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SunOpta Announces First Quarter Fiscal 2020 Financial Results

May 06,2020

Revenue increased 13% adjusted for dispositions, acquisitions, foreign exchange and commodities

All segments delivered revenue growth, on an adjusted basis, and gross margin improvement

Adjusted EBITDA more than doubled YOY

TORONTO--(BUSINESS WIRE)-- SunOpta Inc. (“SunOpta” or the “Company”) (Nasdaq:STKL) (TSX:SOY), a leading global company focused on plant-based foods and beverages, fruit-based foods and beverages, and organic ingredient sourcing and production, today announced financial results for the first quarter ended March 28, 2020.

All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.

First Quarter 2020 Highlights:

  • Revenues of $335.9 million for the first quarter of 2020, compared to $305.3 million in the first quarter of 2019, an increase of 10.0%. Adjusted for dispositions, acquisitions, foreign exchange and commodity prices, revenues grew by 13.2%.
  • Gross margin increased 380 basis points to 13.0% from 9.2% in the prior year.
  • Earnings attributable to common shareholders of $1.3 million or $0.01 per diluted common share in the first quarter of 2020, compared to $23.7 million or $0.26 per diluted common share in the first quarter of 2019. Earnings in the first quarter of 2019 included a pre-tax gain on the sale of the specialty and organic soy and corn business of $45.6 million. Adjusted earnings¹ excluding disposed operations of $0.9 million or $0.01 per common share during the first quarter of 2020, compared to an adjusted loss of $7.6 million or $0.09 per common share during the first quarter of 2019.
  • Adjusted EBITDA¹ excluding disposed operations of $24.3 million or 7.2% of revenues for the first quarter of 2020, versus $11.1 million or 3.6% of revenues in the first quarter of 2019.

“We are well into executing our turnaround plan. We delivered an outstanding first quarter, with 13% adjusted revenue growth and the second highest adjusted EBITDA in the Company’s history. The growth and margin strength were broad based, across all three operating segments,” said Joe Ennen, Chief Executive Officer of SunOpta. “Our focus and investment in plant-based foods and beverages continues to be a significant driver of revenue and margin growth. We generated 30% adjusted revenue growth in this key segment and doubled gross profit versus prior year. We remain well positioned to capitalize on the rapidly growing plant-based trend. We also continue to make progress on our capital investments to expand capacity and capabilities, supported by our recent preferred equity capital raise. Our Fruit-Based Food and Beverages segment is performing in-line with previously communicated expectations and our productivity initiatives to improve margins are on track. We generated 9% revenue growth in our fruit platform and continued to deliver sequential improvements in gross margin. We have sold through the vast majority of higher priced 2019 inventory related to last year’s supply constraints. We have successfully taken pricing action, delivered productivity improvements and are entering the 2020 procurement season in a very healthy position. Finally, our Global Ingredients segment contributed 6% adjusted revenue growth and saw strong improvement in gross margin. We are successfully executing our strategy of investing and focusing on key ingredient categories, where we can maximize our return on capital.”

“Looking ahead for the remainder of 2020, we remain focused on our key initiatives and remain confident in our ability to drive further year-over-year adjusted EBITDA improvement. We have successfully responded to the evolving environment of COVID-19. We have followed government advice as it evolved and are very focused on the health and safety of our employees. Our facilities are operating effectively and uninterrupted and we have maintained high levels of service to all of our customers. We remain well positioned in large and growing categories with strong market positions and are successfully executing our turnaround strategy,” continued Ennen.

First Quarter 2020 Results

Revenues for the first quarter of 2020 were $335.9 million, an increase of 10.0% compared to $305.3 million in the first quarter of 2019. Excluding the impact on reported revenues of the soy and corn business sold in February 2019, changes in commodity-related pricing and foreign exchange rates and excluding the impact of the acquisition of Sanmark in April 2019, revenues in the first quarter of 2020 increased by 13.2% compared with the first quarter of 2019.

