U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
S
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MARCH 30, 2012.
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£
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
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For the transition period from ______ to _____.
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Commission File Number
0-5278
IEH CORPORATION
(Name of Small Business Issuer in Its Charter)
NEW YORK
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13-5549348
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(State or Other Jurisdiction of
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(I.R.S. Employer Identification No.)
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In Company)
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140
58
th
Street, Suite 8E
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Brooklyn, NY 11220
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(718) 492-4448
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(Address of Principal Executive Offices)
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(Issuer’s Telephone Number,
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Including Area Code)
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Securities registered under Section 12(b) of the Exchange Act:
NONE
Securities registered under Section 12(g) of the Act: Common
Stock, $.01 Par Value Per Share
Indicate by check mark if Registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes
£
No
S
Indicate by check mark if the Registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act.
Yes
£
No
S
Indicate by check mark whether the
Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) 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
S
No
£
Indicate by check mark whether the Registrant
has submitted electronically and posted on its corporate Website, if any, every Interactive Date File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the Registrant was
required to submit and post such files).
£
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein and will not be contained, to
the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.;
Indicate by check mark whether the Registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act. (check one):
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Large accelerated filer
£
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Accelerated filer
£
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Non-accelerated filer
£
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Smaller reporting company
£
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(do not check if a smaller reporting company)
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Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act). Yes
£
No
S
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and
asked price of such common equity, as of the last business day of the Registrant's most recently completed second fiscal quarter
(September 23, 2011): $12,093,207.00.
Indicate the number of shares outstanding of
each of the Registrant’s classes of common stock, as of the latest practicable date: On July 9, 2012, the Registrant had
2,303,468 shares of common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder
the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus
filed pursuant to Rule 424(b) or (e) under the Securities Act of 1933 (“Securities Act”).
None
IEH CORPORATION
INDEX TO FORM 10-K
FOR THE YEAR ENDED MARCH 30, 2012
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Page
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PART I
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5
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ITEM 1.
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BUSINESS
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5
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ITEM 1A.
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RISK FACTORS
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10
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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10
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ITEM 2.
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PROPERTIES
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10
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ITEM 3.
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LEGAL PROCEEDINGS
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11
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ITEM 4.
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(REMOVED AND RESERVED)
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PART II
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11
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ITEM 5.
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MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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11
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ITEM 6.
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SELECTED FINANCIAL DATA
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13
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ITEM 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATION
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13
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ITEM 7A.
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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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21
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ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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21
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ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
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21
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ITEM 9A.
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CONTROLS AND PROCEDURES
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21
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ITEM 9B.
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OTHER INFORMATION
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24
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PART III
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25
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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
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25
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ITEM 11.
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EXECUTIVE COMPENSATION
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27
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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28
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
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30
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ITEM 14.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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30
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PART IV
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32
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ITEM 15.
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EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
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32
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SIGNATURES
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54
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References in this Annual Report to, the terms “
Company
”,
“
IEH
”, “
we
”, “
us
” and “
our
” refer to IEH Corporation,
unless otherwise stated or the context clearly indicates otherwise.
IEH CORPORATION
Forward-Looking Statements
This report contains forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)
and Section 27A of the Securities Act of 1933 (the “Securities Act”). Any statements contained in this report that
are not statements of historical fact may be forward-looking statements. When we use the words “anticipates,” “plans,”
“expects,” “believes,” “should,” “could,” “may,” “will”
and similar expressions, we are identifying forward-looking statements. A
ll statements that express expectations, estimates,
forecasts or projections are forward-looking statements within the meaning of the Securities Act and the Exchange Act, respectively.
We have based these forward-looking statements largely on our current expectations and projections about future financial events
and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial
needs.
Forward-looking statements involve risks and uncertainties, which may cause our actual results,
performance or achievements to be materially different from those expressed or implied by forward-looking statements. These
factors include our limited experience with our business plan; pricing pressures on our product caused by competition;
the
risk that our products will not gain market acceptance; our ability to obtain additional financing; our ability to protect intellectual
property; and our ability to attract and retain key employees.
No forward-looking statement is a guarantee
of future performance and you should not place undue reliance on any forward-looking statements. Our actual results may differ
materially from those projected in any forward-looking statements, as they will depend on many factors about which we are unsure,
including many factors beyond our control.
Except as may
be required by applicable law, we do not undertake or intend to update or revise our forward-looking statements, and we assume
no obligation to update any forward-looking statements contained in this report as a result of new information or future events
or developments. Thus, you should not assume that our silence over time means that actual events are bearing out as expressed or
implied in such forward-looking statements. You should carefully review and consider the various disclosures we make in this report
and our other reports filed with the Securities and Exchange Commission (“SEC”) that attempt to advise interested parties
of the risks, uncertainties and other factors that may affect our business.
IEH CORPORATION
PART I
IEH Corporation (hereinafter referred to as the “Company”)
was organized under the laws of the State of New York on March 22, 1943 under the name Industrial Heat Treating Company, Inc. On
March 15, 1989, the Company changed its name to its current name. The Company’s executive offices and manufacturing facilities
are located at 140 58
th
Street, Suite 8E, Brooklyn, New York 11220. The Company’s telephone number is (718) 492-4448;
Fax: 718-492-9898; its email address is ieh@iehcorp.com.
The majority of our customers require that we maintain
a quality system in strict accordance with ISO 9001. This is an International Standard Organization (ISO) specification and we
have been recently audited and have received certification to ISO 9001:2008. Our quality policy is: “Listening to our Customers
and meeting their needs, while continuously improving our processes and services.”
The Company has developed a web site that reflects the
standard catalog items produced along with custom offerings. The web site is currently undergoing a major expansion and addition
that will allow our customers to obtain information on our product line very quickly. Newsworthy information about the Company
will also be included on the web site. You can view it by going to: http://www.iehcorp.com.
The Company designs, develops and manufactures printed
circuit connectors for high performance applications.
We have also developed a high performance plastic circular
connector line. All of our products utilize the HYPERTAC™ contact design, which is identified by the generic “HYPERBOLOID”
in our catalogs. This is necessary since all other HYPERTAC™ companies have been purchased by a multi-national company. We
are the only independent producer of HYPERTAC™ in the United States.
Our customers consist of OEM’s (Original Equipment
Manufacturers), companies manufacturing medical equipment, and Distributors who resell our products to OEMs. We sell our products
directly and through 16 independent sales representatives located in all regions of the United States, Canada, Israel, India, various
Pacific Rim countries, South Korea and the European Union (EU).
The customers we service are in the Government, Military,
Aerospace, Medical, Automotive, Industrial, Test Equipment and Commercial Electronics markets. We appear on the Military Qualified
Product Listing “QPL” to MIL-DTL-55302 and supply customer requested modifications to this specification. Sales to
the commercial electronic and military markets were 31% and 60%, respectively, of the Company’s net sales for the year ended
March 30, 2012. Our offering of “QPL” items has recently been expanded to include additional products.
In order to remain competitive, the Company has an internal
program to upgrade, add and maintain machinery, review material costs and increase labor force productivity. We recently purchased
several machines to increase the productivity of certain processes. This will help us meet this goal.
Index
IEH CORPORATION
PART I
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Item
1.
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Business
(continued)
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Business New Product Development
The Company is sought after by many of its customers to
design and manufacture custom connectors. This has created many new products that are innovative designs and employ new technologies.
The Company continues to be successful because of its ability to assist its customers and create a new design, including engineering
drawing packages, in a relatively short period of time. We will continue to support our customers to the best of our ability.
The circular product line of connectors introduced several
years ago for the medical industry continues to be very rewarding for the Company. The line has been expanded to include connector
cable assemblies utilizing the circular connectors.
A new product line featuring high density connectors is
being added to the Company’s product offering. This offering should be available with the next 12 months. The Company expects
the new product line to bring additional revenue.
The standard printed circuit board connectors we produce
are continually being expanded and utilized in many of the military programs being built today. We have recently received approval
for additional products that we can offer under the Military Qualified Product Listing “QPL”.
Commitments
The
Company has a collective bargaining multi-employer pension plan (“Multi-Employer Plan”) with the United Auto Workers
of America, Local 259 (the “Union”). 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 Plan Amendments Act
of 1990 (the “1990 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 Multi-Employer Plan. The Company has not taken any action to terminate, withdraw or partially withdraw from the Multi-Employer
Plan nor does it intend to do so in the future. Under the 1990 Act, liabilities would be based upon the Company’s proportional
share of the Multi-Employer 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 such Plan were $115,637 for the year ended March 30, 2012 and $110,881 for the year ended March 25, 2011.
On
September 15, 2008, the Company was notified by the State of New York Workers’ Compensation Board (the “Board”)
that the Trade Industry Workers’ Compensation Trust for Manufacturers (the “Trust”) had defaulted. As a member
of this self-insured group, the Company was assessed on an estimated basis by the Board for its allocable share necessary to discharge
all liabilities of the Trust.
The assessed amount for the years 2002 through 2006 was
$101,362. The assessed amount for each year is detailed as follows:
2002
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$
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16,826
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2003
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24,934
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2004
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31,785
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2005
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14,748
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2006
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13,069
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$
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101,362
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Index
IEH CORPORATION
PART I
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Item 1.
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Business
(continued)
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Commitments
(continued)
The Company did have the option of paying this assessment
as a lump sum amount or paying off the assessment over a 60 month period. The Company elected the deferral option, and was obligated
to making monthly payments of $1,689 for 59 months, and $1,711 for the 60
th
and final month. The Company had recorded
this assessment as a charge to Cost and Expenses in the quarter ended December 26, 2008.
The
Company was subsequently notified that it was being assessed an additional $146,073 covering the years 2002 through 2007, bringing
the total deficit allocation assessment to $247,435.
The total revised assessment for the years 2002 to 2007
is as follows:
2002
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$
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23,445
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2003
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43,797
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2004
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51,381
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2005
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38,309
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2006
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46,477
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2007
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44,026
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$
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247,435
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As of March 30, 2012, the Company had paid down $134,374
of this assessment.
The Company has elected to pay the revised assessment over
a five year period (60 months). The monthly payments, inclusive of interest at 7.50%, are $3,970.
As of March 30, 2012, the remaining balance of the revised
assessment payable was $113,061.
We have been approved by the federal government as a “HubZone
small business Company”. This classification is monitored, and while the Company must remain competitive, it is taken into
consideration by large business concerns when awarding military contracts in support of government programs. The federal government
has mandated that major corporations being awarded government contracts must give a specific percentage of such business to “Hub-Zone
small business enterprises”.
As of October 2, 2011, the Company received notice from
the U.S. Small Business Administration-HUBZone Program that effective October 1, 2011 the Company is no longer eligible for participation
in the HUBZone Program because the Company’s principal office is no longer located in a qualified HUBZone. As a result of
the 2010 decennial census, certain designated HUBZones lost their status as a qualified HUBZone on October 1, 2011. The Company’s
principal office in which the Company has been based since 1991 is no longer within a designated HUBZone and thus the Company is
no longer approved by the federal government as a HUBZone small business enterprise. Although it is possible that the loss of eligibility
for participation in the HUBZone Program may have a material adverse effect on the business of the Company, at this juncture, the
Company cannot determine whether such loss of eligibility will have a material adverse effect on our business.
Legislation has been introduced in the U.S. Congress to
restore HUBZone certification to a number of areas, including where the Company’s principal office is located. No assurance
can be given as to the likelihood that this legislation will be enacted.
Index
IEH CORPORATION
PART I
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Item 1.
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Business
(continued)
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Marketing
and Sales
The
market for connectors and interconnect devices, domestic and worldwide, is highly fragmented as a result of the manufacture by
many companies of a multitude of different types and varieties of connectors and interconnects. For example, connectors include:
printed wiring board, rectangular I/O, circular, planar (IOC) RF coaxial, IC socket and fiber optic. The Company has been servicing
a niche in the market by manufacturing connectors containing HYPERTAC ™ contact designs in the printed wiring board style
of connectors.
The
Company is continuously experimenting with innovative connection designs, which may cause it to alter its marketing plans in the
future if a market should develop for any of its current or future innovative designs. The Company is continually reviewing product
lines being sold in the connector and interconnector marketplace. We are committed to expanding our product offering and we consider
that many of our current or future custom designs will become product lines.
