UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
___________________________________________
FORM 10-Q
___________________________________________
þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended June 30, 2014
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 001-08641
____________________________________________
COEUR MINING, INC.
(Exact name of registrant as specified in its charter)
____________________________________________
Delaware | 82-0109423 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
104 S. Michigan Ave., Suite 900 Chicago, Illinois | 60603 | |
(Address of principal executive offices) | (Zip Code) | |
(312) 489-5800
(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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | þ | Accelerated filer | ¨ | ||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
The Company has 150,000,000 shares of common stock, par value of $0.01, authorized of which 103,466,078 shares were issued and outstanding as of August 5, 2014.
COEUR MINING, INC.
INDEX
Page | ||
Part I. | ||
Item 1. Financial Statements | ||
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) | ||
Condensed Consolidated Statements of Cash Flows (Unaudited) | ||
Condensed Consolidated Balance Sheets | ||
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) | ||
Notes to Condensed Consolidated Financial Statements (Unaudited) | ||
Item 4. Controls and Procedures | ||
Part II. | ||
Item 1. Legal Proceedings | ||
Item 1A. Risk Factors | ||
Item 4. Mine Safety Disclosures | ||
Item 6. Exhibits | ||
2
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Notes | (In thousands, except share data) | |||||||||||||||
Revenue | 3 | $ | 164,562 | $ | 204,525 | $ | 324,195 | $ | 376,322 | |||||||
COSTS AND EXPENSES | ||||||||||||||||
Costs applicable to sales(1) | 3 | 118,687 | 142,386 | 225,583 | 230,444 | |||||||||||
Amortization | 41,422 | 56,894 | 81,849 | 106,589 | ||||||||||||
General and administrative | 9,398 | 15,026 | 23,294 | 25,253 | ||||||||||||
Exploration | 5,153 | 6,774 | 9,370 | 13,615 | ||||||||||||
Litigation settlement | 19 | — | 32,046 | — | 32,046 | |||||||||||
Pre-development, reclamation, and other | 8,760 | 1,817 | 15,775 | 7,163 | ||||||||||||
Total costs and expenses | 183,420 | 254,943 | 355,871 | 415,110 | ||||||||||||
OTHER INCOME (EXPENSE), NET | ||||||||||||||||
Fair value adjustments, net | 9 | (8,282 | ) | 66,754 | (19,717 | ) | 84,550 | |||||||||
Impairment of marketable securities | 12 | (934 | ) | (17,192 | ) | (3,522 | ) | (17,227 | ) | |||||||
Interest income and other, net | (116 | ) | 419 | (2,100 | ) | 4,275 | ||||||||||
Interest expense, net of capitalized interest | 17 | (12,310 | ) | (10,930 | ) | (25,365 | ) | (20,662 | ) | |||||||
Total other income (expense), net | (21,642 | ) | 39,051 | (50,704 | ) | 50,936 | ||||||||||
Income (loss) before income and mining taxes | (40,500 | ) | (11,367 | ) | (82,380 | ) | 12,148 | |||||||||
Income and mining tax (expense) benefit | 7 | (2,621 | ) | (23,673 | ) | 2,068 | (34,918 | ) | ||||||||
NET INCOME (LOSS) | $ | (43,121 | ) | $ | (35,040 | ) | $ | (80,312 | ) | $ | (22,770 | ) | ||||
OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | ||||||||||||||||
Unrealized loss on marketable securities, net of tax of $487 and $253 for the three and six months ended June 30, 2014, respectively | (773 | ) | (7,491 | ) | (401 | ) | (11,057 | ) | ||||||||
Reclassification adjustments for impairment of marketable securities, net of tax of $(362) and $(1,363) for the three and six months ended June 30, 2014, respectively | 572 | 17,192 | 2,159 | 17,227 | ||||||||||||
Reclassification adjustments for realized loss on sale of marketable securities, net of tax of $(10) for the three and six months ended June 30, 2014, respectively | 17 | — | 17 | — | ||||||||||||
Other comprehensive income (loss) | (184 | ) | 9,701 | 1,775 | 6,170 | |||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | (43,305 | ) | $ | (25,339 | ) | $ | (78,537 | ) | $ | (16,600 | ) | ||||
NET INCOME (LOSS) PER SHARE | 8 | |||||||||||||||
Basic | $ | (0.42 | ) | $ | (0.35 | ) | $ | (0.78 | ) | $ | (0.24 | ) | ||||
Diluted | $ | (0.42 | ) | $ | (0.35 | ) | $ | (0.78 | ) | $ | (0.24 | ) | ||||
(1) Excludes amortization.
