Exhibit 99.1
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Company Contact:
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Lisa Peterson / Chief Financial Officer
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| | (214) 390-1831 |
Investor Relations: | | Integrated Corporate Relations, Inc. |
| | John Rouleau / Brendon Frey |
| | (203) 682-8200 |
HEELYS, INC. REPORTS 2008 THIRD QUARTER FINANCIAL RESULTS
DALLAS, TX (November 6, 2008) – Heelys, Inc. (NASDAQ: HLYS) today reported the following financial results for the third quarter ended September 30, 2008.
Net sales for the third quarter of 2008 were $23.8 million compared to net sales of $49.9 million in the corresponding period a year ago. Gross profit was $7.9 million, or 33.3% of net sales, compared to $15.9 million, or 31.9% of net sales for the third quarter of 2007. Total selling, general and administrative expenses were $6.8 million, or 28.6% of net sales, compared to $6.3 million, or 12.7% of net sales in the third quarter of last year. Net income for the quarter was $0.8 million, or $0.03 per fully diluted share versus $6.6 million, or $0.24 per fully diluted share in the third quarter of 2007.
On a sequential quarter comparison, net sales for the third quarter of 2008 were $23.8 million compared to net sales of $18.2 million in the second quarter of 2008. Gross profit was $7.9 million, or 33.3% of net sales, compared to $4.2 million, or 23.0% of net sales for the second quarter of 2008. Total selling, general and administrative expenses were $6.8 million, or 28.6% of net sales, compared to $5.4 million, or 29.5% of net sales in the second quarter of 2008. Net income for the quarter was $0.8 million, or $0.03 per fully diluted share versus a net loss of $0.4 million, or ($0.01) per fully diluted share in the second quarter of 2008.
Commenting on the results, Don Carroll, chief executive officer of the Company, said, “While many of our business trends have improved since the start of the year, the recent events in the global economy and their impact on consumer confidence levels have created a challenging selling environment and made the outlook for holiday more uncertain. Therefore, with retailers in general becoming even more cautious with their level of future orders, we will closely monitor inventories and price points as well as our expenses and look to capitalize on at-once opportunities that maintain our brand equity and enhance our market position.”
Lisa Peterson, chief financial officer of the Company, commented, “In the third quarter of 2008 we have seen a return to more full-price selling at our retail partners, which helped our gross margins improve over the prior year period and a sequential quarterly basis. Importantly, our balance sheet at 9/30/08 remains very strong with over $90 million in cash and no debt.”
Conference Call Information
A conference call to discuss third quarter fiscal 2008 financial results is scheduled for today (November 6, 2008) at 5:00 PM Eastern Time. A webcast of the call will take place simultaneously and can be accessed by clicking
http://investors.heelys.com/index.cfm or www.opencompany.info. To listen to the broadcast, your computer must have Windows Media Player installed. If you do not have Windows Media Player, go to the latter site prior to the call, where you can download the software for free.
About Heelys, Inc.
Heelys, Inc. designs, markets and distributes innovative, action sports-inspired products under the HEELYS® 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 skating 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 the Company 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 the Company may not realize its expectations and the underlying assumptions may not prove correct. The Company’s 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 the Company’s net sales are generated by one product, the Company may not be able to successfully introduce new product categories, the Company’s intellectual property may not restrict competing products that infringe on its patents from being sold, the Company’s dependence on independent manufacturers, continued changes in fashion trends and consumer preferences and general economic conditions, the outcome of lawsuits filed against the Company, which could have a material adverse effect on us, and additional factors which are detailed in the Company’s filings with the Securities and Exchange Commission, including the Risk Factors contained in the Company’s 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 the Company 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 for per share data)
| | Three-month period ended | | Nine-month period ended | |
| | September 30, | | September 30, | | September 30, | | September 30, | |
| | 2007 | | 2008 | | 2007 | | 2008 | |
Net sales | | $ | 49,908 | | $ | 23,825 | | $ | 173,646 | | $ | 55,143 | |
Cost of sales | | 33,991 | | 15,880 | | 113,926 | | 40,179 | |
Gross profit | | 15,917 | | 7,945 | | 59,720 | | 14,964 | |
| | | | | | | | | |
Selling, general and administrative expenses | | 6,326 | | 6,823 | | 18,814 | | 18,280 | |
Income (loss) from operations | | 9,591 | | 1,122 | | 40,906 | | (3,316 | ) |
| | | | | | | | | |
Other expense (income), net | | (954 | ) | (57 | ) | (2,454 | ) | (2,455 | ) |
Income (loss) before income taxes | | 10,545 | | 1,179 | | 43,360 | | (861 | ) |
| | | | | | | | | |
Income tax expense (benefit), net | | 3,899 | | 424 | | 15,505 | | (175 | ) |
| | | | | | | | | |
Net income (loss) | | $ | 6,646 | | $ | 755 | | $ | 27,855 | | $ | (686 | ) |
| | | | | | | | | |
Net income (loss) per share: | | | | | | | | | |
Basic | | $ | 0.25 | | $ | 0.03 | | $ | 1.03 | | $ | (0.03 | ) |
Diluted | | $ | 0.24 | | $ | 0.03 | | $ | 0.99 | | $ | (0.03 | ) |
| | | | | | | | | |
Weighted-average shares: | | | | | | | | | |
Basic | | 27,065 | | 27,439 | | 27,055 | | 27,237 | |
Diluted | | 28,059 | | 27,549 | | 28,278 | | 27,237 | |
| | | | | | | | | | | | | | | |
HEELYS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(amounts in thousands)
| | December 31, | | September 30, | |
| | 2007 | | 2008 | |
Assets | | | | | |
Current Assets: | | | | | |
Cash and cash equivalents | | $ | 98,771 | | $ | 93,241 | |
Accounts receivable, net of allowances | | 5,577 | | 10,912 | |
Inventories | | 14,969 | | 18,393 | |
Prepaid and other current assets | | 1,439 | | 728 | |
Income taxes receivable | | 2,216 | | 4,924 | |
Deferred income tax benefits | | 2,382 | | 436 | |
Total current assets | | 125,354 | | 128,634 | |
| | | | | |
Property and Equipment, net of accumulated depreciation | | 923 | | 1,048 | |
Patents and Trademarks, net of accumulated amortization | | 359 | | 333 | |
Intangibles, net of accumulated amortization | | — | | 1,533 | |
Goodwill | | — | | 1,710 | |
Deferred Income Tax Benefits, net of valuation allowance | | 595 | | 483 | |
| | | | | |
Total Assets | | $ | 127,231 | | $ | 133,741 | |
| | | | | |
Liabilities and Stockholders’ Equity | | | | | |
| | | | | |
Current Liabilities: | | | | | |
Accounts payable | | $ | 306 | | $ | 5,633 | |
Accrued expenses | | 7,966 | | 5,943 | |
Income taxes payable | | 884 | | 661 | |
Total current liabilities | | 9,156 | | 12,237 | |
| | | | | |
Other long term liabilities | | — | | 1,429 | |
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Stockholders’ Equity: | | | | | |
Common stock | | 27 | | 28 | |
Additional paid-in capital | | 61,783 | | 64,560 | |
Retained earnings | | 56,265 | | 55,579 | |
Accumulated other comprehensive income | | — | | (92 | ) |
Total stockholders’ equity | | 118,075 | | 120,075 | |
| | | | | |
Total Liabilities and Stockholders’ Equity | | $ | 127,231 | | $ | 133,741 | |
