MINNEAPOLIS, July 11 /PRNewswire-FirstCall/ -- HEI, Inc. (Pink Sheets: HEII; http://www.heii.com) today announced its financial results for its third quarter of fiscal year 2008, which ended May 31, 2008.

Net sales for the third quarter were $10,204,000, compared to $8,905,000 for the third quarter of fiscal year 2007. The Company generated net income of $179,000 for the third quarter of fiscal year 2008 compared to a net loss of ($1,755,000) for the same period of fiscal year 2007. Net sales for the first nine months of fiscal year 2008 were $30,164,000, compared to $30,917,000 for the same prior year period. We generated a net income of $388,000 through the third quarter of the current fiscal year compared to a net loss of ($4,960,000) for the first nine months of the prior fiscal year.

HEI CEO, Mark B. Thomas, remarked: "We are very pleased with our progress to date at all three of our operating divisions. Our objectives continue to be to build a strong foundation for sustained growth and profitability through our people, capital investments and expanding and strengthening customer relationships. Everyday, we strive to make HEI a better company and through collaborative innovation, continuous improvement, speed, responsiveness and high product quality we are helping our customers to be leaders in their markets."

HEI, Inc. designs, develops and manufactures ultra-miniature microelectronics, substrates, systems, and connectivity and software solutions for customers engaged in the medical, hearing, telecommunications, 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.



    Headquarters & Microelectronics Division
    PO Box 5000, 1495 Steiger Lake Lane, Victoria, MN  55386

    -Advanced Medical Division
    4801 North 63rd Street, Boulder, CO  80301

    -High Density Interconnect Division
    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 the estimated HEI revenue, cash flow and profits, are forward looking statements. All of such forward-looking statements involve risks and uncertainties including, without limitation, continuing adverse business and market conditions, the ability of HEI to secure and satisfy customers, the availability and cost of materials from HEI's suppliers, our ability to satisfy financial or other obligations or covenants set forth in our 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 from time to time in HEI's SEC filings. We undertake no obligation to update these statements to reflect ensuing events or circumstances, or subsequent actual results. See the risk factor section in our annual report on Form 10K for year ended September 1, 2007.





                                  HEI, Inc.
                         Summary Financial Statements

              Consolidated Statements of Operations - Unaudited

                             Three Months Ended           Nine Months Ended
                              May 31,    June 2,          May 31,    June 2,
                               2008       2007             2008       2007
                            (In thousands except       (In thousands except
                          per share and share data)  per share and share data)

    Net sales                $10,204     $8,905          $30,164    $30,917
    Cost of sales              8,258      8,774           24,568     28,766
      Gross profit             1,946        131            5,596      2,151
    Operating expenses:
     Selling, general and
      administrative           1,301      1,311            3,862      4,432
     Research, development
      and engineering            320        502              960      1,821
    Total operating expenses   1,621      1,813            4,822      6,253
    Operating income (loss)      325     (1,682)             774     (4,102)
    Other income (expenses):
      Interest expense, net     (146)      (350)            (517)    (1,119)
      Other income (expense),
       net                         -        476              131        476
    Income (loss) from
     continuing operations       179     (1,556)             388     (4,745)
    Income (loss) from
     discontinued operations       -       (199)               -       (215)
    Net income (loss)           $179    $(1,755)            $388    $(4,960)

    Income (loss) per share -
     basic and diluted:
      Income (loss) per
       share from continuing
       operations              $0.02     ($0.16)           $0.04     ($0.50)
      Income (loss) per
       share from
       discontinued
       operations              $0.00     ($0.02)           $0.00     ($0.02)
      Net income (loss) per
       share                   $0.02     ($0.18)           $0.04     ($0.52)

    Weighted average
     shares outstanding -
     basic and diluted     9,613,859  9,514,000        9,574,025  9,509,000



                  Consolidated and Condensed Balance Sheets

                                   May 31, 2008    September 1, 2007
                                    (Unaudited)        (Audited)
                         Assets
    Current assets:
      Cash and cash equivalents            $7             $177
      Accounts receivable, net          5,481            4,449
      Inventories                       4,073            3,260
      Deferred income taxes               528              528
      Other current assets                464              321
    Total current assets               10,553            8,735
    Net property and equipment          5,188            5,891
    Other long-term assets              1,006            1,076
    Total assets                      $16,747          $15,702

              Liabilities and Shareholders' Equity
    Current liabilities:
      Checks issued in excess of cash
       in bank                           $479             $191
      Current maturities of long-term
       debt                               495              848
      Accounts payable                  2,521            3,215
      Accrued liabilities               2,327            1,493
    Total current liabilities           5,822            5,747
    Total long-term liabilities,
     less current maturities            7,087            6,595
    Total liabilities                  12,909           12,342
    Shareholders' equity:
      Convertible preferred stock and
       common stock                       480              480
      Paid-in capital                  27,844           27,763
      Accumulated deficit             (24,486)         (24,883)
    Total shareholders' equity          3,838            3,360
    Total liabilities and
     shareholders' equity             $16,747          $15,702

SOURCE HEI, Inc.