8-K
SunOpta Inc. (STKL)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 ___________________________
FORM 8-K
CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
August 5, 2020
SUNOPTA INC.(Exact name of registrant as specified in its charter)
| Canada | 001-34198 | Not Applicable |
|---|---|---|
| (State or other jurisdiction | (Commission | (IRS Employer |
| of incorporation) | File Number) | Identification No.) |
2233 Argentia Road, Suite 401
Mississauga, Ontario, L5N 2X7, Canada
\(Address of principal executive offices\) \(ZIP Code\)
Registrant’s telephone number, including area code:
\(905\)
821-9669
Former name or former address, if changed since last report: Not Applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a -12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d -2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e -4(c))
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
| Title of each class | Trading Symbols | Name of each exchange on which registered |
|---|---|---|
| Common Stock | STKL | The Nasdaq Stock Market LLC |
| Common Shares | SOY | The Toronto Stock Exchange |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b 2 of the Securities Exchange Act of 1934 (17 CFR §240.12b 2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 5, 2020, SunOpta Inc. (the "Company") issued a press release announcing financial results for the quarter ended June 27, 2020. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information in this Current Report, including but not limited to Exhibit 99.1 attached hereto, is furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) Exhibits
Exhibit No.Description
99.1 Press Release, dated August 5, 2020, announcing financial results for the quarter ended June 27, 2020.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| SUNOPTA INC. | |
|---|---|
| By: | /s/ Scott Huckins |
| Scott Huckins | |
| Chief Financial Officer | |
| Date: | August 5, 2020 |
3
SunOpta Inc.: Exhibit 99.1 - Filed by newsfilecorp.com
FOR IMMEDIATE RELEASE
SUNOPTA ANNOUNCES SECOND QUARTER FISCAL 2020 FINANCIAL RESULTS
Adjusted EBITDA more than doubled YOY for the third consecutive quarter propelled by 6.1% revenue growth and strong operations execution as gross margins expanded 350 basis points
Toronto, August 5, 2020 - SunOpta Inc. ("SunOpta" or the "Company") (Nasdaq:STKL) (TSX:SOY), a leading global company focused on plant-based foods and beverages, organic ingredient sourcing and production, and fruit-based foods and beverages, today announced financial results for the second quarter ended June 27, 2020.
All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.
Second Quarter 2020 Highlights:
- Revenues of $310.9 million for the second quarter of 2020, compared to $293.0 million in the second quarter of 2019, an increase of 6.1%. Adjusted for foreign exchange and commodity prices, revenues grew by 5.8%.
- Gross margin increased 350 basis points to 12.8% from 9.3% in the prior year.
- Earnings attributable to common shareholders was a loss of $1.6 million or $0.02 per diluted common share in the second quarter of 2020, compared to a loss of $11.1 million or $0.13 per diluted common share in the second quarter of 2019.
- Adjusted EBITDA¹ of $20.5 million or 6.6% of revenues for the second quarter of 2020, versus $10.1 million or 3.5% of revenues in the second quarter of 2019.
"We delivered another strong quarter, doubling adjusted EBITDA over the prior year for the third consecutive quarter. We believe our turnaround efforts have now taken root, setting us up for more consistent revenue and profitability growth going forward. The quarter represented a powerful combination of strong execution and favorable underlying category trends. Each of our three segments produced revenue growth and expanded gross margin during the second quarter," said Joe Ennen, Chief Executive Officer of SunOpta. "Our growth continues to be led by our #1 focus area, which is plant-based foods and beverages. Despite the negative impact on volumes in the foodservice channel, as a result of COVID-19, we still produced 10% growth on an adjusted basis. This growth and our ability to offset COVID-19 impacts are a direct reflection of the strength of our plant-based platform. We are extremely bullish on our plant-based opportunity including a robust sales pipeline and incremental capacity expected to come on-line in the fourth quarter of this year.
