Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2019
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock (par value $.01 per share)
CDE
New York Stock Exchange
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☑ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files.) Yes☑ 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
☑
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 ☑
The Company has 300,000,000 shares of common stock, par value of $0.01, authorized of which 222,163,463 shares were issued and outstanding as of August 5, 2019.
Item 1.Financial Statements and Supplementary Data
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2019 (unaudited)
December 31, 2018
ASSETS
Notes
In thousands, except share data
CURRENT ASSETS
Cash and cash equivalents
$
37,907
$
115,081
Receivables
4
38,495
29,744
Inventory
5
59,048
66,279
Ore on leach pads
5
72,310
75,122
Prepaid expenses and other
12,066
11,393
219,826
297,619
NON-CURRENT ASSETS
Property, plant and equipment, net
298,926
298,451
Mining properties, net
945,839
971,567
Ore on leach pads
5
76,910
66,964
Restricted assets
8,730
12,133
Equity and debt securities
6
19,457
17,806
Receivables
4
31,871
31,151
Other
75,671
16,809
TOTAL ASSETS
$
1,677,230
$
1,712,500
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable
$
65,676
$
47,210
Accrued liabilities and other
19
116,187
82,619
Debt
8
21,772
24,937
Reclamation
9
6,552
6,552
210,187
161,318
NON-CURRENT LIABILITIES
Debt
8
348,205
433,889
Reclamation
9
133,127
128,994
Deferred tax liabilities
61,653
79,070
Other long-term liabilities
77,612
56,717
620,597
698,670
COMMITMENTS AND CONTINGENCIES
17
STOCKHOLDERS’ EQUITY
Common stock, par value $0.01 per share; authorized 300,000,000 shares, 221,858,660 issued and outstanding at June 30, 2019 and 203,310,443 at December 31, 2018
2,219
2,033
Additional paid-in capital
3,492,736
3,443,082
Accumulated other comprehensive income (loss)
—
(59
)
Accumulated deficit
(2,648,509
)
(2,592,544
)
846,446
852,512
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
$
1,677,230
$
1,712,500
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
4
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Notes
In thousands, except share data
Revenue
3
$
162,123
$
169,987
$
316,993
$
333,254
COSTS AND EXPENSES
Costs applicable to sales(1)
3
131,948
108,246
263,598
207,586
Amortization
43,204
29,459
85,080
60,236
General and administrative
7,750
7,650
17,224
16,454
Exploration
5,719
6,429
9,433
13,112
Pre-development, reclamation, and other
4,334
3,620
8,768
7,845
Total costs and expenses
192,955
155,404
384,103
305,233
OTHER INCOME (EXPENSE), NET
Fair value adjustments, net
12
(5,296
)
(2,462
)
3,824
2,192
Interest expense, net of capitalized interest
8
(6,825
)
(6,018
)
(13,279
)
(11,983
)
Other, net
14
643
544
703
1,057
Total other income (expense), net
(11,478
)
(7,936
)
(8,752
)
(8,734
)
Income (loss) before income and mining taxes
(42,310
)
6,647
(75,862
)
19,287
Income and mining tax (expense) benefit
10
5,546
(3,717
)
14,204
(15,666
)
Income (loss) from continuing operations
$
(36,764
)
$
2,930
$
(61,658
)
$
3,621
Income (loss) from discontinued operations
18
—
—
5,693
550
NET INCOME (LOSS)
$
(36,764
)
$
2,930
$
(55,965
)
$
4,171
OTHER COMPREHENSIVE INCOME (LOSS), net of tax:
Unrealized gain (loss) on debt and equity securities
—
(87
)
59
(365
)
Other comprehensive income (loss)
—
(87
)
59
(365
)
COMPREHENSIVE INCOME (LOSS)
$
(36,764
)
$
2,843
$
(55,906
)
$
3,806
NET INCOME (LOSS) PER SHARE
15
Basic income (loss) per share:
Net income (loss) from continuing operations
$
(0.18
)
$
0.02
$
(0.30
)
$
0.02
Net income (loss) from discontinued operations
—
—
0.03
—
Basic(2)
$
(0.18
)
$
0.02
$
(0.27
)
$
0.02
Diluted income (loss) per share:
Net income (loss) from continuing operations
$
(0.18
)
$
0.02
$
(0.30
)
$
0.02
Net income (loss) from discontinued operations
—
—
0.03
—
Diluted(2)
$
(0.18
)
$
0.02
$
(0.27
)
$
0.02
(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.
