<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended December 29, 1996
------------------
or
o Transition report pursuant to Section 13 or 15(d) of the Securities 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 February 11, 1997
- --------------------------------- --------------------------------
Common Stock, $.01 Par Value 17,726,040
<PAGE>
INDEX
Page No.
--------
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 . . . . . . . . . . . . . .9
PART II: OTHER INFORMATION
ITEM 6: Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . .12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
<PAGE>
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:
Interim Condensed Consolidated Balance Sheets at September 29, 1996
and December 29, 1996 (unaudited).
Interim Condensed Consolidated Statements of Income (unaudited) for
the three months ended December 31, 1995 and December 29, 1996.
Interim Condensed Consolidated Statements of Cash Flows (unaudited)
for the three months ended December 31, 1995 and December 29, 1996.
Notes to Interim Condensed Consolidated Financial Statements.
----------------------------------------
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1
<PAGE>
CITATION CORPORATION
INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except share data)
<TABLE>
<CAPTION>
September 29,1996 December 29, 1996
----------------- -----------------
<S> <C> <C>
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 2,267 $ 2,185
Accounts receivable, net 77,931 82,279
Inventories 39,478 46,792
Deferred income taxes, prepaid expenses and
other assets 15,683 9,322
--------- ---------
Total current assets 135,359 140,578
Property, plant and equipment, net 199,367 267,043
Other assets 48,831 51,552
---------- ---------
$ 383,557 $ 459,173
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Cash overdraft $ 8,328 $ 5,878
Current portion of other long-term debt 2,654 3,123
Accounts payable 33,668 34,381
Accrued expenses 28,205 31,026
--------- ---------
Total current liabilities 72,855 74,408
Long-term debt, net of current portion 140,946 194,524
Deferred income taxes and other deferred liabilities 20,437 37,420
--------- ---------
Total liabilities 234,238 306,352
--------- ---------
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 shares issued
and outstanding at September 29, 1996, and
17,721,040 at December 29, 1996 177 177
Additional paid-in capital 107,087 107,115
Retained earnings 42,055 45,529
--------- ---------
Total stockholders' equity 149,319 152,821
--------- ---------
$ 383,557 $ 459,173
--------- ---------
--------- ---------
</TABLE>
See notes to interim condensed consolidated financial statements.
2
<PAGE>
CITATION CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars, except share and per share data)
<TABLE>
<CAPTION>
For the Three Months Ended
December 31, 1995 December 29, 1996
----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C>
Net sales $ 91,761 $ 140,486
Costs of sales 75,901 118,360
----------- -----------
Gross profit 15,860 22,126
Selling, general and administrative expenses 9,956 12,805
----------- -----------
Operating income 5,904 9,321
Other (income) expenses:
Interest expense, net 789 3,517
Other, net (99) 109
----------- -----------
690 3,626
----------- -----------
Income before provision for income taxes 5,214 5,695
Provision for income taxes 2,086 2,221
----------- -----------
Net income $ 3,128 $ 3,474
----------- -----------
----------- -----------
Earnings per share $ 0.18 $ 0.20
----------- -----------
----------- -----------
Weighted average shares outstanding 17,675,540 17,718,491
----------- -----------
----------- -----------
</TABLE>
See notes to interim condensed consolidated financial statements.
3
<PAGE>
CITATION CORPORATION
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars)
<TABLE>
<CAPTION>
For the Three Months Ended
December 31, 1995 December 29, 1996
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES: (unaudited) (unaudited)
<S> <C> <C>
Net income $ 3,128 $ 3,474
-------- --------
Adjustments to reconcile net income to net cash flows
from operating activities:
Provision for losses on receivables 48 66
Depreciation and amortization 3,743 7,039
Changes in operating assets and liabilities, net:
Accounts receivable 3,736 7,523
Inventories (889) 986
Prepaid expenses and other assets (972) 5,806
Accounts payable (2,769) (5,047)
Accrued expenses and other liabilities (1,532) (3,341)
-------- --------
Total adjustments 1,365 13,032
-------- --------
Net cash provided by operating activities 4,493 16,506
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment expenditures, net (7,702) (7,009)
Proceeds from sale of Penn Steel 9,006
Cash paid for acquisition (47,780)
-------- --------
Net cash used by investing activities (7,702) (45,783)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash overdraft (2,223)
Repayments of acquired debt (16,340)
Change in long-term debt, note payable and other liabilities (6,600) 47,730
Change in paid in capital -- 28
-------- --------
Net cash provided by (used in) financing activities (6,600) 29,195
-------- --------
Net decrease in cash and cash equivalents (9,809) (82)
Cash and cash equivalents, beginning of period 9,812 2,267
-------- --------
Cash and cash equivalents, end of period $ 3 $ 2,185
-------- --------
-------- --------
</TABLE>
See notes to interim condensed consolidated financial statements.
4
<PAGE>
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 at September 29, 1996, has
been derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles (GAAP).
The interim condensed consolidated financial statements at December 29,
1996 and for the three months ended December 31, 1995 and December 29,
1996 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 1996 annual report on SEC Form 10-K.
2. A summary of inventories is as follows:
September 29, December 29,
1996 1996
------------- ------------
Raw materials $ 8,872 $ 11,395
Supplies and containers 9,817 10,114
Castings 20,789 25,283
--------- ---------
$ 39,478 $ 46,792
--------- ---------
--------- ---------
3. Balances of major classes of property, plant and equipment and accumulated
depreciation are as follows:
September 29, December 29,
1996 1996
------------- ------------
Land and improvements $ 7,166 $ 10,244
Buildings 37,316 46,898
Plant and equipment 195,370 236,019
Office equipment 9,230 10,897
Transportation equipment 8,788 9,823
Construction in progress 8,403 25,376
-------- --------
266,273 339,257
Less accumulated depreciation (66,906) (72,214)
---------- ----------
$ 199,367 $ 267,043
---------- ----------
---------- ----------
5
<PAGE>
4. The Company's other assets consist of the following:
September 29, December 29,
1996 1996
------------- ------------
Goodwill $ 45,704 $ 45,441
Consulting and non-competition
agreements 1,893 1,779
Other 1,234 4,332
--------- ---------
$ 48,831 $ 51,552
--------- ---------
--------- ---------
5. Long term debt consists of the following:
September 29, December 29,
1996 1996
------------- ------------
Note payable $ 133,055 $ 182,000
Industrial development bonds 1,085 1,035
Other financing arrangements 9,460 14,612
---------- ----------
$ 143,600 $ 197,647
Less current portion of
long-term debt 2,654 3,123
---------- ----------
$ 140,946 $ 194,524
---------- ----------
---------- ----------
6. The following unaudited pro forma summary for the three months ended
December 31, 1995 combines the results of operations of the Company
with the acquisition of Texas Steel Company ("Texas Steel"), Hi-Tech
Corporation ("Hi-Tech"), Southern Aluminum Castings Company ("Southern
Aluminum"), Bohn Aluminum Corporation ("Bohn"), Interstate Forging
Industries, Inc. ("Interstate"), the sale of Pennsylvania Steel Foundry
& Machine Company ("Penn Steel"), and the idling of the steel division
operations at Texas Foundries as if the acquisitions, sale and idling
had occurred at the beginning of the 1996 fiscal year. For the three
months ended December 29, 1996, the pro forma summary presents the
results of operations of the Company as if the acquisition of Interstate
and the sale of Penn Steel had occurred at the beginning of the 1997
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. 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, sale and
idling been made at the beginning of either fiscal years 1996 or 1997,
or of results which may occur in the future.
