Learning Curve Q3 sales increase

Positive quarterly and year-to-date consolidated net sales comparisons
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Learning Curve today announced its results for the third quarter and nine months ended September 30th, 2010.

The company reported net profit for the third quarter 2010 of $12.4 million, compared with $13.6 million for the third quarter 2009.

Excluding the impact of retailer product returns, inventory charges and costs related to infant sleep positioners and acquisition-related costs, net income was $13.9 million for the period.

Learning Curve reported net income for the nine months ended September 30th, 2010, of $19.6 million, compared with $18.7 million, for the nine months ended September 30th, 2009.

Excluding the impact of retailer product returns, inventory charges and costs related to infant sleep positioners and acquisition-related costs, net income was $21.1 million, for the nine months ended September 30th, 2010.

Net sales for the third quarter 2010 increased by two per cent to $129 million compared with net sales of $126.5 million for the third quarter a year ago.

Net sales for the nine months ended September 30, 2010, increased by 1.1 per cent to $303.2 million compared with net sales of $299.8 million for the nine months ended September 30th, 2009.

Favorable fluctuations in foreign currency exchange rates increased the 2010 nine-month consolidated net sales by approximately 1.5 per cent, but had no significant impact on third quarter consolidated net sales.

During the third quarter, on August 4th, 2010, the company completed the acquisition of substantially all of the assets of JJ Cole Collections, a privately-held, developer and marketer of mother, infant and toddler stylized travel, storage, comfort and convenience products.

Learning Curve funded the acquisition with approximately $41 million from its existing cash. JJ Cole Collections' senior management has retained approximately nine per cent carry-over ownership.

Curt Stoelting, CEO of RC2 commented: "Third quarter sales reflected strong organic growth in our continuing product lines, initial contributions from our recent JJ Cole Collections acquisition and continued international sales growth.

"For the quarter, our international sales increased 18.7 per cent due to strong growth in the mother, infant and toddler (MIT) products category and shipments of our new Chuggington train-play+ Die-cast and Interactive products lines. During the quarter, we also announced that we are launching Chuggington Die-cast in the US exclusively at Toys "R" Us for the 2010 holiday season.

"Net sales in our MIT products category increased by 13.4 per cent in the third quarter due to increases in The First Years feeding and gear product lines and Lamaze infant development toys, as well as the acquisition of JJ Cole Collections.

"Excluding sales from the acquisition, our MIT sales grew organically by over six per cent. We continue to invest in our MIT products business, which on an annualized pro forma basis now represents nearly 50 per cent of our total annual net sales, and we expect continued growth in this category.

"Net sales in our pre-school, youth and adult products category decreased 4.3 per cent in the third quarter due to declines in the discontinued Take Along Thomas & Friends die-cast product line. Excluding the impact on net sales from discontinued product lines of $16.2 million in the third quarter, net sales in this category were up 19.4 per cent, due to increases from the Chuggington, Dinosaur Train and Thomas & Friends Early Engineers product lines.

"We are seeing very positive overall results for our new product lines and are pleased with our year-to-date preschool, youth and adult products category transition.

"As expected, gross margin declined in the third quarter of 2010 compared with the prior year and with the first half of 2010. Higher input costs including ocean transportation costs, along with China labor and currency inflation, continue to put pressure on our margins. We remain focused on reducing costs and eliminating low-volume and low-margin items. These efforts and future price increases should help offset input cost increases."

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