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Press release from GlobeNewswire (a Nasdaq OMX company)

SunOpta Announces Third Quarter 2010 Results

Wednesday, November 10, 2010

SunOpta Announces Third Quarter 2010 Results13:30 EST Wednesday, November 10, 2010TORONTO, Nov. 10, 2010 (GLOBE NEWSWIRE) -- SunOpta Inc. ("SunOpta" or "the Company") (Nasdaq:STKL) (TSX:SOY), a leading global company focused on natural, organic and specialty foods and natural health products, today announced financial results for the period ended October 2, 2010. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted. As a result of the June 11, 2010 sale of the Company's Food Distribution Assets and August 31, 2010 sale of SunOpta BioProcess Inc., all results from operations related to these businesses have been excluded from operating results and are now reported as discontinued operations for all comparable periods. For the third quarter of 2010 the Company realized revenues of $217.9 million versus third quarter 2009 revenues of $212.5 million, a year over year increase of 2.5%. Revenues in SunOpta Foods were $197.5 million, an increase of 0.9% versus the third quarter of 2009. After adjusting for movements in foreign exchange rates and commodity related pricing, revenues increased approximately 7.6% on a consolidated basis versus the third quarter of 2009, and approximately 6.4% in SunOpta Foods, reflecting continued momentum in the natural, organic and specialty foods sectors. For the third quarter of 2010 the Company reported net income on a GAAP basis of $34.1 million or $0.52 per diluted common share versus net losses in the third quarter of 2009 of $4.7 million or $0.07 per diluted common share. Included in the results of the third quarter was a net gain on the sale of SunOpta Bioprocess Inc. of $34.6 million after tax or $0.52 per diluted common share, offset by non-cash goodwill and impairment charges of $6.4 million after tax or $0.10 per diluted common share. Earnings from operations1 for the third quarter of 2010 were $5.3 million or $0.08 per diluted common share. Earnings from operations1 for the third quarter include additional pre-tax costs of approximately $0.6 million related primarily to ongoing facility and operational rationalizations. Operating income1 for the third quarter increased 96.2% to $10.0 million or 4.6% of revenues versus operating income1 in the prior year of $5.1 million or 2.4% of revenues. Operating income1 in SunOpta Foods increased to $9.7 million or 4.9% of revenues versus $5.3 million or 2.7% in the prior year. EBITDA1 for the third quarter of 2010, excluding the net effect of discontinued operations and non-cash charges increased 52% to $14.1 million versus $9.3 million in 2009, indicative of the improved operating performance realized within the business. For the year to date period ended October 2, 2010 the Company has realized revenues of $668.5 million versus year to date third quarter 2009 revenues of $619.8 million, a year over year increase of 7.9%. Revenues in SunOpta Foods for the year-to-date period were $609.0 million, an increase of 6.1% versus the year-to-date period in 2009. After adjusting for movements in foreign exchange rates and commodity related pricing, revenues increased approximately 11.2% on a consolidated basis, and approximately 9.7% in SunOpta Foods. Year to date all operating segments have realized increased revenues and operating income1 versus the prior year.    Year to date the Company has realized net income on a GAAP basis of $59.1 million or $0.90 per diluted common share versus a net loss in 2009 of $4.5 million or $0.07 per diluted common share.   Included in the year to date results was a net gain after tax on the sale of the Canadian Food Distribution assets of $13.8 million or $0.21 per diluted common share and a net gain after tax on the sale of SunOpta Bioprocess Inc. of $34.6 million or $0.52 per diluted common share, offset by certain non-cash goodwill and impairment charges of $6.4 million after tax or $0.10 per diluted common share. Earnings from operations1 for the three quarters ended October 2, 2010 were $16.6 million or $0.25 per diluted common share. Earnings from operations in the three quarters ended October 2, 2010 also include additional pre-tax costs of approximately $4.6 million, including legal and professional fees and costs related to ongoing facility and operational rationalizations.    