Dean Hollis - Chairman Kathy Houde - Director Rik Jacobs - President and Chief Executive Officer Robert McKeracher - Vice President and Chief Financial Officer

Peter Prattas - AltaCorp Capital Eric Gottlieb - D.A. Davidson & Co. Amit Sharma - BMO Capital Markets Mitch Pinheiro - Wunderlich Securities, Inc. Jon Andersen - William Blair & Co.

Good morning and welcome to SunOpta’s third quarter 2016 earnings conference call. By now, everyone should have access to the earnings press release that was issued this morning. The release as well as the accompanying slides are available on the Investor Relations page of SunOpta’s website at www.sunopta.com. This call is being webcast and its transcription will also be available on the company’s website. As a reminder, please note that the prepared remarks, which will follow, contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. We refer you to all risk factors contained in SunOpta’s press release issued this morning, the company's annual report filed on Form 10-K and other filings with the Securities and Exchange Commission for a more detailed discussion of the factors that could cause actual results to differ materially from those projections in any forward-looking statements. The company undertakes no obligation to publicly correct or update the forward-looking statements made during the presentation to reflect future events or circumstances except as may be required under applicable securities laws. Finally, we would like to remind listeners that the company may refer to certain non-GAAP financial measures during the teleconference. A reconciliation of these non-GAAP financial measures was included in the company's press release issued earlier today. Also, please note that, unless otherwise stated, all figures discussed today are in US dollars and occasionally rounded to the nearest million. And now, I'd like to turn the conference call over to Dean Hollis, the new Chairman of SunOpta’s Board of Directors.

Good morning. And thank you for joining us today. With me on the call today are Rik Jacobs, Rob McKeracher, and Kathy Houde. As noted in today's earnings press release, Rik is stepping down as President and CEO of the company and director, Kathy Houde, will serve as interim CEO as the board has initiated the search for a new CEO. We're appreciative of all the hard work Rik has undertaken during his tenure at SunOpta and then he is with us on the call today to discuss the results of the third quarter and answer any questions you have on Q3 results. I would like to thank our prior, Alan Murray, for his leadership on the board, his years of service, and for the effort he put forth to help get SunOpta to the point where we have a real opportunity to now optimize this business and unlock meaningful long-term value for our shareholders. I’d like to remind those of you on the call that there’s an accompanying presentation on the Investor Relations page of our website, which we will reference in our prepared remarks. Slide two of the deck covers forward-looking statements, which the operator covered. Turning to page three, I want to remind you of SunOpta’s vision and key strategies, which are not changing and have been endorsed by our new partners. Our vision is to responsibly bring healthy food from the field to the table. Responsibly means we aspire to deliver products consistently and reliably to customers, while always doing what is right for the consumer. Healthy means organic and non-GMO products without artificial flavors, colors or preservatives. From the field to the table refers to our unique core competency of having the world's largest vertically-integrated organic raw material supply chain and taking this all the way to consumer products. The three strategies underpinning our vision are, number one, focus on an efficient and reliable vertically-integrated supply chain. We believe that as demand for healthy products continues to outstrip supply, having our own vertically integrated global supply chain will lead to more opportunities for increased competitive advantages. We intend to invest in that insulation. Number two, ultimately bringing consumer products via private label brands across both retail and food service channels, which creates customer loyalty and provides a pipeline of innovation. And number three, focusing on three emerging categories, healthy beverages, healthy fruit and healthy snacks. On slide four, much has certainly happened at SunOpta in the last six months. In April, the company communicated its midterm targets. In June, the company announced a strategic review process. In October, the company announced acceptance of an $85 million investment from Oaktree, which it used to reduce leverage. Oaktree also added dedicated operational resources, which immediately began work on a value creation plan. The Board also appointed three new directors with operational, strategic, and financial expertise and established a new committee on the Board to oversee the work necessary to create long-term shareholder value. Today, we're reaffirming our overall mid-term targets. The Board also announced I will be assuming the role of Board Chair and Kathy as interim CEO. We're also disclosing our value creation plan designed to maximize our ability to deliver long-term shareholder value. The Board is very pleased to have Kathy assume the role of interim CEO and feels she is very well-qualified to oversee this work, while we search for our new CEO. Kathy will talk in more detail about the four pillars of the value creation plan as well as the actions already taken. We have identified a range of overall cost savings and are very confident in the long-term shareholder value this will create. We know there's a desire for granularity, but we're not yet in a position to give you specifics as to how these savings may impact the 2017 plan or the long-term plan. First, because we will need to invest to achieve these savings. Second, transformation change is hard. It takes time and it is not linear. Finally, we're building a culture of accountability and sustainable results. When we have more details on how and when these net savings will be realized, we will share those with you. I have done numerous successful transformations in my career and I'm more excited and more confident in the long-term value creation at SunOpta than perhaps any other time in my career. I appreciate your investment, your interest and your patience as we focus on implementing and executing our value creation plan. I would now like to turn the call over to Kathy, so she can take you through the four pillars of the value creation plan and the near-term actions we've already taken. Kathy?

