Spin Master Reports Growth in 2018, Despite
Challenging Industry Disruption
TORONTO, March 6, 2019
/CNW/ - Spin Master Corp. ("Spin Master" or the "Company") (TSX:
TOY; www.spinmaster.com), a leading global children's entertainment
company, today announced its financial results for the fourth
quarter and year ended December 31, 2018. The Company's full
Management Discussion and Analysis ("MD&A") for the three month
period and the year ended December 31, 2018 is available on
SEDAR (www.sedar.com) and posted on the Company's web site at
www.spinmaster.com/financial-info.php.
"We are pleased with our performance in 2018. Despite the
disruptive impact that the Toys R Us liquidation had on the toy
industry in 2018, we delivered an increase in our full year Gross
Product Sales2 and grew Adjusted EBITDA2 to
record levels for Spin Master," said Ronnen
Harary, Spin Master's Chairman and Co-CEO. "Our 2019 product
and entertainment offering displays the innovation and creativity
that our customers have come to expect from Spin Master. We expect
growth in 2019 to be based on a mix of proven licenses such as
Monster Jam and How to Train your Dragon, a range of
our own intellectual property including the global relaunch of
Bakugan, fresh content for PAW Patrol and the
roll-out of our new show Abby
Hatcher as well as highly innovative new products. We're
excited by the initial response to our 2019 line and pleased that
our PAW Patrol and Abby
Hatcher shows occupy the number one and two positions in
the Pre-School space respectively."
Q4 2018 Financial Highlights as compared to the same period
in 20171
- Revenue of US$414.3 million
decreased 6.0% from US$440.9 million.
In Constant Currency2 terms, revenue decreased by
4.6%.
- Gross Product Sales2 decreased 3.8% to US$465.5 million, compared to US$483.9 million.
- Gross Product Sales2 decreased 9.3% in North America and increased by 7.2% and 2.6%
in Rest of World and Europe,
respectively. International Gross Product Sales2 on a
combined basis were 44.2% of total Gross Product Sales2,
increasing from 40.8%.
- Other revenue increased 10.4% to US$33.1
million, driven by increased television distribution
income.
- Sales Allowances2 increased by US$11.3 million to US$84.3
million, primarily driven by markdowns and promotional
spending. As a percentage of Gross Product Sales2, Sales
Allowances2 increased to 18.1% from 15.1%.
- Gross profit was US$199.0
million, representing 48.0% of revenue, compared to
US$228.9 million, or 51.9% of
revenue. The decrease in gross margin was driven primarily by
increased amortization attributed to entertainment properties and
higher Sales Allowances2, offset by higher other
revenue.
- Selling, General and Administrative expenses ("SG&A")
decreased 1.9%. SG&A as a percentage of revenue was 47.3%,
compared with 45.3% in Q4 2017, which was driven by higher
distribution and administrative expenses, partially offset by lower
selling expenses. SG&A adjusted for share-based compensation
expenses, represented 46.2% of revenue compared to 44.9%.
- Net income was US$11.4 million,
or diluted earnings per share of US$0.11, compared with US$20.0 million, or US$0.21 per share. The decline was primarily due
to lower gross profit, offset by improvements in SG&A
and favourable foreign exchange.
- Adjusted Net Income2 was US$6.1 million, or diluted earnings per share of
US$0.06, compared to US$25.5 million, or US$0.25 per share. The decline was primarily due
to lower gross profit, offset by improvements in SG&A.
- Adjusted EBITDA2 was US$35.1
million compared with US$47.3
million. Adjusted EBITDA Margin2 decreased to
8.5% compared to 10.7%.
- Free Cash Flow2 was negative US$11.5 million compared to US$18.4 million.
