UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2002.
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 of (I.R.S. Employer Identification No.)
incorporation or organization)
536 East Pike Avenue
Columbus, Montana 59019
--------------------------------------- ------------------------------
(Address of principal executive offices) (Zip Code)
(406) 322-8700
- -------------------------------------------------------------------------------
(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 October 21, 2002, 43,504,852 shares of common stock, $0.01 par value per
share, were issued and outstanding.
STILLWATER MINING COMPANY
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements................................................... 3
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................... 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk............. 18
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................... 19
Item 2. Changes in Securities and Use of Proceeds.............................. 20
Item 3. Defaults Upon Senior Securities........................................ 20
Item 4. Submission of Matters to a Vote of Security Holders.................... 20
Item 5. Other Information...................................................... 20
Item 6. Exhibits and Reports on Form 8-K....................................... 20
SIGNATURES ....................................................................... 21
CERTIFICATION ....................................................................... 22
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Stillwater Mining Company
Consolidated Balance Sheet
(Unaudited)
(in thousands, except share and per share amounts)
September 30, December 31,
2002 2001
-------------- -------------
ASSETS
Current assets
Cash and cash equivalents $ 42,223 $ 14,911
Inventories 46,498 42,944
Accounts receivable 23,531 21,773
Deferred income taxes 4,410 1,417
Other current assets 7,017 4,745
---------- ----------
Total current assets 123,679 85,790
Property, plant and equipment, net 785,672 774,036
Other noncurrent assets 6,477 8,395
---------- ----------
Total assets $ 915,828 $ 868,221
========== ==========
LIABILITIES and SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 13,889 $ 21,539
Accrued payroll and benefits 9,306 10,630
Property, production and franchise taxes payable 9,859 7,768
Current portion of long-term debt and capital lease
obligations 18,247 9,008
Accrued restructuring costs 2,066 10,974
Other current liabilities 8,471 3,588
--------- ----------
Total current liabilities 61,838 63,507
Long-term debt and capital lease obligations 204,055 246,803
Deferred income taxes 79,358 71,887
Other noncurrent liabilities 10,584 10,901
--------- ----------
Total liabilities 355,835 393,098
--------- ----------
Shareholders' equity
Preferred stock, $0.01 par value, 1,000,000 shares
authorized; none issued - -
Common stock, $0.01 par value, 100,000,000 shares
authorized; 43,453,551 and 38,771,377 shares
issued and outstanding 435 388
Paid-in capital 350,867 291,182
Retained earnings 210,104 177,820
Accumulated other comprehensive income (loss) (359) 5,733
Unearned compensation - restricted stock awards (1,054) -
----------- ----------
Total shareholders' equity 559,993 475,123
----------- ----------
Total liabilities and shareholders' equity $ 915,828 $ 868,221
========== ==========
See notes to consolidated financial statements.
Stillwater Mining Company
Consolidated Statement of Operations
(Unaudited)
(in thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
-------------------------------- -----------------------------
2002 2001 2002 2001
--------------- ------------- ------------- ------------
Revenues $ 65,970 $ 52,893 $ 216,954 $ 218,061
Costs and expenses
Cost of metals sold 42,364 26,978 130,028 100,816
Depreciation and amortization 10,078 5,950 29,654 17,171
----------- ----------- ---------- -----------
Total cost of sales 52,442 32,928 159,682 117,987
General and administrative expenses 3,853 5,450 10,578 15,905
Restructuring costs, net - - (5,938) -
Legal settlement - 1,684 - 1,684
----------- ----------- ----------- -----------
Total costs and expenses 56,295 40,062 164,322 135,576
----------- ----------- ----------- -----------
Operating income 9,675 12,831 52,632 82,485
Other income (expense)
Interest income 263 473 744 1,719
Interest expense, net of capitalized interest of
$0, $4,485, $0 and $13,433 (4,050) - (12,578) -
------------ ----------- ----------- -----------
Income before income taxes 5,888 13,304 40,798 84,204
Income tax provision (1,229) (3,044) (8,514) (23,250)
------------ ------------ ----------- ------------
Net income $ 4,659 $ 10,260 $ 32,284 $ 60,954
----------- ------------ ---------- -----------
Other comprehensive income (loss), net of tax (2,215) 4,031 (6,092) 15,805
------------ ------------ ----------- -----------
Comprehensive income $ 2,444 $ 14,291 $ 26,192 $ 76,759
============ =========== ========== ===========
Earnings per share
Basic 0.11 0.26 0.76 1.57
Diluted 0.11 0.26 0.75 1.55
Weighted average common shares outstanding
Basic 43,306 38,744 42,712 38,708
Diluted 43,365 39,173 42,851 39,294
See notes to consolidated financial statements.
Stillwater Mining Company
Consolidated Statement of Cash Flows
(Unaudited)
(in thousands)
Three Months ended Nine Months ended
September 30, September 30,
--------------------------------- -------------------------------
2002 2001 2002 2001
-------------- -------------- ----------- -------------
Cash flows from operating activities
Net income $ 4,659 $ 10,260 $ 32,284 $ 60,954
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 10,078 5,950 29,654 17,171
Deferred income taxes 529 5,212 4,478 21,918
Restructuring costs, net - - (5,938) -
Cash paid on accrued restructuring costs (469) - (2,970) -
Stock issued to employee benefit plans 998 - 2,548 -
Amortization of debt issuance costs 256 225 759 507
Amortization of restricted stock compensation 116 - 543 -
Changes in operating assets and liabilities:
Inventories (317) (8,507) (3,554) 3,545
Accounts receivable 3,840 12,783 (1,758) (20,003)
Accounts payable 2,572 7,091 (7,650) 4,830
Other (3,010) 2,770 (2,332) 3,412
----------- ----------- ---------- ----------
Net cash provided by operating activities 19,252 35,784 46,064 92,334
----------- ----------- ----------- ----------
Cash flows from investing activities
Capital expenditures (16,409) (53,328) (39,607) (156,306)
Proceeds from sale/leaseback transactions - - 1,282 -
----------- ----------- ----------- ----------
Net cash used in investing activities (16,409) (53,328) (38,325) (156,306)
----------- ----------- ----------- ----------
Cash flows before financing activities 2,843 (17,544) 7,739 (63,972)
----------- ------------ ------------- -----------
Cash flows from financing activities
Payments on long-term debt and capital lease
obligations (2,345) (1,085) (36,474) (127,240)
Issuance of common stock, net of issue costs 16 251 56,047 1,617
Payments for debt issuance costs - - - (3,946)
Net metals repurchase agreement transactions - - - (9,386)
Issuance of long-term debt - - - 202,611
----------- ------------ ------------- -----------
Net cash provided (used) by financing activities (2,329) (834) 19,573 63,656
----------- ------------ ------------- -----------
Cash and cash equivalents
Net increase (decrease) 514 (18,378) 27,312 (316)
Balance at beginning of period 41,709 36,281 14,911 18,219
----------- ------------ ------------- ------------
Balance at end of period $ 42,223 $ 17,903 $ 42,223 $ 17,903
=========== ============ ============= ============
See notes to consolidated financial statements.
