SunOpta Inc. (“SunOpta” or the “Company”) (Nasdaq:STKL)
(TSX:SOY), a leading global company focused on organic,
non-genetically modified and specialty foods, today announced
financial results for the first quarter ended March 30, 2019.
“We delivered adjusted revenue growth of 6.2% during the first
quarter of 2019, with strong commercial results across the Healthy
Beverage, Healthy Snacks and international organic sourcing
operations. On an adjusted basis, these businesses generated
revenue growth versus prior year of 6.0%, 13.6% and 12.2%
respectively in the quarter reflecting strong execution in on-trend
categories," said Joe Ennen, Chief Executive Officer at SunOpta.
“We have made progress on our fruit margin optimization plan and
are on track with our automation investments to reduce production
costs. We continue to expect the benefits of the first phase of our
margin optimization plan to be realized by the fourth quarter of
2019. However, as anticipated, fruit margins continued to weigh on
consolidated EBITDA margins during the first quarter, offsetting
gains in the Healthy Beverage, Healthy Snacks and international
organic sourcing operations. With a robust sales pipeline, strong
positioning in on-trend, healthy food categories, and the right
team to drive execution of our margin optimization plan, I am
confident we can deliver improving results as the year progresses.
In 2019, we remain focused on strengthening our product portfolio,
accelerating customer-centric innovation, and improving
profitability in frozen fruit through pricing and productivity,
with the objective to create sustainable, long-term shareholder
value.”
All amounts are expressed in U.S. dollars and results are
reported in accordance with U.S. GAAP, except where specifically
noted.
First Quarter 2019 Highlights:
- Revenues of $305.3 million for the
first quarter of 2019, compared to $312.7 million in the first
quarter of 2018, a decrease of 2.4%. Adjusted for divested and
disposed operations, foreign exchange, commodity prices, and a new
contract manufacturing arrangement, revenues grew 6.2% during the
first quarter.
- Net income attributable to common
shareholders of $23.7 million or $0.27 per common share in the
first quarter of 2019, compared to a loss attributable to common
shareholders of $6.3 million or $0.07 per common share in the first
quarter of 2018. Net income 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 loss¹ of $7.9 million or $0.09
per common share during the first quarter of 2019, compared to an
adjusted loss of $6.4 million or $0.07 per common share during the
first quarter of 2018.
- Adjusted EBITDA¹ excluding disposed
operations of $11.1 million or 3.6% of revenues for the first
quarter of 2019, versus $11.0 million or 3.5% of revenues in the
first quarter of 2018.
- Completed sale of specialty and organic
soy and corn business for gross proceeds of $66.5 million, subject
to certain post-closing adjustments.
First Quarter 2019 Results
Revenues for the first quarter of 2019 were $305.3 million, a
decrease of 2.4% compared to $312.7 million in the first quarter of
2018. Excluding the impact on reported revenues of disposed
business including the soy and corn business (sold in February
2019) and exit from flexible resealable pouch and nutrition bar
product lines (exited in fiscal 2018), changes in commodity-related
pricing and foreign exchange rates, and a profit-neutral change to
a co-manufacturing agreement with one of our customers, revenues in
the first quarter of 2019 increased by 6.2% compared with the first
quarter of 2018.
The Global Ingredients segment generated revenues of $128.0
million, a decrease of 6.1% compared to $136.3 million in the first
quarter of 2018. Excluding the impact on revenues from the divested
soy and corn business, and changes in commodity-related pricing and
foreign exchange rates, Global Ingredients revenue in the first
quarter increased 9.7%. Adjusting for the items noted above, sales
of internationally-sourced organic ingredients grew 12.2% during
the quarter, mainly driven by increased demand for cocoa, fruits,
oils and coffee, partially offset by lower volumes of nuts, seeds
and sugars. Sales of domestically-sourced ingredients declined 9.8%
during the quarter, primarily reflecting lower inshell and kernel
sunflower volumes, partially offset by higher roasted snack and
ingredient volumes.