______________________
|
1 The
financial highlights in this release are presented in US$ millions,
whereas the financial information in the MD&A is presented in
US$ thousands. This may result in immaterial rounding differences
and differences in the calculated percentages reflected between the
two documents.
|
2 Non-IFRS financial measure. See
"Non-IFRS Financial Measures" below.
|
Q4 2018 Gross
Product Sales2 by Business Segment (US$
millions)1
|
|
Q4
2018
|
Q4
2017
|
$
Change
|
%
Change
|
Activities, Games
& Puzzles and Plush
|
$145.2
|
$131.5
|
$13.7
|
10.5%
|
Remote Control &
Interactive Characters
|
$107.9
|
$198.7
|
($90.8)
|
(45.7)%
|
Boys Action &
High-Tech Construction
|
$57.9
|
$36.7
|
$21.2
|
57.8%
|
Pre-School and
Girls
|
$139.1
|
$102.4
|
$36.7
|
35.8%
|
Outdoor
|
$15.4
|
$14.6
|
$0.8
|
5.3%
|
Gross Product
Sales2
|
$465.5
|
$483.9
|
($18.4)
|
(3.8)%
|
Sales
Allowances2
|
$84.3
|
$73.0
|
$11.3
|
15.4%
|
Total Net
Sales2
|
$381.2
|
$410.9
|
($29.7)
|
(7.2)%
|
Other
Revenue
|
$33.1
|
$30.0
|
$3.1
|
10.4%
|
Revenue
|
$414.3
|
$440.9
|
($26.6)
|
(6.0)%
|
Q4 2018 Business Segment Gross Product
Sales2 as compared to the same period in
20171
Gross Product Sales2 in Activities, Games
& Puzzles and Plush increased by $13.7 million, or 10.5% to $145.2 million. The increase was driven primarily
by sales of Gund plush products and increases in Kumi
Creator and Kinetic Sand, partially offset by decreases
in Bunchems, Spin Master's Games & Puzzles portfolio,
Mashmallow furniture, Sew Cool and Doctor
Dreadful.
Gross Product Sales2 in Remote Control and
Interactive Characters decreased by $90.8
million or 45.7% to $107.9
million, due to lower sales of all Hatchimals
products, Zoomer and Air Hogs.
Gross Product Sales2 in Boys Action and High‑Tech
Construction increased by $21.2
million or 57.8% to $57.9
million. The increase was primarily driven by sales of
Boxer and initial shipments of DreamWorks Dragons,
Monster Jam and Bakugan products, partially offset by
decreases in Star Wars licensed merchandise including
BB8 and Meccano.
Gross Product Sales2 in Pre‑School and Girls
increased by $36.7 million or 35.8%
to $139.1 million. The increase was
driven primarily by higher sales of PAW Patrol and Twisty
Petz, partially offset by decreases in ZhuZhu Pets.
Gross Product Sales2 in Outdoor, comprised of sales
of products under the SwimWays, Kelsyus, Coop and
Aerobie brands, increased by $0.8
million or 5.3% to $15.4
million.
Year Ended December 31, 2018
Financial Highlights as compared to the same period in
20171
- Revenue of US$1,631.5 million
increased 5.2% from US$1,551.3
million. In Constant Currency2 terms, revenue
increased by 5.1%.
- Gross Product Sales2 increased 3.1% to US$1,708.0 million, compared to US$1,657.0 million.
- Gross Product Sales2 increased 19.5% in Rest of
World, 2.2% in Europe, and 0.2% in
North America. International Gross
Product Sales2 on a combined basis represented 36.5% of
total Gross Product Sales2 increasing from 34.7%.
- Other revenue increased by $36.1
million or 42.1%, to $121.9,
driven by increased royalty income from products marketed by third
parties using Spin Master's owned intellectual property, increased
television distribution income and increased app revenue from
Toca Boca and Sago Mini.
- Sales Allowances2 increased by $6.9 million to $198.4
million, driven primarily by higher promotional activity. As
a percentage of Gross Product Sales2, Sales
Allowances2 remained flat at 11.6%.
- Gross profit increased 2.3% to US$818.8
million, representing 50.2% of revenue, compared with
US$800.5 million, or 51.6% of
revenue.
- SG&A increased 8.8%. SG&A as a percentage of revenue
was 38.3%, an increase of 130 basis points compared the same period
in 2017. The increase was driven primarily by higher marketing and
administrative costs, partially offset by lower selling expenses.
SG&A adjusted for share-based compensation expenses,
represented 37.6% of revenue compared to 36.4%.
