hl20160818_10q.htm Table Of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

 

[X]           QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2016

 

 

Commission file number

 

1-8491

 

 

HECLA MINING COMPANY

(Exact name of registrant as specified in its charter)

 

 

 

Delaware

 

77-0664171

 
 

(State or other jurisdiction of

 

(I.R.S. Employer

 
 

incorporation or organization)

 

Identification No.)

 
         
 

6500 Mineral Drive, Suite 200

     
 

Coeur d'Alene, Idaho

 

83815-9408

 
 

(Address of principal executive offices)

 

(Zip Code)

 
         

208-769-4100

(Registrant's telephone number, including area code)

 

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes XX .    No      .

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes XX .    No___.

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

 Large Accelerated Filer   XX

 Accelerated Filer     .

 Non-Accelerated Filer     

 Smaller reporting company    .

 (Do not check if a smaller reporting company)

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes      .    No XX.

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

Class

 

Shares Outstanding November 4, 2016

Common stock, par value

$0.25 per share

 

395,286,875

 

 
 

Table Of Contents
 

 

Hecla Mining Company and Subsidiaries

 

Form 10-Q

 

For the Quarter Ended September 30, 2016

 

INDEX*

 

     

Page

PART I - Financial Information

 
       
   

Item 1 – Condensed Consolidated Financial Statements (Unaudited)

  4
       
   

Condensed Consolidated Balance Sheets -September 30, 2016 and December 31, 2015

  4
       
   

Condensed Consolidated Statements of Operations and Comprehensive Loss -Three Months Ended and Nine Months Ended September 30, 2016 and 2015

5
       
   

Condensed Consolidated Statements of Cash Flows -Nine Months Ended September 30, 2016 and 2015

  6
       
   

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

       
   

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

  30
       
   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

55

       
   

Item 4. Controls and Procedures

57

       

PART II - Other Information

 
       
   

Item 1 – Legal Proceedings

57

       
   

Item 1A – Risk Factors

57

       
   

Item 4 – Mine Safety Disclosures

58

       
   

Item 6 – Exhibits

58

       
   

Signatures

59

       
   

Exhibits

60

 

*Items 2, 3 and 5 of Part II are omitted as they are not applicable.

 

 
3

Table Of Contents
 

 

 

Part I - Financial Information

 

Item 1. Financial Statements

  

Hecla Mining Company and Subsidiaries

 

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands, except shares)

 

   

September 30, 2016

   

December 31, 2015

 

ASSETS

 

Current assets:

               

Cash and cash equivalents

  $ 167,844     $ 155,209  

Investments

    24,534        

Accounts receivable:

               

Trade

    26,622       13,490  

Taxes

    8,211       11,458  

Other, net

    14,122       16,401  

Inventories:

               

Concentrates, doré, and stockpiled ore

    23,005       22,441  

Materials and supplies

    23,074       23,101  

Current deferred income taxes

    8,238       17,980  

Current restricted cash

    3,900        

Other current assets

    10,451       9,453  

Total current assets

    310,001       269,533  

Non-current investments

    6,356       1,515  

Non-current restricted cash and investments

    2,184       999  

Properties, plants, equipment and mineral interests, net

    2,023,109       1,896,811  

Non-current deferred income taxes

    19,456       36,589  

Reclamation insurance asset

          13,695  

Other non-current assets and deferred charges

    2,573       2,783  

Total assets

  $ 2,363,679     $ 2,221,925  

LIABILITIES

 

Current liabilities:

               

Accounts payable and accrued liabilities

  $ 57,003     $ 51,277  

Accrued payroll and related benefits

    28,696       27,563  

Accrued taxes

    5,990       8,915  

Current portion of capital leases

    7,175       8,735  

Current portion of debt

    1,384       2,721  

Current portion of accrued reclamation and closure costs

    17,866       20,989  

Other current liabilities

    17,033       6,884  

Total current liabilities

    135,147       127,084  

Capital leases

    6,532       8,841  

Accrued reclamation and closure costs

    83,598       74,549  

Long-term debt

    500,666       500,199  

Non-current deferred tax liability

    124,385       119,623  

Non-current pension liability

    43,742       46,513  

Other noncurrent liabilities

    7,626       6,190  

Total liabilities

    901,696       882,999  

Commitments and contingencies

               

SHAREHOLDERS’ EQUITY

 

Preferred stock, 5,000,000 shares authorized:

               

Series B preferred stock, $0.25 par value, 157,816 shares issued and outstanding, liquidation preference — $7,891

    39       39  

Common stock, $0.25 par value, authorized 500,000,000 shares; issued and outstanding 2016 — 395,110,129 shares and 2015 — 378,112,840 shares

    99,759       95,219  

Capital surplus

    1,594,816       1,519,598  

Accumulated deficit

    (186,579

)

    (232,565

)

Accumulated other comprehensive loss

    (30,942

)

    (32,631

)

Less treasury stock, at cost; 2016 — 3,930,122 and 2015 — 2,764,973 shares issued and held in treasury

    (15,110

)

    (10,734

)

Total shareholders’ equity

    1,461,983       1,338,926  

Total liabilities and shareholders’ equity

  $ 2,363,679     $ 2,221,925  

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 
4

Table Of Contents
 

 

Hecla Mining Company and Subsidiaries

 

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)

(Dollars and shares in thousands, except for per-share amounts)

 

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30, 2016

   

September 30, 2015

   

September 30, 2016

   

September 30, 2015

 

Sales of products

  $ 179,393     $ 104,941     $ 481,712     $ 328,230  

Cost of sales and other direct production costs

    94,061       79,273       251,335       220,805  

Depreciation, depletion and amortization

    26,647       28,229       82,419       80,649  
      120,708       107,502       333,754       301,454  

Gross profit (loss)

    58,685       (2,561

)

    147,958       26,776  

Other operating expenses:

                               

General and administrative

    11,155       9,461       31,728       26,477  

Exploration

    3,859       5,540       10,171       14,748  

Pre-development

    550       1,696       1,475       3,834  

Other operating expense

    954       743       2,216       2,137  

Provision for closed operations and reclamation

    2,162       1,181       4,779       10,983  

Acquisition costs

    1,765       15       2,167       2,162  
      20,445       18,636       52,536       60,341  

Income (loss) from operations

    38,240       (21,197

)

    95,422       (33,565

)

Other income (expense):

                               

Gain on derivative contracts

    7       3,347             8,252  

Unrealized gain (loss) on investments

    49       (100

)

    488       (3,226

)

Foreign exchange gain (loss)

    2,375       9,077       (7,713

)

    19,518  

Interest and other income

    145       100       346       173  

Interest expense, net of amount capitalized

    (5,574

)

    (6,617

)

    (16,655

)

    (19,350

)

      (2,998

)

    5,807       (23,534

)

    5,367  

Income (loss) before income taxes

    35,242       (15,390

)

    71,888       (28,198

)

Income tax (provision) benefit

    (9,453

)

    5,500       (22,603

)

    4,193  

Net income (loss)

    25,789       (9,890

)

    49,285       (24,005

)

Preferred stock dividends

    (138

)

    (138

)

    (414

)

    (414

)

Income (loss) applicable to common shareholders

  $ 25,651     $ (10,028

)

  $ 48,871     $ (24,419

)

Comprehensive income (loss):

                               

Net income (loss)

  $ 25,789     $ (9,890

)

  $ 49,285     $ (24,005

)

Reclassification of loss on disposition or impairment of marketable securities included in net income (loss)

                1,000       2,993  

Change in fair value of derivative contracts designated as hedge transactions

    (1,602

)

          (1,556

)

     

Unrealized holding gains (losses) on investments

    987       (391

)

    2,245       (2,603

)

Comprehensive income (loss)

  $ 25,174     $ (10,281

)

  $ 50,974     $ (23,615

)

Basic income (loss) per common share after preferred dividends

  $ 0.07     $ (0.03

)

  $ 0.13     $ (0.07

)

Diluted income (loss) per common share after preferred dividends

  $ 0.07     $ (0.03

)

  $ 0.13     $ (0.07

)

