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, 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 August 11, 1999.
<PAGE>
IEH CORPORATION
CONTENTS
Page
Number
------
Part I - FINANCIAL INFORMATION
ITEM 1- FINANICAL STATEMENTS
Balance Sheets as of July 2, 1999 (Unaudited) and April 2, 1999 2-3
Statement of Operations (Unaudited) for the three months ended
July 2, 1999 and June 26, 1998 4
Statement of Cash Flows (Unaudited) for the three months ended
July 2, 1999 and June 26, 1998 5-6
Notes to Financial Statements (Unaudited) 7-11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12-13
Part II - OTHER INFORMATION 14
-2-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of July 2, 1999 and April 2, 1999
July 2, April 2,
1999 1999
(Unaudited) (Note 1)
---------- ----------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ..................................................... $ 4,950 $ 15,120
Accounts receivable, less allowances for doubtful accounts
of $10,062 at July 2, 1999 and April 2, 1999 .......... 1,141,943 810,551
Inventories (Note 2) ..................................... 903,000 926,471
Prepaid expenses and other current assets (Note 3) ....... 12,177 14,683
---------- ----------
Total current assets ........................... 2,062,070 1,766,825
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of
$4,852,821 at July 2, 1999
and $4,777,296 at April 2, 1999 ....................... 1,394,538 1,438,733
---------- ----------
OTHER ASSETS:
Prepaid pension cost (Note 8) .......................... 43,949 43,949
Other assets ........................................... 46,486 46,622
---------- ----------
90,435 90,571
---------- ----------
---------- ----------
Total assets ............................................. $3,547,043 $3,296,129
========== ==========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of July 2, 1999 and April 2, 1999
July 2, April 2,
1999 1999
(Unaudited) (Note 1)
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts receivable financing ................................ $ 1,019,732 $ 759,330
Notes payable, equipment, current portion (Note 7) ........... 25,333 25,333
Notes payable, current portion (Note 6) ...................... 62,062 60,798
Loans payable, current portion (Note 5) ...................... 51,069 50,693
Accrued corporate income taxes ............................... 17,565 15,352
Union pension and health & welfare, current portion (Note 8) . 96,000 96,000
Accounts payable ............................................. 776,545 769,893
Other current liabilities (Note 4) ........................... 191,581 178,303
----------- -----------
Total current liabilities .......................... 2,239,887 1,955,702
LONG-TERM LIABILITIES:
Pension Plan payable (Note 8) ................................ 516,966 516,966
Notes payable, equipment, less current portion (Note 7) ...... 49,102 52,936
Notes payable, less current portion (Note 6) ................. 55,893 71,759
Loan payable, less current portion (Note 5) .................. 120,842 133,747
Union pension & health & health & welfare,
less current portion (Note 8) .............................. 62,827 62,827
----------- -----------
Total long-term liabilities ........................ 805,630 838,235
----------- -----------
Total liabilities .................................. 3,045,517 2,793,937
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value; 10,000,000 shares authorized,
2,303,468 shares issued and outstanding at July 2, 1999 and
April 2, 1999 (Note 9) .................................... 1,151,734 1,151,734
Capital in excess of par value ............................... 1,615,891 1,615,874
Retained earnings (Deficit) .................................. (2,266,099) (2,265,416)
----------- -----------
Total stockholders' equity ......................... 501,526 502,192
----------- -----------
Total liabilities and stockholders' equity ......... $ 3,547,043 $ 3,296,129
=========== ===========
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
July 2, June 26,
1999 1998
----------- -----------
(Unaudited) (Note 1)
<S> <C> <C>
REVENUE, net sales ............................ $ 1,134,232 $ 1,233,649
COSTS AND EXPENSES
Cost of products sold ......................... 824,979 886,138
Selling, general and administrative ........... 192,755 207,636
Interest expense .............................. 37,697 32,632
Depreciation and amortization ................. 75,525 68,580
----------- -----------
1,130,956 1,194,986
----------- -----------
OPERATING INCOME (LOSS) ....................... 3,276 38,663
OTHER INCOME .................................. 241 203
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ............. 3,517 38,866
PROVISION FOR INCOME TAXES .................... 4,200 4,200
----------- -----------
NET INCOME (LOSS) ............................. $ (683) $ 34,666
=========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE ... $ (.01) $ .02
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING (in thousands) ... 2,303 2,304
=========== ===========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
For the Three Months Ended July 2, 1999 and June 26, 1998
(Unaudited)
July 2, June 26,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) .............................................. $ (683) $ 34,666
--------- ---------
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization .................................. 75,525 68,580
Changes in assets and liabilities:
