SunOpta Announces Fourth Quarter 2013 Results

Record Fourth Quarter and Annual Revenues

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| Source: SunOpta Inc.

TORONTO, March 4, 2014 (GLOBE NEWSWIRE) -- SunOpta Inc. ("SunOpta" or the "Company") (Nasdaq:STKL) (TSX:SOY), a leading global company focused on natural, organic and specialty foods, today announced financial results for the fourth quarter and year ended December 28, 2013. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.

Fourth Quarter 2013 Highlights

  • Record fourth quarter revenues of $285.2 million, an increase of 5.6%
  • Operating income¹ of $5.3 million, or 1.8% of revenues
  • EBITDA¹ of $11.3 million, or 4.0% of revenues
  • Adjusted earnings from continuing operations¹ of $1.9 million, or $0.03 per diluted common share
  • GAAP loss per common share of $0.02 or $1.3 million, after accounting for a loss contingency associated with previously announced customer initiated voluntary product recall

Fiscal Year 2013 Highlights

  • Record annual revenues of $1,181.9 million, an increase of 8.3%
  • Operating income¹ of $39.1 million, or 3.3% of revenues
  • EBITDA¹ of $61.5 million, or 5.2% of revenues
  • Adjusted earnings from continuing operations¹ of $19.0 million, or $0.28 per diluted common share
  • GAAP loss per common share from continuing operations of $0.12 or $8.2 million, after accounting for non-cash impairment charges associated with non-core investments in Opta Minerals Inc. and Mascoma Corporation, as well as a loss contingency associated with a previously announced customer initiated voluntary product recall

(all comparisons above are to the fourth quarter and year ended December 29, 2012 respectively)

"Fiscal 2013 was a transformational year for SunOpta, marked by a significant operational realignment, changes in leadership, and a re-positioned go-to-market strategy to better position our Company for sustainable long-term growth," commented Steve Bromley, Chief Executive Officer of SunOpta. "Our operating income and EBITDA for the fourth quarter are consistent with our preliminary expectations which were previously announced. Although our results for the fourth quarter were disappointing, and some of the operational challenges will continue into the first quarter of 2014, our management team is pleased that our internal re-alignment is now complete and feel the Company is better positioned to capitalize on the strong growth trends in the natural and organic foods industry. Our management team remains focused on our three core strategies of becoming a pure-play natural and organic foods company, growing our value-added consumer products and ingredients portfolio, and leveraging our integrated platform in support of our long-term financial targets."

Fourth Quarter 2013 Results

Revenues increased 5.6% to a record $285.2 million compared to $270.1 million in the fourth quarter of 2012. The increase in consolidated revenues was driven by continued growth in consumer packaged categories and increased demand for organic raw materials, which more than offset the effect of lower commodity prices. Excluding the impact of a number of factors including commodity, currency and product rationalizations, consolidated revenues increased approximately 10% and SunOpta Foods revenues increased approximately 12% versus the prior year.

During the fourth quarter, the Company's Allentown pouch facility experienced downtime and costs associated with a previously announced customer initiated voluntary product recall, including delays in shipment of finished product in November and December. As the recall is still under investigation, the Company cannot be reasonably assured that certain receivable balances will be collected or that unshipped finished product inventory will be delivered. As a result the Company recognized a loss contingency during the fourth quarter in the amount of $5.2 million, or $3.2 million after tax which equates to approximately $0.05 per diluted share. The Company continues to supply finished product to the customer from its Allentown and west coast operations.

Operating income¹ was $5.3 million, or 1.8% of revenues, compared to $7.2 million, or 2.6% of revenues in 2012. Operating income in the fourth quarter was driven by positive results in core integrated aseptic beverage, value-added ingredients and internationally sourced raw materials operations. These were offset by downtime and costs associated with the aforementioned customer initiated voluntary product recall, delays in the expansion of the Company's premium juice facility, costs related to the rationalization of certain consumer product lines, costs related to the internal realignment, and margin challenges on domestic raw materials due primarily to the transition to lower new crop pricing and continued cyclical weakness at Opta Minerals. 

The Company reported a loss from continuing operations of $1.3 million, or $0.02 per common share, compared to earnings from continuing operations of $4.3 million, or $0.06 per diluted common share for the fourth quarter of 2012. Included in the results for the fourth quarter were other expenses related to the product recall of approximately $3.2 million after tax, or $0.05 per diluted common share. Excluding the other expense items, adjusted earnings from continuing operations¹ in the fourth quarter of 2013 were $1.9 million, or $0.03 per diluted common share. In addition, earnings for the fourth quarter include the impact of approximately $4.6 million in pre-tax costs related to downtime stemming from the aforementioned customer initiated voluntary product recall, and other expansion, rationalization and realignment costs, or approximately $2.8 million after tax and minority interest.

