<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 1997.
------------------
OR
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ______ to ______
Commission File Number 0-25090
-------
STILLWATER MINING COMPANY
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 81-0480654
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
536 E. Pike Avenue
Post Office Box 1330
Columbus, Montana 59019
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 978-2525
--------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has 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
--- ---
At November 13, 1997, 20,376,340 shares of Common Stock, $.01 par value per
share, were issued and outstanding.
<PAGE>
STILLWATER MINING COMPANY
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
PAGE
----
<C> <S> <C>
Item 1. Financial Statements..................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings........................................ 14
Item 2. Change in Securities..................................... 14
Item 3. Defaults Upon Senior Securities.......................... 14
Item 4. Submission of Matters to a Vote of Security Holders...... 14
Item 5. Other Information........................................ 14
Item 6. Exhibits and Reports on Form 8-K......................... 14
SIGNATURES ......................................................... 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STILLWATER MINING COMPANY
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 5,818 $ 16,389
Short-term investments 13,295 17,060
Inventories 8,641 13,522
Accounts receivable 6,086 71
Other current assets 1,702 1,221
Deferred income taxes 798 798
-------- --------
Total current assets 36,340 49,061
-------- --------
PROPERTY, PLANT AND EQUIPMENT, NET 191,161 187,802
OTHER NONCURRENT ASSETS 2,759 3,047
-------- --------
TOTAL ASSETS $230,260 $239,910
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
and capital lease obligations $ 1,852 $ 1,463
Accounts payable 2,126 5,039
Accrued payroll and benefits 2,307 2,289
Property, production and franchise taxes payable 3,068 3,120
Other current liabilities 2,366 3,922
-------- --------
Total current liabilities 11,719 15,833
-------- --------
LONG-TERM LIABILITIES
Long-term debt and capital lease obligations 62,093 62,563
Other noncurrent liabilities 3,026 2,528
Deferred income taxes 12,777 15,320
-------- --------
TOTAL LIABILITIES 89,615 96,244
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued -- --
Common stock, $.01 par value, 50,000,000 shares
authorized, 20,342,028 and 20,135,912 shares
issued and outstanding 203 201
Paid-in capital 139,602 138,093
Accumulated earnings 840 5,372
-------- --------
TOTAL SHAREHOLDERS' EQUITY 140,645 143,666
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $230,260 $239,910
======== ========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
STILLWATER MINING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------------ -----------------
<S> <C> <C> <C> <C>
REVENUES $16,998 $16,482 $55,293 $40,777
COSTS AND EXPENSES
Cost of metals sold 15,494 15,004 48,217 36,211
Depreciation and amortization 2,876 2,624 10,346 6,191
--------- ------- -------- -------
Total cost of sales 18,370 17,628 58,563 42,402
General and administrative expenses 281 404 1,091 1,247
Other costs and expenses 46 -- 592 --
--------- ------- -------- -------
Total costs and expenses 18,697 18,032 60,246 43,649
--------- ------- -------- -------
OPERATING LOSS (1,699) (1,550) (4,953) (2,872)
OTHER INCOME (EXPENSE)
Interest income 248 737 775 1,563
Interest expense, net of capitalized
interest (1,256) (506) (3,192) (1,063)
--------- ------- -------- -------
LOSS BEFORE INCOME TAXES AND
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (2,707) (1,319) (7,370) (2,372)
INCOME TAX BENEFIT 1,043 507 2,838 911
--------- ------- -------- -------
LOSS BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE (1,664) (812) (4,532) (1,461)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE,
NET OF INCOME TAX PROVISION OF $8,677 -- -- -- 13,861
--------- ------- -------- -------
NET INCOME (LOSS) $(1,664) $ (812) $ (4,532) $12,400
======= ======= ======== =======
PRIMARY INCOME (LOSS) PER COMMON SHARE
Loss before cumulative effect
of accounting change $ (0.08) $ (0.04) $ (0.22) $ (0.07)
Cumulative effect of accounting change -- -- -- 0.67
--------- ------- -------- -------
NET INCOME (LOSS) $ (0.08) $ (0.04) $ (0.22) $ 0.60
======= ======= ======== =======
FULLY DILUTED INCOME (LOSS) PER COMMON
SHARE/(1)/
Loss before cumulative effect
of accounting change $ (0.08) $ (0.04) $ (0.22) $ (0.07)
Cumulative effect of accounting change -- -- -- 0.64
--------- ------- -------- -------
NET INCOME (LOSS) $ (0.08) $ (0.04) $ (0.22) $ 0.57
======= ======= ======== =======
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
Primary 20,654 20,580 20,787 20,607
Fully diluted 22,574 22,499 22,711 21,692
</TABLE>
/(1)/ Fully diluted earnings per share were anti-dilutive in 1997.