Weighted average number of common shares outstanding - basic

    387,578       377,508       383,458       372,555  

Weighted average number of common shares outstanding - diluted

    389,918       377,508       386,318       372,555  

Cash dividends declared per common share

  $ 0.0025     $ 0.0025     $ 0.0075     $ 0.0075  

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 
5

Table Of Contents
 

 

Hecla Mining Company and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

   

Nine Months Ended

 
   

September 30,

2016

   

September 30,

2015

 

Operating activities:

               

Net income (loss)

  $ 49,285     $ (24,005

)

Non-cash elements included in net income (loss):

               

Depreciation, depletion and amortization

    83,900       81,475  

Unrealized (gain) loss on investments

    (488

)

    3,060  

(Gain) loss on disposition of properties, plants, equipment, and mineral interests

    (319

)

    175  

Provision for reclamation and closure costs

    3,685       11,028  

Stock compensation

    4,814       4,036  

Acquisition costs

    1,048        

Deferred income taxes

    10,330       (1,781

)

Amortization of loan origination fees

    1,397       1,365  

Loss on derivative contracts

    337       9,561  

Foreign exchange loss (gain)

    7,555       (17,566

)

Other non-cash items, net

    5       45  

Change in assets and liabilities, net of business acquisitions:

               

Accounts receivable

    5,776       (2,951

)

Inventories

    (44

)

    4,382  

Other current and non-current assets

    (539

)

    (6,779

)

Accounts payable and accrued liabilities

    2,042       3,986  

Accrued payroll and related benefits

    8,621       2,221  

Accrued taxes

    (2,894

)

    2,782  

Accrued reclamation and closure costs and other non-current liabilities

    (1,397

)

    7,934  

Cash provided by operating activities

    173,114       78,968  

Investing activities:

               

Additions to properties, plants, equipment and mineral interests

    (120,236

)

    (95,399

)

Acquisitions of other companies, net of cash acquired

    (3,931

)

    (809

)

Proceeds from disposition of properties, plants, equipment and mineral interests

    348       277  

Purchases of investments

    (32,847

)

    (947

)

Maturities of investments

    7,240        

Changes in restricted cash and investment balances

    (3,900

)

     

Net cash used in investing activities

    (153,326

)

    (96,878

)

Financing activities:

               

Proceeds from sale of common stock, net of offering costs

    8,121        

Acquisition of treasury shares

    (4,363

)

    (1,875

)

Dividends paid to common shareholders

    (2,882

)

    (2,796

)

Dividends paid to preferred shareholders

    (414

)

    (414

)

Credit availability and debt issuance fees

    (107

)

    (123

)

Repayments of debt

    (1,807

)

    (216

)

Repayments of capital leases

    (6,328

)

    (7,833

)

Net cash used in financing activities

    (7,780

)

    (13,257

)

Effect of exchange rates on cash

    627       (4,044

)

Net increase (decrease) in cash and cash equivalents

    12,635       (35,211

)

Cash and cash equivalents at beginning of period

    155,209       209,665  

Cash and cash equivalents at end of period

  $ 167,844     $ 174,454  

Significant non-cash investing and financing activities:

               

Addition of capital lease obligations

  $ 2,297     $ 4,346  

Common stock issued for the acquisition of other companies

  $ 48,109     $ 19,133  

Payment of accrued compensation in restricted stock units

  $ 5,511     $ 3,016  

 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

 
6

Table Of Contents
 

 

Note 1.    Basis of Preparation of Financial Statements

 

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements and notes to the unaudited interim condensed consolidated financial statements contain all adjustments, consisting of normal recurring items and items which are nonrecurring, necessary to present fairly, in all material respects, the financial position of Hecla Mining Company and its consolidated subsidiaries (“we” or “our” or “us”).  See Note 4 and Note 13 for information on adjustments which are nonrecurring contained in the accompanying unaudited interim condensed consolidated financial statements. These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and related footnotes as set forth in our annual report filed on Form 10-K for the year ended December 31, 2015, as it may be amended from time to time.

 

The results of operations for the periods presented may not be indicative of those which may be expected for a full year.  The unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").  Certain information and footnote disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures are adequate for the information not to be misleading.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the financial statements, the reported amounts of revenues and expenses during the reporting period, and the disclosures of contingent liabilities.  Accordingly, ultimate results could differ materially from those estimates.     

 

On September 13, 2016, we completed the acquisition of Mines Management, Inc. ("Mines Management"), giving us ownership of the Montanore project in Northwest Montana. The unaudited interim condensed consolidated financial statements included herein reflect our ownership of the assets previously held by Mines Management as of the September 13, 2016 acquisition date. See Note 13 for more information.

 

Note 2.    Investments and Restricted Cash

 

Investments

 

Our current investments, which are classified as "available for sale" and consist of bonds having maturities of greater than 90 days and less than 365 days, had a fair value and cost basis of $24.5 million at September 30, 2016. We held no such investments as of December 31, 2015.     

 

At September 30, 2016 and December 31, 2015, the fair value of our non-current investments was $6.4 million and $1.5 million, respectively.  Our non-current investments consist of marketable equity securities which are carried at fair value, and are primarily classified as “available-for-sale.” The cost basis of our non-current investments was approximately $4.1 million and $4.0 million at September 30, 2016 and December 31, 2015, respectively. In the first nine months of 2016, we acquired marketable equity securities having a cost basis of $0.9 million. During the first quarters of 2016 and 2015, we recognized impairment charges against current earnings of $1.0 million and $2.8 million, respectively, as we determined the impairments to be other-than-temporary.

 

Restricted Cash and Investments

 

Various laws, permits, and covenants require that funds be in place for certain environmental and reclamation obligations and other potential liabilities.  We had a current restricted cash balance of $3.9 million as of September 30, 2016 representing funds deposited in escrow to be applied towards settlement of environmental matters for the South Dakota Superfund site related to our subsidiary, CoCa Mines, Inc. (see Note 4 for more information). Our non-current restricted investments are used primarily for reclamation funding or for funding surety bonds, and were $2.2 million and $1.0 million at September 30, 2016 and December 31, 2015, respectively. Non-current restricted investments primarily represent investments in money market funds and certificates of deposit.

 

 
7

Table Of Contents
 

 

Note 3.   Income Taxes

 

Major components of our income tax provision (benefit) for the three and nine months ended September 30, 2016 and 2015 are as follows (in thousands):

 

 

   

Three Months Ended

   

Nine Months Ended

 
   

September 30,

   

September 30,

 
   

2016

   

2015

   

2016

   

2015

 

Current:

                               

Domestic

  $ 4,123     $ (4,776

)

  $ 4,122     $ (2,911

)

Foreign

    5,773       451       8,416       606  

Total current income tax provision (benefit)

    9,896       (4,325

)

    12,538       (2,305

)

                                 

Deferred:

                               

Domestic

    (5,723

)

    1,812       3,642       5,400  

Foreign

    5,280       (2,987

)

    6,423       (7,288

)

Total deferred income tax provision (benefit)

    (443

)

    (1,175

)

    10,065       (1,888

)

Total income tax provision (benefit)

  $ 9,453     $ (5,500

)

  $ 22,603     $ (4,193

)

 

As of September 30, 2016, we have a net deferred tax asset in the U.S. of $24.8 million, a net deferred tax liability in Canada of $125.6 million, and a net deferred tax asset in Mexico of $2.9 million, for a consolidated worldwide net deferred tax liability of $97.9 million. Our ability to utilize our deferred tax assets depends on future taxable income generated from operations. At September 30, 2016 and December 31, 2015, the balances of the valuation allowances on our deferred tax assets were $107 million and $116 million, respectively, primarily for net operating losses and tax credit carryforwards. The amount of the deferred tax asset considered recoverable, however, could be reduced in the near term if estimates of future taxable income are reduced.

 

During the quarter ended June 30, 2016, there was a change in judgment about the realizability of our deferred tax assets in Mexico. Based on revised projections of future taxable income, tax net operating losses are now projected to be fully utilized. The valuation allowance in Mexico decreased to $1.3 million based on this change in judgment.

