SunOpta Inc. - FORM 8-K - EX-99.2 - EXHIBIT 99.2 - September 7, 2010

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Exhibit 99.2

 

 

Unaudited Pro-forma Consolidated Financial Statements

 

SunOpta Inc.

 

For the two quarters ended July 3, 2010 and the years
ended December 31, 2009, 2008 and 2007

(Unaudited)

On September 1, 2010, SunOpta Inc. (“SunOpta” or the “Company”) announced the sale (the “SBI Transaction”) of SunOpta BioProcess Inc. ("SBI") to Mascoma Corporation ("Mascoma"). In exchange for selling all outstanding common shares of SBI, SunOpta will take back a combination of preferred and common shares representing an approximate 18% ownership interest in Mascoma. The Company expects to record a net gain on the SBI Transaction, with the amount being dependant on the finalization of the closing balance sheet and related closing costs, which are expected to be finalized in the next 12 months.

Following the SBI Transaction, SunOpta will account for its investment in Mascoma on a cost basis. Accordingly, no part of the ongoing financial results of Mascoma will be included in SunOpta’s operational results.

On June 14, 2010, the Company announced that it had completed the divestiture of its Canadian Food Distribution Assets (the “CFDA Transaction”) to United Natural Foods, Inc. (“UNFI”) and UNFI Canada, Inc., a wholly owned subsidiary of UNFI for cash consideration of Cdn $68,000. The Company realized a $13,809 gain on the CFDA Transaction, subject to post closing adjustments, in accordance with the asset purchase agreement, which are expected to be finalized within the next nine months.

The assets sold in the CFDA Transaction formed part of the Distribution Group. The Company retained the natural health products distribution and manufacturing assets, which represent the balance of the assets in the Distribution Group.

The accompanying unaudited pro-forma consolidated balance sheet of SunOpta Inc. as of July 3, 2010 is presented as if the SBI Transaction had occurred on July 3, 2010. The disposition of the Canadian Food Distribution Assets occurred prior to the balance sheet date, as a result the impact of the CFDA Transaction is already reflected on the historical consolidated balance sheet of SunOpta Inc. as of July 3, 2010. The accompanying unaudited pro-forma consolidated statements of operations of SunOpta Inc. for the two quarters ended July 3, 2010 and the years ended December 31, 2009, 2008 and 2007 are presented as if the SBI Transaction and the CFDA Transaction had occurred on January 1, 2007. In order to derive the pro-forma financial information, the historical results of SunOpta Inc. have been adjusted to eliminate the assets, liabilities and results of operations of SBI and the Canadian Food Distribution business, which have historically been consolidated by SunOpta Inc. Pro-forma adjustments are described in the notes to the unaudited pro-forma consolidated financial statements. The historical unaudited pro-forma consolidated statement of operations for the two quarters ended July 3, 2010 has been adjusted to remove the impact of discontinued operations, which related to the sale of the Canadian Food Distribution Assets. The discontinued operations removed included the gain on the sale of the Canadian Food Distribution business, as well as its results from operations. Accordingly, there are no further pro-forma adjustments required for the CFDA Transaction on the consolidated statement of operations for the two quarters ended July 3, 2010.

The pro-forma adjustments are based upon available information and certain assumptions that management believes are reasonable under the circumstances; however, actual amounts could differ. The pro-forma adjustments are directly attributable to the SBI Transaction and the CFDA Transaction and are expected to have a continuing impact on the results of operations of the Company. In the opinion of management, all adjustments necessary to present fairly the unaudited pro-forma financial statements have been made. The unaudited consolidated pro-forma financial information is for informational purposes only, and is not necessarily indicative of the operating results or financial position that would have been achieved had the SBI Transaction and the CFDA Transaction been consummated on the dates indicated, and should not be construed as being representative of SunOpta Inc.’s future results of operations or financial position.

The unaudited pro-forma financial statements should be read in conjunction with SunOpta Inc.’s consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the years ended December 31, 2009, 2008 and 2007 in SunOpta Inc.’s Annual Report on Form 10-K for the annual period ended December 31, 2009 and SunOpta Inc.’s consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the quarter and two quarters ended July 3, 2010 in SunOpta Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended July 3, 2010.

