Editor's note: A previous version of this article referred to Beanie Babies instead of troll dolls. The Fool regrets the error. 

It seems to be a long time since plush toy maker Russ Berrie (NYSE:RUS) was a meaningful force in retail. Perhaps best known for the troll-doll mania that swept the land, the toy manufacturer has been a wastrel with shareholder capital and wallowing in losses for several years now.

Yet maybe it's back on the road to recovery. Previously, it had relied on the small-town gift store to distribute its wares, and back when troll dolls were at their height, it would ensure that those stores received first dibs on the newest iterations. They had been the backbone of its operations for so long that the toy maker wanted to reward them for their loyalty.

But mom-and-pop stores are basically a product of a bygone era, and survival for manufacturers and distributors relies upon big retail buys. These days, Toys 'R Us and Babies 'R Us account for 20% of its infant and juvenile product sales.

That segment has been the bright spot for Russ Berrie, and in the fourth quarter, its sales jumped 19% to nearly $39 million. Its other reportable segment, gifts, saw a 15% decline in sales as the toy maker restructured the division by terminating employees in Europe and slashing product categories.

While Russ Berrie saw a slight increase in sales for the full year, it was still reporting losses -- albeit narrower ones -- of $9.4 million. That's a sight better than the $35 million loss it recorded last year. Sales began declining in 2003 as independent retailers began consolidating and consumers shifted their buying preferences to mass retailers. Competition grew more fierce for both gifts and infant and juvenile products, and Russ Berrie found itself underperforming peers like Blyth (NYSE:BTH), CSS Industries (NYSE:CSS), and high-end gift specialist Lenox (NYSE:LNX). Profits followed the downward slide, and Russ Berrie was forced to change tactics.

It acquired the Applause brand from the bankrupt retailer of the same name and has used that line to sell its gift products to 33,000 customers worldwide. Yet it was double-digit growth in its Sassy and Kids Line brands this past quarter that has management thinking the turnaround has perhaps turned around at last. Feeling resurgent, the company's 2007 product line comprises 70% new product introductions.

That's not to say this company is a buy yet for investors. Total liabilities exceed its cash position by better than 9 to 1, and its debt covenants restrict how easily it's able to offset losses from one division with cash raised from another. In 2005, Russ Berrie funded losses in the gifts segment with cash flow from the infant and juvenile segment. Since it restructured its debt and aligned itself as a holding company, Russ Berrie is now limited in how it can use that cash.

While the toy maker looks like it has put itself on a firmer financial footing, it also seems a little early to call a bottom in its business. If Russ Berrie can turn a few more quarters like the fourth while improving its gift segment, it may once again create a mania, but this time for its stock.

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.