5
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Notes
In thousands
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(36,764
)
$
2,930
$
(55,965
)
$
4,171
(Income) loss from discontinued operations
—
—
(5,693
)
(550
)
Adjustments:
Amortization
43,204
29,459
85,080
60,236
Accretion
3,007
3,886
5,950
7,204
Deferred taxes
(9,158
)
(1,265
)
(17,417
)
(811
)
Fair value adjustments, net
12
5,296
2,462
(3,824
)
(2,192
)
Stock-based compensation
11
1,987
1,850
4,210
4,636
Inventory write-downs
5
11,872
—
27,319
—
Other
4,731
2,174
5,981
2,242
Changes in operating assets and liabilities:
Receivables
(7,624
)
(8,888
)
(17,359
)
(10,579
)
Prepaid expenses and other current assets
(834
)
8,126
(3,518
)
2,491
Inventory and ore on leach pads
(14,391
)
(2,766
)
(33,212
)
(11,474
)
Accounts payable and accrued liabilities
25,109
(39,262
)
19,037
(41,127
)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES OF CONTINUING OPERATIONS
26,435
(1,294
)
10,589
14,247
CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS
—
—
—
(2,690
)
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
26,435
(1,294
)
10,589
11,557
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(20,749
)
(41,165
)
(48,187
)
(83,510
)
Proceeds from the sale of assets
57
96
904
156
Purchase of investments
—
(39
)
—
(400
)
Sale of investments
1,102
11,141
1,102
12,760
Proceeds from notes receivable
2,000
—
7,168
—
Other
277
(33
)
2,018
(98
)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF CONTINUING OPERATIONS
(17,313
)
(30,000
)
(36,995
)
(71,092
)
CASH USED IN INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS
—
—
—
(28,470
)
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
(17,313
)
(30,000
)
(36,995
)
(99,562
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock
15
48,887
—
48,887
—
Issuance of notes and bank borrowings, net of issuance costs
8
—
—
15,000
15,000
Payments on debt, finance leases, and associated costs
8
(90,812
)
(4,373
)
(113,273
)
(22,822
)
Other
—
(233
)
(3,259
)
(4,839
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES OF CONTINUING OPERATIONS
(41,925
)
(4,606
)
(52,645
)
(12,661
)
CASH USED IN FINANCING ACTIVITIES OF DISCONTINUED OPERATIONS
—
—
—
(22
)
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
(41,925
)
(4,606
)
(52,645
)
(12,683
)
Effect of exchange rate changes on cash and cash equivalents
56
(175
)
257
382
INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(32,747
)
(36,075
)
(78,794
)
(100,306
)
Less net cash used in discontinued operations(1)
—
—
—
(32,930
)
(32,747
)
(36,075
)
(78,794
)
(67,376
)
Cash, cash equivalents and restricted cash at beginning of period
72,022
172,101
118,069
203,402
Cash, cash equivalents and restricted cash at end of period
$
39,275
$
136,026
$
39,275
$
136,026
(1)Less net cash used in discontinued operations includes the following cash transactions: net subsidiary payments to parent company of $1,748, during the six months ended June 30, 2018.
