What changed in SunOpta Inc.'s 10-K — 2023 vs 2024
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Paragraph-level year-over-year comparison of SunOpta Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.
+315 added−459 removedSource: 10-K (2024-02-28) vs 10-K (2023-03-01)
Top changes in SunOpta Inc.'s 2024 10-K
315 paragraphs added · 459 removed · 194 edited across 6 sections
- Item 7. Management's Discussion & Analysis+181 / −255 · 102 edited
- Item 1A. Risk Factors+80 / −132 · 50 edited
- Item 1. Business+38 / −53 · 28 edited
- Item 7A. Quantitative and Qualitative Disclosures About Market Risk+10 / −11 · 9 edited
- Item 5. Market for Registrant's Common Equity+3 / −6 · 3 edited
Item 1. Business
Business — how the company describes what it does
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Item 1. Business
Business — how the company describes what it does
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2023 filing
2024 filing
Biggest changeAgricultural commodities and ingredients are subject to fluctuations in market price caused by weather, growing and harvesting conditions, market conditions, including inflationary cost increases, and other factors beyond our control. Where possible, we mitigate the input price volatility by entering into annual purchase arrangements with our suppliers and by incorporating pass-through pricing adjustment clauses into our contracts with customers.
Biggest changeWhere possible, we mitigate market price volatility by entering into annual purchase arrangements with our suppliers and by incorporating pass-through pricing adjustment clauses into our contracts with customers. The costs of raw materials used in our products also fluctuate due to energy costs, fuel prices, labor availability, and freight and storage demand.
Securities and Exchange Commission (the "SEC") or Canadian Securities Administrators (the "CSA"). Regulations We are subject to a wide range of governmental regulations and policies in the U.S., Canada, and Mexico. These laws, regulations and policies are implemented, as applicable in each jurisdiction, on the national, federal, state, provincial, and local levels.
Securities and Exchange Commission (the "SEC") or Canadian Securities Administrators (the "CSA"). Regulations We are subject to a wide range of governmental regulations and policies in the U.S. and Canada. These laws, regulations and policies are implemented, as applicable in each jurisdiction, on the national, federal, state, provincial, and local levels.
SUNOPTA INC. 9 December 31, 2022 Form 10-K Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), are available free of charge on our website at www.sunopta.com as soon as reasonably practicable after we file such information electronically with, or furnish it to, the SEC and the CSA.
Available Information Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"), are available free of charge on our website at www.sunopta.com as soon as reasonably practicable after we file such information electronically with, or furnish it to, the SEC and the CSA.
Additionally, the SEC and CSA maintain internet sites that contain reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC and CSA, which can be found at http://www.sec.gov and http://www.sedar.com , respectively.
Additionally, the SEC and CSA maintain internet sites that contain reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC and CSA, which can be found at http://www.sec.gov and http://www.sedarplus.ca , respectively.
Our employees and 10 manufacturing facilities are principally located in the U.S., as well as Mexico and Canada. Our corporate headquarters is located in Eden Prairie, Minnesota, together with our innovation center and pilot plant.
Our employees and production facilities are principally located in the U.S., as well as Canada. Our corporate headquarters is located in Eden Prairie, Minnesota, together with our innovation center and pilot plant.
Employee Safety Regulations We are subject to certain safety regulations, including OSHA regulations. These regulations require us to comply with certain manufacturing safety standards to protect our employees from accidents. We believe that we are in material compliance with all employee safety regulations applicable to our business. Canadian and Other Non-U.S.
Employee Safety Regulations We are subject to certain safety regulations, including OSHA regulations. These regulations require us to comply with certain manufacturing safety standards to protect our employees from accidents. We believe that we are in material compliance with all employee safety regulations applicable to our business.
With a focus on health and sustainability, the core of our diverse product portfolio is our range of non-genetically modified ("non-GMO"), organic, and gluten-free plant-based beverages, including oat, almond, soy, coconut and rice milks and creamers, which have a favorable climate profile relative to traditional dairy milks in terms of lower carbon emissions and water usage.
The core of our product portfolio is a range of plant-based beverages, including oat, almond, soy, coconut and rice milks and creamers, which have a favorable climate profile relative to traditional dairy milks in terms of lower carbon emissions and water usage. Our plant-based offerings include non-genetically modified ("non-GMO"), organic, and gluten-free products.
Generally, organic food products are produced using: agricultural management practices intended to promote and enhance ecosystem health; ingredients produced without genetically engineered seeds or crops, sewage sludge, long-lasting pesticides, herbicides, or fungicides; and food processing practices intended to protect the integrity of the organic product and disallow irradiation, genetically modified organisms, or synthetic preservatives.
Generally, organic food products are produced using: agricultural management practices intended to promote and enhance ecosystem health; SUNOPTA INC. 5 December 30, 2023 Form 10-K ingredients produced without genetically engineered seeds or crops, sewage sludge, long-lasting pesticides, herbicides, or fungicides; and food processing practices intended to protect the integrity of the organic product and disallow irradiation, genetically modified organisms, or synthetic preservatives.
Regulations In Canada, the sale of food is regulated under various federal and provincial laws, principally (but not limited to) the Safe Food for Canadians Act ("SFCA"), the Food and Drugs Act ("FADA"), the Canada Consumer Product Safety Act ("CCPSA"), the Canadian Food Inspection Agency Act ("CFIAA") and the Canadian Environmental Protection Act, 1999 ("CEPA"), along with their supporting regulations.
SUNOPTA INC. 6 December 30, 2023 Form 10-K Canadian Regulations In Canada, the sale of food is regulated under various federal and provincial laws, principally (but not limited to) the Safe Food for Canadians Act ("SFCA"), the Food and Drugs Act ("FADA"), the Canada Consumer Product Safety Act ("CCPSA"), the Canadian Food Inspection Agency Act ("CFIAA") and the Canadian Environmental Protection Act, 1999 ("CEPA"), along with their supporting regulations.
We rely on our packaging suppliers to ensure delivery of often unique, portable, and convenient consumer packaging formats. In our plant-based beverage processing facilities, we specialize in the use of Tetra Pak processing and packaging equipment in a variety of package sizes, and an array of opening types and extended shelf-life options.
SUNOPTA INC. 3 December 30, 2023 Form 10-K We rely on our packaging suppliers to ensure delivery of often unique, portable, and convenient consumer packaging formats. In our plant-based beverage processing facilities, we specialize in the use of Tetra Pak processing and packaging equipment in a variety of package sizes, and an array of opening types and extended shelf-life options.
Overall, the demand for most of our products does not typically fluctuate significantly in any particular season; however, sales of everyday broths are generally highest in the first and fourth quarters of each year.
Seasonality Overall, the demand for most of our products does not typically fluctuate significantly in any particular season; however, broth sales are generally higher in the first and fourth quarters of each year.
Timelines for complying with the SFCR requirements vary by food, activity, and size of the food business. SUNOPTA INC. 8 December 31, 2022 Form 10-K Food and Drug Regulations (under the FADA) - food and drugs are subject to specific regulatory requirements, including composition (such as food additives, fortification, and food standards), packaging, labeling, advertising, and marketing, and licensing requirements.
Timelines for complying with the SFCR requirements vary by food, activity, and size of the food business. Food and Drug Regulations (under the FADA) - food and drugs are subject to specific regulatory requirements, including composition (such as food additives, fortification, and food standards), packaging, labeling, advertising, and marketing, and licensing requirements.
Our business also requires that we have certain permits from various state, provincial and local authorities related to air quality, water consumption and treatment, stormwater discharge, solid waste, land spreading and hazardous waste. We are committed to meeting all applicable environmental compliance requirements.
Environmental Compliance As described above, we are subject to environmental regulations in the U.S. and Canada. Our business also requires that we have certain permits from various state, provincial and local authorities related to air quality, water consumption and treatment, stormwater discharge, solid waste, land spreading and hazardous waste. We are committed to meeting all applicable environmental compliance requirements.
In 2022, we implemented a new Foundational Manager Program created for managers and supervisors with a focus on cross-functional leadership, effective communication, leading through change, influencing with integrity, negotiating, and creative problem solving. We are committed to identifying and developing the talents of our next generation leaders.
In 2023, we expanded the Foundational Manager Program to all of our plant locations. This offering was created for managers and supervisors with a focus on cross-functional leadership, effective communication, leading through change, influencing with integrity, negotiating, and creative problem solving. We are committed to identifying and developing the talents of our next generation leaders.
SUNOPTA INC. 5 December 31, 2022 Form 10-K Product Development Our 24,000 square foot innovation center and pilot plant located in Eden Prairie, Minnesota, supports our product development team of 27 highly trained and experienced food scientists and technologists that are dedicated to the development of innovative food and beverage offerings and addressing product development opportunities for our customers.
Product Development Our 24,000 square foot innovation center and pilot plant located in Eden Prairie, Minnesota, supports our product development team of 21 highly trained and experienced food scientists and technologists that are dedicated to the development of innovative food and beverage offerings and addressing product development opportunities for our customers.
While we consider these trademarks to be valuable to the marketing and sale of our proprietary brands, we do not consider any trademark to be of such material importance that its absence would cause a material disruption of our business.
Trademarks We market our own consumer brands under trademarks that we own, including SOWN, Dream and West Life. While we consider these trademarks to be valuable to the marketing and sale of our proprietary brands, we do not consider any trademark to be of such material importance that its absence would cause a material disruption of our business.
On an annual basis, we conduct talent assessments across the organization and succession planning for our most critical roles within the organization to identify high potential employees, gaps in capabilities or skills, and bench strength. We believe in the power of diversity.
On an annual basis, we conduct talent assessments across the organization and succession planning for our most critical roles within the organization to identify high potential employees, gaps in capabilities or skills, and bench strength. In 2023, we had the first cohort of the Leadership Impact Program.
SUNOPTA INC. 7 December 31, 2022 Form 10-K After becoming certified, organic operations must retain records concerning the production, harvesting, and handling of agricultural products that are to be sold as organic for a period of five years.
After becoming certified, organic operations must retain records concerning the production, harvesting, and handling of agricultural products that are to be sold as organic for a period of five years.
Our continued success depends, in part, on our ability to protect our products, trade names and technology under U.S. and international patent laws and other intellectual property laws.
SUNOPTA INC. 7 December 30, 2023 Form 10-K Our continued success depends, in part, on our ability to protect our products, trade names and technology under U.S. and international patent laws and other intellectual property laws.
We foster inclusion by recognizing and supporting activities and initiatives representative of our workforce such as celebrations of Black History month, Hispanic Heritage month, PRIDE, National Native American Heritage month, and our Women's Leadership Program. In 2022, we also kicked off programming for our Hispanic Employee Resource Group.
We foster inclusion by recognizing and supporting activities and initiatives representative of our workforce such as celebrations of Black History month, Hispanic Heritage month, PRIDE, National Native American Heritage month, and our Women's Leadership Program. We continue to foster our Hispanic and Women's Employee Resource Groups by offering programming for awareness, education and collaboration.
SunOpta conducts an organizational health survey two times each year to check the pulse of our workforce and look for areas of improvement through the lens of all our employees. The average of our survey scores this year were 4.0 on a five-point scale.
SunOpta conducts an organizational health survey two times each year to check the pulse of our workforce and look for areas of improvement through the lens of all our employees.
We engage in communication efforts such as quarterly town halls and monthly all-company huddles that we believe help employees feel they are a part of SunOpta as a whole, not just their individual department or location.
We engage in communication efforts such as quarterly town halls and monthly all-company huddles that we believe help employees feel they are a part of SunOpta as a whole, not just their individual department or location. As of December 31, 2023, we employed 1,174 full-time employees in North America. Our average employee has over four years of service.
In 2022, our voluntary turnover was 22% across the Company. Except for our employees at our Jacona, Mexico, facility, none of our employees are represented by a collective bargaining group. We continue to focus on increasing employee retention by implementing retention programs and initiatives to increase employee engagement. Employee health and safety is paramount to our success.
In 2023, our voluntary turnover was 20% (down from 22% in 2022) across the Company. We continue to focus on increasing employee retention by implementing retention programs and initiatives to increase employee engagement. Employee health and safety is paramount to our success.
At the end of 2022, we announced two additional paid personal holidays for our regular, full-time employees called "You Days," which can be taken in recognition of an employee's birthday and work anniversary date.
In 2023, we implemented two additional paid personal holidays for our regular, full-time employees called "You Days," which can be taken in recognition of an employee's birthday and work anniversary date. In addition, we added a mental health benefit that provides faster access to care at the individual level of need for employees and their families.
We manufacture and sell the following: private label products to retail and foodservice customers; branded products under co-manufacturing agreements to other branded food companies for their distribution; branded products under our own proprietary brands to retail and foodservice customers; and bulk ingredients for use by foodservice customers and other food manufacturers.
We sell our products through various distribution channels including private label products to retail customers; branded products under co-manufacturing agreements to other branded food companies for their distribution; and our own branded products to retail and foodservice customers. In addition, we also produce liquid and dry ingredients for internal use and for sale to other food and beverage manufacturers.
We believe that our access to an established network of growers and suppliers, the strategic locations of our manufacturing and distribution facilities, our in-house processing and packaging capabilities, and our innovation center and pilot plant, allows us to compete effectively. Raw Materials Our raw materials primarily consist of agricultural commodities and ingredients.
We compete with major branded and private-label food manufacturers that have significantly greater resources and brand recognition than we do. However, we believe that the strategic locations of our manufacturing and distribution facilities, our in-house processing and packaging capabilities, and our innovation center and pilot plant, allows us to compete effectively.
Customers and Competition We sell our plant-based and fruit-based food and beverage products through various distribution channels, including large retailers and club stores, branded food companies, foodservice distributors, quick service and casual dining restaurants, and food manufacturers, located principally in the U.S.
