<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
<S> <C>
Filed by the Registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement [_] Confidential, for Use of the Commission Only
[X] Definitive proxy statement (as permitted by Rule 14a-6(e)(2) )
[_] Definitive additional materials
[_] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
CITATION CORPORATION
(Name of registrant as Specified in Its Charter)
REGISTRANT
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
</TABLE>
<PAGE>
January 7, 1998
To Our Shareholders:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders which will be held at 11:00 a.m. on Tuesday, February 17,
1998, at SouthTrust Bank of Alabama's auditorium on the eighth floor of
the SouthTrust Tower, located at 420 North 20th Street, Birmingham,
Alabama 35203.
Information about the meeting and the various matters on which the
shareholders will act is included in the Notice of Meeting and Proxy
Statement which follow. Also included is a Proxy Card and postage paid
return envelope.
It is important that your shares be represented at the meeting.
Whether you plan to attend or not, we hope that you will complete and
return your Proxy in the enclosed prepaid envelope as promptly as
possible.
We look forward to seeing you at the shareholders meeting.
Yours very truly,
T. Morris Hackney
Chairman
<PAGE>
CITATION CORPORATION
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
(205) 871-5731
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
February 17, 1998
The Annual Meeting of Shareholders of Citation Corporation, a
Delaware corporation (the "Company"), will be held at SouthTrust Bank of
Alabama's auditorium on the eighth floor of the SouthTrust Tower, located
at 420 North 20th Street, Birmingham, Alabama, on Tuesday, February 17,
1998 at 11:00 a.m. Central Standard Time.
At the Annual Meeting shareholders will consider and act upon the
following matters:
1. The election of nine directors, each director to hold office
until his successor is elected and qualified.
2. Ratification of the appointment of the Company's independent
auditors.
3. The transaction of such other business as may properly come
before the meeting.
The Board of Directors has fixed the close of business on December
31, 1997, as the record date for the determination of shareholders
entitled to vote at the Annual Meeting.
All shareholders are cordially invited to attend the Annual Meeting.
By Order of the Board of Directors
STANLEY B. ATKINS
Secretary
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, WE URGE YOU TO MARK, SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENVELOPE PROVIDED
IN ORDER THAT AS MANY SHARES AS POSSIBLE MAY BE REPRESENTED AT THE
MEETING AND TO ASSURE A QUORUM. THE GIVING OF A PROXY WILL NOT AFFECT
YOUR RIGHT TO VOTE IN PERSON SHOULD YOU LATER DETERMINE TO ATTEND THE
MEETING.
<PAGE>
CITATION CORPORATION
2 OFFICE PARK CIRCLE, SUITE 204
BIRMINGHAM, ALABAMA 35223
----------------
PROXY STATEMENT
The following information is furnished in connection with the solicitation
of proxies by the Board of Directors of Citation Corporation (the "Company"), to
be voted at the annual meeting of shareholders, which will be held on February
17, 1998. A copy of the Annual Report of the Company for the fiscal year ended
September 28, 1997, and a form of proxy for use at the meeting are enclosed with
this Proxy Statement. It is anticipated that this Proxy Statement and the
enclosed proxy will be first mailed to shareholders on or about January 7,
1998.
GENERAL INFORMATION
PROXY
Shareholders are requested to execute and return the enclosed proxy in the
accompanying envelope. The proxy may be revoked at any time before it is voted
by giving written notice to the Secretary of the Company, by granting a
subsequent proxy, or by appearing in person and voting at the annual meeting.
Proxies that are returned properly executed, and not revoked, will be voted in
accordance with the shareholders' directions specified on the proxy. Where no
direction is specified, proxies will be voted FOR each of the nominees for
directors and FOR the other proposals. If any other matters properly come before
the meeting, proxies will be voted by the persons named in the proxy in
accordance with their best judgment.
RECORD DATE AND VOTING SECURITIES
Shareholders of record at the close of business on December 31, 1997 are
entitled to notice of, and to vote at, the annual meeting. As of December 15,
1997, there were 17,782,600 shares of the Company's common stock issued and
outstanding, and entitled to vote. The holders of common stock, the only class
of voting stock of the Company outstanding, are entitled to one vote per share,
exercisable in person or by proxy, for the election of directors and all other
matters.
A majority of the outstanding shares entitled to vote is necessary to
provide a quorum at this meeting. The election of directors requires the vote of
a plurality of the shares present or represented and entitled to vote on the
election of directors. The ratification of independent auditors requires a
majority of the votes cast. Proxies marked as abstentions or as broker no votes
will be treated as shares present for purposes of determining whether a quorum
is present. Broker no votes (that is, shares held in street name for which
proxies have been designated as not voted) are not considered entitled to vote
and will not be counted as votes cast. An abstention or a proxy instructing that
a vote be withheld is considered a negative vote.
