10-K, 1996
Business

* "Bethelehem" when used in this report means Bethlehem Steel Corporation, a Delaware Corporation, and where applicable includes its consolidated subsidiaries. Bethlehem was incorporated in Delaware in 1919.

Bethlehem is the second largest steel producer in the United States and primarily manufactures and sells a wide variety of steel mill products. Bethlehem also produces and sells coke, coal and iron ore.

For financial reporting purposes, Bethlehem reports the results of its operations and other financial information in two segments, Basic Steel Operations and Steel Related Operations. Note B to the Consolidated Financial Statements contains financial information relating to Bethlehem's industry segments for 1996, 1995 and 1994. The table below shows the percentage contribution to Bethlehem's net sales of each segment and of major classes of products for each of the years 1994 through 1996:

Basic Steel Operations

Operations

Bethlehem's Basic Steel Operations produces a wide variety of steel mill products, including hot rolled, cold rolled and coated sheets and strip, plates, tin mill products, specialty blooms, carbon and alloy bars, rail and large-diameter pipe. Basic Steel Operations includes the following Business Units: the Burns Harbor Division, the Sparrows Point Division and Pennsylvania Steel Technologies, Inc. Basic Steel Operations also includes Bethlehem Structural Products Corporation which produced structural shapes and special sections. See "ITEM 1. BUSINESS--Restructuring Activities" of this Report for a discussion of Bethlehem Structural Products Corporation. Also included in Basic Steel Operations are iron ore and coal operations (which provide raw materials to Bethlehem's steelmaking facilities or sell such materials to trade customers), railroad and trucking operations (which primarily transport raw materials and semifinished steel products within various Bethlehem operations) and lake shipping operations (which primarily transport raw materials to the Burns Harbor Division). See "ITEM 2. PROPERTIES" of this Report for a description of the facilities of these business units and operations.

As reported by the American Iron and Steel Institute ("AISI"), the domestic steel industry's raw steel production capability for 1996 was 116 million tons, and the preliminary average rate of industry utilization of that capability was 90 percent, compared with 112 million tons and 93 percent for 1995 and 108 million tons and 93 percent for 1994. Bethlehem's raw steel production capability was 10.5 million tons for 1996 compared with 11.5 million tons for 1995 and 1994. Its average rate of utilization of that capability was 90 percent for 1996, 91 percent for 1995 and 85 percent for 1994.

The following table shows, for each of the years indicated, the raw steel production of Bethlehem and of the entire domestic steel industry:

* The figures are as reported by the AISI.
** Based on preliminary AISI figures.

Of Bethlehem's 1996 raw steel production, 92 percent was produced by basic oxygen furnaces and 8 percent by electric furnaces. Bethlehem's three continuous slab casters for light flat rolled products and plates produced about 81 percent of the slabs needed for these products in 1996 compared with 84 percent in 1995 and 78 percent in 1994.

Bethlehem's operations are subject to planned and unplanned outages due to required maintenance, equipment malfunctions, work stoppages, various hazards (including explosions, fires and severe weather conditions) and the availability of raw materials, supplies, utilities and other items needed for the production of steel. These outages could result in reduced production and increased costs.

Markets

The following table shows, for each of the years indicated, the percentage of the total net tons of steel mill products shipped by Bethlehem's Basic Steel Operations to each of its principal markets, including shipments to its own manufacturing operations:

Many of the markets Bethlehem supplies, such as automotive, machinery and construction, are highly cyclical and subject to downturns in the U.S. economy. Also, many of Bethlehem's customers and suppliers are subject to collective bargaining agreements and their ability to operate could be impacted by a strike or work stoppage.

Bethlehem distributes steel products principally through its own sales organization, which has sales offices at various locations in the United States and Mexico, and through foreign sales agents. In addition to selling to customers who consume steel products directly, Bethlehem sells steel products to steel service centers, distributors, processors and converters. Export sales for this segment were 3 percent of total sales in 1996, 5 percent in 1995 and 2 percent in 1994.

