UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 1997
Commission File Number 0-22206
NIAGARA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 59-3182820
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
667 Madison Avenue
New York, New York 10021
-------------------------------------
(Address of principal executive office)
(212) 317-1000)
---------------------------
(Registrant's telephone
number, including area code)
N/A
------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES __X__ NO_____
Number of shares of Common Stock outstanding at June 30, 1997
Common Stock, $.001 par value 3,954,465
----------------------------- -----------------
(Class) (Number of Shares)
EXPLANATORY NOTE
This Amendment on Form 10-Q/A to the Quarterly Report on Form
10-Q of Niagara Corporation ("Niagara") for the quarter ended June 30, 1997
(the "Form 10-Q") amends and restates in their entirety Items 1 and 2 of
Part I thereof.
INDEX TO JUNE 30, 1997 FORM 10-Q/A
- -----------------------------------------------------------------------------
PAGE
PART I - FINANCIAL INFORMATION (UNAUDITED)
FINANCIAL STATEMENTS (UNAUDITED):
NIAGARA CORPORATION
BALANCE SHEETS............................................ 3
STATEMENTS OF INCOME...................................... 4-5
STATEMENT OF STOCKHOLDERS' EQUITY......................... 6
STATEMENTS OF CASH FLOWS.................................. 7
NOTES TO FINANCIAL STATEMENTS............................. 8-12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................ 13-15
SIGNATURES 16
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
BALANCE SHEETS
- -----------------------------------------------------------------------------------------
December 31, June 30,
1996 (a) 1997 (b)
- -----------------------------------------------------------------------------------------
(unaudited)
ASSETS
CURRENT:
<S> <C> <C>
Cash and cash equivalents $ 1,587,927 $ 3,828,135
Trade accounts receivable, net of allowance for
doubtful accounts 5,952,896 27,543,946
Inventories 14,446,473 38,768,009
Other current assets 253,078 499,668
- ------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 22,240,374 70,639,758
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION 21,649,219 91,227,403
INTANGIBLE ASSETS 2,543,294 12,232,095
OTHER ASSETS, NET 914,928 2,087,321
- ------------------------------------------------------------------------------------------
$ 47,347,815 $ 176,186,577
==========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Trade accounts payable $ 4,109,731 $ 26,041,173
Accrued expenses and other current 4,380,691 16,060,823
Current maturities of long-term debt 1,662,039 1,139,491
- ------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 10,152,461 43,241,487
- ------------------------------------------------------------------------------------------
LONG-TERM DEBT, LESS CURRENT MATURITIES 18,075,147 83,277,692
- ------------------------------------------------------------------------------------------
DEFERRED POST RETIREMENT AND PENSION 27,919,848
- ------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES 3,594,000 3,514,000
- ------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value - shares
authorized 500,000;
none outstanding - -
Common stock, $.001 par value - shares authorized
15,000,000;outstanding 3,668,750 and 3,954,465 3,669 3,955
Additional paid-in capital 15,560,127 16,881,273
Retained earnings (deficit) (37,589) 1,348,322
- ------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 15,526,207 18,233,550
- ------------------------------------------------------------------------------------------
$ 47,347,815 $ 176,186,577
==========================================================================================
</TABLE>
(a) Includes the balance sheets of Niagara Corporation and Niagara Cold
Drawn Corp.
(b) Includes the balance sheets of Niagara Corporation, Niagara Cold
Drawn Corp. and LaSalle Steel Company.
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
=========================================================================================
<S> <C> <C>
Three months ended June 30, 1996 (a) 1997 (b)
- ------------------------------------------------------------------------------------------
NET SALES $ 21,618,202 $ 69,397,329
COST OF PRODUCTS SOLD 18,579,650 59,468,687
- ------------------------------------------------------------------------------------------
GROSS PROFIT 3,038,552 9,928,642
OPERATING EXPENSES:
Selling, general and administrative 2,173,658 6,492,529
- ------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS 864,894 3,436,113
OTHER INCOME (EXPENSE):
Interest income 19,281 11,990
Interest expense (338,197) (1,750,031)
- ------------------------------------------------------------------------------------------
INCOME BEFORE TAXES ON INCOME 545,978 1,698,072
TAXES ON INCOME 197,000 662,612
- ------------------------------------------------------------------------------------------
NET INCOME FOR THE PERIOD $ 348,978 $ 1,035,460
==========================================================================================
NET INCOME PER SHARE $ .10 $ .27
==========================================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,668,750 3,901,090
==========================================================================================
</TABLE>
(a) Includes the results of Niagara Corporation, Niagara Cold Drawn Corp.
and Southwest Steel Company, Inc. from April 1, 1996. On November 1,
1996, Southwest Steel Company, Inc. was merged into Niagara Cold Drawn
Corp.
