SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________
Commission File No. 0-5258
IEH CORPORATION
(Exact name of registrant as specified in its charter)
New York 1365549348
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
140 58th Street, Suite 8E, Brooklyn, New York 11220
---------------------------------------------------
(Address of principal executive office)
Registrant's telephone number, including area code: (718) 492-4440
---------------
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report.
Check whether the Issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
the past 90 days.
Yes [ X ] No [ ]
2,303,502 shares of Common Shares, par value $.50 per share, were
outstanding as of August 7, 1997.
<PAGE>
IEH CORPORATION
CONTENTS
PART 1 - FINANCIAL INFORMATION:
ITEM 1 - FINANCIAL STATEMENTS
Balance Sheets
June 27, 1997 (Unaudited)
and March 28, 1997
Statement of Operations
(Unaudited) for the three months
ended June 27, 1997 and
June 28, 1996
Statement of Cash Flows (Unaudited)
for the three months ended
June 27, 1997 and June 28, 1996
Notes to Financial Statements
(Unaudited)
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
PART II - OTHER INFORMATION
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of June 27, 1997 and March 28, 1997
June 27, March 28,
1997 1997
---------- ----------
(Unaudited) (Note 1)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ............................................. $ 24,543 $ 15,274
Accounts receivable, less allowance for
doubtful accounts of $10,062 at June 27,1997
and March 28, 1997 .............................. 897,518 651,873
Inventories (Note 2 ) ............................ 1,023,800 1,107,100
Prepaid expenses and other current assets (Note 3) 38,768 52,629
Other receivables ................................ 936 30,492
---------- ----------
Total current assets .......................... 1,985,565 1,857,368
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $4,307,633
June 27,1997 and $4,238,093 at March 28, 1997 ... 1,469,651 1,480,841
---------- ----------
OTHER ASSETS:
Prepaid pension cost (Note 7) .................... 43,949 43,949
Other assets ..................................... 47,422 47,798
---------- ----------
91,371 91,747
---------- ----------
Total assets .................................. $3,546,587 $3,429,956
========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of June 27, 1997 and March 28, 1997
June 27, March 28,
1997 1997
----------- -----------
(Unaudited) (Note 1)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts receivable financing .................................... $ 663,186 $ 536,457
Notes payable, current portion (Note 6) .......................... 52,997 1,789
Loan payable, current portion (Note 5) ........................... 46,399 45,710
Accrued corporate income taxes ................................... 2,700 8,217
Union pension and health and welfare,current portion(Note 7) ..... 120,000 120,000
Accounts payable ................................................. 763,992 1,074,903
Other current liabilities (Note 4) ............................... 162,385 131,835
----------- -----------
Total current liabilities ..................................... 1,811,659 1,918,911
----------- -----------
LONG-TERM LIABILITIES:
Pension plan payable (Note 7) .................................... 516,966 516,966
Notes payable, less current portion .............................. 174,986 --
Loan payable, less current portion (Note 5) ...................... 221,108 240,206
Union pension and health and welfare, less current portion(Note 7) 170,491 194,491
----------- -----------
1,083,551 951,663
----------- -----------
Total liabilities ............................................. 2,895,210 2,870,574
----------- -----------
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) ....................................... (2,116,248) (2,208,243)
Total stockholders' equity .................................... 651,377 559,382
----------- -----------
Total liabilities and stockholders' equity .................... $ 3,546,587 $ 3,429,956
=========== ===========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
------------------------------
June 27, June 28,
1997 1996
---------- ----------
<S> <C> <C>
REVENUES, net sales .................... $1,290,847 $1,152,385
---------- ----------
COSTS AND EXPENSES:
Cost of products sold ................. 870,917 819,993
Selling, general and
administrative .................... 233,785 178,294
Interest .............................. 21,610 39,278
Depreciation and
amortization ...................... 69,840 77,100
---------- ----------
1,196,152 1,114,665
---------- ----------
OPERATING INCOME (LOSS) ................ 94,695 37,720
---------- ----------
OTHER INCOME ........................... -- 627
