- --------------------------------------------------------------------------------
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 29, 2000
(Third 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
February 29, 2000: 2,378,520.
Number of pages in this report: 14
<PAGE>
INDEX
PART I. Financial Information: Page No.
- ------- ---------------------- --------
Consolidated Balance Sheet as of
February 29, 2000 (unaudited) and May 31, 1999.................3
Consolidated Statements of Income for the three months
ended February 29, 2000 and February 28, 1999 (unaudited)......5
Consolidated Statements of Income for the nine
months ended February 29, 2000 and
February 28, 1999 (unaudited)..................................6
Consolidated Condensed Statements of
Cash Flows for the nine
months ended February 29, 2000 and
February 28, 1999 (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...........12
Signatures....................................................13
Page 2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
-----------------------------
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
February 29, 2000 May 31, 1999
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 90 $ 113
Accounts receivable (net of allowance
for doubtful accounts of $19 and $47) 2,490 2,342
Costs and estimated profit in
excess of billings on long-term contracts 1,563 1,618
Inventories 4,929 5,092
Prepaid expenses and other current assets 231 113
Deferred tax asset 375 375
------- -------
Total Current Assets 9,678 9,653
------- -------
PROPERTY, PLANT AND EQUIPMENT, at cost less
accumulated depreciation and amortization 5,717 5,917
OTHER ASSETS:
Inventories, non current 750 750
Intangibles (net of $145 and $122 of accumulated amortization) 252 275
Intangible pension and deferred compensation plan assets 145 145
Deferred financing costs 297 382
Other 106 115
------- -------
Total Other Assets 1,550 1,667
------- -------
Total Assets $16,945 $17,237
======= =======
</TABLE>
Page 3
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
February 29, 2000 May 31, 1999
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES;
Current maturities of long-term debt and capital leases $ 4,241 $ 1,209
Note Payable - related party 788 787
Accounts payable 3,873 3,545
Accounts payable, related parties 75 24
Accrued liabilities 370 565
Billings in excess of costs and estimated profit
on long-term contracts 215 239
-------- --------
Total Current Liabilities 9,562 6,369
-------- --------
LONG TERM LIABILITIES:
Long-term debt and capital leases, net of current maturities 4,331 8,266
Deferred compensation and other pension liabilities 511 491
-------- --------
Total Long-Term Liabilities 4,842 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; 2,378,520 shares outstanding 1,189 1,189
Additional paid-in capital 6,658 6,557
Accumulated deficit (5,306) (5,635)
Less treasury stock, at cost, 12 shares -- --
-------- --------
Total Stockholders' Equity 2,541 2,111
-------- --------
Total Liabilities and Stockholders' Equity $ 16,945 $ 17,237
======== ========
</TABLE>
Page 4
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three months ended February 29, 2000 and February 28, 1999
(in thousands, except per share data)
(unaudited)
- --------------------------------------------------------------------------------
2000 1999
NET SALES $ 3,122 $ 3,063
COST OF GOODS SOLD 2,195 2,384
------------------
GROSS PROFIT 927 679
------------------
OPERATING EXPENSES:
Selling 274 266
General and Administrative 568 408
Non-Employee Stock Option Expense 29 29
------------------
871 703
------------------
Operating income (loss) 56 (24)
------------------
OTHER INCOME (EXPENSE):
Interest expense (260) (161)
Financing charge - amortization of stock options (26) (61)
Other income 533 102
------- -------
247 (120)
------------------
Income (loss) before income taxes 303 (144)
INCOME TAX PROVISION -0- (30)
------------------
NET INCOME (LOSS) $ 303 $ (174)
==================
EARNINGS (LOSS) PER SHARE DATA:
Basic $ .13 $ (.08)
==================
Diluted $ .11 $ (.08)
==================
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
Basic 2,379 2,289
==================
Diluted 2,843 2,289
==================
Page 5
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Nine months ended February 29, 2000 and February 28, 1999
(in thousands, except per share data)
(unaudited)
- --------------------------------------------------------------------------------
2000 1999
NET SALES $ 10,247 $ 9,406
--------------------
COST OF GOODS SOLD 6,933 6,554
--------------------
GROSS PROFIT 3,314 2,852
--------------------
OPERATING EXPENSES:
Selling 805 867
General and Administrative 1,785 1,379
Non-employees Stock Option Expense 87 72
--------------------
2,677 2,318
--------------------
Operating income 637 534
--------------------
OTHER INCOME (EXPENSE):
Interest expense (758) (516)
Financing charge - amortization of stock options (68) (86)
Other income 517 64
--------------------
(309) (538)
--------------------
Income (loss) before income taxes 328 (4)
INCOME TAX PROVISION -0- (15)
--------------------
NET INCOME (LOSS) $ 328 $ (19)
====================
EARNINGS (LOSS) PER SHARE DATA:
Basic $ .14 $ (.01)
====================
Diluted $ .10 $ (.01)
====================
