Heelys, Inc. reported fourth-quarter sales fell 26.9% to $11.4 million from $15.6 million a year ago. The company reported a net loss of $1.1 million, or 4 cents a share, versus a net loss of $5.2 million, or 19 cents, in the prior year.
Gross profit was $4.5 million, or 39.8%, compared to gross profit of $3.8 million, or 24.2%, in the fourth quarter of 2008. Selling, general and administrative expenses, excluding litigation settlements and related costs, were $5.1 million compared to $8.3 million in the fourth quarter of last year. Litigation settlements and related costs were $30,000 compared to $1.2 million in the fourth quarter of last year.
Commenting on the results, Lisa Peterson, chief financial officer of the Company, said, “Although fourth quarter sales were disappointing, we managed to reduce our inventory levels and our operating expenses. Gross margins improved in the quarter as we were able to move newer product into the pipeline at a higher average sales price. Going forward, we are significantly reducing the number of SKUs that we carry in our inventory. We are still designing 40-50 new styles each season, but after previewing them with our retail partners, we are only bringing the favorites to market.”
Year-over-Year Annual Comparisons
Net sales were $43.8 million for the year ended December 31, 2009 compared to net sales of $70.7 million in 2008.
Gross profit was $15.7 million, or 35.8%, compared to gross profit of $21.3 million, or 30.1%, in 2008. Selling, general and administrative expenses, excluding litigation settlements and related costs, were $18.7 million in 2009 compared to $28.5 million in 2008. Litigation settlements and related costs were $4.1 million in 2009, compared to $1.8 million in 2008. The Company reported a net loss of $5.1 million, or ($0.19) per fully diluted share, versus a net loss of $5.9 million, or ($0.22) per fully diluted share, in 2008.
Balance Sheet
As of December 31, 2009, the Company had combined cash and investments totaling $66.5 million compared with cash and cash equivalents of $68.4 million as of December 31, 2008. Inventories as of December 31, 2009 were $6.0 million, a decrease of $6.1 million from the $12.1 million balance as of December 31, 2008.
Tom Hansen, chief executive officer, commented, “While market forces and a tough economy continue to impact our sales, we are optimistic about our prospects. Our international business has been strong and we believe that with improved distribution and new marketing partnerships it will continue to do well. Our 2010 focus will be on our domestic business where we plan to deploy new products, new programs and new partnerships designed to revitalize the brand here in the U.S. We will also continue to look for ways and review opportunities to deploy our cash to grow our business and increase shareholder value.”
