Document
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, 2018
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
____________________________________________ 
a021914coeurminingrpmshsmb25.jpg
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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
þ
Accelerated filer
 
¨   
 
 
 
 
Non-accelerated filer
 
¨   
Smaller reporting company
 
¨   
 
 
 
 
 
 
 
 
 
Emerging growth company
 
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
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 187,062,006 shares were issued and outstanding as of July 24, 2018.



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
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,
 
 
2018
 
2017
 
2018
 
2017
 
Notes
In thousands, except share data
Revenue
3
$
169,987

 
$
149,540

 
$
333,254

 
$
335,094

COSTS AND EXPENSES
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
3
108,246

 
102,229

 
207,586

 
216,719

Amortization
 
29,459

 
30,734

 
60,236

 
69,427

General and administrative
 
7,650

 
7,025

 
16,454

 
17,150

Exploration
 
6,429

 
7,813

 
13,112

 
13,065

Pre-development, reclamation, and other
 
3,620

 
4,085

 
7,845

 
7,922

Total costs and expenses
 
155,404

 
151,886


305,233

 
324,283

OTHER INCOME (EXPENSE), NET
 
 
 
 
 
 
 
 
Gain (loss) on debt extinguishment


 
(9,342
)
 

 
(9,342
)
Fair value adjustments, net
10
(2,462
)
 
336

 
2,192

 
(864
)
Interest expense, net of capitalized interest
18
(6,018
)
 
(3,744
)
 
(11,983
)
 
(7,323
)
Other, net
7
544

 
3,974

 
1,057

 
24,773

Total other income (expense), net
 
(7,936
)
 
(8,776
)

(8,734
)
 
7,244

Income (loss) before income and mining taxes
 
6,647

 
(11,122
)

19,287

 
18,055

Income and mining tax (expense) benefit
8
(3,717
)
 
1,127

 
(15,666
)
 
(9,751
)
Income (loss) from continuing operations
 
$
2,930

 
$
(9,995
)

$
3,621

 
$
8,304

Income (loss) from discontinued operations
21

 
(960
)
 
550

 
(596
)
NET INCOME (LOSS)
 
$
2,930

 
$
(10,955
)

$
4,171

 
$
7,708

OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on debt and equity securities
 
(87
)
 
(18
)
 
(365
)
 
(2,200
)
Reclassification adjustments for impairment of equity securities
 

 
305

 

 
426

Reclassification adjustments for realized (gain) loss on sale of equity securities
 

 
(203
)
 

 
1,268

Other comprehensive income (loss)
 
(87
)
 
84


(365
)
 
(506
)
COMPREHENSIVE INCOME (LOSS)
 
$
2,843

 
$
(10,871
)

$
3,806

 
$
7,202

 
 
 
 
 
 
 
 
 
NET INCOME (LOSS) PER SHARE
9
 
 
 
 
 
 
 
Basic income (loss) per share:
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
$
0.02

 
$
(0.06
)
 
$
0.02

 
$
0.05

Net income (loss) from discontinued operations
 
0.00

 
(0.01
)
 
0.00

 
0.00

Basic(2)
 
$
0.02

 
$
(0.06
)
 
$
0.02

 
$
0.04

Diluted income (loss) per share:
 
 
 
 
 
 
 
 
Net income (loss) from continuing operations
 
$
0.02

 
$
(0.06
)
 
$
0.02

 
$
0.05

Net income (loss) from discontinued operations
 
0.00

 
(0.01
)
 
0.00

 
0.00

Diluted(2)
 
$
0.02

 
$
(0.06
)
 
$
0.02

 
$
0.04

(1) Excludes amortization.
(2) Due to rounding, the sum of net income per share from continuing operations and discontinued operations may not equal net income per share.
The accompanying notes are an integral part of these condensed consolidated financial statements.

