<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, 2000.
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
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STILLWATER MINING COMPANY
-------------------------
(Exact name of registrant as specified in its charter)
Delaware 81-0480654
-------------------------------- --------------------------------
(State or other jurisdiction (I.R.S. Employer of
incorporation or organization) Identification No.)
One Tabor Center
1200 Seventeenth Street, Suite
900 Denver, Colorado 80202
-------------------------------- ------------------------------
(Address of principal executive (Zip Code)
offices)
(303) 352-2060
--------------------------------------------------
(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 21, 2000, 38,527,528 shares of common stock, $0.01 par value per share,
were issued and outstanding.
1
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STILLWATER MINING COMPANY
FORM 10-Q
QUARTER ENDED June 30, 2000
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements...................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................... 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings......................................... 19
Item 2. Changes in Securities and Use of Proceeds................. 19
Item 3. Defaults Upon Senior Securities........................... 19
Item 4. Submission of Matters to a Vote of Security Holders....... 19
Item 5. Other Information......................................... 20
Item 6. Exhibits and Reports on Form 8-K.......................... 20
SIGNATURES................................................................ 21
</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)
June 30, December 31,
2000 1999
--------------- -----------------
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 1,531 $ 2,846
Inventories 15,600 11,658
Accounts receivable 36,171 26,248
Deferred income taxes 2,400 1,945
Other current assets 2,275 3,013
--------------- -----------------
Total current assets 57,977 45,710
---------------- -----------------
Property, plant and equipment, net 518,937 428,252
Other noncurrent assets 4,975 4,876
---------------- -----------------
Total assets $ 581,889 $ 478,838
================ =================
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 25,879 $ 20,157
Accrued payroll and benefits 4,494 5,511
Property, production and franchise taxes payable 2,486 4,322
Current portion of capital lease obligations 2,633 2,628
Income taxes payable 5,500 642
Metals leases payable 8,591 -
Other current liabilities 6,993 3,729
---------------- -----------------
Total current liabilities 56,576 36,989
---------------- -----------------
Long-term liabilities
Long-term debt and capital lease obligations 116,133 84,404
Deferred income taxes 36,668 29,042
Other noncurrent liabilities 7,802 5,299
---------------- -----------------
Total liabilities 217,179 155,734
---------------- -----------------
Shareholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, none issued - -
Common stock, $0.01 par value, 50,000,000 shares
authorized, 38,519,205 and 37,917,973 shares
issued and outstanding, respectively 385 379
Paid-in capital 281,167 272,173
Accumulated earnings 83,158 50,552
---------------- -----------------
Total shareholders' equity 364,710 323,104
---------------- -----------------
Total liabilities and shareholders' equity $ 581,889 $ 478,838
================ =================
</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,
------------------------------------- -------------------------------------
2000 1999 2000 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 48,565 $ 36,845 $ 109,900 $ 74,875
Costs and expenses
Cost of metals sold 25,376 21,168 52,268 39,399
Depreciation and amortization 4,210 3,332 8,512 6,259
---------------- ---------------- ---------------- ----------------
Total cost of sales 29,586 24,500 60,780 45,658
General and administrative expense 2,243 1,216 4,298 2,544
---------------- ---------------- ---------------- ----------------
Total costs and expenses 31,829 25,716 65,078 48,202
---------------- ---------------- ---------------- ----------------
Operating income 16,736 11,129 44,822 26,673
Other income (expense)
Interest income 185 180 464 667
Interest expense, net of capitalized
interest of $2,423, $564, $5,079
and $1,652 - (28) - (137)
---------------- ---------------- ---------------- ----------------
Income before income taxes 16,921 11,281 45,286 27,203
Income tax provision (4,738) (3,235) (12,680) (8,569)
---------------- ---------------- ---------------- ----------------
Net income and comprehensive income $ 12,183 $ 8,046 $ 32,606 $ 18,634
================ ================ ================ ================
Basic and diluted earnings per share
Basic $ 0.32 $ 0.22 $ 0.85 $ 0.52
================ ================ ================ ================
Diluted $ 0.31 $ 0.21 $ 0.83 $ 0.48
================ ================ ================ ================
Weighted average common shares
outstanding
Basic 38,514 36,709 38,393 35,654
Diluted 39,178 38,767 39,257 38,607
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
Stillwater Mining Company
Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
-------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 32,606 $ 18,634
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 8,512 6,259
Deferred income taxes 7,171 6,584
Changes in operating assets and liabilities:
Inventories (3,942) (288)
Accounts receivable (9,923) (2,054)
Accounts payable 5,722 1,853
Other 17,002 1,553
------------- -------------
Net cash provided by operating activities 57,148 32,541
------------- -------------
Cash flows from investing activities
Capital expenditures (99,197) (89,358)
------------- -------------
Net cash used in investing activities (99,197) (89,358)
------------- -------------
Cash flows from financing activities
Borrowings under credit facility 33,100 12,000
Payments on long-term debt and capital lease
obligations (1,366) (1,214)
Issuance of common stock 9,000 2,311
Payments for debt issuance costs - (2,657)
Payments for conversion costs of 7% convertible
notes - (309)
------------- -------------
Net cash provided by financing activities 40,734 10,131
------------- -------------
Cash and cash equivalents
Net (decrease) (1,315) (46,686)
Balance at beginning of period 2,846 49,811
------------- -------------
Balance at end of period $ 1,531 $ 3,125
============= =============
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
Stillwater Mining Company
Notes to Consolidated Financial Statements
(Unaudited)
Note 1 - General
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the company's financial
position as of June 30, 2000 and the results of operations for the three and six
month periods ended June 30, 2000 and 1999 and cash flows for the six month
periods ended June 30, 2000 and 1999. Certain prior year amounts have been
reclassified to conform with the current year presentation. The results of
operations for the three and six month periods are not necessarily indicative of
the results to be expected for the full year. The accompanying consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the company's 1999 Annual
Report on Form 10-K.
