- --------------------------------------------------------------------------------
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, 1999
(Second Quarter of Fiscal 2000)
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, 1999: 2,378,520
Number of pages in this report: 13
<PAGE>
INDEX
PART I. Financial Information: Page No.
Consolidated Balance Sheet as of November 30, 1999 (unaudited)
and May 31, 1999..................................................3
Consolidated Statements of Income for the three months
ended November 30, 1999 and 1998 (unaudited)......................5
Consolidated Statements of Income for the six months
ended November 30, 1999 and 1998 (unaudited).................. 6
Consolidated Condensed Statements of Cash Flows for the six
months ended November 30, 1999 and 1998 (unaudited)............. 7
Notes to Financial Statements.....................................8
Management's Discussion and Analysis .............................9
PART II. Other Information:
Legal Proceedings,
Exhibits and Reports on Form 8-K.................................11
Signatures.......................................................12
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Nov 30,1999 May 31, 1999
(unaudited)
CURRENT ASSETS:
<S> <C> <C>
Cash $ 206 $ 113
Accounts receivable (net of allowance
for doubtful accounts of $37 and $47) 3,272 2,342
Costs and estimated profit in excess of
billings on long-term contracts 701 1,618
Inventories 5,229 5,092
Prepaid expenses and other current assets 284 113
Deferred tax asset 375 375
------- -------
Total Current Assets 10,067 9,653
------- -------
PROPERTY, PLANT AND EQUIPMENT, at cost less
Accumulated depreciation and amortization 6,260 5,917
OTHER ASSETS:
Inventories, non current 750 750
Intangibles (net of $137 and $122 of accumulated amortization) 260 275
Intangible pension and deferred compensation plan assets 145 145
Deferred financing costs 340 382
Other 103 115
------- -------
Total Other Assets 1,598 1,667
------- -------
Total Assets $17,925 $17,237
======= =======
</TABLE>
Page 3
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Nov 30, 1999 May 31, 1999
(unaudited)
CURRENT LIABILITIES:
<S> <C> <C>
Current maturities of long-term debt and capital leases $ 4,673 $ 1,209
Note Payable - related party 788 787
Accounts payable 4,232 3,545
Accounts payable, related parties 75 24
Accrued liabilities 387 565
Billings in excess of costs and estimated profit
on long-term contracts 163 239
-------- --------
Total Current Liabilities 10,318 6,369
-------- --------
LONG TERM LIABILITIES:
Long-term debt and capital leases, net of current maturities 4,887 8,266
Deferred compensation and other pension liabilities 510 491
-------- --------
Total Long-Term Liabilities 5,397 8,757
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
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;
2,378,532 shares issued and 2,378,520 shares outstanding 1,189 1,189
Additional paid-in capital 6,630 6,557
Accumulated deficit (5,609) (5,635)
Less - treasury stock, at cost, 12 shares -- --
Total Stockholders' Equity 2,210 2,111
-------- --------
Total Liabilities and Stockholders' Equity $ 17,925 $ 17,237
======== ========
</TABLE>
Page 4
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three months ended November 30
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
NET SALES $ 3,800 $ 2,775
COST OF GOODS SOLD 2,296 1,783
------- -------
GROSS PROFIT 1,504 992
------- -------
OPERATING EXPENSES:
Selling 277 331
General and Administrative 557 440
Non-Employee Stock Option Expense 14 15
------- -------
848 786
------- -------
Operating income 656 206
------- -------
OTHER EXPENSE:
Interest expense (313) (142)
Financing charge - issuance of stock options (14) (11)
Other expense 4 8
------- -------
(323) (145)
------- -------
Income before income taxes 333 61
INCOME TAX (PROVISION) 0 (10)
------- -------
NET INCOME $ 333 $ 51
======= =======
EARNINGS PER SHARE DATA:
Basic $ .14 $ .02
======= =======
Diluted $ .11 $ .02
======= =======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Basic 2,379 2,288
===== =====
Diluted 3,152 2,834
===== =====
</TABLE>
Page 5
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Six months ended November 30
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1999 1998
<S> <C> <C>
NET SALES $ 7,125 $ 6,343
COST OF GOODS SOLD 4,738 4,170
------- -------
GROSS PROFIT 2,387 2,173
