
|
|
|
|
|
|
|
|
Increase (decrease) under line of credit facilities
|
|
(21,499
|
)
|
|
54,718
|
|
|
236,976
|
|
|
85,968
|
|
Repayment of line of credit facilities
|
|
-
|
|
|
-
|
|
|
(192,677
|
)
|
|
-
|
|
Borrowings under long-term debt
|
|
230,998
|
|
|
330,135
|
|
|
231,430
|
|
|
330,135
|
|
Repayment of long-term debt
|
|
(310,475
|
)
|
|
(10,296
|
)
|
|
(322,004
|
)
|
|
(11,018
|
)
|
Issuance of Series A Preferred Stock, net
|
|
78,963
|
|
|
-
|
|
|
78,963
|
|
|
-
|
|
Payment of debt issuance costs
|
|
(7,472
|
)
|
|
(13,778
|
)
|
|
(13,017
|
)
|
|
(15,966
|
)
|
Payment of contingent consideration
|
|
-
|
|
|
(204
|
)
|
|
(4,554
|
)
|
|
(204
|
)
|
Proceeds from the exercise of stock options and employee share
purchases
|
|
572
|
|
|
406
|
|
|
1,486
|
|
|
3,884
|
|
Proceeds from the issuance of common shares, net
|
|
-
|
|
|
(1,264
|
)
|
|
-
|
|
|
94,080
|
|
Proceeds from the exercise of warrants
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,879
|
|
Other
|
|
294
|
|
|
(323
|
)
|
|
168
|
|
|
(781
|
)
|
Net cash flows from financing activities - continuing operations
|
|
(28,619
|
)
|
|
359,394
|
|
|
16,771
|
|
|
489,977
|
|
Net cash flows from financing activities - discontinued operations
|
|
-
|
|
|
668
|
|
|
(1,180
|
)
|
|
(4,304
|
)
|
|
|
(28,619
|
)
|
|
360,062
|
|
|
15,591
|
|
|
485,673
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss) on cash held in a foreign currency
|
|
(253
|
)
|
|
(40
|
)
|
|
52
|
|
|
(54
|
)
|
|
|
|
|
|
|
|
|
|
Decrease in cash and cash equivalents in the period
|
|
(388
|
)
|
|
(95,008
|
)
|
|
(2,730
|
)
|
|
(5,957
|
)
|
|
|
|
|
|
|
|
|
|
Discontinued operations cash activity included above:
|
|
|
|
|
|
|
|
|
Add: Balance included at beginning of period
|
|
-
|
|
|
1,626
|
|
|
1,707
|
|
|
2,170
|
|
Less: Balance included at end of period
|
|
-
|
|
|
(1,707
|
)
|
|
-
|
|
|
(1,707
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of the period
|
|
1,639
|
|
|
97,363
|
|
|
2,274
|
|
|
7,768
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - end of the period
|
|
1,251
|
|
|
2,274
|
|
|
1,251
|
|
|
2,274
|
|
|
|
|
SunOpta Inc.
