FOR IMMEDIATE RELEASE
SUNOPTA ANNOUNCES FOURTH QUARTER AND FISCAL 2015 FINANCIAL RESULTS
Consumer Demand for Healthy Foods Remain ns Robust
Company on Track to Achieve Synergy Target
Reiterates 2016 Operatio onal Goals
Toronto, March 1, 2016- SunOpta Inc. (“SunOpta”) (Nasdaq:STKL) (TSX:SOY), a leading global company focused on organic, non-genetically modified and specialty foods, today announced financial results for the fourth quarter and fiscal year ended ended January 2, 2016 and provided an update on its business transformation and operational goals for 2016. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.
Full Year 2015 and Recent Highlights:
| • | Three strategic acquisitions to transform the Company: |
| o | Completed the transformative acquisition of Sunrise Growers, immediately providing scale and market leadership in the private label frozen fruit category |
| o | Acquired Citrusource and fully integrated produduction into expanded San Bernardino juice processing facility |
| o | Integrated the acquisition of Niagara Natural and repositioned Healthy Snack portfolio to provide a turn-key private label solution for retailers |
| • | Specific actions to further optimize the business: |
| o | Entered into a definitive agreement to divest interest in Opta Minerals, expected to close in Q2 |
| o | Closing Buena Park frozen fruit processing facility at the end of Q1 consolidating volume in our other facilities – accelerating realization of synergy targets |
| o | Resetting management incentive program around margin improvement goals and debt reduction targets |
| • | Long term capital structure secured: |
| o | $350 million revolving asset-based credit facility at competitive rates maturing in 2021 |
| o | Second lien debt secured through 2022 at no more than 9.5% interest rate |
| o | Expects to de-lever 1.0 to 1.5 times over the next 12 to 18 months |
“We have completed a transformational year, repositioning our business with three strategic acquisitions and major capital projects to expand our capacity and capabilities in each of our three Consumer Products commercial platforms: Healthy Fruit, Healthy Snacks and Healthy Beverages. The recently announced sale of Opta Minerals removes the most significant non-core business from the portfolio, clearly reinforcing our position as a leading pure-play healthy foods company. Our fourth quart ter results were impacted by a number of one-time charges and unfortunate operational events, but we are confident the issues have been addressed and should not impact our overall targets for 2016. We are intensely focused on strengthening operational efficiency and execution, expanding margins, optimizing our portfolio and business structure and reducing our leverage ratio. We are shaping SunOpta to take advantage of very attractive market opportunities and look forward to achieving our 2016 goals for the benefit of all shareholders,” said Rik Jacobs, President and Chief Executive Officer of SunOpta Inc.
Fourth Quarter 2015 Results
The Consumer Products segment generated revenues from external customers of $172.9 million in the quarter, versus $108.7 million in the prior year, driven primarily by the acquisitions of Sunrise Growers, Niagara Natural and Citrusource, as well as growth in aseptic beverages, offset by lower sales of contract manufactured non-aseptic beverages and healthy snacks.
Jacobs continued, “We began to see incremental growth from our expanded aseptic capabilities, including 5% sequential growth when compared to the third quarter and 9% compared to the same quarter last year. The acquisition of Sunrise Growers, which closed during the quarter, contributed in line with expectations to EBITDA, and we have accelerated on delivering our targeted $5 million to $7 million of synergy savings in 2016 including the planned closure of the Buena Park processing facility by the end of the first quarter of 2016. We have also secured a number of contracts in our aseptic beverage platform as a result of our expanded national footprint.”
The Global Ingredients segment reported quarterly revenues from external customers of $143.5 million, versus $141.8 million a year earlier. Global Ingredients returned to growth during the quarter, despite the decline in the euro, sale of sunflower assets in the prior year, and the pass-through of lower commodity prices. Adjusting for currency and commodity price changes, as well as rationalized product lines, revenues increased 4.2% on a normalized basis during the fourth quarter.
“Global Ingredients continued to enjoy strong momentum of internationally sourced organic ingredients that has helped to mitigate the pressure from commodities and currencies in the quarter,” Jacobs added.
Consolidated revenues for the fourth quarter increased 26.3% to $316.4 million compared to $250.6 million for the fourth quarter of 2014. After adjusting for the impact of changes including commodity prices, foreign exchange rates, acquired businesses and product rationalizations, consolidated revenues increased 5.5% on a normalized basis.
