MEGA Brands reports second quarter 2013 results

• Toy sales up 4%, Stationery & Activities sales up 3%
• EBITDA of $9.8 million compared to $9.2 million
• Basic EPS of $0.18 ($0.10 diluted) compared to $0.10 (loss of $0.12)
• Significant debt reduction of $60.0 million completed, interest expenses reduced
  
  

MONTREAL, Aug. 1, 2013 /CNW Telbec/ - MEGA Brands Inc. (TSX: MB) announced its financial results today for the second quarter ended June 30, 2013. (All figures are expressed in US dollars.)

Consolidated net sales in the second quarter increased 4% to $98.1 million compared to $94.5 million in the corresponding 2012 period.

• Sales for the Toys segment increased 4% compared to the second quarter of 2012, driven by higher product shipments in Preschool & Girls construction toys.
• Sales for the Stationery & Activities segment were up 3%, the ninth consecutive quarter of year-over-year growth.
• On a geographical basis, North American sales were 5% higher and international sales were level.

Earnings before interest, taxes, depreciation and amortization (''EBITDA'') increased to $9.8 million compared to $9.2 million in the second quarter of 2012. EBITDA is a supplementary financial measure.

Net earnings were $4.0 million or $0.10 per diluted share ($0.18 per basic share) compared to net earnings of $1.6 million or a loss of $0.12 per diluted share (earnings of $0.10 per basic share) in the second quarter of 2012.

For the six-month period ended June 30, 2013, consolidated net sales increased 7% to $162.6 million compared to $152.7 million in the same period last year, with 9% growth in Toys, 3% in Stationery & Activities, 8% in North America and 4% in International. EBITDA increased to $8.8 million compared to $7.1 million in the corresponding period in 2012. Net loss was $3.2 million or $0.16 per diluted share compared to a net loss of $6.9 million or $0.42 per diluted share in the corresponding period of 2012.

''Our sales for the remainder of the year will be driven by the strength of our MEGA BLOKS Preschool & Girls product offering, several new product launches in Boys & Collectors construction toys, including a major new product line hitting retail by the end of the third quarter, and positive momentum in our Stationery & Activities business.'' said Marc Bertrand, President and CEO. ''Our performance will also be supported by a much-improved financial position, with a trailing net debt-to-EBITDA ratio of 1.1 times, and significantly lower interest expenses than in the comparable period last year,''

The Corporation's business is seasonal and, historically, it has observed a higher level of activity and profitability during the last two quarters of the year compared to the first two 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 1 [phone] or [phone]. For those unable to participate, a replay will be available until August 8, 2013. The replay phone number is [phone] or 1 [phone], access code 15959767.

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 June 30, 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- and six-month periods ended June 30, 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 June 30,		Six-month periods ended June 30,
		2013	2012	2013	2012
		$	$	$	$
Net sales		98,084	94,489	162,630	152,676
Cost of sales		62,097	60,224	103,513	98,980
Gross profit		35,987	34,265	59,117	53,696
Marketing and advertising expenses		4,089	3,028	8,607	5,876
Research and development expenses		3,984	4,003	7,893	8,059
Other selling, distribution and administrative expenses		21,536	20,655	41,566	39,113
Contingent consideration on business acquisition		86	96	173	192
Loss (gain) on foreign currency translation		(52)	434	(1,291)	(471)
Earnings from operations		6,344	6,049	2,169	927
Financial expenses		2,327	4,289	6,477	8,712
Early redemption of debentures		-	-	2,869	-
		2,327	4,289	9,346	8,712
Earnings (loss) before income taxes		4,017	1,760	(7,177)	(7,785)
Income taxes
	Current	65	174	(3,963)	(838)
	Deferred	-	-	-	-
		65	174	(3,963)	(838)
Net earnings (loss)		3,952	1,586	(3,214)	(6,947)
Earnings (loss) per share
	Basic	0.18	0.10	(0.16)	(0.42)
	Diluted	0.10	(0.12)	(0.16)	(0.42)