The
Company’s products are marketed to OEM’s (original equipment manufacturers) directly and through authorized representatives
and distributors serving primarily the Government, Military, Aerospace, Medical, Automotive, Industrial, Test Equipment and Commercial
Electronics markets. The Company is also involved in developing new connectors for specific uses, which result from changes in
technology. The Company assists customers in the development and design of connectors for specific customer applications. This
service is marketed to customers who require the development of connectors and interconnection devices specially designed to accommodate
the customers’ own products.
The
Company is primarily a manufacturer and its products are essentially basic components of larger assemblies of finished goods.
Approximately 96% of the Company’s net sales for the years ended March 30, 2012 and March 25, 2011, respectively, were made
directly to manufacturers of finished products with the balance of the Company’s products sold to distributors. Distributors
often purchase connectors for customers who do not require large quantities of connectors over a short period of time but rather
require small allotments of connectors over an extended period of time.
Five
of the Company’s customers accounted for 50.3% of the Company’s net sales for the year ended March 30, 2012. Two of
those customers accounted for 24% of the Company’s net sales. Four of the Company’s customers accounted for 38% of
the Company’s net sales for the year ended March 25, 2011. One of those customers accounted for 14% of the Company’s
net sales.
The Company currently employs 16 independent sales
representatives to market its products in all regions in the United States as well as in Canada, Israel, India, various
Pacific Rim countries, South Korea and the European Union (EU). These independent sales representatives also promote the
product lines of other electronics manufacturers; however, they do not promote the product lines of manufacturers which
compete directly with the Company’s products. These sales representatives accounted for approximately 94% of Company
net sales for the year ended March 30, 2012 (with the balance of Company net sales being generated via direct customer
contact).
International
sales accounted for approximately 9% of net sales for the years ended March 30, 2012 and March 25, 2011, respectively.
Index
IEH CORPORATION
PART I
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Item 1.
|
Business
(continued)
|
Backlog
of Orders/Capital Requirements
The backlog of orders for the Company’s
products amounted to approximately $5,400,000 at March 30, 2012 as compared to $5,450,000 at March 25, 2011. A portion of
these orders are subject to cancellation or postponement of delivery dates and, therefore, no assurance can be given that
actual sales will result from these orders. The Company does not foresee any problems which would prevent it from fulfilling
its orders.
Competition
The
design, development, manufacture and distribution of electrical connectors and interconnection devices is a highly competitive
field. The Company principally competes with companies who produce high performance connectors in printed circuits and wireboards
for high technology application. The Company competes by adapting certain technologies to meet specific product applications,
producing connectors cost-effectively, and through its production capabilities. In addition, there are many companies who offer
connectors with designs similar to those utilized by the Company and are direct competitors of the Company.
The
primary basis upon which the Company competes is product performance and production capabilities. The Company usually receives
job orders after submitting bids pursuant to customer-issued specifications for connectors and interconnectors. The Company’s
bid can be for a new item that requires the item to perform under harsh environment requirements or it can be for a standard catalog
item. The Company also offers engineering services to its customers in designing and developing connectors for specialized products
and specific customer applications. This enables the Company to receive a competitive advantage over those companies who basically
manufacture connectors based solely or primarily on cataloged specifications.
Many
of the Company’s competitors have greater financial resources than the Company and no assurances can be given that the Company
will be able to compete effectively with these companies in the future.
Suppliers
of Raw Materials and Component Parts
The
Company utilizes a variety of raw materials and manufactured component parts, which it purchases from various suppliers. These
materials and components are available from numerous sources and the Company does not believe that it will have a problem obtaining
such materials and parts in the future.
However,
any delay in the Company’s ability to obtain necessary raw materials and component parts may affect its ability to meet
customer production needs. In anticipation of such delays, the Company carries an inventory of raw materials and component parts
to avoid shortages and to insure continued production.
Research
& Development
The
Company provides personalized engineering services to its customers by designing connectors for specific customer applications.
The employment of electromechanical engineers is the anticipated cornerstone of the Company’s future growth. The Company
maintains a testing laboratory where its engineers experiment with
Index
IEH CORPORATION
PART I
|
Item 1.
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Business
(continued)
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Research and Development
(continued)
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new connector designs based on changes in technology and in an attempt to create innovative, more efficient connector designs.
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The Company did not expend any funds on, nor receive any revenues related to, customer sponsored research and development activities
relating to the development of new designs, techniques and the improvement of existing designs during the years ended March 30,
2012 and March 25, 2011.
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The Company presently employs approximately 121 people, two (2) of whom are executive officers; three (3) are engaged in management
activities; nine (9) provide general and administrative services; and approximately 107 are employed in manufacturing and testing
activities. The employees engaged in manufacturing and testing activities are covered by a collective bargaining agreement with
the Union, which expired on March 31, 2012. The Union and the Company are currently engaged in negotiations for the terms of a
new contract. The Company believes that it has a good relationship with its employees and the Union.
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The Company is subject to federal regulations under the Occupational Safety and Health Act (“OSHA”) and the Defense
Supply Command Columbus (“DSCC”).
|
OSHA provides federal guidelines and specifications to
companies in order to insure the health and safety of employees. DSCC oversees the quality and specifications of products and components
manufactured and sold to the government and the defense industry. DSCC’s primary customer is the U.S. military. Many of our
products appear on the DSCC Qualified Products Listing (“QPL”). To remain qualified, the Company submits its products
to an outside testing laboratory which performs all required testing. After review by the Company of the testing results the data
is then submitted to the DSCC. The Company and its products are only approved and remain on the QPL if the Company has passed all
testing requirements. Although DESC continuously requires suppliers to meet changing specifications, the Company has not encountered
any significant problems meeting such specifications and its products have, in the past, been approved. The Company is unaware
of any changes in the government’s regulations which are expected to materially affect the Company’s business.
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We are a “smaller reporting company” as defined by Regulation S-K and as such, are not required to provide the
information contained in this item pursuant to Regulation S-K.
|
Item 1B.
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Unresolved Staff Comments
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Index
IEH CORPORATION
PART I
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Item 2.
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Properties
(continued)
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The Company has renewed its lease for its manufacturing facility located at 140 58
th
Street, Suite E, Brooklyn,
New York. The renewed lease term runs from December 1, 2010 through November 30, 2020. The basic minimum annual rentals are as
follows:
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Fiscal year ending March:
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2013
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$
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153,860
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2014
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158,480
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2015
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163,240
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2016
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168,120
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2017
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173,180
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Thereafter
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679,920
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$
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1,496,800
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The Company leases approximately 20,400 square feet of space, of which it estimates 6,000 square feet are used as executive,
sales and administrative offices and 14,400 square feet are used for its manufacturing, testing and plating operations.
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The rental expense for
the years ended March 30, 2012 and March 25, 2011 was $149,380 and $133,849, respectively. In addition to the base rent, the Company
pays insurance premiums and utility charges relating to the use of the premises. The Company considers its present facilities to
be adequate for its present and anticipated future needs.
Item 3.
|
Legal Proceedings
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The Company is not a party to or aware of any pending or threatened legal proceedings which, in the opinion of the Company’s
management, would result in any material adverse effect on its results of operations or its financial condition.
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Item 4.
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(Removed and Reserved)
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PART II
Item 5.
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Market for Registrant’s Common Equity and Related Stockholder Matters
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The common stock of the Company (the “common stock”) is traded in the Over-The-Counter Market Electronic Bulletin
Board (OTCBB) and is quoted on the National Association of Securities Dealers Automated Quotation (“NASDAQ”) System
Bulletin Board under the symbol (“IEHC”).
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The range of high and low bid prices for the Company’s common stock, for the periods indicated as set forth below
as quoted over the Electronic Bulletin Board (OTCBB). Set forth below is a table indicating the high and low bid prices of
the common stock during the periods indicated.
|
Index
IEH CORPORATION
PART II
|
Item 5.
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Market for Registrant’s Common Equity and Related Stockholder Matters
(
continued)
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Market Information
(continued)
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Year
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High Bid
|
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Low Bid
|
|
Fiscal Year ended March 30, 2012 (*)
|
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1
st
Quarter
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$
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5.20
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$
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4.44
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2
nd
Quarter
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$
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5.40
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$
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4.85
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3
rd
Quarter
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$
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5.30
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$
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3.75
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4
th
Quarter
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$
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4.50
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$
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3.85
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Fiscal Year ended March 25, 2011 (*)
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1
st
Quarter
|
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$
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4.45
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|
|
$
|
3.56
|
|
2
nd
Quarter
|
|
$
|
4.45
|
|
|
$
|
3.60
|
|
3
rd
Quarter
|
|
$
|
4.89
|
|
|
$
|
3.60
|
|
4
th
Quarter
(*) As reported by the OTCBB.
|
|
$
|
5.00
|
|
|
$
|
4.05
|
|
|
|
|
|
|
|
|
|
|
|
|
The above quotations, as reported, represent prices between dealers and do not include retail mark-ups, mark-downs or commissions.
Such quotations do not necessarily represent actual transactions.
|
|
|
On June 12, 2012 (the last day prior to the filing of this report on which trading in the common stock occurred), the high
bid for the common stock was $4.09 and the low bid was $3.30.
|
|
|
The Company has not paid any cash dividends on its common stock during the last five (5) fiscal years. At present, the Company
does not anticipate issuing any cash dividends on its common stock in the foreseeable future by reason of its contemplated future
financial requirements and business plans. The Company will retain earnings, to the extent that there are any, to finance the development
of its business.
|
|
|
|
|
|
Approximate Number of Equity Security Holders
|
|
|
The number of record holders of the Company’s common stock as of July 2, 2012 was approximately 469. Such number
of record owners was determined from the Company’s shareholder records, and does not include the beneficial owners of
the Company’s common stock whose shares are held in the names of various security holders, dealers and clearing
agencies.
|
|
|
The transfer agent for our common stock is Registrar & Transfer Company located in Cranford, New Jersey.
|
Index
IEH CORPORATION
PART II
|
Item 6.
|
Selected Financial Data
|
|
|
We are a “smaller reporting company” as defined by Regulation S-K and as such, are not required to provide the
information contained in this item pursuant to Regulation S-K.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Statements contained in this report, which are not historical
facts, may be considered forward-looking information with respect to plans, projections, or future performance of the Company as
defined under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties,
which could cause actual results to differ materially from those projected. The words “anticipate,” “believe”,
“estimate”, “expect,” “objective,” and “think” or similar expressions used herein
are intended to identify forward-looking statements. The forward-looking statements are based on the Company’s current views
and assumptions and involve risks and uncertainties that include, among other things, the effects of the Company’s business,
actions of competitors, changes in laws and regulations, including accounting standards, employee relations, customer demand, prices
of purchased raw material and parts, domestic economic conditions, including housing starts and changes in consumer disposable
income, and foreign economic conditions, including currency rate fluctuations. Some or all of the facts are beyond the Company’s
control.
|
|
The following discussion and analysis should be read in conjunction with our audited financial statements and related footnotes
included elsewhere in this report, which provide additional information concerning the Company’s financial activities and
condition.
|
The Company designs, develops and manufactures printed
circuit connectors for high performance applications.
We have also developed a high performance plastic circular
connector line. All of our products utilize the HYPERTAC™ contact design, which is identified by the generic “HYPERBOLOID”
in our catalogs. This is necessary since all other HYPERTAC™ companies have been purchased by a multi-national company. We
are the only independent producer of HYPERTAC™ in the United States.
