Revenue declined 6.5% (adjusted for the
divested Sunflower business), despite double digit growth in oat
milk and fruit snacks
Net Loss of $18.8 million, including tax
expense of $8.8 million mainly due to the recognition of a full
valuation allowance for deferred tax assets and $2.5 million of net
expense related to the frozen fruit recall versus net earnings of
$1.5 million in the prior year period
Adjusted EBITDA of $20.2 million, or 9.7% of
revenue, compared to $22.3 million or 9.2% of revenue in the prior
year. The second quarter of 2022 included a $2.4 million adjusted
EBITDA contribution from the divested Sunflower business
Cash flow generated from operations was
$15.9 million, an increase of $18.3 million versus the prior
year
Full-year outlook revised to $880 - $900
million of revenue, and $87 - $91 million of Adjusted
EBITDA
SunOpta Inc. (“SunOpta” or the “Company”) (Nasdaq:STKL)
(TSX:SOY), a U.S.-based global pioneer fueling the future of
sustainable, plant-based and fruit-based foods and beverages, today
announced financial results for the second quarter ended July 1,
2023.
All amounts are expressed in U.S. dollars and results are
reported in accordance with U.S. GAAP, except where specifically
noted.
Second Quarter 2023 highlights:
- Revenues of $207.8 million compared to $222.2 million
(excluding the divested sunflower business) in the year earlier
period, or $243.5 million including sunflower. Excluding the impact
of the sunflower business, which was divested in October 2022,
total revenues were down 6.5% reflecting an 8.1% decline in
Plant-Based and a 4.4% decline in Fruit-Based.
- Gross profit margin was 7.9% on a reported basis. Excluding
start-up and product recall costs, gross margin was 12.1%, down 230
basis points from 14.4% as 90 basis points of margin expansion in
Plant-Based was more than offset by a decline in Fruit-Based
margin, including a 320-basis decline for direct costs related to
the frozen fruit recall.
- Loss from continuing operations, including tax expense of $8.8
million mainly due to the recognition of a full valuation allowance
for deferred tax assets and $2.5 million of net expense related to
the frozen fruit recall, was $18.8 million compared to earnings
from continuing operations of $2.3 million in the prior year
period.
- Adjusted loss¹ attributable to common shareholders was $3.0
million or $0.03 per diluted common share, compared to adjusted
earnings of $3.3 million or $0.03 per diluted common share in the
prior year period.
- Adjusted EBITDA¹ of $20.2 million, or 9.7% of revenues,
compared to $22.3 million and 9.2% of revenues in the prior year
period. The prior year period included a $2.4 million contribution
from the divested Sunflower business.
“While we were certainly not pleased with the quarter, the
resiliency of our model to deliver high rates of profitability
despite a more challenging environment was a key takeaway from our
latest results,” said Joe Ennen, Chief Executive Officer. “Due to
frozen fruit customer losses, slower ramp-up of new business, and
current category softness, we are tempering our outlook for 2023.
Demand for our oat-based offerings remains exceptionally strong, as
volume growth drove a 59% increase in oat milk sales during the
second quarter. Our fruit snack business also delivered another
quarter of double-digit increases. In addition, we continue to make
steady progress on our strategic growth initiatives including
starting up our new ready-to-drink protein shake line in
Midlothian, Texas and our capacity expansion project in Omak,
Washington. Despite the short-term results, we remain committed to
our long-term growth algorithm, and are well positioned for
significant growth in our plant-based segment as we leverage our
operational expertise and innovation across our expanding
capabilities and production capacity to Fuel the Future of
Food.”
Second Quarter 2023 Results
Revenues of $207.8 million for the second quarter of 2023
decreased 6.5% excluding the divested sunflower business. This was
driven by an 8.1% decline in Plant-Based Foods and Beverages,
excluding sunflower, and a 4.4% decline in Fruit-Based Foods and
Beverages. The decline, including sunflower, was 14.7% compared to
the second quarter of 2022.
