DALLAS, Aug. 12, 2010 (GLOBE NEWSWIRE) -- Heelys, Inc. (Nasdaq:HLYS) today reported the following financial results for the second quarter ended June 30, 2010.
Year-over-Year Quarterly Comparisons
Net sales for the second quarter of 2010 were $8.8 million compared to net sales of $12.4 million in the corresponding period a year ago. Gross profit was $3.7 million, or 42.2%, compared to gross profit of $4.1 million, or 32.9%, for the second quarter of 2009. Selling, general and administrative expenses, excluding litigation settlements and related costs, were $3.8 million compared to $4.5 million in the second quarter of last year. Litigation settlements and related costs were $3.1 million for the second quarter of 2009. Litigation settlements and related costs incurred during the second quarter of 2009 were related to the class action lawsuit (filed in August 2007), the shareholders' derivative lawsuit (filed in October 2007) and the individual lawsuit (filed in May 2008). These lawsuits, which were related to the Company's initial public offering, were settled during the third and fourth quarters of 2009. In April 2010, the Company settled a potential patent and trademark lawsuit, in the Company's favor, in the amount of $750,000. This settlement amount is reported as other income in the Company's statement of operations. The Company reported net income of $473,000, or $0.02 per fully diluted share, versus a net loss of $1.6 million, or ($0.06) per fully diluted share in the second quarter of 2009.
Sequential Quarterly Comparisons
Net sales for the second quarter of 2010 were $8.8 million compared to net sales of $6.7 million in the first quarter of 2010. Gross profit was $3.7 million, or 42.2%, compared to $3.2 million, or 47.9%, for the first quarter of this year. Selling, general and administrative expenses were $3.8 million compared to $4.2 million in the first quarter of 2010. In April 2010, the Company settled a potential patent and trademark lawsuit, in the Company's favor, in the amount of $750,000. This settlement amount is reported as other income in the Company's statement of operations. The Company reported net income of $473,000, or $0.02 per fully diluted share in the second quarter of 2010 versus a net loss of $1.2 million, or ($0.04) per fully diluted share in the first quarter of this year.
Balance Sheet
As of June 30, 2010, the Company had combined cash and investments totaling $69.1 million compared with cash and investments of $66.5 million as of December 31, 2009.
Tom Hansen, chief executive officer of the Company, commented, "We've added top talent to our management team in the first half of the year; Rick Groesch as VP Brand, Craig Storey as COO/CFO and Rene Trevino leading our sales effort. Even so, the retail environment continues to be very difficult. We find that retailers are still hesitant about taking significant inventory positions with all of the uncertainty around a possible double-dip and continued weak jobs reports. However, results at the retailers who have proactively engaged with the brand are encouraging. We expect our relationships there to continue to improve as we introduce Nano and HX2 into the marketplace. We also believe that these two new products will rekindle consumer interest in the Heelys brand. Our international business, though down some from original expectations, continues to perform consistently. And, as always, we continue to look for more efficiencies in our operations cutting costs where we can and investing in areas that will help us grow the business."
About Heelys, Inc.
Heelys, Inc. designs, markets and distributes innovative, action sports-inspired products under the HEELYS(R) brand targeted to the youth market. The Company's primary product, HEELYS-wheeled footwear, is patented dual purpose footwear that incorporates a stealth, removable wheel in the heel. HEELYS-wheeled footwear allows the user to seamlessly transition from walking or running to rolling by shifting weight to the heel. Users can transform HEELYS-wheeled footwear into street footwear by removing the wheel. HEELYS-wheeled footwear provides users with a unique combination of fun and style that differentiates it from other footwear and wheeled sports products.