(b) Includes the results of Niagara Corporation, Niagara Cold Drawn Corp.
and LaSalle Steel Company from April 1, 1997.
See accompanying notes to financial statements.
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENTS OF INCOME
(UNAUDITED)
============================================================================
Six months ended June 30, 1996 (a) 1997 (b)
- ----------------------------------------------------------------------------
NET SALES $ 40,421,929 $ 90,582,209
COST OF PRODUCTS SOLD 34,633,352 77,636,244
- ----------------------------------------------------------------------------
GROSS PROFIT 5,788,397 12,945,965
OPERATING EXPENSES:
Selling, general and administrative 4,186,558 8,571,274
- ----------------------------------------------------------------------------
INCOME FROM OPERATIONS 1,601,839 4,374,691
OTHER INCOME (EXPENSE):
Interest income 44,572 26,471
Interest expense (636,197) (2,146,819)
- ----------------------------------------------------------------------------
INCOME BEFORE TAXES ON INCOME 1,010,214 2,254,343
TAXES ON INCOME 364,000 868,432
- ----------------------------------------------------------------------------
NET INCOME FOR THE PERIOD $ 646,214 $ 1,385,911
============================================================================
NET INCOME PER SHARE $ .18 $ .37
============================================================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 3,668,750 3,785,562
============================================================================
(a) Includes the results of Niagara Corporation and Niagara Cold Drawn Corp.
from January 1, 1996 and the results of Southwest Steel Company, Inc.
from February 1, 1996.
(b) Includes the results of Niagara Corporation and Niagara Cold Drawn
Corp. from January 1, 1997 and the results of LaSalle Steel Company
from April 1, 1997.
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
========================================================================================================
Period January 1, 1997 to June 30, 1997
- --------------------------------------------------------------------------------------------------------
Common Stock
-------------------- Additional
Number of paid-in Retained earnings
shares Amount capital (deficit) Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 3,668,750 $3,669 $15,560,127 $ (37,589) $ 15,526,207
Shares issued (a) 285,715 286 1,321,146 - 1,321,432
Net income for the period - - - 1,385,911 1,385,911
- --------------------------------------------------------------------------------------------------------
BALANCE, JUNE 30, 1997 3,954,465 $3,955 $16,881,273 $ 1,348,322 $ 18,233,550
=======================================================================================================
</TABLE>
(a)On April 18, 1997, Niagara Corporation issued 285,715 shares of common
stock in connection with the subordinated debt portion of the financing for
the acquisition of LaSalle Steel Company. (See note 1)
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
==========================================================================================
<S> <C> <C>
Six months ended June 30, 1996 (a) 1997 (b)
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 646,214 $ 1,385,911
- ------------------------------------------------------------------------------------------
Adjustments to reconcile net income to
net cash provided
by (used in) operating activities:
Depreciation and amortization 847,736 2,304,092
Deferred income taxes (112,000) 80,000
Provision for doubtful accounts 37,000 40,903
Changes in assets and liabilities,
net of effects from purchase of
Southwest in 1996 and LaSalle in
1997:
Increase in accounts receivable (1,403,136) (2,601,675)
Decrease (increase) in inventories 3,643,111 (63,092)
Increase in other current assets (93,781) (125,598)
Increase (decrease) in other
assets, net (305,392) 337,401
Increase (decrease) in trade
accounts payable and accrued
expenses (182,918) 5,349,038
- ------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS 2,430,620 5,321,069
- ------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 3,076,834 6,706,980
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of Southwest, net of cash
acquired (3,004,999) -
Acquisition of LaSalle, net of cash
acquired - (67,240,635)
Acquisitions of fixed assets, net (2,422,091) (1,362,269)
- ------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (5,429,090) (68,602,904)
- ------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from financing 1,630,574 65,701,213
Financing fees (1,565,081)
- ------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITY 64,136,132
- ------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (719,682) 2,240,208
- ------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, BEGINNING OF
PERIOD 2,186,897 1,587,927
- ------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,467,215 $ 3,828,135
===========================================================================================
</TABLE>
(a) Includes the cash flows of Niagara Corporation and Niagara Cold Drawn
Corp. from January 1, 1996 and the cash flows of Southwest Steel
Company, Inc. from February 1, 1996.