Note 2 - New Accounting Standards
In December 1999, the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements. The objective of this SAB is to provide further guidance on revenue
recognition issues in the absence of authoritative literature addressing a
specific arrangement or a specific industry. In March 2000, the SEC released SAB
No. 101A, which delayed the implementation date of SAB 101 for registrants with
fiscal years that begin between December 16, 1999 and March 15, 2000 until the
second fiscal quarter of the first fiscal year beginning after December 15,
1999. In June 2000, in response to requests from a number of groups asking for
additional time to assess the effect of SAB 101, the SEC released SAB 101B,
which delays the implementation date of SAB 101 until no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999. The company is
currently assessing the impact of SAB 101. Its effect on the company's financial
position or results of operations has not yet been determined. Any changes
resulting from the implementation of SAB 101 will be reported as a change in
accounting principle with the cumulative effect of the change on retained
earnings at the beginning of the fiscal year included in restated net income of
the first interim period of the fiscal year in which the change is made.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. In June 2000, the FASB issued
SFAS No. 138, Accounting for Derivative Instruments and Certain Hedging
Activities, an amendment to FASB SFAS No. 133. SFAS Nos. 133 and 138 are
required to be adopted for fiscal years beginning after June 15, 2000. SFAS
Nos. 133 and 138 require that derivatives be reported on the balance sheet at
fair value and, if the derivative is not designated as a hedging instrument,
changes in fair value must be recognized in earnings in the period of change.
If the derivative is designated as a hedge and to the extent such hedge is
determined to be effective, changes in fair value are either a) offset by the
change in fair value of the hedged asset or liability (if applicable) or b)
reported as a component of other comprehensive income in the period of change,
and subsequently recognized in earnings when the offsetting hedged transaction
occurs. The definition of derivatives has also been expanded to include
contracts that require physical delivery if the contract allows for net cash
settlement. The company primarily uses derivatives to hedge metal prices. Such
derivatives are reported at cost, if any, and gains and losses on such
derivatives are reported when the hedged transaction occurs. Accordingly, the
company's adoption of SFAS Nos. 133 and 138 will have an impact on the reported
financial position of the company, and although such impact has not been
determined, it is currently not believed to be material. Adoption of SFAS Nos.
133 and 138 should have no significant impact on reported earnings, but could
materially affect comprehensive income.
In May 2000, the FASB Emerging Issues Task Force reached a consensus on
Issue No. 00-14, Accounting for Certain Sales Incentives (the consensus). The
consensus requires the reduction in or refund of the selling price of the
product or service resulting from any cash sales incentive to be classified as a
reduction of revenue. The consensus is effective for all reporting periods
beginning after May 18, 2000. The company currently classifies sales discounts
associated with its long-term sales contracts as components of cost of metals
sold. Accordingly,
6
<PAGE>
the company's application of the consensus will have an impact on the reported
revenues and cost of metals sold, and although such impact has not been
determined, it is currently not believed to be material. Application of the
consensus should have no impact on reported earnings, comprehensive income, or
financial position.
Note 3 - Inventories
Inventories consisted of the following (in thousands):
(Unaudited)
June 30, December 31,
2000 1999
----------- ------------
Metals inventory
Raw ore $ 151 $ 187
Concentrate and in-process 10,577 7,079
----------- ------------
10,728 7,266
Materials and supplies 4,872 4,392
----------- ------------
$15,600 $11,658
=========== ============
Note 4 - Long-Term Debt
Scotiabank Credit Facility
In March 1999, the company entered into a seven-year $175 million credit
facility ("Scotiabank Credit Facility") from a syndicate of banks led by the
Bank of Nova Scotia. The Scotiabank Credit Facility provides for a $125 million
term loan facility and a $50 million revolving credit facility. Borrowings may
be made under the term loan facility until December 29, 2000 and amortization of
the term loan facility will commence on March 31, 2001. The final maturity of
the term loan facility and revolving credit facility is December 30, 2005. As
of June 30, 2000, the company had $76.4 million outstanding under the term loan
facility and $36.2 million outstanding under the revolving credit facility.
The loans are required to be repaid from excess cash flow, proceeds from
asset sales and any issuance of debt or equity securities, subject to specific
exceptions. Proceeds of the term loan facility are used to finance a portion of
the expansion plan. At the company's option, the Scotiabank Credit Facility
bears interest at London Interbank Offered Rates (LIBOR) or an alternate base
rate, in each case plus a margin of 1.00% to 1.75%, which is adjusted depending
upon the company's ratio of debt to operating cash flow. At June 30, 2000, the
borrowings outstanding under the Scotiabank Credit Facility bear interest at
7.94%. Substantially all the property and assets of the company are pledged as
security for the Scotiabank Credit Facility.
During 1999, the company did not comply with certain production covenants
set forth in the original Scotiabank Credit Facility. The bank syndicate has
granted waivers of these covenants that are effective until September 30, 2000.
In 1999, the company retained independent mining engineers to review key
operating and capital cost parameters included in its long-term mine plans. The
company is seeking to renegotiate, refinance or replace the credit agreement
prior to the date the waiver expires. The company is in compliance with all
other aspects of the credit agreement, including all financial covenants as of
June 30, 2000. As a result, the company has classified the debt as a long-term
liability as of June 30, 2000.
On July 6, 2000, the company completed a $30 million offering of Exempt
Facility Revenue Bonds, Series 2000, through the State of Montana Board of
Investments. The bonds were issued by the State of Montana Board of Investments
to finance a portion of the costs of constructing and equipping certain sewage
and solid waste disposal facilities at both the Stillwater Mine and the East
Boulder Project. The bonds mature on July 1, 2020 and have an interest rate of
8% with interest paid semi-annually.
7
<PAGE>
Convertible Subordinated Notes
On May 1, 1999, the company completed the underwritten call for redemption
of its $51.4 million outstanding principal amount of 7% Convertible Subordinated
Notes. Substantially all of the notes were converted into common stock. The
notes were redeemed at a conversion price of $17.87 per share with cash paid in
lieu of fractional shares. The company issued approximately 2.9 million shares
of common stock in connection with the conversion of the notes. Underwriters'
fees and other costs associated with the call for redemption were approximately
$0.3 million.
