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, 2016
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 162,364,657 shares were issued and outstanding as of July 25, 2016.
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 (Unaudited) | ||
Condensed Consolidated Statement of Changes in Stockholders' Equity (Unaudited) | ||
Notes to Condensed Consolidated Financial Statements (Unaudited) | ||
Consolidated Financial Results | ||
Results of Operations | ||
Liquidity and Capital Resources | ||
Non-GAAP Financial Performance Measures | ||
Item 4. Controls and Procedures | ||
Part II. | ||
Item 1. Legal Proceedings | ||
Item 1A. Risk Factors | ||
Item 4. Mine Safety Disclosures | ||
Item 6. Exhibits | ||
Signatures | ||
2
PART I
Item 1. Financial Statements
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Notes | In thousands, except share data | |||||||||||||||
Revenue | 3 | $ | 182,007 | $ | 166,263 | $ | 330,394 | $ | 319,219 | |||||||
COSTS AND EXPENSES | ||||||||||||||||
Costs applicable to sales(1) | 3 | 100,465 | 119,097 | 202,020 | 234,160 | |||||||||||
Amortization | 37,505 | 38,974 | 65,470 | 72,064 | ||||||||||||
General and administrative | 7,400 | 8,451 | 15,676 | 17,286 | ||||||||||||
Exploration | 2,233 | 3,579 | 3,963 | 7,845 | ||||||||||||
Write-downs | — | — | 4,446 | — | ||||||||||||
Pre-development, reclamation, and other | 4,364 | 2,267 | 8,568 | 9,030 | ||||||||||||
Total costs and expenses | 151,967 | 172,368 | 300,143 | 340,385 | ||||||||||||
OTHER INCOME (EXPENSE), NET | ||||||||||||||||
Fair value adjustments, net | 10 | (3,579 | ) | 2,754 | (12,274 | ) | (2,130 | ) | ||||||||
Interest expense, net of capitalized interest | 18 | (10,875 | ) | (10,734 | ) | (21,995 | ) | (21,499 | ) | |||||||
Other, net | 7 | (1,857 | ) | (2,852 | ) | (543 | ) | (5,362 | ) | |||||||
Total other income (expense), net | (16,311 | ) | (10,832 | ) | (34,812 | ) | (28,991 | ) | ||||||||
Income (loss) before income and mining taxes | 13,729 | (16,937 | ) | (4,561 | ) | (50,157 | ) | |||||||||
Income and mining tax (expense) benefit | 8 | 768 | 260 | (1,338 | ) | 192 | ||||||||||
NET INCOME (LOSS) | $ | 14,497 | $ | (16,677 | ) | $ | (5,899 | ) | $ | (49,965 | ) | |||||
OTHER COMPREHENSIVE INCOME (LOSS), net of tax: | ||||||||||||||||
Unrealized gain (loss) on equity securities, net of tax of $(1,164) and $(2,174) for the three and six months ended June 30, 2016, respectively, and $7 for the three months June 30, 2015 | 2,103 | (1,312 | ) | 3,146 | (2,813 | ) | ||||||||||
Reclassification adjustments for impairment of equity securities | 20 | 31 | 20 | 1,545 | ||||||||||||
Reclassification adjustments for realized (gain) loss on sale of equity securities | (314 | ) | 904 | 273 | 904 | |||||||||||
Other comprehensive income (loss) | 1,809 | (377 | ) | 3,439 | (364 | ) | ||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | 16,306 | $ | (17,054 | ) | $ | (2,460 | ) | $ | (50,329 | ) | |||||
NET INCOME (LOSS) PER SHARE | 9 | |||||||||||||||
Basic | $ | 0.09 | $ | (0.12 | ) | $ | (0.04 | ) | $ | (0.42 | ) | |||||
Diluted | $ | 0.09 | $ | (0.12 | ) | $ | (0.04 | ) | $ | (0.42 | ) | |||||
(1) Excludes amortization.
