<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, 1996
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 August 9, 1996:
111,499,223
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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, 1996 and 1995 (unaudited). . . . . . . . 2
Consolidated Balance Sheets-
June 30, 1996 (unaudited), December 31, 1995
and June 30, 1995 (unaudited) . . . . . . . . . . 3
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1996
and 1995 (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. . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . 12
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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
- ------------------- ---------------------
1996 1995 1996 1995
- --------- --------- --------- ---------
$1,236.9 $1,250.2 Net Sales $2,355.4 $2,490.9
- --------- --------- --------- ---------
Costs and Expenses:
1,092.9 1,061.6 Cost of sales 2,102.8 2,130.5
73.2 72.1 Depreciation 143.1 143.1
Selling, administration
26.1 29.2 and general expense 52.2 55.8
- --------- --------- --------- ---------
1,192.2 1,162.9 Total Costs and Expenses 2,298.1 2,329.4
- --------- --------- --------- ---------
44.7 87.3 Income from Operations 57.3 161.5
Financing Income (Expense):
(14.1) (16.6) Interest and other financing costs (28.1) (29.8)
1.5 1.6 Interest and other income 3.0 4.1
- --------- --------- --------- ---------
32.1 72.3 Income before Income Taxes 32.2 135.8
(5.5) (12.0) Provision for Income Taxes (5.5) (23.0)
- --------- --------- --------- ----------
26.6 60.3 Net Income 26.7 112.8
Dividends on Preferred and
10.5 10.7 Preference Stock 21.0 21.3
- --------- --------- --------- ---------
Net Income Applicable to
$ 16.1 $ 49.6 Common Stock $ 5.7 $ 91.5
========= ========= ========= =========
$ 0.14 $ 0.45 Net Income per Common Share $ 0.05 $ 0.83
111.1 110.2 Average Primary Shares 111.0 110.1
Outstanding
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
1996 1995 1995
(unaudited) (unaudited)
Current Assets: ----------- ----------- -----------
Cash and cash equivalents $ 155.6 $ 180.0 $ 128.6
Receivables, less allowances 338.3 374.6 481.3
Inventories:
Raw materials 298.1 335.5 299.0
Finished and semifinished 610.5 604.9 614.6
Contract work-in-progress, less billings 21.6 17.8 23.0
---------- ---------- ----------
930.2 958.2 936.6
Other current assets 8.9 13.0 8.6
---------- ---------- ----------
Total Current Assets 1,433.0 1,525.8 1,555.1
Investments and Miscellaneous Assets 113.4 112.3 117.4
Property, Plant and Equipment,
less accumulated depreciation of
$4,456.5, $4,329.5 and $4,252.9 2,687.2 2,714.2 2,720.0
Deferred Income Tax Asset - net 877.2 885.0 881.2
Intangible Asset - Pensions 463.0 463.0 396.2
---------- ---------- ----------
Total Assets $ 5,573.8 $ 5,700.3 $ 5,669.9
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 392.1 $ 381.4 $ 389.9
Accrued employment costs 308.2 358.0 313.5
Accrued taxes 65.1 72.4 58.5
Debt and capital lease obligations 71.9 91.5 94.4
Other current liabilities 110.8 146.3 122.4
---------- ---------- ----------
Total Current Liabilities 948.1 1,049.6 978.7
Pension Liability 1,115.0 1,115.0 1,038.1
Postretirement Benefits Other Than Pensions 1,423.4 1,415.0 1,422.3
Long-term Debt and Capital Lease Obligations 520.4 546.8 615.7
Other Long-term Liabilities 316.6 335.6 361.3
Stockholders' Equity:
Preferred Stock 11.6 11.6 11.6
Preference Stock 2.7 2.6 2.7
Common Stock 113.3 112.7 112.3
Common Stock held in treasury at cost (59.4) (59.4) (59.4)
Additional paid-in capital 1,835.2 1,850.6 1,933.2
Accumulated deficit (653.1) (679.8) (746.6)
---------- ---------- ----------
Total Stockholders' Equity 1,250.3 1,238.3 1,253.8
---------- ---------- ----------
Total Liabilities and Stockholders' Equity $ 5,573.8 $ 5,700.3 $ 5,669.9
========== ========== ==========
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
----------------------
1996 1995
--------- ---------
Operating Activities:
Net income $ 26.7 $ 112.8
Adjustments for items not affecting
cash from operating activities:
Depreciation 143.1 143.1
Deferred Income Taxes 5.5 22.0
Other - net 8.9 (3.6)
Working capital (excluding financing
and investing activities):
Receivables - operating (23.6) 38.1
Receivables - sold 60.0 -
Inventories 28.0 (53.4)
