Northfield, MN, June 28, 2000 – Sheldahl, Inc. (Nasdaq: SHEL) today announced record sales of $36.2 million for its third quarter ended May 26, 2000, largely driven by a better than two-fold increase in business from the Datacom market and increasing demand in Micro Products. This represents an 11.0% improvement over the comparable quarter in fiscal 1999 when net sales were $32.6 million. Pre-tax losses for the quarter prior to the payment of preferred dividends were $3.7 million versus $1.4 million in the comparable period a year ago. Net losses for the quarter were $4.2 million, or $0.36 per share, compared with $2.0 million, or $0.18 per share, for the fiscal 1999 third quarter ended May 28, 1999 .

The fiscal 2000 third quarter improvements resulted in positive cash flow for Sheldahl for the quarter but gross profits were off due to a less profitable sales mix and higher material costs. In addition, material cost adjustments amounting to $1.2 million were made resulting in a more conservative presentation of inventory.

Cash requirements to fund restructuring charges taken during fiscal 1999 and 1998, (estimated to be $2.7 million for fiscal 2000 versus $5.0 million for all of fiscal 1999), coupled with capital expenditures (planned for $3.0 million in fiscal 2000 compared with $5.5 million in fiscal 1999) and debt repayments of approximately $3.8 million continue to place significant pressure on the cash reserves of the Company. As a result, the financial condition of the Company at May 26, 2000, was not in compliance with one of its debt covenants. Sheldahl has received a waiver from its lenders with respect to matters of non-compliance. In addition new debt covenants have been established for the Company’s fourth quarter ending September 1, 2000.

Edward L. Lundstrom, President and Chief Executive Officer commented on the quarter, stating, "Core business revenues are strong, being driven by the Datacom market where Sheldahl has made significant in-roads with its Novacladâ family of products -- Novaflexâ VHD, Novaflexâ HD and ViaThinâ . These are most commonly utilized in newer products focused on smaller scale, more and faster functionality and lighter weight, such as cellular telephones and portable computing devices."

"Micro Products also had a record quarter, with more than $1.3 million in sales," Lundstrom continued. "We enter the final quarter of fiscal 2000 with Micro Products backlog at a record $2.2 million, demonstrative of increasing market acceptance and reliance on Sheldahl as a preferred vendor. We expect to see continued progress in this area."

NINE MONTH RESULTS

For the first nine months of fiscal 2000, Sheldahl reported record sales of $103.0 million, an increase of more than 15% over the $89.1 million reported for the first nine months of fiscal 1999. Gross profits improved to $11.2 million from $9.8 million, driven by significantly more sales in the Datacom market and a record $3.8 million in sales for Micro Products. Operating losses before preferred dividends amounted to $6.7 million in fiscal 2000 versus $9.5 million, including $2.6 million of restructuring costs incurred in the first nine months of fiscal 1999. Net losses for the first nine months of fiscal 2000 were $8.2 million versus $11.1 million for the comparable period of fiscal 1999.

"As we enter the final quarter of our fiscal year, we are pleased with the increasing demand for our products, with our increased sales in the Datacom market and with the confidence our customers have in our technology and our ability to deliver quality products," Lundstrom said. "We are focused on improving our liquidity and capital position and remain committed to our shareholders to maximize shareholder value for the long-term."

Sheldahl is a leading producer of high-density substrates, high-quality flexible printed circuitry, and flexible laminates primarily for sale to the automotive electronics and data communications markets. The Company, which is headquartered in Northfield, Minnesota, has operations in Northfield; Longmont, Colorado; Detroit, Michigan; South Dakota; Toronto, Ontario, Canada; and Chihuahua, Chih., Mexico. Its sales offices are located in Hong Kong, China; Singapore; and Mainz, Germany. As of June 1, 2000, Sheldahl employed approximately 820 people. Sheldahl’s common stock trades on the Nasdaq National Market tier of the Nasdaq Stock Market under the symbol: SHEL. Sheldahl news and information can be found on the World Wide Web at http://www.sheldahl.com.

