<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 March 31, 1997
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
BETHLEHEM, PENNSYLVANIA 18016-7699
(Address of principal executive offices) (Zip Code)
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 May 1,1997: 112,144,545
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BETHLEHEM STEEL CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Consolidated Statements of Income-
Three Months Ended March 31, 1997
and 1996 (unaudited). . . . . . . . . . . . . . . . . . . 2
Consolidated Balance Sheets-
March 31, 1997 (unaudited), December 31, 1996
and March 31, 1996 (unaudited). . . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows-
Three Months Ended March 31, 1997
and 1996 (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 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . 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
MARCH 31
------------------
1997 1996
------ ------
Net Sales $1,192.5 $1,118.5
--------- ---------
Costs and Expenses:
Cost of sales 1,052.5 1,009.9
Depreciation 56.9 69.9
Selling, administration and general expense 26.8 26.1
--------- ---------
Total Costs and Expenses 1,136.2 1,105.9
--------- ---------
Income from Operations 56.3 12.6
Financing Income (Expense):
Interest and other financing costs (11.8) (14.0)
Interest and other income 1.4 1.5
--------- ---------
Income before Income Taxes 45.9 0.1
Provision for Income Taxes (7.5) -
--------- ---------
Net Income 38.4 0.1
Dividends on Preferred and Preference Stock 10.4 10.5
--------- ---------
Net Income (Loss) Applicable to Common Stock $ 28.0 $ (10.4)
========= =========
Net Income (Loss) per Common Share $ 0.25 $ (0.09)
Average Primary Shares Outstanding 112.0 110.8
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
MARCH 31 MARCH 31
1997 DECEMBER 31 1996
(UNAUDITED) 1996 (UNAUDITED)
----------- ----------- -----------
Current Assets:
Cash and cash equivalents $ 133.9 $ 136.6 $ 130.5
Receivables, less allowances 331.7 311.6 335.2
Inventories:
Raw materials 315.3 332.0 332.3
Finished and semifinished 646.6 667.0 643.7
Contract work-in-progress, less
billings 18.9 18.3 19.2
--------- --------- ---------
980.8 1,017.3 995.2
Other current assets 11.5 22.9 11.2
--------- --------- ---------
Total Current Assets 1,457.9 1,488.4 1,472.1
Investments and Miscellaneous Assets 108.0 106.7 108.0
Property, Plant and Equipment,
less accumulated depreciation of
$3,971.2, $3,924.2 and $4,396.7 2,409.1 2,419.8 2,689.4
Deferred Income Tax Asset - net 927.5 935.0 885.0
Intangible Asset - Pensions 160.0 160.0 463.0
--------- --------- ---------
Total Assets $5,062.5 $5,109.9 $5,617.5
========= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 367.1 $ 410.4 $ 389.8
Accrued employment costs 298.6 313.3 313.5
Accrued taxes 61.4 67.9 63.2
Debt and capital lease obligations 47.9 49.3 82.4
Other current liabilities 117.6 116.5 121.7
--------- --------- ---------
Total Current Liabilities 892.6 957.4 970.6
Pension Liability 886.9 870.0 1,152.6
Postretirement Benefits Other Than
Than Pensions 1,450.7 1,445.0 1,418.4
Long-term Debt and Capital Lease
Obligations 473.1 497.4 521.1
Other Long-term Liabilities 363.8 374.1 326.2
Stockholders' Equity:
Preferred Stock 11.6 11.6 11.6
Preference Stock 2.5 2.5 2.5
Common Stock 114.1 113.9 112.9
Common Stock held in treasury at cost (59.9) (59.7) (59.4)
Additional paid-in capital 1,877.3 1,886.3 1,840.7
Accumulated deficit (950.2) (988.6) (679.7)
--------- --------- ---------
Total Stockholders' Equity 995.4 966.0 1,228.6
Total Liabilities and Stockholders'
Equity $5,062.5 $5,109.9 $5,617.5
========= ========= =========
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)
THREE MONTHS ENDED
MARCH 31
------------------------
1997 1996
-------- --------
Operating Activities:
Net income $ 38.4 $ 0.1
Adjustments for items not affecting
cash from operating activities:
Depreciation 56.9 69.9
Deferred income taxes 7.5 -
Other - net 9.3 5.3
Working capital (excluding financing
and investing activities):
Receivables - operating (20.1) (20.6)
Receivables - sold - 60.0
Inventories 36.5 (37.1)
Accounts payable (43.3) 8.2
Employment costs and other (17.1) (63.8)
