MONTREAL, March 14, 2012 /PRNewswire/ - MEGA Brands Inc. (TSX: MB) announced today its financial results for the fourth quarter and full year ended December 31, 2011. (All figures are expressed in US dollars.)
Consolidated total net sales in 2011 increased 2% to $376.8 million compared to $368.0 million in 2010. Sales increased 2% in Toys product lines and 3% in the Stationery & Activities segment. On a geographic basis, sales were up 1% in North America and 5% in international markets.
Reported net earnings were $8.3 million in 2011 compared to $131.1 million in 2010. Reported earnings in 2011 include a $3.0 million loss on the settlement of debt in 2011 and, in 2010, a $144.3 million gain on the settlement of debt and transaction costs and other expenses of $13.4 million.
Adjusted net earnings increased to $12.3 million or $0.75 per share in 2011 compared to $0.9 million or $0.07 per share in 2010. The term ''adjusted net earnings'' does not have standardized meaning under IFRS and, consequently, is unlikely to be comparable to similar measures used by other issuers. A reconciliation of adjusted net earnings with IFRS financial statements is provided in the Corporation's Management's Discussion & Analysis for the year ended December 31, 2011.
Fourth quarter results
Fourth quarter 2011 consolidated net sales decreased 3% to $108.5 million compared to $111.8 million in the corresponding 2010 period. Sales decreased 8% in Toys product lines, after a string of eight consecutive quarters of year-over-year increases. Stationery & Activities sales increased 35%, the third consecutive quarter of year-over-year growth for this segment. On a geographical basis, sales declined 4% in North America and 1% in international markets.
Reported net earnings were $0.2 million compared to $11.3 million in the same 2010 period. Reported earnings include contingent consideration charges of $0.1 million in the 2011 period and $0.2 million in the 2010 period resulting from the transition to IFRS.
Adjusted net earnings were $0.3 million or $0.02 per share compared to $11.5 million or $0.70 per share in the 2010 fourth quarter.
Fourth quarter results were mainly impacted by lower than expected sales of Toys in the United States. However, retail sales of the Corporation's Toys during the quarter were higher than in the fourth quarter of 2010.
2012 Outlook
''MEGA Brands achieved important milestones in 2011, including sales growth in all of our operating segments,'' said Marc Bertrand, President and CEO. ''The MEGA BLOKS and ROSE ART brands gained momentum at retail and we entered 2012 with a positive outlook thanks to a compelling offering for preschoolers, girls and boys of all ages, and collectors.''
- Our Preschool construction toys feature several innovations for toddlers and an appealing offering for girls led by our new MEGA BLOKS Lil' Princess assortment and popular licenses such as Hello Kitty and Moshi Monsters.
- In the Boys construction category, major product launches for 2012 include Power Rangers Super Samurai in the first quarter, Spider-Man in the second quarter based on the new movie, and World of WarCraft in the third quarter. The popularity of MEGA BLOKS Halo continues to grow worldwide and we expect 2012 sales to be stimulated by the release of the Halo 4 video game by Microsoft Games Studios scheduled for the peak toy-selling season.
- Stationery & Activities began 2012 with growth momentum following three consecutive quarters of year-over-year sales gains in 2011 and a return to profitability.
- We invested in production equipment and tooling at our Montreal facility in 2011 to increase production efficiency and expect to benefit from this investment in 2012 and beyond.
''With innovative products in our Toys segment, sales momentum in Stationery & Activities, and investments in production efficiency, we are looking forward to a successful 2012,'' concluded Bertrand.
Conference Call
A conference call will be held at 9:00 a.m. today to discuss the results and business outlook. Participants may listen to the call by dialing (514) 807-9895 or 1 (888) 231-8191. For those unable to participate, a replay will be available until March 21, 2012. The replay phone number is (514) 807-9274 or 1 (855) 859-2056, access code 57470766.
About MEGA Brands
MEGA Brands Inc. is a trusted family of leading global brands in construction toys, games & puzzles, arts & crafts and stationery. They offer engaging creative experiences for children and families through innovative, well-designed, affordable and high-quality products. Visit http://www.megabrands.com for more information.
The MEGA logo, Mega Bloks, Rose Art, MEGA Puzzles, MEGA Games and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates.
MD&A Filing
This press release should be read in conjunction with the Corporation's Management's Discussion and Analysis (the ''MD&A'') as well as the audited consolidated financial statements and notes for the years ended December 31, 2011 and 2010. The Corporation will file these documents today via SEDAR. The MD&A, financial statements and notes will be posted today on the Corporation's Web site.
