(RTTNews) - Tuesday, toy maker RC2 Corp. (RCRC: News ) said its third quarter profit increased reported higher net income on lower operating costs. Looking ahead, the company raised its guidance for the fourth-quarter, with earnings expected in line with the current Street estimates.

The Oak Brook, Illinois-based company's third-quarter net income increased to $13.6 million or $0.66 per share from $11.1 million or $0.64 per share a year ago. Excluding recall-related and non-recurring items, third-quarter net income was $11.5 million or $0.66 per share.

On average, eight analysts polled by Thomson Reuters estimated earnings of $0.58 per share for the quarter. Analysts' estimates typically exclude special items.

Net sales for the quarter decreased 4.8% to $126.5 million from $132.9 million in the third quarter of 2008. Analysts expected revenues of $130.96 million for the quarter.

The company's net sales was adversely affected to the tune of 3% by unfavorable fluctuations in foreign currency exchange rates.

The company's gross margin decreased slightly to 46.4% from 46.7% in the prior-year third quarter.

Operating income for the quarter rose to $21.8 million from $20.9 million in the comparable quarter last year.
Operating costs were over $4 million lower than in the prior year primarily due to operating cost reduction plan and lower variable costs. Selling, general, and administrative expenses decreased to $36.9 million from $41.0 million in the previous-year quarter, primarily due to the impact of operating cost reduction plan, lower variable costs, and foreign currency rate fluctuations.

Expenses linked to recall-related items was $112 thousand, compared to $1.46 million a year ago. The company had nil costs related to terminated acquisition, compared to $1.42 million last year.

For the nine-month period, the company reported net income of $18.7 million or $1.01 per share, compared to $6.7 million or $0.38 per share last year. Net sales decreased 4.9% to $299.8 million from $315.3 million, with 5% reduction due to unfavorable fluctuations in foreign currency exchange rates.

Looking forward, the company now expects full year 2009 net income in the range of $25 to $27 million or $1.30 to $1.40 per share. On a consensus, analysts currently expect net income of $1.35 per share, with estimates ranging from $1.24 to $1.50 per share for the year.

RC2 said it expects sales declines to continue across most product lines with the exception of Thomas & Friends Wooden Railway, which achieved positive sales comparisons both in the quarterly and year to date periods.

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