Year to date the Company has realized operating income1 of $31.5 million or 4.7% of revenues versus operating income1 in the prior year of $9.6 million or 1.6% of revenues. Operating income1 in SunOpta Foods increased to $33.9 million or 5.6% of revenues versus $14.1 million or 2.4% in the prior year. The Company has realized EBITDA1 through the first three quarters ended October 2, 2010 of $43.9 million versus $22.4 million in the prior year, an increase of approximately 96%, excluding the net favorable benefit of dispositions offset by goodwill and impairment charges. At October 2, 2010 the Company's balance sheet reflects a current working capital ratio of 1.61 to 1.00, long-term debt to equity ratio of 0.25 to 1.00 and total debt to equity ratio of 0.33 to 1.00. During the third quarter the Company generated cash from continuing operations of $20.7 million.  At October 2, 2010 the Company has total assets of $517.4 million and a net book value of $4.42 per outstanding share. At quarter-end, the Company is in compliance with all banking covenants. Steve Bromley, President and Chief Executive Officer of SunOpta, commented, "We are very pleased with our third quarter and year to date results which are the result of numerous operational improvement initiatives which have been implemented, combined with the benefit of the disposition of certain of our non-core assets.   We continue to focus on process improvement across the organization and are very pleased that the initiatives undertaken are having the expected positive effect on our results. At the same time our balance sheet has improved significantly with lower debt leverage and improved return on net assets employed. We remain confident that our continued focus on margin improvement and asset management, when combined with strong consumer interest in health and wellness, positions our Company for long-term success."   The Company plans to host a conference call at 10:00 a.m. Eastern Time on Thursday, November 11th, 2010 to discuss these results and recent corporate developments. The conference call can be accessed via a link at the Company's website at www.sunopta.com. Additionally, the call may be accessed with the toll free dial-in number 1-877-312-9198 or 631-291-4622. A replay number can also be accessed between November 11th and 18th with the toll free dial-in number 1–800-642-1687 or 706-645-9291 followed by pass code: 86530032#.1 See discussion and reconciliation of Non-GAAP MeasuresAbout SunOpta Inc. SunOpta Inc. is a leading global company focused on natural, organic and specialty foods and natural health products. The Company specializes in sourcing, processing and packaging of natural and organic food products, integrated from seed through packaged products; with a focus on strategically significant vertically integrated business models The Company's core natural and organic food operations focus on value-added grains, fiber and fruit based product offerings, supported by a global infrastructure. The Company has two non-core holdings, a 66.4% ownership position in Opta Minerals Inc. (TSX:OPM), a producer, distributor, and recycler of environmentally friendly industrial materials; and a minority ownership position in Mascoma Corporation, an innovative biofuels company. The SunOpta Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3958Forward-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, management's continued focus on process improvement, margin improvement and asset management and positioning for long-term success. The terms and phrases "continue," "improvement," "remain confident," "positions," and other similar terms and phrases are intended to identify these forward-looking statements. Forward-looking statements are based on information available to us on the date of this release and are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors the Company believes are appropriate in the circumstances including, but not limited to, general economic conditions, consumer interest in health and wellness, product pricing levels, current customer demand, competitive intensity, cost rationalization and product development initiatives. Whether actual timing and results will agree with expectations and predications of the Company is subject to many risks and uncertainties including, but not limited to, global economic conditions, consumer spending patterns and changes in market trends, decreases in customer demand, potential failure of product development, working capital management and continuous improvement initiatives, availability and pricing of raw materials and supplies, and other risks described from time to time under "Risk Factors" in the Company's Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q (available at www.sec.gov). Consequently all forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized.SunOpta Inc.       