Value Creation Plan Driving Notable Improvements in the Beverage
and Snack Platforms
Internationally Sourced Organic Ingredients Revenue Grew Over 15%
During the First Quarter
TORONTO--(BUSINESS WIRE)--May 9, 2018--
SunOpta Inc. (“SunOpta” or the “Company”) (Nasdaq:STKL) (TSX:SOY), a
leading global company focused on organic, non-genetically modified and
specialty foods, today announced financial results for the first quarter
ended March 31, 2018.
“We are pleased with the first quarter performance of our global
ingredients, beverage and fruit snacks platforms, each of which
generated meaningful revenue growth during the first quarter. We believe
the Value Creation Plan is driving significant improvements in the
beverage platform, which was our first area of focus when we began
executing the plan over a year ago. Given recent sales wins in the
non-dairy and broth categories as well as the strength of the sales
opportunity pipeline, we are initiating an aseptic capacity expansion
plan that we expect will increase our system capacity by approximately
20% upon completion,” said David Colo, Chief Executive Officer. “While
these improvements continue to be offset by challenges in our frozen
fruit platform, we continue to focus intensely on quality and customer
service and remain confident in our ability to win new business in that
category and improve sales and margins over time. We remain confident in
our plan to achieve $20 million of productivity-driven EBITDA
improvements this year and return to consolidated sales growth in the
second half of 2018.”
All amounts are expressed in U.S. dollars and results are reported in
accordance with U.S. GAAP, except where specifically noted.
First Quarter 2018 Highlights:
-
Revenues of $312.7 million for the first quarter of 2018, compared to
$330.0 million in the first quarter of 2017, a decrease of 5.3%.
Adjusted for changes in foreign exchange, commodity prices, and sales
of flexible resealable pouch and nutrition bar products, revenues
declined 1.6% during the first quarter.
-
Loss attributable to common shareholders of $6.3 million or $0.07 per
common share in the first quarter of 2018, compared to a loss
attributable to common shareholders of $13.3 million or $0.16 per
common share in the first quarter of 2017.
-
Adjusted EBITDA¹ of $12.4 million or 4.0% of revenues for the first
quarter of 2018, versus $18.9 million or 5.7% of revenues in the first
quarter of 2017.
-
Adjusted loss of $6.4 million or $0.07 per common share during the
first quarter of 2018, compared to adjusted loss of $0.9 million or
$0.01 per common share during the first quarter of 2017.
¹ See discussion of non-GAAP measures included at the end of this press
release
Value Creation Plan Update
As part of the Company’s commitment to deliver long-term value to its
shareholders, in early 2017 it launched its Value Creation Plan. The
Company is targeting implementation of $30 million of
productivity-driven annualized enhancements to EBITDA in the first phase
of the plan, to be implemented over 2017 and 2018. For 2017, these
EBITDA benefits were offset by expenses associated with the Value
Creation Plan, including structural investments made in the areas of
quality, sales, marketing, operations and engineering resources, as well
as 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, these investments are
expected to yield additional improvement in EBITDA beyond the $30
million of initial productivity-driven savings. During the first quarter
of 2018, the Company continued to make progress against each of the four
pillars of its Value Creation Plan and believes it is on track to
achieve targeted productivity enhancements, while continuing to make the
necessary structural investments it believes will accelerate growth and
drive long-term value. Since the initiation of the Value Creation Plan,
the Company has implemented actions that are expected to yield
approximately $20.0 million of annualized EBITDA benefits.
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. Recent highlights include:
-
Completed the expansion project at the Company’s Mexican frozen fruit
facility, which is expected to drive incremental cost savings, in
addition to enhanced profitability from the addition of retail bagging
capabilities while continuing to ensure high quality and customer
service. The increased freezing and storage capacity also enables
further diversification of the fruit varieties sourced from Mexico,
which is also expected to provide long-term cost advantages.
-
Began commercial production on the second roasting and processing line
at the Company’s organic cocoa facility in Holland. In support of
increased demand and future growth opportunities in cocoa, this
expansion approximately doubles processing capacity in addition to
adding new capabilities.
-
Continued commissioning efforts on a new oil processing line at the
Company’s Bulgarian sunflower facility, which is expected to drive
incremental margins through growth and production efficiency.
-
Completed the installation of new roasting equipment at the Company’s
Crookston, MN facility and began commissioning activities in April.
The new equipment is expected to come on-line in the third quarter of
2018 and will support further growth in roasted grains and seeds.
