CDE-09.30.14 10Q

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 September 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 103,450,586 shares were issued and outstanding as of November 4, 2014.


COEUR MINING, INC.
INDEX
 
 
Page
Part I.
 
 
 
 
 
 
 
 
 
 
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
 
 
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
 
 
 
 
 
 
 
Consolidated Financial Results
 
 
 
 
Results of Operations
 
 
 
 
Liquidity and Capital Resources
 
 
 
 
Non-GAAP Financial Performance Measures
 
 
 
 
 
 
 
 
 
 
 
Part II.
 
 
 
 
 
 
 
 
 
Item 1A. Risk Factors
 
 
 
 
 
 
 
 
Item 6. Exhibits
 
 
 
Signatures





2

PART I. Financial Information
Item 1. Financial Statements

COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2014
 
2013
 
2014
 
2013
 
Notes
In thousands, except share data
Revenue
3
$
170,938

 
$
200,825

 
$
495,133

 
$
577,147

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
3
125,910

 
131,805

 
351,492

 
362,250

Amortization
 
41,985

 
60,097

 
123,834

 
166,686

General and administrative
 
8,515

 
16,240

 
31,809

 
41,492

Exploration
 
6,587

 
3,305

 
15,957

 
16,920

Litigation settlement
19
—

 
—

 
—

 
32,046

Pre-development, reclamation, and other
 
4,244

 
4,732

 
20,019

 
11,896

Total costs and expenses
 
187,241

 
216,179

 
543,111

 
631,290

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
Fair value adjustments, net
9
16,105

 
(20,646
)
 
(3,611
)
 
63,905

Impairment of marketable securities
12
(1,092
)
 
(870
)
 
(4,614
)
 
(18,097
)
Interest income and other, net
 
(211
)
 
(1,791
)
 
(2,313
)
 
2,484

Interest expense, net of capitalized interest
17
(11,616
)
 
(9,662
)
 
(36,980
)
 
(30,324
)
Total other income (expense), net
 
3,186

 
(32,969
)
 
(47,518
)
 
17,968

Income (loss) before income and mining taxes
 
(13,117
)
 
(48,323
)
 
(95,496
)
 
(36,175
)
Income and mining tax (expense) benefit
7
16,583

 
2,058

 
18,650

 
(32,860
)
NET INCOME (LOSS)
 
$
3,466

 
$
(46,265
)
 
$
(76,846
)
 
$
(69,035
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on marketable securities, net of tax of $686 and $939 for the three and nine months ended September 30, 2014, respectively
 
(1,086
)
 
301

 
(1,487
)
 
(10,756
)
Reclassification adjustments for impairment of marketable securities, net of tax of $(423) and $(1,786) for the three and nine months ended September 30, 2014, respectively
 
669

 
870

 
2,828

 
18,097

Reclassification adjustments for realized loss on sale of marketable securities, net of tax of $(140) and $(150) for the three and nine months ended September 30, 2014, respectively
 
221

 
136

 
238

 
136

Other comprehensive income (loss)
 
(196
)
 
1,307

 
1,579

 
7,477

COMPREHENSIVE INCOME (LOSS)
 
$
3,270

 
$
(44,958
)
 
$
(75,267
)
 
$
(61,558
)
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
8
 
 
 
 
 
 
 
Basic
 
$
0.03

 
$
(0.46
)
 
$
(0.75
)
 
$
(0.71
)
 
 
 
 
 
 
 
 
 
Diluted
 
$
0.03

 
$
(0.46
)
 
$
(0.75
)
 
$
(0.71
)
(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 September 30,
 
Nine months ended September 30,
 
 
2014
 
2013
 
2014
 
2013
 
Notes
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
3,466

 
$
(46,265
)
 
$
(76,846
)
 
(69,035
)
Adjustments:
 
 
 
 
 
 
 
 
Amortization
 
41,985

 
60,097

 
123,834

 
166,686

Accretion
 
3,868

 
4,175

 
12,961

 
15,015

Deferred income taxes
 
(23,437
)
 
(1,869
)
 
(39,142
)
 
17,680

Loss on termination of revolving credit facility
 
—

 
—

 
3,035

 
—

Fair value adjustments, net
 
(15,421
)
 
