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FORM 10-Q
UNITED STATES 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, 2002
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 July 19, 2002:
130,969,146
-----------
BETHLEHEM STEEL CORPORATION AND CONSOLIDATED SUBSIDIARIES
INDEX
Page No.
--------
PART I. Financial Information
Consolidated Statements of Operations-
Three Months and Six Months Ended
June 30, 2002 and 2001 (unaudited). . . . . . . . . . 2
Consolidated Balance Sheets-
June 30, 2002 (unaudited), December 31, 2001
and June 30, 2001 (unaudited) . . . . . . . . . . . . 3
Consolidated Statements of Cash Flows-
Six Months Ended June 30, 2002
and 2001 (unaudited). . . . . . . . . . . . . . . . . 4
Notes to Consolidated Financial Statements (unaudited) . 5
Management's Discussion and Analysis of Results of
Operations and Financial Condition. . . . . . . . . . 8
PART II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . 13
Item 3. Defaults Under Senior Securities. . . . . . . 13
Item 6. Exhibits and Reports on Form 8-K . . . . . . 14
Signatures . . . . . . . . . . . . . . . . . . . . . . . 15
1
Bethlehem Steel Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
-------------------- ---------------------------
2002 2001 2002 2001
---- ---- ---- ----
$ 933.5 $ 911.1 Net Sales $ 1,737.3 $ 1,789.0
- ---------- ---------- ---------- ----------
Costs and Expenses
931.2 915.2 Cost of sales 1,742.7 1,826.0
62.4 64.9 Depreciation 122.9 125.2
22.3 26.8 Selling, administration and general expense 47.4 54.0
20.0 3.4 Unusual charges (Note 3) 20.0 3.4
- ---------- ---------- ---------- ---------
1,035.9 1,010.3 Total Costs and Expenses 1,933.0 2,008.6
- ---------- ---------- ---------- ---------
(102.4) (99.2) Loss from Operations (195.7) (219.6)
(3.7) - Reorganization Items (Note 4) (5.8) -
(12.8) (23.7) Financing Expense - net (Note 5) (25.0) (46.7)
- ---------- ---------- ---------- ----------
(118.9) (122.9) Loss before Income Taxes (226.5) (266.3)
- (1,009.0) Benefit (Provision) for Income Taxes (Note 6) 10.3 (984.0)
- ---------- ---------- ---------- ----------
(118.9) (1,131.9) Net Loss (216.2) (1,250.3)
9.9 10.2 Dividend Requirements on Preferred and 19.8 20.4
- ---------- ---------- Preference Stock ---------- ----------
$ (128.8) $(1,142.1) Net Loss Applicable to Common Stock $ (236.0) $(1,270.7)
========== ========== ========== ==========
Net Loss per Common Share:
$ (0.98) $ (8.80) Basic and Diluted $ (1.80) $ (9.79)
Average Shares Outstanding:
131.0 129.8 Basic and Diluted 130.9 129.8
Additional Data
2,028 2,124 Steel products shipped (thousands of net tons) 3,908 4,145
2,123 2,386 Raw steel produced (thousands of net tons) 4,429 4,690
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
2
Bethlehem Steel Corporation
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
ASSETS
June 30 December 31
2002 2001
(unaudited)
----------- ------------
Current Assets:
Cash and cash equivalents $ 62.0 $ 104.0
Receivables - net 395.9 350.4
Inventories:
Raw materials 247.0 259.5
Finished and semifinished 467.9 465.8
---------- ----------
Total Inventories 714.9 725.3
Other current assets 13.1 22.8
---------- ----------
Total Current Assets 1,185.9 1,202.5
Investments and Miscellaneous Assets 86.5 129.6
Property, Plant and Equipment - less accumulated
depreciation of $4,477.3 and $4,367.6 2,764.3 2,686.9
Intangible Pension Asset 225.0 225.0
---------- ----------
Total Assets $ 4,261.7 $ 4,244.0
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 180.7 $ 150.1
Accrued employment costs 75.7 37.9
Accrued taxes 24.1 14.4
Debt and capital lease obligations - current (Note 9) 128.1 19.3