---------- ----------
INCOME BEFORE INCOME TAXES ............. 94,695 38,347
---------- ----------
PROVISION FOR INCOME TAXES ............. 2,700 6,436
---------- ----------
NET INCOME ............................. $ 91,995 $ 31,911
========== ==========
NET INCOME PER
COMMON SHARE .......................... $ .04 $ .014
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING
(in thousands) ........................ 2,304 2,304
========== ==========
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
(Unaudited)
Three Months Ended
------------------------
June 27, June 28,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss) ........................................ $ 91,995 $ 31,911
--------- ---------
Adjustments to reconcile net income(loss)
to net cash used in operating activities:
Depreciation and amortization ......................... 69,840 77,100
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ............ (245,645) 17,573
(Increase) decrease in inventories .................... 83,300 (50,689)
(Increase) decrease in prepaid expenses
and other current assets ........................... 13,861 16,470
(Increase) decrease in other receivables .............. 29,556 37,891
(Increase) decrease in other assets ................... 376 464
(Decrease) increase in accounts payable ............... (310,911) (11,667)
(Decrease) increase in other current liabilities ...... 30,550 (46,683)
(Decrease) in accrued corporate income taxes payable .. (5,517) 4,052
Increase in due to union pension and health and welfare (24,000) (20,112)
(Decrease) increase in pension plan payable ........... -- 65,489
--------- ---------
Total adjustments ............................ (358,590) 89,888
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES ..................... (266,595) 121,799
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment .............. (58,650) (65,209)
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES .................................. (58,650) (65,209)
--------- ---------
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENTS OF CASH FLOWS (CONTINUED)
Increase (Decrease) in Cash
(Unaudited)
Three Months Ended
-------------------------
June 27, June 28,
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable .................. $ -- $ (85)
Increase in notes payable ............................ 226,194
Proceeds from accounts receivable financing .......... 126,729 --
Principal payments on accounts receivable financing .. -- (1,410)
Principal payments on loan payable ................... (18,409) (10,882)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES ............................... 334,514 (12,377)
--------- ---------
INCREASE (DECREASE) IN CASH ........................... 9,269 44,213
CASH, beginning of period ............................. 15,274 3,416
--------- ---------
CASH, end of period ................................... $ 24,543 $ 47,629
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION, cash paid during the three months for:
Interest .......................................... $ 21,610 $ 39,278
========= =========
Income Taxes ...................................... $ 2,700 $ 6,436
========= =========
See accompanying notes to financial statements
</TABLE>
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1- FINANCIAL STATEMENTS:
The accompanying financial statements of IEH Corporation ("The
Company") for the three months ended June 27, 1997 have been
prepared in accordance with the instructions to Form 10-QSB
and do not include all of the information and footnotes
required by generally accepted accounting principles. The
financial statements have been prepared by management from the
books and records of the Company and reflect, in the opinion
of management, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation of the financial
position, results of operations, and cash flows of the
Company. These statements should be read in conjunction with
the financial statements and notes thereto included in the
Company's annual report Form 10-KSB for the fiscal year ended
March 28, 1997. The balance sheet at March 28, 1997 has been
taken from the audited financial statements of that date.
Note 2- INVENTORIES:
Inventories are comprised of the following:
<TABLE>
<CAPTION>
June 27, March 28,
1997 1997
--------- -----------
(Unaudited)
<S> <C> <C>
Raw materials $ 726,900 $ 791,452
Work in process 30,714 37,476
Finished goods 266,186 278,172
--------- -----------
$1,023,800 $ 1,107,100
========== ===========
</TABLE>
Inventories are priced at the lower of cost (first-in,
first-out method) or market. During the current fiscal year,
the Company established a reserve for obsolescence to reflect
net realizable value. The balance of this reserve as of June
27, 1997 was $12,600.