The Plant-Based Foods and Beverages segment generated revenues
of $114.5 million, a decrease of 8.1% excluding the impact of our
sunflower business, which was divested in October 2022. Including
the sunflower business, the decline was 21.5% compared with the
second quarter of 2022. Pricing increased 3.2%, reflecting the
wrap-around benefit of actions in 2022, partially offset by an
unfavorable volume/mix, which was down 10.2%. Volume/mix reflected
lower external sales of plant-based ingredients due to increased
internal demand for oat base, lower demand for almond beverages,
lower sales volumes of everyday broths, and lower tea volumes due
to a customer’s inability to supply us with their raw material.
Partially offsetting these factors was volume growth from oat milks
and creamers as well as our newly introduced 330-milliliter protein
shakes.
The Fruit-Based Foods and Beverages segment generated revenues
of $93.3 million, a decrease of 4.4% compared to $97.6 million in
the second quarter of 2022, reflecting an unfavorable volume/mix
impact of 4.5% partially offset by a 0.3% increase in pricing. The
volume/mix impact was driven by lower volumes of frozen fruit, due
to decreased retail consumption trends, constraints on certain
fruit varieties impacting blends, and lost foodservice volumes,
partially offset by increased volumes of fruit snacks and smoothie
bowls.
Gross profit was $16.4 million for the second quarter, compared
to $34.9 million in the prior year period, as reported. As a
percentage of revenues, gross profit margin was 7.9% compared to
14.3% in the second quarter of 2022, a decrease of 640 basis
points, as reported.
Gross profit in the Plant-Based Foods and Beverages segment
decreased 39.8% to $14.4 million, while gross margin decreased 380
basis points to 12.6%. Excluding the impact of start-up costs
related to the new plant in Midlothian, Texas, adjusted gross
margin for the Plant-Based Foods and Beverages segment was 17.5% in
the second quarter of 2023, compared to 16.6% in the second quarter
of 2022. The 90-basis point increase in adjusted gross margin
reflected the benefit of pricing actions taken in 2022 to combat
inflationary pressures, positive margin impacts resulting from the
divestiture of the lower-margin sunflower commodity business, and a
mix shift in the Company’s plant-based ingredient operations. These
factors were partially offset by incremental depreciation of new
production equipment for capital expansion projects, together with
the negative impacts of higher input costs and lower production
volumes and plant utilization within our plant-based
operations.
Gross profit in the Fruit-Based Foods and Beverages segment was
$2.0 million, compared with $11.0 million in the prior year period,
and gross margin decreased 910 basis points to 2.1%. In the second
quarter of 2023, we recorded a reserve for unsaleable inventory
associated with the frozen fruit product recall of $3.0 million
(3.2% gross margin impact) and $0.2 million of start-up costs
related to a new high-speed fruit snacks packaging line. Excluding
the impact of these costs, adjusted gross margin for the
Fruit-Based Foods and Beverages segment was 5.6% in the second
quarter of 2023, compared to 11.2% in the second quarter of 2022, a
decrease of 560 basis points. The decrease reflected higher
manufacturing costs, unfavorable plant utilization driven by
reduced volumes, a higher mix of lower margin bulk fruit sales to
right-size inventories and improve working capital efficiency, and
a higher cost of inventory from Mexico due to the impact of a
strengthening Mexican peso (approximately $2.4 million or 2.6%
gross margin impact).
Segment operating loss¹ was $3.3 million, or 1.6% of revenues in
the second quarter of 2023, compared to segment operating income of
$8.1 million, or 3.3% of revenues in the second quarter of 2022.
The decrease in segment operating income was driven by lower gross
profit, partially offset by a favorable $2.3 million foreign
exchange impact and a $4.7 million decrease in SG&A as a result
of lower employee incentive compensation accruals and lower
stock-based compensation expense related to timing, partially
offset by higher business development costs.
Loss attributable to common shareholders for the second quarter
of 2023 was $19.3 million, or $0.17 per diluted common share,
compared to income of $0.7 million, or $0.01 per diluted common
share, during the second quarter of 2022. Loss attributable to
common shareholders included tax expense of $8.8 million mainly due
to the recognition of a full valuation allowance for deferred tax
assets and $2.5 million of net expense related to the frozen fruit
recall.