3


COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2018
 
2017
 
2018
 
2017
 
Notes
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
Net income (loss)
 
$
2,930

 
$
(10,955
)
 
$
4,171

 
$
7,708

(Income) loss from discontinued operations
 

 
960

 
(550
)
 
596

Adjustments:
 
 
 
 
 
 
 
 
Amortization
 
29,459

 
30,734

 
60,236

 
69,427

Accretion
 
3,886

 
2,312

 
7,204

 
4,552

Deferred taxes
 
(1,265
)
 
(3,636
)
 
(811
)
 
(1,052
)
Loss (gain) on debt extinguishment
 

 
9,342

 

 
9,342

Fair value adjustments, net
10
2,462

 
(336
)
 
(2,192
)
 
864

Stock-based compensation
5
1,850

 
2,235

 
4,636

 
5,542

Gain on sale of the Joaquin project
 

 

 

 
(21,138
)
Other
 
2,174

 
(3,421
)
 
2,242

 
(5,317
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Receivables
 
(8,888
)
 
(2,215
)
 
(10,579
)
 
3,465

Prepaid expenses and other current assets
 
8,126

 
4,061

 
2,491

 
(845
)
Inventory and ore on leach pads
 
(2,766
)
 
(4,809
)
 
(11,474
)
 
10,362

Accounts payable and accrued liabilities
 
(39,262
)
 
(167
)
 
(41,127
)
 
(15,466
)
CASH PROVIDED BY OPERATING ACTIVITIES OF CONTINUING OPERATIONS
 
(1,294
)

24,105


14,247

 
68,040

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS
 

 
5,175

 
(2,690
)
 
16,510

CASH PROVIDED BY OPERATING ACTIVITIES
 
(1,294
)
 
29,280

 
11,557

 
84,550

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
Capital expenditures
 
(41,165
)
 
(37,107
)
 
(83,510
)
 
(60,698
)
Proceeds from the sale of assets
 
96

 
436

 
156

 
15,455

Purchase of investments
 
(39
)
 
(8,948
)
 
(400
)
 
(9,964
)
Sale of investments
 
11,141

 
898

 
12,760

 
10,918

Other
 
(33
)
 
(52
)
 
(98
)
 
(66
)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS
 
(30,000
)

(44,773
)
 
(71,092
)
 
(44,355
)
CASH USED IN INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS
 

 
(375
)
 
(28,470
)
 
(763
)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
 
(30,000
)
 
(45,148
)
 
(99,562
)
 
(45,118
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
Issuance of notes and bank borrowings, net of issuance costs
18

 
244,958

 
15,000

 
244,958

Payments on debt, capital leases, and associated costs
18
(4,373
)
 
(188,910
)
 
(22,822
)
 
(192,116
)
Other
 
(233
)
 
(473
)
 
(4,839
)
 
(3,720
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES OF CONTINUING OPERATIONS
 
(4,606
)

55,575


(12,661
)
 
49,122

CASH USED IN FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS
 

 
(21
)
 
(22
)
 
(41
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
 
(4,606
)
 
55,554

 
(12,683
)
 
49,081

Effect of exchange rate changes on cash and cash equivalents
 
(175
)
 
328

 
382

 
884

INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
(36,075
)
 
40,014


(100,306
)
 
89,397

Less net cash provided by (used in) discontinued operations(1)
 

 
(338
)
 
(32,930
)
 
5,189

 
 
(36,075
)
 
40,352

 
(67,376
)
 
84,208

Cash, cash equivalents and restricted cash at beginning of period
 
172,101

 
170,457

 
203,402

 
126,601

Cash, cash equivalents and restricted cash at end of period
 
$
136,026

 
$
210,809


$
136,026

 
$
210,809

(1) Less net cash provided by (used in) discontinued operations includes the following cash transactions: net subsidiary payments to parent company of $5,117 for the three months ended June 30, 2017 and $1,748 and $10,517 during the six months ended June 30, 2018 and 2017, respectively.

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

4


COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
June 30, 2018 (unaudited)
 
December 31, 2017
ASSETS
Notes
In thousands, except share data
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
$
123,539

 
$
192,032

Receivables
14
40,759

 
19,069

Inventory
15
62,154

 
58,230

Ore on leach pads
15
75,261

 
73,752

Prepaid expenses and other
 
11,925

 
15,053

Assets held for sale
21

 
91,421

 
 
313,638

 
449,557

NON-CURRENT ASSETS
 
 
 
 
Property, plant and equipment, net
16
273,337

 
254,737

Mining properties, net
17
861,379

 
829,569

Ore on leach pads
15
70,043

 
65,393

Restricted assets
13
21,635

 
20,847

Equity and debt securities
13
23,804

 
34,837

Receivables
14
53,046

 
28,750

Other
 
19,022

 
17,485

TOTAL ASSETS
 
$
1,635,904

 
$
1,701,175

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
53,428

 
$
48,592

Accrued liabilities and other
22
61,664

 
94,930

Debt
18
21,745

 
30,753

Reclamation
4
3,777

 
3,777

Liabilities held for sale
21

 
50,677

 
 