6
<PAGE>
Pro forma interim condensed consolidated statements of income are as
follows:
For the Three Months Ended
--------------------------
December 31, December 29,
1995 1996
------------ ------------
Sales $ 133,065 $ 149,633
Operating income 9,449 10,297
Income before provision for income taxes 6,144 6,219
Pro forma net income 3,686 3,794
Pro forma earnings per common share 0.21 0.21
Pro forma earnings per share for the three months ending December 31, 1995
and December 29, 1996 is calculated by dividing pro forma net income by the
weighted average shares outstanding of 17,675,540 and 17,718,491,
respectively.
7. On October 31, 1996, the Company completed the sale of Penn Steel. The
sales price was based on the book value of Penn Steel at October 31, 1996
less $600. The Company recorded a one-time pre-tax loss of $1,807 in the
consolidated statement of income for the year ended September 29, 1996
based on its estimate of the October 31, 1996 book value of Penn Steel.
The actual book value for purposes of this calculation is subject to
negotiation by both parties to the agreement. The agreement states that if
the parties do not agree on the book value of Penn Steel, the disagreement
will be resolved through negotiation between the chief executive officers
of the purchaser and the Company.
8. Effective October 29, 1996 the Company completed the purchase of the stock
of Interstate Forging Industries, Inc. ("Interstate") of Milwaukee,
Wisconsin and Navasota, Texas for $47.8 million plus the assumption of
approximately $22.7 million of Interstate's debt. In addition, the
agreement includes contingent payments equal to five (5) times the amount
by which the average annual net earnings of Interstate before interest,
income taxes and franchise taxes during the three year period from January
1, 1996 through December 31, 1998 exceeds $10,000, computed in accordance
with GAAP on a pre-merger basis. This acquisition has been accounted for
under the purchase method of accounting and, accordingly, the purchase
price has been allocated to the assets and liabilities of Interstate based
on their estimated fair values at the date of acquisition. Operating
results of Interstate since October 29, 1996 are included in the Company's
condensed consolidated financial statements. Interstate, which produces
custom closed die forgings of carbon, alloy, and stainless steel, has
approximately 500 employees and had annual sales for the
7
<PAGE>
years ended December 31, 1995 and 1996 of approximately $83.4 million and
$103.7 million, respectively. The estimated fair values of assets acquired
and liabilities assumed are as follows:
Accounts receivable $ 15,161
Inventories 12,946
Property, plant and equipment 72,559
Other assets 3,014
Accounts payable and accrued expenses (18,819)
Deferred income taxes (14,424)
Long-term debt (22,657)
---------
Purchase Price $ 47,780
---------------------------------------------
8
<PAGE>
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 balance sheets and statements of income.
QUARTER ENDED DECEMBER 29, 1996 COMPARED TO THE QUARTER ENDED DECEMBER 31, 1995
SALES. Sales increased 53.1%, or $48.7 million, to $140.5 million for the three
months ended December 29, 1996 from $91.8 million in the comparable prior year
period. The increase was attributable to fiscal year 1996 and 1997
acquisitions, all of which were made subsequent to the 1996 first quarter.
Sales at Texas Steel, Hi-Tech, Southern Aluminum, Bohn Aluminum, and Interstate
(collectively the "Acquisitions") in the fiscal 1997 first quarter were
approximately $57.1 million. Sales from the Acquisitions were partially offset
by lower sales at the Company's existing foundry operations, the sale of Penn
Steel during the first quarter of fiscal 1997 and the idling of the Texas
Foundries steel division ("TF Steel") during the last quarter of fiscal 1996.
For the three months ended December 29, 1996, sales from existing units were
down approximately 1.6%, or $1.3 million as compared to the same quarter last
year. The total sales of Penn Steel and TF Steel that were included in the
first fiscal quarter of 1996 was approximately $7.1 million. Tons shipped
increased 25.5% or 12,400 tons, to 61,000 tons for the three months ended
December 29, 1996 from 48,600 tons in the comparable prior year period.
GROSS PROFIT. Gross profit increased 39.5%, or $6.2 million, to $22.1 million
in the 1997 first quarter from $15.9 million in the comparable 1996 period.
Gross margin decreased to 15.8% in the 1997 first quarter from 17.3% in the 1996
first quarter. The overall decrease was due to the integration of the
Acquisitions. The gross margin for the Acquisitions included in the first
quarter of fiscal 1997 was approximately 12.0%. The gross margin from existing
units decreased to 18.4% in the 1997 first quarter from 18.9% in the comparable
prior year period. Penn Steel and TF Steel had a combined negative gross margin
of (1.6%) in the first fiscal quarter of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses ("SG&A") increased 28.6%, or $2.8 million, to $12.8
million in the 1997 first quarter from $10.0 million in the 1996 first quarter.
SG&A costs attributable to the Acquisitions were $3.9 million. SG&A costs at
existing Company operations were down approximately $230 thousand. SG&A costs
included in the first fiscal quarter of 1996 related to Penn Steel and TF Steel
were approximately $770 thousand. As a percentage of sales, SG&A expenses
decreased to 9.1% in the 1997 first quarter from 10.9 % in the 1996 first
quarter.
