SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1999
Commission File Number 0-22206
NIAGARA CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 59-3182820
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
667 Madison Avenue
New York, New York 10021
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(Address of principal executive office)
(212) 317-1000
--------------------------
(Registrant's telephone
number, including area code)
N/A
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(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 March 31, 1999
Common Stock, par value $.001 per share 9,511,575
--------------------------------------- ------------------
(Class) (Number of Shares)
NIAGARA CORPORATION
INDEX TO MARCH 1999 FORM 10-Q
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PAGE
PART I - FINANCIAL INFORMATION (UNAUDITED)
FINANCIAL STATEMENTS (UNAUDITED):
NIAGARA CORPORATION
BALANCE SHEETS............................................ 3
STATEMENTS OF OPERATIONS.................................. 4
STATEMENT OF STOCKHOLDERS' EQUITY......................... 5
STATEMENTS OF CASH FLOWS.................................. 6
NOTES TO FINANCIAL STATEMENTS............................. 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................................ 10
PART II - OTHER INFORMATION........................................... 15
SIGNATURES............................................................ 18
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
BALANCE SHEETS
==========================================================================================
December 31, March 31,
1998 1999
(unaudited)
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT:
Cash and cash equivalents $ 440,654 $ 111,277
Trade accounts receivable, net of allowance for
doubtful accounts of $789,000
and $815,000 13,360,290 24,058,596
Inventories 30,131,877 32,360,222
Deferred income taxes 494,000 -
Other current assets 1,446,130 1,905,602
- ------------------------------------------------------------------------------------------
Ttotal current assets 45,872,951 58,435,697
Property, plant and equipment, net of accumulated
depreciation of $13,371,116 and $15,092,809 89,748,881 89,981,813
Goodwill, net of accumulated amortization of
$225,545 and $244,928 2,099,593 2,080,210
Deferred financing costs, net of accumulated
amortization of $184,480 and $212,152 590,520 562,848
Intangible pension asset 526,000 526,000
other assets, net of accumulated amortization of
$414,213 and $444,754 591,075 1,052,161
$ 139,429,020 $ 152,638,729
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT:
Accounts payable $ 14,106,608 $ 22,768,040
Accrued expenses 6,555,103 7,430,248
Current maturities of long-term debt 4,797,209 4,797,696
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TOTAL CURRENT LIABILITIES 25,458,920 34,995,984
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Long-term debt, less current maturities 41,572,250 43,302,110
Accrued pension cost 4,664,337 4,664,687
Accrued post-retirement welfare benefits 5,638,639 5,638,424
Deferred income taxes 7,357,000 7,537,000
Other noncurrent liabilities 207,331 551,227
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TOTAL LIABILITIES 84,898,477 96,689,432
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STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value - 500,000 shares
authorized; none outstanding - -
Common stock, $.001 par value - 15,000,000 shares
authorized; 9,997,455 issued 9,998 9,998
Additional paid-in capital 50,111,675 50,111,675
Retained earnings 8,384,835 9,803,589
Accumulated other comprehensive income (1,076,000) (1,076,000)
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57,430,508 58,849,262
Treasury stock, at cost, 485,880 shares (2,899,965) (2,899,965)
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TOTAL STOCKHOLDERS' EQUITY 54,530,543 55,949,297
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$ 139,429,020 $ 152,638,729
==========================================================================================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
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<S> <C> <C>
Three months ended March 31, 1998 1999
- ------------------------------------------------------------------------------------------
NET SALES $ 62,770,679 $ 49,380,153
COST OF PRODUCTS SOLD 53,324,976 42,139,536
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GROSS PROFIT 9,445,703 7,240,617
OPERATING EXPENSES:
Selling, general and administrative 4,208,338 4,104,668
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INCOME FROM OPERATIONS 5,237,365 3,135,949
OTHER INCOME (EXPENSE):
Interest income 136,517 7,327
Interest expense (1,278,359) (895,780)
Other income 115,177 71,258
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INCOME BEFORE TAXES ON INCOME 4,210,700 2,318,754
TAXES ON INCOME 1,642,000 900,000
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NET INCOME $ 2,568,700 $ 1,418,754
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EARNINGS PER SHARE (BASIC) $ .26 $ .15
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EARNINGS PER SHARE (DILUTED) $ .25 $ .15
