U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 (Fee required)
For the fiscal year ended March 29, 1996
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 (No fee required)
For the transition period from to
Commission file number 0-5278
IEH CORPORATION
(Name of Small Business Issuer in Its Charter)
New York 13-5549348
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
140 58th Street, Suite 8E, Brooklyn, New York 11220
(Address of Principal Executive Offices) (Zip Code)
(718) 492-4440
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act:
Name of Each Exchange on Which
Title of Each Class Registered
None None
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None None
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.50 Par Value
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(Title of Class)
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(Title of Class)
Indicated by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports),and (2) has been subject to such filing
requirements for past 90 days.
Yes [X] No [ ]
<PAGE>
Indicate by check mark if disclosure of delinquent filers in response
to Item 405 of Regulation S-B is not contained in this form, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
The Registrant's revenues for its most recent fiscal year ended March
31, 1996 were $4,085,177.
On June 25, 1996, the aggregate market value of the voting stock of
Registrant held by non-affiliates of Registrant (consisting of Common Stock,
$.50 par value) computed by reference to the closing-bid price at which the
stock was sold on such date ($.156) was $148,499.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
On June 25, 1996, there were 2,303,502 shares of Common Stock, $.50 par
value, issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART I
Item 1. Business
IEH Corporation (hereinafter referred to as the "Company") was
organized under the laws of the State of New York on March 22, 1943 under the
name Industrial Heat Treating Company, Inc. On March 15, 1989, the Company
changed its name to its current name. The Company's executive offices and
manufacturing facilities are located at 140 58th Street, Suite 8E, Brooklyn, New
York 11220. The Company's telephone number is (718) 492-4440.
The Industry in Which the Company is Engaged
The Company is engaged in the design, development, manufacture and
distribution of high performance electronic printed circuit connectors and
specialized interconnection devices. Electronic connectors and interconnection
devices are used to provide connections between electronic component assemblies.
The Company develops and manufactures connectors which are designed for a
variety of high technological and high performance applications. These
connectors are primarily utilized by those users who require highly efficient
and dense (the space between connection pins within the connector) electrical
connections.
Printed circuit boards in computers contain the components necessary to
perform specific system sub-functions. These functions require connections which
relay information between electronic components and circuit boards, enabling the
commands that are input by the user to be performed. Electronic connectors, in
essence, enable circuit boards and electronic components to communicate with
each other, via direct electrical connection. Connectors also are fundamental to
modular construction of electronic assemblies enabling the disconnection and
removal of circuit boards and other electronic components for testing, repair,
and replacement.
Connectors may be designed and manufactured in various shapes, sizes
and specifications to meet specific customer requirements and applications. High
performance connectors are designed to meet various density and pin count (the
number of individual connection points within each connector) criteria and to
provide low forces (the amount of pressure needed to make the connection) and
electrically efficient connections.
Constant advances in the design of solid state devices have resulted in
significantly denser component packaging configurations on circuit boards.
Historically, a 5" X 8" circuit board may have consisted of thousands of
circuits with 10 to 30 lines of communication. Under those conditions, an
insertion force of one pound per contact for each of the communication lines
formed a common and acceptable standard in connection devices. As a result of
technological developments in recent years, the same 5" X 8" circuit board may
contain hundreds of thousands of circuits with hundreds of communication lines,
and an insertion force of one (1) ounce per contact as the standard in the
industry.
The Company's Product Line
The Company primarily manufactures printed circuit board connectors
that meet military or individual customer specifications. Certain of the
Company's manufacturing and sales involve the competitive bidding process
because of the military and/or government status of customers. The Company also
manufactures a line of standard universal connectors which have common usage in
the high technology and commercial electronics industries. The Company serves
<PAGE>
both the commercial and military marketplace, manufacturing connectors for
avionics, electronics, satellite, radar systems, test equipment, medical
electronics and related industries.
The Company is continuously redesigning and adapting its connectors to
keep pace with developments in the electronics industry, and has, for example,
developed connectors for use with flex-circuits which are used in aerospace
programs, computers, air-borne communication systems, testing systems and other
areas. The Company also provides engineering services to its customers to assist
in the development and design of connectors to meet specific product
requirements.
The Company's electronic printed circuit connectors are sold to
original equipment manufacturers and distributors. The Company supplies its
connectors to manufacturers who principally produce and distribute finished
products as well as to distributors who resell the Company's products. Prior to
the decrease in military and government spending over the last five (5) years,
the Company's sales were made primarily to the government, military defense
contractors and aerospace companies. However, since the decrease in military and
government spending the Company has modified its product line so as to
concentrate its sales efforts to commercial electronics companies. The Company
still continues to market its connectors for use in government and military
computers; military defense equipment and information systems; terrestrial,
airborne and aerospace communications products; avionics and guidance systems
and instrumentation and electronic testing equipment.
With the continuing downturn in government contracts over the last few
years, the Company has been striving the past several years to develop
commercial accounts.
Management has instituted several steps to increase productivity and
increase sales such as downsizing the labor force, implementing material changes
to make the Company's products more competitive and developing machinery and
equipment to increase production rates. Management believes these initiatives
have decreased costs and will continue to do so in the near future.
For the fiscal year ended March 29, 1996, the Company's principal
customers included manufacturers of commercial electronics products, military
defense contractors and distributors who service these markets. Sales to the
commercial electronics and military defense markets comprised 24 % and 75%,
respectivley, of the Company's net sales for the year ended March 29, 1996.
Approximately 1% of the Company's net sales for the year ended March 29, 1996,
were made directly to the federal government.
New Product Development
The Company maintains a program to increase the efficiency and
performance of its connectors to meet anticipated and specific market needs.
Computer and electronics technology is continuously changing and requires the
redesign and development of connectors to adapt to these changes. Primarily, new
technology has dictated a decrease in the size of solid state electronic
components and smaller and denser high performance connectors. Management
believes that a key ingredient to the Company's success is its ability to assist
customer with a new design effort and prepare necessary drawing packages in a
short period of time. After the customer approves the design, prototypes are
built, approved by the customer and production is released. As an example, six
new connectors have been introduced to a major commercial account. The Company's
design effort on this product line began mid-year 1994 and was recently
completed. The new development process with this commercial client has lead to
<PAGE>
substantial repeat business in the past fiscal year. the Company now has the
ability to introduce this line to other commercial accounts.
The Company has also recently commenced production of two new
connectors for the aerospace industry. To date early orders for pre-production
units have been completed and the Company is awaiting commencement of
production.
One of the nation's leading radar system manufacturers has contracted
with the Company for six new designs. The design work is complete, approvals
have been obtained, and the Company is now in small scale production. The
Company anticipates full scale production when the radar system is released for
sale by the customer. During fiscal year 1996, the company's business with this
customer doubled from the previous fiscal year.
Several years ago, the Company has recently designed and developed a
form of compliant termination connector, which is named, "COMTAC". This product,
which utilizes technology known as "Solderless Pin Technology", does not require
the soldering of connector pins, but instead utilizes a spring type locking
system in attaching the connector to the printed circuit board. This technology
was patented in the United States under patent No. 4,720,268 and assigned to the
Company on January 19,1988. During fiscal year ended March 29, 1996 sales of
COMTAC connectors accounted for over 10 % of the Company's total sales. The
Company has sent to certain of its customers and potential customers
pre-production units for evaluation. Although there can be no assurance of
fututre sales, the Company is optimistic that this new technology will lead to
an increase in sales.
In connection with relocation of the Company's facilities in August
1991, the City of New York granted the Company utility and tax incentives.
Additionally, in July 1992, the New York State Urban Development Corp. ("UDC")
loaned the Company $435,000. The loan is repayable over a ten (10) year period,
with interest rates progressively increasing from 4% to 7% over the term of the
loan. The loan proceeds were used to finance construction and renovation of the
new facility. As of March 29, 1996, principal due under this loan equalled
$322,208 As of its fiscal year ended April 1, 1994, the Company failed to meet
the tangible net worth covenant as well as certain other financial covenants
contained in this loan agreement and to date remains in default of this loan
agreement as a result thereof. The Company has previously obtained waivers from
the UDC for this breach of loan covenant. The Company has requested an
additional waiver of this covenant from the UDC for additional periods of time.
To date, the Company has not obtained such a waiver nor has the UDC declared a
default. There can be no assurance that the Company will be able to obtain a
waiver of the loan covenant or that the UDC will not declare a default of the
loan.
