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Note 17 - Guarantor Subsidiaries
 12 Months Ended
Dec. 31, 2018
Notes to Financial Statements  
Guarantor Subsidiaries [Text Block]
Note
17:
  Guarantor Subsidiaries
 
Presented below are Hecla’s 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 RQ Notes (see
Note
7
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, Inc.; Montanore Minerals Corp.; Hecla Alaska LLC; Hecla Greens Creek Mining Company; Hecla Admiralty Company; Hecla Juneau Mining Company; Klondex Holdings Inc.; Klondex Gold & Silver Mining Co.; Klondex Midas Holdings Limited; Klondex Aurora Mine Inc.; and Klondex Hollister Mine Inc. 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 condensed consolidating financial statements below have been prepared from our financial information on the same basis of accounting as the 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 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 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.
 
Condensed Consolidating Balance Sheets
 
   
As of December 31, 2018
  
   
Parent
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Assets
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Cash and cash equivalents
   $
6,265
     $
8,661
     $
12,463
     $
—
     $
27,389
  
Other current assets
    
6,388
      
69,574
      
60,868
      
(69
)
    
136,761
  
Properties, plants, and equipment - net
    
1,913
      
1,795,994
      
722,097
      
—
      
2,520,004
  
Intercompany receivable (payable)
    
171,905
      
(222,815
)
    
(171,834
)
    
222,744
      
—
  
Investments in subsidiaries
    
1,577,564
      
—
      
—
      
(1,577,564
)
    
—
  
Other non-current assets
    
276,641
      
9,030
      
(122,969
)
    
(142,912
)
    
19,790
  
Total assets
   $
2,040,676
     $
1,660,444
     $
500,625
     $
(1,497,801
)
   $
2,703,944
  
Liabilities and Stockholders' Equity
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Current liabilities
   $
(234,133
)
   $
118,863
     $
45,922
     $
205,542
     $
136,194
  
Long-term debt
    
532,799
      
141,870
      
1,989
      
(135,988
)
    
540,670
  
Non-current portion of accrued reclamation
    
—
      
94,602
      
10,377
      
—
      
104,979
  
Non-current deferred tax liability
    
—
      
64,639
      
98,689
      
10,209
      
173,537
  
Other non-current liabilities
    
51,047
      
5,659
      
895
      
—
      
57,601
  
Stockholders' equity
    
1,690,963
      
1,234,811
      
342,753
      
(1,577,564
)
    
1,690,963
  
Total liabilities and stockholders' equity
   $
2,040,676
     $
1,660,444
     $
500,625
     $
(1,497,801
)
   $
2,703,944
  
 
 
   
As of December 31, 2017
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
                   
Revised
            
Revised
  
   
(in thousands)
  
Assets
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
Cash and cash equivalents
   $
103,878
     $
31,016
     $
51,213
     $
—
     $
186,107
  
Other current assets
    
47,555
      
47,608
      
40,541
      
(575
)
    
135,129
  
Properties, plants, and equipment - net
    
1,946
      
1,244,161
      
753,204
      
—
      
1,999,311
  
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
     $
513,059
     $
(1,133,660
)
   $
2,345,158
  
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
      
124,352
      
(10,120
)
    
124,352
  
Other non-current liabilities
    
53,588
      
5,185
      
838
      
—
      
59,611
  
Stockholders' equity
    
1,483,882
      
1,000,913
      
334,507
      
(1,358,025
)
    
1,461,277
  
Total liabilities and stockholders' equity
   $
1,813,123
     $
1,152,636
     $
513,059
     $
(1,133,660
)
   $
2,345,158
  
 
Condensed Consolidating Statements of Operations
 
   
Year Ended December 31, 2018
  
   
Parent
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Revenues
   $
8,084
     $
298,491
     $
260,562
     $
—
     $
567,137
  
Cost of sales
    
(446
)
    
(188,567
)
    
(164,981
)
    
—
      
(353,994
)
Depreciation, depletion, and amortization
    
—
      
(58,140
)
    
(75,904
)
    
—
      
(134,044
)
General and administrative
    
(18,760
)
    
(15,761
)
    
(2,021
)
    
—
      
(36,542
)
Exploration and pre-development
    
(130
)
    
(20,514
)
    
(19,938
)
    
—
      
(40,582
)
Research and development
    
—
      
(2,893
)
    
(2,548
)
    
—
      
(5,441
)
Gain on derivative contracts
    
40,253
      
—
      
—
      
—
      
40,253
  
Acquisition costs
    
(9,445
)
    
(344
)
    
(256
)
    
—
      
(10,045
)
Equity in earnings of subsidiaries
    
(47,229
)
    
—
      
—
      
47,229
      
—
  
Other (expense) income
    
515
      
(29,302
)
    
16,212
      
(47,431
)
    
(60,006
)
(Loss) income before income taxes
    
(27,158
)
    
