Q4 Profitability Climbs
Significantly
Operational Initiatives Strengthen
Spin Master's Platform for Long-term Growth
TORONTO, March 1, 2021 /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, 2020. The Company's full Management's Discussion
and Analysis ("MD&A") for the three-month period and year ended
December 31, 2020 is available under the Company's profile on
SEDAR (www.sedar.com) and posted on the Company's web site at
www.spinmaster.com/financial-info.php.
"We're proud of the significant operational improvements and
cost efficiencies our team delivered in 2020, while simultaneously
navigating the complexities of the global pandemic," said
Ronnen Harary, Spin Master's Co-CEO.
"At the outset, we were committed to resolving the operational
challenges we faced in 2019. I am pleased to say that we achieved
our goal through significantly improved focus and execution in
every function across Spin Master globally. We are particularly
excited with the strong growth we saw in our digital games business
led by Toca Life World. With a clear vision for our future, a solid
operating platform with three thriving creative centres
encompassing toys, entertainment and digital games and an
exceptional leadership team in place, fortified by the appointment
of Max Rangel as Global President
and with him assuming the position of CEO in April, we are now
poised for our next stage of growth. We are well positioned to grow
in 2021 as we continue to navigate through COVID-19, based on our
diversified brand portfolio, award-winning entertainment franchises
and innovative digital games, all driving towards generating strong
long term growth and shareholder value."
"We are pleased to see the results of the operational
improvement initiatives we put into place throughout 2020, solidify
in the fourth quarter," added Mark
Segal, Spin Master's Chief Financial Officer. "By Q4 2020 we
completed most of the work necessary to remediate the operational
issues arising in Q4 2019. We were able to streamline our
distribution and warehousing structure, considerably reduce
inventory levels, lower our costs and expand our gross margins.
This allowed us to generate nearly US$124
million in free cash flow for the quarter and US$232 million for 2020, allowing us to end 2020
with the strongest net cash position in our history of just over
US$320 million. Our solid financial
position together with the achievement of our targeted run-rates on
key expenses related to our operational improvement initiatives,
supports the growth potential of our global platform. As we look to
2021, despite some continuing lockdowns and retail disruptions,
2021 is starting with strong momentum."
Q4 2020 Financial Highlights as compared to the same period
in 2019
- Total revenue of US$490.6 million
increased by 3.6% from US$473.5
million. In Constant Currency1 terms, total
revenue increased by 2.4%.
- Gross Product Sales1 decreased by 7.1% to
US$511.8 million from US$550.7 million. A decline in Remote Control
& Interactive Characters was offset in part by increases in
Activities, Games & Puzzles and Plush, Boys Action &
Construction and Pre-School & Girls. In Constant
Currency1 terms, Gross Product Sales1
decreased by 7.9%.
- Gross Product Sales1 increased by 2.3% in
Europe and declined by 11.8% in
North America and 8.1% in Rest of
World, respectively. International Gross Product Sales1
were 46.8% of total Gross Product Sales1, compared to
43.9%.
- Other revenue grew by 76.5% to US$56.3
million. Growth was driven by an increase in digital games
and entertainment and licensing revenue.
- Digital games revenue increased by 404.8% to US$31.8 million, driven by the Toca
Life World platform and growth in the Sago Mini
subscription user base.
- Entertainment and licensing revenue was lower by 4.3% at
US$24.5 million.
- Sales Allowances1 decreased by US$31.6 million to US$77.5
million. As a percentage of Gross Product Sales1,
Sales Allowances1 declined 4.7% to 15.1% from 19.8%,
primarily driven by lower markdowns and non-compliance charges
resulting from the remediation of operational challenges, which
arose in Q4 2019.
- Gross profit was US$241.0
million, representing 49.1% of total revenue, compared to
US$226.1 million or 47.8% of total
revenue. The increase in gross margin was primarily due to lower
Sales Allowances, higher digital games revenue and lower costs
resulting from the Company's ongoing operational improvement
initiatives, including lower freight-related expenses, scrap and
obsolescence and reconfiguration costs, offset in part by product
mix and lower entertainment and licensing revenue.
- Selling, general and administrative expenses
("SG&A")2 decreased as a percentage of total revenue
to 43.2% compared to 48.9%, due to lower distribution and selling
expenses, partially offset by higher administrative expenses.