"Within our Global Ingredients segment, we saw continued strong growth and enhanced margin as we optimize our category investments. We remain confident and encouraged about initiatives across our global organization and remain well-positioned in each of our operating segments to drive growth, improve margins and enhance shareholder value. We continued to generate sequential and year-over-year margin improvement in our Fruit-Based Foods and Beverages segment, reflecting each of our initiatives to date and remain confident that our productivity investments will further this improvement in the second half of 2020," continued Ennen.
Second Quarter 2020 Results
Revenues for the second quarter of 2020 were $310.9 million, an increase of 6.1% compared to $293.0 million in the second quarter of 2019. Excluding the impact of changes in commodity-related pricing and foreign exchange rates, revenues in the second quarter of 2020 increased by 5.8% compared with the second quarter of 2019.
The Plant-Based Foods and Beverages segment generated revenues of $91.7 million during the second quarter of 2020, an increase of 11.9% compared to $81.9 million in the second quarter of 2019. Excluding sunflower commodity price variances, Plant-Based segment revenues in the second quarter increased 9.6% compared to the prior year period, reflecting higher volumes of aseptic beverages, broth offerings, and ingredient extraction partially offset by reduced sales volumes of plant-based beverage products to foodservice customers as a result of COVID-19.
The Global Ingredients segment generated revenues of $126.5 million, an increase of 4.7% compared to $120.9 million in the second quarter of 2019. Excluding the impact of changes in commodity-related pricing and foreign exchange rates, Global Ingredients revenue in the second quarter of 2020 increased 6.9% compared to the prior year period, which reflected higher volumes in certain organic ingredient product categories and of premium juice products.
The Fruit-Based Foods and Beverages segment generated revenues of $92.7 million during the second quarter of 2020, an increase of 2.8% compared to $90.2 million in the second quarter of 2019. Excluding the impact of commodity price fluctuations, Fruit-Based segment revenues in the second quarter increased 0.8% compared to the prior year period, primarily reflecting increased retail volumes and pricing for frozen fruit partially offset by lower demand for frozen fruit and fruit preparations from foodservice customers as a result of COVID-19.
Gross profit was $39.7 million for the quarter ended June 27, 2020, an increase of $12.4 million compared to $27.3 million for the quarter ended June 29, 2019. As a percentage of revenues, gross profit for the quarter ended June 27, 2020 was 12.8% compared to 9.3% for the quarter ended June 29, 2019, an increase of 350 basis points. The Plant-Based Foods and Beverages segment accounted for $4.6 million of the increase in gross profit, primarily due to higher sales and production volumes of plant-based beverages, broths and plant-based ingredients, and improved plant utilization and productivity-driven cost savings partially offset by wage premiums and higher cleaning costs attributable to COVID-19. The Global Ingredients segment accounted for $4.4 million of the increased gross profit in the quarter primarily due to increased pricing spreads for certain organic ingredients and premium juice products and productivity improvements. The Fruit-Based Foods and Beverages segment increased gross profit by $3.4 million in the quarter, reflecting increased sales, pricing and a favorable sales mix of higher-margin retail versus foodservice sales, and the impact of our automation and productivity initiatives, partially offset by lower sales volumes and plant utilization for fruit ingredients, together with wage premiums and higher cleaning costs attributable to COVID-19.
Segment operating income¹ was $8.8 million, or 2.8% of revenues in the second quarter of 2020, compared to operating loss of $2.5 million, or 0.9% of revenues in the second quarter of 2019. The increase in operating income year-over-year was primarily attributable to the $12.4 million increase in gross profit, partially offset by a year-over-year $1.0 million increase in SG&A primarily related to higher employee-related variable compensation and benefit costs, partially offset by lower travel and marketing costs and stock-based compensation expense.
Adjusted EBITDA¹ was $20.5 million or 6.6% of revenues in the second quarter of 2020, compared to $10.1 million or 3.5% of revenues in the second quarter of 2019.
The Company reported a loss attributable to common shareholders for the second quarter of 2020 of $1.6 million, or $0.02 per diluted common share, compared to a loss of $11.1 million, or $0.13 per diluted common share during the second quarter of 2019.
