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Note 13 - Guarantor Subsidiaries
 9 Months Ended
Sep. 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. Certain 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 parents' 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 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 September 30, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Assets

                                       

Cash and cash equivalents

  $ 151,739     $ 48,205     $ 22,416     $ —     $ 222,360  

Other current assets

    3,032       55,060       25,878       12,109       96,079  

Properties, plants, and equipment - net

    1,446       1,076,560       751,494       —       1,829,500  

Intercompany receivable (payable)

    510,942       (116,857

)

    (444,144

)

    50,059       —  

Investments in subsidiaries

    1,275,038       —       —       (1,275,038

)

    —  

Other non-current assets

    2,726       183,249       6,392       (87,853

)

    104,514  

Total assets

  $ 1,944,923     $ 1,246,217     $ 362,036     $ (1,300,723

)

  $ 2,252,453  

Liabilities and Shareholders' Equity

                                       

Current liabilities

  $ 26,620     $ 63,603     $ 22,604     $ (11,785

)

  $ 101,042  

Long-term debt

    498,183       10,864       26       —       509,073  

Non-current portion of accrued reclamation

    —       48,224       8,569       —       56,793  

Non-current deferred tax liability

    —       13,100       157,512       (13,900

)

    156,712  

Other non-current liabilities

    33,753       9,764       (1,051

)

    —       42,466  

Shareholders' equity

    1,386,367       1,100,662       174,376       (1,275,038

)

    1,386,367  

Total liabilities and shareholders' equity

  $ 1,944,923     $ 1,246,217     $ 362,036     $ (1,300,723

)

  $ 2,252,453  

   

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 September 30, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ 1,444     $ 94,202     $ 39,861     $ —     $ 135,507  

Cost of sales

    —       (57,995

)

    (28,685

)

    —       (86,680

)

Depreciation, depletion, amortization

    —       (17,205

)

    (9,599

)

    —       (26,804

)

General and administrative

    (4,048

)

    (3,590

)

    (246

)

    —       (7,884

)

Exploration and pre-development

    (4

)

    (3,085

)

    (3,099

)

    —       (6,188

)

Gain/(loss) on derivative contracts

    (411

)

    —       —       —       (411

)

Equity in loss of subsidiaries

    96,349       —       —       (96,349

)

    —  

Other (expense) income

    (89,654

)

    3,503       14,450       68,017       (3,684

)

Income (loss) before income taxes

    3,676       15,830       12,682       (28,332

)

    3,856  

(Provision) benefit from income taxes

    —       (2,878

)

    70,715       (68,017

)

    (180

)

Net income (loss)

    3,676       12,952       83,397       (96,349

)

    3,676  

Preferred stock dividends

    (138

)

    —       —       —       (138

)

Income (loss) applicable to common shareholders

    3,538       12,952       83,397       (96,349

)

    3,538  

Net income (loss)

    3,676       12,952       83,397       (96,349

)

    3,676  

Changes in comprehensive income (loss)

    2,276       78       2,229       (2,307

)

    2,276  

Comprehensive income (loss)

  $ 5,952     $ 13,030     $ 85,626     $ (98,656

)

  $ 5,952  

   

Nine Months Ended September 30, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ (2,029

)

  $ 260,577     $ 120,248     $ —     $ 378,796  

Cost of sales

    —       (151,145

)

    (84,315

)

    —       (235,460

)

Depreciation, depletion, amortization

    —       (53,706

)

    (26,636

)

    —       (80,342

)

General and administrative

    (13,207

)

    (9,819

)

    (958

)

    —       (23,984

)

Exploration and pre-development

    (56

)

    (5,826

)

    (8,451

)

    —       (14,333

)

Gain/(loss) on derivative contracts

    (2,560

)

    —       —       —       (2,560

)

Equity in earnings of subsidiaries

    32,864       —       —       (32,864

)

    —  

Other (expense) income

    (14,093

)

    4,781       (1,550

)

    (11,398

)

    (22,260

)

Income (loss) before income taxes

    919       44,862       (1,662

)

    (44,262

)

    (143

)

(Provision) benefit from income taxes

    —       (10,486

)

    150       11,398       1,062  

Net income (loss)

    919       34,376       (1,512

)

    (32,864

)

    919  

Preferred stock dividends

    (414

)

    —       —       —       (414

)

Income (loss) applicable to common shareholders

    505       34,376       (1,512

)

    (32,864

)

    505  

Net income (loss)

    919       34,376       (1,512

)

    (32,864

)

    919  

Changes in comprehensive income (loss)

    1,438       303       2,449       (2,752

)

    1,438  

Comprehensive income (loss)

  $ 2,357     $ 34,679     $ 937     $ (35,616

)

  $ 2,357  

   

Three Months Ended September 30, 2013

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ (2,447

)

  $ 81,687     $ 27,389     $ —     $ 106,629  

Cost of sales

    —       (45,342

)

    (21,595

)

    —       (66,937

)

Depreciation, depletion, amortization

    —       (15,736

)

    (3,270

)

    —       (19,006

)

General and administrative

    (3,550

)

    (3,636

)

    (534

)

    —       (7,720

)

Exploration and pre-development

    (42

)

    (6,551

)

    (2,648

)

    —       (9,241

)

Gain on derivative contracts

    (4,564

)

    —       —       —       (4,564

)

