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 27, 1998
[ ] 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, 1998.
<PAGE>
IEH CORPORATION
CONTENTS
PART 1- FINANCIAL INFORMATION
ITEM 1- FINANCIAL STATEMENTS
Balance Sheets as of June 26, 1998(Unaudited)
and March 27, 1998
Statement of Operations (Unaudited) for the three
months ended June 26, 1998 and June 27, 1997
Statement of Cash Flows (Unaudited) for the three months ended
June 26, 1998 and June 27, 1997
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 26, 1998 and March 27, 1998
June 26, March 27,
1998 1998
---------- ----------
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash ............................................. $ 2,901 $ 19,454
Accounts receivable, less allowance for
doubtful accounts of $10,062 at June 26, 1998
and March 27, 1998 .............................. 887,767 838,721
Inventories (Note 2) ............................. 919,459 949,282
Prepaid expenses and other current assets (Note 3) 9,178 38,224
Other receivables ................................. 4,300 --
---------- ----------
Total current assets ...................... 1,823,605 1,845,681
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation and amortization of
$4,572,847 at June 26, 1998 and $ 4,504,267
at March 27, 1998 ................................. 1,405,587 1 ,405,625
---------- ----------
OTHER ASSETS:
Prepaid pension cost (Note 7) .................... 43,949 43,949
Other assets ..................................... 47,905 47,429
---------- ----------
91,854 91,378
---------- ----------
Total assets .............................. $3,321,046 $3,342,684
========== ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of June 26, 1998 and March 27, 1998
June 26, March 27,
1998 1998
(Unaudited) (Note 1)
----------- -----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts receivable financing .................... $ 724,639 $ 656,015
Notes payable, current portion (Note 6) .......... 57,163 56,000
Loans payable, current portion (Note 5) .......... 49,261 48,530
Accrued corporate income taxes ................... 19,532 15,332
Union pension and health & welfare,
current portion (Note 7) .................... 120,000 120,000
Accounts payable .................................. 578,208 722,957
Other current liabilities (Note 4) ................ 189,001 124,026
----------- -----------
Total current liabilities ................ 1,737,804 1,742,860
----------- -----------
LONG-TERM LIABILITIES:
Pension plan payable (Note 7) .................... 516,966 516,966
Notes payable, less current portion (Note 6) ..... 117,824 132,558
Loan payable, less current portion (Note 5) ...... 171,926 184,440
Union pension & health & health & welfare,
less current portion (Note 7) ................ 86,827 110,827
----------- -----------
Total long-term liabilities .............. 893,543 944,791
----------- -----------
Total liabilities ........................ 2,631,347 2,687,651
----------- -----------
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) ....................... (2,077,926) (2,112,592)
Total stockholders' equity ............... 689,699 655,033
----------- -----------
Total liabilities and stockholders' equity $ 3,321,046 $ 3,342,684
=========== ===========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
June 26, June 27,
1998 1997
---------- ----------
(in thousands)
<S> <C> <C>
REVENUES, net sales .......................... $1,233,649 $1,290,847
---------- ----------
COSTS AND EXPENSES:
Cost of products sold ....................... 886,138 870,917
Selling, general and administrative ......... 207,636 233,785
Interest expense ............................ 32,632 21,610
Depreciation and amortization ............... 68,580 69,840
---------- ----------
1,194,986 1,196,152
---------- ----------
OPERATING INCOME ............................. 38,663 94,695
OTHER INCOME ................................. 203 --
---------- ----------
INCOME BEFORE INCOME TAXES ................... 38,866 94,695
PROVISION FOR INCOME TAXES ................... 4,200 2,700
---------- ----------
NET INCOME ................................... $ 34,666 $ 91,995
========== ==========
BASIC AND DILUTED EARNINGS PER SHARE ......... $ .02 $ .04
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING .................. 2,304 2,304
========== ==========
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
For the Three Months Ended June 26, 1998 and June 27, 1997
(Unaudited)
June 26, June 27,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ......................................... $ 34,666 $ 91,995
--------- ---------
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization ...................... 68,580 69,840
Changes in assets and liabilities:
(Increase) decrease in accounts receivable .......... (49,046) (245,645)
(Increase) decrease in inventories .................. 29,823 83,300
(Increase) decrease in prepaid expenses and
other current assets ............................ 29,046 13,861
(Increase) decrease in other receivables ............ (4,300) 29,556
(Increase) decrease in other assets ................. (476) 376
(Decrease) increase in accounts payable ............. (144,749) (310,911)
(Decrease) increase in other current liabilities .... 64,975 30,550