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Notes | (In thousands) | |||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income (loss) | $ | (43,121 | ) | $ | (35,040 | ) | $ | (80,312 | ) | (22,770 | ) | |||||
Adjustments: | ||||||||||||||||
Amortization | 41,422 | 56,896 | 81,849 | 106,589 | ||||||||||||
Accretion | 4,502 | 5,380 | 9,093 | 10,840 | ||||||||||||
Deferred income taxes | (3,844 | ) | 12,123 | (15,705 | ) | 19,548 | ||||||||||
Loss on termination of revolving credit facility | — | — | 3,035 | — | ||||||||||||
Fair value adjustments, net | 8,288 | (65,754 | ) | 18,845 | (81,795 | ) | ||||||||||
Litigation settlement | 19 | — | 22,046 | — | 22,046 | |||||||||||
Stock-based compensation | 5 | 2,385 | 1,617 | 4,950 | 2,713 | |||||||||||
(Gain) loss on sale of assets | (48 | ) | (264 | ) | 222 | (1,132 | ) | |||||||||
Impairment of marketable securities | 12 | 934 | 17,192 | 3,522 | 17,227 | |||||||||||
Other | (12 | ) | 234 | (219 | ) | (112 | ) | |||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Receivables | 4,921 | 4,401 | 10,544 | 8,647 | ||||||||||||
Prepaid expenses and other current assets | 3,551 | 2,930 | (4,558 | ) | 411 | |||||||||||
Inventory and ore on leach pads | 14 | (1,606 | ) | 31,483 | (15,519 | ) | 10,990 | |||||||||
Accounts payable and accrued liabilities | 13,118 | 10,094 | 5,117 | (16,930 | ) | |||||||||||
CASH PROVIDED BY OPERATING ACTIVITIES | 30,490 | 63,338 | 20,864 | 76,272 | ||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Capital expenditures | (15,356 | ) | (27,201 | ) | (27,292 | ) | (40,028 | ) | ||||||||
Acquisitions | 11 | (2,250 | ) | (101,648 | ) | (2,250 | ) | (113,214 | ) | |||||||
Purchase of short-term investments and marketable securities | (2,139 | ) | (683 | ) | (48,360 | ) | (5,332 | ) | ||||||||
Sales and maturities of short-term investments | 800 | 1,522 | 890 | 6,344 | ||||||||||||
Other | 12 | 254 | (13 | ) | 1,209 | |||||||||||
CASH USED IN INVESTING ACTIVITIES | (18,933 | ) | (127,756 | ) | (77,025 | ) | (151,021 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Issuance of notes and bank borrowings | 17 | — | — | 153,000 | 300,000 | |||||||||||
Payments on long-term debt, capital leases, and associated costs | (2,851 | ) | (1,857 | ) | (6,962 | ) | (57,197 | ) | ||||||||
Gold production royalty payments | (12,345 | ) | (15,480 | ) | (27,028 | ) | (30,929 | ) | ||||||||
Share repurchases | — | — | — | (12,557 | ) | |||||||||||
Other | (160 | ) | (25 | ) | (406 | ) | (477 | ) | ||||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | (15,356 | ) | (17,362 | ) | 118,604 | 198,840 | ||||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | (3,799 | ) | (81,780 | ) | 62,443 | 124,091 | ||||||||||
Cash and cash equivalents at beginning of period | 272,932 | 331,311 | 206,690 | 125,440 | ||||||||||||
Cash and cash equivalents at end of period | $ | 269,133 | $ | 249,531 | $ | 269,133 | $ | 249,531 | ||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2014 (Unaudited) | December 31, 2013 | ||||||||
ASSETS | Notes | (In thousands, except share data) | |||||||
CURRENT ASSETS | |||||||||
Cash and cash equivalents | $ | 269,133 | $ | 206,690 | |||||
Investments | 12 | 47,642 | — | ||||||
Receivables | 13 | 68,693 | 81,074 | ||||||
Ore on leach pads | 44,964 | 50,495 | |||||||
Inventory | 14 | 137,644 | 132,023 | ||||||
Deferred tax assets | 7 | 35,079 | 35,008 | ||||||
Prepaid expenses and other | 23,593 | 25,940 | |||||||
626,748 | 531,230 | ||||||||
NON-CURRENT ASSETS | |||||||||
Property, plant and equipment, net | 15 | 482,787 | 486,273 | ||||||
Mining properties, net | 16 | 1,728,667 | 1,751,501 | ||||||
Ore on leach pads | 46,956 | 31,528 | |||||||
Restricted assets | 7,510 | 7,014 | |||||||
Marketable securities | 12 | 13,761 | 14,521 | ||||||
Receivables | 13 | 38,424 | 36,574 | ||||||
Debt issuance costs, net | 11,031 | 10,812 | |||||||
Deferred tax assets | 7 | 808 | 1,189 | ||||||
Other | 10,830 | 15,336 | |||||||
TOTAL ASSETS | $ | 2,967,522 | $ | 2,885,978 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
CURRENT LIABILITIES | |||||||||
Accounts payable | $ | 49,651 | $ | 53,847 | |||||
