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Note 13 - Guarantor Subsidiaries
 6 Months Ended
Jun. 30, 2014
Guarantor Subsidiaries [Abstract]  
Guarantor Subsidiaries [Text Block]

Note 13.    Guarantor Subsidiaries


Presented below are Hecla’s unaudited interim 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 Hecla's subsidiaries (the "Guarantors") of the Notes (see Note 9 for more information). The Guarantors consist of the following of Hecla's 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 initial 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 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 Hecla's 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 Hecla's 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 Hecla's 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 guarantor 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 June 30, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Assets

                                       

Cash and cash equivalents

  $ 160,374     $ 38,639     $ 23,070     $ —     $ 222,083  

Other current assets

    2,911       84,491       35,488       1,907       124,797  

Properties, plants, and equipment - net

    1,280       1,070,673       746,679       —       1,818,632  

Intercompany receivable (payable)

    475,113       (75,243

)

    (387,124

)

    (12,746

)

    —  

Investments in subsidiaries

    1,243,429       —       —       (1,243,429

)

    —  

Other non-current assets

    9,744       160,560       6,923       (87,612

)

    89,615  

Total assets

  $ 1,892,851     $ 1,279,120     $ 425,036     $ (1,341,880

)

  $ 2,255,127  

Liabilities and Stockholders' Equity

                                       

Current liabilities

  $ 22,502     $ 117,510     $ 22,189     $ (15,155

)

  $ 147,046  

Long-term debt

    496,354       12,030       31       —       508,415  

Non-current portion of accrued reclamation

    —       48,169       8,799       —       56,968  

Non-current deferred tax liability

    —       11,901       236,837       (83,296

)

    165,442  

Other non-current liabilities

    32,612       4,386       (1,125

)

    —       35,873  

Stockholders' equity

    1,341,383       1,085,124       158,305       (1,243,429

)

    1,341,383  

Total liabilities and stockholders' equity

  $ 1,892,851     $ 1,279,120     $ 425,036     $ (1,341,880

)

  $ 2,255,127  

   

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)

    528,290       (112,815

)

    (464,634

)

    49,159       —  

Investments in subsidiaries

    1,195,076       —       —       (1,195,076

)

    —  

Other non-current assets

    5,249

 

    164,563       11,115       (84,044

)

    96,883  

Total assets

  $ 1,860,484     $ 1,218,942     $ 364,201     $ (1,211,508

)

  $ 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

    —       16,430       164,861       (16,430

)

    164,861  

Other non-current liabilities

    33,281       4,043       212       —       37,536  

Stockholders' equity

    1,326,419       1,028,330       166,748       (1,195,078

)

    1,326,419  

Total liabilities and stockholders' equity

  $ 1,860,484     $ 1,218,942     $ 364,201     $ (1,211,508

)

  $ 2,232,119  

Condensed Consolidating Statements of Operations


   

Three Months Ended June 30, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ (3,454

)

  $ 82,665     $ 38,291     $ —     $ 117,502  

Cost of sales

    —       (43,217

)

    (27,822

)

    —       (71,039

)

Depreciation, depletion, amortization

    —       (19,280

)

    (8,455

)

    —       (27,735

)

General and administrative

    (4,529

)

    (3,221

)

    (409

)

    —       (8,159

)

Exploration and pre-development

    (8

)

    (1,784

)

    (1,785

)

    —       (3,577

)

Loss on derivative contracts

    (11,601

)

    —       —       —       (11,601

)

Equity in earnings of subsidiaries

    (81,189

)

    —       —       81,189       —  

Other (expense) income

    86,382       870       (25,955

)

    (76,112

)

    (14,815

)

Income (loss) before income taxes

    (14,399

)

    16,033       (26,135

)

    5,077       (19,424

)

(Provision) benefit from income taxes

    —       (4,722

)

    (66,365

)

    76,112       5,025  

Net income (loss)

    (14,399

)

    11,311       (92,500

)

    81,189       (14,399

)