Our customers consist of OEM’s (Original Equipment
Manufacturers), companies manufacturing medical equipment, and Distributors who resell our products to OEMs. We sell our products
directly and through 16 independent sales representatives located in all regions of the United States as well as in, Canada, Israel,
India, various Pacific Rim countries, South Korea and the European Union (EU).
|
|
The customers we service are in the Government, Military, Aerospace, Medical, Automotive, Industrial, Test Equipment and Commercial
Electronics markets. We appear on the Military Qualified Product Listing “QPL” to MIL-DTL-55302 and supply customer
requested modifications to this specification. Sales to the commercial electronic and military markets were 31% and 60%, respectively,
of the Company’s net sales for the year ended March 30, 2012. Our offering of “QPL” items has recently been expanded
to include additional products.
|
Critical Accounting Policies
|
|
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States
of America, which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could differ from
those estimates. The Company believes the following are the critical accounting policies, which could have the most significant
effect on the Company's reported results and require the most difficult, subjective or complex judgments by management.
|
|
·
|
Impairment of Long-Lived Assets:
|
|
|
The Company reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount
of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the
carrying amount of the asset, an impairment loss is
|
Index
IEH CORPORATION
PART II
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
|
|
|
Critical Accounting Policies
(continued)
|
|
|
recognized as the amount by which the carrying amount of the asset exceeds its fair value. The Company makes estimates of its
future cash flows related to assets subject to impairment review.
|
|
|
Raw materials and supplies are valued at the lower of first-in, first-out cost or market. Finished goods and work in process
are valued at the lower of actual cost, determined on a specific identification basis, or market. The Company estimates which materials
may be obsolete and which products in work in process or finished goods may be sold at less than cost, and adjusts their inventory
value accordingly. Future periods could include either income or expense items if estimates change and for differences between
the estimated and actual amount realized from the sale of inventory.
|
|
|
The Company records a liability for potential tax assessments based on its estimate of the potential exposure. Due to the subjectivity
and complex nature of the underlying issues, actual payments or assessments may differ from estimates. Income tax expense in future
periods could be adjusted for the difference between actual payments and the Company's recorded liability based on its assessments and estimates.
|
|
|
Revenues are recognized at the shipping date of the Company's products. The Company has historically adopted the shipping terms
that title merchandise passes to the customer at the shipping point (FOB Shipping Point). At this juncture, title has passed, the
Company has recognized the sale, inventory has been relieved, and the customer has been invoiced. The Company does not offer any
discounts, credits or other sales incentives.
|
|
|
The Company’s policy with respect to customer returns and allowances as well as product warranty is as follows:
|
|
|
The Company will accept a return of a defective product within one year from shipment for repair or replacement at the Company’s
option. If the product is repairable, the Company at its own cost will repair and return it to the customer. If not repairable,
the Company will either offer an allowance against payment or will reimburse the customer for the total cost of the product deemed
defective.
|
|
|
Most of the Company’s products are custom ordered by customers for a specific use. The Company provides engineering services
as part of the relationship with its customers in developing the custom product. The Company is not obligated to provide such engineering
service to its customers. The Company does not charge separately for these services.
|
|
·
|
Research & Development:
|
|
|
The Company provides personalized engineering services to its customers by designing connectors for specific customer applications.
The employment of electromechanical engineers is the anticipated cornerstone of the Company’s future growth. The Company
maintains a testing laboratory where its
|
Index
IEH CORPORATION
PART II
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
|
|
|
Critical Accounting Policies
(continued)
|
|
|
engineers experiment with new connector designs based on changes in technology and in an attempt to create innovative, more
efficient connector designs.
|
The Company did not expend any funds on, nor receive any
revenues related to, customer sponsored research and development activities relating to the development of new designs, techniques
and the improvement of existing designs during the years ended March 30, 2012 and March 25, 2011, respectively.
|
|
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:
|
Relationship to Total Revenues
|
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Operating revenues (in thousands)
|
|
$
|
13,293
|
|
|
$
|
13,824
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
(as a percentage of operating revenues)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of products sold
|
|
|
66.1
|
%
|
|
|
62.9
|
%
|
Selling, general and administrative
|
|
|
15.9
|
%
|
|
|
14.4
|
%
|
Interest expense
|
|
|
.3
|
%
|
|
|
.3
|
%
|
Depreciation and amortization
|
|
|
1.4
|
%
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
TOTAL COSTS AND EXPENSES
|
|
|
83.7
|
%
|
|
|
78.8
|
%
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
16.3
|
%
|
|
|
21.2
|
%
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
16.3
|
%
|
|
|
21.2
|
%
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
(8.0
|
%)
|
|
|
(9.2
|
%)
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
8.3
|
%
|
|
|
12.0
|
%
|
Index
IEH CORPORATION
PART II
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
|
|
|
Results of Operations
(continued)
|
|
|
Year End Results: March 30, 2012 vs. March 25, 2011
(continued)
|
Net sales for the year ended March 30, 2012 amounted to
$13,292,732 reflecting a 3.8% decrease versus the year ended March 25, 2011 net sales of $13,823,640. The decrease in net sales
is a direct result of a slow economy.
|
|
The Company is primarily a manufacturer and its products are essentially basic components of larger assemblies of
finished goods. Approximately 96% of the Company’s net sales for the fiscal years ended March 30, 2012 and March 25,
2011, respectively, were made directly to manufacturers of finished products with the balance of the Company’s products
sold to distributors.
|
Distributors often purchase
connectors for customers who do not require large quantities of connectors over a short period of time but rather require small
allotments of connectors over an extended period of time.
|
|
For the fiscal year ended March 30, 2012, five of the Company’s customers accounted for approximately 50.3% of net sales.
Of these, two customers accounted for approximately 24% of net sales. Four of the Company’s customers accounted for 38% of
the Company’s net sales for the year ended March 25, 2011. One of those customers accounted for 14% of the Company’s
net sales.
|
|
|
The Company currently employs 16 independent sales representatives to market its products in all regions of the United States
as well as in Canada, Israel, India, various Pacific Rim countries, South Korea and the European Union (EU). These sales representatives
accounted for approximately 94% of the Company’s net sales for the year ended March 30, 2012, with the balance of net sales
being generated by direct customer contact.
|
|
|
For the fiscal year ended March 30, 2012, the Company’s principal customers included manufacturers of commercial electronic
products, military defense contractors and distributors who service these markets. Sales to the commercial electronic and government
markets comprised 91% of the Company’s net sales for the years ended March 30, 2012 and March 25, 2011, respectively. Approximately
9% of net sales were made to international customers for the years ended March 30, 2012 and March 25, 2011, respectively.
|
|
|
Cost of products sold amounted to $8,782,313 for the fiscal year ended March 30, 2012, or 66.1% of operating revenues. This
reflected an $88,841 or 1.0% increase in the cost of products sold of $8,693,472 or 62.9% of operating revenues for the fiscal
year ended March 25, 2011. This increase is due primarily to the increased cost of production associated with the increase in purchase
costs of gold and other components.
|
|
|
Selling, general and administrative expenses were $2,118,631 and $1,983,862 or 15.9% and 14.4% of net sales for the fiscal
years ended March 30, 2012 and March 25, 2011, respectively. This category of expenses increased by $134,769 or 6.8% from the prior
year. The increase can be attributed to an increase in salaries, commissions and travel.
|
|
|
Interest expense was $39,021 for the fiscal year ended March 30, 2012 or .3% of net sales. For the fiscal year ended March
25, 2011, interest expense was $43,946 or .3% of net sales. The decrease of $4,925 or 11.2% reflects the slight decrease in interest
bearing debt by the Company.
|
Index
IEH CORPORATION
PART II
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
|
|
|
Results of Operations
(continued)
|
|
|
Year End Results: March 30, 2012 vs. March 25, 2011
(continued)
|
|
|
Depreciation and amortization of $185,243 or 1.4% of net sales was reported for the fiscal year ended March 30, 2012.
This reflects an increase of $24,061 or 14.9% from the prior year ended March 25, 2011 of $161,182 or 1.2% of net sales. The
increase is due primarily to additional new equipment being put in use during the current fiscal year.
|
|
|
The Company reported net income of $1,102,424 for the year ended March 30, 2012 representing basic earnings of $.48 per
share as compared to net income of $1,669,517 or $ .73 per share for the year ended March 25, 2011. The decrease in net
income for the current year can be attributed primarily to the reported decrease in government, military, aerospace and
commercial sales.
|
Index
IEH CORPORATION
PART II
|
Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
(continued)
|
|
Results of Operations
(continued)
|
|
|
Year End Results: March 30, 2012 vs. March 25, 2011
(continued)
|
|
|
Liquidity and Capital Resources
|
|
|
The Company reported working capital of $6,286,025 as of March 30, 2012 compared to a working capital of $5,411,126 as of March
25, 2011. The increase in working capital of $874,899 was attributable to the following items:
|
Net income
|
|
$
|
1,102,424
|
|
Depreciation and amortization
|
|
|
185,243
|
|
Capital expenditures
|
|
|
(361,840
|
)
|
Other transactions
|
|
|
(50,928
|
)
|
|
|
$
|
874,899
|
|
|
|
As a result of the above, the current ratio (current assets to current liabilities) was 8.73 to 1 at March 30, 2012 as compared
to 8.01 to 1 at March 25, 2011. Current liabilities at March 30, 2012 were $813,040 compared to $772,080 at March 25, 2011.
|
|
|
The Company reported $361,840 in capital expenditures for the year ended March 30, 2012 and recorded depreciation expense of
$185,243 for the year ended March 30, 2012.
|
|
|
The net income of $1,102,424 for the year ended March 30, 2012 resulted in an increase in stockholders’ equity to $7,697,266
as compared to stockholders’ equity of $6,594,842 at March 25, 2011.
|
|
|
The Company has an accounts receivable financing agreement with a non-bank lending institution (“Factor”) whereby
it can borrow up to 80 percent of its eligible receivables (as defined in such financing agreement) at an interest rate of 2 ½%
above JP Morgan Chase’s publicly announced rate with a minimum interest rate of 12% per annum.
|
The financing agreement has an initial term of one year
and will automatically renew for successive one-year terms, unless terminated by the Company or its lender upon receiving 60 days
prior notice. Funds advanced by the Factor are secured by the Company’s accounts receivable and inventories. As of March
30, 2012 the Company had reported a liability to the factor of $54,943 as compared to March 25, 2011, where the Company had reported
excess payments to the Factor resulting from an overpayment of $78,898, which the Company intended to apply against future borrowings.
These excess repayments are reported in the accompanying financial statements as “Excess payments to accounts receivable
factor”.
|
|
In the past two fiscal years, management has been reviewing its collection practices and policies for outstanding receivables
and has revised its collection procedures to a more aggressive collection policy. As a consequence of this new policy the Company’s
experience is that its customers have been remitting payments on a more consistent and timely basis. The Company reviews the collectability
of all accounts receivable on a monthly basis. The reserve is less than 2% of average gross accounts receivable and is considered
to be conservatively adequate.
|
Index
IEH CORPORATION
PART II
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
|
|
|
Results of Operations
(continued)
|
|
|
Year End Results: March 30, 2012 vs. March 25, 2011
(continued)
|
Liquidity and Capital Resources (
continued
)
|
|
The Company has a collective bargaining multi-employer plan (“Multi-Employer Plan”) with the United Auto Workers
of America, Local 259. 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 1990 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 Multi-Employer Plan. The Company
has not taken any action to terminate, withdraw or partially withdraw from the Multi-Employer Plan nor does it intend to do so
in the future. Under the 1990 Act, liabilities would be based upon the Company’s proportional share of such 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 such Plan were $115,637 for the
year ended March 30, 2012 and $110,881 for the year ended March 25, 2011.
|
|
On September 15, 2008, the Company was notified by the State of New York Workers’ Compensation Board (the “Board”)
that the Trade Industry Workers’ Compensation Trust for Manufacturers (the “Trust”) had defaulted. As a member
of this self-insured group, the Company was assessed on an estimated basis by the Board for its allocable share necessary to discharge
all liabilities of the Trust.
|
|
|
The assessed amount for the years 2002 through 2006 was $101,362. The assessed amount for each year is detailed as follows:
|
2002
|
|
$
|
16,826
|
|
2003
|
|
|
24,934
|
|
2004
|
|
|
31,785
|
|
2005
|
|
|
14,748
|
|
2006
|
|
|
13,069
|
|
|
|
$
|
101,362
|
|
The Company did have the option of paying this assessment
as a lump sum amount or paying off the assessment over a 60 month period. The Company elected the deferral option, and was obligated
to making monthly payments of $1,689 for 59 months, and $1,711 for the 60
th
and final month. The Company had recorded
this assessment as a charge to Cost of Sales in the quarter ended December 26, 2008.
The Company was subsequently notified that it was being
assessed an additional $146,073 covering the years 2002 through 2007, bringing the total deficit allocation assessment to $247,435.
