Attached files
| file | filename |
|---|---|
| EX-31.2 - EXHIBIT 31.2 - Heelys, Inc. | ex31_2.htm |
| EX-32.1 - EXHIBIT 32.1 - Heelys, Inc. | ex32_1.htm |
| EX-31.1 - EXHIBIT 31.1 - Heelys, Inc. | ex31_1.htm |
| EXCEL - IDEA: XBRL DOCUMENT - Heelys, Inc. | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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x
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the quarterly period ended June 30, 2012
or
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o
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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For the transition period from to
Commission File Number 001-33182
HEELYS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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75-2880496
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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3200 Belmeade Drive, Suite 100
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Carrollton, Texas
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75006
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(Address of principal executive offices)
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(Zip Code)
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(214) 390-1831
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company x
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(Do not check if a smaller reporting company)
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
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Class of common stock
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Outstanding as of August 3, 2012
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Par value $0.001 per share
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27,571,052
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INDEX TO FORM 10- Q
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Part I. FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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3
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4
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6
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7
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Item 2.
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13
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Item 4.
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20
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PART II. OTHER INFORMATION
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Item 1.
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20
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Item 1A.
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20
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Item 2.
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20
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Item 5.
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20
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Item 6.
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21
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22
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As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Heelys” refer to Heelys, Inc., a Delaware corporation, and its direct and indirect subsidiaries.
Part I – FINANCIAL INFORMATION
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Item 1.
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Financial Statements
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HEELYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
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June 30,
2012
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December 31, 2011
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents
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$ | 18,995 | $ | 17,925 | ||||
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Investments
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39,235 | 40,469 | ||||||
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Accounts receivable, net of allowances of $357 and $391, respectively
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4,115 | 7,077 | ||||||
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Inventories
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8,290 | 8,836 | ||||||
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Prepaid expenses and other current assets
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959 | 1,193 | ||||||
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Income taxes receivable
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211 | 133 | ||||||
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Deferred income taxes
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15 | 14 | ||||||
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Total current assets
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71,820 | 75,647 | ||||||
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PROPERTY AND EQUIPMENT, net of accumulated depreciation of $2,064 and $1,933, respectively
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426 | 570 | ||||||
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PATENTS AND TRADEMARKS, net of accumulated amortization of $1,518 and $1,456, respectively
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329 | 320 | ||||||
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INTANGIBLE ASSETS, net of accumulated amortization of $1,206 and $1,091, respectively
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227 | 380 | ||||||
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GOODWILL
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1,488 | 1,532 | ||||||
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DEFERRED INCOME TAXES
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450 | 364 | ||||||
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TOTAL ASSETS
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$ | 74,740 | $ | 78,813 | ||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
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Accounts payable
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$ | 886 | $ | 2,277 | ||||
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Accrued liabilities
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3,608 | 2,974 | ||||||
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Deferred income taxes
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104 | 104 | ||||||
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Total current liabilities
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4,598 | 5,355 | ||||||
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`
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LONG TERM LIABILITIES:
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Income taxes payable
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670 | 660 | ||||||
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Deferred income taxes
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2 | 40 | ||||||
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Other long term liabilities
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224 | 247 | ||||||
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TOTAL LIABILITIES
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5,494 | 6,302 | ||||||
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COMMITMENTS AND CONTINGENCIES (Note 9)
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STOCKHOLDERS' EQUITY:
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Common stock, $0.001 par value, 75,000,000 shares authorized; 27,571,052 shares issued and outstanding as of June 30, 2012 and December 31, 2011
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28 | 28 | ||||||
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Additional paid-in capital
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66,303 | 66,126 | ||||||
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Retained earnings
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3,708 | 6,941 | ||||||
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Accumulated other comprehensive loss
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(793 | ) | (584 | ) | ||||
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Total stockholders' equity
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69,246 | 72,511 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 74,740 | $ | 78,813 | ||||
See notes to condensed consolidated financial statements.
HEELYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except per share data)
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Three Months Ended June 30,
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Six Months Ended June 30,
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2012
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2011
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2012
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2011
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NET SALES
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$ | 5,754 | $ | 8,342 | $ | 13,025 | $ | 14,445 | ||||||||
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COST OF SALES
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3,538 | 4,432 | 7,585 | 7,526 | ||||||||||||
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GROSS PROFIT
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2,216 | 3,910 | 5,440 | 6,919 | ||||||||||||
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
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Selling and marketing
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1,366 | 2,055 | 2,966 | 3,562 | ||||||||||||
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General and administrative
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2,341 | 2,923 | 5,177 | 5,528 | ||||||||||||
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Restructuring charges
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222 | - | 768 | - | ||||||||||||
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Total selling, general and administrative expenses
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3,929 | 4,978 | 8,911 | 9,090 | ||||||||||||
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LOSS FROM OPERATIONS
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(1,713 | ) | (1,068 | ) | (3,471 | ) | (2,171 | ) | ||||||||
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OTHER (INCOME) EXPENSE
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Interest (income) expense, net
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(57 | ) | (72 | ) | (118 | ) | (162 | ) | ||||||||
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Other (income) expense, net
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19 | (6 | ) | 5 | (9 | ) | ||||||||||
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Exchange (gain) loss, net
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47 | (59 | ) | 36 | (4 | ) | ||||||||||
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Total other (income) expense, net
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9 | (137 | ) | (77 | ) | (175 | ) | |||||||||
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LOSS BEFORE INCOME TAXES
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(1,722 | ) | (931 | ) | (3,394 | ) | (1,996 | ) | ||||||||
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INCOME TAX (BENEFIT) EXPENSE
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(70 | ) | 42 | (161 | ) | 160 | ||||||||||
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NET LOSS
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$ | (1,652 | ) | $ | (973 | ) | $ | (3,233 | ) | $ | (2,156 | ) | ||||
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LOSS PER SHARE:
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Basic and diluted
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$ | (0.06 | ) | $ | (0.04 | ) | $ | (0.12 | ) | $ | (0.08 | ) | ||||
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WEIGHTED AVERAGE SHARES OUTSTANDING:
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Basic and diluted
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27,571 | 27,571 | 27,571 | 27,571 | ||||||||||||
See notes to condensed consolidated financial statements.
HEELYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited)
(In thousands)
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Three Months Ended June 30,
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Six Months Ended June 30,
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2012
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2011
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2012
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2011
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NET LOSS
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$ | (1,652 | ) | $ | (973 | ) | $ | (3,233 | ) | $ | (2,156 | ) | ||||
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OTHER COMPREHENSIVE INCOME (LOSS):
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Foreign currency translation adjustment
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(256 | ) | 141 | (209 | ) | 526 | ||||||||||
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Total other comprehensive income (loss)
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(256 | ) | 141 | (209 | ) | 526 | ||||||||||
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COMPREHENSIVE LOSS
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$ | (1,908 | ) | $ | (832 | ) | $ | (3,442 | ) | $ | (1,630 | ) | ||||
See notes to condensed consolidated financial statements.
HEELYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
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Six Months Ended June 30,
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2012
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2011
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OPERATING ACTIVITIES:
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Net Loss
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$ | (3,233 | ) | $ | (2,156 | ) | ||
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Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
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Depreciation and amortization
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346 | 384 | ||||||
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Accretion (amortization) of premium (discount) on investments, net
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384 | 320 | ||||||
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Accrued interest income
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(215 | ) | (112 | ) | ||||
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Deferred income taxes
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(136 | ) | (11 | ) | ||||
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Stock-based compensation
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177 | 196 | ||||||
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Unrealized exchange (gain) loss, net
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(137 | ) | (6 | ) | ||||
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Impairment of property and equipment
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34 | - | ||||||
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Inventory impairment charges and reserve adjustments
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37 | 50 | ||||||
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Changes in operating assets and liabilities:
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Accounts receivable
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2,867 | (2,043 | ) | |||||
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Inventories
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384 | (2,330 | ) | |||||
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Prepaid expenses and other current assets
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504 | (131 | ) | |||||
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Accounts payable
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(1,374 | ) | 6 | |||||
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Accrued liabilities
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633 | 799 | ||||||
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Income taxes payable/receivable
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(69 | ) | (450 | ) | ||||
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Net cash provided by (used in) operating activities
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202 | (5,484 | ) | |||||
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INVESTING ACTIVITIES:
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Purchases of investments
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(20,166 | ) | (25,681 | ) | ||||
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Proceeds from maturities of investments
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21,015 | 25,220 | ||||||
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Purchases of equipment
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(27 | ) | (104 | ) | ||||
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Increase in patents and trademarks
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(71 | ) | (44 | ) | ||||
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Net cash provided by (used in) investing activities
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751 | (609 | ) | |||||
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FINANCING ACTIVITIES:
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Payment for previously acquired goodwill and intangible assets
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(26 | ) | (99 | ) | ||||
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Net cash used in financing activities
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(26 | ) | (99 | ) | ||||
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EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
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143 | 110 | ||||||
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
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1,070 | (6,082 | ) | |||||
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CASH AND CASH EQUIVALENTS, beginning of period
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17,925 | 35,320 | ||||||
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CASH AND CASH EQUIVALENTS, end of period
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$ | 18,995 | $ | 29,238 | ||||
See notes to condensed consolidated financial statements.
