Mega Brands reports fourth quarter and 2006 financial results



    MONTREAL, April 2 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced its
financial results today for the fourth quarter and full year ended
December 31, 2006.
    Consolidated net sales in 2006 increased 42.2% to $547.3 million compared
to $384.9 million in 2005. On a pre-EIC 156 basis, consolidated sales in 2006
were $573.1 million compared to $407.0 million in 2005.
    Net sales in North America increased 56.4% to $397.8 million compared to
$254.3 million in 2005, mainly as a result of the inclusion of MEGA Brands
America for the full year in 2006 compared to approximately five months in
2005.
    International net sales were up 14.6% to $149.6 million compared to
$130.5 million in 2005. The Corporation increased its market share in the
construction toy category in virtually all international markets in 2006 and
gained the leadership position in this category in the United Kingdom and
Spain for the first time.
    Reflecting the impact of Specified Items totaling $27.9 million after tax
or $0.82 diluted earnings per share, net earnings in 2006 were $25.3 million
or $0.74 diluted earnings per share. This compares to net earnings of
$39.6 million or $1.26 diluted earnings per share in 2005.
    "All things considered, we are pleased with our operating performance in
2006, with diluted EPS before Specified Items of $1.56, low ending inventories
of our products at retail and the integration of MEGA Brands America," stated
Marc Bertrand, President and CEO. "We overcame a number of unexpected
challenges and positioned MEGA Brands for continued profitable growth with a
strong platform of exciting brands."
    "Sales momentum entering 2007 is strong, driven by several first-quarter
product launches and the May releases of Pirates of the Caribbean 3 and
Spider-Man 3," added Mr. Bertrand. "For 2007, we see continued growth and
earnings that we expect to be supported by $7-10 million of operating
synergies resulting from the integration of MEGA Brands America in 2006."

    
    -------------------------------------------------------------------------
    Financial Highlights
                                       Years ended       Three-month periods
                                       December 31,        ended December 31,
    (U.S. $ millions, except
     earnings per share          2006         2005         2006         2005
    -------------------------------------------------------------------------
                              Audited      Audited    Unaudited    Unaudited

    Net sales                   547.3        384.9        164.8        166.2
    Net earnings                 25.3         39.6          2.8         20.9
    Earnings per share
      Basic                      0.79         1.35         0.09         0.66
      Diluted                    0.74         1.26         0.08         0.61

    Specified Items (1)
     per share
      Basic                     (0.86)           -        (0.53)           -
      Diluted                   (0.82)           -        (0.50)           -

    Earnings per share before
     Specified Items (1)
      Basic                      1.65         1.35         0.61         0.66
      Diluted                    1.56         1.26         0.58         0.61

    (1)Earnings per share before Specified Items is not calculated in
    accordance with Canadian Generally Accepted Accounting Principles and are
    unaudited items. The Corporation believes this to be a relevant measure
    because it excludes items that are not typical of ongoing operations and
    allows shareholders and other investors to compare the Corporation's
    performance for the three-month and twelve-month periods ended December
    31, 2006 with the similar 2005 periods. Please refer to the section of
    this press release titled "Specified Items Affecting Operations in Q4
    and 2006".
    -------------------------------------------------------------------------

    Specified Items Affecting Operations in Q4 and 2006

    The Corporation recorded Specified Items Affecting Operations in 2006.
Depending on their nature, the 2006 Specified Items were recorded against net
sales, in cost of sales or as operating expenses. This classification was
determined in accordance with GAAP. The following table summarizes all
Specified Items Affecting Operations during the year.