Operational Excellence
The focus of the operational excellence pillar is to ensure food quality
and safety, coupled with improved operational performance and
efficiency. The Company expects these efforts to generate productivity
improvements and cost savings in manufacturing, procurement and
logistics. Recent highlights include:
-
Continued advancement of food safety and quality efforts across the
entire manufacturing footprint. Recent third party audits of several
beverage, snacks, and roasting facilities resulted in high scores and
is evidence of the Company’s progress in this area.
-
Invested considerable time and resources into pack plan readiness
initiatives across the Company’s Californian and Mexican fruit
facilities in preparation for the 2018 strawberry harvest.
-
Continued to identify productivity opportunities through the SunOpta
360 continuous improvement initiative in the areas of
manufacturing, purchasing and supply chain management.
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.
Recent highlights include:
-
Continued growth of the pipeline of commercial opportunities across
the beverage, fruit and snack categories, with new retail and food
service opportunities in fruit and roasted snacks.
-
Recent sales wins in key categories including everyday aseptic broth
items with large club, mass and traditional retailers, non-dairy
aseptic beverage with a large food distributor and expanded geographic
sales for private label juice.
-
Continued penetration into broadline food service with frozen fruit
and innovative beverage offerings that utilize proprietary formulas
packaged in control labels.
-
Recent retention of a retail frozen fruit account that was being
re-bid plus a 14% increase in distribution, and secured a multi-year
supply agreement with a large foodservice operator for aseptic
beverage products.
Process Sustainability
The focus of the process sustainability pillar is to ensure the Company
has the infrastructure, systems and skills to sustain the business
improvements and value captured from the Value Creation Plan. Recent
highlights include:
-
Enhanced employee health and safety processes resulting in a nearly
50% improvement in employee safety results year-to-date.
-
Advanced sales and operations planning processes and tools in the
fruit platform, which is enhancing readiness for the upcoming fruit
season and positioning the platform to improve customer service
metrics.
-
Completed the ERP implementation project at the Mexican frozen fruit
facility.
-
Consolidated transactional and other support functions of the Healthy
Fruit platform into the North American shared services.
First Quarter 2018 Results
Revenues for the first quarter of 2018 were $312.7 million, a decrease
of 5.3% compared to $330.0 million in the first quarter of 2017.
Excluding the impact on revenues for the first quarter of 2018 of
changes in commodity-related pricing, foreign exchange rates and sales
of flexible resealable pouch and nutrition bar products, revenues in the
first quarter of 2018 decreased by 1.6% compared with the first quarter
of 2017.
The Global Ingredients segment generated revenues from external
customers of $136.3 million, an increase of 7.7% compared to $126.6
million in the first quarter of 2017. Excluding the impact on revenues
of changes in commodity-related pricing and foreign exchange rates,
Global Ingredients revenue in the first quarter increased 4.1%.
The increase in revenue reflected strong demand for internationally
sourced organic ingredients which grew 15.3% during the quarter,
excluding the effect of commodity prices and foreign exchange. This
growth was partially offset by lower volumes of domestically sourced
specialty grain products.
The Consumer Products segment generated revenues of $176.3 million
during the first quarter of 2018, a decrease of 13.3% compared to $203.4
million in the first quarter of 2017. Excluding the impact of
commodity-related pricing and sales of resealable pouch and nutrition
bar products, Consumer Products revenue in the first quarter decreased
by 5.5%. The decline primarily reflects 17.1% lower sales in frozen
fruit due to ongoing declines in consumer demand, reduced distribution
to certain retail customers, and timing of deliveries to a large food
service customer. These pressures were partially offset by growth in
aseptic non-dairy and broth products, premium juice, and fruit snacks.
On a combined basis, excluding sales of resealable pouch and nutrition
bar products, revenues in the beverage and snacks platforms increased
7.3% compared to the first quarter of 2017.
Gross profit was $33.7 million for the first quarter of 2018, compared
to $38.7 million for the first quarter of 2017. As a percentage of
revenues, gross profit for the first quarter of 2018 was 10.8% compared
to 11.7% in the first quarter of 2017. Excluding the impact of $0.1
million in costs associated with inventories in the flexible resealable
pouch and nutrition bar operations, as well as losses of approximately
$2.8 million on commodity futures contracts used to hedge our organic
cocoa position, the gross margin percentage for the first quarter of
2018 would have been approximately 11.7%, compared to a normalized gross
margin percentage of 11.9% in the first quarter of 2017. The decline in
the gross margin percentage primarily reflects margin pressure within
Consumer Products driven by the frozen fruit platform, partially offset
by the beverage and snacks platforms.