------- -------
OPERATING EXPENSES:
Selling 531 601
General and Administrative 1,217 971
Non-Employee Stock Option Expense 58 43
------- -------
1,806 1,615
------- -------
Operating income 581 558
------- -------
OTHER EXPENSE:
Interest expense (498) (355)
Financing charge - issuance of stock options (42) (25)
Other expense (16) (38)
------- -------
(556) (418)
------- -------
Income before income taxes 25 140
INCOME TAX BENEFIT 0 15
------- -------
NET INCOME $ 25 $ 155
======= =======
EARNINGS PER SHARE DATA:
Basic $ .01 $ .07
======= =======
Diluted $ .01 $ .05
======= =======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Basic 2,379 2,288
======= =======
Diluted 3,323 3,131
======= =======
</TABLE>
Page 6
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Months ended November 30
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows provided by (used in) operating activities: $ 507 $(1,851)
Cash flows used in investing activities: (542) (640)
Cash flows provided by financing activities: 128 2,462
------- -------
NET INCREASE (DECREASE) IN CASH 93 (29)
CASH
BEGINNING OF PERIOD 113 41
------- -------
CASH
END OF PERIOD $ 206 $ 12
======= =======
</TABLE>
Page 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, 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. It is suggested that these interim financial
statements be read in conjunction with the May 31, 1999 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 six months ended November 30, 1999
presented herein are not necessarily indicative of the results expected
for the year ending May 31, 2000.
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 November 30, 1999:
Raw materials & components $ 415
Work in process 2,668
Finished goods 3,131
Less: reserve for obsolete inventory (235)
--------
5,979
Less: non current inventory (750)
--------
$ 5,229
========
Page 8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations for the Quarter Ended November 30, 1999 and for the six
months ended November 1999 ("Fiscal 2000") and for the Quarter ended November
30, 1998 and for the six months ended November 1998 ("Fiscal 1999")
The Company's sales were $3,800,000 for the second quarter of Fiscal
2000 compared to $2,775,000 for the second quarter of Fiscal 1999, an increase
of $1,025,000 or 37%. Gross profit was $1,504,000 or 40% of sales for the second
quarter of Fiscal 2000 compared to gross profit of $992,000 or 36% of sales for
the second quarter of Fiscal 1999. Sales were $7,125,000 for the first six
months of Fiscal 2000 compared to sales of $6,343,000 for the first six months
of Fiscal 1999, an increase of $782,000 or 12%. Gross profit was $2,387,000 or
34% of sales for the first six months of Fiscal 2000 compared to gross profit of
$2,173,000 or 34% for the first six months of Fiscal 1999.
Increased sales in the Company's wholly owned subsidiary Bethlehem
Advanced Materials ("BAM") combined with increased sales in the Company's
Thermal Process Unit were the primary factors for the increased sales for the
second quarter of Fiscal 2000 compared to the second quarter of Fiscal 1999. For
the six-month period ended November 30, 1999, increased sales at BAM was the
primary factory for the increased sales over the same period last year.
Operating expenses for the second quarter of Fiscal 2000 were $848,000
or 22% of sales, compared to 786,000 or 28% of sales for the second quarter of
Fiscal 1999. For the first six months of Fiscal 2000 operating expenses were
$1,806,000 or 25% of sales, compared to operating expenses of $1,615,000 or 25%
of sales for the first six months of Fiscal 1999. The increase in administrative
expenses was due to increased legal and consulting expenses. Other expense
totaled $323,000 for the second quarter of Fiscal 2000 and $556,000 for the
first six months of Fiscal 1999. For the second quarter of Fiscal 1999 other
expense totaled $145,000 and for the first six months of Fiscal 1998 other
expense was $418,000. Interest expense was $313,000 for the second quarter of
Fiscal 2000 compared to $142,000 for the second quarter of Fiscal 1999. Interest
expense was $498,000 for the first six months of Fiscal 2000 compared to
$355,000 for same period last year. Increased interest expense at BAM was the
primary factor for the increase. On January 21, 1999, the Company entered into a
loan agreement with Nations Bank for a $3 million line of credit and term loan.
