Debt and Capital Lease Obligations | 9 Months Ended |
Sep. 30, 2013 |
Debt Disclosure [Abstract] | ' |
Debt and Capital Lease Obligations | ' |
DEBT AND CAPITAL LEASE OBLIGATIONS |
1.875% CONVERTIBLE DEBENTURES |
In March 2008, the Company issued and sold $181.5 million aggregate principal amount of senior unsecured convertible debentures due March 15, 2028, which pay interest at 1.875% per annum, payable semi-annually on March 15 and September 15 of each year, and commenced paying interest on September 15, 2008 (1.875% debentures). The 1.875% debentures will mature on March 15, 2028, subject to earlier repurchase or conversion. Each $1,000 principal amount of debentures is initially convertible, at the option of the holders, into approximately 42.5351 shares of the Company’s common stock, at any time prior to the maturity date. The conversion rate is subject to certain adjustments, but will not be adjusted for accrued interest or any unpaid interest. The conversion rate initially represents a conversion price of $23.51 per share. |
In October 2009, the Company undertook an exchange of $15.0 million in aggregate face amount of the 1.875% debentures for 1.84 million shares of the Company's common stock. Holders of $164.3 million of the 1.875% debentures exercised their option to require the Company to repurchase all or a portion of their 1.875% debentures on March 15, 2013. Holders of the remaining $2.2 million of outstanding 1.875% debentures may require the Company to repurchase all or a portion of their 1.875% debentures on March 15, 2018 or March 15, 2023, or at any time before March 15, 2028 upon the occurrence of certain events including a change in control. As of March 22, 2013, the Company has available the option to redeem the remaining $2.2 million of outstanding 1.875% debentures for cash at its discretion. The outstanding balance of $2.2 million is reported as a long-term debt obligation as of September 30, 2013. |
There was no amortization expense related to the issuance costs of the 1.875% debentures for the three- month period ended September 30, 2013, and for the same period of 2012 there was approximately $0.2 million of such expense. Amortization expense related to the 1.875% debentures was $0.2 million and $0.7 million for the nine- month periods ended September 30, 2013 and 2012, respectively. The interest expense on the 1.875% debentures was approximately $10,500 and $0.7 million for the three- month periods ended September 30, 2013 and 2012, respectively. Interest expense for the nine-month periods ended September 30, 2013 and 2012 was $0.7 million and $2.3 million, respectively. The Company made cash payments of $21,000 and $1.6 million for interest on the debentures for the three- and nine-month periods ended September 30, 2013, respectively. Cash payments in the comparable periods of 2012 were $1.6 million and $3.1 million, respectively. |
1.75% CONVERTIBLE DEBENTURES |
In October 2012, the Company completed the issuance and sale of $396.75 million of 1.75% senior unsecured convertible debentures, due October 15, 2032 (1.75% debentures). Each $1,000 principal amount of the 1.75% debentures is initially convertible, under certain circumstances and during certain periods, into 60.4961 shares (subject to customary anti-dilution adjustments) of the Company's common stock, which represents an initial conversion price of $16.53 per share. The 1.75% debentures also include an embedded conversion enhancement feature that is equivalent to including with each debenture a warrant initially exercisable for 30.2481 shares at $16.53 per share (both subject to customary anti-dilution adjustments). The Company, at its election, may settle conversions of the 1.75% debentures in cash, shares of its common stock or any combination of cash and shares of its common stock. Holders have the right to redeem their 1.75% debentures on October 15 of each of 2019, 2024, 2029, and upon the occurrence of certain corporate events, at face value plus accrued and unpaid interest, up to, but excluding, the relevant repurchase date. The Company will have the option to redeem the 1.75% debentures at any time on or after October 20, 2019. |
The 1.75% debentures were bifurcated under U.S. GAAP into separate debt and equity components, and reflect an effective maturity (to the first optional redemption date) of seven years. The residual amount of $141.6 million recorded within equity is treated for accounting purposes as additional debt discount and accreted as an additional non-cash interest charge to earnings over the expected life. Debt and equity issuance costs totaling approximately $12.4 million were deducted from the gross proceeds of the offering of the 1.75% debentures and the debt portion is being amortized ratably over seven years. Net proceeds of $384.3 million from the offering were used in part to retire $164.3 million of the Company's outstanding 1.875% debentures on March 18, 2013, with the remaining proceeds to be used for general corporate purposes. |
The 1.75% debentures have an effective interest rate of 8.50% and a stated interest rate of 1.75% with interest paid semi-annually. The balance outstanding for the period ended September 30, 2013 was $269.9 million, which is net of unamortized discount of $126.8 million. |
Amortization expense related to the issuance costs of the 1.75% debentures was approximately $0.3 million and $0.9 million for the three- and nine-month periods ended September 30, 2013, respectively. The interest expense was approximately $5.7 million and $16.9 million for the three- and nine-month periods ended September 30, 2013, respectively. The Company made $3.2 million in interest payments on the 1.75% debentures during the nine-month period ended September 30, 2013. |
The 1.75% and 1.875% debentures contain a “change in control” provision, which provides that a “change in control” occurs if, following the election of new directors to the Board of Directors a majority of the members of the Board of Directors are not considered “incumbent directors.” In the second quarter of 2013, the Company's Board of Directors took steps pursuant to the indentures governing the 1.75% and 1.875% debentures to ensure that the election of four non-incumbent directors at the 2013 annual meeting of the Company did not constitute a “change in control” under such indenture. |