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 September 30, 2002 and the results of its
operations and its cash flows for the three- and nine-month periods ended
September 30, 2002 and 2001. Certain prior period amounts have been
reclassified to conform with the current year presentation. The results of
operations for the three- and nine-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 2001 Annual Report on Form 10-K/A.
Note 2 - Recent Accounting Pronouncements
In June 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standard (SFAS) No. 143,
Accounting for Asset Retirement Obligations, which addresses financial
accounting and reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement costs. The
standard applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction,
development and normal use of the asset.
SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The fair value
of the liability is added to the carrying amount of the associated asset
and this additional carrying amount is depreciated over the life of the
asset. The liability is accreted at the end of each period through charges
to operating expense. If the obligation is settled for other than the
carrying amount of the liability, the company will recognize a gain or loss
on settlement.
SFAS No. 143 will be adopted January 1, 2003, when the company
will record the estimated present value of the estimated costs of its
reclamation obligations and increase the carrying value of property, plant
and equipment. The company is in the process of evaluating the effect of
the adoption of this statement and expects to complete this evaluation in
January 2003 as updated financial, production and ore reserve data become
available.
Effective January 1, 2002, the company adopted SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, which
addresses financial accounting and reporting for the impairment or disposal
of long-lived assets. While SFAS No. 144 supersedes SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, it retains many of the fundamental provisions of
that Statement. The adoption of SFAS No. 144 did not have an impact on the
company's consolidated financial position or results of operations as of
and for the three- and nine-month periods ended September 30, 2002.
Note 3 - Comprehensive Income
Comprehensive income consists of net income and other gains and
losses affecting shareholders' equity that, under generally accepted
accounting principles, are excluded from net income. For the company, such
items consist of unrealized gains and losses on derivative financial
instruments.
The following summary sets forth the changes of other
comprehensive income (loss) accumulated in shareholders' equity:
(in thousands) Commodity Interest Total Derivative
Instruments Rate Swaps Financial Instruments
--------------------------------------------------------------
Balance at December 31, 2001 $ 9,458 $ - $ 9,458
Reclassification to earnings (7,018) 1,040 (5,978)
Change in value (300) (3,772) (4,072)
--------------------------------------------------------------
2,140 (2,732) (592)
Tax effect (843) 1,076 233
--------------------------------------------------------------
Balance at September 30, 2002 $ 1,297 $ (1,656) $ (359)
==============================================================
Commodity instruments outstanding at September 30, 2002 relate to
financially settled forwards. All financially settled forward commodity
instruments at September 30, 2002, have been settled and cash has been
received. Pursuant to SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, the gains related to commodity instruments are
being deferred in accumulated other comprehensive income until the original
contract settlement dates. The company expects to reclassify to earnings
the entire $2.1 million ($1.3 million net of tax) of unrealized gains
existing at September 30, 2002 during the next three months.
The unrealized losses of $2.7 million ($1.7 million net of tax)
existing at September 30, 2002 on the interest rate swaps are being
deferred and are expected to be recognized as an addition to interest
expense over the next eighteen months.
Note 4 - Inventories
Inventories consisted of the following:
(in thousands) September 30, December 31,
2002 2001
----------------------- ------------------------
Metals inventory
Raw ore $ 722 $ 1,571
Concentrate and in-process 16,427 14,944
Finished goods 18,145 17,171
----------------------- ------------------------
35,294 33,686
Materials and supplies 11,204 9,258
----------------------- ------------------------
$ 46,498 $ 42,944
======================= ========================
Note 5 - Long-Term Debt
Credit Facility
In February 2001, the company obtained a $250 million credit
facility (the "Credit Facility") from a syndicate of financial
institutions. The Credit Facility provides for a $65 million five-year term
loan facility (Term A), a $135 million seven-year term loan facility (Term
B) and a $50 million revolving credit facility. Amortization of the term
loan facilities commenced on March 31, 2002. The final maturity of the Term
A and the revolving credit facility is December 30, 2005 while the Term B
facility final maturity date is December 31, 2007. As of September 30,
2002, the company had $58.7 million and $130.1 million outstanding under
the Term A and Term B loan facilities, respectively, bearing interest at
4.6% and 5.6% for the Term A and Term B facilities, respectively. During
the third quarter of 2002, the company entered into a letter of credit in
the amount of $7.5 million, which is outstanding under the revolving credit
facility as of September 30, 2002, bearing a financing fee of 2.9% on the
unadvanced amount. The remaining unused balance under the revolving credit
facility requires an annual commitment fee of 0.5% of the unadvanced amount.
During the third quarter of 2002, the company determined that it
might not achieve a minimum production requirement in its Credit Facility.