                                                                 Three-month
                                                    Year ended  period ended
                                                       Dec. 31,     Dec. 31,
    (U.S. $ thousands)                                    2006         2006
    -------------------------------------------------------------------------

    MAGNETIX product replacement expenses               16,029       13,758
    Product liability settlement and related expenses   15,490        1,463
    Integration expenses                                 8,303        8,303
    Litigation expenses                                  4,769        3,678
    -------------------------------------------------------------------------
                                                        44,591       27,202

    MAGNETIX product replacement expenses
        -  The Corporation recorded credits and charges of $6.6 million
           ($5.9 million in the fourth quarter) as a reduction of net sales.
           The net impact of these charges on gross profit amounted to
           $6.1 million for the year ($5.5 million in the fourth quarter).
        -  The Corporation recorded write-offs of MAGNETIX components of
           $4.3 million ($4.3 million in the fourth quarter) as a result of
           the redesign of such components. These amounts are recorded in
           cost of sales.
        -  The Corporation recorded product replacement expenses of
           $5.6 million ($4.0 million in the fourth quarter), consisting of
           freight costs to meet customer shipment dates due to manufacturing
           delays for redesigned MAGNETIX products, development costs for the
           redesign of MAGNETIX components, and product replacements for
           consumers under the voluntary recall and replacement program for
           MAGNETIX products jointly announced with the CPSC. The total
           amount is recorded as a separate line item in operating expenses.

    Product liability settlement and related expenses
        -  The Corporation settled four lawsuits and ten claims related to
           magnet ingestion and recorded product liability settlement and
           related expenses of $15.5 million, consisting of $13.5 million for
           the product liability settlement recorded in the third quarter and
           $2.0 million of related legal expenses ($1.5 million in the fourth
           quarter). The total amount is recorded as a separate line item in
           operating expenses.

    Integration expenses
        -  The Corporation recorded a charge of $4.7 million mostly related
           to inventory write-offs ($4.7 million in the fourth quarter)
           following plant closures as part of the integration of MEGA Brands
           America. This amount is recorded in cost of sales.
        -  The Corporation recorded integration expenses of $3.6 million
           ($3.6 million in the fourth quarter), mainly related to branding,
           plant asset write-offs, plant closure costs and other
           miscellaneous integration charges. This amount is recorded as a
           separate line item in operating expenses.

    Litigation expenses
        -  The Corporation recorded litigation expenses of $4.8 million
           ($3.7 million in the fourth quarter), mainly for the Rosen
           Litigation. This amount is recorded as a separate line item in
           operating expenses.

    Management believes that under the terms of the acquisition of MEGA Brands
America, all claims and expenses related to MAGNETIX, as well as certain other
expenses, are recoverable against the sellers, including but not limited to
the $15.0 million escrow fund provided for in the SPA. The Corporation also
expects to recover substantially the full amount of the $13.5 million product
liability settlement from its insurers and through other recourses. However,
there can be no assurance that a favorable outcome will be achieved.

