MEGA Brands reports first quarter 2009 results



    MONTREAL, May 13 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced
today its financial results for the first quarter ended March 31, 2009. (All
figures are expressed in US dollars.)
    In line with the Corporation's expectations, net sales in the first
quarter of 2009 were $43.5 million compared to $79.4 million in the
corresponding period last year. Net sales of Toys product lines decreased to
$23.4 million compared to $47.2 million in the first quarter of 2008. Net
sales of Stationery and Activities product lines declined to $20.1 million
compared to $32.2 million in the first quarter last year.
    Net loss was $25.9 million or $0.71 diluted loss per share compared to a
net loss of $9.6 million or $0.26 diluted loss per share in the first quarter
of 2008.
    As at March 31, 2009, the Corporation held cash and cash equivalents of
$48.1 million, virtually unchanged from the end of 2008.
    "These results are in line with our 2009 plan," said Marc Bertrand,
President and Chief Executive Officer. "For the next two quarters we expect
lower shipments than in the comparable 2008 periods, but with the gap
narrowing until the fourth quarter when we expect sales to be similar to last
year."
    The Corporation has another strong line-up in Preschool with several new
licenses including Ni Hao, Kai-lan, Wonder Pets, YO GABBA GABBA and In the
Night Garden. In Boys five-plus, the 2009 line-up features a strong new
licence with Halo Wars and two basic categories, Streets and ProBuilder, at
value prices. In magnetic construction, Battle Strikers is already on many Top
10 toy lists and MagNext has been repriced to meet popular price points.
    "Our 2009 product line is high on value and innovation," added Bertrand.
"All new products are on track and we are working with our partners to deliver
successful retail programs."
    Looking forward, the Corporation will soon be announcing a top tier
licence in Preschool for product launch during the fourth quarter. In
addition, the Corporation has commenced product planning tied to Marvel's Iron
Man movie, which is scheduled for release next Spring.

    MD&A Filing

    MEGA Brands will file the Management's Discussion and Analysis as well as
the unaudited consolidated financial statements and notes for the first
quarter ended March 31, 2009 via SEDAR on May 15, 2009. The MD&A, financial
statements and notes will be available on the Corporation's Web site on May
15, 2009.

    Conference Call

    An analyst conference call will be held at 4:30 p.m. on May 13, 2009 to
discuss the results. Participants may listen to the call by dialing 1 (800)
588-4942. For those unable to participate, a replay will be available until
May 20, 2009. The replay phone number is 1 (416) 640-1917, access code
21305336#.

    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. 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 the Corporation's 2008 Annual MD&A which is
available on SEDAR.

    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 loss
    (in thousands of US dollars, except per share data)
    (Unaudited)

                                                         Three-month periods
                                                              ended March 31,
                                                            2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                               $           $

    Net sales                                             43,533      79,392
    -------------------------------------------------------------------------

    Cost of sales                                         31,990      51,589
    -------------------------------------------------------------------------

    Gross profit                                          11,543      27,803

    Marketing and advertising expenses                     2,138       3,951
    Research and development expenses                      3,019       4,550
    Other selling, distribution and administrative
     expenses                                             18,250      27,558
    Litigation expenses                                    1,256       1,142
    Loss on foreign currency translation                   1,245       1,355
    -------------------------------------------------------------------------

    Loss from operations                                 (14,365)    (10,753)
    -------------------------------------------------------------------------

    Interest and other expenses
      Interest on long-term debt                           9,984       5,271
      Change in fair value of interest rate swap           1,583           -
      Amortization of deferred financing costs               306         940
      Other interest                                         (40)        190
    -------------------------------------------------------------------------
                                                          11,833       6,401
    -------------------------------------------------------------------------

    Loss before income taxes                             (26,198)    (17,154)
    -------------------------------------------------------------------------

    Income taxes
      Current                                                433         921
      Future                                                (713)     (8,427)
    -------------------------------------------------------------------------
                                                            (280)     (7,506)
    -------------------------------------------------------------------------

    Net loss                                             (25,918)     (9,648)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Loss per share
      Basic and diluted                                    (0.71)      (0.26)
    -------------------------------------------------------------------------


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

                                                         Three-month periods
                                                              ended March 31,
                                                            2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                               $           $

    Balance, beginning of period as reported            (543,161)    (84,500)
    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            (540,045)    (84,500)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net loss                                             (25,918)     (9,648)
    -------------------------------------------------------------------------

    Balance, end of period                              (565,963)    (94,148)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                                         Three-month periods
                                                              ended March 31,
                                                            2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                               $           $

    Net loss for the period                              (25,918)     (9,648)
    -------------------------------------------------------------------------

    Other comprehensive loss, net of income taxes
      Earnings (loss) on derivatives designated as
       cash flow hedges                                      356      (3,908)
    -------------------------------------------------------------------------
    Comprehensive loss for the period                    (25,562)    (13,556)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other comprehensive loss
    Balance, beginning of period
      Gross                                               (8,246)     (3,659)
      Income taxes                                         3,141       1,394
    -------------------------------------------------------------------------
                                                          (5,105)     (2,265)