140,614

 
228,729

NON-CURRENT LIABILITIES
 
 
 
 
Debt
18
397,974

 
380,569

Reclamation
4
121,264

 
117,055

Deferred tax liabilities
 
102,626

 
105,148

Other long-term liabilities
 
54,655

 
54,697

 
 
676,519

 
657,469

STOCKHOLDERS’ EQUITY
 
 
 
 
Common stock, par value $0.01 per share; authorized 300,000,000 shares, 187,074,029 issued and outstanding at June 30, 2018 and 185,637,724 at December 31, 2017
 
1,871

 
1,856

Additional paid-in capital
 
3,357,318

 
3,357,345

Accumulated other comprehensive income (loss)
 
(450
)
 
2,519

Accumulated deficit
 
(2,539,968
)
 
(2,546,743
)
 
 
818,771

 
814,977

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
1,635,904

 
$
1,701,175


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, 2017
185,638

 
$
1,856

 
$
3,357,345

 
$
(2,546,743
)
 
$
2,519

 
$
814,977

Net income (loss)

 

 

 
4,171

 

 
4,171

Reclassification of unrealized gain (loss) on equity securities for ASU 2016-01

 

 

 
2,604

 
(2,604
)
 

Other comprehensive income (loss)

 

 

 

 
(365
)
 
(365
)
Common stock issued under stock-based compensation plans, net
1,436

 
15

 
(27
)
 

 

 
(12
)
Balances at June 30, 2018 (Unaudited)
187,074

 
$
1,871

 
$
3,357,318

 
$
(2,539,968
)
 
$
(450
)
 
$
818,771

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


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, 2018. The condensed consolidated December 31, 2017 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, 2017 (the “2017 10-K”).

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
On January 1, 2018, the Company adopted the updated revenue guidance applicable under ASC 606, - “Revenue from Contracts with Customers”. The new guidance creates a five-step framework to determine revenue recognition:

1.
Identify the contract with the customer
2.
Identify the performance obligations
3.
Determine the transaction price
4.
Allocate the transaction price to the performance obligations
5.
Recognize revenue when (or as) the entity satisfies a performance obligation
    
The Company produces doré and concentrate that is shipped to third-party refiners and smelters, respectively, for processing. The Company enters into contracts to sell its metal to various third-party customers which may include the refiners and smelters that process the doré and concentrate. The Company’s performance obligation in these transactions is generally the transfer of metal to the customer.

In the case of doré shipments, the Company generally sells refined metal at market prices agreed upon by both parties. The Company also has the right, but not the obligation, to sell a portion of the anticipated refined metal in advance of being fully refined. When the Company sells refined metal or advanced metal, the performance obligation is satisfied when the metal is delivered to the customer. Revenue and Costs Applicable to Sales are recorded on a gross basis under these contracts at the time the performance obligation is satisfied.

Under the Company’s concentrate sales contracts with third-party smelters, metal prices are set on a specified future quotational period, typically one to three months, after the shipment date based on market prices. When the Company sells gold concentrate to the third-party smelters, the performance obligation is satisfied when the concentrate is loaded onto the third-party shipping vessel. The contracts, in general, provide for provisional payment based upon provisional assays and historical metal prices. Final settlement is based on the applicable price for the specified future quotational period and generally occurs three to six months after shipment. The Company’s provisionally priced sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of concentrates measured at the forward price at the time of sale. The embedded derivative does not qualify for hedge accounting and is adjusted to fair value through revenue each period until the date of final metal settlement.

The Company also sells concentrate under off-take agreements to third-party customers that are responsible for arranging the smelting of the concentrate. Prices are can either be fixed or based on a quotational period. The quotational period varies by contract, but is generally a one-month period following the shipment of the concentrate. The performance obligation is satisfied when the concentrate is loaded onto the third-party shipping vessel. The off-take agreement allows for the Company to sell concentrate in advance of shipment and results in the customer taking ownership of the concentrate prior to shipment.

