MEGA Brands reports third quarter 2011 results
- Eighth consecutive quarter of year-over-year sales growth
- Growth in Toys and Stationery & Activities
- Diluted EPS of $0.51 compared to $0.36
MONTREAL, Nov. 2, 2011 /PRNewswire/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the third quarter ended September 30, 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 third quarter increased 4% to $133.4 million compared to $128.3 million in the corresponding 2010 period. This is the eighth consecutive quarter of higher year-over-year consolidated sales since the fourth quarter of 2009.
Toy and Stationery & Activities sales were both up 4% compared to the third quarter of 2011. On a geographical basis, North American sales were up 6% and International sales 2%. The Corporation's overall sales performance compares favorably to its peers in light of the cautious mood of retailers who are managing inventories tightly due to economic uncertainty.
Net earnings were $17.1 million or $0.51 per diluted share, compared to $17.2 million or $0.36 per diluted share in the third quarter of 2010.
''We continue to build momentum in our toy business with retail sales running ahead of shipments and positive movement at retail for our 2011 products, while seeing clear signs that the recovery in Stationery & Activities is firmly on track,'' said Marc Bertrand, President and CEO. ''We are focused on a strong finish to 2011 and creating an even more exciting product portfolio for 2012 based on great innovation and a compelling array of licenses.''
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) 731-5319. For those unable to participate, a replay will be available until November 9, 2011. The replay phone number is (416) 640-1917 or 1 (877) 289-8525, access code 4477050.
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- and nine-month periods ended September 30, 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 September 30, 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) | |||||||||
| Three-month periods ended September 30, |
Nine-month periods ended September 30, |
||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||
| Note | $ | $ | $ | $ | |||||
| Net sales | 133,354 | 128,291 | 268,332 | 256,211 | |||||
| Cost of sales | 80,958 | 74,676 | 167,074 | 155,719 | |||||
| Gross profit | 52,396 | 53,615 | 101,258 | 100,492 | |||||
| Marketing and advertising expenses | 3,721 | 5,505 | 9,219 | 11,183 | |||||
| Research and development expenses | 3,172 | 2,737 | 9,965 | 8,745 | |||||
| Other selling, distribution and administrative expenses | 22,281 | 21,471 | 60,944 | 73,758 | |||||
| Contingent consideration on business acquisition | 4 | 110 | 168 | 884 | 503 | ||||
| Loss (gain) on foreign currency translation | 1,162 | 655 | 620 | (462) | |||||
| Earnings from operations | 21,950 | 23,079 | 19,626 | 6,765 | |||||
| Financial expenses | 4,552 | 4,771 | 14,062 | 20,816 | |||||
| Loss (gain) on settlement of debt | 7 | - | - | 2,984 | (144,338) | ||||
| 4,552 | 4,771 | 17,046 | (123,522) | ||||||
| Earnings before income taxes | 17,398 | 18,308 | 2,580 | 130,287 | |||||
| Income taxes | |||||||||
| Current | 487 | 1,068 | (4,968) | 8,705 | |||||
| Deferred | (139) | 23 | (548) | 1,772 | |||||
| 348 | 1,091 | (5,516) | 10,477 | ||||||
| Net earnings | 17,050 | 17,217 | 8,096 | 119,810 | |||||
| Earnings per share | |||||||||
| Basic | 6 | 1.04 | 1.05 | 0.49 | 10.26 | ||||
| Diluted | 6 | 0.51 | 0.36 | 0.40 | 5.97 | ||||
| Unaudited Interim Consolidated Statements of Comprehensive Income | |||||||||
| (in thousands of US dollars, except per share amounts) | |||||||||
| Three-month periods ended September 30, |
Nine-month periods ended September 30, |
||||||||
| 2011 | 2010 | 2011 | 2010 | ||||||
| Note | $ | $ | $ | $ | |||||
| Net earnings | 17,050 | 17,217 | 8,096 | 119,810 | |||||
| Other comprehensive loss: | |||||||||
| Cumulative translation adjustment | 4 | (1,182) | (541) | (2,063) | (3,216) | ||||
| Other comprehensive loss: | (1,182) | (541) | (2,063) | (3,216) | |||||
| Comprehensive income | 15,868 | 16,676 | 6,033 | 116,594 | |||||
| Unaudited Consolidated Statements of Financial Position | ||||
| (in thousands of US dollars) | ||||
| September 30, | December 31, | |||
| 2011 | 2010 | |||
| Note | $ | $ | ||
| Assets | ||||
| Current assets | ||||
| Cash and cash equivalents | 2,801 | 5,277 | ||
| Trade and other receivables | 137,223 | 123,194 | ||
| Inventories | 70,824 | 51,135 | ||
| Derivative financial instruments | 11 | 48 | 414 | |
| Prepaid expenses | 12,415 | 11,039 | ||
| Total current assets | 223,311 | 191,059 | ||
| Non-current assets | ||||
