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 SunOpta Announces Third Quarter 2022 Financial Results

November 09,2022

 Continued strong revenue growth of 15.7% vs. prior year to $229.7 million

Gross margin expanded 190 basis points to 13.7%

Net loss from continuing operations of $12.6 million, including $14.2 million net loss from asset dispositions

Adjusted EBITDA increased 41.7% vs. prior year to $22.1 million

Raising 2022 Outlook

MINNEAPOLIS--(BUSINESS WIRE)-- SunOpta Inc. (“SunOpta” or the “Company”) (Nasdaq:STKL) (TSX:SOY), a U.S.-based global pioneer fueling the future of sustainable, plant-based and fruit-based foods and beverages, today announced financial results for the third quarter ended October 1, 2022.

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

Third Quarter 2022 highlights:

  • Revenues increased 15.7% to $229.7 million reflecting 19.9% growth in the plant-based segment and a 10.0% increase in the fruit-based segment compared to the third quarter of the prior year.
  • Gross margin increased 190 basis points to 13.7% from 11.8% in the third quarter of the prior year, despite approximately 140 basis points of margin dilution in pass-through pricing to recover cost inflation.
  • Net loss from continuing operations was $12.6 million compared to net loss of $3.0 million in the prior year period, which was inclusive of an after-tax loss on the held-for-sale sunflower business of $16.9 million and an after-tax gain on the sale of the Oxnard frozen fruit facility of $2.7 million.
  • Adjusted earnings¹ attributable to common shareholders was $2.0 million or $0.02 per diluted common share, compared to earnings of $1.1 million or $0.01 per diluted common share in the prior year period.
  • Adjusted EBITDA¹ of $22.1 million, or 9.6% of revenues, was up 41.7% versus $15.6 million or 7.9% in the prior year period.

“Strong execution continues to define our results. Innovation and capacity expansion are propelling steady volume growth, productivity gains are being driven by operational efficiencies, and we are balancing inflationary cost pressures with customer pricing,” said Joe Ennen, Chief Executive Officer. “Similar to last quarter, plant-based growth was broad based with revenues up 20% compared to the third quarter of last year led by a 68% increase in oat milk, our top selling product type, while fruit-based revenues were up 10%, with gross margin at a five-year high of 12.3%, reflecting continued strength in snacks and improved frozen fruit execution. Our new greenfield plant in Texas remains on track and the recent sale of our non-core sunflower business is another important step in our portfolio transformation. Given our strength in leading categories, along with the continued expansion of our aseptic capacity and capabilities, and a significantly de-risked operational profile, we believe that we remain well positioned for success and realizing our vision of Fueling the Future of Food.”

Third Quarter 2022 Results

Revenues of $229.7 million for the third quarter of 2022 increased 15.7% compared to the third quarter of 2021 driven by 19.9% growth in Plant-Based Foods and Beverages and 10.0% growth in Fruit-Based Foods and Beverages. The increase in revenues reflected a 13.9% increase in pricing along with a 1.9% increase in volume/mix.

The Plant-Based Foods and Beverages segment generated revenues of $137.7 million, an increase of 19.9% compared to $114.9 million in the third quarter of 2021. Pricing increased 16.2% driven by actions to offset inflationary cost increases, together with the pass-through effect of higher sunflower commodity pricing. Volume/mix was up 3.7%, reflecting growth in oat-based offerings and teas partially offset by softer volumes in sunflower and decreased demand for everyday broths.

The Fruit-Based Foods and Beverages segment generated revenues of $91.9 million, an increase of 10.0% compared to $83.6 million in the third quarter of 2021. Pricing increased 10.6% reflecting actions to offset inflationary and commodity cost increases, while volume/mix declined a modest 0.6%.

