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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
Commission File No. 0-9989
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
SUNOPTA INC.
(Exact name of registrant as specified in its charter)
CANADA
(Jurisdiction of Incorporation)
Not Applicable
(I.R.S. Employer Identification No.)
2838 Bovaird Drive West
Norval, Ontario L0P 1K0, Canada
(Address of Principal Executive Offices)
(905) 455-1990
(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 |X| No |_|
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)
Yes |X| No |_|
At July 31, 2004 registrant had 53,516,552 common shares outstanding, the only
class of registrant's common stock outstanding. There were no other classes of
stock outstanding and the aggregate market value of voting stock held by
non-affiliates at such date was $346,329,629. The Company's common shares are
traded on the Nasdaq Smallcap Market tier of the Nasdaq Stock Market under the
symbol STKL and The Toronto Stock Exchange under the symbol SOY.
There are 45 pages in the June 30, 2004 10-Q and the index follows the cover
page.
- --------------------------------------------------------------------------------
SUNOPTA INC. 1 June 30, 2004 10-Q
SUNOPTA INC.
FORM 10-Q
June 30, 2004
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as at June 30, 2004 and December 31,
2003.
Consolidated Statements of Shareholders' Equity for the six months
ended June 30, 2004 and the year ended December 31, 2003.
Consolidated Statements of Earnings for the three and six months
ended June 30, 2004 and 2003.
Consolidated Statements of Cash Flow for the three and six months
ended June 30, 2004 and 2003.
Condensed Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Item 3. Quantitative and Qualitative Disclosure about Market Risk
Item 4. Disclosure Controls and Procedures
PART II - OTHER INFORMATION
All financial information is expressed in United States Dollars The
closing rate of exchange on July 30, 2004 was CDN $1 = U.S. $0.7522
- --------------------------------------------------------------------------------
SUNOPTA INC. 2 June 30, 2004 10-Q
PART I - FINANCIAL INFORMATION
Item 1 -
Consolidated Financial Statements
SunOpta Inc.
For the Six Months Ended June 30, 2004
(Unaudited)
- --------------------------------------------------------------------------------
SUNOPTA INC. 3 June 30, 2004 10-Q
SunOpta Inc.
Consolidated Balance Sheets
As at June 30, 2004 and December 31, 2003
Unaudited
(expressed in thousands of U.S. dollars)
June 30, December 31,
2004 2003
$ $
-----------------------
Assets
Current assets
Cash and cash equivalents 1,609 21,990
Accounts receivable - trade (note 6) 38,487 26,241
Inventories (note 7) 40,288 34,778
Prepaid expenses and other current assets (note 17) 5,877 2,524
Income taxes recoverable -- 1,686
Future income taxes 667 1,172
-----------------------
86,928 88,391
Assets held for sale 193 6,007
Property, plant and equipment 54,535 44,761
Goodwill and intangibles, net 40,198 25,084
Future income taxes 6,715 9,023
Other assets 329 490
-----------------------
188,898 173,756
=======================
Liabilities
Current liabilities
Bank Indebtedness (note 8) 3,515 --
Accounts payable and accrued liabilities 29,962 24,670
Customer and other deposits -- 1,778
Current portion of long-term debt (note 8) 4,104 3,840
Current portion of long-term payables (note 9) 851 740
-----------------------
38,432 31,028
Long-term debt (note 8) 19,787 21,196
Long-term payables (note 9) 1,294 1,591
-----------------------
59,513 53,815
-----------------------
Shareholders' Equity
Capital stock (note 10) 98,590 96,636
Contributed surplus 3,384 3,384
Retained earnings 23,673 15,779
Accumulated other comprehensive income 3,738 4,142
-----------------------
129,385 119,941
-----------------------
188,898 173,756
=======================
Commitments and contingencies (note 13)
(See accompanying notes to consolidated financial statements)
- --------------------------------------------------------------------------------
SUNOPTA INC. 4 June 30, 2004 10-Q
SunOpta Inc.
Consolidated Statements of Shareholders' Equity
As at June 30, 2004 and December 31, 2003
Unaudited
(expressed in thousands of U.S. dollars)
Accumulated
Capital Contributed Retained Other
Stock Surplus Earnings Comprehensive Total
Income
$ $ $ $ $
-----------------------------------------------------------------
Balance at December 31, 2003 96,636 3,384 15,779 4,142 119,941
Options exercised 389 -- -- -- 389
Employee Stock Purchase Plan 140 -- -- -- 140
Warrants exercised 1,425 -- -- -- 1,425
Net earnings for the period -- -- 7,894 -- 7,894
Currency translation adjustment -- -- -- (404) (404)
-----------------------------------------------------------------
Balance at June 30, 2004 98,590 3,384 23,673 3,738 129,385
=================================================================
- --------------------------------------------------------------------------------
SUNOPTA INC. 5 June 30, 2004 10-Q
SunOpta Inc.
Consolidated Statements of Earnings
For the three months ended June 30, 2004 and 2003
Unaudited
(expressed in thousands of U.S. dollars, except per share amounts)
June 30, June 30,
2004 2003
$ $
----------------------
Revenues 80,946 52,641
Cost of goods sold 64,690 43,536
----------------------
Gross profit 16,256 9,105
Warehousing and distribution expenses 1,442 229
Selling, general and administrative expenses 8,964 5,575
----------------------
10,406 5,804
----------------------
Earnings before the following 5,850 3,301
Interest expense (152) (493)
Interest and other income (note 17) 2,499 173
Foreign exchange gain 389 254
----------------------
2,736 (66)
----------------------
Earnings before income taxes 8,586 3,235
Provision for income taxes 2,562 787
----------------------
Net earnings for the period 6,024 2,448
======================
Net earnings per share for the period (note 11)
- Basic 0.11 0.06
======================
- Diluted 0.11 0.05
======================
(See accompanying notes to consolidated financial statements)
- --------------------------------------------------------------------------------
SUNOPTA INC. 6 June 30, 2004 10-Q
SunOpta Inc.
Consolidated Statements of Earnings
For the six months ended June 30, 2004 and 2003
Unaudited
(expressed in thousands of U.S. dollars, except per share amounts)
June 30, June 30,
2004 2003
$ $
-----------------------
Revenues 143,448 94,052
Cost of goods sold 114,921 77,829
-----------------------
Gross profit 28,527 16,223
Warehousing and distribution expenses 2,597 407
Selling, general and administrative expenses 16,944 10,792
-----------------------
19,541 11,199
-----------------------
Earnings before the following 8,986 5,024
Interest expense (360) (984)
Interest and other income (note 17) 2,384 210
Foreign exchange gain 248 595
-----------------------
2,272 (179)
-----------------------
Earnings before income taxes 11,258 4,845
Provision for income taxes 3,364 1,270
-----------------------
Net earnings for the period 7,894 3,575
=======================
Net earnings per share for the period (note 11)
- Basic 0.15 0.08
=======================
- Diluted 0.14 0.08
=======================
(See accompanying notes to consolidated financial statements)
- --------------------------------------------------------------------------------
SUNOPTA INC. 7 June 30, 2004 10-Q
SunOpta Inc.
Consolidated Statements of Cash Flow
For the three months ended June 30, 2004 and 2003
Unaudited
(expressed in thousands of U.S. dollars)
June 30, June 30,
2004 2003
$ $
----------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 6,024 2,448
Items not affecting cash
Amortization 1,824 1,178
Future income taxes 1,001 273
Other (66) (151)
Changes in non-cash working capital (note 12) (4,864) (1,825)
----------------------
3,919 1,923
----------------------
Investing activities
Acquisition of companies, net of cash acquired (21,192) (873)
Acquisition of property, plant and equipment (5,399) (1,251)
Proceeds from sale of property 4,850 --
Proceeds from note receivable -- 358
Other 4 126
----------------------
(21,737) (1,640)
----------------------
Financing activities
Increase in bank indebtedness 288 492
Borrowings under term debt facilities 607 --
Repayment of term debt and tender facilities (1,083) (516)
Repayment of deferred purchase consideration (44) (20)
Proceeds from the issuance of common shares, net of issuance costs 303 799
Financing costs -- (180)
Purchase and redemption of Preference Shares of subsidiary companies (202) (1)
----------------------
(131) 574
Foreign exchange gain on cash held in a foreign currency 55 10
----------------------
Increase (Decrease) in cash and cash equivalents during the period (17,894) 867
Cash and cash equivalents - Beginning of the period 19,503 1,782
----------------------
Cash and cash equivalents - End of the period 1,609 2,649
======================
See note 12 for supplemental cash flow information
(See accompanying notes to consolidated financial statements)
- --------------------------------------------------------------------------------
SUNOPTA INC. 8 June 30, 2004 10-Q
SunOpta Inc.
Consolidated Statements of Cash Flow
For the six months ended June 30, 2004 and 2003
Unaudited
(expressed in thousands of U.S. dollars)
June 30, June 30,
2004 2003
$ $
----------------------
Cash provided by (used in)
Operating activities
Net earnings for the period 7,894 3,575
Items not affecting cash
Amortization 3,442 2,266
Future income taxes 1,448 324
Other 45 (106)
Changes in non-cash working capital (note 12) (11,937) (4,527)
----------------------
892 1,532
----------------------
Investing activities
Decrease in short term investments -- 2,038
Acquisition of companies, net of cash acquired (22,103) (2,744)
Acquisition of property, plant and equipment (9,248) (2,480)
Proceeds from sale of property 5,864 --
Proceeds from note receivable -- 716
Other (13) (21)
----------------------
(25,500) (2,491)
----------------------
Financing activities
Increase in bank indebtedness 3,515 5,719
Borrowings under term debt facilities 607 7,800
Repayment of term debt and tender facilities (1,746) (18,335)
Repayment of deferred purchase consideration (65) (247)
Proceeds from the issuance of common shares, net of issuance costs 1,954 1,930
Financing costs -- (250)
Purchase and redemption of Preference Shares of subsidiary companies (218) (131)
----------------------
4,047 (3,514)
Foreign exchange gain on cash held in a foreign currency 180 110
----------------------
Decrease in cash and cash equivalents during the period (20,381) (4,363)
Cash and cash equivalents - Beginning of the period 21,990 7,012
----------------------
Cash and cash equivalents - End of the period 1,609 2,649
----------------------
See note 12 for supplemental cash flow information
(See accompanying notes to consolidated financial statements)
- --------------------------------------------------------------------------------
SUNOPTA INC. 9 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
1. Interim financial statements
The interim consolidated financial statements of SunOpta Inc. (the
Company) have been prepared in accordance with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X and in accordance with accounting
principles generally accepted in the United States. Accordingly, these
financial statements do not include all of the disclosures required by
generally accepted accounting principles for annual financial statements.
In the opinion of management, all adjustments considered necessary for
fair presentation have been included and all such adjustments are of a
normal, recurring nature. Operating results for the six months ended June
30, 2004 are not necessarily indicative of the results that may be
expected for the full year ending December 31, 2004. For further
information, see the Company's consolidated financial statements, and
notes thereto, included in the Annual Report on Form 10K for the year
ended December 31, 2003.
As of January 1, 2004, SunOpta Inc. changed the basis of financial
statement preparation from generally accepted accounting principles in
Canada (Canadian GAAP) to those generally accepted in the United States
(U.S. GAAP). This change was made as a majority of the Company's
operations and shareholders are located in the U.S. As a result of this
change, all comparative financial statement balances and related notes
have been amended to reflect the change to U.S. GAAP. Accounting
principles in the U.S. conform in all material respects to those in
Canada, except as indicated in Note 15.
2. Description of business and significant accounting policies
The Company was incorporated under the laws of Canada on November 13,
1973. The Company conducts business in three main areas, the SunOpta Food
Group (Food Group) processes, packages and distributes a wide range of
natural and organic food products via its vertically integrated operations
with a focus on soy, oat fiber and other natural and organic food
products. Opta Minerals processes, distributes and recycles industrial
minerals. The StakeTech Steam Explosion Group markets proprietary steam
explosion technology systems for the pulp, bio-fuel and food processing
industries. The Company's assets, operations and employees at June 30,
2004 are located in the United States and Canada.