The Company recognizes revenue from concentrate sales, net of treatment and refining charges, when it satisfies the performance obligation of transferring control of the concentrate to the customer.

For doré and off-take sales, the Company may incur a finance charge related to advance sales that is not considered significant and, as such, is not considered a separate performance obligation. In addition, the Company has elected to treat freight costs as a fulfillment cost under ASC 606 and not as a separate performance obligation.

The Company’s streaming agreement with a subsidiary of Franco-Nevada Corporation (“Franco-Nevada”) provided for a $20.0 million deposit paid by Franco-Nevada in exchange for the right and obligation, commencing in 2016, to purchase 50%

7

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

of a portion of Palmarejo gold production at the lesser of $800 or market price per ounce. Because there is no minimum obligation associated with the deposit, it is not considered financing, and each shipment is considered to be a separate performance obligation. The streaming agreement represents a contract liability under ASC 606, which requires the Company to ratably recognize a portion of the deposit as revenue for each gold ounce delivered to Franco-Nevada.

The following table presents a rollforward of the Franco-Nevada contract liability balance:
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
2018
 
2017
 
2018
 
2017
Opening Balance
$
14,340

 
$
17,652

 
$
14,883

 
$
19,281

Revenue Recognized
(541
)
 
$
(817
)
 
$
(1,084
)
 
$
(2,446
)
Closing Balance
$
13,799

 
$
16,835

 
$
13,799

 
$
16,835


Recent Accounting Standards
In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805) - Clarifying the Definition of a Business,” which clarifies the definition of a business to assist entities in the evaluation of acquisitions and disposals of assets or businesses. These changes became effective for the Company’s fiscal year beginning January 1, 2018 and did not materially impact the Company’s consolidated net income, financial position or cash flows.
In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230) - Restricted Cash,” which will require entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. These changes became effective for the Company’s fiscal year beginning January 1, 2018 and resulted in the inclusion of restricted cash equivalents on the Consolidated Statements of Cash Flows of $12.5 million at June 30, 2018 and $9.8 million at June 30, 2017.
In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments,” which provides guidance on presentation and classification of certain cash receipts and payments in the statement of cash flows. These changes became effective for the Company’s fiscal year beginning January 1, 2018 and did not materially impact the Company’s consolidated net income, financial position or 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 January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities,” which requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. This new guidance also updates certain disclosure requirements for these investments. These changes became effective for the Company’s fiscal year beginning January 1, 2018, and resulted in a reclassification of $2.6 million of unrealized holding gains and losses and deferred income taxes related to investments in equity securities from Accumulated other comprehensive income (loss) to Accumulated deficit in the Consolidated Balance Sheets on that date. Unrealized holding gains and losses related to investments in equity securities are now recognized in Fair value adjustments, net in the Consolidated Statements of Comprehensive Income (Loss).
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 became effective for the Company’s fiscal year beginning January 1, 2018 and did not materially impact the Company’s consolidated net income, financial position or cash flows.
In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers, which has subsequently been amended several times, to update revenue guidance under the newly-created ASC 606. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. These changes became effective under the modified retrospective method of adoption for the Company’s fiscal year beginning January 1, 2018 and did not materially impact the Company’s consolidated net income, financial position or cash flows.
    

8

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

NOTE 3 – SEGMENT REPORTING
The Company’s operating segments include the Palmarejo complex, and the Rochester, Kensington, Wharf and Silvertip mines. Except for the Silvertip mine, which was acquired in the fourth quarter of 2017, all operating segments are engaged in the discovery, mining, and production of gold and/or silver. Silvertip is engaged in the discovery, mining, and production of silver, zinc and lead. Other includes the La Preciosa project, other mineral interests, strategic equity investments, corporate office, elimination of intersegment transactions, and other items necessary to reconcile to consolidated amounts.
The Company determined that the disposition of Empresa Minera Manquiri S.A., a Bolivian Sociedad anonima (“Manquiri”), which operates the San Bartolomé mine, represents a strategic shift to a North America-focused mining portfolio and has a significant effect on the entity's results and operations; therefore, the results of operations are presented as discontinued operations in Other for all periods presented.
Financial information relating to the Company’s segments is as follows (in thousands):
Three months ended June 30, 2018
Palmarejo
 