|
Segmented Information
|
For the quarters and years ended December 31, 2016 and January 2,
2016 |
Unaudited
|
(Expressed in thousands of U.S. dollars)
|
|
|
|
Quarter ended
|
|
Year ended
|
|
|
December 31, 2016
|
|
January 2, 2016 |
|
December 31, 2016
|
|
January 2, 2016 |
|
|
$
|
|
$
|
|
$
|
|
$
|
Segment revenues from external customers:
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
132,601
|
|
|
143,485
|
|
|
574,295
|
|
|
610,890
|
|
Consumer Products
|
|
164,938
|
|
|
172,893
|
|
|
772,436
|
|
|
534,244
|
|
Total segment revenues from external customers
|
|
297,539
|
|
|
316,378
|
|
|
1,346,731
|
|
|
1,145,134
|
|
|
|
|
|
|
|
|
|
|
Segment gross margin:
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
9,658
|
|
|
13,236
|
|
|
64,374
|
|
|
66,461
|
|
Consumer Products
|
|
7,385
|
|
|
11,994
|
|
|
61,578
|
|
|
43,901
|
|
Total segment gross margin
|
|
17,043
|
|
|
25,230
|
|
|
125,952
|
|
|
110,362
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss):
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
2,531
|
|
|
4,250
|
|
|
26,787
|
|
|
28,184
|
|
Consumer Products
|
|
(5,783
|
)
|
|
(1,907
|
)
|
|
1,206
|
|
|
3,208
|
|
Corporate Services
|
|
(6,703
|
)
|
|
(4,087
|
)
|
|
(13,247
|
)
|
|
(10,094
|
)
|
Total segment operating income (loss)
|
|
(9,955
|
)
|
|
(1,744
|
)
|
|
14,746
|
|
|
21,298
|
|
|
|
|
|
|
|
|
|
|
Segment gross margin percentage:
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
7.3
|
%
|
|
9.2
|
%
|
|
11.2
|
%
|
|
10.9
|
%
|
Consumer Products
|
|
4.5
|
%
|
|
6.9
|
%
|
|
8.0
|
%
|
|
8.2
|
%
|
Total segment gross margin
|
|
5.7
|
%
|
|
8.0
|
%
|
|
9.4
|
%
|
|
9.6
|
%
|
|
|
|
|
|
|
|
|
|
Segment operating income percentage:
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
1.9
|
%
|
|
3.0
|
%
|
|
4.7
|
%
|
|
4.6
|
%
|
Consumer Products
|
|
-3.5
|
%
|
|
-1.1
|
%
|
|
0.2
|
%
|
|
0.6
|
%
|
Total segment operating income
|
|
-3.3
|
%
|
|
-0.6
|
%
|
|
1.1
|
%
|
|
1.9
|
%
|
Non-GAAP Measures
In addition to reporting financial results in accordance with U.S. GAAP,
the Company provides information regarding segment operating income,
Adjusted earnings, earnings before interest, taxes, depreciation and
amortization ("EBITDA"), and Adjusted EBITDA as additional information
about its operating results, which are not measures in accordance with
U.S. GAAP. We believe that segment operating income and Adjusted
earnings assist investors in comparing performance across reporting
periods on a consistent basis by excluding items that are not indicative
of the Company's core operating performance. We use EBITDA and Adjusted
EBITDA when assessing the performance of the Company's operations and
its ability to generate cash flows to fund its cash requirements,
including debt service and capital expenditures. The non-GAAP measures
of segment operating income, Adjusted earnings, EBITDA and Adjusted
EBITDA should not be considered in isolation or as a substitute for
performance measures calculated in accordance with U.S. GAAP.
In order to evaluate the Company's results of operations, we use certain
other non-GAAP measures that we believe enhance an investor's ability to
derive meaningful year-over-year comparisons and trends from the results
of operations. In particular, we evaluate the Company's revenues on a
basis that excludes the effects of fluctuations in commodity pricing and
foreign exchange rates, as well as the impacts of recent business
acquisitions and product rationalizations. In addition, we exclude
specific items from the Company's 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 in the tables below.
These non-GAAP measures are presented solely to allow investors to more
fully assess the Company's results of operations and should not
considered in isolation of, or as substitutes for an analysis of the
Company's results as reported under U.S. GAAP.
Adjusted Earnings and Adjusted Loss
When assessing our financial performance, we use an internal measure
that excludes the results of discontinued operations as well as other
charges and gains that we believe are not reflective of normal
operations. This information is provided in order to allow investors to
make meaningful comparisons of the Company's operating performance
between periods and to view the Company's business from the same
perspective as Company management. Adjusted earnings/loss and Adjusted
earnings/loss per diluted share should not be considered in isolation or
as a substitute for performance measures calculated in accordance with
U.S. GAAP.