OPERATING INCOME. Operating income increased 57.9%, or $3.4 million, to $9.3
million for the 1997 first quarter from $5.9 million for the comparable 1996
quarter. Operating margin increased to 6.6% in the 1997 first quarter from 6.4%
in the 1996 first quarter.
9
<PAGE>
INTEREST EXPENSE. Interest expense increased to $3.5 million in the 1997 first
quarter from $789 thousand in the 1996 first quarter. This increase is
primarily attributable to higher average outstanding debt balances as a result
of completing five acquisitions during the second and third quarters of 1996 and
the first quarter of 1997. The purchase price plus assumed debt of the
acquisitions totalled approximately $142.3 million. Capitalized interest for
the first fiscal quarter of 1996 was approximately $380 thousand. There was no
capitalized interest during the first fiscal quarter of 1997.
LIQUIDITY AND CAPITAL RESOURCES
On July 1, 1996, the Company executed a new primary credit facility with a
consortium of banks, led by the National Bank of Detroit (NBD), to borrow up to
$230,000 to be used for working capital purposes and to fund future
acquisitions. The facility expires on July 31, 1998 and is collateralized by
substantially all of the assets of the Company as well as the stock of its
subsidiaries. The facility consists of a swing line of credit bearing interest
at prime, and revolving credit borrowings which bear interest at LIBOR plus a
margin based on the Company's leverage ratio, as defined in the credit agreement
as amended, at the time of the borrowing. The facility calls for a commitment
fee payable quarterly, in arrears, of 0.25% based on the daily unused portion.
The total balance outstanding under this credit facility was $133,055 and
$182,000 at September 29, 1996 and December 29, 1996, respectively.
As of September 29, 1996, the Company had $3,055 outstanding under the swing
line of credit at the prime rate of 8.25%. There were no outstanding borrowings
under the swing line of credit at December 29, 1996. The $182,000 outstanding
at December 29,1996 under this facility related to five revolving loans. The
Company had $30,000, $60,000 and $52,000 outstanding under these loans at
interest rates of 7.31%, 7.14% and 7.06% which reprice on January 2, 1997,
February 3, 1997 and May 5, 1997, respectively. The Company has entered into
two $20,000 five-year interest rate swap agreements establishing fixed interest
rates for the remaining $40,000 of debt outstanding under the credit facility.
These agreements are repriced every 90 days and expire in August 2001. The
agreements have fixed interest rates plus a margin of 1.0% to 2.0%, based on the
Company's leverage ratio on the dates the agreements are priced. The Company's
fixed interest rates were 8.34% and 8.16% under these two agreements at December
29, 1996. Subsequent to December 29,1996, these two interest rate swap
agreements were repriced at fixed rates of 8.59% and 8.41%. The Company has
entered into an additional $40,000 swap agreement effective February 3, 1997
with a fixed interest rate of 8.35%. The Company is exposed to credit risk in
the event of nonperformance by the counterparty to the interest rate swap
agreements. The Company mitigates credit risk by dealing with financially sound
U.S. banks. Accordingly, the Company does not anticipate loss for
nonperformance by these counterparties.
The Company's primary sources of working capital are cash flows from operating
activities, equity offerings and borrowings under the above mentioned credit
facility. Primary uses of working capital are the funding of operations,
capital expenditures and acquisitions.
10
<PAGE>
ACQUISITIONS
Note 8 of the interim condensed consolidated financial statements included
elsewhere in this report describes recently announced acquisitions.
--------------------------------------------------
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11
<PAGE>
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10.2(t) First Amendment to Credit Agreement and Waiver and
Consent dated October 28, 1996 among Citation
Corporation and certain of its subsidiaries, NBD
Bank as Agent Bank and other syndicate banks
Exhibit 27 Financial Data Schedule, submitted to the
Securities and Exchange Commission in electronic
format
(b) Reports on Form 8-K:
On November 12, 1996, the Company filed a report on Form 8-K with
respect to events occurring on October 29, 1996, to report the
acquisition of Interstate Forging Industries, Inc. The following
financial statements and pro forma information were filed as a part
of the report:
Financial Statements of business acquired:
Report of Independent Public Accountants
Balance Sheets at December 31, 1995 and January 1, 1995
Statements of Income and Retained Earnings for the years ended
December 31, 1995, January 1, 1995 and January 2, 1994
Statements of Cash Flow for the years ended December 31, 1995,
January 1, 1995 and January 2, 1994
Notes to the Financial Statements
Pro forma financial information:
Pro Forma Combined Balance Sheet at June 30, 1996
Pro Forma Statements of Income for the twelve months ended
October 1, 1995 and for the nine months ended
June 30, 1996 (unaudited)
Notes to the Pro Forma Combined Financial Statements (unaudited)
--------------------------------------------
12
<PAGE>
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: CITATION CORPORATION
February 11, 1997 /s/ T. Morris Hackney
--------------------------------------------
T. MORRIS HACKNEY
Chief Executive Officer and Chairman of the Board
(Principal Executive Officer)
February 11, 1997 /s/ Frederick F. Sommer
--------------------------------------------
FREDERICK F. SOMMER
President and Chief Operating Officer
February 11, 1997 /s/ R. Conner Warren
--------------------------------------------
R. CONNER WARREN
Executive Vice President of Finance and
Administration and Treasurer
(Principal Financial Officer)
February 11, 1997 /s/ Thomas W. Burleson
--------------------------------------------
THOMAS W. BURLESON
Vice President-Controller and Assistant Secretary
(Principal Accounting Officer)
13
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
EXHIBIT 10.2(t)
FORM 10-Q
CITATION CORPORATION
For the first quarter ended December 29, 1996 Commission File no. 0-24492
14
<PAGE>
Exhibit 10.2(t)
FIRST AMENDMENT TO CREDIT AGREEMENT
AND WAIVER AND CONSENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND WAIVER AND CONSENT, dated as
of October 28, 1996 (this "Amendment"), is by and among CITATION CORPORATION, a
Delaware corporation ("Citation"), CITATION AUTOMOTIVE SALES CORP., a Michigan
corporation, MANSFIELD FOUNDRY CORPORATION, an Ohio corporation formerly named
MFC Acquisition Corporation, IROQUOIS FOUNDRY CORPORATION, a Wisconsin
corporation formerly named Iroquois Acquisition Corporation, OBERDORFER
INDUSTRIES CORP., a New York corporation formerly named OBI Acquisition Corp.,
BERLIN FOUNDRY CORPORATION, a Wisconsin corporation, PENNSYLVANIA STEEL FOUNDRY
& MACHINE COMPANY, a Pennsylvania corporation, CASTWELL PRODUCTS, INC., an
Illinois corporation, TEXAS STEEL CORPORATION, a Texas corporation formerly
named TSC Acquisition Corporation, HTC ACQUISITION CORPORATION, an Indiana
corporation, SOUTHERN ALUMINUM CASTINGS COMPANY, an Alabama corporation, BAC
ACQUISITION CORPORATION, an Indiana corporation, TSC TEXAS CORPORATION, a
Delaware corporation, TEXAS FOUNDRIES, LTD., a Texas limited partnership, MABRY
FOUNDRY COMPANY, LTD., a Texas limited partnership, and CITATION CASTINGS, INC.,
an Alabama corporation (together with Citation, collectively the "Borrowers" and
individually a "Borrower"), the BANKS identified on the signature pages hereof
(collectively the "Banks" and individually a "Bank"), SOUTHTRUST BANK OF
ALABAMA, NATIONAL ASSOCIATION, a national banking association, as collateral
agent (in such capacity, the "Collateral Agent") for the Banks, and NBD BANK, a
Michigan banking corporation, as administrative and syndication agent (in such
capacity, the "Administrative Agent", and together with the Collateral Agent,
collectively the "Agents" and individually an "Agent") for the Banks.