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
BASIC 9,997,455 9,511,575
DILUTED 10,442,417 9,677,847
==========================================================================================
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
==========================================================================================================================
Three Months ended March 31, 1999
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Common Stock
----------------
Number Additional Accumulated
of paid-in Comprehensive Treasury
shares Amount capital Retained earnings Income stock Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 9,997,455 $9,998 $50,111,675 $8,384,835 $(1,076,000) $(2,899,965) $54,530,543
Net income for the
period - - - 1,418,754 - - $ 1,418,754
BALANCE, MARCH 31, 1999 9,997,455 $9,998 $50,111,675 $9,803,589 $(1,076,000) $(2,899,965) $55,949,297
==========================================================================================================================
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
NIAGARA CORPORATION
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(UNAUDITED)
=========================================================================================
<S> <C> <C>
Three months ended March 31, 1998 1999
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,568,700 $ 1,418,754
- -----------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,636,086 1,799,284
Accrued post-retirement welfare benefits (159,711) (215)
Provision for doubtful accounts 25,635 26,105
Deferred income taxes 328,000 674,000
Accrued pension costs (186,951) 350
Changes in assets and liabilities:
Increase in accounts receivable (4,364,220) (10,724,140)
Increase in inventories (1,999,230) (2,228,345)
Decrease (increase) in other assets, net 190,766 (951,101)
Increase in trade accounts payable and
accrued expenses 3,809,062 9,536,579
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TOTAL ADJUSTMENTS (720,563) (1,867,483)
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NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 1,848,137 (448,729)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payment of amount to Quanex (1,371,000) -
Acquisition of fixed assets (1,611,967) (1,954,891)
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NET CASH USED IN INVESTING ACTIVITIES (2,982,967) (1,954,891)
- -----------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 2,074,243
Repayment of long-term debt (10,761,731) -
- -----------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES (10,761,731) 2,074,243
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (11,896,561) (329,377)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 13,207,077 440,654
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,310,516 $ 111,277
=========================================================================================
See accompanying notes to financial statements.
</TABLE>
NIAGARA CORPORATION
AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - INFORMATION AS OF
MARCH 31, 1999 AND FOR THE PERIODS ENDED
MARCH 31, 1998 AND 1999 IS UNAUDITED.
==============================================================================
1. BASIS OF The accompanying financial statements are unaudited;
PRESENTATION 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 accompanying notes for
the year ended December 31, 1998.
2. ACQUISITION OF On April 18, 1997, Niagara LaSalle Corporation
LASALLE (formerly Niagara Cold Drawn Corp.) ("Niagara
LaSalle"), a subsidiary of Niagara Corporation
("Niagara"), purchased from Quanex Corporation
("Quanex") all of the outstanding shares of
capital stock of LaSalle Steel Company ("LaSalle,"
and, collectively with Niagara and Niagara
LaSalle, the "Company"), one of the largest
domestic producers of cold drawn steel bars. In
consideration for the sale of such shares, Niagara
LaSalle paid Quanex $65,500,000 in cash at the
closing and an additional $1,371,000, which amount
was paid on January 26, 1998, based on changes in
LaSalle's stockholder's equity between October 31,
1996 and March 31, 1997. Niagara LaSalle also paid
Quanex an amount based on cash activity in the
intercompany account between Quanex and LaSalle
from April 1, 1997 through April 18, 1997. The
acquisition of LaSalle was accounted for as a
purchase. The purchase price, including
acquisition costs and other estimated liabilities
as of the acquisition date, was approximately
$68,000,000. 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 LaSalle indebtedness was financed
pursuant to (i) a revolving credit and term loan
agreement with Niagara LaSalle and LaSalle
(guaranteed by Niagara), providing for a
$50,000,000 three-year revolving credit facility
and a $40,000,000 eight-year term loan and (ii)
the issuance and sale of $20,000,000 aggregate
principal amount of 12.5% senior subordinated
notes of Niagara LaSalle due April 18, 2005 (the
"Subordinated Notes"). In connection with the
subordinated debt portion of this financing, the
purchasers of the Subordinated Notes were issued
285,715 shares of Niagara Common Stock.