The Company's significant accounting policies are outlined below. These
consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States. Differences
arising from the application of accounting principles generally accepted
in Canada are described in note 15.
Basis of presentation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated on consolidation.
Cash and cash equivalents
Cash and cash equivalents consist of unrestricted cash and short-term
deposits with an original maturity of less than 90 days.
- --------------------------------------------------------------------------------
SUNOPTA INC. 10 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
Inventories
Raw materials and finished goods (excluding commodity grains) inventories
are valued at the lower of cost and estimated net realizable value. Cost
is determined on a first-in, first-out basis.
Inventories of commodity grain are valued at market. Changes in market
value are included in cost of goods sold. The Food Group generally follows
a policy of hedging its grain transactions to protect gains and minimize
losses due to market fluctuations. Futures and purchase and sale contracts
are adjusted to market price and gains and losses from such transactions
are included in cost of goods sold. The Company has a risk of loss from
hedge activity if the grower does not deliver the grain as scheduled. The
Company also has inventories consisting of sunflowers and specialty beans
which are valued at cost.
Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated
amortization.
Amortization is provided on property, plant and equipment on the
diminishing balance basis or, in the case of certain U.S.-based
subsidiaries, straight-line basis at rates based on the estimated useful
lives of the assets as follows: 10% to 33% for office furniture and
equipment, machinery and equipment and vehicles and 4 to 8% for buildings.
Amortization is calculated from the time the asset is put into use.
Goodwill and intangibles
The Company assesses the carrying value of goodwill and indefinite life
intangibles for possible impairment on an annual basis. The Company's
finite life intangible assets consist of customer lists, trademarks and
distribution agreements and are amortized straight line over their
estimated useful lives, ranging from 4 to 15 years.
Other assets
i) Deferred financing costs
Costs incurred in connection with obtaining long-term financing are
deferred and amortized over the term of the financing agreement.
ii) Investments
The Company has a 32% (2003 - 32%) investment in Easton Minerals Limited
("Easton"). This investment is considered impaired and the carrying value
at June 30, 2004 is $nil (2003 - $nil). The investment was accounted for
using the equity method of accounting. The Company does not have any
guaranteed obligations with respect to Easton or any commitment to provide
further financial support, and therefore it is not anticipated that
further losses will be recorded on this investment.
All subsidiaries are 100% owned at June 30, 2004. Investments in these
subsidiaries are recorded using the consolidation method, whereby revenues
and expenses are consolidated with the results of the Company.
- --------------------------------------------------------------------------------
SUNOPTA INC. 11 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
Revenue recognition
i) SunOpta Food Group
Grain revenues are recorded at the time of shipment. Revenues from custom
processing services are recorded upon provision of services and upon
completion of quality testing. All other Food Group revenues are
recognized upon the shipment of product or at the time the service is
provided to the customer.
ii) Opta Minerals
Revenues from the sale of industrial minerals are recognized upon the sale
and shipment of the related minerals. Revenues from recycling activities
are recognized upon the sale and shipment or the disposal of non-hazardous
material received.
iii) StakeTech Steam Explosion Group
The percentage of completion method is used to account for significant
contracts in progress when related costs can be reasonably estimated. The
Company uses costs incurred to date as a percentage of total expected
costs to measure the extent of progress towards completion.
License fees related to the right to sell the Company's technologies are
recorded as revenues over the term of the license, when collectibility is
reasonably assured.
Foreign currency translation
The Company's operations are self-sustaining operations, with the
exception of the corporate head office, which is considered to be an
integrated operation. The assets and liabilities of the self-sustaining
operations as well as monetary assets of the corporate head office are
translated at exchange rates in effect at the balance sheet date.
Non-monetary assets of the corporate head office are translated at their
historical rates. Revenues and expenses are translated at average exchange
rates prevailing during the period. Unrealized gains or losses resulting
from translating self-sustaining operations are accumulated and reported
as a currency translation adjustment in shareholders' equity and are
disclosed as part of comprehensive income. Gains and losses resulting from
translating the corporate head office are included in the consolidated
statements of earnings.
The functional currency of all operations located in the United States and
the corporate head office is the United States dollar. The functional
currency of all other operations located in Canada is the Canadian dollar.
Customer and other deposits
Customer and other deposits principally include prepayments by the Food
Group's customers for merchandise inventory to be purchased during the
spring planting season and an amount of $nil at June 30, 2004 (December
31, 2003 - $1,260) related to a deposit received on an option agreement
related to a property held for sale.
Income taxes
The Company follows the asset and liability method of accounting for
income taxes whereby future income tax assets are recognized for
deductible temporary differences and operating loss carry-forwards, and
future income tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the amounts
of assets and liabilities recorded for income tax and financial reporting
purposes. Future income tax assets are recognized only to the extent that
management determines that it is more likely than not
- --------------------------------------------------------------------------------
SUNOPTA INC. 12 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
that the future income tax assets will be realized. Future income tax
assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment. The income tax expense or benefit is
the income tax payable or refundable for the period plus or minus the
change in future income tax assets and liabilities during the period.
Derivative instruments
The Food Group enters into exchange-traded commodity futures and options
contracts to hedge its exposure to price fluctuations on grain
transactions to the extent considered practicable for minimizing risk from
market price fluctuations. Futures contracts used for hedging purposes are
purchased and sold through regulated commodity exchanges. Inventories,
however, may not be completely hedged, due in part to the Company's
assessment of its exposure from expected price fluctuations. Exchange
purchase and sales contracts may expose the Company to risk in the event
that a counter party to a transaction is unable to fulfill its contractual
obligation. The Company manages its risk by entering into purchase
contracts with pre-approved growers.
The Company has a risk of loss from hedge activity if a grower does not
deliver the grain as scheduled. Sales contracts are entered into with
organizations of acceptable creditworthiness, as internally evaluated. All
futures and options transactions are marked to market. Gains and losses on
futures transactions related to grain inventories are included in cost of
goods sold.
Financial Instruments
The Company's financial instruments recognized in the consolidated balance
sheets and included in working capital consist of cash and cash
equivalents, accounts receivable, other current assets, accounts payable
and accrued liabilities and customer and other deposits. The fair values
of these instruments approximate their carrying value due to their
short-term maturities.
The Company's financial instruments that are exposed to credit risk
include cash and cash equivalents, and accounts receivable. The Company
places its cash and cash equivalents with institutions of high
creditworthiness. The Company's trade accounts receivable are not subject
to a high concentration of credit risk. The Company routinely assesses the
financial strength of its customers and, as a consequence, believes that
its accounts receivable credit risk exposure is limited. The Company
maintains an allowance for losses based on the expected collectibility of
the accounts.
Earnings per share
Basic earnings per share is computed by dividing the earnings available
for common shareholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed
using the treasury stock method whereby the weighted average number of
common shares used in the basic earnings per share calculation is
increased to include the number of additional common shares that would
have been outstanding if the dilutive potential common shares had been
issued at the beginning of the period.
Use of estimates
The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the dates of the
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from
those estimates.
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SUNOPTA INC. 13 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
3. Stock Option Plan
The Company maintains several stock option plans under which incentive
stock options may be granted to employees and non-employee directors.
SunOpta accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, because the grant price equals the market price on the date
of grant, no compensation expense is recognized by the Company for stock
options issued to employees.
Had compensation cost for the Company's stock options been recognized
based upon the estimated fair value on the grant date under the fair value
methodology allowed by Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock Based Compensation," as amended by
SFAS No. 148 "Accounting for Stock-Based Compensation - Transition and
Disclosure," the Company's net earnings and earnings per share would have
been as follows:
Three months Six months
ended ended
---------------------------------------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
Number of options granted 212,500 158,700 212,500 557,450
===================================================
$ $ $ $
Total fair value 840 481 840 1,272
===================================================
Net earnings for the period as reported 6,024 2,448 7,894 3,575
Stock compensation expense:
Options vested in current period from current 42 64 42 127
period grants
Options vested in current period from prior 153 60 305 121
period grants
---------------------------------------------------
195 124 347 248
---------------------------------------------------
Pro-forma net earnings for the period 5,829 2,324 7,547 3,327
===================================================
Pro-forma net earnings per common share
- Basic 0.11 0.05 0.14 0.08
===================================================
- Diluted 0.10 0.05 0.13 0.07
===================================================
The fair value of the options granted during the prior year were estimated
using the Black-Scholes option-pricing model with the assumptions of a
dividend yield of 0% (2003 - 0%), an expected volatility of 55% (June 30,
2003 - 60%), a risk-free interest rate of 2.5% (June 30, 2003 - 3%), and
an expected life of four to six years. These options vest at various dates
ranging from the date of the grants to May 13, 2008 and expire four to six
years subsequent to the grant date.
4. Business acquisitions
In the first six months of 2004, the Company acquired five businesses. All
of these acquisitions have been accounted for using the purchase method
and the consolidated financial statements include the results of
operations for these businesses from the date of acquisition. The purchase
price has been allocated to the assets acquired and the liabilities
assumed based on managements best estimate of fair values.
The preliminary purchase price allocation of the net assets acquired and
consideration given is as follows:
- --------------------------------------------------------------------------------
SUNOPTA INC. 14 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
4. Business acquisitions continued
General
Mills Oat
Fiber Supreme Distribution Distribue
Facility Foods Snapdragon A & L Vie Total
(a) (b) (c) (d) (e)
$ $ $ $ $ $
---------------------------------------------------------------------------------
Net assets acquired:
Non-cash working capital 725 2,801 695 226 (41) 4,406
Property, plant and equipment 3,098 233 -- 126 102 3,559
Goodwill 8,202 3,263 -- 68 610 12,143
Intangible assets - finite life -- 3,148 183 152 375 3,858
Future income tax liability -- (1,163) -- (55) (135) (1,353)
Debt and other liabilities (374) -- -- (136) -- (510)
---------------------------------------------------------------------------------
11,651 8,282 878 381 911 22,103
=================================================================================
Consideration given:
Cash paid on closing - net of cash acquired 11,501 7,561 878 381 842 21,163
Note payable -- 590 -- -- -- 590
Accrued acquisition costs 150 131 -- -- 69 350
---------------------------------------------------------------------------------
11,651 8,282 878 381 911 22,103
=================================================================================
(a) General Mills Oat Fiber Facility
On April 16, 2004, SunOpta acquired the assets of General Mills Bakeries
and Food Service oat fiber processing facility for $11,651 including
acquisition costs. The assets included land, building, equipment and
inventory.
With the addition of this facility, the Company continues to increase its
total annual oat fiber processing capacity. The Company's growth in oat
fiber has been driven by the significant increase in consumer demand for
healthier food offerings, resulting from the popularity of low-carb diets
such as Atkins and South Beach, and the general trend to improve the
nutritional content of foods.
SunOpta's purchase of this facility is expected to generate efficiencies
in the Company's oat fiber processing operations enabling the Company to
streamline oat fiber production across three facilities, lengthening run
times, improving operating efficiencies and meeting our current backlog of
orders.
(b) Supreme Foods
On May 1, 2004, SunOpta acquired the outstanding shares of Supreme Foods
Limited (Supreme) for $8,282 including acquisition costs and assumption of
a note payable to shareholders of $590.
Supreme is a leading distributor of certified organic, natural, kosher and
specialty grocery products across Canada, with headquarters in Toronto,
Ontario. Supreme has a number of exclusive sourcing agreements as well as
products marketed under its own trade names.
Supreme's focus and strength in grocery products will become the base of
SunOpta's growing natural organic and specialty foods distribution
business. The combination of Supreme's business in eastern Canada with
Wild West Organic Harvest in western Canada creates a national platform
for SunOpta and will allow for considerable expansion of product lines.
