<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 September 30, 1995
Commission file number 1-1941
BETHLEHEM STEEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 24-0526133
(State of incorporation) (I.R.S. Employer
Identification No.)
1170 Eighth Avenue 18016-7699
BETHLEHEM, PENNSYLVANIA (Zip Code)
(Address of principal
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 October 26, 1995:
112,583,820
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BETHLEHEM STEEL CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
PART I. Financial Information
Consolidated Statements of Income-
Three Months and Nine Months Ended September 30, 1995
and 1994 (unaudited). . . . . . . . . . . . . . . . . . 2
Consolidated Balance Sheets-
September 30, 1995 (unaudited), December 31, 1994
and September 30, 1994 (unaudited). . . . . . . . . . . 3
Consolidated Statements of Cash Flows-
Nine Months Ended September 30, 1995 and
1994 (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 Nine Months Ended
September 30 September 30
------------------ -----------------
1995 1994 1995 1994
---- ---- ---- ----
$1,224.7 $ 1,233.2 Net Sales $3,715.6 $3,594.9
- --------- ----------- --------- ---------
Costs and Expenses:
1,069.6 1,120.9 Cost of sales 3,200.1 3,214.0
70.1 61.2 Depreciation 213.2 193.8
Selling, administration
28.9 30.5 and general expense 84.7 98.8
- --------- ----------- --------- ---------
1,168.6 1,212.6 Total Costs and Expenses 3,498.0 3,506.6
- --------- ----------- --------- ---------
56.1 20.6 Income from Operations 217.6 88.3
Financing Income (Expense):
(15.8) (11.0) Interest and other financing costs (45.6) (37.2)
1.6 1.7 Interest income 5.7 5.3
- --------- ----------- --------- ---------
41.9 11.3 Income before Income Taxes 177.7 56.4
(7.5) (1.0) Provision for Income Taxes (30.5) (7.2)
- --------- ----------- --------- ---------
34.4 10.3 Net Income 147.2 49.2
Dividends on Preferred and
10.6 10.8 Preference Stock 31.9 32.4
- --------- ----------- --------- ---------
Net Income (Loss) Applicable to
$ 23.8 $ (0.5) Common Stock $ 115.3 $ 16.8
========= =========== ========= =========
$ 0.22 $ - Net Income per Common Share $ 1.05 $ 0.16
110.5 109.7 Average Primary Shares Outstanding 110.2 104.7
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
September 30 December 31 September 30
1995 1994 1994
(unaudited) (unaudited)
------------ ----------- ------------
Current Assets:
Cash and cash equivalents $ 102.4 $ 159.5 $ 119.2
Receivables, less allowances (Note 2) 523.3 519.5 496.2
Inventories:
Raw materials 321.3 331.9 332.3
Finished and semifinished 568.4 534.9 528.2
Contract work-in-progress, less
billings 21.1 16.1 14.3
------------ ----------- ------------
910.8 882.9 874.8
Other current assets 14.2 7.2 8.1
------------ ----------- ------------
Total Current Assets 1,550.7 1,569.1 1,498.3
Investments and Miscellaneous Assets 121.0 124.2 140.3
Property, Plant and Equipment,
less accumulated depreciation of
$4,298.0, $4,167.9 and $4,147.2 2,732.0 2,759.3 2,727.7
Deferred Income Tax Asset - net 873.7 903.2 920.5
Intangible Asset - Pensions 391.3 426.6 559.9
------------ ----------- ------------
Total Assets $ 5,668.7 $ 5,782.4 $ 5,846.7
============ =========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 388.8 $ 387.0 $ 388.3
Accrued employment costs 334.7 303.8 283.5
Accrued taxes 65.1 67.6 62.7
Debt and capital lease obligations 94.1 88.9 94.1
Other current liabilities 126.4 163.9 102.8
------------ ----------- ------------
Total Current Liabilities 1,009.1 1,011.2 931.4
Pension Liability 1,020.9 1,117.1 1,279.0
Postretirement Benefits Other Than
Pensions 1,422.9 1,441.4 1,454.0
Long-term Debt and Capital Lease
Obligations 585.2 668.4 674.5
Other Long-term Liabilities 350.1 388.5 426.0
Stockholders' Equity:
Preferred Stock 11.6 11.6 11.6
Preference Stock 2.6 2.6 2.7
Common Stock 112.5 111.9 111.7
Common Stock held in treasury at cost (59.4) (59.5) (59.5)
Additional paid-in capital 1,925.4 1,948.6 1,905.9
Accumulated deficit (712.2) (859.4) (890.7)
------------ ----------- ------------
Total Stockholders' Equity 1,280.5 1,155.8 1,081.7
------------ ----------- ------------
Total Liabilities and Stockholders' Equity $ 5,668.7 $ 5,782.4 $ 5,846.6
============ =========== ============
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)
Nine Months Ended
September 30
-------------------
1995 1994
---- ----
Operating Activities:
Net income $ 147.2 $ 49.2