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
6
COEUR MINING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
The following table summarizes the changes in stockholders’ deficit for the six months ended June 30, 2019:
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, 2018
203,310
$
2,033
$
3,443,082
$
(2,592,544
)
$
(59
)
852,512
Net income (loss)
—
—
—
(19,201
)
—
(19,201
)
Other comprehensive income (loss)
—
—
—
—
59
59
Common stock issued under stock-based compensation plans, net
1,801
18
(1,053
)
—
—
(1,035
)
Balances at March 31, 2019 (Unaudited)
205,111
$
2,051
$
3,442,029
$
(2,611,745
)
$
—
$
832,335
Net income (loss)
—
—
—
(36,764
)
—
(36,764
)
Common stock issued under "at the market" stock offering
16,631
166
48,721
—
—
48,887
Common stock issued under stock-based compensation plans, net
117
2
1,986
—
—
1,988
Balances at June 30, 2019 (Unaudited)
221,859
$
2,219
$
3,492,736
$
(2,648,509
)
$
—
$
846,446
The following table summarizes the changes in stockholders’ deficit for the six months ended June 30, 2018:
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)
—
—
—
1,241
—
1,241
Reclassification of unrealized gain (loss) on equity securities for ASU 2016-01
—
—
—
2,604
(2,604
)
—
Other comprehensive income (loss)
—
—
—
—
(278
)
(278
)
Common stock issued under stock-based compensation plans, net
538
6
(1,635
)
—
—
(1,629
)
Balances at March 31, 2018 (Unaudited)
186,176
$
1,862
$
3,355,710
$
(2,542,898
)
$
(363
)
$
814,311
Net income (loss)
—
$
—
$
—
$
2,930
$
—
2,930
Other comprehensive income (loss)
—
—
—
—
(87
)
(87
)
Common stock issued under stock-based compensation plans, net
898
9
1,608
—
—
1,617
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.
7
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, 2019. The condensed consolidated December 31, 2018 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, 2018 (the “2018 10-K”).
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant Accounting Policies
Please see Note 2 -- Summary of Significant Accounting Policies contained in the 2018 10-K.
Leases
On January 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) 842, Leases. Changes to the Company’s accounting policy as a result of adoption are discussed below.
From time to time, the Company enters into contractual agreements to lease mining equipment and facilities. Based upon the Company’s assessment of the terms of a specific lease agreement, the Company will classify a lease as either finance or operating. Right-of-use (“ROU”) assets and lease liabilities related to finance leases are presented in Property, plant and equipment, net and Debt on the Condensed Consolidated Balance Sheet. ROU assets and lease liabilities related to operating leases that are subject to the ASC 842 measurement requirements such as operating leases with lease terms greater than twelve months are presented in Other asset, non-current, Accrued liabilities and other, and Other long-term liabilities on the Condensed Consolidated Balance Sheet.
Operating and finance lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of the future lease payments over the lease term. The discount rate used to determine the present value of the lease payments, is the rate implicit in the lease unless that rate cannot be readily determined, in that case, the Company utilizes its incremental borrowing rate in determining the present value of the future lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term and amount equal to the lease payments in a similar economic environment. Operating lease ROU assets may also include any cumulative prepaid or accrued rent when the lease payments are uneven throughout the lease term. The ROU assets and lease liabilities may also include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The ROU asset includes any lease payments made and lease incentives received prior to the commencement date. The Company has lease arrangements with lease and non-lease components which are accounted for separately. Non-lease components of the lease payments are expenses as incurred and are not included in determining the present value.
Accounting Standards Recently Implemented
In February 2016, the FASB issued ASU 2016-02, “Leases,” which requires lessees to recognize assets and liabilities for the rights and obligations created by most leases on the balance sheet. These changes became effective for the Company’s fiscal year beginning January 1, 2019 and the Company adopted it using the cumulative-effect adjustment transition method approved by the FASB in July 2018, which does not require the Company to recast the comparative periods presented when transitioning to the new guidance on January 1, 2019. The Company elected to utilize the transition related practical expedients permitted by the new standard. In addition to existing finance leases and other financing obligations, the adoption of the new standard resulted in the recognition of additional ROU assets and lease liabilities related to operating leases of approximately $65.0 million. There was no material impact to the Consolidated Statements of Comprehensive Income (Loss) or the Consolidated Statements of Cash Flows or an impact on the Company’s debt covenant calculations as a result of the adoption of ASU 2016-02. See Note 7 -- Leases for additional qualitative and quantitative disclosures related to leasing arrangements.
Accounting Standards Recently Issued
In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326),” measurement of Credit Losses on Financial Instruments, which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. The guidance is effective for interim and annual periods for the Company on January 1, 2020, with early adoption permitted. The Company is currently evaluating the
8
Coeur Mining, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
impact of the new standard, but it does not expect this update to have a material impact to the Company's consolidated net income, financial position or cash flows.
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, all operating segments are engaged in the discovery, mining, and production of gold and/or silver. The Silvertip mine is engaged in the discovery, mining, and production of silver, zinc and lead. Other includes the Sterling/Crown Block and La Preciosa projects, other mineral interests, strategic equity investments, 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):
