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8-K - 8-K - HECLA MINING CO/DE/d942732d8k.htm
EX-2.1 - EX-2.1 - HECLA MINING CO/DE/d942732dex21.htm
EX-99.1 - EX-99.1 - HECLA MINING CO/DE/d942732dex991.htm
EX-23.1 - EX-23.1 - HECLA MINING CO/DE/d942732dex231.htm
EX-99.2 - EX-99.2 - HECLA MINING CO/DE/d942732dex992.htm
EX-99.3 - EX-99.3 - HECLA MINING CO/DE/d942732dex993.htm

Exhibit 99.4

PRO FORMA INFORMATION

The following unaudited pro forma condensed combined financial statements give effect to the merger and represent the combined company’s unaudited pro forma condensed combined balance sheet as of March 31, 2015 and unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2015 and the year ended December 31, 2014. The unaudited pro forma condensed combined balance sheet gives effect to the merger as if it had occurred on the date of such balance sheet. The accompanying unaudited pro forma condensed combined statements of operations gives effect to the merger as if it had occurred on January 1, 2014.

For accounting purposes, the transaction will be accounted for using the acquisition method, pursuant to which assets and liabilities are recorded at fair values. The valuation of Hecla’s shares to be given as consideration was based upon an assumed closing price of Hecla’s common stock of $3.00 on June 11, 2015. See Note 2 to these unaudited pro forma condensed combined financial statements for additional information on the estimated purchase consideration and the impact thereon of changes in the per share price of Hecla’s stock.

The unaudited pro forma condensed combined balance sheet and statements of operations should be read in conjunction with the historical financial statements of Hecla, including the notes thereto, included in Hecla’s Annual Report on Form 10-K for the year ended December 31, 2014 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2015, and the historical financial statements of Revett including the notes thereto, which are included elsewhere in this current report.

The unaudited pro forma condensed combined financial statements are not necessarily indicative of the operating results or financial condition that would have been achieved if the merger had been completed on the dates or for the periods presented, nor do they purport to project the results of operations or financial position of the combined entities for any future period or as of any future date. Actual amounts recorded upon consummation of the merger will likely differ from those recorded in the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements do not reflect any special items such as integration costs or operating synergies that may be realized as a result of the merger.

 

1


Hecla Mining Company

Unaudited Pro Forma Condensed Combined Balance Sheet

As of March 31, 2015

(in thousands)

 

    As of March 31, 2015  
    Hecla     Revett     Acquisition
adjustments
        Pro forma
combined
 
                (Notes 2 and 3)            
Assets:          

Cash and cash equivalents

  $ 196,231      $ 722      $ (425   (a)   $ 196,528   

Accounts receivable

    42,798        268        —            43,066   

Inventories

    43,895        3,146        (2,517   (b)     44,524   

Current deferred income taxes

    10,064        —          —            10,064   

Other current assets

    15,337        268        —            15,605   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total current assets

  308,325      4,404      (2,942   309,787   

Non-current investments

  4,334      —        (531 (c)   3,803   

Non-current restricted cash and investments

  883      6,553      (6,553 (d)   883   

Properties, plants, equipment and mineral interests, net

  1,837,173      16,303      5,066    (e)   1,858,542   

Non-current deferred income taxes

  98,544      —        —        98,544   

Other non-current assets

  10,692      731      8,500    (d)   11,423   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total assets

$ 2,259,951    $ 27,991    $ 3,540    $ 2,291,482   
 

 

 

   

 

 

   

 

 

     

 

 

 
Liabilities:

Accounts payable and other current liabilities

$ 76,618    $ 1,168      —      $ 77,786   

Current portion of capital leases and notes payable

  10,289      4,061      —        14,350   

Current portion of accrued reclamation and closure costs

  1,631      —        —        1,631   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total current liabilities

  88,538      5,229      —        93,767   

Accrued reclamation and closure costs

  55,781      4,865      3,635    (d)   64,281   

Deferred tax liabilities

  138,422      —        —        138,422   

Long-term debt and capital leases

  510,381      —        —        510,381   

Other non-current liabilities

  47,504      —        —        47,504   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities

  840,626      10,094      3,635      854,355   
 

 

 

   

 

 

   

 

 

     

 

 

 
Shareholders’ Equity:

Series B preferred stock

  39      —        —        39   

Common stock

  93,106      393      1,563    (f)   94,669   
  (393 (g)

