<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 JUNE 30, 1998.
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)
717 17TH STREET, SUITE 1480
DENVER, COLORADO 80202
____________________________________ ____________________________________
(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 JULY 13, 1998, 20,485,050 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE,
WERE ISSUED AND OUTSTANDING.
<PAGE>
STILLWATER MINING COMPANY
FORM 10-Q
QUARTER ENDED JUNE 30, 1998
INDEX
PART I - FINANCIAL INFORMATION
PAGE
----
ITEM 1. FINANCIAL STATEMENTS......................... 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS............................ 13
ITEM 2. CHANGES IN SECURITIES........................ 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.............. 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS..................................... 13
ITEM 5. OTHER INFORMATION............................ 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............. 13
SIGNATURES ............................................. 15
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)
June 30, December 31,
1998 1997
---------------- ----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 8,346 $ 4,191
Short-term investments 7,047 13,468
Inventories 7,721 7,380
Accounts receivable 8,926 6,926
Other current assets 1,545 1,349
Deferred income taxes 1,989 1,989
---------------- ----------------
Total current assets 35,574 35,303
PROPERTY, PLANT AND EQUIPMENT, NET 201,592 191,254
OTHER NONCURRENT ASSETS 2,529 2,662
---------------- ----------------
Total assets $ 239,695 $ 229,219
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt
and capital lease obligations $ 2,083 $ 1,982
Accounts payable 3,760 2,709
Accrued payroll and benefits 2,784 1,972
Property, production and franchise taxes payable 2,762 3,682
Other current liabilities 1,996 1,904
---------------- ----------------
Total current liabilities 13,385 12,249
LONG-TERM LIABILITIES
Long-term debt and capital lease obligations 60,491 61,513
Other noncurrent liabilities 3,405 2,283
Deferred income taxes 14,314 11,782
---------------- ----------------
Total liabilities 91,595 87,827
---------------- ----------------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 1,000,000 shares
authorized, none issued -- --
Common stock, $.01 par value, 50,000,000 shares
authorized, 20,583,017 and 20,377,623
issued and outstanding 206 204
Paid-in capital 143,854 141,193
Accumulated earnings (deficit) 4,040 (5)
---------------- ----------------
Total shareholders' equity 148,100 141,392
---------------- ----------------
Total liabilities and shareholders' equity $ 239,695 $ 229,219
================ ================
</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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ -------------------------------
1998 1997 1998 1997
--------------- ----------- --------------- ------------
<S> <C> <C> <C> <C>
REVENUES $ 26,523 $ 22,292 $ 48,036 $ 38,295
COSTS AND EXPENSES
Cost of metals sold 16,953 18,303 32,557 34,472
Depreciation and amortization 2,935 2,941 5,749 5,721
--------------- ----------- --------------- ------------
Total cost of sales 19,888 21,244 38,306 40,193
General administrative expense and other 1,038 1,002 1,761 1,356
--------------- ----------- --------------- ------------
Total costs and expenses 20,926 22,246 40,067 41,549
--------------- ----------- --------------- ------------
OPERATING INCOME (LOSS) 5,597 46 7,969 (3,254)
OTHER INCOME (EXPENSE)
Interest income 257 277 513 527
Interest expense, net of capitalized
interest of $354, $0, $576, and $742 (877) (1,427) (1,905) (1,936)
--------------- ----------- --------------- ------------
INCOME (LOSS) BEFORE INCOME TAXES 4,977 (1,104) 6,577 (4,663)
INCOME TAX (PROVISION) BENEFIT (1,916) 425 (2,532) 1,795
--------------- ----------- --------------- ------------
NET INCOME (LOSS) $ 3,061 $ (679) $ 4,045 $ (2,868)
=============== =========== =============== ============
NET INCOME (LOSS) PER SHARE
Basic and diluted earnings per share $ 0.15 $ (0.03) $ 0.20 $ (0.14)
=============== =========== =============== ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic 20,483 20,278 20,454 20,225
Diluted 20,889 20,278 20,735 20,225
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
STILLWATER MINING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------------
1998 1997
---------------- ----------------
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 12,101 $ (8,186)
(NOTE 6) ---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (16,109) (10,071)
Purchase of short-term investments (2,256) (8,170)
Proceeds from maturity of short-term investments 8,677 12,177
---------------- ----------------
NET CASH USED IN INVESTING ACTIVITIES (9,688) (6,064)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 2,663 1,496
Payments on long-term debt and capital lease
obligations (921) (661)
Proceeds from capital lease -- 855
---------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,742 1,690
---------------- ----------------
CASH AND CASH EQUIVALENTS
Net increase (decrease) 4,155 (12,560)
Balance at beginning of period 4,191 16,389
---------------- ----------------
BALANCE AT END OF PERIOD $ 8,346 $ 3,829
================ ================
</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 six month
period ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the year ending December 31, 1998. These interim
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Stillwater
Mining Company (the "Company") Form 10-K for the year ended December 31, 1997.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECLASSIFICATIONS
Certain amounts in the accompanying consolidated financial statements for
1997 have been reclassified to conform to the classifications used in 1998.
