Mega Brands announces value enhancement plan and reports third quarter 2007 financial results



    MONTREAL, Nov. 9 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced
today its third quarter 2007 financial results and a Value Enhancement Plan to
drive improved financial performance.
    "The overall health of our business is good, with leading brands, strong
category positions and growth opportunities worldwide," stated Marc Bertrand,
President and Chief Executive Officer. "Through the successful implementation
of this Plan, our financial performance will measure up to the potential of
our company."
    The Plan targets a broad range of activities, including the following:

    Products and Customers

    The Corporation plans to optimize its product portfolio by focusing R&D
and marketing resources on consumer driven product development.
    Innovation will continue to be a key driver of performance, supported by
annual investments of 3-4% of sales. The combination of innovation, the
make-up of the product portfolio and price increases will help offset cost
pressures that are affecting all players in its industry.
    In addition, the Corporation will increase the efforts to develop
profitable growth programs for its customers with great products and
differentiation.

    Inventory and Demand Management

    The Corporation plans to improve its business processes to achieve the
highest levels of customer satisfaction while significantly improving
inventory turns.

    
    Efficiencies

    The Corporation is moving ahead with plans for more synergies and savings,
in addition to the $7-10 million now being captured on an annualized basis as
a result of the integration of MEGA Brands America last year.

    - The Woodridge, New Jersey plant will be closed in December 2007.
    - The Woodridge and Board Dudes (California) distribution centres will
      be consolidated in Seattle.
    - The Corporation's operations and supplier base in China will be
      strengthened.

    These and other actions are expected to generate material cost savings and
manufacturing efficiencies.

    Financial results for the three-month and nine-month periods ended
    September 30, 2007

    -------------------------------------------------------------------------
                             Financial Highlights

                                 Three-month periods      Nine-month periods
                                  ended September 30,     ended September 30,
    (US $ millions, except
     earnings per share)            2007        2006        2007        2006
    -------------------------------------------------------------------------
    (unaudited)

    Net sales                      184.1       201.8       395.7       382.5
      Product line segmentation
        Toys                       111.6       126.5       223.6       210.5
        Stationery & Activities     72.5        75.3       172.1       172.0
      Geographic segmentation
        North America              117.7       141.9       271.1       280.9
        International               66.4        59.9       124.6       101.6

    Net earnings (loss)            (11.0)       18.0       (31.0)       22.6

    Earnings (loss) per share
      Basic                        (0.31)       0.56       (0.92)       0.70
      Diluted(1)                   (0.31)       0.53       (0.92)       0.66

    (1) The dilutive effect of outstanding options under the treasury stock
        method for the three month and nine month periods ended September 30,
        2007 is nil as it is anti-dilutive.
    -------------------------------------------------------------------------

