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 September 30, 2002
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
------------------------
(Address of Principal Executive Offices)
(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 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
----- -----
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act). Yes No X
----- -----
There were 8,238,517 shares of the registrant's Common Stock
outstanding as of September 30, 2002.
NIAGARA CORPORATION
Index to September 2002 Form 10-Q
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Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Niagara Corporation
Balance Sheets.............................................. 3
Statements of Operations.................................... 4-5
Statement of Stockholders' Equity........................... 6
Statements of Cash Flows.................................... 7
Notes to Financial Statements............................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................ 13
Item 3. Quantitative and Qualitative Disclosures about Market Risk ....... 21
Item 4. Controls and Procedures........................................... 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................... 23
Item 2. Changes in Securities and Use of Proceeds......................... 23
Item 3. Defaults Upon Senior Securities................................... 23
Item 4. Submission of Matters to a Vote of Security Holders............... 23
Item 5. Other Information................................................. 23
Item 6. Exhibits and Reports on Form 8-K.................................. 24
Signatures................................................................. 25
Certifications............................................................. 26
NIAGARA CORPORATION
AND SUBSIDIARIES
Balance Sheets
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December 31, September 30,
- -------------------------------------------------------------------------------
2001 2002
- -------------------------------------------------------------------------------
(unaudited)
- -------------------------------------------------------------------------------
Assets
Current:
Cash and cash equivalents $ 1,692,070 $ 5,042,111
- --------------------------------------------------------------------------------
Trade accounts receivable, net
of allowance for doubtful accounts
of $1,276,000 and $1,247,000 37,844,609 38,293,559
Inventories 44,113,663 51,542,446
Deferred income taxes 1,678,000 1,678,000
Other current assets 3,870,749 4,927,124
- --------------------------------------------------------------------------------
Total current assets 89,199,091 101,483,240
Property, plant and equipment,
net of accumulated depreciation
and amortization of $40,232,578
and $48,156,559 89,658,179 84,330,712
Goodwill 1,904,499 1,904,499
Deferred financing costs,
net of accumulated amortization
of $516,564 and $599,580 258,436 175,420
Intangible pension asset 370,000 331,000
Other assets, net of accumulated
amortization of $883,293 and $985,081 488,725 621,246
- --------------------------------------------------------------------------------
$ 181,878,930 $188,846,117
================================================================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 32,604,979 $ 40,698,610
Accrued expenses 10,671,116 14,426,410
Current maturities of long-term debt 9,709,148 10,023,341
- --------------------------------------------------------------------------------
Total current liabilities 52,985,243 65,148,361
Other:
Long-term debt, less current maturities 62,293,980 55,834,676
Accrued pension cost 1,987,000 987,250
Accrued other postretirement benefits 5,302,483 5,024,606
Deferred income taxes 10,020,000 10,434,620
Other noncurrent liabilities 37,710 176,575
- --------------------------------------------------------------------------------
Total liabilities 132,626,416 137,606,088
- --------------------------------------------------------------------------------
Stockholders' equity:
Preferred stock, $.001 par value -
500,000 shares authorized;
none outstanding - -
Common stock, $.001 par value -
15,000,000 shares authorized;
9,997,455 issued 9,998 9,998
Additional paid-in capital 50,111,675 50,111,675
Retained earnings 11,852,159 13,168,211
Accumulated other comprehensive loss (4,471,634) (3,800,171)
- --------------------------------------------------------------------------------
57,502,198 59,489,713
Treasury stock, at cost, 1,758,938 shares (8,249,684) (8,249,684)
- --------------------------------------------------------------------------------
Total stockholders' equity 49,252,514 51,240,029
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$ 181,878,930 $ 188,846,117
================================================================================
See accompanying notes to financial statements.
NIAGARA CORPORATION
AND SUBSIDIARIES
Statements of Operations
(Unaudited)
================================================================================
Three months ended September 30, 2001 2002
- --------------------------------------------------------------------------------
Net sales $ 60,372,998 $ 67,650,129
Cost of products sold 54,568,276 60,779,508
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Gross profit 5,804,722 6,870,621
Operating expenses:
Selling, general and administrative 6,440,541 6,618,897
- --------------------------------------------------------------------------------
Income (loss) from operations (635,819) 251,724
Other income (expense):
Interest expense (1,267,532) (889,866)
Gain on sale of property - 2,906,834
Other income 94,078 2,563
- --------------------------------------------------------------------------------
Income (loss) before income taxes (1,809,273) 2,271,255
Provision (benefit) for income taxes (650,000) 880,000
- --------------------------------------------------------------------------------
Net income (loss) $ (1,159,273) 1,391,255
================================================================================
Earnings (loss) per share
(basic and diluted) $ (.14) $ .17
================================================================================
Weighted average common shares outstanding:
(basic and diluted) 8,351,559 8,238,517
================================================================================
See accompanying notes to financial statements.
NIAGARA CORPORATION
AND SUBSIDIARIES
Statements of Operations
(Unaudited)
================================================================================
Nine months ended September 30, 2001 2002
- --------------------------------------------------------------------------------
Net sales $ 211,928,548 $197,223,228
Cost of products sold 188,022,882 175,467,176
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Gross profit 23,905,666 21,756,052
Operating expenses:
Selling, general and administrative 19,993,365 19,029,165
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Income from operations 3,912,301 2,726,887
Other income (expense):
Interest expense (4,348,949) (2,707,440)
Gain on sale of property - 2,906,834
Other income 189,208 214,771
- --------------------------------------------------------------------------------
Income (loss) before income taxes (247,440) 3,141,052
Provision (benefit) for income taxes (60,000) 1,825,000
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Net income (loss) $ (187,440) $ 1,316,052
================================================================================
Earnings (loss) per share
(basic and diluted) $ (.02) $ .16
================================================================================
Weighted average common shares outstanding:
(basic and diluted) 8,359,686 8,238,517
================================================================================
See accompanying notes to financial statements.