Accounts payable 10.5 2.9
Employment costs and other (72.1) (33.9)
Other - net (6.1) (31.3)
--------- ---------
Cash Provided from Operating Activities 180.9 196.7
--------- ---------
Investing Activities:
Capital expenditures (136.8) (119.9)
Cash proceeds from asset sales and other 5.3 12.3
--------- ---------
Cash Used for Investing Activities (131.5) (107.6)
--------- ---------
Financing Activities:
Pension expense 95.0 106.5
Pension funding (95.0) (155.0)
Long-term debt and capital lease borrowings 1.5 2.7
Long-term debt and capital lease payments (46.0) (48.8)
Cash dividends paid (20.2) (20.2)
Other payments (9.1) (5.2)
--------- ---------
Cash Used for Financing Activities (73.8) (120.0)
--------- ---------
Net Decrease in Cash and Cash Equivalents (24.4) (30.9)
Cash and Cash Equivalents - Beginning of Period 180.0 159.5
--------- ---------
- End of Period $ 155.6 $ 128.6
========= =========
Supplemental Cash Payment Information:
Interest, net of amount capitalized $ 27.4 $ 32.9
Income taxes $ 3.3 $ -
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)
1996 1995
------------------- -----------------------------
Second First Fourth Third Second
Quarter Quarter Quarter Quarter Quarter
--------- --------- --------- --------- ---------
Net Sales:
Basic Steel Operations $1,216.4 $1,095.4 $1,130.4 $1,210.6 $1,225.4
Steel Related Operations 32.8 32.2 28.6 23.8 29.4
Eliminations (12.3) (9.1) (7.1) (9.7) (4.6)
--------- --------- --------- --------- ---------
Total $1,236.9 $1,118.5 $1,151.9 $1,224.7 $1,250.2
========= ========= ========= ========= =========
Operating Income (Loss):
Basic Steel Operations $ 52.5 $ 21.4 $ 66.5 $ 67.5 $ 97.6
Steel Related Operations (7.8) (8.8) (15.2) (11.4) (10.3)
--------- --------- --------- --------- ---------
Total $ 44.7 $ 12.6 $ 51.3 $ 56.1 $ 87.3
========= ========= ========= ========= =========
Shipments
(thousands of net tons):
Basic Steel Operations 2,315 2,103 2,143 2,291 2,263
========= ========= ========= ========= =========
Raw Steel Production
(thousands of net tons):
Basic Steel Operations 2,417 2,259 2,533 2,565 2,729
========= ========= ========= ========= =========
2. The Consolidated Financial Statements as of and for the three month and six
month periods ended June 30, 1996 and 1995 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
1995 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 1996
Second Quarter and First Six Months 1995
Bethlehem Steel Corporation reported net income of $27 million, on sales of
$1.24 billion, for the second quarter of 1996, an improvement of $27 million
over the breakeven performance for the first quarter of 1996. Net income was
$60 million, on sales of $1.25 billion, for the second quarter of 1995. Income
applicable to common stock for the second quarter of 1996 was $.14 per common
share, compared to $.45 per common share for the second quarter of 1995.
For the first six months of 1996, net income was $27 million, on sales of
$2.36 billion, compared to net income of $113 million, on sales of $2.49
billion, for the first six months of 1995. Income applicable to common stock
was $.05 per common share, compared to $.83 per common share for the first six
months of 1995.
Segment Results
Basic Steel Operations. The Basic Steel Operations segment had income from
operations of $53 million on shipments of 2,315,000 tons for the second quarter
of 1996, compared to income from operations of $98 million on shipments of
2,263,000 tons for the second quarter of 1995. Segment results declined from a
year ago principally due to lower realized prices and, to a lesser extent,
start-up costs related to Bethlehem's upgraded structural mill, partially
offset by an improved mix from higher coated and cold-rolled shipments and
lower operating costs at Bethlehem's flat-rolled operations.
Second quarter 1996 income from operations improved $31 million from the
first quarter of 1996 principally due to higher shipments at Burns Harbor and
Sparrows Point and lower operating costs. Average realized prices were
slightly better reflecting implementation of price increases for sheet and
plate products in Bethlehem's short-term markets and from slightly higher sales
of raw materials and other products. However, product mix was less favorable
because of higher hot rolled and structural shipments.