Rochester
 
Silvertip
 
Kensington
 
Wharf
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
70,744

 
$
33,668

 
$

 
$
35,735

 
$
29,840

 
$

 
$
169,987

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
Costs applicable to sales(1)
30,310

 
24,451

 

 
34,227

 
19,258

 

 
108,246

Amortization
14,633

 
4,793

 

 
6,441

 
3,353

 
239

 
29,459

Exploration
3,198

 
212

 
106

 
1,395

 

 
1,518

 
6,429

Other operating expenses
750

 
903

 
5

 
327

 
688

 
8,597

 
11,270

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net

 

 

 

 

 
(2,462
)
 
(2,462
)
Interest expense, net
(147
)
 
(125
)
 
(246
)
 
(231
)
 
(11
)
 
(5,258
)
 
(6,018
)
Other, net
755

 
466

 
60

 
(33
)
 
64

 
(768
)
 
544

Income and mining tax (expense) benefit
(3,646
)
 
(463
)
 
943

 

 
(1,036
)
 
485

 
(3,717
)
Income (loss) from continuing operations
$
18,815

 
$
3,187

 
$
646

 
$
(6,919
)
 
$
5,558

 
$
(18,357
)
 
$
2,930

Income (loss) from discontinued operations
$

 
$

 
$

 
$

 
$

 
$

 
$

Segment assets(2)
$
373,310

 
$
253,638

 
$
390,155

 
$
215,753

 
$
99,878

 
$
115,170

 
$
1,447,904

Capital expenditures
$
9,479

 
$
669

 
$
19,045

 
$
10,708

 
$
1,162

 
$
102

 
$
41,165

(1) Excludes amortization
(2) Segment assets include receivables, prepaids, inventories, property, plant and equipment, and mineral interests
Three months ended June 30, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
53,235

 
$
32,791

 
$
35,567

 
$
27,013

 
$
934

 
$
149,540

Costs and Expenses
 
 
 
 
 
 
 
 


 
 
Costs applicable to sales(1)
33,894


24,161


27,988


15,768

 
418

 
102,229

Amortization
14,431


4,938


8,347


2,549

 
469

 
30,734

Exploration
3,124


315


1,980


3

 
2,391

 
7,813

Other operating expenses
310


831


350


632

 
8,987

 
11,110

Other income (expense)
 
 
 
 
 
 
 
 


 
 
Loss on debt extinguishment

 

 

 

 
(9,342
)
 
(9,342
)
Fair value adjustments, net

 
336

 

 

 

 
336

Interest expense, net
(102
)
 
(133
)
 
(113
)
 
(17
)
 
(3,379
)
 
(3,744
)
Other, net
(498
)
 
2,344

 
(57
)
 
336

 
1,849

 
3,974

Income and mining tax (expense) benefit
(3,229
)
 
44

 

 
(1,060
)
 
5,372

 
1,127

Income (loss) from continuing operations
$
(2,353
)
 
$
5,137

 
$
(3,268
)
 
$
7,320

 
$
(16,831
)
 
$
(9,995
)
Income (loss) from discontinued operations
$

 
$

 
$

 
$

 
$
(550
)
 
$
(960
)
Segment assets(2)
$
397,254

 
$
241,381

 
$
207,103

 
$
104,311

 
$
83,338

 
$
1,033,387

Capital expenditures
$
11,202

 
$
13,816

 
$
8,649

 
$
1,471

 
$
1,969

 
$
37,107

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


9

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Six months ended June 30, 2018
Palmarejo
 
Rochester
 
Silvertip
 
Kensington
 
Wharf
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
140,781

 
$
67,165

 
$

 
$
72,035

 
$
53,273

 
$

 
$
333,254

Costs and Expenses
 
 
 
 
 
 
 
 
 
 
 
 


Costs applicable to sales(1)
61,406

 
48,756

 

 
62,857

 
34,567

 

 
207,586

Amortization
30,958

 
9,624

 

 
13,158

 
6,010

 
486

 
60,236

Exploration
7,168

 
245

 
106

 
2,985

 
10

 
2,598

 
13,112

Other operating expenses
1,481

 
1,787

 
25

 
648

 
1,353

 
19,005

 
24,299

Other income (expense)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value adjustments, net

 

 

 

 

 
2,192

 
2,192

Interest expense, net
(266
)
 
(223
)
 
(656
)
 
(474
)
 
(23
)
 