    Fourth Quarter 2006 Performance

    Consolidated net sales in the fourth quarter of 2006 were $164.8 million
compared to $166.2 million in the fourth quarter of 2005. On a pre-EIC basis,
consolidated net sales in the fourth quarter of 2006 are $174.6 million
compared to $175.9 million in the same 2005 period.
    Net sales of Toys product lines increased 4.2% to $123.1 million in the
fourth quarter of 2006 compared to $118.1 million in the 2005 period. Net
sales increased in all product categories except games and puzzles.
    Net sales of Stationery and Activities product lines declined to
$41.7 million compared to $48.1 million in the fourth quarter of 2005. This is
explained mainly by lower sales of licensed craft and activity sets in the
fourth quarter of 2006 compared to the corresponding 2005 period.
    Net sales in North America were $116.9 million in the fourth quarter of
2006, compared to $127.0 million in the corresponding 2005 period. Net sales
of preschool and boys 5-plus construction toys matched the levels achieved in
the fourth quarter of 2005, while sales declined in craft and activity sets
and games and puzzles. Stationery sales were higher than in the fourth quarter
of 2005.
    International net sales increased 22.0% to $47.9 million compared to $39.3
million in the fourth quarter of 2005. Sales growth was achieved in preschool,
boys 5-plus and magnetic construction toys compared to the fourth quarter of
2005. International sales accounted for 29.1% of consolidated net sales in the
fourth quarter of 2006 compared to 23.6% in the same 2005 period.
    Cost of sales increased 28.0% to $113.3 million in the fourth quarter of
2006 compared to $88.6 million in the corresponding 2005 period. This increase
is explained by additional freight costs incurred in order to meet customer
deadlines for the delivery of redesigned MAGNETIX products and higher magnet
costs due to the escalation in commodity prices, for a combined impact of
approximately $10.0 million. Cost of sales in the fourth quarter of 2006 also
includes Specified Items of $8.5 million.
    Gross profit declined to $51.5 million compared to $77.7 million in the
fourth quarter of 2005 and gross margin decreased to 31.3% of sales compared
to 46.7% in the same 2005 period. Plastic resin prices were in line with the
levels during the fourth quarter of 2005 and did not negatively impact gross
margin.
    Marketing and advertising expenses were $10.6 million compared to
$13.1 million in the fourth quarter of 2005. As a percentage of net sales,
such expenses were 6.4% compared to 7.9% in the fourth quarter of 2005. This
decrease is due mainly to timing differences in such expenditures in 2006
compared to 2005. Marketing and advertising expenses for the first nine months
of 2006 were 41.2% higher than in the corresponding 2005 period.
    Research and development expenses increased to $5.9 million or 3.6% of
sales, compared to $3.7 million or 2.2% of sales in the fourth quarter of
2005.
    Other selling, distribution and administrative expenses were $23.7 million
compared to $29.2 million in the fourth quarter of 2005. These expenses
represented 14.4% of net sales in the fourth quarter of 2006 compared to 17.6%
in 2005. This decrease is explained by an overall leveraging of administrative
expenses and lower bonus payouts compared to 2005.
    As a result of the above, loss from operations in the fourth quarter of
2006 was $1.3 million compared to earnings from operations of $31.7 million in
the fourth quarter of 2005. Earnings from operations resulted in a loss of
$34.4 million in North America compared to earnings of $25.4 million in the
fourth quarter of 2005. International earnings from operations increased to
$33.1 million compared to $6.3 million in the fourth quarter of 2005.
    Interest expense was $6.8 million compared to $5.1 million in the fourth
quarter of 2005, reflecting mainly higher average interest rates in the 2006
period.
    The Corporation recorded an income tax recovery of $10.8 million in the
fourth quarter of 2006 compared to $5.7 million of income taxes in the fourth
quarter of 2005. Before Specified Items, the effective tax rate in the fourth
quarter of 2006 was 7.8% compared to 21.4% for the corresponding 2005 period.
    Reflecting the impact of Specified Items totaling $17.0 million after tax
or $0.50 diluted earnings per share, net earnings in the fourth quarter of
2006 were $2.8 million or $0.08 diluted earnings per share compared to
$20.9 million or $0.61 diluted earnings per share in the fourth quarter of
2005.

    Liquidity and Capital Resources

    Cash flows from operating activities before changes in non-cash working
capital items were $3.0 million in the fourth quarter of 2006 compared to
$30.5 million for the same period in 2005, mainly due to Specified Items
recorded during the fourth quarter of 2006. After changes in non-cash working
capital items, operating cash flow was $28.7 million compared to $11.0 million
in the fourth quarter of 2005.
    As at December 31, 2006, the Corporation held cash and cash equivalents of
$13.7 million. Working capital stood at $124.7 million as at December 31, 2006
compared to $101.6 million at the end of 2005. This increase is due mainly to
higher inventories at the end of 2006.
    Long-term debt at the end of 2006 was $312.0 million compared to
$301.0 million in 2005. As at December 31, 2006, the Corporation's debt was
comprised of $14.4 million under its Term A facility maturing in 2009,
$256.8 million under its Term B facility maturing in 2012 and $40.0 million
drawn against its $120.0 million revolving credit facility. The Corporation
was in compliance with all covenants of its credit facility as at December 31,
2006.