HEELYS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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1.
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BUSINESS DESCRIPTION AND BASIS OF PRESENTATION
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Business Description — Heelys, Inc. and its subsidiaries (the “Company” or “Heelys”) designs, markets and distributes innovative, action sports-inspired products primarily under the HEELYS brand targeted to the youth market. The primary product, HEELYS-wheeled footwear, is patented, dual-purpose footwear that incorporates a stealth, removable wheel in the heel. HEELYS are distributed directly to retail stores in the United States and certain other countries, and through international wholesale distributors.
The Company initially incorporated as Heeling, Inc. in Nevada in 2000. The Company was reincorporated in Delaware in August 2006 and changed its name to Heelys, Inc. Heeling Sports Limited, a Texas limited partnership, which was formed in May 2000 is an indirect wholly-owned subsidiary of Heelys, Inc.
In February 2008, the Company formed Heeling Sports EMEA SPRL, a Belgian corporation and indirect wholly-owned subsidiary of the Company, with offices in Brussels, and branch offices in Germany and France, primarily to manage the Company's European operations. To improve efficiency and reduce costs, effective as of June 30, 2012 the Company closed its office in Brussels and transitioned the business operations conducted through that office to its French, German and U.S. offices.
In February 2011, the Company formed Heeling Sports Japan K.K., a Japanese corporation and indirect wholly-owned subsidiary of the Company, with offices in Tokyo, to manage its operations in Japan and to take over distribution in that country effective March 1, 2011.
Consolidated Financial Statements —The consolidated financial statements include the accounts of Heelys, Inc. and its subsidiaries. All intercompany balances and transactions are eliminated in consolidation.
Foreign Currency Translation —The U.S. dollar is the Company's reporting currency. Assets and liabilities of foreign operations which are denominated in a functional currency other than the U.S. dollar are translated at the rate of exchange at the balance sheet date. Revenues and expenses are translated at the average rate of exchange during the applicable period. Adjustments resulting from translating foreign functional currency financial statements into U.S. dollars are included in the foreign currency translation adjustment, a component of accumulated other comprehensive loss in stockholders' equity.
Basis Of Presentation — Unaudited Condensed Interim Consolidated Financial Information — In the opinion of management, all adjustments necessary for a fair presentation of results of operations for the periods presented have been included in the accompanying unaudited condensed consolidated financial statements of the Company. Such adjustments consist of normal recurring items. The accompanying financial statements have been prepared in accordance with the instructions to Form 10-Q and include the information and notes required by those instructions. The unaudited condensed consolidated balance sheet data as of December 31, 2011 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. Accordingly, the unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2011.
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2.
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RECENT ACCOUNTING PRONOUNCEMENTS
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In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, to make the presentation of items within other comprehensive income (“OCI”) more prominent. The new standard requires companies to present items of net income, items of OCI and total comprehensive income in one continuous statement or two separate consecutive statements, and companies are no longer allowed to present items of OCI in the statement of stockholders’ equity. This new standard was effective for the Company beginning January 1, 2012, with early adoption permitted. The Company adopted this standard effective January 1, 2012. Refer to the condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2012 and 2011 for the required interim period disclosures.
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3.
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RESTRUCTURING
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As part of an initiative to improve efficiency and reduce costs, the Company began taking steps in the first quarter of 2012 to close its office in Brussels, Belgium and transition the business operations conducted through that office to its French, German and U.S. offices. As part of this initiative, the Company eliminated its workforce in Belgium effective as of June 30, 2012. These workforce reductions primarily came from the elimination of certain finance, supply chain and customer service functions. The work performed by these persons was absorbed by the Company’s employees in France, Germany and the United States. The Company hired limited personnel to assist with accounting and logistical support in those offices. Financial management and reporting for the Company’s Belgian subsidiary was transitioned to its headquarters in the United States.
Restructuring charges and related liability balances are as follows:
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December 31, 2011
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Charges
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Payments
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June 30, 2012 | |||||||||||||||
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Severance and one-time termination benefit costs
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$ | - | $ | 457,000 | (1 | ) | $ | (314,000 | ) | $ | 143,000 | |||||||
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Contract termination costs
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- | 92,000 | (2 | ) | - | 92,000 | ||||||||||||
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Other costs
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- | 185,000 | (3 | ) | (102,000 | ) | 83,000 | |||||||||||
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Fixed asset impairment
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- | 34,000 | (4 | ) | - | - | ||||||||||||
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Total
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$ | - | $ | 768,000 | $ | (416,000 | ) | $ | 318,000 |
(5)
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(1)
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The Company recognized $26,000 of these costs during the three months ended June 30, 2012. Liabilities outstanding as of June 30, 2012 for these costs are expected to be paid monthly in approximately equal amounts through March 31, 2013.
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(2)
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Contract termination costs were recognized during the three months ended June 30, 2012. Liabilities outstanding as of June 30, 2012 for these costs includes approximately $47,000 in contract termination costs attributable to the Company's operating lease for office space in Brussels, Belgium and is expected to be paid by monthly installments through April 30, 2014. The balance of the outstanding contract termination liabilities is expected to be paid during the third quarter of 2012.
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(3)
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The Company recognized $104,000 of these costs during the three months ended June 30, 2012. Other costs are those costs, including, but not limited to, costs to close the Company’s office in Belgium, transfer its business operations to the Company's German, French and U.S. offices, and repatriate the Company's Vice President, International back to the United States. Liabilities outstanding as of June 30, 2012 for these costs are expected to be paid during the third quarter of 2012.
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(4)
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Recognized during the three months ended March 31, 2012.
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(5)
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All outstanding liabilities related to the restructuring are included in accrued liabilities.
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The Company’s restructuring initiatives were substantially completed as of June 30, 2012, although some additional costs are expected. Total cumulative pre-tax costs for these initiatives are estimated to be between $800,000 and $900,000.
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4.
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LOSS PER SHARE
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Basic loss per common share is calculated by dividing net loss available to common stockholders for the period by the weighted-average number of common shares outstanding during the period. Diluted loss per share reflects the effects of potentially dilutive securities that could share in the loss of the Company. A reconciliation of the numerator and denominator used in the calculation of basic and diluted loss per share is as follows (in thousands):
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Three Months Ended June 30,
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Six Months Ended June 30,
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2012
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2011
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2012
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2011
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Numerator— net loss available to common stockholders
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$ | (1,652 | ) | $ | (973 | ) | $ | (3,233 | ) | $ | (2,156 | ) | ||||
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Denominator:
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Weighted average common stock outstanding for basic loss per share
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27,571 | 27,571 | 27,571 | 27,571 | ||||||||||||
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Effect of dilutive securities:
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Stock options
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– | – | – | – | ||||||||||||
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Restricted stock units
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– | – | – | – | ||||||||||||
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Adjusted weighted average common stock and assumed conversions for diluted loss per share
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27,571 | 27,571 | 27,571 | 27,571 | ||||||||||||
Stock options to purchase approximately 1.5 million shares of common stock were excluded from the computation of diluted loss per share for the three and six months ended June 30, 2012 and 2011, because the effect of their inclusion would have been anti-dilutive. Restricted stock units convertible into approximately 756,000 and 661,000 shares of common stock were excluded from the computation of diluted loss per share for the three and six months ended June 30, 2012, respectively, and restricted stock units convertible into approximately 780,000 and 508,000 shares of common stock were excluded from the computation of diluted loss per share for the three and six months ended June 30, 2011, respectively, because the effect of their inclusion would have been anti-dilutive.
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5.
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CASH EQUIVALENTS
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Cash equivalents consist of highly liquid investments with original maturity dates of three months or less when purchased. Cash equivalents at June 30, 2012 and December 31, 2011 consist of an investment in the Fidelity Money Market Fund of $3.3 million and $4.9 million, respectively. Investments in the Fidelity Money Market Fund are valued using observable inputs.
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6.
