SunOpta Inc.: Form 10-Q - Filed by newsfilecorp.com

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended April 1, 2023

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from to .

Commission file number: 001-34198

SUNOPTA INC.

(Exact name of registrant as specified in its charter)

CANADA	Not Applicable
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

7078 Shady Oak Road Eden Prairie, Minnesota, 55344	(952) 820-2518
(Address of principal executive offices)	(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☐
(Do not check if a smaller reporting company)	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	STKL	The Nasdaq Stock Market
Common Shares	SOY	The Toronto Stock Exchange

The number of the registrant's common shares outstanding as of May 5, 2023 was 115,419,623.

SUNOPTA INC.

FORM 10-Q

For the Quarterly Period Ended April 1, 2023

TABLE OF CONTENTS

PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Statements of Operations for the quarters ended April 1, 2023 and April 2, 2022	5
	Consolidated Balance Sheets as at April 1, 2023 and December 31, 2022	6
	Consolidated Statements of Shareholders' Equity as at and for the quarters ended April 1, 2023 and April 2, 2022	7
	Consolidated Statements of Cash Flows for the quarters ended April 1, 2023 and April 2, 2022	8
	Notes to Consolidated Financial Statements	9

Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3	Quantitative and Qualitative Disclosures about Market Risk	31
Item 4	Controls and Procedures	31

PART II	OTHER INFORMATION
Item 1	Legal Proceedings	32
Item 1A	Risk Factors	32
Item 6	Exhibits	32

Basis of Presentation

Except where the context otherwise requires, all references in this Quarterly Report on Form 10-Q ("Form 10-Q") to the "Company," "SunOpta," "we," "us," "our" or similar words and phrases are to SunOpta Inc. and its subsidiaries, taken together.

In this report, all currency amounts presented are expressed in thousands of United States ("U.S.") dollars ("$"), except per share amounts, unless otherwise stated. Other amounts may be presented in thousands of Canadian dollars ("C$") and Mexican pesos ("M$").

Forward-Looking Statements

This Form 10-Q contains forward-looking statements that are based on management's current expectations and assumptions and involve a number of risks and uncertainties. Generally, forward-looking statements do not relate strictly to historical or current facts and are typically accompanied by words such as "anticipate," "estimate," "target," "intend," "project," "potential," "predict," "continue," "believe," "expect," "can," "could," "would," "should," "may," "might," "plan," "will," "budget," "forecast," the negatives of such terms, and words and phrases of similar impact and include, but are not limited to, references to future financial and operating results, plans, objectives, expectations, and intentions; our expectations regarding the future profitability of our plant-based and fruit-based businesses, including anticipated results of operations, revenue trends, and gross margin profiles; the expected impact of the inflationary cost environment on our business, including raw material, packaging, labor, energy, fuel and transportation costs; the expected impact of pricing actions on sales volumes and gross margins; the expected impact of cost containment measures and productivity initiatives; our expectations regarding customer demand, consumer preferences, competition, sales pricing, availability and pricing of raw material inputs, and timing and cost to complete capital expansion projects; our ability to successfully execute on our capital investment plans, and the viability of those plans; the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing; the anticipated sufficiency of future cash flows to enable the payments of interest and repayment of debt, working capital needs, planned capital expenditures; and our ability to obtain additional financing or issue additional debt or equity securities; our intentions related to the potential sale of selected businesses, operations, or assets; the outcome of litigation to which we may, from time to time, be a party; and other statements that are not historical facts. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on certain assumptions, expectations and analyses we make in light of our experience and our interpretation of current conditions, historical trends and expected future developments, as well as other factors that we believe are appropriate in the circumstances. Whether actual results and developments will be consistent with and meet our expectations and predictions is subject to many risks and uncertainties, including those set forth under Part I, Item 1A "Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, under Item 1A. "Risk Factors" of this report, and in our other filings with the U.S. Securities and Exchange Commission and the Canadian Securities Administrators

SUNOPTA INC.

April 1, 2023 Form 10-Q

All forward-looking statements made herein are qualified by these cautionary statements, and our actual results or the developments we anticipate may not be realized. Our forward-looking statements are based only on information currently available to us and speak only as of the date on which they are made. We do not undertake any obligation to publicly update our forward-looking statements, whether written or oral, after the date of this report for any reason, even if new information becomes available or other events occur in the future, except as may be required under applicable securities laws. The foregoing factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this report.

SUNOPTA INC.

April 1, 2023 Form 10-Q

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SunOpta Inc.