As a result, the company obtained an
amendment from its lenders on September 27, 2002, which reduced the
trailing four quarters production covenant from 620,000 ounces to 610,000
ounces of palladium and platinum. On October 25, 2002, the company obtained
an additional amendment that modifies certain production and financial
covenants for the remaining term of the agreement. In exchange for the
covenant modification, the company agreed to an amendment fee of 50 basis
points, or approximately $1.2 million, and a 50 basis point increase in the
interest rate payable on the loans. As a result of the amendments, the
company believes it is in compliance with all production and financial
covenants of the credit agreement.
Note 6 - Capital Stock Transactions
Restricted Stock
During the first quarter of 2002, the company granted 135,119
shares of restricted stock to certain of its officers and employees. At
September 30, 2002, 45,250 shares had vested and the remaining shares will
vest on January 2, 2005, provided that the recipients are still employed by
the company on such vesting date. Vesting may accelerate upon the
attainment of certain performance criteria measured on specified dates. The
market value of restricted stock awarded totaled approximately $2.6 million
on the grant date and was recorded as a separate component of shareholders'
equity. Approximately 1,000 and 7,000 shares of restricted stock were
forfeited or cancelled during the first three and nine months ending
September 30, 2002, respectively. The company is amortizing unearned
compensation over the vesting periods. During the three- and nine-month
periods ended September 30, 2002, approximately $118,000 and $543,000,
respectively, related to the restricted stock was recognized as
compensation expense.
Stock Offering
On January 31, 2002, the company completed a $60 million private
placement of its common stock involving approximately 4.3 million shares or
approximately 10% of the outstanding shares after such issuance. The price
per share was $14.00 representing an approximate 10% discount from the
closing price of $15.61 on January 29, 2002. Proceeds from the offering
were approximately $54.0 million, net of actual offering costs incurred of
$6.0 million. The proceeds were used to pay down the $25 million revolving
credit facility and the remaining proceeds used for general corporate
purposes.
Note 7 - Earnings per Share
The effect of outstanding stock options on diluted weighted
average shares outstanding was 54,616 and 428,644 shares for the
three-month periods ending September 30, 2002 and 2001, respectively.
Outstanding options to purchase 2,474,802 and 1,192,220 shares of common
stock were excluded from the computation of diluted earnings per share for
the three-month periods ended September 30, 2002 and 2001, respectively,
because the effect would have been antidilutive using the treasury stock
method.
The effect of outstanding stock options on diluted weighted
average shares outstanding was 99,504 and 585,937 shares for the nine-month
periods ending September 30, 2002 and 2001, respectively. Outstanding
options to purchase 2,274,667 and 640,041 shares of common stock were
excluded from the computation of diluted earnings per share for the
nine-month periods ended September 30, 2002 and 2001, respectively, because
the effect would have been antidilutive using the treasury stock method.
The effect of outstanding restricted stock on diluted weighted
average shares outstanding was 3,711 and 39,656 shares for the three- and
nine-month periods ending September 30, 2002, respectively. 82,351 shares
of unvested restricted stock were excluded from the computation of diluted
earnings per share for the three- and nine-month periods ending September
30, 2002 because the effect would have been antidilutive using the treasury
stock method.
Note 8 - Long-Term Sales Contracts
The company has entered into long-term sales contracts with
General Motors Corporation, Ford Motor Company and Mitsubishi Corporation.
The contracts provide for floor and ceiling price structures as summarized
below:
PALLADIUM PLATINUM
-------------------------------------------------- -------------------------------------------------------
% of Avg. % of Avg. % of Avg. Floor % of Avg.
Year Production Floor Production Ceiling Production Price Production Ceiling
Price Price Price
- ------- -------------------------------------------------- -------------------------------------------------------
2002 95% $370 28% $400 100% $402 45% $558
2003 95% $357 28% $400 100% $403 30% $562
2004 100% $371 39% $644 80% $425 16% $856
2005 100% $355 31% $702 80% $425 16% $856
2006 100% $339 16% $981 80% $425 16% $856
2007 80% $400 20% $975 70% $425 14% $850
2008 80% $385 20% $975 70% $425 14% $850
2009 80% $380 20% $975 70% $425 14% $850
2010 80% $375 20% $975 70% $425 14% $850
Note 9 - Financial Instruments
The company utilizes the following types of derivative financial
instruments: fixed forwards, cashless put and call option collars,
financially settled forwards and interest rate swaps. For derivative
instruments, the company designates derivatives as a hedge of a forecasted
transaction or the variability of cash flows to be received or paid related
to a recognized asset or liability ("cash flow" hedge). Changes in fair
value of derivatives that are highly effective as hedges and that are
designated and qualified as a cash-flow hedge are reported in other
comprehensive income until the related specific firm commitments or
forecasted transactions occur. Hedging gains or (losses) on commodity
instruments were recognized as an adjustment to revenue and consisted of
the following:
Three months ended Nine months ended
(in thousands) September 30, September 30,
2002 2001 2002 2001
----------------- ---------------- ------------------- ---------------
Cashless put and call
option collars $ (15) $ - $ (15) $ (2,457)
Financially settled
forwards 2,243 3,926 7,033 2,839
----------------- ---------------- ------------------- ---------------
$ 2,228 $ 3,926 $ 7,018 $ 382
================= ================ =================== ===============
The company had no fixed forward contracts outstanding during the
three- and nine-month periods ending September 30, 2002 and 2001. At
September 30, 2002, all financially settled forward commodity instruments
have been settled and cash has been received. The gains related to these
commodity instruments are being deferred in accumulated other comprehensive
income until the original contract settlement dates. The company had no
fixed forward contracts or put and call option collars outstanding at
September 30, 2002.
During the first quarter of 2002, the company entered into two
identical interest rate swap agreements with a combined notional amount
totaling $100 million. The interest rate swap agreements were effective
March 4, 2002 and mature on March 4, 2004. The agreements require the
company to pay interest at a fixed rate of 3.67% and receive interest at a
rate based on London Interbank Offered Rate (LIBOR), which is adjusted on a
quarterly basis. The adjusted quarterly rate at September 30, 2002 was
1.81%. The interest rate swap agreements qualify as a cash flow hedge and
are considered to be highly effective since the change in the value of the
interest rate swap will offset changes in the future cash flows related to
interest payments on the company's debt.
