UPDATE 2-RC2 posts surprise Q1 profit, shares rise

* Q1 adj EPS $0.11 vs est loss $0.02/shr

* Q1 rev $86.3 mln vs est $81.6 mln

* Affirms full-year 2009 EPS view of $1.35

* Shares jump 23 pct (Adds analyst comments, updates share movement)

By Poojya Trivedi

BANGALORE, April 21 (Reuters) - Toymaker RC2 Corp (RCRC.O) posted a surprise first-quarter profit, helped by lower expenses, and it stood by its full-year earnings outlook, sending its shares up 23 percent.

The company captured market share in a difficult environment, and sales trends have noticeably improved, Wedbush Morgan Securities analyst Chris White said by phone.

For the first quarter ended March 31, the company reported net income of $1.8 million, or 10 cents a share, compared with $2.0 million, or 11 cents a share, a year earlier.

Net sales fell 7.5 percent, hurt by unfavorable fluctuations in foreign currency exchange rates.

The company, which had earlier this year cut jobs to reduce costs, said selling, general and administrative expenses fell 21 percent to $29.7 million in the quarter.

"They managed to cut costs very diligently," White said. "They were able to take out several million dollars of costs that we were not expecting."

White, who rates the stock "hold", expects operating margins at the company to expand in 2009, benefiting from its aggressive cost-cutting measures.

"We continue to anticipate a difficult 2009, but remain focused on our long-term strategic plan, cost reduction, cash preservation and debt reduction," Chief Executive Curt Stoelting said in statement.

As of March 31, the company said its cash balances were $27.8 million and outstanding debt was $76.3 million, down from $95.1 million at Dec. 31, 2008.

The company, however, said it still expects that sales and earnings-per-share estimates in the second quarter may fall below prior-year adjusted amounts.

Shares of the Oak Brook, Illinois-based company were trading at $7.85 after the bell. They closed at $6.40 Tuesday on Nasdaq.

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