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING:
EQUIVALENT SHARES OUTSTANDING
Basic 2,379 2,289
====================
Diluted 3,209 2,289
====================
Page 6
<PAGE>
THE BETHLEHEM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Nine Months ended February 29, 2000 and February 28, 1999
(in thousands)
(unaudited)
- --------------------------------------------------------------------------------
2000 1999
---- ----
Cash flow provided by (used in) operating activities $ 331 $(2,125)
Cash flow provided by (used in) investing activities: 462 (1,995)
Cash flow provided by (used in) financing activities: (816) 4,752
------- -------
NET INCREASE (DECREASE) IN CASH (23) 632
CASH
BEGINNING OF PERIOD 113 41
------- -------
CASH
END OF PERIOD $ 90 $ 673
======= =======
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 nine months ended February 29, 2000
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 consisted of the following at February 29, 2000:
Raw materials & components $ 362
Work in process 2,529
Finished goods 3,108
Less: reserve for obsolete inventory (320)
-------
5,679
Less: non current inventory (750)
-------
$ 4,929
=======
Page 8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
- -------------------------------------------------------------------------
RESULTS OF OPERATION
- --------------------
Repayment of Outstanding Indebtedness and the Impact on the Company's Cash
Position
As of February 29, 2000, the Company had $90,000 in available
cash. As of May 1, 2000, the amount outstanding to the Harrisburg Authority
"Harrisburg" of $445,000 is due and payable. The Company is currently attempting
to secure additional financing to provide funds to pay Harrisburg. However,
there can be no assurance that the Company will be successful in any such
efforts. Accordingly, if the Company is unsuccessful in such efforts, the
Company's cash position will be insufficient to satisfy its liquidity
requirements, and the Company will be required to explore other options
including but not limited to the sale, refinancing or additional financing of
its 29 acre site and manufacturing facilities in Easton, Pa.
For further information relating to the Company's liquidity, see "Liquidity and
Capital Resources".
Results of Operations for the Quarter Ended February 29, 2000 and for the nine
months ended February 29, 2000 ("Fiscal 2000") and for the Quarter ended
February 28, 1999 and for the nine months ended February 28, 1999 ("Fiscal
1999")
The Company's sales were $3,122,000 for the third quarter of
Fiscal 2000 compared to $3,063,000 for the third quarter of Fiscal 1999, an
increase of $59,000 or 2%. Gross profit was $927,000 or 30% of sales for the
third quarter of Fiscal 2000 compared to gross profit of $679,000 or 22% of
sales for the third quarter of Fiscal 1999. Sales were $10,247,000 for the first
nine months of Fiscal 2000 compared to sales of $9,406,000 for the first nine
months of Fiscal 1999, an increase of $841,000. Gross profit was $3,314,000 or
32% of sales for the first nine months of Fiscal 2000 compared to gross profit
of $2,852,000 or 30% of sales for the first nine months of Fiscal 1999.
Increased sales in the Company's Thermal Process Unit combined
with increased sales in the Filtration Unit were the primary factors for the
increased sales for the third quarter of Fiscal 2000 compared to the third
quarter of Fiscal 1999. For the nine month period ended February 29, 2000
increased sales in the Company's wholly owned subsidiary, Bethlehem Advanced
Materials "BAM" was the primary factor for the increased sales over the same
period last year. This increase in sales is line with the contract executed by
the Company in November of 1998.
As of March 31,2000 the Company no longer manufactures its
products at its facilities in Easton, PA. Orders for customers in North and
South America will routinely be manufactured through Penn Bethlehem, LLC, a
joint venture with Penn Ironworks located in Reading, PA. Orders for Europe and
Asia will be manufactured either in Germany or Poland where the Company has
previously established manufacturing and licensing relationships. The Company
plans to sell all or some of its 29 acre site and manufacturing facilities in
Easton, PA. However, the Company will continue to direct its sales, marketing,
engineering and field services from its Easton, PA location.
In conjunction with discontinuing manufacturing of the
Company's products in Easton, PA, a tentative agreement was reached with The
Bethlehem Employees Association to provide closure to the existing collective
bargaining agreement. The terms of the definitive agreement are currently under
review. The Company terminated certain employees. The charge related to this
plan of action was not considered material relative to the quarter and nine
months ended February 29, 2000.
Operating expenses for the third quarter of Fiscal 2000 were
$871,000 or 28% of sales, compared to $703,000 or 23% of sales for the third
quarter of Fiscal 1999. For the first nine months of Fiscal 2000 operating
expenses were $2,677,000 or 26% of sales, compared to operating expenses of
$2,318,000 or 25% of sales for the first nine months of Fiscal 1999. The
increase in general and administrative expenses was due to increased salary and
legal expense at BAM.
