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Note 14 - Guarantor Subsidiaries
 3 Months Ended
Mar. 31, 2018
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 and the RQ 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.
We issued the RQ Notes on
March 5, 2018.
 
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 at least 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 at least 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.
 
Unaudited Interim Condensed Consolidating Balance Sheets
 
   
As of March 31, 2018
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Assets
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Cash and cash equivalents
   $
137,504
     $
21,096
     $
53,969
     $
—
     $
212,569
  
Other current assets
    
48,067
      
55,771
      
49,767
      
(69
)
    
153,536
  
Properties, plants, and equipment - net
    
1,934
      
1,241,325
      
765,445
      
—
      
2,008,704
  
Intercompany receivable (payable)
    
293,972
      
(163,503
)
    
(338,811
)
    
208,342
      
—
  
Investments in subsidiaries
    
1,373,604
      
—
      
—
      
(1,373,604
)
    
—
  
Other non-current assets
    
13,807
      
7,370
      
8,325
      
(6,220
)
    
23,282
  
Total assets
   $
1,868,888
     $
1,162,059
     $
538,695
     $
(1,171,551
)
   $
2,398,091
  
Liabilities and Stockholders' Equity
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Current liabilities
   $
(203,947
)
   $
67,735
     $
38,776
     $
213,370
     $
115,934
  
Long-term debt
    
533,566
      
3,682
      
3,412
      
—
      
540,660
  
Non-current portion of accrued reclamation
    
—
      
66,614
      
12,273
      
—
      
78,887
  
Non-current deferred tax liability
    
—
      
11,630
      
116,553
      
(11,317
)
    
116,866
  
Other non-current liabilities
    
44,768
      
5,384
      
1,091
      
—
      
51,243
  
Stockholders' equity
    
1,494,501
      
1,007,014
      
366,590
      
(1,373,604
)
    
1,494,501
  
Total liabilities and stockholders' equity
   $
1,868,888
     $
1,162,059
     $
538,695
     $
(1,171,551
)
   $
2,398,091
  
 
   
As of December 31, 2017
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Assets
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Cash and cash equivalents
   $
103,878
     $
31,016
     $
51,213
     $
—
     $
186,107
  
Other current assets
    
47,555
      
47,608
      
39,630
      
(575
)
    
134,218
  
Properties, plants, and equipment - net
    
1,946
      
1,244,161
      
773,914
      
—
      
2,020,021
  
Intercompany receivable (payable)
    
287,310
      
(177,438
)
    
(341,182
)
    
231,310
      
—
  
Investments in subsidiaries
    
1,358,025
      
—
      
—
      
(1,358,025
)
    
—
  
Other non-current assets
    
14,409
      
7,289
      
9,283
      
(6,370
)
    
24,611
  
Total assets
   $
1,813,123
     $
1,152,636
     $
532,858
     $
(1,133,660
)
   $
2,364,957
  
Liabilities and Stockholders' Equity
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Current liabilities
   $
(226,576
)
   $
66,550
     $
37,671
     $
234,485
     $
112,130
  
Long-term debt
    
502,229
      
2,303
      
3,890
      
—
      
508,422
  
Non-current portion of accrued reclamation
    
—
      
67,565
      
11,801
      
—
      
79,366
  
Non-current deferred tax liability
    
—
      
10,120
      
121,546
      
(10,120
)
    
121,546
  
Other non-current liabilities
    
53,588
      
5,185
      
838
      
—
      
59,611
  
Stockholders' equity
    
1,483,882
      
1,000,913
      
357,112
      
(1,358,025
)
    
1,483,882
  
Total liabilities and stockholders' equity
   $
1,813,123
     $
1,152,636
     $
532,858
     $
(1,133,660
)
   $
2,364,957
  
 
Unaudited Interim Condensed Consolidating Statements of Operations
   
Three Months Ended March 31, 2018
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Revenues
   $
615
     $
70,211
     $
68,883
     $
—
     $
139,709
  
Cost of sales
    
475
      
(34,701
)
    