(10,341
)
 
(11,983
)
Other, net
(1,389
)
 
426

 
422

 
(70
)
 
43

 
1,625

 
1,057

Income and mining tax (expense) benefit
(16,089
)
 
(834
)
 
1,778

 

 
(1,675
)
 
1,154

 
(15,666
)
Income (loss) from continuing operations
$
22,024


$
6,122

 
$
1,413


$
(8,157
)

$
9,678


$
(27,459
)

$
3,621

Income (loss) from discontinued operations
$

 
$

 
$

 
$

 
$

 
$
550

 
$
550

Segment assets(2)
$
373,310

 
$
253,638

 
$
390,155

 
$
215,753

 
$
99,878

 
$
115,170

 
$
1,447,904

Capital expenditures
$
18,772

 
$
3,302

 
$
37,674

 
$
22,072

 
$
1,506

 
$
184

 
$
83,510

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


Six months ended June 30, 2017
Palmarejo
 
Rochester
 
Kensington
 
Wharf
 
Other
 
Total
Revenue
 
 
 
 
 
 
 
 
 
 
 
Metal sales
$
130,939

 
$
71,770

 
$
73,531

 
$
57,264

 
$
1,590

 
$
335,094

Costs and Expenses
 
 
 
 
 
 
 
 

 
 
Costs applicable to sales(1)
76,895

 
50,600

 
56,431

 
32,088

 
705

 
216,719

Amortization
34,581

 
10,754

 
17,525

 
5,660

 
907

 
69,427

Exploration
4,755

 
459

 
2,819

 
3

 
5,029

 
13,065

Other operating expenses
611

 
1,641

 
695

 
1,251

 
20,874

 
25,072

Other income (expense)
 
 
 
 
 
 
 
 


 
 
Loss on debt extinguishment

 

 

 

 
(9,342
)
 
(9,342
)
Fair value adjustments, net

 
(864
)




 

 
(864
)
Interest expense, net
(227
)

(250
)

(153
)

(36
)
 
(6,657
)
 
(7,323
)
Other, net
(127
)

2,312


(865
)

425

 
23,028

 
24,773

Income and mining tax (expense) benefit
(14,415
)

(454
)



(2,016
)
 
7,134

 
(9,751
)
Income (loss) from continuing operations
$
(672
)

$
9,060


$
(4,957
)

$
16,635


$
(11,762
)
 
$
8,304

Income (loss) from discontinued operations
$

 
$

 
$

 
$

 
$
(596
)
 
$
(596
)
Segment assets(2)
$
397,254

 
$
241,381

 
$
207,103

 
$
104,311

 
$
83,338

 
$
1,033,387

Capital expenditures
$
17,432

 
$
24,384

 
$
14,170

 
$
2,358

 
$
2,354

 
$
60,698

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

Assets
June 30, 2018

December 31, 2017
Total assets for reportable segments
$
1,447,904

 
$
1,344,553

Cash and cash equivalents
123,539

 
192,032

Other assets
64,461


164,590

Total consolidated assets
$
1,635,904


$
1,701,175









10

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Geographic Information
Long-Lived Assets
June 30, 2018

December 31, 2017
Mexico
$
358,080

 
$
370,188

United States
391,026

 
377,768

Canada
375,199

 
331,440

Other
10,411

 
4,910

Total
$
1,134,716


$
1,084,306

 
Revenue
Three months ended June 30,
 
Six months ended June 30,
2018
 
2017
 
2018
 
2017
United States
$
99,243

 
$
95,371

 
$
192,473

 
$
202,565

Mexico
70,744

 
53,235

 
140,781

 
130,939

Australia

 
934

 

 
1,590

Total
$
169,987

 
$
149,540

 
$
333,254


$
335,094

    

11

Coeur Mining, Inc. and Subsidiaries
Notes to Consolidated Financial Statements

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 its operating sites are as follows:
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
2018
 
2017
 
2018
 
2017
Asset retirement obligation - Beginning

$120,848

 

$88,397

 
$
118,799

 
$
86,754

Accretion
2,766

 
2,116

 
5,311

 
4,180

Settlements
(707
)
 
(511
)
 
(1,203
)
 
(932
)
Asset retirement obligation - Ending

$122,907

 

