Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 5: Income Taxes

Major components of our income tax benefit (provision) for the years ended December 31, 2013, 2012 and 2011 are as follows (in thousands):

	2013			2012			2011
Current:
Domestic	$	2,963		$	(7,086	)	$	(4,282	)
Foreign		(175	)		(459	)		(752	)
Total current income tax benefit (provision)		2,788			(7,545	)		(5,034	)
Deferred:
Domestic		247			(1,334	)		(76,944	)
Foreign		6,760			—			—
Total deferred income tax benefit (provision)		7,007			(1,334	)		(76,944	)
Total income tax benefit (provision)	$	9,795		$	(8,879	)	$	(81,978	)

Domestic and foreign components of income (loss) before income taxes for the years ended December 31, 2013, 2012 and 2011, are as follows (in thousands): 

	2013			2012			2011
Domestic	$	(1,681	)	$	37,025		$	244,833
Foreign		(33,244	)		(13,192	)		(11,691	)
Total	$	(34,925	)	$	23,833		$	233,142

The annual tax benefit (provision) is different from the amount that would be provided by applying the statutory federal income tax rate to our pretax income (loss). The reasons for the difference are (in thousands):

	2013					2012					2011
Computed “statutory” benefit (provision)	$	12,224		35	%	$	(8,342	)	35	%	$	(81,600	)	35	%
Percentage depletion		3,946		11			5,575		(24	)		13,751		(6	)
Change in valuation allowance other than utilization		(3,870	)	(11	)		(3,837	)	16			(3,822	)	2
State taxes, net of federal taxes		720		2			(1,110	)	5			(10,890	)	5
Transaction costs		(1,743	)	(5	)		—		—			—		—
Foreign currency translation of monetary assets		3,445		10			—		—			—		—
Rate differential on foreign earnings		(4,255	)	(12	)		(780	)	3			(634	)	—
Other		(672	)	(2	)		(385	)	2			1,217		(1	)
	$	9,795		28	%	$	(8,879	)	37	%	$	(81,978	)	35	%

We evaluated the positive and negative evidence available to determine the amount of valuation allowance required on our deferred tax assets.  At December 31, 2013 and 2012, the balances of our valuation allowances were $27 million and $23 million, respectively, primarily for foreign net operating loss carryforwards. The amount of the deferred tax asset considered recoverable, however, could be reduced in the near term if estimates of future taxable income are reduced.

At December 31, 2013, the net deferred tax liability was $51 million compared to the net deferred tax asset of $116 million at December 31, 2012. The change is due primarily to the acquisition of Aurizon and the establishment of a deferred tax liability related to the excess accounting bases over the historical tax bases of the assets acquired. The individual components of our net deferred tax assets and liabilities are reflected in the table below (in thousands).

	December 31,
	2013			2012
Deferred tax assets:
Accrued reclamation costs	$	39,262		$	45,653
Deferred exploration		35,267			32,396
Foreign net operating losses		27,923			20,247
Domestic net operating losses		54,181			44,814
AMT credit carryforwards		22,155			24,603
Pension and benefit obligation		10,354			12,488
Miscellaneous		31,077			17,437
Total deferred tax assets		220,219			197,638
Valuation allowance		(27,155	)		(23,030	)
Total deferred tax assets		193,064			174,608
Deferred tax liabilities:
Miscellaneous		(5,966	)		(1,262	)
Properties, plants and equipment		(238,497	)		(57,583	)
Total deferred tax liabilities		(244,463	)		(58,845	)
Net deferred tax asset (liability)	$	(51,399	)	$	115,763

We plan to permanently reinvest earnings from foreign subsidiaries with the exception of Hecla Quebec Inc., our wholly-owned subsidiary which owns our Casa Berardi mine and other interests in Quebec, Canada. For the years 2013, 2012 and 2011, we had no unremitted foreign earnings. Foreign net operating losses carried forward are shown above as a deferred tax asset, with a partial valuation allowance as discussed below.

We recorded a valuation allowance to reflect the estimated amount of deferred tax assets, which may not be realized principally due to the expiration of foreign net operating losses and foreign tax credit carryforwards. The changes in the valuation allowance for the years ended December 31, 2013, 2012 and 2011, are as follows (in thousands):

	2013			2012			2011
Balance at beginning of year	$	(23,030	)	$	(22,895	)	$	(19,073	)
Increase related to non-utilization of net operating loss carryforwards and non-recognition of deferred tax assets due to uncertainty of recovery		(3,870	)		(3,837	)		(3,822	)
Decrease related to utilization and expiration of deferred tax assets, other		(255	)		3,702			—
Balance at end of year	$	(27,155	)	$	(23,030	)	$	(22,895	)

As of December 31, 2013, for U.S. income tax purposes, we have federal and state net operating loss carryforwards of $172 million and $38 million, respectively.  These net operating loss carryforwards have a 20 year expiration period, the earliest of which could expire in 2020.  We have foreign and provincial net operating loss carryforwards of approximately $96 million and $26 million, respectively, which expire between 2014 and 2033. We have approximately $22 million in alternative minimum tax credit carryforwards which do not expire and are eligible to reduce future U.S. tax liabilities.  Our utilization of U.S. net operating loss carryforwards may be subject to annual limitations if there is a change in control as defined under Internal Revenue Code Section 382.

At December 31, 2013 and 2012 we had $20 million and $19 million, respectively, of federal net operating loss carryovers relating to excess tax benefits from the exercise of employee stock options and the vesting of restricted stock awards. These amounts are not reflected in our deferred tax asset for net operating loss carryovers. We recognize the excess tax benefits from the exercise of employee stock options and the vesting of restricted stock awards in the period in which these tax benefits reduce income taxes payable, after net operating loss carryforwards are fully utilized.

We file income tax returns in the U.S. federal jurisdiction, various state and foreign jurisdictions.  We are no longer subject to income tax examinations by U.S. federal and state tax authorities for years prior to 1997, or examinations by foreign tax authorities for years prior to 2007.  We currently have no tax years under examination other than years 2008 through 2011 under routine exam by Revenue Quebec.

We had no unrecognized tax benefits as of December 31, 2013 or 2012.  Due to the net operating loss carryover provision, coupled with the lack of any unrecognized tax benefits, we have not provided for any interest or penalties associated with any uncertain tax positions.  If interest and penalties were to be assessed, our policy is to charge interest to interest expense, and penalties to other operating expense.  It is not anticipated that there will be any significant changes to unrecognized tax benefits within the next 12 months.