Heelys, Inc. Reports Litigation Settlements

DALLAS--(BUSINESS WIRE)--Heelys, Inc. (NASDAQ: HLYS) announced today that on November 17, 2009, the federal judge presiding over the previously disclosed consolidated securities class action and consolidated shareholder derivative action approved the settlements of those lawsuits and signed a Final Judgment and Order of Dismissal with Prejudice with respect to each lawsuit. These cases were pending in the U.S. District Court for the Northern District of Texas, Dallas Division. These settlement agreements were described in the Company’s prior filings. Defendants did not admit any liability or wrongdoing in the settlements.

“although the Company continues to believe that the claims asserted in these lawsuits were without merit and that defendants would have prevailed at trial, we are pleased to have resolved these claims and to continue to focus on Heelys’ business initiatives.”

Gary L. Martin, chairman of the board of Heelys, Inc., commented “although the Company continues to believe that the claims asserted in these lawsuits were without merit and that defendants would have prevailed at trial, we are pleased to have resolved these claims and to continue to focus on Heelys’ business initiatives.”

The consolidated securities class action, Brian Rines, Individually and On Behalf of All Others Similarly Situated vs. Heelys, Inc., et al., arose from a number of lawsuits filed in the latter part of 2007. The plaintiffs asserted claims under the federal securities laws against the Company and certain of its former and current officers and directors in connection with the Company’s 2006 initial public offering. The consolidated derivative action, In Re Heelys Inc. Derivative Litigation, arose from lawsuits that were originally filed in the latter part of 2007 against certain of The Company’s former and current officers and directors. Plaintiffs asserted breach of fiduciary duty and other claims relating to the Company’s 2006 initial public offering. The Company’s insurance policies funded the majority of the settlement amounts and related legal defense costs. As previously disclosed, during the third quarter of 2009, the Company paid its share of the settlement amounts for those matters. Also as part of the settlement of the derivative action, the Company has agreed to institute certain corporate governance changes.

About Heelys, Inc.

Heelys, Inc. designs, markets and distributes innovative, action sports-inspired products under the HEELYS(R) brand targeted to the youth market. The Company's 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. HEELYS-wheeled footwear provides users with a unique combination of fun and style that differentiates it from other footwear and wheeled sports products.

Forward Looking Statements

Certain statements in this press release and oral statements made from time to time by representatives of the Company are "forward-looking statements" for purposes of the safe harbor provisions of The Private Securities Litigation Reform Act of 1995, including in particular, statements regarding our guidance, outlook for future events, financial performance, customer demand, growth and profitability. In some cases, you can identify forward-looking statements by terminology such as "subject to," "believes," "anticipates," "plans," "expects," "intends," "estimates," "may," "will," "should," "can," the negatives thereof, variations thereon, similar expressions, or discussions of strategy. All forward-looking statements are based upon management's current expectations and various assumptions, but they are inherently uncertain, and the Company may not realize its expectations and the underlying assumptions may not prove correct. The Company's actual results and the timing of events could differ materially from those described in or implied by the forward-looking statements as a result of risks and uncertainties, including, without limitation, the fact that substantially all of the Company's net sales are generated by one product, continued changes in fashion trends and consumer preferences and general economic conditions, the Company's intellectual property may not restrict competing products that infringe on its patents from being sold, the Company's dependence on independent manufacturers, the Company may not be able to successfully introduce new product categories, the outcome of lawsuits filed against the Company, which could have a material adverse effect on us, and additional factors which are detailed in the Company's filings with the Securities and Exchange Commission, including the Risk Factors contained in the Company's Annual Report on Form 10-K. Investors, potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements made herein are only made as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.