SunOpta: Fiscal 2014 & Q4 Results
TORONTO - SunOpta Inc. ("SunOpta" or "the Company") (STKL) (SOY.TO), a leading global company focused on natural, organic and specialty foods, announced financial results for fiscal 2014 and the fourth quarter ended January 3, 2015. The Company also announced the strategic, accretive acquisition of Citrusource, LLC ("Citrusource"), expanding its healthy beverages platform, plus the approval of a share repurchase program by its Board of Directors. All amounts noted in this release are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.
Fiscal 2014 Highlights
Record revenues of $1,242.6 million, an increase of 10.3% on a consolidated basis, and 11.8% within SunOpta Foods, after excluding the impact of changes including commodity prices, foreign exchange rates, and a 53rd week in 2014.
Operating income(1) of $45.2 million, or 3.6% of revenues, an increase of 20% versus prior year.
EBITDA(1) of $67.1 million, or 5.4% of revenues, an increase of 15% versus prior year.
Adjusted earnings(1) of $25.7 million, or $0.38 per diluted common share, versus Adjusted earnings(1) of $18.5 million, or $0.27 per diluted common share in the prior year.
Cash provided by operations of $24.8 million, and cash provided by investing activities of $22.1 million.
Net debt of $121.3 million, net debt to equity ratio of 0.36 to 1.0.
(All comparisons above are to the fiscal year ended December 28, 2013)
"2014 was a record year in our core foods business and we made progress on a number of fronts in support of our strategies focusing on our integrated natural and organic foods business, accelerating growth by delivering more value to our customers, and leveraging the integrated platform that we continue to build," said Steve Bromley, SunOpta's Chief Executive Officer.
Fourth Quarter 2014 Highlights
Revenues of $284.8 million, an increase of 5.5% on a consolidated basis, and 5.3% within SunOpta Foods, after excluding the impact of changes including commodity prices and foreign exchange rates.
Operating income(1) of $4.2 million, or 1.5% of revenues, a decrease of 16% versus prior year.
EBITDA(1) of $9.8 million, or 3.4% of revenues, a decrease of 8% versus prior year.
Adjusted earnings(1) of $3.9 million, or $0.06 per diluted common share, versus Adjusted earnings(1) of $1.8 million or $0.03 per diluted common share in the prior year.
Cash generated by investing activities of $29.7 million, offset by cash used in operations of $13.8 million.
(All comparisons above are to the quarter ended December 28, 2013)
"During the quarter our Global Ingredients segment performed extremely well, however this was partly offset by commercial and operational pressures that were experienced in Consumer Products and Opta Minerals," Bromley continued. "We are addressing the challenges in Consumer Products, and the process to divest of Opta Minerals continues. We're fortunate to be participating in strong markets and remain focused on delivering value to our customers and our shareholders. Following the sale of the fiber and starch business and the acquisition of Citrusource we believe our integrated natural and organic foods platform is even better positioned to capitalize on opportunities from an increasing global awareness of healthy eating."
Acquisition of Citrusource
The Company also announced the acquisition of Citrusource, one of the largest producers of premium not-from-concentrate private label orange juice in the United States, offering an extensive portfolio of premium and organic citrus juice products and ingredients with revenues of approximately $30 million. Citrusource operates a national sourcing and supply platform utilizing a number of processing and packaging partners to serve a variety of well-known retailer customers. The acquisition of Citrusource enhances the SunOpta's healthy beverages portfolio, is expected to be immediately accretive, and aligns with the Company's strategy to grow its value-added consumer products and leverage its integrated operating platform. The Company is issuing a separate press release today with additional information about the Citrisource acquisition.
Share Repurchase Program
SunOpta also announced that its Board of Directors approved a share repurchase program authorizing the buyback of up to $30 million of SunOpta's outstanding common shares through the facilities of the Nasdaq Stock Market over the course of the next 12 months.
"We believe this to be a prudent use of our capital resources and reflects our confidence in the Company's cash flow generation and business going forward," Bromley said. "The repurchase would be an accretive use of our funds and will not impact our ability to grow our business through capital investment or acquisition."
SunOpta plans to repurchase its shares in open market transactions. In no event will SunOpta acquire shares representing in excess of 5% of its issued and outstanding shares unless all necessary regulatory approvals have first been obtained. The actual number of shares purchased, the timing of purchases and the price at which shares will be purchased under the share repurchase program will depend on the market price of SunOpta's shares, general market conditions and SunOpta's capital requirements and potential alternative uses for cash resources. There is no assurance that any shares will be purchased under the share repurchase program and SunOpta may elect to suspend or discontinue the program at any time.
Fiscal 2014 Results
Revenues increased 9.0% to a record $1,242.6 million in 2014, compared to $1,140.1 million in fiscal 2013. The increase in consolidated revenues was driven by strong demand for internationally sourced organic raw materials, continued growth in consumer packaged categories including aseptic beverages, frozen foods, fruit bases and toppings, and re-sealable pouch products. This growth was offset by lower commodity grain sales and declines within Opta Minerals. Fiscal 2014 was a 53-week year, with the extra week falling in the first quarter, compared to a 52-week year in fiscal 2013. Excluding a number of factors including the extra week of sales, as well as the impact of changes including commodity prices and foreign exchange rates, consolidated revenues increased 10.3% and revenues in SunOpta Foods increased 11.8% versus the prior year.
