Heely's, Inc. reported a 377% jump in net sales for the fourth quarter to $71.1 million from $14.9 million in the year-ago quarter. Net income jumped 700% over the same period to $11.5 million versus $1.4 million a year ago, with diluted earnings per share increasing 633% to 44 cents from 6 cents last year.
For the full year, net sales increased 328% to $188.2 million compared to $44.0 million in fiscal 2005. Net income increased 571% to $29.2 million compared to $4.3 million in the prior year, while diluted earnings per share increased 582% to $1.16 compared to 17 cents for fiscal 2005.
Mike Staffaroni, president and CEO of Heelys, Inc. commented, “We are very pleased to have concluded a record year for our Company across the board with a fourth quarter in which we posted significant increases in net sales and earnings. Our results were fueled by robust demand for our portfolio of wheeled footwear here in the United States coupled with higher net sales in several key international markets. Over the past 12-months we have made progress increasing our brand awareness through additional advertising and marketing programs while at the same time expanding our manufacturing capacity in order to better serve our retail partners and position the Company to capitalize on the opportunities that lie ahead.”
For the fourth quarter ended December 31, 2006, gross profit was $25.1 million, or 35.3% of net sales, compared to $5.1 million, or 34.2% of net sales for the fourth quarter ended December 31, 2005. Total selling, general and administrative expenses for the fourth quarter of 2006 was $7.1 million, or 10.0% of net sales, compared to $2.8 million, or 19.1% of net sales in the fourth quarter of last year. Operating income was $18.0 million, or 25.3% of net sales for the fourth quarter of 2006 versus operating income of $2.3 million, or 15.1% of net sales in the corresponding period a year ago.
For the fiscal year ended December 31, 2006, gross profit was $65.6 million, or 34.9% of net sales, compared to $15.0 million, or 34.1% of net sales for the fiscal year ended December 31, 2005. Total selling, general and administrative expenses for 2006 was $20.1 million, or 10.7% of net sales, versus $8.2 million, or 18.7% of net sales in 2005. Operating income was $45.6 million, or 24.2% of net sales compared to operating income of $6.8 million, or 15.4% of net sales in the prior year.
On December 13, 2006, the company completed an initial public offering of 7,388,750 shares of common stock at a price to the public of $21.00 per share, of which 3,125,000 shares were sold by the company and 4,263,750 were sold by certain selling stockholders, including 963,750 shares sold pursuant to the underwriters' over-allotment option. Upon completing the offering, the company received net proceeds of approximately $61.0 million after deducting $4.6 million in underwriting discounts and commissions. The company also incurred direct expenses of $2.2 million in connection with the offering. The company did not receive any proceeds from the selling stockholders' sale of their shares. The company used $8.5 million of the proceeds from the offering to repay amounts outstanding under its revolving credit facility, and $8.5 million of the proceeds for other working capital purposes. The company intends to use the remaining proceeds to fund infrastructure improvements, including expanding and upgrading IT systems, hire new employees, marketing and advertising programs, product development, working capital needs and other general corporate purposes.
Outlook
The company does not offer specific guidance for quarterly or annual earnings, but does have a stated objective to provide annual net sales and net income growth of 20-25% over the next several years. As a reminder, the share count in 2007 will be higher than the reported 2006 share count as a result of the December 8, 2006 IPO.
Mr. Staffaroni concluded, “We are very pleased with our performance in 2006 which was highlighted by a number of accomplishments that we believe have strengthened our organization and enhanced our future prospects. Foremost, we completed a successful initial public offering which will allow us to improve our operating platform and support our growth initiatives. We also took important steps to diversify our business with the introduction of new styles of our wheeled footwear and the initial launch of our accessories category. Lastly, we broadened our geographic reach and increased our presence at retail by adding new accounts and expanding our shelf space within our existing doors. We move forward with solid momentum and a sound business plan that we believe will result in long-term sales and earnings growth and increased stockholder value.”
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,
------------------------- ------------ ------------
2005 2006 2005 2006
------- ------- ------- --------
Net sales $14,898 $71,101 $43,950 $188,208
Cost of sales 9,808 45,995 28,951 122,565
------- ------- ------- --------
Gross profit 5,090 25,106 14,999 65,643
Selling, general
and administrative
expenses 2,839 7,084 8,234 20,092
------- ------- ------- --------
Income from
operations 2,251 18,022 6,765 45,551
Other expense, net
of other income 55 187 131 589
------- ------- ------- --------
Income before
income taxes 2,196 17,835 6,634 44,962
Income taxes 757 6,328 2,287 15,788
------- ------- ------- --------
Net income $ 1,439 $11,507 $ 4,347 $ 29,174
======= ======= ======= ========
Net income per
share:
Basic $ 0.10 $ 0.47 $ 0.31 $ 1.50
Diluted $ 0.06 $ 0.44 $ 0.17 $ 1.16
======= ======= ======= ========
Weighted-average
shares:
Basic 13,989 24,720 13,989 19,479
Diluted 25,353 25,952 25,353 25,114
======= ======= ======= ========
