MEGA Brands reports second quarter 2010 results
MONTREAL, Aug. 11 /PRNewswire-FirstCall/ - MEGA Brands Inc. (TSX: MB) announced today its financial results for the second quarter and six months ended June 30, 2010. (All figures are expressed in US dollars.)
Net sales increased 12% to $78.8 million compared to $70.1 million in the second quarter of 2009. Net earnings were $1.2 million or nil per diluted share compared to a net loss of $13.3 million or $0.36 per diluted share in the second quarter of 2009.
Net sales were higher in both North America and International, led by a solid increase in Toys shipments and stable sales of Stationery and Activities products. The growth in toy sales reflects a continued strong performance in the Preschool category, increased sales in the Boys category led by Halo, Iron Man 2, initial shipments of Dragons Universe and a steady performance in Games and Puzzles.
"We are pleased to report a third consecutive quarter of year-over-year improvement in net sales and gross margins, and a positive outlook for the balance of 2010," said Marc Bertrand, President and CEO. "For the second half of the year, we are well-positioned with more shelf space at retail, the launch of Thomas & Friends in international markets in the third quarter and the full global roll-out of our exciting Dragons Universe product line supported by TV advertising in North America beginning this month."
For the six-month period ended June 30, 2010, net sales are up 13% to $127.9 million compared to $113.7 million in the same period last year. Net earnings were $99.4 million or $0.53 per diluted share compared to a loss of $39.2 million or $(1.07) per diluted share in the corresponding period of 2009. In the first quarter of 2010, the Corporation recognized a non-cash gain on settlement of debt which increased net earnings by $0.68 per diluted share.
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 six-month periods ended June 30, 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.
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 (647) 427-7450 or 1 (888) 231-8191. For those unable to participate, a replay will be available until August 20, 2010. The replay phone number is (416) 849-0833 or (514) 807-9274, access code 92430083.
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, MagNext, MEGA Puzzles and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates.
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 second quarter ended June 30, 2010 and the year ended December 31, 2009, which are available at www.sedar.com. 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 (loss)
(in thousands of US dollars, except per share data)
Three-month periods Six-month periods
ended June 30, ended June 30,
2010 2009 2010 2009
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$ $ $ $
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Net sales 78,775 70,122 127,920 113,655
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Cost of sales 48,259 44,285 80,589 76,275
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Gross profit 30,516 25,837 47,331 37,380
Marketing and
advertising expenses 3,044 1,449 5,678 3,587
Research and development
expenses 2,955 2,759 6,008 5,778
Other selling,
distribution and
administrative expenses 20,498 24,977 51,811 44,483
Impairment of goodwill
- - 900 -
Loss (gain) on foreign
currency translation (2,123) (159) (1,450) 1,086
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Earnings (loss) from
operations 6,142 (3,189) (15,616) (17,554)
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Interest and other
expenses
Interest on long-term
debt 4,142 10,904 14,193 20,888
Settlement of debt
- - (140,344) -
Change in fair value
of interest rate swap - (2,131) - (548)
Amortization of deferred
financing costs 473 963 1,603 1,269
Other interest 39 50 152 10
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4,654 9,786 (124,396) 21,619
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Earnings (loss) before
income taxes 1,488 (12,975) 108,780 (39,173)
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Income taxes
Current 730 29 299 462
Future (427) 272 9,087 (441)
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303 301 9,386 21
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Net earnings (loss) 1,185 (13,276) 99,394 (39,194)
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Earnings (loss) per
share
Basic 0.00 (0.36) 0.53 (1.07)
Diluted(1) 0.00 (0.36) 0.53 (1.07)
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(1) The dilutive effect of the outstanding options for the three-and six-
month periods ended June 30, 2010 and 2009 is nil as they are anti-
dilutive. The dilutive effect of the outstanding warrants for the
three- and six-month periods ended June 30, 2010 is nil as they are
anti-dilutive. The dilutive effect of the outstanding debentures for
the six-month period ended June 30, 2010 and the three- and six-month
periods ended June 30, 2009 is nil as they are anti-dilutive.