Forward Looking Statements
Certain statements in this press release and oral statements made from time to time by representatives of Heelys are "forward-looking statements" for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995, including in particular, statements regarding our guidance, outlook for future events, financial performance, customer demand, growth and profitability. In some cases, you can identify forward-looking statements by terminology such as "subject to," "believes," "anticipates," "plans," "expects," "intends," "estimates," "may," "will," "should," "can," the negatives thereof, variations thereon, similar expressions, or discussions of strategy. All forward-looking statements are based upon management's current expectations and various assumptions, but they are inherently uncertain, and Heelys may not realize its expectations and the underlying assumptions may not prove correct. Heelys' actual results and the timing of events could differ materially from those described in or implied by the forward-looking statements as a result of risks and uncertainties, including, without limitation, the fact that substantially all of Heelys' net sales are generated by one product, Heelys' intellectual property may not restrict competing products that infringe on its patents from being sold, continued changes in fashion trends and consumer preferences and general economic conditions, Heelys' dependence on independent manufacturers, Heelys may not be able to successfully introduce new product categories, and additional factors which are detailed in Heelys' filings with the Securities and Exchange Commission, including the Risk Factors contained in Heelys' Annual Report on Form 10-K. Investors, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and Heelys undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
| HEELYS, INC. AND SUBSIDIARIES | ||||
| Condensed Consolidated Statements of Operations | ||||
| (Unaudited) | ||||
| (amounts in thousands, except per share data) | ||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||
| 2010 | 2009 | 2010 | 2009 | |
| Net sales | $ 8,804 | $ 12,402 | $ 15,456 | $ 21,651 |
| Cost of sales | 5,089 | 8,324 | 8,558 | 14,175 |
| Gross profit | 3,715 | 4,078 | 6,898 | 7,476 |
| Selling, general and administrative expenses | 3,789 | 4,463 | 8,002 | 9,542 |
| Litigation settlements and related costs | -- | 3,051 | -- | 3,829 |
| Loss from operations | (74) | (3,436) | (1,104) | (5,895) |
| Other (income) expense, net | (721) | (590) | (690) | (485) |
| Income (loss) before income taxes | 647 | (2,846) | (414) | (5,410) |
| Income tax expense (benefit) | 174 | (1,256) | 295 | (2,510) |
| Net income (loss) | $ 473 | $ (1,590) | $ (709) | $ (2,900) |
| Net income (loss) per share: | ||||
| Basic | $ 0.02 | $ (0.06) | $ (0.03) | $ (0.11) |
| Diluted | $ 0.02 | $ (0.06) | $ (0.03) | $ (0.11) |
| Weighted-average shares: | ||||
| Basic | 27,571 | 27,571 | 27,571 | 27,571 |
| Diluted | 27,571 | 27,571 | 27,571 | 27,571 |
| HEELYS, INC. AND SUBSIDIARIES | ||
| Condensed Consolidated Balance Sheets | ||
| (Unaudited) | ||
| (amounts in thousands) | ||
| June 30, | December 31, | |
| Assets | 2010 | 2009 |
| Current Assets: | ||
| Cash and cash equivalents | $ 32,489 | $ 39,370 |
| Investments | 36,575 | 20,556 |
| Accounts receivable, net of allowances | 3,827 | 5,704 |
| Inventories | 5,915 | 6,038 |
| Prepaid and other current assets | 881 | 756 |
| Income taxes receivable | -- | 3,106 |
| Deferred income taxes | 3,241 | 3,178 |
| Total current assets | 82,928 | 78,708 |
| Investments | -- | 6,566 |
| Property and Equipment, net of accumulated depreciation | 772 | 856 |
| Patents and Trademarks, net of accumulated amortization | 353 | 343 |
| Intangible Assets, net of accumulated amortization | 780 | 1,071 |
| Goodwill | 1,445 | 1,696 |
| Total Assets | $ 86,278 | $ 89,240 |
| Liabilities and Stockholders' Equity | ||
| Current Liabilities: | ||
| Accounts payable | $ 2,237 | $ 1,634 |
| Accrued expenses | 2,313 | 2,789 |
| Income taxes payable | 619 | 2,108 |
| Total current liabilities | 5,169 | 6,531 |
| Long Term Liabilities: | ||
| Income taxes payable | 445 | 439 |
| Deferred income taxes | 77 | 72 |
| Other long term liabilities | 122 | 458 |
| Total Liabilities | 5,813 | 7,500 |
| Stockholders' Equity: | ||
| Common stock | 28 | 28 |
| Additional paid-in capital | 65,544 | 65,305 |
| Retained earnings | 15,823 | 16,532 |
| Accumulated other comprehensive loss | (930) | (125) |
| Total stockholders' equity | 80,465 | 81,740 |
| Total Liabilities and Stockholders' Equity | $ 86,278 | $ 89,240 |