20,308

 
3,423

 
(61,487
)
Litigation settlement
19
—

 
—

 
—

 
22,046

Stock-based compensation
5
2,505

 
373

 
7,455

 
3,085

(Gain) loss on sale of assets
 
(89
)
 
(7
)
 
133

 
(1,139
)
Impairment of marketable securities
12
1,092

 
870

 
4,614

 
18,097

Other
 
1,088

 
(375
)
 
870

 
(487
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Receivables
 
7,446

 
(2,132
)
 
18,297

 
6,515

Prepaid expenses and other current assets
 
3,871

 
(14,306
)
 
(687
)
 
(13,894
)
Inventory and ore on leach pads
 
9,698

 
11,592

 
(5,821
)
 
22,582

Accounts payable and accrued liabilities
 
(4,806
)
 
(5,657
)
 
311

 
(22,588
)
CASH PROVIDED BY OPERATING ACTIVITIES
 
31,266

 
26,804

 
52,437

 
103,076

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Capital expenditures
 
(16,784
)
 
(32,726
)
 
(44,076
)
 
(72,754
)
Acquisitions
11
(13,829
)
 
—

 
(16,079
)
 
(113,214
)
Purchase of short-term investments and marketable securities
 
(2,089
)
 
(2,689
)
 
(50,423
)
 
(8,022
)
Sales and maturities of short-term investments
 
2,856

 
27

 
3,413

 
6,371

Other
 
74

 
(48
)
 
61

 
1,163

CASH USED IN INVESTING ACTIVITIES
 
(29,772
)
 
(35,436
)
 
(107,104
)
 
(186,456
)
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
 
(13,274
)
 
(1,824
)
 
(20,236
)
 
(59,021
)
Gold production royalty payments
 
(11,351
)
 
(12,619
)
 
(38,379
)
 
(43,548
)
Share repurchases
 
—

 
(14,995
)
 
—

 
(27,552
)
Other
 
(77
)
 
(27
)
 
(483
)
 
(505
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(24,702
)
 
(29,465
)
 
93,902

 
169,374

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
(23,208
)
 
(38,097
)
 
39,235

 
85,994

Cash and cash equivalents at beginning of period
 
269,133

 
249,531

 
206,690

 
125,440

Cash and cash equivalents at end of period
 
$
245,925

 
$
211,434

 
$
245,925

 
$
211,434


The accompanying notes are an integral part of these condensed consolidated financial statements.

4

COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
September 30, 2014
(Unaudited)
 
December 31,
2013
ASSETS
Notes
 
In thousands, except share data
CURRENT ASSETS
 
 
 
 
 
Cash and cash equivalents
 
 
$
245,925

 
$
206,690

Investments
12
 
49,520

 
—

Receivables
13
 
67,599

 
81,074

Ore on leach pads
 
 
50,335

 
50,495

Inventory
14
 
127,985

 
132,023

Deferred tax assets

 
35,021

 
35,008

Prepaid expenses and other
 
 
19,974

 
25,940

 
 
 
596,359

 
531,230

NON-CURRENT ASSETS
 
 
 
 
 
Property, plant and equipment, net
15
 
474,250

 
486,273

Mining properties, net
16
 
1,729,928

 
1,751,501

Ore on leach pads
 
 
41,547

 
31,528

Restricted assets
 
 
6,853

 
7,014

Marketable securities
12
 
9,162

 
14,521

Receivables
13
 
36,166

 
36,574

Debt issuance costs, net
 
 
10,315

 
10,812

Deferred tax assets

 
705

 
1,189

Other
 
 
10,039

 
15,336

TOTAL ASSETS
 
 
$
2,915,324

 
$
2,885,978

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
Accounts payable
 
 
$
49,232

 
$
53,847

Accrued liabilities and other
 
 
37,882

 
38,266

Debt
17
 
11,733

 
2,505

Royalty obligations
9,10
 
45,347

 
48,019

Reclamation
4
 
767

 
913

Deferred tax liabilities

 
1,858

 
1,011

 
 
 
146,819

 
144,561

NON-CURRENT LIABILITIES
 
 
 
 
 
