MEGA BRANDS REPORTS FOURTH QUARTER AND 2010 RESULTS
MONTREAL, March 17 /PRNewswire-FirstCall/ - MEGA Brands Inc. (TSX: MB) announced today its financial results for the fourth quarter and full year ended December 31, 2010. (All figures are expressed in US dollars.)
Consolidated net sales in the fourth quarter increased 4% to $111.8 million compared to $107.3 million in the corresponding 2009 period. Net earnings were $10.2 million or $0.01 per diluted share compared to a net loss of $22.1 million or $0.60 per share in the fourth quarter of 2009. Adjusted earnings from operations increased to $14.5 million compared to $4.9 million in the fourth quarter of 2009.
For 2010, consolidated net sales increased 9% to $368.0 million compared to $338.9 million in 2009. Net earnings were $125.9 million or $0.28 per diluted share compared to $10.7 million or $0.29 per diluted share in 2009. Net earnings in both years included gains from non-recurring items. Adjusted earnings from operations increased to $35.1 million compared to $21.8 million in 2009.
The improvement in the Corporation's 2010 results was led by its Toys segment which more than offset lower results in the Stationery and Activities segment. Consolidated 2010 net sales increased 3% in North America and 20% in international markets.
''We are pleased with our overall performance, with 20% growth in worldwide toy sales for the year driven by strong contributions from core MEGA BLOKS product lines and licenses such as Thomas & Friends and Halo,'' said Marc Bertrand, President and CEO. ''EBITDA was up 13% to $45.3 million and we ended the year in a sound financial position.''
For 2011, the Corporation is launching several new MEGA BLOKS product lines complemented by new licenses such as Hello Kitty in the Preschool category and Need for Speed in the Boys category. ''The construction category continues to outperform the toy industry and we entered the year with good momentum and a solid business plan to increase sales and profitability in 2011,'' 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) 807-8791 or 1 (888) 731-5319. For those unable to participate, a replay will be available until March 23, 2011. The replay phone number is (416) 640-1917 or (877) 289-8525, access code 4421804.
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, 2010 and 2009. 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 Canadian Generally Accepted Accounting Principles (GAAP). However, the Corporation believes that certain non-GAAP measures provide useful information to investors regarding its financial condition and results of operations. A reconciliation of supplementary financial measures with GAAP financial statements is provided in the Corporation's MD&A for the year ended December 31, 2010, 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.
| Consolidated statements of earnings | ||||||||||
| (in thousands of US dollars, except per share data) | ||||||||||
| Three-month periods | Twelve-month periods | |||||||||
| ended December 31, | ended December 31, | |||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||
| $ | $ | $ | $ | |||||||
| (Unaudited) | (Unaudited) | (Audited) | (Audited) | |||||||
| Net sales | 111,809 | 107,295 | 368,020 | 338,912 | ||||||
| Cost of sales | 66,657 | 73,612 | 221,692 | 219,069 | ||||||
| Gross profit | 45,152 | 33,683 | 146,328 | 119,843 | ||||||
| Marketing and advertising expenses | 8,177 | 6,524 | 19,360 | 14,208 | ||||||
| Research and development expenses | 3,555 | 2,827 | 12,300 | 11,370 | ||||||
| Other selling, distribution and administrative expenses | 21,088 | 25,295 | 93,855 | 99,806 | ||||||
| Impairment of goodwill / recovery of purchase price | - | 2,039 | 900 | (69,927) | ||||||
| Loss (gain) on foreign currency translation on debentures | 4,275 | 1,424 | 4,096 | 8,089 | ||||||
| Loss (gain) on foreign currency translation | (2,125) | (1,281) | (906) | (5,736) | ||||||
| Earnings from operations | 10,182 | (3,145) | 16,723 | 62,033 | ||||||
