November 13, 2009 / 1:22 PM / in 8 years

UPDATE 3-Mega Brands mulls options, shares soar

* Looking at ways to improve financial position

* Won’t say if options include asset sale

* EPS $1.22 vs loss $3.34 a year earlier

* Revenue down 26.7 pct at $118 million

* Shares soar 63.5 percent to C$1.39 (Updates stock activity. In U.S. dollars unless noted)

TORONTO, Nov 13 (Reuters) - Shares of toymaker Mega Brands MB.TO surged more than 60 percent on Friday after it reported a profit and said it was mulling a number of options as it struggles to climb out from under its cumbersome debt load.

“We’re looking at different alternatives to improve our financial position and those discussions and those different alternatives are being pursued concurrently,” Marc Bertrand, president and chief executive, said on a conference call with analysts.

Bertrand declined to say whether those alternatives included the sale of the Montreal-based company or its Rose Art division, which it purchased in 2005.

“We are looking for really a financing solution to our capital structure,” he said.

Mega Brands is still recovering from a huge recall of its Magnetix toys, which began in 2006 and expanded in 2007. One child died and 27 were seriously injured after swallowing small, powerful magnets that came loose from the magnetic toys, which were acquired as part of the Rose Art takeover.

In March 2008, it 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 plant in China and outsource production.

Earlier this year Mega Brands struck a deal with its lenders that saw them agree to waive some conditions on its credit facilities. The agreement applied to credit facilities maturing in 2012, and also relaxed some covenants pertaining to minimum EBITDA (earnings before interest, taxes, depreciation, and amortization) levels.

Bertrand said the company, which had some $295.7 million in long-term debt as of Sept. 30, was in line with its covenants.

Mega Brands’ stock, which has slipped 47 percent in the past year because of the financial struggles, was up 63.5 percent, at C$1.39, with more than 5.8 million shares changing hands.

Earlier on Friday the company said it earned $72 million, or $1.22 a share, for the third quarter. That compared with a year-earlier loss of $122.1 million, or $3.34 a share, which included a $150 million pre-tax charge for impairment of goodwill and other assets.

Excluding one-time items, it earned $6.9 million, or 14 cents a share, in the latest quarter.

Revenue dropped 26.7 percent to $118 million.

Earlier this week Mega Brands said it had settled legal actions related to Rose Art, which it bought from the Rosen family in 2005.

Under the settlement, Mega Brands received $17.2 million and dropped a $200 million counterclaim against the Rosens.

$1=$1.05 Canadian Reporting by Scott Anderson; Editing by Jeffrey Hodgson

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