    Net sales in the third quarter of 2007 decreased 8.8% to $184.1 million
compared to $201.8 million in the corresponding period last year. The
reduction in sales was primarily due to production delays in Asia that
resulted in at least $15 million of orders not shipped, as well as lower
shipments of MAGNETIX products.
    Net sales of our Toys product lines in the third quarter of 2007 decreased
11.8% to $111.6 million compared to $126.5 million in the third quarter of
2006. Our shipments of MAGNETIX products decreased by approximately $16
million during the third quarter compared to the same period of last year.
Given the Corporation's announcement of a second MAGNETIX product recall at
the beginning of this year and recalls of magnet based products announced by
other toy manufacturers in recent months, retailers have taken a very cautious
approach in building inventory levels of MAGNETIX products. Furthermore, our
2006 third quarter results were characterized by higher levels of MAGNETIX
sales due to a catch up in deliveries of the redesigned products. Finally,
production delays in Asia resulted in at least $10 million of unfulfilled
orders, coming primarily in our boys 5-plus category. Construction toys sales
were flat compared to last year with a strong performance of our Preschool
products offset by lower shipments of boys 5-plus products.
    Net sales of Stationery and Activities product lines in the third quarter
of 2007 decreased by 3.7% to $72.5 million compared to $75.3 million in the
corresponding period last year. Higher sales of Activities products were
offset by lower Stationery sales, as this year's back to school season did not
meet our expectations. Furthermore, approximately $5 million of customer
orders were not shipped during the quarter due to production delays in Asia.
These orders were mainly related to new product initiatives in our activities
product lines.
    On a geographical basis, net sales in North America decreased 17.1% to
$117.7 million compared to $141.9 million in the third quarter of 2006. The
reduction in North America was caused primarily by lower shipments of MAGNETIX
products which were approximately $17 million lower than last year for the
same period as well as production delays in Asia which resulted in
approximately $6 million of orders that were delivered in the first few weeks
of the fourth quarter of the current year. International net sales in the
third quarter of 2007 were up 10.9% to $66.4 million compared to $59.9 million
in the corresponding period of last year. Growth in the International segment
was driven by construction toy sales in the preschool category as well as
sales of MAGNETIX, Stationery and Activities products. This growth was offset
by at least $9 million in orders not shipped as a result of production delays
in Asia. Approximately $2.8 million of the sales increase is attributable to
changes in exchange rates. International net sales accounted for 36.1% of
consolidated net sales in the third quarter of 2007 compared to 29.7% for the
corresponding period for the prior year.
    For the nine-month period ended September 30, 2007, net sales increased
3.5% to $395.7 million compared to $382.5 million in the same period last
year. Sales of Toys were up 6.2% to $223.6 million compared to $210.6 million
in the first nine months of 2006 based on strong sales in the preschool
category, in addition to solid growth in the boys 5-plus and games and puzzles
categories. Sales of MAGNETIX products for the nine-month period ended
September 30, 2007 were lower than the prior year. Sales of Stationery and
Activities products for the first nine months of 2007 were flat at
$172.1 million compared to $172.0 million for the corresponding period of the
prior year. North American sales reached $271.1 million for the first nine
months of 2007 compared to $280.9 million in the corresponding 2006 period,
while International sales increased to $124.6 million or 31.5% of total net
sales during the nine month period ended September 30, 2007, compared to
$101.7 million or 26.6% of total net sales in the corresponding period of the
prior year.
    Cost of sales increased to $148.3 million in the third quarter of 2007
compared to $111.2 million in the corresponding period of 2006, an increase of
$37.1 million. Despite lower net sales, cost of sales increased by
approximately $19 million as a result of the sale of excess inventory below
cost and by approximately $20 million as a result of the recording of a
non-cash inventory revaluation adjustment.
    For the nine-month period ended September 30, 2007, cost of sales
increased to $303.2 million compared to $215.6 million for the same period in
2006. Included in the 2007 cost of sales is $30.5 million of MAGNETIX product
recall and other charges, approximately $28 million of resulting from the sale
of excess inventory below cost and approximately $20 million related to a
non-cash inventory revaluation adjustment recorded during the third quarter.
    Gross profit in the third quarter of 2007 decreased to $35.8 million
compared to $90.5 million in the third quarter of 2006.  Gross margin declined
to 19.5% compared to 44.8% in the third quarter of last year.
    Gross profit for the quarter was impacted by the following factors:

    - The sale of approximately $19 million of excess inventory which
      resulted in a negative gross profit of approximately $12 million. This
      is primarily related to the integration plan put in place following the
      acquisition of MEGA Brands America. In anticipation of plant closures
      in the United States, the Corporation had built higher levels of
      inventories in 2006 to avoid service issues with its key customers. In
      December 2007, the Corporation will close its manufacturing and
      distribution facility in New Jersey and Management has decided not to
      incur significant additional operating costs associated with keeping
      and transferring excess inventory to its distribution facilities
      located on the west coast of the United States.
    - The recording of a non-cash inventory revaluation adjustment of
      approximately $20 million. This expense was primarily set-up as a
      result of Management's decision to minimize any future financial impact
      related to the completion of its MEGA Brands America integration plan,
      and the full integration of Board Dudes' operations scheduled in 2008.
      It was also influenced by a conservative approach in regards to
      potential impacts following Management's decision to transition its
      MAGNETIX product offering into an entirely new generation of magnetic
      play called MagNext(TM). Preliminary responses to viewings of this new
      product at toy shows have been very positive. MAGNEXT is expected to
      reach retailers by mid-2008.
    - Lower gross profit generated by the MAGNETIX product line of
      $12 million due to lower unit sales and prices. Other product lines
      generated the same average gross margins compared to the prior year.
    - Production delays in Asia which resulted in at least $15 million of
      orders not shipped during the quarter. The gross profit impact of these
      unfulfilled orders amounted to approximately $7 million.
    - Lower manufacturing efficiencies resulting primarily from the inventory
      reduction plan initiated by the Corporation and the downsizing of the
      New Jersey facility which is scheduled to be fully closed by December
      2007. The impact of these items on gross profit amounted to
      approximately $4 million.

