Beverage, Snack and Organic Ingredient Platforms Drive Growth
TORONTO--(BUSINESS WIRE)--Nov. 7, 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 third quarter
ended September 29, 2018.
“We generated 2.0% adjusted revenue growth during the third quarter, led
by our beverage, snack and organic ingredient platforms. Success in our
go-to-market effectiveness pillar positions us for continued revenue
growth in the fourth quarter,” said David Colo, Chief Executive Officer.
“We successfully commercialized approximately 100 private label broth
and frozen fruit SKUs during the quarter, and our sales opportunity
pipeline remains robust. The expansion project in our aseptic beverage
platform remains on track, and during the quarter we completed final
commissioning of our organic cocoa processing facility. These projects
will enable us to capitalize on our sales opportunity pipeline, while
also providing needed capacity to support our current growth trajectory.
While we remain on track to deliver $20 million of productivity savings
this year, plant start-up costs and inefficiencies in our domestic
ingredients business, combined with our continued investment to return
the frozen fruit platform to profitable growth, offset these
productivity improvements during the quarter. We are committed to making
the necessary investments to sustainably improve profitability in 2019
and beyond.”
All amounts are expressed in U.S. dollars and results are reported in
accordance with U.S. GAAP, except where specifically noted.
Third Quarter 2018 Highlights:
-
Revenues of $308.4 million for the third quarter of 2018, compared to
$320.7 million in the third quarter of 2017, a decrease of 3.8%.
Adjusted for changes in foreign exchange, commodity prices, and sales
of flexible resealable pouch and nutrition bar products, revenues grew
2.0% during the third quarter.
-
Loss attributable to common shareholders of $6.6 million or $0.08 per
common share in the third quarter of 2018, compared to a loss
attributable to common shareholders of $8.0 million or $0.09 per
common share in the third quarter of 2017.
-
Adjusted loss of $3.8 million or $0.04 per common share during the
third quarter of 2018, compared to adjusted loss of $1.9 million or
$0.02 per common share during the third quarter of 2017.
-
Adjusted EBITDA¹ of $16.7 million or 5.4% of revenues for the third
quarter of 2018, versus $19.1 million or 6.0% of revenues in the third
quarter of 2017.
-
Loss attributable to common shareholders, Adjusted loss¹ and Adjusted
EBITDA¹ for the third quarter of 2018 included a timing-related,
pre-tax gain of $1.9 million recognized in cost of goods sold,
relating to the net impact of foreign exchange and commodity price
movements in the quarter, on certain contracts within the
European-based operations of the Global Ingredients segment, compared
to a pre-tax gain of $0.6 million in the third 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. For 2018, these EBITDA benefits are expected to be
offset by a decline in profitability in the frozen fruit platform as a
result of sales price reductions and higher costs. The plan also calls
for increased investment in capital upgrades at several manufacturing
facilities to continue 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 third 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 drive growth and deliver
long-term value. Since the initiation of the Value Creation Plan, the
Company has implemented actions that are expected to yield approximately
$28 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. The Company has exited three lines of business and closed or
consolidated five facilities since the launch of the Value Creation
Plan, and is continually evaluating its portfolio to ensure all
businesses are strategically positioned to drive long-term value. Recent
highlights include:
-
Completed commissioning of the second roasting and processing line at
the Company’s organic cocoa facility in the Netherlands, contributing
to strong sales growth and increased gross margins in the quarter.
This expansion approximately doubled cocoa processing capacity in
addition to adding new capabilities at the facility.
-
Continued to make progress with an aseptic expansion project to add
processing and packaging capacity and capabilities to the Company’s
Allentown, Pennsylvania, beverage facility. This investment is
designed to add enhanced mixing and processing capabilities which will
enable the Company to bring further innovation to the plant-based
beverage market. The additional processing and filling capacity is
expected to provide increased flexibility and cost advantages across
the network of aseptic plants, while creating needed capacity to
continue to grow the Company’s organic and conventional aseptic
beverage offerings. The project is expected to cost approximately $22
million and is on track to come online in mid-2019.
-
Continued the commissioning of new roasting equipment at the Company’s
Crookston, Minnesota, facility, which is expected to be completed
during the fourth quarter. The new equipment is designed to increase
production efficiencies and add incremental capacity and roasting
capabilities in support of demand for on-trend healthy snacks
including roasted grains, seeds and legumes.
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:
-
Completed the 2018 fruit pack season with high scores for fruit
quality as a result of enhanced sorting and handling processes. During
the quarter, the Company approved a significant capital enhancement
project to bring new automation and technology to its California
frozen fruit processing facilities and also negotiated a new long-term
lease at the Santa Maria, California, location, which will include the
construction of a new cold storage facility. These enhancements are an
important step in the margin optimization plan designed to lower cost
and increase productivity in the Healthy Fruit platform.
-
Continued strong operational performance across the network of aseptic
facilities. The Company expects overall capacity utilization to be
approximately 85% by the end of 2018.
-
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:
-
Successfully commercialized approximately 100 new everyday broth and
frozen fruit SKUs with large mass and traditional retailers during the
third quarter, with volume building late in the quarter and additional
SKUs on track for delivery in the fourth quarter.
-
The pipeline of commercial opportunities in Consumer Products remains
strong and the overall contract book for organic ingredients both in
Europe and the U.S. exceeds prior year levels.
-
Recent commercial wins include innovative oat-based, non-dairy
beverage into retail and industrial channels, traditional non-dairy
SKUs into retail and broadline foodservice channels, expanded
distribution of everyday broth with a large mass retailer, private
label frozen fruit for a specialty retailer, and increased orders for
private label frozen fruit items following a category reset.
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. Broadening
the skillset and experience of SunOpta’s leadership team is a critical
component to the process sustainability pillar of the Value Creation
Plan. Recent highlights include:
-
Significant advancement made with a new demand planning system that is
expected to enhance the Company’s sales and operations planning
processes. The new tool is expected to go live during the fourth
quarter of 2018.
