<PAGE> 1
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 March 31, 1999
Commission file number 1-8491
------------------------------------------
HECLA MINING COMPANY
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 82-0126240
- --------------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6500 Mineral Drive
Coeur d'Alene, Idaho 83815-8788
- ---------------------------------------- -------------------
(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,
and (2) has been subject to such filing requirements for at least
the past 90 days. Yes XX . No .
---- ----
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding April 30, 1999
- ---------------------------- ----------------------------
Common stock, par value 55,392,862 shares
$0.25 per share
<PAGE> 2
HECLA MINING COMPANY and SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
I N D E X*
PAGE
PART I. - Financial Information
Item l - Consolidated Balance Sheets - March 31,
1999 and December 31, 1998 3
- Consolidated Statements of Operations
and Comprehensive Income (Loss) - Three
Months Ended March 31, 1999 and 1998 4
- Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1999 and 1998 5
- Notes to Consolidated Financial Statements 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 17
PART II. - Other Information
Item 1 - Legal Proceedings 37
Item 6 - Exhibits and Reports on Form 8-K 42
*Items omitted are not applicable.
-2-
<PAGE> 3
PART I - FINANCIAL INFORMATION
HECLA MINING COMPANY and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,470 $ 2,480
Accounts and notes receivable 34,157 25,919
Income tax refund receivable 19 1,087
Inventories 21,787 22,757
Other current assets 879 1,251
---------- ----------
Total current assets 60,312 53,494
Investments 2,453 3,406
Restricted investments 6,327 6,331
Properties, plants and equipment, net 172,609 178,168
Other noncurrent assets 10,924 10,663
---------- ----------
Total assets $ 252,625 $ 252,062
========== ==========
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses $ 13,005 $ 12,172
Accrued payroll and related benefits 3,233 2,852
Preferred stock dividends payable 2,012 2,012
Accrued taxes 999 772
Accrued reclamation and closure costs 6,106 6,537
---------- ----------
Total current liabilities 25,355 24,345
Deferred income taxes 300 300
Long-term debt 45,919 42,923
Accrued reclamation and closure costs 22,066 23,216
Other noncurrent liabilities 9,793 9,542
---------- ----------
Total liabilities 103,433 100,326
---------- ----------
SHAREHOLDERS' EQUITY
Preferred stock, $0.25 par value,
authorized 5,000,000 shares, issued
and outstanding - 2,300,000 shares,
liquidation preference $117,012 575 575
Common stock, $0.25 par value,
authorized 100,000,000 shares,
issued 1999 - 55,454,972,
issued 1998 - 55,166,728 13,864 13,792
Capital surplus 375,395 374,017
Accumulated deficit (234,004) (230,493)
Accumulated other comprehensive loss (5,252) (5,269)
Less stock held by grantor trust;
1999 - 132,289 shares, 1998 - 0 shares (500) - -
Less treasury stock, at cost;
1999 and 1998 - 62,110 common shares (886) (886)
---------- ----------
Total shareholders' equity 149,192 151,736
---------- ----------
Total liabilities and shareholders' equity $ 252,625 $ 252,062
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
-3-
<PAGE> 4
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
(Dollars and shares in thousands, except for per-share amounts)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Sales of products $ 41,658 $ 40,129
--------- ---------
Cost of sales and other direct production costs 31,346 30,527
Depreciation, depletion and amortization 6,052 5,126
--------- ---------
37,398 35,653
--------- ---------
Gross profit 4,260 4,476
--------- ---------
Other operating expenses:
General and administrative 2,011 2,141
Exploration 1,162 816
Depreciation and amortization 92 94
Provision for closed operations and
environmental matters 267 59
--------- ---------
3,532 3,110
--------- ---------
Income from operations 728 1,366
--------- ---------
Other income (expense):
Interest and other income 696 2,534
Miscellaneous expense (549) (557)
Gain on investments - - 86
Interest expense:
Interest costs (924) (740)
Less amount capitalized - - 271
--------- ---------
(777) 1,594
--------- ---------
Income (loss) before income taxes and cumulative effect
of change in accounting principle (49) 2,960
Income tax provision (65) (113)
--------- ---------
Income (loss) before cumulative effect of change in
accounting principle (114) 2,847
Cumulative effect of change in accounting principle, net
of tax (1,385) - -
--------- ---------
Net income (loss) (1,499) 2,847
Preferred stock dividends (2,012) (2,012)
--------- ---------
Income (loss) applicable to common shareholders (3,511) 835
--------- ---------
Other comprehensive income (loss), net of tax:
Unrealized holding gains (losses) on securities 17 (19)
--------- ---------
Other comprehensive income (loss) 17 (19)
--------- ---------
Comprehensive income (loss) applicable to
common shareholders $ (3,494) $ 816
========= =========
Basic and diluted income (loss) per common share before
cumulative effect of change in accounting principle $ (0.04) $ 0.02
Cumulative effect of change in accounting principle (0.02) - -
--------- ---------
Basic and diluted income (loss) per common share $ (0.06) $ 0.02
========= =========
Cash dividends per common share $ - - $ - -
========= =========
Weighted average number of common
shares outstanding 55,201 55,095
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
-4-
<PAGE> 5
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended
-------------------------------
March 31, 1999 March 31, 1998
-------------- --------------
<S> <C> <C>
Operating activities:
Net income (loss) $ (1,499) $ 2,847
Noncash elements included in net income (loss):
Depreciation, depletion and amortization 6,144 5,220
Cumulative effect of change in accounting principle 1,385 - -
Gain on disposition of properties,
plants and equipment (87) (1,737)
Gain on sale of investments - - (86)
Provision for reclamation and closure costs 168 133
Change in:
Accounts and notes receivable (8,238) (12,328)
Income tax refund receivable 1,068 223
Inventories 1,072 (961)
Other current and noncurrent assets 166 (2,493)
Accounts payable and accrued expenses 833 344
Accrued payroll and related benefits 381 674
Accrued taxes 227 381
Accrued reclamation and closure costs and
other noncurrent liabilities (998) 106
--------- ---------
Net cash provided (used) by operating activities 622 (7,677)
--------- ---------
Investing activities:
Additions to properties, plants and equipment (2,158) (4,239)
Proceeds from disposition of properties,
plants and equipment 203 2,676
Proceeds from sale of investments - - 86
Decrease (increase) in restricted investments 4 (708)
Purchase of investments and change in cash
surrender value of life insurance, net 45 (221)
Other, net (85) (223)
--------- ---------
Net cash used by investing activities (1,991) (2,629)
--------- ---------
Financing activities:
Common stock issuance, net of offering costs 450 2
Preferred stock dividends (2,012) (2,012)
Borrowings (repayments) on cash surrender
value of life insurance 925 (99)
Borrowings on long-term debt 8,500 19,500
Repayments on long-term debt (5,504) (5,502)
--------- ---------
Net cash provided by financing activities 2,359 11,889
--------- ---------
Net increase in cash and cash equivalents 990 1,583
Cash and cash equivalents at beginning of period 2,480 3,794
--------- ---------
Cash and cash equivalents at end of period $ 3,470 $ 5,377
========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
-5-
<PAGE> 6
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The notes to the consolidated financial statements as
of December 31, 1998, as set forth in the Company's
1998 Annual Report on Form 10-K, substantially apply to
these interim consolidated financial statements and are
not repeated here. For additional information, please
refer to such notes.
Note 2. The financial information given in the accompanying
unaudited interim consolidated financial statements
reflects all adjustments which, in the opinion of
management, are necessary to a fair statement of the
results for the interim periods reported. All such
adjustments are of a normal recurring nature. All
financial statements presented herein are unaudited.
However, the balance sheet as of December 31, 1998, was
derived from the audited consolidated balance sheet
referenced in Note 1 above. Certain consolidated
financial statement amounts have been reclassified to
conform to the 1999 presentation. These
reclassifications had no effect on the net income
(loss) or accumulated deficit as previously reported.
Note 3. The components of the income tax provision for the
three months ended March 31, 1999 and 1998 are as
follows (in thousands):
1999 1998
------ ------
Current:
State income taxes $ 68 $ 113
Foreign income taxes 4 - -
Federal income taxes (7) - -
------ ------
Total $ 65 $ 113
====== ======
The Company's income tax provision for the first
three months of 1999 and 1998 varies from the amount
that would have been provided by applying the statutory
rate to the income or loss before income taxes
primarily due to the availability of net operating
losses.