Capital surplus

  1,495,893      91,937      17,195    (f)   1,512,566   
  (91,937 (g)
  (522 (c)

Accumulated deficit

  (129,817   (74,433   74,433    (g)   (130,242
  (425 (a)

Accumulated other comprehensive loss, net

  (30,095   —        (9 (c)   (30,104

Less treasury stock

  (9,801   —        —        (9,801
 

 

 

   

 

 

   

 

 

     

 

 

 

Total shareholders’ equity

  1,419,325      17,897      (95   1,437,127   
 

 

 

   

 

 

   

 

 

     

 

 

 

Total liabilities and shareholders’ equity

$ 2,259,951    $ 27,991    $ 3,540    $ 2,291,482   
 

 

 

   

 

 

   

 

 

     

 

 

 

See accompanying notes to these unaudited pro forma condensed combined financial statements.

 

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Hecla Mining Company

Unaudited Pro Forma Condensed Combined Statement of Operations

For the three months ended March 31, 2015

(dollars and shares in thousands, except per share amounts)

 

    Three months ended March 31, 2015  
    Hecla     Revett     Acquisition
adjustments
    Pro forma
combined
 
                (Notes 2, 3 and 4)        

Sales of products

  $ 119,092      $ 2,268      $ —        $ 121,360   
 

 

 

   

 

 

   

 

 

   

 

 

 

Cost of sales and other direct production costs

  73,965      2,662      —        76,627   

Depreciation, depletion and amortization

  25,254      41      —        25,295   
 

 

 

   

 

 

   

 

 

   

 

 

 
  99,219      2,703      —        101,922   
 

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit (loss)

  19,873      (435   —        19,438   
 

 

 

   

 

 

   

 

 

   

 

 

 

General and administrative

  8,720      965      —        9,685   

Exploration

  4,615      183      —        4,798   

Pre-developemnt

  521      —        —        521   

Impairment of property, plant and equipment

  —        —        —        —     

Provision for closed operations and environmental matters

  467      —        —        467   

Other operating expenses

  628      898      —        1,526   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

  4,922      (2,481   —        2,441   
 

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

Net foreign exchange gain

  12,274      2      —        12,276   

Gain on derivative contracts

  5,792      —        —        5,792   

Interest expense, net of amounts capitalized

  (6,192   (45   —        (6,237

Other income (expense)

  (2,805   (2   —        (2,807
 

 

 

   

 

 

   

 

 

   

 

 

 
  9,069      (45   —        9,024   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income taxes

  13,991      (2,526   —        11,465   

Income tax benefit

  (1,439   —        —        (1,439
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

  12,552      (2,526   —        10,026   

Preferred stock dividends

  (138   —        —        (138
 

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) applicable to common shareholders

$ 12,414    $ (2,526 $ —      $ 9,888   
 

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted income (loss) per common share after preferred stock dividends

$ 0.03    $ 0.03   

Weighted average number of common shares outstanding—basic

  368,798      6,253 (f)    375,051   

Weighted average number of common shares outstanding—diluted

  369,691      6,253 (f)    375,944   

See accompanying notes to these unaudited pro forma condensed combined financial statements.

 

3


Hecla Mining Company

Unaudited Pro Forma Condensed Combined Statement of Operations

For the year ended December 31, 2014

(dollars and shares in thousands, except per share amounts)

 

    Year ended December 31, 2014  
    Hecla     Revett     Acquisition
adjustments
    Pro forma
combined
 
                (Notes 2, 3 and 4)        

Sales of products

  $ 500,781      $ 6        —        $ 500,787   
 

 

 

   

 

 

   

 

 

   

 

 

 

Cost of sales and other direct production costs

  304,446      —        —        304,446   

Depreciation, depletion and amortization

  111,134      110      —        111,244   
 

 

 

   

 

 

   

 

 

   

 

 

 
  415,580      110      —        415,690   
 

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit (loss)

  85,201      (104   —        85,097   
 

 

 

   

 

 

   

 

 

   

 

 

 

General and administrative

  31,538      3,519      —        35,057   

Exploration

  17,698      951      —        18,649   

Pre-developemnt

  1,969      —        —        1,969   

Impairment of property, plant and equipment

  —        54,724 (h)    54,724   

Provision for closed operations and environmental matters

  10,098      —        —        10,098   

Other operating expenses

  2,270      4,282      —        6,552   
 

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

  21,628      (63,580   —        (41,952
 

 

