Company Name: RC2 Corp.
Public Availability Date: January 30, 2008Document Sections:
INQUIRY LETTER
APPENDIX 1
APPENDIX 2
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
January 15, 2008
DELIVERED BY COURIER
Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: RC2 Corporation - Shareholder Proposal of the Board of Pensions of the
Evangelical Lutheran Church in America
Ladies and Gentlemen:
Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, this letter
is to inform you that our client, RC2 Corporation ("RC2" or the "Company"),
intends to omit from its proxy statement and form of proxy for the 2008 annual
meeting of its stockholders (the "2008 Proxy Materials") a proposal and
supporting statement (the "Proposal") received from the Board of Pensions of the
Evangelical Lutheran Church in America (the "Proponent"). The Proposal requests
that "the Board issue a report, at reasonable expense and excluding confidential
information, on the company's product safety and toxicity policies, above and
beyond regulatory compliance, by November 2008." The Proposal is attached to
this letter as Exhibit A.
On behalf of RC2, we respectfully request the concurrence of the Staff of the
Division of Corporation Finance (the "Staff") of the Securities and Exchange
Commission (the "Commission") in our opinion that the Proposal may be excluded
from the 2008 Proxy Materials. As discussed in more detail below, the Proposal
may properly be excluded from the 2008 Proxy Materials under either Rule
14a-8(e) because the Proponent failed to submit the Proposal in a timely manner
or under Rule 14a-8(i)(7) because the Proposal relates to the Company's ordinary
business operations, specifically its procedures for testing product safety.
The Company intends to begin distribution of its definitive 2008 Proxy Materials
on or about April 7, 2008 and to hold its 2008 annual meeting of stockholders on
May 8, 2008. Accordingly, pursuant to Rule 14a-8(j), this letter is being filed
with the Commission no later than eighty calendar days before the Company's
filing of its definitive 2008 Proxy Materials with the Commission.
Grounds for Exclusion
1. The Proposal was not Submitted in a Timely Manner
under Rule 14a-8(e)
The Proposal may be properly omitted in accordance with Rule 14a-8(e) because
the Proponent failed to submit the Proposal in a timely manner. Rule 14a-8(e)(2)
provides that proposals for a regularly scheduled annual meeting "must be
received at the company's principal executive offices not less than 120 calendar
days before the date of the company's proxy statement released to shareholders
in connection with the previous year's annual meeting."
The Company's 2007 Proxy Statement was dated and released to shareholders on
March 30, 2007, and on Page 31 of the Company's 2007 Proxy Statement, the
Company informed stockholders that the deadline for submission of shareholder
proposals for inclusion in the Company's proxy soliciting material for its 2008
annual meeting of stockholders was December 1, 2007 (see copy attached as
Exhibit B). That date is 120 calendar days before March 30, 2008.
The Proponent's submission was dated November 30, 2007 and was sent by overnight
delivery. As December 1, 2007 was a Saturday, the next day that the Company's
offices were open to receive delivery of overnight packages was Monday, December
3, 2007. Accordingly, the Proposal was not received by the Company until
December 3, 2007, after the December 1, 2007 deadline.
Staff Legal Bulletin No. 14 ("SLB No. 14") in Part C.3.b. specifically addresses
the deadline for proposals under Rule 14a-8(e) if the 120th calendar day before
the release date disclosed in the previous year's proxy statement is a Saturday,
Sunday or federal holiday. SLB No. 14 provides that if the deadline falls on a
Saturday, Sunday or federal holiday, the issuer must disclose this date in its
proxy statement and Rule 14a-8 proposals received after business reopens would
be untimely. Since the Company received the Proposal when its business reopened
on December 3, 2007, after the deadline disclosed in its 2007 Proxy Statement
determined in accordance with Rule 14a-8(e)(2), the Proposal was untimely.
For the foregoing reasons, we believe the Company may properly exclude the
Proposal from the 2008 Proxy Materials under Rule 14a-8(e).
2. The Proposal Relates to RC2's Ordinary Business
Operations and is Excludable under Rule 14a-8(i)(7)
Under Rule 14a-8(i)(7), a shareholder proposal may be omitted from a company's
proxy materials if the proposal "deals with a matter relating to the company's
ordinary business operations." The policy underlying the ordinary business
exclusion is "to confine the resolution of ordinary business problems to
management and the board of directors, since it is impracticable for
shareholders to decide how to solve such problems at an annual shareholders
meeting." Exchange Act Release No. 40018 (May 21, 1998) (the "1998 Release"). As
discussed in the 1998 Release, there are two central considerations underlying
this policy: first, that "[c]ertain tasks are so fundamental to management's
ability to run the company on a day-to-day basis that they could not, as a
practical matter, be subject to direct shareholder oversight;" and second, "the
degree to which the proposal seeks to `micro-manage' the company by probing too
deeply into matters of a complex nature upon which shareholders, as a group,
would not be in a position to make an informed judgment." Furthermore, in a 1983
release, the Staff stated that merely requesting that the registrant prepare a
special report does not remove the proposal from the ordinary business grounds
for exclusion. Exchange Act Release No. 20091 (August 16, 1983).
