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Note 14 - Guarantor Subsidiaries
 6 Months Ended
Jun. 30, 2016
Notes to Financial Statements  
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 Senior 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.; Hecla Montana, 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 Senior 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 and its subsidiaries and among the 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 (if any) and income activity (if any), and payments of principal and accrued interest amounts (if any) 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 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.
 
Effective December 31, 2015, Hecla Limited (our wholly owned subsidiary) sold 100% of its ownership of Hecla Alaska LLC (its wholly owned subsidiary) to Hecla Mining Company for consideration totaling approximately $240.8 million.  The consideration consisted of satisfaction of inter-company debt between Hecla Limited and Hecla Mining Company and an obligation by Hecla Mining Company, under certain circumstances, to fund a limited amount of the capital requirements of Hecla Limited for up to five years.  Hecla Alaska LLC owns a 29.7331% interest in the joint venture which owns the Greens Creek mine.
 
 
Unaudited Interim Condensed Consolidating Balance Sheets
 
 
  
As of June 30, 2016
  
 
  
Parent
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
 
  
(in thousands)
  
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
   $ 102,488     $ 23,720     $ 17,405     $ —     $ 143,613  
Other current assets
     41,498       95,009       43,534       (12,519
)
     167,522  
Properties, plants, and equipment - net
     2,266       1,167,053       756,839       —       1,926,158  
Intercompany receivable (payable)
     553,020       (342,822
)
     (329,269
)
     119,071       —  
Investments in subsidiaries
     1,247,747       —       —       (1,247,747
)
     —  
Other non-current assets
     2,518       177,907       5,206       (152,114
)
     33,517  
Total assets
   $ 1,949,537     $ 1,120,867     $ 493,715     $ (1,293,309
)
   $ 2,270,810  
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
   $ 21,820     $ 82,221     $ 50,845     $ (25,098
)
   $ 129,788  
Long-term debt
     500,354       5,079       2,237       —       507,670  
Non-current portion of accrued reclamation
     —       43,381       29,638       —       73,019  
Non-current deferred tax liability
     —       13,293       134,584       (20,464
)
     127,413  
Other non-current liabilities
     47,685       5,937       (380
)
     —       53,242  
Stockholders' equity
     1,379,678       970,956       276,791       (1,247,747
)
     1,379,678  
Total liabilities and stockholders' equity
   $ 1,949,537     $ 1,120,867     $ 493,715     $ (1,293,309
)
   $ 2,270,810  
 
 
 
  
As of December 31, 2015
  
 
  
Parent
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
 
  
(in thousands)
  
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
   $ 94,167     $ 42,692     $ 18,350     $ —     $ 155,209  
Other current assets
     15,972       58,453       32,273       7,626       114,324  
Properties, plants, and equipment - net
     2,281       1,147,770       746,760       —       1,896,811  
Intercompany receivable (payable)
     540,665       (301,291
)
     (332,553
)
     93,179       —  
Investments in subsidiaries
     1,252,191       —       —       (1,252,191
)
     —  
Other non-current assets
     2,200       165,080       1,781       (113,480
)
     55,581  
Total assets
   $ 1,907,476     $ 1,112,704     $ 466,611     $ (1,264,866
)
   $ 2,221,925  
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
   $ 21,087     $ 84,559     $ 30,636     $ (9,198
)
   $ 127,084  
Long-term debt
     499,729       6,128       3,183       —       509,040  
Non-current portion of accrued reclamation
     —       45,494       29,055       —       74,549  
Non-current deferred tax liability
     —       3,264       119,836       (3,477
)
     119,623  
Other non-current liabilities
     47,734       5,834       (865
)
     —       52,703  
Stockholders' equity
     1,338,926       967,425       284,766       (1,252,191
)
     1,338,926  
Total liabilities and stockholders' equity
   $ 1,907,476     $ 1,112,704     $ 466,611     $ (1,264,866
)
   $ 2,221,925  
 
 
 
Unaudited Interim Condensed Consolidating Statements of Operations
 
 
 
Three Months Ended June 30, 2016
 
 
 