Trade orders on hand for Basic Steel Operations at December 31, 1996 and 1995 were about $1.2 billion and $1.3 billion, respectively. Substantially all of the orders on hand at December 31, 1996, are expected to be filled in 1997.

Steel Price Sensitivity

Bethlehem's results are significantly affected by relatively small (on a percentage basis) variations in the realized prices for its products. Bethlehem shipped 8.8 million net tons of steel products and recorded sales of $4.7 billion during 1996, implying an average realized price per ton of about $530. A one percent increase or decrease in this implied average realized price during 1996 would, on a pro forma basis, have resulted in an increase or decrease in net sales and pre-tax income of about $47 million. Competitive pressures in the steel industry are severe. These pressures could limit Bethlehem's ability to obtain price increases or could lead to a decline in prices, which could have a material adverse effect upon Bethlehem.

Cyclicality

The domestic steel industry is highly cyclical in nature. Domestic integrated producers suffered substantial losses in the first half of the 1980s. During the second half of the 1980s, domestic steel producers benefited from improved industry conditions and in 1988 domestic industry earnings reached record levels. Steel demand and pricing declined between 1989 and 1992 and the domestic industry reported substantial losses. Since 1993, there has been a recovery in steel markets and domestic steel producers have reported improved results. Although Bethlehem believes that domestic steel markets will be relatively good in 1997, there can be no assurance as to the extent of any future improvement in domestic industry earnings.

Competition

The domestic steel industry is highly competitive. This competition affects the prices that Bethlehem can charge for its products, the utilization of its production facilities, its ability to sell higher value products and ultimately the profitability of Bethlehem.

Capacity. There is excess world capacity for many of the products produced by Basic Steel Operations. Many foreign steel producers are owned, controlled or subsidized by their governments. Decisions by these foreign producers to continue marginal facilities may be influenced to a greater degree by political and economic policy considerations than by prevailing market conditions. Overcapacity has also been perpetuated by the continued operation, modernization and upgrading of marginal domestic facilities through bankruptcy reorganization proceedings and by the sale by integrated producers of marginal domestic facilities to new owners, which operate such facilities with a lower cost structure. Over the next several years, construction of additional flat rolled production facilities could result in increased domestic capability of up to 10 million tons over 1996 levels.

Mini-mills. Domestic integrated producers, such as Bethlehem, have lost market share in recent years to domestic mini-mills. Mini-mills provide significant competition in certain product lines, including hot rolled sheet products. Mini-mills, which are less expensive to build than integrated facilities, are relatively efficient, low-cost producers that produce steel from scrap in electric furnaces, have low employment and environmental costs and target regional markets. Through the use of iron substitutes and thin slab casting technology, mini-mill competitors are increasingly able to compete directly with producers of higher value products, including cold rolled and coated sheets. Most of the new previously mentioned flat rolled facilities that will be constructed over the next several years will be mini-mills.

Imports. Domestic steel producers also face significant competition from foreign producers and have been adversely affected by unfairly traded imports. In many cases, foreign producers are pricing their products below their production costs. Imports of finished steel products accounted for about 18 percent of the domestic market in 1996 and 1995 and 20 percent in 1994.

The following table, which is based on data reported by the AISI, shows the percentage of the domestic apparent consumption of steel mill products supplied by imports for various classes of products.

* Preliminary
** Excludes steel imported in the form of manufactured goods, such as automobiles, but includes semifinished steel.

Excluding semifinished steel, imports of steel mill products were about 21.6 million tons in 1996, 19.2 million tons in 1995 and 22.1 million tons in 1994.

Antidumping and countervailing duty orders covering imports of corrosion resistant sheet from 6 countries, cold rolled sheet from 3 countries and plates from 11 countries, which resulted from unfair trade cases filed by Bethlehem and 11 other companies in 1992, remain in place. Imports of flat rolled steel from countries not subject to orders, including particularly the Commonwealth of Independent States (formerly the USSR), eastern European countries and the People's Republic of China, have increased significantly. New antidumping investigations are currently pending with respect to imports of cut-to-length plate from the People's Republic of China, Russia, the Ukraine and South Africa.

