Adjusted EBITDA doubled YOY excluding
disposed operations
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 fourth quarter ended December 28, 2019.
“I am pleased to report that SunOpta doubled adjusted EBITDA,
excluding disposed operations, in the fourth quarter versus the
prior year. The adjusted EBITDA results were primarily driven by
strong revenue growth and margin expansion in our plant-based
beverages business unit, supported by sequential improvement in
frozen fruit profitability. We are confident in the outlook for
continued EBITDA growth in 2020 as we expect to benefit from strong
industry tailwinds and further capitalize on our industry-leading
capabilities in key product categories,” said Joe Ennen, Chief
Executive Officer at SunOpta.
“Within our plant-based food and beverage business unit, we grew
revenue 25%, reflecting strong growth in both existing and new
customers. We also saw improved gross margins as a result of higher
plant utilization and significant contributions from our
productivity initiatives. Our capital investments to expand our
extraction capabilities are well timed, given the growing consumer
demand for plant-based foods and beverages and the scarcity of
capacity capable of meeting this demand. Within our fruit-based
food and beverage platform, results were consistent with our
expectations. Encouragingly, we had both sequential and
year-over-year gross margin improvement in all product segments of
our fruit business and we were able to make pricing changes with
key customers to reflect higher costs and in some cases move to
indexed based pricing. As we gear up for the 2020 fruit season, we
remain focused on executing our fruit margin optimization
activities, which include further automation to lower variable
labor costs; more direct bagging; shifting to customer pricing
structures that reduce risk, and completing our enhancements to
business planning and leadership. We still have considerable work
to do to achieve acceptable margin levels in this business, but we
are tracking in line with our turnaround plan. Within Tradin
Organic, which is part of our Global Ingredients segment, our
margin rate remains relatively consistent in spite of the inherent
volatility in a commodity-based business and production
inefficiencies in our cocoa business.”
Mr. Ennen continued, “As we look ahead to 2020, we expect to see
continued improvement in adjusted EBITDA performance as we
capitalize on our strong plant-based food and beverage momentum,
execute our margin optimization strategy in our fruit business, and
leverage Tradin’s unique positioning in the organic ingredient
supply chain. The recent extension of our $360 million revolving
asset-based credit facility reflects the support and confidence of
our banking partners as we execute our turnaround plan, while
providing enhanced flexibility and liquidity to support our growth
plans.”
All amounts are expressed in U.S. dollars and results are
reported in accordance with U.S. GAAP, except where specifically
noted.
Fourth Quarter 2019 Highlights:
- Revenues of $295.8 million for the fourth quarter of 2019,
compared to $320.5 million in the fourth quarter of 2018, a
decrease of 7.7%. Adjusted for disposed operations, foreign
exchange, commodity prices, a new contract manufacturing
arrangement and the acquisition of Sanmark, revenues grew 0.8%
during the fourth quarter.
- Loss attributable to common shareholders of $7.6 million or
$0.09 per common share in the fourth quarter of 2019, compared to a
loss attributable to common shareholders of $99.0 million or $1.13
per common share in the fourth quarter of 2018.
- Adjusted loss¹ of $5.6 million or $0.06 per common share during
the fourth quarter of 2019, compared to an adjusted loss of $9.3
million or $0.11 per common share during the fourth quarter of
2018.
- Adjusted EBITDA¹ excluding disposed operations of $16.4 million
or 5.5% of revenues for the fourth quarter of 2019, versus $8.2
million or 2.5% of adjusted revenues in the fourth quarter of
2018.
Fourth Quarter 2019 Results
Revenues for the fourth quarter of 2019 were $295.8 million, a
decrease of 7.7% compared to $320.5 million in the fourth quarter
of 2018. Excluding the impact on reported revenues of disposed
business, including the soy and corn business sold in February
2019, changes in commodity-related pricing and foreign exchange
rates, a profit-neutral change to a co-manufacturing agreement, and
excluding the impact of the acquisition of Sanmark in April 2019,
revenues in the fourth quarter of 2019 increased by 0.8% compared
with the fourth quarter of 2018.
As a result of the Company’s restructuring efforts in 2019, the
Company has realigned its reporting structure to better align with
its operational and strategic objectives. As a result, the Company
established two new segments: a Plant-Based Foods and Beverages
segment and a Fruit-Based Foods and Beverages segment, based on the
synergistic nature of the underlying principal product ingredients
and the reporting structure within each segment. The Plant-Based
Foods and Beverages segment includes aseptic beverages, ingredient
extraction and sunflower operations. The Fruit-Based Foods and
Beverages segment includes: Sunrise frozen fruit, fruit ingredients
and fruit snacks. In addition, the Company realigned the Global
Ingredients segment to combine its Tradin Organic operations and
its premium juice program, based on shared raw material
sourcing.