Customers and Competition We sell our products through various distribution channels, including foodservice operators, grocery retailers and club stores, branded food companies, and food manufacturers, located principally in the U.S. We generally conduct our business with customers based on purchase orders or pursuant to contracts that are terminable by either party following a designated notice period.
In addition to our safety training and initiatives at our manufacturing facilities, we track our Total Recordable Incident Rate (TRIR) which ended the year at 1.44, compared to a goal of 1.6. 2022 continued to be a challenging year with the continuation of the COVID-19 global pandemic and evolving variants in addition to supply chain issues and labor shortages.
In addition to our safety training and initiatives at our manufacturing facilities, we track our Total Recordable Incident Rate (TRIR) which ended the year at 1.02, compared to a goal of 1.3. Environmental, Social and Governance We are committed to incorporating environmental, social and governance ("ESG") principles into our business strategies and organizational culture.
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Item 1. Business The Company SunOpta Inc., a corporation organized under the laws of Canada in 1973, is a U.S.-based global pioneer fueling the future of sustainable, plant-based and fruit-based foods and beverages.
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Item 1. Business The Company SunOpta Inc. was organized under the laws of Canada in 1973. We operate as a manufacturer for leading natural and private label brands and also produce our own propriety brands, including SOWN®, Dream® and West Life™.
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Reportable Segments and Principal Products The following is a description of the principal activities and products that comprise our operating and reportable segments: Plant-Based Foods and Beverages - We offer a full line of plant-based beverages and liquid and powder ingredients, utilizing oat, almond, soy, coconut, rice, hemp, and other bases, as well as everyday broths, teas, and nutritional beverages.
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Our consumer products portfolio also includes protein shakes, teas, broths, and fruit snacks. In October 2023, we completed the divestiture of our commodity-based frozen fruit business ("Frozen Fruit"), in order to focus on value-add products in plant-based and healthy snack categories (see below - "Divestiture of Frozen Fruit").
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In addition, our former sunflower business, which packaged dry- and oil-roasted inshell sunflower and sunflower kernels and processed raw sunflower inshell and kernel for food and feed applications, was part of this segment until it was sold on October 11, 2022.
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Divestiture of Frozen Fruit On October 12, 2023, we completed the sale of certain assets and liabilities of Frozen Fruit, which included owned facilities of Frozen Fruit located in Edwardsville, Kansas, and Jacona, Mexico. In December 2023, we completed the liquidation of a leased frozen fruit facility located in Oxnard, California.
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Fruit-Based Foods and Beverages - We offer individually quick frozen ("IQF") fruit for retail, including strawberries, blueberries, mango, pineapple, and other berries and blends, and IQF and bulk frozen fruit for foodservice, including toppings, purées, and smoothies. In addition, we offer fruit snacks, including bars, twists, ropes, and bite-sized varieties, as well as fruit smoothie bowls.
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These transactions represent our exit from the processing, packaging and selling of individually quick frozen fruit for retail, foodservice and industrial applications and completes our strategic optimization plan for our non-core, commodity-based businesses, which included the divestiture of our sunflower business ("Sunflower") in October 2022. Frozen Fruit and Sunflower have been classified as discontinued operations.
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In 2022, we derived 60% (2021 - 58%) of our revenues from the sale of plant-based foods and beverages, and 40% (2021 - 42%) from the sale of fruit-based offerings. Additional information regarding our segments is presented in note 21 to the consolidated financial statements at Item 15 of this Form 10-K.
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However, some of our contracts may extend for several years and/or include volume purchase commitments. A relatively limited number of customers account for a large percentage of our revenues. In 2023, our ten largest customers accounted for approximately 80% of our revenues from continuing operations.
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Recent Developments Midlothian, Texas, Manufacturing Facility In February 2023, we officially opened our newly constructed, 285,000 square foot plant-based beverage manufacturing facility in Midlothian, Texas.
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For sales of private label and co-manufactured products, the principal competitive factors are product quality, reliability of service, innovation, and price. For sales of our own branded products, the principal competitive factors are consumer brand recognition and loyalty, product quality, promotion, and price. Raw Materials Our raw materials primarily consist of ingredients and packaging materials.
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As part of a three-year, approximately $200 million capital investment into our plant-based manufacturing operations, this facility significantly increases our plant-based beverage production capacity and capabilities, including the addition of 330 milliliter packaging options, which is the common format for nutritional beverages.
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Principal ingredients used in our products include oats, almonds, soybeans, coconut, apple and sugar. For critical raw materials, we identify and qualify alternate sources of supply, where possible. Ingredients are subject to fluctuations in market price caused by weather, growing and harvesting conditions, market conditions, including inflationary cost increases, and other factors beyond our control.
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Together with our existing plant-based production facilities in California, Minnesota, and Pennsylvania, the Texas location completes our "diamond-shaped" manufacturing network within the U.S., allowing us to be nearer to the markets we serve in order to lower transportation usage and reduce carbon emissions.
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Volatility in the cost of our raw materials can adversely affect our performance, as price changes may lag behind changes in costs, and we are not always able to adjust our pricing to reflect changes in raw material costs due to competitive pressures.
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Additionally, the Midlothian facility was constructed using recycled and recyclable materials where feasible and has been fitted with resource efficient heating and cooling, water treatment, and lighting systems.
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As part of our focus on financial wellness, we announced expedited access to our 401(k) plan, beginning in 2024 so employees can realize the benefits of planning for retirement with employer match earlier in their tenure.
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SUNOPTA INC. 4 December 31, 2022 Form 10-K We commenced commercial production on the first high-speed aseptic processing and packaging line in February 2023, with the start-up of the 330-milliliter packaging line planned for the second quarter of 2023.
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Participants at the SVP and VP level gathered quarterly throughout the year to focus on leadership skills, strategy, professional growth and completed capstone projects to further the business. SUNOPTA INC. 4 December 30, 2023 Form 10-K We believe in the power of diversity.
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Production levels and plant utilization within the facility are expected to ramp-up through 2024, as we continue our business development efforts to fill remaining open capacity.
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Sale of Sunflower Business On October 11, 2022, we completed the sale of 100% of the assets and liabilities of our sunflower business and related roasted snacks operations, which operated from three processing facilities located in Minnesota and North Dakota.
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The sale of the sunflower commodity business was consistent with our strategic priority of optimizing our non-core businesses and focusing on high-growth, high-return opportunities.
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We generally conduct our business with customers based on purchase orders or pursuant to contracts that are terminable by either party following a designated notice period. However, some of our contracts may extend for several years and/or include volume purchase commitments.
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In 2022, our ten largest customers accounted for approximately 74% of our consolidated revenues, including approximately 72% of our Plant-Based Foods and Beverages segment revenues and approximately 76% of our Fruit-Based Foods and Beverages segment revenues. Our plant-based and fruit-based food and beverage operations compete with major branded and private-label food manufacturers.
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Our customers do not typically commit to buy predetermined amounts of products and many customers utilize bidding procedures to select vendors. As a result, price is often a key competitive factor in winning bids and retaining customers, along with product quality, food safety, innovation, and customer service.
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Principal commodities included in our products include strawberries, oats, almonds, and soybeans. Fresh and frozen berries are sourced directly from growers and suppliers primarily located in Mexico, the U.S., and South America. We source oats, almonds, and soybeans directly from established suppliers mainly within the U.S. and Canada.
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For critical raw materials, we identify and qualify alternate sources of supply, where possible. For certain organic ingredients, we are party to a long-term supply agreement with Tradin Organic, our former global organic ingredients business, which we sold in 2020.
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Seasonality We experience seasonality in the procurement, transportation, and processing of strawberries, mainly related to the peak Mexico and California production seasons, which generally occur during the first two quarters of the year.
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As a result, our short-term financing needs are generally highest in those periods due to crop inventory builds, while cash inflows are typically higher in the second half of the year as inventories are drawn down.
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Trademarks We market our own consumer brands under trademarks that we own, including SOWN™, Dream™, West Life™ (formerly WestSoy™) and Sunrise Growers™.
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SUNOPTA INC. 6 December 31, 2022 Form 10-K As of December 31, 2022, we employed 1,453 full-time employees and 493 seasonal employees in North America. Excluding our newly constructed Midlothian facility, our average employee has four years of service and our annual voluntary turnover of employees at the director level or above was 1%.
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We have been successful in mitigating the effect on our employees by proactively implementing measures early and thoroughly and keeping up to date on recommendations and guidance from the Centers for Disease Control and Prevention (CDC), state, provincial, and local health departments.
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Our operations teams continued to hold regular meetings to discuss health and safety protocols, best practices, and address employee concerns. In addition, we continued special pay and leave policies related to COVID-19 through the end of 2022. Environmental, Social and Governance We are committed to incorporating environmental, social and governance ("ESG") principles into our business strategies and organizational culture.
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In Mexico, our frozen fruit processing facility is subject to Mexican regulations, including regulations regarding processing, packaging, and sales of food products, labor relations and profit-sharing with employees, and water consumption and treatment. Environmental Compliance As described above, we are subject to environmental regulations in the U.S., Canada, and Mexico.
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
50 edited+30 added−82 removed85 unchanged
Item 1A. Risk Factors
Risk Factors — what could go wrong, per management
50 edited+30 added−82 removed85 unchanged
2023 filing
2024 filing
Biggest changeIf the material weaknesses we have identified in our internal control over financial reporting persist or if we fail to establish and maintain effective internal control over financial reporting, our ability to accurately report our financial results could be adversely affected In connection with the preparation of our consolidated financial statements as of and for the year ended December 31, 2022, our management conducted an assessment of the effectiveness of our internal control over financial reporting.
Biggest changeIn connection with the preparation of our consolidated financial statements as of and for the fiscal year ended December 31, 2022, we identified a material weakness in our internal control over financial reporting. This material weakness was remediated during the fiscal year ended December 30, 2023.
Our business may be adversely affected by the availability of non-GMO and organic commodities and ingredients Our ability to ensure a continuing supply of non-GMO and organic commodities and ingredients at competitive prices depends on many factors beyond our control, including the number and size of farms that grow non-GMO and organic crops.
Our business may be adversely affected by the availability of non-GMO and organic commodities and ingredients Our ability to ensure a continuing supply of non-GMO and organic ingredients at competitive prices depends on many factors beyond our control, including the number and size of farms that grow non-GMO and organic crops.
The non-GMO and organic raw materials that we use in the production of our products, including, among others, fruits, grains, nuts, sweeteners, and flavorings, are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, water scarcity, temperature extremes, frosts, earthquakes, and pestilences.
The non-GMO and organic raw materials that we use in the production of our products, including, among others grains, nuts, fruits, sweeteners, and flavorings, are vulnerable to adverse weather conditions and natural disasters, such as floods, droughts, water scarcity, temperature extremes, frosts, earthquakes, and pestilences.
Factors which could result in an impairment of a long-lived asset include, but are not limited to, reduced demand or pricing for our products due to increased competition, the loss of a significant customer or market share, or a current expectation that, more likely than not, a long-lived asset may be disposed of before the end of its previously estimated useful life.
Factors which could result in an impairment of a long-lived assets include, but are not limited to, reduced demand or pricing for our products due to increased competition, the loss of a significant customer or market share, or a current expectation that, more likely than not, a long-lived asset may be disposed of before the end of its previously estimated useful life.
In addition, a recall or withdrawal may cause us to lose future revenues from, or relationships with, one or more material customers, and the impact of the recall or withdrawal could affect our customers' willingness to continue to purchase related or unrelated products from us or could otherwise hinder our ability to grow our business with those customers.
In addition, a product recall or withdrawal may cause us to lose future revenues from, or relationships with, one or more material customers, and the impact of the recall or withdrawal could affect our customers' willingness to continue to purchase related or unrelated products from us or could otherwise hinder our ability to grow our business with those customers.
The future payment of dividends will be dependent on factors such as covenant restrictions, cash on hand, or achieving and maintaining profitability, the financial requirements to fund growth, our general financial condition, and other factors we may consider appropriate in the circumstances.
Any future payment of dividends will be dependent on factors such as covenant restrictions, cash on hand, or achieving and maintaining profitability, the financial requirements to fund growth, our general financial condition, and other factors we may consider appropriate in the circumstances.
Risks Related to Weather, Climate Change, and Other External Factors Adverse weather conditions and natural disasters could impose costs on our business Agricultural commodities and ingredients for our products are vulnerable to adverse weather conditions and natural disasters, including windstorms, hurricanes, earthquakes, floods, droughts, fires, and temperature and precipitation extremes, some of which are recurring but difficult to predict, as well as crop disease and infestation.
Risks Related to Weather, Climate Change, and Other External Factors Adverse weather conditions and natural disasters could impose costs on our business Ingredients for our products are vulnerable to adverse weather conditions and natural disasters, including windstorms, hurricanes, earthquakes, floods, droughts, fires, and temperature and precipitation extremes, some of which are recurring but difficult to predict, as well as crop disease and infestation.
Our debt instruments restrict, and our future debt instruments may restrict, our ability to pay dividends to our shareholders, and we do not currently intend to pay any cash dividends on our common shares in the foreseeable future; therefore, our shareholders may not be able to receive a return on their common shares until their shares are sold We have never paid or declared any cash dividends on our common shares.
Our debt instruments restrict, and our future debt instruments may restrict, our ability to pay dividends to our shareholders, and we do not currently intend to pay any cash dividends on our common shares in the foreseeable future; therefore, our shareholders may not be able to receive a return on their common shares until their shares are sold We have never paid or declared any cash dividends on our common shares, and we do not currently anticipate paying any cash dividends on our common shares in the foreseeable future.
