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MEGA Brands reports second quarter 2010 results

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  Published in House and Home on Wednesday, August 11th 2010 at 4:15 GMT by Market Wire
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 Consolidated statements of earnings (loss) (in thousands of US dollars, except per share data) Three-month periods Six-month periods ended June 30, ended June 30, 2010 2009 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ $ (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------------------------------------------------------------------- Net sales 78,775 70,122 127,920 113,655 ------------------------------------------------------------------------- Cost of sales 48,259 44,285 80,589 76,275 ------------------------------------------------------------------------- Gross profit 30,516 25,837 47,331 37,380 Marketing and advertising expenses 3,044 1,449 5,678 3,587 Research and development expenses 2,955 2,759 6,008 5,778 Other selling, distribution and administrative expenses 20,498 24,977 51,811 44,483 Impairment of goodwill - - 900 - Loss (gain) on foreign currency translation (2,123) (159) (1,450) 1,086 ------------------------------------------------------------------------- Earnings (loss) from operations 6,142 (3,189) (15,616) (17,554) ------------------------------------------------------------------------- Interest and other expenses Interest on long-term debt 4,142 10,904 14,193 20,888 Settlement of debt - - (140,344) - Change in fair value of interest rate swap - (2,131) - (548) Amortization of deferred financing costs 473 963 1,603 1,269 Other interest 39 50 152 10 ------------------------------------------------------------------------- 4,654 9,786 (124,396) 21,619 ------------------------------------------------------------------------- Earnings (loss) before income taxes 1,488 (12,975) 108,780 (39,173) ------------------------------------------------------------------------- Income taxes Current 730 29 299 462 Future (427) 272 9,087 (441) ------------------------------------------------------------------------- 303 301 9,386 21 ------------------------------------------------------------------------- Net earnings (loss) 1,185 (13,276) 99,394 (39,194) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings (loss) per share Basic 0.00 (0.36) 0.53 (1.07) Diluted(1) 0.00 (0.36) 0.53 (1.07) ------------------------------------------------------------------------- (1) The dilutive effect of the outstanding options for the three-and six- month periods ended June 30, 2010 and 2009 is nil as they are anti- dilutive. The dilutive effect of the outstanding warrants for the three- and six-month periods ended June 30, 2010 is nil as they are anti-dilutive. The dilutive effect of the outstanding debentures for the six-month period ended June 30, 2010 and the three- and six-month periods ended June 30, 2009 is nil as they are anti-dilutive. Consolidated statements of deficit (in thousands of US dollars) Three-month periods Six-month periods ended June 30, ended June 30, 2010 2009 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ $ (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------------------------------------------------------------------- Balance, beginning of period (431,110) (565,963) (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 (431,110) (565,963) (529,319) (540,045) Net earnings (loss) 1,185 (13,276) 99,394 (39,194) ------------------------------------------------------------------------- Balance, end of period (429,925) (579,239) (429,925) (579,239) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated statements of comprehensive income (loss) and Accumulated other comprehensive income (loss) (in thousands of US dollars) Three-month periods Six-month periods ended June 30, ended June 30, 2010 2009 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ $ (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------------------------------------------------------------------- Net earnings (loss) for the period 1,185 (13,276) 99,394 (39,194) ------------------------------------------------------------------------- Other comprehensive income (loss), net of income taxes Gain (loss) on derivatives designated as cash flow hedges - 356 - 712 ------------------------------------------------------------------------- Comprehensive income (loss) for the period 1,185 (12,920) 99,394 (38,482) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Accumulated other comprehensive loss Balance, beginning of period Gross - (7,671) - (8,246) Income taxes - 2,922 - 3,141 ------------------------------------------------------------------------- - (4,749) - (5,105) Other comprehensive income (loss) Net change in losses on cash flow hedging items - - - - Reclassification to income (loss) - 575 - 1,150 Income taxes - (219) - (438) ------------------------------------------------------------------------- - 