<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended June 30, 1994
Commission file number 1-1941
BETHLEHEM STEEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State of incorporation) 24-0526133
(I.R.S. Employer
Identification No.)
1170 Eighth Avenue
BETHLEHEM, PENNSYLVANIA l8016-7699
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code:
(610) 694-2424
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 of Common Stock Outstanding as of August 10, 1994:
109,346,946
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BETHLEHEM STEEL CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
PART I. Financial Information
Consolidated Statements of Income-
Three Months and Six Months Ended June 30, 1994
and 1993 (unaudited). . . . . . . . . . . . . . . . . . 2
Consolidated Balance Sheets-
June 30, 1994 (unaudited), December 31, 1993
and June 30, 1993 (unaudited) . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1994 and
1993 (unaudited). . . . . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements. . . . . . . . . 5
Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . . 6
PART II. Other Information
Item 1. Legal Proceedings. . . . . . . . . . . . . . . 9
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . 11
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Bethlehem Steel Corporation
CONSOLIDATED STATEMENTS OF INCOME
(dollars and shares in millions, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
- - ------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
$1,230.5 $1,117.4 Net Sales $2,361.7 $2,137.8
- - -------- -------- -------- --------
Costs and Expenses:
1,087.9 1,010.6 Cost of sales 2,093.1 1,957.0
67.1 70.8 Depreciation 132.6 137.2
Selling, administration
33.9 38.3 and general expense 68.3 78.3
- - -------- -------- -------- --------
1,188.9 1,119.7 Total Costs and Expenses 2,294.0 2,172.5
- - -------- -------- -------- --------
41.6 (2.3) Income (Loss) from Operations 67.7 (34.7)
Financing Income (Expense):
(12.6) (15.7) Interest and other financing costs (26.2) (32.2)
1.7 1.9 Interest and other income 3.6 3.5
- - -------- -------- -------- --------
30.7 (16.1) Income (Loss) before Income Taxes 45.1 (63.4)
(4.7) 2.5 Benefit (Provision) for Income Taxes (6.2) 9.0
- - -------- -------- -------- --------
26.0 (13.6) Net Income (Loss) 38.9 (54.4)
Dividends on Preferred and
10.8 10.9 Preference Stock 21.6 18.4
- - -------- -------- -------- --------
Net Income (Loss) Applicable
$ 15.2 $ (24.5) to Common Stock $ 17.3 $ (72.8)
======== ======== ======== =========
$ 0.14 $ (0.27) Net Income (Loss) per Common Share $ 0.17 $ (0.80)
109.2 90.7 Average Primary Shares Outstanding 102.2 90.7
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
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Bethlehem Steel Corporation
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
ASSETS
June 30 December 31 June 30
1994 1993 1993
(unaudited) (unaudited)
----------- ----------- -----------
Current Assets:
Cash and cash equivalents $ 145.4 $ 228.9 $ 205.4
Receivables, less allowances 511.1 503.2 489.0
Inventories:
Raw materials 293.0 341.9 350.3
Finished and semifinished 597.8 494.8 412.6
Contract work-in-progress, less
billings 15.6 15.8 18.7
--------- --------- ---------
906.4 852.5 781.6
Other current assets 5.5 6.5 7.9
--------- --------- ---------
Total Current Assets 1,568.4 1,591.1 1,483.9
Investments and Miscellaneous Assets 144.9 124.0 153.0
Property, Plant and Equipment,
less accumulated depreciation of
$4,152.0, $4,107.0 and $4,371.7 2,665.7 2,634.3 2,784.9
Deferred Income Tax Asset - net 921.5 926.7 839.2
Intangible Asset - Pensions 568.8 600.6 202.2
--------- --------- ---------
Total Assets $ 5,869.3 $ 5,876.7 $ 5,463.2
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 390.2 $ 360.9 $ 360.5
Accrued employment costs 282.2 262.4 262.3
Accrued taxes 57.8 65.4 54.5
Debt and capital lease obligations 124.8 95.5 88.4
Other current liabilities 103.4 130.0 110.1
-------- --------- ---------
Total Current Liabilities 958.4 914.2 875.8
Pension Liability 1,256.6 1,613.6 1,081.2
Postretirement Benefits Other Than
Pensions 1,454.2 1,448.3 1,433.0
Long-term Debt and Capital Lease
Obligations 703.4 718.3 650.2
Other Long-term Liabilities 417.4 485.7 449.5
Stockholders' Equity:
Preferred Stock 11.6 11.6 11.6
Preference Stock 2.9 2.8 3.0
Common Stock 111.2 93.4 92.9