<PAGE>
EXPENSES OF SOLICITATION
The cost of soliciting proxies is paid by the Company. Solicitation is
being made principally by mail; solicitation other than by mail may be made
personally and by telephone by regularly employed officers and employees of the
Company who will not be additionally compensated therefor. Banks, brokerage
firms and other custodians, nominees and fiduciaries will be reimbursed by the
Company for reasonable expenses incurred in sending proxy material to beneficial
owners of the Company's stock. In addition, the Company has engaged Corporate
Communications, Inc. to deliver proxy materials to, and solicit proxies from,
these institutions. Corporate Communications, Inc. will receive a fee of
approximately $4,000 for its solicitation services and will be reimbursed for
printing costs, postage and freight.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of December 15, 1997, certain
information with respect to the Company's common stock owned beneficially by
each director, each nominee for election as a director, each executive officer,
by all executive officers and directors as a group, and by each person known by
the Company to be a beneficial owner of more than five percent of the issued and
outstanding common stock of the Company.
<TABLE>
<CAPTION>
Shares Percentage
Beneficially of Common
Beneficial Owner Owned(1) Stock
----------------------- -------------- ------------
<S> <C> <C>
T. Morris Hackney 5,833,200(2) 32.21%
Chairman, Chief Executive Officer
and Nominee
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
Frederick F. Sommer 110,500(3) *
President and Chief Operating Officer
Director and Nominee
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
R. Conner Warren 892,800(4) 4.91%
Executive Vice President of Finance and
Administration, Treasurer,
Director and Nominee
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage
Beneficially of Common
Beneficial Owner Owned(1) Stock
----------------------- -------------- ------------
<S> <C> <C>
Virgil C. Reid 50,750(5) *
Group Vice President -
Medium Volume Foundries
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
Timothy L. Roberts 61,273(6) *
Group Vice President -
Special Foundries
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
Thomas W. Burleson 18,845(7) *
Vice President - Controller
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
A. Derrill Crowe 62,436(8) *
Director and Nominee
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
Franklyn Esenberg 25,500(9) *
Director and Nominee
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
William W. Featheringill 102,461(8) *
Director and Nominee
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
Frank B. Kelso, II 11,000(8) *
Director and Nominee
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Shares Percentage
Beneficially of Common
Beneficial Owner Owned(1) Stock
----------------------- -------------- ------------
<S> <C> <C>
Van L. Richey 13,575(8) *
Director and Nominee
2 Office Park Circle, Suite 204
Birmingham, Alabama 35223
Hugh G. Weeks 1,348,861(8) 7.5%
Director and Nominee
2 Office Park Circle, Suite One
Birmingham, Alabama 35223
All directors and executive officers 8,531,201(10) 47.1%
as a group (12 persons)
</TABLE>
- ---------------
* less than 1%
(1) Beneficial ownership reflects sole voting and investment power unless
otherwise noted.
(2) Includes 50,000 shares that may be acquired pursuant to stock options
exercisable within 60 days, and 334,000 shares owned by the Hackney
Charitable Foundation, of which Mr. Hackney is an officer and a director
with shared voting and investment power. Also includes 12,400 shares owned
by trusts for the benefit of Mr. Hackney's minor children and 400,000
shares owned by his spouse, as to all of which he disclaims beneficial
ownership.
(3) Includes 100,000 shares that may be acquired pursuant to stock options
exercisable within 60 days.
(4) Includes 50,000 shares that may be acquired pursuant to stock options
exercisable within 60 days. Also includes 15,000 shares owned by Mr.
Warren's spouse and 6,000 shares owned by his children, as to all of which
he disclaims beneficial ownership.
(5) Includes 18,690 shares that may be acquired pursuant to stock options
exercisable within 60 days. Also includes 15,905 shares owned by Mr.
Reid's spouse, as to which he disclaims beneficial ownership.
(6) Includes 30,000 shares that may be acquired pursuant to stock options
exercisable within 60 days.
(7) Includes 15,500 shares that may be acquired pursuant to stock options
exercisable within 60 days. Also includes 1050 shares owned by Mr.
Burleson's spouse, as to which he disclaims beneficial ownership.
(8) Included in the number of shares beneficially owned by Dr. Crowe, Mr.
Featheringill, Admiral Kelso, Mr. Richey and Mr. Weeks are 10,000 shares
each that non-employee directors have the right to acquire within 60 days
pursuant to stock options granted under the Company's Non-Qualified Stock
Option Plan for Non-Employee Directors.
(9) Includes 10,000 shares that may be acquired pursuant to stock options
exercisable within 60 days.