Operating loss¹ was $1.7 million, or 0.6% of revenues, compared to operating income of $4.2 million, or 1.7% of revenues in the fourth quarter of 2014. Fourth quarter performance was impacted by a number of items that the Company believes are not reflective of normal operations. During the quarter the Company recorded reserves for inventory in addition to realizing low margin sales in an effort to reduce inventory exposures which cost $2.4 million, incurred $2.2 million of costs due primarily to downtime and spoilage stemming from an equipment failure at the Allentown pouch facility, incurred $0.2 million of costs as a result of a non-recurring logistical issue reported in the third quarter, and also recognized $4.0 million in higher costs as a result of the acquisition accounting adjustment related to the Sunrise’s inventory sold subsequent to the acquisition date. The Company also incurred $1.9 million in expansion and start-up costs related to our east coast aseptic and premium juice facilities, and recognized a benefit from the reversal of stock-based compensation which was mostly offset by costs associated with ongoing litigation. Excluding these items, operating income during the fourth quarter would have been approximately $8.8 million, or 2.8% of revenues.
The Company reported a loss from continuing operations for the fourth quarter of 2015 of $13.6 million, or $0.16 per common share, compared to earnings from continuing operations of $5.1 million, or $0.07 per diluted common share during the fourth quarter of 2014. Excluding the unusual items noted above, as well as other expenses related primarily to business acquisitions, severance and asset disposal charges, offset by gains related to the benefit of previously unrecognized tax benefits, Adjusted Earnings¹ were $2.4 million or $0.03 per diluted share, compared to Adjusted Earnings¹ of $5.0 million or $0.07 per share in the fourth quarter of 2014.
Adjusted EBITDA¹ for the fourth quarter of 2015 was $14.2 million compared to Adjusted EBITDA¹ of $9.5 million in the fourth quarter of 2014.
The results of operations of Opta Minerals for the current and prior fiscal periods have been reported in discontinued operations in our consolidated statements of operations. For the fourth quarter of 2015 the loss from discontinued operations was $16.5 million, or $0.19 per common share, reflects the results of Opta Minerals as well as the non-cash loss recognized on classification as held for sale, net of non-controlling interest and taxes. The loss from discontinued operations in the fourth quarter of 2014 of $6.9 million or $0.10 per common share reflects the results of Opta Minerals net of non-controlling interest, as well as a gain recognized on the sale of the Company’s former fiber business, all net of taxes.
Fiscal 2015 Results
Revenues for fiscal 2015 increased 3.8% to $1.145 billion compared to $1.103 billion during fiscal 2014. It is important to note that fiscal 2015 included 52 weeks, while 2014 included 53 weeks. After adjusting for the impact of changes including the additional week in 2014, commodity prices, foreign exchange rates, acquired businesses and product rationalizations, consolidated revenues increased 4.1% . The increase in revenues was primarily due to stronger demand for organic ingredients in the U.S. and Europe, offset by lower sunflower and grain-based ingredient volumes and lower volumes for consumer-based aseptic beverage and frozen food retail products.
Operating income¹ for fiscal 2015 was $21.3 million, or 1.9% of revenues, compared to $41.7 million, or 3.8% of revenues in fiscal 2014. Excluding the unusual items previously noted, updated for the full year impact of those items, operating income would have been approximately $37.1 million or 3.2% of revenues in fiscal 2015.
The Company reported a loss from continuing operations of $3.0 million, or $0.04 per common share, compared to earnings from continuing operations of $19.3 million, or $0.28 per diluted common share, during fiscal 2014. Excluding items which are not reflective of normal operations, Adjusted Earnings¹ were $19.0 million or $0.26 per diluted common share in fiscal 2015, compared to $26.4 million or $0.38 per diluted share in 2014.
Adjusted EBITDA¹ for fiscal 2015 was $62.2 million compared to Adjusted EBITDA¹ of $61.2 million in fiscal 2014.
2016 Operational Goals:
| • | Increasing gross margin in the healthy beverages category by at least $6 million in juice and achieving double-digit growth rates in non-dairy aseptic product sales now that expansions have been completed. |
| • | Integrating Sunrise Growers successfully and delivering $5.0 million to 7.0 million of forecasted synergies. |
| • | Growing the fruit snacks business within healthy snacks by at least 10%. |
| • | Delivering at least $10 million in new product sales from pro-active innovation while reducing cost of goods sold. |
| • | Holding selling, general and administrative expenses at or below 8% of revenues. |
Balance Sheet and Cash Flow
At January 2, 2016 SunOpta’s balance sheet reflected total assets of $1.219 billion, total debt of $482.8 million, and a total debt to equity ratio of 1.15 to 1.00. For the year, Adjusted EBITDA¹ was $62.2 million which includes the results of businesses acquired in 2015 from the date of acquisition. At January 2, 2016 leverage was approximately five times pro forma Adjusted EBITDA¹ after factoring in the run-rate EBITDA of acquired businesses and cost synergies expected to be realized in 2016. SunOpta continues to expect to de-lever 1.0 to 1.5 times over the next 12 to 18 months through a combination of EBITDA growth and positive cash flow resulting in debt reduction.
