Bethlehem Steel Operating Results Improve.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)--July 22, 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's recent net losses include several unusual or non-cash items as reflected in the following table:
Three Months Ended Six Months Ended
-------------------------------
$ in Millions 2002 2001 June 30
------------------ ---------- --------------------
June 30 March 31 June 30 2002 2001
-------- -------- ---------- -------- ----------
Net loss $(118.9) $(97.3) $(1,131.9) $(216.2) $(1,250.3)
Blast furnace
outages 16.7 6.7 23.4
Environmental
accrual 20.0 20.0
Income tax
benefit (10.3) (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) $(100.9) $(119.5) $(183.1) $(262.9)
======== ======== ========== ======== ==========
"Our second quarter operating results, excluding unusual items, improved compared to the first quarter of 2002 and the second quarter of 2001. Realized prices and shipments continue to improve primarily as a result of decreased domestic supply from recent capacity shutdowns, 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 and customer inventory replenishments," 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. "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. repairs caused by the unscheduled unscheduled Adjective not planned or intended Adj. 1. unscheduled - not scheduled or not on a regular schedule; "an unscheduled meeting"; "the plane made an unscheduled stop at Gander for refueling" 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. at the 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 our Burns Harbor Division were completed in June June: see month. and the furnace is once again fully operational. We expect our financial performance to continue to improve this year as prices continue to be restored and costs are further reduced. "During the second quarter of 2002, we maintained adequate liquidity while increasing capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. to protect and enhance our facilities. Our liquidity, comprising cash and borrowing availability under our committed credit facility, was $240 million at the end of the second quarter. "In addition to replacing the bell on the D blast furnace at Burns Harbor, we progressed other projects that we deemed essential to maintain the quality of our steel producing assets. We also purchased the remaining 50% interest in 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 joint ventures from LTV LTV See: Loan-to-value ratio for $2.4 million in cash, the assumption of debts and the 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 certain LTV obligations to CCC and Bethlehem. CCC is a state-of-the-art coating line that produces high quality, corrosion resistant sheet steel primarily for the automotive market. CCC is strategically important to the future of our Burns Harbor Division. We also sold our Weyhill Guesthouse guest·house n. 1. A small house or cottage adjacent to a main house, used for lodging guests. 2. A bed-and-breakfast. in Bethlehem, PA for about $4 million during the quarter. "Our business outlook and the market for steel remains positive but we have many hurdles to overcome in order to emerge from bankruptcy court bankruptcy court n. the specialized Federal court in which bankruptcy matters under the Federal Bankruptcy Act are conducted. There are several bankruptcy courts in each state, and each one's territory covers several counties. protection. International Steel Group's start-up Start-up The earliest stage of a new business venture. of the former LTV steel plants and Nucor's recent acquisition and planned start-up of the Trico Trico is an American company that specializes in windshield wipers. Trico, then Tri-Continental Corporation, invented the windshield Wiper blade in 1917. Steel operations, coupled with continuing pressure for exclusions from the Section 201 tariffs This is a list of tariffs and trade legislation:
