Note 9 - Stockholders' Equity

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Stockholders' Equity Note Disclosure [Text Block]

Note 9: Stockholders’ Equity

Common Stock

We are authorized to issue 750,000,000 shares of common stock, $0.25 par value per share, of which 529,182,994 shares of common stock were issued and 6,287,271 shares issued and held in treasury, for a net of 522,895,723 shares outstanding as of December 31, 2019. All of our currently outstanding shares of common stock are listed on the New York Stock Exchange under the symbol “HL.”

Subject to the rights of the holders of any outstanding shares of preferred stock, each share of common stock is entitled to: (i) one vote on all matters presented to the stockholders, with no cumulative voting rights; (ii) receive such dividends as may be declared by the board of directors out of funds legally available therefor; and (iii) in the event of our liquidation or dissolution, share ratably in any distribution of our assets.

Dividends

In September 2011 and February 2012, our board of directors adopted a common stock dividend policy that has two components: (1) a dividend that links the amount of dividends on our common stock to our average quarterly realized silver price in the preceding quarter, and (2) a minimum annual dividend of $0.01 per share of common stock, in each case, payable quarterly, if and when declared. For illustrative purposes only, the table below summarizes potential per share dividend amounts at different quarterly average realized price levels according to the first component of the policy:

Quarterly average realized silver price per ounce	Quarterly dividend per share	Annual dividend per share
$30	$0.01	$0.04
$35	$0.02	$0.08
$40	$0.03	$0.12
$45	$0.04	$0.16
$50	$0.05	$0.20
$55	$0.06	$0.24
$60	$0.07	$0.28

The following table summarizes the quarterly common stock dividends declared by our board of directors for the years ended December 31, 2017, 2018 and 2019:

	(A)	(B)	(A+B)
Declaration date	Silver-price- linked component per share	Minimum annual component per share	Total dividend per share	Total dividend amount (in millions)	Month of payment
February 21, 2017	$—	$0.0025	$0.0025	$1.0	March 2017
May 4, 2017	$—	$0.0025	$0.0025	$1.0	June 2017
August 3, 2017	$—	$0.0025	$0.0025	$1.0	September 2017
November 7, 2017	$—	$0.0025	$0.0025	$1.0	December 2017
February 14, 2018	$—	$0.0025	$0.0025	$1.0	March 2018
May 9, 2018	$—	$0.0025	$0.0025	$1.0	June 2018
August 8, 2018	$—	$0.0025	$0.0025	$1.2	September 2018
November 6, 2018	$—	$0.0025	$0.0025	$1.2	December 2018
February 20, 2019	$—	$0.0025	$0.0025	$1.2	March 2019
May 7, 2019	$—	$0.0025	$0.0025	$1.2	June 2019
August 5, 2019	$—	$0.0025	$0.0025	$1.2	September 2019
November 6, 2019	$—	$0.0025	$0.0025	$1.3	December 2019

Because the average realized silver prices for all periods in 2017, 2018 and 2019 were below the minimum threshold of $30, according to the policy no silver-price-linked component was declared or paid. Prior to 2011, no dividends had been declared on our common stock since 1990. The declaration and payment of common stock dividends is at the sole discretion of our board of directors.

At-The-Market Equity Distribution Agreement

Pursuant to an equity distribution agreement dated February 23, 2016, as amended, we issued a total of 28,583,845 shares of common stock for total proceeds of $73.5 million, net of commissions of approximately $1.5 million, which were used for general corporate purposes. The shares were registered under the Securities Act of 1933, as amended, pursuant to our shelf registration statement on Form S-3. During the fourth quarter of 2019, we sold 21,410,231 shares under the agreement in 2019 for total proceeds of $49.0 million, net of commissions of approximately $1.0 million.

Common Stock Repurchase Program

On May 8, 2012, we announced that our board of directors approved a stock repurchase program.  Under the program, we are authorized to repurchase up to 20 million shares of our outstanding common stock from time to time in open market or privately negotiated transactions, depending on prevailing market conditions and other factors. The repurchase program may be modified, suspended or discontinued by us at any time. As of December 31, 2019, 934,100 shares had been repurchased under the program, at an average price of $3.99 per share, leaving approximately 19.1 million shares that may yet be purchased under the program. The closing price of our common stock at February 6, 2020, was $3.43 per share. No shares were purchased under the program during 2019.

