EXHIBIT 99.2
CITATION CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of June 27, 1999
June 27, Recapitalization June 27,
1999 and Offering 1999
Historical Adjustments (a) As Adjusted
(dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents............ $ 2,080 $ (2,080) $ --
Accounts receivable, net............. 117,989 -- 117,989
Inventories.......................... 58,781 -- 58,781
Deferred income taxes, prepaid
expenses and other current assets... 33,719 -- 33,719
-------- --------- ---------
Total current assets............... 212,569 (2,080) 210,489
Property, plant and equipment, net... 339,872 -- 339,872
Intangible assets, net............... 109,593 -- 109,593
Other assets......................... 16,696 15,548 32,244
-------- --------- ---------
Total assets....................... $678,730 $ 13,468 $ 692,198
======== ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and
capital leases...................... $ 3,936 $ (1,384) $ 2,552
Accounts payable..................... 57,876 -- 57,876
Accrued expenses and other current
liabilities......................... 51,513 (5,342) 46,171
-------- --------- ---------
Total current liabilities.......... 113,325 (6,726) 106,599
Long-term liabilities:
Revolving credit facility............ -- 6,238 6,238
Long-term debt and capital leases.... 315,415 (309,800) 5,615
Senior term loan A................... -- 50,000 50,000
Senior term loan B................... -- 210,000 210,000
Senior subordinated notes............ -- 200,000 200,000
Deferred income taxes and other long-
term liabilities.................... 50,086 -- 50,086
-------- --------- ---------
Total liabilities.................. 478,826 149,712 628,538
Stockholders' equity:
Common stock......................... 179 (66) 113
Additional paid-in capital........... 107,304 72,733 180,037
Retained earnings (accumulated
deficit)............................ 92,421 (208,911) (116,490)
-------- --------- ---------
Total stockholders' equity........... 199,904 (136,244) 63,660
-------- --------- ---------
Total liabilities and stockholders'
equity............................ $678,730 $ 13,468 $ 692,198
======== ========= =========
See Notes to Unaudited Pro Forma Consolidated Balance Sheet
CITATION CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(dollars in thousands)
The pro forma financial data have been derived by the application of pro
forma adjustments to Citation's historical financial statements as of the date
noted. The merger will be accounted for as a recapitalization which will have
no impact on the historical basis of Citation's assets and liabilities. The pro
forma financial data assume that no stockholders assert appraisal rights in
connection with the merger.
(a) Pro forma adjustments to the Unaudited Pro Forma Consolidated Balance
Sheet are summarized in the following table and are described in the notes that
follow:
Purchase Transaction
Price of Compensation Fees and Repayment of Total Net
Financing (1) Equity (2) Expense (3) Expenses (4) Existing Debt (5) Adjustment
Cash and cash
equivalents............ $656,238 $(309,286) $(4,941) $(30,800) $(313,291) $ (2,080)
Other assets............ 16,200 (652) 15,548
Current portion of long-
term debt and capital
leases................. (1,384) (1,384)
Accrued expenses and
other current
liabilities............ (2,974) (2,368) (5,342)
Revolving credit
facility............... 6,238 6,238
Long-term debt and
capital leases......... (309,800) (309,800)
Senior term loan A...... 50,000 50,000
Senior term loan B...... 210,000 210,000
Senior subordinated
notes.................. 200,000 200,000
Common stock............ 105 (171) (66)
Additional paid-in
capital................ 189,895 (102,562) (14,600) 72,733
Retained earnings....... (206,553) (1,967) (391) (208,911)
- ---------------------
(1) Sources and uses of cash for the recapitalization are as follows:
Sources:
Existing cash....................................................... $ 2,080
Senior secured revolving facility................................... 6,238
Tranche A term loan................................................. 50,000
Tranche B term loan................................................. 210,000
Senior subordinated notes........................................... 200,000
Equity contribution................................................. 190,000
--------
Total............................................................. $658,318
========
Uses:
Payment of merger consideration..................................... $309,286
Cancellation of outstanding options and payment of deferred
compensation....................................................... 4,941
Repayment of outstanding indebtedness............................... 311,184
Payment of accrued interest......................................... 2,107
Estimated fees and expenses......................................... 30,800
--------
Total............................................................. $658,318
========
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET--(Continued)
- ---------------------
(2) The adjustments represent the payment of the cash portion of the merger
consideration to existing stockholders. Subsequent to the merger, existing
stockholders will own 790,115 shares, or approximately 7.0%, of the
outstanding common stock of Citation as the surviving corporation.