As of March 29, 1996, the Company was in arrears with respect to the
Health & Welfare Fund and Pension Funds (together, the "Union Funds") which it
is required to maintain under its labor agreements with the United Automobile
Workers Local 259 (the "Union"). In December 1993, the Company reached a verbal
understanding with the Union pursuant to which the Company agreed to a payment
schedule to make current its obligations under the Union Funds. At December 1,
1993, the Company owed $388,777 to the Health & Welfare Funds and $129,286 to
the Pension Fund. Pursuant to the understanding the Company had agreed to pay
$10,000 per month until the total debt in arrears has been paid in full. As of
March 29, 1996, the amount in arrears with respect to the Union Funds was
$403,101. There can be no assurance that the Company will be able to meet its
obligations, in full or in part, in accordance with this understanding.
<PAGE>
On June 30, 1995, the Company applied to the Pension Benefit Guaranty
Corporation ("PBGC") to have the PBGC assume all of the Company's
responsibilities and liabilities under its Salaried Pension Plan. On April 26,
1996, the Company was notified that the PBGC had granted the Company's request
and agreed to assume the Company's obligations under the Salaried Pension Plan.
The PBGC has not issued a final accounting and order with respect to the
Salaried Pension Plan. It is possible that the PBGC will require that the
Company make future payments to PBGC. Marketing and Sales
The market for connectors and interconnect devices, domestic and
worldwide, is highly fragmented as a result of the manufacture by many companies
of a multitude of different types and varieties of connectors. For example,
connectors include: printed circuit, rectangular I/O, circular, planar (IOC) RF
coax, IC socket and fiber optic. The Company has been servicing a niche in the
market by manufacturing HYPERTAC(TM) connectors and innovative Company-designed
printed circuit connectors such as the Comtac connectors. Previously, the
Company was one of only three licensed manufacturers of the HYPERTAC(TM) design
in the United States. In fiscal year 1996, the Company learned that the other
two licensees had merged. Moreover, the Company, based upon advice of counsel,
determined that the HYPERTAC technology was no longer protected by a patent, and
therefore was in the public domain. As a result, the Company notified the
licensor that it would no longer be bound by the terms of its license agreement
and the Company ceased making license payments. See Financial Statements and
Notes thereto. The, the Company does not anticipate manufacturing other types of
connectors in the immediate future. The Company is continuously experimenting
with innovative connection designs, which may cause it to alter its marketing
plans in the future if a market should develop for any of its current or future
innovative designs.
The Company's products are marketed to original equipment manufacturers
directly and through distributors serving primarily the government, military,
aerospace and commercial electronics markets. The Company is also involved in
developing new connectors for specific uses which result from changes in
technology. This includes the COMTAC connectors. The Company assists customers
in the development and design of connectors for specific customer applications.
This service is marketed to customers who require the development of connectors
and interconnect devices specially designed to accommodate the customers own
products.
The Company is primarily a manufacturer and its products are
essentially basic components of larger assemblies of finished goods.
Approximately 95% and 95% of the Company's net sales for the years ended March
29, 1996 and March 31, 1995, respectively, were made directly to manufacturers
of finished products with the balance of the Company's products sold to
distributors. Distributors often purchase connectors for customers who do not
require large quantities of connectors over a short period of time but rather
require small allotments of connectors over an extended period of time.
Three (3) of the Company's customers accounted for 23% and 24 % of the
Company's net sales for the years ended March 29, 1996 and March 31, 1996,
respectively. One of the Company's customers accounted for 8% and 11% of the
Company's sales for the years ended March 29, 1996 and March 31, 1995,
respectively.
The Company currently employs 14 independent sales representatives and
one western regional office to market its products in all regions in the United
States. These independent sales representatives also promote the product lines
of other electronics manufacturers; however, they do not promote the product
lines of competitors which compete directly with the Company's products. These
<PAGE>
sales representatives accounted for approximately 94% of Company sales (with the
balance of Company sales being generated via direct customer contact) for the
year ended March 29, 1996.
International sales accounted for less than l% of sales for the years
ended March 29, 1996 and March 31, 1995.
Backlog Of Orders/Capital Requirements
The backlog of orders for the Company's products amounted to
approximately $1,200,000 at March 29, 1996, as compared to $1,000,000 at March
31, 1995. At June 25, 1996, the backlog had increased to approximately
$1,400,000. A significant portion of these orders are subject to cancellation or
postponement of delivery dates and, therefore, no assurance can be given that
actual sales will result from these orders. The estimated funds required to
manufacture the current backlog of orders is estimated at approximately
$450,000. The Company presently does not have the funds to manufacture all of
their orders and, therefore, it cannot estimate the portion of those orders
which will be manufactured or delivered.
Competition
The design, development, manufacture and distribution of electrical
connectors and interconnection devices is a highly competitive field. The
Company principally competes with companies who produce high performance
connectors in printed circuits and wireboards for high technology application
which includes Hypertronics Corporation and Si-Tac Connectors, Inc. The Company
competes with these companies with respect to their abilities to adapt certain
technologies to meet specific product applications; in producing connectors
cost-effectively; and in production capabilities. In addition, there are many
companies who offer connectors with designs similar to those utilized by the
Company and are direct competitors of the Company.
The Company also competes with those companies who provide standard
universal printed circuit connectors. These companies include: Airborne, Inc.,
Texas Instrument, Inc., and Winchester Electronics, Inc.
The primary basis upon which the Company competes is product
performance and production capabilities. The Company usually receives job orders
after submitting bids pursuant to customer-issued specifications. The Company
also offers engineering services to its customers in designing and developing
connectors for specialized products and specific customer applications. This
enables the Company to receive a competitive advantage over those companies who
basically manufacture connectors based solely or primarily on cataloged
specifications. Many of the Company's competitors have greater financial
resources, market penetration and experience than the Company and no assurances
can be given that the Company will be able to compete effectively with these
companies in the future.
Suppliers of Raw Materials and Component Parts
The Company utilizes a variety of raw materials and manufactured
component parts which it purchases from various suppliers. These materials and
components are available from numerous sources and the Company does not believe
that it will have a problem obtaining such materials in the future. However, any
delay in the Company's ability to obtain necessary raw materials and component
parts may affect its ability to meet customer production needs. In anticipation
of such delays, the Company carries an inventory of raw materials and components
parts to avoid shortages and to insure continued production.
<PAGE>
Engineering/Research & Development
The Company provides personalized engineering services to its customers
by designing connectors for specific customer applications. The employment of
electromechanical engineers is the anticipated cornerstone of the Company's
future growth. The Company maintains a testing laboratory where its engineers
experiment with new connector designs based on changes in technology and in an
attempt to create innovative, more efficient connector designs.
The Company expended an estimated $19,500 and $51,050 for the years
ended March 29, 1996 and March 31, 1995, respectively, on Company sponsored
research and development activities relating to the development of new designs,
techniques and the improvement of existing designs. In addition, the Company
received revenues of $129,000 and $82,700 for the years ended March 29, 1996 and
March 31, 1995, respectively, pursuant to customer sponsored research
activities.
Employees
The Company presently employs approximately 65 people, three (3) of
whom are executive officers; three (3) are engaged in management activities;
four (4) provide general administrative services and approximately 55 are
employed in manufacturing and testing activities. The employees engaged in
manufacturing and testing activities are covered by a collective bargaining
agreement with the United Auto Workers of America, Local 259 (the "Union") which
expired on July 31, 1995 and was extended until March 31, 1996. On April 1,
1996, the Union and the Company negotiated a new contract which expires on March
31, 1999. The Company believes that it has a good relationship with its
employees and the Union.
Patents and Licenses
Electrical connectors and interconnection devices are usually the
subject of standard designs, therefore, only innovations of standard designs or
the discovery of a new form of connector are patentable. The Company is
continuously attempting to develop new forms of connector or adaptations of
current connector designs in an attempt to increase performance and decrease per
unit costs. The Company has developed and designed the COMTAC connector which
was patented on January 19, 1988, at which time the patent was assigned to the
Company.
Governmental Regulations
The Company is subject to federal regulations under the Occupational
Safety and Health Act ("OSHA") and the Defense Electric Supply Command ("DESC").
OSHA provides federal guidelines and specifications to companies in order to
<PAGE>
insure the health and safety of employees. DESC oversees the quality and
specifications of products and components manufactured and sold to the
government and the defense industry. Although DESC continuously requires
suppliers to meet changing specifications, the Company has not encountered any
significant problems meeting such specifications and its products have, in the
past, been approved. The Company is unaware of any changes in the government's
regulations which are expected to materially affect the Company's business.
