Bethlehem Steel loss narrowed in third quarter

Pension underfunding has grown to $3.2 billion

October 22, 2002|By Kristine Henry | Kristine Henry,SUN STAFF

Bethlehem Steel Corp. said yesterday that its third-quarter loss narrowed because of higher steel prices, but it also warned that prices soon will level off and that its pension plan is short even more money than it was in the past.

The Pennsylvania-based steelmaker lost $54 million, or 49 cents a share, on sales of $938.5 million in the three months that ended Sept. 30. That compares with a loss of $152 million, or $1.25 a share, on sales of $825 million in the year-ago period.

Bethlehem, which has filed for Chapter 11 bankruptcy protection and has about 3,400 employees at its Sparrows Point plant, generated $21.2 million in cash from operations during the third quarter. It generated about $400,000 in cash from operations in the second quarter.

"Realized prices continued to improve, primarily as a result of reduced domestic supply from [plant] shutdowns and the favorable [tariff] ruling in March 2002," Robert S. "Steve" Miller Jr., chairman and chief executive, said in a statement.

"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."

Steel prices have risen not only because of the tariffs on imported steel that President Bush imposed in March, but also because LTV Corp. of Cleveland filed for bankruptcy protection and then shut down, taking 6 million tons of capacity with it. Average prices went from $230 a ton for hot-rolled steel in September last year to $380 a ton last month, according to Purchasing Magazine.

The former LTV plant recently reopened as International Steel Group with new owners and a streamlined operation, and the added capacity is likely to relieve some of the pressure on prices.

Miller also said Bethlehem's pension plan is underfunded by about $3.2 billion because of the decline in market value of the pension trust's assets. When Bethlehem filed for Chapter 11 bankruptcy protection in October last year, the pension fund was short about $1.85 billion.

The company and the federal Pension Benefit Guaranty Corp. are in discussions, and Bethlehem expects the agency to take over its pension plan in the near future.

The change in the pension funding means Bethlehem will have to take a $1.5 billion charge to shareholder equity at the end of the year, but Miller said the charge will not affect this year's operating results.

"Domestic steel consumption remains fairly strong, driven principally by automotive sales," Miller said. "The problem of excess global capacity, however, remains a significant hurdle for the steel industry."

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