(17,030
)
    
11,126
      
(202
)
    
(33,264
)
(Provision) benefit from income taxes
    
595
      
(37,444
)
    
(3,881
)
    
47,431
      
6,701
  
Net (loss) income
    
(26,563
)
    
(54,474
)
    
7,245
      
47,229
      
(26,563
)
Preferred stock dividends
    
(552
)
    
—
      
—
      
—
      
(552
)
(Loss) income applicable to common stockholders
    
(27,115
)
    
(54,474
)
    
7,245
      
47,229
      
(27,115
)
Net (loss) income
    
(26,563
)
    
(54,474
)
    
7,245
      
47,229
      
(26,563
)
Changes in comprehensive (loss) income
    
(17,807
)
    
—
      
38
      
(38
)
    
(17,807
)
Comprehensive (loss) income
   $
(44,370
)
   $
(54,474
)
   $
7,283
     $
47,191
     $
(44,370
)
 
   
Year Ended December 31, 2017
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
                   
Revised
            
Revised
  
   
(in thousands)
  
Revenues
   $
(5,983
)
   $
305,835
     $
277,923
     $
—
     $
577,775
  
Cost of sales
    
1,098
      
(158,135
)
    
(147,690
)
    
—
      
(304,727
)
Depreciation, depletion, and amortization
    
—
      
(58,774
)
    
(61,825
)
    
—
      
(120,599
)
General and administrative
    
(17,693
)
    
(15,690
)
    
(2,228
)
    
—
      
(35,611
)
Exploration and pre-development
    
(459
)
    
(11,600
)
    
(16,899
)
    
—
      
(28,958
)
Research and development    
—
      
(3,276
 )    
—
      
—
      
(3,276
 )
Loss on derivative contracts
    
(21,250
)
    
—
      
—
      
—
      
(21,250
)
Closed operations
    
(24
)
    
—
      
(1
)
    
—
      
(25
)
Equity in earnings of subsidiaries
    
(187,574
)
    
—
      
—
      
187,574
      
—
  
Other (expense) income
    
203,365
      
(29,735
)
    
(42,002
)
    
(202,514
)
    
(70,886
)
Income (loss) before income taxes
    
(28,520
)
    
28,625
      
7,278
      
(14,940
)
    
(7,557
)
(Provision) benefit from income taxes
    
—
      
(208,793
)
    
(14,684
)
    
202,514
      
(20,963
)
Net income (loss)
    
(28,520
)
    
(180,168
)
    
(7,406
)
    
187,574
      
(28,520
)
Preferred stock dividends
    
(552
)
    
—
      
—
      
—
      
(552
)
Income (loss) applicable to common stockholders
    
(29,072
)
    
(180,168
)
    
(7,406
)
    
187,574
      
(29,072
)
Net income (loss)
    
(28,520
)
    
(180,168
)
    
(7,406
)
    
187,574
      
(28,520
)
Changes in comprehensive income (loss)
    
11,229
      
296
      
2,486
      
(2,782
)
    
11,229
  
Comprehensive income (loss)
   $
(17,291
)
   $
(179,872
)
   $
(4,920
)
   $
184,792
     $
(17,291
)
 
   
Year Ended December 31, 2016
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
                   
Revised
            
Revised
  
   
(in thousands)
  
Revenues
   $
(14,237
)
   $
369,162
     $
291,032
     $
—
     $
645,957
  
Cost of sales
    
—
      
(202,475
)
    
(135,850
)
    
—
      
(338,325
)
Depreciation, depletion, and amortization
    
—
      
(65,032
)
    
(58,599
)
    
—
      
(123,631
)
General and administrative
    
(23,262
)
    
(20,425
)
    
(1,353
)
    
—
      
(45,040
)
Exploration and pre-development
    
(304
)
    
(6,640
)
    
(10,913
)
    
—
      
(17,857
)
Gain on derivative contracts
    
4,423
      
—
      
—
      
—
      
4,423
  
Closed operations
    
(2,607
)
    
(34
)
    
(54
)
    
—
      
(2,695
)
Equity in earnings of subsidiaries
    
86,900
      
—
      
—
      
(86,900
)
    
—
  
Other (expense) income
    
10,656
      
11,400
      
(35,885
)
    
(19,344
)
    
(33,173
)
(Loss) income before income taxes
    
61,569
      
85,956
      
48,378
      
(106,244
)
    
89,659
  
(Provision) benefit from income taxes
    
—
      
(25,334
)
    
(22,100
)
    
19,344
      
(28,090
)
Net (loss) income
    
61,569
      
60,622
      
26,278
      
(86,900
)
    
61,569
  
Preferred stock dividends
    
(552
)
    
—
      
—
      
—
      
(552
)
(Loss) income applicable to common stockholders
    
61,017
      
60,622
      
26,278
      
(86,900
)
    