Forward-Looking Statements
Statements included in this report regarding the expected gain on the SBI Transaction, the estimated amount of the gain and anticipated savings due to the reduction or elimination of cost from management fees are "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation, and are based on information available to us on the date of this report. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on certain assumptions and analyses we make in light of our experience and our interpretation of current conditions, historical trends and expected future developments as well as other factors that we believe are appropriate in the circumstance. Whether actual results and developments will agree with our expectations and predictions is subject to many risks and uncertainties including, but not limited to, finalization of the closing balance sheets and related closing costs of the SBI Transaction and CFDA Transaction, cost rationalization initiatives and general economic conditions. Consequently all forward-looking statements made herein are qualified by these cautionary statements and there can be no assurance that our actual results or the developments we anticipate will be realized.


SunOpta Inc.
Pro-forma Consolidated Statement of Operations
For the two quarters ended July 3, 2010
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 

          SBI        
    Historical     Adjustments     Pro-Forma  
                   
Revenues   453,310     2,676   (g)   450,634  
                   
Cost of goods sold   377,953     1,930   (g)   376,023  
                   
Gross profit   75,357     746     74,611  
                   
Warehousing and distribution expenses   2,192     -     2,192  
Selling, general and administrative expenses   51,556     1,536   (h)   50,020  
Intangible asset amortization   2,319     -     2,319  
Other expense, net   250     (1,109 ) (h)   1,359  
Foreign exchange gain   (1,499 )   (63 ) (h)   (1,436 )
                   
Earnings from continuing operations before the following   20,539     382     20,157  
                   
Interest expense, net   5,739     150   (i)   5,589  
                   
Earnings from continuing operations before income taxes   14,800     232     14,568  
                   
Provision for income taxes   3,930     12     3,918  
                   
Earnings for the period   10,870     220     10,650  
                   

Earnings from continuing operations for the period attributable to non-controlling interests

  214     -     214  
                   
Earnings for the period attributable to SunOpta Inc.   10,656     220     10,436  
                   
                   
Earnings per share for the period – basic   0.16           0.16  
Earnings per share for the period – diluted   0.16           0.16  
                   
Weighted average number of common shares                  
           -Basic   65,049,223           65,049,223  
           -Diluted   65,696,508           65,696,508  

See the accompanying notes to the unaudited pro-forma consolidated financial statements


SunOpta Inc.
Pro-forma Consolidated Statement of Operations
For the year ended December 31, 2009
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 

          CFDA     SBI        
    Historical     Adjustments     Adjustments     Pro-Forma  
                         
Revenues   989,132     169,573   (a)   519   (g)   819,040  
                         
Cost of goods sold   840,262     129,985   (a)   296   (g)   709,981  
                         
Gross profit   148,870     39,588     223     109,059  
                         
Warehousing and distribution expenses   18,856     14,633   (b)   -     4,223  
Selling, general and administrative expenses   111,475     19,262   (b)   3,372   (h)   88,841  
Intangible asset amortization   5,677     1,017   (b)   12   (h)   4,648  
Other expense, net   2,587     342   (b)   -     2,245  
Goodwill impairment   8,841     -     -     8,841  
Foreign exchange gain   (1,042 )   (527 ) (b)   8   (h)   (523 )
                         
Earnings before the following   2,476     4,861     (3,169 )   784  
                         
Interest expense, net   14,028     3,353   (c)   189   (i)   10,486  
                         
Loss before income taxes   (11,552 )   1,508     (3,358 )   (9,702 )
                         
Recovery of income taxes   (1,762 )   238   (d)   -     (2,000 )
                         
Loss for the year   (9,790 )   1,270     (3,358 )   (7,702 )
                         

Loss for the year attributable to non-controlling interests

  (3,027 )   -     -     (3,027 )
                         
Loss for the year attributable to SunOpta Inc.   (6,763 )   1,270     (3,358 )   (4,675 )
                         
Loss per share for the year – basic   (0.10 )               (0.07 )
Loss per share for the year – diluted   (0.10 )               (0.07 )
                         
Weighted average number of common shares                        
     -Basic   64,770,614                 64,770,614  
     -Diluted   64,770,614                 64,770,614  

See the accompanying notes to the unaudited pro-forma consolidated financial statements


SunOpta Inc.
Pro-forma Consolidated Statement of Operations
For the year ended December 31, 2008
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 