Adjustments for items not affecting cash
from operating activities:
Depreciation 213.2 193.8
Deferred Income Taxes 29.5 6.2
Other - net (4.4) 5.8
Working capital (excluding financing and
investing activities):
Receivables (3.8) 7.0
Inventories (27.4) (23.0)
Accounts payable 1.8 28.7
Employment costs and other (8.9) 3.5
Other - net (38.5) (0.9)
--------- ---------
Cash Provided from Operating Activities 308.7 270.3
--------- ---------
Investing Activities:
Capital expenditures (204.9) (349.3)
Cash proceeds from asset sales and other 13.9 18.5
--------- ---------
Cash Used for Investing Activities (191.0) (330.8)
--------- ---------
Financing Activities:
Pension expense 159.2 153.9
Pension funding (220.0) (455.0)
Long-term debt and capital lease borrowings 3.1 24.5
Long-term debt and capital lease payments (79.7) (84.4)
Common stock issued - 355.3
Cash dividends paid (30.3) (30.3)
Other payments (7.1) (13.2)
--------- ---------
Cash Used for Financing Activities (174.8) (49.2)
--------- ---------
Net Decrease in Cash and Cash Equivalents (57.1) (109.7)
Cash and Cash Equivalent- Beginning of Period 159.5 228.9
--------- ---------
- End of Period $ 102.4 $ 119.2
========= =========
Supplemental Cash Payment Information:
Interest, net of amount capitalized $ 53.9 $ 32.1
Income taxes $ - $ 0.2
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)
1995 1994
-------------------- --------------------------------
Third Second First Fourth Third
Quarter Quarter Quarter Quarter
Quarter
---------- ---------- ---------- ---------- ---------
Net Sales:
Basic Steel Operations $ 1,210.6 $ 1,225.4 $ 1,210.4 $ 1,203.0 $1,187.6
Steel Related Operations 23.8 29.4 36.5 29.7 51.3
Eliminations (9.7) (4.6) (6.2) (8.2) (5.7)
---------- ---------- ---------- ---------- ---------
Total $ 1,224.7 $ 1,250.2 $ 1,240.7 $ 1,224.5 $1,233.2
========== ========== ========== ========== =========
Operating Income (Loss):
Basic Steel Operations $ 67.5 $ 97.6 $ 79.1 $ 51.5 $ 29.4
Steel Related Operations (11.4) (10.3) (4.9) (6.2) (8.8)
---------- ---------- ---------- ---------- ---------
Total $ 56.1 $ 87.3 $ 74.2 $ 45.3 $ 20.6
========== ========== ========== ========== =========
Shipments
(thousands of net tons):
Basic Steel Operations 2,291 2,263 2,273 2,294 2,321
========== ========== ========== ========== =========
Raw Steel Production
(thousands of net tons):
Basic Steel Operations 2,565 2,729 2,596 2,479 2,187
========== ========== ========== ========== =========
2. On September 12, 1995, Bethlehem entered into a Purchase and Sale Agreement
to sell substantially all of its trade receivables to a wholly owned, special
purpose subsidiary, Bethlehem Steel Funding, LLC (BSF). BSF entered into a
five-year $300 million Receivables Purchase Agreement with a group of banks, of
which up to $150 million can be used for letters of credit. At September 30,
1995, the banks had an ownership interest in receivables for issuing about $73
million of letters of credit, leaving about $227 million available under the
Agreement. BSF will receive cash from the banks upon expiration of the letters
of credit.
3. The Consolidated Financial Statements as of and for the three month and nine
month periods ended September 30, 1995 and 1994 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.
4. These Consolidated Financial Statements should be read together with the
1994 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:
- -----------------
Third Quarter and First Nine Months 1995
Third Quarter and First Nine Months 1994
Bethlehem Steel Corporation reported third quarter net income of $34
million, or $.22 per common share, compared to net income of $10 million for
the third quarter of 1994.
For the first nine months of 1995, net income was $147 million, or $1.05
per common share, compared to $49 million, or $.16 per common share, for the
first nine months of 1994.
Segment Results
- ---------------
Basic Steel Operations. The Basic Steel Operations segment had income from
operations of $68 million for the third quarter of 1995 compared to $29 million
for the third quarter of 1994. Results improved by $39 million from a year ago
principally from higher realized prices. Operating income increased to $29 per
ton compared to $13 per ton for the third quarter of 1994.
For the first nine months of 1995, this segment had income from operations
of $244 million, an increase of $129 million from the same period in 1994.