$90,002

 
$
122,907

 
$
90,002

The Company accrued $2.0 million at each of June 30, 2018 and December 31, 2017, 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 performance shares, restricted stock and stock options. Stock-based compensation expense for the three and six months ended June 30, 2018 was $1.8 million and $4.6 million, respectively, compared to $2.2 million and $5.5 million to three and six months ended June 30, 2017, respectively. At June 30, 2018, there was $10.8 million of unrecognized stock-based compensation cost which is expected to be recognized over a weighted-average remaining vesting period of 1.6 years.
The performance shares issued in 2018 vest at the end of a three-year service period if internal performance metrics are met. The number of shares that vest is also impacted by the inclusion of a modifier that is based upon a relative stockholder return metric. The relative stockholder return metric is included in the determination of the grant date fair value of the performance shares however the recognition of compensation cost for performance share awards is based on the results of the internal performance metrics. The performance shares issued prior to 2018 vest at the end of a three-year service period if relative stockholder return and internal performance metrics are met and the existence of a market condition requires recognition of compensation cost for the relative stockholder return portion of the performance share awards over the requisite period regardless of whether the relative stockholder return metric is met. All other stock-based compensation awards are consistent with prior years.
The following table summarizes the grants awarded during the six months ended June 30, 2018:
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
March 5, 2018
 
31,887

 
$
7.84

 

 
$

 

 
$

May 9, 2018
 
868,134

 
$
7.90

 
14,310

 
$
4.09

 
408,179

 
$
7.39


The following options and stock appreciation rights were exercisable during the six months ended June 30, 2018:
Award Type
 
Number of 
Exercised Units
 
Weighted Average
Exercised Price
 
Number of Exercisable Units
 
Weighted Average
Exercisable Price
Stock options
 
159,069

 
$
3.35

 
334,838

 
$
14.72

Stock appreciation rights
 

 
$

 
42,152

 
$
14.14


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 generally makes matching contributions equal to 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, 2018 were $0.8 million and $1.7 million, respectively, compared $1.8 million and $3.9 million to three and six months ended June 30, 2017, respectively. In addition, the Company has a deferred compensation plan for employees whose benefits under the 401(k) plan are limited by federal regulations.


12

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

NOTE 7 - OTHER, NET
Other, net consists of the following:
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
2018
 
2017
 
2018
 
2017
Foreign exchange gain (loss)
$
(3,309
)
 
$
786

 
$
(3,979
)
 
$
1,992

Gain (loss) on sale of assets and investments
586

 
513

 
345

 
(1,552
)
Gain on sale of the Joaquin project

 

 

 
21,138

Gain on repurchase of the Rochester royalty obligation

 
2,332

 

 
2,332

Mexico inflation adjustment
1,939

 

 
1,939

 

Other
1,328

 
343

 
2,752

 
863

Other, net
$
544

 
$
3,974

 
$
1,057

 
$
24,773


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, 2018 and 2017 by significant jurisdiction:

 
Three months ended June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017
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
$
(11,334
)
$
(2,309
)
 
$
(6,563
)
$
2,315

 
$
(10,147
)
$
(1,792
)
 
$
14,090

$
213

Argentina
(180
)
(108
)
 
(129
)
945

 
74

(97
)
 
(457
)
2,070

Canada
(2,155
)
1,199

 
6

940

 
(3,909
)
2,044

 
8

908

Mexico
20,542

(2,499
)
 
(2,195
)
(4,766
)
 
33,669

(15,821
)
 
6,455

(14,689
)
Other jurisdictions
(226
)


(2,241
)
1,693


(400
)


(2,041
)
1,747

 
$
6,647

$
(3,717
)
 
$
(11,122
)
$
1,127

 
$
19,287

$
(15,666
)
 
$
18,055

$
(9,751
)
The Company’s effective income and mining 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 the consolidated effective tax rate, along with mining taxes, uncertain tax positions, and a full valuation allowance on deferred tax assets related to losses in the United States and certain foreign jurisdictions. Fluctuations in foreign exchange rates on deferred tax balances decreased income and mining tax expense by $4.5 million and increased income and mining tax expense by $3.0 million for the three months ended June 30, 2018 and 2017, respectively. Fluctuations in foreign exchange rates on deferred tax balances decreased income and mining tax expense by $0.9 million and increased income and mining tax expense by $8.6 million for the six months ended June 30, 2018 and 2017, respectively. The impact of foreign exchange rates on deferred tax balances is predominately due to the Mexican Peso and Canadian Dollar.
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. 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 factors that impact the Company’s ability to realize its deferred tax assets. For additional information, please see the sections titled “Risk Factors” set forth in the 2017 10-K.
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 2014 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 twelve 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 $1.5 million and $2.5 million in the next twelve months.
At June 30, 2018 and December 31, 2017, the Company had $4.0 million and $4.3 million of total gross unrecognized tax benefits, respectively that, if recognized, would positively impact the Company’s effective income tax rate. The Company’s