(38,643
)
    
—
      
(72,869
)
Depreciation, depletion, amortization
    
—
      
(11,260
)
    
(16,794
)
    
—
      
(28,054
)
General and administrative
    
(3,833
)
    
(3,448
)
    
(454
)
    
—
      
(7,735
)
Exploration and pre-development
    
(55
)
    
(1,939
)
    
(6,371
)
    
—
      
(8,365
)
Research and development
    
—
      
(482
)
    
(954
)
    
—
      
(1,436
)
Gain on derivative contracts
    
4,007
      
—
      
—
      
—
      
4,007
  
Acquisition costs
    
(2,360
)
    
—
      
(147
)
    
—
      
(2,507
)
Equity in earnings of subsidiaries
    
17,768
      
—
      
—
      
(17,768
)
    
—
  
Other (expense) income
    
(8,377
)
    
(6,794
)
    
6,917
      
(5,488
)
    
(13,742
)
Income (loss) before income taxes
    
8,240
      
11,587
      
12,437
      
(23,256
)
    
9,008
  
(Provision) benefit from income taxes
    
—
      
(5,488
)
    
(768
)
    
5,488
      
(768
)
Net income (loss)
    
8,240
      
6,099
      
11,669
      
(17,768
)
    
8,240
  
Preferred stock dividends
    
(138
)
    
—
      
—
      
—
      
(138
)
Income (loss) applicable to common stockholders
    
8,102
      
6,099
      
11,669
      
(17,768
)
    
8,102
  
Net income (loss)
    
8,240
      
6,099
      
11,669
      
(17,768
)
    
8,240
  
Changes in comprehensive income (loss)
    
(2,104
)
    
—
      
38
      
(38
)
    
(2,104
)
Comprehensive income (loss)
   $
6,136
     $
6,099
     $
11,707
     $
(17,806
)
   $
6,136
  
 
   
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
  
 
Unaudited Interim Condensed Consolidating Statements of Cash Flows
 
   
Three Months Ended March 31, 2018
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Cash flows from operating activities
   $
21,183
     $
18,747
     $
13,396
     $
(36,943
)
   $
16,383
  
Cash flows from investing activities:
                                        
Additions to properties, plants, and equipment
    
—
      
(8,082
)
    
(9,553
)
    
—
      
(17,635
)
Other investing activities, net
    
(16,260
)
    
151
      
—
      
15,579
      
(530
)
Cash flows from financing activities:
                                        
Dividends paid to stockholders
    
(1,136
)
    
—
      
—
      
—
      
(1,136
)
Borrowings on debt    
31,024
      
—
      
—
      
—
      
31,024
  
Payments on debt
    
—
      
(644
)
    
(678
)
    
—
      
(1,322
)
Other financing activity
    
(1,186
)
    
(20,118
)
    
(1,285
)
    
21,364
      
(1,225
)
Effect of exchange rate changes on cash
    
—
      
—
      
876
      
—
      
876
  
Changes in cash, cash equivalents and restricted cash and cash equivalents
    
33,625
      
(9,946
)
    
2,756
      
—
      
26,435
  
Beginning cash, cash equivalents and restricted cash and cash equivalents
    
103,878
      
32,048
      
51,213
      
—
      
187,139
  
Ending cash, cash equivalents and restricted cash and cash equivalents
   $
137,503
     $
22,102
     $
53,969
     $
—
     $
213,574
  
 
   
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
)
    
3,025
      
7,431
      
29,818
      
(822
)
Effect of exchange rate changes on cash
    
—
      
—
      
1,814
      
—
      
1,814
  
Changes in cash, cash equivalents and restricted cash and cash equivalents
    
(8,749
)
    
5,396
      
10,362
      
—
      
7,009
  
Beginning cash, cash equivalents and restricted cash and cash equivalents
    
113,275
      
26,588
      
32,114
      
—
      
171,977
  
Ending cash, cash equivalents and restricted cash and cash equivalents
   $
104,526
     $
31,984
     $
42,476
     $
—
     $
178,986