HEI, Inc. Announces Third Quarter 2012 Results

HEI, Inc. Announces Third Quarter 2012 Results

MINNEAPOLIS--(BUSINESS WIRE)-- 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.



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

KEYWORDS: United States North America Minnesota

INDUSTRY KEYWORDS:

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