INTRODUCTION
The Borrowers, the Banks and the Agents are parties to that certain Credit
Agreement, dated as of July 1, 1996 (the "Credit Agreement"). The parties now
desire to amend the Credit Agreement on the terms and conditions herein set
forth. Therefore, in consideration of the premises and of the mutual agreements
herein and in the Credit Agreement contained, the parties hereto agree as
follows:
ARTICLE 1. AMENDMENTS TO CREDIT AGREEMENT
Effective upon the date that the condition precedent set forth in Article 2
of this Amendment is satisfied, which date (the "Amendment Date") shall be
determined by the Administrative Agent in its sole discretion, the Credit
Agreement hereby is amended as follows:
1.1 Addition of Definition of the Term "Adjusted EBITDA". The following
definition of the term "Adjusted EBITDA" is added to Section 1.1 in alphabetical
order:
15
<PAGE>
"Adjusted EBITDA" for any period means EBITDA for such
period calculated on a pro forma basis assuming that each
Consolidated Entity that was acquired by Citation after the
first day of such period (and that exists as a Consolidated
Entity at the end of such period) was acquired on and as of
the first day of such period.
1.2 Amendment of Definition of Term "Commitment Fee Rate". The definition
of the term "Commitment Fee Rate" in Section 1.1 is amended to read in full as
follows:
"Commitment Fee Rate" means the per annum rate
(expressed as a percentage) in accordance with the
following:
<TABLE>
<S> <C>
----------------------------------------------------------------
Ratio of Funded Debt to Capitalization as
of preceding fiscal quarter end Commitment Fee
Rate (%)
----------------------------------------------------------------
Less than or equal to 0.65 to 1.00
but not less than 0.575 to 1.00 .35
----------------------------------------------------------------
Less than 0.575 to 1.00 .25
----------------------------------------------------------------
</TABLE>
Such ratio shall be determined as of the end of each fiscal quarter of Citation
and the Consolidated Entities. Each change in the Commitment Fee Rate shall be
effective on the first day of the first complete calendar month following the
end of such fiscal quarter; provided that such first day is not less than 25
calendar days after such fiscal quarter end (in order to allow time for delivery
of the Margin Certificate for such fiscal quarter end); and provided further
that with respect to any fiscal quarter end that corresponds to a fiscal year
end of Citation and the Consolidated Entities, any change shall be retroactively
effective as of such first day of such first complete calendar month following
the fiscal quarter end once the Banks receive the Margin Certificate for such
fiscal quarter end (required to be delivered 45 calendar days after each fiscal
year end).
1.3 Amendment of Definition of Term "Letter of Credit Fee Rate". The
definition of the term "Letter of Credit Fee Rate" in Section 1.1 is amended to
read in full as follows:
"Letter of Credit Fee Rate" means the rate (expressed as a percentage) in
accordance with the following:
<TABLE>
<S> <C>
----------------------------------------------------------------
Ratio of Funded Debt to Capitalization as Letter of Credit
of preceding fiscal quarter end Fee Rate (%)
----------------------------------------------------------------
Less than or equal to 0.65 to 1.00
but not less than 0.575 to 1.00 1.375
----------------------------------------------------------------
Less than 0.575 to 1.00 1.125
----------------------------------------------------------------
</TABLE>
16
<PAGE>
Such ratio shall be determined as of the end of each fiscal quarter of Citation
and the Consolidated Entities. Each change in the Letter of Credit Fee Rate
shall be effective on the first day of the first complete calendar month
following the end of such fiscal quarter; provided that such first day is not
less than 25 calendar days after such fiscal quarter end (in order to allow time
for delivery of the Margin Certificate for such fiscal quarter end); and
provided further that with respect to any fiscal quarter end that corresponds to
a fiscal year end of Citation and the Consolidated Entities, any change shall be
retroactively effective as of such first day of such first complete calendar
month following the fiscal quarter end once the Banks receive the Margin
Certificate for such fiscal quarter end (required to be delivered 45 calendar
days after each fiscal year end).
1.4 Amendment of Definition of Term "Margin". The definition of the term
"Margin" in Section 1.1 is amended to read in full as follows:
"Margin" means the margin (expressed as a percentage)
to be used to determine the Floating Rate or the Eurodollar
Rate, as the case may be, in accordance with the following:
<TABLE>
<S> <C> <C>
--------------------------------------------------------------------
Ratio of Funded Debt to Capitalization Floating Rate Eurodollar Rate
as of preceding fiscal quarter end Margin (%) Margin (%)
--------------------------------------------------------------------
Less than or equal to 0.65 to 1.00 but
not less than 0.575 to 1.00 0.75 2.00
--------------------------------------------------------------------
Less than 0.575 to 1.00 but not less
than 0.475 to 1.00 0.25 1.50
--------------------------------------------------------------------
Less than 0.475 to 1.00 but not less
than 0.375 to 1.00 0 1.25
--------------------------------------------------------------------
Less than 0.375 to 1.00 0 1.00
--------------------------------------------------------------------
</TABLE>
Such ratio shall be determined as of the end of each fiscal quarter of
Citation and the Consolidated Entities. Each change in the Margin shall be
effective on the first day of the first complete calendar month following the
end of such fiscal quarter; provided that such first day is not less than 25
calendar days after such fiscal quarter end (in order to allow time for delivery
of the Margin Certificate for such fiscal quarter end); and provided further
that with respect to any fiscal quarter end that corresponds to a fiscal year
end of Citation and the Consolidated Entities, any change shall be retroactively
effective as of such first day of such first complete calendar month following
the fiscal quarter end once the Banks receive the Margin Certificate for such
fiscal quarter end (required to be delivered 45 calendar days after each fiscal
year end). Notwithstanding anything herein to the contrary, a change in the
Margin shall not affect the Eurodollar Rate with
17
<PAGE>
respect to any Eurodollar Rate Loan the Eurodollar Interest
Period for which commenced prior to the first day of such first
complete calendar month following the relevant fiscal quarter end.