(10) Included in the number of shares beneficially owned by all executive
officers and directors as a group are 323,190 shares that may be acquired
pursuant to stock options exercisable within 60 days.
4
<PAGE>
ELECTION OF DIRECTORS
At the annual meeting, nine directors will be elected to hold office until
their successors are elected and qualified. The persons named as proxies in the
accompanying proxy, or their substitutes, will vote for the election of the
nominees listed hereafter, except to the extent authority to vote for any or all
of the nominees is withheld. The election of each director requires the
affirmative vote of a plurality of the shares present or represented and
entitled to vote on the election of directors.
Other than Mr. Esenberg, no nominee for election as a director is proposed
to be elected pursuant to any arrangement or understanding between the nominee
and any other person or persons. Mr. Esenberg's nomination arose from the
Company's October 1996 acquisition of Interstate Forging Industries, Inc.
("Interstate"). One of the conditions of the Agreement and Plan of Merger
relating to this acquisition was that the Company would nominate Mr. Esenberg,
who was then chairman of Interstate's board of directors, for election to the
Company's Board of Directors at the 1997 meeting and each annual meeting of the
Company until the 1999 annual meeting. Mr. Esenberg's nomination as a member of
the Company's Board of Directors is being made pursuant to this agreement. Also
see the discussion of Mr. Esenberg's employment agreement under "Compensation of
Directors."
All nominations for membership on the Board of Directors originated with
the Board of Directors. It is believed that all such nominees are available for
election. If any are unable or unwilling to serve, the persons named as proxies
in the accompanying proxy, or their substitutes, will have full discretion and
authority to vote or refrain from voting for any other nominees in accordance
with their judgment.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND NOMINEES
All the nominees listed below are now directors of the Company and have
served continuously in that capacity since their first election or appointment.
The Company's bylaws provide for a minimum of one and a maximum of fifteen
directors, with the number of directors to be determined by the Board. The
Board of Directors has presently fixed the number of directors at nine. The
following is a brief summary of each nominee's business experience during at
least the past five years, unless otherwise indicated, and other directorships
held.
T. MORRIS HACKNEY
Mr. Hackney, age 65, is Chairman of the Board and Chief Executive
Officer of Citation Corporation. He founded the Company in 1974 and
has served as its Chief Executive Officer since that time. In
addition, Mr. Hackney held the position of President of the Company
until July 1996, when Mr. Sommer joined the Company. Mr. Hackney is
also a director of Alabama National Bancorporation.*
Director since 1974
FREDERICK F. SOMMER
Mr. Sommer, age 55, is President and Chief Operating Officer of the
Company. He was President and Chief Operating Officer of Automotive
5
<PAGE>
Industries, Inc. from 1992 until his appointment as its President and
Chief Executive Officer in 1994. He remained in that position after
Automotive Industries, Inc. was acquired by Lear Corporation in 1995,
and also served as a Senior Vice President of Lear Corporation, until
joining Citation Corporation in July, 1996. Mr. Sommer was appointed
to a newly-created position on the Board of Directors in July, 1996.
Director since 1996
R. CONNER WARREN
Mr. Warren, age 53, is Executive Vice President of Finance and
Administration, Treasurer and Chief Financial Officer of the Company.
He joined the Company in 1975, shortly after its founding. Since that
time, Mr. Warren has served the Company in various capacities and is
currently its senior administrative and financial officer. He is a
past president of the American Foundryman's Society and of the
American Cast Metals Association and is currently the U.S.
representative to the International Association of Foundry Technical
Associations and a member of its executive board.
Director since 1975
A. DERRILL CROWE
Dr. Crowe, age 61, is a retired physician and has been the Medical
Director of the Alabama Kidney Stone Foundation since 1985. Dr. Crowe
has also been President, Chief Executive Officer and chairman of the
board of directors of MAI Holdings, Inc.,* since 1976.
Director since 1994
FRANKLYN ESENBERG
Mr. Esenberg, age 64, was Chairman of Interstate Forging Industries,
Inc., from 1971 until its acquisition by Citation Corporation in
October, 1996, and was Chief Executive Officer of Interstate from 1971
to 1990. Mr. Esenberg was appointed to a newly-created position on
the Company's Board of Directors following the closing and pursuant to
the provisions of the Agreement and Plan of Merger by which Interstate
was acquired by the Company.
Director since 1996
WILLIAM W. FEATHERINGILL
Mr. Featheringill, age 55, has been President and a member of the
board of directors of Private Capital Corporation, a private
investment company, since 1973, and Chairman of Electronic Healthcare
Systems, Inc., a computer systems company, since 1995. Mr.
