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DALLAS, Mar 04, 2008 (BUSINESS WIRE) -- Heelys, Inc. (NASDAQ: HLYS) today reported the following financial results for the fourth quarter and fiscal year ended December 31, 2007.
Net sales for the fourth quarter were $9.8 million compared to net sales of $71.1 million in the fourth quarter of 2006. The Company's top-line was negatively impacted by approximately $3.0 million related to an increase in its reserve for Marketing Discretionary Fund (MDF) assistance and approximately $2.7 million for an increase in its returns reserve. Excluding the impact, net sales for the fourth quarter of 2007 were $15.5 million. Gross profit for the fourth quarter was a negative $1.7 million, compared to gross profit of $25.1 million, or 35.3% of net sales in the fourth quarter of 2006. Included in this year's fourth quarter gross profit is a charge of approximately $1.5 million related to the write-down of certain inventory on the Company's balance sheet and the aforementioned increases related to the MDF assistance and reserve for returns. Gross profit net of these adjustments for the fourth quarter of 2007 was $4.5 million, or 29.0%. SG&A for the fourth quarter was $7.2 million compared to $7.1 million, or 10.0% of net sales in the corresponding period last year. The Company reported a net loss for the quarter of $5.5 million, or ($0.20) per diluted share compared to net income of $11.5 million, or $0.44 per diluted share in the fourth quarter of 2006. Excluding the impact on sales and gross margins from the aforementioned additional expenses, the Company reported a net loss of $1.2 million, or ($0.04) per diluted share in the fourth quarter of 2007.
Ralph Parks, Interim Chief Executive Officer of Heelys, Inc. (the "Company") commented, "Our fourth quarter results reflect the ongoing challenge to bring retail inventories more in-line with consumer demand. While our sales and earnings were negatively impacted by higher returns and increased markdown assistance, we are pleased that we ended the year with more appropriate inventory levels across the majority of our channels of distribution. Importantly, during this time we continued to make key investments in our operating platform in order to drive greater awareness for our brand and products, improve our execution and efficiency, and create a stronger, more well balanced Company for the future."
For the full year, net sales were $183.5 million compared to net sales of $188.2 million in 2006. Gross profit for fiscal 2007 was $58.1 million, or 31.6% of net sales, compared to $65.6 million, or 34.9% of net sales in fiscal 2006. Total SG&A for the full year was $26.1 million, or 14.2% of net sales, compared to $20.1 million, or 10.7% of net sales a year ago. Net income was $22.3 million, or $0.79 per diluted share in fiscal 2007, compared to $29.2 million, or $1.16 per diluted share in fiscal 2006.
Mr. Parks concluded "We began 2007 with a lot of positive momentum in our business which translated into a very strong first half of the year. Despite the slowdown we experienced over the past 6-months we continue to be very confident about our long-term potential and we remain excited about the many opportunities we still believe exist for our Company. We are very focused on working more closely with our retailers to find the right balance of inventory for the marketplace while at the same time developing more innovative and exciting products, including both wheeled and non-wheeled footwear. We are also committed to growing our presence overseas, with a particularly focus on Europe where the brand has resonated very well with our target consumer. Looking ahead, this entire organization is committed to improving on our recent performance and returning greater value to our shareholders."
Conference Call Information
A conference call to discuss fourth quarter and fiscal 2007 year-end financial results is scheduled for today (Tuesday, March 4, 2008) at 4:30 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(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 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 Year ended
ended
December December December December
31, 31, 31, 31,
-------- ---------
2006 2007 2006 2007
------ ------- ------- -------
Net sales $71,101 9,826 $188,208 183,472
Cost of sales 45,995 11,486 122,565 125,412
------ ------- ------- -------
Gross profit (loss) 25,106 (1,660) 65,643 58,060
Selling, general and
administrative expenses 7,084 7,242 20,092 26,056
------ ------- ------- -------
Income (loss) from operations 18,022 (8,902) 45,551 32,004
Other expense (income), net 187 (1,096) 589 (3,550)
------ ------- ------- -------
Income (loss) before income tax
expense (benefit) 17,835 (7,806) 44,962 35,554
Income tax expense (benefit) 6,328 (2,268) 15,788 13,237
------ ------- ------- -------
Net income (loss) $11,507 $(5,538) $ 29,174 $ 22,317
====== ======= ======= =======
Earnings (loss) per share:
Basic $ 0.47 $ (0.20) $ 1.50 $ 0.82
Diluted $ 0.44 $ (0.20) $ 1.16 $ 0.79
====== ======= ======= =======
Weighted-average shares:
Basic 24,720 27,073 19,479 27,060
Diluted 25,952 27,073 25,114 28,214
====== ======= ======= =======
HEELYS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)
(amounts in thousands)
December December
31, 31,
Assets 2006 2007
-------- --------
Current Assets:
Cash and cash equivalents $ 54,184 $ 98,771
Accounts receivable, net of allowances 43,256 5,577
Inventories 6,057 14,969
Deferred income tax benefits 637 2,382
Prepaid and other current assets 962 1,439
Income taxes receivable - 1,332
-------- --------
Total current assets 105,096 124,470
Property and Equipment, net of accumulated
depreciation 393 923
Patents and Trademarks, net of accumulated
amortization 478 359
Deferred Income Tax Benefits, net of valuation
allowance 371 595
-------- --------
Total Assets $ 106,338 $ 126,347
======== ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 1,304 $ 306
Accrued expenses 8,187 7,966
Income taxes payable 2,866 -
Debt 211 -
-------- --------
Total current liabilities 12,568 8,272
-------- --------
Stockholders' Equity:
Common stock 27 27
Additional paid-in capital 59,795 61,783
Retained earnings 33,948 56,265
-------- --------
Total stockholders' equity 93,770 118,075
-------- --------
Total Liabilities and Stockholders' Equity $ 106,338 $ 126,347
======== ========
SOURCE: Heelys, Inc.
Heelys, Inc. Mike Hessong, 214-390-1831 Chief Financial Officer or Integrated Corporate Relations, Inc. Investor Relations: Joe Teklits / Brendon Frey, 203-682-8200
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