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<PAGE> 7
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Note 4. Inventories consist of the following (in thousands):
March 31, Dec. 31,
1999 1998
-------- --------
Concentrates, bullion, metals
in transit and other products $ 3,398 $ 3,879
Industrial mineral products 9,740 10,240
Materials and supplies 8,649 8,638
-------- --------
$ 21,787 $ 22,757
======== ========
Note 5. In April 1998, Statement of Position 98-5 (SOP 98-5),
"Reporting on the Costs of Start-up Activities" was
issued. SOP 98-5 requires costs of start-up activities
and organizational costs to be expensed as incurred, as
well as the recognition of a cumulative effect of a
change in accounting principle for retroactive
application of the standard. Hecla adopted SOP 98-5
effective as of January 1, 1999. The impact of this
change in accounting principle related to unamortized
start-up costs associated with Hecla's 29.7% ownership
interest in the Greens Creek mine. SOP 98-5 requires
that these costs be expensed as incurred whereas the
Company's previous policy was to capitalize these
costs. The $1.4 million cumulative effect of this
change in accounting principle is included in the
consolidated statement of operations for the three
months ended March 31, 1999.
Note 6. Contingencies
- Bunker Hill Superfund Site
In 1994, the Company, as a potentially responsible
party under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended
(CERCLA or Superfund), entered into a Consent Decree
with the Environmental Protection Agency (EPA) and the
State of Idaho, concerning environmental remediation
obligations at the Bunker Hill Superfund Site (Bunker
Hill Site) located at Kellogg, Idaho. The Consent
Decree settled the Company's response-cost liability
under Superfund at the Bunker Hill Site. As of
March 31, 1999, the Company has estimated and accrued
an allowance for liability for remedial activity costs
at the Bunker Hill Site of $5.0 million. These
estimated expenditures are anticipated to be made over
the next three to five years. Although the Company
-7-
<PAGE> 8
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
believes the allowance is adequate based upon current
estimates of aggregate costs, the Company plans to
reassess its obligations under the Consent Decree as
new information is developed during 1999. Depending on
the results of the reassessment, it is reasonably
possible that the Company's estimate of its obligations
may change in the near term.
Coeur d'Alene River Basin Natural Resource Damage
Claims
- Coeur d'Alene Tribe Claims
In July 1991, the Coeur d'Alene Indian Tribe (the
Tribe) brought a lawsuit, under CERCLA, in Idaho
Federal District Court against the Company and a number
of other mining companies asserting claims for damages
to natural resources downstream from the Bunker Hill
Site over which the Tribe alleges some ownership or
control. The Company answered the Tribe's complaint
denying liability for natural resource damages. In
October 1996, following a court imposed four-year stay
of the proceeding, the Tribe's natural resource damage
litigation was consolidated with the United States
Natural Resources Damage (NRD) litigation described
below for discovery and other limited pretrial
purposes.
- U.S. Government Claims
In March 1996, the United States filed a lawsuit
in Idaho Federal District Court against certain mining
companies that conducted historic mining operations in
the Silver Valley of northern Idaho, including the
Company. The lawsuit asserts claims under CERCLA and
the Clean Water Act and seeks recovery for alleged
damages to or loss of natural resources located in the
Coeur d'Alene River Basin (the Basin) in northern Idaho
over which the United States asserts to be the trustee
under CERCLA. The lawsuit asserts that the defendants'
historic mining activity resulted in releases of
hazardous substances and damaged natural resources
within the Basin. The suit also seeks declaratory
relief that the Company and other defendants are
jointly and severally liable for response costs under
CERCLA for historic mining impacts in the Basin outside
the Bunker Hill Site. The Company answered the
-8-
<PAGE> 9
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
complaint in May 1996, denying liability to the
United States under CERCLA and the Clean Water Act and
asserted a counterclaim against the United States for
the federal government's involvement in mining
activities in the Basin which contributed to the
releases and damages alleged by the United States. The
Company believes it also has a number of defenses to
the United States' claims.
On September 30, 1998, the Federal District Court
granted the Company's summary judgment motion with
respect to the applicable statute of limitations and
dismissed the United States' NRD claim due to the
failure of the EPA to comply with federal law and EPA
regulations in expanding the National Priority List
site boundaries to include the entire Coeur d'Alene
River/Lake Coeur d'Alene Basin which would have the
effect of extending the statute of limitations. The
United States has appealed the Federal District Court's
decision to the Ninth Circuit Court of Appeals. The
case is proceeding through discovery. On March 31,
1999, the Court issued a case management order setting
trial in this case for November 2000. Summary judgment
motions related to 1) the extent of Federal Trusteeship
over Natural Resources in the Basin and 2) a
constitutional challenge to the retroactive application
of Superfund liability at the site are currently
pending before the Federal District Court.
In May 1998, the EPA announced that it had commenced a
remedial investigation/feasibility study under CERCLA
for the entire Basin, including Lake Coeur d'Alene, in
support of its response cost claims asserted in its
March 1996 lawsuit.
- State of Idaho Claims
In March 1996, the Company entered into an agreement
(the Idaho Agreement) with the State of Idaho (the
State) pursuant to which the Company agreed to continue
certain financial contributions to environmental
cleanup work in the Basin being undertaken by a State
trustees group. In return, the State agreed not to sue
the Company for damage to natural resources for which
the State is a trustee for a period of five years, to
pursue settlement with the Company of the State's NRD
claims and to grant the Company credit against any such
-9-
<PAGE> 10
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
State claims for all expenditures made under the
Idaho Agreement and certain other Company contributions
and expenditures for environmental cleanup in the
Basin.
At March 31, 1999, the Company's accrual for
remediation activity in the Basin, not including the
Bunker Hill Site, totaled approximately $0.3 million.
These expenditures are anticipated to be expended
during 1999. Depending on the results of the
aforementioned lawsuits, it is reasonably possible that
the Company's estimate of its obligation may change in
the near or longer term.
Insurance Coverage Litigation
In 1991, the Company initiated litigation in the
Idaho State District Court in Kootenai County, Idaho,
against a number of insurance companies which provided
comprehensive general liability insurance coverage to
the Company and its predecessors. The Company believes
that the insurance companies have a duty to defend and
indemnify the Company under their policies of insurance
for all liabilities and claims asserted against the
Company by the EPA and the Tribe under CERCLA related
to the Bunker Hill Site and the Basin in northern
Idaho. In 1992, the Idaho State District Court ruled
that the primary insurance companies had a duty to
defend the Company in the Tribe's lawsuit. During 1995
and 1996, the Company entered into settlement
agreements with a number of the insurance carriers
named in the litigation. The Company has received a
total of approximately $7.2 million under the terms of
the settlement agreements. Thirty percent of these
settlements were paid to the EPA to reimburse the U.S.
Government for past costs under the Bunker Hill Site
Consent Decree. Litigation is still pending against
one insurer with trial continued until the underlying
environmental claims against the Company are resolved
or settled. The remaining insurer is providing the
Company with a partial defense in all Basin
environmental litigation. As of March 31, 1999, the
Company had not reduced its accrual for reclamation and
closure costs to reflect the receipt of any anticipated
insurance proceeds.
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<PAGE> 11
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Other Claims
On October 22, 1998, the Company and certain
affiliates were served with a lawsuit filed in Superior
Court of Kern County, California. The complaint
pertains to the Cactus Gold mine located near Mojave,
California. Seventy-four plaintiffs allege that during
the period from 1960 through the present, the named
defendants' operations and activities caused personal
injury and property damage to the plaintiffs. The
plaintiffs seek monetary damages of $29.6 billion for
general negligence, nuisance, trespass, statutory
violations, ultra-hazardous activities, strict
liability, and other torts. The Company has provided
notice and demand for defense/indemnity to its
insurance carriers providing liability insurance
coverage for the Cactus Gold mine operation. The
primary carrier has denied coverage. The Company is
currently investigating the advisability of seeking
court enforcement of the carrier's coverage obligations
under the policies. The Company has retained outside
counsel to defend the Company. Based on a prior health
risk assessment completed for the operation as required
by the State of California and a preliminary review
with outside legal counsel of the allegations in the
complaint as it relates to the historical operations of
the Company and its predecessors at the Cactus Gold
mine, the Company believes the allegations are without
merit.