Debt
17
 
457,744

 
306,130

Royalty obligations
9,10
 
41,319

 
65,142

Reclamation
4
 
60,946

 
57,515

Deferred tax liabilities

 
516,715

 
556,246

Other long-term liabilities
 
 
29,541

 
25,817

 
 
 
1,106,265

 
1,010,850

STOCKHOLDERS’ EQUITY
 
 
 
 
 
Common stock, par value $0.01 per share; authorized 150,000,000 shares, issued and outstanding 103,438,765 at September 30, 2014 and 102,843,003 at December 31, 2013
 
 
1,034

 
1,028

Additional paid-in capital
 
 
2,788,098

 
2,781,164

Accumulated other comprehensive income (loss)
 
 
(3,327
)
 
(4,906
)
Accumulated deficit
 
 
(1,123,565
)
 
(1,046,719
)
 
 
 
1,662,240

 
1,730,567

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
$
2,915,324

 
$
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
Income (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)
—

 
—

 
—

 
(76,846
)
 
—

 
(76,846
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
1,579

 
1,579

Common stock issued under stock-based compensation plans, net
596

 
6

 
6,934

 
—

 
—

 
6,940

Balances at September 30, 2014 (Unaudited)
103,439

 
$
1,034

 
$
2,788,098

 
$
(1,123,565
)
 
$
(3,327
)
 
$
1,662,240

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. and its subsidiaries (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.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards
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, La Preciosa, 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 September 30, 2014
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
La Preciosa
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
61,376

 
$
28,350

 
$
45,922

 
$
32,362

 
$
—

 
$
2,367

 
$
—

 
$
170,377

Royalties
—

 
—

 
—

 
—

 
—

 
561

 
—

 
561

 
61,376

 
28,350

 
45,922

 
32,362

 
—

 
2,928

 
—

 
170,938

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
45,988

 
20,447

 
34,668

 
23,718

 
—

 
1,089

 
—

 
125,910

Amortization
16,493

 
5,117

 
12,887

 
5,359

 
22

 
1,563

 
544

 
41,985

Exploration
2,615

 
(19
)
 
2,638

 
127

 
20

 
150

 
1,056

 
6,587

Other operating expenses
340

 
180

 
202

 
(87
)
 
2,338

 
342

 
9,444

 
12,759

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
284

 
583

 
—

 
39

 
(209
)
 
(1,480
)
 
(520
)
 
(1,303
)
Interest expense, net
(2,126
)
 
(10
)
 
(70
)
 
(250
)
 
—

 
—

 
(9,160
)
 
(11,616
)
Fair value adjustments, net
8,771

 
—

 
—

 
4,345

 
—

 
—

 
2,989

 
16,105

Income and mining tax (expense) benefit
11,562

 
(2,969
)
 
—

 
(210
)
 
5,305

 
214

 
2,681

 
16,583

Net income (loss)
$
14,431

 
$
229

 
$
(4,543
)
 
$
7,169

 
$
2,716

 
$
(1,482
)
 
$
(15,054
)
 
$
3,466

Segment assets(2)
$
1,111,829

 
$
304,644

 
$
315,959

 
$
208,284

 
$
412,202

 
$
67,934

 
$
126,932

 
$
2,547,784

Capital expenditures
$
5,857

 
$
2,783

 
$
3,610

 
$
4,194

 
$
62

 
$
—

 
$
278

 
$
16,784

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests




7
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Three months ended September 30, 2013
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
La Preciosa
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
104,524

 
$
28,819

 
$
38,927

 
$
24,259

 
$
—

 
$
4,296

 
$
—

 
$
200,825

Royalties
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
104,524

 
28,819

 
38,927

 
24,259

 
—

 
4,296

 
—

 
200,825

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
66,839

 
17,673

 
27,484

 
17,938

 
—

 
1,871

 
—

 
131,805

Amortization
33,475

 
4,788

 
18,086

 
2,518

 
11

 
898

 
321

 
60,097

Exploration
860

 
(3
)
 
1,496

 
625

 
(645
)
 
184

 
788

 
3,305

Litigation settlement
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

Other operating expenses
179

 
2,090

 
98

 
515

 
1,933

 
(144
)
 
16,301

 
20,972

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
(2,281
)
 