Adjusted loss¹ in the second quarter of 2020 was $1.4 million or $0.02 per common share, compared to an adjusted loss of $9.0 million or $0.10 per common share in the second quarter of 2019. Please refer to the discussion and table below under "Non-GAAP Measures - Adjusted Earnings/Loss".
Balance Sheet and Cash Flow
At June 27, 2020, SunOpta's balance sheet reflected total assets of $909.4 million and total debt of $448.9 million. During the second quarter of 2020, cash generated by operating activities was $2.7 million, compared to cash used in operations of $31.7 million during the second quarter of 2019. The $34.4 million improvement in operating cash flow primarily reflects the improved year-over-year operating results, along with more efficient working capital management. Cash used in investing activities in the second quarter of 2020 was $6.3 million, compared with $12.9 million in the second quarter of 2019, a decrease in cash used of $6.6 million.
Conference Call
SunOpta plans to host a conference call at 9:00 A.M. Eastern time on Wednesday, August 5, 2020, to discuss the second quarter financial results. After opening remarks, there will be a question and answer period. Investors interested in listening to a live webcast of the conference call can access a link on SunOpta's website at www.sunopta.com under the "Investors" section or directly here. Investors interested in listening to the live call over the telephone must pre-register for the conference call via a link on SunOpta's website at www.sunopta.com under the "Investors Relations" section or directly at http://www.directeventreg.com/registration/event/5755999. Upon registration, investors will be provided with the dial-in information, passcode and individual ID. Investors will also receive a confirmation email. Investors are encouraged to register at least 15 minutes prior to the scheduled call time and can register earlier at any time to receive the conference details. 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.
¹ See discussion of non-GAAP measures
About SunOpta Inc.
SunOpta Inc. is a leading global company focused on plant-based foods and beverages, fruit-based foods and beverages, and organic ingredient sourcing and production. SunOpta specializes in the sourcing, processing and packaging of organic, natural and non-GMO food products, integrated from seed through packaged products, with a focus on strategic vertically integrated business models.
Forward-Looking Statements
Certain statements included in this press release may be considered "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation, which are based on information available to us on the date of this release. These forward-looking statements include, but are not limited to, our belief that our turnaround efforts are setting us up for more consistent revenue and profitability growth going forward, our expectations regarding the anticipated conversion of our plant-based sales pipeline, and the timing of the incremental capacity expected in the fourth quarter. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as "continue", "expect", "believe", "anticipate", "estimates", "can", "will", "target", "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, the Company's actual financial results; uninterrupted operations and service levels to our customers during COVID-19; current customer demand for the Company's products and the additional anticipated demand due to COVID-19; general economic conditions; continued consumer interest in health and wellness; the Company's ability to maintain product pricing levels; planned facility and operational expansions, closures and divestitures; cost rationalization and product development initiatives; alternative potential uses for the Company's capital resources; 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. Whether actual timing and results will agree with expectations and predictions of the Company is subject to many risks and uncertainties including, but not limited to, potential loss of suppliers and customers as well as supply chain, logistics and other disruptions resulting from or related to COVID-19; unexpected issues or delays with the Company's structural improvements and automation investments; 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.
Scott Van Winkle
ICR
617-956-6736
scott.vanwinkle@icrinc.com
Source: SunOpta Inc.
