• Q4, 1998
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
BETHLEHEM, Pa., Wednesday, January 27, 1999 -- Bethlehem Steel Corporation today reported a net loss of $23 million, or a loss of $.26 per common share - basic, for the fourth quarter of 1998 compared with net income of $42 million, or $.28 per common share - basic, for the fourth quarter of 1997. Sales for the fourth quarter of 1998 were $1.01 billion compared with $1.12 billion for the fourth quarter of 1997.
For the year 1998, net income was $120 million, or $.64 per common share - basic, including an after-tax charge of $29 million related to the closing of our Sparrows Point plate mill. Net income for the year 1997 was $281 million, or $2.13 per common share - basic, including an after-tax gain of $113 million related to the sale of our equity interest in Iron Ore Company of Canada (IOC). If the 1998 charge and the 1997 IOC gain were excluded, net income for the year 1998 would have been $149 million ($.88 per common share - basic), on sales of $4.48 billion, compared with $168 million ($1.12 per common share - basic), on sales of $4.63 billion, for the year 1997.
"1998 was a year of significant accomplishment and continued progress but it was also a year of disappointment", said Curtis H. Barnette, Bethlehem's Chairman and Chief Executive Officer. "During the first half of the year, our financial performance was strong, and we successfully completed the acquisition of Lukens Inc. and formed the Bethlehem Lukens Plate Division. However, during the second half of the year, business conditions worsened considerably primarily because of the unprecedented levels of unfairly traded steel imports entering the domestic marketplace. It was very disappointing to see our strong financial performance come to such an abrupt ending as a result of the adverse effects of these imports. Nevertheless, we are pleased with the many accomplishments we achieved during 1998. We started construction of Sparrows Point's new continuous cold rolling mill complex, and we were able to increase the size of our revolving credit arrangement and extend its term. Our credit rating also improved one level in recognition of our continued operating and financial improvement. I am especially proud that our employees achieved the best safety and environmental performance ever recorded by the company."
Operating Results
Our loss from operations was $14 million for the fourth quarter of 1998 compared with income from operations of $57 million for the fourth quarter of 1997. Fourth quarter 1998 operating results declined from a year ago due to lower shipments and realized prices resulting from high levels of unfairly traded steel imports. Steel shipments of 1,933,000 net tons for the fourth quarter of 1998 were lower than the 2,159,000 net tons shipped in the fourth quarter of 1997 even though we had additional shipments resulting from our acquisition of Lukens. Shipments decreased at Burns Harbor, Sparrows Point and Pennsylvania Steel Technologies, Inc. (PST).
Excluding the charge and gain discussed above, income from operations for 1998 was $225 million compared with $239 million for 1997. Income from operations declined from 1997 primarily due to the negative impact of unfairly traded steel imports on our realized prices and shipment levels. This negative impact was partially offset by lower costs from exiting underperforming businesses and lower pension expense and by higher shipments at PST and higher shipments resulting from our acquisition of Lukens.
Fourth quarter 1998 operating income declined from the third quarter of 1998 principally due to lower shipments, lower realized prices and higher operating costs.
Liquidity and Capital Structure
At December 31, 1998, total liquidity, comprising cash, cash equivalents and funds available under our bank credit arrangements, totaled $479 million compared with $612 million at December 31, 1997. At December 31, 1998, funds available under our credit arrangements totaled $341 million. In June 1998, we amended our non-reducing credit arrangement extending its term to June 2003 and increasing its size by $75 million to $600 million.
During 1998, we completed asset sales resulting in cash proceeds of about $310 million. This included the sale of one of our two coke oven batteries at Burns Harbor to an affiliate of DTE Energy Services, Inc. for about $190 million and the sale of certain stainless assets, acquired in our merger with Lukens, to Allegheny Teledyne Incorporated for $175 million. On November 20, 1998, we received $105 million in cash and a non-interest bearing note for the remaining $70 million from Allegheny Teledyne. The note will become payable upon the completion of certain agreed upon improvements to the Steckel plate mill in Conshohocken, Pennsylvania that will enhance the performance of the facilities that will be used to provide conversion services to Allegheny Teledyne. Bethlehem and Allegheny Teledyne will share in the costs of these improvements, which are expected to be about $25 million.