Accrued liabilities and other | 40,632 | 38,266 | |||||||
Debt | 17 | 11,565 | 2,505 | ||||||
Royalty obligations | 9,10 | 51,087 | 48,019 | ||||||
Reclamation | 4 | 752 | 913 | ||||||
Deferred tax liabilities | 7 | 1,858 | 1,011 | ||||||
155,545 | 144,561 | ||||||||
NON-CURRENT LIABILITIES | |||||||||
Debt | 17 | 468,570 | 306,130 | ||||||
Royalty obligations | 9,10 | 58,505 | 65,142 | ||||||
Reclamation | 4 | 59,757 | 57,515 | ||||||
Deferred tax liabilities | 7 | 540,232 | 556,246 | ||||||
Other long-term liabilities | 28,280 | 25,817 | |||||||
1,155,344 | 1,010,850 | ||||||||
STOCKHOLDERS’ EQUITY | |||||||||
Common stock, par value $0.01 per share; authorized 150,000,000 shares, issued and outstanding 103,485,960 at June 30, 2014 and 102,843,003 at December 31, 2013 | 1,034 | 1,028 | |||||||
Additional paid-in capital | 2,785,761 | 2,781,164 | |||||||
Accumulated other comprehensive income (loss) | (3,131 | ) | (4,906 | ) | |||||
Accumulated deficit | (1,127,031 | ) | (1,046,719 | ) | |||||
1,656,633 | 1,730,567 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,967,522 | $ | 2,885,978 | |||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(In thousands) | Common Stock Shares | Common Stock Par Value | Additional Paid- In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||
Balances at December 31, 2013 | 102,843 | $ | 1,028 | $ | 2,781,164 | $ | (1,046,719 | ) | $ | (4,906 | ) | $ | 1,730,567 | |||||||||
Net income (loss) | — | — | — | (80,312 | ) | — | (80,312 | ) | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | 1,775 | 1,775 | ||||||||||||||||
Common stock issued under stock-based compensation plans, net | 643 | 6 | 4,597 | — | — | 4,603 | ||||||||||||||||
Balances at June 30, 2014 (Unaudited) | 103,486 | $ | 1,034 | $ | 2,785,761 | $ | (1,127,031 | ) | $ | (3,131 | ) | $ | 1,656,633 | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 1 - | BASIS OF PRESENTATION |
The interim condensed consolidated financial statements of Coeur Mining, Inc. (collectively "Coeur" or "the Company") are unaudited. In the opinion of management, all adjustments and disclosures necessary for the fair presentation of these interim statements have been included. The results reported in these interim statements may not be indicative of the results reported for the year ending December 31, 2014. The condensed consolidated December 31, 2013 balance sheet data was derived from the audited consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the year ended December 31, 2013 included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013 (the "2013 10-K").
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards
On January 1, 2014, the Company adopted ASU 2013-11, "Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists." The updated guidance requires an entity to net its unrecognized tax benefits against the deferred tax assets for all same jurisdiction net operating loss carryforwards, a similar tax loss, or tax credit carryforwards. A gross presentation will be required only if such carryforwards are not available or would not be used by the entity to settle any additional income taxes resulting from disallowance of the uncertain tax provision. The Company's adoption had no impact on the Company's consolidated financial position, results of operations, or cash flows.
In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers." The updated guidance provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. These changes become effective prospectively for the Company's fiscal year beginning January 1, 2017. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.
NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo, San Bartolomé, Rochester, and Kensington mines, the La Preciosa project, and Coeur Capital. All operating segments are engaged in the discovery and mining of gold and silver and generate the majority of their revenues from the sale of these precious metals with the exception of Coeur Capital, which holds the Endeavor silver stream and other precious metals royalties. Other includes the Joaquin project, Martha mine, corporate headquarters, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.