Parent
 
 
Guarantors
 
 
Non-Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Revenues
   $ (5,659
)
   $ 87,992     $ 88,969     $ —     $ 171,302  
Cost of sales
     —       (47,203
)
     (35,750
)
     —       (82,953
)
Depreciation, depletion, amortization
     —       (15,238
)
     (14,659
)
     —       (29,897
)
General and administrative
     (6,474
)
     (3,679
)
     (206
)
     —       (10,359
)
Exploration and pre-development
     (113
)
     (1,360
)
     (2,410
)
     —       (3,883
)
Loss on derivative contracts
     (6
)
     —       —       —       (6
)
Acquisition costs
     (394
)
     (8
)
     —       —       (402
)
Equity in earnings of subsidiaries
     37,111       —       —       (37,111
)
     —  
Other (expense) income
     (349
)
     2,623       (8,732
)
     (1,732
)
     (8,190
)
Income (loss) before income taxes
     24,116       23,127       27,212       (38,843
)
     35,612  
(Provision) benefit from income taxes
     —       (8,386
)
     (4,842
)
     1,732       (11,496
)
Net income (loss)
     24,116       14,741       22,370       (37,111
)
     24,116  
Preferred stock dividends
     (138
)
     —       —       —       (138
)
Income (loss) applicable to common stockholders
     23,978       14,741       22,370       (37,111
)
     23,978  
Net income (loss)
     24,116       14,741       22,370       (37,111
)
     24,116  
Changes in comprehensive income (loss)
     1,239       —       1,193       (1,193
)
     1,239  
Comprehensive income (loss)
   $ 25,355     $ 14,741     $ 23,563     $ (38,304
)
   $ 25,355  
 
 
 
 
 
Six Months Ended June 30, 2016
 
 
 
Parent
 
 
Guarantors
 
 
Non-Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Revenues
   $ (11,794
)
   $ 169,261     $ 144,852     $ —     $ 302,319  
Cost of sales
     —       (93,956
)
     (63,317
)
     —       (157,273
)
Depreciation, depletion, amortization
     —       (31,844
)
     (23,928
)
     —       (55,772
)
General and administrative
     (11,714
)
     (8,202
)
     (657
)
     —       (20,573
)
Exploration and pre-development
     (158
)
     (2,647
)
     (4,432
)
     —       (7,237
)
Loss on derivative contracts
     (6
)
     —       —       —       (6
)
Acquisition costs
     (394
)
     (8
)
     —       —       (402
)
Equity in earnings of subsidiaries
     16,120       —       —       (16,120
)
     —  
Other (expense) income
     31,444       6,959       (44,250
)
     (18,561
)
     (24,408
)
Income (loss) before income taxes
     23,498       39,563       8,268       (34,681
)
     36,648  
(Provision) benefit from income taxes
     —       (13,219
)
     (18,492
)
     18,561       (13,150
)
Net income (loss)
     23,498       26,344       (10,224
)
     (16,120
)
     23,498  
Preferred stock dividends
     (276
)
     —       —       —       (276
)
Income (loss) applicable to common stockholders
     23,222       26,344       (10,224
)
     (16,120
)
     23,222  
Net income (loss)
     23,498       26,344       (10,224
)
     (16,120
)
     23,498  
Changes in comprehensive income (loss)
     2,304       8       2,253       (2,261
)
     2,304  
Comprehensive income (loss)
   $ 25,802     $ 26,352     $ (7,971
)
   $ (18,381
)
   $ 25,802  
 
 
 
 
 
Three Months Ended June 30, 2015
 
 
 
Parent
 
 
Guarantors
 
 
Non-Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Revenues
   $ 1,081     $ 67,531     $ 35,585     $ —     $ 104,197  
Cost of sales
     —       (41,512
)
     (26,055
)
     —       (67,567
)
Depreciation, depletion, amortization
     —       (16,452
)
     (10,714
)
     —       (27,166
)
General and administrative
     (4,373
)
     (3,392
)
     (531
)
     —       (8,296
)
Exploration and pre-development
     (122
)
     (1,445
)
     (4,643
)
     —       (6,210
)
Acquisition costs
     (887
)
     —       —       —       (887
)
Loss on derivative contracts
     (2,055
)
     (92
)
     —       —       (2,147
)
Equity in earnings of subsidiaries
     (738
)
     —       —       738       —  
Other (expense) income
     (19,573
)
     3,499       (22,544
)
     19,895       (18,723
)
Income (loss) before income taxes
     (26,667
)
     8,137       (28,902
)
     20,633       (26,799
)
(Provision) benefit from income taxes
     —       (1,956
)
     21,983       (19,895
)
     132  
Net income (loss)
     (26,667
)
     6,181       (6,919
)
     738       (26,667
)
Preferred stock dividends
     (138
)
     —       —       —       (138
)
Income (loss) applicable to common stockholders
     (26,805
)
     6,181       (6,919
)
     738       (26,805
)
Net income (loss)
     (26,667
)
     6,181       (6,919
)
     738       (26,667
)
Changes in comprehensive income (loss)
     (1,156
)
     183       (1,264
)
     1,082       (1,155
)
Comprehensive income (loss)
   $ (27,823
)
   $ 6,364     $ (8,183
)
   $ 1,820     $ (27,822
)
 