Thank you, Dean. The strategic investment by Oaktree was the first step in the many positive changes this Board and management intend to bring to SunOpta. As you all know, our strategic review took a number of months. And what was exceedingly impressive about Oaktree during that process was the resources they invested and due diligence which was clearly a cut above and beyond the standard. Aside from the benefits of the capital committed as part of the transaction, they knew they wanted to be a partner of SunOpta and really hit the ground running on creating a framework for helping the company reset and evolve. Immediately after closing, Oaktree has worked with the newly formed operations transformation committee of the board and management to create a framework that focuses on product portfolio, drives operational and go-to-market excellence and embeds a culture and system of continuous improvement across the organization. Working together and with key outside advisors, we’re taking steps immediately addressing legacy issues and costs, identifying opportunities to drive margin expansion, invest in ways that can augment innovation and revenue growth, while meeting the highest of quality standards. As Dean noted, we're not yet in a position to give you specifics on how the value creation plan may impact 2017, but I am able to present the four pillars of the plan and some key themes and early decisions. If you’d all turn to page – or slide five, the four pillars are portfolio optimization, operational excellence, go-to-market effectiveness, and process sustainability. First, portfolio optimization. We continue to review our product offerings and our focus on simplifying our portfolio. We will invest in areas where we have structural advantage and will assess the impact of existing product lines where SunOpta is not or cannot be effectively positioned. Second, operational excellence. We are committed to ensure food safety and improve our quality performance in all areas of our business and this always has to be our first priority. Beyond that, we need to maintain our reliability and responsiveness to ensure we have satisfied customers. At the same time, we have identified significant savings opportunities in both procurement and logistics. Third, go-to-market effectiveness. In order to increase top and bottom line growth, we need to optimize our customer and product mix in existing channels, while also penetrating new channels that have high potential to add revenue and margins. Four, process sustainability. This is probably one of the most important areas as it will set the standards for all operations. Guard our culture and motivate our people to find ways to constantly improve SunOpta. It is about further embedding critical business process and implementing best-in-class tools in operations, finance, and sales. Please turn to slide six. Under each of the four pillars, we are already implementing some near-term actions to drive results. Within portfolio optimization, we have initiated the closure of the facility in San Bernardino, California and moving to an entirely co-pack business model. This decision is expected to generate at least $4 million of annual EBITDA improvement. In the operation excellence pillar, we are engaging third-party support across the supply chain to help us capture significant savings while also further enhancing food safety and quality. We will centralize non-grower related procurement and logistics and will drive supply chain excellence, strategic sourcing and product design to cost. To become more effective in our go-to-market strategy, we will shift our sales and marketing focus towards the channel-based systems as opposed to the current regional structure. Additionally, we have identified numerous areas of opportunity to drive incremental sales. For example, food service. Beyond the customers we serve today has been identified as a substantial white space opportunity for the company and appropriate resources will be deployed to develop this area. Finally, in the area of process sustainability, we have formed a project management office to manage all critical activity and plan the inter-related work streams from the four pillars. Focus will be directed towards simplifying and strengthening the organization, improving plant operating levers, augmenting asset flexibility and capacities, investing in systems that can provide detailed data on supply chains, and manufacturing processes to support commercial strategy and optimizing working capital. With that, I will turn the call over to Rik and Rob to discuss the third quarter results. Rik, over to you.

