MEGA Brands reports third quarter 2011 results

• Eighth consecutive quarter of year-over-year sales growth
• Growth in Toys and Stationery & Activities
• Diluted EPS of $0.51 compared to $0.36

MONTREAL, Nov. 2, 2011 /PRNewswire/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the third quarter ended September 30, 2011. The Corporation adopted International Financial Reporting Standards effective January 1, 2011 and all comparative 2010 figures have been restated. (All figures are expressed in US dollars.)

Consolidated net sales in the third quarter increased 4% to $133.4 million compared to $128.3 million in the corresponding 2010 period. This is the eighth consecutive quarter of higher year-over-year consolidated sales since the fourth quarter of 2009.

Toy and Stationery & Activities sales were both up 4% compared to the third quarter of 2011. On a geographical basis, North American sales were up 6% and International sales 2%. The Corporation's overall sales performance compares favorably to its peers in light of the cautious mood of retailers who are managing inventories tightly due to economic uncertainty.

Net earnings were $17.1 million or $0.51 per diluted share, compared to $17.2 million or $0.36 per diluted share in the third quarter of 2010.

''We continue to build momentum in our toy business with retail sales running ahead of shipments and positive movement at retail for our 2011 products, while seeing clear signs that the recovery in Stationery & Activities is firmly on track,'' said Marc Bertrand , President and CEO. ''We are focused on a strong finish to 2011 and creating an even more exciting product portfolio for 2012 based on great innovation and a compelling array of licenses.''

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) 807-8791 or 1 (800) 731-5319. For those unable to participate, a replay will be available until November 9, 2011. The replay phone number is (416) 640-1917 or 1 (877) 289-8525, access code 4477050.

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- and nine-month periods ended September 30, 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 three-month period ended September 30, 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, 2010, 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 September 30,				Nine-month periods ended September 30,
			2011		2010		2011		2010
		Note	$		$		$		$
Net sales			133,354		128,291		268,332		256,211
Cost of sales			80,958		74,676		167,074		155,719
Gross profit			52,396		53,615		101,258		100,492
Marketing and advertising expenses			3,721		5,505		9,219		11,183
Research and development expenses			3,172		2,737		9,965		8,745
Other selling, distribution and administrative expenses			22,281		21,471		60,944		73,758
Contingent consideration on business acquisition		4	110		168		884		503
Loss (gain) on foreign currency translation			1,162		655		620		(462)
Earnings from operations			21,950		23,079		19,626		6,765
Financial expenses			4,552		4,771		14,062		20,816
Loss (gain) on settlement of debt		7	-		-		2,984		(144,338)
			4,552		4,771		17,046		(123,522)
Earnings before income taxes			17,398		18,308		2,580		130,287
Income taxes
	Current		487		1,068		(4,968)		8,705
	Deferred		(139)		23		(548)		1,772
			348		1,091		(5,516)		10,477
Net earnings			17,050		17,217		8,096		119,810
Earnings per share
	Basic	6	1.04		1.05		0.49		10.26
	Diluted	6	0.51		0.36		0.40		5.97
Unaudited Interim Consolidated Statements of Comprehensive Income
(in thousands of US dollars, except per share amounts)
			Three-month periods ended September 30,				Nine-month periods ended September 30,
			2011		2010		2011		2010
		Note	$		$		$		$
Net earnings			17,050		17,217		8,096		119,810
Other comprehensive loss:
	Cumulative translation adjustment	4	(1,182)		(541)		(2,063)		(3,216)
Other comprehensive loss:			(1,182)		(541)		(2,063)		(3,216)
Comprehensive income			15,868		16,676		6,033		116,594