For the first six months of 1996, this segment had income from operations
of $74 million, a decrease of $103 million from the same period last year,
primarily reflecting lower realized prices. Lower shipments were offset by an
improved product mix and lower costs.
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Steel Related Operations. The Steel Related Operations segment (BethForge,
CENTEC and BethShip) reported losses from operations of $8 million and $17
million for the second quarter and first six months of 1996, compared to losses
of $10 million and $15 million for the second quarter and first six months of
1995.
Liquidity and Capital Structure
At June 30, 1996, total liquidity, comprising cash, cash equivalents and
funds available under Bethlehem's bank credit arrangements, totaled $486
million, compared to $512 million at December 31, 1995, and $555 million at
June 30, 1995. At June 30, 1996, funds available under Bethlehem's bank credit
arrangements totaled $330 million.
Cash provided from operating activities for the first six months of 1996,
including selling accounts receivable under Bethlehem's credit arrangements of
$60 million, was $181 million, compared to $197 million for the first six
months of 1995. Principal uses of cash during the first six months of 1996
included capital expenditures, pension funding and debt repayments.
Capital expenditures were $137 million for the first six months of 1996,
compared to $120 million during the year-earlier period. Capital expenditures
are currently expected to be about $300 million in 1996, compared to $267
million in 1995. Major capital projects include improvements at Burns Harbor's
160" Plate Mill and Hot Strip Mill. Bethlehem contributed $85 million to its
pension fund during the second quarter of 1996, for a total of $95 million so
far this year. Bethlehem repaid $46 million of debt and capital lease
obligations during the first six months of 1996 and expects to repay about $40
million of such obligations during the remainder of the year.
Principal uses of cash during the remainder of 1996 include additional
pension funding, capital expenditures 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 bank credit arrangements.
Labor Negotiations
Bethlehem's labor agreement with the United Steelworkers of America (USWA)
provided for reopener negotiations in 1996 of wage and certain benefit
provisions (excluding pensions and health care benefits) and for resolving
issues in final offer interest arbitration without any strike or lockout. The
labor agreement covers the Burns Harbor and Sparrows Point Divisions, Bethlehem
Structural Products Corporation and BethForge, Inc. The parties did not reach
a settlement and Bethlehem and the USWA submitted their final offers to
arbitration.
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The arbitrator reached a decision to accept Bethlehem's contract proposal.
The revisions to the contract, which are effective August 1, 1996, will result
in an increase to Bethlehem's represented employees' wage and benefit cost per
hour of about 3% per year for the term of the agreement which expires August 1,
1999. With this contract reopener finalized, Bethlehem will continue to work
with the Union and its employees to improve its productivity and
competitiveness.
GM Supplier of the Year
Bethlehem was selected by General Motors as a 1995 Supplier of the Year --
the only steel producing company in the world to be so honored. To win a
Supplier of the Year award, a supplier must meet a number of challenging
criteria. Bethlehem's Burns Harbor Division supplies high-quality steel used
in General Motors cars, vans, pickups and sport-utility vehicles. Recently,
Bethlehem's business with General Motors has been growing and this includes the
transition to Bethlehem products for their Saturn line. This transition is on
schedule and Bethlehem expects that General Motors will be using Bethlehem's
products exclusively starting in the third quarter.
Dividends
On July 31, 1996, 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, 1996, to holders of record on August 9, 1996. No
dividend was declared on Bethlehem's Common Stock.
Outlook
Bethlehem believes that the U.S. economy, which has recently experienced
relatively strong economic activity, will resume its course of moderate and
sustainable growth and low inflation. Bethlehem believes that this is a good
economic environment for the steel industry and its customers. Demand for
Bethlehem's steel products is strong, inventories at the customer level are
relatively low and Bethlehem has a good backlog of orders. Currently, certain
of Bethlehem's flat-rolled products are on controlled acceptance plans and
Bethlehem continues to work on implementing its previously announced price
increases for sheet and plate products in its short-term markets for third
quarter deliveries.
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With respect to Bethlehem's operations, its flat-rolled businesses are
currently running at relatively high operating rates and Bethlehem believes
that they will continue to do so for the balance of the year. Bethlehem's
Pennsylvania Steel Technologies, Inc. business unit is continuing to increase
the utilization of its new steelmaking equipment and its new rail
head-hardening facility is producing high quality product.