Unaudited Interim Consolidated Statements of Comprehensive Income (Loss)
(in thousands of US dollars, except per share amounts)
		Three-month periods ended June 30,		Six-month periods ended June 30,
		2013	2012	2013	2012
		$	$	$	$
Net earnings (loss)		3,952	1,586	(3,214)	(6,947)
Other comprehensive income:
Items that may be reclassified subequently to income or loss
	Cumulative translation adjustment	(386)	(71)	(543)	809
Items that will not be reclassified subequently to income or loss
	Cumulative translation adjustment	536	1,311	2,744	1,473
Other comprehensive income:		150	1,240	2,201	2,282
Comprehensive income (loss)		4,102	2,826	(1,013)	(4,665)

Unaudited Consolidated Statements of Financial Position
(in thousands of US dollars)
	June 30,	December 31,
	2013	2012
	(Unaudited)	(Audited)
	$	$
Assets
Current assets
Cash and cash equivalents	4,288	8,018
Trade and other receivables	104,760	130,541
Inventories	74,314	45,779
Derivative financial instruments	83	113
Prepaid expenses	6,812	9,370
Total current assets	190,257	193,821
Non-current assets
Property, plant and equipment	44,504	39,817
Intangible assets	22,560	22,771
Goodwill	30,000	30,000
Total assets	287,321	286,409
Liabilities
Current liabilities
Trade and other payables	72,155	62,638
Income taxes	3,706	5,631
Current portion of long-term debt	1,832	8,023
	77,693	76,292
Non-current liabilities
Long-term debt	59,137	112,992
Derivative financial instruments	-	206
	59,137	113,198
Equity
Share capital	501,663	431,893
Warrants	8,486	24,029
Contributed surplus	4,836	4,478
Deficit	(360,950)	(357,736)
Accumulated other comprehensive loss	(3,544)	(5,745)
Total equity	150,491	96,919
Total liabilities and equity	287,321	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	-	-	-	(6,947)	-	(6,947)
Other comprehensive loss	-	-	-	-	2,282	2,282
Stock-based compensation	-	-	657	-	-	657
Balance - June 30, 2012	429,007	24,430	4,149	(381,269)	(4,562)	71,755
Balance - December 31, 2012	431,893	24,029	4,478	(357,736)	(5,745)	96,919
Net loss	-	-	-	(3,214)	-	(3,214)
Options exercised	1,470	-	(454)	-	-	1,016
Warrants exercised	68,300	(15,543)	-	-	-	52,757
Other comprehensive income	-	-	-	-	2,201	2,201
Stock-based compensation	-	-	812	-	-	812
Balance - June 30, 2013	501,663	8,486	4,836	(360,950)	(3,544)	150,491

Unaudited Consolidated Statements of Cash Flows
(in thousands of US dollars)
		Six-month periods ended June 30,
		2013	2012
		$	$
Operating activities
Net loss		(3,214)	(6,947)
Adjustments for:
	Depreciation of property, plant and equipment	6,288	5,739
	Amortization of intangible assets	211	211
	Stock-based compensation	812	657
	Financial expenses	6,477	8,712
	Early redemption of debentures	2,868	-
	Income taxes	(3,963)	(838)
	Gain on foreign currency	(189)	(526)
		9,290	7,008
	Net change in non-cash working capital balances	5,981	10,511
	Income taxes recovered (paid)	1,765	(305)
	Interest paid	(4,571)	(6,598)
Cash flows provided by operating activities		12,465	10,616
Financing activities
Repayment of debentures		(60,368)	(7,151)
Change in asset-based credit facility		-	3,978
Issuance of capital stock		53,775	-
Repayment of long-term debt		(357)	-
Cash flows used in financing activities		(6,950)	(3,173)
Investing activities
Acquisition of property, plant and equipment		(9,264)	(11,113)
Cash flows used in investing activities		(9,264)	(11,113)
Effect of changes in foreign exchange rates on cash and cash equivalents		19	(38)
Decrease in cash and cash equivalents		(3,730)	(3,708)
Cash and cash equivalents — Beginning of period		8,018	6,745
Cash and cash equivalents — End of period		4,288	3,037

 

SOURCE: MEGA BRANDS INC.

Investor Contact:
Peter Ferrante
Vice President and Chief Financial Officer
Tel: [phone] ext. 2283