NIAGARA CORPORATION
AND SUBSIDIARIES
Statement of Stockholders' Equity
(Unaudited)
===================================================================================================================================
Nine months ended September 30, 2002
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Accumulated
Common Stock Additional other Treasury Total
------------------------- paid-in Retained comprehensive stock stockholders'
Number of shares Amount capital earnings loss at cost equity
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, January 1, 2002 9,997,455 $9,998 $50,111,675 $11,852,159 $(4,471,634) $(8,249,684) $49,252,514
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income:
Net income for the period - - - 1,316,052 - - 1,316,052
Foreign currency
translation adjustment
(Note 2) - - - 671,463 - 671,463
- ------------------------------------------------------------------------------------------------------------------------------------
Total comprehensive income - - - - - - 1,987,515
====================================================================================================================================
Balance, September 30, 2002 9,997,455 $9,998 $50,111,675 $13,168,211 $(3,800,171) $(8,249,684) $51,240,029
====================================================================================================================================
See accompanying notes to financial statements.
NIAGARA CORPORATION
AND SUBSIDIARIES
Statements of Cash Flows
(Unaudited)
================================================================================
Nine months ended September 30, 2001 2002
- --------------------------------------------------------------------------------
Cash flows from operating activities:
Net income (loss) $ (187,440) $ 1,316,052
- -------------------------------------------------------------------------------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 7,217,569 6,887,718
Gain on sale of property - (2,906,834)
Provision for doubtful accounts 309,460 (45,598)
Deferred income taxes - 414,619
Pension costs (1,857,483) (999,750)
Other postretirement benefits (125,320) (277,877)
Changes in assets and liabilities:
Decrease in accounts receivable 7,716,976 1,153,705
Decrease (increase) in inventories 12,119,620 (6,247,464)
Increase in other assets, net (1,147,331) (819,587)
(Decrease) increase in trade
accounts payable, accrued
expenses and other non-current
liabilities (11,305,350) 10,091,794
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Total adjustments 12,928,141 7,250,726
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Net cash provided by
operating activities 12,740,701 8,566,778
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Cash flows from investing activities:
Proceeds from sale of property - 3,109,050
Acquisition of property and equipment (2,703,285) (741,302)
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Net cash (used in)
provided by
investing activities (2,703,285) 2,367,748
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Cash flows from financing activities:
Repayment of long-term debt (9,434,966) (7,948,112)
Payments to acquire treasury stock (219,275) -
- --------------------------------------------------------------------------------
Net cash used in
financing activities (9,654,241) (7,948,112)
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Effect of exchange rate changes
on cash and cash equivalents (117,816) 363,627
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Net increase in cash and cash equivalents 265,359 3,350,041
Cash and cash equivalents,
beginning of period 2,350,515 1,692,070
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Cash and cash equivalents, end of period $ 2,615,874 $ 5,042,111
================================================================================
See accompanying notes to financial statements.
NIAGARA CORPORATION
AND SUBSIDIARIES
Notes to Financial Statements - Information as of
September 30, 2002 and for the periods ended
September 30, 2001 and 2002 is unaudited.
================================================================================
1. Basis of The accompanying condensed financial statements
Presentation of Niagara Corporation ("Niagara") and its
subsidiaries (together with Niagara, the "Company"),
Niagara LaSalle Corporation ("Niagara LaSalle"),
LaSalle Steel Company ("LaSalle," and together with
Niagara LaSalle, "Niagara US") and Niagara LaSalle
(UK) Limited ("Niagara UK"), are 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 Company's
audited financial statements and accompanying notes
for the year ended December 31, 2001.
2. Foreign Currency Niagara UK, an English company, uses British pounds
Translation and sterling ("(pound)") as its functional currency and
Transactions its accounts are translated to United States dollars
in conformity with Statement of Financial Accounting
Standards ("SFAS") No. 52, "Foreign Currency
Translation." Assets and liabilities of this
subsidiary are translated at the exchange rates in
effect at the balance sheet dates and the related
revenues and expenses have been translated at the
average rate for the periods. Translation
adjustments arising from the use of different
exchange rates from period to period are included as
accumulated other comprehensive income (loss) within
the Statement of Stockholders' Equity. Gains and
losses resulting from foreign currency transactions
are included in other income (expense) within the
Statements of Operations.
3. Inventories Inventories consisted of the following:
December 31, September 30,
2001 2002
---------------------------------
Raw materials $10,503,938 $15,120,109
Work-in-process 3,783,934 3,977,418
Finished goods 29,825,791 32,444,919
---------------------------------
$44,113,663 $51,542,446
=====================================================
At September 30, 2002, Niagara US inventories were
$35,892,736 determined using the LIFO method and
Niagara UK inventories were $15,649,710 determined
using the FIFO method.
4. Contingencies Niagara US and Niagara UK are subject to extensive
environmental laws and regulations concerning, among
other matters, water and air emissions and waste
disposal. Under such laws, including the
Comprehensive Environmental Response, Compensation
and Liability Act of 1980 as amended, Niagara US and
Niagara UK 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
expended through September 30, 2002 have been largely
covered by insurance. Management believes that the
resolution of these matters will not have a material
adverse effect on the Company's financial position or
results of operations.
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. In
connection with these programs, Niagara US has
provided certain insurance carriers with irrevocable
standby letters of credit totaling $1,220,000 as of
September 30, 2002. It is the policy of the Company
to retain a portion of certain expected losses. These
relate 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 for claims. Such estimates
utilize certain actuarial assumptions followed in the
insurance industry and are included in accrued
expenses.