| SunOpta Inc. | |||||
|---|---|---|---|---|---|
| Consolidated Statements of Operations | |||||
| For the quarters and two quarters ended June 27, 2020 and June 29, 2019 | |||||
| (Unaudited) | |||||
| (All dollar amounts expressed in thousands of U.S. dollars, except per share amounts) | |||||
| Quarter ended | Two quarters ended | ||||
| June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | ||
| Revenues | 310,944 | 293,004 | 646,893 | 598,279 | |
| Cost of goods sold | 271,252 | 265,677 | 563,481 | 542,746 | |
| Gross profit | 39,692 | 27,327 | 83,412 | 55,533 | |
| Selling, general and administrative expenses | 28,299 | 27,262 | 55,505 | 53,510 | |
| Intangible asset amortization | 2,605 | 2,692 | 5,326 | 5,434 | |
| Other expense (income), net | (333 | 445 | (1,631 | (43,067 | |
| Foreign exchange loss (gain) | (44 | (90 | 2,290 | (1,194 | |
| Earnings (loss) before the following | 9,165 | (2,982 | 21,922 | 40,850 | |
| Interest expense, net | 7,936 | 8,254 | 16,216 | 16,993 | |
| Earnings (loss) before income taxes | 1,229 | (11,236 | 5,706 | 23,857 | |
| Provision for (recovery of) income taxes | 452 | (2,324 | 1,582 | 7,174 | |
| Net earnings (loss) | 777 | (8,912 | 4,124 | 16,683 | |
| Earnings (loss) attributable to non-controlling interests | (230 | 143 | (244 | 89 | |
| Earnings (loss) attributable to SunOpta Inc. | 1,007 | (9,055 | 4,368 | 16,594 | |
| Dividends and accretion on preferred stock | (2,604 | (2,001 | (4,629 | (3,996 | |
| Earnings (loss) attributable to common shareholders | (1,597 | (11,056 | (261 | 12,598 | |
| Earnings (loss) per share | |||||
| Basic | (0.02 | (0.13 | (0.00 | 0.14 | |
| Diluted | (0.02 | (0.13 | (0.00 | 0.14 | |
| Weighted-average common shares outstanding (000s) | |||||
| Basic | 89,089 | 87,683 | 88,625 | 87,579 | |
| Diluted | 89,089 | 87,683 | 88,625 | 87,743 |
All values are in US Dollars.
| SunOpta Inc. | |||
|---|---|---|---|
| Consolidated Balance Sheets | |||
| As at June 27, 2020 and December 28, 2019 | |||
| (Unaudited) | |||
| (All dollar amounts expressed in thousands of U.S. dollars) | |||
| June 27, 2020 | December 28, 2019 | ||
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 1,625 | 1,498 | |
| Accounts receivable | 124,279 | 121,445 | |
| Inventories | 318,002 | 323,546 | |
| Prepaid expenses and other current assets | 28,103 | 35,985 | |
| Income taxes recoverable | 5,660 | 7,480 | |
| Total current assets | 477,669 | 489,954 | |
| Property, plant and equipment | 190,519 | 184,550 | |
| Operating lease right-of-use assets | 62,248 | 68,433 | |
| Goodwill | 28,462 | 28,422 | |
| Intangible assets | 144,679 | 150,009 | |
| Deferred income taxes | 2,187 | - | |
| Other assets | 3,661 | 1,991 | |
| Total assets | 909,425 | 923,359 | |
| LIABILITIES | |||
| Current liabilities | |||
| Bank indebtedness | 204,852 | 245,536 | |
| Accounts payable and accrued liabilities | 132,795 | 133,529 | |
| Customer and other deposits | 166 | 37 | |
| Income taxes payable | 1,610 | 1,272 | |
| Other current liabilities | 633 | 802 | |
| Current portion of long-term debt | 3,276 | 2,987 | |
| Current portion of operating lease liabilities | 15,971 | 17,215 | |
| Current portion of long-term liabilities | 900 | 4,286 | |
| Total current liabilities | 360,203 | 405,664 | |
| Long-term debt | 240,785 | 242,204 | |
| Operating lease liabilities | 47,020 | 52,020 | |
| Long-term liabilities | 1,905 | 2,011 | |
| Deferred income taxes | 14,432 | 9,027 | |
| Total liabilities | 664,345 | 710,926 | |
| Series A Preferred Stock | 84,881 | 82,524 | |
| Series B Preferred Stock | 26,895 | - | |
| EQUITY | |||
| SunOpta Inc. shareholders' equity | |||
| Common shares | 323,412 | 318,456 | |
| Additional paid-in capital | 34,610 | 35,767 | |
| Accumulated deficit | (215,192 | (214,931 | |
| Accumulated other comprehensive loss | (11,163 | (11,271 | |
| 131,667 | 128,021 | ||
| Non-controlling interests | 1,637 | 1,888 | |
| Total equity | 133,304 | 129,909 | |
| Total equity and liabilities | 909,425 | 923,359 |
All values are in US Dollars.