In 1997, K-T Clay terminated shipments of 1% of
annual ball clay production, sold to animal feed
producers, when the Food and Drug Administration
determined trace elements of dioxin were present in
poultry. Dioxin is inherently present in ball clays
generally. The Company believes $11.0 million of
insurance coverage is available for approximately $8.0
million in claims to date. Although the outcome cannot
be assured, the Company believes that there will be no
material adverse effect on the Company's results of
operations, financial condition or cash flows from this
matter.
The Company is subject to other legal proceedings
and claims which have arisen in the ordinary course of
its business and have not been finally adjudicated.
Although there can be no assurance as to the ultimate
disposition of these matters and the proceedings
disclosed above, it is the opinion of the Company's
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<PAGE> 12
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
management that the outcome of these matters will
not have a material adverse effect on the financial
condition of the Company. However, it is possible that
these matters could have a material effect on quarterly
or annual operating results, when they are resolved, in
future periods.
Note 7. At March 31, 1999, there was $36.0 million outstanding
under the Company's $55.0 million Bank Agreement
classified as long-term debt. On February 25, 1999,
Hecla received a commitment from the lead bank under
the Bank Agreement to amend the Bank Agreement. Under
the revised terms of the Bank Agreement, the amount
available to borrow will remain at $55.0 million,
subject to certain limitations. The Company was in
compliance with all restrictive covenants pursuant to
the commitment as of March 31, 1999. In addition to
the borrowings under the Bank Agreement, the Company
also has outstanding $9.8 million aggregate principal
amount of tax-exempt, solid waste disposal revenue
bonds as of March 31, 1999. The amount available to
borrow under the Bank Agreement is reduced by the $9.8
million amount of tax-exempt, solid waste bonds. At
March 31, 1999, the Company had the ability to borrow
an additional $9.2 million under the Bank Agreement.
Note 8. The following table presents a reconciliation of the
numerators (net income (loss)) and denominators
(shares) used in the basic and diluted income (loss)
per common share computations. Also shown is the
effect that has been given to preferred dividends in
arriving at income (loss) applicable to common
shareholders for the three months ended March 31, 1999
and 1998 in computing basic and diluted income (loss)
per common share (dollars and shares in thousands,
except per share amounts):
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<PAGE> 13
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
<TABLE>
<CAPTION>
1999 1998
--------------------------- ---------------------------
Net Per-Share Net Per-Share
Loss Shares Amount Income Shares Amount
-------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) before preferred
stock dividends $(1,499) $ 2,847
Less: Preferred
stock dividends (2,012) (2,012)
------- -------
Basic income (loss) applicable
to common shareholders (3,511) 55,201 $(0.06) 835 55,095 $ 0.02
Effect of dilutive
securities - - - - - - - - - - - -
------- ------ ------ ------- ------ ------
Diluted income (loss) applicable
to common shareholders $(3,511) 55,201 $(0.06) $ 835 55,095 $ 0.02
======== ====== ====== ======= ====== ======
</TABLE>
These calculations of diluted earnings per share
for each of the three months ended March 31, 1999 and
1998 exclude the effects of $115,000,000 of convertible
preferred stock as such conversion would be
antidilutive. These calculations also exclude the
effects of 1,653,000 and 970,500 shares of common stock
issuable upon exercise of stock options as of March 31,
1999 and 1998, respectively, as their exercise would be
antidilutive.
Note 9. Common Stock Offering
In March 1999, the Company issued 155,955 shares
of its common stock realizing proceeds of approximately
$450,000, net of issuance costs of approximately
$50,000. The shares were sold under the Company's
existing Registration Statement on Form S-3 which
provides for the issuance of up to $100.0 million of
equity and debt securities. The Company plans to use
the net proceeds for general corporate purposes.
Note 10. The Company has a nonqualified Deferred Compensation
Plan which permits eligible officers, directors, and
key employees to defer a portion of their compensation.
In November 1998, the Company amended the plan to
permit participants to irrevocably transfer all or a
portion of their deferred compensation amounts into a
Company common stock account to be held in trust until
distribution. As of March 31, 1999, a total of 132,289
shares of the Company's common stock are held in the
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<PAGE> 14
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
grantor trust. Shares held in the grantor trust
are valued at fair value at the time of issuance, are
recorded in the contra equity account "Stock held by
grantor trust," and are legally outstanding for
registration purposes and dividend payments. The
shares held in the grantor trust are considered
outstanding for purposes of calculating earnings (loss)
per share.
Note 11. During the first quarter of 1999, the Company sold call
options for 1,350,000 ounces of silver through
December 31, 1999, at an average strike price of $5.33.
The Company received a premium of $460,000 for the sale
of the call options. These contracts are designed to
provide some price protection, to the extent of the
amount of the premium received, in the event of a
decline in the price of silver. They also limit the
maximum price the Company may receive for a portion of
the Company's silver production to the strike price of
the call options plus the premium received. The
options are considered to be held for trading purposes,
and as such the premiums received are deferred until
the expiration of the contract or exercise of the
option contract by the counterparties. Due to the
trading nature of the option contracts, the Company
recognizes, in revenue, a mark to market adjustment at
the end of each reporting period for the change in the
fair value of the remaining outstanding option
contracts. During the first quarter of 1999, the
Company recognized $253,000 of revenue from these call
options based upon a mark to market adjustment as of
March 31, 1999.
Note 12. The Company is organized and managed primarily on the
basis of the principal products being produced from its
ten operating units. Two of the operating units have
been aggregated into the Metals-Gold segment, two of the
operating units have been aggregated into the Metals-
Silver segment, and six operating units have been
combined to form the Industrial Minerals segment. General
corporate activities not associated with operating units
as well as idle properties are presented as Other.
-14-
<PAGE> 15
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
The tables below present information about reportable
segments as of and for the three months ended March 31
(in thousands):
1999 1998
--------- ---------
Net sales to unaffiliated customers:
Metals-Gold $ 6,391 $ 9,255
Metals-Silver 12,569 10,122
Industrial Minerals 22,698 20,752
--------- ---------
$ 41,658 $ 40,129
========= =========
1999 1998
--------- ---------
Income (loss) from operations:
Metals-Gold $ (412) $ 1,357
Metals-Silver 875 299
Industrial Minerals 2,635 2,004
Other (2,370) (2,294)
--------- ---------
$ 728 $ 1,366
========= =========
The table below presents identifiable assets by reportable
segment as of March 31, 1999, and December 31, 1998
(in thousands):
1999 1998
--------- ---------
Identifiable assets:
Metals-Gold $ 22,010 $ 23,808
Metals-Silver 125,811 127,499
Industrial Minerals 79,426 71,593
Other 25,378 29,162
--------- ---------
$ 252,625 $ 252,062
========= =========
Note 13. In June 1998, Statement of Financial Accounting
Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities" was
issued. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain
derivative instruments embedded in other contracts
(collectively referred to as derivatives), and for
hedging activities. It requires that an entity
recognizes all derivatives as either assets or
-15-
<PAGE> 16
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
liabilities in the statement of financial position
and measures those instruments at fair value. SFAS 133
is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999, however, earlier
application of all of the provisions of this statement
is encouraged as of the beginning of any fiscal
quarter. The Company is presently evaluating the
effect the adoption of this standard will have on the
Company's financial condition, results of operations,
and cash flows.
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<PAGE> 17
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
Hecla Mining Company (Hecla) is primarily involved
in the exploration, development, mining, and processing
of gold, silver, lead, zinc, and industrial minerals.
Hecla's gold and silver segment revenues and
profitability are strongly influenced by world prices
of gold, silver, lead, and zinc, which fluctuate widely
and are affected by numerous factors beyond Hecla's
control, including inflation and worldwide forces of
supply and demand for precious and base metals. The
aggregate effect of these factors is not possible to
accurately predict. In the current metals price
environment, Hecla's industrial minerals segment has
been a significant contributor to overall revenues,
including 54% of total revenue during the first quarter
of 1999. In the following descriptions, where there
are changes that are attributable to more than one
factor, Hecla presents each attribute in descending
order relative to the attribute's importance to the
overall change.
Except for the historical information contained in
this Management's Discussion and Analysis of Financial
Condition and Results of Operations, the matters
discussed below are forward-looking statements that
involve risks and uncertainties, including:
- the timely development of existing properties
and reserves and future projects;
- the impact of metal prices and metal
production volatility;
- changing market conditions and the regulatory
environment; and
- the other risks detailed from time to time in
Hecla's Form 10-K and Form 10-Qs filed with
the Securities and Exchange Commission (see
also "Investment Considerations" of Part I,
Item 1 of Hecla's 1998 Annual Report on Form
10-K).