 

The current income tax provisions for the three and nine months ended September 30, 2016 and 2015 vary from the amounts that would have resulted from applying the statutory income tax rate to pre-tax income primarily due to the effects of percentage depletion for all periods presented and the impact of taxation in foreign jurisdictions.

 

Note 4.    Commitments, Contingencies and Obligations

 

General

 

We follow the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") guidance in determining our accruals and disclosures with respect to loss contingencies, and evaluate such accruals and contingencies for each reporting period. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

 

 
8

Table Of Contents
 

 

Rio Grande Silver Guaranty

 

Our wholly-owned subsidiary, Rio Grande Silver Inc. (“Rio”), is party to a joint venture with Emerald Mining & Leasing, LLC (“EML”) and certain other parties with respect to a land package in the Creede Mining District of Colorado that is adjacent to other land held by Rio. Rio holds a 70% interest in the joint venture. In connection with the joint venture, we are required to guarantee certain environmental remediation-related obligations of EML to a third party up to a maximum liability to us of $2.5 million. As of September 30, 2016, we have not been required to make any payments pursuant to the guaranty. We may be required to make payments in the future, limited to the $2.5 million maximum liability, should EML fail to meet its obligations to the third party. However, to the extent that any payments are made by us under the guaranty, EML, in addition to other parties, has jointly and severally agreed to reimburse and indemnify us for any such payments. We have not recorded a liability relating to the guaranty as of September 30, 2016.

 

Lucky Friday Water Permit Matters

 

Over the last several years, the Lucky Friday unit has experienced several regulatory issues relating to its water discharge permits and water management more generally. In December 2013, the EPA issued to Hecla Limited a notice of violation (“2013 NOV”) alleging certain storm water reporting violations under Lucky Friday’s Clean Water Act Multi-Sector General Stormwater Permit for Industrial Activities. The alleged violations were resolved. The 2013 NOV also contained a request for information under Section 308 of the Clean Water Act directing Hecla Limited to undertake a comprehensive groundwater investigation of Lucky Friday’s tailings pond no. 3 to evaluate whether the pond is causing the discharge of pollutants via seepage to groundwater that is discharging to surface water.

 

We completed the investigation mandated by the EPA and submitted a draft report to the agency in December 2015. We are waiting for the EPA’s response, and until such time as the process is complete, we cannot predict what the impact of the investigation will be.

 

Hecla Limited strives to maintain its water discharges at the Lucky Friday unit in full compliance with its permits and applicable laws, however, we cannot provide assurance that in the future it will be able to fully comply with the permit limits and other regulatory requirements regarding water management.

 

Johnny M Mine Area near San Mateo, McKinley County, New Mexico

 

In May 2011, the EPA made a formal request to Hecla Mining Company for information regarding the Johnny M Mine Area near San Mateo, McKinley County, New Mexico, and asserted that Hecla Mining Company may be responsible under CERCLA for environmental remediation and past costs the EPA has incurred at the site. Mining at the Johnny M was conducted for a limited period of time by a predecessor of our subsidiary, Hecla Limited. In August 2012, Hecla Limited and the EPA entered into a Settlement Agreement and Administrative Order on Consent for Removal Action (“Consent Order”), pursuant to which Hecla Limited agreed to pay (i) $1.1 million to the EPA for its past response costs at the site and (ii) any future response costs at the site under the Consent Order, in exchange for a covenant not to sue by the EPA. Hecla Limited paid the approximately $1.1 million to the EPA for its past response costs and in December 2014, submitted to EPA the Engineering Evaluation and Cost Analysis (“EE/CA”) for the site. The EE/CA evaluates three alternative response actions: 1) no action, 2) off-site disposal, and 3) on-site disposal. The range in estimated costs of these alternatives is $0 to $221 million. In the EE/CA, Hecla Limited recommended that EPA approve on-site disposal, which is currently estimated to cost $5.6 million, on the basis that it is the most appropriate response action under CERCLA. In June 2015, the EPA approved the EE/CA, with a few minor conditions. The EPA still needs to publish the EE/CA for public notice and comment, and the agency will not make a final decision on the appropriate response action until the public comment process is complete. It is anticipated that Hecla Limited will implement the response action selected by the EPA pursuant to an amendment to the Consent Order or a new order. Based on the foregoing, we believe it is probable that Hecla Limited will incur a liability for remediation at the site, and our best estimate of that liability as of the date of this report is $5.6 million, and we have accrued that amount. There can be no assurance that Hecla Limited’s liability will not be more than $5.6 million, or that its ultimate liability will not have a material adverse effect on Hecla Limited’s or our results of operations or financial position.

 

 
9

Table Of Contents
 

 

In September 2016, Hecla Limited was served with a lawsuit filed by an individual in state court in New Mexico alleging personal injury claims arising from alleged exposure to contaminants as a result of allegedly living on land adjacent to the Johnny M Mine site.  We do not yet have enough information to conclude if Hecla Limited has any liability or to estimate any loss that it may incur.

 

Carpenter Snow Creek Site, Cascade County, Montana

 

In July 2010, the EPA made a formal request to Hecla Mining Company for information regarding the Carpenter Snow Creek Superfund Site located in Cascade County, Montana. The Carpenter Snow Creek Site is located in a historic mining district, and in the early 1980s Hecla Limited leased 6 mining claims and performed limited exploration activities at the site. Hecla Limited terminated the mining lease in 1988.

 

In June 2011, the EPA informed Hecla Limited that it believes Hecla Limited, among several other viable companies, may be liable for cleanup of the site or for costs incurred by the EPA in cleaning up the site. The EPA stated in the June 2011 letter that it has incurred approximately $4.5 million in response costs and estimated that total remediation costs may exceed $100 million. Hecla Limited cannot with reasonable certainty estimate the amount or range of liability, if any, relating to this matter because of, among other reasons, the lack of information concerning the site.

 

South Dakota and Colorado Superfund Sites Related to CoCa Mines, Inc.

 

In 1991, Hecla Limited acquired all of the outstanding common stock of CoCa Mines, Inc. (“CoCa”).  CoCa is alleged to have held prior property interests and undertaken exploration activities at the Gilt Edge Mine Superfund site in Lawrence County, South Dakota, and to have been engaged in exploration and mining activities at or near the Nelson Tunnel/Commodore Waste Rock Pile Superfund site in Creede, Colorado.  The United States and the State of South Dakota alleged that CoCa, along with other parties, is a potentially responsible party (“PRP”) under CERCLA at the Gilt Edge site.  In addition, the United States and the State of Colorado alleged that CoCa is a PRP at the Nelson Tunnel/Commodore site. The United States, South Dakota and Colorado based their claims of liability on allegations of CoCa’s historical relationship to each site, and that CoCa succeeded to the liabilities of one or more predecessor entities that may have held certain property interests at the sites or undertaken certain activities.

 

The United States alleged that it had incurred $118 million, plus interest, in response costs at the Gilt Edge site. At the Nelson Tunnel/Commodore site, the EPA alleges that it had incurred $10 million, plus interest, in response costs.

 

As a result of settlement discussions, in the second quarter of 2015 we accrued $9.9 million by recording a liability for the total amount that would be paid by CoCa to settle the Gilt Edge and Nelson Tunnel/Commodore Waste Rock Pile matters, and an asset for the estimated amount that would be recovered by CoCa from insurers and the other settling PRP with respect to the Gilt Edge site.

 

CoCa reached final terms of settlement on each of the matters in April 2016 in the form of Consent Decrees agreed to by CoCa and (i) the United States and the State of South Dakota with respect to the Gilt Edge site and (ii) the United States and the State of Colorado with respect to Nelson Tunnel/Commodore Waste Rock Pile site.

 

The Consent Decrees were approved and entered by the Courts on June 15, 2016 in the case of the Nelson Tunnel/Commodore Waste Rock Pile, and on September 19, 2016 in the case of Gilt Edge. As a result, CoCa paid an aggregate of $6 million in August 2016 to the United States and the State of Colorado, and an aggregate of $3.9 million in November 2016 to the United States and the State of South Dakota (insurers and another PRP paid an additional $6.4 million to settle the Gilt Edge matter). As a result, CoCa has resolved the claims of (i) the United States and the State of South Dakota with respect to the Gilt Edge site, and (ii) the United States and the State of Colorado with respect to the Nelson Tunnel site, in each case under CERCLA and certain relevant state statutes, for all past and future response costs at each site.