For Consumer Products, margin pressure in healthy fruit was driven by
lower plant utilization due to declines in sales volumes, an unfavorable
shift in sales mix towards lower margin product offerings, and
significant costs in manufacturing related to yield losses, excess labor
and handling, storage costs, and outbound freight. These costs were
partially offset by margin expansion in the healthy beverage and snacks
platforms reflecting favorable plant utilization due to higher
production volumes to meet sales demand, productivity driven cost
savings, and operational savings following the discontinuance of
flexible resealable pouch and nutrition bar production in the fourth
quarter of 2017.
In Global Ingredients, the negative hedge results of $2.8 million
reflected the impact that the steep rise in the market price for cocoa
during the first quarter had on the Company’s cocoa position, which also
grew during the first quarter in support of the expansion of the cocoa
processing facility in Holland. The impact of these hedge losses are
expected to be offset by improved forward margins on cocoa to be
realized over the balance of the year.
Operating income¹ was $1.7 million, or 0.5% of revenues, compared to a
loss of $3.0 million, or 0.9% of revenues in the first quarter of 2017.
The increase in operating income year-over-year primarily reflects lower
non-structural SG&A costs when compared to the prior year. Operating
income would have been $4.9 million, or 1.6% of revenues excluding the
inventory and hedge losses that affected gross profit, as well as $0.3
million of non-structural costs in SG&A incurred in relation to the
Value Creation Plan, as compared to a normalized operating income of
$9.6 million or 2.9% of revenues in the first quarter of 2017.
Adjusted EBITDA¹ was $12.4 million or 4.0% of revenues in the first
quarter of 2018, compared to $18.9 million or 5.7% of revenues in the
first quarter of 2017. Excluding flexible resealable pouch and nutrition
bar operations, adjusted EBITDA for the first quarter of 2018 was $12.5
million, compared with $20.7 million for the first quarter of 2017.
The Company reported a loss attributable to common shareholders of $6.3
million, or $0.07 per common share, compared to $13.3 million, or $0.16
per common share during the first quarter of 2017. Adjusted loss¹ in the
first quarter of 2018 was $6.4 million or a loss of $0.07 per common
share, compared to $0.9 million or $0.01 per common share in the first
quarter of 2017. Please refer to the discussion and table below under
“Non-GAAP Measures - Adjusted Earnings”.
Balance Sheet and Cash Flow
At March 31, 2018, SunOpta’s balance sheet reflected total assets of
$979.9 million and total debt of $464.4 million. During the first
quarter of 2018, cash provided by operating activities was $7.5 million,
compared to $19.5 million during the first quarter of 2017. The decrease
reflects the immediate cash benefit generated from working capital
efficiency initiatives implemented in the first quarter of 2017,
partially offset by improved operational performance, as well as lower
non-structural cash costs incurred in support of the Value Creation
Plan. Cash used in investing activities during the first quarter of 2018
was $6.0 million, compared to $8.7 million in the prior year period. The
decrease in cash used reflected a lower level of capital expenditures
when compared to the prior year period.
Conference Call
SunOpta plans to host a conference call at 9:00 A.M. Eastern time on
Wednesday, May 9, 2018, to discuss the first 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, the anticipated benefits of our efforts to
transform our business operations, including our Value Creation Plan;
the estimated amount and timing of EBITDA enhancements attributable to
improvements initiated or implemented to date pursuant to our Value
Creation Plan; the increased capacity resulting from our aseptic
capacity expansion plan; anticipated portfolio optimization benefits
resulting from expansion projects and/or new processing lines at our
Mexican frozen fruit facility, our organic cocoa facility in Holland,
our Bulgarian sunflower facility and at our Crookston, MN facility;
expected productivity and cost improvements as a result of our food
safety and quality and our 360 continuous improvement initiatives,;
improved revenue growth and profitability as a result of our growing
pipeline of commercial opportunities, recent sales wins in key
categories and continued penetration of high-potential sales channels,;
sustainable business improvements resulting from our enhanced employee
health and safety and advanced sales and operations planning processes
and other process sustainability initiatives; and our intention to exit
businesses or product lines where we are not effectively positioned.