Gross profit was $31.4 million for the third quarter, an increase of $8.0 million compared to $23.4 million in the prior year period. Gross profit margin was 13.7% compared to 11.8% in the third quarter of 2021, an increase of 190 basis points. Gross profit in the Plant-Based Foods and Beverages segment increased $1.4 million to $20.1 million, while gross margin declined 170 basis points to 14.6% primarily due an estimated 225 basis point decline in pass-through pricing to recover cost inflation, together with the impacts of higher labor and utility costs, increased inventory reserves, and higher depreciation expense. Gross profit in the Fruit-Based Foods and Beverages segment increased by $6.6 million to $11.3 million and gross margin increased 670 basis points to 12.3% despite an estimated 50 basis point impact from the dilutive effect of pass-through pricing to offset commodity cost inflation. Excluding the pricing effect, Fruit-Based gross margin benefited from portfolio rationalization and manufacturing consolidation, as well as increased production volumes and plant efficiencies in our fruit snack operations.

Segment operating income¹ was $7.6 million, or 3.3% of revenues in the third quarter of 2022, compared to segment operating income of $3.9 million, or 2.0% of revenues in the third quarter of 2021. The increase in segment operating income was due to higher gross profit, partially offset by a $4.2 million increase in SG&A expenses due to higher employee compensation costs, including incentive accruals partially offset by a reduction in expenses related to business integration in 2021.

Adjusted EBITDA¹ was $22.1 million or 9.6% of revenues in the third quarter of 2022, compared to $15.6 million or 7.9% of revenues in the third quarter of 2021.

Loss attributable to common shareholders for the third quarter of 2022 was $13.4 million, or $0.12 per diluted common share, which was inclusive of an after-tax loss on the held-for-sale sunflower business of $16.9 million and an after-tax gain on the sale of the Oxnard facility of $2.7 million, compared to a loss of $3.8 million, or $0.04 per diluted common share during the third quarter of 2021.

Adjusted earnings¹ in the third quarter of 2022 was $2.0 million or $0.02 per common share, compared to adjusted earnings of $1.1 million or $0.01 per common share in the third quarter of 2021.

Please refer to the discussion and table below under “Non-GAAP Measures.”

Balance Sheet and Cash Flow

As of October 1, 2022, SunOpta had total assets of $859.0 million and total debt of $306.3 million compared to total assets of $755.1 million and total debt of $224.6 million at year end fiscal 2021. During the third quarter of 2022, cash provided by operating activities was $20.0 million compared to cash provided by operating activities of $5.1 million during the third quarter of 2021. Investing activities of continuing operations consumed $21.9 million of cash during the third quarter of 2022 versus $17.4 million in the prior year, as investments in capacity expansion were partially offset by proceeds from the sale of non-core assets.

2022 Outlook2

We are raising our previously provided outlook for fiscal 2022, as follows:

($ millions)

 

Prior Outlook

 

Revised Outlook Excluding Disposal Impact

 

Disposal Impact

 

Revised Outlook after Disposal

Revenue

$

930 - 960

$

940 - 960

$

(17

)

$

923 - 943

Adj. EBITDA

72 - 78

76 - 80

-

 

76 – 80

Revenue growth

14% - 18%

16% - 18%

 

14% - 16%

Adj. EBITDA growth

19% - 28%

25% - 32%

25% - 32%

Conference Call

SunOpta plans to host a conference call at 5:30 P.M. Eastern time on Wednesday, November 9, 2022, to discuss the third quarter financial results. After opening remarks, there will be a question-and-answer period. Investors interested in listening to the live webcast can access a link on SunOpta's website at www.sunopta.com under the "Investor Relations" section or directly here. A replay of the webcast will be archived and can be accessed for approximately 90 days on the Company's website. This call may be accessed with the toll free dial-in number dial (888) 440-4182 or International dial-in number (646) 960-0653 using Conference ID: 8338433.

¹ See discussion of non-GAAP measures

2 The Company has included certain forward-looking statements about the future financial performance that include non-GAAP financial measures, including Adjusted EBITDA. These non–GAAP financial measures are derived by excluding certain amounts, expenses or income, from the corresponding financial measures determined in accordance with GAAP. The determination of the amounts that are excluded from these non-GAAP financial measures is a matter of management judgment and depends upon, among other factors, the nature of the underlying expense or income amounts recognized in a given period. We are unable to present a quantitative reconciliation of the aforementioned forward-looking non-GAAP financial measures to their most directly comparable forward-looking GAAP financial measures because management cannot reliably predict all of the necessary components of such GAAP measures. Historically, management has excluded the following items from certain of these non-GAAP measures, and such items may also be excluded in future periods and could be significant amounts.

