Thursday, December 12, 2019

 


Sunopta Inc
(TSX: SOY.TO) Add to Watchlist
$3.45
+0.01 (+0.29%)
as of Dec 12, 2019

SunOpta Announces Third Quarter Fiscal 2019 Financial Results

SunOpta Inc. ("SunOpta" or the "Company") (Nasdaq:STKL) (TSX:SOY.TO), a leading global company focused on organic, non-genetically modified and specialty foods, today announced financial results for the third quarter ended September 28, 2019.

"In the third quarter, we delivered consolidated revenue growth, adjusted for changes in our business of 6.6% and adjusted EBITDA(1) of $9.9 million. This was led by outstanding performance in our plant-based beverage and broth business, as a direct result of the investments we have made and our enhanced focus on optimizing our product portfolio," said Joe Ennen, Chief Executive Officer at SunOpta. "Our Healthy Beverage platform reported 31% adjusted revenue growth and a 390 basis-point increase in margins, supported by the addition of new capacity to the aseptic network in 2019. We continue to see strong demand across channels and product categories within Healthy Beverage, supporting the capacity expansion that was brought online this summer. Heading into the fourth quarter, our beverage capacity and capabilities are meaningfully improved when compared to last year, which should allow us to more efficiently meet higher demand for broth during this seasonally strong period."

"Revenue and margins in our Healthy Fruit platform were consistent with our expectations. While Healthy Fruit was unprofitable in the third quarter, the impact of this year's weather-related strawberry crop shortfall was in-line with our second quarter outlook. We believe the third quarter will represent the low point for frozen fruit margins, and we anticipate sequential improvement in the fourth quarter and into 2020. We are making progress on the fruit margin optimization plan, including the installation of further automation to lower variable labor costs, building rational customer pricing structures, and enhancing business planning and leadership. We remain flexible and nimble in our response to the crop shortfalls in Mexico and California, leveraging our global sourcing capabilities to service our customers through the procurement of additional supply from South America. While progress against our fruit margin optimization plan will continue to be masked in the near-term by the 2019 crop shortfall, we remain confident that the structural improvements we have made to date are building a strong foundation for future profitability."

"In the third quarter, we also completed a reorganization of our corporate and CPG organizational structure. The goal of this action was to delayer the top of the organization, create more direct accountability by fully aligning all commercial functions under general managers, and to increase our speed and decisiveness. While these changes resulted in minimal savings for the quarter, the annualized benefit of these changes is expected to be $8 to $10 million. This reorganization has the dual benefit of both improving SunOpta's profitability and accelerating SunOpta's transformation to a more nimble and entrepreneurial company," concluded Mr. Ennen.

All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.

Third Quarter 2019 Highlights:

Revenues of $295.9 million for the third quarter of 2019, compared to $308.4 million in the third quarter of 2018, a decrease of 4.0%. Adjusted for disposed operations, foreign exchange, commodity prices, a new contract manufacturing arrangement and the acquisition of Sanmark, revenues grew 6.6% during the third quarter. Loss attributable to common shareholders of $13.8 million or $0.16 per common share in the third quarter of 2019, compared to a loss attributable to common shareholders of $6.6 million or $0.08 per common share in the third quarter of 2018. Adjusted loss(1) of $9.9 million or $0.11 per common share during the third quarter of 2019, compared to an adjusted loss of $3.8 million or $0.04 per common share during the third quarter of 2018. Adjusted EBITDA(1) excluding disposed operations of $9.9 million or 3.4% of revenues for the third quarter of 2019, versus $16.3 million or 5.3% of adjusted revenues in the third quarter of 2018.

Third Quarter 2019 Results

Revenues for the third quarter of 2019 were $295.9 million, a decrease of 4.0% compared to $308.4 million in the third quarter of 2018. Excluding the impact on reported revenues of disposed business, including the soy and corn business (sold in February 2019) and exit from flexible resealable pouch product lines (exited in fiscal 2018), changes in commodity-related pricing and foreign exchange rates, a profit-neutral change to a co-manufacturing agreement, and excluding the impact of the acquisition of Sanmark in April 2019, revenues in the third quarter of 2019 increased by 6.6% compared with the third quarter of 2018.

The Consumer Products segment generated revenues of $188.1 million during the third quarter of 2019, an increase of 9.6% compared to $171.6 million in the third quarter of 2018. Excluding the impact of commodity-related pricing, sales of resealable pouch products in the third quarter of 2018, and a profit-neutral change to a co-manufacturing agreement, Consumer Products revenue in the third quarter increased by 10.7%. The growth primarily reflects a 31.0% increase in the Healthy Beverage platform due to higher sales of plant-based beverages, broth and plant-based ingredients, partially offset by a 23.4% revenue decrease in the Healthy Snack platform which levels off the 21.2% increase in the second quarter of 2019, and a 2.4% decline in the Healthy Fruit platform as a result of modest declines in volumes, slightly offset by increased pricing for frozen fruit.

The Global Ingredients segment generated revenues of $107.9 million, a decrease of 21.1% compared to $136.8 million in the third quarter of 2018. Excluding the impact on revenues from the divested soy and corn business, changes in commodity-related pricing and foreign exchange rates, and the acquisition of Sanmark, Global Ingredients revenue in the third quarter increased 0.3%. Adjusting for the items noted above, sales of internationally sourced organic ingredients grew 1.0% during the quarter, driven mainly by increased volumes of sugars, grains and cocoa, offset by the timing of sales of organic fruits and vegetables, coffee and nuts, together with lower volumes of sunflower inshell and kernel. Sales of domestically sourced ingredients declined 5.3% during the quarter, reflecting lower sunflower volumes.

Gross profit was $26.3 million for the quarter ended September 28, 2019, a decrease of $7.8 million compared to $34.1 million for the quarter ended September 29, 2018. Consumer Products accounted for $3.4 million of the decrease in gross profit, mainly reflecting the impact of a significant shortfall in strawberries from central Mexico and California due to poor weather conditions, which resulted in commodity price inflation and unfavorable production variances within the frozen fruit operations due to lower plant utilization and rework of bulk inventories to meet customer demand. The negative impact to gross profit from the strawberry shortage during the third quarter of 2019 was approximately $8.1 million. The unfavorability in Healthy Fruit was partially offset by favorable impacts within the Healthy Beverage platform from higher beverage volumes and productivity-driven cost savings for aseptic beverages and fruit snacks. Global Ingredients accounted for $4.4 million of the decrease in gross profit mainly due to the sale of the soy and corn business and lower commodity hedging gains within the international organic ingredients operations.

As a percentage of revenues, gross profit for the quarter ended September 28, 2019 was 8.9% compared to 11.1% for the quarter ended September 29, 2018, a decrease of 2.2%. On a pro forma basis, which excludes the gross profit from disposed businesses and equipment start-up and product introduction costs of $1.9 million, the gross profit percentage for the third quarter of 2018 would have been approximately 12.4%.