-
Improved capacity planning capabilities across the frozen fruit
network.
-
New product commercialization capabilities were enhanced and
demonstrated success during the third quarter, as evidenced by the
approximately 100 new SKUs commercialized across the beverage and
fruit platforms. Combined with the Company’s R&D capabilities, the
enhanced commercialization processes are expected to aid in
successfully bringing new innovation to market in the categories they
serve.
-
Enhancements to employee health and safety processes continued to
result in a reduction in recordable incidents year-to-date in 2018
compared to 2017.
Third Quarter 2018 Results
Revenues for the third quarter of 2018 were $308.4 million, a decrease
of 3.8% compared to $320.7 million in the third quarter of 2017.
Excluding the impact on revenues for the third 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
third quarter of 2018 increased by 2.0% compared with the third quarter
of 2017.
The Global Ingredients segment generated revenues from external
customers of $136.8 million, a decrease of 0.4% compared to $137.3
million in the third quarter of 2017. Excluding the impact on revenues
of changes in commodity-related pricing and foreign exchange rates,
Global Ingredients revenue in the third quarter increased 0.9%. Sales of
internationally-sourced organic ingredients grew 5.4% during the
quarter, excluding the effect of commodity prices and foreign exchange,
driven by increased demand in the U.S. market, offset by continued
pressure in Europe due in part to the impact of drought as well as a
slowdown in certain dry categories including nuts and seeds. This growth
was largely offset by a 9.6% decline in domestically-sourced
ingredients, excluding the effects of commodity prices, reflecting lower
sales of organic feed due to volatility caused by the import market,
continued soft market conditions for sunflower, and the previously
announced exit from certain domestically-sourced grain varieties in 2017.
The Consumer Products segment generated revenues of $171.6 million
during the third quarter of 2018, a decrease of 6.5% compared to $183.5
million in the third quarter of 2017. Excluding the impact of
commodity-related pricing and sales of resealable pouch and nutrition
bar products, which have been exited, Consumer Products revenue in the
third quarter increased by 3.0%. The growth primarily reflects a 53.9%
increase in the Healthy Snacks platform driven by strong sales in fruit
snacks, and 6.8% increase in the Healthy Beverage platform consisting of
higher sales of aseptic non-dairy and the introduction of everyday broth
products, partially offset by a 5.5% decline in the Healthy Fruit
platform due to mainly to sales price decreases and a product mix shift
towards lower priced items.
Gross profit decreased $2.3 million, or 6.4%, to $34.1 million for the
quarter ended September 29, 2018, compared with $36.5 million for the
quarter ended September 30, 2017. Global Ingredients accounted for $1.2
million of the decrease in gross profit, which was largely due to
start-up costs associated with new roasting equipment at the Crookston
facility, and the impact of foreign exchange on certain contracts within
the European-based operations of the international organic ingredient
platform. During the third quarter of 2018, the Company recognized a
non-cash $0.7 million foreign exchange loss on U.S. dollar-denominated
raw material purchase contracts, compared with a non-cash foreign
exchange gain of $0.7 million in the third quarter of 2017. These
factors were partially offset by increased volumes and pricing spreads
for certain organic ingredients, as well as a $2.6 million gain in the
third quarter of 2018 on commodity futures contracts used to hedge
organic cocoa, compared to a $0.1 million loss in the third quarter of
2017. Consumer Products accounted for $1.2 million of the decrease in
gross profit due mainly to lower sales pricing coupled with increased
manufacturing and supply chain costs for frozen fruit. These factors
were partially offset by increased sales and production volumes, and
productivity-driven cost savings in the beverage and snacks platforms,
as well as operational savings from the discontinuance of flexible
resealable pouch and nutrition bar production.
As a percentage of revenues, gross profit for the quarter ended
September 29, 2018 was 11.1% compared to 11.4% for the quarter ended
September 30, 2017, a decrease of 0.3%. The gross profit percentage for
the third quarter of 2018 would have been approximately 11.7%, excluding
start-up costs of $1.5 million related to the new roasting equipment and
$0.4 million of costs associated with the commercialization of new
beverage and frozen fruit SKUs. The gross profit percentage for the
third quarter of 2017 would have been approximately 11.8%, excluding the
impact of a $1.3 million write-down of flexible resealable pouch and
nutrition bar inventories.
Segment operating income¹ for the quarter ended September 29, 2018
decreased $0.5 million to $4.5 million, compared to $5.0 million for the
quarter ended September 30, 2017. The decrease in segment operating
income reflected lower overall gross profit, as described above, and a
$1.1 million increase in SG&A expenses, partially offset by a $2.9
million reduction in foreign exchange losses, which included a $1.2
million favorable result related to forward currency contracts within
the international organic ingredient operations, which mostly offset the
foreign exchange movement within gross profit. Excluding SG&A costs
related to the Value Creation Plan, as well as those items identified
above affecting gross profit, segment operating income as a percentage
of revenues on an adjusted basis would have been 2.1% for the third
quarter of 2018, compared with 2.7% for the third quarter of 2017.
Adjusted EBITDA¹ was $16.7 million or 5.4% of revenues in the third
quarter of 2018, compared to $19.1 million or 6.0% of revenues in the
third quarter of 2017. Excluding flexible resealable pouch and nutrition
bar operations, adjusted EBITDA for the quarter ended September 29, 2018
was $16.7 million, compared with $20.3 million for the quarter ended
September 30, 2017.
The Company reported a loss attributable to common shareholders of $6.6
million, or $0.08 per common share, compared to a loss attributable to
common shareholders of $8.0 million, or $0.09 per common share during
the third quarter of 2017. Adjusted loss¹ in the third quarter of 2018
was $3.8 million or a loss of $0.04 per common share, compared to $1.9
million or $0.02 per common share in the third quarter of 2017. Please
refer to the discussion and table below under “Non-GAAP Measures -
Adjusted Earnings/Loss”.
