-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ad1CybcsV16cIh2LUGG6wAwiQ4aB6K1tJvSdRTgbn5oq52MlqpcSUynFHVKrWWLf EWHgsr9rEqPumuBoT8Bdmg== 0000950134-97-008578.txt : 19971117 0000950134-97-008578.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950134-97-008578 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: URANIUM RESOURCES INC /DE/ CENTRAL INDEX KEY: 0000839470 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-METALS, MINERALS (NO PETROLEUM) [5050] IRS NUMBER: 752212772 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17171 FILM NUMBER: 97720742 BUSINESS ADDRESS: STREET 1: 12750 MERIT DRIVE STREET 2: SUITE 1210 CITY: DALLAS STATE: TX ZIP: 75251 BUSINESS PHONE: 2143877777 MAIL ADDRESS: STREET 1: 12750 MERIT DRIVE STREET 2: SUITE 1210 CITY: DALLAS STATE: TX ZIP: 75251 10-Q 1 FORM 10-Q FOR QUARTER ENDED SEPTEMBER 30, 1997 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the quarterly period ended September 30, 1997 or Transition report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 For the transition period from __________ to __________ Commission file number 0-17171 URANIUM RESOURCES, INC. (exact name of Registrant as specified in its Charter) DELAWARE 75-2212772 (State of Incorporation) (I.R.S. Employer Identification No.) 12750 MERIT DRIVE, SUITE 1020, DALLAS, TEXAS 75251 (Address of principal executive offices, including zip code) (972) 387-7777 (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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Each Class of Common Stock Number of Shares Outstanding Common Stock, $.001 par value 12,053,027 as of November 10, 1997 - -------------------------------------------------------------------------------- 2 URANIUM RESOURCES, INC. 1997 SECOND QUARTERLY REPORT ON FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets - September 30, 1997 (Unaudited) and December 31, 1996 3 Consolidated Statements of Operations - Nine Months and Three Months Ended September 30, 1997 and 1996 (Unaudited) 5 Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1997 and 1996 (Unaudited) 6 Notes to Consolidated Financial Statements - September 30, 1997 (Unaudited) 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II -- OTHER INFORMATION 12 SIGNATURES 13 INDEX TO EXHIBITS E-1
2 3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS URANIUM RESOURCES, INC. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 (NOTE 1) ASSETS
September 30, December 31, ------------- ------------ 1997 1996 ------------- ------------ (Unaudited) Current assets: Cash and cash equivalents $ 1,095,567 $ 16,934,276 Short-term investment: Certificate of deposit, restricted 3,220,132 2,779,840 Receivables, net 5,925,981 1,829,539 Uranium inventory 1,171,735 3,575,285 Materials and supplies inventory 78,371 88,483 Prepaid and other current assets 280,689 239,435 ------------ ------------ Total current assets 11,772,475 25,446,858 ------------ ------------ Property, plant and equipment, at cost: Uranium properties 90,831,648 71,364,561 Other property, plant and equipment 567,975 546,985 Less-accumulated depreciation and depletion (33,903,613) (29,335,818) ------------ ------------ Net property, plant and equipment 57,496,010 42,575,728 Other assets 666,097 771,084 ------------ ------------ $ 69,934,582 $ 68,793,670 ============ ============
The accompanying notes to financial statements are an integral part of these consolidated balance sheets. 3 4 URANIUM RESOURCES, INC. CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 (NOTE 1) LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31, ------------- ------------ 1997 1996 ------------- ------------ Current liabilities: Accounts payable $ 3,189,382 $ 2,201,145 Notes payable -- 5,440,000 Accrued interest payable 102,479 185,186 Current portion of long-term debt 6,004,000 730,074 Royalties payable 720,398 746,113 Current portion of restoration reserve 350,000 368,000 Other accrued liabilities 543,272 507,117 ------------ ------------ Total current liabilities 10,909,531 10,177,635 ------------ ------------ Other long-term liabilities and deferred credits 4,680,323 4,279,289 Long-term debt, less current portion 459,144 6,407,054 Deferred federal income taxes 2,247,000 2,633,000 Shareholders' equity: Common stock, $.001 par value, shares authorized: 25,000,000 shares issued and outstanding (net of treasury shares): 1997 - 12,037,527; 1996 - 10,813,027 12,190 10,966 Paid-in capital 40,176,804 32,290,630 Retained earnings 11,459,008 13,004,514 Less: Treasury stock (152,500 shares), at cost (9,418) (9,418) ------------ ------------ Total shareholders' equity 51,638,584 45,296,692 ------------ ------------ $ 69,934,582 $ 68,793,670 ============ ============