ACCOUNTING STANDARDS
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income. This
Statement establishes standards for reporting and displaying comprehensive
income and its components. The effect of adopting SFAS No. 130 was not material
for any of the periods presented.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement is effective for the fiscal
quarter beginning January 1, 2000 and establishes accounting and reporting
standards for derivative instruments and for hedging activities. Based upon the
Company's current hedging practices, it does not appear that the effect of
adopting SFAS No. 133 will have a material effect on the Company's accounting
for these activities. However, upon adoption the Company will report a
statement of comprehensive income displaying the effects of the forecasted
transactions.
Additionally in June 1998, the FASB issued Statement of Position (SOP) 98-
5, Reporting on the Costs of Start-up Activities. SOP 98-5 is effective for
fiscal year 1999 and requires that the costs of start-up activities, including
organization costs, be expensed as incurred. The Company has yet to determine
the effect of this guidance on the Company's accounting.
NOTE 3 - INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
(Unaudited)
JUNE 30, December 31,
1998 1997
--------------------- ----------------------
<S> <C> <C>
Raw ore $ 492 $ 460
Concentrate and in-process 3,889 3,604
--------------------- ----------------------
Metals inventory 4,381 4,064
Materials and supplies 3,340 3,316
--------------------- ----------------------
$ 7,721 $ 7,380
===================== ======================
</TABLE>
6
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 - PRECIOUS METALS HEDGING CONTRACTS
Precious metals hedging contracts at June 30, 1998, consist of spot deferred
forward sales contracts, which require the future delivery of metals at a
specific price. The realization of revenue pursuant to these contracts is
dependent upon the counterparties' performance in accordance with the terms of
the contracts. The Company anticipates all counterparties will meet their
obligations under the contracts.
At June 30, 1998, the Company's outstanding hedge contracts are as follows:
<TABLE>
<CAPTION>
1998 1999
---------------------------------- -----------------------------------
HEDGED AVERAGE PRICE HEDGED AVERAGE PRICE
OUNCES PER OUNCE OUNCES PER OUNCE
---------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
PALLADIUM 87,069 $133 - -
PLATINUM 11,142 $387 4,000 $399
</TABLE>
The Company has credit agreements with its major trading partners that
provide for margin deposits in the event that forward prices for palladium and
platinum exceed the Company's hedge contract prices and its credit lines.
NOTE 5 - EARNINGS PER SHARE
In 1997, the Company adopted SFAS No. 128, Earnings per Share. All
prior period earnings per share data presented have been restated to conform to
the provisions of this Statement.
Outstanding options to purchase 1,239,115 and -0- shares of common stock
were included in the computation of diluted earnings per share for the three
month periods ended June 30, 1998 and 1997, respectively. Outstanding options
to purchase 92,000 and 1,134,884 shares of common stock were excluded from the
computation of diluted earnings per share for the three month periods ended June
30, 1998 and 1997, respectively, because to do so would have been antidilutive
using the treasury stock method.
Outstanding options to purchase 938,965 and -0- shares of common stock
were included in the computation of diluted earnings per share for the six month
periods ended June 30, 1998 and 1997, respectively. Outstanding options to
purchase 392,150 and 1,134,884 shares of common stock were excluded from the
computation of diluted earnings per share for the six month periods ended June
30, 1998 and 1997, respectively, because to do so would have been antidilutive
using the treasury stock method.
In addition, 1.9 million shares of common stock issuable under the
terms of the Company's Convertible Subordinated Notes were excluded from the
computation of diluted earnings per share for the six month and three month
periods ended June 30, 1998 and 1997, because to do so would have been
antidilutive.