The Global Ingredients segment generated revenues of $128.4 million, a decrease of 4.8% compared to $134.8 million in the first quarter of 2019. Excluding the impact of the disposed soy and corn business, and changes in commodity-related pricing and foreign exchange rates, Global Ingredients revenue in the first quarter of 2020 increased 5.5% compared to the prior year period, which reflected higher volumes in certain organic ingredient product categories and of premium juice products.

The Plant-Based Foods and Beverages segment generated revenues of $106.2 million during the first quarter of 2020, an increase of 30.7% compared to $81.3 million in the first quarter of 2019. Excluding sunflower price variances, Plant-Based segment revenues in the first quarter increased 29.7% compared to the prior year period, reflecting higher volumes of aseptic beverages, broth offerings, and ingredient extraction.

The Fruit-Based Foods and Beverages segment generated revenues of $101.4 million during the first quarter of 2020, an increase of 13.7% compared to $89.2 million in the first quarter of 2019. Excluding the impact of commodity price fluctuations, Fruit-Based segment revenues in the first quarter increased 9.1% compared to the prior year period, primarily reflecting increased retail volumes and pricing for frozen fruit.

Gross profit was $43.7 million for the quarter ended March 28, 2020, an increase of $15.5 million compared to $28.2 million for the quarter ended March 30, 2019. As a percentage of revenues, gross profit for the quarter ended March 28, 2020 was 13.0% compared to 9.2% for the quarter ended March 30, 2019, an increase of 3.8%. The Plant-Based Foods and Beverages segment accounted for $10.6 million of the increase in gross profit, primarily due to higher sales and production volumes of plant-based beverages, broths and plant-based ingredients, and improved plant utilization and productivity-driven cost savings. The Fruit-Based Foods and Beverages segment increased gross profit by $3.1 million in the quarter due to increased gross margin, reflecting increased sales, pricing and productivity improvements. The Global Ingredients segment accounted for $1.9 million of the increased gross profit in the quarter primarily due to increased pricing spreads for organic ingredients and premium juice products and productivity improvements in our factories.

Segment operating income¹ was $11.5 million, or 3.4% of revenues in the first quarter of 2020, compared to operating income of $0.3 million, or 0.1% of revenues in the first quarter of 2019. The increase in operating income year-over-year was primarily attributable to the $15.5 million increase in gross profit, partially offset by a year-over-year unfavorable foreign exchange impact of $3.4 million within our Mexican frozen fruit and European organic ingredient operations and increased reserves for credit losses included in SG&A expenses, due to a weaker economic outlook.

Other income of $1.3 million for the first quarter of 2020 reflected the settlement of a dispute arising from a prior business acquisition, offset by employee termination and facility closure costs, mainly related to the consolidation of our corporate office functions.

Adjusted EBITDA¹ was $24.3 million or 7.2% of revenues in the first quarter of 2020, compared to $10.9 million or 3.6% of revenues in the first quarter of 2019. Excluding disposed operations, adjusted EBITDA for the quarter ended March 30, 2019 was $11.1 million.

The Company reported earnings attributable to common shareholders for the first quarter of 2020 of $1.3 million, or $0.01 per diluted common share, compared to earnings of $23.7 million, or $0.26 per diluted common share during the first quarter of 2019. Earnings in the first quarter of 2019 included a pre-tax gain on the sale of the specialty and organic soy and corn business of $45.6 million.

Adjusted earnings¹ in the first quarter of 2020 was $0.9 million or $0.01 per common share, compared to an adjusted loss of $7.9 million or $0.09 per common share in the first quarter of 2019. Please refer to the discussion and table below under “Non-GAAP Measures - Adjusted Earnings/Loss”.