3. INVENTORIES Inventories consisted of the following:
December 31, March 31,
1998 1999
-----------------------------------
Raw materials $ 7,824,023 $ 9,492,779
Work-in-process 4,588,895 5,568,009
Finished goods 17,718,959 17,299,434
-----------------------------------
$30,131,877 $32,360,222
=====================================================
Inventories are stated using the LIFO method.
4. COLLECTIVE On July 19, 1998, following a nine-week strike, the
BARGAINING hourly workers at LaSalle's Hammond, Indiana
AGREEMENT facility voted to accept a new three-year collective
bargaining agreement. Among other things, this
agreement provides for a curtailment of certain
pension costs and other post-retirement benefits.
The net effect of these curtailments was to reduce
the Company's obligations by $4,949,000 for 1998.
5. CONTINGENCIES Niagara LaSalle and LaSalle are subject to federal,
state and local environmental laws and regulations
concerning, among other matters, water emissions
and waste disposal. Management believes that
Niagara LaSalle and LaSalle are currently in
material compliance with all applicable
environmental laws and regulations.
Under applicable state and federal laws, including
the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 as amended
("CERCLA"), Niagara LaSalle and LaSalle may be
responsible for parts of the costs required to
remove or remediate previously disposed wastes or
hazardous substances at the locations they own or
operate or at the locations which they arranged
for disposal of such materials. The costs incurred
through March 31, 1999 have been largely covered
by insurance. Management believes any resolution
of these matters will not have a material adverse
effect on the Company's financial position.
Under the Company'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 the Company 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 the Company'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.
6. SUBSEQUENT EVENT On April 16, 1999, Niagara and Niagara LaSalle
(UK) Limited, an English company and a subsidiary
of Niagara ("Niagara UK"), entered into a Sale of
Business Agreement with Glynwed International plc,
an English company ("Glynwed"), and Glynwed Steels
Limited, an English company and a subsidiary of
Glynwed ("Glynwed Steels"), providing for the
purchase by Niagara UK of the equipment, inventory
and certain other assets of Glynwed's steel bar
division for (pound) 21,202,000 (approximately $33.9
million), subject to a post-closing adjustment
based upon the value of the net assets
transferred. Certain costs relating to this
proposed acquisition, primarily professional fees,
have been deferred.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Niagara was organized in April of 1993. With the acquisition of
Niagara LaSalle in August 1995, Niagara entered the cold drawn steel bar
industry. With plants in Buffalo, New York and Chattanooga, Tennessee,
Niagara LaSalle had an established position in the northeast and southeast
regions of the United States cold drawn steel bar market.
In January 1996, Niagara LaSalle acquired Southwest Steel Company,
Inc. ("Southwest"). During 1996, Southwest completed construction of a new
plant in Midlothian, Texas, relocated its Tulsa, Oklahoma operations to
this new facility and was merged into Niagara LaSalle. With this
acquisition, Niagara gained an established position in the southwest region
of the United States because Southwest was the leading cold drawn steel bar
producer servicing that area.
In April 1997, Niagara LaSalle acquired LaSalle, which has plants in
Hammond and Griffith, Indiana. This acquisition gave Niagara LaSalle a
strong market position in the midwest region of the United States and
broadened Niagara LaSalle's product range by adding thermal treated and
chrome plated bars.
