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 second quarter ended June 29, 2019.
“In the second quarter, we delivered consolidated revenue
growth, adjusted for changes in our business, of 2.4%, led by
accelerated growth rates in both our Healthy Beverage and Healthy
Snack platforms, which increased 9.3% and 21.2% respectively,” said
Joe Ennen, Chief Executive Officer at SunOpta. “Additionally, our
Global Ingredients platform delivered adjusted revenue growth of
1.4%, as strength in Tradin Organic more than offset pressure in
the domestic sunflower market.”
“In our Healthy Fruit business, we made progress on the first
phase of our fruit margin optimization plan, and encouragingly, we
are on plan with our efforts to lower variable labor costs through
our investments in automation, increase our finished good
production in Mexico, and reduce our processing yield loss, while
also focusing commercial efforts to address pricing and contractual
terms with customers. However, the weather-related shortfall of
strawberry supply in 2019 from both Mexico and California is having
a significant impact on gross profit. California freezer volume is
down approximately 20% compared to 2018. We are experiencing
similar shortfalls compared to our pack plan which is resulting in
reduced production volumes and therefore lower overhead absorption
and higher rework costs to fill orders, and is further compounded
by higher fruit purchase prices, substitution, and labor as we take
steps to produce more product in California to compensate for the
Mexican strawberry shortfall. These supply issues weighed on
profitability during the second quarter and are expected to
continue in the near term as we sell through this season’s
inventory and take actions to limit future revenue pressure due to
the shortage of raw materials. Despite these weather-related crop
issues, I am pleased with our fast and flexible response to service
customers and our efforts to limit the overall impact to the
Company. Our fruit operations were able to flex production
schedules, and our sales team has been working with customers to
establish service expectations and build sustainable pricing
positions where we were misaligned. While our progress against the
plan is being more than offset by significant strawberry sourcing
challenges, we believe the structural improvements made are
sustainable. As a result, we expect to drive improved profitability
in Healthy Fruit as supply dynamics return to historical
norms.”
“As we look forward to the second half of 2019, we anticipate
accelerated growth in both Healthy Beverage and Tradin Organic. In
Healthy Beverage, consumer demand for plant-based beverages
continues to be robust. The expansion of our Allentown aseptic
facility, which added approximately 20% system-wide incremental
processing and filling capacity, was completed on time, and we are
currently producing and shipping product run on the new lines in
the third quarter. At Tradin Organic, we anticipate accelerated
growth in the second half of the year, driven by improved
throughput at our recently expanded organic cocoa operations and
the smooth integration of Sanmark.”
“While the crop-related challenges we are experiencing in Health
Fruit are disappointing, we are encouraged by the strong results
and growing pipeline we see across the balance of our business. We
remain focused on strengthening our product portfolio, accelerating
customer-centric, margin accretive innovation, and executing our
fruit margin optimization plan to drive growth, margin and
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.
Second Quarter 2019 Highlights:
- Revenues of $293.0 million for the second quarter of 2019,
compared to $319.3 million in the second quarter of 2018, a
decrease of 8.2%. Adjusted for disposed operations, foreign
exchange, commodity prices, a new contract manufacturing
arrangement and the acquisition of Sanmark, revenues grew 2.4%
during the second quarter.
- Loss attributable to common shareholders of $11.1 million or
$0.13 per common share in the second quarter of 2019, compared to a
loss attributable to common shareholders of $5.1 million or $0.06
per common share in the second quarter of 2018.
- Adjusted loss¹ of $9.0 million or $0.10 per common share during
the second quarter of 2019, compared to an adjusted loss of $5.0
million or $0.06 per common share during the second quarter of
2018.
- Adjusted EBITDA¹ excluding disposed operations of $10.1 million
or 3.5% of revenues for the second quarter of 2019, versus $12.7
million or 4.4% of adjusted revenues in the second quarter of
2018.
Second Quarter 2019 Results
Revenues for the second quarter of 2019 were $293.0 million, a
decrease of 8.2% compared to $319.3 million in the second 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 product lines (exited
in fiscal 2018), 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 second quarter of 2019 increased by
2.4% compared with the second quarter of 2018.