Segment operating loss(1) was $3.5 million, or 1.2% of revenues in the third quarter of 2019, compared to operating income of $4.5 million, or 1.5% of revenues in the third quarter of 2018. The decrease in operating income year-over-year was primarily attributable to $7.8 million lower gross profit and a $0.5 million increase in SG&A due to higher employee-related compensation costs, partially offset by to the sale of the soy and corn business and rationalized overhead, together with other cost reduction measures. Excluding the operating results of disposed businesses, as well as non-structural SG&A expenses related to the quarter, segment operating loss would have been $1.9 million for the third quarter of 2019, compared with income of $6.2 million for the third quarter of 2018.

Other expense for the third quarter of 2019 reflected employee termination and recruitment costs of $4.0 million, including costs related to the transition of the Company's Chief Financial Officer in the third quarter of 2019, and post-closing adjustments of $1.1 million related to the sale of the soy and corn business, offset by a legal settlement gain of $1.3 million and the reversal of $0.8 million of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees.

Adjusted EBITDA(1) was $9.9 million or 3.4% of revenues in the third quarter of 2019, compared to $16.7 million or 5.4% of revenues in the third quarter of 2018. Excluding disposed operations, adjusted EBITDA for the quarter ended September 29, 2018 was $16.3 million.

The Company reported a loss attributable to common shareholders for the third quarter of 2019 of $13.8 million, or $0.16 per common share, compared to a loss of $6.6 million, or $0.08 per common share during the third quarter of 2018. Adjusted loss(1) in the third quarter of 2019 was $9.9 million or $0.11 per common share, compared to $3.8 million or $0.04 per common share in the third quarter of 2018. Please refer to the discussion and table below under "Non-GAAP Measures - Adjusted Earnings/Loss".

Balance Sheet and Cash Flow

At September 28, 2019, SunOpta's balance sheet reflected total assets of $958.6 million and total debt of $514.9 million. During the third quarter of 2019, cash provided by operating activities was $4.3 million, compared to $10.5 million during the third quarter of 2018. The $6.2 million decrease in cash provided by operating activities primarily reflects a year over year increase in consolidated net loss due primarily to lower profitability in the Company's Healthy Fruit platform. Cash used in investing activities was $7.6 million in the third quarter of 2019, compared with $6.0 million in the third quarter of 2018, an increase in cash used of $1.6 million due mainly to lower proceeds from sales of businesses and assets.

Conference Call

SunOpta plans to host a conference call at 9:00 A.M. Eastern time on Wednesday, November 6, 2019, to discuss the third quarter financial results. After opening remarks, there will be a question and answer period. This conference call can be accessed via a link on SunOpta's website at www.sunopta.com under the "Investors" section. To listen to the live call over the Internet, please go to SunOpta's website at least 15 minutes early to register, download and install any necessary audio software. Additionally, the call may be accessed with the toll-free dial-in number 1 (877) 312-9198 or International dial-in number 1 (631) 291-4622. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days on the Company's website.

(1) See discussion of non-GAAP measures

About SunOpta Inc. SunOpta Inc. is a leading global company focused on organic, non-genetically modified ("non-GMO") and specialty foods. SunOpta specializes in the sourcing, processing and packaging of organic and non-GMO food products, integrated from seed through packaged products; with a focus on strategic vertically integrated business models. SunOpta's organic and non-GMO food operations revolve around value-added grain, seed, fruit and vegetable-based product offerings, supported by a global sourcing and supply infrastructure.

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 belief that frozen fruit margins will improve following the third quarter, our anticipated sequential improvement in the fourth quarter, our expectation that our structural improvements will lead to future profitability and the estimated annualized benefit of the reorganization of our corporate and CPG organizational structure. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as "believe", "anticipate", "continue", "expected", "estimates", "can", "will", "targeting", "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, unexpected issues or delays with the Company's structural improvements and automation investments, 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, and labor cost reductions, as well as other factors the Company believes are appropriate in the circumstances including, but not limited to, general economic conditions, continued consumer interest in health and wellness, ability to maintain product pricing levels, current customer demand, planned facility and operational expansions, closures and divestitures, competitive intensity, cost rationalization, product development initiatives, and alternative potential uses for the Company's capital resources. 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, 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; 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.

Source: SunOpta Inc.

SunOpta Inc.
Consolidated Statements of Operations
For the quarters and three quarters ended September 28, 2019 and September 29, 2018
(Unaudited)
(All dollar amounts expressed in thousands of U.S. dollars, except per share amounts)
                                                                                       
--------------------------------------------------------- -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------
                                              Quarter ended                                                                        Quarter ended                                                                   Three quarters ended
                                                          -------------------- --------------------------------------------------------------------------------     -------------------- --------------------------------------------------------------------------------
                                              September 28,                   September 28,                     September 29,                     September 28,                     September 29,
                                                                          2019                            2019                                                 2018                                                 2019                                                 2018
                                                          $                               $                                 $                                 $                                 $
--------------------------------------------------------- -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------
                                                                                                  
Revenues                                                               295,941    295,941                308,371    308,371                894,220    894,220                940,331    940,331  
                                                                                       
Cost of goods sold                                                     269,616    269,616                274,243    274,243                812,362    812,362                838,173    838,173  
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                       
Gross profit                                                            26,325     26,325                 34,128     34,128                 81,858     81,858                102,158    102,158  
                                                                                       
Selling, general and administrative expenses                            27,674     27,674                 27,220     27,220                 81,184     81,184                 82,456     82,456  
Intangible asset amortization                                            2,768      2,768                  2,754      2,754                  8,202      8,202                  8,293      8,293  
Other expense (income), net                                              3,323      3,323                  1,136      1,136                (39,744    (39,744 )                                   1,317      1,317  
Foreign exchange loss (gain)                                              (590       (590 )                                    (368       (368 )                                  (1,784     (1,784 )                                     583        583  
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                       
Earnings (loss) before the following                                    (6,850     (6,850 )                                   3,386      3,386                 34,000     34,000                  9,509      9,509  
                                                                                       
Interest expense, net                                                    8,864      8,864                  8,792      8,792                 25,857     25,857                 25,486     25,486  
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                       
Earnings (loss) before income taxes                                    (15,714    (15,714 )                                  (5,406     (5,406 )                                   8,143      8,143                (15,977    (15,977 )
                                                                                       
Provision for (recovery of) income taxes                                (3,935     (3,935 )                                    (870       (870 )                                   3,239      3,239                 (3,853     (3,853 )
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                       
Net earnings (loss)                                                    (11,779    (11,779 )                                  (4,536     (4,536 )                                   4,904      4,904                (12,124    (12,124 )
                                                                                       
