10-Q

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, 2015
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 300,000,000 shares of common stock, par value of $0.01, authorized of which 136,957,701 shares were issued and outstanding as of October 30, 2015.


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 Statement 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 5. Other Information
 
 
 
 
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,
 
 
2015
 
2014
 
2015
 
2014
 
Notes
In thousands, except share data
Revenue
3
$
162,552

 
$
170,938

 
$
481,770

 
$
495,133

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
3
120,237

 
125,910

 
354,397

 
351,492

Amortization
 
35,497

 
41,985

 
107,560

 
123,834

General and administrative
 
6,694

 
8,515

 
23,979

 
31,809

Exploration
 
2,112

 
6,587

 
9,957

 
15,957

Pre-development, reclamation, and other
 
4,938

 
4,244

 
13,968

 
20,019

Total costs and expenses
 
169,478

 
187,241

 
509,861

 
543,111

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
Fair value adjustments, net
9
5,786

 
16,105

 
3,657

 
(3,611
)
Interest expense, net of capitalized interest
17
(12,446
)
 
(11,616
)
 
(33,945
)
 
(36,980
)
Other, net
 
(8,893
)
 
(1,303
)
 
(14,257
)
 
(6,927
)
Total other income (expense), net
 
(15,553
)
 
3,186

 
(44,545
)
 
(47,518
)
Income (loss) before income and mining taxes
 
(22,479
)
 
(13,117
)
 
(72,636
)
 
(95,496
)
Income and mining tax (expense) benefit
7
8,260

 
16,583

 
8,451

 
18,650

NET INCOME (LOSS)
 
$
(14,219
)
 
$
3,466

 
$
(64,185
)
 
$
(76,846
)
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on equity securities, net of tax of $686 and $939 for the three and nine months ended September 30, 2014, respectively
 
(931
)
 
(1,086
)
 
(3,744
)
 
(1,487
)
Reclassification adjustments for impairment of equity securities, net of tax of $(423) and $(1,768) for the three and nine months ended September 30, 2014, respectively
 
483

 
669

 
2,028

 
2,828

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

 
221

 
904

 
238

Other comprehensive income (loss)
 
(448
)
 
(196
)
 
(812
)
 
1,579

COMPREHENSIVE INCOME (LOSS)
 
$
(14,667
)
 
$
3,270

 
$
(64,997
)
 
$
(75,267
)
 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
8
 
 
 
 
 
 
 
Basic
 
$
(0.11
)
 
$
0.03

 
$
(0.52
)
 
$
(0.75
)
 
 
 
 
 
 
 
 
 
Diluted
 
$
(0.11
)
 
$
0.03

 
$
(0.52
)
 
$
(0.75
)
(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,
 
 
2015
 
2014
 
2015
 
2014
 
Notes
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
(14,219
)
 
$
3,466

 
$
(64,185
)
 
(76,846
)
Adjustments:
 
 
 
 
 
 
 
 
Amortization
 
35,497

 
41,985

 
107,560

 
123,834

Accretion
 
3,629

 
3,868

 
10,305

 
12,961

Deferred income taxes
 
(1,233
)
 
(23,437
)
 
(8,470
)
 
(39,142
)
Loss on termination of revolving credit facility
 
—

 
—

 
—

 
3,035

Fair value adjustments, net
9
(5,786
)
 
(16,105
)
 
(3,657
)
 
3,611

Stock-based compensation
5
1,639

 
2,505

 
6,393

 
7,455

Impairment of equity securities
12
483

 
1,092

 
2,028

 
4,614

Foreign exchange and other
 
8,541

 
1,683

 
13,845

 
815

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Receivables
 
11,011

 
7,446

 
11,225

 
18,297

Prepaid expenses and other current assets
 
(2,055
)
 
3,871

 
(3,222
)
 
(687
)
Inventory and ore on leach pads
 
5,380

 
9,698

 
10,713

 
(5,821
)
Accounts payable and accrued liabilities
 
(6,650
)
 
(4,806
)
 
(13,407
)
 
311

CASH PROVIDED BY OPERATING ACTIVITIES
 
36,237

 
31,266

 
69,128

 
52,437

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Capital expenditures
 
(23,861
)
 
(16,784
)
 
(65,158
)
 
(44,076
)
Acquisitions, net of cash acquired
11
(122
)
 
(13,829
)
 
