April 6, 2009 / 11:07 AM / 9 years ago

UPDATE 2-Mega Brands loss widens, shares sag

* Revenue falls 21.6 pct to $101 million

* Shares drop 16 pct to 44.5 Canadian cents (Adds details, company comments, updates share price; in U.S. dollars unless noted)

TORONTO, April 6 (Reuters) - Mega Brands MB.TO posted a wider fourth-quarter loss on Monday and warned of even tougher times ahead, sending its shares down more than 16 percent.

The Montreal-based toy and stationery products maker said it lost $323.3 million, or $8.83 a share for the quarter, compared with a loss of $66.2 million, or $1.81 a share, in the year ago period.

Sales declined 21.6 percent to $101 million from $128 million.

The results were hurt by impairment of goodwill and intangible assets and other charges amounting to $234.4 million or $6.40 per diluted share.

“Instead of the turnaround we anticipated, the fourth quarter turned out to be a disappointment,” Chief Executive Marc Bertrand said on a conference call.

Bertrand said the company planned to take additional measures to preserve cash and increase liquidity.

Last week, the toymaker struck a deal with its lenders, which saw them agree to waive some conditions on its credit facilities. The agreement applies to credit facilities maturing in 2012 and also relaxes some covenants pertaining to minimum EBITDA levels in the first two quarters of this year.

Mega Brands’ shares closed down 16 percent at 44.5 Canadian cents on the Toronto Stock Exchange. The shares touched a low of 35.5 Canadian cents earlier in the day.

The company is still recovering from a recall of its Magnetix toys, which began in 2006 and expanded in 2007.

One child was killed and 27 others were seriously injured after swallowing small, powerful magnets that came loose from the magnetic toys, which were acquired as part of Mega Brands’ 2005 takeover of Rose Art.

In March 2008, the company announced two separate recalls after reports of magnets coming loose from several toys manufactured in China.

The company decided to downsize operations in the former Rose Art manufacturing facility in China and outsource production.

$1=$1.24 Canadian Reporting by Scott Anderson, additional reporting by Richa Dubey in Bangalore; editing by Rob Wilson

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