Earnings (loss) attributable to non-controlling interests                  (30        (30 )                                      70         70                     59         59                     19         19  
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                       
Earnings (loss) attributable to SunOpta Inc.                           (11,749    (11,749 )                                  (4,606     (4,606 )                                   4,845      4,845                (12,143    (12,143 )
                                                                                       
Dividends and accretion on Series A Preferred Stock                     (2,009     (2,009 )                                  (1,981     (1,981 )                                  (6,005     (6,005 )                                  (5,922     (5,922 )
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                       
Loss attributable to common shareholders                               (13,758    (13,758 )                                  (6,587     (6,587 )                                  (1,160     (1,160 )                                 (18,065    (18,065 )
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                       
Loss per share                                                                                            
                                                                         (0.16      (0.16 )                                   (0.08      (0.08 )                                   (0.01      (0.01 )                                   (0.21      (0.21 )
   Basic
                                                                         (0.16      (0.16 )                                   (0.08      (0.08 )                                   (0.01      (0.01 )                                   (0.21      (0.21 )
   Diluted
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                       
Weighted-average common shares outstanding (000s)                                                                    
                                                                        87,928     87,928                 87,168     87,168                 87,695     87,695                 86,982     86,982  
   Basic
                                                                        87,928     87,928                 87,168     87,168                 87,695     87,695                 86,982     86,982  
   Diluted
                                                          -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
SunOpta Inc.
Consolidated Balance Sheets
As at September 28, 2019 and December 29, 2018
(Unaudited)
(All dollar amounts expressed in thousands of U.S. dollars)
                                                            
------------------------------------------------------------ -------------------- ------------------------------  -------------------- ------------------------------
                                                 September 28,                   September 28,                      December 29,
                                                                             2019                            2019                                                 2018
                                                             $                               $                                 $
------------------------------------------------------------ -------------------- ------------------------------  -------------------- ------------------------------
                                                                       
ASSETS                                                                                    
Current assets                                                                            
                                                                            2,209      2,209                  3,280      3,280  
   Cash and cash equivalents
                                                                          128,047    128,047                132,131    132,131  
   Accounts receivable
                                                                          345,685    345,685                361,957    361,957  
   Inventories
                                                                           36,015     36,015                 29,024     29,024  
   Prepaid expenses and other current assets
                                                                            8,324      8,324                  7,029      7,029  
   Income taxes recoverable
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total current assets                                                      520,280    520,280                533,421    533,421  
                                                            
Property, plant and equipment                                             182,129    182,129                171,032    171,032  
Operating lease right-of-use assets                                        71,672     71,672                      -          -  
Goodwill                                                                   28,131     28,131                 27,959     27,959  
Intangible assets                                                         152,742    152,742                160,975    160,975  
Deferred income taxes                                                       1,294      1,294                    182        182  
Other assets                                                                2,362      2,362                  3,169      3,169  
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                            
Total assets                                                              958,610    958,610                896,738    896,738  
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                            
LIABILITIES                                                                    
Current liabilities                                                            
                                                                          270,145    270,145                280,334    280,334  
   Bank indebtedness
                                                                          134,353    134,353                155,371    155,371  
   Accounts payable and accrued liabilities
                                                                              237        237                  1,445      1,445  
   Customer and other deposits
                                                                            1,692      1,692                  2,208      2,208  
   Income taxes payable
                                                                              310        310                    862        862  
   Other current liabilities
                                                                            2,809      2,809                  1,840      1,840  
   Current portion of long-term debt
                                                                           17,709     17,709                      -          -  
   Current portion of operating lease liabilities
                                                                            4,286      4,286                  4,286      4,286  
   Current portion of long-term liabilities
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total current liabilities                                                 431,541    431,541                446,346    446,346  
                                                            
Long-term debt                                                            241,896    241,896                227,023    227,023  
Operating lease liabilities                                                54,663     54,663                      -          -  
Long-term liabilities                                                       2,107      2,107                  2,079      2,079  
Deferred income taxes                                                      11,500     11,500                  8,149      8,149  
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total liabilities                                                         741,707    741,707                683,597    683,597  
                                                            
Series A Preferred Stock                                                   82,207     82,207                 81,302     81,302  
                                                            
EQUITY                                                                         
SunOpta Inc. shareholders' equity                   
                                                                          318,196    318,196                314,357    314,357  
   Common shares
                                                                           33,779     33,779                 31,796     31,796  
   Additional paid-in capital
                                                                         (207,311   (207,311 )                                (206,151   (206,151 )
   Accumulated deficit
                                                                          (11,783    (11,783 )                                  (9,667     (9,667 )
   Accumulated other comprehensive loss
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                       132,881    132,881                130,335    130,335  
Non-controlling interests                                                   1,815      1,815                  1,504      1,504  
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
Total equity                                                              134,696    134,696                131,839    131,839  
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                            
Total equity and liabilities                                              958,610    958,610                896,738    896,738  
                                                             -------------------- ---------- -------------------- -------------------- ---------- --------------------
SunOpta Inc.
Consolidated Statements of Cash Flows
For the quarters and three quarters ended September 28, 2019 and September 29, 2018
(Unaudited)
(Expressed in thousands of U.S. dollars)
                                                                                                        
-------------------------------------------------------------------------- -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------
                                                               Quarter ended                                                                        Quarter ended                                                                   Three quarters ended
                                                                           -------------------- --------------------------------------------------------------------------------     -------------------- --------------------------------------------------------------------------------
                                                                September 28                    September 28                     September 29,                     September 28,                     September 29,
                                                                                           2019                            2019                                                 2018                                                 2019                                                 2018
                                                                           $                               $                                 $                                 $                                 $
-------------------------------------------------------------------------- -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------
                                                                                                        
CASH PROVIDED BY (USED IN)                                                                                                 
                                                                                                        