1.5 Conforming Amendment of Definition of Term "Margin Certificate." The
definition of the term "Margin Certificate" in Section 1.1 is amended to read in
full as follows:
"Margin Certificate" means the certificate, pursuant to
Section 5.1(c)(6), provided to the Banks by Citation, on
behalf of itself and the other Borrowers, on a quarterly
basis with respect to the ratio used to calculate the
Applicable Margin.
1.6 Amendment of Definition of Term "Permitted Liens" to Allow Limited
Lien Securing Certain Existing Interstate Forging Indebtedness. The definition
of the term "Permitted Liens" in Section 1.1 is amended by moving the word "and"
from the end of part (H) thereof to the end of part (I) thereof, by changing the
period at the end of part (I) to a semicolon, and by adding the following new
part (J):
(J) The Lien in favor of M&I Marshall & Ilsley Bank ("M&I
Bank") covering Interstate Forging Industries, Inc.'s
("Interstate") 14,000 ton press line and related equipment
located in the building commonly referred to by Interstate
as its 14,000 ton press building in Navasota, Texas, and
only such assets, to secure the Indebtedness of Interstate
Forging Industries, Inc. permitted under Part (10) of
Section 5.2(h), and only such Indebtedness.
1.7 Amendment to Clarify that No Bank Approval of Each New Participating
Subsidiary's Loan Documents is Required. Section 2.10 is amended to read in
full as follows:
2.10 Additional Required Documents for New
Participating Subsidiaries. On or before the date on which
a Subsidiary becomes a Participating Subsidiary, the
Administrative Agent shall have received, with copies for
each of the Banks, the following:
(a) a certificate of such Subsidiary's, or
such Subsidiary's general partner's, corporate
secretary, in substantially the same form as those
provided by the Initial Participating Subsidiaries
and otherwise satisfactory to the Administrative
Agent and certifying as to the incumbency and
signatures of the officers of such Subsidiary or
general partner, as the case may be, together with
the following documents attached thereto:
(1) A copy of resolutions of such
Subsidiary's, or such Subsidiary's general
partner's, board of directors authorizing the
execution, delivery and performance of this
Agreement, the Notes and the other Loan Documents,
and each other document to be delivered by such
Subsidiary pursuant hereto;
18
<PAGE>
(2) A copy, certified as of the most
recent date practicable by the appropriate
authority or official of the jurisdiction in which
such Subsidiary's articles or certificate of
incorporation or certificate of limited
partnership or similar document is filed or the
appropriate authority or official of the state
where such Subsidiary is incorporated or with
which such Subsidiary's certificate of limited
partnership or similar document has been filed, as
appropriate, of such Subsidiary's articles or
certificate of incorporation or certificate of
limited partnership or similar document; and
(3) A copy of such Subsidiary's
bylaws or partnership agreement or similar
document;
(b) certificates, as of the most recent
dates practicable, of the aforesaid authorities or
officials, the appropriate authority or official
of each state in which such Subsidiary is
qualified as a foreign corporation and the
department of revenue or taxation of each of the
foregoing states, as to the good standing of such
Subsidiary;
(c) a written opinion of legal counsel for
such Subsidiary and addressed to the Agents and
the Banks, in for-m substantially similar to, and
covering such matters covered by, the opinion
provided by counsel for the Initial Participating
Subsidiaries in connection with the closing of
this Agreement, and otherwise satisfactory to the
Administrative Agent;
(d) fully executed copies of all Loan
Documents that this Agreement requires to be
executed or delivered (or both) by such Subsidiary
(including a duly executed Participating
Subsidiary Assumption Agreement, in the case of
any Subsidiary that becomes a Participating
Subsidiary after the Effective Date), and fully
executed Security Documents, which Security
Documents shall include a security agreement, in
substantially the same form as those provided by
the Initial Participating Subsidiaries and
otherwise acceptable to the Administrative Agent,
covering all of such Subsidiary's personal
property, and if requested by the Administrative
Agent or any Bank, a mortgage, in form acceptable
to the Administrative Agent and the Banks,
covering all of such Subsidiary's real property,
and an Environmental Certificate; and
(e) such additional supporting documents as the
19
<PAGE>
Administrative Agent or its counsel may reasonably request.
1.8 Addition to Quarterly Reporting Requirements. Part 2 of paragraph (c)
of Section 5.1 is amended by moving the word "and" from the end of subpart (ii)
thereof to the end of subpart (iii) thereof, and by adding the following new
subpart (iv):
(iv) A Consolidated income statement for the period of
four consecutive fiscal quarters of Citation
ending with the end of such quarter, in each case
prepared for Citation and the Consolidated
Entities on a pro forma basis assuming that each
Consolidated Entity that was acquired by Citation
after the first day of such period (and that
exists as a Consolidated Entity at the end of such
period) was acquired on and as of the first day of
such period.
1.9 Conforming Amendment of Margin Certificate Requirement. Part 6 of
paragraph (c) of Section 5.1 is amended to read in full as follows:
(6) Not later than 25 calendar days after the end of
each fiscal quarter of Citation and the
Consolidated Entities (or 45 calendar days in the
case of any such fiscal quarter end that
corresponds to a fiscal year end of Citation and
the Consolidated Entities), a certificate (the
"Margin Certificate") executed by the chief
financial officer, treasurer or chief executive
officer of Citation setting forth (a) the ratio of
Funded Debt to Capitalization as of the end of
such quarterly accounting period and (b) the
computations used in calculating said ratio; and
1.10 Conforming Amendment of Section 5.1(q). Section 5.1(q) is amended to
read in full as follows:
(q) If a private placement of the debt or equity of
Citation or any of the Consolidated Entities is
entered into during the term of this Agreement and
any such private placement includes a Funded Debt
to Capitalization or similar covenant with respect
to Citation, Citation and the other Borrowers
shall grant to the Banks the same covenant with a
stricter requirement by 2.5% (or amend any such
existing covenant in this Agreement to the same
effect). For example, if the private placement
includes a covenant that Funded Debt to
Capitalization shall not be more than 65%, the
percentage applicable to the Banks shall be 62.5%.