In addition, prior to fiscal 2019, we recognized accumulated impairment losses of $213.8 million related to goodwill that arose from business acquisitions. We perform impairment tests of our long-lived assets annually, or at any time when events occur that could affect the value of these assets.
In addition, prior to fiscal 2019, we recognized accumulated impairment losses of $213.8 million related to goodwill that arose from business acquisitions. We perform impairment assessments for our long-lived assets annually, or at any time when events occur that could affect the value of these assets.
The lenders could condition any such waiver on an amendment to the credit agreement on terms, including, but not limited to, the payment of consent fees, that may be unfavorable to us.
The lenders could condition any such waiver on an amendment to the credit agreement on terms, including, but not limited to, the payment of consent fees, which may be unfavorable to us.
SUNOPTA INC. 10 December 31, 2022 Form 10-K We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw and packaging materials, labor, energy, fuel and distribution costs, which may impact our business, financial condition, and results of operations In recent years, we have experienced elevated commodity and supply chain costs, including the costs of raw materials, packaging, labor, energy, fuel, freight and other inputs necessary for the production and distribution of our products, and we expect elevated levels of inflation to continue in 2023.
SUNOPTA INC. 8 December 30, 2023 Form 10-K We may not be able to increase prices to fully offset inflationary pressures on costs, such as raw and packaging materials, labor, energy, fuel and distribution costs, which may impact our business, financial condition, and results of operations In recent years, we have experienced elevated commodity and supply chain costs, including the costs of raw materials, packaging, labor, energy, fuel, freight and other inputs necessary for the production and distribution of our products, and we expect elevated levels of inflation to continue in 2024.
Our business and results of operations have in the past been, and may continue to be, adversely affected by changes in global economic conditions including inflation, interest rates, consumer spending rates, energy availability and costs, the negative impacts caused by public health crises, such as the COVID-19 pandemic, as well as the potential impacts of geopolitical uncertainties, including the ongoing conflict between Russia and Ukraine, and the effect of governmental initiatives to manage economic conditions.
Our business and results of operations have in the past been, and may continue to be, adversely affected by changes in global economic conditions including inflation, interest rates, consumer spending rates, energy availability and costs, the negative impacts caused by public health crises, such as the COVID-19 pandemic, as well as the potential impacts of geopolitical events, and the effect of governmental initiatives to manage economic conditions.
If we do not manage our supply chain effectively, our operating results may be adversely affected Our supply chain is complex. We rely on third-party suppliers for our raw materials and packaging, as well as the distribution of our products.
If we do not manage our supply chain effectively, our operating results may be adversely affected Our supply chain is complex and critical to our ability to manufacture, move, and sell products. We rely on third-party suppliers for our raw materials and packaging, as well as the distribution of our products.
To the extent that these various SCF programs were terminated, our financial condition, cash flows, and liquidity could be adversely affected by higher working capital levels due to delays in collecting accounts receivables, or by the shortening of supplier payment terms.
To the extent that these various SCF programs were terminated, our financial condition, cash flows, and liquidity could be adversely affected by higher working capital levels due to delays in collecting accounts receivables.
The effects of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations. SUNOPTA INC. 15 December 31, 2022 Form 10-K Additionally, we might fail to effectively address increased attention from customers, consumers, investors, activists and other stakeholders on climate change and related environmental sustainability matters.
The effects of climate change and legal or regulatory initiatives to address climate change could have a long-term adverse impact on our business and results of operations. Additionally, we might fail to effectively address increased attention from customers, consumers, investors, activists and other stakeholders on climate change and related environmental sustainability matters.
SUNOPTA INC. 21 December 31, 2022 Form 10-K If securities or industry research analysts do not publish or cease publishing research or reports about our business or if they issue unfavorable commentary or downgrade our common shares, our share price and trading volume could decline The trading market for our common shares relies in part on the research and reports that securities and industry research analysts publish about us, our industry, our competitors and our business.
If securities or industry research analysts do not publish or cease publishing research or reports about our business or if they issue unfavorable commentary or downgrade our common shares, our share price and trading volume could decline The trading market for our common shares relies in part on the research and reports that securities and industry research analysts publish about us, our industry, our competitors and our business.
Many of these materials and costs are subject to price fluctuations from a number of factors, including, but not limited to, market conditions, the ongoing conflict between Russia and Ukraine, demand for raw materials, weather, growing and harvesting conditions, energy and fuel costs, currency fluctuations, and other factors beyond our control.
Many of these materials and costs are subject to price fluctuations from a number of factors, including, but not limited to, market conditions, geopolitical events, demand for raw materials, weather, growing and harvesting conditions, energy and fuel costs, currency fluctuations, and other factors beyond our control.
Risks Related to Significant Investors and Shareholder Activism Our significant investor may have interests that conflict with those of our debtholders and other stakeholders As at December 31, 2022, Oaktree Capital Management L.P., a private equity investor (together with its affiliates, "Oaktree") held an approximately 19% voting interest in the Company and has nominated two members of our Board of Directors.
SUNOPTA INC. 15 December 30, 2023 Form 10-K Risks Related to Significant Investors and Shareholder Activism Our significant investor may have interests that conflict with those of our debtholders and other stakeholders As at December 30, 2023, Oaktree Capital Management L.P., a private equity investor (together with its affiliates, "Oaktree") held an approximately 20% voting interest in the Company and has nominated two members of our Board of Directors.
Our customers generally are not obligated to continue purchasing products from us Many of our customers buy from us under short-term, binding purchase orders. As a result, these customers are not committed to maintain or increase their sales volumes or orders for the products supplied by us.
SUNOPTA INC. 9 December 30, 2023 Form 10-K Our customers generally are not obligated to continue purchasing products from us Many of our customers buy from us under short-term, binding purchase orders. As a result, these customers are not committed to maintain or increase their sales volumes or orders for the products supplied by us.
The future issuance of additional common shares in connection with the exchange of convertible preferred stock, vesting of equity-based awards, participation in our employee stock purchase plan and issuance of additional securities could dilute the value of our common shares We have unlimited common shares authorized but unissued.
SUNOPTA INC. 16 December 30, 2023 Form 10-K The future issuance of additional common shares in connection with the exchange of convertible preferred stock, vesting of equity-based awards, participation in our employee stock purchase plan and issuance of additional securities could dilute the value of our common shares We have unlimited common shares authorized but unissued.
General macroeconomic conditions and the COVID-19 pandemic have increased the challenges of managing our supply chain, and these factors could continue to cause unpredictable supply chain interruptions or other adverse effects on our supply chain.
General macroeconomic and conditions, geopolitical events and health crises have increased the challenges of managing our supply chain, and these factors could continue to cause unpredictable supply chain interruptions or other adverse effects on our supply chain.
SUNOPTA INC. 20 December 31, 2022 Form 10-K Our other large investors do not have specific rights beyond those of smaller holders of our common shares. However, a concentration of ownership within our large investors could potentially be disadvantageous to, or conflict with, interests of our debtholders or smaller shareholders.
Our other large investors do not have specific rights beyond those of smaller holders of our common shares. However, a concentration of ownership within our large investors could potentially be disadvantageous to, or conflict with, interests of our debtholders or smaller shareholders.
Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business, financial condition and results of operations Long-term climate change impacts on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters may negatively impact the price or availability of agricultural commodities and ingredients, as well as other raw materials and packaging (such as corrugated cardboard) that are necessary for our products.
SUNOPTA INC. 13 December 30, 2023 Form 10-K Climate change, or legal, regulatory or market measures to address climate change, may negatively affect our business, financial condition and results of operations Long-term climate change impacts on global temperatures, weather patterns, and the frequency and severity of extreme weather and natural disasters may negatively impact the price or availability of ingredients and packaging materials (such as corrugated cardboard) that are necessary for our products.
SUNOPTA INC. 11 December 31, 2022 Form 10-K An interruption at one or more of our manufacturing facilities could negatively affect our business, and our business continuity plan may prove inadequate We own or lease, manage and operate a number of manufacturing, processing, packaging, storage and office facilities.
An interruption at one or more of our manufacturing facilities could negatively affect our business, and our business continuity plan may prove inadequate We own or lease, manage and operate a number of manufacturing, processing, packaging, storage and office facilities.
We may not realize some or all of the anticipated benefits of our capital investment plans in the anticipated time frame or at all We are currently undergoing the largest capital expansion in our company's history, including the construction of our new plant-based beverage facility in Midlothian, Texas.
We may not realize some or all of the anticipated benefits of our capital investment plans in the anticipated time frame or at all We have recently completed the largest capital expansion in our company's history, which included the construction of our new plant-based beverage facility in Midlothian, Texas.
SUNOPTA INC. 13 December 31, 2022 Form 10-K We may require additional capital, which may not be available on favorable terms or at all Our working capital requirements, capital investment plans, and our ability to acquire complementary businesses or assets often require significant financial resources.
We may require additional capital, which may not be available on favorable terms or at all Our working capital requirements, capital investment plans, and our ability to acquire complementary businesses or assets often require significant financial resources.
Our ten largest customers accounted for approximately 74% of consolidated revenues for the year ended December 31, 2022. The loss, decrease or cancellation of business with any of our large customers could materially and adversely affect our business, financial condition, and results of operations.
For the year ended December 30, 2023, our ten largest customers accounted for approximately 80% of revenues from continuing operations. The loss, decrease or cancellation of business with any of our large customers could materially and adversely affect our business, financial condition, and results of operations.
Our level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations As at December 31, 2022, we have a significant amount of indebtedness outstanding as a result of the capital investments we have made in recent years.
SUNOPTA INC. 14 December 30, 2023 Form 10-K Our level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations As at December 30, 2023, we have a significant amount of indebtedness outstanding as a result of the capital investments we have made in recent years.
If we are unable to hire and retain employees capable of performing at a high-level, our ability to efficiently operate our manufacturing facilities and overall business could be adversely affected.
We compete with other companies both within and outside of our industry for talented employees. If we are unable to hire and retain employees capable of performing at a high-level, our ability to efficiently operate our manufacturing facilities and overall business could be adversely affected.
If we lose the services of our key executives or fail to identify, recruit, and retain key management personnel, our business, financial condition and results of operations may be materially and adversely impacted.
We do not typically carry key person life insurance on our executive officers. If we lose the services of our key executives or fail to identify, recruit, and retain key management personnel, our business, financial condition and results of operations may be materially and adversely impacted.
SUNOPTA INC. 12 December 31, 2022 Form 10-K Impairment charges related to long-lived assets or goodwill could adversely impact our financial condition and results of operations As at December 31, 2022, we had $321.4 million of property, plant and equipment, $135.6 million of intangible assets, and $82.6 million of operating lease right-of-use assets, as well as $4.0 million of goodwill.
Impairment charges related to long-lived assets or goodwill could adversely impact our financial condition and results of operations As at December 30, 2023, we had $319.9 million of property, plant and equipment, $105.9 million of operating lease right-of-use assets, and $21.9 million of intangible assets, as well as $4.0 million of goodwill.
Information technology systems are also integral to our internal and external financial reporting. Furthermore, a significant portion of the communications between, and storage of personal data of, our personnel, customers, consumers, and suppliers, depends on information technology.
Furthermore, a significant portion of the communications between, and storage of personal data of, our personnel, customers and suppliers depends on information technology.
Examples of such factors include evolving regulatory requirements affecting sustainability standards or disclosures, the development of new environmental technologies to address climate change, and the availability of financing to support climate-related projects.
Our ability to achieve any stated goal or commitment is subject to numerous factors and conditions, many of which are outside of our control. Examples of such factors include evolving regulatory requirements affecting sustainability standards or disclosures, the development of new environmental technologies to address climate change, and the availability of financing to support climate-related projects.
If we lose the services of our key executives, our business could suffer Our prospects depend to a significant extent on the continued service of our key executives, and our continued growth depends on our ability to identify, recruit, and retain key management personnel. We do not typically carry key person life insurance on our executive officers.
SUNOPTA INC. 11 December 30, 2023 Form 10-K If we lose the services of our key executives, our business could suffer Our prospects depend to a significant extent on the continued service of our key executives, and our continued growth depends on our ability to identify, recruit, and retain key management personnel.
Such changes could increase the costs of doing business for the Company, our customers, or suppliers, or restrict our actions, causing our results of operations to be adversely affected. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the law are issued or applied.
Changes in these laws or regulations, or the introduction of new laws or regulations, could increase the costs of doing business for the Company, our customers, or suppliers, or restrict our actions, causing our results of operations to be adversely affected.
Risks Related to Our Indebtedness and Liquidity Increases in interest rates or changes in our credit ratings may negatively impact our cost of borrowing and access to capital financing To address inflation, the U.S.
Risks Related to Our Indebtedness and Liquidity Increases in interest rates may negatively impact our cost of borrowing and access to capital financing To address inflation, the U.S. Federal Reserve implemented tighter monetary policies beginning in 2022, causing interest rates to rise significantly, which negatively impacted the cost of borrowing on our variable rate debt beginning in 2022.
A product liability judgment against us or a future product recall could have a material and adverse effect on our business, financial condition, and results of operations.
Consequently, any failure or breach of our information technology systems could have a material adverse effect on our business, financial condition and results of operations.
Additionally, increased competition from other industries for migrant workers could increase our costs and adversely affect our business, financial condition, and results of operations. If we face labor shortages or increased labor costs, our business, financial condition, and results of operations could be adversely affected Labor is a primary component of operating our business.
If we face labor shortages or increased labor costs, our business, financial condition, and results of operations could be adversely affected Labor is a primary component of operating our business. Our ability to achieve our operating goals depends on our ability to identify, hire, train, and retain qualified employees.