Adjusted loss¹ in the second quarter of 2023 was $3.0 million or
$0.03 per common share, compared to adjusted earnings of $3.3
million or $0.03 per common share in the second quarter of
2022.
Adjusted EBITDA¹ was $20.2 million or 9.7% of revenue in the
second quarter of 2023, compared to $22.3 million or 9.2% of
revenue in the second quarter of 2022.
Please refer to the discussion and table below under “Non-GAAP
Measures”.
Balance Sheet and Cash Flow
As of July 1, 2023, SunOpta had total assets of $887.1 million
and total debt of $316.1 million compared to total assets of $855.9
million and total debt of $308.5 million at year end fiscal 2022.
During the second quarter of 2023, cash provided by operating
activities was $15.9 million compared to cash used in operating
activities of $2.5 million during the second quarter of 2022.
Investing activities of continuing operations consumed $8.1 million
of cash during the second quarter of 2023 versus $34.1 million in
the prior year. The year-over-year decrease reflected the
completion of certain major capital projects, including the
construction of our new plant-based beverage facility in
Midlothian, Texas.
Frozen Fruit Recall
On June 21, 2023, we announced that our subsidiary, Sunrise
Growers Inc., had issued a voluntary recall of specific frozen
fruit products linked to pineapple provided by a third-party
supplier due to possible contamination by Listeria monocytogenes.
In July 2023, we began restocking each of the affected retail
customers with replacement products produced with fruit sourced
from a different supplier.
For the quarter ended July 1, 2023, we recognized net expenses
of $2.5 million related to this recall, equal to the self-insured
retention amount under our insurance policies, which included a
reduction to revenues of $0.2 million for customer returns and a
$3.0 million charge to cost of goods sold for unsaleable inventory,
partially offset by estimated insurance recoveries of $0.7 million,
recorded in other income. We expect to incur additional
recall-related costs during the second half of 2023, which we
expect will be generally covered under our insurance policies.
2023 Outlook2
For fiscal 2023, the Company revised its outlook:
($ millions)
Previous 2023 Outlook
Growth
Revenue
$
1,000 – 1,050
7% - 12%
Adj. EBITDA
$
97 - 103
16% - 23%
($ millions)
Revised 2023 Outlook
Growth
Revenue
$
880 – 900
(6%) – (4%)
Adj. EBITDA
$
87 - 91
4% - 9%
Excluding $57.9 million of revenue in 2022 related to the
divested Sunflower business, expected revenue growth rates in 2023
are between 0% - 3%.
Conference Call
SunOpta plans to host a conference call at 5:30 P.M. Eastern
time on Wednesday, August 9, 2023, to discuss the second quarter
financial results. After opening remarks, there will be a
question-and-answer period. Investors interested in listening to
the live webcast can access a link on SunOpta's website at
www.sunopta.com under the "Investor Relations" section or directly
here. A replay of the webcast will be archived and can be accessed
for approximately 90 days on the Company's website. This call may
be accessed with the toll free dial-in number (888) 440-4182 or
International dial-in number (646) 960-0653 using Conference ID:
8338433.
1 See discussion of non-GAAP measures
2 The Company has included certain forward-looking statements
about the future financial performance that include non-GAAP
financial measures, including Adjusted EBITDA. These non–GAAP
financial measures are derived by excluding certain amounts,
expenses or income, from the corresponding financial measures
determined in accordance with GAAP. The determination of the
amounts that are excluded from these non-GAAP financial measures is
a matter of management judgment and depends upon, among other
factors, the nature of the underlying expense or income amounts
recognized in a given period. We are unable to present a
quantitative reconciliation of the aforementioned forward-looking
non-GAAP financial measures to their most directly comparable
forward-looking GAAP financial measures because management cannot
reliably predict all of the necessary components of such GAAP
measures. Historically, management has excluded the following items
from certain of these non-GAAP measures, and such items may also be
excluded in future periods and could be significant amounts:
- Expenses related to the acquisition or divestiture of a
business, including business development costs, impairment of
assets, integration costs, severance, retention costs and
transaction costs;
- Start-up costs of new facilities and equipment;
- Frozen fruit product recall-related costs, net of insurance
recoveries;
- Charges associated with restructuring and cost saving
initiatives, including but not limited to asset impairments,
accelerated depreciation, severance costs and lease abandonment
charges;
- Asset impairment charges and facility closure costs;
- Legal settlements or awards; and
- The tax effect of the above items.