(Increase) decrease in accounts receivable ..................... (331,392) (49,046)
(Increase) decrease inventories ................................ 23,471 29,823
(Increase) decrease in prepaid expenses and other current assets 2,506 29,046
(Increase) decrease in other receivables ....................... -- (4,300)
--------- ---------
(Increase) decrease in other assets ............................ 136 (476)
(Decrease) increase in accounts payable ........................ 6,669 (144,749)
(Decrease) increase in other current liabilities ............... 13,278 64,975
Increase in accrued corporate income taxes ..................... 2,213 4,200
(Decrease) in due to union pension & health & welfare .......... -- (24,000)
--------- ---------
Total adjustments .................................... (207,594) (25,947)
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES ............... (208,277) 8,719
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets ...................................... (31,330) (68,542)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES .......................... (31,330) (68,542)
--------- ---------
</TABLE>
See accompanying notes to financial statements
-6-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
For the Three Months Ended July 2, 1999 and June 26, 1998
(Unaudited)
July 2, June 26,
1999 1998
--------- ----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable ................. $ (18,436) $ (13,571)
Increase in notes payable ........................... -- --
--------- ---------
Proceeds from accounts receivable financing ......... 260,402 68,624
Principal payments on loan payable .................. (12,529) (11,783)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
229,437 43,270
--------- ---------
INCREASE (DECREASE) IN CASH ......................... (10,170) (16,553)
CASH, beginning of period ........................... 15,120 19,454
--------- ---------
CASH, end of period ................................. $ 4,950 $ 2,901
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION,
Cash paid during the nine months for:
Interest ....................................... $ 37,697 $ 32,632
========= =========
Income Taxes ................................... $ 4,200 $ 4,200
========= =========
</TABLE>
See accompanying notes to financial statements
-7-
<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 July 2, 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 three months ended July 2, 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:
<TABLE>
<CAPTION>
July 2, April 2,
1999 1999
-------- --------
<S> <C> <C>
Raw materials $677,250 $702,176
Work in progress 126,420 122,606
Finished goods 99,330 101,689
-------- --------
$903,000 $926,471
======== ========
</TABLE>
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
July 2, 1999 was $12,000. At April 2, 1999, the balance of
this reserve was $50,400.
Inventories at July 2, 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:
<TABLE>
<CAPTION>
July 2, April 2,
1999 1999
-------- --------
<S> <C> <C>
Prepaid insurance $ 12,177 $ 14,077
Other current assets - 606
-------- --------
$ 12,177 $ 14,683
======== ========
</TABLE>
-8-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 4 - OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
<TABLE>
<CAPTION>
July 2, April 2,
1999 1999
----------- ------------
<S> <C> <C>
Payroll and vacation accruals $ 62,646 $ 77,787
Sales commissions 11,990 21,178
Pension Plan payable 65,489 65,489
Other 51,456 13,849
----------- -----------
$ 191,581 $ 178,303
=========== ===========
</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 8% annum.
The balance remaining at July 2, 1999 was $171,911.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
2000 $ 38,164
2001 54,289
2002 58,795
2003 20,663
----------
$ 171,911
=========
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 July 2, 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.
-9-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 5 - LOAN PAYABLE (continued):
The Company reported tangible net worth of $501,526. The ratio
of current assets to current liabilities was .92 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 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 note bears
interest at the rate of 8.25% per annum. The balance remaining
at July 2, 1999 was $117,955.
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 July 2, 1999
amounted to $74,435.
Aggregate future principal payments are as follows:
2000 $ 11,763
2001 15,597
2002 15,597
2003 15,597
Thereafter 15,881
========
$ 74,435
========
-10-
<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 $7,649 for the three
months ended July 2, 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 July 2, 1999, 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 $3,638.
The total amount due of $158,827 is reported on the
accompanying balance sheet in two components; $96,000 reported
as a current liability and $62,827 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.
<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.
-11-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 8 - COMMITMENTS (continued) :
At July 2, 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:
The Company retired 34 shares of its issued and outstanding
common stock during the quarter ended September 25, 1998.
Retained earnings (deficit) increased by $683, which
represents the net loss for the three months ended July 2,
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.