SUNOPTA INC. 14 December 31, 2022 Form 10-K Our business could be materially and adversely affected if we are unable to meet the financial covenants of our credit agreement Our credit agreement requires us to maintain a minimum fixed charge coverage ratio if excess availability is below certain thresholds and a maximum senior funded leverage ratio covenant with respect to the delayed draw term loan facility.
Our business could be materially and adversely affected if we are unable to meet the financial covenants of our credit agreement Our credit agreement requires us to maintain a minimum fixed charge coverage ratio and a maximum consolidated total net leverage ratio.
Unfavorable growing and harvesting conditions could reduce both crop size and crop quality. In extreme cases, entire harvests may be lost in some geographic areas. Adverse weather conditions or natural disasters may adversely affect our supply of raw materials or prevent or impair our ability to ship products as planned.
Adverse weather conditions or natural disasters may adversely affect our supply of raw materials or prevent or impair our ability to ship products as planned.
Risks Related to Regulations and Litigation Product liability suits, recalls and threatened market withdrawals, could have a material adverse effect on our business Many of our products are susceptible to harmful bacteria, and the sale of food products for human consumption involves the risk of injury or illness to consumers.
Risks Related to Litigation and Government Regulations Product recalls and withdrawals and product liability claims could have a material adverse effect on our business We sell products for human consumption, which involves risks such as product contamination or spoilage, misbranding, product tampering, and other adulteration of food products.
Decreases in our customers' sales volumes or orders for products supplied by us may have a material adverse effect on our business, financial condition and results of operations. Loss of a key customer could materially reduce revenues and earnings Our relationships with our key customers are critical to the success of our business and our results of operations.
Decreases in our customers' sales volumes or orders for products supplied by us may have a material adverse effect on our business, financial condition and results of operations. In addition, some customer buying decisions are based on a periodic bidding process. Our sales volume may decrease if our offer is too high and rejected.
To improve working capital efficiency, we utilize SCF programs offered by some of our major customers that allow us to monetize our receivables from those customers earlier than our payment terms would provide. We also offer our own SCF program, through a participating financial institution, to selected suppliers in order to extend payment terms with those suppliers.
Our ability to maintain current levels of working capital may be adversely affected if we are unable to utilize supply chain financing ("SCF") programs to accelerate payment terms for certain customers To improve working capital efficiency, we utilize SCF programs offered by some of our major customers that allow us to monetize our receivables from those customers earlier than our payment terms would provide.
Our operations are subject to the general risks associated with acquisitions and divestitures We have made several business and asset acquisitions and divestitures in recent years that align with our strategic priority of optimizing our non-core businesses and focusing on high-growth, high-return opportunities. We regularly review strategic opportunities to grow through acquisitions and to divest non-core businesses and/or underperforming assets.
SUNOPTA INC. 10 December 30, 2023 Form 10-K Our operations are subject to the general risks associated with acquisitions and divestitures We regularly review strategic opportunities to grow our business through acquisitions of complementary businesses or assets.
For the year ended December 31, 2022, we incurred a pre-tax loss on the sale of our sunflower business of $23.2 million, of which a significant portion was comprised of the carrying value of the long-lived assets of the business.
Within discontinued operations, we incurred a pre-tax loss on the sale of Frozen Fruit of $119.8 million, of which a significant portion was comprised of the carrying value of the long-lived assets of the business. Future impairments of long-lived assets and/or goodwill could materially and adversely impact our business, financial condition, and results of operations.
If our remedial measures are insufficient to address the material weakness, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results. Even after the identified material weakness has been remediated, investors may lose confidence in our reported financial information and the market price of our common shares may decline.
The identified material weakness and associated remediation efforts are further described in Part II, Item 9A of this Form 10-K. Even after any identified material weaknesses have been remediated, investors may lose confidence in our reported financial information and the market price of our common shares may decline.
Revisions in these and other comparable programs, in the U.S. and elsewhere, could have a material and adverse effect on our business, financial condition, and results of our operations.
A change in the aggregate purchase price could have a material impact on our consolidated results of operations, financial condition and cash flows.
Changes in laws or regulations governing foreign trade or taxation could adversely affect our business Changes in governmental laws or regulations affecting foreign trade or taxation, or the introduction of new laws or regulations, may have a direct or indirect effect on our business or those of our customers or suppliers.
Governmental regulations also affect taxes and levies, healthcare costs, energy usage, and labor issues, all of which may have a direct or indirect effect on our business or those of our customers or suppliers.
Even if not merited, class claims, actions by the FTC or state attorneys general enforcement actions could be expensive to defend and could adversely affect our reputation with existing and potential customers and consumers, as well as our corporate and brand image, which could have a material and adverse effect on our business, financial condition, and results of operations.
Even if product liability claims against us are not successful or fully pursued, these claims could be costly and time consuming to defend against, and the negative publicity surrounding any such claims could adversely affect our reputation. Any of these events could have a material and adverse effect on our business, results of operations, financial condition and cash flows.
In addition, approximately 10 percent of our strawberry supply is sourced from California, which has experienced severe drought conditions and significant wildfires from time to time, resulting in lost and damaged crops. Severe weather conditions may occur with higher frequency or may be less predictable in the future due to the effects of climate change.
Severe weather conditions may occur with higher frequency or may be less predictable in the future due to the effects of climate change. Unfavorable growing and harvesting conditions could reduce both crop size and crop quality. In extreme cases, entire harvests may be lost in some geographic areas.
Removed
A pandemic, including COVID-19, could have an adverse impact on our business, financial condition, and results of operations The severity, magnitude and duration of the current COVID-19 pandemic continues to be uncertain and rapidly changing as a result of new variants and vaccines.
Added
Alternatively, we risk reducing our margins if our offer is successful but less than our desired price point. Either of these outcomes may adversely affect our results of operations. Loss of a key customer could materially reduce revenues and earnings Our relationships with our key customers are critical to the success of our business and our results of operations.
Removed
The COVID-19 pandemic has caused, and could continue to cause, increased economic uncertainty, including impacts from inflation, interest rates, consumer spending rates, and energy availability and costs.
Added
Additionally, we have made several significant divestitures in recent years that aligned with our strategic priority of optimizing our non-core, commodity-based businesses and focusing on value-add opportunities.
Removed
The ongoing implications of the COVID-19 pandemic could adversely impact our business in a number of ways, including but not limited to, significant volatility in customer demand for our products, changes in consumer behavior and preferences, increases in raw material and energy costs, disruptions in our supply chain and manufacturing operations, disruptions to our business expansion plans, limitations on our employees' ability to work and travel due to illness or government restrictions, significant changes in the economic conditions in markets in which we operate, currency and commodity volatility, and pressure on our liquidity.
Added
In October 2023, we completed the sale of certain assets and liabilities of Frozen Fruit to Natures Touch Mexico, S. de R.L. de C.V. and Nature's Touch Frozen Fruits, LLC (the "Purchasers") for an estimated aggregate purchase price of approximately $141 million.
Removed
The impact from the COVID-19 pandemic depends on future developments that are beyond our control, such as the emergence and spread of variants, infection rates in areas we operate, the extent and effectiveness of containment actions, including the continued availability and effectiveness of vaccines.
Added
The estimated aggregate purchase price is subject to post-closing adjustments based on a determination of the final net working capital as of the closing date of the transaction on October 12, 2023.
Removed
If we are unable to anticipate or respond to all implications of the COVID-19 pandemic, i ncluding any of the above factors and others that are currently unknown, it could have a material adverse effect on our business, financial condition and results of operations .
Added
Our estimate of the final net working capital allocation, which is recognized as part of the loss from discontinued operations in the consolidated statement of operations for the year ended December 30, 2023, may be subject to change, which could be material, as the parties are currently in the process of reconciling the final aggregate purchase price, including the resolution of certain disputed items, in accordance with the procedures set forth in the Asset Purchase Agreement.
Removed
Furthermore, the items above and other impacts of the COVID-19 pandemic could have the effect of heightening many of the other risks described in this "Risk Factors" section of our Form 10-K, including but not limited to risks of deteriorating global economic conditions, inflationary pressure on costs, and labor shortages.
Added
In addition, a portion of the aggregate purchase price was in the form of secured seller promissory notes due in three years and with a stated principal amount of $20.0 million in the aggregate (the "Seller Promissory Notes") that the Company entered into with the Purchasers and Nature's Touch Frozen Foods, LLC (collectively the "Loan Parties").
Removed
Part of our supply chain depends in part on a seasonal, temporary workforce comprised primarily of migrant workers.
Added
The Seller Promissory Notes are secured by a second-priority lien on certain assets of Frozen Fruit acquired by the Purchasers. While we assessed the Seller Promissory Notes to be collectible as at December 30, 2023, a deterioration in the liquidity of the Loan Parties could impact the collectability of the Seller Promissory Notes.
Removed
Changes in immigration laws or policies that discourage migration to the U.S. and political or other events (such as war, terrorism, or health crises) that make it more difficult for individuals to immigrate to or migrate throughout the U.S. could adversely affect the migrant worker population and reduce the workforce available for farms and production facilities in the U.S.
Added
For the year ended December 30, 2023, on a continuing operations basis, we did not recognize any impairment charges related to our long-lived assets or goodwill.
Removed
Our ability to achieve our operating goals depends on our ability to identify, hire, train, and retain qualified employees. We compete with other companies both within and outside of our industry for talented employees.
Added
Failure of our internal control over financial reporting could harm our business and financial results Our management is responsible for establishing and maintaining effective internal control over financial reporting. Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting for external purposes in accordance with United States generally accepted accounting principles.
Removed
In addition, we store chemicals used in the equipment for quick freezing of fruit or used for cooling processes during ingredient processing, and our storage of these chemicals could lead to risk of leaks, explosions, or other events.
Added
Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that we would prevent or detect a misstatement of our financial statements or fraud.
Removed
In addition, we may explore the disposal of other assets or businesses in the future, which could result in material disposal and impairment charges in future periods, which could adversely impact our business, financial condition, and results of operations.
Added
Any failure to maintain an effective system of internal control over financial reporting could limit our ability to report our financial results accurately and in a timely manner, or to detect and prevent fraud.
Removed
We may also engage in additional acquisitions in the future, which could result in the recognition of additional long-lived assets and goodwill.
Added
A significant financial reporting failure or material weakness in internal control over financial reporting could cause a loss of investor confidence and/or a decline in the market price of our stock.
Removed
If the financial performance of the acquired businesses or assets does not meet our expectations, we could be required to record subsequent impairments to the acquired long-lived assets and/or goodwill, which could materially and adversely impact our business, financial condition, and results of operations.
Added
Consumption of a contaminated, spoiled, tampered, or adulterated product may result in personal illness or injury. Under certain circumstances, we may be required to recall or withdraw products, which may be costly and time consuming, and may require the diversion of management's time and resources from business operations.
Removed
Federal Reserve implemented tighter monetary policies in 2022, causing interest rates to rise significantly, which negatively impacted the cost of borrowing on our variable rate debt in 2022, as well as the implicit rate of interest for finance leases that commenced in 2022.
Added
The costs of a recall or withdrawal may include product destruction costs, temporary plant closings, and compliance or remediation costs.
Removed
As at December 31, 2022, we had total outstanding variable rate debt of approximately $184 million, at a weighted-average interest rate of 6.89% (January 1, 2022 - 2.34%). In addition, as at December 31, 2022, we had approximately $45 million of open finance lease commitments related to planned capital expansion projects.
Added
Further, we could be subject to claims or lawsuits relating to an actual or alleged illness or injury, and we could incur liabilities that are not insured or that exceed our insurance coverage.
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Item 2. Properties
Properties — owned and leased real estate
2 edited+1 added−0 removed0 unchanged
Item 2. Properties
Properties — owned and leased real estate
2 edited+1 added−0 removed0 unchanged
2023 filing
2024 filing
Biggest changeDavid's, Ontario Fruit snack processing Leased December 2026 (3) Edwardsville, Kansas Frozen fruit processing Owned Oxnard, California Frozen fruit processing Leased December 2029 Jacona, Mexico Frozen fruit processing Owned Corporate Services Eden Prairie, Minnesota Executive office, innovation center, and pilot plant Leased December 2033 (1) (1) Lease includes two five-year renewal options. (2) Lease includes three five-year renewal options.
Biggest changeDavid's, Ontario Fruit snack processing Leased December 2026 (4) (1) Lease includes two five-year renewal options. (2) Lease includes three five-year renewal options. (3) Lease includes one remaining five-year renewal option. (4) Lease includes a three-year renewal option.
Properties The following table lists the location, description, ownership and operating segment of our production facilities and corporate headquarters: Location Facility Description Owned/Leased Noncancellable Lease Term End Date Plant-Based Foods and Beverages Alexandria, Minnesota Aseptic beverage processing Owned Alexandria, Minnesota Ingredient processing Owned Allentown, Pennsylvania Aseptic beverage processing Leased April 2027 (1) Midlothian, Texas Aseptic beverage processing Leased September 2037 (2) Modesto, California Aseptic beverage and ingredient processing Leased May 2024 (1) Fruit-Based Foods and Beverages Omak, Washington Fruit snack processing Leased May 2027 St.
Location Facility Description Owned/Leased Noncancellable Lease Term End Date Alexandria, Minnesota Aseptic beverage processing Owned Alexandria, Minnesota Ingredient processing Owned Allentown, Pennsylvania Aseptic beverage processing Leased April 2027 (1) Midlothian, Texas Aseptic beverage processing Leased September 2037 (2) Modesto, California Aseptic beverage and ingredient processing Leased May 2029 (3) Omak, Washington Fruit snack processing Leased May 2027 St.