1.11 Amendment to Increase Other Indebtedness Allowance. Part (5) of
paragraph (h) of Section 5.2 is amended to read in full as follows:
20
<PAGE>
(5) Indebtedness not to exceed $5,000,000
which is unsecured or secured by Permitted Liens;
1.12 Amendment to Allow Intercompany Indebtedness and Certain Existing
Interstate Forging Indebtedness. Paragraph (h) of Section 5.2 is amended by
deleting the word "and" from the end of part (7) thereof, by changing the period
at the end of part (8) to a semicolon, and by adding the following new parts (9)
and (10):
(9) Indebtedness of any Participating
Subsidiary owing to Citation or to any other
Participating Subsidiary; and
(10) The following Indebtedness of Interstate
Forging Industries, Inc. ("Interstate") to M&I
Bank, provided that no extension or renewal
thereof shall be permitted: (i) term loan in the
principal amount of $6,200,000, reducing by
$200,000 each quarter, maturing March 31, 1999;
(ii) line of credit in the aggregate principal
amount of $189,600 supporting certain letters of
credit and banker's acceptances expiring on or
before December 15, 1997; and (iii) Petroleum
Environmental Cleanup Fund Act line of credit in
the aggregate principal amount of $150,000
expiring April 30, 1997 relating to environmental
cleanup at Interstate's Milwaukee facility.
1.13 Conforming Amendment to Paragraph (1) of Section 5.2. Paragraph (1) of
Section
5.2 is amended to read in full as follows:
(1) Citation will not declare or pay any
dividends, or make any other payments or
distributions on account of its capital stock,
which exceed in the aggregate for all such
dividends, payments and distributions in any
fiscal year an amount equal to 10% of Citation's
net income, determined in accordance with
Generally Accepted Accounting Principles, for the
immediately preceding fiscal year; provided,
however, that no dividends or other such payments
shall be made by Citation at any time that the
ratio of Adjusted Funded Debt to Adjusted EBITDA,
as determined in accordance with Section 5.3(b) as
of the end of the latest fiscal quarter of
Citation for which a Compliance Certificate has
been delivered pursuant to Section 5.1 (c)(4), is
equal to or greater than 2.0 to 1.0.
1.14 Amendment to Increase Operating Lease Allowance. Paragraph (m) of
Section 5.2 is amended to read in full as follows:
21
<PAGE>
(m) Neither Citation nor any Consolidated
Entity will pay, in an aggregate amount in any
fiscal year (commencing with the current fiscal
year), lease obligations in excess of $5,000,000.
As used in this paragraph, the term "lease" means
a lease that is not reflected on a Consolidated
balance sheet of Citation and the Consolidated
Entities and should not be so reflected under
Generally Accepted Accounting Principles.
1.15 Replacement of Funded Debt to EBITDA Ratio Covenant with Funded Debt
to Adjusted EBITDA Ratio Covenant. Section 5.3(b) is amended to read in full as
follows:
(b) A ratio of Funded Debt to Adjusted
EBITDA of not more than 3.25 to 1.00; such ratio
to be determined as of the end of each fiscal
quarter of Citation and the Consolidated Entities
by dividing Funded Debt as of the end of such
fiscal quarter by Adjusted EBITDA for the period
of four consecutive fiscal quarters then ended.
1.16 Addition of Funded Debt to Capitalization Ratio Covenant. Section
5.3(e) is added as follows:
(e) A ratio of Funded Debt to
Capitalization of not greater than 0.65 to 1.00.
1.17 Substitution of Updated Schedules to Credit Agreement. Schedules
1.1(b), 4.1(a), 4.1(b), 4.1(d), 4.1(i), 4.1(n), 4.1(u), 4.1(v) and 5.2(h)
attached to the Credit Agreement are deemed deleted and the corresponding
Schedules attached to this Amendment are deemed substituted in place thereof.
ARTICLE 2. CONDITION PRECEDENT TO AMENDMENTS
As a condition precedent to the effectiveness of the amendments to the
Credit Agreement set forth in Article 1 of this Amendment, the Agents and the
Banks shall receive, in form and substance satisfactory to the Administrative
Agent, an incumbency certificate for each Borrower with specimen signatures of
those officers of the Borrowers authorized to execute documents on behalf of the
Borrowers in connection with this Amendment and the transactions contemplated
hereby.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES
In order to induce the Banks and the Agents to enter into this Amendment,
each of the Borrowers represents and warrants that:
3.1 The execution, delivery and performance by each of the Borrowers of
this Amendment is within its corporate or partnership, as the case may be,
powers, has been duly authorized by all necessary corporate or partnership, as
the case may be, action and is not in contravention of any law, rule or
regulation, or any judgment, decree, writ, injunction, order or award of any
arbitrator, court or governmental authority, or of the terms of any Borrower's
charter or by-laws or certificate of limited partnership or partnership
agreement, as the case may be, or of any contract or undertaking to which any
Borrower is a party or by
22
<PAGE>
which any Borrower or its property is or may be bound or affected.
3.2 This Amendment is a legal, valid and binding obligation of each of the
Borrowers, enforceable against each of the Borrowers in accordance with its
terms.
3.3 No consent, approval or authorization of or declaration, registration
or filing with any governmental authority or any nongovernmental person or
entity, including without limitation any creditor or stockholder or partner of
any Borrower, is required on the part of any of the Borrowers in connection with
the execution, delivery and performance of this Amendment or the transactions
contemplated hereby or as a condition to the legality, validity or
enforceability of this Amendment.
3.4 After giving effect to the amendments contained in Article I of this
Amendment, the representations and warranties contained in Article IV of the
Credit Agreement and in the Security Documents are true and correct on and as of
the date hereof with the same force and effect as if made on and as of the date
hereof, no Default or Event of Default exists or has occurred and is continuing
on the date hereof, and no material adverse change has occurred in the financial
condition of any Borrower since the Effective Date of the Credit Agreement.
