SunOpta Sees Q2 Revenue Fall 11.7%
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Source: SunOpta, Inc.
07/08/2009
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Toronto, Aug. 6, 2009 - SunOpta Inc., a leading global company focused on natural, organic and specialty foods and natural health products, today announced financial results for the second quarter ended June 30, 2009. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.
The Company realized revenues of $257.7 million in the second quarter of 2009 versus second quarter 2008 revenues of $291.9 million, a year over year decrease of 11.7%. After adjusting for revenue declines in non-food operations plus the impact on revenues due to changes in foreign exchange rates and commodity prices, food revenues declined approximately 3% in the second quarter of 2009 versus the second quarter of 2008.
Earnings for the second quarter were $1.8 million or $0.03 per diluted common share versus earnings of $0.7 million or $0.01 per diluted common share in the second quarter of 2008. The results for the second quarter of 2009 include $3.6 million of additional pre-tax costs incurred during the quarter.
Adjusted earnings(1) for the second quarter of 2009 were $4.3 million or $0.07 per diluted common share versus adjusted earnings(1) in the second quarter of 2008 of $5.1 million or $0.08 per diluted common share. 2009 results reflect the impact of additional pre-tax costs of $3.6 million incurred during the quarter, many of which are expected to provide future benefits to the Company. During the second quarter the Company incurred approximately $1.5 million pre-tax in start-up costs related to the Modesto soymilk processing and packaging facility which commenced commercial production in June 2009. The Company also incurred pre-tax severance and related costs of approximately $0.7 million as it continues to position the business for improved future performance. In addition, pre-tax costs of approximately $0.7 million were incurred related to the investment in the revitalization and re-launch of a number of company owned natural health products brands. The Company also incurred legal and professional fees of approximately $0.7 million related to a legal action in the SunOpta BioProcess Group and costs related to ongoing matters related to the 2007 financial restatement. 2008 adjusted earnings1 reflect pre-tax costs of $6.4 million related to the Company's investigation and actions into the write down in the SunOpta Fruit Group Berry Operations and subsequent financial restatement, as well as severance.
For the six months ended June 30, 2009, the Company realized revenues of $489.8 million versus revenues of $522.4 million for the six months ended June 30, 2008. After adjusting for the April 2008 acquisition of The Organic Corporation, revenue declines in non-core food operations and the impact on revenues due to changes in foreign exchange rates and commodity prices, food revenues have declined approximately 1% versus the same period in 2008.
Earnings for the six months ended June 30, 2009 were $0.1 million or $0.00 per diluted common share versus earnings of $2.2 million or $0.03 per diluted common share in the comparable period in 2008. The 2009 results reflect the impact of $5.9 million of additional pre-tax costs incurred during the first six months.
Adjusted earnings(1) for the six months ended June 30, 2009 were $4.1 million or $0.06 per diluted common share versus adjusted earnings(1) in the comparable period in 2008 of $7.5 million or $0.12 per diluted common share. 2009 results reflect the impact of additional pre-tax costs of $5.9 million. During the six months ended June 30, 2009 the Company incurred approximately $2.5 million pre-tax in start-up costs related to the Modesto soymilk processing and packaging facility which commenced commercial production in June 2009. The Company also incurred pre-tax severance and related costs of approximately $1.5 million within a number of its operating segments as it continues to position the business for improved future performance. In addition, pre-tax costs of approximately $1.2 million were incurred related to the investment in the revitalization and re-launch of a number of company owned natural health products brands. The Company also incurred legal and professional fees of approximately $0.8 million related to a legal action in the SunOpta BioProcess Group and costs related to ongoing matters related to the 2007 financial restatement. 2008 adjusted earnings1 reflect pre-tax costs of $7.7 million related to the Company's investigation and actions into the write down in the SunOpta Fruit Group Berry Operations and subsequent financial restatement, including severance.