Note 5 - Earnings per Share
The company follows SFAS No. 128, Earnings per Share, which requires the
presentation of basic and diluted earnings per share.
The effect of outstanding stock options on diluted weighted average shares
outstanding was 663,721 and 1,109,411 shares for the three month periods ending
June 30, 2000 and 1999, respectively. Outstanding options to purchase 46,375
and 24,875 shares of common stock were excluded from the computation of diluted
earnings per share for the three month periods ended June 30, 2000 and 1999,
respectively, because the effect of inclusion would have been antidilutive using
the treasury stock method.
The effect of outstanding stock options on diluted weighted average shares
outstanding was 864,261 and 1,050,590 shares for the six month periods ending
June 30, 2000 and 1999, respectively. Outstanding options to purchase 26,450
and 75,525 shares of common stock were excluded from the computation of diluted
earnings per share for the six month periods ended June 30, 2000 and 1999,
respectively, because the effect of inclusion would have been antidilutive using
the treasury stock method.
The effect of the company's Convertible Subordinated Notes on diluted
weighted average shares outstanding was 948,498 shares for the three month
period ended June 30, 1999. The effect of the company's Convertible Subordinated
Notes on diluted weighted average shares outstanding was 1,902,090 shares for
the six month period ended June 30, 1999.
Note 6 - Income Taxes
Income taxes for the three and six month periods ended June 30, 2000,
have been provided for at the expected annualized rate of 28%.
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,
------------------------------- -------------------------------
2000 1999 2000 1999
----------- -------------- ---------- ---------------
<S> <C> <C> <C> <C>
Ounces produced (000)
Palladium 75 75 161 158
Platinum 23 23 49 48
----------- -------------- ---------- ---------------
Total 98 98 210 206
Tons mined (000) 147 167 317 350
Tons milled (000) 149 167 317 352
Mill head grade (ounce per ton) 0.68 0.66 0.70 0.65
Mill recovery (%) 91 91 92 91
Sub-grade tons milled (000) 30 - 44 -
Sub-grade mill head grade (ounce per ton) 0.30 - 0.24 -
Sub-grade mill recovery (%) 80 - 80 -
Total tons milled 179 - 361 -
Combined mill head grade 0.61 - 0.64 -
Cash costs per total ton milled $ 142 $ 115 $ 142 $ 108
Cash costs per ounce/(1)/ $ 258 $ 197 $ 245 $ 186
Depreciation and amortization 43 35 41 30
----------- -------------- ---------- ---------------
Total costs per ounce produced $ 301 $ 232 $ 286 $ 216
Ounces sold (000)/(2)/
Palladium 75 82 161 162
Platinum 23 25 49 49
----------- -------------- ---------- ---------------
Total 98 107 210 211
Average realized price per ounce/(3)/
Palladium $ 497 $ 341 $ 541 $ 351
Platinum $ 488 $ 353 $ 466 $ 363
Combined/(2)/ $ 495 $ 344 $ 523 $ 354
Average market price per ounce/(3)/
Palladium $ 600 $ 341 $ 594 $ 342
Platinum $ 529 $ 356 $ 504 $ 360
Combined/(2)/ $ 583 $ 345 $ 573 $ 346
</TABLE>
(1) Cash costs include cash costs of mine operations, processing and
administrative expenses at the mine site (including overhead, taxes other
than income taxes, royalties, and credits for metals produced other than
palladium and platinum). Total costs of production include cash costs plus
depreciation and amortization. Income taxes, corporate general and
administrative expense and interest income and expense are not included in
either total or cash costs.
(2) Stillwater Mining reports a combined average 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.
The combined average market price represents the London PM Fix for the
actual months of the period.
(3) Revenue is recognized when product is shipped from the company's base
metals refinery to external refiners. Sales are recorded and later adjusted
when sales prices are finalized. Therefore, differences between realized
prices and market prices may occur.
9
<PAGE>
Results of Operations
Three months ended June 30, 2000 compared to three months ended June 30, 1999
-----------------------------------------------------------------------------
PGM Production
--------------
During the second quarter of 2000, the company produced approximately
75,000 ounces of palladium and approximately 23,000 ounces of platinum compared
with similar production levels of approximately 75,000 ounces of palladium and
23,000 ounces of platinum in the second quarter of 1999.
Revenues
--------
Revenues were $48.6 million for the second quarter of 2000 compared to
$36.8 million for the second quarter of 1999, an increase of 32% as a result of
higher realized metal prices partially offset by an 8% decrease in the quantity
of metals sold.
Palladium and platinum sales decreased to approximately 75,000 ounces and
23,000 ounces, respectively, for the second quarter of 2000 compared with
palladium and platinum sales of approximately 82,000 ounces and 23,000 ounces,
respectively, in the second quarter of 1999. The decrease is due to normal
fluctuations as a result of the timing of metal shipments.
The average realized price per ounce of palladium and platinum sold in the
second quarter of 2000 increased 44% to $495 per ounce, compared to $344 per
ounce in the second quarter of 1999. The average market price rose 69% to $583
per ounce in the second quarter of 2000 compared to $345 per ounce in the second
quarter of 1999. The average realized price per ounce of palladium was $497 in
the second quarter of 2000 compared to $341 per ounce in the second quarter of
1999, while the average market price was $600 per ounce in the second quarter of
2000 compared to $341 per ounce in the second quarter of 1999. The average
realized price per ounce of platinum sold was $488 per ounce in the second
quarter of 2000, compared with $353 per ounce in the second quarter of 1999.
The platinum average market price was $529 per ounce in the second quarter of
2000 compared to $356 per ounce in the second quarter of 1999.
Costs and Expenses
------------------
Cost of sales increased by $5.1 million, or 21%, to $29.6 million in the
second quarter of 2000 from $24.5 million in the second quarter of 1999. Cash
production costs per ounce in the second quarter of 2000 increased $61 or 31%,
to $258 per ounce from $197 per ounce in the second quarter of 1999. The
increase is primarily the result of the following items: 1) Additional stope
development activities performed during the second quarter which do not
immediately contribute to current production but are necessary for expansion of
stope mining areas. The company expects to benefit from these additional stope
development activities in the second half of 2000 and the first half of 2001.
