SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the quarterly period ended June 30, 1996
or
[ ] Transition report pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the transition period from _______________ to _______________
Commission File No. 0-24492
CITATION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 63-0828225
(STATE OF INCORPORATION) (IRS EMPLOYER I.D. NO.)
2 OFFICE PARK CIRCLE, SUITE 204
BIRMINGHAM, ALABAMA 35223
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(205) 871-5731
(REGISTRANT'S TELEPHONE NUMBER)
_______________
Indicate by check mark whether the registrant has (1) 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 the number of shares outstanding of the registrant's
class of common stock, as of the latest practicable date.
Class Outstanding at August 12, 1996
- ---------------------------- ------------------------------
Common Stock, $.01 Par Value 17,715,540
INDEX
Page No.
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PART I: FINANCIAL INFORMATION
ITEM 1: Financial Statements................................. 1
Interim Condensed Consolidated Balance Sheets..... 2
Interim Condensed Consolidated Statements
of Income......................................... 3
Interim Condensed Consolidated Statements
of Cash Flows..................................... 4
Notes to Interim Condensed Consolidated
Financial Statements.............................. 5
ITEM 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 11
PART II: OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K..................... 14
SIGNATURES..................................................... 15
EXHIBITS:
Credit Agreement Dated July 1, 1996
Financial Data Schedule
PART I: FINANCIAL INFORMATION
ITEM I: FINANCIAL STATEMENTS
The financial statements listed below are included on the
following pages of this Report on Form 10-Q (Unaudited):
Interim Condensed Consolidated Balance Sheets at
October 1, 1995 and June 30, 1996.
Interim Condensed Consolidated Statements of Income for
the three months and nine months ended July 2, 1995 and
June 30, 1996.
Interim Condensed Consolidated Statements of Cash Flows
for the nine months ended July 2, 1995 and June 30,
1996.
Notes to Interim Condensed Consolidated Financial Statements.
__________________________________
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1
CITATION CORPORATION
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except share data)
October 1, 1995 June 30, 1996
--------------- -------------
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 9,812 $ 1,600
Accounts receivable, net 52,994 81,937
Inventories 23,903 42,105
Deferred income taxes, prepaid
expenses and other assets 7,882 10,017
-------- --------
Total current assets 94,591 135,659
Property, plant and equipment, net 143,425 201,389
Other assets 33,855 43,141
-------- --------
$271,871 $380,189
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,553 $ 2,170
Accounts payable 24,605 37,154
Accrued expenses 24,857 32,184
-------- --------
Total current liabilities 56,015 71,508
Long-term debt, net of current portion 71,254 146,274
Deferred income taxes and other deferred
liabilities 12,126 14,484
-------- --------
Total liabilities 139,395 232,266
-------- --------
Stockholders' equity:
Preferred stock, $0.01 par value; 5,000,000
shares authorized, none issued and outstanding -- --
Common stock, $0.01 par value; 30,000,000 shares
authorized, 17,715,540 issued and outstanding
in 1996, and 17,675,540 in 1995 177 177
Additional paid-in capital 106,986 107,105
Retained earnings 25,313 40,641
-------- --------
Total stockholders' equity 132,476 147,923
-------- --------
$271,871 $380,189
-------- --------
-------- --------
See notes to interim condensed consolidated financial statements.
2
CITATION CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars, except share and per share data)
For the Three For the Nine
Months Ended Months Ended
July 2, 1995 June 30, 1996 July 2, 1995 June 30, 1996
------------ ------------- ------------ -------------
(unaudited) (unaudited) (unaudited)
Net sales $ 82,130 $ 143,420 $ 215,585 $ 356,136
Costs of sales 64,728 117,167 170,080 291,678
----------- ----------- ----------- -----------
Gross profit 17,402 26,253 45,505 64,458
Selling, general and
administrative expenses 8,828 12,326 23,334 34,059
----------- ----------- ----------- -----------
Operating income 8,574 13,927 22,171 30,399
Other (income) expenses:
Interest expense, net 1,087 2,559 2,170 5,210
Other, net (55) (141) (266) (358)
----------- ----------- ----------- -----------
1,032 2,418 1,904 4,852
----------- ----------- ----------- -----------
Income before provision for
income taxes 7,542 11,509 20,267 25,547
Provision for income taxes 2,902 4,604 7,991 10,219
----------- ----------- ----------- -----------
Net income $ 4,640 $ 6,905 $ 12,276 $ 15,328
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income per share $ 0.35 $ 0.39 $ 0.93 $ 0.87
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Weighted average shares
outstanding 13,297,826 17,699,331 13,260,942 17,686,639
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
See notes to interim condensed consolidated financial statements.
