Montreal toymaker Mega Brands Inc. believes it may finally have turned the corner after a massive toy recall in 2006.

The toymaker reported on Friday a $72-million profit for the third quarter, a significant turnaround from a $122.1-million loss a year earlier that was linked largely to a major recall of its entire Magnetix line.

"It was tough, it was tough," said Carine Sroujian, a Mega Brands senior marketing manager. "It's important to remember that we inherited the problem."

The Magnetix line was created by Rose Art, which Mega Brands purchased in 2006. It phased out the troublesome Magnetix line shortly after and replaced it with a wholly re-imagined and redesigned line, MagNext. However, the notoriety of the recall lives on.

Old recalls never die

The U.S. Consumer Product Safety Commission, which issued the U.S. recalls, still has two Mega Brand magnetic toys on its "Most Wanted list" — a list of products that were recalled, often after being linked to the deaths of babies and toddlers.

The Mega Brand recalls involved about 1.3 million MagnaMan Magnetic Action Figures, and about 1.1 million Magtastik and Magnetix Jr. Pre-School Magnetic Toys. No deaths or serious injuries were reported regarding those recalls, but it hit the company hard all the same.

"We are a toy company that makes products that bring joy into children's lives," said Sroujian. "Most of our employees have kids."

The Mega Brand recalls came after reports that 19 magnets had come loose. A three-year-old boy received medical treatment to remove a magnet from his nasal cavity, and an 18-month-old boy was reported to have a magnet in his mouth, which was not swallowed, according the CPSC recall.

In the redesigned MagNext line, the magnets cannot come loose and the pieces are bigger. "The pieces could not be ingested, they're too large," Sroujian said.

On Monday, Mega Brands settled its lawsuit with former owners of Rose Art. Under terms of the settlement, Mega Brands will receive approximately $17.2 million in cash. In addition, former owners Lawrence, Jeffrey and Sydney Rosen will forego all claims for additional consideration, which totalled $54.8 million.

The Rosens had filed suit in 2006 claiming earn-out payments and damages relating to the Rose Art acquisition. Mega Brands countersued, claiming the Rosens withheld and misrepresented information about serious defects in the Magnetix product line purchased as part of the transaction.

"At the end of the day, we have become a trusted brand. It was the communication with the consumer," Sroujian said.