Other current liabilities 49.4 49.9
---------- ----------
Total Current Liabilities 458.0 271.6
Long-term Debt and Capital Lease Obligations 125.8 132.7
Debtor-in-Possession Financing 220.7 205.6
Debt Secured by Inventory 289.9 289.9
Deferred Gain 92.2 103.2
Long-term Liabilities 45.9 43.4
Liabilities Subject to Compromise (Note 7) 4,924.8 4,878.1
Stockholders' Deficit:
Preferred Stock 11.3 11.4
Preference Stock 2.0 2.0
Common Stock 135.9 135.8
Common Stock held in treasury at cost (65.9) (65.9)
Additional paid-in capital 1,909.3 1,908.2
Accumulated other comprehensive loss (833.0) (833.0)
Accumulated deficit (3,055.2) (2,839.0)
---------- ----------
Total Stockholders' Deficit (1,895.6) (1,680.5)
---------- ----------
Total Liabilities and Stockholders' Deficit $ 4,261.7 $ 4,244.0
========== ==========
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
3
Bethlehem Steel Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
(unaudited)
Six Months Ended
June 30
------------------------
2002 2001
---- ----
Operating Activities:
Net loss $ (216.2) $(1,250.3)
Adjustments for items not affecting cash from operating activities:
Deferred income taxes - 984.0
Depreciation and amortization 122.9 125.2
Recognition of deferred gains (10.9) (10.9)
Reorganization items 5.8 -
Litigation recovery - 13.0
Unusual charges 20.0 3.4
Other - net 2.5 (1.3)
Working capital (excluding financing and investing activities):
Receivables (50.9) (8.6)
Inventories 10.5 96.7
Accounts payable 6.9 (78.0)
Other 20.9 (8.8)
Funding postretirement benefits:
Pension funding less than expense 65.7 47.0
Retiree healthcare and life insurance benefit payments less than expense 25.2 60.8
---------- ----------
Cash Provided By (Used For) Operating Activities Before Reorganization Items 2.4 (27.8)
---------- ----------
Reorganization items (5.8) -
Cash Used For Operating Activities ---------- ----------
(3.4) (27.8)
---------- ----------
Investing Activities:
Capital expenditures (55.6) (36.6)
Cash proceeds from asset sales 22.5 9.2
---------- ----------
Cash Used For Investing Activities (33.1) (27.4)
---------- ----------
Financing Activities:
Borrowings 30.5 120.3
Debt and capital lease payments (21.3) (48.0)
Cash dividends paid - (20.2)
Other payments (14.7) (19.4)
---------- ----------
Cash From (Used for) Financing Activities (5.5) 32.7
---------- ----------
Net Decrease in Cash and Cash Equivalents (42.0) (22.5)
Cash and Cash Equivalents - Beginning of Period 104.0 109.7
---------- ----------
- End of Period 62.0 87.2
Available Borrowing under Committed Bank Credit Arrangements 178.1 25.2
---------- ----------
Total Liquidity at End of Period $ 240.1 $ 112.4
========== ==========
Supplemental Cash Payment Information (Note 9):
Interest and other financing costs, net of amount capitalized $ 18.0 $ 45.3
Income taxes paid (received) 0.1 (0.2)
Capital lease obligations incurred 1.9 5.0
The accompanying Notes are an integral part of the Consolidated Financial
Statements.
4
Bethlehem Steel Corporation
NOTES TO JUNE 30, 2002 CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The Consolidated Financial Statements as of and for the three-month and
six-month periods ended June 30, 2002 and 2001 were not audited. However, in
Management's opinion, the information reflects all adjustments necessary for a
fair statement of the results for the periods presented. Management believes
all adjustments were of a normal and recurring nature.
These Consolidated Financial Statements should be read together with the
audited financial statements in Bethlehem's Annual Report on Form 10-K for the
year ended December 31, 2001 filed with the Securities and Exchange Commission.
