MEGA Brands reports third quarter 2009 results
The Corporation reported net earnings of
Net earnings in the third quarter of 2009 before recovery of purchase price and, net of litigation expenses were
"We are pleased with the third quarter results. Our return to profitability reflects mainly the significant cost reductions and supply chain initiatives implemented over the past 18 months under our Value Enhancement Plan," said
Net sales in the third quarter of 2009 decreased to
MD&A Filing
MEGA Brands will file its Management's Discussion and Analysis as well as the unaudited consolidated financial statements and notes for the third quarter ended
Conference Call
An analyst conference call will be held at
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 our 2008 annual MD&A and Q3 2009 MD&A.
About MEGA Brands
MEGA Brands 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,
Consolidated statements of earnings (loss)
(in thousands of US dollars, except per share data)
(Unaudited)
Three-month periods Nine-month periods
ended September 30, ended September 30,
2009 2008 2009 2008
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$ $ $ $
Net sales 117,962 160,860 231,617 346,637
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Cost of sales 69,182 101,992 145,457 225,211
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Gross profit 48,780 58,868 86,160 121,426
Marketing and advertising
expenses 4,097 4,648 7,684 13,893
Research and development
expenses 2,765 4,750 8,543 13,156
Other selling, distribution
and administrative expenses 23,148 30,751 64,893 84,317
Recovery of purchase price (71,966) - (71,966) -
Litigation expenses 6,880 3,623 9,618 7,076
Product liability settlement
and related expenses - (9,350) - (9,350)
Impairment of goodwill and
other assets - 150,000 - 150,000
Loss on foreign currency
translation 1,124 2,204 2,210 3,223
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Earnings (loss) from operations 82,732 (127,758) 65,178 (140,889)
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Interest expense
Interest on long-term debt 11,455 9,416 32,343 20,845
Change in fair value of
interest rate swap (1,249) 1,657 (1,797) (3,921)
Amortization of deferred
financing costs 977 1,201 2,246 3,015
Other interest 34 307 44 325
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11,217 12,581 32,836 20,264
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Earnings (loss) before income
taxes 71,515 (140,339) 32,342 (161,153)
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Income taxes
Current (220) (313) 242 1,001
Future (238) (17,886) (679) (26,794)
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(458) (18,199) (437) (25,793)
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Net earnings (loss) 71,973 (122,140) 32,779 (135,360)
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Earnings (loss) per share
Basic 1.97 (3.34) 0.90 (3.70)
Diluted 1.22 (3.34) 0.61 (3.70)
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Consolidated statements of deficit
(in thousands of US dollars)
(Unaudited)
Three-month periods Nine-month periods
ended September 30, ended September 30,
2009 2008 2009 2008
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$ $ $ $
Balance, beginning of period (579,239) (97,720) (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) -
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- - 3,116 -
Balance, beginning of period
as restated (579,239) (97,720) (540,045) (84,500)
Net earnings (loss) 71,973 (122,140) 32,779 (135,360)
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Balance, end of period (507,266) (219,860) (507,266) (219,860)
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Consolidated statements of comprehensive income (loss) and
Accumulated other comprehensive income (loss)
(in thousands of US dollars)
(Unaudited)
Three-month periods Nine-month periods
ended September 30, ended September 30,
2009 2008 2009 2008
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$ $ $ $
Net earnings (loss) for the
period 71,973 (122,140) 32,779 (135,360)
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Other comprehensive income (loss),
net of income taxes
Gain (loss) on derivatives
designated as cash flow hedges 356 356 1,068 (3,196)
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Comprehensive income (loss) for
the period 72,329 (121,784) 33,847 (138,556)
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Accumulated other comprehensive
loss
Balance, beginning of period
Gross (7,096) (9,398) (8,246) (3,659)
Income taxes 2,703 3,581 3,141 1,394
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(4,393) (5,817) (5,105) (2,265)
Other comprehensive income (loss)
Net change in losses on cash
flow hedging items - - - (6,313)
Reclassification to income (loss) 575 575 1,725 1,150
Income taxes (219) (219) (657) 1,967
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356 356 1,068 (3,196)
Balance, end of period
Gross (6,521) (8,823) (6,521) (8,822)
Income taxes 2,484 3,362 2,484 3,361