Item 2. Properties
In August 1991, the Company relocated its offices and manufacturing
facilities to the Brooklyn Army Terminal at 140 58th Street, Brooklyn, New York
pursuant to a lease agreement with the New York City Economic Development
Corporation. This facility occupies one floor of an eight (8) story concrete
building and includes the Company's executive and administrative offices as well
as its manufacturing facilities. The manufacturing facilities include a tooling
and machine shop, a plating operation and a testing laboratory. The Company
leases approximately 40,000 feet of space, of which it estimates; 10,000 square
feet are used as executive, sales and administrative offices; 22,000 square feet
are used for its manufacturing and plating facilities; 4,000 square feet are
used for its laboratory facilities; and 4,000 square feet are used as warehouse
space. The premises are occupied by the Company under a ten (10) year lease
agreement dated August 23, 1991. The Company's net rent expense for the year
ended March 29, 1996 was $186,952. The basic rent under the lease agreement is
approximately $194,236 per year for the balance of the term of the lease except
for the last year, in which the rent increased to $274,630. In addition to the
base rent, the Company pays real estate taxes, insurance premiums and utility
charges relating to the use of the premises. The Company considers its present
facilities to be adequate for its present and anticipated future needs.
Item 3. Legal Proceedings
The Company is not a party to or aware of any pending or threatened
legal proceedings which would result in any material adverse effect on its
operations or its financial condition.
Item 4. Submission of Matters to Vote of Security Holders
No matters were submitted to shareholders during the fourth quarter for
the fiscal year ended March 29, 1996.
PART II
Item 5. Market For Common Equity and
Related Stockholder Matters
Principal Market
The Common Stock of the Registrant (the "Common Stock") is traded in
the Over-The-Counter Market and is quoted on the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System Bulletin Board under
the symbol "IEHC". On January 11, 1993, the Company's Common Stock was deleted
from listing on the NASDAQ SmallCap Market System because of the Company's
failure to maintain the minimum asset and shareholders equity requirements. On
January 12, 1993, the Company's Common Stock was first quoted on the NASDAQ
Bulletin Board.
<PAGE>
Market Information
The range of high and low bid prices for the Company's Common Stock,
for the periods indicated as set forth below. For the period prior to October
29, 1991, the Company was listed on the NASDAQ National Market System. On
October 29, 1991, the Company's Common Stock was delisted from the NASDAQ
National Market System and from October 29, 1991 to January 11, 1993, the
Company's Common Stock was listed on the NASDAQ SmallCap Market System. On
January 11, 1993, the Company's Common Stock was delisted from the NASDAQ Small
Cap Market System and on January 13, 1993, the Company's Common Stock was first
quoted on the NASDAQ Bulletin Board. Set forth below is a table indicating the
high and low bid prices of the Common Stock during the periods indicated.
Year High Bid Low Bid
Fiscal Year ended March 31, 1995 (1)
1st Quarter ......................................... 1/4 1/8
2nd Quarter ......................................... 1/4 1/8
3rd Quarter ......................................... 7/32 1/8
4th Quarter ......................................... 7/32 1/8
Fiscal Year ended March 29, 1996 (1)
1st Quarter .135 1/16
2nd Quarter 3/16 1/16
3rd Quarter 1/16 1/32
4th Quarter 1/8 1/32
===============================================================================
(1) As reported by the NASDAQ Bulletin Board.
The above quotations, as reported, represent prices between dealers and
do not include retail mark-up, mark-down or commissions. Such quotations do not
necessarily represent actual transactions.
Dividends
The Company has not paid any cash dividends on its Common Stock during
the last five (5) fiscal years. At present, the Company does not anticipate
issuing any cash dividends on its Common Stock in the foreseeable future by
reason of its contemplated future financial requirements and business plans. The
Company will retain earnings, to the extent that there are any, to finance the
development of its business.
Approximated Number of Equity Security Holders
The number of record holders of the Company's Common Stock as of June
<PAGE>
25, 1996 was approximately 1800. Such number of record owners was determined
from the Company's stockholder records, and does not include the beneficial
owners of the Company's Common Stock whose shares are held in the names of
various security holders, dealers and clearing agencies. The Company believes
there are approximately 1,800 beneficial holders of its Common Stock held by
others or in nominee names.
Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
The following table sets forth for the periods indicated, percentages
for certain items reflected in the financial data as such items bear to the
revenues of the Company:
Relationship to Total Revenues
<TABLE>
<CAPTION>
Fiscal Year Ended
March 29, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Operating Revenues (in thousands) ................ $ 4,085 $ 4,959
Operating Expenses:
(As a percentage of Operating Revenues
Cost of Products Sold ........................ 75.2% 79.2%
Selling, General and Administrative .......... 18.2% 16.3%
Interest Expense .............................. 3.8% 2.9%
Depreciation and amortization ................. 7.1% 5.2%
TOTAL COSTS AND EXPENSES ................ 103.4% 103.6%
Operating Income (loss) .......................... (4.3%) (3.6%)
Other Income (Expense)
Other Non-Operating Income ................... 2.6% .1%
Income (Loss) Before Income Taxes ................ (1.7%) (3.5%)
Income taxes ..................................... (.6%) (.1%)
Net Income (Loss) ................................ (2.3%) (3.6%)
</TABLE>
<PAGE>
Comparative Analysis:
Year End Results: March 29, 1996 vs. March 31, 1995
Operating revenues for the year ended March 29, 1996 amounted to
$4,085,177 reflecting a 17.6% decrease versus prior year 1995 revenues of
$4,958,600. The decrease in revenues is a direct result of a continued decrease
in governmental and military procurement and the Company's efforts to redirect
its sales efforts to the commercial electronic market.
Cost of products sold amounted to $3,070,264 for the fiscal year ended
March 29, 1996 , or 75.2% of operating revenues. This reflected a decrease in
the cost of products sold from $3,925,204 or 79.2% of operating revenues for the
fiscal year ended March 31, 1995. This decrease is primarily due to cost
reductions achieved as a result of the Company's cost control efforts to reduce
variable operating expenses in a more competitive marketplace.
Selling, general and administrative expenses were $746,000 and $809,235
or 18.2% and 16.3% of operating revenues for the fiscal years ended March 29,
1996 and March 31, 1995 respectively. This category of expense decreased 7.8% in
fiscal 1996 from the prior year. The decrease can be attributed to management's
efforts to better control selling and administrative costs.
Interest expenses was $156,989 for the fiscal year ended March 29, 1996
or 3.8% of operating revenues. For the fiscal year ended March 31, 1995,
interest expenses was $144,620 or 2.9% of operating revenues. The increase of
7.8% reflects increased interest rates in fiscal 1996 as compared to the prior
year.
Depreciation and amortization of $289,236 or 7.1% of operating revenues
was reported for the fiscal year ended March 29, 1996. This reflects an increase
of 11.6% from the prior year ended March 31, 1995 of $256,765 or 5.2% of
operating revenues. The increase is a result of acquisition of new plant and
equipment.
The Company reported a net loss of $95,518 for the year ended March 29,
1996, representing a loss per common share of $.04 as compared to a loss of
$181,598 or $.08 per share for the year ended March 31, 1995. The net loss can
be attributed to a decrease of 17.6% in operating revenues over the prior year.
Liquidity and Capital Resources
The Company reported a deficit working capital of $98,012 at March 29,
1996 as compared to a working capital deficit of $56,684 at March 31, 1995. The
further decrease in working capital of $41,328 was attributable to the following
items: "(approximate)"
Net Income, (loss) (excluding depreciation and amortization) 193,718
Capital expenditures (196,847)
Other transactions 38,199
As a result of the above, the current ratio (current assets to current
liabilities) was .95 to 1 at March 29, 1996 as compared to .97 to 1 at March 31,
1995.
<PAGE>
Current liabilities at March 29, 1996 were $2,094,213 compared to
$1,995,148 at March 31, 1995. This continued decrease is primarily reflective of
a decrease in revenue and resultant accounts receivable.
The Company expended $196,847 in capital expenditures as against
depreciation of $218,354 for the year ended March 29, 1996.
The net loss for the year ended March 29, 1996 of $95,518 decreased
stockholders' equity to $453,673 as compared to stockholders' equity of $549,191
at March 31, 1995.
