SunOpta Inc., a leading global company focused on natural, organic and specialty foods and natural health products, today announced financial results for the first quarter ended March 31, 2009. All amounts are expressed in U.S. dollars and results are reported in accordance with U.S. GAAP, except where specifically noted.
For the first three months of 2009, the Company realized its 46th consecutive quarter of increased revenues versus the same quarter in the previous year. Revenues in the first quarter of 2009 were $232.1 million versus first quarter 2008 revenues of $230.4 million. These results reflect an $8.4 million increase in revenues from the SunOpta Food Group, offset by declines in revenue in non-core businesses of $6.7 million.
The main driver of the increase in revenues in the first quarter of 2009 as compared to the 2008 first quarter in the SunOpta Food Group was the positive contribution in the quarter of the April 2008 acquisition of The Organic Corporation, offset by year over year foreign exchange rate changes versus the U.S. dollar and the impact of declines in commodity prices that have a direct correlation on selling prices, totaling $15.9 million. Revenues in the first quarter were impacted by a number of factors related to the economic downturn combined with significant inventory de-leveraging that has been reported from consumers through retailers, branded product suppliers and food manufacturers.
For the first quarter of 2009, the Company realized a loss of ($1.7) million or ($0.03) per diluted common share versus earnings of $1.5 million or $0.02 per diluted common share in the first quarter of 2008. These results include an unfavorable pre-tax increase in foreign exchange loss of $1.0 million versus the first quarter of 2008 plus $2.4 million of additional pre-tax costs which were realized during the first quarter of 2009.
Adjusted earnings(1) for the first quarter of 2009 were ($0.1) million or $0.00 per diluted common share after adjusting for the additional pre-tax costs of $2.4 million which were incurred during the quarter and are expected to provide significant future benefits to the Company. During the quarter the Company incurred approximately $1.0 million pre-tax in start-up costs related to its Modesto soymilk processing and packaging facility which is scheduled to begin production in mid to late May 2009. The Company also incurred pre-tax severance and related costs of approximately $0.7 million within a number of its operating segments as it continues to position these operations for improved future performance. Also during the quarter the Company incurred pre-tax costs of approximately $0.4 million investing in new packaging, new formulations and new products intended to revitalize a number of company owned natural health products brands. These new products are expected to come to the market during the second quarter of 2009 and are expected to drive incremental volumes and contribution going forward.
Segment operating income(2) for the first quarter of 2009 reflects a loss of ($0.4) million as compared to income of $5.4 million in the first quarter of 2008, reflecting positive segment operating income in core Food Group operations, offset by the combined effect of losses in non-core businesses and Corporate costs. Segment operating income reflects reduced volumes and margins due in part to inventory de-leveraging and current economic conditions, unfavourable foreign exchange and the impact of the additional costs that were incurred in the quarter.
At March 31, 2009 the Company's balance sheet reflects a current working capital ratio of 1.70 to 1.00, long-term debt to equity ratio of 0.48 to 1.00 and total debt to equity ratio of 0.83 to 1.00. The Company has total assets of $573.7 million and a net book value of $3.42 per outstanding share.
During the three month period ended March 31, 2009, cash utilized to fund working capital decreased $7.0 million versus the first quarter of 2008, indicative of efforts to reduce working capital, especially inventories, across the Company. Net cash utilized by operating activities of $4.5 million reflects a small improvement versus cash utilized in the three month period ended March 31, 2008. Cash and short-term investments were $23.9 million at the end of the quarter versus $24.8 million at December 31, 2008. During the first quarter of 2009, the Company reduced net long-term debt by $3.3 million as compared to a net increase of $5.1 million in the first quarter of 2008.
The Company has reached an agreement with its lending syndicate to extend the term on its operating facilities, scheduled for renewal on June 30, 2009, through to December 31, 2009. As part of this agreement the Company has negotiated a waiver of financial covenants for the first quarter of 2009 and amended certain covenants for the balance of the fiscal year. The Company has started the process to convert its current operating lines to facilities which will provide more flexibility and better utilize the Company's strong asset base, and is targeting to complete this process no later than the end of the current fiscal year.
Consistent with the Company's efforts to meet best standards in corporate governance, the Board today approved certain changes to the Company's Employee Stock Purchase Plan ("Plan") to ensure compliance with recommendations made by the Risk Metrics Group, ISS Governance Services. In particular, the revised Plan now requires shareholder approval for matters relating to changes in employee contribution limits and to the discount factor applied to the exercise price.
Steve Bromley, President and Chief Executive Officer of SunOpta commented: "The Company's primary focus for 2009 remains the improvement of operating margins and return on assets employed through working capital management and a tight focus on capital spending. The first quarter was marked by continued consumer uncertainty and market volatility resulting from the deterioration in global economic conditions. While market conditions were difficult, we have remained focused on numerous cost control, efficiency, product development and asset utilization initiatives that we believe will position the Company for improved returns. We remain confident that our core food operations are well positioned as interest in health and wellness continues to increase around the globe."
As previously announced, as a result of uncertain and rapidly changing world-wide macroeconomic conditions, the Company has decided to take a cautious approach with regards to providing guidance, and in doing so has not provided specific revenue and earnings guidance for 2009. The Company will continue to provide updates when appropriate related to material changes in business affairs resulting from changes in the business and related economic conditions.
SunOpta will host a conference call at 10:00 am Eastern Time on Friday May 8, 2009 to discuss these results and recent corporate developments. The conference call can be accessed toll-free by dialing 1-866-322-1159 or 416-640-3404 followed by pass code 8639140#. Additionally, the call may be accessed via a link at the Company's website at www.sunopta.com. A replay number can also be accessed between May 8th and May 18th with the toll-free dial-in number 1-888-203-1112 or 647-436-0148 followed by pass code 8639140#.
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 ) (66.5% 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.
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, management's expectations regarding future benefits of additional tax costs, intended revitalization of a number natural health products brands, incremental volumes and contribution, benefits of new banking arrangements as well as cost cutting and restructuring measures, and overall improved returns for 2009. The terms and phrases "expected", "continues", "intended", "scheduled", "future performance", "will", 'targeting", "positioned", "remain focused", "believe", "confident" 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 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 as well as other factors the Company believes are appropriate in the circumstances including, but not limited to, general economic conditions, applicable tax legislation, consumer trends, preferences and spending patterns, product pricing levels, current customer demand, competitive intensity, cost rationalization, product development initiatives, supply contracts and discussions with the Company's lenders to date. 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, global economic conditions, consumer spending patterns, decreases in customer demand, potential failure of product development initiatives, availability and pricing of raw materials and supplies, potential refusal or inability of lenders to amend the Company's credit facilities and/or continue to waive certain covenants and other risks described from time to time under "Risk Factors" in the Company's Annual Report of 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.
(1) Adjusted earnings 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, additional 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. A reconciliation of this non-GAAP measure to GAAP is included on the last page of this release.
(2) Segment Operating Income is defined as "Earnings Before the Following" excluding the impact of "Other expense, net".