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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 1996
(First Quarter of fiscal 1997)
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
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Commission File No. 1-4676
*
THE BETHLEHEM CORPORATION
Incorporated in PENNSYLVANIA I.R.S. Employer I.D. No. 24-0525900
25th and Lennox Streets
P. O. Box 348
Easton, PA 18044-0348
Telephone: (610) 258-7111
*
The registrant (1) has 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
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*
Number of shares outstanding of the issuer's classes of common stock as of
August 31, 1996: 1,938,520.
Number of pages in this report:
-----
<PAGE>
FORM 10-QSB
INDEX
PART I. Financial Information: Page No.
Consolidated Balance Sheet August 31, 1996 .............. 3
Consolidated Statement of Operations three months ended
August 31, 1996 and 1995 ................................ 5
Consolidated Statement of Cash Flows
three Months ended August 31, 1996 and 1995 ............. 6
Notes to Financial Statements ........................... 7
Management's Discussion and Analysis or Plan of
Operation ............................................... 8
PART II. Other Information:
Legal Proceedings ....................................... 13
Exhibits and Reports on Form 8-K ........................ 13
Signatures .............................................. 14
2
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Part I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
August 31, 1996
(in thousands)
(UNAUDITED)
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 13
Accounts receivable (Net of allowance for doubtful
accounts of $137,000) ....................................... 3,845
Costs and accumulated gross profit in excess of
billings on long-term contracts ............................. 1,868
Inventories* .................................................. 2,579
Prepaid expenses and other current assets ..................... 177
--------
Total Current Assets ........................................ 8,482
PROPERTY, PLANT AND EQUIPMENT:
At cost ....................................................... 9,364
Less accumulated depreciation ................................. 7,060
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Net Property, Plant and Equipment ........................... 2,304
OTHER ASSETS:
Goodwill (Net of $15,000 of accumulated amortization) ......... 382
Deferred financing costs ...................................... 178
Inventories, net of current ................................... 2,203
Intangible pension and deferred compensation plan
assets ...................................................... 173
Other ......................................................... 204
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Total Other Assets .......................................... 3,140
TOTAL ASSETS .............................................. $ 13,926
*Inventories consist of the following:
Finished goods ............................................... 3,425
Raw materials & components ................................... 202
Work in process (net of $269 advanced from
customers) ................................................ 1,238
Less allowance for write down to estimate
net realizable value ...................................... (83)
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4,782
Less amount classified as a long term asset .................. (2,203)
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2,579
See accompanying notes to financial statements.
3
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THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
August 31, 1996
(in thousands)
(UNAUDITED)
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ........................ $ 296
Accounts payable ............................................ 6,383
Accrued liabilities ......................................... 732
Advances on contracts in excess
of costs .................................................. 483
Notes Payable - Related Party ............................... 250
--------
Total Current Liabilities ................................. 8,144
Other Liabilities:
Accounts payable - long term .................................. 1,360
Long-term debt - net of current maturities .................... 4,493
Deferred compensation and other pension
liabilities ................................................. 1,051
--------
Total Long Term Liabilities ............................... 6,904
STOCKHOLDERS' EQUITY:
Preferred stock - authorized, 5,000,000 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 1,938,520 shares ........................ 969
Additional paid-in capital .................................. 4,932
Accumulated deficit ......................................... (7,023)
Less treasury stock, at cost, 12 shares ..................... 0
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TOTAL STOCKHOLDERS' EQUITY .................................... (1,122)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................... 13,926
See accompanying notes to financial statements.