Thank you, Kathy. And, Dean, I appreciate your kind words and it's a pleasure to be here today to provide an update on the quarter and answer any questions you may have about that. Of course, as you can imagine, this particular update is a bittersweet moment for me as working with a new board and the team from Oaktree on the enhancements you’ve just heard about, makes me more convinced than ever that SunOpta is on the right path. At the same time, while we have implemented many positive changes, I also recognize that more needs to be done and that this may be best achieved with new leadership in place. So, with that, let’s turn to slide seven. Our Q3 revenue added up to $348.7 million, slightly less than we had predicted due primarily to three factors. First, lower volumes in sunflower products than we had foreseen, which cost us about $3 million, a fire at a copacker on the West Coast where we have some of our pouch products filled which cost us about $2 million, and finally, a slower-than-anticipated ramp-up of new contracts in the healthy snack segments. Looking at the numbers by segments, Global Ingredients declined about 9% on an un-adjusted basis. But if we adjust for the impact of lower commodity prices, foreign exchange and the impact of the recall, the underlying decline is actually about 3%. As before, domestically-sourced raw material saw a significant decline on a like-for-like basis of about 24% because we contracted less acres than in previous years and sold less to export markets as our focus has shifted to margin generation ahead of revenue growth. Our internationally sourced organic raw materials grew like-for-like by 16%, well above end markets. Although somewhat slower than in previous quarters as some of the customer slowed down their contractor deliveries and each quarter, of course, we're facing tougher comps. In Consumer Products, we grew by 67%, but, obviously, you also need to compare that on a like-for-like basis, mainly to adjust for the acquisition of Sunrise Growers last year. When we do, growth was actually only 1%. Now, we’re very pleased with the performance of our healthy beverage platform where revenues increased 16%, driven primarily by our aseptic beverages. We started shipping the new product to our largest food service customer and also added other new wins as a result of the East Coast expansion, which truly gives us a national platform unlike anyone else in this space. In healthy snacks, as I mentioned, the ramp-up of new product launches and contract was slower than expected and they also suffered from the fire at the copacker I mentioned just now. Net-net, we declined about 13% in revenue due to these factors, combined with the slowdown due to lower promotional activity in our fruit snack portfolio. Finally, in healthy fruit, the decline versus prior year after adjusting for some SKU rationalization, following the consolidation of our Buena Park facility, was roughly 5% or about $6 million. This decline is mainly attributable to lower sales to our largest food service customer due to timing of deliveries compared to the prior year. Looking ahead, we have contracted a substantial amount of this food service business for 2017 already. So, please turn to slide number eight. Gross margin for the quarter came in at an adjusted rate of 12.3% compared to 10.7% adjusted last year when we had the port issues with importing organic feed as well as the startup cost for the East Coast aseptic facility. This compares to a gross margin of 11.5% in the second quarter based on the same adjustments. Overall, a good uptick of 160 and 80 basis points respectively. Global Ingredients [indiscernible] 12.5% compared to 11.4% last year and about the same as the 12.4% we booked in the last quarter. The positive change to last year is because our sales continued to shift to higher margin organic products, which we have been experiencing for some time now. Overall, good progress. And as we have stated before, we are managing the domestic sourcing for margin and not revenue. Consumer Products came in at an adjusted rate of 12.2% versus 9.9% last year and 10.7% in the second quarter of this year. The margin rate improved significantly both against last year and against the prior quarter as we anticipated following the challenges we experienced in healthy fruit in the second quarter of this year. Also, as our aseptic beverage plants are now filling up to more than 70% utilization, this is helping to drive plant efficiencies inside beverages. With that, I’ll turn the call over to Rob to go through the numbers in more detail.