Use of Supplementary Financial Measures
The Corporation reports its financial results in accordance with International Financial Reporting Standards (''IFRS''). However, the Corporation believes that certain non-IFRS measures provide useful information to investors regarding its financial condition and results of operations. A reconciliation of supplementary financial measures with IFRS financial statements is provided in the Corporation's MD&A for the year ended December 31, 2011, which is available at www.sedar.com and on the Corporation's Web site.
Forward-Looking Statements
All statements in this press release that do not directly and exclusively relate to historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities laws These statements represent the Corporation's intentions, plans, expectations and beliefs. Readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking information and statements are based on a number of assumptions and involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by them, including, but not limited to risks, assumptions and uncertainties described in the Corporation's MD&A for the year ended December 31, 2011, which are available at www.sedar.com and on the Corporation's Web site. The Corporation disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by applicable law.
The Corporation adopted International Financial Reporting Standards effective January 1, 2011 and all comparative 2010 figures have been adjusted.
Consolidated Income Statements | |||||
(in thousands of US dollars, except per share amounts) | |||||
Three-month periods ended December 31, |
Twelve-month periods ended December 31, |
||||
2011 | 2010 | 2011 | 2010 | ||
(Unaudited) | (Unaudited) | (Audited) | (Audited) | ||
$ | $ | $ | $ | ||
Net sales | 108,495 | 111,809 | 376,827 | 368,020 | |
Cost of sales | 68,575 | 66,942 | 235,649 | 222,661 | |
Gross profit | 39,920 | 44,867 | 141,178 | 145,359 | |
Marketing and advertising expenses | 7,808 | 8,177 | 17,027 | 19,360 | |
Research and development expenses | 4,491 | 3,555 | 14,456 | 12,300 | |
Other selling, distribution and administrative expenses | 21,596 | 21,637 | 82,540 | 95,395 | |
Contingent consideration on business acquisition | 110 | 168 | 994 | 671 | |
Loss (gain) on foreign currency translation | 801 | 41 | 1,421 | (421) | |
Earnings from operations | 5,114 | 11,289 | 24,740 | 18,054 | |
Financial expenses | 4,604 | 4,957 | 18,666 | 25,773 | |
Loss (gain) on settlement of debt | - | - | 2,984 | (144,338) | |
4,604 | 4,957 | 21,650 | (118,565) | ||
Earnings before income taxes | 510 | 6,332 | 3,090 | 136,619 | |
Income taxes | |||||
Current | (7,369) | (5,520) | (12,337) | 3,185 | |
Deferred | 7,645 | 560 | 7,097 | 2,332 | |
276 | (4,960) | (5,240) | 5,517 | ||
Net earnings | 234 | 11,292 | 8,330 | 131,102 | |
Earnings per share | |||||
Basic | 0.01 | 0.70 | 0.51 | 10.19 | |
Diluted | (0.14) | 0.17 | 0.45 | 5.94 |
Consolidated Statements of Comprehensive Income | |||||
(in thousands of US dollars, except per share amounts) | |||||
Three-month periods ended December 31, |
Twelve-month periods ended December 31, |
||||
2011 | 2010 | 2011 | 2010 | ||
(Unaudited) | (Unaudited) | (Audited) | (Audited) | ||
$ | $ | $ | $ | ||
Net earnings | 234 | 11,292 | 8,330 | 131,102 | |
Other comprehensive loss (income): | |||||
Cumulative translation adjustment | 479 | (2,044) | (1,584) | (5,260) | |
Other comprehensive loss (income) | 479 | (2,044) | (1,584) | (5,260) | |
Comprehensive income | 713 | 9,248 | 6,746 | 125,842 |
Consolidated Statements of Financial Position | ||
(in thousands of US dollars) | ||
December 31, | December 31, | |
2011 | 2010 | |
(Audited) | (Audited) | |
$ | $ | |
Assets | ||
Current assets | ||
Cash and cash equivalents | 6,745 | 5,277 |
Trade and other receivables | 126,359 | 123,194 |
Inventories | 69,560 | 51,135 |
Derivative financial instruments | 904 | 414 |
Prepaid expenses | 13,760 | 11,039 |
Total current assets | 217,328 | 191,059 |
Non-current assets | ||
Property, plant and equipment | 32,172 | 21,501 |
