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HEI, Inc. Announces Fourth Quarter and Fiscal Year 2013 Results
[February 28, 2014]

HEI, Inc. Announces Fourth Quarter and Fiscal Year 2013 Results


MINNEAPOLIS --(Business Wire)--

HEI (News - Alert), Inc. (Pink Sheets: HEII) (http://www.heii.com) today announced its financial results for the fourth quarter and fiscal year 2013, which ended December 28, 2013.

Sales for the fourth quarter of 2013 were $8,585,000, compared to $11,426,000 for the fourth quarter of 2012. The Company generated a net income of $601,000 in the fourth quarter of 2013, compared to a net loss of ($245,000) in the fourth quarter of 2012.

Fourth quarter sales decreased primarily as a result of lack of follow on orders for the military radio system components in the Victoria division due to delays and reductions in government procurement, which is expected to continue in 2014. Although a limited amount of follow on orders have been received in the first quarter of 2014, no assurances can be made as to whether or not additional orders will be received in 2014 and, if received, the volume and timing of shipments is uncertain at this time. Fourth quarter profitability improved primarily as a result of yield and process efficiency improvements in the Victoria division and the Tempe division.

Sales for the full fiscal year of 2013 were $44,778,000, compared to $40,020,000 in 2012. The Company generated a net income of $1,995,000 in the full fiscal year of 2013, compared to a net loss of ($1,257,000) in 2012.

Annual sales increased $4,757,000, or 12% primarily as a result of increases in the Company's Victoria division. Annual gross profit increased to $7,085,000 in 2013 from $4,296,000 in 2012 due primarily to increased volume in the Victoria division. Annual net cash flow provided by operating activities increased 60% to $3,844,000 in 2013 from $2,399,000 in 2012, primarily due to the improved profitability as well as significant reductions in inventory as a result of improved inventory management.

HEI, Inc. designs, develops and manufactures ultra-miniature microelectronics, high density interconnect flexible and rigid-flex substrates, electromechanical hardware, and embedded software with complex user interface 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) 1495 Steiger Lake Lane, Victoria, MN 55386
HEI - Boulder (Design and Development, Box (News - Alert) 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 (News - Alert) 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
   
December 28, 2013 December 29, 2012
(In thousands)
ASSETS
Current assets:

Accounts receivable, net of allowance for doubtful accounts of $88 and $45, respectively

$ 4,783 $ 4,538
Inventories, net 3,308 5,454
Other current assets   359     712  
Total current assets   8,450     10,704  
 
Property and equipment:
Land 216 216
Building and improvements 4,337 4,337
Fixtures and equipment 30,334 28,554
Accumulated depreciation and amortization   (28,487 )   (27,005 )
Property and equipment, net 6,400 6,102
Security deposit 230 230
Other long-term assets   175     205  
Total assets $ 15,255   $ 17,241  
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving line of credit 2,568 4,003
Accounts payable $ 1,458 $ 3,129
Accrued liabilities 1,151 1,019
Customer deposits 7 712
Current maturities of long-term liabilities   1,136     1,120  
Total current liabilities   6,320     9,983  
 
Long-term liabilities:
Long-term lease obligation, less current maturities 1,716 1,845
Long-term capital lease obligations, less current maturities 969 620
Long-term debt, less current maturities   870     1,580  
Total long-term liabilities, less current maturities   3,555     4,045  
Total liabilities   9,875     14,028  
 
Shareholders' equity:
Undesignated stock; 5,000,000 shares authorized; none issued - -
 

Convertible preferred stock, $.05 par; 167,000 shares authorized; 32,000 shares issued and outstanding; liquidation preference at $26 per share (total liquidation preference $832)

2 2
 

Common stock, $.05 par; 20,000,000 shares authorized; 10,987,527 issued and 10,586,527 outstanding shares at December 28, 2013; 10,973,390 issued and 10,262,501 outstanding shares at December 29, 2012

529 513
Additional paid-in capital 28,797 28,641
Accumulated deficit   (23,948 )   (25,943 )
Total shareholders' equity   5,380     3,213  
Total liabilities and shareholders' equity $ 15,255   $ 17,241  
 
 
HEI, INC.
STATEMENTS OF OPERATIONS
     
 
Fiscal Years Ended
December 28, 2013 December 29, 2012 December 31, 2011
(In thousands, except share and per share data)
 
Net sales $ 44,778 $ 40,020 $ 37,415
Cost of sales   37,693     35,724     31,586  
Gross profit 7,085 4,296 5,829
 
Operating expenses:
Selling, general and administrative   4,729     5,120     4,454  
Operating income (loss) 2,356 (824 ) 1,375
 
Interest expense, net (324 ) (446 ) (364 )
Other income (expense), net   8     17     40  
Income (loss) before income taxes 2,040 (1,253 ) 1,051
 
Income tax expense   (45 )   (4 )   -  
Net income (loss) $ 1,995   $ (1,257 ) $ 1,051  
 

Income (loss) per common share:

Basic $ 0.19 $ (0.12 ) $ 0.11
Diluted $ 0.18 $ (0.12 ) $ 0.10
 

Weighted average common shares outstanding:

Basic 10,459,153 10,180,352 9,979,516
Diluted 10,816,508 10,180,352 10,290,885
 
 
HEI, INC.
STATEMENTS OF CASH FLOWS
   
Fiscal Years Ended
December 28, 2013 December 29, 2012 December 31, 2011
(In thousands)
 
Cash flow from operating activities:
Net income (loss) $ 1,995 $ (1,257 ) $ 1,051

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

Depreciation and amortization 1,714 1,659 1,613
Change in allowance for doubtful accounts 43 10 (18 )
(Gain) loss on disposal of property and equipment (7 ) (6 ) (3 )
Stock-based compensation expense 172 215 204
Amortization of long-term and unfavorable lease (40 ) (39 ) -
Changes in operating assets and liabilities:
Accounts receivable (288 ) 941 (401 )
Inventories 2,146 (774 ) (321 )
Other current assets 353 (347 ) (17 )
Accounts payable (1,671 ) 978 (586 )
Accrued liabilities 132 318 (17 )
Customer deposit liabilities   (705 )   701     (286 )
Net cash flow provided by operating activities 3,844 2,399 1,219
 
Cash flow from investing activities:
Additions to property and equipment (1,287 ) (1,957 ) (1,194 )
Proceeds from the sale of assets 7 54 20
Additions to patents   -     -     (29 )
Net cash flow used in investing activities (1,280 ) (1,903 ) (1,203 )
 
Cash flow from financing activities:
Repayment of long-term debt (1,129 ) (1,047 ) (812 )
Proceeds from leases and long-term debt - 490 784
Net proceeds (repayments) of revolving line of credit   (1,435 )   61     12  
Net cash flow used in financing activities (2,564 ) (496 ) (16 )
 
Net increase (decrease) in cash and cash equivalents - - -
Cash and cash equivalents, beginning of year   -     -     -  
Cash and cash equivalents, end of year $ -   $ -   $ -  
 
Supplemental disclosures of cash flow information:
Interest paid $ 263 $ 428 $ 331
Taxes paid - - -
 
Supplemental disclosures of non-cash financing and investing activities:
Issuance of common stock for vested restricted stock awards $ 16 $ 7 $ 12
Security deposits utilized towards buy-out of capital leases - - -
Capital lease assets acquired 695 400 252

 


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