    Recent Developments

    During the fourth quarter of 2006, the Corporation announced a multi-year
licensing partnership with MTV Networks to develop construction toys based on
Dora the Explorer, Go Diego Go! and The Backyardigans. New products based on
these popular Nickelodeon character brands will launch in 2007 beginning in
the United States and Canada with an expansion to the United Kingdom, France,
Australia and Latin America later in the year and other countries in 2008. The
Corporation also announced a multi-year agreement to launch a global line of
arts and crafts products based on popular Disney properties. The new line will
feature Disney Princess and Pirates of the Caribbean, with products available
in North America, Europe, Scandinavia, Africa and the Middle East in 2007.
Under an agreement with Disney PIXAR, the Corporation began offering preschool
vehicles based on the movie "Cars" in the first quarter of 2007.
    On October 24, 2006, the Corporation announced that it had settled four
lawsuits and ten claims related to injuries to children resulting from the
ingestion of magnets. Terms of the settlement include no admission of
liability. The aggregate amount paid to settle the lawsuits and claims is
$13.5 million and is recorded as a product liability settlement expense in the
2006 consolidated statement of earnings. The Corporation expects to recover
substantially the full amount from its insurers and through other recourses,
although there can be no assurance that a favorable outcome will be achieved.
Discussions with our insurers in this regard are underway. On September 14,
2006 and on December 5, 2006, two lawsuits related to magnet ingestion
requiring surgical removal were served on the Corporation and remain
outstanding. They are being handled by the Corporation's insurers. On
March 29, 2007 the Corporation learned that a third lawsuit had been filed in
U.S. District Court in Denver by the family of a child who is alleged to have
sustained similar injuries. The lawsuit has been reported to our insurers. The
Corporation is also aware of at least seven other incidents in which children
are alleged to have required surgery following the ingestion of multiple
magnets. Lawsuits have not been filed in these matters as of April 1, 2007.
The Corporation is not able to assess with any certainty the outcome of these
lawsuits and claims or impact, if any. As such, no amounts have been reserved
in our year-end financial statements.
    The Corporation's portfolio of product liability insurance was renewed on
December 1, 2006. As a result of the voluntary recall and replacement program
and the ensuing publicity and product liability lawsuits and claims against
the Corporation, the cost of insurance coverage for MAGNETIX products
manufactured before May 1, 2006 was prohibitive. After careful consideration
of the risks and an analysis of the costs of insurance, the Corporation
determined that it was more economically advantageous, all factors considered,
to self-insure these risks. As such, the Corporation is self-insured for
incidents occurring after December 1, 2006, for MAGNETIX products manufactured
prior to May 1, 2006.
    The Corporation incurred significant litigation expenses in 2006,
particularly in the fourth quarter, related mainly to the Rosen Litigation.
Management believes that these expenses were warranted under the circumstances
and will be offset by the benefit of asserting the Corporation's rights under
the SPA and its insurance policies. The Rosen Litigation has delayed recovery
against the $15 million escrow fund provided for under the SPA. Management
expects that the resolution of the Rosen Litigation will also resolve the
issue of the claims against the escrow fund, although there can be no
assurance that a favorable outcome will be achieved.
    David I. Foley resigned as a director of the Corporation on December 18,
2006 as a result of increased responsibilities at The Blackstone Group where
he is Senior Managing Director. Mr. Foley was a member of the Nominating and
Corporate Governance Committee and the Compensation Committee. "We deeply
appreciate David Foley's important contribution to the growth and development
of MEGA Brands. His relationship with our company began during the Blackstone
years and we are grateful to him for continuing to give us the benefit of his
experience and counsel as a director since our Initial Public Offering in
2002," stated Marc Bertrand, President and CEO of MEGA Brands.

    Impact of EIC-156

    In 2006, the Corporation adopted a new guideline issued by the Emerging
Issues Committee of the CICA called EIC-156, "Accounting by a Vendor for
Consideration Given to a Customer (Including a Reseller of the Vendor's
Product)". As a result, certain allowances given to customers in the normal
course of business, for which the fair market value cannot be precisely
determined, are recorded as a reduction of sales. Under the former accounting
standard used by the Corporation, such allowances were included in sales, cost
of sales and marketing and advertising expenses. For comparative purposes, the
Corporation has reclassified such allowances for 2005. The adoption of EIC 156
reduced net sales by $25.8 million in 2006 and $22.2 million in 2005 and by
$9.8 million and $9.7 million in the fourth quarters of 2006 and 2005,
respectively.