 

 
10

Table Of Contents
 

 

Senior Notes

 

On April 12, 2013, we completed an offering of $500 million aggregate principal amount of 6.875% Senior Notes due 2021. The net proceeds from the offering of the Senior Notes were used to partially fund the acquisition of Aurizon Mines Ltd. ("Aurizon") and for general corporate purposes, including expenses related to the Aurizon acquisition. In 2014, we completed additional issuances of our Senior Notes in the aggregate principal amount of $6.5 million, which were contributed to one of our pension plans to satisfy the funding requirement for 2014. Interest on the Senior Notes is payable on May 1 and November 1 of each year, commencing November 1, 2013. See Note 9 for more information.

 

Other Commitments

 

Our contractual obligations as of September 30, 2016 included approximately $0.8 million for various costs. In addition, our open purchase orders at September 30, 2016 included approximately $1.4 million, $1.6 million and $8.3 million, respectively, for various capital items at the Lucky Friday, Casa Berardi and Greens Creek units, and approximately $0.6 million, $1.1 million, and $2.4 million, respectively, for various non-capital costs at the Lucky Friday, Casa Berardi and Greens Creek units. We also have total commitments of approximately $14.2 million relating to scheduled payments on capital leases, including interest, primarily for equipment at our Greens Creek, Lucky Friday and Casa Berardi units (see Note 9 for more information). As part of our ongoing business and operations, we are required to provide surety bonds, bank letters of credit, and restricted deposits for various purposes, including financial support for environmental reclamation obligations and workers compensation programs. As of September 30, 2016, we had surety bonds totaling $105.3 million in place as financial support for future reclamation and closure costs, self insurance, and employee benefit plans. The obligations associated with these instruments are generally related to performance requirements that we address through ongoing operations. As the requirements are met, the beneficiary of the associated instruments cancels or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure of the sites. We believe we are in compliance with all applicable bonding requirements and will be able to satisfy future bonding requirements as they arise.

 

Other Contingencies

 

On April 12, 2013, the family of Larry Marek, an employee of Hecla Limited who was fatally injured in an April 2011 accident, filed a lawsuit against us and certain of our officers and employees seeking damages for, among other claims, wrongful death and infliction of emotional distress. No dollar amount of damages is specified in the complaint, which was filed in state court in Idaho (Kootenai County District Court). On April 21, 2015, the judge hearing the case granted Hecla’s motion for summary judgment and dismissed the case. The plaintiffs appealed the decision to the Idaho Supreme Court which heard arguments on August 30, 2016. No decision has yet been issued, and we cannot predict the outcome of this matter.

 

On December 11, 2013, four employees of Hecla Limited who were injured in a December 2011 rock burst filed a lawsuit against us and certain of our employees seeking damages for, among other claims, intentional and willful injury and infliction of emotional distress. The plaintiffs seek damages in excess of $1,000,000, as claimed in the complaint, which was filed in state court in Idaho (Kootenai County District Court). On August 28, 2015, the judge hearing the case granted Hecla’s motion for summary judgment and dismissed the case. The plaintiffs appealed the decision to the Idaho Supreme Court which heard arguments on August 30, 2016. No decision has yet been issued, and we cannot predict the outcome of this matter.

 

We also have certain other contingencies resulting from litigation, claims, EPA investigations, and other commitments and are subject to a variety of environmental and safety laws and regulations incident to the ordinary course of business. We currently expect that the resolution of such contingencies will not materially affect our financial position, results of operations or cash flows. However, in the future, there may be changes to these contingencies, or additional contingencies may occur, any of which might result in an accrual or a change in the estimated accruals recorded by us, and there can be no assurance that their ultimate disposition will not have a material adverse effect on our financial position, results of operations or cash flows.

 

 
11

Table Of Contents
 

 

Note 5.    Earnings (Loss) Per Common Share

 

We are authorized to issue 500,000,000 shares of common stock, $0.25 par value per share. At September 30, 2016, there were 399,040,251 shares of our common stock issued and 3,930,122 shares issued and held in treasury, for a net of 395,110,129 shares outstanding. For the three-month and nine-month periods ended September 30, 2016, 4,309,440 restricted stock units that are unvested or vested in the current period are included in the calculation of diluted income per share. There were no options outstanding for the three-month and nine-month periods ended September 30, 2016. For the three-month and nine-month periods ended September 30, 2015, all outstanding options, restricted share units, and warrants were excluded from the computation of diluted loss per share, as our reported net losses for those periods would cause their conversion and exercise to have no effect on the calculation of loss per share.

 

Note 6.    Business Segments

 

We are currently organized and managed in four reporting segments: the Greens Creek unit, the Lucky Friday unit, the Casa Berardi unit and the San Sebastian unit. The San Sebastian unit, a historic operating property for Hecla, resumed commercial production in the fourth quarter of 2015 and was added as a new reporting segment in 2015.

 

 

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 following tables present information about reportable segments for the three and nine months ended September 30, 2016 and 2015 (in thousands):

 

   

Three Months Ended
September 30,

   

Nine Months Ended

September 30,

 
   

2016

   

2015

   

2016

   

2015

 

Net sales to unaffiliated customers:

                               

Greens Creek

  $ 85,804     $ 54,351     $ 199,260     $ 175,749  

Lucky Friday

    26,140       13,916       70,152       48,376  

Casa Berardi

    41,131       36,674       126,614       104,105  

San Sebastian

    26,318             85,686        
    $ 179,393     $ 104,941     $ 481,712     $ 328,230  

Income (loss) from operations:

                               

Greens Creek

  $ 26,498     $ 21     $ 49,407     $ 24,664  

Lucky Friday

    6,652       (3,894

)

    13,442       (933

)

Casa Berardi

    3,691       (2,603

)

    16,246       (6,567

)

San Sebastian

    18,415       (2,420

)

    58,911       (7,269

)

Other

    (17,016

)

    (12,301

)

    (42,584

)

    (43,460

)

    $ 38,240     $ (21,197

)

  $ 95,422     $ (33,565

)

 

 
12

Table Of Contents
 

 

The following table presents identifiable assets by reportable segment as of September 30, 2016 and December 31, 2015 (in thousands):

 

   

September 30, 2016

   

December 31, 2015

 

Identifiable assets:

               

Greens Creek

  $ 696,209     $ 698,265  

Lucky Friday

    437,925       393,338  

Casa Berardi

    799,570       779,423  

San Sebastian

    23,109       22,238  

Other

    406,866       328,661  
    $ 2,363,679     $ 2,221,925  

 

Note 7.   Employee Benefit Plans

 

We sponsor defined benefit pension plans covering substantially all U.S. employees.  Net periodic pension cost for the plans consisted of the following for the three and nine months ended September 30, 2016 and 2015 (in thousands):

 

   

Three Months Ended

September 30,

 
   

2016

   

2015

 

Service cost

  $ 1,077     $ 1,054  

Interest cost

    1,307       1,206  

Expected return on plan assets

    (1,325

)

    (1,345

)

Amortization of prior service cost

    (84

)

    (84

)

Amortization of net loss

    1,093       1,065  

Net periodic pension cost

  $ 2,068     $ 1,896  

 

 

   

Nine Months Ended

September 30,

 
   

2016

   

2015

 

Service cost

  $ 3,231     $ 3,162  

Interest cost

    3,921       3,618  

Expected return on plan assets

    (3,975 )     (4,036 )

Amortization of prior service cost

    (252 )     (253 )

Amortization of net loss

    3,279       3,195  

Net periodic pension cost

  $ 6,204     $ 5,686  

 

 

We contributed approximately $2.6 million in shares of our common stock and cash to our defined benefit plans in February 2016, and $6.1 million in shares of our common stock in July 2016, with no additional contributions anticipated in 2016. We expect to contribute approximately $0.4 million to our unfunded supplemental executive retirement plan during 2016.

