- --------------------------------------------------------------------------------
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, 1997
(First Quarter of fiscal 1998)
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _____ to _____
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 / /
Number of shares outstanding of the issuer's classes of common stock as of
August 31, 1997; 1,938,520.
Number of pages in this report: 11
<PAGE>
FORM 10-QSB
INDEX
PART I. Financial Information: Page No.
Consolidated Balance Sheet as of August 31, 1997 (unaudited).... 3
Consolidated Statements of Income for the three months
ended August 31, 1997 and 1996 (unaudited)...................... 5
Consolidated Condensed Statements of Cash Flow for the
three months ended August 31, 1997 and 1996 (unaudited)......... 6
Notes to Financial Statements................................... 7
Management's Discussion and Analysis ........................... 8
PART II. Other Information:
Exhibits and Reports on Form 8-K............................... 10
Signatures..................................................... 11
2
<PAGE>
Part I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
August 31, 1997
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash $ 249
Accounts receivable (Net of allowance
for doubtful accounts of $120) 2,326
Accounts receivable - related parties 1,989
Costs and estimated earnings in excess of
billings on long-term contracts 1,070
Inventories 2,480
Prepaid expenses and other current assets 114
Deferred tax asset 125
----------
Total Current Assets 8,353
----------
PROPERTY, PLANT AND EQUIPMENT, at cost 10,166
Less: accumulated depreciation and amortization 7,467
----------
Property, Plant and Equipment, Net 2,699
----------
OTHER ASSETS:
Intangibles (net of $66 of accumulated amortization) 332
Inventories, non current 2,113
Intangible pension and deferred compensation plan assets 204
Other 200
----------
Total Other Assets 2,849
----------
$ 13,901
==========
3
<PAGE>
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
August 31, 1997
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Current maturities of long-term debt $ 2,225
Accounts payable 2,417
Accounts payable - related parties 2,378
Accrued liabilities 620
Billings in excess of costs and estimated earnings
on long-term contracts 1,111
Note Payable - related party 930
---------
Total Current Liabilities 9,681
---------
OTHER LIABILITIES:
Accounts payable, long term 1,410
Long-term debt, net of current maturities 2,148
Deferred compensation and other pension
liabilities 931
---------
Total Long Term Liabilities 4,489
---------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock - authorized, 5,000,000 shares
without par value; none issued or outstanding
Common stock - authorized, 20,000,000 shares
without par value; stated value of $.50 per share;
1,938,532 shares issued; 1,938,520 shares outstanding 969
Additional paid-in capital 4,995
Accumulated deficit (6,233)
---------
(269)
Less treasury stock, at cost, 12 shares --
---------
Total Stockholders' Equity (Deficit) (269)
---------
$13,901
=========
4
<PAGE>
THE BETHLEHEM CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Three months ended August 31
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
1997 1996
NET SALES $ 4,706 $ 4,003
COST OF GOODS SOLD 3,402 2,758
--------------------------
GROSS PROFIT 1,304 1,245
--------------------------
OPERATING EXPENSES:
Selling 275 298
General and Administrative 531 635
--------------------------
806 933
--------------------------
Operating Income 498 312
--------------------------
OTHER INCOME (EXPENSE):
Interest expense (167) (145)
Other income (expense) (16) 34
Interest income 2 1
--------------------------
(181) (110)
--------------------------
Income before income taxes 317 202
INCOME TAX BENEFIT 25 0
--------------------------
NET INCOME $ 342 $ 202
==========================
EARNINGS PER SHARE DATA:
Primary $ .11 $ .06
==========================
Fully Diluted $ .10 $ .06
==========================
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Primary 3,248 3,289
==========================
Fully Diluted 3,319 3,201
==========================
5
<PAGE>
THE BETHLEHEM CORPORATION--CONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOW
Three Months ended August 31
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
Three months ended
August 31
1997 1996
---- ----
Cash flow provided by operating activities: $ 481 $ 211
Cash flow used in investing activities: (32) (45)
Cash flow used in financing activities: (236) (172)
----------- ---------
NET INCREASE (DECREASE) IN CASH 213 (6)
CASH
BEGINNING OF PERIOD 36 19
----------- ---------
CASH
END OF PERIOD $ 249 $ 13
=========== =========
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 1997 financial statements and the notes
thereto included in the Company's latest annual report on Form 10-KSB.
In the Company's opinion, all adjustments necessary for a fair
presentation of the information shown have been included.
2. The results of operations for the quarter ended August 31, 1997
presented herein are not necessarily indicative of the results expected
for the year ending May 31, 1998.
3. Inventories, other than inventoried costs relating to long-term
contracts, are stated at the lower of cost (principally first-in,
first-out cost) or market. Inventoried costs relating to any contracts
accounted for under the completed contract method are stated at the
actual production cost, including factory overhead incurred to date.
The Company periodically performs a review of inventories to evaluate
whether such goods are obsolete or off standard. When identified,
provisions to reduce inventories to net realizable value are recorded.
Inventories consist of the following at August 31, 1997:
Raw materials & components $ 271
Work in process 1,414
Finished goods 3,164
Less: reserve for obsolete inventory (256)
---------
4,593
Less: non current inventory (2,113)
$ 2,480
=========
4. Net earnings 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.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------ ------------------------------------
Results of Operations for the Quarter Ended August 31, 1997 ("Fiscal 1998") and
for the Quarter ended August 31, 1996 ("Fiscal 1997")
The Company's total sales were $4,706,000 for the first quarter of
fiscal 1998 compared to $4,003,000 for the first quarter of fiscal 1997, an
increase of $703,000 or 18%. Sales for the first quarter of fiscal 1998 in the
Thermal Process Unit, Environmental Systems Unit, Rebuild/Remanufacture Unit and
Specialty Heavy Machining and Fabrication Services Unit were higher than
recorded for the first quarter of fiscal 1997. The increase in sales is mainly
attributable to increased sales in Environmental Systems. The Company's two
largest customers accounted for 24% and 13% respectively of the Company's sales
for the first quarter of fiscal 1998.
