NEWS RELEASE
1495 Steiger Lake Lane
Victoria, Minnesota 55386
952-443-2500
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| CONTACTS: | | For Immediate Release |
| Mark B. Thomas, CEO | | |
HEI Announces Fourth Quarter and Fiscal 2006 Results
MINNEAPOLIS, MINNESOTA December 1, 2006— HEI, Inc. (Nasdaq:HEII) (www.heii.com) (“HEI”) today announced its financial results for its fourth quarter and full fiscal year, which ended September 2, 2006.
HEI achieved net sales of $13.9 million in the fourth quarter of fiscal 2006, representing an 8% reduction from net sales of $15.1 million reported in the fourth quarter of fiscal 2005. The Company reported net loss of $2.6 million or ($0.27) per diluted share in the fourth quarter this year as compared to net income of $204,000 or $0.02 per share in the prior year. The operating loss for the fourth quarter of fiscal 2006 was $2.2 million as compared to an operating income of $387,000 in the fourth quarter of fiscal 2005. Operating income for the fourth quarter of fiscal 2006 was adversely impacted by an $813,000 charge to cost of sales from our change in accounting estimate relating to our inventory overhead calculations and $115,000 of employee stock-based compensation expense related to the adoption of SFAS 123(R) compared to no employee stock-based compensation expense in the fourth quarter of fiscal 2005.
For the fiscal year ended September 2, 2006, net sales were $52.6 million, a decrease of 7% from net sales of $56.6 million for the fiscal year ended August 31, 2005. The Company reported a net loss for fiscal year 2006 of $6.1 million or ($0.64) per diluted share as compared with net income of $355,000 or $0.04 per share for fiscal year 2005. Operating income for the fiscal year 2006 was adversely impacted by an approximately $1.0 million charge to cost of sales from our change in accounting estimate relating to our inventory overhead calculations and $503,000 of employee stock-based compensation expense related to the adoption of SFAS 123(R) compared to no employee stock-based compensation expense for the fiscal year 2005.
“Fiscal year 2006 has been a challenge for the Company, but we have refocused our efforts on operational performance and will continue to assess our strategies moving forward,” commented Mark Thomas, HEI’s Chief Executive Officer.
The Company will hold a conference call to discuss the Company’s operating results on Monday December 4, 2006 at 11:00 a.m. Eastern Time (10:00 a.m. Central Time). This call is being web cast and is also accessible via telephone. To access the listen-only web cast, visit http://www.actioncast.acttel.com and enter Event ID 32977. The conference call can be accessed via telephone by dialing 1-800-218-4007 (outside the US, dial 303-262-2140). Specify conference reservation number 11078168.
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HEI, Inc.
Consolidated Statements of Operations (Unaudited)
(In thousands, except per share data)
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| | | Three Months Ended | | | Year Ended | |
| | | September 2, 2006 | | | August 31, 2005 | | | September 2, 2006 | | | August 31, 2005 | |
| Net sales | | $ | 13,907 | | | $ | 15,068 | | | $ | 52,631 | | | $ | 56,631 | |
| Cost of sales | | | 12,853 | | | | 11,877 | | | | 44,669 | | | | 45,047 | |
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| Gross profit | | | 1,054 | | | | 3,191 | | | | 7,962 | | | | 11,584 | |
| Operating expenses: | | | | | | | | | | | | | | | | |
| Selling, general and administrative | | | 2,203 | | | | 2,002 | | | | 8,963 | | | | 8,383 | |
| Research, development and engineering | | | 1,099 | | | | 802 | | | | 4,238 | | | | 3,264 | |
| Gain on claim settlement | | | — | | | | — | | | | — | | | | (300 | ) |
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| Operating income (loss) | | | (2,248 | ) | | | 387 | | | | (5,239 | ) | | | 237 | |
| Other income (expenses) | | | (380 | ) | | | (183 | ) | | | (818 | ) | | | 118 | |
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| Net Income (loss) | | | (2,628 | ) | | | 204 | | | | (6,057 | ) | | | 355 | |
| Deemed dividend on Preferred Stock | | | — | | | | — | | | | — | | | $ | 1,072 | |
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| Net loss attributable to common stock | | $ | (2,628 | ) | | $ | 204 | | | $ | (6,057 | ) | | $ | (717 | ) |
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| Earnings (loss) Per Common Share: | | | | | | | | | | | | | | | | |
| Basic and Diluted: | | | | | | | | | | | | | | | | |
| Net Income (loss) | | $ | (0.27 | ) | | $ | 0.02 | | | $ | (0.64 | ) | | $ | 0.04 | |
| Deemed dividend on Preferred Stock | | | — | | | | — | | | | — | | | | (0.13 | ) |
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| Net loss attributable to common stock | | $ | (0.27 | ) | | $ | 0.02 | | | $ | (0.64 | ) | | $ | (0.09 | ) |
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| Weighted Average Shares Used in EPS Calculation | | | | | | | | | | | | | | | | |
| Basic: | | | 9,469,000 | | | | 8,382,000 | | | | 9,469,000 | | | | 8,382,000 | |
| Diluted: | | | 9,469,000 | | | | 8,958,000 | | | | 9,469,000 | | | | 8,958,000 | |
HEI, Inc.