At June 30, 2009 the Company's balance sheet reflects a current working capital ratio of 1.57 to 1.00, long-term debt to equity ratio of 0.47 to 1.00 and total debt to equity ratio of 0.80 to 1.00. The Company has total assets of $594.0 million and a net book value of $3.56 per outstanding share.
During the three month period ended June 30, 2009, cash utilized to fund working capital decreased $15.4 million versus the second quarter of 2008, indicative of efforts to reduce working capital, especially inventories, across the Company. During the second quarter the Company generated cash from operating activities of $11.5 million, reflecting a significant improvement versus cash used in operational activities in the three month period ended June 30, 2008 of $6.3 million, an improvement of $17.8 million. During the second quarter of 2009, the Company repayed debt of $5.3 million as compared to borrowing $9.8 million in the second quarter of 2008 and has realized a reduction in net debt of $44.3 million versus June 30, 2008.
As previously announced, the Company reached an agreement with its lending syndicate to extend the term on its operating facilities, scheduled for renewal on June 30, 2009, through to December 31, 2009. As part of this agreement the Company negotiated a waiver of financial covenants for the first quarter of 2009 and amended certain covenants for the balance of the fiscal year. As at June 30, 2009, the Company is in compliance with these amended financial covenants. The Company has started the process to convert its current syndicated operating lines to facilities which it anticipates will provide more flexibility and better utilize the Company's strong asset base, and is currently on target to complete this process no later than the end of the current fiscal year.
Steve Bromley, President and Chief Executive Officer of SunOpta, commented: "We are pleased with the improvement in our earnings results for the second quarter combined with continued improvement in cash generated from operations. The Company's primary focus remains the improvement of operating margins and return on assets employed, to be realized through a combination of aggressive working capital management and continuous improvement initiatives. While we are seeing some improvement in market conditions, we remain focused on our cost control, efficiency, product development and asset utilization initiatives and believe that these will position the Company for improved returns as we move forward. We remain confident that our core food operations are well positioned as interest in health and wellness continues to gain attention around the globe."
As previously announced, as a result of uncertain and rapidly changing world-wide macroeconomic conditions, the Company will not be providing specific revenue and earnings guidance for 2009. The Company will continue to provide updates when appropriate related to material changes in business affairs resulting from changes in the business and related economic conditions.
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SunOpta Inc.
Condensed Consolidated Statements of Operations
For the three month periods ended June 30, 2009 and 2008
(Expressed in thousands of U.S. dollars, except per share amounts)
(Unaudited)
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June 30, June 30,
2009 2008
$ $
Revenues 257,725 291,945 -11.7%
Cost of goods sold 219,644 246,077 -10.7%
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Gross profit 38,081 45,868 -17.0%
Warehousing and distribution expenses 4,494 5,448 -17.5%
Selling, general and administrative
expenses 27,279 34,700 -21.4%
Intangible asset amortization 1,332 1,508 -11.7%
Other expense, net 109 -- n/m
Foreign exchange gain (982) (1,279) -23.2%
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Earnings before the following 5,849 5,491 6.5%
Interest expense, net 3,470 3,601 -3.6%
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Earnings before income taxes 2,379 1,890 25.9%
Provision for income taxes 833 473 76.1%
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Earnings for the period 1,546 1,417 9.1%
(Loss) earnings for the period
attributable to non-controlling
interests (234) 698 -133.5%
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Earnings for the period attributable to
SunOpta Inc. 1,780 719 147.6%
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Earnings per share for the period
Basic $ 0.03 $ 0.01
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Diluted $ 0.03 $ 0.01
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SunOpta Inc.
