Hei (HEIIQ) 8-K Hei, Inc. Announces Third Quarter Fiscal Year 2002 Resultsreports Third Quarter Profit

Exhibit 99.1

NEWS RELEASE

6385 Old Shady Oak Road
Eden Prairie, Minnesota 55344 USA
952-443-2500

CONTACTS:	For Immediate Release
Anthony J. Fant, CEO     Donald R. Reynolds, President/COO     Steve E. Tondera, CFO

HEI, INC. ANNOUNCES THIRD QUARTER FISCAL YEAR 2002 RESULTS

REPORTS THIRD QUARTER PROFIT

MINNEAPOLIS, June 20, 2002 — HEI, Inc. (Nasdaq: HEII, www.heii.com) today announced financial results for its third quarter ended June 1, 2002. Net sales for the third quarter were $8,500,000 as compared to $10,331,000 for the third quarter of the previous year, and up 9% from second quarter net sales of $7,795,000. Net income for the third quarter was $115,000, or 2 cents per share fully diluted, compared to a net loss of $652,000, or 13 cents per share fully diluted for the same period a year ago, and a net loss of $310,000 or 5 cents per share fully diluted for second quarter.

“In the third quarter HEI returned to profitability earning 2 cents per share, which is consistent with our previous guidance. We had a higher value mix of products, improved yields, and strong expense controls as shown by overhead and operating expense reductions,” said Don Reynolds, President and Chief Operating Officer of HEI, Inc. “Third quarter gross margins increased to 25% as compared to 16% for the third quarter of the previous year, and 20% for the second quarter of this year,” added Mr. Reynolds.

“Based on bookings early in the quarter, it looks as though fourth quarter sales may be down slightly from the third quarter and similar to the fourth quarter of the previous year. We continue to see new program wins in the medical and hearing markets, and anticipate sales growth in these markets as we move into fiscal year 2003,” said Anthony Fant, Chairman and Chief Executive Officer of HEI, Inc. “Our new products and the proprietary technology we’ve invested in over the past year continue to gain acceptance in the broadband fiber-optic and wireless communications markets. We are confident that HEI is positioned to deliver products to the leaders in these industries as growth in the telecommunications markets return. Our goal is to remain profitable as we continue to bring new products to each of our focus markets,” Mr. Fant added.

HEI, Inc. specializes in the design and manufacture of high performance, ultraminiature microelectronic devices and high-technology products incorporating those devices. HEI contributes to its customers’ competitiveness in the hearing, medical, communications, wireless and contact smart cards, other RF applications, and industrial markets through innovative design solutions and by the application of state-of-the art materials, processes and manufacturing capabilities.

Corporate Headquarters
Microelectronics Division
High Density Interconnect Division
RF Identification and Smart Card Division 6385 Old Shady Oak Road, Suite 280, Eden Prairie, MN 55344
PO Box 5000, 1495 Steiger Lake Lane, Victoria, MN 55386
610 South Rockford Drive, Tempe, AZ 85281
1546 Lake Drive West, Chanhassen, MN 55317

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. Statements contained in this press release, including the growth of specific markets, and the estimated HEI revenue and profit growth and growth rates, are forward looking statements. All of such forward-looking statements involve risks and uncertainties including, without limitation, adverse business or market conditions, the ability of HEI to secure and satisfy customers, the availability and cost of materials from HEI’s suppliers, adverse competitive developments, change in or cancellation of customer requirements, and other risks detailed from time to time in HEI’s SEC filings.