The Consumer Products segment generated revenues of $176.0
million during the second quarter of 2019, an increase of 2.0%
compared to $172.6 million in the second quarter of 2018. Excluding
the impact of commodity-related pricing, sales of resealable pouch
products in the second quarter of 2018, and a profit-neutral change
to a co-manufacturing agreement, Consumer Products revenue in the
second quarter increased by 3.1%. The growth primarily reflects a
9.3% increase in the Healthy Beverage platform consisting of
favorable customer product mix and higher sales of aseptic
plant-based beverages and favorable extraction volumes combined
with a 21.2% revenue increase in the Healthy Snack platform driven
by favorable volumes, partially offset by a 4.9% decline in the
Healthy Fruit platform as a result of reduced demand for fruit
ingredients and modest declines in volumes and pricing for frozen
fruit.
The Global Ingredients segment generated revenues of $117.0
million, a decrease of 20.2% compared to $146.7 million in the
second quarter of 2018. Excluding the impact on revenues from the
divested soy and corn business, changes in commodity-related
pricing and foreign exchange rates, and the acquisition of Sanmark,
Global Ingredients revenue in the second quarter increased 1.4%.
Adjusting for the items noted above, sales of internationally
sourced organic ingredients grew 2.3% during the quarter, driven
mainly by increased volumes of oils, nuts, coffee and cocoa, offset
by lower volumes of grains, fruits and vegetables, sugars and
liquid sweeteners. Sales of domestically sourced ingredients
declined 5.5% during the quarter, primarily reflecting lower
sunflower volumes, partially offset by higher roasted snack and
ingredient volumes.
Gross profit was $27.3 million for the quarter ended June 29,
2019, a decrease of $7.0 million compared to $34.3 million for the
quarter ended June 30, 2018. Consumer Products accounted for $5.3
million of the decrease in gross profit, mainly reflecting the
impact of a substantial shortfall in strawberries from central
Mexico and California due to poor weather conditions, which
resulted in commodity price inflation and unfavorable production
variances within the frozen fruit operations due to lower plant
utilization and rework of bulk inventories to meet customer demand.
The negative impact to gross profit from the strawberry shortage
during the second quarter of 2019 was approximately $3.6 million.
The unfavorability in Healthy Fruit was partially offset by
favorable impacts within the Healthy Beverage and Snacks platforms
from improved plant utilization due to higher production volumes to
meet demand, and productivity-driven cost savings for aseptic
beverages and fruit snacks. Global Ingredients accounted for $1.7
million of the decrease in gross profit primarily due to the sale
of the soy and corn business, partially offset by higher sales
volumes of organic ingredients.
As a percentage of revenues, gross profit for the quarter ended
June 29, 2019 was 9.3% compared to 10.8% for the quarter ended June
30, 2018, a decrease of 1.5%. On a pro forma basis, which excludes
the gross profit from disposed businesses, as well as $0.5 million
of plant expansion and contract manufacturing transition costs in
the second quarter of 2019, and in the second quarter of 2018 a
claim recovery from a supplier for $1.2 million, less equipment
start-up costs of $0.7 million, the gross profit percentage for the
second quarter of 2019 would have been approximately 9.5%, compared
with 10.7% for the second quarter of 2018.
Segment operating loss¹ was $2.5 million, or 0.9% of revenues in
the second quarter of 2019, compared to operating income of $4.6
million, or 1.5% of revenues in the second quarter of 2018. The
decrease in operating income year-over-year was primarily
attributable to $7.0 million lower gross profit and a $0.3 million
increase in SG&A due to higher employee-related compensation
costs, partially offset by the sale of the soy and corn business
and rationalized overhead, together with other cost reduction
measures. Excluding the operating results of disposed businesses,
as well as SG&A expenses related to employee retention and
transition costs, our segment operating loss would have been $1.1
million for the second quarter of 2019, compared with income of
$2.8 million for the second quarter of 2018.
Other expense for the second quarter of 2019 reflected employee
termination costs of $0.7 million associated with the Value
Creation Plan, and $0.2 million of legal fees associated with the
sale of the soy and corn business, offset by a $0.5 gain related to
a project cancellation.