The hourly production workers at LaSalle's Griffith,
Indiana facility, representing approximately 3.5% of
Niagara US's personnel, are covered by a collective
bargaining agreement which expires on February 19,
2003.
5. Segments and The Company operates in two reportable segments: (i)
Related Niagara US which has operations in the United States
Information and (ii) Niagara UK which has operations in the
United Kingdom. The Company operates these segments
as separate strategic business units and measures the
segment performance based on earnings before
interest, taxes, depreciation and amortization
("EBITDA"). Niagara UK uses British pounds sterling
as its functional currency and its accounts are
translated to United States dollars in conformity
with SFAS No. 52, "Foreign Currency Translation."
Assets and liabilities of this subsidiary have been
translated at the exchange rates in effect on
September 30, 2001 and 2002 and the related revenues
and expenses have been translated at the average
rates for the periods. The following tables set forth
certain performance and other information by
reportable segment.
Three months ended
September 30, 2001 Niagara US Niagara UK
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Net sales $ 34,591,666 $ 25,781,332
Segment profit (EBITDA) 1,621,399 484,466
Depreciation and amortization 1,817,405 393,108
Interest expense 756,515 511,017
Long-lived assets 81,766,043 14,257,062
Segment assets 129,784,149 60,401,809
Acquisition of property and equipment 473,600 702,560
------------------------------------------------------------------------------
Three months ended
September 30, 2002 Niagara US Niagara UK
------------------------------------------------------------------------------
Net sales $ 47,352,893 $ 20,297,236
Segment profit (loss) (EBITDA)(a) 3,404,235 (422,556)
Depreciation and amortization 1,864,029 372,650
Interest expense 486,691 403,175
Long-lived assets 75,696,969 11,170,622
Segment assets 133,662,947 54,104,236
Acquisition of property and equipment 76,932 14,300
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(a) Segment profit (loss) (EBITDA) for Niagara UK does not
include a $2,906,834 gain on the sale of property.
Nine months ended
September 30, 2001 Niagara US Niagara UK
------------------------------------------------------------------------------
Net sales $128,296,148 $83,632,400
Segment profit (EBITDA) 9,387,576 3,461,313
Depreciation and amortization 5,729,342 1,399,208
Interest expense 2,678,852 1,670,097
Long-lived assets 81,766,043 14,257,062
Segment assets 129,784,149 60,401,109
Acquisition of property and equipment 1,649,860 1,016,759
------------------------------------------------------------------------------
Nine months ended
September 30, 2002 Niagara US Niagara UK
------------------------------------------------------------------------------
Net sales $135,057,871 $62,165,357
Segment profit (loss) (EBITDA)(a) 11,775,076 (821,247)
5,565,754 1,253,984
Depreciation and amortization
1,526,272 1,181,168
Interest expense
75,696,969 11,170,622
Long-lived assets
133,662,947 54,104,236
Segment assets
504,047 235,400
Acquisition of property and equipment
-----------------------------------------------------------------------------
(a) Segment profit (loss) (EBITDA) for Niagara UK does not
include a $2,906,834 gain on the sale of property.
Niagara US sells its products primarily to customers
in the United States.
Approximately 68% of Niagara UK's sales to
unaffiliated customers during the nine months ended
September 30, 2002 were within the United Kingdom,
16% to continental Europe and 15% to the rest of the
world. These amounts were 63%, 19% and 18%,
respectively, for the nine months ended September 30,
2001. For these periods, Niagara UK's sales to any
one foreign country, other than the United States,
represented less than 5% of its total sales.
Certain of the foregoing segment information (profit,
depreciation and amortization, assets and acquisition
of property and equipment) does not include
components attributable to Niagara or incurred by
Niagara on behalf of its operating subsidiaries.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Niagara was organized in April of 1993. In August 1995, Niagara
acquired Niagara LaSalle . With plants in Buffalo, New York and Chattanooga,
Tennessee, Niagara LaSalle was an established cold finished steel bar producer
in the northeast and southeast regions of the United States.
In January 1996, Niagara LaSalle acquired Southwest Steel Company,
Inc. ("Southwest"), the leading cold drawn steel bar producer servicing the
southwest region of the United States. During 1996, Southwest completed
construction of a new plant in Midlothian, Texas and relocated its Tulsa,
Oklahoma operations to this new facility.
In April 1997, Niagara LaSalle acquired LaSalle, which had 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 this acquisition, Niagara US became the largest independent
producer of cold drawn steel bars in the United States.
On May 21, 1999, Niagara UK purchased the equipment, inventory and
certain other assets of the eight steel bar businesses of Glynwed Steels
Limited ("Glynwed Steels"). These steel bar businesses are engaged in hot
rolling, cold finishing and distribution and represent the largest independent
steel bar concern in the United Kingdom.
In November 1999 and September 2001, the Company announced
restructuring plans for its hot rolling operations in the United Kingdom.
Under the 1999 plan, Niagara UK closed its Ductile Hot Mill facility in
Willenhall, terminated its lease of the real property, transferred most of the
production from this facility to its W Wesson facility in Moxley (which was
renamed Ductile Wesson) and invested approximately $1.5 million in its
remaining hot rolling businesses. During the same period, Niagara UK
reorganized the management structures in each of its three operating divisions
(hot rolling, cold finishing and distribution). Under the 2001 plan, Niagara
UK closed its Dudley Port hot rolling facility in Tipton and transferred most
of its production to its two other hot rolling facilities. On March 15, 2002,
Niagara UK entered into an agreement to sell this leased property for
(pound)3,600,000 ($5,329,800), which Niagara UK had an option to purchase for
(pound)1,495,000 ($2,213,348). On September 30, 2002, Niagara UK completed the
transaction by selling this option to purchase. This sale resulted in a
pre-tax gain of (pound)1,963,414 ($2,906,834) and an after-tax gain of
(pound)1,463,414 ($2,166,584) which reflects a reduction in Niagara UK's
deferred tax asset (recorded as an increase in accrued expenses).