Thanks, Rik. I’ll take you through some of the key financial statistics as well as balance sheet and cash flow metrics for the third quarter. Turning to slide nine, gross profit was $41 million for the third quarter of 2016 compared with $36 million in the second quarter of 2016 and $26.3 million quarter for the third quarter of 2015. As a percentage of revenues, gross profit for the third quarter of 2016 was 11.8% compared to 10.3% in the second quarter and 9.5% in the third quarter last year. Excluding the impact of an acquisition accounting adjustment related to the sales of Sunrise inventory and losses caused by the interruption of production in our roasting operations, the gross profit percentage for the third quarter of 2016 would've been approximately 12.3% compared to 11.5% in the second quarter of 2016. The sequential improvement in gross profit reflects increased volumes of IQF fruit and improved production efficiencies within our frozen operations as early season crop shortages were recovered. For the third quarter, we reported operating income of $13.2 million or 3.8% of revenues compared to operating income of $8.8 million or 2.5% of revenues in the second quarter of 2016 and operating income of $4.1 million or 1.5% of revenues in the third quarter of 2015. Adjusting for the same items I just mentioned, as well as the impact of legal costs, mainly related to the Plum dispute and the strategic review, operating income in the third quarter would have been $16.8 million for 4.8% of revenues. Earlier today, we announced the planned closure of our juice facility located in San Bernardino, California, as we’ve determined it will be more profitable to transfer our juice production from the facility to contract manufacturers with whom we have ongoing relationships, rather than make further investments in support of the bottling or extraction areas of the facility. These investments would have been necessary to satisfy packaging format changes that were initiated by our largest juice customer and to address challenges in contracting sufficient supply of raw citrus for the upcoming season, which would have allowed for effective and efficient use of the facility’s extraction capabilities. In the third quarter of 2016, we recorded an impairment loss of $10.3 million to write-down the carrying value of the long-lived assets associated with the facility. We expect to incur additional facility closure costs of approximately $4 million to $5 million over the next one to two quarters relating to lease termination and severance costs. On a GAAP basis, for the third quarter, we reported a loss from continuing operations of $3.4 million or $0.04 per common share compared to a loss from continuing operations of $0.2 million or zero cents per diluted common share during the third quarter of 2015. Third quarter results were impacted by a number of items that are not reflective of normal operations and have been excluded when calculating adjusted earnings. These items included $5.5 million of costs associated with the purchase accounting, financing and integration of the Sunrise acquisition, $0.7 million associated with product recall costs, $0.06 million of litigation related professional fees, $0.5 million in costs associated with the strategic review, and $1.3 million gain from changes in unrecognized tax benefits. Excluding all of these items on an after-tax basis, adjusted earnings in the quarter were $6.3 million or $0.07 per diluted common share compared to adjusted earnings of $4.7 million or $0.07 per share in the third quarter of 2015. We realized adjusted EBITDA of $26.7 million during the third quarter of 2016 compared to $23.5 million during the second quarter and $13.2 million in the second quarter of 2015 – pardon me, third quarter of 2015. I’d like to remind listeners that adjusted EBITDA and adjusted earnings are non-GAAP measures and a reconciliation of these measures to GAAP can be found towards the back of the press release issued earlier this morning. Turning to slide ten, from a cash flow perspective, during the third quarter of 2016, we generated $17 million from cash from continuing operating activities, reflecting cash results from operations and a small reduction in working capital. During the third quarter, we invested $5.5 million to purchase capital assets and we expect to incur capital expenditures of approximately $18 million to $20 million for 2016. During the quarter, we applied $13.1 million of cash against our global credit facility. As we mentioned on the last call, the seasonal outflow of cash in our business is greatest in the first half of the fiscal year due to the timing of raw material purchases from growers. The buildup in working capital has been reduced over the back half of the year resulting in a positive cash flow expectation as the company heads towards year-end. We expect further positive cash flows from continuing operations in the fourth quarter. If you’ll please turn to slide 11, you’ll see our key balance sheet metrics. At October 1, 2016, SunOpta’s balance sheet reflected total assets of $1.2 billion, total debt of $546.3 million and a total debt-to-equity ratio of 1.36 to 1. Total debt declined by approximately $12 million from the end of the second quarter of 2016 as a result of the positive cash that I just mentioned. At October 1, 2016, SunOpta’s leverage was approximately 5.8 times adjusted EBITDA on a trailing four-quarter basis after eliminating the negative impact on EBITDA from the San Bernardino juice facility. From a liquidity perspective, we ended the quarter with approximately $105 million of available capacity on our asset-backed credit facility. And following the conversion of our bridge loan into six-year notes, which I’ll discuss in a moment, we are very well positioned with sufficient capital resources to support the value creation plan mentioned by Kathy. On October 7, 2016, we announced a strategic partnership with Oaktree Capital Management whereby Oaktree invested $85 million into cumulative non-participating Series A preferred stock of SunOpta Foods, Inc. that are exchangeable at any time into common shares of SunOpta, Inc. The net proceeds from the issuance of the preferred stock were used to repay $79 million of borrowing on our second lien loan, reducing the aggregate principal amount of the second lien loan to $231 million. On October 9, 2016, the remaining $231 million of the second lien loan matured and automatically converted into a term loan bearing interest at 9.5% with a maturity date of October 9, 2022. On October 20, 2016, all of the outstanding term loan was exchanged for a corresponding amount of 9.5% senior secured second lien notes to 2022, which effectively completes our debt capital structuring, following the purchase of Sunrise Growers in 2015. Finally, during the second quarter of 2016, the company announced a voluntary recall of certain roasted sunflower kernel products produced at its Crookston, Minnesota facility. For the first three quarters of 2016, estimated losses of $28 million were recognized in relation to recall. The company carries general liability and product recall insurance and expects to recover recall related costs less applicable deductibles and subject to coverage limits. As a result, during the first three quarters of 2016, the company recorded estimated insurance recoveries of $27.4 million for the losses recognized to date. As the company continues to work with its customers and insurance providers to substantiate claims received, it may need to revise its estimates in subsequent periods. With that, I’ll turn it over to Kathy who will conclude our prepared remarks. Kathy?

Thanks, Rob. If I can leave all of you with some key messages, it would be those on slide 12. The successful implementation of the value creation plans will deliver value for all stakeholders. For our customers, it will lead us to the most trusted, reliable supplier of natural and organic ingredients as well as private label solutions, supported by timely and on-trend innovation. For our employees, we aim to provide them with the tools, resources and support to help them do their work and incent them to align with our objectives. Finally, for our shareholders, it's all about delivering value long-term through meeting or beating our mid-term EBITDA targets. So, with that, I’d ask the operator to please open up the call to questions.

[Operator Instructions] Our first question comes from the line of Peter Prattas with AltaCorp Capital. Your line is now open.

Good morning, everyone. I’m wondering if you can provide an update on the capacity utilization rate within the aseptic healthy beverages business and how that has progressed through the quarter and maybe where you expect to turn the year given any new sales you may have signed. And with respect to the healthy fruit business, you had a few headwinds which faced you in Q2 related to the later strawberry harvests and some competitor recalls that hurt sales. I’m wondering here if you could tell me if we saw any transition towards tailwinds through the third quarter and whether those are expected to continue to unfold here in the fourth quarter. Thanks.