For fiscal 2015, SunOpta generated cash flows from continuing operations of $26.4 million as compared to $17.5 million in 2014. Excluding the after-tax cash impact of approximately $11.1 million of costs not reflective of normal operations that affected earnings during the year, cash flows from continuing operations would have been approximately $37.5 million in 2015. In addition, during 2015 the Company incurred cash financing costs of $16.0 million related primarily to the acquisition of Sunrise Growers.
Included in total debt is $320 million in the form of a second lien loan which has been classified as long-term debt. On October 9, 2015 SunOpta borrowed $330 million of second lien debt to fund part of the purchase price of Sunrise Growers. This debt matures on October 9, 2016 and, if not re-financed prior to the maturity date, and no event of default exists, then any amount of this debt still outstanding at maturity will automatically convert into term loans that would mature on October 9, 2022. Under the terms of our financing arrangements, our lenders may demand that we enter into alternative long-term financing to replace the second lien debt prior to October 9, 2016, however in either case, the interest rate on this tranche of debt cannot exceed 9.5% per annum. Subject to covenants that exist within our first lien credit facilities we have the ability to repay second lien debt, and during the fourth quarter we repaid $10.0 million principal amount of the second lien loan.
On February 11, 2016 the Company successfully entered into a new, committed, five year asset-based credit facility that replaced its previous North American and European operating credit facilities. The new facility is $350 million in size and provides the Company with increased borrowing capacity at lower interest rates than the previous credit facilities.
Conference Call with accompanying presentation
SunOpta plans to host a conference call at 9:00 A.M. eastern time on Tuesday, March 1, 2016, to discuss the fourth quarter financial results. After opening remarks, there will be a question and answer period. This conference call can be accessed via a link at www.sunopta.com. The presentation that will accompany the conference call can be downloaded at http://investor.sunopta.com.
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 at SunOpta’s website.
1See 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 focus on strengthening operational efficiency and execution, expanding margins and optimizing our portfolio and business structure, our 2016 operational goals and our intention to de-lever our business over the net 12 to 18 months. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as “continue”, “confident”, “should”, “believe”, “would”, “may”, “plans”, "expect", “will”, "anticipate", "estimate", "intend", "project", "potential", "continue", "might", "predict" or other similar terms and phrases 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, continued consumer interest in health and wellness, ability to maintain product pricing levels, current customer demand, planned facility and operational expansions, competitive intensity, cost rationalization, product development initiatives, and alternative potential uses for our 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, risks associated with acquisitions generally such failure to retain key management and employees of Sunrise Growers and Niagara Natural; issues or delays in the successful integration of the operations, systems and personnel of Sunrise Growers and Niagara Natural with those of the Company including incurring or experiencing unanticipated costs and/or delays or difficulties, future levels of revenues being lower than expected, costs being higher than expected, inability to realize synergies to the extent anticipated and conditions affecting the frozen fruit industry generally; failure or inability to implement growth 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 and continuous improvement initiatives; availability and pricing of raw materials and supplies; potential covenant breaches under our credit facilities; inability to re-finance or replace our second lien loan on satisfactory terms or at all; 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.
