Note

12:

Business Segments, Sales of Products 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

five

segments, which represent our operating units: the Greens Creek unit, the Lucky Friday unit, the Casa Berardi unit, the San Sebastian unit, and the Nevada Operations unit. The Nevada Operations unit was added as a result of our acquisition of Klondex in

July 2018 (

see

Note

for more information).

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.

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

December

31,

2018,

2017

and

2016

(in thousands).

	2018			2017			2016
Net sales to unaffiliated customers:
Greens Creek	$	265,650		$	278,297		$	260,446
Lucky Friday		9,750			21,555			94,479
Casa Berardi		210,339			192,165			177,143
San Sebastian		50,224			85,758			113,889
Nevada Operations		31,174			—			—
Total sales to unaffiliated customers	$	567,137		$	577,775		$	645,957
Income (loss) from operations:
Greens Creek	$	70,293		$	70,132		$	65,125
Lucky Friday		(20,199	)		(16,037	)		18,175
Casa Berardi (1)		881			(534	)		8,831
San Sebastian		(14	)		53,591			77,221
Nevada Operations		(26,715	)		—			—
Other		(63,372	)		(47,046	)		(59,913	)
Total (loss) income from operations (1)	$	(39,126	)	$	60,106		$	109,439
Capital additions (including non-cash additions):
Greens Creek	$	43,631		$	35,255		$	42,013
Lucky Friday		14,236			6,268			44,839
Casa Berardi		39,816			51,327			67,577
San Sebastian		8,492			9,994			6,026
Nevada Operations		35,721			—			—
Other		4,555			2,908			21,344
Total capital additions	$	146,451		$	105,752		$	181,799

Depreciation, depletion and amortization:
Greens Creek	$	46,511		$	56,328	$	53,222
Lucky Friday		1,012			2,447		11,810
Casa Berardi (1)		71,302			59,131		54,817
San Sebastian		4,602			2,693		3,782
Nevada Operations		10,617			—		—
Total depreciation, depletion and amortization (1)	$	134,044		$	120,599	$	123,631
Other significant non-cash items:
Greens Creek	$	3,325		$	2,685	$	2,736
Lucky Friday		618			2,011		720
Casa Berardi (1)		696			33		1,072
San Sebastian		419			468		—
Nevada Operations		8,758			—		—
Other		(23,358	)		52,266		11,795
Total other significant non-cash items (1)	$	(9,542	)	$	57,463	$	16,323
Identifiable assets:
Greens Creek	$	637,386		$	671,960	$	681,303
Lucky Friday		437,499			432,400		442,829
Casa Berardi (1)		754,248			784,706		790,162
San Sebastian		44,152			62,198		33,608
Nevada Operations		581,194			—		—
Other		249,465			393,894		407,893
Total identifiable assets (1)	$	2,703,944		$	2,345,158	$	2,355,795

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

December

31,

2018

and

2017

(in thousands):

	2018		2017
United States	$	1,797,441	$	1,248,824
Canada (1)		707,473		743,779
Mexico		15,090		6,708
Total long-lived assets (1)	$	2,520,004	$	1,999,311

(

)

Amounts reported as of and for the years ended

December 31, 2017

and

2016

have been revised. See

Note

for more information.

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. Revenue is recognized upon the completion of the performance obligations and transfer of control of the product to the customer.

For sales of metals from refined doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of control of the agreed-upon metal quantities to the customer by the refiner. For sales of unrefined doré, the performance obligation is met, the transaction price is known, and revenue is recognized at the time of transfer of title and control of the doré containing the agreed-upon metal quantities to the customer. Refining, selling and shipping costs related to sales of doré and metals from doré are recorded to cost of sales as incurred.

For concentrate sales, which we currently have at our Greens Creek and Lucky Friday units, the performance obligation is met, the transaction price can be reasonably estimated, and revenue is recognized generally at the time of shipment. Concentrates sold at our Lucky Friday unit typically leave the mine and are received by the customer within the same day. However, there is a period of time between shipment of concentrates from our Greens Creek unit and their physical receipt by the customer, and judgment is required in determining when control has been transferred to the customer for those shipments. We have determined the performance obligation is met and title is transferred to the customer upon shipment of concentrate parcels from Greens Creek because, at that time,

) legal title is transferred to the customer,

) the customer has accepted the parcel and obtained the ability to realize all of the benefits from the product,

) the concentrate content specifications are known, have been communicated to the customer, and the customer has the significant risks and rewards of ownership of it,

) it is very unlikely a concentrate parcel from Greens Creek will be rejected by a customer upon physical receipt, and

) we have the right to payment for the parcel.

Judgment is also required in identifying the performance obligations for our concentrate sales. Most of our concentrate sales involve “frame contracts” with smelters that can cover multiple years and specify certain terms under which individual parcels of concentrates are sold. However, some terms are

not

specified in the frame contracts and/or can be renegotiated as part of annual amendments to the frame contract. We have determined parcel shipments represent individual performance obligations satisfied at a point in time when control of the shipment is transferred to the customer.

The consideration we receive for our concentrate sales fluctuates due to changes in metals prices between the time of shipment and final settlement with the customer. However, we are able to reasonably estimate the transaction price for the concentrate sales at the time of shipment using forward prices for the month of settlement, and previously recorded sales and accounts receivable are adjusted to estimated settlement metals prices until final settlement with the customer. Also, it is unlikely a significant reversal of revenue for any

one

concentrate parcel will occur. As such, we use the expected value method to price the parcels until the final settlement date occurs, at which time the final transaction price is known. At

December

31,

2018,

metals contained in concentrates and exposed to future price changes totaled

1.0

million ounces of silver,

3,658

ounces of gold,

10,689

tons of zinc, and

1,572

tons of lead. However, as discussed in

Note

, we seek to mitigate the risk of negative price adjustments by using financially-settled forward contracts for some of our sales.