4
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THE BETHLEHEM CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended August 31
(in thousands)
(UNAUDITED)
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1996 1995
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NET REVENUES ..................................... $ 4,003 $ 2,966
Cost of Goods Sold ........................... 2,758 2,121
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Gross Profit ................................. 1,245 845
Selling and administrative expenses:
Selling ...................................... 298 235
Administrative ............................... 635 469
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933 704
Operating profit/loss ............................ 312 141
Other income/(Expenses):
Interest expense ............................. (127) (60)
Other income - (expense) ..................... 16 (15)
Interest income .............................. 1 0
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(110) (75)
Income/loss from operations before provision
for income taxes .............................. 202 66
(Provision)Benefit for income taxes .............. 0 0
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NET INCOME/(LOSS) ................................ 202 66
=========== ===========
EARNINGS(LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary ...................................... .06 .02
Assuming Full Dilution ....................... .06 .02
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING
Primary ...................................... 3,288,991 3,125,846
Fully Diluted ................................ 3,301,283 3,150,606
See accompanying notes to financial statements.
5
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THE BETHLEHEM CORPORATION--CONSOLIDATED STATEMENT OF CASH FLOWS
Three Months ended August 31
(in thousands)
(UNAUDITED)
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1996 1995
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Cash flows provided by (used for)
operating activities .................................... $ 211 $(1,260)
Cash flows (used for)investing activities: ............... (45) (70)
Cash flows provided by (used for) financing activities: .. (172) 1,236
NET (DECREASE) IN CASH AND CASH EQUIVALENTS .............. (6) (94)
Cash and cash equivalents,
beginning of period .................................... 19 151
Cash and cash equivalents,
at end of period ....................................... 13 57
======= =======
See accompanying notes to financial statements.
6
<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 1997. 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, 1997.
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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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
YEAR TO DATE COMPARISON
Revenues of $4,003,000 for the first quarter fiscal 1997 represent an
increase of 35% over the first quarter fiscal 1996 level of $2,966,000. The
primary reason for the increase in revenues was the increase in orders received
which is attributed to expansion in the chemical process industry. A portion of
the increase in revenues during the first quarter of fiscal 1997 resulted from
major contracts that were entered into in fiscal 1996 in the Company's Heat
Transfer Process Unit. Additionally, several major contracts for products were
recorded by the Company during the first quarter of fiscal 1997 in both the Heat
Transfer Process Unit and the Rebuild/Remanufacture Unit. The Company's largest
customers accounted for 27% and 19% of the Company's revenues during the first
quarter of fiscal 1997.
Gross profit equaled $1,245,000 (31% of net revenues) for the first
quarter of fiscal 1997 compared to a gross profit of $845,000 (28% of net
revenues) for the first quarter of fiscal 1996. The increase in gross profit was
attributable to increased revenues in the Company's proprietary product lines
and in the Company's Rebuild/Remanufacture Unit. This represents a continuation
of the trend toward a slightly higher gross profit margin, in certain business
units, which began in fiscal 1996.
Backlog as of August 31, 1996 was $9,843,000 compared to backlog of
$4,472,000 at August 31, 1995. New orders received by the Company equaled
8
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$3,382,000 for the first quarter of fiscal 1997 compared to new orders of
$3,995,000 for the first quarter of fiscal 1996, including new orders from
related parties of $133,000 and $72,000 respectively.
The Company reported operating income of $312,000 or (8% of net
revenues) for the first quarter of fiscal 1997 compared to operating income of
$141,000 or (5% of net revenues) for the first quarter of fiscal 1996. Selling
and administrative expenses decreased as a percentage of net revenues for the
first quarter of fiscal 1997 to 23% or $933,000 as compared to 24% or $704,000
for the first quarter of fiscal 1996. Selling and administrative expenses for
the first quarter of fiscal 1997 reflect expenses incurred at Bethlehem Advanced
Materials Corporation ("BAM") which began operations in November, 1995. Other
expenses equaled $110,000 for the first quarter of fiscal 1997 compared to
$75,000 for the first quarter of fiscal 1996. The increase in other expenses was
primarily the result of increased interest expense incurred on a restructured
real estate mortgage loan and the secured term loan and line of credit obtained
in July, 1995. Net income for the first quarter of fiscal 1997 equaled $202,000
or (5% of net revenues) compared to net income of $66,000 or (2% of net
revenues) for the first quarter of fiscal 1996.
9
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LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities equaled $211,000 for the
first quarter of fiscal 1997 compared to net cash used for operating activities
for the first quarter of fiscal 1996 of $1,260,000.