Generally, forward-looking statements do not relate strictly to
historical or current facts and are typically accompanied by words such
as “believe”, “expect”, "continue", “will”, “targeting”, “anticipates”,
"should", "would", "plans", "becoming", "estimated", "intend",
"confident", "can", "may", "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 including, but not limited to, our planned expansion
initiatives, portfolio optimization and productivity efforts, our
expectations regarding commodity pricing, margins and hedging results,
improved availability and field prices for fruit, procurement and
logistics savings, freight lane cost reductions, yield and throughput
enhancements, and labor cost reductions, 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, 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 portfolio changes, process improvements,
go-to-market improvements and process sustainability strategies in a
timely manner; delays or difficulties in exiting certain businesses and
product lines including the failure of purchasers to satisfy the
purchase price and inability to satisfy the conditions of closing for
any such transactions; 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; 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 ended March 31, 2018 and April 1, 2017
|
|
(Unaudited)
|
|
(All dollar amounts expressed in thousands of U.S. dollars, except
per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
March 31, 2018
|
|
|
April 1, 2017
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
| Revenues |
|
|
312,652
|
|
|
|
330,031
|
|
|
|
|
|
|
|
|
| Cost of goods sold |
|
|
278,968
|
|
|
|
291,332
|
|
|
|
|
|
|
|
|
| Gross profit |
|
|
33,684
|
|
|
|
38,699
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
28,288
|
|
|
|
38,272
|
|
|
Intangible asset amortization
|
|
|
2,771
|
|
|
|
2,803
|
|
|
Other expense (income), net
|
|
|
(402
|
)
|
|
|
5,443
|
|
|
Foreign exchange loss
|
|
|
962
|
|
|
|
580
|
|
|
|
|
|
|
|
|
| Earnings (loss) before the following |
|
|
2,065
|
|
|
|
(8,399
|
)
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
8,220
|
|
|
|
7,754
|
|
|
|
|
|
|
|
|
| Loss before income taxes |
|
|
(6,155
|
)
|
|
|
(16,153
|
)
|
|
|
|
|
|
|
|
|
Recovery of income taxes
|
|
|
(1,693
|
)
|
|
|
(4,969
|
)
|
|
|
|
|
|
|
|
| Net loss |
|
|
(4,462
|
)
|
|
|
(11,184
|
)
|
|
|
|
|
|
|
|
|
Earnings (loss) attributable to non-controlling interests
|
|
|
(99
|
)
|
|
|
214
|
|
|
|
|
|
|
|
|
| Loss attributable to SunOpta Inc. |
|
|
(4,363
|
)
|
|
|
(11,398
|
)
|
|
|
|
|
|
|
|
|
Dividends and accretion on Series A Preferred Stock
|
|
|
(1,967
|
)
|
|
|
(1,940
|
)
|
|
|
|
|
|
|
|
| Loss attributable to common shareholders |
|
|
(6,330
|
)
|
|
|
(13,338
|
)
|
|
|
|
|
|
|
|
| Loss per share |
|
|
|
|
|
|
|
Basic
|
|
|
(0.07
|
)
|
|
|
(0.16
|
)
|
|
Diluted
|
|
|
(0.07
|
)
|
|
|
(0.16
|
)
|
|
|
|
|
|
|
|
| Weighted-average number of shares outstanding (000s) |
|
|
|
|
|
|
|
Basic
|
|
|
86,810
|
|
|
|
85,929
|
|
|
Diluted
|
|
|
86,810
|
|
|
|
85,929
|
|
|
|
|
|
|
|
|
|
|
| SunOpta Inc. |
|
Consolidated Balance Sheets
|
|
As at March 31, 2018 and December 30, 2017
|
|
(Unaudited)
|
|
(All dollar amounts expressed in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
|
December 30, 2017
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
| ASSETS |
|
|
|
|
|
|
| Current assets |
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
2,924
|
|
|
|
3,228
|
|
|
Accounts receivable
|
|
|
143,420
|
|
|
|
125,152
|
|
|
Inventories
|
|
|
334,481
|
|
|
|
354,978
|
|
|
Prepaid expenses and other current assets
|
|
|
38,379
|
|
|
|
33,213
|
|
|
Income taxes recoverable
|
|
|
9,078
|
|
|
|
12,006
|
|
| Total current assets |
|
|
528,282
|
|
|
|
528,577
|
|
|
|
|
|
|
|
|
| Property, plant and equipment |
|
|
164,518
|
|
|
|
163,624
|
|
| Goodwill |
|
|
109,729
|
|
|
|
109,533
|
|
| Intangible assets |
|
|
169,317
|
|
|
|
172,059
|
|
| Deferred income taxes |
|
|
363
|
|
|
|
363
|
|
| Other assets |
|
|
7,678
|
|
|
|
8,017
|
|
|
|
|
|
|
|
|
| Total assets |
|
|
979,887
|
|
|
|
982,173
|
|
|
|
|
|
|
|
|
| LIABILITIES |
|
|
|
|
|
|
| Current liabilities |
|
|
|
|
|
|
|
Bank indebtedness
|
|
|
236,637
|
|
|
|
234,090
|
|
|
Accounts payable and accrued liabilities
|
|
|
162,682
|
|
