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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
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HEI, INC.
(Name of Subject Company)
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HEI, INC.
(Name of Person Filing Statement)
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COMMON STOCK, PAR VALUE $.05 PER SHARE
(INCLUDING THE ASSOCIATED COMMON STOCK PURCHASE RIGHTS)
(Title of Class of Securities)
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404160103
(CUSIP Number of Class of Securities)
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EUGENE W. COURTNEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HEI, INC.
P.O. BOX 5000
1495 STEIGER LAKE LANE
VICTORIA, MINNESOTA 55386
(612) 443-2500
(Name, Address and Telephone Number of Person
Authorized to Receive Notice and Communications
on Behalf of the Person Filing Statement)
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COPIES TO:
DEANNE M. GRECO
Moss & Barnett,
A Professional Association
4800 Norwest Center
90 South Seventh Street
Minneapolis, Minnesota 55402-4129
(612) 347-0287
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HEI, Inc. hereby amends and supplements its Solicitation/Recommendation
Statement on Schedule 14D-9 filed with the Securities and Exchange Commission on
March 20, 1998 in response to the Tender Offer Statement on Schedule 14D-1 filed
by Fant Industries Inc., as set forth below.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Item 9 is hereby amended to add the following:
Exhibit 5 Letter to Shareholders dated April 30, 1998, including
enclosures.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
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HEI, INC.
By /s/ EUGENE W. COURTNEY
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Eugene W. Courtney,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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Dated: May 1, 1998
2
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EXHIBIT 5
[LOGO]
AN IMPORTANT MESSAGE CONCERNING YOUR INVESTMENT IN HEI, INC.
DO NOT BE STAMPEDED BY ANTHONY FANT'S ATTEMPTS
TO SEIZE CONTROL OF YOUR COMPANY!
DO NOT RETURN ANY GREEN PROXY CARDS-- MR. FANT HAS NOT
BOTHERED TO REQUEST A SHAREHOLDERS MEETING SO THERE IS NO
REASON TO ACT NOW, AND EVERY REASON TO WAIT!
April 30, 1998
Dear Shareholder:
Over the past two months you may have received several communications from
Anthony J. Fant or his representatives concerning his proposal to seize control
of your company and its assets, including a proxy statement and green proxy card
seeking your vote for a shareholders meeting he has not bothered to request.
SINCE NO SHAREHOLDERS MEETING HAS BEEN REQUESTED, AS PROVIDED UNDER MINNESOTA
LAW AND YOUR COMPANY'S BYLAWS, AND CONSEQUENTLY NO MEETING HAS BEEN CALLED,
THERE IS NO NEED TO RETURN ANY GREEN PROXY CARDS NOW.
Your Board believes that Mr. Fant is trying to stampede the shareholders
into demonstrating support for him without providing the opportunity to
carefully consider the issues and management's positions in the context of a
duly called shareholders meeting.
If Mr. Fant makes a valid request for a shareholders meeting, as provided
under Minnesota law and your company's bylaws, your Board will schedule such a
meeting under a timetable that allows for a full, fair and adequate discussion
of these issues, which involve the future of ALL THE SHAREHOLDERS' investments
in HEI. In connection with such a meeting, your Board will send you a detailed
proxy statement containing our position concerning Mr. Fant, his proposals and
his efforts to seize control of your company while only paying for less than 30%
of the stock. Until such time, you should not return any green proxies for Mr.
Fant's phantom meeting.
IN THE MEANTIME, PLEASE REVIEW THE ENCLOSED FINANCIAL SUMMARY. The summary
shows the progress the current management team has made in transforming HEI from
an unprofitable operation in desperate financial straits in 1990 to a vibrant,
profitable, focused business with greatly enhanced capabilities and financial
strength. To take just two examples, over that period shareholders equity has
grown from $1 million to $17 million and our mainstream business, custom
microelectronics, has grown from about $3 million a year to $30 million in
fiscal 1997.
YOU SHOULD ALSO CONSIDER MR. FANT AND HIS TACTICS. He has launched what your
Board believes is a coercive attempt to gain control of HEI, while paying for
less than 30% of the stock. While your Board has tried to learn more about him
and his qualifications, Mr. Fant has provided no meaningful data beyond the
limited information in his proxy statement. It appears, however, that neither he
nor any of his hand-picked slate of director nominees has any experience in
HEI's business--the design and manufacture of microelectronic products. Yet, he
wants to seize control over the future of the more than 70% of the company's
stock he does not intend to buy.