7
<PAGE>
STILLWATER MINING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 - CASH FLOW INFORMATION
Reconciliation of net income (loss) to net cash provided by (used in) operating
activities is as follows (in thousands):
<TABLE>
<CAPTION>
Six months ended June 30, 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 4,045 $(2,868)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization 5,749 5,721
Deferred income taxes 2,532 (1,795)
Other 22 575
Changes in operating assets and liabilities:
Decrease (increase) in inventories (341) 5,061
Increase in accounts receivable (2,000) (10,389)
Increase in other current assets (196) (3,640)
Decrease in other noncurrent assets 133 192
Increase (decrease) in accounts payable 1,051 (2,969)
Increase (decrease) in other current liabilities (16) 1,886
Increase in noncurrent liabilities 1,122 40
- --------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $12,101 $(8,186)
- --------------------------------------------------------------------------------
</TABLE>
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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
OUNCES PRODUCED
Palladium (000) 91 60 168 120
Platinum (000) 29 18 52 37
------------- ---------- ------------- ----------
Total 120 78 220 157
TONS MINED (000) 183 134 347 255
TONS MILLED (000) 182 134 346 255
AVERAGE MILL GRADE (OPT) 0.72 0.68 0.70 0.70
MILL RECOVERY (%) 92 87 92 87
CASH COSTS PER OUNCE PRODUCED(1) $147 $189 $150 $186
Depreciation and amortization 24 38 26 37
------------- ---------- ------------- ----------
Total costs per ounce produced(1) $171 $227 $176 $223
OUNCES SOLD
Palladium (000) 91 73 164 135
Platinum (000) 27 23 50 43
------------- ---------- ------------- ----------
Total 118 96 214 178
AVERAGE REALIZED PRICE PER OUNCE
Palladium $179 $177 $174 $158
Platinum $380 $408 $391 $394
Combined (2) $225 $232 $224 $215
AVERAGE MARKET PRICE PER OUNCE
Palladium $321 $175 $281 $155
Platinum $386 $397 $386 $383
Combined (2) $326 $227 $297 $208
</TABLE>
(1) Cash costs of production include cash costs of mining, processing and
administrative expenses at the mine site (including overhead, taxes other
than income, royalties, and credits for metals produced other than palladium
and platinum). Total costs of production include cash costs plus
depreciation and amortization. Income taxes, general and administrative
expense and interest income and expense are not included in either total or
cash costs of production.
(2) Stillwater Mining reports a combined realized price of palladium and
platinum at the same ratio as ounces are produced from the base metals
refinery. The same ratio is applied to the combined average market price.
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. Such statements include comments
regarding anticipated capital expenditures and sources of financing for capital
expenditures. In addition to factors discussed below, the factors that could
cause actual results to differ materially include, but are not limited to, the
following: supply and demand of palladium and platinum; unexpected events during
facility expansion; fluctuations in ore grade, tons mined, crushed or milled;
variations in smelter or refinery operation; amounts and prices of the Company's
forward metals sales, and geological, technical, permitting, mining or
processing issues. 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, 1997.
RESULTS OF OPERATIONS
Three months ended June 30, 1998 compared to three months ended June 30, 1997
- -----------------------------------------------------------------------------
Revenues
--------
Revenues for the second quarter of 1998 increased $4.2 million, or 19%, to
$26.5 million compared to $22.3 million in the second quarter of 1997. The
increase in revenue was primarily due to a 23% increase in the quantity of metal
sold. The increase was partially offset by a 7% decrease in the average realized
price per ounce of platinum.
During the second quarter of 1998, the Company sold 91,000 ounces of
palladium and 27,000 ounces of platinum, at average realized prices of $179 and
$380, respectively, compared with sales of 73,000 ounces of palladium and 23,000
ounces of platinum, at average realized prices of $177 and $408, respectively,
in the prior year's comparable period. During the second quarter of 1998, the
average market prices of palladium and platinum were $321 and $386,
respectively. As a result of hedge contracts that were entered into in 1997,
the Company realized $11.9 million less revenue in the second quarter of 1998
than would have been realized if metal had been delivered at prevailing average
market prices. During the second quarter of 1998, the Company increased
production 54% to 91,000 ounces of palladium and 29,000 ounces of platinum
compared with production of 60,000 ounces of palladium and 18,000 ounces of
platinum in the second quarter of 1997.
Costs and Expenses
------------------
Cost of metals sold decreased by $1.3 million, or 7%, from $18.3 million in
the second quarter of 1997 to $17.0 million in the second quarter of 1998. The
cash costs per ounce produced decreased 22% from $189 in the second quarter of
1997 to $147 in 1998. The decrease in costs is the result of operating
efficiencies that have occurred as a result of completion of an expansion at the
Stillwater Mine. During 1997, the facility increased production capacity from
1,200 tons per day in the first quarter of 1997 to 2,000 tons per day in the
fourth quarter of 1997. In addition, materials handling and processing
efficiencies were realized upon commissioning of the production shaft in June
1997. In addition, mill recovery increased from 87% in the second quarter of
1997 to 92% in the second quarter of 1998, as a result of operational
efficiencies.