Total stope mining cash costs per ounce in the second quarter of 2000 included
an additional $40 per ounce compared to the second quarter of 1999. 2) Cash
production costs per ounce for the second quarter of 2000 also included an
additional $8 per ounce of maintenance costs as compared to the prior year's
quarter related to ongoing expansion activities and the implementation of a
preventative maintenance system. 3) An additional $8 of cash costs per ounce
were also incurred in the second quarter of 2000 compared to the second quarter
of 1999 for royalties and production taxes associated with higher realized PGM
prices. In addition, by-product credits increased $8 per ounce in the second
quarter of 2000 compared to the same period of 1999 due to metals prices. Total
production costs per ounce in the second quarter of 2000 increased $69 or 30% to
$301 per ounce from $232 per ounce in the second quarter of 1999. This increase
is also primarily due to the items noted above. Depreciation and amortization
increased $8, or 23% to $43 per ounce from $35 per ounce in the second quarter
of 1999 due to certain assets acquired for the expansion being placed into
service.
10
<PAGE>
General and Administrative Expense
----------------------------------
For the second quarter of 2000, general and administrative costs were $2.2
million compared to $1.2 million in the second quarter of 1999. The increase
was primarily a result of consulting and outside service costs incurred in the
second quarter of 2000 in connection with our expansion effort.
Income Tax Provision
--------------------
The company has provided for income taxes of $4.7 million, or 28% of pretax
income, for the second quarter of 2000 compared to $3.2 million, or 28% of
pretax income, for the second quarter of 1999.
Six months ended June 30, 2000 compared to six months ended June 30, 1999
-------------------------------------------------------------------------
PGM Production
--------------
During the first half of 2000, production increased 2% to approximately
161,000 ounces of palladium and 49,000 ounces of platinum compared with
production of approximately 158,000 ounces of palladium and 48,000 ounces of
platinum in the first half of 1999.
Revenues
--------
Revenues for the first half of 2000 increased $35.0 million, or 47%, to
$109.9 million compared to $74.9 million in the first half of 1999. The increase
in revenue was primarily due to a 47% increase in the combined average realized
price per ounce of palladium and platinum as compared to the first half of 1999.
During the first half of 2000, the company sold approximately 161,000
ounces of palladium and 49,000 ounces of platinum at average realized prices of
$541 and $466, respectively, compared with sales of approximately 162,000 ounces
of palladium and 49,000 ounces of platinum at average realized prices of $351
and $363, respectively, in the prior year's comparable period. During the first
half of 2000, the average market prices of palladium and platinum were $594 and
$504, respectively.
Costs and Expenses
------------------
Cost of sales increased by $15.1 million, or 33%, to $60.8 million in the
first half of 2000 from $45.7 million in the first half of 1999. Cash
production costs per ounce for the six months ended June 30, 2000 increased $59
per ounce, or 32%, to $245 per ounce from $186 per ounce in the first half of
1999. This increase is primarily due to the following: (1) Total stope mining
cash costs per ounce in the first half of 2000 included an additional $35 per
ounce compared to the first half of 1999. 2) Cash production costs per ounce
for the first half of 2000 also included an additional $8 per ounce of
maintenance costs as compared to the prior year's period related to ongoing
expansion activities and the implementation of a preventative maintenance
system. 3) An additional $8 of cash costs per ounce were also incurred in the
first half of 2000 compared to the first half of 1999 for royalties and
production taxes associated with higher realized PGM prices. In addition, by-
product credits increased $6 per ounce in the first half of 2000 compared to the
same period in 1999, due to higher metal prices. Depreciation and amortization
increased $11, or 37% to $41 per ounce in the first half of 2000 from $30 per
ounce in the first half of 1999 due to certain assets acquired for the expansion
being placed into service. Total production costs per ounce in the first half
of 2000 increased $70 or 32% to $286 per ounce from $216 per ounce in the first
half of 1999.
General and Administrative Expense
----------------------------------
For the first half of 2000, general and administrative costs were $4.3
million compared to $2.5 million for the same period of 1999. The increase was
primarily a result of consulting and other outside service costs incurred in the
first half of 2000 in connection with our expansion effort.
11
<PAGE>
Income Tax Provision
--------------------
The company has provided for income taxes of $12.7 million, or 28% of
pretax income, for the six months ended June 30, 2000, compared to $8.6 million,
or 31.5% of pretax income, for the same period of 1999. A review of the
company's projected benefit from statutory depletion resulted in the reduction
of the first half of 2000 tax rate to 28% from the rate of 31.5% accrued in the
first half of 1999.
Liquidity and Capital Resources
The company's working capital at June 30, 2000 was $1.4 million compared to
$8.7 million at December 31, 1999. The ratio of current assets to current
liabilities was 1.0 at June 30, 2000, compared to 1.2 at December 31, 1999.
Net cash provided by operations for the six months ended June 30, 2000, was
$57.1 million compared with $32.5 million for the comparable period of 1999, an
increase of $24.6 million. The increase was primarily a result of higher net
income and changes in operating assets and liabilities. The increase in
operating assets and liabilities is primarily due to outstanding palladium
leasing transactions of approximately $8.6 million as of June 30, 2000. The
company leases metals to third parties from time to time and records a liability
when the cash is received. The outstanding balance will subsequently be repaid
to the lender at specified installment dates in July and August of 2000.
A total of $99.2 million was used in investing activities in the first half
of 2000 compared to $89.4 million in the same period of 1999. The increase was
primarily due to increased capital expenditures as a result of the development
of the East Boulder project and the Stillwater Mine expansion.
For the six months ended June 30, 2000, cash flow provided by financing
activities was $40.7 million compared to $10.1 million for the comparable period
of 1999. The increase was primarily due to additional borrowings of $33.1
million under the company's seven-year, $175 million credit facility, and $9.0
million in proceeds received from the issuance of common stock in connection
with the company's incentive stock option plans.
