- Sixth consecutive quarter of year-over-year sales growth
- Toy sales up 17%
- $18.6 million reduction in adjusted net loss
MONTREAL, May 12 /PRNewswire-FirstCall/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the first quarter ended March 31, 2011. The Corporation adopted International Financial Reporting Standards effective January 1, 2011 and all comparative 2010 figures have been restated. (All figures are expressed in US dollars.)
Consolidated net sales in the first quarter increased 4% to $51.0 million compared to $49.1 million in the corresponding 2010 period. This is the sixth consecutive quarter of higher year-over-year sales since the fourth quarter of 2009.
Toy sales continued their strong momentum with a 17% increase compared to the first quarter of 2010. Sales of Stationery and Activities products declined as expected and the Corporation is taking steps to improve this segment's results through the balance of the year.
The Corporation reduced its adjusted net loss by $18.6 million compared to the first quarter of 2010. Reported net loss was $9.3 million or $0.03 per basic and diluted share compared to net earnings of $103.0 million or $2.39 per basic and diluted share in the first quarter of 2010. Net earnings in the 2010 period were due primarily to a non-recurring accounting gain of $144.3 million resulting from the settlement of debt. Before this non-cash gain and other Specified items, net loss in the first quarter of 2010 was $27.7 million.
''We are off to a good start to the year with an $18.6 million improvement in operating results, positive feedback on new products and a strong outlook for the construction toy category which continues to outperform the toy industry,'' said Marc Bertrand, President and CEO. ''MEGA Brands is on track for higher sales and profitability in 2011.''
New products introduced in the first quarter included Blok Town, Blok Squad and Hello Kitty, a new construction toy line for girls which is off to a strong start at retail. The Corporation's Fall launches include construction toys based on the Need for Speed video games, new products in conjunction with the 10th anniversary of Halo, and Breakthrough Puzzles, an innovation in 3D puzzles.
The Corporation's business is seasonal, with net sales and financial results typically at their highest levels in the third and fourth quarters.
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 (514) 807-8791 or 1-800-589-8577. For those unable to participate, a replay will be available until May 18, 2011. The replay phone number is 877-289-8525 or (416) 640-1917, access code 4437892.
Annual Meeting of Shareholders
The Corporation's Annual Meeting of Shareholders will be held today at 11:00 a.m. at Le Nouvel Hotel, 1740 René-Lévesque Blvd. West, in Montreal.
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, 2011 and 2010. 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.
Use of 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, 2011, 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, 2010, 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) |
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Three-month periods ended March 31, |
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2011 | 2010 | |||
Note | $ | $ | ||
Net sales | 51,036 | 49,145 | ||
Cost of sales | 33,224 | 32,555 | ||
Gross profit | 17,812 | 16,590 | ||
Marketing and advertising expenses | 2,864 | 2,634 | ||
Research and development expenses | 3,276 | 3,053 | ||
Other selling, distribution and administrative expenses | 17,910 | 31,385 | ||
Contingent consideration on business acquisition | 4 | 168 | 168 | |
Loss on foreign currency translation | 121 | 202 | ||
Loss from operations | (6,527) | (20,852) | ||
Financial expenses | 4,673 | 11,382 | ||
Gain on settlement of debt | 8 | - | (144,338) | |
4,673 | (132,956) | |||
Earnings (loss) before income taxes | (11,200) | 112,104 | ||
Income taxes | ||||
Current | (1,451) | 6,840 | ||
Deferred | (485) | 2,243 | ||
(1,936) | 9,083 | |||
Net earnings (loss) | (9,264) | 103,021 | ||
Earnings (loss) per share | ||||
Basic | 6 | (0.03) | 2.39 | |
Diluted | 6 | (0.03) | 2.39 | |
Unaudited Interim Consolidated Statements of Comprehensive Income (in thousands of US dollars, except per share amounts) |
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Three-month periods ended March 31, |
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2011 | 2010 | |||
Note | $ | $ | ||
Net earnings (loss) | (9,264) | 103,021 | ||
Other comprehensive loss: | ||||
Cumulative translation adjustment | 4 | (566) | (2,589) | |
Other comprehensive loss | (566) | (2,589) | ||
Comprehensive income (loss) | (9,830) | 100,432 |
Unaudited Consolidated Statements of Financial Position (in thousands of US dollars) |
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March 31, | December 31, | January 1, | |||
2011 | 2010 | 2010 | |||
Note | $ | $ | $ | ||
Assets | |||||
Current assets | |||||
Cash and cash equivalents | 16,574 | 5,277 | 26,763 | ||