Consolidated Statements of Operations For the quarter ended October 2, 2010 and September 30, 2009 Unaudited       (Expressed in thousands of U.S. dollars, except per share amounts)           Quarter ended October 2, 2010 $ Quarter ended September 30, 2009 $ % change                        Revenues 217,905 212,488 2.5%        Cost of goods sold 184,698 183,949 0.4%        Gross profit 33,207 28,539 16.4%         Warehousing and distribution expenses702 1,036 (32.2%) Selling, general and administrative expenses 21,412 21,747 (1.5%) Intangible asset amortization1,155 1,300 (11.2%) Other expense (income), net 7,453 (270) n/m Goodwill impairment 1,654 8,341 (80.2%) Foreign exchange gain(58) (639) 90.9%        Earnings (loss) from continuing operations before the following 889 (2,976) 129.9%         Interest expense, net2,036 3,883 (47.6%)        Loss from continuing operations before income taxes(1,147) (6,859) (83.3%)Recovery of income taxes(1,258) (145) 767.6%        Earnings (loss) from continuing operations111 (6,714) (101.7%)        Discontinued operations       Loss from discontinued operations, net of taxes(15,415) (150) n/mGain on sale of discontinued operations, net of taxes49,867 -- n/m        Earnings (loss) from discontinued operations, net of taxes34,452 (150) n/m  34,563 (6,864) 603.5%Earnings (loss)               Earnings (loss) attributable to non-controlling interests496 (2,192) 122.6%        Earnings (loss) attributable to SunOpta Inc.34,067 (4,672) 829.2%        (Loss) earnings per share  – basic       -from continuing operations(0.01) (0.07)  -from discontinued operations0.53 --    0.52 (0.07)          (Loss) earnings per share  – diluted       -from continuing operations-- (0.07)  -from discontinued operations0.52 --    0.52 (0.07)  SunOpta Inc.       Consolidated Statements of Operations  For the three quarters ended October 2, 2010 and September 30, 2009 Unaudited       (Expressed in thousands of U.S. dollars, except per share amounts)           Three quarters ended October 2, 2010 $ Three quarters ended September 30, 2009 $ % change                        Revenues 668,539 619,772 7.9%        Cost of goods sold 560,721 538,859 4.1%        Gross profit 107,818 80,913 33.3%         Warehousing and distribution expenses2,894 3,034 (4.6%) Selling, general and administrative expenses 71,432 64,833 10.2% Intangible asset amortization3,474 3,577 (2.9%) Other expense (income), net 8,812 (342) n/m Goodwill impairment 1,654 8,341 (80.2%) Foreign exchange gain (1,494) (156) (857.7%)        Earnings from continuing operations before the following 21,046 1,626 n/m         Interest expense, net7,625 10,159 (24.9%)        Earnings (loss) from continuing operations before income taxes13,421 (8,533) 257.3%Provision for (recovery of) income taxes2,672 (1,207) 321.4%        Earnings (loss) from continuing operations 10,749 (7,326) 246.7%        Discontinued operations       (Loss) earnings from discontinued operations, net of taxes(14,569) 29 n/mGain on sale of discontinued operations, net of taxes63,676 -- n/m        Earnings from discontinued operations, net of taxes49,107 29 n/m  59,856 (7,297)  Earnings (loss)     n/m         Earnings (loss) attributable to non-controlling interests710 (2,748) 125.8%        Earnings (loss) attributable to SunOpta Inc.59,146 (4,549) n/m        Earnings (loss) per share – basic       -from continuing operations0.16 (0.07)  -from discontinued operations0.75 --    0.91 (0.07)          Earnings (loss) per share – diluted       -from continuing operations0.15 (0.07)  -from discontinued operations0.75 --    0.90 (0.07)  SunOpta Inc.       