- Net income was US$154.9 million,
or diluted earnings per share US$1.51, a decrease of 3.8% from US$161.1 million, or US$1.58 per share.
- Adjusted Net Income2 was US$163.5 million, or diluted earnings per share
of US$1.60, a decrease of 5.5% from
US$173.0 million, or US$1.70 per share.
- Adjusted EBITDA2 was US$303.6
million, up 3.9% from US$292.2
million. Adjusted EBITDA Margin2 was 18.6%
compared to 18.8%.
- Free Cash Flow2 decreased to US$129.4 million compared to US$193.4 million.
Year ended
December 31, 2018 Gross Product Sales2 by Business
Segment (US$ millions)1
|
|
2018
|
2017
|
$
Change
|
%
Change
|
Activities, Games
& Puzzles and Plush
|
$455.5
|
$365.4
|
$90.1
|
24.7%
|
Remote Control &
Interactive Characters
|
$505.4
|
$593.4
|
($88.0)
|
(14.8)%
|
Boys Action and
High-Tech Construction
|
$133.1
|
$112.1
|
$21.0
|
18.7%
|
Pre-School and
Girls
|
$517.5
|
$493.0
|
$24.5
|
5.0%
|
Outdoor
|
$96.5
|
$93.1
|
$3.4
|
3.6%
|
Gross Product
Sales2
|
$1,708.0
|
$1,657.0
|
$51.0
|
3.1%
|
Sales
Allowances2
|
$198.4
|
$191.5
|
$6.9
|
3.6%
|
Total Net
Sales2
|
$1,509.6
|
$1,465.5
|
$44.1
|
3.0%
|
Other
Revenue
|
$121.9
|
$85.8
|
$36.1
|
42.1%
|
Revenue
|
$1,631.5
|
$1,551.3
|
$80.2
|
5.2%
|
Year Ended December 31, 2018
Business Segment Gross Product Sales2 as compared to the
same period in 20171
Gross Product Sales2 in Activities, Games &
Puzzles and Plush increased by $90.1
million or 24.7% to $455.5
million, primarily driven by sales of Gund plush
products and increases in Kumi Creator, Kinetic Sand and
Spin Master's Games & Puzzles portfolio, which includes
Cardinal and Marbles. This
was partially offset by decreases in Bunchems,
Doctor Dreadful, Build a Bear, Sew Cool,
Pottery Cool and Marshmallow furniture.
Gross Product Sales2 in Remote Control and
Interactive Characters decreased by $88.0
million or 14.8% to $505.4
million, primarily due to declines in Hatchimals
large eggs, Zoomer and Air Hogs, partially offset by
increases in Luvabella and Hatchimals
Colleggtibles.
Gross Product Sales2 in Boys Action and High‑Tech
Construction increased by $21.0
million 18.7% to $133.1
million, primarily due to sales of Boxer and
Fugglers and initial shipments of DreamWorks Dragons,
Bakugan and Monster Jam, partially offset by decreased
sales of Meccano, Star Wars licensed products including
BB8 and Pirates of the Caribbean licensed products.
Gross Product Sales2 in Pre‑School and Girls
increased by $24.5 million or 5.0% to
$517.5 million, driven by Twisty
Petz and Party Popteenies, partially offset by declines in
PAW Patrol and ZhuZhu Pets.
Gross Product Sales2 in Outdoor, comprised of sales
of products under the SwimWays, Kelsyus, Coop
and Aerobie brands, increased by $3.4
million or 3.6% to $96.5
million.
"Our performance in a challenging year has demonstrated that our
focus and our strong execution against our four key growth
strategies have positioned Spin Master for long term success, "
said Ben Gadbois, Spin Master's President and Chief Operating
Officer. "Although we expect the retail disruption that impacted
the toy industry in 2018 to continue through the first half of
2019, we are looking forward to solid growth in the second half of
the year, and for 2019 as a whole. We remain focused on achieving
sustainable, long-term profitable growth based on our proven
formula for idea generation, innovative design and broad
distribution. In addition, our global scale and strong balance
sheet puts us in an excellent position to capitalize on acquisition
opportunities."