The major restructuring of the domestic steel industry, which began in the late 1970s and early 1980s, has removed the steelmaking capacity that once existed to meet market demand during peak periods. During the last few years, domestic producers have met a portion of the demand that exceeded steelmaking capacity by importing semifinished slabs for rolling into finished products in their own mills. Increased imports of finished products met the remaining demand, which could not be met by domestic rolling mills.

Substitute Materials. For many steel products, there is substantial competition from manufacturers of products other than steel, including plastics, aluminum, ceramics, glass, wood and concrete. Changes to the relative competitiveness of these substitute materials and the emergence of additional substitute materials could adversely affect future prices and demand for Bethlehem's products.

Steel Related Operations

Bethlehem's Steel Related Operations includes BethForge, Inc. and CENTEC Roll Corporation. BethForge manufactures and fabricates forged products, including forged rolls for the metalworking industry. CENTEC produces centrifugally cast rolls for the metalworking industry. The operations of BethForge and CENTEC are located in Bethlehem, Pennsylvania.

Steel Related Operations also includes BethShip, Inc., which repairs and services ships and fabricates industrial products. The facilities of BethShip consist of a ship repair yard at Sparrows Point, Maryland.

Trade orders on hand for Bethlehem's Steel Related Operations at December 31, 1996 and 1995, were about $59 million and $43 million, respectively. Substantially all the orders on hand at December 31, 1996, are expected to be filled in 1997.

See "ITEM 1. BUSINESS--Restructuring Activities" of this Report for a discussion of the status of Bethlehem's Steel Related Operations.

General

Capital Expenditures

Capital expenditures were $259 million in 1996 compared with $267 million in 1995 and $445 million in 1994. Capital expenditures for 1997 are currently estimated to be about $280 million.

Major projects during 1996 included the upgrade of the 160-inch plate mill and the modernization of the hot strip mill at the Burns Harbor Division.

About $280 million of additional capital expenditures were authorized in 1996. At December 31, 1996, the estimated cost of completing authorized capital expenditures was about $386 million compared with $400 million at December 31, 1995. Such authorized capital expenditures are expected to be completed during the 1997-1999 period.

The domestic integrated steel industry is very capital intensive. As discussed under "ITEM 2. PROPERTIES--General" of this Report, Bethlehem's principal operations and facilities are of varying ages, technologies and operating efficiencies. Bethlehem will need to continue to make significant capital expenditures in the future to improve and maintain the competitiveness of its operations and facilities.

Environmental Control and Cleanup Expenditures

Bethlehem is subject to various federal, state and local environmental laws and regulations concerning, among other things, air emissions, waste water discharges and solid and hazardous waste disposal. During the five years ended December 31, 1996, Bethlehem spent about $160 million for environmental control equipment. Expenditures for new environmental control equipment totaled about $29 million in 1996, $36 million in 1995 and $44 million in 1994. The costs incurred in 1996 to operate and maintain existing environmental control equipment were about $115 million (excluding interest costs but including depreciation charges of $19 million) compared with $120 million in 1995 and $115 million in 1994. In addition, Bethlehem has been required to pay various fines and penalties relating to violations or alleged violations of laws and regulations in the environmental control area. Bethlehem paid about $160,000 in 1996, $5.9 million in 1995 and $3.9 million in 1994 for such fines and penalties.

Under the Clean Air Act, as amended, coke-making facilities will have to meet progressively more stringent standards over the next 25 years. Bethlehem currently operates coke-making facilities in Bethlehem, Pennsylvania; Burns Harbor, Indiana; and Lackawanna, New York. While Bethlehem continues to evaluate the impact future emission control regulations will have on these operations, it believes that these operations will be able to comply.

Negotiations between Bethlehem and federal and state regulatory agencies are being conducted to resolve differences in interpretation of certain environmental control requirements. In some instances, those negotiations are being held in connection with the resolution of pending environmental proceedings. Bethlehem believes there will not be any significant curtailment or interruptions of any of its important operations as a result of these proceedings and negotiations.