As of March 29, 1996 and as of March 31, 1995, the Company failed to
meet the tangible net worth covenant and certain other financial covenants
contained in its loan agreement with the UDC. The Company received a waiver of
this covenant from the UDC for the period ending March 31, 1994. The Company has
requested a continued waiver from the UDC. To date, UDC has not declared an
event of default. There are no assurances that the Company will receive any
additional waivers of this covenant and therefor, the Company may be deemed to
be in default of its loan obligation to the UDC.
Effects of Inflation
The Company does not view the effects of inflation to have a material
effect upon its business. Increases in costs of raw materials and labor costs
have been offset by increases in the price of the Company's products, as well as
reductions in costs of production, reflecting management's efforts in this area.
While the Company has in the past increased its prices to its customers, it has
maintained its relative competitive price position. However, significant
decreases in government, military and military subcontractor spending has
provided excess production capacity in the industry which in turn has tightened
pricing margins.
Item 7. Financial Statements See Index to Financial Statements and financial
statements attached hereto.
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
The Company had no disagreements with its accountants during the last
two fiscal years.
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance with Section 16(a) of the Exchange Act
<PAGE>
The executive officers and directors of the Company are as follows:
Name Age Office
- ---- --- ------
Michael Offerman 55 Chairman of the Board of
Directors and President
Ralph Acello 59 Vice-President - Production
and Director
Robert Knoth 54 Secretary and Treasurer
Murray Sennet 73 Director
Allen Gottlieb 55 Director
Robert Pittman 71 Director
- ------------------------
All Directors serve for a term of two years and until their successors are
duly elected. All officers serve at the discretion of the Board of Directors.
Michael Offerman has been a member of the Board of Directors since
1973. In May, 1987, Mr. Offerman was elected President of the Company and has
held that position since that date. Prior to his becoming President, Mr.
Offerman served as Executive Vice-President of the Company.
Ralph Acello has been a member of the Board of Directors since 1988. In
August, 1984, Mr. Acello was elected the Company's Vice-President of Production
and has held the position since that date.
Robert Knoth joined the Company as Controller in January, 1990 and was
elected Treasurer of the Company in March, 1990. Mr. Knoth was elected as
Secretary of the Company in September 1992 and Mr. Knoth has held these
positions since said dates. From 1986 to January, 1990, Mr. Knoth was employed
as controller by G&R Preuss, Inc., a company engaged in the business of
manufacturing truck bodies and accessories.
Murray Sennet has been a member of the Company's Board of Directors
since 1970. Mr. Sennet was the Secretary and Treasurer of the Company at the
time of his retirement in April, 1986.
Allen Gottlieb has been a member of the Company's Board of Directors
since 1992. Mr. Gottlieb has been an attorney in private practice for over five
(5) years.
Robert Pittman has been a member of the Board of Directors since 1987.
Mr. Pittman retired in October 1992, at which time he had held the position of
Vice-President of Engineering and Secretary of the Company.
Significant Employees
Thomas Hunt is the director of Quality Control, a position he has held
since October, 1992. Mr. Hunt joined the Company in 1987 as the laboratory
director and senior inspector and held such positions until his promotion in
October, 1992.
<PAGE>
Stephen Reich is the Director of Purchasing, a position he has held
since July 1995. Prior to joining the Company, Mr. Reich owned and operated a
retail business.
Joan Prideaux joined the Company in July, 1995 as National Sales
Manager. Prior to such time Ms. Prideaux was employed as an account executive of
Viking Connectors.
Certain Reports
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and officers and persons who own, directly or indirectly,
more than 10% of a registered class of the Corporation's equity securities, to
file with the Securities and Exchange Commission ("SEC") reports of ownership
and reports of changes in ownership of Common Stock of the Corporation.
Officers, directors and greater than 10% shareholders are required to furnish
the Company with copies of all Section 16(a) reports that they file. Based
solely on review of the copies of such reports received by the Company, the
Company believes that filing requirements applicable to officers, directors and
10% shareholders were complied with during the fiscal year.
Item 10. Executive Compensation
The following table sets forth below the summary compensation paid or
accrued by the Corporation during the fiscal years ended March 29, 1996, March
31, 1995 and April 1, 1994 for the Corporation's Chief Executive Officer:
<TABLE>
<CAPTION>
Name and Principal Position Year Salary Bonus Compensation1
--------------------------- ---- ------ ----- -------------
<S> <C> <C> <C> <C>
Michael Offerman, Chief March 29, 1996 $92,404 - 0
Executive Officer, President2 March 31, 1995 86,875 - 0
April 1, 1994 85,000 - 1,000
</TABLE>
-----------------------------------
(!) Represents a Director's fee of $1,000 per annum for service on the Board
of Directors.
(2) During the years ended March 29, 1996, March 31, 1995 and April 1, 1994,
the Corporation provided automobile allowances to Mr. Offerman. This
does not include the aggregate incremental cost to the Corporation of
such automobile or automobile allowances. The Corporation is unable to
determine without unreasonable effort and expense the specific amount of
such benefit, however, the Corporation has concluded that the aggregate
amounts of such personal benefit for Mr. Offerman does not exceed
$25,000 or 10% of the compensation reported as total salary and bonus
reported. Effective January 1, 1995, Mr. Offerman entered into an
employment agreement with the Company to increase his salary to $100,000
per annum. Mr. Offerman has agreed that, not withstanding the terms of
his new employment agreement, he would be paid at the rate of $92,404
for fiscal 1996. See "Employment Agreements".
No other officer of the Corporation received compensation (salary and
bonus) in excess of $100,000 during the fiscal year ended March 29, 1996.
<PAGE>
Pension/Benefit Incentive Plan
In 1964, the Corporation's Shareholders and Board of Directors adopted
a contributory pension plan (the "Salaried Pension Plan") effective April 1,
1964, for salaried employees of the Corporation. The Salaried Pension Plan as
revised on April 1, 1987, provides for retirement benefits for qualified
employees upon or prior to retirement. For early retirement, employees are
eligible to receive a portion of their retirement benefits, starting 10 years
prior to the employees anticipated normal retirement date (age 65), if the
employee has completed l5 years of service to the Corporation. The employee is
eligible to receive reduced retirement benefits based on an actuarial table for
a period not exceeding ten (l0) years or his lifetime. In no event will benefits
exceed $12,000 per year.
For normal retirement at the age of sixty-five (65) the employee is
entitled to receive full retirement benefits for a period not exceeding ten (10)
years or his lifetime. If the employee should die prior to the ten year period,
his beneficiaries will continue to receive the full benefit for the remainder of
the ten year term. In no event will benefits exceed $12,000 per year.
If payment is made on the "joint and survivor basis" as elected by the
employee, benefits will be provided to both the employee and spouse on a reduced
basis over the life of both the employee and his spouse. If the employee should
die prior to the guaranteed ten year period, the spouse will receive the
employee benefit for the remainder of the term, after which, the spouse will
receive the reduced spousal benefit for the life of the spouse. In no event will
the benefits pursuant to the joint and survivor basis exceed $12,000 per year.
In June, 1995, the Company applied to the Pension Benefit Guarantee
Corporation for a distress termination of the Salaried Pension Plan. The PBGC
has notfied the Company that it has agreed to take over the Salaried Pension
Plan. The PBGC has not issued its final order and may require that the Company
enter into an agreement to make future payments to the PBGC.
Under an agreement dated June 16, 1978, the Corporation entered into a
retirement compensation agreement with Michael Offerman, which provides that
upon reaching the age of 65, or the earlier of death, total disability, or
employment termination by mutual consent, Michael Offerman or his beneficiary
would be entitled to retirement payments of $30,000 per year for a period of
five years.
On April 8, 1986, the Board of Directors granted to Mr. Murray Sennet,
a supplemental pension, effective upon his retirement on April 11, 1986, in the
amount of $600 per month, which pension is to continue for a period of the
earlier of ten (l0) years or, the death of Mr. Sennet.
Employment Agreements
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Michael Offerman, its President and Chairman of the
Board. Effective as of January 1, 1995, the terms of the Employment Agreement
provide that Mr. Offerman's salary will be $100,000 per year and that he will be
employed as President of the Company until a term expiring on December 31, 1999.