With the acquisition of LaSalle, Niagara became the largest
independent producer of cold drawn steel bars in the United States. The
geographic position of Niagara's plants creates competitive advantages
because of freight savings and the ability to supply efficiently multiple
locations of steel service centers.
During the fourth quarter of 1997, nearly all of Niagara's 6,050,000
Redeemable Common Stock Purchase Warrants ("Warrants") were exercised
resulting in approximately $33.2 million in gross proceeds to Niagara. This
significantly strengthened the Company's balance sheet at December 31, 1997
by enabling it to prepay, with approximately $21.8 million of such
proceeds, the Subordinated Notes in their entirety and by increasing total
stockholders' equity to approximately $52 million at year end. During the
first quarter of 1998, the Company used another $10 million of such
proceeds to reduce the balance due under its revolving credit facility.
On April 16, 1999, Niagara and Niagara UK entered into a Sale of
Business Agreement (the "Sale of Business Agreement") with Glynwed and
Glynwed Steels, providing for the purchase (the "Acquisition") by Niagara
UK of the equipment, inventory and certain other assets of Glynwed's steel
bar division (the "Division") for (pound) 21,202,000 (approximately $33.9
million), subject to a post-closing adjustment based upon the value of the
net assets transferred. In connection with the execution of the Sale of
Business Agreement, Niagara and Niagara UK entered into property agreements
with subsidiaries of Glynwed contemplating that, subject to consummation of
the Acquisition, Niagara UK will lease or sublease 10 operating facilities
and accept assignments of the leases for 5 sales offices. Pursuant to these
property and related agreements (i) the initial term of the lease would be
10 years for 9 of the operating facilities and 5 years for the remaining
operating facility at rents specified in the property agreements,
(ii) each operating facility lease could be terminated by Niagara UK on one
year's notice and (iii) Niagara UK would have the option to purchase 7 of
the operating facilities at prices specified in the property agreements
(which prices total (pound)9,468,000 (approximately $15.1 million)), or
renew the leases with respect thereto for an additional term of 15 years at
commercial market rates. The Acquisition is subject to certain conditions
which if not satisfied on or before May 31, 1999, will result in the Sale
of Business Agreement automatically terminating unless the parties agree
otherwise. In addition, Niagara UK may elect not to close the Acquisition
for any material breach of Glynwed Steel's warranties or the occurrence of
an event having a material adverse effect on the Division.
RESULTS OF OPERATIONS
During the second half of 1998 and through the first quarter of 1999,
the Company experienced competitive pressures due to a marked decline in
prices and weakened demand for its products. Management believes that such
developments were due to overcapacity in the industry and the carryover
effect from 1998 of low-priced imports, primarily from Asia and Eastern
European countries.
On July 19,1998, following a nine-week strike, the hourly workers at
LaSalle's Hammond, Indiana facility voted to accept a new three-year
collective bargaining agreement. Among other things, this agreement
provides for a curtailment of certain pension costs and other
postretirement benefits. Management believes that operating costs at
the Hammond facility have been reduced under the new agreement.
Three Months ended March 31, 1999 compared with March 31, 1998
Net sales for the three months ended March 31, 1999 were $49,380,153,
representing a decrease of $13,390,526, or 21.3%, over the same period in
1998. Approximately 80% of this decrease was attributable to the volume of
sales with the remainder due to the decline in prices.
Cost of sales for the three months ended March 31, 1999 decreased by
$11,185,440 to $42,139,536, representing a decrease of 21% over the same
period in 1998. This decrease was primarily attributable to reduced raw
material costs as a result of the lower sales volume and, to a lesser
extent, reduced operating costs.
Gross margins for the three months ended March 31, 1999 decreased by
0.4% over the same period in 1998, due to the decline in prices which was
partially offset by a decrease in raw material prices and the Company's
greater emphasis on higher margin value-added products.
