HEI, Inc. (Pink Sheets:HEII) (http://www.heii.com) today announced its financial results for the third quarter of fiscal year 2013, which ended September 28, 2013.

Sales for the third quarter were $10,659,000, compared to $9,882,000 for the third quarter of 2012. The Company generated net income of $70,000 for the third quarter of 2013 compared to net loss of ($503,000) for the same period in 2012. Sales for the first nine months of 2013 were $36,193,000, compared to $28,595,000 for the first nine months of 2012. The Company generated net income of $1,385,000 for the first nine months ended September 28, 2013 compared to net loss of ($1,012,000) for the first nine months of 2012.

Sales were up 7.9% year-over-year in the third quarter as a result of increases in our Victoria and Tempe operations, partially offset by a slight decrease in our Boulder operation. Gross margins improved to 13% of sales on a consolidated basis in the third quarter 2013 compared to 10% in the third quarter 2012 as a result of Victoria and Tempe gross margins improving due to cost reductions and improved efficiencies associated with the increased sales volumes, partially offset by a decrease in the Boulder operation due to product mix changes and the lower sales levels as compared to the prior year.

"The volume increases, along with our inventory management improvements, have significantly improved HEI's cash flow. Our primary focus will continue to be increasing our sales pipelines and improving our operations and systems throughout the company. Our current contracts with government contractors are nearing completion in our Victoria operation. As noted previously, we continue to be guardedly optimistic that our participation in the programs with government contractors will continue with limited interruption and will be part of our continued growth," commented HEI CEO, Mark B. Thomas.

 
HEI, Inc. designs, develops and manufactures ultra-miniature microelectronics, high density interconnect flexible and rigid-flex substrates, electromechanical hardware, and embedded software with complex user interface 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) 1495 Steiger Lake Lane, Victoria, MN 55386
HEI - Boulder (Contract Design, Development, and Medical Box Build) 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
(In thousands, except share and per share data)
       
September 28, 2013   December 29, 2012
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $ - $ -
Accounts receivable, net 5,864 4,538
Inventories, net 3,632 5,454
Deferred income taxes 804 804
Other current assets   294     712  
Total current assets   10,594     11,508  
 
Property and equipment:
Land 216 216
Building and improvements 4,336 4,337
Fixtures and equipment 29,651 28,554
Accumulated depreciation and amortization   (28,287 )   (27,005 )
Property and equipment, net 5,916 6,102
Security deposit 230 230
Other long-term assets   189     205  
Total assets $ 16,929   $ 18,045  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,018 $ 3,129
Accrued liabilities 1,581 1,019
Customer deposit liabilities 11 712
Current maturities of long-term liabilities   1,132     1,120  
Total current liabilities   4,742     5,980  
 
Long-term liabilities:
Deferred income taxes 804 804
Other long-term liabilities, less current maturities 2,215 2,465
Long-term debt, less current maturities   4,406     5,583  
Total long-term liabilities, less current maturities   7,425     8,852  
Total liabilities   12,167     14,832  
 
Commitments and contingencies
 
Shareholders' equity:
Undesignated stock - -
Convertible preferred stock, $.05 par 2 2
Common stock, $.05 par 513 513
Additional paid-in capital 28,805 28,641
Accumulated deficit   (24,558 )   (25,943 )
Total shareholders' equity   4,762     3,213  
Total liabilities and shareholders' equity $ 16,929   $ 18,045  
 
 
HEI, INC.
STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
               
Three Months Ended Nine Months Ended
September 28, 2013 September 29, 2012 September 28, 2013   September 29, 2012
(Unaudited) (Audited) (Unaudited) (Audited)
 
Net sales $ 10,659 $ 9,882 $ 36,193 $ 28,595
Cost of sales   9,291     8,938     30,629     25,404  
Gross profit 1,368 944 5,564 3,191
13 % 10 % 15 % 11 %
Operating expenses:
Selling, general and administrative   1,060     1,336     3,357     3,928  
Operating income (loss) 308 (392 ) 2,207 (737 )
 
Interest expense, net (81 ) (113 ) (259 ) (289 )
Other income (expense), net   (132 )   3     (504 )   17  
Income (loss) before income taxes 96 (501 ) 1,444 (1,009 )
 
Income tax expense   26     1     59     3  
Net income (loss) $ 70   $ (503 ) $ 1,385   $ (1,012 )
 

Income (loss) per common share:

Basic $ 0.01 $ (0.05 ) $ 0.13 $ (0.10 )
Diluted $ 0.01 $ (0.05 ) $ 0.13 $ (0.10 )
 

Weighted average common shares outstanding:

Basic 10,478,886 10,120,000 10,341,316 10,120,000
Diluted 11,035,147 10,120,000 10,897,578 10,120,000
 
Certain minor reclassifications have been made to our prior period financial information in order to conform to the current year presentation.
 

HEI, Inc.
Mark B. Thomas, CEO, 952-443-2500