Operating Income
----------------
As a result of the increase in revenues and the decrease in operating costs
discussed above, operating income in the second quarter of 1998 increased to
$5.6 million compared with operating income of $46,000 in the comparable period
of 1997.
10
<PAGE>
Other Income (Expense)
----------------------
During the second quarter of 1998, net interest expense decreased by $0.5
million to $0.9 million compared with $1.4 million in the second quarter of
1997. The decrease in net interest expense is due to the fact that no interest
was capitalized in second quarter of 1997, since the expansion of the Stillwater
Mine was substantially completed in the first quarter of 1997. Interest expense
of $0.4 million was capitalized in the second quarter of 1998.
Net Income
----------
The Company's income before income taxes amounted to $5.0 million in the
second quarter of 1998 compared to a loss before income taxes of $1.1 million in
the second quarter of 1997. In the second quarter of 1998, the Company provided
for $1.9 million of income taxes compared to a recorded benefit of $0.4 million
in the second quarter of 1997. The Company has provided for deferred income
taxes at the statutory rate of 38.5%; however, as a result of approximately
$46.6 million of operating loss carryforwards the Company will not be required
to fund any material income tax liability until future years. As a result, the
Company reports net income of $3.1 million, or $ 0.15 per basic and diluted
share in the second quarter of 1998, compared to a net loss of $0.7 million, or
$0.03 per basic and diluted share in the second quarter of 1997.
RESULTS OF OPERATIONS
Six months ended June 30, 1998 compared to six months ended June 30, 1997
- -------------------------------------------------------------------------
Revenues
--------
Revenues for the first half of 1998 increased $9.7 million, or 25%, to
$48.0 million compared to $38.3 million in the first half of 1997. The increase
in revenue was primarily due to a 20% increase in the quantity of metal sold
combined with a 10% increase in the average realized price per ounce of
palladium.
During the first half of 1998, the Company sold 164,000 ounces of palladium
and 50,000 ounces of platinum at average realized prices of $174 and $391,
respectively, compared with sales of 135,000 ounces of palladium and 43,000
ounces of platinum at average realized prices of $158 and $394, respectively, in
the prior year's comparable period. During the first half of 1998, the average
market prices of palladium and platinum were $281 and $386, respectively. As a
result of hedge contracts that were entered into in 1997, the Company realized
$15.6 million less revenue in the first half of 1998 than would have been
realized if metal had been delivered at prevailing average market prices. In the
comparable period of 1997, a hedging gain of $1.2 million resulted.
During the first half of 1998, the Company increased production 40% to
168,000 ounces of palladium and 52,000 ounces of platinum compared with
production of 120,000 ounces of palladium and 37,000 ounces of platinum in the
first half of 1997.
Costs and Expenses
------------------
Cost of metals sold decreased by $1.9 million, from $34.5 million in the
first half of 1997 to $32.6 million in the first half of 1998. The cash costs
per ounce produced decreased 19% from $186 in the first half of 1997 to $150 in
1998. The decrease in costs is the result of operating efficiencies that have
occurred as a result of completion of an expansion at the Stillwater Mine.
During 1997, the facility increased production capacity from 1,200 tons per day
in the first quarter of 1997 to 2,000 tons per day in the fourth quarter of
1997. In addition, materials handling and processing efficiencies were realized
upon commissioning of the production shaft in June 1997. In addition, the mill
recovery increased from 87% in the first half of 1997 to 92% in the first half
of 1998.
11
<PAGE>
Operating Income
----------------
As a result of the increase in revenues and the decrease in operating costs
discussed above, operating income in the first half of 1998 increased by $11.3
million to $8.0 million compared with an operating loss of $3.3 million in the
comparable period of 1997.
Net Income
----------
The Company's income before income taxes amounted to $6.6 million in the
first half of 1998 compared to a loss before income taxes of $4.7 million in the
first half of 1997. In the first half of 1998, the Company provided for $2.5
million of income taxes compared to a recorded benefit of $1.8 million in the
first half of 1997. The Company has provided for deferred income taxes at the
statutory rate of 38.5%; however, as a result of approximately $46.6 million of
operating loss carryforwards the Company will not be required to fund any
material income tax liability until future years. As a result, the Company
reports net income of $4.0 million, or $0.20 per basic and diluted share in the
first half of 1998, compared to a net loss of $2.9 million, or $0.14 per basic
and diluted share in the first half of 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital at June 30, 1998 was $22.2 million compared
to $23.1 million at December 31, 1997. The ratio of current assets to current
liabilities was 2.66 at June 30, 1998, compared to 2.88 at December 31, 1997.
