Citation Corporation Announces Third Quarter Earnings
20 July 1999
Citation Corporation Announces Third Quarter Earnings
BIRMINGHAM, Ala.--July 19, 1999--Citation Corporation today announced its earnings per share (EPS) were $0.26 for the third quarter of fiscal 1999, versus $0.54 for the third quarter of fiscal 1998. The third quarter 1999 EPS includes approximately $0.11 in non-recurring losses. Approximately $0.06 resulted from a loss on the sale of the Company's Oberdorfer Industries. An additional $0.03 resulted from Oberdorfer operating losses incurred during the quarter prior to the sale. The remaining $0.02 related to a strike at the Company's Mansfield facility, which was settled during June.Sales for the fiscal third quarter were $214.7 million versus $196.4 million for the third quarter of fiscal 1998, an increase of 9.3%. Excluding fiscal 1999 acquisitions, sales for the quarter were down 6.4% from the year-ago period.
The reduction in sales is attributable to softness in orders for heavy capital goods -- construction and farm equipment, mining equipment, and oil tools, which are significant markets for Citation's castings and forgings.
Earnings after tax for the 1999 fiscal quarter were $4.7 million versus $9.7 million in the year-ago quarter. The tax rate for the 1999 period was 40% versus 39% for the comparable period last year.
Sales for the first nine months of fiscal 1999 were $613.4 million, a 9.6% increase over sales for the nine months of fiscal 1998 of $559.8 million. Excluding the effect of acquisitions made before the completion of the first nine months of fiscal 1998, sales were down 6.8%. Weakness in the heavy capital goods markets that adversely affected the third quarter were also responsible for the weakness in the nine month period.
Earnings after tax for the nine months of fiscal 1999 were $14.9 million versus $23.2 million for the nine months of fiscal 1998, down $8.3 million. For the nine months of fiscal 1999, the tax rate was 40% as compared to 39% for the nine months of fiscal 1998.
EPS for the first nine months of fiscal 1999 was $0.83 as compared to $1.30 for the same period of fiscal 1998. The 1999 period EPS includes the $0.11 non-recurring losses related to Oberdorfer and Mansfield.
Fiscal 1999 Automotive group sales were up 13.2% and 9.9% respectively over the third quarter and first nine-month periods of fiscal 1998, excluding the impact of acquisitions. Including the acquisition of Citation - Marion, Automotive group sales for the fiscal quarter exceeded $106 million. This includes both the effect of strong sales of passenger cars and light trucks, but also substantial new business for Citation in both iron and aluminum casting centers.
In addition to sales of cast and machined parts to the automotive industry, sales to heavy truck and aerospace customers continued at very good levels. Heavy truck cast, forged and machined parts included new business developed with Navistar through Citation's Custom Products division. The trend to cast parts replacing more costly fabrications in the aerospace industry contributed to the performance of Citation's Aerospace and Technology group.
F.F. "Rick" Sommer, President and CEO, said; "We continue to see weak performance in sales to heavy capital goods markets, particularly construction and farm equipment, mining equipment, and oil tool equipment. This directly affects casting and forging shipments from both our Industrial -- Iron and Industrial -- Steel groups.
"Beyond this, the quarter also saw the impact of a five-week strike at Mansfield, one time operating losses associated with the sale of Oberdorfer, as well as the loss on the Oberdorfer sale.
"We have reduced the level of the operations serving these markets and we are concentrating on developing new sales. While heavy capital goods markets remain slow and probably will continue so for the next few quarters, we believe new business we have sold will begin to have an influence on our Industrial groups, possibly as early as late in our fiscal fourth quarter," he said.
Citation announced that it had signed a definitive agreement to merge with RSJ Acquisition Co., a corporation formed by Kelso & Company, a private investment firm based in New York City.
If the merger is approved by Citation's shareholders at a special meeting expected to be held in the fall of 1999, and subject to a number of other conditions, RSJ Acquisition Co. will pay $18.10 per share for approximately 95.6% of the outstanding shares of Citation. Citation stockholders will be entitled to elect to receive a combination of either $18.10 per share and/or shares of the surviving corporation up to the point that a maximum of 790,000 Citation shares (approximately 4.4% of the outstanding shares) are converted into the right to receive shares of the surviving corporation.
Mr. Sommer said, "We continue to be excited about the potential this transaction offers our company and its employees and we believe it is in the best interest of all shareholders."
The merger is expected to be completed before the end of the year and is subject to approval by Citation's stockholders, the refinancing of Citation's existing indebtedness, obtaining additional financing to pay the merger consideration, the expiration of the applicable waiting period under the Hart-Scott Rodino Act and other customary conditions.
Citation Corporation is a metal components supplier to capital and durable goods industries. The company currently operates 20 manufacturing divisions in 10 states and employs more than 7,000 employees.
Note: The statements in this news release that are not historical fact are forward-looking statements that involve risks and uncertainties including, but not limited to, changes in the economy, demand for durable goods, pricing by competitors, entry of new competitors, and other risks detailed in the Company's 10-K for the year ended September 27, 1998, the 10-Q for the quarter ended March 28, 1999, and other filings with the Securities and Exchange Commission.
Any offering of securities in connection with the merger will be made only by means of a prospectus.
Financial Highlights
(All figures except share and per share
data are in Thousands)(Unaudited)
Three Months Ended
June 28, June 27,
1998 1999
------- -------
Sales $196,446 $214,715
Gross Profit 35,965 33,374
S,G & A Expenses 15,944 18,190
Operating Income 20,021 15,184
Interest Expense 4,115 5,495
Loss on sale of division - 1,815
Income Before Tax 15,906 7,874
Income Taxes 6,203 3,150
Net Income $9,703 $4,724
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Earnings per Share - Basic $0.54 $0.26
===== =====
Weighted Avg. Number
Shares Outstanding - Basic 17,880,558 17,877,534
Earnings per Share - Diluted $0.54 $0.26
===== =====
Weighted Avg. Number
Shares Outstanding - Diluted 18,123,034 17,960,850
Nine Months Ended
June 28, June 27,
1998 1999
------- -------
Sales $559,760 $613,446
Gross Profit 97,053 95,335
S,G & A Expenses 47,938 52,974
Operating Income 49,115 42,361
Interest Expense 11,040 15,752
Loss on sale of division - 1,815
Income Before Tax 38,075 24,794
Income Taxes 14,849 9,918
Net Income $23,226 $14,876
====== ======
Earnings per Share - Basic $1.30 $0.83
====== ======
Weighted Avg. Number
Shares Outstanding - Basic 17,821,750 17,885,253
Earnings per Share - Diluted $1.29 $0.83
====== ======
Weighted Avg. Number
Shares Outstanding - Diluted 18,066,793 17,947,728