Operating activities                                                                                                       
Net earnings (loss)                                                                     (11,779    (11,779 )                                  (4,536     (4,536 )                                   4,904      4,904                (12,124    (12,124 )
Items not affecting cash:                                                                                                  
                                                                                          8,517      8,517                  8,171      8,171                 25,005     25,005                 24,501     24,501  
   Depreciation and amortization
                                                                                            683        683                    598        598                  2,022      2,022                  1,806      1,806  
   Amortization of debt issuance costs
                                                                                         (2,732     (2,732 )                                  (1,706     (1,706 )                                   2,239      2,239                 (3,857     (3,857 )
   Deferred income taxes
                                                                                          2,558      2,558                  2,120      2,120                  5,393      5,393                  6,395      6,395  
   Stock-based compensation
                                                                                            865        865                  2,110      2,110                    577        577                    867        867  
   Unrealized loss on derivative contracts
                                                                                          1,109      1,109                      -          -                (44,269    (44,269 )                                       -          -  
   Loss (gain) on sale of business
                                                                                              -          -                     25         25                      -          -                 (2,348     (2,348 )
   Fair value of contingent consideration
                                                                                              -          -                      -          -                      -          -                    409        409  
   Impairment of long-lived assets
                                                                                             26         26                     36         36                   (108       (108 )                                    (111       (111 )
   Other
                                                                                          5,042      5,042                  3,664      3,664                (22,146    (22,146 )                                 (31,771    (31,771 )
   Changes in non-cash working capital, net of businesses acquired or sold
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Net cash flows from operations                                                            4,289      4,289                 10,482     10,482                (26,383    (26,383 )                                 (16,233    (16,233 )
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                                        
Investing activities                                                                                                       
Net proceeds from sale of business                                                           (3         (3 )                                   1,006      1,006                 64,672     64,672                  1,236      1,236  
Purchases of property, plant and equipment                                               (7,592     (7,592 )                                  (7,758     (7,758 )                                 (24,907    (24,907 )                                 (24,921    (24,921 )
Acquisition of business, net of cash acquired                                                 -          -                      -          -                 (3,341     (3,341 )                                       -          -  
Proceeds from sale of assets                                                                  -          -                    707        707                      -          -                  1,437      1,437  
Other                                                                                         -          -                      -          -                      -          -                    159        159  
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Net cash flows from investing activities                                                 (7,595     (7,595 )                                  (6,045     (6,045 )                                  36,424     36,424                (22,089    (22,089 )
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                                        
Financing activities                                                                                                       
Increase (decrease) under line of credit facilities                                       4,603      4,603                 (2,716     (2,716 )                                  (6,691     (6,691 )                                  47,478     47,478  
Borrowings under long-term debt                                                             565        565                      -          -                  2,441      2,441                      -          -  
Repayment of long-term debt                                                                (556       (556 )                                    (557       (557 )                                  (1,913     (1,913 )                                  (1,494     (1,494 )
Payment of cash dividends on Series A Preferred Stock                                    (1,700     (1,700 )                                  (1,700     (1,700 )                                  (5,100     (5,100 )                                  (5,100     (5,100 )
Proceeds from the exercise of stock options and employee share purchases                    164        164                    359        359                    429        429                    599        599  
Payment of debt issuance costs                                                                -          -                      -          -                   (395       (395 )                                       -          -  
Dividend paid by subsidiary to non-controlling interest                                     (31        (31 )                                       -          -                    (31        (31 )                                       -          -  
Payment of contingent consideration                                                           -          -                      -          -                      -          -                 (4,399     (4,399 )
Other                                                                                        (5         (5 )                                     (44        (44 )                                     211        211                    (89        (89 )
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
Net cash flows from financing activities                                                  3,040      3,040                 (4,658     (4,658 )                                 (11,049    (11,049 )                                  36,995     36,995  
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                                        
Foreign exchange loss on cash held in a foreign currency                                    (55        (55 )                                      (9         (9 )                                     (63        (63 )                                     (44        (44 )
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                                        
Decrease in cash and cash equivalents in the period                                        (321       (321 )                                    (230       (230 )                                  (1,071     (1,071 )                                  (1,371     (1,371 )
                                                                                                        
Cash and cash equivalents - beginning of the period                                       2,530      2,530                  2,087      2,087                  3,280      3,280                  3,228      3,228  
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                                        
Cash and cash equivalents - end of the period                                             2,209      2,209                  1,857      1,857                  2,209      2,209                  1,857      1,857  
                                                                           -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
SunOpta Inc.
Segmented Information
For the quarters and three quarters ended September 28, 2019 and September 29, 2018
Unaudited
(Expressed in thousands of U.S. dollars)
                                                                                  
---------------------------------------------------- -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------
                                         Quarter ended                                                                        Quarter ended                                                                   Three quarters ended
                                                     -------------------- --------------------------------------------------------------------------------     -------------------- --------------------------------------------------------------------------------
                                         September 28,                   September 28,                     September 29,                     September 28,                     September 29,
                                                                     2019                            2019                                                 2018                                                 2019                                                 2018
                                                     $                               $                                 $                                 $                                 $
---------------------------------------------------- -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------
Segment revenues from external customers:                                                            
                                                                  107,853    107,853                136,754    136,754                352,903    352,903                419,770    419,770  
   Global Ingredients
                                                                  188,088    188,088                171,617    171,617                541,317    541,317                520,561    520,561  
   Consumer Products
                                                     -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                  295,941    295,941                308,371    308,371                894,220    894,220                940,331    940,331  
      Total segment revenues from external customers
                                                     -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                  
Segment gross profit:                                                                                
                                                                   10,101     10,101                 14,477     14,477                 34,735     34,735                 42,576     42,576  
   Global Ingredients
                                                                   16,224     16,224                 19,651     19,651                 47,123     47,123                 59,582     59,582  
   Consumer Products
                                                     -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                   26,325     26,325                 34,128     34,128                 81,858     81,858                102,158    102,158  
      Total segment gross profit
                                                     -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                  
Segment operating income (loss):                                                                     
                                                                    1,543      1,543                  5,304      5,304                  9,611      9,611                 11,371     11,371  
   Global Ingredients
                                                                     (147       (147 )                                   3,319      3,319                 (2,698     (2,698 )                                  11,397     11,397  
   Consumer Products
                                                                   (4,923     (4,923 )                                  (4,101     (4,101 )                                 (12,657    (12,657 )                                 (11,942    (11,942 )
   Corporate Services
                                                     -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                   (3,527     (3,527 )                                   4,522      4,522                 (5,744     (5,744 )                                  10,826     10,826  
      Total segment operating income (loss)
                                                     -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- --------------------
                                                                                  
Segment gross profit percentage:                                                                     
                                                                      9.4        9.4 %                                    10.6       10.6 %                                     9.8        9.8 %                                    10.1       10.1 %
   Global Ingredients
                                                                      8.6        8.6 %                                    11.5       11.5 %                                     8.7        8.7 %                                    11.4       11.4 %
   Consumer Products
                                                                      8.9        8.9 %                                    11.1       11.1 %                                     9.2        9.2 %                                    10.9       10.9 %
      Total segment gross profit percentage
                                                                                  
Segment operating income (loss) percentage:                                                          
                                                                      1.4        1.4 %                                     3.9        3.9 %                                     2.7        2.7 %                                     2.7        2.7 %
   Global Ingredients
                                                                     -0.1       -0.1 %                                     1.9        1.9 %                                    -0.5       -0.5 %                                     2.2        2.2 %
   Consumer Products
                                                                     -1.2       -1.2 %                                     1.5        1.5 %                                    -0.6       -0.6 %                                     1.2        1.2 %
      Total segment operating income (loss)

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, adjusted earnings and adjusted earnings 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, adjusted earnings and adjusted EBITDA assist investors in comparing performance across reporting periods on a consistent basis by excluding items that are not indicative of its operating performance. The non-GAAP measures of segment operating income, adjusted earnings 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 evaluates its revenues on a basis that excludes the effects of fluctuations in commodity pricing and foreign exchange rates, and the impacts of acquired or disposed operations and changes in contractual relationships with customers. In addition, 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 net earnings/loss, which the Company believes to be the most directly comparable U.S. GAAP financial measure. In addition, in recognition of the sale of the soy and corn business in the first quarter of 2019, and the previous exit from flexible resealable pouch and nutrition bar product lines and operations, the Company has prepared these tables in a columnar format to present the effect of the disposal of these operations on the Company's consolidated results for the current and comparative periods. The Company believes this presentation assists investors in assessing the results of the operations the Company has disposed and the effect of those operations on its financial performance.

