SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended February 29, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
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
- ----------------------------------- -----------------------------------
(State or Other Jurisdiction of (IRS Employer Identification Number)
Incorporation or Organization)
25th and Lennox Streets, P.O. Box 348, Easton, PA 18044-0348
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(Address of Principal Executive Offices)
(610) 258-7111
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(Issuer's Telephone Number, Including Area Code)
N/A
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report.)
Check whether the issuer (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 / /
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: At February 29, 1996, there
were outstanding 1,938,520 shares of the Registrant's Common Stock, no par
value.
Transitional Small Business Disclosure Format:
Yes / / No / X /
<PAGE>
FORM 10-QSB
INDEX
Page No.
PART I. Financial Information:
Consolidated Balance Sheet - February 29, 1996
(unaudited).................................................... 3
Consolidated Statement of Operations - Three months
ended February 29, 1996 and February 28, 1995
(unaudited).................................................... 5
Consolidated Statement of Operations - Nine Months
ended February 29, 1996 and February 28, 1995
(unaudited).................................................... 6
Consolidated Statement of Cash Flows - Nine Months
ended February 29, 1996 and February 28, 1995
(unaudited).................................................... 7
Notes to Consolidated Interim Financial Statements............. 8
Management's Discussion and Analysis or Plan of Operation...... 9
PART II. Other Information:
Submission of Matters to a Vote of Security Holders...........11
Exhibits and Reports on Form 8-K..............................12
Signatures....................................................13
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<PAGE>
Part I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE BETHLEHEM CORPORATION - CONSOLIDATED BALANCE SHEET
February 29, 1996
(in thousands)
(UNAUDITED)
-------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents....................................................... $ 67
Accounts receivable (Net of allowance for doubtful accounts of $42)............. 5,435
Inventories*.................................................................... 2,602
Prepaid expenses and other current assets....................................... 166
--------
Total Current Assets................................................... 8,270
PROPERTY, PLANT AND EQUIPMENT:
At cost......................................................................... 9,074
Less accumulated depreciation................................................... 6,896
-------
Net Property, Plant and Equipment...................................... 2,178
OTHER ASSETS:
Intangible pension and deferred compensation plan assets........................ 524
Intangibles..................................................................... 684
Other........................................................................... 44
-------
Total Other Assets..................................................... 1,252
TOTAL ASSETS.................................................. $11,700
*Inventories consist of the following:
Finished goods.................................................................. 1,028
Raw materials & components...................................................... 541
Work in process (Net of $196 advanced from customers)........................... 1,056
Less allowance for write down to estimated net realizable value................. (23)
-------
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
THE BETHLEHEM CORPORATION - CONSOLIDATED BALANCE SHEET
February 29, 1996
(in thousands)
(UNAUDITED)
-------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt............................................ $ 1,285
Accounts payable................................................................ 5,094
Accrued liabilities............................................................. 1,494
Advances on contracts in excess of costs........................................ 982
Total Current Liabilities.............................................. 8,855
Other Liabilities:
Long-term debt - net of current maturities...................................... 3,285
Deferred compensation and other pension liabilities............................. 1,216
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 1,000,000 shares without par value; none issued
or outstanding......................................................... 0
Common stock - authorized, 20,000,000 shares without par value, stated
value of $.50 per share; issued 1,938,532 shares....................... 969
Additional paid-in capital...................................................... 4,724
Accumulated deficit............................................................. (7,349)
Less treasury stock, at cost, 12 shares......................................... 0
TOTAL STOCKHOLDERS' EQUITY............................................................... (1,656)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................................... $11,700
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
THE BETHLEHEM CORPORATION - CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended
(in thousands)
(UNAUDITED)
----------------------------------------------------------------
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
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<S> <C> <C>
NET REVENUES
Cost of Goods Sold............................................... $ 5,503 $ 3,880
Gross Profit..................................................... 4,311 3,304
--------- ----------
1,192 576
Selling and administrative expenses:
Selling.......................................................... 284 162
Administrative................................................... 553 356
--------- ----------
837 518
Operating profit.......................................................... 355 58
Other income/(Expenses):
Interest expense................................................. (167) (61)
Other Income..................................................... (64) 20
Interest Income.................................................. 4 7
------ -----------
(227) (34)
Income from operations before provision for income taxes.................. 128 24
(Provision) Benefit for income taxes...................................... 0 0
NET INCOME................................................................ $ 128 $ 24
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary.......................................................... .041 .008
