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 October 1, 1999
[ ] 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. O-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 [ ]
2,303,468 shares of Common Shares, par value $.50 per share, were
outstanding as of September 30, 1999.
<PAGE>
IEH CORPORATION
FINANCIAL REPORT
October 1, 1999
IEH CORPORATION
CONTENTS
Page
Number
------
PART I - FINANCIAL INFORMATION
ITEM 1- FINANICAL STATEMENTS
BALANCE SHEETS AS OF OCTOBER 1, 1999 (UNAUDITED) and April 2,
1999 2-3
STATEMENT OF OPERATIONS (UNAUDITED) for the three and six months
ended October 1, 1999 and September 25, 1998 4
STATEMENT OF CASH FLOWS (UNAUDITED) for the six months ended
October 1, 1999 and September 25, 1998 5-6
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 7-11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF 12-13
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 14
PART II - OTHER INFORMATION
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of October 1, 1999 and April 2, 1999
October 1, April 2,
1999 1999
---------- ----------
(Unaudited) (Note 1)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ..................................................... $ 13,702 $ 15,120
Accounts receivable, less allowances for doubtful accounts
of $10,062 at October 1, 1999 and April 2, 1999 ....... 806,916 810,551
Inventories (note 2) ..................................... 887,400 926,471
Prepaid expenses and other current assets (note 3) ....... 6,879 14,683
---------- ----------
Total current assets ........................... 1,714,897 1,766,825
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of
$4,928,346 at October 1, 1999
and $4,777,296 at April 2, 1999 ....................... 1,340,464 1,438,733
---------- ----------
OTHER ASSETS:
Prepaid pension cost (note 8) .......................... 43,949 43,949
Other assets ........................................... 46,259 46,622
---------- ----------
90,208 90,571
---------- ----------
TOTAL ASSETS ............................................. $3,145,569 $3,296,129
========== ==========
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of October 1, 1999 and April 2, 1999
October 1, April 2,
1999 1999
----------- -----------
(Unaudited) (Note 1)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts receivable financing .............................. $ 677,352 $ 759,330
Notes payable, equipment, current portion (note 7) ......... 15,324 25,333
Notes payable, current portion (note 6) .................... 31,156 60,798
Loans payable, current portion (note 5) .................... 25,761 50,693
Accrued corporate income taxes ............................. 25,888 15,352
Union pension and health & welfare, current portion (note 8) 96,000 96,000
Accounts payable ........................................... 779,466 769,893
Other current liabilities (note 4) ......................... 168,144 178,303
----------- -----------
Total current liabilities ........................ 1,819,091 1,955,702
----------- -----------
LONG-TERM LIABILITIES:
Pension plan payable (note 8) .............................. 516,966 516,966
Notes payable, equipment, less current portion (note 7) .... 45,278 52,936
Notes payable, less current portion (note 6) ............... 71,759 71,759
Loan payable, less current portion (note 5) ................ 133,747 133,747
Union pension & health & health & welfare,
less current portion (note 8) ............................ 59,189 62,827
----------- -----------
Total long-term liabilities ...................... 826,939 838,235
----------- -----------
Total liabilities ................................ 2,646,030 2,793,937
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value; 10,000,000 shares
authorized; 2,303,468 shares
issued and outstanding at October 1, 1999 and
April 2, 1999 ........................................... 1,151,734 1,151,734
Capital in excess of par value ............................. 1,615,874 1,615,874
Retained earnings (Deficit) ................................ (2,268,069) (2,265,416)
----------- -----------
Total stockholders' equity ....................... 499,539 502,192
----------- -----------
Total liabilities and stockholders' equity ....... $ 3,145,569 $ 3,296,129
=========== ===========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Six months ended Three months ended
---------------- ------------------
Oct. 1, Sept. 25, Oct. 1, Sept. 25,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE, net sales ........................ $ 2,226,814 $ 2,321,344 $ 1,092,582 $ 1,087,695
----------- ----------- ----------- -----------
COSTS AND EXPENSES
Cost of products sold ..................... 1,641,896 1,688,136 801,856 808,837
Selling, general and administrative ....... 354,396 421,972 176,701 207,487
Interest expense .......................... 74,113 66,362 36,416 33,730
Depreciation and amortization ............. 151,050 137,160 75,525 68,590
----------- ----------- ----------- -----------
2,221,455 2,313,630 1,090,498 1,118,644
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) ................... 5,359 7,714 2,084 (30,949)