About SunOpta Inc.
SunOpta (Nasdaq:STKL) (TSX:SOY) is a U.S.-based, global pioneer
fueling the future of sustainable, plant-based and fruit-based food
and beverages. Founded nearly 50 years ago, SunOpta manufactures
natural, organic and specialty products sold through retail and
foodservice channels. SunOpta operates as a manufacturer for
leading natural and private label brands, and also proudly produces
its own brands, including SOWN ®, Dream®, West Life™ and Sunrise
Growers®. For more information, visit www.sunopta.com, LinkedIn and
Twitter.
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
adjusted outlook for 2023, our belief that we are well positioned
for significant growth in our plant-based segment and our
expectation that we will incur additional recall-related costs
during the second half of 2023 which will be generally covered
under our insurance policy. Generally, forward-looking statements
do not relate strictly to historical or current facts and are
typically accompanied by words such as “expect,” “continue,”
“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; current customer demand for the Company’s products;
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; the cost of the frozen fruit
recall; labor cost reductions; and the terms of our insurance
policies. 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 the possibility of
supply chain, logistics and other disruptions; 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; potential
additional costs associated with the frozen fruit recall; 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.
SunOpta Inc.
Consolidated Statements of Operations
For the quarters and two quarters ended
July 1, 2023 and July 2, 2022
(Unaudited)
(All dollar amounts expressed in thousands
of U.S. dollars, except per share amounts)
Quarter ended
Two quarters ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
$
$
$
$
Revenues
207,809
243,531
431,689
483,704
Cost of goods sold
191,430
208,633
387,107
420,450
Gross profit
16,379
34,898
44,582
63,254
Selling, general and administrative
expenses
19,573
24,304
45,003
46,514
Intangible asset amortization
2,446
2,612
4,892
5,224
Other expense (income), net
(227
)
1,540
(192
)
1,827
Foreign exchange gain
(2,377
)
(127
)
(4,588
)
(599
)
Earnings (loss) from continuing
operations before the following
(3,036
)
6,569
(533
)
10,288
Interest expense, net
6,969
3,132
12,781
5,662
Earnings (loss) from continuing
operations before income taxes
(10,005
)
3,437
(13,314
)
4,626
Income tax expense
8,833
1,152
4,147
1,339
Earnings (loss) from continuing
operations
(18,838
)
2,285
(17,461
)
3,287
Earnings (loss) from discontinued
operations
-
(814
)
-
2,752
Net earnings (loss)
(18,838
)
1,471
(17,461
)
6,039
Dividends and accretion on preferred
stock
(422
)
(760
)
(1,126
)
(1,515
)
Earnings (loss) attributable to common
shareholders
(19,260
)
711
(18,587
)
4,524
Basic and diluted earnings (loss) per
share
Earnings (loss) from continuing
operations
(0.17
)
0.01
(0.16
)
0.02
Earnings (loss) from discontinued
operations
-
(0.01
)
-
0.03
Earnings (loss) attributable to common
shareholders(1)
(0.17
)
0.01
(0.16
)
0.04
Weighted-average common shares
outstanding (000s)
Basic
115,471
107,622
112,743
107,510
Diluted
115,471
108,667
112,743
108,495
(1) The sum of individual per share
amounts may not add due to rounding.
SunOpta Inc.
