-----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, Onr6YMGePKQjApp65kYY40x/3pkjY6vBaRQfMkyEBJovpYhcF0k0XmbkY1AA0zOs 0EaRHruSJBvT1T4EU1sl7w== 0000927356-98-001138.txt : 19980721 0000927356-98-001138.hdr.sgml : 19980721 ACCESSION NUMBER: 0000927356-98-001138 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980720 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: STILLWATER MINING CO /DE/ CENTRAL INDEX KEY: 0000931948 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS METAL ORES [1090] IRS NUMBER: 810480654 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13053 FILM NUMBER: 98668487 BUSINESS ADDRESS: STREET 1: 717 SEVENTEENTH STREET STREET 2: SUITE 1480 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3039782525 MAIL ADDRESS: STREET 1: 717 SEVEENTH STREET STREET 2: SUITE 1480 CITY: DENVER STATE: CO ZIP: 80202 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ TO ______ COMMISSION FILE NUMBER 0-25090 ------- STILLWATER MINING COMPANY ------------------------- (Exact name of registrant as specified in its charter) DELAWARE 81-0480654 ____________________________________ ____________________________________ (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 717 17TH STREET, SUITE 1480 DENVER, COLORADO 80202 ____________________________________ ____________________________________ (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) (303) 978-2525 ____________________________________________________ (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES X NO --- --- AT JULY 13, 1998, 20,485,050 SHARES OF COMMON STOCK, $.01 PAR VALUE PER SHARE, WERE ISSUED AND OUTSTANDING. STILLWATER MINING COMPANY FORM 10-Q QUARTER ENDED JUNE 30, 1998 INDEX PART I - FINANCIAL INFORMATION PAGE ---- ITEM 1. FINANCIAL STATEMENTS......................... 3 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS............................ 13 ITEM 2. CHANGES IN SECURITIES........................ 13 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.............. 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................................... 13 ITEM 5. OTHER INFORMATION............................ 13 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............. 13 SIGNATURES ............................................. 15 2 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STILLWATER MINING COMPANY CONSOLIDATED BALANCE SHEET (in thousands, except share and per share amounts)
(Unaudited) June 30, December 31, 1998 1997 ---------------- ---------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 8,346 $ 4,191 Short-term investments 7,047 13,468 Inventories 7,721 7,380 Accounts receivable 8,926 6,926 Other current assets 1,545 1,349 Deferred income taxes 1,989 1,989 ---------------- ---------------- Total current assets 35,574 35,303 PROPERTY, PLANT AND EQUIPMENT, NET 201,592 191,254 OTHER NONCURRENT ASSETS 2,529 2,662 ---------------- ---------------- Total assets $ 239,695 $ 229,219 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long-term debt and capital lease obligations $ 2,083 $ 1,982 Accounts payable 3,760 2,709 Accrued payroll and benefits 2,784 1,972 Property, production and franchise taxes payable 2,762 3,682 Other current liabilities 1,996 1,904 ---------------- ---------------- Total current liabilities 13,385 12,249 LONG-TERM LIABILITIES Long-term debt and capital lease obligations 60,491 61,513 Other noncurrent liabilities 3,405 2,283 Deferred income taxes 14,314 11,782 ---------------- ---------------- Total liabilities 91,595 87,827 ---------------- ---------------- SHAREHOLDERS' EQUITY Preferred stock, $.01 par value, 1,000,000 shares authorized, none issued -- -- Common stock, $.01 par value, 50,000,000 shares authorized, 20,583,017 and 20,377,623 issued and outstanding 206 204 Paid-in capital 143,854 141,193 Accumulated earnings (deficit) 4,040 (5) ---------------- ---------------- Total shareholders' equity 148,100 141,392 ---------------- ---------------- Total liabilities and shareholders' equity $ 239,695 $ 229,219 ================ ================
