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Note 13 - Guarantor Subsidiaries
 3 Months Ended
Mar. 31, 2017
Notes to Financial Statements  
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 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.; Mines Management, Inc.; Newhi Corp.; Montanore Minerals Corp.; 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 condensed consolidated financial statements set forth elsewhere in this report. Investments in the subsidiaries are accounted for under the equity method. Accordingly, the entries necessary to consolidate Hecla, the Guarantors, and our non-guarantor subsidiaries 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. The presentation of unaudited interim condensed consolidating financial statements below reflects the effective date for accounting purposes of
January
1,
2016.
 
Unaudited Interim Condensed Consolidating Balance Sheets
 
 
  
As of March 31, 2017
  
 
  
Parent
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
 
  
(in thousands)
  
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
   $
104,526
     $
29,783
     $
42,477
     $
—
     $
176,786
  
Other current assets
    
49,158
      
51,092
      
38,693
      
(574
)
    
138,369
  
Properties, plants, and equipment - net
    
2,031
      
1,259,079
      
771,873
      
—
      
2,032,983
  
Intercompany receivable (payable)
    
453,210
      
(243,979
)
    
(314,308
)
    
105,077
      
—
  
Investments in subsidiaries
    
1,499,401
      
—
      
—
      
(1,499,401
)
    
—
  
Other non-current assets
    
1,761
      
188,815
      
5,534
      
(137,787
)
    
58,323
  
Total assets
   $
2,110,087
     $
1,284,790
     $
544,269
     $
(1,532,685
)
   $
2,406,461
  
                                         
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
   $
47,831
     $
52,762
     $
47,968
     $
(15,906
)
   $
132,655
  
Long-term debt
    
501,292
      
3,692
      
2,396
      
—
      
507,380
  
Non-current portion of accrued reclamation
    
—
      
61,706
      
17,628
      
—
      
79,334
  
Non-current deferred tax liability
    
—
      
11,767
      
126,635
      
(17,377
)
    
121,025
  
Other non-current liabilities
    
46,661
      
5,328
      
(225
)
    
—
      
51,764
  
Stockholders' equity
    
1,514,303
      
1,149,535
      
349,867
      
(1,499,402
)
    
1,514,303
  
Total liabilities and stockholders' equity
   $
2,110,087
     $
1,284,790
     $
544,269
     $
(1,532,685
)
   $
2,406,461
  
 
 
 
  
As of December 31, 2016
  
 
  
Parent
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
 
  
(in thousands)
  
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
   $
113,275
     $
24,388
     $
32,114
     $
—
     $
169,777
  
Other current assets
    
33,950
      
65,369
      
35,524
      
(1,236
)
    
133,607
  
Properties, plants, and equipment - net
    
2,103
      
1,258,890
      
771,692
      
—
      
2,032,685
  
Intercompany receivable (payable)
    
404,121
      
(222,072
)
    
(307,018
)
    
124,969
      
—
  
Investments in subsidiaries
    
1,496,787
      
—
      
—
      
(1,496,787
)
    
—
  
Other non-current assets
    
4,186
      
186,988
      
5,350
      
(160,916
)
    
35,608
  
Total assets
   $
2,054,422
     $
1,313,563
     $
537,662
     $
(1,533,970
)
   $
2,371,677
  
                                         
Liabilities and Stockholders' Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
   $
22,401
     $
86,730
     $
41,348
     $
(22,999
)
   $
127,480
  
Long-term debt
    
500,979
      
3,065
      
2,773
      
—
      
506,817
  
Non-current portion of accrued reclamation
    
—
      
63,025
      
16,902
      
—
      
79,927
  
Non-current deferred tax liability
    
—
      
14,212
      
121,600
      
(14,212
)
    
121,600
  
Other non-current liabilities
    
51,198
      
5,108
      
(325
)
    
28
      
56,009
  
Stockholders' equity
    
1,479,844
      
1,141,423
      
355,364
      
(1,496,787
)
    
1,479,844
  
Total liabilities and stockholders' equity
   $
2,054,422
     $
1,313,563
     $
537,662
     $
(1,533,970
)
   $
2,371,677
  
 
Unaudited Interim Condensed Consolidating Statements of Operations
 
 
Three Months Ended March 31, 2017
 
 
 
Parent
 
 
Guarantors
 
 
Non-Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Revenues
   $
(4,093
)
   $
82,953
     $
63,684
     $
—
     $
142,544
  
Cost of sales
    
(148
)
    
(42,772
)
    
(35,756
)
    
—
      
(78,676
)
Depreciation, depletion, amortization
    
—
      
(15,766
)
    
(13,186
)
    
—
      
(28,952
)
General and administrative
    
(6,469
)
    
(2,319
)
    
(418
)
    
—
      
(9,206
)
Exploration and pre-development
    
(244
)
    
(1,901
)
    
(3,621
)
    
—
      
(5,766
)
Gain on derivative contracts
    
(7,809
)
    
—
      
—
      
—
      
(7,809
)
Equity in earnings of subsidiaries
    
2,701
      
—
      
—
      
(2,701
)
    
—
  
Other (expense) income
    
42,896
      
(3,116
)
    
(9,332
)
    
(44,820
)
    
(14,372
)
Income (loss) before income taxes
    
26,834
      
17,079
      
1,371
      
(47,521
)
    
(2,237
)
(Provision) benefit from income taxes
    
—
      
(8,969
)
    
(6,780
)
    
44,820
      
29,071
  
Net income (loss)
    