Adjusted EBITDA¹ was $10.1 million or 3.5% of revenues in the
second quarter of 2019, compared to $14.8 million or 4.6% of
revenues in the second quarter of 2018. Excluding disposed
operations, adjusted EBITDA for the quarter ended June 29, 2019 was
$10.1 million, compared with $12.7 million for the quarter ended
June 30, 2018.
The Company reported a loss attributable to common shareholders
for the second quarter of 2019 of $11.1 million, or $0.13 per
diluted common share, compared to a loss of $5.1 million, or $0.06
per diluted common share during the second quarter of 2018.
Adjusted loss¹ in the second quarter of 2019 was $9.0 million or
$0.10 per common share, compared to $5.0 million or $0.06 per
common share in the second quarter of 2018. Please refer to the
discussion and table below under “Non-GAAP Measures - Adjusted
Earnings/Loss”.
Balance Sheet and Cash Flow
At June 29, 2019, SunOpta’s balance sheet reflected total assets
of $971.7 million and total debt of $498.5 million. During the
second quarter of 2019, cash used in operating activities was $31.7
million, compared to cash used of $34.2 million during the second
quarter of 2018. The $2.5 million decrease in cash used in
operating activities reflects lower cash used to fund working
capital, partially offset by decreased consolidated earnings
primarily due to lower profitability in the Company’s Healthy Fruit
platform. Cash used in investing activities was $12.9 million in
the second quarter of 2019, compared with $10.0 million in the
second quarter of 2018, an increase in cash used of $2.9 million
due mainly to cash used to finance the acquisition of Sanmark in
April 2019.
Conference Call
SunOpta plans to host a conference call at 9:00 A.M. Eastern
time on Wednesday, August 7, 2019, to discuss the second quarter
financial results. After opening remarks, there will be a question
and answer period. This conference call can be accessed via a link
on SunOpta’s website at www.sunopta.com under the “Investors”
section. To listen to the live call over the Internet, please go to
SunOpta’s website at least 15 minutes early to register, download
and install any necessary audio software. Additionally, the call
may be accessed with the toll-free dial-in number 1 (877) 312-9198
or International dial-in number 1 (631) 291-4622. If you are unable
to listen live, the conference call will be archived and can be
accessed for approximately 90 days on the Company’s website.
¹ See discussion of non-GAAP measures
About SunOpta Inc.
SunOpta Inc. is a leading global company focused on organic,
non-genetically modified ("non-GMO") and specialty foods. SunOpta
specializes in the sourcing, processing and packaging of organic
and non-GMO food products, integrated from seed through packaged
products; with a focus on strategic vertically integrated business
models. SunOpta's organic and non-GMO food operations revolve
around value-added grain, seed, fruit and vegetable-based product
offerings, supported by a global sourcing and supply
infrastructure.
Forward-Looking Statements
Certain statements included in this press release may be
considered "forward-looking statements" within the meaning of the
United States Private Securities Litigation Reform Act of 1995 and
applicable Canadian securities legislation, which are based on
information available to us on the date of this release. These
forward-looking statements include, but are not limited to, our
expectation that our structural improvements will persist and drive
improved profitability, the anticipated accelerated growth in our
Healthy Beverage platform and at Tradin Organic, our expectation
for greater cost efficiencies as a result of the further
optimization of our national production planning and the estimated
full year impact to gross profit from the strawberry shortage.
Generally, forward-looking statements do not relate strictly to
historical or current facts and are typically accompanied by words
such as “continue”, “expected”, “anticipate”, “estimates”, “can”,
“will”, “believe”, “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.
Source: SunOpta Inc.
SunOpta Inc.