Condensed Consolidated Statements of Operations
For the six month periods ended June 30, 2009 and 2008
(Expressed in thousands of U.S. dollars, except per share amounts)
(Unaudited)
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June 30, June 30,
2009 2008
$ $
Revenues 489,799 522,389 -6.2%
Cost of goods sold 418,071 436,320 -4.2%
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Gross profit 71,728 86,069 -16.7%
Warehousing and distribution expenses 8,955 10,894 -17.8%
Selling, general and administrative
expenses 54,131 62,511 -13.4%
Intangible asset amortization 2,763 2,766 -0.1%
Other income, net (77) -- n/m
Foreign exchange loss (gain) 281 (991) -128.4%
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Earnings before the following 5,675 10,889 -17.8%
Interest expense, net 6,341 6,501 -2.5%
---------------------------
(Loss) earnings before income taxes (666) 4,388 -115.2%
(Recovery of) provision for income taxes (233) 1,122 -120.8%
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(Loss) earnings for the period (433) 3,266 -113.3%
(Loss) earnings for the period
attributable to non-controlling
interests (556) 1,061 -152.4%
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Earnings for the period attributable to
SunOpta Inc. 123 2,205 -94.4%
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Earnings per share for the period
Basic
$ 0.00 $ 0.03
-----------------
Diluted $ 0.00 $ 0.03
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SunOpta Inc.
Consolidated Balance Sheets
As at June 30, 2009 and December 31, 2008
(Expressed in thousands of U.S. dollars)
(Unaudited)
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June 30, December 31,
2009 2008
$ $
Assets
Current assets
Cash and cash equivalents 21,592 24,755
Short-term investments 1,500 --
Accounts receivable 106,014 95,129
Inventories 194,933 200,689
Prepaid expenses and other current assets 20,631 14,448
Current income taxes recoverable 1,293 595
Deferred income taxes 5,209 493
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351,172 336,109
Property, plant and equipment 112,999 110,641
Goodwill 55,121 54,022
Intangible assets 61,860 63,161
Deferred income taxes 11,931 16,160
Other assets 925 954
------------------------
594,008 581,047
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Liabilities
Current liabilities
Bank indebtedness 78,087 67,164
Accounts payable and accrued liabilities 112,075 106,989
Customer and other deposits 725 1,228
Other current liabilities 4,197 4,437
Current portion of long-term debt 28,459 12,174
Current portion of long-term liabilities -- 1,362
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223,543 193,354
Long-term debt 78,928 99,353
Long-term liabilities 4,784 5,017
Deferred income taxes 13,359 13,614
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320,614 311,338
Preferred shares of a subsidiary company 27,991 27,796
Equity
SunOpta Inc. Shareholders' Equity
Capital stock 178,270 177,858
64,846,560 common shares (2008-64,493,320)
Additional paid in capital 7,463 6,778
Retained earnings 41,032 40,909
Accumulated other comprehensive income 4,010 1,266
------------------------
Total SunOpta Inc. Shareholders' Equity 230,775 226,811
Non-controlling interest 14,628 15,102
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Total Equity 245,403 241,913
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594,008 581,047
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SunOpta Inc.
Condensed Consolidated Statements of Cash Flow
For the three month periods ended June 30, 2009 and 2008
(Expressed in thousands of U.S. dollars)
(Unaudited)
---------------------------------------------------------------------
June 30, June 30,
2009 2008
$ $
Cash provided by (used in)
Operating activities
Earnings for the period 1,546 1,417
Items not affecting cash
Amortization 4,904 5,135
Unrealized loss on a foreign exchange 291 389
Deferred income taxes 1,861 (413)
Other 1,243 934
Changes in non-cash working capital, net of
businesses acquired 1,630 (13,780)
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11,475 (6,318)
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Investing activities
Acquisition of businesses, net of cash
acquired -- (4,111)
Decrease (increase) in short-term investments 15,000 (20,000)
Purchases of property, plant and
equipment, net (4,255) (3,164)
Payment of deferred purchase consideration (1,000) (255)
Purchase of patents, trademarks and other
intangible assets (138) (32)
Other (2,282) 117
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7,325 (27,445)
------------------------
Financing activities
(Decrease) increase in line of credit
facilities (2,756) 12,129
Proceeds from the issuance of common shares 214 41
Repayment of long-term debt (2,510) (2,296)
Other (8) 16
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(5,060) 9,890
------------------------
Foreign exchange gain (loss) on cash held in
a foreign currency 447 (5)
------------------------
Increase (decrease) in cash and cash
equivalents during the period 14,187 (23,878)
Cash and cash equivalents - beginning of the
period 7,405 33,001
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Cash and cash equivalents - end of the
period 21,592 9,123
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SunOpta Inc.