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INVESTMENTS
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The Company has an investment policy, the purpose of which is to establish sound investment guidelines for the ongoing management of the Company’s excess cash and investments. The policy provides guidelines on, among other things, investment term limitations, permitted investments, credit quality, single issuer concentration and corporate debt sector concentrations. In all categories of investments, emphasis is placed on securities of high quality subject to the following quality limitations at the time of investment:
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·
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U.S. Treasury and other U.S. Federal Agencies, debentures or mortgages;
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·
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$1 net asset value money market mutual funds governed by SEC Rule 2a-7;
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·
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Commercial Paper (minimum A-1/P-1/F-10); Corporate Notes (minimum A or better); and
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·
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Municipal Debt (short-term: minimum A-1/P-1 or equivalent; long term: A or better).
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Investments consist of the following:
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As of June 30, 2012
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Amortized
Cost
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Gross
Unrealized
Gains
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Gross
Unrealized
Losses(1)
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Aggregate
Fair Value(2)
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Maturities
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(In thousands, except table notes)
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Current held-to-maturity securities
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Commercial paper
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$
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15,949
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3
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(65)
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$
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15,887
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Oct-2012 thru Mar-2013
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Corporate bonds
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7,116
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-
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(1)
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7,115
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Sep-2012 thru Jan-2013
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Municipal bonds
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16,170
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-
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(6)
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16,164
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Jul-2012 thru Jan-2013
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Total current held-to-maturity securities
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$
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39,235
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$
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3
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$
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(72)
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$
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39,166
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|||||
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As of December 31, 2011
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Amortized
Cost
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Gross
Unrealized
Gains
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Gross
Unrealized
Losses(1)
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Aggregate
Fair Value(2)
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Maturities
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(In thousands, except table notes)
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Current held-to-maturity securities
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|||||||||||||
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Certificate of deposit
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$
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500
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$
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-
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$
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-
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$
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500
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Feb-2012
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||||
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Commercial paper
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11,472
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-
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(8)
|
11,464
|
Jan-2012 thru Oct-2012
|
||||||||
|
Corporate bonds
|
9,436
|
-
|
(30)
|
9,406
|
Jun-2012 thru Sep-2012
|
|||||||||
|
Municipal bonds
|
19,061
|
-
|
(41)
|
19,020
|
Mar-2012 thru Oct-2012
|
|||||||||
|
Total current held-to-maturity securities
|
|
$
|
40,469
|
$
|
-
|
$
|
(79)
|
$
|
40,390
|
|||||
|
(1)
|
No investments outstanding as of June 30, 2012 or December 31, 2011 had continuous unrealized loss positions longer than 12 months. All investments that matured during the six months ended June 30, 2012 matured at their full face amounts.
|
|
(2)
|
Aggregate fair values for commercial paper and bonds were determined using a third-party pricing service. This third-party pricing service uses the market approach to value these investments (Level 2 fair value hierarchy).
|
All investments as of June 30, 2012 and as of December 31, 2011 are classified as held-to-maturity since the Company has the intent and ability to hold these investments to maturity. Investments in debt securities (commercial paper, municipal bonds and corporate bonds) are reported at cost, adjusted for premiums and discounts that are recognized in interest income, using a method that approximates the effective interest method, over the period to maturity. The Company considers as current assets those investments which will mature in the next 12 months. The remaining investments are considered non-current.
|
7.
|
CONCENTRATION OF RISK
|
The Company maintains substantially all of its cash and cash equivalents in financial institutions in amounts that exceed U.S. federally insured limits or in international jurisdictions where either insurance is not provided or in amounts that exceed amounts guaranteed by the local government or other governmental agencies. Investments in the Fidelity Money Market Fund are not insured. The Company has not experienced any losses in such accounts and believes it is not exposed to significant credit risk.
The Company invests a portion of its cash in fully insured certificates of deposit and in debt instruments of corporations and municipalities with strong credit ratings.
The Company considers its concentration risk related to accounts receivable to be mitigated by the Company’s credit policy, the significance of outstanding balances owed by each individual customer at any point in time and the geographic dispersion of these customers.
The Company outsources all of its manufacturing to a small number of independent manufacturers. Establishing replacement sources could require significant additional time and expense.
|
8.
|
ACCRUED LIABILITIES
|
Accrued liabilities consisted of the following (in thousands):
|
June 30,
2012
|
December 31,
2011
|
|||||||
|
Professional fees
|
$ | 84 | $ | 77 | ||||
|
Payments due - termination of distributorship agreements
|
85 | 67 | ||||||
|
Accrued taxes payable
|
200 | 124 | ||||||
|
Customer credits and prepayments
|
156 | 199 | ||||||
|
Payroll and payroll related costs
|
346 | 488 | ||||||
|
Inventory and related costs
|
1,672 | 1,257 | ||||||
|
Commissions
|
383 | 295 | ||||||
|
Restructuring
|
318 | - | ||||||
|
Other
|
364 | 467 | ||||||
|
Total accrued liabilities
|
$ | 3,608 | $ | 2,974 | ||||
Customer credits include amounts due to customers in excess of amounts owed to the Company, including estimated credits due to customers for estimated returns and co-op advertising and marketing allowances. Restructuring related accrued liabilities include $143,000 in severance and one-time termination benefits, $92,000 in contract termination costs and $83,000 of other costs attributable to the initiatives the Company began taking in the first quarter of 2012 to improve efficiency and reduce costs (see Note 3).
|
9.
|
COMMITMENTS AND CONTINGENCIES
|
Purchase Commitments — The Company had open purchase commitments of $2.8 million at June 30, 2012 for the purchase of inventory.
Legal Proceedings — Due to the nature of the Company's products, from time to time the Company has to defend against personal injury and product liability claims arising out of personal injuries that allegedly are suffered using the Company's products. To date, none of these claims has had a material adverse effect on the Company. The Company is also engaged in various claims and legal proceedings relating to intellectual property matters, especially in connection with enforcing the Company's intellectual property rights against the various third parties importing and selling knockoff products domestically and internationally. Often, such legal proceedings result in counterclaims against the Company that the Company must defend. The Company believes that none of the pending personal injury, product liability or intellectual property legal matters will have a material adverse effect upon the Company's financial position, cash flows or results of operations. Litigation settlement payments related to intellectual property legal matters (whether received by the Company or paid by the Company) are reported as other income (expense) in the Company’s consolidated statements of operations. Legal fees related to intellectual property matters and associated enforcement are included in general and administrative expenses.
|
10.
|
INCOME TAXES
|
The Company recognized an income tax benefit of $161,000 for the six months ended June 30, 2012, representing an effective income tax rate of 4.7%, compared to income tax expense of $160,000 for the six months ended June 30, 2011, representing an effective income tax rate of (8.0)%. The effective rate for the six months ended June 30, 2012 differs from the statutory federal rate of 35% primarily due to domestic operating losses and operating losses in the Company’s Japanese operations for which no tax benefits have been recognized and foreign taxes at rates other than 35%, as well as for certain other items, such as state and local taxes and non-deductible expenses. While the Company did not record the benefit of losses from its domestic and Japanese operations for the six months ended June 30, 2012, profits and losses in its European operations resulted in an income tax benefit of approximately $49,000 for that period. Additionally, the Company recorded a net tax benefit of approximately $112,000 related to discrete items, consisting of approximately $129,000 of tax benefit related to certain tax losses arising from the Company’s restructuring (discussed in Note 3); offset by approximately $17,000 in additional tax expense related to prior year items. The Company operates in multiple jurisdictions and its business is impacted by seasonality, which causes variability in its consolidated effective tax rate during the year. The Company continually reviews its assertion regarding its valuation allowance, which includes an analysis of multiple factors, including projections, reversal of deferred tax liabilities, and tax planning strategies.
The Company may, from time to time, be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to the Company’s financial results. In the event the Company has received an assessment for interest and/or penalties, interest has been classified in the financial statements as interest expense and penalties as general and administrative expense.
As of June 30, 2012, there have been no material changes in the Company’s gross unrecognized tax benefits or accrued interest and penalties. All unrecognized tax benefits have been classified as other long-term liabilities. The Company classifies interest and penalties related to unrecognized tax benefits as interest expense and general and administrative expense, respectively.