Consolidated Statements of Operations
For the quarters and two quarters ended
June 29, 2019 and June 30, 2018
(Unaudited)
(All dollar amounts expressed in thousands
of U.S. dollars, except per share amounts)
Quarter ended
Two quarters ended
June 29, 2019
June 30, 2018
June 29, 2019
June 30, 2018
$
$
$
$
Revenues
293,004
319,308
598,279
631,960
Cost of goods sold
265,677
284,962
542,746
563,930
Gross profit
27,327
34,346
55,533
68,030
Selling, general and administrative
expenses
27,262
26,948
53,510
55,236
Intangible asset amortization
2,692
2,768
5,434
5,539
Other expense (income), net
445
583
(43,067
)
181
Foreign exchange loss (gain)
(90
)
(11
)
(1,194
)
951
Earnings (loss) before the
following
(2,982
)
4,058
40,850
6,123
Interest expense, net
8,254
8,474
16,993
16,694
Earnings (loss) before income
taxes
(11,236
)
(4,416
)
23,857
(10,571
)
Provision for (recovery of) income
taxes
(2,324
)
(1,290
)
7,174
(2,983
)
Net earnings (loss)
(8,912
)
(3,126
)
16,683
(7,588
)
Earnings (loss) attributable to
non-controlling interests
143
48
89
(51
)
Earnings (loss) attributable to SunOpta
Inc.
(9,055
)
(3,174
)
16,594
(7,537
)
Dividends and accretion on Series A
Preferred Stock
(2,001
)
(1,974
)
(3,996
)
(3,941
)
Earnings (loss) attributable to common
shareholders
(11,056
)
(5,148
)
12,598
(11,478
)
Earnings (loss) per share
Basic
(0.13
)
(0.06
)
0.14
(0.13
)
Diluted
(0.13
)
(0.06
)
0.14
(0.13
)
Weighted-average common shares
outstanding (000s)
Basic
87,683
86,968
87,579
86,889
Diluted
87,683
86,968
87,743
86,889
SunOpta Inc.
Consolidated Balance Sheets
As at June 29, 2019 and December 29,
2018
(Unaudited)
(All dollar amounts expressed in thousands
of U.S. dollars)
June 29, 2019
December 29, 2018
$
$
ASSETS
Current assets
Cash and cash equivalents
2,530
3,280
Accounts receivable
121,084
132,131
Inventories
377,377
361,957
Prepaid expenses and other current
assets
34,224
29,024
Income taxes recoverable
7,558
7,029
Total current assets
542,773
533,421
Property, plant and equipment
168,433
171,032
Operating lease right-of-use
assets
72,788
-
Goodwill
28,488
27,959
Intangible assets
155,492
160,975
Deferred income taxes
183
182
Other assets
3,536
3,169
Total assets
971,693
896,738
LIABILITIES
Current liabilities
Bank indebtedness
268,510
280,334
Accounts payable and accrued
liabilities
148,248
155,371
Customer and other deposits
719
1,445
Income taxes payable
1,889
2,208
Other current liabilities
309
862
Current portion of long-term debt
1,524
1,840
Current portion of operating lease
liabilities
17,402
-
Current portion of long-term
liabilities
4,286
4,286
Total current liabilities
442,887
446,346
Long-term debt
228,494
227,023
Operating lease liabilities
56,111
-
Long-term liabilities
2,192
2,079
Deferred income taxes
13,121
8,149
Total liabilities
742,805
683,597
Series A Preferred Stock
81,898
81,302
EQUITY
SunOpta Inc. shareholders’
equity
Common shares
317,735
314,357
Additional paid-in capital
31,518
31,796
Accumulated deficit
(193,553
)
(206,151
)
Accumulated other comprehensive loss
(10,508
)
(9,667
)
145,192
130,335
Non-controlling interests
1,798
1,504
Total equity
146,990
131,839
Total equity and liabilities
971,693
896,738
SunOpta Inc.
Consolidated Statements of Cash Flows
For the quarters and two quarters ended
June 29, 2019 and June 30, 2018
(Unaudited)
(Expressed in thousands of U.S.
