Bethlehem Steel Further Reduces Quarterly Loss While Liquidity Remains Stable.Business Editors BETHLEHEM Bethlehem, city, United States Bethlehem, city (1990 pop. 71,428), Northampton and Lehigh counties, E Pa., on the Lehigh R. near Allentown and Easton; inc. as a city 1917. Local manufacturing, once dominated by the giant Bethlehem Steel Corp. , Pa.--(BUSINESS WIRE)--Oct. 21, 2002 Bethlehem Steel The Bethlehem Steel Corporation (1857–2003), based in Bethlehem, Pennsylvania, once was the second largest steel producer in the United States (after Pittsburgh, Pennsylvania-based US Steel). Corporation reported a loss for the third quarter of 2002 of $54 million, an improvement from the loss of $119 million recorded in the second quarter of 2002 and the loss of $152 million recorded in the third quarter of 2001. Our recent losses include several unusual or non-cash items as reflected in the following table:
Three Months Ended Nine Months Ended
---------------------------- ----------------------
2002 2001 2002 2001
------------------ -------- -------- --------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
-------- ------- -------- -------- --------
Net loss $(54.2) $(118.9) $(152.2) $(270.4) $(1,402.5)
Loss on closure
of pipe mill 2.5 - - 2.5 -
Loss on sales of
interest in iron
ore facility and
excess ore 8.0 - - 8.0 -
Blast furnace
outages 2.3 16.7 - 25.7 -
Environmental
accrual - 20.0 - 20.0 -
Income tax benefit - - - (10.3) -
Loss on closure of
Lackawanna Coke - - 40.0 - 40.0
Gain on sale of MBR - - (22.2) - (22.2)
Reserving deferred
taxes - - - - 984.0
Write-off equity
investment - - - - 3.4
-------- -------- -------- -------- --------
Net loss
excluding
unusual items $(41.4) $(82.2) $(134.4) $(224.5) $(397.3)
======== ======== ======== ======== ========
"Our third quarter operating results were significantly better than both the second quarter of 2002 and the third quarter of 2001. Realized prices continued to improve, primarily as a result of reduced domestic supply from capacity shutdowns and the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. Section 201 trade ruling in March 2002," said Robert Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. "Steve v. t. 1. To pack or stow, as cargo in a ship's hold. See Steeve. " Miller, Jr., Chairman and Chief Executive Officer of Bethlehem Steel. "However, we believe prices will begin to level off in the fourth quarter as a significant portion of the reduced domestic capacity that occurred in 2001 is coming back online, with International Steel Group's start-up Start-up The earliest stage of a new business venture. of the former LTV LTV See: Loan-to-value ratio steel plants and Nucor's start-up of the former Trico Trico is an American company that specializes in windshield wipers. Trico, then Tri-Continental Corporation, invented the windshield Wiper blade in 1917. Steel plant. We expect our financial performance to level out in the fourth quarter, as shipments decline seasonally. We will also incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. additional costs in connection with planned maintenance in the fourth quarter at our light flat rolled plants. "We ended the third quarter of 2002 with liquidity of about $235 million. Our operations generated about $21 million in cash during the quarter compared to essentially break-even cash from operations during the first half of the year. We expect to have sufficient liquidity into 2003 to pursue various strategic alternatives toward a plan of reorganization. "Because of the decline in market value of our pension trust assets, continuing pension payments from the trust and declining interest rates, our pension plan is now about $3.2 billion underfunded un·der·fund tr.v. un·der·fund·ed, un·der·fund·ing, un·der·funds To provide insufficient funding for. underfunded adj → infradotado (económicamente) at today's market. Accordingly, we now have over $6 billion of unfunded pension and other postretirement obligations, principally healthcare, that we simply cannot support. Further, like many companies with defined benefit pension plans, this increase in our unfunded pension obligation will require us to record a non-cash, direct charge to stockholders' deficit of about $1.5 billion if the market remains the same at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . This charge is only required at year-end and will not affect our 2002 operating results. Our operating results for the first nine months of 2002 include about $321 million for total pension and other post employment benefit expenses, much of which are non-cash. Without these expenses, Bethlehem would clearly report profits this year. "Domestic steel consumption remains fairly strong, driven principally by automotive sales. The problem of excess global capacity, however, remains a significant hurdle HURDLE, Eng. law. A species of sledge, used to draw traitors to execution. for the steel industry. As previously announced, the key for Bethlehem to emerge from Chapter 11 bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most protection is the substantial reduction or elimination of our unfunded pension and