Balance Sheet and Cash Flow
At September 29, 2018, SunOpta’s balance sheet reflected total assets of
$999.2 million and total debt of $505.7 million. During the third
quarter of 2018 cash provided by operating activities was $10.5 million,
compared to cash used of $11.1 million during the third quarter of 2017.
The increase in cash provided by operations reflects improved cash flows
from working capital as compared to the third quarter of 2017, due
mainly to timing of payments made for purchases of fruit, and services
associated with the Value Creation Plan. Cash used in investing
activities during the third quarter of 2018 was $6.0 million, compared
to $7.8 million in the prior year period as the current quarter
benefited from cash received against an outstanding note receivable from
the sale of a legacy business.
Conference Call
SunOpta plans to host a conference call at 9:00 A.M. Eastern time on
Wednesday, November 7, 2018, to discuss the third 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 the Company’s Value
Creation Plan, including the estimated amount and timing of EBITDA
enhancements; the Company’s intention to exit businesses or product
lines where it is not effectively positioned; the expected increased
capacity resulting from the Company’s aseptic capacity expansion plan
and the associated cost and timing; the expected completion date of
commissioning and increased capacity from the Company’s new roasting
equipment at Crookston, MN; proposed construction of new cold storage
facility at Santa Maria, CA; improved revenue growth and profitability
as a result of the Company’s customer and product mix optimization
efforts; and expected enhancements resulting from and timing of
implementation of the Company’s new demand planning system. Generally,
forward-looking statements do not relate strictly to historical or
current facts and are typically accompanied by words such as “expect”,
“will”. "continue", “believe”, “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 the Company 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, the Company’s planned
expansion initiatives, portfolio optimization and productivity efforts,
the Company’s 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 the Company’s 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, failure or inability to implement portfolio changes,
process improvements, go-to-market improvements and process
sustainability 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; availability and
pricing of raw materials and supplies; potential covenant breaches under
the Company’s 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 three quarters ended September 29, 2018 and
September 30, 2017
|
(Unaudited)
|
(All dollar amounts expressed in thousands of U.S. dollars, except
per share amounts)
|
|
|
|
|
Quarter ended
|
|
|
Three quarters ended
|
|
|
|
September 29,
|
|
|
September 30,
|
|
|
September 29,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
308,371
|
|
|
|
320,713
|
|
|
|
940,331
|
|
|
|
987,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold |
|
|
274,243
|
|
|
|
284,258
|
|
|
|
838,173
|
|
|
|
870,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
34,128
|
|
|
|
36,455
|
|
|
|
102,158
|
|
|
|
116,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
27,220
|
|
|
|
26,102
|
|
|
|
82,456
|
|
|
|
99,413
|
|
Intangible asset amortization
|
|
|
2,754
|
|
|
|
2,817
|
|
|
|
8,293
|
|
|
|
8,429
|
|
Other expense, net
|
|
|
1,136
|
|
|
|
5,972
|
|
|
|
1,317
|
|
|
|
12,022
|
|
Foreign exchange loss (gain)
|
|
|
(368
|
)
|
|
|
2,575
|
|
|
|
583
|
|
|
|
4,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before the following |
|
|
3,386
|
|
|
|
(1,011
|
)
|
|
|
9,509
|
|
|
|
(7,398
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
8,792
|
|
|
|
8,371
|
|
|
|
25,486
|
|
|
|
23,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(5,406
|
)
|
|
|
(9,382
|
)
|
|
|
(15,977
|
)
|
|
|
(31,218
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recovery of income taxes
|
|
|
(870
|
)
|
|
|
(3,499
|
)
|
|
|
(3,853
|
)
|
|
|
(14,049
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(4,536
|
)
|
|
|
(5,883
|
)
|
|
|
(12,124
|
)
|
|
|
(17,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings attributable to non-controlling interests
|
|
|
70
|
|
|
|
144
|
|
|
|
19
|
|
|
|
664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to SunOpta Inc. |
|
|
(4,606
|
)
|
|
|
(6,027
|
)
|
|
|
(12,143
|
)
|
|
|
(17,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends and accretion on Series A Preferred Stock
|
|
|
(1,981
|
)
|
|
|
(1,954
|
)
|
|
|
(5,922
|
)
|
|
|
(5,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to common shareholders |
|
|
(6,587
|
)
|
|
|
(7,981
|
)
|
|
|
(18,065
|
)
|
|
|
(23,681
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.08
|
)
|
|
|
(0.09
|
)
|
|
|
(0.21
|
)
|
|
|
(0.27
|
)
|
Diluted
|
|
|
(0.08
|
)
|
|
|
(0.09
|
)
|
|
|
(0.21
|
)
|
|
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding (000s) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
87,168
|
|
|
|
86,541
|
|
|
|
86,982
|
|
|
|
86,232
|
|
Diluted
|
|
|
87,168
|
|
|
|
86,541
|
|
|
|
86,982
|
|
|
|
86,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SunOpta Inc. |
Consolidated Balance Sheets
|
As at September 29, 2018 and December 30, 2017
|
(Unaudited)
|
(All dollar amounts expressed in thousands of U.S. dollars)
|
|
|
|
|
September 29, 2018
|
|
|
December 30, 2017
|
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
1,857
|
|
|
|
3,228
|
|
Accounts receivable
|
|
|
131,924
|
|
|
|
125,152
|
|
Inventories
|
|
|
378,758
|
|
|