Featheringill was a co-founder and President of Complete Health
Services, Inc., a health maintenance organization, until that company
was sold in 1994. He was the founder and Chairman and Chief Executive
Officer of MACESS Corporation, a computer software and services
company, until the company was sold in 1995. Mr. Featheringill is
also a director of BioCryst Pharmaceuticals, Inc.*
Director since 1994
FRANK B. KELSO II
Admiral Kelso, age 64, was Chief of Naval Operations for the United
States Navy from 1990 until his retirement in 1994. From 1988 to
1990, he was Commander-in-Chief, United States Atlantic Command and
6
<PAGE>
Supreme Allied Commander, Atlantic; he served from 1986 to 1988 as
Commander-in-Chief of the Atlantic Fleet, and from 1985 to 1986 as
Commander of the Sixth Fleet.
Director since 1994
VAN L. RICHEY
Mr. Richey, age 48, has been President and Chief Executive Officer of
American Cast Iron Pipe Company ("ACIPCO") since 1989. He joined
ACIPCO in 1976 and served in several sales positions until he became
Vice President-Sales and Secretary in 1986. Mr. Richey is also a
director of SouthTrust Corporation.*
Director since 1994
HUGH G. WEEKS
Mr. Weeks, age 54, joined the Company in 1977 and after that time
served the Company in various corporate and operational capacities,
most recently as President of Citation Foam division. Effective
January 1, 1995, Mr. Weeks terminated his employment with the Company
to pursue other business interests; he is presently Chairman and Chief
Executive Officer of Custom Chip Connections, Inc.
Director since 1977
* A company having a class of stock registered under the Securities Exchange
Act of 1934.
BOARD AND COMMITTEE MEETINGS AND ATTENDANCE
The Board of Directors held four formal meetings during the fiscal year
ended September 28, 1997. All incumbent directors attended at least 75% of the
board and committee meetings held during the year.
The Executive Committee of the Board of Directors consists of Mr. Hackney,
Mr. Warren, Mr. Sommer, and Mr. Richey. Pursuant to authority granted under the
Company's bylaws, the Executive Committee is empowered to act for the Board of
Directors until further action of the Board and to exercise certain powers of
the Board of Directors when the Board is not in session. The Executive
Committee does not have the power to amend the bylaws, fill vacancies in the
Board, appoint the Company's independent accountants, set compensation of
employees, award stock options, or act on any other matter that requires the
action of the full Board or another committee. The Executive Committee did not
formally convene during fiscal 1997, but took action by unanimous written
consent on a number of occasions.
The Audit Committee of the Board of Directors consists of Mr.
Featheringill, Dr. Crowe, and Mr. Weeks. The Audit Committee is charged with
recommending to the Board of Directors the independent accountants to be
selected as the Company's auditors, reviewing the audit plan, financial
statements and audit results, reviewing with internal and independent auditors
the accounting practices and policies, and overall accounting and financial
controls, and conducting an appropriate review of all related party transactions
and potential conflict of interest situations. The committee met one time
during the 1997 fiscal year.
The Compensation Committee of the Board of Directors consists of Dr. Crowe,
Admiral Kelso, and Mr. Richey. The committee met once during the 1997 fiscal
year. The Compensation Committee is responsible for review of the compensation
of all employees of the Company except non-salaried workers, the approval or
7
<PAGE>
alteration of the Company's bonus plan, and approval or alteration of the chief
executive officer's compensation. This Committee also administers the Company's
Incentive Award Plan and Employee Stock Purchase Plan, and acts on such other
matters as the Board may request or direct.
EXECUTIVE COMPENSATION
The following tables and charts set forth information with respect to
benefits made available, and compensation paid or accrued, by the Company during
the last three fiscal years for services by each of the chief executive officer
and the other four highest paid executive officers of the Company who were
serving as such at the end of fiscal 1997 whose total salary and bonus exceeded
$100,000 during fiscal year 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
---------------
All Other
Annual Compensation Awards Compensation(2)
---------------------- ---------------- ---------------
Securities
Name and Fiscal Underlying
Principal Position Year Salary Bonus Options(1)
- --------------------------------- ------------ ----------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
T. Morris Hackney 1997 $208,000 $439,160 -0- $132,201
Chairman and Chief Executive 1996 208,000 316,472 -0- 13,905
Officer 1995 196,500 402,199 -0- 5,721
Frederick F. Sommer 1997 $234,000 $415,160 -0- -0-
President and Chief Operating 1996 49,500 -0- 100,000 -0-
Officer 1995 N/A N/A N/A N/A
R. Conner Warren 1997 $156,000 $298,298 -0- $ 23,884
Executive Vice President 1996 156,000 237,354 -0- 11,355
of Finance and Administration 1995 146,800 278,808 -0- 5,721
Virgil C. Reid 1997 $141,431 $147,065 -0- $ 22,840
Group Vice President, Medium 1996 135,200 168,772 -0- 10,335
Volume Foundries 1995 127,150 161,428 -0- 5,721
Timothy L. Roberts 1997 $135,142 $278,874 -0- $ 23,686
Group Vice President, Special 1996 130,000 144,899 -0- 10,435
Foundries 1995 45,000 -0- 40,000 -0-
</TABLE>
(1) The Company's Incentive Award Plan provides for grants of restricted stock
and stock appreciation rights, but no such awards have been made.