Preferred stock dividends

    (138

)

    —       —       —       (138

)

Income (loss) applicable to common stockholders

    (14,537

)

    11,311       (92,500

)

    81,189       (14,537

)

Net income (loss)

    (14,399

)

    11,311       (92,500

)

    81,189       (14,399

)

Changes in comprehensive income (loss)

    (2,188

)

    168       (1,096

)

    928       (2,188

)

Comprehensive income (loss)

  $ (16,587

)

  $ 11,479     $ (93,596

)

  $ 82,117     $ (16,587

)


   

Six Months Ended June 30, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ (3,473

)

  $ 166,375     $ 80,387     $ —     $ 243,289  

Cost of sales

    —       (93,150

)

    (55,630

)

    —       (148,780

)

Depreciation, depletion, amortization

    —       (36,501

)

    (17,037

)

    —       (53,538

)

General and administrative

    (9,159

)

    (6,229

)

    (712

)

    —       (16,100

)

Exploration and pre-development

    (52

)

    (2,742

)

    (5,352

)

    —       (8,146

)

Loss on derivative contracts

    (2,149

)

    —       —       —       (2,149

)

Equity in earnings of subsidiaries

    (63,486

)

    —       —       63,486       —  

Other (expense) income

    75,561       1,278       (16,000

)

    (79,415

)

    (18,576

)

Income (loss) before income taxes

    (2,758

)

    29,031       (14,344

)

    (15,929

)

    (4,000

)

(Provision) benefit from income taxes

    —       (7,608

)

    (70,565

)

    79,415       1,242  

Net income (loss)

    (2,758

)

    21,423       (84,909

)

    63,486       (2,758

)

Preferred stock dividends

    (276

)

    —       —       —       (276

)

Income (loss) applicable to common stockholders

    (3,034

)

    21,423       (84,909

)

    63,486       (3,034

)

Net income (loss)

    (2,758

)

    21,423       (84,909

)

    63,486       (2,758

)

Changes in comprehensive income (loss)

    (838

)

    225       220       (445

)

    (838

)

Comprehensive income (loss)

  $ (3,596

)

  $ 21,648     $ (84,689

)

  $ 63,041     $ (3,596

)


   

Three Months Ended June 30, 2013

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ 372     $ 74,838     $ 10,120     $ —     $ 85,330  

Cost of sales

    —       (51,777

)

    (8,231

)

    —       (60,008

)

Depreciation, depletion, amortization

    —       (16,887

)

    (3,324

)

    —       (20,211

)

General and administrative

    (3,993

)

    (3,137

)

    (352

)

    —       (7,482

)

Exploration and pre-development

    (253

)

    (8,553

)

    (1,927

)

    —       (10,733

)

Gain on derivative contracts

    6,541       —       —       —       6,541  

Aurizon acquisition costs

    (10,650

)

    1,422       (11,080

)

    —       (20,308

)

Equity in earnings of subsidiaries

    (13,625

)

    —       —       13,625       —  

Other (expense) income

    (3,250

)

    3,643       (3,225

)

    (1,950

)

    (4,782

)

Income (loss) before income taxes

    (24,858

)

    (451

)

    (18,019

)

    11,675       (31,653

)

Benefit from income taxes

    —       211       6,321       263       6,795  

Net income (loss)

    (24,858

)

    (240

)

    (11,698

)

    11,938       (24,858

)

Preferred stock dividends

    (138

)

    —       —       —       (138

)

Income (loss) applicable to common stockholders

    (24,996

)

    (240

)

    (11,698

)

    11,938       (24,996

)

Net income (loss)

    (24,858

)

    (240

)

    (11,698

)

    11,938       (24,858

)

Changes in comprehensive income (loss)

    (1,944

)

    4,257       (1,425

)

    (2,832

)

    (1,944

)

Comprehensive income (loss)

  $ (26,802

)

  $ 4,017     $ (13,123

)

  $ 9,106     $ (26,802

)


   