    Excluding the impact of sales of excess inventory and the recording of a
non-cash inventory revaluation adjustment described above, the gross margin
was 38.1% for the quarter ended September 30, 2007.
    For the nine-month period ended September 30, 2007, gross profit was $92.5
million compared to $167.0 million for the same period in 2006. Excluding the
MAGNETIX product recall and other charges of $30.5 million, the sale of excess
inventory and the recording of a non-cash inventory revaluation adjustment,
the gross margin was 41.3% compared to 43.7% in the same period of the prior
year.
    Marketing and advertising expenses were reduced to $4.8 million in the
third quarter of 2007 compared to $8.2 million in the third quarter of 2006.
The decrease reflects the timing of new product releases in 2007, with more
spending occurring earlier during the year related to products associated with
theatrical releases. For the nine months ended September 30, 2007, marketing
and advertising expenses were slightly lower than the prior year at
$15.6 million compared to $16.2 million for the corresponding period of the
prior year.
    Research and development expenses increased to $5.4 million in the third
quarter of 2007 compared to $5.1 million in the corresponding period last
year. This increase is mainly related to expenses to support new product
initiatives. For the nine months ended September 30, 2007, research and
development expenses increased to $17.1 million compared to $12.5 million for
the corresponding period of the prior year. The increase reflects our strong
investment in new product initiatives across all product categories.
    Other selling, distribution and administrative expenses amounted to
$34.6 million in the third quarter of 2007 compared to $36.6 million in the
third quarter of 2006. The improvement is mainly the result of lower product
distribution costs and lower administrative expenses. The current quarter
includes two non-recurring expenses, $2.1 million related to the sub-lease of
excess warehouse space in Montreal at unfavourable terms and $0.5 million
related to the set-up of a second-lien credit facility. This facility was
subsequently eliminated as a result of an issue of common shares from treasury
made by the Corporation in July 2007. For the nine months ended September 30,
2007, other selling, distribution and administrative expenses increased to
$90.9 million compared to $84.8 million for the corresponding period of the
prior year.
    As a result of the above, the loss from operations amounted to
$5.1 million for the third quarter of 2007 compared to earnings from
operations of $26.4 million in the corresponding 2006 period. In North
America, the earnings from operations for the third quarter of 2007 were $3.3
million compared to $16.4 million last year. In International, the loss from
operations amounted to $8.4 million compared to earnings from operations of
$10.0 million in the third quarter of 2006. As a result of the tax structure
implemented in conjunction with the Mega Brands America acquisition in July
2005, the majority of the inventory related charges described in the cost of
sales section above incurred this quarter are allocated to our International
operations.
    For the nine-month period ended September 30, 2007, the loss from
operations was $31.7 million compared to an operating profit of $40.7 million
in the corresponding period of 2006. This amount includes the MAGNETIX product
recall and other charges and litigation expenses of $36.2 million, once the
recovery of $3.6 million in product liability settlement from our insurers in
netted. It also includes the inventory related charges described in the cost
of sales section above totalling approximately $35 million. The loss from
operations in North America amounted to $29.9 million compared to earnings
from operations of $23.1 million in the prior year while the loss from
operations in International markets amounted to $1.8 million compared to
earnings from operation of $17.6 million in the same period of the prior year.
    Interest and other expenses in the third quarter of 2007 were $7.0 million
compared to $6.1 million in the same 2006 period, reflecting mainly an
increase in average long-term debt and, to a lesser extent, higher interest
rates. For the nine months ended September 30, 2007, interest and other
expenses amounted to $19.8 million compared to $16.4 million in the prior
year, also reflecting the increase in average long-term debt and, to a lesser
extent, higher interest rates.
    Income taxes for the third quarter ended September 30, 2007 amounted to a
recovery of $1.0 million, compared to an expense of $2.3 million in the
corresponding period of the prior year. For the nine months ended
September 30, 2007, the income tax recovery was $20.6 million compared to an
income tax expense of $1.7 million in the prior year. The tax rate used to
establish the income tax expense for the quarterly results is the applicable
estimated effective rate of each entity of the Corporation. The effective tax
rate reflects the Corporation's structure for tax purposes as well as the
financing structure put in place following the acquisition of MEGA Brands
America.
    The net loss amounted to $11.0 million or $0.31 diluted loss per share in
the third quarter of 2007 compared to net earnings of $18.0 million or $0.53
diluted earnings per share for the corresponding period last year. The impact
of the MAGNETIX product recall and other charges, litigation expenses, the
sale of excess inventory and the recording of a non-cash inventory revaluation
adjustment amounted to $0.80 diluted earnings per share for the third quarter
of 2007 compared to $0.28 diluted earnings per share for the corresponding
period of the prior year.
    For the nine months ended September 30, 2007, the net loss amounted to
$31.0 million, or $0.92 per diluted share compared to earnings of
$22.6 million, or $0.66 per diluted share for the corresponding period of the
prior year. The impact of the MAGNETIX product recall and other charges,
litigation expenses, the sale of excess inventory and the recording of a
non-cash inventory revaluation adjustment amounted to $1.49 diluted earnings
per share for the third quarter of 2007 compared to $0.32 diluted earnings per
share for the corresponding period of the prior year.