The accompanying notes to financial statements are an integral part of these consolidated balance sheets. 4 5 URANIUM RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (NOTE 1) (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, ---------------------------- ---------------------------- 1997 1996 1997 1996 ------------ ------------ ------------ ------------ Revenues: Uranium sales - Produced uranium $ 5,297,730 $ 6,575,673 $ 12,278,910 $ 13,361,203 Purchased uranium 4,201,550 4,494,000 4,204,963 5,479,167 ------------ ------------ ------------ ------------ Uranium sales 9,499,280 11,069,673 16,483,873 18,840,370 Costs and expenses: Cost of uranium sales - Direct cost of purchased uranium 3,505,489 3,565,500 3,505,489 4,151,094 Royalties 292,977 514,823 683,525 949,597 Operating expenses 3,156,980 1,801,669 5,645,615 3,692,830 Provision for restoration and reclamation costs 424,840 738,637 864,343 1,150,930 Depreciation and depletion 2,926,816 3,335,886 6,261,738 5,759,369 ------------ ------------ ------------ ------------ Total cost of uranium sales 10,307,102 9,956,515 16,960,710 15,703,820 ------------ ------------ ------------ ------------ Earnings (loss) from operations before corporate expenses (807,822) 1,113,158 (476,837) 3,136,550 Corporate expenses - General and administrative 744,313 716,601 2,236,225 2,243,929 Depreciation 5,749 5,136 17,410 15,442 ------------ ------------ ------------ ------------ Total corporate expenses 750,062 721,737 2,253,635 2,259,371 ------------ ------------ ------------ ------------ Earnings (loss) from operations (1,557,884) 391,421 (2,730,472) 877,179 Other income (expense): Interest expense, net of capitalized interest (34,391) (182,022) (134,013) (418,836) Interest and other income, net 75,462 39,622 932,754 162,741 ------------ ------------ ------------ ------------ Total other income (expense) 41,071 (142,400) 798,741 (256,095) ------------ ------------ ------------ ------------ Earnings (loss) before federal income taxes (1,516,813) 249,021 (1,931,731) 621,084 Federal income tax expense (benefit): Current -- -- (225) -- Deferred (303,000) 50,000 (386,000) 124,000 ------------ ------------ ------------ ------------ Net earnings (loss) $ (1,213,813) $ 199,021 $ (1,545,506) $ 497,084 ============ ============ ============ ============ Net earnings (loss) per common share and common equivalent $ (0.10) $ 0.02 $ (0.13) $ 0.05 ============ ============ ============ ============ Weighted average common shares and common equivalent shares per share data Primary 12,028,288 10,068,333 11,661,904 10,023,608 ============ ============ ============ ============ Fully Diluted 12,028,288 10,084,993 11,661,904 10,046,838 ============ ============ ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. 5 6 URANIUM RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (NOTE 1) (UNAUDITED)
September 30, ------------------------------ 1997 1996 ------------ ------------ Cash flows from operations: Net earnings (loss) $ (1,545,506) $ 497,084 Reconciliation of net earnings to cash provided by operations- Provision for restoration and reclamation costs 864,343 1,150,930 Depreciation and depletion 6,279,148 5,774,811 Provision (credit) for deferred income taxes (386,000) 124,000 Decrease in restoration and reclamation accrual (292,443) (375,221) Other non-cash items, net 69,966 267,135 ------------ ------------ Cash flow provided by operations, before changes in operating working capital items 4,989,508 7,438,739 Effect of changes in operating working capital items- Increase in receivables (4,096,442) (4,588,687) Increase (decrease) in inventories 478,976 (478,222) Increase in prepaid and other current assets (357,758) (350,634) Increase in payables and accrued liabilities 958,916 1,705,519 ------------ ------------ Net cash provided by operations 1,973,200 3,726,715 ------------ ------------ Investing activities: Increase in investments (440,292) (1,973,398) Additions to property, plant and equipment - Kingsville Dome (7,241,321) (4,872,161) Rosita (1,896,291) (1,628,929) Alta Mesa (210,157) (4,207,633) Churchrock (607,060) (385,907) Crownpoint (845,732) (528,605) Other property (466,991) (178,982) Increase in other assets (20,472) (96,260) ------------ ------------ Net cash used in investing activities (11,728,316) (13,871,875) ------------ ------------ Financing activities: Payments and refinancings of principal (6,170,992) (3,715,869) Proceeds from other borrowings -- 9,429,000 Issuance of common stock and warrants, net 87,399 633,339 ------------ ------------ Net cash provided by (used in) financing activities (6,083,593) 6,346,470 ------------ ------------ Net decrease in cash and cash equivalents (15,838,709) (3,798,690) Cash and cash equivalents, beginning of period 16,934,276 4,715,942 ------------ ------------ Cash and cash equivalents, end of period $ 1,095,567 $ 917,252 ============ ============