The Consumer Products segment generated revenues of $177.2
million during the first quarter of 2019, an increase of 0.5%
compared to $176.3 million in the first quarter of 2018. Excluding
the impact of commodity-related pricing, sales of resealable pouch
and nutrition bar products in the first quarter of 2018, and a
profit-neutral change to a co-manufacturing agreement with one of
our customers, Consumer Products revenue in the first quarter
increased by 3.9%. The growth primarily reflects a 6.0% increase in
the Healthy Beverage platform consisting of higher sales of aseptic
plant-based beverages and the expansion of broth products combined
with a 13.6% revenue increase in the Healthy Snack platform driven
by in part by increased customer promotions, and to a lesser extent
a 0.2% increase in the Healthy Fruit platform as higher volume
offset lower realized pricing.
Gross profit was $28.2 million for the quarter ended March 30,
2019, a decrease of $5.5 million compared to $33.7 million for the
quarter ended March 31, 2018. Consumer Products accounted for $3.7
million of the decrease in gross profit, reflecting the impact of
the weather-related delay to the fruit season in central Mexico and
continued margin pressure in frozen fruit. The delay resulted in
commodity price inflation due to a short supply of frozen fruit
from Mexico, unfavorable production variances due to lower yields
related to crop quality, rework of bulk inventories and
substitution of higher-cost U.S.-grown product, and lower plant
utilization at our Mexican frozen fruit facility. The negative
impact to gross profit from the weather-related delay is estimated
to be $1.6 million in the first quarter of 2019. In addition, the
decrease in gross profit reflected lower volumes and plant
utilization for fruit ingredients due to reduced demand. These
factors were partially offset by increased sales volume and
productivity-driven cost savings for aseptic beverages and snacks.
Global Ingredients accounted for $1.8 million of the decrease in
gross profit primarily due to the sale of the soy and corn
business, and a modest decline in gross profit from sunflower and
international manufacturing facilities, which more than offset
improved gross profit in international organic ingredients driven
by a gain on commodity futures contracts used to hedge the
Company’s organic cocoa position and higher sales volumes.
As a percentage of revenues, gross profit for the quarter ended
March 30, 2019 was 9.2% compared to 10.8% for the quarter ended
March 31, 2018, a decrease of 1.6%. On a pro forma basis that
excludes the gross profit from disposed businesses, as well as
costs of $0.1 million to transition certain production activities
to a new contract manufacturer in the first quarter of 2019, the
gross profit percentage for the first quarter of 2019 would have
been approximately 9.5%, compared with 10.7% for the first quarter
of 2018.
Segment operating income¹ was $0.3 million, or 0.1% of revenues
in the first quarter of 2019, compared to $1.7 million, or 0.5% of
revenues in the first quarter of 2018. The decrease in operating
income year-over-year was primarily attributable to $5.5 million
lower gross profit, partially offset by a $2.0 million reduction in
SG&A due to the sale of the soy and corn business and
rationalized overhead, lower employee-related benefit costs,
professional fees, and other cost reduction measures, and a $2.1
million decrease in foreign exchange losses. Excluding the
operating results of disposed businesses, as well as SG&A
expenses related to employee retention and transition costs, our
segment operating income would have been $1.0 million for the first
quarter of 2019, compared with $0.9 million for the first quarter
of 2018.
Other income for the first quarter of 2019 includes the pre-tax
gain on sale of the soy and corn business of $45.6 million along
with the reversal of $2.1 million of previously recognized
stock-based compensation expense. These other income amounts were
offset mainly by employee termination and recruitment costs of $3.5
million.
Adjusted EBITDA¹ was $10.9 million or 3.6% of revenues in the
first quarter of 2019, compared to $12.4 million or 4.0% of
revenues in the first quarter of 2018. Excluding disposed
operations, adjusted EBITDA for the quarter ended March 30, 2019
was $11.1 million, compared with $11.0 million for the quarter
ended March 31, 2018.
The Company reported income attributable to common shareholders
for the first quarter of 2019 of $23.7 million, or $0.26 per
diluted common share, compared to a loss of $6.3 million, or $0.07
per diluted common share during the first quarter of 2018. Adjusted
loss¹ in the first quarter of 2019 was $7.9 million or $0.09 per
common share, compared to $6.4 million or $0.07 per common share in
the first quarter of 2018. Please refer to the discussion and table
below under “Non-GAAP Measures - Adjusted Earnings/Loss”.
