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Note 14 - Guarantor Subsidiaries
 3 Months Ended
Mar. 31, 2014
Guarantor Subsidiaries [Abstract]  
Guarantor Subsidiaries [Text Block]

Note 14.   Guarantor Subsidiaries


Presented below are Hecla Mining Company’s condensed consolidating financial statements as required by Rule 3-10 of Regulation S-X of the Securities Exchange Act of 1934, as amended, resulting from the guarantees by certain of our subsidiaries (the "Guarantors") of the Notes (see Note 9 for more information). The Guarantors consist of the following of our 100%-owned subsidiaries: Hecla Limited; Silver Hunter Mining Company; Rio Grande Silver, Inc.; RHL Holdings, Inc.; Hecla MC Subsidiary, LLC; Hecla Silver Valley, Inc.; Burke Trading, Inc.; Hecla Alaska LLC; Hecla Greens Creek Mining Company; Hecla Admiralty Company; and Hecla Juneau Mining Company. We completed the offering of the Notes on April 12, 2013, and a related exchange offer for virtually identical notes registered with the SEC on January 3, 2014.


The unaudited interim condensed consolidating financial statements below have been prepared from our financial information on the same basis of accounting as the unaudited interim consolidated financial statements. Investments in the subsidiaries are accounted for under the equity method. Accordingly, the entries necessary to consolidate Hecla Mining Company and the Guarantors are reflected in the intercompany eliminations column. In the course of preparing consolidated financial statements, we eliminate the effects of various transactions conducted between our subsidiaries. While valid at an individual subsidiary level, such activities are eliminated in consolidation because, when taken as a whole, they do not represent business activity with third-party customers, vendors, and other parties. Examples of such eliminations include the following:


 

•

Investments in subsidiaries. The acquisition of a company results in an investment on the records of the parent company and a contribution of capital on the records of the subsidiary. Such investments and capital contributions are eliminated in consolidation.


 

•

Capital contributions. Other of our subsidiaries do not generate cash flow, and their cash requirements are routinely met with inter-company advances from their parent companies. On an annual basis, the boards of directors of such parent companies declare contributions of capital to their subsidiary companies, which increase the parent's investment and the subsidiaries' additional paid-in capital. In consolidation, investments in subsidiaries and related additional paid-in capital are eliminated.


 

•

Deferred taxes. Our ability to realize deferred tax assets and liabilities is considered on a consolidated basis for subsidiaries within the United States, with all subsidiaries' estimated future taxable income contributing to the ability to realize all such assets and liabilities. However, when our subsidiaries are viewed independently, we use the separate return method to assess the realizability of each subsidiary's deferred tax assets and whether a valuation allowance is required against such deferred tax assets. In some instances, a parent company or subsidiary may possess deferred tax assets whose realization depends on the future taxable incomes of other subsidiaries on a consolidated-return basis, but would not be considered realizable if such parent or subsidiary filed on a separate stand-alone basis. In such a situation, a valuation allowance is assessed on that subsidiary's deferred tax assets, with the resulting adjustment reported in the eliminations column of the guarantor and parent's financial statements, as is the case in the financial statements set forth below. The separate return method can result in significant eliminations of deferred tax assets and liabilities and related income tax provisions and benefits. Non-current deferred tax asset balances are included in other non-current assets on the condensed consolidating balance sheets and make up a large portion of that item, particularly for the guarantor balances.


Separate financial statements of the subsidiary guarantors are not presented because the guarantees by the guarantors are joint and several and full and unconditional, except for certain customary release provisions. These release provisions include: (1) the sale or disposal of all or substantially all of the assets of the guarantor; (2) the sale or other disposition of the capital stock of the guarantor; (3) the guarantor is designated as an unrestricted entity in accordance with the applicable provisions of the indenture; (4) the company ceases to be a borrower as defined in the indenture; and (5) upon legal or covenant defeasance or satisfaction and discharge of the indenture.


