Montreal, Canada-based Mega Brands reported US$22.2 million in earnings for Q3, compared to a US$5.2 million loss during the same period last year.

Including a US$150 million non-cash goodwill impairment provision, net loss from operations was US$127.8 million while net loss was US$122.1 million in Q3.

Following the end of Q3, Mega decided to downsize operations at the former Rose Art manufacturing facility in Shenzen, China and outsource production to qualified third-party suppliers that already manufacture over 50% of its products by sales revenue.

The transfer of production will be completed by the end of 2008.

Net sales in the Q3 of 2008 decreased 12.6% to US$160.9 million compared to US$184.1 million in the corresponding period last year.

The decrease reflects softer than expected sales in certain product categories and weakening consumer demand as well as additional identified product recall charges compared to 2007 Q3.