Thomas recall costs could top $8M
By Staff -- Playthings, 7/26/2007 1:03:00 PM
OAK BROOK, Ill.—RC2 Corp. said costs related to recovering and replacing the 23 Thomas & Friends toy SKUs it recalled last month will chip $4 million off the company's second quarter results, and as much as an additional $4 million in the year's second half.
The $4 million impact to the company's second quarter numbers is up from the $1 to $2 million the toymaker originally anticipated the recall would cost. Charges in the year's last six months are expected to include costs of marketing and promotional efforts related to the recall and estimated defense costs to fight off class action suits that have been filed against the company.
RC2 announced it was recalling nearly 1.5 million Thomas & Friends wooden railway toys in mid-June because lead paint was found to have been applied to the toys by the company's Chinese supplier. The recall is progressing well, according Curt Stoelting, RC2's CEO.
"We continue to work closely with the [U.S.] Consumer Product Safety Commission to recover as many of the recalled products as possible," said Stoelting. "The company believes the message is getting through to parents, not only because of the high level of product recovered to date, but also because approximately 98 percent of the products returned from consumers mate the recalled items list."
Stoelting said that RC2 is making additional efforts to avoid a repeat of its recall by "conducting rigorous audits of contract manufacuturing facilities and their compliance with the company's quality specifications; adding a new, toughter certification for paint suppliers; and increasing the scope and frequence of testing for both incoming materials and finished products." Those checks will apply to RC2's other toy lines as well as its Thomas ones, Stoelting added.