Financial information relating to the Company’s segments is as follows (in thousands):
Three months ended June 30, 2014 | Palmarejo Mine | San Bartolomé Mine | Kensington Mine | Rochester Mine | La Preciosa | Coeur Capital | Other | Total | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||
Metal sales | $ | 72,446 | $ | 29,078 | $ | 29,018 | $ | 31,193 | $ | — | $ | 1,971 | $ | — | $ | 163,706 | |||||||||||||||
Royalties | — | — | — | — | — | 856 | — | 856 | |||||||||||||||||||||||
72,446 | 29,078 | 29,018 | 31,193 | — | 2,827 | — | 164,562 | ||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 49,551 | 20,695 | 23,218 | 24,381 | — | 842 | — | 118,687 | |||||||||||||||||||||||
Amortization | 18,044 | 4,855 | 11,566 | 5,025 | 22 | 1,419 | 491 | 41,422 | |||||||||||||||||||||||
Exploration | 1,637 | 57 | 1,636 | 738 | 26 | 109 | 950 | 5,153 | |||||||||||||||||||||||
Other operating expenses | 325 | 194 | 199 | 844 | 5,711 | 263 | 10,622 | 18,158 | |||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||
Interest income and other, net | (1,202 | ) | 691 | 4 | 32 | 118 | (964 | ) | 271 | (1,050 | ) | ||||||||||||||||||||
Interest expense, net | (2,771 | ) | (11 | ) | (53 | ) | (261 | ) | — | — | (9,214 | ) | (12,310 | ) | |||||||||||||||||
Fair value adjustments, net | (4,989 | ) | — | — | (1,837 | ) | — | — | (1,456 | ) | (8,282 | ) | |||||||||||||||||||
Income and mining tax (expense) benefit | 1,342 | (2,204 | ) | — | (419 | ) | (1,159 | ) | 263 | (444 | ) | (2,621 | ) | ||||||||||||||||||
Net income (loss) | $ | (4,731 | ) | $ | 1,753 | $ | (7,650 | ) | $ | (2,280 | ) | $ | (6,800 | ) | $ | (507 | ) | $ | (22,906 | ) | $ | (43,121 | ) | ||||||||
Segment assets(2) | $ | 1,133,851 | $ | 309,565 | $ | 331,151 | $ | 206,665 | $ | 412,226 | $ | 67,864 | $ | 110,406 | $ | 2,571,728 | |||||||||||||||
Capital expenditures | $ | 5,589 | $ | 1,711 | $ | 3,989 | $ | 3,956 | $ | 3 | $ | — | $ | 108 | $ | 15,356 | |||||||||||||||
(1) Excludes amortization
7
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(2) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Three months ended June 30, 2013 | Palmarejo Mine | San Bartolomé Mine | Kensington Mine | Rochester Mine | La Preciosa | Coeur Capital | Other | Total | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||
Metal sales | $ | 86,217 | $ | 49,236 | $ | 30,851 | $ | 34,903 | $ | — | $ | 3,479 | $ | (161 | ) | $ | 204,525 | ||||||||||||||
Royalties | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
$ | 86,217 | $ | 49,236 | $ | 30,851 | $ | 34,903 | $ | — | $ | 3,479 | $ | (161 | ) | $ | 204,525 | |||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 55,218 | 32,815 | 30,154 | 22,516 | — | 1,683 | — | 142,386 | |||||||||||||||||||||||
Amortization | 35,384 | 4,824 | 13,159 | 1,989 | 2 | 1,224 | 312 | 56,894 | |||||||||||||||||||||||
Exploration | 3,189 | 27 | 563 | 512 | 690 | 322 | 1,471 | 6,774 | |||||||||||||||||||||||
Litigation settlement | — | — | — | 32,046 | — | — | — | 32,046 | |||||||||||||||||||||||
Other operating expenses | 173 | 117 | 236 | 2,466 | — | (191 | ) | 14,042 | 16,843 | ||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||
Interest income and other, net | (428 | ) | 683 | 150 | — | (11 | ) | 91 | (17,258 | ) | (16,773 | ) | |||||||||||||||||||
Interest expense, net | (4,190 | ) | (14 | ) | (95 | ) | (5 | ) | — | — | (6,626 | ) | (10,930 | ) | |||||||||||||||||
Fair value adjustments, net | 61,066 | — | 6,350 | — | — | — | (662 | ) | 66,754 | ||||||||||||||||||||||
Income and mining tax (expense) benefit | (17,282 | ) | (4,506 | ) | — | (538 | ) | — | (191 | ) | (1,156 | ) | (23,673 | ) | |||||||||||||||||
