* Q4 adj EPS $0.02 vs adj EPS $0.70, year ago
* Shares fall 19 pct (Adds CEO comments from conf call, analyst comments, details, share movement)
By Maneesha Tiwari
March 14 (Reuters) - Canada's Mega Brands reported a 97 percent fall in adjusted profit for the fourth quarter as rising competition in the United States and increased costs ate into the toymaker's margins.
Shares of the company fell 19 percent to C$6.40 -- their lowest in nearly three years -- on Wednesday morning. The stock was one of the top percentage losers on the Toronto Stock Exchange.
The Montreal-based company said net income fell to $234,000 from $11.3 million a year ago. On an adjusted basis, the company earned 2 cents per share, compared with 70 cents per share a year ago.
Net sales for the company, which sells both its own brands and licensed toys, fell 3 percent to $108.5 million.
"Gross margin declined by just over 200 basis points compared with 2010 due to higher resin prices, the stronger Canadian dollar and cost pressures in China," Chief Executive Marc Bertrand said on a conference call.
Gross margins for the Montreal-based company fell to 38.1 percent, the lowest in 12 quarters, according to Thomson Reuters StarMine data.
In January, the world's largest toy company -- Mattel Inc -- which makes toys like Barbie dolls and Hot Wheels cars, raised prices to compensate for increasing costs for materials like resin and rising wages in China.
"Rising input costs and stronger competition are hurting the toymaker," said analyst Megan MacNeill of Haywood Securities.
Total toy sales fell 8 percent and North American sales fell 4 percent in the quarter, Mega Brands said in a statement.
"They are growing but it's not an easy environment right now. There is rising competition from online gaming and decreased consumer spending," MacNeill said.
Analysts on an average had expected the company to earn 18 cents per share, on revenue of $120.2 million, for the fourth quarter, according to Thomson Reuters I/B/E/S. (Reporting by Maneesha Tiwari in Bangalore; Editing by Gopakumar Warrier)