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<PAGE> 18
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
As a result of the above factors and potentially
others, actual results may differ materially from those
projected, forecasted or implied. These forward-
looking statements represent Hecla's judgment as of the
date of this filing. Hecla disclaims, however, any
intent or obligation to update these forward-looking
statements as circumstances may change or develop.
On April 1, 1999, Hecla entered into an agreement
in principle to acquire the assets of Monarch Resources
Limited (Monarch). Monarch's primary asset is its 100%
owned La Camorra gold mine and surrounding exploration
concession in Venezuela. The La Camorra property is
located 300 kilometers southeast of Puerto Ordaz in the
El Dorado District in Bolivar State. La Camorra is an
underground mine that produced approximately 51,000
ounces of gold in 1998 at a grade of 0.44 ounce per
ton. The La Camorra operations exploit two shear zone-
hosted quartz veins that are estimated to contain more
than 600,000 ounces of gold resource. Hecla's
agreement in principle provides Hecla the exclusive
right, for a limited period, to purchase the assets of
Monarch for $28.0 million, comprising $15.0 million
cash and $13.0 million of Hecla common shares. In order
to fund the $15.0 million cash requirement, Hecla is
planning to issue equity for a portion of the cash
requirement and to utilize project financing for the
residual cash requirement. In addition, Monarch will
receive a royalty payment for future production from
the purchased assets that exceed the current reserves.
The agreement in principle is subject to satisfactory
completion of due diligence, Hecla board of directors'
approval and the execution of a definitive purchase
agreement, which if executed would be subject to
regulatory and Monarch shareholders' approval. Hecla
has completed preliminary due diligence and has until
May 10, 1999, to complete due diligence review and
execute a definitive purchase agreement with Monarch.
There can be no assurance that an actual purchase of
the assets of Monarch will be completed.
During the first quarter of 1999, mining operations
at the Lucky Friday mine were suspended for 14 days
following a groundfall that damaged the #2 shaft at
the Lucky Friday mine. The #2 shaft is the mine's
secondary escapeway and is not used for daily ore
production activities. The temporary suspension of
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<PAGE> 19
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
operations did not materially impact the operating
results from the Lucky Friday during the first quarter
of 1999.
During the first quarter of 1999, Hecla produced
approximately 29,000 ounces of gold compared to
approximately 36,000 ounces of gold production in the
first quarter of 1998. The following table displays
the actual gold production (in ounces) by operation for
the three months ended March 31, 1999 and 1998,
projected gold production for the year ending December
31, 1999, and actual gold production for the year ended
December 31, 1998:
Actual Actual Projected Actual
Mar. 31, Mar. 31, Dec. 31, Dec. 31,
Operation 1999 1998 1999 1998
- --------- -------- -------- ------------- --------
Rosebud 16,000 17,000 52,000-54,000 65,000
La Choya (1) 6,000 13,000 10,000 40,000
Greens Creek 7,000 4,000 20,000-22,000 18,000
Other sources -- 2,000 1,000 4,000
-------- -------- ------------- --------
Totals 29,000 36,000 83,000-87,000 127,000
======== ======== ============= ========
(1) Mining at La Choya was completed in December
1998. Gold production in 1999 is from residual
recoveries from the heap leach pads.
In the first quarter of 1999, Hecla produced
approximately 1,774,000 ounces of silver compared to
1998 first quarter silver production of 1,530,000
ounces. The following table displays the actual silver
production (in ounces) by operation for the three
months ended March 31, 1999 and 1998, projected silver
production for the year ending December 31, 1999, and
actual silver production for the year ended
December 31, 1998 (in thousands):
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<PAGE> 20
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Actual Actual Projected Actual
Mar. 31, Mar. 31, Dec. 31, Dec. 31,
Operation 1999 1998 1999 1998
- --------- -------- -------- ------------- --------
Lucky Friday 1,021 836 4,400-4,600 4,137
Greens Creek 699 631 2,600-2,800 2,824
Rosebud 53 62 180-190 278
Other sources 1 1 2 6
-------- -------- ----------- --------
Totals 1,774 1,530 7,182-7,592 7,245
======== ======== =========== ========
In 1998, Hecla shipped approximately 1,005,000 tons
of product from the Kentucky-Tennesee Clay (K-T
clay) group, including ball clay, kaolin, and feldspar.
Hecla's shipments of industrial minerals are expected
to increase in 1999 to approximately 1,120,000 tons.
During the first quarter of 1999, Hecla shipped
approximately 23,000 tons of specialty aggregates from
its MWCA-Colorado Aggregate division, and approximately
231,000 cubic yards of landscape material from its MWCA-
Mountain West Products division. In order to provide
funds for possible metals and industrial minerals
expansion, as well as to reduce indebtedness, Hecla has
decided to attempt to sell MWCA in 1999, although there
can be no assurance that Hecla will be successful.
RESULTS OF OPERATIONS
Hecla recorded a loss before the cumulative effect
of a change in accounting principle of approximately
$0.1 million, or $0.00 per common share, in the first
three months of 1999 compared to net income of
approximately $2.8 million, or $0.05 per common share,
in the same period of 1998. After recognizing a $1.4
million charge from an accounting change to write off
unamortized start-up costs associated with the Greens
Creek mine, and after $2.0 million in dividends to
holders of the Company's Series B Cumulative
Convertible Preferred Stock, Hecla's loss applicable to
common shareholders for the first quarter of 1999 was
approximately $3.5 million, or $0.06 per common share,
compared to income of $0.8 million, or $0.02 per common
share, in the comparable 1998 period. The change in
income (loss) applicable to common shareholders during
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<PAGE> 21
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
1999 was attributable to a variety of factors, the
most significant which are discussed below.
Interest and other income decreased approximately
$1.8 million, from $2.5 million in the 1998 period to
$0.7 million in the 1999 period. The decrease in 1999
was principally the result of a 1998 gain of $1.8
million on sale of land located near Hecla's corporate
headquarters in Coeur d'Alene, Idaho.
The cumulative effect of change in accounting principle
totaled $1.4 million in 1999, due to the write off
of unamortized start-up costs relating to Hecla's 29.7%
ownership interest in the Greens Creek mine. The
adjustment was the result of application of Statement
of Position No. 98-5, "Accounting for Start-up
Activities."
Depreciation, depletion, and amortization increased
$0.9 million, or 18%, from the first quarter of 1998 to
the first quarter of 1999 principally due to:
- increased depreciation at the La Choya mine
($0.6 million), the result of depreciating
costs associated with the La Choya pit
expansion completed in 1998;
- increased depreciation at the Greens Creek mine
($0.3 million) due to increased production
in the 1999 period;
- increased depreciation at the Lucky Friday mine
($0.2 million) due to increased production in
the 1999 period; and
- decreased depreciation at the Rosebud mine ($0.1
million) resulting from lower gold production in
the 1999 period.
Cost of sales and other direct production costs
increased approximately $0.8 million, or 3%, from the
first three months of 1998 to the comparable 1999
period primarily due to:
- increased cost of sales at the Lucky Friday mine
($1.8 million) due to increased production and
shipments from the Lucky Friday expansion area;
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<PAGE> 22
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
- increased cost of sales at the industrial
minerals segment ($1.3 million) associated with
increased sales of $1.9 million;
- decreased cost of sales at the Greens Creek mine
($0.4 million) principally due to the timing of
concentrate shipments;
- elimination of cost of sales at the American
Girl mine ($0.4 million) due to final gold sales
in 1998; and
- decreased cost of sales at the La Choya mine
($1.5 million) due to completion of mining in
December 1998.
Cost of sales and other direct production costs as
a percentage of sales from products decreased from 76%
in the first quarter of 1998 to 75% in the comparable
1999 period. The slight improvement was principally a
result of improved margins in the silver segment.
Interest expense, net of amounts capitalized
increased $0.5 million, or 97% in the first quarter of
1999 as compared to the first quarter of 1998. The
$0.5 million increase was the result of decreased
capitalized interest of $0.3 million, associated with
the Lucky Friday expansion project in 1998, and
increased interest expense under Hecla's bank loan
($0.2 million), as a result of higher borrowings in the
1999 period.