As a result of the above, cash and cash equivalents decreased by $1.3
million for the first half of 2000, compared with a decrease of $46.7 million
for the comparable period of 1999.
Cash flow from operating activities is not expected to be sufficient to
cover remaining 2000 capital expenditures. Based on cash on hand and expected
cash flows from operations, along with the remaining credit of $62.4 million
available at June 30, 2000 under the existing $175 million credit facility and
the proceeds from the $30 million Exempt Facility Revenue Bond offering
completed in July, management believes there is sufficient liquidity to meet
2000 operating and capital needs. In addition, the company may, from time to
time, also seek to raise additional capital from the public or private
securities markets or from other sources for general corporate purposes and for
investments beyond the scope of the current phase of the current expansion
plans.
On July 6, 2000, the company completed a $30 million offering of Exempt
Facility Revenue Bonds, Series 2000, through the State of Montana Board of
Investments. The bonds are being issued to finance a portion of the costs of
constructing and equipping certain sewage and solid waste disposal facilities at
both the Stillwater Mine and the East Boulder Project. The bonds mature on July
1, 2020 and have an interest rate of 8% with interest paid semi-annually.
In March 1999, the company obtained a seven-year $175 million credit
facility from a syndicate of banks led by the Bank of Nova Scotia. The facility
provides for a $125 million term loan facility and a $50 million revolving
credit facility. Borrowings may be made under the term loan facility until
December 29, 2000 and amortization of the term loan facility will commence on
March 31, 2001. The final maturity of the term loan facility and revolving
credit facility is December 30, 2005.
The loans are required to be repaid from excess cash flow, proceeds from
asset sales and the issuance of
12
<PAGE>
debt or equity securities, subject to specified exceptions. Proceeds of the term
loan facility are being used to finance a portion of the expansion plan. At the
company's option, the credit facility bears interest at the London Interbank
Offered Rate (LIBOR) or an alternate base rate, in each case plus a margin of
1.00% to 1.75% which is adjusted depending upon the company's ratio of debt to
operating cash flow. Substantially all the property and assets of the company
are pledged as security for the credit facility.
Covenants in the Scotiabank Credit Facility restrict: (1) additional
indebtedness; (2) payment of dividends or redemption of capital stock; (3)
liens; (4) investment, acquisitions, dispositions or mergers; (5) transactions
with affiliates; (6) capital expenditures (other than those associated with the
expansion plan); (7) refinancing or prepayment of subordinated debt (excluding
the underwritten call of the company's 7% Convertible Subordinated Notes); (8)
changes in the nature of business conducted or ceasing operations at the
principal operating properties; and (9) commodities hedging to no more than 90%
of annual palladium production and 75% of annual platinum production (excluding
the sales covered by the company's marketing contracts and similar agreements).
The company is also subject to financial covenants, including a debt to
operating cash flow ratio, a debt service coverage ratio and a debt to equity
ratio.
Events of default include: (1) a cross-default to other indebtedness of the
company or its subsidiaries; (2) any material modification to the life-of-mine
plan for the Stillwater Mine; (3) a change of control of the company; (4) the
failure to maintain annual palladium production of at least 315,000 ounces in
the year 2000 and at least 490,000 ounces each year thereafter or (5) any breach
or modification of any of the sales contracts.
During 1999, as a result of delays in the expansion plan, the company did
not comply with certain production covenants set forth in the credit facility.
The bank syndicate has granted waivers of these covenants that are effective
until September 30, 2000, and consented to the $30 million offering of
Exempt Facility Revenue Bonds, Series 2000, through the State of Montana Board
of Investments. In 1999, the company retained independent mining engineers to
review key operating and capital cost parameters included in its long-term mine
plans. The company is seeking to renegotiate, refinance or replace the credit
facility. In the event the company is unable to renegotiate, refinance or
replace the existing credit facility by September 30, 2000, it may not be able
to obtain an additional waiver of the production covenants from the bank
syndicate. If this occurs, the company would be in default under the existing
credit facility and would be required to seek alternative financing, which may
not be available, and could adversely impact operating and capital costs or
affect project completion.
New Accounting Standards
In December 1999, the Securities and Exchange Commission (SEC) released
Staff Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial
Statements. The objective of this SAB is to provide further guidance on revenue
recognition issues in the absence of authoritative literature addressing a
specific arrangement or a specific industry. In March 2000, the SEC released
SAB No. 101A, which delayed the implementation date of SAB 101 for registrants
with fiscal years that begin between December 16, 1999 and March 15, 2000 until
the second fiscal quarter of the first fiscal year beginning after December 15,
1999. In June 2000, in response to requests from a number of groups asking for
additional time to assess the effect of SAB 101, the SEC released SAB 101B,
which delays the implementation date of SAB 101 until no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999. The company
is currently assessing the impact of SAB 101. Its effect on the company's
financial position or results of operations has not yet been determined. Any
changes resulting from the implementation of SAB 101 will be reported as a
change in accounting principle with the cumulative effect of the change on
retained earnings at the beginning of the fiscal year included in restated net
income of the first interim period of the fiscal year in which the change is
made.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. In June 2000, the FASB issued
SFAS No. 138, Accounting for Derivative Instruments and Certain Hedging
Activities, an amendment to FASB SFAS No. 133. SFAS Nos. 133 and 138 are
required to be adopted for fiscal years beginning after June 15, 2000. SFAS
Nos. 133 and 138 require that derivatives be reported on the balance sheet at
fair value and, if the derivative is not designated as a hedging instrument,
changes in fair value must be recognized in earnings in the period of change.
If the derivative is designated as a hedge and to the extent such hedge is
13
<PAGE>
determined to be effective, changes in fair value are either a) offset by the
change in fair value of the hedged asset or liability (if applicable) or b)
reported as a component of other comprehensive income in the period of change,
and subsequently recognized in earnings when the offsetting hedged transaction
occurs. The definition of derivatives has also been expanded to include
contracts that require physical delivery if the contract allows for net cash
settlement. The company primarily uses derivatives to hedge metal prices. Such
derivatives are reported at cost, if any, and gains and losses on such
derivatives are reported when the hedged transaction occurs. Accordingly, the
company's adoption of SFAS Nos. 133 and 138 will have an impact on the reported
financial position of the company, and although such impact has not been
determined, it is currently not believed to be material. Adoption of SFAS Nos.