Selling, general and administrative expenses for the three months
ended March 31, 1999 decreased by $103,670 to $4,104,668, or 8.3% of sales,
compared to 6.7% of sales for the same period in 1998. Both the decrease in
dollar amount and increase as a percentage of sales were due to the
decrease in sales.
Net interest expense for the three months ended March 31, 1999
decreased by $253,389 to $888,453, due primarily to reduced levels of
borrowing.
Net income for the three months ended March 31, 1999 was $1,418,754,
a decrease of $1,149,946, or 44.8%, as compared to the net income for the
three months ended March 31, 1998. This decrease resulted primarily from
the marked decline in prices and weakened demand for the Company's products
during the first quarter of 1999 as compared to the first quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term liquidity requirement for day-to-day
operating expenses has been, and is expected to continue to be, funded by
operations and borrowings under its revolving credit facility. The
Company's principal long-term liquidity requirement has been, and is
expected to continue to be, the funding of capital expenditures to
modernize, improve and expand its facilities, machinery and equipment.
Capital expenditures for the three months ended March 31, 1999 totaled
$1,954,891 as compared to $1,611,967 for the same period in 1998. This
increase in expenditures was largely due to the purchase of production
equipment and certain leasehold improvements.
Cash flows used by operations were $448,729 for the three months
ended March 31, 1999, a decrease of $2,296,866 as compared to cash flows
provided by operations of $1,848,137 for the same period in 1998. This
decrease is attributable primarily to a decrease in net income of
$1,149,946 and an increase in accounts receivable of $10,724,140 which was
offset in part by an increase in accounts payable of $9,536,579. At March
31, 1999, the Company had $111,277 in cash and cash equivalents. Such funds
are used for working capital and other corporate purposes.
On April 18, 1997 and in connection with the acquisition of LaSalle,
Niagara LaSalle and LaSalle entered into a revolving credit and term loan
agreement (the "Credit Agreement") with Manufacturers and Traders Trust
Company ("M&T"), CIBC Inc., National City Bank, National Bank of Canada and
the Prudential Insurance Company of America, and Niagara LaSalle terminated
its previously existing credit agreements with M&T. The Credit Agreement
provides for a $50,000,000 three-year revolving credit facility and a
$40,000,000 eight-year term loan. The obligations of Niagara LaSalle and
LaSalle under the Credit Agreement are guaranteed by Niagara and secured by
substantially all of the assets and a pledge of all outstanding capital
stock of Niagara LaSalle and LaSalle.
Principal of the term loan under the Credit Agreement amortizes in
monthly installments that commenced on November 1, 1997 and end on April 1,
2004. The principal repayment installments on the term loan escalate
throughout its term. Interest on the term loan is payable in monthly
installments either at the LIBOR rate (for a period specified by Niagara
LaSalle from time to time) plus 235 basis points, or M&T's prime rate plus
50 basis points. Revolving credit loans made pursuant to the Credit
Agreement are 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 is either 200 basis points above the
LIBOR rate (for a period specified by Niagara LaSalle from time to time) or
M&T's prime rate plus 25 basis points.
The Credit Agreement carries restrictions on, among other things,
indebtedness, liens, capital expenditures, dividends, asset dispositions
and changes in control of Niagara LaSalle and LaSalle, and requires minimum
levels of net worth through maturity. Also included in this agreement 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 LaSalle was in compliance with all of these requirements as of
March 31, 1999.
On October 31, 1997, Niagara exercised its right to redeem all of its
then outstanding and unexercised Warrants. Each outstanding Warrant
entitled the holder to purchase from Niagara, prior to the exercise
deadline, one share of Niagara Common Stock at an exercise price of $5.50.
Of the 6,050,000 Warrants outstanding prior to the call for redemption,
6,042,990 were exercised resulting in $33,236,445 in gross proceeds to
Niagara and the issuance of 6,042,990 shares of Niagara Common Stock.
