RC2 Corp. (RCRC) filed Quarterly Report for the period ended 2009-09-30.
RC2 is a leading producer and marketer of high quality innovative collectibles and toys targeted at adult collectors and children. Their diverse product offerings include: agricultural construction and outdoor sports vehicle replicas; automotive high performance and racing vehicle replicas; traditional children's toys; sports trading cards racing apparel and souvenirs; and collectible figures. Rc2 Corp. has a market cap of $281 million; its shares were traded at around $13.49 with a P/E ratio of 9.8 and P/S ratio of 0.6.
Highlight of Business Operations:
Net sales for the three months ended September 30, 2009, decreased 4.8% compared to net sales for the three months ended September 30, 2008. Gross profit margin decreased to 46.4% for the three months ended September 30, 2009, from 46.7% for the three months ended September 30, 2008. Selling, general and administrative expenses, as a percentage of net sales, decreased to 29.2% for the three months ended September 30, 2009, from 30.9% for the three months ended September 30, 2008. Operating income was $21.8 million for the three months ended September 30, 2009, compared to $20.9 million for the three months ended September 30, 2008. As a percentage of net sales, operating income was 17.2% for the three months ended September 30, 2009, compared to 15.7% for the three months ended September 30, 2008.
Net sales for the nine months ended September 30, 2009, decreased 4.9% compared to net sales for the nine months ended September 30, 2008. Gross profit margin decreased to 43.4% for the nine months ended September 30, 2009, from 46.0% for the nine months ended September 30, 2008. Selling, general and administrative expenses, as a percentage of net sales, decreased to 32.1% for the nine months ended September 30, 2009, from 35.6% for the nine months ended September 30, 2008. Operating income was $33.0 million for the nine months ended September 30, 2009, compared to $15.5 million for the nine months ended September 30, 2008. As a percentage of net sales, operating income was 11.0% for the nine months ended September 30, 2009, compared to 4.9% for the nine months ended September 30, 2008.
Net sales. Net sales for the three months ended September 30, 2009, decreased $6.4 million, or 4.8%, to $126.5 million from $132.9 million for the three months ended September 30, 2008. Net sales in our North America segment increased 0.5% and net sales in our international segment decreased 19.6%, which includes a 7.5% negative impact in changes from currency exchange rates.
Net sales. Net sales for the nine months ended September 30, 2009, decreased $15.5 million, or 4.9%, to $299.8 million from $315.3 million for the nine months ended September 30, 2008. Net sales in our North America segment decreased 0.9% and net sales in our international segment decreased 16.4%, which includes a 15.9% negative impact in changes from currency exchange rates.
On November 3, 2008, the Company entered into a new credit facility to replace its previous credit facility. The credit facility is comprised of a term loan and provides for borrowings up to $70.0 million under a revolving line of credit. The total borrowing capacity available under the credit facility is subject to a formula based on the Company s leverage ratio, as defined in the credit agreement. The term loan and the revolving line of credit both have a scheduled maturity date of November 1, 2011. Under this credit facility, the term loan and the revolving line of credit bear interest, at the Company s option, at a base rate or at LIBOR, plus applicable margins, which are based on the Company s leverage ratio. Applicable margins vary between 2.25% and 3.25% on LIBOR borrowings and 1.25% and 2.25% on base rate borrowings. At September 30, 2009, the applicable margins in effect were 2.50% for LIBOR borrowings and 1.50% for base rate borrowings. Principal payments on the term loan are $3.8 million per calendar quarter, with the remaining principal of $33.8 million due on November 1, 2011. During the third quarter of 2009, the Company prepaid its required fourth quarter 2009 principal payment. The Company is also required to pay a commitment fee which varies from 0.45% and 0.50% per annum on the average daily unused portion of the revolving line of credit. At September 30, 2009, the commitment fee in effect was 0.50% per annum.
If the Hong Kong dollar ceased to be pegged to the U.S. dollar, a material increase in the value of the Hong Kong dollar relative to the U.S. dollar would increase our expenses, and therefore, could adversely affect our profitability. A 10.0% change in the exchange rate of the U.S. dollar with respect to the Hong Kong dollar for the nine months ended September 30, 2009, would have changed the total dollar amount of our gross profit by 10.4%. A 10.0% change in the exchange rate of the U.S. dollar with respect to the translation of financial reporting denominated in the British pound sterling, the Australian dollar or the Euro for the nine months ended September 30, 2009, individually would not have had a significant impact on the Company s net income. The Company is also subject to exchange rate risk relating to transfers of funds or other transactions denominated in British pounds sterling, Australian dollars, Canadian dollars or Euros from its foreign subsidiaries to the United States, such as for purchases of inventory by certain of our foreign subsidiaries, effectively in U.S. dollars. A 10.0% change in the exchange rate of the U.S. dollar with respect to the British pound sterling, the Australian dollar and the Canadian dollar for the nine months ended September 30, 2009, would have changed the total dollar amount of our gross profit by 1.3%, 0.7% and 0.8%, respectively. The Company is not currently using and has not historically used hedges or other derivative financial instruments to manage or reduce exchange rate risk.
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