Balance Sheet and Cash Flow
At March 30, 2019, SunOpta’s balance sheet reflected total
assets of $921.7 million and total debt of $454.2 million. During
the first quarter of 2019, cash provided by operating activities
was $1.0 million, compared to $7.5 million during the first quarter
of 2018. The $6.5 million decrease in cash provided by operating
activities reflects the receipt of income tax refunds in the first
quarter of 2018 and lower quarter-over-quarter operating results.
Excluding net proceeds from the sale of the soy and corn business
of $64.9 million, cash used in investing activities was $8.0
million in the first quarter of 2019, compared with $6.0 million in
the first quarter of 2018, an increase in cash used of $2.0
million. The increase in cash used reflected a higher net level of
capital expenditures during the first quarter of 2019, mainly
related to the expansion of aseptic beverage capacity and addition
of automation equipment in the Company’s frozen fruit and cocoa
processing facilities.
Conference Call
SunOpta plans to host a conference call at 9:00 A.M. Eastern
time on Wednesday, May 8, 2019, to discuss the first quarter
financial results. After opening remarks, there will be a question
and answer period. This conference call can be accessed via a link
on SunOpta’s website at www.sunopta.com under the “Investors”
section. To listen to the live call over the Internet, please go to
SunOpta’s website at least 15 minutes early to register, download
and install any necessary audio software. Additionally, the call
may be accessed with the toll-free dial-in number 1 (877) 312-9198
or International dial-in number 1 (631) 291-4622. If you are unable
to listen live, the conference call will be archived and can be
accessed for approximately 90 days on the Company’s website.
¹ See discussion of non-GAAP measures
About SunOpta Inc.SunOpta Inc. is a leading global
company focused on organic, non-genetically modified ("non-GMO")
and specialty foods. SunOpta specializes in the sourcing,
processing and packaging of organic and non-GMO food products,
integrated from seed through packaged products; with a focus on
strategic vertically integrated business models. SunOpta's organic
and non-GMO food operations revolve around value-added grain, seed,
fruit and vegetable-based product offerings, supported by a global
sourcing and supply infrastructure.
Forward-Looking StatementsCertain statements included in
this press release may be considered "forward-looking statements"
within the meaning of the United States Private Securities
Litigation Reform Act of 1995 and applicable Canadian securities
legislation, which are based on information available to us on the
date of this release. These forward-looking statements include, but
are not limited to, the reduction of production costs due to the
Company’s automation investments; the expected benefits of the
first phase of the Company’s margin optimization plan; the delivery
of improved results throughout the year; the Company’s continued
focus on strengthening its product portfolio, accelerating
customer-centric innovation, and improving profitability in frozen
fruit through pricing and productivity; and the estimated impact of
the weather-related delay to the fruit season in central Mexico.
Generally, forward-looking statements do not relate strictly to
historical or current facts and are typically accompanied by words
such as “expect”, “can”, “will”, "continue", “estimated”,
“believe”, “targeting”, “anticipates”, "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
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.
Source: SunOpta Inc.
SunOpta Inc. Consolidated Statements of Operations
For the quarters ended March 30, 2019 and March 31, 2018
(Unaudited) (All dollar amounts expressed in thousands of U.S.