dollars)
Quarter ended
Two quarters ended
June 29, 2019
June 30, 2018
June 29, 2019
June 30, 2018
$
$
$
$
CASH PROVIDED BY (USED IN)
Operating activities
Net earnings (loss)
(8,912
)
(3,126
)
16,683
(7,588
)
Items not affecting cash:
Depreciation and amortization
8,186
8,189
16,488
16,330
Amortization of debt issuance costs
684
600
1,339
1,208
Deferred income taxes
(2,356
)
(865
)
4,971
(2,151
)
Stock-based compensation
2,998
2,104
2,835
4,275
Unrealized gain on derivative
contracts
(400
)
(2,764
)
(288
)
(1,243
)
Loss (gain) on sale of business
201
-
(45,378
)
-
Fair value of contingent consideration
-
43
-
(2,373
)
Impairment of long-lived assets
-
70
-
409
Other
(72
)
(148
)
(134
)
(147
)
Changes in non-cash working capital, net
of businesses
acquired or sold
(31,989
)
(38,324
)
(27,188
)
(35,435
)
Net cash flows from operations
(31,660
)
(34,221
)
(30,672
)
(26,715
)
Investing activities
Net proceeds from sale of business
(201
)
-
64,675
-
Purchases of property, plant and
equipment
(9,341
)
(10,428
)
(17,315
)
(17,163
)
Acquisition of business, net of cash
acquired
(3,341
)
-
(3,341
)
-
Proceeds from sale of assets
-
30
-
730
Other
-
389
-
389
Net cash flows from investing
activities
(12,883
)
(10,009
)
44,019
(16,044
)
Financing activities
Increase (decrease) under line of credit
facilities
43,367
49,885
(11,294
)
50,194
Borrowings under long-term debt
24
-
1,876
-
Repayment of long-term debt
(634
)
(415
)
(1,357
)
(937
)
Payment of cash dividends on Series A
Preferred Stock
(1,700
)
(1,700
)
(3,400
)
(3,400
)
Proceeds from the exercise of stock
options and employee
share purchases
37
91
265
240
Payment of debt issuance costs
(81
)
-
(395
)
-
Payment of contingent consideration
-
(4,399
)
-
(4,399
)
Other
(5
)
(5
)
216
(45
)
Net cash flows from financing
activities
41,008
43,457
(14,089
)
41,653
Foreign exchange gain (loss) on cash held
in a foreign currency
50
(64
)
(8
)
(35
)
Decrease in cash and cash equivalents in
the period
(3,485
)
(837
)
(750
)
(1,141
)
Cash and cash equivalents - beginning of
the period
6,015
2,924
3,280
3,228
Cash and cash equivalents - end of the
period
2,530
2,087
2,530
2,087
SunOpta Inc.
Segmented Information
For the quarters and two quarters ended
June 29, 2019 and June 30, 2018
Unaudited
(Expressed in thousands of U.S.
dollars)
Quarter ended
Two quarters ended
June 29, 2019
June 30, 2018
June 29, 2019
June 30, 2018
$
$
$
$
Segment revenues from external
customers:
Global Ingredients
117,007
146,685
245,050
283,016
Consumer Products
175,997
172,623
353,229
348,944
Total segment revenues from external
customers
293,004
319,308
598,279
631,960
Segment gross profit:
Global Ingredients
11,762
13,464
24,634
28,099
Consumer Products
15,565
20,882
30,899
39,931
Total segment gross profit
27,327
34,346
55,533
68,030
Segment operating income
(loss):
Global Ingredients
3,345
2,965
8,068
6,067
Consumer Products
(1,213
)
4,762
(2,551
)
8,078
Corporate Services
(4,669
)
(3,086
)
(7,734
)
(7,841
)
Total segment operating income (loss)
(2,537
)
4,641
(2,217
)
6,304
Segment gross profit
percentage:
Global Ingredients
10.1
%
9.2
%
10.1
%
9.9
%
Consumer Products
8.8
%
12.1
%
8.7
%
11.4
%
Total segment gross profit percentage
9.3
%
10.8
%
9.3
%
10.8
%
Segment operating income (loss)
percentage:
Global Ingredients
2.9
%
2.0
%
3.3
%
2.1
%
Consumer Products
-0.7