The accompanying notes to financial statements are an integral part of these consolidated statements. 6 7 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The accompanying statements should be read in conjunction with the audited financial statements included in the Company's 1996 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended September 30, 1997 are not necessarily indicative of the results that may be expected for the full calendar year ending December 31, 1997. 2. URANIUM PROPERTIES On March 25, 1997, the Company completed the acquisition of certain uranium mineral interests in New Mexico from Santa Fe Pacific Gold Corporation in exchange for 1,200,000 shares of the Company's common stock and a commitment to expend certain amounts on exploration. The mineral interests acquired cover approximately 500,000 acres and include approximately 14.7 million pounds of proven in-place uranium reserves on 37,000 acres of the property on which it acquired the entire mineral estate (excluding coal). Also included in the 500,000 acres is the fee interest in uranium on approximately 140,000 acres and the exclusive uranium exploration rights for 17 years on approximately 346,000 acres. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward Looking Statements This Item 2 contains "forward-looking statements" which are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements relating to liquidity, financing of operations, continued volatility of uranium prices, estimates of future capital expenditures, proved undeveloped reserves and other such matters. The words "believes," "expects," "projects," "targets," or "estimates" and similar expressions identify forward-looking statements. The Company does not undertake to update, revise or correct any of the forward-looking information. Readers are cautioned that such forward-looking statements should be read in conjunction with the Company's disclosures under the heading: "Cautionary Statement for the Purposes of the `Safe Harbor' Provisions of the Private Securities Litigation Reform Act of 1995" in the Company's 1996 Annual Report on Form 10-K. CAPITAL RESOURCES AND LIQUIDITY Operating Cash Flows For the quarter ended September 30, 1997, the Company's cash and cash equivalents were $1,096,000, a decrease of $2,761,000 for the three month period. In comparison, cash and cash equivalents in the third quarter of 1996 decreased by $588,000. Cash and cash equivalents decreased by $15,839,000 for the nine months ended September 30, 1997 compared to a decrease of $3,799,000 for the same period in 1996. The Company's uranium operations generated cash flow from operations of $1,839,000 for the quarter ended September 30, 1997, in comparison to a cash flow from operations in the same period in 1996 of $2,853,000. Net cash provided by uranium operations for the nine months ended September 30, 1997 was $1,973,000 compared to cash flow from operations of $3,727,000 for the same period in 1996. The Company's net working capital at September 30, 1997 was $863,000 and included $6.0 million from the current portion of long-term debt from a convertible debenture issued in May 1995 (exercise price $4.00 per share). The convertible debenture is scheduled to mature under its original terms in May 1998. 7 8 Investing Cash Flows South Texas Producing Properties During the nine months ending September 30, 1997, development expenditures totaling $7,241,000 and $1,896,000 were incurred at the Company's Kingsville Dome and Rosita sites, respectively. Expenditures to be incurred for the remainder of 1997 at Kingsville Dome and Rosita are expected to be approximately $3,100,000 and $1,100,000, respectively. These costs will be incurred primarily for additional wellfield capital and operations at both locations. In the fourth quarter of 1997, the Company projects to begin pre-restoration on its original wellfield at Kingsville Dome (PAA #1). The Company expects to begin full restoration in PAA #1 in the first quarter of 1998 once mining operations have begun in its next production area (PAA #3). The Company expects to fund its 1997 operating and capital expenditures at its Kingsville Dome and Rosita projects from cash on hand, sales proceeds under 1997 uranium deliveries and through existing financing arrangements. The capital expenditures projected for the remainder of 1997 at Kingsville Dome includes significant wellfield drilling and development activity in the Company's next production area (PAA #3). Prior to the commencement of mining in PAA #3, the Company must have regulatory approval from the Texas Natural Resources Conservation Commission (the "TNRCC"). Similar approval was required before mining operations could commence in the first two PAA's that are currently being operated at