3
CITATION CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
For the Nine Months Ended
July 2, 1995 June 30, 1996
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited)
Net income $ 12,276 $ 15,328
-------- --------
Adjustments to reconcile net income
to net cash flows provided
by operating activities:
Provision for losses on receivables 276 208
Depreciation and amortization 7,113 14,394
Other, net (29) (14)
Changes in operating assets and
liabilities, net:
Accounts receivable (2,565) (10,467)
Inventories (620) (5,765)
Prepaid expenses and other assets (4,486) (1,785)
Accounts payable (2,537) 1,697
Accrued expenses and other liabilities 1,004 4,617
-------- --------
Total adjustments (1,844) 2,885
-------- --------
Net cash provided by operating activities 10,432 18,213
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment
expenditures - net (22,819) (22,662)
Other nonoperating assets, net (191) (2,699)
Net assets from acquisitions (19,700) (36,450)
-------- --------
Net cash used by investing activities (42,710) (61,811)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of capital stock 72 --
Change in long-term debt, and note payable 34,691 35,267
Change in paid in capital -- 119
Distributions to original S corporation
stockholders (3,466) --
-------- --------
Net cash provided by financing activities 31,297 35,386
-------- --------
Net decrease in cash and cash equivalents (981) (8,212)
Cash and cash equivalents, beginning of period 981 9,812
-------- --------
Cash and cash equivalents, end of period $ 0 $ 1,600
-------- --------
-------- --------
See notes to interim condensed consolidated financial statements.
4
CITATION CORPORATION
NOTES TO INTERIM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(in thousands of dollars, except share and per share data)
1. The interim condensed consolidated balance sheet of Citation
Corporation (the "Company") at October 1, 1995 and the interim
condensed consolidated financial statements for the nine
months ended July 2, 1995, have been derived from audited
financial statements, but do not include all disclosures
required by generally accepted accounting principles. The
interim condensed consolidated financial statements at June
30, 1996 and for the three and nine months ended June 30,
1996 and for the three months ended July 2, 1995 are
unaudited; however, in the opinion of management, all
adjustments, consisting only of normal recurring accruals
necessary for a fair presentation, have been included. These
financial statements should be read in conjunction with the
1995 annual report on Form 10-K.
2. During September 1995, the Company completed a secondary
public offering of 4,250,000 common shares at $17.375 per
share. After the secondary offering, the Company had
17,675,540 common shares outstanding.
3. A summary of inventories is as follows:
October 1, 1995 June 30, 1996
--------------- -------------
Raw materials $ 6,600 $ 8,769
Supplies and containers 5,398 9,923
Castings 11,905 23,413
---------- --------
$ 23,903 $ 42,105
---------- --------
---------- --------
4. Balances of major classes of property, plant and equipment and
accumulated depreciation are as follows:
October 1, 1995 June 30, 1996
--------------- -------------
Land and improvements $ 5,921 $ 8,374
Buildings 28,945 39,253
Plant and equipment 125,277 177,806
Office equipment 5,813 8,145
Transportation equipment 6,297 8,816
Construction in progress 22,343 21,316
---------- --------
194,596 263,710
Less accumulated depreciation (51,171) (62,321)
---------- --------
$ 143,425 $201,389
---------- --------
---------- --------
5
5. The Company's other assets consist of the following:
October 1, 1995 June 30, 1996
--------------- -------------
Goodwill, net $ 29,495 $ 40,017
Consulting, noncompetition
agreements and other, net 4,360 3,124
---------- ---------
$ 33,855 $ 43,141
---------- ---------
---------- ---------
6. Long term debt consists of the following:
October 1, 1995 June 30, 1996
--------------- -------------
Note payable $ 62,638 $ 136,724
Other financing arrangements 15,169 11,720
---------- ---------
77,807 148,444
Less current portion of long-term debt 6,553 2,170
---------- ---------
$ 71,254 $ 146,274
---------- ---------
---------- ---------
7. The following unaudited pro forma summary for the nine months
ended July 2, 1995 combines the results of operations of the
Company with Oberdorfer Industries Corporation ("Oberdorfer"),