 
 
 
 
Six Months Ended June 30, 2015
 
 
 
Parent
 
 
Guarantors
 
 
Non-Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Revenues
   $ 1,393     $ 154,465     $ 67,431     $ —     $ 223,289  
Cost of sales
     —       (92,949
)
     (48,583
)
     —       (141,532
)
Depreciation, depletion, amortization
     —       (33,063
)
     (19,357
)
     —       (52,420
)
General and administrative
     (8,815
)
     (7,285
)
     (916
)
     —       (17,016
)
Exploration and pre-development
     (339
)
     (2,579
)
     (8,428
)
     —       (11,346
)
Gain on derivative contracts
     4,905       —       —       —       4,905  
Acquisition costs
     (2,055
)
     (92
)
     —       —       (2,147
)
Equity in earnings of subsidiaries
     39,304       —       —       (39,304
)
     —  
Other (expense) income
     (48,508
)
     7,066       8,462       16,439       (16,541
)
Income (loss) before income taxes
     (14,115
)
     25,563       (1,391
)
     (22,865
)
     (12,808
)
(Provision) benefit from income taxes
     —       (6,902
)
     22,034       (16,439
)
     (1,307
)
Net income (loss)
     (14,115
)
     18,661       20,643       (39,304
)
     (14,115
)
Preferred stock dividends
     (276
)
     —       —       —       (276
)
Income (loss) applicable to common stockholders
     (14,391
)
     18,661       20,643       (39,304
)
     (14,391
)
Net income (loss)
     (14,115
)
     18,661       20,643       (39,304
)
     (14,115
)
Changes in comprehensive income (loss)
     780       (11
)
     787       (775
)
     781  
Comprehensive income (loss)
   $ (13,335
)
   $ 18,650     $ 21,430     $ (40,079
)
   $ (13,334
)
 
 
Unaudited Interim Condensed Consolidating Statements of Cash Flows
 
 
 
Six Months Ended June 30, 2016
 
 
 
Parent
 
 
Guarantors
 
 
Non-Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Cash flows from operating activities
   $ 22,190     $ (8,639
)
   $ 40,815     $ 31,772     $ 86,138  
Cash flows from investing activities:
                                        
Additions to properties, plants, and equipment
     (40
)
     (43,677
)
     (33,243
)
             (76,960
)
Other investing activities, net
     (15,248
)
     317       (3,900
)
     —       (18,831
)
Cash flows from financing activities:
                                        
Dividends paid to stockholders
     (2,190
)
     —       —               (2,190
)
Payments on debt
     (1,339
)
     (3,836
)
     (520
)
             (5,695
)
Other financing activity
     (4,948
)
     36,863       (5,385
)
     (31,772
)
     4,654  
Effect of exchange rate changes on cash
     —       —       1,288       —       1,288  
Changes in cash and cash equivalents
     8,321       (18,972
)
     (945
)
     —       (11,596
)
Beginning cash and cash equivalents
     94,167       42,692       18,350       —       155,209  
Ending cash and cash equivalents
   $ 102,488     $ 23,720     $ 17,405     $ —     $ 143,613  
 
 
 
 
 
 
Six Months Ended June 30, 2015
 
 
 
Parent
 
 
Guarantors
 
 
Non-Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Cash flows from operating activities
   $ 31,482     $ 49,275     $ 7,355     $ (35,939
)
   $ 52,173  
Cash flows from investing activities:
                                     —  
Additions to properties, plants, and equipment
     (436
)
     (40,963
)
     (16,873
)
             (58,272
)
Acquisition of Revett, net of cash acquired
     (809
)
     —       —       —       (809
)
Other investing activities, net
     61       267       (1,122
)
     —       (794
)
Cash flows from financing activities:
                                     —  
Dividends paid to stockholders
     (2,126
)
     —       —       —       (2,126
)
Payments on debt
     —       (4,349
)
     (591
)
     —       (4,940
)
Other financing activity
     (47,645
)
     17,852       (7,210
)
     35,939       (1,064
)
Effect of exchange rate changes on cash
     —       —       (2,259
)
     —       (2,259
)
Changes in cash and cash equivalents
     (19,473
)
     22,082       (20,700
)
     —       (18,091
)
Beginning cash and cash equivalents
     146,885       33,824       28,956               209,665  
Ending cash and cash equivalents
   $ 127,412     $ 55,906     $ 8,256     $ —     $ 191,574