The accompanying notes are an integral part of these 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, | ||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||
Notes | In thousands | ||||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||
Net income (loss) | $ | 14,497 | $ | (16,677 | ) | $ | (5,899 | ) | (49,965 | ) | |||||||
Adjustments: | |||||||||||||||||
Amortization | 37,505 | 38,974 | 65,470 | 72,064 | |||||||||||||
Accretion | 2,848 | 3,526 | 6,017 | 6,676 | |||||||||||||
Deferred income taxes | (15,170 | ) | (5,053 | ) | (17,275 | ) | (7,237 | ) | |||||||||
Fair value adjustments, net | 10 | 3,579 | (2,754 | ) | 12,274 | 2,130 | |||||||||||
Stock-based compensation | 5 | 2,307 | 2,604 | 5,222 | 4,754 | ||||||||||||
Impairment of equity securities | 13 | 20 | 31 | 20 | 1,545 | ||||||||||||
Write-downs | — | — | 4,446 | — | |||||||||||||
Other | 1,910 | 4,224 | 474 | 5,303 | |||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||
Receivables | (12,402 | ) | (2,342 | ) | (8,921 | ) | 214 | ||||||||||
Prepaid expenses and other current assets | (898 | ) | 160 | 381 | (1,167 | ) | |||||||||||
Inventory and ore on leach pads | (7,686 | ) | 4,649 | (15,508 | ) | 5,333 | |||||||||||
Accounts payable and accrued liabilities | 19,429 | 9,662 | 5,855 | (6,095 | ) | ||||||||||||
CASH PROVIDED BY OPERATING ACTIVITIES | 45,939 | 37,004 | 52,556 | 33,555 | |||||||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||
Capital expenditures | (23,288 | ) | (23,677 | ) | (45,460 | ) | (41,297 | ) | |||||||||
Acquisitions, net | 12 | — | (9,152 | ) | — | (111,170 | ) | ||||||||||
Proceeds from the sale assets | 7,293 | 8 | 11,302 | 165 | |||||||||||||
Purchase of investments | (92 | ) | (1,597 | ) | (99 | ) | (1,873 | ) | |||||||||
Sales and maturities of investments | 648 | 399 | 1,645 | 469 | |||||||||||||
Other | (1,446 | ) | (111 | ) | (2,919 | ) | (1,841 | ) | |||||||||
CASH USED IN INVESTING ACTIVITIES | (16,885 | ) | (34,130 | ) | (35,531 | ) | (155,547 | ) | |||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||
Issuance of common stock | 73,071 | — | 73,071 | — | |||||||||||||
Issuance of notes and bank borrowings | 18 | — | 100,000 | — | 153,500 | ||||||||||||
Payments on debt, capital leases, and associated costs | (6,712 | ) | (66,626 | ) | (12,683 | ) | (75,220 | ) | |||||||||
Gold production royalty payments | (10,461 | ) | (9,754 | ) | (19,592 | ) | (20,122 | ) | |||||||||
Other | (448 | ) | (72 | ) | (728 | ) | (495 | ) | |||||||||
CASH PROVIDED (USED IN) BY FINANCING ACTIVITIES | 55,450 | 23,548 | 40,068 | 57,663 | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (302 | ) | (141 | ) | (216 | ) | (664 | ) | |||||||||
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 84,202 | 26,281 | 56,877 | (64,993 | ) | ||||||||||||
Cash and cash equivalents at beginning of period | 173,389 | 179,587 | 200,714 | 270,861 | |||||||||||||
Cash and cash equivalents at end of period | $ | 257,591 | $ | 205,868 | $ | 257,591 | $ | 205,868 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, 2016 | December 31, 2015 | ||||||||
ASSETS | Notes | In thousands, except share data | |||||||
CURRENT ASSETS | |||||||||
Cash and cash equivalents | $ | 257,591 | $ | 200,714 | |||||
Receivables | 14 | 79,932 | 85,992 | ||||||
Inventory | 15 | 84,074 | 81,711 | ||||||
Ore on leach pads | 15 | 76,335 | 67,329 | ||||||
Prepaid expenses and other | 11,614 | 10,942 | |||||||
509,546 | 446,688 | ||||||||
NON-CURRENT ASSETS | |||||||||
Property, plant and equipment, net | 16 | 217,345 | 195,999 | ||||||
Mining properties, net | 17 | 552,035 | 589,219 | ||||||
Ore on leach pads | 15 | 52,885 | 44,582 | ||||||
Restricted assets | 14,792 | 11,633 | |||||||
Equity securities | 13 | 11,250 | 2,766 | ||||||
Receivables | 14 | 39,739 | 24,768 | ||||||
Deferred tax assets | 1,370 | 1,942 | |||||||
Other | 12,893 | 14,892 | |||||||
TOTAL ASSETS | $ | 1,411,855 | $ | 1,332,489 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||
CURRENT LIABILITIES | |||||||||