- --------------------------------------------------------------------------------
SUNOPTA INC. 15 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
4. Business acquisitions continued
(c) Snapdragon
On June 1, 2004, SunOpta acquired the inventory and business of Snapdragon
Natural Foods Inc. (Snapdragon) for $878. Additional consideration may be
payable equal to 5% of net sales greater than a predetermined target
during the period September 1, 2004 to August 31, 2005.
Snapdragon distributes organic groceries and frozen products to both mass
market and natural food retailers throughout Canada from warehousing
facilities located in Montreal, Quebec, Toronto, Ontario and Calgary,
Alberta. The Snapdragon operation will further contribute to the Company's
stated objective of building Canada's first national natural and organics
food distributor.
(d) Distribution A & L
On April 1, 2004, SunOpta acquired the outstanding shares of Distribution
A&L for $381 including acquisition costs. An additional $381 of contingent
consideration may be payable if certain predetermined profit targets are
achieved by the acquired business during the period April 1, 2004 to June
30, 2009 and will be recorded as goodwill when the amount and outcome of
the consideration becomes determinable.
Distribution A&L specializes in the distribution of specialty abrasive and
related products. Distribution A&L focuses on smaller markets currently
not serviced by Opta Minerals via its network of selling professionals
specializing in the industrial, automotive and pool filtration industries.
The skills contained within this operation are key as the Opta Minerals
group continues to strategically expand products and sales capabilities.
(e) Distribue-Vie
On March 1, 2004, SunOpta acquired the outstanding shares of Distribue-Vie
Fruits & Legumes Biologiques Inc. (Distribue-Vie) for $911 including
acquisition costs.
Distribue-Vie specializes in the distribution of organic fresh foods with
an emphasis on produce. Distribue-Vie is the dominant player in the
distribution of organic produce in Quebec and operates from a warehousing
facility located in Montreal, servicing the key Quebec market along with
geographic reach to Eastern Ontario and the Maritime provinces. An
additional $229 of contingent consideration may be payable if certain
predetermined profit targets are achieved by the acquired business during
the period April 1, 2004 to March 31, 2006 and will be recorded as
goodwill when the amount and outcome of this contingency becomes
determinable.
The addition of Distribue-Vie to SunOpta's Canadian natural and organic
distribution system is expected to bring significant benefits to the
customer base in the form of broader product lines and greater support for
consumer education of organics through marketing and retail merchandising
initiatives.
- --------------------------------------------------------------------------------
SUNOPTA INC. 16 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
5. Comprehensive Income (loss)
The following are components of comprehensive income (loss), net of tax,
for the following periods:
Three months ended Six months ended
--------------------------------------------------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
$ $ $ $
Net earnings 6,024 2,448 7,894 3,575
Change in foreign currency translation adjustment (207) 1,297 (404) 2,075
--------------------------------------------------------------
Comprehensive income 5,817 3,745 7,490 5,650
==============================================================
6. Accounts Receivable
June 30, December 31,
2004 2003
$ $
Trade receivable 39,764 27,417
Allowance for doubtful accounts (1,277) (1,176)
------------------------------
38,487 26,241
==============================
7. Inventories
June 30, December 31,
2004 2003
$ $
Raw materials 12,608 8,437
Finished goods 22,340 24,525
Grain 5,340 1,816
------------------------------
40,288 34,778
==============================
Grain inventories consist of the following:
June 30, December 31,
2004 2003
$ $
Company owned grain 4,105 1,491
Unrealized gain on
Sales and purchase contracts 135 153
Futures contracts 1,100 172
------------------------------
5,340 1,816
==============================
- --------------------------------------------------------------------------------
SUNOPTA INC. 17 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
8. Long-term debt and banking facilities
June 30, December 31,
2004 2003
$ $
Long-Term Debt
Term loan (a) 18,700 19,800
Other long-term debt (b) 5,191 5,236
----------------------------------
23,891 25,036
Less: current portion (4,104) (3,840)
----------------------------------
19,787 21,196
==================================
(a) Subsequent to June 30, 2004, the Company has amended and restated
its credit agreement with a group of banks with the following
components;
i) Term loan
The term loan has been increased to $35,000 from a June 30,
2004 balance of $18,700 (2003 - $19,800). Principal is payable
quarterly based on a seven year amortization. The term loan
matures June 30, 2008 and is renewable at the option of the
lender and the Company.
Interest on the term loan is payable at the borrower's option
at U.S. dollar base rate or U.S. LIBOR plus a margin based on
certain financial ratios of the Company (2.2% as at June 30,
2004 and 2.2% as at December 31, 2003).
ii) $11,246 (CDN $15,000), (CDN $7,500 at June 30, 2004) line of
credit facility
Interest on borrowings under this facility accrues at the
borrower's option based on various reference rates including
Canadian or U.S. bank prime, or Canadian bankers' acceptances,
plus a margin based on certain financial ratios. As at June
30, 2004 $nil (2003 - $nil) of this facility has been utilized
and $795 has been committed through letters of credit as
itemized in note 13(d).
iii) $17,500 ($9,000 at June 30, 2004) line of credit facility
Interest on borrowings under this facility accrues at the
borrower's option based on various reference rates including
U.S. bank prime, or LIBOR, plus a margin based on certain
financial ratios. As at June 30, 2004 $3,515 (2003 - $nil) of
this facility has been utilized. This amount has been
classified as bank indebtedness on the consolidated balance
sheet.
iv) $10,000 revolving acquisition facility
A part of the amendment, subsequent to the quarter end, the
Company obtained an acquisition facility to finance future
acquisitions and capital expenditures and is subject to
certain draw restrictions. Principal is payable quarterly
equal to the greater of (a) 1/20 of the initial drawdown
amount of the facility, or (b) 1/20 of the outstanding
principal amount as of the date of the last draw. All
remaining outstanding principal under this facility is due on
June 30, 2008.
Interest on borrowing under this facility is consistent with
the term loan described in i) above. This facility was not
available at June 30, 2004.
- --------------------------------------------------------------------------------
SUNOPTA INC. 18 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
8. Long-term debt and banking facilities continued
The Canadian and U.S. line of credit facilities along with the unused
portion of the acquisition facility are subject to annual extensions.
All of the credit facilities described above are collateralized by a first
priority security against substantially all of the Company's assets in
both Canada and the United States.
(b) Other long-term debt consists of the following:
2004 2003
$ $
Note payable (Cdn $1,088) issued to the former shareholders of Kettle 705 816
Valley Dried Fruit Ltd. as part of the acquisition in 2003, interest
at 5% payable in ten semi-annual instalments, uncollateralized.
Note payable (Cdn $809) issued to the former shareholders of Supreme 607 --
Foods Inc. as a component of the acquisition in the quarter ended
June 30, 2004, discounted at 5%, payable in three equal annual
instalments, uncollateralized.
Term loan assumed on the acquisition of Sigco Sun Products in 2003, 2,196 2,440
payable in ten semi annual instalments of $244. Interest payable
monthly at LIBOR + 1.95% (June 30, 2004 - 3.04%), collateralized by
the property and equipment of Sigco.
Term loan issued to Oracle Credit Corp. on the purchase of a software 834 1,107
license agreement. Interest at 2.0% payable in eight quarterly
instalments.
Other term debt with a weighted average interest rate of 4.5%, due in 739 802
varying instalments through July 2009.
Capital lease obligations due in monthly payments through 2006, with 110 71
a weighted average interest rate of 6.8%.
----------------------------------
5,191 5,236
----------------------------------
9. Long-term payables
June 30, December 31,
2004 2003
$ $
Deferred supplier rebate 192 --
Product rebate payable 1,403 1,402
Deferred purchase consideration -- 65
Preference shares of subsidiary companies 117 144
Payable to former shareholders of acquired companies 433 623
Other -- 97
-------------------------------
2,145 2,331
Less: Current Portion (851) (740)
-------------------------------
1,294 1,591
===============================
- --------------------------------------------------------------------------------
SUNOPTA INC. 19 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars, except per share amounts)
10. Capital stock
June 30, December 31,
2004 2003
$ $
Issued and fully paid -
53,481,612 common shares (December 31, 2003 - 52,705,096) 96,669 94,338
2,647,500 warrants (December 31, 2003 - 3,241,350) 1,921 2,298
-------------------------
98,590 96,636
=========================
(a) In the first six months of 2004, employees and directors exercised
162,697 (June 30, 2003 - 500,995) common share options and an equal
number of common shares were issued for net proceeds of $389 (June
30, 2003 - $887).
(b) In the first six months of 2004, 593,850 (June 30, 2003 - 308,356)
warrants were exercised and an equal number of common shares were
issued for net proceeds of $1,425 (June 30, 2003 - $582).
(c) In the first six months of 2004, 19,969 (June 30, 2003 - $nil)
common shares were issued for net proceeds of $140 as part of the
Company's employee stock purchase plan.
(d) In the first six months of 2004, 212,500 options were granted to
employees at a price of $7.69.
(e) As at June 30, 2004, there were options vested to employees and
directors to acquire 828,500 common shares at exercise prices of
$1.06 to $9.90. In addition, at June 30, 2004, options to acquire an
additional 1,239,980 common shares at $1.06 to $9.90 have been
granted to employees and directors but have not yet vested.
11. Earnings per share
The calculation of basic earnings per share is based on the weighted
average number of shares outstanding. Diluted earnings per share reflect
the dilutive effect of the exercise of warrants and options. The number of
shares for the diluted earnings per share was calculated as follows:
Three months ended Six Months ended
----------------------------------------------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
$ $ $ $
==========================================================
Net earnings for the period 6,024 2,448 7,894 3,575
==========================================================
Weighted average number of shares outstanding 53,443,189 42,871,386 53,141,253 42,448,394
Dilutive Warrants 1,914,913 2,213,031 1,934,087 1,852,812
Dilutive Options 956,010 1,214,409 1,066,413 1,036,986
Convertible debenture -- 1,666,667 -- --
----------------------------------------------------------
Diluted weighted average number of shares outstanding 56,314,112 47,965,493 56,141,753 45,338,192
==========================================================
Earnings per share:
- Basic 0.11 00.6 0.15 0.08
- Diluted 0.11 0.05 0.14 0.08
- --------------------------------------------------------------------------------
SUNOPTA INC. 20 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
12. Supplemental cash flow information
Three months ended Six months ended
--------------------------------------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
$ $ $ $
Changes in non-cash working capital:
Accounts receivable - trade (8,423) (3,251) (10,463) (2,905)
Inventories 1,724 246 (1,517) (479)
Recoveries of income taxes 1,686 -- 1,686 --
Prepaid expenses and other current assets (2,418) (213) (3,209) (998)
Accounts payable and accrued liabilities 5,538 2,609 3,344 158
Customer and other deposits (2,971) (1,216) (1,778) (303)
--------------------------------------------------
(4,864) (1,825) (11,937) (4,527)
==================================================
Cash paid for:
Interest 152 200 352 416
==================================================
Income taxes -- -- 747 615
==================================================
13. Commitments and contingencies
(a) The Company is subject to a variety of other claims and suits that
arise from time to time in the ordinary course of our business.
While management currently believes that resolving all of these
matters, individually or in aggregate, will not have a material
adverse impact on our financial position or our results of
operations, litigation and claims are subject to inherent
uncertainties and management's view of these matters may change in
the future. Were an unfavorable final outcome to occur, there exists
the possibility of a material adverse impact on our financial
position and the results of operations for the period in which the
effect becomes reasonably estimable.
(b) The Company believes, with respect to both its operations and real
property that it is in material compliance with current
environmental laws. Based on known existing conditions and the
Company's experience in complying with emerging environmental
issues, the Company is of the view that future costs relating to
environmental compliance will not have a material adverse effect on
its financial position, but there can be no assurance that
unforeseen changes in the laws or enforcement policies of relevant
governmental bodies, the discovery of changed conditions on the
Company's real property or in its operations, or changes in use of
such properties and any related site restoration requirements, will
not result in the incurrence of significant costs. No provision has
been made in these consolidated financial statements for these
future costs since such costs, if any, are not determinable at this
time.