Iroquois Foundry Corporation ("Iroquois"), Berlin Foundry
Corporation ("Berlin"), Pennsylvania Steel Foundry & Machine
Company ("Penn. Steel"), Castwell Products, Inc. ("Castwell"),
Texas Steel Company ("Texas Steel"), Hi-Tech Corporation ("Hi-
Tech"), Southern Aluminum Castings Company ("Southern
Aluminum") and Bohn Aluminum Corporation ("Bohn") as if the
acquisitions had occurred at the beginning of the 1995 fiscal
year. For the nine months ended June 30, 1996, the pro forma
summary combines the results of operations of the Company with
Texas Steel, Hi-Tech, Southern Aluminum and Bohn as if the
acquisitions had occurred at the beginning of the 1996 fiscal
year. Certain adjustments, including additional depreciation
expense, interest expense on the acquisition debt,
amortization of intangible assets and income tax effects have
been made to reflect the impact of the purchase transactions.
Additionally, a reduction in interest expense has been
recorded for the nine months ended July 2, 1995 resulting from
the application of the net proceeds of the Company's secondary
public offering of 4,250,000 shares of common stock. These
pro forma results have been prepared for comparative purposes
only and do not purport to be indicative of what would have
occurred had the acquisitions been made at the beginning of
the 1995 or 1996 fiscal year.
6
Pro forma interim condensed consolidated statements of income
are as follows:
Nine Months Ended
July 2, 1995 June 30, 1996
------------ -------------
Sales $394,597 $400,955
Operating income $ 37,494 $ 32,854
Income before provision for
income taxes $ 30,751 $ 25,829
Pro forma net income $ 18,626 $ 15,497
Pro forma earnings per common share $ 1.06 $ 0.88
Pro forma earnings per common share for the nine months ended
July 2, 1995 is calculated by dividing pro forma net income by
the weighted average shares outstanding at July 2, 1995 plus
the 61,540 shares and 80,000 shares issued in conjunction with
the purchase of Berlin and Penn. Steel, respectively and the
4,250,000 shares issued in conjunction with the Company's
secondary public offering of common stock. Pro forma earnings
per common share for the nine months ended June 30, 1996 is
calculated by dividing pro forma net income by the weighted
average shares outstanding as of June 30, 1996.
8. Effective January 5, 1996, the Company completed the purchase
of the net assets of Texas Steel Company of Fort Worth, Texas
for $13 million and the assumption of approximately $2.2
million in debt. Texas Steel produces high quality steel
castings for the construction machinery, energy, mining,
railroad and other industrial markets. Texas Steel has
approximately 440 employees and sales for the twelve months
ending December 31, 1995 were approximately $38 million. The
estimated fair value of assets acquired and liabilities
assumed are as follows:
Accounts receivable $ 3,833
Inventories 4,795
Other current assets 211
Property, plant and equipment 9,938
Other non-operating assets 521
Accounts payable and accrued expenses (4,103)
Long-term debt (2,195)
-------
Purchase price $13,000
-------
-------
On February 4, 1996, the Company completed the purchase of the
net assets of Hi-Tech Corporation of Albion, Indiana for $3.2
million plus the assumption of approximately $2.6 million of
debt. Hi-Tech machines medium volume products for the
automotive, industrial, heavy truck and heavy off road
equipment markets. Hi-Tech has approximately
7
90 employees and had sales for the twelve months ended December 31,
1995, of approximately $7 million. The estimated fair values of assets
acquired and liabilities assumed are as follows:
Accounts receivable $ 801
Inventories 367
Other current assets 8
Property, plant and equipment 4,622
Other non-operating assets 437
Accounts payable and accrued expenses (410)
Long-term debt (2,625)
-------
Purchase Price $ 3,200
-------
-------
Effective March 1, 1996, the Company completed the purchase of
the stock of Southern Aluminum Castings Company of Bay
Minette, Alabama for $12 million plus the assumption of
approximately $28.5 million of debt. Southern Aluminum
consists of three foundries producing high volume aluminum
sand castings, a processing plant, a pattern shop and a
machine shop. Primary products are intake manifolds, oil
cooler housings, oil filter adapters and throttle body
adapters. Substantially all of Southern Aluminum's sales are