For further information, please contact:
SunOpta Inc.
Rob Litt, Director Global Communications
Tel: 952-893-7863
Rob.litt@sunopta.com
| SunOpta Inc. |
| Consolidated Statements of Operations |
| For the quarter and year ended January 2, 2016 and January 3, 2015 |
| (Unaudited) |
| (Expressed in thousands of U.S. dollars, except per share amounts) |
| | | | | | Quarter ended | | | | | | Year ended | |
| | | January 2, 2016 | | | January 3, 2015 | | | January 2, 2016 | | | January 3, 2015 | |
| | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | |
| Revenues | | 316,378 | | | 250,571 | | | 1,145,134 | | | 1,102,745 | |
| | | | | | | | | | | | | |
| Cost of goods sold | | 291,148 | | | 226,931 | | | 1,034,772 | | | 980,640 | |
| | | | | | | | | | | | | |
| Gross profit | | 25,230 | | | 23,640 | | | 110,362 | | | 122,105 | |
| | | | | | | | | | | | | |
| Selling, general and administrative expenses | | 24,723 | | | 19,777 | | | 85,754 | | | 80,365 | |
| Intangible asset amortization | | 2,846 | | | 474 | | | 4,951 | | | 2,036 | |
| Other expense (income), net | | 7,758 | | | (164 | ) | | 12,151 | | | (2,220 | ) |
| Foreign exchange gain | | (595 | ) | | (842 | ) | | (1,641 | ) | | (1,993 | ) |
| | | | | | | | | | | | | |
| Earnings (loss) from continuing operations before the following | | (9,502 | ) | | 4,395 | | | 9,147 | | | 43,917 | |
| | | | | | | | | | | | | |
| Interest expense, net | | 12,498 | | | 696 | | | 15,669 | | | 3,943 | |
| Impairment loss on investment | | - | | | - | | | - | | | 8,441 | |
| | | | | | | | | | | | | |
| Earnings (loss) from continuing operations before income taxes | | (22,000 | ) | | 3,699 | | | (6,522 | ) | | 31,533 | |
| | | | | | | | | | | | | |
| Provision for (recovery of) income taxes | | (8,228 | ) | | (1,280 | ) | | (3,390 | ) | | 12,043 | |
| | | | | | | | | | | | | |
| Earnings (loss) from continuing operations | | (13,772 | ) | | 4,979 | | | (3,132 | ) | | 19,490 | |
| | | | | | | | | | | | | |
| Loss from discontinued operations, net of income taxes and non-controlling interest | | (16,516 | ) | | (8,812 | ) | | (19,475 | ) | | (8,092 | ) |
| Gain on sale of discontinued operations, net of income taxes | | - | | | 1,898 | | | - | | | 1,898 | |
| | | | | | | | | | | | | |
| Loss from discontinued operations attributable to SunOpta Inc. | | (16,516 | ) | | (6,914 | ) | | (19,475 | ) | | (6,194 | ) |
| | | | | | | | | | | | | |
| Earnings (loss) | | (30,288 | ) | | (1,935 | ) | | (22,607 | ) | | 13,296 | |
| | | | | | | | | | | | | |
| Earnings (loss) attributable to non-controlling interests | | (220 | ) | | (72 | ) | | (136 | ) | | 195 | |
| | | | | | | | | | | | | |
| Earnings (loss) attributable to SunOpta Inc. | | (30,068 | ) | | (1,863 | ) | | (22,471 | ) | | 13,101 | |
| | | | | | | | | | | | | |
| Earnings (loss) per share – basic | | | | | | | | | | | | |
| - from continuing operations | | (0.16 | ) | | 0.08 | | | (0.04 | ) | | 0.29 | |
| - from discontinued operations | | (0.19 | ) | | (0.10 | ) | | (0.27 | ) | | (0.09 | ) |
| | | (0.35 | ) | | (0.03 | ) | | (0.31 | ) | | 0.20 | |
| | | | | | | | | | | | | |
| Earnings (loss) per share – diluted | | | | | | | | | | | | |
| - from continuing operations | | (0.16 | ) | | 0.07 | | | (0.04 | ) | | 0.28 | |
| - from discontinued operations | | (0.19 | ) | | (0.10 | ) | | (0.27 | ) | | (0.09 | ) |
| | | (0.35 | ) | | (0.03 | ) | | (0.31 | ) | | 0.19 | |
| | | | | | | | | | | | | |
| Weighted-average number of shares outstanding (000s) | | | | | | | | | | | | |
| - basic | | 85,361 | | | 67,054 | | | 72,408 | | | 66,835 | |
| - diluted | | 85,361 | | | 68,689 | | | 72,463 | | | 68,371 | |
| SunOpta Inc. |
| Consolidated Balance Sheets |
| As at January 2, 2016 and January 3, 2015 |
| (Unaudited) |
| (Expressed in thousands of U.S. dollars) |
| | | January 2, 2016 | | | January 3, 2015 | |
| | | $ | | | $ | |
| | | | | | | |
| | | | | | | |
| ASSETS | | | | | | |
| Current assets | | | | | | |
| Cash and cash equivalents | | 2,274 | | | 7,768 | |
| Accounts receivable | | 117,412 | | | 106,970 | |
| Inventories | | 371,223 | | | 229,770 | |
| Prepaid expenses and other current assets | | 20,088 | | | 17,027 | |
| Current income taxes recoverable | | 21,728 | | | 1,373 | |
| Current assets held for sale | | 64,330 | | | 60,688 | |