    Other comprehensive loss
      Net change in losses on cash flow hedging items          -      (6,313)
      Reclassification to loss                               575           -
      Income taxes                                          (219)      2,405
    -------------------------------------------------------------------------
                                                             356      (3,908)
    Balance,end of period
      Gross                                               (7,671)     (9,972)
      Income taxes                                         2,922       3,799
    -------------------------------------------------------------------------
    Balance, end of period                                (4,749)     (6,173)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated balance sheets
    (in thousands of US dollars)

                                               March    December       March
                                            31, 2009    31, 2008    31, 2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                          (Unaudited)   (Audited) (Unaudited)
                                                   $           $           $
    Assets
    Current assets
      Cash and cash equivalents               48,118      49,427       4,073
      Accounts receivable                     58,539     104,620     101,047
      Inventories                             64,133      65,220      97,722
      Income taxes                             5,973       7,149       6,470
      Future income taxes                      3,590       5,291       4,983
      Prepaid expenses                        12,713      12,857      18,118
    -------------------------------------------------------------------------
                                             193,066     244,564     232,413

    Property, plant and equipment             30,500      31,726      44,329
    Intangible assets                         24,776      24,942      74,440
    Goodwill                                  30,900      30,000     298,938
    Future income taxes                        1,866       1,931      45,096
    -------------------------------------------------------------------------
                                             281,108     333,163     695,216
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current liabilities
      Accounts payable and accrued
       liabilities                            53,535      76,532      82,167
      Additional consideration accrued
       on business combination                54,775      54,775      54,775
      Derivative financial instruments             -           -       2,052
      Current portion of long-term debt        1,672       3,273       6,492
    -------------------------------------------------------------------------
                                             109,982     134,580     145,486

    Long-term debt                           386,649     387,702     299,295
    Derivative financial instruments          11,113      14,828      10,522
    Future income taxes                       16,254      16,497      30,999
    -------------------------------------------------------------------------
                                             523,998     553,607     486,302
    -------------------------------------------------------------------------

    Shareholders' equity
      Capital stock                          308,678     308,678     308,677
      Contributed surplus                        558         558         558
      Equity component of convertible
       debentures                             18,586      18,586           -
      Deficit                               (565,963)   (543,161)    (94,148)
      Accumulated other comprehensive
       loss net of income taxes               (4,749)     (5,105)     (6,173)
    -------------------------------------------------------------------------
                                            (242,890)   (220,444)    208,914
    -------------------------------------------------------------------------
                                             281,108     333,163     695,216
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                                         Three-month periods
                                                              ended March 31,
                                                            2009        2008
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                               $           $
    Cash flows from operating activities
      Net loss                                           (25,918)     (9,648)
      Items not affecting cash and cash equivalents
        Amortization of property, plant and equipment      3,178       3,607
        Amortization of intangible assets                    166         166
        Stock-based compensation plans                         3        (429)
        Future income taxes                                 (713)     (8,427)
        Accretion of interest on convertible
         debentures                                          596           -
        Amortization of deferred financing costs             306         940
        Amortization of unrealized loss on swap
         derivative financial instruments                    575           -
        Loss on swap derivative financial instruments      1,008           -
        Loss (gain) on foreign currency                     (382)        645
    -------------------------------------------------------------------------
                                                         (21,181)    (13,146)

    Changes in non-cash operating working capital
     items                                                25,068     (30,169)
    -------------------------------------------------------------------------
                                                           3,887     (43,315)
    -------------------------------------------------------------------------

    Cash flows from financing activities
      Repayment of long-term debt                         (2,345)     (2,353)
      Change in revolving credit facility                      -      48,500
      Addition to deferred financing costs                     -      (2,666)
      Issuance of capital stock                                -          76
    -------------------------------------------------------------------------
                                                          (2,345)     43,557
    -------------------------------------------------------------------------

    Cash flows from investing activities
      Business combinations                                 (900)          -
      Acquisition of property, plant and equipment        (1,951)     (4,674)
    -------------------------------------------------------------------------
                                                          (2,851)     (4,674)
    -------------------------------------------------------------------------

    Decrease in cash and cash equivalents                 (1,309)     (4,432)
    Cash and cash equivalents, beginning of period        49,427       8,505
    -------------------------------------------------------------------------
    Cash and cash equivalents, end of period              48,118       4,073
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary disclosure of cash flow information
      Interest paid                                       10,665       5,693
      Income taxes recovery                                 (870)       (310)

    Non cash item
      Property, plant and equipment acquired by
       means of capital leases                                 -         622
    




For further information:

For further information: Analysts and Investors: Eric Phaneuf, (514)
333-5555 ext. 2538, ephaneuf@megabrands.com; Media: Harold Chizick, (514)
333-5555 ext. 2338, hchizick@megabrands.com

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