Note

Business Segments and Sales of Products

We discover, acquire, develop, produce, and market concentrates and doré containing silver, gold, lead and zinc. We are currently organized and managed in

five

segments, which represent our operating units: the Greens Creek unit, the Lucky Friday unit, the Casa Berardi unit, the San Sebastian unit, and the Nevada Operations unit. The Nevada Operations unit was added as a result of our acquisition of Klondex in

July 2018 (

see

Note

for more information).

General corporate activities

not

associated with operating units and their various exploration activities, as well as discontinued operations and idle properties, are presented as “other.” Interest expense, interest income and income taxes are considered general corporate items, and are

not

allocated to our segments.

The following tables present information about reportable segments for the

three

months ended

March

31,

2019

and

2018

(in thousands):

	Three Months Ended March 31,
	2019			2018
Net sales to unaffiliated customers:
Greens Creek	$	80,129		$	65,850
Lucky Friday		2,182			4,977
Casa Berardi		40,062			55,548
San Sebastian		12,600			13,334
Nevada Operations		17,644			—
	$	152,617		$	139,709
Income (loss) from operations:
Greens Creek	$	25,433		$	23,152
Lucky Friday		(2,781	)		(4,146	)
Casa Berardi		(10,519	)		3,250
San Sebastian		(1,512	)		5,017
Nevada Operations		(13,991	)		—
Other		(12,754	)		(15,324	)
	$	(16,124	)	$	11,949

The following table presents identifiable assets by reportable segment as of

March

31,

2019

and

December

31,

2018

(in thousands):

	March 31, 2019		December 31, 2018
Identifiable assets:
Greens Creek	$	640,241	$	637,386
Lucky Friday		440,433		437,499
Casa Berardi		739,978		754,248
San Sebastian		54,152		44,152
Nevada Operations		575,197		581,194
Other		244,604		249,465
	$	2,694,605	$	2,703,944

Our products consist of both metal concentrates, which we sell to custom smelters and brokers, and unrefined bullion bars (doré), which

may

be sold as doré or further refined before sale to precious metals traders. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer.

For sales of metals from refined doré, which we currently have at our Casa Berardi, San Sebastian and Nevada Operations units, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner. For sales of doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of title and control of the doré containing the agreed-upon metal quantities to the customer. Refining, selling and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred.

For concentrate sales, which we currently have at our Greens Creek and Lucky Friday units, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment. Concentrates sold at our Lucky Friday unit typically leave the mine and are received by the customer within the same day. However, there is a period of time between shipment of concentrates from our Greens Creek unit and their physical receipt by the customer, and judgment is required in determining when control has been transferred to the customer for those shipments. We have determined the performance obligation is met and title is transferred to the customer upon shipment of concentrate parcels from Greens Creek because, at that time,

) legal title is transferred to the customer,

) the customer has accepted the parcel and obtained the ability to realize all of the benefits from the product,

) the concentrate content specifications are known, have been communicated to the customer, and the customer has the significant risks and rewards of ownership of it,

) it is very unlikely a concentrate parcel from Greens Creek will be rejected by a customer upon physical receipt, and

) we have the right to payment for the parcel.

Judgment is also required in identifying the performance obligations for our concentrate sales. Most of our concentrate sales involve “frame contracts” with smelters that can cover multiple years and specify certain terms, under which individual parcels of concentrates are sold. However, some terms are

not

specified in the frame contracts and/or can be renegotiated as part of annual amendments to the frame contract. We have determined parcel shipments represent individual performance obligations satisfied at a point in time when control of the shipment is transferred to the customer.

The consideration we receive for our concentrate sales fluctuates due to changes in metals prices between the time of shipment and final settlement with the customer. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement with the customer. Also, it is unlikely a significant reversal of revenue for any

one

concentrate parcel will occur. As such, we use the expected value method to price the parcels until the final settlement date occurs, at which time the final transaction price is known. At

March

31,

2019,

metals contained in concentrates and exposed to future price changes totaled

0.9

million ounces of silver,

4,096

ounces of gold,

11,108

tons of zinc, and

1,814

tons of lead. However, as discussed in

Note

, we seek to mitigate the risk of negative price adjustments by using financially-settled forward contracts for some of our sales.

Sales and accounts receivable for concentrate shipments are recorded net of charges for treatment, refining, smelting losses, and other charges negotiated by us with the customers, which represent components of the transaction price. Charges are estimated by us upon shipment of concentrates based on contractual terms, and actual charges typically do

not

vary materially from our estimates. Costs charged by customers include fixed treatment and refining costs per ton of concentrate and

may

include price escalators which allow the customers to participate in the increase of lead and zinc prices above a negotiated baseline. Costs for shipping concentrates to customers are recorded to cost of sales as incurred.