582

 
—

 
60

 
(71
)
 
26

 
(977
)
 
(2,661
)
Interest expense, net
(2,925
)
 
(12
)
 
(51
)
 
(5
)
 
—

 
(1
)
 
(6,668
)
 
(9,662
)
Fair value adjustments, net
(15,260
)
 
—

 
(2,952
)
 
(2,363
)
 
—

 
—

 
(71
)
 
(20,646
)
Income and mining tax (expense) benefit
1,564

 
(4,648
)
 
—

 
78

 
(20
)
 
(604
)
 
5,688

 
2,058

Net income (loss)
$
(15,731
)
 
$
193

 
$
(11,240
)
 
$
433

 
$
(1,390
)
 
$
908

 
$
(19,438
)
 
$
(46,265
)
Segment assets(2)
$
1,825,599

 
$
289,274

 
$
481,613

 
$
161,993

 
$
410,085

 
$
27,938

 
$
115,666

 
$
3,312,168

Capital expenditures
$
10,290

 
$
4,166

 
$
4,934

 
$
12,267

 
$
358

 
$
—

 
$
711

 
$
32,726

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Nine months ended September 30, 2014
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
La Preciosa
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
201,809

 
$
84,983

 
$
111,000

 
$
87,710

 
$
—

 
$
7,227

 
$
—

 
$
492,729

Royalties
—

 
—

 
—

 
—

 
—

 
2,404

 
—

 
2,404

 
201,809

 
84,983

 
111,000

 
87,710

 
—

 
9,631

 
—

 
495,133

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
139,113

 
60,042

 
86,417

 
62,806

 
—

 
3,114

 
—

 
351,492

Amortization
53,196

 
14,430

 
35,162

 
14,835

 
63

 
4,685

 
1,463

 
123,834

Exploration
5,257

 
63

 
5,318

 
2,039

 
229

 
462

 
2,589

 
15,957

Other operating expenses
962

 
515

 
591

 
2,102

 
13,006

 
868

 
33,784

 
51,828

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
(2,489
)
 
1,957

 
4

 
90

 
(226
)
 
(4,988
)
 
(1,275
)
 
(6,927
)
Interest expense, net
(7,721
)
 
(42
)
 
(145
)
 
(515
)
 
—

 
—

 
(28,557
)
 
(36,980
)
Fair value adjustments, net
(6,454
)
 
—

 
—

 
1,835

 
—

 
—

 
1,008

 
(3,611
)
Income and mining tax (expense) benefit
16,734

 
(7,937
)
 
—

 
(629
)
 
4,034

 
(304
)
 
6,752

 
18,650

Net income (loss)
$
3,351

 
$
3,911

 
$
(16,629
)
 
$
6,709

 
$
(9,490
)
 
$
(4,790
)
 
$
(59,908
)
 
$
(76,846
)
Segment assets(2)
$
1,111,829

 
$
304,644

 
$
315,959

 
$
208,284

 
$
412,202

 
$
67,934

 
$
126,932

 
$
2,547,784

Capital expenditures
$
15,188

 
$
5,935

 
$
12,310

 
$
9,110

 
$
202

 
$
—

 
$
1,331

 
$
44,076

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests

8
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

Nine months ended September 30, 2013
Palmarejo
Mine
 
San Bartolomé
Mine
 
Kensington
Mine
 
Rochester
Mine
 
La Preciosa
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
248,167

 
$
111,196

 
$
109,053

 
$
98,636

 
$
—

 
$
10,757

 
$
(662
)
 
$
577,147

Royalties
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
248,167

 
111,196

 
109,053

 
98,636

 
—

 
10,757

 
(662
)
 
577,147

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
148,776

 
66,165

 
81,203

 
61,231

 
—

 
4,875

 
—

 
362,250

Amortization
97,641

 
14,252

 
44,531

 
6,360

 
12

 
2,950

 
940

 
166,686

Exploration
6,029

 
76

 
2,732

 
1,621

 
19

 
814

 
5,629

 
16,920

Litigation
—

 
—

 
—

 
32,046

 
—

 
—

 
—

 
32,046

Other operating expenses
520

 
6,045

 
510

 
3,454

 
2,082

 
(320
)
 