During the first quarter of fiscal 1997, the Company's accounts
receivable and accounts payable decreased. The decrease in accounts receivable
was due to the timely receipt of milestone and progress payments on several
major contracts. The decrease in accounts payable was a result of payments made
to suppliers for major materials purchases. Currently the Company is delinquent
with respect to certain accounts payable. In some instances, the Company has
negotiated new payment terms. If the Company's working capital position does not
improve, the Company's delinquencies with its accounts payable could adversely
affect the Company's future ability to structure favorable terms in the purchase
of materials and services.
Cash flow used for financing activities equaled $172,000 for the first
quarter of fiscal 1997 compared to cash flow provided by financing activities
for the first quarter of fiscal 1996 of $1,236,000. During the first quarter of
fiscal 1996, 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 including a $1.5 million five
year first mortgage loan from Sterling Commercial Capital, Inc., First Wall
Street SBIC, L.P., and Interequity Capital
10
<PAGE>
Partners, L.P. and 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 on Company owned real estate and a first lien on substantially all
other owned assets of the Company.
Capital expenditures were $45,000 during the first quarter of fiscal
1997 compared to $70,000 for the first quarter of fiscal 1996. If the Company
receives sufficient net proceeds in a proposed distribution of transferable
subscription rights to its shareholders to purchase additional shares of Common
Stock (the "Rights Offering"), the Company intends to continue to renovate its
one-story office building and laboratory. The Company also intends to purchase
laboratory equipment and a management information system/network. Additional
capital expenditures will be dependent upon whether the Company engages in
significant expansion opportunities.
From time to time in the ordinary course of business, Universal Process
Equipment, Inc. ("UPE") advances funds to the Company to enable the Company to
meet certain temporary cash requirements. These advances are repaid from
operations. During May 1996, the Company received a $310,000 advance from UPE.
This advance was repaid in June and August 1996. An advance of $250,000 was made
to the Company in August 1996 by UPE. In addition, another advance of $250,000
was made to the Company by UPE in October 1996. As of October 15, 1996, these
two advances remain outstanding.
11
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The Company believes that cash generated from existing business, new
orders and sales of used equipment, together with the anticipated net proceeds
of the Rights Offering , if any, will be sufficient to meet operating
requirements through the fiscal year ending May 31, 1997. In the event that the
Company's operations were to expand significantly, the Company is unable to
consumate the Rights Offering or the Company were to desire to make further
acquisitions, further 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.
This Form 10-QSB contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E
of the Securities Exchange Act of 1934, as amended which are intended to be
covered by the safe harbors created thereby. Although the Company believes that
the assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward-looking statements included in this Form 10-QSB
will prove to be accurate. Factors that could cause actual results to differ
from the results discussed in the forward-looking statements include, but not
limited to, the Company's proprietary rights, environmental considerations and
its ability to obtain contracts in the future. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a
12
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representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
Part II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits: Exhibit 27
There were no reports on Form 8-K filed for the three months ended
August 31, 1996.
13
<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, Director and
Chief Executive Officer
/s Antoinette L. Martin
------------------------------
Antoinette L. Martin
Vice President, Finance
(Principal Financial and
Accounting Officer)
Date: October 21, 1996
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-QSB FOR THE QUARTER ENDED AUGUST 31, 1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-END> AUG-31-1996
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<RECEIVABLES> 3,875
<ALLOWANCES> 137
<INVENTORY> 2,579
<CURRENT-ASSETS> 8,482
<PP&E> 9,364
<DEPRECIATION> 7,060
<TOTAL-ASSETS> 13,926
<CURRENT-LIABILITIES> 8,144
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0
0
<COMMON> 969
<OTHER-SE> (1,122)
<TOTAL-LIABILITY-AND-EQUITY> 13,926
<SALES> 4,003
<TOTAL-REVENUES> 4,003
<CGS> 2,758
<TOTAL-COSTS> 2,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 137
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</TABLE>
