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 December 31, 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 December 31, 1999.
<PAGE>
IEH CORPORATION
CONTENTS
Page
Number
------
Part I - FINANCIAL INFORMATION
ITEM 1- FINANICAL STATEMENTS
Balance Sheets as of December 31, 1999 (Unaudited) and April 2,
1999 2-3
Statement of Operations (Unaudited) for the three and nine months
ended December 31, 1999 and December 25, 1998 4
Statement of Cash Flows (Unaudited) for the nine months ended
December 31, 1999 and December 25, 1998 5-6
Notes to Financial Statements (Unaudited) 7-11
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12-17
Part II - OTHER INFORMATION 18
-1-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of December 31, 1999 and April 2, 1999
December 31, April 2,
1999 1999
---------- ----------
(Unaudited) (Note 1)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash ......................................................... $ 34,300 $ 15,120
Accounts receivable, less allowances for doubtful accounts
of $10,062 at December 31, 1999 and April 2, 1999 ......... 744,759 810,551
Inventories (Note 2) ......................................... 946,700 926,471
Other receivables ............................................ 9,036 --
Prepaid expenses and other current assets (Note 3) ........... 21,309 14,683
---------- ----------
Total current assets ............................... 1,756,104 1,766,825
PROPERTY, PLANT AND EQUIPMENT, less accumulated
depreciation and amortization of $5,003,871 at December 31,
1999 and $4,777,296 at April 2, 1999 ...................... 1,285,697 1,438,733
OTHER ASSETS:
Prepaid pension cost (Note 8) .............................. 43,949 43,949
Other assets ............................................... 46,948 46,622
---------- ----------
90,897 90,571
---------- ----------
Total assets ................................................. $3,132,698 $3,296,129
========== ==========
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
BALANCE SHEETS
As of December 31, 1999 and April 2, 1999
December 31, April 2,
1999 1999
------------ ------------
(Unaudited) (Note 1)
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts receivable financing .................................................. $ 694,828 $ 759,330
Notes payable, equipment, current portion (Note 7) ............................. 15,933 25,333
Notes payable, current portion (Note 6) ........................................ 64,666 60,798
Loans payable, current portion (Note 5) ........................................ 52,865 50,693
Accrued corporate income taxes ................................................. 29,588 15,352
Union pension and health & welfare, current portion (Note 8) ................... 96,000 96,000
Accounts payable ............................................................... 849,832 769,893
Other current liabilities (Note 4) ............................................. 140,958 178,303
----------- -----------
Total current liabilities ............................................ 1,944,670 1,955,702
----------- -----------
LONG-TERM LIABILITIES:
Pension Plan payable (Note 8) .................................................. 516,966 516,966
Notes payable, equipment, less current portion (Note 7) ........................ 40,835 52,936
Notes payable, less current portion (Note 6) ................................... 22,896 71,759
Loan payable, less current portion (Note 5) .................................... 94,539 133,747
Union pension & health & health & welfare,
less current portion (Note 8) ................................................ 50,625 62,827
----------- -----------
Total long-term liabilities .......................................... 725,861 838,235
----------- -----------
Total liabilities .................................................... 2,670,531 2,793,937
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.50 par value; 10,000,000 shares authorized; 2,303,468 shares
issued and outstanding at December 31, 1999
and April 2, 1999 ........................................................... 1,151,734 1,151,734
Capital in excess of par value ................................................. 1,615,891 1,615,874
Retained earnings (Deficit) .................................................... (2,305,508) (2,265,416)
----------- -----------
Total stockholders' equity ........................................... 462,117 502,192
----------- -----------
Total liabilities and stockholders' equity ........................... $ 3,132,648 $ 3,296,129
=========== ===========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
----------------- ------------------
Dec. 31, Dec. 25, Dec. 31, Dec. 25,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUE, net sales ........................ $ 3,320,862 $ 3,294,571 $ 1,094,048 $ 973,227
COSTS AND EXPENSES
Cost of products sold ..................... 2,432,920 2,416,580 810,149 728,445
Selling, general and administrative ....... 581,500 644,255 207,980 222,283
Interest expense .......................... 107,901 99,650 33,788 33,288
Depreciation and amortization ............. 226,575 205,740 75,525 68,580
----------- ----------- ----------- -----------
3,348,896 3,366,225 1,127,442 1,052,596
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) ................... (71,654) (33,394) (79,369)
(28,034)
OTHER INCOME .............................. 542 236 153 33
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES ......... (27,492) (71,418) (33,241) (79,336)
----------- ----------- ----------- -----------
PROVISION FOR INCOME TAXES ................ 12,600 12,600 4,200 4,200
NET INCOME (LOSS) ......................... $ (40,092) $ (84,018) $ (37,441) $ (83,536)
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ (.017) $ (.036) $ (.016) $ (.036)
=========== =========== =========== ===========