the Kingsville Dome site. As part of the TNRCC's process, there is the opportunity for parties affected by the proposed mining operations to request a public hearing. Several parties have requested a public hearing but the TNRCC has not determined if such a hearing will be granted. The public hearing process is a formal procedure which depending upon its scope, can take from approximately six months to two years to complete. While the Company does not believe the expansion of mining into PAA #3 should warrant a public hearing, there is the possibility that the TNRCC may hold a public hearing. Should a public hearing be held, this could delay the Company's ability to begin production from this next production area. The Company had projected to begin mining in PAA #3 early in the first quarter of 1998. A delay in the Company's ability to begin mining from PAA #3 may require it to continue its mining operations in its current wellfields longer than previously planned. This could result in less efficient production output and higher production costs than were previously projected and could adversely impact the cashflow and operating results of the Company in 1998. South Texas Development Properties In June 1996, the Company acquired the rights to a significant uranium deposit in South Texas known as the Alta Mesa project. The Company spent $4,000,000 to acquire the uranium rights to the property which is estimated to contain approximately 6.2 million pounds of in-place proven and probable reserves. Capital expenditures incurred on the Alta Mesa project for the nine months ended September 30, 1997 were approximately $210,000 and were related primarily to permitting and licensing activities. Additional capital costs for permitting, licensing and land holding costs on Alta Mesa are expected to be approximately $350,000 for the remainder of 1997. The Company projects to commence with plant and wellfield activities in 1998 provided the necessary regulatory permits and licenses are secured. Progress towards fulfilling the regulatory requirements is continuing but the timing of actual construction and wellfield development is being evaluated with respect to the economic assessment of the project when compared to the current uranium market prices (spot price of $12.75 at November 4, 1997), the ability of the Company to secure the requisite capital for the project and the Company's current and prospective contracted sales portfolios. The initial funds to acquire the rights to the Alta Mesa property were obtained through a one-year $4.0 million note from the Lindner Dividend Fund. This note was repaid in January 1997. At the Company's Vasquez project, plant and wellfield activities are projected to begin in 1998 provided permitting and licensing are completed. The Company is investigating the options for accelerating development activity at Vasquez to maintain its South Texas production levels in the event the TNRCC holds a public hearing on the expansion of mining on PAA #3 at Kingsville Dome. In the event that production activity at Vasquez is not utilized to replace production from PAA #3 at Kingsville Dome, the timing of mining at this project will be evaluated based on the economic assessment of the project compared to the uranium market prices, the Company's ability to secure capital for the project, and the Company's current and prospective contracted sales portfolios. 8 9 New Mexico Development Properties Capital expenditures at the Company's Churchrock and Crownpoint projects for permitting and land holding costs totaled approximately $1,453,000 for the nine months ending September 30, 1997 and expenditures for these activities are expected to amount to approximately $250,000 for the remainder of 1997. The Company anticipated expenditures for plant and wellfield activities at the Churchrock project to begin in 1998 or 1999 provided the necessary regulatory permits and licenses are obtained. Progress towards fulfilling the regulatory requirements is continuing but the timing of actual construction and wellfield development is being evaluated with respect to the economic assessment of the project when compared to the current uranium market prices, the Company's ability to secure capital for the project, and the Company's current and prospective contracted sales portfolios. Capital requirements for 1997 and beyond for these projects are expected to be met through future sales proceeds from current and additional uranium delivery contracts and through future sources of debt and/or equity financing. Financing Cash Flows In July 1997, the Company renewed its revolving credit facility with NationsBank of Texas, N.A. The amount of available credit was increased from $3.0 million to $5.0 million and was extended for an additional two years. This