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Press release from PR Newswire

MEGA Brands Reports First Quarter 2013 Results

Thursday, May 02, 2013

MEGA Brands Reports First Quarter 2013 Results

00:01 EDT Thursday, May 02, 2013
  • Consolidated sales up 11%
  • Toys sales up 14%
  • Stationery & Activities sales up 3%

MONTREAL, May 2, 2013 /PRNewswire/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the first quarter ended March 31, 2013. (All figures are expressed in US dollars.)

Consolidated net sales in the first quarter increased 11% to $64.5 million compared to $58.2 million in the corresponding 2012 period.

  • Toys sales increased 14% compared to the first quarter of 2012, driven by growth in both of the Corporation's construction toy categories.
  • Sales of Stationery & Activities products were up 3%, the eighth consecutive quarter of year-over-year growth in this segment.
  • On a geographical basis, sales were 12% higher in North America and 9% in international markets compared to the first quarter of 2012.

The Corporation recorded negative earnings before interest, taxes, depreciation and amortization (''EBITDA'') of $1.0 million, an improvement of $1.2 million compared to negative EBITDA of $2.2 million in the first quarter of 2012. EBITDA is a supplementary financial measure.

Net loss improved to $7.2 million or $0.43 basic and diluted per share compared to a net loss of $8.5 million or $0.52 per basic and diluted share in the first quarter of 2012. The Corporation's business is seasonal and historically the first quarter is the period with the lowest sales of the year and negative profitability.

''We are pleased with the sustained improvement in our sales and profitability,'' said Marc Bertrand, President and CEO. ''We continue to build momentum in the marketplace and our new product lines are being well received by retailers around the world.''

Recent Developments As at April 15, 2013, the principal amount of the Corporation's debentures outstanding was reduced to CA$53.7 million, compared to CA$114.6 as at December 31, 2012 and CA$141.7 million as at March 30, 2010 when they were issued. This reduction in principal amount of CA$60.9 million was made using proceeds from the exercise of warrants together with a scheduled repayment of CA$7.1 million. As a result, the Corporation's pre-tax cash interest expense will be reduced by approximately CA$6.1 million annually, which represents $0.22 in cash earnings per share on a diluted basis.

As at March 31, 2013, the Corporation's net debt to EBITDA multiple, adjusted for the early redemption of debentures on April 15, 2013, was 1.1 times, compared to 2.3 times as at December 31, 2012.

Annual Meeting The Corporation's 2013 Annual General Meeting of Shareholders will be held on May 2, 2013 in the Toy Showroom of its Montreal headquarters, 4505 Hickmore, starting at 10:30 a.m.

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 May 9, 2013. The replay phone number is (514) 807-9274 or 1 (855) 859-2056, access code 28998640.

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 March 31, 2013 and 2012. 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 March 31, 2013, 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, 2012, 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 March 31,
  2013   2012
  $   $
       
Net sales 64,546   58,187
Cost of sales 41,416   38,756
Gross profit 23,130   19,431
       
Marketing and advertising expenses 4,518   2,848
Research and development expenses 3,909   4,056
Other selling, distribution and administrative expenses 20,030   18,458
Contingent consideration on business acquisition 87   96
Gain on foreign currency translation (1,239)   (905)
       
Loss from operations (4,175)   (5,122)
       
Financial expenses      
  Interest and other financial charges 4,150   4,423
  Early redemption of debentures 2,869   -
  7,019   4,423
       
Loss before income taxes (11,194)   (9,545)
       
Income taxes      
  Current (4,028)   (1,012)
  Deferred -   -
  (4,028)   (1,012)
       
Net loss (7,166)   (8,533)
       
Loss per share      
  Basic (0.43)   (0.52)
  Diluted (0.43)   (0.52)
         
         
Unaudited Interim Consolidated Statements of Comprehensive Income
(in thousands of US dollars, except per share amounts)
       
  Three-month periods ended March 31,
  2013   2012
  $   $
       
Net loss (7,166)   (8,533)
       
Other comprehensive income:      
       