EXEMPT FACILITY REVENUE BONDS |
The Company also has outstanding $30.0 million in aggregate principal amount of 8.0% Exempt Facility Revenue Bonds, Series 2000 (exempt facility revenue bonds), issued through the State of Montana Board of Investments and maturing on July 1, 2020. The balance outstanding at September 30, 2013, was $29.6 million, which is net of unamortized discount of $0.4 million. The Company made $1.2 million in interest payments on the revenue bonds during each of the nine-month periods ended September 30, 2013 and 2012. |
ASSET-BACKED REVOLVING CREDIT FACILITY |
In December 2011, the Company entered into a $100.0 million asset-backed revolving credit agreement incurring debt issuance costs of $1.1 million. In January 2012, the Company completed the syndication of the credit facility and simultaneously expanded the maximum line of credit to $125.0 million. Borrowings under this working capital credit facility are limited to a borrowing base equal to the sum of 85% of eligible accounts receivable and 70% of eligible inventories. Any borrowings are secured by the Company’s accounts receivable, metals inventories and other accounts. The asset-backed revolving credit facility includes a single fixed-charge coverage covenant that only takes effect when less than 30% of the total borrowing capacity under the facility remains available. The facility includes a $60.0 million letter of credit sub-facility. Outstanding borrowings under the facility accrue interest at a spread over the London Interbank Offer Rate that varies from 2.25% to 2.75%, decreasing progressively as the percentage drawn under the facility increases. The Company also pays an unused capacity fee on committed but unutilized borrowing capacity available under the facility at a rate per annum of 0.375% or 0.5%, depending on utilization of the facility. The asset-backed revolving credit agreement does contain a “change in control” provision which if triggered would constitute an event of default under the credit agreement. If an event of default occurs under the credit agreement, the holders of any indebtedness outstanding under the facility would have a right to accelerate such indebtedness. |
The “change in control” provision provides that a “change in control” event will have occurred if the composition of the Board of Directors of the Company changes such that a majority of the members of the Company's Board of Directors are not Continuing Directors. On May 7, 2013, the Company announced the election of four new directors to its Board of Directors. The election resulted in four incumbent (continuing) directors being retained on the board and four new directors being elected to the board. This four/four split constituted a "change in control" event under the credit facility. As a result of this change in control, the Company was considered to be in default of the credit agreement. On July 1, 2013, the Company was issued a waiver by the four banks that have provided commitments under the facility. At the time of default, the Company had not yet drawn a balance, although approximately $17.5 million had been utilized to collateralize outstanding irrevocable letters of credit in support of the Company's long-term reclamation obligations. |
The Company recognized $0.3 million and $0.2 million in fees associated with the asset-backed revolving credit agreement in the three- month periods ended September 30, 2013 and 2012, respectively, and $0.8 million and $0.7 million for the nine-month periods ended September 30, 2013 and 2012, respectively. Amortization expense related to the issuance costs of the credit agreement was less than $0.1 million for each of the three- month periods ended September 30, 2013 and 2012, and $0.2 million for each of the nine-month periods ended September 30, 2013 and 2012. |
CAPITAL LEASE OBLIGATIONS |
In June 2012, the Company entered into a lease agreement with General Electric Capital Corporation (GECC) covering the acquisition of a tunnel-boring machine for use on the Blitz project adjacent to the Stillwater Mine. The transaction is structured as a capital lease with a four-year term; lease payments are due quarterly in advance. In the third quarter of 2012, the Company increased the lease balance due under the original GECC capital lease by $0.7 million. The Company made cash payments of $1.6 million and $1.0 million on its capital lease obligations in each of the nine-month periods ended September 30, 2013 and 2012, respectively. The cash payment for the nine- month period ended September 30, 2013 included interest of $0.2 million. There was $0.1 million of interest included in the cash payment for the nine-month period ended September 30, 2012. As of September 30, 2013, the outstanding balance under the capital lease was $5.1 million. |
The following is a schedule, by year, of the future minimum lease payments for the capital lease together with the present value of the net minimum lease payments: |
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| | | | |
(In thousands) | | |
Remaining 2013 | | $ | 541 | |
|
2014 | | 2,168 | |
|
2015 | | 2,168 | |
|
2016 | | 590 | |
|
Total minimum lease payments | | $ | 5,467 | |
|
Less interest at rates ranging from 5.21% to 5.46% (before tax) | | 390 | |
|
Net minimum lease payments | | $ | 5,077 | |
|
Less current portion | | 1,931 | |
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Total long-term capital lease obligation | | $ | 3,146 | |
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CAPITALIZED INTEREST |
The Company capitalizes interest incurred on its various debt instruments as a cost of specific and identified projects under development. For the three- month periods ended September 30, 2013 and 2012, the Company capitalized interest of $1.2 million and $0.3 million, respectively. For the nine-month periods ended September 30, 2013 and 2012, the Company capitalized interest of $3.3 million and $0.9 million, respectively. Capitalized interest is recorded as a reduction to Interest expense in the Company's Consolidated Statements of Comprehensive (Loss) Income. |