Trade and other receivables | 78,696 | 123,194 | 112,517 | ||
Inventories | 64,616 | 51,135 | 46,247 | ||
Derivative financial instruments | 12 | 581 | 414 | - | |
Prepaid expenses | 10,463 | 11,039 | 12,806 | ||
Total current assets | 170,930 | 191,059 | 198,333 | ||
Non-current assets | |||||
Property, plant and equipment | 7 | 28,987 | 21,501 | 21,210 | |
Intangible assets | 23,509 | 23,615 | 24,278 | ||
Goodwill | 30,000 | 30,000 | 30,000 | ||
Derivative financial instruments | 12 | 223 | 309 | - | |
Deferred income tax assets | 7,106 | 7,097 | 6,394 | ||
Total assets | 260,755 | 273,581 | 280,215 | ||
Liabilities | |||||
Current liabilities | |||||
Trade and other payables | 54,280 | 62,686 | 69,016 | ||
Income taxes | 16,717 | 16,857 | 10,729 | ||
Derivative financial instruments | 12 | 1,693 | 970 | - | |
Current portion of long-term debt | 8 | 26 | 35 | 944 | |
72,716 | 80,548 | 80,689 | |||
Non-current liabilities | |||||
Long-term debt | 8 | 129,566 | 125,507 | 395,940 | |
Derivative financial instruments | 12 | 261 | 19 | 7,340 | |
Deferred income tax liabilities | - | - | 764 | ||
129,827 | 125,526 | 404,044 | |||
Equity | |||||
Share capital | 9 | 429,007 | 429,007 | 308,678 | |
Warrants | 9 | 24,430 | 24,430 | - | |
Contributed surplus | 2,517 | 1,982 | 558 | ||
Deficit | 4 | (391,916) | (382,652) | (513,754) | |
Accumulated other comprehensive loss | 4 | (5,826) | (5,260) | - | |
Total equity | 58,212 | 67,507 | (204,518) | ||
Total liabilities and equity | 260,755 | 273,581 | 280,215 |
Unaudited Consolidated Statement of Changes in Equity (in thousands of US dollars) |
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Share capital | Warrants | Contributed surplus |
Deficit | Accumulated other comprehensive loss |
Total equity | ||
Note | $ | $ | $ | $ | $ | $ | |
Balance - January 1, 2010 | 308,678 | - | 558 | (513,754) | - | (204,518) | |
Net earnings for the period | - | - | - | 103,021 | - | 103,021 | |
Other comprehensive loss | 4 | - | - | - | - | (2,589) | (2,589) |
Shares issued in settlement of debt | 9 | 37,869 | - | - | - | - | 37,869 |
Shares issued for cash | 9 | 85,859 | - | - | - | - | 85,859 |
Share issuance expense | 9 | (3,399) | - | - | - | - | (3,399) |
Issuance of warrants | 9 | - | 25,395 | - | - | - | 25,395 |
Warrant issuance expense | 9 | - | (965) | - | - | - | (965) |
Balance - March 31, 2010 | 429,007 | 24,430 | 558 | (410,733) | (2,589) | 40,673 | |
- | - | - | - | ||||
Net earnings for the period | - | - | - | 28,081 | - | 28,081 | |
Other comprehensive loss | 4 | - | - | - | - | (2,671) | (2,671) |
Stock-based compensation | - | - | 1,424 | - | - | 1,424 | |
Balance - December 31, 2010 | 429,007 | 24,430 | 1,982 | (382,652) | (5,260) | 67,507 | |
Net loss for the period | - | - | - | (9,264) | - | (9,264) | |
Other comprehensive loss | - | - | - | - | (566) | (566) | |
Stock-based compensation | - | - | 535 | - | - | 535 | |
Balance - March 31, 2011 | 429,007 | 24,430 | 2,517 | (391,916) | (5,826) | 58,212 |
Unaudited Consolidated Statements of Cash Flows (in thousands of US dollars) |
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Three-month periods, ended March 31 |
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2011 | 2010 | ||||
Note | $ | $ | |||
Operating activities | |||||
Net earnings (loss) | (9,264) | 103,021 | |||
Items not affecting cash and cash equivalents | |||||
Depreciation of property, plant and equipment | 7 | 2,404 | 2,491 | ||
Amortization of intangible assets | 105 | 166 | |||
Gain on settlement of debt | 8 | - | (149,304) | ||
Stock-based compensation | 535 | - | |||
Financial expenses | 4,673 | 11,382 | |||
Writeoff deferred financing costs | 8 | - | 2,967 | ||
Income taxes | (1,936) | 9,083 | |||
Loss (gain) on foreign currency | (31) | 1,970 | |||
(3,514) | (18,224) | ||||
Net change in non-cash working capital balances | 11 | 22,211 | 33,314 | ||
Income taxes recovered (paid) | 1,312 | (141) | |||
Interest paid | (92) | (16,826) | |||
Cash flows provided by operating activities | 19,917 | (1,877) | |||
Financing activities | |||||
Repayment of long-term debt | 8 | (14) | (216,024) | ||
Issuance of debentures | 8 | - | 120,732 | ||
Issuance of capital stock | 9 | - | 85,859 | ||
Issurance of warrants | 9 | - | 23,776 | ||
Addition to deferred financing costs | 8 | - | (7,937) | ||
Share issue cost | 9 | - | (3,399) | ||
Issue costs on warrants | 9 | - | (965) | ||
Cash flows provided by financing activities | (14) | 2,042 | |||
Investing activities | |||||
Acquisition of property, plant and equipment | 7 | (8,575) | (1,997) | ||
Cash flows provided by investing activities | (8,575) | (1,997) | |||
Effect of changes in foreign exchange rates on cash and cash equivalents | (31) | (115) | |||
Increase (decrease) in cash and cash equivalents | 11,297 | (1,947) | |||
Cash and cash equivalents — Beginning of period | 5,277 | 26,763 | |||
Cash and cash equivalents — End of period | 16,574 | 24,816 |
SOURCE MEGA BRANDS INC.
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