See notes to consolidated financial statements. 3 STILLWATER MINING COMPANY CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (in thousands, except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------------------ ------------------------------- 1998 1997 1998 1997 --------------- ----------- --------------- ------------ REVENUES $ 26,523 $ 22,292 $ 48,036 $ 38,295 COSTS AND EXPENSES Cost of metals sold 16,953 18,303 32,557 34,472 Depreciation and amortization 2,935 2,941 5,749 5,721 --------------- ----------- --------------- ------------ Total cost of sales 19,888 21,244 38,306 40,193 General administrative expense and other 1,038 1,002 1,761 1,356 --------------- ----------- --------------- ------------ Total costs and expenses 20,926 22,246 40,067 41,549 --------------- ----------- --------------- ------------ OPERATING INCOME (LOSS) 5,597 46 7,969 (3,254) OTHER INCOME (EXPENSE) Interest income 257 277 513 527 Interest expense, net of capitalized interest of $354, $0, $576, and $742 (877) (1,427) (1,905) (1,936) --------------- ----------- --------------- ------------ INCOME (LOSS) BEFORE INCOME TAXES 4,977 (1,104) 6,577 (4,663) INCOME TAX (PROVISION) BENEFIT (1,916) 425 (2,532) 1,795 --------------- ----------- --------------- ------------ NET INCOME (LOSS) $ 3,061 $ (679) $ 4,045 $ (2,868) =============== =========== =============== ============ NET INCOME (LOSS) PER SHARE Basic and diluted earnings per share $ 0.15 $ (0.03) $ 0.20 $ (0.14) =============== =========== =============== ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic 20,483 20,278 20,454 20,225 Diluted 20,889 20,278 20,735 20,225
See notes to consolidated financial statements. 4 STILLWATER MINING COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS (in thousands)
SIX MONTHS ENDED JUNE 30, ----------------------------------- 1998 1997 ---------------- ---------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 12,101 $ (8,186) (NOTE 6) ---------------- ---------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (16,109) (10,071) Purchase of short-term investments (2,256) (8,170) Proceeds from maturity of short-term investments 8,677 12,177 ---------------- ---------------- NET CASH USED IN INVESTING ACTIVITIES (9,688) (6,064) ---------------- ---------------- CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 2,663 1,496 Payments on long-term debt and capital lease obligations (921) (661) Proceeds from capital lease -- 855 ---------------- ---------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,742 1,690 ---------------- ---------------- CASH AND CASH EQUIVALENTS Net increase (decrease) 4,155 (12,560) Balance at beginning of period 4,191 16,389 ---------------- ---------------- BALANCE AT END OF PERIOD $ 8,346 $ 3,829 ================ ================
See notes to consolidated financial statements. 5 STILLWATER MINING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - GENERAL The accompanying unaudited interim consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the financial condition and results of operations have been included. Operating results for the six month period ended June 30, 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1998. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Stillwater Mining Company (the "Company") Form 10-K for the year ended December 31, 1997. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES RECLASSIFICATIONS Certain amounts in the accompanying consolidated financial statements for 1997 have been reclassified to conform to the classifications used in 1998. ACCOUNTING STANDARDS Effective January 1, 1998, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 130, Reporting Comprehensive Income. This Statement establishes standards for reporting and displaying comprehensive income and its components. The effect of adopting SFAS No. 130 was not material for any of the periods presented. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This Statement is effective for the fiscal quarter beginning January 1, 2000 and establishes accounting and reporting standards for derivative instruments and for hedging activities. Based upon the Company's current hedging practices, it does not appear that the effect of adopting SFAS No. 133 will have a material effect on the Company's accounting for these activities. However, upon adoption the Company will report a statement of comprehensive income displaying the effects of the forecasted transactions. Additionally in June 1998, the FASB issued Statement of Position (SOP) 98- 5, Reporting on the Costs of Start-up Activities. SOP 98-5 is effective for fiscal year 1999 and requires that the costs of start-up activities, including organization costs, be expensed as incurred. The Company has yet to determine the effect of this guidance on the Company's accounting. NOTE 3 - INVENTORIES Inventories consisted of the following (in thousands):
(Unaudited) JUNE 30, December 31, 1998 1997 --------------------- ---------------------- Raw ore $ 492 $ 460 Concentrate and in-process 3,889 3,604 --------------------- ---------------------- Metals inventory 4,381 4,064 Materials and supplies 3,340 3,316 --------------------- ---------------------- $ 7,721 $ 7,380 ===================== ======================
