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HEI, Inc. Announces Third Quarter 2012 Results

HEI, Inc. (Pink Sheets: HEII) (http://www.heii.com) today announced its financial results for the third quarter of fiscal year 2012, which ended September 29, 2012.

Sales for the third quarter were $9,882,000, compared to $9,221,000 for the third quarter of 2011. The Company generated a net loss of ($503,000) for the third quarter of 2012 compared to net income of $162,000 for the same period in 2011. Sales for the first nine months of 2012 were $28,595,000, compared to $28,215,000 for the first nine months of 2011. The Company generated a year-to-date net loss of ($1,012,000) for 2012 compared to a net income of $686,000 for the first nine months of 2011.

Sales were up 7.2% year-over-year in the third quarter as a result of increases in our Victoria operation which was partially offset by decreased sales in our other two operating divisions. Gross margins were down on a consolidated basis with Victoria gross margins improving as a result of improved efficiencies associated with the increased sales volumes while the other two operating divisions’ gross margins declined as a result of product mix changes and the lower sales levels as compared to the prior year. The net loss for the third quarter of fiscal 2012 included an increase to our reserve for inventory obsolescence of $380,000, which had no cash impact during the quarter.

“Increasing sales continues to be our focus and product demand and customer backlogs are strong in our Victoria plant, and our Tempe and Boulder divisions are working to increase sales penetration,” commented HEI CEO, Mark B. Thomas.

Also during the third quarter, Thomas Leahy resigned from the board of directors for personal reasons, and Timothy Floeder was elected to the board of directors. Mr. Leahy continues to be a significant shareholder of HEI.

 
HEI, Inc. designs, develops and manufactures ultra-miniature microelectronics, substrates, systems, connectivity and software solutions for customers engaged in the medical, hearing, telecommunications, military, aerospace, and industrial markets. HEI provides its customers with a single point of contact that can take an idea from inception to a fully functional and cost effective product utilizing innovative design solutions and by the application of state-of-the-art materials, processes and manufacturing capabilities.
 
Corporate & HEI –Victoria (Microelectronics Contract Manufacturing and ATE) 1495 Steiger Lake Lane, Victoria, MN 55386
HEI – Boulder (Design and Development, Box Build and ATE) 4801 North 63rd Street, Boulder, CO 80301
HEI – Tempe (Quick Turn and Production High Density Interconnect Flex and Rigid-Flex) 610 South Rockford Drive, Tempe, AZ 85281
 

FORWARD LOOKING INFORMATION
Information in this news release, which is not historical, includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as “may,” “will,” “expect,” “anticipate,” “believe,” “intend,” “estimate,” “continue,” and similar words. Statements contained in this press release, including the implementation of business strategies, growth of specific markets, improved results and estimated HEI revenue, cash flow and profits, are forward looking statements. All such forward-looking statements involve risks and uncertainties including, without limitation, adverse business and market conditions, the ability of HEI to secure and satisfy customers, the availability and cost of materials from HEI’s suppliers, HEI’s ability to satisfy financial or other obligations or covenants set forth in its financing agreements, adverse competitive developments, change in or cancellation of customer requirements, collection of receivables and outstanding debt, HEI’s ability to control fixed and variable operating expenses, and other risks detailed in previous HEI SEC filings. Since HEI is no longer reporting to the SEC, readers are cautioned to weigh the potential for additional risk factors based on ongoing business activities and the current economic conditions. The information set forth herein should be read in light of such risks. We undertake no obligation to update these statements to reflect ensuing events or circumstances, or subsequent actual results.

 
 
HEI, INC.
BALANCE SHEETS
 

September 29, 2012

   

December 31, 2011

(In thousands, except share and per share data)

ASSETS

Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable, net 5,459 5,489
Inventories, net 6,081 4,680
Deferred income taxes 447 447
Other current assets   814     253  
Total current assets   12,801     10,869  
 
Property and equipment:
Land 216 216
Building and improvements 4,337 4,337
Fixtures and equipment 28,329 26,676
Accumulated depreciation and amortization   (26,568 )   (25,788 )
Property and equipment, net 6,314 5,441
Security deposit 230 230
Other long-term assets   221     328  
Total assets $ 19,566   $ 16,868  
 

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:
Accounts payable $ 4,177 $ 2,151
Accrued liabilities 1,290 701
Customer deposit liabilities 172 11
Current maturities of long-term liabilities   1,116     927  
Total current liabilities   6,755     3,790  
 
Long-term liabilities:
Deferred income taxes 447 447
Other long-term liabilities, less current maturities 2,547 2,443
Long-term debt, less current maturities   6,428     5,933  
Total long-term liabilities, less current maturities   9,422     8,823  
Total liabilities   16,177     12,613  
 
Commitments and contingencies
 
Shareholders’ equity:
Undesignated stock - -
Convertible preferred stock, $.05 par 2 2
Common stock, $.05 par 506 506
Additional paid-in capital 28,579 28,433
Accumulated deficit   (25,698 )   (24,686 )
Total shareholders’ equity   3,389     4,255  
Total liabilities and shareholders’ equity $ 19,566   $ 16,868  

Certain minor reclassifications have been made to our prior period financial information in order to conform to the current year presentation.

 
HEI, INC.
STATEMENTS OF OPERATIONS
 
   

Three Months Ended

   

Nine Months Ended

September 29, 2012

   

October 1, 2011

September 29, 2012

   

October 1, 2011

(In thousands, except share and per share data)

 
Net sales $ 9,882 $ 9,221 $ 28,595 $ 28,215
Cost of sales   8,846     7,712     25,008     23,596  
Gross profit 1,037 1,509 3,587 4,619
 
Operating expenses:
Selling, general and administrative 1,337 1,100 3,876 3,285
Research, development and engineering   92     174     448     423  
Operating income (loss) (392 ) 235 (737 ) 910
 
Interest expense, net (113 ) (90 ) (289 ) (245 )
Other income (expense), net   3     17     17     20  
Income (loss) before income taxes (501 ) 162 (1,009 ) 686
 
Income tax expense   2     -     3     -  
Net income (loss) $ (503 ) $ 162   $ (1,012 ) $ 686  
 

Income (loss) per common share:

Basic $ (0.05 ) $ 0.02 $ (0.10 ) $ 0.07
Diluted $ (0.05 ) $ 0.02 $ (0.10 ) $ 0.07
 

Weighted average common shares outstanding:

Basic 10,120,000 10,045,000 10,120,000 9,933,000
Diluted 10,120,000 10,045,000 10,120,000 9,933,000

Certain minor reclassifications have been made to our prior period financial information in order to conform to the current year presentation.

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