|
354,978
|
|
Prepaid expenses and other current assets
|
|
|
27,026
|
|
|
|
33,213
|
|
Income taxes recoverable
|
|
|
11,545
|
|
|
|
12,006
|
|
Total current assets |
|
|
551,110
|
|
|
|
528,577
|
|
|
|
|
|
|
|
|
Property, plant and equipment |
|
|
168,889
|
|
|
|
163,624
|
|
Goodwill |
|
|
109,281
|
|
|
|
109,533
|
|
Intangible assets |
|
|
163,731
|
|
|
|
172,059
|
|
Deferred income taxes |
|
|
362
|
|
|
|
363
|
|
Other assets |
|
|
5,786
|
|
|
|
8,017
|
|
|
|
|
|
|
|
|
Total assets |
|
|
999,159
|
|
|
|
982,173
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Bank indebtedness
|
|
|
278,688
|
|
|
|
234,090
|
|
Accounts payable and accrued liabilities
|
|
|
158,918
|
|
|
|
161,364
|
|
Customer and other deposits
|
|
|
789
|
|
|
|
4,901
|
|
Income taxes payable
|
|
|
3,093
|
|
|
|
1,351
|
|
Other current liabilities
|
|
|
1,485
|
|
|
|
818
|
|
Current portion of long-term debt
|
|
|
2,003
|
|
|
|
2,228
|
|
Current portion of long-term liabilities
|
|
|
4,505
|
|
|
|
5,300
|
|
Total current liabilities |
|
|
449,481
|
|
|
|
410,052
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
225,007
|
|
|
|
225,805
|
|
Long-term liabilities |
|
|
2,202
|
|
|
|
8,352
|
|
Deferred income taxes |
|
|
11,862
|
|
|
|
15,850
|
|
Total liabilities |
|
|
688,552
|
|
|
|
660,059
|
|
|
|
|
|
|
|
|
Series A Preferred Stock |
|
|
81,015
|
|
|
|
80,193
|
|
|
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
|
SunOpta Inc. shareholders’ equity |
|
|
|
|
|
|
Common shares
|
|
|
312,970
|
|
|
|
308,899
|
|
Additional paid-in capital
|
|
|
30,929
|
|
|
|
28,006
|
|
Accumulated deficit
|
|
|
(107,102
|
)
|
|
|
(89,291
|
)
|
Accumulated other comprehensive loss
|
|
|
(8,939
|
)
|
|
|
(7,268
|
)
|
|
|
|
227,858
|
|
|
|
240,346
|
|
Non-controlling interests |
|
|
1,734
|
|
|
|
1,575
|
|
Total equity |
|
|
229,592
|
|
|
|
241,921
|
|
|
|
|
|
|
|
|
Total equity and liabilities |
|
|
999,159
|
|
|
|
982,173
|
|
|
|
|
|
|
|
|
SunOpta Inc. |
Consolidated Statements of Cash Flows
|
For the quarters and three quarters ended September 29, 2018 and
September 30, 2017
|
(Unaudited)
|
(Expressed in thousands of U.S. dollars)
|
|
|
|
|
Quarter ended
|
|
|
Three quarters ended
|
|
|
|
September 29,
|
|
|
September 30,
|
|
|
September 29,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH PROVIDED BY (USED IN) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(4,536
|
)
|
|
|
(5,883
|
)
|
|
|
(12,124
|
)
|
|
|
(17,169
|
)
|
Items not affecting cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,171
|
|
|
|
8,254
|
|
|
|
24,501
|
|
|
|
24,601
|
|
Amortization of debt issuance costs
|
|
|
598
|
|
|
|
613
|
|
|
|
1,806
|
|
|
|
1,751
|
|
Deferred income taxes
|
|
|
(1,706
|
)
|
|
|
(3,425
|
)
|
|
|
(3,857
|
)
|
|
|
(13,340
|
)
|
Stock-based compensation
|
|
|
2,120
|
|
|
|
1,995
|
|
|
|
6,395
|
|
|
|
4,133
|
|
Unrealized loss (gain) on derivative contracts
|
|
|
2,110
|
|
|
|
754
|
|
|
|
867
|
|
|
|
(475
|
)
|
Fair value of contingent consideration
|
|
|
25
|
|
|
|
83
|
|
|
|
(2,348
|
)
|
|
|
287
|
|
Impairment of long-lived assets
|
|
|
-
|
|
|
|
4,467
|
|
|
|
409
|
|
|
|
8,190
|
|
Other
|
|
|
36
|
|
|
|
55
|
|
|
|
(111
|
)
|
|
|
(46
|
)
|
Changes in non-cash working capital
|
|
|
3,664
|
|
|
|
(18,006
|
)
|
|
|
(31,771
|
)
|
|
|
(25,319
|
)
|
Net cash flows from operations
|
|
|
10,482
|
|
|
|
(11,093
|
)
|
|
|
(16,233
|
)
|
|
|
(17,387
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property, plant and equipment
|
|
|
(7,758
|
)
|
|
|
(6,527
|
)
|
|
|
(24,921
|
)
|
|
|
(22,694
|
)
|
Proceeds from sale of assets
|
|
|
707
|
|
|
|
475
|
|
|
|
1,437
|
|
|
|
776
|
|
Payments received on note from sale of business
|
|
|
1,006
|
|
|
|
39
|
|
|
|
1,236
|
|
|
|
39
|
|
Acquisition of non-controlling interests
|
|
|
-
|
|
|
|
(1,737
|
)
|
|
|
-
|
|
|
|
(1,737
|
)
|
Other
|
|
|
-
|
|
|
|
(34
|
)
|
|
|
159
|
|
|
|
330
|
|
Net cash flows from investing activities
|
|
|
(6,045
|
)
|
|
|
(7,784
|
)
|
|
|
(22,089
|
)
|
|
|
(23,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) under line of credit facilities
|
|
|
(2,716
|
)
|
|
|
19,222
|
|
|
|
47,478
|
|
|
|
48,571
|
|
Borrowings under long-term debt
|
|
|
-
|
|
|
|
417
|
|
|
|
-
|
|
|
|
417
|
|
Repayment of long-term debt
|
|
|
(557
|
)
|
|
|
(564
|
)
|
|
|
(1,494
|
)
|
|
|
(1,680
|
)
|
Payment of cash dividends on Series A Preferred Stock
|
|
|
(1,700
|
)
|
|
|
(1,700
|
)
|
|
|
(5,100
|
)
|
|
|
(4,991
|
)
|
Proceeds from the exercise of stock options and employee share
purchases, net of withholding taxes paid
|
|
|
359
|
|
|
|
1,052
|
|
|
|
599
|
|
|
|
4,681
|
|
Payment of debt issuance costs
|
|
|
-
|
|
|
|
(206
|
)
|
|
|
-
|
|
|
|
(206
|
)
|
Payment of contingent consideration
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,399
|
)
|
|
|
(4,330
|
)
|
Other
|
|
|
(44
|
)
|
|
|
13
|
|
|
|
(89
|
)
|
|
|
(290
|
)
|
Net cash flows from financing activities
|
|
|
(4,658
|
)
|
|
|
18,234
|
|
|
|
36,995
|
|
|
|
42,172
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gain (loss) on cash held in a foreign currency
|
|
|
(9
|
)
|
|
|
41
|
|
|
|
(44
|
)
|
|
|
105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents in the period
|
|
|
(230
|
)
|
|
|
(602
|
)
|
|
|
(1,371
|
)
|
|
|
1,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of the period
|
|
|
2,087
|
|
|
|
3,457
|
|
|
|
3,228
|
|
|
|
1,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - end of the period
|
|
|
1,857
|
|
|
|
2,855
|
|
|
|
1,857
|
|
|
|
2,855
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SunOpta Inc. |
Segmented Information
|
For the quarters and three quarters ended September 29, 2018 and
September 30, 2017
|