Outlook
Spin Master continues to focus on driving growth, both
organically and through acquisitions. The Company's principal
strategies, which remain unchanged for 2019, include:
- Innovation across the portfolio;
- Developing evergreen global entertainment properties;
- Increasing international sales in developed and emerging
markets; and
- Leveraging its global platform through strategic
acquisitions.
On a full year comparative basis, the Company expects
to:
- Grow organic Gross Product Sales2 in the low single
digit range relative to 2018. Seasonality of Gross Product
Sales2 for 2019 is expected to be approximately
30%-33% in H1. Q1 2019 will be particularly challenged as a
result of the absence of Toys R Us in Q1 2019 compared to Q1 2018
and the later timing of Easter; and
- Deliver Adjusted EBITDA Margin2 for the full year
2019, in line with 2018.
Conference call
Ronnen Harary, Chairman and
Co-Chief Executive Officer, Ben
Gadbois, Global President & Chief Operating Officer, and
Mark Segal, Executive Vice President
and Chief Financial Officer will host a conference call to discuss
these results on Thursday, March 7th,
2019 at 9:30 a.m. (ET).
The call-in numbers for participants are (647) 427-7450 or (888)
231-8191. A live webcast of the call will be accessible via Spin
Master's website at: http://www.spinmaster.com/events.php.
Following the call, both an audio recording and transcript of the
call will be archived on the same website page.
About Spin Master
Spin Master (TSX:TOY; www.spinmaster.com) is a leading
global children's entertainment company that creates, designs,
manufactures, licenses and markets a diversified portfolio of
innovative toys, games, products and entertainment properties. Spin
Master is best known for award-winning brands including Zoomer®,
Bakugan®, Erector® by Meccano®, Hatchimals®, Air Hogs® and PAW
Patrol®. Since 2000, Spin Master has received 103 Toy of The
Year (TOTY) nominations with 28 wins across a variety of product
categories, including 13 TOTY nominations for Innovative Toy of the
Year. To date, Spin Master has produced eight television series,
including the recently launched Bakugan Battle Brawlers and current
hit PAW Patrol, which is broadcast in over 160 countries and
territories globally. Spin Master has 28 offices employs over 1,700
people globally in Canada, United
States, Mexico, France, Italy, United Kingdom,
Russia, Slovakia, Poland, Germany, Sweden,
the Netherlands, China, Hong
Kong, Japan, Vietnam and Australia.
Non-IFRS Financial Measures
In addition to using financial measures prescribed under IFRS,
references are made in this press release to "EBITDA", "Adjusted
EBITDA", "Adjusted EBITDA Margin", "Adjusted Net Income", "Free
Cash Flow", "Gross Product Sales", "Constant Currency" and "Sales
Allowances", which are non-IFRS financial measures. Non-IFRS
financial measures do not have any standardized meaning prescribed
by IFRS and are therefore unlikely to be comparable to similar
measures presented by other issuers.
EBITDA is calculated as net earnings before finance costs,
income tax expense and depreciation and amortization.
Adjusted EBITDA is calculated as EBITDA excluding normalization
adjustments, non-recurring items that do not necessarily reflect
the Company's underlying financial performance. Normalization
adjustments include restructuring costs, foreign exchange gains or
losses, equity-settled share-based compensation expenses,
impairment of intangible assets, fair market value adjustments to
acquired inventories and bad debt expense, among other items.
Adjusted EBITDA is used by management as a measure of the Company's
profitability.
Adjusted EBITDA Margin is calculated as Adjusted EBITDA divided
by Revenue. Management uses Adjusted EBITDA Margin to evaluate the
Company's performance compared to internal targets and to benchmark
its performance against key competitors.
Adjusted Net Income is calculated as net income excluding
normalization adjustments, as defined above, and the corresponding
impact these items have on income tax expense. Management uses
Adjusted Net Income to measure the underlying financial performance
of the business on a consistent basis over time.