The Global Ingredients segment generated revenues of $109.7
million, a decrease of 24.4% compared to $145.1 million in the
fourth quarter of 2018. 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 fourth
quarter decreased 5.7% compared to the prior year period, which
reflected lower volumes in certain organic ingredient product
categories. The Plant-Based Foods and Beverages segment generated
revenues of $106.4 million during the fourth quarter of 2019, an
increase of 25.0% compared to $85.1 million in the fourth quarter
of 2018. Excluding sunflower price variances and a profit-neutral
change to a co-manufacturing agreement, Plant-Based segment
revenues in the fourth quarter increased 26.8% compared to the
prior year period, reflecting higher volumes of aseptic beverages,
broth offerings, and ingredient extraction. This growth came on top
of a very strong prior year which was up 18.7% from 2017. The
Fruit-Based Foods and Beverages segment generated revenues of $79.7
million during the fourth quarter of 2019, a decrease of 11.7%
compared to $90.3 million in the fourth quarter of 2018. Excluding
the impact of commodity price fluctuations, Fruit-Based segment
revenues in the fourth quarter decreased 14.9% compared to the
prior year period, primarily reflecting lower volumes with one
large food service customer, partially offset by higher
pricing.
Gross profit was $33.4 million for the quarter ended December
28, 2019, an increase of $12.1 million compared to $21.3 million
for the quarter ended December 29, 2018. The Plant-Based Foods and
Beverages segment accounted for $10.5 million of the increase in
gross profit primarily due to revenue growth, increased gross
margin as a result of increased capacity utilization and
productivity programs, and strong margin performance in extraction
operations. The Fruit-Based Foods and Beverages segment increased
gross profit by $4.1 million in the quarter due to increased gross
margin, reflecting pricing actions and efficiency efforts to
optimize margins across the segment. These favorable impacts were
partially offset by a $2.5 million decline in gross profit in the
Global Ingredients segment primarily due to the sale of the soy and
corn business, along with lower volumes and pricing spreads for
certain organic ingredients.
As a percentage of revenues, gross profit for the quarter ended
December 28, 2019 was 11.3% compared to 6.6% for the quarter ended
December 29, 2018, an increase of 4.7%. On an adjusted basis, the
gross profit percentage in the fourth quarter of 2019 would have
been 11.4% excluding start-up costs of $0.3 million related to the
Company’s new organic avocado oil facility in Ethiopia. The gross
profit percentage for the fourth quarter of 2018 would have been
approximately 8.5%, excluding inventory write-downs in frozen
fruit, costs related to the commercialization of new beverage
products, and equipment start-up costs.
Segment operating income¹ was $3.0 million, or 1.0% of revenues
in the fourth quarter of 2019, compared to an operating loss of
$6.9 million, or 2.2% of revenues in the fourth quarter of 2018.
The increase in operating income year-over-year was primarily
attributable to the $12.1 million increase in gross profit, offset
by an increase in SG&A due to higher employee-related variable
and stock-based compensation costs, non-structural costs in
SG&A related to the Value Creation Plan, and an increase in
foreign exchange losses within our Tradin Organic international
operations. Excluding the impact of non-structural SG&A and
items above impacting gross profit, segment operating income would
have been $4.1 million for the fourth quarter of 2019, compared
with an operating loss of $0.9 million for the fourth quarter of
2018.
Other income for the fourth quarter of 2019 reflected legal
settlement gains of $1.2 million, offset by employee termination
costs and post-closing adjustments related to the sale of the soy
and corn business.
In the fourth quarter of 2018, the Company recognized a non-cash
goodwill impairment charge of $81.2 million to write-off the
remaining goodwill balance related to the Sunrise frozen fruit
business.
Adjusted EBITDA¹ was $16.4 million or 5.5% of revenues in the
fourth quarter of 2019, compared to $9.1 million or 2.8% of
revenues in the fourth quarter of 2018. Excluding disposed
operations, adjusted EBITDA for the quarter ended December 29, 2018
was $8.2 million.
The Company reported a loss attributable to common shareholders
for the fourth quarter of 2019 of $7.6 million, or $0.09 per
diluted common share, compared to a loss of $99.0 million, or $1.13
per diluted common share during the fourth quarter of 2018.
Adjusted loss¹ in the fourth quarter of 2019 was $5.6 million or
$0.06 per common share, compared to $9.3 million or $0.11 per
common share in the fourth quarter of 2018. Please refer to the
discussion and table below under “Non-GAAP Measures - Adjusted
Earnings/Loss”.