2. On October 15, 2001, Bethlehem Steel Corporation and 22 of its wholly owned
subsidiaries (collectively, the Debtors) filed voluntary petitions under
chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York (the Court). Bethlehem continues
to manage its properties and operate its businesses under Sections 1107 and
1108 of the Code as a debtor-in-possession. Due to material uncertainties, it
is not possible to predict the length of time the Debtors will operate under
chapter 11 protection, the outcome of the reorganization in general, the effect
of the reorganization on the Debtors' businesses or the recovery by creditors
of the Debtors and equity holders of Bethlehem.
As a result of the chapter 11 filing, there is no assurance that the carrying
amounts of the assets will be realized or that liabilities will be settled for
amounts recorded. Bethlehem also is continuing to pursue various strategic
alternatives including, among other things, possible consolidation
opportunities, joint ventures with other steel operators, a stand-alone plan of
reorganization and liquidation of part or all of Bethlehem's assets. Such
alternatives are in an early stage and have not been implemented, nor can there
be any assurance that any such alternatives will be implemented. After further
consideration of such alternatives and negotiations with various parties in
interest, Bethlehem expects to present a chapter 11 plan, which will likely
cause a material change to the carrying amount of assets and liabilities in the
financial statements.
3. Bethlehem personnel recently attended a meeting requested by
representatives from New York Department of Environmental Conservation (NYDEC)
(1) to discuss the contents and timing of a Consent Order to conduct a RCRA
Corrective Measures Study and (2) to begin to implement an agreed upon plan of
remediation at our closed steel manufacturing facility in Lackawanna, New York.
Based upon the information received and the conceptual agreements reached at
that meeting, we recorded a $20 million non-cash charge to reflect the most
current estimate of the probable remediation costs at Lackawanna. The cash
requirements for remediation are expected to be expended over a protracted
period of years, according to a schedule to be agreed upon by Bethlehem and the
NYDEC.
During the second quarter of 2001, we wrote-off our $3.4 million equity
investment in MetalSite, an internet marketplace for steel that ceased
operations in June 2001.
4. Net costs resulting from reorganization of the businesses have been
reported in the statement of operations separately as reorganization items.
For the three-month and six-month periods ended June 30, 2002, the following
have been recorded (in millions):
Three Six
Months Months
------ ------
Professional and other fees $ 3.9 $ 8.2
Gains from termination of contracts - (2.0)
Interest income (0.2) (0.4)
------- -------
Total $ 3.7 $ 5.8
======= =======
5
5. Interest at the stated contractual amount on unsecured debt that was not
charged to earnings was approximately $11 million for the three-month period
ended and approximately $22 million for the six-month period ended June 30,
2002.
6. The income tax benefit recorded for the first quarter 2002 represents a $10
million tax refund as a result of the "Job Creation and Workers Assistance Act
of 2002" that was enacted March 8, 2002. The Act provides us the ability to
carry back a portion of our 2001 Alternative Minimum Tax loss for a refund of
taxes paid in prior years that was not previously available. We received the
refund in early July 2002.
Bethlehem incurred financial accounting losses in 1999 through 2001. Our
results during 2001 were worse than we anticipated at the beginning of the year
and we were not able to use any of the NOL expiring in 2001 in our federal
income tax return for the year. In the absence of specific favorable factors,
application of FASB Statement No. 109, issued in 1992, and its subsequent
interpretations require a 100% valuation allowance for any deferred tax asset
when a company has cumulative financial accounting losses, excluding unusual
items, over several years. Accordingly, in the second quarter of 2001, we
provided a 100% valuation allowance for our deferred tax asset, increasing our
non-cash provision for income taxes and net loss for the second quarter 2001 by
$1,009 million. We provided a 100% valuation allowance for our deferred income
tax asset for the balance of 2001 and for 2002. We will continue that policy
in the future, until, at a minimum, a chapter 11 plan of reorganization is
confirmed.