Added
Item 2. Properties Our leased executive offices, innovation center and pilot plant are located in Eden Prairie, Minnesota. The table below lists the location, description and ownership our production facilities. We believe our owned and leased facilities are suitable for our operations and provide sufficient capacity to meet our requirements for the foreseeable future.
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+0 added−3 removed2 unchanged
Item 5. Market for Registrant's Common Equity
Market for Common Equity — stock, dividends, buybacks
3 edited+0 added−3 removed2 unchanged
2023 filing
2024 filing
Biggest changeThe following graph compares the five-year cumulative shareholder return on our common shares to the cumulative total return of the S&P/TSX Composite and the NASDAQ Industrial Indices for the period which commenced December 31, 2017. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 SunOpta Inc. 100.00 49.55 32.13 150.58 89.68 108.90 Nasdaq Industrial Index 100.00 97.17 124.15 188.55 205.17 133.25 S&P/TSX Composite Index 100.00 87.74 105.92 107.55 130.93 119.59 Assumes that $100.00 was invested in our common shares and in each index on December 31, 2017.
Biggest changeThe following graph compares the five-year cumulative shareholder return on our common shares to the cumulative total return of the S&P/TSX Composite and the NASDAQ Industrial Indices for the period which commenced December 31, 2018. 12/31/2018 12/31/2019 12/30/2020 12/31/2021 12/31/2022 12/31/2023 SunOpta Inc. 100.00 64.84 303.91 180.99 219.79 142.45 Nasdaq Industrial Index 100.00 127.77 194.05 211.15 137.14 176.82 S&P/TSX Composite Index 100.00 120.72 122.58 149.23 136.30 147.37 Assumes that $100.00 was invested in our common shares and in each index on December 31, 2018.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares are listed in U.S. dollars on The Nasdaq Stock Market LLC under the symbol "STKL," and in Canadian dollars on the Toronto Stock Exchange ("TSX") under the symbol "SOY." As at December 31, 2022, we had approximately 334 shareholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares are listed in U.S. dollars on The Nasdaq Stock Market LLC under the symbol "STKL," and in Canadian dollars on the Toronto Stock Exchange ("TSX") under the symbol "SOY." As at December 30, 2023, we had approximately 332 shareholders of record.
SUNOPTA INC. 24 December 31, 2022 Form 10-K Shareholder Return Performance Graph This performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing of SunOpta under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Shareholder Return Performance Graph This performance graph shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing of SunOpta under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Removed
Equity Compensation Plan Information The following table provides information as at December 31, 2022, with respect to our common shares that may be issued under the Company's stock incentive and employee share purchase plans: Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (a) (b) (c) Equity compensation plans approved by securities holders: 2013 Stock Incentive Plan 5,578,133 (1) $6.58 (3) 114,398 Employee Stock Purchase Plan - 546,232 Equity compensation plans not approved by securities holders: CEO and CFO Plan 1,952,420 (2) $3.15 (3) - Total 7,530,553 $5.51 (3) 660,630 (1) Represents common shares of the Company issuable in respect of 2,698,357 stock options, 640,256 restricted stock units ("RSUs") and 2,239,520 performance share units ("PSUs") granted to selected employees and directors of the Company.
Removed
(2) Represents common shares of the Company issuable in respect of 1,222,243 stock options, 19,393 RSUs and 710,784 PSUs granted to the Chief Executive Officer and Chief Financial Officer of the Company (3) Vested RSUs and PSUs entitle the holder to receive one common share per unit without payment of additional consideration.
Removed
Accordingly, these units are disregarded for purposes of computing the weighted-average exercise price.
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
102 edited+79 added−153 removed26 unchanged
Item 7. Management's Discussion & Analysis
Management's Discussion & Analysis (MD&A) — revenue / margin commentary
102 edited+79 added−153 removed26 unchanged
2023 filing
2024 filing
Biggest changeThe table below explains the increase in gross profit: Plant-Based Foods and Beverages Gross Profit Changes Gross profit for the year ended January 1, 2022 $75,971 Higher volumes and pricing for plant-based beverages and ingredients, including the incremental contribution in the first quarter of 2022 from the acquisition of the Dream and West Life brands in April 2021, partially offset by higher manufacturing plant spend due to inflationary pressures on wage costs and utility rates, together with higher inventory reserves, and incremental depreciation of new production equipment for capital expansion projects 14,818 Increase in start-up costs related to our new plant in Midlothian, Texas, and other expansion projects within our plant-based operations, together with the integration of the Dream and West Life brands (5,259) Lower sunflower volumes in the first three quarters of 2022, partially offset by increased pricing spreads (367) Gross profit for the year ended December 31, 2022 $85,163 Operating income in Plant-Based Foods and Beverages increased by $1.9 million to $38.5 million for the year ended December 31, 2022, compared to $36.6 million for the year ended January 1, 2022.
Biggest changeRollforward of Revenue, Gross Profit and Operating Income For the year ended December 31, 2022 January 1, 2022 Change % Change Revenues $ 591,395 $ 496,455 $ 94,940 19.1% Gross profit 99,730 81,144 18,586 22.9% Gross margin 16.9% 16.3% 0.6% Operating income $ 17,933 $ 8,241 $ 9,692 117.6% Operating margin 3.0% 1.7% 1.3% SUNOPTA INC. 35 December 30, 2023 Form 10-K Revenues The table below explains the $94.9 million increase in revenues from $496.5 million for the year ended January 1, 2022 to $591.4 million for the year ended December 31, 2022: Revenues for the year ended January 1, 2022 $496,455 Benefit of pricing actions taken to offset input cost inflation, together with sales volume growth for oat-based product offerings, almond beverages, and teas, partially offset by lower broth demand 88,417 Higher sales volumes and pricing for fruit snacks and incremental revenue from the introduction of smoothie bowls 28,841 Incremental revenue in the first quarter of 2022 related to the acquisition of the Dream and West Life brands in April 2021 3,735 Impact of the rationalization of fruit-based ingredients in 2021 (26,053) Revenues for the year ended December 31, 2022 $591,395 Gross Profit The table below explains the $18.6 million increase in gross profit from $81.1 million for the year ended January 1, 2022 to $99.7 million for the year ended December 31, 2022: Gross profit for the year ended January 1, 2022 $81,144 Higher volumes and pricing for plant-based beverages and ingredients, including the incremental contribution in the first quarter of 2022 from the acquisition of the Dream and West Life brands in April 2021, partially offset by higher manufacturing plant spend due to inflationary pressures on wage costs and utility rates, together with higher inventory reserves, and incremental depreciation of new production equipment for capital expansion projects 14,818 Impact of the rationalization of fruit-based ingredients in 2021, including the closure of our fruit ingredient processing facility 4,407 Higher sales volumes and pricing for fruit snacks, together with increased production volumes and plant efficiencies in our fruit snack operations 4,394 Increase in start-up costs related to our new plant in Midlothian, Texas, together with the integration of the Dream and West Life brands (5,033) Gross profit for the year ended December 31, 2022 $99,730 SUNOPTA INC. 36 December 30, 2023 Form 10-K Operating Income The table below explains the $9.7 million increase in operating income from $8.2 million for the year ended January 1, 2022 to $17.9 million for the year ended December 31, 2022: Operating income for the year ended January 1, 2022 $8,241 Increase in gross profit, as explained above 18,586 Decrease in facility closure and employee severance costs related to the exit from our former fruit ingredients processing facility in 2021 5,094 Higher employee compensation costs, including incremental 2022 incentive plan accruals based on improved performance, together with costs related to our inaugural 2022 Investor Day, partially offset by lower business development costs (9,258) Higher variable stock-based compensation expense based on improved performance (4,730) Operating income for the year ended December 31, 2022 $17,933 Liquidity and Capital Resources Utilizing the net cash proceeds from the divestiture of Frozen Fruit, we were able to reduce our debt by approximately $78 million in the fourth quarter of 2023.
GAAP and non-GAAP measures, such as revenues, gross profit, segment operating income (loss), net earnings (loss), and adjusted earnings (loss) to measure our operating performance. Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP and should not be considered as an alternative to our results of operations or cash flows from operations determined in accordance with U.S.
GAAP and non-GAAP measures, such as revenues, gross profit, operating income, net earnings/loss, and adjusted earnings/loss to measure our operating performance. Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP and should not be considered as an alternative to our results of operations or cash flows from operations determined in accordance with U.S.
For 2021, these costs were mainly related to the integration of the Dream and West Life brands and project development activities related to our new plant in Midlothian, Texas, which were recorded in cost of goods sold ($0.6 million) and SG&A expenses ($4.9 million), together with professional fees incurred in connection with post-closing matters related to the 2020 divestiture of our global ingredients business, Tradin Organic, which were recorded in other expense ($0.7 million).
For 2021, these costs are mainly related to the integration of the Dream and West Life brands and project development activities related to our new plant in Midlothian, Texas, which are recorded in cost of goods sold ($0.6 million) and SG&A expenses ($4.9 million), together with professional fees incurred in connection with post-closing matters related to the 2020 divestiture of our global ingredients business, Tradin Organic, which are recorded in other expense ($0.7 million).
Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved. Recent Accounting Pronouncements Information regarding recent accounting pronouncements is provided in note 1 of the consolidated financial statements at Item 15 of this Form 10-K.
Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved. Recent Accounting Pronouncements Information regarding recent accounting pronouncements is provided in note 1 of the consolidated financial statements included in Item 15 of this Form 10-K.
GAAP, and our calculation of adjusted EBITDA may not be comparable to the calculation of a similarly titled measure reported by other companies. (5) In order to evaluate our results of operations, we use certain non-GAAP measures that we believe enhance an investor's ability to derive meaningful period-over-period comparisons and trends from our results of operations.
GAAP, and our calculation of adjusted EBITDA may not be comparable to the calculation of a similarly titled measure reported by other companies. (4) In order to evaluate our results of operations, we use certain non-GAAP measures that we believe enhance an investor's ability to derive meaningful period-over-period comparisons and trends from our results of operations.
(e) Represents incremental direct costs incurred in connection with plant expansion projects and new product introductions before the project or product reaches normal production levels, including costs for the hiring and training of additional personnel, fees for outside services, travel costs, and plant- and production-related expenses.
(a) Represents incremental direct costs incurred in connection with plant expansion projects and new product introductions before the project or product reaches normal production levels, including costs for the hiring and training of additional personnel, fees for outside services, travel costs, and plant- and production-related expenses.
GAAP financial measure (refer to footnote (2) to the "Consolidated Results of Operations for Fiscal Years 2022 and 2021" table regarding the use of this non-GAAP measure).
GAAP financial measure (refer to footnote (2) to the "Consolidated Results of Operations for Fiscal Years 2023 and 2022" table regarding the use of this non-GAAP measure).
GAAP financial measure (refer to footnote (3) to the "Consolidated Results of Operations for Fiscal Years 2022 and 2021" table regarding the use of this non-GAAP measure).
GAAP financial measure (refer to footnote (3) to the "Consolidated Results of Operations for Fiscal Years 2023 and 2022" table regarding the use of this non-GAAP measure).
Note 16 of the consolidated financial statements at Item 15 of this Form 10-K provides an analysis of the changes in the valuation allowance and the components of our deferred tax assets. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could differ from our accrued position.
Note 14 of the consolidated financial statements included in Item 15 of this Form 10-K provides an analysis of the changes in the valuation allowance and the components of our deferred tax assets. While we believe we have adequately provided for all tax positions, amounts asserted by taxing authorities could differ from our accrued position.
In response, we use this measure of adjusted gross margin to evaluate the underlying profitability of our revenue-generating activities within each fiscal period. We believe that disclosing this non-GAAP measure provides investors with a meaningful, consistent comparison of our profitability measure for the periods presented.
We use the measure of adjusted gross margin to evaluate the underlying profitability of our revenue-generating activities within each reporting period. We believe that disclosing this non-GAAP measure provides investors with a meaningful, consistent comparison of our profitability measure for the periods presented.
Some of these limitations are: adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; adjusted EBITDA does not include the payment/recovery of taxes, which is a necessary element of our operations; although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and adjusted EBITDA does not include non-cash stock-based compensation, which is an important component of our total compensation program for employees and directors.
Some of these limitations are: adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest payments on our indebtedness; adjusted EBITDA does not include the payment or recovery of income taxes, which is a necessary element of our operations; SUNOPTA INC. 26 December 30, 2023 Form 10-K although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and adjusted EBITDA does not reflect any cash requirements for such replacements; and adjusted EBITDA does not include non-cash stock-based compensation, which is an important component of our total compensation program for employees and directors.
For 2021, these costs mainly related to expansion projects within our plant-based beverage operations, as well as the introduction of fruit smoothie bowls, which were recorded in cost of goods sold.
For 2021, start-up costs mainly related to expansion projects within our plant-based beverage operations, as well as the introduction of fruit smoothie bowls, which are recorded in cost of goods sold.
We believe that our operating cash flows, including the selective use of SCF programs to improve payment terms, together with our revolving and term loan credit facilities, and access to lease financing, will be adequate to meet our operating, investing, and financing needs for the foreseeable future, including the 12-month period following the issuance of our financial statements.
We believe that our operating cash flows, including the selective use of customer SCF programs to improve collection terms, together with our New Credit Facilities and access to committed lease financing, will be adequate to meet our operating, investing, and financing needs for the foreseeable future, including the 12-month period following the issuance of our financial statements.
SUNOPTA INC. 31 December 31, 2022 Form 10-K (4) We use a measure of adjusted EBITDA when assessing the performance of our operations, which we believe is useful to investors' understanding of our operating profitability because it excludes non-operating expenses, such as interest and income taxes, and non-cash expenses, such as depreciation, amortization, and stock-based compensation, as well as other unusual items that affect the comparability of operating performance.