%
2.8
%
-0.7
%
2.3
%
Total segment operating income (loss)
-0.9
%
1.5
%
-0.4
%
1.0
%
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 Share
Per Diluted Share
Per Diluted Share
For the quarter ended
$
$
$
$
$
$
June 29, 2019
Net loss
(8,766
)
(146
)
(8,912
)
Less: earnings attributable to
non-controlling interests
(143
)
-
(143
)
Less: dividends and accretion of Series A
Preferred Stock
(2,001
)
-
(2,001
)
Loss attributable to common
shareholders
(10,910
)
(0.12
)
(146
)
-
(11,056
)
(0.13
)
Adjusted for:
Costs related to the Value Creation
Plan(a)
1,675
-
1,675
Plant expansion costs(b)
311
-
311
Costs related to sale of soy and corn
business(c)
-
201
201
Contract manufacturer transition
costs(d)
201
-
201
Other(e)
30
-
30
Project cancellation(f)
(507
)
-
(507
)
Net income tax effect(g)
211
(55
)
156
Adjusted loss
(8,989
)
(0.10
)
-
-
(8,989
)
(0.10
)
June 30, 2018
Net earnings (loss)
(4,517
)
1,391
(3,126
)
Less: earnings attributable to
non-controlling interests
(48
)
-
(48
)
Less: dividends and accretion of Series A
Preferred Stock
(1,974
)
-
(1,974
)
Earnings (loss) attributable to common
shareholders
(6,539
)
(0.08
)
1,391
0.02
(5,148
)
(0.06
)
Adjusted for:
Equipment start-up costs(h)
730
-
730
Costs related to Value Creation
Plan(i)
669
(30
)
639
Product withdrawal and recall costs(j)
122
-
122
Other(k)
122
-
122
Recovery of product withdrawal
costs(l)
(1,200
)
-
(1,200
)
Net income tax effect(g)
(258
)
8
(250
)
Adjusted earnings (loss)
(6,354
)
(0.07
)
1,369
0.02
(4,985
)
(0.06
)
(a)
Reflects employee retention and relocation
costs of $0.8 million, and professional fees of $0.2 million
recorded in SG&A expenses; and employee termination costs of
$0.7 million recorded in other expense.
(b)
Reflects costs related to the expansion of
our Allentown, Pennsylvania, aseptic beverage facility, which were
recorded in cost of goods sold.
(c)
Reflects legal fees incurred in connection
with the sale of the soy and corn business, which were recorded in
other expense.
(d)
Reflects costs to transition premium juice
production activities to new contract manufacturers, which were
recorded in cost of goods sold.
(e)
Other included gain/loss of sale of assets
and business development costs, which were recorded in other
expense.
(f)
Reflects a gain related to a project
cancellation, which was recorded in other income.
(g)
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 June
29, 2019 (June 30, 2018 – 26%) on adjusted earnings/loss before
tax.
(h)
Reflects costs related to the start-up of
new roasting equipment, which were recorded in cost of goods
sold.
(i)
Reflects professional fees of $0.3 million
recorded in SG&A expenses; and asset impairment, facility
closure and employee termination costs of $0.3 million recorded in
other expense.
(j)
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.
(k)
Other included the accretion of contingent
consideration obligations and gain/loss on the sale of assets,
which were recorded in other expense/income.
(l)
Reflects the recovery from a third-party
supplier of $1.2 million of costs we incurred relating to the
withdrawal of certain consumer-packaged products due to
quality-related issues, which was recorded in cost of goods sold.
Costs incurred related to this withdrawal were recognized in cost
of goods sold in the fourth quarter of 2016.