Index
IEH CORPORATION
PART II
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
|
|
|
Results of Operations
(continued)
|
|
|
Year End Results: March 30, 2012 vs. March 25, 2011
(continued)
|
Liquidity and Capital Resources (
continued
)
The total revised assessment for the years 2002 to 2007
is as follows:
2002
|
|
$
|
23,445
|
|
2003
|
|
|
43,797
|
|
2004
|
|
|
51,381
|
|
2005
|
|
|
38,309
|
|
2006
|
|
|
46,477
|
|
2007
|
|
|
44,026
|
|
|
|
$
|
247,435
|
|
As of March 30, 2012, the Company had paid down $134,374
of this assessment.
The Company has elected to pay the revised assessment over
a five year period (60 months). The monthly payments, inclusive of interest at 7.50%, are $3,970.
As of March 30, 2012 the remaining balance of the revised
assessment payable was $113,061.
On August 31, 2011, the Company’s shareholders approved
the adoption of the Company’s 2011 Equity Incentive Plan (“2011 Plan”) to provide for the grant of stock options
and restricted stock awards to purchase up to 750,000 shares of the Company’s common stock to all employees, consultants
and other eligible participants including senior management and members of the Board of Directors of the Company. The 2011 Plan
replaced the prior 2002 Employee Stock Option Plan which had expired in accordance with its terms.
Options granted to employees under the 2011 Plan may be
designated as options which qualify for incentive stock option treatment under Section 422A of the Internal Revenue Code, or options
which do not qualify (non-qualified stock options).
Under the 2011 Plan, the exercise price of an option
designated as an incentive stock option shall not be less than the fair market value of the Company’s common stock on
the day the option is granted. In the event an option designated as an incentive stock option is granted to a ten percent
(10%) or greater shareholder, such exercise price shall be at least 110 percent (110%) of the fair market value of the
Company’s common stock and the option must not be exercisable after the expiration of five years from the day of the
grant. The 2011 Plan also provides that holders of options that wish to pay for the exercise price of their options with
shares of the Company’s common stock must have beneficially owned such stock for at least six months prior to the
exercise date.
Index
IEH CORPORATION
PART II
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
(continued)
|
|
|
Results of Operations
(continued)
|
|
|
Year End Results: March 30, 2012 vs. March 25, 2011
(continued)
|
Liquidity and Capital Resources (
continued
)
Exercise prices of non-incentive stock options may be less
than the fair market value of the Company’s common stock. The aggregate fair market value of shares subject to options granted
to a participant(s), which are designated as incentive stock options, and which become exercisable in any calendar year, shall
not exceed $100,000. As of March 30, 2012, no options or restricted stock awards had been granted under the 2011 Plan.
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 relatively competitive price position. However, significant decreases in government and military subcontractor spending
have provided excess production capacity in the industry, which in turn has tightened pricing margins.
|
|
|
Off Balance Sheet Arrangements
|
|
|
The Company does not have any off balance sheet arrangements within the meaning of Item 303 of Regulation S-B.
|
Item 7A.
|
Quantitative and Qualitative Disclosure About Market Risk
|
|
|
We are a “smaller reporting company” as defined by Regulation S-K and as such, are not required to provide the
information contained in this item pursuant to Regulation S-K.
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
|
See our audited Financial Statements for the fiscal year ended March 30, 2012 which follows Item 15 of this Annual Report on
Form 10-K.
|
Item 9.
|
Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
|
None.
Item 9A.
|
Controls and Procedures
|
|
|
Evaluations of Disclosure Controls and Procedures
|
|
|
As of the end of the period covered by this report, we carried out an evaluation, under the supervision
and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness
of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). In designing and evaluating
the disclosure controls and procedures, management recognized that any
|
Index
IEH CORPORATION
PART II
|
Item 9A.
|
Controls and Procedures
(continued)
|
|
|
Evaluations of Disclosure Controls and Procedures (continued)
|
|
|
controls and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
|
|
|
Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded
that our disclosure controls and procedures were effective at the reasonable level as of the end of the year to ensure that information
we are required to disclose in the reports that we file and submit under the Exchange Act is: (i) recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms; and (ii) accumulated and communicated to our
management, including our principal executive officer and principal financial officer, as appropriate, to allow timely discussions
regarding disclosure.
|
Under the supervision and with the
participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an assessment
of the effectiveness of our internal control over financial reporting based upon the framework in
Internal Control – Integrated
Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based upon assessment, our management
concluded that our internal control over financial reporting is effective as of March 30, 2012.
Management’s Report on Internal
Control over Financial Reporting
Our management, under the supervision
of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial
reporting is a process designed by, or under the supervision of our principal executive officer and principal financial officer,
or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. The Company’s internal control over financial reporting includes
those policies and procedures that:
(i) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the Company; and
(iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect
on the financial statements.
Index
IEH CORPORATION
PART II
|
Item 9A.
|
Controls and Procedures (
continued
)
|
|
|
Management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the
effectiveness of our internal control over financial reporting as of March 30, 2012. In making this evaluation, management
used the framework in
Internal Control—Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on our evaluation under the framework in
Internal
Control—Integrated Framework
, our management has concluded that our internal control over financial reporting was
effective as of March 30, 2012.
|
|
|
This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm
regarding our internal control over financial reporting. Management’s report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this
Annual Report.
|
|
|
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
|
|
|
Changes in Internal Control over Financial Reporting
|
|
|
There was no change in our system of internal control over financial reporting
(as defined in Rule
13a-15(f) under the Exchange Act)
during our fiscal year ended March 30, 2012 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
|
Inherent Limitations on Effectiveness of Controls
We do not expect that internal controls over financial
reporting will prevent all errors or all instances of fraud. A control system, no matter how well designed and operated, can provide
only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within its company have been detected. These inherent limitations include the
realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Controls
can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override
of the controls. The design of any system of controls is based in part upon certain assumptions about the likelihood of future
events, and any design may not succeed in achieving its stated goals under all potential future conditions. Over time, controls
may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Because of the inherent limitation of a cost-effective control system, misstatements due to error or fraud may occur and not be
detected.
|
|
Other Information Related to Internal Controls
|
Historically, the Company has relied upon the entire Board
of Directors in appointing the Company’s independent auditors and reviewing the financial condition and statements of the
Company. Given the relatively small size of the Company’s operations and revenues, the Board has not believed that appointing
an independent committee was a necessity.
Index
IEH CORPORATION
PART II
|
Item 9A.
|
Controls and Procedures (
continued
)
|
|
|
Additionally, in response to the passage of the Sarbanes-Oxley Act of 2002, our Board of Directors and management have
adopted a Code of Ethics and have instituted a periodic review by members of our management team to assist and guide the
disclosure process. The Board has also determined to periodically review and develop policies and procedures to enhance our
disclosure controls and procedures as well as with reviewing our periodic reports and other public disclosures.
|
In connection with their review and assessment of our disclosure
controls and procedures, the Company’s management has retained the services of an outside consultant to further assist management
in its annual evaluation of such controls and procedures. There have been no changes in our internal control over financial reporting
(as defined in Rule 13a – 15(f) under the Exchange Act) during the year ended March 30, 2012 that have been materially affected,
or are reasonably likely to materially affect our internal controls over financial reporting.
Item 9B.
|
Other Information
|
IEH CORPORATION
PART III
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
As of March 30, 2012, the executive officers
and directors of the Company are as follows:
Name
|
|
Age
|
|
Office
|
Class
|
|
|
|
|
|
|
Michael Offerman
|
|
71
|
|
Chairman of the Board of Directors, President and Chief
Executive Officer
|
I
|
|
|
|
|
|
|
Robert Knoth
|
|
70
|
|
Chief Financial Officer, Controller, Secretary and Treasurer
|
|
|
|
|
|
|
|
Allen Gottlieb
|
|
71
|
|
Director
|
II
|
|
|
|
|
|
|
Gerald E. Chafetz
|
|
69
|
|
Director
|
II
|
|
|
Effective September 1, 2011, Murray Sennet, a member of the Board of Directors since 1970, resigned
as a director for health reasons.
|
|
|
IEH’s Certificate of Incorporation provides that the directors of the Company are to be elected
in two (2) classes; each class to be elected to a staggered two (2) year term and until their successors are duly elected and qualified.
Prior to May 26, 2009, the Board of Directors consisted of three (3) members divided into two classes with two Class I Members
(Messrs. Offerman and Sennet) and one Class II Member (Mr. Gottlieb). On May 26, 2009, the Board of Directors unanimously voted
to increase the number of directors from three to four directors and elected Gerald E. Chafetz as a Class II Member. The Class
II Members of the Board of Directors are scheduled to be elected at the Company’s 2012 Annual Meeting. All officers are elected
by and serve at the discretion of the Board of Directors.
|
Executive Officers and Directors
|
|
Michael Offerman.
Michael Offerman has been a member of the Board of Directors since 1973. In May 1987, Mr. Offerman
was elected President and Chief Executive Officer of the Company and has held that position since that date. Prior to his becoming
President, Mr. Offerman served as Executive Vice-President of the Company.
|
|
|
Robert Knoth.
Robert Knoth joined the Company as Controller in January 1990 and was elected Treasurer of the Company
in March 1990. Mr. Knoth was elected as Secretary of the Company in September 1992 and Mr. Knoth has held these positions since
said dates. From 1986 to January 1990, Mr. Knoth was employed as controller by G&R Preuss, Inc., a company engaged in the business
of manufacturing truck bodies and accessories.
|
IEH CORPORATION
PART III
Item 10.
|
Directors, Executive Officers and Corporate Governance
(continued)
|
Executive Officers and Directors
(continued)
Allen Gottlieb
. Allen Gottlieb has been a member
of the Company’s Board of Directors since 1992. Mr. Gottlieb is retired.
Gerald Chafetz
. Mr. Chafetz is President of GEC
Enterprises, LLC since 2011. GEC Enterprises, LLC is a property management company headquartered in Rockville Centre, New York.
He was previously President of Capitol City Companies. Prior to founding Capitol City Companies, he had an extended 22-year executive
career in the textile industry with several knitwear and high fashion manufacturers, including Arista Knitwear, Berwick Fashion
Knitwear and Beged-or Knitwear. Mr. Chafetz graduated from the University of Hartford in 1965 with a Bachelor of Science degree
in business.
|
|
Joan Prideaux
joined the Company in April 1994, as Director of Sales and Marketing. Joan has been in the connector business
over 30 years and brings this experience to IEH. Prior to joining us, she was employed by Automatic Connector as Director of Sales.
|
|
|
Mark Iskin
is the Director of Purchasing, a position he has held since September 2000. On April 14, 2011, the Board
of Directors appointed Mark to the position of Vice-President-Operations. Prior to joining the Company, Mark worked as a materials
and purchasing specialist, in manufacturing and distribution companies. In his last position with an industrial distributor, he
was responsible for purchasing and managing vendors for the cutting tool section of the catalog. In addition he participated in
setting up and developing the company’s forecasting/planning software related to that department procedures.
|
|
|
David Offerman
joined IEH in September 2004 as the National Sales Manager. On April 14, 2011, the Board of Directors
appointed David to the position of Vice-President-Sales and Marketing. Prior to joining IEH, David worked as an account executive
and sales manager in the telecommunication industry. David is the son of Michael Offerman, President and Chief Executive Officer
of the Company.
|
|
|
Robert Romeo
serves as Vice President of Engineering for IEH, a post he has held since October 2005. Robert has corporate
responsibility for engineering products and driving product enhancements to satisfy the demanding application requirements of IEH
customers. In addition, Robert is tasked with engineering new product developments in the IEH connector offerings to broaden the
market base of potential customers. These new connectors will introduce the traditional IEH quality and value to industries that
specify exceptional reliability and performance in electrical equipment. Before joining IEH, Robert worked for more than 20 years
in positions of increasing responsibility for major national manufacturers of electrical and electronic goods for residential,
industrial, government and OEM markets.
|
|
|
Paul Tzetzos
joined IEH in November, 2005 as a Quality Assurance Director. Paul has over 20 years of experience in the
field of Quality Assurance; with the last 15 years as Director/Manager. He is a degreed Engineer with diversified knowledge in
developing, implementing, maintaining, and improving Quality Systems, such as ISO 9001:2008, EECS, MIL-Q-9858A, ETC. A certified
Lead and Internal Auditor, Paul has a great deal of knowledge concerning military and industry specifications and standards.