Items that may be reclassified subequently to income or loss      
  Cumulative translation adjustment (157)   880
       
Items that will not be reclassified subequently to income or loss      
  Cumulative translation adjustment 2,208   162
       
Other comprehensive income: 2,051   1,042
       
Comprehensive loss (5,115)   (7,491)

Unaudited Consolidated Statements of Financial Position
(in thousands of US dollars)
       
  March 31,   December 31,
  2013   2012
  (Unaudited)   (Audited)
  $   $
       
Assets      
Current assets      
Cash and cash equivalents 13,758   8,018
Trade and other receivables 89,659   130,541
Inventories 55,810   45,779
Income taxes 2,382   -
Derivative financial instruments 679   113
Prepaid expenses  9,226   9,370
Total current assets 171,514   193,821
       
Non-current assets      
Property, plant and equipment 41,850   39,817
Intangible assets 22,666   22,771
Goodwill 30,000   30,000
Derivative financial instruments 267   -
Total assets 266,297   286,409
       
Liabilities      
       
Current liabilities      
Trade and other payables 51,091   62,638
Income taxes 3,811   5,631
Current portion of long-term debt 53,838   8,023
  108,740   76,292
Non-current liabilities      
Long-term debt 64,247   112,992
Derivative financial instruments -   206
  64,247   113,198
Equity      
Share capital 433,585   431,893
Warrants 23,822   24,029
Contributed surplus 4,499   4,478
Deficit (364,902)   (357,736)
Accumulated other comprehensive loss (3,694)   (5,745)
Total equity 93,310   96,919
Total liabilities and equity 266,297   286,409

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, 2011 429,007 24,430 3,492 (374,322) (6,844) 75,763
Net loss - - - (8,533) - (8,533)
Other comprehensive income - - - - 1,042 1,042
Stock-based compensation - - 332 - - 332
Balance - March 31, 2012 429,007 24,430 3,824 (382,855) (5,802) 68,604
             
Balance - December 31, 2012 431,893 24,029 4,478 (357,736) (5,745) 96,919
Net loss - - - (7,166) - (7,166)
Options exercised 487   (152)     335
Warrants exercised 1,205 (207)       998
Other comprehensive income - - - - 2,051 2,051
Stock-based compensation - - 173 - - 173
Balance - March 31, 2013 433,585 23,822 4,499 (364,902) (3,694) 93,310

Unaudited Consolidated Statements of Cash Flows
(in thousands of US dollars)
       
  Three-month periods ended March 31,
  2013   2012
  $   $
       
Operating activities      
Net loss (7,166)   (8,533)
Adjustments for:      
  Depreciation of property, plant and equipment 3,030   2,765
  Amortization of intangible assets 105   105
  Stock-based compensation 173   332
  Financial expenses 4,150   4,423
  Early redemption of debentures 2,869   -
  Income taxes (4,028)   (1,012)
  Gain on foreign currency (496)   (762)
  (1,363)   (2,682)
  Net change in non-cash working capital balances 18,394   23,339
  Income taxes paid (525)   (272)
  Interest paid (301)   (446)
Cash flows provided by operating activities 16,205   19,939
       
Financing activities      
Repayment of debentures (7,149)   (7,267)
Change in asset-based credit facility -   (7,562)
Issuance of capital stock 1,333   -
Repayment of long-term debt (177)   (12)
Cash flows used in financing activities (5,993)   (14,841)
       
Investing activities      
Acquisition of property, plant and equipment (4,541)   (6,248)
Cash flows used in investing activities (4,541)   (6,248)
       
Effect of changes in foreign exchange rates on cash and cash equivalents 69   34
       
Increase (decrease) in cash and cash equivalents 5,740   (1,116)
Cash and cash equivalents ? Beginning of period 8,018   6,745
       
Cash and cash equivalents ? End of period 13,758   5,629

 

 

SOURCE MEGA BRANDS INC.

For further information: <p> </p> <p> <b>Investor Contact</b>:<br/> Peter Ferrante<br/> Vice President and Chief Financial Officer<br/> Tel: (514) 333-5555 ext. 2283 </p>

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