In response to an International Trade Commission finding on the
negative effects of imports on the domestic steel industry and its workers, on
March 5, 2002, President Bush announced tariffs and other measures concerning
a broad range of steel products imported into the United States. These
measures became effective on March 20, 2002 and include tariffs on imported
hot rolled and cold finished steel bar of 30% in the first year, 24% in the
second year and 18% in the third year. Excluded from the tariffs are imports
from many developing countries, as well as Canada and Mexico. The Company
submitted applications for exclusion of approximately 22,000 tons of Niagara
UK products (based on 2001 shipments), approximately 58% of which were
granted. The Company intends to submit additional applications for tariff
exclusion later this year.
On July 2, 2002, Niagara LaSalle offered to purchase from Republic
Technologies International, LLC ("Republic") all of the equipment and supplies
located at Republic's Harvey, Illinois facility. Niagara LaSalle's offer of $
2.225 million prevailed at an auction held on July 8, 2002 and was approved by
the U.S. Bankruptcy Court for the Northern District of Ohio, Eastern Division,
on July 23, 2002. The closing of this transaction, which is scheduled to occur
by November 19, 2002, is subject to the satisfaction of certain conditions.
Management has not yet determined where this equipment would be deployed.
On October 8, 2002, Niagara LaSalle purchased certain production
equipment and related assets of Moltrup Steel Products Company for $375,000.
Niagara US has relocated the majority of these assets to its other operating
facilities.
Results of Operations
During the third quarter of 2002, the Company experienced an overall
increase in sales and net income as compared to the same period in 2001. The
Company's U.S. operations continued the improvement that began in the first
quarter of 2002 as a result of firmer pricing and a reduction in capacity, due
primarily to the closure of certain competitors' facilities. As a result,
Niagara US's sales, margins and net income improved for the quarter as
compared to the third quarter of 2001.
During the third quarter of 2002, the Company's U.K. operations
continued to be faced with depressed conditions in the manufacturing sector of
the U.K. and imports from lower-cost foreign competitors. While prices
increased marginally toward the end of the quarter, demand for Niagara UK's
products lacks buoyancy. In addition, the high value of the pound sterling
relative to the Euro and the imposition of U.S. tariffs on imported steel
(notwithstanding the exclusions obtained by the Company) had a negative impact
on Niagara UK's export business. As a result, Niagara UK's sales and margins
declined for the quarter as compared to the third quarter of 2001.
As previously discussed, results for the three and nine months ended
September 30, 2002 were favorably impacted by the sale of Niagara UK's option
to purchase the Tipton property resulting in a tax-adjusted gain of
(pound)1,463,414 ($2,166,584).
Three Months ended September 30, 2002 compared with September 30, 2001
Net sales for the three months ended September 30, 2002 were
$67,650,129, representing an increase of $7,277,131, or 12.1%, over the same
period in 2001. Net sales by the Company's U.S. operations increased by
$12,761,227, or 36.9%, which was partially offset by a decrease in net sales
by the Company's U.K. operations of $5,484,096, or 21.3%. The increase in net
sales attributable to the Company's U.S. operations was due primarily to an
increase in sales volume of 35.6% and, to a lesser extent, an increase in
prices, while the decrease in net sales attributable to the Company's U.K.
operations was due primarily to a decrease in sales volume of 19.0% and, to a
lesser extent, a decrease in prices and the imposition of U.S. tariffs on
imported steel.
Cost of products sold for the three months ended September 30, 2002
increased by $6,211,232 to $60,779,508, representing an increase of 11.4% over
the same period in 2001. This increase was primarily attributable to the
increase in the cost of products sold by the Company's U.S. operations of
$10,711,367 due to the increase in sales volume by such operations, which was
partially offset by a decrease in the cost of products sold by the Company's
U.K. operations of $4,500,135 due to the decrease in sales volume by such
operations.
Gross margins for the three months ended September 30, 2002 increased
by 0.6% compared to the same period in 2001. Gross margins for the Company's
U.S. operations increased by 2.3% and were partially offset by a decrease of
1.9% in gross margins for the Company's U.K. operations.
Selling, general and administrative expenses for the three months
ended September 30, 2002 increased by $178,356 to $6,618,897, or 9.8% of
sales, compared to 10.7% of sales for the same period in 2001. The increase in
dollar amount and the decrease as a percentage of sales were primarily
attributable to the increase in net sales by the Company's U.S. operations.
Interest expense for the three months ended September 30, 2002
decreased by $377,666 to $889,866, due to decreased levels of borrowing and
lower interest rates.
Net income for the three months ended September 30, 2002 was
$1,391,255, an increase of $2,550,528, as compared to a net loss of $1,159,273
for the three months ended September 30, 2001. The increase in net income
attributable to the Company's U.S. operations was $906,962. The increase in
net income attributable to the Company's U.K. operations was $1,643,566, which
included an after-tax gain of $2,166,584 on the sale of a property option. Net
income attributable to the Company's U.S. operations for the three months
ended September 30, 2002 reflects statutory tax rates whereas the net income
attributable to the Company's U.K. operations for this period reflects a tax
rate higher than the statutory rate primarily as a result of a reduction in
Niagara UK's deferred tax asset (recorded as an increase in accrued expenses)
given the uncertainty of its realization.
