Good morning, and welcome to SunOpta Incorporated's Third Quarter Fiscal 2014 Earnings Conference Call. By now everyone should have access to the earnings press release that was issued after the close of business yesterday. The release is available on the Investor Relations portion of SunOpta's website at www.sunopta.com. This call is being webcast and the transcription will be available on the Company's website. As a reminder, please note that 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 of the risk factors contained in SunOpta's press release issued yesterday, the Company's third quarter fiscal 2014 quarterly report on Form 10-Q that will be issued at the close of business today and other filings with the Securities and Exchange Commission for more detailed discussions of the factors that could cause actual results to differ materially from those projections and any forward-looking statements. Finally, we would also like to remind listeners that the Company may refer to certain non-GAAP financial measures during the teleconference. A reconciliation of financial measures was included with the Company's press release issued yesterday. Also note that unless otherwise stated, all figures discussed today are in U.S. dollars and are occasionally rounded to the nearest million. I now would like to turn the call over to SunOpta's CEO, Steve Bromley.

Thanks, and good morning, everyone. On the call with me today are Rob McKeracher, our Vice President and Chief Financial Officer; and Rik Jacobs, our President and Chief Operating Officer. This morning, I will provide you with a brief overview of our third quarter 2014 financial results and an update on our key strategic initiatives. Then Rob will discuss our financial performance in more detail and Rik will provide an update on our operations. Finally, I will provide some brief closing remarks and then we will open up the call to questions. We remained focused on our core strategies during the third quarter and continued to realize the benefits of our operational realignment and re-position go to market strategy. Our business segments posted solid growth in revenues and we’re pleased that each of our core foods operating segments generated higher revenues in the third quarter versus the prior year. This positive revenue growth, combined with our 140 basis point gross margin improvement and operating margin expansion of 80 basis points versus the prior year, helped fuel our earnings performance in the third quarter. We’re pleased with our continued execution against our stated objective of growing our top-line while at the same time improving our margin profile. We achieved these results despite additional investments in people and infrastructure to support our future growth opportunities. Our third quarter and year-to-date revenues were led by a higher demand for internationally sourced organic raw materials, both domestically and abroad, and continued growth in consumer package categories including aseptic beverages and retail frozen food products. Consistent with prior quarters, our growth more than offset lower commodity grain pricing and volume. We continue to experience positive industry trends and importantly for us, moment is being driven across product categories, customers and geographies. Consumers are increasingly buying natural and organic products and our product portfolio was well positioned to capitalize on these opportunities. Many consumer trends such as clean labeling, eating healthier at home and healthy portable snacking all support continued growth in the categories we serve. Our diversified integrated fruits platform has enabled us to build a leadership position in the organic and non-GMO industry. This combined with our management team’s consistent focus on our three core strategies of becoming a pure play in natural and organic foods company, growing our value-added consumer products and ingredients portfolio and leveraging our integrated platform will continue to drive our long-term performance. So with that, I’ll turn the call over to Rob who will dive into the numbers. Rob?

Thanks, Steve and good morning, everyone. I’ll focus more specifically on our financial results for the third quarter and three quarters ended October 4, 2014. For the third quarter of 2014, we reported record revenues of 319 million, an increase of 5.2% compared to revenues of 303 million during the third quarter last year. Excluding the impact of changes, including commodity prices, foreign exchange rates, and downtime due to aseptic facility expansions, consolidated revenues increased 10.1% and SunOpta Foods revenues increased 11% versus the prior year. We generated operating income of 12.7 million during the third quarter, up 29% from 9.8 million in the same period last year. The growth in operating income was driven by increased volume and margins on organic raw materials, improved performance in our sunflower operations, and increased contribution from higher margins aseptic beverage and frozen private label retail products. These positive factors were partially offset by lower margins on specialty corn, increased SG&A in support of the growth of the business, and within the Consumer Products segment, costs associated with beverage facility expansions, lower plant utilization of Premium Juice operation during the retrofit of this facility, and increased competitive pressures in the resealable pouch market. Opta Minerals also continued to experience pricing pressures predominately on industrial mineral products. For the third quarter of 2014, we reported adjusted earnings from continuing operations of 8 million or $0.12 per diluted common share compared to adjusted earnings in the same period last year of 4.8 million or $0.07 per share. A tabular presentation of adjusted earnings from continuing operations can be found in our press release that was issued after the close of business yesterday. Included in our third quarter 2014 results was a non-cash charge of approximately 8.4 million after-tax or $0.12 per diluted common share, representing…