    Non-GAAP Financial Measures

    The terms "impact of the MAGNETIX product recall and other charges,
litigation expenses, the sale of excess inventory and the recording of a
non-cash inventory revaluation adjustment" and "excluding the impact of the
MAGNETIX product recall and other charges, litigation expenses, the sale of
excess inventory and the recording of a non-cash inventory revaluation
adjustment" do not have any standardized meaning under GAAP and are therefore
unlikely to be comparable to similar measures presented by other companies. We
present this information as a measure of operating performance of our ongoing
business without the effects of unusual items. We exclude such items because
they affect the comparability of our financial results between periods and
could potentially distort the analysis of trends in business performance.

    MD&A Filing

    MEGA Brands will file its third quarter 2007 Management's Discussion and
Analysis, as well as its unaudited consolidated financial statements and notes
for the third quarter ended September 30, 2007 via SEDAR on November 9, 2007.
The MD&A, financial statements and notes will be available on the
Corporation's Web site as of 7:00 a.m. on November 9, 2007.

    Conference Call

    An analyst conference call will be held at 9:00 a.m. on November 9, 2007
to discuss the third quarter results. Participants may listen to the call by
dialling 1 (800) 732-9307. For those unable to participate, a replay will be
available until November 16, 2007. The replay phone number is (416) 640-1917,
access code 21247969#. A webcast is also available at www.megabrands.com under
the investor relations section.

    Forward-looking Statements

    All statements in this press release that do not directly and exclusively
relate to historical facts constitute "forward-looking statements". These
statements represent the Corporation's intentions, plans, expectations and
beliefs. In certain instances, these statements require us to make assumptions
and there is significant risk that these assumptions may not be correct.
Furthermore, these statements are subject to risks, uncertainties and other
factors, many of which are beyond the Corporation's control. These factors
include and are not restricted to: toy recalls, realization of synergies,
litigation and its inherent uncertainty, including the recovery of the full
product liability settlement amount and risks associated with product recalls,
international operations, insurance coverage, difficulty in predicting
consumer preferences and development and acceptance of new products, rate of
growth or profitability, dependence on a few large customers, fluctuations in
the price of plastic resins and other raw materials as well as currency rates,
seasonality of toy and stationery industries, risks related to licensed
products, retail environment, construction toy litigation and financing and
interest rate matters. The words "believe", "estimate", "expect", "intend",
"anticipate", "foresee", "plan", and similar expressions and variations
thereof, identify certain of such forward-looking statements, which speak only
as of the date on which they are made. The Corporation disclaims any intention
or obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise, other than
as required by applicable legislation. Readers are cautioned not to place
undue reliance on these forward-looking statements. More information about the
risks that could cause our actual results to significantly differ from our
current expectations can be found in the "Risks and Uncertainties" section of
our 2006 and third quarter 2007 MD&A.

    About MEGA Brands

    MEGA Brands is a trusted family of leading global brands in construction
toys, games & puzzles, arts & crafts and stationery. We offer engaging
creative experiences for children and families through innovative,
well-designed, affordable and high-quality products that deliver on our
Creativity to the Rescue promise. For more information, please visit
http://www.megabrands.com.