dollars, except per share amounts)
Quarter ended March 30, 2019
March 31, 2018 $ $
Revenues 305,275 312,652
Cost of goods
sold 277,069 278,968
Gross profit 28,206 33,684 Selling, general and
administrative expenses 26,248 28,288 Intangible asset amortization
2,742 2,771 Other income, net (43,512 ) (402 ) Foreign exchange
loss (gain) (1,104 ) 962
Earnings
before the following 43,832 2,065 Interest expense, net
8,739 8,220
Earnings (loss)
before income taxes 35,093 (6,155 ) Provision for
(recovery of) income taxes 9,498 (1,693 )
Net earnings (loss) 25,595 (4,462 ) Earnings
attributable to non-controlling interests (54 ) (99 )
Earnings (loss) attributable to SunOpta Inc. 25,649
(4,363 ) Dividends and accretion on Series A Preferred Stock
(1,995 ) (1,967 )
Earnings (loss)
attributable to common shareholders 23,654
(6,330 )
Earnings (loss) per share (1) Basic
0.27 (0.07 ) Diluted 0.26 (0.07 )
SunOpta Inc. Consolidated Statements of Operations
(continued) For the quarters and quarters ended March 30, 2019 and
March 31, 2018 (Unaudited) (All dollar amounts expressed in
thousands of U.S. dollars, except per share amounts)
Quarter ended March 30,
2019 March 31, 2018
(1)
Earnings (loss) per share Numerator for basic
earnings (loss) per share Earnings (loss) attributable to SunOpta
Inc. $ 25,649 $ (4,363 ) Less: dividends and accretion on Series A
preferred stock (1,995 ) (1,967 )
Earnings (loss) attributable to common shareholders $ 23,654
$ (6,330 ) Denominator for basic earnings
(loss) per share Basic weighted-average number of shares
outstanding 87,475 86,810
Basic earnings (loss) per share $ 0.27
$ (0.07 ) Numerator for diluted earnings (loss) per
share Earnings (loss) attributable to SunOpta Inc. $ 25,649 $
(4,363 ) Less: dividends and accretion on Series A preferred
stock(a) - (1,967 ) Earnings
(loss) attributable to common shareholders $ 25,649
$ (6,330 ) Denominator for diluted earnings (loss)
per share Basic weighted-average number of shares outstanding
87,475 86,810 Dilutive effect of the following: Series A preferred
stock(a) 11,333 - Stock options and restricted stock units
191 - Diluted weighted-average
number of shares outstanding 98,999
86,810 Diluted earnings (loss) per share $
0.26 $ (0.07 ) (a) For the
quarter ended March 30, 2019, it was more dilutive to assume the
Series A preferred stock was converted into common shares of the
Company and, therefore, the numerator of the diluted loss per share
calculation was adjusted to add back the dividends and accretion on
the 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
30, 2019 and December 29, 2018 (Unaudited) (All dollar amounts
expressed in thousands of U.S. dollars)
March 30, 2019
December 29, 2018 $ $
ASSETS Current assets Cash and cash equivalents 6,015
3,280 Accounts receivable 120,335 132,131 Inventories 329,930
361,957 Prepaid expenses and other current assets 31,456 29,024
Income taxes recoverable 7,096 7,029
Total current assets 494,832 533,421
Property,
plant and equipment 163,532 171,032
Operating lease
right-of-use assets 75,503 -
Goodwill 26,292 27,959
Intangible assets 158,223 160,975
Deferred income
taxes 182 182
Other assets 3,162
3,169
Total assets 921,726
896,738
LIABILITIES Current
liabilities Bank indebtedness 223,989 280,334 Accounts payable
and accrued liabilities 127,877 155,371 Customer and other deposits
1,543 1,445 Income taxes payable 4,246 2,208 Other current
liabilities 437 862 Current portion of long-term debt 1,816 1,840
Current portion of operating lease liabilities 17,432 - Current
portion of long-term liabilities 4,286 4,286
Total current liabilities 381,626 446,346
Long-term debt 228,436 227,023
Operating lease
liabilities 58,910 -
Long-term liabilities 1,259 2,079
Deferred income taxes 15,476 8,149
Total liabilities 685,707 683,597
Series A
Preferred Stock 81,597 81,302
EQUITY SunOpta
Inc. shareholders’ equity Common shares 315,202 314,357
Additional paid-in capital 31,016 31,796 Accumulated deficit
(182,497 ) (206,151 ) Accumulated other comprehensive loss (10,757
) (9,667 ) 152,964 130,335
Non-controlling
interests 1,458 1,504
Total
equity 154,422 131,839
Total equity and liabilities 921,726
896,738
SunOpta Inc. Consolidated
Statements of Cash Flows For the quarters ended March 30, 2019 and
March 31, 2018 (Unaudited) (All dollar amounts expressed in
thousands of U.S. dollars)
Quarter ended March 30, 2019