    Non-GAAP Financial Measures

    The terms "net earnings before Specified Items" and "diluted earnings per
share before Specified Items" do not have any standardized meaning under GAAP
and are therefore unlikely to be comparable to similar measures presented by
other companies. We present them 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 is filing its Q4 and 2006 Management's Discussion and
Analysis, as well as its audited consolidated financial statements and notes
for the year ended December 31, 2006 via SEDAR on April 2, 2007. The MD&A will
be available on the Corporation's Web site as of 8:00 a.m on April 2, 2007.

    Conference Call

    An analyst conference call will be held at 8:30 a.m. on April 2, 2007 to
discuss the fourth quarter and full year 2006 results. Participants may listen
to the call by dialing 1 (800) 732 0232. For those unable to participate, a
replay will be available until April 9, 2007. The replay phone number is 1
(416) 640-1917, access code 21222125#.

    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: 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 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
and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates.


    MEGA Brands Inc.
    Consolidated statements of earnings
    (in thousands of U.S. $, except per share amounts)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                               Three-month periods      Twelve-month periods
                                 ended December 31,        ended December 31,

                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
                           (Unaudited)  (Unaudited)    (Audited)    (Audited)
                                    $            $            $            $

    Net sales                 164,805      166,234      547,347      384,863
    -------------------------------------------------------------------------
    Cost of sales             113,272       88,559      328,822      214,668
    -------------------------------------------------------------------------
    Gross profit               51,533       77,675      218,525      170,195

    Marketing and
     advertising expenses      10,562       13,067       26,808       24,573
    Research and development
     expenses                   5,858        3,658       18,334        9,402
    Other selling,
     distribution and
     administrative expenses   24,540       28,658      109,815       71,074
    Loss (gain) on foreign
     currency translation        (858)         589       (4,846)       2,796
    Voluntary product recall
     and replacement            3,995            -        5,612            -
    Product liability
     settlement and related
     expenses                   1,463            -       15,490            -
    Integration                 3,573            -        3,573            -
    Litigation expenses         3,678            -        4,769            -
    -------------------------------------------------------------------------
    Earnings (loss) from
     operations                (1,278)      31,703       38,970       62,350
    -------------------------------------------------------------------------
    Interest and other
     expenses
      Interest on long-term
       debt                     6,419        5,127       22,526        9,310
      Other interest              371          (26)         177          954
    -------------------------------------------------------------------------
                                6,790        5,101       22,703       10,264
    -------------------------------------------------------------------------
    Earnings (loss) before
     income taxes              (8,068)      26,602       16,267       52,086
    -------------------------------------------------------------------------
    Income taxes
      Current                  (5,126)         360       (1,217)       5,473
      Future                   (5,703)       5,331       (7,864)       7,005
    -------------------------------------------------------------------------
                              (10,829)       5,691       (9,081)      12,478
    -------------------------------------------------------------------------
    Net earnings                2,761       20,911       25,348       39,608
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings
     per share
      Basic                 $    0.09    $    0.66    $    0.79    $    1.35
      Diluted               $    0.08    $    0.61    $    0.74    $    1.26

    Weighted average
     number of
     outstanding
     common shares
      Basic                32,352,319   31,854,644   32,220,495   29,281,145
      Diluted              34,289,179   34,080,643   34,189,034   31,390,456
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MEGA Brands Inc.
    Consolidated statements of retained earnings (deficit)
    (in thousands of U.S. $)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                               Three-month periods      Twelve-month periods
                                 ended December 31,        ended December 31,

                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
                           (Unaudited)  (Unaudited)    (Audited)    (Audited)
                                    $            $            $            $

    Deficit - Beginning of
     the year                   9,875      (33,623)     (12,712)     (52,320)

    Net earnings for the
     year                       2,761       20,911       25,348       39,608
    -------------------------------------------------------------------------
    Retained earnings
     (deficit) -
     End of year               12,636      (12,712)      12,636      (12,712)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MEGA Brands Inc.
    Consolidated balance sheets
    (in thousands of U.S. $)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                                   December 31, December 31,

                                                          2006         2005
    -------------------------------------------------------------------------
                                                      (Audited)    (Audited)
                                                             $            $
    Assets
    Current assets
      Cash and cash equivalents                         13,658       19,567
      Accounts receivable                              161,612      173,666
      Inventories                                      140,630       82,280
      Income taxes                                       9,317            -
      Future income taxes                                8,354       13,396
      Prepaid expenses                                  12,025        8,324
    -------------------------------------------------------------------------
                                                       345,596      297,233

