SunOpta Reports Record Revenues in Q4
05 Mar 2014 --- SunOpta Inc., a leading global company focused on natural, organic and specialty foods, announced financial results for the fourth quarter and year ended December 28, 2013. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.
Revenues increased 5.6% to a record $285.2 million compared to $270.1 million in the fourth quarter of 2012. The increase in consolidated revenues was driven by continued growth in consumer packaged categories and increased demand for organic raw materials, which more than offset the effect of lower commodity prices. Excluding the impact of a number of factors including commodity, currency and product rationalizations, consolidated revenues increased approximately 10% and SunOpta Foods revenues increased approximately 12% versus the prior year.
During the fourth quarter, the Company's Allentown pouch facility experienced downtime and costs associated with a previously announced customer initiated voluntary product recall, including delays in shipment of finished product in November and December. As the recall is still under investigation, the Company cannot be reasonably assured that certain receivable balances will be collected or that unshipped finished product inventory will be delivered. As a result the Company recognized a loss contingency during the fourth quarter in the amount of $5.2 million, or $3.2 million after tax which equates to approximately $0.05 per diluted share. The Company continues to supply finished product to the customer from its Allentown and west coast operations.
Operating income(1) was $5.3 million, or 1.8% of revenues, compared to $7.2 million, or 2.6% of revenues in 2012. Operating income in the fourth quarter was driven by positive results in core integrated aseptic beverage, value-added ingredients and internationally sourced raw materials operations. These were offset by downtime and costs associated with the aforementioned customer initiated voluntary product recall, delays in the expansion of the Company's premium juice facility, costs related to the rationalization of certain consumer product lines, costs related to the internal realignment, and margin challenges on domestic raw materials due primarily to the transition to lower new crop pricing and continued cyclical weakness at Opta Minerals.
The Company reported a loss from continuing operations of $1.3 million, or $0.02 per common share, compared to earnings from continuing operations of $4.3 million, or $0.06 per diluted common share for the fourth quarter of 2012. Included in the results for the fourth quarter were other expenses related to the product recall of approximately $3.2 million after tax, or $0.05 per diluted common share. Excluding the other expense items, adjusted earnings from continuing operations(1) in the fourth quarter of 2013 were $1.9 million, or $0.03 per diluted common share. In addition, earnings for the fourth quarter include the impact of approximately $4.6 million in pre-tax costs related to downtime stemming from the aforementioned customer initiated voluntary product recall, and other expansion, rationalization and realignment costs, or approximately $2.8 million after tax and minority interest.
Revenues increased 8.3% to a record $1,181.9 million compared to $1,091.1 million in fiscal 2012. These record revenues are indicative of continued strong demand in healthy foods categories, combined with the execution of the Company's growth strategies. Excluding the impact of a number of factors including commodity, currency, acquisitions and product rationalizations, consolidated revenues increased approximately 7% and SunOpta Foods revenues increased approximately 9% versus the prior year.
Operating income(1) was $39.1 million, or 3.3% of revenues, as compared to $47.0 million, or 4.3% of revenues, in fiscal 2012. Operating earnings for the full year were driven by improved results within the Company's core aseptic beverage, pouch and frozen consumer product offerings, as well as fruit-based ingredients. These were offset by facility start-up and expansion costs, sunflower processing yields, downtime related to the product recall, rationalized consumer product lines and cyclical weakness at Opta Minerals.
The Company incurred a loss from continuing operations of $8.2 million, or $0.12 per common share in fiscal 2013, compared to earnings from continuing operations of $23.0 million, or $0.34 per diluted common share, during fiscal 2012. Included in the results for 2013 were non-cash charges of approximately $23.0 million after tax, or $0.34 per diluted common share, reflecting the write-down of the Company's non-core investment in Mascoma and goodwill impairment at Opta Minerals. Also included in the results for 2013 were other expenses related to the aforementioned customer initiated product recall, severance, and long-lived asset write-downs. In aggregate, these other expense items amounted to a charge to earnings of $4.1 million after tax or $0.06 per diluted common share. After excluding these items, adjusted earnings from continuing operations(1) in fiscal 2013 were $19.0 million, or $0.28 per diluted common share. In addition, fiscal 2013 earnings include the impact of approximately $9.2 million in pre-tax costs related to downtime stemming from the product recall, start-up, expansion, rationalization, integration and realignment costs, or approximately $5.6 million after-tax and minority interest.
The Company's balance sheet remains strong and at December 28, 2013 reflecting a net debt to equity ratio of 0.56 to 1.00. At December 28, 2013, the Company had total debt outstanding of $190.9 million, net debt of $182.3 million, total assets of $705.9 million, shareholders' equity of $325.3 million and a net book value of $4.89 per outstanding share.
"Fiscal 2013 was a transformational year for SunOpta, marked by a significant operational realignment, changes in leadership, and a re-positioned go-to-market strategy to better position our Company for sustainable long-term growth," commented Steve Bromley, Chief Executive Officer of SunOpta. "Our operating income and EBITDA for the fourth quarter are consistent with our preliminary expectations which were previously announced. Although our results for the fourth quarter were disappointing, and some of the operational challenges will continue into the first quarter of 2014, our management team is pleased that our internal re-alignment is now complete and feel the Company is better positioned to capitalize on the strong growth trends in the natural and organic foods industry. Our management team remains focused on our three core strategies of becoming a pure-play natural and organic foods company, growing our value-added consumer products and ingredients portfolio, and leveraging our integrated platform in support of our long-term financial targets."