Balance Sheet and Cash Flow

At March 28, 2020, SunOpta’s balance sheet reflected total assets of $894.4 million and total debt of $469.3 million. During the first quarter of 2020, cash provided by operating activities was $34.7 million, compared to $1.0 million during the first quarter of 2019. The $33.8 million increase in cash provided by operating activities primarily reflects the improved year-over-year operating results, along with more efficient working capital management. Cash used in investing activities was $9.7 million in the first quarter of 2020, compared with $8.0 million in the first quarter of 2019, an increase in cash used of $1.7 million, including a higher level of capital expenditures related to the expansion of our ingredient extraction capabilities.

Conference Call

SunOpta plans to host a conference call at 9:00 A.M. Eastern time on Wednesday, May 6, 2020, 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 Relations” 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 (833) 979-2699 or International dial-in number 1 (236) 714-2200 using Conference ID 7369963. 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 plant-based foods and beverages, fruit-based foods and beverages, and organic ingredient sourcing and production. SunOpta specializes in the sourcing, processing and packaging of organic, natural and non-GMO food products, integrated from seed through packaged products, with a focus on strategic vertically integrated business models.

Forward-Looking Statements

Certain statements included in this press release may be considered "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation, which are based on information available to us on the date of this release. These forward-looking statements include, but are not limited to, our belief that investment in plant-based foods and beverages will continue to be a significant driver of revenue and margin growth, and our ability to drive further year-over-year adjusted EBITDA improvement. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as “continue”, “expect”, “believe”, “anticipate”, “estimates”, “can”, “will”, “target”, "should", "would", "plans", "becoming", "intend", "confident", "may", "project", "potential", "intention", "might", "predict", “budget”, “forecast” 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 actual financial results; uninterrupted operations and service levels to our customers during COVID-19; current customer demand for the Company’s products and the additional anticipated demand due to COVID-19; general economic conditions; continued consumer interest in health and wellness; the Company’s ability to maintain product pricing levels; planned facility and operational expansions, closures and divestitures; cost rationalization and product development initiatives; alternative potential uses for the Company’s capital resources; portfolio optimization and productivity efforts; the sustainability of the Company’s sales pipeline; 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. Whether actual timing and results will agree with expectations and predictions of the Company is subject to many risks and uncertainties including, but not limited to, potential loss of suppliers and customers as well as supply chain, logistics and other disruptions resulting from or related to COVID-19; unexpected issues or delays with the Company’s structural improvements and automation investments; 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 ended March 28, 2020 and March 30, 2019

(Unaudited)

(All dollar amounts expressed in thousands of U.S. dollars, except per share amounts)

 

 

 

 

Quarter ended

 

March 28, 2020

March 30, 2019

 

$

$

 

 

 

Revenues

 

335,949

 

 

305,275

 

 

 

 

Cost of goods sold

 

292,229

 

 

277,069

 

 

 

 

Gross profit

 

43,720

 

 

28,206

 

 

 

 

Selling, general and administrative expenses

 

27,206

 

 

26,248

 

Intangible asset amortization

 

2,721

 

 

2,742

 

Other income, net

 

(1,298

)

 

(43,512

)

Foreign exchange loss (gain)

 

2,334

 

 

(1,104

)

 

 

 

Earnings before the following

 

12,757

 

 

43,832

 

 

 

 

Interest expense, net

 

8,280

 

 

8,739

 

 

 

 

Earnings before income taxes

 

4,477

 

 

35,093

 

 

 

 

Provision for income taxes

 

1,130

 

 

9,498

 

 

 

 

Net earnings

 

3,347

 

 

25,595

 

 

 

 

Loss attributable to non-controlling interests

 

(14

)

 

(54

)

 

 

 

Earnings attributable to SunOpta Inc.

 

3,361

 

 

25,649

 

 

 

 

Dividends and accretion on Series A Preferred Stock

 

(2,025

)

 

(1,995

)

 

 

 

Earnings attributable to common shareholders

 

1,336

 

 

23,654

 

 

 

 

Earnings per share (1)

 

 

Basic

 

0.02

 

 

0.27

 

Diluted

 

0.01

 

 

0.26

 

SunOpta Inc.