8
<PAGE>
(2) The amounts shown in this column consist of Company contributions to the
Company's 401(k) Retirement Plan and Company contributions to the Company's
Deferred Compensation Plan. For Mr. Hackney, this amount also includes for
the last fiscal year $104,757 in dollar value of premiums paid by the
Company for his benefit, for split-dollar life insurance with respect to
term life insurance and to premium amounts unrelated to term life insurance
coverage. On termination of the insurance policy the beneficiaries are
obligated by contract to refund to the Company all premiums paid. The
aggregate dollar amount of perquisites and other personal benefits provided
to each officer is less than $50,000 or 10% of the total annual salary and
bonus of such officer.
OPTION GRANTS IN LAST FISCAL YEAR
There were no option grants in fiscal 1997 to the named executive officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES
The following table provides information on option exercises and the
aggregate value of unexercised stock options held by the named executive
officers as of September 28, 1997. No stock appreciation rights are held by any
such officer.
<TABLE>
<CAPTION>
Value of Unexercised
Number of In-the-Money
Shares Unexercised Options/SARs Options/SARs
Acquired at Fiscal Year End at Fiscal Year End(1)
on ----------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------- ---------- ------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
T. Morris Hackney -0- N/A 50,000 -0- $494,375 $ -0-
Frederick F. Sommer -0- N/A 100,000 -0- 662,750 -0-
R. Conner Warren -0- N/A 50,000 -0- 534,375 -0-
Virgil C. Reid 31,810 $276,349 18,190 -0- 194,406 -0-
Timothy L. Roberts -0- N/A 30,000 10,000 78,825 26,275
(1) Based on $18.6875 per share, the average of high and low prices reported by
NASDAQ on September 26, 1997, the last business day of fiscal 1997.
</TABLE>
COMPENSATION OF DIRECTORS
Standard Arrangements. The Company's outside directors receive an annual
retainer of $7,000 and receive $2,000 for each Board of Directors meeting
attended, in addition to reimbursement of travel and other expenses related to
their duties. Each director who is a member of a committee receives $1,000 for
each committee meeting attended, unless the committee meeting occurs in
conjunction with a Board of Directors meeting, in which case no additional
compensation is paid. Directors who are also employees of the Company are not
compensated for meetings they attend.
9
<PAGE>
Upon initial appointment or election to the Board of Directors, non-
employee directors are eligible to receive a one-time grant of options for the
purchase of 10,000 shares of Common Stock of the Company under the Company's
Non-Qualified Stock Option Plan for Non-Employee Directors.
Other Arrangements. In connection with the acquisition of Interstate by
the Company, Interstate entered into an employment agreement with Mr. Esenberg,
by which Mr. Esenberg would serve as Vice Chairman of Interstate for a period
beginning on the date of Citation's acquisition of Interstate and ending on
December 31, 2001. Pursuant to the terms of this employment agreement, Mr.
Esenberg receives an annual salary of $67,000 and receives fringe benefits
customarily provided to Interstate's executive employees for his services as
Vice Chairman to Interstate. This employment agreement also contains certain
noncompetition provisions whereby Mr. Esenberg has agreed not to compete with
Interstate during the term of his employment agreement. In fiscal 1997, options
for 10,000 shares were granted to Mr. Esenberg under the Company's Incentive
Award Plan. The options are exercisable November 22, 1997 and until May 22,
2002 at an exercise price of $14.875.
EMPLOYMENT CONTRACTS
Immediately prior to the Company's initial public offering in 1994, the
Company entered into employment agreements with T. Morris Hackney and R. Conner
Warren pursuant to which Mr. Hackney serves as Chairman and Chief Executive
Officer, and Mr. Warren serves as Executive Vice President of Finance and
Administration and Treasurer. Each agreement provides for an initial term of
three years commencing on August 9, 1994. Each agreement also provides that, at
the end of each year of its term, the agreement is automatically extended for an
additional year, unless either the Company or the executive elects, on 180 days'
notice, for the agreement not to be so extended. Mr. Hackney notified the
Company during fiscal 1997 of his election not to extend his employment
agreement; it therefore terminated August 9, 1997. The base salaries of Messrs.