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 Nine Months Ended December 31, 1999 and December 25, 1998
(Unaudited)
Dec. 31, Dec. 25,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ........................................................... $ (40,092) $ (84,018)
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization ............................................... 226,575 205,740
Changes in assets and liabilities:
(Increase) decrease in accounts receivable .................................. 65,792 10,861
(Increase) decrease inventories ............................................. (20,229) 40,788
(Increase) decrease in prepaid expenses and other current assets ............ 13,227
(6,626)
(Increase) decrease in other receivables .................................... --
(9,036)
(Increase) decrease in other assets ......................................... 1,109
(326)
(Decrease) increase in accounts payable ..................................... 80,006 (10,805)
(Decrease) increase in other current liabilities ............................ (37,345) 17,646
Increase in accrued corporate income taxes .................................. 14,236 (139)
(Decrease) in due to union pension & health & welfare ....................... (12,202) (72,000)
--------- ---------
Total adjustments ................................................. 300,845 206,427
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
260,753 122,409
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets ................................................... (73,539) (205,977)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES ....................................... $ (73,539) $(205,977)
========= =========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
<TABLE>
<CAPTION>
IEH CORPORATION
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
For the Nine Months Ended December 31, 1999 and December 25, 1998
(Unaudited)
Dec. 31, Dec. 25,
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of common shares ...................................... $ -- $ (17)
Principal payments on notes payable .............................. -- --
Increase (decrease) in notes payable ............................. (66,496) 14,004
Proceeds from accounts receivable financing ...................... (64,502) 89,051
Increase (decrease) on loan payable .............................. (37,036) (35,924)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
(168,034) 67,114
--------- ---------
INCREASE (DECREASE) IN CASH ...................................... 19,180 (16,454)
CASH, beginning of period ........................................ 15,120 19,454
--------- ---------
CASH, end of period .............................................. $ 34,300 $ 3,000
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION, cash paid during the six months for:
Interest .................................................... $ 107,901 $ 99,650
========= =========
Income Taxes ................................................ $ 12,600 $ 12,600
========= =========
</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 nine months ended December 31, 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 nine months ended December 31, 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:
Dec. 31, April 2,
1999 1999
-------- --------
Raw materials $719,492 $702,176
Work in progress 123,071 122,606
Finished goods 104,137 101,689
-------- --------
$946,700 $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
December 31, 1999 was $36,000. At April 2, 1999, the balance
of this reserve was $50,400.
Inventories at December 31, 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:
Dec. 31, April 2,
1999 1999
------- -------
Prepaid insurance $21,309 $14,077
Other current assets - 606
------- -------
$21,309 $14,683
======= =======
-7-
<PAGE>
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 4 - OTHER CURRENT LIABILITIES:
Other current liabilities are comprised of the following:
Dec. 31, April 2,
1999 1999
--------- ---------
Payroll and vacation accruals $ 7,490 $ 77,787
Sales commissions 12,405 21,178
Pension Plan payable 65,489 65,489
Interest payable 25,424 -
Other 30,150 13,849
--------- ---------
$ 140,958 $ 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 December 31, 1999 was $147,404.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
2000 $12,824
2001 53,929
2002 58,405
2003 22,246
--------
$147,404
========
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 December 31, 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 December 31, 1999, the Company reported tangible net worth
of $462,117. The ratio of current assets to current
liabilities was .90 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 nor 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 December
31, 1999 was $87,562.
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 December 31, 1999
amounted to $56,768.
Aggregate future principal payments are as follows:
Fiscal year ended March 31,
2000 $ 3,983
2001 15,933
2002 15,933
2003 15,933
Thereafter 4,986
--------------
$ 56,768
-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 $8,306 for the three
months ended December 31, 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 December 31, 1999, the Company had paid down the arrears
to the Union's pension plan and the amount due the health and
welfare plan was $146,625.
The total amount due of $146,625 is reported on the
accompanying balance sheet in two components; $96,000 reported
as a current liability and $50,625 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 December 31, 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 or $112,765 per annum through the conclusion
of the lease which ends August 23, 2001.)
Note 9 - CHANGES IN STOCKHOLDERS' EQUITY:
Retained earnings (deficit) increased by $37,441, which
represents the net loss for the three months ended December
31, 1999.