-12-
<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>
Three Months Ended
-----------------------
July 2, June 26,
1999 1998
------- --------
<S> <C> <C>
Operating Revenues (in thousands) ........................ $ 1,134 $ 1,234
Operating Expenses: (as a percentage of operating revenues
Cost of Products Sold .................................... 72.7% 71.8%
Selling, General and Administrative ...................... 17.0% 16.8%
Interest Expense ......................................... 3.3% 2.6%
Depreciation and Amortization ............................ 6.7% 5.6%
-------- --------
Total Costs and Expenses ....................... 99.7% 96.8%
======== ========
Operating Income (Loss) .................................. .3% 3.2%
======= ========
Other Income ............................................. -- --
------- --------
Income (Loss) Before Income Taxes ........................ .3% 3.2%
======= ========
Income Taxes ............................................. (.4)% .3%
-------- --------
Net Income ............................................... (.1)% 2.9%
======== ========
</TABLE>
-13-
<PAGE>
IEH CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS (continued)
Comparative Analysis
Operating revenues for the three months ended July 2, 1999 amounted to
$1,134,232, reflecting a 8.1% decrease versus the comparative three months
operating revenues of $1,233,649. The decrease is a direct result of
management's attempt 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 $824,979 for the three months ended
July 2, 1999 or 72.7% of operating revenues. This reflected a decrease of
$61,159 or 6.9% of the cost of products sold of $886,138 for the three months
ended June 26, 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 $192,775 or 17% of
revenues compared to $207,636 or 16.8% of revenues for the comparable three
month period ended June 26, 1998. This reflected a decrease of 7.2% and reflects
management's efforts to better control expenses.
Interest expense was $37,697 or 3.3% of revenues as compared to $32,632
or 2.6% of revenues in the three month period ended June 26, 1998. This increase
of 15.5% reflects this increase in borrowing by the Company in the current
fiscal period.
Depreciation and amortization of $75,525 or 6.7% of revenues was
reported for the three month period ended July 2, 1999. This reflects a increase
of 10.1% from the comparable three month period ended June 26, 1998 of $68,580
or 5.6% of revenues. The increase is a result of increased depreciation levels
on fixed assets during the three month period ended July 2, 1999.
The Company reported a net loss of $683 for the three months ended July
2, 1999, representing basic loss per common share of $.01 as compared to a basic
earnings of $34,665 or $.02 per common share for the three months ended June 26,
1998.
The resultant decrease in net income can be attributed to reduced sales
in the commercial sector in the current three month period ending July 2, 1999.
Liquidity and Capital Resources
The Company reported a working capital deficit as of July 2, 1999 of
$177,817 as compared to a working capital deficit of $188,877 at April2, 1999.
The increase in working capital of $11,060 was attributable to the following
items:
Net income (loss)
(excluding depreciation and amortization 74,842
Capital expenditures (31,330)
Other transactions (32,452)
-14-
<PAGE>
IEH CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS (continued)
As a result of the above, the current ratio (current assets to current
liabilities) was .92 to at July 2,1999 as compared to .90 to 1 at April 2,1999.
Current liabilities at July 2,1999 were $2,239,887 compared to $1,955,702 at
April 2,1999. This increase in the current ratio is primarily reflective of an
increase in accounts receivable.
The Company expended $31,330 in capital expenditures in the three
months ended July 2, 1999. Depreciation for the three months ended July 2,1999
was $75,525.
The net loss of $683 for the three months ended July 2, 1999 decreased
stockholders' equity to $501,526 as compared to stockholders' equity of $502,192
at April 2, 1999.
The Company has an accounts receivable financing agreement with a
factor which bears interest at 2.5% above prime with a maximum of 12% per annum.
At July 2,1999 the amount outstanding was $1,019,732 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"), collateralized by machinery
and equipment. The loan is payable over ten years, with interest rates
progressively increasing from 4% to 8% per annum.
The balance remaining at July 2, 1999 was $171,911. Aggregate future
principal payments are as follows:
Fiscal Year Ending March:
2000 $ 38,164
2001 54,289
2002 58,795
2003 20,663
--------
$171.911
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 April 2,1999, 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."
The Company reported tangible net worth of $501,526. The ratio of
current assets to current liabilities was .92 to 1.0.
<PAGE>
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.
-15-
<PAGE>
IEH CORPORATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS (continued)
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 managements 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 in turn has tightened pricing margins.
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.
-16-
<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)
August 11, 1999 /s/Michael Offerman
-------------------
Michael Offerman
President
August 11, 1999 /s/Robert Knoth
----------------
Robert Knoth
Chief Financial Officer
-17-
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