Bethlehem cannot predict the future specific environmental control requirements. Based on existing and anticipated regulations promulgated under presently enacted legislation, Bethlehem estimates that capital expenditures for new environmental control equipment will average about $30 million per year over the next two years. However, estimates of future capital expenditures and operating costs required for environmental compliance are subject to numerous uncertainties, including the evolving nature of regulations, possible imposition of more stringent requirements, availability of new technologies and the timing of expenditures.

Under the Resource Conservation and Recovery Act, as amended ("RCRA"), the owners of certain facilities that managed hazardous waste after 1980 are required to investigate and, if appropriate, remediate certain historic environmental contamination found at the facility. All of Bethlehem's major facilities may be subject to this "Corrective Action Program", and Bethlehem has implemented or is currently implementing the program at its facilities located in Steelton, Pennsylvania; Lackawanna, New York; Burns Harbor, Indiana; and Sparrows Point, Maryland. At Steelton, Bethlehem has completed a RCRA Facility Investigation ("RFI"), a Corrective Measures Study ("CMS") and a remediation program, which program received formal approval of the United States Environmental Protection Agency (the "EPA") and was completed in 1994. At Lackawanna, Bethlehem is conducting an RFI which is expected to be completed later this year. At Burns Harbor, Bethlehem has recently received EPA approval of its proposed scope of work for an RFI which will require several years to complete. At Sparrows Point, Bethlehem, the EPA and the Maryland Department of the Environment have agreed to a phased RFI as part of a comprehensive multimedia pollution prevention agreement which was lodged in the U. S. District Court for Maryland as a proposed consent decree on February 25, 1997. The potential costs for possible remediation activities, if any, at Lackawanna, Burns Harbor and Sparrows Point and the timeframe for implementation of these activities cannot be reasonably estimated until the RFIs, and possibly the CMSs, have been completed and approved.

Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA", also known as "Superfund"), the EPA has authority to impose liability for site remediation on generators and transporters of waste, as well as past and present owners and operators of the sites where the waste was disposed of, regardless of fault or the legality of the disposal activities. Bethlehem is actively involved at a total of 25 sites where it has been advised that it may be considered a potentially responsible party under CERCLA or the corresponding State Superfund legislation. Based on its experience regarding site remediation and its knowledge of and extent of involvement in such sites, Bethlehem expects that its share of the costs for remediation of these sites will not be material.

Although it is possible that Bethlehem's future quarterly or annual results of operations could be materially affected by the future costs of environmental compliance, Bethlehem believes that the future costs of environmental compliance will not have a material adverse effect on its consolidated financial position or on its competitive position with respect to other integrated domestic steelmakers that are subject to the same environmental requirements. To the extent that competitors are not required to undertake equivalent costs, Bethlehem's competitive position could be adversely affected.

Since 1946, Bethlehem has had a formal program of environmental control. Bethlehem was one of the first industrial companies in the United States to recognize its obligation to its communities, the citizens of its communities and the environment. Bethlehem continues to expand its commitment to the environment through the development and implementation of progressive environmental programs consistent with the goals identified in its Corporate Environmental Policy and the CERES Principles which Bethlehem first endorsed last year. During 1996, Bethlehem published its first environmental progress report and CERES report based upon its environmental accomplishments and activities for the preceding year.

Purchased Materials and Services

Bethlehem purchases about $3 billion per year of raw materials, energy, equipment, goods and services from commercial sources. Difficulties in obtaining these items and the prices paid by Bethlehem could affect Bethlehem's profitability. Bethlehem has made significant progress in 1996 through its Strategic Sourcing initiatives and expects further progress in 1997. The objectives of Strategic Sourcing are to forge a strong, competitive base of supply partners who share Bethlehem's commitment to deliver superior value to customers; to realize significant, immediate and sustainable improvements in the total cost, quality and value of purchased goods and services; and to establish mutual commitments to continuous improvement. See "ITEM 2. PROPERTIES--Properties Relating to the Basic Steel Operations Segment--Raw Material Properties and Interests" of this Report for a further description of the sources of iron ore, coal, limestone and other raw materials essential to Bethlehem's steelmaking business.