ARTICLE 4. CONSENT AND WAIVER
The Borrowers have advised the Banks and the Agents, and hereby represent
and warrant, as follows:
1. Citation has transferred to TSC Texas Corporation a portion
of the intercompany receivables previously owed to Citation by the
other Participating Subsidiaries, as discussed and for the purpose set
forth in the letter dated September 24, 1996 from counsel for the
Borrowers to the Administrative Agent, a copy of which is attached
hereto as Exhibit A (the "Receivables Transfer").
2. Citation desires to sell all its shares of the capital stock
of Pennsylvania Steel Foundry & Machine Company ("Penn Steel") to
Atchison Casting Corporation, as discussed in the letter dated October
15, 1996 from counsel for the Borrowers to the Administrative Agent, a
copy of which is attached hereto as Exhibit B (the "Penn Steel Sale").
3. Citation desires to acquire all the capital stock of
Interstate Forging Industries, Inc., a Wisconsin corporation
("Interstate"), and then to transfer the assets of Interstate's
Navasota, Texas facility to Interstate Southwest, Ltd., a newly formed
Texas limited partnership ("Interstate Southwest"), the general
partner of which will be Texas Steel Corporation, an existing
Participating Subsidiary, and the limited partner of which will be ISW
Texas Corporation, a newly fanned Delaware corporation wholly owned by
Interstate ("ISW") and, together with Interstate and Interstate
Southwest, collectively the "New Interstate Entities" and individually
a "New Interstate Entity"), as discussed in the letter dated October
18, 1996 from counsel for the Borrowers to the Administrative Agent, a
copy of which is attached hereto to Exhibit C, and the memorandum
dated September 17, 1996 from counsel for the Borrowers to counsel for
the Administrative Agent, a copy of which is attached hereto as
Exhibit D (the "Interstate Transaction").
Without the prior written consent of the Required Banks, the Receivables
Transfer is prohibited under,
23
<PAGE>
without limitation, Sections 5.2(b), (c), (d) and (i) of the Credit Agreement,
the Penn Steel Sale is prohibited under, without limitation, Sections 5.2(b) and
(d) of the Credit Agreement, and the Interstate Transaction is or may be
prohibited under, without limitation, Sections 5.2(b), (e), (i) and (r), and the
Borrowers have requested the Banks to consent to the Receivables Transfer, the
Penn Steel Sale and the Interstate Transaction (collectively the "Transactions"
and individually a "Transaction"), have requested the Agents to release and
discharge their security interests for the benefit of the Banks and the Agents
in the assets of Penn Steel and in Penn Steel's capital stock, and have
requested the Banks and the Agents to release Penn Steel from all of its
indebtedness, obligations and liabilities under the Credit Agreement and the
Notes. In addition, although all of Interstate's indebtedness to M&I Marshall
& Ilsley Bank ("M&I Bank"), other than theindebtedness to be permitted under new
Section 5.2(h)(10) of the Credit Agreement in accordance with Section 1.12 of
this Amendment (the "Remaining Interstate Indebtedness"), is to be repaid in
connection with the closing of the Interstate Transaction, it is anticipated
that Citation and M&I Bank will require not more than two weeks following the
closing for (i) the parties to negotiate and Citation to execute and deliver to
M&I Bank a guaranty agreement covering Interstate's remaining indebtedness to
M&I Bank (such guaranty is permitted under Section 5.2(g) of the Credit
Agreement) and (ii) for M&I Bank and Interstate to amend the related agreements
between them to incorporate or cross default to the Borrowers' covenants under
the Credit Agreement as amended hereby (collectively, the "Post-Closing
Matters"), and that therefor the Borrowers have requested the Banks to consent
to M&I Bank's security interests in all of Interstate's assets continuing until
the completion of the Post-Closing Matters or the date that is two weeks after
the closing of the Interstate Transaction, whichever occurs first (the "M&I
Bank Release Deadline").
Based upon the foregoing, each Bank hereby consents to each of the
Transactions, in the case of the Receivables Transfer, waives any Event of
Default that has occurred due to the Borrowers' failure to comply with Section
5.2(b), (c), (d) or (i) of the Credit Agreement in connection therewith,
consents to the release and discharge by the Agents of their security interests
for the benefit of the Banks and the Agents in the assets of Penn Steel and in
Penn Steel's capital stock, agrees that Penn Steel shall be released from all of
its indebtedness, obligations and liabilities, under the Credit Agreement and
the Notes, and acknowledges and agrees that the Borrowers have satisfied the
requirements of clauses (i), (ii) and (iii) of Section 5.2(r) in connection with
the Interstate Transaction (and each bank hereby waives the 10-day requirement
with respect thereto to the extent it was not met); provided that
(a) on or before the date of the Penn Steel Sale, (i) Penn Steel shall
have repaid all of its indebtedness to Citation and the other Participating
Subsidiaries and (ii) the Borrowers shall have repaid to the Banks not less than
$8,500,000, being the aggregate outstanding principal amount of all the Loans
borrowed by, or the proceeds of which were otherwise used for the benefit of,
Penn Steel;
(b) the Borrowers and each of the New Interstate Entities shall have
complied with all the requirements under Section 2.10 of the Credit Agreement in
connection with the Interstate Transaction;
(c) (i) at the time of the closing of the Interstate Transaction,
Interstate shall have paid in full all indebtedness, obligations and liabilities
of Interstate to M&I Bank other than the Remaining Interstate Indebtedness, and
(ii) on or before the M&I Bank Release Deadline, M&I Bank shall have released
its security interests in all assets of Interstate other than the Lien permitted
under new part (J) of the definition of the term "Permitted Liens" pursuant to
Section 1.6 of this Amendment;
(d) the failure of either of subclauses (i) or (ii) of the foregoing
clause (c) to occur shall be deemed an Event of Default; and
24
<PAGE>
(e) such consent and waiver of each Bank (i) is limited to each
Transaction and the release and discharge of the Administrative Agent's security
interests as herein described, (ii) shall not be deemed to be a consent to any
other action in violation of such Sections of the Credit Agreement identified
above or any other Section or provision of the Credit Agreement or any other
Loan Docwnent, (iii) shall not be deemed a waiver of any Section or provision of
the Credit Agreement or any other Loan Document, except such identified Sections
as they apply to each Transaction, respectively, (iv) shall not be deemed to
prejudice any other right or rights which the Agents or any of the Banks now
have or may hav'e in the future under or in connection with the Credit Agreement
or any of the other Loan Documents, and (v) shall not be deemed a consent to the
release or discharge of any other Collateral.
