-----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, IXbo0gM5G/p2IaCvlW1GOf2wZUu9Z2izet2bLbDjRGHYhN21dRswb9GIpuRyGjIF 9VIeuvhKpB7riTdbxL0nYA== 0001047469-98-026432.txt : 19980707 0001047469-98-026432.hdr.sgml : 19980707 ACCESSION NUMBER: 0001047469-98-026432 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980530 FILED AS OF DATE: 19980706 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HEI INC CENTRAL INDEX KEY: 0000351298 STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674] IRS NUMBER: 410944876 STATE OF INCORPORATION: MN FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10078 FILM NUMBER: 98660657 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 10QSB SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 **** FORM 10-QSB **** [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended May 30,1998. [ ] Transition report pursuant to 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 in Its Charter) Minnesota 41-0944876 - --------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) P.O. 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 . -- -- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: as of July 3, 1998, 4,095,195 shares of common stock, par value $.05. Transitional Small Business Disclosure Format (Check one): Yes No X. -- --- This Form 10-QSB consists of 13 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 . . . . . . . . . . 6-7 Review Report of Independent Accountants. . . . . 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . 9-11 Part II - Other Information Item 1. Legal Proceedings . . . . . . . . . . . . . . . . 12 Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . 12 Signatures . . . . . . . . . . . . . . . . . . . . . . . . 13
PART I. FINANCIAL INFORMATION 3 ITEM 1. FINANCIAL STATEMENTS HEI, INC. BALANCE SHEET (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- ----------------------------------------------------------------------------------------------- MAY 30, 1998 August 31, 1997 - ----------------------------------------------------------------------------------------------- ASSETS (Unaudited) Current assets: Cash and cash equivalents $2,054 $3,458 Short-term investments 10,894 9,175 - ----------------------------------------------------------------------------------------------- 12,948 12,633 Accounts receivable, net 2,597 2,325 Inventories 1,194 1,575 Other, principally deferred tax assets 903 860 - ----------------------------------------------------------------------------------------------- Total current assets 17,642 17,393 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Property and equipment: Land 216 216 Building and improvements 3,893 3,790 Fixtures and equipment 8,867 8,158 Accumulated depreciation (6,572) (5,558) - ----------------------------------------------------------------------------------------------- Net property and equipment 6,404 6,606 - ----------------------------------------------------------------------------------------------- Restricted cash - 389 Long-term investments 464 - Deferred financing costs 124 123 - ----------------------------------------------------------------------------------------------- Total assets $24,634 $24,511 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $700 $648 Accounts payable 1,025 728 Accrued liabilities 986 1,233 Income taxes payable 376 - - ----------------------------------------------------------------------------------------------- Total current liabilities 3,087 2,609 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- Long-term debt 3,835 4,537 Deferred tax liability 258 370 - ----------------------------------------------------------------------------------------------- Shareholders' equity: Undesignated stock; 5,000,000 shares authorized; none issued Common stock, $.05 par; 10,000,000 shares authorized; 4,095,195 and 4,103,176 shares issued and outstanding 205 205 Paid-in capital 7,530 7,518 Retained earnings 9,719 9,272 - ----------------------------------------------------------------------------------------------- Total shareholders' equity 17,454 16,995 - ----------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $24,634 $24,511 - ----------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements. 