The Bethlehem, Pa. based structural and forging operations are continuing
to work through their transition of having shut down their iron and steelmaking
facilities late last year, obtaining their semifinished steel from other
sources and starting up facilities that were recently upgraded. They have been
experiencing operating losses and are being closely monitored as to their
progress and outlook. Bethlehem's strategy continues to be that all of its
businesses must achieve satisfactory performance or Bethlehem will consider
exiting them by sale or shutdown, as appropriate.
Competition remains intense in all of Bethlehem's markets as new capacity
continues to enter the marketplace. Also, Bethlehem believes import levels may
increase somewhat later this year. Bethlehem is responding to these challenges
by continuing to increase the utilization and efficiency of its production
facilities, investing in facilities that will grow its business where Bethlehem
believes there are good market opportunities, divesting assets that do not fit
with Bethlehem's strategic plan and pursuing cost reduction and working capital
improvement throughout the Corporation.
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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, 1996.
On July 31, 1996, the EPA issued an Administrative Complaint alleging that
Bethlehem violated the Comprehensive Environmental Response, Compensation and
Liability Act by failing to report until January 31, 1995 releases in excess of
the reportable quantity of sodium nitrite on each of twenty days in January
1995. The Complaint sets forth a proposed civil penalty of $148,500.
Bethlehem will file an answer and request for hearing and will request a
settlement conference. If settlement discussions are unsuccessful, Bethlehem
believes it has meritorious defenses and will vigorously defend the action.
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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 Earnings Per Share.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by Bethlehem during the quarter
ended June 30, 1996.
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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 13, 1996
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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 Earnings
Per Share
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)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
--------------- ---------------
1996 1995 Primary Earnings Per Share 1996 1995
---- ---- -------------------------- ---- ----
<S> <C> <C> <C> <C>
$26.6 $60.3 Net Income $26.7 $112.8
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) (9.0)
(0.4) (0.6) 5% Preference Dividend (0.8) (1.0)
- -------- -------- -------- --------
(10.5) (10.7) Total Preferred and Preference Dividends (21.0) (21.3)
- -------- -------- -------- --------
$16.1 $49.6 Net Income Applicable to Common Stock $5.7 $91.5
======== ======== ======== ========
Average Shares of Common Stock and
Equivalents Outstanding:
111,128 110,163 Common Stock 110,963 110,071
1 8 Stock Options 3 22
- -------- -------- -------- --------
111,129 110,171 Total 110,966 110,093
======== ======== ======== ========
$0.14 $0.45 Primary Earnings Per Share $0.05 $0.83
======== ======== ======== ========
Fully Diluted Earnings Per Share
--------------------------------
$26.6 $60.3 Net Income $26.7 $112.8
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) - $3.50 Preferred Dividend (9.0) -
(0.4) - 5% Preference Dividend (0.8) -
- -------- -------- -------- --------
$16.1 $54.7 Net Income Applicable to Common Stock $5.7 $101.5
======== ======== ======== ========
Average Shares of Common Stock and Equivalents and
Other Potentially Dilutive Securities Outstanding:
111,128 110,163 Common Stock 110,963 110,071
1 12 Stock Options 3 24
* * $2.50 Preferred Stock * *
* * $5.00 Preferred Stock * *
* 12,255 $3.50 Preferred Stock * 12,255
* 2,673 5% Preference Stock * 2,673
- -------- -------- -------- --------
111,129 125,102 Total 110,966 125,022
======== ======== ======== ========
$0.14 $0.44 Fully Diluted Earnings Per Share $0.05 $0.81
======== ======== ======== ========
</TABLE>
* Antidilutive
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 156
<SECURITIES> 0
<RECEIVABLES> 358
<ALLOWANCES> 20
<INVENTORY> 930
<CURRENT-ASSETS> 1433
<PP&E> 7144
<DEPRECIATION> 4456
<TOTAL-ASSETS> 5574
<CURRENT-LIABILITIES> 948
<BONDS> 520
0
14
<COMMON> 113
<OTHER-SE> 1123
<TOTAL-LIABILITY-AND-EQUITY> 5574
<SALES> 2355
<TOTAL-REVENUES> 2355
<CGS> 2103
<TOTAL-COSTS> 2298
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28
<INCOME-PRETAX> 32
<INCOME-TAX> 5
<INCOME-CONTINUING> 27
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