7. Liabilities subject to compromise at June 30, 2002 and December 31, 2001
follows ($ in millions):
June 30, December 31,
2002 2001
--------- ------------
Other postemployment benefits $ 2,031.7 $ 2,005.7
Pension liability 1,689.7 1,624.0
Unsecured debt 526.7 526.7
Accounts payable 198.8 220.8
Accrued employment costs 225.9 270.6
Other accrued liabilities 174.9 152.8
Accrued taxes and interest 77.1 77.5
--------- ---------
Total $ 4,924.8 $ 4,878.1
========= =========
8. Our financing arrangement with General Electric Capital Corporation
restricts dividend payments. Preferred dividends are in arrears since the
second quarter of 2001.
9. In the second quarter of 2002, we acquired the remaining 50% portion of the
Columbus Coatings Company (CCC) and Columbus Processing Company (CPC) joint
ventures from LTV Steel Corporation. CCC is an automotive quality, hot-dipped
galvanized coating line and CPC is a steel slitting facility, both located in
Columbus, Ohio. These interests were acquired on June 5, 2002 for cash, a
release of LTV's guarantee of CCC's debt and forgiveness of claims against
LTV by Bethlehem and CCC. The acquisition was accounted for as a purchase.
CCC's and CPC's results are included in the Consolidated Financial Statements
from the date of acquisition. Pro-forma amounts for the year are not
significant. The value assigned to the assets and liabilities acquired follows
($ in millions):
Property, plant & equipment $ 155.3
Debt and capital lease obligation (105.9)
Other - net (.3)
---------
Net assets 49.1
Less:
Investment in and receivable from joint ventures and LTV (46.7)
---------
Cash purchase price, net of cash acquired $ 2.4
=========
CCC's construction costs were financed in part with a loan under a 1999
agreement with a group of lenders. Bethlehem has guaranteed the full amount of
the construction loan. Bethlehem has provided CCC's
6
lenders with a collateralized letter of credit for $30 million and a mortgage
on our corporate headquarters building as additional collateral.
Because of our chapter 11 filing, CCC and Bethlehem are in default under the
construction loan agreements which would allow the lenders to call the full
amount of the loan. We believe that the market value of CCC exceeds the net
loan amount. We are working with the CCC lenders and others to resolve open
issues or refinance the net outstanding debt. We believe these matters can be
resolved without any additional significant impact on our liquidity.
7
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On October 15, 2001, Bethlehem Steel Corporation and 22 of its wholly
owned subsidiaries (collectively, the Debtors) filed voluntary petitions under
chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Southern District of New York (the Court). Bethlehem continues
to manage its properties and operate its businesses under Sections 1107 and
1108 of the Code as a debtor-in- possession. Due to material uncertainties, it
is not possible to predict the length of time the Debtors will operate under
chapter 11 protection, the outcome of the reorganization in general, the effect
of the reorganization on the Debtors' businesses or the recovery by creditors
of the Debtors and equity holders of Bethlehem.
As a result of the chapter 11 filing, there is no assurance that the
carrying amounts of the assets will be realized or that liabilities will be
settled for amounts recorded. Bethlehem also is continuing to pursue various
strategic alternatives including, among other things, possible consolidation
opportunities, joint ventures with other steel operators, a stand-alone plan of
reorganization and liquidation of part or all of Bethlehem's assets. Such
alternatives are in an early stage and have not been implemented, nor can there
be any assurance that any such alternatives will be implemented. After further
consideration of such alternatives and negotiations with various parties in
interest, Bethlehem expects to present a chapter 11 plan, which will likely
cause a material change to the carrying amount of assets and liabilities in the
financial statements.
Bethlehem has excellent steel facilities capable of producing
high-quality, low-cost products to serve the requirements of our most
demanding customers. Our goal is to assure that our competitive facilities
remain a key part of the North American steel industry and continue providing
valued products to our customers, jobs to our employees and customers to our
suppliers.
Our business outlook and the market for steel remains positive but we
have many hurdles to overcome in order to emerge from bankruptcy court
protection. International Steel Group's start-up of the former LTV steel
plants and Nucor's recent acquisition and planned start-up of the Trico Steel
operations coupled with continuing pressure for exclusions from the Section 201
tariffs could intensify competition and reduce prices.