Condensed Consolidating Balance Sheets


    As of March 31, 2014  
    Parent     Guarantors     Non-Guarantors     Eliminations     Consolidated  
    (in thousands)  

Assets

                                       
                                         

Cash and cash equivalents

  $  137,252     $  43,399     $  26,991     $  —     $  207,642  

Other current assets

    9,706       78,346       41,867       (5,290

)

    124,629  

Properties, plants, and equipment - net

    1,069       1,061,211       743,352       —       1,805,632  

Intercompany receivable (payable)

    508,911       (111,937

)

    (453,843

)

    56,869       —  

Investments in subsidiaries

    1,235,581       —       —       (1,235,581

)

    —  

Other non-current assets

    8,742       166,027       15,192       (77,583

)

    112,378  
                                         

Total assets

  $ 1,901,261     $ 1,237,046     $ 373,559     $ (1,261,585

)

  $ 2,250,281  
                                         

Liabilities and Stockholders' Equity

                                       
                                         

Current liabilities

  $ 35,021     $ 109,246     $ 20,966     $ (13,673

)

  $ 151,560  

Long-term debt

    491,043       14,077       34       —       505,154  

Non-current portion of accrued reclamation

    —       47,061       8,292       —       55,353  

Non-current deferred tax liability

    —       12,331       159,890       (12,331 )      159,890  

Other non-current liabilities

    31,735       4,216       (1,089

)

    —       34,862  

Stockholders' equity

    1,343,462       1,050,115       185,466       (1,235,581

)

    1,343,462  
                                         

Total liabilities and stockholders' equity

  $ 1,901,261     $ 1,237,046     $ 373,559     $ (1,261,585

)

  $ 2,250,281  

      As of December 31, 2013  
      Parent       Guarantors       Non-Guarantors       Eliminations       Consolidated  
      (in thousands)  

Assets

                                       
                                         

Cash and cash equivalents

  $  126,271     $  40,009     $  45,895     $  —     $  212,175  

Other current assets

    4,795       75,083       33,129       18,453       131,460  

Properties, plants, and equipment - net

    803       1,052,102       738,696       —       1,791,601  

Intercompany receivable (payable)

    547,074       (131,599

)

    (464,634

)

    49,159       —  

Investments in subsidiaries

    1,176,293       —       —       (1,176,293

)

    —  

Other non-current assets

    5,248       164,563       11,115       (84,043

)

    96,883  
                                         

Total assets

  $ 1,860,484     $ 1,200,158     $ 364,201     $ (1,192,724

)

  $ 2,232,119  
                                         

Liabilities and Stockholders' Equity

                                       
                                         

Current liabilities

  $ 10,058     $ 117,421     $ 24,000     $ —     $ 151,479  

Long-term debt

    490,726       14,292       40       —       505,058  

Non-current portion of accrued reclamation

    —       38,426       8,340       —       46,766  

Non-current deferred tax liability

    —       16,431       164,861       (16,431

)

    164,861  

Other non-current liabilities

    33,281       4,043       212       —       37,536  

Stockholders' equity

    1,326,419       1,009,545       166,748       (1,176,293

)

    1,326,419  
                                         

Total liabilities and stockholders' equity

  $ 1,860,484     $ 1,200,158     $ 364,201     $ (1,192,724

)

  $ 2,232,119  

Condensed Consolidating Statements of Operations


   

Three Months Ended March 31, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ (19

)

  $ 83,710     $ 42,096     $ —     $ 125,787  

Cost of sales

    —       (49,933

)

    (27,808

)

    —       (77,741

)

Depreciation, depletion, amortization

    —       (17,221

)

    (8,582

)

    —       (25,803

)

General and administrative

    (4,630

)

    (3,008

)

    (303

)

    —       (7,941

)

Exploration and pre-development

    (44

)

    (958

)

    (3,567

)

    —       (4,569

)

Gain on derivative contracts

    9,452       —       —       —       9,452  

Equity in earnings of subsidiaries

    17,703       —       —       (17,703

)

    —  

Other (expense) income

    (10,821

)

    408       9,955       (3,303 )      (3,761

)

                                         

Income (loss) before income taxes

    11,641       12,998       11,791       (21,006

)

    15,424  

(Provision) benefit from income taxes

    —       (2,886

)

    (4,200 )      (3,303

)

    (3,783

)

                                         

Net income (loss)

    11,641       10,112       7,591       (17,703

)

    11,641  

Preferred stock dividends

    (138

)

    —       —       —       (138

)

                                         

Income (loss) applicable to common stockholders

    11,503       10,112       7,591       (17,703

)

    11,503  
                                         

Net income (loss)

