Good morning, and welcome to SunOpta’s Fourth Quarter Fiscal 2017 Earnings Conference Call. By now everyone should have access to the earnings press release that was issued this morning, and is available on the Investor Relations page on 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 more detailed discussion of the factors that could cause actual results to differ materially from those projections and 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 also like to remind listeners that the Company may refer to certain non-GAAP financial measures, during this teleconference. A reconciliation of these non-GAAP financial measures was included with the Company’s press release issued earlier today. Also, please note that unless otherwise stated, all figures discussed today are in U.S. dollars and are occasionally rounded to the nearest million. And now I’d like to turn the conference call over to SunOpta’s CEO, David Colo.

Good morning and thank you for attending our fourth quarter fiscal 2017 earnings call. With me this morning is Rob McKeracher, our Chief Financial Officer. It has been just over a year since I joined SunOpta as CEO and spoke with you on my first earnings call. In that introductory call, I laid out the three phases of our turnaround, highlighted our plans supporting each pillar of our Value Creation Plan and told you we had significant work to do in the first phase of this turnaround and that the first phase is the bumpiest and its where we would build the foundation for a long term value creation. We said that we would invest in our people, assets and capabilities all while finding ways to streamline our portfolio where it makes sense in order to increase our focus on the core business. I’m pleased to report that we have done what we said we would do. In 2017, we worked hard to strengthen the foundation of our business, while this [Indiscernible] difficult decisions and led to significant changes across the organization, we are entering 2018 with an improved business mix and a more efficient reliable and higher quality production network. Additionally, in 2017 we reinvested in savings generated from our Value Creation Plan into the talent and infrastructure necessary to drive the long term growth and profitability of SunOpta. As I have previously stated, our goal is to create sustainable, long term shareholder value. There is still work to be done but we have begun to see the benefits of our efforts even if they are not readily apparent in our financial results today. We are still in the first phase of the turnaround, however we have a good line of sight on the transition to the second phase…

Thanks Dave. I’ll tell you the rest of the key financial statistics, as well as balance sheet and cash flow metrics for the fourth quarter. As Dave mentioned, fourth quarter revenue was $292.4 million or 1.7% year-over-year decline as reported but up 0.2% excluding the impact on revenues from changes in commodity related pricing and foreign exchange rates and removing the impact of the bar and pouch lines of business that are being wound-down. The global ingredient segment generated revenues from external customers of $130.3 million a decrease of 1.8% compared to $132.6 million in the fourth quarter of 2016. Excluding the impact of changes in commodity related pricing and foreign exchange, revenues in global ingredients decreased 3.5%. The decrease in revenue reflected lower volumes of domestically sourced specialty soy and corn products, partially offset by higher volumes of organic cocoa, nuts and dried fruit as well as roasted grains and seeds. The Consumer Products segment generated revenues of $162.1 million during the fourth quarter of 2017, a decrease of 1.7% compared to $164.9 million in the fourth quarter of 2016. Excluding the impact of commodity pricing and removing the bar and pouch lines of business. Revenues in the fourth quarter increased by 3.4%. As Dave mentioned, the increase was largely driven by refrigerated juice and aseptic beverage products as well as fruit snack sales. During the fourth quarter of 2017, sales of frozen fruit were essentially flat to prior year after adjusting for the impact of lower commodity prices representing continued declines in retail sales offset by increased food service and industrial sales. Consolidated gross profit was $28.3 million for the fourth quarter of 2017, compared to $17.0 million for the fourth quarter of 2016. As a percentage of revenues, gross profit for the fourth quarter of 2017 was…

[Operator Instructions]. Our first question comes from the line of Jon Andersen with William Blair. Your line is now open.

Good morning everybody.

Hey, Jon. Good morning.

I wanted to start with frozen fruit. If you could talk a little bit about consumption, I know that’s one of the issues that the category you’re experiencing in the category right now, what have you seen more recently in terms of consumption trends and what are your expectations as you look to the balance of kind of 2018? And are there specific levers that you feel you can poll as the private label market share leader in the category to drive better performance as we move to the year?