Note 10 - Restructuring Costs
In the fourth quarter of 2001, the company began implementing a
revised operating plan, which included a reduction of the company's
previously planned capital expenditures and production levels. In
accordance with the plan, the company terminated certain contracts related
to ongoing mine development and accrued a pre-tax charge of approximately
$11 million for early contract termination costs. The accrual was based on
the termination provisions of the related contracts. During the first nine
months of 2002, the company reduced its accrued restructuring costs
resulting in a gain of $7.0 million primarily as a result of negotiations
of certain termination clauses of the construction contracts. Any
adjustments to the original estimate of the accrual have been included in
the company's results of operations.
In accordance with the revised operating plan, during the second
quarter of 2002, the company made an addition to its restructuring accrual
to include the decision to eliminate six management positions and recorded
an addition to the restructuring accrual of $1.1 million.
The following summary sets forth the changes of the restructuring
accrual during the first nine months of 2002:
Total
Contract Employee Restructuring
(in thousands) Terminations Terminations Accrual
--------------------- --------------------- ----------------------
Balance at December 31, 2001 $ 10,974 $ - $ 10,974
Additional accrual - 1,089 1,089
Cash paid (2,266) (704) (2,970)
Accrual adjustments (7,027) - (7,027)
--------------------- --------------------- ----------------------
Balance at September 30, 2002 $ 1,681 $ 385 $ 2,066
===================== ===================== ======================
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Stillwater Mining Company
Key Factors
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
--------------------------------------------------------------------
2002 2001 2002 2001
------------- --------------- ------------- -------------
OPERATING DATA (1)
Consolidated:
Ounces produced (000)
Palladium 108 103 363 292
Platinum 31 29 107 87
------------- --------------- ------------- -------------
Total 139 132 470 379
Tons mined (000) 296 201 968 581
Tons milled (000) 303 242 976 629
Mill head grade (ounce per ton) 0.51 0.59 0.54 0.65
Sub-grade tons milled (000) 32 30 56 73
Sub-grade mill head grade (ounce per ton) 0.11 0.21 0.15 0.21
Total tons milled (000) 335 272 1,032 702
Combined mill head grade (ounce per ton) 0.47 0.55 0.51 0.60
Total mill recovery (%) 89 91 89 90
Stillwater Mine:
Ounces produced (000)
Palladium 80 96 293 285
Platinum 24 27 87 85
------------- --------------- ------------- -------------
Total 104 123 380 370
Tons mined (000) 198 201 694 581
Tons milled (000) 197 201 693 588
Mill head grade (ounce per ton) 0.58 0.65 0.60 0.68
Sub-grade tons milled (000) 30 30 51 73
Sub-grade mill head grade (ounce per ton) 0.10 0.21 0.15 0.21
Total tons milled (000) 227 231 744 661
Combined mill head grade (ounce per ton) 0.51 0.59 0.57 0.62
Total mill recovery (%) 90 91 90 90
East Boulder Mine: (1)
- ------------------
Ounces produced (000)
Palladium 27 7 70 7
Platinum 8 2 20 2
------------- --------------- ------------- -------------
Total 35 9 90 9
Tons mined (000) 98 - 274 -
Tons milled (000) 106 41 283 41
Mill head grade (ounce per ton) 0.39 0.28 0.37 0.28
Sub-grade tons milled (000) 2 - 5 -
Sub-grade mill head grade (ounce per ton) 0.32 - 0.20 -
Total tons milled (000) 108 41 288 41
Combined mill head grade (ounce per ton) 0.38 0.28 0.36 0.28
Total mill recovery (%) 86 83 87 83
SALES AND PRICE DATA
Ounces sold (000)
Palladium 117 80 368 292
Platinum 31 26 110 84
------------- --------------- ------------- -------------
Total 148 106 478 376
Average realized price per ounce(2)
Palladium $ 431 $ 513 $ 443 $ 610
Platinum 517 474 506 516
Combined 449 504 457 589
Average market price per ounce(2)
Palladium $ 325 $ 475 $ 355 $ 687
Platinum 542 481 523 559
Combined 376 477 394 657
(1) The development ounces recovered and tons milled at the East
Boulder Mine in 2001 were generated from construction and
development activities. Proceeds of $2.4 million generated from
the ounces during 2001 were credited to capitalized mine
development in 2001.
(2) Stillwater Mining reports a combined average realized and market
price of palladium and platinum at the same ratio as ounces are
produced from the refinery. The company's average realized price
represents revenues which include the impact of contract floor and
ceiling prices and hedging gains and losses realized on commodity
instruments and exclude contract discounts, divided by ounces
sold. The average market price represents the average London PM
Fix for the actual months of the period.