|
|
161,364
|
|
|
Customer and other deposits
|
|
|
3,499
|
|
|
|
4,901
|
|
|
Income taxes payable
|
|
|
1,854
|
|
|
|
1,351
|
|
|
Other current liabilities
|
|
|
628
|
|
|
|
818
|
|
|
Current portion of long-term debt
|
|
|
2,190
|
|
|
|
2,228
|
|
|
Current portion of long-term liabilities
|
|
|
8,904
|
|
|
|
5,300
|
|
| Total current liabilities |
|
|
416,394
|
|
|
|
410,052
|
|
|
|
|
|
|
|
|
| Long-term debt |
|
|
225,570
|
|
|
|
225,805
|
|
| Long-term liabilities |
|
|
2,367
|
|
|
|
8,352
|
|
| Deferred income taxes |
|
|
14,867
|
|
|
|
15,850
|
|
| Total liabilities |
|
|
659,198
|
|
|
|
660,059
|
|
|
|
|
|
|
|
|
| Series A Preferred Stock |
|
|
80,460
|
|
|
|
80,193
|
|
|
|
|
|
|
|
|
| EQUITY |
|
|
|
|
|
|
| SunOpta Inc. shareholders’ equity |
|
|
|
|
|
|
|
Common shares
|
|
|
309,575
|
|
|
|
308,899
|
|
|
Additional paid-in capital
|
|
|
29,650
|
|
|
|
28,006
|
|
|
Accumulated deficit
|
|
|
(95,367
|
)
|
|
|
(89,291
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(5,225
|
)
|
|
|
(7,268
|
)
|
|
|
|
238,633
|
|
|
|
240,346
|
|
| Non-controlling interests |
|
|
1,596
|
|
|
|
1,575
|
|
| Total equity |
|
|
240,229
|
|
|
|
241,921
|
|
|
|
|
|
|
|
|
| Total equity and liabilities |
|
|
979,887
|
|
|
|
982,173
|
|
|
|
|
|
|
|
|
|
|
| SunOpta Inc. |
|
Consolidated Statements of Cash Flows
|
|
For the quarters ended March 31, 2018 and April 1, 2017
|
|
(Unaudited)
|
|
(Expressed in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
March 31, 2018
|
|
|
April 1, 2017
|
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
| CASH PROVIDED BY (USED IN) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating activities |
|
|
|
|
|
|
|
Net loss
|
|
|
(4,462
|
)
|
|
|
(11,184
|
)
|
|
Items not affecting cash:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,141
|
|
|
|
8,180
|
|
|
Amortization of debt issuance costs
|
|
|
608
|
|
|
|
486
|
|
|
Deferred income taxes
|
|
|
(1,286
|
)
|
|
|
(6,092
|
)
|
|
Stock-based compensation
|
|
|
2,171
|
|
|
|
852
|
|
|
Unrealized loss on derivative commodity contracts
|
|
|
1,521
|
|
|
|
38
|
|
|
Fair value of contingent consideration
|
|
|
(2,416
|
)
|
|
|
-
|
|
|
Impairment of long-lived assets
|
|
|
339
|
|
|
|
3,723
|
|
|
Other
|
|
|
1
|
|
|
|
143
|
|
|
Changes in non-cash working capital
|
|
|
2,889
|
|
|
|
23,335
|
|
|
Net cash flows from operations
|
|
|
7,506
|
|
|
|
19,481
|
|
|
|
|
|
|
|
|
| Investing activities |
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(6,735
|
)
|
|
|
(9,024
|
)
|
|
Proceeds from sale of assets
|
|
|
700
|
|
|
|
250
|
|
|
Other
|
|
|
-
|
|
|
|
110
|
|
|
Net cash flows from investing activities
|
|
|
(6,035
|
)
|
|
|
(8,664
|
)
|
|
|
|
|
|
|
|
| Financing activities |
|
|
|
|
|
|
|
Increase (decrease) under line of credit facilities
|
|
|
309
|
|
|
|
(7,341
|
)
|
|
Repayment of long-term debt
|
|
|
(522
|
)
|
|
|
(527
|
)
|
|
Payment of cash dividends on Series A Preferred Stock
|
|
|
(1,700
|
)
|
|
|
(1,591
|
)
|
|
Proceeds from the exercise of stock options and employee share
purchases
|
|
|
149
|
|
|
|
1,094
|
|
|
Other
|
|
|
(40
|
)
|
|
|
(202
|
)
|
|
Net cash flows from financing activities
|
|
|
(1,804
|
)
|
|
|
(8,567
|
)
|
|
|
|
|
|
|
|
|
Foreign exchange gain on cash held in a foreign currency
|
|
|
29
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents in the period
|
|
|
(304
|
)
|
|
|
2,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of the period
|
|
|
3,228
|
|
|
|
1,251
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - end of the period
|
|
|
2,924
|
|
|
|
3,511
|
|
|
|
|
|
|
|
|
|
|
| SunOpta Inc. |
|
Segmented Information
|
|
For the quarters ended March 31, 2018 and April 1, 2017
|
|
Unaudited
|
|
(Expressed in thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
Quarter ended
|
|
|
|
March 31, 2018
|
|
|
April 1, 2017
|
|
|
|
|
$
|
|
|
$
|
| Segment revenues from external customers: |
|
|
|
|
|
|
|
Global Ingredients
|
|
|
136,331
|
|
|
|
126,642
|
|
|
Consumer Products
|
|
|
176,321
|
|
|
|
203,389
|
|
|
Total segment revenues from external customers
|
|
|
312,652
|
|
|
|
330,031
|
|
|
|
|
|
|
|
|
| Segment gross profit: |
|
|
|
|
|
|
|
Global Ingredients
|
|
|
14,635
|
|
|
|
15,096
|
|
|
Consumer Products
|
|
|
19,049
|
|
|
|
23,603
|
|
|
Total segment gross profit
|
|
|