Mr. Offerman has agreed to defer the increase in his salary from the previous
year's rate of compensation ($86,875) until October 20, 1995. As further
provided under the terms of the Employment Agreement, the Company will provide
certain benefits such as health benefits and the use of a full size automobile
during the term. The Company also agreed to pay the premium for a $150,000 term
life insurance policy payable to Mr. Offerman's beneficiary. In the event the
Company declines to enter into a new employment agreement with Mr. Offerman at
<PAGE>
the expiration of his term, the Company has agreed to pay Mr. Offerman the sum
of $50,000. Additionally, in the event there occurs a "change of control" of the
Company, and within the one (1) year period thereafter Mr. Offerman's employment
is terminated or he resigns, then Mr. Offerman will be entitled to receive a sum
equal to the balance of his base salary for the remainder of the term plus
$50,000. A "change of control" is defined to mean (i) a person becomes the
holder of 30% or more of the combined voting power of the Company's outstanding
securities (ii) the stockholders of the Company approve a merger or
consolidation whereby the Company's voting securities fail to represent, after
such merger or consolidation, at least 50.1% of the voting securities of the
surviving entity. Additionally, in the event the Company relocates outside of
the New York City Metropolitan area, it has agreed to pay Mr. Offerman the sum
of $50,000.
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Ralph Acello, its Vice President-Production. Effective
as of January 1, 1995, the terms of the Employment Agreement provide that Mr.
Acello's salary will be $58,300 per year and that he will be employed as Vice
President-Production of the Company until a term expiring on December 31, 1999.
As further provided under the terms of the Employment Agreement, the Company
will provide certain benefits such as health benefits and the use of a full size
automobile during the term. The Company also agreed to pay the premium of a
$150,000 term life insurance policy payable to Mr. Acello's beneficiary. In the
event the Company declines to enter into a new employment agreement with Mr.
Acello at the expiration of his term, the Company has agreed to pay Mr. Acello
the sum of $29,150. Additionally, in the event there occurs a "change of
control" of the Company, and within the one (1) year period thereafter Mr.
Acello's employment is terminated or he resigns, then Mr. Acello will be
entitled to receive a sum equal to the balance of his base salary for the
remainder of the term plus $29,150. A "change of control" is defined to mean (i)
a person becomes the holder of 30% or more of the combined voting power of the
Company's outstanding securities (ii) the stockholders of the Company approve a
merger or consolidation whereby the Company's voting securities fail to
represent, after such merger or consolidation, at least 50.1% of the voting
securities of the surviving entity. Additionally, in the event the Company
relocates outside of the New York City Metropolitan area, it has agreed to pay
Mr. Acello the sum of $29,150.
In August, 1995, the Board of Directors approved the terms of an
employment agreement with Robert Knoth. Effective as of January 1, 1995, the
terms of the Employment Agreement provide that Mr. Knoth's salary will be
$56,000 per year and that he will be employed as Secretary and Treasurer until a
term expiring on December 31, 1999. As further provided under the terms of the
Employment Agreement, the Company will provide certain benefits such as health
benefits. The Company also agreed to pay the premium of a $150,000 term life
insurance policy payable to Mr. Knoth's beneficiary. In the event the Company
declines to enter into a new employment agreement with Mr. Knoth at the
expiration of his term, the Company has agreed to pay Mr. Knoth the sum of
$28,250. Additionally, in the event there occurs a "change of control" of the
Company, and within the one (1) year period thereafter Mr. Knoth's employment is
terminated or he resigns, then Mr. Knoth will be entitled to receive a sum equal
to the balance of his base salary for the remainder of the term plus $28,250. A
"change of control" is defined to mean (i) a person becomes the holder of 30% or
more of the combined voting power of the Company's outstanding securities (ii)
the stockholders of the Company approve a merger or consolidation whereby the
Company's voting securities fail to represent, after such merger or
consolidation, at least 50.1% of the voting securities of the surviving entity.
Additionally, in the event the Company relocates outside of the New York City
Metropolitan area, it has agreed to pay Mr. Knoth the sum of $28,250.
<PAGE>
Cash Bonus Plan
In 1987, the Company adopted a cash bonus plan ("Cash Bonus Plan") for
Executive Officers. Contributions to the Bonus Plan are made by the Company only
after pre-tax operating profits exceed $150,000 for a fiscal year, and then to
the extent of 10% of the excess of the greater of $150,000 or 25% of pre-tax
operating profits. There were no contributions to the Bonus Plan for the fiscal
years ended March 29, 1996, March 31, 1995, or April 1, 1994.
Compensation Of Directors
Each Director, including officers of the Company who serve on the Board
of Directors, receive a fee of $1,000 per year for their services. The Company
has not paid Directors for their services for the last 2 fiscal years.
<PAGE>
Item 11. Security Ownership of Certain Beneficial
Owners and Management
The following table sets forth certain information as of June 25, 1996
with respect to (i) the persons (including any "group" as that term is used in
Section 13(d)(3) of the Securities Exchange Act of 1934), known by the Company
to be the beneficial owner of more than five percent (5%) of any class of the
Company's voting securities; (ii) each Executive Officer and Director who owns
Common Stock in the Company; and (iii) all Executive Officers and Directors as a
group. As of June 25, 1996, there were 2,303,502 shares of Common Stock issued
and outstanding.
<TABLE>
<CAPTION>
Amount of and Nature
Name and Address of of Beneficial
Title of Class Beneficial Owner Ownership Percentage of Class
-------------- ---------------- --------- -------------------
<S> <C>
Common Stock $.50 Michael Offerman 399,784 (1) 17.4%
Par Value 140 58th Street
Brooklyn, NY 11220
Murray Sennet 24,500 1.1%
1900 Manor Lane
Plano, TX 75093
Allen Gottlieb 82,300 3.6%
325 Coral Way
Ft. Lauderdale. FL
33301
Robert Pittman 20,000 *
45 Ocean Avenue
Monmouth Bch, NJ
07750
Gerard Deiss
16 Rue De La Mart 547,000 (2) 23.7%
Chartreuil
6-68 490
Mere Par Montfort
L'Amaury, France
David Lopez and 278,000 12.1%
Nancy Lopez
Edge of Woods
P.O. Box 323
Southhampton, NY
11968
All Officers & 526,584 22.9%
Directors as a Group
(4 in number)
</TABLE>
* Less than 1%.
<PAGE>
(1) 43,600 shares of Common Stock are jointly owned by Mr. Offerman and his
wife, Gail Offerman.
(2) These shares are beneficially owned by Mr. Deiss through a Liechtenstein
trust.
Item 12. Certain Relationships and Related Transactions
None.
Item 13. Exhibits, List and Reports on Form 8-K
(a) Exhibits filed with Form 10-KSB:
See annexed Exhibit index.
(b) Reports on Form 8-K
The Company did not file any Reports on Form 8-K during the last
quarter of the period covered by this Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
IEH CORPORATION
By: /s/ Michael Offerman
Michael Offerman, President
Dated: August 13, 1996
Pursuant to the requirements of the Securities Exchange Act of l934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ Michael Offerman August 13, 1996
Michael Offerman, Chairman of the
Board and President
/s/ Ralph Acello August 13, 1996
Ralph Acello
Vice President and Director
/s/ Robert Knoth August 13, 1996
Robert Knoth, Secretary and
Treasurer
/s/ Murray Sennet August 13, 1996
Murray Sennet, Director
/s/ Robert Pittman August 13, 1995
Robert Pittman, Director
<PAGE>
EXHIBIT INDEX
The following Exhibits have previously been filed with the Securities
and Exchange Commission and, pursuant to 17 C.F.R. Secs. 201.24 and 240.12b-32,
are incorporated by reference to the document referenced in brackets following
the descriptions of such Exhibits. Those Exhibits designated by an asterisk (*)
are filed herewith.
Exhibit No. Description
- ----------- -----------
3.1 Amended and Restated Certificate of Incorporation of the Company
[Exhibit C-4 to Current Report filed on From 8-K, dated February 27,
1991].
3.2 By-Laws of the Company Filed as Exhibit 3.2 on Report on Form 10-KSB
for the fiscal year ended March 27, 1994.
4.1 Form of Common Stock Certificate of Company. Filed as Exhibit 4.1 on
Report on Form 10-KSB for the fiscal year ended March 27, 1994.
4.2 Form of Secured Promissory Note payable, New York State Urban
Development Corporation [Exhibit 10B to Current Report on Form 8-K,
dated July 22, 1992].
10.1 License Agreement between the Company and Brevetron, S.A., Lugano,
Switzerland, dated January 1, 1979. Filed as Exhibit 10.1 on Report on
Form 10-KSB for the fiscal year ended March 27, 1994.
10.2 Amendment to License Agreement between the Company and Brevetron, S.A.
dated September 28, 1982. Filed as Exhibit 10.2 on Report on Form
10-KSB for the fiscal year ended March 27, 1994.