See notes to consolidated financial statements.
4
<PAGE>
STILLWATER MINING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (4,532) $ 12,400
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 10,346 6,191
Deferred income taxes (2,838) (911)
Cumulative effect of accounting change -- (13,861)
Other 729 --
Changes in operating assets and liabilities:
Decrease in inventories 3,141 3,855
Increase in other assets (6,208) (2,486)
(Decrease) increase in liabilities (3,710) 2,878
-------- --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (3,072) 8,066
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures, including capitalized interest (12,663) (42,561)
Purchase of short-term investments (10,412) (47,358)
Proceeds from sale and maturity of short-term
investments 14,177 31,122
Proceeds from sale of assets 67 170
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (8,831) (58,627)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of stock options 1,511 313
Proceeds from long-term debt and capital leases 855 51,896
Payments on long-term debt and capital leases (1,034) (511)
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,332 51,698
-------- --------
CASH AND CASH EQUIVALENTS
Net increase (decrease) (10,571) 1,137
Balance at beginning of period 16,389 714
-------- --------
BALANCE AT END OF PERIOD $ 5,818 $ 1,851
======== ========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - GENERAL
The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with the instructions for Form 10-Q. In the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation of the financial condition and
results of operations have been included. Operating results for the nine month
period ended September 30, 1997 are not necessarily indicative of the results
which may be expected for the year ending December 31, 1997. These interim
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Stillwater Mining Company
(the "Company") Form 10-K for the year ended December 31, 1996.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenues consist of the sales revenue for platinum and palladium,
including any hedging gain or loss. By-product metals revenue and secondary
materials processing revenue are included as a reduction to the cost of metals
sold. Prior to 1997, the Company recognized revenue when product title was
transferred to the buyer. Effective January 1, 1997, the Company changed its
method of revenue recognition whereby platinum and palladium revenue is
recognized when the product is shipped to the external refiner. Sales and
receivables are provisionally valued and later adjusted when sales prices are
finalized to reflect changes in market metals prices and changes arising from
final weight and assay calculations. This change makes the Company's results
more comparable with other precious metals producers. The cumulative effect of
this change as of January 1, 1997 is to increase revenue by $2.7 million in the
first quarter of 1997; the effect on net income was not material.
HEDGING PROGRAM
The Company enters into forward sales contracts, spot deferred contracts
and put and call option contracts from time to time to reduce the effect of
price changes in platinum and palladium. Gains and losses from these
transactions are included in sales revenue when the hedged production is sold.
Although spot deferred contracts could limit amounts realizable during a period
of rising prices, the Company has the ability to "roll forward" its spot
deferred contracts to future periods in order to realize current market price
increases, while maintaining future downside protection. Currently, the Company
intends to deliver into all of these hedge positions when they come due.
PROPERTY, PLANT, AND EQUIPMENT
Interest is capitalized on expenditures related to construction or
development projects actively being prepared for their intended use and
amortized using the same basis of depreciation as the related asset.
Capitalization is discontinued when the asset enters commercial operation or
development ceases.
Interest capitalized for the three months ended September 30, 1997 and
1996 was $22,000 and $698,000, respectively. Interest capitalized for the nine
months ended September 30, 1997 and 1996 was $764,000 and $1,321,000
respectively.