(111,290
)
 
(16,079
)
Other
 
340

 
74

 
(1,338
)
 
61

Purchase of short-term investments and equity securities
 
(3
)
 
(2,089
)
 
(1,876
)
 
(50,423
)
Sales and maturities of short-term investments
 
60

 
2,856

 
529

 
3,413

CASH USED IN INVESTING ACTIVITIES
 
(23,586
)
 
(29,772
)
 
(179,133
)
 
(107,104
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings
17
—

 
—

 
153,500

 
153,000

Payments on debt, capital leases, and associated costs
 
(2,618
)
 
(13,274
)
 
(77,838
)
 
(20,236
)
Gold production royalty payments
 
(10,159
)
 
(11,351
)
 
(30,281
)
 
(38,379
)
Other
 
(34
)
 
(77
)
 
(529
)
 
(483
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(12,811
)
 
(24,702
)
 
44,852

 
93,902

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
(160
)
 
(23,208
)
 
(65,153
)
 
39,235

Cash and cash equivalents at beginning of period
 
205,868

 
269,133

 
270,861

 
206,690

Cash and cash equivalents at end of period
 
$
205,708

 
$
245,925

 
$
205,708

 
$
245,925


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, 2015
(Unaudited)
 
December 31,
2014
ASSETS
Notes
 
In thousands, except share data
CURRENT ASSETS
 
 
 
 
 
Cash and cash equivalents
 
 
$
205,708

 
$
270,861

Receivables
13
 
93,599

 
116,921

Inventory
14
 
98,109

 
114,931

Ore on leach pads
14
 
68,695

 
48,204

Deferred tax assets

 
7,197

 
7,364

Prepaid expenses and other
 
 
18,431

 
15,523

 
 
 
491,739

 
573,804

NON-CURRENT ASSETS
 
 
 
 
 
Property, plant and equipment, net
15
 
261,043

 
227,911

Mining properties, net
16
 
851,590

 
501,192

Ore on leach pads
14
 
39,685

 
37,889

Restricted assets
 
 
8,003

 
7,037

Equity securities
12
 
3,213

 
5,982

Receivables
13
 
27,507

 
21,686

Deferred tax assets

 
64,359

 
60,151

Other
 
 
11,534

 
9,915

TOTAL ASSETS
 
 
$
1,758,673

 
$
1,445,567

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
Accounts payable
 
 
$
49,690

 
$
49,052

Accrued liabilities and other
 
 
38,329

 
51,513

Debt
17
 
11,775

 
17,498

Royalty obligations
9
 
33,440

 
43,678

Reclamation
4
 
3,310

 
3,871

Deferred tax liabilities

 
8,078

 
8,078

 
 
 
144,622

 
173,690

NON-CURRENT LIABILITIES
 
 
 
 
 
Debt
17
 
534,211

 
451,048

Royalty obligations
9
 
6,781

 
27,651

Reclamation
4
 
88,009

 
66,943

Deferred tax liabilities

 
222,809

 
111,006

Other long-term liabilities
 
 
47,856

 
29,911

 
 
 
899,666

 
686,559

STOCKHOLDERS’ EQUITY
 
 
 
 
 
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 136,962,174 at September 30, 2015 and authorized 150,000,000 shares, issued and outstanding 103,384,408 at December 31, 2014
 
 
1,370

 
1,034

Additional paid-in capital
 
 
2,983,423

 
2,789,695

Accumulated other comprehensive income (loss)
 
 
(3,620
)
 
(2,808
)
Accumulated deficit
 
 
(2,266,788
)
 
(2,202,603
)
 
 
 
714,385

 
585,318

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
$
1,758,673

 
$
1,445,567


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, 2014
103,384

 
$
1,034

 
$
2,789,695

 
$
(2,202,603
)
 
$
(2,808
)
 
$
585,318

Net income (loss)
—

 
—

 
—

 
(64,185
)
 
—

 
(64,185
)
Other comprehensive income (loss)
—

 
—

 
—

 
—

 
(812
)
 
(812
)
Common stock issued for the acquisition of Paramount Gold and Silver Corp.
32,667

 
327

 
188,490

 
—

 
—

 
188,817

Common stock issued under stock-based compensation plans, net
911

 
9

 
5,238

 
—

 
—

 
5,247

Balances at September 30, 2015 (Unaudited)
136,962

 
$
1,370

 
$
2,983,423

 
$
(2,266,788
)
 
$
(3,620
)
 
$
714,385

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 which will be reported for the year ending December 31, 2015. The condensed consolidated December 31, 2014 balance sheet data was derived from audited consolidated financial statements. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements included in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2014.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards
In September 2015, the FASB issued ASU 2015-16, "Simplifying the Accounting for Measurement-Period Adjustments," which eliminates the requirement for an acquirer to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is consummated. These changes become effective for the Company's fiscal year beginning January 1, 2016. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.
    