          CFDA     SBI        
    Historical     Adjustments     Adjustments     Pro-Forma  
                         
Revenues   1,055,173     179,293   (a)   1,435    (g)   874,445  
                         
Cost of goods sold   899,078     134,982   (a)   1,988    (g)   762,108  
                         
Gross profit   156,095     44,311     (553

)

  112,337  
                         
Warehousing and distribution expenses   21,040     16,244   (b)   -     4,796  
Selling, general and administrative expenses   117,808     19,079   (b)   2,856     (h)   95,873  
Intangible asset amortization   5,879     1,090   (b)   15     (h)   4,774  
Other expense, net   1,003     (7 ) (b)   1,729     (h)   (719 )
Goodwill impairment   10,154     -     -     10,154  
Foreign exchange gain   (4,835 )   224   (b)   (598 )   (h)   (4,461 )
                         
Earnings before the following   5,046     7,681     (4,555 )   1,920  
                         
Interest expense, net   14,281     4,443   (c)   (326 )  (i)   10,164  
                         
Loss before income taxes   (9,235 )   3,238     (4,229 )   (8,244 )
                         
Provision for income taxes   790     756   (d)   -     34  
                         
Loss for the year   (10,025 )   2,482     (4,229 )   (8,278 )
                         

Earnings for the year attributable to non-controlling interests

  911     -     -     911  
                         
Loss for the year attributable to SunOpta Inc.   (10,936 )   2,482     (4,229 )   (9,189 )
                         
Loss per share for the year – basic   (0.17 )               (0.14 )
Loss per share for the year – diluted   (0.17 )               (0.14 )
                         
Weighted average number of common shares                        
     -Basic   64,255,250                 64,255,250  
     -Diluted   64,255,250                 64,255,250  

See the accompanying notes to the unaudited pro-forma consolidated financial statements


SunOpta Inc.
Pro-forma Consolidated Statement of Operations
For the year ended December 31, 2007
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 

    CFDA SBI  
  Historical Adjustments Adjustments Pro-Forma
         
Revenues   802,494     153,555    (a)   1,839    (g)   647,100  
Cost of goods sold   676,360     113,209    (a)   2,957    (g)   560,194  
Gross profit   126,134     40,346     (1,118 )   86,906  
Warehousing and distribution expenses   20,899     16,430    (b)   -     4,469  
Selling, general and administrative expenses   95,911     14,379    (b)   4,932    (h)   76,600  
Intangible asset amortization   4,201     1,093    (b)   21    (h)   3,087  
Other expense, net   1,187     567    (b)   -     620  
Goodwill impairment   996     -     -     996  
Foreign exchange gain   (539 )   (356 )  (b)   (268 )  (h)   85  
                         
Earnings before the following   3,479     8,233     (5,803 )   1,049  
                         
Dilution gain   693     -     -     693  
Interest expense, net   8,823     3,785    (c)   (496 )  (i)   5,534  
                         
Loss before income taxes   (4,651 )   4,448     (5,307 )   (3,792 )
                         
Recovery of income taxes   (6,101 )   1,406    (d)   -     (7,507 )
                         
Earnings for the year   1,450     3,042     (5,307 )   3,715  
                         

Earnings for the year attributable to non-controlling interests

  1,043     -     -     1,043  

 

                        

Earnings for the year attributable to SunOpta Inc.

  407     3,042     (5,307 )   2,672  
                         
                         
Earnings per share for the year – basic   0.01                 0.04  
Earnings per share for the year – diluted   0.01                 0.04  
                         
Weighted average number of common shares                      
           -Basic   62,602,772                 62,602,772  
           -Diluted   63,222,113                 63,222,113  

See the accompanying notes to the unaudited pro-forma consolidated financial statements


SunOpta Inc.
Pro-forma Consolidated Balance Sheet
As at July 3, 2010
Unaudited
(Expressed in thousands of U.S. dollars, except per share amounts)
 

    SBI    
  Historical Adjustments   Pro-forma
         
Assets                    
         
Current assets                    
Cash and cash equivalents 38,355 (17,974 ) (e) 20,381
Accounts receivable   99,684     (532 ) (e)   99,152  
Inventories 146,599 (1 ) (e) 146,598
Prepaid expenses and other current assets   9,079     (110 ) (e)   8,969  
Deferred income taxes 5,172 -   5,172
    298,889     (18,617 )     280,272  
         