For the quarter and year ended December 31, 2016, the Company recognized
other expenses related primarily to business acquisitions, goodwill and
asset impairments, legal settlement costs and litigation-related legal
fees, product withdrawal and recall costs, costs associated with the
strategic review process and execution of Value Creation Plan, severance
and rationalization costs, inventory reserves and liquidation sales to
de-risk positions, plant start-up costs related to our east coast
aseptic facility, the write-off of debt issuance costs, gains on
settlement of contingent consideration and changes in unrecognized tax
benefits. We do not believe these charges and gains are reflective of
normal business operations. These charges and gains have been excluded
to arrive at Adjusted earnings/loss and Adjusted earnings/loss per
diluted share.
The following is a tabular presentation of Adjusted earnings/loss and
Adjusted earnings/loss per diluted share, including a reconciliation to
U.S. GAAP loss from continuing operations and U.S. GAAP loss from
continuing operations on a per diluted share basis, which the Company
believes to be the most directly comparable U.S. GAAP financial measure.
|
|
|
|
|
|
|
|
|
Per Diluted Share
|
For the quarter ended
|
|
$
|
|
$
|
December 31, 2016
|
|
|
|
|
Loss from continuing operations
|
|
(33,426
|
)
|
|
|
Less: earnings attributable to non-controlling interests
|
|
(50
|
)
|
|
|
Less: dividends and accretion of Series A Preferred Stock
|
|
(1,812
|
)
|
|
|
Loss from continuing operations available to common shareholders
|
|
(35,288
|
)
|
|
(0.41
|
)
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
Goodwill Impairment(a) |
|
17,540
|
|
|
|
Costs related to strategic review and Value Creation Plan(b) |
|
3,558
|
|
|
|
Inventory reserves and liquidation sales to de-risk positions(c) |
|
3,428
|
|
|
|
Severance and rationalization costs(d) |
|
3,033
|
|
|
|
Product withdrawal and recall costs(e) |
|
3,013
|
|
|
|
Costs related to business acquisitions(f) |
|
1,871
|
|
|
|
Asset impairments related to facility closures(g) |
|
1,222
|
|
|
|
Other(h) |
|
173
|
|
|
|
Net income tax effect on adjusted earnings(i) |
|
(5,840
|
)
|
|
|
Adjusted loss
|
|
(7,290
|
)
|
|
(0.08
|
)
|
|
|
|
|
|
January 2, 2016
|
|
|
|
|
Loss from continuing operations
|
|
(13,772
|
)
|
|
|
Add: loss attributable to non-controlling interests
|
|
220
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
(13,552
|
)
|
|
(0.16
|
)
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
Costs related to business acquisitions(j) |
|
15,620
|
|
|
|
Plant expansion and start-up costs(k) |
|
1,861
|
|
|
|
Inventory reserves and liquidation sales to de-risk positions(l) |
|
2,367
|
|
|
|
Downtime, spoilage, and other costs due to equipment failure(m) |
|
2,219
|
|
|
|
Demurrage, detention and other related expenses(n) |
|
180
|
|
|
|
Litigation-related legal fees(o) |
|
532
|
|
|
|
Reversal of stock-based compensation expense(p) |
|
(579
|
)
|
|
|
Other(q) |
|
1,563
|
|
|
|
Net income tax effect of preceding adjustments(i) |
|
(6,940
|
)
|
|
|
Change in unrecognized tax benefits(r) |
|
(855
|
)
|
|
|
Adjusted earnings
|
|
2,416
|
|
|
0.03
|
|
|
|
|
|
(a)
|
|
|
Reflects the impairment charge to write off the goodwill associated
with the sunflower reporting unit.
|
|
|
|
|
(b)
|
|
|
Reflects legal and other professional advisory costs associated with
the strategic review and execution of the Value Creation Plan, which
are recorded in SG&A expenses.
|
|
|
|
|
(c)
|
|
|
Reflects aging reserves and low margin sales to reduce inventory
exposures related to certain grain varieties the Company is exiting,
which were recorded in cost of goods sold.
|
|
|
|
|
(d)
|
|
|
Reflects contractual severance benefits of $1.5 million and
previously unrecognized stock-based compensation of $0.2 million
recognized in connection with the departure of Mr. Jacobs as CEO.