26,834
      
8,110
      
(5,409
)
    
(2,701
)
    
26,834
  
Preferred stock dividends
    
(138
)
    
—
      
—
      
—
      
(138
)
Income (loss) applicable to common stockholders
    
26,696
      
8,110
      
(5,409
)
    
(2,701
)
    
26,696
  
Net income (loss)
    
26,834
      
8,110
      
(5,409
)
    
(2,701
)
    
26,834
  
Changes in comprehensive income (loss)
    
3,204
      
—
      
(89
)
    
89
      
3,204
  
Comprehensive income (loss)
   $
30,038
     $
8,110
     $
(5,498
)
   $
(2,612
)
   $
30,038
  
 
 
 
 
Three Months Ended March 31, 2016
 
 
 
Parent
 
 
Guarantors
 
 
Non-
Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Revenues
   $
(6,135
)
   $
81,269
     $
55,883
     $
—
     $
131,017
  
Cost of sales
    
—
      
(46,753
)
    
(27,567
)
    
—
      
(74,320
)
Depreciation, depletion, amortization
    
—
      
(16,606
)
    
(9,269
)
    
—
      
(25,875
)
General and administrative
    
(5,240
)
    
(4,523
)
    
(451
)
    
—
      
(10,214
)
Exploration and pre-development
    
(45
)
    
(1,287
)
    
(2,022
)
    
—
      
(3,354
)
Gain on derivative contracts
    
—
      
—
      
—
      
—
      
—
  
Equity in earnings of subsidiaries
    
(20,991
)
    
—
      
—
      
20,991
      
—
  
Other (expense) income
    
31,793
      
4,336
      
(35,518
)
    
(16,829
)
    
(16,218
)
Income (loss) before income taxes
    
(618
)
    
16,436
      
(18,944
)
    
4,162
      
1,036
  
(Provision) benefit from income taxes
    
—
      
(4,833
)
    
(13,650
)
    
16,829
      
(1,654
)
Net income (loss)
    
(618
)
    
11,603
      
(32,594
)
    
20,991
      
(618
)
Preferred stock dividends
    
(138
)
    
—
      
—
      
—
      
(138
)
Income (loss) applicable to common stockholders
    
(756
)
    
11,603
      
(32,594
)
    
20,991
      
(756
)
Net income (loss)
    
(618
)
    
11,603
      
(32,594
)
    
20,991
      
(618
)
Changes in comprehensive income (loss)
    
1,065
      
8
      
1,060
      
(1,068
)
    
1,065
  
Comprehensive income (loss)
   $
447
     $
11,611
     $
(31,534
)
   $
19,923
     $
447
  
 
 
Unaudited Interim Condensed Consolidating Statements of Cash Flows
 
 
 
Three Months Ended March 31, 2017
 
 
 
Parent
 
 
Guarantors
 
 
Non-
Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Cash flows from operating activities
   $
40,953
     $
11,508
     $
15,642
     $
(29,818
)
   $
38,285
  
Cash flows from investing activities:
                                        
Additions to properties, plants, and equipment
    
—
      
(7,540
)
    
(14,118
)
    
—
      
(21,658
)
Other investing activities, net
    
(7,479
)
    
61
      
—
      
—
      
(7,418
)
Cash flows from financing activities:
                                        
Dividends paid to stockholders
    
(1,127
)
    
—
      
—
      
—
      
(1,127
)
Payments on debt
    
—
      
(1,658
)
    
(407
)
    
—
      
(2,065
)
Other financing activity
    
(41,096
)
    
3,024
      
7,432
      
29,818
      
(822
)
Effect of exchange rate changes on cash
    
—
      
—
      
1,814
      
—
      
1,814
  
Changes in cash and cash equivalents
    
(8,749
)
    
5,395
      
10,363
      
—
      
7,009
  
Beginning cash and cash equivalents
    
113,275
      
24,388
      
32,114
      
—
      
169,777
  
Ending cash and cash equivalents
   $
104,526
     $
29,783
     $
42,477
     $
—
     $
176,786
  
 
 
 
 
Three Months Ended March 31, 2016
 
 
 
Parent
 
 
Guarantors
 
 
Non-
Guarantors
 
 
Eliminations
 
 
Consolidated
 
 
 
(in thousands)
 
Cash flows from operating activities
   $
7,848
     $
(21,658
)
   $
(7,884
)
   $
40,442
     $
18,748
  
Cash flows from investing activities:
                                        
Additions to properties, plants, and equipment
    
(53
)
    
(18,552
)
    
(16,049
)
    
—
      
(34,654
)
Other investing activities, net
    
—
      
215
      
(3,900
)
    
—
      
(3,685
)
Cash flows from financing activities:
                                        
Dividends paid to stockholders
    
(1,090
)
    
—
      
—
      
—
      
(1,090
)
Payments on debt
    
—
      
(2,556
)
    
(226
)
    
 
      
(2,782
)
Other financing activity
    
(9,833
)
    
27,189
      
23,823
      
(40,442
)
    
737
  
Effect of exchange rate changes on cash
    
—
      
—
      
1,535
      
—
      
1,535
  
Changes in cash and cash equivalents
    
(3,128
)
    
(15,362
)
    
(2,701
)
    
—
      
(21,191
)
Beginning cash and cash equivalents
    
94,167
      
42,692
      
18,350
      
—
      
155,209
  
Ending cash and cash equivalents
   $
91,039
     $
27,330
     $
15,649
     $
—
     $
134,018