- --------------------------------------------------------------------------------
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 February 28, 1997
(3rd 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
February 28, 1997: 1,938,520.
<PAGE>
FORM 10-QSB
INDEX
PART I. Financial Information: Page No.
Consolidated Balance Sheet February 28, 1997 (unaudited).......3
Consolidated Statement of Operations three months ended
February 28, 1997 and February 29, 1996 (unaudited)............5
Consolidated Statement of Operations nine months ended
February 28, 1997 and February 29, 1996 (unaudited)............6
Consolidated Statement of Cash Flow nine months ended
February 28, 1997 and February 29, 1996 (unaudited)...........7
Notes to Financial Statements..................................8
Management's Discussion and Analysis or Plan of Operation......9
PART II. Other Information:
Legal Proceedings.............................................11
Exhibits and Reports on Form 8-K..............................11
Signatures....................................................12
2
<PAGE>
Part I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
February 28, 1997
(in thousands)
(UNAUDITED)
------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................... $ 49
Accounts receivable (net of allowance for doubtful
accounts of $135,000).............................. 3,928
Costs and accumulated gross profit in excess of
billings on long-term contracts.................... 2,256
Inventories.. ............................................... 2,961
Prepaid expenses and other current assets ................... 210
---------
Total Current Assets .............................. 9,404
---------
PROPERTY, PLANT AND EQUIPMENT:
At cost...................................................... 9,692
Less accumulated depreciation ............................... (7,233)
---------
Net Property, Plant and Equipment ................ 2,459
---------
OTHER ASSETS:
Goodwill (net of $40,000 of accumulated amortization) 357
Deferred financing costs.................................... 143
Inventories, net of current................................. 2,203
Intangible pension and deferred compensation plan
assets............................................ 173
Other....................................................... 58
---------
Total Other Assets ............................... 2,934
---------
TOTAL ASSETS ...................................... $ 14,797
=========
See accompanying notes to financial statements.
3
<PAGE>
THE BETHLEHEM CORPORATION--CONSOLIDATED BALANCE SHEET
February 28, 1997
(in thousands)
(UNAUDITED)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt .......................... $ 364
Accounts payable .............................................. 6,133
Accrued liabilities ........................................... 1,049
Advances on contracts in excess
of costs ............................................ 631
Notes Payable - Related Party.................................. 725
------
Total Current Liabilities ........................... 8,902
------
Other Liabilities:
Accounts payable - long term..................................... 1,361
Long-term debt - net of current maturities....................... 4,321
Deferred compensation and other pension
liabilities ................................................... 1,059
------
Total Long Term Liabilities.................................. 6,741
------
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 ........................................... (6,747)
--------
(846)
Less treasury stock, at cost, 12 shares ....................... -0-
--------
TOTAL STOCKHOLDERS' EQUITY ...................................... (846)
--------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,797
========
See accompanying notes to financial statements.
4
<PAGE>
THE BETHLEHEM CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
FEBRUARY 28, 1997 FEBRUARY 29, 1996
----------------- -----------------
<S> <C> <C>
NET REVENUES $4,077 $ 5,503
Cost of Goods Sold 2,852 4,311
----- -----
Gross Profit 1,225 1,192
Selling and administrative expense:
Selling 301 284
Administrative 684 553
--- ----
985 837
Operating profit 240 355
Other income/(expense):
Interest expense (148) (167)
Other income (expense) 50 (64)
Interest income -0- 4
(98) (227)
Income from operations before provision
for income taxes 142 128
Provision for income taxes -0- -0-
NET INCOME $ 142 $ 128
------- -------
EARNINGS(LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary .04 .04
Assuming Full Dilution .04 .04
WEIGHTED AVERAGE OF COMMON AND COMMON EQUILAVENT
SHARES OUTSTANDING:
Primary 3,287,373 3,122,635
Fully Diluted 3,287,978 3,122,635
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
THE BETHLEHEM CORPORATION CONSOLIDATED STATEMENT OF OPERATIONS
Nine months ended
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
February 28, 1997 February 29, 1996
----------------- -----------------
<S> <C> <C>
NET REVENUES $12,820 $12,375
Cost of Goods Sold 9,114 9,604
----- ------
Gross Profit 3,706 2,771
Selling and administrative expense:
Selling 895 782
Administrative 1,937 1,430
----- -----
2,832 2,212
Operating profit 874 559
Other income/(expense):
Interest expense (463) (287)
Other income - (expense) 66 (62)
Interest income 1 7
----- -----
(396) (342)
Income from operations before provision
for income taxes 478 217
Provision for income taxes -0- -0-
NET INCOME $ 478 $ 217
-------- --------
EARNINGS (LOSS) PER COMMON AND COMMON
EQUIVALENT SHARE:
Primary .14 .07
Assuming Full Dilution .14 .07
WEIGHTED AVERAGE OF COMMON AND COMMON EQUILAVENT
SHARSHARES OUTSTANDING:
Primary 3,385,667 2,984,280
Fully Diluted 3,406,226 3,039,430
</TABLE>
See accompanying notes to financial statements.