EBITDA¹ was $11.3 million compared to $12.4 million during the fourth quarter of 2012.

Fiscal Year 2013 Results

Revenues increased 8.3% to a record $1,181.9 million compared to $1,091.1 million in fiscal 2012. These record revenues are indicative of continued strong demand in healthy foods categories, combined with the execution of the Company's growth strategies. Excluding the impact of a number of factors including commodity, currency, acquisitions and product rationalizations, consolidated revenues increased approximately 7% and SunOpta Foods revenues increased approximately 9% versus the prior year.

Operating income¹ was $39.1 million, or 3.3% of revenues, as compared to $47.0 million, or 4.3% of revenues, in fiscal 2012. Operating earnings for the full year were driven by improved results within the Company's core aseptic beverage, pouch and frozen consumer product offerings, as well as fruit-based ingredients. These were offset by facility start-up and expansion costs, sunflower processing yields, downtime related to the product recall, rationalized consumer product lines and cyclical weakness at Opta Minerals.

The Company incurred a loss from continuing operations of $8.2 million, or $0.12 per common share in fiscal 2013, compared to earnings from continuing operations of $23.0 million, or $0.34 per diluted common share, during fiscal 2012. Included in the results for 2013 were non-cash charges of approximately $23.0 million after tax, or $0.34 per diluted common share, reflecting the write-down of the Company's non-core investment in Mascoma and goodwill impairment at Opta Minerals. Also included in the results for 2013 were other expenses related to the aforementioned customer initiated product recall, severance, and long-lived asset write-downs. In aggregate, these other expense items amounted to a charge to earnings of $4.1 million after tax or $0.06 per diluted common share. After excluding these items, adjusted earnings from continuing operations¹ in fiscal 2013 were $19.0 million, or $0.28 per diluted common share. In addition, fiscal 2013 earnings include the impact of approximately $9.2 million in pre-tax costs related to downtime stemming from the product recall, start-up, expansion, rationalization, integration and realignment costs, or approximately $5.6 million after-tax and minority interest.

EBITDA¹ was $61.5 million as compared to $67.2 million in fiscal 2012.

Balance Sheet

The Company's balance sheet remains strong and at December 28, 2013 reflecting a net debt to equity ratio of 0.56 to 1.00. At December 28, 2013, the Company had total debt outstanding of $190.9 million, net debt of $182.3 million, total assets of $705.9 million, shareholders' equity of $325.3 million and a net book value of $4.89 per outstanding share.

Conference Call

The Company plans to host a conference call at 10:00 A.M. Eastern Time on Wednesday, March 5, 2014 to discuss the results for the fourth quarter of 2013 and recent corporate developments. After opening remarks, there will be a question and answer period. This conference call can be accessed via a link at the Company's website at www.sunopta.com. To listen to the live call over the Internet, please go to the Company'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 (877) 312-9198 or international dial-in number (631) 291-4622. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days at the Company's website.

1See discussion of non-GAAP measures

About SunOpta Inc.

SunOpta Inc. is a leading global company focused on natural, organic and specialty foods products. The Company specializes in sourcing, processing and packaging of natural and organic food products, integrated from seed through packaged products; with a focus on strategically vertically integrated business models. The Company's core natural and organic food operations focus on value-added grains, fiber and fruit based product offerings, supported by a global infrastructure. The Company has two non-core holdings, a 66.0% ownership position in Opta Minerals Inc., listed on the Toronto Stock Exchange, a producer, distributor, and recycler of environmentally friendly industrial materials; and a minority ownership position in Mascoma Corporation, an innovative biofuels company.

The SunOpta Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3958

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 strategy to better position the Company for sustainable long-term growth, our positioning to capitalize on growth trends in the natural and organic foods industry and our continued focus on our three core strategies. The terms and phrases "continue", "positioned", "becoming", "growing", "leveraging" and other similar terms and phrases are intended to identify these forward looking statements. Forward looking statements are based on information available to us 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 as well as other factors the Company believes are appropriate in the circumstances including, but not limited to, general economic conditions, consumer interest in health and wellness, product pricing levels, current customer demand, planned facility and operational expansions, competitive intensity, cost rationalization and product development initiatives. 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, global 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 and continuous improvement initiatives, availability and pricing of raw materials and supplies, potential covenant breaches under our 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.