(3) Compensation expense of $3,278 ($1,967 after related tax effect) relates to
the cancellation of all outstanding stock options at the difference between
$18.10 per share and the exercise price of the options and $1,663 relates
to the payment of accrued benefits under Citation's non-qualified deferred
compensation plan.
(4) The adjustment represents the estimated transaction fees and expenses of
$30,800. The portion of estimated transaction fees and expenses
attributable to the debt financing is $16,200, which will be recorded as
debt issuance costs and therefore amortized over the expected life of the
debt to be issued. Such estimated debt issuance costs include estimated
fees and expenses payable to banks and related advisors. The remaining
estimated transaction fees and expenses of $14,600 represent costs
associated with the payment of the cash portion of the merger consideration
to existing stockholders.
(5) This adjustment represents the repayment of existing indebtedness, except
for capital leases, related accrued interest and the write-off of
unamortized debt issuance costs related to the existing debt. The
unamortized debt issuance costs of $652 ($391 after related tax effect)
will be written off as an extraordinary charge upon repayment of the
existing indebtedness.
CITATION CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Twelve Months Ended August 1, 1999
(dollars in thousands)
Citation Recapitalization
Citation Acquisitions Combination Disposition Pro Forma Pre- and Offering Citation
Historical Actual (a) Adjustments (b) Actual (c) Recapitalization Adjustments Pro Forma
Net sales.............. $ 792,447 $ 36,777 $ -- $ (11,278) $ 817,946 $ -- $ 817,946
Cost of sales.......... 678,524 33,239 (1,231) (12,144) 698,388 -- 698,388
--------- -------- ------- --------- --------- -------- ---------
Gross profit.......... 113,923 3,538 1,231 866 119,558 -- 119,558
Selling, general, and
administrative
expenses ............. 68,510 3,768 381 (2,560) 70,099 60 (d) 70,159
Impairment charge...... 10,000 -- -- (10,000) -- -- --
--------- -------- ------- --------- --------- -------- ---------
Operating income....... 35,413 (230) 850 13,426 49,459 (60) 49,399
Other expenses (income)
Interest expense...... 20,722 1,529 1,085 -- 23,336 29,192 (e) 52,528
Other, net............ 4,010 (7) -- (1,826) 2,177 -- 2,177
--------- -------- ------- --------- --------- -------- ---------
24,732 1,522 1,085 (1,826) 25,513 29,192 54,705
--------- -------- ------- --------- --------- -------- ---------
Income before provision
for income taxes...... 10,681 (1,752) (235) 15,252 23,946 (29,252) (5,306)
Income tax provision... 4,415 (210) (582) 5,981 9,604 (11,659)(f) (2,055)
--------- -------- ------- --------- --------- -------- ---------
Net income............. 6,266 (1,542) 347 9,271 14,342 (17,593) (3,251)
========= ======== ======= ========= ========= ======== =========
EBITDA:
Operating income....... 35,413 (230) 850 13,426 49,459 (60) 49,399
Depreciation and
amortization.......... 44,098 3,145 (850) (126) 46,267 -- 46,267
Impairment charge...... 10,000 -- -- (10,000) -- -- --
--------- -------- ------- --------- --------- -------- ---------
EBITDA (g)............. $ 89,511 $ 2,915 $ -- $ 3,300 $ 95,726 $ (60) $ 95,666
========= ======== ======= ========= ========= ======== =========
See Notes to Unaudited Pro Forma Consolidated Statements of Income
CITATION CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Fiscal Year Ended September 27, 1998
(dollars in thousands)
Citation Recapitalization
Citation Acquisitions Combination Disposition Pro Forma Pre- and Offering Citation
Historical Actual (a) Adjustments (b) Actual (c) Recapitalization Adjustments Pro Forma
