Year-over-Year Quarterly Comparisons

Net sales for the first quarter of 2009 were $9.2 million compared to net sales of $13.1 million in the corresponding period a year ago. Gross profit was $2.9 million, or 30.8% of net sales, compared to gross profit of $2.8 million, or 21.5% of net sales in the first quarter of 2008. Total selling, general and administrative expenses were $5.3 million compared to $6.1 million in the first quarter of last year. The Company reported a net loss of $1.3 million, or ($0.05) per fully diluted share versus a net loss of $1.0 million, or ($0.04) per fully diluted share in the first quarter of 2008.

Sequential Quarterly Comparisons

Net sales for the first quarter of 2009 were $9.2 million compared to net sales of $15.6 million in the fourth quarter of 2008. Gross profit was $2.9 million, or 30.8% of net sales, compared to $3.0 million, or 18.9% of net sales for the fourth quarter of last year. Total selling, general and administrative expenses were $5.3 million compared to $8.7 million in the fourth quarter of 2008. The Company reported a net loss of $1.3 million, ($0.05) per fully diluted share versus a net loss of $5.2 million, or ($0.19) per fully diluted share in the fourth quarter of last year.

Commenting on the results, Mike Hessong, interim chief executive officer of the Company, said, "In the current difficult environment, we continue to focus on managing inventory, reducing expenses, and preserving our strong cash and balance sheet position. While we expected continued pressure on our top line, we were able to increase our gross margin and reduce certain operating expenses, which is reflected in our improved operating performance versus a year ago. During the quarter, we also developed a new web site, sold our one millionth pair of Heelys in Japan and launched a new grass roots driven marketing campaign. While we are not assuming an improvement in the overall retail environment during the near-term, we are encouraged by the early reaction to our new styles and we believe that we are in a better position from both a product and inventory standpoint as we head towards the summer and back-to-school selling seasons."

Balance Sheet

As of March 31, 2009, the Company had cash and cash equivalents of $66.1 million compared with $100.8 million as of March 31, 2008 and $68.4 million as of December 31, 2008. As a reminder, the Company paid a special one-time dividend of $1 per share of common stock, totaling $27.6 million in the fourth quarter of 2008. Inventory as of March 31, 2009 decreased to $11.6 million versus $12.2 million as of March 31, 2008 and $12.1 million as of December 31, 2008.

Strategic Review

The Company also announced that its board of directors has completed its previously announced review of strategic alternatives for the Company. With the assistance of its investment banking advisor, Houlihan Lokey, the review consisted of an extended and extensive process of analyzing and exploring various strategic alternatives for enhancing shareholder value, including the potential sale of the Company as well as other acquisitions and opportunities. Heelys' Board of Directors has determined that it is currently in the best interest of the company and its stockholders to continue operating and building Heelys as an independent company. The Board's determination was made in light of various factors, including the Company's current operating results, the Board's interest in enhancing the Company's management team, and the existing acquisition environment for discretionary consumer product companies.

Gary Martin, Chairman of the Board commented "The Board will continue to evaluate the Company's opportunities in order to maximize the long-term growth potential of this business and increase shareholder value. At the same time, the management team will remain focused on executing our current business plan and navigating through this challenging economic environment."

Conference Call Information

A conference call to discuss first quarter fiscal 2009 financial results is scheduled for today (May 14, 2009) at 4:30 PM Eastern Time. A webcast of the call will take place simultaneously and can be accessed by clicking http://investors.heelys.com/index.cfm or www.opencompany.info. To listen to the broadcast, your computer must have Windows Media Player installed. If you do not have Windows Media Player, go to the latter site prior to the call, where you can download the software for free.

About Heelys, Inc.

Heelys, Inc. designs, markets and distributes innovative, action sports-inspired products under the HEELYS® brand targeted to the youth market.