Heelys, Inc. reported that net sales for the second quarter fell 31.9% to $12.4 million compared to net sales of $18.2 million in the year-ago period. The company reported a net loss of $1.6 million, or 6 cents per fully diluted share, versus a net loss of $0.4 million, or a penny per fully diluted share, in the second quarter of 2008.


Gross profit was $3.6 million, or 28.9%, compared to gross profit of $4.2 million, or 23.0%, in the second quarter of 2008. Selling, general and administrative expenses were $4.0 million compared to $5.1 million in the second quarter of last year. Litigation settlements and related costs were $3.1 million for the second quarter of 2009 compared to $0.2 million for the same quarter of 2008. These costs are related to the lawsuits filed in the latter part of 2007 and early part of 2008 in connection with the company’s initial public offering. The company has reached proposed settlements with regards to these lawsuits and has accrued approximately $3.6 million as of June 30, 2009.


Tom Hansen, chief executive officer of the company, commented “We continue to evaluate every aspect of our business to make sure that we’re operating as efficiently as possible. While things on a macro level seem to be stabilizing, we believe that we must be more precise than ever in our inventory management and hyper aware of our retail partners’ needs going forward.”


As of June 30, 2009, the company had cash and cash equivalents of $67.1 million compared with $96.8 million as of June 30, 2008 and $68.4 million as of December 31, 2008. Inventory as of June 30, 2009 decreased to $10.6 million versus $19.2 million as of June 30, 2008 and $12.1 million as of December 31, 2008.


The company has reached proposed settlements of lawsuits filed in the latter part of 2007 and early part of 2008 in connection with the company’s initial public offering. Pursuant to the proposed settlements, if approved by the court, the company’s insurance policies will fund the majority of the settlement amounts and related legal defense costs. As stated above, the company has accrued approximately $3.6 million with respect to these settlements as of June 30, 2009.