RC2 believes that the Proposal is excludable under the ordinary business
exclusion in Rule 14a-8(i)(7). The application of safety policies and procedures
would require a detailed review of specific products and specific substances.
RC2 has a large number of different products, and preparing a report addressing
the safety and toxicity of each one would involve "micro managing" the Company's
ordinary business operations. The scope and detail of the proposed report is
expanded still further as the Proponent's supporting statement calls for it to
cover hazards to both consumers and workers. The Proponent also sets a deadline
of November 2008 for the report. The 1998 Release states that proposals may be
seen as attempting to micro-manage a company "where the proposal involves
intricate detail, or seeks to impose specific time-frames." Furthermore, the
Proposal calls for the report to address such policies "above and beyond
regulatory compliance," although it does not define what that means. Decisions
regarding safety standards, particularly beyond applicable regulatory
requirements, involve the type of day-to-day operational oversight of a
company's business that the ordinary business exclusion in Rule 14a-8(i)(7) was
meant to address.
The Staff has allowed the exclusion of other shareholder proposals for the
publication of reports relating to toxic substances in products. See Family
Dollar Stores Inc. (available November 6, 2007), Walgreen Co. (available October
13, 2006) and Wal-Mart Stores, Inc. (available March 24, 2006). The shareholder
proposals excluded in these cases were the same as the Proposal in all respects
relevant to the ordinary business exclusion in Rule 14a-8(i)(7). Although to
some extent these proposals may have involved a significant social policy issue,
the requested reports involved micro-managing the company's operations to a
degree that warranted exclusion of the proposals. The Proposal similarly
micro-manages the Company's relationships with its suppliers and its policies
and procedures for product safety.
For the foregoing reasons, we believe the Company may properly exclude the
Proposal from the 2008 Proxy Materials under Rule 14a-8(i)(7).
Conclusion
Based on the foregoing, the Company respectfully requests that the Staff agree
that it will not recommend enforcement action if the Company omits the Proposal
from its 2008 Proxy Materials. If the Staff does not concur with the Company's
position, we would appreciate an opportunity to confer with the Staff concerning
this matter prior to the issuance of a Rule 14a-8 response.
Pursuant to Rule 14a-8(j), enclosed are six copies of this letter and its
attachments. One additional copy of this letter is enclosed, and I ask that you
acknowledge receipt by stamping that copy and returning it in the enclosed
self-addressed stamped envelope. A copy of this letter and its attachments is
being mailed on this date to the Proponent in accordance with Rule 14a-8(j),
informing the Proponent of the Company's intention to omit the Proposal from the
2008 Proxy Materials. The Proponent is requested to copy the undersigned on any
response it may choose to make to the Staff.
If you have any questions or need any further information, please call the
undersigned at (414) 298-8225.
Yours very truly,
/s/
Benjamin G. Lombard
Encs.
cc Ms. Heather H. Williamson, CFA
Senior Investment Manager
ELCA Board of Pensions
800 Marquette Avenue, Suite 1050
Minneapolis, MN 55402-2892
Jody L. Taylor, Corporate Secretary
RC2 Corporation
1111 West 22nd Street
Oak Brook, IL 60523
[APPENDIX 1]
VIA OVERNIGHT DELIVERY
November 30, 2007
Ms. Jody L. Taylor
Corporate Secretary
RC2 Corporation
1111 West 22nd Street
Oak Brook, IL 60523
Dear Ms. Taylor:
As a faith-based pension plan and institutional investor, the Board of Pensions
of the Evangelical Lutheran Church in America (ELCA) seeks to reflect its
values, principles and mission in its investment decisions. We believe that it
benefits corporations to promote positive corporate policies that sustain the
human community and all of creation.
The ELCA Board of Pensions is beneficial owner of 400 shares of RC2 Corporation
common stock. A letter of ownership verification from the custodian of our
portfolio will follow under separate cover. We have been a shareholder of more
than $2,000 of common stock for over one year, and we intend to maintain an
ownership position through the date of the annual meeting of shareholders.