133 and 138 should have no significant impact on reported earnings, but could
materially affect comprehensive income.
In May 2000, the FASB Emerging Issues Task Force reached a consensus on
Issue No. 00-14, Accounting for Certain Sales Incentives (the consensus). The
consensus requires the reduction in or refund of the selling price of the
product or service resulting from any cash sales incentive to be classified as a
reduction of revenue. The consensus is effective for all reporting periods
beginning after May 18, 2000. The company currently classifies sales discounts
associated with its long-term sales contracts as components of cost of metals
sold. Accordingly, the company's application of the consensus will have an
impact on the reported revenues and cost of metals sold, and although such
impact has not been determined, it is currently not believed to be material.
Application of the consensus should have no impact on reported earnings,
comprehensive income, or financial position.
Forward Looking Statement; Factors That May Affect Future Results and Financial
Condition
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 development and other activities associated with the expansion plan,
anticipated capital expenditures and sources of financing for capital
expenditures, renegotiation of our credit facility and our future compliance
thereunder and the effect of new accounting rules. In addition to factors
discussed below, the factors that could cause actual results to differ
materially include, but are not limited to, the following: price volatility of
palladium and platinum, economic, political and other events affecting supply
and demand of palladium and platinum, loss of a significant customer, our
dependence upon a few significant customers, risk of cost overruns, inaccurate
forecasts, labor difficulties, inadequate insurance coverage, government
regulations, property title uncertainty, unexpected events or problems during
expansion or development, fluctuations in ore grade, tons mined, crushed or
milled, complexity of processing platinum group metals, difficulty of estimating
reserves accurately, dependence upon a single mine, amounts and prices of the
company's forward metals sales under hedging and supply contracts and
geological, technical, 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, 1999.
Vulnerability to Metals Price Declines--Changes in supply and demand could
reduce market prices and significantly impact profitability.
Since the company's sole source of revenue is the sale of platinum group
metals, changes in the market price of platinum group metals significantly
impact revenues and profitability. The prices for platinum group metals have
recently risen to unprecedented levels. As a result of such price increases,
the company's revenues and profitability in 1999 increased despite a decrease in
overall production. A decline in the market price of platinum group metals
could materially adversely affect the revenues and profitability of the company
and could limit the company's ability to successfully implement and finance its
current expansion plans. Furthermore, if platinum group metals prices should
decline below the company's cash costs of production and remain at such levels
for any sustained period, the company could determine that it is not
economically feasible to continue commercial production. The company's cash
costs of production per ounce of metal were $199 for the year ended December 31,
1999 and $245 for the quarter ended June 30, 2000. The company's total costs of
production per ounce of metal were $232 for the year ended December 31, 1999 and
$286 for the quarter ended June 30, 2000. The recent increase in platinum group
metals prices is illustrated in the following table which sets forth the average
daily closing prices for palladium and platinum for the periods indicated:
14
<PAGE>
<TABLE>
<CAPTION>
2000 (through
1996 1997 1998 1999 June 30)
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Palladium ($ per ounce) $128 $177 $284 $358 $594
Platinum ($ per ounce) $397 $396 $372 $377 $504
</TABLE>
Many factors beyond the company's control influence the market prices of
these metals. These factors include global supply and demand, demand changes
for products that use the company's metals, speculative activities,
international political and economic conditions and production levels and costs
in other platinum group metal producing countries, particularly Russia and South
Africa. A series of expansions in platinum mining in South Africa are projected
to occur over the next few years. Any such mining expansions may significantly
increase overall South African platinum production and may deliver more
palladium as a by-product. If this occurs, increased global supply may have a
depressive effect on market prices from platinum and palladium.
Current economic and political events in Russia could result in declining
market prices. Russia has a significant stockpile of platinum group metals. If
Russia disposes of substantial amounts of platinum group metals from stockpiles
or otherwise, the increased supply could significantly reduce the market prices
of palladium and platinum. Political instability in Russia and potential
economic problems make Russian shipments difficult to predict and the risk of
sales from stockpiles more significant. Volatility was evident during 1997,
1998 and 1999 when apparent tightness in the market for platinum group metals
led to high prices for current delivery contracts and "backwardation," a
condition in which delivery prices for metals in the near term are higher than
delivery prices for metals to be delivered in the future.
Continued high PGM price may lead users of PGMs to substitute other base
metals and other materials for palladium and platinum. The automobile,
electronics and dental industries are the three largest sources of palladium
demand. In response to supply questions and high market prices for palladium,
some auto companies may seek alternatives to their consumption of palladium.
Although there are lower cost alternatives to high palladium content dental
alloys, there appears to have been only limited substitution to date. There has
been some substitution of other base metals for palladium in electronics
applications. Substitution in all of these industries may increase
significantly if PGM market price continues to rise.
The company enters into hedging contracts from time to time in an effort to
reduce the negative effect of price changes on the company's cash flow. These
hedging activities typically consist of contracts that require the company to
deliver specific quantities of metal in the future at specific prices and the
sale of call options and the purchase of put options. During the first quarter
of 1997, the company entered into significant hedging positions, particularly in
palladium, for sales in 1997 and 1998. Following that time, market prices for
palladium to be delivered currently rose sharply. Because the contracts were
entered into before the price increase, deliveries under the hedging contracts
during 1997 and 1998 were made at below market prices and the company
experienced substantial hedging losses. In 1998, the company realized $202 per
ounce of palladium sold while average current delivery prices were $284 per
ounce. Thus, while hedging transactions are intended to reduce the negative
effects of price decreases, they can also prevent the company from benefiting
from price increases. During 1997, 1998 and 1999, respectively, the company
reported hedging losses of approximately $10.2 million, $26.8 million and $0.06
million, respectively. In addition, the company has entered into long-term
sales contracts that provide a floor price for sales of a portion of the
company's production.