Aurizon acquisition costs

    (268

)

    —       (500

)

    —       (768

)

Equity in earnings of subsidiaries

    82,896       —       —       (82,896

)

    —  

Other expense

    (80,483

)

    (811

)

    (15,800

)

    87,701       (9,393

)

Income (loss) before income taxes

    (8,458

)

    9,611       (16,958

)

    4,805       (11,000

)

(Provision) benefit from income taxes

    —       (3,795

)

    92,351       (86,014

)

    2,542  

Net income (loss)

    (8,458

)

    5,816       75,393       (81,209

)

    (8,458

)

Preferred stock dividends

    (138

)

    —       —       —       (138

)

Income (loss) applicable to common shareholders

    (8,596

)

    5,816       75,393       (81,209

)

    (8,596

)

Net income (loss)

    (8,458

)

    5,816       75,393       (81,209

)

    (8,458

)

Changes in comprehensive income (loss)

    2,489       (5,078

)

    (1,079

)

    6,157       2,489  

Comprehensive income (loss)

  $ (5,969

)

  $ 738     $ 74,314     $ (75,052

)

  $ (5,969

)


   

Nine Months Ended September 30, 2013

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ 338     $ 230,562     $ 37,509     $ —     $ 268,409  

Cost of sales

    —       (133,944

)

    (29,826

)

    —       (163,770

)

Depreciation, depletion, amortization

    —       (46,630

)

    (6,594

)

    —       (53,224

)

General and administrative

    (11,015

)

    (10,183

)

    (943

)

    —       (22,141

)

Exploration and pre-development

    (459

)

    (23,299

)

    (7,500

)

    —       (31,258

)

Gain/(loss) on derivative contracts

    23,516       —       —       —       23,516  

Aurizon acquisition costs

    (14,416

)

    —       (11,952

)

    —       (26,368

)

Equity in earnings of subsidiaries

    68,198       —       —       (68,198

)

       

Other (expense) income

    (88,384

)

    1,132       (19,757

)

    87,701       (19,308

)

Income (loss) before income taxes

    (22,222

)

    17,638       (39,063

)

    19,503       (24,144

)

(Provision) benefit from income taxes

    —       (9,049

)

    98,672       (87,701

)

    1,922  

Net income (loss)

    (22,222

)

    8,589       59,609       (68,198

)

    (22,222

)

Preferred stock dividends

    (414

)

    —       —       —       (414

)

Income (loss) applicable to common shareholders

    (22,636

)

    8,589       59,609       (68,198

)

    (22,636

)

Net income (loss)

    (22,222

)

    8,589       59,609       (68,198

)

    (22,222

)

Changes in comprehensive income (loss)

    (2,286

)

    (1,248

)

    (4,909

)

    6,157       (2,286

)

Comprehensive income (loss)

  $ (24,508

)

  $ 7,341     $ 54,700     $ (62,041

)

  $ (24,508

)


Condensed Consolidating Statements of Cash Flows


   

Nine Months Ended September 30, 2014

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
                                         

Cash flows from operating activities

  $ 37,533     $ 32,896     $ 20,307     $ (31,968

)

  $ 58,768  

Cash flows from investing activities:

                                       

Additions to properties, plants, and equipment

    (1,057

)

    (58,472

)

    (31,168

)

    —       (90,697

)

Other investing activities, net

    —       358       3,843       —       4,201  

Cash flows from financing activities:

                                       

Dividends paid to shareholders

    (3,043

)

    —       —       —       (3,043

)

Borrowings on debt

    —       —       —       —       —  

Proceeds from (payments on) debt

    —       (6,878

)

    (15

)

    —       (6,893

)

Other financing activity, net

    (7,965

)

    40,292       (14,322

)

    31,968       49,973  

Effect of exchange rates on cash

    —       —       (2,124

)

            (2,124

)

Changes in cash and cash equivalents

    25,468       8,196       (23,479

)

    —       10,185  

Beginning cash and cash equivalents

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

Ending cash and cash equivalents

  $ 151,739     $ 48,205     $ 22,416     $ —     $ 222,360  

   

Nine Months Ended September 30, 2013

 
   

Parent

   

Guarantors

   

Non-Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Cash flows from operating activities

  $ (7,020

)

  $ 57,833     $ (45,733

)

  $ —     $ 5,080  

Cash flows from investing activities:

                                       

Additions to properties, plants, and equipment

    (1,169

)

    (88,807

)

    (22,830

)

    —       (112,806

)

Acquisition of Aurizon Mines

    (498,705

)

            177,588       —       (321,117

)

Other investing activities, net

    —       103       (3,979

)

    —       (3,876

)

Cash flows from financing activities:

                                       

Dividends paid to shareholders

    (5,548

)

    —       —       —       (5,548

)

Borrowings on debt

    490,000       —       —       —       490,000  

Proceeds from (payments on) debt

    —       (5,171

)

    —       —       (5,171

)

Other financing activity, net

    6,431       7,936       (15,897

)

    —       (1,530

)

Effect of exchange rates on cash

    —       —       1,820       —       1,820  

Changes in cash and cash equivalents

    (16,011

)

    (28,106

)

    90,969       —       46,852  

Beginning cash and cash equivalents

    132,266       57,970       748       —       190,984  

Ending cash and cash equivalents

  $ 116,255     $ 29,864     $ 91,717     $ —     $ 237,836