Accounts payable | $ | 49,219 | $ | 48,732 | |||||
Accrued liabilities and other | 50,169 | 53,953 | |||||||
Debt | 18 | 108,809 | 10,431 | ||||||
Royalty obligations | 10 | 12,915 | 24,893 | ||||||
Reclamation | 4 | 1,790 | 2,071 | ||||||
222,902 | 140,080 | ||||||||
NON-CURRENT LIABILITIES | |||||||||
Debt | 18 | 402,257 | 479,979 | ||||||
Royalty obligations | 10 | 7,069 | 4,864 | ||||||
Reclamation | 4 | 85,048 | 83,197 | ||||||
Deferred tax liabilities | 131,459 | 147,132 | |||||||
Other long-term liabilities | 66,961 | 55,761 | |||||||
692,794 | 770,933 | ||||||||
STOCKHOLDERS’ EQUITY | |||||||||
Common stock, par value $0.01 per share; authorized 300,000,000 shares, issued and outstanding 162,370,864 at June 30, 2016 and 151,339,136 at December 31, 2015 | 1,624 | 1,513 | |||||||
Additional paid-in capital | 3,101,493 | 3,024,461 | |||||||
Accumulated other comprehensive income (loss) | (283 | ) | (3,722 | ) | |||||
Accumulated deficit | (2,606,675 | ) | (2,600,776 | ) | |||||
496,159 | 421,476 | ||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,411,855 | $ | 1,332,489 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
5
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
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, 2015 | 151,339 | $ | 1,513 | $ | 3,024,461 | $ | (2,600,776 | ) | $ | (3,722 | ) | $ | 421,476 | |||||||||
Net income (loss) | — | — | — | (5,899 | ) | — | (5,899 | ) | ||||||||||||||
Other comprehensive income (loss) | — | — | — | — | 3,439 | 3,439 | ||||||||||||||||
Issuance of common stock | 9,253 | 93 | 72,978 | — | — | 73,071 | ||||||||||||||||
Common stock issued under stock-based compensation plans, net | 1,779 | 18 | 4,054 | — | — | 4,072 | ||||||||||||||||
Balances at June 30, 2016 | 162,371 | $ | 1,624 | $ | 3,101,493 | $ | (2,606,675 | ) | $ | (283 | ) | $ | 496,159 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
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, 2016. The condensed consolidated December 31, 2015 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 year ended December 31, 2015.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Standards
In March 2016, the FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," which amends several aspects of the accounting for share-based payment transaction, including income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. These changes become effective for the Company's fiscal year beginning January 1, 2018. The Company is currently evaluating the potential impact of implementing these changes on the Company's consolidated financial position, results of operations, and cash flows.
In February 2016, the FASB issued ASU 2016-02, "Leases," which will require lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes become effective for the Company's fiscal year beginning January 1, 2019. Modified retrospective adoption for all leases existing at, or entered into after, the date of initial application, is required with an option to use certain transition relief. The Company is currently evaluating the potential impact of implementing these changes on the Company's consolidated financial position, results of operations, and cash flows.
In November 2015, the FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes," which requires entities with a classified balance sheet to present all deferred tax assets and liabilities as non-current. 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 Current deferred tax assets to Non-current deferred tax assets and Current deferred tax liabilities to Non-current deferred tax liabilities in the current and prior periods.
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's adoption had no impact 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 adopting 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 implementing 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's adoption had no impact on the Company's consolidated financial position, results of operations, and cash flows.