The statute of limitations remains open for the Company’s consolidated federal income tax returns for the tax years ended December 31, 2006 forward. For income tax returns filed in foreign jurisdictions, the statute of limitations remains open for the tax years ended December 31, 2008 forward. State statutes are open for various years, depending on the jurisdiction.
|
11.
|
STOCKHOLDERS’ EQUITY
|
Total stockholders’ equity decreased $3.3 million to $69.2 million at June 30, 2012, from $72.5 million at December 31, 2011. Additional paid-in-capital increased as a result of the recognition of stock-based compensation expense. Retained earnings decreased solely as a result of the net loss recognized for the six months ended June 30, 2012. Changes in accumulated other comprehensive loss are the result of translating the foreign currency financial statements of Heeling Sports EMEA SPRL and Heeling Sports Japan K.K., as of and for the six months ended June 30, 2012, into U.S. dollars.
|
12.
|
SEGMENT REPORTING
|
Operating results are assessed based on geographic areas to make decisions about necessary resources and in assessing performance. Consequently, based on the nature of the financial information that is received by the Chief Executive Officer as chief operating decision maker, the Company has two reportable segments for financial statement purposes. Each segment derives revenue primarily from the sale of HEELYS-wheeled footwear.
|
Three Months Ended June 30, 2012
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||
|
Domestic
|
International
|
Unallocated
|
Consolidated
|
|||||||||||||
|
Net Sales
|
$ | 1,836 | $ | 3,918 | $ | - | $ | 5,754 | ||||||||
|
Cost of Sales
|
1,230 | 2,308 | - | 3,538 | ||||||||||||
|
Gross Profit
|
606 | 1,610 | - | 2,216 | ||||||||||||
|
Selling, General and Administrative Expenses
|
1,227 | 2,530 | 172 | 3,929 | ||||||||||||
|
Income (Loss) from Operations
|
(621 | ) | (920 | ) | (172 | ) | (1,713 | ) | ||||||||
|
Other (Income) Expense, net
|
(8 | ) | 68 | (51 | ) | 9 | ||||||||||
|
Income (Loss) before Income Taxes
|
$ | (613 | ) | $ | (988 | ) | $ | (121 | ) | $ | (1,722 | ) | ||||
|
Three Months Ended June 30, 2011
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||
|
Domestic
|
International
|
Unallocated
|
Consolidated
|
|||||||||||||
|
Net Sales
|
$ | 2,738 | $ | 5,604 | $ | - | $ | 8,342 | ||||||||
|
Cost of Sales
|
1,588 | 2,844 | - | 4,432 | ||||||||||||
|
Gross Profit
|
1,150 | 2,760 | - | 3,910 | ||||||||||||
|
Selling, General and Administrative Expenses
|
1,815 | 2,956 | 207 | 4,978 | ||||||||||||
|
Income (Loss) from Operations
|
(665 | ) | (196 | ) | (207 | ) | (1,068 | ) | ||||||||
|
Other (Income) Expense, net
|
(14 | ) | (52 | ) | (71 | ) | (137 | ) | ||||||||
|
Income (Loss) before Income Taxes
|
$ | (651 | ) | $ | (144 | ) | $ | (136 | ) | $ | (931 | ) | ||||
|
Six Months Ended June 30, 2012
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||
|
Domestic
|
International
|
Unallocated
|
Consolidated
|
|||||||||||||
|
Net Sales
|
$ | 3,981 | $ | 9,044 | $ | - | $ | 13,025 | ||||||||
|
Cost of Sales
|
2,606 | 4,979 | - | 7,585 | ||||||||||||
|
Gross Profit
|
1,375 | 4,065 | - | 5,440 | ||||||||||||
|
Selling, General and Administrative Expenses
|
2,780 | 5,526 | 605 | 8,911 | ||||||||||||
|
Income (Loss) from Operations
|
(1,405 | ) | (1,461 | ) | (605 | ) | (3,471 | ) | ||||||||
|
Other (Income) Expense, net
|
(33 | ) | 57 | (101 | ) | (77 | ) | |||||||||
|
Income (Loss) before Income Taxes
|
$ | (1,372 | ) | $ | (1,518 | ) | $ | (504 | ) | $ | (3,394 | ) | ||||
|
Six Months Ended June 30, 2011
|
||||||||||||||||
|
(In thousands)
|
||||||||||||||||
|
Domestic
|
International
|
Unallocated
|
Consolidated
|
|||||||||||||
|
Net Sales
|
$ | 4,402 | $ | 10,043 | $ | - | $ | 14,445 | ||||||||
|
Cost of Sales
|
2,582 | 4,944 | - | 7,526 | ||||||||||||
|
Gross Profit
|
1,820 | 5,099 | - | 6,919 | ||||||||||||
|
Selling, General and Administrative Expenses
|
3,423 | 5,158 | 509 | 9,090 | ||||||||||||
|
Income (Loss) from Operations
|
(1,603 | ) | (59 | ) | (509 | ) | (2,171 | ) | ||||||||
|
Other (Income) Expense, net
|
(30 | ) | 2 | (147 | ) | (175 | ) | |||||||||
|
Income (Loss) before Income Taxes
|
$ | (1,573 | ) | $ | (61 | ) | $ | (362 | ) | $ | (1,996 | ) | ||||
Selling, general and administrative expenses attributable to our international operations for the three and six months ended June 30, 2012 includes $26,000 and $457,000 in severance and one-time termination benefit costs, respectively, $92,000 in contract termination costs for each period, $104,000 and $185,000 in other costs, respectively, including, but not limited to, costs to close the Company’s office in Belgium, transfer its business operations to the Company’s German, French and U.S. offices, and repatriate the Company’s Vice President, International back to the United States. These costs are reported as restructuring charges in the statement of operations and are directly attributable to the initiatives the Company began taking in the first quarter of 2012 to improve efficiency and reduce costs (see Note 3). In addition, the Company recognized $34,000 in fixed asset impairment charges related to these initiatives.
Other income attributed to domestic operations includes interest income earned on cash (including cash equivalents) and investments, as well as other income primarily attributable to settlements of patent and trademark litigation. Litigation settlement payments related to intellectual property legal matters (whether received by the Company or paid by the Company) are attributed to either domestic or international operations as appropriate. Legal fees related to intellectual property matters and associated enforcement are included in general and administrative expenses and are attributed to either domestic or international operations as appropriate.
Other income (expense), net, attributed to international operations is primarily gains (losses) generated by transactions denominated in a currency different from the functional currency of the Company’s Belgian and Japanese subsidiaries.
Although the Company’s international operations benefit from centrally managed costs, such as compensation of the Company’s executive officers, product development efforts and operating related insurance coverage, these costs have not been allocated to the international operations and are fully attributed to domestic operations.
Unallocated items included in the tables above include professional fees incurred at the consolidated level, including fees for tax, accounting and other consulting and professional services that are not directly attributed to operating either the domestic or international business, fees paid to members of the Company's board of directors, premiums for directors' and officers' insurance, other miscellaneous costs directly attributable to operating as a public company, as well as interest income earned on monies and investments held at the Heelys, Inc. entity level.
Sales in the Company’s Italian market accounted for 17% and 22% of consolidated net sales for the three and six months ended June 30, 2012, respectively, and 25% of consolidated net sales for both the three and six months ended June 30, 2011. Sales in the Company’s French market accounted for 19% and 17% of consolidated net sales for the three and six months ended June 30, 2012, respectively, and 16% and 19% of consolidated net sales for the three and six months ended June 30, 2011, respectively. Sales in the Company’s German market accounted for 7% and 9% of consolidated net sales for the three and six months ended June 30, 2012, respectively, and 8% and 10% of consolidated net sales for the three and six months ended June 30, 2011, respectively. Sales to the Company’s independent distributor in Russia accounted for 12% and 9% of consolidated net sales for the three and six months ended June 30, 2012, respectively, and 8% and 9% of consolidated net sales for the three and six months ended June 30, 2011, respectively. No other country, other than the United States, accounted for 10% or more of the Company’s consolidated net sales for the three and six months ended June 30, 2012 and 2011.
Customers of the Company consist of retail stores in the United States and certain other countries, and international wholesale distributors. The customers, individually or considered as a group under common ownership, which accounted for greater than 10% of net sales during the periods reflected, were as follows:
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Oxylane Group
|
10 | % | 13 | % | 9 | % | 14 | % | ||||||||
|
Alegria Corp Ltd
|
12 | % | 8 | % | 9 | % | 9 | % | ||||||||
Oxylane Group is a French sporting goods retail chain operating under the name Decathlon. Alegria Corp Ltd is the Company’s independent distributor in Russia.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements due to known and unknown risks, uncertainties and other factors. The section entitled “Risk Factors” set forth in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011, and similar discussions in our other Securities and Exchange Commission filings, discuss some of the important risk factors that may affect our business, results of operations and financial condition. You should carefully consider those risks, in addition to the information in this report and in our other filings with the Securities and Exchange Commission, before deciding to purchase, hold or sell our securities. We do not have any intention or obligation to update forward-looking statements included in this Quarterly Report on Form 10-Q after the date of this Quarterly Report on Form 10-Q, except as required by law. In addition, the following discussion should be read in conjunction with the information presented in our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2011.