Preferred Stock

Our certificate of incorporation authorizes us to issue 5,000,000 shares of preferred stock, par value $0.25 per share. The preferred stock is issuable in series with such voting rights, if any, designations, powers, preferences and other rights and such qualifications, limitations and restrictions as may be determined by our board of directors. The board may fix the number of shares constituting each series and increase or decrease the number of shares of any series. As of December 31, 2019, 157,816 shares of Series B preferred stock were outstanding. Our Series B preferred stock is listed on the New York Stock Exchange under the symbol “HL PB.”

Ranking

The Series B preferred stock ranks senior to our common stock and any shares of Series A junior participating preferred stock (none of which have ever been issued) with respect to payment of dividends, and amounts due upon liquidation, dissolution or winding up.

While any shares of Series B preferred stock are outstanding, we may not authorize the creation or issuance of any class or series of stock that ranks senior to the Series B preferred stock as to dividends or amounts due upon liquidation, dissolution or winding up without the consent of the holders of 66 2/3% of the outstanding shares of Series B preferred stock and any other series of preferred stock ranking on a parity with the Series B preferred stock as to dividends and amounts due upon liquidation, dissolution or winding up, voting as a single class without regard to series.

Dividends

Series B preferred stockholders are entitled to receive, when, as and if declared by the board of directors out of our assets legally available therefor, cumulative cash dividends at the rate per annum of $3.50 per share of Series B preferred stock. Dividends on the Series B preferred stock are payable quarterly in arrears on October 1, January 1, April 1 and July 1 of each year (and, in the case of any undeclared and unpaid dividends, at such additional times and for such interim periods, if any, as determined by the board of directors), at such annual rate. Dividends are cumulative from the date of the original issuance of the Series B preferred stock, whether or not in any dividend period or periods we have assets legally available for the payment of such dividends. Accumulations of dividends on shares of Series B preferred stock do not bear interest.

All quarterly dividends on our Series B preferred stock for 2017, 2018 and 2019 were declared and paid in cash.

Redemption

The Series B preferred stock is redeemable at our option, in whole or in part, at $50 per share, plus all dividends undeclared and unpaid on the Series B preferred stock up to the date fixed for redemption.

Liquidation Preference

The Series B preferred stockholders are entitled to receive, in the event that we are liquidated, dissolved or wound up, whether voluntary or involuntary, $50 per share of Series B preferred stock plus an amount per share equal to all dividends undeclared and unpaid thereon to the date of final distribution to such holders (the “Liquidation Preference”), and no more. Until the Series B preferred stockholders have been paid the Liquidation Preference in full, no payment will be made to any holder of Junior Stock upon our liquidation, dissolution or winding up. The term “Junior Stock” means our common stock and any other class of our capital stock issued and outstanding that ranks junior as to the payment of dividends or amounts payable upon liquidation, dissolution and winding up to the Series B preferred stock. As of December 31, 2019 and 2018, our Series B preferred stock had a Liquidation Preference of $7.9 million.

 Voting Rights

Except in certain circumstances and as otherwise from time to time required by applicable law, the Series B preferred stockholders have no voting rights and their consent is not required for taking any corporate action. When and if the Series B preferred stockholders are entitled to vote, each holder will be entitled to one vote per share.

Conversion

Each share of Series B preferred stock is convertible, in whole or in part at the option of the holders thereof, into shares of common stock at a conversion price of $15.55 per share of common stock (equivalent to a conversion rate of 3.2154 shares of common stock for each share of Series B preferred stock). The right to convert shares of Series B preferred stock called for redemption will terminate at the close of business on the day preceding a redemption date (unless we default in payment of the redemption price).

Stock Award Plans

We use stock-based compensation plans to aid us in attracting, retaining and motivating our employees, as well as to provide incentives more directly linked to increases in stockholder value. These plans provide for the grant of options to purchase shares of our common stock, the issuance of restricted stock units, performance-based shares and other equity-based awards.

Stock-based compensation expense amounts recognized for the years ended December 31, 2019, 2018 and 2017 were approximately $5.7 million, $6.3 million, and $6.3 million, respectively.  Over the next twelve months, we expect to recognize approximately $4.5 million in additional compensation expense as outstanding restricted stock units and performance-based shares vest.