RECLASSIFICATIONS
Certain amounts in the accompanying consolidated financial statements for
1996 have been reclassified to conform to the classifications used in 1997.
6
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3 - INVENTORIES
INVENTORIES CONSISTED OF THE FOLLOWING (IN THOUSANDS):
<TABLE>
<CAPTION>
(Unaudited)
SEPTEMBER 30, December 31,
1997 1996
--------------- --------------
<S> <C> <C>
Raw ore $ 160 $ 273
Concentrate and in-process 5,192 6,570
Matte and finished goods -- 3,529
--------------- ----------------
5,352 10,372
Materials and supplies 3,289 3,150
--------------- ----------------
$8,641 $13,522
=============== ================
</TABLE>
As described in Note 2, platinum and palladium revenue is now recognized when
the product is shipped to the external refiner, thereby eliminating essentially
all finished goods inventory.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT CONSISTED OF THE FOLLOWING (IN THOUSANDS):
<TABLE>
<CAPTION>
(Unaudited)
SEPTEMBER 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
Equipment $ 23,069 $ 22,067
Leased equipment 12,099 11,088
Facilities 67,055 54,522
Mine development 125,855 94,900
Land 2,221 2,221
Construction-in-process 11,660 46,642
------------- ------------
241,959 231,440
Less: accumulated depreciation and amortization (50,798) (43,638)
------------- ------------
$191,161 $187,802
============= ============
</TABLE>
7
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
EQUIPMENT LEASE AGREEMENTS
In the first quarter of 1997, pursuant to the terms and conditions of the
1995 $7.5 million Senstar Capital Corporation Master Lease Agreement, the
Company entered into an additional five-year equipment leasing agreement with
Senstar Capital Corporation, for $855,000. The agreement covers new underground
mining equipment acquired in 1996 and 1997 and contains a two-year renewal
option at the end of five years. Based upon the provisions of the leasing
agreement, the lease qualifies as a capital lease and the renewal option
qualifies as an extension of the base lease term. As a result, all leased
equipment has been capitalized and is being depreciated over seven years.
CREDIT AGREEMENT
The Company's credit agreement, dated April 19, 1994, with N. M.
Rothschild & Sons Limited was extended in the second quarter of 1997 to expire
on April 30, 1999.
NOTE 6 - PRECIOUS METALS HEDGING CONTRACTS
Precious metals hedging contracts at September 30, 1997, consist of spot
deferred forward sales contracts. Realization under these contracts is dependent
upon the counterparties performing in accordance with the terms of the
contracts. The Company does not anticipate nonperformance of the counterparties.
Forward sales contracts require the future delivery of metals at a specific
price.
At September 30, 1997, the Company's outstanding hedge contracts for 1997
and 1998 are as follows:
<TABLE>
<CAPTION>
4th Quarter 1997 Full Year 1998
---------------------------- ---------------------------
Hedged Average Price Hedged Average Price
Ounces per Ounce Ounces per Ounce
---------------------------- ---------------------------
<S> <C> <C> <C> <C>
PLATINUM
Forward sales contracts 12,200 $384 10,990 $380
(spot deferred)
PALLADIUM
Forward sales contracts 71,670 $130 224,965 $134
(spot deferred)
</TABLE>
The Company has credit agreements with its major trading partners that provide
for margin deposits in the event that forward prices for platinum and palladium
exceed the Company's hedge contract prices and their credit lines.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
STILLWATER MINING COMPANY
KEY FACTORS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PRODUCTION (OUNCES)
Platinum (000) 22 14 59 41
Palladium (000) 71 47 191 137
-------- -------- -------- --------
Total Production 93 61 250 178
TONS MINED (000) 147 115 402 301
TONS MILLED (000) 147 117 402 320
AVERAGE MILL GRADE (OPT) 0.72 0.61 0.71 0.65
MILL RECOVERY (%) 89 87 88 87
CASH COSTS PER TON MILLED $ 107 $ 104 $ 112 $ 103
CASH COSTS PER OUNCE $ 169 $ 196 $ 180 $ 185
Depreciation & Amortization 31 40 35 34
-------- -------- -------- --------
Total Costs Per Ounce $ 200 $ 236 $ 215 $ 219