Average realized steel prices on a consistent product mix were higher and
shipments were slightly lower than a year ago. Operating costs were higher
because of material costs, employment costs and depreciation.
Income from operations declined by $30 million from the second quarter of
1995. This decrease is attributable to lower average realized prices and a less
favorable product mix, which were partially offset by slightly higher shipments.
Product mix was less favorable principally due to lower shipments to the
automotive industry during its normal summer outages and model year changeovers.
Bethlehem continues to make progress with regard to Bethlehem Structural
Products Corporation ("BSPC") and Pennsylvania Steel Technologies ("PST") which
have been unprofitable. During the fourth quarter, as previously announced,
Bethlehem will close the 48-inch structural mill and discontinue iron and
steelmaking operations at BSPC. Force levels will be reduced by about 1,800.
Bethlehem will make the transition to a single structural mill (44-inch mill)
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at BSPC, which will be supplied principally with continuously cast blooms
from PST. PST has completed its modernization program including the
installation of a new DC electric furnace, a vacuum degasser, ladle furnace,
and technology for the production of in-line head-hardened rail. The
modernization and restructuring of these two business units will result in
significantly higher utilization of their assets and significantly lower
costs.
Based on its current order patterns, extended backlogs and market outlook,
Bethlehem expects its basic steel segment to maintain high operating rates for
the balance of the year.
Steel Related Operations. The Steel Related Operations segment (BethShip,
BethForge and CENTEC) reported losses from operations of $11 million for the
third quarter and $26 million for the first nine months of 1995. This segment
had losses of $9 million for the third quarter and $26 million for the first
nine months of 1994. These losses reflect BethForge's current high cost
structure, which is expected to be significantly reduced following completion of
a modernization plan early next year. These losses also reflect lower revenues
at BethShip, which continued to experience a weak ship repair market, although
demand has recently shown some improvement.
Liquidity
- ---------
Cash and cash equivalents were $102 million at September 30, 1995, compared
to $160 million at December 31, 1994, and $119 million at September 30, 1994.
Cash provided from operating activities was $309 million for the first nine
months of 1995, compared to $270 million for the first nine months of 1994.
Significant uses of cash during the first nine months of 1995 included pension
funding and capital expenditures.
Capital expenditures were $205 million for the first nine months of 1995,
compared to $349 million during the year earlier period. Bethlehem expects
capital expenditures to be about $300 million in 1995, compared to $445 million
in 1994.
Bethlehem contributed $65 million to its pension fund during the third
quarter for total contributions of $220 million during the first nine months of
1995. Bethlehem expects to make additional contributions during the remainder
of the year. Repayments of debt and capital lease obligations were $80 million
during the first nine months of 1995 and Bethlehem expects to repay an
additional $10 million of such obligations during the fourth quarter.
In September 1995, Bethlehem entered into a new $500 million five year,
non-reducing credit arrangement with 15 banks. The new financing, which
replaces Bethlehem's 1992 $500 million secured credit agreement, consists of a
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$300 million receivables purchase agreement and a $200 million inventory
credit agreement. Of the $500 million total commitments, $150 million can be
used for letters of credit. Under the receivables purchase agreement, Bethlehem
has sold and will continue to sell substantially all its trade receivables to a
newly created, wholly owned special purpose subsidiary, Bethlehem Steel Funding,
LLC. Bethlehem Steel Funding has sold, and will continue to sell when letters
of credit or advances are required, an undivided interest in such receivables to
the bank group. At the closing, the banks acquired an undivided ownership
interest in receivables to support outstanding letters of credit of
approximately $73 million. At September 30, 1995, the only usage under the new
arrangement was for these letters of credit. During the fourth quarter,
Bethlehem intends to use the proceeds from selling receivables under this new
agreement to redeem $30 million of 9% debentures due May 15, 2000.
Bethlehem expects to maintain an adequate level of liquidity from cash flow
from operations, reductions in working capital and available borrowings under
its 1995 credit arrangement.
Dividends
- ---------
On October 25, 1995, 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
December 10, 1995, to holders of record on November 10, 1995. No dividend was
declared on Bethlehem's Common Stock.
Outlook
- -------
Steel market fundamentals remain strong and customers appear to have reduced
their inventories to more normal levels. The automotive market improved
recently following summer vacations and model year changeovers and the demand
from the construction, machinery, railcar and shipbuilding markets continues to
be good.
Bethlehem believes the economy will remain on a course of moderate and
sustainable growth for the balance of this year and next. This, when combined
with continued strong demand from Bethlehem's domestic customers, declining
imports and continued strong exports, should help to support levels of steel
shipments of about 94 million tons this year and 92 million tons in 1996.
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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 September 30, 1995.