(b) Includes the cash flows of Niagara Corporation and Niagara Cold Drawn
Corp. from January 1, 1997 and the cash flows of LaSalle Steel Company
from April 1, 1997.
See accompanying notes to financial statements.
NIAGARA CORPORATION
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - INFORMATION AS OF
JUNE 30, 1997 AND FOR THE PERIODS ENDED
JUNE 30, 1996 AND 1997 IS UNAUDITED.
=============================================================================
1. BASIS OF The accompanying financial statements are
PRESENTATION unaudited; however, in the opinion of management,
all adjustments necessary for a fair statement
of financial position and results for the stated
periods have been included. These adjustments
are of a normal recurring nature. Selected
information and footnote disclosures normally
included in financial statements prepared in
accordance with generally accepted accounting
principles have been condensed or omitted.
Results for interim periods are not necessarily
indicative of the results to be expected for an
entire fiscal year. It is suggested that these
condensed financial statements be read in
conjunction with the audited financial
statements and notes thereto as of and for the
year ended December 31, 1996.
2. ACQUISITION OF On April 18, 1997, Niagara Corporation ("Niagara")
LASALLE and Niagara Cold Drawn Corp. ("Niagara Cold Drawn")
entered into a stock purchase agreement with
Quanex Corporation ("Quanex"), pursuant to
which, and at a closing occurring simultaneously
therewith, Niagara Cold Drawn purchased from
Quanex all of the outstanding shares of capital
stock of LaSalle Steel Company ("LaSalle").
Pursuant to the LaSalle stock purchase agreement
and in consideration for the sale of the LaSalle
shares (i) Niagara Cold Drawn paid Quanex
$65,500,000 in cash at the closing and (ii)
Quanex or Niagara Cold Drawn, as the case may
be, will pay the other an amount based on
changes in LaSalle's stockholder's equity
between October 31, 1996 and March 31, 1997. The
LaSalle stock purchase agreement also provides
that Quanex or Niagara Cold Drawn, as the case
may be, pay the other an amount based on cash
activity in the intercompany account between
Quanex and LaSalle from April 1, 1997 through
April 18, 1997. The acquisition was accounted
for as a purchase and the financial statements
include the results of LaSalle from April 1,
1997. The transaction purchase price including
acquisition costs and other estimated
liabilities at acquisition date was
approximately $70,000,000. The purchase price
exceeded LaSalle's stockholder's equity by
approximately $56,000,000, and based on an
appraisal, the excess was primarily allocated to
property, plant and equipment.
The acquisition of LaSalle and the refinancing
of existing Niagara Cold Drawn indebtedness was
financed pursuant to (i) a revolving credit and
term loan agreement with Niagara Cold Drawn and
LaSalle (guaranteed by Niagara), providing for a
$50,000,000 three-year revolving credit facility
and a $40,000,000 term loan and (ii) the
issuance and sale of $20,000,000 aggregate
principal amount of 12.5% senior subordinated
notes of Niagara Cold Drawn due April 18, 2005.
In connection with the subordinated debt portion
of this financing, the purchasers of these notes
were issued 285,715 shares of Niagara common
stock.
Pro forma results of operations, assuming
the acquisition had occurred on January 1, 1996,
are unaudited and detailed below. Pro forma
adjustments primarily include additional
depreciation and amortization on excess purchase
price allocated to property, plant, equipment
and intangible assets and additional interest
expense related to debt incurred for the
acquisition.
This pro forma data does not purport to be
indicative of the results which actually would
have been obtained had such transactions been
completed as of the assumed dates or of the results
which may be obtained in the future.
-------------------------------------------------
SIX MONTHS ENDED June 30, 1996 June 30, 1997
-------------------------------------------------
NET SALES $126,095,929 $134,831,209
NET INCOME $ 803,152 $ 1,171,045
NET INCOME PER SHARE $ .22 $ .30
-------------------------------------------------
3. INVENTORIES Inventories consisted of the following:
December 31, June 30,
1996 1997
Raw materials $6,302,827 $18,468,743
Work-in-process 1,252,278 6,494,761
Finished goods 6,891,368 13,592,454
--------------------------------------------------
$14,446,473 $38,768,009
==================================================
Inventories are stated using the LIFO method.
