MINNEAPOLIS, July 28 /PRNewswire-FirstCall/ -- HEI, Inc. (Pink Sheets: HEII) ([ http://www.heii.com ]) today announced its financial results for its second quarter of fiscal year 2010, which ended July 3, 2010.

Sales for the second quarter were $9,350,000, compared to $7,826,000 for the second quarter of 2009. The Company generated a net income of $79,000 for the second quarter of 2010 compared to a net loss of ($168,000) for the same period of 2009. Sales for the first six months of 2010 were $18,870,000, compared to $16,709,000 for the first six months of 2009. The Company generated a year-to-date net income of $371,000 for 2010 compared to a net income of $100,000 for the first six months of 2009.

HEI CEO, Mark B. Thomas, remarked: "We are still rebuilding our revenues from the downturn in 2009 and rebuilding profitability as the year progresses. The results are still lower than we are driving for, but we are optimistic about the remainder of fiscal year 2010 and beyond. As we stated before, our drive throughout the remainder of 2010 is to continue to grow sales, improve gross margins and expand our customer base and we are making steady progress in each of these areas."

HEI, Inc. designs, develops and manufactures ultra-miniature microelectronics, substrates, systems, connectivity and software 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 Headquarters & HEI –Victoria (Microelectronics Division)	PO Box 5000, 1495 Steiger Lake Lane, Victoria, MN 55386
HEI – Boulder (Advanced Medical Division)	4801 North 63rd Street, Boulder, CO 80301
HEI – Tempe (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, 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 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 in the world economy. 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.
CONSOLIDATED BALANCE SHEETS

	July 3,	January 2,
	2010	2010
	(Unaudited)	(Audited)
	(In thousands, except share and per share data)
ASSETS
Current assets:
Cash and cash equivalents	$ -	$ -
Accounts receivable, net	4,303	3,566
Inventories, net	3,906	2,952
Deferred income taxes	362	362
Other current assets	809	455
Total current assets	9,380	7,335
Property and equipment:
Land	216	216
Building and improvements	4,337	4,337
Fixtures and equipment	24,336	24,140
Accumulated depreciation	(23,442)	(23,025)
Net property and equipment	5,447	5,668
Security deposit	230	230
Other long-term assets	357	388
Total assets	$ 15,414	$ 13,621
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Checks issued in excess of cash in bank	$ 619	$ 395
Current maturities of long-term debt	518	551
Accounts payable	1,952	1,750
Customer deposit liabilities	8	228
Accrued liabilities	876	945
Total current liabilities	3,973	3,869
Deferred income taxes	362	362
Other long-term liabilities, less current maturities	1,950	1,934
Long-term debt, less current maturities	5,475	4,240
Total other long-term liabilities, less current maturities	7,787	6,536
Total liabilities	11,760	10,405
Shareholders’ equity:
Undesignated stock	-	-
Convertible preferred stock, $.05 par	2	2
Common stock, $.05 par	486	486
Paid-in capital	28,163	28,096
Accumulated deficit	(24,997)	(25,368)
Total shareholders’ equity	3,654	3,216
Total liabilities and shareholders’ equity	$ 15,414	$ 13,621

HEI, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended		Six Months Ended
	July 3,	July 4,	July 3,	July 4,
	2010	2009	2010	2009
	(In thousands, except share and per share data)		(In thousands, except share and per share data)
Net sales	$ 9,350	$ 7,826	$ 18,870	$ 16,709
Cost of sales	7,813	6,378	15,943	13,330
Gross profit	1,537	1,448	2,927	3,379
Operating expenses:
Selling, general and administrative	1,193	1,334	2,195	2,637
Research, development and engineering	186	223	381	433
Operating income (loss)	158	(109)	351	309

Interest expense	(79)	(61)	(147)	(215)
Other income (expense), net	-	2	167	6
Net income (loss)	$ 79	$ (168)	$ 371	$ 100

Net income (loss) per common share	$ 0.01	$ (0.02)	$ 0.04	$ 0.01

Weighted average common shares outstanding	9,724,000	9,720,000	9,724,000	9,678,000