| Total current assets | | 597,055 | | | 423,596 | |
| | | | | | | |
| Property, plant and equipment | | 176,513 | | | 112,492 | |
| Goodwill | | 241,690 | | | 29,082 | |
| Intangible assets | | 195,008 | | | 13,755 | |
| Deferred income taxes | | 958 | | | 7,830 | |
| Other assets | | 7,979 | | | 4,878 | |
| Non-current assets held for sale | | - | | | 49,317 | |
| | | | | | | |
| Total assets | | 1,219,203 | | | 640,950 | |
| | | | | | | |
| LIABILITIES | | | | | | |
| Current liabilities | | | | | | |
| Bank indebtedness | | 159,773 | | | 78,454 | |
| Accounts payable and accrued liabilities | | 151,831 | | | 110,867 | |
| Customer and other deposits | | 5,322 | | | 4,127 | |
| Income taxes payable | | 1,720 | | | 3,090 | |
| Other current liabilities | | 1,521 | | | 3,087 | |
| Current portion of long-term debt | | 1,773 | | | 1,042 | |
| Current portion of long-term liabilities | | 5,243 | | | - | |
| Current liabilities held for sale | | 52,486 | | | 35,661 | |
| Total current liabilities | | 379,669 | | | 236,328 | |
| | | | | | | |
| Long-term debt | | 321,222 | | | 3,539 | |
| Long-term liabilities | | 17,809 | | | 1,086 | |
| Deferred income taxes | | 74,324 | | | 11,669 | |
| Non-current liabilities held for sale | | - | | | 35,000 | |
| Total liabilities | | 793,024 | | | 287,622 | |
| | | | | | | |
| EQUITY | | | | | | |
| SunOpta Inc. shareholders’ equity | | | | | | |
| Common shares | | 297,987 | | | 190,668 | |
| Additional paid-in capital | | 22,327 | | | 22,490 | |
| Retained earnings | | 106,838 | | | 129,309 | |
| Accumulated other comprehensive loss | | (6,113 | ) | | (1,778 | ) |
| | | 421,039 | | | 340,689 | |
| Non-controlling interests | | 5,140 | | | 12,639 | |
| Total equity | | 426,179 | | | 353,328 | |
| | | | | | | |
| Total equity and liabilities | | 1,219,203 | | | 640,950 | |
| SunOpta Inc. |
| Consolidated Statements of Cash Flows |
| For the quarter and year ended January 2, 2016 and January 3, 2015 |
| (Unaudited) |
| (Expressed in thousands of U.S. dollars) |
| | | | | | Quarter ended | | | | | | Year ended | |
| | | | | | | | | | | | | |
| | | January 2, 2016 | | | January 3, 2015 | | | January 2, 2016 | | | January 3, 2015 | |
| | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | |
| CASH PROVIDED BY (USED IN) | | | | | | | | | | | | |
| Operating activities | | | | | | | | | | | | |
| Earnings (loss) | | (30,288 | ) | | (2,094 | ) | | (22,607 | ) | | 13,296 | |
| Loss from discontinued operations | | (16,516 | ) | | (6,915 | ) | | (19,475 | ) | | (6,194 | ) |
| Earnings (loss) from continuing operations | | (13,772 | ) | | 4,821 | | | (3,132 | ) | | 19,490 | |
| Items not affecting cash: | | | | | | | | | | | | |
| Depreciation and amortization | | 4,268 | | | 3,957 | | | 21,007 | | | 15,641 | |
| Amortization of debt issuance costs | | 5,895 | | | - | | | 5,895 | | | 375 | |
| Acquisition accounting adjustment on inventory sold | | 4,000 | | | - | | | 4,000 | | | - | |
| Deferred income taxes | | (4,735 | ) | | (6,039 | ) | | (4,038 | ) | | (3,489 | ) |
| Stock-based compensation | | 534 | | | 1,359 | | | 4,366 | | | 3,906 | |
| Unrealized loss on derivative instruments | | 677 | | | (1,845 | ) | | 143 | | | 176 | |
| Impairment loss on investment | | - | | | - | | | - | | | 8,441 | |
| Gain (loss) on disposal of assets | | 232 | | | (368 | ) | | 251 | | | (1,386 | ) |
| Fair value of contingent consideration | | 646 | | | - | | | 884 | | | (1,373 | ) |
| Other | | (858 | ) | | (615 | ) | | 739 | | | 27 | |
| Changes in non-cash working capital, net of business acquired | | 29,180 | | | (16,271 | ) | | (3,685 | ) | | (24,318 | ) |
| Net cash flows from operations - continuing operations | | 26,067 | | | (15,001 | ) | | 26,430 | | | 17,490 | |
| Net cash flows from operations - discontinued operations | | (603 | ) | | 1,230 | | | 4,814 | | | 7,325 | |
| | | 25,464 | | | (13,771 | ) | | 31,244 | | | 24,815 | |
| Investing activities | | | | | | | | | | | | |
| Acquisition of businesses, net of cash acquired | | (470,994 | ) | | - | | | (490,715 | ) | | - | |
| Purchases of property, plant and equipment | | (9,345 | ) | | (6,911 | ) | | (31,186 | ) | | (17,671 | ) |
| Proceeds from the disposal of assets | | 114 | | | 145 | | | 1,138 | | | 5,833 | |