4 HEI, INC. STATEMENT OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------------------------------- Three Months Ended Nine Months Ended MAY 30, 1998 May 31, 1997 MAY 30, 1998 May 31, 1997 - --------------------------------------------------------------------------------------------------------- Net sales $6,026 $9,067 $14,738 $24,522 Cost of sales 4,612 7,539 11,795 18,982 - --------------------------------------------------------------------------------------------------------- Gross profit 1,414 1,528 2,943 5,540 - --------------------------------------------------------------------------------------------------------- Operating expenses: Selling, general and administrative 594 579 1,873 1,780 Research, development and engineering 210 205 589 644 Special proxy/legal expenses 274 - 274 - - --------------------------------------------------------------------------------------------------------- Operating income 336 744 207 3,116 - --------------------------------------------------------------------------------------------------------- Other income, principally interest income 167 79 440 230 - --------------------------------------------------------------------------------------------------------- Income before income taxes 503 823 647 3,346 Income taxes 156 284 200 1,206 - --------------------------------------------------------------------------------------------------------- Net income $347 $539 $447 $2,140 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Net income per common share Basic $0.08 $0.13 $0.11 $0.52 Diluted $0.08 $0.13 $0.11 $0.50 - --------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------- Weighted average common shares outstanding Basic 4,091 4,203 4,082 4,130 Diluted 4,300 4,275 4,196 4,308 - --------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements. 5 HEI, INC. STATEMENT OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
- ------------------------------------------------------------------------------------- Nine Months Ended MAY 30, 1998 May 31, 1997 - ------------------------------------------------------------------------------------- Cash flow provided by operating activities: Net income $447 $2,140 Depreciation 1,016 1,046 Amortization 47 54 Accounts receivable and inventory allowances 31 137 Deferred income tax benefit (123) (17) Changes in current operating items: Accounts receivable (272) 905 Inventories 350 (1,205) Other current assets (222) (382) Accounts payable 297 1,726 Accrued liabilities (247) 26 Income taxes payable 376 (464) - ------------------------------------------------------------------------------------- Net cash flow provided by operating activities 1,700 3,966 - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Cash flow used for investing activities: Purchases of investments (13,541) (6,437) Maturities of investments 11,358 5,075 Additions to property and equipment (814) (1,709) Proceeds from sales of product lines 190 78 Proceeds from sale of property and equipment - 65 Decrease in restricted cash 389 1,872 - ------------------------------------------------------------------------------------- Net cash flow used for investing activities (2,418) (1,056) - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Cash flow provided by financing activities: Repayment of long-term debt (650) (439) Increase in deferred financing fees (48) (54) Issuance of common stock and other 198 808 Tax benefit of nonqualified stock options - 167 Repurchase of common shares (186) - - ------------------------------------------------------------------------------------- Net cash flow (used for) provided by financing activities (686) 482 - ------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------- Net increase (decrease) in cash and cash equivalents (1,404) 3,392 Cash and cash equivalents, beginning of period 3,458 1,186 - ------------------------------------------------------------------------------------- Cash and cash equivalents, end of period $2,054 $4,578 - ------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------
See accompanying notes to unaudited financial statements. 6 NOTES TO FINANCIAL STATEMENTS (UNAUDITED) HEI, INC. - -------------------------------------------------------------------------- (1) BASIS OF FINANCIAL STATEMENT PRESENTATION The unaudited interim 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, 1997. Interim results of operations for the three and nine month periods ended May 30, 1998 may not necessarily be indicative of the results to be expected for the full year. The Company's quarterly periods end on the last Saturday of each quarter of its fiscal year ending August 31. (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) MAY 30, 1998 August 31, 1997 ------------ --------------- (UNAUDITED) Purchased parts $1,354 $1,557 Work in process 577 556 Finished goods 52 220 Allowance for excess or obsolete stock (789) (758) ---- ---- $1,194 $1,575 ===== =====
7 (3) NET INCOME PER COMMON SHARE In the second quarter of fiscal 1998, the Company adopted Statement of Financial Accounting Standards No. 128, a new standard of computing and presenting both basic and diluted net income per common share amounts. All prior periods have been restated to conform with the new presentation. However, basic and diluted net income per share amounts are generally consistent with net income per share amounts previously reported. The computation of the basic and diluted per share amounts are as follows: (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months Ended Nine Months Ended MAY 30, 1998 May 31, 1997 MAY 30, 1998 May 31, 1997 ------------ ------------ ------------ ------------ Net income $347 $539 $447 $2,140 Weighted average common shares outstanding Basic (actual shares outstanding) 4,091 4,203 4,082 4,130 Effect of dilutive stock options 209 72 114 178 --- -- --- --- Diluted 4,300 4,275 4,196 4,308 ==== ==== ==== ==== Net income per common share Basic $ 0.08 $ 0.13 $ 0.11 $ 0.52 Diluted $ 0.08 $ 0.13 $ 0.11 $ 0.50 ====== ====== ====== ======