 

   

 

 

   

 

 

   

 

 

 

Other income (expense):

Net foreign exchange gain

  11,535      —        —        11,535   

Gain on derivative contracts

  9,134      —        —        9,134   

Interest expense, net of amounts capitalized

  (26,775   (118   —        (26,893

Other income (expense)

  (2,938   1,775      —        (1,163
 

 

 

   

 

 

   

 

 

   

 

 

 
  (9,044   1,657      —        (7,387
 

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

  12,584      (61,923   —        (49,339

Income tax benefit (provision)

  5,240      —        —        5,240   
 

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  17,824      (61,923   —        (44,099

Preferred stock dividends

  (552   —        —        (552
 

 

 

   

 

 

   

 

 

   

 

 

 

Income applicable to common shareholders

$ 17,272    $ (61,923 $ —      $ (44,651
 

 

 

   

 

 

   

 

 

   

 

 

 

Basic and diluted income per common share after preferred stock dividends

$ 0.05    $ (0.12

Weighted average number of common shares outstanding—basic

  353,442      6,253 (f)    359,695   

Weighted average number of common shares outstanding—diluted

  357,435      6,253 (f)    363,688   

See accompanying notes to these unaudited pro forma condensed combined financial statements.

 

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Notes to Unaudited Pro Forma Condensed Combined Financial Statements

Note 1. Basis of presentation

Hecla Mining Company (“Hecla”) and Revett Mining Company (“Revett”) entered into a merger agreement (“merger” or “acquisition”) pursuant to which Hecla acquired all of the issued and outstanding common shares of Revett (see Note 2 for more information). The merger is accounted for as a business combination. The unaudited pro forma condensed combined financial statements are prepared on that basis, and are presented to give effect to the acquisition of all of the outstanding common shares of Revett by Hecla. The unaudited pro forma condensed combined financial statements represent the combined company’s unaudited pro forma condensed combined balance sheet as of March 31, 2015, and unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2015 and the year ended December 31, 2014. The unaudited pro forma condensed combined balance sheet gives effect to the acquisition as if it occurred on the date of such balance sheet. The unaudited pro forma condensed combined statements of operations give effect to the acquisition as if it occurred on January 1, 2014. Historical information for Hecla and Revett has been derived from historical consolidated financial statements, which were prepared and presented in accordance with United States Generally Accepted Accounting Principles (“GAAP”).

The unaudited pro forma condensed combined financial statements are not necessarily indicative of the operating results or financial condition that would have been achieved if the merger had been completed on the dates or for the periods presented, nor do they purport to project the results of operations or financial position of the combined entities for any future period or as of any future date. Actual amounts recorded upon consummation of the merger will likely differ from those recorded in the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements do not reflect any special items such as integration costs or operating synergies that may be realized as a result of the merger.

The pro forma adjustments and allocations of the estimated consideration transferred are based on preliminary estimates of the fair value of assets to be acquired, liabilities to be assumed, and consideration to be transferred. The final determination of the consideration transferred and the related allocation will be completed after asset and liability valuations are finalized as of the date of completion of the merger. Changes to these adjustments may materially affect both the estimated value of the consideration transferred and the preliminary estimated fair value to the assets and liabilities as presented in the unaudited pro forma condensed combined financial statements.

In preparing the unaudited pro forma condensed combined balance sheet and statements of operations in accordance with GAAP, the following historical information was used:

 

    Revett’s consolidated balance sheet (unaudited) as of March 31, 2015 included in this current report;

 

    Revett’s consolidated statement of operations and comprehensive income (loss) (unaudited) for the three months ended March 31, 2015 included in this current report;

 

    Revett’s consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2014 included in this current report;

 

    Hecla’s condensed consolidated balance sheet (unaudited) as of March 31, 2015 filed on Form 10-Q for the three months ended March 31, 2015;

 

    Hecla’s condensed consolidated statement of operations and comprehensive income (unaudited) for the three months ended March 31, 2015 filed on Form 10-Q for the three months ended March 31, 2015; and

 

    Hecla’s consolidated statement of operations and comprehensive income for the year ended December 31, 2014 filed on Form 10-K for the year ended December 31, 2014.

The unaudited pro forma condensed combined balance sheet and statements of operations should be read in conjunction with the historical financial statements including the notes thereto, as listed above.