Consolidated Balance Sheets
(In thousands)
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| | September 2, 2006 | | | August 31, 2005 | |
| Cash and cash equivalents | | $ | 674 | | | $ | 351 | |
| Accounts receivable, net | | | 9,205 | | | | 9,278 | |
| Inventories | | | 7,000 | | | | 8,044 | |
| Other current assets | | | 1,146 | | | | 3,303 | |
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| Total current assets | | | 18,025 | | | | 20,976 | |
| Net property and equipment | | | 7,717 | | | | 6,889 | |
| Other assets | | | 1,130 | | | | 629 | |
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| Total assets | | $ | 26,872 | | | $ | 28,494 | |
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| Line of credit | | $ | 5,948 | | | $ | 2,563 | |
| Current maturities of long-term debt | | | 1,038 | | | | 484 | |
| Accounts payable and accrued liabilities | | | 6,507 | | | | 8,148 | |
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| Total current liabilities | | | 13,493 | | | | 11,195 | |
| Other long-term liabilities | | | 1,791 | | | | 1,690 | |
| Long-term debt, less current maturities | | | 2,824 | | | | 1,813 | |
| Total shareholders’ equity | | | 8,764 | | | | 13,796 | |
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| Total liabilities and shareholder’s equity | | $ | 26,872 | | | $ | 28,494 | |
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HEI, Inc. designs, develops and manufactures microelectronics, subsystems, systems, connectivity and software solutions for OEMs engaged in the medical equipment and medical device, hearing, communications, and industrial markets. HEI provides its customers with a single point of contact that can take an idea from inception to a fully functional, cost effective and manufacturability product utilizing innovative design solutions and by the application of state-of-the-art materials, processes and manufacturing capabilities.
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| Headquarters & Microelectronics Division | | PO Box 5000, 1495 Steiger Lake Lane, Victoria, MN 55386 |
| -Advanced Medical Division | | 4801 North 63rd Street, Boulder, CO 80301 |
| -High Density Interconnect Division | | 610 South Rockford Drive, Tempe, AZ 85281 |
| RF Identification and Smart Card Division | | 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 implementation of business strategies, growth of specific markets, improved results and the estimated HEI net sales, cash flow and profits ,HEI’s expectations regarding continued listing of HEI’s common stock on Nasdaq, are forward looking statements. All of such forward-looking statements involve risks and uncertainties including, without limitation, continuing adverse business and market conditions, the ability of HEI to secure and satisfy customers, the availability and cost of materials from HEI’s suppliers, our ability to satisfy financial or other obligations or covenants set forth in our banking agreements, adverse competitive developments, change in or cancellation of customer requirements, the integration of the Advanced Medical Division, collection of outstanding debt, HEI’s ability to succeed on the merits and defend against litigation, and other risks detailed from time to time in HEI’s SEC filings. We undertake no obligation to update these statements to reflect ensuing events or circumstances, or subsequent actual results.
