EX-99.2 4 d594090dex992.htm EX-99.2 EX-99.2
Table of Contents

Exhibit 99.2

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

     Page  

Condensed consolidated balance sheet as of June 30, 2013 and December 31, 2012 (unaudited)

     F-2   

Condensed consolidated statements of operations for the three and six months ended June  30, 2013 and 2012 (unaudited)

     F-3   

Condensed consolidated statements of comprehensive income (loss) for the three and six months ended June 30, 2013 and 2012 (unaudited)

     F-4   

Condensed consolidated statement of changes in stockholders’ equity for the six months ended June 30, 2013 (unaudited)

     F-5   

Condensed consolidated statements of cash flows for the three and six months ended June  30, 2013 and 2012 (unaudited)

     F-6   

Notes to condensed consolidated financial statements (unaudited)

     F-7   

 

F-1


Table of Contents

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

     Notes      June 30,
2013
    December 31,
2012
 
            (In thousands, except share data)  
ASSETS        

CURRENT ASSETS

       

Cash and cash equivalents

      $ 249,531      $ 125,440   

Investments

     5        —          999   

Receivables

     6        64,607        62,438   

Ore on leach pad

        28,880        22,991   

Metal and other inventory

     7        148,286        170,670   

Deferred tax assets

     13        2,620        2,458   

Restricted assets

        660        396   

Prepaid expenses and other

        17,945        20,790   
     

 

 

   

 

 

 
        512,529        406,182   

NON-CURRENT ASSETS

       

Property, plant and equipment, net

     9        660,333        683,860   

Mining properties, net

     10        2,357,689        1,991,951   

Ore on leach pad

        26,861        21,356   

Restricted assets

        24,468        24,970   

Marketable securities

     5        16,008        27,065   

Receivables

     6        38,539        48,767   

Debt issuance costs, net

        11,890        3,713   

Deferred tax assets

     13        969        955   

Other

        17,430        12,582   
     

 

 

   

 

 

 

TOTAL ASSETS

      $ 3,666,716      $ 3,221,401   
     

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY        

CURRENT LIABILITIES

       

Accounts payable

      $ 57,446      $ 57,482   

Accrued liabilities and other

        9,369        10,002   

Accrued income taxes

        8,662        27,108   

Accrued payroll and related benefits

        15,576        21,306   

Accrued interest payable

        10,237        478   

Debt and capital leases

     11        5,485        55,983   

Royalty obligations

     11,16        44,605        65,104   

Reclamation and mine closure

     12        473        668   

Deferred tax liabilities

     13        121        121   
     

 

 

   

 

 

 
        151,974        238,252   

NON-CURRENT LIABILITIES

       

Debt and capital leases

     11        306,578        3,460   

Royalty obligations

     11,16        86,304        141,879   

Reclamation and mine closure

     12        35,708        34,670   

Deferred tax liabilities

     13        711,550        577,488   

Other long-term liabilities

        23,110        27,372   
     

 

 

   

 

 

 
        1,163,250        784,869   

COMMITMENTS AND CONTINGENCIES (Notes 11, 12, 13, 16, 17 and 20)

       

STOCKHOLDERS’ EQUITY

       

Common stock, par value $0.01 per share; authorized 150,000,000 shares, issued and outstanding 101,567,355 at June 30, 2013 and 90,342,338 at December 31, 2012

        1,016        903   

Additional paid-in capital

        2,770,953        2,601,254   

Accumulated deficit

        (418,926     (396,156

Accumulated other comprehensive loss

        (1,551     (7,721
     

 

 

   

 

 

 
        2,351,492        2,198,280   
     

 

 

   

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

      $ 3,666,716     $ 3,221,401   
     

 

 

   

 

 

 

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

 

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Table of Contents

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

            Three months ended
June 30,
   

Six months ended

June 30,

 
     Notes      2013     2012     2013     2012  
            (In thousands, except share data)  

Sales of metal

      $ 204,525     $ 254,406     $ 376,322     $ 458,970   

Production costs applicable to sales

        (142,924 )     (131,823 )     (231,708 )     (224,377

Depreciation, depletion and amortization

        (57,653 )     (61,024 )     (108,089 )     (113,616
     

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

        3,948       61,559       36,525       120,977   

COSTS AND EXPENSES

           

General and administrative

        15,026       8,594       25,253       16,190   

Exploration

        6,774       6,305       13,615       12,872   

Litigation settlement

     20         32,046       —         32,046       —     

Loss on impairment and other

        86       4,813       205       4,813   

Pre-development, care, maintenance and other

        973       273       5,458       1,341   
     

 

 

   

 

 

   

 

 

   

 

 

 

Total cost and expenses

        54,905       19,985       76,577       35,216   
     

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME (LOSS)

        (50,957 )     41,574       (40,052 )     85,761   

OTHER INCOME AND EXPENSE

           

Fair value adjustments, net

     4,16         66,754       16,039       84,550       (7,074

Other than temporary impairment of marketable securities

     5         (17,192 )     —         (17,227 )     —     

Interest income and other, net

        419       (3,221 )     4,275       1,786   

Interest expense, net of capitalized interest

     11         (10,930 )     (7,557 )     (20,662 )     (14,227
     

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and expense, net

        39,051       5,261       50,936       (19,515
     

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

        (11,906 )     46,835       10,884       66,246   

Income tax provision

     13         (23,134 )     (23,862 )     (33,654 )     (39,298
     

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

      $ (35,040 )   $ 22,973     $ (22,770 )   $ 26,948   
     

 

 

   

 

 

   

 

 

   

 

 

 

INCOME (LOSS) PER SHARE

           

Basic

     3       $ (0.35 )   $ 0.26     $ (0.24 )   $ 0.30   
     

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     3       $ (0.35 )   $ 0.26     $ (0.24 )   $ 0.30   
     

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares

           

Basic

     3         99,833       89,631       94,918       89,611   

Diluted

     3         99,833       89,733       94,918       89,777   

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

 

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Table of Contents

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

 

            Three months ended
June 30,
    Six months ended
June 30,
 
     Notes      2013     2012     2013     2012  
            (In thousands)  

Net income (loss)

      $ (35,040 )   $ 22,973      $ (22,770 )   $ 26,948   

OTHER COMPREHENSIVE INCOME (LOSS) net of tax:

           

Unrealized loss on available for sale securities

     4,5         (7,491 )     (5,676     (11,057 )     (5,252

Reclassification adjustments for losses included in net income (A)

     4,5         17,192       —          17,227       —     
     

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

        9,701       (5,676     6,170       (5,252
     

 

 

   

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME (LOSS)

      $ (25,339 )   $ 17,297      $ (16,600 )   $ 21,696   
     

 

 

   

 

 

   

 

 

   

 

 

 

 

A. The reclassification adjustments have been reflected in other than temporary impairment of marketable securities in the condensed consolidated statements of operations.

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

 

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Table of Contents

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Six months ended June 30, 2013

(Unaudited)

 

(In thousands, except per share data)   Notes     Common
Stock
Shares
    Common
Stock Par
Value
    Additional Paid-
In Capital
    Accumulated
Deficit
    Accumulated
Other
Comprehensive
Income (Loss)
    Total  

Balances at December 31, 2012

      90,342     $ 903     $ 2,601,254     $ (396,156 )   $ (7,721 )   $ 2,198,280   

Net income (loss)

      —         —         —         (22,770 )     —         (22,770

Other comprehensive income (loss)

      —         —         —         —         6,170       6,170   

Common stock issued for the acquisition of Orko Silver Corp.

    8        11,573       116       173,247       —         —         173,363   

Warrants issued for the acquisition of Orko Silver Corp.

    8        —         —         5,777       —         —         5,777   

Common stock share buy back

      (655 )     (7 )     (12,550 )     —         —         (12,557

Common stock issued/cancelled under long-term incentive plans and director fees and options, net

    14        307       4       3,225       —           3,229   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balances at June 30, 2013

      101,567     $ 1,016     $ 2,770,953     $ (418,926 )   $ (1,551 )   $ 2,351,492   
   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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Table of Contents

COEUR MINING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

          Three months ended
June 30,
    Six months ended
June 30,
 
    Notes     2013     2012     2013     2012  
          (In thousands)     (In thousands)  

CASH FLOWS FROM OPERATING ACTIVITIES:

         

Net income (loss)

    $ (35,040 )   $ 22,973     $ (22,770 )   $ 26,948   

Add (deduct) non-cash items

         

Depreciation, depletion and amortization

      57,653       61,024       108,089       113,616   

Accretion of discount on debt and other assets, net

      484       808       1,531       1,605   

Accretion of royalty obligation

    16        4,139       5,492       7,809       10,072   

Deferred income taxes

    13        12,123       9,690       19,548       17,368   

Fair value adjustments, net

    4        (65,754 )     (17,759 )     (81,795 )     4,018   

Loss on foreign currency transactions

      148       70       (317 )     369   

Litigation settlement

    20        22,046       —         22,046       —     

Share-based compensation

    14        1,617       1,033       2,713       3,170   

Loss on sale of assets

      (264 )     264       (1,132 )     264   

Other than temporary impairment of marketable securities

    5        17,192       —         17,227       —     

Loss on impairment

      86       4,813       205       4,813   

Other non-cash charges

      —         (40 )     —         (40

Changes in operating assets and liabilities:

         

Receivables and other current assets

    6        4,401       10,319       8,647       7,365   

Prepaid expenses and other

      2,930       (2,857 )     411       1,916   

Inventories

    7        31,483       3,097       10,990       (21,625

Accounts payable and accrued liabilities

      10,094       14,276       (16,930 )     (39,655
   

 

 

   

 

 

   

 

 

   

 

 

 

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

      63,338       113,203       76,272       130,204   
   

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

         

Purchase of short term investments and marketable securities

      (683 )     (6,831 )     (5,332 )     (7,866

Proceeds from sales and maturities of short term investments

      1,522       683       6,344       20,701   

Capital expenditures

    19        (27,201 )     (32,238 )     (40,028 )     (63,885

Acquisition of Orko Silver Corporation

    8        (101,648 )     —         (113,214 )     —     

Other

      254       995       1,209       1,180   
   

 

 

   

 

 

   

 

 

   

 

 

 

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

      (127,756 )     (37,391 )     (151,021 )     (49,870
   

 

 

   

 

 

   

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

         

Proceeds from issuance of notes and bank borrowings

    11        —         —         300,000       —     

Payments on long-term debt, capital leases, and associated costs

    11        (1,857 )     (8,794 )     (57,197 )     (14,244

Payments on gold production royalty

    11        (15,480 )     (19,287 )     (30,929 )     (40,660

Share repurchases

      —         —         (12,557 )     —     

Other

      (25 )     (217 )     (477 )     (1,045
   

 

 

   

 

 

   

 

 

   

 

 

 

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

      (17,362 )     (28,298 )     198,840       (55,949
   

 

 

   

 

 

   

 

 

   

 

 

 

INCREASE IN CASH AND CASH EQUIVALENTS

      (81,780 )     47,514       124,091       24,385   

Cash and cash equivalents at beginning of period

      331,311       151,883       125,440       175,012   
   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

    $ 249,531     $ 199,397     $ 249,531     $ 199,397   
   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

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Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – BASIS OF PRESENTATION

Basis of Presentation: The Company’s unaudited interim condensed consolidated financial statements have been prepared under United States Generally Accepted Accounting Principles (“U.S. GAAP”) and applicable rules of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting and include the accounts of Coeur Mining, Inc. and its consolidated subsidiaries (“Coeur” or the “Company”). All significant intercompany transactions and balances have been eliminated during consolidation. The Company has evaluated all activity that took place after June 30, 2013 and determined there are no subsequent events that need to be disclosed. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Form 10-K for the year ended December 31, 2012. The condensed consolidated balance sheet as of December 31, 2012, included herein, was derived from the audited consolidated financial statements as of that date.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s consolidated financial position as of June 30, 2013 and December 31, 2012 and the Company’s consolidated results of operations and cash flows for the three and six months ended June 30, 2013 and 2012. The results for the three and six months ended June 30, 2013 are not necessarily indicative of the results to be expected for the year ending December 31, 2013. All references to June 30, 2013 or to the three and six months ended June 30, 2013 and 2012 in the notes to the condensed consolidated financial statements are unaudited.