Includes employee severance costs of $0.9 million incurred in
connection with certain facility closures and workforce
rationalization initiatives and employee retention costs of $0.3
million, which are recorded in other expense.
|
|
|
|
|
(e)
|
|
|
Reflects voluntary product withdrawal or recall costs of $3.0
million, net of expected insurance recoveries, related to the
withdrawal of certain consumer-packaged products and the recall of
certain sunflower kernel products, of which $1.2 million is recorded
in cost of goods sold and $1.1 million is recorded in other expense.
Also includes a $0.7 million adjustment for the estimated lost
margin caused by the sunflower recall, which reflects a shortfall in
revenues against anticipated volumes of approximately $3.4 million,
less associated cost of goods sold of approximately $2.7 million.
|
|
|
|
|
(f)
|
|
|
Reflects costs related to business combinations, including an
acquisition accounting adjustment related to Sunrise's inventory
sold during the quarter of $1.6 million, which is recorded in cost
of goods sold; and $0.3 million of debt issuance costs, which are
recorded in interest expense.
|
|
|
|
|
(g)
|
|
|
Reflects the impairment of long-lived assets associated with the
closure of the Heuvelton, New York soy extraction facility.
|
|
|
|
|
(h)
|
|
|
Other includes fair value adjustments related to contingent
consideration arrangements and gain/loss on sale of assets, which
are recorded in other expense.
|
|
|
|
|
(i)
|
|
|
To tax effect the preceding adjustments to earnings and to reflect
an overall estimated annual effective tax rate of approximately 30%
on adjusted earnings before tax.
|
|
|
|
|
(j)
|
|
|
Reflects costs related to business combinations, including an
acquisition accounting adjustment related to Sunrise's inventory
sold subsequent to the acquisition date of $4.0 million, which was
recorded in cost of goods sold; acquisition- and integration-related
costs incurred in connection with the Sunrise Acquisition of $6.2
million, which were included in other expense; and the non-cash
amortization of debt issuance costs incurred in connection with the
financing related to the Sunrise Acquisition of $5.4 million, which
were recorded in interest expense.
|
|
|
|
|
(k)
|
|
|
Reflects costs related to the retrofit of the San Bernardino,
California juice facility and expansion of the Allentown,
Pennsylvania facility to add aseptic beverage processing and filling
capabilities, which were recorded in cost of goods sold.
|
|
|
|
|
(l)
|
|
|
Reflects inventory reserves and low margin sales incurred to reduce
inventory exposures in certain organic raw materials, which were
recorded in cost of goods sold.
|
|
|
|
|
(m)
|
|
|
Reflects downtime and spoilage caused by equipment failures at the
Allentown, Pennsylvania resealable pouch facility, which were
recorded in cost of goods sold.
|
|
|
|
|
(n)
|
|
|
Reflects additional logistics costs stemming from capacity
constraints on imports and exports within the Global Ingredients
segment, which were recorded in cost of goods sold.
|
|
|
|
|
(o)
|
|
|
Reflects litigation-related legal costs mainly associated with the
settlement of the Plum dispute, which were recorded in SG&A expenses.
|
|
|
|
|
(p)
|
|
|
Reflects the reversal to SG&A expenses of previously recognized
stock-based compensation related to performance share units granted
to certain employees as the performance conditions were not achieved.
|
|
|
|
|
(q)
|
|
|
Other includes severance and rationalization costs, fair value
adjustments related to contingent consideration arrangements and
gain/loss on disposal of assets, which were recorded in other
expense.
|
|
|
|
|
(r)
|
|
|
Reflects the realization of previously unrecognized tax benefits due
to the expiration of the statute of limitations.