|
IEH CORPORATION
PART III
Item 10.
|
Directors, Executive Officers and Corporate Governance
(continued)
|
|
|
Compliance with Section 16(a) of the Exchange Act
|
|
|
Section 16(a) of the Exchange Act requires the Company’s directors and officers and persons who own, directly or indirectly,
more than 10% of a registered class of the Company’s common stock, to file with the SEC initial reports of ownership and
reports of changes in ownership of our common stock.
|
|
|
Officers, directors and greater than 10% shareholders are required to furnish the Company with copies of all Section 16(a)
reports that they file. Based solely on review of the copies of such reports received by the Company, the Company believes that
filing requirements applicable to officers, directors and 10% shareholders were complied with during the year ended March 30, 2012.
|
|
|
Director Independence; Meetings of Directors; Committees of the Board
|
|
|
Our Board of Directors currently consists of three individuals. Two of our directors (other than Michael Offerman) are “independent”
as defined in the Marketplace Rules of The NASDAQ Stock Market. During the fiscal year ended March 30, 2012, our Board of Directors
held one meeting and acted by unanimous written consent on two occasions.
|
|
|
Since the Board of Directors has historically and will in the immediate future consist of only a small number of directors,
we have not formed any Board committees. All matters relating to audit, compensation, nominations and corporate governance are
considered and acted only by the entire Board of Directors.
|
|
|
The Board did not adopt any modifications to the procedures by which security holders may recommend nominees to its Board of
Directors.
|
Item 11.
|
Executive Compensation
|
|
|
The following table sets forth below the summary compensation paid or accrued by the Company during the fiscal years ended
March 30, 2012 and March 25, 2011 for the Company’s Chief Executive Officer and Chief Financial Officer:
|
Name and Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Other Annual
Compensation
|
|
|
Total
|
|
Michael Offerman, Chief
|
|
|
March 30, 2012
|
|
|
$
|
203,673
|
|
|
$
|
40,000
|
|
|
$
|
0
|
|
|
$
|
243,673
|
|
Executive Officer, President (1)
|
|
|
March 25, 2011
|
|
|
$
|
203,191
|
|
|
$
|
45,000
|
|
|
$
|
0
|
|
|
$
|
248,191
|
|
Robert Knoth, Chief Financial
|
|
|
March 30, 2012
|
|
|
$
|
161,481
|
|
|
$
|
33,000
|
|
|
$
|
0
|
|
|
$
|
194,481
|
|
Officer
|
|
|
March 25, 2011
|
|
|
$
|
149,833
|
|
|
$
|
36,000
|
|
|
$
|
0
|
|
|
$
|
185,833
|
|
(1) During the fiscal years ended March 30, 2012 and
March 25, 2011, the Company provided automobile allowances to Mr. Offerman. This does not include the aggregate incremental cost
to the Company of such automobile allowance.
IEH CORPORATION
PART III
Item 11.
|
Executive Compensation
(continued)
|
(2) During the fiscal years ended March 30, 2012 and
March 25, 2011, the Company provided automobile allowances to Mr. Offerman. This does not include the aggregate incremental cost
to the Company of such automobile allowance.
On September 1, 2009, the Company entered into agreements
with each of Michael Offerman, its President and Chief Executive Officer, and Robert Knoth, its Chief Financial Officer, respectively,
providing for certain retirement benefits to be payable to each of them after termination of each such officer’s active service
of employment with the Company. Each agreement provides that each officer’s employment with the Company shall be divided
into an “active period” and a “retirement period”. The active period shall mean the period of time until
the officer attains the age of 70 years, or further period of employment beyond such date if extended by mutual agreement of the
officer and the Company. The retirement period shall mean the period beginning with the officer attaining the age of 70 years and
continuing until 10 years thereafter unless the officer’s employment has been previously terminated or extended by the mutual
agreement of the officer and the Company. The retirement period shall take effect only on termination of the active period. Pursuant
to Mr. Offerman’s agreement, he will be entitled to receive $50,000 per annum and aggregate payments during the retirement
period not to exceed $500,000. Pursuant to Mr. Knoth’s agreement, he will be entitled to receive $12,000 per annum and aggregate
payments during the retirement period not to exceed $120,000.
|
|
In 1987, the Company adopted the Cash Bonus Plan for executive officers. Contributions to the Cash Bonus Plan are made by the
Company only after pre-tax operating profits exceed $150,000 for a fiscal year, and then to the extent of 10% of the excess of
the greater of $150,000 of 25% of pre-tax operating profits. For the fiscal year ended March 30, 2012, the contribution was $149,000.
The contribution for the fiscal year ended
|
|
|
March 25, 2011 was $173,000.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
|
|
The following table sets forth certain information as of July 2, 2012 with respect to: (i) the persons (including any
"group" as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934), known by the Company to
be the beneficial owner of more than five percent (5%) of any class of the Company's voting securities; (ii) each Executive
Officer and Director who owns common stock in the Company; and (iii) all Executive Officers and Directors as a group. As of
July 2, 2012, there were 2,303,468 shares of common stock issued and outstanding. The figures stated below are based upon
Schedule 13Ds, Schedule 13D/As, Form 3s and Form 4s filed with the SEC by the named persons.
|
IEH CORPORATION
PART III
Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters
(continued)
Title of Class
|
Name and Address of Beneficial
Owner
|
Shares of
Common Stock
Beneficially
Owned
|
Percentage (%) of
Common Stock
Owned
|
Officers and Directors
|
|
|
|
Common Stock
$.01 Par Value
|
Michael Offerman
c/o IEH Corporation
140 58
th
Street
Brooklyn, NY 11220
|
923,784(1)
|
40%
|
|
Murray Sennet
c/o IEH Corporation
140 58
th
Street
Brooklyn, NY 11220
|
24,500(2)
|
1.1%
|
|
Allen Gottlieb
c/o IEH Corporation
140 58
th
Street
Brooklyn, NY 11220
|
0
|
0
|
|
Robert Knoth
c/o IEH Corporation
140 58
th
Street
Brooklyn, NY 11220
|
2,195
|
*
|
|
Gerald E. Chafetz
c/o IEH Corporation
140 58
th
Street
Brooklyn, NY 11220
|
0
|
0
|
All Officers & Directors as a Group
(5 in number)
|
950,479(1)
|
41%
|
5% Shareholders
|
|
|
|
|
Hummingbird Management, LLC
145 East 57
th
Street, 8
th
Floor
New York, NY 10022
|
304,422
|
13.2%
|
|
David and Nancy Lopez
P.O. Box 323
Southampton, NY 11969
|
188,500
|
8.2%
|
______________________
* Denotes ownership percentage of
less than 1%.
|
(1)
|
43,600 shares of common stock are jointly owned by Mr. Offerman and his wife, Gail Offerman.
|
|
(2)
|
All shares set forth above are owned directly by the named individual unless otherwise stated.
|
Mr. Sennet resigned as a director
of the Company for health reasons effective September 1, 2011.
IEH CORPORATION
PART III
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
|
|
Other than the employment terms for its executive officers as described elsewhere in this Form 10-K,
and as described below, there have been no related transactions between the Company, officers,
directors or shareholders
holding in excess of 5% of its securities within the last three years. Messrs. Gottlieb and Chafetz are deemed independent directors.
|
Item 14.
|
Principal Accountant Fees and Services
|
|
|
The Board of Directors of IEH has selected Jerome Rosenberg, CPA P.C., as the independent auditor of IEH for the fiscal year
ending March 29, 2013. Shareholders will be asked to ratify such selection at the Company’s annual meeting to be held in
September 2012. The audit services provided by Jerome Rosenberg, CPA P.C., consist of examination of financial statements, services
relative to filings with the SEC, and consultation in regard to various accounting matters. A member of Jerome Rosenberg, CPA P.C.,
is expected to be present at the next annual meeting of shareholders, will have the opportunity to make a statement if he so desires,
and will be available to respond to appropriate questions.
|
|
|
Audit Fees
. During the fiscal year ended March 30, 2012 and March 25, 2011, IEH paid an aggregate of $46,400 and 43,000,
respectively, to Jerome Rosenberg, CPA P.C., for fees related to the audit of its financial statements.
|
|
|
Audit Related Fees.
During the fiscal years ended March 30, 2012 and March 25, 2011, no fees were paid to Jerome Rosenberg,
CPA P.C., with respect to financial systems design or implementation.
|
|
|
Tax
Fees
. During the fiscal years ended March 30, 2012 and March 25,
2011, the Company paid to Jerome Rosenberg, CPA P.C., the sums of $4,000 and 3,800 for tax compliance, tax advice and tax planning
services.
|
|
|
All Other Fees.
During the fiscal year ended March 30, 2012, IEH did not pay any other fees for services to its independent
auditor.
|
|
|
The Board of Directors has determined that the services provided by Jerome Rosenberg, CPA P.C., and the fees paid to it for
such services during the fiscal year ended March 30, 2012 has not compromised the independence of Jerome Rosenberg, CPA P.C.
|
|
|
The Board of Directors of the Company is comprised of three persons. Due to the limited size and scope of the Company’s
operations which are limited to one office and the level of revenue and income, the Board of Directors has not established an Audit
Committee. Further, as the Company’s securities are not traded on any exchange or on Nasdaq, but solely are listed for quotations
on the Over the Counter Bulletin Board, there is no requirement that an Audit Committee be established. The Board, as an entirety,
approves that appointment of its independent auditor and the related work performed by the auditor for services which are not audit
related. In its deliberations regarding approval of the independent auditor for auditing and other services, the Board reviews
the auditor’s history of representing the Company, the fees to be paid and paid historically, the level of performance provided
by the auditor and the ability of the Company, given its lack of profits to obtain similar services for similar costs.
|
IEH CORPORATION
PART III
Item 14.
|
Principal Accountant Fees and Services
(continued)
|
|
|
Consistent with SEC policies regarding auditor independence, the Board of Directors has responsibility for appointing, setting
compensation and overseeing the work of the independent auditor. In recognition of this responsibility, the Board has established
a policy to pre-approve all audit and permissible non-audit services provided by the independent auditor. Prior to engagement of
the independent auditor for the next year's audit, management advises the Board of the audit and permissible non-audit services
expected to be rendered during that year for each of the categories of services which may provided by the independent auditor to
the Board for approval. The primary categories of services expected to be provided by the independent auditor are as described
in the list of fees set forth above. In addition, management will also provide to the Board for its approval a fee proposal for
the services proposed to be rendered by the independent auditor. Prior to the engagement of the independent auditor, the Board
will approve both the description of audit and permissible non-audit services proposed to be rendered by the independent auditor
and the budget for all such services. The fees are budgeted and the Board requires the independent auditor and management to report
actual fees versus the budget periodically throughout the year by category of service.
|
|
|
During the year, circumstances may arise when it may become necessary to engage the independent auditor for additional services
not contemplated in the original pre-approval. In those instances, the Board requires separate pre-approval before engaging the
independent auditor.
|
IEH CORPORATION
PART IV
Item 15.
|
Exhibits and Financial Statement Schedules.
|
|
|
Exhibits filed with Form 10-K:
|
(a)(1) Financial Statements
|
|
The financial statements referenced in Part II, Item 9 of this Annual Report appear on pages 33 to 53.
|
(a)(2) Financial Statement Schedule
(a)(3) Exhibits
|
|
The exhibits designated with an asterisk (*) are filed herewith. All other exhibits have been previously filed with the SEC
and pursuant to 17 C.F.R. Section 201.24 and 240.12b-32, are incorporated by reference to the document referenced in parentheses
following the description of such exhibit. The exhibits designated with a number sign (#) indicate a management contract or compensation
plan or arrangement.
|
|
|
10.1(#) Agreement between the Company and Michael Offerman (filed as Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on September 4, 2009).
|
|
|
10.2(#) Agreement between the Company and Robert Knoth (filed as Exhibit 10.2 to the Company’s Current Report on Form
8-K filed on September 4, 2009).
|
|
|
31.1* Certification of Chief Executive Officer pursuant to Section 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a) pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
31.2* Certification of Chief Accounting Officer pursuant to Section 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a) pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
32.1* Certifications by Chief Executive Officer and Chief Financial Officer, pursuant to 17 CFR 240.13a-14(b) or 17 CFR 240.15d-14(b)
and Section 1350 of Chapter 63 of Title 18 of the United States Code adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
|
IEH CORPORATION
March 30, 2012 and March 25, 2011
Index to Financial Statements
|
Page
|
|
Number
|
Report of Independent Registered Public Accounting Firm
|
34
|
|
|
Financial Statements:
|
|
|
|
Balance Sheets as of March 30, 2012 and March 25, 2011
|
35
|
|
|
Statements of Operations for the years ended March 30, 2012 and March 25, 2011
|
37
|
|
|
Statements of Stockholders’ Equity for the years ended March 30, 2012 and March 25, 2011
|
38
|
|
|
Statements of Cash Flows for the years ended March 30, 2012 and March 25, 2011
|
39
|
|
|
Notes to Financial Statements
|
41
|
|
|
Report of Independent Registered Public
Accounting Firm
Board of Directors
IEH Corporation
We have audited the accompanying balance sheets of IEH Corporation
as of March 30, 2012 and March 25, 2011 and the related statements of operations, stockholders’ equity, and cash flows for
each of the two years in the periods ended March 30, 2012 and March 25, 2011. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements based upon our audit.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly,
we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of IEH Corporation as of March 30, 2012 and March 25, 2011 and the results
of its operations and its cash flows for each of the two years ended March 30, 2012 and March 25, 2011 in conformity with U.S.
generally accepted accounting principles.