| SunOpta Inc. | |||||
|---|---|---|---|---|---|
| Consolidated Statements of Cash Flows | |||||
| For the quarters and two quarters ended June 27, 2020 and June 29, 2019 | |||||
| (Unaudited) | |||||
| (Expressed in thousands of U.S. dollars) | |||||
| Quarter ended | Two quarters ended | ||||
| June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 | ||
| CASH PROVIDED BY (USED IN) | |||||
| Operating activities | |||||
| Net earnings (loss) | 777 | (8,912 | 4,124 | 16,683 | |
| Items not affecting cash: | |||||
| Depreciation and amortization | 8,751 | 8,186 | 17,673 | 16,488 | |
| Amortization of debt issuance costs | 1,065 | 684 | 2,004 | 1,339 | |
| Deferred income taxes | 2,958 | (2,356 | 3,218 | 4,971 | |
| Stock-based compensation | 1,932 | 2,998 | 4,379 | 2,835 | |
| Unrealized loss (gain) on derivative contracts | (406 | (400 | 150 | (288 | |
| Gain on settlement of contingent consideration obligation | - | - | (2,286 | - | |
| Loss (gain) on sale of business | - | 201 | - | (45,378 | |
| Other | (11 | (72 | (101 | (134 | |
| Changes in non-cash working capital, net of businesses acquired or sold | (12,401 | (31,989 | 8,253 | (27,188 | |
| Net cash flows from operations | 2,665 | (31,660 | 37,414 | (30,672 | |
| Investing activities | |||||
| Purchases of property, plant and equipment | (6,370 | (9,341 | (16,059 | (17,315 | |
| Net proceeds from sale of business | - | (201 | - | 64,675 | |
| Acquisition of business, net of cash acquired | - | (3,341 | - | (3,341 | |
| Other | 41 | - | 41 | - | |
| Net cash flows from investing activities | (6,329 | (12,883 | (16,018 | 44,019 | |
| Financing activities | |||||
| Increase (decrease) under line of credit facilities | (21,257 | 43,367 | (41,011 | (11,294 | |
| Borrowings under long-term debt | - | 24 | 155 | 1,876 | |
| Repayment of long-term debt | (744 | (634 | (1,341 | (1,357 | |
| Proceeds on issuance of preferred stock, net of issuance costs | 26,804 | - | 26,804 | - | |
| Payment of cash dividends on preferred stock | - | (1,700 | (1,700 | (3,400 | |
| Proceeds from the exercise of stock options and employee share purchases | 349 | 336 | 571 | 647 | |
| Payment of withholding taxes on stock-based awards | (1,030 | (299 | (1,151 | (382 | |
| Payment of debt issuance costs | (415 | (81 | (2,488 | (395 | |
| Payment of contingent consideration | (1,100 | - | (1,100 | - | |
| Other | - | (5 | (4 | 216 | |
| Net cash flows from financing activities | 2,607 | 41,008 | (21,265 | (14,089 | |
| Foreign exchange gain (loss) on cash held in a foreign currency | 12 | 50 | (4 | (8 | |
| Increase (decrease) in cash and cash equivalents in the period | (1,045 | (3,485 | 127 | (750 | |
| Cash and cash equivalents - beginning of the period | 2,670 | 6,015 | 1,498 | 3,280 | |
| Cash and cash equivalents - end of the period | 1,625 | 2,530 | 1,625 | 2,530 |
All values are in US Dollars.