|
|
|
|
|
|
|
|
|
|
Per Diluted Share
|
For the year ended
|
|
$
|
|
$
|
December 31, 2016
|
|
|
|
|
Loss from continuing operations
|
|
(50,564
|
)
|
|
|
Less: earnings attributable to non-controlling interests
|
|
(54
|
)
|
|
|
Less: dividends and accretion of Series A Preferred Stock
|
|
(1,812
|
)
|
|
|
Loss from continuing operations available to common shareholders
|
|
(52,430
|
)
|
|
(0.61
|
)
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
Costs related to business acquisitions(a) |
|
27,802
|
|
|
|
Goodwill Impairment(b) |
|
17,540
|
|
|
|
Asset impairments related to facility closures(c) |
|
11,522
|
|
|
|
Legal settlement and litigation-related legal fees(d) |
|
10,850
|
|
|
|
Product withdrawal and recall costs(e) |
|
5,693
|
|
|
|
Costs related to strategic review and Value Creation Plan(f) |
|
4,041
|
|
|
|
Severance and rationalization costs(g) |
|
3,679
|
|
|
|
Inventory reserves and liquidation sales to de-risk positions(h) |
|
3,428
|
|
|
|
Plant start-up costs(i) |
|
1,565
|
|
|
|
Write-off of debt issuance costs(j) |
|
215
|
|
|
|
Other(k) |
|
726
|
|
|
|
Gain on settlement of contingent consideration(l) |
|
(1,715
|
)
|
|
|
Net income tax effect on adjusted earnings(m) |
|
(25,825
|
)
|
|
|
Change in unrecognized tax benefits(n) |
|
(1,268
|
)
|
|
|
Adjusted earnings
|
|
5,823
|
|
|
0.07
|
|
|
|
|
|
|
January 2, 2016
|
|
|
|
|
Loss from continuing operations
|
|
(3,132
|
)
|
|
|
Add: loss attributable to non-controlling interests
|
|
136
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
(2,996
|
)
|
|
(0.04
|
)
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
Costs related to business acquisitions(o) |
|
17,192
|
|
|
|
Plant expansion and start-up costs(p) |
|
4,081
|
|
|
|
Inventory reserves and liquidation sales to de-risk positions(q) |
|
2,367
|
|
|
|
Downtime, spoilage, and other costs due to equipment failure(r) |
|
2,219
|
|
|
|
Demurrage, detention and other related expenses(s) |
|
2,038
|
|
|
|
Litigation-related legal fees(d) |
|
1,709
|
|
|
|
Reversal of stock-based compensation expense(t) |
|
(579
|
)
|
|
|
Other(u) |
|
4,384
|
|
|
|
Net income tax effect of preceding adjustments(m) |
|
(10,598
|
)
|
|
|
Change in unrecognized tax benefits(n) |
|
(855
|
)
|
|
|
Adjusted earnings
|
|
18,962
|
|
|
0.26
|
|
|
|
|
|
(a)
|
|
|
Reflects costs related to business combinations, including an
acquisition accounting adjustment related to Sunrise's inventory
sold during the year of $15.0 million, which is recorded in cost of
goods sold; the non-cash amortization of debt issuance costs
incurred in connection with the financing related to the Sunrise
acquisition of $7.8 million, as well as $2.6 million of additional
debt issuance costs expensed, which are recorded in interest
expense; and $2.4 million of integration costs related to the
closure and consolidation of our frozen fruit processing facilities
following the Sunrise acquisition, which are recorded in cost of
goods sold and other expense.
|
|
|
|
|
(b)
|
|
|
Reflects the impairment charge to write off the goodwill associated
with the sunflower reporting unit.
|
|
|
|
|
(c)
|
|
|
Reflects the impairment of long-lived assets associated with the
closure of the San Bernardino juice facility and the Heuvelton soy
extraction facility.
|
|
|
|
|
(d)
|
|
|
Reflects the charge recorded in connection with the settlement of
the Plum dispute, which is recorded in other expense. Also includes
$1.6 million (2015 - $1.7 million) of litigation-related legal costs
mainly associated with the Plum dispute, which are recorded in SG&A
expenses.