Balance Sheet and Cash Flow
At December 28, 2019, SunOpta’s balance sheet reflected total
assets of $923.4 million and total debt of $490.7 million. During
the fourth quarter of 2019, cash provided by operating activities
was $36.2 million, compared to $5.1 million during the fourth
quarter of 2018. The $31.1 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 $9.2 million in
the fourth quarter of 2019, compared with $6.7 million in the
fourth quarter of 2018, an increase in cash used of $2.5 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 Thursday, February 27, 2020, to discuss the fourth quarter
financial results. After opening remarks, there will be a question
and answer period. This conference call can be accessed via a link
on SunOpta’s website at www.sunopta.com under the “Investors”
section. To listen to the live call over the Internet, please go to
SunOpta’s website at least 15 minutes early to register, download
and install any necessary audio software. Additionally, the call
may be accessed with the toll-free dial-in number 1 (877) 312-9198
or International dial-in number 1 (631) 291-4622. If you are unable
to listen live, the conference call will be archived and can be
accessed for approximately 90 days on the Company’s website.
¹ See discussion of non-GAAP measures
About SunOpta Inc. SunOpta Inc. is a leading global
company focused on 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 expectation that we will benefit from
strong industry tailwinds and see continued improvement in adjusted
EBITDA performance, our ability to execute our margin optimization
strategy in our fruit business and leverage Tradin’s unique
positioning in the organic ingredient supply chain. Generally,
forward-looking statements do not relate strictly to historical or
current facts and are typically accompanied by words such as
“expect”, “believe”, “anticipate”, “continue”, “estimates”, “can”,
“will”, “targeting”, "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,
unexpected issues or delays with the Company’s structural
improvements and automation investments, 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, 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 years ended December
28, 2019 and December 29, 2018
(Unaudited)
(All dollar amounts expressed in thousands
of U.S. dollars, except per share amounts)
Quarter ended
Year ended
December 28,
December 29,
December 28,
December 29,
2019
2018
2019
2018
$
$
$
$
Revenues
295,802
320,521
1,190,022
1,260,852
Cost of goods sold
262,407
299,209
1,074,769
1,137,382
Gross profit
33,395
21,312
115,253
123,470
Selling, general and administrative
expenses
27,156
25,792
108,340
108,248
Intangible asset amortization
2,769
2,745
10,971
11,038
Other expense (income), net
(304
)
1,508
(40,048
)
2,825
Goodwill impairment
-
81,222
-
81,222
Foreign exchange loss (gain)
480
(331
)
(1,304
)
252
Earnings (loss) before the
following
3,294
(89,624
)
37,294
(80,115
)
Interest expense, net
8,820
8,920
34,677
34,406
Earnings (loss) before income
taxes
(5,526
)
(98,544
)
2,617
(114,521
)
Provision for (recovery of) income
taxes
(18
)
(1,525
)
3,221
(5,378
)
Net loss
(5,508
)
(97,019
)
(604
)
(109,143
)
Earnings attributable to non-controlling
interests
95
43
154
62
Loss attributable to SunOpta
Inc.
(5,603
)
(97,062
)
(758
)
(109,205
)
Dividends and accretion on Series A
Preferred Stock
(2,017
)
(1,987
)
(8,022
)
(7,909
)
Loss attributable to common
shareholders
(7,620
)
(99,049
)
(8,780
)
(117,114
)
Loss per share
Basic
(0.09
)
(1.13
)
(0.10
)
(1.34
)
Diluted
(0.09
)
(1.13
)
(0.10
)
(1.34
)
Weighted-average common shares
outstanding (000s)
Basic
88,017
87,351
87,787
87,082
Diluted
88,017
87,351
87,787
87,082
SunOpta Inc.
