Heelys, Inc. reported net sales for the fourth quarter ended Dec. 31, 2008 were $15.6 million compared to net sales of $9.8 million in the corresponding period a year ago.

Gross profit was $3.0 million, or 18.9% of net sales, compared to negative $1.7 million in the fourth quarter of 2007. Total selling, general and administrative expenses were $8.7 million compared to $7.5 million in the fourth quarter of last year. The company reported a net loss of $5.2 million, or 19 cents per fully diluted share versus a loss of $5.9 million, or 22 cents per fully diluted share in the fourth quarter of 2007.

Commenting on the results, Mike Hessong, interim chief executive officer of the company, said, �The deteriorating macroeconomic conditions created an extremely difficult selling environment during the fourth quarter. While we had made progress improving sales and gross margins through the first nine-months of 2008, we were unable to sustain this trend as a result of lower than expected consumer demand both domestically and abroad over the last three months of the year. We begin 2009 fully aware of the near-term challenges ahead of us and we will continue to work closely with our vendors, suppliers and retail partners in order to minimize costs and preserve cash until conditions visibly improve.�

Full Year
 
For the full year, net sales were $70.7 million compared to net sales of $183.5 million in 2007. Gross profit was $17.9 million, or 25.3% of net sales, compared to $58.1 million, or 31.6% of net sales for 2007.
 
Total selling, general and administrative expenses were $27.0 million, or 38.1% of net sales, compared to $26.3 million, or 14.3% of net sales last year. The company reported a net loss of $5.9 million, or 22 cents fully diluted share versus net income of $21.9 million, or 78 cents per fully diluted share in 2007.

Lisa Peterson, chief financial officer of the company, commented, �During the fourth quarter we returned more than $27 million in cash to our shareholders through a special $1 dividend. Even with this payout and the net loss for the full year, we ended 2008 with more than $68 million in cash and cash equivalents on our balance sheet and no debt. In addition, while still higher than we would like, we reduced our inventories despite the sales shortfall in the fourth quarter and begin the new year with levels down on both a year-over-year and sequential basis.� Mrs. Peterson further added that �We have engaged in a mediation and reached a proposed settlement in the pending class action and derivative lawsuits relating to our IPO. These settlements are subject to final documentation and court approval, but we expect our portion of the settlements to approximate $722,000, the amount we accrued in our fourth quarter results. Our insurance policies are expected to fund the remaining portion of the settlement.�

 
 
HEELYS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(amounts in thousands, except for per share data)
 
 
  Three-month period ended   Year ended

 

December 31,

 

 

December 31,

 

December 31,

 

 

December 31,

2007 2008 2007 2008
 
Net sales $ 9,826 15,598 $ 183,472 70,741
Cost of sales 11,486   12,646   125,412   52,825  
Gross profit (1,660)   2,952 58,060 17,916
 
Selling, general and administrative expenses 7,461   8,684   26,275   26,964  
Income (loss) from operations (9,121)   (5,732)   31,785 (9,048)
 
Other expense (income), net (1,020)   (152)   (3,474)   (2,607)
Income (loss) before income taxes (8,101)   (5,580)   35,259 (6,441)  
 
Income tax expense (benefit), net (2,186)   (342)   13,319   (517)  
 
Net income (loss) $ (5,915)   $ (5,238)   $ 21,940   $ (5,924)  
 
Net income (loss) per share:
Basic $ (0.22)   $ (0.19)   $ 0.81 $ (0.22)
Diluted $ (0.22)   $ (0.19)   $ 0.78   $ (0.22)  
 
Weighted-average shares:
Basic <

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