Stock Incentive Plan

 During the second quarter of 2010, our stockholders voted to approve the adoption of our 2010 Stock Incentive Plan and to reserve up to 20,000,000 shares of common stock for issuance under the plan.  In the second quarter of 2019, our stockholders voted to approve an amendment to the plan to restore the number of shares of common stock available for issuance under the 2010 plan to the original 20,000,000 shares (along with other changes). The board of directors has broad authority under the 2010 plan to fix the terms and conditions of individual agreements with participants, including the duration of the award and any vesting requirements. As of December 31, 2019, there were 17,319,293 shares available for future grant under the 2010 plan.

Directors’ Stock Plan

In 2017, we adopted the amended and restated Hecla Mining Company Stock Plan for Non-Employee Directors (the “Directors’ Stock Plan”), which may be terminated by our board of directors at any time. Each non-employee director is credited each year with that number of shares determined by dividing $120,000 by the average closing price for our common stock on the New York Stock Exchange for the prior calendar year. A minimum of 25% of the shares credited each year is held in trust for the benefit of each director until delivered to the director. Each director may elect, prior to the first day of the applicable year, to have a greater percentage contributed to the trust for that year. Delivery of the shares from the trust occurs upon the earliest of: (1) death or disability; (2) retirement; (3) a cessation of the director’s service for any other reason; (4) a change in control; or (5) at the election of the director at any time, provided, however, that shares must be held in the trust for at least two years prior to delivery. During 2019, 2018, and 2017, 252,819, 161,630, and 152,439 shares, respectively, were credited to the non-employee directors. During 2019, 2018 and 2017, $455,000, $593,000, and $774,000, respectively, was charged to general and administrative expense associated with the shares issued to the non-employee directors. At December 31, 2019, there were 2,867,888 shares available for grant in the future under the plan.

Restricted Stock Units

Unvested restricted stock units granted by the board of directors to employees are summarized as follows:

	Shares			Weighted Average Grant Date Fair Value per Share
Unvested, January 1, 2019		2,689,468		$	4.14
Granted (unvested)		3,312,481		$	1.85
Canceled		(803,683	)	$	2.62
Distributed (vested)		(1,201,098	)	$	4.00
Unvested, December 31, 2019		3,997,168		$	2.46

The 3,997,168 unvested units at December 31, 2019 are scheduled to vest as follows:

1,703,869	in June 2020
1,404,693	in June 2021
888,606	in June 2022

Unvested units will be forfeited by participants upon termination of employment in advance of vesting, with the exception of termination due to retirement if certain criteria are met. Since the earliest grant date of unvested units (which was 2017), we have recognized approximately $4.9 million in compensation expense, including approximately $3.6 million recognized in 2019, and expect to record an additional $3.8 million in compensation expense over the remaining vesting period related to these units. The latest vesting date for unvested units as of December 31, 2019 is June 2022.

Performance-Based Shares

We periodically grant performance-based share awards to certain executive employees. The value of the awards is based on the ranking of the market performance of our common stock relative to the performance of the common stock of a group of peer companies over a three-year measurement period. The number of shares to be issued is based on the value of the awards divided by the share price at grant date. The compensation cost is measured using a Monte Carlo simulation to estimate their value at grant date. Since the earliest grant date of unvested units (which was 2018), we have recognized approximately $0.4 million in compensation expense, including approximately $0.2 million recognized in 2019, and expect to record an additional $0.2 million in compensation expense over the remaining vesting period related to these awards. The latest vesting date for unvested units as of December 31, 2019 is December 31, 2021.

In connection with the vesting of restricted stock units, performance-based shares and other stock grants, employees have in the past, at their election and when permitted by us, chosen to satisfy their tax withholding obligations through net share settlement, pursuant to which we withhold the number of shares necessary to satisfy such withholding obligations and pay the obligations in cash.  Pursuant to such net settlements, in 2019 we withheld 1,060,480 shares valued at approximately $2.2 million, or approximately $2.10 per share.  In 2018, we withheld 697,341 shares valued at approximately $2.7 million, or approximately $3.86 per share. These shares become treasury shares unless we cancel them.

Warrants

As discussed in Note 15, we issued 4,136,000 warrants to purchase one share of our common stock to holders of warrants to purchase Klondex common stock under the terms of the Klondex acquisition, and all of the warrants were outstanding as of December 31, 2019. Warrants to purchase 2,068,000 shares of common stock have an exercise price of $8.02 and expire in April 2032. Warrants to purchase 2,068,000 shares of common stock have an exercise price of $1.57 and expire in February 2029.