SunOpta Inc., a leading global company focused on natural, organic and specialty foods and natural health products, today announced financial results for the year ended December 31, 2008. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP.
For fiscal 2008 the Company realized record revenues of $1.055 billion, an increase of 31.5% versus fiscal 2007 revenues of $802.5 million. These results were led by a 32.4% increase in revenues from the SunOpta Food Group and reflect a consolidated internal growth rate of approximately 16% for fiscal 2008.
On a GAAP basis for fiscal 2008 the Company realized a loss of ($10.9) million or ($0.17) per diluted common share including the impact of non-cash charges for goodwill impairment in certain operations and non-cash tax valuation allowances totaling $13.7 million or $0.21 per diluted common share, due in part to recent economic conditions and the decline in the Company's stock price.
Adjusted earnings(1) for fiscal 2008 were $13.3 million or $0.21 per diluted common share after adjusting for professional fees, severance and related costs incurred during the year related to the investigation of internal controls in the SunOpta Fruit Group and the Company's restatement of financial results for the first three months of 2007, non-cash charges for goodwill impairment and tax valuation allowances plus non-recurring start up and operational costs. Excluding non-recurring start up and operational costs, earnings were $10.8 million or $0.17 per diluted common share versus previous guidance of $0.19 to $0.23 per diluted common share. Segment operating income(2) for the year was $16.2 million as compared to $5.7 million in 2007, an increase of 186%.
During fiscal 2008 the Company realized cash from operating activities of $33.7 million versus cash used in 2007 of $35.1 million, a year over year improvement of $68.8 million, indicative of the extensive efforts to reduce working capital and control spending across the organization. Excluding the impact of credit facilities included with acquisitions completed in 2008, the Company reduced bank indebtedness by $24.6 million versus an increase of $18.0 million in 2007.
At December 31, 2008 the Company's balance sheet reflects a current working capital ratio of 1.74 to 1.00, long term debt to equity ratio of 0.49 to 1.00 and total debt to equity ratio of 0.79 to 1.00. The Company has total assets of $581.0 million and a net book value of $3.52 per outstanding share. The Company is in compliance with all banking covenants as at December 31, 2008.
Steve Bromley, President and Chief Executive Officer of SunOpta commented, "2008 was certainly a challenging year for our Company as we navigated through the issues we experienced in the SunOpta Fruit Group and the impact of the deterioration in the global economy. We have started 2009 with a cautious sense of awareness of the difficulties in the global economic environment, but confident that our position as a key player in health conscious food categories, combined with numerous cost control, efficiency and product development initiatives focused on improving and solidifying our business, will lead us to improved returns in 2009 and beyond."
Segment operating income(2) for the year was $16.2 million as compared to $5.7 million in 2007, an increase of 186%. Segment operating income(2) within the SunOpta Food Group increased 84.9%. The improved segment operating income(2) in the SunOpta Food Group was driven by record results in the SunOpta Grains & Foods Group and SunOpta Distribution Group. There is continued demand for the Food Groups natural, organic and specialty foods and natural health product offerings as consumers focus on health conscious food categories. The SunOpta Fruit Group reduced its losses as a result of a sharpened and continued focus on margin improvement and cost containment. Prospects for the SunOpta Fruit Group for 2009 are encouraging.
Segment operating income(2) within Opta Minerals declined approximately 17% to $5.5 million in 2008, reflecting the precipitous drop in the fourth quarter in the foundry and steel industries as a result of the decline in the global economy and a $2.8 million write-down of magnesium inventory to realizable value. Operations have been restructured to deal with this decline and the group is well positioned to benefit from expected increased infrastructure spending in 2009. Segment operating results in the SunOpta BioProcess Group improved in 2008 but remain in a loss position. The group remains focused on leveraging their technology and expertise in the production of cellulosic ethanol, a category that is believed offers excellent long term growth potential as the world looks to reduces its dependence on fossil fuels and reduce green house gas emissions.