Enclosed is a shareholder proposal requesting that RC2 Corporation prepare a
report regarding RC2's product safety and toxicity policies. According to SEC
Rule 14a-8, we ask that this resolution be included in the proxy materials for
the next annual meeting of shareholders. Should the Board of Directors choose to
oppose the resolution, we ask that our supporting statement be included as well
in the proxy materials.
We are looking forward to engaging with you in a dialogue on this issue.
Patricia Zerega, Director of Corporate Social Responsibility, is prepared to
assemble a dialogue team and can be reached at 412-367-7575 in the Corporate
Social Responsibility office of the ELCA.
Sincerely,
/s/
Heather H. Williamson, CFA
Senior Investment Manager
ELCA Board of Pensions
CC: Pat Zerega
ELCA SW PA Synod
9625 Perry Highway
Pittsburgh, PA 15237-5590
Julie WokatyICCR
475 Riverside DriveRoom 1842
New York, NY 10115-0050
Kelli DeverMellon Globai
Security Services
135 Santilli Highway
Everett, MA 02149
[APPENDIX 2]
Product Safety Report
Whereas:
On June 13, 2007, RC2 recalled 1.5 million Thomas & Friends Wooden Railway sets
manufactured between January 2005 and June 2007, after discovering excessive
quantities of lead in the toys' paint.1
On July 26, 2007, RC2 estimated the cost of the recall would be $3-$4 million in
the second half of 2007, also including costs to defend class action lawsuits.
RC2 linked the problem to a single manufacturing facility.2
On September 26, 2007, RC2 recalled an additional 269,000 lead-painted toys, all
of which had been manufactured prior to April 30, 2007.3
On October 24, RC2 reported that third quarter earnings dropped 44%, and net
sales fell 8%. 2007 costs related to the two recalls were estimated at $13-$14
million.4
The State of California filed a lawsuit in November 2007 against RC2 and other
toy companies for selling toys containing quantities of lead unlawful under
California's Proposition 65, the Safe Drinking Water and Toxic Enforcement Act
of 1986.5
The price of shares of RC2 stock had declined from above $40 prior to the recall
to below $30 as of mid-November 2007.6
In Form 10-K filings in years 2005-2007, RC2 management made general references
to potential financial risks in the event of safety problems or recalls, but the
management also asserted that our "products are designed, manufactured, packaged
and labeled to conform with all safety requirements under U.S. federal and other
applicable laws and regulations." 7
The sale of lead-tainted toys, aside from impacting our company, has become a
major public policy and international trade issue, prompting calls for
overhauling and strengthening federal programs for protecting consumers from
dangerous products and for closer monitoring of supply chains in China.
Therefore be it
Resolved: Shareholders request that the Board issue a report, at reasonable
expense and excluding confidential information, on the company's product safety
and toxicity policies, above and beyond regulatory compliance, by November 2008.
Supporting statement: In light of the public policy challenges posed by toxic
chemicals in products, proponents believe the report should discuss any new
initiatives or actions, above and beyond regulatory compliance, that management
is taking to respond to these issues, including efforts to identify and minimize
hazards to consumers and workers, and policy options such as product labeling,
consumer education and materials selection.
-----FOOTNOTES-----
1 OFFICIAL SOURCES: RC2 PRESS RELEASE, JUNE 13, 2007, "RC2 CORP. RECALLS VARIOUS
THOMAS & FRIENDS RAILWAY TOYS DUE TO LEAD POISONING HAZARD", AVAILABLE AT:
http://www.rc2.com/press/2007/Release_TWR_recall_07.pdf AND SAME-TITLED US
CONSUMER PRODUCT SAFETY COMMISSION PRESS RELEASE, JUNE 13, 2007, "RC2 CORP,
RECALLS VARIOUS THOMAS & FRIENDS WOODEN RAILWAY TOYS DUE TO LEAD POISONING
HAZARD", AVAILABLE AT http://www.cpsc.gov/cpscpub/prerel/prhtm107/07212.html
2 OFFICIAL SOURCE: RC2 PRESS RELEASE, JULY 26, 2007, "RC2 UPDATES ESTIMATES OF
RECALL-RELATED COSTS", AVAILABLE AT: http://www.rc2.com/investor/financial/2007/Release_recall_update_final.pdf
3 OFFICIAL SOURCE: RC2 PRESS RELEASE, SEPTEMBER 26, 2007, "RC2 RECALLS FIVE
ADDITIONAL THOMAS & FRIENDS WOODEN RAILWAY ITEMS" AVAILABLE AT:
http://www.rc2.com/press/2007/Release_TWR_recall_0907.pdf
4 OFFICIAL SOURCE: RC2 PRESS RELEASE, OCTOBER 24, 2007, "RC2 REPORTS 2007 THIRD