(3) We use a measure of adjusted EBITDA when assessing the performance of our operations, which we believe is useful to investors' understanding of our operating profitability because it excludes non-operating expenses, such as interest and income taxes, and non-cash expenses, such as depreciation, amortization, and stock-based compensation, as well as other unusual items that affect the comparability of operating performance.
Our effective tax rate differs from the statutory tax rate and will vary from year to year primarily as a result of numerous permanent differences, investment and other tax credits, the provision for income taxes at different rates in foreign and other provincial jurisdictions, enacted statutory tax rate increases or reductions in the year, changes due to foreign exchange, changes in valuation allowance based on our recoverability assessments of deferred tax assets, and favorable or unfavorable resolution of various tax examinations.
Income Taxes Our effective tax rate may differ from the statutory tax rates in the jurisdiction in which we operate and may vary from year to year as a result of permanent differences, investment and other tax credits, the provision for income taxes at different rates in foreign jurisdictions, enacted statutory tax rate increases or reductions in the year, changes due to foreign exchange, changes in valuation allowance based on our recoverability assessments of deferred tax assets, and favorable or unfavorable resolution of various tax examinations.
Impairment exists when the carrying amount of a long-lived asset is not recoverable through undiscounted future cash flows and its carrying value exceeds its estimated fair value. A discounted cash flow analysis is typically used to determine fair value using estimates and assumptions that market participants would apply.
SUNOPTA INC. 39 December 30, 2023 Form 10-K Impairment exists when the carrying amount of a long-lived asset is not recoverable through undiscounted future cash flows and its carrying value exceeds its estimated fair value. A discounted cash flow analysis is typically used to determine fair value using estimates and assumptions that market participants would apply.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Financial Information This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") section provides analysis of our operations and financial position for the fiscal year ended December 31, 2022 and includes information available to March 1, 2023, unless otherwise indicated herein.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Financial Information This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") section provides analysis of our operations and financial position for the fiscal year ended December 30, 2023 and includes information available to February 28, 2024, unless otherwise indicated herein.
(e) Represents third-party costs associated with business development activities, including costs related to the evaluation, execution, and integration of external acquisitions and divestitures, internal expansion projects, and other strategic initiatives.
(f) Represents third-party costs associated with business development activities, which are inclusive of costs related to the evaluation, execution, and integration of external acquisitions and divestitures, internal expansion projects, and other strategic initiatives.
We also use this measure to assess operating performance in connection with our employee incentive programs. We define adjusted EBITDA as segment operating income plus depreciation, amortization, and stock-based compensation, and excluding other unusual items as identified in the determination of adjusted earnings (refer above to footnote (3)).
We also use this measure to assess operating performance in connection with our employee incentive programs. We define adjusted EBITDA as net earnings (loss) before interest, income taxes, depreciation, amortization, and stock-based compensation, and excluding other unusual items as identified in the determination of adjusted earnings (loss) (refer above to footnote (2)).
These items are identified above under footnote (3), and in the discussion of our results of operations below. These non-GAAP measures are presented solely to allow investors to more fully assess our results of operations and should not be considered in isolation of, or as substitutes for an analysis of our results as reported under U.S. GAAP.
These non-GAAP measures are presented solely to allow investors to more fully assess our results of operations and should not be considered in isolation of, or as substitutes for an analysis of our results as reported under U.S. GAAP.
SUNOPTA INC. 32 December 31, 2022 Form 10-K Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by not viewing adjusted EBITDA in isolation, and specifically by using other U.S.
Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. Management compensates for these limitations by not viewing adjusted EBITDA in isolation, and specifically by using other U.S.
SUNOPTA INC. 49 December 31, 2022 Form 10-K Long-Lived Assets We evaluate long-lived assets, comprising property, plant and equipment, intangible assets and operating lease right-of-use assets, for impairment if events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable.
Long-Lived Assets We evaluate long-lived assets, comprising property, plant and equipment, intangible assets and operating lease right-of-use assets, for impairment if events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable.
Outstanding preferred stock since February 2021 consists entirely of our Series B-1 preferred stock. SUNOPTA INC. 34 December 31, 2022 Form 10-K For the year ended December 31, 2022, adjusted earnings were $9.0 million, or $0.08 earnings per diluted share, compared with adjusted earnings of $4.5 million, or $0.04 earnings per diluted share for the year ended January 1, 2022.
Outstanding preferred stock since February 2021 consists entirely of our Series B-1 preferred stock. On a consolidated basis, adjusted earnings for the year ended December 31, 2022 were $9.0 million, or $0.08 earnings per diluted share, compared with adjusted earnings of $4.5 million, or $0.04 earnings per diluted share, for the year ended January 1, 2022.
See footnotes (2) and (3) to the table above for a reconciliation of adjusted earnings (loss) and adjusted EBITDA from loss from continuing operations, which we consider to be the most directly comparable U.S. GAAP financial measure.
See footnotes (2) and (3) to the "Consolidated Results of Operations for Fiscal Years 2022 and 2021" table for a reconciliation of adjusted earnings (loss) and adjusted EBITDA from net earnings (loss), which we consider to be the most directly comparable U.S. GAAP financial measure.
(c) For 2022, start-up costs mainly related to our new plant-based beverage facility in Midlothian, Texas, and the integration of the Dream and West Life brands, which were recorded in cost of goods sold ($5.7 million) and SG&A expenses ($0.3 million).
For 2022, start-up costs mainly related to the hiring and training of new employees for the Midlothian facility, and the integration of the Dream and West Life brands, which are recorded in cost of goods sold ($5.7 million) and SG&A expenses ($0.3 million).
Diluted loss per share from continuing operations attributable to common shareholders (after dividends and accretion on preferred stock) was $0.12 for the year ended December 31, 2022, compared with a diluted loss per share $0.05 for the year ended January 1, 2022.
Diluted loss per share from continuing operations attributable to common shareholders (after dividends and accretion on preferred stock) was $0.21 for the year ended December 30, 2023, compared with a diluted earnings per share of $0.01 for the year ended December 31, 2022.
Contingencies We make estimates for payments that are contingent on the outcome of uncertain future events. These contingencies include accrued but unpaid bonuses, tax-related matters, and claims or litigation. In establishing our estimates, we consider historical experience with similar contingencies and the progress of each contingency, as well as the recommendations of internal and external advisors and legal counsel.
These contingencies include accrued but unpaid bonuses, tax-related matters, product recall-related claims and recoveries, and other claims or litigation. In establishing our estimates, we consider historical experience with similar contingencies and the progress of each contingency, as well as the recommendations of internal and external advisors and legal counsel.
We re-evaluate all contingencies as additional information becomes available; however, given the inherent uncertainties, the ultimate amount paid could differ from our estimates. Income Taxes We are liable for income taxes in Canada, the U.S., and Mexico.
We re-evaluate all contingencies as additional information becomes available; however, given the inherent uncertainties, the ultimate amount paid could differ from our estimates.
See footnotes (3) and (4) to the table above for a reconciliation of adjusted earnings and adjusted EBITDA from loss from continuing operations, which we consider to be the most directly comparable U.S. GAAP financial measure.
Adjusted earnings (loss) and adjusted EBITDA are non-GAAP financial measures. See footnotes (2) and (3) to the "Consolidated Results of Operations for Fiscal Years 2023 and 2022" table for a reconciliation of adjusted earnings (loss) and adjusted EBITDA from net earnings (loss), which we consider to be the most directly comparable U.S. GAAP financial measure.
For more information on our asset-based credit facilities and other long-term debt, including maturity dates, see note 11 to the consolidated financial statements at Item 15 of this Form 10-K.
For more information on our New Credit Facilities, including maturity dates, see note 10 to the consolidated financial statements included in Item 15 of this Form 10-K.
The increase in SG&A expenses was mainly due to higher employee compensation costs, including incremental 2022 incentive plan accruals based on performance, and a one-time bonus of $1.6 million recognized in the first quarter of 2022 to reward employees for improved performance, partially offset by lower business development costs, and cost savings related to headcount reductions in our frozen fruit operations in August 2021.
These factors were partially offset by higher employee compensation costs, including incremental 2022 incentive plan accruals based on performance, and a one-time bonus of $1.6 million recognized in the first quarter of 2022 to reward employees for improved performance, partially offset by lower business development costs.
Fiscal years 2022 and 2021 were each 52-week periods ending on December 31, 2022 and January 1, 2022, respectively, and fiscal year 2020 was a 53-week period ending on January 2, 2021.
Fiscal years 2023, 2022 and 2021 were each 52-week periods ending on December 30, 2023, December 31, 2022 and January 1, 2022, respectively.
In addition, in 2022, we incurred start-up costs of $5.7 million (1.0% gross margin impact) mainly related to our new plant construction in Midlothian, Texas, and the integration of the Dream and West Life brands, compared to $0.5 million (0.1% gross margin impart) of start-up costs incurred in 2021.
For the year ended December 31, 2022, we incurred start-up costs included in cost of goods sold of $5.8 million (1.0% gross margin impact) mainly related to our new plant in Midlothian, Texas, and integration of the acquired Dream and West Life brands, compared with $0.7 million (0.1% gross margin impact) of start-up costs incurred for the year ended January 1, 2022.
(d) For 2021, mainly reflects costs related to the relocation of our executive office and innovation center into Eden Prairie, Minnesota, and the vacating of our former leased facility, which were recorded in other expense.
(h) For 2021, reflects costs to complete the exit from a former frozen fruit processing facility, which are recorded in loss from discontinued operations. (i) For 2021, facility closure costs mainly related to the relocation of our executive office and innovation center into Eden Prairie, Minnesota, and the vacating of our former leased facility, which are recorded in other expense.
SUNOPTA INC. 29 December 31, 2022 Form 10-K December 31, 2022 January 1, 2022 Plant-Based Fruit-Based Plant-Based Fruit-Based Foods and Foods and Foods and Foods and For the year ended Beverages Beverages Consolidated Beverages Beverages Consolidated Reported gross margin 15.3% 10.0% 13.1% 16.1% 6.4% 12.0% Start-up costs (a) 1.0% 0.0% 0.6% 0.1% 0.1% 0.1% Adjusted gross margin 16.3% 10.0% 13.8% 16.2% 6.4% 12.1% Note: percentages may not add due to rounding.
SUNOPTA INC. 30 December 30, 2023 Form 10-K For the year ended December 31, 2022 January 1, 2022 Reported gross margin 16.9% 16.3% Start-up costs (a) 1.0% 0.1% Adjusted gross margin 17.8% 16.5% Note: percentages may not add due to rounding.
This process involves a determination of the amount of taxes currently payable as well as the assessment of the effect of temporary timing differences resulting from different treatment of items for accounting and tax purposes.
In making an estimate of our income tax liability, we first assess which items of income and expense are taxable in a particular jurisdiction. This process involves a determination of the amount of taxes currently payable as well as the assessment of the effect of temporary timing differences resulting from different treatment of items for accounting and tax purposes.
For example, as described above under footnote (1), we evaluate our gross margins on a basis that excludes the impact of start-up costs. In addition, we exclude specific items from our reported results that due to their nature or size, we do not expect to occur as part of our normal business on a regular basis.
In addition, we exclude specific items from our reported results that due to their nature or size, we do not expect to occur as part of our normal business on a regular basis. These items are identified above under footnote (2), and in the discussion of our results of operations below.
Net interest expense increased by $5.9 million to $14.7 million for the year ended December 31, 2022, compared with $8.8 million for the year ended January 1, 2022, resulting from an increase in outstanding debt to finance capital expansion projects and fund working capital requirements, together with the impact of higher interest rates.
(Further details on the changes in revenue, gross profit and operating income are provided in the rollforward tables below.) Net interest expense increased by $5.6 million to $13.2 million for the year ended December 31, 2022, compared with $7.6 million for the year ended January 1, 2022, reflecting an increase in outstanding debt to finance capital expansion projects and fund working capital requirements, together with the impact of higher interest rates.
GAAP financial measure (refer to footnote (4) to the "Consolidated Results of Operations for Fiscal Years 2022 and 2021" table regarding the use of this non-GAAP measure).
(4) Refer to footnote (4) to the "Consolidated Results of Operations for Fiscal Years 2023 and 2022" table regarding the use of certain other non-GAAP measures in the discussion of our results of operations below.
SUNOPTA INC. 47 December 31, 2022 Form 10-K As at December 31, 2022, we had approximately $124 million of purchase commitments related to inventories to be used in our production processes over the next 12 months, which we intend to fund through operating cash flows, supplemented with seasonal borrowings under our revolving credit facility to finance fruit crop inventory builds.
As at December 30, 2023, we had approximately $86.3 million of purchase commitments related to inventories to be used in our production processes over the next 12 months, which we intend to fund through operating cash flows, supplemented from time to time with short-term borrowings under our New Revolving Credit Facility.
Consolidated gross profit increased $25.2 million, or 25.7%, to $122.9 million for the year ended December 31, 2022, compared with $97.7 million for the year ended January 1, 2022. Consolidated gross margin for the year ended December 31, 2022 was 13.1% compared to 12.0% for the year ended January 1, 2022, an increase of 110 basis points.
Gross profit increased $18.6 million, or 22.9%, to $99.7 million for the year ended December 31, 2022, compared with $81.1 million for the year ended January 1, 2022. Gross margin for the year ended December 31, 2022 was 16.9% compared to 16.3% for the year ended January 1, 2022, an increase of 60 basis points.