  • Expenses related to the acquisition or divestiture of a business, including business development costs, impairment of assets, integration costs, severance, retention costs and transaction costs;
  • Start-up costs of new facilities and equipment;
  • Charges associated with restructuring and cost saving initiatives, including but not limited to asset impairments, accelerated depreciation, severance costs and lease abandonment charges;
  • Asset impairment charges and facility closure costs;
  • Legal settlements or awards; and
  • The tax effect of the above items.

About SunOpta Inc.

SunOpta (Nasdaq:STKL) (TSX:SOY) is a U.S.-based, global pioneer fueling the future of sustainable, plant-based and fruit-based food and beverages. Founded nearly 50 years ago, SunOpta manufactures natural, organic and specialty products sold through retail and foodservice channels. SunOpta operates as a manufacturer for leading natural and private label brands, and also proudly produces its own brands, including SOWN™, Dream™, West Life™ and Sunrise Growers™ For more information, visit www.sunopta.com, LinkedIn and Twitter.

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 construction of our new greenfield plant in Texas remains on track and that we are well positioned for success and realizing our visions, as well as forecasted revenue, and adjusted EBITDA growth for fiscal 2022. 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; current customer demand for the Company’s products and the additional anticipated demand; 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 and three quarters ended October 1, 2022 and October 2, 2021

(Unaudited)

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

Three quarters ended

 

 

 

October 1,
2022

October 2,
2021

October 1,
2022

October 2,
2021

 

 

 

$

$

$

$

 

 

 

 

 

 

 

Revenues

229,665

 

198,479

 

713,369

 

608,392

 

 

 

 

 

 

 

 

Cost of goods sold

198,282

 

175,123

 

619,097

 

528,711

 

 

 

 

 

 

 

 

Gross profit

31,383

 

23,356

 

94,272

 

79,681

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

20,654

 

16,487

 

66,893

 

60,081

 

Intangible asset amortization

2,612

 

2,612

 

7,836

 

7,338

 

Other expense, net

20,200

 

1,172

 

22,027

 

7,448

 

Foreign exchange loss (gain)

473

 

336

 

(126

)

533

 

 

 

 

 

 

 

 

Earnings (loss) from continuing operations before the following

(12,556

)

2,749

 

(2,358

)

4,281

 

 

 

 

 

 

 

 

Interest expense, net

4,342

 

2,854

 

10,004

 

6,145

 

 

 

 

 

 

 

 

Loss from continuing operations before income taxes

(16,898

)

(105

)

(12,362

)

(1,864

)

 

 

 

 

 

 

 

Income tax expense (benefit)

(4,259

)

2,929

 

(2,875

)

416

 

 

 

 

 

 

 

 

Loss from continuing operations

(12,639

)

(3,034

)

(9,487

)

(2,280

)

Earnings from discontinued operations

-

 

-

 

2,752

 

-

 

Net loss

(12,639

)

(3,034

)

(6,735

)

(2,280

)

 

 

 

 

 

 

 

Dividends and accretion on preferred stock

(764

)

(748

)

(2,279

)

(3,445

)

 

 

 

 

 

 

 

Loss attributable to common shareholders

(13,403

)

(3,782

)

(9,014

)

(5,725

)

 

 

 

 

 

 

 

Basic and diluted earnings (loss) per share

 

 

 

 

Loss from continuing operations

(0.12

)

(0.04

)

(0.11

)

(0.06

)

Earnings from discontinued operations

-

 

-

 

0.03

 

-

 

Loss attributable to common shareholders

(0.12

)

(0.04

)

(0.08

)

(0.06

)

 

 

 

 

 

 

 

Weighted-average common shares outstanding (000s)

 

 

 

 

Basic

107,752

 

107,255

 

107,566

 

103,017

 

Diluted

107,752

 

107,255

 

107,566

 

103,017

 

SunOpta Inc.