During the fourth quarter of 1997, the Company used approximately $21.8
million of such proceeds to prepay in their entirety, at 107% plus accrued
interest, the Subordinated Notes. During the first quarter of 1998, the
Company used another $10 million of such proceeds to reduce the balance due
under its revolving credit facility.
On March 20, 1998, Niagara's Board of Directors authorized the
repurchase, from time to time, of up to one million shares of Niagara
Common Stock in open market and privately negotiated transactions. Such
repurchases are subject to market and other conditions and financed with
internally generated funds or borrowings under the revolving credit
facility. Shares of Niagara Common Stock repurchased are held as treasury
stock and are available for use in the Company's benefit plans and for
general corporate purposes. As of March 31, 1999, Niagara had repurchased
485,880 shares of its Common Stock at a cost of $2,899,965. All of such
repurchases were made during 1998.
At March 31, 1999, Niagara LaSalle had borrowed $11,800,000 under its
revolving credit facility and had approximately $27,000,000 in available
credit thereunder, and the outstanding balance of its term loan was
$35,333,000. Working capital of the Company at March 31, 1999 was
$23,439,713 as compared to $20,414,031 on December 31, 1998.
YEAR 2000 READINESS DISCLOSURE
The Company could be adversely affected if the computer and other
systems, machinery, equipment and applications which it or its suppliers,
customers or service providers use does not properly accommodate the "Year
2000" dating changes necessary to permit the recording of year dates for
2000 and later years. Management does not anticipate any material
disruption in the Company's operations as a result of this issue. However,
because of the reliance on and involvement of a great many third parties in
this regard, disruptions in the Company's operations could occur which may
have a material effect on the Company's results of operations.
In 1998, the Company upgraded its internal computer systems in four
of its five plants at a cost of approximately $1,000,000. This upgrade
allowed the Company to centralize all of its internal business functions.
Based on assurances from the manufacturers of the upgraded system's
hardware and software, management does not expect that this system will
suffer any interruption or performance degradation as a result of the Year
2000.
The Company's personnel, together with outside engineering firms,
have assessed the Company's machinery, equipment, applications and other
systems for Year 2000 readiness. Management is taking all appropriate steps
to correct the problems identified or to minimize the impact of any
interruptions or performance degradations caused by the Year 2000.
Management has budgeted $60,000 for this assessment and any needed
corrective actions, nearly all of which has been expended as of March 31,
1999.
The Company has inquired into the Year 2000 readiness status of its
suppliers, customers and essential service providers and, based on their
responses, is finalizing contingency plans to prepare for any Year 2000
related issues they identify.
CAUTIONARY STATEMENT FOR PURPOSES OF THE" SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES REFORM ACT OF 1995
The Private Securities Reform Act of 1995 provides a "safe harbor"
for certain forward-looking statements. The factors discussed under
"CAUTIONARY STATEMENTS FOR PURPOSES OF THE 'SAFE HARBOR' PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995" in Niagara's Report on
Form 10-K for the fiscal year ended December 31, 1998, among others, could
cause actual results to differ materially from those contained in
forward-looking statements made in this Form 10-Q, including, without
limitation, in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS," in future filings by Niagara with the
Securities and Exchange Commission, in the Company's press releases and in
oral statements made by authorized officers of the Company. The words
"may," "will," "should," "could," "expects," "plans," "anticipates,"
"intends," "believes," "estimates," "predicts," "projects," "potential," or
"continue" and other similar expressions are intended to identify such
forward- looking statements.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Under applicable state and federal laws, including the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), Niagara LaSalle and LaSalle may be responsible for costs
required to remove or remediate previously disposed wastes or hazardous
substances at locations owned or operated by them or at locations owned or
operated by third parties where they, or a company from which they acquired
assets, arranged for the disposal of such materials. Claims for such costs
have been made against LaSalle with respect to four such third-party sites.
