2014

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.



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