Six Months Ended June 30, 2013

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ 2,785     $ 148,875     $ 10,120     $ —     $ 161,780  

Cost of sales

    —       (88,602

)

    (8,231

)

    —       (96,833

)

Depreciation, depletion, amortization

    —       (30,894

)

    (3,324

)

    —       (34,218

)

General and administrative

    (7,465

)

    (6,547

)

    (409

)

    —       (14,421

)

Exploration and pre-development

    (417

)

    (16,748

)

    (4,852

)

    —       (22,017

)

Gain on derivative contracts

    28,080       —       —       —       28,080  

Aurizon acquisition costs

    (14,148

)

    —       (11,452

)

    —       (25,600

)

Equity in earnings of subsidiaries

    (14,698

)

    —       —       14,698          

Other (expense) income

    (7,901

)

    1,943       (3,957

)

    —       (9,915

)

Income (loss) before income taxes

    (13,764

)

    8,027       (22,105

)

    14,698       (13,144

)

(Provision) benefit from income taxes

    —       (5,254

)

    6,321       (1,687

)

    (620

)

Net income (loss)

    (13,764

)

    2,773       (15,784

)

    13,011       (13,764

)

Preferred stock dividends

    (276

)

    —       —       —       (276

)

Income (loss) applicable to common stockholders

    (14,040

)

    2,773       (15,784

)

    13,011       (14,040

)

Net income (loss)

    (13,764

)

    2,773       (15,784

)

    13,011       (13,764

)

Changes in comprehensive income (loss)

    (4,775

)

    3,830       (3,830

)

    —       (4,775

)

Comprehensive income (loss)

  $ (18,539

)

  $ 6,603     $ (19,614

)

  $ 13,011     $ (18,539

)


Condensed Consolidating Statements of Cash Flows


   

Six Months Ended June 30, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Cash flows from operating activities

  $ 10,632     $ 46,829     $ (2,006

)

  $ 1,574

 

  $ 57,029  

Cash flows from investing activities:

                                       

Additions to properties, plants, and equipment

    (736

)

    (32,891

)

    (23,834

)

    —       (57,461

)

Other investing activities, net

    —       238       4,334       —

 

    4,572  

Cash flows from financing activities:

                                       

Dividends paid to stockholders

    (1,991

)

    —       —       —       (1,991

)

Borrowings on debt

    —       —       —       —       —  

Payments on debt

    —       (4,525

)

    —       —       (4,525

)

Other financing activity

    26,198       (11,021

)

    (1,569

)

    (1,574 )     12,034  

Effect of exchange rate changes on cash

    —       —       250       —       250  

Changes in cash and cash equivalents

    34,103       (1,370

)

    (22,825

)

    —       9,908  

Beginning cash and cash equivalents

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

Ending cash and cash equivalents

  $ 160,374     $ 38,639     $ 23,070     $ —     $ 222,083  

   

Six Months Ended June 30, 2013

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Cash flows from operating activities

  $ (7,524

)

  $ 54,148     $ (36,349

)

  $ —     $ 10,275  

Cash flows from investing activities:

                                       

Additions to properties, plants, and equipment

    (229

)

    (54,128

)

    (5,934

)

    —       (60,291

)

Acquisition of Aurizon Mines

    (498,705

)

            177,588       —       (321,117

)

Other investing activities, net

    —       102       (3,888

)

    —       (3,786

)

Cash flows from financing activities:

                                       

Dividends paid to stockholders

    (4,553

)

    —       —       —       (4,553

)

Borrowings on debt

    490,000       —       —       —       490,000  

Payments on debt

    —       (3,425

)

    —       —       (3,425

)

Other financing activity

    (2,706

)

    1,681       (687

)

    —       (1,712

)

Changes in cash and cash equivalents

    (23,717

)

    (1,622

)

    130,730       —       105,391  

Beginning cash and cash equivalents

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

Ending cash and cash equivalents

  $ 108,549     $ 55,453     $ 132,373     $ —     $ 296,375