/s/Jerome Rosenberg CPA, P.C.
|
Jerome Rosenberg CPA, P.C.
|
Melville, New York
|
June 22, 2012
|
IEH CORPORATION
BALANCE SHEETS
As of March 30, 2012 and March 25, 2011
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
286,109
|
|
|
$
|
157,049
|
|
Accounts receivable, less allowances for doubtful accounts
of $11,562 at March 30, 2012 and $11,562 at March 25, 2011
|
|
|
2,043,982
|
|
|
|
1,986,799
|
|
Inventories
(Note 2)
|
|
|
4,233,260
|
|
|
|
3,713,372
|
|
Excess payments to accounts receivable factor
(Note 5)
|
|
|
—
|
|
|
|
78,898
|
|
Prepaid expenses and other current assets
(Note 3)
|
|
|
535,714
|
|
|
|
247,088
|
|
|
|
|
|
|
|
|
|
|
Total Current Assets
|
|
|
7,099,065
|
|
|
|
6,183,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT, less accumulated depreciation and
amortization of $7,429,871 at March 30, 2012 and $7,244,628 at March 25, 2011
(Note 4)
|
|
|
1,445,487
|
|
|
|
1,268,890
|
|
|
|
|
1,445,487
|
|
|
|
1,268,890
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
31,177
|
|
|
|
27,887
|
|
|
|
|
31,177
|
|
|
|
27,887
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
8,575,729
|
|
|
$
|
7,479,983
|
|
The accompanying notes and independent auditors’ report
should be read in conjunction with the financial statements.
IEH CORPORATION
BALANCE SHEETS
(Continued)
As of March 30, 2012 and March 25, 2011
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
305,786
|
|
|
$
|
356,225
|
|
Accounts receivable financing
(Note 5)
|
|
|
54,943
|
|
|
|
—
|
|
Accrued corporate income taxes
|
|
|
—
|
|
|
|
3,752
|
|
Workers compensation insurance assessments- current portion
(Note 8)
|
|
|
47,638
|
|
|
|
47,638
|
|
Other current liabilities
(Note 6)
|
|
|
404,673
|
|
|
|
364,465
|
|
|
|
|
|
|
|
|
|
|
Total Current Liabilities
|
|
|
813,040
|
|
|
|
772,080
|
|
|
|
|
|
|
|
|
|
|
LONG-TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
Workers compensation insurance assessments- net of current portion
(Note 8)
|
|
|
65,423
|
|
|
|
113,061
|
|
Total Long-Term Liabilities
|
|
|
65,423
|
|
|
|
113,061
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
878,463
|
|
|
|
885,141
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ EQUITY:
|
|
|
|
|
|
|
|
|
Common Stock, $.01 par value; 10,000,000 shares authorized;
2,303,468 shares issued and outstanding at March 30, 2012 andMarch 25, 2011
|
|
|
23,035
|
|
|
|
23,035
|
|
Capital in excess of par value
|
|
|
2,744,573
|
|
|
|
2,744,573
|
|
Retained earnings
|
|
|
4,929,658
|
|
|
|
3,827,234
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
7,697,266
|
|
|
|
6,594,842
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
8,575,729
|
|
|
$
|
7,479,983
|
|
The accompanying notes and independent auditors’ report
should be read in conjunction with the financial statements.
IEH CORPORATION
STATEMENTS OF OPERATIONS
For the Years Ended March 30, 2012 and March
25, 2011
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
REVENUE, net sales
(Note 13)
|
|
$
|
13,292,732
|
|
|
$
|
13,823,640
|
|
|
|
|
|
|
|
|
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
|
|
|
Cost of products sold
|
|
|
8,782,313
|
|
|
|
8,693,472
|
|
Selling, general and administrative
|
|
|
2,118,631
|
|
|
|
1,983,862
|
|
Interest expense
|
|
|
39,021
|
|
|
|
43,946
|
|
Depreciation and amortization
|
|
|
185,243
|
|
|
|
161,182
|
|
|
|
|
11,125,208
|
|
|
|
10,882,462
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
|
2,167,524
|
|
|
|
2,941,178
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
—
|
|
|
|
3,339
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAXES
|
|
|
2,167,524
|
|
|
|
2,944,517
|
|
|
|
|
|
|
|
|
|
|
PROVISION FOR INCOME TAXES
|
|
|
(1,065,100
|
)
|
|
|
(1,275,000
|
)
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
1,102,424
|
|
|
$
|
1,669,517
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS PER COMMON SHARE
(Note 1)
|
|
$
|
.48
|
|
|
$
|
.73
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (IN THOUSANDS)
|
|
|
2,303
|
|
|
|
2,303
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes and independent auditors’
report should be read in conjunction with the financial statements.
IEH CORPORATION
STATEMENTS OF STOCKHOLDERS’
EQUITY
For the Years Ended March 30, 2012 and
March 25, 2011
|
|
|
|
|
Capital in
|
|
|
|
|
|
|
|
|
|
|
|
|
Excess of
|
|
|
Retained
|
|
|
|
|
|
|
Common Stock
|
|
|
Par Value
|
|
|
Earnings
|
|
|
Total
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 26, 2010
|
|
|
2,303,468
|
|
|
$
|
23,035
|
|
|
$
|
2,744,573
|
|
|
$
|
2,157,717
|
|
|
$
|
4,925,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income: year ended March 25,
2011
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,669,517
|
|
|
|
1,669,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 25, 2011
|
|
|
2,303,468
|
|
|
|
23, 035
|
|
|
|
2,744,573
|
|
|
|
3,827,234
|
|
|
|
6,594,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income: year ended March 30,
2012
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,102,424
|
|
|
|
1,102,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 30, 2012
|
|
|
2,303,468
|
|
|
$
|
23,035
|
|
|
$
|
2,744,573
|
|
|
$
|
4,929,658
|
|
|
$
|
7,697,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes and independent auditors’
report should be read in conjunction with the financial statements.
IEH CORPORATION
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash
For the Years Ended March 30, 2012 and
March 25, 2011
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,102,424
|
|
|
$
|
1,669,517
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
185,243
|
|
|
|
161,182
|
|
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) in accounts receivable
|
|
|
(57,183
|
)
|
|
|
(466,435
|
)
|
Decrease in excess payments to accounts receivable factor
|
|
|
78,898
|
|
|
|
145,142
|
|
(Increase) in inventories
|
|
|
(519,888
|
)
|
|
|
(1,140,176
|
)
|
(Increase) in prepaid expenses and other current assets
|
|
|
(288,626
|
)
|
|
|
(136,768
|
)
|
(Increase) in other assets
|
|
|
(3,290
|
)
|
|
|
(2,868
|
)
|
|
|
|
|
|
|
|
|
|
(Decrease) in accounts payable
|
|
|
(50,439
|
)
|
|
|
(32,893
|
)
|
Increase (decrease) in other current liabilities
|
|
|
40,208
|
|
|
|
(68,723
|
)
|
(Decrease) in accrued corporate income taxes
|
|
|
(3,752
|
)
|
|
|
(4,257
|
)
|
(Decrease) in workers compensation insurance assessment
|
|
|
(47,638
|
)
|
|
|
(52,952
|
)
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
(666,467
|
)
|
|
|
(1,598,748
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
435,957
|
|
|
|
70,769
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment
|
|
|
(361,840
|
)
|
|
|
(233,726
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH (USED) BY INVESTING ACTIVITIES
|
|
$
|
(361,840
|
)
|
|
$
|
(233,726
|
)
|
The accompanying notes and independent auditors’
report should be read in conjunction with the financial statements.
IEH CORPORATION
STATEMENTS OF CASH FLOWS
(Continued)
Increase (Decrease) in Cash
For the Years Ended March 30, 2012 and March
25, 2011
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net activity in accounts receivable financing
|
|
$
|
54,943
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
54,943
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
INCREASE (DECREASE) IN CASH
|
|
|
129,060
|
|
|
|
(162,957
|
)
|
|
|
|
|
|
|
|
|
|
CASH, beginning of period
|
|
|
157,049
|
|
|
|
320,006
|
|
|
|
|
|
|
|
|
|
|
CASH, end of period
|
|
$
|
286,109
|
|
|
$
|
157,049
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the year for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
35,438
|
|
|
$
|
39,325
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
$
|
846,988
|
|
|
$
|
1,341,369
|
|
The
accompanying notes and independent auditors’ report should be read in conjunction with the financial statements.
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
|
Description of Business:
The Company designs, develops and manufactures printed circuit
connectors for high performance applications. The Company has also developed a high performance plastic circular connector line.
All of the Company’s products utilize the HYPERTAC™ contact design, which is identified by the generic “HYPERBOLOID”
in the Company’s catalogs. This is necessary since all other HYPERTAC™ companies have been purchased by a multi-national
company. The Company is the only independent producer of HYPERTAC™ in the United States.
The Company’s customers consist of OEM’s (Original
Equipment Manufacturers), companies manufacturing medical equipment, and Distributors who resell the Company’s products to
OEMs. The Company sells its products directly and through regional representatives located in all regions of the United States,
Canada, Israel, India, various Pacific Rim countries, South Korea and the European Union (EU).
The customers the Company services are in the Government,
Military, Aerospace, Medical, Automotive, Industrial, Test Equipment and Commercial Electronics markets. The Company appears on
the Military Qualified Product Listing “QPL” to MIL-DTL-55302 and supply customer requested modifications to this specification.
Sales to the commercial electronic and military markets were 31% and 60%, respectively, of the Company’s net sales for the
year ended March 30, 2012. The Company’s offering of “QPL” items has recently been expanded to include additional
products.
Accounting Period:
The Company maintains an accounting period based upon a
52-53 week year, which ends on the nearest Friday in business days to March 31
st
. The year ended March 30, 2012 was
comprised of 53 weeks and the year ended March 25, 2011 was comprised of 52 weeks.
Revenue Recognition:
Revenues are recognized at the shipping date of the Company's
products. The Company has historically adopted the shipping terms that title merchandise passes to the customer at the shipping
point (FOB Shipping Point). At this juncture, title has passed, the Company has recognized the sale, inventory has been relieved,
and the customer has been invoiced. The Company does not offer any discounts, credits or other sales incentives.
The Company’s policy with respect to customer returns
and allowances as well as product warranty is as follows:
The Company will accept a return of a defective product
within one year from shipment for repair or replacement at the Company’s option. If the product is repairable, the Company
at its own cost will repair and return to the customer. If unrepairable, the Company will either offer an allowance against payment
or will reimburse the customer for the total cost of the defective product.