(c) In the normal course of business, the Food Group holds grain for the
benefit of others. The Company is liable for any deficiencies of
grade or shortage of quantity that may arise in connection with such
grain.
- --------------------------------------------------------------------------------
SUNOPTA INC. 21 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars, except per share amounts)
(d) Letters of credit:
i) An irrevocable letter of credit for $561 has been placed with
the Ontario Ministry of Environment and Energy as a security
deposit for the Certificate of Approval granted to the Company
for certain recycling activities. This letter of credit must
remain in place indefinitely as a condition of the Certificate
of Approval.
ii) An irrevocable letter of credit for $205 has been placed with
the Commonwealth of Virginia Department of Environmental
Qualities as a security deposit for the Certificate of
Approval granted to the Company for certain recycling
activities. This letter of credit must remain in place
indefinitely as a condition of the Certificate of Approval.
iii) Additional letters of credit totalling $29 have been placed
with third parties as security on transactions occurring in
the ordinary course of operations.
(e) Real property lease commitments:
The Company has entered into various leasing arrangements which have
fixed monthly rents that are adjusted annually each year for
inflation.
Commitments under operating leases, principally for distribution
centres, warehouse and equipment, are as follows:
$
2004 1,817
2005 2,805
2006 2,506
2007 1,996
2008 1,981
Thereafter 1,693
---------
12,798
=========
- --------------------------------------------------------------------------------
SUNOPTA INC. 22 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
14. Segmented information
Industry segments
The Company operates in three industry segments: (a) the SunOpta Food
Group, processes, packages and distributes a wide range of natural and
organic food products via its vertically integrated operations with a
focus on soy, oat fiber, natural and organic food products. During 2003
the Company expanded its reporting structure and has further defined its
segments into Grains and Soy Products Group, Ingredients Group,
Distribution Group and Packaged Products Group (which combined form the
Food Group). The addition of these segments reflects how management views
and manages the business and is aligned with the Company's vertically
integrated model; (b) Opta Minerals, processes, distributes, and recycles
industrial minerals; and (c) the StakeTech Steam Explosion Group, markets
proprietary steam explosion technology systems for the pulp, biofuel and
food processing industries. The Company's assets, operations and employees
are located in Canada and the United States.
The Company has revised its reporting of segmented net earnings (loss) to
net earnings (loss) before interest expense and provision for income taxes
but inclusive of allocated corporate management fees, as this is better
aligned with how management views its operations. The SunRich Food Group
Inc., the holding company of U.S. operations, has also been reclassified
from the Food Group segment to Corporate.
Three months ended
June 30, 2004
--------------------------------------------------------
StakeTech
Steam
Explosion
Technology
SunOpta Opta Minerals Group and
Food Group Group Corporate Consolidated
$ $ $ $
External revenues by market
U.S. 44,825 3,570 290 48,685
Canada 21,123 5,270 -- 26,393
Other 5,716 152 -- 5,868
--------------------------------------------------------
Total revenues to external customers 71,664 8,992 290 80,946
--------------------------------------------------------
Segment net earnings(loss) before
interest expense and income taxes 8,000 1,717 (979) 8,738
--------------------------------------------------------
Interest expense -- -- 152 152
--------------------------------------------------------
Provision for income taxes -- -- 2,562 2,562
--------------------------------------------------------
Segment net earnings (loss) 8,000 1,717 (3,693) 6,024
--------------------------------------------------------
The SunOpta Food Group has the following segmented reporting:
Three months ended
June 30, 2004
-----------------------------------------------------------------------
Grains and
Soy Packaged SunOpta
Products Ingredients Distribution Products Food
Group Group Group Group Group
$ $ $ $ $
External revenues by market
U.S. 20,102 14,766 -- 9,957 44,825
Canada 341 443 19,403 936 21,123
Other 4,187 1,479 -- 50 5,716
-----------------------------------------------------------------------
Total revenues from external customers 24,630 16,688 19,403 10,943 71,664
-----------------------------------------------------------------------
Segment net earnings before interest
expense and income taxes 1,140 2,043 1,421 3,396 8,000
-----------------------------------------------------------------------
- --------------------------------------------------------------------------------
SUNOPTA INC. 23 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
14. Segmented information continued
Six months ended
June 30, 2004
--------------------------------------------------------
StakeTech
Steam
Explosion
Technology
SunOpta Opta Minerals Group and
Food Group Group Corporate Consolidated
$ $ $ $
--------------------------------------------------------
External revenues by market
U.S. 80,061 7,705 437 88,203
Canada 36,690 7,974 -- 44,664
Other 10,429 152 -- 10,581
--------------------------------------------------------
Total revenues to external customers 127,180 15,831 437 143,448
========================================================
Segment net earnings (loss) before
interest expense and income taxes 11,221 2,224 (1,827) 11,618
--------------------------------------------------------
Interest expense -- -- 360 360
--------------------------------------------------------
Provision for income taxes -- -- 3,364 3,364
--------------------------------------------------------
Segment net earnings (loss) 11,221 2,224 (5,551) 7,894
--------------------------------------------------------
The SunOpta Food Group has the following segmented reporting:
Six months ended
June 30, 2004
-----------------------------------------------------------------------
Grains and
Soy Packaged SunOpta
Products Ingredients Distribution Products Food
Group Group Group Group Group
$ $ $ $ $
External revenues by market
U.S. 34,483 28,043 -- 17,535 80,061
Canada 500 936 33,404 1,850 36,690
Other 7,330 2,994 -- 105 10,429
-----------------------------------------------------------------------
Total revenues from external customers 42,313 31,973 33,404 19,490 127,180
=======================================================================
Segment net earnings before interest
expense and income taxes 1,662 3,829 2,579 3,151 11,221
-----------------------------------------------------------------------
Three months ended
June 30, 2003
--------------------------------------------------------
StakeTech
Steam
Explosion
Technology
SunOpta Opta Minerals Group and
Food Group Group Corporate Consolidated
$ $ $ $
--------------------------------------------------------
External revenues by market
U.S. 37,858 2,543 76 40,477
Canada 6,523 4,070 -- 10,593
Other 1,520 51 -- 1,571
--------------------------------------------------------
Total revenues to external customers 45,901 6,664 76 52,641
========================================================
Segment net earnings (loss) before
interest expense and income taxes 3,292 963 (527) 3,728
--------------------------------------------------------
Interest expense -- -- 493 493
--------------------------------------------------------
Provision for income taxes -- -- 787 787
--------------------------------------------------------
Segment net earnings (loss) 3,292 963 (1,807) 2,448
--------------------------------------------------------
- --------------------------------------------------------------------------------
SUNOPTA INC. 24 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
14. Segmented information continued
The SunOpta Food Group has the following segmented reporting:
Three months ended
June 30, 2003
-----------------------------------------------------------------------
Grains and
Soy Packaged SunOpta
Products Ingredients Distribution Products Food
Group Group Group Group Group
$ $ $ $ $
External revenues by market
U.S. 18,616 11,082 -- 8,160 37,858
Canada 75 289 5,346 813 6,523
Other 338 1,182 -- -- 1,520
-----------------------------------------------------------------------
Total revenues from external customers 19,029 12,553 5,346 8,973 45,901
-----------------------------------------------------------------------
Segment net earnings before interest
expense and income taxes 1,309 1,067 207 709 3,292
-----------------------------------------------------------------------
Six months ended
June 30, 2003
--------------------------------------------------------
StakeTech
Steam
Explosion
Technology
SunOpta Opta Minerals Group and
Food Group Group Corporate Consolidated
$ $ $ $
--------------------------------------------------------
External revenues by market
U.S. 67,682 4,536 301 72,519
Canada 11,031 7,452 -- 18,483
Other 2,972 75 3 3,050
--------------------------------------------------------
Total revenues to external customers 81,685 12,063 304 94,052
========================================================
Segment net earnings (loss) before
interest expense and income taxes 4,980 1,435 (586) 5,829
--------------------------------------------------------
Interest expense -- -- 984 984
--------------------------------------------------------
Provision for income taxes -- -- 1,270 1,270
--------------------------------------------------------
Segment net earnings (loss) 4,980 1,435 (2,840) 3,575
--------------------------------------------------------
The SunOpta Food Group has the following segmented reporting:
Six months ended
June 30, 2003
-----------------------------------------------------------------------
Grains and
Soy Packaged SunOpta
Products Ingredients Distribution Products Food
Group Group Group Group Group
$ $ $ $ $
External revenues by market
U.S. 31,161 20,848 -- 15,673 67,682
Canada 128 578 9,269 1,056 11,031
Other 594 2,378 -- -- 2,972
-----------------------------------------------------------------------
Total revenues from external customers 31,883 23,804 9,269 16,729 81,685
-----------------------------------------------------------------------
Segment net earnings before interest
expense and income taxes 1,646 1,455 256 1,623 4,980
-----------------------------------------------------------------------
Customer concentration
The Company had one customer in the Food Group whose purchases were
greater than 10% of the Company's revenue for the period ending June 30,
2003. No customer was greater than 10% for the period ending June 30,
2004.
- --------------------------------------------------------------------------------
SUNOPTA INC. 25 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
15. Canadian generally accepted accounting principle differences
These consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (U.S.
GAAP) which conform in all material respects applicable to the Company
with those in Canada (Canadian GAAP) during the periods presented, except
with respect to the following items:
Three months ended Six months ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
$ $ $ $
Net earnings for the period - as reported 6,024 2,448 7,894 3,575
Pre-operating costs expenses (i) -- (70) -- (160)
Stock option compensation expense (ii) (172) -- (306) --
Tax effect of above items -- 18 -- 45
-----------------------------------------------------------
Net earnings for the period - Canadian GAAP 5,852 2,396 7,588 3,460
===========================================================
Net earnings per share - Canadian GAAP - Basic 0.11 0.06 0.14 0.08
===========================================================
Net earnings per share - Canadian GAAP - Diluted 0.10 0.05 0.14 0.08
===========================================================
Shareholders' equity - as reported 129,530 52,347
Cumulative pre-operating costs, net of amortization, net -- 152
of tax
-------------------------
Shareholders' equity - Canadian GAAP 129,530 52,499
=========================
Retained earnings as reported 23,673 7,967
Cumulative pre-operating costs, net of amortization, net -- 152
of tax (i)
Stock option compensation expense, net of tax (ii) (551) 416
-------------------------
Retained earnings - Canadian GAAP 23,122 8,535
=========================
- --------------------------------------------------------------------------------
SUNOPTA INC. 26 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
15. Canadian generally accepted accounting principles differences, continued
(i) Under Canadian GAAP, certain costs expensed in prior years under U.S. GAAP
would have been deferred and amortized. Net costs incurred in the
pre-operating stage of a start-up business can be deferred until the
business reaches commercial operation or the passage of a certain period
of time as predetermined by management.
Under Canadian GAAP, the Company would have deferred pre-operating
expenses of $308 in 2002 relating to the start up of an organic dairy
business in Canada. Amortization of these costs on a straight line basis
would have commenced in July 2002 and as at December 31, 2003 these costs
would have been fully amortized.
In 2000, the Company acquired Nordic Aseptic, Inc., (renamed to SunOpta
Aseptic Inc.) which under Canadian GAAP would have been considered a
start-up business from the date of acquisition to December 31, 2000.
Certain operating costs, net of income earned during the pre-operating
period totaling $482 would have been deferred. Amortization of these costs
would have commenced January 1, 2001 and as of December 31, 2003 these
deferred costs would have been fully amortized.
Amortization of $nil in the six months ended June 30, 2004 (June 30, 2003
- $160) relating to these pre-operating costs would have been expensed
under Canadian GAAP.