Unaudited
|
(Expressed in thousands of U.S. dollars)
|
|
|
|
|
Quarter ended
|
|
|
Three quarters ended
|
|
|
|
September 29,
|
|
|
September 30,
|
|
|
September 29,
|
|
|
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
Segment revenues from external customers: |
|
|
|
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
|
136,754
|
|
|
|
137,254
|
|
|
|
419,770
|
|
|
|
410,022
|
|
Consumer Products
|
|
|
171,617
|
|
|
|
183,459
|
|
|
|
520,561
|
|
|
|
577,176
|
|
Total segment revenues from external customers
|
|
|
308,371
|
|
|
|
320,713
|
|
|
|
940,331
|
|
|
|
987,198
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment gross profit: |
|
|
|
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
|
14,477
|
|
|
|
15,645
|
|
|
|
42,576
|
|
|
|
51,025
|
|
Consumer Products
|
|
|
19,651
|
|
|
|
20,810
|
|
|
|
59,582
|
|
|
|
65,791
|
|
Total segment gross profit
|
|
|
34,128
|
|
|
|
36,455
|
|
|
|
102,158
|
|
|
|
116,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
|
5,304
|
|
|
|
4,846
|
|
|
|
11,371
|
|
|
|
16,960
|
|
Consumer Products
|
|
|
3,319
|
|
|
|
4,947
|
|
|
|
11,397
|
|
|
|
16,124
|
|
Corporate Services
|
|
|
(4,101
|
)
|
|
|
(4,832
|
)
|
|
|
(11,942
|
)
|
|
|
(28,460
|
)
|
Total segment operating income
|
|
|
4,522
|
|
|
|
4,961
|
|
|
|
10,826
|
|
|
|
4,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment gross profit percentage: |
|
|
|
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
|
10.6
|
%
|
|
|
11.4
|
%
|
|
|
10.1
|
%
|
|
|
12.4
|
%
|
Consumer Products
|
|
|
11.5
|
%
|
|
|
11.3
|
%
|
|
|
11.4
|
%
|
|
|
11.4
|
%
|
Total segment gross profit percentage
|
|
|
11.1
|
%
|
|
|
11.4
|
%
|
|
|
10.9
|
%
|
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income percentage: |
|
|
|
|
|
|
|
|
|
|
|
|
Global Ingredients
|
|
|
3.9
|
%
|
|
|
3.5
|
%
|
|
|
2.7
|
%
|
|
|
4.1
|
%
|
Consumer Products
|
|
|
1.9
|
%
|
|
|
2.7
|
%
|
|
|
2.2
|
%
|
|
|
2.8
|
%
|
Total segment operating income
|
|
|
1.5
|
%
|
|
|
1.5
|
%
|
|
|
1.2
|
%
|
|
|
0.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. The Company believes 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 its 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 its results of operations, the Company uses certain
other non-GAAP measures that it believes enhance an investor’s ability
to derive meaningful period-over-period comparisons and trends from the
results of operations. In particular, the Company evaluates its revenues
on a basis that excludes the effects of fluctuations in commodity
pricing and foreign exchange rates. In addition, the Company excludes
specific items from its reported results that due to their nature or
size, it does not expect to occur as part of its 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 its financial performance, the Company uses an internal
measure that excludes charges and gains that it believes 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 the Company’s 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, the Company has prepared these tables in a columnar format
to present the effect of these operations on the Company’s consolidated
results for the current and comparative periods. The Company believes
this presentation assists investors in assessing the results of the
operations the Company has exited and the effect of those operations on
its 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 |
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
September 29, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(4,500
|
)
|
|
|
|
|
|
(36
|
)
|
|
|
|
|
|
(4,536
|
)
|
|
|
|
Less: earnings attributable to non-controlling interests
|
|
|
(70
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(70
|
)
|
|
|
|
Less: dividends and accretion of Series A Preferred Stock
|
|
|
(1,981
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(1,981
|
)
|
|
|
|
Loss attributable to common shareholders
|
|
|
(6,551
|
)
|
|
|
(0.08
|
)
|
|
|
(36
|
)
|
|
|
-
|
|
|
|
(6,587
|
)
|
|
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment start-up costs(a) |
|
|
1,500
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
1,500
|
|
|
|
|
Product withdrawal and recall costs(b) |
|
|
1,011
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
1,011
|
|
|
|
|
New product commercialization costs(c) |
|
|
360
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
360
|
|
|
|
|
Costs related to the Value Creation Plan(d) |
|
|
43
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
43
|
|
|
|
|
Other(e) |
|
|
83
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
83
|
|
|
|
|
Net income tax effect(f) |
|
|
(243
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(243
|
)
|
|
|
|
Adjusted loss
|
|
|
(3,797
|
)
|
|
|
(0.04
|
)
|
|
|
(36
|
)
|
|
|
-
|
|
|
|
(3,833
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(639
|
)
|
|
|
|
|
|
(5,244
|
)
|
|
|
|
|
|
(5,883
|
)
|
|
|
|
Less: earnings attributable to non-controlling interests
|
|
|
(144
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(144
|
)
|
|
|
|
Less: dividends and accretion of Series A Preferred Stock
|
|
|
(1,954
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(1,954
|
)
|
|
|
|
Loss attributable to common shareholders
|
|
|
(2,737
|
)
|
|
|
(0.03
|
)
|
|
|
(5,244
|
)
|
|
|
(0.06
|
)
|
|
|
(7,981
|
)
|
|
|
(0.09
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs related to the Value Creation Plan(g) |
|
|
3,050
|
|
|
|
|
|
|
7,206
|
|
|
|
|
|
|
10,256
|
|
|
|
|
Product withdrawal and recall costs(b) |
|
|
134
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
134
|
|
|
|
|
Recovery of legal settlement(h) |
|
|
(1,024