Research and Development

Bethlehem engages in its own research activities for the improvement of existing products and the development of new products and more efficient operating processes. During 1996, 1995 and 1994, Bethlehem spent about $25 million, $25 million and $24 million, respectively, in its research and development activities. Bethlehem owns a number of United States and corresponding foreign patents that relate to a wide variety of products and processes, has pending various patent applications and is licensed under a number of patents. Bethlehem also licenses its patents to others, producing royalties. During 1996, six United States patents covering a variety of new developments were awarded to Bethlehem. However, Bethlehem believes that no single patent or license, which expires from time to time, or any group of patents or licenses relating to a particular product or process is of material importance in its overall business. Bethlehem also owns registered trademarks for certain of its products and service marks for certain of its services which, unlike patents and licenses, are renewable so long as they are continued in use and properly protected.

In 1994, Bethlehem and U. S. Steel Group, a unit of USX Corporation, entered into a Cooperative Research and Development Agreement. During 1996, Bethlehem and U. S. Steel Group continued to conduct joint research and development activities under the Agreement in the field of basic ironmaking and steelmaking technologies and processes, such as primary iron and steel process development, finishing process development and process instrumentation development. Bethlehem believes that the joint research and development activities are helping to meet the Agreement's goals, including expediting technological developments and improvements, enhancing Bethlehem's domestic and worldwide competitiveness and reducing research and development costs and time periods. Bethlehem, therefore, intends to continue the joint research and development activities in 1997. Notices in connection with the Agreement have been filed in accordance with the National Cooperative Research and Development Act of 1993.

Employees and Employment Costs

At the end of 1996, Bethlehem had about 17,500 employees compared with about 18,300 employees at the end of 1995 and 19,900 employees at the end of 1994. About 13,000 Bethlehem employees are covered by collective bargaining agreements with the United Steelworkers of America ("USWA"). The agreement applicable to a majority of Bethlehem's USWA represented employees includes a guarantee of minimum hours of work which limits Bethlehem's ability to reduce costs during economic downturns.

Under the terms of Bethlehem's 1993 labor agreements with the USWA, most employees at its steel operations received a bonus in 1996 of $.50 per hour worked (maximum payment of $1,000) based on Bethlehem having achieved the required level of 1995 adjusted consolidated pre-tax income. Also, profit sharing of 8 percent of adjusted consolidated annual income before taxes, unusual items and expenses applicable to the plan plus 2 percent of adjusted profits of certain operations is paid to USWA represented employees in the following year. Profit sharing is also paid to non-represented employees based on specific Corporate and Business Unit plans and performance. Bethlehem paid about $75 million in 1996 and expects to pay about $45 million for income related bonus, profit-sharing and shortfall amounts in early 1997.

The 1993 labor agreements provided for Reopener Negotiations in March 1996 for certain wage and benefit provisions (excluding pensions and health care benefits) with changes effective August 1, 1996, and continuing through the expiration of the labor agreement on August 1, 1999. Bethlehem did not reach a settlement with the USWA and the parties submitted unresolved issues to arbitration. The Arbitrator selected Bethlehem's final offer which included three wage increases totaling $1.00 per hour, lump sums totaling up to $2,000 per employee (one-half depends on achieving certain levels of profits in 1997 and 1998) and continuing one floating holiday each year for the next three years. As a result of the Arbitrator's decision, most employees at steel operations received a $.50 per hour wage increase on August 1, 1996, and will receive a $.25 per hour wage increase on August 1, 1997 and 1998.  The Arbitrator's decision will not have a material adverse effect on Bethlehem's future profitability.

Under other provisions of the labor agreements, Bethlehem is required to pay "shortfall amounts" each year up to 10 percent of the first $100 million and 20 percent in excess of $100 million of consolidated income before taxes, unusual items and expenses applicable to the shortfall plan. Shortfall amounts arise when employees terminate employment and ESOP Preference Stock, held in trust for employees in reimbursement for wage and benefit reductions in prior years, is converted into Common Stock and sold for amounts less than the stated value of the Preference Stock ($32 for Series A and $40 for Series B). Bethlehem issued about 61,000 shares of Series B Preference Stock in 1996 and about 40,800 shares in 1995 to a trustee for the benefit of employees for 1995 and 1994, respectively, and expects to issue about 35,000 shares in early 1997 for the 1996 plan year.