Sales of metal concentrates and metal products are made principally to custom smelters, brokers and metals traders. The percentage of sales contributed by each segment is reflected in the following table:

	Three Months Ended March 31,
	2019			2018

Greens Creek		53	%		46	%
Lucky Friday		1	%		4	%
Casa Berardi		26	%		40	%
San Sebastian		8	%		10	%
Nevada Operations		12	%		—	%
		100	%		100	%

Sales of products by metal for the thee-month periods ended

March

31,

2019

and

2018

were as follows (in thousands):

	Three Months Ended March 31,
	2019			2018

Silver	$	45,506		$	35,222
Gold		79,679			73,044
Lead		9,025			9,227
Zinc		24,755			30,109
Less: Smelter and refining charges		(6,348	)		(7,893	)
Sales of products	$	152,617		$	139,709

The following is sales information by geographic area based on the location of smelters and brokers (for concentrate shipments) and location of parent companies (for doré sales to metals traders) for the

three

-month periods ended

March

31,

2019

and

2018

(in thousands):

	Three Months Ended March 31,
	2019		2018

Canada	$	92,872	$	88,668
Korea		49,300		32,703
Japan		8,350		13,773
United States		4,571		4,081
Other		—		(131	)
Total, excluding gains/losses on forward contracts	$	155,093	$	139,094

Sales by significant product type for the

three

-month periods ended

March

31,

2019

and

2018

were as follows (in thousands):

	Three Months Ended March 31,
	2019		2018

Doré and metals from doré	$	75,901	$	73,492
Lead concentrate		49,300		34,334
Zinc concentrate		23,792		25,652
Bulk concentrate		6,100		5,616
Total, excluding gains/losses on forward contracts	$	155,093	$	139,094

Sales of products for the

first

three

months of

2019

and

2018

included net losses of

$2.5

million and net gains of

$0.6

million, respectively, on financially-settled forward contracts for silver, gold, lead and zinc contained in our concentrate sales. See

Note

for more information.

Sales of products to significant customers as a percentage of total sales were as follows for the

three

-month periods ended

March

31,

2019

and

2018:

	Three Months Ended March 31,
	2019			2018

CIBC		16	%		47	%
Scotia		29	%		2	%
Korea Zinc		20	%		23	%
Teck Metals Ltd.		15	%		4	%
Trafigura		12	%		—	%
Ocean Partners		—	%		10	%

Our trade accounts receivable balance related to contracts with customers was

$9.6

million at

March

31,

2019

and

$4.2

million at

December

31,

2018,

and included

allowance for doubtful accounts.

We have determined our contracts do

not

include a significant financing component. For doré sales and sales of metal from doré, payment is received at the time the performance obligation is satisfied. The amount of consideration for concentrate sales is variable, and we receive payment for a significant portion of the estimated value of concentrate parcels within a relatively short period of time after the performance obligation is satisfied.

We do

not

incur significant costs to obtain contracts, nor costs to fulfill contracts which are

not

addressed by other accounting standards. Therefore, we have

not

recognized an asset for such costs as of

March

31,

2019

December

31,

2018.

The sales and income (loss) from operations amounts reported above include results from our Lucky Friday segment. The Lucky Friday mine is our only operation where some of our employees are subject to a collective bargaining agreement, and the most recent agreement expired on

April 30, 2016.

February 19, 2017,

the unionized employees voted against our contract offer, and on

March 13, 2017

went on strike and have been on strike since that time. Production at Lucky Friday was suspended from the start of the strike until

July 2017,

when limited production resumed. In the

first

quarter of

2019

and

2018,

suspension costs

not

related to production of

$1.9

million and

$4.1

million, respectively, along with

$0.9

million in non-cash depreciation expense in each of those periods, are reported in a separate line item on our consolidated statements of operations. We cannot predict how long the strike will last or whether an agreement will be reached. As a result of the strike or other related events, operations at Lucky Friday could continue to be disrupted, which could adversely affect our financial condition and results of operations. If the strike continues for a further extended period or it is determined an eventual resolution is unlikely, it

may

be appropriate in the future to review the carrying value of properties, plants, equipment and mineral interests at Lucky Friday. Under such review, if estimated undiscounted cash flows from Lucky Friday were less than its carrying value, an impairment loss would be recognized for the difference between the carrying value and the estimated fair value. The carrying value of properties, plants, equipment and mineral interests at Lucky Friday as of

March

31,

2019

was approximately

$435.9

million. However, Lucky Friday has significant identified reserves and mineralized material and a current estimated mine life of approximately

years.