Net sales.............. $724,017 $127,850 $ -- $(13,008) $838,859 $ -- $838,859
Cost of sales.......... 612,035 112,130 (2,940) (17,081) 704,144 -- 704,144
-------- -------- ------- -------- -------- -------- --------
Gross profit.......... 111,982 15,720 2,940 4,073 134,715 -- 134,715
Selling, general, and
administrative
expenses ............. 63,603 12,780 1,853 (2,448) 75,788 (119)(d) 75,669
Impairment charge...... 10,000 -- -- (10,000) -- -- --
-------- -------- ------- -------- -------- -------- --------
Operating income....... 38,379 2,940 1,087 16,521 58,927 119 59,046
Other expenses (income)
Interest expense...... 15,254 3,450 4,949 -- 23,653 27,890 (e) 51,543
Other, net............ 2,155 (6) -- (11) 2,138 -- 2,138
-------- -------- ------- -------- -------- -------- --------
17,409 3,444 4,949 (11) 25,791 27,890 53,681
-------- -------- ------- -------- -------- -------- --------
Income before provision
for income taxes...... 20,970 (504) (3,862) 16,532 33,136 (27,771) 5,365
Income tax provision... 8,178 1,100 (2,803) 6,447 12,922 (10,831)(f) 2,091
-------- -------- ------- -------- -------- -------- --------
Net income............. $ 12,792 $ (1,604) $(1,059) $ 10,085 $ 20,214 $(16,940) $ 3,274
======== ======== ======= ======== ======== ======== ========
EBITDA:
Operating income....... $ 38,379 $ 2,940 $ 1,087 $ 16,521 $ 58,927 $ 119 $ 59,046
Depreciation and
amortization.......... 36,275 9,553 (1,087) (709) 44,032 -- 44,032
Impairment charge...... 10,000 -- -- (10,000) -- -- --
-------- -------- ------- -------- -------- -------- --------
EBITDA (g)............. $ 84,654 $ 12,493 $ -- $ 5,812 $102,959 $ 119 $103,078
======== ======== ======= ======== ======== ======== ========
See Notes to Unaudited Pro Forma Consolidated Statements of Income
CITATION CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Nine Months Ended June 27, 1999
(dollars in thousands)
Citation Recapitalization
Citation Acquisitions Combination Disposition Pro Forma Pre- and Offering Citation
Historical Actual (a) Adjustments (b) Actual (c) Recapitalization Adjustments Pro Forma
Net sales.............. $613,446 $18,129 $-- $(8,913) $622,662 $ -- $622,662
Cost of sales.......... 518,111 16,715 (745) (8,906) 525,175 -- 525,175
-------- ------- ---- ------- -------- -------- --------
Gross profit.......... 95,335 1,414 745 (7) 97,487 -- 97,487
Selling, general, and
administrative
expenses ............. 52,974 2,240 163 (2,062) 53,315 19 (d) 53,334
Impairment charge...... -- -- -- -- -- -- --
-------- ------- ---- ------- -------- -------- --------
Operating income....... 42,361 (826) 582 2,055 44,172 (19) 44,153
Other expenses (income)
Interest expense...... 15,752 901 541 -- 17,194 22,099 (e) 39,293
Other, net............ 1,815 -- -- (1,815) -- -- --
-------- ------- ---- ------- -------- -------- --------
17,567 901 541 (1,815) 17,194 22,099 39,293
-------- ------- ---- ------- -------- -------- --------
Income before provision
for income taxes...... 24,794 (1,727) 41 3,870 26,978 (22,118) 4,860
Income tax provision... 9,918 (257) (417) 1,548 10,792 (8,847)(f) 1,945
-------- ------- ---- ------- -------- -------- --------
Net income............. $ 14,876 $(1,470) $458 $ 2,322 $ 16,186 $(13,271) $ 2,915
======== ======= ==== ======= ======== ======== ========
EBITDA:
Operating income....... $ 42,361 $ (826) $582 $ 2,055 $ 44,172 $ (19) $ 44,153
Depreciation and
amortization.......... 33,318 1,607 (582) -- 34,343 -- 34,343
Impairment charge...... -- -- -- -- -- -- --
-------- ------- ---- ------- -------- -------- --------
EBITDA (g)............. $ 75,679 $ 781 $-- $ 2,055 $ 78,515 $ (19) $ 78,496
======== ======= ==== ======= ======== ======== ========
See Notes to Unaudited Pro Forma Consolidated Statements of Income
