MEGA Brands reports third quarter 2012 results

  • Consolidated net sales up 5%
  • EBITDA up 13% to $28.2 million
  • Basic EPS of $1.19 compared to $1.04

MONTREAL, Nov. 1, 2012 /PRNewswire/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the third quarter ended September 30, 2012. (All figures are expressed in US dollars.)

Consolidated net sales in the third quarter increased 5% to $140.1 million compared to $133.4 million in the corresponding 2011 period.

  • Toy sales increased 5% compared to the third quarter of 2011, with higher product shipments in the Preschool and Boys construction categories. Toy sales have increased year-over-year in 11 of the last 12 quarters.
  • Sales of Stationery & Activities products were up 3%, the sixth consecutive quarter of year-over-year growth in this segment.
  • North American sales rose 19%, more than offsetting lower international shipments.

Gross margin improved to 40% of net sales compared to 39.2% in the third quarter of 2011, mainly as a result of favourable product mix and proactive measures by the Corporation, including investments in new equipment to increase efficiency at its Montreal production facility.

Earnings before interest, taxes, depreciation and amortization (''EBITDA'') increased 13% to $28.2 million compared to $25.0 million in the third quarter of 2011. For the nine-month period ended September 30, 2012, EBITDA was up 22% to $35.2 million compared to $28.8 million in the corresponding period in 2011. EBITDA is a supplementary financial measure.

Net earnings were $19.5 million or $1.19 per basic share ($0.65 per diluted share) compared to $17.1 million or $1.04 per basic share ($0.51 per diluted share) in the third quarter of 2011. For the nine-month period ended September 30, 2012, net earnings were $12.6 million or $0.77 per basic share ($0.60 per diluted share) compared to $8.1 million or $0.49 per basic share ($0.40 per diluted share) in the same period of 2011.

''MEGA Brands achieved higher sales and earnings, improved gross margin and stronger cash flow in the third quarter,'' said Marc Bertrand, President and CEO. ''After nine months, we are well ahead of 2011 and well-positioned for the fourth quarter with higher listings at North American retailers compared to the same period last year, including the launch of the MEGA BLOKS Skylanders GiantsTM and MEGA BLOKS BarbieTM collections which will soon be appearing in stores.''

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 November 8, 2012. The replay phone number is (514) 807-9274 or 1 (855) 859-2056, access code 37587536.

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, 2012 and 2011. 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 nine-month month periods ended September 30, 2012, 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.


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,
  2012 2011 2012 2011
  $ $ $ $
         
Net sales 140,057 133,354 292,733 268,332
Cost of sales 84,076 80,958 183,056 167,074
Gross profit 55,981 52,396 109,677 101,258
         
Marketing and advertising expenses 3,358 3,721 9,234 9,219
Research and development expenses 3,754 3,172 11,813 9,965
Other selling, distribution and administrative expenses 23,533 22,281 62,646 60,944
Contingent consideration on business acquisition 95 110 287 884
Loss on foreign currency translation 574 1,162 103 620
         
Earnings from operations 24,667 21,950 25,594 19,626
         
Financial expenses 4,419 4,552 13,131 14,062
Loss on settlement of debt - - - 2,984
  4,419 4,552 13,131 17,046
         
Earnings before income taxes 20,248 17,398 12,463 2,580
         
Income taxes         
  Current 725 487 (113) (4,968)
  Deferred - (139) - (548)
  725 348 (113) (5,516)
         
Net earnings 19,523 17,050 12,576 8,096
         
Earnings per share        
  Basic 1.19 1.04 0.77 0.49
  Diluted 0.65 0.51 0.60 0.40
         

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,
  2012 2011 2012 2011
  $ $
         
Net earnings 19,523 17,050 12,576 8,096
         
Other comprehensive income (loss):        
  Cumulative translation adjustment (925) (1,182) 1,357 (2,063)
         
Other comprehensive income (loss): (925) (1,182) 1,357 (2,063)
         
Comprehensive income 18,598 15,868 13,933 6,033

Consolidated Statements of Financial Position
(in thousands of US dollars) 
   
     
     
  September 30, December 31,
  2012 2011
  (Unaudited) (Audited)
  $ $
     
Assets    
Current assets    
Cash and cash equivalents 3,654 6,745
Trade and other receivables 133,234 126,359
Inventories 75,683 69,560
Derivative financial instruments 667 904
Prepaid expenses  9,171 13,760
Total current assets 222,409 217,328
     
Non-current assets    
Property, plant and equipment 38,134 32,172
Intangible assets 22,877 23,193
Goodwill 30,000 30,000
Derivative financial instruments - 231
Total assets 313,420 302,924
     
     
Liabilities    
     
Current liabilities    
Asset-based credit facility 33,261 37,279
Trade and other payables 64,725 71,762
Income taxes 5,122 5,832
Current portion of long-term debt 7,244 7,013
  110,352 121,886
Non-current liabilities    
Long-term debt 112,464 105,275
  112,464 105,275
Equity    
Share capital 429,323 429,007
Warrants 24,430 24,430
Contributed surplus 4,084 3,492
Deficit (361,746) (374,322)
Accumulated other comprehensive loss (5,487) (6,844)
Total equity 90,604 75,763
Total liabilities and equity 313,420 302,924

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, 2010 429,007 24,430 1,982 (382,652) (5,260) 67,507
Net earnings - - - 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
             
Balance - December 31, 2011 429,007 24,430 3,492 (374,322) (6,844) 75,763
Net earnings - - - 12,576 - 12,576
Options exercised 316   (100)     216
Other comprehensive income - - - - 1,357 1,357
Stock-based compensation - - 692 - - 692
Balance - September 30, 2012 429,323 24,430 4,084 (361,746) (5,487) 90,604


Unaudited Consolidated Statements of Cash Flows
(in thousands of US dollars)
   
     
  Nine-month periods
ended September 30,
  2012 2011
  $
     
Operating activities    
Net earnings 12,576 8,096
Adjustments for:    
  Depreciation of property, plant and equipment 9,045 7,960
  Amortization of intangible assets 316 316
  Loss  on settlement of debt - 1,236
  Stock-based compensation 692 1,263
  Writeoff deferred financing costs - 1,748
  Financial expenses 13,131 14,062
  Income taxes (113) (5,516)
  Loss (gain) on foreign currency 2,849 (3,331)
    38,496 25,834
  Net change in non-cash working capital balances (13,640) (27,851)
  Income taxes recovered (paid) (472) 706
  Interest paid (7,055) (6,827)
Cash flows provided by (used in) operating activities 17,329 (8,138)
     
Financing activities    
Repayment of debentures (7,411) (20,644)
Change in asset-based credit facility (4,018) 40,154
Government loan 6,591 4,152
Issurance of capital stock 217 -
Repayment of long-term debt 24 32
Cash flows provided by (used in) financing activities (4,597) 23,694
     
Investing activities    
Acquisition of property, plant and equipment (15,765) (18,145)
Cash flows used in investing activities (15,765) (18,145)
     
Effect of changes in foreign exchange rates on cash and cash equivalents (58) 113
     
Decrease in cash and cash equivalents (3,091) (2,476)
Cash and cash equivalents — Beginning of period 6,745 5,277
     
Cash and cash equivalents — End of period 3,654 2,801

 

 

SOURCE MEGA BRANDS INC.




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