Expansion Plan Risks--Achievement of the company's long-term goals is subject to
significant uncertainties.
The company's achievement of its long-term expansion goals depends upon its
ability to increase production substantially at the Stillwater Mine and related
facilities and its ability to develop the East Boulder mine. Each of these
tasks will require the company to construct mine and processing facilities and
to commence and maintain production within budgeted levels. Construction of
mines is a very complicated process. During 1998, the company developed an
expansion plan with the goal of reaching an annualized rate of PGM production of
1.2 million ounces before the end of 2001. The key components of this plan were
to increase mine production at the Stillwater Mine from 2,000 to 3,000 tons of
ore per day, develop the new East Boulder Mine with a capacity of
15
<PAGE>
2,000 tons of ore per day, construct a tailings facility and expand the smelter
and base metals refinery to accommodate the anticipated increased throughput.
In January 2000, the company announced that it expects to reach the
annualized 1.2 million ounce production by the end of 2002, approximately one
year behind the original schedule although the company is currently reviewing
this estimate. During 1999, the company experienced difficulties in the
expansion of the Stillwater Mine associated with the need to remove and dispose
of large quantities of rock in order to correct the shortfall of developed
working faces and convert the company's probable reserves into proven reserves,
materials handling bottlenecks and increased dilution resulting from narrower
ore width and lower mine productivity.
Although the company believes its goals and preliminary estimates are based
upon reasonable assumptions, the company expects to revise its plans and
estimates for the Stillwater Mine and East Boulder project as the projects
progress, which revisions may be significant. Among the major risks to
successful completion of our current expansion plans are:
. potential cost overruns during development of new mine operations and
construction of new facilities;
. uncertainty regarding ore grades in expansion areas prior to
conversion of such areas from probable to proven reserves;
. possible delays and unanticipated costs resulting from difficulty in
obtaining the required permits; and
. the inability to recruit sufficient numbers of skilled underground
miners.
In addition, a decrease in the market price for platinum group metals would
significantly limit the company's ability to successfully implement and finance
our current expansion plans.
Based on the complexity and uncertainty involved in development projects at
this early stage, it is extremely difficult to provide reliable time and cost
estimates. The company cannot be certain that either the Stillwater Mine
expansion or the development of East Boulder will be completed on time or at
all, that the expanded operations will achieve the anticipated production
capacity, that the construction costs will not be higher than estimated, that
the expected operating cost levels will be achieved or that funding will be
available from internal and external sources in necessary amounts or on
acceptable terms. Furthermore, the Stillwater Mine has never been operated at a
rate of 3,000 tons of ore per day. In the course of seeking to increase
production to reach that level, the company has experienced difficulties
resulting from development shortfalls and productions constraints including
underground materials haulage constraints, equipment unavailability, operational
inconsistencies and service interruptions. Due to these difficulties, the
company's production decreased from approximately 444,000 ounces in 1998 to
409,000 ounces in 1999. The company is re-evaluating the project's development
schedule, mine planning, capital and operating cost estimates. During 1999 the
company retained Bechtel Corporation and MRDI, USA, a division of AGRA Simons
Limited, to assist it in this process. The company expects to conclude its
analysis with respect to the Stillwater Mine in August 2000 at which time it
expects to announce any changes in production goals, cost estimates and the
anticipated expansion schedule for the Stillwater Mine. These changes may be
significant. The company cannot be certain that it will not continue to
experience difficulties and delays as it increases production.
East Boulder is a development project and has no operating history. Thus,
estimates of future cash operating costs at East Boulder are based largely on
the company's operating experience at the Stillwater Mine portion of the J-M
Reef. Actual production, cash operating costs and economic returns may differ
significantly from those currently estimated or those established in future
studies and estimates. New mining operations often experience unexpected
problems during the development and start-up phases, which can result in
substantial delays in reaching commercial production.
The company has also retained Bechtel Corporation and MRDI, USA to conduct
a review of the East Boulder project. The company expects to conclude this
analysis with respect to the East Boulder Mine by the first quarter of 2001 when
the company expects to announce any changes in production goals, cost estimates
and anticipated expansion schedule for the East Boulder mine.
16
<PAGE>
Compliance with Bank Credit Agreement
The company's agreement with the syndicate of banks, led by the Bank of
Nova Scotia, provides a credit facility that is being used to finance a portion
of the expansion plan and contains certain covenants relating to the
accomplishment of project milestones and certain other production covenants.
During 1999, as a result of problems encountered with our expansion plans, the
company did not comply with certain production covenants. The bank syndicate
has granted waivers of these covenants that are effective until September 30,
2000. In 1999, the company retained independent mining engineers to review key
operating and capital cost parameters included in its long-term mine plans. The
company is seeking to renegotiate, refinance or replace the credit facility. In
the event the company is unable to renegotiate, refinance or replace the
existing credit facility by September 30, 2000, it may not be able to obtain an
additional waiver of the production covenants from the bank syndicate. If this
occurs, the company would be in default under the existing credit facility and
would be required to seek alternative financing, which may not be available, and
could adversely impact operating and capital costs or affect project completion.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The company is exposed to market risk, including the effects of adverse changes
in metal prices and interest rates as discussed below.
Commodity Price Risk
The company produces and sells palladium, platinum and associated by-
product metals directly to its customers and also through third parties. As a
result, financial results are materially affected when prices for these
commodities fluctuate. In order to manage commodity price risk and to reduce
the impact of fluctuation in prices, the company enters into long-term contracts
and uses various derivative financial instruments. The company may also lease
metal to counterparties to earn interest on excess metal balances. All
derivatives are off-balance sheet and therefore have no carrying value. Because
the company hedges only with instruments that have a high correlation with the
value of the hedged transactions, changes in derivatives' fair value are
expected to be offset by changes in the value of the hedged transaction.
