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RC2 cuts jobs as sales decline

By Staff -- Gifts and Dec, 1/16/2009 3:17:00 PM

OAK BROOK, Ill.—RC2 recorded lower than expected preliminary net sales for the fourth quarter and full year 2008, the toymaker said this week.

Fourth quarter preliminary adjusted net sales were approximately $121 million, down 10 percent versus 2007’s fourth quarter net sales, excluding recall items and discontinued product lines.

“Fourth quarter sales and profits were negatively impacted by unprecedented declines in holiday spending, the global economic slowdown and the negative impact from foreign currency exchange rates,” said CEO Curt Stoelting. “Although we were disappointed with the fourth quarter sales results, holiday retail sell-through met or exceeded our plans in many product categories.”

Preliminary net sales for 2008, excluding recall items and discontinued product lines, decreased approximately 8 percent to $434 million compared with the prior year’s net sales, excluding recall items and discontinued product lines.

The lower than expected sales in the fourth quarter negatively impacted the company’s diluted earnings per share, which, excluding non-cash charges and severance costs as well as recall-related and non-recurring items, are expected to be $0.05 to $0.10 below the low end of previously announced guidance, which was $0.45 per diluted share. Since September, the company's share price has fallen more than 70 percent. As a result of its falling market capitalization, RC2 will take an impairment charge of $245 million to $265 million in the fourth quarter.

During the quarter, the toymaker launched a cost-cutting effort it expects will pare operating costs by at least $10 million. Its moves included a 15 percent reduction in its full-time white collar workforce, which cost the company $2 million. It also reduced its outstanding debt by approximately $43 million during the period. It plans to reduce non-payroll operating expenses in 2009.

“We faced some difficult challenges in 2008 and made some tough decisions which we believe better position RC2 for sustainable growth once economic conditions improve,” Stoelting said.

The toymaker will report its official 2008 fourth quarter and full year financial results on Feb. 18, 2009 at the close of market, and plans to provide a preliminary 2009 financial outlook at that time.

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