to Ford Motor Company. Net sales for the twelve months ended
December 31, 1995 were approximately $42 million. The
estimated fair values of assets acquired and liabilities
assumed are as follows:
Accounts receivable, net $ 9,911
Inventories 5,975
Other current assets 19
Property, plant and equipment, net 26,980
Other non-operating assets 5,046
Accounts payable and accrued expenses (7,393)
Long-term debt (28,538)
-------
Purchase Price $12,000
-------
-------
Effective April 1, 1996, the Company completed the acquisition
of the net assets of Bohn Aluminum Corporation ("Bohn") of
Butler, Indiana for $8.25 million plus the assumption of
approximately $2.0 million of debt. Bohn is a producer of
aluminum permanent mold castings to the medium truck, diesel
engine and construction equipment markets. In addition, Bohn
operates its own smelter which remelts aluminum scrap for
reuse. Bohn had net sales of approximately $32 million for
the twelve months ended September 30, 1995 and has
approximately 275 employees. The estimated fair values of
assets acquired
8
and liabilities assumed are as follows:
Accounts receivable $ 4,139
Inventories 1,300
Other current assets 112
Property, plant and equipment 5,948
Other non-operating assets 2,777
Accounts payable and accrued expenses (4,014)
Long-term debt (2,012)
-------
Purchase Price $ 8,250
-------
-------
On May 16, 1996, the Company and Interstate Forging
Industries, Inc. ("Interstate Forging") of Milwaukee,
Wisconsin and Navasota, Texas, entered into a definitive
Merger Agreement whereby a subsidiary of the Company would be
merged into Interstate Forging, and Interstate Forging would
become a wholly owned subsidiary of the Company (the
"Merger"). Interstate Forging produces custom closed die
forgings of carbon, alloy and stainless steel for construction
equipment, aircraft, off-road equipment, material handling,
outboard motors, and truck and trailer industries. Interstate
Forging has approximately 500 employees and had sales for the
twelve months ended December 31, 1995 of approximately $85
million.
The Company has filed a Registration Statement on Form S-4
(the "S-4") with the S.E.C. to register certain contingent
payment rights which Citation is to pay to the shareholders
and certain option holders of Interstate Forging as a portion
of the purchase price for the Merger. At such time as the S-4
is declared effective, Interstate Forging will hold a meeting
of its shareholders to vote on the Merger. If Interstate Forging
shareholder approval and all required regulatory approvals are
received and certain other conditions fulfilled, it is anticipated
that the Merger would be effective in the fall of 1996.
9. Recently Issued Accounting Standards - The Financial
Accounting Standards Board (FASB) has issued SFAS No. 107,
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS.
Management believes that this statement will not have a significant
effect on the Company's consolidated financial statements.
Also in October 1995, the FASB issued SFAS No. 123.
ACCOUNTING FOR STOCK-BASED COMPENSATION. The Company is not
required to adopt this statement until fiscal year
9
1997. The Company anticipates continuing to account for its
stock based compensation plans in accordance with APB Opinion No. 25.
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, as permitted by this
statement. When this statement becomes applicable, the
Company intends to provide the appropriate pro forma net
income and net income per share disclosures required by this
statement.
10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of
certain significant factors that have affected the Company's
financial condition and earnings during the periods included in the
accompanying interim condensed consolidated financial statements.
QUARTER ENDED JUNE 30, 1996 COMPARED TO THE QUARTER ENDED JULY 2, 1995
SALES. Sales increased 74.6%, or $61.3 million, to $143.4 million
for the three months ended June 30, 1996 from $82.1 million in the
comparable prior year period. The increase was attributable to
fiscal year 1995 and 1996 acquisitions. Sales added at Berlin,
Penn. Steel, Castwell, Texas Steel, Southern Aluminum and Bohn
Aluminum foundries and Hi-Tech machine shop (collectively the
"Acquisitions") in the fiscal 1996 third quarter were approximately
$61.5 million. Sales from the Company's existing foundry
operations in the 1996 third quarter were approximately the same as
the prior year comparable period.
