Exhibit 99.3
HEI, Inc.
Unaudited Pro Forma Consolidated Financial Statements
Basis of Presentation
Unaudited Pro Forma Consolidated Financial Statements
Basis of Presentation
The following unaudited pro forma financial statements give effect to the sale (the “Transaction”) of certain assets and liabilities of HEI, Inc., a Minnesota corporation (the “Company”), and its wholly-owned subsidiary, Cross Technology, Inc., which assets and liabilities constituted a majority of the Company’s business division for radio frequency identification (“RFID”).
The following presents the Company’s unaudited pro forma financial information for the nine months ended June 2, 2007 and for the fiscal year ended September 2, 2006. The unaudited pro forma balance sheet as of June 2, 2007 gives effect to the Transaction as if it had occurred on June 2, 2007. The unaudited pro forma statements of operations for the nine months ended June 2, 2007 and for the year ended September 2, 2006 give effect to the Transaction as if it had occurred as of the beginning of each respective period.
The unaudited pro forma consolidated financial statements should be read together with the Company’s Annual Report on Form 10-K for the fiscal year ended September 2, 2006 and the consolidated financial statements as of September 2, 2006, and notes thereto, included therein as well as the unaudited consolidated financial statements as of June 2, 2007, including the notes thereto, included in the Company’s Quarterly Report on Form 10-Q for the nine months ended June 2, 2007.
The pro forma financial information is for informational purposes only and does not purport to present what the Company’s results would actually have been had these transactions actually occurred on the dates presented or to project the Company’s results of operations or financial position for any future period.
HEI, Inc.
Unaudited Pro Forma Consolidated Balance Sheet
at June 2, 2007
at June 2, 2007
(In thousands, except share and per share data)
As Reported | Disposition | Notes | Pro Forma | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 96 | $ | 3,000 | (1 | ) | $ | 3,096 | ||||||||
Accounts receivable, net of allowance for doubtful accounts | 5,604 | (616 | ) | (2 | ) | 4,988 | ||||||||||
Inventories | 4,717 | (689 | ) | (2 | ) | 4,028 | ||||||||||
Deferred income taxes | 830 | 830 | ||||||||||||||
Other current assets | 262 | (24 | ) | (2 | ) | 238 | ||||||||||
Total current assets | 11,509 | 1,671 | 13,180 | |||||||||||||
Property and equipment: | ||||||||||||||||
Land | 216 | 216 | ||||||||||||||
Building and improvements | 4,388 | (399 | ) | (2 | ) | 3,989 | ||||||||||
Fixtures and equipment | 23,638 | (1,296 | ) | (2 | ) | 22,342 | ||||||||||
Accumulated depreciation | (21,740 | ) | 1,483 | (2 | ) | (20,257 | ) | |||||||||
Net property and equipment | 6,502 | (212 | ) | 6,290 | ||||||||||||
Security deposit | 524 | 524 | ||||||||||||||
Other long-term assets | 593 | — | 593 | |||||||||||||
Total assets | $ | 19,128 | $ | 1,459 | $ | 20,587 | ||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Line of credit | $ | — | $ | — | ||||||||||||
Current maturities of long-term debt | 854 | 854 | ||||||||||||||
Accounts payable | 2,856 | (318 | ) | (2 | ) | 2,538 | ||||||||||
Accrued liabilities | 1,704 | (1 | ) | (2 | ) | 1,703 | ||||||||||
Total current liabilities | 5,414 | (319 | ) | 5,095 | ||||||||||||
Deferred income taxes | 830 | 830 | ||||||||||||||
Other long-term liabilities, less current maturities | 1,676 | 1,676 | ||||||||||||||
Long-term debt, less current maturities | 7,159 | — | 7,159 | |||||||||||||
Total other long-term liabilities, less current maturities | 9,665 | — | 9,665 | |||||||||||||
Total liabilities | 15,079 | (319 | ) | 14,760 | ||||||||||||
Commitments and contingencies | ||||||||||||||||
Shareholders’ equity: | ||||||||||||||||
Convertible preferred stock | 2 | 2 | ||||||||||||||
Common stock | 476 | 476 | ||||||||||||||
Paid-in capital | 27,748 | 27,748 | ||||||||||||||
Accumulated deficit | (24,160 | ) | 1,778 | (3 | ) | (22,382 | ) | |||||||||
Notes receivable-related parties-officers and former directors | (17 | ) | — | (17 | ) | |||||||||||
Total shareholders’ equity | 4,049 | 1,778 | 5,827 | |||||||||||||
Total liabilities and shareholders’ equity | $ | 19,128 | $ | 1,459 | $ | 20,587 | ||||||||||
HEI, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Nine Months Ended June 2, 2007
For the Nine Months Ended June 2, 2007
(In thousands, except share and per share data)
As Reported | Disposition | Notes | Pro Forma | |||||||||||||
Net sales | $ | 33,331 | $ | (2,416 | ) | (4 | ) | $ | 30,915 | |||||||
Cost of sales | 30,791 | (2,062 | ) | (4 | ) | 28,729 | ||||||||||
Gross profit | 2,540 | (354 | ) | 2,186 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 4,898 | (617 | ) | (4 | ) | 4,281 | ||||||||||
Research, development and engineering | 1,959 | (139 | ) | (4 | ) | 1,820 | ||||||||||
Operating income (loss) | (4,317 | ) | 402 | (3,915 | ) | |||||||||||