retiree health care obligations together with a new labor agreement with the United Steelworkers United Steelworkers (USW) historic labour union representing workers in steel, aluminum, and other metallurgical industries for much of the 20th century. In the U.S. of America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. . Negotiations are underway with the union to achieve a new labor agreement that will allow Bethlehem to become cost competitive with other restructured integrated producers and the mini mills." Unusual Items Our pipe mill located in Steelton, Pennsylvania Steelton is a borough in Dauphin County, Pennsylvania, three miles (5 km) southeast of Harrisburg. In 1900, 12,086 people lived here; in 1910, 14,246 people lived here; in 1920, 13,248 people lived here; and in 1940, 13,115 people lived here. has not operated since June June: see month. 1999 and we recently announced the permanent closing of the facility. As a result, we recorded a $2.5 million charge in the third quarter of 2002 to account for the required employee benefit costs. We recently determined that our ownership percentage of Hibbing Hibbing, city (1990 pop. 18,046), St. Louis co., NE Minn., on the Mesabi iron range 90 mi (145 km) from the Canadian border; inc. 1893. Iron mining, formerly the major industry, has declined. Taconite taconite, low-grade iron ore, a flintlike rock usually containing less than 30% iron. Resistant to drilling and to the extraction of its contained metal, the rock was long considered worthless. Experiments begun in 1912 by the American scientist Edward W. , our iron ore joint venture in Minnesota Minnesota, state, United States Minnesota (mĭn'ĭsō`tə), upper midwestern state of the United States. It is bordered by Lake Superior and Wisconsin (E), Iowa (S), South Dakota and North Dakota (W), and the Canadian provinces , exceeded the future iron ore requirements at our Burns Harbor plant. As a result, during the third quarter we sold an 8% interest in the venture and agreed to sell excess ore inventory. While we recognized a total loss of $8 million from these transactions, they avoided temporary production shutdowns of the iron ore facility that would have increased our costs and consumed con·sume v. con·sumed, con·sum·ing, con·sumes v.tr. 1. To take in as food; eat or drink up. See Synonyms at eat. 2. a. cash in excess of the loss recognized. As previously reported, during the second quarter of 2002, the large bell on our D blast furnace blast furnace, structure used chiefly in smelting. The principle involved in this means of extracting metals is that of the reduction of the ores by the action of carbon monoxide, i.e., the removal of oxygen from the metal oxide in order to obtain the metal. at Burns Harbor failed, causing an extended repair outage out·age n. 1. A quantity or portion of something lacking after delivery or storage. 2. A temporary suspension of operation, especially of electric power. and related lost production. The furnace furnace, enclosed space for the burning of fuel. There are many kinds of furnaces, the type depending upon the fuel and the use to which the heat produced within it is put. Most familiar are the furnaces used in the heating of buildings. was returned to full operation in June. Carryover carryover n. in taxation accounting, using a tax year's deductions, business losses or credits to apply to the following year's tax return to reduce the tax liability. (See: carryback) costs related to the outage were about $2 million in the third quarter of 2002. The combination of the repair costs, unabsorbed costs from lost production and other related costs decreased net income by about $17 million in the second 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. During the second quarter of 2002, Bethlehem personnel attended a meeting requested by the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Department of Environmental Conservation (NYDEC NYDEC New York Department of Environmental Conservation ) to discuss the contents and timing of a Consent Order to conduct a RCRA RCRA Resource Conservation & Recovery Act of 1976 RCRA Resort and Commercial Recreation Association Corrective cor·rec·tive adj. Counteracting or modifying what is malfunctioning, undesirable, or injurious. n. An agent that corrects. corrective, n Measures Study and to begin to implement an agreed upon Adj. 1. agreed upon - constituted or contracted by stipulation or agreement; "stipulatory obligations" stipulatory noncontroversial, uncontroversial - not likely to arouse controversy plan of remediation at our closed steel manufacturing facility in Lackawanna, New York
