MEGA Brands reports second quarter 2013 results

  • Toy sales up 4%, Stationery & Activities sales up 3%
  • EBITDA of $9.8 million compared to $9.2 million
  • Basic EPS of $0.18 ($0.10 diluted) compared to $0.10 (loss of $0.12)
  • Significant debt reduction of $60.0 million completed, interest expenses reduced

MONTREAL, Aug. 1, 2013 /PRNewswire/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the second quarter ended June 30, 2013. (All figures are expressed in US dollars.)

Consolidated net sales in the second quarter increased 4% to $98.1 million compared to $94.5 million in the corresponding 2012 period.

  • Sales for the Toys segment increased 4% compared to the second quarter of 2012, driven by higher product shipments in Preschool & Girls construction toys.
  • Sales for the Stationery & Activities segment were up 3%, the ninth consecutive quarter of year-over-year growth.
  • On a geographical basis, North American sales were 5% higher and international sales were level.

Earnings before interest, taxes, depreciation and amortization (''EBITDA'') increased to $9.8 million compared to $9.2 million in the second quarter of 2012. EBITDA is a supplementary financial measure.

Net earnings were $4.0 million or $0.10 per diluted share ($0.18 per basic share) compared to net earnings of $1.6 million or a loss of $0.12 per diluted share (earnings of $0.10 per basic share) in the second quarter of 2012.

For the six-month period ended June 30, 2013, consolidated net sales increased 7% to $162.6 million compared to $152.7 million in the same period last year, with 9% growth in Toys, 3% in Stationery & Activities, 8% in North America and 4% in International. EBITDA increased to $8.8 million compared to $7.1 million in the corresponding period in 2012. Net loss was $3.2 million or $0.16 per diluted share compared to a net loss of $6.9 million or $0.42 per diluted share in the corresponding period of 2012.

''Our sales for the remainder of the year will be driven by the strength of our MEGA BLOKS Preschool & Girls product offering, several new product launches in Boys & Collectors construction toys, including a major new product line hitting retail by the end of the third quarter, and positive momentum in our Stationery & Activities business.'' said Marc Bertrand, President and CEO. ''Our performance will also be supported by a much-improved financial position, with a trailing net debt-to-EBITDA ratio of 1.1 times, and significantly lower interest expenses than in the comparable period last year,''

The Corporation's business is seasonal and, historically, it has observed a higher level of activity and profitability during the last two quarters of the year compared to the first two quarters.

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 1 (888) 231-8191 or (514) 807-9895. For those unable to participate, a replay will be available until August 8, 2013. The replay phone number is (514) 807-9274 or 1 (855) 859-2056, access code 15959767.

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 unaudited consolidated financial statements and notes for the three-month periods ended June 30, 2013 and 2012. 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.

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 three- and six-month periods ended June 30, 2013, 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, 2012, 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.

Unaudited Interim Consolidated Income Statements
(in thousands of US dollars, except per share amounts)
         
  Three-month periods
ended June 30,
Six-month periods
ended June 30,
  2013 2012 2013 2012
  $ $ $ $
         
Net sales 98,084 94,489 162,630 152,676
Cost of sales 62,097 60,224 103,513 98,980
Gross profit 35,987 34,265 59,117 53,696
         
Marketing and advertising expenses 4,089 3,028 8,607 5,876
Research and development expenses 3,984 4,003 7,893 8,059
Other selling, distribution and administrative expenses 21,536 20,655 41,566 39,113
Contingent consideration on business acquisition 86 96 173 192
Loss (gain) on foreign currency translation (52) 434 (1,291) (471)
         
Earnings from operations 6,344 6,049 2,169 927
         
Financial expenses 2,327 4,289 6,477 8,712
Early redemption of debentures - - 2,869 -
  2,327 4,289 9,346 8,712
         
Earnings (loss) before income taxes 4,017 1,760 (7,177) (7,785)
         
Income taxes         
  Current 65 174 (3,963) (838)
  Deferred - - - -
  65 174 (3,963) (838)
         
Net earnings (loss) 3,952 1,586 (3,214) (6,947)
         
Earnings (loss) per share        
  Basic 0.18 0.10 (0.16) (0.42)
  Diluted 0.10 (0.12) (0.16) (0.42)

Unaudited Interim Consolidated Statements of Comprehensive Income (Loss)
(in thousands of US dollars, except per share amounts)
         
