SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
/x/ SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1995
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number 1-4676
THE BETHLEHEM CORPORATION
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(Exact Name of Small Business Issuer as Specified in Its Charter)
Pennsylvania 24-0525900
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
25th and Lennox Streets
P. O. Box 348
Easton, PA 18045
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(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code: (610) 257-7111
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(Former Name, Former Address and Former Fiscal Year, if changed Since Last
Report)
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes /X/
No / /.
The number of shares outstanding of the Issuer's Common Stock, as
of August 31, 1995: 1,888,520
<PAGE>
FORM 10-QSB
INDEX
Page No.
PART I. Financial Information:
Consolidated Balance Sheet August 31, 1995................ 1
Consolidated Statement of Operations three 3
months ended August 31, 1995 and 1994.....................
Consolidated Statement of Cash Flows three 4
Months ended August 31, 1995 and 1994.....................
Notes to Financial Statements............................. 4
Management's Discussion and Analysis or Plan 6
of Operation..............................................
PART II. Other Information:
Exhibits and Reports on Form 8-K.......................... 9
Signatures................................................ 10
<PAGE>
Part I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
August 31, 1995
(in thousands)
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................... $ 57
Accounts receivable (Net of allowance for doubtful
accounts of $216,000) ............................. 3,669
Inventories* ........................................ 1,843
Prepaid expenses and other current assets ........... 192
------
Total Current Assets .............................. 5,761
PROPERTY, PLANT AND EQUIPMENT:
At cost ............................................. 8,608
Less accumulated depreciation ....................... 6,730
-----
Net Property, Plant and Equipment ................. 1,878
OTHER ASSETS:
Intangible pension and deferred compensation
plan assets ....................................... 524
Intangibles........................................... 150
Other ............................................... 45
---
Total Other Assets ................................ 719
TOTAL ASSETS .................................... 8,358
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*Inventories consist of the following:
Finished goods ..................................... 336
Raw materials & components ......................... 467
Work in process (net of $717,000 advanced from
customers) ....................................... 1,059
Less allowance for write down to estimated
net realizable value ............................ (19)
------
1,843
See accompanying notes to financial statements.
<PAGE>
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
August 31, 1995
(in thousands)
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ............... $ 600
Accounts payable ................................... 3,337
Accrued liabilities ................................ 1,299
Advances on contracts in excess
of costs ......................................... 700
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Total Current Liabilities ........................ 5,936
Other Liabilities:
Long-term debt - net of current maturities............ 3,116
Deferred compensation and retirement
liabilities ........................................ 1,267
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 1,000,000 shares
without par value; none issued or
outstanding ...................................... 0
Common stock - authorized, 4,000,000 shares
without par value, stated value of $.50
per share; issued 1,888,532 shares ............... 944
Additional paid-in capital ......................... 4,595
Accumulated deficit ................................ (7,500)
Less treasury stock, at cost, 12 shares ............ 0
-----
TOTAL STOCKHOLDERS' EQUITY ........................... (1,961)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ........... 8,358
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See accompanying notes to financial statements.
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<PAGE>
THE BETHLEHEM CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended August 31
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------------------ -------------------------
<S> <C> <C>
NET SALES $2,966 $2,766
Cost of Goods Sold 2,121 2,168
----- -----
Gross Profit 845 598
Selling and administrative expenses:
Selling 235 146
Administrative 469 368
--- ---
704 514
Operating profit/loss 141 84
Other income/(Expenses):
Interest expense (60) (58)
Gains on Sale of Equipment 0 0
Royalty Income - related party 0 0
Other income - (expense) (15) 0
Interest income 0 0
--- ---
(75) (58)
Income/loss from operations before
provision for income taxes 66 26
(Provision) Benefit for income taxes 0 0
NET INCOME/(LOSS) 66 26
== ==
EARNINGS (LOSS) PER COMMON AND COMMON
AND EQUIVALENT SHARE:
Primary .02 .01
Assuming Full Dilution .02 .01
WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING
Primary 3,125,846 2,549,897
Fully Diluted 3,105,401 2,588,804
See accompanying notes to financial statements.