356 - 712 Balance, end of period Gross - (7,096) - (7,096) Income taxes - 2,703 - 2,703 ------------------------------------------------------------------------- Balance, end of period - (4,393) - (4,393) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated balance sheets (in thousands of US dollars) June 30, December 31, 2010 2009 (Unaudited) (Audited) ------------------------------------------------------------------------- $ $ ------------------------------------------------------------------------- Assets Current assets Cash and cash equivalents 3,918 26,763 Accounts receivable 78,121 112,517 Inventories 72,281 46,247 Income taxes 1,160 914 Future income taxes 2,911 4,197 Prepaid expenses 10,789 12,806 ------------------------------------------------------------------------- 169,180 203,444 Property, plant and equipment 20,612 21,210 Intangible assets 23,946 24,278 Goodwill, net 30,000 30,000 Derivative financial instruments 13 - Future income taxes 2,374 2,197 ------------------------------------------------------------------------- 246,125 281,129 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Current liabilities Accounts payable and accrued liabilities 67,702 67,290 Current portion of long-term debt 200 944 ------------------------------------------------------------------------- 67,902 68,234 Long-term debt 115,654 395,940 Derivative financial instruments - 6,045 Future income taxes 19,652 12,407 ------------------------------------------------------------------------- 203,208 482,626 ------------------------------------------------------------------------- Shareholders' equity Capital stock 429,007 308,678 Warrants 24,430 - Contributed surplus 19,405 558 Equity component of convertible debentures - 18,586 Deficit (429,925) (529,319) ------------------------------------------------------------------------- 42,917 (201,497) ------------------------------------------------------------------------- 246,125 281,129 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated statements of cash flows (in thousands of US dollars) Three-month periods Six-month periods ended June 30, ended June 30, 2010 2009 2010 2009 ------------------------------------------------------------------------- ------------------------------------------------------------------------- $ $ $ $ (Unaudited) (Unaudited) (Unaudited) (Unaudited) ------------------------------------------------------------------------- Cash flows from operating activities Net earnings (loss) 1,185 (13,276) 99,394 (39,194) Items not affecting cash and cash equivalents Amortization of property, plant and equipment 2,536 3,347 4,730 6,525 Amortization of intangible assets 166 166 332 332 Settlement of debt - - (145,310) - Impairment of goodwill/recovery of purchase price - - - (900) Amortization of unrealized loss on swap derivative financial instruments - 576 - 1,151 Gain on swap derivative financial instruments - (2,706) - (1,698) Stock-based compensation plans 441 42 146 45 Amortization of deferred financing costs 612 963 1,603 1,269 Amortization of warrants 591 - 591 - Writeoff deferred financing costs - - 2,967 - Future income taxes (427) 272 9,087 (441) Accretion of interest on convertible debentures - 644 819 1,240 Loss (gain) on foreign currency (5,021) 1,301 (2,754) 919 ------------------------------------------------------------------------- 83 (8,671) (28,395) (30,752) Changes in non-cash operating working capital items (18,711) (7,400) 7,716 17,668 ------------------------------------------------------------------------- (18,628) (16,071) (20,679) (13,084) ------------------------------------------------------------------------- Cash flows from financing activities Repayment of long-term debt (76) (687) (216,100) (3,032) Issuance of debentures - - 120,733 - Issuance of capital stock - - 85,859 - Issuance of warrants - - 23,775 - Addition to deferred financing costs - (3,254) (7,937) (3,254) Share issue cost - - (3,399) - Issue costs on warrants - - (965) - ------------------------------------------------------------------------- (76) (3,941) 1,966 (6,286) ------------------------------------------------------------------------- Cash flows from investing activities Acquisition of property, plant and equipment (2,194) (2,131) (4,132) (4,082) ------------------------------------------------------------------------- (2,194) (2,131) (4,132) (4,082) ------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (20,898) (22,143) (22,845) (23,452) Cash and cash equivalents, beginning of period 24,816 48,118 26,763 49,427 ------------------------------------------------------------------------- Cash and cash equivalents, end of period 3,918 25,975 3,918 25,975 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Supplementary disclosure of cash flow information Interest paid 3,441 8,889 20,267 19,554 Income taxes paid (recovery) 1,026 481 1,167 (389) -------------------------------------------------------------------------