In August 2015, the FASB issued ASU 2015-14, "Deferral of the Effective Date", which defers the effective date of ASU 2014-09, "Revenue from Contracts with Customers" to January 1, 2018. The Company is currently evaluating the potential impact of the prescribed changes on the Company's consolidated financial position, results of operations, and cash flows.    

In July 2015, the FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory," which provides a revised, simpler measurement for inventory to be measured at the lower of cost and net realizable value. These changes become effective for the Company's fiscal year beginning January 1, 2018. The Company is currently evaluating the potential impact of these changes on the Company's consolidated financial position, results of operations, and cash flows.

In April 2015, the FASB issued ASU 2015-03, "Simplifying the Presentation of Debt Issuance Costs," which requires that debt issuance costs related to a recognized debt liability be presented as a reduction to the carrying amount of that debt liability, not as an asset. The updated guidance became effective under early adoption for the Company's fiscal year beginning January 1, 2015, and resulted in a reclassification of amounts from Other Non-current Assets to Debt in the current and prior periods.

In February 2015, the FASB issued ASU 2015-02, "Amendments to the Consolidation Analysis," which amends the consolidation requirements in ASC 810. These changes become effective for the Company's fiscal year beginning January 1, 2016. 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, Kensington, and Wharf mines, 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 La Preciosa project, Joaquin project, Martha mine, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.

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

Financial information relating to the Company’s segments is as follows (in thousands):
Three months ended September 30, 2015
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
49,187

 
$
34,638

 
$
30,466

 
$
27,986

 
$
17,391

 
$
1,264

 
$
—

 
$
160,932

Royalties
—

 
—

 
—

 
—

 
—

 
1,620

 
—

 
1,620

 
49,187

 
34,638

 
30,466

 
27,986

 
17,391

 
2,884

 
—

 
162,552

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
34,093

 
25,436

 
24,973

 
17,777

 
17,483

 
475

 
—

 
120,237

Amortization
8,617

 
6,731

 
8,499

 
5,642

 
3,526

 
1,983

 
499

 
35,497

Exploration
1,087

 
49

 
217

 
—

 
54

 
(362
)
 
1,067

 
2,112

Other operating expenses
303

 
742

 
254

 
517

 
1,059

 
(38
)
 
8,795

 
11,632

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
2,998

 
1,752

 
—

 
—

 
—

 
—

 
1,036

 
5,786

Interest expense, net
(928
)
 
(168
)
 
(51
)
 
—

 
(100
)
 
—

 
(11,199
)
 
(12,446
)
Other, net
(7,870
)
 
1

 
1

 
53

 
347

 
(455
)
 
(970
)
 
(8,893
)
Income and mining tax (expense) benefit
10,370

 
(1,053
)
 
406

 
(907
)
 
(1,029
)
 
291

 
182

 
8,260

Net income (loss)
$
9,657

 
$
2,212

 
$
(3,122
)
 
$
3,195

 
$
(5,513
)
 
$
662

 
$
(21,310
)
 
$
(14,219
)
Segment assets(2)
$
653,501

 
$
192,348

 
$
193,712

 
$
124,754

 
$
165,931

 
$
51,553

 
$
76,860

 
$
1,458,659

Capital expenditures
$
10,514

 
$
5,281

 
$
5,522

 
$
665

 
$
1,786

 
$
—

 
$
93

 
$
23,861

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Three months ended September 30, 2014
Palmarejo
 
Rochester
 
Kensington
 
San Bartolomé
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
61,376

 
$
32,362

 
$
45,922

 
$
28,350

 
$
2,367

 
$
—

 
$
170,377

Royalties
—

 
—

 
—

 
—

 
561

 
—

 
561

 
61,376

 
32,362

 
45,922

 
28,350

 
2,928

 
—

 
170,938

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

 
23,718

 
34,668

 
20,447

 
1,089

 
—

 
125,910

Amortization
16,493

 
5,359

 
12,887

 
5,117

 
1,563

 
566

 
41,985

Exploration
2,615

 
127

 
2,638

 
(19
)
 