OTHER INCOME .............................. 389 203 148 --
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ......... 5,748 7,917 2,232 (30,949)
PROVISION FOR INCOME TAXES ................ 8,400 8,400 4,200 4,200
----------- ----------- ----------- -----------
NET INCOME (LOSS) ......................... $ (2,652) $ (483) $ (1,968) $ (35,149)
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (.001) $ (.0002) $ (.0008) $ (.015)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES
OUTSTANDING (IN THOUSANDS) ............. 2,303 2,303 2,303 2,303
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
For the Six Months Ended October 1, 1999 and September 25, 1998
(Unaudited)
Oct. 1, Sept. 25,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .............................................. $ (2,652) $ (483)
--------- ---------
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization .................................. 151,050 137,160
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ..................... 3,635 (117,531)
(Increase) decrease inventories ................................ 39,071 79,077
(Increase) decrease in prepaid expenses and other current assets 7,804 28,452
(Increase) decrease in other receivables ....................... -- (4,900)
(Increase) decrease in other assets ........................... 363 (1,281)
(Decrease) increase in accounts payable ........................ 9,572 (100,014)
(Decrease) increase in other current liabilities ............... (10,159) 15,437
Increase in accrued corporate income taxes ..................... 10,536 7,200
(Decrease) in due to union pension & health & welfare .......... (3,638) (48,000)
--------- ---------
Total adjustments .................................... 208,234 (4,400)
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES ............... 205,582 (4,883)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets ...................................... (52,781) (150,961)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES .......................... (52,781) (150,961)
--------- ---------
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
For the Six Months Ended October 1, 1999 and September 25, 1998
(Unaudited)
Oct. 1, Sept. 25,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES: ............. $ -- $ (17)
Principal payments on notes payable ............... (47,309) (29,775)
Increase in notes payable ......................... -- 50,470
Proceeds from accounts receivable financing ....... (81,978) 152,152
Principal payments on loan payable ................ (24,932) (23,763)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (154,219) 149,067
--------- ---------
INCREASE (DECREASE) IN CASH ....................... (1,418) (6,777)
CASH, beginning of period ......................... 15,120 19,454
--------- ---------
CASH, end of period ............................... $ 13,702 $ 12,677
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION, cash paid during the six months for:
Interest ..................................... $ 74,113 $ 66,362
========= =========
Income Taxes ................................. $ -- $ --
========= =========
</TABLE>
See accompanying notes to financial statements
-6-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - FINANCIAL STATEMENTS:
The accompanying financial statements of IEH Corporation ("The
Company") for the six months ended October 1, 1999 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 six months ended October 1, 1999. 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 April 2, 1999 as filed with the Securities
and Exchange Commission.
The balance sheet at April 2, 1999 has been taken from the
audited financial statements of that date.
NOTE 2 - INVENTORIES:
Inventories are comprised of the following:
Oct. 1, April 2,
1999 1999
-------- --------
Raw materials $672,564 $702,176
Work in progress 117,435 122,606
Finished goods 97,401 101,689
-------- --------
$887,400 $926,471
======== ========
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
October 1, 1999 was $24,000. At April 2, 1999, the balance of
this reserve was $50,400.
Inventories at October 1, 1999 and April 2, 1999 are recorded
net of this reserve.
<PAGE>
NOTE 3 - PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets are comprised of the
following:
Oct. 1, April 2,
1999 1999
------ -------
Prepaid insurance $6,879 $14,077
Other current assets - 606
------ -------
$6,879 $14,683
====== =======
-7-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
Oct. 1, April 2,
1999 1999
-------- --------
Payroll and vacation accruals $33,805 $77,787
Sales commissions 8,567 21,178
Pension Plan payable 65,489 65,489
Interest payable 27,007 -
Other 33,276 13,849
-------- --------
$168,144 $178,303
======== ========
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 8% annum.
The balance remaining at October 1, 1999 was $159,508.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
2000 $25,761
2001 54,289
2002 58,795
2003 20,663
--------
$159,508
========
In April 1997, the Company was informed by the UDC that the
loan was sold and conveyed to WAMCO XXIV, Ltd. All of the
terms and conditions of the loan remained in effect.