(ii) Effective January 1, 2004, Canadian GAAP requires the Company to record
stock compensation expense on options granted to employees. Under the
transitional provisions of this new standard, the Company would record a
charge through retained earnings representing the cumulative impact of
stock options granted since January 2002 and would record an expense for
existing and any new options over the remaining vesting period.
In conjunction with the standard, under Canadian GAAP, the Company would
have recorded $306 in stock compensation expense for the six months ended
June 30, 2004 (2003 - $nil) and a charge to retained earnings of $661 for
prior year expenses.
Partially offsetting the balance above, is stock option expenses
recognized under US GAAP, not recognized under Canadian GAAP, related to a
delay between when options were granted to employees and when they were
approved by shareholders. An amount of $416 is a permanent difference
between Canadian and US GAAP.
- --------------------------------------------------------------------------------
SUNOPTA INC. 27 June 30, 2004 10-Q
SunOpta Inc.
Condensed Notes to Consolidated Financial Statements
For the six months ended June 30, 2004
Unaudited
(expressed in thousands of U.S. dollars)
16. Proforma data (unaudited)
Condensed proforma income statement, as if the acquisitions of Supreme,
Distribution A & L, Snap Dragon, Distribue-Vie, Kettle Valley, Pro
Organics, Sigco Sun Products and Sonne Labs Inc. had occurred at the
beginning of 2003, is as follows:
Three months ended Six Months ended
--------------------------------------------------------
June 30, June 30, June 30, June 30,
2004 2003 2004 2003
$ $ $ $
Revenues 84,279 73,422 156,333 135,176
Net earnings 6,390 2,841 8,634 4,375
Earnings per share
- Basic 0.11 0.07 0.15 0.10
--------------------------------------------------------
- Diluted 0.11 0.06 0.15 0.09
--------------------------------------------------------
17. Other Income
Sunrich Inc. a subsidiary of the Company commenced in 2002, a suit against
a supplier for failure to adhere to the terms of a contract. The supplier
counter-sued the Company for breach of contract. On June 29, 2004 a
federal court jury, in the United States District Court for the District
of Oregon, entered a net verdict in favour of Sunrich Inc. against the
supplier on Sunrich's breach of contract, trade secrets, and punitive
damage claims after a two week trial, in the amount of $2,498 plus legal
fees. On July 1st, 2004 Sunrich filed a Proposed Form of Judgment with the
Oregon court in the sum of $2,697, excluding legal fees, based upon
Sunrich's calculation of prejudgment interest due on damages awarded by
the federal jury. It is expected that the court will enter such a judgment
in the month of August, 2004.
The Company has recorded in prepaids and other current assets the value of
the verdict plus an estimated amount of legal and interest costs that are
recoverable, net of outstanding receivables already recorded on the
Companies books that relate to this settlement.
- --------------------------------------------------------------------------------
SUNOPTA INC. 28 June 30, 2004 10-Q
PART I - FINANCIAL INFORMATION
Item 2 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Significant Developments
Change to U.S. GAAP
As of January 1, 2004, SunOpta changed the basis of financial statement
preparation from generally accepted accounting principles in Canada to those
generally accepted in the United States. This change was made as a majority of
the Company's operations and shareholders are located in the U.S. As a result of
this change comparative financial statement balances and related notes have been
amended to reflect the change to U.S. GAAP. Note 15 to the consolidated
financial statements reconciles differences between U.S. and Canadian GAAP.
Amended and Restated Financing Agreement
Subsequent to June 30, 2004, the Company amended and restated its credit
agreement. The amended and restated agreement increased the term loan
$16,300,000 to $35,000,000, increased the Canadian line of credit facility from
CDN $7,500,000 to CDN $15,000,000 and increased the US line of credit facility
from $9,00,000 to $17,500,000. In addition the agreement added a revolving
acquisition facility with maximum borrowings up to $10,000,000, which can be
used to finance future acquisitions and significant capital expenditures. The
term loan has quarterly payments with a seven year amortization. Draws from the
revolving acquisition line pay principal quarterly equal to the greater of (a)
1/20 of the initial drawdown amount of the facility, or (b) 1/20 of the
outstanding principal amount as of the date of the last draw. Both the term loan
and borrowings under the revolving acquisition facility have a maturity of June
30, 2008. The Canadian and US line of credit facilities and unused portion of
the revolving acquisition facility are subject to annual extensions.
Acquisitions during 2004
In the first six months of 2004, the Company acquired five businesses. All of
these acquisitions have been accounted for using the purchase method and the
consolidated financial statements include the results of operations for these
businesses from the date of acquisition. The purchase price has been allocated
to the assets acquired and the liabilities assumed based on managements best
estimate of fair values.
(a) General Mills Bakeries and Food Service Oat Fiber Facility
On April 16, 2004 SunOpta acquired the assets of General Mills Bakeries
and Food Service oat fiber processing facility for $11,651,000 including
acquisition costs.
With the addition of this facility, the Company continues to increase its
total annual oat fiber processing capacity. The Company's growth in oat
fiber has been driven by the significant increase in consumer demand for
healthier food offerings, resulting from the popularity of low-carb diets
such as Atkins and South Beach, and the general trend to improve the
nutritional content of foods.
SunOpta's purchase of this facility is expected to generate efficiencies
in the Company's oat fiber processing operations enabling the Company to
streamline oat fiber production across the three facilities, lengthening
run times and improving operating efficiencies.
(b) Supreme Foods
On May 1, 2004 SunOpta acquired the outstanding shares of Supreme Foods
Limited (Supreme) for $8,282,000 including acquisition costs and the
assumption of a note payable to shareholders of $590,000.
Supreme is a leading distributor of certified organic, natural, kosher and
specialty grocery products across Canada, with headquarters in Toronto,
Ontario. Supreme has a number of exclusive sourcing agreements as well as
products marketed under its own trade names.
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SUNOPTA INC. 29 June 30, 2004 10-Q
Supreme's focus and strength in grocery products will become the base of
SunOpta's growing natural organic and specialty foods distribution
business. The combination of Supreme's business in eastern Canada with
Wild West Organic Harvest in western Canada creates a national platform
for SunOpta and will allow for considerable expansion of product lines.
(c) Snapdragon
On June 1, 2004 SunOpta acquired the inventory and business of Snapdragon
Natural Foods Inc. (Snapdragon) for $878,000. Additional consideration may
be payable equal to 5% of net sales greater than a predetermined target
during the period September 1, 2004 to August 31, 2005.
Snapdragon distributes organic groceries and frozen products to both mass
market and natural food retailers throughout Canada from warehousing
facilities located in Montreal, Quebec, Toronto, Ontario and Calgary,
Alberta. The Snapdragon operation will further contribute to the Company's
stated objective of building Canada's first national natural and organics
food distributor.
(d) Distribution A & L
On April 1, 2004 SunOpta acquired the outstanding shares of Distribution
A&L for $381,000 including acquisition costs. An additional $381,000 of
contingent consideration may be payable if certain predetermined profit
targets are achieved by the acquired business during the period April 1,
2004 to June 30, 2009 and will be recorded as goodwill when the amount and
outcome of the consideration becomes determinable.
Distribution A&L specializes in the distribution of specialty abrasive and
related products. Distribution A&L focuses on smaller markets currently
not serviced by the Opta Minerals via its network of selling professionals
specializing in the industrial, automotive and pool filtration industries.
The skills contained within this operation are key as the Opta Minerals
group continues to strategically expand products and sales capabilities.
(e) Distribue-Vie
On March 1, 2004 SunOpta acquired the outstanding shares of Distribue-Vie
Fruits & Legumes Biologiques Inc. (Distribue-Vie) for $911,000 including
acquisition costs.
Distribue-Vie specializes in the distribution of organic fresh foods with
an emphasis on produce. Distribue-Vie is the dominant player in the
distribution of organic produce in Quebec and operates from a warehousing
facility located in Montreal, servicing the key Quebec market along with
geographic reach to Eastern Ontario and the Maritime provinces. An
additional $229,000 of contingent consideration may be payable if certain
predetermined profit targets are achieved by the acquired business during
the period April 1, 2004 to March 31, 2006 and will be recorded as
goodwill when the amount and outcome of this contingency becomes
determinable.
The addition of Distribue-Vie to SunOpta's Canadian natural and organic
distribution system is expected to bring significant benefits to the
customer base in the form of broader product lines and greater support for
consumer education of organics through marketing and retail merchandising
initiatives.
Operations For the Three Months Ended June 30, 2004 Compared With the Three
Months Ended June 30, 2003
Consolidated
Revenues in the three months ended June 30, 2004 increased by 53.8% to
$80,946,000 versus $52,641,000 in the comparable three months of 2003. The
Company's net earnings for the three months of 2004 were $6,024,000 or $0.11 per
basic common share (diluted - $0.11) compared to $2,448,000 or $0.06 per basic
common share (diluted - $0.05) for the three months ended June 30, 2003,
representing a 146% increase. Net earnings for the quarter included a gain
recognized on the judgment received in a lawsuit against a supplier for breach
of contract as described in Note 17 (Other Income) of the consolidated financial
statements. Net earnings for the three months ended June 30, 2004 excluding this
gain would have been $0.08 per basic common share ($0.07 diluted).
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SUNOPTA INC. 30 June 30, 2004 10-Q
The increase in the Company's revenues is due to a $25,763,000 increase in
revenue from the SunOpta Food Group, an increase of $2,328,000 from Opta
Minerals, and an increase of $214,000 in revenue attributable to the StakeTech
Steam Explosion Group. These increases are due to continued internal growth in
certain product lines and the impact of acquisitions completed to date. Details
are provided in the segmented analysis below.
Net earnings before interest expense, other income (expense), foreign exchange
gains (losses) and income taxes increased to $5,850,000 compared to $3,301,000
for the same period in the prior year, a 77.2% increase. The increases are due
to the acquisitions completed in the prior year and first half of this year,
pricing on certain product lines, internal sales growth, synergies and cost
reductions realized throughout the organization. Further details are included in
segmented analysis detailed below.
Interest expense decreased to $152,000 in the three months ended June 30, 2004
from $493,000 in the three months ended June 30, 2004. The decrease in borrowing
costs reflects the decrease in debt outstanding during the quarter compared to
the three months ended June 30, 2003, lower borrowing costs as a result of
improved financial ratios impacting the Company's premium over LIBOR and lower
interest rates in general.
Interest and other income increased to $2,499,000 in the three months ended June
30, 2004 from $173,000 in the three months ended June 30, 2003, primarily due to
the gain recognized on the favourable judgment received in a lawsuit against a
supplier for breach of contract (see Note 17 - Other Income) offset by costs
incurred for the St. Thomas plant closing and the sale of the Bedford facility.
Foreign exchange gain in the quarter increased to $389,000 compared to $254,000
in the same period in 2003. The increase is due to the realization of gains
during the quarter based on significant movements of the value of the Canadian
dollar.
The provision for income taxes in the three months ended June 30, 2004 reflects
the Company's estimated effective tax rate in 2004 of 30%.
Readers should note that due to differences between Canadian and U.S. GAAP, the
earnings for the three months ended June 30, 2004 was revised from $2,396,000 as
previously reported under Canadian GAAP to $2,448,000 under U.S. GAAP. Note 15
to the consolidated financial statements itemizes differences between U.S. and
Canadian GAAP.
Segmented Operations Information
(Note: Certain prior year figures have been adjusted to conform with the current
year presentation and segmented reporting.)
SunOpta Food Group
The SunOpta Food Group contributed $71,664,000 or 88.5% of total Company
consolidated revenues in the three months ended June 30, 2004 versus $45,901,000
or 87.2% in the same period in 2003. The increase of $25,763,000 or 56.1% in
SunOpta Food Group revenues was primarily due to increased sales of oat fiber,
specialty food ingredients, distributed products and the acquisitions completed
in 2003 and 2004, partially offset by a decline in sales of certain consumer
products as discussed below.
