- Seventh consecutive quarter of year-over-year sales growth
- Toy sales up 11%, growth in all categories
- Stationery and Activities sales up 2%
MONTREAL, July 28, 2011 /PRNewswire/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the second quarter ended June 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 second quarter increased 6% to $83.9 million compared to $78.8 million in the corresponding 2010 period. This is the seventh consecutive quarter of higher year-over-year consolidated sales since the fourth quarter of 2009.
Toy sales increased 11% with growth in all categories compared to the second quarter of 2010. Sales of Stationery and Activities products increased 2%, reflecting the successful execution of the Corporation's new business plan for this segment.
On a geographical basis, North American sales were up 6%, reflecting growth in both of the Corporation's product segments. International sales increased 8% in the second quarter and the Corporation expects further growth in the second half of the year.
Net earnings were $0.3 million compared to a net loss of $0.4 million in the second quarter of 2010.
''These results - and the fact that retail sales of our products are running ahead of shipments - show that we are building momentum throughout our business,'' said Marc Bertrand, President and CEO. ''We continue to invest in innovation and licensed properties, including an expanded offering of video game-based products from industry leaders such as Microsoft, Electronic Arts and Blizzard Entertainment. In Stationery and Activities, we are seeing early signs of a turnaround and we continue to implement our new business plan based on innovation and growth.''
The Corporation's business is seasonal, with net sales and financial results typically at their highest levels in the third and fourth quarters.
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 August 3, 2011. The replay phone number is (416) 640-1917 or 1 (877) 289-8525, access code 4454214.
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 six month periods ended June 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 June 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 June 30, |
Six-month periods ended June 30, |
||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||
| Note | $ | $ | $ | $ | |||||
| Net sales | 83,942 | 78,775 | 134,978 | 127,920 | |||||
| Cost of sales | 52,892 | 48,488 | 86,116 | 81,043 | |||||
| Gross profit | 31,050 | 30,287 | 48,862 | 46,877 | |||||
| Marketing and advertising expenses | 2,634 | 3,044 | 5,498 | 5,678 | |||||
| Research and development expenses | 3,517 | 2,955 | 6,793 | 6,008 | |||||
| Other selling, distribution and administrative expenses | 20,753 | 20,902 | 38,663 | 52,287 | |||||
| Contingent consideration on business acquisition | 4 | 606 | 167 | 774 | 335 | ||||
| Gain on foreign currency translation | (663) | (1,319) | (542) | (1,117) | |||||
| Earnings (loss) from operations | 4,203 | 4,538 | (2,324) | (16,314) | |||||
| Financial expenses | 4,837 | 4,663 | 9,510 | 16,045 | |||||
| Loss (gain) on settlement of debt | 7 | 2,984 | - | 2,984 | (144,338) | ||||
| 7,821 | 4,663 | 12,494 | (128,293) | ||||||
| Earnings (loss) before income taxes | (3,618) | (125) | (14,818) | 111,979 | |||||
| Income taxes | |||||||||
| Current | (4,004) | 797 | (5,455) | 7,637 | |||||
| Deferred | 76 | (494) | (409) | 1,749 | |||||
| (3,928) | 303 | (5,864) | 9,386 | ||||||
| Net earnings (loss) | 310 | (428) | (8,954) | 102,593 | |||||
| Earnings (loss) per share | |||||||||
| Basic | 6 | 0.02 | (0.03) | (0.55) | 11.03 | ||||
| Diluted | 6 | (0.18) | (0.24) | (0.55) | 6.48 | ||||
| Unaudited Interim Consolidated Statements of Comprehensive Income | |||||||||
| (in thousands of US dollars, except per share amounts) | |||||||||
| Three-month periods ended June 30, |
Six-month periods ended June 30, |
||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||
| Note | $ | $ | $ | $ | |||||
| Net earnings (loss) | 310 | (428) | (8,954) | 102,593 | |||||
| Other comprehensive loss: | |||||||||
| Cumulative translation adjustment | 4 | (315) | (86) | (881) | (2,675) | ||||
| Other comprehensive loss | (315) | (86) | (881) | (2,675) | |||||
| Comprehensive income (loss) | (5) | (514) | (9,835) | 99,918 | |||||
| Unaudited Consolidated Statements of Financial Position | ||||
| (in thousands of US dollars) | ||||
| June 30, | December 31, | |||