Consolidated Statements of Operations
For the quarters ended April 1, 2023 and April 2, 2022
(Unaudited)
(All dollar amounts expressed in thousands of U.S. dollars, except per share amounts)

	Quarter ended
	April 1, 2023		April 2, 2022
	$		$

Revenues (note 13)	223,880		240,173
Cost of goods sold	195,677		211,817

Gross profit	28,203		28,356
Selling, general and administrative expenses	25,430		22,210
Intangible asset amortization	2,446		2,612
Other expense, net	35		287
Foreign exchange gain	(2,211	)	(472	)

Earnings from continuing operations before the following	2,503		3,719
Interest expense, net	5,812		2,530

Earnings (loss) from continuing operations before income taxes	(3,309	)	1,189
Income tax expense (benefit) (note 9)	(4,686	)	187

Earnings from continuing operations	1,377		1,002
Earnings from discontinued operations	-		3,566

Net earnings	1,377		4,568
Dividends and accretion on preferred stock (note 7)	(704	)	(755	)

Earnings attributable to common shareholders	673		3,813

Basic and diluted earnings per share (note 10)
Earnings from continuing operations	0.01		0.00
Earnings from discontinued operations	-		0.03
Earnings attributable to common shareholders⁽¹⁾	0.01		0.04

Weighted-average common shares outstanding (000s) (note 10)
Basic	110,014		107,399
Diluted	113,107		108,359

(1) The sum of the individual per share amounts may not add due to rounding.

(See accompanying notes to consolidated financial statements)

SUNOPTA INC.

April 1, 2023 Form 10-Q

SunOpta Inc.

Consolidated Balance Sheets
As at April 1, 2023 and December 31, 2022
(Unaudited)
(All dollar amounts expressed in thousands of U.S. dollars)

	April 1, 2023		December 31, 2022
	$		$

ASSETS
Current assets
Cash and cash equivalents	910		679
Accounts receivable, net of allowance for credit losses of $649 and $584, respectively	86,124		74,903
Inventories (note 2)	200,557		207,047
Prepaid expenses and other current assets	15,239		15,688
Income taxes recoverable	3,896		4,040
Total current assets	306,726		302,357

Property, plant and equipment, net	339,529		322,391
Operating lease right-of-use assets (note 3)	81,097		82,564
Intangible assets, net	133,200		135,646
Goodwill	3,998		3,998
Deferred income taxes	8,562		3,712
Other assets	5,013		5,184
Total assets	878,125		855,852

LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (note 4)	112,944		108,511
Notes payable (note 5)	5,229		—
Income taxes payable	404		957
Current portion of long-term debt (note 6)	43,807		38,491
Current portion of operating lease liabilities (note 3)	13,199		13,074
Total current liabilities	175,583		161,033

Long-term debt (note 6)	282,371		269,993
Operating lease liabilities (note 3)	76,670		77,557
Total liabilities	534,624		508,583

Series B-1 preferred stock (note 7)	14,147		28,062

SHAREHOLDERS' EQUITY
Common shares, no par value, unlimited shares authorized, 115,379,620 shares issued (December 31, 2022 - 107,909,792)	461,132		440,348
Additional paid-in capital	21,874		33,184
Accumulated deficit	(155,015	)	(155,688	)
Accumulated other comprehensive income	1,363		1,363
Total shareholders' equity	329,354		319,207
Total liabilities and shareholders' equity	878,125		855,852

(See accompanying notes to consolidated financial statements)

SUNOPTA INC.

April 1, 2023 Form 10-Q

SunOpta Inc.

Consolidated Statements of Shareholders' Equity
As at and for the quarters ended April 1, 2023 and April 2, 2022
(Unaudited)
(All dollar amounts expressed in thousands of U.S. dollars)

	Common shares		Additional paid-in capital		Accumulated deficit		Accumulated other comprehensive income	Total
	000s	$	$		$		$	$

Balance at December 31, 2022	107,910	440,348	33,184		(155,688	)	1,363	319,207
Exchange of Series B-1 preferred stock, net of share issuance costs of $87 (note 7)	6,089	14,019	-		-		-	14,019
Employee stock purchase plan	25	160	-		-		-	160
Stock incentive plan	1,356	6,605	(6,476	)	-		-	129
Withholding taxes on stock-based awards	-	-	(8,726	)	-		-	(8,726	)
Stock-based compensation	-	-	3,892		-		-	3,892
Net earnings	-	-	-		1,377		-	1,377
Dividends on preferred stock	-	-	-		(

SEC Form 10-Q filed by SunOpta Inc.