SALES (000)
Ounces of Platinum Sold 21 19 64 45
Ounces of Palladium Sold 68 62 203 153
------ -------- -------- --------
Total Ounces Sold 89 81 267 198
AVERAGE REALIZED PRICES
Platinum $ 386 $ 406 $ 391 $ 411
Palladium $ 131 $ 142 $ 149 $ 146
Combined Average Realized Price $ 191 $ 204 $ 207 $ 206
AVERAGE MARKET PRICES
Platinum $ 422 $ 395 $ 396 $ 403
Palladium $ 197 $ 127 $ 169 $ 132
Combined Average Market Price $ 250 $ 188 $ 223 $ 194
</TABLE>
9
<PAGE>
This Form 10-Q contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended that involve uncertainties or risks
that could cause actual results to differ materially. Such forward-looking
statements include comments regarding operating performance, anticipated cash
flows and capital expenditures and expansion plans. Factors that could cause
actual results to differ materially include, but are not limited to, the
following: price volatility of platinum and palladium, economic and political
events affecting supply and demand for platinum and palladium, fluctuations in
ore grade, tons mined, crushed or milled, variations in smelter or refinery
operation, amounts and prices of the Company's forward metal sales and
geological, technical, mining or processing problems. For a more detailed
description of risks attendant to the business and operations of Stillwater and
to the mining industry in general, please see the Company's other SEC filings,
in particular the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved. In addition, the
Company disclaims any intent or obligation to update publicly these forward-
looking statements, whether as a result of new information, future events, or
otherwise.
RESULTS OF OPERATIONS
PGM Production
--------------
Total ore mined in the third quarter of 1997 increased 32,000 tons to
147,000 tons, compared with 115,000 tons mined in the third quarter of 1996.
Third quarter 1997 tons milled averaged about 1,600 tons per day (TPD). For the
third quarter of 1996, tons milled averaged about 1,300 TPD. In October 1997,
operations ran at an average rate of over 1,900 TPD. Increases in ore tonnage
were achieved through operating efficiencies gained as a result of commencing
underground ore crushing, additional mine manpower and improved stoping
productivity. Enhanced stoping productivity was driven by an increase in
mechanized mining to almost 84% of third quarter 1997 production, up from 57% in
the third quarter of 1996.
The average head grade of ore delivered to the mill was 0.72 ounces per
ton (OPT) during the third quarter of 1997, an increase of 18% from 0.61 OPT in
the third quarter of 1996. The mill grade increased primarily due to successful
implementation of controls to minimize mining dilution. Additionally,
commissioning of the production shaft in June 1997 produced greater efficiencies
in material handling and subsequent material processing through the mill.
Production of platinum and palladium in the third quarter of 1997 was
93,000 ounces, a 52% increase versus the 61,000 ounces produced in the
comparable 1996 period. This improved production was primarily driven by the
increase in tons milled and higher average mill head grades, coupled with an
improvement in recoveries resulting from installation of three additional
flotation cells earlier this year.
For the nine months ended September 30, 1997, 402,000 ore tons were milled,
a 26% increase over the 320,000 tons milled in the comparable period of 1996.
Efficiencies from commencing underground ore crushing, additional mine manpower
and improved stoping productivity drove this increase. The average mill head
grade for the nine months ended September 30, 1997, was 0.71 OPT, up 9% from
0.65 OPT for the nine months ended September 30, 1996. Improved mine dilution
controls and the development of higher grade ore stopes contributed to the
increase. Total platinum and palladium production increased to 250,000 ounces
for the nine months ended September 30, 1997, a 72,000 ounce increase as
compared to the 178,000 ounces produced during the same period of 1996. This was
primarily due to the increase in tons milled and the higher average mill head
grade.
