Mega Brands posts steep loss on goodwill charge

TORONTO (Reuters) - Mega Brands Inc (MB.TO) reported a steep quarterly loss on Thursday due mostly to a $150 million charge for goodwill impairment.

The Montreal-based toymaker said it lost $122.1 million, or $3.34 a share, in the quarter, compared with a loss of $11 million, or 31 cents a share, a year earlier.

The 2008 quarter included a $150 million noncash goodwill impairment provision related to its 2005 takeover of Rose Art. The company said the impairment of goodwill and other assets represents a loss of $3.57 per share.

Revenue fell 12.6 percent to $160.9 million from $184.1 million. Analysts, on average, expected revenue of $186.4 million, according to Reuters Estimates.

The maker of construction toys, games and puzzles, arts and crafts, and stationery, said quarterly revenue was hurt by lower sales in its toys and stationery and activities product lines.

Mega Brands continues its recovery from a recall of its Magnetix toys that began in 2006 and expanded in 2007.

In March, 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 manufacturing facility in Shenzen, China, and outsource production. The company said the move, which is expected to be completed by the end of the year, should result in margin improvements in 2009.

($1=$1.23 Canadian)

(Reporting by Scott Anderson, editing by Steve Orlofsky)