| Acquisition of non-controlling interest | | - | | | - | | | (733 | ) | | - | |
| Payment of contingent consideration | | (204 | ) | | (271 | ) | | (204 | ) | | (800 | ) |
| Decrease in long-term investment, net | | - | | | 1,135 | | | - | | | 264 | |
| Other | | (258 | ) | | 453 | | | (89 | ) | | (76 | ) |
| Net cash flows from investing activities - continuing operations | | (480,687 | ) | | (5,449 | ) | | (521,789 | ) | | (12,450 | ) |
| Net cash flows from investing activities - discontinued operations | | (11 | ) | | 35,980 | | | (1,235 | ) | | 34,538 | |
| | | (480,698 | ) | | 30,531 | | | (523,024 | ) | | 22,088 | |
| Financing activities | | | | | | | | | | | | |
| Increase (decrease) under line of credit facilities | | 54,718 | | | (11,294 | ) | | 85,968 | | | (40,953 | ) |
| Borrowings under long-term debt | | 330,135 | | | - | | | 330,135 | | | - | |
| Repayment of long-term debt | | (10,296 | ) | | (70 | ) | | (11,018 | ) | | (910 | ) |
| Proceeds from the issuance of common shares, net | | (1,264 | ) | | - | | | 94,080 | | | - | |
| Proceeds from the exercise of stock options | | 406 | | | 62 | | | 3,884 | | | 3,058 | |
| Proceeds from the exercise of warrants | | - | | | - | | | 3,879 | | | - | |
| Financing costs | | (13,778 | ) | | (34 | ) | | (15,966 | ) | | (34 | ) |
| Other | | (323 | ) | | 401 | | | (781 | ) | | 244 | |
| Net cash flows from financing activities - continuing operations | | 359,598 | | | (10,935 | ) | | 490,181 | | | (38,595 | ) |
| Net cash flows from financing activities - discontinued operations | | 668 | | | (3,582 | ) | | (4,304 | ) | | (7,066 | ) |
| | | 360,266 | | | (14,517 | ) | | 485,877 | | | (45,661 | ) |
| | | | | | | | | | | | | |
| Foreign exchange gain (loss) on cash held in a foreign currency | | (40 | ) | | 266 | | | (54 | ) | | 159 | |
| Increase (decrease) in cash and cash equivalents in the period | | (95,008 | ) | | 2,509 | | | (5,957 | ) | | 1,401 | |
| Discontinued operations cash activity included above: | | | | | | | | | | | | |
| Add: Balance included at beginning of period | | 1,626 | | | 3,907 | | | 2,170 | | | 4,084 | |
| Less: Balance included at end of period | | (1,707 | ) | | (2,170 | ) | | (1,707 | ) | | (2,170 | ) |
| Cash and cash equivalents - beginning of the period | | 97,363 | | | 3,522 | | | 7,768 | | | 4,453 | |
| Cash and cash equivalents - end of the period | | 2,274 | | | 7,768 | | | 2,274 | | | 7,768 | |
| SunOpta Inc. |
| Segmented Information |
| For the quarter and year ended January 2, 2016 and January 3, 2015 |
| Unaudited |
| (Expressed in thousands of U.S. dollars) |
| | | | | | Quarter ended | | | | | | Year ended | |
| | | January 2, 2016 | | | January 3, 2015 | | | January 2, 2016 | | | January 3, 2015 | |
| | | $ | | | $ | | | $ | | | $ | |
| Segment revenues from external customers: | | | | | | | | | | | | |
| Global Ingredients | | 143,485 | | | 141,826 | | | 610,890 | | | 619,066 | |
| Consumer Products | | 172,893 | | | 108,745 | | | 534,244 | | | 483,679 | |
| Total segment revenues from external customers | | 316,378 | | | 250,571 | | | 1,145,134 | | | 1,102,745 | |
| | | | | | | | | | | | | |
| Segment gross margin: | | | | | | | | | | | | |
| Global Ingredients | | 13,236 | | | 15,769 | | | 66,461 | | | 63,591 | |
| Consumer Products | | 11,994 | | | 7,871 | | | 43,901 | | | 58,514 | |
| Total segment operating income | | 25,230 | | | 23,640 | | | 110,362 | | | 122,105 | |
| | | | | | | | | | | | | |
| Segment operating income (loss): | | | | | | | | | | | | |
| Global Ingredients | | 4,250 | | | 7,020 | | | 28,184 | | | 26,274 | |
| Consumer Products | | (1,907 | ) | | 460 | | | 3,208 | | | 27,872 | |
| Corporate Services | | (4,088 | ) | | (3,248 | ) | | (10,094 | ) | | (12,449 | ) |
| Total segment operating income (loss) | | (1,745 | ) | | 4,232 | | | 21,298 | | | 41,697 | |
| | | | | | | | | | | | | |
| Segment operating income percentage: | | | | | | | | | | | | |
| Global Ingredients | | 3.0% | | | 4.9% | | | 4.6% | | | 4.2% | |
| Consumer Products | | (1.1% | ) | | 0.4% | | | 0.6% | | | 5.8% | |
| Total segment operating income | | (0.6% | ) | | 1.7% | | | 1.9% | | | 3.8% | |
(Segment operating income (loss) is defined as “Earnings (loss) from continuing operations before the following” excluding the impact of “Other expense (income), net”.)