Hackney and Warren under the contract for fiscal 1997 were $208,000 and $156,000
per year, respectively. These base salaries may be raised periodically at the
discretion of the Compensation Committee. Messrs. Hackney and Warren are also
entitled to cash bonuses pursuant to the Company's management bonus plan. See
"Report on Executive Compensation" below. In the event employment is terminated
by the executive because of a material breach by the Company, or by the Company,
without cause, including in connection with a change in control of the Company,
the executive will be entitled to receive his current compensation for the
remainder of the agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors consists of Dr. Crowe,
Admiral Kelso and Mr. Richey, who were appointed to the Committee in 1995.
None of the three are now or have ever been employees of the Company or its
subsidiaries.
The Compensation Committee's duties as assigned by the Board include the
following: review of the compensation of all salaried employees, approval or
10
<PAGE>
alteration of the Company's bonus plan, approval or alteration of the chief
executive officer's compensation, and approval or alteration of awards made
under the Company's Incentive Award Plan.
The Committee also administers the Company's Incentive Award Plan and the
Employee Stock Purchase Plan.
The Committee formally met once during the 1997 fiscal year and once
subsequent to the end of the fiscal year. During fiscal 1997, the Committee
requested that the study of key salaried employee compensation, originally
conducted in fiscal 1996, be updated with current compensation information.
COMPENSATION POLICIES
The Company's goal for its compensation policy, both as a private and
public company, has been and remains to maintain salary and benefit programs
that allow Citation to hire, motivate, and retain managers and technical
employees who are among the most highly-qualified in the foundry and forging
industries at both the corporate and division levels.
In pursuit of this goal, the Company attempts to pay base salaries that are
at the lower end of the range of competitive salaries in Citation's industry and
geographic areas, and to provide key employees the opportunity for performance-
based incentive bonus payments at the upper end of the range. In combination,
Citation's policy is to pay total compensation that is at the upper end of the
competitive range.
At the request of the Committee, in fiscal 1996 the Company retained
William M. Mercer, Inc. of Atlanta, Georgia to review the highest compensated
individuals at both corporate and division levels for the purpose of evaluating
whether Citation was reasonably implementing its compensation policies.
Mercer's findings reported to the Committee were that the Company's policy was
appropriate, and that with a few individual variances, compensation was within
the competitive range.
In fiscal 1997, the Committee requested that Mercer update its compensation
study to include any changes in key personnel since the initial study, as well
as updated compensation information. In a May 1997 report to the Compensation
Committee, Mercer indicated that Citation key personnel compensation was
generally competitive that of peer companies.
The Committee also reviewed and approved the fiscal 1997 bonus plan
submitted by the Chief Executive Officer, which was substantially similar to the
plan for previous years.
SALARIES AND ANNUAL PERFORMANCE BONUSES
The Compensation Committee directly reviews salaries of Mr. Hackney, Mr.
Sommer, and Mr. Warren. Salaries of Mr. Hackney and Mr. Warren are established
pursuant to employment contracts with the Company, entered into in 1994.
11
<PAGE>
Mr. Sommer's salary was established when he joined the Company in July 1996 and
was approved by the Compensation Committee. During fiscal 1997, the base
salaries of all three were the same as fiscal 1996.
Salaries for key employees, including the named executive officers other
than Messers. Hackney, Sommer, and Warren, are reviewed annually by the managers
to whom they report. The review involves a subjective evaluation of individual
performance and responsibilities in light of total cash compensation. Total
compensation for all key employees was reviewed by the Mercer studies of fiscal
1996 and 1997.
A principal component of Citation Corporation's compensation program for
key employees, including the chief executive officer and the other named
executive officers, at the corporate and division levels are the performance-
based bonus programs. Participation in and makeup of incentive plan programs
for other salaried employees, clerical and hourly workers varies by division.
Corporate staff and group and corporate management participate in a
management bonus pool equal to an aggregate of five percent of each division's
earnings before taxes and corporate administrative charges. Group managers'
participation in the bonus pool is limited to profitability of their respective
groups; of the named executive officers, Messrs. Reid and Roberts are in this
category. Corporate management and staff bonuses are based upon overall
corporate profitability; Messrs. Hackney, Sommer and Warren participate in this
bonus pool group. The corporate staff bonuses are based upon each individual's
compensation level. Bonus payments are made quarterly.
At the division level, a bonus pool, which is presently ten percent of the
division's earnings before taxes and corporate administrative charges, is
divided among the general manager of each division and certain key employees of
the division, who may differ by division. Distribution of division bonus
payments, which are also paid quarterly, is determined by division General
Managers and Group Vice Presidents with review and approval by the Chief
Operating Officer and Chief Financial Officer.
