Report to Shareholders
for the third quarter ended September 30, 2010
We are pleased to report a fourth consecutive quarter of improvement in our year-over-year net sales.
Our improved performance is due primarily to the retail success of our major 2010 product initiatives in
the toy business. Toy sales were up 18% for the third quarter and 24% for the nine-month period ended
September 30, 2010.
In the Preschool category, we are benefiting from the strength of innovation in our core Mega
Bloks offering and the successful launch of
Thomas & Friends
in global markets.
In Boys products, Halo has been strong all year and Dragons Universe
is generating good sales
in the back half of the year, just as
Iron Man 2
did in the first six months.
We are seeing good growth in toy sales in North America and a strong rebound in international
markets.
In our Stationery & Activities business, we have reduced costs through supply chain efficiencies and the
consolidation of Rose Art and Board Dudes operations in Irvine, California. Margins are up and now we
are shifting our attention to innovation and growth. We recently hired Tom Prichard, a respected industry
veteran, to lead our efforts.
Q3 2010 Results
Net sales increased 9% to $128.3 million compared to $118.0 million in the third quarter of 2009.
Adjusted net earnings were $19.8 million or $0.06 per basic and diluted share compared to $14.4 million
or $0.39 per basic and diluted share in the third quarter of 2009. Third quarter 2010 results are adjusted
for a $3.4 million unrealized foreign exchange loss on debentures. Third quarter 2009 results include
adjustments for Specified items including a non-recurring gain of $72.0 million from a favourable litigation
settlement, as well as a $4.2 million unrealized foreign exchange loss on debentures.
Outlook
Outlook
Our sales momentum is positive for the peak toy selling season and into next year with all of our key
product initiatives performing well at retail and a strong line-up of new products set for launch in spring
and fall of next year.
We are on track with our plan and continue to strengthen our product portfolio for the coming years.