Inventories at June 27, 1997 are recorded net of this reserve.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 3- PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets are comprised of the
following:
<TABLE>
<CAPTION>
June 27, March 28,
1997 1997
-------- -------
(Unaudited)
<S> <C> <C>
Prepaid insurance $ 38,768 $ 48,054
Other current assets - 4,575
-------- -------
$ 38,768 $ 52,629
======== ========
</TABLE>
Note 4- OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
<TABLE>
<CAPTION>
June 27, March 28,
1997 1997
-------- ---------
(Unaudited)
<S> <C> <C>
Payroll and vacation accruals $ 37,078 $ 12,817
Sales commissions 11,906 9,591
Pension plan payable 65,489 65,489
Other 47,912 43,938
-------- ---------
$162,385 $ 131,835
======== =========
</TABLE>
Note 5- 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 balance remaining at June 27, 1997 was $267,507.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 5- LOAN PAYABLE (continued):
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
1998 $ 34,537
1999 45,710
2000 48,529
2001 50,694
Thereafter 88,037
---------
$ 267,507
=========
In April, 1997, the Company was informed by the UDC that the
loan was sold and conveyed to WAMCO XXIV, Ltd. The Company has
been advised that all the terms and conditions of the loan
will remain in effect.
As of June 27, 1997, the Company had failed to meet one of the
financial covenants of the loan agreement; namely that the
"Company shall be obligated to maintain a tangible net
worth of not less than $1,300,000 and 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 $651,377. The ratio
of current assets to current liabilities at June 27, 1997 was
1.1 to 1.0.
The Company had previously received a waiver of this covenant
from the UDC through the period ending March 31, 1994 and has
applied for additional waivers of this covenant. The UDC has
not acted on these requests. 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
may 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 6- NOTES PAYABLE:
The Company was in arrears in the amount of $236,000 to the
New York City Economic Development ("NYCEDC") Corporation for
rent due for its offices and manufacturing facilities. In
April 1997, the Company and the NYCEDC negotiated an agreement
for the Company to pay off this indebtedness over a 48 month
period by the Company issuing notes payable due to NYCEDC. The
notes bear interest at the rate of 8.25% per annum. The
balance due at June 30, 1997 was $227,638.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 7- COMMITMENTS:
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 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 currently not available. The amount of
accumulated benefits and net assets of such Plan also is not
currently available to the Company. Total contributions
charged to operations under this pension plan were $9,663 for
the three months ended June 27, 1997.
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 49 months.
Additionally, both parties have agreed that current
obligatory funding by the Company will be made on a
timely current basis.
Effective February 1, 1995, the Company withdrew from the
union's health and welfare plan,and offered and provided its
employees an alternative health insurance plan.
As of June 27,1997, the Company reported arrears with respect
to its contributions to the union's health welfare and pension
plan. The amount due the health and welfare plan was $144,889
and the amo9unt due the pension plan was $145,602, for a total
of $290,491.
The total amount due of $290,491 is reported on the
accompanying balance sheet in two components; $120,000
reported as a current liability and $170,491 as a long-term
liability.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 7- COMMITMENTS (continued):
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 Employment 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.
At June 30, 1997 and March 28, 1997, $65,489 of the pension
liability is included in other current liabilities, with the
balance of $516,966 shown as a long-term liability. On those
dates, the long-term portion includes $226,041, which
represents the recognition of the additional minimum liability
to comply with the requirements of Statement of Financial
Standards No.87.
Note 8- CHANGES IN STOCKHOLDERS' EQUITY:
Retained earnings increased by $91,995 which represents the
net income for the three months ended June 27, 1997.
