MEGA BRANDS REPORTS THIRD QUARTER 2010 RESULTS

MONTREAL, Nov. 5 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced today its financial results for the third quarter and nine months ended September 30, 2010. (All figures are expressed in US dollars.)

Net sales increased 9% to $128.3 million compared to $118.0 million in the third quarter of 2009. Adjusted net earnings were $19.8 million or $0.06 per basic and diluted share compared to $14.4 million or $0.39 per basic and diluted share in the third quarter of 2009. Third quarter 2010 results are adjusted for a $3.4 million unrealized foreign exchange loss on debentures. Third quarter 2009 results include adjustments for Specified items including a non-recurring gain of $72.0 million from a favourable litigation settlement, as well as a $4.2 million unrealized foreign exchange loss on debentures.

Net sales of Toys product lines increased 18% compared to the third quarter of 2009, led by Halo and Dragons Universe in the Boys category and sustained growth in the Preschool category.  On a geographical basis, North American net sales were higher, reflecting strong Toys shipments, which more than offset lower sales in Stationery and Activities. International sales were up 18% led by growth in key European markets. The Corporation has increased year-over-year sales in four consecutive quarters.

''Our sales momentum is positive for the peak toy selling season and into next year with all of our key product initiatives performing well at retail and a strong line-up of new products set for launch in spring and fall of next year,'' said Marc Bertrand, President and CEO. ''We are on track with our plan and continue to strengthen our product portfolio for the years to come.''

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, 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.

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 [phone] or 1 [phone]. For those unable to participate, a replay will be available until November 16, 2010. The replay phone number is [phone] or [phone], access code 20448559.

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, MagNext, MEGA Puzzles and Board Dudes are trademarks of MEGA Brands Inc. or its affiliates.

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 third quarter ended September 30, 2010 and the year ended December 31, 2009, which are available at www.sedar.com. 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.

Consolidated statements of earnings
(in thousands of US dollars, except per share data)
		Three-month periods		Nine-month periods
		ended September 30,		ended September 30,
		2010	2009	2010	2009
		$	$	$	$
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Net sales		128,291	117,962	256,211	231,617
Cost of sales		74,446	69,182	155,035	145,457
Gross profit		53,845	48,780	101,176	86,160
Marketing and advertising expenses		5,505	4,097	11,183	7,684
Research and development expenses		2,737	2,765	8,745	8,543
Other selling, distribution and administrative expenses		20,956	30,028	72,767	74,511
Impairment of goodwill / recovery of purchase price		-	(71,966)	900	(71,966)
Loss (gain) on foreign currency translation on debentures		3,444	4,195	(179)	6,665
Loss (gain) on foreign currency translation		(954)	(3,071)	1,219	(4,455)
Earnings from operations		22,157	82,732	6,541	65,178
Interest and other expenses
	Interest on long-term debt	4,192	11,455	18,385	32,343
	Settlement of debt	-	-	(140,344)	-
	Change in fair value of interest rate swap	-	(1,249)	-	(1,797)
	Amortization of deferred financing costs	461	977	2,064	2,246
	Other interest	104	34	256	44
		4,757	11,217	(119,639)	32,836
Earnings before income taxes		17,400	71,515	126,180	32,342
Income taxes
	Current	356	(220)	655	242
	Future	735	(238)	9,822	(679)
		1,091	(458)	10,477	(437)
Net earnings		16,309	71,973	115,703	32,779
Earnings per share
	Basic	0.05	1.97	0.50	0.90
	Diluted	0.05	1.97	0.50	0.90

Consolidated statements of deficit
(in thousands of US dollars)
		Three-month periods		Nine-month periods
		ended September 30,		ended September 30,
		2010	2009	2010	2009
		$	$	$	$
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Balance, beginning of period		(429,925)	(579,239)	(529,319)	(543,161)
Impact of the adoption of new abstract, Handbook EIC-173,
	Credit Risk and the Fair Value of Financial Assets and Financial Liabilities
	Change in fair value of interest rate swap	-	-	-	4,722
	Income taxes	-	-	-	(1,606)
		-	-	-	3,116
Balance, beginning of period as restated		(429,925)	(579,239)	(529,319)	(540,045)
Net earnings		16,309	71,973	115,703	32,779
Balance, end of period		(413,616)	(507,266)	(413,616)	(507,266)
Consolidated statements of comprehensive income and Accumulated other comprehensive income
(in thousands of US dollars)
		Three-month periods		Nine-month periods
		ended September 30,		ended September 30,
		2010	2009	2010	2009
		$	$	$	$
		(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Net earnings for the period		16,309	71,973	115,703	32,779
Other comprehensive income, net of income taxes
	Gain on derivatives designated as cash flow hedges	-	356	-	1,068
Comprehensive income for the period		16,309	72,329	115,703	33,847
Accumulated other comprehensive loss
Balance, beginning of period
	Gross	-	(7,096)	-	(8,246)
	Income taxes	-	2,703	-	3,141
		-	(4,393)	-	(5,105)
Other comprehensive income (loss)
	Net change in losses on cash flow hedging items	-	-	-	-
	Reclassification to income (loss)	-	575	-	1,725
	Income taxes	-	(219)	-	(657)
		-	356	-	1,068
Balance, end of period
	Gross	-	(6,521)	-	(6,521)
	Income taxes	-	2,484	-	2,484
Balance, end of period		-	(4,037)	-	(4,037)