Net income (loss) | $ | 31,419 | $ | 7,616 | $ | (6,856 | ) | $ | (25,169 | ) | $ | (703 | ) | $ | 341 | $ | (41,688 | ) | $ | (35,040 | ) | ||||||||||
Segment assets(2) | $ | 1,860,240 | $ | 286,325 | $ | 485,215 | $ | 122,917 | $ | 409,458 | $ | 31,493 | $ | 108,954 | $ | 3,304,602 | |||||||||||||||
Capital expenditures | $ | 9,166 | $ | 3,159 | $ | 7,406 | $ | 6,596 | $ | 735 | $ | — | $ | 139 | $ | 27,201 | |||||||||||||||
(1) Excludes amortization
(2) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Six months ended June 30, 2014 | Palmarejo Mine | San Bartolomé Mine | Kensington Mine | Rochester Mine | La Preciosa | Coeur Capital | Other | Total | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||
Metal sales | $ | 140,434 | $ | 56,632 | $ | 65,079 | $ | 55,347 | $ | — | $ | 4,860 | $ | — | $ | 322,352 | |||||||||||||||
Royalties | — | — | — | — | — | 1,843 | — | 1,843 | |||||||||||||||||||||||
140,434 | 56,632 | 65,079 | 55,347 | — | 6,703 | — | 324,195 | ||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 93,126 | 39,595 | 51,749 | 39,089 | — | 2,024 | — | 225,583 | |||||||||||||||||||||||
Amortization | 36,702 | 9,313 | 22,275 | 9,476 | 41 | 3,121 | 921 | 81,849 | |||||||||||||||||||||||
Exploration | 2,642 | 82 | 2,680 | 1,912 | 210 | 312 | 1,532 | 9,370 | |||||||||||||||||||||||
Other operating expenses | 622 | 335 | 390 | 2,189 | 10,668 | 504 | 24,361 | 39,069 | |||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||
Interest income and other, net | (2,772 | ) | 1,373 | 4 | 51 | (17 | ) | (3,512 | ) | (749 | ) | (5,622 | ) | ||||||||||||||||||
Interest expense, net | (5,595 | ) | (31 | ) | (75 | ) | (266 | ) | — | — | (19,398 | ) | (25,365 | ) | |||||||||||||||||
Fair value adjustments, net | (15,225 | ) | — | — | (2,510 | ) | — | — | (1,982 | ) | (19,717 | ) | |||||||||||||||||||
Income and mining tax (expense) benefit | 5,171 | (4,969 | ) | — | (419 | ) | (1,271 | ) | (25 | ) | 3,581 | 2,068 | |||||||||||||||||||
Net income (loss) | $ | (11,079 | ) | $ | 3,680 | $ | (12,086 | ) | $ | (463 | ) | $ | (12,207 | ) | $ | (2,795 | ) | $ | (45,362 | ) | $ | (80,312 | ) | ||||||||
Segment assets(2) | $ | 1,133,851 | $ | 309,565 | $ | 331,151 | $ | 206,665 | $ | 412,226 | $ | 67,864 | $ | 110,406 | $ | 2,571,728 | |||||||||||||||
Capital expenditures | $ | 9,331 | $ | 3,152 | $ | 8,700 | $ | 4,915 | $ | 141 | $ | — | $ | 1,053 | $ | 27,292 | |||||||||||||||
(1) Excludes amortization
(2) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests
8
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Six months ended June 30, 2013 | Palmarejo Mine | San Bartolomé Mine | Kensington Mine | Rochester Mine | La Preciosa | Coeur Capital | Other | Total | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||
Metal sales | $ | 143,643 | $ | 82,377 | $ | 70,126 | $ | 74,377 | $ | — | $ | 6,461 | $ | (662 | ) | $ | 376,322 | ||||||||||||||
Royalties | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
143,643 | 82,377 | 70,126 | 74,377 | — | 6,461 | (662 | ) | 376,322 | |||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 81,937 | 48,494 | 53,718 | 43,293 | — | 3,002 | — | 230,444 | |||||||||||||||||||||||
Amortization | 64,166 | 9,464 | 26,445 | 3,842 | 2 | 2,052 | 618 | 106,589 | |||||||||||||||||||||||
Exploration | 5,170 | 79 | 1,235 | 996 | 690 | 630 | 4,815 | 13,615 | |||||||||||||||||||||||
Litigation | — | — | — | 32,046 | — | — | — | 32,046 | |||||||||||||||||||||||
Other operating expenses | 341 | 3,954 | 412 | 2,938 | — | (245 | ) | 25,016 | 32,416 | ||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||
Interest income and other, net | 1,514 | 1,288 | 281 | 57 | (11 | ) | 138 | (16,219 | ) | (12,952 | ) | ||||||||||||||||||||
Interest expense, net | (7,928 | ) | (46 | ) | (354 | ) | (11 | ) | — | — | (12,323 | ) | (20,662 | ) | |||||||||||||||||