4. CONTINGENCIES On January 31, 1996, Niagara Cold Drawn entered
into a stock purchase agreement with the
stockholders of Southwest Steel Company, Inc.
("Southwest"), pursuant to which, and
simultaneously therewith, Niagara Cold Drawn
purchased all of the outstanding capital stock
of Southwest for $1,920,000 in cash and
$1,156,773 principal amount of Niagara Cold
Drawn promissory notes guaranteed by Niagara. On
May 8, 1996, pursuant to the provisions of the
Southwest stock purchase agreement, Niagara Cold
Drawn asserted indemnification claims in the
aggregate amount of approximately $1,300,000
against the former Southwest stockholders. On
May 22, 1996, Niagara Cold Drawn brought an
action against such stockholders relating to
these claims. The defendants have denied
liability in their answer. On January 17, 1997,
Niagara Cold Drawn notified the former Southwest
stockholders that in light of the ongoing claim
for indemnification, Niagara Cold Drawn was
asserting its common law right of offset and
would not be making principal and interest
payments (the first of which was due on January
31, 1997) under the terms of the promissory
notes issued to such individuals in connection
with the acquisition.
Under applicable state and federal laws,
including the Comprehensive Environmental
Response, Compensation and Liability Act of 1980
as amended ("CERCLA"), LaSalle may be
responsible for parts of the costs required to
remove or remediate previously disposed wastes
or hazardous substances at the locations LaSalle
owns or operates or at which it arranged for
disposal of such materials. The costs are
largely covered by insurance, in certain cases
LaSalle is classified as a de minimis
contributor and a reserve has been established
for these matters which management believes is
adequate. Niagara believes any settlement of
these matters will not have a material adverse
effect on its financial position. Niagara Cold
Drawn and LaSalle are also subject to federal,
state and local environmental laws and
regulations concerning, among other matters,
water emissions and waste disposal. Management
believes that both companies currently are in
material compliance with all applicable
environmental laws and regulations.
Under Niagara Cold Drawn's insurance programs,
coverage is obtained for catastrophic exposures
as well as those risks required to be insured by
law or contract. It is the policy of Niagara
Cold Drawn to retain a portion of certain
expected losses related primarily to workers'
compensation, physical loss to property,
business interruption resulting from such loss,
and comprehensive general, product, vehicle,
medical and life benefits and liability.
Provisions for losses expected under these
programs are recorded based upon Niagara Cold
Drawn's estimates of the aggregate liability,
actual and estimated, for claims. Such estimates
utilize certain actuarial assumptions followed
in the insurance industry and are included in
accrued expenses.
5. SUBSEQUENT EVENTS Pursuant to the LaSalle stock purchase agreement,
Quanex or Niagara Cold Drawn, as the case may
be, will pay the other an amount based on
changes in LaSalle's stockholder's equity
between October 31, 1996 and March 31, 1997. On
July 2, 1997, Niagara and Niagara Cold Drawn
submitted to Quanex a statement disputing the
amounts reflected on the balance sheet of
LaSalle as of March 31, 1997 for inventory
reserves, doubtful account allowances and
certain accrued expenses and reserves, in the
aggregate amount of $2,136,584. Any dispute
between Niagara and Quanex concern ing such
financial statements is subject to binding
arbitration by an indepen dent accounting firm.
There is no assurance that these disputed items
will be resolved in favor of Niagara and Niagara
Cold Drawn.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Niagara was organized in April of 1993. With the acquisition of
Niagara Cold Drawn in August 1995, Niagara entered the cold finished steel
bar industry. With plants in Buffalo, New York and Chattanooga, Tennessee,
Niagara Cold Drawn had an established position in the northeast and
southeast regions of the United States cold finished steel bar market.
In January 1996, Niagara Cold Drawn acquired Southwest. During 1996,
Southwest completed construction of a new plant outside of Dallas, Texas
and closed existing facilities in Tulsa, Oklahoma. With this acquisition,
Niagara gained an established position in the southwest region of the
United States because Southwest was the leading cold finished steel bar
producer servicing that area.
In April 1997, Niagara Cold Drawn completed its acquisition of
LaSalle, which has plants in Hammond and Griffith, Indiana. This
acquisition gave Niagara Cold Drawn a strong market position in the midwest
region of the United States and broadened Niagara Cold Drawn's product
range by adding thermal treated and chrome plated bars to its product
range.