Excluding                                                                 Excluding                                                                                       
                                                                      disposed operations                                                       disposed operations                                                                    Disposed operations                                                                Consolidated
                                                                                        -------------------- ---------------------------------------------------------------------     -------------------- --------------------------------------------------------------------------------     -------------------- ---------------------------------------------------------------------
                                                                                               Per Diluted                                      Per Diluted                           Per Diluted
                                                                                                                                                                                 Share                                                                                                     Share                                                                                          Share
For the quarter ended                                                                                      $                               $                      $                                 $                                 $                                 $                      $
--------------------------------------------------------------------------------------- -------------------- ------------------------------  -------------------- -------------------  -------------------- ------------------------------  -------------------- ------------------------------  -------------------- ------------------------------  -------------------- -------------------
September 28, 2019                                                                                                                                         
Net loss                                                                                             (10,974    (10,974 )                                        (805       (805 )                                                (11,779    (11,779 )                       
Loss attributable to non-controlling interests                                                            30         30                          -          -                                    30         30      
Dividends and accretion of Series A Preferred Stock                                                   (2,009     (2,009 )                                           -          -                                (2,009     (2,009 )                       
                                                                                        -------------------- ---------- --------------------                                           -------------------- ---------- --------------------                                                      -------------------- ---------- --------------------
Loss attributable to common shareholders                                                             (12,953    (12,953 )                                   (0.15      (0.15 )                         (805       (805 )                                   (0.01      (0.01 )                                 (13,758    (13,758 )                                   (0.16      (0.16 )
                                                                                                                                        
Adjusted for:                                                                                                                                              
                                                                                                       4,837      4,837                          -          -                                 4,837      4,837      
   Costs related to the Value Creation Plan(a)
                                                                                                           -          -                      1,109      1,109                                 1,109      1,109      
   Post-closing adjustments and other costs related to sale of soy and corn business(b)
                                                                                                         159        159                          -          -                                   159        159      
   Contract manufacturer transition costs(c)
                                                                                                      (1,166     (1,166 )                                           -          -                                (1,166     (1,166 )                       
   Other(d)
                                                                                                        (764       (764 )                                        (304       (304 )                                                 (1,068     (1,068 )                       
   Net income tax effect(e)
                                                                                        -------------------- ---------- --------------------                                           -------------------- ---------- --------------------                                                      -------------------- ---------- --------------------
Adjusted loss                                                                                         (9,887     (9,887 )                                   (0.11      (0.11 )                            -          -                      -          -                 (9,887     (9,887 )                                   (0.11      (0.11 )
                                                                                        -------------------- ---------- -------------------- -------------------- ---------- --------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- ---------
                                                                                                                                        
September 29, 2018                                                                                                                                         
Net earnings (loss)                                                                                   (4,620     (4,620 )                                          84         84                                (4,536     (4,536 )                       
Earnings attributable to non-controlling interests                                                       (70        (70 )                                           -          -                                   (70        (70 )                       
Dividends and accretion of Series A Preferred Stock                                                   (1,981     (1,981 )                                           -          -                                (1,981     (1,981 )                       
                                                                                        -------------------- ---------- --------------------                                           -------------------- ---------- --------------------                                                      -------------------- ---------- --------------------
Earnings (loss) attributable to common shareholders                                                   (6,671     (6,671 )                                   (0.08      (0.08 )                           84         84                      -          -                 (6,587     (6,587 )                                   (0.08      (0.08 )
                                                                                                                                        