Use of Estimates: The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in its condensed consolidated financial statements and accompanying notes. The most significant areas requiring the use of management’s estimates and assumptions relate to recoverable ounces from proven and probable reserves that are the basis of future cash flow estimates and units-of-production depreciation and amortization calculations; useful lives utilized for depreciation, depletion and amortization; estimates of future cash flows for long lived assets; estimates of recoverable gold and silver ounces in ore on leach pads; the amount and timing of reclamation and remediation costs; valuation allowance for deferred tax assets; and other employee benefit liabilities.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements:

In December, 2011, the FASB issued ASU 2011-11, “Balance Sheet (Topic 201): Disclosures about Offsetting Assets and Liabilities.” This ASU adds certain additional disclosure requirements about financial instruments and derivative instruments that are subject to netting arrangements. ASU 2011-11 is effective for fiscal years, and interim periods within those years, beginning January 1, 2013, with retrospective application required. The adoption of ASU 2011-11 had no effect on the Company’s financial position, results of operations or cash flows.

Effective January 1, 2013, the Company adopted ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.” This ASU adds the following disclosure requirements:

 

   

For items reclassified out of accumulated other comprehensive income (AOCI) and into net income in their entirety, the effect of the reclassification on each affected net income line item; and

 

   

For AOCI reclassification items that are not reclassified in their entirety into net income, a cross reference to other required U.S. GAAP disclosures.

 

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Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

NOTE 3 – EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding during each period. Diluted earnings per share reflect the potential dilution that could 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, 2013, 1,202,100 shares of common stock equivalents related to equity-based awards have not been included in the diluted per share calculation as the shares would be antidilutive. For the three and six months ended June 30, 2012, 632,213 shares of common stock equivalents related to equity-based awards have not been included in the diluted per share calculation as the shares would be antidilutive. The 3.25 % Convertible Senior Notes were not included in the computation of diluted earnings per share for the three and six months ended June 30, 2013 and 2012 because there is no excess value upon conversion over the principal amount of the Notes.

The effect of potentially dilutive stock outstanding as of June 30, 2013 and 2012 are as follows (in thousands, except per share data):

 

    Three months ended June 30, 2013     Six months ended June 30, 2013  
    Income
(Numerator)
    Shares
(Denominator)
    Per-Share
Amount
    Income
(Numerator)
    Shares
(Denominator)
    Per-Share
Amount
 

Basic EPS

           

Net income (loss) available to common stockholders

  $ (35,040 )     99,833     $ (0.35 )   $ (22,770 )     94,918     $ (0.24

Effect of Dilutive Securities

           

Equity awards

    —          —            —          —       
 

 

 

   

 

 

     

 

 

   

 

 

   

Diluted EPS

           

Net income (loss) available to common stockholders

  $ (35,040 )     99,833     $ (0.35 )   $ (22,770 )     94,918     $ (0.24
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

    Three months ended June 30, 2013     Six months ended June 30, 2012  
    Income
(Numerator)
    Shares
(Denominator)
    Per-Share
Amount
    Income
(Numerator)
    Shares
(Denominator)
    Per-Share
Amount
 

Basic EPS

   

Net income (loss) available to common stockholders

  $ 22,973       89,631     $ 0.26     $ 26,948       89,611     $ 0.30   

Effect of Dilutive Securities

           

Equity awards

    —          102         —          166    
 

 

 

   

 

 

     

 

 

   

 

 

   

Diluted EPS

           

Net income (loss) available to common stockholders

  $ 22,973       89,733     $ 0.26     $ 26,948       89,777     $ 0.30   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 4 – FAIR VALUE MEASUREMENTS

Accounting standards establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

 

  Level 1 Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

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Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

  Level 2 Quoted market prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and

 

  Level 3 Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

The following table sets forth 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. As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement (in thousands):

 

     Fair Value at June 30, 2013  
     Total      Level 1      Level 2      Level 3  

Assets:

           

Marketable equity securities

   $ 16,008      $ 16,008      $ —         $ —     

Gold put and call options

     2,358        —           2,358        —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 18,366      $ 16,008      $ 2,358      $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Palmarejo royalty obligation embedded derivative

   $ 52,359      $ —         $ 52,359      $ —     

Rochester NSR royalty obligation

     22,046        —           22,046        —     

Other derivative instruments, net

     2,554        —           2,554        —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 76,959      $ —         $ 76,959      $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value at December 31, 2012  
     Total      Level 1      Level 2      Level 3  

Assets:

           

Short term investments

   $ 999      $ 999      $ —         $ —     

Marketable securities

     27,065        27,065        —           —     

Other derivative instruments, net

     943        —           943        —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 29,007      $ 28,064      $ 943      $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities:

           

Royalty obligation embedded derivative

   $ 145,098      $ —         $ 145,098      $ —     

Put and call options

     9,299        —           9,299        —     
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 154,397      $ —         $ 154,397      $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

The Company’s short-term investments are readily convertible to cash and, therefore, these investments are classified within Level 1 of the fair value hierarchy.

The Company’s marketable equity securities are recorded at fair market value in the financial statements based on quoted market prices, which are accessible at the measurement date for identical assets. Such instruments are classified within Level 1 of the fair value hierarchy.

The Company’s gold put and call options, Palmarejo royalty obligation embedded derivative, Rochester NSR royalty obligation, and other derivative instruments, net, which relate to the concentrate sales contracts and foreign exchange contracts, are valued using pricing models, which require inputs that are derived from observable market data, including contractual terms, forward market prices, yield curves and credit spreads. The model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.

 

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Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

The Company had no Level 3 financial assets and liabilities as of June 30, 2013 or December 31, 2012.

Financial assets and liabilities that are not measured at fair value at June 30, 2013 and December 31, 2012 are set forth below (in thousands):

 

     Fair Value at June 30, 2013  
     Total      Level 1      Level 2      Level 3  

Liabilities:

           

3.25% Convertible Senior Notes due 2028

   $ 5,153      $ 5,153      $ —         $ —     

7.875% Senior Notes due 2021

   $ 295,689      $ 295,689      $ —         $ —     

Palmarejo Gold Production Royalty Obligation

   $ 75,645      $ —         $ 75,645      $ —     
     Fair Value at December 31, 2012  
     Total      Level 1      Level 2      Level 3  

Liabilities:

           

3.25% Convertible Senior Notes due 2028

   $ 48,220      $ 48,220      $ —         $ —     

Palmarejo Gold Production Royalty Obligation

   $ 90,617      $ —         $ 90,617      $ —     

The fair value of the Company’s 7.875% Senior Notes due 2021 was moved to Level 1 as a result of the availability of active market transactions to establish fair value.

NOTE 5 – INVESTMENTS

The Company classifies the marketable securities in which it invests as available-for-sale securities. Such securities are measured at fair market value in the financial statements with unrealized gains or losses recorded in other comprehensive income.

The equity securities reflected in the table below consist of equity securities of silver and gold exploration and development companies that the Company purchased. The following table summarizes the Company’s available-for-sale securities on hand as of June 30, 2013 and December 31, 2012 (in thousands):

 

     Investments in marketable securities  
     Adjusted
Cost
     Gross
Unrealized
Losses
    Gross
Unrealized
Gains
     Estimated
Fair Value
 

Marketable securities at June 30, 2013

   $ 17,608      $ (1,799 )   $ 199      $ 16,008   
  

 

 

    

 

 

   

 

 

    

 

 

 

Marketable securities at December 31, 2012

   $ 34,786      $ (10,443 )   $ 2,722      $ 27,065   
  

 

 

    

 

 

   

 

 

    

 

 

 

In the three months ended June 30, 2013 and 2012, the Company recognized an unrealized loss of $7.5 million and $5.7 million, respectively, in other comprehensive income (loss). In the six months ended June 30, 2013, and 2012, the Company recognized an unrealized loss of $11.1 million and $5.3 million, respectively. The Company performs a quarterly assessment on each of its marketable securities with unrealized losses to determine if the security is other than temporarily impaired. The Company’s management team uses industry knowledge and expertise to evaluate each investment and determined that unrealized losses on certain investments are not other than temporary. As a result, an other than temporary impairment charge of $17.2 million was recorded during the three months ended June 30, 2013.

The Company had $1.0 million of short-term investments at December 31, 2012. These investments were held with various banks and had maturity dates of less than one year. There were no short term investments at June 30, 2013.

 

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Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

NOTE 6 – RECEIVABLES

Receivables consist of the following (in thousands):

 

     June 30, 2013      December 31, 2012  

Receivables – current

     

Accounts receivable – trade

   $ 9,664      $ 8,701   

Refundable income tax

     1,807        9,331   

Refundable value added tax

     48,186        40,020   

Accounts receivable – other

     4,950        4,386   
  

 

 

    

 

 

 
   $ 64,607      $ 62,438   
  

 

 

    

 

 

 

Receivables – non-current

     

Refundable value added tax

   $ 38,539      $ 48,767   
  

 

 

    

 

 

 

Trade receivables and other receivable balances are reported at outstanding principal amounts, net of an allowance for doubtful accounts. Management evaluates the collectability of receivable account balances to determine the allowance, if any. There were no allowances against receivable balances at June 30, 2013 or December 31, 2012.

NOTE 7 – METAL AND OTHER INVENTORY

Metal and other inventory consist of the following (in thousands):

 

     June 30, 2013      December 31, 2012  

Concentrate and doré inventory

   $ 80,306      $ 91,130   

Supplies

     67,980        79,540   
  

 

 

    

 

 

 

Metal and other inventory

   $ 148,286      $ 170,670   
  

 

 

    

 

 

 

NOTE 8 – ACQUISITION OF ORKO SILVER CORPORATION/LA PRECIOSA MINERAL INTERESTS

On April 16, 2013, the Company completed its acquisition of Orko Silver Corporation (“Orko”). Upon completion of the acquisition, the Company holds the La Preciosa silver-gold project in the state of Durango, Mexico. The transaction was accounted for as a purchase of mineral interests since La Preciosa is a development stage project.

Total consideration paid for the asset acquisition (in thousands):

 

Common shares issued (11,572,918 at $14.98)

   $ 173,363   

Cash

     99,059   

Warrants (1,588,768 valued at $3.64 per warrant)

     5,777   

Transaction advisory fees and other acquisition costs

     17,642   
  

 

 

 

Total purchase price

     295,841   

Current liabilities

     2,616   

Deferred income taxes

     114,339   
  

 

 

 

Total liabilities assumed

     116,955   
  

 

 

 

Total Consideration

   $ 412,796   
  

 

 

 

 

F-11


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

Estimated fair value of the assets acquired (in thousands):

 

Cash

   $ 3,487   

Other current assets

     635   

Mineral interests

     408,352   

Other assets

     322   
  

 

 

 

Total assets acquired

   $ 412,796   
  

 

 

 

NOTE 9 – PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following (in thousands):

 

     June 30, 2013     December 31, 2012  

Land

   $ 1,888     $ 2,010   

Buildings and improvements

     593,989       581,286   

Machinery and equipment

     379,912       360,199   

Capitalized leases for machinery, equipment, buildings, and land

     22,445       35,129   
  

 

 

   

 

 

 
     998,234       978,624   

Accumulated depreciation and amortization

     (353,533 )     (313,067
  

 

 

   

 

 

 
     644,701       665,557   

Construction in progress

     15,632       18,303   
  

 

 

   

 

 

 
   $ 660,333     $ 683,860   
  

 

 

   

 

 

 

NOTE 10 – MINING PROPERTIES

Mining properties consist of the following (in thousands):

 

June 30, 2013   Palmarejo     San
Bartolomé
    Kensington     Rochester     Endeavor     La Preciosa     Joaquin     Total  

Mining properties

  $ 162,855     $ 70,360     $ 338,907     $ 120,350     $ —        $ —        $ —        $ 692,472   

Accumulated depletion

    (94,647 )     (20,305 )     (60,310 )     (101,353 )     —          —          —          (276,615
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    68,208       50,055       278,597       18,997       —          —          —          415,857   

Mineral interests

    1,660,580       26,643       —          —          44,033       408,352       93,429       2,233,037   

Accumulated depletion

    (266,499 )     (8,037 )     —          —          (16,669 )     —          —          (291,205
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,394,081       18,606       —          —          27,364       408,352       93,429       1,941,832   

Non-producing and development properties

    —          —          —          —          —          —          —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mining properties

  $ 1,462,289     $ 68,661     $ 278,597     $ 18,997     $ 27,364     $ 408,352     $ 93,429     $ 2,357,689   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-12


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

December 31, 2012   Palmarejo     San
Bartolomé
    Kensington     Rochester     Endeavor     Joaquin     Other     Total  

Mining properties

  $ 155,722     $ 70,322     $ 333,619     $ 114,973     $ —        $ —        $ 11,416     $ 686,052   

Accumulated depletion

    (82,037 )     (18,439 )     (46,649 )     (100,437 )     —          —          (11,416 )     (258,978
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    73,685       51,883       286,970       14,536       —          —          —          427,074   

Mineral interests

    1,658,389       26,642       —          —          44,033       93,429       —          1,822,493   

Accumulated depletion

    (235,795 )     (7,338 )     —          —          (14,625 )     —          —          (257,758
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    1,422,594       19,304       —          —          29,408       93,429       —          1,564,735   

Non-producing and development properties

    —          —          —          —          —          —          142       142   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mining properties

  $ 1,496,279     $ 71,187     $ 286,970     $ 14,536     $ 29,408     $ 93,429     $ 142     $ 1,991,951   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operational Mining Properties

Palmarejo Mine: Palmarejo is located in the State of Chihuahua in northern Mexico, and its principal silver and gold properties are collectively referred to as the “Palmarejo mine.” The Palmarejo mine commenced production in April 2009.