|
|
|
|
|
(e)
|
|
|
Reflects voluntary product withdrawal or recall costs of $5.7
million, net of expected insurance recoveries, related to the
withdrawal of consumer-packaged products for quality-related issues
and the recall of certain sunflower kernel products, of which $1.2
million is recorded in cost of goods sold and $2.8 million is
recorded in other expense. Also includes a $1.7 million adjustment
for the estimated lost margin caused by the sunflower recall, which
reflects a shortfall in revenues against anticipated volumes of
approximately $9.8 million, less associated cost of goods sold of
approximately $8.1 million.
|
|
|
|
|
(f)
|
|
|
Reflects legal and other professional advisory costs associated with
the strategic review and execution of the Value Creation Plan, which
are recorded in SG&A expenses.
|
|
|
|
|
(g)
|
|
|
Reflects contractual severance benefits of $1.5 million and
previously unrecognized stock-based compensation of $0.2 million
recognized in connection with the departure of Mr. Jacobs as CEO.
Also includes employee severance costs of $1.6 million incurred in
connection with certain facility closures and workforce
rationalization initiatives and employee retention costs of $0.3
million, which are recorded in other expense.
|
|
|
|
|
(h)
|
|
|
Reflects aging reserves and low margin sales to reduce inventory
exposures mainly related to certain grain varieties the Company is
exiting, which were recorded in cost of goods sold.
|
|
|
|
|
(i)
|
|
|
Plant start-up costs relate to the ramp-up of production at our
Allentown facility following the completion of the addition of
aseptic beverage processing and filling capabilities in the fourth
quarter of 2015, which are recorded in cost of goods sold. These
start-up costs reflect the negative gross margin reported by the
facility as the facility ramped up to break-even production levels.
|
|
|
|
|
(j)
|
|
|
Reflects the write-off to interest expense of $0.2 million of
remaining unamortized debt issuance costs related to our North
American credit facilities, which were replaced by a Global Credit
Facility.
|
|
|
|
|
(k)
|
|
|
Other includes fair value adjustments related to contingent
consideration arrangements and gain/loss on sale of assets, which
are recorded in other expense.
|
|
|
|
|
(l)
|
|
|
Reflects the gain on settlement of the contingent consideration
obligation related to Niagara Natural, which was recorded in other
income.
|
|
|
|
|
(m)
|
|
|
To tax effect the preceding adjustments to earnings and to reflect
an overall estimated annual effective tax rate of approximately 30%
on adjusted earnings before tax.
|
|
|
|
|
(n)
|
|
|
Reflects the realization of previously unrecognized tax benefits due
to the expiration of the statute of limitations.
|
|
|
|
|
(o)
|
|
|
Reflects costs related to business combinations, including an
acquisition accounting adjustment related to Sunrise's inventory
sold subsequent to the acquisition date of $4.0 million, which was
recorded in cost of goods sold; acquisition- and integration-related
costs incurred in connection with the Sunrise Acquisition of $7.8
million, which were recorded in other expense; and the non-cash
amortization of debt issuance costs incurred in connection with the
financing related to the Sunrise acquisition of $6.4 million, as
well as $2.0 million of loan commitment fees associated with bridge
financing for the Sunrise acquisition that was not utilized, which
were recorded in interest expense.
|
|
|
|
|
(p)
|
|
|
Reflects costs related to the retrofit of the San Bernardino juice
facility and expansion of the Allentown facility to add aseptic
beverage processing and filling capabilities, which were recorded in
cost of goods sold.
|
|
|
|
|
(q)
|
|
|
Reflects inventory reserves and low margin sales incurred to reduce
inventory exposures in certain organic raw materials, which were
recorded in cost of goods sold.
|
|
|
|
|
(r)
|
|
|
Reflects downtime and spoilage caused by equipment failures at the
Allentown pouch facility, which were recorded in cost of goods sold.
|
|
|
|
|
(s)
|
|
|
Reflects additional logistics costs stemming from capacity
constraints on imports and exports within the Global Ingredients
segment, which were recorded in cost of goods sold.
|
|
|
|
|
(t)
|
|
|
Reflects the reversal to SG&A expenses of previously recognized
stock-based compensation related to performance share units granted
to certain employees as the performance conditions were not achieved.