 

Note 8.    Shareholders’ Equity

 

Stock-based Compensation Plans

 

We periodically grant restricted stock unit awards and/or shares of common stock to our employees and directors. We measure compensation cost for restricted stock units and stock grants at the closing price of our stock at the time of grant. Restricted stock unit grants vest after a specified period with compensation cost amortized over that period. Although we have no current plans to issue stock options, we may do so in the future.

 

 
13

Table Of Contents
 

 

In March 2016, the Board of Directors granted 2,335,196 shares of common stock to employees for payment of annual and long-term incentive compensation for the period ended December 31, 2015. The shares were distributed in March 2016, and $5.5 million in expense related to the stock awards was recognized in the periods prior to March 31, 2016.

 

In June 2016, the Board of Directors granted the following restricted stock unit awards to employees:

 

 

952,612 restricted stock units, with one third of those vesting in June 2017, one third vesting in June 2018, and one third vesting in June 2019;

 

87,493 restricted stock units, with one half of those vesting in June 2017 and one half vesting in June 2018; and

 

43,187 restricted stock units that vest in June 2017.

 

The unit awards discussed above vesting in 2017 have an associated expense of $1.8 million that will be recognized on a straight-line basis over the twelve months following the date of the award. The unit awards discussed above vesting in 2018 have an associated expense of $1.6 million that will be recognized on a straight-line basis over the twenty-four months following the date of the award. The unit awards discussed above vesting in 2019 have an associated expense of $1.4 million that will be recognized on a straight-line basis over the thirty-six month period following the date of the award.

 

In the first nine months of 2016, a total of 185,353 shares of common stock were granted to nonemployee directors. We granted a total of 48,246 shares of common stock to nonemployee directors in the first nine months of 2015.

 

Stock-based compensation expense for restricted stock unit grants to employees and shares issued to nonemployee directors recorded in the first nine months of 2016 totaled $4.8 million, compared to $4.0 million in the same period last year.

 

In connection with the vesting of restricted stock units and other stock grants, employees have in the past, at their election and when permitted by us, chosen to satisfy their minimum tax withholding obligations through net share settlement, pursuant to which the Company withholds the number of shares necessary to satisfy such withholding obligations.  As a result, in the first nine months of 2016 we withheld 1,010,509 shares valued at approximately $3.5 million, or approximately $3.44 per share. In the first nine months of 2015 we withheld 613,698 shares valued at approximately $1.9 million, or approximately $3.05 per share.

 

Common Stock 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, when and if 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

   

Annualized 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  

 

On November 4, 2016, our Board of Directors declared a common stock dividend, pursuant to the minimum annual dividend component of the policy described above, of $0.0025 per share, for a total dividend of $1.0 million payable in December 2016. Because the average realized silver price for the second quarter of 2016 was $19.53 per ounce, below the minimum threshold of $30 according to the policy, no silver-price-linked component was declared or paid. The declaration and payment of common stock dividends is at the sole discretion of our Board of Directors.

 

 
14

Table Of Contents
 

 

Acquisition of Mines Management

 

In September 2016, we issued 8,309,006 shares of our common stock as part of the consideration in the acquisition of Mines Management. See Note 13 for more information.

 

At-The-Market Equity Distribution Agreement

 

Pursuant to an equity distribution agreement dated February 23, 2016, we may issue and sell shares of our common stock from time to time through ordinary broker transactions having an aggregate offering price of up to $75 million, with the net proceeds available for general corporate purposes. The terms of sales transactions under the agreement, including trading day(s), number of shares sold in the aggregate, number of shares sold per trading day, and the floor selling price per share, are proposed by us to the sales agent. Whether or not we engage in sales from time to time may depend on a variety of factors, including share price, our cash resources, customary black-out restrictions, and whether we have any material inside information. The agreement can be terminated by us at any time. The shares issued under the equity distribution agreement are registered under the Securities Act of 1933, as amended, pursuant to our shelf registration statement on Form S-3, which was filed with the SEC on February 23, 2016. As of September 30, 2016, we had sold 2,780,087 shares under the agreement for proceeds of approximately $8.1 million, net of commissions and fees of approximately $166 thousand, with all of those sales occurring prior to the third quarter of 2016.

 

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. Whether or not we engage in repurchases from time to time may depend on a variety of factors, including not only price and cash resources, but customary black-out restrictions, whether we have any material inside information, limitations on share repurchases or cash usage that may be imposed by our credit agreement or in connection with issuances of securities, alternative uses for cash, applicable law, and other investment opportunities from time to time. As of September 30, 2016, 934,100 shares have been purchased at an average price of $3.99 per share, leaving 19.1 million shares that may yet be purchased under the program. The closing price of our common stock at November 4, 2016, was $6.46 per share.

 

Warrants

 

At December 31, 2015, we had 2,249,550 warrants outstanding, with each warrant exercisable for 0.1622 of a share of our common stock at an exercise price of $6.17 per share. All of the warrants expired in March 2016, and there were no warrants outstanding as of September 30, 2016.

 

Note 9.    Senior Notes, Credit Facility, and Capital Leases

 

Senior Notes

 

On April 12, 2013, we completed an offering of $500 million in aggregate principal amount of our Senior Notes due May 1, 2021 in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, and in 2014, an additional $6.5 million aggregate principal amount of the Senior Notes were issued to one of our pension plans. The Senior Notes were subsequently exchanged for substantially identical Senior Notes registered with the SEC. The Senior Notes are governed by the Indenture, dated as of April 12, 2013, as amended (the "Indenture"), among Hecla Mining Company ("Hecla") and certain of our subsidiaries and The Bank of New York Mellon Trust Company, N.A., as trustee. The net proceeds from the initial offering of the Senior Notes ($490 million) were used to partially fund the acquisition of Aurizon and for general corporate purposes, including expenses related to the Aurizon acquisition.

 

 
15

Table Of Contents
 

 

The Senior Notes are recorded net of a 2% initial purchaser discount totaling $10 million at the time of the April 2013 issuance and having an unamortized balance of $5.8 million as of September 30, 2016. The Senior Notes bear interest at a rate of 6.875% per year from the date of original issuance or from the most recent payment date on which interest has been paid or provided for.  Interest on the Senior Notes is payable on May 1 and November 1 of each year, commencing November 1, 2013. During the nine months ended September 30, 2016 and 2015, interest expense related to the Senior Notes and amortization of the initial purchaser discount and fees related to the issuance of the Senior Notes, net of $12.0 million and $10.0 million, respectively, in capitalized interest, totaled $15.2 million and $17.2 million, respectively.

 

The Senior Notes are guaranteed on a senior unsecured basis by certain of our subsidiaries (the "Guarantors"). The Senior Notes and the guarantees are, respectively, Hecla's and the Guarantors' general senior unsecured obligations and are subordinated to all of Hecla's and the Guarantors' existing and future secured debt to the extent of the assets securing that secured debt.  In addition, the Senior Notes are effectively subordinated to all of the liabilities of Hecla's subsidiaries that are not guaranteeing the Senior Notes, to the extent of the assets of those subsidiaries.

 

The Senior Notes became redeemable in whole or in part, at any time and from time to time after May 1, 2016, on the redemption dates and at the redemption prices specified in the Indenture, plus accrued and unpaid interest, if any, to the date of redemption.

 

Upon the occurrence of a change of control (as defined in the Indenture), each holder of Senior Notes will have the right to require us to purchase all or a portion of such holder's Senior Notes pursuant to a change of control offer (as defined in the Indenture), at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase, subject to the rights of holders of the Senior Notes on the relevant record date to receive interest due on the relevant interest payment date.

