- --------------------------------------------------------------------------------
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 November 30, 1996
(2nd Quarter fiscal 1997)
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
November 30, 1996: 1,938,520.
Number of pages in this report: 11
<PAGE>
FORM 10-QSB
INDEX
PART I. Financial Information: Page No.
Consolidated Balance Sheet November 30, 1996.................. 2
Consolidated Statement of Operations three months ended
November 30, 1996 and 1995 (unaudited)........................ 4
Consolidated Statement of Operations six months ended
November 30, 1996 and 1995 (unaudited)........................ 5
Consolidated Statement of Cash Flow six months ended
November 30, 1996 and 1995 (unaudited)........................ 6
Notes to Consolidated Interim
Financial Statements.......................................... 7
Management's Discussion and Analysis or Plan of
Operation..................................................... 8
PART II. Other Information:
Legal Proceedings............................................. 10
Exhibits and Reports on Form 8-K.............................. 10
Signatures.................................................... 12
<PAGE>
Part I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
November 30, 1996
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ..................................... $ 52
Accounts receivable (net of allowance for doubtful
accounts of $219,000) ............................... 3,609
Costs and accumulated gross profit in excess of
billings on long-term contracts ..................... 2,632
Inventories* .................................................. 2,061
Prepaid expenses and other current assets ..................... 50
--------
Total Current Assets ................................ 8,404
PROPERTY, PLANT AND EQUIPMENT:
At cost ....................................................... 9,447
Less accumulated depreciation ................................. 7,149
--------
Net Property, Plant and Equipment ................... 2,298
OTHER ASSETS:
Goodwill (net of $20,000 of accumulated amortization) ......... 377
Deferred financing costs ...................................... 160
Inventories, net of current ................................... 2,203
Intangible pension and deferred compensation plan
assets .............................................. 173
Other ......................................................... 204
--------
Total Other Assets .................................. 3,117
TOTAL ASSETS ........................................ $ 13,819
========
*Inventories consist of the following:
Finished goods ............................................... 3,313
Raw materials & components ................................... 226
Work in process (net of $ 194,000 advanced from
customers) .......................................... 821
Less allowance for write down to estimate
net realizable value ................................ (96)
--------
4,264
Less amount classified as a long term asset .................. (2,203)
--------
2,061
See accompanying notes to financial statements.
Page 2
<PAGE>
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
November 30, 1996
(in thousands)
(UNAUDITED)
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ......................... $ 282
Accounts payable ............................................. 5,728
Accrued liabilities .......................................... 1,067
Advances on contracts in excess
of costs ........................................... 237
Notes Payable - Related Party ................................ 500
--------
Total Current Liabilities .......................... 7,814
========
Other Liabilities:
Accounts payable - long term ................................... 1,360
Long-term debt - net of current maturities ..................... 4,582
Deferred compensation and other pension
liabilities .................................................. 1,051
Total Long Term Liabilities ................................ $ 6,993
========
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 .......................................... (6,889)
Less treasury stock, at cost, 12 shares ...................... -0-
--------
TOTAL STOCKHOLDERS' EQUITY ..................................... (988)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..................... $ 13,819
========
See accompanying notes to financial statements.
Page 3
<PAGE>
THE BETHLEHEM CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended November 30
(in thousands)
UNAUDITED
---------
1996 1995
---- ----
NET REVENUES
Cost of Goods Sold ........................... $ 4,740 $ 3,906
Gross Profit ................................. 3,504 3,172
----------- -----------
1,236 734
Selling and administrative expenses:
Selling ...................................... 295 263
Administrative ............................... 619 408
----------- -----------
914 671
Operating profit ................................. 322 63
Other income/(Expenses):
Interest expense ............................. (188) (60)
Other income - (expense) ..................... -0- 17
Interest income .............................. -0- 3
----------- -----------
(188) (40)
Income/loss from operations before provision
for income taxes .............................. 134 23
(Provision)Benefit for income taxes .............. -0- -0-
NET INCOME ....................................... $ 134 $ 23
=========== ===========
EARNINGS(LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary ...................................... .042 .007
Assuming Full Dilution ....................... .042 .007
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING::
Primary ...................................... 3,238,997 3,266,530
Fully Diluted ................................ 3,241,397 3,266,530
See accompanying notes to financial statements.
Page 4
<PAGE>
THE BETHLEHEM CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
Six months ended November 30
(in thousands)
UNAUDITED
---------
1996 1995
---- ----
NET REVENUES
Cost of Goods Sold ........................... $ 8,743 $ 6,872
Gross Profit ................................. 6,262 5,293
----------- -----------
2,481 1,579
Selling and administrative expenses:
Selling ...................................... 593 498
Administrative ............................... 1,254 877
----------- -----------
1,847 1,375
Operating profit ................................. 634 204
Other income/(Expenses):
Interest expense ............................. (315) (120)
Other income - (expense) ..................... 16 2
Interest income .............................. 1 3
----------- -----------
(298) (115)
Income/loss from operations before provision
for income taxes .............................. 336 89
(Provision)Benefit for income taxes .............. -0- -0-
NET INCOME ....................................... $ 336 $ 89
EARNINGS(LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary ...................................... .102 .028
Assuming Full Dilution ....................... .102 .028
WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING:
Primary ...................................... 3,319,773 3,206,642
Fully Diluted ................................ 3,329,828 3,226,754
See accompanying notes to financial statements.