150

 
1,076

 
6,587

Other operating expenses
340

 
(87
)
 
202

 
180

 
342

 
11,782

 
12,759

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
8,771

 
4,345

 
—

 
—

 
—

 
2,989

 
16,105

Interest expense, net
(2,126
)
 
(250
)
 
(70
)
 
(10
)
 
—

 
(9,160
)
 
(11,616
)
Other, net
284

 
39

 
—

 
583

 
(1,480
)
 
(729
)
 
(1,303
)
Income and mining tax (expense) benefit
11,562

 
(210
)
 
—

 
(2,969
)
 
214

 
7,986

 
16,583

Net income (loss)
$
14,431

 
$
7,169

 
$
(4,543
)
 
$
229

 
$
(1,482
)
 
$
(12,338
)
 
$
3,466

Segment assets(2)
$
1,111,829

 
$
208,284

 
$
315,959

 
$
304,644

 
$
67,934

 
$
539,134

 
$
2,547,784

Capital expenditures
$
5,857

 
$
4,194

 
$
3,610

 
$
2,783

 
$
—

 
$
340

 
$
16,784

(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, 2015
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
San Bartolomé
 
Coeur Capital
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
127,455

 
$
115,010

 
$
116,971

 
$
48,359

 
$
62,304

 
$
6,292

 
$
—

 
$
476,391

Royalties
—

 
—

 
—

 
—

 
—

 
5,379

 
—

 
5,379

 
127,455

 
115,010

 
116,971

 
48,359

 
62,304

 
11,671

 
—

 
481,770

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
98,695

 
81,221

 
81,844

 
34,410

 
55,767

 
2,460

 
—

 
354,397

Amortization
24,997

 
18,962

 
32,738

 
9,133

 
13,487

 
6,753

 
1,490

 
107,560

Exploration
4,047

 
1,272

 
2,311

 
—

 
132

 
(212
)
 
2,407

 
9,957

Other operating expenses
940

 
2,190

 
1,015

 
1,188

 
1,544

 
(8
)
 
31,078

 
37,947

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
1,882

 
596

 
—

 
—

 
—

 
—

 
1,179

 
3,657

Interest expense, net
(3,112
)
 
(598
)
 
(172
)
 
—

 
(674
)
 
—

 
(29,389
)
 
(33,945
)
Other, net
(9,478
)
 
(38
)
 
(16
)
 
108

 
1,219

 
(2,904
)
 
(3,148
)
 
(14,257
)
Income and mining tax (expense) benefit
9,836

 
(1,753
)
 
(587
)
 
(495
)
 
(2,240
)
 
266

 
3,424

 
8,451

Net income (loss)
$
(2,096
)
 
$
9,573

 
$
(1,712
)
 
$
3,241

 
$
(10,322
)
 
$
40

 
$
(62,909
)
 
$
(64,185
)
Segment assets(2)
$
653,501

 
$
192,348

 
$
193,712

 
$
124,754

 
$
165,931

 
$
51,553

 
$
76,860

 
$
1,458,659

Capital expenditures
$
30,421

 
$
14,451

 
$
14,380

 
$
1,959

 
$
3,729

 
$
—

 
$
218

 
$
65,158

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

 
$
87,710

 
$
111,000

 
$
84,983

 
$
7,227

 
$
—

 
$
492,729

Royalties
—

 
—

 
—

 
—

 
2,404

 
—

 
2,404

 
201,809

 
87,710

 
111,000

 
84,983

 
9,631

 
—

 
495,133

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

 
62,806

 
86,417

 
60,042

 
3,114

 
—

 
351,492

Amortization
53,196

 
14,835

 
35,162

 
14,430

 
4,685

 
1,526

 
123,834

Exploration
5,257

 
2,039

 
5,318

 
63

 
462

 
2,818

 
15,957

Other operating expenses
962

 
2,102

 
591

 
515

 
868

 
46,790

 
51,828

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net
(6,454
)
 
1,835

 
—

 
—

 
—

 
1,008

 
(3,611
)
Interest expense, net
(7,721
)
 