Exploration expense increased $0.3 million, or
42%, during the first quarter of 1999 as compared to
the first quarter of 1998 principally due to increased
expenditures at the Cacique property in Chile ($0.4
million), and increased expenditures in Mexico ($0.2
million), partly offset by decreased expenditures at
other South American targets ($0.2 million), and other
decreases ($0.1 million).
Hecla's provision for closed operations and
environmental matters increased $0.2 million, from $0.1
million in the first quarter of 1998 to $0.3 million in
the 1999 period. The increase resulted principally
from expenditures for technical studies and legal costs
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<PAGE> 23
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
associated with the Coeur d'Alene River Basin area.
For further information on the Coeur d'Alene River
Basin area, see Item 3, "Legal Proceedings" of this
Form 10-Q.
Sales of products increased by approximately $1.5
million, or 4%, in the first three months of 1999 as
compared to the same period in 1998 primarily due to:
- increased sales totaling approximately $2.4
million from silver operations primarily as a
result of increased production and sales;
- increased sales totaling approximately $1.9
million from Hecla's industrial minerals segment
principally the result of increased shipments at
both the K-T Clay group and the MWCA group; and
- decreased sales of $2.9 million from gold
operations principally a result of completion
of mining operations at the La Choya mine in
December 1998, although residual gold production
from the La Choya heap leach pads continues.
The following table compares the average metal prices
for the first quarter of 1999 with the comparable
1998 period:
Metal 1999 1998 $ Change % Change
------------------ ------- ------- ---------- ----------
Gold-Realized ($/oz.) $ 299 $ 299 $ - - - -%
Gold-London Final ($/oz.) 287 294 (7) (2)
Silver-Handy & Harman ($/oz.) 5.30 6.24 (0.94) (15)
Lead-LME Cash (cents/pound) 0.229 0.243 (0.014) (6)
Zinc-LME Cash (cents/pound) 0.450 0.482 (0.032) (7)
Cash operating, and total cash cost per gold ounce
decreased from $160 and $171 for the first quarter of
1998 to $156 and $169 for the first quarter of 1999,
respectively. The decreases in the cash operating and
total cash cost per gold ounce were primarily
attributable to a greater share of 1999 production
coming from the lower cost Rosebud mine. Total
production costs per gold ounce increased from $225 per
ounce in 1998 to $269 per ounce in 1999. The increase
in the total production cost per gold ounce was
attributable to increased depreciation charges
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<PAGE> 24
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
associated with the La Choya pit expansion that was
completed in 1998.
Cash operating, total cash, and total production
cost per silver ounce decreased from $4.47, $4.47 and
$5.98 in the first quarter of 1998 to $3.70, $3.70, and
$5.27 in the first quarter of 1999, respectively. The
decreases in the cost per silver ounce are due
primarily to positive impacts of increased by-product
production, as well as increased silver production.
Gold, lead, and zinc are by-products of Hecla's silver
production, the revenues from which are netted against
production costs in the calculation of production cost
per ounce of silver.
FINANCIAL CONDITION AND LIQUIDITY
A substantial portion of Hecla's revenue is
derived from the sale of products, the prices of which
are affected by numerous factors beyond Hecla's
control. Prices may change dramatically in short
periods of time and such changes have a significant
effect on revenues, profits and liquidity of Hecla.
Hecla is subject to many of the same inflationary
pressures as the U.S. economy in general. Hecla
continues to implement cost-cutting measures in an
effort to reduce per unit production costs. Management
believes, however, that Hecla may not be able to
continue to offset the impact of inflation over the
long term through cost reductions alone. However, the
market prices for products produced by Hecla have a
much greater impact than inflation on revenues and
profitability. Moreover, the discovery, development
and acquisition of mineral properties are in many
instances unpredictable events. Future metals prices,
the success of exploration programs, changes in legal
and regulatory requirements, and other property
transactions can have a significant impact on the need
for capital.
The variability of metals prices require that
Hecla, in assessing the impact of prices on
recoverability of its metals segment assets, exercise
judgment as to whether price changes are temporary or
are likely to persist. Hecla performs a comprehensive
evaluation of the recoverability of its assets on a
periodic basis. This evaluation includes a review of
estimated future net cash flows against the carrying
value of Hecla's
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<PAGE> 25
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
assets. Moreover, a review is made on a quarterly
basis to assess the impact of significant changes in
market conditions and other factors. Asset write-downs
may occur if Hecla determines that the carrying values
attributed to individual assets are not recoverable
given reasonable expectations for future production and
market conditions.
At March 31, 1999, assets totaled approximately
$252.6 million and shareholders' equity totaled
approximately $149.2 million. Cash and cash
equivalents increased by $1.0 million to $3.5 million
at March 31, 1999 from $2.5 million at the end of 1998.
During the first three months of 1999, approximately
$2.4 million of cash was provided by financing
activities. The major sources of cash were borrowings
of long-term debt of $8.5 million, borrowings
against the cash surrender value of life insurance
of $0.9 million, and proceeds from the issuance
of common stock of $0.5 million. These sources
were partially offset by uses of cash, including
repayments of long-term debt of $5.5 million, and
payment of preferred dividends of $2.0 million.
Operating activities provided approximately $0.6
million of cash during the first three months of 1999.
The primary sources of cash were from (1) the silver
and gold segment; (2) cash provided from an income tax
refund ($1.1 million); (3) decreased inventories ($1.1
million); and (4) increased accounts payable and
accrued expenses ($0.8 million). The primary uses of
cash were (1) increases, totaling $8.2 million, in
accounts and notes receivable principally due to
seasonal sales at MWCA, increased sales at the K-T Clay
group and timing of shipments and cash receipts at
Greens Creek; and (2) cash required for reclamation and
other noncurrent liabilities of $1.0 million.
Principal noncash charges included depreciation,
depletion, and amortization ($6.1 million), the
cumulative effect of change in accounting principle for
start-up costs ($1.4 million), and provision for
reclamation and closure costs ($0.1 million).
Hecla's investing activities used $2.0 million of
cash during the first three months of 1999. The most
significant use of cash was additions to properties,
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<PAGE> 26
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
plants, and equipment totaling $2.2 million, including
significant additions at the Noche Buena project
($1.0 million), Greens Creek mine ($0.7 million),
industrial minerals segment ($0.3 million), and other
additions ($0.2 million). This use of cash was partly
offset by proceeds from disposition of properties,
plants, and equipment during the first three months
of 1998 totaling approximately $0.2 million.
Due to declines in the prices of metals that Hecla
produces, including gold, silver, lead, and zinc, Hecla
has developed and implemented plans to generate and
preserve cash during the current low metals price
environment. Hecla's 1999 plans include marketing for
sale its MWCA subsidiary and certain other assets. The
Company has also implemented certain cost cutting
measures to reduce operating cash costs in 1999.
Without improvements in the prices of metals, Hecla
anticipates that its history of losses applicable to
common shareholders will continue. There can be no
assurance that Hecla will be successful in its efforts
to sell the MWCA subsidiary and other assets, or in its
implementation of additional cost cutting measures.
Hecla estimates that minimum capital expenditures
to be incurred during the remainder of 1999, excluding
any additional development expenditures following a
possible board of directors approval of the Noche Buena
project (discussed below) or any possible capital
expenditures associated with assets acquired from
Monarch Resources Limited (Monarch) in the event the
contemplated acquisition of Monarch is completed
(discussed below), will be approximately $5.0 million.
These capital expenditures consist primarily of:
- Greens Creek (29.7%) $2.9 million
- Industrial minerals segment $1.0 million
- Noche Buena project $0.7 million
- Rosebud (50%) $0.2 million
- Lucky Friday $0.2 million
These planned capital expenditures will depend, in
large part, on Hecla's ability to obtain the required
funds from operating activities, amounts available
under its Bank Agreement and the possible issuance of
additional equity. There can be no assurance that
actual capital expenditures will be as projected based
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<PAGE> 27
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
upon the uncertainties associated with the estimates
for capital projects, uncertainties associated with
possible development projects, and Hecla' ability
to generate adequate funding for the projected capital
expenditures.
Hecla's estimate of its capital expenditure
requirements assumes, with respect to the Greens Creek
and Rosebud properties, that Hecla's joint venture
partners will not default with respect to their portion
of development costs and capital expenditures.