Business Overview
We are a designer, marketer and distributor of innovative, action sports-inspired products primarily under the HEELYS brand targeted to the youth market. Our primary product, HEELYS-wheeled footwear, is patented, dual-purpose footwear that incorporates a stealth, removable wheel in the heel. HEELYS-wheeled footwear allows the user to seamlessly transition from walking or running to rolling by shifting weight to the heel. Users can transform HEELYS-wheeled footwear into street footwear by removing the wheel. We believe our distinctive product offering and our HEELYS brand is synonymous with a popular lifestyle activity. For the three and six months ended June 30, 2012, approximately 87% and 91%, respectively, of our net sales were derived from the sale of HEELYS-wheeled footwear. In each of the three and six months ended June 30, 2011, approximately 99% of our net sales were derived from the sale of HEELYS-wheeled footwear. The remainder of our net sales for the three and six months ended June 30, 2012 was derived primarily from the sale of Blazer Pro and District scooters and accessories, Tony Hawk skateboards, our Nano™ inline footboard and HEELYS’ branded accessories, such as replacement wheels. We began to distribute Blazer Pro and District scooters and accessories and Tony Hawk skateboards in Europe during the third quarter of 2011.
We were initially incorporated as Heeling, Inc. in Nevada in 2000. In August 2006, we reincorporated in Delaware and changed our name to Heelys, Inc. Through our general and limited partner interests, we own 100% of Heeling Sports Limited, a Texas limited partnership, which was formed in May 2000. In February 2008, we formed Heeling Sports EMEA SPRL, a Belgian corporation and indirect wholly-owned subsidiary, with offices in Brussels, and branch offices in Germany and France, to manage our operations in Europe, the Middle East and Africa (“EMEA”). In February 2011, we formed Heeling Sports Japan, K.K., a Japanese corporation and indirect wholly-owned subsidiary, with offices in Tokyo, to manage our operations in Japan and to take over the distribution of our products in that country effective March 1, 2011. As part of an initiative to improve efficiency and reduce costs, we began taking steps in the first quarter of 2012 to close our office in Brussels, Belgium and transition our business operations conducted through that office to our French, German and U.S. offices. We completed the restructuring of our EMEA operations, including the closing of our office in Belgium and the transition of business operations to our French, German and U.S. offices, as of June 30, 2012.
Financial Overview / Significant Events — Second Quarter of 2012
Domestic net sales decreased $902,000, or 32.9%, for the three months ended June 30, 2012, when compared to the same period last year, attributable to a combination of $325,000 in sales during the first quarter of 2011 that were pushed to the second quarter of 2011 as a result of production delays, Holiday carryover inventory from 2011 with certain retailers that affected replenishment in 2012 and lower average sales price per shoe.
Internationally, our net sales decreased $1.7 million, or 30.1%, for the three months ended June 30, 2012, when compared to the same period last year, the result of decreased sales of our HEELYS-wheeled footwear in France, Germany and Italy, offset by sales increases in Japan and with third-party distributors and sales of our third party scooter and skateboard lines in France and Germany.
Consolidated gross profit margin decreased to 38.5% for the three months ended June 30, 2012, from 46.9% for the three months ended June 30, 2011. The decrease in gross profit percentage from the same quarter in the prior year was primarily the result of changes in product and customer mix from the prior year, with a larger percentage of global sales coming from lower priced shoes sold at smaller product margins, certain European retail customers that are provided larger discounts and sales of certain of our slow moving and older inventory styles at discounted prices in Japan and Germany in order to reduce excess inventories.
Cash and cash equivalents and investments remained consistent at $58.2 million as of June 30, 2012, when compared to $58.4 million as of December 31, 2011.
As part of an initiative to improve efficiency and reduce costs, we began taking steps in the first quarter of 2012 to close our office in Brussels, Belgium and transition our business operations conducted through that office to our French, German and U.S. offices. As part of this initiative, the Company eliminated its workforce in Belgium effective as of June 30, 2012. These workforce reductions primarily came from the elimination of certain finance, supply chain and customer service functions. The work performed by these people was absorbed by our employees in France, Germany and the United States. We hired limited personnel to assist with accounting and logistical support in those offices. Financial management and reporting for our Belgian subsidiary was transitioned to our headquarters in the United States. The total cumulative pre-tax costs to take this action are estimated to be between $0.8 million to $0.9 million. Approximately 85% of these costs will relate to cash outlays related to employee separation expenses, contract termination costs and professional fees. The Company does not anticipate that the actions taken thus far with respect to the initiative will result in pre-tax savings in 2012, but estimates pre-tax annual savings of approximately $1.5 million in future years.
Results of Operations
Net Sales
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Net Sales (in thousands)
|
||||||||||||||||
|
HEELYS-Wheeled Footwear
|
||||||||||||||||
|
Domestic
|
$ | 1,776 | $ | 2,741 | $ | 3,948 | $ | 4,405 | ||||||||
|
International
|
3,249 | 5,514 | 7,956 | 9,901 | ||||||||||||
| 5,025 | 8,255 | 11,904 | 14,306 | |||||||||||||
|
Other
|
||||||||||||||||
|
Domestic
|
32 | 5 | 35 | 17 | ||||||||||||
|
International
|
693 | 108 | 1,130 | 173 | ||||||||||||
| 725 | 113 | 1,165 | 190 | |||||||||||||
|
Freight, Sales Discounts/Allowances
|
||||||||||||||||
|
Domestic
|
28 | (8 | ) | (2 | ) | (20 | ) | |||||||||
|
International
|
(24 | ) | (18 | ) | (42 | ) | (31 | ) | ||||||||
| 4 | (26 | ) | (44 | ) | (51 | ) | ||||||||||
|
Consolidated
|
$ | 5,754 | $ | 8,342 | $ | 13,025 | $ | 14,445 | ||||||||
|
Net Sales (as % of Consolidated Net Sales)
|
||||||||||||||||
|
Domestic
|
31.9 | % | 32.8 | % | 30.6 | % | 30.5 | % | ||||||||
|
International
|
68.1 | % | 67.2 | % | 69.4 | % | 69.5 | % | ||||||||
| 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Pairs Sold (HEELYS-wheeled footwear)
|
||||||||||||||||
|
Domestic
|
74,000 | 104,000 | 156,000 | 167,000 | ||||||||||||
|
International
|
101,000 | 146,000 | 242,000 | 260,000 | ||||||||||||
|
Consolidated
|
175,000 | 250,000 | 398,000 | 427,000 | ||||||||||||
Domestically, our net sales decreased $902,000, or 32.9%, and $421,000, or 9.6%, to $1.8 million and $4.0 million for the three and six months ended June 30, 2012, respectively, from $2.7 million and $4.4 million for the three and six months ended June 30, 2011, respectively, primarily as a result of a decrease in the number of pairs of HEELYS-wheeled footwear sold, combined with a decrease in the average price per pair sold, during the three months ended June 30, 2012, when compared to the same period in the prior year. Sales during the three months and six months ended June 30, 2011 included approximately $325,000 in customer orders placed during the first quarter of 2011 that we were unable to fulfill until the second quarter of 2011 as a result of short-term delays from one of our sourced third-party manufacturers. The decrease in average price per pair sold is primarily the result of change in product mix with a larger percentage of sales coming from our lower-priced, basic skate shoe styles that typically sell for a lower wholesale price than some of our more current styles.
