-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QSz8j8Sk0g0jAHu4qLXaGc1KWr1RrJ0k2D5yQPRdI2ztvNCadx5UxDqs10gPgfgx F9lVlse4GZy2MKQgQdEF0g== 0000912057-96-005983.txt : 19960405 0000912057-96-005983.hdr.sgml : 19960405 ACCESSION NUMBER: 0000912057-96-005983 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960302 FILED AS OF DATE: 19960404 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEI INC CENTRAL INDEX KEY: 0000351298 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 410944876 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-10078 FILM NUMBER: 96544336 BUSINESS ADDRESS: STREET 1: 1495 STEIGER LAKE LN STREET 2: P O BOX 5000 CITY: VICTORIA STATE: MN ZIP: 55386 BUSINESS PHONE: 6124432500 MAIL ADDRESS: STREET 1: P O BOX 5000 STREET 2: 1495 STEIGER LAKE LANE CITY: VICTORIA STATE: MN ZIP: 55386 10QSB 1 10-QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 2, 1996 ("Second Quarter, -------------------------------- Fiscal 1996") or ------------ [ ] Transition Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___________________ to ________________ Commission File Number 0-10078 ------------------------------ HEI, INC. --------- (Exact name of small business issuer as specified in its charter) Minnesota 41-0944876 --------- ---------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) PO Box 5000, 1495 Steiger Lake Lane, Victoria, MN 55386 ------------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Issuer's Telephone number, including area code: (612) 443-2500 -------------- None ---- Former name, former address and former fiscal year, if changed since last report. Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- 4,004,097 Common Shares, par value $0.05, were outstanding as of March 2, 1996. This Form 10-QSB consists of 10 pages. 2 Table of Contents HEI, Inc. - ---------------------------------------------------------------------------- Part I - Financial Information Item 1. Financial Statements Balance Sheet............................... 3 Statement of Operations..................... 4 Statement of Cash Flows..................... 5 Notes to Financial Statements................ 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 7-8 Part II - Other Information Item 6. Exhibits and Reports on Form 8-K................ 9 Signatures............................................... 10 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 3
HEI, INC. BALANCE SHEET (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) - ------------------------------------------------------------------------------------------------- March 2, 1996 August 31, 1995 ------------- --------------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $1,106 $1,438 Short-term investments 3,954 3,820 ----- ----- 5,060 5,258 Accounts receivable, net 2,702 2,525 Inventories 2,576 1,851 Other, principally deferred tax assets 382 349 - ------------------------------------------------------------------------------------------------- Total current assets 10,720 9,983 - ------------------------------------------------------------------------------------------------- Property and equipment: Land 216 184 Building and improvements 1,819 1,398 Fixtures and equipment 6,108 5,475 Accumulated depreciation and amortization (4,569) (4,183) - ------------------------------------------------------------------------------------------------- Net property and equipment 3,574 2,874 - ------------------------------------------------------------------------------------------------- Total assets $14,294 $12,857 - ------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $710 $385 Accrued liabilities 1,122 1,043 Income taxes payable 116 175 - ------------------------------------------------------------------------------------------------- Total current liabilities 1,948 1,603 - ------------------------------------------------------------------------------------------------- Deferred tax liability 272 272 - ------------------------------------------------------------------------------------------------- Shareholders' equity: Undesignated stock; 5,000,000 shares authorized, none issued Common stock, $.05 par; 10,000,000 shares authorized; 4,004,097 and 3,791,597 shares issued and outstanding 200 190 Paid-in capital 6,699 6,183 Retained earnings 5,175 4,609 - ------------------------------------------------------------------------------------------------- Total shareholders' equity 12,074 10,982 - ------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $14,294 $12,857 - -------------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements.