Sure, Jon. This is Dave. I think the consumption trend as we quoted, the overall category is still showing decline -- it’s down about 2% roughly as a category in the last reported periods. One of things that we spoke about previously is the issues affecting the category in general is more prevalent, supply of fresh fruit in the perimeter of the stores and that’s the trend that realistically we don't see going away. So I think the levers that we’re going to be polling as we go forward here really focused around making sure that we've got the right category, management approach to support our retailers in the frozen fruit space. So, what I mean by that is we’re working on what’s the proper assortment, the proper merchandising plans, the proper pricing, and what’s the proper innovation formats to be bringing to the category. We think the combination of those factors will help stabilize and return the category to growth. The primary fruits that are consumed in IQF [ph] historically have been strawberry and blueberry. And what we’re seeing is there are signs of growth within the categories specifically around organic fruits, as well as fruits that are not as common if you will as the strawberry or blueberry and maybe require more effort by the consumer at home to prepare. So, things such as tropical fruits; mix blends, smoothie blends, things of that nature. So our focus is going to be not walking away if you will from the core fruits in the category but augmenting them with more innovation around the fruit types that we see growth in particularly around the organic blends and more ease-of-use if you will and convenience items for the consumer at home.

Can you talk a little bit about the decision to lower prices? I think in the third quarter there may have been some volume loss at least one customer. Talk a little bit about depend on the pricing strategy in fruit, it sounds like you did lower prices. And have you seen a stabilization in your volume trends or customer base at retail or has there been additional kind of market share shift that prompted that response? Thanks.

Yes. I think as we’ve talked about before this has been a kind of a transition year where you're coming from the 2016 crop, there was a higher cost crop into the 2017 crop, there was a lower cost crop, specifically related to strawberries. And we had a long position as we're coming into the new crop for 2017, so basically we held pricing to work through that higher cost inventory as a result of that we lost some distribution with some customers and recognize that you can only hold pricing for so long as you try to work through those long inventories of higher cost and that’s ultimately would lead us to start taking pricing down was to prevent further loss in distribution and really position ourselves to be competitive in the marketplace reflective of the lower cost of the crop that came in at 2017. So that’s the corrections that you’ve seen us make here in the last half of Q3 and the Q4 that put some margin pressure on the business. As we go into 2018, we’re doing a much better job of putting in an S&OP process, so that we understand what’s are carry-in position as we go in to new crop of this year. What’s our forecasted demand look like for the business, so that we don't over procure fruit and put ourselves in a long position similar to what we are in the prior year. So we had a lot of focus on improved process is to make sure we right-size the inventory relative to our forecasted demand not only on strawberries but with all the fruit that we procure to support our business. So I think we’re going to be in a much better position as we go throughout the year rightsizing inventories, making sure that we have a cost structure that’s competitive with the market and then take pricing actions and some of the other actions I mentioned Jon relative to how we think we can return this category to growth.

That’s really helpful. Couple more on fruit. How quickly or how soon will you be ready to stand up the new retail bagging operation in Mexico? And then the ability to source more fruits from Mexico and do tropical blends. What kind of timeframe are we talking about before that’s up and running and you're able to kind of ship then we see products on shelf using that distribution method and/or those new varieties?

Yes. The Mexican retail bagging operation is going through commissioning currently, so we plan to bring that online in basically the start of April of this year, so in the very near future. And we’ll have retail bagged item shipping from Mexico in Q2 of this fiscal year. Our additional sourcing of different fruit varieties in Mexico, we’ve laid out a five-year plan for that. And as each year goes by we’ll be sourcing more fruit types and more pounds of fruit type. We've already started that process. So this year’s an example we’ll be souring mango, blueberries, blackberries et cetera from Mexico. It starts out with small volumes as we build the grower base and then it grows overtime. So that’s a multi-year effort to expand the varieties that we can procure from Mexico and then expand the volumes of those varieties as well.

Great. On the EBITDA productivity driven EBITDA enhancement target is $30 million by the end of 2018 I guess. They were somewhere in the neighborhood I think of $10 million of non-structural cost this year. And I know there were other things happening in 2017 that masked some of the underlying improvement that you are able to get. Should we be thinking about 2018 is a year where we see a nice step-up in the underlying EBITDA of the company to the tune of kind of $20 million based on productivity target in the absence of some of the non-structural cost I guess $20 million of nonstructural cost. Or does the fruit dynamic your kind of set that back trying -- I know you don't provide guidance but just trying to kind of quantify or trying to how think about 2018 in the context of what we just saw in 2017?