Constant Currency represents Revenue and Gross Product Sales
results that are presented excluding the impact from changes in
foreign currency exchange rates. The current period and prior
period results for entities reporting in currencies other than the
US dollar are translated using consistent exchange rates, rather
than using the actual exchange rate in effect during the respective
periods. The difference between the current period and prior period
results using the consistent exchange rates reflects the changes in
the underlying performance results, excluding the impact from
fluctuations in foreign currency exchange rates.
Free Cash Flow is calculated as cash flows provided by/used in
operating activities before changes in net working capital and
after cash flows used in investing activities before cash used in
license, brand and business acquisitions. Management uses the Free
Cash Flow metric to analyze the cash flow being generated by the
Company's business.
Gross Product Sales represent sales of the Company's products to
customers, excluding the impact of Sales Allowances. As Sales
Allowances are generally not associated with individual products,
the Company uses changes in Gross Product Sales to provide
meaningful comparisons across product category and geographical
segment results to highlight trends in Spin Master's business. For
a reconciliation of Gross Product Sales to Revenue, please see the
table "2018 Gross Product Sales by Product Category" in this press
release.
Sales Allowances represent marketing and sales credits requested
by customers relating to factors such as cooperative advertising,
contractual discounts, negotiated discounts, customer audits,
volume rebates, defective products and costs incurred by customers
to sell the Company's products and are recorded as a reduction to
Gross Product Sales. Management uses Sales Allowances to identify
and compare the cost of doing business with individual retailers,
different geographic markets and amongst various distribution
channels.
Total Net Sales represents Gross Product Sales less Sales
Allowances. Management uses Total Net Sales to evaluate the
Company's total net revenue generating capacity compared to
internal targets and past performance and as a measure to
understand the performance of the Company.
Management believes that the non-IFRS measures defined above are
important supplemental measures of operating performance and
highlight trends in the core business that may not otherwise be
apparent when relying solely on IFRS financial measures. Management
believes that these measures allow for assessment of the Company's
operating performance and financial condition on a basis that is
more consistent and comparable between reporting periods. The
Company believes that lenders, securities analysts, investors and
other interested parties frequently use these non-IFRS financial
measures in the evaluation of issuers.
|
|
Three Months Ended
December 31
|
(in $ thousands,
except percentages)
|
2018
|
|
2017
|
|
$
Change
|
|
%
Change
|
Reconciliation of
Non-IFRS Financial Measures
|
|
|
|
|
Net
income
|
11,403
|
|
20,040
|
|
(8,637)
|
|
(43.1)%
|
|
Income tax
expense
|
2,708
|
|
4,843
|
|
(2,135)
|
|
(44.1)%
|
|
Finance
costs
|
2,852
|
|
2,584
|
|
268
|
|
10.4%
|
|
Depreciation and
amortization
|
25,436
|
|
12,422
|
|
13,014
|
|
104.8%
|
EBITDA
(1)
|
42,399
|
|
39,889
|
|
2,510
|
|
6.3%
|
Normalization
