MEGA Brands reports second quarter 2010 results

MONTREAL, Aug. 11 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced today its financial results for the second quarter and six months ended June 30, 2010. (All figures are expressed in US dollars.)

Net sales increased 12% to $78.8 million compared to $70.1 million in the second quarter of 2009. Net earnings were $1.2 million or nil per diluted share compared to a net loss of $13.3 million or $0.36 per diluted share in the second quarter of 2009.

Net sales were higher in both North America and International, led by a solid increase in Toys shipments and stable sales of Stationery and Activities products. The growth in toy sales reflects a continued strong performance in the Preschool category, increased sales in the Boys category led by Halo, Iron Man 2, initial shipments of Dragons Universe and a steady performance in Games and Puzzles.

"We are pleased to report a third consecutive quarter of year-over-year improvement in net sales and gross margins, and a positive outlook for the balance of 2010," said Marc Bertrand, President and CEO. "For the second half of the year, we are well-positioned with more shelf space at retail, the launch of Thomas & Friends in international markets in the third quarter and the full global roll-out of our exciting Dragons Universe product line supported by TV advertising in North America beginning this month."

For the six-month period ended June 30, 2010, net sales are up 13% to $127.9 million compared to $113.7 million in the same period last year. Net earnings were $99.4 million or $0.53 per diluted share compared to a loss of $39.2 million or $(1.07) per diluted share in the corresponding period of 2009. In the first quarter of 2010, the Corporation recognized a non-cash gain on settlement of debt which increased net earnings by $0.68 per diluted share.

MD&A Filing

This press release should be read in conjunction with the Corporation's Management's Discussion and Analysis (the "MD&A") as well as the unaudited consolidated financial statements and notes for the three- and six-month periods ended June 30, 2010 and 2009. The Corporation will file these documents today via SEDAR. The MD&A, financial statements and notes will be posted today on the Corporation's Web site.

Conference Call

A conference call will be held at 9:00 a.m. today to discuss the results and business outlook. Participants may listen to the call by dialing (647) 427-7450 or 1 (888) 231-8191. For those unable to participate, a replay will be available until August 20, 2010. The replay phone number is (416) 849-0833 or (514) 807-9274, access code 92430083.

About MEGA Brands

MEGA Brands Inc. is a trusted family of leading global brands in construction toys, games & puzzles, arts & crafts and stationery. They offer engaging creative experiences for children and families through innovative, well-designed, affordable and high-quality products. Visit http://www.megabrands.com for more information.

The MEGA logo, Mega Bloks, Rose Art, MagNext, MEGA Puzzles and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates.

Forward-Looking Statements

All statements in this press release that do not directly and exclusively relate to historical facts constitute "forward-looking information" within the meaning of applicable Canadian securities laws. These statements represent the Corporation's intentions, plans, expectations and beliefs. Readers are cautioned not to place undue reliance on these forward-looking statements. Forward-looking information and statements are based on a number of assumptions and involve risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by them, including, but not limited to risks, assumptions and uncertainties described in the Corporation's MD&A for the second quarter ended June 30, 2010 and the year ended December 31, 2009, which are available at www.sedar.com. The Corporation disclaims any intention or obligation to publicly update or revise any forward-looking information, whether as a result of new information, future events or otherwise, other than as required by applicable law.

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

                              Three-month periods        Six-month periods
                                  ended June 30,           ended June 30,
                                 2010         2009         2010         2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                    $            $            $            $
                           (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
    -------------------------------------------------------------------------
    Net sales                  78,775       70,122      127,920      113,655
    -------------------------------------------------------------------------

    Cost of sales              48,259       44,285       80,589       76,275
    -------------------------------------------------------------------------

    Gross profit               30,516       25,837       47,331       37,380

    Marketing and
     advertising expenses       3,044        1,449        5,678        3,587
    Research and development
     expenses                   2,955        2,759        6,008        5,778
    Other selling,
     distribution and
    administrative expenses    20,498       24,977       51,811       44,483
    Impairment of goodwill
                                    -            -          900            -
    Loss (gain) on foreign
     currency translation      (2,123)        (159)      (1,450)       1,086
    -------------------------------------------------------------------------

    Earnings (loss) from
     operations                 6,142       (3,189)     (15,616)     (17,554)
    -------------------------------------------------------------------------