(See the Company's Liquidity and Capital Resources Section for further
information).
Net income for the second quarter of Fiscal 2000 was $333,000 compared
to net income of $51,000 for the second quarter of Fiscal 1999. Net income for
the first six months of Fiscal 2000 was $25,000 compared to net income of
155,000 for the first six months of Fiscal 1999. While the results of the second
quarter were positive, the Company's new order intake and backlog are a
continuing concern. Therefore, the Company cannot project that Fiscal 2000 year
results will be consistent with the Fiscal 2000 second quarter results.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of Fiscal 2000, $507,000 of cash was
provided by operating activities compared to $1,851,000 of cash used in
operating activities for the first six months of Fiscal 1999. The Company's
accounts payable increased $687,000 due to costs incurred on contracts in
process during the first six months of Fiscal 2000.
Cash flow used for investing activities, solely capital expenditures,
was $542,000 for the first six months of Fiscal 2000 compared to $640,000 for
the first six months of Fiscal 1999. The Company continues to build the high
temperature furnaces needed to support the long term contract secured by BAM.
The capital expenditures also include new computer equipment, upgrades to
existing plant equipment and new plant equipment at BAM.
Page 9
<PAGE>
Cash flow provided by financing activities was $128,000 for the first
six months of Fiscal 2000 compared to cash flow provided by financing activities
of $2,462,000 for the first six months of Fiscal 1999. On June 3, 1998, the
Company entered into a loan agreement with PNC for a $4 million line of credit
and term loan, secured by a first lien on the Company's (excluding BAM)
inventory, accounts receivable, machinery and equipment and other assets. The
proceeds of the line of credit and term loan were used to prepay the outstanding
term loan and line of credit with The CIT Group/Credit Finance ("CIT") and for
general working capital needs. On December 23, 1999, the agreement with PNC was
amended. The amended credit facility includes (a) an $800,000 term loan
requiring $13,000 monthly principal payments plus interest at 9.70%, maturing on
June 1, 2003, and (b) a $3,450,000 line of credit with advances against eligible
inventory and accounts receivable at the interest rate of prime plus one and
one-half percent, maturing on July 31, 2000. The line of credit will be reduced
to an amount equal to $3,200,000 after January 31, 2000. As of January 19, 2000,
the amount outstanding under the facility (including the term loan) is
$3,879,000. The loan agreement contains certain covenants which, among other
criteria, will require the Company to maintain specified levels of net worth.
UPE agreed to provide a guarantee for this credit facility. This guarantee
consists of an equipment repurchase agreement wherein UPE is required to either
liquidate or otherwise purchase for its own account the Company's eligible
inventory upon the occurrence of a payment default. In addition, UPE agreed to
subordinate $800,000 of indebtedness due from the Company to PNC. By securing
this funding, the Company expanded working capital and increased liquidity.
In September 1998, the Company entered into a $250,000 non revolving
and committed equipment line of credit with PNC. The purpose of the facility is
to provide funding for acquisition of equipment from time to time, in aggregate
amounts not exceeding the sum of $250,000. The maximum amount of each advance
made under the facility shall be equal to the lesser of; (1) the then current
unadvanced portion of the facility or, (2) ninety percent (90%) of the price
paid by the Company to acquire the equipment. The rate bears interest of a
maximum rate of 9.40% and a minimum rate of 9.15%. Borrowings under the facility
are secured by a lien on all of the collateral advanced. Borrowings under this
facility are fully amortized with fixed equal payments of $5,000 not to exceed a
term of 60 months. The amount outstanding as of January 19, 2000 under the
facility is $184,000.