During the first quarter of 1999, Hecla continued
its feasibility study on the Noche Buena gold project
in Mexico. Hecla completed fill-in drilling to 35-
meter centers on the core of the deposit as well as
step out drilling to expand the deposit. Additional
metallurgical testing was also completed during the
first quarter. Hecla plans to update Hecla's board of
directors on the progress of the Noche Buena project at
its May 1999 board meeting. A decision on whether to
further develop the Noche Buena project is expected
later in 1999. Based upon uncertainties associated
with development projects and Hecla's ability to
provide funding, there can be no assurance that Hecla
will develop the Noche Buena project.
On April 1, 1999, Hecla entered into an agreement
in principle to acquire the assets of Monarch Resources
Limited (Monarch). Monarch's primary asset is its 100%
owned La Camorra gold mine and surrounding exploration
concession in Venezuela. The La Camorra property is
located 300 kilometers southeast of Puerto Ordaz in the
El Dorado District in Bolivar State. La Camorra is an
underground mine that produced approximately 51,000
ounces of gold in 1998 at a grade of 0.44 ounce per
ton. The La Camorra operations exploit two shear zone-
hosted quartz veins that are estimated to contain more
than 600,000 ounces of gold resource. Hecla's
agreement in principle provides Hecla the exclusive
right, for a limited period, to purchase the assets of
Monarch for $28.0 million, comprising $15.0 million
cash and $13.0 million of Hecla common shares. In order
to fund the $15.0 million cash requirement, Hecla is
planning to issue equity for a portion of the cash
requirement and to utilize project financing for the
residual cash requirement. In addition, Monarch will
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<PAGE> 28
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
receive a royalty payment for future production
from the purchased assets that exceed the current
reserves. The agreement in principle is subject to
satisfactory completion of due diligence, Hecla board
of directors' approval and the execution of a
definitive purchase agreement, which if executed would
be subject to regulatory and Monarch shareholders'
approval. Hecla has completed preliminary due
diligence and has until May 10, 1999, to complete due
diligence review and execute a definitive purchase
agreement with Monarch. There can be no assurance that
an actual purchase of the assets of Monarch will be
completed.
Pursuant to a Registration Statement filed with
the Securities and Exchange Commission and declared
effective in the third quarter of 1995, Hecla can, at
its option, issue debt securities, common shares,
preferred shares or warrants in an amount not to exceed
$100.0 million in the aggregate. During the first
quarter of 1999, Hecla issued 155,955 shares of its
common stock realizing net proceeds of approximately
$0.5 million. The shares were sold under the above-
described Registration Statement. To date, Hecla has
issued $48.9 million of shares of Hecla's common stock
under the Registration Statement.
On February 25, 1999, Hecla received a commitment
from the lead bank under Hecla's Bank Agreement to
amend the Bank Agreement. Under the revised terms of
the Bank Agreement, the amount available to borrow will
remain up to $55.0 million, subject to certain
limitations. At March 31, 1999, there was $36.0 million
outstanding under the Bank Agreement classified as long-
term debt. Hecla was in compliance with all restrictive
covenants pursuant to the commitment as of March 31,
1999. In addition to the borrowings under the Bank
Agreement, Hecla has outstanding $9.8 million aggregate
principal amount of tax-exempt, solid waste disposal
revenue bonds as of March 31, 1999. The amount
available to borrow under the Bank Agreement is reduced
by the $9.8 million amount of tax-exempt, solid waste
disposal bonds. At March 31, 1999, Hecla had the
ability to borrow an additional $9.2 million under the
Bank Agreement.
Exploration expenditures for the remainder of 1999 are
estimated to be approximately $3.0 to $3.5 million. The
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<PAGE> 29
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Company's exploration strategy is to focus further
exploration at, or in the vicinity of, its currently
owned domestic and foreign properties, as well as grass
roots and advanced stage projects. Accordingly,
domestic exploration expenditures will be incurred
principally at Greens Creek, Rosebud, and Lucky Friday.
Foreign exploration efforts in 1999 will center
primarily on targets in Mexico and South America. There
can be no assurances that actual exploration
expenditures will be as projected.
Hecla's planned environmental and reclamation
expenditures for the remainder of 1999 are expected to
be approximately $9.0 to $10.5 million. These
expenditures will occur at the Grouse Creek mine, the
Bunker Hill Superfund site, the Coeur d'Alene River
Basin, the Cactus mine, the Yellow Pine mine, the
Republic mine, the American Girl mine, and the Durita
property. There can be no assurances that actual
environmental and reclamation expenditures will be as
projected.
Reserves for closure costs, reclamation and
environmental matters totaled $28.2 million at
March 31, 1999. The Company anticipates that
expenditures relating to these reserves will be made
over the next several years. Although the Company
believes the allowance is adequate based on current
estimates of aggregate costs, the Company plans to
reassess its environmental and reclamation obligations,
including obligations under the Bunker Hill Consent
Decree, and at Grouse Creek, Yellow Pine and other idle
properties as new information develops on these sites
during 1999. Depending on the results of the
reassessment, it is reasonably possible that the
Company's estimate of its obligations may change in the
near term.
In the normal course of its business, Hecla uses
forward sales commitments and commodity put and call
option contracts to manage its exposure to fluctuations
in the prices of certain metals which it produces.
Contract positions are generally designed to ensure
that Hecla will receive a defined minimum price for
certain quantities of its production. Gains and
losses, and the related costs paid or premium received,
for contracts which hedge the sales prices of
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<PAGE> 30
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
commodities are deferred and included in income as
part of the hedged transaction. Revenues from these
contracts are recognized at the time contracts are
closed out by delivery of the underlying commodity,
when Hecla matches specific production to a contract,
or upon settlement of the net position in cash. Hecla
is exposed to certain losses, generally the amount by
which the contract price exceeds the spot price of a
commodity, in the event of nonperformance by the
counterparties to these agreements.
At March 31, 1999, Hecla had forward sales
commitments through June 30, 1999 for 3,000 ounces of
gold at an average price of $354 per ounce. The
estimated fair value of these forward sales commitments
was $215,000 as of March 31, 1999. The London Final
gold price at March 31, 1999, was $279. Additionally,
at March 31, 1999, Hecla had forward sales commitments
through December 31, 2000 for 2,350,000 ounces of
silver at an average price of $5.71. If Hecla's
forward silver sales commitments were closed on March
31, 1999, the estimated fair value of these forward
sales commitments was approximately $1,607,000. The
Handy & Harman silver price at March 31, 1999 was
$5.06. The nature and purpose of the forward sales
contracts, however, do not presently expose Hecla to
any significant net loss. All of these contracts were
designated as hedges as of March 31, 1999.
During the first quarter of 1999, Hecla sold call
options for 1,350,000 ounces of silver through
December 31, 1999, at an average strike price of $5.33.
Hecla received a premium of $460,000 for the sale of
these call options. At March 31, 1999, Hecla
recognized $253,000 of revenue from these call options
based upon a mark to market adjustment of the call
options as of March 31, 1999. These contracts are not
designated as hedges and are subject to revenue
recognition based upon the changes in the fair market
value of the contracts. These contracts are designed
to provide some price protection, to the extent of the
amount of the premium received, in the event of a
decline in the price of silver. They also limit the
maximum price that Hecla may receive on a portion of
Hecla's silver production to the strike price of the
call options plus the premium received.
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<PAGE> 31
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Hecla is subject to legal proceedings and claims
which have arisen in the ordinary course of its
business and have not been finally adjudicated (see
Part II. Item 1. Legal Proceedings and Note 6 of Notes
to Consolidated Financial Statements). Although the
ultimate disposition of these matters and various other
pending legal actions and claims is not presently
determinable, it is the opinion of Hecla's management
that the outcome of these matters will not have a
material adverse effect on the financial position of
Hecla and its subsidiaries. However, it is possible
that these matters could have a material effect on
quarterly or annual operating results, when they are
resolved, in the future periods.
YEAR 2000
Hecla utilizes software and related technologies
throughout its business that will be affected by the
"Year 2000 computer problem," which is common to many
corporations and governmental entities. This problem
concerns the inability of information systems,
primarily computer software programs and certain
hardware, to properly recognize and process date-
sensitive information as the Year 2000 approaches.
Absent corrective actions, computer programs that have
date-sensitive software may recognize a date using "00"
as the year 1900 rather than 2000. This could result
in system failures or miscalculations causing
disruptions to various activities and operations.
Hecla has established thirteen teams to identify
and correct Year 2000 compliance issues. Hecla's
primary information systems (IS) with non-compliant
code are expected to be modified or replaced with
systems that are Year 2000 compliant. Hecla is also
evaluating its non-IS applications, primarily systems
embedded in processing and other facilities.