Excluding
disposed operations
Disposed operations
Consolidated
Per Diluted Share
Per Diluted Share
Per Diluted Share
For the two quarters ended
$
$
$
$
$
$
June 29, 2019
Net earnings (loss)
(15,967
)
32,650
16,683
Less: earnings attributable to
non-controlling interests
(89
)
-
(89
)
Less: dividends and accretion of Series A
Preferred Stock
(3,996
)
-
(3,996
)
Earnings (loss) attributable to common
shareholders
(20,052
)
(0.23
)
32,650
0.37
12,598
0.14
Adjusted for:
Gain on sale of soy and corn
business(a)
-
(45,378
)
(45,378
)
Costs related to the Value Creation
Plan(b)
3,533
-
3,533
Plant expansion costs(c)
311
-
311
Contract manufacturer transition
costs(d)
289
-
289
Product withdrawal and recall costs(e)
260
-
260
Other(f)
182
-
182
Project cancellation(g)
(507
)
-
(507
)
Net income tax effect(h)
(615
)
12,434
11,819
Adjusted loss
(16,599
)
(0.19
)
(294
)
-
(16,893
)
(0.19
)
June 30, 2018
Net earnings (loss)
(8,937
)
1,349
(7,588
)
Add: loss attributable to non-controlling
interests
51
-
51
Less: dividends and accretion of Series A
Preferred Stock
(3,941
)
-
(3,941
)
Earnings (loss) attributable to common
shareholders
(12,827
)
(0.15
)
1,349
0.02
(11,478
)
(0.13
)
Adjusted for:
Costs related to Value Creation
Plan(i)
1,653
1,181
2,834
Equipment start-up costs(j)
730
-
730
Product withdrawal and recall costs(e)
445
-
445
Other(k)
115
-
115
Fair value adjustment on contingent
consideration(l)
(2,500
)
-
(2,500
)
Recovery of product withdrawal
costs(m)
(1,200
)
-
(1,200
)
Net income tax effect(h)
(37
)
(307
)
(344
)
Adjusted earnings (loss)
(13,621
)
(0.16
)
2,223
0.03
(11,398
)
(0.13
)
(a)
Reflects the recognized gain on sale of
the soy and corn business, pending finalization of certain
post-closing adjustments, which was recorded in other income.
(b)
Reflects employee retention and relocation
costs of $0.9 million, and professional fees of $0.3 million
recorded in SG&A expenses; and employee termination costs of
$3.5 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.
(c)
Reflects costs related to the expansion of
our Allentown, Pennsylvania, aseptic beverage facility, 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 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.
(f)
Other included insurance deductibles,
gain/loss of sale of assets, and business development costs, which
were recorded in other expense.
(g)
Reflects a gain related to a project
cancellation, which was recorded in other income.
(h)
Reflects the tax effect of the preceding
adjustments to earnings and reflects an overall estimated annual
effective tax rate of approximately 27% for the two quarters ended
June 29, 2019 (June 30, 2018 – 26%) on adjusted earnings/loss
before tax.
(i)
Reflects the write-down of remaining
flexible resealable pouch and nutrition bar inventories of $0.1
million recorded in cost of goods sold; professional and consulting
fees, and employee recruitment and relocation costs of $0.6 million
recorded in SG&A expenses; and asset impairment, facility
closure and employee termination costs of $2.1 million recorded in
other expense, all related to the Value Creation Plan.
(j)
Reflects costs related to the start-up of
new roasting equipment, which were recorded in cost of goods
sold.
(k)
Other included the accretion of contingent
consideration obligations and gain/loss on the sale of assets,
which were recorded in other expense/income.
(l)
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.
(m)
Reflects the recovery from a third-party
supplier of $1.2 million of costs we incurred relating to the
withdrawal of certain consumer-packaged products due to
quality-related issues, which was recorded in cost of goods sold.
Costs incurred related to this withdrawal were recognized in cost
of goods sold in the fourth quarter of 2016.
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
$
$
$
June 29, 2019
Net loss
(8,766
)
(146
)
(8,912
)
Recovery of income taxes
(2,269
)
(55
)
(2,324
)
Interest expense, net
8,254
-
8,254
Other expense, net
244
201
445
Total segment operating loss
(2,537
)
-
(2,537
)
Depreciation and amortization
8,186
-
8,186
Stock-based compensation
2,999
-
2,999
Costs related to Value Creation
Plan(a)
954
-
954
Plant expansion costs(b)
311
-
311
Contract manufacturer transition
costs(c)
201
-
201
Adjusted EBITDA
10,114
-
10,114
June 30, 2018
Net earnings (loss)
(4,517
)
1,391
(3,126
)
Provision for (recovery of) income
taxes
(1,808
)
518
(1,290
)
Interest expense (income), net
8,501
(27
)
8,474
Other expense (income), net
613
(30
)
583
Total segment operating income
2,789
1,852
4,641
Depreciation and amortization
7,972
217
8,189
Stock-based compensation
2,104
-
2,104
Equipment start-up costs(d)
730
-
730
Costs related to Value Creation
Plan(a)
300
-
300
Recovery of product withdrawal
costs(e)
(1,200
)
-
(1,200
)
Adjusted EBITDA
12,695
2,069
14,764
(a)
For the second quarter of 2019, reflects
employee retention and relocation costs of $0.8 million, and
professional fees of $0.2 million recorded in SG&A expenses.