(515
)
 
(145
)
 
(42
)
 
—

 
(28,557
)
 
(36,980
)
Other, net
(2,489
)
 
90

 
4

 
1,957

 
(4,988
)
 
(1,501
)
 
(6,927
)
Income and mining tax (expense) benefit
16,734

 
(629
)
 
—

 
(7,937
)
 
(304
)
 
10,786

 
18,650

Net income (loss)
$
3,351

 
$
6,709

 
$
(16,629
)
 
$
3,911

 
$
(4,790
)
 
$
(69,398
)
 
$
(76,846
)
Segment assets(2)
$
1,111,829

 
$
208,284

 
$
315,959

 
$
304,644

 
$
67,934

 
$
539,134

 
$
2,547,784

Capital expenditures
$
15,188

 
$
9,110

 
$
12,310

 
$
5,935

 
$
—

 
$
1,533

 
$
44,076

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

Assets
September 30, 2015

December 31, 2014
Total assets for reportable segments
$
1,458,659

 
$
1,084,257

Cash and cash equivalents
205,708

 
270,861

Other assets
94,306

 
90,449

Total consolidated assets
$
1,758,673

 
$
1,445,567



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

Geographic Information
Long-Lived Assets
September 30, 2015

December 31, 2014
United States
$
349,303

 
$
275,594

Mexico
621,960

 
298,101

Bolivia
98,966

 
107,960

Australia
17,099

 
21,362

Argentina
10,925

 
10,970

Other
14,380

 
15,116

Total
$
1,112,633

 
$
729,103

 

Revenue
Three months ended September 30,
 
Nine months ended September 30,
2015
 
2014
 
2015
 
2014
United States
$
93,091

 
$
78,284

 
$
280,340

 
$
198,710

Mexico
50,170

 
61,684

 
129,753

 
202,851

Bolivia
17,391

 
28,350

 
62,304

 
84,983

Australia
1,264

 
2,367

 
6,292

 
7,227

Other
636

 
253

 
$
3,081

 
$
1,362

Total
$
162,552

 
$
170,938

 
$
481,770

 
$
495,133


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. 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 for operating sites are as follows:
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands
2015
 
2014
 
2015
 
2014
Asset retirement obligation - Beginning
$
87,601

 
$
59,795

 
$
67,214

 
$
57,454

Accretion
2,038

 
1,452

 
5,652

 
4,205

Additions and changes in estimates
—

 
—

 
18,270

 
—

Settlements
(2,363
)
 
(58
)
 
(3,860
)
 
(470
)
Asset retirement obligation - Ending
$
87,276

 
$
61,189

 
$
87,276

 
$
61,189

The increase in asset retirement obligations in the nine months ended September 30, 2015 is due to the acquisition of the Wharf gold mine. The Company has accrued $4.0 million and $3.6 million at September 30, 2015 and December 31, 2014, respectively, for reclamation liabilities related to former mining activities, which are included in Reclamation.

NOTE 5 – STOCK-BASED COMPENSATION
The Company has stock incentive plans for executives and eligible employees. Stock awards include stock options, restricted stock, and performance shares. Stock-based compensation expense was $1.6 million and $2.5 million for the three months ended and $6.4 million and $7.5 million for the nine months ended September 30, 2015 and 2014, respectively. At September 30, 2015, there was $9.8 million of unrecognized stock-based compensation cost expected to be recognized over a period of 1.5 years. During the nine months ended September 30, 2015, the supplemental incentive accrual increased $1.2 million to $1.8 million.

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

The following table summarizes the grants awarded during the nine months ended September 30, 2015:
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
May 13, 2015
 
1,127,814

 
$
5.57

 
310,028

 
$
2.65

 
809,293

 
$
6.97

July 1, 2015
 
22,897

 
$
5.35

 
—

 
$
—

 
—

 
$
—


The following options and stock appreciation rights were exercisable during the nine months ended September 30, 2015:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Stock options
 
—

 
$
—

 
322,117

 
$
19.96

Stock appreciation rights
 
—

 
$
—

 
46,572

 
$
14.06


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. In addition, the Company has a deferred compensation plan for employees whose benefits under the 401(k) plan are limited by federal regulations. The Company generally makes matching contributions equal to 100% of the employee’s contribution up to 4% of the employee's salary. The Company may also provide a voluntary, noncontributory defined contribution based on an eligible employee's salary. Expenses (income) related to retirement savings plan contributions were $(0.7) million and $1.4 million for the three months ended and $2.8 million and $4.4 million for the nine months ended September 30, 2015 and 2014, 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, 2015 and 2014 by significant jurisdiction:
 