Additionally, the teams are responsible for evaluating
Hecla's critical suppliers and vendors as to their
state of readiness for the Year 2000.
Hecla's primary IS was originally evaluated in
1996, and out of 2,300 programs, 850 were identified
that required modification. All of the 850 programs
have been modified, installed and tested by Hecla's
information services department. End user testing is
-31-
<PAGE> 32
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
complete. The Company's other IS's have been
evaluated and are compliant systems. Remediation and
contingency plans are in progress with completion
scheduled on or before September 30, 1999.
Inventories and assessments of non-IS systems have
been completed by all thirteen teams. Remediation
efforts are currently being implemented, where
necessary. Contingency plans are being developed for
all major components in case of system failures
surrounding the Year 2000.
Hecla is utilizing independent consultants to
oversee the Year 2000 project as well as to perform
certain remediation efforts. In addition, progress on
the Year 2000 project is also monitored by senior
management, and reported to the Board of Directors at
each respective meeting.
Hecla has identified critical suppliers, as well
as other essential service providers, and has surveyed
their Year 2000 compliancy. Based on expected
compliance dates expressed by some of these critical
suppliers and other service providers, additional
follow-up will be required to fully assess their state
of readiness for the Year 2000. These follow-up
activities will occur throughout 1999. For other
suppliers and service providers, risk assessments and
contingency plans, where necessary, will be finalized
by mid-year 1999. Hecla has taken the above-described
steps to address issues surrounding suppliers and
service providers; however, Hecla has no direct ability
to influence other parties' compliance actions. Hecla
believes it has taken the necessary actions to mitigate
the effect of Year 2000 risks, although Hecla is not
able to eliminate the risks or to estimate the ultimate
effect Year 2000 will have on Hecla's operating results
and financial condition.
Contingency plans for Year 2000 related business
interruptions are being developed and will include, but
are not limited to, the development of emergency backup
recovery procedures, replacing automated processes with
manual processes, identification of alternate
suppliers, and increasing raw material supplies and
finished goods inventory prior to December 31, 1999.
All plans are expected to be completed by the end of
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<PAGE> 33
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
the second quarter of 1999, but ongoing monitoring
will continue throughout 1999.
Hecla's most likely potential risk is a temporary
inability to process and ship its products, as well as
the inability of some customers to order and pay on a
timely basis.
Incremental costs directly related to Year 2000
issues are estimated to be $201,000 from 1998 to 2000,
of which approximately $110,000 has been spent as of
March 31, 1999. Hecla's current estimate of expected
costs is based upon work performed to date, and
depending on the results of future work, the cost
estimate may increase. This estimate assumes that
Hecla will not incur significant Year 2000 costs on
behalf of its suppliers or customers.
Hecla's Year 2000 efforts are ongoing and its
overall plan, as well as the consideration of
contingency plans, will continue to evolve as new
information becomes available. While Hecla is taking
steps it believes to be necessary to prevent any major
interruption to its business activities, that will
depend in part, upon the ability of third parties to be
Year 2000 compliant.
NEW ACCOUNTING PRONOUNCEMENT
In June 1998, Statement of Financial Accounting
Standards No. 133 (SFAS 133), "Accounting for
Derivative Instruments and Hedging Activities" was
issued. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including
derivatives embedded in other contracts (collectively
referred to as derivatives), and for hedging
activities. It requires that an entity recognizes all
derivatives as either assets or liabilities in the
statement of financial position and measures those
instruments at fair value. SFAS 133 is effective for
all fiscal quarters of fiscal years beginning after
June 15, 1999, however, earlier application of all of
the provisions of this statement is encouraged as of
the beginning of any fiscal quarter. The Company is
presently evaluating the effect the adoption of this
standard will have on the Company's financial
condition, results of operations, and cash flows.
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<PAGE> 34
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The following discussion about Hecla's risk-
management activities include "forward-looking
statements" that involve risk and uncertainties.
Actual results could differ materially from those
projected in the forward-looking statements.
The following tables summarize the financial
instruments and derivative instruments held by Hecla at
March 31, 1999, which are sensitive to changes in
interest rates and commodity prices. In the normal
course of business, Hecla also faces risks that are
either nonfinancial or nonquantifiable (See "Investment
Considerations" of Part I, Item 1 of Hecla's 1998
Annual Report on Form 10-K).
Interest-Rate Risk Management
At March 31, 1999, Hecla's debt is subject to
changes in market interest rates and is sensitive to
those changes. Hecla currently has no derivative
instruments to offset the risk of interest rate
changes. Hecla may choose to use derivative
instruments, such as interest rate swaps to manage the
risk associated with interest rate changes.
The following table presents principal cash flows
for debt outstanding at March 31, 1999, by maturity
date and the related average interest rate. The
variable rates are estimated based on implied forward
rates in the yield curve at the reporting date.
<TABLE>
<CAPTION>
Outstanding Debt
(in thousands)
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
------- ------- ------- ------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bank credit agreement $ - - $ - - $ - - $18,000 $18,000 $ - - $36,000 $36,000
Average interest rate 6.89% 7.33% 7.55% 7.69% 7.84%
Revenue bonds $ - - $ - - $ - - $ - - $ - - $ 9,800 $ 9,800 $ 9,800
Average interest rate 3.15% 3.38% 3.64% 3.78% 3.91% 4.20%
</TABLE>
-34-
<PAGE> 35
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
Commodity-Price Risk Management
Hedging
Hecla uses commodity forward sales commitments and
commodity put and call option contracts to manage its
exposure to fluctuation in the prices of certain metals
which it produces. Contract positions are designed to
ensure that Hecla will receive a defined minimum price
for certain quantities of its production. Hecla uses
these instruments to reduce risk by offsetting market
exposures. Hecla is exposed to certain losses,
generally the amount by which the contract price
exceeds the spot price of a commodity, in the event of
nonperformance by the counterparties to these
agreements. The instruments held by Hecla are not
leveraged and are held for purposes other than trading.
All of these contracts are designated as hedges at
March 31, 1999.
The following table provides information about the
Company's forward sales commitments at March 31, 1999.
The table presents the notional amount in ounces, the
average forward sales price, and the total-dollar
contract amount expected by the maturity dates, which
occur between April 30, 1999, and December 31, 2000.
Expected Expected
Maturity Maturity Estimated
--------- --------- Fair
1999 2000 Value
--------- --------- ---------
Forward contracts:
Gold sales (ounces) 3,000 - -
Future price (per ounce) $ 354 - -
Contract amount (in $000's) $ 1,061 - - $ 215
Silver sales (ounces) 1,150,000 1,200,000
Future price (per ounce) $ 5.92 $ 5.51
Contract amount (in $000's) $ 6,813 $ 6,606 $ 1,607
Trading
During the first quarter of 1999, Hecla sold call
options for 1,350,000 ounces of silver through
December 31, 1999, at an average strike price of $5.33.
Hecla sold the call options to provide additional cash
flow during the quarter. The sale of the options are
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<PAGE> 36
PART I - FINANCIAL INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
designed to provide some price protection, to the
extent of the amount of the call premium received, in
the event of a decline in the price of silver. These
contracts also limit the maximum that Hecla may receive
on a portion of Hecla's silver production to the strike
price of the options plus the premium received. Hecla
is exposed to price risk on these call options, and the
value of the call options are marked to market with a
gain or loss, if any, recorded in earnings. During the
first quarter of 1999, earnings include a gain of $0.3
million from mark to market adjustments.
The following table provides information about
Hecla's silver call options at March 31, 1999. The
table presents the notional amount in ounces, the
weighted average strike price, and the total-dollar
contract amount expected by the maturity dates, which
occur between April 28, 1999, and December 31, 1999.
Expected
Maturity Estimated
--------- Fair
1999 Value
--------- ---------
Sold call options:
Silver calls (ounces) 1,350,000
Weighted average strike price (per ounce) $ 5.33
Contract amount (in $000's) $ 7,200 $ 253
-36-
<PAGE> 37
PART II - OTHER INFORMATION
HECLA MINING COMPANY and SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
- Bunker Hill Superfund Site
In 1994, the Company, as a potentially responsible
party under the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended
(CERCLA or Superfund), entered into a Consent Decree
with the Environmental Protection Agency (EPA) and the
State of Idaho, concerning environmental remediation
obligations at the Bunker Hill Superfund Site (Bunker
Hill Site) located at Kellogg, Idaho. The Consent
Decree settled the Company's response-cost liability
under Superfund at the Bunker Hill Site. As of
March 31, 1999, the Company has estimated and accrued
an allowance for liability for remedial activity costs
at the Bunker Hill Site of $5.0 million. These
estimated expenditures are anticipated to be made over
the next three to five years. Although the Company
believes the allowance is adequate based upon current
estimates of aggregate costs, the Company plans to
reassess its obligations under the Consent Decree as
new information is developed during 1999. Depending on
the results of the reassessment, it is reasonably
possible that the Company's estimate of its obligations
may change in the near term.