- Net income was US$0.3 million or
earnings per share of nil, compared to net loss of US$17.2 million or loss per share of US$0.17.
- Adjusted Net Income1 was US$14.6 million or Adjusted Diluted
EPS1 of US$0.14, compared
to an Adjusted Net Loss of US$7.8
million or Adjusted Basic EPS1 of US$(0.08).
- Adjusted EBITDA1 was US$51.5
million compared to US$6.7
million. Adjusted EBITDA Margin1 was 10.5%
compared to 1.4%.
- Cash provided by operating activities were US$138.2 million compared to US$10.8 million.
- Free Cash Flow1 was US$123.7
million compared to negative US$19.3
million.
- On October 27, 2020, the Company
announced it reached an agreement to acquire control of
Rubik's Brand Limited ("Rubik's") through the acquisition of
100% of the shares of its holding company, Rubiks Malta
Holding Company Limited. The transaction closed on January 4, 2021 for a preliminary estimate of
purchase consideration of $56.4
million. Gross Product Sales1 related to Rubik's
will be included in the Activities, Games & Puzzles and Plush
product category.
Q4 2020 Gross
Product Sales1 by Product
Category2 (US$
millions)
|
|
Q4
2020
|
Q4
2019
|
$
Change
|
%
Change
|
Activities, Games
& Puzzles and Plush
|
$165.1
|
$162.1
|
$3.0
|
1.9
|
%
|
Pre-School &
Girls
|
$154.0
|
$152.4
|
$1.6
|
1.0
|
%
|
Boys Action &
Construction
|
$116.9
|
$114.8
|
$2.1
|
1.8
|
%
|
Remote Control &
Interactive Characters
|
$60.1
|
$106.5
|
$(46.4)
|
(43.6)
|
%
|
Outdoor
|
$15.7
|
$14.9
|
$0.8
|
5.4
|
%
|
Gross Product
Sales1
|
$511.8
|
$550.7
|
$(38.9)
|
(7.1)
|
%
|
Sales
Allowances1
|
$(77.5)
|
$(109.1)
|
$31.6
|
(29.0)
|
%
|
Net
Sales1
|
$434.3
|
$441.6
|
$(7.3)
|
(1.7)
|
%
|
Entertainment and
Licensing revenue
|
$24.5
|
$25.6
|
$(1.1)
|
(4.3)
|
%
|
Digital games
revenue
|
$31.8
|
$6.3
|
$25.5
|
404.8
|
%
|
Other
revenue
|
$56.3
|
$31.9
|
$24.4
|
76.5
|
%
|
Total
revenue
|
$490.6
|
$473.5
|
$17.1
|
3.6
|
%
|
|
|
2)
|
Effective January 1,
2021, Spin Master will be simplifying its product categories to
better align with the Company's product offerings going
forward. Refer to the Addendum for additional
information.
|
Q4 2020 Product Category Gross Product
Sales1 as compared to the same period
in 2019
Gross Product Sales1 were US$511.8 million, a decrease of US$38.9 million or 7.1%. Excluding the
impact of foreign exchange, Gross Product Sales1
decreased by US$43.2 million or 7.9%.
The decline was primarily driven by Remote Control &
Interactive Characters, offset in part by increases in Activities,
Games & Puzzles and Plush, Boys Action & Construction and
Pre-School & Girls.
Gross Product Sales1 in Activities, Games
& Puzzles and Plush increased by US$3.0 million or 1.9% to US$165.1 million. The increase was driven
primarily by Kinetic Sand and Rainbow Jellies,
partially offset by declines in GUND, the Games &
Puzzles portfolio and Bunchems.
Gross Product Sales1 in Pre–School & Girls
increased by US$1.6 million or 1.0%
to US$154.0 million. The increase was
driven primarily by higher sales of PAW Patrol and
Pre Cool, offset in part by
declines in Candylocks, Twisty Petz, Awesome
Blossems, Off the Hook and Hatchimals Plush.
Gross Product Sales1 in Boys Action &
Construction increased by US$2.1
million or 1.8% to US$116.9
million. The increase was primarily driven by DC
licensed products, Tech Deck and Present Pets, offset
in part by declines in Bakugan, DreamWorks Dragons
and Boxer.