We recently announced that we plan to get on with the tough job of
restructuring and implementing the necessary changes that will enable Bethlehem
to emerge from bankruptcy court protection. The changes include discussions
with the United Steelworkers of America to obtain a new comprehensive labor
agreement to reduce costs, improve productivity and enhance our flexibility and
to find solutions to our $5 billion pension and retiree healthcare obligations.
We also plan to implement a leaner organizational structure from top to bottom.
8
Review of Results:
Second Quarter and First Six Months 2002
Second Quarter and First Six Months 2001
Our second quarter 2002 net loss of $119 million compares to a net
loss of $1,132 million for the same period in 2001. Our six-month 2002 net
loss of $216 million compares to a net loss of $1,250 for the same period in
2001. These results include several unusual or non-cash items as reflected in
the following table:
$ Million
Second Quarter First Six Months
------------------- --------------------
2002 2001 2002 2001
-------- ---------- -------- ----------
Net loss $(118.9) $(1,131.9) $(216.2) $(1,250.3)
Blast furnace outages 16.7 23.4
Environmental accrual 20.0 20.0
Income tax benefit (10.3)
Reserving deferred taxes 1,009.0 984.0
Write-off equity investment 3.4 3.4
-------- ---------- -------- ----------
Net loss excluding unusual items $ (82.2) $ (119.5) $(183.1) $(262.9)
======== =========== ======== ==========
During the second quarter of 2002, the large bell on our D blast
furnace at Burns Harbor failed, causing an extended repair outage and related
lost production. The furnace was returned to full operation in June. The
combination of the repair costs, unabsorbed costs from lost production and
other related costs decreased net income by about $17 million in that quarter.
The first quarter of 2002 included carryover higher costs of $7 million from a
separate blast furnace outage that occurred in the fourth quarter of 2001.
Bethlehem personnel recently attended a meeting requested by the New
York Department of Environmental Conservation (NYDEC) (1) to discuss the
contents and timing of a Consent Order to conduct a RCRA Corrective Measures
Study and (2) to begin to implement an agreed upon plan of remediation at our
closed steel manufacturing facility in Lackawanna, NY. Based upon the
information received and the conceptual agreements reached at that meeting, we
recorded a $20 million non-cash charge to reflect the most current estimate of
the probable remediation costs at Lackawanna. The cash requirements for
remediation are expected to be expended over a protracted period of years,
according to a schedule to be agreed upon by Bethlehem and the NYDEC.
The income tax benefit recorded for the first quarter 2002 represents
a tax refund as a result of the "Job Creation and Workers Assistance Act of
2002" that was enacted March 8, 2002. The Act provides us the ability to carry
back a portion of our 2001 Alternative Minimum Tax loss for a refund of taxes
paid in prior years that was not previously available. We received the refund
in early July 2002.
9
The unusual non-cash charges for the second quarter and first half of
2001 include fully reserving our net deferred tax asset and writing off our
equity investment in MetalSite, an internet marketplace for steel that ceased
operations. During the second quarter of 2001, it was determined that the
cumulative financial accounting losses had reached the point that fully
reserving the deferred tax asset was required (see Note 6 to the accompanying
Notes to June 30, 2002 Financial Statements).
Bethlehem's net loss of $82 million for the second quarter of 2002 is
a $38 million improvement over the prior year net loss of $120 million,
excluding unusual items previously mentioned. This improvement resulted from
higher prices, a better product mix and less interest expense, partially offset
by lower shipments. Prices, on a constant mix basis, increased by about 4%
from a year ago, primarily from recent capacity shutdowns, the favorable
Section 201 trade ruling in March 2002 and customer inventory replenishment.
Shipments are lower by about 5%, primarily plate products, as business capital
spending continues to lag other segments of the economy. Our product mix
improved from higher shipments of cold-rolled, coated and tin products, while
the shipments of lower value hot-rolled and non-prime products decreased.
