Note 8. Shareholders’ Equity

9 Months Ended

Sep. 30, 2011

Stockholders' Equity Note Disclosure [Text Block]

Note 8.    Shareholders’ Equity

Share-based Compensation Plans

We periodically grant stock options, restricted stock unit awards, and/or shares of common stock to our employees and directors.  We measure the fair value of compensation cost for stock options issued pursuant to our equity compensation plans using the Black-Scholes options pricing model.  Stock option grants generally vest immediately. However, grants to individual executives upon hiring or retention vest over a defined service period, with cost amortized over that period. We measure compensation cost for restricted stock units and stock grants at the closing price of our stock at the time of grant, net of estimated forfeiture.  Restricted stock unit grants vest after a named period, usually one year, with compensation cost amortized over that period.

As the result of June 9, 2011 awards granted by the Board of Directors, 7,968 shares of common stock were distributed to employees in June 2011, with the total $0.1 million expense related to these awards recognized in the second quarter of 2011.  On June 24, 2011 the Board of Directors granted 256,927 stock units that vest in June 2012 and 163,649 restricted stock units that vest in March 2014, with $0.6 million of the expense related to these awards recognized as of September 30, 2011, and the remaining expense to be recognized over the vesting periods.  The $1.4 million in remaining expense related to the unit awards vesting in 2012 will be recognized on a straight-line basis over the next nine months, while the $1.1 million in remaining expense related to the awards vesting in 2014 will be recognized on a straight-line basis over the next thirty months.

In the second quarter of 2011, a total of 42,636 common shares were issued to nonemployee directors.  We issued a total of 48,825 common shares to nonemployee directors in the second quarter of 2010.

Share-based compensation expense for restricted stock unit grants recorded in the first nine months of 2011 totaled $1.5 million, compared to $3.3 million in the same period last year.  No stock options were granted in the first nine months of 2011.

Under the terms of our equity compensation plans, we have permitted our employees’ withholding tax obligations to be satisfied by net share settlement.  As a result, in the first nine months of 2011, we repurchased 56,688 shares at fair market value for $0.5 million, or approximately $8.29 per share.

Cash received for the exercise of stock options during the first nine months of 2011 and 2010 totaled $0.5 million and $0.4 million, respectively.

Common Stock Dividends

In September 2011, our Board of Directors adopted a common stock dividend policy that links the amount of any declared dividend on our common stock to our average quarterly realized silver price in the preceding quarter.  The table below summarizes potential per share dividend amounts at different quarterly average realized price levels according to the policy:

Quarterly average realized silver price per ounce	Quarterly dividend per share	Annual dividend per share
$ 30	$0.01	$0.04
$ 35	$0.02	$0.08
$ 40	$0.03	$0.12
$ 45	$0.04	$0.16
$ 50	$0.05	$0.20
$ 55	$0.06	$0.24
$ 60	$0.07	$0.28

The declaration and payment of common stock dividends is at the sole discretion of our Board of Directors.  On November 8, 2011, our Board of Directors declared the first quarterly silver price-linked dividend of $0.02 per share ($5.6 million total), based on the average realized silver price in the third quarter of 2011 of $37.02 per ounce.

  Conversion of 6.5% Mandatory Convertible Preferred Stock to Common Stock

On January 1, 2011, all 2,012,500 outstanding shares of our 6.5% Mandatory Convertible Preferred Stock were automatically converted to shares of our common stock at a conversion rate of 9.3773 shares of Common Stock for each share of 6.5% Mandatory Convertible Preferred Stock.  We issued approximately 18.9 million shares of common stock in connection with the mandatory conversion.  The final $3.3 million quarterly dividend on the 6.5% Mandatory Convertible Preferred Stock for the quarter ended December 31, 2010 was paid in cash in January 2011.

Warrants

The following table summarizes certain information about our stock purchase warrants at September 30, 2011:

Warrants Outstanding	Warrants		Exercise Price		Expiration Date
Series 1 warrants	$	5,200,519	$	2.45	June 2014
Series 1 warrants		460,976		2.56	June 2014
Series 3 warrants		16,944,378		2.50	August 2014
Total warrants outstanding		22,605,873

In the first nine months of 2011, warrants to purchase approximately 1.9 million shares of our common stock were exercised, resulting in net proceeds to us of approximately $4.6 million.  Under the financial terms of the Consent Decree settling the Coeur d’Alene Basin litigation, the proceeds from the exercise of our outstanding warrants will be paid to the Plaintiffs within 30 days after the end of the quarter when exercised.  Proceeds from Series 1 and Series 3 warrant exercises prior to April 12, 2011, totaling approximately $9.5 million, were paid over to the Plaintiffs in October 2011 under the terms of the Consent Decree (see Note 4 for more information).