A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. to reflect Bethlehem's most current estimate of the probable remediation costs at Lackawanna Lackawanna, city, United States Lackawanna (lăkəwä`nə), city (1990 pop. 20,585), Erie co., W N.Y., on Lake Erie; inc. 1909. . The cash requirements for remediation are expected to be expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. over a protracted pro·tract tr.v. pro·tract·ed, pro·tract·ing, pro·tracts 1. To draw out or lengthen in time; prolong: disputants who needlessly protracted the negotiations. 2. period of years, according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a schedule to be agreed upon by Bethlehem and the NYDEC. The $10 million income tax benefit recorded in 2002 represents a tax refund Tax refund Money back from the government when too much tax has been paid or withheld from a salary. 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 TO REFUND. To pay back by the party who has received it, to the party who has paid it, money which ought not to have been paid. 2. On a deficiency of assets, executors and administrators cum testamento annexo, are entitled to have refunded to them legacies of taxes paid in prior years that was not previously available. We received the refund in July July: see month. 2002. Unusual non-cash charges for the nine months ended September September: see month. 30, 2001 included fully reserving our net deferred tax asset, a provision for closure of our Lackawanna, New York coke plant, a gain on the sale of our interest in a Brazilian iron ore property and writing off our equity investment in Metal Site, an internet marketplace See vertical portal and Web hub. 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 Notes 3 and 6 to the accompanying Notes to September 30, 2002 Financial Statements for further details on these items. Financial Results Excluding unusual items previously mentioned, our third quarter 2002 net loss of $41 million compares with an $82 million net loss in the second quarter of 2002. The increase in average realized prices, on a constant mix basis, of about 6% during the quarter was the principal reason for the improved results. Bethlehem's net loss before unusual items of $41 million for the third quarter of 2002 is a $93 million improvement over the prior year net loss of $134 million. This improvement resulted from higher prices and an improved product mix, partially offset by higher costs. Average realized prices, on a constant mix basis, improved by about 12% from the same period last year. Our product mix shipped improved, as our percentage of higher margin, cold-rolled, coated and tin products increased and we reduced the percentage of lower margin secondary products. Costs were higher mainly from increased pension expense and reorganization expense partially offset by lower interest expense. Interest expense declined because, after filing for protection under chapter 11 on October October: see month. 15, 2001, we are no longer accruing interest on unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. . Our net loss before unusual items for the nine months ended September 30, 2002 of $225 million compares with a net loss of $397 million for the same period in 2001. The improvement is mainly attributable to improvements in prices, product mix and reduced costs, offset by lower shipments. Average realized prices on a constant mix basis have increased by about 4%. Our product mix shipped improved, as our percentage of shipments of higher margin, cold-rolled, coated and tin products increased, while we reduced the percentage of lower margin hot-rolled and secondary products. Costs were lower mainly from decreases in natural gas prices, employee reductions and lower interest expense, partially offset by higher pension expense and the effects of lower production volume at our plate operations. As previously mentioned, interest expense declined because we are no longer accruing interest on unsecured debt. Shipments were lower by about 4%, primarily in plate products, as business investment continues to lag, and from increased competition from new entrants into the plate marketplace. Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Certain statements in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. , whether there will be a major steel industry consolidation effort, the effect of chapter 11 cases on our 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 prices we obtain for our products; intense competition due to excess global steel capacity, low-cost electric furnace electric furnace: see furnace. electric furnace Chamber heated with electricity to very high temperatures, for melting and alloying metals and refractories. Modern electric furnaces generally are either arc furnaces or induction furnaces. facilities, imports (especially unfairly-traded imports) and substitute materials; the consolidation of many of our customers and suppliers; the high capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. associated with integrated steel facilities; the significant costs associated with environmental control and remediation expenditures; availability, prices and terms associated with raw materials, supplies, utilities and other services and items required by our operations; employment matters, including costs and uncertainties associated with our collective bargaining collective bargaining, in labor relations, procedure whereby an employer or employers agree to discuss the conditions of work by bargaining with representatives of the employees, usually a labor union. unit 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.