10.3 Amendment to License Agreement between the Company and Brevetron, S.A.
dated September 20, 1991. Filed as Exhibit 10.3 on Report on Form
10-KSB for the fiscal year ended March 27, 1994.
10.4 Lease for premises 140 58th Street, Brooklyn, New York 11220 [Exhibit A
to Current Report filed on Form 8-K, dated August 23, 1991].
10.5 Form of Loan Agreement between the Company and the New York State Urban
Development Corporation [Exhibit 10A to Current Report filed on Form
8-K, dated July 22, 1992].
10.6 Form of Security Agreement between the Registrant and New York State
Urban Development Corporation [Exhibit 10C to Current Report filed on
Form 8-K, dated July 22, 1992].
10.7 Form of financing agreement between the Company and Milberg Factors,
Inc. [Exhibit C-1 to the Current Report filed on Form 8-K, dated March
1, 1990].
10.8 Form of Collective Bargaining Agreement between Company and Local 259
of the United Auto Workers Union, dated October 1, 1991.
10.9 Form of Employment Agreement between Company and Michael Offerman
<PAGE>
Exhibit No. Description
- ----------- -----------
23.1* Consent of Jerome Rosenberg CPA, independent auditor of the Company
27* EDGAR Financial Date Schedule
ITEM 7- FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA:
IEH CORPORATION
CONTENTS
INDEPENDENT AUDITOR'S REPORT FOR THE YEARS ENDED MARCH 29, 1996
AND MARCH 31, 1995
BALANCE SHEETS AT MARCH 29, 1996 AND MARCH 31, 1995
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED MARCH 29, 1996
AND MARCH 31, 1995
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
MARCH 29, 1996 AND MARCH 31, 1995
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
MARCH 29, 1996 AND MARCH 31, 1995
NOTES TO FINANCIAL STATEMENTS
<PAGE>
JEROME ROSENBERG
CERTIFIED PUBLIC ACCOUNTANT, P.C.
186 FEN WAY
SYOSSET, NEW YORK 11791
INDEPENDENT AUDITOR'S REPORT
To the stockholders and Board of Directors of
IEH Corporation
I have audited the accompanying balance sheets of IEH Corporation as of March
29, 1996 and March 31, 1995 and the related statements of operations,
stockholders equity and cash flows for each of the years ended March 29, 1996
and March 31, 1995. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based upon my audit.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of IEH Corporation as of March 29,
1996 and March 31, 1995 and the results of its operations and its cash flows for
the years ended March 29, 1996 and March 31, 1995 in conformity with generally
accepted accounting principles.
Syosset, New York
June 15, 1996
<PAGE>
IEH CORPORATION
BALANCE SHEETS
As of March 29, 1996 and March 31, 1995
<TABLE>
<CAPTION>
March 29, March 31,
1996 1995
---------- ----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ................................................ $ 3,416 $ 300
Accounts receivable,less allowance for
doubtful accounts of $10,062 at March 29, 1996,
and March 31, 1995 ................................. 861,103 793,083
Inventories ( Note 2 ) .............................. 1,016,272 1,020,309
Prepaid expenses and other current assets ( Note 3 ) 54,000 89,001
Other receivables ................................... 61,410 35,771
---------- ----------
Total current assets .............................. 1,996,201 1,938,464
---------- ----------
PROPERTY, PLANT AND EQUIPMENT,less accumulated
depreciation and amortization of $3,967,899 at
March 29, 1996 and $4,704,880 at March 31, 1995 ..... 1,537,973 1,630,362
---------- ----------
OTHER ASSETS:
Prepaid pension cost ................................ 43,949 16,387
Other assets ........................................ 48,510 49,007
---------- ----------
92,459 65,394
---------- ----------
Total assets ....................................... $3,626,633 $3,634,220
========== ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
IEH CORPORATION
BALANCE SHEETS
As of March 29, 1996 and March 31, 1995
<TABLE>
<CAPTION>
March 29, March 31,
1996 1995
----------- -----------
(Restated)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts receivable financing ............................. $ 643,380 $ 585,620
Notes payable, current portion ............................ 4,542 15,706
Loan payable, current portion (Note 7 ) ................... 43,528 43,604
Accrued corporate income taxes ............................ 29,064 13,794
Union pension, health and welfare,current portion (Note 11) 120,000 120,000
Accounts payable .......................................... 1,097,924 953,532
Other current liabilities (Note 9 ) ....................... 155,775 262,892
----------- -----------
Total current liabilities ............................... 2,094,213 1,995,148
----------- -----------
LONG-TERM LIABILITIES:
Pension plan payable ...................................... 516,966 438,651
Notes payable, less current portion ....................... -- 4,750
Loan payable, less current portion (Note 7 ) .............. 278,680 320,533
Union pension, health and welfare,long-term ( Note 11 ) ... 283,101 325,947
----------- -----------
Total long-term liabilities ............................ 1,078,747 1,089,881
----------- -----------
Total liabilities ....................................... 3,172,960 3,085,029
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value;
10,000,000 shares authorized,
2,303,502 shares issued and outstanding .................. 1,151,751 1,151,751
Capital in excess of par value ............................ 1,615,874 1,615,874
Retained earnings, ( Deficit ) ............................ (2,313,952) (2,218,434)
Total stockholders' equity .............................. 453,673 549,191
----------- -----------
Total liabilities and stockholders' equity .............. $ 3,626,633 $ 3,634,220
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
IEH CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended
----------------------------
March 29, March 31,
1996 1995
----------- -----------
<S> <C> <C>
REVENUES:
Net sales (Note 13 ) ........................ $ 4,085,177 $ 4,958,600
----------- -----------
COSTS AND EXPENSES:
Cost of products sold ....................... 3,070,264 3,925,204
Selling, general and administrative ......... 746,049 809,235
Interest .................................... 156,989 144,620
Depreciation and amortization ............... 289,236 258,765
----------- -----------
4,262,538 5,137,824
----------- -----------
OPERATING INCOME (LOSS) ....................... (177,361) ( 179,224 )
----------- -----------
OTHER INCOME .................................. 107,049 1,719
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ............. (70,312) ( 177,505 )
----------- -----------
PROVISION FOR INCOME TAXES .................... 25,206 4,093
----------- -----------
NET INCOME (LOSS) ............................. $ ( 95,518) $ (181,598)
=========== ===========
INCOME (LOSS) PER COMMON SHARE
BEFORE INCOME TAXES .......................... $ (.03 ) $ ( .08 )
=========== ===========
NET INCOME (LOSS) PER
COMMON SHARE(Note 1) ........................ $ (.04 ) $ (. 08 )
=========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING .......................... 2,303,502 2,303,502
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
IEH CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended March 29, 1996
and March 31, 1995
<TABLE>
<CAPTION>
Capital in Retained
Common Stock Excess of Earnings
Shares Amount Par Value (Deficit)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balances, April 1, 1994 .............................. 2,303,502 $ 1,151,751 $ 1,615,874 ($1,892,571)
Net loss -Year ended March 31, 1995 .................. (181,598)
----------- ----------- ----------- -----------
Balances, March 31, 1995 ............................. 2,303,502 1,151,751 1,615,874 (2,074,169)
Prior period adjustments:
Writedown of pension plan assets to
net realizable value (Note 14) ..................... (144,265)
----------- ----------- ----------- -----------
Restated balances at March 31, 1995 .................. 2,303,502 1,151,751 1,615,874 (2,218,434)
Net loss-Year ended March 21, 1996 ................... (95,518)
----------- ----------- ----------- -----------
Balances, March 29, 1996 ............................. 2,303,502 $ 1,151,751 $ 1,615,874 ($2,313,952)
</TABLE>
See accompanying notes to financial statements
<PAGE>
IEH CORPORATION
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Year Ended
-----------------------
March 29, March 31,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ........................................ $ (95,518) $(181,598)
--------- ---------
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization ..................... 289,236 258,765
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ........ (68,020) 362,784
(Increase) decrease in inventories ................ 4,037 135,280
(Increase) decrease in prepaid expenses
and other current assets ........................ 35,001 (44,390)
(Increase) decrease in other receivables .......... (25,639) (6,241)
(Increase) decrease in prepaid pension costs ...... (27,562) 55,450
Decrease in other assets .......................... 497 7,830
Decrease in prepaid and refundable income taxes ... -- 271
Increase (decrease) in accounts payable ........... 144,392 (2,718)
(Decrease) in other current liabilities ........... (107,117) (167,002)
Increase (decrease) in accrued
corporate income taxes payable .................. 15,270 (9,201)
(Decrease) in union pension and
health and welfare ............................. (42,846) (59,152)
(Decrease) in deferred taxes ...................... -- (13,800)
Increase (decrease) in pension plan payable ....... 78,315 42,402
--------- ---------
Total adjustments .......................... 295,564 560,278
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES .............. 200,046 378,680
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ........ (196,847) (218,354)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES .............. (196,847) (218,354)
--------- ---------
</TABLE>
See accompanying notes to financial statements
<PAGE>
IEH CORPORATION
STATEMENT OF CASH FLOWS (CONTINUED)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
Year Ended
----------------------
March 29, March 31,
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ................. (15,914) ( 2,810)
Proceeds from accounts receivable financing ......... 57,760 --
Principal payments on accounts receivable financing . -- (122,881)
Principal payments on loan payable ................... (41,929) (42,508)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES ................................ 83 (168,199)
--------- ---------
INCREASE (DECREASE) IN CASH .......................... 3,116 (7,873)
CASH, beginning of year .............................. 300 8,173
--------- ---------
CASH, end of year .................................... $ 3,416 $ 300
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest expense .................................... $ 156,989 $ 144,620
========= =========
Income taxes ........................................ $ 25,206 $ 4,093
========= =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Description of Business:
The Company is engaged in the design, development, manufacture
and distribution of high performance electronic printed
circuit connectors and specialized interconnection devices.