For the second quarter of 2018, reflects professional fees of $0.3
million recorded in SG&A expenses.
(b)
Reflects costs related to the expansion of
our Allentown, Pennsylvania, aseptic beverage facility, which were
recorded in cost of goods sold.
(c)
Reflects costs to transition premium juice
production activities to new contract manufacturers, which were
recorded in cost of goods sold.
(d)
Reflects costs related to the start-up of
new roasting equipment, which were recorded in cost of goods
sold.
(e)
Reflects the recovery from a third-party
supplier of $1.2 million of costs we incurred relating to the
withdrawal of certain consumer-packaged products due to
quality-related issues, which was recorded in cost of goods sold.
Costs incurred related to this withdrawal were recognized in cost
of goods sold in the fourth quarter of 2016.
Excluding
disposed operations
Disposed operations
Consolidated
For the two quarters ended
$
$
$
June 29, 2019
Net earnings (loss)
(15,967
)
32,650
16,683
Provision for (recovery of) income
taxes
(5,148
)
12,322
7,174
Interest expense, net
16,993
-
16,993
Other expense (income), net
2,311
(45,378
)
(43,067
)
Total segment operating income (loss)
(1,811
)
(406
)
(2,217
)
Depreciation and amortization
16,359
129
16,488
Stock-based compensation(a)
4,938
-
4,938
Costs related to Value Creation
Plan(b)
1,157
-
1,157
Plant expansion costs(c)
311
-
311
Contract manufacturer transition
costs(d)
289
-
289
Adjusted EBITDA
21,243
(277
)
20,966
June 30, 2018
Net earnings (loss)
(8,937
)
1,349
(7,588
)
Provision for (recovery of) income
taxes
(3,510
)
527
(2,983
)
Interest expense (income), net
16,736
(42
)
16,694
Other expense (income), net
(998
)
1,179
181
Total segment operating income
3,291
3,013
6,304
Depreciation and amortization
15,900
430
16,330
Stock-based compensation
4,275
-
4,275
Equipment start-up costs(e)
730
-
730
Costs related to Value Creation
Plan(b)
713
-
713
Recovery of product withdrawal
costs(f)
(1,200
)
-
(1,200
)
Adjusted EBITDA
23,709
3,443
27,152
(a)
For the first half of 2019, stock-based
compensation of $4.9 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 half of 2019, reflects
employee retention and relocation costs of $0.9 million, and
professional fees of $0.3 million recorded in SG&A expenses.
For the first half of 2018, reflects the write-down of remaining
flexible resealable pouch and nutrition bar inventories of $0.1
million recorded in cost of goods sold; and professional and
consulting fees, and employee recruitment and relocation costs of
$0.6 million recorded in SG&A expenses.
(c)
Reflects costs related to the expansion of
our Allentown, Pennsylvania, aseptic beverage facility, 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 costs related to the start-up of
new roasting equipment, which were recorded in cost of goods
sold.
(f)
Reflects the recovery from a third-party
supplier of $1.2 million of costs we incurred relating to the
withdrawal of certain consumer-packaged products due to
quality-related issues, which was recorded in cost of goods sold.
Costs incurred related to this withdrawal were recognized in cost
of goods sold in the fourth quarter of 2016.
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 two quarters ended June 30, 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
Two quarters ended
February 22, 2019
June 30, 2018
June 30, 2018
$
$
$
Revenues
10,346
29,543
50,942
Gross profit
192
2,778
5,436
Segment operating income (loss)
(187
)
2,395
4,670
Earnings (loss) before income taxes
(187
)
2,422
4,714
Depreciation
129
217
430
Interest income
-
(27
)
(42
)
Other income
-
-
(2
)
Less costs and expenses to be
rationalized
(169
)
(901
)
(1,896
)
Adjusted EBITDA
(227
)
1,711
3,204
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/20190807005238/en/
Scott Van Winkle ICR 617-956-6736 scott.vanwinkle@icrinc.com
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