| SunOpta Inc. | ||||||
|---|---|---|---|---|---|---|
| Segmented Information | ||||||
| For the quarters and two quarters ended June 27, 2020 and June 29, 2019 | ||||||
| Unaudited | ||||||
| (Expressed in thousands of U.S. dollars) | ||||||
| **** | **** | **** | Quarter ended | Two quarters ended | ||
| **** | **** | **** | June 27, 2020 | June 29, 2019 | June 27, 2020 | June 29, 2019 |
| **** | **** | **** | ||||
| Segment revenues from external customers: | ||||||
| Global Ingredients | 126,543 | 120,892 | 254,895 | 255,734 | ||
| Plant-Based Foods and Beverages | 91,705 | 81,940 | 197,947 | 163,216 | ||
| Fruit-Based Foods and Beverages | 92,696 | 90,172 | 194,051 | 179,329 | ||
| Total segment revenues from external customers | 310,944 | 293,004 | 646,893 | 598,279 | ||
| Segment gross profit: | ||||||
| Global Ingredients | 16,433 | 12,077 | 32,980 | 26,769 | ||
| Plant-Based Foods and Beverages | 16,731 | 12,114 | 37,802 | 22,610 | ||
| Fruit-Based Foods and Beverages | 6,528 | 3,136 | 12,630 | 6,154 | ||
| Total segment gross profit | 39,692 | 27,327 | 83,412 | 55,533 | ||
| Segment operating income (loss): | ||||||
| Global Ingredients | 8,038 | 3,667 | 16,152 | 10,210 | ||
| Plant-Based Foods and Beverages | 10,484 | 4,496 | 24,337 | 7,024 | ||
| Fruit-Based Foods and Beverages | (2,016 | (5,960 | (6,718 | (11,565 | ||
| Corporate Services | (7,674 | (4,740 | (13,480 | (7,886 | ||
| Total segment operating income (loss) | 8,832 | (2,537 | 20,291 | (2,217 | ||
| Segment gross profit percentage: | ||||||
| Global Ingredients | 13.0% | 10.0% | 12.9% | 10.5% | ||
| Plant-Based Foods and Beverages | 18.2% | 14.8% | 19.1% | 13.9% | ||
| Fruit-Based Foods and Beverages | 7.0% | 3.5% | 6.5% | 3.4% | ||
| Total segment gross profit percentage | 12.8% | 9.3% | 12.9% | 9.3% | ||
| Segment operating income (loss) percentage: | ||||||
| Global Ingredients | 6.4% | 3.0% | 6.3% | 4.0% | ||
| Plant-Based Foods and Beverages | 11.4% | 5.5% | 12.3% | 4.3% | ||
| Fruit-Based Foods and Beverages | -2.2% | -6.6% | -3.5% | -6.4% | ||
| Total segment operating income (loss) percentage | 2.8% | -0.9% | 3.1% | -0.4% |
All values are in US Dollars.
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. 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, 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 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 27, 2020 | |||||||
| Net earnings | 777 | - | 777 | ||||
| Loss attributable to non-controlling interests | 230 | - | 230 | ||||
| Dividends and accretion on preferred stock | (2,604 | - | (2,604 | ||||
| Loss attributable to common shareholders | (1,597 | (0.02 | - | - | (1,597 | (0.02 | |
| Adjusted for: | |||||||
| Costs related to the Value Creation Plan^(a)^ | 479 | - | 479 | ||||
| Plant expansion costs^(b)^ | 92 | - | 92 | ||||
| Other^(c)^ | (349 | - | (349 | ||||
| Net income tax effect^(d)^ | 17 | - | 17 | ||||
| Adjusted loss | (1,358 | (0.02 | - | - | (1,358 | (0.02 | |
| June 29, 2019 | |||||||
| Net loss | (8,766 | (146 | (8,912 | ||||
| Earnings attributable to non-controlling interests | (143 | - | (143 | ||||
| Dividends and accretion on 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 Value Creation Plan^(e)^ | 1,675 | - | 1,675 | ||||
| Plant expansion costs^(f)^ | 311 | - | 311 | ||||
| Costs related to sale of soy and corn business^(g)^ | - | 201 | 201 | ||||
| Contract manufacturer transition costs^(h)^ | 201 | - | 201 | ||||
| Other^(i)^ | (477 | - | (477 | ||||
| Net income tax effect^(d)^ | 211 | (55 | 156 | ||||
| Adjusted loss | (8,989 | (0.10 | - | - | (8,989 | (0.10 |
All values are in US Dollars.