Yeah. Hey, good morning. So, basically, as I mentioned in the remarks, our utilization rate is now above 70% and we expect to continue to improve that utilization probably to about 75%. As I also mentioned, we started shipping the new beverages to our food service customer and that will only continue to grow as we progress into the fourth quarter. When it comes to healthy fruit, yes, sales were impacted in Q2. You look at IRI data which we just received last week, the category has been growing in the third quarter, so we – except for his large customer in food service, that basically caused a year-over-year decline. What is more important, though, is that definitely our margins bounced back to more historical levels. You remember in Q2 how the margins were impacted by all the sorting issues that we had to go through. We have been overcoming those and margins are back up and we continue to expect good things from our IQF fruit business.

Our next question comes from Eric Gottlieb with D.A. Davidson. Your line is now open.

Yes, hi. I was just trying to get through this plan a little bit more. Can we compare and contrast where we were in April or what are we giving up on and what goals are going to remain? There was a lot of specifics back then. There really was no specifics now. And I am wondering if you can just shed some light. I know you said that we weren’t trying to get into it, but at least somewhat.

Well, look, if I go back to the house that we have been presenting that is now obviously being replaced to some degree with a value creation plan, but if you just look at the house itself, first of all, innovation, we are far exceeding our goal of $10 million of innovation this year on the back of this food service win that we’ve had. Secondly, if we say about healthy beverages where we said we need to get double-digit growth inside of aseptic, definitely getting that. If you look at the healthy fruit segment where we said we have to go for successful integration, we’re getting the synergies, although the base plan is off of our expectations, mainly due to the issues we had in Q2. If you look at it on the SG&A, you can see that yourself. We’re definitely below the 8% that we have stated. I think the latest quarter, Rob, was…

Right around 7%.

Right around 7%. And then, finally, I think the issue where we've been struggling, of course, in terms of the reduction of our cost of non-performers on the operational side. I can’t call that a win for this year when we had to announce the product recall in the second quarter. So, that's a little bit of a more detailed update for you on the house, if you like.

Okay. And then moving on to the food service opportunities, what specific categories or channels are you targeting?

Well, look, when all the external partners have been looking at the business, they really identified that the food service is just not one channel, right? You have broad line distributors. You have the chain accounts. You have the contract feeders, et cetera, et cetera. If we’re looking at the success we’re having with a very large food service customer from the focus on coffee on the West Coast, we think that that success can be replicated by going to broad line distributors for our aseptic beverages. But the outside-in look is there’s more opportunities for our snacks portfolio as well as our fruit portfolio into that channel. And I have to say that, as a company, I think we’ve under-invested into marketing and sales resources in the past. It’s a significant area of white space that the company will be well served to invest in, so that we can increase the growth across the platform.

Okay, fair enough. Do you have a targeted leverage?

Yeah. Our target, what we said before, is that we expect the cash flow over the coming period to time to get down to, hopefully, in the 3% to 3.5% range, I’d is over-targeting. The important thing right now as you look before us and with the value creation plan and acknowledging that this will take potentially some investments to start to get at the improvement, we do have $105 million of availability on our ABL, which offers us good capital flexibility to execute that. Bu our goal of continuing to de-leverage is, obviously, still something that we’re pursuing and I’d suggest that 3% to 3.5% is a comfortable spot for us to end up.

So, before you’re going to use that ABL to kind of swap out some of the 9.5% and now you’re going to hold some of that back to make investments in the business, is that right?

We’re definitely going to be investing in the business. What we will be doing as we cash flows is making sure we put the money to the most effective use by way of where we’re going to be generating returns. And so, that will be ultimately what guides our decision-making on whether we’re, in your words, holding it back, Eric. But that’s the key here. We’ve got the flexibility. We need to deliver on the value creation plan. So, long-term, we feel the benefit is better to invest rather than reducing the debt. The debt – we’ll bear that interest. The debt is temporary. We can reduce that as the cash flows pick up over time.

Okay.

And just to jump in, Eric, important to note, and it wasn’t in the script, we do have the ability under the second – or under, what is now, the notes to make payments against that in each of the first two years. So, in terms of the debt capital restructuring we've done, we’ve afforded ourselves that flexibility where we can continue to reduce the 9.5% debt to a certain extend over the first couple of years.

Okay. I’ll pass it on with that. Thank you.

Thanks. Operator The next question comes from Amit Sharma with BMO Capital Markets. Your line is now open.

Hi. Good morning, everyone.

Good morning.

Hey, Amit. Good morning, Amit.

Rik, thanks a lot for all [indiscernible] for the last several years and good luck with your endeavor. With that, Dean and Kathy, could you just reiterate what midterm goals are in terms of both topline and margin profile? If you want to go at the divisional level, that will be better. But just put on the table, what are those goals.

And maybe I’ll just jump in, Amit, what we’ve got in our release here. As everyone is aware, we did put out our midterm targets, which were back in April, 24 to 36 months was the time horizon provided. And that was very much a buildup by all the pieces of the business, but I think the fundamental metric, if you will, that we put out there as a goal is to achieve the EBITDA percentage of between 8.5% and 10.5% of sales. And so, to me, fundamentally, that is what will drive the most value here in terms of achieving those. And so, I think to be really short about it, that is the ultimate target we’ve got in mind.