--------- ---------
Cash Provided from Operating Activities 68.1 22.0
--------- ---------
Investing Activities:
Capital expenditures (50.0) (59.9)
Cash proceeds from asset sales and other 1.3 2.5
--------- ---------
Cash Used for Investing Activities (48.7) (57.4)
--------- ---------
Financing Activities:
Pension expense 40.9 47.6
Pension funding (25.0) (10.0)
Long-term debt and capital lease borrowings 0.4 0.7
Long-term debt and capital lease payments (25.7) (34.8)
Cash dividends paid (10.1) (10.1)
Other payments (2.6) (7.5)
--------- ---------
Cash Used for Financing Activities (22.1) (14.1)
--------- ---------
Net Decrease in Cash and Cash Equivalents (2.7) (49.5)
Cash and Cash Equivalent- Beginning of Period 136.6 180.0
--------- ---------
- End of Period $ 133.9 $ 130.5
========= =========
Supplemental Cash Payment Information:
Interest, net of amount capitalized $ 15.8 $ 23.0
Income taxes $ 7.5 $ 3.2
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)
1997 1996
-------- --------------------------------------
FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- --------- ---------
Net Sales:
Basic Steel Operations $1,174.3 $1,126.4 $1,142.6 $1,216.4 $1,095.4
Steel Related Operations 27.0 32.6 42.8 32.8 32.2
Eliminations (8.8) (10.0) (10.8) (12.3) (9.1)
--------- --------- --------- --------- ---------
Total $1,192.5 $1,149.0 $1,174.6 $1,236.9 $1,118.5
========= ========= ========= ========= =========
Estimated Restructuring Loss:
Basic Steel Operations $ - $ 240.0 $ 15.0 $ - $ -
Steel Related Operations - 210.0 - - -
--------- --------- --------- --------- ---------
Total $ - $ 450.0 $ 15.0 $ - $ -
========= ========= ========= ========= =========
Operating Income (Loss):
Basic Steel Operations $ 63.8 $ (193.0) $ 31.8 $ 52.5 $ 21.4
Steel Related Operations (7.5) (217.5) (7.0) (7.8) (8.8)
--------- --------- --------- --------- ---------
Total $ 56.3 $ (410.5) $ 24.8 $ 44.7 $ 12.6
========= ========= ========= ========= =========
Shipments
(thousands of net tons):
Basic Steel Operations 2,220 2,146 2,200 2,315 2,103
========= ========= ========= ========= =========
Raw Steel Production
(thousands of net tons):
Basic Steel Operations 2,317 2,412 2,359 2,417 2,259
========= ========= ========= ========= =========
2. On April 1, 1997, we sold our 37.57 percent equity interest in the Iron Ore
Company of Canada for about $145 million. This sale will result in recognizing
a pretax gain of about $135 million in the second quarter of 1997.
3. The Consolidated Financial Statements as of and for the three month periods
ended March 31, 1997 and 1996 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
1996 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:
FIRST QUARTER 1997 - FIRST QUARTER 1996
Bethlehem reported net income of $38 million, on sales of $1.19 billion,
for the first quarter of 1997 compared to net income of $.1 million, on sales
of $1.12 billion, for the first quarter of 1996. After deducting preferred
dividends, net income per common share was $.25 for the first quarter of 1997
compared to a loss of $.09 per common share for the first quarter of 1996.
SEGMENT RESULTS
The Basic Steel Operations segment had income from operations of $64
million on shipments of 2,220,000 tons for the first quarter of 1997 compared
to income from operations of $21 million on shipments of 2,103,000 tons for the
first quarter of 1996. Results improved from a year ago due to increased steel
shipments, lower costs and higher average realized prices. Shipments were
higher and costs per ton were lower in the first quarter of 1997 compared to
the first quarter of 1996 even though Burns Harbor had an extended outage at
its No. 3 BOF. We were able to increase shipments and lower costs compared to
last year due to improved operating performance at Sparrows Point and
Pennsylvania Steel Technologies (PST), the elimination of operating problems at
Bethlehem Structural and the absence of severe winter weather at PST and the
work stoppage at General Motors. Additionally, depreciation expense was lower
than a year ago principally due to the write-off of assets as part of our
fourth quarter 1996 restructuring charge.