Bethlehem Steel Corporation
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions)
(unaudited)
Three Months Ended
-------------------------------------
September 30 June 30 September 30
2002 2002 2001
------- ------- -------
$ 938.5 $ 933.5 $ 825.4 Net Sales
------- ------- -------
Costs and Expenses
887.5 931.2 844.0 Cost of sales
64.1 62.4 64.7 Depreciation
Selling, administration and
19.7 22.3 24.8 general expense
2.5 20.0 17.8 Special charges (Note 3)
------- ------- -------
973.8 1,035.9 951.3 Total Costs and Expenses
------- ------- -------
(35.3) (102.4) (125.9) Loss from Operations
(4.9) (3.7) (1.4) Reorganization Items (Note 4)
(14.0) (12.8) (24.9) Financing Expense - net (Note 5)
------- ------- -------
(54.2) (118.9) (152.2) Loss before Income Taxes
Benefit (Provision) for Income
- - - Taxes (Note 6)
------- ------- -------
(54.2) (118.9) (152.2) Net Loss
Dividend Requirements on
9.8 9.9 10.2 Preferred and Preference Stock
------- ------- -------
Net Loss Applicable to Common
$ (64.0) $ (128.8) $ (162.4) Stock
======= ======= =======
Net Loss per Common Share:
$ (0.49) $ (0.98) $ (1.25) Basic and Diluted
Average Shares Outstanding:
131.0 131.0 130.2 Basic and Diluted
Additional Data
Steel products shipped
1,913 2,028 1,929 (thousands of net tons)
Raw steel produced
2,338 2,123 2,252 (thousands of net tons)
Nine Months Ended
September 30
--------------------------
2002 2001
--------- ---------
Net Sales $ 2,675.8 $ 2,614.4
--------- ---------
Costs and Expenses
Cost of sales 2,630.2 2,670.0
Depreciation 187.0 189.9
Selling, administration and
general expense 67.1 78.8
Special charges (Note 3) 22.5 21.2
--------- ---------
Total Costs and Expenses 2,906.8 2,959.9
--------- ---------
Loss from Operations (231.0) (345.5)
Reorganization Items (Note 4) (10.7) (1.4)
Financing Expense - net (Note 5) (39.0) (71.6)
--------- ---------
Loss before Income Taxes (280.7) (418.5)
Benefit (Provision) for Income
Taxes (Note 6) 10.3 (984.0)
--------- ---------
Net Loss (270.4) (1,402.5)
Dividend Requirements on Preferred
and Preference Stock 29.6 30.6
--------- ---------
Net Loss Applicable to Common Stock $ (300.0) $ (1,433.1)
========= =========
Net Loss per Common Share:
Basic and Diluted $ (2.29) $ (11.02)
Average Shares Outstanding:
Basic and Diluted 131.0 130.0
Additional Data
Steel products shipped (thousands
of net tons) 5,821 6,074
Raw steel produced (thousands of
net tons) 6,767 6,942
Bethlehem Steel Corporation
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
ASSETS
Sept. 30 Dec. 31
2002 2001
--------- ---------
(unaudited)
Current Assets:
Cash and cash equivalents $ 86.3 $ 104.0
Receivables - net 382.5 350.4
Inventories:
Raw materials 244.2 259.5
Finished and semifinished 500.7 465.8
--------- ---------
Total Inventories 744.9 725.3
Other current assets 24.2 22.8
--------- ---------
Total Current Assets 1,237.9 1,202.5
Investments and Miscellaneous Assets - net 83.2 129.6
Property, Plant and Equipment 2,714.7 2,686.9
Intangible Pension Asset 225.0 225.0
--------- ---------
Total Assets $ 4,260.8 $ 4,244.0
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $ 153.7 $ 150.1
Accrued employment costs 96.8 37.9
Accrued taxes 25.1 14.4
Debt and capital lease obligations -
current (Note 10) 93.8 19.3
Other current liabilities 60.9 49.9
--------- ---------
Total Current Liabilities 430.3 271.6
Long-term Debt and Capital Lease Obligations 123.2 132.7
Debtor-in-Possession Financing 280.7 205.6
Debt Secured by Inventory 289.9 289.9
Deferred Gain 86.9 103.2
Other Long-term Liabilities 43.1 43.4
Liabilities Subject to Compromise (Note 7) 4,956.2 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 1,909.7 1,908.2
Accumulated other comprehensive loss (833.0) (833.0)
Accumulated deficit (3,109.5) (2,839.0)
--------- ---------
Total Stockholders' Deficit (1,949.5) (1,680.5)
--------- ---------
Total Liabilities and Stockholders' Deficit $ 4,260.8 $ 4,244.0
========= =========
Bethlehem Steel Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
(unaudited)
Three Months Ended
------------------------------------
September 30, June 30, March 31,
2002 2002 2002
---- ---- ----
Operating Activities:
Net loss $ (54.2) $ (118.9) $ (97.3)
Adjustments for
items not affecting
cash from operating
activities:
Depreciation and
amortization 64.1 62.4 60.5
Special charges 2.5 20.0 -
Recognition of
deferred gains (5.4) (5.3) (5.6)
Reorganization items 4.9 3.7 2.1
Other - net 6.3 (2.4) 4.9
Working capital (excluding
financing and investing
activities):
Receivables 13.3 (30.9) (20.0)
Inventories (30.8) 7.4 3.1
Accounts payable (27.6) 16.7 (9.8)
Other 4.3 10.2 10.7