Unaudited Consolidated Statements of Financial Position
(in thousands of US dollars)
		September 30,		December 31,
		2011		2010
	Note	$		$
Assets
Current assets
Cash and cash equivalents		2,801		5,277
Trade and other receivables		137,223		123,194
Inventories		70,824		51,135
Derivative financial instruments	11	48		414
Prepaid expenses		12,415		11,039
Total current assets		223,311		191,059
Non-current assets
Property, plant and equipment		30,587		21,501
Intangible assets		23,298		23,615
Goodwill		30,000		30,000
Derivative financial instruments	11	116		309
Deferred income tax assets		5,935		7,097
Total assets		313,247		273,581
Liabilities
Current liabilities
Asset-based credit facility	7	40,154		-
Trade and other payables		74,195		62,686
Income taxes		12,610		16,857
Derivative financial instruments	11	289		970
Current portion of long-term debt	7	6,848		35
		134,096		80,548
Non-current liabilities
Long-term debt	7	104,219		125,507
Derivative financial instruments	11	129		19
		104,348		125,526
Equity
Share capital	8	429,007		429,007
Warrants	8	24,430		24,430
Contributed surplus		3,245		1,982
Deficit	4	(374,556)		(382,652)
Accumulated other comprehensive loss	4	(7,323)		(5,260)
Total equity		74,803		67,507
Total liabilities and equity		313,247		273,581

Unaudited Consolidated Statement of Changes in Equity
(in thousands of US dollars)
		Share capital	Warrants	Contributed surplus		Deficit	Accumulated other comprehensive loss	Total equity
	Note	$	$	$		$	$	$
Balance - January 1, 2010		308,678	-	558		(513,754)	-	(204,518)
Net earnings for the period		-	-	-		119,810	-	119,810
Other comprehensive loss	4	-	-	-		-	(3,216)	(3,216)
Shares issued in settlement of debt	8	37,869	-	-		-	-	37,869
Shares issued for cash	8	85,859	-	-		-	-	85,859
Share issuance expense	8	(3,399)	-	-		-	-	(3,399)
Issuance of warrants	8	-	25,395	-		-	-	25,395
Warrant issuance expense	8	-	(965)	-		-	-	(965)
Stock-based compensation		-	-	916		-	-	916
Balance - September 30, 2010		429,007	24,430	1,474		(393,944)	(3,216)	57,751
Net earnings for the period		-	-	-		11,292	-	11,292
Other comprehensive loss	4	-	-	-		-	(2,044)	(2,044)
Stock-based compensation		-	-	508		-	-	508
Balance - December 31, 2010		429,007	24,430	1,982		(382,652)	(5,260)	67,507
Net earnings for the period		-	-	-		8,096	-	8,096
Other comprehensive loss		-	-	-		-	(2,063)	(2,063)
Stock-based compensation		-	-	1,263		-	-	1,263
Balance - September 30, 2011		429,007	24,430	3,245		(374,556)	(7,323)	74,803

Unaudited Consolidated Statements of Cash Flows
(in thousands of US dollars)
			Nine-month periods, ended September 30
			2011		2010
		Note	$		$
Operating activities
Net earnings			8,096		119,810
Items not affecting cash and cash equivalents
	Depreciation of property, plant and equipment		7,960		8,043
	Amortization of intangible assets		316		498
	Loss (gain) on settlement of debt	7	1,236		(149,304)
	Stock-based compensation		1,263		916
	Financial expenses		14,062		20,816
	Writeoff deferred financing costs	7	1,748		2,967
	Income taxes		(5,516)		10,477
	Gain on foreign currency		(3,331)		(4,739)
			25,834		9,484
	Net change in non-cash working capital balances	10	(27,851)		(16,684)
	Income taxes recovered (paid)		706		(1,255)
	Interest paid		(6,827)		(20,887)
Cash flows used by operating activities			(8,138)		(29,342)
Financing activities
Repurchase of debentures		7	(20,644)		-
Change in asset-based credit facility		7	40,154		17,887
Government loan		7	4,152		-
Issuance of long-term debt		7	32		-
Repayment of long-term debt		7	-		(216,159)
Issuance of debentures		7	-		120,732
Issuance of capital stock		8	-		85,859
Issurance of warrants		8	-		23,776
Addition to deferred financing costs		7	-		(7,937)
Share issue cost		8	-		(3,399)
Issue costs on warrants		8	-		(965)
Cash flows provided by financing activities			23,694		19,794
Investing activities
Acquisition of property, plant and equipment			(18,145)		(7,319)
Cash flows used by investing activities			(18,145)		(7,319)
Effect of changes in foreign exchange rates on cash and cash equivalents			113		(102)
Decrease in cash and cash equivalents			(2,476)		(16,969)
Cash and cash equivalents — Beginning of period			5,277		26,763
Cash and cash equivalents — End of period			2,801		9,794

 

 

SOURCE MEGA BRANDS INC.