Thanks, Rob. Good morning, everyone. I’m going to discuss the performance of the three segments in SunOpta Foods that you already know, Global Sourcing and Supply, Value Added Ingredients and Consumer Products. So let’s start with global sourcing and supply. The revenue increased 7.4% and that supported both the gross margin and operating margin expansion of 360 basis points. As Rob mentioned, when you strip away the changes in the commodity pricing and foreign exchange, the real growth rate here was 13.6%. The categories that did particularly well were organic alternative sweeteners, chia, quinoa, fruits, vegetables and feed products and that was offset to some degree by lower volumes of non-GMO corn and soy. I mean the market expansion versus prior year is due to three key factors: one, our factories are operating better, especially the cocoa factory in the Netherlands; two, we’ve turned around the sunflower business versus last year partially as a result of the rightsizing efforts with the shutdown and sale of two locations in the Midwest; and three is mix, the growth in higher priced organic raw material categories. In our Value Added Ingredients segment, revenues increased approximately 4%. Gross margin expanded 290 basis points and we’re pleased with our operating margin expansion of 140 basis points versus the prior year. Top line performance came from higher volume in food ingredients which continue on a positive trajectory, and higher volumes of oils and grain ingredients. That’s partially offset by lower starch and lower contract manufacturing sales. Our margin performance in the quarter reflects better plant performance across the board and is helped by increased reduction volume of food and grain based ingredients. In the third quarter, we launched our recently developed OptaSmooth in soluble fiber and nutritional beverage. Initial feedback has been positive, but it’s just…

Thanks, Rik. In summary, we’re pleased with our third quarter and year-to-date financial performance. Our balance sheet is strong and we’re generating strong cash flows, as Rob mentioned. Our progress stems from our organizational alignments which are yielding improvements in our performance and we’ll continue to drive sales growth and margin expansion. We have solid opportunities for continued expansion and we’re very excited that that will contribute to both the top and bottom line. Going forward, our team remains focused on the growth of our portfolio of natural and organic foods offerings, the further refinement of our cost structure to drive additional operational improvements, and the prudent evaluation of potential acquisition opportunities, supported of course by our strong balance sheet and future cash flow generation. We remain focused on pursuing all options to maximize shareholder value. As Rob mentioned, Mascoma completed the sale of the its yeast business. The realization of proceeds on this transaction is consistent with our strategy to divest our non-core assets so we can invest further in our natural and organic foods platform. In addition, the review of strategic alternatives for Opta Minerals continues and we remain committed to bringing this to a successful conclusion. In closing, our unique market position enables us to benefit from the increasingly growing global healthy foods and beverage industry. This dynamic with solid execution of our core strategies provides us with a strong platform to deliver consistent and sustainable earnings growth and in turn shareholder value. We continue to realize improvement across our business from our operational realignment and re-position go to market strategy, which we believe will only strengthen our business in 2015 and beyond. So that concludes our prepared remarks. I’d like to thank you for joining us on the call today. And with that, Rob, Rik and I are available to take your questions. So I’ll turn it back to the operator.

Thank you. (Operator Instructions) Our first question comes from the line of Scott Van Winkle of Canaccord Genuity. Your line is open.

So first on the aseptic expansion, can you give us the magnitude maybe on a percentage basis what, how much higher capacity will be in February of next year?

Yes, we’re installing a processor over there and today we have two processors in the facility and this is processor number three. And so that would basically be an expansion, $20 million, $30 million at least right away.

Okay. 20 million to 30 million in sales?

Yes. Then obviously we are now adding more lines as well, Scott. So the processor will unlock the capacity that we have in the facility [indiscernible] add more lines. Think about that a little bit, just kind of give a little bit of bridge on that point. If you take away those long time costs that we’re incurring and we’re expanding San Bernardino and the aseptic, the margins from the foods business go basically from four to about five. Then you have to see on the aseptic, you fill up the San Bernardino plants and the cost initiatives that are really going to take some hold in our factories that are performing better and better. And we’re now really attacking the rest of the supply chain as well if you like. So you should see solid growth going forward.