 

 

Consolidated Balance Sheets

 

 

As at October 1, 2022 and January 1, 2022

 

 

(Unaudited)

 

 

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

 

 

 

 

 

 

 

 

 

October 1, 2022

January 1,2022

 

 

 

$

$

 

 

 

 

 

ASSETS

 

 

Current assets

 

 

Cash and cash equivalents

459

 

227

 

Accounts receivable

75,460

 

84,702

 

Inventories

225,059

 

220,143

 

Prepaid expenses and other current assets

16,413

 

16,638

 

Income taxes recoverable

7,258

 

8,259

 

Assets held for sale

16,151

 

-

 

Total current assets

340,800

 

329,969

 

 

 

 

 

 

Property, plant and equipment, net

292,407

 

219,537

 

Operating lease right-of-use assets

78,167

 

47,245

 

Intangible assets, net

138,092

 

148,440

 

Goodwill

3,998

 

3,998

 

Other assets

5,486

 

5,930

 

 

 

 

 

 

Total assets

858,950

 

755,119

 

 

 

 

 

 

LIABILITIES

 

 

Current liabilities

 

 

Accounts payable and accrued liabilities

117,578

 

121,430

 

Income taxes payable

44

 

-

 

Current portion of long-term debt

31,374

 

9,760

 

Current portion of operating lease liabilities

12,601

 

12,203

 

Liabilities held for sale

7,005

 

-

 

Total current liabilities

168,602

 

143,393

 

 

 

 

 

 

Long-term debt

274,888

 

214,843

 

Operating lease liabilities

71,016

 

39,028

 

Long-term liabilities

-

 

2,241

 

Deferred income taxes

10,585

 

22,485

 

Total liabilities

525,091

 

421,990

 

 

 

 

 

 

Series B-1 preferred stock

28,597

 

28,145

 

 

 

 

 

 

SHAREHOLDERS' EQUITY

 

 

Common shares

439,670

 

436,463

 

Additional paid-in capital

29,325

 

23,240

 

Accumulated deficit

(165,096

)

(156,082

)

Accumulated other comprehensive income

1,363

 

1,363

 

Total shareholders' equity

305,262

 

304,984

 

 

 

 

 

 

Total liabilities and shareholders' equity

858,950

 

755,119

 

SunOpta Inc.

 

 

 

 

Consolidated Statements of Cash Flows

 

 

 

 

For the quarters and three quarters ended October 1, 2022 and October 2, 2021

 

(Unaudited)

 

 

 

 

(Expressed in thousands of U.S. dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

Three quarters ended

 

 

 

 

October 1,
2022

October 2,
2021

October 1,
2022

October 2,
2021

 

 

 

 

$

$

$

$

 

 

 

 

 

 

 

 

CASH PROVIDED BY (USED IN)

 

 

 

 

Operating activities

 

 

 

 

Net loss

(12,639

)

(3,034

)

(6,735

)

(2,280

)

Earnings from discontinued operations

-

 

-

 

2,752

 

-

 

Loss from continuing operations

(12,639

)

(3,034

)

(9,487

)

(2,280

)

Items not affecting cash:

 

 

 

 

Depreciation and amortization

9,730

 

8,837

 

28,515

 

25,790

 

Amortization of debt issuance costs

413

 

359

 

1,184

 

993

 

Deferred income taxes

(2,925

)

3,315

 

(717

)

(179

)

Stock-based compensation

4,092

 

1,250

 

9,691

 

9,593

 

Loss on classification of sunflower business as held for sale

23,227

 

-

 

23,227

 

-

 

Gain on sale of frozen fruit processing facility

(3,779

)

-

 

(3,779

)

-

 

Impairment of long-lived assets

-

 

-

 

-

 

2,962

 

Other

(149

)

(168

)

1,596

 

(504

)

Changes in operating assets and liabilities

2,003

 

(5,494

)

(17,168

)

(77,472

)

Net cash provided by (used in) operating activities of continuing operations

19,973

 

5,065

 

33,062

 

(41,097

)

Investing activities

 

 

 

 