Consolidated Statements of Operations (continued)

For the quarters ended March 28, 2020 and March 30, 2019

(Unaudited)

(All dollar amounts expressed in thousands of U.S. dollars, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

 

 

March 28, 2020

March 30, 2019

 

 

 

 

 

 

 

 

(1)

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator for basic earnings per share

 

 

 

 

 

 

Earnings attributable to SunOpta Inc.

$

3,361

 

$

25,649

 

 

 

Less: dividends and accretion on Series A preferred stock

 

(2,025

)

 

(1,995

)

 

 

Earnings attributable to common shareholders

$

1,336

 

$

23,654

 

 

 

 

 

 

 

 

 

 

Denominator for basic earnings per share

 

 

 

 

 

 

Basic weighted-average number of shares outstanding

 

88,161

 

 

87,475

 

 

 

 

 

 

 

 

 

 

Basic earnings per share

$

0.02

 

$

0.27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Numerator for diluted earnings per share

 

 

 

 

 

 

Earnings attributable to SunOpta Inc.

$

3,361

 

$

25,649

 

 

 

Less: dividends and accretion on Series A preferred stock

 

(2,025

)

 

-

 

 

 

Earnings attributable to common shareholders

$

1,336

 

$

25,649

 

 

 

 

 

 

 

 

 

 

Denominator for diluted earnings per share

 

 

 

 

 

 

Basic weighted-average number of shares outstanding

 

88,161

 

 

87,475

 

 

 

Dilutive effect of the following:

 

 

 

 

 

 

 

Stock options and restricted stock units

 

1,136

 

 

191

 

 

 

 

Series A preferred stock(a)

 

-

 

 

11,333

 

 

 

Diluted weighted-average number of shares outstanding

 

89,297

 

 

98,999

 

 

 

 

 

 

 

 

 

 

Diluted earnings per share

$

0.01

 

$

0.26

 

(a)

For the quarter ended March 30, 2019, it was more dilutive to assume the Series A Preferred Stock was converted into Common Shares and, therefore, the numerator of the diluted earnings per share calculation was adjusted to add back the dividends and accretion on the Series A Preferred Stock and the denominator was adjusted to include 11,333,333 Common Shares issuable on an if-converted basis.

SunOpta Inc.

Consolidated Balance Sheets

As at March 28, 2020 and December 28, 2019

(Unaudited)

(All dollar amounts expressed in thousands of U.S. dollars)

 

 

 

 

March 28, 2020

December 28, 2019

 

$

$

 

 

 

ASSETS

 

 

Current assets

 

 

Cash and cash equivalents

2,670

 

1,498

 

Accounts receivable

149,651

 

121,445

 

Inventories

272,475

 

323,546

 

Prepaid expenses and other current assets

35,484

 

35,985

 

Income taxes recoverable

1,864

 

7,480

 

Total current assets

462,144

 

489,954

 

 

 

 

Property, plant and equipment

186,815

 

184,550

 

Operating lease right-of-use assets

65,246

 

68,433

 

Goodwill

28,316

 

28,422

 

Intangible assets

147,285

 

150,009

 

Deferred income taxes

1,129

 

-

 

Other assets

3,481

 

1,991

 

 

 

 

Total assets

894,416

 

923,359

 

 

 

 

LIABILITIES

 

 

Current liabilities

 

 

Bank indebtedness

224,864

 

245,536

 

Accounts payable and accrued liabilities

122,765

 

133,529

 

Customer and other deposits

1,632

 

37

 

Income taxes payable

1,725

 

1,272

 

Other current liabilities

749

 

802

 

Current portion of long-term debt

3,300

 

2,987

 

Current portion of operating lease liabilities

16,579

 

17,215

 

Current portion of long-term liabilities

2,000

 

4,286

 

Total current liabilities

373,614

 

405,664

 

 

 

 

Long-term debt

241,106

 

242,204

 