Condensed Consolidated Statements of Cash Flow
For the six month periods ended June 30, 2009 and 2008
(Expressed in thousands of U.S. dollars)
(Unaudited)
---------------------------------------------------------------------
June 30, June 30,
2009 2008
$ $
Cash provided by (used in)
Operating activities
(Loss) earnings for the period (433) 3,266
Items not affecting cash
Amortization 9,635 9,513
Unrealized (gain) loss on foreign exchange (234) 389
Deferred income taxes 63 75
Other 768 996
Changes in non-cash working capital, net of
businesses acquired (2,844) (25,207)
------------------------
6,955 (10,968)
------------------------
Investing activities
Acquisition of businesses, net of cash
acquired -- (4,111)
Increase in short-term investments (1,500) (20,000)
Purchases of property, plant and
equipment, net (8,843) (5,530)
Payment of deferred purchase consideration (1,500) (755)
Purchase of patents, trademarks and other
intangible assets (202) (122)
Other (2,232) 169
------------------------
(14,277) (30,349)
------------------------
Financing activities
Increase in line of credit facilities 9,246 16,981
Borrowings under long-term debt 716 13,075
Proceeds from the issuance of common shares 412 260
Repayment of long-term debt (6,529) (10,253)
Other 61 100
------------------------
3,906 20,163
------------------------
Foreign exchange (gain) loss on cash held in
a foreign subsidiary 253 (25)
------------------------
Decrease in cash and cash equivalents during
the period (3,163) (21,179)
Cash and cash equivalents - beginning of the
period 24,755 30,302
------------------------
Cash and cash equivalents - end of the
period 21,592 9,123
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SunOpta Inc.
Segmented Information
For the three month periods ended June 30, 2009 and 2008
(Expressed in thousands of U.S. dollars)
(Unaudited)
----------------------------------------------------------------------
----------------------------------------------------------
Three Months Ended
June 30, 2009
----------------------------------------------------------
SunOpta Opta SunOpta Corporate Consoli-
Food Group Minerals BioProcess Services dated
$ $ $ $ $
----------------------------------------------------------
Total
revenues
from
external
customers 243,266 14,340 119 -- 257,725
Segment
operating
income
(loss) 7,794 (109) (836) (891) 5,958
----------------------------------------------------------
SunOpta Food Group has the following segmented reporting:
------------------------------------------------------------
Three Months Ended
June 30, 2009
------------------------------------------------------------
Inter-
SunOpta SunOpta national SunOpta SunOpta
Grains and Ingred- SunOpta Sourcing & Distri- Food
Foods ients Fruit Trading bution Group
$ $ $ $ $ $
------------------------------------------------------------
Total
revenues
from
external
cust-
omers 89,717 16,213 39,859 39,110 58,367 243,266
Segment
oper-
ating
income 5,213 1,890 623 9 59 7,794
------------------------------------------------------------
----------------------------------------------------------
Three Months Ended
June 30, 2008
----------------------------------------------------------
SunOpta Opta SunOpta Corporate Consoli-
Food Group Minerals BioProcess Services dated
$ $ $ $ $
----------------------------------------------------------
Total
revenues
from
external
customers 266,226 25,248 471 -- 291,945
Segment
operating
income
(loss) 9,051 3,351 (755) (6,156) 5,491
----------------------------------------------------------
The SunOpta Food Group has the following segmented reporting:
------------------------------------------------------------
Three Months Ended
June 30, 2009
------------------------------------------------------------
Inter-
SunOpta SunOpta national SunOpta SunOpta
Grains and Ingred- SunOpta Sourcing & Distri- Food
Foods ients Fruit Trading bution Group
$ $ $ $ $ $
------------------------------------------------------------
Total
revenues
from
external
cust-
omers 86,487 16,826 41,461 52,571 68,881 266,226
Segment
oper-
ating
income
(loss) 5,601 586 (1,906) 1,625 3,145 9,051
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SunOpta Inc.