Additions to property, plant and equipment

(38,019

)

(18,386

)

(100,779

)

(34,989

)

Proceeds from sale of property, plant and equipment

16,111

 

950

 

20,293

 

2,300

 

Additions to intangible assets

-

 

-

 

-

 

(25,073

)

Net cash used in investing activities of continuing operations

(21,908

)

(17,436

)

(80,486

)

(57,762

)

Net cash used in investing activities of discontinued operations

-

 

-

 

(6,324

)

(13,380

)

Net cash used in investing activities

(21,908

)

(17,436

)

(86,810

)

(71,142

)

Financing activities

 

 

 

 

Increase (decrease) in borrowings under revolving credit facilities

(24,247

)

11,348

 

(3,485

)

123,177

 

Borrowings of long-term debt

33,094

 

4,739

 

74,197

 

9,380

 

Repayment of long-term debt

(6,265

)

(1,849

)

(13,834

)

(11,789

)

Payment of debt issuance costs

(113

)

(181

)

(672

)

(2,552

)

Proceeds from the exercise of stock options and employee share purchases

612

 

304

 

1,203

 

7,494

 

Payment of withholding taxes on stock-based awards

(631

)

(1,576

)

(1,602

)

(8,313

)

Payment of cash dividends on preferred stock

(609

)

(609

)

(1,827

)

(4,638

)

Payment of share issuance costs

-

 

-

 

-

 

(287

)

Net cash provided by financing activities of continuing operations

1,841

 

12,176

 

53,980

 

112,472

 

Net cash used in financing activities of discontinued operations

-

 

-

 

-

 

(200

)

Net cash provided by financing activities

1,841

 

12,176

 

53,980

 

112,272

 

Increase (decrease) in cash and cash equivalents in the period

(94

)

(195

)

232

 

33

 

Cash and cash equivalent, beginning of the period

553

 

479

 

227

 

251

 

Cash and cash equivalents, end of the period

459

 

284

 

459

 

284

 

SunOpta Inc.

 

Segmented Information

 

 

 

 

For the quarters and three quarters ended October 1, 2022 and October 2, 2021

Unaudited

 

 

 

(Expressed in thousands of U.S. dollars)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarter ended

Three quarters ended

 

 

 

 

October 1, 2022

October 2, 2021

October 1, 2022

October 2, 2021

 

 

 

 

$

$

$

$

Segment revenues from external customers:

 

 

 

 

Plant-Based Foods and Beverages

137,726

 

114,870

 

419,149

 

345,680

 

Fruit-Based Foods and Beverages

91,939

 

83,609

 

294,220

 

262,712

 

Total segment revenues from external customers

229,665

 

198,479

 

713,369

 

608,392

 

 

 

 

 

 

 

Segment gross profit:

 

 

 

 

Plant-Based Foods and Beverages

20,106

 

18,697

 

64,026

 

61,751

 

Fruit-Based Foods and Beverages

11,277

 

4,659

 

30,246

 

17,930

 

Total segment gross profit

31,383

 

23,356

 

94,272

 

79,681

 

 

 

 

 

 

 

 

 

Segment operating income (loss):

 

 

 

 

Plant-Based Foods and Beverages

8,814

 

8,056

 

29,106

 

30,014

 

Fruit-Based Foods and Beverages

2,870

 

(3,517

)

6,865

 

(6,858

)

Corporate Services

(4,040

)

(618

)

(16,302

)

(11,427

)

Total segment operating income

7,644

 

3,921

 

19,669

 

11,729

 

 

 

 

 

 

 

 

 

Segment gross profit percentage:

 

 

 

 

Plant-Based Foods and Beverages

14.6

%

16.3

%

15.3

%

17.9

%

Fruit-Based Foods and Beverages

12.3

%

5.6

%

10.3

%

6.8

%

Total segment gross profit percentage

13.7

%

11.8

%

13.2

%

13.1

%

 

 

 

 

 

 

 

 

Segment operating income (loss) percentage:

 

 

 

 

Plant-Based Foods and Beverages

6.4

%

7.0

%

6.9

%

8.7

%

Fruit-Based Foods and Beverages

3.1

%

-4.2

%

2.3

%

-2.6

%

Total segment operating income percentage

3.3

%

2.0

%

2.8

%

1.9

%

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. 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 management believes 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 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

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 and adjusted earnings 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 and adjusted earnings per diluted share, including a reconciliation from loss from continuing operations, which the Company believes to be the most directly comparable U.S. GAAP financial measure.