GROSS PROFIT. Gross profit increased 50.9%, or $8.9 million, to
$26.3 million in the 1996 third quarter from $17.4 million in the
comparable 1995 period. Gross margin decreased to 18.3% in the
1996 third quarter from 21.2% in the 1995 third quarter. This
decrease was due to the integration of the Acquisitions, the impact
of the Texas Foundries expansion and increased competition for the
Company's products as a result of a slower economy as compared to
the same period in the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") increased 39.6%, or $3.5 million,
to $12.3 million in the 1996 third quarter from $8.8 million in the
1995 third quarter. The net increase of $3.5 million consists of a
$4.6 million increase attributable to the Acquisitions and a $1.1
million decrease from the existing Company operations for the three
months ended June 30, 1996 from the comparable 1995 period. As a
percentage of net sales, SG&A expenses decreased to 8.6% in the
1996 third quarter from 10.8% in the 1995 third quarter.
OPERATING INCOME. Operating income increased 62.4%, or $5.4
million, to $13.9 million for the 1996 third quarter from $8.6
million for the comparable 1995 quarter. Operating margin decreased
to 9.7% in the 1996 third quarter from 10.4% in the 1995 third
quarter.
INTEREST EXPENSE. Interest expense increased to $2.6 million in
the 1996 third quarter from $1.1 million in the 1995 third quarter.
This increase is primarily attributable to higher average
outstanding debt balances as a result of completing four
acquisitions during the 1996 second and third quarters. The
purchase price plus assumed debt of the acquisitions totaled
approximately $72 million. Capitalized interest for the third
fiscal quarters of 1996 and 1995 was approximately -0- and $234
thousand, respectively.
11
NET INCOME. As a result of the foregoing factors, net income
increased $2.3 million, or 48.9% in the third quarter of 1996 to
$6.9 million from $4.6 million in the 1995 comparable quarter.
NINE MONTHS ENDED JUNE 30, 1996 COMPARED TO THE NINE MONTHS ENDED
JULY 2, 1995
SALES. Sales increased 65.2%, or $140.6 million, to $356.1 million
for the nine months ended June 30, 1996 from $215.6 million in the
comparable prior year period. The increase was attributable to
fiscal year 1995 and 1996 acquisitions. Sales at Oberdorfer,
Iroquois, Berlin, Penn. Steel, Castwell, Texas Steel, Southern
Aluminum and Bohn Aluminum foundries and Hi-Tech machine shop
(collectively the "Acquisitions") in the first nine months of
fiscal 1996 were approximately $148.6 million. Sales from the
Acquisitions were partially offset by lower sales at the Company's
existing foundry operations. For the nine months ended June 30,
1996, sales from existing units were down approximately 3.7%, or
$8.0 million, as compared to the same period last year. Management
attributes this decrease to the delay of the Texas Foundries
expansion and a slower economy as compared to the comparable prior
year period. The Texas Foundries expansion was originally targeted
to be complete prior to the 1996 fiscal first quarter. However,
because of delayed shipments of critical new equipment the project
was not fully completed until the second quarter of 1996. The
Texas Foundries expansion project is currently operating at
approximately 75% of its optimal capacity.
GROSS PROFIT. Gross profit increased 42%, or $19.0 million, to
$64.5 million for the nine months ended June 30, 1996 from $45.6
million in the comparable 1995 period. Gross margin decreased to
18.1% during the first nine months from 21.1% in the comparable
1995 period. This decrease was due to the integration of the
Acquisitions, the impact of the Texas Foundries expansion and
increased competition for the Company's products as a result of a
slower economy as compared to the same period in the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") increased 46%, or $10.7 million,
to $34.1 million for the nine months ended June 30, 1996 from $23.4
million in the first nine months of 1995. The net increase of
$10.7 million consists of a $13.0 million increase attributable to
the Acquisitions and a $2.3 million decrease from the existing
Company operations for the nine months ended June 30, 1996 from the
comparable 1995 period. As a percentage of net sales, SG&A
expenses decreased to 9.6% for the nine months ended June 30, 1996
from 10.8% in the 1995 comparable period.