Costs were about the same as lower energy prices and administration expense
offset higher pension expense. Interest expense decreased because, after
filing for protection under chapter 11 on October 15, 2001, we are no longer
accruing interest on unsecured debt.
Excluding unusual items previously mentioned, our net loss for the six
months ended June 30, 2002 of $183 million compares to a net loss of $263
million for 2001. The improvement is mainly attributable from an improved
product mix and lower costs. Our product mix improved as shipments of higher
valued, coated and tin products increased, while shipments of lower valued hot-
rolled and secondary products decreased. Costs in 2002 are lower due to
substantially lower natural gas prices and productivity improvements from force
reductions, which were partially offset by higher pension expense. In
addition, interest expense declined because we are no longer accruing interest
on unsecured debt.
Liquidity and Cash Flow
Total liquidity (cash, cash equivalents and borrowing available under
our committed credit facility) was $240 million at June 30, 2002 and $276
million at December 31, 2001.
Cash used for operating activities for the first six months of 2002
was $3 million compared with $28 million in the same period for 2001. Cash
used for operations before working capital and funding post retirement benefits
in 2002 was about half of the prior year's principally from the reduced net
loss.
Prior to 1999, we had contributed amounts to our pension fund
substantially in excess of amounts required under current law and regulations.
Because of these contributions and better than assumed earnings performance on
our pension fund assets through 2000, we built a funding credit balance that is
expected to allow us to defer
10
pension funding, except for minor administrative expenses and other payments,
until the third quarter of 2003. We expect our annual 2002 pension expense to
be about $150 million compared with $103 million in 2001.
We paid $28 million of retiree health and insurance benefits (OPEB) in
the first quarter of 2001 from existing trust fund assets. After that,
substantially all OPEB benefits are being paid directly by Bethlehem until
certain restrictions are removed on the $15 million remaining trust fund
assets. For the year 2002, we expect to pay directly about $230 million which
is less than our expected expense of $280 million.
Capital expenditures were about $56 million for the first half of 2002
and are expected to be about $150 million for the year. During the second
quarter, we purchased the remaining 50% interests in Columbus Coatings Company
(CCC) and Columbus Processing Company joint ventures from LTV Steel Corporation
(see Note 9 to the accompanying Notes to June 30, 2002 Financial Statements).
CCC's construction costs were financed in part with a loan under a
1999 agreement with a group of lenders. Bethlehem has guaranteed the full
amount of the construction loan. Bethlehem has provided CCC's lenders with a
collateralized letter of credit for $30 million and a mortgage on its corporate
headquarters building as additional collateral.
Because of our chapter 11 filing, CCC and Bethlehem are in default
under the construction loan agreements which would allow the lenders to call
the full amount of the loan. We believe that the market value of CCC exceeds
the net loan amount. We are working with the CCC lenders and others to resolve
open issues or refinance the net outstanding debt. We believe these matters
can be resolved without any additional significant impact on our liquidity.
In the first six months of 2002, we received about $23 million from
the sale of surplus land and environmental credits, including $4 million
received during the second quarter for the sale of our Weyhill Guesthouse in
Bethlehem, Pennsylvania.
We expect to have sufficient liquidity through this year and into next
to pursue various strategic alternatives toward a plan of reorganization.
Securities
Prior to the market opening on June 12, 2002, the New York Stock
Exchange, Inc. (NYSE) suspended trading of Bethlehem's common stock, $5.00
cumulative convertible preferred stock, $2.50 cumulative convertible preferred
stock and 8.45% debentures due March 1, 2005. The NYSE reached its decision
because Bethlehem had been unable to comply with the NYSE's continued listing
standard requiring an average closing share price of not less than $1 per share
over a consecutive 30 trading day period.
11
Bethlehem's common stock and preferred stock are currently being
quoted on the OTC (over-the-counter) Bulletin Board (OTCBB). The OTCBB is a
regulated quotation service that displays real-time quotes, last-sale prices
and volume information in OTC equity securities. Although Bethlehem previously
indicated that it expected its debentures to be quoted on the National
Quotation Service's "Yellow Sheets", to date, no market makers have filed
applications to quote such debt.