Consolidated Balance Sheets As at October 2, 2010 and December 31, 2009 Unaudited       (Expressed in thousands of U.S. dollars, except per share amounts)          October 2, 2010 $ December 31, 2009 $        Assets               Current assets        Cash and cash equivalents   21,067 1,752 Accounts receivable   94,618 78,483 Inventories  158,049 157,541 Prepaid expenses and other current assets   13,573 10,001 Current income taxes recoverable  -- 442 Deferred income taxes  5,173 5,457 Current assets held for sale   -- 56,140    292,480 309,816        Investments  33,345 --Property, plant and equipment   100,266 103,561Goodwill  30,134 31,431Intangible assets  48,424 55,229Deferred income taxes   10,680 15,257Other assets  2,037 2,876Non-current assets held for sale   -- 33,120            517,366 551,290Liabilities               Current liabilities        Bank indebtedness   23,690 63,481 Accounts payable and accrued liabilities  100,167 87,519 Customer and other deposits   963 1,064 Incomes taxes payable  1,612 -- Other current liabilities  1,187 1,566 Current portion of long-term debt   53,842 52,455 Current portion of long-term liabilities   373 683 Current liabilities held for sale   -- 19,135    181,834 225,903        Long-term debt   17,183 34,734Long-term liabilities   2,595 2,760Deferred income taxes  13,126 12,708Non-current liabilities held for sale   -- 487    214,738 276,592        Preferred shares of a subsidiary company held for sale  -- 28,187        Equity       SunOpta Inc. shareholders' equity      Capital stock   179,587 178,694 65,299,048 common shares (December 31, 2009 – 64,982,968)      Additional paid in capital   11,480 7,934Retained earnings  93,292 34,146Accumulated other comprehensive income   4,101 12,079    288,460 232,853Non-controlling interest  14,168 13,658Total equity  302,628 246,511           517,366 551,290SunOpta Inc.     Consolidated Statements of Cash Flows     For the quarter ended October 2, 2010 and September 30, 2009 Unaudited     (Expressed in thousands of U.S. dollars, except per share amounts)   Quarter ended October 2, 2010 $  Quarter ended September 30, 2009 $      Cash provided by (used in)          Operating activities     Earnings (loss)34,563 (6,864) Earnings (loss) from discontinued operations34,452 (150) Earnings (loss) from continuing operations111 (6,714)       Items not affecting cash     Depreciation and amortization4,110 4,187 Unrealized loss (gain) on foreign exchange829 (169) Deferred income taxes(1,909) (1,459) Goodwill impairment1,654 8,341 Impairment of long-lived assets7,505 -- Other21 2,254 Changes in non-cash working capital 8,371 13,683 Net cash flows from operating activities – continuing operations20,692 20,123 Net cash flows from operating activities – discontinued operations(5,362) (857)  15,330 19,266Investing activities     Purchases of property, plant and equipment, net(4,714) (1,871) Purchase of patents, trademarks and other intangible assets(37) (77) Other116 2,041 Cash flows from investing activities – continuing operations(4,635) 93 Cash flows from investing activities – discontinued operations(12,485) 1,120  (17,120) 1,213Financing activities    Decrease in line of credit facilities(4,359) (18,996) Proceeds from the issuance of common shares338 215 Repayment of long-term debt (12,158) (3,141) Other(44) (1) Cash flows from financing activities – continuing operations(16,223) (21,923) Cash flows from financing activities – discontinued operations-- --  (16,233) (21,923)      Foreign exchange gain on cash held in a foreign currency725 573      Decrease in cash and cash equivalents during the period(17,288) (871)      Discontinued operations cash activity included above:    Add: Balance included at beginning of period17,974 19,136Less: Balance included at end of period-- (19,400)      Cash and cash equivalents – beginning of the period20,381 2,456      Cash and cash equivalents – end of the period21,067 1,321SunOpta Inc.     Consolidated Statements of Cash Flows     For the three quarters ended October 2, 2010 and September 30, 2009 Unaudited     (Expressed in thousands of U.S. dollars, except per share amounts)   Three quarters ended October 2, 2010 $  Three quarters ended September 30, 2009 $      Cash provided by (used in)          Operating activities     Earnings (loss) 59,856 (7,297) Earnings from discontinued operations48,107 29 Earnings (loss) from continuing operations10,749 (7,326)       Items not affecting cash     Depreciation and amortization12,350 12,806 Unrealized gain on foreign exchange(589) (403) Deferred income taxes(784) (354) Goodwill impairment1,654 8,341 Impairment of long-lived assets7,895 -- Other1,603 337 Changes in non-cash working capital (10,433) 14,628 Cash flows from operating activities – continuing operations22,444 28,029 Cash flows from operating