4 HEI, INC. STATEMENT OF OPERATIONS (UNAUDITED) (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) - ------------------------------------------------------------------------------------------------------------------------ Three Months Ended Six Months Ended Mar. 2, 1996 Feb. 25, 1995 Mar. 2, 1996 Feb. 25, 1995 - ------------------------------------------------------------------------------------------------------------------------ Net sales $4,917 $5,924 $9,627 $11,871 Cost of sales 3,662 4,189 7,322 8,220 - ------------------------------------------------------------------------------------------------------------------------ Gross profit 1,255 1,735 2,305 3,651 - ------------------------------------------------------------------------------------------------------------------------ Operating expenses: Selling, general and administrative 565 596 1,158 1,234 Research, development and engineering 208 187 398 384 - ------------------------------------------------------------------------------------------------------------------------ Operating income 482 952 749 2,033 - ------------------------------------------------------------------------------------------------------------------------ Other income, net 66 60 153 96 - ------------------------------------------------------------------------------------------------------------------------ Income before income taxes 548 1,012 902 2,129 - ------------------------------------------------------------------------------------------------------------------------ Income taxes 206 360 336 767 - ------------------------------------------------------------------------------------------------------------------------ Net income $342 $652 $566 $1,362 - ------------------------------------------------------------------------------------------------------------------------ Net income per common share $.08 $.17 $.14 $.35 - ------------------------------------------------------------------------------------------------------------------------ Weighted average number of common and common equivalent shares outstanding 4,064,970 3,874,553 4,034,687 3,881,067 - ------------------------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements.
5 HEI, INC. STATEMENT OF CASH FLOWS (UNAUDITED) DOLLARS IN THOUSANDS - ------------------------------------------------------------------------------------------------------- Six months ended March 2, 1996 February 25, 1995 - ------------------------------------------------------------------------------------------------------- CASH FLOW PROVIDED BY OPERATING ACTIVITIES: Net income $ 566 $1,362 Depreciation and amortization 394 366 - ------------------------------------------------------------------------------------------------------- CHANGES IN CURRENT OPERATING ITEMS: Accounts receivable (177) (51) Inventories (725) (209) Other current assets (33) 24 Accounts payable 325 155 Accrued liabilities 79 212 Income taxes payable (59) (52) - ------------------------------------------------------------------------------------------------------- NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES 370 1,807 - ------------------------------------------------------------------------------------------------------- CASH FLOW PROVIDED BY (USED FOR) INVESTING ACTIVITIES: Purchase of short-term investments (1,484) (3,522) Maturity of short-term investments 1,350 1,266 Additions to property and equipment (1,094) (494) - ------------------------------------------------------------------------------------------------------- NET CASH FLOW USED FOR INVESTING ACTIVITIES (1,228) (2,750) - ------------------------------------------------------------------------------------------------------- CASH FLOW PROVIDED BY (USED FOR) FINANCING ACTIVITIES: Principal payments for obligations under capital leases 0 (24) Issuance of common shares 526 77 - ------------------------------------------------------------------------------------------------------- NET CASH FLOW PROVIDED BY FINANCING ACTIVITIES 526 53 - ------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (332) (890) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,438 1,579 - ------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $1,106 $689 - -------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements. 6 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) HEI,INC. - ------------------------------------------------------------------------- (1) BASIS OF FINANCIAL STATEMENT PRESENTATION The unaudited financial statements have been prepared by the Company, under the rules and regulations of the Securities and Exchange Commission. The accompanying financial statements contain all normal recurring adjustments which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted under such rules and regulations although the Company believes that the disclosures are adequate to make the information presented not misleading. The year-end balance sheet data were derived from audited financial statements, but do not include all disclosures required by generally accepted accounting principles. These unaudited financial statements should be read in conjunction with the financial statements and notes included in the Company's Annual Report to Shareholders on Form 10-KSB for the year ended August 31, 1995. Interim results of operations for the three and six month periods ended March 2, 1996 may not necessarily be indicative of the results to be expected for the full year. (2) INVENTORIES Inventories are stated at the lower of cost or market and include materials, labor and overhead costs. The first-in, first-out cost method is used in valuing inventories. Inventories consist of the following:
(Dollars in thousands) March 2, 1996 August 31, 1995 ------------- --------------- (Unaudited) Purchased parts $2,206 $1,670 Work in process 1,252 907 Finished goods 148 233 Allowance for excess or obsolete stock (1,030) (959) ---------- ---------- $2,576 $1,851 ---------- ---------- ---------- ----------