Common Stock held in treasury at cost (59.5) (59.7) (59.7)
Additional paid-in capital 1,914.1 1,588.4 1,653.7
Retained deficit (901.0) (939.9) (728.0)
--------- --------- ---------
Total Stockholders' Equity 1,079.3 696.6 973.5
--------- --------- ---------
Total Liabilities and Stockholders' Equity $5,869.3 $ 5,876.7 $ 5,463.2
========= ========= =========
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
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Bethlehem Steel Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
(unaudited)
Six Months Ended
June 30
-----------------
1994 1993
---- ----
Operating Activities:
Net income (loss) $ 38.9 $ (54.4)
Adjustments for items not affecting cash
from operating activities:
Depreciation 132.6 137.2
Deferred Income Taxes 5.2 (10.0)
Other - net 3.3 2.5
Working capital (excluding financing and
investing activities):
Receivables (7.8) (85.7)
Inventories (54.6) 70.9
Accounts payable 30.2 (3.1)
Employment costs and other (2.8) (35.0)
Other - net 5.8 7.5
--------- ---------
Cash Provided from Operating Activities 150.8 29.9
--------- ---------
Investing Activities:
Capital expenditures (222.9) (126.4)
Cash proceeds from sale of businesses
and assets 3.0 9.4
Other - net (0.4) (0.8)
--------- ---------
Cash Used for Investing Activities (220.3) (117.8)
--------- ---------
Financing Activities:
Pension expense 105.2 102.1
Pension funding (437.5) (174.8)
Revolving and other credit borrowings
(payments) - net 25.0 (80.0)
Long-term debt and capital lease borrowings 14.6 49.4
Long-term debt and capital lease payments (48.7) (27.0)
Restructured facilities payments (7.7) (17.0)
Common Stock issued 355.3 -
Preferred Stock issued - 248.4
Cash dividends paid (20.2) (16.0)
--------- ---------
Cash (Used for) Provided from Financing Activities (14.0) 85.1
--------- ---------
Net Decrease in Cash and Cash Equivalents (83.5) (2.8)
Cash and Cash Equivalents- Beginning of Period 228.9 208.2
--------- ---------
- End of Period $ 145.4 $ 205.4
========= =========
Supplemental Cash Payment Information:
Interest, net of amount capitalized $ 23.3 $ 19.5
Income taxes $ 0.1 $ 5.6
The accompanying Notes are an integral part of the
Consolidated Financial Statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Segment Results (dollars in millions):
(unaudited)
1994 1993
-------------------- --------------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
-------------------- --------------------------------
Net Sales:
Basic Steel Operations $ 1,189.9 $ 1,125.7 $ 1,112.2 $ 1,029.3 $ 1,077.3
Steel Related Operations 45.3 10.1 21.7 29.8 43.3
Eliminations (4.7) (4.6) (3.6) (3.8) (3.2)
---------- ---------- ---------- ---------- ----------
Total $ 1,230.5 $ 1,131.2 $ 1,130.3 $ 1,055.3 $ 1,117.4
========== ========== ========== ========== ==========
Operating Income (Loss):
Basic Steel Operations $ 49.3 $ 35.8 $ (278.7)*$ 32.0 $ 1.4
Steel Related Operations (7.7) (9.7) (5.2) (8.6) (3.7)
---------- ---------- ---------- ---------- ----------
Total $ 41.6 $ 26.1 $ (283.9) $ 23.4 $ (2.3)
========== ========== ========== ========== ==========
Shipments
(thousands of net tons):
Basic Steel Operations 2,346 2,290 2,328 2,160 2,290
========== ========== ========== ========== ==========
Raw Steel Production
(thousands of net tons):
Basic Steel Operations 2,648 2,474 2,691 2,629 2,511
========== ========== ========== ========== ==========
* Operating income for the Basic Steel segment was $76.4 million, excluding
the $350 million charge ($290 million after tax) recorded in the fourth
quarter of 1993. The restructuring loss was principally for a revised
modernization plan for our Bethlehem Structural Products subsidiary and for
the book value of the idled coke plant at our Sparrows Point Division.
2. The Consolidated Financial Statements as of and for the three month and
six month periods ended June 30, 1994 and 1993 have not been audited. However,
the information reflects all adjustments which, in the opinion of management,
are necessary to present fairly the results shown for the periods indicated.
Management believes all adjustments were of a normal recurring nature.
3. These Consolidated Financial Statements should be read together with the
1993 audited financial statements set forth in Bethlehem's Annual Report on Form
10-K filed with the Securities and Exchange Commission.