</TABLE>
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<PAGE>
THE BETHLEHEM CORPORATION--CONSOLIDATED
STATEMENT OF CASH FLOWS Three Months
ended August 31
(in thousands)
(UNAUDITED)
Three months ended
August 31,
1995 1994
---- ----
Cash flows provided by (used for) $(1,260) $244
operating activities
Cash flows (used for) investing (70) (15)
activities:
Cash flows provided by (used for) 1,236 (270)
financing activities:
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS (94) (41)
Cash and cash equivalents, beginning
of period 151 60
Cash and cash equivalents, at end of 57 19
== ==
period
See accompanying notes to financial statements.
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FINANCIAL STATEMENT PRESENTATION:
1. The consolidated interim financial statements included
herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and
Exchange Commission with respect to Form 10-QSB. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the
Company believes that the disclosures made herein are
adequate to make the information not misleading. It is
suggested that these interim financial statements be read in
conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on
Form 10-KSB.
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<PAGE>
2. Interim statements are subject to possible adjustments in connection
with the annual audit of the Company's accounts for the full fiscal
year 1996. In the Company's opinion, all adjustments necessary for a
fair presentation of the information shown have been included.
3. The results of operations for the interim periods presented
are not necessarily indicative of the results expected for
the fiscal year ending May 31, 1996.
4. Inventories, other than inventoried costs relating to long-term
contracts, are valued at the lower of first-in, first-out cost or
market. Inventoried costs relating to long-term contracts are stated at
the actual production cost, including factory overhead, incurred to
date reduced by amounts identified with revenue recognized on units
delivered or progress completed.
5. Net income/(loss) per share was determined on the basis of the weighted
average number of shares of common stock including, when applicable,
dilutive stock options using the treasury stock method.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
RESULTS OF OPERATIONS
YEAR TO DATE COMPARISON
Sales of $2,966,000 for the first quarter fiscal 1996 compared to sales
of $2,766,000 for the same period in fiscal 1995, an increase of $200,000. The
principal factor for the increase in revenues was increased sales in the
Company's proprietary product lines due to worldwide expansion in the chemical
process industry. Gross profit was $845,000 or 28% of net sales for the first
quarter fiscal 1996 compared to gross profit of $598,000 or 22% of net sales for
the same period in fiscal 1995. The increased gross profit was attributable to
increased sales in the Company's proprietary product lines which produce higher
profit margins than historically experienced in some of the Company's other
business units.
Backlog of as of August 31, 1995 was $4,472,000 compared to backlog of
$8,715,000 for the same period last year. New orders received by the Company
were $3,995,000 for the first quarter fiscal 1996 compared to new orders of
$4,991,000 for the same period last year.
The operating profit for the first quarter fiscal 1996 was $141,000
compared to $84,000 for the same period last year. Selling and administrative
expenses increased for the first quarter fiscal 1996 to $704,000 as compared to
$514,000 for the first quarter fiscal 1995. Increased advertising expenditures
combined with increased personnel in the sales force were the primary factors
for increased selling expenses. Both factors were needed to continue the
Company's expansion into international markets as well as to support product
sales. Administrative expenses increased from $368,000 for the first quarter
fiscal 1995 to $469,000 for the first quarter fiscal 1996, an increase of
$101,000. The Company added additional management personnel and other staff in
the administrative area to support the Company's workload.
Other expenses were $75,000 for the first quarter fiscal 1996 compared
to $58,000 for the same period last year. Net income for the first quarter
fiscal 1996 equalled $66,000 compared to net income of $26,000 for the same
period last year.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow used for operating activities was $1,260,000 for first
quarter fiscal 1996 compared to net cash flow provided by operating activities
for first quarter fiscal 1995 of $244,000. Decreased accounts payable and
accrued liabilities
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<PAGE>
accounted for the cash used in operating activities in the first
quarter fiscal 1996.