7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HEI, INC. - -------------------------------------------------------------------------------- FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES The Company's net cash flow provided by operating activities was $370,000 for the six months ended March 2, 1996. This included net income of $566,000, non- cash depreciation and amortization of $394,000, offset by a net increase of $590,000 in current operating items for the first six months of fiscal 1996. The increase in current operating items included increased accounts receivable of $177,000 and increased inventories of $725,000, partially offset by increased accounts payable of $325,000. The inventory increase is primarily due to increased purchased parts and work in process for customer scheduled build requirements. Accounts receivable average days outstanding improved to 41 days at March 2, 1996 compared to 50 days a year ago primarily due to improved collections. Inventory turns were 5.7 turns for the second quarter of fiscal 1996 as compared to 7.5 turns for the same period a year ago. The reduced inventory turns are primarily due to increased inventory to meet customer scheduled build requirements. The Company has a $3,000,000 revolving line of credit which expires in March 1997. Borrowings under this agreement would be collateralized by accounts receivable. The agreement requires compliance with certain financial covenants and restricts obtaining other borrowings. Interest on the revolving line of credit is based on, at the Company's option, the lender's prime rate of interest or 2% above the lender's LIBOR rate. As of March 2, 1996, there were no borrowings under the revolving line of credit. Capital equipment expenditures for the six months ended March 2, 1996 were $1,094,000 primarily for production equipment and a facility addition. During fiscal 1996, the Company intends to spend approximately $4.3 million for a facility addition, manufacturing facility improvements and capital equipment. These additions will increase manufacturing capacity to meet anticipated requirements for continued revenue growth. It is expected that these expenditures will be funded primarily through long-term financing. 8 REVIEW OF OPERATIONS NET SALES 1996 vs. 1995: HEI, Inc's net sales for the three and six month periods ended March 2, 1996 decreased 17% and 19%, respectively, compared to the same periods a year ago. Microelectronic sales decreased 17% and 21%, respectively, from the same three and six month periods last year as a result of reduced shipments in the high density disk drive business. However, the reduction in disk drive business shipments was partially offset by increased shipments to medical and hearing aid accounts. As previously reported, shipments to a new disk drive account are expected to increase as that program enters production volumes. The major new disk drive customer is expected to absorb much of the capacity made available after the previous largest account model phased out in the first quarter. Peripheral product sales decreased 13% and 1%,respectively, for the three and six month periods ended March 2, 1996 compared to last year's comparable periods. GROSS PROFIT 1996 vs. 1995: For the three and six month periods ended March 2, 1996, gross profit decreased $480,000, or 28%, and $1,346,000, or 37%, respectively, from the same periods last year. For the three and six month periods ended March 2, 1996, the gross profit rate decreased to 26% and 24% from 29% and 31%, respectively, for the same periods last year. The gross profit rate decrease is primarily due to the effect of reduced volumes on manufacturing fixed costs, as well as the effect of lower margins on new business as the product mix evolves to a larger percentage of new programs bid under increasing price competition. OPERATING EXPENSES 1996 vs. 1995: Operating expenses for the three and six month periods ended March 2, 1996 decreased 1% and 4%, respectively, from last year's comparable periods. The decrease in selling, general and administrative expense for the quarter was due to reduced bad debt expense. Operating expenses were 16% of net sales for the three and six month periods this year as compared to 13% and 14%, respectively, for the three and six month periods last year. The increase in the percentage of operating expenses to net sales is primarily due to the effect of reduced volumes on fixed expenses. INCOME TAXES During each quarter of fiscal 1996, the Company is recording income tax expense based on the expected effective rate for the full year. The expected effective income tax rate for fiscal 1996 is approximately 37%, the same rate as fiscal 1995. Income tax expense for the three month and six month periods of fiscal 1996 was $206,000 and $336,000, respectively, as compared to $360,000 and $767,000, respectively, for the same periods a year ago. NET INCOME 1996 vs. 1995: The Company had net income of $342,000 for the second quarter of fiscal 1996 compared to $652,000 for the same period a year ago. The Company had net income of $566,000 for the six months ended March 2, 1996 compared to $1,362,000 for the same period a year ago. The decrease in net income principally was the result of reduced sales and reduced gross profit margins. 9 PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Exhibit 27 Financial Data Schedule b) Reports on Form 8-K No Reports on Form 8-K were filed during the quarter ended March 2, 1996. 10 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HEI, INC. (Registrant) Date: March 27, 1996 /s/ Jerald H. Mortenson --------------------- ----------------------------------- Jerald H. Mortenson Vice President of Finance and Administration, Chief Financial Officer and Treasurer (a duly authorized officer) EX-27 2 EXHIBIT 27 (FDS)
5 1,000 6-MOS AUG-31-1996 SEP-01-1995 MAR-02-1996 1,106 0 2,702 0 2,576 10,720 8,143 4,569 14,294 1,948 0 0 0 200 11,874 14,294 9,627 9,627 7,322 7,322 1,403 0 0 902 336 566 0 0 0 566 .14 .14
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