Gross profit was $1,304,000 or 28% of sales for the first quarter of
fiscal 1998 compared to gross profit of $1,245,000 or 31% of sales for the first
quarter of fiscal 1997. Decreased sales in the Company's Filtration Business
Unit for the first quarter of fiscal 1998 was the primary factor for the lower
gross profit margin. The gross profit margin recognized in the first quarter of
fiscal 1997 for this business unit was higher than the gross profit margins
recorded in other business units. The Company continues to focus on decreasing
manufacturing overhead expenses as well as increasing production efficiency.
The Company reported operating income of $498,000 for the first quarter
of fiscal 1998 compared to operating income of $312,000 for the first quarter of
fiscal 1997. Selling and administrative expenses were $806,000 or 17% of sales
for the first quarter of fiscal 1998 compared to $933,000 or 23% of sales for
the first quarter of fiscal 1997. The decrease in selling, general and
administrative expenses was due to decreased salary and fringe benefits as well
as decreased legal expenses. Decreased salary and fringe benefits were due to
reductions in personnel. Other expenses were $181,000 for the first quarter of
fiscal 1998 as compared to $110,000 for the first quarter of fiscal 1997. In the
first quarter of fiscal 1997, a settlement was recorded on a trade payable in
the amount of $56,000. Income before taxes for the first quarter of fiscal 1998
was $317,000 compared to $202,000 for the first quarter of fiscal 1997.
The Company's income tax benefit for the first quarter of fiscal 1998
was $25,000. Based on first quarter earnings and estimated earnings for the
balance of fiscal 1998, which include earnings on existing contracts, management
considers realization of the unreserved deferred tax asset at August 31, 1997
more likely than not. Based on an assessment of all available evidence, in the
fourth quarter of the Company's fiscal year ended May 31, 1997, an income tax
benefit of $100,000 was recognized. Net income for the first quarter of fiscal
1998 was $342,000 compared to $202,000 for the first quarter of fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of fiscal 1998, $481,000 of cash was provided
by operating activities compared to $211,000 of cash provided by operating
activities for the first quarter of fiscal 1997. The Company's accounts
receivable, inventories and accounts payable decreased in the first quarter of
fiscal 1998. The decrease in accounts receivable was due to the timely receipt
of milestone and progress payments on several major contracts. The decrease in
inventories was due to increased sales of used equipment. The decrease in
accounts payable was attributable to payments made to suppliers and third party
service providers.
Cash flow used for investing activities was $32,000 for the first
quarter of fiscal 1998 compared to $45,000 for the first quarter of fiscal 1997.
The Company's current commitment for capital expenditures in fiscal 1998
includes approximately $300,000 for energy efficiency upgrades and upgrades to
existing plant equipment.
Cash flow used for financing activities was $236,000 for the first
quarter of fiscal 1998 compared to cash flow used for financing activities of
$172,000 for the first quarter of fiscal 1997. From time to time in the ordinary
8
<PAGE>
course of business, Universal Process Equipment ("UPE"), a related party,
advances funds to the Company to enable the Company to meet certain temporary
cash requirements. These advances are repaid from operations. 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 10, 1997, these two advances remain outstanding. The interest rate on
the advances is prime plus 1%.
On February 28, 1997, the Company purchased a complete two stage
environmental thermal process system in Alberta, Canada. In order to effect the
acquisition of the equipment, the Company borrowed $225,000 from UPE at an
interest rate of prime plus 2.5%. This loan will be repaid from the proceeds of
the sale of the specific equipment purchased. The Company also secured a loan
with the Royal Bank of Canada in the amount of $320,000 to assist with the
buy-out of these assets at the borrowing rate of Canadian prime rate plus 1.5%
per annum. This loan was paid in full in September 1997.
The Company believes that cash generated from existing business, new
orders and sales of used equipment will be sufficient to meet operating
requirements through the fiscal year ending May 31, 1998. The Company is
presently working to increase its credit facility so the Company can expand
working capital and make available additional capital for inventory acquisition.
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 representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
Backlog as of August 31, 1997 was $9,033,000 compared to backlog of
$9,843,000 at August 31, 1996. New orders received by the Company for the first
quarter of fiscal 1998 were $4,239,000 compared to new orders of $3,382,000 for
the first quarter of fiscal 1997.
9
<PAGE>
Part II - OTHER INFORMATION
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, 1997.
10
<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 15, 1997
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-QSB FOR THE THREE MONTHS ENDED AUGUST 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> AUG-31-1997
<CASH> 249
<SECURITIES> 0
<RECEIVABLES> 4,435
<ALLOWANCES> 120
<INVENTORY> 2,480
<CURRENT-ASSETS> 1,195
<PP&E> 10,166
<DEPRECIATION> 7,467
<TOTAL-ASSETS> 8,353
<CURRENT-LIABILITIES> 9,681
<BONDS> 2,148
<COMMON> 969
0
0
<OTHER-SE> (1,238)
<TOTAL-LIABILITY-AND-EQUITY> 13,901
<SALES> 0
<TOTAL-REVENUES> 4,706
<CGS> 0
<TOTAL-COSTS> 3,402
<OTHER-EXPENSES> 14
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> 317
<INCOME-TAX> 25
<INCOME-CONTINUING> 342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 342
<EPS-PRIMARY> .11
<EPS-DILUTED> .10
</TABLE>