    The MEGA logo, Creativity to the Rescue, MEGA BLOKS, ROSE ART, MAGNETIX,
BOARD DUDES and MAGNEXT are trademarks of MEGA Brands Inc. or its affiliates.


    Consolidated statements of earnings
    (in thousands of US dollars, except per share data)
    (Unaudited)

                                 Three-month periods      Nine-month periods
                                  ended September 30,     ended September 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $
    Net sales                    184,105     201,778     395,697     382,542
    -------------------------------------------------------------------------

    Cost of sales                148,279     111,231     303,230     215,550
    -------------------------------------------------------------------------

    Gross profit                  35,826      90,547      92,467     166,992

    Marketing and advertising
     expenses                      4,794       8,178      15,565      16,246
    Research and development
     expenses                      5,379       5,079      17,064      12,476
    Other selling, distribution
     and administrative
     expenses                     34,604      36,604      90,902      84,788
    Voluntary product recall
     and replacement                   -         183       4,700       1,617
    Litigation expenses            2,300         669       4,613       1,091
    Product liability
     settlement (reimbursement)
     and related expenses         (2,600)     13,859      (3,600)     14,027
    Gain on foreign currency
     translation                  (3,582)       (404)     (5,040)    (3,988)
    -------------------------------------------------------------------------

    Earnings (loss) from
     operations                   (5,069)     26,379     (31,737)     40,735
    -------------------------------------------------------------------------

    Interest expenses
      Interest on long-term
       debt                        6,727       6,126      19,276      16,107
      Amortization of deferred
       financing costs               260         179         552         487
      Other interest                  21        (171)        (33)      (194)
    -------------------------------------------------------------------------
                                   7,008       6,134      19,795      16,400
    -------------------------------------------------------------------------

    Earnings (loss) before
     income taxes                (12,077)     20,245     (51,532)     24,335
    -------------------------------------------------------------------------

    Income taxes
      Current                      3,244      11,108       1,476       3,909
      Future                      (4,293)     (8,822)    (22,032)    (2,161)
    -------------------------------------------------------------------------
                                  (1,049)      2,286     (20,556)      1,748
    -------------------------------------------------------------------------

    Net earnings (loss)          (11,028)     17,959     (30,976)     22,587
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per share
      Basic                        (0.31)       0.56       (0.92)       0.70
      Diluted(1)                   (0.31)       0.53       (0.92)       0.66
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) The dilutive effect of outstanding options under the treasury stock
        method for the three-month and the nine-month periods ended
        September 30, 2007 is nil as it is anti-dilutive.


    Consolidated statements of retained earnings (deficit)
    (in thousands of US dollars)
    (Unaudited)

                                 Three-month periods      Nine-month periods
                                  ended September 30,     ended September 30,
                                    2007        2006        2007        2006
                                       $           $           $           $
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Balance, beginning of
     period                       (7,312)     (8,084)     12,636     (12,712)

    Net earnings (loss)          (11,028)     17,959     (30,976)     22,587
    -------------------------------------------------------------------------

    Balance, end of period       (18,340)      9,875     (18,340)      9,875
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated statements of comprehensive income and
    Accumulated other comprehensive income
    (in thousands of US dollars)
    (Unaudited)

                                 Three-month periods      Nine-month periods
                                  ended September 30,     ended September 30,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $

    Net earnings (loss) for
     the period                  (11,028)     17,959     (30,976)     22,587
    -------------------------------------------------------------------------

    Other comprehensive income,
     net of income taxes
      Loss on derivatives
       designated as cashflow
       hedges                     (2,583)          -      (1,184)          -
    -------------------------------------------------------------------------
    Comprehensive income (loss)
     for the period              (13,611)     17,959     (32,160)     22,587
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income
    Balance, beginning of
     period                        3,150           -           -           -
    Impact of adopting the
     new accounting policy
     regarding financial
     instruments, net of
     income taxes                      -           -       1,751           -
    Other comprehensive loss,
     net of income taxes          (2,583)          -      (1,184)          -
    -------------------------------------------------------------------------
    Balance, end of period           567           -         567           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated balance sheet
    (in thousands of US dollars)

                                    September 30,  December 31, September 30,
                                            2007          2006          2006
                                      (Unaudited)     (Audited)   (Unaudited)
    -------------------------------------------------------------------------
                                               $             $             $
    Assets
    Current assets
      Cash and cash equivalents            8,928        13,658         9,696
      Accounts receivable                163,946       161,612       209,412
      Inventories                        119,971       140,630       137,742
      Income taxes                         8,965         9,317         8,753
      Future income taxes                 14,911         8,354        29,799
      Prepaid expenses                    15,702        12,025         9,148
    -------------------------------------------------------------------------
                                         332,423       345,596       404,550