Three months ended September 30,
 
Nine months ended September 30,
 
2015

2014
 
2015
 
2014
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
$
(16,168
)
$
(1,080
)

$
(14,954
)
$
739

 
$
(46,640
)
$
1,123

 
$
(75,168
)
$
447

Argentina
(731
)
(2
)

(935
)
1,539

 
(2,083
)
(3
)
 
(3,828
)
5,622

Mexico
(1,412
)
11,951


(283
)
17,003

 
(16,666
)
11,234

 
(28,999
)
20,831

Bolivia
(4,483
)
(1,029
)

3,199

(2,969
)
 
(8,081
)
(2,240
)
 
11,848

(7,937
)
Other jurisdictions
315

(1,580
)
 
(144
)
271

 
834

(1,663
)
 
651

(313
)

$
(22,479
)
$
8,260

 
$
(13,117
)
$
16,583

 
$
(72,636
)
$
8,451

 
$
(95,496
)
$
18,650


The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions, mining tax expense and uncertain tax position accruals. In addition, the Company's consolidated effective income tax rate is a function of the combined effective tax rates and foreign exchange rates in the jurisdictions in which it operates. Variations in the jurisdictional mix of income and loss and foreign exchange rates result in significant fluctuations in our consolidated effective tax rate.

A valuation allowance is provided for deferred tax assets for which it is more likely than not that the related tax benefits will not be realized. Each quarter, the Company analyzes its deferred tax assets and, if it is determined that the Company will not realize all or a portion of its deferred tax assets, it will record or increase a valuation allowance. Conversely, if it is determined that the Company will ultimately be able to realize all or a portion of the related benefits for which a valuation allowance has been provided, all or a portion of the related valuation allowance will be reduced. There are a number of risk factors that could impact the Company’s ability to realize its deferred tax assets. For additional information, see Part II, Item 1A of this Report.
    
The Company or one of its subsidiaries files income tax returns in the U.S. Federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal income tax examination by tax

11
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

authorities for years before 2012 and is no longer subject to examination by certain foreign jurisdictions by tax authorities for years before 2005. As a result of statutes of limitation that will begin to expire within the next 12 months in various jurisdictions and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease between $0.8 million and $1.1 million in the next 12 months.

At September 30, 2015 and December 31, 2014, the Company had $17.4 million and $16.1 million of total gross unrecognized tax benefits, respectively. If recognized, these unrecognized tax benefits would positively impact the Company’s effective income tax rate. The Company’s continuing practice is to recognize potential interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. At September 30, 2015 and December 31, 2014, the amount of accrued income-tax-related interest and penalties was $9.4 million and $6.9 million, respectively.
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 and nine months ended September 30, 2015 and 2014, 3,302,701 and 1,387,957 shares and 3,251,347 and 2,008,749, 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, 2015 and 2014 because there is no excess value upon conversion over the principal amount of the Notes.
 
Three months ended September 30,
 
Nine months ended September 30,
In thousands except per share amounts
2015
 
2014
 
2015
 
2014
Net income (loss) available to common stockholders
$
(14,219
)
 
$
3,466

 
$
(64,185
)
 
$
(76,846
)
Weighted average shares:
 
 
 
 
 
 
 
Basic
135,247

 
102,470

 
124,478

 
102,427

Effect of stock-based compensation plans
—

 
91

 
—

 
—

Diluted
135,247

 
102,561

 
124,478

 
102,427

Income (loss) per share:
 
 
 
 
 
 
 
Basic
$
(0.11
)
 
$
0.03

 
$
(0.52
)
 
$
(0.75
)
Diluted
$
(0.11
)
 
$
0.03

 
$
(0.52
)
 
$
(0.75
)

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
 
2015
 
2014
 
2015
 
2014
Palmarejo royalty obligation embedded derivative
 
$
2,983

 
$
8,736

 
$
1,823

 
$
(6,560
)
Rochester net smelter royalty (NSR) royalty obligation
 
1,752

 
4,345

 
596

 
1,835

Silver and gold options
 
1,051

 
3,081

 
1,238

 
213

Foreign exchange contracts
 
—

 
(57
)
 
—

 
901

Fair value adjustments, net
 
$
5,786

 
$
16,105

 
$
3,657

 
$
(3,611
)
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), secondary priority to quoted prices in inactive markets or observable inputs (Level 2), and the lowest priority to unobservable inputs (Level 3).