Gross margins as a percentage of sales increased in the quarter from 16.7% to
19.0% reflecting the impact of improved product mix pricing, higher margins
within the Distribution Group which has become a more significant segment and
cost rationalization within the Food Group.
Net earnings before interest expense and income taxes in the SunOpta Food Group
increased 144.5% to $8,000,000 in the three months ended June 30, 2004 compared
to $3,272,000 in the three months ended June 30, 2003.
Grains & Soy Products Group
The Grains and Soy Products Group contributed $24,630,000 in revenues in the
second quarter of 2004 versus $19,029,000 in the same quarter of 2003, a 29.4%
increase. Revenues were favourably impacted in the quarter by the acquisition of
Sigco Sun Products (Sigco) in late 2003, totalling $8,131,000, offset by revenue
decreases of $2,530,000 mainly attributable to a decrease in shipments of grain
products as a result of supply issues (net of higher commodity prices) and
delayed shipments of non-GMO corn in the quarter.
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SUNOPTA INC. 31 June 30, 2004 10-Q
Gross margin in the Grains and Soy Products Group decreased by $37,000 in the
quarter to $2,552,000 or 10.4% of revenues compared to $2,589,000 or 13.6%, in
the same period in 2003. The decrease in gross profit margins is primarily
attributable to mix, lower volumes of high margin specialty grains and margin
pressures on organic feed and soy beans due to the increase in commodity prices
and certain fixed sales contract relationships.
Selling, general and administrative expenses increased to $1,451,000 in the
three months ended June 30, 2004 versus $1,281,000 in the three months ended
June 30, 2003. The increase is due primarily to the Sigco acquisition completed
in 2003. Other income in the three months ended June 30, 2004 was $38,000.
Net earnings before interest expense and income taxes in the Grains and Soy
Products Group was $1,140,000 in the three months ended June 30, 2004 compared
to $1,309,000 in the three months ended June 30, 2003, due to the factors noted
above.
Ingredients Group
The Ingredients Group contributed $16,688,000 revenues in the three months of
2004 versus $12,553,000 in 2003 a 32.9% increase. The increase in revenue is
attributable to increased sales of oat fiber, dairy blending and specialty food
ingredients. Oat fibre increases of $2,622,000 resulted from the demand
generated by low carb diets (such as Atkins, South Beach and Hampton diets) and
fiber enriched foods and were supported by increased capacity due to expansion
projects at our Cambridge facility and the procurement of an additional facility
in the quarter (see significant developments). Increased revenues in dairy
blending of $872,000 were due to increased pricing and volumes. Increases in
specialty food ingredients were primarily attributable to increases in technical
processing and custom blending.
Gross margin in the Ingredients Group increased by $1,001,000 in the three
months ended June 30, 2004 to $3,810,000 or 22.8% of revenue compared to
$2,809,000 or 22.4% of revenue, in the same period in 2003. The increase in
gross margin reflects increased percentage of oat fiber revenues on a
comparative basis, improved plant utilization and cost rationalization
initiatives, partially offset by unfavourable technical processing margins due
to downtime required to increase sweetener processing capacity and lower
ingredient margins on blending and reduced technical processing revenues at our
Alexandria ingredient facility.
Selling, general and administrative expenses decreased to $1,605,000 in the
three months ended June 30, 2004 versus $1,714,000 in the three months ended
June 30, 2003. The decrease is primarily due to staff reductions from the
rationalization of the St. Thomas facility and reduced head-office facility
costs.
Other income (expenses) in the three months ended June 30, 2004 increased to
($162,000) compared to ($28,000) in the same period in 2003. The increase is
primarily related to costs incurred to close the St. Thomas Facility of
($216,000) and costs incurred to prepare the Bedford facility for sale,
partially offset by gains recognized on the sale of the Bedford facility.
Net earnings before interest expense and income taxes in the Ingredients Group
were $2,043,000 in the three months ended June 30, 2004 compared to $1,067,000
in the three months ended June 30, 2003, due primarily to the factors noted
above.
Distribution Group
The Distribution Group contributed $19,403,000 revenues in the three months
ended June 30, 2004 versus $5,346,000 in 2003, an increase of $14,057,000 or
262.9%. Revenues were favourably impacted by increased produce and grocery
revenues of $723,000 in our existing divisions and an increase in revenues
including internal growth of $13,334,000 resulting from the acquisitions
completed in late 2003 and the first half of 2004 in the Canadian Distribution
Group.
Gross margin in the Distribution Group increased by $4,392,000 in the three
months ended June 30, 2004 to $5,386,000 or 27.8% of revenue compared to
$994,000 or 18.6% of revenue, in the same period in 2003. The increase in gross
profit is attributable to the acquired businesses and synergies recognized in
both the acquisition and existing companies within the Distribution Group.
Warehousing and distribution costs increased to $1,442,000 in the three months
ended June 30, 2004 versus $229,000 in the three months ended June 30, 2003.
Selling, general and administrative expenses increased to
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SUNOPTA INC. 32 June 30, 2004 10-Q
$2,515,000 in the three months ended June 30, 2004 versus $576,000 in the three
months ended June 30, 2003. The increases noted are due primarily to the
acquisitions noted above.
Other expenses in the three months ended June 30, 2004 of $8,000 compared to
other income of $18,000 in same period in 2003.
Net earnings before interest expense and income taxes in the Distribution Group
were $1,421,000 in the three months ended June 30, 2004 compared to $207,000 in
the three months ended June 30, 2003 due to the factors noted above.
Packaged Products Group
The Packaged Products Group contributed $10,943,000 revenues in the three months
of 2004 versus $8,973,000 in 2003, an increase of $1,970,000 or 22.0%. Revenues
were favourably impacted by increased aseptic sales of $945,000 and an increase
of $1,379,000 resulting from the acquisitions completed in 2003 in the healthy
convenience foods sector, partially offset by a net decline of $354,000 in
consumer product.
Gross margin in the Packaged Products Group increased by $574,000 in the three
months ended June 30, 2004 to $1,843,000 or 16.8% of revenues compared to
$1,269,000 or 14.1% of revenues, in the same period in 2003. The increase in
gross margin was attributable to the acquired businesses which have inherently
higher margin rates, offset by a reduction in contribution due to the decline in
sales of certain consumer products including the effects of fixed overhead
absorption.
Selling, general and administrative expenses increased to $1,106,000 in the
three months ended June 30, 2004 versus $547,000 in the three months ended June
30, 2003. The increases noted are due to the acquisitions noted above and other
general cost increases.
Other income (expenses) in the three months ended June 30, 2004 is $2,658,000
compared to other income of ($13,000) in same period in 2003. The gain
recognized is primarily related to the favourable judgment received in a lawsuit
against a supplier for breach of contract (see Note 17 - Other Income).
Net earnings before interest expense and income taxes in the Packaged Products
Group were $3,396,000 in the three months ended June 30, 2004 compared to
$709,000 in the three months ended June 30, 2003 due to the factors noted above.
Opta Minerals Group
Opta Minerals contributed $8,992,000 or 11.1% of the total Company consolidated
revenues in the three months of 2004, versus $6,664,000 or 12.7% in 2003.
Revenues were favourably impacted by an increase in revenues of $610,000 due to
the acquisition of Distribution A&L and an increase in demand for silica free
abrasives due to increased activity in the United States.
Gross margins in Opta Minerals were $2,527,000 in the three months ended June
30, 2004 versus $1,368,000 in the three months ended June 30, 2003. As a
percentage of revenues, gross margin increased to 28.1% in the three months of
2004 from 20.5% in the three months of 2003. The increase in margin is due
primarily to product mix and an increasing percentage of sales from U.S. based
businesses which have inherently higher margins.
Selling, general and administrative expenses increased to $844,000 in the three
months ended June 30, 2004 versus $516,000 in the three months ended June 30,
2003. The increase is due to the acquisition of Distribution A&L and the
fulfillment of previously vacant positions.
Other income decreased to $34,000 in the three months of 2004 versus $111,000 in
the same three months of 2003. Other income recognized in 2003 related to gains
on the disposal of non-core assets.
Net earnings before interest expense and income taxes were $1,717,000 in the
three months ended June 30, 2004 versus $963,000 in the three months ended June
30, 2003.
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SUNOPTA INC. 33 June 30, 2004 10-Q
StakeTech Steam Explosion Group and Corporate
Revenues of $290,000 for the three months ended June 30, 2004, versus $76,000 in
same period in 2003, were derived from engineering work undertaken during the
quarter for the investigation of converting corn stover into bio-mass for the
production of ethanol. Licence fees recognized in the second quarter of 2003
were $76,000. There have been no licence fee revenues recognized in 2004.
Gross margin in the StakeTech Steam Explosion Group was $137,000 in the three
months ended June 30, 2004 versus $76,000 in the three months ended June 30,
2003. As a percentage of revenues, gross margin decreased to 47.3% in the three
months of 2004 from 100% in the three months of 2003. Gross margin recognized in
2003 was attributed to license fees which have no associated service costs.
Selling, general and administrative expenses were $1,443,000 for the three
months ended June 30, 2004 compared to $942,000 for the same period in 2003. The
increase was a result of payroll expenses and increased costs associated with a
growing public company including the addition of in-house legal counsel and
internal audit functions. In addition, the Company incurred increased personnel
and associated costs within the StakeTech Steam Explosion Group for work
completed in the bio-fuel contracts and work related to the use of steam
technology in food applications.
Other income was $327,000 in the three months ended June 30, 2004 versus
$339,000 in the three months ended June 30, 2003. The gain in 2004 is mainly due
foreign exchange gains recognized in the quarter.
Net loss before interest expense and income taxes was $979,000 in the three
months ended June 30, 2004 versus $527,000 in the three months ended June 30,
2003 were attributed to the factors listed above.
Operations For the Six Months Ended June 30, 2004 Compared With the Six Months
Ended June 30, 2003
Consolidated
Revenues in the first six months of 2004 increased by 52.5% to $143,448,000
versus $94,052,000 in the first six months of 2003. The Company's net earnings
for the first six months of 2004 were $7,894,000 or $0.15 per basic common share
(diluted - $0.15) compared to $3,575,000 or $0.08 per basic common share
(diluted - $0.08) for the first six months of 2003, representing a 120.8%
increase.
The increase in the Company's revenues is due to a $45,495,000 increase in
revenue from the SunOpta Food Group, an increase of $3,768,000 from Opta
Minerals and an $133,000 increase in revenue attributable to the StakeTech Steam
Explosion Group. These increases are due to continued internal growth in certain
product lines and the impact of acquisitions completed to date. Details are
provided in the segmented analysis below.
Net earnings before interest expense, other income (expense), foreign exchange
gains (losses) and income taxes increased to $8,986,000 compared to $5,024,000
for the same period in the prior year, a 78.9% increase. The increases are due
to the acquisitions completed in the prior year, internal sales growth,
synergies and cost reductions realized throughout the organization. Further
details are included in segmented analysis detailed below.
Interest expense decreased to $360,000 in the six months ended June 30, 2004
from $984,000 in the six months ended June 30, 2003. The decrease in borrowing
costs reflects the decrease in debt outstanding during the year compared to the
prior period ended June 30, 2003 and lower borrowing costs as a result of
improved premiums and lower LIBOR rates in general.
Interest and other income increased to $2,384,000 in the six months ended June
30, 2004 from $210,000 in the six months ended June 30, 2003, primarily due to
the favourable judgment received in a lawsuit against a supplier for breach of
contract (see Note 17 - Other Income).
Foreign exchange gains of $248,000 compared to $595,000 in the same period in
2003 are due to the realization of gains due to significant movements in the
Canadian dollar during the first half of 2004. The prior year gain is due to
significantly greater appreciation of the Canadian dollar in the first 6 months
of 2003.
The provision for income taxes in the first three months of 2004 reflects the
Company's estimated effective tax rate in 2004 of 30%.