And how much volume was going through the San Bernardino facility before you went through the expansion project?

About $10 million to $15 million.

And that on the other end is going to be two or three ex that in capacity?

Yes, exactly.

And then on the comps side, you talked about overcapacity in pricing. I’m wondering is the overcapacity a function of kind of weaker consumer demand or like the growth has slowed or is it an overbuild on the packaging side?

I think there's two things going on over there. I mean we have innovated together with some of our customers to basically enter into new product categories, these protein filled pouches, et cetera, et cetera. And quite honestly, those pouches are not reaching the expectations of us, nor those of our customers. So that’s a little bit of a slowdown. And what we’re really finding out through more and more research that is becoming available and that we’re doing ourselves is that these pouches in terms of their appeal to the consumers are kind of limited to babies and toddlers, if you like. That is where about 90% of the usage that you see out there of the pouches that we have today. So if you look at that, it's a capacity that has been installed into the market over the last couple of years and has been tremendous. So now you have a temporary situation where you have some overcapacity in the market. And as I think everybody will appreciate, that makes it challenging to increase your margins and your volumes.

And then last question on commodities, if you think about -- you’ve given the sourcing growth ex-commodity changes was higher than the reported growth, what should we think about for the next 12 months or so about the impact of pricing of raw materials into your sourcing business or commodity prices, volumes are favorable, unfavorable, how will that flow through to the P&L do you think?

Well, first of all, if you will recall, at the end of the third quarter last year we entered -- it was a long position while the market was going down. The market is going down quite steeply this year as well as everybody that can follow the market as you can see. And I’m talking more about soy, corn, sunflower, the domestic stuff. We don’t have a long position right now, so that should help us out. And as the market goes down, we basically sell it on a certain spread, if you like. So from a dollar perspective, it should be a little bit -- pretty much the same. From a percentage perspective it should be a bit higher. That’s kind of on our non-GMO organic domestic portfolio. But then look internationally, when you look at the sesames, the chias, the coconuts, sugar, the coffee, the cocoa and stuff like that, I mean it’s kind of – that’s a very broad portfolio. So I think it’s kind of difficult to say broad brush whether or not that's going up or going down. I mean you saw cocoa going up a lot when you had the Ebola scare and now it has started to come down again, for example, right. So that’s a little bit too difficult to pin point, Scott.

Our next question comes from the line of Christine Healy with Scotiabank. Your line is open?

I just wanted to follow up I guess on the question on the resealable pouches and maybe I missed it in your opening comment, Rik. But, so it seems like the pouch opportunity may not be as good as you once hoped when Allentown came up. Do you plan on still trying to expand the pouch volumes at that lower margin or there are products that you could possibly process at Allentown to sell the capacity?

It’s both, Christine. I mean, we will be filling up that factory and we will be coming out with a separate announcement on that I think within the next four weeks or so. So we’re going to fill up that facility with other equipment and then at the same time the lines that we have, both on the West Coast and on the East Coast, we’re going to fill those up one way or the other.

So the existing the lines that you have dedicated for pouches will remain dedicated to pouches and you'll fill them up, but the rest of the capacity at Allentown, you announced that you’re doing something different, different products there?

Yes, I mean look, if you have a situation where it’s overcapacity in the market, it doesn’t make a lot of sense for us to then put more pouch lines in of the same. So, but there are other alternatives that would work very, very well in the Allentown facility. And we, as everybody will realize, we just yesterday had our Board meeting and have gotten approvals or go-aheads on what else we’re going to do. So, we’ll come out with something else on that.

And then turning to the consumer products segment, just margins in that segment on my calculations are tracking about 8% when you strip out the plant upgrade cost. So it’s still quite a bit below the targeted 12% to 14%. But Rik, in your comments you still seem confident that you can increase the margins in that segment with Modesto and the juice plant. Do you believe you can fully close the margin gap through organic means, gradual plant expansion, top line growth, or do you think you'll require acquisitions to really move the needle for that segment?