SUNOPTA INC. 30 December 31, 2022 Form 10-K December 31, 2022 January 1, 2022 Per Share Per Share For the year ended $ $ $ $ Loss from continuing operations (9,518 ) (1,172 ) Dividends and accretion on preferred stock (3,109 ) (4,197 ) Loss from continuing operations attributable to common shareholders (12,627 ) (0.12 ) (5,369 ) (0.05 ) Adjusted for: Loss on sale of sunflower business (a) 23,227 - Gain on sale of frozen fruit processing facility (b) (3,779 ) - Start-up costs (c) 6,028 745 Facility closure costs (d) 1,812 1,063 Business development costs (e) 1,170 6,209 Costs related to exit from fruit ingredient processing facility (f) - 5,504 Restructuring costs (g) - 1,432 Workforce reduction charges (h) - 499 Other (i) 872 261 Net income tax effect (j) (7,711 ) (5,827 ) Adjusted earnings 8,992 0.08 4,517 0.04 (a) Reflects the loss on sale of the sunflower business, which was recorded in other expense.
Continuing Discontinued Operations Operations Consolidated Per Share Per Share Per Share For the year ended $ $ $ $ $ $ December 31, 2022 Net earnings (loss) 3,881 (8,722 ) (4,841 ) Dividends and accretion on preferred stock (3,109 ) - (3,109 ) Earnings (loss) attributable to common shareholders 772 0.01 (8,722 ) (0.08 ) (7,950 ) (0.07 ) Adjusted for: Loss on divestiture of discontinued operations (a) - 31,468 31,468 Start-up costs (b) 6,028 - 6,028 Sale of frozen fruit processing facility (c) - (2,544 ) (2,544 ) Business development costs (d) 1,170 - 1,170 Exit from fruit ingredient processing facility (e) 577 - 577 Other (f) 1,074 (202 ) 872 Net income tax on adjusting items (g) (2,326 ) (18,303 ) (20,629 ) Adjusted earnings 7,295 0.07 1,697 0.02 8,992 0.08 SUNOPTA INC. 31 December 30, 2023 Form 10-K Continuing Discontinued Operations Operations Consolidated Per Share Per Share Per Share For the year ended $ $ $ $ $ $ January 1, 2022 Net earnings (loss) 5,543 (6,715 ) (1,172 ) Dividends and accretion on preferred stock (4,197 ) - (4,197 ) Earnings (loss) attributable to common shareholders 1,346 0.01 (6,715 ) (0.06 ) (5,369 ) (0.05 ) Adjusted for: Business development costs (d) 6,209 - 6,209 Exit from fruit ingredient processing facility (e) 5,504 - 5,504 Exit from frozen fruit processing facility (h) - 1,432 1,432 Facility closure costs (i) 1,063 - 1,063 Start-up costs (b) 745 - 745 Workforce reduction charges (j) - 499 499 Other (f) 47 214 261 Net income tax on adjusting items (g) (5,032 ) (795 ) (5,827 ) Adjusted earnings (loss) 9,882 0.09 (5,365 ) (0.05 ) 4,517 0.04 (a) For 2022, reflects the pre-tax loss on the divestiture of Sunflower of $23.2 million, together with a loss of $8.2 million on the settlement of the purchase price allocation related to the 2020 divestiture of our global ingredients business, Tradin Organic, which are recorded in loss from discontinued operations.
The 80-basis point decrease in gross margin reflected an estimated 180 basis-point decline due to the dilutive effect of pass-through pricing to recover cost inflation on raw materials and packaging, together with the impacts of higher labor and utility costs, increased inventory reserves, and higher depreciation expense.
These factors were partially offset by the dilutive effect of pass-through pricing to recover cost inflation on raw materials and packaging, together with the impacts of higher labor and utility costs, increased inventory reserves, and higher depreciation expense.
For more information regarding this transaction, see note 3 to the consolidated financial statements at Item 15 of this Form 10-K.
For further information regarding the change in our segment structure, see note 1 to the consolidated financial statements included in Item 15 of this Form 10-K.
Adjusted gross margin on a consolidated basis for the year ended December 31, 2022 was 13.8% compared to 12.2% for the year ended January 1, 2022, an increase of 160 basis points.
Excluding the impact of these costs, adjusted gross margin for the year ended December 31, 2022 was 17.8% compared to 16.5% for the year ended January 1, 2022, an increase of 130 basis points.
Adjusted EBITDA for the year ended December 31, 2022 was $83.7 million, compared with $60.6 million for the year ended January 1, 2022. Adjusted earnings and adjusted EBITDA are non-GAAP financial measures.
Adjusted EBITDA from continuing operations increased $14.1 million, or 28.5%, to $63.7 million for the year ended December 31, 2022, compared with $49.5 million for the year ended January 1, 2022. Adjusted earnings (loss) and adjusted EBITDA are non-GAAP financial measures.
Diluted loss per share from continuing operations attributable to common shareholders (after dividends and accretion on preferred stock) was $0.05 for the year ended January 1, 2022, compared with a diluted loss per share $0.59 for the year ended January 2, 2021.
Diluted earnings per share from continuing operations attributable to common shareholders (after dividends and accretion on preferred stock) were $0.01 for each of the years ended December 31, 2022 and January 1, 2022.
The following table presents a reconciliation of adjusted earnings from loss from continuing operations, which we consider to be the most directly comparable U.S. GAAP financial measure.
The following table presents a reconciliation of adjusted earnings (loss) from net earnings (loss), which we consider to be the most directly comparable U.S. GAAP financial measure. In addition, we have prepared this table in columnar format to present the effects of discontinued operations on our consolidated results for the periods presented.
For 2022, start-up costs mainly related to our new plant-based beverage facility in Midlothian, Texas, together with the integration of the Dream and West Life brands. For 2021, these costs mainly related to expansion projects within our plant-based beverage operations, as well as the introduction of fruit smoothie bowls.
For 2022, start-up costs included in cost of goods sold related to the hiring and training of new employees for our new plant-based beverage facility in Midlothian, Texas, together with the integration of the acquired Dream and West Life brands.
Fiscal Year We operate on a fiscal calendar that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to December 31.
On February 23, 2024, we entered into an agreement to sell the assets related to our smoothie bowl product line, which is expected to close on March 4, 2024. Fiscal Year We operate on a fiscal calendar that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to December 31.
In connection with an impairment evaluation, we also reassess the remaining useful life of an amortizable long-lived asset and modify it, as appropriate. As at December 31, 2022, our frozen fruit operations included property, plant and equipment of approximately $30 million and customer relationship intangible assets of $112 million.
In connection with an impairment evaluation, we also reassess the remaining useful life of an amortizable long-lived asset and modify it, as appropriate.
On a consolidated basis, we realized a loss attributable to common shareholders of $5.4 million (diluted loss per share of $0.05) for the year ended January 1, 2022, compared with earnings attributable to common shareholders of $72.1 million (diluted earnings per share of $0.81) for the year ended January 2, 2021.
We realized a loss attributable to common shareholders of $177.0 million (diluted loss per share of $1.55) for the year ended December 30, 2023, compared with a loss attributable to common shareholders of $8.0 million (diluted loss per share of $0.07) for the year ended December 31, 2022.
We recognized an income tax benefit of $2.3 million on a pre-tax loss of $11.9 million for the year ended December 31, 2022, compared with an income tax benefit of $6.4 million on a pre-tax loss of $7.6 million for the year ended January 1, 2022.
We recognized income tax expense of $0.9 million on pre-tax earnings from continuing operations of $4.8 million for the year ended December 31, 2022, compared with an income tax benefit of $4.9 million on pre-tax earnings from continuing operations of $0.7 million for the year ended January 1, 2022, which reflected the recognition of excess tax benefits on the vesting of stock-based awards.
For 2021, these costs mainly related to the integration of the Dream and West Life brands and project development activities related to our new plant in Midlothian, Texas, which were recorded in cost of goods sold ($0.6 million) and SG&A expenses ($4.9 million).
(b) For 2022, start-up costs mainly related to the hiring and training of new employees for the Midlothian facility, and the integration of the Dream and West Life brands, which are recorded in cost of goods sold ($5.7 million) and SG&A expenses ($0.3 million).
SUNOPTA INC. 41 December 31, 2022 Form 10-K For the year ended January 1, 2022, Plant-Based Foods and Beverages segment revenues increased by 13.4% to $470.8 million from $415.2 million for the year ended January 2, 2021.
SUNOPTA INC. 33 December 30, 2023 Form 10-K Revenues for the year ended December 31, 2022 increased by 19.1% to $591.4 million from $496.5 million for the year ended January 1, 2022.
We use a measure of gross margin that excludes non-capitalizable start-up costs included in cost of goods sold that are incurred in connection with capital expansion projects. We are undergoing the largest capital expansion in our company's history, including the construction of our new plant-based beverage facility in Midlothian, Texas.
(1) Gross margin is a measure of gross profit (equal to revenues less cost of goods sold) as a percentage of revenues. We use a measure of adjusted gross margin that excludes non-capitalizable start-up costs included in cost of goods sold that are incurred in connection with capital expansion projects.
For 2022, these costs related to actions undertaken to optimize non-core assets, including the sale of the sunflower business, as well as costs related to our inaugural Investor Day held in June 2022, which were recorded in SG&A expenses.
(d) For 2022, business development costs related to the divestitures of Frozen Fruit and Sunflower, together with our inaugural Investor Day held in June 2022, which are recorded in SG&A expenses.
However, adjusted earnings is not, and should not be viewed as, a substitute for loss from continuing operations prepared under U.S. GAAP. Adjusted earnings is presented solely to allow investors to more fully understand how we assess our financial performance.
Adjusted earnings (loss) is presented solely to allow investors to more fully understand how we assess our financial performance.
Volume/mix was favorable mainly due to growth from our oat-based product offerings, almond beverages, and teas, partially offset by softer volumes of sunflower in the first three quarters of 2022, and lower demand for everyday broths.
The increase in pricing was driven by pricing actions taken with customers to offset inflationary cost increases, while volume/mix was favorable mainly due to growth from our oat-based product offerings, almond beverages, and teas, together with strong demand for fruit snacks and the introduction of smoothie bowls, partially offset by lower broth demand.
Earnings from discontinued operations of $4.7 million (diluted earnings per share of $0.04) for the year ended December 31, 2022, were related to the settlement of the purchase price allocation and other post-closing matters in connection with the 2020 divestiture of our global ingredients business, Tradin Organic.
The loss from discontinued operations for the year ended December 31, 2022 included a pre-tax loss on the divestiture of Sunflower of $23.2 million, together with an $8.2 million loss on the settlement of the purchase price allocation related to the 2020 divestiture of our global ingredients business, Tradin Organic.
Consolidated gross profit decreased $11.4 million, or 10.4%, to $97.7 million for the year ended January 1, 2022, compared with $109.1 million for the year ended January 2, 2021. Consolidated gross margin for the year ended January 1, 2022 was 12.0% compared to 13.8% for the year ended January 2, 2021, a decrease of 180 basis points.
Gross profit decreased $11.1 million, or 11.1%, to $88.6 million for the year ended December 30, 2023, compared with $99.7 million for the year ended December 31, 2022. Gross margin for the year ended December 30, 2023 was 14.1% compared to 16.9% for the year ended December 31, 2022, a decrease of 280 basis points.
For the year ended January 1, 2022, the adjusted earnings were $4.5 million, or $0.04 earnings per diluted share, compared with an adjusted loss of $16.6 million, or $0.19 loss per diluted share for the year ended January 2, 2021.
For the year ended December 31, 2022, adjusted earnings from continuing operations were $7.3 million, or $0.07 earnings per diluted share, compared with adjusted earnings of $9.9 million, or $0.09 earnings per diluted share, for the year ended January 1, 2022.
The use of estimates is pervasive throughout our financial statements. The following are the accounting estimates which we believe to be most significant to our business. Inventory Inventory is our largest current asset and consists primarily of raw materials and finished goods held for sale. Inventories are valued at the lower of cost and estimated net realizable value.
The use of estimates is pervasive throughout our financial statements. The following are the accounting estimates which we believe to be most significant to our business.
In addition, we estimate approximately $20 million of non-cash capital investments in 2023, consisting of capitalized finance lease right-of-use assets. For 2023, our estimated capital expenditures directly related to environmental projects, including the installation of solar panels at our executive office and innovation center, are not expected to be material.
We also anticipate the addition of approximately $25 million of finance lease right-of-use assets related to an expansion of our ingredient extraction operations at our Modesto, California, facility. For 2024, our estimated capital expenditures directly related to environmental projects are not expected to be material.
For 2021, these costs related to expansion projects within our plant-based beverage operations, as well as the introduction of fruit smoothie bowls, which were recorded in cost of goods sold.
For 2021, these costs mainly related to expansion projects within our plant-based beverage operations, as well as the introduction of fruit smoothie bowls. (2) The following table presents a reconciliation of adjusted earnings (loss) from net earnings (loss), which we consider to be the most directly comparable U.S.
Financing Activities of Continuing Operations Cash provided by financing activities of continuing operations decreased $69.4 million from 2021 to 2022, which mainly reflected reduced levels of revolver borrowings required to fund changes in working capital in 2022, partially offset by increased borrowings of long-term debt related to term loan and lease financing for capital projects.
Cash provided by financing activities of continuing operations increased $43.8 million from 2021 to 2022, which mainly reflected higher borrowings in 2022 to fund the ramp-up in construction activities related to major capital projects.
The table below explains the decrease in operating loss: Corporate Services Operating Loss Changes Operating loss for the year ended January 2, 2021 $(31,151) Lower employee-related variable compensation related to our 2021 short-term incentive plan, based on financial performance, partially offset by higher business development costs, and reduced gains on Mexican peso hedging activities 5,822 Increase in corporate cost allocations to SunOpta operating segments, as a result of the reallocation of management fees previously charged to Tradin Organic 4,622 Lower variable stock-based compensation related to the equity component of our short-term incentive plan, based on financial performance 3,470 Operating loss for the year ended January 1, 2022 $(17,237) Liquidity and Capital Resources From time to time, as part of our ongoing efforts to improve working capital efficiency, we utilize, at our sole discretion, supply chain finance ("SCF") programs offered by some of our major customers that allows us to sell our receivables from the customers to such customers' financial institutions, on a non-recourse basis, in order to be paid earlier than our payment terms with the customer provide at a discount rate that leverages those customers' favorable credit ratings.