|
|
|
|
|
(u)
|
|
|
Other includes severance and rationalization costs, fair value
adjustments related to contingent consideration arrangements and
gain/loss on disposal of assets, which were recorded in other
expense.
|
Segment Operating Income, EBITDA, and Adjusted
EBITDA
The Company defines segment operating income/loss as "earnings (loss)
from continuing operations before the following" excluding the impact of
other income/expense items and goodwill impairments; EBITDA as segment
operating income plus depreciation and amortization; and Adjusted EBITDA
as EBITDA excluding certain charges and gains that affect the
comparability of operating performance. The following is a tabular
presentation of segment operating income (loss), EBITDA and Adjusted
EBITDA, including a reconciliation to loss from continuing operations,
which the Company believes to be the most directly comparable U.S. GAAP
financial measure:
|
|
|
|
|
|
|
Quarter ended
|
|
Year ended
|
|
|
December 31, 2016
|
|
January 2, 2016 |
|
December 31, 2016
|
|
January 2, 2016 |
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
(33,426
|
)
|
|
(13,772
|
)
|
|
(50,564
|
)
|
|
(3,132
|
)
|
Recovery of income taxes
|
|
(8,165
|
)
|
|
(8,228
|
)
|
|
(23,797
|
)
|
|
(3,390
|
)
|
Interest expense, net
|
|
8,527
|
|
|
12,498
|
|
|
43,275
|
|
|
15,669
|
|
Other expense, net
|
|
5,569
|
|
|
7,758
|
|
|
28,292
|
|
|
12,151
|
|
Goodwill impairment
|
|
17,540
|
|
|
-
|
|
|
17,540
|
|
|
-
|
|
Total segment operating income (loss)
|
|
(9,955
|
)
|
|
(1,744
|
)
|
|
14,746
|
|
|
21,298
|
|
Depreciation and amortization
|
|
8,195
|
|
|
8,268
|
|
|
34,150
|
|
|
21,007
|
|
Stock based compensation
|
|
712
|
|
|
534
|
|
|
3,885
|
|
|
3,512
|
|
EBITDA
|
|
(1,048
|
)
|
|
7,058
|
|
|
52,781
|
|
|
45,817
|
|
Adjustments (a)
|
|
|
|
|
|
|
|
|
Costs related to business acquisitions
|
|
1,596
|
|
|
4,000
|
|
|
15,150
|
|
|
4,000
|
|
Product withdrawal and recall costs
|
|
1,872
|
|
|
-
|
|
|
2,855
|
|
|
-
|
|
Costs related to strategic review and Value Creation Plan
|
|
3,558
|
|
|
-
|
|
|
4,041
|
|
|
-
|
|
Inventory reserves and liquidation sales to de-risk positions
|
|
3,428
|
|
|
2,367
|
|
|
3,428
|
|
|
2,367
|
|
Litigation-related legal fees
|
|
-
|
|
|
532
|
|
|
1,850
|
|
|
1,709
|
|
Plant expansion and start-up costs
|
|
-
|
|
|
1,861
|
|
|
1,565
|
|
|
4,081
|
|
Downtime, spoilage, and other costs due to equipment failure
|
|
-
|
|
|
2,219
|
|
|
-
|
|
|
2,219
|
|
Demurrage, detention and other related expenses
|
|
-
|
|
|
180
|
|
|
-
|
|
|
2,038
|
|
Adjusted EBITDA
|
|
9,406
|
|
|
18,217
|
|
|
81,670
|
|
|
62,231
|
|
|
|
|
|
|
|
|
|
|
(a) The adjustments include all adjustments in the table
"Reconciliation of GAAP Results to Adjusted Earnings and Adjusted
earnings per diluted share" that affect cost of goods sold and SG&A.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20170301005600/en/
ICR
Scott Van Winkle, 617-956-6736
scott.vanwinkle@icrinc.com
Source: SunOpta Inc.
News Provided by Acquire Media