Gross Product Sales1 in Remote Control &
Interactive Characters decreased by US$46.4
million or 43.6% to US$60.1
million, primarily due to lower sales of
Hatchimals, Owleez, Juno and
Luvabella, partially offset by increases in Monster
Jam RC.
Gross Product Sales1 in Outdoor increased by
US$0.8 million or 5.4% to
US$15.7 million.
Financial Highlights for Year Ended December 31, 2020 as
compared to the same period in 2019
- Total revenue of US$1,570.6
million decreased by 0.7% from US$1,581.6 million. In Constant
Currency1 terms, total revenue decreased by 1.0%.
- Gross Product Sales1 decreased by US$67.5 million or 4.0% to US$1,623.7 million. In Constant
Currency1 terms, Gross Product Sales1
decreased by 4.2%.
- Gross Product Sales1 increased by 4.8% in
Europe and decreased by 19.3% in
Rest of World and 4.2% in North
America, respectively. International Gross Product
Sales1 represented 39.4% of total Gross Product
Sales1 compared to 39.3%.
- Other revenue increased by US$37.1
million or 31.5% to US$155.0
million, driven by higher digital games revenue, offset in
part by lower entertainment and licensing revenue.
- Digital games revenue increased by 193.1% to US$76.8 million, primarily driven by higher
in-game purchases in the Toca Life World platform and growth
in the Sago Mini subscription user base.
- Entertainment and licensing revenue decreased by 14.7% to
US$78.2 million.
- Sales Allowances1 decreased by US$19.4 million to US$208.1 million. As a percentage of Gross
Product Sales1, Sales Allowances were 12.8% compared to
13.5%, primarily driven by lower markdowns and non-compliance
charges resulting from the remediation of operational challenges,
which arose in Q4 2019.
- Gross profit decreased to US$727.9
million, representing 46.3% of total revenue compared to
US$785.0 million or 49.6% of total
revenue. The decline in gross margin was primarily due to changes
in product mix, lower entertainment and licensing revenue and
higher Sales Allowances1 and freight-related expenses in
the first half of 2020, offset in part by higher digital games
revenue.
- SG&A2 decreased US$10.9
million or 1.7%, driven by lower marketing and distribution
expenses, offset by higher administrative expenses.
- Net income was US$45.5 million or
earnings per share of US$0.44
(diluted), compared to US$64.3
million or US$0.62
(diluted).
- Adjusted Net Income1 was US$53.4 million or Adjusted Diluted
EPS1 of US$0.51, compared
to US$92.8 million or US$0.90.
- Adjusted EBITDA1 was US$180.6
million compared to US$219.0
million. Adjusted EBITDA Margin1 was 11.5%
compared to 13.8%.
- Cash provided by operating activities were US$310.8 million compared to US$98.4 million.
- Free Cash Flow1 was US$232.1
million compared to US$4.7
million.
Year Ended
December 31, 2020 Gross Product
Sales1 by Product
Category2 (US$
millions)
|
|
2020
|
2019
|
$
Change
|
%
Change
|
Activities, Games
& Puzzles and Plush
|
$511.2
|
$457.7
|
$53.5
|
11.7
|
%
|
Pre-School &
Girls
|
$467.2
|
$516.2
|
$(49.0)
|
(9.5)
|
%
|
Boys Action &
Construction
|
$352.1
|
$331.4
|
$20.7
|
6.2
|
%
|
Remote Control &
Interactive Characters
|
$202.1
|
$299.3
|
$(97.2)
|
(32.5)
|
%
|
Outdoor
|
$91.1
|
$86.6
|
$4.5
|
5.2
|
%
|
Gross Product
Sales1
|
$1,623.7
|
$1,691.2
|
$(67.5)
|
(4.0)
|
%
|
Sales
Allowances1
|
$(208.1)
|
$(227.5)
|
$19.4
|
(8.5)
|
%
|
Net
Sales1
|
$1,415.6
|
$1,463.7
|
$(48.1)
|
(3.3)
|
%
|
Entertainment and
Licensing revenue
|
$78.2
|
$91.7
|
$(13.5)
|
(14.7)
|
%
|
Digital games
revenue
|
$76.8
|
$26.2
|
$50.6
|
193.1
|
%
|
Other
revenue
|
$155.0
|
$117.9
|
$37.1
|
31.5
|
%
|
Total
revenue
|
$1,570.6
|
$1,581.6
|
$(11.0)
|
(0.7)
|
%
|
|
|
2)
|
Effective January 1,
2021, Spin Master will be simplifying its product categories to
better align with the Company's product offerings going
forward. Refer to the Addendum for additional
information.