1Non-GAAP Measures
In addition to reporting financial results in accordance with U.S. GAAP, the Company provides information regarding segment operating income, earnings before interest, taxes, depreciation and amortization (“EBITDA”), and Adjusted EBITDA as additional information about its operating results, which are not measures in accordance with U.S. 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 segment operating income, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP.
The Company defines segment operating income as "earnings/(loss) from continuing operations before the following" excluding the impact of other income/expense items; EBITDA as segment operating income plus depreciation and amortization; and Adjusted EBITDA as EBITDA excluding certain charges and gains that affect the comparability of operating performance. The following is a tabular presentation of segment operating income, EBITDA, and Adjusted EBITDA, including a reconciliation to earnings (loss) from continuing operations, which the Company believes to be the most directly comparable U.S. GAAP financial measure:
| | | | | | Quarter ended | | | | | | Year ended | |
| | | January 2, | | | January 3, | | | January 2, | | | January 3, | |
| | | 2016 | | | 2015 | | | 2016 | | | 2015 | |
| | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | | |
| Earnings (loss) from continuing operations | | (13,772 | ) | | 4,979 | | | (3,132 | ) | | 19,490 | |
| Provision for (recovery of) income taxes | | (8,228 | ) | | (1,280 | ) | | (3,390 | ) | | 12,043 | |
| Interest expense, net | | 12,498 | | | 696 | | | 15,669 | | | 3,943 | |
| Other expense (income), net | | 7,758 | | | (164 | ) | | 12,151 | | | (2,220 | ) |
| Impairment loss on investment | | - | | | - | | | - | | | 8,441 | |
| Total segment operating income (loss) | | (1,744 | ) | | 4,231 | | | 21,298 | | | 41,697 | |
| Depreciation and amortization | | 4,268 | | | 3,957 | | | 21,007 | | | 15,641 | |
| Stock based compensation (a) | | 534 | | | 1,359 | | | 3,512 | | | 3,906 | |
| EBITDA | | 3,058 | | | 9,547 | | | 45,817 | | | 61,244 | |
| Adjustments (b) | | 11,159 | | | - | | | 16,414 | | | - | |
| Adjusted EBITDA | | 14,217 | | | 9,547 | | | 62,231 | | | 61,244 | |
(a) $0.9 million of stock based compensation is reported in Other expense for the year ended January 2, 2016.
(b) The adjustments include all adjustments in the table "Reconciliation of GAAP Results to Adjusted Earnings and Adjusted earnings per diluted share" that affect cost of goods sold and selling, general and administrative expenses, except for the reversal of stock-based compensation expense.
The Company also reported Adjusted Earnings from Continuing Operations and Adjusted earnings per diluted share for the years ended January 2, 2016 and January 3, 2015. Adjusted earnings and Adjusted earnings per diluted share are also non-GAAP financial measures. When assessing our financial performance, we use an internal measure that excludes the results of discontinued operations as well as other charges and gains that we believe are not reflective of normal operations. This information is provided in order 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 Company management. Adjusted Earnings and Adjusted earnings per diluted share should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP.
The following is a tabular presentation of Adjusted Earnings and Adjusted Earnings per diluted share, including a reconciliation to U.S. GAAP earnings (loss) attributable to SunOpta Inc. and U.S. GAAP earnings (loss) attributable to SunOpta Inc. on a per diluted share basis, which the Company believes to be the most directly comparable U.S. GAAP financial measure.
Items affecting comparability of operating performance
For the quarter and year ended January 2, 2016, in addition to the results of discontinued operations, the Company recognized other expenses related primarily to business acquisitions, severance and asset disposal charges, expansion and start-up costs related to our east coast aseptic and premium juice facilities, inventory reserves and low margin sales to reduce inventory exposures on certain organic raw materials, downtime and other costs associated equipment failure, demurrage, detention and other related expenses in connection with trans-loading capacity constraints on imported and exported product, and ongoing litigation costs. Also for the quarter and year ended January 2, 2016, the Company recognized gains related to the benefit of previously unrecognized tax benefits and the reversal of stock-based compensation expense. We do not believe these charges and gains are reflective of normal business operations. These charges and gains have been excluded to arrive at Adjusted Earnings and Adjusted Earnings per diluted share.
For the quarter and year ended January 3, 2015, in addition to the results of discontinued operations, the Company recognized other expense (and income) related primarily to gains related to assets sales and the settlement of a remaining earn out related to a previous acquisition. As well, the Company recognized an impairment of investment during the third quarter of 2014. We do not believe these charges and gains are reflective of normal business operations and have been excluded to arrive at Adjusted Earnings and Adjusted Earnings per diluted share.