| Interest and other expenses | ||||||||||
| Interest on long-term debt | 4,145 | 11,573 | 22,530 | 43,916 | ||||||
| Settlement of debt | - | - | (140,344) | - | ||||||
| Change in fair value of interest rate swap | - | 5,982 | - | 4,185 | |
|||||
| Amortization of deferred financing costs | 472 | 986 | 2,536 | 3,232 | ||||||
| Other interest | 320 | 219 | 576 | 263 | ||||||
| 4,937 | 18,760 | (114,702) | 51,596 | |||||||
| Earnings before income taxes | 5,245 | (21,905) | 131,425 | 10,437 | ||||||
| Income taxes | ||||||||||
| Current | (5,520) | 1,775 | 3,185 | 5,555 | ||||||
| Future | 560 | (1,627) | 2,332 | (5,844) | ||||||
| (4,960) | 148 | 5,517 | (289) | |||||||
| Net earnings | 10,205 | (22,053) | 125,908 | 10,726 | ||||||
| Earnings per share (Note 8) | ||||||||||
| Basic | 0.03 | (0.60) | 0.49 | 0.29 | ||||||
| Diluted1) | 0.01 | (0.60) | 0.28 | 0.29 | ||||||
| Consolidated statements of deficit | |||||||||
| (in thousands of US dollars) | |||||||||
| Three-month periods | Twelve-month periods | ||||||||
| ended December 31, | ended December 31, | ||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||
| $ | $ | $ | $ | ||||||
| (Unaudited) | (Unaudited) | (Audited) | (Audited) | ||||||
| Balance, beginning of period | (413,616) | (507,266) | (529,319) | (543,161) | |||||
| Impact of the adoption of new abstract, Handbook EIC-173, | |||||||||
| Credit Risk and the Fair Value of Financial Assets and Financial Liabilities | |||||||||
| Change in fair value of interest rate swap | - | - | - | 4,722 | |||||
| Income taxes | - | - | - | (1,606) | |||||
| - | - | - | 3,116 | ||||||
| - | - | - | |||||||
| Balance, beginning of period as restated | (413,616) | (507,266) | (529,319) | (540,045) | |||||
| Net earnings | 10,205 | (22,053) | 125,908 | 10,726 | |||||
| Balance, end of period | (403,411) | (529,319) | (403,411) | (529,319) | |||||
| Consolidated statements of comprehensive income and Accumulated other comprehensive income |
|||||||||
| (in thousands of US dollars) | |||||||||
| Three-month periods | Twelve-month periods | ||||||||
| ended December 31, | ended December 31, | ||||||||
| 2010 | 2009 | 2010 | 2009 | ||||||
| $ | $ | $ | $ | ||||||
| (Unaudited) | (Unaudited) | (Audited) | (Audited) | ||||||
| Net earnings for the period | 10,205 | (22,053) | 125,908 | 10,726 | |||||
| Other comprehensive income, net of income taxes | |||||||||
| Gain on derivatives designated as cash flow hedges | - | 4,037 | - | 5,105 | |||||
| Comprehensive income for the period | 10,205 | (18,016) | 125,908 | 15,831 | |||||
| Accumulated other comprehensive loss | |||||||||
| Balance, beginning of period | |||||||||
| Gross | - | (6,521) | - | (8,246) | |||||
| Income taxes | - | 2,484 | - | 3,141 | |||||
| - | (4,037) | - | (5,105) | ||||||
| Other comprehensive income (loss) | |||||||||
| Net change in losses on cash flow hedging items | - | - | - | - | |||||
| Reclassification to income (loss) | - | 6,521 | - | 8,246 | |||||
| Income taxes | - | (2,484) | - | (3,141) | |||||
| - | 4,037 | - | 5,105 | ||||||
| Balance, end of period | |||||||||
| Gross | - | - | - | - | |||||
| Income taxes | - | - | - | - | |||||
| Balance, end of period | - | - | - | - | |||||
| Consolidated balance sheets | ||||||
| (in thousands of US dollars) | ||||||
| December 31, | December 31, | |||||
| 2010 | 2009 | |||||
| (Audited) | (Audited) | |||||
| $ | $ | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | 5,277 | 26,763 | ||||
| Accounts receivable | 123,194 | 112,517 | ||||
| Inventories | 51,135 | 46,247 | ||||
| Future income taxes | 4,954 | 4,197 | ||||
| Derivative financial instruments | 414 | - | ||||
| Prepaid expenses | 11,039 | 12,806 | ||||
| 196,013 | 202,530 | |||||
| Property, plant and equipment | 21,722 | 21,210 | ||||
| Intangible assets | 23,615 | 24,278 | ||||
| Goodwill, net | 30,000 | 30,000 | ||||
| Derivative financial instruments | 309 | - | ||||
| Future income taxes | 2,143 | 2,197 | ||||