Intangible assets | 23,193 | 23,615 |
Goodwill | 30,000 | 30,000 |
Derivative financial instruments | 231 | 309 |
Deferred income tax assets | - | 7,097 |
Total assets | 302,924 | 273,581 |
Liabilities | ||
Current liabilities | ||
Asset-based credit facility | 37,279 | - |
Trade and other payables | 71,762 | 62,686 |
Income taxes | 5,832 | 16,857 |
Derivative financial instruments | - | 970 |
Current portion of long-term debt | 7,013 | 35 |
121,886 | 80,548 | |
Non-current liabilities | ||
Long-term debt | 105,275 | 125,507 |
Derivative financial instruments | - | 19 |
105,275 | 125,526 | |
Equity | ||
Share capital | 429,007 | 429,007 |
Warrants | 24,430 | 24,430 |
Contributed surplus | 3,492 | 1,982 |
Deficit | (374,322) | (382,652) |
Accumulated other comprehensive loss | (6,844) | (5,260) |
Total equity | 75,763 | 67,507 |
Total liabilities and equity | 302,924 | 273,581 |
Consolidated Statement of Changes in Equity | ||||||
(in thousands of US dollars) | ||||||
Share capital | Warrants | Contributed surplus |
Deficit | Accumulated other comprehensive loss |
Total equity | |
(Audited) | $ | $ | $ | $ | $ | $ |
Balance - January 1, 2010 | 308,678 | - | 558 | (513,754) | - | (204,518) |
Net earnings | - | - | - | 131,102 | - | 131,102 |
Other comprehensive loss | - | - | - | - | (5,260) | (5,260) |
Shares issued in settlement of debt | 37,869 | - | - | - | - | 37,869 |
Shares issued for cash | 85,859 | - | - | - | - | 85,859 |
Share issuance expense | (3,399) | - | - | - | - | (3,399) |
Issuance of warrants | - | 25,395 | - | - | - | 25,395 |
Warrant issuance expense | - | (965) | - | - | - | (965) |
Stock-based compensation | - | - | 1,424 | - | - | 1,424 |
Balance - December 31, 2010 | 429,007 | 24,430 | 1,982 | (382,652) | (5,260) | 67,507 |
Net earnings | - | - | - | 8,330 | - | 8,330 |
Other comprehensive loss | - | - | - | - | (1,584) | (1,584) |
Stock-based compensation | - | - | 1,510 | - | - | 1,510 |
Balance - December 31, 2011 | 429,007 | 24,430 | 3,492 | (374,322) | (6,844) | 75,763 |
Consolidated Statements of Cash Flows | |||
(in thousands of US dollars) | |||
Twelve-month periods, ended December 31 |
|||
2011 | 2010 | ||
(Audited) | (Audited) | ||
$ | $ | ||
Operating activities | |||
Net earnings | 8,330 | 131,102 | |
Adjustments for: | |||
Depreciation of property, plant and equipment | 13,074 | 10,741 | |
Amortization of intangible assets | 422 | 664 | |
Loss (gain) on settlement of debt | 1,236 | (149,304) | |
Stock-based compensation | 1,511 | 1,424 | |
Financial expenses | 18,666 | 25,773 | |
Writeoff deferred financing costs | 1,748 | 2,967 | |
Income taxes | (5,240) | 5,517 | |
Gain on foreign currency | (374) | (2,185) | |
39,373 | 26,699 | ||
Net change in non-cash working capital balances | (24,011) | (14,696) | |
Income taxes recovered | 1,312 | 2,943 | |
Interest paid | (13,755) | (28,194) | |
Cash flows provided by (used in) operating activities | 2,919 | (13,248) | |
Financing activities | |||
Repurchase of debentures | (20,678) | - | |
Change in asset-based credit facility | 37,279 | - | |
Government loan | 5,065 | - | |
Issuance of long-term debt | 32 | - | |
Repayment of long-term debt | - | (216,277) | |
Issuance of debentures | - | 120,732 | |
Issuance of capital stock | - | 85,859 | |
Issurance of warrants | - | 23,776 | |
Addition to deferred financing costs | - | (7,937) | |
Share issue cost | - | (3,399) | |
Issue costs on warrants | - | (965) | |
Cash flows provided by financing activities | 21,698 | 1,789 | |
Investing activities | |||
Acquisition of property, plant and equipment | (23,248) | (9,981) | |
Cash flows used in investing activities | (23,248) | (9,981) | |
Effect of changes in foreign exchange rates on cash and cash equivalents | 99 | (46) | |
Increase (decrease) in cash and cash equivalents | 1,468 | (21,486) | |
Cash and cash equivalents — Beginning of year | 5,277 | 26,763 | |
Cash and cash equivalents — End of year | 6,745 | 5,277 |
SOURCE MEGA BRANDS INC.
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