San Bartolomé Mine: The San Bartolomé mine is a silver mine located near the city of Potosi, Bolivia. The mineral rights for the San Bartolomé project are held through long-term joint venture/lease agreements with several local independent mining co-operatives and the Bolivian state owned mining organization, (“COMIBOL”). The Company commenced commercial production at San Bartolomé in June 2008.

Kensington Mine: The Kensington mine is an underground gold mine and consists of the Kensington and adjacent Jualin properties located on the east side of the Lynn Canal about 45 miles north-northwest of Juneau, Alaska. The Company commenced commercial production in July of 2010.

Rochester Mine: The Company has conducted operations at the Rochester mine, located in Western Nevada, since September 1986. The mine utilizes the heap-leaching process to extract both silver and gold from ore mined using open pit methods. Rochester’s primary product is silver with gold produced as a by-product.

Martha Mine: The Martha mine is an underground silver mine located in Argentina. The Martha mine ceased active mining operations in September 2012 and is included in “other” in the tables above.

Mineral Interests

Endeavor Mine: In May 2005, CDE Australia Pty Ltd (“CDE Australia”), a wholly-owned subsidiary of Coeur acquired the silver production and reserves, up to a maximum 17.7 million payable ounces, contained at the Endeavor mine in Australia, which is owned and operated by Cobar Operations Pty. Limited, a wholly-owned subsidiary of CBH Resources Ltd. In March 2006, CDE Australia entered into an amended agreement under which it owns all silver production and reserves up to a total of 20.0 million payable ounces.

CDE Australia began realizing reductions in revenues in the fourth quarter of 2008 as a result of a silver price sharing provision that was part of the purchase agreement. CDE Australia has received approximately 4.5 million payable ounces to date and the current ore reserve contains approximately 4.1 million payable ounces based on current metallurgical recovery and current smelter contract terms.

 

F-13


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

Joaquin Project: The Joaquin project is located in the Santa Cruz province of southern Argentina. The Company commenced exploration of this large property located north of the Company’s Martha silver mine in November 2007 and acquired 100% in December 2012. Since that time, the Company has defined silver and gold mineralization in two deposits at Joaquin, La Negra and La Morocha, collectively referred to as the “Joaquin Project,” and has recently commenced work on detailed drilling and other technical, economic and environmental programs.

La Preciosa Project: On April 16, 2013, the Company completed its acquisition of Orko Silver Corporation (“Orko”), which holds the La Preciosa silver-gold project in Durango, Mexico.

NOTE 11 – DEBT AND CAPITAL LEASE OBLIGATIONS

The current and non-current portions of long-term debt and capital lease obligations as of June 30, 2013 and December 31, 2012 are as follows (in thousands):

 

     June 30,
2013
     December 31,
2012
 
     Current      Non-Current      Current      Non-Current  

3.25% Convertible Senior Notes due 2028

   $ —         $ 5,334      $ 48,081      $ —     

7.875% Senior Notes due 2021

     —           300,000        —           —     

Capital lease obligations

     5,485        1,244        7,902        3,460   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 5,485      $ 306,578      $ 55,983      $ 3,460   
  

 

 

    

 

 

    

 

 

    

 

 

 

3.25% Convertible Senior Notes due 2028

Per the indenture governing the 3.25% Convertible Senior Notes due 2028 (the “Convertible Notes”), the Company announced on February 13, 2013 that it was offering to repurchase all of its outstanding 3.25% Convertible Senior Notes due 2028. As of February 12, 2013, there was $48.7 million aggregate principal amount of Convertible Notes outstanding. The Company repurchased $43.3 million in aggregate principal amount, leaving a balance of $5.3 million at June 30, 2013.

7.875% Senior Notes due 2021

On January 29, 2013, the Company completed an offering of $300 million in aggregate principal amount of 7.875% Senior Notes due 2021 (the “Notes”) in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). As of June 30, 2013, the outstanding balance of Notes was $300 million.

Revolving Credit Facility

On August 1, 2012, Coeur Alaska, Inc. and Coeur Rochester, Inc. (the “Borrowers”), each a wholly-owned subsidiary of the Company, entered into a new Credit Agreement (the “Credit Agreement”) by and among the Company, the Borrowers, the lenders party thereto and Wells Fargo Bank, N.A., as administrative agent. The Credit Agreement provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) in an aggregate principal amount of up to $100.0 million, which principal amount may be increased, subject to receiving additional commitments therefor, by up to $50.0 million. There is a commitment fee of 0.10% on the unused portion of the line. The unused line fee for the three and six months ended June 30, 2013 was $ 0.1 and $0.3 million, respectively and was charged to interest expense.

As of June 30, 2013, no amounts were outstanding under the Revolving Credit Facility.

 

F-14


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

Palmarejo Gold Production Royalty Obligation

The Company recognized accretion expense on the Palmarejo gold production royalty obligation for the three months ended June 30, 2013 and 2012 of $4.1 million and $5.6 million, respectively. As of June 30, 2013 and December 31, 2012, the remaining minimum obligation under the royalty agreement was $56.5 million and $61.9 million, of which $23.9 million and $24.0 million were current, respectively.

Interest Expense

The Company expenses interest incurred on its various debt instruments as a cost of operating its properties. For the three and six months ended June 30, 2013, the Company expensed interest of $10.9 million and $20.7 million, respectively. For the three and six months ended June 30, 2012, the Company expensed interest of $7.6 and $14.2 million, respectively.

Interest expense is made up of the following (in thousands):

 

    Three months ended June 30,     Six months ended
June 30,
 
    2013     2012     2013     2012  

3.25% Convertible Senior Notes due 2028

  $ 43      $ 395     $ 380      $ 791   

7.875% Senior Notes due 2021

    5,906        —          10,041        —     

Revolving Credit Facility

    133        —          258        —     

Kensington Term Facility (terminated in 2012)

    —          906       —          1,880   

Capital lease obligations

    98        265       266        608   

Other debt obligations

    72        162       268        230   

Accretion of Palmarejo gold production royalty obligation

    4,107        5,559       8,170        10,663   

Amortization of debt issuance costs

    539        251       1,064        508   

Accretion of debt discount

    —          629       576        1,241   

Capitalized interest

    32        (610 )     (361     (1,694
 

 

 

   

 

 

   

 

 

   

 

 

 

Total interest expense, net of capitalized interest

  $ 10,930      $ 7,557     $ 20,662      $ 14,227   
 

 

 

   

 

 

   

 

 

   

 

 

 

NOTE 12 – RECLAMATION AND MINE CLOSURE

Reclamation and mine closure costs are based principally on legal and regulatory requirements. Management estimates costs associated with reclamation of mining properties as well as remediation costs for inactive properties. The Company uses assumptions about future costs, mineral prices, mineral processing recovery rates, production levels, capital costs and reclamation costs. Such assumptions are based on the Company’s current mining plan and the best available information for making such estimates. The sum of the expected costs by year is discounted, using the Company’s credit adjusted risk free interest rate. On an ongoing basis, management evaluates its estimates and assumptions; however, actual amounts could differ from those based on such estimates and assumptions.

Changes to the Company’s asset retirement obligations for active mining sites are as follows (in thousands):

 

     Three months ended June 30,     Six months ended
June 30,
 
     2013     2012     2013     2012  

Asset retirement obligation – Beginning

   $ 35,197     $ 33,434     $ 34,457     $ 32,714   

Accretion

     758       742       1,500       1,466   

Addition and changes in estimates

     —          335       —          335   

Settlements

     (377 )     (1 )     (379 )     (5
  

 

 

   

 

 

   

 

 

   

 

 

 

Asset retirement obligation

   $ 35,578     $ 34,510     $ 35,578     $ 34,510   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

F-15


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

In addition, the Company has accrued $0.6 million and $0.9 million as of June 30, 2013 and December 31, 2012, respectively, for reclamation liabilities related to former mining activities. These amounts are also included in reclamation and mine closure liabilities.

NOTE 13 – INCOME TAXES

The following table summarizes the components of the Company’s income tax provision for the three and six months ended June 30, 2013 and 2012 (in thousands):

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2013     2012     2013     2012  

United States

   $ (790 )   $ (388 )   $ (3,277 )   $ (3,525

Mexico

     (15,798 )     (12,052 )     (19,471 )     (15,750

Bolivia

     (4,556 )     (10,889 )     (8,884 )     (18,578

Other jurisdictions

     (1,990 )     (533 )     (2,022 )     (1,445
  

 

 

   

 

 

   

 

 

   

 

 

 

Income tax provision from continuing operations

   $ (23,134 )   $ (23,862 )   $ (33,654 )   $ (39,298
  

 

 

   

 

 

   

 

 

   

 

 

 

The income tax provision for the three and six months ended June 30, 2013 varies from the statutory rate primarily because of differences in tax rates for the Company’s foreign operations and changes in valuation allowances for net deferred tax assets, permanent differences and foreign exchange rate differences.

The Company has U.S. net operating loss carryforwards which expire in 2017 through 2031. Net operating losses in foreign countries have an indefinite carryforward period, except in Mexico where net operating loss carryforwards are limited to ten years.

NOTE 14 – SHARE-BASED COMPENSATION PLANS

Compensation expense recognized in the Company’s consolidated financial statements for the three months ended June 30, 2013 and 2012 for share based compensation awards was $1.5 million and $1.0 million, respectively. Compensation expense recognized for the six months ended June 30, 2013 and 2012 for share based compensation awards was $2.1 million and $2.7 million, respectively. Stock appreciation rights (SARs) outstanding under the plan are liability-based awards and are required to be re-measured at the end of each reporting period with corresponding adjustments to previously recognized and future stock-based compensation expense. At June 30, 2013, there was $10.3 million of total unrecognized compensation cost (net of estimated forfeitures) to be recognized over a weighted-average period of 1.8 years.

The following table summarizes the new grants issued during the six months ended June 30, 2013:

 

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 2, 2013

     1,805      $ 25.20        —         $ —           —         $ —     

January 22, 2013

     47,994      $ 23.90        77,715      $ 14.77        95,991      $ 27.41   

February 4, 2013

     18,668      $ 22.63        17,692      $ 14.00        21,828      $ 25.96   

April 1, 2013

     157,142      $ 18.51        73,290      $ 11.39        28,662      $ 21.23   

May 21, 2013

     111,193      $ 13.66        —         $ —           —         $ —     

 

F-16


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

The following options and stock appreciation rights were exercised during the six months ended June 30, 2013:

 

Award Type    Number of Units      Weighted Average
Exercise Price
 

Options

     926      $ 20.80   

Stock Appreciation Rights

     3,846      $ 15.40   

The following shows the weighted average fair value of SARs outstanding at June 30, 2013:

 

     SARs  

Weighted average fair value

   $ 4.05   

The following table shows the options and SARs exercisable at June 30, 2013:

 

Options
Exercisable
   Weighted
Average Exercise
Price
   SARs
Exercisable
   Weighted
Average Exercise
Price
256,336    $32.92    65,019    $14.21

NOTE 15 – DEFINED CONTRIBUTION AND 401(k) PLANS

Defined Contribution Plan

The Company provides a noncontributory defined contribution retirement plan for all eligible U.S. employees. Total contributions, which are based on a percentage of the salary of eligible employees, were $0.4 million and $0.5 million, for the three months ended June 30, 2013 and 2012, respectively. Total contributions for the six months ended June 30, 2013 and 2012 were $0.8 million and $1.0 million, respectively.