As of October 1, 1999, 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.
-8-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - LOAN PAYABLE (CONTINUED):
At October 1, 1999, the Company reported tangible net worth of
$499,539. The ratio of current assets to current liabilities
was .94 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 XXVI, 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 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 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 note bears interest at
the rate of 8.25% per annum. The balance remaining at October
1, 1999 was $102,915.
NOTE 7 - NOTES PAYABLE EQUIPMENT:
The Company financed the acquisition of new computer equipment
and software with notes payable. The notes are payable over a
sixty month period. The balance remaining at October 1, 1999
amounted to $60,602.
Aggregate future principal payments are as follows:
2000 $ 7,930
2001 15,597
2002 15,597
2003 15,597
Thereafter 5,881
========
$ 60,602
========
-9-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - 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 $8,775 for the three months ended October 1,
1999.
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 $8,000 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 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 October 1, 1999, the Company had paid down the arrears
to the Union's pension plan and the amount due the health and
welfare plan was $155,189.
The total amount due of $155,189 is reported on the
accompanying balance sheet in two components; $96,000 reported
as a current liability and $59,189 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.
<PAGE>
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 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.
-10-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 - COMMITMENTS (CONTINUED):
At October 1, 1999 and April 2, 1999, $65,489 of the pension
liability is included in other current liabilities, with the
balance of $516,966 shown as 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.
In August 1998, the Company was notified by the PBGC that the
Company is liable to the PBGC for the following amounts as of
September 1, 1998:
o $456,418 representing the amount of unfunded benefit
liabilities of the Plan
o $242,097 representing funding liability
The total amount claimed by the PBGC amounts to $698,515.
The amount claimed is being contested by the Company, and an
appeal has been filed with the PBGC. The Company is presently
awaiting a response from the PBGC.
On December 1, 1998, the Company amended its lease on its
premises by surrendering a portion of its rented premises back
to its landlord. Accordingly, the base monthly rent was
reduced to $9,397.11 or $112,765.29 per annum through the
conclusion of the lease which ends August 23, 2001.
NOTE 9 - CHANGES IN STOCKHOLDERS' EQUITY:
Retained earnings (deficit) increased by $1,968, which
represents the net loss for the three months ended October 1,
1999.
NOTE 10 - YEAR 2000 COMPUTER ISSUE:
The Company does not believe that the impact of the year 2000
computer issue will have a significant impact on its
operations or financial position. The Company has allocated
approximately $100,000 to upgrade its computer operations to
obviate any potential problems that might arise as a result of
the impact of the year 2000. However, if internal systems do
not correctly recognize date information when the year changes
to 2000, there could be an adverse impact on the Company's
operations. Furthermore, there can be no assurances that
another entity's failure to ensure year 2000 capability would
not have an adverse effect on the Company.
-11-
<PAGE>
IEH CORPORATION
NOTES TO FINANICAL STATEMENTS
(Unaudited)
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, the
percentages for certain items reflected in the financial data
as such items bear to the revenues of the Company:
<TABLE>
<CAPTION>
Six Months Ended
--------------------------
Oct. 1, Sept. 25,
1999 1998
--------- ---------
<S> <C> <C>
Operating Revenues (in thousands) ........................ $ 2,227 $ 2,321
--------- ---------
Operating Expenses: (as a percentage of operating revenues
Cost of Products Sold .................................... 73.73% 72.72%
Selling, General and Administrative ...................... 15.92% 18.18%
Interest Expense ......................................... 3.33% 2.86%
Depreciation and amortization ............................ 6.79% 5.91%
--------- ---------
Total Costs and Expenses ....................... 99.76% 99.67%
========= =========
Operating income (loss) .................................. .24% .33%
--------- ---------
Other income ............................................. .02% .01%
--------- ---------
Income (Loss) Before Income Taxes ........................ .26% .34%
--------- ---------
Income Taxes ............................................. .38% .36%
--------- ---------
Net Income ............................................... (.12)% (.02)%
========= =========
</TABLE>
-12-
<PAGE>
IEH CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS (continued)
COMPARATIVE ANALYSIS
Operating revenues for the six months ended October 1, 1999
amounted to $2,226,814,
reflecting a 4.1% decrease versus the comparative six months
operating revenues of $2,321,814. The decrease is a direct
result of management's effort to redirect its dependence on
government and military sales to developing new market sales
in the commercial electronic sector.