QUARTER OPERATING RESULTS; INCREASES AND EXTENDS THE COMPANY'S STOCK REPURCHASE
PROGRAM" AVAILABLE AT:
http://www.rc2.com/investor/financial/2007/Release_q3_07_final.pdf
5 OFFICIAL SOURCE: OFFICE OF THE ATTORNEY GENERAL, STATE OF CALIFORNIA,
DEPARTMENT OF JUSTICE PRESS RELEASE, NOVEMBER 19, 2007, "BROWN SUES TOY
COMPANIES FOR LEAD", AVAILABLE AT: http://ag.ca.gov/newsalerts/release.php?id=1497&
6 This paragraph based on viewing graph of RC2 stock price over one year
beginning mid-November 2006 available at Yahoo Finance website. AVAILABLE AT:
http://finance.yahoo.com/q/b?s=RCRC&t=1v
7 See, e.g., page 8 of RC2's Form 10-K for FY2006 filed February 28, 2007:
Product safety. Our products are designed, manufactured, packaged and labeled to
conform with all safety requirements under U.S. federal and other applicable
laws and regulations, industry developed voluntary standards and product
specific standards, and are periodically reviewed and approved by independent
safety testing laboratories. AVAILABLE AT: http://www.secinfo.com/dvpNx.u3u.htm
OR AT http://yahoo.brand.edgar-online.com/fetchFilingFrameset.aspx?den=0001042167-07-000113&Type=HTML
[INQUIRY LETTER]
January 28, 2008
DELIVERED BY COURIER
Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: RC2 Corporation - Withdrawal of Shareholder Proposal of the Board of
Pensions of the Evangelical Lutheran Church in America
Ladies and Gentlemen:
Our client, RC2 Corporation ("RC2" or the "Company"), received the enclosed
letter from the Board of Pensions of the Evangelical Lutheran Church in America
withdrawing its earlier shareholder proposal which was addressed in our request
for a no-action letter on behalf of the Company dated January 15, 2008.
If you have any questions or need any further information, please call the
undersigned at (414) 298-8225.
Yours very truly,
/s/
Benjamin G. Lombard
Encs.
cc Ms. Heather H. Williamson, CFA
Senior Investment Manager
ELCA Board of Pensions
800 Marquette Avenue, Suite 1050
Minneapolis, MN 55402-2892
Jody L. Taylor, Corporate Secretary
RC2 Corporation
1111 West 22nd Street
Oak Brook, IL 60523
[INQUIRY LETTER]
January 30, 2008
SENT BY E-MAIL
Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
100 F Street, N.E.
Washington, D.C. 20549
Re: RC2 CorporationWithdrawal of Shareholder Proposal of the Board of Pensions
of the Evangelical Lutheran Church in America
Ladies and Gentlemen:
On January 15, 2008, we submitted a letter to the Office of Chief Counsel on
behalf of our client, RC2 Corporation ("RC2" or the "Company") seeking your
concurrence that RC2 could omit from its proxy statement and form of proxy for
the 2008 annual meeting of the Company's stockholders a shareholder proposal and
supporting statement (together, the "Proposal") from the Board of Pensions of
the Evangelical Lutheran Church in America (the "Proponent"). The Proponent has
notified RC2 that it is withdrawing the Proposal in a letter dated January 23,
2008, a copy of which was sent to you on January 28, 2008. Accordingly, the
Company hereby withdraws its request that the staff issue a no-action letter
concurring in RC2's omission of the Proposal.
If you have any questions or need any further information, please call the
undersigned at (414) 298-8225.
Yours very truly,
/s/
Benjamin G. Lombard
Encs.
cc Ms. Heather H. Williamson, CFA
Jody L. Taylor, Corporate Secretary
[STAFF REPLY LETTER]
January 30, 2008
Benjamin G. Lombard, Esq.
Reinhart Boerner Van Deuren S.C.
Attorneys at Law
P.O. Box 2965
Milwaukee, WI 53201-2965
Re: RC2 Corporation
Dear Mr. Lombard:
This is in regard to your letters dated January 28,
2008 and January 30, 2008 concerning the shareholder proposal submitted by the
Board of Pensions of the Evangelical Lutheran Church in America for inclusion in
RC2's proxy materials for its upcoming annual meeting of security holders. Your
letters indicate that the proponent has withdrawn the proposal, and that RC2
therefore withdraws its January 15, 2008 request for a no-action letter from the
Division. Because the matter is now moot, we will have no further comment.
Sincerely,
/s/
William A. Hines
Special Counsel
cc: Heather H. Williamson, CFA
Senior Investment Manager
Board of Pensions
Evangelical Lutheran Church in America
800 Marquette Ave., Suite 1050
Minneapolis, MN 55402-2892
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