After the acquisition of LaSalle, Niagara became the largest
independent producer of cold finished steel bars in the United States. The
geographic position of Niagara's plants create competitive advantages
because of freight savings and the ability to supply efficiently multiple
locations of steel service center companies.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED WITH JUNE 30, 1996
Net sales for the three months ended June 30, 1997 were $69,397,239,
representing an increase of $47,779,127, or 221%, over the same period in
1996. This increase resulted primarily from the acquisition of LaSalle.
Cost of sales for the three months ended June 30, 1997 increased by
$40,889,037 to $59,468,687, representing an increase of 220% over the same
period in 1996. This increase was primarily attributable to the increase in
sales. Gross margins for the second quarter of 1997 were unchanged.
Selling, general and administrative expenses for the three months
ended June 30, 1997 increased by $4,318,871 to $6,492,529, or 9.4% of
sales, compared to 10.1% of sales for the same period in 1996. This dollar
increase was due to the increased sales and the decline as a percentage of
sales was caused by the consolidation of the LaSalle and Niagara Cold Drawn
sales forces and other personnel reductions at LaSalle.
Net interest expense for the three months ended June 30, 1997
increased $1,419,125 to $1,738,041, due primarily to the increased level of
debt incurred in connection with the acquisition of LaSalle.
Net income for the three months ended June 30, 1997 was $1,035,460, an
increase of $686,482, or approximately 197%, as compared to the net income
for the three months ended June 30, 1996. Of this increase, 154% was
attributable to the acquisition of LaSalle and 43% was attributable to
pre-existing operations.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH JUNE 30, 1996
Net sales for the six months ended June 30, 1997 were $90,582,209,
representing an increase of $50,160,280, or 124%, over the same period in
1996. This increase resulted primarily from the acquisition of LaSalle.
Cost of sales for the six months ended June 30, 1997 increased by
$43,002,892 to $77,636,244, representing an increase of 124% over the same
period in 1996. This increase was primarily attributable to the increase in
sales. Gross margins for the first half of 1997 were unchanged from those
in 1996.
Selling, general and administrative expenses for the six months ended
June 30, 1997 increased by $4,384,716 to $8,571,274, or 9.5% of sales,
compared to 10.4% of sales for the same period in 1996. This increase was
primarily due to the increased sales, and the decline as a percentage of
sales was caused by the consolidation of the LaSalle and Niagara Cold Drawn
sales forces and other personnel reductions at LaSalle.
Net interest expense for the six months ended June 30, 1997 increased
$1,528,723 to $2,120,348, due primarily to the increased level of debt
incurred in connection with the acquisition of LaSalle.
Net income for the six months ended June 30, 1997 was $1,385,911, an
increase of $739,697, or approximately 115%, over the net income for the
six months ended June 30, 1996. Of this increase, 154% was attributable to
the acquisition of LaSalle and 43% was attributable to pre-existing
operations.
On a pro forma basis, and as disclosed in Note 2 to the financial
statements, net income for the six months ended June 30, 1997 was
1,171,045 compared to $803,152 for the same period in 1996. This increase
resulted primarily from an increase in sales of $8,735,280.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, Niagara had a $3,828,135 in cash and cash
equivalents. Such funds are used for working capital and other corporate
purposes.
Cash flows provided by operations were $6,706,980 for the six months
ended June 30, 1997 (which included cash flows of LaSalle from April 1,
1997) compared to $3,076,834 for the six months ended June 30, 1996 (which
included the cash flows of Southwest from February 1, 1996). This increase
of $3,630,146 over the same period in 1996 is primarily attributable to an
increase of $739,697 in net income, an increase of $1,456,356 in
depreciation and amortization, an increase of $5,531,956 in accounts
payable and accrued expenses, a decrease of $642,793 in other assets and
offset by a $1,198,537 increase in accounts receivable and a $3,706,203
increase in inventories.
The increase in trade accounts payable and accrued expenses of
$5,531,956 over the comparable period in 1996 consisted primarily of a
$2,138,600 increase in accounts payable (due to the timing of receipt of
raw materials and resultant payment due dates) and increases in accrued
expenses at June 30, 1997, including $550,802 of fees associated with the
closing of the LaSalle acquisition, $819,002 in interest expense payable,
$500,000 in employee profit sharing expense payable and $916,013 in federal
and state income taxes payable.