And what is that goal for top line?

For topline, if you recall, we kind of went segment by segment, but the topline growth was high singles when you balance it all out between what we expected to grow in terms of our organic sourcing versus what we said was not expected to be growth and certainly coming through this year not as growth in the domestic sourcing. And then, across our consumer portfolio, we very much went channel by channel specific, and said we expect to grow at or, in some cases, above the markets. So, it really was a sum of the parts that balances out at high-single-digits. I think that as we look forward, obviously, we’re going to be in the first pillar of our value creation plan, an important feature is where we’re going to invest more heavily and what aspects of our portfolio do we step back and say, we’re perhaps not best situated to succeed. And so, obviously, way too early to give you any more than that kind of visual in terms of where our head is at. But if there are changes there, obviously, that would change what would be just a simple revenue growth number. So, it is very much a buildup piece by piece, but the focus is hitting that EBITAD goal.

Right. And I fully appreciate that you don't have all the specifics or you’re not ready to share all the specifics today, but given the extent of changes that we're talking about, not just at the high level of management, but [indiscernible] organization, changing the compensation structure, changing your sales structure, changing your orientation of customers, consumers – sorry, customers’ channels. And, Dean, this is – perhaps are you – given your experience, is it unreasonable for us to expect for you to get there either sooner or achieve or exceed those goals in this timeframe.

Well, Amit, I think a couple of things. I’ll make sure what time frame you’re…

24 and 36 months is what the midterm goal…

For 36 months. I think what – and as Robs says is I think our focus – we’re basically saying, don’t change your models at this point, right? When we have the net impact of the value creation plan, we’re going to share those details with you. So, at this point, stay with where we are. Our focus will be on margin and EBITDA, right, because that's – at the end of the day, those are the ultimate measures of our success and our commitment to our shareholders. But, yeah, in my past, do I think the timing is realistic to achieve our plan? I do. It takes time. And as I said in my opening remarks, transformation is hard, change is hard. It’s not linear. But we absolutely are committed and believe in the long-term value creation at SunOpta. Absolutely.

Okay. That’s fair. And then one more for – we’re talking about replacing Rik and Alan. Should we expect more changes throughout the organization as you put this new structure in place?

I think anybody that says they’re not changing is either lying or dying, right? When any company, no matter where they are in the lifecycle or transformation cycle says there’s not going to be change, that's actually ludicrous. So, yeah, we’re going to change. And we’ll have a change-oriented mindset. And we’re going to be decisive. And we’re going to be results-oriented and we’re going to be focused on accountability and focusing on delivering long-term shareholder value. And I think against the four pillars of our value creation plan, yes, you can expect continued change and positive change for, as Kathy said, for all our shareholders – stakeholders, for our customers, our employees and our shareholders.

Got it. And the last from me, just to get your early thinking on the private label brand and, clearly, that is seen as a very attractive opportunity, could you at least – even in broad [indiscernible] can you paint what the opportunity is relative to the size of the business that you have in that channel today?

I don’t know who that [indiscernible] to. I think it’s premature for us to establish what the total topline or private label component of that will be. Very bullish on private label. Very bullish on consumer brands broadly, specifically private label and then, as Rik said, across multiple channels. We think we have opportunities in the retail channel and across all the food service channels. But, obviously, we will hear more as we continue to ferret out those and identify those long-term topline opportunities.

That’s it from me. Thank you very much. And I really look forward to getting more specifics on this turnaround plan.

Right. Thank you, Amit. Operator [Operator Instructions] Our next question comes from the line of Mitch Pinheiro with Wunderlich Securities. Your line is now open.

Yeah. Good morning.

Hey, Mitch.

Hey, so a couple things here. First, you already addressed some of this. But this value creation plan, a lot of it, I’ve heard this before over the last three, four years, simplifying the organization, building a culture of accountability, lot of these bullets on slide five sound like repeats. And I’d like to understand, like – you’re always looking for cost savings. Why is it different this time?