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(1,024
|
)
|
|
|
|
Other(e) |
|
|
293
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
293
|
|
|
|
|
Net income tax effect(f) |
|
|
(774
|
)
|
|
|
|
|
|
(2,810
|
)
|
|
|
|
|
|
(3,584
|
)
|
|
|
|
Adjusted loss
|
|
|
(1,058
|
)
|
|
|
(0.01
|
)
|
|
|
(848
|
)
|
|
|
(0.01
|
)
|
|
|
(1,906
|
)
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Reflects costs related to the start-up of new roasting equipment at
the Crookston facility, which were recorded in cost of goods sold.
|
(b)
|
|
Reflects product withdrawal and recall costs that were not
eligible for reimbursement under the Company’s insurance policies
or exceeded the limits of those policies, including costs related
to the recall of certain sunflower kernel products initiated in
the second quarter of 2016, which were recorded in other expense.
|
(c)
|
|
Reflects costs of production trials and employee training related
to the commercialization of new consumer products, which were
recorded in cost of goods sold.
|
(d)
|
|
Reflects employee termination costs recorded in other expense,
related to the Value Creation Plan.
|
(e)
|
|
Other included the accretion of contingent consideration
obligations, gain/loss on the sale of assets, and settlement of a
legal matter in the third quarter of 2018, which were recorded in
other expense/income.
|
(f)
|
|
Reflects the tax effect of the preceding adjustments to earnings
and reflects an overall estimated annual effective tax rate of
approximately 26% for the three quarters ended September 29, 2018
(September 30, 2017 – 30%) on adjusted earnings before tax.
|
(g)
|
|
Reflects inventory write-downs of $1.3 million recorded in cost of
goods sold; and consulting fees, temporary labor, employee
recruitment, relocation and retention costs of $2.4 million
recorded in SG&A expenses; and asset impairment charges and
employee termination costs of $6.6 million recorded in other
expense, all related to the Value Creation Plan.
|
(h)
|
|
Reflects the recovery on the early extinguishment of a rebate
obligation that arose from the settlement in fiscal 2016 of a
flexible resealable pouch product recall dispute with a customer,
which was recorded in other income.
|
|
|
|
|
|
|
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 three quarters ended |
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
September 29, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(11,391
|
)
|
|
|
|
|
|
(733
|
)
|
|
|
|
|
|
(12,124
|
)
|
|
|
|
Less: earnings attributable to non-controlling interests
|
|
|
(19
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(19
|
)
|
|
|
|
Less: dividends and accretion of Series A Preferred Stock
|
|
|
(5,922
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(5,922
|
)
|
|
|
|
Loss attributable to common shareholders
|
|
|
(17,332
|
)
|
|
|
(0.20
|
)
|
|
|
(733
|
)
|
|
|
(0.01
|
)
|
|
|
(18,065
|
)
|
|
|
(0.21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs related to the Value Creation Plan(a) |
|
|
1,696
|
|
|
|
|
|
|
1,181
|
|
|
|
|
|
|
2,877
|
|
|
|
|
Equipment start-up costs(b) |
|
|
2,230
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
2,230
|
|
|
|
|
Product withdrawal and recall costs(c) |
|
|
1,456
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
1,456
|
|
|
|
|
New product commercialization costs(d) |
|
|
360
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
360
|
|
|
|
|
Other(e) |
|
|
198
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
198
|
|
|
|
|
Fair value adjustment on contingent consideration(f) |
|
|
(2,500
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(2,500
|
)
|
|
|
|
Recovery of product withdrawal costs(g) |
|
|
(1,200
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(1,200
|
)
|
|
|
|
Net income tax effect(h) |
|
|
(280
|
)
|
|
|
|
|
|
(307
|
)
|
|
|
|
|
|
(587
|
)
|
|
|
|
Adjusted earnings (loss)
|
|
|
(15,372
|
)
|
|
|
(0.18
|
)
|
|
|
141
|
|
|
|
-
|
|
|
|
(15,231
|
)
|
|
|
(0.18
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(9,304
|
)
|
|
|
|
|
|
(7,865
|
)
|
|
|
|
|
|
(17,169
|
)
|
|
|
|
Less: earnings attributable to non-controlling interests
|
|
|
(664
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(664
|
)
|
|
|
|
Less: dividends and accretion of Series A Preferred Stock
|
|
|
(5,848
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(5,848
|
)
|
|
|
|
Loss attributable to common shareholders
|
|
|
(15,816
|
)
|
|
|
(0.18
|
)
|
|
|
(7,865
|
)
|
|
|
(0.09
|
)
|
|
|
(23,681
|
)
|
|
|
(0.27
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs related to the Value Creation Plan(i) |
|
|
28,021
|
|
|
|
|
|
|
7,206
|
|
|
|
|
|
|
35,227
|
|
|
|
|
Product withdrawal and recall costs(j) |
|
|
1,142
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
1,142
|
|
|
|
|
Recovery of legal settlement(k) |
|
|
(1,024
|
)
|
|
|
|
|
|
-
|
|
|
|
|
|
|
(1,024
|
)
|
|
|
|
Other(d) |
|
|
166
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
166
|
|
|
|
|
Net income tax effect(h) |
|
|
(12,560
|
)
|
|
|
|
|
|
(2,810
|
)
|
|
|
|
|
|
(15,370
|
)
|
|
|
|
Adjusted loss
|
|
|
(71
|
)
|
|
|
-
|
|
|
|
(3,469
|
)
|
|
|
(0.04
|
)
|
|
|
(3,540
|
)
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Reflects the write-down of remaining flexible resealable pouch and
nutrition bar inventories of $0.1 million recorded in cost of goods
sold; professional and consulting fees, and employee recruitment and
relocation costs of $0.6 million recorded in SG&A expenses; and
asset impairment, facility closure and employee termination costs of
$2.2 million recorded in other expense, all related to the Value
Creation Plan.