Note 10 - YEAR 2000 UPDATE:
Subject to continued monitoring of third party suppliers, IEH
Corporation's year 2000 program ("Program") is complete, and
no material problems have arisen since the end of calendar
year 1999. The Program addressed the issue of computer
programs and embedded computer chips being unable to
distinguish between the year 1900 and the year 2000. All of
the Company's business computer systems are year 2000 ready.
-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>
Nine Months Ended
-------------------------
Dec. 31, Dec. 25,
1999 1998
-------- --------
<S> <C> <C>
Operating Revenues (in thousands) ........................ $ 3,321 $ 3,295
-------- --------
Operating Expenses: (as a percentage of operating revenues
Cost of Products Sold .................................... 73.3% 73.4%
Selling, General and Administrative ...................... 17.5% 19.6%
Interest Expense ......................................... 3.3% 3.0%
Depreciation and Amortization ............................ 6.8% 6.2%
-------- --------
Total Costs and Expenses ....................... 100.9% 102.2%
-------- --------
Operating Income (Loss) .................................. (.9)% (2.2)%
-------- --------
Other Income ............................................ .1% --
-------- --------
Income (Loss) Before Income Taxes ....................... (.8)% (2.2)%
-------- --------
Income Taxes ............................................. .4 % .3 %
-------- --------
Net Income .............................................. (1.2)% (2.5)%
========= ========
</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 nine months ended December 31, 1999
amounted to $3,320,862, reflecting a 1.0% increase versus the
comparative nine months operating revenues of $3,294,571. The
increase 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 $2,432,920 for the nine
months ended December 31, 1999 or 73.3% of operating revenues.
This reflected an increase of $16,340 or 1.0% in the cost of
products sold of $2,416,580 for the nine months ended December
25, 1998. This increase is primarily due to increased
production costs inherent in producing new products.
Selling, general and administrative expenses were $581,500 or
17.5% of revenues for the nine month period ended December 31,
1999 as compared to $644,255 or 19.6% of revenues for the
comparable nine month period ended December 25, 1998. This
reflected a decrease of 10.0% and reflects management's
efforts to better control expenses.
Interest expense was $107,901 or 3.33% of revenues for the
period ended December 31, 1999 as compared to $99,650 or 3.0%
of revenues in the nine-month period ended December 25, 1998.
This increase of 8.0% reflects the increase in borrowing by
the Company in the current fiscal period.
Depreciation and amortization of $226,575 or 6.8% of revenues
was reported for the nine-month period ended December 31,
1999. This reflects an increase of 10.0% from the comparable
nine-month period ended December 25, 1998 of $205,740 or 6.2%
of revenues. The increase is a result of additional purchases
of fixed assets during the nine-month period ended December
31, 1999.
The Company reported a net loss of $40,092 for the nine months
ended December 31, 1999, representing basic loss per share of
$.017 as compared to basic loss of $84,018 or $.036 per common
share for the nine months ended December 25, 1998.
The resultant decrease in net loss can be attributed to
increased sales in the commercial sector in the current
nine-month period ending December 31, 1999 and better control
over operating expenses.
-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
--------------------------------
Dec. 31, Dec. 25,
1999 1998
-------- -------
<S> <C> <C>
Operating Revenues (in thousands) ......................... $ 1,094 $ 973
-------- ------
Operating Expenses: (as a percentage of operating revenues)
Cost of Products Sold ..................................... 74.0% 74.9%
Selling, General and Administrative ....................... 19.0% 22.9%
Interest Expense .......................................... 3.1% 3.4%
Depreciation and Amortization ............................. 6.9% 7.0%
-------- ------
Total Costs and Expenses ........................ 103.0% 108.2%
-------- ------
Operating Income (loss) ................................... (3.0)% (8.2)%
-------- ------
Other Income .............................................. -- --
-------- ------
Income (loss) before Income Taxes ......................... (3.0)% (8.2)%
Income Taxes .............................................. .4% .4%
-------- ------
Net Income (loss) ......................................... (3.4)% (8.6)%
======== ======
</TABLE>
COMPARATIVE ANALYSIS
Operating revenues for the three months ended December 31,
1999 amounted to $1,094,048, reflecting a 12% increase versus
the comparative three months operating revenues of $973,227.
The increase is a direct result of management's new market
sales in the commercial electronic sector.
Cost of products sold amounted to $810,149 for the three
months ended December 31, 1999 or 74.0% of operating revenues.
This reflected an increase of $81,704 or 11.0% of the cost of
products sold of $728,445 for the three months ended December
25, 1998. This increase is primarily due to increased
production costs inherent in producing new products.