7
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo complex, Rochester, Kensington, Wharf, and San Bartolomé 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, corporate office, 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, 2016 | Palmarejo | Rochester | Kensington | Wharf | San Bartolomé | Coeur Capital | Other | Total | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||
Metal sales | $ | 48,272 | $ | 35,761 | $ | 36,469 | $ | 34,005 | $ | 25,185 | $ | 505 | $ | — | $ | 180,197 | |||||||||||||||
Royalties | — | — | — | — | — | 1,810 | — | 1,810 | |||||||||||||||||||||||
48,272 | 35,761 | 36,469 | 34,005 | 25,185 | 2,315 | — | 182,007 | ||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 22,865 | 21,721 | 22,611 | 14,342 | 18,645 | 281 | — | 100,465 | |||||||||||||||||||||||
Amortization | 14,765 | 5,437 | 9,808 | 5,128 | 1,853 | 100 | 414 | 37,505 | |||||||||||||||||||||||
Exploration | 562 | 188 | 977 | — | — | 85 | 421 | 2,233 | |||||||||||||||||||||||
Write-downs | — | — | — | — | — | — | — | — | |||||||||||||||||||||||
Other operating expenses | 278 | 700 | 257 | 688 | 1,076 | 38 | 8,727 | 11,764 | |||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||
Fair value adjustments, net | (840 | ) | (2,687 | ) | — | — | — | — | (52 | ) | (3,579 | ) | |||||||||||||||||||
Interest expense, net | (425 | ) | (181 | ) | (34 | ) | (27 | ) | (7 | ) | — | (10,201 | ) | (10,875 | ) | ||||||||||||||||
Other, net | (4,360 | ) | (3,860 | ) | 1 | 204 | 411 | 1,460 | 4,287 | (1,857 | ) | ||||||||||||||||||||
Income and mining tax (expense) benefit | 3,153 | 8 | — | (352 | ) | 848 | (2,275 | ) | (614 | ) | 768 | ||||||||||||||||||||
Net income (loss) | $ | 7,330 | $ | 995 | $ | 2,783 | $ | 13,672 | $ | 4,863 | $ | 996 | $ | (16,142 | ) | $ | 14,497 | ||||||||||||||
Segment assets(2) | $ | 427,938 | $ | 207,764 | $ | 196,403 | $ | 113,821 | $ | 83,814 | $ | 9,158 | $ | 75,061 | $ | 1,113,959 | |||||||||||||||
Capital expenditures | $ | 8,863 | $ | 3,885 | $ | 7,536 | $ | 1,511 | $ | 1,317 | $ | — | $ | 176 | $ | 23,288 | |||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interest
Three months ended June 30, 2015 | Palmarejo | Rochester | Kensington | Wharf | San Bartolomé | Coeur Capital | Other | Total | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||
Metal sales | $ | 38,875 | $ | 36,340 | $ | 42,468 | $ | 20,373 | $ | 23,366 | $ | 3,083 | $ | — | $ | 164,505 | |||||||||||||||
Royalties | — | — | — | — | — | 1,758 | — | 1,758 | |||||||||||||||||||||||
38,875 | 36,340 | 42,468 | 20,373 | 23,366 | 4,841 | — | 166,263 | ||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 30,112 | 24,392 | 27,452 | 16,632 | 19,157 | 1,352 | — | 119,097 | |||||||||||||||||||||||
Amortization | 9,046 | 5,387 | 12,684 | 3,491 | 5,271 | 2,619 | 476 | 38,974 | |||||||||||||||||||||||
Exploration | 1,837 | 501 | 432 | — | 43 | 75 | 691 | 3,579 | |||||||||||||||||||||||
Other operating expenses | 324 | 307 | 526 | 506 | 241 | 13 | 8,801 | 10,718 | |||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||
Fair value adjustments, net | 429 | 1,137 | — | — | — | — | 1,188 | 2,754 | |||||||||||||||||||||||
Interest expense, net | (844 | ) | (205 | ) | (57 | ) | — | (293 | ) | — | (9,335 | ) | (10,734 | ) | |||||||||||||||||
Other, net | (505 | ) | — | (14 | ) | 37 | 420 | (924 | ) | (1,866 | ) | (2,852 | ) | ||||||||||||||||||