Management believes that, in three cases, the volumes of the waste
allegedly attributable to LaSalle and the share of costs for which it may
be liable are de minimis. At two of these sites, LaSalle has entered into
de minimis settlement agreements resolving the pending claims of liability,
one of which is awaiting judicial approval. In the fourth case, LaSalle has
entered into an agreement with a group of other companies alleged to be
responsible for remediation of the site in an effort to share
proportionately the cost of remediation. LaSalle and this group of
companies have also signed an Administrative Order on Consent with the
United States Environmental Protection Agency and agreed to perform a
limited remediation at the site. LaSalle has received an insurance
settlement in an amount that largely covers the financial contributions it
has been required to make for these sites through March 31, 1999. Because
liability under CERCLA and analogous state laws is generally joint and
several, and because further remediation work may be required at these
sites, LaSalle may be required to contribute additional funds. However,
based on its volumetric share of wastes disposed and the participation of
other potentially liable parties, management does not believe that
LaSalle's share of the additional costs will have a material adverse effect
on the Company's financial position or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
+3.1 Registrant's Restated Certificate of Incorporation, as amended on
May 16, 1996.
*3.2 Registrant's By-laws.
*4.1 Form of Common Stock Certificate.
!!!
!!!4.2 Revolving Credit and Term Loan Agreement, dated as of April 18,
1997, by and among Niagara Cold Drawn Corp., LaSalle Steel
Company, Manufacturers and Traders Trust Company (individually
and as Agent), CIBC Inc. and National City Bank (the "Credit
Agreement").
+++4.3 First Amendment to the Credit Agreement, dated as of September
4, 1997.
+++4.4 Second Amendment to the Credit Agreement, effective as of
December 31, 1997.
!!!!4.5 Third Amendment to the Credit Agreement, effective May 15, 1998.
**4.6 Fourth Amendment to the Credit Agreement, effective as of December
1, 1998.
!!!
!!!4.7 Stockholders Agreement, dated as of April 18, 1997, among the
Registrant, Niagara Cold Drawn Corp., Michael J. Scharf, The
Prudential Insurance Company of America, The Equitable Life
Assurance Society of the United States and United States
Fidelity and Guaranty Company.
**4.8 Amended and Restated Promissory Note, dated December 15, 1998,
made by Gilbert D. Scharf in favor of Niagara Corporation.
***10.1 Employment Agreement, dated as of January 1, 1999, by and
among Niagara Corporation, Niagara LaSalle Corporation
and Michael Scharf.
** 10.2 Employment Agreement, dated August 16, 1995, between International
Metals Acquisition Corporation, Niagara Cold
Drawn Corp. and Frank Archer.
** 10.3 Employment Agreement, dated August 16, 1995, between International
Metals Acquisition Corporation, Niagara Cold Drawn Corp. and
Raymond Rozanski.
!!10.4 Amended and Restated Promissory Note made by Southwest Steel
Company, Inc. in favor of the Cohen Family Revocable Trust,
u/t/a dated June 15, 1988, in the principal amount of $898,000,
dated January 31, 1996.
!!10.5 Guaranty, made by the Registrant in favor of the Cohen Family
Revocable Trust, u/t/a dated June 15, 1988, dated January 31,
1996.
!!!10.6 International Metals Acquisition Corporation 1995 Stock Option
Plan.
!!!!!10.7 First Amendment to the International Metals Acquisition
Corporation 1995 Stock Option Plan, dated October 5, 1996.
++10.8 Second Amendment to the Niagara Corporation 1995 Stock Option
Plan, dated June 8, 1998.
++10.9 Niagara Corporation Employee Stock Purchase Plan.
!!!
!!!10.10 Stock Purchase Agreement, dated April 18, 1997, by and among the
Registrant, Niagara Cold Drawn Corp. and Quanex Corporation.