401(k) Plan

The Company maintains a retirement savings plan (which qualifies under Section 401(k) of the U.S. Internal Revenue Code) covering all eligible U.S. employees. Under the plan, employees may elect to contribute up to 100% of their cash compensation, subject to ERISA limitations. The Company adopted a Safe Harbor Tiered Match and is required to make matching contributions equal to 100% of the employee’s contribution up to 3% of the employee’s compensation plus matching contributions equal to 50% of the employee’s contribution up to an additional 2% of the employee’s compensation. Total plan expenses recognized in the Company’s consolidated financial statements for the three months ended June 30, 2013 and 2012 were $0.5 million and $0.5 million, respectively. Total plan expenses recognized in the Company’s consolidated financial statements for the six months ended June 30, 2013 and 2012 were $1.3 million and $1.1 million, respectively.

NOTE 16 – DERIVATIVE FINANCIAL INSTRUMENTS

Palmarejo Gold Production Royalty

On January 21, 2009, the Company entered into a gold production royalty transaction with Franco-Nevada Corporation. The royalty covers 50% of the life of mine production from the Palmarejo mine and adjacent properties. The royalty transaction included a minimum obligation of 4,167 ounces per month that ends when payments have been made on a total of 400,000 ounces of gold. As of June 30, 2013, a total of 170,382 ounces of gold remain outstanding under the minimum royalty obligation.

 

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Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

The price volatility associated with the minimum royalty obligation is considered an embedded derivative financial instrument under U.S. GAAP. As such, the Company is required to recognize the change in fair value of the remaining minimum obligation due to the changing gold prices. Unrealized gains are recognized in periods when the forward gold price has decreased from the previous period and unrealized losses are recognized in periods when the forward gold price increases. The fair value of the embedded derivative is reflected net of the Company’s current credit adjusted risk free rate, which was 7.0% and 4.2% at June 30, 2013 and December 31, 2012, respectively. The fair value of the embedded derivative at June 30, 2013 and December 31, 2012, based on forward gold prices averaging approximately $1,243 and $1,694 per ounce, respectively, was a liability of $52.3 million and $145.1 million, respectively. During the three months ended June 30, 2013 and 2012, mark-to-market adjustments for this embedded derivative amounted to a gain of $69.2 million and $25.1 million, respectively. During the six months ended June 30, 2013 and 2012, mark-to-market adjustments for this embedded derivative amounted to a gain of $92.7 million and $12.7 million, respectively.

Payments on the royalty obligation occur monthly resulting in a decrease to the carrying amount of the minimum obligation and the derivative liability and the recognition of realized gains or losses as a result of changing prices for gold. Each monthly payment is an amount equal to the greater of the minimum of 4,167 ounces of gold or 50% of the actual gold production per month multiplied by the excess of the monthly average market price of gold above $400 per ounce (which $400 floor is subject to a 1% annual inflation compounding adjustment beginning on January 21, 2013). For the three months ended June 30, 2013 and 2012, realized losses on settlement of the liabilities were $8.1 million and $11.0 million, respectively. For the six months ended June 30, 2013 and 2012, realized losses on settlement of the liabilities were $17.2 million and $24.2 million, respectively. The mark-to-market adjustments and realized losses are included in fair value adjustments, net in the consolidated statement of operations.

Forward Foreign Exchange Contracts

The Company periodically enters into forward foreign currency contracts to reduce the foreign exchange risk associated with forecasted Mexican peso (“MXN”) operating costs at its Palmarejo mine. At June 30, 2013, the Company had MXN foreign exchange contracts of $32.7 million in U.S. dollars. These contracts require the Company to exchange U.S. dollars for MXN at a weighted average exchange rate of 12.65 MXN to each U.S. dollar over the next nine months. At December 31, 2012, the Company had MXP foreign exchange contracts of $26.1 million in U.S. dollars. These contracts required the Company to exchange U.S. dollars for MXN at a weighted average exchange rate of 13.11 MXN to each U.S. dollar and the Company had a liability with a fair value of $0.1 million at December 31, 2012. In addition, at June 30, 2013, the Company had outstanding call options requiring it to sell $6.0 million in U.S. dollars in exchange for MXP at a weighted average strike price of 15.50 MXP to each U.S. dollar if the foreign exchange rate exceeds the strike price. Further, at June 30, 2013, the Company had outstanding put options allowing it to buy $6.0 million in U.S. dollars in exchange for MXP at a weighted average strike price of 12.50 MXP to each U.S. dollar if the foreign exchange rate exceeds the strike price. The Company had a liability with a fair value of $1.4 million at June 30, 2013. The Company recorded mark-to-market losses on these contracts of $2.3 million and $1.5 million for the three and six months ended June 30, 2013, respectively. The Company recorded mark-to-market gains on these contracts of $0.1 million and $2.8 million for the three and six months ended June 30, 2012, respectively. These mark-to-market adjustments are reflected in fair value adjustments, net in the consolidated statement of operations. The Company recorded realized gains of $0.2 million and $0.8 million in production costs applicable to sales during the three and six months ended June 30, 2013, respectively. The Company recorded realized losses of $1.2 million and $1.9 million in the three and six months ended June 30, 2012, respectively, which have been recognized in production costs applicable to sales.

In connection with an arrangement agreement entered into with Orko Silver Corp., the Company entered into a foreign currency contract in the first quarter of 2013 to reduce the foreign exchange risk associated with

 

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Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

forecasted Canadian dollars (“CAD”). Please see Note 8 – ACQUISITION OF ORKO SILVER CORPORATION/LA PRECIOSA MINERAL INTERESTS for additional information. This contract allowed the Company to exchange U.S. dollars for CAD at an exchange rate of 1.0 CAD to each U.S. dollar if the CAD exchange rate exceeded par. The contract expired unexercised in the second quarter. The Company recorded a mark-to-market gain on this contract of $1.6 million for the three months ended June 30, 2013, reversing the loss recognized in the first quarter. This mark-to-market adjustment is reflected in fair value adjustments, net in the consolidated statement of operations.

Concentrate Sales Contracts

The Company enters into concentrate sales contracts with third-party smelters. The contracts, in general, provide for a provisional payment based upon provisional assays and quoted metal prices. The 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 at the forward price at the time of sale. The embedded derivative, which is the final settlement price based on a future price, does not qualify for hedge accounting. These embedded derivatives are recorded as derivative assets (in Prepaid expenses and other) or derivative liabilities (in Accrued liabilities and other) on the balance sheet and are adjusted to fair value through earnings each period until the date of final settlement. At June 30, 2013, the Company had outstanding provisionally priced sales of $29.5 million, consisting of 0.3 million ounces of silver and 15,589 ounces of gold, which had a fair value of $28.4 million including the embedded derivative. At December 31, 2012, the Company had outstanding provisionally priced sales of $33.2 million consisting of 0.4 million ounces of silver and 11,957 ounces of gold, which had a fair value of approximately $34.1 million including the embedded derivative.

Commodity Derivatives

As of June 30, 2013, the Company had outstanding call options requiring it to deliver 87,000 ounces of gold at a weighted average strike price of $1,964.20 per ounce if the market price of gold exceeds the strike price. At June 30, 2013, the Company had outstanding put options allowing it to sell 97,000 ounces of gold at a weighted average strike price of $979.79 per ounce if the market price of gold were to fall below the strike price. The contracts expire over the next three years. At December 31, 2012, the Company had outstanding call options requiring it to deliver 97,000 ounces of gold at a weighted average strike price of $1,967.89 per ounce if the market price of gold exceeds the strike price. At December 31, 2012, the Company had outstanding put options allowing it to sell 122,000 ounces of gold at a weighted average strike price of $967.86 per ounce if the market price of gold were to fall below the strike price. As of June 30, 2013 and December 31, 2012, the fair market value of these contracts was a net asset of $2.4 million and a net liability of $ 9.3 million, respectively. During the three and six months ended June 30, 2013, 12,500 and 25,000 ounces of gold put options, respectively, expired at a weighted average strike price of $921.60 per ounce, resulting in a realized loss of $0.5 million and $1.1 million, respectively. During the three and six months ended June 30, 2013, 5,000 and 10,000 ounces of gold call options, respectively, at a weighted average strike price of $ 2,000.00 expired. During the three months ended June 30, 2013 and 2012, the Company recorded unrealized gains of $6.9 million and $4.5 million, respectively, related to the outstanding options which was included in fair value adjustments, net in the consolidated statement of operations. During the six months ended June 30, 2013 and 2012, the Company recorded unrealized gains of $11.7 million and $4.7 million, respectively, related to the outstanding options which was included in fair value adjustments, net in the consolidated statement of operations.

 

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Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

As of June 30, 2013, the Company had the following derivative instruments that settle in each of the years indicated in the table (in thousands except average prices, ounces and notional data):

 

     2013      2014      2015      Thereafter  

Palmarejo gold production royalty

   $ 14,750      $ 24,895      $ 24,691      $ 20,069   

Average gold price in excess of minimum contractual deduction

   $ 502      $ 498      $ 492      $ 490   

Notional ounces

     29,389        50,004        50,004        40,985   

Mexican peso forward purchase contracts

   $ 20,700      $ 12,000      $ —        $ —     

Average rate (MXP/$)

   $ 12.90      $ 12.21      $ —        $ —     

Mexican peso notional amount

     267,119        146,460        —          —     

Mexican peso put options purchased

   $ —        $ 6,000      $ —        $ —     

Average strike price (MXP/$)

   $ —        $ 12.50      $ —        $ —     

Mexico peso notional amount

     —          75,000        —          —     

Mexican peso call options sold

   $ —        $ 6,000      $ —        $ —     

Average strike price (MXP/$)

   $ —        $ 15.50      $ —        $ —     

Mexico peso notional amount

     —          93,000        —          —     

Silver concentrate sales agreements

   $ 7,249      $ —        $ —        $ —     

Average silver price

   $ 23.92      $ —        $ —        $ —     

Notional ounces

     302,990        —          —          —     

Gold concentrates sales agreements

   $ 22,252      $ —        $ —        $ —     

Average gold price

   $ 1,427      $ —        $ —        $ —     

Notional ounces

     15,589        —          —          —     

Gold put options purchased

   $ 720      $ 720      $ —        $ —     

Average gold strike price

   $ 936      $ 979      $ 1,010      $ —     

Notional ounces

     20,000        47,000        30,000        —     

Gold call options sold

   $ —        $ 720      $ —        $ —     

Average gold strike price

   $ 2,000      $ 1,934      $ 2,000      $ —     

Notional ounces

     10,000        47,000        30,000        —     

The following summarizes the classification of the fair value of the derivative instruments as of June 30, 2013 and December 31, 2012 (in thousands):

 

     June 30, 2013  
     Prepaid
expenses and
other
     Other
long-term
assets
     Accrued
liabilities  and
other
     Current
portion of
royalty
obligation
     Non-current
portion of
royalty
obligation
 

Foreign exchange contracts Peso

   $ 12      $ —        $ 1,457      $ —        $ —     

Palmarejo gold production royalty

     —          —          —          17,759        34,600   

Put and call options, net

     50        2,308        —          —          —     

Concentrate sales contracts

     20        —          1,128        —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 82      $ 2,308      $ 2,585      $ 17,759      $ 34,600   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

     December 31, 2012  
     Prepaid
expenses and
other
     Accrued
liabilities  and
other
     Other long-
term
Liabilities
     Current
portion of
royalty
obligation
     Non-current
portion of
royalty
obligation
 

Forward foreign exchange contracts Peso

   $ 376      $ 300      $ —        $ —        $ —     

Palmarejo gold production royalty

     —          —          —          41,146        103,952   

Put and call options, net

     —          2,025        7,274        —          —     

Concentrate sales contracts

     1,030        163        —          —          —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 
   $ 1,406      $ 2,488      $ 7,274      $ 41,146      $ 103,952   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following represent mark-to-market gains (losses) on derivative instruments for the three months ended June 30, 2013 and 2012 (in thousands):

 

        Three months ended
June 30,
    Six months ended
June 30,
 
Financial statement line  

Derivative

  2013     2012     2013     2012  

Sales of metal

  Concentrate sales contracts   $ (667 )   $ (877 )   $ (2,422 )   $ 459   

Production costs applicable to sales

  Forward foreign exchange contracts     203       (1,151 )     830       (1,934

Fair value adjustments, net

  Foreign exchange contracts MXN Peso     (2,260 )     83       (1,522 )     2,773   

Fair value adjustments, net

  Forward foreign exchange contracts Canadian dollar     1,598       —         —         —     

Fair value adjustments, net

  Silver ounces receivable     —         (337 )     —         22   

Fair value adjustments, net

  Palmarejo gold royalty     61,066       14,105       75,494       (11,505

Fair value adjustments, net

  Put and call options     6,350       2,187       10,577       1,636   
   

 

 

   

 

 

   

 

 

   

 

 

 
    $ 66,290     $ 14,010     $ 82,957     $ (8,549
   

 

 

   

 

 

   

 

 

   

 

 

 

Credit Risk

The credit risk exposure related to any potential derivative instruments is limited to the unrealized gains, if any, on outstanding contracts based on current market prices. To reduce counter-party credit exposure, the Company deals with financial institutions management deems credit worthy and limits credit exposure to each. The Company does not anticipate non-performance by any of its counterparties. In addition, to allow for situations where positions may need to be revised, the Company deals only in markets that management considers highly liquid.