(a) Reflects employee retention costs of $0.2 million and professional fees of $0.2 million recorded in SG&A expenses; and employee termination costs of $0.5 million (offset by a $0.4 million reversal of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees) recorded in other expense.
(b) Reflects costs related to the expansion of our plant-based extraction capabilities at our Alexandria, Minnesota, facility, which were recorded in cost of goods sold.
(c) Other income includes the reversal of previously accrued costs related to the withdrawal of certain consumer-packaged products. These costs were recognized in other expense in 2016.
(d) Reflects the tax effect of the preceding adjustments to earnings and reflects an overall estimated annual effective tax rate of approximately 30% for the quarter ended June 27, 2020 (June 29, 2019 - 27%) on adjusted earnings/loss before tax.
(e) 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.
(f) Reflects costs related to the expansion of our Allentown, Pennsylvania, plant-based beverage facility, which were recorded in cost of goods sold.
(g) Reflects legal fees incurred in connection with the sale of the soy and corn business, which were recorded in other expense.
(h) Reflects costs to transition premium juice production activities to new contract manufacturers, which were recorded in cost of goods sold.
(i) Other includes a gain related to a project cancellation, partially offset by losses on the disposal of assets, and business development costs, which were recorded in other income/expense.
| Excluding | |||||||
|---|---|---|---|---|---|---|---|
| disposed operations | Disposed operations | Consolidated | |||||
| Per Diluted Share | Per Diluted Share | Per Diluted Share | |||||
| For the two quarters ended | |||||||
| June 27, 2020 | |||||||
| Net earnings | 4,124 | - | 4,124 | ||||
| Loss attributable to non-controlling interests | 244 | - | 244 | ||||
| Dividends and accretion on preferred stock | (4,629 | - | (4,629 | ||||
| Loss attributable to common shareholders | (261 | (0.00 | - | - | (261 | (0.00 | |
| Adjusted for: | |||||||
| Costs related to the Value Creation Plan^(a)^ | 2,474 | - | 2,474 | ||||
| Plant expansion costs^(b)^ | 92 | - | 92 | ||||
| Contingent consideration settlement^(c)^ | (2,286 | - | (2,286 | ||||
| Other^(d)^ | (320 | - | (320 | ||||
| Net income tax effect^(e)^ | (118 | - | (118 | ||||
| Adjusted loss | (419 | (0.00 | - | - | (419 | (0.00 | |
| June 29, 2019 | |||||||
| Net earnings (loss) | (15,967 | 32,650 | 16,683 | ||||
| Earnings attributable to non-controlling interests | (89 | - | (89 | ||||
| Dividends and accretion on 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^(f)^ | - | (45,378 | (45,378 | ||||
| Costs related to Value Creation Plan^(g)^ | 3,533 | - | 3,533 | ||||
| Plant expansion costs^(h)^ | 311 | - | 311 | ||||
| Contract manufacturer transition costs^(i)^ | 289 | - | 289 | ||||
| Product withdrawal and recall costs^(j)^ | 260 | - | 260 | ||||
| Other^(k)^ | (325 | - | (325 | ||||
| Net income tax effect^(e)^ | (615 | 12,434 | 11,819 | ||||
| Adjusted loss | (16,599 | (0.19 | (294 | (0.00 | (16,893 | (0.19 |
All values are in US Dollars.
(a) Reflects employee retention costs of $0.7 million and professional fees of $0.8 million recorded in SG&A expenses; and employee termination costs of $1.5 million (offset by a $0.9 million reversal of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees), and facility closure costs of $0.4 million recorded in other expense.
(b) Reflects costs related to the expansion of our plant-based extraction capabilities at our Alexandria, Minnesota, facility, which were recorded in cost of goods sold.
(c) Reflects a gain on the settlement of the remaining earn-out obligation related to our acquisition of Citrusource in 2015, which was recorded in other income.
(d) Other income includes the reversal of previously accrued costs related to the withdrawal of certain consumer-packaged products. These costs were recognized in other expense in 2016.