Consolidated Balance Sheets
As at December 28, 2019 and December 29,
2018
(Unaudited)
(All dollar amounts expressed in thousands
of U.S. dollars)
December 28, 2019
December 29, 2018
$
$
ASSETS
Current assets
Cash and cash equivalents
1,498
3,280
Accounts receivable
121,445
132,131
Inventories
323,546
361,957
Prepaid expenses and other current
assets
35,985
29,024
Income taxes recoverable
7,480
7,029
Total current assets
489,954
533,421
Property, plant and equipment
184,550
171,032
Operating lease right-of-use
assets
68,433
-
Goodwill
28,422
27,959
Intangible assets
150,009
160,975
Deferred income taxes
-
182
Other assets
1,991
3,169
Total assets
923,359
896,738
LIABILITIES
Current liabilities
Bank indebtedness
245,536
280,334
Accounts payable and accrued
liabilities
133,529
155,371
Customer and other deposits
37
1,445
Income taxes payable
1,272
2,208
Other current liabilities
802
862
Current portion of long-term debt
2,987
1,840
Current portion of operating lease
liabilities
17,215
-
Current portion of long-term
liabilities
4,286
4,286
Total current liabilities
405,664
446,346
Long-term debt
242,204
227,023
Operating lease liabilities
52,020
-
Long-term liabilities
2,011
2,079
Deferred income taxes
9,027
8,149
Total liabilities
710,926
683,597
Series A Preferred Stock
82,524
81,302
EQUITY
SunOpta Inc. shareholders’
equity
Common shares
318,456
314,357
Additional paid-in capital
35,767
31,796
Accumulated deficit
(214,931
)
(206,151
)
Accumulated other comprehensive loss
(11,271
)
(9,667
)
128,021
130,335
Non-controlling interests
1,888
1,504
Total equity
129,909
131,839
Total equity and liabilities
923,359
896,738
SunOpta Inc.
Consolidated Statements of Cash Flows
For the quarters and years ended December
28, 2019 and December 29, 2018
(Unaudited)
(Expressed in thousands of U.S.
dollars)
Quarter ended
Year ended
December 28,
December 29,
December 28,
December 29,
2019
2018
2019
2018
$
$
$
$
CASH PROVIDED BY (USED IN)
Operating activities
Net loss
(5,508
)
(97,019
)
(604
)
(109,143
)
Items not affecting cash:
Depreciation and amortization
8,947
8,287
33,952
32,788
Amortization of debt issuance costs
699
730
2,721
2,536
Deferred income taxes
(1,179
)
(3,533
)
1,060
(7,390
)
Stock-based compensation
2,092
1,544
7,485
7,939
Unrealized loss (gain) on derivative
contracts
(987
)
(402
)
(410
)
465
Loss (gain) on sale of business
242
-
(44,027
)
-
Fair value of contingent consideration
-
(287
)
-
(2,635
)
Impairment of long-lived assets
-
-
-
409
Goodwill impairment
-
81,222
-
81,222
Reserve for notes receivable
-
2,232
-
2,232
Other
(155
)
(86
)
(263
)
(197
)
Changes in non-cash working capital, net
of businesses acquired or sold
32,041
12,404
9,895
(19,367
)
Net cash flows from operating
activities
36,192
5,092
9,809
(11,141
)
Investing activities
Net proceeds from sale of businesses
(1,348
)
-
63,324
1,236
Purchases of property, plant and
equipment
(7,857
)
(6,682
)
(32,764
)
(31,603
)
Acquisition of business, net of cash
acquired
-
-
(3,341
)
-
Proceeds from sale of assets
-
-
-
1,437
Other
-
-
-
159
Net cash flows from investing
activities
(9,205
)
(6,682
)
27,219
(28,771
)
Financing activities
Increase (decrease) under line of credit
facilities
(26,104
)
2,797
(32,795
)
50,275
Borrowings under long-term debt
789
2,029
3,230
2,029
Repayment of long-term debt
(833
)
(316
)
(2,746
)
(1,810
)
Payment of cash dividends on Series A
Preferred Stock
(1,700
)
(1,700
)
(6,800
)
(6,800
)
Proceeds from the exercise of stock
options and employee share purchases
156
710
585
1,309
Payment of debt issuance costs
(17
)
-
(412
)
-
Dividend paid by subsidiary to
non-controlling interest
-
(278
)
(31
)
(278
)
Payment of contingent consideration
-
-
-
(4,399
)
Other
(5
)
(203
)
206
(292
)
Net cash flows from financing
activities
(27,714
)
3,039
(38,763
)
40,034
Foreign exchange gain (loss) on cash held
in a foreign currency
16
(26
)
(47
)
(70
)
Increase (decrease) in cash and cash
equivalents in the period
(711
)
1,423
(1,782
)
52
Cash and cash equivalents - beginning of
the period
2,209
1,857
3,280
3,228
Cash and cash equivalents - end of the
period
1,498
3,280
1,498
3,280
SunOpta Inc.