 

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Note 2. Summary of the acquisition of Revett

On June 15, 2015, Hecla completed the acquisition of all of the issued and outstanding common shares of Revett. Under the terms of the merger, each holder of Revett common shares will receive 0.1622 of a Hecla share per Revett share. Revett had 38,548,989 shares issued and outstanding common shares as of June 11, 2015, excluding 725,000 shares held by a wholly-owned subsidiary of Hecla which will be cancelled in the merger. For financial accounting purposes, the purchase price allocation is based upon the assumption of Hecla issuing 6,252,646 shares of Hecla common stock for total consideration valued at $18.8 million. The pro forma value of Hecla stock issued as consideration was based upon the closing price at June 11, 2015.

The following represents the preliminary estimated allocation of the consideration transferred as if the merger had occurred on March 31, 2015:

 

     (US$, in thousands)  

Consideration:

  

Hecla stock issued (6.3M shares @ $3.00 per share)

   $ 18,758   
  

 

 

 

Fair value of net assets acquired:

Assets:

Cash

  722   

Receivables

  268   

Inventories

  629   

Property, plant, and equipment and mineral interests

  21,369   

Other assets

  9,499   
  

 

 

 

Total assets

  32,487   
  

 

 

 

Liabilities:

Accounts payable

  524   

Payroll liabilities

  319   

Income taxes payable

  259   

Current portion of notes payable

  4,061   

Other current liabilities

  66   

Accrued reclamation and closure costs

  8,500   
  

 

 

 

Total liabilities

  13,729   
  

 

 

 

Net assets

$ 18,758   
  

 

 

 

The actual value of consideration transferred will be based on the market price of Hecla’s common stock on June 15, 2015, the date the merger was consummated.

Note 3. Effect of the merger on the unaudited pro forma condensed combined balance sheet

The unaudited pro forma condensed combined balance sheet includes the following adjustments:

a) To record payment of estimated acquisition related costs of $0.4 million. The adjustment for the estimated acquisition related costs is not reflected in the pro forma statement of operations, as it is considered to be non-recurring in nature.

b) To adjust Revett’s materials and supplies inventory to reflect its estimated fair value.

c) To record cancelation of 725,000 shares of Revett’s common stock held by a wholly-owned subsidiary of Hecla.

 

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d) To increase the value of the reclamation liability related to the Troy mine to reflect the amount of estimated undiscounted cash flows required to settle the reclamation obligation. The acquisition adjustment also includes an increase to other non-current assets for the estimated value of an insurance policy held by Revett which is anticipated to fund the reclamation obligation at the Troy mine. Also, the $6.6 million restricted cash balance representing collateral provided by Revett as security for the Troy mine reclamation bond has been eliminated, as it is anticipated that this amount will not be recoverable upon utilization of the insurance policy.

e) To recognize the preliminary estimated fair value of Revett’s assets acquired and liabilities assumed in the merger. The adjustment includes the assumption that the allocation of the estimated difference between consideration and the net fair value of assets acquired and liabilities assumed will be recorded to value beyond proven and probable reserves, with no amount allocated to goodwill. This allocation is preliminary and is subject to change due to several factors including: (1) detailed valuations of assets and liabilities which have not been completed as of the date of this current report; (2) subsequent changes in the fair values of Revett’s assets and liabilities up to the closing date of the merger; and (3) an assessment of the extent by which the merged company may realize Revett’s deferred tax assets, which have a full valuation allowance in Revett’s historical financial statements. These changes will not be known until after completion of the detailed valuation of assets and liabilities assumed.

f) To record issuance of 6,252,646 shares of Hecla common stock to Revett shareholders, valued at $3.00 per share or $18.8 million, as discussed above.

g) To eliminate Revett’s equity accounts.

Note 4. The effect of the merger on the unaudited pro forma condensed combined statement of operations

The following is information on the unaudited pro forma condensed combined statement of operations:

h) Revett’s consolidated statement of operations and comprehensive loss for the year ended December 31, 2014 included a $54.7 million expense for impairment of property, plant, and equipment. Revett recognized the impairment as of December 31, 2014, with the estimated fair value of long-lived assets based on the merger agreement between Hecla and Revett. Although the impairment is not eliminated through an adjustment to the unaudited pro forma condensed combined statement of operations, it is a nonrecurring item and is not reflective of the operating results for the combined entities after consummation of the merger.

 

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