On January 7, 1999, we signed an agreement with Ryerson Tull, Inc. for the sale of our distribution business, Washington Specialty Metals Corporation (WSM), for about $70 million. WSM was acquired in our merger with Lukens. We expect to complete this transaction during the first quarter of 1999.
Also on January 7, 1999, we announced that we intend to permanently close the stainless sheet and strip operations in Massillon, Ohio and Washington, Pennsylvania, which were acquired in our merger with Lukens. The closings are necessary due to the losses being sustained, which were particularly affected by the unprecedented levels of unfairly traded steel imports, and our inability to sell these operations. We will continue with our efforts to sell the assets at these locations.
For 1998, cash provided from operations before pension activities was $487 million, including the sale of $64 million of receivables, compared with $551 million for 1997. Principal uses of cash during 1998 included the Lukens acquisition, capital expenditures, pension funding and debt repayments. We acquired all of the outstanding stock of Lukens for an aggregate purchase price of about $560 million, which included cash and transaction costs of about $375 million and the issuance of 15.1 million shares of Bethlehem Common Stock valued at about $185 million. Capital expenditures were $328 million compared with $228 million during 1997. Pension funding for the year 1998 totaled $150 million, and we repaid $290 million of debt, including a $200 million short-term borrowing used to complete the Lukens acquisition.
Major uses of cash for 1999 are expected to be capital expenditures of about $450 million, debt payments of about $40 million and pension funding. We expect to maintain an adequate level of liquidity during 1999 with available cash from operations, proceeds from the sale of assets, including the previously announced sale of WSM, collection of the Allegheny Teledyne note, reductions in working capital and available funds under our credit arrangements.
We have continued to make progress in strengthening our financial condition by reducing debt and increasing our stockholders' equity. In recognition of the progress we have made in improving our operating performance and strengthening our financial condition, Standard & Poor's and Moody's Investor Services both raised our credit ratings one level earlier last year.
International Steel Trade
The unprecedented level of unfairly traded imports being dumped into the United States continues to cause serious injury to Bethlehem and the American steel industry. The high levels of imports have negatively impacted shipment levels and prices. At Bethlehem, production, shipments and workforce schedules have been reduced at all of our operations.
On January 7, 1999, the Clinton Administration submitted a Comprehensive Plan for Responding to the Increased Steel Imports to the United States Congress. While the Plan reviews certain helpful actions that have been taken, and others that may be taken, the Plan falls short of what is required and is not yet sufficiently comprehensive, timely or effective given the significant increases in imports, the precipitous decline in prices due to the dumping of foreign steel and the mounting losses by the American steel industry.
Under the present circumstances we are taking three actions:
- Legal - We have filed and will continue to file all appropriate legal actions.
- Public Affairs - We have joined with the United Steelworkers, leading steel companies and others in an educational campaign - "Stand Up for Steel--Stand Up for America".
- Governmental - We are continuing our review of the Plan submitted by the Clinton Administration and will be meeting with the Administration to discuss our concerns in detail. We will also continue to work with the Administration and Congress in an effort to restore fair trade in steel.
We believe that the actions that we are taking, along with those to be taken by the Congress and the Administration, will help to resolve this very serious issue that threatens our company, stockholders, employees and customers and the communities in which we operate.
Outlook
We believe that the U.S. economy will continue on a course of moderate and sustainable growth and low inflation, although growth will be somewhat slower compared with the past several years. We also believe that domestic industry shipments in 1999 will be about 100 million tons, slightly lower than the estimated 102 million tons shipped in 1998.
Competition will be intense in 1999. We continue to be very concerned about the high levels of unfairly traded steel imports, which we expect will adversely affect our 1999 results. We also expect average 1999 steel prices to be lower than 1998 prices. While current business conditions remain difficult, we will continue our strategy of concentrating on steel and rebuilding our financial strength, and we will take all necessary actions to reduce costs and improve our overall competitiveness.
Dividends
The Board of Directors today declared dividends of $1.25 per share on Bethlehem's $5.00 Cumulative Convertible Preferred Stock, $0.625 per share on Bethlehem's $2.50 Cumulative Convertible Preferred Stock and $0.875 per share on Bethlehem's $3.50 Cumulative Convertible Preferred Stock, each payable March 10, 1999, to holders of record on February 10, 1999. No dividend was declared on Bethlehem's Common Stock.
• Q4, 1998
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Financial Quarterly Financial Statements
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