Cash flows provided by financing activities equalled $1,236,000 for
first quarter fiscal 1996 compared to cash flow used for financing activities
for the first quarter fiscal 1995 of $270,000. On July 14, 1995, the Company
prepaid its note payable to G.E. Capital and paid relevant closing costs with
proceeds from advances against a $6.5 million total credit facility available
from a group of lenders as follows:
(1) A $1.5 million five year first mortgage loan from
Sterling Commercial Capital, Inc., First Wall Street
SBIC, L.P., and Interequity Capital Partners, L.P. The
loan is collateralized by a first mortgage lien on real
estate owned by the Company and a second lien on all
other Company owned assets. The loan will bear
interest at 14.25% per annum. The outstanding
principal and interest will be payable in 59
consecutive equal monthly payments calculated to fully
amortize over a 15 year period with a final payment of
all then outstanding principal and interest. The loan
agreement contains a number of covenants which among
other things will require the Company to maintain
specified levels of net worth and working capital and
will impose certain limitations on the Company with
respect to (I) the incurrence of additional
indebtedness; (II) the incurrence of additional liens;
(III) the payment of cash dividends and (IV) mergers
and investments. Universal Process Equipment ("UPE")
agreed to provide a limited guarantee for up to
$350,000 of the mortgage payable and subordinate all of
its outstanding receivables or other extensions of
credit due from the Company to the mortgage. UPE is
the beneficial owner of approximately 55% of the
Company's outstanding Common Stock. In addition,
Ronald H. Gale and Jan Gale, directors of the Company,
are officers, directors and principal stockholders of
UPE. The Company granted warrants to the three-party
lending group to purchase up to 40,000 shares (2.12%)
of the Company's stock. The purpose of this loan was
to pay off the existing mortgage loan.
(2) A three year $5 million maximum line of credit and term
loan facility from The CIT Group/Credit Finance, Inc.,
secured by a third lien position (behind the three
party lending group referenced above and the Harrisburg
Authority) on Company owned real estate and a first
lien on substantially all other owned assets of the
Company. This credit facility includes: (a) an $800,000
term loan requiring $13,333 monthly principal payments
plus interest at prime rate (Chemical Bank, New York)
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<PAGE>
plus 3% and (b) advances against a percentage of eligible
inventory not to exceed $4 million in the aggregate. Initial
proceeds of this credit facility were used to fund working
capital. The amount outstanding as of October 1, 1995 is
$760,000 on the term loan and $457,000 on the secured credit
line. Additional advances will be for the purpose of acquiring
eligible Inventory. The loan agreement contains certain
restrictions among other things on the making of investments,
loans and capital expenditures, on borrowings, on the sale of
assets and on the payment of dividends. The loan agreement
contains customary events of default including material
misrepresentations, payment defaults and default in the
performance of other covenants. An additional condition of the
loan agreement is that UPE will purchase all of the Company's
used resale inventory in the event of default. The term of the
agreement is for three years and automatically renewable for
successive terms of two years thereafter unless terminated by
either party at the end of the initial or any renewal term.
Notwithstanding the foregoing, the agreement shall terminate
automatically upon termination or non renewal of The CIT
Group/Credit Finance Inc.'s financing agreements with UPE. The
Company granted warrants to The CIT Group/Credit Finance, Inc.
to purchase 50,000 (2.65%) shares of the Company's stock.
By securing this new funding, the Company has expanded working capital,
made available additional capital for inventory acquisition and increased
liquidity.
Capital expenditures were $70,000 for first quarter fiscal 1996 versus
$15,000 for the first quarter in 1995. The Company expects to fund the majority
of capital expenditures through cash flow generated through operations and to
utilize third party financing when cost effective or appropriate.
Assuming continuing profitability, management believes that cash
generated from existing business, new orders and sales of used equipment will be
sufficient to meet the Company's cash requirements. Should the results of
operations of the Company generate cash that is insufficient to meet the
Company's requirements, outside sources of financing will be sought. Management
believes that any inflationary increase arising from the Company's raw material
costs and certain overhead expenses have generally been reflected in pricing to
its customers.
Net revenues from UPE for the three month period ending August 31, 1995
equalled $142,000 or 5% of the Company's total net
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<PAGE>
revenues. Orders received from UPE for this period equalled $72,000 or 2% of
the total orders received.
Part II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In an order dated September 29, 1995, the court found in a case
instituted by the Company against former executives and an unrelated competitor,
that the Company lawfully had trade secrets for which it is entitled to court
protection with regard to its Porcupine mixer/dryer and other products
manufactured by its Process Equipment Division. The court found also that the
Company was not entitled to a preliminary injunction against the unrelated
competitor because the competitor disavowed any intention of using the Company's
trade secrets, and there was no evidence that any trade secrets were ever
disclosed to the competitor. The action against the competitor is in the damages
phase based primarily on a tortious interference with contract cause of action
asserted by the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits: None
There were no reports on Form 8-K filed for the three months ended
August 31, 1995.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
THE BETHLEHEM CORPORATION
/s/ Alan H. Silverstein
-----------------------
Alan H. Silverstein
President
/s/ Antoinette L. Martin
Antoinette L. Martin
Vice President, Finance
(Principal Financial and
Accounting Officer)
Date: October 16, 1995
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