 

 

 

 

 

 

 

 

 

 

 

 

 

October 1, 2022

 

October 2, 2021

 

 

 

 

 

Per Share

 

 

Per Share

 

For the quarter ended

$

$

 

$

$

 

Loss from continuing operations

(12,639

)

 

 

(3,034

)

 

 

Dividends and accretion on preferred stock

(764

)

 

 

(748

)

 

 

Loss from continuing operations attributable to common shareholders

(13,403

)

(0.12

)

 

(3,782

)

(0.04

)

 

Adjusted for:

 

 

 

 

 

 

Loss on classification of sunflower business as held for sale(a)

23,227

 

 

 

-

 

 

 

Gain on sale of frozen fruit processing facility(b)

(3,779

)

 

 

-

 

 

 

Start-up costs(c)

608

 

 

 

-

 

 

 

Facility closure costs(d)

525

 

 

 

-

 

 

 

Business development costs(e)

75

 

 

 

1,782

 

 

 

Workforce reduction charges(f)

-

 

 

 

499

 

 

 

Costs related to exit from fruit ingredient processing facility(g)

-

 

 

 

479

 

 

 

Other(h)

227

 

 

 

40

 

 

 

Net income tax effect(i)

(5,491

)

 

 

2,121

 

 

 

Adjusted earnings

1,989

 

0.02

 

 

1,139

 

0.01

 

(a)

Reflects the loss on the classification of the sunflower business as held for sale at the end of the third quarter of 2022, which was recorded in other expense.

(b)

Reflects the gain on sale of our frozen fruit processing facility located in Oxnard, California, which was recorded in other income.

(c)

Represents incremental direct costs incurred in connection with plant expansion projects and new product introductions before the project or product reaches normal production levels, including costs for the hiring and training of additional personnel, fees for outside services, travel costs, and plant- and production-related expenses. For the third quarter of 2022, start-up costs mainly related to new employee hires for our plant-based beverage facility under construction in Midlothian, Texas, which were recorded in cost of goods sold ($0.5 million) and SG&A expenses ($0.1 million).

(d)

For the third quarter of 2022, facility closure costs mainly related to the relocation of certain equipment from the sold Oxnard facility to our Mexican facility, which were recorded in other expense.

(e)

Represents third-party costs associated with business development activities, including costs related to the evaluation, execution, and integration of external acquisitions and divestitures, internal expansion projects, and other strategic initiatives. For the third quarter of 2022, these costs related to actions undertaken to optimize non-core assets, which were recorded in SG&A expenses. For the third quarter of 2021, these costs were mainly related to the transition of the Dream and WestSoy brands, acquired in April 2021, and project development activities related to our new plant in Midlothian, Texas, which were recorded in SG&A expenses ($1.6 million), together with professional fees incurred in connection with post-closing matters related to the 2020 divestiture of our global ingredients business, Tradin Organic, which were recorded in other expense ($0.2 million).

(f)

For the third quarter of 2021, represents employee termination costs related to workforce reduction actions in our frozen fruit operations, which were recorded in other expense.

(g)

For the third quarter of 2021, these costs related to the exit from our former South Gate, California, fruit ingredient processing facility, which were recorded in other expense.

(h)

For the third quarters of 2022 and 2021, other mainly reflects losses on the disposal of assets and the settlement of certain legal and matters.