SunOpta Inc.
Consolidated Statements of Operations 
For the quarter and year ended December 28, 2013 and December 29, 2012
(Unaudited)
(Expressed in thousands of U.S. dollars, except per share amounts)
 
  Quarter ended Year ended
  December 28,
2013
December 29,
2012
December 28,
2013
December 29,
2012
  $ $ $ $
         
Revenues  285,211   270,089   1,181,929   1,091,064 
         
Cost of goods sold   256,679   241,107   1,050,681   957,327 
         
Gross profit  28,532   28,982   131,248   133,737 
         
Selling, general and administrative expenses  22,612   20,967   89,040   82,878 
Intangible asset amortization  1,105   1,280   4,733   4,933 
Other expense, net   5,250   188   7,049   2,194 
Goodwill impairment   --   --   3,552   -- 
Foreign exchange gain (455) (417) (1,607) (1,046)
         
Earnings from continuing operations before the following   20   6,964   28,481   44,778 
         
Interest expense, net  1,975   1,853   7,860   9,333 
Impairment loss on investment   --   --   21,495   -- 
         
Earnings (loss) from continuing operations before income taxes (1,955)  5,111  (874)  35,445 
         
Provision for (recovery of) income taxes (796)  632   7,780   10,934 
         
Earnings (loss) from continuing operations (1,159)  4,479  (8,654)  24,511 
         
Discontinued operations         
Earnings (loss) from discontinued operations, net of income taxes  --  (69) (360)  448 
Gain on sale of discontinued operations, net of income taxes  --   132   --   808 
         
Earnings (loss) from discontinued operations, net of income taxes   --   63  (360)  1,256 
         
Earnings (loss) (1,159)  4,542  (9,014)  25,767 
         
Earnings (loss) attributable to non-controlling interests  122   159  (490)  1,543 
         
Earnings (loss) attributable to SunOpta Inc. (1,281)  4,383  (8,524)  24,224 
         
Earnings (loss) per share – basic         
- from continuing operations  (0.02) 0.07   (0.12) 0.35 
- from discontinued operations  --   --   (0.01) 0.02 
   (0.02) 0.07   (0.13) 0.37 
         
Earnings (loss) per share – diluted         
- from continuing operations  (0.02) 0.06   (0.12) 0.34 
- from discontinued operations --  --   (0.01) 0.02 
   (0.02) 0.07   (0.13) 0.36 
         
Weighted-average number of shares outstanding (000s)        
- basic  66,489   65,988   66,288   65,898 
- diluted  68,518   66,906   67,832   66,611 
     
SunOpta Inc.    
Consolidated Balance Sheets    
As at December 28, 2013 and December 29, 2012    
(Unaudited)    
(Expressed in thousands of U.S. dollars)    
 
  December 28, 2013 December 29, 2012
  $ $
     
ASSETS    
Current assets    
Cash and cash equivalents   8,537  6,840 
Restricted cash   --   6,595 
Accounts receivable  109,917  113,314 
Inventories   274,286  255,738 
Prepaid expenses and other current assets  16,067  20,538 
Current income taxes recoverable  6,116   1,814 
Deferred income taxes  4,806  2,653 
  419,729  407,492 
     
Investment   12,350   33,845 
Property, plant and equipment  158,073   140,579 
Goodwill   53,673   57,414 
Intangible assets  47,991   52,885 
Deferred income taxes  12,565   12,879 
Other assets  1,554   2,216 
     
   705,935  707,310 
     
LIABILITIES    
Current liabilities    
Bank indebtedness   141,853  131,061 
Accounts payable and accrued liabilities  129,829  128,544 
Customer and other deposits  3,408  4,734 
Income taxes payable  2,564  4,125 
Other current liabilities  2,114  2,660 
Current portion of long-term debt   6,354  6,925 
Current portion of long-term liabilities  1,034  1,471 
  287,156  279,520 
     
Long-term debt   42,654   51,273 
Long-term liabilities  3,072   5,544 
Deferred income taxes  30,441   27,438 
   363,323  363,775 
     
EQUITY    
SunOpta Inc. shareholders' equity    
Common shares  186,376  183,027 
Additional paid-in capital   19,323  16,855 
Retained earnings  116,208  124,732 
Accumulated other comprehensive income 3,397  1,537 
   325,304   326,151 
Non-controlling interests  17,308  17,384 
Total equity  342,612   343,535 
     
