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Press release from CNW Group

MEGA Brands reports third quarter 2012 results

Thursday, November 01, 2012

MEGA Brands reports third quarter 2012 results07:00 EDT Thursday, November 01, 2012Consolidated net sales up 5%EBITDA up 13% to $28.2 millionBasic EPS of $1.19 compared to $1.04MONTREAL, Nov. 1, 2012 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the third quarter ended September 30, 2012. (All figures are expressed in US dollars.)Consolidated net sales in the third quarter increased 5% to $140.1 million compared to $133.4 million in the corresponding 2011 period.Toy sales increased 5% compared to the third quarter of 2011, with higher product shipments in the Preschool and Boys construction categories. Toy sales have increased year-over-year in 11 of the last 12 quarters.Sales of Stationery & Activities products were up 3%, the sixth consecutive quarter of year-over-year growth in this segment.North American sales rose 19%, more than offsetting lower international shipments.Gross margin improved to 40% of net sales compared to 39.2% in the third quarter of 2011, mainly as a result of favourable product mix and proactive measures by the Corporation, including investments in new equipment to increase efficiency at its Montreal production facility.Earnings before interest, taxes, depreciation and amortization (''EBITDA'') increased 13% to $28.2 million compared to $25.0 million in the third quarter of 2011. For the nine-month period ended September 30, 2012, EBITDA was up 22% to $35.2 million compared to $28.8 million in the corresponding period in 2011. EBITDA is a supplementary financial measure.Net earnings were $19.5 million or $1.19 per basic share ($0.65 per diluted share) compared to $17.1 million or $1.04 per basic share ($0.51 per diluted share) in the third quarter of 2011. For the nine-month period ended September 30, 2012, net earnings were $12.6 million or $0.77 per basic share ($0.60 per diluted share) compared to $8.1 million or $0.49 per basic share ($0.40 per diluted share) in the same period of 2011.''MEGA Brands achieved higher sales and earnings, improved gross margin and stronger cash flow in the third quarter,'' said Marc Bertrand, President and CEO. ''After nine months, we are well ahead of 2011 and well-positioned for the fourth quarter with higher listings at North American retailers compared to the same period last year, including the launch of the MEGA BLOKS Skylanders GiantsTM and MEGA BLOKS BarbieTM collections which will soon be appearing in stores.''Conference CallA 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 1 (888) 231-8191 or (514) 807-9895. For those unable to participate, a replay will be available until November 8, 2012. The replay phone number is (514) 807-9274 or 1 (855) 859-2056, access code 37587536.About MEGA BrandsMEGA 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 for more information.The MEGA logo, Mega Bloks, Rose Art, MEGA Puzzles, MEGA Games and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates.MD&A FilingThis 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 nine-month periods ended September 30, 2012 and 2011. 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.Supplementary Financial MeasuresThe Corporation reports its financial results in accordance with International Financial Reporting Standards (''IFRS''). However, the Corporation believes that certain non-IFRS measures provide useful information to investors regarding its financial condition and results of operations. A reconciliation of supplementary financial measures with IFRS financial statements is provided in the Corporation's MD&A for the three- and nine-month month periods ended September 30, 2012, which is available at and on the Corporation's Web site.Forward-Looking StatementsAll 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 year ended December 31, 2011, which are available at and on the Corporation's Web site. 