March 31, 2018 $ $
CASH PROVIDED BY (USED IN) Operating
activities Net earnings (loss) 25,595 (4,462 ) Items not
affecting cash: Depreciation and amortization 8,302 8,141
Amortization of debt issuance costs 655 608 Deferred income taxes
7,327 (1,286 ) Stock-based compensation (163 ) 2,171 Unrealized
loss on derivative contracts 112 1,521 Gain on sale of business
(45,579 ) - Fair value of contingent consideration - (2,416 )
Impairment of long-lived assets - 339 Other (62 ) 1 Changes in
non-cash working capital 4,801 2,889
Net cash flows from operations 988 7,506
Investing activities Net proceeds from sale of
business 64,876 - Purchases of property, plant and equipment (7,974
) (6,735 ) Proceeds from sale of assets - 700
Net cash flows from investing activities 56,902
(6,035 )
Financing activities Increase
(decrease) under line of credit facilities (54,661 ) 309 Borrowings
under long-term debt 1,852 - Repayment of long-term debt (723 )
(522 ) Payment of cash dividends on Series A Preferred Stock (1,700
) (1,700 ) Proceeds from the exercise of stock options and employee
share purchases 228 149 Payment of debt issuance costs (314 ) -
Other 221 (40 ) Net cash flows from financing
activities (55,097 ) (1,804 ) Foreign exchange
gain (loss) on cash held in a foreign currency (58 )
29 Increase (decrease) in cash and cash equivalents
in the period 2,735 (304 ) Cash and cash equivalents
- beginning of the period 3,280 3,228
Cash and cash equivalents - end of the period 6,015
2,924
SunOpta Inc.
Segmented Information For the quarters ended March 30, 2019 and
March 31, 2018 Unaudited (Expressed in thousands of U.S. dollars)
Quarter ended March 30, 2019 March 31, 2018
$ $
Segment revenues from external
customers: Global Ingredients 128,043 136,331 Consumer Products
177,232 176,321 Total segment revenues
from external customers 305,275 312,652
Segment gross profit: Global Ingredients 12,872
14,635 Consumer Products 15,334 19,049
Total segment gross profit 28,206 33,684
Segment operating income (loss): Global
Ingredients 4,723 3,102 Consumer Products (1,338 ) 3,316 Corporate
Services (3,065 ) (4,755 ) Total segment operating
income 320 1,663
Segment
gross profit percentage: Global Ingredients 10.1 % 10.7 %
Consumer Products 8.7 % 10.8 % Total segment gross profit
percentage 9.2 % 10.8 %
Segment operating income (loss)
percentage: Global Ingredients 3.7 % 2.3 % Consumer Products
-0.8 % 1.9 % Total segment operating income 0.1 % 0.5 %
Non-GAAP Measures
In addition to reporting financial results in accordance with
U.S. GAAP, the Company provides additional information about its
operating results regarding segment operating income, adjusted
earnings and adjusted earnings before interest, taxes, depreciation
and amortization (“Adjusted EBITDA”), which are not measures in
accordance with U.S. GAAP. The Company believes that segment
operating income, adjusted earnings and adjusted EBITDA assist
investors in comparing performance across reporting periods on a
consistent basis by excluding items that are not indicative of its
operating performance. The non-GAAP measures of segment operating
income, adjusted earnings and adjusted EBITDA should not be
considered in isolation or as a substitute for performance measures
calculated in accordance with U.S. GAAP.
In order to evaluate its results of operations, the Company uses
certain other non-GAAP measures that it believes enhance an
investor’s ability to derive meaningful period-over-period
comparisons and trends from the results of operations. In
particular, the Company evaluates its revenues on a basis that
excludes the effects of fluctuations in commodity pricing and
foreign exchange rates, and the impacts of 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.
Value Creation Plan
Since the fourth quarter of 2016, the Company has been
implementing its Value Creation Plan with the objective of
maximizing the Company’s ability to deliver long-term value to its
shareholders. In the first quarter of 2019, actions under the Value
Creation Plan included the sale of the soy and corn business and
related cost rationalization, as well as the CEO transition. In the
first quarter of 2018, actions under the Value Creation Plan
included the continued exit from flexible resealable pouch and
nutrition bar operations and the consolidation of roasted snack
operations.