Adjustments:
|
|
|
|
|
|
Restructuring
(2)
|
5,024
|
|
327
|
|
4,697
|
|
1,436.4%
|
|
Foreign exchange
(gain) loss (3)
|
(13,390)
|
|
2,866
|
|
(16,256)
|
|
(567.2)%
|
|
Share based
compensation (4)
|
4,446
|
|
2,076
|
|
2,370
|
|
114.2%
|
|
Acquisition related
incentive compensation (5)
|
(334)
|
|
(840)
|
|
506
|
|
(60.2)%
|
|
Bad debt recovery
(6)
|
(3,039)
|
|
—
|
|
(3,039)
|
|
n.m
|
|
Impairment of
intangible assets (7)
|
—
|
|
2,531
|
|
(2,531)
|
|
n.m
|
|
Amortization of fair
market value adjustments (8)
|
—
|
|
450
|
|
(450)
|
|
n.m
|
|
Transaction costs
(9)
|
—
|
|
44
|
|
(44)
|
|
n.m
|
Adjusted EBITDA
(1)
|
35,106
|
|
47,343
|
|
(12,237)
|
|
(25.8)%
|
|
Income tax
expense
|
2,708
|
|
4,843
|
|
(2,135)
|
|
(44.1)%
|
|
Finance
costs
|
2,852
|
|
2,584
|
|
268
|
|
10.4%
|
|
Depreciation and
amortization
|
25,436
|
|
12,422
|
|
13,014
|
|
104.8%
|
|
Tax effect of
normalization adjustments (10)
|
(1,963)
|
|
1,982
|
|
(3,945)
|
|
(199.0)%
|
Adjusted Net
Income (1)
|
6,073
|
|
25,512
|
|
(19,439)
|
|
(76.2)%
|
|
|
|
|
|
|
Cash provided by
operations
|
71,241
|
|
109,525
|
|
(38,284)
|
|
(35.0)%
|
Changes in net
working capital
|
(64,612)
|
|
(90,514)
|
|
25,902
|
|
(28.6)%
|
Cash provided by
operations before net working capital changes
|
6,629
|
|
19,011
|
|
(12,382)
|
|
(65.1)%
|
Cash used in from
investing activities
|
(18,135)
|
|
(9,618)
|
|
(8,517)
|
|
88.6%
|
Cash used for
license, brand and business acquisitions
|
—
|
|
9,046
|
|
(9,046)
|
|
n.m
|
Free Cash Flow
(1)
|
(11,506)
|
|
18,439
|
|
(29,945)
|
|
(162.4)%
|
|
|
1)
|
Non-IFRS financial
measure. See "Non-IFRS Financial Measures".
|
2)
|
Restructuring
primarily relates to organizational changes.
|
3)
|
Includes foreign
exchange (gains) losses generated by the translation of monetary
assets/liabilities denominated in a currency other than the
functional currency of the applicable entity and (gains) losses
related to the Company's hedging programs.
|
4)
|
Related to non-cash
expenses associated with subordinate voting shares granted to
equity participants at the time of the IPO and share option
expense. As of August 1, 2018, share based compensation includes
non-cash expenses related to the Company's LTIP.
|
5)
|
Remuneration expense
associated with contingent consideration for the Swimways
acquisition.
|
6)
|
Non-recurring bad
debt recovery related to the bankruptcy declaration and liquidation
proceedings of TRU during the fourth quarter of 2018.
|
7)
|
Non-cash impairment
charges for intangible assets relating to licenses, content
development, brands and trademarks.
|
8)
|
Amortization of fair
market value adjustments to inventory relating to the acquisition
of Marbles and Aerobie in the second and third quarters of 2017,
respectively.
|
9)
|
Non-recurring
transaction costs relating to Marbles acquisition in the second
quarter of 2017.
|
10)
|
Tax effect of
normalization adjustments (Footnotes 2-9). Normalization
adjustments are tax effected at the effective tax rate of the given
period.
|
|
|
Year ended
December 31
|
(in $ thousands,
except percentages)
|
2018
|
|
2017
|
|
$
Change
|
|
%
Change
|
Reconciliation of
Non-IFRS Financial Measures
|
|
|
|
|
Net
income
|
154,904
|
|
161,066
|
|
(6,162)
|
|
(3.8)%
|
|
Income tax
expense
|
53,522
|
|
59,363
|
|
(5,841)
|
|
(9.8)%
|
|
Finance
costs
|
9,398
|
|
10,445
|
|
(1,047)
|
|
(10.0)%
|
|
Depreciation and
amortization
|
74,195
|
|
44,908
|
|
29,287
|
|