    Interest and other
     expenses
      Interest on long-term
       debt                     4,142       10,904       14,193       20,888
      Settlement of debt
                                    -            -     (140,344)           -
      Change in fair value
       of interest rate swap        -       (2,131)           -         (548)
      Amortization of deferred
       financing costs            473          963        1,603        1,269
      Other interest               39           50          152           10
    -------------------------------------------------------------------------
                                4,654        9,786     (124,396)      21,619
    -------------------------------------------------------------------------

    Earnings (loss) before
     income taxes               1,488      (12,975)     108,780      (39,173)
    -------------------------------------------------------------------------

    Income taxes
      Current                     730           29          299          462
      Future                     (427)         272        9,087         (441)
    -------------------------------------------------------------------------
                                  303          301        9,386           21
    -------------------------------------------------------------------------

    Net earnings (loss)         1,185      (13,276)      99,394      (39,194)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Earnings (loss) per
     share
    Basic                        0.00        (0.36)        0.53        (1.07)
    Diluted(1)                   0.00        (0.36)        0.53        (1.07)
    -------------------------------------------------------------------------

    (1) The dilutive effect of the outstanding options for the three-and six-
        month periods ended June 30, 2010 and 2009 is nil as they are anti-
        dilutive. The dilutive effect of the outstanding warrants for the
        three- and six-month periods ended June 30, 2010 is nil as they are
        anti-dilutive. The dilutive effect of the outstanding debentures for
        the six-month period ended June 30, 2010 and the three- and six-month
        periods ended June 30, 2009 is nil as they are anti-dilutive.


    Consolidated statements of deficit
    (in thousands of US dollars)

                              Three-month periods        Six-month periods
                                  ended June 30,           ended June 30,
                                 2010         2009         2010         2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                    $            $            $            $
                           (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
    -------------------------------------------------------------------------

    Balance, beginning of
     period                  (431,110)    (565,963)    (529,319)    (543,161)
    Impact of the adoption
     of new abstract,
     Handbook EIC-173,
     Credit Risk and the
     Fair Value of
     Financial Assets and
     Financial Liabilities


      Change in fair value
       of interest rate swap        -            -            -        4,722
      Income taxes                  -            -            -       (1,606)
    -------------------------------------------------------------------------
                                    -            -            -        3,116
    Balance, beginning of
     period as restated      (431,110)    (565,963)    (529,319)    (540,045)

    Net earnings (loss)         1,185      (13,276)      99,394      (39,194)
    -------------------------------------------------------------------------

    Balance, end of period   (429,925)    (579,239)    (429,925)    (579,239)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                              Three-month periods        Six-month periods
                                  ended June 30,           ended June 30,
                                 2010         2009         2010         2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                    $            $            $            $
                           (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
    -------------------------------------------------------------------------

    Net earnings (loss)
     for the period             1,185      (13,276)      99,394      (39,194)
    -------------------------------------------------------------------------

    Other comprehensive
     income (loss), net
     of income taxes
      Gain (loss) on
       derivatives
       designated as
       cash flow hedges             -          356            -          712
    -------------------------------------------------------------------------
    Comprehensive income
     (loss) for the period      1,185      (12,920)      99,394      (38,482)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive loss
    Balance, beginning of
     period
      Gross                         -       (7,671)           -       (8,246)
      Income taxes                  -        2,922            -        3,141
    -------------------------------------------------------------------------
                                    -       (4,749)           -       (5,105)
    Other comprehensive
     income (loss)
      Net change in losses
       on cash flow hedging
       items                        -            -            -            -
      Reclassification to
       income (loss)                -          575            -        1,150
      Income taxes                  -         (219)           -         (438)
    -------------------------------------------------------------------------
                                    -          356            -          712
    Balance, end of period
      Gross                         -       (7,096)           -       (7,096)
      Income taxes                  -        2,703            -        2,703
    -------------------------------------------------------------------------
    Balance, end of period          -       (4,393)           -       (4,393)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated balance sheets
    (in thousands of US dollars)

                                                       June 30,  December 31,
    2010 2009
                                                    (Unaudited)     (Audited)
    -------------------------------------------------------------------------
                                                             $             $
    -------------------------------------------------------------------------
    Assets
    Current assets
      Cash and cash equivalents                          3,918        26,763
      Accounts receivable                               78,121       112,517
      Inventories                                       72,281        46,247
      Income taxes                                       1,160           914
      Future income taxes                                2,911         4,197
      Prepaid expenses                                  10,789        12,806
    -------------------------------------------------------------------------
                                                       169,180       203,444