Interest expense was $260,000 for the third quarter of Fiscal
2000 and $758,000 year to date compared to $161,000 for the third quarter of
Fiscal 1999 and $516,000 year to date. Increased interest
Page 9
<PAGE>
expense at BAM was the primary factor for the increase. 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. (See the Company's Liquidity and Capital Resources
Section for further information). Other income was $533,000 for the third
quarter of Fiscal 2000 compared to other income of $102,000 for the third
quarter of Fiscal 1999. Other income for the first nine months of Fiscal 2000
was $517,000 compared to other income of $64,000 for the first nine months of
Fiscal 1999. During the third quarter of Fiscal 2000, in conjunction with the
discontinuing of manufacturing in Easton, Pa, the Company sold the machinery and
equipment assets associated with this facility. The Company recorded a gain of
$552,000 for this sale. For further information relating to this transaction,
see "Liquidity and Capital Resources."
The Company's income before taxes for the third quarter of
Fiscal 2000 was $303,000 compared to a loss before income taxes of $144,000 for
the third quarter of Fiscal 1999. Income before taxes for the first nine months
of Fiscal 2000 was $328,000 compared to a loss before income taxes of $4,000 for
the same period last year. Net income for the third quarter of Fiscal 2000 was
$303,000 compared to a net loss of $174,000 for the third quarter of Fiscal
1999. Net income for the first nine months of Fiscal 2000 was $328,000 compared
to a net loss of $19,000 for the same period last year.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of Fiscal 2000, $331,000 of cash
was provided by operating activities compared to $2,125,000 of cash used in
operating activities for the first nine months of Fiscal 1999. The Company's
accounts payable increased by approximately $328,000 due to costs incurred on
contracts in process during the first nine months of Fiscal 2000.
Cash flow provided by investing activities comprised of
capital expenditures and was offset by the effect of the sale of assets of
$462,000 for the first nine months of Fiscal 2000 compared to cash flow used in
investing activities of $1,995,000 for the first nine months of Fiscal 1999. The
Fiscal 2000 capital expenditures of $740,000 included costs to build the high
temperature furnaces needed to support the long term contract secured by BAM,
upgrades to existing plant equipment, new plant equipment and new computer
equipment. Cash flow provided by investing activities was $1,202,000 for the
first nine months of Fiscal 2000 due to the sale of the machinery and equipment
assets.
Cash flow used in financing activities was $816,000 for the
first nine months of Fiscal 2000 compared to cash flow provided by financing
activities of $4,752,000 for the first nine months of Fiscal 1999. On June 3,
1998, the Company entered into a loan agreement with PNC Bank National
Association for a $4 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 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 and for general working capital needs. This credit facility included (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 $3,200,000 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. During the
third quarter of Fiscal 2000, the Company prepaid the term loan in the amount of
$536,000 from proceeds raised in the sale of the machinery and equipment assets.
The line of credit agreement contains certain covenants, which
among other criteria will require the Company to maintain specified levels of
net worth. Universal Process Equipment ("UPE") agreed to provide a guarantee for
the 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. As of April 19, 2000, the amount outstanding under
the line of credit is $3,200,000.
In September 1998, the Company entered into a $250,000
non-revolving and committed equipment line of credit with PNC. The purpose of
Page 10
<PAGE>
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. As of April 19, 2000, the balance outstanding
under the facility is $169,000.
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 were 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 April 19,
2000, the balance outstanding under the facility is $2,692,000.
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
April 19, 2000, $788,000 of these advances remains outstanding.
On November 1, 1999, the Company reached an agreement with the
Harrisburg Authority 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 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. The
balance due and payable on May 1, 2000 is $445,000. The Company is currently
attempting to secure additional financing to provide funds to pay Harrisburg.
However, there can be no assurance that the Company will be successful in any
such efforts. Accordingly, if the Company is unsuccessful in such efforts, the
Company's cash position will be insufficient to satisfy its liquidity
requirements, and the Company will be required to explore other options
including but not limited to the sale, refinancing or additional financing of
its 29 acre site and manufacturing facilities in Easton, Pa.
Backlog as of February 29, 2000 was $19,165,000 compared to
backlog of $24,174,000 at February 28, 1999.
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 are 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 11
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
- ------- -----------------
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
Exhibits: 27-Financial Data Schedule
Reports on Form 8-K: None
Page 12
<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 19, 2000
Page 13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Company
10-QSB for the twelve months ended August 31, 1999 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 90
<SECURITIES> 0
<RECEIVABLES> 2,509
<ALLOWANCES> 19
<INVENTORY> 4,929
<CURRENT-ASSETS> 9,678
<PP&E> 9,011
<DEPRECIATION> 3,294
<TOTAL-ASSETS> 16,945
<CURRENT-LIABILITIES> 9,562
<BONDS> 4,331
<COMMON> 1,189
0
0
<OTHER-SE> 1,352
<TOTAL-LIABILITY-AND-EQUITY> 16,945
<SALES> 10,247
<TOTAL-REVENUES> 10,247
<CGS> 6,933
<TOTAL-COSTS> 2,677
<OTHER-EXPENSES> 449
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 758
<INCOME-PRETAX> 328
<INCOME-TAX> 0
<INCOME-CONTINUING> 328
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 328
<EPS-BASIC> .14
<EPS-DILUTED> .10
</TABLE>