Fair value adjustments, net | 75,494 | — | 10,577 | — | — | — | (1,521 | ) | 84,550 | ||||||||||||||||||||||
Income and mining tax (expense) benefit | (20,816 | ) | (8,834 | ) | (1 | ) | (1,264 | ) | — | (245 | ) | (3,758 | ) | (34,918 | ) | ||||||||||||||||
Net income (loss) | $ | 40,293 | $ | 12,794 | $ | (1,181 | ) | $ | (9,956 | ) | $ | (703 | ) | $ | 915 | $ | (64,932 | ) | $ | (22,770 | ) | ||||||||||
Segment assets(2) | $ | 1,860,240 | $ | 286,325 | $ | 485,215 | $ | 122,917 | $ | 409,458 | $ | 31,493 | $ | 108,954 | $ | 3,304,602 | |||||||||||||||
Capital expenditures | $ | 14,480 | $ | 3,616 | $ | 10,736 | $ | 9,894 | $ | 735 | $ | — | $ | 567 | $ | 40,028 | |||||||||||||||
(1) Excludes amortization
(2) Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mineral interests
(in thousands) | June 30, 2014 | December 31, 2013 | |||||
Assets | |||||||
Total assets for reportable segments | $ | 2,571,728 | $ | 2,595,408 | |||
Cash and cash equivalents | 269,133 | 206,690 | |||||
Short term investments | 47,642 | — | |||||
Other assets | 79,019 | 83,880 | |||||
Total consolidated assets | $ | 2,967,522 | $ | 2,885,978 | |||
Geographic Information
(in thousands) | June 30, 2014 | December 31, 2013 | |||||
Long Lived Assets | |||||||
United States | $ | 387,617 | $ | 384,626 | |||
Australia | 23,858 | 25,668 | |||||
Argentina | 94,495 | 94,705 | |||||
Bolivia | 228,606 | 235,085 | |||||
Mexico | 1,461,228 | 1,487,228 | |||||
Other Foreign Countries | 15,650 | 10,462 | |||||
Total | $ | 2,211,454 | $ | 2,237,774 | |||
9
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
(in thousands) | 2014 | 2013 | 2014 | 2013 | |||||||||||
Revenue | |||||||||||||||
United States | $ | 60,212 | $ | 65,754 | $ | 120,427 | $ | 144,502 | |||||||
Mexico | 72,657 | 86,217 | 141,167 | 143,643 | |||||||||||
Bolivia | 29,078 | 49,236 | 56,632 | 82,377 | |||||||||||
Australia | 1,971 | 3,479 | 4,860 | 6,462 | |||||||||||
Other | 644 | (161 | ) | $ | 1,109 | $ | (662 | ) | |||||||
Total | $ | 164,562 | $ | 204,525 | $ | 324,195 | $ | 376,322 | |||||||
NOTE 4 – RECLAMATION
Reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, mineral prices, mineral processing recovery rates, production levels, capital costs and reclamation costs. On an ongoing basis, management evaluates its estimates and assumptions, and future expenditures could differ from current estimates.
Changes to the Company’s asset retirement obligations are as follows (in thousands):
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Asset retirement obligation - Beginning | $ | 58,460 | $ | 35,197 | $ | 57,454 | $ | 34,457 | |||||||
Accretion | 1,435 | 758 | 2,752 | 1,500 | |||||||||||
Settlements | (100 | ) | (377 | ) | (411 | ) | (379 | ) | |||||||
Asset retirement obligation - Ending | $ | 59,795 | $ | 35,578 | $ | 59,795 | $ | 35,578 | |||||||
The Company has accrued $0.7 million and $1.0 million at June 30, 2014 and December 31, 2013, respectively, for reclamation liabilities related to former mining activities. These amounts are also included in Reclamation.
NOTE 5 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives and eligible employees. Stock awards include stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, and performance share units. Stock-based compensation expense for the three months ended June 30, 2014 and 2013 was $2.4 million and $1.6 million, respectively. Stock-based compensation expense for the six months ended June 30, 2014 and 2013 was $5.0 million and $2.7 million, respectively. At June 30, 2014, there was $11.8 million of unrecognized stock-based compensation cost which is expected to be recognized over a period of 1.8 years.