Adjusted for:                                                                                                                                              
                                                                                                       1,500      1,500                          -          -                                 1,500      1,500      
   Equipment start-up costs(f)
                                                                                                       1,011      1,011                          -          -                                 1,011      1,011      
   Product withdrawal and recall costs(g)
                                                                                                         360        360                          -          -                                   360        360      
   New product commercialization costs(h)
                                                                                                          43         43                          -          -                                    43         43      
   Costs related to Value Creation Plan(i)
                                                                                                          83         83                          -          -                                    83         83      
   Other(j)
                                                                                                        (243       (243 )                                           -          -                                  (243       (243 )                       
   Net income tax effect(e)
                                                                                        -------------------- ---------- --------------------                                           -------------------- ---------- --------------------                                                      -------------------- ---------- --------------------
Adjusted earnings (loss)                                                                              (3,917     (3,917 )                                   (0.05      (0.05 )                           84         84                      -          -                 (3,833     (3,833 )                                   (0.04      (0.04 )
                                                                                        -------------------- ---------- -------------------- -------------------- ---------- --------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- ---------
(a) Reflects employee retention and relocation costs of $0.9 million, and professional fees of $0.7 million recorded in SG&A expenses; and employee termination costs of $3.4 million (net of the reversal of $0.8 million of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees), and CFO recruitment costs of $0.6 million recorded in other expense. Reflects employee retention and relocation costs of $0.9 million, and professional fees of $0.7 million recorded in SG&A expenses; and employee termination costs of $3.4 million (net of the reversal of $0.8 million of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees), and CFO recruitment costs of $0.6 million recorded in other expense.
(b) Reflects post-closing adjustments and transaction costs incurred in connection with the sale of the soy and corn business, which reduced the gain on sale recorded in other income.                                                                                                                                                                                                                                    Reflects post-closing adjustments and transaction costs incurred in connection with the sale of the soy and corn business, which reduced the gain on sale recorded in other income.
(c) Reflects the write-down of assets related to the transition of premium juice production activities to new contract manufacturers, which was recorded in other expense.                                                                                                                                                                                                                                     Reflects the write-down of assets related to the transition of premium juice production activities to new contract manufacturers, which was recorded in other expense.
(d) Other includes a legal settlement gain of $1.3 million, offset by losses on disposal of assets, which were recorded in other income/expense.                                                                                                                                                                                                                                     Other includes a legal settlement gain of $1.3 million, offset by losses on disposal of assets, which were recorded in other income/expense.
(e) Reflects the tax effect of the preceding adjustments to earnings and reflects an overall estimated annual effective tax rate of approximately 27% for the quarter ended September 28, 2019 (September 29, 2018 - 26%) on adjusted earnings/loss before tax.                                                                                                                                               Reflects the tax effect of the preceding adjustments to earnings and reflects an overall estimated annual effective tax rate of approximately 27% for the quarter ended September 28, 2019 (September 29, 2018 - 26%) on adjusted earnings/loss before tax.
(f) Reflects costs related to the start-up of new roasting equipment for grains, seeds and legumes at our Crookston, Minnesota, facility, which were recorded in cost of goods sold.                                                                                                                                                                                                                                     Reflects costs related to the start-up of new roasting equipment for grains, seeds and legumes at our Crookston, Minnesota, facility, which were recorded in cost of goods sold.
(g) Reflects product withdrawal and recall costs that were not eligible for reimbursement under insurance policies or exceeded the limits of those policies, including costs related to the recall of certain sunflower kernel products initiated in the second quarter of 2016, which were recorded in other expense.                                                                                                     Reflects product withdrawal and recall costs that were not eligible for reimbursement under insurance policies or exceeded the limits of those policies, including costs related to the recall of certain sunflower kernel products initiated in the second quarter of 2016, which were recorded in other expense.
(h) Reflects costs of production trials and employee training related to the commercialization of new consumer products, which were recorded in cost of goods sold.                                                                                                                                                                                                                                     Reflects costs of production trials and employee training related to the commercialization of new consumer products, which were recorded in cost of goods sold.
(i) Reflects employee termination costs related to the Value Creation Plan, which were recorded in other expense.                                                                                                                                                                                                                                     Reflects employee termination costs related to the Value Creation Plan, which were recorded in other expense.
(j) Other includes the accretion of contingent consideration obligations, gain/loss on the disposal of assets, and settlement of a legal matter, which were recorded in other expense/income.                                                                                                                                                                                                                              Other includes the accretion of contingent consideration obligations, gain/loss on the disposal of assets, and settlement of a legal matter, which were recorded in other expense/income.
Excluding            Excluding                                                                 Excluding                                                                            
                                      disposed operations                                                       disposed operations                                                         Disposed operations                                                                Consolidated
                                                        -------------------- ---------------------------------------------------------------------     -------------------- ----------------------------------------------------------------------    -------------------- ---------------------------------------------------------------------
                                                               Per Diluted                           Per Diluted                           Per Diluted
                                                                                                                                                 Share                                                                                          Share                                                                                          Share
For the three quarters ended                                               $                               $                      $                                 $                      $                                 $                      $
------------------------------------------------------- -------------------- ------------------------------  -------------------- -------------------  -------------------- ------------------------------  -------------------- -------------------- -------------------- ------------------------------  -------------------- -------------------
September 28, 2019                                                                                              
Net earnings (loss)                                                  (26,941    (26,941 )                                      31,845     31,845                      4,904      4,904      
Earnings attributable to non-controlling interests                       (59        (59 )                                           -          -                        (59        (59 )                       
Dividends and accretion of Series A Preferred Stock                   (6,005     (6,005 )                                           -          -                     (6,005     (6,005 )                       
                                                        -------------------- ---------- --------------------                                           -------------------- ---------- --------------------                                           -------------------- ---------- --------------------
Earnings (loss) attributable to common shareholders                  (33,005    (33,005 )                                   (0.38      (0.38 )                       31,845     31,845                   0.36                 0.36               (1,160     (1,160 )                                   (0.01      (0.01 )
                                                                                             
Adjusted for:                                                                                                   
                                                                           -          -                    (44,269    (44,269 )                                     (44,269    (44,269 )                       
   Gain on sale of soy and corn business(a)
                                                                       8,370      8,370                          -          -                      8,370      8,370      
   Costs related to the Value Creation Plan(b)
                                                                         448        448                          -          -                        448        448      
   Contract manufacturer transition costs(c)
                                                                         311        311                          -          -                        311        311      
   Plant expansion costs(d)
                                                                         260        260                          -          -                        260        260      
   Product withdrawal and recall costs(e)
                                                                      (1,491     (1,491 )                                           -          -                     (1,491     (1,491 )                       
   Other(f)
                                                                      (1,379     (1,379 )                                      12,130     12,130                     10,751     10,751      
   Net income tax effect(g)
                                                        -------------------- ---------- --------------------                                           -------------------- ---------- --------------------                                           -------------------- ---------- --------------------
Adjusted loss                                                        (26,486    (26,486 )                                   (0.30      (0.30 )                         (294       (294 )                                       -                    -              (26,780    (26,780 )                                   (0.31      (0.31 )
                                                        -------------------- ---------- -------------------- -------------------- ---------- --------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- ---------
                                                                                             
September 29, 2018                                                                                              
Net earnings (loss)                                                  (13,557    (13,557 )                                       1,433      1,433                    (12,124    (12,124 )                       
Earnings attributable to non-controlling interests                       (19        (19 )                                           -          -                        (19        (19 )                       
Dividends and accretion of Series A Preferred Stock                   (5,922     (5,922 )                                           -          -                     (5,922     (5,922 )                       
                                                        -------------------- ---------- --------------------                                           -------------------- ---------- --------------------                                           -------------------- ---------- --------------------
Earnings (loss) attributable to common shareholders                  (19,498    (19,498 )                                   (0.22      (0.22 )                        1,433      1,433                   0.02                 0.02              (18,065    (18,065 )                                   (0.21      (0.21 )
                                                                                             