The discussion above contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements by their nature involve substantial risks and uncertainties as described by Sheldahl’s periodic filings. Actual results may differ materially depending on a variety of factors, including, but not limited to the following: the achievement of Sheldahl’s projected operating results, the ability of Sheldahl to successfully obtain waivers from its lenders for its default on its debt covenants, the achievement of efficient volume production and relates sales revenue results at Longmont, the ability of Sheldahl to identify and successfully pursue other business opportunities, and Sheldahl not entering into an agreement with respect to a transaction or any such transaction not being consummated. Additional information with respect to the risks and uncertainties faced by Sheldahl may be found in, and the prior discussion is qualified in its entirety by, the Risk Factors contained in the Company’s filings with the Securities and Exchange Commission including Sheldahl’s Annual Report, Form 10-K for the fiscal year ended August 27, 1999, forms 10-Q for the quarters ending November26, 1999, February 25, 2000, and other SEC filings. Sheldahl does not undertake any obligation to update any such factors or to publicly announce developments or events related to the matters described herein.

SHELDAHL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited

SHELDAHL, INC. AND SUBSIDIARY
   CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited

                                                           Nine Months Ended

    (in thousands, except for per share data)          May 26,        May 28,
                                                        2000           1999

    Net sales                                       $  102,994      $  89,091
    Cost of sales                                       91,794         79,224

    Gross profit                                        11,200          9,867

    Expenses:
     Sales and marketing                                 6,103          6,923
     General and administrative                          6,640          6,153
     Research and development                            2,375          1,870
     Interest                                            2,746          1,787
     Restructuring Costs                                    --          2,600

      Total expenses                                    17,864         19,333

    Loss before income taxes                            (6,664)        (9,466)

    Income taxes                                            --             --

    Net loss before preferred dividends             $   (6,664)     $  (9,466)

    Convertible preferred stock dividends           $   (1,555)     $  (1,593)

    Net loss applicable to common shareholders      $   (8,219)     $ (11,059)

    Net loss after convertible preferred stock
     dividends -- basic and diluted                 $    (0.70)     $   (1.02)

    Weighted average number of shares
     outstanding -- basic and diluted                   11,680         10,857

                                SHELDAHL, INC.
                         CONSOLIDATED BALANCE SHEETS

                                    ASSETS
                                  Unaudited

    (In thousands)                                       May 26,   August 27,
                                                          2000         1999
    Current assets:
     Cash and cash equivalents                       $     972    $   1,043
     Accounts receivable, net                           22,330       19,908
     Inventories                                        18,434       18,746
     Other current assets                                  939          593
      Total current assets                              42,675       40,290

     Construction in progress                              793        3,399
     Land and buildings                                 28,662       28,560
     Machinery and equipment                           130,786      127,377
     Less:  accumulated depreciation                   (88,274)     (76,491)
      Net plant and equipment                           71,967       82,845

     Other assets                                          773          795
                                                     $ 115,415    $ 123,930

                   LIABILITIES AND SHAREHOLDERS' INVESTMENT

    Current liabilities:
     Current maturities of long-term debt            $   3,468    $   4,142
     Accounts payable                                   12,082       10,493
     Accrued salaries                                    1,310        1,323
     Other accrued liabilities                           5,069        4,682
     Restructuring reserves                              1,227        2,713
      Total current liabilities                         23,156       23,353

     Long-term debt                                     27,708       29,284

     Restructuring reserves                              1,734        2,484

     Other non-current liabilities                       3,341        3,477

      Total Liabilities                                 55,939       58,598

    Shareholders' investment:
      Convertible preferred stock                           42           40
      Common stock                                       2,940        2,903
      Additional paid-in capital                       111,732      109,407
      Retained earnings                                (55,238)     (47,018)

      Total shareholders' investment                    59,476       65,332
                                                     $ 115,415    $ 123,930