activities – discontinued operations(5,439) (1,808)  17,005 26,221Investing activities     Purchases of property, plant and equipment, net(13,545) (9,490) Payment of deferred purchase consideration(721) (1,500) Purchase of patents, trademarks and other intangible assets(400) (214) Other281 (191) Cash flows from investing activities – continuing operations(14,385) (11,395) Cash flows from investing activities – discontinued operations52,298 (1,669)  37,913 (13,064)Financing activities    Decrease in line of credit facilities(39,155) (9,750) Borrowings under long-term debt 247 716 Proceeds from the issuance of common shares850 627 Repayment of long-term debt (16,327) (9,670) Other(287) 60 Net cash flows from financing activities – continuing operations(54,672) (18,017) Net cash flows from financing activities – discontinued operations-- --  (54,672) (18,017)      Foreign exchange gain on cash held in a foreign currency98 826      Increase (decrease) in cash and cash equivalents during the period344 (4,034)      Discontinued operations cash activity included above:    Add: Balance included at beginning of period18,971 22,877Less: Balance included at end of period-- (19,400)      Cash and cash equivalents – beginning of the period1,752 1,878      Cash and cash equivalents – end of the period21,067 1,321SunOpta Inc.           Segmented Information           For the quarter ended October 2, 2010 and September 30, 2009   Unaudited           (Expressed in thousands of U.S. dollars)        Quarter ended October 2, 2010     SunOpta Foods $ Opta Minerals $ Corporate Services $ Consolidated $              Total revenues from external customers197,484 20,421 --217,905              Segment Operating Income9,710 2,792 (2,506)9,996               SunOpta Foods has the following segmented reporting:    Quarter ended October 2, 2010   Grains and Foods Group  $ Ingredients Group $ Fruit Group $ International Foods Group $ SunOpta Foods $            Total revenues from external customers86,95217,13434,82458,574197,484            Segment Operating Income5,3533,1047075469,710        Quarter ended September 30, 2009     SunOpta Foods $ Opta Minerals $ Corporate Services $ Consolidated $              Total revenues from external customers 195,743 16,745 -- 212,488              Segment Operating Income 5,292 1,290 (1,487) 5,095               SunOpta Foods has the following segmented reporting:    Quarter ended September 30, 2009   Grains and Foods Group $ Ingredients Group  $ Fruit Group $ International Foods Group $ SunOpta Foods $            Total revenues from external customers 86,290 17,385 35,870 56,198 195,743            Segment Operating Income 5,257 2,859 (1,745) (1,079) 5,292             (Segment Operating Income is defined as "Earnings before the following" excluding the impact of "other expense (income), net" and "Goodwill impairment")SunOpta Inc.           Segmented Information           For the three quarters ended October 2, 2010 and September 30, 2009 Unaudited           (Expressed in thousands of U.S. dollars)        Three quarters ended October 2, 2010     SunOpta Foods $ Opta Minerals $ Corporate Services $ Consolidated $              Total revenues from external customers609,046 59,493 --668,539              Segment Operating Income33,919 6,224 (8,631)31,512               SunOpta Foods has the following segmented reporting:    Three quarters ended October 2, 2010   Grains and Foods Group $ Ingredients Group $ Fruit Group $ International Foods Group $ SunOpta Foods $            Total revenues from external customers257,88552,932119,476178,753609,046            Segment Operating Income17,55710,3223,8672,17333,919        Three quarters ended September 30, 2010     SunOpta Foods $ Opta Minerals $ Corporate Services $ Consolidated $              Total revenues from external customers 573,962 45,810 -- 619,772              Segment Operating Income 14,051 429 (4,855) 9,625               SunOpta Foods has the following segmented reporting:    Three quarters ended September 30, 2009   Grains and Foods Group $ Ingredients Group $ Fruit Group $ International Foods Group $ SunOpta Foods $            Total revenues from external customers 250,346 47,138 113,331 163,147 573,962            Segment Operating Income 14,405 5,571 (2,279) (3,646) 14,051             (Segment Operating Income is defined as "Earnings before the following" excluding the impact of "other expense (income), net" and "Goodwill