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

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, 2015
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
3,213

 
$
3,124

 
$
—

 
$
89

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
9,024

 
$
—

 
$
—

 
$
9,024

Rochester NSR royalty obligation
10,940

 
—

 
—

 
10,940

Other derivative instruments, net
431

 
—

 
431

 
—

 
$
20,395

 
$
—

 
$
431

 
$
19,964

 
 
Fair Value at December 31, 2014
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity securities
$
5,982

 
$
4,603

 
$
—

 
$
1,379

Silver and gold options
3,882

 
—

 
3,882

 
—

 
$
9,864

 
$
4,603

 
$
3,882

 
$
1,379

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
21,912

 
$
—

 
$
—

 
$
21,912

Rochester NSR royalty obligation
15,370

 
—

 
—

 
15,370

Silver and gold options
1,039

 
—

 
1,039

 
—

Other derivative instruments, net
805

 
—

 
805

 
—

 
$
39,126

 
$
—

 
$
1,844

 
$
37,282

The Company’s investments in equity securities are recorded at fair market value in the financial statements based primarily on quoted market prices. Such instruments are classified within Level 1 of the fair value hierarchy. Quoted market prices are not available for certain equity securities; these securities are valued using pricing models, which require the use of observable and unobservable inputs, and are classified within Level 3 of the fair value hierarchy.
The Company’s silver and gold options and other derivative instruments, net, which relate to concentrate and certain doré 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, credit spreads, and other unobservable inputs. 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 fair values of the Palmarejo royalty obligation embedded derivative and Rochester NSR royalty obligation were estimated based on observable market data including contractual terms, forward silver and gold prices, yield curves, and credit spreads, as well as the Company’s current mine plan which is considered a significant unobservable input. Therefore, the Company has classified these obligations as Level 3 financial liabilities. Based on current mine plans, expected royalty durations of 1.0 years and 2.5 years were used to estimate the fair value of the Palmarejo royalty obligation embedded derivative and Rochester NSR royalty obligation, respectively, at September 30, 2015.

13
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)

No assets or liabilities were transferred between fair value levels in the nine months ended September 30, 2015.
The following tables present the changes in the fair value of the Company's Level 3 financial assets and liabilities for the three and nine months ended September 30, 2015:
 
Three months ended September 30, 2015
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
Equity securities
$
89

 
$
—

 
$
—

 
$
89

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
15,281

 
$
(2,983
)
 
$
(3,274
)
 
$
9,024

Rochester NSR royalty obligation
13,905

 
(1,752
)
 
(1,213
)
 
10,940

 
Nine months ended September 30, 2015
In thousands
Balance at the beginning of the period
 
Revaluation
 
Settlements
 
Balance at the
end of the
period
Assets:
 
 
 
 
 
 
 
Equity securities
$
1,379

 
$
(904
)
 
$
(386
)
 
$
89

Liabilities:
 
 
 
 
 
 
 
Palmarejo royalty obligation embedded derivative
$
21,912

 
$
(1,823
)
 
$
(11,065
)
 
$
9,024

Rochester NSR royalty obligation
15,370

 
(596
)
 
(3,834
)
 
10,940

The fair value of financial assets and liabilities carried at book value in the financial statements at September 30, 2015 and December 31, 2014 is presented in the following table:
 
September 30, 2015
In thousands
Book Value
 
Fair Value
 
Level 1
 
Level 2
 
Level 3  
Liabilities:
 
 

 
 
 
 
 
 
3.25% Convertible Senior Notes due 2028
$
712

 
$
696

 
$
—

 
$
696

 
$
—

7.875% Senior Notes due 2021(1)
426,533

 
260,016

 
—

 
260,016

 
—

Term Loan due 2020(2)
94,557

 
99,750

 
—

 
99,750

 
—

San Bartolomé Lines of Credit
9,142

 
9,142

 
—

 
9,142

 
—

Palmarejo gold production royalty obligation
20,258

 
20,991

 
—

 
—