Electronic connectors and interconnection devices are used to
provide electrical connections between electronic component
assemblies. The Company develops and manufactures connectors
which are designed for a variety of high technology and high
performance applications, and are primarily utilized by those
users who require highly efficient and dense(the space between
connection pins within the connector) electrical connections.
The Company is continuously redesigning and adapting its
connectors to meet and keep pace with developments in the
electronics industry, and has, for example, developed
connectors for use with flex-circuits now being used in
aerospace programs, computers, air-borne communication
systems, testing systems and other areas. The Company also
services its customers, by working directly with the customers
in the development and design of connectors to meet specific
product requirements.
Accounting Period:
The Company maintains an accounting period based upon a 52-53
week year which ends on the nearest Friday in business days to
March 31. The years ended March 29, 1996 and March 31, 1995
were comprised of 52 weeks.
Inventories:
Inventories are stated at cost, on a first-in, first-out
basis, which does not exceed market value.
Property, Plant and Equipment:
Property, plant and equipment is stated at cost less
accumulated depreciation and amortization.The Company provides
for depreciation and amortization on the straight-line method
over estimated useful lives of four to ten years.
Maintenance and repair expenditures are charged to operations,
and renewals and betterments are capitalized. Items of
property, plant and equipment which are sold, retired or
otherwise disposed of are removed from the asset and
accumulated depreciation or amortization account and any gain
or loss thereon is credited or charged to operations.
Income Taxes:
The Company follows the policy of treating investment tax
credits as a reduction in the provision for Federal income tax
in the year in which the credit arises or may be utilized.
Deferred income taxes arise from temporary differences
resulting from different depreciation methods used for
financial and income tax purposes. The Company has adopted
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" effective for the year ended
March 26, 1993.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED):
Net Income (Loss) per Common Share:
Net income ( loss) per common share is based upon the weighted
average number of common shares outstanding during each year.
NOTE 2- INVENTORIES:
Inventories are comprised of the following:
March 29, March 31,
1996 1995
---------- ----------
Raw materials $ 607,593 $ 575,144
Work in process 113,309 115,070
Finished goods 295,370 330,095
---------- ----------
$1,016,272 $1,020,309
========== ==========
NOTE 3- PREPAID AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets are comprised of the
following:
March 29, March 31,
1996 1995
-------- --------
Prepaid insurance $ 54,000 $ 20,843
Other - 68,158
-------- --------
$ 54,000 $ 89,001
======== ========
NOTE 4- PROPERTY, PLANT AND EQUIPMENT:
Details of property, plant and equipment are as follows:
March 29, March 31,
1996 1995
---------- ----------
Leasehold improvements $ 568,006 $ 568,006
Machinery and equipment 3,561,995 3,636,802
Tools and dies 1,215,855 1,642,855
Furniture and fixtures 148,770 432,760
Transportation equipment 11,246 54,819
---------- ----------
5,505,872 6,335,242
Less: accumulated depreciation
and amortization 3,967,899 4,446,115
---------- ----------
$1,537,973 $1,670,773
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 5- ACCOUNTS RECEIVABLE FINANCING:
The Company entered into an accounts receivable financing
agreement whereby it can borrow up to eighty percent of its
eligible receivables (as defined in the agreement) at an
interest rate of 2 1/2% above The Chemical Bank's publicly
announced rate (8.25% at March 29, 1996) with a minimum of 12%
per annum. The agreement has an initial term of one year and
will automatically renew for successive one year terms, unless
terminated by the Company or Lender upon providing sixty days
prior written notice. The loan is secured by the Company's
accounts receivable and inventories.
NOTE 6- NOTES PAYABLE:
The following is a summary of notes payable:
<TABLE>
<CAPTION>
Interest March 29, March 31,
Rate 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
of $297 through August, 1997 and
collateralized by transportation equipment ........................... 9.75% $ 5,048 $ 8,313
Insurance financing payable ........................................... 11.25% -- 13,876
------- -------
5,048 22,189
Less: unamortized discount ............................................ 506 1,733
------- -------
4,542 20,456
Less: current portion ................................................. 4,542 15,706
------- -------
Long-term portion ..................................................... $ 0 $ 4,750
======= =======
</TABLE>
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 7- LOAN PAYABLE
On July 22, 1992, the Company obtained a loan of $435,000 from
the New York State Urban Development Corporation (UDC),
collateralized by machinery and equipment. The loan is payable
over ten years, with interest rates progressively increasing
from 4% to 7%. The terms of the loan required only monthly
interest payments from September 1, 1992 until August 1, 1993.
Payment of principal and interest began on September 1, 1993.
The balance remaining at March 29, 1996 amounted to $322,208.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
1997 $ 43,528
1998 45,710
1999 48,529
2000 50,694
Thereafter 133,747
--------
$322,208
As of March 29, 1996 and as of March 31, 1995, the Company had
failed to meet two of the financial covenants; namely that the
"Company" shall be obligated to maintain a tangible net worth
of not less than $1,300,000 and that the Company shall be
obligated to maintain a ratio of current assets to current
liabilities of 1.1 to 1.0. The Company reported tangible net
worth of $453,673 at March 29, 1996 and $549,191 at March 31,
1995. The ratio of current assets to current liabilities at
March 29, 1996 was .95 to 1.0, and at March 31, 1995, the
ratio was .97 to 1.0.
The Company had previously received a waiver of this covenant
from the UDC through the period ended July 8, 1993 and has
subsequently received an additional waiver of this covenant
through the period ending March 31, 1994. There are no
assurances that the Company will receive any additional
waivers of this covenant. Should the Company not receive any
additional waivers, then it will be deemed to be in default of
this loan obligation to the UDC and the entire loan plus
interest will become due and payable.
NOTE 8- INCOME TAXES:
The Company has available at March 29, 1996, for federal
income tax purposes, a net operating loss of approximately
$2,050,000 of which approximately 1,300,000 will expire in
2007 with the balance expiring in 2009. In addition, the
Company has unused investment tax credits of approximately
$86,000 which expire between 1997 and 2002.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 9- OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
March 29, March 31,
1996 1995
-------- ---------
Payroll and vacation pay accruals $ 5,590 $ 15,075
Sales commissions 6,074 7,315
License fees 0 75,417
Pension plan payable 65,389 35,049
Other 78,722 130,036
-------- ---------
$155,775 $ 262,892
======== =========
NOTE 10- PENSION PLAN-SALARIED PERSONNEL:
On June 30, 1995, the Company applied to the Pension Benefit
Guaranty Corporation ("PBGC") to have the PBGC assume all of
the Company's responsibilities and liabilities under its
Salaried Pension Plan. On April 26, 1996, the PBGC determined
that the Salaried Pension Plan did not have sufficient assets
available to pay benefits which were and are currently due
under the terms of the Plan. The PBGC further determined that
pursuant to the provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") that the Plan must
be terminated in order to protect the interests of the Plan's
participants. Accordingly, the PBGC intends to proceed
pursuant to ERISA to have the Plan terminated and the PBGC
appointed as statutory trustee, and to have July 31, 1995
established as the Plan's termination date.