STOCK OPTIONS AND OTHER STOCK-BASED INCENTIVES
In fiscal 1997, the shareholders approved additional shares for award under
the Company's Incentive Award Plan. Options for up to 200,000 shares may be
awarded in each fiscal year for the next five years, for a maximum of 1,000,000
stock options through fiscal 2002. If the total available stock options are not
awarded in any year or if outstanding options expire, the remaining amounts are
available for grant in subsequent years.
Stock options are awarded to Citation employees based upon a general
formula proposed by management and intended to reflect performance of the
Division (for Division key employees), the Group (for Group management), and the
Company as a whole (for senior management and corporate staff employees). The
number of options granted to individuals is generally reflective of relative
rank and base compensation levels, but also may take into account management's
subjective evaluation of individual performance. In certain cases, where
warranted from time to time because of individual performance or other
appropriate circumstances, management may also recommend specific individual
stock option awards.
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<PAGE>
Stock option awards are granted by the Compensation Committee based on
recommendations by the chief executive officer in consultation with the chief
operating officer and chief financial officer.
The Incentive Award Plan also provides for restricted stock awards.
Management recommended and the Compensation Committee approved the award of
43,500 restricted stock grants to certain key Interstate Forging Industries,
Inc. ("Interstate") employees under the terms of the negotiated purchase
agreement by which Citation acquired Interstate. These were awarded effective
with the close of the Interstate acquisition in early fiscal 1997. Restrictions
expire January 1, 1999 unless grantees leave the Company's employ prior to that
time for reasons other than permanent disability or death, or by reason of
involuntary discharge except for "cause."
Management also recommended the grant of a total of 34,000 stock option
shares under the terms of the Incentive Award Plan in fiscal 1997. This
included a grant of 10,000 option shares to Mr. Esenberg, a member of the Board
of Directors and Vice Chairman of Interstate Forging Industries. Senior
management did not recommend the grant of options during fiscal 1997 to any of
the named executive officers, based on the Company"s performance in fiscal 1996.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
In the 1997 fiscal year, Mr. Hackney's base salary was $208,000, which is
the same base salary he received in fiscal 1996. His performance bonus for
fiscal 1997, which is derived from a formula based upon overall Company earnings
before taxes and corporate administrative charges, was $439,160.
In fiscal 1996 and 1997, Mr. Hackney's compensation was included in the
review conducted by Mercer, and was ranked by that analysis in both years as
being below the median of other chief executive officers of manufacturing
companies similar in size to Citation Corporation.
All members of the Compensation Committee concur in this report to the
shareholders.
A. Derrill Crowe
Frank B. Kelso, II
Van L. Richey
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Van L. Richey, a Director and nominee for Director, is a Director of
SouthTrust Corporation. The Company maintains its primary credit facility with
a group of lenders including SouthTrust Bank of Alabama, which is a subsidiary
of SouthTrust Corporation. The maximum borrowing available under the credit
facility in fiscal 1997 was $300 million and the largest amount owed by the
Company under such credit facility during fiscal 1997 was approximately $194
million.
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PERFORMANCE GRAPH
The graph below sets forth Company's cumulative total stockholder return
during the period from the Company's initial public offering through its fiscal
year end, compared to the NASDAQ Stock Market - U.S. index and a peer group
index presently composed of Intermet Corporation, Atchison Casting Corporation,
Westcast Industries, Inc., Mascotech, Inc., and Wymann Gordon Co. The members
of this peer group are to the Company's knowledge the only U.S. companies whose
stock was publicly-traded during the period shown in the graph, and which have
as a major component foundry and/or forging operations.
The graph also presents a comparison to the old peer group index used in
the three previous years. The old peer group consisted of Intermet, Atchison,
Westcast and Sudbury, Inc., which were the only publicly-traded U.S. companies
during the relevant periods in the iron and/or steel castings business. Sudbury
was deleted from the index this year following its acquisition by Intermet, and
Mascotech and Wymann Gordon, which are both forging companies, were added to
reflect Citation's expansion during the year of its lines of business to include
steel forging.
Historical stock price performance is not necessarily indicative of future
results.
COMPARISON OF 37 MONTH CUMULATIVE TOTAL RETURN*
AMONG CITATION CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX,
A NEW PEER GROUP AND AN OLD PEER GROUP
<TABLE>
<CAPTION>
Cumulative Total Return
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
8/94 9/94 9/95 9/96 9/97
------- ------- ------- ------ ------
Citation Corporation 100 144 225 142 241
New Peer Group 100 86 112 152 211
Old Peer Group 100 94 134 152 251
NASDAQ Stock Market (U.S.) 100 106 146 173 238
</TABLE>
* $100 Invested on 8/02/94 in stock or index -
including reinvestment of dividends.
Fiscal year ending September 30.