Excluding
disposed operations Disposed operations
Consolidated
Per DilutedShare
Per DilutedShare
Per DilutedShare
For the quarter ended $ $
$ $ $ $
March
30, 2019 Net earnings (loss) (7,201 ) 32,796 25,595 Add: loss
attributable to non-controlling interests 54 - 54 Less: 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 - (45,579 ) (45,579 ) Costs related to the
Value Creation Plan(a) 1,858 - 1,858 Product withdrawal and recall
costs(b) 260 - 260 Contract manufacturer transition costs(c) 88 -
88 Other(d) 152 - 152 Net income tax effect(e) (826 ) 12,489
11,663 Adjusted loss (7,610 ) (0.09 )
(294 ) - (7,904 )
(0.09 )
March 31, 2018 Net loss (4,420 ) (42 ) (4,462
) Add: loss attributable to non-controlling interests 99 - 99 Less:
dividends and accretion of Series A Preferred Stock (1,967 ) -
(1,967 ) Loss attributable to common shareholders (6,288 )
(0.07 ) (42 ) - (6,330 ) (0.07 ) Adjusted for: Fair value
adjustment on contingent consideration(f) (2,500 ) - (2,500 ) Costs
related to Value Creation Plan(g) 984 1,211 2,195 Product
withdrawal and recall costs(b) 323 - 323 Other(h) (7 ) - (7 ) Net
income tax effect(d) 221 (315 ) (94 ) Adjusted loss (7,267 )
(0.08 ) 854 0.01
(6,413 ) (0.07 ) (a)
Reflects costs incurred and expensed in connection with the Value
Creation Plan, consisting of 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, net of
the reversal of $2.1 million of previously recognized stock-based
compensation related to forfeited awards previously granted to
terminated employees, all recorded in other expense. (b) 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. (c) Reflects costs to
transition certain production activities to a new contract
manufacturer, which were recorded in cost of goods sold. (d) Other
included insurance deductibles, which were recorded in other
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 the quarter ended March 30, 2019
(March 31, 2018 – 26%) on adjusted earnings/loss before tax. (f)
Reflects a fair value adjustment of $2.5 million 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. (g) Reflects the write-down of
remaining flexible resealable pouch and nutrition bar inventories
of $0.1 million recorded in cost of goods sold; and consulting
fees, and employee recruitment and relocation costs of $0.3 million
recorded in SG&A expenses; and asset impairment, lease
obligation and employee termination costs of $1.8 million recorded
in other expense. (h) Other included the accretion of contingent
consideration obligations and gain/loss on the sale of assets,
which were recorded in other expense/income.
Segment Operating Income/Loss and Adjusted
EBITDA
The Company defines segment operating income/loss as net
earnings/loss before income taxes, interest expense and other
income/expense items, and adjusted EBITDA as segment operating
income/loss plus depreciation, amortization, non-cash stock-based
compensation, and other unusual items that affect the comparability
of operating performance as identified above in the determination
of adjusted earnings/loss. The following is a tabular presentation
of segment operating income/loss and adjusted EBITDA, including a
reconciliation to net 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 quarter
ended $ $ $
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
March 31, 2018 Net
loss (4,420 ) (42 ) (4,462 ) Provision for (recovery of) income
taxes (1,702 ) 9 (1,693 ) Interest expense (income), net 8,235 (15
) 8,220 Other expense (income), net (1,611 ) 1,209
(402 ) Total segment operating income 502
1,161 1,663 Depreciation and amortization 7,928 213 8,141
Stock-based compensation 2,171 - 2,171 Costs related to Value
Creation Plan(b) 413 -
413 Adjusted EBITDA 11,014 1,374
12,388 (a) For the first quarter
of 2019, stock-based compensation of $1.9 million was recorded in
SG&A expenses, and the reversal of $2.1 million of previously
recognized stock-based compensation related to forfeited awards
previously granted to terminated employees was recognized in other
income. (b) For the first quarter of 2019, reflects professional
fees and employee retention costs of $0.2 million recorded in
SG&A expenses. For the first quarter of 2018, reflects the
write-down of remaining flexible resealable pouch and nutrition bar
inventories of $0.1 million recorded in cost of goods sold; and
consulting fees, and employee recruitment and relocation costs of
$0.3 million recorded in SG&A expenses. (c) Reflects costs to
transition certain production activities to a new contract
manufacturer, which were recorded in cost of goods sold.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190508005112/en/
Scott Van WinkleICR617-956-6736scott.vanwinkle@icrinc.com
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