Pension plan expense for the period April 1, 1995 through July
31, 1995 ( the Plan's termination date) and the year ended
March 31, 1995 included the following components:
April 1, 1995
to Year Ended
July 31, March 31,
1995 1995
-------- --------
Service cost $ 0 $ 6,867
Interest cost on
projected benefit obligation 31,266 27,509
Actual return on assets
held in plan 4,075 (4,107)
Net amortization of
transition liability
and net gain 19,398 21,755
-------- --------
Pension plan expense $ 54,739 $ 52,024
========= =========
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 10- PENSION PLAN-SALARIED PERSONNEL: (continued)
The unfunded status of the plan at July 31,1995 ( the Plan's
termination date ) and March 31, 1995 is as follows:
<TABLE>
<CAPTION>
July 31, March 31,
1995 1995
-------- --------
<S> <C> <C>
Vested benefit obligation ........................ $606,300 $478,934
======== ========
Accumulated benefit obligation ................... $626,304 $503,201
======== ========
Projected benefit obligation ..................... $626,304 $514,175
Plan assets at fair value ........................ 43,949 38,208
-------- --------
Unfunded status .................................. 582,355 475,967
Unrecognized net gain ............................ 77,968 1,125
Unrecognized liability at transition ............. 148,073 172,751
Adjustment required to recognize
minimum liability ............................... 226,041 162,902
-------- --------
Net pension liability recognized in
the balance sheet ............................... $582,355 $464,993
======== ========
</TABLE>
The weighted discount rate used to measure the projected
benefit obligation is 5.25%, the rate of increase in future
compensation levels is 5.25% and the expected long-term rate
of return on assets is 9%.
At March 29, 1996 and March 31, 1995, $65,389 and $35,049
respectively of the pension liability is included in other
current liabilities, with the balance of $516,966 and $438,651
respectively shown as a long-term liability. At March 29, 1996
and March 31, 1995, the long-term portion includes $226,041
and $160,652 respectively, which represents the recognition of
the additional minimum liability to comply with the
requirements of Statement of Financial Accounting Standards
No. 87.
All Plan assets are invested in the Cigna Guaranteed Deposit
Administration Fund.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 11- COMMITMENTS:
The Company had entered into employment agreements with
certain of its officers. The agreements provide for retirement
compensation of $30,000 per annum for a period of five years
upon reaching either age 65, death, total disability or
employment termination by mutual consent between the Company
and the respective officer. Prior to March 26, 1993, all but
one of these agreements had expired. The remaining agreement
is with the President of the Company.
In 1979, the Company entered into an agreement with Brevetron
S.A., for the manufacture and sale of certain electrical
connectors. The agreement was a so-called "hybrid" agreement
involving a license under both patent rights and know-how. The
license was non-exclusive, and in fact the Company encountered
licensed competition in the United States in the sale of these
products known as the "Hypertac" socket. The last of these
patents expired in 1992.
The Company, however, had continued to pay licensing fees to
Brevetron S.A. and for the year ended March 31, 1995 had
recorded a licensing fee liability of $75,417. For the six
months ended September 30, 1995, the Company had initially
recorded an additional $31,783 in license fees. Upon having
outside counsel conduct a review of the agreement, the Company
had advised Brevetron S.A. that it believes that there is no
legal obligation on the part of the Company to pay any further
licensinfg fees. It is the opinion of the Company's outside
counsel that the agreement had been unenforceable since
January 7, 1992, the date of expiration of the latest patent.
Accordingly, the Company has reversed the current year's
license fees of $31,783 that were recorded as an expense in
the period ending September 30, 1995. The remaining liability
of $75,417 representing the amount of licensing fees recorded
for the year ended March 31, 1995 was reversed and recorded in
the current year as an item of other income.
On August 23, 1991, the Company entered into a lease with the
New York City Economic Development Corporation for its office
and manufacturing facility. The Company is obligated under
this lease through September 1, 2001, at minimum annual
rentals as follows:
Fiscal Year Ending:
1997 $ 194,236
1998 194,236
1999 194,236
2000 194,236
2001 194,236
Thereafter 80,394
----------
$1,051,574
Net rental expense for the year ended March 29, 1996 for this
lease was $186,952.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 11- COMMITMENTS: (continued)
The Company has, with the United Auto Workers of America,
Local 259, a collective bargaining multi-employer pension
plan. Contributions are made in accordance with a negotiated
labor contract and are based on the number of covered
employees employed per month. With the passage of the
Multi-Employer Pension Plan Amendments Act of 1980 ("The
Act"), the Company may become subject to liabilities in excess
of contributions made under the collective bargaining
agreement. Generally, these liabilities are contingent upon
the termination, withdrawal, or partial withdrawal from the
Plan. The Company has not taken any action to terminate,
withdraw or partially withdraw from the Plan nor does it
intend to do so in the future. Under the Act, liabilities
would be based upon the Company's proportional share of the
Plan's unfunded vested benefits which is not currently
available. The amount of accumulated benefits and net assets
of such plan also is not currently available to the Company.
Total contributions charged to expense under this pension plan
were $42,140 and $65,254 for the fiscal years ending March 29,
1996 and March 31, 1995.
As of March 29, 1996, the Company was in arrears with respect
to its contributions to the union's health and welfare and
pension plans. The amount due the health and welfare plan was
$179,889 and the amount due the pension plan was $223,212, for
a total amount due of $403,101.
In December, 1993, the Company and Local 259 entered into a
verbal agreement whereby the Company would satisfy this debt
by the following payment schedule:
The sum of $10,000 will be paid by the Company each
month in satisfaction of the current arrears until
this total debt has been paid. Under this agreement,
the projected payment schedule for arrears will
satisfy the total debt in 52 months.
Additionally, both parties have agreed that current
obligatory funding by the Company will be made on a
timely current basis.
The total amount due of $403,101 is reported on the
accompanying balance sheet in two components; $120,000
reported as a current liability and $283,101 as a long-term
liability.
NOTE 12- STOCK OPTION PLAN:
On December 4, 1986 and as supplemented on January 6, 1987 and
March 11, 1987, the Company's Board of Directors proposed the
establishment of a non-qualified stock option plan for key
employees, which was ratified on September 11, 1987 by a
majority vote of the Company's stockholders at the Company'
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
annual meeting. The plan provided for the granting of options
to purchase an aggregate of 125,000 shares of the Company's
common stock. The Plan lapsed in September 1992. There are
currently no options outstanding nor exercisable at March 29,
1996.
NOTE 13- REVENUES FROM MAJOR CUSTOMERS:
In the fiscal year ended March 29, 1996, more than 10% of the
Company's total revenues were earned from three customers.
Total sales to these customers were approximately $924,000.
Individually, sales to these three customers were $319,000,
$307,000 and $298,000. In the fiscal year ended March 31, 1995
more than 10% of the Company's total revenues were earned from
three customers. Total sales to these customers were
approximately $717,000, $581,000 and $382,000.
NOTE 14- PRIOR PERIOD ADJUSTMENT:
In connection with the termination of the Salaried Pension
Plan, it was determined that the Pension Plan's assets were
overstated in the prior year. Accordingly, an adjustment of
$144,265, representing the writedown of pension plan assets to
net realizable value was made as a charge to opening retained
earnings (deficit), as reflected in the accompanying financial
statements.
CONSENT OF INDEPENDENT AUDITOR
I consent to the reference to my firm under the caption "Experts", and to the
use of my report dated June 15, 1996 in the form 10-KSB for the year ended March
29, 1996.
Syosset, New York
August 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-29-1996
<PERIOD-END> MAR-29-1996
<CASH> 3,416
<SECURITIES> 0
<RECEIVABLES> 861,103
<ALLOWANCES> 0
<INVENTORY> 1,016,272
<CURRENT-ASSETS> 1,996,201
<PP&E> 5,505,872
<DEPRECIATION> 3,967,899
<TOTAL-ASSETS> 3,626,633
<CURRENT-LIABILITIES> 2,094,213
<BONDS> 278,600
0
0
<COMMON> 1,151,751
<OTHER-SE> 1,615,874
<TOTAL-LIABILITY-AND-EQUITY> 3,626,633
<SALES> 4,085,177
<TOTAL-REVENUES> 4,192,226
<CGS> 3,070,264
<TOTAL-COSTS> 1,035,285
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 156,989
<INCOME-PRETAX> (70,312)
<INCOME-TAX> 25,206
<INCOME-CONTINUING> (95,518)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (95,518)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> 0
</TABLE>