Total return calculations assume annual dividend reinvestment. Citation
Corporation has never paid a cash dividend (other than S corporation dividends
to then existing shareholders prior to the Company's initial public offering and
change to C corporation status in fiscal 1994).
14
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The information set forth in the following paragraph is based solely upon a
review of Forms 3 and 4 and amendments thereto furnished to the Company
pursuant to Rule 16a-3(e) during the fiscal year ended September 28, 1997, and
Form 5 and amendments thereto furnished to the Company with respect to that
fiscal year, if any, and written representations received by the Company.
Of those persons who, at any time during the fiscal year ended September
28, 1997, were directors, executive officers, or beneficial owners of more than
10 percent of the Company's outstanding stock, none of such persons failed to
file, on a timely basis, as disclosed in the above forms, reports required by
Section 16(a) of the Securities Exchange Act of 1934 during the most recent
fiscal year.
PROPOSAL NUMBER 2:
RATIFICATION OF INDEPENDENT AUDITORS
At the recommendation of the Audit Committee, the Board of Directors has
selected Coopers & Lybrand, L.L.P., as the Company's independent auditors for
the fiscal year ending September 27, 1998, subject to ratification by the
shareholders at the annual meeting. Coopers & Lybrand, L.L.P., Certified Public
Accountants, served as the Company's independent auditors for the fiscal year
ending September 28, 1997, and has performed this function for the Company since
1987. Representatives of Coopers & Lybrand, L.L.P. will be present at the
annual meeting with the opportunity to make a statement if they so desire and
will be available to respond to questions of shareholders.
The Board of Directors of the Company recommends a vote FOR Proposal number
2, the ratification of the appointment of Coopers & Lybrand, L.L.P., as the
Company's independent auditors for the 1998 fiscal year.
OTHER MATTERS
The Board of Directors knows of no other business to be transacted, but if
any other matters do come before the meeting, the persons named as proxies in
the accompanying proxy, or their substitutes, will vote or act with respect to
them in accordance with their best judgment.
SHAREHOLDERS' PROPOSALS
Any proposal which a shareholder expects to present at the next annual
meeting to be held in 1999 must be received at the Company's principal executive
office shown on the first page of this Proxy Statement not later than September
17, 1998, in order to be included in the proxy material for the 1999 meeting.
All proposals must be sent to the Company by Certified Mail, Return Receipt
Requested, and must comply with the Rule 14a-8 of Regulation 14A of the proxy
rules of the Securities and Exchange Commission.
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<PAGE>
THE ANNUAL REPORT OF THE COMPANY THAT ACCOMPANIES THIS PROXY STATEMENT
CONTAINS CERTAIN OF THE INFORMATION CONTAINED IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. A COPY OF THE
10-K WILL BE FURNISHED TO SHAREHOLDERS UPON REQUEST WITHOUT CHARGE. REQUESTS
FOR FORM 10-K REPORTS SHOULD BE SENT TO STANLEY B. ATKINS, SECRETARY, CITATION
CORPORATION, NO. 2 OFFICE PARK CIRCLE, SUITE 204, BIRMINGHAM, ALABAMA 35223.
By Order of the Board of Directors
STANLEY B. ATKINS
Secretary
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<PAGE>
PROXY
CITATION CORPORATION
Proxy for Annual Meeting of Shareholders, February 17, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints T. Morris Hackney and R. Conner Warren and
either of them, proxies for the undersigned, with full power of substitution, to
represent the undersigned and to vote, as designated below, all of the shares of
the common stock of Citation Corporation (the Company) the undersigned is
entitled to vote at the annual meeting of shareholders of the Company to be held
on February 17, 1998, and at any adjournment thereof.
1. The election as directors of all nominees listed below (except as marked to
the contrary below):
A. Derrill Crowe Van L. Richey
Franklyn Esenberg Frederick F. Sommer
William W. Featheringill R. Conner Warren
T. Morris Hackney Hugh G. Weeks
Frank B. Kelso, II
[ ] FOR all nominees listed above [ ] VOTE WITHHELD
(except as marked to the to vote for all
contrary) nominees listed above
(INSTRUCTION: TO WITHHOLD YOUR AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
WRITE THAT NOMINEE'S NAME ON THE LINE BELOW:)
--------------------------------------------------------------------------
2. Ratification of the appointment of independent auditors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS and will be voted as
directed herein. If no direction is given, this proxy will be voted FOR
proposals 1 and 2.
Dated ________________, 19__ Phone No. ______________________________
__________________________________
Signature of Stockholder
__________________________________
Signature of Stockholder
Where stock is registered jointly in the names of two or more persons, ALL
should sign. Signature(s) should correspond exactly with the name(s) as shown
above. Please mark, sign, date, and return the proxy card promptly in the
enclosed envelope. No postage need be affixed if mailed in the United States.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