(4) LEGAL MATTERS Discussion of Legal Matters is cross-referenced to this Form 10-QSB, Part II, Item 1, Legal Proceedings, and should be considered an integral part of the financial statements. 8 REVIEW REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS OF HEI, INC.: We have reviewed the accompanying balance sheet of HEI, Inc. as of May 30, 1998, and the related statements of operations and cash flows for the three- and nine-month periods ended May 30, 1998 and May 31, 1997. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet as of August 31, 1997, and the related statements of operations, changes in shareholders' equity and cash flows for the year then ended (not presented herein); and in our report dated September 26, 1997, we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of August 31, 1997, is fairly stated in all material respects in relation to the balance sheet from which it has been derived. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Minneapolis, Minnesota June 16, 1998 9 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 $1,700,000 for the nine months ended May 30, 1998. This primarily included net income of $447,000, non-cash depreciation and amortization of $1,063,000, and a net reduction of $282,000 in working capital investment during the first nine months of fiscal 1998. The lower working capital investment resulted primarily from decreased inventories of $350,000 and increased income taxes payable of $376,000 offset by increased accounts receivable of $272,000. The inventory decrease is primarily due to improved through-put during the quarter. Accounts receivable average days outstanding were 37 days as of May 30, 1998 compared to 34 days for the same period a year ago. Annualized inventory turns were 12.3 for the third quarter of fiscal 1998 compared to 10.9 turns for the same period a year ago. In April 1996, the Company received proceeds of $5,625,000 from the issuance of Industrial Development Revenue Bonds. Of these funds, approximately $1,500,000 has been used for the construction of the new addition to the Company's manufacturing facility and approximately $4,100,000 has been used for equipment purchases. The bonds related to the facility expansion require annual principal payments of $90,000 in the first year and $95,000 on April 1 of each year thereafter through 2011. The bonds related to the purchased equipment require payments over seven years from the date of purchase of the equipment through April 1, 2005. In April 1997 and 1998, the Company repaid $440,000 and $650,000 of the construction and equipment bonds respectively. The bonds bear interest at a rate which varies weekly, based on comparable tax exempt issues, and is limited to a maximum rate of 10%. The interest rate at May 30, 1998 and August 31, 1997 was 4.30% and 3.75%, respectively. The bonds are collateralized by two irrevocable letters of credit and essentially all property and equipment. The letter of credit reimbursement agreement, as amended on November 27, 1997, contains certain restrictive covenants including limitations on other borrowings and maintenance of specified financial levels and ratios for net income, tangible net worth, debt to tangible net worth, cash flow and indebtedness. Restricted cash on the balance sheet represented cash advanced under the bonds which was held by the bond trustee in an interest bearing account and was subsequently released to the Company for equipment purchases. The Company has a $3,000,000 revolving line of credit which expires in January 1999. As of May 30, 1998, there were no borrowings under this revolving line of credit. Any borrowings under this agreement are subject to the extent of and collateralized by the Company's accounts receivable. The agreement requires compliance with certain financial covenants and restricts obtaining other borrowings. Interest on the revolving line of credit is, based at the Company's option, on the lender's prime rate of interest or 2% above the lender's LIBOR rate. Capital equipment expenditures for the nine months ended May 30, 1998 were $814,000, primarily for production equipment. During the remainder of fiscal 1998, the Company intends to expend approximately $500,000 for capital equipment to increase manufacturing capacity to meet anticipated requirements for continued revenue growth. It is expected that these expenditures will be funded primarily from internally generated funds. 