Note 14 - Guarantor Subsidiaries

3 Months Ended

Mar. 31, 2015

Guarantor Subsidiaries [Abstract]

Guarantor Subsidiaries [Text Block]

Note 14.   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, the Guarantors, and Non-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, either at all or sufficient to meet their capital needs, 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.

• Dividends. Certain of Hecla's subsidiaries which generate cash flow routinely provide cash to their parent companies through inter-company transfers. On an annual basis, the boards of directors of such subsidiary companies declare dividends to their parent companies, which reduces the subsidiaries' retained earnings and increases the parents' dividend income. In consolidation, such activity is eliminated.

• Debt. Inter-company debt agreements have been established between certain of Hecla's subsidiaries and their parents. The related debt liability and receivable balances, accrued interest expense and income activity, and payments of principal and accrued interest amounts by the subsidiary companies to their parents are eliminated in consolidation.

• 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 unaudited interim 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, including: (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) Hecla ceases to be a borrower as defined in the indenture; and (5) upon legal or covenant defeasance or satisfaction and discharge of the indenture.

Unaudited Interim Condensed Consolidating Balance Sheets

	As of March 31, 2015
	Parent		Guarantors			Non-Guarantors			Eliminations			Consolidated
	(in thousands)
Assets
Cash and cash equivalents	$	145,284	$	35,957		$	14,990		$	—		$	196,231
Other current assets		17,969		52,393			27,769			13,963			112,094
Properties, plants, and equipment - net		1,838		1,085,971			749,364			—			1,837,173
Intercompany receivable (payable)		439,735		(125,964	)		(370,025	)		56,254			—
Investments in subsidiaries		1,365,864		—			—			(1,365,864	)		—
Other non-current assets		10,102		182,205			4,207			(82,061	)		114,453
Total assets	$	1,980,792	$	1,230,562		$	426,305		$	(1,377,708	)	$	2,259,951
Liabilities and Stockholders' Equity
Current liabilities	$	24,709	$	48,654		$	19,983		$	(4,808	)	$	88,538
Long-term debt		498,791		10,150			1,440			—			510,381
Non-current portion of accrued reclamation		—		43,886			11,895			—			55,781
Non-current deferred tax liability		—		7,036			138,422			(7,036	)		138,422
Other non-current liabilities		37,967		10,386			(849	)		—			47,504
Stockholders' equity		1,419,325		1,110,450			255,414			(1,365,864	)		1,419,325
Total liabilities and stockholders' equity	$	1,980,792	$	1,230,562		$	426,305		$	(1,377,708	)	$	2,259,951

	As of December 31, 2014
	Parent		Guarantors			Non-Guarantors			Eliminations			Consolidated
	(in thousands)
Assets
Cash and cash equivalents	$	146,885	$	33,824		$	28,956		$	—		$	209,665
Other current assets		7,115		48,981			23,165			27,433			106,694
Properties, plants, and equipment - net		1,572		1,079,658			750,334			—			1,831,564
Intercompany receivable (payable)		470,306		(123,671	)		(392,880	)		46,245			—
Investments in subsidiaries		1,317,969		—			—			(1,317,969	)		—
Other non-current assets		8,644		189,014			4,620			(88,137	)		114,141
Total assets	$	1,952,491	$	1,227,806		$	414,195		$	(1,332,428	)	$	2,262,064
Liabilities and Stockholders' Equity
Current liabilities	$	14,143	$	54,918		$	21,996		$	(72	)	$	90,985
Long-term debt		498,479		10,597			3,053			—			512,129
Non-current portion of accrued reclamation		—		43,314			12,305			—			55,619
Non-current deferred tax liability		—		14,387			153,300			(14,387	)		153,300
Other non-current liabilities		42,895		11,126			(964	)		—			53,057
Stockholders' equity		1,396,974		1,093,464			224,505			(1,317,969	)		1,396,974
Total liabilities and stockholders' equity	$	1,952,491	$	1,227,806		$	414,195		$	(1,332,428	)	$	2,262,064

Unaudited Interim Condensed Consolidating Statements of Operations

	Three Months Ended March 31, 2015
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(in thousands)
Revenues	$	312		$	86,934		$	31,846		$	—		$	119,092
Cost of sales		—			(51,437	)		(22,528	)		—			(73,965	)
Depreciation, depletion, amortization		—			(16,611	)		(8,643	)		—			(25,254	)
General and administrative		(4,442	)		(3,893	)		(385	)		—			(8,720	)
Exploration and pre-development		(217	)		(1,134	)		(3,785	)		—			(5,136	)
Gain on derivative contracts		5,792			—			—			—			5,792
Equity in earnings of subsidiaries		40,042			—			—			(40,042	)		—
Other (expense) income		(28,935	)		3,567			31,006			(3,456	)		2,182
Income (loss) before income taxes		12,552			17,426			27,511			(43,498	)		13,991
(Provision) benefit from income taxes		—			(4,946	)		51			3,456			(1,439	)
Net income (loss)		12,552			12,480			27,562			(40,042	)		12,552
Preferred stock dividends		(138	)		—			—			—			(138	)
Income (loss) applicable to common stockholders		12,414			12,480			27,562			(40,042	)		12,414
Net income (loss)		12,552			12,480			27,562			(40,042	)		12,552
Changes in comprehensive income (loss)		1,936			(194	)		2,051			(1,857	)		1,936
Comprehensive income (loss)	$	14,488		$	12,286		$	29,613		$	(41,899	)	$	14,488

	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			(17,303	)		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

Unaudited Interim Condensed Consolidating Statements of Cash Flows

	Three Months Ended March 31, 2015
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(in thousands)
Cash flows from operating activities	$	15,726		$	15,823		$	19,902		$	(30,032	)	$	21,419
Cash flows from investing activities:
Additions to properties, plants, and equipment		(424	)		(18,163	)		(8,371	)					(26,958	)
Other investing activities, net		—			25			(947	)		—			(922	)
Cash flows from financing activities:
Dividends paid to stockholders		(1,062	)		—			—			—			(1,062	)
Borrowings on debt		—			—			—			—			—
Payments on debt		—			(1,901	)		(446	)		—			(2,347	)
Other financing activity		(15,841	)		6,349			(21,544	)		30,032			(1,004	)
Effect of exchange rate changes on cash		—			—			(2,560	)		—			(2,560	)
Changes in cash and cash equivalents		(1,601	)		2,133			(13,966	)		—			(13,434	)
Cash and cash equivalents at beginning of period		146,885			33,824			28,956			—			209,665
Cash and cash equivalents at end of period	$	145,284		$	35,957		$	14,990		$	—		$	196,231

	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	)
Cash and cash equivalents at beginning of period		126,271			40,009			45,895			—			212,175
Cash and cash equivalents at end of period	$	137,252		$	43,399		$	26,991		$	—		$	207,642