HEI, Inc.
Consolidated Balance Sheets (Unaudited)
(In thousands)

		June 1, 2002			August 31, 2001
Assets
Current assets:
	Cash and cash equivalents	$	3,475		$	4,393
	Accounts receivable, net		4,105			4,617
	Inventories		3,965			4,284
	Other current assets		1,269			635
Total current assets			12,814			13,929
Property and equipment:
	Land		216			216
	Building and improvements		4,315			4,316
	Fixtures and equipment		20,784			18,810
	Accumulated depreciation		(13,705	)		(11,714	)
Net property and equipment			11,610			11,628
Other long-term assets			2,049			1,971
Total assets		$	26,473		$	27,528
Liabilities and Shareholders’ Equity
Current liabilities:
	Revolving line of credit	$	1,755		$	10
	Current maturities of long-term debt		1,441			1,441
	Accounts payable		1,752			1,912
	Accrued employee related costs		623			839
	Accrued liabilities		847			934
Total current liabilities			6,418			5,136
Long-term liabilities, less current maturities			2,659			3,972
Shareholders’ equity:
	Undesignated stock; 5,000 shares authorized; none issued		—			—
	Common stock, $.05 par; 10,000 shares authorized; 6,010 and 5,956 shares issued and outstanding		301			298
	Paid-in capital		16,572			16,310
	Retained earnings		1,789			3,078
	Notes receivable		(1,266	)		(1,266	)
Total shareholders’ equity			17,396			18,420
Total liabilities and shareholders’ equity		$	26,473		$	27,528

HEI, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share amounts)

			Three Months Ended						Nine Months Ended
			June 1, 2002			June 2, 2001			June 1, 2002			June 2, 2001
Net sales			$	8,500		$	10,331		$	22,424		$	36,936
Cost of sales				6,346			8,663			18,346			30,242
	Gross profit			2,154			1,668			4,078			6,694
Operating expenses:
	Selling, general and administrative			1,369			1,434			3,976			4,527
	Research, development and engineering			579			696			1,945			1,830
	Unusual charges			—			425			—			1,693
	Operating income (loss)			206			(887	)		(1,843	)		(1,356	)
Other expense, net				(27	)		(106	)		(109	)		(670	)
	Operating income (loss) before income taxes			179			(993	)		(1,952	)		(2,026	)
Income tax (expense) benefit				(64	)		341			663			691
	Net income (loss)			115			(652	)		(1,289	)		(1,335	)
Net income (loss) per common share:
	Basic		$	0.02			($0.13	)		($0.22	)		($0.28	)
	Diluted		$	0.02			($0.13	)		($0.21	)		($0.28	)
Weighted average common shares outstanding:
		Basic		5,999			4,930			5,985			4,831
		Diluted		6,032			4,930			6,016			4,831

HEI, Inc.
Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

		Nine Months Ended
		June 1, 2002			June 2, 2001
Cash flow provided by operating activities:
	Net loss		($1,289	)		($1,335	)
	Equity in net loss from MSC		—			31
	Depreciation and amortization		2,155			2,213
	Accounts receivable allowance		—			1,230
	Deferred income tax benefit		(395	)		(615	)
	Other		97			—
	Non-cash expenses for CMED transaction		—			161
	Loss on disposal of property and equipment		—			63
Changes in operating assets and liabilities:
	Accounts receivable		512			(266	)
	Inventories		319			18
	Income taxes		—			(86	)
	Other current assets		(326	)		(72	)
	Accounts payable		(160	)		2,050
	Accrued employee related costs and accrued liabilities		(216	)		121
Net cash flow provided by operating activities			697			3,513
Cash flow from investing activities:
	Additions to property and equipment		(2,200	)		(2,995	)
	Decrease in restricted cash		—			86
	Additions to patents		(87	)		(55	)
	Other long term prepaid assets		—			(500	)
Net cash flow used for investing activities			(2,287	)		(3,464	)
Cash flow from financing activities:
	Issuance of common stock and other		265			68
	Increase in deferred financing fees		(25	)		(33	)
	Net issuances (repayments) of long-term debt		(1,313	)		547
	Borrowings on (repayments of) revolving line of credit		1,745			(1,064	)
Net cash flow provided by (used for) financing activities			672			(482	)
Net decrease in cash and cash equivalents			(918	)		(434	)
Cash and cash equivalents, beginning of period			4,393			484
Cash and cash equivalents, end of period		$	3,475		$	50
Supplemental disclosures of cash flow information:
Interest paid		$	262		$	250
Income taxes paid			—			14