Segmented Information
For the quarters and years ended December
28, 2019 and December 29, 2018
Unaudited
(Expressed in thousands of U.S.
dollars)
Quarter ended
Year ended
December 28,
December 29,
December 28,
December 29,
2019
2018
2019
2018
$
$
$
$
Segment revenues from external
customers:
Global Ingredients
109,682
145,062
478,772
581,307
Plant-Based Foods and Beverages
106,371
85,110
361,398
314,076
Fruit-Based Foods and Beverages
79,749
90,349
349,852
365,469
Total segment revenues from external
customers
295,802
320,521
1,190,022
1,260,852
Segment gross profit (loss):
Global Ingredients
11,198
13,742
49,942
61,249
Plant-Based Foods and Beverages
19,881
9,385
58,812
40,477
Fruit-Based Foods and Beverages
2,316
(1,815
)
6,499
21,744
Total segment gross profit
33,395
21,312
115,253
123,470
Segment operating income
(loss):
Global Ingredients
2,355
5,272
15,965
23,266
Plant-Based Foods and Beverages
13,745
931
29,476
10,766
Fruit-Based Foods and Beverages
(4,669
)
(11,215
)
(26,873
)
(16,029
)
Corporate Services
(8,441
)
(1,882
)
(21,322
)
(14,071
)
Total segment operating income (loss)
2,990
(6,894
)
(2,754
)
3,932
Segment gross profit (loss)
percentage:
Global Ingredients
10.2
%
9.5
%
10.4
%
10.5
%
Plant-Based Foods and Beverages
18.7
%
11.0
%
16.3
%
12.9
%
Fruit-Based Foods and Beverages
2.9
%
-2.0
%
1.9
%
5.9
%
Total segment gross profit percentage
11.3
%
6.6
%
9.7
%
9.8
%
Segment operating income (loss)
percentage:
Global Ingredients
2.1
%
3.6
%
3.3
%
4.0
%
Plant-Based Foods and Beverages
12.9
%
1.1
%
8.2
%
3.4
%
Fruit-Based Foods and Beverages
-5.9
%
-12.4
%
-7.7
%
-4.4
%
Total segment operating income (loss)
1.0
%
-2.2
%
-0.2
%
0.3
%
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, and the
previous 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 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
Per Diluted
Per Diluted
Share
Share
Share
For the quarters ended
$
$
$
$
$
$
December 28, 2019
Net loss
(5,332
)
(176
)
(5,508
)
Earnings attributable to non-controlling
interests
(95
)
-
(95
)
Dividends and accretion of Series A
Preferred Stock
(2,017
)
-
(2,017
)
Loss attributable to common
shareholders
(7,444
)
(0.08
)
(176
)
-
(7,620
)
(0.09
)
Adjusted for:
Costs related to the Value Creation
Plan(a)
1,279
-
1,279
Plant expansion costs(b)
298
-
298
Post-closing adjustments related to sale
of soy and corn business(c)
-
242
242
Other(d)
(1,042
)
-
(1,042
)
Net income tax effect(e)
1,312
(66
)
1,246
Adjusted loss
(5,597
)
(0.06
)
-
-
(5,597
)
(0.06
)
December 29, 2018
Net earnings (loss)
(97,920
)
901
(97,019
)
Earnings attributable to non-controlling
interests
(43
)
-
(43
)
Dividends and accretion of Series A
Preferred Stock
(1,987
)
-
(1,987
)
Earnings (loss) attributable to common
shareholders
(99,950
)
(1.15
)
901
0.01
(99,049
)
(1.13
)
Adjusted for:
Goodwill impairment(f)
81,222
-
81,222
Inventory write-downs(g)
3,101
-
3,101
New product commercialization costs(h)
2,369
-
2,369
Reserve for notes receivable(i)
2,232
-
2,232
Equipment start-up costs(j)
683
-
683
Other(k)
98
-
98
Costs related to Value Creation
Plan(l)
-
(503
)
(503
)
Reversal of stock-based
compensation(m)
(182
)
-
(182
)
Fair value adjustment on contingent
consideration(n)
(321
)
-
(321
)
Net income tax effect(e)
961
131
1,092
Adjusted earnings (loss)
(9,787
)
(0.11
)
529
0.01
(9,258
)
(0.11
)
(a)
Reflects employee retention and relocation costs of $0.4
million, and professional fees of $0.4 million recorded in SG&A
expenses; and employee termination costs of $1.7 million (net of
the reversal of $1.3 million of previously recognized stock-based
compensation related to forfeited awards previously granted to
terminated employees).
(b)
Reflects costs related to the start-up of our new organic
avocado oil facility in Ethiopia, which were recorded in cost of
goods sold.
(c)
Reflects post-closing adjustments related to the sale of the soy
and corn business, which reduced the gain on sale recorded in other
income.
(d)
Other includes gains on the settlement of certain legal matters,
offset by losses on disposal of assets, which were recorded in
other income/expense.