As of June 30, 2000, the company had sold forward 9,000 ounces of platinum
for delivery in 2000 at an average price of $403 per ounce pursuant to forward
sales contracts. The company has also sold forward 22,000 and 2,000 ounces of
palladium to be delivered in 2001and 2002, respectively, at an average price of
$672 per ounce pursuant to forward sales contracts. The fair value of the
company's forward sales contracts resulted in an unrealized gain of
approximately $0.7 million at June 30, 2000. For anticipated production in the
year 2000, the company has established put and call options on 30,000 ounces of
palladium production at $324 and $419, respectively. For anticipated production
in the year 2001, the company has established put and call options on 5,000
ounces of palladium at $324 and $419, respectively. The fair value of the
company's put and call options resulted in an unrealized loss of approximately
$7.1 million at June 30, 2000. These put and call options work together as
collars under which the company receives the difference between the put price
and market price only if the market price is below the put price and the company
pays the difference between the call price and the market price only if the
market price is above the call price. The company's put and call options are
settled at maturity.
In addition, the company has entered into long-term sales contracts with
General Motors Corporation, Ford Motor Company and Mitsubishi Corporation
covering the sale of palladium and platinum over the five-year period from
January 1999 through December 2003. Under these contracts, the company has
committed all of its annual palladium production and approximately 20% of its
platinum production. Furthermore, the company's contract with General Motors
Corporation provides for automatic extension of the contract until the company
has delivered an aggregate of 1.4 million ounces of palladium if it fails to
meet this threshold by December 31, 2003. Each contract with General Motors,
Ford and Mitsubishi represents over 10% of the company's revenues and together
represent approximately 75%. The contracts provide for a floor price on 45%
of the company's palladium production sold under the contracts at $225 per
ounce, and a floor price of $230 per ounce on the remaining 55% of palladium
production sold. The contracts also provide for a ceiling price of $400 per
ounce on approximately 30% of the company's palladium production sold under the
contracts. These contracts provide for floor prices for platinum production
sold under these contracts at $350 per ounce and ceiling prices ranging from
$425 to $430 per
17
<PAGE>
ounce on our platinum production sold under these contracts. At June 30, 2000,
the market prices for palladium and platinum were $638 and $558 per ounce,
respectively. If market prices of palladium and platinum continue substantially
above the price ceilings provided for in these contracts, the company will
forego significant revenue.
The sales contracts contain termination provisions that allow the
purchasers to terminate in the event the company breaches certain provisions of
the contract and the breach is not cured within periods ranging from ten to
thirty days of notice by the purchaser. In addition, the contracts contain force
majeure provisions that allow for the suspension and, in one instance, the
termination of the contract upon the occurrence of certain events, such as "acts
of God," that are beyond the control of a contracting party and that limit the
party's ability to perform the contract. The company is subject to its
customers' compliance with the terms of the contracts, their ability to
terminate or suspend the contracts and their willingness and ability to pay. In
the event the company becomes involved in a disagreement with one or more of its
customers, their compliance with these contracts may be at risk. For example,
the company has negotiated floor prices that are well above historical low
prices for palladium. In the event of a substantial decline in the market price
of palladium, one or more of these customers could seek to renegotiate the
prices or fail to honor the contracts. In such an event, the company's current
expansion plans could be threatened. Although the company believes it has
adequate legal remedies if a customer fails to perform, a customer's termination
or breach could have a material adverse effect on the company's expansion plans
and results of operations.
Interest Rate Risk
At the present time, the company has no financial instruments in place to
manage the impact of changes in interest rates. Therefore, it is exposed to
changes in interest rates that effect the credit facility which carries a
variable interest rate based upon LIBOR or an alternative base rate. At June
30, 2000, approximately $112.6 million had been borrowed under the total
available credit of $175 million at an interest rate of 7.94%.
18
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The company is involved in various claims and legal actions arising in
the ordinary course of business. In the opinion of management, the
ultimate disposition of these matters will not have a material adverse
effect on the company's consolidated financial position, results of
operations or liquidity.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
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 10, 2000.
(b) The following individuals were elected to continue as Directors
at the meeting: Douglas D. Donald, Richard E. Gilbert, Lawrence
M. Glaser, Apolinar Guzman, William E. Nettles, Ted Schwinden and
Peter Steen.
(c) Set forth below are the votes cast for the election of Directors:
<TABLE>
<CAPTION>
For (*) Withheld
---------- ---------
<S> <C> <C>
Douglas D. Donald 33,676,918 375,615
Richard E. Gilbert 33,754,029 298,504
Lawrence M. Glaser 33,689,598 362,935
Apolinar Guzman 33,701,803 350,730
William E. Nettles 30,763,456 3,289,077
Ted Schwinden 33,690,806 361,737
Peter Steen 33,701,312 351,221
</TABLE>
*Stockholders have cumulative voting rights in connection with the
election of directors.
Stockholders were asked to amend and restate the company's 1998 Equity
Incentive Plan to (i) eliminate the ability to reduce the exercise
price of granted stock options, (ii) authorize an additional one
million shares of stock available thereunder and (iii) adopt a limit
on the number of shares subject to awards which any one individual can
receive in a calendar year in order to exempt stock options from the
deduction limits under Section 162(m) of the Internal Revenue Code.
Votes cast for were 32,800,184, against were 1,198,210, abstaining
were 54,139 and non-votes were 0.
Stockholders were asked to amend the company's Restated Certificate of
Incorporation to increase the number of the Company's authorized
shares of common stock from 50 million to 100 million shares. Votes
cast for were 29,937,968, against were 4,022,992, abstaining were
91,573 and non-votes were 0.
Additionally, stockholders were asked to ratify the appointment of
KPMG LLP as the Company's independent accountants for the fiscal year
ending December 31, 2000. Votes cast for were 31,493,094, against were
2,529,811, abstaining were 29,628 and non-votes were 0.
(d) None.
19
<PAGE>
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
10 Robert M. Taylor Employment Agreement
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STILLWATER MINING COMPANY
(Registrant)
Date: July 28, 2000 By: /s/ William E. Nettles
_________________________________________
William E. Nettles
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: July 28, 2000
By: /s/ James A. Sabala
_________________________________________
James A. Sabala
Vice President and Chief Financial Officer
(Principal Financial Officer)
21