Funding postretirement
benefits:
Pension funding less
than expense 38.0 30.1 35.6
Retiree healthcare
and life insurance
benefit payments
less than expense 10.7 11.1 14.1
------- -------- -------
Cash Provided By (Used For)
Operating Activities Before
Reorganization Items 26.1 4.1 (1.7)
------- -------- -------
Reorganization items (4.9) (3.7) (2.1)
------- -------- -------
Cash Provided By (Used For)
Operating Activities 21.2 0.4 (3.8)
------- -------- -------
Investing Activities:
Capital expenditures (18.9) (41.4) (14.2)
Cash proceeds from
asset sales 3.2 5.9 16.6
------- -------- -------
Cash Provided By (Used For)
Investing Activities (15.7) (35.5) 2.4
------- -------- -------
Financing Activities:
Borrowings 60.1 30.0 0.5
Debt and capital
lease payments (36.9) (3.2) (18.1)
Other payments (4.4) (5.7) (9.0)
------- -------- -------
Cash From (Used For)
Financing Activities 18.8 21.1 (26.6)
------- -------- -------
Net Increase (Decrease)
in Cash and Cash Equivalents 24.3 (14.0) (28.0)
Cash and Cash Equivalents
- Beginning of Period 62.0 76.0 104.0
------- -------- -------
- End of Period 86.3 62.0 76.0
Available Borrowing under
Committed Bank Credit
Arrangements 148.1 178.1 197.4
------- -------- -------
Total Liquidity at End
of Period $ 234.4 $ 240.1 $ 273.4
======= ======== =======
Supplemental Cash Information
(Note 10):
Interest and other
financing costs, net of
amount capitalized $ 13.0 $ 11.3 $ 8.1
Income taxes paid
(received) (8.1) 0.1 -
Capital lease
obligations incurred - - 1.9
The accompanying Notes are an integral part of the Consolidated
Financial Statements.
Bethlehem Steel Corporation NOTES TO SEPTEMBER 30, 2002 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge (unaudited) 1. The Consolidated Financial Statements as of and for the three-month and nine-month periods ended September 30, 2002 and 2001 and for the three-month periods ended June 30 and March 31, 2002 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 re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. nature. These Consolidated Financial Statements should be read together with audited financial statements in Bethlehem's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December December: see month. 31, 2001 and other reports filed with the Securities and Exchange Commission during 2002. 2. On October 15, 2001, Bethlehem Steel Corporation and 22 of its wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. (collectively, the Debtors) filed voluntary petitions under chapter 11 of the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Bankruptcy Code Bankruptcy Code may refer to:
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 is pursuing a stand alone plan of reorganization while continuing to consider alternative opportunities for, among other things, possible consolidation and joint ventures with other steel operators and liquidation The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts. A type of proceeding pursuant to federal Bankruptcy of part or all of Bethlehem's assets. There can be no 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. The deadline for the creditors to file proofs of claim with the court-appointed claims agent was September 30, 2002, with certain extensions granted by the Court. Differences between the amounts reflected on Bethlehem's records and claims by creditors will be investigated and resolved in connection with our claims resolution process. That process has commenced and, in light of the number of creditors, will take considerable time to complete. Accordingly, the ultimate number and amount of allowed claims is not presently known and, because the settlement terms of such allowed claims are subject to a confirmed chapter 11 plan, the ultimate distribution with respect to allowed claims is not presently ascertainable as·cer·tain tr.v. as·cer·tained, as·cer·tain·ing, as·cer·tains 1. To discover with certainty, as through examination or experimentation. See Synonyms at discover. 2. . 3. A summary of special charges follows:
Three Months Ended Nine Months Ended
----------------------------- ------------------
2002 2001 2002 2001
------------------ ------- ------- -------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
-------- ------- -------- -------- ---------
Loss on closure
of pipe mill $ 2.5 - - $ 2.5 -
Environmental
accrual - $ 20.0 - $ 20.0 -
Loss on
closure of
Lackawanna Coke - - $ 40.0 - $ 40.0
Gain on sale of
MBR - - (22.2) - (22.2)
Write-off equity
investment - - - - 3.4
------- ------- ------- ------- -------
Total $ 2.5 $ 20.0 $ 17.8 $ 22.5 $ 21.2