Operating lease liabilities

49,350

 

52,020

 

Long-term liabilities

1,908

 

2,011

 

Deferred income taxes

10,416

 

9,027

 

Total liabilities

676,394

 

710,926

 

 

 

 

Series A Preferred Stock

84,549

 

82,524

 

 

 

 

EQUITY

 

 

SunOpta Inc. shareholders’ equity

 

 

Common shares

318,958

 

318,456

 

Additional paid-in capital

37,813

 

35,767

 

Accumulated deficit

(213,595

)

(214,931

)

Accumulated other comprehensive loss

(11,580

)

(11,271

)

 

131,596

 

128,021

 

Non-controlling interests

1,877

 

1,888

 

Total equity

133,473

 

129,909

 

 

 

 

Total equity and liabilities

894,416

 

923,359

 

SunOpta Inc.

Consolidated Statements of Cash Flows

For the quarters ended March 28, 2020 and March 30, 2019

(Unaudited)

(Expressed in thousands of U.S. dollars)

 

 

 

 

Quarter ended

 

March 28, 2020

March 30, 2019

 

$

$

 

 

 

CASH PROVIDED BY (USED IN)

 

 

 

 

 

Operating activities

 

 

Net earnings

3,347

 

25,595

 

Items not affecting cash:

 

 

Depreciation and amortization

8,922

 

8,302

 

Amortization of debt issuance costs

939

 

655

 

Deferred income taxes

260

 

7,327

 

Stock-based compensation

2,447

 

(163

)

Unrealized loss on derivative contracts

556

 

112

 

Gain on settlement of contingent consideration obligation

(2,286

)

-

 

Gain on sale of business

-

 

(45,579

)

Other

(90

)

(62

)

Changes in non-cash working capital, net of business sold

20,654

 

4,801

 

Net cash flows from operating activities

34,749

 

988

 

 

 

 

Investing activities

 

 

Purchases of property, plant and equipment

(9,689

)

(7,974

)

Net proceeds from sale of business

-

 

64,876

 

Net cash flows from investing activities

(9,689

)

56,902

 

 

 

 

Financing activities

 

 

Decrease under line of credit facilities

(19,754

)

(54,661

)

Borrowings under long-term debt

155

 

1,852

 

Repayment of long-term debt

(597

)

(723

)

Payment of cash dividends on Series A Preferred Stock

(1,700

)

(1,700

)

Proceeds from the exercise of stock options and employee share purchases

101

 

228

 

Payment of debt issuance costs

(2,073

)

(314

)

Other

(4

)

221

 

Net cash flows from financing activities

(23,872

)

(55,097

)

 

 

 

Foreign exchange loss on cash held in a foreign currency

(16

)

(58

)

 

 

 

Increase in cash and cash equivalents in the period

1,172

 

2,735

 

 

 

 

Cash and cash equivalents - beginning of the period

1,498

 

3,280

 

 

 

 

Cash and cash equivalents - end of the period

2,670

 

6,015

 

SunOpta Inc.

Segmented Information

For the quarters ended March 28, 2020 and March 30, 2019

Unaudited

(Expressed in thousands of U.S. dollars)

 

 

 

 

 

 

 

 

 

 

Quarter ended

 

 

 

 

March 28, 2020

March 30, 2019

 

 

 

 

$

$

Segment revenues from external customers:

 

 

 

Global Ingredients

128,352

 

134,842

 

 

Plant-Based Foods and Beverages

106,242

 

81,276

 

 

Fruit-Based Foods and Beverages

101,355

 

89,157

 

 

 

Total segment revenues from external customers

335,949

 

305,275

 

 

 

 

 

Segment gross profit:

 

 

 

Global Ingredients

16,547

 

14,692

 

 

Plant-Based Foods and Beverages

21,071

 

10,496

 

 

Fruit-Based Foods and Beverages

6,102

 

3,018

 

 

 

Total segment gross profit

43,720

 