65.2%
|
EBITDA
(1)
|
292,019
|
|
275,782
|
|
16,237
|
|
5.9%
|
Normalization
adjustments:
|
|
|
|
|
|
Restructuring
(2)
|
7,258
|
|
1,680
|
|
5,578
|
|
332.0%
|
|
Foreign exchange
(gain) (3)
|
(9,346)
|
|
(11,370)
|
|
2,024
|
|
(17.8)%
|
|
Share based
compensation (4)
|
12,193
|
|
10,082
|
|
2,111
|
|
20.9%
|
|
Legal settlement
(5)
|
(15,500)
|
|
—
|
|
(15,500)
|
|
n.m
|
|
Bad debt expense
(6)
|
12,113
|
|
5,382
|
|
6,731
|
|
125.1%
|
|
Acquisition related
incentive compensation (7)
|
1,157
|
|
—
|
|
1,157
|
|
n.m
|
|
Amortization of fair
market value adjustments (8)
|
3,692
|
|
2,805
|
|
887
|
|
31.6%
|
|
Impairment of
intangible assets (9)
|
—
|
|
9,032
|
|
(9,032)
|
|
n.m
|
|
Transaction costs
(10)
|
—
|
|
1,000
|
|
(1,000)
|
|
n.m
|
|
Royalty recovery
(11)
|
—
|
|
(2,200)
|
|
2,200
|
|
n.m
|
Adjusted EBITDA
(1)
|
303,586
|
|
292,193
|
|
11,393
|
|
3.9%
|
|
Income tax
expense
|
53,522
|
|
59,363
|
|
(5,841)
|
|
(9.8)%
|
|
Finance
costs
|
9,398
|
|
10,445
|
|
(1,047)
|
|
(10.0)%
|
|
Depreciation and
amortization
|
74,195
|
|
44,908
|
|
29,287
|
|
65.2%
|
|
Tax effect of
normalization adjustments (13)
|
2,969
|
|
4,480
|
|
(1,511)
|
|
(33.7)%
|
Adjusted Net
Income (1)
|
163,502
|
|
172,997
|
|
(9,495)
|
|
(5.5)%
|
|
|
|
|
|
|
Cash provided by
operations
|
192,890
|
|
267,405
|
|
(74,515)
|
|
(27.9)%
|
Plus:
|
|
|
|
|
Changes in net
working capital
|
19,067
|
|
(16,782)
|
|
35,849
|
|
(213.6)%
|
Cash provided by
operations before net working capital changes
|
211,957
|
|
250,623
|
|
(38,666)
|
|
(15.4)%
|
Less:
|
|
|
|
|
Cash used in
investing activities
|
(159,537)
|
|
(81,598)
|
|
(77,939)
|
|
95.5%
|
Plus:
|
|
|
|
|
Cash used for
license, brand and business acquisitions
|
77,029
|
|
24,416
|
|
52,613
|
|
215.5%
|
Free Cash Flow
(1)
|
129,449
|
|
193,441
|
|
(63,992)
|
|
(33.1)%
|
|
|
1)
|
Non-IFRS financial
measure. See "Non-IFRS Financial Measures".
|
2)
|
Restructuring
primarily relates to organizational changes.
|
3)
|
Includes foreign
exchange gains generated by the translation of monetary
assets/liabilities denominated in a currency other than the
functional currency of the applicable entity and gains related to
the Company's hedging programs.
|
4)
|
Share based
compensation is related to expenses associated with subordinate
voting shares granted to equity participants and restricted stock
units granted to employees at the time of the IPO and share option
expense.
|
5)
|
Non-recurring legal
settlement in the Company's favour in the second quarter of
2018.
|
6)
|
Non-recurring net bad
debt expense related to the bankruptcy declaration and liquidation
proceedings of TRU during the first quarter of 2018 and third
quarter of 2017.
|
7)
|
Remuneration expense
associated with contingent consideration for the Swimways
acquisition.
|
8)
|
Amortization of fair
market value adjustments to inventory relating to the acquisition
of Gund in the second quarter of 2018 and Marbles and Aerobie in
the second and third quarters of 2017, respectively.
|
9)
|
Impairment of
intangible assets related to content development, licenses, brands
and trademarks.
|
10)
|
Non-recurring
transaction costs relating to the Marbles acquisition in the second
quarter of 2017.
|
11)
|
Non-recurring royalty
recovery related to the prior year.
|
12)
|
Tax effect of
normalization adjustments (Footnotes 2-11). Normalization
adjustments are tax effected at the effective tax rate of the given
period.