First quarter 1997 income from operations increased by $17 million from the
fourth quarter of 1996 (excluding a restructuring charge of $240 million)
principally from higher shipments and lower costs. Shipments of coated
products to the automotive market increased at Burns Harbor, shipments of
premium rail and pipe increased at PST and shipments of sheet piling were
significantly higher at Bethlehem Structural in connection with its planned
shutdown during the first quarter of 1997. Reduced repair and maintenance
costs and higher yields, particularly at Sparrows Point, favorably impacted
costs.
The Steel Related Operations segment (BethForge, CENTEC and BethShip)
reported a loss from operations of $8 million for the first quarter of 1997
compared to a loss of $9 million for the first quarter of 1996. We will exit
this segment of our business during 1997 as a result of our 1996 restructuring
plan.
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LIQUIDITY AND CAPITAL STRUCTURE
At March 31, 1997, total liquidity, comprising cash, cash equivalents and
funds available under our bank credit arrangements, totaled $469 million
compared to $446 million at December 31, 1996. Cash and cash equivalents were
$134 million at March 31, 1997, compared to $137 million at December 31, 1996.
Cash provided from operating activities during the first quarter of 1997
was $68 million compared to $22 million in the first quarter of 1996.
Principal uses of cash during the first quarter of 1997 included capital
expenditures of $50 million, working capital of $44 million, debt repayments of
$26 million and pension funding of $25 million.
In continuing our corporate strategy of concentrating on our core steel
businesses and rebuilding our financial strength, on April 1 we sold our equity
interest in Iron Ore Company of Canada to North Limited, an Australian
resources company. This sale resulted in cash proceeds to Bethlehem of about
$145 million and an after-tax gain of $113 million, or $1.01 per share, which
will be recorded in the second quarter.
Major uses of cash for 1997 include an estimated $280 million of capital
expenditures, additional pension funding and repayment of approximately $50
million of debt and capital lease obligations. We expect to maintain adequate
liquidity throughout 1997 from cash flow from operations, reductions in working
capital, proceeds from the sale of our interest in IOC and other assets and
available funds under our credit arrangements.
COMPETITIVENESS INITIATIVES
We are making steady progress in advancing our four principal goals for
1997. Our business plans are being successfully executed. The actions to
implement our restructuring plans are proceeding and we are eliminating the
significant losses of the discontinued businesses by closing or selling them.
During the first four months of this year we have made contributions of $145
million to our pension trust. These contributions, along with additional
contributions we plan to make during the year, should result in further
reducing our pension expense and liability. Additionally, we continue to
advance plans for profitably growing our business through selective
modernization, joint ventures and other actions.
In 1996 we announced a restructuring plan to improve financial performance
and stockholder value. Planned actions include exiting several of our
underperforming businesses, including Bethlehem Structural, BethForge, CENTEC
and BethShip Sparrows Point Yard. We have ceased production at Bethlehem
Structural and efforts to sell this business have been unsuccessful. We are
proceeding with the sale of the structural assets. We are currently
negotiating the sale of our BethForge, CENTEC and BethShip businesses.
In March the Board of Directors authorized a capital appropriation of $70
million for the modernization of one of Burns Harbor's two continuous slab
casters. Extensive modifications will be made to the caster during 1998 to
improve slab quality, increase productivity
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and reduce production costs.
Operations have started at our Chicago Cold Rolling joint venture in
Indiana which produces light-gauge cold-rolled sheet for the appliance and
other specialty markets. We have announced our participation in two other new
joint ventures. One is with TWB Company located in Michigan which operates the
largest plant in North America producing laser-welded blanks for the automotive
industry. The second is with CSR Rinker, the largest building materials
company in Florida, to expand the use of steel in residential and light
commercial buildings.
We are developing plans and implementing actions to further improve the
profitability of the entire corporation through a wide range of competitiveness
initiatives including enhancing customer service and reliability, improving
productivity, aggressively reducing costs and, where appropriate, undertaking
selected modernization projects.
At Sparrows Point one such project under active consideration is the
possible construction of a new cold rolling mill which could be either on-site
at Sparrows Point or off-site at another location.
DIVIDENDS
On April 30, 1997, 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 June 10, 1997, to holders of record on May 9, 1997. No dividend was
declared on Bethlehem's Common Stock.
RECENTLY ISSUED ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share," which establishes new standards for computing
and reporting earnings per share. Bethlehem will adopt Statement No. 128 in
the fourth quarter. Adoption will not have a material impact on earnings per
share.
