BETHLEHEM, Pa., Wednesday, July 30, 1997 -- Bethlehem Steel Corporation today reported second quarter net income of $160 million, or $1.33 per common share, including an after-tax gain of $113 million, or $1.01 per common share, related to the previously announced sale of its equity interest in Iron Ore Company of Canada (IOC) to North Limited, an Australian diversified resources company. Excluding this gain, net income for the second quarter was $47 million, or $.32 per common share. This compares to net income of $27 million, or $.14 per common share, for the second quarter of 1996. Sales for the second quarter of 1997 were $1.21 billion, compared to $1.24 billion for the second quarter of 1996.
For the first six months of 1997, net income was $198 million on sales of $2.40 billion, compared to net income of $27 million on sales of $2.36 billion for the first six months of 1996. Income applicable to common stock was $1.58 per common share, compared to $.05 per common share in 1996. Excluding the IOC gain, net income for the first six months of 1997 was $85 million, or $.57 per common share.
"We continue to make steady progress toward achieving our principal goals for 1997 and beyond," said Curtis H. Barnette, Bethlehem's Chairman and Chief Executive Officer. "We are successfully executing our business plans, implementing our restructuring plans, eliminating the significant losses of the restructured businesses, and rebuilding our financial strength.
"During the first six months of this year we contributed $265 million to our pension trust. These contributions have helped us reduce our pension liability to $685 million, compared to $870 million at the end of last year and $1.6 billion at the end of 1993. We plan to make additional contributions during the year, which should further reduce our pension expense and liability and improve our capital structure."
Segment Results
The Basic Steel Operations segment had income from operations of $212 million for the second quarter of 1997. Excluding the effects of the gain on the sale of IOC, income from operations was $77 million for the second quarter of 1997, compared to income from operations of $53 million for the second quarter of 1996. Results for the quarter improved from a year ago principally due to improved costs as a result of our restructuring plans and higher realized prices. Shipments of 2,238,000 tons for the second quarter of 1997 were lower than the 2,315,000 tons shipped in the second quarter of 1996 as a result of our exiting Bethlehem Structural.
Second quarter 1997 income from operations improved over the first quarter due to lower costs at Bethlehem Structural and higher shipments at our three core businesses of Burns Harbor, Sparrows Point and Pennsylvania Steel Technologies, Inc. (PST).
Income from operations was $276 million for the first six months of 1997. Excluding the IOC gain, income for the first six months of 1997 was $141 million, compared to $74 million for the first six months of 1996. Income from operations for the first six months of 1997 improved over the first six months of 1996 due to lower costs, principally at Sparrows Point and PST, exiting Bethlehem Structural, and higher realized prices and shipments.
The Steel Related Operations segment (BethForge, CENTEC and BethShip) reported losses from operations of $10 million and $18 million for the second quarter and first six months of 1997, compared to losses of $8 million and $17 million for the second quarter and first six months of 1996. As part of our restructuring plans, we continue to negotiate the sales of these businesses.
Liquidity and Capital Structure
At June 30, 1997, total liquidity, comprising cash, cash equivalents and funds available under our bank credit arrangements, totaled $551 million, compared to $446 million at December 31, 1996, and $486 million at June 30, 1996. In June 1997, we amended our existing non-reducing credit arrangement with 13 banks, extending the term by about two years, through September 12, 2002, and increasing the size by $25 million to $525 million. The amended arrangement consists of a $300 million receivables purchase agreement and a $225 million inventory credit agreement. At June 30, 1997, funds available under our bank credit arrangements totaled $363 million.
Cash provided from operating activities for the first six months of 1997 was $271 million, compared to $181 million for the first six months of 1996. Additionally, the sale of our equity interest in IOC to North Limited on April 1 resulted in cash proceeds of $145 million.
Principal uses of cash during the first six months of 1997 included capital expenditures and pension funding. Capital expenditures were $116 million for the first six months of 1997, compared to $137 million during the year-earlier period. Capital expenditures are currently expected to be about $270 million in 1997, compared to $259 million in 1996. We contributed $240 million to our pension fund during the second quarter of 1997, for a total of $265 million so far this year.
Principal uses of cash during the remainder of 1997 include capital expenditures, additional pension funding, and the repayment of debt and capital lease obligations.
Outlook
We believe that the domestic economy will continue on a course of moderate and sustainable growth and low inflation and that the global economy will continue to strengthen during the balance of the year. The demand from the major steel-consuming sectors continues to be relatively good and domestic industry steel shipments in 1997 should be 100 million tons, about the same volume shipped in 1996. We recognize, however, that competition will remain intense in all our markets particularly as a result of new steel production capacity and unfairly traded imports.
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 September 10, 1997, to holders of record on August 11, 1997. No dividend was declared on Bethlehem's Common Stock.
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