Dividends
Pursuant to Delaware law and our financing with General Electric
Capital Corporation, we are not permitted to declare a dividend on our Common
Stock, Cumulative Convertible Preferred Stock or Preference Stock.
Forward-looking Statements
Certain statements in this report are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Actual results may differ materially from those indicated in such statements
due to a number of factors, including changes arising from our chapter 11
filing. Due to material uncertainties, it is not possible to predict the
length of time we will operate under chapter 11 protection, the outcome of the
proceedings in general, whether we will continue to operate under our current
organizational structure, whether there will be a major steel industry
consolidation effort, the effect of the chapter 11 cases on Bethlehem's
businesses, including customer and supplier reactions and the interests of
various creditors and security holders. Additional factors that may affect our
business and financial results are changes in customer spending patterns,
supplier choices and demand for steel products; the effect of planned and
unplanned outages on our operations; the potential impact of strikes or work
stoppages at facilities of our customers and suppliers; the sensitivity of our
results to relatively small changes in the prices we obtain for our products;
intense competition due to excess global steel capacity, low-cost electric
furnace facilities, imports (especially unfairly-traded imports) and substitute
materials; the consolidation of many of our customers and suppliers; the high
capital requirements associated with integrated steel facilities; the
significant costs associated with environmental controls and remediation
expenditures and the uncertainty of future environmental control requirements;
availability, prices and terms associated with raw materials, supplies,
utilities and other services and items required by Bethlehem's operations;
employment matters, including costs and uncertainties associated with our
collective bargaining agreements, and employee postretirement obligations; the
effect of possible future closure or exit of businesses; our highly leveraged
capital structure and our ability to obtain new capital at reasonable costs and
terms; financial difficulties encountered by joint venture partners; and the
effect of existing and possible future lawsuits against us. The
forward-looking statements included in this document are based on information
available to us as of the date of this report, and we assume no obligation to
update any of these statements.
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
On October 15, 2001, Bethlehem and 22 of its direct and indirect
subsidiaries filed voluntary petitions under chapter 11 of title 11, United
States Code (the "Bankruptcy Code") in the United States Bankruptcy Court for
the Southern District of New York (Case Nos. 01-15288 (BRL) through 01-15302
(BRL) and 01-15308 (BRL) through 01-15315 (BRL)). Bethlehem and its
subsidiaries remain in possession of their assets and properties, and continue
to operate their businesses and manage their properties as
debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy
Code. As a result of the chapter 11 cases, all pending litigation against
Bethlehem and the 22 subsidiaries is stayed automatically by section 362 of the
Bankruptcy Code and, absent further order of the Bankruptcy Court, no party may
take any action to recover on pre-petition claims against Bethlehem and such
subsidiaries.
Bethlehem, in the ordinary course of its business, is the subject of
various pending or threatened legal actions involving governmental agencies or
private interests. Prosecution of certain of these actions may be stayed by
Bethlehem's chapter 11 filing. 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, 2002.
Bethlehem does not have any material developments in legal proceedings
to report for the second quarter of 2002.
Item 3. Defaults Upon Senior Securities.
As a result of its chapter 11 filing, Bethlehem has not made principal
or interest payments on unsecured indebtedness incurred prior to October 15,
2001 without approval of the Bankruptcy Court. In addition, Bethlehem is not
permitted to pay dividends on its Common Stock, Cumulative Convertible
Preferred Stock or Preference Stock. The dividend arrearage from June 30, 2001
through June 30, 2002 is approximately $40 million.
13
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:
4(a). Amendment No. 1 to Revolving Credit and Guaranty Agreement and
Security Agreement and Amendment No. 2 to Pledge Agreement.
4(b). Revolving Credit and Guaranty Agreement, as amended by
Amendment No. 1 dated as of April 23, 2002, among Bethlehem
Steel Corporation and Certain of its Subsidiaries, the Lenders
and General Electric Capital Corporation.
11. Statement Regarding Computation of Earnings Per Share.
(b) Reports on Form 8-K.