    Property, plant and equipment         48,316        43,213        42,872
    Intangible assets                     78,967        79,517        71,986
    Goodwill                             301,988       300,829       318,962
    Derivative financial instruments         916             -             -
    Future income taxes                   49,258        28,006             -
    Deferred charges                           -         3,281         3,979
    -------------------------------------------------------------------------
                                         811,868       800,442       842,349
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current liabilities
      Accounts payable and accrued
      liabilities                        105,991       153,437       180,656
      Additional consideration
       accrued on business
       combination                        57,825        57,825        55,712
       Derivative financial
        instruments                          988             -             -
      Current portion of long-term
       debt                                8,495         9,609         9,539
    -------------------------------------------------------------------------
                                         173,299       220,871       245,907

    Long-term debt                       313,064       302,345       324,819
    Future income taxes                   34,121        27,782        27,354
    -------------------------------------------------------------------------
                                         520,484       550,998       598,080
    -------------------------------------------------------------------------

    Shareholders' equity
      Capital stock                      308,598       236,088       233,294
      Contributed surplus                    559           720         1,100
      Retained earnings (deficit)        (18,340)       12,636         9,875
    Accumulated other comprehensive
     income net of income taxes              567             -             -
    -------------------------------------------------------------------------
                                         291,384       249,444       244,269
    -------------------------------------------------------------------------
                                         811,868       800,442       842,349
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated statements of cash flows
    (in thousands of US dollars)
    (Unaudited)

                                 Three-month periods      Nine-month periods
                                  ended September 30,     ended September 30,

                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                       $           $           $           $

    Cash flows from operating
     activities
      Net earnings (loss)        (11,028)     17,959     (30,976)     22,587
      Items not affecting cash
       and cash equivalents
        Amortization of
         property, plant and
         equipment                 3,568       3,109       9,977       9,224
        Amortization of
         intangible assets           182          26         550         188
        Amortization of
         deferred charges              -         315           -         846
        Stock-based
         compensation plans          157         778          57       1,436
        Future income taxes       (4,293)     (8,822)    (22,032)     (2,161)
        Gain on disposal of
         property, plant and
         equipment                   (20)          -        (260)          -
        Gain on foreign
        currency                    (678)       (193)       (295)     (2,631)
    -------------------------------------------------------------------------
                                 (12,112)     13,172     (42,979)     29,489

    Changes in non-cash
     operating working capital
     items                           970     (39,397)    (31,245)   (42,278)
    -------------------------------------------------------------------------
                                 (11,142)    (26,225)    (74,224)   (12,789)
    -------------------------------------------------------------------------

    Cash flows from financing
     activities
      Repayment of long-term
       debt                       (2,414)    (22,641)     (7,133)   (26,594)
      Change in revolving
       credit facility           (48,400)     54,000      20,600      60,000
      Amortization of deferred
       financing costs               260           -         552           -
      Issuance of capital stock   70,519         537      71,293       1,522
    -------------------------------------------------------------------------
                                  19,965      31,896      85,312      34,928
    -------------------------------------------------------------------------

    Cash flows from investing
     activities
      Acquisition of property,
       plant and equipment        (3,681)     (4,211)    (15,457)    (12,644)
      Proceeds from disposal
       of property, plant and
       equipment                       -           -         798          54
      Business combinations         (817)     (1,920)     (1,159)    (19,420)
    -------------------------------------------------------------------------
                                  (4,498)     (6,131)    (15,818)    (32,010)
    -------------------------------------------------------------------------

    Decrease in cash and cash
     equivalents                   4,325        (460)     (4,730)     (9,871)
    Cash and cash equivalents,
     beginning of period           4,603      10,156      13,658      19,567
    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of period                 8,928       9,696       8,928       9,696
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary disclosure
     of cash flow information
      Interest paid                6,570       5,542      19,101      15,920
      Income taxes paid
       (recovered)                 1,300       2,633        (794)     16,507
    




For further information:

For further information: Bertrand Jolicoeur, Director, Corporate
Finance, (514) 333-3339 ext.2538

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