<PAGE>
Selling, general and administrative expenses were $207,980 or
19.0% of revenues compared to $222,283 or 22.9% of revenues
for the comparable three-month period ended December 25, 1998.
This reflected a decrease of 6.0% 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 $33,788 or 3.1% of revenues for the
period ended December 31, 1999 as compared to $33,288 or 3.4%
of revenues in the three-month period ended December 25, 1998.
This increase of 1.0% reflects an increase in borrowing by the
Company in the current fiscal period.
Depreciation and amortization of $75,525 or 6.9% of revenues
was reported for the three-month period ended December 31,
1999. This reflects an increase of 10.0% from the comparable
three-month period ended December 25, 1998 of $68,580 or 7.0%
of revenues. The increase is a result of additional purchases
of fixed assets during the three-month period ended December
31, 1999.
The Company reported a net loss of $37,441 for the three
months ended December 31, 1999, representing basic loss per
common share of $.016 as compared to a basic loss of $83,536
or $.036 per common share for the three months ended December
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 December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company reported a working capital deficit as of December
31, 1999 of $188,566 as compared to a working capital deficit
of $188,877 at April 2, 1999. The decrease of this deficit in
working capital of $311 was attributable to the following
items:
Net income (loss) $ 186,483
(excluding depreciation and amortization)
Capital expenditures (73,539)
Other transactions (112,633)
-----------
$ 311
===========
As a result of the above, the current ratio (current assets to
current liabilities) was .90 to 1.0 as of December 31, 1999 as
compared to .90 to 1.0 at April 2, 1999. Current liabilities
at December 31, 1999 were $1,944,670 compared to $1,955,702 at
April 2, 1999.
The Company expended $73,539 in capital expenditures in the
nine months ended December 31, 1999. Depreciation and
amortization for the nine months ended December 31, 1999 was
$266,575.
<PAGE>
The Company has an accounts receivable financing agreement
with a factor which bears interest at 2.5% above prime with a
minimum of 12% per annum. At December 31, 1999 the amount
outstanding was $694,828 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% annum.
-15-
<PAGE>
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The balance remaining at December 31, 1999 was $147,404.
Aggregate future principal payments are as follows:
Fiscal Year Ending March:
2000 $ 12,824
2001 53,929
2002 58,405
2003 22,246
--------
$ 147,404
=========
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 December 31, 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.
At December 31, 1999, the Company reported tangible net worth
of $462,106. The ratio of current assets to current
liabilities was .90 to 1.0.
The Company has applied for additional waivers of this
covenant. Neither the UDC nor 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 obligations and the loan
plus interest will become due and payable.
EFFECTS OF INFLATION
The Company does not view the effects of inflation to have a
material effect upon its business. Increases in costs of raw
materials and labor costs have been offset by increases in the
price of the Company's products, as well as reductions in
costs of production, reflecting management's efforts in this
area.
While the Company has in the past increased its prices to
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.
-16-
<PAGE>
IEH CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
YEAR 2000 UPDATE
Subject to continued monitoring of third party suppliers, IEH
Corporation's year 2000 program ("Program") is complete, and
no material problems have arisen since the end of calendar
year 1999. The Program addressed the issue of computer
programs and embedded computer chips being unable to
distinguish between the year 1900 and the year 2000. All of
the Company's business computer systems are year 2000 ready.
-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)
February 11, 2000 /s/Michael Offerman
- ----------------- -------------------
Michael Offerman
President
February 11, 2000 /s/Robert Knoth
- ----------------- ---------------
Robert Knoth
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-END> DEC-31-1999
<CASH> 34,300
<SECURITIES> 0
<RECEIVABLES> 754,821
<ALLOWANCES> 10,062
<INVENTORY> 946,700
<CURRENT-ASSETS> 1,756,104
<PP&E> 6,289,568
<DEPRECIATION> (5,003,871)
<TOTAL-ASSETS> 3,132,698
<CURRENT-LIABILITIES> 1,944,670
<BONDS> 0
0
0
<COMMON> 1,151,734
<OTHER-SE> (689,617)
<TOTAL-LIABILITY-AND-EQUITY> 3,132,648
<SALES> 3,320,862
<TOTAL-REVENUES> 3,321,404
<CGS> 2,432,920
<TOTAL-COSTS> 2,432,920
<OTHER-EXPENSES> 808,075
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107,901
<INCOME-PRETAX> (27,492)
<INCOME-TAX> 0
<INCOME-CONTINUING> (27,492)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (40,092)
<EPS-BASIC> (.017)
<EPS-DILUTED> 0
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