v. in·ten·si·fied, in·ten·si·fy·ing, in·ten·si·fies v.tr. 1. To make intense or more intense: competition and reduce prices. "We recently announced that we plan to get on with the tough job of restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and implementing the necessary changes that will enable Bethlehem to emerge from bankruptcy court protection. The changes include discussions 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. 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  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. from top to bottom." Unusual Items 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 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) 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 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 ) (1) 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 (2) 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 the 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 income tax benefit recorded for the first quarter 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 early July July: see month. 2002. 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 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 Note 6 to the accompanying Notes to June 30, 2002 Financial Statements). Financial Results Excluding unusual items previously mentioned, our second quarter 2002 net loss of $82 million compares to $101 million net loss in the first quarter of 2002. Results improved principally from higher prices and shipments, which were offset by higher energy costs. Prices, on a constant mix basis, increased by about 6% during the quarter while shipments increased about 8%. Bethlehem's net loss 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. Shipments were lower by about 5%, primarily plate products as business capital spending continues to lag in 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 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. . 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 the same period in 2001. The improvement is mainly attributable to an improved product mix and lower costs. Our product mix improved, as shipments of higher valued, coated and tin products increased, while the 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. 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, 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
--------------------------------
June 30 March 31 June 30
2002 2002 2001
---------- ---------- ----------
$ 933.5 $ 803.8 $ 911.1 Net Sales
---------- ---------- ----------
Costs and Expenses
931.2 811.5 915.2 Cost of sales
62.4 60.5 64.9 Depreciation
Selling, administration and
22.3 25.1 26.8 general expense
20.0 - 3.4 Unusual charges (Note 3)
---------- ---------- ----------
1,035.9 897.1 1,010.3 Total Costs and Expenses
---------- ---------- ----------
(102.4) (93.3) (99.2) Loss from Operations
(3.7) (2.1) - Reorganization Items (Note 4)
(12.8) (12.2) (23.7) Financing Expense - net (Note 5)
---------- ---------- ----------
(118.9) (107.6) (122.9) Loss before Income Taxes
Benefit (Provision) for
- 10.3 (1,009.0) Income Taxes (Note 6)
---------- ---------- ----------
(118.9) (97.3) (1,131.9) Net Loss
Dividend Requirements on
Preferred and Preference
9.9 9.9 10.2 Stock
---------- ---------- ----------
Net Loss Applicable to
$ (128.8) $ (107.2) $ (1,142.1) Common Stock
========== ========== ==========
Net Loss per Common Share:
$ (0.98) $ (0.82) $ (8.80) Basic and Diluted
Average Shares Outstanding:
131.0 130.9 129.8 Basic and Diluted
Additional Data
Steel products shipped
2,028 1,880 2,124 (thousands of net tons)
Raw steel produced
2,123 2,306 2,386 (thousands of net tons)
Six Months Ended
June 30
---------------------
2002 2001
---------- ----------
Net Sales $ 1,737.3 $ 1,789.0
---------- ----------
Costs and Expenses
Cost of sales 1,742.7 1,826.0
Depreciation 122.9 125.2
Selling, administration
and general expense 47.4 54.0
Unusual charges (Note 3) 20.0 3.4
---------- ----------
Total Costs and Expenses 1,933.0 2,008.6
---------- ----------
Loss from Operations (195.7) (219.6)
Reorganization Items
(Note 4) (5.8) -
Financing Expense - net
(Note 5) (25.0) (46.7)
---------- ----------
Loss before Income Taxes (226.5) (266.3)
Benefit (Provision) for
Income Taxes (Note 6) 10.3 (984.0)
---------- ----------
Net Loss (216.2) (1,250.3)
Dividend Requirements on
Preferred and Preference
Stock 19.8 20.4
---------- ----------
Net Loss Applicable to
Common Stock $ (236.0)$ (1,270.7)
========== ==========
Net Loss per Common
Share:
Basic and Diluted $ (1.80)$ (9.79)
Average Shares
Outstanding:
Basic and Diluted 130.9 129.8
Additional Data
Steel products shipped
(thousands of net tons) 3,908 4,145
Raw steel produced
(thousands of net tons) 4,429 4,690
The accompanying Notes are an integral part of the Consolidated
Financial Statements.
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 - net 86.5 129.6
Property, Plant and Equipment 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.