On January 21, 1999, the Company entered into a loan agreement with
Bank of America for a $3 million line of credit and term loan, secured by a
first lien on the Company's inventory, accounts receivable, machinery and
equipment and other assets. The proceeds of this credit facility are being used
to finance capital expenditures at the BAM facility to support the contract
received during the third quarter of 1999. On July 31, 1999, the credit line was
converted to a seven-year term loan requiring principal payments of
approximately $38,000 plus interest at prime plus one half of one percent. The
loan agreement contains certain covenants, which among other criteria will
require the Company to maintain a specified level of net worth. As of January
19, 2000, the amount outstanding under the facility is $2,808,000. .
From time to time in the ordinary course of business, UPE advances
funds to the Company to enable the Company to meet certain temporary cash
requirements. These advances are repaid from operating cash flow. As of January
19, 2000, $788,000 of these advances remains outstanding.
On November 1, 1999, the Company reached an agreement with the
Harrisburg Authority "Harrisburg" with respect to a note balance due from the
Company on November 1, 1999 in the amount of $535,000. Under the terms of the
agreement, Harrisburg agreed to extend the note pay off date to May 1, 2000 and
accepted the sum of $50,000 on November 5, 1999 and monthly payments of
principal and interest commencing December 1, 1999 through May 1, 2000 in the
approximate amount of $10,000. The balance due on May 1, 2000 will be $445,000.
The Company paid the amount of $44,000 on November 1, 1999 for interest accrued
on the note from March of 1998 to November 1, 1999. As of January 19, 2000, the
amount outstanding on this note is $472,000.
Backlog of $19,804,432 at November 30, 1999, compares to backlog of
$23,373,000 for the same period last year.
Page 10
<PAGE>
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.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 5. OTHER INFORMATION
On November 3, 1999 a Form 8-K was filed to report the agreement
reached with the Harrisburg Authority with respect to a note balance due from
the Company on November 1, 1999 in the amount of $535,000. The agreement extends
the note pay off date to May 1, 2000. The Company paid Harrisburg $50,000 on
November 5, 1999 and agreed to pay six monthly payments of approximately $10,000
commencing December 1, 1999. The balance due on May 1, 2000 will be $445,208. In
addition, on November 1, 1999, the Company received an extension from PNC Bank,
N.A. for the sum of $250,000 due on November 1, 1999 to January 3, 2000.
On January 3, 2000 a Form 8-K was filed to report the following (i) the
receipt of waivers from PNC Bank, N.A. and Bank of America for violation of
covenants for the reporting period ending August 31, 1999; (ii) an extension
from PNC Bank, N.A. for the sum of $125,000 due on January 3, 2000 to January
31, 2000, (iii) the resignation of Salvatore J. Zizza as Chairman of the Company
and the appointment of Alan H. Silverstein, (iv) the appointment of Seidman and
Co. Inc., Investment Banking as an advisor to the Board of Directors.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits: 27 - Financial Data Schedule
Reports on Form 8-K: Filed November 3, 1999 and January 3, 2000 - Under
Item 5 Other Events
Page 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: January 19, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-QSB FOR THE SIX MONTHS ENDED NOVEMBER 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> NOV-30-1999
<CASH> 206
<SECURITIES> 0
<RECEIVABLES> 3,309
<ALLOWANCES> 37
<INVENTORY> 5,229
<CURRENT-ASSETS> 10,067
<PP&E> 14,111
<DEPRECIATION> 7,851
<TOTAL-ASSETS> 17,925
<CURRENT-LIABILITIES> 4,673
<BONDS> 0
<COMMON> 1,189
0
0
<OTHER-SE> 1,021
<TOTAL-LIABILITY-AND-EQUITY> 17,925
<SALES> 7,125
<TOTAL-REVENUES> 7,125
<CGS> 4,738
<TOTAL-COSTS> 1,806
<OTHER-EXPENSES> 58
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 498
<INCOME-PRETAX> 25
<INCOME-TAX> 0
<INCOME-CONTINUING> 25
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