Most of the Company’s products are custom ordered
by customers for a specific use. The Company provides engineering services as part of the relationship with its customers in developing
the custom product. The Company is not obligated to provide such engineering service to its customers. The Company does not charge
its customers separately for these services.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
|
Inventories:
Inventories
are stated at cost, on a first-in, first-out basis, which does not exceed market value.
The
Company manufactures products pursuant to specific technical and contractual requirements.
The Company historically purchases material in excess of
its requirements to avail itself of
favorable pricing as well as the possibility of receiving additional orders from customers.
This excess may result in material not being used in subsequent periods, which may result in this material being deemed obsolete.
The Company annually reviews its purchase and usage activity
of its inventory of parts as well as work in process and finished goods to determine which items of inventory have become obsolete
within the framework of current and anticipated orders. The Company based upon historical experience has determined that if a part
has not been used and purchased or an item of finished goods has not been sold in three years, it is deemed to be obsolete. The
Company estimates which materials may be obsolete and which products in work in process or finished goods may be sold at less than
cost. A periodic adjustment, based upon historical experience is made to inventory in recognition of this impairment.
Concentration of Credit Risk:
Financial instruments which potentially subject the Company
to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
Under the provisions of the Dodd-Frank Wall Street Reform
and Consumer Protection Act that was signed into law on July 21, 2010, the Federal Deposit Insurance Corporation (FDIC) will permanently
insure interest bearing accounts at financial institutions up to $250,000 in the aggregate.
An additional provision of the Dodd-Frank Act provides
for all non-interest bearing transaction accounts to be fully insured by the FDIC. Coverage under this provision will begin on
December 31, 2010 and end on December 31, 2012.
The Company has not experienced any losses in such accounts
and believes its cash balances are not exposed to any significant risk.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
|
Concentration of Credit Risk
(continued)
:
As of March 30, 2012, the Company had funds on deposit in
the amount of $286,109 in one financial institution comprised of the following:
Non-interest bearing accounts
|
|
$
|
121,158
|
|
Interest bearing account
|
|
|
164,951
|
|
|
|
$
|
286,109
|
|
The Company has not experienced any losses in such accounts
and believes its cash balances are not exposed to any significant risk.
Property, Plant and Equipment:
Property, plant and equipment is stated at cost less accumulated
depreciation and amortization. The Company provides for depreciation and amortization using the Double Declining Balance method
over the estimated useful lives (5-7 years) of the related assets.
Maintenance and repair expenditures are charged to operations,
and renewals and betterments are capitalized. Items of property, plant and equipment, which are sold, retired or otherwise disposed
of, are removed from the asset and accumulated depreciation or amortization account. Any gain or loss thereon is either credited
or charged to operations.
Income Taxes:
The Company follows the policy of treating investment tax
credits as a reduction in the provision for federal income tax in the year in which the credit arises or may be utilized. Deferred
income taxes arise from temporary differences resulting from different depreciation methods used for financial and income tax purposes.
The Company has adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 740, Income Taxes which includes the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting
for Income Taxes”.
Net Income Per Share:
The Company has adopted the provisions of ASC Topic
260, Earnings Per Share which includes the provisions of SFAS No. 128, “Earnings Per Share”, which requires the
disclosure of “basic” and “diluted” earnings (loss) per share. Basic earnings per share is computed
by dividing net income by the weighted average number of common shares outstanding during each period. Diluted earnings per
share is similar to basic earnings per share except that the weighted average number of common shares outstanding is
increased to reflect the dilutive effect of potential common shares, such as those issuable upon the exercise of stock or
warrants, as if they had been issued. For the years ended March 30, 2012 and March 25, 2011, there were no items of potential
dilution that would impact on the computation of diluted earnings or loss per share.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
|
Fair Value of Financial Instruments:
The carrying value of the Company’s financial instruments,
consisting of accounts receivable, accounts payable, and borrowings, approximate their fair value due to the relatively short maturity
(three months) of these instruments.
Use of Estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities at the date of the financial
statements. Actual amounts could differ from those estimates.
Impairment of Long-Lived Assets:
The Company has adopted the provisions of ASC Topic 360,
Property, Plant and Equipment-Impairment or Disposal of Long Lived Assets which includes the provisions of SFAS No. 144, “Accounting
For The Impairment of Long-Lived Assets And Long-Lived Assets To Be Disposed Of”, and requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. The Company has adopted SFAS No. 144. There were no long-lived
asset impairments recognized by the Company for the years ended March 30, 2012 and March 25, 2011.
Reporting Comprehensive Income:
The Company has adopted the provisions of ASC Topic 220,
Comprehensive Income which includes the provisions of SFAS No. 130, “Reporting Comprehensive Income”. This Statement
established standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses)
in an entity’s financial statements. This Statement requires an entity to classify items of other comprehensive income by
their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of financial position. There were no material items
of comprehensive income to report for the years ended March 30, 2012 and March 25, 2011.
Segment Information:
The Company has adopted the provisions of ASC Topic 280,
Segment Reporting which includes the Provisions of SFAS No. 131, “Disclosures About Segment of An Enterprise and Related
Information.” This Statement requires public enterprises to report financial and descriptive information about its reportable
operating segments and establishes standards for related disclosures about product and services, geographic areas, and major customers.
The adoption of ASC Topic 280 did not affect the Company’s presentation of its results of operations or financial position.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
|
Research and Development:
The Company provides personalized engineering services to
its customers by designing connectors for specific customer applications. The employment of electromechanical engineers is the
anticipated cornerstone of the Company’s future growth. The Company maintains a testing laboratory where its engineers experiment
with new connector designs based on changes in technology and in an attempt to create innovative, more efficient connector designs.
The Company did not expend any funds on, nor receive any
revenues related to, customer sponsored research and development activities relating to the development of new designs, techniques
and the improvement of existing designs during the years ended March 30, 2012 and March 25, 2011, respectively.
Effect of New Accounting Pronouncements:
In June 2009, the FASB issued SFAS No. 168, “The FASB
Accounting Standards Codification and Hierarchy of Generally Accepted Principles - a Replacement of FASB Statement No. 162 (“SFAS
No. 168”). SFAS No. 168 establishes the ASC as the source of authoritative accounting principles recognized by the FASB to
be applied in the preparation of financial statements in conformity with GAAP.
Rules and interpretive releases of the SEC under the authority
of Federal securities laws are also sources of authoritative GAAP for SEC registrants. All guidance contained in the ASC carries
an equal level of authority.
The ASC superseded all existing non-SEC accounting and reporting
standards. The FASB will not issue new standards in the form of any SFAS, FASB Staff Positions or Emerging Issues Task Force Abstracts.
Instead, the FASB will issue Accounting Standards Updates (“ASU”) that will serve to update the ASC, provide background
information about the guidance and provide the bases for conclusions on the change(s) in the ASC. The adoption of SFAS No. 168
did not have an impact upon the Company’s financial position, results of operations or cash flows.
In May 2009, the FASB issued guidance now codified as ASC
Topic 855, “Subsequent Events”, which provides authoritative accounting literature related to evaluating subsequent
events. ASC 855 is similar to current guidance with some exceptions that are not intended to result in significant change to current
practice. ASC 855 defines subsequent events and also requires the disclosure of the date through which an entity has evaluated
subsequent events and the basis for that date. The provisions of ASC 855 are effective for interim or annual financial periods
ending after June 15, 2009. The Company has adopted the provisions of ASC 855 effective as of September 30, 2009 and its adoption
did not have a material impact on the Company’s financial position, results of operations, cash flows or its required disclosures
in its Form 10-K. The Company has evaluated subsequent events through June 22, 2012.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
|
Effect of New Accounting Pronouncements
(continued)
:
In April 2009, the FASB issued FSP FAS No. 107-1 and Accounting
Principles Board (“APB”) Opinion No. 28-1, Interim Disclosures about Fair Value of Financial Instruments”, which
amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments and requires disclosures about the fair value of financial
instruments for interim reporting periods as well as in annual financial statements. FSP FAS No. 107-1 and APB No. 28-1 also amend
APB Opinion No. 28, Interim Financial Reporting, to require these disclosures in all interim financial statements. FSP FAS No.
107-1 and APB No. 28-1 are effective for interim reporting periods ending after June 15, 2009. The guidance of FSP FAS No. 107-1
and APB No. 28-1 is now included in ASC Topic 825, Financial Statements. The adoption of FSP FAS No. 107-1 and APB No. 28-1 did
not have a material impact on the Company’s financial position, results of operations or cash flows.
The Company has adopted the provisions of ASC Topic 740,
Income Taxes which includes the provisions of Financial Accounting Standards Board Interpretation No.48 (“FIN 48”),
“Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109”, which clarifies the accounting
for uncertainty in income taxes recognized in an entity’s financial statements in accordance with FASB Statement No.109,
“Accounting for Income Taxes”. ASC 740 prescribes a recognition threshold and measurement attribute for the financial
statement disclosures of tax positions taken or expected to be taken in an income tax filing.
The evaluation of a tax position is a two step process.
The first step requires an entity to determine whether it is more likely than not that a tax position will be sustained upon examination
based upon the technical merits of the position. The second step requires an entity to recognize in the financial statements each
tax position that meets the more likely than not criteria, measured at the largest amount of benefit that has a greater than fifty
percent likelihood of being recognized. ASC 740 also provides guidance on de-recognition, classification, interest and penalties,
accounting for interim periods, disclosure and transition.
The Company believes that with its adoption of ASC Topic
740, that the income tax positions taken by it did not have a material effect on the financial statements for the year ended March
30, 2012.
The Company has adopted the provisions of ASC Topic 820,
Fair Value Measurements and Disclosures which includes the provisions of SFAS No.157, “Fair Value Measurements”, which
enhances existing guidance for measuring assets and liabilities using fair value. ASC Topic 820 and SFAS No. 157 provide a single
definition of fair value, together with a framework for measuring it, and require additional disclosure about the use of fair value
to measure assets and liabilities. The Company does not believe that ASC Topic 820 will have a material impact on its financial
statements.
The Company has adopted the provisions of ASC Topic 825,
Financial Instruments, which includes the provisions of SFAS No. 159 (“SFAS 159”) “The Fair Value Option for
Financial Assets and Financial Liabilities”, providing companies with an option to report selected financial assets and liabilities
at fair value. The objective of ASC Topic 825 and SFAS 159 is to reduce both complexity in accounting for
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 1 -
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
:
|
Effect of New Accounting Pronouncements
(continued)
:
financial instruments and the volatility in earnings caused
by measuring related assets and liabilities differently. They also require entities to display the fair value of those assets and
liabilities. The Company has chosen to use fair value on the face of the balance sheet. The Company does not believe that ASC Topic
825 will have a material impact on its financial statements.
Inventories are stated at cost, on a first-in, first-out
basis, which does not exceed market value.
The Company manufactures products pursuant to specific technical
and contractual requirements. The Company historically purchases material in excess of its requirements to avail itself of favorable
pricing as well as the possibility of receiving additional orders from customers. This excess may result in material not being
used in subsequent periods, which may result in this material being deemed obsolete.
The Company annually reviews its purchase and usage activity
of its inventory of parts as well as work in process and finished goods to determine which items of inventory have become obsolete
within the framework of current and anticipated orders. The Company based upon historical experience has determined that if a part
has not been used and purchased or an item of finished goods has not been sold in three years, it is deemed to be obsolete.
The Company estimates which materials may be obsolete and
which products in work in process or finished goods may be sold at less than cost. A periodic adjustment, based upon historical
experience is made to inventory in recognition of this impairment.