facility is secured by the Company's uranium inventory and receivables from its uranium sales. Principal and interest payments under the loan are due monthly, with interest on the loan accruing at the prime rate plus 1%. Repayments under this facility amounted to $1,440,000 in the nine months ending September 30, 1997. In June 1996, the Company received $4.0 million in proceeds from the one-year note entered into with the Lindner Dividend Fund, noted previously. The terms of the note provided for the payment of both the principal and accrued interest by June 1997 with interest on the note accruing at a rate of 6.5% per annum. The $4.0 million principal amount and accrued interest on this note was paid in January 1997. The Company was obligated to pay a production payment royalty of $1.00 per pound on the first three million pounds of uranium produced and sold from either Kingsville Dome or Rosita. The Company made the final payment of approximately $730,000 on this obligation in January 1997. In the first nine months of 1997 the Company generated $87,000 from the issuance of 25,500 shares of common stock associated with the exercise of certain stock warrants. In the same period in 1996, approximately $633,000 was generated from the issuance of approximately 167,000 shares of common stock upon the exercise of certain stock options. Other Non-Cash Transactions In March 1997, the Company acquired from Santa Fe Pacific Gold Corporation ("Santa Fe") certain mineral interests covering approximately 500,000 acres in northwestern New Mexico in exchange for 1.2 million shares of the Company's common stock and a commitment for certain exploration expenditures. Approximately one-third of the acreage comprises uranium mineral rights and the remaining acreage comprises exploration rights with rights to purchase and develop any uranium mineral interests found. Included in the purchase is an existing royalty obligation from the Company to Santa Fe on certain properties currently under lease from Santa Fe. The Company estimates that there is approximately 14.7 million pounds of proven in-place uranium reserves on 37,000 acres of the property on which it acquired the entire mineral estate (excluding coal). Also included in the 500,000 acres is the fee interest in uranium on approximately 140,000 acres and the exclusive uranium rights, for 17 years, on approximately 346,000 acres. 9 10 ENVIRONMENTAL ASPECTS The Company utilizes ISL solution mining technology as its only mining method. Unlike conventional uranium mining companies, the Company's mining technology does not create "tailings". Nevertheless, the Company is highly regulated. Its primary environmental costs to date have been related to obtaining and complying with environmental mining permits and, once mining is completed, the reclamation and restoration of the surface areas and underground water quality to a condition consistent with applicable requirements. Accruals for the estimated future cost of such activities are made on a per-pound basis as part of production costs. See the Consolidated Statements of Operations for the applicable provisions for such future costs. See also Note 1 - "Restoration and Reclamation Costs" of Notes to Consolidated Financial Statements in the Company's Form 10-K as of December 31, 1996. RESULTS OF OPERATIONS Revenues, earnings from operations and net income for the Company can fluctuate significantly on a quarter to quarter basis during the year because of the timing of deliveries requested by its utility customers. The Company's customers have generally elected, where possible, to take delivery of the bulk of the annual deliveries under their long-term sales contracts later in each year. Accordingly, operating results for any quarter or year-to-date period are not necessarily comparable and may not be indicative of the results which may be expected for future quarters or for the entire year. Three Months and Nine Months Ended September 30, 1997 and 1996 The following is a summary of the key operational and financial statistics related to the Results of Operations:
Three Months Ended Nine Months Ended September 30, September 30, ------------------------ ------------------------- 1997 1996 1997 1996 ------- ------- ------- --------- (In thousands) (In thousands) Uranium sales revenue(1) $ 9,499 $11,070 $16,484 $ 18,840 Total pounds delivered 730 869 1,165 1,358 Average sales price/pound(2) $ 14.62 $ 15.67 $ 15.30 $ 15.78 Pounds produced 165 411 588 1,025 Pounds purchased 415 390 415 439 Average cost of purchased pounds $ 9.93 $ 9.14 $ 9.93 $ 9.46 Average cost of produced pounds sold $ 17.17 $ 11.79 $ 15.66 $ 10.93 Average cost of purchased pounds sold $ 9.86 $ 9.14 $ 9.86 $ 9.46
