HEI, Inc. Announces the 2010 Year End Results

Corporate Headquarters & HEI –Victoria (Microelectronics Division)

PO Box 5000, 1495 Steiger Lake Lane, Victoria, MN  55386

HEI – Boulder (Advanced Medical Division)

4801 North 63rd Street, Boulder, CO  80301

HEI – Tempe (High Density Interconnect Division)

610 South Rockford Drive, Tempe, AZ  85281

HEI, INC.

 BALANCE SHEETS

January 1,

January 2,

2011

2010

(In thousands, except share and per share data)

ASSETS

Current assets:

Cash and cash equivalents

$             -

$             -

Accounts receivable, net of allowance for doubtful accounts of $53 and $130, respectively

5,071

3,566

Inventories, net

4,359

2,952

Deferred income taxes

425

362

Other current assets

227

455

Total current assets

10,082

7,335

Property and equipment:

Land

216

216

Building and improvements

4,337

4,337

Fixtures and equipment

25,334

24,140

Accumulated depreciation

(24,290)

(23,025)

Net property and equipment

5,597

5,668

Security deposit

230

230

Other long-term assets

336

388

Total assets

$    16,245

$    13,621

LIABILITIES AND SHAREHOLDERS’ EQUITY

Current liabilities:

Checks issued in excess of cash in bank

$         524

$         395

Current maturities of long-term debt

684

551

Accounts payable

2,737

1,750

Customer deposit liabilities

297

228

Accrued liabilities

718

945

Total current liabilities

4,960

3,869

Deferred income taxes

425

362

Other long-term liabilities, less current maturities

1,953

1,934

Long-term debt, less current maturities

5,907

4,240

Total other long-term liabilities, less current maturities

8,285

6,536

Total liabilities

13,245

10,405

Commitments and contingencies

Shareholders’ equity:

Undesignated stock; 5,000,000 shares authorized; none issued

-

-

Convertible preferred stock, $.05 par; 167,000 shares

2

2

authorized; 32,000 shares issued and outstanding;

liquidation preference at $26 per share (total liquidation

preference $832,000)

Common stock, $.05 par; 20,000,000 shares authorized;

494

486

10,971,000 and 10,183,000 shares issued and 9,871,000

and 9,720,000 outstanding

Additional paid-in capital

28,241

28,096

Accumulated deficit

(25,737)

(25,368)

Total shareholders’ equity

3,000

3,216

Total liabilities and shareholders’ equity

$    16,245

$    13,621

HEI, INC.

STATEMENTS OF OPERATIONS

Fiscal Periods Ended

12 months

12 months

16 months

January 1,

January 2,

January 3,

2011

2010

2009

(In thousands, except share and per share data)

Net sales

$     36,420

$     31,530

$     55,751

Cost of sales

31,665

26,734

45,183

Gross profit

4,755

4,796

10,568

Operating expenses:

Selling, general and administrative

4,393

5,074

7,212

Research, development and engineering

612

805

1,658

Operating income (loss)

(250)

(1,083)

1,698

Interest expense

(286)

(445)

(836)

Other income (expense), net

167

(30)

211

Income (loss) before income taxes

(369)

(1,558)

1,073

Income tax provision

-

-

Net income (loss)

$        (369)

$     (1,558)

$       1,073

Income (loss) per common share — basic and diluted:

Net income (loss)

$       (0.04)

$       (0.16)

$         0.11

Weighted average common shares outstanding:

Basic and diluted

9,766,000

9,699,000

9,575,000

HEI, INC.

STATEMENTS OF CASH FLOWS

Fiscal Period Ended

12 months

12 months

16 months

January 1,

January 2,

January 3,

2011

2010

2009

(In thousands, except share and per share data)

Cash flow from operating activities:

Net income (loss)

$        (369)

$     (1,558)

$       1,073

Adjustments to reconcile net income (loss) to cash flow from operating activities:

Depreciation and amortization

1,817

2,005

2,234

Change in accounts receivable allowance

(77)

53

(29)

(Gain) loss on disposal of property and equipment

(19)

43

(51)

Stock based compensation expense

153

145

196

Changes in operating assets and liabilities:

Accounts receivable

(1,428)

1,067

(208)

Inventories

(1,407)

522

(214)

Other current assets

219

308

(561)

Accounts payable

987

316

(1,781)

Customer deposit liabilities

69

155

42

Accrued liabilities

(208)

(382)

82

Net cash flow provided by (used in) operating activities

(263)

2,674

783

Cash flow from investing activities:

Additions to property and equipment

(1,614)

(560)

(3,024)

Proceeds from the sale of assets

-

5

52

Additions to patents

(29)

(38)

(50)

Net cash flow provided by (used in) investing activities

(1,643)

(593)

(3,022)

Cash flow from financing activities:

Checks written in excess of cash in bank

129

(114)

318

Payment of debt issuance costs

(23)

(51)

-

Repayment of long-term debt

(608)

(1,910)

(1,125)

Proceeds from long-term debt

716

2,029

1,233

Net proceeds (repayments) of long-term debt - revolving line of credit

1,692

(2,042)

1,643

Net cash flow provided by (used in) financing activities

1,906

(2,088)

2,069

Net increase (decrease) in cash and cash equivalents

-

(7)

(170)

Cash and cash equivalents, beginning of year

-

7

177

Cash and cash equivalents, end of year

$              -

$              -

$              7

Supplemental disclosures of cash flow information:

Interest paid

$          309

$          446

$          803

Supplemental disclosures of non-cash financing and investing activities:

In Fiscal 2010, 2009 and 2008, the Company issued common stock for vested restricted stock awards of $8, $4 and $4, respectively

During Fiscal 2009, the Company utilized $298 of its security deposits towards the buy-out of select capital leases

During Fiscal 2009, the Company acquired an asset that was under a capital lease for $63 that was financed by the lessor over a 12-month period