DO NOT BE STAMPEDED BY MR. FANT. These important issues, which affect the
future value of your investment, should be decided in the proper forum, a duly
called shareholders meeting for which there is adequate time for the
shareholders to consider all sides.
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DO NOT BE MISLED BY MR. FANT. Your Board is committed to the best long-term
interests of ALL the shareholders. There is no need to take any action at this
time. Do not return any green proxy cards.
Thank you for your past and continuing support of our efforts at HEI.
Despite the distractions caused by Mr. Fant, we are continuing our efforts to
increase shareholder value by growing revenues and net income. As part of those
efforts, we have appointed Don Reynolds as our new President and enclose a
letter from Gene Courtney concerning that appointment.
If you have any questions or need assistance, please call Jerald Mortenson
or Gene Courtney at HEI (612) 443-2500.
Sincerely,
HEI Inc. Board of Directors
Robert L. Brueck Eugene W. Courtney William R. Franta Frederick M. Zimmerman
The following information is provided pursuant to Section 14(a) of the
Securities Exchange Act of 1934, as amended, and Rule 14a-11(b)(2) thereto.
Participants in the solicitation are HEI, directors of HEI and certain senior
management. Their beneficial ownership interests in HEI Common Stock are as
follows: Robert L. Brueck, director, 32,000 shares, including 30,000 shares
subject to options exercisable within 60 days; Eugene W. Courtney, Chief
Executive Officer and director, 160,547 shares, including 75,000 shares subject
to options exercisable within 60 days; William R. Franta, director, 45,211
shares, including 40,000 shares subject to options exercisable within 60 days;
Jerald H. Mortenson, Vice President of Finance and Administration, 99,179
shares, including 30,000 shares subject to options exercisable within 60 days;
Donald R. Reynolds, President, no shares; and Frederick M. Zimmerman, director,
30,900 shares, including 30,000 shares subject to options exercisable within 60
days.
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Box 5000
1495 Steiger Lake Lane
Victoria, MN 55386
(612) 443-2500
Fax (612) 443-2668
[LOGO]
April 30, 1998
To Our Shareholders:
Given the fast pace to life today, you may have missed some important recent
news that means a great deal to the future of our company. I just want to take a
few moments to reiterate how pleased I am with the recent announcement of our
new President, Don Reynolds.
Your board began a strategic planning process well over a year ago, a
portion of which was directed at defining HEI's management needs for future
growth. As one result, we employed an executive search firm last September to
identify a top-level executive to enhance our already solid management team. The
board and I felt we needed an individual with the right blend of high tech
industry knowledge, innovation, leadership and personal integrity. We looked for
someone who was not only technically sound, but with the management style
capable of helping lead HEI to even more rapid growth, sound business innovation
and diversification--building on the strong financial and technology platform
we've put in place over the past eight years.* Don is that person.
Don's initial responsibilities--guiding our new business development and
strategic planning efforts-- will take full advantage of his professional
experience and allow him to focus on growth and new market development, thereby
achieving the maximum impact in the shortest possible time. Don's addition is a
key step for the HEI team as we chart our course to maximize shareholder value.
Don came to HEI just about a month ago, accepting the interim position of
Executive Vice President, pending his appointment as President. He joins us
after a distinguished 17 year career with BF Goodrich, Rosemount Aerospace where
he held ever increasing responsibilities for groups such as marketing and sales,
key account management, strategic business development, engineering and finance.
Under his direction, Don's business unit enjoyed a yearly 25 percent revenue and
income growth rate and won 80 percent of targeted new business pursuits.
Personally, I am particularly pleased that Don was born, raised, and
educated right here in Minnesota. I have long felt that a significant factor in
HEI's success is the strong sense of loyalty and work ethic that is so much a
part of this region. Don understands that kind of commitment and the key role it
can play in producing solid long-term performance.
In closing, I want to underscore our use of the word SHAREHOLDER. Some
companies substitute the word stockholder, others use the term investor. We
prefer shareholder because that is exactly how we view those who join with us in
our future growth strategy. We are confident that we have the people, the plans
and the opportunity to continue the positive story that is HEI. We look forward
to your continued partnership in our profitable and rewarding future.
As always, please feel free to contact me with questions or comments.