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MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Review of Results:
Second Quarter and First Six Months 1994
Second Quarter and First Six Months 1993
Bethlehem reported net income of $26 million, or $.14 per common share,
for the second quarter of 1994, an improvement of $40 million over the net
loss of $14 million, or $.27 per common share, for the second quarter of 1993.
For the first six months of 1994, net income was $39 million, or $.17 per
common share, an improvement of $93 million over the net loss of $54 million,
or $.80 per common share, for the first six months of 1993.
Segment Results
Basic Steel Operations. The Basic Steel Operations segment had income
from operations of $49 million for the second quarter of 1994, an increase of
$48 million over income from operations of $1 million for the year earlier
period. For the first six months of 1994, this segment had income from
operations of $85 million, an increase of $112 million over the loss from
operations of $27 million for the first six months of 1993.
This segment's improved operating results for the second quarter of 1994
compared to the year earlier period reflect strong steel demand from the
automotive, machinery and light construction markets resulting in higher
realized steel prices and increased shipments primarily of sheet products from
the Burns Harbor and Sparrows Point Divisions. The benefit of the improved
prices and shipments was partially offset by increased operating costs,
including higher costs for purchased slabs to meet customer requirements
and higher costs for purchased coke in connection with the rebuild of a coke
oven battery at Burns Harbor.
At Bethlehem Structural Products Corporation operating results were worse
for the second quarter of 1994 compared to the year earlier period because of
increased operating costs at its blast furnace operations, higher employment
costs and lower prices and shipments of its structural products.
Operating results at Pennsylvania Steel Technologies ("PST") were also
worse for the second quarter of 1994 compared to the year earlier period
primarily due to higher scrap prices and higher employment costs.
Additionally, PST incurred start-up costs in connection with its modernization
program discussed below.
Steel Related Operations. The Steel Related Operations segment
(BethShip, BethForge, and CENTEC) had losses from operations of $8 million for
the second quarter and $17 million for the first half of 1994 compared to
losses from operations of $4 million and $8 million for the year earlier
periods. Results at the BethShip Division were worse for the second quarter
of 1994 than for the year earlier quarter due to weak demand from the ship
repair market. BethForge, Inc. and the CENTEC joint venture continued to
experience losses in the second quarter of 1994.
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Liquidity
Principal uses of cash during the first six months of 1994 included
capital expenditures, pension funding and increased working capital to support
high levels of operations at the Burns Harbor and Sparrows Point Divisions and
a blast furnace reline at Burns Harbor. Cash provided from operating
activities was $151 million for the first half of 1994 compared to $30 million
for the first half of 1993. Cash and cash equivalents totaled $145 million at
June 30, 1994 compared to $229 million at December 31, 1993 and $205 million
at June 30, 1993.
Bethlehem has received additional bank commitments raising its total
borrowing capacity under its 1992 credit agreement from $400 million to $467
million. With these additional commitments, the amount available for
additional borrowings and letters of credit under this agreement total $340
million. Bethlehem borrowed $25 million under its 1992 credit agreement
during the second quarter in order to support the increase in working capital.
At June 30, 1994, $25 million of borrowings and $102 million for letters
of credit were outstanding under this agreement. Bethlehem's accounts
receivable and inventories are pledged as collateral under this agreement.
In April 1994, Bethlehem completed an offering of $26 million of 8% tax
exempt revenue bonds due 2024. The proceeds are being used to finance the
construction of a solid waste disposal facility at the Burns Harbor Division.
Bethlehem repaid $49 million of debt and capital lease obligations during
the first six months of 1994 and expects to repay an additional $72 million of
such obligations during the remainder of the year, including the $25 million
of borrowings outstanding under the 1992 credit agreement.
Capital expenditures were $223 million for the first six months of 1994
compared to $126 million during the year earlier period. Capital expenditures
are currently expected to be about $450 million in 1994 compared to $327
million in 1993.
Bethlehem contributed a total of $437 million to its pension fund during
the first six months of 1994, including net proceeds of $355 million from a
public offering of 17.25 million shares of Common Stock. As a result of this
funding, Bethlehem's unfunded pension liability was reduced to approximately
$1,257 million at June 30, 1994 compared to $1,614 million at December 31,
1993. Pension funding reform legislation is currently pending in Congress.
The prospects for passage of such legislation are uncertain. If the
legislation is enacted as currently proposed, it is not expected to increase
Bethlehem's minimum annual contribution requirement for its pension fund for
at least seven years because of transition rules. The proposed legislation
would raise Bethlehem's annual pension insurance premiums from about $8
million to about $21 million over a three year period, assuming there was no
change in the funded level of the pension fund.