Bethlehem filed the following Current Reports on Form 8-K with the
Securities and Exchange Commission since the end of its First Quarter:
1. April 16, 2002 - Consolidated Monthly Operating Statement for the
month of March, 2002, as filed with the Bankruptcy Court.
2. April 16, 2002 - Press Release announcing Bethlehem's First
Quarter Results.
3. May 15, 2002 - Consolidated Monthly Operating Statement for the
month of April, 2002, as filed with the Bankruptcy Court.
4. June 10, 2002 - Press release concerning the suspension and
delisting of Bethlehem's equity and debt securities from the New
York Stock Exchange.
5. June 20, 2002 - Consolidated Monthly Operating Statement for the
month of May, 2002, as filed with the Bankruptcy Court.
6. July 9, 2002 - Press release addressing the current status of
Bethlehem's restructuring plans.
7. July 22, 2002 - Consolidated Monthly Operating Statement for the
month of June, 2002, as filed with the Bankruptcy Court.
8. July 22, 2002 - Press release announcing Bethlehem's Second
Quarter Results.
14
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: July 22, 2002
15
EXHIBIT INDEX
The following is an index of the exhibits included in this Report:
Exhibit
-------
4(a) Amendment No. 1 to Revolving Credit and Guaranty Agreement and Security
Agreement and Amendment No. 2 to Pledge Agreement.
4(b) Revolving Credit and Guaranty Agreement, as amended by Amendment No. 1
dated as of April 23, 2002, among Bethlehem Steel Corporation and Certain
of its Subsidiaries, the Lenders and General Electric Capital Corporation.
11 Statement Regarding Computation of Earnings Per Share.
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
- --------------------- ---------------------
2002 2001 Basic Loss Per Share 2002 2001
---- ---- -------------------- ---- ----
$ (118.9) $(1,131.9) Net Loss $ (216.2) $(1,250.3)
Less Dividend Requirements:
(2.5) (2.5) $2.50 Preferred Dividend (5.0) (5.0)
(3.2) (3.1) $5.00 Preferred Dividend (6.3) (6.2)
(4.2) (4.5) $3.50 Preferred Dividend (8.5) (9.0)
0.0 (0.1) 5% Preference Dividend 0.0 (0.2)
- ---------- ---------- ---------- ----------
(9.9) (10.2) Total Preferred and Preference Dividends (19.8) (20.4)
- ---------- ---------- ---------- ----------
$ (128.8) $(1,142.1) Net Loss Applicable to Common Stock $ (236.0) $(1,270.7)
========== ========== ========== ==========
130,969 129,819 Average Shares of Common Stock 130,944 129,804
$ (0.98) $ (8.80) Basic Loss Per Share $ (1.80) $ (9.79)
========== ========== ========== ==========
Diluted Loss Per Share
----------------------
$ (118.9) $(1,131.9) Net Loss $ (216.2) $(1,250.3)
Less Dividend Requirements:
(2.5) (2.5) $2.50 Preferred Dividend (5.0) (5.0)
(3.2) (3.1) $5.00 Preferred Dividend (6.3) (6.2)
(4.2) (4.5) $3.50 Preferred Dividend (8.5) (9.0)
0.0 (0.1) 5% Preference Dividend 0.0 (0.2)
- ---------- ---------- ---------- ----------
$ (128.8) $(1,142.1) Net Loss Applicable to Common Stock $ (236.0) $(1,270.7)
========== ========== ========== ==========
Average Shares of Common Stock and
Other Potentially Dilutive Securities Outstanding:
130,969 129,819 Common Stock 130,944 129,804
- - Stock Options - -
* * $2.50 Preferred Stock * *
* * $5.00 Preferred Stock * *
* * $3.50 Preferred Stock * *
* * 5% Preference Stock * *
- ---------- ---------- ---------- ----------
130,969 129,819 Total 130,944 129,804
========== ========== ========== ==========
$ (0.98) $ (8.80) Diluted Loss Per Share $ (1.80) $ (9.79)
========== ========== ========== ==========
* Antidilutive