41,097

 
53,388

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income and other, net
(768
)
 
1,871

 
281

 
117

 
(84
)
 
157

 
(17,187
)
 
(15,613
)
Interest expense, net
(10,853
)
 
(59
)
 
(405
)
 
(16
)
 
—

 
(1
)
 
(18,990
)
 
(30,324
)
Fair value adjustments, net
60,234

 
—

 
7,626

 
(2,363
)
 
—

 
—

 
(1,592
)
 
63,905

Income and mining tax (expense) benefit
(17,383
)
 
(13,482
)
 
(1
)
 
(1,186
)
 
(20
)
 
(1,112
)
 
324

 
(32,860
)
Net income (loss)
$
26,431

 
$
12,988

 
$
(12,422
)
 
$
(9,524
)
 
$
(2,217
)
 
$
1,482

 
$
(85,773
)
 
$
(69,035
)
Segment assets(2)
$
1,825,599

 
$
289,274

 
$
481,613

 
$
161,993

 
$
410,085

 
$
27,938

 
$
115,666

 
$
3,312,168

Capital expenditures
$
24,770

 
$
7,782

 
$
15,670

 
$
22,161

 
$
1,093

 
$
—

 
$
1,278

 
$
72,754

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests

In thousands
September 30, 2014

December 31, 2013
Assets
 
 
 
Total assets for reportable segments
$
2,547,784

 
$
2,595,408

Cash and cash equivalents
245,925

 
206,690

Short term investments
49,520

 
—

Other assets
72,095

 
83,880

Total consolidated assets
$
2,915,324

 
$
2,885,978


Geographic Information
In thousands
September 30, 2014

December 31, 2013
Long Lived Assets
 
 
 
United States
$
392,225

 
$
384,626

Australia
22,949

 
25,668

Argentina
94,435

 
94,705

Bolivia
226,495

 
235,085

Mexico
1,452,739

 
1,487,228

Other Foreign Countries
15,335

 
10,462

Total
$
2,204,178

 
$
2,237,774

 

9
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)


 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2014
 
2013
 
2014
 
2013
Revenue
 
 
 
 
 
 
 
United States
$
78,284

 
$
63,186

 
$
198,710

 
$
207,689

Mexico
61,684

 
104,524

 
202,851

 
248,167

Bolivia
28,350

 
28,819

 
84,983

 
111,196

Australia
2,367

 
4,296

 
7,227

 
10,757

Other
253

 
—

 
$
1,362

 
$
(662
)
Total
$
170,938

 
$
200,825

 
$
495,133

 
$
577,147


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 (included in Reclamation) are as follows: 
In thousands
Nine months ended September 30,
 
2014
 
2013
Asset retirement obligation - Beginning
$
57,454

 
$
34,456

Accretion
4,205

 
2,277

Additions and changes in estimates
—

 
19,542

Settlements
(470
)
 
(502
)
Asset retirement obligation - Ending
$
61,189

 
$
55,773

The Company has accrued $0.5 million and $1.0 million at September 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 September 30, 2014 and 2013 was $2.5 million and $0.4 million, respectively. Stock-based compensation expense for the nine months ended September 30, 2014 and 2013 was $7.5 million and $3.1 million, respectively. At September 30, 2014, there was $11.6 million of unrecognized stock-based compensation cost expected to be recognized over a period of 1.7 years.

The following table summarizes the grants awarded during the nine months ended September 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 exercisable during the nine months ended September 30, 2014:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Options
 
—

 
$
—

 
168,775

 
$
25.12

Stock Appreciation Rights
 
—

 
$
—

 
46,572

 
$
14.06


10
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 6 – RETIREMENT SAVINGS PLAN
The Company has a 401(k) retirement savings plan that covers all eligible U.S. employees. Eligible employees may elect to contribute up to 75% of base salary, subject to ERISA limitations. The Company makes matching contributions equal to 100% of the employee’s contribution up to 4% of the employee's salary. The Company also provides a voluntary, noncontributory defined contribution based on a percentage of eligible employee's salary. Total plan expenses recognized for the three and nine months ended September 30, 2014 and 2013 were $1.4 million and $1.1 million, and $4.4 million and $3.2 million, respectively.
NOTE 7 – INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three and nine months ended September 30, 2014 and 2013 by significant location:
 