(e) Reflects the tax effect of the preceding adjustments to earnings and reflects an overall estimated annual effective tax rate of approximately 30% for the two quarters ended June 27, 2020 (June 29, 2019 - 27%) on adjusted earnings/loss before tax.
(f) Reflects the recognized gain on sale of the soy and corn business, which was recorded in other income.
(g) 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, offset by 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.
(h) Reflects costs related to the expansion of our Allentown, Pennsylvania, plant-based beverage facility, which were recorded in cost of goods sold.
(i) Reflects costs to transition premium juice production activities to new contract manufacturers, which were recorded in cost of goods sold.
(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 2016, which were recorded in other expense.
(k) Other includes a gain related to a project cancellation, partially offset by insurance deductibles, losses on the disposal of assets, and business development costs, which were recorded in other income/expense.
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 disposal of the soy and corn business on the Company's consolidated results for the 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 27, 2020 | ||||
| Net earnings | 777 | - | 777 | |
| Provision for income taxes | 452 | - | 452 | |
| Interest expense, net | 7,936 | - | 7,936 | |
| Other income, net | (333 | - | (333 | |
| Total segment operating income | 8,832 | - | 8,832 | |
| Depreciation and amortization | 8,751 | - | 8,751 | |
| Stock-based compensation^(a)^ | 2,368 | - | 2,368 | |
| Costs related to Value Creation Plan^(b)^ | 463 | - | 463 | |
| Plant expansion costs^(c)^ | 92 | - | 92 | |
| Adjusted EBITDA | 20,506 | - | 20,506 | |
| 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^(b)^ | 954 | - | 954 | |
| Plant expansion costs^(c)^ | 311 | - | 311 | |
| Contract manufacturer transition costs^(d)^ | 201 | - | 201 | |
| Adjusted EBITDA | 10,114 | - | 10,114 |
All values are in US Dollars.
(a) For the second quarter of 2020, stock-based compensation of $2.4 million was recorded in SG&A expenses, and the reversal of $0.4 million of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees was recognized in other income.
(b) For the second quarters of 2020 and 2019, reflects professional fees and employee retention costs of $0.5 million and $1.0 million, respectively, recorded in SG&A expenses.
(c) For the second quarter of 2020, reflects costs related to the expansion of our plant-based extraction capabilities at our Alexandria, Minnesota, facility, and, for the second quarter of 2019, reflects costs related to the expansion of our Allentown, Pennsylvania, plant-based 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.
| Excluding | ||||
|---|---|---|---|---|
| disposed operations | Disposed operations | Consolidated | ||
| For the two quarters ended | ||||
| June 27, 2020 | ||||
| Net earnings | 4,124 | - | 4,124 | |
| Provision for income taxes | 1,582 | - | 1,582 | |
| Interest expense, net | 16,216 | - | 16,216 | |
| Other income, net | (1,631 | - | (1,631 | |
| Total segment operating income | 20,291 | - | 20,291 | |
| Depreciation and amortization | 17,673 | - | 17,673 | |
| Stock-based compensation^(a)^ | 5,274 | - | 5,274 | |
| Costs related to Value Creation Plan^(b)^ | 1,499 | - | 1,499 | |
| Plant expansion costs^(c)^ | 92 | - | 92 | |
| Adjusted EBITDA | 44,829 | - | 44,829 | |
| 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 |
All values are in US Dollars.
(a) For the first two quarters of 2020 and 2019, stock-based compensation of $5.3 million and $4.9 million, respectively, was recorded in SG&A expenses, and the reversal of $0.9 million and $2.1 million, respectively, of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees was recognized in other income.
(b) For the first two quarters of 2020 and 2019, reflects professional fees, and employee retention and relocation costs of $1.5 million and $1.2 million, respectively, recorded in SG&A expenses.
(c) For the first two quarters of 2020, reflects costs related to the expansion of our plant-based extraction capabilities at our Alexandria, Minnesota, facility, and, for the first two quarters of 2019, reflects costs related to the expansion of our Allentown, Pennsylvania, plant-based 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.