| 273,802 | 280,215 | |||||
| Liabilities | ||||||
| Current liabilities | ||||||
| Accounts payable and accrued liabilities | 60,590 | 67,290 | ||||
| Income taxes | 16,857 | 10,729 | ||||
| Derivative financial instruments | 970 | - | ||||
| Current portion of long-term debt | 35 | 944 | ||||
| 78,452 | 78,963 | |||||
| Long-term debt | 125,507 | 395,940 | ||||
| Derivative financial instruments | 19 | 6,045 | ||||
| Future income taxes | - | 764 | ||||
| 203,978 | 481,712 | |||||
| Shareholders' equity | ||||||
| Capital stock | 429,007 | 308,678 | ||||
| Warrants | 24,430 | - | ||||
| Contributed surplus | 19,798 | 558 | ||||
| Equity component of convertible debentures | - | 18,586 | ||||
| Deficit | (403,411) | (529,319) | ||||
| 69,824 | (201,497) | |||||
| 273,802 | 280,215 | |||||
| Consolidated statements of cash flows | ||||||||||
| (in thousands of US dollars) | ||||||||||
| Three-month periods | Twelve-month periods | |||||||||
| ended December 31, | ended December 31, | |||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||
| $ | $ | $ | $ | |||||||
| (Unaudited) | (Unaudited) | (Audited) | (Audited) | |||||||
| Cash flows from operating activities | ||||||||||
| Net earnings | 10,205 | (22,053) | 125,908 | 10,726 | ||||||
| Items not affecting cash and cash equivalents | ||||||||||
| Amortization of property, plant and equipment | 2,323 | 7,543 | 9,469 | 17,612 | ||||||
| Amortization of intangible assets | 166 | 166 | 664 | 664 | ||||||
| Settlement of debt | - | - | (145,310) | - | ||||||
| Impairment of goodwill / recovery of purchase price | - | 2,039 | - | (54,775) | ||||||
| Amortization of unrealized loss on swap derivative financial instruments | - | 6,520 | - | 8,246 | ||||||
| Gain on swap derivative financial instruments | - | (539) | - | (4,062) | ||||||
| Stock-based compensation plans | 726 | 340 | 1,302 | 368 | ||||||
| Amortization of deferred financing costs | 472 | 986 | 2,536 | 3,232 | ||||||
| Accretion of interest on debentures | 591 | - | 1,758 | - | ||||||
| Writeoff deferred financing costs | - | - | 2,967 | - | ||||||
| Future income taxes | 560 | (1,627) | 2,332 | (5,844) | ||||||
| Accretion of interest on convertible debentures | - | 768 | 819 | 2,727 | ||||||
| Loss (gain) on foreign currency | 4,663 | 1,206 | 1,426 | 7,516 | ||||||
| 19,706 | (4,651) | 3,871 | (13,590) | |||||||
| Changes in non-cash operating working | ||||||||||
| capital items | (3,612) | 20,262 | (17,119) | 5,658 | ||||||
| 16,094 | 15,611 | (13,248) | (7,932) | |||||||
| Cash flows from financing activities | ||||||||||
| Change in asset-based credit facility | (17,887) | - | - | - | ||||||
| Repayment of long-term debt | (118) | (707) | (216,277) | (4,440) | ||||||
| Issuance of debentures | - | - | 120,733 | - | ||||||
| Issuance of capital stock | - | - | 85,859 | - | ||||||
| Issuance of warrants | - | - | 23,775 | - | ||||||
| Addition to deferred financing costs | - | - | (7,937) | (3,254) | ||||||
| Share issue cost | - | - | (3,399) | - | ||||||
| Issue costs on warrants | - | - | (965) | - | ||||||
| (18,005) | (707) | 1,789 | (7,694) | |||||||
| Cash flows from investing activities | ||||||||||
| Acquisition of property, plant and equipment | (2,662) | (1,629) | (9,981) | (7,096) | ||||||
| (2,662) | (1,629) | (9,981) | (7,096) | |||||||
| Effect of changes in foreign exchange rates on cash and cash equivalents |
56 | |
51 | |
(46) | |
58 | |
||
| Increase (decrease) in cash and cash equivalents | (4,517) | 13,326 | (21,486) | (22,664) | ||||||
| Cash and cash equivalents, beginning of period | 9,794 | 13,437 | 26,763 | 49,427 | ||||||
| Cash and cash equivalents, end of period | 5,277 | 26,763 | 5,277 | 26,763 | ||||||
| Supplementary disclosure of cash flow information | ||||||||||
| Interest paid | 6,967 | 12,811 | 27,488 | 42,535 | ||||||
| Income taxes paid (recovery) | (4,198) | (661) | (2,943) | (817) | ||||||
SOURCE MEGA BRANDS INC.
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