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RC2 counts cost of recall - ToyNews

RC2 counts cost of recall

RC2’s recall of its Thomas railway set could end up costing it $8m.
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The firm last month recalled over a million Thomas and Friends wooden railway toys because they were contaminated with lead paint. Estimates as to the ultimate cost of the recall suggest it could be as much as $8 million.

The toy maker said it is recovering "high numbers" of the recalled toys, and that replacement costs and related expenses, which it had previously suggested might be in the range of $1m to $2m, will now require an after-tax second-quarter charge of $4m.

In addition, RC2 said, the company currently anticipates after-tax costs of an additional $3m to $4m to cover professional service fees, air freight, returns and replacement processing, marketing and promotional costs related to the recall.

Those charges, the company noted, "include estimated defense costs relating to the class action lawsuits that have been filed against the company."

The company said it is "encouraged by the high recovery levels" of the recalled products.

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