Internationally, our net sales decreased $1.7 million, or 30.1%, and $1.0 million, or 10.0%, to $3.9 million and $9.0 million for the three and six months ended June 30, 2012, respectively, from $5.6 million and $10.0 million for the three and six months ended June 30, 2011, respectively. Sales to independent distributors in our non-EMEA markets increased $69,000 and $312,000, from $108,000 and $180,000 during the three and six months ended June 30, 2011, respectively, to $177,000 and $492,000 during the three and six months ended June 30, 2012, respectively, primarily due to sales to our distributors in Australia and New Zealand. Sales to independent distributors in our EMEA markets decreased approximately $247,000 and $127,000, to approximately $696,000 and $1.5 million during the three and six months ended June 30, 2012, respectively, from approximately $943,000 and $1.7 million during the three and six months ended June 30, 2011, respectively, primarily due to a decrease in sales with certain of our distributors, particularly in our Middle Eastern markets. Sales in our French market decreased approximately $259,000 and $457,000, to approximately $1.1 million and $2.3 million during the three and six months ended June 30, 2012, respectively, from approximately $1.4 million and $2.7 million during the three months and six months ended June 30, 2011, respectively. Sales in our German market decreased approximately $310,000 and $300,000, to approximately $374,000 and $1.1 million during the three and six months ended June 30, 2012, respectively, from approximately $684,000 and $1.4 million during the three and six months ended June 30, 2011, respectively. Sales of HEELYS-wheeled footwear decreased approximately $1.2 million and $1.8 million in France and Germany, to approximately $870,000 and $2.3 million during the three and six months ended June 30, 2012, respectively, from approximately $2.1 million and $4.1 million during the three and six months ended June 30, 2011, respectively. These decreases were offset by sales in France and Germany of Blazer Pro and District scooters and accessories and Tony Hawk skateboards, which accounted for approximately $615,000 and $1.0 million of sales during the three and six months ended June 30, 2012. We believe retailers in our French and German markets are being cautious when placing orders of HEELYS-wheeled footwear to minimize their inventory levels and inventory related risks resulting from a decrease in consumer demand, which we believe is due to market competition from other wheeled products such as coaster boards. Sales in our Italian market decreased approximately $1.1 million and $820,000, to approximately $975,000 and $2.8 million during the three and six months ended June 30, 2012, respectively, from approximately $2.1 million and $3.6 million during the three and six months ended June 30, 2011, respectively. Net sales in our Japanese market increased $133,000 and $324,000, from $382,000 during the three and six months ended June 30, 2011, to $515,000 and $706,000 during the three and six months ended June 30, 2012, respectively. We took over direct distribution in the Japanese market effective March 1, 2011. During the three months ended March 31, 2011, we did not sell any product to either our former distributor in Japan or direct to retailers. We believe the March 2011 earthquake and related tsunami, nuclear and other disasters in the region impacted consumer buying behavior with reduced discretionary spending and purchases of non-essential items during the first and second quarters of 2011.
Gross Profit
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Gross Profit (in thousands)
|
||||||||||||||||
|
Domestic
|
$ | 606 | $ | 1,150 | $ | 1,375 | $ | 1,820 | ||||||||
|
International
|
1,610 | 2,760 | 4,065 | 5,099 | ||||||||||||
|
Consolidated
|
$ | 2,216 | $ | 3,910 | $ | 5,440 | $ | 6,919 | ||||||||
|
Gross Profit (%)
|
||||||||||||||||
|
Domestic
|
33.0 | % | 42.0 | % | 34.5 | % | 41.3 | % | ||||||||
|
International
|
41.1 | % | 49.3 | % | 44.9 | % | 50.8 | % | ||||||||
|
Consolidated
|
38.5 | % | 46.9 | % | 41.8 | % | 47.9 | % | ||||||||
Gross profit margin on domestic sales decreased to 33.0% and 34.5% for the three and six months ended June 30, 2012, respectively, from 42.0% and 41.3% for the three and six months ended June 30, 2011, respectively. The decrease in gross profit margin is primarily the result of a larger percentage of lower margin products sold during the three and six months ended June 30, 2012 when compared to the same periods in the prior year.
Internationally, gross profit margin decreased to 41.1% and 44.9% for the three and six months ended June 30, 2012, respectively, from 49.3% and 50.8% for the three and six months ended June 30, 2011. The decrease in gross profit margin is primarily the result of lower average sales prices in our French market due to product mix, lower average sales prices in our Italian market resulting from changes in customer mix, with greater sales to larger customers who benefit from discount programs, and lower average sales prices in our German and Japanese markets resulting from the sale of certain of our slow moving and older inventory styles at discounted prices in order to reduce our excess inventories.
Selling and Marketing Expense
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
\
|
||||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Selling & Marketing (in thousands)
|
||||||||||||||||
|
Domestic
|
$ | 316 | $ | 483 | $ | 820 | $ | 980 | ||||||||
|
International
|
1,050 | 1,572 | 2,146 | 2,582 | ||||||||||||
|
Consolidated
|
$ | 1,366 | $ | 2,055 | $ | 2,966 | $ | 3,562 | ||||||||
Domestically, selling and marketing expense, excluding commissions and payroll and payroll related expenses, decreased $84,000 and $97,000, to $46,000 and $223,000 for the three and six months ended June 30, 2012, respectively, from $130,000 and $320,000 for the three and six months ended June 30, 2011, respectively. Consumer marketing and advertising and related costs increased $104,000 and $12,000, from $107,000 and $214,000 for the three and six months ended June 30, 2011, respectively, to $211,000 and $226,000 for the three and six months ended June 30, 2012, respectively. These increases were offset by credits in the amount of $236,000 and $82,000 received during the second quarter of 2012 and 2011, respectively, for unaired purchased television commercial spots.
Internationally, selling and marketing expense, excluding commissions and payroll and payroll related expenses, decreased $263,000 and $248,000, to $475,000 and $801,000 for the three and six months ended June 30, 2012, respectively, from $738,000 and $1.0 million for the three and six months ended June 30, 2011, respectively. Selling and marketing expense, excluding commissions and payroll and payroll related expenses, attributable to our Japanese operations increased $101,000 and $173,000, from $66,000 and $86,000 for the three and six months ended June 30, 2011, respectively, to $167,000 and $259,000 for the three and six months ended June 30, 2012, respectively. These increases are primarily attributable to point-of-sale and consumer advertising related costs to support sales of product during Japan’s “Golden Week” holiday period which increased $52,000 and $68,000, from $60,000 for the three and six months ended June 30, 2011, to $112,000 and $128,000 for the three and six months ended June 30, 2012, respectively. The increase in selling and marketing expense, excluding commissions and payroll related expenses, attributable to our Japanese operations was offset by a decrease in selling and marketing expense, excluding commissions and payroll and payroll related expenses, attributable to our EMEA operations, which decreased $364,000 and $409,000, to $307,000 and $535,000 for the three and six months ended June 30, 2012, respectively, from $671,000 and $944,000 for the three and six months ended June 30, 2011, respectively, primarily as a result of a decrease in consumer advertising. Consumer advertising, and related costs, attributable to our EMEA operations decreased $312,000 and $392,000, to $224,000 and $319,000 for the three and six months ended June 30, 2012, respectively, from $536,000 and $711,000 for the three and six months ended June 30, 2011, respectively. During the three months ended June 30, 2012, we incurred approximately $47,000 and $113,000 in advertising, and related costs, in our French and Italian markets, respectively, for our HEELYS-wheeled footwear. The decrease in consumer advertising, and related costs, for the three months ended June 30, 2012, when compared to the same period in the prior year, was primarily the result of increased costs recognized during the three months ended June 30, 2011 due to timing of the holidays which resulted in holiday marketing campaigns shifting from March to April during 2011 due to the later Easter holiday (April 24, 2011) and the school holiday periods immediately following Easter. The decrease in consumer advertising, and related costs, for the six months ended June 30, 2012, when compared to the same period in the prior year was primarily due to a decrease in television commercial advertising related expenses for our HEELYS wheeled-footwear resulting from management’s decision to reduce consumer advertising in our German and French markets as a result of decreased consumer demand. These decreases were offset by $30,000 in event marketing related costs incurred during the three months ended March 31, 2012 primarily attributable to marketing of the Blazer Pro and District scooters and accessories and Tony Hawk skateboards, which we began distributing in Europe during the third quarter of 2011.
Domestically, commissions paid to our independent sales representatives decreased $54,000 and $29,000, to $65,000 and $158,000 for the three and six months ended June 30, 2012, respectively, from $119,000 and $187,000 for the three and six months ended June 30, 2011. Internationally, commissions paid to our independent sales representatives decreased $232,000 and $220,000, to $224,000 and $633,000 for the three and six months ended June 30, 2012, respectively, from $456,000 and $853,000 for the three and six months ended June 30, 2011, respectively. Commission expense is impacted by increases and decreases in sales as well as changes in product and customer mix due to differing commission rates paid on those sales.
Payroll and payroll related costs attributable to our domestic operations decreased $29,000 and $34,000, to $205,000 and $439,000 for the three and six months ended June 30, 2012, respectively, from $234,000 and $473,000 for the three and six months ended June 30, 2011, respectively, primarily due to decreases in accrued incentive compensation offset by an increase in recognized stock based compensation costs attributable to restricted stock units awarded in 2012. Payroll and payroll related costs attributable to our international operations decreased $28,000 to $350,000 for the three months ended June 30, 2012, from $378,000 for the three months ended June 30, 2011, primarily as a result of changes in headcount. Payroll and payroll related costs attributable to our international operations increased $32,000 from $680,000 for the six months ended June 30, 2011, to $712,000 for the six months ended June 30, 2012, primarily as a result of the opening of our Japanese subsidiary during the latter part of the first quarter of 2011, offset by changes in headcount.