Inventories are comprised of the following:
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
2,655,462
|
|
|
$
|
2,279,762
|
|
Work in progress
|
|
|
614,658
|
|
|
|
673,619
|
|
Finished goods
|
|
|
963,140
|
|
|
|
759,991
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,233,260
|
|
|
$
|
3,713,372
|
|
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 3 -
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS:
|
Prepaid expenses and other current assets are
comprised of the following:
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Prepaid insurance
|
|
$
|
57,637
|
|
|
$
|
31,249
|
|
Prepaid corporate taxes
|
|
|
426,849
|
|
|
|
145,440
|
|
Other current assets
|
|
|
51,228
|
|
|
|
70,399
|
|
|
|
$
|
535,714
|
|
|
$
|
247,088
|
|
Note 4 -
|
PROPERTY, PLANT AND EQUIPMENT:
|
Property, plant and equipment are as follows:
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Computers
|
|
$
|
269,124
|
|
|
$
|
258,402
|
|
Leasehold improvements
|
|
|
740,682
|
|
|
|
588,685
|
|
Machinery and equipment
|
|
|
5,276,587
|
|
|
|
5,212,686
|
|
Tools and dies
|
|
|
2,419,087
|
|
|
|
2,286,175
|
|
Furniture and fixture
|
|
|
162,328
|
|
|
|
160,020
|
|
Website development cost
|
|
|
7,550
|
|
|
|
7,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,875,358
|
|
|
|
8,513,518
|
|
Less: accumulated depreciation and amortization
|
|
|
(7,429,871
|
)
|
|
|
(7,244,628
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,445,487
|
|
|
$
|
1,268,890
|
|
Note 5 -
|
ACCOUNTS RECEIVABLE FINANCING:
|
The Company has an accounts receivable financing agreement
with a non-bank lending institution (“Factor”) whereby it can borrow up to 80 percent of its eligible receivables (as
defined in such financing agreement) at an interest rate of 2 ½% above JP Morgan Chase’s publicly announced rate with
a minimum rate of 12% per annum.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 5 -
|
ACCOUNTS RECEIVABLE FINANCING
(continued)
:
|
The financing agreement has an initial term of one year
and will automatically renew for successive one-year terms, unless terminated by the Company or its lender upon receiving 60 days
prior notice. Funds advanced by the Factor are secured by the Company’s accounts receivable and inventories. As of March
30, 2012 the Company had reported a liability to the factor of $54,943 compared to March 25, 2011, where the Company had reported
excess payments to the Factor resulting in an overpayment of $78,898, which the Company intends to apply against future borrowings.
These excess repayments are reported in the accompanying financial statements as “Excess payments to accounts receivable
factor”.
Note 6 -
|
OTHER CURRENT LIABILITIES:
|
Other current liabilities are comprised of the
following:
|
|
March 30,
|
|
|
March 25,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Payroll and vacation accruals
|
|
$
|
337,961
|
|
|
$
|
323,205
|
|
Sales commissions
|
|
|
53,204
|
|
|
|
37,009
|
|
Insurance
|
|
|
2,807
|
|
|
|
—
|
|
Other
|
|
|
10,701
|
|
|
|
4,251
|
|
|
|
$
|
404,673
|
|
|
$
|
364,465
|
|
The Company accounts for income taxes under the provisions
of ASC Topic 740, Income Taxes which includes the provisions of SFAS No. 109 (“SFAS 109”). Under SFAS 109, deferred
income tax assets or liabilities are computed based upon the temporary differences between the financial statement and income tax
bases of assets and liabilities using the currently enacted marginal income tax rates. Deferred income tax expenses or credits
are based on the changes in the deferred income tax assets or liabilities from period to period.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 7 -
|
INCOME TAXES
(continued)
:
|
The provision for income taxes consists of the following:
|
|
March 30,
|
|
|
|
2012
|
|
Current:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
408,406
|
|
State and local
|
|
|
396,672
|
|
Total current tax provision
|
|
|
805,078
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
202,294
|
|
State and local
|
|
|
57,728
|
|
Total deferred tax benefit
|
|
|
260,022
|
|
|
|
|
|
|
Total provision (benefit)
|
|
$
|
1,065,100
|
|
The components of the Company’s deferred taxes at March 30, 2012 are as follows:
|
|
|
|
|
Deferred tax assets:
|
|
|
|
|
Accounts receivable reserves
|
|
$
|
11,562
|
|
Accrued expenses
|
|
|
514,926
|
|
Prepaid expenses
|
|
|
(139,982
|
)
|
|
|
|
386,506
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Depreciation
|
|
|
(129,303
|
)
|
|
|
|
|
|
Net deferred tax assets before valuation allowance
|
|
|
257,203
|
|
Valuation allowance
|
|
|
(257,203
|
)
|
Net deferred tax assets
|
|
$
|
—
|
|
The Company has fully utilized its net operating loss carryovers
in prior years.
The foregoing amounts are management’s estimates and
the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually
obtaining and fulfilling net profitable contracts or the failure of the Company’s engineering development efforts could reduce
estimates of future profitability, which could affect the Company’s ability to realize the deferred tax assets.
A reconciliation of the income tax benefit at the statutory
Federal tax rate of 34 % to the income tax benefit recognized in the financial statements is as follows:
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 7 -
|
INCOME TAX
(continued)
:
|
|
|
March 30,
|
|
|
|
2012
|
|
|
|
|
|
Income tax expense (benefit) – statutory rate
|
|
|
34.0
|
%
|
Income tax expenses – state and local, net of federal benefit
|
|
|
12.0
|
%
|
|
|
|
|
|
Income tax expense (benefit)
|
|
|
46.0
|
%
|
Note 8 -
|
WORKERS COMPENSATION INSURANCE ASSESSMENT:
|
On September 15, 2008, the Company was notified by the State
of New York Workers’ Compensation Board (the “Board”) that the Trade Industry Workers’ Compensation Trust
for Manufacturers (the “Trust”) had defaulted. As a member of this self-insured group, the Company was assessed on
an estimated basis by the Board for its allocable share necessary to discharge all liabilities of the Trust.
The assessed amount for the years 2002 through 2006 was
$101,362. The assessed amount for each year is detailed as follows:
2002
|
|
$
|
16,826
|
|
2003
|
|
|
24,934
|
|
2004
|
|
|
31,785
|
|
2005
|
|
|
14,748
|
|
2006
|
|
|
13,069
|
|
|
|
$
|
101,362
|
|
The Company did have the option of paying this assessment
as a lump sum amount or paying off the assessment over a 60 month period. The Company elected the deferral option, and was obligated
to making monthly payments of $1,689 for 59 months, and $1,711 for the 60
th
and final month. The Company had recorded
this assessment as a charge to Cost of Sales in the quarter ended December 26, 2008.
The Company was subsequently notified that it was being
assessed an additional $146,073 covering the years 2002 through 2007, bringing the total deficit allocation assessment to $247,435.
The total received assessment for the years 2002 to 2007
is as follows:
2002
|
|
$
|
23,445
|
|
2003
|
|
|
43,797
|
|
2004
|
|
|
51,381
|
|
2005
|
|
|
38,309
|
|
2006
|
|
|
46,477
|
|
2007
|
|
|
44,026
|
|
|
|
$
|
247,435
|
|
As of March 30, 2012, the Company had paid down $134,374
of this assessment.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 8 -
|
WORKERS COMPENSATION INSURANCE ASSESSMENT
(continued)
:
|
The Company has elected to pay the revised assessment over
a five year period (60 months). The monthly payments, inclusive of interest at 7.50%, are $3,970.
As of March 30, 2012 the remaining balance of the revised
assessment payable was $113,061.
Note 9 -
|
CHANGES IN STOCKHOLDERS’ EQUITY:
|
The accumulated retained earnings increased by $1,102,424,
which represents the net income for the fiscal year ended March 30, 2012. As a result, the Company reported retained earnings of
$4,929,658.
Note 10-
|
2011 EMPLOYEE STOCK OPTION PLAN:
|
On August 31, 2011, the Company’s shareholders approved
the adoption of the Company’s 2011 Equity Incentive Plan (“2011 Plan”) to provide for the grant of stock options
and restricted stock awards to purchase up to 750,000 shares of the Company’s common stock to all employees, consultants
and other eligible participants including senior management and members of the Board of Directors of the Company. The 2011 Plan
replaced the prior 2002 Employee Stock Option Plan which had expired in accordance with its terms.
Options granted to employees under the 2011 Plan may be
designated as options which qualify for incentive stock option treatment under Section 422A of the Internal Revenue Code, or options
which do not qualify (non-qualified stock options).
Under the 2011 Plan, the exercise price of an option
designated as an incentive stock option shall not be less than the fair market value of the Company’s common stock on
the day the option is granted. In the event an option designated as an incentive stock option is granted to a ten percent
(10%) or greater shareholder, such exercise price shall be at least 110 percent (110%) of the fair market value of the
Company’s common stock and the option must not be exercisable after the expiration of five years from the day of the
grant. The 2011 Plan also provides that holders of options that wish to pay for the exercise price of their options
with shares of the Company’s common stock must have beneficially owned such stock for at least six months prior to
the exercise date.
Exercise prices of non-incentive stock options may be less
than the fair market value of the Company’s common stock.
The aggregate fair market value of shares subject to options
granted to a participant(s), which are designated as incentive stock options, and which become exercisable in any calendar year,
shall not exceed $100,000. As of March 30, 2012, no options or restricted stock awards had been granted under the 2011 Plan.
Note 11 -
|
CASH BONUS PLAN:
|
In 1987, the Company adopted a cash bonus plan (“Cash
Bonus Plan”) for Executive Officers. Contributions to the Bonus Plan are made by the Company only after pre-tax operating
profits exceed $150,000 for a fiscal year, and then to the extent of 10% of the excess of the greater of $150,000 or 25% of pre-tax
operating profits. For the year ended March 30, 2012, the Company’s contribution was $149,000. For the year ended March 25,
2011, the Company’s contribution was $173,000.
Index
IEH CORPORATION
NOTES TO FINANCIAL STATEMENTS
|
Note 12 -
|
COMMITMENTS AND CONTINGENCIES:
|
The Company has renewed its lease for its manufacturing
facility located at 140 58
th
Street, Suite E, Brooklyn, New York. The renewed lease term runs from December 1, 2010
through November 30, 2020. The basic minimum annual rentals are as follows:
Fiscal year ending March:
|
|
|
|
|
|
|
|
2013
|
|
$
|
153,860
|
|
2014
|
|
|
158,480
|
|
2015
|
|
|
163,240
|
|
2016
|
|
|
168,120
|
|
2017
|
|
|
173,180
|
|
Thereafter
|
|
|
679,920
|
|
|
|
$
|
1,496,800
|
|
The rental expense for the years ended March 30, 2012 and
March 25, 2011, was $149,380 and $133,849, respectively.
The
Company has a collective bargaining multi-employer pension plan (“Multi-Employer Plan”) with the United Auto Workers
of America, Local 259. 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 Plan Amendments Act of 1990 (the “1990 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 Multi-Employer Plan.
The Company has not taken any action to terminate, withdraw
or partially withdraw from the Multi-Employer Plan nor does it intend to do so in the future. Under the 1990 Act, liabilities would
be based upon the Company’s proportional share of the Multi-Employer 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 $115,637 for the year ended March 30, 2012 and $110,881
for the year ended March 25, 2011.
Note 13 -
|
REVENUES FROM MAJOR CUSTOMERS:
|
In
the fiscal year ended March 30, 2012 five customers accounted for approximately 50.3% of revenues. During the year ended March
25, 2011 approximately 38% of the Company’s total revenues were earned from four customers. Total sales to these customers
were approximately $6,687,000 and $5,240,000. Of these, two customers accounted for 12.15% and 11.83% of the Company’s sales
respectively. As of March 30, 2012, amounts due from three customers represented 28% of the total balance of accounts receivable.
IEH CORPORATION
SIGNATURES
Pursuant to the requirements of Section 13 or
15(d) of the Securities Exchange Act of 1934, IEH Corporation has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
IEH CORPORATION
|
|
|
|
|
By:
|
/s/ Michael Offerman
|
|
|
Michael Offerman
|
|
|
President and Chief Executive Officer
|
Dated: July 9, 2012
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.
/s/ Michael Offerman
|
|
July 9, 2012
|
Michael Offerman, Chairman of the
|
|
|
Board, Chief Executive Officer and President
|
|
|
|
|
|
/s/ Robert Knoth
|
|
July 9, 2012
|
Robert Knoth, Secretary and
|
|
|
Treasurer; Chief Financial Officer,
|
|
|
Controller and Principal Accounting Officer
|
|
|
|
|
|
|
|
|
/s/ Alan Gottlieb
|
|
July 9, 2012
|
Alan Gottlieb, Director
|
|
|
|
|
|
|
|
|
/s/ Gerald E. Chafetz
|
|
July 9, 2012
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Gerald E. Chafetz, Director
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IEH (PK) (USOTC:IEHC)
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