 

Credit Facility

 

In May 2016, we entered into a $100 million senior secured revolving credit facility with a three year term. The credit facility is collateralized by the shares of common stock held in our material domestic subsidiaries and by our joint venture interests in the Greens Creek mine, all of our rights and interests in the joint venture agreement, and all of our rights and interests in the assets of the joint venture.  This credit facility replaced our previous $100 million credit facility which had the same terms of collateral as described above. Below is information on the interest rates, standby fee, and financial covenant terms under our current credit facility:

 

Interest rates:

           

Spread over the London Interbank Offer Rate

    2.25 - - 3.25%  

Spread over alternative base rate

    1.25 - - 2.25%  

Standby fee per annum on undrawn amounts

      0.50%    

Covenant financial ratios:

           

Senior leverage ratio (debt secured by liens/EBITDA)

 

 

not more than 2.50:1  

Leverage ratio (total debt less unencumbered cash/EBITDA)(1)

    not more than 5.00:1  

Interest coverage ratio (EBITDA/interest expense)

    not more than 3.00:1  

 

 

(1) The leverage ratio will decrease to 4.00:1 in 2017.

 

We are also able to obtain letters of credit under the facility, and for any such letters we are required to pay a participation fee of between 2.25% and 3.25% based on our total leverage ratio, as well as a fronting fee to each issuing bank of 0.20% annually on the average daily dollar amount of any outstanding letters of credit. There were $2.6 million in letters of credit outstanding as of September 30, 2016.

 

 
16

Table Of Contents
 

 

We believe we were in compliance with all covenants under the credit agreement and no amounts were outstanding as of September 30, 2016.  We have not drawn funds on the current revolving credit facility as of the filing date of this report.

 

Capital Leases

 

We have entered into various lease agreements, primarily for equipment at our Greens Creek, Lucky Friday, and Casa Berardi units, which we have determined to be capital leases.  At September 30, 2016, the total liability balance associated with capital leases, including certain purchase option amounts, was $13.7 million, with $7.2 million of the liability classified as current and the remaining $6.5 million classified as non-current. At December 31, 2015, the total liability balance associated with capital leases was $17.6 million, with $8.7 million of the liability classified as current and $8.8 million classified as non-current. The total obligation for future minimum lease payments was $14.2 million at September 30, 2016, with $0.5 million attributed to interest.

 

At September 30, 2016, the annual maturities of capital lease commitments, including interest, are (in thousands):

 

 

Twelve-month period

 ending September 30,

       

2017

  $ 6,830  

2018

    4,592  

2019

    2,207  

2020

    583  

Total

    14,212  

Less: imputed interest

    (528

)

Net capital lease obligation

  $ 13,684  

 

 

Note 10.    Developments in Accounting Pronouncements

 

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09 Revenue Recognition, replacing guidance currently codified in Subtopic 605-10 Revenue Recognition-Overall with various SEC Staff Accounting Bulletins providing interpretive guidance. The guidance establishes a new five step principle-based framework in an effort to significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets. In August 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date. ASU No. 2015-14 defers the effective date of the guidance in ASU No. 2014-09 to annual and interim reporting periods beginning after December 15, 2017. We are in the process of evaluating this guidance and our method of adoption.

 

In April 2015, the FASB issued ASU No. 2015-03 Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The update requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability instead of being presented as an asset. Debt disclosures will include the face amount of the debt liability and the effective interest rate. The update requires retrospective application and represents a change in accounting principle. The update is effective for fiscal years beginning after December 15, 2015. ASU No. 2015-03 has not had a material impact on our consolidated financial statements.

 

In July 2015, the FASB issued ASU 2015-11 Inventory (Topic 330): Simplifying the Measurement of Inventory. The update provides for inventory to be measured at the lower of cost and net realizable value, and is effective for the fiscal years beginning after December 15, 2016. We are currently evaluating the potential impact of implementing this update on our consolidated financial statements.

 

 
17

Table Of Contents
 

 

In November 2015, the FASB issued ASU No. 2015-17 Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic 740). The update is designed to reduce complexity of reporting deferred income tax liabilities and assets into current and non-current amounts in a statement of financial position. The FASB has proposed the presentation of deferred income taxes, changes to deferred tax liabilities and assets be classified as non-current in the statement of financial position. The update is effective for fiscal years beginning after December 15, 2016. ASU No. 2015-17 is not expected to have a material impact on our consolidated financial statements. Our current deferred tax asset balance at September 30, 2016 was $8.2 million.

 

In January 2016, the FASB issued ASU 2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The guidance requires entities to measure equity investments that are not accounted for under the equity method at fair value, with any changes in fair value included in current earnings, and updates certain disclosure requirements. The update is effective for fiscal years beginning after December 15, 2017. We are currently evaluating the impact of implementing this update on our consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). The update modifies the classification criteria and requires lessees to recognize the assets and liabilities on the balance sheet for most leases. The update is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact of implementing this update on our consolidated financial statements.

 

In March 2016, the FASB issued ASU 2016-09 Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The update simplifies the accounting for stock-based compensation, including income tax consequences and balance sheet and cash flow statement classification of awards. The update is effective for fiscal years beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the potential impact of implementing this update on our consolidated financial statements.

 

In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The update provides guidance on classification for cash receipts and payments related to eight specific issues. The update is effective for fiscal years beginning after December 15, 2018, and interim periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the potential impact of implementing this update on our consolidated financial statements.

 

Note 11.    Derivative Instruments

 

Foreign Currency

 

Our wholly-owned subsidiary owning the Casa Berardi mine is a U.S. dollar ("USD")-functional entity which routinely incurs expenses denominated in Canadian dollars ("CAD"), and such expenses expose us to exchange rate fluctuations between the USD and CAD. In April 2016, we initiated a program to manage our exposure to fluctuations in the exchange rate between the USD and CAD and the impact on our future operating costs denominated in CAD. The program utilizes forward contracts to sell CAD, and each contract is designated as a cash flow hedge. As of September 30, 2016, we have 70 forward contracts outstanding to sell CAD$175 million having a notional amount of US$135.9 million. These contracts represent between 20% and 44% of our forecasted cash operating costs at Casa Berardi from 2017 through 2020 and have USD-to-CAD exchange rates ranging between 1.2787 and 1.3031. Our risk management policy allows for up to 75% of our planned cost exposure for five years into the future to be hedged under such programs, and for potential additional programs to manage other foreign currency-related exposure areas.

 

 
18

Table Of Contents
 

 

As of September 30, 2016, we recorded the following balances for the fair value of the contracts:

 

 

a non-current asset of $48 thousand, which is included in other non-current assets;

 

a current liability of $0.7 million, which is included in other current liabilities, and

 

a non-current liability of $0.9 million, which is included in other non-current liabilities.

 

Net unrealized losses of approximately $1.6 million related to the effective portion of the hedges were included in accumulated other comprehensive income as of September 30, 2016, and are net of related deferred taxes. Unrealized gains and losses will be transferred from accumulated other comprehensive loss to current earnings as the underlying operating expenses are recognized. We estimate approximately $0.7 million in net unrealized losses included in accumulated other comprehensive income as of September 30, 2016 would be reclassified to current earnings in the next twelve months. Net unrealized losses of less than $1 thousand related to ineffectiveness of the hedges were included in current earnings for the nine months ended September 30, 2016.

 

Metals Prices

 

At times, we may use commodity forward sales commitments, commodity swap contracts and commodity put and call option contracts to manage our exposure to fluctuation in the prices of certain metals which we produce. Contract positions are designed to ensure that we will receive a defined minimum price for certain quantities of our production, thereby partially offsetting our exposure to fluctuations in the market. Our risk management policy allows for up to 75% of our planned metals price exposure for five years into the future, with certain other limitations, to be hedged under such programs. These instruments do, however, expose us to (i) credit risk in the event of non-performance by counterparties for contracts in which the contract price exceeds the spot price of a commodity and (ii) price risk to the extent that the spot price exceeds the contract price for quantities of our production covered under contract positions.

 

We are currently using financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments between the time of shipment and final settlement. In addition, at times we use financially-settled forward contracts to manage the exposure to changes in prices of zinc and lead (but not silver and gold) contained in our forecasted future concentrate shipments; however, there were no open contracts related to this latter program as of September 30, 2016 or December 31, 2015. These contracts are not designated as hedges and are marked-to-market through earnings each period.  At September 30, 2016, we recorded a current liability of $0.6 million on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in other current liabilities. The liability balance at September 30, 2016 was net of $0.8 million for contracts in an asset position.