Income and mining tax (expense) benefit | 837 | (350 | ) | (994 | ) | (274 | ) | 195 | (623 | ) | 1,469 | 260 | |||||||||||||||||||
Net income (loss) | $ | (2,527 | ) | $ | 6,335 | $ | 309 | $ | (493 | ) | $ | (1,024 | ) | $ | (765 | ) | $ | (18,512 | ) | $ | (16,677 | ) | |||||||||
Segment assets(2) | $ | 657,448 | $ | 190,704 | $ | 197,241 | $ | 131,990 | $ | 173,451 | $ | 55,896 | $ | 78,395 | $ | 1,485,125 | |||||||||||||||
Capital expenditures | $ | 10,723 | $ | 5,915 | $ | 4,714 | $ | 1,244 | $ | 994 | $ | — | $ | 87 | $ | 23,677 | |||||||||||||||
(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
Six months ended June 30, 2016 | Palmarejo | Rochester | Kensington | Wharf | San Bartolomé | Coeur Capital | Other | Total | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||
Metal sales | $ | 78,085 | $ | 65,743 | $ | 72,212 | $ | 61,934 | $ | 46,463 | $ | 2,396 | $ | — | $ | 326,833 | |||||||||||||||
Royalties | — | — | — | — | — | 3,561 | — | 3,561 | |||||||||||||||||||||||
78,085 | 65,743 | 72,212 | 61,934 | 46,463 | 5,957 | — | 330,394 | ||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 43,903 | 44,206 | 47,029 | 29,803 | 36,142 | 937 | — | 202,020 | |||||||||||||||||||||||
Amortization | 22,054 | 10,750 | 18,157 | 9,179 | 3,607 | 881 | 842 | 65,470 | |||||||||||||||||||||||
Exploration | 1,363 | 297 | 930 | — | — | 206 | 1,167 | 3,963 | |||||||||||||||||||||||
Write-downs | — | — | — | — | — | 4,446 | — | 4,446 | |||||||||||||||||||||||
Other operating expenses | 593 | 1,381 | 509 | 1,181 | 1,367 | 175 | 19,038 | 24,244 | |||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||
Fair value adjustments, net | (5,704 | ) | (4,936 | ) | — | — | — | — | (1,634 | ) | (12,274 | ) | |||||||||||||||||||
Interest expense, net | (1,159 | ) | (352 | ) | (77 | ) | (27 | ) | (10 | ) | — | (20,370 | ) | (21,995 | ) | ||||||||||||||||
Other, net | (5,595 | ) | (3,857 | ) | (19 | ) | 214 | 726 | 3,742 | 4,246 | (543 | ) | |||||||||||||||||||
Income and mining tax (expense) benefit | 3,251 | (415 | ) | — | (236 | ) | (723 | ) | (3,567 | ) | 352 | (1,338 | ) | ||||||||||||||||||
Net income (loss) | $ | 965 | $ | (451 | ) | $ | 5,491 | $ | 21,722 | $ | 5,340 | $ | (513 | ) | $ | (38,453 | ) | $ | (5,899 | ) | |||||||||||
Segment assets(2) | $ | 427,938 | $ | 207,764 | $ | 196,403 | $ | 113,821 | $ | 83,814 | $ | 9,158 | $ | 75,061 | $ | 1,113,959 | |||||||||||||||
Capital expenditures | $ | 17,678 | $ | 7,174 | $ | 15,626 | $ | 2,921 | $ | 1,838 | $ | — | $ | 223 | $ | 45,460 | |||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Six months ended June 30, 2015 | Palmarejo | Rochester | Kensington | Wharf | San Bartolomé | Coeur Capital | Other | Total | |||||||||||||||||||||||
Revenue | |||||||||||||||||||||||||||||||
Metal sales | $ | 78,269 | $ | 80,371 | $ | 86,506 | $ | 20,373 | $ | 44,913 | $ | 5,028 | $ | — | $ | 315,460 | |||||||||||||||
Royalties | — | — | — | — | — | 3,759 | — | 3,759 | |||||||||||||||||||||||
78,269 | 80,371 | 86,506 | 20,373 | 44,913 | 8,787 | — | 319,219 | ||||||||||||||||||||||||
Costs and Expenses | |||||||||||||||||||||||||||||||
Costs applicable to sales(1) | 64,603 | 55,785 | 56,871 | 16,632 | 38,284 | 1,985 | — | 234,160 | |||||||||||||||||||||||
Amortization | 16,380 | 12,230 | 24,238 | 3,491 | 9,961 | 4,770 | 994 | 72,064 | |||||||||||||||||||||||
Exploration | 2,960 | 1,223 | 2,094 | — | 79 | 150 | 1,339 | 7,845 | |||||||||||||||||||||||
