The bad news never ends for Heelys. In the third quarter ended Sept. 30, sales dropped by 55.6 percent to $10.8 million, and the gross margin fell by 3.3 percentage points to 30.1 percent. The net loss was $1.1 million, compared with net income of $0.8 million in the same period last year.
The figures were dramatically negative in the U.S.: domestic sales plummeted by 82.6 percent to $2.5 million, despite higher average selling prices, and their gross margin plunged by 30 full percentage points to 0.4 percent. The operating loss in the U.S. was $1.9 million, compared with income of $438,000 last year.
Outside the U.S., net sales declined by 12.1 percent to $8.2 million, with improvements in France and Germany. During the quarter, Heelys completed a big sale to its Japanese distributor, but the European distributor business, which made up 7.8 percent of total sales, waned; it had made up 2.2 percent of business last year. (The Japanese distributor made up 20.8 percent of sales, up from 3.9 percent in 2008.) Gross margins for the international market rose by 1.8 percentage points to 38.4 percent. Operating profit fell by 1.1 percent to $1.9 million.
As of Sept. 30, Heelys still had cash and cash equivalents of $68.4 million, against $93.2 million in September 2008, but the same it had as of Dec. 31. Inventories as of Sept. 30 decreased to $9.8 million versus $18.4 million from 2008.
The Dallas Morning News reported on Nov. 25 that Heelys’ class-action lawsuit stemming from its 2006 initial public offering has been settled. Heelys said a federal judge in the U.S. approved a $5.25 million settlement in the case, which started with several lawsuits filed in 2007 claiming that Heelys and certain of its executives and directors violated federal securities laws related to the stock offering. Heelys’ insurance company took care of most of the judgment and related legal costs, which totaled $3.6 million. The case was dismissed with prejudice by the judge.