Consolidated statements of deficit
(in thousands of US dollars)
Three-month periods Six-month periods
ended June 30, ended June 30,
2010 2009 2010 2009
-------------------------------------------------------------------------
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$ $ $ $
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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Balance, beginning of
period (431,110) (565,963) (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)
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- - - 3,116
Balance, beginning of
period as restated (431,110) (565,963) (529,319) (540,045)
Net earnings (loss) 1,185 (13,276) 99,394 (39,194)
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Balance, end of period (429,925) (579,239) (429,925) (579,239)
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Consolidated statements of comprehensive
income (loss) and Accumulated other
comprehensive income (loss)
(in thousands of US dollars)
Three-month periods Six-month periods
ended June 30, ended June 30,
2010 2009 2010 2009
-------------------------------------------------------------------------
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$ $ $ $
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------------------------------------------------------------------
Net earnings (loss)
for the period 1,185 (13,276) 99,394 (39,194)
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Other comprehensive
income (loss), net
of income taxes
Gain (loss) on
derivatives
designated as
cash flow hedges - 356 - 712
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Comprehensive income
(loss) for the period 1,185 (12,920) 99,394 (38,482)
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Accumulated other
comprehensive loss
Balance, beginning of
period
Gross - (7,671) - (8,246)
Income taxes - 2,922 - 3,141
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- (4,749) - (5,105)
Other comprehensive
income (loss)
Net change in losses
on cash flow hedging
items - - - -
Reclassification to
income (loss) - 575 - 1,150
Income taxes - (219) - (438)
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- 356 - 712
Balance, end of period
Gross - (7,096) - (7,096)
Income taxes - 2,703 - 2,703
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Balance, end of period - (4,393) - (4,393)
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Consolidated balance sheets
(in thousands of US dollars)
June 30, December 31,
2010 2009
(Unaudited) (Audited)
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$ $
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Assets
Current assets
Cash and cash equivalents 3,918 26,763
Accounts receivable 78,121 112,517
Inventories 72,281 46,247
Income taxes 1,160 914
Future income taxes 2,911 4,197
Prepaid expenses 10,789 12,806
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169,180 203,444
Property, plant and equipment 20,612 21,210
Intangible assets 23,946 24,278
Goodwill, net 30,000 30,000
Derivative financial instruments 13 -
Future income taxes 2,374 2,197
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246,125 281,129
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Liabilities
Current liabilities
Accounts payable and accrued liabilities 67,702 67,290
Current portion of long-term debt 200 944
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67,902 68,234
Long-term debt 115,654 395,940
Derivative financial instruments - 6,045
Future income taxes 19,652 12,407
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203,208 482,626
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Shareholders' equity
Capital stock 429,007 308,678
Warrants 24,430 -
Contributed surplus 19,405 558
Equity component of convertible debentures
- 18,586
Deficit (429,925) (529,319)
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42,917 (201,497)
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246,125 281,129
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Consolidated statements of cash flows
(in thousands of US dollars)
Three-month periods Six-month periods
ended June 30, ended June 30,
2010 2009 2010 2009
-------------------------------------------------------------------------
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$ $ $ $
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------------------------------------------------------------------
Cash flows from
operating activities
Net earnings (loss) 1,185 (13,276) 99,394 (39,194)
Items not affecting
cash and cash
equivalents
Amortization of
property, plant
and equipment 2,536 3,347 4,730 6,525
Amortization of
intangible assets 166 166 332 332
Settlement of debt
- - (145,310) -
Impairment of
goodwill/recovery
of purchase price - - - (900)
Amortization of
unrealized loss
on swap derivative
financial
instruments - 576 - 1,151
Gain on swap
derivative
financial
instruments - (2,706) - (1,698)
Stock-based
compensation plans 441 42 146 45
Amortization of
deferred financing
costs 612 963 1,603 1,269
Amortization of
warrants 591 - 591 -
Writeoff deferred
financing costs
- - 2,967 -
Future income taxes
(427) 272 9,087 (441)
Accretion of interest
on convertible
debentures - 644 819 1,240
Loss (gain) on
foreign currency (5,021) 1,301 (2,754) 919
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83 (8,671) (28,395) (30,752)
Changes in non-cash
operating working
capital items (18,711) (7,400) 7,716 17,668
-------------------------------------------------------------------------
(18,628) (16,071) (20,679) (13,084)
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Cash flows from
financing activities
Repayment of long-term
debt (76) (687) (216,100) (3,032)
Issuance of debentures
- - 120,733 -
Issuance of capital
stock - - 85,859 -
Issuance of warrants
- - 23,775 -
Addition to deferred
financing costs
- (3,254) (7,937) (3,254)
Share issue cost
- - (3,399) -
Issue costs on warrants
- - (965) -
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(76) (3,941) 1,966 (6,286)
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Cash flows from investing
activities
Acquisition of property,
plant and equipment (2,194) (2,131) (4,132) (4,082)
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(2,194) (2,131) (4,132) (4,082)
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Increase (decrease) in
cash and cash
equivalents (20,898) (22,143) (22,845) (23,452)
Cash and cash
equivalents, beginning
of period 24,816 48,118 26,763 49,427
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Cash and cash
equivalents, end of
period 3,918 25,975 3,918 25,975
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Supplementary
disclosure of cash
flow information
Interest paid 3,441 8,889 20,267 19,554
Income taxes paid
(recovery) 1,026 481 1,167 (389)
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SOURCE MEGA BRANDS INC.
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