Other operating expenses | 638 | 1,448 | 761 | 671 | 485 | 30 | 22,283 | 26,316 | |||||||||||||||||||||||
Other income (expense) | |||||||||||||||||||||||||||||||
Fair value adjustments, net | (1,116 | ) | (1,155 | ) | — | — | — | — | 141 | (2,130 | ) | ||||||||||||||||||||
Interest expense, net | (2,184 | ) | (430 | ) | (120 | ) | — | (574 | ) | — | (18,191 | ) | (21,499 | ) | |||||||||||||||||
Other, net | (1,608 | ) | (40 | ) | (18 | ) | 54 | 872 | (2,449 | ) | (2,173 | ) | (5,362 | ) | |||||||||||||||||
Income and mining tax (expense) benefit | (534 | ) | (700 | ) | (994 | ) | 412 | (1,211 | ) | (24 | ) | 3,243 | 192 | ||||||||||||||||||
Net income (loss) | $ | (11,754 | ) | $ | 7,360 | $ | 1,410 | $ | 45 | $ | (4,809 | ) | $ | (621 | ) | $ | (41,596 | ) | $ | (49,965 | ) | ||||||||||
Segment assets(2) | $ | 657,448 | $ | 190,704 | $ | 197,241 | $ | 131,990 | $ | 173,451 | $ | 55,896 | $ | 78,395 | $ | 1,485,125 | |||||||||||||||
Capital expenditures | $ | 19,907 | $ | 9,170 | $ | 8,859 | $ | 1,295 | $ | 1,943 | $ | — | $ | 123 | $ | 41,297 | |||||||||||||||
(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Assets | June 30, 2016 | December 31, 2015 | |||||
Total assets for reportable segments | $ | 1,113,959 | $ | 1,103,310 | |||
Cash and cash equivalents | 257,591 | 200,714 | |||||
Other assets | 40,305 | 28,465 | |||||
Total consolidated assets | $ | 1,411,855 | $ | 1,332,489 | |||
9
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Geographic Information
Long-Lived Assets | June 30, 2016 | December 31, 2015 | |||||
Mexico | $ | 387,562 | $ | 390,694 | |||
United States | 332,007 | 336,210 | |||||
Bolivia | 31,297 | 35,201 | |||||
Australia | 3,235 | 5,952 | |||||
Argentina | 10,227 | 10,871 | |||||
Other | 5,051 | 9,058 | |||||
Total | $ | 769,379 | $ | 787,986 | |||
Revenue | Three months ended June 30, | Six months ended June 30, | |||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
United States | $ | 106,236 | $ | 99,180 | $ | 199,890 | $ | 187,249 | |||||||
Mexico | 48,489 | 39,443 | 79,011 | 79,584 | |||||||||||
Bolivia | 25,185 | 23,366 | 46,463 | 44,913 | |||||||||||
Australia | 504 | 3,083 | 2,395 | 5,028 | |||||||||||
Other | 1,593 | 1,191 | 2,635 | 2,445 | |||||||||||
Total | $ | 182,007 | $ | 166,263 | $ | 330,394 | $ | 319,219 | |||||||
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. 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 June 30, | Six months ended June 30, | ||||||||||||||
In thousands | 2016 | 2015 | 2016 | 2015 | |||||||||||
Asset retirement obligation - Beginning | $ | 83,974 | $ | 86,059 | $ | 82,072 | $ | 67,214 | |||||||
Accretion | 2,009 | 1,990 | 3,968 | 3,614 | |||||||||||
Additions and changes in estimates | (130 | ) | — | 121 | 18,270 | ||||||||||
Settlements | (308 | ) | (448 | ) | (616 | ) | (1,497 | ) | |||||||
Asset retirement obligation - Ending | $ | 85,545 | $ | 87,601 | $ | 85,545 | $ | 87,601 | |||||||
The Company has accrued $1.3 million and $3.2 million at June 30, 2016 and December 31, 2015, 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 for the three and six months ended June 30, 2016 and 2015 was $2.3 million and $2.6 million and $5.2 million and $4.8 million, respectively. At June 30, 2016, there was $9.5 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.5 years. During the six months ended June 30, 2016, the supplemental incentive accrual increased $0.4 million to $1.6 million.