Assuming Full Dilution........................................... .041 .008
WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING:
Primary.......................................................... 3,122,635 2,987,881
Fully Diluted.................................................... 3,122,635 2,987,881
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
THE BETHLEHEM CORPORATION - CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended
(in thousands)
(UNAUDITED)
-----------------------------------------------------------------
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
----------- ------------
<S> <C> <C>
NET REVENUES
Cost of Goods Sold............................................... $ 12,375 $ 10,877
Gross Profit..................................................... 9,604 9,040
--------- ----------
2,771 1,837
Selling and administrative expenses:
Selling.......................................................... 782 450
Administrative................................................... 1,430 1,079
--------- -----------
2,212 1,529
Operating profit.......................................................... 559 308
Other income/(Expenses):
Interest expense................................................. (287) (193)
Other Income..................................................... (62) 8
Interest Income.................................................. 7 21
--------- ----------
(342) (164)
Income from operations before provision for income taxes.................. 217 144
(Provision) Benefit for income taxes...................................... 0 0
NET INCOME................................................................ $ 217 $ 144
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary.......................................................... .073 .056
Assuming Full Dilution........................................... .071 .050
WEIGHTED AVERAGE OF COMMON SHARES
OUTSTANDING:
Primary.......................................................... 2,984,280 2,581,530
Fully Diluted.................................................... 3,039,430 2,903,745
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
THE BETHLEHEM CORPORATION - CONSOLIDATED STATEMENT OF CASH FLOW
Nine months ended
(in thousands)
(UNAUDITED)
----------------------------------------------------------------
<TABLE>
<CAPTION>
February 29, February 28,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows provided by (used for) operating activities.................... $(1,794) $ 707
Cash flows used for investing activities.................................. (534) (111)
Cash flows provided by (used for) financing activities.................... 2,244 (588)
-------- ------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS............................... (84) 8
Cash and cash equivalents, beginning of period............................ 151 60
Cash and cash equivalents, at end of period............................... $ 67 $ 68
</TABLE>
See accompanying notes to financial statements.
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<PAGE>
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.
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 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.
6. On November 28, 1995 the Company completed its acquisition of certain
assets of the American Furnace division of Third Millennium Products,
Inc. pursuant to the terms of an Asset Purchase Agreement by and among
the Company, Bethlehem Advanced Materials Corporation (a wholly owned
subsidiary of the Company), Third Millennium Products Inc. and North
American Advanced Materials Corporation. Pursuant to the agreement, the
Company purchased certain Accounts Receivable, Customer Contracts,
Machinery and Equipment and Goodwill. The purchase price was $420,000
which included the issuance of 50,000 shares of the Company's common
stock, valued at approximately $3.00 per share.
The business combination is being accounted for utilizing the purchase
method of accounting. Goodwill will be amortized over twenty (20)
years. Results of operations of the acquired enterprise are included in
the accompanying statements of operations as of November 28, 1995.
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<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Sales of $5,503,000 for the third quarter fiscal 1996 compared to sales
of $3,880,000 for the third quarter fiscal 1995 - an increase of $1,623,000.
Gross profit for the third quarter fiscal 1996 was $1,192,000, compared to gross
profit of $576,000 for the same period last year. Sales of $12,375,000 for the
nine month period ending February 1996 compares to sales of $10,877,000 for the
same period in 1995 - an increase of $1,498,000. Gross profit for the nine month
period ending February 1996 equalled $2,771,000 or 22% of sales compared to
gross profit of $1,837,000 or 17% of sales for the same period in 1995.
Increased sales and gross profits in both the Company's industrial and process
sales divisions were due to the booking of several major long term contracts
with higher profit margins than historically experienced in these divisions.
The operating profit for the third quarter fiscal 1996 equalled
$355,000 compared to $58,000 for the same period last year. Operating profit
equalled $559,000 for the nine month period ending February 1996 compared to
operating profit of $308,000 for the same period last year. Selling and
administrative expenses increased from $518,000 or 13% of sales for the third
quarter fiscal 1995 to $837,000 or 15% of sales for the third quarter fiscal
1996. Selling and administrative expenses increased from $1,529,000 or 14% of
sales for the nine month period ending February 1995 to $2,212,000 or 18% of
sales for the same period in 1996. The primary factors for the increase in
selling and administrative expenses were: 1) additional sales and administrative
personnel; 2) increased advertising expenditures; and 3) increased travel
expenses. These resources are needed to continue the Company's entry into the
international market as well as to pursue sales and purchases of used process
and environmental equipment.
Other expenses equalled $227,000 compared to other expenses of $34,000
for the same period in fiscal 1995. Net income for the third quarter of fiscal
1996 equalled $128,000, compared to net income of $24,000 for the same period in
fiscal 1995. Other expenses were $342,000 for the nine month period ending
February 1996, compared to other expenses of $164,000 for the same period last
year. Increased interest expense combined with the amortization of financing
fees from the loans secured by the Company in the first quarter of fiscal 1996
were the main factors for the increase in other expenses. Net income for the
nine month period ending February 1996 equalled $217,000 compared to $144,000
for the same period in fiscal 1995.