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Balance, end of period (4,037) (5,461) (4,037) (5,461)
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Consolidated balance sheets
(in thousands of US dollars)
September December September
30, 2009 31, 2008 30, 2008
(Unaudited) (Audited) (Unaudited)
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$ $ $
Assets
Current assets
Cash and cash equivalents 13,437 49,427 39,664
Accounts receivable 111,912 104,620 173,289
Recovery of purchase price 17,191 - -
Inventories 67,420 65,220 108,135
Income taxes 3,322 7,149 8,869
Future income taxes 3,460 5,291 4,843
Derivative financial instruments - - 1,599
Prepaid expenses 11,850 12,857 21,072
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228,592 244,564 357,471
Property, plant and equipment 27,125 31,726 40,860
Intangible assets 24,444 24,942 74,108
Goodwill, net 31,339 30,000 149,539
Derivative financial instruments - - 552
Future income taxes 2,091 1,931 48,708
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313,591 333,163 671,238
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Liabilities
Current liabilities
Accounts payable and accrued
liabilities 84,311 76,532 97,507
Additional consideration accrued on
business combination - 54,775 54,775
Current portion of long-term debt 98,912 3,273 2,885
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183,223 134,580 155,167
Long-term debt 295,651 387,702 392,269
Derivative financial instruments 6,583 14,828 4,901
Future income taxes 11,615 16,497 16,401
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497,072 553,607 568,738
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Shareholders' equity
Capital stock 308,678 308,678 308,677
Contributed surplus 558 558 558
Equity component of convertible
debentures 18,586 18,586 18,586
Deficit (507,266) (543,161) (219,860)
Accumulated other comprehensive
income (loss) net of income taxes (4,037) (5,105) (5,461)
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(183,481) (220,444) 102,500
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313,591 333,163 671,238
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Consolidated statements of cash flows
(in thousands of US dollars)
(Unaudited)
Three-month periods Nine-month periods
ended September 30, ended September 30,
2009 2008 2009 2008
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$ $ $ $
Cash flows from operating
activities
Net earnings (loss) 71,973 (122,140) 32,779 (135,360)
Items not affecting cash and
cash equivalents
Amortization of property,
plant and equipment 3,544 3,754 10,069 11,214
Amortization of intangible
assets 166 166 498 498
Stock-based compensation
plans (17) (113) 28 (745)
Amortization of deferred
financing costs 977 1,200 2,246 3,015
Amortization of unrealized
loss on swap derivative
financial instruments 575 576 1,726 1,151
Loss (gain) on swap
derivative financial
instruments (1,825) 1,082 (3,523) (5,071)
Future income taxes (238) (17,886) (679) (26,794)
Impairment of goodwill and
other assets - 150,000 - 150,000
Accretion of interest on
convertible debentures 719 - 1,959 -
Loss (gain) on foreign
currency 5,391 (148) 6,310 742
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81,265 16,491 51,413 (1,350)
Changes in non-cash operating
working capital items (91,278) (63,199) (73,610) (106,443)
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(10,013) (46,708) (22,197) (107,793)
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Cash flows from financing
activities
Repayment of long-term debt (701) (2,344) (3,733) (7,009)
Change in revolving credit
facility - 19,000 - 94,000
Issuance of convertible
debentures - 69,934 - 69,934
Issue costs on equity
component of convertible
debentures - (1,051) - (1,051)
Addition to deferred
financing costs - (4,898) (3,254) (7,564)
Issuance of capital stock - - - 76
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(701) 80,641 (6,987) 148,386
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Cash flows from investing
activities
Acquisition of property,
plant and equipment (1,385) (1,396) (5,467) (8,833)
Business combinations (439) (601) (1,339) (601)
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(1,824) (1,997) (6,806) (9,434)
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Increase (decrease) in cash
and cash equivalents (12,538) 31,936 (35,990) 31,159
Cash and cash equivalents,
beginning of period 25,975 7,728 49,427 8,505
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Cash and cash equivalents,
end of period 13,437 39,664 13,437 39,664
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Supplementary disclosure of cash
flow information
Interest paid 10,170 8,096 29,724 16,327
Income taxes paid (recovery) 233 (135) (156) 2,418
Non cash item
Property, plant and equipment
acquired by means of capital
leases 116 - 116 622
For further information: Analysts and investors: Eric Laniel, (514) 333-5555, ext. 2620, [email protected]; Media: Carine Sroujian, (514) 333-5555, ext. 2669, [email protected]
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