Note 8. Shareholders' Equity

6 Months Ended

Jun. 30, 2012

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.  Restricted stock unit grants vest after a named period with compensation cost amortized over that period.

On June 25, 2012, the Board of Directors granted 440,735 restricted stock units to employees, with one third of those vesting in June 2013, one third vesting in June 2014, and one third vesting in June 2015.  The Board of Directors granted an additional 262,934 restricted stock units on June 25, 2012 that vest in June 2013.  The $1.9 million in expense related to the unit awards vesting in 2013 will be recognized on a straight-line basis over the next twelve months, while the $0.7 million in expense related to awards vesting in each of 2014 and 2015 will be recognized over the next twenty-four and thirty-six month periods, respectively.

In the second quarter of 2012, a total of 77,976 common shares were issued to nonemployee directors.  We issued a total of 42,636 common shares to nonemployee directors in the second quarter of 2011.

Stock-based compensation expense for restricted stock unit grants to employees and shares issued to nonemployee directors recorded in the first six months of 2012 totaled $1.5 million, compared to $0.9 million in the same period last year.

Under the terms of our equity compensation plans, we have permitted our employees' withholding tax obligations with respect to shares awarded thereunder which have vested to be satisfied by net share settlement.  As a result, in the first half of 2012, we repurchased 39,538 shares for $0.2 million, or approximately $4.58 per share.

Common Stock Dividends

In September 2011, our Board of Directors adopted a common stock dividend policy that links the amount of anticipated dividends on our common stock to our average quarterly realized silver price in the preceding quarter.  For illustrative purposes only, 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		Annualized 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

On February 17, 2012, our Board of Directors declared a silver price-linked common stock dividend of $0.01 per share based on the average realized silver price of $31.61 per ounce in the fourth quarter of 2011.  In addition, in February 2012, our Board of Directors adopted an additional common stock dividend policy that includes a minimum anticipated annual dividend of $0.01 per share of common stock, payable quarterly when declared, and declared a dividend of $0.0025 per share pursuant to that policy.  Therefore, the aggregate common stock dividend declared by our Board of Directors was $0.0125 per share, for a total of approximately $3.6 million paid in March 2012.  On May 8, 2012, our Board of Directors declared a silver price-linked common stock dividend of $0.02 per share, based on the realized silver price for the first quarter of 2012 of $36.59, along with a $0.0025 common dividend related to our $0.01 minimum anticipated annual dividend policy.  The total cash dividend of approximately $6.4 million was paid in June 2012.  A silver price-linked dividend was not declared for the second quarter of 2012, as the average realized silver price of $27.05 per ounce was below the minimum threshold of $30 according to the policy.  On August 7, 2012, our Board of Directors declared a $0.0025 common dividend related to our $0.01 minimum anticipated annual dividend policy, with the total dividend of approximately $0.7 million to be paid in the third quarter of 2012.  The declaration and payment of common stock dividends is at the sole discretion of our Board of Directors.

Common Stock Repurchase Program

On May 8, 2012, we announced that our Board of Directors approved a stock repurchase program.  Under the program, we are authorized to repurchase up to 20 million shares of our outstanding common stock from time to time in open market or privately negotiated transactions, depending on prevailing market conditions and other factors.  The repurchase program may be modified, suspended or discontinued by us at any time.  As of June 30, 2012, no shares had been purchased under the repurchase program.  During July 2012, 60,000 shares were purchased at an average price of $4.89 per share, leaving 19.94 million shares that may yet be purchased under the program.  The closing price of our common stock at August 6, 2012, was $4.69 per share.

 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 June 30, 2012:

Warrants Outstanding	Warrants	Exercise Price		Expiration Date
Series 1 warrants	5,200,519	$	2.42	June 2014
Series 1 warrants	460,976	2.53		June 2014
Series 3 warrants	16,671,128	2.47		August 2014
Total warrants outstanding	22,332,623

No warrants were exercised during the first six months of 2012.  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  totaling approximately $0.7 million and $10.5 million were paid to the Plaintiffs in 2012 and 2011, respectively, under the terms of the Consent Decree.