MEGA BRANDS: Second quarter loss reported

Company?s sales fall 12.4 per cent following recalls and lawsuits.
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The firm has reported a net loss for Q2 of $3.6 million or 10 cents per share compared to net earnings in the same period in 2007 of $4 million or 12 cents per share.

The net sales for the second quarter dropped to $106.4 million from $121.5 million in the same period in 2007. Gross profit was $34.8 million compared to $47.3 million year-on-year

The company is attributing the decrease to lower sales in the toys and stationary and activities product lines as well as additional product recall charges and higher costs.

Net sales of toy lines declined to $47.3 million compared to $57.9 million year-on-year. This is due mainly to lower shipments of licensed toys offsetting increased sales of pre-school construction toys. In Q2 last year, sales were buoyed by Disney’s Pirates of the Carribean: At World’s End and Marvel’s Spiden-Man 3.

The decrease in toy sales also reflects $2.5 million of additional product recall charges related to Magtastix and Magnaman.

Geographically, net sales in North America decreased to $71.1 million compare to $87.1 million in the same period last year.

International net sales, however, increased to $35.3 million compared to $34.3 million year-on-year. These sales accounted for 33.1 per cent of total net sales in the second quarter, as opposed to 28.3 per cent in the corresponding 2007 period.

Marc Bertrand, Mega Brands’ president and CEO said: “Looking ahead, the next two quarters are traditionally the strongest in our business and our objective is to restore profitability.”

He continued: “This year’s new product launches are occurring in the third and fourth quarters and we are well positioned to build sales momentum through the balance of the year.”

The corporation also announced yesterday the closing of the private placement offering of $75 million.

Subsequent to the closing of the Q2 statement, the firm has also reached an agreement with insurers for the recovery of an additional $9.3 million related to the settlement of lawsuits for magnet ingestion.

The company expects to report the insurance payment in its third quarter results. The payment will bring the total recovery to $12.9 million, nearly the full amount of the $13.5 million settlement paid in 2006.

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