From time to time, as part of our ongoing efforts to improve working capital efficiency, we utilize, at our sole discretion, supply chain finance ("SCF") programs offered by some of our major customers that allows us to sell our receivables from the customers to such customers' financial institutions, on a non-recourse basis, in order to be paid earlier than our payment terms with the customer provide at a discount rate that leverages those customers' favorable credit ratings.
As a result, start-up costs began to significantly impact the comparability of our reported gross margins in 2022 and are expected to continue to have a notable impact in 2023, as we ramp-up production at the Midlothian facility, as well as other major capital projects currently underway, which may obscure trends in our margin performance.
In recent years, we have undergone the largest capital expansion in our company's history, including the construction of our new plant-based beverage facility in Midlothian, Texas. As a result, start-up costs have had a significant impact on the comparability of reported gross margins in 2023 and 2022, which may obscure trends in our margin performance.
Utilizing our customers' SCF programs reduces our accounts receivable balances, improves our cash flows, and reduces the cost of servicing these receivables with our revolving credit facility. In addition, in connection with our efforts to extend payment terms with certain of our major suppliers, we have implemented our own SCF program through a participating financial institution.
Utilizing our customers' SCF programs reduces our accounts receivable balances, improves our cash flows, and reduces the cost of servicing these receivables with our revolving credit facility. All operating cash flows from accounts receivable are reported consistently in our consolidated statements of cash flows regardless of whether they are associated with a SCF program.
The following table presents a reconciliation of segment operating income and adjusted EBITDA from loss from continuing operations, which we consider to be the most directly comparable U.S. GAAP financial measure.
The following table presents a reconciliation of adjusted EBITDA from net earnings (loss), which we consider to be the most directly comparable U.S. GAAP financial measure. In addition, as described above in footnote (2), we have prepared this table in columnar format to present the effects of discontinued operations on our consolidated results for the periods presented.
The amounts attributable to common shareholders for 2021 and 2020 reflected dividends and accretion on preferred stock of $4.2 million and $10.3 million, respectively. The decline in preferred stock dividends and accretion reflected the exchange of all of the shares of Series A preferred stock for shares of our common stock in February 2021.
Loss attributable to common shareholders included dividends and accretion on our Series B-1 preferred stock of $2.0 million and $3.1 million in 2023 and 2022, respectively.
Cash Flows from Discontinued Operations Cash used in investing activities of discontinued operations of $6.3 million in 2022 was related to the settlement of the purchase price allocation and other post-closing matters in connection with the 2020 divestiture of Tradin Organic, while cash used in investing activities of discontinued operations of $13.4 million in 2021 was related to the settlement of transaction costs accrued in connection with the Tradin Organic sale.
Net cash used in discontinued operations decreased $7.7 million from 2021 to 2022, which reflected the $6.3 million settlement of the Tradin Organic closing matters in 2022, compared with the payment of $13.4 million of transaction costs in 2021 related to the Tradin Organic divestiture. Critical Accounting Estimates The preparation of financial statements in conformity with U.S.
Plant-Based Fruit-Based Foods and Foods and Corporate Beverages Beverages Services Consolidated $ $ $ $ December 31, 2022 Segment operating income (loss) 38,491 6,919 (20,402 ) 25,008 Other income (expense), net (22,692 ) 2,094 (1,534 ) (22,132 ) Earnings (loss) from continuing operations before the following 15,799 9,013 (21,936 ) 2,876 January 1, 2022 Segment operating income (loss) 36,616 (9,320 ) (17,237 ) 10,059 Other expense, net (280 ) (6,807 ) (1,803 ) (8,890 ) Earnings (loss) from continuing operations before the following 36,336 (16,127 ) (19,040 ) 1,169 (3) When assessing our financial performance, we use an internal measure of adjusted earnings that excludes specific items recognized in other income or expense, and other unusual items that are identified and evaluated on an individual basis, which due to their nature or size, we would not expect to occur as part of our normal business on a regular basis.
(2) When assessing our financial performance, we use an internal measure of adjusted earnings/loss that excludes specific items recognized in other income or expense, and other unusual items that are identified and evaluated on an individual basis, which due to their nature or size, we would not expect to occur as part of our normal business on a regular basis.
We recognized an income tax benefit of $6.4 million for the year ended January 1, 2022, compared with a benefit of $7.7 million for the year ended January 2, 2021.
We recognized a loss from discontinued operations of $8.7 million (diluted loss per share of $0.08) for the year ended December 31, 2022, compared with a loss of $6.7 million (diluted loss per share of $0.06) for the year ended January 1, 2022.
(e) For 2021, reflects inventory write-offs related to the exit from our former South Gate, California, fruit ingredient processing facility, which were recorded in cost of goods sold. (f) For 2020, reflects professional fees of $1.0 million and employee retention costs of $0.6 million recorded in SG&A expenses.
(e) Reflects exit costs related to a former fruit ingredient processing facility. For 2022, these costs are recorded in other expense, and, for 2021, these costs are recorded in cost of goods sold ($0.8 million) and other expense ($4.9 million).
In 2022, our frozen fruit operations returned to profitability as a result of an improved margin profile from portfolio rationalizations and reduced manufacturing cost base, together with the pass-through of higher sales pricing.
Before the losses on divestitures, earnings from discontinued operations were $6.6 million in 2022, compared with a loss of $8.3 million in 2021, which reflected an improved margin profile for Frozen Fruit in 2022 from portfolio rationalizations, a reduced manufacturing cost base, and higher pricing for retail customers.
Investing cash inflows in 2022 included net proceeds of $20.3 million from the sale of property, plant and equipment, including the sale of our Oxnard, California, frozen fruit processing facility, and $7.8 million received from the sale of the sunflower business, while investing cash outflows in 2021 included $25.1 million paid to acquire the Dream and West Life brand name intangible assets.
In addition, investing cash outflows in 2021 included $25.1 million paid to acquire the Dream and West Life brand name intangible assets.
(b) For 2022, business development costs related to actions undertaken to optimize non-core assets, including the sale of the sunflower business, as well as costs related to our inaugural Investor Day, which were recorded in SG&A expenses.
For 2023, business development costs related to the divestiture of Frozen Fruit, and, for 2022, these costs related to the divestitures of Frozen Fruit and Sunflower, together with our inaugural Investor Day held in June 2022. These costs are recorded in SG&A expenses.
The change in revenues from the 2021 to 2022 was due to the following: Plant-Based Fruit-Based Foods and Beverages Foods and Beverages Consolidated $ % $ % $ % 2021 revenues 470,754 341,870 812,624 Price 58,405 12.4% 34,605 10.1% 93,010 11.4% Volume/Mix 37,276 7.9% 451 0.1% 37,727 4.6% Acquisition of Dream and West Life brands 3,735 0.8% - - 3,735 0.5% Sale of sunflower business (12,434 ) -2.6% - - (12,434 ) -1.5% 2022 revenues 557,736 18.5% 376,926 10.3% 934,662 15.0% For the year ended December 31, 2022, the 18.5% increase in revenues for the Plant-Based Foods and Beverages segment reflected a 12.4% overall increase in pricing, a favorable volume/mix impact of 7.9%, and 0.8% of incremental revenue in the first quarter of 2022 related to the acquisition of the Dream and West Life brands in April 2021, partially offset by the impact of the sale of the sunflower business in the fourth quarter of 2022.
For the year ended December 31, 2022, the 19.1% increase in revenues reflected a 10.6% increase in pricing, a favorable volume/mix impact of 13.1%, and 0.8% of incremental revenue in the first quarter of 2022 related to the acquisition of the Dream and West Life brands in April 2021, partially offset by the impact of the rationalization of lower-margin fruit-based ingredients in July 2021.
(j) For 2022 and 2021, reflects the tax effect of the preceding adjustments to earnings calculated based on the statutory tax rates applicable in the tax jurisdiction of the underlying adjustment. We believe that investors' understanding of our financial performance is enhanced by disclosing the specific items that we exclude to compute adjusted earnings.
We believe that investors' understanding of our financial performance is enhanced by disclosing the specific items that we exclude to compute adjusted earnings (loss). However, adjusted earnings (loss) is not, and should not be viewed as, a substitute for net earnings (loss) prepared under U.S. GAAP.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
9 edited+1 added−2 removed3 unchanged
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Market Risk — interest-rate, FX, commodity exposure
9 edited+1 added−2 removed3 unchanged
2023 filing
2024 filing
Biggest changeOn the other hand, the cost-plus pricing mechanisms built into most of our co-manufacturing arrangements, which are concentrated in our plant-based business, generally result in our customers bearing the majority of the raw material and packaging price risk. In addition, co-manufactured products are typically picked up by our customers, so they bear the impact of changing freight rates.
Biggest changeAs a result, with private label we have greater exposure to price risk, including the impact of changing freight rates as these products are typically delivered to the customers. On the other hand, the cost-plus pricing mechanisms built into most of our co-manufacturing arrangements generally result in our customers bearing the majority of the raw material and packaging price risk.
A one percent, or 100 basis-point, change in interest rates would have a pre-tax effect of approximately $1.8 million on our results of operations and cash flows, based on current outstanding borrowings of variable rate debt, and the fair value of the fixed-rate finance lease liabilities would increase or decrease by approximately $2.3 million.
A one percent, or 100 basis-point, change in interest rates would have a pre-tax effect of approximately $2.1 million on our results of operations and cash flows, based on current outstanding borrowings of variable rate debt, and the fair value of the fixed-rate finance lease liabilities would increase or decrease by approximately $0.9 million.
In addition, as described above under "Recent Events," the impacts of global economic conditions, the COVID-19 pandemic, and the conflict between Russia and Ukraine have each contributed to higher commodity inflation and input costs over the past two years. We currently do not utilize derivative contracts to hedge our exposure to fluctuations in input prices.
In addition, as described above under "Recent Events," the impacts of global macroeconomic conditions have contributed to higher commodity inflation and input costs over the past few years. We currently do not utilize derivative contracts to hedge our exposure to fluctuations in input prices.
As at December 31, 2022, we had approximately $184 million of variable rate debt, mainly comprised of our asset-based credit facilities, and approximately $124 million principal amount of fixed rate debt, comprised of finance lease obligations.
As at December 30, 2023, we had approximately $212 million of variable rate debt, mainly comprised of our New Credit Facilities, and approximately $53 million principal amount of fixed rate debt, comprised of finance lease obligations.
Foreign currency risk All of our U.S. subsidiaries use the U.S. dollar as their functional currency, and the U.S. dollar is also our reporting currency. In addition, the functional currency of our Canadian and Mexican operations is the U.S. dollar.
Foreign currency risk Following the divestiture of Frozen Fruit with its Mexican operations, our remaining operations, assets and customers are principally located in the U.S. All of our U.S. subsidiaries use the U.S. dollar as their functional currency, and the U.S. dollar is also our reporting currency.
As at December 31, 2022, a 10% change in foreign exchange rates would not have a material impact on our consolidated financial position, results of operations, or cash flows. Our operations based in the U.S. and Canada have limited exposure to other currencies since almost all sales and purchases are made in U.S. dollars.
In addition, the functional and reporting currencies of our smaller Canadian operations are the U.S. dollar. As at December 30, 2023, a 10% change in foreign exchange rates would not have a material impact on our consolidated financial position, results of operations, or cash flows.
As at December 31, 2022, we did not have any open foreign currency forward contracts. Price risk Certain agricultural commodities and ingredients we use in the production of our products are exposed to market price risk, including fruits, grains, nuts, sweeteners, and flavorings.
In addition, U.S. and Canadian operations have limited exposure to foreign currency transactions since sales and purchases are predominately made in U.S. dollars. Price risk Certain agricultural commodities and ingredients we use in the production of our products are exposed to market price risk, including grains, nuts, sweeteners, and flavorings.
SUNOPTA INC. 51 December 31, 2022 Form 10-K Changes in the prices of our products may lag changes in the costs to produce and ship our products due to contractual restrictions in our revenue contracts with customers, or competitive pressures.
Changes in the prices of our products may lag changes in the costs to produce and ship our products due to contractual restrictions in our revenue contracts with customers, or competitive pressures. If we are unable to increase our prices to offset increasing costs, our gross margins, operating results, and cash flows could be materially affected.
If we are unable to increase our prices to offset increasing costs, our gross margins, operating results, and cash flows could be materially affected. Our ability to pass through higher input costs to our customers on a timely basis depends on how we go-to-market, that is private label, co-manufacturing, or branded products.
Our ability to pass through higher input costs to our customers on a timely basis depends on how we go-to-market, that is private label, co-manufacturing, or branded products. In our private label contracts, the timing of pass-through pricing adjustments tends to lag impacts from cost inflation.
Removed
We are exposed to fluctuations in the Mexican peso on purchases of fruit inventory and operating costs in our frozen fruit operations based in Mexico. From time to time, we enter into foreign currency forward contracts to establish a fixed foreign currency exchange rate related to these Mexican peso cash flows requirements.
Added
In addition, co-manufactured products are typically picked up by our customers, so they bear the impact of changing freight rates.
Removed
In our private label contracts, which are concentrated in our fruit-based business, the timing of pass-through pricing adjustments tends to lag impacts from cost inflation. As a result, with private label we have greater exposure to price risk, including the impact of changing freight rates as these products are typically delivered to the customers.