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During August 2002, Bethlehem announced the permanent closing of a facility for producing large diameter pipe in Steelton, Pennsylvania. As a result, we recorded a $2.5 million non-cash charge to account for the required employee benefit costs. During the second quarter of 2002, Bethlehem personnel attended a meeting requested by representatives from the New York Department of Environmental Conservation (NYDEC) to discuss the contents and timing of a Consent Order to conduct a RCRA Corrective Measures Study and 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 Bethlehem's 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 third quarter of 2001, we announced we would close our Lackawanna Coke operations. This facility ended operations on September 30, 2001. We recorded a charge of $40 million in connection with the closing, principally to account for the required employee benefit costs. Also in the third quarter, we sold our interest in MBR (Master Boot Record) See boot sector. , a Brazilian iron ore property, for $4 million in cash and $19 million in credits against future iron ore purchases (all of which have been used) resulting in a $22 million gain. Operating results for third quarter and nine months of 2001 include pension and OPEB OPEB Other Post-Employment Benefits OPEB Other Postretirement Obligations (pensions/retirement) expense of $4 million and $12 million related to incentives provided to certain employees at Burns Harbor to elect early retirement. Earlier during 2001, we received $18 million from the settlement of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. related to construction of one of our coke oven batteries at Burns Harbor. Nine month 2001 operating results include $5 million for the recovery of litigation and maintenance costs already incurred; $13 million was deferred and is being amortized over the remaining useful life of the battery to offset expected higher than normal future maintenance costs. 4. The following net costs resulting from reorganization of the businesses have been reported in the statement of operations See Income statement. separately as reorganization items ($ in millions):
Three Months Ended Nine Months Ended
----------------------------- ------------------
2002 2001 2002 2001
------------------ ------- ------- -------
Sept. 30 June 30 Sept. 30 Sept. 30 Sept. 30
-------- ------- -------- -------- --------
Professional and
other fees $ 5.1 $ 3.9 $ 1.4 $ 13.3 $ 1.4
Gains from
termination of
contracts - - - (2.0) -
Interest income (0.2) (0.2) - (0.6) -
------- ------- ------- ------- -------
Total $ 4.9 $ 3.7 $ 1.4 $ 10.7 $ 1.4
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5. Interest at the stated contractual amount on unsecured debt that was not charged to earnings as a result of our chapter 11 filing was approximately $11 million for the three-month periods ended September 30 and June 30, 2002 and approximately $32 million for the nine-month period ended September 30, 2002. 6. The income tax benefit recorded in 2002 represents a $10 million tax refund as a result of the "Job Creation and Workers Assistance Act of 2002" that was enacted on 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 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 NOL - Never Offline expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. in 2001 in our federal income tax return for the year. In the absence of specific favorable factors, application of FASB Statement FASB Statement A standard set by the Financial Accounting Standards Board regarding a financial accounting and reporting method. Essentially, FASB statements determine the acceptable accounting practices that Certified Public Accountants use in reporting 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 $1,009 million. We provided a 100% valuation allowance for our deferred income tax asset for the balance of 2001 and for 2002. We will continue that policy in the future, until, at a minimum, a chapter 11 plan is confirmed. 7. Liabilities subject to compromise Liabilities Subject to Compromise refers to the Debtors' liabilities incurred prior to the commencement of the Chapter 11 Cases. This amount represents the debtors' estimate of known or potential pre-petition claims to be resolved in connection with the Chapter 11 cases. at September 30, 2002 and December 31, 2001 follows ($ in millions):
September 30, December 31,
2002 2001
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Other postemployment benefits $ 2,043.4 $ 2,005.7
Pension liability 1,729.2 1,624.0
Unsecured debt 526.7 526.7
Accounts payable 197.9 220.8
Accrued employment costs 208.2 270.6