CITATION CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
The unaudited pro forma consolidated financial data have been derived by the
application of pro forma adjustments to Citation's historical financial
statements for the periods indicated. The merger has been accounted for as a
recapitalization, which will have no impact on the historical basis of
Citation's assets and liabilities. The pro forma financial data assume that no
stockholders assert appraisal rights in connection with the merger.
The pro forma adjustments to the statements of income exclude $3,278 ($1,967
after related tax effect) of employee compensation expense relating to the
cancellation of the existing stock options and $652 ($391 after related tax
effect) related to the write-off of existing unamortized debt issuance costs.
These amounts represent non-recurring expenses which Citation anticipates will
be recorded in its consolidated statement of income concurrent with the
effective date of the merger.
(a) The following acquisitions, both individually and in the aggregate, did not
constitute acquisitions of "significant subsidiaries," within the meaning
of SEC rules regarding financial reporting. The unaudited pro forma
statement of income for the fiscal year ended September 27, 1998 gives
effect to the acquisitions of Camden Casting Center ("Camden"), which
occurred on December 1, 1997, Dycast, Inc. ("Dycast"), which occurred on
January 8, 1998, Amcast Precision Products, Inc. ("Citation Precision"),
which occurred on March 30, 1998, Custom Products Corporation ("Custom"),
which occurred on November 17, 1998, and CT South Inc. ("Citation Marion"),
which occurred on December 28, 1998, as if each such acquisition had
occurred at the beginning of the fiscal year. The unaudited pro forma
statements of income for the nine months ended June 27, 1999 and the twelve
months ended August 1, 1999 give effect to the acquisitions of Custom and
Citation Marion as if they had occurred at the beginning of the periods
presented.
(b) For the fiscal year ended September 27, 1998, the nine month period ended
June 27, 1999 and the twelve months ended August 1, 1999, the adjustments
represent the (i) reduced depreciation expense, reflected in cost of sales,
related to the net write down of fixed assets in purchase accounting of
($13,567) amortized primarily over a 12-year life; (ii) additional goodwill
amortization, reflected in selling, general and administrative expenses,
based on the fair values of the net assets acquired of $51,734 amortized
over a 20-year life; (iii) additional interest expense on the increased
borrowings of $98,234 at weighted average interest rates of 7.28%, 7.00%
and 7.00%, respectively; and (iv) the pro forma tax effect of the above
adjustments.
(c) Represents an adjustment for the historical operating results of the
Oberdorfer Industries facility, which was sold on June 16, 1999. The sale
of the Oberdorfer Industries facility did not constitute a disposition of a
"significant subsidiary," within the meaning of SEC rules regarding
financial reporting.
(d) Represents (i) an annual monitoring fee of $848 that will be paid by
Citation to Kelso & Company; (ii) reduced compensation expense of $755,
$351, and $464 for the fiscal year ended September 27, 1998; the nine month
period ended June 27, 1999 and the twelve months ended August 1, 1999 for
executives whose employment with Citation will not continue after the
merger; and (iii) reduced costs associated with certain public company
related expenses of $212, $266 and $324 for the fiscal year ended September
27, 1998; the nine month period ended June 27, 1999 and the twelve months
ended August 1, 1999 that will not continue after the merger.