Adjusted for:                                                                                                   
                                                                       1,696      1,696                      1,181      1,181                      2,877      2,877      
   Costs related to Value Creation Plan(h)
                                                                       2,230      2,230                          -          -                      2,230      2,230      
   Equipment start-up costs(i)
                                                                       1,456      1,456                          -          -                      1,456      1,456      
   Product withdrawal and recall costs(j)
                                                                         360        360                          -          -                        360        360      
   New product commercialization costs(k)
                                                                         198        198                          -          -                        198        198      
   Other(l)
                                                                      (2,500     (2,500 )                                           -          -                     (2,500     (2,500 )                       
   Fair value adjustment on contingent consideration(m)
                                                                      (1,200     (1,200 )                                           -          -                     (1,200     (1,200 )                       
   Recovery of product withdrawal costs(n)
                                                                        (280       (280 )                                        (307       (307 )                                        (587       (587 )                       
   Net income tax effect(g)
                                                        -------------------- ---------- --------------------                                           -------------------- ---------- --------------------                                           -------------------- ---------- --------------------
Adjusted earnings (loss)                                             (17,538    (17,538 )                                   (0.20      (0.20 )                        2,307      2,307                   0.03                 0.03              (15,231    (15,231 )                                   (0.18      (0.18 )
                                                        -------------------- ---------- -------------------- -------------------- ---------- --------- -------------------- ---------- -------------------- -------------------- -------------------- -------------------- ---------- -------------------- -------------------- ---------- ---------
(a) Reflects the gain on sale of the soy and corn business, net of transaction costs and post-closing adjustments, which was recorded in other income.
(b) Reflects employee retention and relocation costs of $1.8 million, and professional fees of $1.0 million recorded in SG&A expenses; and employee termination costs of $6.9 million (net of the reversal of $2.9 million of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees), CEO and CFO recruitment costs of $1.2 million, and facility closure costs of $0.3 million, all recorded in other expense.
(c) Reflects costs to transition premium juice production activities to new contract manufacturers, which were recorded in cost of goods sold and other expense.
(d) Reflects costs related to the expansion of our Allentown, Pennsylvania, aseptic beverage facility, which were recorded in cost of goods sold.
(e) Reflects product withdrawal and recall costs that were not eligible for reimbursement under insurance policies or exceeded the limits of those policies, including costs related to the recall of certain sunflower kernel products initiated in the second quarter of 2016, which were recorded in other expense.
(f) Other includes settlement gains resulting from a legal matter and a project cancellation, offset by losses on disposal of assets, insurance deductibles, and business development costs, which were recorded in other income/expense.
(g) Reflects the tax effect of the preceding adjustments to earnings and reflects an overall estimated annual effective tax rate of approximately 27% for the three quarters ended September 28, 2019 (September 29, 2018 - 26%) on adjusted earnings/loss before tax.
(h) Reflects the write-down of remaining flexible resealable pouch and nutrition bar inventories of $0.1 million recorded in cost of goods sold; professional and consulting fees, and employee recruitment and relocation costs of $0.6 million recorded in SG&A expenses; and asset impairment, facility closure and employee termination costs of $2.2 million recorded in other expense, all related to the Value Creation Plan.
(i) Reflects costs related to the start-up of new roasting equipment for grains, seeds and legumes at our Crookston, Minnesota, facility, which were recorded in cost of goods sold.
(j) Reflects product withdrawal and recall costs that were not eligible for reimbursement under insurance policies or exceeded the limits of those policies, including costs related to the recall of certain sunflower kernel products initiated in the second quarter of 2016, which were recorded in other expense.
(k) Reflects costs of production trials and employee training related to the commercialization of new consumer products, which were recorded in cost of goods sold.
(l) Other included the accretion of contingent consideration obligations, gain/loss on the disposal of assets, severance costs unrelated to the Value Creation Plan, and settlement of a legal matter, which were recorded in other expense/income.
(m) Reflects a fair value adjustment of $2.5 million to reduce the contingent consideration obligation related to a prior business acquisition, based on the results for the business in fiscal 2018, which was recorded in other income.
(n) Reflects the recovery from a third-party supplier of $1.2 million of costs we incurred relating to the withdrawal of certain consumer-packaged products due to quality-related issues, which was recorded in cost of goods sold. Costs incurred related to this withdrawal were recognized in cost of goods sold in the fourth quarter of 2016.

Segment Operating Income/Loss and Adjusted EBITDA

The Company defines segment operating income/loss as net earnings/loss before income taxes, interest expense and other income/expense items, and adjusted EBITDA as segment operating income/loss plus depreciation, amortization, non-cash 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 to net earnings/loss, which the Company believes to be the most directly comparable U.S. GAAP financial measure. In addition, as with adjusted earnings/loss presented above, the Company has prepared these tables in a columnar format to present the effect of the disposals of the soy and corn business, and flexible resealable pouch and nutrition bar operations on the Company's consolidated results for the current and comparative periods. The Company believes this presentation assists investors in assessing the results of the operations the Company has disposed and the effect of those operations on its financial performance.

Excluding                                                                                                  
                                                                        disposed operations                                                 Disposed operations                                                        Consolidated
For the quarter ended                                                                                        $                                                                   $                                                                   $
                                                                        --------------------------------------------------------  ---------------------------- --------------------------------------------------------  ---------------------------- --------------------------------------------------------
September 28, 2019                                                                                                                                                                           
Net loss                                                                  (10,974 )                                                    (805                         (805 )                                                 (11,779                      (11,779 )
Recovery of income taxes                                                   (3,631 )                                                    (304                         (304 )                                                  (3,935                       (3,935 )
Interest expense, net                                                       8,864                                      -                            -                                  8,864                        8,864  
Other expense, net                                                          2,214                                  1,109                        1,109                                  3,323                        3,323  
                                                                        ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Total segment operating loss                                               (3,527 )                                                       -                            -                                 (3,527                       (3,527 )
                                                                            8,517                                      -                            -                                  8,517                        8,517  
   Depreciation and amortization
                                                                            3,327                                      -                            -                                  3,327                        3,327  
   Stock-based compensation(a)
                                                                            1,615                                      -                            -                                  1,615                        1,615  
   Costs related to Value Creation Plan(b)
                                                                        ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Adjusted EBITDA                                                             9,932                                      -                            -                                  9,932                        9,932  
                                                                        ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                                                                     
September 29, 2018                                                                                                                                      
Net earnings (loss)                                                        (4,620 )                                                      84                           84                                 (4,536                       (4,536 )
Provision for (recovery of) income taxes                                     (903 )                                                      33                           33                                   (870                         (870 )
Interest expense (income), net                                              8,831                                    (39                          (39 )                                                   8,792                        8,792  
Other expense (income), net                                                 1,045                                     91                           91                                  1,136                        1,136  
                                                                        ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Total segment operating income                                              4,353                                    169                          169                                  4,522                        4,522  
                                                                            7,959                                    212                          212                                  8,171                        8,171  
   Depreciation and amortization
                                                                            2,120                                      -                            -                                  2,120                        2,120  
   Stock-based compensation
                                                                            1,500                                      -                            -                                  1,500                        1,500  
   Equipment start-up costs(c)
                                                                              360                                      -                            -                                    360                          360  
   New product commercialization costs(d)
                                                                        ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
Adjusted EBITDA                                                            16,292                                    381                          381                                 16,673                       16,673  
                                                                        ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ---------------------------- ----------------------------
                                                                                                                                     