|
Forward-Looking Statements
Certain statements, other than statements of historical fact,
contained in this press release constitute "forward-looking
information" within the meaning of certain securities laws,
including the Securities Act (Ontario), and are based on expectations,
estimates and projections as of the date on which the statements
are made in this press release. The words "plans", "expects",
"projected", "estimated", "forecasts", "anticipates", "indicative",
"intend", "guidance", "outlook", "potential", "prospects", "seek",
"strategy", "targets" or "believes", or variations of such words
and phrases or statements that certain future conditions, actions,
events or results "will", "may", "could", "would", "should",
"might" or "can", or negative versions thereof, "be taken",
"occur", "continue" or "be achieved", and other similar
expressions, identify statements containing forward-looking
information. Statements of forward-looking information in this
press release include, without limitation, statements with respect
to: the Company's outlook for 2019 (see "Outlook"); future growth
expectations; financial position, cash flows and financial
performance; drivers for such growth; the impact of TRU's Chapter
11 and CCAA proceedings on the Company; impact of acquisitions on
future financial performance, the successful execution of its
strategies for growth; and the seasonality of financial results and
performance.
Forward-looking statements are necessarily based upon
management's perceptions of historical trends, current conditions
and expected future developments, as well as a number of specific
factors and assumptions that, while considered reasonable by
management as of the date on which the statements are made in this
press release, are inherently subject to significant business,
economic and competitive uncertainties and contingencies which
could result in the forward-looking statements ultimately being
incorrect. In addition to any factors and assumptions set forth
above in this press release, the material factors and assumptions
used to develop the forward-looking information include, but are
not limited to: the expanded use of advanced technology, robotics
and innovation the Company applies to its products will have a
level of success consistent with its past experiences; the Company
will continue to successfully secure broader licenses from third
parties for major entertainment properties consistent with past
practices; the expansion of sales and marketing offices in new
markets will increase the sales of products in that territory; the
Company will be able to successfully identify and integrate
strategic acquisition opportunities; the Company will be able to
maintain its distribution capabilities; the Company will be able to
leverage its global platform to grow sales from acquired brands;
the Company will be able to recognize and capitalize on
opportunities earlier than its competitors; the Company will
be able to continue to build and maintain strong, collaborative
relationships; the Company will maintain its status as a preferred
collaborator; the culture and business structure of the Company
will support its growth; the current business strategies of the
Company will continue to be desirable on an international platform;
the Company will be able to expand its portfolio of owned
branded intellectual property and successfully license it to third
parties; use of advanced technology and robotics in the Company's
products will expand; access of entertainment content on mobile
platforms will expand; fragmentation of the market will continue to
create acquisition opportunities; the Company will be able to
maintain its relationships with its employees, suppliers and
retailers; the Company will continue to attract qualified personnel
to support its development requirements; and the Company founders
will continue to be involved in the Company products and
entertainment properties will be launched as scheduled and that the
risk factors noted in the Annual MD&A, collectively, do not
have a material impact on the Company.
By its nature, forward-looking information is subject to
inherent risks and uncertainties that may be general or specific
and which give rise to the possibility that expectations,
forecasts, predictions, projections or conclusions will not prove
to be accurate, that assumptions may not be correct and that
objectives, strategic goals and priorities will not be achieved.
Known and unknown risk factors, many of which are beyond the
control of the Company, could cause actual results to differ
materially from the forward-looking information in this press
release. Such risks and uncertainties include, without limitation,
the factors discussed in the Company's disclosure materials,
including the Annual MD&A and the Company's most recent Annual
Information Form, filed with the securities regulatory authorities
in Canada and available under the
Company's profile on SEDAR (www.sedar.com) These risk factors are
not intended to represent a complete list of the factors that could
affect the Company and investors are cautioned to consider these
and other factors, uncertainties and potential events carefully and
not to put undue reliance on forward-looking statements.
There can be no assurance that forward-looking
statements will prove to be accurate, as actual results and future
events could differ materially from those anticipated in such
statements. Forward-looking statements are provided for the purpose
of providing information about management's expectations and plans
relating to the future. The Company disclaims any intention or
obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise,
or to explain any material difference between subsequent actual
events and such forward-looking statements, except to the extent
required by applicable law.
View original
content:http://www.prnewswire.com/news-releases/spin-master-reports-q4-and-full-year-2018-financial-results-300808076.html
SOURCE Spin Master Corp.