NOTE 17 – COMMITMENTS AND CONTINGENCIES

Labor Union Contracts

The Company maintains one labor agreement with Sindicato de la Empresa Minera Manquiri at the San Bartolomé mine in Bolivia. The labor agreement, which became effective October 11, 2007, does not have a fixed term. As of June 30, 2013, approximately 10.2% of the Company’s worldwide labor force was covered by collective bargaining agreements.

Termination Benefits

As part of the March 2013 decision to relocate the Company’s headquarters office to Chicago, the Company established a one-time termination benefit program to retain current employees during the transition. The program provides for a one-time stay-bonus as well as severance and medical benefits equal to two weeks per

 

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Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

year of service. At June 30, 2013, the total benefit expected to be incurred under this plan is approximately $1.7 million. The liability is recognized ratably over the service period to June 30, 2014.

The Company does not have a written severance plan for any of its operations, including those operations located in Chile, Argentina, Bolivia and Mexico. However, laws in these foreign jurisdictions require payment of certain minimum statutory termination benefits. Accordingly, in situations where minimum statutory termination benefits must be paid to the affected employees, the Company records employee severance costs in accordance with U.S. GAAP. The Company has accrued obligations for post-employment benefits in these locations of approximately $7.3 million and $7.6 million at June 30, 2013 and December 31, 2012, respectively.

Kensington Production Royalty

On July 7, 1995, Coeur, through its wholly-owned subsidiary, Coeur Alaska, Inc., acquired the 50% ownership interest of Echo Bay Exploration Inc., or Echo Bay, giving Coeur 100% ownership of the Kensington property. Coeur Alaska is obligated to pay Echo Bay, a subsidiary of Kinross Gold Corporation, a scaled net smelter return royalty on 1.0 million ounces of future gold production after Coeur Alaska recoups the $32.5 million purchase price and its construction and development expenditures incurred after July 7, 1995 in connection with placing the property into commercial production. The royalty ranges from 1% at gold prices of $400 per ounce to a maximum of 2.5% at gold prices above $475 per ounce, with the royalty to be capped at 1.0 million ounces of production. No royalty has been paid to date.

Rochester Production Royalty

The Company acquired the Rochester property from ASARCO, a subsidiary of Grupo Mexico SA de CV, in 1983. The Company is obligated to pay a net smelter royalty interest to ASARCO when the market price of silver equals or exceeds $23.60 per ounce up to a maximum rate of 5%. Royalty expense was nil and $0.5 million, respectively for the three months ended June 30, 2013 and 2012, respectively. Royalty expense was $1.0 million and $1.1 million, respectively for the six months ended June 30, 2013 and 2012, respectively.

Rochester 3.4% NSR Royalty

In connection with the Company’s settlement of all disputes regarding competing mining claims located on or adjacent to the property encompassed by the Company’s Rochester gold and silver mine, the Company granted a 3.4% NSR royalty to a third party on up to 39.4 million silver equivalent ounces sold from the Rochester mine beginning January 1, 2014. Payments on the royalty obligation will occur quarterly reducing the carrying amount of the royalty liability and changes in silver and gold prices will result in the recognition of mark-to-market gains or losses in Fair value adjustments, net in the consolidated statement of operations.

Palmarejo Gold Production Royalty

On January 21, 2009, Coeur Mexicana entered into a gold production royalty transaction with Franco-Nevada Corporation under which Franco-Nevada purchased a royalty covering 50% of the life of mine gold to be produced from its Palmarejo silver and gold mine in Mexico. The royalty agreement provides for a minimum obligation to be paid monthly on a total of 400,000 ounces of gold, or 4,167 ounces per month over an initial eight year period. As of June 30, 2013, a total of 170,382 ounces of gold remain outstanding under the minimum royalty obligation.

NOTE 18 – SIGNIFICANT CUSTOMERS

The Company markets its doré to credit worthy bullion trading houses, market makers and members of the London Bullion Market Association, industrial companies and sound financial institutions. The refined metals are sold to end users for use in electronic circuitry, jewelry, silverware, pharmaceutical products, and the

 

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Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

technology industry. The Company currently has nine trading counterparties (International Commodities, Mitsui, Mitsubishi, Standard Bank, TD Securities, Valcambi, Johnson Matthey, Toronto Dominion Bank, and Auramet) and the sales of metals to these companies amounted to approximately 74% and 92% of total metal sales for the six months ended June 30, 2013 and 2012, respectively. Generally, the loss of a single bullion trading counterparty would not adversely affect the Company due to the liquidity of the markets and the availability of alternative trading counterparties.

Sales of silver and gold concentrates to third parties (Nyrstar, Aurubis, Sumitomo, Trafigura, Johnson Matthey, and China National Gold) amounted to approximately 26% and 8% of total metal sales for the six months ended June 30, 2013, and 2012, respectively. The loss of any one smelting and refining client may have a material adverse effect if alternate smelters and refiners are not available. The Company believes there is sufficient global capacity available to address the loss of any one smelter.

The following table indicates customers that represent 10% or more of total sales of metal for the three months ended June 30, 2013 and 2012 (in millions):

 

Customer

   Three months
ended June 30,
     Three months
ended June 30,
    

Segments reporting sales of metal

   2013      2012     

Valcambi

   $ 27.2      $ 148.3      Palmarejo, San Bartolomé

Auramet

     44.1        19.9      San Bartolomé, Kensington

Toronto Dominian Bank

     34.5        18.3      Palmarejo, Rochester

International Commodities

     25.7        7.0      Palmarejo, San Bartolomé, Rochester

The following table indicates customers that represent 10% or more of total sales of metal for the six months ended June 30, 2013 and 2012 (in millions):

 

Customer

   Six months
ended June 30,
     Six months
ended June 30,
    

Segments reporting sales of metal

   2013      2012     

Valcambi

   $ 39.4      $ 256.2      Palmarejo, San Bartolomé

Auramet

     68.9        33.5      San Bartolomé, Kensington

Johnson Mathey

     44.8        0.9      San Bartolomé, Rochester

International Commodities

     40.4        23.8      Palmarejo, San Bartolomé, Rochester

NOTE 19 – SEGMENT REPORTING

The operating segments are managed separately because each segment represents a distinct use of company resources and a separate contribution to the Company’s cash flows. The Company’s reportable operating segments include the Palmarejo, San Bartolomé, Martha, Rochester, Kensington and Endeavor mining properties and the La Preciosa exploration property. All operating segments are engaged in the discovery and/or mining of gold and silver and generate the majority of their revenues from the sale of these precious metal concentrates and/or refined precious metals. Through September 2012, the Martha mine sold precious metal concentrates, typically under long-term contracts, to trading partners located in the United States and Switzerland. The Company ceased active mining operations at the Martha mine in September of 2012.

The Kensington mine sells precious metals and concentrates, typically under long-term contracts to smelters in China, Japan, and Germany. Refined gold and silver produced by the Rochester, Palmarejo, and San Bartolomé mines are principally sold on a spot basis to precious metals trading banks such as International Commodities, Mitsui, Mitsubishi, Standard Bank, TD Securities, Valcambi and Auramet. Concentrates produced

 

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Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

at the Endeavor mine are sold to Nyrstar (formerly Zinifex), an Australian smelter. The Company’s exploration programs, other than the La Preciosa project, are reported in its other segment. The other segment also includes the corporate headquarters, elimination of intersegment transactions and other items necessary to reconcile to consolidated amounts. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies above. The Company evaluates performance and allocates resources based on profit or loss before interest, income taxes, depreciation and amortization, unusual and infrequent items and extraordinary items.

Financial information relating to the Company’s segments is as follows (in thousands):

 

Three months ended
June 30, 2013
  Palmarejo
Mine
    San
Bartolomé
Mine
    Kensington
Mine
    Rochester
Mine
    Martha
Mine
    Endeavor
Mine
    La Preciosa     Other     Total  

Sales of metals

  $ 86,217     $ 49,236     $ 30,851     $ 34,903     $ (161 )   $ 3,479     $ —       $ —       $ 204,525   

Productions costs applicable to sales

    (55,218 )     (32,815 )     (30,154 )     (23,054 )     —         (1,683 )     —         —         (142,924

Depreciation and depletion

    (35,557 )     (4,941 )     (13,261 )     (2,324 )     (113 )     (1,220 )     (2 )     (235 )     (57,653
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    (4,558 )     11,480       (12,564 )     9,525       (274 )     576       (2 )     (235 )     3,948   

Exploration expense

    3,189       27       563       512       603       —         690       1,190       6,774   

Loss on impairment

    —         —         —         —         86       —         —         —         86   

Other operating expenses

    —         —         134       34,177       861       —         —         12,873       48,045   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

    (7,747 )     11,453       (13,261 )     (25,164 )     (1,824 )     576       (692 )     (14,298 )     (50,957

Interest and other income, net

    (428 )     683       150       —         (177 )     —         (11 )     (16,990 )     (16,773

Interest expense, net

    (4,190 )     (14 )     (95 )     (5 )     (1 )     —         —         (6,625 )     (10,930

Fair value adjustments, net

    61,066       —         6,350       —         —         —         —         (662 )     66,754   

Income tax expense

    (17,282 )     (4,506 )     —         —         (117 )     85       —         (1,314 )     (23,134
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 31,419     $ 7,616     $ (6,856 )   $ (25,169 )   $ (2,119 )   $ 661     $ (703 )   $ (39,889 )   $ (35,040
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment assets (A)

  $ 1,860,240     $ 286,325     $ 485,215     $ 122,917     $ 6,757     $ 30,226     $ 409,458     $ 103,464     $ 3,304,602   

Capital expenditures (B)

  $ 9,166     $ 3,159     $ 7,406     $ 6,596     $ 10     $ —       $ 735     $ 129     $ 27,201   

 

A. Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties
B. Balance represents cash flow amounts

 

Three months ended
June 30, 2012
  Palmarejo
Mine
    San
Bartolomé
Mine
    Kensington
Mine
    Rochester
Mine
    Martha
Mine
    Endeavor
Mine
    Other     Total  

Sales of metals

  $ 136,365     $ 53,383     $ 21,124     $ 34,153     $ 4,149     $ 5,232     $ —       $ 254,406   

Productions costs applicable to sales

    (62,538 )     (22,773 )     (16,106 )     (20,751 )     (7,102 )     (2,553 )     —         (131,823

Depreciation and depletion

    (42,748 )     (4,070 )     (9,719 )     (2,060 )     (704 )     (1,592 )     (131 )     (61,024
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    31,079       26,540       (4,701 )     11,342       (3,657 )     1,087       (131 )     61,559   

Exploration expense

    1,624       (70 )     274       1,135       2,763       —         579       6,305   

Loss on impairment

    —         —         —         —         4,813       —         —      

Other operating expenses

    —         25       16       692       81       —         8,053       8,867   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

    29,455       26,585       (4,991 )     9,515       (11,314 )     1,087       (8,763 )     41,574   

Interest and other income, net

    (4,720 )     631       —         239       (494 )     —         1,123       (3,221

Interest expense

    (5,672 )     (36 )     (901 )     (7 )     (1 )     —         (940 )     (7,557

Fair value adjustments, net

    14,105       —         2,187       —         —         —         (253 )     16,039   