For the fourth quarter of 2008 the Company realized revenues of $245.0 million versus $209.8 million in 2007, an increase of 16.8%. On a GAAP basis the Company realized a loss of ($17.0) or ($0.27) per diluted common share including the impact of non-cash charges for goodwill impairment and non-cash tax valuation allowances totalling $0.21 per diluted common share as well as charges related to the unfavourable arbitration decision in SunOpta BioProcess and professional fees and related costs totalling $0.03 per diluted common share, resulting in an adjusted loss(1) for the quarter of ($1.1) million or ($0.02) per diluted common share. Results in the quarter were significantly impacted by pre-tax commodity cost write-downs of approximately $3.6 million on certain commodities which needed to be marked to market.
As previously announced, as a result of the current uncertain and rapidly changing world-wide macroeconomic conditions, the Company has decided to take a more cautious approach with regard to providing guidance, and in doing so has decided not to provide specific revenue and earnings guidance for 2009. The Company will provide updates when appropriate related to material changes in business affairs resulting from changes in economic conditions. The Company expects to realize improved results in 2009 as a result of improved pricing and product mix; the impact of capacity expansion, cost reduction and rationalization initiatives; fixed cost leverage; and the avoidance of certain professional fees, severance and operational costs incurred in 2008 which are not expected to reoccur to the same extent in 2009. The Company's primary focus for 2009 remains the improvement of operating margins and return on assets employed.
SunOpta will host a conference call at 10:00 am Eastern Standard Time on Friday March 6, 2009 to discuss these results and recent corporate developments. The conference call can be accessed toll free by dialing 1-(866) 322-2356 or (416) 640-3405 followed by pass code 4939312#.
About SunOpta Inc.
SunOpta Inc. is an operator of high-growth ethical businesses, focusing on integrated business models in the natural and organic food and natural health markets. The Company has three business units: the SunOpta Food Group, which specializes in sourcing, processing and distribution of natural and organic food products integrated from seed through packaged products; Opta Minerals Inc. (CA:OPM: news , chart , profile ) (66.2% owned by SunOpta), a producer, distributor, and recycler of environmentally friendly industrial materials; and SunOpta BioProcess Inc. which engineers and markets proprietary steam explosion technology systems for the bio-fuel, pulp and food processing industries. Each of these business units has proprietary products and services that give it a solid competitive advantage in its sector.
Forward Looking Statements
Certain statements included in this press release regarding 2008 results and 2009 plans and projected results are "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation, and are based on information available to us on the date of this release. These forward looking statements include, but are not limited to management's expectations for improved financial results in 2009 and beyond, increased infrastructure spending in 2009 and the long term growth potential of cellulosic ethanol as well as the Company's business strategy and objectives. The terms and phrases "will", "continued", "prospects", "expected", "believed" and other similar terms and phrases are intended to identify these forward looking statements. Forward-looking statements are based on information available to us on the date of this release and on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors the Company believes are appropriate in the circumstances including, but not limited to, general economic conditions, product pricing levels, customer demand, competitive intensity, cost rationalization initiatives, product development initiatives, projected capacity expansion, supply contracts and certain market publications and studies. 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, economic conditions, consumer spending patterns, potential failure of product development initiatives, availability and pricing of raw materials and supplies and other risks described from time to time under "Risk Factors" in the Company's Annual Report on Form 10-K (available at www.sec.gov). 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. We assume no obligation to update these forward looking statements except as required by law.
(1) Adjusted earnings (loss) is not a GAAP measure. SunOpta believes adjusted earnings (adjusted for the impact of the professional fees and severance costs incurred in relation to the investigation and related activities, non-recurring start up and operational costs plus the non-cash charges for goodwill impairment and tax valuation allowances) provides useful information to understand the underlying performance of the business and as a result these items have been adjusted.
(2) Segment Operating Income is defined as "Earnings Before the Following" excluding the impact of "Other expenses, net" and "Goodwill Impairment." This provides useful information to understand the underlying performance of the particular segment of the Company's business.