Consolidated Balance Sheets
As at July 1, 2023 and December 31,
2022
(Unaudited)
(All dollar amounts expressed in thousands
of U.S. dollars)
July 1, 2023
December 31, 2022
$
$
ASSETS
Current assets
Cash and cash equivalents
981
679
Accounts receivable
72,776
74,903
Inventories
220,752
207,047
Prepaid expenses and other current
assets
15,734
15,688
Income taxes recoverable
4,133
4,040
Total current assets
314,376
302,357
Property, plant and equipment, net
342,679
322,391
Operating lease right-of-use assets
90,454
82,564
Intangible assets, net
130,754
135,646
Goodwill
3,998
3,998
Deferred income taxes
-
3,712
Other assets
4,864
5,184
Total assets
887,125
855,852
LIABILITIES
Current liabilities
Accounts payable and accrued
liabilities
124,826
108,511
Notes payable
19,727
-
Income taxes payable
180
957
Current portion of long-term debt
45,394
38,491
Current portion of operating lease
liabilities
14,231
13,074
Total current liabilities
204,358
161,033
Long-term debt
270,717
269,993
Operating lease liabilities
85,427
77,557
Deferred income taxes
266
-
Total liabilities
560,768
508,583
Series B-1 preferred stock
14,264
28,062
SHAREHOLDERS' EQUITY
Common shares
462,290
440,348
Additional paid-in capital
22,715
33,184
Accumulated deficit
(174,275
)
(155,688
)
Accumulated other comprehensive income
1,363
1,363
Total shareholders' equity
312,093
319,207
Total liabilities and shareholders'
equity
887,125
855,852
SunOpta Inc.
Consolidated Statements of Cash Flows
For the quarters and two quarters ended
July 1, 2023 and July 2, 2022
(Unaudited)
(Expressed in thousands of U.S.
dollars)
Quarter ended
Two quarters ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
$
$
$
$
CASH PROVIDED BY (USED IN)
Operating activities
Net earnings (loss)
(18,838
)
1,471
(17,461
)
6,039
Earnings (loss) from discontinued
operations
-
(814
)
-
2,752
Earnings (loss) from continuing
operations
(18,838
)
2,285
(17,461
)
3,287
Items not affecting cash:
Depreciation and amortization
10,787
9,372
20,785
18,785
Amortization of debt issuance costs
388
396
795
771
Deferred income taxes
8,828
2,341
3,978
2,163
Stock-based compensation
2,029
3,970
5,921
5,599
Other
(97
)
1,634
506
1,745
Changes in operating assets and
liabilities
12,781
(22,452
)
5,221
(19,261
)
Net cash provided by (used in) operating
activities of continuing operations
15,878
(2,454
)
19,745
13,089
Investing activities
Additions to property, plant and
equipment
(8,057
)
(37,038
)
(33,899
)
(62,760
)
Proceeds from sale of sunflower
business
-
-
385
-
Proceeds from sale of property, plant and
equipment
-
2,978
-
4,182
Net cash used in investing activities of
continuing operations
(8,057
)
(34,060
)
(33,514
)
(58,578
)
Net cash used in investing activities of
discontinued operations
-
(6,324
)
-
(6,324
)
Net cash used in investing activities of
continuing operations
(8,057
)
(40,384
)
(33,514
)
(64,902
)
Financing activities
Increase (decrease) in borrowings under
revolving credit facilities
(3,112
)
31,067
5,700
20,762
Borrowings of long-term debt
640
18,206
19,333
41,103
Repayment of long-term debt
(10,964
)
(5,174
)
(21,012
)
(7,569
)
Proceeds from notes payable
24,433
-
35,095
-
Repayment of notes payable
(9,935
)
-
(15,368
)
-
Proceeds from the exercise of stock
options and employee share purchases
287
341
576
591
Payment of withholding taxes on
stock-based awards
(8,758
)
(882
)
(9,007
)
(971
)
Payment of cash dividends on preferred
stock
(305
)
(609
)
(1,123
)
(1,218
)
Payment of share issuance costs
(36
)
-
(123
)
-
Payment of debt issuance costs
-
(53
)
-
(559
)
Net cash provided by (used in) financing
activities of continuing operations
(7,750
)
42,896
14,071
52,139
Increase in cash and cash equivalents in
the period
71
58
302
326
Cash and cash equivalent, beginning of the
period
910
495
679
227
Cash and cash equivalents, end of the
period
981
553
981
553
SunOpta Inc.