OUTLOOK
We believe that the domestic economy will continue on a course of moderate
and sustainable growth and low inflation in 1997 and that the global economy
will show some additional strength later this year. The demand from the major
steel-consuming sectors should continue to be relatively good and domestic
industry steel shipments in 1997 should be close to the 100 million tons
shipped in 1996. We recognize, however, that competition will remain intense
in all of our markets as new steel production capacity and unfairly traded
imports continue to enter the marketplace.
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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 March 31, 1997.
The following previously reported proceedings had developments during the
first quarter of 1997:
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 bipheny (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. The parties
have negotiated a consent order in which Bethlehem has agreed to pay a civil
penalty of $12,000 and to complete a supplemental environmental project costing
at least $1,023,804. Compliance with the consent order constitutes a
settlement and final disposition of this matter.
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 at the Burns Harbor Division on
each of 20 days in January 1995. The Complaint sets forth a proposed civil
penalty of $148,500. Bethlehem filed an Answer and Request for Hearing on
August 19, 1996, and requested a settlement conference. The parties have
negotiated a consent order in which Bethlehem has agreed to pay a civil penalty
of $18,562 and to complete a supplemental environmental project costing at
least $200,000. Compliance with the consent order constitutes a settlement
and final disposition of this matter.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of the Stockholders of Bethlehem was held on April 29,
1997.
The following nominees for director named in the Proxy Statement dated
March 14, 1997 were elected at the Meeting by the votes indicated:
For Withheld
--- --------
Curtis H. Barnette 93,051,591 5,749,811
Benjamin R. Civiletti 93,273,663 5,527,739
Worley H. Clark 93,360,800 5,440,602
John B. Curcio 93,222,333 5,579,069
Lewis B. Kaden 93,236,708 5,564,694
Harry P. Kamen 93,311,336 5,490,066
Robert McClements, Jr. 93,302,911 5,498,491
Gary L. Millenbruch 93,404,637 5,396,765
Roger P. Penny 93,161,331 5,640,071
Shirley D. Peterson 93,369,912 5,431,490
Dean P. Phypers 93,268,643 5,532,759
William A. Pogue 93,269,285 5,532,117
John F. Ruffle 93,385,381 5,416,021
The votes in favor of the election of the nominees represent at least
94.2% of the shares voted for each of the nominees.
Ratification of the appointment of Independent Auditors was approved by the
following vote:
For Against Abstentions
--- ------- -----------
Number of Shares 97,617,479 729,379 454,544
There were no broker non-votes with respect to any of these matters voted
upon at the Meeting.
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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 March 31, 1997.
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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: May 7, 1997
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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)
THREE MONTHS
ENDED MARCH 31
---------------------
Primary Earnings Per Share 1997 1996
-------------------------- ---------- ----------
Net Income $38.4 $0.1
Less Dividend Requirements:
$2.50 Preferred Dividend (2.5) (2.5)
$5.00 Preferred Dividend (3.1) (3.1)
$3.50 Preferred Dividend (4.5) (4.5)
5% Preference Dividend (0.3) (0.4)
---------- ---------
Total Preferred and Preference Dividends (10.4) (10.5)
---------- ---------
Net (Loss) Income Applicable to Common Stock $28.0 ($10.4)
========== =========
Average Shares of Common Stock and
Equivalents Outstanding:
Common Stock 111,974 110,797
Stock Options - 5
---------- ---------
Total 111,974 110,802
========== =========
Primary Earnings Per Share $0.25 ($0.09)
========== =========
Fully Diluted Earnings Per Share
--------------------------------
Net Income $38.4 $0.1
Less Dividend Requirements:
$2.50 Preferred Dividend (2.5) (2.5)
$5.00 Preferred Dividend (3.1) (3.1)
$3.50 Preferred Dividend (4.5) (4.5)
5% Preference Dividend - (0.4)
---------- ---------
Net (Loss) Income Applicable to Common Stock $28.3 ($10.4)
========== =========
Average Shares of Common Stock and Equivalents and
Other Potentially Dilutive Securities Outstanding:
Common Stock 111,974 110,797
Stock Options - 5
$2.50 Preferred Stock * *
$5.00 Preferred Stock * *
$3.50 Preferred Stock * *
5% Preference Stock 2,468 *
---------- ---------
Total 114,442 110,802
========== =========
Fully Diluted Earnings Per Share $0.25 ($0.09)
========== =========
* Antidilutive
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0
14
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