Cash flows provided by operations during the six months ended June 30,
1997 together with the financing discussed in more detail below (net proceeds
of $64,136,132) were utilized in the acquisition of LaSalle ($67,240,635
including $65,500,000 paid at closing and certain acquisition costs) and
$1,362,269 in acquisition of fixed assets for Niagara's various manufacturing
facilities.
Niagara's principal long-term liquidity requirement has been and is
expected to be the funding of capital expenditures to modernize, improve
and expand its facilities, machinery and equipment. Capital expenditures
for the six months ended June 30, 1997 totaled approximately $1,360,000
compared to approximately $2,422,000 for the same period in 1996.
On April 18, 1997 and in connection with the acquisition of LaSalle,
Niagara Cold Drawn and LaSalle entered into a revolving credit and term
loan agreement (the "Credit Agreement") with Manufacturers and Traders
Trust Company ("M&T"), CIBC Inc. and National City Bank. The Credit
Agreement provides for a $50,000,000 revolving credit facility and a
$40,000,000 term loan. The obligations of Niagara Cold Drawn and LaSalle
under the Credit Agreement are guaranteed by Niagara and secured by
substantially all of the assets of Niagara Cold Drawn and LaSalle. In
addition, all of the outstanding capital stock of Niagara Cold Drawn and
LaSalle was pledged to M&T, as Agent. In connection with the execution of
the Credit Agree ment, Niagara Cold Drawn terminated its previously
existing term loan and revolving credit agreements with M&T.
Principal of the term loan under the Credit Agreement amortizes in
monthly installments commencing on November 1, 1997 and ending on April 1,
2004. The principal repayment installments on the term loan escalate
throughout the term of such loan. Interest on the term loan is payable in
monthly installments either at the LIBOR rate (for a period specified by
Niagara Cold Drawn from time to time) plus 285 basis points, or M&T's prime
rate plus 50 basis points. Revolving credit loans made pursuant to the
Credit Agreement will be based on a percentage of eligible accounts
receivable and inventory and will mature on April 17, 2000. Interest on
such loans is payable in monthly installments and will be either 250 basis
points above the LIBOR rate (for a period specified by Niagara Cold Drawn
from time to time) or M&T's prime rate plus 25 basis points.
Note and stock purchase agreements were entered into on April 18,
1997, by and among Niagara, Niagara Cold Drawn, LaSalle and, respectively,
The Prudential Insurance Company of America, The Equitable Life Assurance
Society of the United States and United States Fidelity and Guaranty
Company (collectively, the "Note and Stock Purchase Agreements") providing
for, among other things, the issuance and sale of $20,000,000 aggregate
principal amount of 12.5% senior subordinated notes of Niagara Cold Drawn
due April 18, 2005 (the "Notes"). In connection with this financing, the
purchasers of the Notes were issued 285,715 shares of Niagara common stock.
The Note and Stock Purchase Agreements also provide for the payment of
interest on the outstanding principal amount of the Notes on each April 18
and October 18 until such principal has been paid in full. Niagara Cold
Drawn may at any time on or after August 13, 2000 prepay all or part of the
amount owing under the Notes at amounts ranging from 112.5% to 100% of the
outstanding principal amount (plus accrued interest). Niagara Cold Drawn is
obligated to prepay the Notes at 107% of the outstanding principal amount
(plus accrued interest) with the net proceeds from any exercise of Niagara's
warrants.
The Credit Agreement and the Note and Stock Purchase Agreements carry
restrictions on, among other things, indebtedness, liens, capital
expenditures, dividends, asset dispositions and changes in control of
Niagara and Niagara Cold Drawn, and require minimum levels of net worth
through maturity. Also included in these agreements are requirements
regarding the ratio of consolidated current assets to consolidated current
liabilities and the ratio of net income before interest, taxes,
depreciation and amortization to cash interest expense. Niagara was in
compliance with all of these requirements as of June 30, 1997.
At June 30, 1997, Niagara Cold Drawn had borrowed $23,000,000 under
its revolving credit facility and had $25,419,000 in available credit
thereunder. Working capital of Niagara and its subsidiaries at June 30,
1997 was $27,398,271 as compared to $12,087,913 on December 31, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 27, 1997 NIAGARA CORPORATION
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(Registrant)
/s/ GILBERT D. SCHARF
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Gilbert D. Scharf, Vice President
Date: October 27, 1997 /s/ GILBERT D. SCHARF
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Gilbert D. Scharf, Principal
Accounting Officer