   705,935   707,310 
 
SunOpta Inc.
Consolidated Statements of Cash Flows
For the quarter and year ended December 28, 2013 and December 29, 2012
(Unaudited)
(Expressed in thousands of U.S. dollars)
 
  Quarter ended Year ended
  December 28,
2013
December 29,
2012
December 28,
2013
December 29,
2012
  $ $ $ $
         
CASH PROVIDED BY (USED IN)        
         
Operating activities        
Earnings (loss) (1,159)  4,542  (9,014)  25,767 
Earnings (loss) from discontinued operations  --   63  (360)  1,256 
Earnings (loss) from continuing operations (1,159)  4,479  (8,654)  24,511 
         
Items not affecting cash:        
Depreciation and amortization  6,056   5,280   22,399   20,226 
Deferred income taxes  1,406  (1,096)  1,164   1,981 
Stock-based compensation  833   712   3,255   2,753 
Unrealized loss (gain) on derivative instruments  (916)  483   1,976  (695)
Goodwill impairment   --   --   3,552   -- 
Loss on sale of property, plant and equipment  223   51   223   51 
Impairment of long-lived assets   --   --   310   -- 
Impairment loss on investments   --   --   21,495   -- 
Other 31 (2) (632)  1,046 
Changes in non-cash working capital, net of businesses acquired  (3,581) (16,917) (10,428) (18,838)
Net cash flows from operations - continuing operations  2,893  (7,010)  34,660   31,035 
Net cash flows from operations - discontinued operations  --  (55) (4,608) (58)
   2,893  (7,065)  30,052   30,977 
         
Investing activities        
         
Purchases of property, plant and equipment (1,155) (6,628) (33,928) (24,251)
Acquisitions of businesses, net of cash acquired   --  (870) (3,828) (30,044)
Payment of contingent consideration (193) (89) (1,267) (477)
Purchases of intangible assets (5) (47) (182) (128)
Decrease (increase) in restricted cash   --  (6,595)  6,495  (6,595)
Proceeds from the sale of property, plant and equipment  125   50   125   50 
Other (97) (352) (416) (436)
Net cash flows from investing activities - continuing operations (1,325) (14,531) (33,001) (61,881)
Net cash flows from investing activities - discontinued operations  --   --   --   12,134 
  (1,325) (14,531) (33,001) (49,747)
         
Financing activities        
Increase under line of credit facilities   1,297   19,379   9,151   20,517 
Borrowings under long-term debt   --   25,385   486   59,992 
Repayment of long-term debt  (1,631) (20,525) (7,328) (55,484)
Financing costs (8) (74) (36) (2,564)
Proceeds from the issuance of common shares  527   107   2,562   787 
Other (243) (105) (340) (81)
Net cash flows from financing activities - continuing operations (58)  24,167   4,495   23,167 
         
Foreign exchange gain on cash held in a foreign currency  208   82   151   65 
         
Increase in cash and cash equivalents in the period  1,718   2,653   1,697   4,462 
         
         
Cash and cash equivalents - beginning of the period  6,819   4,187   6,840   2,378 
         
Cash and cash equivalents - end of the period  8,537   6,840   8,537   6,840 
 
SunOpta Inc.
Segmented Information
For the quarter and year ended December 28, 2013 and December 29, 2012
Unaudited
(Expressed in thousands of U.S. dollars)
 
  Quarter ended Year ended
  December 28,
2013
December 29,
2012
December 28,
2013
December 29,
2012
  $ $ $ $
Segment revenues from external customers:        
Global Sourcing and Supply  123,996   119,122   529,888   499,454 
Value Added Ingredients  32,526   30,720   131,157   123,551 
Consumer Products  95,868   86,122   379,449   341,408 
SunOpta Foods  252,390   235,964   1,040,494   964,413 
Opta Minerals  32,821   34,125   141,435   126,651 
Total segment revenues from external customers  285,211   270,089   1,181,929   1,091,064 
         
Segment operating income (loss):        
Global Sourcing and Supply  748  (77)  7,622   14,137 
Value Added Ingredients  1,916   1,748   7,895   7,975 
Consumer Products  3,739   4,817   25,224   20,799 
SunOpta Foods  6,403   6,488   40,741   42,911 
Opta Minerals  1,661   1,884   6,731   10,062 
Corporate Services (2,794) (1,220) (8,390) (6,001)
Total segment operating income  5,270   7,152   39,082   46,972 
         
Segment operating income (loss) percentage:        
Global Sourcing and Supply 0.6% (0.1%) 1.4% 2.8%
Value Added Ingredients 5.9% 5.7% 6.0% 6.5%
Consumer Products 3.9% 5.6% 6.6% 6.1%
SunOpta Foods 2.5% 2.7% 3.9% 4.4%
Opta Minerals 5.1% 5.5% 4.8% 7.9%
Total segment operating income 1.8% 2.6% 3.3% 4.3%
         
(Segment operating income (loss) is defined as "Earnings from continuing operations before the following" excluding the impact of "Other expense, net" and "Goodwill impairment".)