6
<PAGE>
THE BETHLEHEM CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS
Nine Months ended
(in thousands)
(UNAUDITED)
<TABLE>
<CAPTION>
FEBRUARY 28, 1997 FEBRUARY 29, 1996
----------------- -----------------
<S> <C> <C>
Cash flows provided by (used for)
operating activities $ 151 $(1,794)
Cash flows (used for)investing activities: (321) (534)
Cash flows provided by (used for) financing activities: 200 2,244
--- ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 30 (84)
== ====
Cash and cash equivalents,
beginning of period 19 151
Cash and cash equivalents,
at end of period 49 67
</TABLE>
See accompanying notes to financial statements.
7
<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 (consisting of
only formal recurring 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. Inventories consist of the following
at February 28, 1997:
Finished goods ....................................... 4,655
Raw materials & components ........................... 240
Work in process (net of $ 194,000 advanced from
customers) .................................. 385
Less allowance for write down to estimate
net realizable value ........................ (116)
-----
5,164
Less amount classified as a long term asset........... (2,203)
-------
2,961
=======
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.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Net revenues are $4,077,000 for the third quarter fiscal 1997 compared
to net revenues of $5,503,000 for the third quarter of fiscal 1996. This
decrease in net revenues of $1,426,000 was attributable to decreased revenues in
the Company's Proprietary Product Sales Division. During the second quarter of
fiscal 1996, the Company received a major order in the amount of $10,557,418 in
the Company's Proprietary Product Sales Division. Net Revenues recorded on this
contract were higher in the third quarter of fiscal 1996 than the level of
revenues recorded on this contract for the same period this year due to the fact
that this contract is in the final stage of completion. This contract is
scheduled for final shipment in the first quarter of 1998. Net revenues of
$12,820,000 for the first nine months of fiscal 1997 represent an increase of 4%
over the first nine months of the fiscal 1996 level of $12,375,000. Gross profit
for the third quarter of fiscal 1997 equaled $1,225,000 or 30% of net revenues
compared to gross profit of $1,192,000 or 22% of net revenues for the same
period last year. Gross profit for the first nine months of fiscal 1997 equaled
$3,706,000 or 29% of net revenues compared to gross profit of $2,771,000 or 22%
of net revenues for the same period last year. The overall increased gross
profit margins were primarily attributable to stronger profit performance in the
Company's Heat Transfer and Filtration product lines as well as the Company's
Rebuild Business Unit. With respect to the Company's Rebuild Unit, the Company,
over the last fifteen months, 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 nine 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
recorded 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 customer accounted for 25% of the Company's net
revenues for the first nine months of fiscal 1997 and 33% for the first nine
months of fiscal 1996.
Selling and administrative expenses equaled $985,000 or 24% of net
revenues for the third quarter of fiscal 1997 compared to $837,000 or 15% of net
revenues for the third quarter of fiscal 1996. Selling and administrative
expenses equaled $2,832,000 or 22% of net revenues for the first nine months of
fiscal 1997 compared to $2,212,000 or 18% of net revenues for the same period
last year. The primary factors for the increase in selling and administrative
expenses for both the three month period and the nine month period fiscal 1997
were 1) increased salary and bonus expense; 2) increased bad debt expense; 3)
the reclassification of financing expenses related to company borrowings to
administrative expenses and 4) the reclassification of retirees pension expense
from cost of goods sold to administrative expense.
