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For evidence of a turnaround at Mega Brands look no further than their Dragons Universe lineup. The distracted management team at the toy maker had been so busy putting out fires and working in survival mode that some of their products were suffering from neglect.

In need of a makeover, the sci-fi themed Dragons Universe set of build-able creatures, spaceships and warriors - a key element in the company's boys five-plus segment - was re-launched this year with a major new marketing campaign. The move came as executives were able to again turn their attention to the full product lineup after a complex financial restructuring and the conclusion of a draining legal fight over its recalled Magnetix toys.

The company unveils its third-quarter results on Friday and the report will be closely studied for evidence once-struggling Mega Brands is indeed back on solid footing and poised for sustained growth.

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So far, the signs are positive.

The maker of snap-together blocks, play sets, puzzles and arts and crafts has posted two consecutive quarters of earnings growth, the first time in years.

In September, the company won a final and binding court ruling in its favor against rival Lego AS's claims that it copied the shape of its building blocks.

As part of a sweeping financial reorganization in March, Mega Brands raised millions of dollars via new equity and private placements and slashed a big chunk of its debt.

The massive new issue, of course, diluted shareholders' equity, with the stock now trading in the 60-cent range, light years from the heady days when it changed hands for more than $20.

For the critical holiday season, Mega Brands has high hopes riding on its Thomas & Friends line.

And for next year, two key licences are expected to be major sales drivers: Marvel Publishing's Thor and Captain America superheroes.

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The big uncertainty is how Mega Brands will fare against renewed competition from archrival Lego and hungry low-price manufacturers like Best-Lock Construction Toys.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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