Stillwater Mining Company
Key Factors (continued)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
COST DATA
Consolidated:
PER TON MILLED(3)
Cash operating costs $ 112 $ 128 $ 113 $ 126
Royalties and taxes 14 13 14 21
------------ ------------ ------------ ------------
Total cash costs $ 126 $ 141 $ 127 $ 147
Depreciation and amortization 31 26 29 26
------------ ------------ ------------ ------------
Total production costs $ 157 $ 167 $ 156 $ 173
============ ============ ============ ============
PER OUNCE PRODUCED(3)
Cash operating costs $ 270 $ 239 $ 248 $ 225
Royalties and taxes 34 25 31 38
------------ ------------ ------------ ------------
Total cash costs $ 304 $ 264 $ 279 $ 263
Depreciation and amortization 73 49 64 47
------------ ------------ ------------ ------------
Total production costs $ 377 $ 313 $ 343 $ 310
============ ============ ============ ============
Stillwater Mine:
PER TON MILLED(3)
Cash operating costs $ 111 $ 128 $ 115 $ 126
Royalties and taxes 15 13 14 21
------------ ------------ ------------ ------------
Total cash costs $ 126 $ 141 $ 129 $ 147
Depreciation and amortization 30 26 28 26
------------ ------------ ------------ ------------
Total production costs $ 156 $ 167 $ 157 $ 173
============ ============ ============ ============
PER OUNCE PRODUCED(3)
Cash operating costs $ 243 $ 239 $ 225 $ 225
Royalties and taxes 32 25 28 38
------------ ------------ ------------ ------------
Total cash costs $ 275 $ 264 $ 253 $ 263
Depreciation and amortization 66 49 55 47
------------ ------------ ------------ ------------
Total production costs $ 341 $ 313 $ 308 $ 310
============ ============ ============ ============
East Boulder Mine:
PER TON MILLED(3)
Cash operating costs $ 114 $ - $ 108 $ -
Royalties and taxes 14 - 13 -
------------ ------------ ------------ ------------
Total cash costs $ 128 $ - $ 121 $ -
Depreciation and amortization 30 - 31 -
------------ ------------ ------------ ------------
Total production costs $ 158 $ - $ 152 $ -
============ ============ ============ ============
PER OUNCE PRODUCED(3)
Cash operating costs $ 348 $ - $ 348 $ -
Royalties and taxes 42 - 41 -
------------ ------------ ------------ ------------
Total cash costs $ 390 $ - $ 389 $ -
Depreciation and amortization 94 - 102 -
------------ ------------ ------------ ------------
Total production costs $ 484 $ - $ 491 $ -
============ ============ ============ ============
(3) Income taxes, corporate general and administrative expense and
interest income and expense are not included in total cash costs or
total production costs.
Recent Developments
During the third quarter of 2002 the company revised its
production target for 2002 to approximately 640,000 ounces of palladium and
platinum, a decrease of 40,000 ounces from the previous target of 680,000
ounces. The decrease in the production target is the result of industrial
relations issues experienced during the third quarter and the delay of
certain infrastructure projects at the Stillwater Mine. Late in the third
quarter, the mine began to return to a more normal state and the company
has initiated work to address the infrastructure projects delayed earlier
this year. As a result of the revised production target, the company
obtained an amendment from its lenders on September 27, 2002, which reduced
the trailing four quarters production covenant from 620,000 ounces to
610,000 ounces of palladium and platinum. On October 25, 2002, the Company
obtained an additional amendment that modifies certain production and
financial covenants for the remaining term of the agreement. In exchange
for the covenant modification, the company agreed to an amendment fee of 50
basis points, or approximately $1.2 million, and a 50 basis point increase
in the interest rate payable on the loans.
Results of Operations
Three months ended September 30, 2002 compared to three months ended
September 30, 2001
PGM Production. During the third quarter of 2002, the company
produced approximately 108,000 ounces of palladium and 31,000 ounces of
platinum compared with production of approximately 103,000 ounces of
palladium and 29,000 ounces of platinum in the third quarter of 2001. The
increase was primarily due to the East Boulder Mine, which commenced commercial
production in 2002 and produced 27,000 ounces of palladium and 8,000 ounces
of platinum in the third quarter of 2002, offset by a 15% decrease in
production at the Stillwater Mine, which produced 80,000 ounces of
palladium and 24,000 ounces of platinum in the third quarter of 2002
compared to 96,000 ounces of palladium and 27,000 ounces of platinum in the
third quarter of 2001 as a result of a 14% decrease in the combined mill
head grade due to mining more tonnage from the Upper West area of the mine
and having fewer high-grade stopes available in the quarter. In addition,
operations were adversely effected by labor and infrastructure issues
previously reported. Late in the third quarter, the mine began to return to
a more normal state and the Company has initiated work to address the
infrastructure projects, which had been delayed earlier in the year. The
increase in consolidated tonnage milled and decrease in consolidated mill
head grade is primarily due to the lower mill head grade at the Stillwater
Mine due to increased emphasis in mining the upper west area, combined with
placing the East Boulder Mine into commercial production in 2002.
Revenues. Revenues were $66.0 million for the third quarter of
2002 compared with $52.9 million for the third quarter of 2001. The
increase is primarily due to a 40% increase in the number of ounces sold,
partially offset by an 11% decrease in realized palladium and platinum
prices.
Palladium sales increased to approximately 117,000 ounces during
the third quarter of 2002 compared to 80,000 ounces for the third quarter
of 2001. Platinum sales increased to approximately 31,000 ounces during the
third quarter compared to 26,000 for the same period of 2001. As a result,
the total quantity of metal sold increased 40% to approximately 148,000
ounces during the third quarter of 2002 compared with 106,000 for the same
period of 2001.
The company's combined average realized price per ounce of
palladium and platinum sold in the third quarter of 2002 decreased 11% to
$449, compared to $504 in the third quarter of 2001. The combined average
market price decreased 21% to $376 per ounce in the third quarter of 2002,
compared to $477 per ounce in the third quarter of 2001. The company's
average realized price per ounce of palladium was $431 in the third quarter
of 2002, compared to $513 in the third quarter of 2001, while the average
market price of palladium was $325 per ounce in the third quarter of 2002
compared to $475 per ounce in the third quarter of 2001. The company's
average realized price per ounce of platinum was $517 in the third quarter
of 2002, compared to $474 in the third quarter of 2001, while the average
market price of platinum was $542 per ounce in the third quarter of 2002
compared to $481 per ounce in the third quarter of 2001.
Production Costs. Total consolidated cash costs per ounce in the
third quarter of 2002 increased $40 or 15% to $304 per ounce from $264 per
ounce in the quarter ended September 30, 2001. The increase in total
consolidated cash costs per ounce is attributed to a $31 per ounce increase
in operating costs primarily related to placing the East Boulder Mine into
production in 2002, and a $9 per ounce increase in royalties and taxes
which is primarily due to an increase in ounces sold and an increase in the
areas mined subject to royalties, as compared to the same period of 2001.
Total consolidated production costs per ounce increased $64, or 20%, to
$377 per ounce in the quarter ended September 30, 2002. The increase is due
to the increase in operating costs and an increase in depreciation and
amortization costs of $24 per ounce, primarily related to lower production
ounces at the Stillwater Mine and the impact of placing the East Boulder
Mine assets into commercial production during 2002, combined with changes
in reserve estimates used in calculating depreciation.