|
Year Ended December 31, 2020
Product Category Gross Product
Sales1 as compared to the same period
in 2019
Gross Product Sales1 were US$1,623.7 million, a decrease of US$67.5 million or 4.0%. The decline was driven
by Remote Control & Interactive Characters and Pre-School &
Girls, offset by increases in Activities, Games & Puzzles and
Plush and Boys Action & Construction.
Gross Product Sales1 in Activities, Games &
Puzzles and Plush increased by US$53.5
million or 11.7% to US$511.2
million, primarily driven by Kinetic Sand, the Games
& Puzzles portfolio, Rainbow Jellies and Orbeez,
offset in part by declines in GUND and Bunchems.
Gross Product Sales1 in Pre–School & Girls
decreased by US$49.0 million or 9.5%
to US$467.2 million, driven by
declines in Twisty Petz, Candylocks, PAW
Patrol, Awesome Blossems and Off the Hook, offset
in part by higher sales of Pre
Cool.
Gross Product Sales1 in Boys Action &
Construction increased by US$20.7
million or 6.2% to US$352.1
million, due to DC licensed products, Tech
Deck and Present Pets, partially offset by declines in
DreamWorks Dragons, Bakugan, Boxer,
Fugglers, and Meccano.
Gross Product Sales1 in Remote Control &
Interactive Characters decreased by US$97.2
million or 32.5% to US$202.1
million, due to declines in Hatchimals,
Owleez, Juno and Luvabella, partially offset
by Monster Jam RC, Ninja Bots and remote-controlled
DC licensed products.
Gross Product Sales1 in Outdoor increased by
US$4.5 million or 5.2% to
US$91.1 million.
Outlook
Spin Master continues to focus on driving long-term growth. Its
principle strategies are to:
- Innovate using our global internal and external research and
development network;
- Increase international sales in developed and emerging
markets;
- Develop evergreen global entertainment franchises;
- Establish a leading position in digital games; and
- Leverage the Company's global platform through strategic
acquisitions.
The Company expects 2021 Gross Product Sales1 to
increase low to mid single digits compared to 2020. The seasonality
of Gross Product Sales1 for 2021 is expected to be
approximately 32-34% in the first half of 2021 and 66-68% in the
second half of 2021.
On a full year basis, the Company expects 2021 total revenue to
increase mid to high single digits compared to 2020. The Company
expects 2021 Adjusted EBITDA Margin1 to be in the mid to
high teens, significantly improved over 2020.
Conference call
Ronnen Harary, Co-Chief Executive
Officer and Mark Segal, Executive
Vice President and Chief Financial Officer will host a conference
call to discuss these results on Tuesday,
March 2, 2021 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 Corp. (TSX:TOY) is a leading global children's
entertainment company creating exceptional play experiences through
a diverse portfolio of innovative toys, entertainment franchises
and digital games. Spin Master is best known for award-winning
brands PAW Patrol®, Bakugan®, Kinetic Sand®, Air Hogs®,
Hatchimals®, Rubik's Cube® and GUND®, and is the toy licensee for
other popular properties. Spin Master Entertainment creates and
produces compelling multiplatform content, stories and endearing
characters through its in-house studio and partnerships with
outside creators, including the preschool success PAW Patrol
and nine other original shows along with multiple short-form
series, which are distributed in more than 190 countries. The
Company has an established digital presence anchored by the Toca
Boca® and Sago Mini® brands, which combined have more than 40
million monthly active users. With close to 2,000 employees in 28
offices globally, Spin Master distributes products in more than 100
countries. For more information visit spinmaster.com or follow on
Instagram, Facebook and Twitter @spinmaster.
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", "Sales
Allowances" and "Net Sales" 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 (recovery) expense and depreciation and
amortization.