Sincerely,
/s/ Eugene W. Courtney
Eugene W. Courtney
CHIEF EXECUTIVE OFFICER
* I've enclosed a summary fact sheet for your information.
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[LOGO]
COMPANY BACKGROUND
HEI, Inc. is a Minnesota-based company specializing in the design and
manufacture of custom ultraminiature microelectronic devices, and
high-technology products that incorporate those devices. HEI provides design and
manufacturing services to meet the outsourcing needs and solve the size- and
cost-reduction challenges of its customers in the medical, computer, industrial
instrumentation and telecommunications industries. HEI's diverse capabilities
include placement of bare semiconductor die and other miniature components on
ceramic, laminate and flexible substrates or combinations thereof, using
state-of-the-art interconnect techniques.
In response to today's demand forever smaller and more complex electronic
devices, HEI has enjoyed significant success in the hearing and medical
instrument markets and in building devices for computer peripherals. HEI also
has a growing presence in telecommunications applications for its technology.
HEI is on solid financial ground with cash reserves available for future
expansion and investment. The company continues to attract new business through
its market position, unique design expertise, process capabilities and
world-class manufacturing facility.
HEI operates a 49,000 square foot facility in Victoria, Minnesota. The
facility is ISO 9001 registered and contains certified clean rooms, the latest
in high precision processing equipment and flexible continuous flow high volume
manufacturing capabilities.
The company's stock trades on the NASDAQ National Market under the symbol
HEII. Its web site is www.heii.com.
COMPANY FACTS (APRIL, 1998)
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Founded 1968
IPO 1981
Fiscal Year End August 31
FY 1997 Revenue $30,962,000*
FY 1997 Net Income $2,550,000*
Revenue--
Qtr. Ending 2/28/98 $4,632,000
Six Months $8,712,000
Net Income--
Qtr. Ending 2/28/98 $204,000
Six Months $100,000
1495 Steiger Lake
Lane
PO Box 5000
Victoria, MN 55386
(612) 443-2500
Headquarters
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* Represents all-time company record
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[LOGO]
FINANCIAL SUMMARY
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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HEI REVENUE
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FY 1990-1997
TOTAL REVENUE
Millions
1990 $8.5
1991 $9.0
1992 $14.1
1993 $18.9
1994 $17.3
1995 $23.4
1996 $20.7
1997 $31.0
FISCAL YEAR 1990-1997
Revenues have grown from $8.5 million in
1990
to $31.0 million in 1997, a 20% compound
annual growth rate.
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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HEI CASH AND INVESTMENTS
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FY 1990-1997
CASH/INVESTMENTS
Millions
1990 $0.0
1991 $0.2
1992 $0.9
1993 $2.0
1994 $2.3
1995 $5.3
1996 $6.7
1997 $12.6
FISCAL YEAR 1990-1997
Cash and Investments were just a few
thousand dollars during 1990 and 1991
but by 1997 had grown to nearly $13
million.
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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HEI PROFIT BEFORE TAX
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FY 1990-1997
NPBT % RETURN
Millions ON REVENUE
1990 ($0.8) (9.7%)
1991 $0.1 0.6%
1992 $2.0 14.2%
1993 $4.0 21.2%
1994 $2.1 12.2%
1995 $3.3 13.9%
1996 $2.8 13.7%
1997 $4.0 12.9%
FISCAL YEAR 1990-1997
From a loss of nearly $1 million in
1990,
profits have been solid since 1992 and
have
consistently exceeded 12.0% to 13.0% of
revenues through 1997.
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EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
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HEI SHAREHOLDER EQUITY
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FY 1990-1997
EQUITY BOOK VALUE
Millions PER SHARE
1990 $1.1 $0.77
1991 $1.6 $0.56
1992 $3.6 $1.14
1993 $6.8 $1.86
1994 $8.7 $2.35
1995 $11.0 $2.90
1996 $13.8 $3.43
1997 $17.0 $4.14
FISCAL YEAR 1990-1997
In 1990, shareholder equity was only
$1.1M with retained earnings at a
negative
$3.1M. By 1997, shareholder equity
increased to $17.0 M with retained
earnings at a positive $9.3 M.
The book value per share increased
from $.77 in 1990 to $4.14 in 1997.
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During the FY'90 through FY'97 period, HEI also spent $10 million on capital
improvements in plant and equipment. This includes upgrading the original
facility, including two class 10,000 clean rooms, more than doubling the
production capacity and installing new precision, high-speed equipment.