6 STILLWATER MINING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 4 - PRECIOUS METALS HEDGING CONTRACTS Precious metals hedging contracts at June 30, 1998, consist of spot deferred forward sales contracts, which require the future delivery of metals at a specific price. The realization of revenue pursuant to these contracts is dependent upon the counterparties' performance in accordance with the terms of the contracts. The Company anticipates all counterparties will meet their obligations under the contracts. At June 30, 1998, the Company's outstanding hedge contracts are as follows:
1998 1999 ---------------------------------- ----------------------------------- HEDGED AVERAGE PRICE HEDGED AVERAGE PRICE OUNCES PER OUNCE OUNCES PER OUNCE ---------------------------------- ----------------------------------- PALLADIUM 87,069 $133 - - PLATINUM 11,142 $387 4,000 $399
The Company has credit agreements with its major trading partners that provide for margin deposits in the event that forward prices for palladium and platinum exceed the Company's hedge contract prices and its credit lines. NOTE 5 - EARNINGS PER SHARE In 1997, the Company adopted SFAS No. 128, Earnings per Share. All prior period earnings per share data presented have been restated to conform to the provisions of this Statement. Outstanding options to purchase 1,239,115 and -0- shares of common stock were included in the computation of diluted earnings per share for the three month periods ended June 30, 1998 and 1997, respectively. Outstanding options to purchase 92,000 and 1,134,884 shares of common stock were excluded from the computation of diluted earnings per share for the three month periods ended June 30, 1998 and 1997, respectively, because to do so would have been antidilutive using the treasury stock method. Outstanding options to purchase 938,965 and -0- shares of common stock were included in the computation of diluted earnings per share for the six month periods ended June 30, 1998 and 1997, respectively. Outstanding options to purchase 392,150 and 1,134,884 shares of common stock were excluded from the computation of diluted earnings per share for the six month periods ended June 30, 1998 and 1997, respectively, because to do so would have been antidilutive using the treasury stock method. In addition, 1.9 million shares of common stock issuable under the terms of the Company's Convertible Subordinated Notes were excluded from the computation of diluted earnings per share for the six month and three month periods ended June 30, 1998 and 1997, because to do so would have been antidilutive. 7 STILLWATER MINING COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 6 - CASH FLOW INFORMATION Reconciliation of net income (loss) to net cash provided by (used in) operating activities is as follows (in thousands):
Six months ended June 30, 1998 1997 - -------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 4,045 $(2,868) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 5,749 5,721 Deferred income taxes 2,532 (1,795) Other 22 575 Changes in operating assets and liabilities: Decrease (increase) in inventories (341) 5,061 Increase in accounts receivable (2,000) (10,389) Increase in other current assets (196) (3,640) Decrease in other noncurrent assets 133 192 Increase (decrease) in accounts payable 1,051 (2,969) Increase (decrease) in other current liabilities (16) 1,886 Increase in noncurrent liabilities 1,122 40 - -------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $12,101 $(8,186) - --------------------------------------------------------------------------------
8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS STILLWATER MINING COMPANY KEY FACTORS (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------------- ----------------------------- 1998 1997 1998 1997 ------------- ---------- ------------- ---------- OUNCES PRODUCED Palladium (000) 91 60 168 120 Platinum (000) 29 18 52 37 ------------- ---------- ------------- ---------- Total 120 78 220 157 TONS MINED (000) 183 134 347 255 TONS MILLED (000) 182 134 346 255 AVERAGE MILL GRADE (OPT) 0.72 0.68 0.70 0.70 MILL RECOVERY (%) 92 87 92 87 CASH COSTS PER OUNCE PRODUCED(1) $147 $189 $150 $186 Depreciation and amortization 24 38 26 37 ------------- ---------- ------------- ---------- Total costs per ounce produced(1) $171 $227 $176 $223 OUNCES SOLD Palladium (000) 91 73 164 135 Platinum (000) 27 23 50 43 ------------- ---------- ------------- ---------- Total 118 96 214 178 AVERAGE REALIZED PRICE PER OUNCE Palladium $179 $177 $174 $158 Platinum $380 $408 $391 $394 Combined (2) $225 $232 $224 $215 AVERAGE MARKET PRICE PER OUNCE Palladium $321 $175 $281 $155 Platinum $386 $397 $386 $383 Combined (2) $326 $227 $297 $208