Sure. Hi, Jon. It’s Rob, I’ll take that. Our target as far as the first phase of Value Creation Plan is 30 million which is now actually closer to 33 million given some of the additional portfolio decisions we made. Still keep that $20 million in year 2018 target intact. And so we continue to implement additional investors [ph] and really in 2018 you’ll hear that it mainly comes out of the operational excellence pillar, that’s the one that got the most left to deliver if you will. But that 20 million intact, if you look beyond the 20 in terms of puts and takes in the business there is some rollover of SG&A that comes up a little bit to sort of get to the full run rate of our investments that we made this year. But then looking beyond that, I think it will be fair to expect and I think I gave in the prepared remarks we’re expecting back revenue growth. And so I think it’s kind of a situation where we got really good things, improved margins and growth in all parts of our business really with the exception of fruit as Dave mentioned and that’s going to stand out and it will be further stand out in the first half, but by the time we get to the second half we start to see more so engines, the engine going and sort of overcoming that first half headwind a little bit. So we don’t give guidance, but I think the way you ask the question and certainly our productivity intact kind of lead folks hopefully with some line of sight as to what we’re seeing and the trend line look like over 2018.

Just two quick housekeeping questions, the impairment charge for the frozen fruit business, what impact does that have on annual DNA in other words, how much do we need to reduce kind of the add back to EBITDA for the write-down?

It was a goodwill impairment charge, which goodwill subject to annual review. It doesn't compare with it any amortization, so no impact on ongoing DNA. It’s literally just the taking 115 million off of that bounce in the balance sheet.

Great. That’s helpful. I’d see, I had one more. No. I’ll come back and get back in the queue. Thanks.

Thanks, Jon.

[Operator Instructions] Our next question comes from the line of Amit Sharma with BMO Capital Markets. Your line is now open.

Yes. Hi. Good morning everyone.

Good morning.

Rob, very quick one, on the $2.5 million excess cost in the frozen fruit, are you expecting more of those excess costs rather than inventory write-down or excess warehouse cost in the first half as well?

Yes. The part that will certainly continue here until we can get right-size is excess storage, right. So it obviously holding more pounds of frozen inventory we’re incurring more storage costs on that, a little bit handling. So I do expect that to continue in the first half as we get pass the point where we've done our 2018 berry harvest, that’s when you can start to see that it subside, and the level of our stock relative to the demand plan be more in sync.

So similar magnitude of impact in the first half to what we saw in the fourth quarter?

It should be a little bit less. I’m not anticipating as much on the obsolescence inventory write-down side if you will, but certainly storage handling, those will continue, so I’d scale it back a bit in the first half at a quarterly run-rate but it will still be there.

Got it. And then, David, you did say that you pass the higher cost inventory in frozen, so just to confirm that. So now inventory that you’re holding, the cost structure or cost base of that is reflecting the lower strawberry prices that we saw inclusive 2017?

Yes. For the most part it is, it’s there – so the cost basis more in sync with where our sale price is, but the cost profile of the business obviously as we just discussed as now.

Sure. Absolutely. And then as we look forward David and you talked about looking at your California cost footprint. Can you talk about that a little bit? If you do decide to reduce your footprint in California what does it do to your cost structure in this business, and then how much of that is reflected in your current cost saving goals under the Value Creation Plan?

Yes. I think as we look to go into this crop and run a less pounds than we ran in the prior, what I meant by the utilization of our facilities in that, we obviously have more capacity that we’re going to need to process the crop this year. So basically we’re going to run. We have three primary facilities in California that process berries. Last year we ran all three. This year we’ll definitely run two of the three with probably a limited amount of pounds potentially to go through the third facility. So that’s what I meant by kind of rightsizing and cost optimizing the footprint this year. As we go forward, we constantly look at network optimization and are we producing the products in the right locations with the investments we’re making in our Mexican operations. Over time, we can definitely see a trend where we would grow and source and produce potentially more product coming out of our Mexico facility which would also have an impact on how much we process out to California. That’s going to be more of a two to three-year transformation as opposed to just this year, Amit, but that’s kind of directionally how we see this playing out.

And just if you give us any indication of what does that do to your cost structure or margin structure as you move from a higher cost facility to a lower cost?

Yes. That means, it’s obviously improve, I think one of the most important things that we’re talking about here is also diversity of where we’re getting the product and diversity of our footprint. We don't want to have certainly all of our eggs in the California basket or in the Mexico basket. So if you think about where the fruits coming from and the fact that in California there’s always shifting and where the acres exist. Could it be – it’s a meaningful benefit to margin obviously to be balance through Mexico, but we’re not going to – there’s not a single solution here – it’s very much spread and diversify growing region and your footprint to maximize the…..

And the last one from Mexico, NAFTA, is that any issue? If the NAFTA -- TVD does fall off? Does it do anything to your cost structure there?