Segmented Information
For the quarters and two quarters ended
July 1, 2023 and July 2, 2022
Unaudited
(Expressed in thousands of U.S.
dollars)
Quarter ended
Two quarters ended
July 1, 2023
July 2, 2022
July 1, 2023
July 2, 2022
$
$
$
$
Segment revenues from external
customers:
Plant-Based Foods and Beverages
114,492
145,912
243,842
281,423
Fruit-Based Foods and Beverages
93,317
97,619
187,847
202,281
Total segment revenues from external
customers
207,809
243,531
431,689
483,704
Segment gross profit:
Plant-Based Foods and Beverages
14,405
23,940
34,570
44,285
Fruit-Based Foods and Beverages
1,974
10,958
10,012
18,969
Total segment gross profit
16,379
34,898
44,582
63,254
Segment operating income
(loss):
Plant-Based Foods and Beverages
1,903
12,196
10,180
20,657
Fruit-Based Foods and Beverages
(4,278
)
3,211
(2,493
)
3,995
Corporate Services
(888
)
(7,298
)
(8,412
)
(12,537
)
Total segment operating income (loss)
(3,263
)
8,109
(725
)
12,115
Segment gross profit
percentage:
Plant-Based Foods and Beverages
12.6
%
16.4
%
14.2
%
15.7
%
Fruit-Based Foods and Beverages
2.1
%
11.2
%
5.3
%
9.4
%
Total segment gross profit percentage
7.9
%
14.3
%
10.3
%
13.1
%
Segment operating income (loss)
percentage:
Plant-Based Foods and Beverages
1.7
%
8.4
%
4.2
%
7.3
%
Fruit-Based Foods and Beverages
-4.6
%
3.3
%
-1.3
%
2.0
%
Total segment operating income (loss)
percentage
-1.6
%
3.3
%
-0.2
%
2.5
%
Non-GAAP Measures
In addition to reporting financial results in accordance with
U.S. GAAP, the Company provides additional information about its
operating results regarding segment operating income/loss, adjusted
earnings/loss and adjusted earnings/loss 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/loss, adjusted earnings/loss and adjusted
EBITDA assist investors in comparing performance across reporting
periods on a consistent basis by excluding items that management
believes are not indicative of its operating performance. The
non-GAAP measures of segment operating income/loss, adjusted
earnings/loss 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 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 earnings/loss from continuing
operations, which the Company believes to be the most directly
comparable U.S. GAAP financial measure.
July 1, 2023
July 2, 2022
Per Share
Per Share
For the quarter ended
$
$
$
$
Earnings (loss) from continuing
operations
(18,838
)
2,285
Dividends and accretion on preferred
stock
(422
)
(760
)
Earnings (loss) from continuing operations
attributable to common shareholders
(19,260
)
(0.17
)
1,525
0.01
Adjusted for:
Start-up costs(a)
6,697
281
Product recall costs, net of insurance
recoveries(b)
2,500
-
Business development costs(c)
731
616
Facility closure costs(d)
-
1,287
Other(e)
443
253
Net income tax on adjusting items(f)
1,873
(640
)
Change in valuation allowance for deferred
tax assets(g)
3,978
-
Adjusted earnings (loss)
(3,038
)
(0.03
)
3,322
0.03
(a)
For the second quarter of 2023, start-up
costs included the ramp-up of production at our new plant-based
beverage facility in Midlothian, Texas, the start-up of a new
high-speed packaging line at our fruit snacks facility in Omak,
Washington, and professional fees related to productivity
initiatives within our plant-based beverage operations, which were
recorded in cost of goods sold ($5.8 million) and SG&A expenses
($0.9 million). For the second quarter of 2022, start-up costs
included the hiring and training of new employees for the
Midlothian facility, which were recorded in cost of goods sold
($0.2 million) and SG&A expenses ($0.1 million).
(b)
Reflects estimated costs related to the
frozen fruit product recall in the second quarter of 2023, which
were recorded as a reduction to revenues ($0.2 million) for
customer returns and as an addition to cost of goods sold ($3.0
million) for unsaleable inventory. These costs are reflected in the
table above net of estimated insurance recoveries of $0.7 million,
which were recorded in other income.