Sales and accounts receivable for concentrate shipments are recorded net of charges for treatment, refining, smelting losses, and other charges negotiated by us with the customers, which represent components of the transaction price. Charges are estimated by us upon shipment of concentrates based on contractual terms, and actual charges typically do

not

vary materially from our estimates. Costs charged by customers include fixed treatment and refining costs per ton of concentrate and

may

include price escalators which allow the customers to participate in the increase of lead and zinc prices above a negotiated baseline. Costs for shipping concentrates to customers are recorded to cost of sales as incurred.

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,
	2018			2017			2016
Greens Creek		46.7	%		48.1	%		40.3	%
Lucky Friday		1.8	%		3.8	%		14.7	%
Casa Berardi		37.1	%		33.3	%		27.4	%
San Sebastian		8.9	%		14.8	%		17.6	%
Nevada Operations		5.5	%		—	%		—	%
		100	%		100	%		100	%

Sales of products by metal for the years ended

December

31,

2018,

2017

and

2016

were as follows (in thousands):

	Year Ended December 31,
	2018			2017			2016
Silver	$	144,609		$	194,813		$	274,438
Gold		313,076			277,421			276,630
Lead		33,829			37,995			63,942
Zinc		99,800			104,023			95,058
Less: Smelter and refining charges		(24,177	)		(36,477	)		(64,111	)
Sales of products	$	567,137		$	577,775		$	645,957

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,

2018,

2017

and

2016

(in thousands):

	2018		2017		2016
United States	$	48,437	$	16,806	$	22,499
Canada		322,402		358,663		437,621
Japan		42,885		58,475		44,158
Korea		145,263		80,183		116,687
China		66		69,631		35,220
Other		—		—		4,008
Total, excluding gains/losses on forward contracts	$	559,053	$	583,758	$	660,193

Sales by significant product type for the years ended

December

31,

2018,

2017

and

2016

were as follows (in thousands):

	Year Ended December 31,
	2018		2017		2016
Doré and metals from doré	$	311,567	$	295,176	$	313,784
Lead concentrate		148,880		179,143		250,153
Zinc concentrate		80,938		88,688		82,872
Bulk concentrate		17,668		20,751		13,384
Total, excluding gains/losses on forward contracts	$	559,053	$	583,758	$	660,193

Sales of products for

2018

included net gains of

$8.1

million, and for

2017

and

2016

include net losses of

$6.0

million and

$14.2

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

Note

for more information.

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

December

31,

2018,

2017

and

2016:

	Year Ended December 31,
	2018			2017			2016
Teck Metals Ltd.		8.4	%		11.3	%		21.2	%
Korea Zinc		17.8	%		16.4	%		16.9	%
Scotia		15.3	%		24.9	%		24.5	%
CIBC		29.7	%		22.8	%		19.0	%

Our trade accounts receivable balance related to contracts with customers was

$4.2

million at

December

31,

2018

and

$14.8

million at

December

31,

2017,

and included

allowance for doubtful accounts.

We have determined our contracts do

not

include a significant financing component. For doré sales and sales of metal from doré, payment is received at the time the performance obligation is satisfied. The amount of consideration for concentrate sales is variable, and we receive payment for a significant portion of the estimated value of concentrate parcels within a relatively short period of time after the performance obligation is satisfied.

We do

not

incur significant costs to obtain contracts, nor costs to fulfill contracts which are

not

addressed by other accounting standards. Therefore, we have

not

recognized an asset for such costs as of

December

31,

2018

December

31,

2017.

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.

February 19, 2017,

the unionized employees voted against our contract offer, and on

March 13, 2017

went on strike and have been on strike since that time. Production at Lucky Friday was suspended from the start of the strike until

July 2017,

when limited production resumed. In

2018

and

2017,

suspension costs

not

related to production of

$14.6

million and

$17.1

million, respectively, along with

$5.0

million and

$4.2

million, respectively, in non-cash depreciation expense, are reported in a separate line item on our consolidated statements of operations. We cannot predict how long the strike will last or whether an agreement will be reached. As a result of the strike or other related events, operations at Lucky Friday could continue to be disrupted, which could adversely affect our financial condition and results of operations. If the strike continues for a further extended period or it is determined an eventual resolution is unlikely, it

may

be appropriate in the future to review the carrying value of properties, plants, equipment and mineral interests at Lucky Friday. Under such review, if estimated undiscounted cash flows from Lucky Friday were less than its carrying value, an impairment loss would be recognized for the difference between the carrying value and the estimated fair value. The carrying value of properties, plants, equipment and mineral interests at Lucky Friday as of

December

31,

2018

was approximately

$435.6

million. However, Lucky Friday has significant identified reserves and mineralized material and a current estimated mine life of approximately

years.

April 30, 2018,

we settled with the National Labor Relations Board ("NLRB") an unfair labor practice claim made by the union. As part of the settlement, Hecla Limited rescinded its last, best and final contract offer implemented in

March 2017.

We do

not

believe the settlement with the NLRB will resolve any of the key differences in the ongoing labor dispute. On

May 4, 2018,

we gave notice to the union that the parties to the labor dispute are at impasse, and implemented portions of our revised final offer presented in

December 2017.