Cost of products sold amounted to $1,641,896 for the six
months ended October 1, 1999 or 73.73% of operating revenues.
This reflected a decrease of $46,240 or 2.8% in the cost of
products sold of $1,688,136 for the six months ended September
25, 1998. This decrease is primarily due to reduced production
costs inherent in producing new products. Cost of products
sold increased as a percentage of revenues in the comparative
periods.
Selling, general and administrative expenses were $354,396 or
15.92% of revenues for the period ended October 1, 1999 as
compared to $421,972 or 18.18% of revenues for the comparable
six month period ended September 25, 1998. This reflected a
decrease of 16.0% and reflects management's efforts to better
control expenses.
Interest expense was $74,113 or 3.33% of revenues for the
period ended October 1, 1999 as compared to $66,362 or 2.86%
of revenues in the six month period ended September 25, 1998.
This increase of 11.7% reflects the increase in borrowing by
the Company in the current fiscal period.
Depreciation and amortization of $151,050 or 6.79% of revenues
was reported for the six month period ended October 1, 1999.
This reflects an increase of 10.1% from the comparable six
month period ended September 25, 1998 of $137,160 or 5.91% of
revenues. The increase is a result of additional purchases of
fixed assets during the six month period ended October 1,
1999.
The Company reported a net loss of $2,652 for the six months
ended October 1, 1999, representing basic loss per share of
$.001 as compared to basic loss of $483 or $.0002 per common
share for the six months ended September 25, 1998.
The resultant decrease in net income can be attributed to
reduced sales in the commercial sector in the current six
month period ending October 1, 1999.
-13-
<PAGE>
IEH CORPORATION
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
-------------------------
Oct. 1, Sept. 25,
1999 1998
--------- ---------
<S> <C> <C>
Operating Revenues (in thousands) ......................... $ 1,093 $ 1,088
--------- ---------
Operating Expenses: (as a percentage of operating revenues)
Cost of Products Sold ..................................... 73.39% 74.36%
Selling, General and Administrative ....................... 16.17% 19.08%
Interest Expense .......................................... 3.33% 3.10%
Depreciation and Amortization ............................. 6.91% 6.31%
--------- ---------
Total Costs and Expenses ........................ 99.81% 102.84%
Operating Income (loss) ................................... .19% (2.84)%
Other Income .............................................. .01% --
--------- ---------
Income (loss) before Income Taxes ......................... .20% (2.84)%
Income Taxes .............................................. .38% .39%
--------- ---------
Net Income (loss) ......................................... (.18)% (3.23)%
========= =========
</TABLE>
COMPARATIVE ANALYSIS
Operating revenues for the three months ended October 1, 1999
amounted to $1,092,582,
reflecting a .5% increase versus the comparative three months
operating revenues of $1,087,695. The increase is a direct
result of management's new market sales in the commercial
electronic sector.
<PAGE>
Cost of products sold amounted to $801,856 for the three
months ended October 1, 1999 or 73.39% of operating revenues.
This reflected a decrease of $6,981 or .9% of the cost of
products sold of $808,837 for the three months ended September
25, 1998. This decrease is primarily due to reduced production
costs inherent in producing new products. Costs of products
sold decreased as a percentage of revenues in the comparative
periods.
Selling, general and administrative expenses were $176,701 or
16.17% of revenues compared to $207,487 or 19.08% of revenues
for the comparable three month period ended September 25,
1998. This reflected a decrease of 14.9% and reflects
management's efforts to better control expenses.
-14-
<PAGE>
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMPARATIVE ANALYSIS (continued)
Interest expense was $36,416 or 3.33% of revenues for the
period ended October 1, 1999 as compared to $33,730 or 3.1% of
revenues in the three month period ended September 25, 1998.
This increase of 8.0% reflects an increase in borrowing by the
Company in the current fiscal period.
Depreciation and amortization of $75,525 or 6.91% of revenues
was reported for the three month period ended October 1, 1999.
This reflects an increase of 10.1% from the comparable three
month period ended September 25, 1998 of $68,590 or 6.31% of
revenues. The increase is a result of additional purchases of
fixed assets during the three month period ended October 1,
1999.