Nine Months ended September 30, 2002 compared with September 30, 2001
Net sales for the nine months ended September 30, 2002 were
$197,223,228, representing a decrease of $14,705,320, or 6.9%, over the same
period in 2001. Net sales by the Company's U.K. operations decreased by
$21,467,043, or 25.7%, which was partially offset by an increase in net sales
by the Company's U.S. operations of $6,761,723 or 5.3%. The decrease in net
sales attributable to the Company's U.K. operations was due primarily to a
decrease in volume of 22.1% and, to a lesser extent, a decrease in prices and
the imposition of U.S. tariffs on imported steel, while the increase in net
sales attributable to the Company's U.S. operations was due primarily to an
increase in sales volume of 5.7% and, to a lesser extent, an increase in prices.
Cost of products sold for the nine months ended September 30, 2002
decreased by $12,555,706 to $175,467,176, representing a decrease of 6.7% over
the same period in 2001. This decrease was primarily attributable to the
decrease in the cost of products sold by the Company's U.K. operations of
$16,926,676 due to the decrease in sales volume by such operations, which was
partially offset by an increase in the cost of products sold by the Company's
U.S. operations of $4,370,970 due to the increase in sales volume by such
operations.
Gross margins for the nine months ended September 30, 2002 decreased
by 0.2% compared to the same period in 2001. Gross margins for the Company's
U.K. operations decreased by 2.5%, which was partially offset by an increase of
1.3% in gross margins for the Company's U.S. operations.
Selling, general and administrative expenses for the nine months
ended September 30, 2002 decreased by $964,200 to $19,029,165, or 9.6% of
sales, compared to 9.4% of sales for the same period in 2001. The reduction in
dollar amount was primarily attributable to the Company's cost-cutting
measures, and the increase as a percentage of sales was due primarily to the
decrease in net sales.
Interest expense for the nine months ended September 30, 2002
decreased by $1,641,509 to $2,707,740, due to decreased levels of borrowing
and lower interest rates.
Net income for the nine months ended September 30, 2002 was
$1,316,052 as compared to a net loss of $187,440 for the nine months ended
September 30, 2001. The decrease attributable to the Company's U.K. operations
was $689,651, which was offset by an increase of $2,193,142 attributable to
the Company's U.S. operations. Net income attributable to the Company's U.S.
operations for the nine months ended September 30, 2002 reflects statutory tax
rates whereas the net loss attributable to the Company's U.K. operations for
this period reflects a tax accrual primarily as a result of a reduction in
Niagara UK's deferred tax asset (recorded as an increase in accrued expenses)
given the uncertainty of its realization.
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 cash
provided by operations, borrowings under its revolving credit facilities and
advances under its invoice discounting agreement. The Company's principal
long-term liquidity requirement has been, and is expected to continue to be,
the repayment of debt and the funding of capital expenditures to modernize,
improve and expand its facilities, machinery and equipment. Capital
expenditures for the nine months ended September 30, 2002 totaled $741,302 as
compared to $2,703,285 for the same period in 2001. This decrease was
attributable to a decrease by both U.S. and U.K. operations in the purchase of
new machinery and equipment in response to weak operating conditions.
Cash flows provided by operating activities were $8,566,778 for the
nine months ended September 30, 2002, a decrease of $4,173,923 as compared to
cash flows provided by operating activities of $12,740,701 for the same period
in 2001. This decrease was largely attributable to an increase in U.S.
inventories in 2002 of $8,733,224 which was partially offset by a decrease in
U.K. inventories of $2,485,760 (for a net increase of $6,247,464) as compared
to a decrease of $12,119,620 in 2001, a decrease in accounts receivable of
$1,153,705 in 2002 as compared to a decrease of $7,716,976 in 2001. These were
partially offset by an increase in accounts payable, accrued expenses and
other non-current liabilities of $10,091,794 in 2002 as compared to a decrease
of $11,305,350 in 2001. Cash and cash equivalents at September 30, 2002 was
$5,042,111, an increase of $3,350,041 as compared to December 31, 2001. Such
funds, which include $3,278,940 in proceeds received on September 30, 2002 for
the sale of the Tipton property option, are used for working capital and other
corporate purposes.
On April 18, 1997 and in connection with the acquisition of LaSalle,
Niagara US entered into a revolving credit and term loan agreement (as
amended, the "Credit Agreement") and Niagara LaSalle terminated its previously
existing credit agreement. The other parties to the Credit Agreement are
Manufacturers and Traders Trust Company ("M&T"), Comerica Bank, Citizens
Business Credit Company, and PNC Bank. The obligations of Niagara US 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 US.
At the Company's request, a number of amendments were made to the
Credit Agreement effective September 1, 2002. The revolving credit facility
was reduced from $50,000,000 to $35,000,000 and the balance owed under the
term loan was increased from $14,333,356 to $18,000,000. Principal payments
under the term loan were reduced to $375,000 from $666,666 per month. In
addition, the maturity date of both the term loan and revolving credit loans
made pursuant to the Credit Agreement was extended to July 31, 2004.
Interest on the term loan is payable in monthly installments either
at the LIBOR rate (for a period specified by Niagara US from time to time)
plus 2.85%, or M&T's prime rate plus 1.00%. Revolving credit loans made
pursuant to the Credit Agreement are based on a percentage of eligible
accounts receivable and inventory. Interest on such loans is payable in
monthly installments at a rate that is either 2.50% above the LIBOR rate (for
a period specified by Niagara US from time to time) or M&T's prime rate plus
0.75%.
The Credit Agreement carries restrictions on, among other things,
indebtedness, liens, capital expenditures, dividends, asset dispositions,
cross-defaults and changes in control of Niagara and Niagara US, 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 debt service and capital expenditures.
Niagara US was in compliance with all of these requirements as of September
30, 2002.
On May 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. On October 6,
1999, Niagara's Board authorized the repurchase of an additional one million
Niagara shares. Such repurchases are subject to market and other conditions
and financed with internally generated funds and borrowings under the
Company's credit facilities. 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 September 30, 2002, Niagara
had repurchased 1,758,938 shares of its Common Stock at a cost of $8,249,684.
