mikehir...@aol.com

I read the earnings release and listened to the conference call and
still couldn't explain the puzzling 29% difference in the full year
diluted earnings of $1.16 and the much higher non diluted number of
$1.50 per share.
So I called Investor Relations for an explanation and found out that
the 29% difference was largely due to one time IPO expenses. And going
forward the 7% difference in Q4 06 is a lot more representative than
the 29% full year difference.

So adjusting away the IPO expenses I figure the "real" earnings power
for 2006 was the non diluted $1.50 x .93 = $1.40 per share.
Most companies would have broken out that number of earnings before
non recurring expenses or charges, but Heelys chose not to. Since the
IPO expenses will not recur in 2007, they can meet the current
consensus estimate of $1.40 without any sales growth. More likely they
will report well above the consensus estimate.

Say you are expecting 30% sales growth for 2007 with unchanged
margins. Since the IPO expenses will not recur I believe it to be more
accurate to project that growth rate over the higher $1.40 number x
1.3 = $1.82 per share.

I am currently long HLYS.