Principal uses of cash during the remainder of 1994 include capital
expenditures, additional pension funding and the repayment of debt and capital
lease obligations. Bethlehem expects to maintain an adequate level of
liquidity from cash flow from operations, reductions in working capital and
available borrowings under its 1992 revolving credit agreement.
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Capital Projects and Joint Ventures
Work is progressing on three capital projects at Burns Harbor that will
further enhance the competitiveness of this Division. Rebuild of a coke oven
battery has been accelerated, with the battery now scheduled to resume
production in December of 1994. A reline of one of Burns Harbor's two blast
furnaces commenced on July 29 and is scheduled to be completed in November.
Construction is also proceeding on a new coal injection facility for the blast
furnaces which is on schedule for completion in early 1995. Operating costs
per ton are higher at Burns Harbor while these projects are underway, due
primarily to lower raw steel production and increased costs for purchased
slabs and coke.
PST is nearing the scheduled completion of its modernization program to
establish it as the low cost North American producer of high quality railroad
rails and specialty blooms. PST expects to commence producing premium head
hardened rails in September.
During the second quarter, a joint venture in which Bethlehem is
participating, known as Double G Coatings Company, L.P., started operation of
a 270,000 ton per year sheet coating line near Jackson, Mississippi, which
produces galvanized and Galvalume coated sheets primarily for the construction
market. The Sparrows Point Division is providing cold rolled coils for
approximately half of Double G's annual capacity and is responsible for
marketing its share of the finished product.
Dividends
On July 27, 1994, the Board of Directors declared dividends of $1.25 per
share on Bethlehem's $5.00 Cumulative Convertible Preferred Stock, $0.625 per
share on Bethlehem's $2.50 Cumulative Convertible Preferred Stock and $0.875
per share on Bethlehem's $3.50 Cumulative Convertible Preferred Stock, each
payable September 10, 1994 to holders of record on August 10, 1994. No
dividend was declared on Bethlehem's Common Stock.
Outlook
The steel-intensive sectors of the economy remain strong, and Bethlehem
believes that recent and expected levels of consumer spending and business
investment will support high levels of steel demand through 1995. Industry
shipments are estimated to be 91 million tons in 1994.
As to the near term outlook for Bethlehem, demand for its flat-rolled
products is very strong and orders are on controlled acceptance at the Burns
Harbor and Sparrows Point Divisions. In order to restore fair value for its
products and help rebuild its financial strength, Bethlehem announced price
increases for all its sheet and plate products, effective January 1, 1995.
Bethlehem will incur higher costs during the remainder of the year in
connection with the modernization projects underway at Burns Harbor and the
start-up of PST's modernized steelmaking and rail production facilities.
These projects are very important to Bethlehem over the longer-term and will
help it to achieve sustained profitability.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
Bethlehem, in the ordinary course of its business, is the subject of
various pending or threatened legal actions involving governmental agencies or
private interests. Bethlehem believes that any ultimate liability arising
from these actions should not have a material adverse effect on its
consolidated financial position at June 30, 1994.
On June 9, 1994, the United States Environmental Protection Agency (the
"EPA") issued an administrative Complaint and Notice of Opportunity for
Hearing alleging several violations of the polychlorinated biphenyl (PCB)
regulations under the Toxic Substance Control Act by Bethlehem at the Sparrows
Point Division. The Complaint sets forth a proposed civil penalty of
$145,500. On June 30, 1994, Bethlehem filed its Answer and Request for
Hearing. Settlement discussions have been initiated between Bethlehem and
the EPA. If such discussions do not succeed, Bethlehem believes it has
meritorious defenses and will vigorously defend the action.
The following previously reported legal proceedings had developments
during the second quarter of 1994:
The Justice Department, the EPA and the Texas Natural Resource
Conservation Commission (formerly Texas Water Commission) have instituted a
criminal investigation into certain environmental practices involving the
operations of the BethShip Sabine Yard in Port Arthur, Texas. The basic
operations of the Yard comprise the drydocking of marine vessels to clean and
paint exterior surfaces and internal tanks, as well as performing steel hull
plate repairs and other general repairs. These operations use blasting grit,
paint thinner and other materials. The investigation includes the above
operations and the usage, treatment, storage and disposal of those materials.
Bethlehem is cooperating with the authorities as to the conduct of the
investigation, which is continuing. While no criminal charges have been
brought or fines or penalties proposed, Bethlehem has had discussions with the
government to explore possible resolution of the matter. However, it is not
possible at this time to reach any conclusions as to the outcome of the
investigation or the future decisions or actions by the governmental agencies.