Adjusted EBITDA is calculated as EBITDA excluding adjustments
that do not necessarily reflect the Company's underlying financial
performance. These adjustments include restructuring expenses,
foreign exchange gains or losses, equity-settled share based
compensation expenses, acquisition related incentive compensation,
impairment of intangible assets, impairment of property, plant and
equipment, legal settlement, transaction costs and bad debt
recovery. Adjusted EBITDA is used by management as a measure of the
Company's profitability.
Adjusted Net Income (Loss) is calculated as net income excluding
adjustments, as defined above, in addition to a one-time tax
recovery and the corresponding impact these items have on income
tax (recovery) expense. Management uses Adjusted Net Income (Loss)
to measure the underlying financial performance of the business on
a consistent basis over time.
Adjusted Basic EPS (Loss) is calculated by dividing Adjusted Net
Income (Loss) by the weighted average number of shares outstanding
during the period. Adjusted Diluted EPS (Loss) is calculated by
dividing Adjusted Net Income (Loss) by the weighted average number
of common shares outstanding, assuming the conversion of all
dilutive securities were exercised during the period.
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 reduced by cash flows used in investing
activities and adding back 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. Prior year
comparative information has been updated to conform with the
current disclosure.
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 "Q4 2020 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.
Net Sales represents Gross Product Sales less Sales Allowances.
Management uses Net Sales to evaluate the Company's total net
revenue generating capacity compared to internal targets and as a
measure of Company performance.
Management believes 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
Dec 31
|
(in US$ millions,
except percentages)
|
2020
|
2019
|
$
Change
|
%
Change
|
Reconciliation of
Non-IFRS Financial Measures
|
|
|
|
|
Net income
(loss)
|
0.3
|
|
(17.2)
|
|
17.5
|
|
(101.7)
|
%
|
|
Income tax
recovery
|
(4.7)
|
|
(7.5)
|
|
2.8
|
|
(37.3)
|
%
|
|
Finance
costs
|
3.4
|
|
3.2
|
|
0.2
|
|
6.3
|
%
|
|
Depreciation and
amortization expenses
|
27.6
|
|
16.2
|
|
11.4
|
|
70.4
|
%
|
EBITDA1
|
26.6
|
|
(5.3)
|
|
31.9
|
|
(601.9)
|
%
|
Adjustments:
|
|
|
|
|
|
Restructuring
expense2
|
0.5
|
|
0.7
|
|
(0.2)
|
|
(28.6)
|
%
|
|
Foreign exchange loss
(gain)3
|
10.5
|
|
(0.1)
|
|
10.6
|
|
n.m.
|
|
Share based
compensation4
|
2.9
|
|
3.5
|
|
(0.6)
|
|
(17.1)
|
%
|
|
Acquisition related
contingent consideration5
|
3.7
|
|
3.2
|
|
0.5
|
|
15.6
|
%
|
|
Impairment of
intangible assets6
|
0.4
|
|
5.6
|
|
(5.2)
|
|
(92.9)
|
%
|
|
Impairment of
property, plant and equipment7
|
0.5
|
|
—
|
|
0.5
|
|
n.m.
|
|
Legal
settlement8
|
5.5
|
|
—
|
|
5.5
|
|
n.m.
|
|
Transaction
costs9
|
0.9
|
|
—
|
|
0.9
|
|
n.m.
|
|
Bad debt
recovery10
|
—
|
|
(0.9)
|
|
0.9
|
|
n.m.
|
Adjusted
EBITDA1
|
51.5
|
|
6.7
|
|
44.8
|
|
668.7
|
%
|
|
Income tax
recovery
|
(4.7)
|
|
(7.5)
|
|
2.8
|
|
(37.3)
|
%
|
|
Finance
costs
|
3.4
|
|
3.2
|
|
0.2
|
|
6.3
|
%
|
|
Depreciation and
amortization expenses
|
27.6
|
|
16.2
|
|
11.4
|
|
70.4
|
%
|
|
Tax effect of
adjustments11
|
10.6
|
|
2.6
|
|
8.0
|
|
307.7
|
%
|
Adjusted Net
Income (Loss)1
|
14.6
|
|
(7.8)
|
|
22.4
|
|
(287.2)
|
%
|
|
|
|
|
|
|
Cash provided by
operations
|
138.2
|
|
10.8
|
|
127.4
|
|
1,179.6
|
%
|
Cash used in
investing activities
|
(19.3)
|
|
(43.2)
|
|
23.9
|
|
(55.3)
|
%
|
Add:
|
|
|
|
|
Cash used for
license, brand and business acquisitions
|
4.8
|
|
13.1
|
|
(8.3)
|
|
(63.4)
|
%
|
Free Cash
Flow1
|
123.7
|
|
(19.3)
|
|
143.0
|
|
(740.9)
|
%
|
|
|
|
|
|
|
1) See "Non-IFRS
Financial Measures".