Reconciliation of GAAP Results to Adjusted Earnings and Adjusted earnings per diluted share
| | | | | | Adjusted | |
| | | Quarter ended | | | earnings per | |
| | | January 2, 2016 | | | diluted share | |
| | | $ | | | $ | |
| Loss attributable to SunOpta Inc. | | (30,068 | ) | | (0.35 | ) |
| Loss from discontinued operations attributable to SunOpta Inc. | | 16,516 | | | 0.19 | |
| Loss from continuing operations attributable to SunOpta Inc. | | (13,552 | ) | | (0.16 | ) |
| Adjusted for: | | | | | | |
| Plant expansion and start-up costs(a) | | 1,861 | | | | |
| Downtime, spoilage, and other costs due to equipment failure(a) | | 2,219 | | | | |
| Inventory reserves and low margin sales to reduce inventory exposures(a) | | 2,367 | | | | |
| Demurrage, detention and other related expenses(a) | | 180 | | | | |
| Professional fees related to ongoing litigation and other activities(b) | | 532 | | | | |
| Reversal of stock-based compensation expense(b) | | (579 | ) | | | |
| Costs related to business acquisitions(c) | | 15,620 | | | | |
| Other expense | | 1,563 | | | | |
| Net income tax effect of preceding adjustments | | (6,940 | ) | | | |
| Change in unrecognized tax benefits | | (855 | ) | | | |
| Adjusted earnings | | 2,416 | | | 0.03 | |
| | | | | | Adjusted | |
| | | Quarter ended | | | earnings per | |
| | | January 3, 2015 | | | diluted share | |
| | | $ | | | $ | |
| Loss attributable to SunOpta Inc. | | (1,863 | ) | | (0.03 | ) |
| Loss from discontinued operations attributable to SunOpta Inc. | | 6,914 | | | 0.10 | |
| Earnings from continuing operations attributable to SunOpta Inc. | | 5,051 | | | 0.07 | |
| Adjusted for: | | | | | | |
| Other income | | (164 | ) | | | |
| Net income tax effect of preceding adjustments | | 89 | | | | |
| Adjusted earnings | | 4,976 | | | 0.07 | |
| (a) | Included in cost of goods sold. |
| (b) | Included in selling, general and administrative expenses. |
| (c) | Costs related to business combinations represent costs incurred in connection with the acquisitions of Sunrise, Citrusource and Niagara Natural, of which $4.0 million is included in cost of goods sold, $6.2 million is included in other expense and $5.4 million is included in interest expense. |
Reconciliation of GAAP Results to Adjusted Earnings and Adjusted earnings per diluted share
| | | | | | Adjusted | |
| | | Year ended | | | earnings per | |
| | | January 2, 2016 | | | diluted share | |
| | | $ | | | $ | |
| Loss attributable to SunOpta Inc. | | (22,471 | ) | | (0.31 | ) |
| Loss from discontinued operations attributable to SunOpta Inc. | | 19,475 | | | 0.27 | |
| Loss from continuing operations attributable to SunOpta Inc. | | (2,996 | ) | | (0.04 | ) |
| Adjusted for: | | | | | | |
| Plant expansion and start-up costs(a) | | 4,081 | | | | |
| Downtime, spoilage, and other costs due to equipment failure(a) | | 2,219 | | | | |
| Inventory reserves and low margin sales to reduce inventory exposures(a) | | 2,367 | | | | |
| Demurrage, detention and other related expenses(a) | | 2,038 | | | | |
| Professional fees related to ongoing litigation and other activities(b) | | 1,709 | | | | |
| Reversal of stock-based compensation expense(b) | | (579 | ) | | | |
| Costs related to business acquisitions(c) | | 17,192 | | | | |
| Other expense | | 4,384 | | | | |
| Net income tax effect of preceding adjustments | | (10,598 | ) | | | |
| Change in unrecognized tax benefits | | (855 | ) | | | |
| Adjusted earnings | | 18,962 | | | 0.26 | |
| | | | | | Adjusted | |
| | | Year ended | | | earnings per | |
| | | January 3, 2015 | | | diluted share | |
| | | $ | | | $ | |
| Earnings attributable to SunOpta Inc. | | 13,101 | | | 0.19 | |
| Loss from discontinued operations attributable to SunOpta Inc. | | 6,194 | | | 0.09 | |
| Earnings from continuing operations attributable to SunOpta Inc. | | 19,295 | | | 0.28 | |
| Adjusted for: | | | | | | |
| Impairment loss on investment | | 8,441 | | | | |
| Other income | | (2,220 | ) | | | |
| Net income tax effect of preceding adjustments | | 901 | | | | |
| Adjusted earnings | | 26,417 | | | 0.38 | |
| (a) | Included in cost of goods sold. |
| (b) | Included in selling, general and administrative expenses. |
| (c) | Costs related to business combinations represent costs incurred in connection with the acquisitions of Sunrise, Citrusource and Niagara Natural, of which $4.0 million is included in cost of goods sold, $7.8 million is included in other expense and $5.4 million is included in interest expense. |