Bethlehem's ability to operate could be impacted by a strike or work stoppage if it is unable to negotiate a new agreement with its represented employees when the existing agreement expires in 1999. Also, Bethlehem's profitability could be adversely affected if increased costs associated with any future contract are not recoverable through productivity improvements or price increases.

For further information with regard to Bethlehem's employment costs, see "Employment Cost Summary--All Employees" under "Financial Review and Operating Analysis" in Bethlehem's 1996 Annual Report to Stockholders. As set forth on Part II, Item 7 of this Report (see SEC Full-Text 10-K Report), such discussion is incorporated herein by reference.

Employee Postretirement Obligations

Bethlehem has substantial financial obligations related to its employee postretirement plans for pensions and health care. Also, due to the excess of projected benefit obligations over pension fund assets, Bethlehem's annual pension expense is substantially higher on a per ton basis than that of most other domestic steel producers. This pension expense, combined with postretirement health care expense, puts Bethlehem at a competitive disadvantage with respect to such costs compared to most other domestic steel producers. As of December 31, 1996, Bethlehem's consolidated balance sheet reflects liabilities of $870 million and $1,595 million for the actuarial present value of unfunded accumulated benefit obligations ("ABO") for pensions and postretirement benefits other than pensions, respectively. The calculation of the actuarial present value of the ABOs for active employees assumes continued employment with projections for retirements, deaths, resignations and discharges. If the actual retirement of active employees is significantly earlier than projected (for plant closings or other reasons), the ABOs would increase substantially. The charges for employees terminated as a result of plant shutdowns or restructurings vary depending upon the demographics of the work force, but could be $100,000 per employee. The recording of these charges could result in a material adverse impact on Bethlehem's financial condition because of the increase in recorded liabilities, decrease in stockholders' equity and increases in required contributions to the pension fund and retiree health care payments.

During 1996, long-term interest rates increased. As a result, Bethlehem increased the discount rate used to calculate the actuarial present value of its ABO for pensions from the 7.25 percent used at December 31, 1995, to 7.75 percent at November 30, 1996. This increase in the discount rate reduced Bethlehem's ABO for pensions and restored $67 million to additional paid-in capital as required by generally accepted accounting principles. For each 25 basis point change in the future discount rate, Bethlehem's ABO for pensions changes by about $100 million. A decrease in interest rates at November 30, 1997, from November 30, 1996, would require Bethlehem to increase the actuarial present value of its ABO for pensions and might again require Bethlehem to reduce additional paid-in capital depending on the market value of Bethlehem's pension trust fund assets (which at November 30, 1996, was $4.2 billion). For postretirement benefits other than pensions, principally health care and life insurance, the same increase in the discount rate as of November 30, 1996, and potential future changes also apply to the actuarial present value of Bethlehem's ABO. However, because different accounting principles apply, there is no immediate change in the recorded liability or potential charge to equity.

Bethlehem has contributed amounts to its pension fund substantially in excess of amounts required under current law and regulations. As a result, Bethlehem currently has a funding standard credit balance which would allow it under current law and regulations to defer all pension funding for about two years, although it presently has no plans to do so.

Restructuring Activities

As part of Bethlehem's efforts to make its business and operations more competitive, Bethlehem has implemented, and will continue to consider, a wide range of restructuring alternatives.

Joint Ventures, Partnerships, Facility Sharing Arrangements and Mergers. Bethlehem has considered, and discussed with others, various opportunities for joint ventures, partnerships, facility sharing arrangements and mergers of all or part of Bethlehem. Bethlehem will continue to explore such opportunities. See "ITEM 2. PROPERTIES." of this Report for a description of joint ventures in which Bethlehem participates.