OPERATING INCOME. Operating income increased 37.1%, or $8.2
million, to $30.4 million for the nine months ended June 30, 1996
from $22.2 million in the comparable 1995 period. Operating margin
decreased to 8.5% during the first nine months of 1996 from 10.3%
in the 1995 comparable period.
INTEREST EXPENSE. Interest expense increased to $5.2 million for
the nine months ended June 30, 1996 from $2.2 million in the nine
months ended July 2, 1995. This increase is primarily attributable
to higher average outstanding debt balances as a result of
completing four acquisitions
12
during the 1996 second and third quarters. The purchase price plus
assumed debt of these acquisitions totaled approximately $72 million.
Additionally, the Company placed the remainder of the Texas Foundries
expansion in service during the second quarter of 1996, which reduced
capitalized interest and increased interest expense for the period.
Capitalized interest for the nine months ended June 30, 1996 and
July 2, 1995 was approximately $453 thousand and $659 thousand,
respectively.
NET INCOME. As a result of the foregoing factors, net income
increased $3.0 million, or 24.9% to $15.3 million in the first nine
months of 1996 from $12.3 million in the comparable prior year
period.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had a bank line of credit from its
current lending institution to provide credit facilities in an
aggregate amount of up to $175 million, bearing interest rates
equal to LIBOR plus 1.0% to LIBOR plus 2.5% depending on the
Company's leverage ratios from time to time. The Company was able
to borrow at LIBOR plus 1.5% based on its leverage ratio at June
30, 1996. At June 30, 1996, $136.7 million was outstanding and
$38.3 million was available to borrow under this facility.
The Company had working capital of $38.6 million at October 1, 1995
and $64.2 million at June 30, 1996. The Company's primary sources
of working capital are cash flows from operating activities, equity
offerings and borrowings under the above mentioned line of credit.
Primary uses of working capital are the funding of operations,
capital expenditures and acquisitions.
Effective July 1, 1996, the Company's credit facility was
increased from $175 million to $230 million. Additionally, NBD
Bank replaced SouthTrust Bank as the lead bank, and several new
agent banks were added to the lending group. Under the amended
facility, the Company can borrow at interest rates from LIBOR plus
1.0% to LIBOR plus 2.0% depending on the Company's leverage ratios
from time to time.
Also, subsequent to June 30, 1996, the Company entered into
interest rate swap agreements with NBD Bank establishing fixed
interest rates for approximately $80 million of the total
outstanding debt. The agreements have fixed interest rates ranging
from 6.85% to 7.09% plus 1.0% to 2.5% depending on the Company's
leverage ratios on the effective date of the agreement. Each of
the swap agreements are for a period of five years and mature in
the years 2001 and 2002. The Company is exposed to credit risk in
the event of non-performance by the counterparty to the interest
rate swap agreement (NBD). The Company mitigates credit risk by
dealing only with financially sound U.S. banks. Accordingly, the
Company does not anticipate loss for non-performance.
ACQUISITIONS
Note 8 of the interim condensed consolidated financial statements
included elsewhere in this filing describes recently announced
acquisitions.
13
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.2(r) - Credit Agreement dated July 1, 1996
among the Company and its subsidiaries,
SouthTrust Bank of Alabama, National
Association and NBD Bank
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
There were no Reports on Form 8-K during the quarter
ended June 30, 1996.
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14
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
DATE: CITATION CORPORATION
August 12, 1996 /s/ T. MORRIS HACKNEY
-------------------------------------
T. MORRIS HACKNEY
Chairman and Chief Executive Officer
August 12, 1996 /s/ R. CONNER WARREN
--------------------------------------
R. CONNER WARREN
Executive Vice President of Finance and
Administration and Treasurer
(Principal Financial Officer)
August 12, 1996 /s/ THOMAS W. BURLESON
--------------------------------------
THOMAS W. BURLESON
Vice President-Controller and
Assistant Secretary
(Principal Accounting Officer)
15