13

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

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, 2018 and December 31, 2017, the amount of accrued income-tax-related interest and penalties was $3.7 million and $4.8 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, 2018, 1,528,162 and 1,563,841 common stock equivalents, respectively, related to equity-based awards were not included in the diluted earnings per share calculation as the shares would be antidilutive. Similarly, 852,176 and 1,426,480 common stock equivalents were excluded from the diluted earnings per share calculation for the three and six months ended June 30, 2017, respectively.
 
Three months ended June 30,
 
Six months ended June 30,
In thousands except per share amounts
2018
 
2017
 
2018
 
2017
Net income (loss) available to common stockholders:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
2,930

 
$
(9,995
)
 
$
3,621

 
$
8,304

Income (loss) from discontinued operations

 
(960
)
 
550

 
(596
)
 
$
2,930

 
$
(10,955
)
 
$
4,171

 
$
7,708

 
 
 
 
 
 
 
 
Weighted average shares:
 
 
 
 
 
 
 
Basic
185,183

 
179,241

 
184,777

 
179,071

Effect of stock-based compensation plans
2,305

 

 
2,780

 
4,049

Diluted
187,488


179,241


187,557


183,120

 
 
 
 
 
 
 
 
Basic income (loss) per share:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
0.02

 
$
(0.06
)
 
$
0.02

 
$
0.05

Income (loss) from discontinued operations
0.00

 
(0.01
)
 
0.00

 
0.00

Basic(1)
$
0.02

 
$
(0.06
)
 
$
0.02


$
0.04

 
 
 
 
 
 
 
 
Diluted income (loss) per share:
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
0.02

 
$
(0.06
)
 
$
0.02

 
$
0.05

Income (loss) from discontinued operations
0.00

 
(0.01
)
 
0.00

 
0.00

Diluted(1)
$
0.02

 
$
(0.06
)
 
$
0.02


$
0.04

(1) Due to rounding, the sum of net income per share from continuing operations and discontinued operations may not equal net income per share.

NOTE 10 – FAIR VALUE MEASUREMENTS
 
Three months ended June 30,
 
Six months ended June 30,
In thousands
2018
 
2017
 
2018
 
2017
Rochester royalty obligation
$

 
$
336

 
$

 
$
(864
)
Interest rate swap
(188
)
 

 
(188
)
 

Unrealized gain (loss) on equity securities
(8,028
)
 

 
(3,185
)
 

Realized gain (loss) on equity securities
5,535

 

 
5,202

 

Zinc options
219

 

 
363

 

Fair value adjustments, net
$
(2,462
)
 
$
336

 
$
2,192

 
$
(864
)
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

14

Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

(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, 2018
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity and debt securities
$
23,804

 
$
17,577

 
$

 
$
6,227

Other derivative instruments, net
486

 

 
486

 

 
$
24,290

 
$
17,577

 
$
486

 
$
6,227

Liabilities:
 
 
 
 
 
 
 
Silvertip contingent consideration
$
48,616

 
$

 
$

 
$
48,616

Other derivative instruments, net
302

 

 
302

 

 
$
48,918

 
$

 
$
302

 
$
48,616

 
 
Fair Value at December 31, 2017
In thousands
Total
 
Level 1
 
Level 2
 
Level 3  
Assets:
 
 
 
 
 
 
 
Equity and debt securities
$
34,837

 
$
27,946

 
$

 
$
6,891

Other derivative instruments, net
251

 

 
251

 

 
$
35,088

 
$
27,946

 
$
251

 
$
6,891

Liabilities:
 
 
 
 
 
 
 
Silvertip contingent consideration
$
47,965

 
$

 
$

 
$
47,965

Other derivative instruments, net
222

 

 
222

 

 
$
48,187</