Increase in accrued corporate income taxes .......... 4,200 (5,517)
(Decrease) in due to union pension & health & welfare (24,000) (24,000)
--------- ---------
Total adjustments .......... (25,947) (358,590)
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES ............................... 8,719 (266,595)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets ........................... (68,542) (58,650)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES . (68,542) (58,650)
--------- ---------
</TABLE>
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
For The Three Months Ended June 26, 1998 and June 27, 1997
(Unaudited)
June 26, June 27,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ............. $ (13,571) $ --
Increase in notes payable ....................... -- 226,194
Proceeds from accounts receivable financing ..... 68,624 126,729
Principal payments on loan payable .............. (11,783) (18,409)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES ........................... 43,270 334,514
--------- ---------
INCREASE (DECREASE) IN CASH ....................... (16,553) 9,269
CASH, beginning of period ......................... 19,454 15,274
--------- ---------
CASH, end of period ................ $ 2,901 $ 24,543
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION, cash paid during the nine months for:
Interest ..................................... $ 32,632 $ 21,610
========= =========
Income Taxes ................................. $ 4,200 $ 2,700
========= =========
</TABLE>
See accompanying notes to financial statements
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMEMTS
(Unaudited)
Note 1- FINANCIAL STATEMENTS:
The accompanying financial statements of IEH Corporation ("The
Company") for the three months ended June 26, 1998 have been
prepared in accordance with the instructions for 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
for the three months ended June 26, 1998. These statements are
not necessarily indicative of the results to be expected for
the full fiscal year. 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 27, 1998 as filed with the Securities
and Exchange Commission.
The balance sheet at March 27, 1998 has been taken from the
audited financial statements of that date.
Note 2- INVENTORIES:
Inventories are comprised of the following:
June 26, March 27,
1998 1998
-------- --------
Raw materials $634,427 $651,975
Work in process 91,000 99,523
Finished goods 194,032 197,784
-------- --------
$919,459 $949,282
======== ========
Inventories are priced at the lower of cost (first-in,
first-out method) or market, whichever is lower. The Company
has established a reserve for obsolescence to reflect net
realizable inventory value. The balance of this reserve as of
June 26, 1998 was $12,600. At March 27, 1998, the balance of
this reserve was $50,400.
Inventories at June 26, 1998 and March 27, 1998 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:
June 26, March 27,
1998 1998
------- -------
Prepaid insurance .. $ 9,178 $34,356
Other current assets -- 3,868
------- -------
$ 9,178 $38,224
======= =======
Note 4- OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
June 26, March 27,
1998 1998
-------- --------
Payroll and vacation accruals $ 58,084 $ 28,300
Sales commissions 13,862 9,574
Pension plan payable 65,489 65,489
Other 51,566 20,663
-------- --------
$189,001 $124,026
======== ========
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% per annum.
The balance remaining at June 26, 1998 was $221,187.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
1999 $ 36,668
2000 50,693
2001 54,289
2002 58,795
Thereafter 20,742
--------
$221,187
========
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 5- LOAN PAYABLE (continued):
In April 1997, the Company was informed by the UDC that the
loan was sold and conveyed to WAMCO XXIV, Ltd. All the terms
and conditions of the loan remained in effect.
As of June 26, 1998, 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 $689,600. The ratio
of current assets to current liabilities 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. Neither the
UDC or WAMCO XXIV, Ltd. Has 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 will be deemed to be in default of
this loan obligation 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 Corporation ("NYCEDC") for rent
due for its offices and manufacturing facilities. In May 1997,
the Company and the NYCEDC negotiated an agreement for the
Company to pay off its indebtedness over a 48 month period by
the Company issuing notes payable to NYCEDC. The notes bear
interest at the rate of 8.25% per annum. The balance remaining
at June 26, 1998 was $174,987.
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. The total contributions charged to operations under
this pension plan were $9,383 for the three months ended June
26, 1998.
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 7- COMMITMENTS (continued):
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.
Additionally, both parties 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 its employees an
alternative health insurance plan.
As of June 26, 1998, the Company reported 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
$155,189 and the amount due the pension plan was $51,638.