Income tax benefit (expense)

    (11,967 )     (10,889 )     —         —         (28 )     —         (978 )     (23,862
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 21,201     $ 16,291     $ (3,705 )   $ 9,747     $ (11,837 )   $ 1,087     $ (9,811 )   $ 22,973   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment assets (A)

  $ 1,954,084     $ 289,428     $ 518,611     $ 94,677     $ 13,070     $ 33,228     $ 16,654     $ 2,919,752   

Capital expenditures (B)

  $ 11,174     $ 7,800     $ 9,324     $ 2,946     $ 529     $ —       $ 465     $ 32,238   

 

A. Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties
B. Balance represents cash flow amounts

 

F-24


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

Six months ended

June 30, 2013

  Palmarejo
Mine
    San
Bartolomé
Mine
    Kensington
Mine
    Rochester
Mine
    Martha
Mine
    Endeavor
Mine
    La
Preciosa
    Other     Total  

Sales of metals

  $ 143,643     $ 82,377     $ 70,126     $ 74,377     $ (662 )   $ 6,461       $ —       $ 376,322   

Productions costs applicable to sales

    (81,937 )     (48,494 )     (53,718 )     (44,557 )     —         (3,003 )     —         1       (231,708

Depreciation and depletion

    (64,507 )     (9,696 )     (26,647 )     (4,505 )     (229 )     (2,044 )     (2 )     (459 )     (108,089
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    (2,801 )     24,187       (10,239 )     25,315       (891 )     1,414       (2 )     (458 )     36,525   

Exploration expense

    5,170       79       1,235       996       1,587       —         690       3,858       13,615   

Loss on impairment

    —         —         —         —         205       —         —         —         205   

Other operating expenses

    —         3,722       210       34,321       1,906       —         —         22,598       62,757   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

    (7,971 )     20,386       (11,684 )     (10,002 )     (4,589 )     1,414       (692 )     (26,914 )     (40,052

Interest and other income, net

    1,514       1,288       281       57       746       —         (11 )     (16,827 )     (12,952

Interest expense, net

    (7,928 )     (46 )     (354 )     (11 )     —         —         —         (12,323 )     (20,662

Fair value adjustments, net

    75,494       —         10,577       —         —         —         —         (1,521 )     84,550   

Income tax expense

    (20,816 )     (8,834 )     (1 )     —         (44 )     84       —         (4,043 )     (33,654
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $ 40,293     $ 12,794     $ (1,181 )   $ (9,956 )   $ (3,887 )   $ 1,498     $ (703 )   $ (61,628 )   $ (22,770
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment assets (A)

  $ 1,860,240     $ 286,325     $ 485,215     $ 122,917     $ 6,757     $ 30,226     $ 409,458     $ 103,464     $ 3,304,602   

Capital expenditures (B)

  $ 14,480     $ 3,616     $ 10,736     $ 9,894     $ 10     $ —       $ 735     $ 557     $ 40,028   

 

A. Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties
B. Balance represents cash flow amounts

 

Six months ended

June 30, 2012

   Palmarejo
Mine
    San
Bartolomé
Mine
    Kensington
Mine
    Rochester
Mine
    Martha
Mine
    Endeavor
Mine
    Other     Total  

Sales of metals

   $ 260,087     $ 94,759     $ 31,500     $ 52,911     $ 7,767     $ 11,946     $ —       $ 458,970   

Productions costs applicable to sales

     (108,397 )     (36,381 )     (33,197 )     (30,317 )     (10,795 )     (5,290 )     —         (224,377

Depreciation and depletion

     (80,517 )     (8,289 )     (16,324 )     (3,702 )     (1,300 )     (3,236 )     (248 )     (113,616
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     71,173       50,089       (18,021 )     18,892       (4,328 )     3,420       (248 )     120,977   

Exploration expense

     2,945       —         496       1,844       6,174       —         1,413       12,872   

Loss on impairment

     —         —         —         —         4,813       —         —         4,813   

Other operating expenses

     —         30       35       2,033       279       —         15,154       17,531   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

OPERATING INCOME

     68,228       50,059       (18,552 )     15,015       (15,594 )     3,420       (16,815 )     85,761   

Interest and other income, net

     (139 )     726       —         288       (570 )     —         1,481       1,786   

Interest expense, net

     (10,481 )     (36 )     (1,793 )     (15 )     (1 )     —         (1,901 )     (14,227

Fair value adjustments, net

     (11,505 )     —         1,636       —         —         —         2,795       (7,074

Income tax expense

     (15,511 )     (18,578 )     —         —         (239 )     —         (4,970 )     (39,298
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 30,592     $ 32,171     $ (18,709 )   $ 15,288     $ (16,404 )   $ 3,420     $ (19,410 )   $ 26,948   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Segment assets (A)

   $ 1,954,084     $ 289,428     $ 518,611     $ 94,677     $ 13,070     $ 33,228     $ 16,654     $ 2,919,752   

Capital expenditures (B)

   $ 18,344     $ 18,007     $ 20,202     $ 5,585     $ 1,188     $ —       $ 559     $ 63,885   

 

A. Segment assets consist of receivables, prepaids, inventories, property, plant and equipment, and mining properties
B. Balance represents cash flow amounts

 

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Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

     June 30,
2013
     December 31,
2012
 

Assets

     

Total assets for reportable segments

   $ 3,304,602      $ 2,974,056   

Cash and cash equivalents

     249,531        125,440   

Short term investments

     —          999   

Other assets

     112,583        120,906   
  

 

 

    

 

 

 

Total consolidated assets

   $ 3,666,716      $ 3,221,401   
  

 

 

    

 

 

 

Geographic Information

 

     June 30,
2013
     December 31,
2012
 

Long Lived Assets:

     

United States

   $ 503,105      $ 514,687   

Australia

     27,364        29,408   

Argentina

     94,964        95,134   

Bolivia

     235,781        240,905   

Mexico

     2,156,808        1,795,677   
  

 

 

    

 

 

 

Total

   $ 3,018,022      $ 2,675,811   
  

 

 

    

 

 

 

 

     Three months ended
June 30,
     Six months ended
June 30,
 
     2013     2012      2013     2012  

Revenues:

         

United States

   $ 65,754     $ 55,277      $ 144,502     $ 84,411   

Mexico

     86,217       136,365        143,643       260,087   

Bolivia

     49,236       53,383        82,377       94,759   

Australia

     3,479       5,232        6,462       11,946   

Argentina

     (161 )     4,149        (662 )     7,767   
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

   $ 204,525     $ 254,406      $ 376,322     $ 458,970   
  

 

 

   

 

 

    

 

 

   

 

 

 

NOTE 20 – LITIGATION AND OTHER EVENTS

Sites Related to Callahan Mining Corporation

In 1991, the Company acquired all of the outstanding common stock of Callahan Mining Corporation. Since then, the Company has received requests for information or notices of potential liability from state or federal agencies with regard to Callahan’s operations at sites in Idaho, Maine, Colorado and Washington. The Company did not make any decisions with respect to generation, transport or disposal of hazardous waste at these sites. Therefore, the Company believes that it is not liable for any potential cleanup costs either directly as an operator or indirectly as a parent. To date, none of these agencies have made any claims against the Company or Callahan for cleanup costs. The Company anticipates that further agency interaction may be possible with respect to three of these sites, discussed below.

Callahan operated a mine and mill in Brooksville, Maine from 1968 until 1972 and subsequently disposed of the property. In 2000, the U.S. Environmental Protection Agency, or EPA, made a formal request to the Company for information regarding the site. The site was placed on the National Priorities List on September 5,

 

F-26


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

2002, and the Maine Department of Transportation, a partial owner of the property, signed a consent order in 2005. In January 2009, the EPA and the State of Maine made additional formal requests to the Company for information relating to the site, to which the Company responded. The first phase of cleanup at the site began in April 2011.

The Van Stone Mine in Stevens County, Washington consists of several parcels and was mined from 1926 until 1993. Callahan sold its parcel in 1990. In February 2010, the State of Washington Department of Ecology notified Callahan Mining Corporation that it, among others, is a potentially liable person (PLP) under Washington law. Asarco LLC (“Asarco”), an affiliate of American Smelting and Refining Company, which developed the mill on the site in 1951, settled for $3.5 million. Another potentially liable person, Vaagen Brothers, signed a consent order which allows access to the site for a Remedial Investigation and Feasibility Study. Neither the Company nor Callahan Mining Corporation has received any further notices from the Washington Department of Ecology. On June 5, 2012, Asarco filed a lawsuit in the U.S. District Court for the Eastern District of Washington against five named defendants, including Callahan Mining Corporation, seeking contribution for the $3.5 million settlement. Callahan Mining Corporation filed a response and defense to the lawsuit on December 11, 2012 and does not believe it has any liability to Asarco. The Court has set a trial date for April 28, 2014. On January 23, 2013, the Court entered an Order dismissing one of the five named defendants from the lawsuit as a result of the parties reaching a settlement.

Callahan controlled the Akron Mine located in Gunnison County, Colorado under lease and option agreements with several owners from 1937-1960. In December 2003, the United States Forest Service (“USFS”) made a formal request for information to the Company for information regarding the site, to which the Company responded. In February 2007, the USFS made a formal request for information to Callahan for information regarding the site, to which Callahan responded. In April 2013, the USFS made a formal request for information to the Company regarding the site, to which the Company responded on June 10, 2013.

Bolivian Temporary Restriction on Mining above 4,400 Meters

On October 14, 2009, the Bolivian state-owned mining organization, COMIBOL, announced by resolution that it was temporarily suspending mining activities above the elevation of 4,400 meters above sea level while stability studies of Cerro Rico mountain are undertaken. The Company holds rights to mine above this elevation under valid contracts with COMIBOL as well as under authorized contracts with local mining cooperatives that hold their rights under contract themselves with COMIBOL. The Company temporarily adjusted its mine plan to confine mining activities to the ore deposits below 4,400 meters above sea level and timely notified COMIBOL of the need to lift the restriction.

The Cooperative Reserva Fiscal, with which the Company has one of those contracts, subsequently interpreted the COMIBOL resolution and determined that the Huacajchi deposit was not covered by such resolution. In March 2010, the Cooperative Reserva Fiscal notified COMIBOL that, based on its interpretation, it was resuming mining of high grade material above the 4,400 meter level in the Huacajchi deposit. In December 2011, the Cooperative Reserva Fiscal sent a similar notification to COMIBOL with respect to a further area above the 4,400 meter level known as Huacajchi Sur. Based on these notifications and on the absence of any objection from COMIBOL, the Company resumed mining operations at the San Bartolomé mine on the Huacajchi deposit and Huacajchi Sur. Mining in other areas above the 4,400 meter level continues to be suspended.

The partial suspension may reduce production until the Company is able to resume mining above 4,400 meters generally. It is uncertain at this time how long the suspension will remain in place. In addition, it is possible that COMIBOL may decide that the Company’s operations at the Huacajchi deposit or Huacajchi Sur are subject to the COMIBOL resolution, which may force the Company to cease mining at such deposits. If

 

F-27


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

COMIBOL objects to the Company mining at the Huacajchi deposit or Huacajchi Sur or if the other restrictions are not lifted, the Company may need to write down the carrying value of the asset. It is also uncertain if any new mining or investment policies or shifts in political attitude may affect mining in Bolivia.

Unpatented Mining Claims Dispute at Rochester in Nevada

On December 5, 2011, Coeur Rochester filed a lawsuit in the Sixth Judicial District Court of Nevada against Rye Patch Gold Corp and Rye Patch Gold US, Inc. seeking a declaratory judgment as to Coeur Rochester’s ownership of 447 unpatented mining claims covering approximately 8,600 acres of federal lands in and surrounding the Coeur Rochester mine operation. On December 5, 2011, Rye Patch Gold US, Inc. filed a similar action asserting its interest in the claims in the Second Judicial District Court of Nevada. The Rye Patch action was subsequently moved to the Sixth Judicial Court and consolidated with Coeur Rochester’s pending action. The dispute stemmed from competing asserted interests in the mining claims between Coeur Rochester and Rye Patch following Coeur Rochester’s inadvertent failure to pay annual mining claim maintenance fees.