The following previously reported proceeding had developments during
the third quarter of 1995:
On May 28, 1992, the New York State Department of Environmental
Conservation ("DEC") sent Bethlehem a proposed Order on Consent to resolve
various alleged violations of the New York air pollution control regulations
due to emissions from the Lackawanna coke ovens for the period from May 1, 1990
through October 7, 1991. Following extended negotiations between Bethlehem and
the DEC, a final Order on Consent was issued on August 17, 1995 covering all
alleged violations of state air pollution regulations at the coke ovens, all
alleged violations of state water pollution regulations at the coke ovens and
the other Bethlehem Lackawanna facilities, and all alleged violations of state
hazardous waste regulations related to waste carbonate solution at the
facilities up to the date of the issuance of the Order. The Order requires
Bethlehem to pay DEC a civil penalty of $765,000 by October 16, 1995; to pay
$180,000 to purchase New York State-based sulfur dioxide credits over a three
year period beginning August 17, 1995; and to spend $150,000 on supplemental
environmental projects, to be approved by DEC, at the Lackawanna Coke Division
"LCD" over the same three year period. The Order also requires Bethlehem to
have an environmental audit performed by an independent consultant to determine
the LCD's compliance with applicable environmental statutory and regulatory
requirements. Bethlehem paid the $765,000 civil penalty on October 13, 1995,
and is complying fully with the Order.
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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.
27. Financial Data Schedule
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were filed by Bethlehem during the quarter
ended September 30, 1995.
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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: October 30, 1995
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EXHIBIT INDEX
The following is an index of the exhibits included in this Report:
Item
No. Exhibit
- ---- -------
11 Statement Regarding Computation of Per
Share Earnings
27 Financial Data Schedule
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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 Nine Months
Ended September 30 Ended September 30
- ------------------ ------------------
1995 1994 Primary Earnings Per Share 1995 1994
---- ---- ---- ----
$34.4 $10.3 Net Income $147.2 $49.2
Less Dividend Requirements:
(2.5) (2.5) $2.50 Preferred Dividend (7.5) (7.5)
(3.1) (3.1) $5.00 Preferred Dividend (9.4) (9.3)
(4.5) (4.5) $3.50 Preferred Dividend (13.4) (13.5)
(0.5) (0.7) 5% Preference Dividend (1.6) (2.1)
- -------- -------- -------- --------
Total Preferred and
(10.6) (10.8) Preference Dividends (31.9) (32.4)
$23.8 ($0.5) Net Income Applicable to Common Stock $115.3 $16.8
======== ======== ======== ========
Average Shares of Common Stock and
Equivalents Outstanding:
110,454 109,462 Common Stock 110,200 104,483
9 250 Stock Options 18 256
- -------- -------- -------- --------
110,463 109,712 Total 110,218 104,739
- -------- -------- -------- --------
$0.22 $0.00 Primary Earnings Per Share $1.05 $0.16
======== ======== ======== ========
Fully Diluted Earnings Per Share
$34.4 $10.3 Net Income $147.2 $49.2
Less Dividend Requirements:
(2.5) (2.5) $2.50 Preferred Dividend (7.5) (7.5)
(3.1) (3.1) $5.00 Preferred Dividend (9.4) (9.3)
(4.5) (4.5) $3.50 Preferred Dividend (13.4) (13.5)
- (0.7) 5% Preference Dividend - (2.1)
- -------- -------- -------- --------
$24.3 ($0.5) Net Income Applicable to Common Stock $116.9 $16.8
======== ======== ======== ========
Average Shares of Common Stock and Equivalents and
Other Potentially Dilutive Securities Outstanding:
110,454 109,462 Common Stock 110,200 104,483
9 250 Stock Options 19 256
* * $2.50 Preferred Stock * *
* * $5.00 Preferred Stock * *
* * $3.50 Preferred Stock * *
2,616 * 5% Preference Stock 2,616 *
- -------- -------- -------- --------
113,079 109,712 Total 112,835 104,739
======== ======== ======== ========
$0.21 $0.00 Fully Diluted Earnings Per Share $1.04 $0.16
======== ======== ======== ========
* Antidilutive
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<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 102
<SECURITIES> 0
<RECEIVABLES> 544
<ALLOWANCES> 21
<INVENTORY> 911
<CURRENT-ASSETS> 1551
<PP&E> 7030
<DEPRECIATION> 4298
<TOTAL-ASSETS> 5669
<CURRENT-LIABILITIES> 1009
<BONDS> 585
<COMMON> 113
0
14
<OTHER-SE> 1154
<TOTAL-LIABILITY-AND-EQUITY> 5669
<SALES> 3716
<TOTAL-REVENUES> 3716
<CGS> 3200
<TOTAL-COSTS> 3498
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 178
<INCOME-TAX> 31
<INCOME-CONTINUING> 147
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
</TABLE>