**10.11 First Amendment to Lease, dated May 4, 1998, between
Niagara LaSalle Corporation and North American Royalties, Inc.
!10.12 Sale of Business Agreement, dated April 16, 1999, between Glynwed
Steels Limited, Glynwed International plc, Niagara LaSalle (UK)
Limited and Niagara Corporation
!10.13 Property Agreement, dated April 16, 1999, between Glynwed Property
Management Limited, Glynwed Properties Limited, Niagara LaSalle
(UK) Limited, Niagara Corporation and Glynwed International plc.
!10.14 Agreement For Lease of Unit 6-8 Eagle Industrial Estate, dated
April 16, 1999, between Glynwed Property Management Limited,
Glynwed Properties Limited, Niagara LaSalle (UK) Limited and
Niagara Corporation.
27 Financial Data Schedule.
- --------------------------
+ Incorporated by reference to exhibit 3.1 filed with the
Registrant's Report on Form 10-Q for the quarter ended June 30,
1996.
++ Incorporated by reference to Annexes to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders held on July 7,
1998.
+++ Incorporated by reference to exhibits filed with the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1997.
* Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form S-1, Registration No. 33-64682.
** Incorporated by reference to exhibits filed with the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1998.
*** Incorporated by reference to exhibit 10.1 filed with the
Registrant's Report on Form 10-K/A for the fiscal year ended
December 31, 1998.
! Incorporated by reference to exhibits filed with the Registrant's
Report on Form 8-K, dated April 27, 1999.
!! Incorporated by reference to exhibits filed with the Registrant's
Report on Form 10-K for the year ended December 31, 1995.
!!! Incorporated by reference to Annex A to the Registrant's Proxy
Statement for the Annual Meeting of Stockholders held on May 16,
1996.
!!!! Incorporated by reference to exhibit 4.8 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1998.
!!!!! Incorporated by reference to exhibit 10.10 to the Registrant's
Report on Form 10-K for the fiscal year ended December 31, 1996.
!!!!!! Incorporated by reference to exhibits filed with the Registrant's
Report on Form 8-K, dated May 2, 1997.
(b) Reports on Form 8-K.
The Registrant filed its Report on Form 8-K, dated April 27,
1999, reporting under Items 5 and 7 the execution of agreements in
connection with the proposed acquisition of the steel bar division of
Glynwed International plc.
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: May 14, 1999 NIAGARA CORPORATION
---------------------
(Registrant)
/s/ Michael Scharf
-------------------------------------
Michael Scharf, President
Date: May 14, 1999 /s/ Raymond Rozanski
-------------------------------------
Raymond Rozanski, Vice President
and Treasurer
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- -------
27 Financial Data Schedule 20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE UNAUDITED QUARTERLY FINANCIAL
STATEMENTS OF NIAGARA CORPORATION AND SUBSIDIARIES
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<PERIOD-TYPE> 3-MOS
<CASH> 111,277
<SECURITIES> 0
<RECEIVABLES> 24,873,596
<ALLOWANCES> 815,000
<INVENTORY> 32,360,222
<CURRENT-ASSETS> 58,435,697
<PP&E> 105,074,622
<DEPRECIATION> 15,092,809
<TOTAL-ASSETS> 152,638,729
<CURRENT-LIABILITIES> 34,995,984
<BONDS> 43,302,110
<COMMON> 9,998
0
0
<OTHER-SE> 55,939,299
<TOTAL-LIABILITY-AND-EQUITY> 152,638,729
<SALES> 49,380,153
<TOTAL-REVENUES> 49,380,153
<CGS> 42,139,536
<TOTAL-COSTS> 42,139,536
<OTHER-EXPENSES> 4,104,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 895,780
<INCOME-PRETAX> 2,318,754
<INCOME-TAX> 900,000
<INCOME-CONTINUING> 1,418,754
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,418,754
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