On June 24, 2013, Coeur Rochester entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) with Rye Patch. The closing of the transactions contemplated by the Settlement Agreement (the “Closing”) occurred on June 27, 2013. At the Closing, in accordance with the terms of the Settlement Agreement, all disputes among Coeur Rochester and Rye Patch regarding the competing unpatented mining claims were mutually released and Coeur Rochester and Rye Patch agreed to take necessary actions to cause all pending litigation involving the parties associated with the competing claims to be dismissed with prejudice. In addition, Coeur Rochester acquired all Rye Patch mining claims in dispute with those of Coeur Rochester, in exchange for (1) a $10 million cash payment, (2) the granting to Rye Patch of a 3.4% net smelter returns royalty on up to 39.4 million silver equivalent ounces produced and sold from the Rochester Mine beginning January 1, 2014, payable in cash on a quarterly basis, which had an estimated fair value of $22.0 million, and (3) granting Rye Patch an option to acquire CRI’s federal patented mining claim called “Blue Bird” (which option was timely exercised by Rye Patch and the transfer of the “Blue Bird” claim to Rye Patch occurred on July 11, 2013).

Appeal of Plan of Operations Amendment at Rochester in Nevada

The Rochester property is also the subject of an administrative appeal filed by Great Basin Resource Watch (“GBRW”) with the Interior Board of Land Appeals (“IBLA”). This appeal challenges the decision of the U.S. Bureau of Land Management (“BLM”) to approve a plan of operations amendment permitting resumed mining in the existing mine pit and construction of a new heap leach pad. GBRW asserts that the National Environmental Policy Act (“NEPA”) required an Environmental Impact Statement for the plan of operations amendment, as opposed to the Environmental Assessment (“EA”) that was prepared. GBRW further alleges that BLM violated the Federal Land Policy & Management Act (“FLPMA”) by failing to avoid unnecessary and undue degradation of public lands. Because GBRW did not seek a stay of BLM’s decision, operations are proceeding as approved. Coeur was granted intervenor status in the appeal and is actively participating in its resolution. The BLM and Coeur assert that the EA complies with NEPA and that BLM complied with FLPMA by, among other things, requiring mitigation of any possible future effects on water quality. BLM filed a Supplemental Briefing on March 1, 2012 regarding additional analysis conducted by the BLM further supporting and strengthening BLM and Coeur’s positions that the EA complies with NEPA. The Company cannot predict whether this will result in further briefing with the IBLA, when the IBLA will rule on the appeal or what impact, if any, an adverse ruling may have on Rochester’s operations.

 

F-28


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

NOTE 21 – SUPPLEMENTAL GUARANTOR INFORMATION

The following Condensed Consolidating Financial Statements are presented to satisfy disclosure requirements of Rule 3-10 of Regulation S-X resulting from the guarantees by Coeur Alaska, Inc., Coeur Explorations, Inc., Coeur Rochester, Inc. and Coeur South America Corp. (collectively, the “Subsidiary Guarantors”) of the $300 million aggregate principal amount of 7.875% Senior Notes issued by Coeur on January 29, 2013. The following schedules present Condensed Consolidating Financial Statements of (a) Coeur, the parent company; (b) the Subsidiary Guarantors; and (c) certain wholly owned domestic and foreign subsidiaries of the Company (collectively, the “Non-Guarantor Subsidiaries”). Each of the Subsidiary Guarantors is 100% owned by Coeur, the guarantees are full and unconditional and no other subsidiary of Coeur guaranteed any security issued under the Registration Statement. There are no restrictions on the ability of Coeur to obtain funds from its subsidiaries by dividend or loan.

 

F-29


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING BALANCE SHEET

JUNE 30, 2013

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

ASSETS

         

Current Assets

         

Cash and cash equivalents

  $ 186,881      $ 723      $ 61,927      $ —        $ 249,531   

Short term investments

    —          —          —          —          —     

Receivables

    1,414        9,300        53,893        —          64,607   

Ore on leach pad

    —          28,880        —          —          28,880   

Metal and other inventory

    —          34,933        113,353        —          148,286   

Deferred tax assets

    —          —          2,620        —          2,620   

Restricted Assets

    —          —          660        —          660   

Prepaid expenses and other

    3,384        8,480        6,081        —          17,945   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    191,679        82,316        238,534        —          512,529   

Non-Current Assets

         

Property, plant and equipment, net

    1,700        203,350        455,283        —          660,333   

Mining properties, net

    —          297,594        2,060,095        —          2,357,689   

Ore on leach pad, non-current portion

    —          26,861        —          —          26,861   

Restricted assets

    18,682        60        5,726        —          24,468   

Marketable securities

    16,008        —          —          —          16,008   

Receivables, non-current portion

    —          —          38,539        —          38,539   

Debt issuance costs, net

    11,890        —          —          —          11,890   

Deferred tax assets

    955        —          14        —          969   

Net investment in subsidiaries

    1,878,855        —          1,578,799        (3,457,654     —     

Other

    52,443        14,717        318,635        (368,365     17,430   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

  $ 2,172,212      $ 624,898      $ 4,695,625      $ (3,826,019   $ 3,666,716   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

         

Current Liabilities

         

Accounts payable

  $ 2,379      $ 16,948      $ 38,119      $ —        $ 57,446   

Accrued liabilities and other

    2,309        2,254        4,806        —          9,369   

Accrued income taxes

    34        —          8,628        —          8,662   

Accrued payroll and related benefits

    3,231        4,312        8,033        —          15,576   

Accrued interest payable

    10,222        4        1,033        (1,022     10,237   

Current portion of capital leases and other debt obligations

    —          2,421        307,714        (304,650     5,485   

Current portion of royalty obligation

    —          2,911        41,694        —          44,605   

Current portion of reclamation and mine closure

    —          —          1,068        (595     473   

Deferred tax liability

    —          —          121        —          121   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    18,175        28,850        411,216        (306,267     151,974   

Non-Current Liabilities

         

Long-term debt and capital leases

    305,333        312        63,625        (62,692     306,578   

Non-current portion of royalty obligation

    —          19,135        67,169        —          86,304   

Reclamation and mine closure

    —          24,009        11,104        595        35,708   

Deferred income taxes

    118,743        —          592,807        —          711,550   

Other long term liabilities

    955        705        21,450        —          23,110   

Intercompany payable (receivable)

    (622,486     392,288        230,198        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (197,455     436,449        986,353        (62,097     1,163,250   

Stockholders’ Equity

         

Common stock

    1,016        350        120,848        (121,198     1,016   

Additional paid-in capital

    2,770,953        107,734        3,235,572        (3,343,306     2,770,953   

Accumulated deficit

    (418,926     51,515        (58,364     6,849        (418,926

Accumulated other comprehensive loss

    (1,551     —          —          —          (1,551
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

  $ 2,172,212      $ 624,898      $ 4,695,625      $ (3,826,019   $ 3,666,716   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-30


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING BALANCE SHEET

DECEMBER 31, 2012

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

ASSETS

         

Current Assets

         

Cash and cash equivalents

  $ 86,788      $ 400      $ 38,252      $ —        $ 125,440   

Short term investments

    999        —          —          —          999   

Receivables

    8,520        7,643        46,275        —          62,438   

Ore on leach pad

    —          22,991        —          —          22,991   

Metal and other inventory

    —          45,906        124,764        —          170,670   

Deferred tax assets

    —          —          2,458        —          2,458   

Restricted Assets

    —          —          396        —          396   

Prepaid expenses and other

    3,395        5,947        11,448        —          20,790   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Current Assets

    99,702        82,887        223,593        —          406,182   

Non-Current Assets

         

Property, plant and equipment, net

    4,183        208,857        470,820        —          683,860   

Mining properties, net

    —          301,506        1,690,445        —          1,991,951   

Ore on leach pad, non-current portion

    —          21,356        —          —          21,356   

Restricted assets

    18,922        60        5,988        —          24,970   

Marketable securities

    27,065        —          —          —          27,065   

Receivables, non-current portion

    —          —          48,767        —          48,767   

Debt issuance costs, net

    3,713        —          —          —          3,713   

Deferred tax assets

    955        —          —          —          955   

Net investment in subsidiaries

    1,553,434        —          1,285,862        (2,839,296     —     

Other

    39,120        12,360        318,330        (357,228     12,582   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Assets

  $ 1,747,094      $ 627,026      $ 4,043,805      $ (3,196,524   $ 3,221,401   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

         

Current Liabilities

         

Accounts payable

  $ 2,954      $ 17,211      $ 37,317      $ —        $ 57,482   

Accrued liabilities and other

    1,418        4,014        4,570        —          10,002   

Accrued income taxes

    257        —          26,851        —          27,108   

Accrued payroll and related benefits

    7,477        8,158        5,671        —          21,306   

Accrued interest payable

    463        5        1,002        (992     478   

Current portion of capital leases and other debt obligations

    48,081        3,013        309,539        (304,650     55,983   

Current portion of royalty obligation

    —          —          65,104        —          65,104   

Current portion of reclamation and mine closure

    —          —          1,445        (777     668   

Deferred tax liability

    —          —          121        —          121   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    60,650        32,401        451,620        (306,419     238,252   

Non-Current Liabilities

         

Long-term debt and capital leases

    —          1,675        53,367        (51,582     3,460   

Non-current portion of royalty obligation

    —          —          141,879        —          141,879   

Reclamation and mine closure

    —          23,149        10,744        777        34,670   

Deferred income taxes

    115,425        —          462,063        —          577,488   

Other long term liabilities

    955        8,086        18,331        —          27,372   

Intercompany payable (receivable)

    (628,216     390,480        237,736        —          —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (511,836     423,390        924,120        (50,805     784,869   

Stockholders’ Equity

         

Common stock

    903        350        22,760        (23,110     903   

Additional paid-in capital

    2,601,254        107,734        2,748,173        (2,855,907     2,601,254   

Accumulated deficit

    (396,156     63,151        (102,868     39,717        (396,156

Accumulated other comprehensive loss

    (7,721     —          —          —          (7,721
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total Liabilities and Stockholders’ Equity

  $ 1,747,094      $ 627,026      $ 4,043,805      $ (3,196,524   $ 3,221,401   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-31


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2013

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Sales of metal

  $ —        $ 65,754      $ 138,771      $ —        $ 204,525   

Production costs applicable to sales

    —          (53,207     (89,717     —          (142,924

Depreciation, depletion and amortization

    (231     (15,589     (41,833     —          (57,653
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

    (231     (3,042     7,221        —          3,948   

COSTS AND EXPENSES

         

General and administrative

    12,617        1,375        1,034        —          15,026   

Exploration

    314        1,398        5,062        —          6,774   

Litigation Settlement

      32,046            32,046   

Loss on impairment and other

    —          —          86        —          86   

Pre-development, care, maintenance, and other

    —          698        275        —          973   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    12,931        35,517        6,457        —          54,905   

OPERATING INCOME (LOSS)

    (13,162     (38,559     764        —          (50,957

OTHER INCOME AND EXPENSE

         

Fair value adjustments, net

    (662     6,350        61,066        —          66,754   

Other than temporary impairment of marketable sec.