The Company reported operating income of $240,000 or 6% of net revenues
for the third quarter of fiscal 1997 compared to operating income of $355,000 or
6% of net revenues for the same period last year. Operating income for the first
nine months of fiscal 1997 equaled $874,000 or 7% of net revenues compared to
operating income of $559,000 or 5% for the first nine months of fiscal 1996.
Other expenses equaled $98,000 for the third quarter fiscal 1997
compared to other expenses of $227,000 for the same period last year. The
Company reported other income of $49,000 for the settlement of an insurance
claim in January of 1997 for property damage that occurred at its subsidiary
facility in April of 1996. Financing expenses were reported as other expenses
for the third quarter of fiscal 1996 but were reclassed to administrative
expenses for this period. Other expenses were $396,000 for the first nine months
of fiscal 1997 compared to other expenses of $342,000 for the first nine months
of fiscal 1996. Increased interest expense for additional borrowings was the
principal factor for the increase in other expenses. Net income for the third
quarter 1997 equaled $142,000 compared to $128,000 for the same period last
year. Net income for the nine month period ending February 28, 1997 equaled
$478,000 compared to net income of $217,000 for the same period last year. The
reason for the increased net income for the nine month period ending February
28, 1997 was overall stronger gross profit margins recognized in the Company's
Heat Transfer and Filtration product lines as well as the Company's Rebuild
Business Unit.
Backlog was $7,669,000 at February 28, 1997 compared to backlog of
$9,093,000 at February 29, 1997. Orders received for the third quarter of fiscal
1997 equaled $4,622,000 compared to orders received for the third quarter of
fiscal 1996 of $3,594,000. Orders received for the first nine months of fiscal
1997 equaled $10,638,000 compared to $19,124,000 for the same period last year.
The decrease in the amount of orders received is due to the fact that a major
order was received in the amount of $10,557,418 during the second quarter of
fiscal 1996.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided by operating activities equaled $151,000 for the
first nine months of fiscal 1997, compared to cash flow used for operating
activities for the same period last year of $1,794,000.
During the first nine months of fiscal 1997, the Company's inventory
and accounts payable decreased while accounts receivable increased. The increase
in accounts receivable for the first nine 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.
Cash flow provided by financing activities equaled $200,000 for the
first nine months of fiscal 1997 compared to cash flow provided by financing
activities for the first nine months of fiscal 1996 of $2,244,000. 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.
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.
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 April 14, 1997, these two advances remain outstanding. In addition
to those two outstanding advances, UPE advanced the Company $230,000 in March of
1997. This advance was repaid on April 10, 1997.
On February 28, 1997, the Company purchased a complete two stage
environmental thermal process treatment plant 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 rate (Chase Bank, New York) 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. The loan is to be paid in full
by March 1, 1999.
Capital expenditures were $373,000 for the first nine months of fiscal
1997 compared to $534,000 for the same period in fiscal 1996. Additional capital
expenditures will be dependent upon whether the Company engages in significant
expansion opportunities.
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, 1997. The Company is
presently working with its current lender, The CIT Group/Credit Finance, to
increase its credit facility so the Company can expand working capital as well
as 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.
10
<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 February 28,
1997.
However, on March 11, 1997, a Form 8K was filed and on March 25, 1997 a Form 8KA
was filed to report a Change in the Company's Certifying Accountant on March 6,
1997. On that date The Board of Directors of the Company terminated the
engagement of Sobel & Company LLC Certified Public Accountants as the
independent auditors of the Company and appointed BDO Seidman LLP as the
independent auditors of the Company for the fiscal year ending May 31, 1997.
11
<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: April 14, 1997
<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 FEBRUARY 28, 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-31-1997
<PERIOD-END> FEB-28-1997
<CASH> 49
<SECURITIES> 0
<RECEIVABLES> 6,319
<ALLOWANCES> 135
<INVENTORY> 2,961
<CURRENT-ASSETS> 9,404
<PP&E> 9,692
<DEPRECIATION> 7,233
<TOTAL-ASSETS> 14,797
<CURRENT-LIABILITIES> 8,902
<BONDS> 0
<COMMON> 969
0
0
<OTHER-SE> (1,815)
<TOTAL-LIABILITY-AND-EQUITY> 14,797
<SALES> 4,077
<TOTAL-REVENUES> 4,077
<CGS> 2,852
<TOTAL-COSTS> 985
<OTHER-EXPENSES> 50
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 142
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