(1) Cash costs of production include cash costs of mining, processing and administrative expenses at the mine site (including overhead, taxes other than income, royalties, and credits for metals produced other than palladium and platinum). Total costs of production include cash costs plus depreciation and amortization. Income taxes, general and administrative expense and interest income and expense are not included in either total or cash costs of production. (2) Stillwater Mining reports a combined realized price of palladium and platinum at the same ratio as ounces are produced from the base metals refinery. The same ratio is applied to the combined average market price. 9 This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements include comments regarding anticipated capital expenditures and sources of financing for capital expenditures. In addition to factors discussed below, the factors that could cause actual results to differ materially include, but are not limited to, the following: supply and demand of palladium and platinum; unexpected events during facility expansion; fluctuations in ore grade, tons mined, crushed or milled; variations in smelter or refinery operation; amounts and prices of the Company's forward metals sales, and geological, technical, permitting, mining or processing issues. For a more detailed description of risks attendant to the business and operations of Stillwater and to the mining industry in general, please see the Company's other SEC filings, in particular the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. RESULTS OF OPERATIONS Three months ended June 30, 1998 compared to three months ended June 30, 1997 - ----------------------------------------------------------------------------- Revenues -------- Revenues for the second quarter of 1998 increased $4.2 million, or 19%, to $26.5 million compared to $22.3 million in the second quarter of 1997. The increase in revenue was primarily due to a 23% increase in the quantity of metal sold. The increase was partially offset by a 7% decrease in the average realized price per ounce of platinum. During the second quarter of 1998, the Company sold 91,000 ounces of palladium and 27,000 ounces of platinum, at average realized prices of $179 and $380, respectively, compared with sales of 73,000 ounces of palladium and 23,000 ounces of platinum, at average realized prices of $177 and $408, respectively, in the prior year's comparable period. During the second quarter of 1998, the average market prices of palladium and platinum were $321 and $386, respectively. As a result of hedge contracts that were entered into in 1997, the Company realized $11.9 million less revenue in the second quarter of 1998 than would have been realized if metal had been delivered at prevailing average market prices. During the second quarter of 1998, the Company increased production 54% to 91,000 ounces of palladium and 29,000 ounces of platinum compared with production of 60,000 ounces of palladium and 18,000 ounces of platinum in the second quarter of 1997. Costs and Expenses ------------------ Cost of metals sold decreased by $1.3 million, or 7%, from $18.3 million in the second quarter of 1997 to $17.0 million in the second quarter of 1998. The cash costs per ounce produced decreased 22% from $189 in the second quarter of 1997 to $147 in 1998. The decrease in costs is the result of operating efficiencies that have occurred as a result of completion of an expansion at the Stillwater Mine. During 1997, the facility increased production capacity from 1,200 tons per day in the first quarter of 1997 to 2,000 tons per day in the fourth quarter of 1997. In addition, materials handling and processing efficiencies were realized upon commissioning of the production shaft in June 1997. In addition, mill recovery increased from 87% in the second quarter of 1997 to 92% in the second quarter of 1998, as a result of operational efficiencies. Operating Income ---------------- As a result of the increase in revenues and the decrease in operating costs discussed above, operating income in the second quarter of 1998 increased to $5.6 million compared with operating income of $46,000 in the comparable period of 1997. 