10 REVIEW OF OPERATIONS NET SALES 1998 VS. 1997: HEI, Inc.'s net sales for the three and nine month periods ended May 30, 1998 decreased 34% and 40%, respectively, compared to the same periods a year ago reflecting the phase out during the last quarter of fiscal 1997 of volume production of a device for use in high density disk drives. In the previous fiscal year, this disk drive program accounted for 55% of total sales. However, for the current nine month period, sales for the Company's other market areas (hearing and medical instruments, telecommunications and industrial applications) have collectively increased 53% compared to sales to such markets for the first nine months of last year. For the nine months ended May 30, 1998, one large multinational customer accounted for 58% of total sales. The business with this customer has steadily grown over the past five years and currently the Company is producing 21 different devices for this customer for shipment to multiple locations, both domestic and international. Because the Company's sales are generally tied to the customers' projected sales and production of the related product, the Company's sales levels are subject to fluctuations outside the Company's control. To the extent that sales to any one customer represent a significant portion of the Company's sales, any change in the level of sales to that customer can have a significant impact on the Company's total sales. In addition, production for one customer may conclude while production for a new customer has not yet begun or is not yet at full volume. These factors may result in significant fluctuations in sales from quarter to quarter. GROSS PROFIT 1998 VS. 1997: For the three month and nine month periods ended May 30, 1998, gross profit decreased $114,000 and $2,597,000, respectively, from the same periods last year as a result of lower revenues in fiscal 1998. The gross profit rate for the nine months ended May 30, 1998 decreased to 20% from 23% last year which primarily reflects the impact in early fiscal 1997 of a higher number of products built using customer supplied material. The gross profit rate for the third quarter of fiscal 1998 improved to 23% from 17% for the comparable period last year primarily due to volume pricing with lower gross margin rates for sales on a high density disk drive program last fiscal year. OPERATING EXPENSES 1998 VS. 1997: Operating expenses for the three and nine month periods ended May 30, 1998 increased 3% and 2%, respectively, from last year's comparable periods. Operating expenses for the three and nine month periods of 1998 were 13% and 17%, respectively, of net sales compared to 9% and 10% of net sales for the three and nine month periods of last year. The increases in operating expenses as a percent of net sales in the 1998 periods is generally due to the fixed components of operating expenses being absorbed by a lower level of net sales. During the third quarter of this fiscal year, the Company incurred $274,000 of special proxy/legal expenses in response to the efforts of Anthony Fant to take control of the Company and its assets. These expenses include responses to Anthony Fant's tender offer, litigation commenced by Anthony Fant in Alabama, preparation of proxy material and other litigation expenses. These special proxy/legal expenses are expected to continue during the fourth quarter of this fiscal year. 11 OTHER INCOME 1998 VS. 1997: Other income, which principally consists of interest income, increased during the three and nine month periods of 1998 versus 1997, principally due to higher average cash equivalent and investment balances. Also, proceeds from the sales of product lines which occurred in prior years were approximately $100,000 higher in the nine months of 1998 versus 1997. INCOME TAXES 1998 VS. 1997: The Company records income tax expense for interim periods based on the expected effective rate for the full year. The expected effective income tax rate for fiscal 1998 is approximately 31% compared to the full year fiscal 1997 effective rate of 36%. Income tax expense was $156,000 and $200,000 for the three and nine month periods ended May 30, 1998 compared to $284,000 and $1,206,000 for the same periods a year ago. The expected lower effective income tax rate this fiscal year is due to tax-exempt municipal bond interest and the reduction of the Company's accrual for prior year taxes. NET INCOME 1998 VS. 1997: The Company had net income of $347,000 and $447,000 for the three and nine month periods ended May 30, 1998 compared to $539,000 and $2,140,000 for the same periods a year ago. The decrease in net income was principally the result of decreased sales and increased expenses (principally the special proxy/legal expenses referred to above) along with lower gross profit rates for the first quarter of this fiscal year. FORWARD-LOOKING STATEMENTS INFORMATION IN THIS DOCUMENT WHICH IS NOT HISTORICAL INCLUDES FORWARD-LOOKING STATEMENTS MADE PURSUANT TO THE SAFE HARBOR PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS ARE MADE BASED ON THE COMPANY'S CURRENT ASSUMPTIONS REGARDING TECHNOLOGY, MARKETS, GROWTH AND EARNINGS EXPECTATIONS, AND ALL OF SUCH FORWARD-LOOKING STATEMENTS INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. THERE ARE CERTAIN IMPORTANT FACTORS THAT CAN CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS, INCLUDING WITHOUT LIMITATION, ADVERSE BUSINESS OR MARKET CONDITIONS; THE ABILITY OF THE COMPANY TO SECURE AND SATISFY CUSTOMERS, THE AVAILABILITY AND COST OF MATERIALS FROM HEI'S SUPPLIERS, ADVERSE COMPETITIVE DEVELOPMENTS, CHANGE IN OR CANCELLATION OF CUSTOMER REQUIREMENTS AND THE EXTENT OF SPECIAL PROXY/LEGAL EXPENSES INCURRED IN CONNECTION WITH THE EFFORTS OF AN INDIVIDUAL TO TAKE CONTROL OF THE COMPANY AND ITS ASSETS. FOR FURTHER DISCUSSION OF FACTORS THAT MAY INFLUENCE THE COMPANY'S OPERATING RESULTS, PLEASE REFER TO THE COMPANY'S REPORT ON FORM 10-KSB FOR THE YEAR ENDED AUGUST 31, 1997, AND OTHER COMPANY FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. HEI UNDERTAKES NO OBLIGATION TO UPDATE THESE STATEMENTS TO REFLECT ENSUING EVENTS OR CIRCUMSTANCES, OR SUBSEQUENT ACTUAL RESULTS. 12 PART II - OTHER INFORMATION - -------------------------------------------------------------------------------- ITEM 1. LEGAL PROCEEDINGS On March 27, 1998, Anthony J. Fant and Fant Industries Inc., a corporation wholly owned by Mr. Fant (the "Fant Group"), filed a complaint, as subsequently amended, against the Company and its directors in the Federal District Court for the Northern District of Alabama. The complaint alleges violations of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules thereunder, tortious interference, breach of fiduciary duty, defamation, libel, slander, wantonness, and conspiracy. The plaintiffs contend that the Company's Schedule 14D-9, filed with the Securities and Exchange Commission in response to a tender offer commenced by the Fant Group, contained untrue statements of material fact and omitted to state material facts necessary to make the statements made not misleading. The plaintiffs seek an order requiring the Company and its directors to file curative disclosures and to retract the allegedly misleading statements, money damages, and declarative relief. A hearing was held on May 15, 1998, on the Company's motion to move the action to the Federal District Court for the District of Minnesota. No ruling has been made on such motion. On April 20, 1998, the company filed a complaint against the Fant Group in the Federal District Court for the District of Minnesota. The Company's complaint alleges that the defendants violated: (1) Section 14(a) of the Exchange Act and Rules 14a-3, 14a-6, 14a-9, 14a-11 and 14a-12 thereunder by soliciting proxies without complying with the federal proxy rules and by soliciting proxies using misleading statements and material fact omissions; (2) Sections 14(d) and (e) of the Exchange Act and the rules thereunder by making misleading statements in their tender offer statements on Schedule 14D-1; and (3) Section 13(d) of the Exchange Act and Rule 13d-101 thereunder by failing to disclose their arrangements and understanding with R.J. Steichen & Co. relating to their joint effort to change the control of the Company and by failing to make other mandated disclosures. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Exhibit 15-Letter Regarding Unaudited Interim Information Exhibit 27-Financial Data Schedule b) Reports on Form 8-K No reports on Form 8-K were filed during the three months ended May 30, 1998. 13 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: 07/06/98 /s/ Jerald H. Mortenson -------- ------------------------------------------- Jerald H. Mortenson Vice President of Finance and Administration, Chief Financial Officer and Treasurer (a duly authorized officer) EX-15 2 EXHIBIT 15 Exhibit 15 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 We are aware that our report dated June 16, 1998 on our reviews of interim financial information of HEI, Inc. (the Company) for the three- and nine-month periods ended May 30, 1998 and May 31, 1997, and included in the Company's Form 10-QSB for the quarter ended May 30, 1998, is incorporated by reference in the Company's registration statements on Form S-8 (Registration Nos. 33-33322, 33-46928, 33-46929 and 333-49489). Pursuant to Rule 436 (c), under the Securities Act of 1993, this report should not be considered a part of the registration statements prepared or certified by us within the meaning of Sections 7 and 11 of that Act. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Minneapolis, Minnesota July 6, 1998 EX-27 3 EXHIBIT 27
5 1,000 9-MOS AUG-31-1998 SEP-01-1997 MAY-30-1998 2,054 0 2,597 0 1,194 17,642 12,976 6,572 24,634 3,089 3,835 0 0 205 17,249 24,634 14,738 14,738 11,795 11,795 2,142 0 154 647 200 447 0 0 0 447 .11 .11
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