Note 11 - Business Segments and Significant Customers

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Segment Reporting Disclosure [Text Block]

Note

11:

Business Segments and Significant Customers

We discover, acquire, develop, produce, and market concentrates and doré containing silver, gold, lead and zinc.  Our products consist of both metal concentrates, which we sell to custom smelters and brokers, and unrefined bullion bars (doré), which

may

be sold as doré or further refined before sale to precious metals traders.  We are currently organized and managed in

four

segments, which represent our operating units: the Greens Creek unit, the Lucky Friday unit, the Casa Berardi unit, and the San Sebastian unit. The San Sebastian unit, a historic operating property for Hecla, resumed commercial production in the

fourth

quarter of

2015

and was added as a new reporting segment in

2015.

General corporate activities not associated with operating units and their various exploration activities, as well as discontinued operations and idle properties, are presented as “other.”  Interest expense, interest income and income taxes are considered general corporate items, and are not allocated to our segments.

Sales of metal concentrates and metal products are made principally to custom smelters, brokers and metals traders. The percentage of sales contributed by each segment is reflected in the following table:

	Year Ended December 31,
	2016			2015			2014
Greens Creek		40.3	%		51.4	%		49.0	%
Lucky Friday		14.7	%		14.9	%		17.9	%
Casa Berardi		27.4	%		33.7	%		33.1	%
San Sebastian		17.6	%		—	%		—	%
		100	%		100	%		100	%

The tables below present information about reportable segments as of and for the years ended

December

 

31,

2016,

2015

and

2014

(in thousands).

	2016			2015			2014
Net sales to unaffiliated customers:
Greens Creek	$	260,446		$	227,833		$	245,175
Lucky Friday		94,479			66,302			89,757
Casa Berardi		177,143			149,432			165,849
San Sebastian		113,889			—			—
	$	645,957		$	443,567		$	500,781
Income (loss) from operations:
Greens Creek	$	65,125		$	26,536		$	39,758
Lucky Friday		18,175			868			21,501
Casa Berardi		16,336			(1,557	)		11,828
San Sebastian		77,221			(9,269	)		(5,780	)
Other		(59,913	)		(52,189	)		(45,679	)
	$	116,944		$	(35,611	)	$	21,628
Capital additions (including non-cash additions):
Greens Creek	$	42,013		$	45,962		$	31,476
Lucky Friday		44,839			60,020			52,193
Casa Berardi		67,577			35,302			48,615
San Sebastian		6,026			4,623			—
Other		21,344			14,809			18,801
	$	181,799		$	160,716		$	151,085

Depreciation, depletion and amortization:
Greens Creek	$	52,564	$	56,553	$	63,505
Lucky Friday		11,810		11,262		9,431
Casa Berardi		47,312		43,674		38,198
San Sebastian		3,782		—		—
	$	115,468	$	111,489	$	111,134
Other significant non-cash items:
Greens Creek	$	2,736	$	2,886	$	2,807
Lucky Friday		720		72		72
Casa Berardi		1,259		2,229		847
San Sebastian		—		13		—
Other		11,135		66,004		506
	$	15,850	$	71,204	$	4,232
Identifiable assets:
Greens Creek	$	681,303	$	698,265	$	704,121
Lucky Friday		442,829		393,338		356,482
Casa Berardi		806,044		779,423		800,961
San Sebastian		33,608		22,238		1,529
Other		407,893		328,661		398,971
	$	2,371,677	$	2,221,925	$	2,262,064

The following is sales information by geographic area based on the location of smelters and brokers (for concentrate shipments) and the location of parent companies (for doré sales to metals traders) for the years ended

December

 

31,

2016,

2015

and

2014

(in thousands):

	2016		2015		2014
United States	$	22,499	$	17,862	$	22,200
Canada		437,621		275,771		295,027
Japan		44,158		38,835		58,466
Korea		116,687		66,293		70,548
China		35,220		38,611		53,067
Other		4,008		—		—
Total, excluding gains/losses on forward contracts	$	660,193	$	437,372	$	499,308

Sales of products for

2016

include net losses of

$14.2

million, and

2015

included net gains of

$6.2

million, on financially-settled forward contracts for silver, gold, lead and zinc contained in our concentrate sales.  

2014

sales included a net gain of

$1.5

million on the contracts for lead and zinc. See

Note

10

for more information.

The following are our long-lived assets by geographic area as of

December

 

31,

2016

and

2015

(in thousands):

	2016		2015
United States	$	1,261,488	$	1,150,521
Canada		764,489		741,612
Mexico		6,708		4,678
	$	2,032,685	$	1,896,811

Sales from continuing operations to significant metals customers as a percentage of total sales were as follows for the years ended

December

 

31,

2016,

2015

and

2014:

	Year Ended December 31,
	2016			2015			2014
Teck Metals Ltd.		21.2	%		22.5	%		25.8	%
Korea Zinc		16.9	%		16.0	%		14.1	%
Scotia		24.5	%		5.6	%		-	%
CIBC		19.0	%		17.6	%		17.0	%
Mitsui		4.4	%		10.2	%		15.8	%

The sales and income (loss) from operations amounts reported above include results from our Lucky Friday segment. The Lucky Friday mine is our only operation where some of our employees are subject to a collective bargaining agreement, and the most recent agreement expired on

April

30,

2016.

On

February

19,

2017,

the unionized employees voted against our contract offer. We expect further discussions with the union but it is possible that an agreement will not be reached, in which case we cannot predict what might happen next, including what actions we or the union might take in response to failing to reach an agreement. In the event of a prolonged strike or other event related to labor at the Lucky Friday, operations at Lucky Friday could be disrupted, which could adversely affect our financial condition and results of operations.