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SUNOPTA INC. 34 June 30, 2004 10-Q
Readers should note that due to differences between Canadian and U.S. GAAP, the
earnings for the six months ended June 30, 2004 was revised from $3,460,000 as
previously reported under Canadian GAAP to $3,575,000 under U.S. GAAP. Note 15
to the consolidated financial statements itemizes differences between U.S. and
Canadian GAAP.
Segmented Operations Information
(Note: Certain prior year figures have been adjusted to conform with the current
year presentation and segmented reporting.)
SunOpta Food Group
The SunOpta Food Group contributed $127,180,000 or 88.7% of total Company
consolidated revenues in the first six months of 2004 versus $81,685,000 or
86.9% in the same period in 2003. The increase of $45,495,000 or 55.7% is
attributable to the acquisitions completed and internal growth from our existing
business. For detailed explanations see segments analysis below.
Gross margins as a percentage of sales increased for the first six months from
16.5% to 19.2% reflecting the impact of improved product mix and pricing, higher
margins within the Distribution Group which has become a more significant
segment and cost rationalization within the Food Group.
Net earnings before interest expense and income taxes in the SunOpta Food Group
increased 125.3% to $11,221,000 in the six months ended June 30, 2004 compared
to $4,980,000 in the six months ended June 30, 2003.
Grains & Soy Products Group
The Grains and Soy Products Group contributed $42,313,000 in revenues in the
first six months of 2004 versus $31,883,000 in 2003, a 32.7% increase. Revenues
were favourably impacted by the acquisition of Sigco Sun Products (Sigco) in
late 2003, totalling $13,438,000 and increases in certain grain revenues of
$784,000, partially offset by revenue decreases attributable to delays in
shipments of Non-GMO corn and a reduction of soy product sales to certain
customers.
Gross margin in the Grains and Soy Products Group increased by $412,000 in the
six months ended June 30, 2004 to $4,795,000 or 11.3% of revenues compared to
$4,383,000 or 13.7%, in the same period in 2003. The decrease in gross profit
margins is related to product mix, margin pressures on fixed sales contracts of
organic feed and lower volumes noted above. The decease was offset by the
sunflower product lines acquired which have historically higher gross margins
than other grain products.
Selling, general and administrative expenses increased to $3,229,000 in the six
months ended June 30, 2004 versus $2,739,000 in the six months ended June 30,
2003. The increase is due primarily to the Sigco acquisition completed in 2003.
Other income in the six months ended June 30, 2004 of $96,000 is primarily
related to a gain recognized on the disposition of assets.
Net earnings before interest expense and income taxes in the Grains and Soy
Products Group was $1,662,000 in the six months ended June 30, 2004 compared to
$1,646,000 in the six months ended June 30, 2003, due to the factors noted
above.
Ingredients Group
The Ingredients Group contributed $31,973,000 revenues in the first six months
of 2004 versus $23,804,000 in 2003, a 34.3% increase. The increase in revenues
is attributable to increased sales of oat fiber, dairy blends, soluble fiber and
technical processing. Oat fibre increases of $4,978,000 resulted from the demand
generated by low carb diets and fiber enriched foods and were supported by
increased capacity at our Cambridge facility and our newly acquired facility in
Cedar Rapids, Iowa. An increase of $1,712,000 in dairy blends due to increased
volumes and pricing compared to the prior year.
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SUNOPTA INC. 35 June 30, 2004 10-Q
Gross margin in the Ingredients Group increased by $2,693,000 in the six months
ended June 30, 2004 to $7,482,000 or 23.4% of revenue compared to $4,789,000 or
20.1% of revenue, in the same period in 2003. The increase in gross margin
reflects increased percentage of oat fiber revenues on a comparative basis,
improved pricing, plant utilization and cost rationalization initiatives.
Selling, general and administrative expenses increased to $3,497,000 in the six
months ended June 30, 2004 versus $3,278,000 in the six months ended June 30,
2003. The increase is primarily due to recruiting and new hires related to
filling previously vacant positions.
Other income (expenses) in the first six months ended June 30, 2004 increased to
($156,000) compared to ($56,000) in the first half of 2003. The expenses in 2004
are related to the closure of the St. Thomas Facility and costs incurred to
prepare the Bedford facility for sale, partially offset by proceeds recognized
on the sale of the Bedford Facility. The loss recognized in 2003 was primarily
attributable to foreign exchange.
Net earnings before interest expense and income taxes in the Ingredients Group
were $3,829,000 in the six months ended June 30, 2004 compared to $1,455,000 in
the six months ended June 30, 2003, due primarily to the factors noted above.
Distribution Group
The Distribution Group contributed $33,404,000 revenues in the six months of
2004 versus $9,269,000 in 2003, an increase of $24,135,000 or 260.4%. Revenues
were favourably impacted by increased produce and grocery revenues of $2,015,000
and revenues of $22,120,000 resulting from the acquisitions completed in 2003
and 2004.
Gross margin increased by $7,668,000 in the six months ended June 30, 2004 to
$9,486,000 compared to $1,818,000 in the same period in 2003. The increase in
gross profit was attributable to acquisitions and the synergies recognized in
our previously existing and acquired businesses.
Warehousing and distribution costs increased to $2,597,000 in the six months
ended June 30, 2004 versus $407,000 in the six months ended June 30, 2003.
Selling, general and administrative expenses increased to $4,280,000 in the six
months ended June 30, 2004 versus $1,202,000 in the six months ended June 30,
2003. The increases noted are due primarily to the acquisitions noted above.
Other income (expenses) in the six months ended June 30, 2004 of ($30,000)
compared to other income of $47,000 in same period in 2003. Other expenses
recognized in the current year are due to foreign exchange.
Net earnings before interest expense and income taxes in the Distribution Group
were $2,579,000 in the six months ended June 30, 2004 compared to $256,000 in
the six months ended June 30, 2003, due to the factors noted above.
Packaged Products Group
The Packaged Products Group contributed $19,490,000 revenues in the first six
months of 2004 versus $16,729,000 in 2003, an increase of $2,761,000 or 16.5%.
Revenues were favourably impacted by the acquisitions completed in 2003 in the
healthy convenience foods sector of $3,111,000 and an increase in Canadian
packaged revenues of $432,000, partially offset by a net decline of $687,000 in
aseptic packaged and consumer products.
Gross margin in the Group increased by $175,000 in the first six months ended
June 30, 2004 to $2,669,000 or 13.7% compared to $2,494,000 or 14.9%, in the
same period in 2003. The decrease in gross margin percentage was attributable to
a reduction in contribution due to a decline in sales of aseptic consumer
products including the effects of fixed overhead absorption, partially offset by
higher margins in the acquired businesses.
Selling, general and administrative expenses increased to $2,169,000 in the six
months ended June 30, 2004 versus $861,000 in the six months ended June 30,
2003. The increases noted are due primarily to the acquisitions made in the
healthy convenience food sector.
Other income (expenses) in the first six months ended June 30, 2004 of
$2,651,000 compared to a loss of ($10,000) in same period in 2003. The gain
recognized is primarily due to the favorable judgment received in a lawsuit
against a supplier for breach of contract, (see note 17-Other Income).
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SUNOPTA INC. 36 June 30, 2004 10-Q
Net earnings before interest expense and income taxes in the Packaged Products
Group were $3,151,000 in the six months ended June 30, 2004 compared to
$1,623,000 in the six months ended June 30, 2003 due to the factors noted above.
Opta Minerals
Opta Minerals contributed $15,831,000 or 11.0% of the total Company consolidated
revenues in the first six months of 2004, versus $12,063,000 or 12.8% in 2003.
Revenues were favourably impacted by an increase in revenues of $610,000 due to
the acquisition of Distribution A&L and an increase in demand for abrasives
products.
Gross margins in Opta Minerals were $3,896,000 in the six months ended June 30,
2004 versus $2,435,000 in the six months ended June 30, 2003. As a percentage of
revenues, gross margin increased to 24.6% in the first six months of 2004 from
20.2% in the first six months of 2003. The increase in margin is due primarily
to increased demand for abrasive sales in the U.S. offset by increased material
costs within the foundry business.
Selling, general and administrative expenses increased to $1,539,000 in the six
months ended June 30, 2004 versus $1,075,000 in the six months ended June 30,
2003. The increase in costs is attributable to the acquisition noted above and
the fulfillment of previously vacant positions.
Other income (expense) increased to ($133,000) in the first six months of 2004
versus a gain of $75,000 in the six months of 2003. The increase was due to
costs incurred in the first quarter due to the rationalization of the Hamilton
Facility.
Net earnings before interest expense and income taxes were $2,224,000 in the six
months ended June 30, 2004 versus $1,435,000 in the six months ended June 30,
2003.
StakeTech Steam Explosion Group and Corporate
Revenues of $437,000 for the six months ended June 30, 2004, versus $304,000 in
same period in 2003, were derived from pre-engineering work undertaken during
the period. Licence fees recognized in the first half of 2003 were $304,000.
There have been no license fees recognized in 2004.
Gross margin in the StakeTech Steam Explosion Group was $191,000 in the six
months ended June 30, 2004 versus $304,000 in the six months ended June 30,
2003. As a percentage of revenues, gross margin decreased to 43.7% in the first
six months of 2004 from 100% in the first six months of 2003. Gross margin
recognized in 2003 was attributed to license fees which have no associated
service costs.
Selling, general and administrative expenses were $2,231,000 for the six months
of 2004 compared to $1,618,000 for the same period in 2003. The increase was a
result of payroll expenses and increased costs associated with a growing public
company including the addition of in-house legal counsel and internal audit
functions. In addition, the Company incurred increased personnel and associated
costs within the StakeTech Steam Explosion Group in anticipation of additional
bio-fuel contracts and work related to the use of steam technology in food
applications.
Other income was $213,000 in the first six months of 2004 versus $728,000 in the
first six months of 2003. The gains are primarily related to foreign exchange
due to significant fluctuations in the Canadian Dollar.
Net loss before interest expense and income taxes was $1,827,000 in the six
months ended June 30, 2004 versus $586,000 in the six months ended June 30,
2003.
Liquidity and Capital Resources at June 30, 2004
Sources of Liquidity
The Company obtains its short term financing through a combination of cash
generated from operating activities, cash and cash equivalents, and available
operating lines of credit. At June 30, 2004, the Company's had a net line of
credit position of $1,906,000. As previously noted the Company has increased its
term loan by $16,300,000 and its operating lines of credit subsequent to June
30, 2004. A revolving acquisition line was also added with maximum draws up to
$10,000,000.
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SUNOPTA INC. 37 June 30, 2004 10-Q
The Company obtains its long term financing through its credit agreement with a
syndicate of lenders. The Company may expand this credit agreement, and/or
obtain additional long term financing for internal expansion uses, acquisitions
or other strategic purposes as required.
The Company has the following sources from which it can fund its operating 2004
cash requirements:
o Cash and cash equivalents.
o Available operating lines of credit.
o Cash flows generated from operating activities.
o Cash flows generated from the sale of assets held for sale.
o Cash flows generated from receipts of warrants and options currently
in-the-money.
o Additional long term financing based on securitization of existing
assets.
In order to finance significant acquisitions beyond those already completed in
2004, the Company would need additional sources of cash which could be obtained
through a combination of additional bank or subordinated financing, a private or
public offering, or the issuance of shares in relation to an acquisition or a
divestiture. The Company intends to maintain a target term debt to equity ratio
of 0.60 to 1.00 versus the current position of 0.18 to 1.00.
The Company anticipates having no issues in obtaining additional long term
financing in view of its current financial position and past experience in the
capital markets.
Cash Flows from Operating Activities
Cash flows provided by operations for the first six months of 2004 before
working capital changes was $12,829,000 (2003 - $6,059,000), an increase of
$6,770,000 or 117%. The increase was due primarily to an increase in net
earnings and an increase in the add-back of amortization and future income
taxes.