No shares were repurchased during the nine months ended September 30, 2002.
On May 21, 1999 and in connection with the acquisition of the steel
bar businesses from Glynwed Steels, Niagara UK entered into a bank facilities
agreement (the "Facilities Agreement") with National Westminster Bank Plc
("National Westminster"). The Facilities Agreement provides for a (pound)10
million (approximately $15.6 million) term loan and a (pound)9.8 million
(approximately $15.3 million) revolving credit facility. The obligations of
Niagara UK under the Facilities Agreement are secured by standby letters of
credit issued by M&T to National Westminster (respectively, the "Term Letter
of Credit" and the "Revolving Letter of Credit," and, together, the "Letters
of Credit") and substantially all of the assets of Niagara UK (for the benefit
of M&T). Niagara UK's agreement to reimburse M&T for drawdowns under the
Letters of Credit is guaranteed by Niagara and Niagara US, which guarantees
are secured by substantially all of the assets of Niagara US on a second
priority basis. As consideration for the issuance of the Letters of Credit,
Niagara UK paid M&T a total of (pound)178,400 (approximately $285,440) at the
time of issuance and agreed to pay further annual fees (in monthly
installments) of 2.5% and 2.75% in respect of the Revolving and Term Letters
of Credit, respectively.
Principal of the term loan under the Facilities Agreement amortizes
in monthly installments commencing on May 31, 2000 and ending on April 30,
2006. The principal repayment installments on the term loan escalate from
(pound)125,000 to (pound)213,333 throughout its term. Revolving credit loans
made pursuant to the Facilities Agreement are based upon a percentage of
eligible inventory and will mature on July 31, 2004. Interest on the term and
revolving credit loans under the Facilities Agreement accrue at the BBA LIBOR
rate (for periods specified by Niagara UK from time to time) plus 0.15% and is
payable at the conclusion of such interest periods.
The purchase of the U.K. steel bar businesses was also financed
pursuant to (i) a (pound)3.75 million (approximately $6 million) equity
investment by Niagara in Niagara UK (the "Equity Investment"), (ii) a
(pound)3.75 million (approximately $6 million) subordinated loan from Niagara
to Niagara UK which accrues interest at 7.5% per annum (the "Subordinated
Loan") and (iii) a (pound)2.5 million (approximately $4 million) non-interest
bearing short-term loan from Niagara to Niagara UK (the "Short-Term Loan").
The Equity Investment, the Subordinated Loan and the Short-Term Loan were
financed by borrowings under the Credit Agreement. The Short-Term Loan was
repaid during the third quarter of 1999.
On August 23, 1999, Niagara UK entered into an Invoice Discounting
Agreement (the "Discount Agreement") with Royal Bank of Scotland Invoice
Discounting Limited ("RBID") (formerly known as Lombard Natwest Discounting
Limited) providing for advances to Niagara UK based upon a formula tied to the
receivables purchased by RBID. The obligations of Niagara UK under the
Discount Agreement are guaranteed by Niagara and secured by substantially all
of the assets of Niagara UK. In connection with the execution of the Discount
Agreement, the Revolving Letter of Credit and the revolving credit facility
under the Facilities Agreement were reduced to (pound)4.9 million
(approximately $7.6 million) and subsequently reduced to (pound)2.5 million
(approximately $3.9 million) as of December 31, 1999.
At the Company's request, a number of amendments were made to the
Discount Agreement effective August 23, 2002. These amendments include (i) a
reduction in the maximum amount of advances to Niagara UK from (pound)20
million (approximately $31.2 million) to (pound)15.0 million (approximately
$23.4 million), (ii) a reduction in the interest rate applicable to such
advances from 2.25% to 2.0% above Royal Bank of Scotland's base rate and (iii)
the extension of the maturity date on such advances from August 23, 2003 to
July 31, 2004. In connection with these amendments, Niagara and Niagara UK
agreed to convert the Subordinated Loan to equity of Niagara UK by November
30, 2002.
The Facilities and Discount Agreements carry restrictions on, among
other things, security interests, borrowed money, asset dispositions,
dividends, transactions with affiliates, capital expenditures, cross-defaults,
changes in control of Niagara UK and mergers and acquisitions. Also included
in these agreements are requirements regarding tangible net worth, the ratio
of consolidated EBITDA to consolidated fixed charges and the ratio of current
assets to current liabilities. Niagara UK was in compliance with all of these
requirements as of September 30, 2002.
In connection with the execution of the Facilities and Discount
Agreements, Niagara and Niagara UK entered into intercreditor agreements
which, among other things (i) restrict the payment of dividends in respect of
the Niagara UK shares, (ii) prohibit the repayment of the Subordinated Loan
until after the discharge of all of Niagara UK's liabilities under the
Facilities and Discount Agreements and (iii) permit the repayment of the
Short-Term Loan upon demand unless payments of principal or interest under
these agreements are owing, certain financial covenants in these agreements
have not been met or an event of default thereunder has occurred and is
continuing.
As a result of depressed conditions in the manufacturing sector in
the United Kingdom including within the overall steel industry, and conditions
within the insurance industry following the events of September 11, 2001, the
market for credit insurance in the United Kingdom has been deteriorating over
the last six months. This has necessitated, during October of 2002, Niagara
guaranteeing on a short-term basis certain trade payables of Niagara UK in the
aggregate amount of up to (pound)6.65 million (approximately $10.4 million) in
order to ensure an orderly supply of raw materials.
At September 30, 2002, the Company had borrowed or been advanced
$35,826,000 under its revolving credit facilities and the Discount Agreement
and had approximately $22,800,000 in available credit thereunder, and the
outstanding balance of its term loans was $29,420,000. Working capital of the
Company at September 30, 2002 was $36,334,879.