10 Other Income (Expense) ---------------------- During the second quarter of 1998, net interest expense decreased by $0.5 million to $0.9 million compared with $1.4 million in the second quarter of 1997. The decrease in net interest expense is due to the fact that no interest was capitalized in second quarter of 1997, since the expansion of the Stillwater Mine was substantially completed in the first quarter of 1997. Interest expense of $0.4 million was capitalized in the second quarter of 1998. Net Income ---------- The Company's income before income taxes amounted to $5.0 million in the second quarter of 1998 compared to a loss before income taxes of $1.1 million in the second quarter of 1997. In the second quarter of 1998, the Company provided for $1.9 million of income taxes compared to a recorded benefit of $0.4 million in the second quarter of 1997. The Company has provided for deferred income taxes at the statutory rate of 38.5%; however, as a result of approximately $46.6 million of operating loss carryforwards the Company will not be required to fund any material income tax liability until future years. As a result, the Company reports net income of $3.1 million, or $ 0.15 per basic and diluted share in the second quarter of 1998, compared to a net loss of $0.7 million, or $0.03 per basic and diluted share in the second quarter of 1997. RESULTS OF OPERATIONS Six months ended June 30, 1998 compared to six months ended June 30, 1997 - ------------------------------------------------------------------------- Revenues -------- Revenues for the first half of 1998 increased $9.7 million, or 25%, to $48.0 million compared to $38.3 million in the first half of 1997. The increase in revenue was primarily due to a 20% increase in the quantity of metal sold combined with a 10% increase in the average realized price per ounce of palladium. During the first half of 1998, the Company sold 164,000 ounces of palladium and 50,000 ounces of platinum at average realized prices of $174 and $391, respectively, compared with sales of 135,000 ounces of palladium and 43,000 ounces of platinum at average realized prices of $158 and $394, respectively, in the prior year's comparable period. During the first half of 1998, the average market prices of palladium and platinum were $281 and $386, respectively. As a result of hedge contracts that were entered into in 1997, the Company realized $15.6 million less revenue in the first half of 1998 than would have been realized if metal had been delivered at prevailing average market prices. In the comparable period of 1997, a hedging gain of $1.2 million resulted. During the first half of 1998, the Company increased production 40% to 168,000 ounces of palladium and 52,000 ounces of platinum compared with production of 120,000 ounces of palladium and 37,000 ounces of platinum in the first half of 1997. Costs and Expenses ------------------ Cost of metals sold decreased by $1.9 million, from $34.5 million in the first half of 1997 to $32.6 million in the first half of 1998. The cash costs per ounce produced decreased 19% from $186 in the first half of 1997 to $150 in 1998. The decrease in costs is the result of operating efficiencies that have occurred as a result of completion of an expansion at the Stillwater Mine. During 1997, the facility increased production capacity from 1,200 tons per day in the first quarter of 1997 to 2,000 tons per day in the fourth quarter of 1997. In addition, materials handling and processing efficiencies were realized upon commissioning of the production shaft in June 1997. In addition, the mill recovery increased from 87% in the first half of 1997 to 92% in the first half of 1998. 11 Operating Income ---------------- As a result of the increase in revenues and the decrease in operating costs discussed above, operating income in the first half of 1998 increased by $11.3 million to $8.0 million compared with an operating loss of $3.3 million in the comparable period of 1997. Net Income ---------- The Company's income before income taxes amounted to $6.6 million in the first half of 1998 compared to a loss before income taxes of $4.7 million in the first half of 1997. In the first half of 1998, the Company provided for $2.5 million of income taxes compared to a recorded benefit of $1.8 million in the first half of 1997. The Company has provided for deferred income taxes at the statutory rate of 38.5%; however, as a result of approximately $46.6 million of operating loss carryforwards the Company will not be required to fund any material income tax liability until future years. As a result, the Company reports net income of $4.0 million, or $0.20 per basic and diluted share in the first half of 1998, compared to a net loss of $2.9 million, or $0.14 per basic and diluted share in the first half of 1997. LIQUIDITY AND CAPITAL RESOURCES The Company's working capital at June 30, 1998 was $22.2 million compared to $23.1 million at December 31, 1997. The ratio of current