61,017
  
Net (loss) income
    
61,569
      
60,622
      
26,278
      
(86,900
)
    
61,569
  
Changes in comprehensive (loss) income
    
(1,971
)
    
8
      
2,657
      
(2,665
)
    
(1,971
)
Comprehensive (loss) income
   $
59,598
     $
60,630
     $
28,935
     $
(89,565
)
   $
59,598
  
 
Condensed Consolidating Statements of Cash Flows
 
   
Year Ended December 31, 2018
  
   
Parent
    
Guarantors
    
Non-Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Cash flows from operating activities
   $
(23,136
)
   $
38,116
     $
35,508
     $
43,733
     $
94,221
  
Cash flows from investing activities:
                                        
Additions to properties, plants, and equipment
    
—
      
(90,578
)
    
(46,354
)
    
 
      
(136,932
)
Purchase of other companies, net of cash acquired
    
(139,326
)
    
 
      
—
      
 
      
(139,326
)
Other investing activities, net
    
(186,615
 )    
1,715
      
5,072
      
219,539
 
    
39,711
  
                                         
Cash flows from financing activities:
                                        
Dividends paid to stockholders
    
(4,945
)
    
—
      
—
      
 
      
(4,945
)
Borrowings under debt arrangements
    
102,024
      
—
      
—
      
 
      
102,024
  
Repayments of debt
    
(106,036
)
    
(5,550
)
    
(1,789
)
    
 
      
(113,375
)
Other financing activity
    
260,422
      
33,933
      
(29,671
)
    
(263,272
)
    
1,412
  
Effect of exchange rate changes on cash
    
—
      
—
      
(1,515
)
    
—
      
(1,515
)
Changes in cash, cash equivalents and restricted cash and cash equivalents
    
(97,612
)
    
(22,364
)
    
(38,749
)
    
—
      
(158,725
)
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
   $
6,266
     $
9,684
     $
12,464
     $
—
     $
28,414
  
 
 
   
Year Ended December 31, 2017
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Cash flows from operating activities
   $
(134,900
)
   $
(98,046
)
   $
120,027
     $
228,797
     $
115,878
  
Cash flows from investing activities:
    
 
      
 
      
 
      
 
      
—
  
Additions to properties, plants, and equipment
    
—
      
(46,570
)
    
(51,468
)
    
 
      
(98,038
)
Other investing activities, net
    
132,118
      
8,119
      
—
      
(138,762
)
    
1,475
  
                                         
Cash flows from financing activities:
                                        
Dividends paid to stockholders
    
(4,528
)
    
—
      
—
      
 
      
(4,528
)
Repayments of debt
    
—
      
(5,242
)
    
(1,744
)
    
 
      
(6,986
)
Other financing activity
    
(2,087
)
    
147,199
      
(48,811
)
    
(90,035
)
    
6,266
  
                                         
Effect of exchange rate changes on cash
    
—
      
—
      
1,095
      
—
      
1,095
  
Changes in cash, cash equivalents and restricted cash and cash equivalents
    
(9,397
)
    
5,460
      
19,099
      
—
      
15,162
  
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
   $
103,878
     $
32,048
     $
51,213
     $
—
     $
187,139
  
 
   
Year Ended December 31, 2016
  
   
Parent
    
Guarantors
    
Non-
Guarantors
    
Eliminations
    
Consolidated
  
   
(in thousands)
  
Cash flows from operating activities
   $
85,665
     $
82,778
     $
76,491
     $
(19,606
)
   $
225,328
  
Cash flows from investing activities:
    
 
      
 
      
 
      
 
      
—
  
Additions to properties, plants, and equipment
    
(348
)
    
(93,541
)
    
(70,899
)
    
—
      
(164,788
)
Purchase of other companies, net of cash acquired
    
(2,730
)
    
—
      
—
      
—
      
(2,730
)
Other investing activities
    
(30,584
)
    
305
      
333
      
—
      
(29,946
)
                                         
Cash flows from financing activities:
    
 
      
 
      
 
      
—
      
—
  
Dividends paid to stockholders
    
(4,419
)
    
—
      
—
      
 
      
(4,419
)
Repayments of debt
    
—
      
(10,174
)
    
(982
)
    
—
      
(11,156
)
Other financing activity
    
(28,476
)
    
3,529
      
8,895
      
19,606
      
3,554
  
Effect of exchange rates on cash
    
—
      
—
      
(74
)
    
—
      
(74
)
Changes in cash, cash equivalents and restricted cash and cash equivalents
    
19,108
      
(17,103
)
    
13,764
      
—
      
15,769
  
Beginning cash, cash equivalents and restricted cash and cash equivalents
    
94,167
      
43,691
      
18,350
      
—
      
156,208
  
Ending cash, cash equivalents and restricted cash and cash equivalents
   $
113,275
     $
26,588
     $
32,114
     $
—
     $
171,977