Interest expense | (1,119 | ) | 78 | (5 | ) | (1,041 | ) | |||||||||
Other income (expense), net | 502 | — | 502 | |||||||||||||
Loss before income taxes | (4,934 | ) | 480 | (4,454 | ) | |||||||||||
Income tax expense (benefit) | — | — | — | |||||||||||||
Net loss from continuing operations before discontinued operations | (4,934 | ) | 480 | (4,454 | ) | |||||||||||
Gain on sale of discontinued operations | — | 1,500 | (6 | ) | 1,500 | |||||||||||
Net loss | $ | (4,934 | ) | $ | 1,980 | $ | (2,954 | ) | ||||||||
Basic and diluted net loss per common share: | ||||||||||||||||
Continuing operations | $ | (0.52 | ) | $ | 0.05 | $ | (0.47 | ) | ||||||||
Discontinued operations | $ | — | $ | 0.16 | $ | 0.16 | ||||||||||
Net Loss | $ | (0.52 | ) | $ | 0.21 | $ | (0.31 | ) | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic and Diluted | 9,509 | 9,509 | 9,509 | |||||||||||||
HEI, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended September 2, 2006
For the Year Ended September 2, 2006
(In thousands, except share and per share data)
As Reported | Disposition | Notes | Pro Forma | |||||||||||||
Net sales | $ | 52,631 | $ | (3,570 | ) | (7 | ) | $ | 49,061 | |||||||
Cost of sales | 44,669 | (3,521 | ) | (7 | ) | 41,148 | ||||||||||
Gross profit | 7,962 | (49 | ) | 7,913 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 8,963 | (864 | ) | (7 | ) | 8,099 | ||||||||||
Research, development and engineering | 4,238 | (237 | ) | (7 | ) | 4,001 | ||||||||||
Operating income (loss) | (5,239 | ) | 1,052 | (4,187 | ) | |||||||||||
Interest expense | (776 | ) | 54 | (8 | ) | (722 | ) | |||||||||
Other income (expense), net | (42 | ) | — | (42 | ) | |||||||||||
Loss before income taxes | (6,057 | ) | 1,106 | (4,951 | ) | |||||||||||
Income tax expense (benefit) | — | — | — | |||||||||||||
Net loss from continuing operations before discontinued operations | (6,057 | ) | 1,106 | (4,951 | ) | |||||||||||
Gain on sale of discontinued operations | — | 1,500 | (9 | ) | 1,500 | |||||||||||
Net loss | $ | (6,057 | ) | $ | 2,606 | $ | (3,451 | ) | ||||||||
Basic and diluted net loss per common share: | ||||||||||||||||
Continuing operations | $ | (0.64 | ) | $ | 0.12 | $ | (0.52 | ) | ||||||||
Discontinued operations | $ | — | $ | 0.16 | $ | 0.16 | ||||||||||
Net Loss | $ | (0.64 | ) | $ | 0.28 | $ | (0.36 | ) | ||||||||
Weighted average common shares outstanding | ||||||||||||||||
Basic and Diluted | 9,469 | 9,469 | 9,469 | |||||||||||||
HEI, Inc.
Notes to Pro Forma Consolidated Financial Statements
Unaudited Pro Forma Balance Sheet at June 2, 2007, Pro Forma Statement of Operations
for the Nine Months Ended June 2, 2007, and Pro Forma Statement of Operations
for the Year Ended September 2, 2006
(Unaudited)
Notes to Pro Forma Consolidated Financial Statements
Unaudited Pro Forma Balance Sheet at June 2, 2007, Pro Forma Statement of Operations
for the Nine Months Ended June 2, 2007, and Pro Forma Statement of Operations
for the Year Ended September 2, 2006
(Unaudited)
Pro Forma Balance Sheet at June 2, 2007
(1) The Company sold substantially all the assets and liabilities related to its RFID division for $3 million in cash. The Company’s balance sheet as of June 2, 2007, has been adjusted on a pro forma basis to show the receipt of these funds.
(2) The pro forma balance sheet has been adjusted to remove the RFID division assets and the trade accounts payable and certain accrued liabilities that were assumed by Smartrac US Inc.
(3) Retained earnings have been adjusted to reflect the cumulative effect on retained earnings as a result of the above adjustments.
Pro Forma Statement of Operations for the Nine Months ended June 2, 2007
4) The pro forma statement of operations for the nine months ended June 2, 2007, reflects the sale substantially all of the RFID division assets and liabilities as though the sale had occurred at the beginning of the period. Accordingly, the revenues and costs associated with those assets have been adjusted for the nine month period.
(5) Interest expense was allocated to the RFID division on a percentage of consolidated revenue basis since interest is consolidated at the corporate level and not recorded at the division level.
(6) The gain on sale of discontinued operations is estimated at $1.5 million which is net of estimated transaction costs.
Pro Forma Statement of Operations for the Year ended September 2, 2006
(7) The pro forma statement of operations for the year ended September 2, 2006, reflects the sale of the RFID division assets as though the sale had occurred at the beginning of the period. Accordingly, the revenues and costs associated with those assets have been adjusted for the year.
(8) Interest expense was allocated to the RFID division on a percentage of consolidated revenue basis since interest is consolidated at the corporate level and not recorded at the division level.
(9) The gain on sale of discontinued operations is estimated at $1.5 million which is net of estimated transaction costs.