(1) Revenues for the three and nine months ended September 30, 1997 include approximately $2.8 million for the sales of Russian uranium sold under the matched sales Amendment. The same periods in 1996 include approximately $4.5 million in revenue from sales of similar Russian material. (2) Average sales price does not include the sale of Russian material which is considered as a "pass through" sale under the matched sales Amendment. Revenue from uranium sales in the third quarter of 1997 decreased by $1,570,000 from the same period in 1996. This difference resulted from a decrease in deliveries of approximately 139,000 pounds and lower average sales prices for the quarter ended September 30, 1997 compared to the same quarter in 1996. 10 11 Revenue from uranium sales in the first nine months of 1997 decreased by $2,356,000 from 1996 levels. This reduction resulted from approximately 193,000 fewer pounds delivered this year compared to 1996. The Company's 1997 contract portfolio includes contracts with sales prices containing base price escalated contracts, market price related contracts and Russian matched sales contracts. This portfolio mix contrasts with the 1996 contract portfolio which consisted of only base price escalated contracts and Russian matched sales contracts. Changes in the market price of uranium can result in a significant impact on the average sales price received under the Company's sales contracts and on the Company's results of operations. Details of the cost of uranium sales were as follows:
Three Months Ended Nine Months Ended September 30, September 30, ------------------ ----------------- 1997 1996 1997 1996 ------- -------- ------- ------- (In thousands) (In thousands) Cost of purchased uranium $ 3,505 $ 3,565 $ 3,505 $ 4,151 Royalties 293 515 684 950 Operating expenses 3,157 1,802 5,646 3,693 Provision for restoration and reclamation costs 425 739 864 1,151 Depreciation and depletion of uranium properties 2,927 3,336 6,262 5,789 ------- ------- ------- ------- Total cost of uranium sales $10,307 $ 9,957 $16,961 $15,704 ======= ======= ======= =======
During the first nine months of 1997, and more specifically the second and third quarters, the Company experienced certain severe production challenges associated with weather, operating techniques and subsurface geochemical conditions. As a result, the Company produced only 165,000 pounds of uranium from the Rosita and Kingsville Dome facilities in the three months ending September 30, 1997, compared to 411,000 pounds in the same quarter of 1996. For the nine month period ending September 30, 1997, the Company produced 588,000 pounds compared to 1,025,000 pounds in the same period during 1996. The reduced production output for both the quarter and the nine months ended September 30, 1997 resulted in per pound production costs which increased significantly compared to 1996. Adverse wet weather conditions submerged a majority of the production areas and resulted in the loss of over 30 days of development and production drilling during the second quarter of 1997 alone. This inability to drill and develop new production areas was a major factor in the downturn in third quarter production. During the first nine months of 1997, the Company experienced inefficiencies related to operating and management techniques coupled with operating constraints resulting from plant design. During the second and third quarter of 1997, the Company reorganized its operating group and redesigned certain plant and wellfield systems to address these inefficiencies and to facilitate future operations. The Rosita facility was downsized in June 1997 in order to concentrate on maximizing production from its newest wellfield (wellfield #7), while strategically continuing to produce from those wellfields that are in the latter stages of their production decline curves. Staffing at Rosita was reduced during this period from 47 employees to 20. At both operating facilities, decreased production from the leach fields relating to water quality has forced the Company to undertake certain redesign of the facilities in order to mitigate the chemical effects of the continuously recycled ground water . During the second quarter, a temporary partial shutdown of the Rosita facility was undertaken to effect these changes. The Kingsville Dome facility underwent a three-day shutdown in July 1997 to re-pipe the facility to allow new wellfields to be mined primarily with the groundwater native to each wellfield. During the transition to the new operating techniques, the Company saw lower production levels and correspondingly higher per pound production costs in the second and third quarter of 1997. However, production levels in October 1997 have demonstrated positive results from these changes. Production from the Kingsville Dome and Rosita projects for the remainder of 1997 is expected to approximate the Company's remaining delivery obligations. 