impairment") Non-GAAP Measures In addition to reporting financial results in accordance with generally accepted accounting principles ("GAAP"), the Company provides information regarding Operating Income, Earnings before interest, taxes, depreciation and amortization ("EBITDA") and Earnings from Operations as additional information about its operating results, which are not measures in accordance with GAAP. The Company believes that these non-GAAP measures assist investors in comparing performance across reporting periods on a consistent basis by excluding items that are not indicative of the Company's core operating performance. The non-GAAP measures of operating income, EBITDA, and earnings from operations should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.  The Company defines Operating Income as "Earnings from continuing operations before the following" excluding the impact of "Other expense (income), net" and "Goodwill Impairment;" and EBITDA as Operating Income plus depreciation and amortization. The following is a tabular presentation of Operating Income and EBITDA, including a reconciliation to GAAP earnings for the period, which the Company believes to be the most directly comparable GAAP financial measure.  Quarter ended  October 2, 2010 $ Quarter ended September 30, 2009 $      Earnings (loss) from continuing operations111 (6,714)      Recovery of income taxes(1,258) (145) Interest expense, net2,036 3,883 Other expense (income), net7,453 (270) Goodwill impairment1,654 8,341  Operating income9,996 5,095 Depreciation and amortization4,110 4,187 Earnings before interest, taxes, depreciation and amortization (EBITDA)14,106 9,282        Three quarters ended October 2, 2010 $ Three quarters ended September 30, 2009 $      Earnings (loss) from continuing operations10,749 (7,326)      Provision for (recovery of) income taxes2,672 (1,207) Interest expense, net7,625 10,159 Other expense (income), net8,812 (342) Goodwill impairment1,654 8,341  Operating income31,512 9,625 Depreciation and amortization12,350 12,806 Earnings before interest, taxes, depreciation and amortization (EBITDA)43,862 22,431 Earnings from operations and diluted earnings from operations per share are non-GAAP measures. During the quarter and three quarters ended October 2, 2010, the Company recognized certain gains and recorded specific expenses against income that we do not believe are reflective of normal business operations.  As a result, earnings attributable to SunOpta Inc. and earnings per diluted share are adjusted to arrive at earnings from operations and earnings from operations per diluted share. The following is a tabular presentation of earnings from operations and earnings from operations per diluted common share, including a reconciliation to GAAP earnings attributable to SunOpta Inc. and diluted earnings per share, which the Company believes to be the most directly comparable GAAP financial measure.  Quarter Ended October 2, 2010 Diluted Earnings per Share for the Period     Earnings attributable to SunOpta Inc. 34,067   0.52  Adjusted for:     Gain on sale of discontinued operations, net of taxes (49,867) (0.76) Costs included in discontinued operations incurred as a result of the sale of SunOpta BioProcess Inc. 15,281   0.23  Impairment of long-lived assets and goodwill, net of taxes of $2,321 6,367   0.10  Reversal of tax valuation allowance(549) (0.01) Earnings from operations 5,299   0.08         Three Quarters Ended October 2, 2010  Diluted Earnings per Share for the Period     Earnings attributable to SunOpta Inc.$ 59,146  0.90  Adjusted for:     Gain on sale of discontinued operations, net of taxes (63,676) (0.97) Costs included in discontinued operations incurred as a result of the sale of the Canadian food distribution assets and SunOpta BioProcess Inc., net of taxes of $388 16,183   0.25  Severance costs related to restructuring plan at our natural health products operation, net of taxes of $223 413   0.01  Gain on dilution of SBI's ownership position in Xylitol Canada(1,242) (0.02) Impairment of long-lived assets and goodwill, net of taxes of $2,321 6,367   0.10  Reversal of tax valuation allowance(549) (0.01) Earnings from operations 16,642   0.25 CONTACT: SunOpta Inc. Steve Bromley, President & CEO Eric Davis, Vice President & CFO Tony Tavares, Chief Operating Officer Susan Wiekenkamp, Information Officer susan.wiekenkamp@sunopta.com 905-455-2528, ext 103 www.sunopta.com