33,684
|
|
|
|
38,699
|
|
|
|
|
|
|
|
|
| Segment operating income (loss): |
|
|
|
|
|
|
|
Global Ingredients
|
|
|
3,102
|
|
|
|
4,201
|
|
|
Consumer Products
|
|
|
3,316
|
|
|
|
6,498
|
|
|
Corporate Services
|
|
|
(4,755
|
)
|
|
|
(13,655
|
)
|
|
Total segment operating income (loss)
|
|
|
1,663
|
|
|
|
(2,956
|
)
|
|
|
|
|
|
|
|
| Segment gross profit percentage: |
|
|
|
|
|
|
|
Global Ingredients
|
|
|
10.7
|
%
|
|
|
11.9
|
%
|
|
Consumer Products
|
|
|
10.8
|
%
|
|
|
11.6
|
%
|
|
Total segment gross profit percentage
|
|
|
10.8
|
%
|
|
|
11.7
|
%
|
|
|
|
|
|
|
|
| Segment operating income (loss) percentage: |
|
|
|
|
|
|
|
Global Ingredients
|
|
|
2.3
|
%
|
|
|
3.3
|
%
|
|
Consumer Products
|
|
|
1.9
|
%
|
|
|
3.2
|
%
|
|
Total segment operating income (loss)
|
|
|
0.5
|
%
|
|
|
-0.9
|
%
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
In addition to reporting financial results in accordance with U.S. GAAP,
the Company provides additional information about its operating results
regarding segment operating income, adjusted earnings and adjusted
earnings before interest, taxes, depreciation and amortization
(“Adjusted EBITDA”), which are not measures in accordance with U.S.
GAAP. We believe that segment operating income, adjusted earnings and
adjusted EBITDA assist investors in comparing performance across
reporting periods on a consistent basis by excluding items that are not
indicative of the Company’s operating performance. The non-GAAP measures
of segment operating income, adjusted earnings 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 period-over-period 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. 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 be considered
in isolation of, or as substitutes for an analysis of the Company’s
results as reported under U.S. GAAP.
Adjusted Earnings/Loss
When assessing our financial performance, we use an internal measure
that excludes charges and gains that we believe are not reflective of
normal operations. This information is provided 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.
The following is a tabular presentation of adjusted earnings/loss and
adjusted earnings/loss per diluted share, including a reconciliation
from net loss, which the Company believes to be the most directly
comparable U.S. GAAP financial measure. In addition, due to the exit
from flexible resealable pouch and nutrition bar product lines and
operations, we have prepared these tables in a columnar format to
present the effect of these operations on our consolidated results for
the current and comparative periods. We believe this presentation
assists investors in assessing the results of the operations we have
exited and the effect of those operations on our financial performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding flexible
|
|
|
Flexible
|
|
|
|
|
|
|
resealable pouch
|
|
|
resealable pouch
|
|
|
|
|
|
|
and nutrition bar
|
|
|
and nutrition bar
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per Diluted
|
|
|
|
|
|
Per Diluted
|
|
|
|
|
|
Per Diluted
|
|
|
|
|
|
|
Share
|
|
|
|
|
|
Share
|
|
|
|
|
|
Share
|
| For the quarter ended |
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
| March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(3,478
|
)
|
|
|
|
|
|
(984
|
)
|
|
|
|
|
|
(4,462
|
)
|
|
|
|
|
Less: loss attributable to non-controlling interests
|
|
|
99
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
99
|
|
|
|
|
|
Less: dividends and accretion of Series A Preferred Stock
|
|
|
(1,967
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(1,967
|
)
|
|
|
|
|
Loss attributable to common shareholders
|
|
|
(5,346
|
)
|
|
|
(0.06
|
)
|
|
|
(984
|
)
|
|
|
(0.01
|
)
|
|
|
(6,330
|
)
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value adjustment on contingent consideration(a) |
|
|
(2,500
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(2,500
|
)
|
|
|
|
|
Costs related to the Value Creation Plan(b) |
|
|
984
|
|
|
|
|
|
|
1,211
|
|
|
|
|
|
|
2,195
|
|
|
|
|
|
Product withdrawal and recall costs(c) |
|
|
323
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
323
|
|
|
|
|
|
Other(d) |
|
|
(7
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
Net income tax effect(e) |
|
|
221
|
|
|
|
|
|