Bethlehem Steel Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in millions)
(unaudited)
Three Months Ended
----------------------------
June 30, March 31, Dec. 31,
2002 2002 2002
-------- -------- --------
Operating Activities:
Net loss $(118.9) $(97.3) $(547.1)
Adjustments for items
not affecting cash from operating
activities:
Depreciation and amortization 62.4 60.5 63.2
Unusual charges 20.0 -- 351.1
Recognition of deferred gains (5.3) (5.6) (5.8)
Reorganization items 3.7 2.1 6.7
Other - net (2.4) 4.9 1.1
Working capital (excluding
financing and investing
activities):
Receivables - operating (30.9) (20.0) 24.0
Receivables - financing -- -- (212.0)
Inventories 7.4 3.1 25.0
Accounts payable 16.7 (9.8) 120.5
Other 10.2 10.7 3.7
Funding postretirement benefits:
Pension funding less than
expense 30.1 35.6 19.0
Retiree healthcare and life
insurance benefit payments
less than expense 11.1 14.1 6.5
-------- -------- --------
Cash Provided by (Used For) Operating
Activities Before
Reorganization Items 4.1 (1.7) (144.1)
-------- -------- --------
Reorganization items (3.7) (2.1) (6.7)
-------- -------- --------
Cash Provided by (Used For) Operating
Activities 0.4 (3.8) (150.8)
-------- -------- --------
Investing Activities:
Capital expenditures (41.4) (14.2) (29.3)
Cash proceeds from asset sales 5.9 16.6 31.8
-------- -------- --------
Cash Provided By (Used For) Investing
Activities (35.5) 2.4 2.5
-------- -------- --------
Financing Activities:
Borrowings 30.0 0.5 258.4
Debt and capital lease payments (3.2) (18.1) (47.9)
Other payments (5.7) (9.0) (8.6)
-------- -------- --------
Cash From (Used For) Financing Activities 21.1 (26.6) 201.9
-------- -------- --------
Net Increase (Decrease) in Cash and Cash
Equivalents (14.0) (28.0) 53.6
Cash and Cash Equivalents
- Beginning of Period 76.0 104.0 50.4
-------- -------- --------
- End of Period 62.0 76.0 104.0
Available Borrowing under Committed Bank
Credit Arrangements 178.1 197.4 171.8
-------- -------- --------
Total Liquidity at End of Period $240.1 $273.4 $275.8
======== ======== ========
Supplemental Cash Payment Information
(Note 9):
Interest and other financing costs,
net of amount capitalized $10.2 $7.8 $12.5
Income taxes paid (received) 0.1 -- (1.2)
Capital lease obligations incurred -- 1.9 0.2
The accompanying Notes are an integral part of the 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 . 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 and for the three-month period ended 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 the 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 filed with the Securities and Exchange Commission. 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:
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 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. 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 $3.4 million equity investment in MetalSite, an internet marketplace for steel that ceased operations in June 2001. 4. Net costs resulting from reorganization of the businesses have been reported in the statement of operations See Income statement. separately as reorganization items. For the three-month periods ended June 30 and March 31, 2002 and for the six-month period ended June 30, 2002, the following have been recorded ($ in millions):
2002
----------------------------------
Three Months Six Months
---------------------- -----------
June 30 March 31 June 30
----------- ---------- -----------
Professional and other
fees $ 3.9 $ 4.3 $ 8.2
Gains from termination
of contracts - (2.0) (2.0)
Interest income (0.2) (0.2) (0.4)
----------- ---------- -----------
Total $ 3.7 $ 2.1 $ 5.8
=========== ========== ===========
5. Interest at the stated contractual amount on unsecured debt that was not charged to earnings was approximately $11 million for the three-month periods ended March 31 and June 30, 2002 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 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 $1,009 million. We provided a 100% valuation allowance for our deferred income tax asset for the balance of 2001 and for 2002. We will continue that policy in the future, until, at a minimum, a chapter 11 plan of reorganization is confirmed. 7. Liabilities subject to compromise Liabilities Subject to Compromise refers to the Debtors' liabilities incurred prior to the commencement of the Chapter 11 Cases. This amount represents the debtors' estimate of known or potential pre-petition claims to be resolved in connection with the Chapter 11 cases. at June 30, 2002 and December 31, 2001 follows ($ 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 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. 9. In the second quarter of 2002, we acquired the remaining 50% portion of the Columbus Coatings Company (CCC) 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 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 the assets and liabilities acquired follows ($ in millions):
Property, plant & equipment $ 155.3
Debt and capital lease obligation (105.9)
Other - net (.3)
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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 has provided CCC's 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 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. Internet Homepage Address: www.bethsteel.com |
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