The total amount due of $206,827 is reported on the
accompanying balance sheet in two components; $120,000
reported as a current liability and $86,827 as a long-term
liability.
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 proceeded 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 26, 1998 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 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 $34,666 which represents the
net income for the three months ended June 26, 1998.
<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, percentages for
certain items reflected in the financial data as such items bear to the
revenues of the Company:
<TABLE>
<CAPTION>
Three Months Ended
-------------------------
June 26, June 27,
1998 1997
-------- --------
<S> <C> <C>
Operating Revenues (in thousands) .............. $ 1,234 $ 1,291
Operating Expenses:
(As a percentage of Operating Revenues)
Cost of Products Sold ......................... 71.8% 67.5%
Selling, General and Administrative ........... 16.8% 18.1%
Interest Expense .............................. 2.7% 1.7%
Depreciation and Amortization ................. 5.6% 5.4%
-------- --------
Total Costs and Expenses ..... 96.9% 92.7%
======== ========
Operating Income ............................... 3.1% 7.3%
======== ========
Other Income ................................... -- --
======== ========
Income Before Income Taxes ..................... 3.1% 7.3%
======== ========
Income Taxes ................................... .3% .2%
======== ========
Net Income ..................................... 2.8% 7.1%
======== ========
</TABLE>
Comparative Analysis:
Operating revenues for the three months ended June 26, 1998 amounted to
$1,233,649, reflecting a 4% decrease versus the comparative three months
operating revenues of $1,290,847. The decrease is a direst result of
management's to redirect its dependence on governmental and military sales to
developing new market sales in the commercial electronic sector.
<PAGE>
Comparative Analysis (continued)
Cost of products sold amounted to $886,138 for the three months ended June 26,
1998 or 71.8% of operating revenues. This reflected an increase of $15,221 or
2.0% in the cost of products sold of $870,917 for the three months ended June
27, 1997. This increase is primarily due to increased production costs inherent
in producing new products. Cost of products sold decreased as a percentage of
revenues in the comparative periods.
Selling, general and administrative expenses were $207,636 or 16.8% of revenues
compared to $233,785 or 18.1% of revenues for the comparable three month period
ended June 27, 1997. This reflected a decrease of 11.2% and reflects
management's efforts to better control expenses.
Interest expense was $32,632 or 2.5% of revenues as compared to $21,610 or 3.2%
of revenues in the three month period ended June 27, 1997. This increase of
51.0% reflects the increase in interest rates in the current fiscal period.
Depreciation and amortization of $68,580 or 5.6% of revenues was reported for
the three month period ended June 26, 1998. This reflects a decrease of 2.0%
from the comparable three month period ended June 27, 1997 of $69,840 or 5.4% of
revenues. The decrease is a result of decreased depreciation levels on fixed
assets during the three month period ended June 27, 1998.
The Company reported net income of $34,666 for the three months ended June 26,
1998, representing basic income per common share of $.02 as compared to basic
income of $91,995 or $.04 per common share for the three months ended June 27,
1997. The resultant decrease in net income can be attributed to increased
operating expenses in the current three month period ending June 26, 1998.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 on Form 10QSB to be signed on its behalf by the
undersigned, thereunto duly authorized.
IEH CORPORATION
(Registrant)
August 7, 1998 /s/Michael Offerman
Michael Offerman
President
August 7, 1998 /s/Robert Knoth
Robert Knoth
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-26-1999
<PERIOD-END> JUN-27-1998
<CASH> 2,901
<SECURITIES> 0
<RECEIVABLES> 887,767
<ALLOWANCES> 10,062
<INVENTORY> 919,459
<CURRENT-ASSETS> 1,823,605
<PP&E> 5,978,434
<DEPRECIATION> 4,572,847
<TOTAL-ASSETS> 3,321,046
<CURRENT-LIABILITIES> 1,737,804
<BONDS> 0
0
0
<COMMON> 1,151,751
<OTHER-SE> (462,052)
<TOTAL-LIABILITY-AND-EQUITY> 3,321,046
<SALES> 1,233,649
<TOTAL-REVENUES> 1,233,852
<CGS> 886,138
<TOTAL-COSTS> 886,138
<OTHER-EXPENSES> 276,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,632
<INCOME-PRETAX> 38,866
<INCOME-TAX> 0
<INCOME-CONTINUING> 38,866
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34,666
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