11 12 Operating expenses attributable directly to the sale of Kingsville Dome and Rosita produced pounds totaled $5,646,000 ($6.98 per pound) in the first nine months of 1997 compared to $3,401,000 ($3.70 per pound) for produced pounds that were sold in the same period in 1996. The increases in the per pound operating costs for the third quarter and the nine months ended September 30, 1997 resulted primarily from the decreased production experienced in those periods compared to the same periods in 1996. The fixed operating costs incurred in connection with the lower production levels resulted in a higher per pound absorption of these costs over the reduced production volume. Total operating expenses and depreciation and depletion in the first nine months ended September 30, 1996 also include $313,000 in standby costs for the Kingsville Dome facility. Such standby costs were recorded as direct charges to operations. The provision for restoration and reclamation in the first nine months ended September 30, 1997 consists of $765,000 ($0.95 per pound) for production sold during 1997 and $99,700 for costs associated with reclamation activities related to the Benavides and Bruni projects (previous mining locations). The provision for restoration and reclamation in the nine months ended September 30, 1996 consists of the provision for production sold of $864,000 ($0.94 per pound) and $287,000 for costs associated with reclamation activities related to the Benavides project. The depreciation and depletion provision for the first nine months ended September 30, 1997 consisted of $6,262,000 ($7.74 per pound) for Rosita and Kingsville Dome production sold. The depreciation and depletion provision in the same period of 1996 consisted of $5,781,000 ($6.29 per pound) for production sold and Kingsville Dome depreciation while on standby of $21,000. Royalties in the first nine months of 1997 totaled $684,000 compared to $950,000 in 1996. The decrease in 1997 is directly attributable to the reduction in sales of produced uranium and a lower spot market price compared to 1996. The average cost of uranium purchases made in the first nine months of 1997 was $9.93 compared to $9.46 for the same period in 1996. Total deliveries in the first nine months of 1997 consisted of 355,000 purchased pounds, at an average cost per pound of $9.86, and 809,000 produced pounds at an average cost per pound of $15.66. During the same period in 1996, the Company delivered 439,000 purchased pounds, at an average cost per pound of $9.46 and 920,000 produced pounds at an average cost of $10.93 per pound. Corporate expenses consisting of general and administrative ("G&A") expenses were comparable in the first nine months of 1997 ($2,254,000) to the first nine months of 1996 ($2,259,000). Total interest costs, net of capitalized amounts decreased to $134,000 in the first nine months of 1997 from $419,000 in the first nine months of 1996. This decrease resulted from the repayment of the additional $4.0 million borrowed in June 1996 to finance the purchase of the Alta Mesa property and because of advances received under the Company's credit facility in 1996. Total other income for the first nine months of 1997 increased by $770,000 from the same period in 1996. This increase resulted from the settlement in June 1997 of the Company's lawsuit against The Professional Bank of Denver, Colorado ($575,000) and an increase in interest income ($195,000) for the nine months. The higher interest income resulted from higher average available cash and investment balances which were generated from the Company's equity placement in December 1996. 12 13 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 5. OTHER INFORMATION. None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. Financial Data Schedule 13 14 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. URANIUM RESOURCES, INC. Dated: November 14, 1997 By: /S/ Paul K. Willmott ------------------------- Paul K. Willmott Director, President and Chief Executive Officer Dated: November 14, 1997 By: /S/ Thomas H. Ehrlich -------------------------- Thomas H. Ehrlich Vice President - Finance and Chief Financial Officer (Principal Financial and Accounting Officer) 14 15 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION - ------- ----------- 27 FINANCIAL DATA SCHEDULE
E-1 EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1997 SEP-30-1997 1,096,567 3,220,132 5,925,981 0 1,171,735 11,772,475 90,831,648 (33,903,613) 69,934,582 10,909,531 459,144 0 0 12,190 51,638,584 69,934,582 16,483,873 16,483,873 16,960,710 19,214,345 0 0 (134,013) (1,931,731) (386,225) (1,545,506) 0 0 0 (1,545,506) (0.13) (0.13)
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