Cash provided by operations after working capital changes was $892,000 for the
six months ended June 30, 2004 (2003 -$1,532,000), reflecting the use of funds
for non-cash working capital of ($11,937,000) (2003 - ($4,527,000)). This
utilization consists principally of an increase in accounts receivable
($10,463,000), an increase in inventories ($1,517,000), an increase in prepaid
expenses and other assets of ($3,209,000) and a decrease in customer deposits of
($1,778,000), partially offset by the recovery of income taxes of $1,686,000 and
an increase in accounts payable and accrued liabilities of $3,344,000. The usage
of cash flows to fund working capital in 2004 reflects the increase in working
capital requirements required to fund the rapid growth in operations.
Cash Flows from Investing Activities
Cash used in investment activities of $25,500,000 in the first six months of
2004 (2003 -$2,491,000), reflects cash used to complete acquisitions, net of
cash acquired, of ($22,103,000) (2003 - ($2,744,000)) and acquisitions of
property, plant and equipment of ($9,248,000) (2003 - ($2,480,000)), offset by
proceeds from the sale of property of $5,864,000 (2003 - $nil), a decrease in
short term investments for proceeds of $nil (2003 - $2,038,000) and payments
received on a note receivable of $nil (2003 - $716,000).
Cash Flows from Financing Activities
Cash provided (used) by financing activities was $4,047,000 in 2004 (2003 -
($3,514,000)), consisting primarily of net proceeds from the issuance of common
shares of $1,954,000 (2003 - $1,930,000), primarily from warrants expiring in
the year, increased borrowings on long-term debt facilities of $607,000 (2003 -
$7,800,000) and an increase in bank indebtedness of $3,515,000 (2003 -
$5,719,000), partially offset by repayment on long-term debt facilities of
($1,746,000) (2003 - ($18,335,000)), payment of deferred purchase consideration
of ($65,000) (2003 - ($247,000)), financing costs of $nil (2003 - ($250,000))
and the purchase and redemption of preference shares of subsidiary companies of
($218,000) (2003 - ($131,000)).
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SUNOPTA INC. 38 June 30, 2004 10-Q
Item 3 -Quantitative and Qualitative Disclosures about Market Risk
Interest rate risk
The primary objective of our investment activities is to preserve principal and
limit risk. To achieve this objective, the company restricts its portfolio to a
variety of securities, including government and corporate obligations and money
market funds. These securities are generally classified as cash and cash
equivalents or short-term investments and are recorded on the balance sheet at
fair value with unrealized gains or losses reported through profit and loss. As
at June 30, 2004 all of SunOpta's excess funds were held in cash and cash
equivalents with a maturity of less than 90 days.
Debt in both fixed rate and floating rate interest carry different types of
interest rate risk. Fixed rate debt may have their fair market value adversely
affected by a decline in interest rates. In general, longer date debts are
subject to greater interest rate risk than shorter dated securities. Floating
rate term debt gives less predictability to cash flows as interest rates change.
As at June 30, 2004, the weighted average interest rate of the fixed rate term
debt was 4.2% (2003 - 3.9%) and $2,998,000 (2003 - $2,796,000) of the Company's
outstanding term debt is at fixed interest rates. Variable rate term debt of
$20,896,000 (2003 - $22,240,000) at an interest rate of 2.4% (2003 - 2.3%) is
partially hedged by variable rate cash equivalent investments. The Company looks
at varying factors to determine the percentage of debt to hold at fixed rates
including, the interest rate spread between variable and fixed (swap rates), the
Company's view on interest rate trends, the percent of offset to variable rate
debt through holding variable rate investments and the Company's ability to
manage interest rate volatility and uncertainty. For every 1% increase
(decrease) in interest rates the Company's after tax earnings would (decrease)
increase by approximately $150,000. Given the short duration of fixed rate debt,
changes in interest rates would have a negligible affect on fixed rate debt
valuations.
Foreign currency risk
All U.S. subsidiaries use the U.S. dollar as their functional currency. The
Company is exposed to foreign exchange rate fluctuations as the financial
results of the Company and its Canadian subsidiaries are translated into U.S.
dollars on consolidation. During the first half of 2004, the Canadian dollar has
depreciated slightly against the U.S. dollar with closing rates moving from CDN
$1.2965 at December 31, 2003 to CDN $1.3338 at June 30, 2004 for each U.S.
dollar. The net effect of this depreciation has been a $248,000 net exchange
gain and a $1,303,000 decrease in net assets. A 10% movement in the levels of
foreign currency exchange rates in favour of (against) the Canadian dollar with
all other variables held constant would result in an increase (decrease) in the
fair value of the Company's net assets by $4,529,000 (2003 - $2,164,000).
The functional currency of all operations located in Canada is the Canadian
dollar. For these operations all transaction gains or losses in relation to the
U.S. dollar are recorded as foreign exchange gain (loss) in the Consolidated
Statements of Earnings while gains (losses) on translation of net assets to U.S.
dollars on consolidation are recorded in Accumulated other comprehensive income
account within Shareholders' Equity. The functional currency of the corporate
head office is the U.S. dollar. Transaction gains or losses as well as
translation gains and losses on monetary assets and liabilities are recorded
within foreign exchange gains (losses) on the Consolidated Statement of
Earnings. U.S. based Food Group operations have no exposure to other currencies
since almost all sales and purchases are made in U.S. dollars. It is the
Company's intention to hold excess funds in the currency in which the funds are
likely to be used, which will, from time to time, potentially expose the Company
to exchange rate fluctuations when converted into U.S. dollars.
Commodity risk
The Food Group enters into exchange-traded commodity futures and options
contracts to hedge its exposure to price fluctuations on grain transactions to
the extent considered practicable for minimizing risk from market price
fluctuations. Futures contracts used for hedging purposes are purchased and sold
through regulated commodity exchanges. Inventories, however, may not be
completely hedged, due in part to the Company's assessment of its exposure from
expected price fluctuations. Exchange purchase and sales contracts may expose
the Company to risk in the event that a counter-party to a transaction is unable
to fulfill its contractual obligation. The Company manages its risk by entering
into purchase contracts with pre-approved producers. The Company has a risk of
loss from hedge activity if a grower does not deliver the grain as scheduled.
Sales contracts are entered into with organizations of acceptable
creditworthiness, as internally evaluated. All futures transactions are marked
to market. Gains and losses on futures transactions related to grain inventories
are included in cost of goods sold. At June 30, 2004 the Company owned 334,905
(2003 - 482,600) bushels of corn with a weighted average price of $2.37 (2003 -
$2.15) and 242,588 (2003 - 313,012) bushels of soy beans with a weighted average
price of $11.63 (2003 - $7.07). The Company has at June 30, 2004 net long
positions on corn and soy beans of 1,064 (2003 - 4,576) and 111,606 (2003
- -167,294)
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SUNOPTA INC. 39 June 30, 2004 10-Q
bushels respectively. An increase/decrease in commodity prices of 10% would
result in a gain (loss) of $nil (2003 - $984) in corn and $129,798 (2003 -
$118,277) in soy beans, respectively. There are no futures contracts in the
other Food Group segments, Opta Minerals, the StakeTech Steam Explosion Group or
related to Corporate office activities.
Item 4. Controls and Procedures
Under the supervision and with the participation of management, the Chief
Executive Officer and Chief Financial Officer of the Company have evaluated the
effectiveness of the design and operation of the Company's disclosure controls
and procedures as of June 30, 2004, and, based on their evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that these controls
and procedures are effective. Disclosure controls and procedures are designed to
ensure that information required to be disclosed by the Company in reports that
it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures are also designed to ensure that information is accumulated and
communicated to management, including the Chief Executive Officer and Chief
Financial Officer, as appropriate to allow timely decisions regarding required
disclosure.
Internal Control over Financial Reporting
There has been no change in the Company's internal control over financial
reporting that occurred during the Company's quarter ended June 30, 2004 that
has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
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SUNOPTA INC. 40 June 30, 2004 10-Q
PART II - OTHER INFORMATION.
Item 1. Legal proceedings
Sunrich Inc. a subsidiary of the Company commenced in 2002, a suit against
a supplier for failure to adhere to the terms of a contract. The supplier
counter-sued the Company for breach of contract. On June 29, 2004 a
federal court jury, in the United States District Court for the District
of Oregon, entered a net verdict in favour of Sunrich Inc. against the
supplier on Sunrich's breach of contract, trade secrets, and punitive
damage claims after a two week trial, in the amount of $2,498,000 plus
legal fees. On July 1st, 2004 Sunrich filed a Proposed Form of Judgment
with the Oregon court in the sum of $2,697,000, excluding legal fees,
based upon Sunrich's calculation of prejudgment interest due on damages
awarded by the federal jury. It is expected that the court will enter such
a judgment in the month of August, 2004.
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity
Securities - Not applicable
Item 3. Defaults upon Senior Securities - Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual and Special Meeting of Shareholders was held in
Toronto on May 13, 2004.
The following persons were elected to serve as directors of the Company
until the next Annual Meeting of shareholders or until their successors
are elected: Stephen Bronfman (43,289,927 votes "FOR", 1,402,794 votes
"WITHHELD"); Robert Fetherstonhaugh (44,165,977 votes "FOR", 526,744 votes
"WITHHELD"); Katrina Houde (44,167,977 votes "FOR", 525,544 votes
"WITHHELD"); Cyril Ing (44,167,977 votes "FOR", 524,744 votes "WITHHELD");
Jeremy Kendall (43,760,407 votes "FOR", 932,314 votes "WITHHELD"); Camillo
Lisio (44,168,177 votes "FOR", 524,544 votes "WITHHELD"); James Rifenbergh
(44,166,027 votes "FOR", 526,694 votes "WITHHELD"); Joseph Riz (44,168,727
votes "FOR", 523,994 votes "WITHHELD") and Allan Routh (44,167,077 votes
"FOR", 525,644 votes "WITHHELD").
In addition to the election of directors, the following matters were voted
upon:
1. The appointment of PricewaterhouseCoopers LLP as auditors for the
Company for 2004. There were 43,796,319 shares voted "FOR" the
appointment, 837,415 shares voted "AGAINST" the appointment and
58,987 shares "ABSTAINED".
2. An amendment to the Company's Stock Option Plan to approving
amendment of Company's Stock Option Plans. There were 35,291,229
shares voted "FOR" the amendment; 1,091,617 shares voted "AGAINST"
the amendment; and 266,422 shares "ABSTAINED".
3. An amendment to the Company's 2002 Stock Option Plan approving
amendment to the Company's 2002 Stock Option Plan. There were
26,864,288 shares voted "FOR" the amendment; 9,426,933 shares voted
"AGAINST" the amendment and 275,297 shares "ABSTAINED".
Item 5. Other Information
(a) Not applicable
(b) The Company has implemented procedures to enable security holders to
recommend nominees for election to the Company's Board of Directors. These
procedures are outlined in detail on page 9 of the Company's current
Information Circular, for its shareholder meeting held on May 13, 2004.
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SUNOPTA INC. 41 June 30, 2004 10-Q
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
10 Third Amending Agreement to Amended and Restated Credit Agreement
dated as of July 7, 2004 among SunOpta Inc. (the "Company"), certain
affiliates of the Company, Bank of Montreal, as Agent and Harris
Trust and Savings Bank as U.S. Security Agent and other Lenders
within the lending group. **
31.1 Certification by Jeremy Kendall, Chief Executive Officer pursuant to
Rule 13(a) - 14(a) under the Exchange Act.
31.2 Certification by John Dietrich, Chief Financial Officer pursuant to
Rule 13(a) - 14(a) under the Exchange Act.
32 Certifications by Jeremy Kendall, Chairman and Chief Executive
Officer and John Dietrich, Vice President and Chief Financial
Officer pursuant to Section 18 U.S.C Section 1350.
** Filed herewith
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SUNOPTA INC.
/s/ John Dietrich
Date August 6, 2004
SunOpta Inc.
by John Dietrich
Vice President
and Chief Financial Officer
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SUNOPTA INC. 42 June 30, 2004 10-Q