Facility Shutdowns and Restructurings. During the last five years, Bethlehem has shut down or restructured facilities and operations and has reduced its annual steelmaking capability from 16.0 million tons in 1992 to 10.5 million tons in 1996. Bethlehem has recorded charges of $815 million in connection with these actions, including a $465 million restructuring charge ($382 million after-tax) in 1996. See Note C to the Consolidated Financial Statements. On October 30, 1996, Bethlehem announced a restructuring plan to improve its financial performance and stockholder value. Planned actions include the sale or shutdown of Bethlehem Structural Products Corporation, BethForge, CENTEC and BethShip. It also included the write-off of the assets of its Coke Division located in Bethlehem, Pennsylvania, as an impaired asset in accordance with generally accepted accounting principles, although Bethlehem will continue to operate this facility. Bethlehem is currently negotiating with qualified buyers for the sale of BethForge, CENTEC and BethShip. Efforts to sell Bethlehem Structural as an ongoing business have been unsuccessful and operations ceased during the first quarter of 1997. Although Bethlehem has no current plans to do so, if it becomes necessary for Bethlehem to shut down or restructure additional businesses and operations in the future, it could incur substantial additional charges in the process. The recording of these charges could have a material adverse impact on Bethlehem's financial condition because of the increase in recorded liabilities and decrease in stockholders' equity.

Asset Sales. Since early 1986, Bethlehem has implemented an extensive program of asset sales. About 35 businesses have been sold since the program began. Upon the completion of Bethlehem's most recent restructuring plan discussed above, Bethlehem believes that its remaining core steel businesses (Burns Harbor, Sparrows Point and PST) will provide a solid base on which to build the company and add value for its stockholders. Bethlehem does not anticipate raising substantial cash in the future from asset sales.

Capital Structure

As of December 31, 1996, Bethlehem's capital structure was highly leveraged reflecting its significant recorded liability for pensions and other post-retirement obligations. Although Bethlehem believes it has sufficient access to funds for the operation of its business, its existing obligations and below investment grade credit rating may limit its ability to raise capital in the future.

Forward-Looking Statements

Bethlehem and its representatives may from time to time make forward-looking statements in reports filed with the Securities and Exchange Commission, reports to stockholders, press releases, other written documents and oral presentations. These forward-looking statements may include, among others, statements concerning projected levels of sales, shipments and income, pricing trends, cost-reduction strategies, product mix, anticipated capital expenditures and other future plans and strategies.

As permitted by the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Bethlehem is identifying in this Report important factors that could cause Bethlehem's actual results to differ materially from those projected in these forward-looking statements. These factors include, but are not necessarily limited to:

• the effect of planned and unplanned outages on Bethlehem's operations;
• the highly cyclical nature of the domestic steel industry and many of the markets supplied by Bethlehem and the effect of that cyclicality on prices and volume;
• the potential impact of strikes or work stoppages at facilities of Bethlehem's customers and suppliers;
• the sensitivity of Bethlehem's results to relatively small changes in the prices obtained by Bethlehem for its products;
• intense competition due to world steel overcapacity, new domestic capacity over the next several years, low-cost mini-mills, imports and substitute materials;
• 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 and prices associated with raw materials, supplies, utilities and other services and items required by Bethlehem's operations;
• employment matters, including costs and uncertainties associated with Bethlehem's collective bargaining agreements, and employee post-retirement obligations, including the impact of changes in the interest rate assumptions applicable in determining employee postretirement obligations and health care costs for retirees and their families;
• the effect of possible future restructuring activities;
• Bethlehem's highly leveraged capital structure; and
• the effect of existing and possible future lawsuits filed against Bethlehem.

The discussion of these factors is contained elsewhere in "ITEM 1. BUSINESS" and in "ITEM 3. LEGAL PROCEEDINGS" (see SEC Full-Text 10-K Report) of this Report and are incorporated by reference into this section. Bethlehem does not undertake to update any forward-looking statements that may be made from time to time by Bethlehem or its representatives.

Introduction Properties Other Items SEC Full Text Listing

Main Menu Investor Relations Business Units Commercial Information Environment History Vision Statement Public Affairs Research