On September 10, 1992, the Justice Department on behalf of the EPA filed
a complaint against Bethlehem in the United States District Court for the
Eastern District of Pennsylvania for penalties for alleged violations of the
coke-by-product recovery plant benzene NESHAP at Bethlehem Structural Products
Corporation and the Sparrows Point Division. The complaint alleges that
Bethlehem failed to meet the regulatory deadlines for operation of certain
sources covered by benzene NESHAP regulations at the two facilities. The
complaint also alleges that Bethlehem failed to submit certain monthly
reports in a timely fashion. On July 5, 1994, the Court entered a Consent
Decree memorializing a settlement resolving all issues in this matter. The
Consent Decree requires Bethlehem to pay a civil penalty of $650,000 and to
continue to comply with all applicable requirements of the benzene NESHAP
regulations at Bethlehem Structural Products Corporation and at the Sparrows
Point Division.
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Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following is an index of the exhibits included in this Report on Form
10-Q:
11. Statement regarding computation of per share earnings.
(b) Reports on Form 8-K.
Except as previously reported, no reports on Form 8-K were filed by
Bethlehem during the quarter ended June 30, 1994.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, Bethlehem Steel Corporation has duly caused this
report to be signed on its behalf by the undersigned thereunto
duly authorized.
Bethlehem Steel Corporation
(Registrant)
by
/s/ L. A. Arnett
______________________
L. A. Arnett
Vice President and
Controller (principal
accounting officer)
Date: August 11, 1994
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EXHIBIT INDEX
The following is an index of the exhibit included in this Report:
Item Sequential
No. Exhibit Page Number
11 Statement Regarding Computation 13
of Per Share Earnings
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EXHIBIT (11)
Bethlehem Steel Corporation
Statement Regarding Computation of Earnings Per Share
(dollars in millions and shares in thousands, except per share data)
Three Months Six Months
Ended June 30 Ended June 30
- - ------------------ ------------------
1994 1993 Primary Earnings Per Share 1994 1993
---- ---- ---- ----
$26.0 ($13.6) Net Income (Loss) $38.9 ($54.4)
Less Dividend Requirements:
(2.5) (2.5) $2.50 Preferred Dividend (5.0) (5.0)
(3.1) (3.1) $5.00 Preferred Dividend (6.3) (6.3)
(4.5) (4.5) $3.50 Preferred Dividend (9.0) (5.8)
(0.7) (0.8) 5% Preference Dividend (1.3) (1.3)
- - -------- -------- -------- --------
Total Preferred and
(10.8) (10.9) Preference Dividend (21.6) (18.4)
- - -------- -------- -------- --------
Net Income (Loss) Applicable
$15.2 ($24.5) to Common Stock $17.3 ($72.8)
======== ======== ======== ========
Average Shares of Common Stock and
Equivalents Outstanding:
109,065 90,728 Common Stock 101,952 90,655
173 * Stock Options 260 *
- - -------- -------- -------- --------
109,238 90,728 Total 102,212 90,655
- - -------- -------- -------- --------
$0.14 ($0.27) Primary Earnings Per Share $0.17 ($0.80)
======== ======== ======== ========
Fully Diluted Earnings Per Share
$26.0 ($13.6) Net Income (Loss) $38.9 ($54.4)
Less Dividend Requirements:
(2.5) (2.5) $2.50 Preferred Dividend (5.0) (5.0)
(3.1) (3.1) $5.00 Preferred Dividend (6.3) (6.3)
(4.5) (4.5) $3.50 Preferred Dividend (9.0) (5.8)
(0.7) (0.8) 5% Preference Dividend (1.3) (1.3)
- - -------- -------- -------- --------
Net Income (Loss) Applicable
$15.2 ($24.5) to Common Stock $17.3 ($72.8)
======== ======== ======== ========
Average Shares of Common Stock and
Equivalents and Other Potentially
Dilutive Securities Outstanding:
109,065 90,728 Common Stock 101,952 90,655
173 * Stock Options 260 *
* * $2.50 Preferred Stock * *
* * $5.00 Preferred Stock * *
* * $3.50 Preferred Stock * *
* * 5% Preference Stock * *
- - -------- -------- -------- --------
109,238 90,728 Total 102,212 90,655
======== ======== ======== ========
$0.14 ($0.27) Fully Diluted Earnings Per Share $0.17 ($0.80)
======== ======== ======== ========
* Antidilutive
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