(e) The recapitalization and offering adjustments to interest expense reflect
the following:
Nine Twelve
Months Months
Year Ended Ended Ended
------------- -------- ---------
September 27, June 27, August 1,
1998 1999 1999
Revolving credit facility (1)............... $ 546 $ 410 $ 546
Senior term loan A (2)...................... 4,375 3,281 4,375
Senior term loan B (3)...................... 19,950 14,963 19,950
Senior subordinated notes (4)............... 23,500 17,625 23,500
Commitment fee (5).......................... 469 352 469
Interest expense related to existing
interest rate swap agreements.............. 993 1,086 1,363
Interest on existing debt not repaid........ 826 722 1,229
-------- -------- -------
Cash interest expense..................... 50,659 38,439 51,432
Amortization of debt issuance costs (6)..... 2,032 1,524 2,032
Historical capitalized interest............. (1,148) (670) (936)
-------- -------- -------
Interest expense--as adjusted............... 51,543 39,293 52,528
Less: pro forma interest expense (7)........ (23,095) (17,004) (22,964)
Less: pro forma amortization of debt
issuance costs (8)......................... (558) (190) (372)
-------- -------- -------
Total adjustment............................ $ 27,890 $ 22,099 $29,192
======== ======== =======
- ---------------------
(1) Represents interest on the revolving credit facility using an assumed
interest rate of 8.75% and assuming borrowings of $6,238 at closing. The
total amount available under the revolving credit facility is $100 million.
(2) Represents interest on $50,000 of senior term loan A using an assumed rate
of 8.75%.
(3) Represents interest on $210,000 of senior term loan B using an assumed rate
of 9.50%.
(4) Represents interest on $200,000 of senior subordinated notes using an
assumed rate of 11.75%.
(5) Represents a 0.5% commitment fee on the unused portions of the revolving
credit facility.
(6) Represents amortization of debt issuance costs of $16,200 over the term of
the related debt.
(7) Represents the elimination of pro forma interest expense paid or payable in
cash.
(8) Represents the elimination of pro forma amortization of debt issuance fees.
A 0.125% increase or decrease in the assumed weighted average interest rate
applicable to the revolving credit facility, senior term loan A and senior term
loan B would change the pro forma interest expense and income before taxes as
follows:
Nine Twelve
Months Months
Year Ended Ended Ended
------------- -------- ---------
September 27, June 27, August 1,
1998 1999 1999
Revolving credit facility...................... $ 8 $ 6 $ 8
Senior term loan A............................. 63 47 63
Senior term loan B............................. 263 197 263
---- ---- ----
Total........................................ $334 $250 $334
==== ==== ====
(f) Represents the tax effect of the recapitalization and offering adjustments.
(g) EBITDA is defined, for any period, as income before interest expense,
provision for income taxes, depreciation and amortization, other expenses
(income) and impairment charge. EBITDA is presented because it is a widely
accepted financial indicator of a company's ability to service and/or incur
indebtedness. EBITDA should not be considered an alternative to net income
as a measure of Citation's operating results or to cash flow as a measure
of liquidity. In addition, although the EBITDA measure of performance is
not recognized under generally accepted accounting principles, it is widely
used by various companies as a general measure of a company's performance
because it assists in comparing performance on a relatively consistent
basis across companies without regard to depreciation and amortization,
which can vary significantly depending on accounting methods (particularly
where acquisitions are involved) or non-operating factors such as
historical costs bases. Because EBITDA is not calculated identically by all
companies, the presentation herein may not be strictly comparable to other
similarly titled measures of other companies.
(h) For purposes of computing this ratio, earnings are defined as operating
income. Fixed charges consist of (i) interest, whether expensed or
capitalized; (ii) amortization of debt issuance costs; and (iii) that
portion of rental expense considered to represent an appropriate interest
factor.