MINNEAPOLIS, April 10 /PRNewswire-FirstCall/ -- HEI, Inc. (Pink Sheets: HEII; http://www.heii.com) today announced its financial results for its second quarter of fiscal year 2008, which ended March 1, 2008.

Net sales for the second quarter were $9,968,000, compared to $9,906,000 for the second quarter of fiscal year 2007. The Company generated a net loss of ($45,000) for the second quarter of fiscal year 2008 compared to a net loss of ($1,571,000) for the same period of fiscal year 2007. Net sales for the first six months of fiscal year 2008 were $19,960,000, compared to $22,012,000 for the same prior year period. We generated a net income of $209,000 through the second quarter of the current fiscal year compared to a net loss of ($3,179,000) for the first six months of the prior fiscal year.

HEI CEO, Mark B. Thomas, commented: "We are on track with our internal objectives to strengthen operations and improve overall effectiveness. Our investments in personnel, equipment and commitment to operational excellence have allowed us to attract new customers and new products for each of our three operating divisions. In addition, our more stable operating results appear to be building confidence with current and new customers, such that we have entertained relationship opportunities not previously available. Our results are still not where we would like them to be, but the trend on a comparative basis shows that we have gotten our operations in line with our current revenues and we will continue to seek to improve gross margins and operating results. Our primary focus remains on the sales effort and to improve operations at all three of our operating divisions. Our balance sheet continues to improve and continued sales improvements should strengthen our balance sheet even further."

HEI, Inc. designs, develops and manufactures microelectronics, subsystems, systems, connectivity and software solutions for OEMs engaged for the medical equipment and medical device, hearing, communications, and industrial markets. HEI provides its customers with a single point of contact that can take an idea from inception to a fully functional, cost effective and manufacturability 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 annual report on Form 10K for year ended September 1, 2007.





                                    HEI, Inc.
                    Summary Financial Statements - Unaudited


                      Consolidated Statements of Operations

                                   Three Months Ended     Six Months Ended
                                   March 1,   March 3,   March 1,   March 3,
                                    2008       2007       2008       2007
                                  (In thousands except  (In thousands except
                                  per share and share   per share and share
                                         data)                 data)

    Net sales                        $9,968     $9,906    $19,960    $22,012
    Cost of sales                     8,298      9,218     16,310     19,992
      Gross profit                    1,670        688      3,650      2,020
    Operating expenses:
      Selling, general and
       administrative                 1,221      1,301      2,561      3,121
      Research, development and
       engineering                      315        609        640      1,319
    Total operating expenses          1,536      1,910      3,201      4,440
    Operating income (loss)             134     (1,222)       449     (2,420)
    Other income (expenses):
      Interest expense, net            (176)      (409)      (371)      (769)
      Other income (expense), net        (3)        19        131         26
    Income (loss) from continuing
     operations                         (45)    (1,612)       209     (3,163)
    Income (loss) from
     discontinued operations              -         41          -        (16)
    Net income (loss)                  $(45)   $(1,571)      $209    $(3,179)

    Income (loss) per share -
     basic and diluted:
      Income (loss) per share
       from continuing operations    ($0.00)    $(0.17)     $0.02     ($0.33)
      Income (loss) per share
       from discontinued
       operations                     $0.00      $0.00      $0.00     ($0.00)
      Net income (loss) per share    ($0.00)    $(0.17)     $0.02     ($0.33)

    Weighted average shares
     outstanding - basic and
     diluted                      9,543,000  9,509,000  9,543,000  9,543,000



                    Consolidated and Condensed Balance Sheets

                                            March 1, 2008    September 1, 2007
                                          (In thousands except per share and
                                                     share data)
                 Assets
    Current assets:
      Cash and cash equivalents                   $18               $177
      Accounts receivable, net                  4,391              4,449
      Inventories                               4,207              3,260
      Deferred income taxes                       528                528
      Other current assets                        408                321
    Total current assets                        9,552              8,735
    Net property and equipment                  5,449              5,891
    Other long-term assets                      1,040              1,076
    Total assets                              $16,041            $15,702

         Liabilities and Shareholders' Equity
    Current liabilities:
      Checks issued in excess of cash in bank    $583               $191
      Current maturities of long-term debt        730                848
      Accounts payable                          2,689              3,215
      Accrued liabilities                       2,695              1,493
    Total current liabilities                   6,697              5,747
    Total long-term liabilities, less
     current maturities                         5,718              6,595
    Total liabilities                          12,415             12,342
    Shareholders' equity:
      Convertible preferred stock and
       common stock                               480                480
      Paid-in capital                          27,816             27,763
      Accumulated deficit                     (24,670)           (24,883)
    Total shareholders' equity                  3,626              3,360
    Total liabilities and shareholders'
     equity                                   $16,041            $15,702

SOURCE HEI, Inc.