1Non-GAAP Measures

In addition to reporting financial results in accordance with generally accepted accounting principles ("GAAP"), the Company provides information regarding Operating Income and Earnings before interest, taxes, depreciation and amortization ("EBITDA") as additional information about its operating results, which are not measures in accordance with GAAP. The Company believes that these non-GAAP measures assist investors in comparing performance across reporting periods on a consistent basis by excluding items that are not indicative of the Company's core operating performance. The non-GAAP measures of Operating Income and EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. 

The Company defines Operating Income as "Earnings from continuing operations before the following" excluding the impact of "Other expense, net" and "Goodwill impairment"; and EBITDA as Operating Income plus depreciation and amortization. The following is a tabular presentation of Operating income and EBITDA, including a reconciliation to GAAP earnings, which the Company believes to be the most directly comparable GAAP financial measure:

  Quarter ended Year ended
  December 28,
2013
December 29,
2012
December 28,
2013
December 29,
2012
  $ $ $ $
Earnings (loss) from continuing operations (1,159)  4,479  (8,654)  24,511 
         
Provision for (recovery of) income taxes (796)  632   7,780   10,934 
Interest expense, net  1,975   1,853   7,860   9,333 
Other expense, net  5,250   188   7,049   2,194 
Goodwill impairment  --   --   3,552   -- 
Impairment loss on investment  --   --   21,495   -- 
Total segment operating income  5,270   7,152   39,082   46,972 
Depreciation and amortization  6,056   5,280   22,399   20,226 
EBITDA  11,326   12,432   61,481   67,198 

The Company also reported Adjusted earnings from continuing operations and Adjusted earnings from continuing operations per diluted share for the quarter and year ended December 28, 2013. Adjusted earnings from continuing operations and Adjusted earnings from continuing operations per diluted share are also non-GAAP financial measures. During the quarter and year ended December 28, 2013, the Company recognized specific charges that we do not believe are reflective of normal business operations. We have excluded the impairment loss on our investment in Mascoma, an impairment of goodwill recognized in our Opta Minerals operating segment, as well as loss contingency, severance, facility restructuring and long-lived asset write-downs all reported in "Other expense, net" to arrive at Adjusted earnings from continuing operations and Adjusted earnings from continuing operations per diluted share. The following is a tabular presentation of Adjusted earnings from continuing operations and Adjusted earnings from continuing operations per diluted share, including a reconciliation to GAAP Earnings (loss) attributable to SunOpta Inc. and GAAP Earnings (loss) attributable to SunOpta Inc. on a per diluted share basis, which the Company believes to be the most directly comparable GAAP financial measures. 

Following is a calculation of our Adjusted earnings from continuing operations and Adjusted earnings from continuing operations per diluted share for the quarter and year ended December 28, 2013.

    Adjusted
  Quarter ended earnings per
  December 28, 2013 diluted share
  $ $
Loss attributable to SunOpta Inc. (1,281)  (0.02)
Adjusted for:    
Other expense, net (net of taxes and non-controlling interest of $2,061)  3,189   0.05 
Adjusted earnings from continuing operations  1,908   0.03 
     
    Adjusted
  Year ended earnings per
  December 28, 2013 diluted share
  $ $
Loss attributable to SunOpta Inc. (8,524)  (0.13)
Loss from discontinued operations, net of taxes (360)  (0.01)
Loss from continuing operations attributable to SunOpta Inc.  (8,164)  (0.12)
Adjusted for:    
Impairment loss on Mascoma investment (net of tax of $nil)  21,495   0.32 
Goodwill impairment (net of taxes of $1,252 and non-controlling interest of $780 )  1,520   0.02 
Other expense, net (net of taxes of $2,644 and non-controlling interest of $266 )  4,139   0.06 
Adjusted earnings from continuing operations  18,990   0.28 
SunOpta Inc.

Steve Bromley, CEO
Robert McKeracher, Vice President & CFO
Susan Wiekenkamp, Information Officer
Tel: 905-455-2528, ext 103

Website: www.sunopta.com