Look, I think we’re really looking at the overall fruit business, right, and how that margin is going to fall between the different segments, that might be a little bit different as we source more and more of our stuff for example through our own Global Sourcing and Supply group. But if you are just saying -- in the overall fruit business we’ve basically said, look, we want to reach at the end of next year about an 8% operating margin. And if you then bridge from where we are today to where we want to be in the overall fruit business at 8%, today without these onetime costs, our operating margins are about 5% already and those onetime costs are now going to go away. Then we just talked about the capacity expansion in aseptic that's starting in Modesto in February. That is a significant uptick because that is a very good segment for us, as everybody realizes. Then you're going to have to ramp up of San Bernardino and we’re commissioning San Bernardino right now. Obviously, that facility has been out of the air for a year and a half, so it’s going to take a little bit of time to fill that plant up. But I wouldn’t expect miracles overnight over there. But by the end of next year, we should have a full San Bernardino. Then if you look at all the cost initiatives that we’re taking in our operations, plus the innovation pipeline, I mean it makes me confident that we remain on track on the overall fruit business. And that means 12% Consumer Products or 11% Consumer Products, that I think is the range I guess that you’re talking about. It should be our highest margin product because this is where we add the most value to our customers. But we remain committed to overall fruit at 8% operating.

And just the last one for Rob. Can you talk to us about your capital projects? CapEx is only 12.5 million, so it’s well below, I guess your guidance was 30 to 35. Have some projects been pushed out or is Q4 going to be a big CapEx quarter? Can you just talk about that?

Yes, sure thing. There is a little bit of a push out. As Rik mentioned, some of the new expansions, the big dollars to be spent in Modesto more into the first quarter of 2015, as well there is some elements of financing that have taken some of the capital out of our cash flow so to speak. So the spend in the overall commitment of building and increasing capacity is still pretty much there. But the overall out of pocket fueled cash flows is lower. So, when we add operating leases, Christine, that leaves it on our balance sheet.

(Operator Instructions) Our next question comes from the line of Tim Tiberio with Miller Tabak. Your line is open.

I just wanted to follow back on the aseptic beverage category. It’s clear that obviously you're capacity constrained. But can you maybe just speak to what you’re seeing from an overall industry perspective? Are you seeing the overall industry as constrained as well? Maybe you can just give us a sense of how you see that developing over the next 12 months and maybe you can also just give us a better sense of what the barriers to entry are in aseptic beverage versus some of your other consumer product groups.

Yes. So if you look at the overall industry dynamics, let’s first -- we are in non-dairy and also now in dairy and we are in nutritional. If you look at those categories overall, we should see 10% to 12% growth rates on non-dairy, nutritional is growing 15% to 20%, something to that. We have made tremendous investments. If you look at the investments that we’re making in Modesto right now, that’s going to be more than $20 million right there. A processing unit that we’re putting in to be able to process these -- sorry, we paint it up with the filling lines that we’re putting, a processing unit like that is going to around close to $10 million and that’s just the unit, I’m not talking about the building. And then on top of that, there is a heck of a lot of know-how that we’ve built up as a company. And I would argue with you that we are the highest quality, most reliable aseptic contract manufacturer out there. And that’s not only because I’m saying that, you also see that. So if you look at Modesto two years ago, we did about 10 SKUs maybe, right now that factory is doing 45. And a couple of years ago it was three customers, now it’s more than 10 customers.

And I guess going back to question of organic versus M&A growth, even with these additional lines that are being added, based on the growth numbers that you’re talking about, is this a scenario where you may even have to look at M&A to really keep up with the growth? And are there any attractive potential assets even out there in the market?

Yes. You know what, I mean we evaluate targets like [indiscernible] on an ongoing basis and I think we have about three of them right now that we are trying to get across the finish line. But as Steve already commented in his prepared remarks, we have to also be prudent. When we find something that is strategically very, very appealing to us, and what do we mean by that, that goes into our core of healthy beverage and healthy snacks, we are prepared to pay a high multiple for that, but not to a degree where we can make it accretive anymore in year two. It doesn’t have to be accretive in year one for us. It has to be accretive in a fairly short period of time, if it’s truly strategic and right in the core of our business. But I think everybody on the line knows how high the multiples have been for some of the companies in the organics space. I think one of the more recent ones was I think Annie's at four times their annual sales. Those are the levels it becomes a little bit challenging to make that accretive for us.

