Note 14 - Guarantor Subsidiaries

9 Months Ended

Sep. 30, 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.; Hecla MC Subsidiary, LLC; Hecla Silver Valley, Inc.; Burke Trading, Inc.; Revett Mining Company, Inc.; Revett Silver Company; RC Resources, Inc.; Troy Mine Inc.; Revett Exploration, Inc.; Revett Holdings, 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 set forth elsewhere in this Form 10-Q. 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 in debt or equity capital on the records of the parent company and a contribution to debt or equity 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, when not otherwise intended as debt, 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.

• 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.

• 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.

• 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.

Condensed Consolidating Balance Sheets

	As of September 30, 2015
	Parent		Guarantors			Non-Guarantors			Eliminations			Consolidated
	(in thousands)
Assets
Cash and cash equivalents	$	123,585	$	45,082		$	5,787		$	—		$	174,454
Other current assets		5,486		56,780			34,870			19,573			116,709
Properties, plants, and equipment - net		1,522		1,131,491			745,164			—			1,878,177
Intercompany receivable (payable)		459,203		(141,131	)		(364,154	)		46,082			—
Investments in subsidiaries		1,373,915		—			—			(1,373,915	)		—
Other non-current assets		2,339		183,590			2,272			(72,328	)		115,873
Total assets	$	1,966,050	$	1,275,812		$	423,939		$	(1,380,588	)	$	2,285,213
Liabilities and Shareholders' Equity
Current liabilities	$	21,123	$	84,121		$	22,112		$	(1,740	)	$	125,616
Long-term debt		499,417		10,343			1,006			—			510,766
Non-current portion of accrued reclamation		—		42,708			28,114			—			70,822
Non-current deferred tax liability		—		5,211			125,475			(4,933	)		125,753
Other non-current liabilities		43,739		6,765			(19	)		—			50,485
Shareholders' equity		1,401,771		1,126,664			247,251			(1,373,915	)		1,401,771
Total liabilities and shareholders' equity	$	1,966,050	$	1,275,812		$	423,939		$	(1,380,588	)	$	2,285,213

	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

Condensed Consolidating Statements of Operations

	Three Months Ended September 30, 2015
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(in thousands)
Revenues	$	4,663		$	63,604		$	36,674		$	—		$	104,941
Cost of sales		—			(53,375	)		(25,898	)		—			(79,273	)
Depreciation, depletion, amortization		—			(16,669	)		(11,560	)		—			(28,229	)
General and administrative		(4,965	)		(4,131	)		(365	)		—			(9,461	)
Exploration and pre-development		(210	)		(2,800	)		(4,226	)		—			(7,236	)
Gain/(loss) on derivative contracts		3,347			—			—			—			3,347
Acquisition costs		1,538			(1,553	)		—			—			(15	)
Equity in loss of subsidiaries		(11,300	)		—			—			11,300			—
Other (expense) income		(2,963	)		3,289			21,549			(21,339	)		536
Income (loss) before income taxes		(9,890	)		(11,635	)		16,174			(10,039	)		(15,390	)
(Provision) benefit from income taxes		—			1,606			(17,444	)		21,338			5,500
Net income (loss)		(9,890	)		(10,029	)		(1,270	)		11,299			(9,890	)
Preferred stock dividends		(138	)		—			—			—			(138	)
Income (loss) applicable to common shareholders		(10,028	)		(10,029	)		(1,270	)		11,299			(10,028	)
Net income (loss)		(9,890	)		(10,029	)		(1,270	)		11,299			(9,890	)
Changes in comprehensive income (loss)		(390	)		(5	)		(302	)		306			(391	)
Comprehensive income (loss)	$	(10,280	)	$	(10,034	)	$	(1,572	)	$	11,605		$	(10,281	)

	Nine Months Ended September 30, 2015
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(in thousands)
Revenues	$	6,056		$	218,069		$	104,105		$	—		$	328,230
Cost of sales		—			(146,324	)		(74,481	)		—			(220,805	)
Depreciation, depletion, amortization		—			(49,732	)		(30,917	)		—			(80,649	)
General and administrative		(13,780	)		(11,416	)		(1,281	)		—			(26,477	)
Exploration and pre-development		(549	)		(5,379	)		(12,654	)		—			(18,582	)
Gain/(loss) on derivative contracts		8,252			—			—			—			8,252
Acquisition costs		(517	)		(1,645	)		—			—			(2,162	)
Equity in earnings of subsidiaries		28,005			—			—			(28,005	)		—
Other (expense) income		(51,472	)		10,355			30,011			(4,899	)		(16,005	)
Income (loss) before income taxes		(24,005	)		13,928			14,783			(32,904	)		(28,198	)
(Provision) benefit from income taxes		—			(5,296	)		4,590			4,899			4,193
Net income (loss)		(24,005	)		8,632			19,373			(28,005	)		(24,005	)
Preferred stock dividends		(414	)		—			—			—			(414	)
Income (loss) applicable to common shareholders		(24,419	)		8,632			19,373			(28,005	)		(24,419	)
Net income (loss)		(24,005	)		8,632			19,373			(28,005	)		(24,005	)
Changes in comprehensive income (loss)		390			(15	)		485			(470	)		390
Comprehensive income (loss)	$	(23,615	)	$	8,617		$	19,858		$	(28,475	)	$	(23,615	)

	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 on derivative contracts		(411	)		—			—			—			(411	)
Equity in earnings of subsidiaries		96,349			—			—			(96,349	)		—
Other expense		(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

Condensed Consolidating Statements of Cash Flows

	Nine Months Ended September 30, 2015
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
Cash flows from operating activities	$	11,043		$	63,831		$	32,258		$	(28,164	)	$	78,968
Cash flows from investing activities:
Additions to properties, plants, and equipment		(436	)		(69,930	)		(25,033	)					(95,399	)
Acquisition of Revett, net of cash acquired		(809	)		—			—			—			(809	)
Other investing activities, net		61			172			(903	)		—			(670	)
Cash flows from financing activities:
Dividends paid to shareholders		(3,210	)		—			—			—			(3,210	)
Proceeds from (payments on) debt		—			(7,109	)		(940	)					(8,049	)
Other financing activity, net		(29,949	)		24,294			(24,507	)		28,164			(1,998	)
Effect of exchange rates on cash		—			—			(4,044	)		—			(4,044	)
Changes in cash and cash equivalents		(23,300	)		11,258			(23,169	)		—			(35,211	)
Beginning cash and cash equivalents		146,885			33,824			28,956			—			209,665
Ending cash and cash equivalents	$	123,585		$	45,082		$	5,787		$	—		$	174,454

	Nine Months Ended September 30, 2014
	Parent			Guarantors			Non-Guarantors			Eliminations			Consolidated
	(in thousands)
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	)
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