Consolidated balance sheets
(in thousands of US dollars)
		September 30,	December 31,
		2010	2009
		(Unaudited)	(Audited)
		$	$
Assets
Current assets
	Cash and cash equivalents	9,794	26,763
	Accounts receivable	124,398	112,517
	Inventories	66,391	46,247
	Income taxes	1,382	914
	Future income taxes	2,160	4,197
	Derivative financial instruments	207	-
	Prepaid expenses	9,425	12,806
		213,757	203,444
Property, plant and equipment		21,383	21,210
Intangible assets		23,781	24,278
Goodwill, net		30,000	30,000
Derivative financial instruments		135	-
Future income taxes		2,308	2,197
		291,364	281,129
Liabilities
Current liabilities
	Accounts payable and accrued liabilities	72,200	67,290
	Derivative financial instruments	1,540	-
	Current portion of long-term debt	18,034	944
		91,774	68,234
Long-term debt		120,165	395,940
Derivative financial instruments		468	6,045
Future income taxes		19,561	12,407
		231,968	482,626
Shareholders' equity
	Capital stock	429,007	308,678
	Warrants	24,430	-
	Contributed surplus	19,575	558
	Equity component of convertible debentures	-	18,586
	Deficit	(413,616)	(529,319)
		59,396	(201,497)
		291,364	281,129

Consolidated statements of cash flows
(in thousands of US dollars)
			Three-month periods		Nine-month periods
			ended September 30,		ended June 30,
			2010	2009	2010	2009
			$	$	$	$
			(Unaudited)	(Unaudited)	(Unaudited)	(Unaudited)
Cash flows from operating activities
	Net earnings		16,309	71,973	115,703	32,779
	Items not affecting cash and cash equivalents
		Amortization of property, plant and equipment	2,416	3,544	7,146	10,069
		Amortization of intangible assets	166	166	498	498
		Settlement of debt	-	-	(145,310)	-
		Impairment of goodwill / recovery of purchase price	-	(439)	-	(1,339)
		Amortization of unrealized loss on swap derivative financial instruments	-	575	-	1,726
		Gain on swap derivative financial instruments	-	(1,825)	-	(3,523)
		Stock-based compensation plans	430	(17)	576	28
		Amortization of deferred financing costs	461	977	2,064	2,246
		Amortization of warrants	576	-	1,167	-
		Writeoff deferred financing costs	-	-	2,967	-
		Future income taxes	735	(238)	9,822	(679)
		Accretion of interest on convertible debentures	-	719	819	1,959
		Loss (gain) on foreign currency	(483)	5,391	(3,237)	6,310
			20,610	80,826	(7,785)	50,074
Changes in non-cash operating working capital items			(29,285)	(90,982)	(21,557)	(73,617)
			(8,675)	(10,156)	(29,342)	(23,543)
Cash flows from financing activities
	Change in asset-based credit facility		17,887	-	17,887	-
	Repayment of long-term debt		(59)	(701)	(216,159)	(3,733)
	Issuance of debentures		-	-	120,733	-
	Issuance of capital stock		-	-	85,859	-
	Issuance of warrants		-	-	23,775	-
	Addition to deferred financing costs		-	-	(7,937)	(3,254)
	Share issue cost		-	-	(3,399)	-
	Issue costs on warrants		-	-	(965)	-
			17,828	(701)	19,794	(6,987)
Cash flows from investing activities
	Acquisition of property, plant and equipment		(3,187)	(1,385)	(7,319)	(5,467)
			(3,187)	(1,385)	(7,319)	(5,467)
Effect of changes in foreign exchange rates on cash and cash equivalents			(90)	(296)	(102)	7
Increase (decrease) in cash and cash equivalents			5,876	(12,538)	(16,969)	(35,990)
Cash and cash equivalents, beginning of period			3,918	25,975	26,763	49,427
Cash and cash equivalents, end of period			9,794	13,437	9,794	13,437
Supplementary disclosure of cash flow information
	Interest paid		254	10,170	20,521	29,724
	Income taxes paid (recovery)		88	233	1,255	(156)

For further information:

Investor Contact:

Peter Ferrante
Chief Financial Officer   
Tel: [phone] ext. 2283