Other accrued liabilities 173.6 152.8
Accrued taxes and interest 77.2 77.5
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Total $ 4,956.2 $ 4,878.1
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8. Because of the decline in market value of our pension trust assets, continuing pension payments from the trust and declining interest rates, our pension plan is now about $3.2 billion underfunded at today's market. Applicable accounting principles will require us to record a non-cash, direct charge to stockholders' deficit of about $1.5 billion if the market remains the same at year-end. This charge is only required at year-end and will not affect our 2002 operating results. 9. Our financing arrangement with General Electric Capital Corporation restricts dividend payments. Preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) are in arrears Adv. 1. in arrears - in debt; "he fell behind with his mortgage payments"; "a month behind in the rent"; "a company that has been run behindhand for years"; "in arrears with their utility bills" behindhand, behind since the second quarter of 2001. 10. In the second quarter of 2002, we acquired the remaining 50% portion of the Columbus Columbus. 1 City (1990 pop. 178,681), seat of Muscogee co., W Ga., at the head of navigation on the Chattahoochee River; settled and inc. 1828 on the site of a Creek village. Coatings Company (CCC CCC A very speculative grade assigned to a debt obligation by a rating agency. Such a rating indicates default or considerable doubt that interest will be paid or principal repaid. Also called Caa. ) and Columbus Processing Company (CPC (1) (Central Processing Complex) An IBM mainframe that has two or more central processors (CPs) that share memory. It is the collection of processors, memory and I/O subsystems manufactured with a single serial number, typically all contained in one cabinet. ) joint ventures from LTV Steel Corporation. CCC is an automotive quality, hot-dipped galvanized gal·va·nize tr.v. gal·va·nized, gal·va·niz·ing, gal·va·niz·es 1. To stimulate or shock with an electric current. 2. coating line and CPC is a steel slitting slit n. A long, straight, narrow cut or opening. tr.v. slit, slit·ting, slits 1. To make a slit or slits in. 2. To cut lengthwise into strips; split. facility, both located in Columbus, Ohio Columbus is the capital and the largest city of the American state of Ohio. Named for explorer Christopher Columbus, the city was founded in 1812 at the confluence of the Scioto and Olentangy rivers, and assumed the functions of state capital in 1816. . These interests were acquired on June 5, 2002 for cash, a release of LTV's guarantee of CCC's debt and forgiveness Forgiveness Angelica, Suor is forgiven by the Virgin Mary for ill-considered suicide. [Ital. Opera: Puccini, Suor Angelica, Westerman, 364] Bishop of Digne 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 as·sign tr.v. as·signed, as·sign·ing, as·signs 1. To set apart for a particular purpose; designate: assigned a day for the inspection. 2. to 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)
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Cash purchase price, net of cash acquired $ 2.4
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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 provided CCC's lenders with a collateralized letter of credit for $30 million and a mortgage on our corporate headquarters building as additional collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although . In July 2002, CCC lenders used the letter of credit to reduce the outstanding loan balance by $30 million. Because of our chapter 11 filing, CCC and Bethlehem are in default under the construction loan agreements which allows 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 Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. the net outstanding debt. We believe these matters can be resolved without any additional significant impact on our liquidity. On August 1, 2001, we purchased the remaining 45% ownership interest of Chicago Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. Cold Rolling cold rolling n. The rolling of steel or other metal at room temperature to preserve its original crystal structure. (CCR 1. CCR - condition code register. 2. CCR - (Database) concurrency control and recovery. ) that we did not already own for $1 million plus assumption of $19 million in debt. The acquisition was accounted for using the purchase method of accounting. Our results include the operations of CCR since the date of acquisition. |
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