|
(b)
|
|
Reflects costs related to the start-up of new roasting equipment
at the Crookston facility, which were recorded in cost of goods
sold.
|
(c)
|
|
Reflects product withdrawal and recall costs that were not
eligible for reimbursement under the Company’s insurance policies
or exceeded the limits of those policies, including costs related
to the recall of certain sunflower kernel products initiated in
the second quarter of 2016, which were recorded in other expense.
|
(d)
|
|
Reflects costs of production trials and employee training related
to the commercialization of new consumer products, which were
recorded in cost of goods sold.
|
(e)
|
|
Other included the accretion of contingent consideration
obligations, gain/loss on the sale of assets, severance costs
unrelated to the Value Creation Plan, and settlement of a legal
matter in the third quarter of 2018, which were recorded in other
expense/income.
|
(f)
|
|
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, based on the projected results for the business
in fiscal 2018, which was recorded in other income.
|
(g)
|
|
Reflects the recovery from a third-party supplier of $1.2 million
of costs incurred relating to the withdrawal of certain
consumer-packaged products due to quality-related issues, which
was recorded in cost of goods sold. Costs incurred related to this
withdrawal were recognized in cost of goods sold in the fourth
quarter of 2016.
|
(h)
|
|
Reflects the tax effect of the preceding adjustments to earnings
and reflects an overall estimated annual effective tax rate of
approximately 26% for the three quarters ended September 29, 2018
(September 30, 2017 – 30%) on adjusted earnings before tax.
|
(i)
|
|
Reflects inventory write-downs and facility closure costs of $1.9
million recorded in cost of goods sold; consulting fees, temporary
labor, employee recruitment, relocation and retention costs of
$20.8 million recorded in SG&A expenses; and asset impairment
charges and employee termination costs of $12.5 million recorded
in other expense, all related to the Value Creation Plan.
|
(j)
|
|
Reflects costs related to sunflower recall, including a $0.7
million adjustment for the estimated lost gross profit caused by
the 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 $0.4 million of direct costs
recorded in other expense that are not eligible for reimbursement
under the Company’s insurance policies.
|
(k)
|
|
Reflects the recovery on the early extinguishment of a rebate
obligation that arose from the settlement in fiscal 2016 of a
flexible resealable pouch product recall dispute with a customer,
which was recorded in other income.
|
|
|
|
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/loss. 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, the Company
has prepared these tables in a columnar format to present the effect of
flexible resealable pouch and nutrition bar operations on the Company’s
consolidated results for the current and comparative periods. The
Company believes this presentation assists investors in assessing the
results of the operations the Company has exited and the effect of those
operations on its financial performance.
|
|
|
Excluding flexible
|
|
|
Flexible
|
|
|
|
|
|
|
resealable pouch
|
|
|
resealable pouch
|
|
|
|
|
|
|
and nutrition bar
|
|
|
and nutrition bar
|
|
|
Consolidated
|
For the quarter ended |
|
|
$
|
|
|
$
|
|
|
$
|
September 29, 2018 |
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(4,500
|
)
|
|
|
(36
|
)
|
|
|
(4,536
|
)
|
Recovery of income taxes
|
|
|
(858
|
)
|
|
|
(12
|
)
|
|
|
(870
|
)
|
Interest expense, net
|
|
|
8,792
|
|
|
|
-
|
|
|
|
8,792
|
|
Other expense, net
|
|
|
1,136
|
|
|
|
-
|
|
|
|
1,136
|
|
Total segment operating income (loss)
|
|
|
4,570
|
|
|
|
(48
|
)
|
|
|
4,522
|
|
Depreciation and amortization
|
|
|
8,171
|
|
|
|
-
|
|
|
|
8,171
|
|
Stock-based compensation
|
|
|
2,120
|
|
|
|
-
|
|
|
|
2,120
|
|
Equipment start-up costs(a) |
|
|
1,500
|
|
|
|
-
|
|
|
|
1,500
|
|
New product commercialization costs(b) |
|
|
360
|
|
|
|
-
|
|
|
|
360
|
|
Adjusted EBITDA
|
|
|
16,721
|
|
|
|
(48
|
)
|
|
|
16,673
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(639
|
)
|
|
|
(5,244
|
)
|
|
|
(5,883
|
)
|
Recovery of income taxes
|
|
|
(146
|
)
|
|
|
(3,353
|
)
|
|
|
(3,499
|
)
|
Interest expense, net
|
|
|
8,371
|
|
|
|
-
|
|
|
|
8,371
|
|
Other expense, net
|
|
|
53
|
|
|
|
5,919
|
|
|
|
5,972
|
|
Total segment operating income (loss)
|
|
|
7,639
|
|
|
|
(2,678
|
)
|
|
|
4,961
|
|
Depreciation and amortization
|
|
|
8,055
|
|
|
|
199
|
|
|
|
8,254
|
|
Stock-based compensation(c) |
|
|
2,235
|
|
|
|
-
|
|
|
|
2,235
|
|
Costs related to Value Creation Plan(d) |
|
|
2,400
|
|
|
|
1,287
|
|
|
|
3,687
|
|
Adjusted EBITDA
|
|
|
20,329
|
|
|
|
(1,192
|
)
|
|
|
19,137
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Reflects costs related to the start-up of new roasting equipment at
the Crookston facility, which were recorded in cost of goods sold.