And just one last question. I think several quarters back you had talked about potentially looking at further rationalization in the fiber ingredient plant network, but we’ve seen very strong operating trends in the quarter. Can you kind of just frame that up for us at this point? Has anything changed significantly within the fiber ingredients business that would be maybe give you pause to pursue further rationalization at this point?

If you look at the value added ingredients, it's obviously bigger than fiber alone, right, and the real driver of the growth and the revenue as well as on the margin is really our fruit business, so the fruit ingredient business. That is really performing very, very strong. The fiber is fairly flat right now. So if it is fairly flat and we have excess capacity, we need to continue to look at what is the right way forward with that business and that definitely includes looking at potential rationalization of growth.

Our next question comes from the line of Chris Krueger with Lake Street Capital. Your line is open.

Another question on the aseptic beverage business. What has been your actual growth rate in that business the last say two years? Do you think you an give that?

We’ve never disclosed that publicly, but it’s fast that we’ve been able to keep up with capacity.

This is sort of a roundhouse number, but it’s well over 30%, 35% CAGR.

Just in the last year I think we probably will have added something like $50 million worth of business.

How much of the percentage of consumer products business has it grown to become?

Yes, a little bit more than half.

Moving on from that, on your segmented breakdown, your corporate services, your expenses there were 3.3 million. It seems to have kind of accelerated this year versus last year. What’s driving that and how should we look at that going forward?

Well, Chris, one of the good news stories in that line is year-over-year because of the improved performance in the business we’re accruing a much higher level of incentives, bonus incentives, given our results versus where we’re targeting internally and where those things are. So, that is well over half of the jump in that line. The balance of the jump in that line are related to our realignment and additional professional resources that we’ve added to really position the Company to go through this next growth phase. I’m talking about operations, personnel and R&D, innovation personnel, M&A personnel that had been added over the last year. So it’s professional personnel combined with just higher incentive being accrued this year versus the prior year when our results were obviously not up to what we were expecting internally and thus the accruals were different.

And then one last question back to the Value Added Ingredients. I think I’ve asked this before, but a couple of years ago you announced the rice fiber product. Has that really made much progress?

Yes, we’re selling the rice fiber now more than what we have before. It’s basically a gluten-free fiber, so that makes it attractive to people. So, yes, we’re selling it. To some -- I don’t think we can devote company names, but there are some very interesting names that we’re selling it to. So it’s more and more.

Our next question comes from the line of Ron Reuven with Reuven Capital Investments. Your line is open.

So in regards to the Mascoma write-down, I guess last year you took a write-down – and I know It’s a non-cash item, but 21.5 million if I remember correctly and today it’s another 8.5 million. What’s the remaining value, or is there any remaining value for your holding?

So, a little bit of history there first, Ron. Just as you're probably aware of this, when we sold SunOpta BioProcess in 2010, because we realized that where our core business is natural and organic foods and being in a biomass processing business that’s focused on cellulose and ethanol didn’t fit with the company. So we sold our interest to Mascoma and took back – we had no book value on the business and we took back stock in Mascoma, no cash. And at that time we recorded a large gain, the value accreted under accounting was around $33 million to the company, non-cash. And when we set that up, we in our results immediately said to everyone, backed out of our results it’s a non-cash gain and there is nothing gained until we actually get cash proceeds. Then last year based on the market dynamics -- in 2010 we got good value for the business because cellulose and ethanol was hot hot hot. I think most people are aware that the rollout of cellulose and ethanol has been much slower and much more difficult. And kudos to the management team at Mascoma who really changed their business model to adapt from being a very high asset business model to an asset light model and outselling their bioengineered yeast products into corn to ethanol and then into cellulosic ethanol, but of course cellulosic ethanol has not done well. When you take a look at cellulosic ethanol companies, a public company that is involved in cellulosic ethanol KiOR went bankrupt yesterday. So we took a write down last year to really mark that investment back to what would be a fair market value at that time based on the market. So, what has happened now is that Mascoma have sold their yeast business for cash and royalties, et cetera. The business is then left with a number of assets and cash as well. And so you’ll see on our balance -- so we’ve written it down, we have on our balance sheet what the estimated cash proceeds will be and that’s $4.8 million. And some of the cash proceeds will start before the end of November.

And so the carrying value what you have is 4.8 million or what you’re getting out of this...?