|
|
2) Restructuring
expense primarily relates to personnel related costs.
|
|
3) Includes foreign
exchange losses (gains) generated by the translation of monetary
assets/liabilities denominated in a currency other than the
functional currency of the applicable entity and losses (gains)
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 initial public offering
("IPO"), share option expense and long-term incentive plan
("LTIP").
|
|
5) Remuneration
expense associated with additional contingent consideration for
previous acquisitions.
|
|
6) Impairment of
intangible assets related to content development, licenses, brands
and trademarks.
|
|
7) Impairment of
property, plant and equipment related to machinery.
|
|
8) Legal settlement
in the fourth quarter of 2020.
|
|
9) Non-recurring
transaction costs relating to the acquisition of
Rubik's.
|
|
10) Bad debt recovery
related to the bankruptcy declaration and liquidation proceedings
of Toys "R" Us ("TRU").
|
|
11) Tax effect of
adjustments (Footnotes 2-10). Adjustments are tax effected at the
effective tax rate of the given period.
|
|
|
Year Ended Dec
31
|
(in US$ millions,
except percentages)
|
2020
|
2019
|
$
Change
|
%
Change
|
Reconciliation of
Non-IFRS Financial Measures
|
|
|
|
|
Net income
|
45.5
|
|
64.3
|
|
(18.8)
|
|
(29.2)
|
%
|
|
Income tax (recovery)
expense
|
(36.1)
|
|
20.7
|
|
(56.8)
|
|
(274.4)
|
%
|
|
Finance
costs
|
12.1
|
|
11.7
|
|
0.4
|
|
3.4
|
%
|
|
Depreciation and
amortization expenses
|
103.0
|
|
84.6
|
|
18.4
|
|
21.7
|
%
|
EBITDA1
|
124.5
|
|
181.3
|
|
(56.8)
|
|
(31.3)
|
%
|
Adjustments:
|
|
|
|
|
|
Restructuring
expense2
|
5.3
|
|
8.8
|
|
(3.5)
|
|
(39.8)
|
%
|
|
Foreign exchange
loss3
|
27.6
|
|
5.8
|
|
21.8
|
|
375.9
|
%
|
|
Share based
compensation4
|
12.2
|
|
15.2
|
|
(3.0)
|
|
(19.7)
|
%
|
|
Acquisition related
contingent consideration5
|
3.7
|
|
3.2
|
|
0.5
|
|
15.6
|
%
|
|
Impairment of
intangible assets6
|
0.4
|
|
5.6
|
|
(5.2)
|
|
(92.9)
|
%
|
|
Impairment of
property, plant and equipment7
|
0.5
|
|
—
|
|
0.5
|
|
n.m.
|
|
Legal
settlement8
|
5.5
|
|
—
|
|
5.5
|
|
n.m.
|
|
Transaction
costs9
|
0.9
|
|
—
|
|
0.9
|
|
n.m.
|
|
Bad debt
recovery10
|
—
|
|
(0.9)
|
|
0.9
|
|
n.m.
|
Adjusted
EBITDA1
|
180.6
|
|
219.0
|
|
(38.4)
|
|
(17.5)
|
%
|
|
Income tax (recovery)
expense
|
(36.1)
|
|
20.7
|
|
(56.8)
|
|
(274.4)
|
%
|
|
Finance
costs
|
12.1
|
|
11.7
|
|
0.4
|
|
3.4
|
%
|
|
Depreciation and
amortization expenses
|
103.0
|
|
84.6
|
|
18.4
|
|
21.7
|
%
|
|
One-time income tax
recovery11
|
33.3
|
|
—
|
|
33.3
|
|
n.m.