10
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes the grants awarded during the six months ended June 30, 2016:
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 20, 2016 | 1,030,833 | $ | 1.81 | 165,479 | $ | 0.86 | 1,428,314 | $ | 1.78 | ||||||||||||
March 21, 2016 | 685,633 | $ | 5.76 | 17,772 | $ | 2.84 | 8,763 | $ | 3.76 | ||||||||||||
The following options and stock appreciation rights were exercisable during the six months ended June 30, 2016:
Award Type | Number of Exercised Units | Weighted Average Exercised Price | Number of Exercisable Units | Weighted Average Exercisable Price | ||||||||||
Stock options | — | $ | — | 423,706 | $ | 15.15 | ||||||||
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 an additional contribution based on an eligible employee's salary. Total plan expenses recognized for the three and six months ended June 30, 2016 and 2015 were $0.9 million and $1.6 million and $1.9 million and $3.2 million, respectively.
NOTE 7 - OTHER, NET
Other, net consists of the following:
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
In thousands | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Impairment of equity securities | $ | (20 | ) | $ | (31 | ) | $ | (20 | ) | $ | (1,545 | ) | ||||
Foreign exchange loss | (5,656 | ) | (2,056 | ) | (5,819 | ) | (4,262 | ) | ||||||||
Gain on sale of assets | 2,812 | 107 | 4,486 | 63 | ||||||||||||
Other | 1,007 | (872 | ) | 810 | 382 | |||||||||||
Other, net | $ | (1,857 | ) | $ | (2,852 | ) | $ | (543 | ) | $ | (5,362 | ) | ||||
NOTE 8 – INCOME AND MINING TAXES
The following table summarizes the components of Income and mining tax (expense) benefit for the three and six months ended June 30, 2016 and 2015 by significant jurisdiction:
Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||||||||||||||
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 | $ | 119 | $ | (1,810 | ) | $ | (9,764 | ) | $ | 319 | $ | (9,242 | ) | $ | (2,342 | ) | $ | (30,471 | ) | $ | 2,204 | ||||||
Argentina | 4,453 | (1,793 | ) | (656 | ) | (1 | ) | 3,438 | (250 | ) | (1,352 | ) | (2 | ) | |||||||||||||
Mexico | 3,353 | 4,316 | (5,582 | ) | 548 | (4,155 | ) | 4,333 | (15,255 | ) | (716 | ) | |||||||||||||||
Bolivia | 4,016 | 848 | (1,219 | ) | 196 | 6,062 | (722 | ) | (3,598 | ) | (1,211 | ) | |||||||||||||||
Other jurisdictions | 1,788 | (793 | ) | 284 | (802 | ) | (664 | ) | (2,357 | ) | 519 | (83 | ) | ||||||||||||||
$ | 13,729 | $ | 768 | $ | (16,937 | ) | $ | 260 | $ | (4,561 | ) | $ | (1,338 | ) | $ | (50,157 | ) | $ | 192 | ||||||||
The Company’s effective tax rate is impacted by recurring items, such as foreign exchange rates on deferred tax balances, uncertain tax position and mining tax expense accruals, and the full valuation allowance on the deferred tax assets relating to losses in the United States and certain foreign jurisdictions. In addition, the Company's consolidated effective income and mining
11
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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 more likely than not 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. The statute of limitations remains open from 2012 forward for the U.S. federal jurisdiction and from 2008 forward for certain other foreign jurisdictions. 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 $3.5 million and $4.5 million in the next 12 months.