(c)
Represents third-party costs associated
with business development activities, which are inclusive of costs
related to the evaluation, execution, and integration of external
acquisitions and divestitures, internal expansion projects, and
other strategic initiatives. These costs were recorded in SG&A
expenses.
(d)
For the second quarter of 2022, facility
closure costs mainly related to the relocation of certain equipment
from our former Oxnard, California, frozen fruit processing
facility to our Mexican facility, which were recorded in other
expense.
(e)
For the second quarters of 2023 and 2022,
other mainly reflects reserves for the settlement of certain legal
and contractual matters.
(f)
Reflects the tax effect of the preceding
adjustments to earnings calculated based on the statutory tax rates
applicable in the tax jurisdiction of the underlying adjustment,
net of deferred tax valuation allowances.
(g)
Reflects an increase to the valuation
allowance for U.S. deferred tax assets that originated prior to
fiscal 2023, based on an assessment of the future realizability of
the related tax benefits.
July 1, 2023
July 2, 2022
Per Share
Per Share
For the two quarters ended
$
$
$
$
Earnings (loss) from continuing
operations
(17,461
)
3,287
Dividends and accretion on preferred
stock
(1,126
)
(1,515
)
Earnings (loss) from continuing operations
attributable to common shareholders
(18,587
)
(0.16
)
1,772
0.02
Adjusted for:
Start-up costs(a)
13,122
721
Product recall costs, net of insurance
recoveries(b)
2,500
-
Business development costs(c)
1,462
799
Facility closure costs(d)
-
1,287
Other(e)
478
540
Net income tax on adjusting items(f)
-
(879
)
Change in valuation allowance for deferred
tax assets(g)
3,978
-
Adjusted earnings
2,953
0.03
4,240
0.04
(a)
For the first two quarters of 2023,
start-up costs included the ramp-up of production at our new
plant-based beverage facility in Midlothian, Texas, the start-up of
a new high-speed packaging line at our fruit snacks facility in
Omak, Washington, and professional fees related to productivity
initiatives within our plant-based beverage operations, which were
recorded in cost of goods sold ($11.6 million) and SG&A
expenses ($1.5 million). For the first two quarters of 2022,
start-up costs mainly related to the hiring and training of new
employees for the Midlothian facility, and the integration of the
Dream and West Life brands, which were recorded in cost of goods
sold ($0.6 million) and SG&A expenses ($0.1 million).
(b)
Reflects estimated costs related to the
frozen fruit product recall in the second quarter of 2023, which
were recorded as a reduction to revenues ($0.2 million) for
customer returns and as an addition to cost of goods sold ($3.0
million) for unsaleable inventory. These costs are reflected in the
table above net of estimated insurance recoveries of $0.7 million,
which were recorded in other income.
(c)
Represents third-party costs associated
with business development activities, which are inclusive of costs
related to the evaluation, execution, and integration of external
acquisitions and divestitures, internal expansion projects, and
other strategic initiatives. These costs were recorded in SG&A
expenses. For the first two quarters of 2022, facility closure
costs mainly related to the relocation of certain equipment from
our former Oxnard, California, frozen fruit processing facility to
our Mexican facility, which were recorded in other expense.
(d)
For the first two quarters of 2022,
facility closure costs mainly related to the relocation of certain
equipment from our former Oxnard, California, frozen fruit
processing facility to our Mexican facility, which were recorded in
other expense.
(e)
For the first two quarters of 2023 and
2022, other mainly reflects reserves for the settlement of certain
legal and contractual matters.
(f)
Reflects the tax effect of the preceding
adjustments to earnings calculated based on the statutory tax rates
applicable in the tax jurisdiction of the underlying adjustment,
net of deferred tax valuation allowances.
(g)
Reflects an increase to the valuation
allowance for U.S. deferred tax assets that originated prior to
fiscal 2023, based on an assessment of the future realizability of
the related tax benefits.
Segment Operating
Income/Loss and Adjusted EBITDA
The Company defines segment operating
income/loss as earnings/loss from continuing operations before
income taxes, interest expense and other income/expense items, and
adjusted EBITDA as segment operating income/loss plus depreciation,
amortization, 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 from
earnings/loss from continuing operations, which the Company
believes to be the most directly comparable U.S. GAAP financial
measure.