  Three-month periods
ended June 30,
Six-month periods
ended June 30,
  2013 2012 2013 2012
  $ $ $ $
         
Net earnings (loss) 3,952 1,586 (3,214) (6,947)
         
Other comprehensive income:        
         
Items that may be reclassified subequently to income or loss        
  Cumulative translation adjustment (386) (71) (543) 809
         
Items that will not be reclassified subequently to income or loss        
  Cumulative translation adjustment 536 1,311 2,744 1,473
         
Other comprehensive income: 150 1,240 2,201 2,282
         
Comprehensive income (loss) 4,102 2,826 (1,013) (4,665)

Unaudited Consolidated Statements of Financial Position 
(in thousands of US dollars)
     
  June 30, December 31,
  2013 2012
  (Unaudited) (Audited)
  $ $
     
Assets    
Current assets    
Cash and cash equivalents 4,288 8,018
Trade and other receivables 104,760 130,541
Inventories 74,314 45,779
Derivative financial instruments 83 113
Prepaid expenses 6,812 9,370
Total current assets 190,257 193,821
     
Non-current assets    
Property, plant and equipment 44,504 39,817
Intangible assets 22,560 22,771
Goodwill 30,000 30,000
Total assets 287,321 286,409
     
     
Liabilities    
     
Current liabilities    
Trade and other payables 72,155 62,638
Income taxes 3,706 5,631
Current portion of long-term debt 1,832 8,023
  77,693 76,292
Non-current liabilities    
Long-term debt 59,137 112,992
Derivative financial instruments - 206
  59,137 113,198
Equity    
Share capital 501,663 431,893
Warrants 8,486 24,029
Contributed surplus 4,836 4,478
Deficit (360,950) (357,736)
Accumulated other comprehensive loss (3,544) (5,745)
Total equity 150,491 96,919
Total liabilities and equity 287,321 286,409

Unaudited Consolidated Statement of Changes in Equity
(in thousands of US dollars)
             
  Share capital Warrants Contributed surplus Deficit Accumulated
other
comprehensive
loss
Total equity
  $ $ $ $ $ $
Balance - December 31, 2011 429,007 24,430 3,492 (374,322) (6,844) 75,763
Net loss - - - (6,947) - (6,947)
Other comprehensive loss - - - - 2,282 2,282
Stock-based compensation - - 657 - - 657
Balance - June 30, 2012 429,007 24,430 4,149 (381,269) (4,562) 71,755
             
Balance - December 31, 2012 431,893 24,029 4,478 (357,736) (5,745) 96,919
Net loss - - - (3,214) - (3,214)
Options exercised 1,470 - (454) - - 1,016
Warrants exercised 68,300 (15,543) - - - 52,757
Other comprehensive income - - - - 2,201 2,201
Stock-based compensation - - 812 - - 812
Balance - June 30, 2013 501,663 8,486 4,836 (360,950) (3,544) 150,491

Unaudited Consolidated Statements of Cash Flows
(in thousands of US dollars)
     
  Six-month periods
ended June 30,
  2013 2012
  $ $
     
Operating activities    
Net loss (3,214) (6,947)
Adjustments for:    
  Depreciation of property, plant and equipment 6,288 5,739
  Amortization of intangible assets 211 211
  Stock-based compensation 812 657
  Financial expenses 6,477 8,712
  Early redemption of debentures 2,868 -
  Income taxes (3,963) (838)
  Gain on foreign currency (189) (526)
    9,290 7,008
  Net change in non-cash working capital balances 5,981 10,511
  Income taxes recovered (paid) 1,765 (305)
  Interest paid (4,571) (6,598)
Cash flows provided by operating activities 12,465 10,616
     
Financing activities    
Repayment of debentures (60,368) (7,151)
Change in asset-based credit facility - 3,978
Issuance of capital stock 53,775 -
Repayment of long-term debt (357) -
Cash flows used in financing activities (6,950) (3,173)
     
Investing activities    
Acquisition of property, plant and equipment (9,264) (11,113)
Cash flows used in investing activities (9,264) (11,113)
     
Effect of changes in foreign exchange rates on cash and cash equivalents 19 (38)
     
Decrease in cash and cash equivalents (3,730) (3,708)
Cash and cash equivalents — Beginning of period 8,018 6,745
     
Cash and cash equivalents — End of period 4,288 3,037

 

SOURCE MEGA BRANDS INC.




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