Critical Accounting Policies
On December 12, 2001, the Securities and Exchange Commission (the
"SEC") issued Financial Reporting Release No. 60 which requires a discussion
of the critical accounting policies used by companies in the preparation of
their financial statements. Note 1 to the Company's audited financial
statements for the year ended December 31, 2001 includes a summary of the
significant accounting policies used by the Company in the preparation of its
financial statements. The Company believes that the following critical
accounting policies affect the significant judgments and estimates used in the
preparation of the Company's condensed financial statements.
The discussion and analysis of the Company's financial condition and
results of operations are based upon the Company's condensed financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires that management make estimates and assumptions
that affect the reported amounts of assets and liabilities, revenues and
expenses and the related disclosure of contingent assets and liabilities. On
an ongoing basis, management evaluates these estimates, including those
related to inventory reserves, taxes, doubtful accounts, intangible assets,
insurance, litigation, environmental compliance and other contingencies.
Management bases its estimates on historical data, when available,
professional advice, experience and various assumptions that are believed to
be reasonable under the circumstances, the combined results of which form the
basis for making judgments about the carrying values of assets and
liabilities. Actual results could differ from these estimates.
Revenue from the sale of products is recorded at the time the goods
are shipped. Revenue from freight charged to customers is recognized when
products are shipped. Provisions for discounts, customer returns and other
adjustments are provided for in the period the related sales are recorded
based upon historical data.
The Company reviews the carrying values of its long-lived and
identifiable intangible assets for possible impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may
not be recoverable. The Company assesses recoverability of these assets by
estimating future nondiscounted cash flows. Any long-lived assets held for
disposal are reported at the lower of their carrying amounts or fair value
less cost to sell.
Effect of Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," which requires that entities use the purchase method of
accounting, and prohibits the use of the pooling-of-interests method of
accounting, for all business combinations initiated after June 30, 2001. This
statement also requires that the Company recognize acquired intangible assets
apart from goodwill if the acquired intangible assets meet certain criteria.
The Company's previous business combinations were accounted for using the
purchase method. The adoption of this statement had no effect on the Company's
financial statements.
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets," which requires, among other things, that entities no
longer amortize goodwill and other intangible assets having indefinite useful
lives, but rather test them, at least annually, for impairment. In accordance
with this statement, intangible assets that have finite useful lives will
continue to be amortized over their useful lives. SFAS No. 142 is required to
be applied in fiscal years beginning after December 15, 2001 to all goodwill
and other intangible assets recognized at that date, regardless of when such
assets were initially recognized. This statement also requires that entities
complete a transitional goodwill impairment test six months from the date of
adoption and reassess the useful lives of other intangible assets within the
first quarter of its adoption. The Company has completed this test and, based
upon an appraisal by an independent third party, determined that the net
carrying amount of goodwill is not impaired. The adoption of this statement
has not had an effect on the Company's financial statements. For the three and
nine months ended September 30, 2001, goodwill amortization net of tax benefit
was approximately $12,000 and $36,000, respectively. As of September 30, 2002,
the net carrying amount of goodwill was $1,904,499.
In August 2001, the FASB issued SFAS No. 143, "Accounting for Assets
Retirement Obligations," which addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. This statement is required to be
applied for fiscal years beginning after June 15, 2002. The adoption of this
statement is not expected to have a material effect on the Company's financial
statements.
In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which addresses financial
accounting for the impairment or disposal of long-lived assets. This statement
requires that one accounting model be used for long-lived assets to be
disposed of by sale, and broadens the presentation of discontinued operations
to include more disposal transactions. This statement is required to be
applied for fiscal years beginning after December 15, 2001. The adoption of
this statement has not had a material effect on the Company's financial
statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." This statement, among other things, rescinds Statement
No. 4, which required that all gains and losses from the extinguishment of
debt to be aggregated and, if material, classified as an extraordinary item,
net of related income tax effect. As a result, the criteria in Accounting
Principle Board Opinion No. 30 will now be used to classify such gains and
losses. SFAS No. 145 also amends SFAS Statement No. 13 to require that certain
lease modifications that have economic effects similar to sale-leaseback
transactions be accounted for in the same manner as sale-leaseback
transactions. Such provisions of SFAS No. 145 are required to be applied in
fiscal years beginning after May 15, 2002. The adoption of this statement is
not expected to have a material effect on the Company's financial statements.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement requires that a
liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred, as opposed to prior guidance which
provided that liability for such exit costs be recognized at the date of an
entity's commitment to an exit plan. This statement is required to be applied
to exit or disposal activities that are initiated after December 31, 2002. The
adoption of this statement is not expected to have a material effect on the
Company's financial statements.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for certain forward-looking statements. Some of the statements in this
Form 10-Q, including, without limitation, in "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," may constitute
forward-looking statements. When used in this Form 10-Q, the words "may,"
"will," "should," "could," "expects," "plans," "anticipates," "intends,"
"believes," "estimates," "predicts," "projects," "potential," "likely" or
"continue" and other similar expressions are intended to identify such
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors, many of which are beyond the control of the
Company, that may cause the Company's actual results to be materially
different from those expressed or implied by such forward-looking statements,
in future filings by Niagara with the SEC, in the Company's press releases or
in oral statements made by authorized officers of the Company. The factors
discussed under "CAUTIONARY STATEMENT 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, 2001,
among others, could cause actual results to differ materially from those
contained in forward-looking statements made in this Form 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's primary market risks include fluctuations in interest
rates, variability in interest rate spreads (i.e., prime to LIBOR spreads),
exchange rate variability, the credit risk of its customers and the
availability to its suppliers of credit insurance on their receivables from
the Company. The Company does not trade in derivative financial instruments.