Carrying value is 4.8 and Ron, that’s the estimated cash that comes initially as well as the estimated revenue streams that come from royalties over the next years.

And in regards to the acquisition, I guess you talked about it a couple of times during the conference, as far as you mentioned you had three targets. But I mean generally, what size companies are you looking at? I mean is there a specific size that you’re looking for? I know in the past you mentioned you’re looking for relatively [indiscernible] transactions than in the past. Is that still the same? Is there a range of sizes of companies that you’re looking at?

Yes. So you know what, Ron, I can tell you that there is big ones and little ones. And some of the smaller ones, if they strategically fit – and by smaller, $25 to $50 million revenue type companies. If they're a nice strategic fit, we’re not against looking at those. I think as you and I have chatted in the past, we’d like to do more meaningful larger acquisitions and so we’re certainly involved in processes for those as well. The balance sheet is strong. We have 135 million and we can just turn around and borrow it. It’s available within the facilities that we have. And of course when you’re acquiring businesses, they come with assets as well that you can borrow against. So we’re in a good position to do larger deals. And as Rik has said, we’ve got a number that are in our pipeline and being evaluated. We’re quite disciplined, and by disciplined I mean we want businesses that strategically fit within the color of what we’re doing and that the valuation is reasonable so that we can build value off it. We haven’t done a lot of acquisitions over the last couple of years and quite frankly one of those reasons was we’ve been so darn busy, we’ve expanded six facilities over the last two years and so we’ve had a lot of resources expanding internally. But we’re quite confident in our ability to go do some of those acquisitions. And so we’re working hard to hopefully complete some of those. And as you know, Ronnie, nothing is cheap these days.

Yes, I think with the way the market is right now, everything has gone up in value, but I guess it makes sense [Multiple Speakers].

Absolutely, yes.

So just going back to the Mascoma, so I guess the overall valuation you’re putting on the entire company is somewhere around 25 million after the space in sales they’ve made if your carrying value is about 4.8?

You can try to look at from what our percentage of the ownership is and back into it, you’d be in the zone I guess. But really the approach towards how did we land on 4.8 million as an estimated carrying value is really more based on the residual assets on what we think SunOpta will receive and proceeds that those are liquidated. So it’s a little bit of a different approach in terms of valuation for that remaining business.

Ron, the enterprise value would be higher, because keep in mind that they have to discharge the debt that they have, right, and there was debt that was there as well that needed to be discharged. So I guess that’s more of a market cap.

No, I guess I’m just trying to figure out, I mean as far as if they sold these assets that they recently have, they're still in the core business, they're still carrying out some. So if the business itself is still the same as it’s been in the past, I guess I’m trying to figure out why it’s gone down in value so much and why the big need of lowering the value of it so much in the last year or so, last year by 21 million, another 8 million now.

You know what, Ron? In all fairness to them, the markets are tough. It’s tough to raise money in those markets now. So companies like Mascoma and look at – not so much that I can tell you about Mascoma, but they’re like a lot of companies that are in that space right now who are wondering where their next fund raise is going to come from and that sort of thing. So personally I think what Mascoma did was extremely prudent. There are still assets, there's still a business there that can be managed and liquidated or they can do as they please. But we’re very pleased with what they did.

And last question in regards to the Opta Mineral. I know you mentioned in the release that it’s still being evaluated in regards to timing. Is it still something that you expect to happen I guess in the next 45 days before the end of the year or is it something that you think is probably going to carry into the first or maybe even second quarter of 2015?

Ron, that’s a really hard one to put my finger on and I’d be sort of guessing if I was to try and put a timing on it. I mean look, the results in the third quarter were tougher, but they’ve got some really good things happening with new business, et cetera. And we remain committed to moving forward in the process. And, I mean, we’re just moving forward and continuing in the process. Can it be done – it's just not real practical for me to try and predict the timing.

And I’m not showing any further questions in the queue at this time. I’d like to turn the call back over to management for closing remarks.

Well, great. Listen, thanks everyone for joining the call and thanks for the questions. We appreciate your taking the time today. We’re excited about our company and where we’re going and we look forward to chatting with everyone again soon. So thanks for joining the call and we’ll talk to you soon.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program and you may all disconnect. Everyone have a good day.