Page 5
<PAGE>
THE BETHLEHEM CORPORATION--CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months ended November 30
(in thousands)
(UNAUDITED)
-----------
1996 1995
---- ----
Cash flows provided by (used for)
operating activities .................................... $ (28) $(1,982)
Cash flows (used for)investing activities: ............... (92) (29)
Cash flows provided by (used for) financing activities: .. 153 1,935
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ..... 33 (76)
======= =======
Cash and cash equivalents,
beginning of period .................................... 19 151
Cash and cash equivalents,
at end of period ....................................... 52 75
See accompanying notes to financial statements.
Page 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 fiscal 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.
Page 7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF
OPERATIONS
Net revenues of $4,740,000 for the second quarter of fiscal 1997
represent an increase of 21% over the second quarter fiscal 1996 level of
$3,906,000. Gross profit for the second quarter of fiscal 1997 was $1,236,000 or
26% of net revenues compared to gross profit of $734,000 or 19% of revenues for
the same period last year. Net revenues of $8,743,000 for the first six months
of fiscal 1997 represent an increase of 27% over the first six months of the
fiscal 1996 level of $6,872,000. Gross profit for the first six months of fiscal
1997 equaled $2,481,000 or 28% of net revenues compared to gross profit of
$1,579,000 or 23% of net revenues for the same period last year.
The increase in net revenues was due to the receipt of several major
contracts for equipment in the Company's Heat Transfer, and Filtration product
lines, as well as in the Company's Rebuild business unit. The Company's Heat
Transfer and Filtration product lines produced higher gross profit margins than
those historically experienced . With respect to the Company's Rebuild Unit, the
Company, over the last year, has begun to purchase and sell used process
equipment as an adjunct to its new equipment and rebuild capabilities. Several
of the orders recorded by the Company for the first six months of fiscal 1997
for the purchase of used equipment also called for the utilization of the
Company's rebuild and remanufacturing capabilities. The gross profit margins
recognized in this business unit were higher than gross profit margins
recognized by the Company in prior periods in other business units.
The Company's largest customers accounted for 27% and 11% of the
Company's net revenues for the first six months of fiscal 1997.
The Company reported operating income of $322,000 or 7% of net
revenues for the second quarter fiscal 1997 compared to operating income of
$63,000 or 2% of net revenues for the second quarter of fiscal 1996. Operating
income for the first six months of fiscal 1997 equaled $634,000 or 7% of net
revenues compared to operating income of $204,000 for the first six months of
fiscal 1996 or 3% of net revenues. Selling and administrative expenses equaled
$914,000 or 19% of net revenues for the second quarter of fiscal 1997 compared
to $671,000 or 17% of net revenues for the second quarter of fiscal 1996.
Selling and administrative expenses equaled $1,847,000 or 21% of net revenues
for the first six months of fiscal 1997 compared to $1,375,000 or 20% of net
revenues for the same period last year.
Other expenses equaled $188,000 for the second quarter of fiscal
1997 compared to $40,000 for the second quarter of fiscal 1996. Net income for
the second quarter of fiscal 1997 equaled $134,000 compared to $23,000 for the
second quarter of fiscal 1996. Other expenses were $298,000 for the first six
months of fiscal 1997 compared to $115,000 for the same period last year. The
increase in other expenses was the result of increased interest expense incurred
on the line of credit obtained by the Company in July, 1995, for increased
inventory borrowing to support the growth of the Company's rebuild and
remanufacture business unit. Net income for the first six months of fiscal 1997
equaled $336,000 compared to net income for the first six months of fiscal 1996
of $89,000.
Backlog was $7,124,000 at November 30, 1996 compared to backlog of
$12,101,000 at November 30,1995. Orders received for the second quarter of
fiscal 1997 equaled $2,021,000 compared to orders received of $11,535,000 for
the second quarter of fiscal 1996. Orders received for the first six months of
fiscal 1997 equaled $6,016,000 compared to $15,530,000 for the same period last
year.
Page 8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow used for operating activities equaled $28,000 for the
first six months of fiscal 1997, compared to cash flow used for operating
activities for the same period last year of $1,982,000.
During the first six months of fiscal 1997, the Company's inventory
and accounts payable decreased while accounts receivable increased. The increase
in accounts receivable for the first six months of fiscal 1997 was due to
increased sales volume. The decrease in accounts payable was a result of
payments made to suppliers for major material 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 provided by financing activities equaled $153,000 for the
first six months of fiscal 1997 compared to cash flow provided by financing
activities for the first six months of fiscal 1996 of $1,935,000. 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 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 $128,000 for the first six months of
fiscal 1997 compared to $29,000 for the same period in 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 ("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 January 15, 1997, these
two advances remain outstanding.
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
consummate 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 representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
Page 9
<PAGE>
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 November 30,
1996.
Page 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: January 21, 1997
Page 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed financial statements for the second quarter ended November 30, 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> NOV-30-1995
<CASH> 52
<SECURITIES> 0
<RECEIVABLES> 6,460
<ALLOWANCES> 219
<INVENTORY> 2,632
<CURRENT-ASSETS> 8,404
<PP&E> 9,447
<DEPRECIATION> 7,149
<TOTAL-ASSETS> 13,819
<CURRENT-LIABILITIES> 7,814
<BONDS> 0
<COMMON> 969
0
0
<OTHER-SE> (988)
<TOTAL-LIABILITY-AND-EQUITY> 13,819
<SALES> 4,740
<TOTAL-REVENUES> 8,743
<CGS> 3,504
<TOTAL-COSTS> 1,871
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188
<INCOME-PRETAX> 134
<INCOME-TAX> 0
<INCOME-CONTINUING> 134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