I mean, the TVD, I guess would be the answer, it certainly depends on if that does place what would happen to the cost base. But again, kind of going back to my previous comments for that reason we don’t want to be overly exposed to anyone jurisdiction here. It does not going to cause more fruit necessary we plan right away. So we want to make sure that we got good balance and a good footprint as to where we both get the raw materials and process them. So I don't have an answer until we learn more about where those negotiation land.

Got it. And then just one more on the aseptic business, Dave you did talk about picking up new volumes. Just remind us you will [Indiscernible] loss in April, right, where is the utilization now? And just on that last business as well, have you had any conversation with them in terms of is there a bad back for you to get back into at least that retailer as well?

Yes. I think in Q4 our utilization across the aseptic network increased from mid-50s to the mid-60s, so we’re about in Q4 around 65% utilization. As we look at the opportunities we have in our sales pipeline, I’ve mentioned in the prepared remarks that if we’re successful in converting a portion of the sales pipeline we’re really good to be in a position where we’re looking at putting those facilities on alternative production schedules to support the anticipated growth, which obviously that would provide good news and help from a cost structure point of view as well. So we’re optimistic about what we see in the beverage business particularly as it relates to the loss business in the club channel, we definitely been having conversations with that specific retailer, with our new sales team that’s in place, all of the new capability that we’re bringing to bear. We do have good growth occurring in that channel with our organic juice business, our conventional juice business. We’ve launched some – brought items into the channel. And we’re having ongoing discussions about ways to help bring growth back to the non-dairy aseptic product category within club as well. So we’re working hard at it and we’re making good progress.

Got it. Thank you so much.

Thank you.

We have a follow-up question from the line of Jon Andersen. Your line is open.

Thanks for the follow-up. Your FX loss was up $3 million, I think that’s embedded in or captured in SG&A, can you talk a little bit more about what that consists of and what your expectation for that is going forward based on I guess your credit hedge positions and some of the currency movements, because it's seem like pretty big increase year-over-year that effective EBITDA in the quarter?

No. You bang on that, Jon. That FX loss and then in my prepared remarks I’d indicated that’s not obviously included in gross margin, but fundamentally the majority of that is us taking action if you will to protect our margin as it relates to us buying products generally in U.S. dollars and having exposure when we sell in the euros. And so the way to really think about is the large loss in the fourth quarter reflects the significant swing in the euro relative to the U.S. dollar and it really reflects kind of mark-to-market losses on the forward currency derivatives, the protection that we put in place which from a modeling perspective if you will you should really just think about that going forward as an offset to margin. And so you get some of the benefit in the gross margin line and there some of the loss in the FX line side. The County rules require you to value derivative instruments and put them on that line called foreign exchange, but the reality is what we’re doing is we’re taking away foreign-exchange exposure if you will in our supply chain as we buy and sell in different currencies.

Okay. One other quick one from me. The bar and pouch exits, are those fully complete now? What was the full-year EBITDA drag from those? And do we start now with a clean sheet in 2018?

They’re substantially complete and so substantially complete basically means that as we work to build inventories to enable the customers of those businesses to properly transition to new suppliers, there’s a very small amount of sell-through that would happen likely to be done by the end of the first quarter here. You're talking $2 million to $3 million likely not big revenue and then no real margin impact expected there. In terms of what’s left? There's the wrap-up, there’s the closure costs that there will be some of that coming through likely in the first quarter as it relates to us finally vacating that the bar facility in Carson City, which I would expect the majority of that to be reported outside of EBITDA. So it’s a little bit of trailing cost that we just couldn't recognize in the fourth quarter and that will come through finally complete those actions, but substantially complete is probably the best way I’d refer to that. From a EBITDA perspective if you go towards the back of the press release that we issued this morning, in the non-GAAP tables we’ve got a column in our EBITDA reconciliation that highlights the EBITDA drag from those two businesses both for the quarter and the year, in an effort to provide users of these financials. What were the business of been without all bars and pouch. So if you go to the back it was EBITDA $5.8 million for the full-year related to bars and pouch.

Great. Okay. And – okay, that's it from me. Thank you very much. Good luck, guys, going forward.

Thanks Jon.

And that concludes today's question-and-answer session. I would like to turn the call back to Mr. Colo for his closing remarks.

Thank you, operator, and thank you all for participating in our fourth quarter conference call. Before we close let me remind you of what we rolled [ph] here. We were focused on food safety, quality and execution. We will be focused and decisive as we execute our strategic plan, we will focus on long term, value creation and we will make decisions with a long term focus even if those decisions do not maximize near term earnings. I look forward to speaking with you in the future and updating you each quarter on our progress as we unlock the opportunity in value in SunOpta. Have a great day.

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.