(i)

Reflects the tax effect of the preceding adjustments to earnings calculated based on the statutory tax rates applicable in the tax jurisdiction of the underlying adjustment.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

October 1, 2022

 

October 2, 2021

 

 

 

 

 

 

Per Share

 

 

Per Share

 

For the three quarters ended

$

$

 

$

$

 

Loss from continuing operations

(9,487

)

 

 

(2,280

)

 

 

Dividends and accretion on preferred stock

(2,279

)

 

 

(3,445

)

 

 

Loss from continuing operations attributable to common shareholders

(11,766

)

(0.11

)

 

(5,725

)

(0.06

)

 

Adjusted for:

 

 

 

 

 

 

Loss on classification of sunflower business as held for sale(a)

23,227

 

 

 

-

 

 

 

Gain on sale of frozen fruit processing facility(b)

(3,779

)

 

 

-

 

 

 

Facility closure costs(c)

1,812

 

 

 

-

 

 

 

Start-up costs(d)

1,329

 

 

 

-

 

 

 

Business development costs(e)

874

 

 

 

3,568

 

 

 

Costs related to exit from fruit ingredient processing facility(f)

-

 

 

 

4,602

 

 

 

Restructuring costs(g)

-

 

 

 

1,432

 

 

 

Workforce reduction charges(h)

-

 

 

 

499

 

 

 

Other(i)

767

 

 

 

287

 

 

 

Net income tax effect(j)

(6,370

)

 

 

(2,141

)

 

 

Adjusted earnings

6,094

 

0.06

 

 

2,522

 

0.02

 

(a)

Reflects the loss on the classification of the sunflower business as held for sale at the end of the third quarter of 2022, which was recorded in other expense.

(b)

Reflects the gain on sale of our frozen fruit processing facility located in Oxnard, California, which was recorded in other income.

(c)

Facility closure costs mainly related to the relocation of certain equipment from the sold Oxnard facility to our Mexican facility, which were recorded in other expense.

(d)

Represents incremental direct costs incurred in connection with plant expansion projects and new product introductions before the project or product reaches normal production levels, including costs for the hiring and training of additional personnel, fees for outside services, travel costs, and plant- and production-related expenses. For the first three quarters of 2022, start-up costs mainly related to new employee hires for our plant-based beverage facility under construction in Midlothian, Texas, and the integration of the Dream and WestSoy brands, which were recorded in cost of goods sold ($1.1 million) and SG&A expenses ($0.2 million).

(e)

Represents third-party costs associated with business development activities, including costs related to the evaluation, execution, and integration of external acquisitions and divestitures, internal expansion projects, and other strategic initiatives. For the first three quarters of 2022, these costs related to actions undertaken to optimize non-core assets, including the sale of the sunflower business, as well as costs related to our inaugural Investor Day held in June 2022, which were recorded in SG&A expenses. For the first three quarters of 2021, these costs were mainly related to the transition of the Dream and WestSoy brands, acquired in April 2021, and project development activities related to our new plant in Midlothian, Texas, which were recorded in SG&A expenses ($2.9 million), together with professional fees incurred in connection with post-closing matters related to the 2020 divestiture of our global ingredients business, Tradin Organic, which were recorded in other expense ($0.7 million).

(f)

For the first three quarters of 2021, represents asset impairment charges, together with employee termination and asset relocation costs related to the exit from our former South Gate, California, fruit ingredient processing facility, which were recorded in other expense.

(g)

For the first three quarters of 2021, represents costs to complete the exit from our former Santa Maria, California, frozen fruit processing facility, which were recorded in other expense.

(h)

For the first three quarters of 2021, represents employee termination costs related to workforce reduction actions in our frozen fruit operations, which were recorded in other expense.

(i)

For the first three quarters of 2022 and 2021, other mainly reflects the settlement of certain legal and contractual matters, together with losses on the disposal of assets, which were recorded in other expense

(j)

Reflects the tax effect of the preceding adjustments to earnings calculated based on the statutory tax rates applicable in the tax jurisdiction of the underlying adjustment.

Segment Operating Income and Adjusted EBITDA

The Company defines segment operating income as loss from continuing operations before income taxes, interest expense and other income/expense items, and adjusted EBITDA as segment operating income plus depreciation, amortization, 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 and adjusted EBITDA, including a reconciliation from loss from continuing operations, which the Company believes to be the most directly comparable U.S. GAAP financial measure.