assets to current liabilities was 2.66 at June 30, 1998, compared to 2.88 at December 31, 1997. Net cash provided by operating activities for the first half of 1998 was $12.1 million compared to net cash used of $8.2 million in the first half of 1997. The $20.3 million increase in operating cash flow in 1998 is primarily attributable to an increase in the Company's net income of $6.9 million, an increase in the provision for deferred income taxes of $4.3 million and a change in the net operating assets and liabilities of $9.6 million. A total of $9.7 million of net cash was used in investing activities in the first half of 1998 compared to $6.1 million in the first half of 1997. The increased usage is primarily due to an increase in capital expenditures, as a result of the increased development at the East Boulder Project. The Company's financing activities provided $1.7 million in net cash in the first half of 1998 and 1997. As a result of the above, cash and cash equivalents increased by $4.2 million in the first half of 1998 compared with a decrease of $12.6 million in the comparable period of 1997. During the remainder of 1998, the Company expects to invest approximately $39.5 million in various capital investment programs which may be funded by operating cash flow, the Company's existing working capital and, if required, lease financing or short-term borrowings. The Company is evaluating various plans to expand production at the facility. Dependent on the outcome of such studies, the level of capital expenditures and the source of funding may vary in future periods. The Company has established an unsecured working capital line of credit with NM Rothschild and Sons, Ltd., with a maximum borrowing capacity of $15 million, which expires on April 30, 1999. As of June 30, 1998, there were no borrowings against this credit line, and the Company could borrow up to $11.9 million based upon quarterly borrowing calculations under the terms of the agreement. 12 PART II OTHER INFORMATION Item 1. Legal Proceedings ----------------- During the period covered by this report, there were no legal proceedings instituted that are reportable. Item 2. Changes in Securities --------------------- None Item 3. Defaults Upon Senior Securities ------------------------------- None Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The annual meeting of stockholders was held on May 15, 1998. (b) The following individuals were elected to continue as Directors at the meeting: Ray W. Ballmer Douglas D. Donald John W. Eschenlohr Lawrence M. Glaser John P. Ingersoll William E. Nettles Ted Schwinden Peter Steen (c) Set forth below are the votes cast for the election of Directors: FOR (*) WITHHELD ---------------- ---------------- Ray W. Ballmer 15,872,898 43,009 Douglas D. Donald 15,871,362 44,545 John W. Eschenlohr 15,865,178 50,729 Lawrence M. Glaser 15,876,836 39,071 John P. Ingersoll 15,868,578 47,329 William E. Nettles 15,879,103 36,804 Ted Schwinden 15,867,098 48,809 Peter Steen 15,863,548 52,359 Stockholders were asked to amend and restate the Company's 1994 Stock Option Plan to authorize an additional one million shares of stock to be made available for issuance under the plan. Votes cast in favor were 12,156,153 representing approximately 76% of the shares entitled to vote, against were 3,667,151, and abstaining were 92,603. Additionally, stockholders were asked to ratify the appointment of Pricewaterhouse Coopers LLP as the Company's independent accountants for the fiscal year ending December 31, 1998. Votes cast in favor were 15,679,421 representing approximately 99% of the shares entitled to vote, against were 17,210, and abstaining were 219,276. * Stockholders have cumulative voting rights in connection with the election of Directors. 13 (d) None Item 5. Other Information ----------------- On July 1, 1998, the Company filed a universal shelf registration statement on Form S-3 under the Securities Act of 1933 for an aggregate initial offering of up to $200 million of securities. The registration statement was declared effective on July 17, 1998. Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibits: None (b) Reports on Form 8-K: None 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS 6-MOS DEC-31-1998 DEC-31-1998 APR-01-1998 JAN-01-1998 JUN-30-1998 JUN-30-1998 8,346 0 7,047 0 8,926 0 0 0 7,721 0 35,574 0 260,626 0 59,034 0 239,695 0 13,385 0 60,491 0 0 0 0 0 206 0 147,894 0 239,695 0 26,523 48,036 26,523 48,036 16,953 32,557 20,926 40,067 0 0 0 0 877 1,905 4,977 6,577 (1,916) (2,532) 3,061 4,045 0 0 0 0 0 0 3,061 4,045 0.15 0.20 0.15 0.20
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