The following table summarizes the grants awarded during the six months ended June 30, 2014:
Grant date | Restricted stock | Grant date fair value of restricted stock | Stock options | Grant date fair value of stock options | Performance shares | Grant date fair value of performance shares | |||||||||||||||
January 17, 2014 | 243,351 | $ | 11.12 | 32,417 | $ | 4.39 | 345,833 | $ | 12.65 | ||||||||||||
March 26, 2014 | 435,208 | $ | 9.31 | 382,755 | $ | 3.74 | — | $ | — | ||||||||||||
The following options and stock appreciation rights were exercised during the six months ended June 30, 2014:
Award Type | Number of Exercised Units | Weighted Average Exercised Price | Number of Exercisable Units | Weighted Average Exercisable Price | ||||||||||
Options | — | $ | — | 256,927 | $ | 28.91 | ||||||||
Stock Appreciation Rights | — | $ | — | 50,209 | $ | 14.15 | ||||||||
10
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE 6 – RETIREMENT SAVINGS PLAN
The Company maintains a retirement savings plan (which qualifies under Section 401(k) of the U.S. Internal Revenue Code) covering all eligible U.S. employees. Under the plan, employees may elect to contribute up to 75% of base salary, subject to ERISA limitations. The Company maintains a Safe Harbor Match and is required to make matching contributions equal to 100% of the employee’s contribution up to 4% of each employee’s salary. In addition, the Company provides a noncontributory defined contribution based on a percentage of each eligible employee's salary. Total plan expenses recognized for the three and six months ended June 30, 2014 and 2013 were $1.6 million and $0.8 million, and $3.0 million and $2.1 million, respectively.
NOTE 7 – INCOME AND MINING TAXES
The following table summarizes the components of the Company's income and mining tax (expense) benefit for the three and six months ended June 30, 2014 and 2013 by significant location:
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||||||||||||
(in thousands) | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | Income (loss) before tax | Tax (expense) benefit | |||||||||||||||||||
United States | $ | (31,370 | ) | $ | (146 | ) | $ | (67,824 | ) | $ | (1,329 | ) | $ | (60,214 | ) | $ | (292 | ) | $ | (61,896 | ) | $ | (4,541 | ) | |||
Argentina | (688 | ) | (349 | ) | (2,989 | ) | (117 | ) | (2,892 | ) | 4,083 | (6,981 | ) | (44 | ) | ||||||||||||
Mexico | (12,710 | ) | 107 | 47,214 | (15,798 | ) | (28,716 | ) | 3,828 | 58,756 | (19,471 | ) | |||||||||||||||
Bolivia | 3,957 | (2,205 | ) | 12,122 | (4,556 | ) | 8,649 | (4,969 | ) | 21,628 | (8,884 | ) | |||||||||||||||
Other jurisdictions | 311 | (28 | ) | 110 | (1,873 | ) | 793 | (582 | ) | 641 | (1,978 | ) | |||||||||||||||
$ | (40,500 | ) | $ | (2,621 | ) | $ | (11,367 | ) | $ | (23,673 | ) | $ | (82,380 | ) | $ | 2,068 | $ | 12,148 | $ | (34,918 | ) | ||||||
The income tax provision for the three and six months ended June 30, 2014 differs from the statutory rate primarily due to (i) a full valuation allowance against the deferred tax assets relating to losses incurred in the United States and certain foreign locations, (ii) the impact of foreign exchange adjustments on deferred tax account balances, reserves for uncertain tax positions, and foreign earnings not considered as permanently reinvested with respect to certain foreign locations, and (iii) differences in foreign tax rates in the Company's foreign locations. In conjunction with these items, the Company's consolidated effective income tax rate is a function of the combined effective tax rates in the jurisdictions in which it operates. Variations in the relative proportions of jurisdictional income and loss result in significant fluctuations in its consolidated effective tax rate.
The Company has U.S. net operating loss carryforwards which expire in 2019 through 2033. Net operating losses in foreign countries have an indefinite carryforward period, except in Mexico where net operating loss carryforwards are limited to ten years.
NOTE 8 – NET INCOME (LOSS) PER SHARE
Basic income (loss) per share is computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock.
For the three months ended June 30, 2014, 2,147,989 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation due to the net loss incurred. For the three months ended June 30, 2013, 1,202,100 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation as the shares would be antidilutive.
For the six months ended June 30, 2014, 2,147,390 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation due to the net loss incurred. For the six months ended June 30, 2013, 1,202,100 shares of common stock equivalents related to equity-based awards were not included in the diluted per share calculation as the shares would be antidilutive.
The 3.25% Convertible Senior Notes were not included in the computation of diluted net income (loss) per share for the three and six months ended June 30, 2014 and 2013 because there is no excess value upon conversion over the principal amount of the Notes.