(e)
Reflects the tax effect of the preceding adjustments to earnings
and reflects an overall estimated annual effective tax rate of
approximately 27% for 2019 (2018 – 27%) on adjusted earnings/loss
before tax.
(f)
Reflects the impairment of goodwill that arose from the
acquisition of Sunrise in 2015.
(g)
Reflects the write-down of certain frozen fruit inventory, due
to a change in expected use of aged stocks, and reduced sales
pricing and high production costs, which was recorded in cost of
goods sold.
(h)
Reflects costs for development, production trials and start-up
costs, incremental freight charges, and employee training related
to the commercialization of new consumer products, which were
recorded in cost of goods sold ($2.0 million) and SG&A expenses
($0.4 million).
(i)
Reflects a bad debt reserve for notes receivable associated with
a previously sold business, which was recorded in other
expense.
(j)
Reflects mainly costs related to the start-up of new roasting
equipment for grains, seeds and legumes at our Crookston,
Minnesota, facility, as well as a second processing line at our
cocoa facility in the Netherlands, which were recorded in cost of
goods sold.
(k)
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, which were recorded in other expense/income.
(l)
Reflects sublease rental related to vacated nutritional bar
facility, which was recorded in other income.
(m)
Reflects the reversal to SG&A expenses of previously
recognized stock-based compensation related to performance share
units granted to certain employees as the performance conditions
were not achieved.
(n)
Reflects a fair value adjustment to reduce the contingent
consideration obligation related to a prior business acquisition,
based on the results for the business in fiscal 2018, which was
recorded in other income.
Excluding
disposed operations
Disposed operations
Consolidated
Per Diluted
Per Diluted
Per Diluted
Share
Share
Share
For the years ended
$
$
$
$
$
$
December 28, 2019
Net earnings (loss)
(32,273
)
31,669
(604
)
Earnings attributable to non-controlling
interests
(154
)
-
(154
)
Dividends and accretion of Series A
Preferred Stock
(8,022
)
-
(8,022
)
Earnings (loss) attributable to common
shareholders
(40,449
)
(0.46
)
31,669
0.36
(8,780
)
(0.10
)
Adjusted for:
Gain on sale of soy and corn
business(a)
-
(44,027
)
(44,027
)
Costs related to the Value Creation
Plan(b)
9,649
-
9,649
Plant expansion costs(c)
609
-
609
Contract manufacturer transition
costs(d)
448
-
448
Product withdrawal and recall costs(e)
260
-
260
Other(f)
(2,533
)
-
(2,533
)
Net income tax effect(g)
(67
)
12,064
11,997
Adjusted loss
(32,083
)
(0.37
)
(294
)
-
(32,377
)
(0.37
)
December 29, 2018
Net earnings (loss)
(111,477
)
2,334
(109,143
)
Earnings attributable to non-controlling
interests
(62
)
-
(62
)
Dividends and accretion of Series A
Preferred Stock
(7,909
)
-
(7,909
)
Earnings (loss) attributable to common
shareholders
(119,448
)
(1.37
)
2,334
0.03
(117,114
)
(1.34
)
Adjusted for:
Goodwill impairment(h)
81,222
-
81,222
Inventory write-downs(i)
3,101
-
3,101
Equipment start-up costs(j)
2,913
-
2,913
New product commercialization costs(k)
2,729
-
2,729
Costs related to Value Creation
Plan(l)
1,696
678
2,374
Reserve for notes receivable(m)
2,232
-
2,232
Product withdrawal and recall costs(n)
1,456
-
1,456
Other(o)
296
-
296
Fair value adjustment on contingent
consideration(p)
(2,821
)
-
(2,821
)
Recovery of product withdrawal
costs(q)
(1,200
)
-
(1,200
)
Reversal of stock-based
compensation(r)
(182
)
-
(182
)
Net income tax effect(g)
681
(176
)
505
Adjusted earnings (loss)
(27,325
)
(0.31
)
2,836
0.03
(24,489
)
(0.28
)
(a)
Reflects the gain on sale of the soy and corn business, net of
transaction costs and post-closing adjustments, which was recorded
in other income.
(b)
Reflects employee retention and relocation costs of $2.2
million, and professional fees of $1.4 million recorded in SG&A
expenses; and employee termination costs of $8.6 million (net of
the reversal of $4.1 million of previously recognized stock-based
compensation related to forfeited awards previously granted to
terminated employees), CEO and CFO recruitment costs of $1.3
million, and facility closure costs of $0.3 million, all recorded
in other expense.
(c)
Reflects costs related to the expansion of our Allentown,
Pennsylvania, plant-based beverage facility and start-up of our new
organic avocado oil facility in Ethiopia, which were recorded in
cost of goods sold.