At June 30, 2016 and December 31, 2015, the Company had $23.0 million and $17.9 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 June 30, 2016 and December 31, 2015, the amount of accrued income-tax-related interest and penalties was $14.7 million and $9.2 million, respectively.
NOTE 9 – 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 six months ended June 30, 2016 and 2015, 439,721 and 3,375,337 shares and 1,600,669 and 3,415,129 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 ("Convertible Notes") were not included in the computation of diluted net income (loss) per share for the three and six months ended June 30, 2016 and 2015 because there is no excess value upon conversion over the principal amount of the Convertible Notes.
Three months ended June 30, | Six months ended June 30, | ||||||||||||||
In thousands except per share amounts | 2016 | 2015 | 2016 | 2015 | |||||||||||
Net income (loss) available to common stockholders | $ | 14,497 | $ | (16,677 | ) | $ | (5,899 | ) | $ | (49,965 | ) | ||||
Weighted average shares: | |||||||||||||||
Basic | 153,972 | 135,036 | 152,110 | 118,897 | |||||||||||
Effect of stock-based compensation plans | 3,928 | — | — | — | |||||||||||
Diluted | 157,900 | 135,036 | 152,110 | 118,897 | |||||||||||
Income (loss) per share: | |||||||||||||||
Basic | $ | 0.09 | $ | (0.12 | ) | $ | (0.04 | ) | $ | (0.42 | ) | ||||
Diluted | $ | 0.09 | $ | (0.12 | ) | $ | (0.04 | ) | $ | (0.42 | ) | ||||
During the three months ended June 30, 2016, the Company completed a $75.0 million “at the market” stock offering. In connection with the offering, the Company sold 9,253,016 shares of its common stock at an average price of $8.11 per share.
12
Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
NOTE 10 – FAIR VALUE MEASUREMENTS
Three months ended June 30, | Six months ended June 30, | |||||||||||||||
In thousands | 2016 | 2015 | 2016 | 2015 | ||||||||||||
Palmarejo royalty obligation embedded derivative | $ | (878 | ) | $ | 385 | $ | (5,756 | ) | $ | (1,160 | ) | |||||
Rochester net smelter returns ("NSR") royalty obligation | (2,687 | ) | 1,137 | (4,936 | ) | (1,155 | ) | |||||||||
Silver and gold options | (14 | ) | 1,232 | (1,582 | ) | 185 | ||||||||||
Fair value adjustments, net | $ | (3,579 | ) | $ | 2,754 | $ | (12,274 | ) | $ | (2,130 | ) | |||||
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).
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 June 30, 2016 | |||||||||||||||
In thousands | Total | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Equity securities | $ | 11,250 | $ | 11,243 | $ | — | $ | 7 | |||||||
Other derivative instruments, net | 655 | — | 655 | — | |||||||||||
$ | 11,905 | $ | 11,243 | $ | 655 | $ | 7 | ||||||||
Liabilities: | |||||||||||||||
Palmarejo royalty obligation embedded derivative | $ | 3,317 | $ | — | $ | — | $ | 3,317 | |||||||
Rochester NSR royalty obligation | 12,559 | — | — | 12,559 | |||||||||||
$ | 15,876 | $ | — | $ | — | $ | 15,876 | ||||||||
Fair Value at December 31, 2015 | |||||||||||||||
In thousands | Total | Level 1 | Level 2 | Level 3 | |||||||||||
Assets: | |||||||||||||||
Equity securities | $ | 2,766 | $ | 2,756 | $ | — | $ | 10 | |||||||
Liabilities: | |||||||||||||||
Palmarejo royalty obligation embedded derivative | $ | ||||||||||||||