ARTICLE 5. MISCELLANEOUS
5.1 If the Borrowers shall fail to perform or observe any term, covenant
or agreement in this Amendment, or any representation or warranty made by the
Borrowers in this Amendment shall prove to have been incorrect in any material
respect when made, such occurrence shall be deemed to constitute an Event of
Default.
5.2 All references to the Credit Agreement in any Note, Security Document
or other Loan Document hereafter shall be deemed references to the Credit
Agreement, as amended hereby.
5.3 The Security Documents, any and all certificates or financing
statements executed pursuant to the Credit Agreement or in connection therewith
and, subject to the amendments herein provided, the Credit Agreement shall in
all respects continue in full force and effect.
5.4 Capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement.
5.5 This Amendment shall be governed by and construed in accordance with
the laws of the State of Michigan.
5.6 The Borrowers jointly and severally agree to pay the reasonable fees
and expenses of Dickinson, Wright, Moon, Van Dusen & Freeman, counsel for the
Administrative Agent, in connection with the negotiation and preparation of this
Amendment and the documents referred to herein and the consummation of the
transactions contemplated hereby, and in connection with advising the
Administrative Agent as to its rights and responsibilities with respect thereto.
5.7 This Amendment may be executed upon any number of counterparts with
the same effect as if the signatures hereto and thereto were upon the same
instrument.
[The remainder of this page intentionally left blank.]
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first-above written.
Borrowers:
CITATION CORPORATION
By: /s/ T. Morris Hackney
--------------------------------------
Its: Chairman
CITATION AUTOMOTIVE SALES CORP.
By: /s/ T. Morris Hackney
--------------------------------------
Its: Chairman
MANSFIELD FOUNDRY CORPORATION
By: /s/ T. Morris Hackney
--------------------------------------
Its: Chairman
IROQUOIS FOUNDRY CORPORATION
By: /s/ T. Morris Hackney
--------------------------------------
Its: Chairman
OBERDORFER INDUSTRIES CORP.
By: /s/ T. Morris Hackney
--------------------------------------
Its: Chairman
BERLIN FOUNDRY CORPORATION
By: /s/ T. Morris Hackney
--------------------------------------
Its: Chairman
PENNSYLVANIA STEEL FOUNDRY &
MACHINE COMPANY
By: /s/ T. Morris Hackney
--------------------------------------
Its: Chairman
CASTWELL PRODUCTS, INC.
By: /s/ T. Morris Hackney
--------------------------------------
Its: Chairman
26
<PAGE>
TEXAS STEEL CORPORATION
(formerly named TSC Acquisition Corporation)
By: /s/ T. Morris Hackney
-----------------------------------------
Its: Chairman
HTC ACQUISITION CORPORATION
By: /s/ T. Morris Hackney
-----------------------------------------
Its: Chairman
SOUTHERN ALUMINUM CASTINGS COMPANY
By: /s/ T. Morris Hackney
-----------------------------------------
Its: Chairman
BAC ACQUISITION CORPORATION
By: /s/ T. Morris Hackney
-----------------------------------------
Its: Chairman
TSC TEXAS CORPORATION
By: /s/ T. Morris Hackney
-----------------------------------------
Its: Chairman
TEXAS FOUNDRIES, LTD.
By: Texas Steel Corporation
Its: General Partner
By: /s/ T. Morris Hackney
-----------------------------------------
Its: Chairman
MABRY FOUNDRY COMPANY, LTD.
By: Texas Steel Corporation
Its: General Partner
By: /s/ T. Morris Hackney
-----------------------------------------
Its: Chairman
CITATION CASTINGS, INC.
By: /s/ T. Morris Hackney
-----------------------------------------
Its: Chairman
27
<PAGE>
Agents and Banks:
BD BANK, as a Bank and as
the Administrative Agent
By: /s/ Richard C. Ellis
-----------------------------------------
Its: Vice President
SOUTHTRUST BANK OF ALABAMA,
NATIONAL ASSOCIATION, as a Bank
and as the Collateral Agent
By: /s/ Stephen F. Vickery
-----------------------------------------
Its: Vice President
AMSOUTH BANK
By: /s/ Harry Waugh, III
-----------------------------------------
Its: Vice President
BRANCH BANKING AND TRUST COMPANY
By: /s/ Thatcher L. Townsend
-----------------------------------------
Its: Vice President
NATIONAL CITY BANK, KENTUCKY
By: /s/ C. C. Tate
-----------------------------------------
Its: Vice President
SUNTRUST BANK, ATLANTA
By: /s/ Jeffrey A. Howard
-----------------------------------------
Its: Assistant Vice President
and By: /s/ F. McClellan Deaver, III
-----------------------------------------
Its: Group Vice President
NATIONAL BANK OF CANADA
By: /s/ William L. Benning
-----------------------------------------
Its: Vice President
and By: /s/ James S. Hannon
-----------------------------------------
Its: Vice President
28
<PAGE>
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By: /s/ Timothy W. Hassler
-----------------------------------------
Its: Vice President
DEPOSIT GUARANTY NATIONAL BANK
By: /s/ Gregory A. Moore
-----------------------------------------
Gregory A. Moore
Its: Vice President
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME
FOUND ON PAGES 2 AND 3 OF THE COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED
DECEMBER 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-START> SEP-30-1996
<PERIOD-END> DEC-29-1996
<CASH> 2,185
<SECURITIES> 0
<RECEIVABLES> 84,336
<ALLOWANCES> (2,057)
<INVENTORY> 46,792
<CURRENT-ASSETS> 140,578
<PP&E> 339,257
<DEPRECIATION> (72,214)
<TOTAL-ASSETS> 459,173
<CURRENT-LIABILITIES> 74,408
<BONDS> 0
0
0
<COMMON> 177
<OTHER-SE> 152,644
<TOTAL-LIABILITY-AND-EQUITY> 459,173
<SALES> 140,486
<TOTAL-REVENUES> 140,486
<CGS> 118,360
<TOTAL-COSTS> 131,165
<OTHER-EXPENSES> 109
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,517
<INCOME-PRETAX> 5,695
<INCOME-TAX> 2,221
<INCOME-CONTINUING> 3,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,474
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