(d)
Reflects costs to transition premium juice production activities
to new contract manufacturers, which were recorded in cost of goods
sold and other expense.
(e)
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 2016, which were
recorded in other expense.
(f)
Other includes gains on the settlement of certain legal matters
and a project cancellation, partially offset by losses on disposal
of assets, insurance deductibles, and business development costs,
which were recorded in other income/expense.
(g)
Reflects the tax effect of the preceding adjustments to earnings
and reflects an overall estimated annual effective tax rate of
approximately 27% for 2019 (2018 – 27%) on adjusted earnings/loss
before tax.
(h)
Reflects the impairment of goodwill that arose from the
acquisition of Sunrise in 2015.
(i)
Reflects the write-down of certain frozen fruit inventory items
in the fourth quarter of 2018, due to a change in expected use of
aged stocks, and reduced sales pricing and high production costs,
which was recorded in cost of goods sold.
(j)
Reflects costs related to the start-up of new roasting equipment
for grains, seeds and legumes at our Crookston, Minnesota,
facility, as well as the start-up of a second processing line at
our cocoa facility in the Netherlands, which were recorded in cost
of goods sold.
(k)
Reflects costs for development, production trials and start-up
costs, incremental freight charges, and employee training related
to the commercialization of new consumer products, which were
recorded in cost of goods sold ($2.3 million) and SG&A expenses
($0.4 million).
(l)
Reflects the write-down of 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 $1.7 million recorded in other
expense, all related to the Value Creation Plan.
(m)
Reflects a bad debt reserve for notes receivable associated with
a previously sold business, which was recorded in other
expense.
(n)
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 sunflower
recall, which were recorded in other expense.
(o)
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, which were recorded in other expense/income.
(p)
Reflects a fair value adjustment to reduce the contingent
consideration obligation related to a prior business acquisition,
based on the results for the business in fiscal 2018, which was
recorded in other income.
(q)
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 2016.
(r)
Reflects the reversal to SG&A expenses of previously
recognized stock-based compensation related to performance share
units granted to certain employees as the performance conditions
were not achieved.
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 disposals of the soy and corn business, and
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 disposed
and the effect of those operations on its financial
performance.
Excluding
disposed operations
Disposed operations
Consolidated
For the quarters ended
$
$
$
December 28, 2019
Net loss
(5,332
)
(176
)
(5,508
)
Provision for (recovery of) income
taxes
48
(66
)
(18
)
Interest expense, net
8,820
-
8,820
Other expense (income), net
(546
)
242
(304
)
Total segment operating loss
2,990
-
2,990
Depreciation and amortization
8,947
-
8,947
Stock-based compensation(a)
3,351
-
3,351
Costs related to Value Creation
Plan(b)
784
-
784
Plant expansion costs(c)
298
-
298
Adjusted EBITDA
16,370
-
16,370
December 29, 2018
Net earnings (loss)
(97,920
)
901
(97,019
)
Provision for (recovery of) income
taxes
(1,856
)
331
(1,525
)
Interest expense (income), net
8,936
(16
)
8,920
Other expense (income), net
2,009
(501
)
1,508
Goodwill impairment
81,222
-
81,222
Total segment operating income
(7,609
)
715
(6,894
)
Depreciation and amortization
8,082
205
8,287
Stock-based compensation
1,544
-
1,544
Inventory write-downs(d)
3,101
3,101
Equipment start-up costs(e)
683
-
683
New product commercialization costs(f)
2,369
-
2,369
Adjusted EBITDA
8,170
920
9,090
(a)
Stock-based compensation of $3.4 million was recorded in
SG&A expenses, and the reversal of $1.3 million of previously
recognized stock-based compensation related to forfeited awards
previously granted to terminated employees was recognized in other
income.
(b)
Reflects employee retention costs of $0.4 million, and
professional fees of $0.4 million recorded in SG&A
expenses.
(c)
Reflects costs related to the start-up of our new organic
avocado oil facility in Ethiopia, which was recorded in cost of
goods sold.
(d)
Reflects the write-down of certain frozen fruit inventory, due
to a change in expected use of aged stocks, and reduced sales
pricing and high production costs, which was recorded in cost of
goods sold.
(e)
Reflects mainly costs related to the start-up of new roasting
equipment for grains, seeds and legumes at our Crookston,
Minnesota, facility, as well as a second processing line at our
cocoa facility in the Netherlands, which were recorded in cost of
goods sold.