Segmented Information
For the six month periods ended June 30, 2009 and 2008
(Expressed in thousands of U.S. dollars)
(Unaudited)
---------------------------------------------------------------------
----------------------------------------------------------
Six Months Ended
June 30, 2009
----------------------------------------------------------
SunOpta Opta SunOpta Corporate Consoli-
Food Group Minerals BioProcess Services dated
$ $ $ $ $
----------------------------------------------------------
Total
revenues
from
external
customers 460,602 29,065 132 -- 489,799
Segment
operating
income
(loss) 10,540 (861) (1,594) (2,487) 5,598
----------------------------------------------------------
The SunOpta Food Group has the following segmented reporting:
------------------------------------------------------------
Six Months Ended
June 30, 2009
------------------------------------------------------------
Inter-
SunOpta SunOpta national SunOpta SunOpta
Grains and Ingred- SunOpta Sourcing & Distri- Food
Foods ients Fruit Trading bution Group
$ $ $ $ $ $
------------------------------------------------------------
Total
revenues
from
external
cust-
omers 164,056 29,753 77,461 74,293 115,039 460,602
Segment
oper-
ating
income
(loss) 9,148 2,712 (534) (1,163) 377 10,540
------------------------------------------------------------
---------------------------------------------------------
Six Months Ended
June 30, 2008
----------------------------------------------------------
SunOpta Opta SunOpta Corporate Consoli-
Food Group Minerals BioProcess Services dated
$ $ $ $ $
----------------------------------------------------------
Total
revenues
from
external
customers 475,168 46,618 603 -- 522,389
Segment
operating
income
(loss) 15,279 5,355 (1,637) (8,108) 10,889
----------------------------------------------------------
The SunOpta Food Group has the following segmented reporting:
------------------------------------------------------------
Six Months Ended
June 30, 2009
------------------------------------------------------------
Inter-
SunOpta SunOpta national SunOpta SunOpta
Grains and Ingred- SunOpta Sourcing & Distri- Food
Foods ients Fruit Trading bution Group
$ $ $ $ $ $
------------------------------------------------------------
Total
revenues
from
external
cust-
omers 159,042 33,774 78,629 65,300 138,423 475,168
Segment
oper-
ating
income
(loss) 11,094 1,604 (5,974) 1,885 6,670 15,279
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SunOpta Inc.
Non-GAAP Reconciliation
For the three month periods ended June 30, 2009 and 2008
(Expressed in thousands of U.S. dollars)
(Unaudited)
For the Three Months Ended June 30,
--------------------------------------------------------------------
2009 2009 2008
GAAP Adjustments Adjusted Adjusted
Revenues 257,725 -- 257,725 291,945
Cost of goods
sold 219,644 (1,463) 218,181 246,077
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Gross profit 38,081 1,463 39,544 45,868
Warehousing
and
distribution
expenses 4,494 -- 4,494 5,448
Selling,
general and
administra-
tive expenses 27,279 (1,984) 25,295 28,348
Intangible
asset
amortization 1,332 -- 1,332 1,508
Other expense,
net 109 (109) -- --
Foreign
exchange gain (982) -- (982) (1,279)
------------------------------------------------------
Earnings
before the
following 5,849 3,556 9,405 11,843
Interest
expense, net 3,470 -- 3,470 3,601
------------------------------------------------------
Earnings
before income
taxes 2,379 3,556 5,935 8,242
Provision for
income taxes 833 1,081 1,914 2,474
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Earnings for
the period 1,546 2,475 4,021 5,768
(Loss)
earnings for
the period
attributable
to non-
controlling
interests (234) -- (234) 698
------------------------------------------------------
Earnings for
the period
attributable
to
SunOpta Inc. 1,780 2,475 4,255 5,070
======================================================
Earnings per
share for the
period
------------------------------------------------------
Basic 0.03 0.04 0.07 0.08
------------------------------------------------------
Diluted 0.03 0.04 0.07 0.08
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Three Months Ended Three Months Ended