 

We recognized a $15.9 million net loss during the first nine months of 2016 on the contracts utilized to manage exposure to prices of metals in our concentrate shipments, which is included in sales of products.  The net loss recognized on the contracts offsets gains related to price adjustments on our provisional concentrate sales due to changes to silver, gold, lead and zinc prices between the time of sale and final settlement.

 

The following tables summarize the quantities of metals committed under forward sales contracts at September 30, 2016 and December 31, 2015:

 

 

September 30, 2016

 

Ounces/pounds under contract (in 000's)

   

Average price per ounce/pound

 
   

Silver

   

Gold

   

Zinc

   

Lead

   

Silver

   

Gold

   

Zinc

   

Lead

 
   

(ounces)

   

(ounces)

   

(pounds)

   

(pounds)

   

(ounces)

   

(ounces)

   

(pounds)

   

(pounds)

 

Contracts on provisional sales

                                                               

2016 settlements

    1,124       2       25,739       13,117     $ 19.65     $ 1,338     $ 1.03     $ 0.92  

2017 settlements

                3,858           $     $     $ 1.08     $  

 

 

 
19

Table Of Contents
 

 

December 31, 2015

 

Ounces/pounds under contract (in 000's)

   

Average price per ounce/pound

 
   

Silver

   

Gold

   

Zinc

   

Lead

   

Silver

   

Gold

   

Zinc

   

Lead

 
   

(ounces)

   

(ounces)

   

(pounds)

   

(pounds)

   

(ounces)

   

(ounces)

   

(pounds)

   

(pounds)

 

Contracts on provisional sales

                                                               

2016 settlements

    1,368       5       23,755       8,433     $ 14.12     $ 1,076     $ 0.71     $ 0.77  

 

Our concentrate sales are based on a provisional sales price containing an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the concentrates at the forward price at the time of the sale. The embedded derivative, which does not qualify for hedge accounting, is adjusted to market through earnings each period prior to final settlement.

 

Credit-risk-related Contingent Features

 

We have agreements with certain counterparties that contain a provision whereby we could be declared in default on our derivative obligations if repayment of the underlying indebtedness is accelerated by the lender due to our default on the indebtedness. As of September 30, 2016, we have not posted any collateral related to these agreements. The fair value of derivatives in a net liability position, which includes accrued interest but excludes any adjustment for nonperformance risk, related to these agreements was $3.2 million as of September 30, 2016. If we had breached any of these provisions at September 30, 2016, we could have been required to settle our obligations under the agreements at their termination value of $3.2 million.

 

Note 12.    Fair Value Measurement

 

The table below sets forth our assets and liabilities that were accounted for at fair value on a recurring basis and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category (in thousands).

 

 

Description

 

Balance at

September 30, 2016

   

Balance at

December 31, 2015

 

Input

Hierarchy Level

Assets:

                 

Cash and cash equivalents:

                 

Money market funds and other bank deposits

  $ 167,844     $ 155,209  

Level 1

Available for sale securities:

                 

Debt securities - municipal and corporate bonds

    24,534        

Level 2

Equity securities – mining industry

    6,356       1,515  

Level 1

Trade accounts receivable:

                 

Receivables from provisional concentrate sales

    26,622       13,490  

Level 2

Restricted cash balances:

                 

Certificates of deposit and other bank deposits

    6,084       999  

Level 1

Derivative contracts:

                 

Foreign exchange contracts

    48        

Level 2

Total assets

  $ 231,488     $ 171,213    
                   

Liabilities:

                 

Derivative contracts:

                 

Foreign exchange contracts

  $ 1,604     $  

Level 2

Metal forward contracts

    1,004       283  

Level 2

Total liabilities

  $ 2,608     $ 283    

 

 

 
20

Table Of Contents
 

 

Cash and cash equivalents consist primarily of money market funds and are valued at cost, which approximates fair value, and a small portion consists of municipal bonds having maturities of less than 90 days, which are recorded at fair value.

 

Current available-for-sale securities consist of municipal and corporate bonds having maturities of more than 90 days, which are recorded at fair value.

 

Current and non-current restricted cash balances consist primarily of certificates of deposit, U.S. Treasury securities, and other deposits and are valued at cost, which approximates fair value.

 

Our non-current available for sale securities consist of marketable equity securities of companies in the mining industry which are valued using quoted market prices for each security.

 

Trade accounts receivable include amounts due to us for shipments of concentrates, doré and precipitate sold to customers.  Revenues and the corresponding accounts receivable for sales of metals products are recorded when title and risk of loss transfer to the customer (generally at the time of loading on truck or ship).  Sales of concentrates are recorded using estimated forward prices for the anticipated month of settlement applied to our estimate of payable metal quantities contained in each shipment.  Sales are recorded net of estimated treatment and refining charges, which are also impacted by changes in metals prices and quantities of contained metals.  We estimate the prices at which sales of our concentrates will be settled due to the time elapsed between shipment and final settlement with the customer.  Receivables for previously recorded concentrate sales are adjusted to reflect estimated forward metals prices at the end of each period until final settlement by the customer.  We obtain the forward metals prices used each period from a pricing service.  Changes in metal prices between shipment and final settlement result in changes to revenues previously recorded upon shipment.  The embedded derivative contained in our concentrate sales is adjusted to fair market value through earnings each period prior to final settlement.

 

We use financially-settled forward contracts to manage exposure to changes in the exchange rate between the U.S. Dollar and Canadian Dollar, and the impact on Canadian Dollar-denominated operating costs incurred at our Casa Berardi Unit (see Note 11 for more information). These contracts qualify for hedge accounting, with unrealized gains and losses related to the effective portion of the contracts included in accumulated other comprehensive loss, and unrealized gains and losses related to the ineffective portion of the contracts included in earnings each period. The fair value of each contract represents the present value of the difference between the forward exchange rate for the contract settlement period as of the measurement date and the contract settlement exchange rate.

 

We use financially-settled forward contracts to manage the exposure to changes in prices of silver, gold, zinc and lead contained in our concentrate shipments that have not reached final settlement.  We also use financially-settled forward contracts to manage the exposure to changes in prices of zinc and lead contained in our forecasted future concentrate shipments (see Note 11 for more information).  These contracts do not qualify for hedge accounting, and are marked-to-market through earnings each period.  The fair value of each contract represents the present value of the difference between the forward metal price for the contract settlement period as of the measurement date and the contract settlement metal price.

 

Our Senior Notes issued in April 2013, which were recorded at their carrying value of $500.7 million, net of unamortized initial purchaser discount at September 30, 2016, had a fair value of $518.3 million at September 30, 2016. Quoted market prices, which we consider to be Level 1 inputs, are utilized to estimate fair values of the Senior Notes. See Note 9 for more information.

 

 
21

Table Of Contents
 

 

Note 13.    Acquisitions

 

Acquisition of Mines Management

 

On September 13, 2016, we completed the acquisition of Mines Management and its subsidiaries through the merger of a wholly owned subsidiary of ours with and into Mines Management, pursuant to which we acquired all of the issued and outstanding common stock of Mines Management for total consideration of $52.1 million. The acquired entities hold 100% ownership of the Montanore project in Northwest Montana, a significant undeveloped silver and copper deposit which we believe provides long-term production growth potential if permitted and developed. Montanore is approximately 10 miles away from our Rock Creek project acquired through our acquisition of Revett Mining Company, Inc. in June 2015. The consideration was comprised of $4.0 million in cash used to fund Mines Management's operating activities prior to completion of the merger and for settlement of outstanding warrants to purchase shares of Mines Management's common stock, and $48.1 million in Hecla common stock. In the merger, each outstanding common share of Mines Management was exchanged for 0.2218 of a share of our common stock. Mines Management had 36,498,625 outstanding common shares and outstanding options to purchase 963,079 shares of Mines Management common stock, resulting in 8,309,006 new shares of Hecla stock issued as consideration. The value of Hecla stock issued as consideration was based upon the closing price at the time of consummation of $5.79 per share.