Operating income(1) for fiscal 2014 was $45.2 million, or 3.6% of revenues, compared to $37.7 million, or 3.3% of revenues, in fiscal 2013. The improved operating earnings were driven by increased volume and higher margin on organic raw materials, improved performance in the sunflower category, and increased volume of consumer products including aseptic beverages and fruit bases and toppings, offset by margin pressure experienced in Opta Minerals, increased costs and competitive pressures in the re-sealable pouch market, increased costs associated with the retrofit of the Company's premium juice operation, and increased resources to support the growth in the business. SunOpta Foods' operating income, including Corporate Services, was $41.7 million, or 3.8% of revenues, compared to $31.0 million or 3.1% of revenues in the prior year.
Adjusted earnings(1) for fiscal 2014 were $25.7 million, or $0.38 per diluted common share, excluding discontinued operations, the impact of non-cash asset impairment charges and a goodwill write-down within non-core operations, favorable tax adjustments, and other income primarily related to gains on sales of assets in the sunflower operations. Including these items, earnings from continuing operations for fiscal 2014 were $11.3 million, or $0.17 per diluted common share, compared to a loss of $8.7 million, or $0.13 per common share, during fiscal 2013.
On December 23, 2014, the Company completed the sale of its fiber and starch business which resulted in a gain on sale of $1.9 million after tax, or $0.03 per diluted common share. Also included in the results for fiscal 2014 was a non-cash charge of approximately $8.4 million after-tax, or $0.12 per diluted common share, reflecting the write-down of the Company's investment in Enchi Corporation (formerly Mascoma Corporation), as well as a non-cash charge of approximately $7.2 million after minority interest, or $0.11 per diluted common share, representing an impairment of all remaining goodwill in Opta Minerals. In June of 2014 Opta Minerals announced that it had established a special committee of independent directors to conduct a review of strategic alternatives available to Opta Minerals, including a potential sale of the business. On the basis of proposals received as part of this strategic review process, the Company determined that external market conditions suggested that the carrying value of its 66% investment in Opta Minerals exceeded its fair value. In addition, results for fiscal 2014 included asset impairment charges and plant closure costs related to Opta Minerals, all reported in other expense, as well as a favorable tax adjustment related to previously unrecognized tax losses and credits. The loss incurred in fiscal 2013 was due mainly to a $21.5 million non-cash impairment of the Company's investment in Enchi recognized in the prior year, a $3.5 million goodwill impairment at Opta Minerals, $1.6 million in asset write-downs and restructuring charges, and loss contingency in the amount of $5.2 million related to a customer initiated voluntary product recall (in aggregate $26.9 million net of tax and minority interest). Excluding these charges, and the impact of discontinued operations, Adjusted Earnings1 for fiscal 2013 was $18.2 million or $0.27 per diluted common share.
EBITDA(1) was $67.1 million in fiscal 2014, compared to $58.3 million in the prior year, an increase of 15%.
Fourth Quarter 2014 Results
Revenues increased 3.7% to $284.8 million compared to $274.7 million in the fourth quarter of 2013. Excluding the impact of changes including commodity prices and foreign exchange rates, consolidated revenues increased 5.5% and SunOpta Foods' revenues increased 5.3% versus the prior year. The increase in revenues was led by stronger demand for organic ingredients in the U.S. and Europe.
Operating income(1) was $4.2 million, or 1.5% of revenues, compared to $5.1 million, or 1.8% of revenues, in the fourth quarter of 2013. SunOpta Foods' operating income, including corporate services, was $4.2 million, or 1.7% of revenues, compared to $3.4 million, or 1.4% of revenues, in the prior year, an increase of 25%. The growth in SunOpta Foods' operating income was driven by increased volume and higher margin on organic raw materials, including feed categories, as well as improved processing efficiencies in sunflower operations. These positive factors were partially offset by a lower margin in consumer products due to decreased plant efficiencies and higher waste factors in the aseptic operations related to expansion activities, decreased margin in fruit juice, frozen fruit, and fruit bases and topping categories, and increased SG&A costs primarily related to higher compensation costs. Competitive pressures in the industrial minerals portfolio of Opta Minerals also negatively impacted operating income in the quarter.
The Company realized Adjusted earnings(1) in the fourth quarter of $3.9 million, or $0.06 per diluted common share, excluding discontinued operations, the non-cash goodwill and other asset impairment and charges at Opta Minerals, and favorable tax adjustments related to previously unrecognized losses and credits. Including these charges and sources of income, the Company realized a loss from continuing operations for the fourth quarter of 2014 of $3.3 million, or $0.05 per common share, compared to a loss of $1.4 million, or $0.02 per common share, during the fourth quarter of 2013.
Included in the results for the fourth quarter of 2013 was a loss contingency in the amount of $5.2 million, or $3.2 million after tax, related to a customer initiated voluntary product recall.
EBITDA(1) was $9.8 million in the fourth quarter of 2014, compared to $10.6 million in the prior year, a decrease of 8%.
The Company's balance sheet remains strong and at January 3, 2015 reflected a net debt to equity ratio of 0.36 to 1.00. At January 3, 2015, the Company had total debt outstanding of $131.3 million, net debt of $121.3 million, total assets of $641.0 million, shareholders' equity of $340.7 million and a net book value of $5.08 per outstanding share.
About SunOpta Inc.
SunOpta Inc. is a leading global company focused on natural, organic and specialty foods 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 vertically integrated business models. The Company's core natural and organic food operations focus on value-added grains, seed, fruit and vegetable based product offerings, supported by a global infrastructure. The Company also has a 66.0% ownership position in Opta Minerals Inc., listed on the Toronto Stock Exchange, a producer, distributor, and recycler of environmentally friendly industrial materials.
Susan Wiekenkamp, Information Officer
Tel: 905-455-2528, ext.103