The Company reported a net loss of $1,968 for the three months
ended October 1, 1999, representing basic loss per common
share of $.0008 as compared to a basic loss of $35,149 or
$.015 per common share for the three months ended September
25, 1998.
The resultant decrease in net loss can be attributed to
management's ability to better control expenses in the current
three month period ending October 1, 1999.
YEAR 2000 COMPUTER ISSUE
The Company does not believe that the impact of the year 2000
computer issue will have a significant impact on its
operations or financial position. The Company has allocated
approximately $100,000 to upgrade its computer operations to
obviate any potential problems that might arise as a result of
the impact of the year 2000. However, if internal systems do
not correctly recognize date information when the year changes
to 2000, there could be an adverse impact on the Company's
operations. Furthermore, there can be no assurances that
another entity's failure to ensure year 2000 capability would
not have an adverse effect on the Company.
-15-
<PAGE>
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company reported a working capital deficit as of October
1, 1999 of $104,194 as compared to a working capital deficit
of $188,877 at April 2, 1999. The decrease of this deficit in
working capital of $84,683 was attributable to the following
items:
Net income (loss) $148,398
(excluding depreciation and amortization)
Capital expenditures (52,781)
Other transactions (10,934)
--------
$ 84,683
========
As a result of the above, the current ratio (current assets to
current liabilities) was .94 to 1.0 as of October 1, 1999 as
compared to .90 to 1.0 at April 2, 1999. Current liabilities
at October 1, 1999 were $1,819,091 compared to $1,955,702 at
April 2, 1999. This increase in the current ratio is primarily
reflective of a decrease in accounts receivable financed.
The Company expended $52,781 in capital expenditures in the
six months ended October 1, 1999. Depreciation and
amortization for the six months ended October 1, 1999 was
$151,050.
The Company has an accounts receivable financing agreement
with a facator which bears interest at 2.5% above prime with a
maxmimum of 12% per annum. At October 1, 1999 the amount
outstanding was $677,352 as compared to $759,330 at April 2,
1999.
On July 22, 1992, the Company obtained a loan of $435,000 from
the New York State Urban Development Corporation ("UDC")
collaterialized by machinery and equipment. The loan is
payable over ten years, with interest rates progressively
increasing from 4% to 8% annum.
The balance remaining at October 1, 1999 was $159,508.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
2000 $ 25,671
2001 54,289
2002 58,795
2003 20,662
--------
$159,608
========
16
<PAGE>
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (continued)
In April 1997, the Company was informed by the UDC that the
loan was sold and conveyed to WAMCO XXIV, Ltd. All of the
terms and conditions of the loan remained in effect.
As of October 1, 1999, 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 or current assets to current liabilities
of 1:1 to 1:0.
At October 1, 1999, the Company reported tangible net worth of
$499,539. The ratio of current assets to current liabilities
was .94 to 1.0.
The Company has applied for additional waivers of this
covenant. Neither the UDC or WAMCO XXIV 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 loan
plus interest will become due and payable.
EFFECTS OF INFLATION
The Company does not view the effects of inflations 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
customers, it has maintained its relative competitive price
position. However, significant decreases in government,
military subcontractor spending has provided excess production
capacity in the industry which has tightened pricing margins.
17
<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
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)
November 11, 1999 /s/Michael Offerman
-------------------
Michael Offerman
President
November 11, 1999 /s/Robert Knoth
---------------
Robert Knoth
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> OCT-01-1999
<CASH> 13,702
<SECURITIES> 0
<RECEIVABLES> 816,978
<ALLOWANCES> (10,062)
<INVENTORY> 887,400
<CURRENT-ASSETS> 1,714,897
<PP&E> 6,268,810
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,145,569
<CURRENT-LIABILITIES> 1,819,091
<BONDS> 0
0
0
<COMMON> 1,151,734
<OTHER-SE> (652,195)
<TOTAL-LIABILITY-AND-EQUITY> 3,145,569
<SALES> 2,226,814
<TOTAL-REVENUES> 2,227,203
<CGS> 1,641,896
<TOTAL-COSTS> 1,641,896
<OTHER-EXPENSES> 505,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,113
<INCOME-PRETAX> 5,748
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,652)
<EPS-BASIC> (.001)
<EPS-DILUTED> 0
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