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.Unaudited Interim Consolidated Income Statements(in thousands of US dollars, except per share amounts)          Three-month periodsended September 30,Nine-month periodsended September 30, 2012201120122011 $$$$     Net sales140,057133,354292,733268,332Cost of sales84,07680,958183,056167,074Gross profit55,98152,396109,677101,258     Marketing and advertising expenses3,3583,7219,2349,219Research and development expenses3,7543,17211,8139,965Other selling, distribution and administrative expenses23,53322,28162,64660,944Contingent consideration on business acquisition95110287884Loss on foreign currency translation5741,162103620     Earnings from operations24,66721,95025,59419,626     Financial expenses4,4194,55213,13114,062Loss on settlement of debt---2,984 4,4194,55213,13117,046     Earnings before income taxes 20,24817,39812,4632,580     Income taxes      Current725487(113)(4,968) Deferred-(139)-(548) 725348(113)(5,516)     Net earnings19,52317,05012,5768,096     Earnings per share      Basic1.191.040.770.49 Diluted0.650.510.600.40     Unaudited Interim Consolidated Statements of Comprehensive Income(in thousands of US dollars, except per share amounts)          Three-month periods ended September 30,Nine-month periodsended September 30, 2012201120122011 $$ $$      Net earnings19,52317,05012,5768,096     Other comprehensive income (loss):     Cumulative translation adjustment(925)(1,182)1,357(2,063)     Other comprehensive income (loss):(925)(1,182)1,357(2,063)     Comprehensive income18,59815,86813,9336,033Consolidated Statements of Financial Position(in thousands of US dollars)          September 30,December 31, 20122011 (Unaudited)(Audited) $$   Assets  Current assets  Cash and cash equivalents3,6546,745Trade and other receivables133,234126,359Inventories75,68369,560Derivative financial instruments667904Prepaid expenses 9,17113,760Total current assets222,409217,328   Non-current assets  Property, plant and equipment38,13432,172Intangible assets22,87723,193Goodwill30,00030,000Derivative financial instruments-231Total assets313,420302,924      Liabilities     Current liabilities  Asset-based credit facility33,26137,279Trade and other payables64,72571,762Income taxes5,1225,832Current portion of long-term debt7,2447,013 110,352121,886Non-current liabilities  Long-term debt112,464105,275 112,464105,275Equity  Share capital429,323429,007Warrants24,43024,430Contributed surplus4,0843,492Deficit(361,746)(374,322)Accumulated other comprehensive loss(5,487)(6,844)Total equity90,60475,763Total liabilities and equity313,420302,924Unaudited Consolidated Statement of Changes in Equity(in thousands of US dollars)         Share capital Warrants Contributed surplus DeficitAccumulated other comprehensive lossTotal equity $$$$$$Balance - December 31, 2010429,00724,4301,982(382,652)(5,260)67,507Net earnings---8,096-8,096Other comprehensive loss----(2,063)(2,063)Stock-based compensation--1,263--1,263Balance - September 30, 2011429,00724,4303,245(374,556)(7,323)74,803       Balance - December 31, 2011429,00724,4303,492(374,322)(6,844)75,763Net earnings---12,576-12,576Options exercised316 (100)  216Other comprehensive income----1,3571,357Stock-based compensation--692--692Balance - September 30, 2012429,32324,4304,084(361,746)(5,487)90,604Unaudited Consolidated Statements of Cash Flows(in thousands of US dollars)      Nine-month periodsended September 30, 20122011 $$    Operating activities  Net earnings12,5768,096Adjustments for:   Depreciation of property, plant and equipment9,0457,960 Amortization of intangible assets316316 Loss  on settlement of debt-1,236 Stock-based compensation6921,263 Writeoff deferred financing costs-1,748 Financial expenses13,13114,062 Income taxes(113)(5,516) Loss (gain) on foreign currency2,849(3,331)  38,49625,834 Net change in non-cash working capital balances(13,640)(27,851) Income taxes recovered (paid)(472)706 Interest paid(7,055)(6,827)Cash flows provided by (used in) operating activities17,329(8,138)   Financing activities  Repayment of debentures(7,411)(20,644)Change in asset-based credit facility(4,018)40,154Government loan6,5914,152Issurance of capital stock217-Repayment of long-term debt2432Cash flows provided by (used in) financing activities(4,597)23,694   Investing activities  Acquisition of property, plant and equipment(15,765)(18,145)Cash flows used in investing activities(15,765)(18,145)   Effect of changes in foreign exchange rates on cash and cash equivalents(58)113   Decrease in cash and cash equivalents(3,091)(2,476)Cash and cash equivalents — Beginning of period6,7455,277   Cash and cash equivalents — End of period3,6542,801  SOURCE: MEGA BRANDS INC.For further information: Investor Contact: Peter Ferrante Vice President and Chief Financial Officer Tel: (514) 333-5555 ext. 2283