 

The following summarizes the preliminary allocation of purchase price to the fair value of assets acquired and liabilities assumed as of the date of acquisition (in thousands):

 

Consideration:

       

Cash

  $ 4,025  

Hecla stock issued (8,309,006 shares at $5.79 per share)

    48,109  

Total consideration

  $ 52,134  

Fair value of net assets acquired:

       

Assets:

       

Cash

  $ 94  

Property, plants, equipment and mineral interests

    68,476  

Restricted cash

    1,185  

Other assets

    329  

Total assets

    70,084  

Liabilities:

       

Accounts payable and accrued liabilities

    2,357  

Deferred tax liability

    14,469  

Non-current reclamation liability

    1,124  

Total liabilities

    17,950  

Net assets

  $ 52,134  

 

The $68.5 million fair value for "Property, plants, equipment, and mineral interests" is comprised of $0.8 million for plant and equipment, $0.1 million for land, and $67.6 million for mineral interests.

 

The allocation of purchase price above is considered preliminary, as review by management of the valuation methodologies for mineral interests and the related deferred tax liability has not been finalized.

 

In September 2016, we issued 181,048 shares of our common stock for payment of approximately $1.0 million in acquisition-related costs, which are included in Acquisition costs on our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited).

 

 
22

Table Of Contents
 

 

The unaudited pro forma financial information below represents the combined results of our operations as if the acquisition had occurred at the beginning of the periods presented. The unaudited pro forma financial information is presented for informational purposes only and is not indicative of the results of operations that would have occurred if the acquisition had taken place at the beginning of the periods presented, nor is it indicative of future operating results.

 

   

Three Months Ended
September 30,

   

Nine Months Ended
September 30,

 

(in thousands, except per share amounts)

 

2016

   

2015

   

2016

   

2015

 

Sales of products

  $ 179,393     $ 104,941     $ 481,712     $ 328,230  

Net income (loss)

    26,322       (10,934

)

    47,988       (27,799

)

Income (loss) applicable to common shareholders

    26,184       (11,071

)

    47,574       (28,213

)

Basic and diluted income (loss) per common share

    0.07       (0.03

)

    0.12       (0.07

)

 

 

The unaudited pro forma financial information includes adjustments to 1) eliminate acquisition-related costs totaling $3.8 million and $4.2 million for the three- and nine-month periods ended September 30, 2016 which are non-recurring and 2) reflect the issuance of Hecla stock as consideration in the acquisition and for payment of acquisition costs. A net loss by the acquired entities since the acquisition date of $32 thousand is included in our net income reported for the nine-month period ended September 30, 2016.

 

Takeover Bid for Dolly Varden Silver Corporation

 

On June 27, 2016, we announced a takeover bid for all of the outstanding shares of Dolly Varden Silver Corporation ("Dolly Varden") not owned by us and our affiliates for cash of CAD$0.69 per share. Dolly Varden owns 100% of the Dolly Varden historic silver property in northwestern British Columbia, Canada. Our wholly owned subsidiary owns 2,620,291 Dolly Varden shares and warrants to purchase 1,250,000 Dolly Varden shares, representing approximately 19.8% of Dolly Varden's shares outstanding on a partially diluted basis. Based on Dolly Varden's outstanding shares and options and warrants to acquire Dolly Varden shares, and excluding shares and warrants held by us and our affiliates, total consideration would have been approximately CAD$13.6 million. In late July 2016, we withdrew the bid due to the failure of a required condition precedent to its consummation.

 

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 (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 consolidated financial statements set forth elsewhere in this Form 10-Q. Investments in the subsidiaries are accounted for under the equity method. Accordingly, the entries necessary to consolidate Hecla, the Guarantors, and Non-Guarantors 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.

 

 
23

Table Of Contents
 

 

 

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.

 

 
24

Table Of Contents
 

 

Condensed Consolidating Balance Sheets

 

   

As of September 30, 2016

 
   

Parent

   

Guarantors

   

Non-

Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Assets

                                       

Cash and cash equivalents

  $ 109,756     $ 39,255     $ 18,833     $     $ 167,844  

Other current assets

    51,486       58,839       46,082       (14,250

)

    142,157  

Properties, plants, and equipment - net

    2,226       1,255,019       765,864             2,023,109  

Intercompany receivable (payable)

    477,706       (322,988

)

    (325,799

)

    171,081        

Investments in subsidiaries

    1,359,813                   (1,359,813

)

     

Other non-current assets

    1,896       190,705       8,245       (170,277

)

    30,569  

Total assets

  $ 2,002,883     $ 1,220,830     $ 513,225     $ (1,373,259

)

  $ 2,363,679  

Liabilities and Stockholders' Equity

                                       

Current liabilities

  $ (6,626

)

  $ 84,493     $ 57,908     $ (628

)

  $ 135,147  

Long-term debt

    500,666       4,019       2,513             507,198  

Non-current portion of accrued reclamation

          55,512       28,086             83,598  

Non-current deferred tax liability

          15,258       121,973       (12,846

)

    124,385  

Other non-current liabilities

    46,860       4,856       (376

)

    28       51,368  

Shareholders' equity

    1,461,983       1,056,692       303,121       (1,359,813

)

    1,461,983  

Total liabilities and stockholders' equity

  $ 2,002,883     $ 1,220,830     $ 513,225     $ (1,373,259

)

  $ 2,363,679  

 

   

As of December 31, 2015

 
   

Parent

   

Guarantors

   

Non-

Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Assets

                                       

Cash and cash equivalents

  $ 94,167     $ 42,692     $ 18,350     $     $ 155,209  

Other current assets

    15,972       58,453       32,273       7,626       114,324  

Properties, plants, and equipment - net

    2,281       1,147,770       746,760             1,896,811  

Intercompany receivable (payable)

    540,665       (301,291

)

    (332,553

)

    93,179        

Investments in subsidiaries

    1,252,191                   (1,252,191

)

     

Other non-current assets

    2,200       165,080       1,781       (113,480

)

    55,581  

Total assets

  $ 1,907,476     $ 1,112,704     $ 466,611     $ (1,264,866

)

  $ 2,221,925  

Liabilities and Stockholders' Equity

                                       

Current liabilities

  $ 21,087     $ 84,559     $ 30,636     $ (9,198

)

  $ 127,084  

Long-term debt

    499,729       6,128       3,183             509,040  

Non-current portion of accrued reclamation

          45,494       29,055             74,549  

Non-current deferred tax liability

          3,264       119,836       (3,477

)

    119,623  

Other non-current liabilities

    47,734       5,834       (865

)

          52,703  

Stockholders' equity

    1,338,926       967,425       284,766       (1,252,191

)

    1,338,926  

Total liabilities and stockholders' equity

  $ 1,907,476     $ 1,112,704     $ 466,611     $ (1,264,866

)

  $ 2,221,925  

 

 

 
25

Table Of Contents
 

 

Condensed Consolidating Statements of Operations

 

   

Three Months Ended September 30, 2016

 
   

Parent

   

Guarantors

   

Non-

Guarantors

   

Eliminations

   

Consolidated

 
   

(in thousands)

 

Revenues

  $ (4,072

)

  $ 116,016     $ 67,449     $     $ 179,393  

Cost of sales

          (62,376

)

    (31,685

)

          (94,061

)

Depreciation, depletion, amortization

          (15,504

)

    (11,143

)

          (26,647

)

General and administrative

    (5,355

)

    (5,469

)

    (331

)

          (11,155

)

Exploration and pre-development

    (33

)

    (1,343

)

    (3,033

)

          (4,409

)

Gain/(loss) on derivative contracts

    7                         7  

Acquisition costs

    (1,766

)

    1                   (1,765

)

Equity in earnings of subsidiaries

    52,606                   (52,606

)

     

Other (expense) income

    (15,597

)

    1,187       1,211       7,078       (6,121

)

Income (loss) before income taxes

    25,790       32,512       22,468       (45,528

)

    35,242  

(Provision) benefit from income taxes

          (8,994

)

    6,621       (7,080

)

    (9,453

)

Net income (loss)

    25,790       23,518       29,089       (52,608

)

    25,789  

Preferred stock dividends

    (138

)