    Property, plant and equipment                       20,612        21,210
    Intangible assets                                   23,946        24,278
    Goodwill, net                                       30,000        30,000
    Derivative financial instruments                        13             -
    Future income taxes                                  2,374         2,197
    -------------------------------------------------------------------------
                                                       246,125       281,129
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current liabilities
      Accounts payable and accrued liabilities          67,702        67,290
      Current portion of long-term debt                    200           944
    -------------------------------------------------------------------------
                                                        67,902        68,234

    Long-term debt                                     115,654       395,940
    Derivative financial instruments                         -         6,045
    Future income taxes                                 19,652        12,407
    -------------------------------------------------------------------------
                                                       203,208       482,626
    -------------------------------------------------------------------------

    Shareholders' equity
      Capital stock                                    429,007       308,678
      Warrants                                          24,430             -
      Contributed surplus                               19,405           558
      Equity component of convertible debentures
                                                             -        18,586
      Deficit                                         (429,925)     (529,319)
    -------------------------------------------------------------------------
                                                        42,917      (201,497)
    -------------------------------------------------------------------------
                                                       246,125       281,129
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                              Three-month periods        Six-month periods
                                  ended June 30,           ended June 30,
                                 2010         2009         2010         2009
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                                    $            $            $            $
                           (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
    -------------------------------------------------------------------------

    Cash flows from
     operating activities
      Net earnings (loss)       1,185      (13,276)      99,394      (39,194)
      Items not affecting
       cash and cash
       equivalents
        Amortization of
         property, plant
         and equipment          2,536        3,347        4,730        6,525
        Amortization of
         intangible assets        166          166          332          332
        Settlement of debt
                                    -            -     (145,310)           -
        Impairment of
         goodwill/recovery
         of purchase price          -            -            -         (900)
        Amortization of
         unrealized loss
         on swap derivative
         financial
         instruments                -          576            -        1,151
        Gain on swap
         derivative
         financial
         instruments                -       (2,706)           -       (1,698)
        Stock-based
         compensation plans       441           42          146           45
        Amortization of
         deferred financing
         costs                    612          963        1,603        1,269
        Amortization of
         warrants                 591            -          591            -
        Writeoff deferred
         financing costs
                                    -            -        2,967            -
        Future income taxes
                                 (427)         272        9,087         (441)
        Accretion of interest
         on convertible
         debentures                 -          644          819        1,240
        Loss (gain) on
         foreign currency      (5,021)       1,301       (2,754)         919
    -------------------------------------------------------------------------
                                   83       (8,671)     (28,395)     (30,752)

    Changes in non-cash
     operating working
     capital items            (18,711)      (7,400)       7,716       17,668
    -------------------------------------------------------------------------
                              (18,628)     (16,071)     (20,679)     (13,084)
    -------------------------------------------------------------------------

    Cash flows from
     financing activities
      Repayment of long-term
       debt                       (76)        (687)    (216,100)      (3,032)
      Issuance of debentures
                                    -            -      120,733            -
      Issuance of capital
       stock                        -            -       85,859            -
      Issuance of warrants
                                    -            -       23,775            -
      Addition to deferred
       financing costs
                                    -       (3,254)      (7,937)      (3,254)
      Share issue cost
                                    -            -       (3,399)           -
      Issue costs on warrants
                                    -            -         (965)           -
    -------------------------------------------------------------------------
                                  (76)      (3,941)       1,966       (6,286)
    -------------------------------------------------------------------------

    Cash flows from investing
     activities
      Acquisition of property,
       plant and equipment     (2,194)      (2,131)      (4,132)      (4,082)
    -------------------------------------------------------------------------
                               (2,194)      (2,131)      (4,132)      (4,082)
    -------------------------------------------------------------------------

    Increase (decrease) in
     cash and cash
     equivalents              (20,898)     (22,143)     (22,845)     (23,452)
    Cash and cash
     equivalents, beginning
     of period                 24,816       48,118       26,763       49,427
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end of
     period                     3,918       25,975        3,918       25,975
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary
     disclosure of cash
     flow information
      Interest paid             3,441        8,889       20,267       19,554
      Income taxes paid
      (recovery)                1,026          481        1,167         (389)
    -------------------------------------------------------------------------
    

SOURCE MEGA Brands Inc.

For further information: For further information: Investor Contact: Eric Laniel, Manager, Treasury & Investor Relations, Tel: (514) 333-5555 ext. 2620


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890