28,206

 

 

 

 

 

 

 

Segment operating income (loss):

 

 

 

Global Ingredients

8,114

 

6,543

 

 

Plant-Based Foods and Beverages

13,853

 

2,528

 

 

Fruit-Based Foods and Beverages

(4,702

)

(5,605

)

 

Corporate Services

(5,806

)

(3,146

)

 

 

Total segment operating income

11,459

 

320

 

 

 

 

 

 

 

Segment gross profit percentage:

 

 

 

Global Ingredients

12.9

%

10.9

%

 

Plant-Based Foods and Beverages

19.8

%

12.9

%

 

Fruit-Based Foods and Beverages

6.0

%

3.4

%

 

 

Total segment gross profit percentage

13.0

%

9.2

%

 

 

 

 

 

 

Segment operating income (loss) percentage:

 

 

 

Global Ingredients

6.3

%

4.9

%

 

Plant-Based Foods and Beverages

13.0

%

3.1

%

 

Fruit-Based Foods and Beverages

-4.6

%

-6.3

%

 

 

Total segment operating income percentage

3.4

%

0.1

%

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, and the impacts of acquired or disposed operations and changes in contractual relationships with customers. 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 earnings/loss, which the Company believes to be the most directly comparable U.S. GAAP financial measure. In addition, in recognition of the sale of the soy and corn business in the first quarter of 2019, the Company has prepared these tables in a columnar format to present the effect of the disposal 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 disposed and the effect of those operations on its financial performance.

 

Excluding

 

 

 

 

 

disposed operations

Disposed operations

 

Consolidated

 

 

Per Diluted
Share

 

Per Diluted
Share

 

 

Per Diluted
Share

For the quarter ended

$

$

$

$

 

$

$

March 28, 2020

 

 

 

 

 

 

Net earnings

3,347

 

 

-

 

 

3,347

 

 

Loss attributable to non-controlling interests

14

 

 

-

 

 

14

 

 

Dividends and accretion of Series A Preferred Stock

(2,025

)

 

-

 

 

(2,025

)

 

Earnings attributable to common shareholders

1,336

 

0.01

 

-

 

-

1,336

 

0.01

 

 

 

 

 

 

 

 

Adjusted for:

 

 

 

 

 

 

Contingent consideration settlement(a)

(2,286

)

 

-

 

 

(2,286

)

 

Costs related to the Value Creation Plan(b)

1,995

 

 

-

 

 

1,995

 

 

Other(c)

29

 

 

-

 

 

29

 

 

Net income tax effect(d)

(135

)

 

-

 

 

(135

)

 

Adjusted earnings

939

 

0.01

 

-

 

-

939

 

0.01

 

 

 

 

 

 

 

 

March 30, 2019

 

 

 

 

 

 

Net earnings (loss)

(7,201

)

 

32,796

 

 

25,595

 

 

Loss attributable to non-controlling interests

54

 

 

-

 

 

54

 

 

Dividends and accretion of Series A Preferred Stock

(1,995

)

 

-

 

 

(1,995

)

 

Earnings (loss) attributable to common shareholders

(9,142

)

(0.10

)

32,796

 

0.33

23,654

 

0.26

 

 

 

 

 

 

 

 

Adjusted for:

 

 

 

 

 

 

Gain on sale of soy and corn business(e)

-

 

 

(45,579

)

 

(45,579

)

 

Costs related to Value Creation Plan(f)

1,858

 

 

-

 

 

1,858

 

 

Product withdrawal and recall costs(g)

260

 

 

-

 

 

260

 

 

Contract manufacturer transition costs(h)

88

 

 

-

 

 

88

 

 

Other(i)

152

 

 

-

 

 

152

 

 

Net income tax effect(d)

(826

)

 

12,489

 

 

11,663

 

 

Adjusted loss

(7,610

)

(0.09

)

(294

)

-

(7,904

)

(0.09

)

(a)

Reflects a gain on the settlement of the remaining earn-out obligation related to a prior business acquisition, which was recorded in other income.