Backlog of $9,093,000 at February 29, 1996 compared to backlog of
$4,758,000 at February 28, 1995. Orders received for the third quarter of fiscal
1996 equalled $3,594,000.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used for operating activities was $1,794,000 for the first
nine months of fiscal 1996 compared to net cash provided by operating activities
for the first nine months of fiscal 1995 of $707,000. The Company's purchase of
approximately $600,000 in used equipment inventory coupled with increased
accounts receivable accounted for the cash used for operating activities.
-9-
<PAGE>
Capital expenditures were $534,000 for the first nine months of fiscal
1996 versus $111,000 for the first nine months of fiscal 1995. The majority of
the Company's cash used for investing activities was expended on acquisition
costs and capital equipment for materials processing at Bethlehem Advanced
Materials Corporation, the Company's wholly owned subsidiary in Knoxville,
Tennessee.
Cash provided by financing activities equalled $2,244,000 for the first
nine months of fiscal 1996 compared to cash used for financing activities for
the same period last year in the amount of $588,000. 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. (Refer to 10-QSB for the quarterly period
ended August 31, 1995 for detailed information on this transaction.)
Assuming continuing profitability, the Company believes that cash
generated from existing business, new orders and sales of used equipment will be
sufficient to meet the Company's cash requirements. In the event that the
Company's operations were to expand significantly or the Company were to desire
to make further acquisitions, external sources of financing would be required.
While the Company believes that such financing would be available to it, there
can be no assurance in this regard. The Company believes that any inflationary
increase arising from its raw material costs and certain overhead expenses have
generally been reflected in pricing to its customers.
-10-
<PAGE>
Part II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was on held December 12,
1995.
(b) Matters voted on at the meeting and the number of votes cast
were as follows.
(1) Amendment of the Company's Articles of Incorporation to
increase the authorized common stock of the Company
from 4,000,000 to 20,000,000 shares.
For 1,719,511
Against 1,728
Abstaining 25,099
Broker Non-Votes 0
(2) Amendment of the Company's Articles of Incorporation to
increase the authorized preferred stock of the Company
from 1,000,000 to 5,000,000 shares.
For 1,191,820
Against 5,858
Abstaining 42,734
Broker Non-Votes 505,926
(3) Directors
<TABLE>
<CAPTION>
Total Vote For Each Total Vote Withheld From
Nominee Each Nominee
-------------------- ------------------------
<S> <C> <C>
B. Ord Houston 1,735,160 11,178
Ronald H. Gale 1,735,334 11,004
Salvatore J. Zizza 1,735,234 11,104
Harold Bogatz 1,735,334 11,004
</TABLE>
The following directors' terms of office continued after the
Annual Meeting: James L. Leuthe, Alan H. Silverstein, Jan P.
Gale and O. Karl Dieckmann.
(4) Approval of the Company's 1994 Stock Option Plan.
For 1,200,157
Against 14,053
Abstaining 26,202
Broker Non-Votes 505,926
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<PAGE>
(5) Amendment of the Company's Equity Incentive Plan for
Directors to increase the term of options granted
under the Directors Option Plan and to increase the
period after termination of service during which an
outstanding option may be exercised.
For 1,701,804
Against 13,999
Abstaining 30,535
Broker Non-Votes 0
(6) Ratification of an amendment to the Company's By-laws
to eliminate the provision establishing four classes
of directors and to provide that all directors shall
be elected annually to serve one year terms.
For 1,726,909
Against 2,998
Abstaining 16,431
Broker Non-Votes 0
(7) Ratification of the appointment of Sobel & Co. as
independent auditors of the Company for the fiscal
year ending May 31, 1996.
For 1,739,730
Against 2,282
Abstaining 4,326
Broker Non-Votes 0
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
No. Description
27 Financial Data Schedule
There were no reports on Form 8-K filed for the three months ended
February 29, 1996.
-12-
<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: April 12, 1996
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed financial statements for the third quarter ended February 29, 1995
and is qualified in its entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> FEB-29-1996
<CASH> 67
<SECURITIES> 0
<RECEIVABLES> 5,477
<ALLOWANCES> 42
<INVENTORY> 2,602
<CURRENT-ASSETS> 8,270
<PP&E> 9,074
<DEPRECIATION> 6,896
<TOTAL-ASSETS> 11,700
<CURRENT-LIABILITIES> 8,855
<BONDS> 0
0
0
<COMMON> 969
<OTHER-SE> (1,656)
<TOTAL-LIABILITY-AND-EQUITY> 11,700
<SALES> 5,503
<TOTAL-REVENUES> 5,503
<CGS> 4,311
<TOTAL-COSTS> 837
<OTHER-EXPENSES> (20)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> 128
<INCOME-TAX> 0
<INCOME-CONTINUING> 128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 128
<EPS-PRIMARY> .041
<EPS-DILUTED> .041
</TABLE>