General and Administrative Expense
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
General & Administrative (in thousands)
|
||||||||||||||||
|
Domestic
|
$ | 911 | $ | 1,332 | $ | 1,960 | $ | 2,443 | ||||||||
|
International
|
1,480 | 1,384 | 3,380 | 2,576 | ||||||||||||
|
Unallocated
|
172 | 207 | 605 | 509 | ||||||||||||
|
Consolidated
|
$ | 2,563 | $ | 2,923 | $ | 5,945 | $ | 5,528 | ||||||||
Consolidated general and administrative expenses, excluding unallocated costs, decreased $325,000 to $2.4 million for the three months ended June 30, 2012, from $2.7 million for the three months ended June 30, 2011, and increased $321,000 from $5.0 million for the six months ended June 30, 2011, to $5.3 million for the six months ended June 30, 2012.
General and administrative expense for the three and six months ended June 30, 2012 attributable to our international operations includes $222,000 and $768,000, respectively, in costs incurred in connection with the restructuring of our international operations which we initiated during the first quarter of 2012. These restructuring costs include $457,000 in severance and one-time termination benefit costs ($431,000 of which we recognized during the first quarter of 2012), $92,000 in contract termination costs for each period, $185,000 in other costs ($81,000 of which we recognized during the first quarter of 2012), including, but not limited to, costs to close our office in Belgium, transfer business operations to our French, German and U.S. offices, and repatriate our Vice President, International back to the United States, and $34,000 in fixed asset impairment charges recognized during the first quarter of 2012. These costs are reported as restructuring charges in the statement of operations and are directly attributable to the initiatives we began taking in the first quarter of 2012 to improve efficiency and reduce costs. See Note 3 to our condensed consolidated financial statements for further discussion regarding these initiatives.
Consolidated shipping and handling costs decreased $149,000 to $584,000 for the three months ended June 30, 2012, from $733,000 for the three ended June 30, 2011, and remained consistent at approximately $1.3 million for the six months ended June 30, 2012 and 2011. Shipping and handling costs attributable to our domestic operations decreased $31,000 and $18,000, to $140,000 and $286,000 for the three and six months ended June 30, 2012, from $171,000 and $304,000 for the three and six months ended June 30, 2011, primarily due to a decrease in sales during the three months ended June 30, 2012. Shipping and handling costs attributable to our EMEA operations decreased $105,000 and $29,000, to $377,000 and $833,000 for the three and six months ended June 30, 2012, respectively, from $482,000 and $862,000 for the three and six months ended June 30, 2011, as a result of decreased sales. Shipping and handling costs attributable to our Japanese operations decreased $13,000 to $67,000 for the three months ended June 30, 2012, from $80,000 for the three months ended June 30, 2011, and increased $33,000 from $88,000 for the six months ended June 30, 2011, to $121,000 for the six months ended June 30, 2012. The decrease in shipping and handling costs attributable to our Japanese operations for the three months ended June 30, 2012, when compared to the same period in the prior year, is attributable to costs incurred during the three months ended June 30, 2011 related to the opening of our Japan operations (and third-party warehouse) and were not the result of shipment of goods. The increase in shipping and handling costs attributable to our Japanese operations for the six months ended June 30, 2012, when compared to the same period in the prior year, is a result of increased sales.
Legal and other fees related to our intellectual property and associated enforcement efforts decreased $55,000 and $80,000, to $69,000 and $200,000 for the three and six months ended June 30, 2012, respectively, from $124,000 and $280,000 for the three and six months ended June 30, 2011, respectively, primarily as a result of cost containment efforts by management.
Consolidated payroll and payroll related costs, excluding those employees whose payroll and related costs are included in shipping and handling costs, decreased $66,000 and $53,000, to $857,000 and $1.7 million for the three and six months ended June 30, 2012, respectively, from $923,000 and $1.8 million for the three and six months ended June 30, 2011. Payroll and payroll related costs attributed to our domestic employees decreased $104,000 and $96,000, to $518,000 and $1.1 million for the three and six months ended June 30, 2012, respectively, from $622,000 and $1.2 million for the three and six months ended June 30, 2011, respectively, primarily due to decreases in accrued incentive compensation, offset by an increase in stock based compensation costs attributable to restricted stock units awarded in 2012. Payroll and payroll related costs attributed to our international operations increased $38,000 and $43,000, from $301,000 and $587,000 for the three and six months ended June 30, 2011, respectively, to $339,000 and $630,000 for the three and six months ended June 30, 2012, respectively, primarily due to an increase in headcount primarily as a result of the opening of our office in Japan during the latter part of the first quarter of 2011, offset by a decrease in incentive compensation and recognized stock based compensation costs.
Unallocated costs are those costs that are directly attributable to operating as a public company, as well as professional fees incurred at the consolidated level, including fees for tax, accounting and other consulting and professional services.
Other (Income) Expense, net
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
|
2012
|
2011
|
2012
|
2011
|
|||||||||||||
|
Other (Income) Expense (in thousands)
|
||||||||||||||||
|
Interest (income) expense, net
|
$ | (57 | ) | $ | (72 | ) | $ | (118 | ) | $ | (162 | ) | ||||
|
Other (income) expense, net
|
19 | (6 | ) | 5 | (9 | ) | ||||||||||
|
Exchange (gain) loss, net
|
47 | (59 | ) | 36 | (4 | ) | ||||||||||
|
Consolidated
|
$ | 9 | $ | (137 | ) | $ | (77 | ) | $ | (175 | ) | |||||
The decrease in interest income (expense), net is primarily the result of a decrease in interest income. Other income is the result of settlements of patent and trademark litigation. Litigation settlement payments related to intellectual property legal matters (whether received by the Company or paid by the Company) are reported as other income (expense). Legal fees related to intellectual property matters and associated enforcement are included in general and administrative expenses. Gains/losses resulting from foreign currency transactions are mainly attributable to intercompany loans due to our U.S. entity from our Belgian and Japanese entities which must be repaid in U.S. dollar.
Income Taxes
We recognized an income tax benefit of $70,000 and $161,000 for the three and six months ended June 30, 2012, respectively, representing effective income tax rates of 4.1% and 4.7%, respectively, compared to income tax expense of $42,000 and $160,000 for the three and six months ended June 30, 2011, respectively, representing effective income tax rates of (4.5)% and (8.0)%. Our effective rate differs from the statutory federal rate of 35% primarily due to domestic operating losses and operating losses in our Japanese operations for which no tax benefits have been recognized and foreign taxes at rates other than 35%, as well as for certain other items, such as state and local taxes and non-deductible expenses. While we did not record the benefit of losses from our domestic and Japanese operations for the three or six months ended June 30, 2012, profits and losses in our European operations resulted in an income tax benefit of approximately $49,000 for the six months ended June 30, 2012. Additionally, the Company recorded a net tax benefit of approximately $112,000 related to discrete items, consisting of approximately $129,000 of tax benefit related to certain tax losses arising from the Company’s restructuring; offset by approximately $17,000 in additional tax expense related to prior year items. We operate in multiple jurisdictions and our business is impacted by seasonality which causes variability in the consolidated effective tax rate during the year. We continually review our assertion regarding the valuation allowance, which includes an analysis of multiple factors, including projections, reversal of deferred tax liabilities and tax planning strategies.
Liquidity and Capital Resources
Our primary cash need is for working capital, which we generally fund with cash flows from operating activities, and may be impacted by fluctuations in demand for our products, investments in our infrastructure and expenditures on marketing and advertising. At June 30, 2012, we had a total of $19.0 million in cash and cash equivalents and $39.2 million in investments. Our investments will mature during the next 12 months and include investments in various debt securities. See Note 6 to our condensed consolidated financial statements for a discussion of our investments.
Cash provided by operating activities for the six months ended June 30, 2012 was $202,000, compared to cash used in operating activities of $5.5 million for the same period last year. Cash flows from operating activities are comprised of net loss recognized for the period adjusted for non-cash items and changes in operating assets and liabilities.
The decrease in accounts receivable is primarily due to a decrease in sales and timing. The decrease in inventories is primarily the result of sales during the quarter offset by managed inventory purchases to maintain appropriate inventory levels. The net decreases in accounts payable and accrued liabilities are primarily due to payments during the period for inventory purchase related liabilities outstanding as of December 31, 2011.