|
(315
|
)
|
|
|
|
|
|
(94
|
)
|
|
|
|
|
Adjusted loss
|
|
|
(6,325
|
)
|
|
|
(0.07
|
)
|
|
|
(88
|
)
|
|
|
-
|
|
|
|
(6,413
|
)
|
|
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| April 1, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(9,970
|
)
|
|
|
|
|
|
(1,214
|
)
|
|
|
|
|
|
(11,184
|
)
|
|
|
|
|
Add: earnings attributable to non-controlling interests
|
|
|
(214
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(214
|
)
|
|
|
|
|
Less: dividends and accretion of Series A Preferred Stock
|
|
|
(1,940
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(1,940
|
)
|
|
|
|
|
Loss attributable to common shareholders
|
|
|
(12,124
|
)
|
|
|
(0.14
|
)
|
|
|
(1,214
|
)
|
|
|
(0.01
|
)
|
|
|
(13,338
|
)
|
|
|
(0.16
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs related to the Value Creation Plan(f) |
|
|
17,283
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
17,283
|
|
|
|
|
|
Product withdrawal and recall costs(g) |
|
|
1,008
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
1,008
|
|
|
|
|
|
Other(d) |
|
|
(309
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(309
|
)
|
|
|
|
|
Net income tax effect(e) |
|
|
(5,532
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(5,532
|
)
|
|
|
|
|
Adjusted earnings (loss)
|
|
|
326
|
|
|
|
-
|
|
|
|
(1,214
|
)
|
|
|
(0.01
|
)
|
|
|
(888
|
)
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
Reflects a fair value adjustment of $2.5 million to reduce the
expected contingent consideration that may be payable in 2019 under
an earn-out arrangement with the former unitholders of Citrusource
LLC (which we acquired in March 2015), based on the projected
results for the business in fiscal 2018, which was recorded in other
income.
|
|
|
|
(b)
|
|
|
Reflects the write-down of remaining flexible resealable pouch and
nutrition bar inventories of $0.1 million recorded in cost of
goods sold; and consulting fees, and employee recruitment and
relocation costs of $0.3 million recorded in SG&A expenses; and
asset impairment, lease obligation and employee termination costs
of $1.8 million recorded in other expense.
|
|
|
|
(c)
|
|
|
Reflects product withdrawal and recall costs not eligible for
reimbursement under our insurance policies, which were recorded in
other expense.
|
|
|
|
(d)
|
|
|
Other included the accretion of contingent consideration
obligations and gain/loss on the sale of assets, which were
recorded in other expense/income.
|
|
|
|
(e)
|
|
|
Reflects the tax effect of the preceding adjustments to earnings
and reflects an overall estimated annual effective tax rate of
approximately 26% for the quarter ended March 31, 2018 (April 1,
2017 – 30%) on adjusted earnings before tax.
|
|
|
|
(f)
|
|
|
Reflects facility closure costs of $0.4 million recorded in cost
of goods sold; consulting fees, temporary labor, employee
recruitment and retention costs of $11.4 million recorded in SG&A
expenses; and asset impairment and employee termination costs of
$5.5 million recorded in other expense.
|
|
|
|
(g)
|
|
|
Reflects costs related to the recall of certain sunflower kernel
products initiated in the second quarter of 2016, including a $0.7
million adjustment for the estimated lost gross profit caused by
the sunflower recall, which reflected a shortfall in revenues in
the first quarter of 2017 against first quarter 2016 volumes of
approximately $3.3 million, less associated cost of goods sold of
approximately $2.6 million; and $0.3 million of direct costs
recorded in other expense that are not eligible for reimbursement
under our insurance policies.
|
|
|
|
|
|
|
|
Segment Operating Income/Loss and Adjusted EBITDA
The Company defines segment operating income/loss as net earnings/loss
before income taxes, interest expense and other income/expense items,
and adjusted EBITDA as segment operating income/loss plus depreciation,
amortization, non-cash stock-based compensation, and other unusual items
that affect the comparability of operating performance as identified
above in the determination of adjusted earnings. The following is a
tabular presentation of segment operating income/loss and adjusted
EBITDA, including a reconciliation to net loss, which the Company
believes to be the most directly comparable U.S. GAAP financial measure.
