Heelys Inc. on Friday filed an amended S-1 detailing a price range on its pending initial public offering of shares and detailing its results for the third quarter. The IPO will consist of 6.25 million shares estimated to be in the $16 to $18 per share range, with half the shares offered by the company and the balance sold by current shareholders. Bear Stearns & Co., Wachovia Securities, JPMorgan, and CIBC World Markets, the underwriters in the deal, will have the option to buy another 937,500 shares to cover over-allotments.
HLYS estimates that the net proceeds of the sale of the 3,125,000 shares offered by the company will be approximately $47.4 million, based on the IPO coming in at the mid-point.
Net sales for the third quarter were up nearly 460% to $72.5 million from $13.0 million in the year-ago period. Domestic sales were up 469% to $61.4 million from $10.8 million in Q3 last year and International sales jumped 413% to $11.1 million from $2.2 million in the prior year quarter.
Heelys was selling product to over 800 accounts in the U.S. at quarter-end, with product estimated to be in over 5,000 doors. U.S. sales represented 84.7% of total sales in Q3, compared to about 83.3% of sales in Q3 last year.
Gross margins were up 120 basis points to 34.4% of sales versus 34.6% in Q3 last year; and, SG&A expenses got all the benefits of leveraging the large sales gain, improving by 840 basis points to just 9.0% of sales. Net income was up more than eight-fold to $18.4 million in the period, compared to $2.0 million in the year-ago quarter.
Order backlog at the end of September was pegged at approximately $69.0 million, up more than 430% from roughly $13.0 million at the end of Q3 last year. HLYS said that the fourth quarter represented approximately 29.8% of annual net sales in 2004 and 33.9% of annual sales in 2005.
Upon completion of the IPO, Heelys indicated that executive officers, key employees, directors, and their affiliates will still own approximately 74.6% of the outstanding common stock. Capital Southwest Venture Corporation will own approximately 34.5% of total outstanding shares.
Heelys expects to use the net proceeds of the sale to repay the outstanding amount under its $25.0 million revolving credit facility, if any. The maximum amount available under their revolving credit facility, which expires on June 30, 2007, reduces to $10.0 million on January 1, 2007. At October 31, 2006 the amount outstanding under the facility was approximately $22.0 million.
The remainder of net proceeds will be used for “infrastructure improvements, including expanding and upgrading our information technology systems; hiring new employees; marketing and advertising; product development; working capital; and other general corporate purposes.”