| 2011 | 2010 | |||
| Note | $ | $ | ||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 3,394 | 5,277 | ||
| Trade and other receivables | 90,027 | 123,194 | ||
| Inventories | 81,649 | 51,135 | ||
| Derivative financial instruments | 11 | 617 | 414 | |
| Prepaid expenses | 11,648 | 11,039 | ||
| Total current assets | 187,335 | 191,059 | ||
| Non-current assets | ||||
| Property, plant and equipment | 31,520 | 21,501 | ||
| Intangible assets | 23,404 | 23,615 | ||
| Goodwill | 30,000 | 30,000 | ||
| Derivative financial instruments | 11 | 96 | 309 | |
| Deferred income tax assets | 7,138 | 7,097 | ||
| Total assets | 279,493 | 273,581 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Asset-based credit facility | 7 | 20,294 | - | |
| Trade and other payables | 70,793 | 62,686 | ||
| Income taxes | 12,532 | 16,857 | ||
| Derivative financial instruments | 11 | 1,620 | 970 | |
| Current portion of long-term debt | 7 | 7,382 | 35 | |
| 112,621 | 80,548 | |||
| Non-current liabilities | ||||
| Long-term debt | 7 | 108,162 | 125,507 | |
| Derivative financial instruments | 11 | 173 | 19 | |
| Deferred income tax liabilities | - | - | ||
| 108,335 | 125,526 | |||
| Equity | ||||
| Share capital | 8 | 429,007 | 429,007 | |
| Warrants | 8 | 24,430 | 24,430 | |
| Contributed surplus | 2,847 | 1,982 | ||
| Deficit | 4 | (391,606) | (382,652) | |
| Accumulated other comprehensive loss | 4 | (6,141) | (5,260) | |
| Total equity | 58,537 | 67,507 | ||
| Total liabilities and equity | 279,493 | 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 | - | - | - | 102,593 | - | 102,593 | ||
| Other comprehensive loss | 4 | - | - | - | - | (2,675) | (2,675) | |
| 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 | - | - | 475 | - | - | 475 | ||
| Balance - June 30, 2010 | 429,007 | 24,430 | 1,033 | (411,161) | (2,675) | 40,634 | ||
| - | - | - | - | |||||
| Net earnings for the period | - | - | - | 28,509 | - | 28,509 | ||
| Other comprehensive loss | 4 | - | - | - | - | (2,585) | (2,585) | |
| Stock-based compensation | - | - | 949 | - | - | 949 | ||
| Balance - December 31, 2010 | 429,007 | 24,430 | 1,982 | (382,652) | (5,260) | 67,507 | ||
| Net loss for the period | - | - | - | (8,954) | - | (8,954) | ||
| Other comprehensive loss | - | - | - | - | (881) | (881) | ||
| Stock-based compensation | - | - | 865 | - | - | 865 | ||
| Balance - June 30, 2011 | 429,007 | 24,430 | 2,847 | (391,606) | (6,141) | 58,537 | ||
| Unaudited Consolidated Statements of Cash Flows | |||||
| (in thousands of US dollars) | |||||
| Six-month periods, ended June 30 |
|||||
| 2011 | 2010 | ||||
| Note | $ | $ | |||
| Operating activities | |||||
| Net earnings (loss) | (8,954) | 102,593 | |||
| Items not affecting cash and cash equivalents | |||||
| Depreciation of property, plant and equipment | 5,134 | 5,323 | |||
| Amortization of intangible assets | 211 | 332 | |||
| Loss (gain) on settlement of debt | 7 | 1,236 | (149,304) | ||
| Stock-based compensation | 866 | 475 | |||
| Financial expenses | 9,510 | 16,045 | |||
| Writeoff deferred financing costs | 7 | 1,748 | 2,967 | ||
| Income taxes | (5,864) | 9,386 | |||
| Loss (gain) on foreign currency | 587 | (2,741) | |||
| 4,474 | (14,924) | ||||
| Net change in non-cash working capital balances | 10 | 10,594 | 15,692 | ||
| Income taxes recovered (paid) | 1,306 | (1,167) | |||
| Interest paid | (7,151) | (20,267) | |||
| Cash flows provided by operating activities | 9,223 | (20,666) | |||
| Financing activities | |||||
| Repurchase of debentures | 7 | (20,644) | - | ||
| Change in asset-based credit facility | 7 | 20,294 | - | ||
| Government loan | 7 | 4,152 | - | ||
| Issuance of long-term debt | 7 | 32 | - | ||
| Repayment of long-term debt | 7 | (216,100) | |||
| 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 | 3,834 | 1,966 | |||
| Investing activities | |||||
| Acquisition of property, plant and equipment | (14,932) | (4,132) | |||
| Cash flows provided by investing activities | (14,932) | (4,132) | |||
| Effect of changes in foreign exchange rates on cash and cash equivalents | (8) | (13) | |||
| Increase (decrease) in cash and cash equivalents | (1,883) | (22,845) | |||
| Cash and cash equivalents — Beginning of period | 5,277 | 26,763 | |||
| Cash and cash equivalents — End of period | 3,394 | 3,918 | |||
SOURCE MEGA BRANDS INC.
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