June 30, 2009 June 30, 2008
------------------------------------------------------
Impact on Impact on Impact on Impact on
earnings provision earnings provision
before for income before for Income
income taxes taxes Income taxes taxes
------------------------------------------------------
Non-recurring
start-up and
operations
costs 1,463 512 -- --
------------------------------------------------------
Cost of sales 1,463 512 -- --
------------------------------------------------------
Severance costs
and related
plant closure
expenses 635 222 2,048 645
Up front
marketing
costs in
support of
brand re-
launches 687 240 -- --
Professional
fees incurred 662 70 4,304 1,356
------------------------------------------------------
1,984 532 6,352 2,001
------------------------------------------------------
Closing costs 109 37 -- --
------------------------------------------------------
Other expense,
net 109 37 -- --
------------------------------------------------------
------------------------------------------------------
Total
adjustments 3,556 1,081 6,352 2,001
======================================================
SunOpta Inc.
Non-GAAP Reconciliation
For the six month periods ended June 30, 2009 and 2008
(Expressed in thousands of U.S. dollars)
(Unaudited)
For the Six Months Ended June 30,
---------------------------------------------------------------------
2009 2009 2008
GAAP Adjustments Adjusted Adjusted
Revenues 489,799 -- 489,799 522,389
Cost of goods
sold 418,071 (2,464) 415,607 436,320
------------------------------------------------------
Gross profit 71,728 2,464 74,192 86,069
Warehousing and
distribution
expenses 8,955 -- 8,955 10,894
Selling,
general and
administrative
expenses 54,131 (3,339) 50,792 54,791
Intangible
asset
amortization 2,763 -- 2,763 2,766
Other income,
net (77) (109) (186) --
Foreign
exchange
(loss) gain 281 -- 281 (991)
------------------------------------------------------
Earnings before
the following 5,675 5,912 11,587 18,609
Interest
expense, net 6,341 -- 6,341 6,501
------------------------------------------------------
(Loss) Earnings
before income
taxes (666) 5,912 5,246 12,108
(Recovery of)
provision for
income taxes (233) 1,906 1,673 3,554
------------------------------------------------------
(Loss) earnings
for the period (433) 4,006 3,573 8,554
(Loss) earnings
for the period
attributable
to non-
controlling
interests (556) -- (556) 1,061
------------------------------------------------------
Earnings for
the period
attributable
to SunOpta Inc. 123 4,006 4,129 7,493
======================================================
Earnings per
share for the
period
------------------------------------------------------
Basic 0.00 0.06 0.06 0.12
------------------------------------------------------
Diluted 0.00 0.06 0.06 0.12
------------------------------------------------------
Six Months Ended Six Months Ended
June 30, 2009 June 30, 2008
------------------------------------------------------
Impact on Impact on Impact on Impact on
earnings provision earnings provision
before for income before for Income
income taxes taxes Income taxes taxes
------------------------------------------------------
Non-recurring
start-up and
operations
costs 2,464 862 -- --
------------------------------------------------------
Cost of sales 2,464 862 -- --
------------------------------------------------------
Severance costs
and related
plant closure
expenses 1,377 482 2,048 645
Up front
marketing
costs in
support of
brand re-
launches 1,159 406 -- --
Professional
fees incurred
in relation to
the internal
investigation 803 119 5,672 1,787
------------------------------------------------------
3,339 1,007 7,720 2,432
------------------------------------------------------
Closing costs 109 37 -- --
------------------------------------------------------
Other expense,
net 109 37 -- --
------------------------------------------------------
------------------------------------------------------
Total
adjustments 5,912 1,906 7,720 2,432
======================================================
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