Substantially all of the Company's non-trade indebtedness relates to loans
made pursuant to the Credit and Facilities Agreements and advances under the
Discount Agreement. Interest on the term loan under the Credit Agreement
accrues at either the LIBOR rate (for a period specified by Niagara US from
time to time) plus 2.85%, or M&T's prime rate plus 1.00%. Interest on
revolving credit loans made pursuant to such agreement accrues at either 2.50%
above the LIBOR rate (for a period specified by Niagara US from time to time)
or M&T's prime rate plus 0.75%. Interest on the term and revolving credit
loans under the Facilities Agreement accrues at the BBA LIBOR rate (for a
period specified by Niagara UK from time to time) plus 0.15%. Interest on
advances under the Discount Agreement accrues at Royal Bank of Scotland's base
rate plus 2.0%. Management attempts to reduce market risks associated with the
fluctuations in interest rates through the selection of LIBOR periods under
the Credit and Facilities Agreements and advance amounts under the Discount
Agreement.
The Company sells its products primarily to customers in North
America and Europe. Revenues from sales by Niagara US are collected
exclusively in U.S. dollars. Niagara UK's revenues are generally collected in
the local currency of its customers. Through February 2002, to reduce its
exposure to fluctuations in exchange rates, Niagara UK purchased foreign
exchange contracts in amounts and with expiration dates in line with customer
orders. Following the adoption of the Euro earlier this year, Niagara UK's
exposure to such fluctuations was substantially reduced. As a result, Niagara
UK has discontinued its purchase of foreign exchange contracts.
The Company is subject to the economic conditions affecting its
customers. To reduce its customer credit risk, Niagara UK has insured
substantially all of its accounts receivable. Generally, these insurance
policies provide for payments to Niagara UK of 80% of the unpaid invoiced
amounts. In the U.S., management continuously reviews information concerning
the financial condition of its customers and believes that its allowance for
doubtful accounts is sufficient to cover such risks.
As a result of depressed conditions in the manufacturing sector in
the United Kingdom including within the overall steel industry, and conditions
within the insurance industry following the events of September 11, 2001, the
market for credit insurance in the United Kingdom has been deteriorating over
the last six months. This has necessitated, during October of 2002, Niagara
guaranteeing on a short-term basis certain trade payables of Niagara UK in the
aggregate amount of up to (pound)6.65 million (approximately $10.4 million) in
order to ensure an orderly supply of raw materials.
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the date of this quarterly report, an
evaluation was performed under the supervision and with the participation of
the Company's management, including the Chief Executive Officer and the Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on such evaluation, such
individuals have concluded that as of such evaluation date, the Company's
disclosure controls and procedures are effective in timely alerting them to
material information relating to the Company (including its consolidated
subsidiaries) required to be included in the Company's periodic SEC reports.
There have been no significant changes in the Company's internal controls or
in other factors that could significantly affect internal controls subsequent
to the date of their evaluation.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSIONOF MATTERS TO VOTE OF SECURITY HOLDERS
(a) An Annual Meeting of Niagara's Stockholders was held on July 9,
2002.
(b) Michael J. Scharf, Gilbert D. Scharf, Frank Archer, Gerald L.
Cohn, Andrew R. Heyer and Douglas T. Tansill were elected as directors of
Niagara at the Annual Meeting.
(c) The matters voted upon at the Annual Meeting were (i) the
election of Michael J. Scharf, Gilbert D. Scharf, Frank Archer, Gerald L.
Cohn, Andrew R. Heyer and Douglas T. Tansill to hold office until the next
Annual Meeting of Stockholders or until their respective successors have been
duly elected and qualified, the vote as to which was 7,944,129 for and 25,900
withheld for each of Messrs. Michael Scharf and Archer, 7,961,429 for and
8,600 withheld for Mr. Gilbert Scharf, 7,960,429 for and 9,600 withheld for
Mr. Cohn, 7,967,429 for and 2,600 withheld for Mr. Heyer, and 7,966,429 for
and 3,600 withheld for Mr. Tansill, and (ii) the ratification of BDO Seidman
LLP as Niagara's independent accountants for 2002, the vote as to which was
7,967,329 for, 2,600 against and 100 abstentions.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
4.1 Twelfth Amendment to the Revolving Credit and Term Loan
Agreement, by and among Niagara LaSalle Corporation, LaSalle
Steel Company, Manufacturers and Traders Trust Company
(individually and as Agent), Citizens Business Credit
Company, PNC Bank, N.A. and Comerica Bank, effective as of
September 1, 2002.
4.2 Fifth Amendment to the Invoice Discounting Agreement between
Niagara LaSalle (UK) Limited, Royal Bank of Scotland Invoice
Discounting Limited and Niagara Corporation, effective
August 23, 2002.
10.1 Form of Niagara Corporation Guaranty to Niagara LaSalle (UK)
Limited supplier.
99.1 Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K.
None.
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: November 14, 2002 NIAGARA CORPORATION
--------------------------
(Registrant)
/s/ Michael Scharf
--------------------------
Michael Scharf, President
Date: November 14, 2002 /s/ Raymond Rozanski
--------------------------
Raymond Rozanski, Vice President
and Treasurer
CERTIFICATION
I, Michael Scharf, as the Chief Executive Officer of Niagara
Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Niagara
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15D-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons performing
the equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involved management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect the
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 14, 2002
/s/ Michael Scharf
--------------------------
Michael Scharf
Chairman, President & Chief Executive Officer
CERTIFICATION
I, Raymond Rozanski, as the Chief Financial Officer of Niagara
Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Niagara
Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15D-14) for the registrant and we
have:
a) Designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of the registrant's board of directors (or persons performing
the equivalent function):
a) All significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involved management
or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect the
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: November 14, 2002
/s/ Raymond Rozanski
--------------------------
Raymond Rozanski
Vice President & Treasurer