For the third quarter of 2019, stock-based compensation of $3.3 million was recorded in SG&A expenses, and the reversal of $0.8 million of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees was recognized in other income.
Reflects employee retention and relocation costs of $0.9 million, and professional fees of $0.7 million recorded in SG&A expenses.
Reflects costs related to the start-up of new roasting equipment for grains, seeds and legumes at our Crookston, Minnesota, facility, which were recorded in cost of goods sold.
Reflects costs of production trials and employee training related to the commercialization of new consumer products, which were recorded in cost of goods sold.
Excluding                                                                                                                                                                                                                    
                                                                                                                                      disposed operations                                                                                                          Disposed operations                                                                                                                 Consolidated
For the three quarters ended                                                                                                                                               $                                                                                                                            $                                                                                                                            $
----------------------------------------------- ----------------------------------------------- ----------------------------------------------------------------------------------------------  ----------------------------------------------- ----------------------------------------------------------------------------------------------  ----------------------------------------------- ----------------------------------------------------------------------------------------------
September 28, 2019                                                                                                                                                                                                                                                                                                                                                           
Net earnings (loss)                                                                                                  (26,941 )                                                                                        31,845                                          31,845                                                                        4,904                                           4,904  
Provision for (recovery of) income taxes                                                                              (8,779 )                                                                                        12,018                                          12,018                                                                        3,239                                           3,239  
Interest expense, net                                                                                                 25,857                                                                            -                                               -                                                                       25,857                                          25,857  
Other expense (income), net                                                                                            4,525                                                                      (44,269                                         (44,269 )                                                                                       (39,744                                         (39,744 )
                                                                                                ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- -----------------------------------------------
Total segment operating loss                                                                                          (5,338 )                                                                                          (406                                            (406 )                                                                                        (5,744                                          (5,744 )
                                                                                                                      24,876                                                                          129                                             129                                                                       25,005                                          25,005  
   Depreciation and amortization
                                                                                                                       8,265                                                                            -                                               -                                                                        8,265                                           8,265  
   Stock-based compensation(a)
                                                                                                                       2,772                                                                            -                                               -                                                                        2,772                                           2,772  
   Costs related to Value Creation Plan(b)
                                                                                                                         311                                                                            -                                               -                                                                          311                                             311  
   Plant expansion costs(c)
                                                                                                                         289                                                                            -                                               -                                                                          289                                             289  
   Contract manufacturer transition costs(d)
                                                                                                ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- -----------------------------------------------
Adjusted EBITDA                                                                                                       31,175                                                                         (277                                            (277 )                                                                                        30,898                                          30,898  
                                                                                                ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- -----------------------------------------------
                                                                                                                                                                                                                                                                               
September 29, 2018                                                                                                                                                                                                                                                                                
Net earnings (loss)                                                                                                  (13,557 )                                                                                         1,433                                           1,433                                                                      (12,124                                         (12,124 )
Provision for (recovery of) income taxes                                                                              (4,413 )                                                                                           560                                             560                                                                       (3,853                                          (3,853 )
Interest expense (income), net                                                                                        25,567                                                                          (81                                             (81 )                                                                                        25,486                                          25,486  
Other expense (income), net                                                                                               47                                                                        1,270                                           1,270                                                                        1,317                                           1,317  
                                                                                                ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- -----------------------------------------------
Total segment operating income                                                                                         7,644                                                                        3,182                                           3,182                                                                       10,826                                          10,826  
                                                                                                                      23,859                                                                          642                                             642                                                                       24,501                                          24,501  
   Depreciation and amortization
                                                                                                                       6,395                                                                            -                                               -                                                                        6,395                                           6,395  
   Stock-based compensation
                                                                                                                       2,230                                                                            -                                               -                                                                        2,230                                           2,230  
   Equipment start-up costs(e)
                                                                                                                         713                                                                            -                                               -                                                                          713                                             713  
   Costs related to Value Creation Plan(b)
                                                                                                                         360                                                                            -                                               -                                                                          360                                             360  
   New product commercialization costs(f)
                                                                                                                      (1,200 )                                                                                             -                                               -                                                                       (1,200                                          (1,200 )
   Recovery of product withdrawal costs(g)
                                                                                                ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- -----------------------------------------------
Adjusted EBITDA                                                                                                       40,001                                                                        3,824                                           3,824                                                                       43,825                                          43,825  
                                                                                                ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- -----------------------------------------------
                                                                                                                                                                                                                                                                      
For the first three quarters of 2019, stock-based compensation of $8.3 million was recorded in SG&A expenses, and the reversal of $2.9 million of previously recognized stock-based compensation related to forfeited awards previously granted to terminated employees was recognized in other income.
For the first three quarters of 2019, reflects employee retention and relocation costs of $1.8 million, and professional fees of $1.0 million recorded in SG&A expenses. For the first three quarters of 2018, reflects the write-down of remaining flexible resealable pouch and nutrition bar inventories of $0.1 million recorded in cost of goods sold; and professional and consulting fees, and employee recruitment and relocation costs of $0.6 million recorded in SG&A expenses.
Reflects costs related to the expansion of our Allentown, Pennsylvania, aseptic beverage facility, which were recorded in cost of goods sold.
Reflects costs to transition premium juice production activities to new contract manufacturers, which were recorded in cost of goods sold.
Reflects costs related to the start-up of new roasting equipment for grains, seeds and legumes at our Crookston, Minnesota, facility, which were recorded in cost of goods sold.
Reflects costs of production trials and employee training related to the commercialization of new consumer products, which were recorded in cost of goods sold.
Reflects the recovery from a third-party supplier of $1.2 million of costs we incurred relating to the withdrawal of certain consumer-packaged products due to quality-related issues, which was recorded in cost of goods sold. Costs incurred related to this withdrawal were recognized in cost of goods sold in the fourth quarter of 2016.

Sale of Specialty and Organic Soy and Corn Business - Selected Financial Information

The following table presents for period ended February 22, 2019, and for the quarter and three quarters ended September 29, 2018, a summary of the results of operations of the soy and corn business, consisting of revenues, gross profit, segment operating income/loss and earnings/loss before income taxes. These results exclude management fees charged by Corporate Services. The following table also presents a reconciliation of adjusted EBITDA in connection with this transaction from earnings/loss before income taxes of the soy and corn business, which we consider in this case to be the most directly comparable U.S. GAAP financial measure.

Period ended                    Period ended                     Quarter ended            Three quarters ended
                                        -------------------- ------------------------------                       ------------------------------  ------------------------------
                        February 22, 2019               February 22, 2019                September 29, 2018              September 29, 2018
                                        $                               $                                 $                               $
                                        -------------------- ------------------------------                       ------------------------------  ------------------------------
Revenues                                              10,346     10,346         27,002       77,944  
Gross profit                                             192        192          1,251        6,687  
Segment operating income (loss)                         (187       (187 )                             868        5,538  
Earnings (loss) before income taxes                     (187       (187 )                             817        5,531  
                                                         129        129            212          642  
   Depreciation
                                                           -          -            (39 )                           (81 )
   Interest income
                                                           -          -             91           89  
   Other expense
                                                        (169       (169 )                            (652 )                        (2,548 )
   Less rationalized costs and expenses
                                        -------------------- ---------- --------------------                      ---------- -------------------- ---------- --------------------
Adjusted EBITDA                                         (227       (227 )                             429        3,633  
--------------------------------------- -------------------- ---------- -------------------- -------------------- ---------- -------------------- ---------- --------------------

Segment operating income/loss and adjusted EBITDA are non-GAAP measures. See discussion above under the heading "Segment Operating Income/Loss and Adjusted EBITDA" on the use of these non-GAAP measures.

View source version on businesswire.com: https://www.businesswire.com/news/home/20191106005259/en/

SOURCE: SunOpta Inc.

Scott Van Winkle
ICR
617-956-6736
scott.vanwinkle@icrinc.com
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