Investments   -     33,457   (k)   33,457  
Property, plant and equipment 106,379 (2,913 ) (e) 103,466
Goodwill   30,491     -       30,491  
Intangible assets 50,718 (576 ) (e) 50,142
Deferred income taxes   10,758     (2,297 ) (f)   8,461  
Other assets 3,539 (1,357 ) (e) 2,182
                     
  500,774 7,697   508,471
                     
Liabilities        
                     
Current liabilities        
Bank indebtedness   26,085     -       26,085  
Accounts payable and accrued liabilities 80,938 291 (e) 81,229
Customer and other deposits   1,215     -       1,215  
Incomes taxes payable 1,079 -   1,079
Other current liabilities   1,914     -       1,914  
Current portion of long-term debt 63,723 -   63,723
    174,954     291       175,245  
         
Long-term debt   17,908     -       17,908  
Long-term liabilities 2,611 -   2,611
Deferred income taxes   13,010     -       13,010  
  208,483 291   208,774
                     
Preferred shares of a subsidiary company 28,387 (28,387 ) (e) -
                     
Equity        
SunOpta Inc. shareholders’ equity                    
         Capital stock (65,170,331 common shares) 179,218 -   179,218
         Additional paid in capital   11,064     -       11,064  
         Retained earnings 59,225 35,793 (j) 95,018
         Accumulated other comprehensive income   953     -       953  
  250,460 35,793   286,253
Non-controlling interest   13,444     -       13,444  
Total equity 263,904 35,793   299,697
                     
  500,774 7,697   508,471

See the accompanying notes to the unaudited pro-forma consolidated financial statements

SUNOPTA INC.
NOTES TO UNAUDITED PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS

a)

This adjustment reflects the elimination of the revenues and cost of goods sold of the assets sold to UNFI Canada.

   
b)

This adjustment reflects the elimination of the warehousing and distribution expenses, selling, general and administrative expenses, intangible asset amortization, other expense, net and foreign exchange gain of the assets sold, net of management fees provided by Corporate services. Not included in the pro-forma results are anticipated savings due to costs included in management fees that will be reduced or eliminated.

   
c)

This adjustment represents an estimate of the interest expense that would not have been incurred during the period if the proceeds from the CFDA Transaction had been used to repay interest bearing debt.

   
d)

This adjustment represents the estimated income tax effect of the pro-forma adjustments. The tax effect of the pro-forma adjustments was calculated using the historical statutory rates in effect in Canada and the U.S. for the periods presented.

   
e)

This adjustment reflects the elimination of assets and liabilities attributable to SBI, and a $2,177 increase to accounts payable and accrued liabilities representing an accrual for a closing cash shortfall in SBI, which SunOpta agreed to fund, in accordance with the share purchase agreement.

   
f)

This adjustment gives effect to the tax impact of the SBI Transaction. The tax on the estimated gain generated from the SBI Transaction was offset by existing deferred tax assets relating to Canadian net operating losses.

   
g)

This adjustment reflects the elimination of the revenues and cost of goods sold of SBI.

   
h)

This adjustment reflects the elimination of the selling, general and administrative expenses (including research and development), intangible asset amortization, other (expense) income, net and foreign exchange (gain) loss of SBI, net of management fees provided by Corporate services. Not included in the pro-forma results are anticipated savings due to costs included in management fees that will be reduced or eliminated.

   
i)

This adjustment reflects the elimination of interest expense relating to the accretion of the preferred shares, net of interest income generated by SBI on cash held.

   
j)

This adjustment reflects the estimated gain of approximately $35,793 arising from the SBI Transaction, net of taxes of approximately $2,297, transaction costs of approximately $1,482 and the settlement of contractual share-based and other compensation related awards due to the change in control of approximately $15,275. This estimated gain has not been reflected in the pro-forma consolidated statements of operations as it is considered to be nonrecurring in nature. No adjustment has been made to the proceeds to give effect to any potential post- closing adjustments under the terms of the share purchase agreement.


k)

This adjustment reflects the estimated carrying value of the investment in Mascoma, which is subject to finalizing fair values estimates used to determine the carrying value of the investment.


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