July 1, 2023
July 2, 2022
For the quarter ended
$
$
Earnings (loss) from continuing
operations
(18,838
)
2,285
Income tax expense
8,833
1,152
Interest expense, net
6,969
3,132
Other expense (income), net
(227
)
1,540
Total segment operating income (loss)
(3,263
)
8,109
Depreciation and amortization
10,787
9,372
Stock-based compensation
2,029
3,970
Start-up costs(a)
6,697
281
Product recall costs(b)
3,170
-
Business development costs(c)
731
616
Adjusted EBITDA
20,151
22,348
(a)
Refer to footnote (a) in the second
quarter tabular presentation of adjusted earnings (loss) above.
(b)
Reflects estimated costs related to the
frozen fruit product recall in the second quarter of 2023, which
were recorded as a reduction to revenues ($0.2 million) and an
addition to cost of goods sold ($3.0 million).
(c)
Refer to footnote (c) in the second
quarter tabular presentation of adjusted earnings (loss) above.
July 1, 2023
July 2, 2022
For the two quarters ended
$
$
Earnings (loss) from continuing
operations
(17,461
)
3,287
Income tax expense
4,147
1,339
Interest expense, net
12,781
5,662
Other expense (income), net
(192
)
1,827
Total segment operating income (loss)
(725
)
12,115
Depreciation and amortization
20,785
18,785
Stock-based compensation
5,921
5,599
Start-up costs(a)
13,122
721
Product recall costs(b)
3,170
-
Business development costs(c)
1,462
799
Adjusted EBITDA
43,735
38,019
(a)
Refer to footnote (a) in the first two
quarters tabular presentation of adjusted earnings above.
(b)
Reflects estimated costs related to the
recall of specific frozen fruit products in the second quarter of
2023, which were recorded as a reduction to revenues ($0.2 million)
and an addition to cost of goods sold ($3.0 million).
(c)
Refer to footnote (c) in the first two
quarters tabular presentation of adjusted earnings above.
Adjusted Revenues
The following table presents adjusted
revenues by segment and consolidated, together with a
reconciliation from reported revenues. Adjusted revenues excludes
revenues of the Company’s former sunflower business, which was
divested in October 2022.
For the quarter ended
For the two quarters
ended
Divested
Divested
Reported
Sunflower
Adjusted
Reported
Sunflower
Adjusted
Revenues
Business
Revenues
Revenues
Business
Revenues
$
$
$
$
$
$
July 1, 2023
Plant-Based Foods and Beverages
114,492
-
114,492
243,842
-
243,842
Fruit-Based Foods and Beverages
93,317
-
93,317
187,847
-
187,847
Consolidated
207,809
-
207,809
431,689
-
431,689
July 2, 2022
Plant-Based Foods and Beverages
145,912
(21,302
)
124,610
281,423
(38,465
)
242,958
Fruit-Based Foods and Beverages
97,619
-
97,619
202,281
-
202,281
Consolidated
243,531
(21,302
)
222,229
483,704
(38,465
)
445,239
Change $
Plant-Based Foods and Beverages
(31,420
)
21,302
(10,118
)
(37,581
)
38,465
884
Fruit-Based Foods and Beverages
(4,302
)
-
(4,302
)
(14,434
)
-
(14,434
)
Consolidated
(35,722
)
21,302
(14,420
)
(52,015
)
38,465
(13,550
)
Change %
Plant-Based Foods and Beverages
-21.5
%
-100.0
%
-8.1
%
-13.4
%
-100.0
%
0.4
%
Fruit-Based Foods and Beverages
-4.4
%
-
-4.4
%
-7.1
%
-
-7.1
%
Consolidated
-14.7
%
-100.0
%
-6.5
%
-10.8
%
-100.0
%
-3.0
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230809060704/en/
Investor Relations: Reed Anderson ICR 646-277-1260
reed.anderson@icrinc.com
Media Relations: Konnect Agency 213-988-8344
sunopta@konnectagency.com
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