10
<PAGE>
Revenue
-------
Platinum and palladium revenue for the third quarter of 1997 increased to
$17.0 million, from $16.5 million in the comparable period of 1996. Higher sales
volumes-89,000 ounces in the third quarter of 1997 versus 81,000 ounces for the
comparable period in 1996-caused an increase in revenue for the quarter, but
this impact was largely offset by lower realized prices for ounces sold. As a
result of capital requirements early in 1997, the Company entered into forward
contracts which fixed the sales price on a substantial portion of its future
metal production. However, with market prices for platinum and palladium in 1997
in backwardation (where the prices for metals in the near term have a higher
price than those in the future), these forward contracts resulted in lower
realized metal prices when compared with current market prices during the third
quarter of 1997. In addition, third quarter 1996 sales included a one-time,
positive adjustment of 27,000 total ounces. These ounces had actually been
produced in the first and second quarters of 1996 and were carried as in-process
inventory until their sale in the third quarter of 1996.
The average realized price per ounce of platinum sold was $386 per ounce
for the third quarter of 1997, a 5% decrease compared with $406 per ounce for
the third quarter of 1996, while the average realized price per ounce of
palladium sold was $131 per ounce for the third quarter of 1997, an 8% decrease
compared with $142 per ounce realized in the comparable 1996 period. These lower
realized prices resulted from the Company delivering approximately 80%
of its third quarter 1997 platinum ounces and 80% of its third quarter 1997
palladium ounces against forward sales contracts having fixed prices below the
current market price as well as below the average realized price for the
comparable period a year ago.
For the nine months ended September 30, 1997, revenue increased to $55.3
million, from $40.8 million for the comparable period in 1996. The increase in
revenue was primarily driven by higher production volume made available for
sale. During the first nine months of 1997, 267,000 ounces of platinum and
palladium were sold, compared with 198,000 ounces for the same period in 1996.
In addition, effective January 1, 1997, the Company changed its revenue
recognition policy. Revenue is now recorded when ounces are shipped from the
Company's base metal refinery to an external refiner, rather than at a later
date upon physical transfer of refined metals to the buyer. This accounting
policy change resulted in a $2.7 million (13,400 ounces) positive, cumulative
effect on first quarter 1997 revenue.
Costs
-----
Cash costs per ounce produced decreased $27 to $169 per ounce during the
third quarter of 1997, compared with $196 per ounce in the third quarter of
1996. Although mine manpower increased, higher production volume more than
offset the increase in costs. Total costs per ounce produced decreased $36 to
$200 per ounce during the third quarter of 1997, compared with $236 per ounce in
the third quarter of 1996. The decrease was driven mainly by higher production
levels.
Cash costs per ounce produced for the nine months ended September 30,
1997, decreased $5 to $180 per ounce, compared with $185 per ounce for the nine
months ended September 30, 1996. Total costs per ounce also decreased during the
nine-month period ended September 30, 1997, dropping $4 to $215 per ounce,
compared with $219 per ounce for the nine months ended September 30, 1996. These
year-to-date decreases in costs were primarily driven by the impact of increased
production volume.
11
<PAGE>
Earnings
--------
The Company reported an operating loss of $1.7 million for the third
quarter of 1997 compared with an operating loss of $1.6 million for the
comparable period of 1996. The net loss for the third quarter 1997 was $1.7
million compared with $.8 million net loss in the third quarter of 1996. The
larger net loss in the third quarter of 1997 was mainly driven by higher
interest expense, compared with the third quarter of 1996. Although total
interest expense for both periods was $1.2 million, virtually all of the
interest costs were expensed in the quarter ended September 30, 1997, while only
$.5 million was expensed during the comparable period a year ago. The balance
of the 1996 third quarter interest expense was capitalized as part of the cost
of the expansion of the Stillwater Mine. Since substantially all of the assets
related to the expansion were placed in service during the first half of 1997,
capitalized interest was minimal in the third quarter of 1997. In addition,
interest income for the third quarter of 1997 decreased $.5 million to $.2
million, compared with $.7 million in the third quarter of 1996, primarily as a
result of lower cash and short-term investment balances in the current year.