(f)
Reflects costs for development, production trials and start-up
costs, incremental freight charges, and employee training related
to the commercialization of new consumer products, which were
recorded in cost of goods sold ($2.0 million) and SG&A expenses
($0.4 million).
Excluding
disposed operations
Disposed operations
Consolidated
For the years ended
$
$
$
December 28, 2019
Net earnings (loss)
(32,273
)
31,669
(604
)
Provision for (recovery of) income
taxes
(8,731
)
11,952
3,221
Interest expense, net
34,677
-
34,677
Other expense (income), net
3,979
(44,027
)
(40,048
)
Total segment operating loss
(2,348
)
(406
)
(2,754
)
Depreciation and amortization
33,823
129
33,952
Stock-based compensation(a)
11,616
-
11,616
Costs related to Value Creation
Plan(b)
3,556
-
3,556
Plant expansion costs(c)
609
-
609
Contract manufacturer transition
costs(d)
289
-
289
Adjusted EBITDA
47,545
(277
)
47,268
December 29, 2018
Net earnings (loss)
(111,477
)
2,334
(109,143
)
Provision for (recovery of) income
taxes
(6,269
)
891
(5,378
)
Interest expense (income), net
34,503
(97
)
34,406
Other expense (income), net
2,056
769
2,825
Goodwill impairment
81,222
-
81,222
Total segment operating income
35
3,897
3,932
Depreciation and amortization
31,941
847
32,788
Stock-based compensation
7,939
-
7,939
Inventory write-downs(e)
3,101
-
3,101
Equipment start-up costs(f)
2,913
-
2,913
New product commercialization costs(g)
2,729
-
2,729
Costs related to Value Creation
Plan(b)
713
-
713
Recovery of product withdrawal
costs(h)
(1,200
)
-
(1,200
)
Adjusted EBITDA
48,171
4,744
52,915
(a)
Stock-based compensation of $11.6 million was recorded in
SG&A expenses, and the reversal of $4.1 million of previously
recognized stock-based compensation related to forfeited awards
previously granted to terminated employees was recognized in other
income.
(b)
For 2019, reflects employee retention and relocation costs of
$2.2 million, and professional fees of $1.4 million recorded in
SG&A expenses. For 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.
(c)
Reflects costs related to the expansion of our Allentown,
Pennsylvania, plant-based beverage facility and start-up of our new
organic avocado oil facility in Ethiopia, which were recorded in
cost of goods sold.
(d)
Reflects costs to transition premium juice production activities
to new contract manufacturers, which were recorded in cost of goods
sold.
(e)
Reflects the write-down of certain frozen fruit inventory items
in the fourth quarter of 2018, due to a change in expected use of
aged stocks, and reduced sales pricing and high production costs,
which was recorded in cost of goods sold.
(f)
Reflects costs related to the start-up of new roasting equipment
for grains, seeds and legumes at our Crookston, Minnesota,
facility, as well as the start-up of a second processing line at
our cocoa facility in the Netherlands, which were recorded in cost
of goods sold.
(g)
Reflects costs for development, production trials and start-up
costs, incremental freight charges, and employee training related
to the commercialization of new consumer products, which were
recorded in cost of goods sold ($2.3 million) and SG&A expenses
($0.4 million).
(h)
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 2016.
Sale of Specialty and Organic Soy and Corn Business -
Selected Financial Information
The following table presents for period ended February 22, 2019,
and for the quarter and year ended December 29, 2018, a summary of
the results of operations of the soy and corn business, consisting
of revenues, gross profit, segment operating income/loss and
earnings/loss before income taxes. These results exclude management
fees charged by Corporate Services. The following table also
presents a reconciliation of adjusted EBITDA in connection with
this transaction from earnings/loss before income taxes of the soy
and corn business, which we consider in this case to be the most
directly comparable U.S. GAAP financial measure.
Period ended
Quarter ended
Year ended
February 22, 2019
December 29, 2018
December 29, 2018
$
$
$
Revenues
10,346
26,483
104,427
Gross profit
192
1,623
8,310
Segment operating income (loss)
(187
)
1,239
6,777
Earnings (loss) before income taxes
(187
)
1,252
6,783
Depreciation
129
205
847
Interest income
-
(16
)
(97
)
Other expense
-
2
91
Less rationalized costs and expenses
(169
)
(490
)
(3,038
)
Adjusted EBITDA
(227
)
953
4,586
Segment operating income/loss and adjusted EBITDA are non-GAAP
measures. See discussion above under the heading “Segment Operating
Income/Loss and Adjusted EBITDA” on the use of these non-GAAP
measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200227005165/en/
Scott Van Winkle ICR 617-956-6736 scott.vanwinkle@icrinc.com
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