    11,641       10,112       7,591       (17,703

)

    11,641  

Changes in comprehensive income (loss)

    1,350       57       1,316       (1,373

)

    1,350  
                                         

Comprehensive income (loss)

  $ 12,991     $ 10,169     $ 8,907     $ (19,076

)

  $ 12,991  

   

Three Months Ended March 31, 2013

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ 2,413     $ 74,037     $ —     $ —     $ 76,450  

Cost of sales

    —       (36,825

)

    —       —       (36,825

)

Depreciation, depletion, amortization

    —       (14,007

)

    —       —       (14,007

)

General and administrative

    (3,472

)

    (3,410

)

    (57

)

    —       (6,939

)

Exploration and pre-development

    (164

)

    (8,195

)

    (2,925

)

    —       (11,284

)

Loss on derivative contracts

    21,539       —       —       —       21,539  

Equity in earnings of subsidiaries

    (1,073

)

    —       —       1,073       —  

Other (expense) income

    (8,149

)

    (3,122

)

    (1,104

)

    1,950       (10,425

)

                                         

Income (loss) before income taxes

    11,094       8,478       (4,086

)

    3,023       18,509  

(Provision) benefit from income taxes

    —       (5,465

)

    —       (1,950

)

    (7,415

)

                                         

Net income (loss)

    11,094       3,013       (4,086

)

    1,073       11,094  

Preferred stock dividends

    (138

)

    —       —       —       (138

)

                                         

Income (loss) applicable to common stockholders

    10,956       3,013       (4,086

)

    1,073       10,956  
                                         

Net income (loss)

    11,094       3,013       (4,086

)

    1,073       11,094  

Changes in comprehensive income (loss)

    (2,831

)

    (427

)

    (2,405

)

    2,832       (2,831

)

                                         

Comprehensive income (loss)

  $ 8,263     $ 2,586     $ (6,491

)

  $ 3,905     $ 8,263  

Condensed Consolidating Statements of Cash Flows


   

Three Months Ended March 31, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Cash flows from operating activities

  $ 31,570     $ 23,937     $ (1,509 )    $ (23,615

)

  $ 30,383  
                                         

Cash flows from investing activities:

                                    —  

Additions to properties, plants, and equipment

    (383

)

    (13,628

)

    (12,856

)

    —       (26,867

)

Other investing activities, net

    (2,570

)

    (57

)

    (2,428

)

    2,570       (2,485

)

                                         

Cash flows from financing activities:

                                    —  

Dividends paid to stockholders

    (995

)

    —       —       —       (995

)

Borrowings on debt

    (316

)

    316       —       —       —  

Payments on debt

    312       (2,715

)

    —       —       (2,403

)

Other financing activity

    (16,637

)

    (4,463

)

    (413

)

    21,045       (468

)

                                         

Effect of exchange rate changes on cash

    —       —       (1,698

)

    —       (1,698

)

                                         

Changes in cash and cash equivalents

    10,981       3,390       (18,904

)

    —       (4,533

)

Beginning cash and cash equivalents

    126,271       40,009       45,895       —       212,175  
                                         

Ending cash and cash equivalents

  $ 137,252     $ 43,399     $ 26,991     $ —     $ 207,642  

   

Three Months Ended March 31, 2013

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Cash flows from operating activities

  $ (10,799

)

  $ 26,096     $ (3,937

)

  $ —     $ 11,360  
                                         

Cash flows from investing activities:

                                    —  

Additions to properties, plants, and equipment

    —       (25,753

)

    —       —       (25,753

)

Other investing activities, net

    (140

)

    250       (2,558

)

    —       (2,448

)

                                         

Cash flows from financing activities:

                                    —  

Dividends paid to stockholders

    (138

)

    —       —       —       (138

)

Payments on debt

    —       (1,534

)

    (6

)

    —       (1,540

)

Other financing activity

    (1,910

)

    (8,073

)

    6,132       —       (3,851

)

                                         

Changes in cash and cash equivalents

    (12,987

)

    (9,014

)

    (369

)

    —       (22,370

)

Beginning cash and cash equivalents

    132,266       57,075       1,643       —       190,984  
                                         

Ending cash and cash equivalents

  $  119,279     $  48,061     $  1,274     $  —     $  168,614