Expenses. General and administrative expenses decreased $1.6
million, or 29%, in the third quarter of 2002 as compared to the same
period of 2001. The decrease is primarily due to $1.2 million incurred for
consulting services during the third quarter of 2001. Additionally, the
company incurred $1.7 million in the third quarter of 2001 related to a
settlement of a legal dispute with a terminated refining contract.
Interest expense increased $4.1 million as a result of placing the
East Boulder Mine into production in 2002, which resulted in interest being
expensed rather than capitalized.
Income Taxes. The company has provided for income taxes of $1.2
million, or 20.9%, of pre-tax income for the quarter ended September 30,
2002 compared to $3.0 million, or 22.9% of pre-tax income, for the quarter
ended September 30, 2001. The reduction in the effective tax rate is the
result of an election in the treatment of mine development costs that will
allow the company to claim additional statutory depletion for tax purposes.
Net Income. The company reported net income of $4.7 million or
$0.11 per diluted share for the third quarter of 2002 compared with net
income of $10.3 million, or $0.26 per diluted share for the third quarter
of 2001.
Other Comprehensive Income (Loss). For the third quarter of 2002,
comprehensive loss, net of tax, includes a decline in the market value of
the interest rate swaps of $1.1 million and reclassification adjustments to
earnings of $1.4 million associated with gains on commodity instruments and
$0.3 million associated with losses on interest rate swaps.
Nine months ended September 30, 2002 compared to nine months ended
September 30, 2001
PGM Production. During the first nine months of 2002, the company
produced approximately 363,000 ounces of palladium and 107,000 ounces of
platinum compared with production of approximately 292,000 ounces of
palladium and 87,000 ounces of platinum in the first nine months of 2001.
The increase was primarily due to a 3% increase in production at the
Stillwater Mine, which produced 293,000 ounces of palladium and 87,000
ounces of platinum in the first nine months of 2002, and the East Boulder
Mine, which commenced commercial production in 2002 and produced 70,000
ounces of palladium and 20,000 ounces of platinum in the first nine months
of 2002. The increased production is primarily the result of a 47% increase
in total tons milled of 1,032,000 tons compared to 702,000 tons in the
first nine months of 2001, partially offset by a 15% decrease in the
combined mill head grade. The increase in consolidated tonnage milled and
decrease in consolidated mill head grade is primarily due to the lower mill
head grade at the Stillwater Mine due to increased emphasis in mining the
upper west area, combined with placing the East Boulder Mine into
commercial production in 2002.
Revenues. Revenues were $217.0 million for the first nine months
of 2002 compared with $218.1 million for the first nine months of 2001. The
decrease is primarily due to a 22% decrease in realized palladium and
platinum prices, offset by a 27% increase in the number of ounces sold.
Palladium sales increased to 368,000 ounces during the first nine
months of 2002 compared with 292,000 ounces for the same period of 2001.
Platinum sales increased to approximately 110,000 ounces during the first
nine months of 2002 compared to 84,000 ounces for the first nine months of
2001. As a result, the total quantity of metal sold increased 27% to
approximately 478,000 ounces during the first nine months of 2002 from
approximately 376,000 ounces for the same period of 2001.
The company's combined average realized price per ounce of
palladium and platinum sold in the first nine months of 2002 decreased 22%
to $457, compared to $589 in the first nine months of 2001. The combined
average market price decreased 40% to $394 per ounce in the first nine
months of 2002, compared to $657 per ounce in the first nine months of
2001. The average realized price per ounce of palladium was $443 in the
first nine months of 2002, compared to $610 in the first nine months of
2001, while the average market price of palladium was $355 per ounce in the
first nine months of 2002 compared to $687 per ounce in the first nine
months of 2001. The average realized price per ounce of platinum was $506
in the first nine months of 2002, compared to $516 in the first nine months
of 2001, while the average market price of platinum was $523 per ounce in
the first nine months of 2002 compared to $559 per ounce in the first nine
months of 2001.
Production Costs. Total consolidated cash costs per ounce for the
nine months ended September 30, 2002 increased $16 or 6% to $279 from $263
for the same period in 2001. The increase in total consolidated cash costs
per ounce is attributed to a $23 per ounce increase in operating costs
primarily related to placing the East Boulder Mine into commercial production
in 2002. This is offset by a $7 per ounce decrease in royalties and taxes
primarily due to lower palladium and platinum market prices as compared to
the same period of 2001. Total consolidated production costs per ounce
increased $33, or 11%, to $343 in the nine months ended September 30, 2002
due to the increase in cash costs and an increase in depreciation and
amortization costs of $17 per ounce, primarily related to placing the East
Boulder Mine into commercial production during the first nine months of 2002.
Expenses. General and administrative expenses decreased $5.3
million, or 33%, in the first nine months of 2002, primarily as a result of
lower costs of $1.8 million related to reduced project management and
recruiting activities associated with the company's previous expansion
plan. In addition, during the first nine months of 2001, the company
incurred $1.7 million of severance costs attributable to a management
realignment, consulting fees of $1.2 million and $1.7 million related to a
settlement of a legal dispute with a terminated refining contract.
During the first nine months of 2002, the company revised its
estimate of accrued restructuring costs as a result of negotiations of
certain termination clauses of construction contracts cancelled. The
company made adjustments to reduce the accrual by $7.0 million during the
first nine months of 2002. Also, during the first nine months of 2002, the
company made an addition to its restructuring accrual of $1.1 million to
reflect the decision to eliminate six management positions, which resulted
in a net adjustment of $5.9 million.
Interest expense increased $12.6 million as a result of placing
the East Boulder Mine into production in 2002, which resulted in interest
being expensed rather than capitalized.
Income Taxes. The company has provided for income taxes of $8.5
million, or 20.9% of pre-tax income for the nine months ended September 30,
2002 compared to $23.3 million, or 27.6% of pre-tax income, for the nine
months ended September 30, 2001. The reduction in the effective tax rate is
the result of a change in the treatment of mine development costs that will
allow the company to claim additional statutory depletion for tax purposes.