The Company reported an operating loss of $5.0 million for the nine months
ended September 30, 1997, compared with an operating loss of $2.9 million in the
comparable period in 1996. Although revenues rose by $14.5 million during the
current nine month period as a result of significantly stronger production and
sales volumes, total cost of sales increased by $16.2 million during the same
period. The increase in costs for the nine months ended September 30, 1997 was
largely related to increased production; however, depreciation expense increased
by $4.1 million to $10.3 million for the nine months ended September 30, 1997,
compared with $6.2 million in the nine month period a year ago. This increase
in costs was due to the expansion assets having been placed into service during
the period, along with a one-time charge for the write-down and disposal of
equipment associated with replacement of a portion of the processing plant as
part of the expansion. The net loss for the nine months ended September 30,
1997, excluding the cumulative effect of an accounting change for capital
development costs, increased to $4.5 million, from $1.5 million for the nine
months ended September 30,1996. The increased net loss was driven by higher
depreciation expense, higher interest expense and lower interest income.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company's current ratio was 3.1 to 1.0, the
same as at December 31, 1996. Working capital at September 30, 1997 was $24.6
million, down $8.6 million from December 31, 1996. Working capital decreases in
1997 were partially the result of a change in revenue recognition which resulted
in reducing finished product inventories from $3.5 million at December 31, 1996
to zero at September 30, 1997. Cash and short-term investments increased $2.2
million to $19.1 million from the second to the third quarter of 1997. The
Company anticipates stable cash flow performance over the remainder of 1997.
The Company expects to invest an additional $3.5 million on capital
projects and underground development at the Stillwater Mine in the fourth
quarter of 1997.
As of September 30, 1997, net availability of $11.4 million existed under
the credit facility. Based on the cash and short-term investments on hand at
September 30, 1997, expected cash flows from operations and the availability of
funds under the Company's line of credit, management believes there is
sufficient liquidity to meet the Company's currently planned operating needs for
the foreseeable future.
12
<PAGE>
OTHER MATTERS
On August 14, 1997, the Company announced the immediate appointment of
William E. Nettles, as Chairman and Chief Executive Officer. Mr. Nettles
replaced Ray W. Ballmer, who continues as a Director of the Company and who had
been appointed interim Chairman and Chief Executive Officer upon the resignation
of Charles R. Engles in February, 1997.
On October 29, 1997, the Company announced the departure of R. Daniel
Williams, Vice-President and Chief Financial Officer. The Company has
identified a number of qualified candidates for this vacancy and will be making
a decision in the near future.
On November 10, 1997, the Company announced the authorization for the
completion of the tunnel boring machine for the East Boulder project. Delivery
of the tunnel borer is expected in the spring of 1998. No material expenditures
are expected for the remainder of 1997. Driving of the 18,000 foot tunnel is
expected to take approximately 18 months and cost about $20 million. During
this period, the Company will complete a final feasibility study and cost
estimate for the East Boulder project. Once this is complete and the grade and
continuity of the reef has been confirmed, the Company will make a decision on
proceeding with development of East Boulder.
13
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
During the period covered by this report, there were no legal
proceedings instituted that are reportable, and there were no material
developments in connection with any legal proceedings previously
reported on the Company's Form 10-K for the year ended December 31,
1996.
Item 2. Changes in Securities.
- ------------------------------
None
Item 3. Defaults Upon Senior Securities.
- ----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders.
- ------------------------------------------------------------
None
Item 5. Other Information.
- --------------------------
None
Item 6. Exhibits and Reports on Form 8-K.
- -----------------------------------------
Form 8-K dated August 15, 1997, announcing the appointment of William
E. Nettles as Chairman and Chief Executive Officer of the Company.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on behalf of the undersigned
thereunto duly authorized.
STILLWATER MINING COMPANY
(Registrant)
Date: November 14, 1997 By: /s/ William E. Nettles
-----------------------
William E. Nettles
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 1997 By: /s/ Tammy R. Cosgrove
-----------------------
Tammy R. Cosgrove
Controller
(Principal Accounting Officer)
15
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<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
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<INTEREST-EXPENSE> 1,256 3,192
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