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Press release from CNW Group

MEGA Brands reports second quarter 2012 results

Friday, July 27, 2012

MEGA Brands reports second quarter 2012 results07:00 EDT Friday, July 27, 2012Toy sales up 14%, Stationery & Activities sales up 10%EBITDA up 21% to $9.2 millionEPS of $0.10 compared to $0.02MONTREAL, July 27, 2012 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the second quarter ended June 30, 2012. (All figures are expressed in US dollars.)Consolidated net sales in the second quarter increased 13% to $94.5 million compared to $83.9 million in the corresponding 2011 period.Toy sales increased 14% compared to the second quarter of 2011, driven by higher product shipments in the Preschool and Boys construction categories. Toy sales have increased year-over-year in ten of the last 11 quarters.Sales of Stationery & Activities products were up 10%, the fifth consecutive quarter of year-over-year growth in this segment.On a geographical basis, North American sales were 18% higher and international sales were stable, with sales growth offset by unfavorable currency changes.Earnings before interest, taxes, depreciation and amortization (''EBITDA'') increased 21% to $9.2 million compared to $7.6 million in the second quarter of 2011. For the six-month period ended June 30, 2012, EBITDA was $7.1 million compared to $3.8 million in the corresponding period in 2011. EBITDA is a supplementary financial measure.Net earnings were $1.6 million or $0.10 basic per share compared to $0.3 million or $0.02 basic per share in the second quarter of 2011.''Our second quarter results demonstrate solid growth in our business as we head into the peak selling period of the year,'' said Marc Bertrand, President and CEO. ''The key metrics in our business are positive and we are well-positioned for a strong finish to the year.''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 August 3, 2012. The replay phone number is (514) 807-9274 or 1 (855) 859-2056, access code 98528715.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 http://www.megabrands.com 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-month periods ended June 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-month period ended June 30, 2012, which is available at www.sedar.com 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 www.sedar.com 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 June 30, Six-month periodsended June 30, 2012 2011 2012 2011 $ $ $ $        Net sales94,489 83,942 152,676 134,978Cost of sales60,224 52,892 98,980 86,116Gross profit34,265 31,050 53,696 48,862        Marketing and advertising expenses3,028 2,634 5,876 5,498Research and development expenses4,003 3,517 8,059 6,793        Other selling, distribution and administrative expenses20,655 20,753 39,113 38,663Contingent consideration on business acquisition96 606 192 774Loss (gain) on foreign currency translation434 (663) (471) (542)        Earnings (loss) from operations6,049 4,203 927 (2,324)        Financial expenses4,289 4,837 8,712 9,510Loss on settlement of debt-   2,984 -   2,984 4,289 7,821 8,712 12,494        Earnings (loss) before income taxes 1,760 (3,618) (7,785) (14,818)        Income taxes         Current174 (4,004) (838) (5,455) Deferred-   76 -   (409) 174 (3,928) (838) (5,864)        Net earnings (loss)1,586 310 (6,947) (8,954)        Earnings (loss) per share         Basic0.10 0.02 (0.42) (0.55) Diluted(0.07) (0.18) (0.42) (0.55)Unaudited Interim Consolidated Statements of Comprehensive Income (Loss)(in thousands of US dollars, except per share amounts) Three-month periodsended June 30, Six-month periodsended June 30, 2012 2011 2012 2011 $ $ $ $        Net earnings (loss)1,586 310 (6,947) (8,954)        Other comprehensive income (loss):        Cumulative translation adjustment847 (315) 2,282 (881)        Other comprehensive income (loss):847 (315) 2,282 (881)        Comprehensive income (loss)2,433 (5) (4,665) (9,835)Consolidated Statements of Financial Position(in thousands of US dollars) June 30,2012 December 31,2011 (Unaudited) (Audited) $ $    Assets   Current assets   Cash and cash equivalents3,037 6,745Trade and other receivables99,031 126,359Inventories84,419 69,560Derivative financial instruments784 904Prepaid expenses 9,113 13,760Total current assets196,384 217,328    Non-current assets   Property, plant and equipment38,682 32,172Intangible assets22,982 23,193Goodwill30,000 30,000Derivative financial instruments174 231Total assets288,222 302,924    Liabilities       Current liabilities   Asset-based credit facility41,257 37,279Trade and other payables63,272 71,762Income taxes4,845 5,832Current portion of long-term debt6,988 7,013 116,362 121,886Non-current liabilities   Long-term debt100,105 105,275 100,105 105,275Equity   Share capital429,007 429,007Warrants24,430 24,430Contributed surplus4,149 3,492Deficit(381,269) (374,322)Accumulated other comprehensive loss(4,562) (6,844)Total equity71,755 75,763Total liabilities and equity288,222 302,924Unaudited Consolidated Statement of Changes in Equity(in thousands of US dollars) Share capitalWarrantsContributedsurplusDeficitAccumulatedothercomprehensivelossTotal equity $$$$$$Balance - December 31, 2010429,00724,4301,982(382,652)(5,260)67,507Net loss---(8,954)-(8,954)Other comprehensive loss----(881)(881)Stock-based compensation--865--865Balance - June 30, 2011429,00724,4302,847(391,606)(6,141)58,537       Balance - December 31, 2011429,00724,4303,492(374,322)(6,844)75,763Net loss---(6,947)-(6,947)Other comprehensive income----2,2822,282Stock-based compensation--657--657Balance - June 30, 2012429,00724,4304,149(381,269)(4,562)71,755Unaudited Consolidated Statements of Cash Flows(in thousands of US dollars) Six-month periods ended June 30, 2012 2011 $ $     Operating activities   Net loss(6,947) (8,954)Adjustments for:    Depreciation of property, plant and equipment5,739 5,134 Amortization of intangible assets211 211 Loss  on settlement of debt-   1,236 Stock-based compensation657 866 Writeoff deferred financing costs-   1,748 Financial expenses8,712 9,510 Income taxes(838) (5,864) Loss (gain) on foreign currency(526) 587 7,008 4,474 Net change in non-cash working capital balances10,511 10,594 Income taxes recovered (paid)(305) 1,306 Interest paid(6,598) (7,151)Cash flows provided by operating activities10,616 9,223    Financing activities   Repayment of debentures(7,151) (20,644)Change in asset-based credit facility3,978 20,294Government loan-   4,152Repayment of long-term debt-   32Cash flows used in financing activities(3,173) 3,834    Investing activities   Acquisition of property, plant and equipment(11,113) (14,932)Cash flows used in investing activities(11,113) (14,932)    Effect of changes in foreign exchange rates on cash and cash equivalents(38) (8)    Increase (decrease) in cash and cash equivalents(3,708) (1,883)Cash and cash equivalents — Beginning of period6,745 5,277    Cash and cash equivalents — End of period3,037 3,394    SOURCE: MEGA BRANDS INC.For further information: Investor Contact: Peter Ferrante Vice President and Chief Financial Officer Tel: (514) 333-5555 ext. 2283