So, I think the primary difference is the whole organization is focused on this from the board on down. We mentioned in the script that we have an operations transformation committee that’s overseeing all of the activity and the value creation plan and all of the pillars that feed into the value creation plan. So, we have all of the new resources and the existing resources and there’s a far more operational oriented focus with frequency and assistance and guidance and challenges and – I think there’s – that’s dramatically different than anything we've ever done and we started that in the last couple of weeks and right now we’ve been meeting actually weekly with the group. The other thing I think that's important is we make – we’re very decisive. We’re action oriented because we have all of these resources focused on it. We’ve closed San Bernardino. That’s something we've been contemplating, we've been thinking about, we – the benefit was there and the EBITDA savings were there. So, we made that decision very quickly. And I think that demonstrates our commitment. The other thing that we're doing very differently is we actually have a structured plan that everybody is involved in, everybody participated in, we’re getting everybody to buy into, and work streams related to all the different activities that feed into these pillars, we’re bringing in the resources that are necessary, sometimes resources. We have a person working with us full time from Oaktree and access to all of the Oaktree. They have access. They’re experienced. They know how to do these types of transformations with the consultant resources and all the different groups of people that can help us with our specific needs. So, it’s all hands-on deck if we need to do it. Let’s fix it. We've all been frustrated by the lack of consistent results. We have great supply. We have great products. We have great customers. But we seem to get bogged down in the middle when it comes to consistent manufacturing. And we’re really committed once and for all to going deep into the factories, making sure we’ve got all the measurements in place, the systems in place, the quality in place and doing – it’s going to be hard and fast, but we’ve got all the resources focused on that right now. Dramatically different than anything we've ever done before. And we have a project management office that I'm sharing. Colin Smith from Oaktree, our full-time resource is acting as our de facto COO. He’s here every day. He is leading this. He’s leading the work streams. And everybody's reporting it to him right now. So, it’s quite different.

Okay. That’s very helpful. With San Bernardino, so you’re going to be selling that facility. Is that right?

Well, for right now, what we’ve announced is our planned closure. Listen, the good news there is – commercially, the business is intact. It goes without saying that we’ve not been successful in what we had intended to do with that facility both on the supply side and on the commercial side. There have been changes. Just don't leave us in a spot where we can honestly say we can make it a success. But it’s not going to impede sales. It’s going to improve margins because we’ll stop the losses there. As far as what we will do with the facility, Mitch, that we still have to work through, how to best maximize the value that remain there.

Let me ask you another thing. I guess you sort of talk about making decisions quickly and you acted on San Bernardino really quickly. It’s been far from quick. It’s been two years plus of just a very painful process quarter-in, quarter-out, why wasn't a decision made a year ago? Just curious. All of a sudden, the quickness with San Bernardino is, is it just time to cut the losses? You sort of saw light at the end of the tunnel and it just never happened.

All those things, absolutely. There comes a time. We're managing a lot of change previously. Obviously, we’re investing. We were committed to turning that facility around and driving results according to our plan. Enough is enough now, I think is kind of the message that you heard from Kathy.

And ultimately, the customers change. The demands of the customer have changed. And we can be more nimble by doing it with contract manufacturing and it’s more profitable, bottom line. We have to make those decisions. Doesn’t mean we have to [indiscernible] facility.

Yeah. It will be nice to get San Bernardino out of the conference call transcript once and for all. And then, so couple other things real quickly, is investing. You talked about investing in the biz. What are we actually talking about? New facilities, different equipment. What is the investment that you're specifically talking about?

We’re looking at all of the above. However, we think it’s premature to start talking about the details. But when we do have that detail, we’re happy to share it with you.

Okay. So, when we talked, we were looking at around $20 million of CapEx. Are we going to see next year go to $40 million, $60 million or is it not in those kind of numbers we’re talking about? Just some kind of gauge when I start looking at cash flow for next year. Is it…?

So, $20 million this year. Obviously, that's kind of an average I’d suggest here for us. Where is at all going beyond maintenance? Right now, it’s going into things that make a tone of sense, productivity improvements, things that help us be more efficient and deliver more consistently in the factories. As Kathy mentioned, we’re not in the spot to give you a new number at this point. But I think it’d be fair to assume there's going to be some capital spending because we're here in terms of our portfolio invest and maximize, especially in those places where we believe we’ve got the biggest competitive advantage here. And so, it’s very likely that that would take some capital dollars. Mitch, to give you a range from modeling perspective, certainly, we’ll have more granularity in the future for you, but if you went back to kind of historical levels, for now, I’d suggest that wouldn’t be – you wouldn’t be too far away from an incorrect source if you went back.

Okay, that’s helpful. I guess final question is, as you still look at your midterm targets, it's going to be a mix still – a revenue mix to get to these EBITDA targets and some of the investment and supply chain and all the other improvements you are looking to make, is that fair, it’s going to be a mix of both revenue and…

For sure. For sure. And I fully appreciate that it’s – as we did the targets and established them and the reason we did, kind of sum of the parts is because as you can probably well appreciate, Mitch, that’s how you have to model the company. And so, it’s going to be a mix of growth. It’s going to be a mix of greater productivity improvements, efficiencies, volume, all of the above. And that’s really the heavy lifting that we’ll be working on now. And at some point certainly will be able to offer more granularity on how to think about that in different pieces.

Well, thank you. Appreciate the insights.

Thanks. Operator Our next question comes from the line of Jon Andersen with William Blair. Your line is now open.

Good morning, everybody.

Hey, Jon.

Good morning, Jon.

