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Press release from PR Newswire

MEGA Brands reports second quarter 2012 results

Friday, July 27, 2012

MEGA Brands reports second quarter 2012 results07:00 EDT Friday, July 27, 2012 Toy sales up 14%, Stationery & Activities sales up 10% EBITDA up 21% to $9.2 million EPS of $0.10 compared to $0.02 MONTREAL, July 27, 2012 /PRNewswire/ - 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 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 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 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, MEGA Puzzles, MEGA Games and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates. 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-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 Measures The 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 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 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 periods ended June 30,   Six-month periods ended June 30,   2012   2011   2012   2011   $   $   $   $                 Net sales 94,489   83,942   152,676   134,978 Cost of sales 60,224   52,892   98,980   86,116 Gross profit 34,265   31,050   53,696   48,862                 Marketing and advertising expenses 3,028   2,634   5,876   5,498 Research and development expenses 4,003   3,517   8,059   6,793          Other selling, distribution and administrative expenses 20,655   20,753   39,113   38,663 Contingent consideration on business acquisition 96   606   192   774 Loss (gain) on foreign currency translation 434   (663)   (471)   (542)                 Earnings (loss) from operations 6,049   4,203   927   (2,324)                 Financial expenses 4,289   4,837   8,712   9,510 Loss 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                  Current 174   (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                 Basic 0.10   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 periods ended June 30,   Six-month periods ended June 30,   2012   2011   2012   2011   $   $   $   $                 Net earnings (loss) 1,586   310   (6,947)   (8,954)                 Other comprehensive income (loss):                 Cumulative translation adjustment 847   (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 equivalents 3,037   6,745 Trade and other receivables 99,031   126,359 Inventories 84,419   69,560 Derivative financial instruments 784   904 Prepaid expenses  9,113   13,760 Total current assets 196,384   217,328         Non-current assets       Property, plant and equipment 38,682   32,172 Intangible assets 22,982   23,193 Goodwill 30,000   30,000 Derivative financial instruments 174   231 Total assets 288,222   302,924         Liabilities               Current liabilities       Asset-based credit facility 41,257   37,279 Trade and other payables 63,272   71,762 Income taxes 4,845   5,832 Current portion of long-term debt 6,988   7,013   116,362   121,886 Non-current liabilities       Long-term debt 100,105   105,275   100,105   105,275 Equity       Share capital 429,007   429,007 Warrants 24,430   24,430 Contributed surplus 4,149   3,492 Deficit (381,269)   (374,322) Accumulated other comprehensive loss (4,562)   (6,844) Total equity 71,755   75,763 Total liabilities and equity 288,222   302,924 Unaudited Consolidated Statement of Changes in Equity (in thousands of US dollars)   Share capital Warrants Contributed surplus Deficit Accumulated other comprehensive loss Total equity   $ $ $ $ $ $ Balance - December 31, 2010 429,007 24,430 1,982 (382,652) (5,260) 67,507 Net loss - - - (8,954) - (8,954) Other comprehensive loss - - - - (881) (881) Stock-based compensation - - 865 - - 865 Balance - June 30, 2011 429,007 24,430 2,847 (391,606) (6,141) 58,537               Balance - December 31, 2011 429,007 24,430 3,492 (374,322) (6,844) 75,763 Net loss - - - (6,947) - (6,947) Other comprehensive income - - - - 2,282 2,282 Stock-based compensation - - 657 - - 657 Balance - June 30, 2012 429,007 24,430 4,149 (381,269) (4,562) 71,755 Unaudited 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 equipment 5,739   5,134   Amortization of intangible assets 211   211   Loss  on settlement of debt -    1,236   Stock-based compensation 657   866   Writeoff deferred financing costs -    1,748   Financial expenses 8,712   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 balances 10,511   10,594   Income taxes recovered (paid) (305)   1,306   Interest paid (6,598)   (7,151) Cash flows provided by operating activities 10,616   9,223         Financing activities       Repayment of debentures (7,151)   (20,644) Change in asset-based credit facility 3,978   20,294 Government loan -    4,152 Repayment of long-term debt -    32 Cash 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 period 6,745   5,277         Cash and cash equivalents ? End of period 3,037   3,394       SOURCE MEGA BRANDS INC.For further information: <p> <b>Investor Contact</b>:<br/> Peter Ferrante<br/> Vice President and Chief Financial Officer<br/> Tel: (514) 333-5555 ext. 2283 </p>