In addition, as with “adjusted earnings/loss” presented above, we have
prepared these tables in a columnar format to present the effect of
flexible resealable pouch and nutrition bar operations on our
consolidated results for the current and comparative periods. We believe
this presentation assists investors in assessing the results of the
operations we have exited and the effect of those operations on our
financial performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
Excluding flexible
|
|
|
Flexible
|
|
|
|
|
|
|
resealable pouch
|
|
|
resealable pouch
|
|
|
|
|
|
|
and nutrition bar
|
|
|
and nutrition bar
|
|
|
Consolidated
|
| For the quarter ended |
|
|
$
|
|
|
$
|
|
|
$
|
| March 31, 2018 |
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(3,478
|
)
|
|
|
(984
|
)
|
|
|
(4,462
|
)
|
|
Recovery of income taxes
|
|
|
(1,347
|
)
|
|
|
(346
|
)
|
|
|
(1,693
|
)
|
|
Interest expense, net
|
|
|
8,220
|
|
|
|
-
|
|
|
|
8,220
|
|
|
Other expense (income), net
|
|
|
(1,613
|
)
|
|
|
1,211
|
|
|
|
(402
|
)
|
|
Total segment operating income (loss)
|
|
|
1,782
|
|
|
|
(119
|
)
|
|
|
1,663
|
|
|
Depreciation and amortization
|
|
|
8,141
|
|
|
|
-
|
|
|
|
8,141
|
|
|
Stock-based compensation
|
|
|
2,171
|
|
|
|
-
|
|
|
|
2,171
|
|
|
Costs related to Value Creation Plan(a) |
|
|
413
|
|
|
|
-
|
|
|
|
413
|
|
|
Adjusted EBITDA
|
|
|
12,507
|
|
|
|
(119
|
)
|
|
|
12,388
|
|
|
|
|
|
|
|
|
|
|
|
| April 1, 2017 |
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(9,970
|
)
|
|
|
(1,214
|
)
|
|
|
(11,184
|
)
|
|
Recovery of income taxes
|
|
|
(4,194
|
)
|
|
|
(775
|
)
|
|
|
(4,969
|
)
|
|
Interest expense, net
|
|
|
7,754
|
|
|
|
-
|
|
|
|
7,754
|
|
|
Other expense, net
|
|
|
5,443
|
|
|
|
-
|
|
|
|
5,443
|
|
|
Total segment operating loss
|
|
|
(967
|
)
|
|
|
(1,989
|
)
|
|
|
(2,956
|
)
|
|
Depreciation and amortization
|
|
|
7,955
|
|
|
|
225
|
|
|
|
8,180
|
|
|
Stock-based compensation(b) |
|
|
1,128
|
|
|
|
-
|
|
|
|
1,128
|
|
|
Costs related to Value Creation Plan(a) |
|
|
11,810
|
|
|
|
-
|
|
|
|
11,810
|
|
|
Product withdrawal and recall costs(c) |
|
|
729
|
|
|
|
-
|
|
|
|
729
|
|
|
Adjusted EBITDA
|
|
|
20,655
|
|
|
|
(1,764
|
)
|
|
|
18,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
For the first quarter of 2018, reflects the write-down of
remaining flexible resealable pouch and nutrition bar inventories
of $0.1 million recorded in cost of goods sold; and consulting
fees, and employee recruitment and relocation costs of $0.3
million recorded in SG&A expenses. For the first quarter of 2017,
reflects facility closure costs of $0.4 million recorded in cost
of goods sold; and consulting fees, temporary labor, employee
recruitment and retention costs of $11.4 million recorded in SG&A
expenses.
|
|
|
|
(b)
|
|
|
For the first quarter of 2017, stock-based compensation of $1.1
million was recorded in SG&A expenses. The reversal of $0.3
million of previously recognized stock-based compensation, related
to forfeited awards of employees that were terminated in
connection with the Value Creation Plan, was recognized in other
expense.
|
|
|
|
(c)
|
|
|
Reflects the estimated lost gross profit caused by the recall of
certain sunflower kernel products of $0.7 million, which reflected
the shortfall in revenues in the first quarter of 2017 against
first quarter 2016 volumes of approximately $3.3 million, less
associated cost of goods sold of approximately $2.6 million.
|
|
|
|
|
|
|
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180509005438/en/
Source: SunOpta Inc.
For SunOpta Inc.
Scott Van Winkle, 617-956-6736
ICR
scott.vanwinkle@icrinc.com