As part of an initiative to improve efficiency and reduce costs, we began taking steps in the first quarter of 2012 to close our office in Brussels, Belgium and transition the business operations conducted through that office to our French, German and U.S. offices. In connection with these initiatives, we recognized $457,000 in severance and one-time termination benefit costs, $92,000 in contract termination costs, $185,000 in other costs related to the restructuring, including, but not limited to, costs to close our office in Belgium, transfer business operations to our German, French and U.S. offices, and repatriate our Vice President, International back to the United States, and $34,000 in fixed asset impairment charges. These costs are reported as restructuring charges in the statement of operations. As of June 30, 2012, $314,000 in severance and one-time termination benefits and $102,000 of other costs related to the restructuring have been paid; $143,000 in severance and one-time termination benefits, $92,000 in contract termination costs and $83,000 of other costs related to the restructuring are included in accrued liabilities. The outstanding severance and one-time termination benefits liability will be paid in monthly installments through March 31, 2013, and approximately $47,000 of the outstanding contract termination costs are attributable to the termination of our operating lease for office space in Brussels, Belgium under which the Company must continue to make monthly payments through April 30, 2014. The balance of the outstanding contract termination costs and other costs related to the restructuring are expected to be paid during the third quarter of 2012. This initiative was substantially completed on June 30, 2012, although we expect to incur some additional costs in 2012 with the total cumulative pre-tax costs estimated to be between $0.8 million to $0.9 million.
Net cash used in operating activities for the six months ended June 30, 2011, was primarily attributable to an increase in accounts receivable due to timing of sales and the collection of outstanding receivables and an increase in inventory primarily as the result of inventory purchased from our former distributor in Japan.
Our cash flows from changes in operating assets and liabilities are subject to seasonality.
As of June 30, 2012, we had open purchase commitments of $2.8 million for the purchase of inventory. These commitments are expected to be settled during the third quarter of 2012 ($1.6 million) and the fourth quarter of 2012 ($1.2 million).
Net cash provided by (used in) investing activities for the three and six months ended June 30, 2012 and 2011 is primarily the result of investment activity of our excess cash.
Cash used in financing activities for the six months ended June 30, 2012, as well as for the six months ended June 30, 2011, was for payments of previously acquired goodwill and intangibles associated with the termination of agreements with our former independent distributors in the German and French markets in 2008. As of June 30, 2012, we have outstanding liabilities of $183,000 due to our former independent distributor in the German market, $85,000 of which are recorded as current liabilities and are expected to be settled during the next 12 months. All liabilities due to our former independent distributor in the French market have been settled.
We believe our cash flows from operating activities, together with the cash on hand (including cash equivalents) and investments, will be sufficient to meet our liquidity needs and capital expenditure requirements for at least the next 12 months.
Contractual Obligations and Commercial Commitments
There were no material changes in our contractual obligations as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011.
In connection with the Company’s initiative to improve efficiency and reduce costs, in June 2012, Heeling Sports EMEA gave notice that it would be terminating its operating lease for office space in Brussels, Belgium, effective April 30, 2014, which is the end of current lease term. This lease was entered into effective May 1, 2008 for a nine year term with the option to terminate the lease at the end of each three year period. Heeling Sports EMEA did not terminate this lease at the end of the first three year period. The Company will make monthly payments under the lease through April 30, 2014. The aggregate amount of monthly payments to be made under the lease is approximately $47,000, and the Company has recorded this amount as a contract termination cost as part of the Company’s restructuring of its international operations.
Seasonality
Similar to other vendors of footwear products, sales of our products are subject to seasonality. There are three major buying seasons in footwear: spring/summer, back-to-school and holiday. We offer two primary lines: spring/summer and a combined back-to-school/holiday line. A few new styles will typically be added for the holiday season. Shipments for spring/summer take place during the first quarter and early weeks of the second quarter; shipments for back-to-school generally begin in June and finish in late August; and shipments for the holiday season begin in October and finish in early December. Historically, we have experienced greater revenues in the second half of the year than those in the first half due to a concentration of shopping around the back-to-school and holiday seasons.
Vulnerability Due to Customer Concentration / Geographical Concentration
Oxylane Group accounted for 10% and 9% of our net sales for the three and six months ended June 30, 2012, respectively, and 13% and 14% for the three and six months ended June 30, 2011, respectively. Oxylane Group is a French sporting goods retail chain operating under the name Decathlon. Sales to Alegria Corp Ltd, our independent distributor in Russia, accounted for 12% and 9% of our net sales for the three and six months ended June 30, 2012, respectively, and 8% and 9% for the three and six months ended June 30, 2011, respectively. No other retail customer or independent distributor accounted for 10% or more of our net sales for the three or six months ended June 30, 2012 and 2011.
Sales in the Company’s Italian market accounted for 17% and 22% of consolidated net sales for the three and six months ended June 30, 2012, respectively, and 25% of consolidated net sales for both the three and six months ended June 30, 2011. Sales in the Company’s French market accounted for 19% and 17% of consolidated net sales for the three and six months ended June 30, 2012, respectively, and 16% and 19% of consolidated net sales for the three and six months ended June 30, 2011, respectively. Sales in the Company’s German market accounted for 7% and 9% of consolidated net sales for the three and six months ended June 30, 2012, respectively, and 8% and 10% of consolidated net sales for the three and six months ended June 30, 2011, respectively. Sales to the Company’s independent distributor in Russia accounted for 12% and 9% of consolidated net sales for the three and six months ended June 30, 2012, respectively, and 8% and 9% of consolidated net sales for the three and six months ended June 30, 2011, respectively. No other country, other than the United States, accounted for 10% or more of the Company’s consolidated net sales for the three and six months ended June 30, 2012 and 2011.
We anticipate that our net sales may remain concentrated for the foreseeable future. If any of our significant retail customers or independent distributors decrease their purchases of our products or stop purchasing our products, our net sales and results of operations could be adversely affected.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements for a discussion of recent accounting pronouncements.
|
Item 4.
|
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures. Management has conducted an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a—15(e) and 15d—15(e) of the Securities Exchange Act of 1934) as of June 30, 2012. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of June 30, 2012 were effective.
Inherent Limitations on Effectiveness of Controls. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control deficiencies and instances of fraud, if any, within the Company have been detected.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the second quarter of 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
|
Item 1.
|
Legal Proceedings
|
Due to the nature of the Company’s products, from time to time the Company has to defend against personal injury and product liability claims arising out of personal injuries that allegedly are suffered using the Company’s products. To date, none of these claims has had a material adverse effect on the Company. The Company is also engaged in various claims and legal proceedings relating to intellectual property matters, especially in connection with enforcing the Company’s intellectual property rights against the various third parties importing and selling knockoff products domestically and internationally. Often, such legal proceedings result in counterclaims against the Company that the Company must defend. The Company believes that none of the pending personal injury, product liability or intellectual property legal matters will have a material adverse effect upon the Company’s financial position, cash flows or results of operations.
|
Item 1A.
|
Risk Factors
|
There were no material changes to the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may adversely affect our business, financial condition and/or results of operations.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Unregistered Sales of Equity Securities
During the period covered by this Quarterly Report on Form 10-Q, we did not sell or issue any unregistered equity securities.
Initial Public Offering of Our Common Stock and Use of Proceeds
The amounts of net offering proceeds from our initial public offering completed on December 13, 2006 used by the Company are set forth in our Annual Report on Form 10-K for the period ended December 31, 2011. During the period covered by this Quarterly Report on Form 10-Q, we did not use any additional proceeds from our initial public offering.
|
Item 5.
|
Other Information
|
Not applicable.
|
Item 6.
|
Exhibits
|
|
Exhibit No.
|
|
Description
|
|
31.1
|
|
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 by Thomas C. Hansen, Chief Executive Officer.†
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|
|
|
|
|
31.2
|
|
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 by Craig D. Storey, Chief Financial Officer.†
|
|
|
|
|
|
32.1
|
|
Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.†
|
|
|
|
|
|
101.INS
|
|
Instance Document † #
|
|
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema Document † #
|
|
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document † #
|
|
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document † #
|
|
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document † #
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|
|
|
|
|
†
|
|
Filed herewith.
|
|
|
|
|
|
#
|
|
Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is not deemed filed or part of a registration statement for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and is otherwise not subject to liability under these sections.
|
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
HEELYS, INC.
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|
|
|
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|
|
Date: August 9, 2012
|
By:
|
/s/ Thomas C. Hansen
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|
|
Thomas C. Hansen
|
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|
|
Chief Executive Officer (Principal Executive Officer)
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|
|
HEELYS, INC.
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|
|
|
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|
|
Date: August 9, 2012
|
By:
|
/s/ Craig D. Storey
|
|
|
|
Craig D. Storey
|
|
|
|
Chief Financial Officer (Principal Accounting Officer)
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INDEX TO EXHIBITS
|
Exhibit No.
|
Description
|
|
|
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 by Thomas C. Hansen, Chief Executive Officer.†
|
||
|
Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 by Craig D. Storey, Chief Financial Officer.†
|
||
|
Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350.†
|
||
|
101.INS
|
Instance Document † #
|
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document † #
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|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document † #
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|
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document † #
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|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document † #
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|
|
†
|
Filed herewith.
|
|
|
#
|
Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is not deemed filed or part of a registration statement for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and is otherwise not subject to liability under these sections.
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23