(b)

Reflects employee retention costs of $0.5 million and professional fees of $0.6 million recorded in SG&A expenses; and employee termination costs of $1.0 million (offset by a $0.5 million reversal of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees), and facility closure costs of $0.4 million recorded in other expense.

(c)

Other includes losses on the disposal of assets, which were recorded in other expense.

(d)

Reflects the tax effect of the preceding adjustments to earnings and reflects an overall estimated annual effective tax rate of approximately 30% for the quarter ended March 28, 2020 (March 30, 2019 – 27%) on adjusted earnings/loss before tax.

(e)

Reflects the gain on sale of the soy and corn business, net of transaction costs, which was recorded in other income.

(f)

Reflects professional fees and employee retention costs of $0.2 million recorded in SG&A expenses; and employee termination costs of $2.9 million, recruitment costs of $0.6 million, and facility closure costs of $0.3 million, offset by a $2.1 million reversal of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees, all recorded in other expense.

(g)

Reflects product withdrawal and recall costs that were not eligible for reimbursement under 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.

(h)

Reflects costs to transition certain production activities to a new contract manufacturer, which were recorded in cost of goods sold.

(i)

Other included insurance deductibles, which were recorded in other expense.

 

 

We believe that investors’ understanding of our financial performance is enhanced by disclosing the specific items that we exclude to compute adjusted earnings/loss. However, adjusted earnings/loss is not, and should not be viewed as, a substitute for earnings prepared under U.S. GAAP. Adjusted earnings/loss is presented solely to allow investors to more fully understand how we assess our financial performance.

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 earnings/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 the disposal of the soy and corn business 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 disposed and the effect of those operations on its financial performance.

 

Excluding

 

 

 

disposed operations

Disposed operations

Consolidated

For the quarter ended

$

$

$

March 28, 2020

 

 

 

Net earnings

3,347

 

-

 

3,347

 

Provision for income taxes

1,130

 

-

 

1,130

 

Interest expense, net

8,280

 

-

 

8,280

 

Other income, net

(1,298

)

-

 

(1,298

)

Total segment operating income

11,459

 

-

 

11,459

 

Depreciation and amortization

8,922

 

-

 

8,922

 

Stock-based compensation(a)

2,906

 

-

 

2,906

 

Costs related to Value Creation Plan(b)

1,036

 

-

 

1,036

 

Adjusted EBITDA

24,323

 

-

 

24,323

 

 

 

 

 

March 30, 2019

 

 

 

Net earnings (loss)

(7,201

)

32,796

 

25,595

 

Provision for (recovery of) income taxes

(2,879

)

12,377

 

9,498

 

Interest expense, net

8,739

 

-

 

8,739

 

Other expense (income), net

2,067

 

(45,579

)

(43,512

)

Total segment operating income (loss)

726

 

(406

)

320

 

Depreciation and amortization

8,173

 

129

 

8,302

 

Stock-based compensation(a)

1,939

 

-

 

1,939

 

Costs related to Value Creation Plan(b)

203

 

-

 

203

 

Contract manufacturer transition costs(c)

88

 

-

 

88

 

Adjusted EBITDA

11,129

 

(277

)

10,852

 

(a)

For the first quarters of 2020 and 2019, stock-based compensation of $2.9 million and $1.9 million, respectively, was recorded in SG&A expenses, and the reversal of $0.5 million and $2.1 million, respectively, of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees was recognized in other income.

(b)

For the first quarters of 2020 and 2019, reflects professional fees and employee retention costs of $1.0 million and $0.2 million, respectively, recorded in SG&A expenses.

(c)

Reflects costs to transition certain production activities to a new contract manufacturer, which were recorded in cost of goods sold.

 

Scott Van Winkle
ICR
617-956-6736
scott.vanwinkle@icrinc.com

Source: SunOpta Inc.

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