    (17,192     —          —          —          (17,192

Interest and other, net

    1,309        241        (247     (884     419   

Interest expense, net of capitalized interest

    (6,623     (100     (5,091     884        (10,930
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and expense, net

    (23,168     6,491        55,728        —          39,051   

INCOME (LOSS) BEFORE INCOME TAXES

    (36,330     (32,068     56,492        —          (11,906

Income tax provision

    (824     (191     (22,119     —          (23,134
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) after taxes

    (37,154     (32,259     34,373        —          (35,040
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity income (loss) in consolidated subsidiaries

    2,114        —          —          (2,114     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

  $ (35,040   $ (32,259   $ 34,373      $ (2,114   $ (35,040
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-32


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)

THREE MONTHS ENDED JUNE 30, 2013

 

     Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
     Eliminations     Consolidated  

NET INCOME (LOSS)

   $ (35,040   $ (32,259   $ 34,373       $ (2,114   $ (35,040

OTHER COMPREHENSIVE INCOME (LOSS) net of tax:

           

Unrealized loss on available for sale securities, net

     (7,491     —          —           —          (7,491

Reclassification adjustments for losses included in net income

     17,192        —          —           —          17,192   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive income (loss)

     9,701        —          —           —          9,701   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

COMPREHENSIVE INCOME (LOSS)

   $ (25,339   $ (32,259   $ 34,373       $ (2,114   $ (25,339
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

F-33


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 2012

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Sales of metal

  $ —        $ 55,277      $ 199,129      $ —        $ 254,406   

Production costs applicable to sales

    —          (36,857     (94,966     —          (131,823

Depreciation, depletion and amortization

    (131     (11,780     (49,113     —          (61,024
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

    (131     6,640        55,050        —          61,559   

COSTS AND EXPENSES

         

General and administrative

    7,989        432        173        —          8,594   

Exploration

    212        1,782        4,311        —          6,305   

Loss on impairment and other

    —          —          4,813        —          4,813   

Pre-development, care, maintenance, and other

    —          276        (3     —          273   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    8,201        2,490        9,294        —          19,985   

OPERATING INCOME (LOSS)

    (8,332     4,150        45,756        —          41,574   

OTHER INCOME AND EXPENSE

         

Fair value adjustments, net

    (254     2,187        14,106        —          16,039   

Interest and other income, net

    2,176        325        (4,495     (1,227     (3,221

Interest expense, net of capitalized interest

    (940     (908     (6,936     1,227        (7,557
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and expense, net

    982        1,604        2,675        —          5,261   

INCOME (LOSS) BEFORE INCOME TAXES

    (7,350     5,754        48,431        —          46,835   

Income tax benefit (provision)

    (388     —          (23,474     —          (23,862
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) after taxes

    (7,738     5,754        24,957        —          22,973   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity income (loss) in consolidated subsidiaries

    30,711        —          —          (30,711     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

  $ 22,973      $ 5,754      $ 24,957      $ (30,711   $ 22,973   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-34


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

THREE MONTHS ENDED JUNE 30, 2012

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

NET INCOME (LOSS)

  $ 22,973      $ 5,754      $ 24,957      $ (30,711   $ 22,973   

OTHER COMPREHENSIVE INCOME (LOSS) net of tax:

         

Unrealized loss on available for sale securities, net

    (5,676     —          —          —          (5,676
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

    (5,676     —          —          —          (5,676
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME (LOSS)

  $ 17,297      $ 5,754      $ 24,957      $ (30,711   $ 17,297   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-35


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2013

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Sales of metal

  $ —        $ 144,502      $ 231,820      $ —        $ 376,322   

Production costs applicable to sales

    —          (98,274     (133,434     —          (231,708

Depreciation, depletion, and amortization

    (450     (31,160     (76,479     —          (108,089
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

    (450     15,068        21,907        —          36,525   

COSTS AND EXPENSES

         

General and administrative

    22,354        1,542        1,357        —          25,253   

Exploration

    663        2,862        10,090        —          13,615   

Litigation settlement

      32,046            32,046   

Loss on impairment and other

    —          —          205        —          205   

Pre-development, care, maintenance, and other

    —          698        4,760        —          5,458   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    23,017        37,148        16,412        —          76,577   

OPERATING INCOME (LOSS)

    (23,467     (22,080     5,495        —          (40,052

OTHER INCOME AND EXPENSE

         

Fair value adjustments, net

    (1,522     10,577        75,495        —          84,550   

Other than temporary impairment of marketable sec.

    (17,227     —          —          —          (17,227

Interest and other, net

    2,208        475        3,316        (1,724     4,275   

Interest expense, net of capitalized interest

    (12,320     (364     (9,702     1,724        (20,662
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and expense, net

    (28,861     10,688        69,109        —          50,936   

INCOME (LOSS) BEFORE INCOME TAXES

    (52,328     (11,392     74,604        —          10,884   

Income tax benefit (provision)

    (3,310     (246     (30,098     —          (33,654
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) after taxes

    (55,638     (11,638     44,506        —          (22,770
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity income (loss) in consolidated subsidiaries

    32,868        —          —          (32,868     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

  $ (22,770   $ (11,638   $ 44,506      $ (32,868   $ (22,770
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-36


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

SIX MONTHS ENDED JUNE 30, 2013

 

NET INCOME (LOSS)

   $ (22,770   $ (11,638   $ 44,506       $ (32,868   $ (22,770

OTHER COMPREHENSIVE INCOME (LOSS) net of tax:

           

Unrealized loss on Available for sale securities

     (11,057     —          —           —          (11,057

Reclassification adjustments for losses included in net income

     17,227        —          —           —          17,227   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Other comprehensive income (loss)

     6,170        —          —           —          6,170   
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

COMPREHENSIVE INCOME (LOSS)

   $ (16,600   $ (11,638   $ 44,506       $ (32,868   $ (16,600
  

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

F-37


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2012

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Sales of metal

  $ —        $ 84,412      $ 374,558      $ —        $ 458,970   

Production costs applicable to sales

    —          (63,513     (160,864     —          (224,377

Depreciation, depletion and amortization

    (248     (20,026     (93,342     —          (113,616
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross Profit

    (248     873        120,352        —          120,977   

COSTS AND EXPENSES

         

General and administrative

    15,035        766        389        —          16,190   

Exploration

    818        2,941        9,113        —          12,872   

Loss on impairment and other

    —          —          4,813        —          4,813   

Pre-development, care, maintenance, and other

    —          1,303        38        —          1,341   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total costs and expenses

    15,853        5,010        14,353        —          35,216   

OPERATING INCOME (LOSS)

    (16,101     (4,137     105,999        —          85,761   

OTHER INCOME AND EXPENSE

         

Fair value adjustments, net

    2,795        1,636        (11,505     —          (7,074

Interest and other, net

    3,670        784        199        (2,867     1,786   

Interest expense, net of capitalized interest

    (1,901     (1,808     (13,385     2,867        (14,227
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total other income and expense, net

    4,564        612        (24,691     —          (19,515

INCOME (LOSS) BEFORE INCOME TAXES

    (11,537     (3,525     81,308        —          66,246   

Income tax benefit (provision)

    (3,524     —          (35,774     —          (39,298
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total income (loss) after taxes

    (15,061     (3,525     45,534        —          26,948   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Equity income (loss) in consolidated subsidiaries

    42,009        —          —          (42,009     —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

NET INCOME (LOSS)

  $ 26,948      $ (3,525   $ 45,534      $ (42,009   $ 26,948   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-38


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE INCOME (LOSS)

SIX MONTHS ENDED JUNE 30, 2012

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

NET INCOME (LOSS)

  $ 26,948      $ (3,525   $ 45,534      $ (42,009   $ 26,948   

OTHER COMPREHENSIVE INCOME (LOSS) net of tax:

         

Unrealized loss on available for sale securities

    (5,252     —          —          —          (5,252
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other comprehensive income (loss)

    (5,252     —          —          —          (5,252
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

COMPREHENSIVE INCOME (LOSS)

  $ 21,696      $ (3,525   $ 45,534      $ (42,009   $ 21,696   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-39


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

THREE MONTHS ENDED JUNE 30, 2013

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Cash Flows From Operating Activities

         

Cash provided by operating activities

  $ (4,115   $ 3,768      $ 65,798      $ (2,113   $ 63,338   

Cash Flows From Investing Activities

         

Purchase of short term investments and marketable securities

    —          (23     (660     —          (683

Proceeds from sales and maturities of short term investments, marketable securities

    1,498        24        —          —          1,522   

Capital expenditures

    (129     (14,003     (13,069     —          (27,201

Acquisition of Orko Silver Corporation

    (107,249     —          3,488        2,113        (101,648

Other

    (18     205        67        —          254   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used in) investing activities

    (105,898     (13,797     (10,174     2,113        (127,756

Cash Flows From Financing Activities

         

Payments on long-term debt, capital leases, and associated costs

    —          (715     (1,142     —          (1,857

Payments on gold lease obligation

    —          —          (15,480     —          (15,480

Net intercompany borrowings (repayments)

    (11,666     11,183        483        —          —     

Other

    (25     —          —          —          (25
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used in) financing activities

    (11,691     10,468        (16,139     —          (17,362
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

    (121,704     439        39,485        —          (81,780

Cash and cash equivalents at beginning of period

    308,585        284        22,442        —          331,311   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $ 186,881      $ 723      $ 61,927      $ —        $ 249,531   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-40


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

THREE MONTHS ENDED JUNE 30, 2012

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Cash Flows From Operating Activities

         

Cash provided by operating activities

  $ 26,729      $ (2,913   $ 120,097      $ (30,710   $ 113,203   

Cash Flows From Investing Activities

         

Purchase of short term investments and marketable securities

    (6,807     (24     —          —          (6,831

Proceeds from sales and maturities of short term investments, marketable securities

    659        24        —          —          683   

Capital expenditures

    (466     (12,269     (19,503     —          (32,238

Other

    1,038        —          (43     —          995   

Investments in unconsolidated subsidiaries

    (30,710     —          —          30,710        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used in) investing activities

    (36,286     (12,269     (19,546     30,710        (37,391

Cash Flows From Financing Activities

         

Payments on long-term debt, capital leases, and associated costs

    —          (4,702     (4,092     —          (8,794

Payments on gold production royalty

    —          —          (19,287     —          (19,287

Net intercompany borrowings (repayments)

    55,024        20,330        (75,354     —          —     

Other

    (217     —          —          —          (217
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by financing activities

    54,807        15,628        (98,733     —          (28,298
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash & cash equivalents

    45,250        446        1,818        —          47,514   

Cash and cash equivalents at beginning of period

    79,656        91        72,136        —          151,883   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

    124,906        537        73,954      $ —        $ 199,397   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-41


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2013

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Cash Flows From Operating Activities

         

Cash provided by operating activities

  $ 18,859      $ 20,659      $ 69,621      $ (32,867   $ 76,272   

Cash Flows From Investing Activities

         

Purchase of short term investments and marketable securities

    (1,598     (39     (3,695     —          (5,332

Proceeds from sales and maturities of short term investments, marketable securities

    2,873        38        3,433        —          6,344   

Capital expenditures

    (557     (20,629     (18,842     —          (40,028

Acquisition of Orko Silver Corporation

    (149,568     —          3,487        32,867        (113,214

Other

    (6     443        772        —          1,209   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used in) investing activities

    (148,856     (20,187     (14,845     32,867        (151,021

Cash Flows From Financing Activities

         

Proceeds from issuance of notes and bank borrowings

    300,000        —          —          —         
300,000
  

Payments on long-term debt, capital leases, and associated costs

    (52,565     (1,955     (2,677     —          (57,197

Payments on gold production royalty

    —          —          (30,929     —          (30,929

Share repurchases

    (12,557     —          —          —          (12,557

Net intercompany borrowings (repayments)

    (4,311     1,806        2,505        —          —     

Other

    (477     —          —          —          (477
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by (used in) financing activities

    230,090        (149     (31,101     —          198,840   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash & cash equivalents

    100,093        323        23,675        —          124,091   

Cash and cash equivalents at beginning of period

    86,788        400        38,252        —          125,440   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $ 186,881      $ 723      $ 61,927      $ —        $ 249,531   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-42


Table of Contents

Coeur Mining, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited) – (Continued)

 

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2012

 

    Coeur Mining, Inc.     Guarantor
Subsidiaries
    Non-Guarantor
Subsidiaries
    Eliminations     Consolidated  

Cash Flows From Operating Activities

         

Cash provided by operating activities

  $ 29,931      $ (9,217   $ 151,498      $ (42,008   $ 130,204   

Cash Flows From Investing Activities

         

Purchase of short term investments and marketable securities

    (7,843     (23     —          —          (7,866

Proceeds from sales and maturities of short term investments, marketable securities

    20,677        24        —          —          20,701   

Capital expenditures

    (559     (25,787     (37,539     —          (63,885

Other

    1,666        —          (486     —          1,180   

Investments in unconsolidated subsidiaries

    (42,008     —          —          42,008        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash used in investing activities

    (28,067     (25,786     (38,025     42,008        (49,870

Cash Flows From Financing Activities

         

Payments on long-term debt, capital leases, and associated costs

    (282     (6,068     (7,894     —          (14,244

Payments on gold production royalty

    —          —          (40,660     —          (40,660

Net intercompany borrowings (repayments)

    38,697        41,175        (79,872     —          —     

Other

    (1,045     —          —          —          (1,045
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash provided by financing activities

    37,370        35,107        (128,426     —          (55,949
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash & cash equivalents

    39,234        104        (14,953     —          24,385   

Cash and cash equivalents at beginning of period

    85,672        433        88,907        —          175,012   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $ 124,906      $ 537      $ 73,954      $ —        $ 199,397   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

F-43