| Property, plant and equipment | 30,587 | 21,501 | ||
| Intangible assets | 23,298 | 23,615 | ||
| Goodwill | 30,000 | 30,000 | ||
| Derivative financial instruments | 11 | 116 | 309 | |
| Deferred income tax assets | 5,935 | 7,097 | ||
| Total assets | 313,247 | 273,581 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Asset-based credit facility | 7 | 40,154 | - | |
| Trade and other payables | 74,195 | 62,686 | ||
| Income taxes | 12,610 | 16,857 | ||
| Derivative financial instruments | 11 | 289 | 970 | |
| Current portion of long-term debt | 7 | 6,848 | 35 | |
| 134,096 | 80,548 | |||
| Non-current liabilities | ||||
| Long-term debt | 7 | 104,219 | 125,507 | |
| Derivative financial instruments | 11 | 129 | 19 | |
| 104,348 | 125,526 | |||
| Equity | ||||
| Share capital | 8 | 429,007 | 429,007 | |
| Warrants | 8 | 24,430 | 24,430 | |
| Contributed surplus | 3,245 | 1,982 | ||
| Deficit | 4 | (374,556) | (382,652) | |
| Accumulated other comprehensive loss | 4 | (7,323) | (5,260) | |
| Total equity | 74,803 | 67,507 | ||
| Total liabilities and equity | 313,247 | 273,581 |
| Unaudited Consolidated Statement of Changes in Equity | ||||||||
| (in thousands of US dollars) | ||||||||
| 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 | - | - | - | 119,810 | - | 119,810 | ||
| Other comprehensive loss | 4 | - | - | - | - | (3,216) | (3,216) | |
| Shares issued in settlement of debt | 8 | 37,869 | - | - | - | - | 37,869 | |
| Shares issued for cash | 8 | 85,859 | - | - | - | - | 85,859 | |
| Share issuance expense | 8 | (3,399) | - | - | - | - | (3,399) | |
| Issuance of warrants | 8 | - | 25,395 | - | - | - | 25,395 | |
| Warrant issuance expense | 8 | - | (965) | - | - | - | (965) | |
| Stock-based compensation | - | - | 916 | - | - | 916 | ||
| Balance - September 30, 2010 | 429,007 | 24,430 | 1,474 | (393,944) | (3,216) | 57,751 | ||
| Net earnings for the period | - | - | - | 11,292 | - | 11,292 | ||
| Other comprehensive loss | 4 | - | - | - | - | (2,044) | (2,044) | |
| Stock-based compensation | - | - | 508 | - | - | 508 | ||
| Balance - December 31, 2010 | 429,007 | 24,430 | 1,982 | (382,652) | (5,260) | 67,507 | ||
| Net earnings for the period | - | - | - | 8,096 | - | 8,096 | ||
| Other comprehensive loss | - | - | - | - | (2,063) | (2,063) | ||
| Stock-based compensation | - | - | 1,263 | - | - | 1,263 | ||
| Balance - September 30, 2011 | 429,007 | 24,430 | 3,245 | (374,556) | (7,323) | 74,803 |
| Unaudited Consolidated Statements of Cash Flows | |||||
| (in thousands of US dollars) | |||||
| Nine-month periods, ended September 30 |
|||||
| 2011 | 2010 | ||||
| Note | $ | $ | |||
| Operating activities | |||||
| Net earnings | 8,096 | 119,810 | |||
| Items not affecting cash and cash equivalents | |||||
| Depreciation of property, plant and equipment | 7,960 | 8,043 | |||
| Amortization of intangible assets | 316 | 498 | |||
| Loss (gain) on settlement of debt | 7 | 1,236 | (149,304) | ||
| Stock-based compensation | 1,263 | 916 | |||
| Financial expenses | 14,062 | 20,816 | |||
| Writeoff deferred financing costs | 7 | 1,748 | 2,967 | ||
| Income taxes | (5,516) | 10,477 | |||
| Gain on foreign currency | (3,331) | (4,739) | |||
| 25,834 | 9,484 | ||||
| Net change in non-cash working capital balances | 10 | (27,851) | (16,684) | ||
| Income taxes recovered (paid) | 706 | (1,255) | |||
| Interest paid | (6,827) | (20,887) | |||
| Cash flows used by operating activities | (8,138) | (29,342) | |||
| Financing activities | |||||
| Repurchase of debentures | 7 | (20,644) | - | ||
| Change in asset-based credit facility | 7 | 40,154 | 17,887 | ||
| Government loan | 7 | 4,152 | - | ||
| Issuance of long-term debt | 7 | 32 | - | ||
| Repayment of long-term debt | 7 | - | (216,159) | ||
| Issuance of debentures | 7 | - | 120,732 | ||
| Issuance of capital stock | 8 | - | 85,859 | ||
| Issurance of warrants | 8 | - | 23,776 | ||
| Addition to deferred financing costs | 7 | - | (7,937) | ||
| Share issue cost | 8 | - | (3,399) | ||
| Issue costs on warrants | 8 | - | (965) | ||
| Cash flows provided by financing activities | 23,694 | 19,794 | |||
| Investing activities | |||||
| Acquisition of property, plant and equipment | (18,145) | (7,319) | |||
| Cash flows used by investing activities | (18,145) | (7,319) | |||
| Effect of changes in foreign exchange rates on cash and cash equivalents | 113 | (102) | |||
| Decrease in cash and cash equivalents | (2,476) | (16,969) | |||
| Cash and cash equivalents — Beginning of period | 5,277 | 26,763 | |||
| Cash and cash equivalents — End of period | 2,801 | 9,794 | |||
SOURCE MEGA BRANDS INC.
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