Three months ended September 30,
 
Nine months ended September 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
$
(14,954
)
$
739


$
(33,250
)
$
5,259

 
$
(75,168
)
$
447

 
$
(95,146
)
$
718

Argentina
(935
)
1,539


(2,092
)
6

 
(3,828
)
5,622

 
(9,073
)
(38
)
Mexico
(283
)
17,003


(18,969
)
1,885

 
(28,999
)
20,831

 
39,787

(17,586
)
Bolivia
3,199

(2,969
)

4,842

(4,598
)
 
11,848

(7,937
)
 
26,470

(13,482
)
Other jurisdictions
(144
)
271

 
1,146

(494
)
 
651

(313
)
 
1,787

(2,472
)

$
(13,117
)
$
16,583

 
$
(48,323
)
$
2,058

 
$
(95,496
)
$
18,650

 
$
(36,175
)
$
(32,860
)

The income tax provision for the three and nine months ended September 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 net 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 September 30, 2014 and 2013, 1,387,957 and 814,235 shares, respectively, 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 nine months ended September 30, 2014 and 2013, 2,008,749 and 998,830 shares, respectively, 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 nine months ended September 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 September 30,
 
Nine months ended September 30,
In thousands except per share amounts
2014
 
2013
 
2014
 
2013
Net income (loss) available to common stockholders
$
3,466

 
$
(46,265
)
 
$
(76,846
)
 
$
(69,035
)
Weighted average shares:
 
 
 
 
 
 
 
Basic
102,470

 
100,778

 
102,427

 
96,893

Effect of stock-based compensation plans
91

 
—

 
—

 
—

Diluted
102,561

 
100,778

 
102,427

 
96,893

Income (loss) per share:
 
 
 
 
 
 
 
Basic
$
0.03

 
$
(0.46
)
 
$
(0.75
)
 
$
(0.71
)
Diluted
$
0.03

 
$
(0.46
)
 
$
(0.75
)
 
$
(0.71
)
NOTE 9 – FAIR VALUE MEASUREMENTS
The following table presents the components of Fair value adjustments, net:
 
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
 
2014
 
2013
 
2014
 
2013
Palmarejo royalty obligation embedded derivative
 
$
8,736

 
$
(15,279
)
 
$
(6,560
)
 
$
60,216

Rochester net smelter royalty obligation
 
4,345

 
(2,363
)
 
1,835

 
(2,363
)
Silver and gold options
 
3,081

 
(3,104
)
 
213

 
7,474

Foreign exchange contracts
 
(57
)
 
100

 
901

 
(1,422
)
Fair value adjustments, net
 
$
16,105

 
$
(20,646
)
 
$
(3,611
)
 
$
63,905

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:
 
Fair Value at September 30, 2014
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Short-term investments
$
49,520

 
$
49,520

 
$
—

 
$
—

Marketable equity securities
9,162

 
9,162

 
—

 
—

Silver and gold options
4,939

 
—

 
4,939

 
—

 
$
63,621

 
$
58,682

 
$
4,939

 
$
—

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
30,261

 
$
—

 
$
—

 
$
30,261

Rochester net smelter royalty obligation
18,268

 
—

 
—

 
18,268

Silver and gold options
1,331

 
—

 
1,331

 
—

Other derivative instruments, net
501

 
—

 
501

 
—

 
$
50,361

 
$
—

 
$
1,832

 
$
48,529

 

12
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

 
Fair Value at December 31, 2013
In thousands
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 1.7 years and 4.3 years were used to estimate the fair value of the Palmarejo royalty obligation embedded derivative and Rochester net smelter royalty obligation, respectively, at September 30, 2014.
No assets or liabilities were transferred between fair value levels in the three and nine months ended September 30, 2014.
The following tables present the changes in the fair value of the Company's Level 3 financial liabilities for the three and nine months ended September 30, 2014:
 
Three months ended September 30, 2014
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Palmarejo royalty obligation embedded derivative
$
43,960

 
$
(8,736
)
 
$
(4,963
)
 
$
30,261

Rochester net smelter royalty obligation
23,656

 
(4,345
)