Net Income. The company reported net income of $32.3 million or
$0.75 per diluted share for the first nine months of 2002 compared with net
income of $61.0 million, or $1.55 per diluted share for the first nine
months of 2001.
Other Comprehensive Income (Loss). For the first nine months of
2002, comprehensive loss, net of tax, includes a decline in the market
value of the interest rate swaps of $2.3 million and a decline in the
market value of commodity instruments of $0.2 million. Other comprehensive
loss also includes reclassification adjustments to earnings of $4.3 million
associated with deferred gains on commodity instruments and $0.6 million
associated with losses on interest rate swaps.
Liquidity and Capital Resources
The company's working capital at September 30, 2002 was $61.8
million compared to $22.3 million at December 31, 2001. The ratio of
current assets to current liabilities was 2.0 at September 30, 2002,
compared to 1.4 at December 31, 2001.
For the quarter ended September 30, 2002, cash flow from operating
activities was $19.3 million compared with $35.8 million for the comparable
period of 2001, a decrease of $16.5 million. The decrease was primarily a
result of decreased net income of $5.6 million, payments on the
restructuring accrual of $0.5 million and an increase in net operating
assets and liabilities of $11.1 million, offset by an increase in non-cash
expenses of $0.6 million. A total of $16.4 million of cash was used in
investing activities in the third quarter of 2002 compared to $53.3 million
in the same period of 2001, a decrease of $36.9 million. The decrease is
due to a reduction of capital expenditures in accordance with the company's
optimization plan. The capital expenditures in the third quarter of 2002
primarily relate to mine development activities. For the quarter ended
September 30, 2002, cash used by financing activities was $2.3 million
compared to $0.8 million for
the comparable period of 2001. Cash used by financing activities were
primarily attributed to payments on the company's debt.
For the nine months ended September 30, 2002, cash flow from
operating activities was $46.1 million compared with $92.3 million for the
comparable period of 2001, a decrease of $46.2 million. The decrease was
primarily a result of decreased net income of $28.7 million, a decrease in
the restructuring accrual of $8.9 million, a decrease in other non-cash
expenses of $1.6 million and an increase in net operating assets and
liabilities of $7.1 million. A total of $38.3 million of cash was used in
investing activities in the first nine months of 2002 compared to $156.3
million in the same period of 2001, a decrease of $118.0 million. The
decrease is due to a reduction of capital expenditures in accordance with
the company's optimization plan. The capital expenditures in the first nine
months of 2002 primarily relate to mine development activities. For the
nine months ended September 30, 2002, cash provided by financing activities
was $19.6 million compared to $63.7 million for the comparable period of
2001. Cash provided by financing activities were primarily attributed to
net proceeds of $55.3 million from a $60 million common stock offering,
offset by $35.1 million of payments on the company's credit facility.
Cash and cash equivalents increased by $0.5 million and $27.3
million for the third quarter and the first nine months of 2002,
respectively, compared to a decrease of $18.4 and $0.3 million,
respectively, for the comparable periods of 2001.
The company intends to utilize cash on hand and expected cash
flows from operations, along with available borrowings under the existing
$50 million Revolving Credit Facility to fund its operating and capital
needs. At September 30, 2002, $17.5 million was available to the company
and an additional $25 million could be available in the future if certain
operating and financial parameters are met. At September 30, 2002, there
was an outstanding letter of credit in the amount of $7.5 million under the
Revolving Credit Facility. During the third quarter of 2002, the company
determined that it might not achieve a minimum production requirement in
its Credit Facility. As a result, the company obtained an amendment from
its lenders on September 27, 2002, which reduced the trailing four quarters
production covenant from 620,000 ounces to 610,000 ounces of palladium and
platinum. On October 25, 2002, the Company received an additional amendment
that modifies certain production and financial covenants for the remaining
term of the agreement. In exchange for the covenant modification, the
company agreed to an amendment fee of 50 basis points, or approximately
$1.2 million, and a 50 basis point increase in the interest rate payable on
the loans. 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 operating plans.
Controls and Procedures
We maintain a system of controls and procedures designed to
provide reasonable assurance as to the reliability of the financial
statements and other disclosures included in this report, as well as to
safeguard assets from unauthorized use or disposition. We evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures under the supervision and with the participation of management,
including our Chief Executive Officer and Chief Financial Officer, within
90 days prior to the filing date of this report. Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that our disclosure controls and procedures are effective in
timely alerting them to material information required to be included in our
periodic Securities and Exchange Commission filings. No significant changes
were made to our internal controls or other factors that could
significantly affect these controls subsequent to the date of their
evaluation.
FORWARD LOOKING STATEMENT; FACTORS THAT MAY AFFECT FUTURE RESULTS AND
FINANCIAL CONDITION
Some statements contained in this report are 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, and, therefore, involve uncertainties or risks that could cause
actual results to differ materially. Such statements include comments
regarding operating plans, costs, grade, production and recovery rates,
permitting, financing needs, and capital expenditures, increases in
processing capacity, cost reduction measures, safety, timing for
engineering studies, and environmental permitting, compliance and bonding,
litigation and the market for palladium and platinum.
Investors are cautioned not to put undue reliance on
forward-looking statements. The company disclaims any obligation to update
forward-looking statements.
Item 3. Quantitative and Qualitative Disclosure 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
byproduct metals directly to its customers and also through third parties.
As a result, financial risks 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.
Because the company hedges only with instruments that have a high
correlation with the value of the hedged transactions, changes in the fair
value of the derivatives are expected to be offset by changes in the value
of the hedged transaction.
The company has entered into long-term sales contracts with
General Motors Corporation, Ford Motor Company and Mitsubishi Corporation.
The contracts apply to the portions of the company's production over the
period through December 2010 and provide for a floor and ceiling price
structure. See Note 8 to the financial statements attached hereto for
additional information about sales contracts.