11
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
In thousands except per share amounts | 2014 | 2013 | 2014 | 2013 | |||||||||||
Net income (loss) available to common stockholders | $ | (43,121 | ) | $ | (35,040 | ) | $ | (80,312 | ) | $ | (22,770 | ) | |||
Weighted average shares: | |||||||||||||||
Basic | 102,444 | 99,833 | 102,405 | 94,918 | |||||||||||
Effect of share based compensation plans | — | — | — | — | |||||||||||
Diluted | 102,444 | 99,833 | 102,405 | 94,918 | |||||||||||
Income (loss) per share: | |||||||||||||||
Basic | $ | (0.42 | ) | $ | (0.35 | ) | $ | (0.78 | ) | $ | (0.24 | ) | |||
Diluted | $ | (0.42 | ) | $ | (0.35 | ) | $ | (0.78 | ) | $ | (0.24 | ) | |||
NOTE 9 – FAIR VALUE MEASUREMENTS
The following table presents the components of Fair value adjustments, net (in thousands):
Three months ended March 31, | Six months ended June 30, | |||||||||||||||
2014 | 2013 | 2014 | 2013 | |||||||||||||
Palmarejo royalty obligation embedded derivative | $ | (5,061 | ) | $ | 61,066 | $ | (15,296 | ) | $ | 75,495 | ||||||
Rochester net smelter royalty obligation | (1,837 | ) | — | (2,510 | ) | — | ||||||||||
Silver and gold options | (1,374 | ) | 6,350 | (2,868 | ) | 10,577 | ||||||||||
Foreign exchange contracts | (10 | ) | (662 | ) | 957 | (1,522 | ) | |||||||||
Fair value adjustments, net | $ | (8,282 | ) | $ | 66,754 | $ | (19,717 | ) | $ | 84,550 | ||||||
Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
Level 2 | Quoted market prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and |
Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
The following table presents the Company’s financial assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):
Fair Value at June 30, 2014 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Short-term investments | $ | 47,642 | $ | 47,642 | $ | — | $ | — | |||||||
Marketable equity securities | 13,761 | 13,761 | — | — | |||||||||||
Silver and gold options | 1,298 | — | 1,298 | — | |||||||||||
Other derivative instruments, net | 240 | — | 240 | — | |||||||||||
$ | 62,941 | $ | 61,403 | $ | 1,538 | $ | — | ||||||||
Liabilities: | |||||||||||||||
Palmarejo royalty obligation embedded derivative | $ | 43,960 | $ | — | $ | — | $ | 43,960 | |||||||
Rochester net smelter royalty obligation | 23,656 | — | — | 23,656 | |||||||||||
Silver and gold options | 291 | — | 291 | — | |||||||||||
$ | 67,907 | $ | — | $ | 291 | $ | 67,616 | ||||||||
12
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
Fair Value at December 31, 2013 | |||||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||||
Assets: | |||||||||||||||
Marketable equity securities | $ | 14,521 | $ | 14,521 | $ | — | $ | — | |||||||
Silver and gold options | 135 | — | 135 | — | |||||||||||
$ | 14,656 | $ | 14,521 | $ | 135 | $ | — | ||||||||
Liabilities: | |||||||||||||||
Palmarejo royalty obligation embedded derivative | $ | 40,338 | $ | — | $ | — | $ | 40,338 | |||||||
Rochester net smelter royalty obligation | 21,630 | — | — | 21,630 | |||||||||||
Other derivative instruments, net | 1,591 | — | 1,591 | — | |||||||||||
$ | 63,559 | $ | — | $ | 1,591 | $ | 61,968 | ||||||||
The Company’s short-term investments are readily convertible to cash. The Company’s investments in marketable equity securities are recorded at fair market value in the financial statements based on quoted market prices, which are accessible at the measurement date for identical assets. Such instruments are classified within Level 1 of the fair value hierarchy.
The Company’s silver and gold options and other derivative instruments, net, which relate to concentrate sales contracts and foreign exchange contracts, are valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves and credit spreads. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.
The estimated fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation was estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves and credit spreads. The Company’s current mine plans are a significant input used in the estimated fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation and is considered company specific and unobservable. Therefore, the Company has classified the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation as Level 3 financial liabilities. Based on the current mine plans, expected royalty durations of 2.0 years and 4.6 years were used to estimate the fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation, respectively, at June 30, 2014.
No assets or liabilities were transferred between fair value levels in the three and six months ended June 30, 2014.
The following tables present the changes in the fair value of the Company's Level 3 financial liabilities for the three and six months ended June 30, 2014 (in thousands):
Three months ended June 30, 2014 | |||||||||||||||
Balance at the beginning of the period | Revaluation | Settlements | Balance at the end of the period | ||||||||||||
Palmarejo royalty obligation embedded derivative | $ | 44,357 | |||||||||||||