|
(b)
|
|
Reflects costs of production trials and employee training related
to the commercialization of new consumer products, which were
recorded in cost of goods sold.
|
(c)
|
|
For the third quarter of 2017, stock-based compensation of $2.2
million was recorded in SG&A expenses, and the reversal of $0.2
million of previously recognized stock-based compensation related
to forfeited awards previously granted to terminated employees was
recognized in other expense.
|
(d)
|
|
Reflects inventory write-downs of $1.3 million recorded in cost of
goods sold and consulting fees, temporary labor, employee
recruitment, relocation and retention costs of $2.4 million
recorded in SG&A expenses.
|
|
|
|
|
|
|
Excluding flexible
|
|
|
Flexible
|
|
|
|
|
|
|
resealable pouch
|
|
|
resealable pouch
|
|
|
|
|
|
|
and nutrition bar
|
|
|
and nutrition bar
|
|
|
Consolidated
|
For the three quarters ended |
|
|
$
|
|
|
$
|
|
|
$
|
September 29, 2018 |
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(11,391
|
)
|
|
|
(733
|
)
|
|
|
(12,124
|
)
|
Recovery of income taxes
|
|
|
(3,596
|
)
|
|
|
(257
|
)
|
|
|
(3,853
|
)
|
Interest expense, net
|
|
|
25,486
|
|
|
|
-
|
|
|
|
25,486
|
|
Other expense (income), net
|
|
|
136
|
|
|
|
1,181
|
|
|
|
1,317
|
|
Total segment operating income
|
|
|
10,635
|
|
|
|
191
|
|
|
|
10,826
|
|
Depreciation and amortization
|
|
|
24,501
|
|
|
|
-
|
|
|
|
24,501
|
|
Stock-based compensation
|
|
|
6,395
|
|
|
|
-
|
|
|
|
6,395
|
|
Equipment start-up costs(a) |
|
|
2,230
|
|
|
|
-
|
|
|
|
2,230
|
|
Costs related to Value Creation Plan(b) |
|
|
713
|
|
|
|
-
|
|
|
|
713
|
|
New product commercialization costs(c) |
|
|
360
|
|
|
|
-
|
|
|
|
360
|
|
Recovery of product withdrawal costs(d) |
|
|
(1,200
|
)
|
|
|
-
|
|
|
|
(1,200
|
)
|
Adjusted EBITDA
|
|
|
43,634
|
|
|
|
191
|
|
|
|
43,825
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2017 |
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(9,304
|
)
|
|
|
(7,865
|
)
|
|
|
(17,169
|
)
|
Recovery of income taxes
|
|
|
(9,021
|
)
|
|
|
(5,028
|
)
|
|
|
(14,049
|
)
|
Interest expense, net
|
|
|
23,820
|
|
|
|
-
|
|
|
|
23,820
|
|
Other expense, net
|
|
|
6,103
|
|
|
|
5,919
|
|
|
|
12,022
|
|
Total segment operating income (loss)
|
|
|
11,598
|
|
|
|
(6,974
|
)
|
|
|
4,624
|
|
Depreciation and amortization
|
|
|
23,951
|
|
|
|
650
|
|
|
|
24,601
|
|
Stock-based compensation(e) |
|
|
4,700
|
|
|
|
-
|
|
|
|
4,700
|
|
Costs related to Value Creation Plan(b) |
|
|
21,473
|
|
|
|
1,287
|
|
|
|
22,760
|
|
Product withdrawal and recall costs(f) |
|
|
729
|
|
|
|
-
|
|
|
|
729
|
|
Adjusted EBITDA
|
|
|
62,451
|
|
|
|
(5,037
|
)
|
|
|
57,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Reflects costs related to the start-up of new roasting equipment at
the Crookston facility, which were recorded in cost of goods sold.
|
(b)
|
|
For the first three quarters 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 professional
and consulting fees, and employee recruitment and relocation costs
of $0.6 million recorded in SG&A expenses. For the first three
quarters of 2017, reflects inventory write-downs and facility
closure costs of $1.9 million recorded in cost of goods sold, and
consulting fees, temporary labor, employee recruitment, relocation
and retention costs of $20.8 million recorded in SG&A expenses.
|
(c)
|
|
Reflects costs of production trials and employee training related
to the commercialization of new consumer products, which were
recorded in cost of goods sold.
|
(d)
|
|
Reflects the recovery from a third-party supplier of $1.2 million
of costs the Company incurred relating to the withdrawal of
certain consumer-packaged products due to quality-related issues,
which was recorded in cost of goods sold. Costs incurred related
to this withdrawal were recognized in cost of goods sold in the
fourth quarter of 2016.
|
(e)
|
|
For the first three quarters of 2017, stock-based compensation of
$4.7 million was recorded in SG&A expenses, and the reversal of
$0.6 million of previously recognized stock-based compensation
related to forfeited awards previously granted to terminated
employees was recognized in other expense.
|
(f)
|
|
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/20181107005260/en/
Source: SunOpta Inc.
For SunOpta Inc.
Scott Van Winkle, 617-956-6736
ICR
scott.vanwinkle@icrinc.com