    Property, plant and equipment                       43,213       39,351
    Intangible assets                                   79,517       72,230
    Goodwill                                           300,829      306,973
    Deferred charges                                     3,281        4,708
    Future income taxes                                 28,006            -
    -------------------------------------------------------------------------
                                                       800,442      720,495
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current liabilities
      Accounts payable and accrued liabilities         153,437      108,025
      Additional consideration accrued on
       business combination                             57,825       74,075
      Income taxes                                           -        4,744
      Current portion of long-term debt                  9,609        8,784
    -------------------------------------------------------------------------
                                                       220,871      195,628

    Long-term debt                                     302,345      292,169
    Future income taxes                                 27,782       12,682
    -------------------------------------------------------------------------
                                                       550,998      500,479
    -------------------------------------------------------------------------

    Shareholders' equity
      Capital stock                                    236,088      231,592
      Contributed Surplus                                  720        1,136
      Retained earnigs (Deficit)                        12,636      (12,712)
    -------------------------------------------------------------------------
                                                       249,444      220,016
    -------------------------------------------------------------------------
                                                       800,442      720,495
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    MEGA Brands Inc.
    Consolidated statements of cash flows
    (in thousands of U.S. $)

    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                               Three-month periods      Twelve-month periods
                                 ended December 31,        ended December 31,

                                 2006         2005         2006         2005
    -------------------------------------------------------------------------
                           (Unaudited)  (Unaudited)    (Audited)    (Audited)
                                    $            $            $            $

    Cash flows from

      Operating activities
      Net earnings for
       the year                 2,761       20,911       25,348       39,608
      Items not affecting
       cash and cash
       equivalents
        Amortization of
         property, plant
         and equipment          3,238        3,152       12,462       10,343
        Amortization of
         deferred charges         364          263        1,044        1,538
        Amortization of
         intangible assets        313          161          667          161
        Stock-based
         compensation plan        738          128        2,126          732
        Future income taxes    (5,703)       5,331       (7,864)       7,005
        Loss (gain) on
         foreign currency          21         (238)      (2,610)       1,680
    -------------------------------------------------------------------------
                                1,732       29,708       31,173       61,067

      Changes in non-cash
       operating working
        capital items          26,306      (18,672)     (15,300)     (36,026)
    -------------------------------------------------------------------------
                               28,038       11,036       15,873       25,041
    -------------------------------------------------------------------------

    Financing activities
      Proceeds from
       long-term debt               -            -            -      300,000
      Repayment of
       long-term debt          (2,404)        (646)     (28,998)     (13,409)
      Repayment of subsi-
       diary indebtedness
       upon  acquisition            -            -         (624)     (36,382)
      Change in revolving
       credit facility        (20,000)      (7,500)      40,000      (11,000)
      Issuance of capital
       stock                    2,360        2,056        3,882       57,158
      Addition of deferred
       charges                      -          (82)           -       (4,457)
    -------------------------------------------------------------------------
                              (20,044)      (6,172)      14,260      291,910
    -------------------------------------------------------------------------

    Investing activities
      Acquisition of
       property, plant
       and equipment           (4,812)      (2,374)     (17,456)      (9,977)
      Acquisition of
       intangible assets            -            -            -       (1,391)
      Proceeds from disposal
       of property, plant
       and equipment              250            -          304            -
      Business combinations       530       (1,434)     (18,890)    (291,623)
    -------------------------------------------------------------------------
                               (4,032)      (3,808)     (36,042)    (302,991)
    -------------------------------------------------------------------------

    Increase (decrease) in
     cash and cash
     equivalents                3,962        1,056       (5,909)      13,960
    Cash and cash
     equivalents -
     Beginning of year          9,696       18,511       19,567        5,607
    -------------------------------------------------------------------------
    Cash and cash
     equivalents -
     End of year               13,658       19,567       13,658       19,567
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Alex Radmanovich, (514) 333-3339, ext.745

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