|
|
Tax effect of
adjustments12
|
14.9
|
|
9.2
|
|
5.7
|
|
62.0
|
%
|
Adjusted Net
Income1
|
53.4
|
|
92.8
|
|
(39.4)
|
|
(42.5)
|
%
|
|
|
|
|
|
|
Cash provided by
operating activities
|
310.8
|
|
98.4
|
|
212.4
|
|
215.9
|
%
|
Cash used in
investing activities
|
(84.9)
|
|
(116.2)
|
|
31.3
|
|
(26.9)
|
%
|
Add:
|
|
|
|
|
Cash used for
license, brand and business acquisitions
|
6.2
|
|
22.5
|
|
(16.3)
|
|
(72.4)
|
%
|
Free Cash
Flow1
|
232.1
|
|
4.7
|
|
227.4
|
|
4,838.3
|
%
|
|
|
|
|
|
|
1) See "Non-IFRS
Financial Measures".
|
|
2) Restructuring
expense primarily relates to personnel related costs. Restructuring
expense in the current period includes costs related to changes in
senior leadership.
|
|
3) Includes foreign
exchange losses generated by the translation of monetary
assets/liabilities denominated in a currency other than the
functional currency of the applicable entity and 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, share option expense
and LTIP.
|
|
5) Remuneration
expense associated with additional contingent consideration for
previous acquisitions.
|
|
6) Impairment of
intangible assets related to content development, licenses, brands
and trademarks.
|
|
7) Impairment of
property plant and equipment related to machinery.
|
|
8) Legal settlement
in the fourth quarter of 2020.
|
|
9) Non-recurring
transaction costs relating to the acquisition of
Rubik's.
|
|
10) Bad debt recovery
related to the bankruptcy declaration and liquidation proceedings
of TRU.
|
|
11) One-time income
tax recovery relates to internal transfer of intangible property of
$33.3 million.
|
|
12) Tax effect of
adjustments (Footnotes 2-10). 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 2021; future growth expectations in
2021 and beyond; financial position, cash flows and financial
performance; drivers for such growth; the resolution of logistics
problems; the program to achieve operational efficiencies supports
the growth of the Company's global platform; the successful
execution of its strategies for growth; the creation of long term
shareholder value; the impacts of the COVID-19 pandemic on the
Company; and consumer demand 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: ability of factories to manufacture products,
including labour size and allocation, tooling, raw material and
component availability, ability to shift between product mix, and
customer acceptance of delayed delivery dates; that the program
designed to gain operational efficiencies will achieve the desired
results; that the steps taken will create long term shareholder
value; 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's key personnel will
continue to be involved in the Company products and entertainment
properties will be launched as scheduled and that the risk factors
noted in this Press Release, 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 magnitude and length of economic disruption as a result of the
COVID-19 pandemic; and 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.
Addendum
Effective January 1, 2021, Spin
Master has simplified its product categories to align with the
Company's product offerings going forward. The following table
restates 2020 Gross Product Sales1 in the same format
that the Company will be presenting Gross Product Sales1
in 2021:
Gross Product
Sales1 by Product
Category
|
|
|
|
|
|
|
|
(US$
millions)
|
Q1
2020
|
Q2
2020
|
Q3
2020
|
Q4
2020
|
Total
|
Pre-School and
Girls
|
73.1
|
93.5
|
242.7
|
200.2
|
609.5
|
Activities, Games
& Puzzles and Plush
|
80.1
|
99.8
|
181.0
|
173.9
|
534.8
|
Boys
|
60.7
|
54.1
|
151.4
|
122.1
|
388.3
|
Outdoor
|
28.4
|
34.8
|
12.3
|
15.6
|
91.1
|
Gross Product
Sales1
|
242.3
|
282.2
|
587.4
|
511.8
|
1,623.7
|
|
|
|
1
|
See "Non-IFRS
Financial Measures".
|
2
|
SG&A expenses
include selling, marketing, distribution, product development and
administrative expenses.
|
View original
content:http://www.prnewswire.com/news-releases/spin-master-reports-q4-and-full-year-2020-financial-results-301237853.html
SOURCE Spin Master Corp.