Most of my questions have been answered. A couple of quick follow-ups. On Mitch's question there, to get to the midterm EBITDA target, there’s a lot of discussion around focus. Makes sense to me. Should we be assuming that parts of the business or the business gets kind of maybe smaller from a revenue perspective before it gets larger. And as part of the equation here that helps you to get to the EBITDA targets that you’ve cited?

Are all options on the table? Absolutely. And so, I think it’ll be fair for you to assume – I appreciate it’s a difficult thing to model. But again this whole concept of focus, if you will, is very grounded on investing in areas where we’ve got the structural right to win and we think we’re very competitively positioned. And in other cases, we will evaluate whether we’ve got the same long-term value opportunity. So, it could very well be a mix. And not to sound like a – I’m repeating myself, but we’re just not in a position to give you much more detail than that right now, but certainly more to come.

Okay. And the decision on San Bernardino, did that have any implications – I understand the benefit to EBITDA. Does that have any implication on sales or kind of commercial activities or is that…?

That's one of the things. San Bernardino was just one of the places where we created the bottled juice. And so, we had co-pack relations and have always had co-pack relations on both coasts. And that’s what will be tapped to continue in and grow the sales that we’ve got in that part of our product portfolio. So, no, no topline impact at all as a result of that decision.

I may have missed this earlier, is there anything you can say about the – as you work through the value creation plan, the timing of updates, will we get updates with quarterly results, could there be something on an inter-quarter basis? But just kind of – so we can get a sense for the pacing of kind of updates as you move through the process?

Yeah. Quarterly would be the cadence that I expect that we will come out. This is priority number one, two and three for the company and so, obviously, each quarter we’ll be providing all investors with an update of where we’re at and how to expect what’s going to come.

Okay. Last one from me. Where was net debt – or where is net debt at present and where do you think your debt level will come in at year-end?

Sure. So, we ended the quarter at $546 million. So, we’re down $12 million from the end of the second quarter. And it will be fair for everyone to continue to see that drop as we head towards the end of the year. From my perspective, I would use last year's fourth quarter as a decent proxy for what we think this year's fourth quarter can do, keeping in mind that the biggest impact on our debt levels is our working capital. And so, I think last year was in the range of $25 million to $30 million from working capital from the end of the third to the end of the fourth quarter. I suggest you use that as your guide.

And then the $79 million that was used to retire second lien, okay.

Of course, So the $79 million is a straight reduction on a net basis to debt. And you’ll see that come through in the fourth quarter, of course.

Okay, great. Thanks, everybody. Good luck.

We have a follow-up question from the line of Amit Sharma. Your line is now open.

Hi. Thank you so much for taking the follow-up. Two quick ones for me. Dean, as we think about future cost savings, A, is there a metric to think about, what those are? And two, I would imagine that sales force optimization would be part – not sales force, but total workforce optimization would be part of that. Are there any union issues to think of? And then I have one more after that.

I’ll let Rob – I’m not as familiar with the union.

We have no unions, Amit, today. [indiscernible].

And are we talking at all about the size of the future savings other than the $4 million cited for the San Bernardino plant.

No. No. Right now, we’re not giving in that – appreciate the thirst for knowing more granularity. We fully get that. We plan on providing that when we’re prepared. But right now, it’s just too premature for us to give much more granularity than that. What I don’t mind sharing is that some of the investment will be into bolstering our sales force, our marketing efforts, those sorts of things to – to take advantage of those white space areas that Kathy mentioned.

Got it. And then just one for – Dean, you mentioned a couple of times, even in the script, SunOpta’s right to win in certain areas. Could you just highlight, when you think of the portfolio as part of your deep dive into it over the last several weeks or not, what are those areas that come to mind? What are the top three areas that you think of?

I’ll let Kathy and Rik chime in as well. But I think as we’ve said before, we have the three areas in healthy fruits, healthy snacks and healthy beverages will continue to be our key focus areas. And as we think about the supply chain, all the away from global ingredient sourcing on the healthy non-GMO and organic all the way through finished consumer goods, specifically around private label.

If I can just build on that, I think as everybody recognizes, I hope, we’re the only company that is vertically integrated. And as demand continues to outstrip supply, I think that’s going to serve us well. And if you look at all the investments that we’re making into, for example, our aseptic portfolio, where we are now the only one that has a national platform. If you look at the investments that Sunrise have been making where we’ve diversified sourcing, but also where they have diversified where they pack to provide more logistics advantages, those are incredibly difficult I think to replicate.

Thank you so much. Operator I’m showing no further questions in queue. At this time, I’d like to turn the call back to Ms. Houde for closing remarks.

Thank you, operator, and thank you all for participating in our Q3 conference call. We are very excited about the opportunity ahead of us. We are very committed to the hard work that's required to deliver on our value creation plan and we look forward to updating you on future calls.

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program. And you may now disconnect. Everyone, have a great day. Q –Name: Text A –Name:

Thank you. I'd like to turn the floor back to you for any final remarks. End of Q&A:

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