<PAGE>
Item 2- Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations:
The following table sets forth for the periods indicated,
sales revenues and percentages for certain items in the
financial data as such items bear to the revenues of the
Company:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
June 27, June 28,
1997 1996
-------- --------
<S> <C> <C>
Revenues, net sales(in thousands) ............ $ 1,291 $ 1,152
-------- --------
Costs and Expenses:
(as a percentage of revenues)
Cost of products sold ....................... 67.5% 71.1%
Selling,general and administrative .......... 18.1% 15.5%
Interest expense ............................ 1.7% 3.4%
Depreciation and amortization ............... 5.4% 6.7%
-------- --------
Total costs and expenses ............ 92.7% 96.7%
-------- --------
Operating income (loss) ..................... 7.3 % 3.3%
-------- --------
Other income ................................ -- --
-------- --------
Income (loss) before income taxes ........... 7.3% 3.3%
-------- --------
Provision for income taxes .................. (.2%) (.5%)
-------- --------
Net income (loss) ........................... 7.1% 2.8%
======== ========
</TABLE>
Comparative Analysis:
Operating revenues for the three month period ending June 27, 1997 amounted to
$1,290,847 reflecting a 12.0% increase versus the prior three month period
ending June 28,1996 of $1,152,385. The increase in revenues in this comparative
period reflects the Company's efforts to redirect its sales focus to commercial
electronic sales.
<PAGE>
Comparative Analysis (continued)
Cost of products sold amounted to $870,917 for the three months ended June
27,1997 or 67.5% of revenues. This reflected an increase of 6.2% in the cost of
products sold from $819,993 or 71.1% of revenues from the comparative three
month period ended June 28,1996. This increase is primarily due to the increase
in revenue and resultant costs associated with production.
Selling, general and administrative expenses were $233,785 or 18.1% of revenues,
compared to $178,294 or 15.5% of revenues for the comparative three month period
ending June 28, 1996. This increase of 31.1% was attributed to the variable
impact of increased revenues.
Interest expense was $21,610 or 1.7% of revenues as compared to $39,278 or 3.4%
of revenues for the prior three month period ending June 28, 1996. The decrease
in interest expense of 45% reflects the lower rates prevailing in the current
three month period as compared to the prior period.
Depreciation and amortization of $69,840 or 5.4% was reported for the three
months ended June 27,1997 as compared to $77,100 or 6.7% of revenues for the
prior three month period ending June 28, 1996. This expense as a percentage of
revenues decreased as a result of an decrease in the acquisition of machinery
and equipment during the three month period ended June 27, 1997.
The Company reported net income of $91,995 for the three month period ended June
27, 1997, representing net income of $.04 per common share as compared to net
income of $.014 per common share for the three months ended June 28, 1996. This
comparative increase for the current three month period is due to an overall
increase in revenues during this period.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits None
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K during Quarter
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has duly cause this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
IEH CORPORATION
(Registrant)
August 7, 1997 /s/Michael Offerman
-------------------
Michael Offerman
President
August 7, 1997 /s/Robert Knoth
----------------
Robert Knoth
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements for the three months ended June 27, 1997 and is qualified in its
entirety by reference to such statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-28-1997
<PERIOD-END> JUN-30-1997
<CASH> 24,543
<SECURITIES> 0
<RECEIVABLES> 907,580
<ALLOWANCES> 10,062
<INVENTORY> 1,023,800
<CURRENT-ASSETS> 1,985,565
<PP&E> 5,777,824
<DEPRECIATION> 4,307,633
<TOTAL-ASSETS> 3,546,587
<CURRENT-LIABILITIES> 1,811,659
<BONDS> 0
0
0
<COMMON> 1,151,751
<OTHER-SE> (500,374)
<TOTAL-LIABILITY-AND-EQUITY> 3,546,587
<SALES> 1,290,847
<TOTAL-REVENUES> 1,290,847
<CGS> 870,917
<TOTAL-COSTS> 870,917
<OTHER-EXPENSES> 303,625
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,610
<INCOME-PRETAX> 94,695
<INCOME-TAX> 0
<INCOME-CONTINUING> 94,695
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 91,995
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