From time to time, the company utilizes financially settled
forwards and cashless put and call option collars. Under financially
settled forwards, at each settlement date, the company receives the
difference between the forward price and the market price if the market
price is below the forward price and the company pays the difference
between the forward price and the market price if the market price is above
the forward price. Under cashless put and call option collars, at each
settlement, the company receives the difference between the put price and
the market price if the market price is below the put price and the company
pays the difference between the call price and the market price of the
market price is above the call price. See Note 9 to the financial
statements for additional information about transactions related to
commodity instruments that the company has entered into.
Interest Rate Risk
During the first quarter of 2002, the company entered into two
identical interest rate swap agreements with a combined notional amount
totaling $100 million. The interest rate swap agreements were effective
March 4, 2002 and mature on March 4, 2004. The agreements require the
company to pay interest at a fixed rate of 3.67% and receive interest at a
rate based on London Interbank Offered Rate (LIBOR), which is adjusted on a
quarterly basis. The adjusted quarterly rate
at September 30, 2002 was 1.81%. Therefore, the company is exposed to
changes in interest rates on the portion of its Credit Facility in excess
of $100 million, since the credit facility carries a variable interest rate
based upon LIBOR. The company's Credit Facility provides for a $65 million
five-year term loan facility (Term A), a $135 million seven-year term loan
facility (Term B) and a $50 million revolving Credit Facility. The final
maturity of the Term A and revolving credit facility is December 30, 2005,
while the Term B facility final maturity date is December 31, 2007. As of
September 30, 2002, the company had $58.7 million and $130.1 million
outstanding under the Term A and Term B loan facilities, respectively,
bearing interest at 4.6% and 5.6% for the Term A and Term B loan
facilities, respectively. During the third quarter of 2002, the company
entered into a letter of credit in the amount of $7.5 million, which was
outstanding under the revolving credit facility as of September 30, 2002,
bearing a financing fee of 2.9% on the unadvanced amount.
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.
Shareholder Suits
During the second quarter of 2002, seven lawsuits were
filed against Stillwater Mining Company and certain senior
officers in United States District Court, Southern District of New
York. These actions purport to be a class action filed on behalf
of all persons who purchased or otherwise acquired common stock of
the company between April 20, 2001 through and including April 1,
2002, and asserts claims against the company and certain of its
officers under Sections 10(b) and 20(a) of the Securities Exchange
Act of 1934. Plaintiffs challenge the accuracy of certain public
disclosures made by the company regarding its financial
performance, and in particular, its accounting for probable ore
reserves. On September 23, 2002, an amended complaint was filed
which has consolidated the cases and lead counsel was appointed to
represent the plaintiff.
On June 24, 2002, a shareholder derivative lawsuit was
filed against Stillwater Mining Company and its directors in state
court in Delaware. It arises out of allegations similar to the
class actions for the period from April 20, 2001 through and
including April 20, 2002 and seeks damages allegedly on behalf of
the shareholders of Stillwater for breach of fiduciary duties by
the directors.
The company considers the lawsuits without merit and
intends to vigorously defend itself in both of these actions.
Item 2. Changes in Securities and Use of Proceeds
On January 31, 2002, the company completed a $60 million
private placement of its common stock involving approximately 4.3
million shares or approximately 10% of the outstanding shares
after such issuance. The price per share was $14 representing an
approximate 10% discount from the closing price of $15.61 on
January 29, 2002. Proceeds from the offering were approximately
$54.0 million, net of actual offering costs incurred of $6.0
million. The proceeds were used to pay down the $25 million
revolving credit facility and the remaining proceeds used for
general corporate purposes.
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
(a) Exhibits:
10.1 Limited Waiver to Credit Agreement, dated as of September 30,
2002, made by and among Stillwater Mining Company and Toronto
Dominion (Texas), Inc. (filed herewith).
10.2 Amendment No. 4 to Credit Agreement, dated as of October 25,
2002, by and among Stillwater Mining Company and Toronto
Dominion (Texas), Inc. (filed herewith).
(b) Reports on Form 8-K:
None
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: October 28, 2002 By: /s/ FRANCIS R. McALLISTER
-------------------------
Francis R. McAllister
Chairman and Chief Executive
Officer (Principal Executive
Officer)
Date: October 28, 2002
By: /s/ JAMES A. SABALA
-------------------------
James A. Sabala
Vice President and Chief
Financial Officer
(Principal Financial Officer)
CERTIFICATION
I, Francis R. McAllister certify that;
1. I have reviewed this quarterly report on Form 10-Q of Stillwater
Mining Co. (Stillwater),
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of Stillwater as of, and for, the periods presented in this
quarterly report;
4. Stillwater's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for Stillwater and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to Stillwater, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of Stillwater's disclosure controls
and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. Stillwater's other certifying officer and I have disclosed, based on
our most recent evaluation, to Stillwater's auditors and audit
committee of Stillwater's Board of Directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect Stillwater's
ability to record, process, summarize and report financial data
and have identified for Stillwater's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in Stillwater's
internal controls; and
6. Stillwater's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Dated: October 28, 2002 /S/ FRANCIS R. McALLISTER
---------------- -------------------------
Francis R. McAllister
Chairman and Chief
Executive Officer
CERTIFICATION
I, James A. Sabala certify that;
1. I have reviewed this quarterly report on Form 10-Q of Stillwater
Mining Co. (Stillwater),
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of Stillwater as of, and for, the periods presented in this
quarterly report;
4. Stillwater's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for Stillwater and we
have:
a) designed such disclosure controls and procedures to ensure that
material information relating to Stillwater, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of Stillwater's disclosure controls and
procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. Stillwater's other certifying officer and I have disclosed, based on
our most recent evaluation, to Stillwater's auditors and audit
committee of Stillwater's Board of Directors:
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect Stillwater's
ability to record, process, summarize and report financial data
and have identified for Stillwater's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in Stillwater's
internal controls; and
6. Stillwater's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Dated: October 28, 2002 /S/ JAMES A. SABALA
---------------- -------------------
James A. Sabala
Vice President and Chief
Financial Officer