Net cash provided by operating activities for the first half of 1998 was
$12.1 million compared to net cash used of $8.2 million in the first half of
1997. The $20.3 million increase in operating cash flow in 1998 is primarily
attributable to an increase in the Company's net income of $6.9 million, an
increase in the provision for deferred income taxes of $4.3 million and a change
in the net operating assets and liabilities of $9.6 million.
A total of $9.7 million of net cash was used in investing activities in the
first half of 1998 compared to $6.1 million in the first half of 1997. The
increased usage is primarily due to an increase in capital expenditures, as a
result of the increased development at the East Boulder Project. The Company's
financing activities provided $1.7 million in net cash in the first half of 1998
and 1997. As a result of the above, cash and cash equivalents increased by $4.2
million in the first half of 1998 compared with a decrease of $12.6 million in
the comparable period of 1997.
During the remainder of 1998, the Company expects to invest approximately
$39.5 million in various capital investment programs which may be funded by
operating cash flow, the Company's existing working capital and, if required,
lease financing or short-term borrowings. The Company is evaluating various
plans to expand production at the facility. Dependent on the outcome of such
studies, the level of capital expenditures and the source of funding may vary in
future periods.
The Company has established an unsecured working capital line of credit
with NM Rothschild and Sons, Ltd., with a maximum borrowing capacity of $15
million, which expires on April 30, 1999. As of June 30, 1998, there were no
borrowings against this credit line, and the Company could borrow up to $11.9
million based upon quarterly borrowing calculations under the terms of the
agreement.
12
<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.
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The annual meeting of stockholders was held on May 15, 1998.
(b) The following individuals were elected to continue as Directors at
the meeting:
Ray W. Ballmer
Douglas D. Donald
John W. Eschenlohr
Lawrence M. Glaser
John P. Ingersoll
William E. Nettles
Ted Schwinden
Peter Steen
(c) Set forth below are the votes cast for the election of Directors:
FOR (*) WITHHELD
---------------- ----------------
Ray W. Ballmer 15,872,898 43,009
Douglas D. Donald 15,871,362 44,545
John W. Eschenlohr 15,865,178 50,729
Lawrence M. Glaser 15,876,836 39,071
John P. Ingersoll 15,868,578 47,329
William E. Nettles 15,879,103 36,804
Ted Schwinden 15,867,098 48,809
Peter Steen 15,863,548 52,359
Stockholders were asked to amend and restate the Company's 1994 Stock
Option Plan to authorize an additional one million shares of stock to
be made available for issuance under the plan. Votes cast in favor were
12,156,153 representing approximately 76% of the shares entitled to
vote, against were 3,667,151, and abstaining were 92,603.
Additionally, stockholders were asked to ratify the appointment of
Pricewaterhouse Coopers LLP as the Company's independent accountants
for the fiscal year ending December 31, 1998. Votes cast in favor were
15,679,421 representing approximately 99% of the shares entitled to
vote, against were 17,210, and abstaining were 219,276.
* Stockholders have cumulative voting rights in connection with the
election of Directors.
13
<PAGE>
(d) None
Item 5. Other Information
-----------------
On July 1, 1998, the Company filed a universal shelf registration
statement on Form S-3 under the Securities Act of 1933 for an aggregate
initial offering of up to $200 million of securities. The registration
statement was declared effective on July 17, 1998.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 8,346 0
<SECURITIES> 7,047 0
<RECEIVABLES> 8,926 0
<ALLOWANCES> 0 0
<INVENTORY> 7,721 0
<CURRENT-ASSETS> 35,574 0
<PP&E> 260,626 0
<DEPRECIATION> 59,034 0
<TOTAL-ASSETS> 239,695 0
<CURRENT-LIABILITIES> 13,385 0
<BONDS> 60,491 0
0 0
0 0
<COMMON> 206 0
<OTHER-SE> 147,894 0
<TOTAL-LIABILITY-AND-EQUITY> 239,695 0
<SALES> 26,523 48,036
<TOTAL-REVENUES> 26,523 48,036
<CGS> 16,953 32,557
<TOTAL-COSTS> 20,926 40,067
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 877 1,905
<INCOME-PRETAX> 4,977 6,577
<INCOME-TAX> (1,916) (2,532)
<INCOME-CONTINUING> 3,061 4,045
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,061 4,045
<EPS-PRIMARY> 0.15 0.20
<EPS-DILUTED> 0.15 0.20
</TABLE>