 

 

 

 

 

October 1, 2022

 

October 2, 2021

 

For the quarter ended

$

 

$

 

Loss from continuing operations

(12,639

)

 

(3,034

)

 

Income tax expense (benefit)

(4,259

)

 

2,929

 

 

Interest expense, net

4,342

 

 

2,854

 

 

Other expense, net

20,200

 

 

1,172

 

 

Total segment operating income

7,644

 

 

3,921

 

 

Depreciation and amortization

9,730

 

 

8,837

 

 

Stock-based compensation

4,092

 

 

1,250

 

 

Start-up costs(a)

608

 

 

-

 

 

Business development costs(b)

75

 

 

1,628

 

 

Adjusted EBITDA

22,149

 

 

15,636

 

(a)

For the third quarter of 2022, start-up costs mainly related to new employee hires for our plant-based beverage facility under construction in Midlothian, Texas, which were recorded in cost of goods sold ($0.5 million) and SG&A expenses ($0.1 million).

(b)

For the third quarter of 2022, business development costs related to actions undertaken to optimize non-core assets, which were recorded in SG&A expenses. For the third quarter of 2021, these costs related to the integration of the Dream and WestSoy brands and project development activities related to our new plant in Midlothian, Texas, which were recorded in SG&A expenses.

 

 

 

 

 

October 1,2022

 

October 2, 2021

 

For the three quarters ended

$

 

$

 

Loss from continuing operations

(9,487

)

 

(2,280

)

 

Income tax expense (benefit)

(2,875

)

 

416

 

 

Interest expense, net

10,004

 

 

6,145

 

 

Other expense, net

22,027

 

 

7,448

 

 

Total segment operating income

19,669

 

 

11,729

 

 

Depreciation and amortization

28,515

 

 

25,790

 

 

Stock-based compensation

9,691

 

 

9,593

 

 

Start-up costs(a)

1,329

 

 

-

 

 

Business development costs(b)

874

 

 

2,940

 

 

Adjusted EBITDA

60,078

 

 

50,052

 

(a)

For the first three quarters of 2022, start-up costs mainly related to new employee hires for our plant-based beverage facility under construction in Midlothian, Texas, and the integration of the Dream and WestSoy brands acquired in April 2021, which were recorded in cost of goods sold ($1.1 million) and SG&A expenses ($0.2 million)

(b)

For the first three quarters of 2022, business development costs related to actions undertaken to optimize non-core assets, including the sale of the sunflower business, as well as costs related to our Investor Day, which were recorded in SG&A expenses. For the first three quarters of 2021, these costs related to the integration of the Dream and WestSoy brands and project development activities related to our new plant in Midlothian, Texas, which were recorded in SG&A expenses.

Sunflower Business - Selected Financial Information

The following table presents a summary of the results of operations of the sunflower business, together with a reconciliation of adjusted EBITDA for the sunflower business from earnings/loss before income taxes, which we consider in this case to be the most directly comparable U.S. GAAP financial measure.

 

 

 

 

Quarter ended

Three quarters ended

 

Trailing four quarters ended

 

 

 

April 2,

July 2,

October 1,

October 1,

 

October 1,

 

 

 

 

2022

 

2022

2022

 

2022

 

2022

 

 

 

 

$

$

$

$

 

$

Revenues

17,163

 

21,302

17,309

 

55,774

 

70,358

Gross profit

239

 

2,377

6

 

2,622

 

2,952

Segment operating income (loss)(a)

(296

)

1,835

(514

)

1,025

 

877

Earnings (loss) before income taxes(a)

(296

)

1,835

(514

)

1,025

 

877

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

597

 

598

597

 

1,792

 

2,388

Adjusted EBITDA

301

 

2,433

83

 

2,817

 

3,265

(a)

Excludes corporate costs allocated to the sunflower business.

Segment operating income/loss and adjusted EBITDA are non-GAAP measures. See discussion above under the heading “Segment Operating Income and Adjusted EBITDA” on the use of these non-GAAP measures.

Reed Anderson
ICR
646-277-1260
reed.anderson@icrinc.com

Source: SunOpta Inc.

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