Coeur d'Alene River Basin Natural Resource Damage
Claims
- Coeur d'Alene Tribe Claims
In July 1991, the Coeur d'Alene Indian Tribe (the
Tribe) brought a lawsuit, under CERCLA, in Idaho
Federal District Court against the Company and a number
of other mining companies asserting claims for damages
to natural resources downstream from the Bunker Hill
Site over which the Tribe alleges some ownership or
control. The Company answered the Tribe's complaint
denying liability for natural resource damages. In
October 1996, following a court imposed four-year stay
of the proceeding, the Tribe's natural resource damage
litigation was consolidated with the United States
Natural Resources Damage (NRD) litigation described
below for discovery and other limited pretrial
purposes.
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<PAGE> 38
PART II - OTHER INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
- U.S. Government Claims
In March 1996, the United States filed a lawsuit
in Idaho Federal District Court against certain mining
companies that conducted historic mining operations in
the Silver Valley of northern Idaho, including the
Company. The lawsuit asserts claims under CERCLA and
the Clean Water Act and seeks recovery for alleged
damages to or loss of natural resources located in the
Coeur d'Alene River Basin (the Basin) in northern Idaho
over which the United States asserts to be the trustee
under CERCLA. The lawsuit asserts that the defendants'
historic mining activity resulted in releases of
hazardous substances and damaged natural resources
within the Basin. The suit also seeks declaratory
relief that the Company and other defendants are
jointly and severally liable for response costs under
CERCLA for historic mining impacts in the Basin outside
the Bunker Hill Site. The Company answered the
complaint in May 1996, denying liability to the United
States under CERCLA and the Clean Water Act and
asserted a counterclaim against the United States for
the federal government's involvement in mining
activities in the Basin which contributed to the
releases and damages alleged by the United States. The
Company believes it also has a number of defenses to
the United States' claims.
On September 30, 1998, the Federal District Court
granted the Company's summary judgment motion with
respect to the applicable statute of limitations and
dismissed the United States' NRD claim due to the
failure of the EPA to comply with federal law and EPA
regulations in expanding the National Priority List
site boundaries to include the entire Coeur d'Alene
River/Lake Coeur d'Alene Basin which would have the
effect of extending the statute of limitations. The
United States has appealed the Federal District Court's
decision to the Ninth Circuit Court of Appeals. The
case is proceeding through discovery. On March 31,
1999, the Court issued a case management order setting
trial in this case for November 2000. Summary judgment
motions related to 1) the extent of Federal Trusteeship
over Natural Resources in the Basin and 2) a
constitutional challenge to the retroactive application
of Superfund liability at the site are currently
pending before the Federal District Court.
-38-
<PAGE> 39
PART II - OTHER INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
In May 1998, the EPA announced that it had
commenced a remedial investigation/feasibility study
under CERCLA for the entire Basin, including Lake Coeur
d'Alene, in support of its response cost claims
asserted in its March 1996 lawsuit.
- State of Idaho Claims
In March 1996, the Company entered into an
agreement (the Idaho Agreement) with the State of Idaho
(the State) pursuant to which the Company agreed to
continue certain financial contributions to
environmental cleanup work in the Basin being
undertaken by a State trustees group. In return, the
State agreed not to sue the Company for damage to
natural resources for which the State is a trustee for
a period of five years, to pursue settlement with the
Company of the State's NRD claims and to grant the
Company credit against any such State claims for all
expenditures made under the Idaho Agreement and certain
other Company contributions and expenditures for
environmental cleanup in the Basin.
At March 31, 1999, the Company's accrual for
remediation activity in the Basin, not including the
Bunker Hill Site, totaled approximately $0.3 million.
These expenditures are anticipated to be expended
during 1999. Depending on the results of the
aforementioned lawsuits, it is reasonably possible that
the Company's estimate of its obligation may change in
the near or longer term.
Insurance Coverage Litigation
In 1991, the Company initiated litigation in the
Idaho State District Court in Kootenai County, Idaho,
against a number of insurance companies which provided
comprehensive general liability insurance coverage to
the Company and its predecessors. The Company believes
that the insurance companies have a duty to defend and
indemnify the Company under their policies of insurance
for all liabilities and claims asserted against the
Company by the EPA and the Tribe under CERCLA related
to the Bunker Hill Site and the Basin in northern
Idaho. In 1992, the Idaho State District Court ruled
that the primary insurance companies had a duty to
defend the Company in the Tribe's lawsuit. During 1995
-39-
<PAGE> 40
PART II - OTHER INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
and 1996, the Company entered into settlement
agreements with a number of the insurance carriers
named in the litigation. The Company has received a
total of approximately $7.2 million under the terms of
the settlement agreements. Thirty percent of these
settlements were paid to the EPA to reimburse the U.S.
Government for past costs under the Bunker Hill Site
Consent Decree. Litigation is still pending against
one insurer with trial continued until the underlying
environmental claims against the Company are resolved
or settled. The remaining insurer is providing the
Company with a partial defense in all Basin
environmental litigation. As of March 31, 1999, the
Company had not reduced its accrual for reclamation and
closure costs to reflect the receipt of any anticipated
insurance proceeds.
Other Claims
On October 22, 1998, the Company and certain
affiliates were served with a lawsuit filed in Superior
Court of Kern County, California. The complaint
pertains to the Cactus Gold mine located near Mojave,
California. Seventy-four plaintiffs allege that during
the period from 1960 through the present, the named
defendants' operations and activities caused personal
injury and property damage to the plaintiffs. The
plaintiffs seek monetary damages of $29.6 billion for
general negligence, nuisance, trespass, statutory
violations, ultra-hazardous activities, strict
liability, and other torts. The Company has provided
notice and demand for defense/indemnity to its
insurance carriers providing liability insurance
coverage for the Cactus Gold mine operation. The
primary carrier has denied coverage. The Company is
currently investigating the advisability of seeking
court enforcement of the carrier's coverage obligations
under the policies. The Company has retained outside
counsel to defend the Company. Based on a prior health
risk assessment completed for the operation as required
by the State of California and a preliminary review
with outside legal counsel of the allegations in the
complaint as it relates to the historical operations of
the Company and its predecessors at the Cactus Gold
mine, the Company believes the allegations are without
merit.
-40-
<PAGE> 41
PART II - OTHER INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
In 1997, K-T Clay terminated shipments of 1% of
annual ball clay production, sold to animal feed
producers, when the Food and Drug Administration
determined trace elements of dioxin were present in
poultry. Dioxin is inherently present in ball clays
generally. The Company believes $11.0 million of
insurance coverage is available for approximately $8.0
million in claims to date. Although the outcome cannot
be assured, the Company believes that there will be no
material adverse effect on the Company's results of
operations, financial conditions or cash flows from
this matter.
The Company is subject to other legal proceedings
and claims which have arisen in the ordinary course of
its business and have not been finally adjudicated.
Although there can be no assurance as to the ultimate
disposition of these matters and the proceedings
disclosed above, it is the opinion of the Company's
management, that the outcome of these matters will not
have a material adverse effect on the financial
condition of the Company. However, it is possible that
these matters could have a material effect on quarterly
or annual operating results, when they are resolved, in
future periods.
-41-
<PAGE> 42
PART II - OTHER INFORMATION (Continued)
HECLA MINING COMPANY and SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
12 - Fixed Charge Coverage Ratio Calculation
13 - First Quarter Report to Shareholders for
the quarter ended March 31, 1999, dated
April 29, 1999.
27 - Financial Data Schedule
(b) Reports on Form 8-K
Report on Form 8-K dated March 26, 1999, related
to Form of Agreement to purchase Common Stock by
and between Hecla Mining Company and Purchaser.
(Item 7)
Report on Form 8-K dated April 2, 1999, related to
Hecla's plans to acquire the assets of Monarch
Resources Limited. (Item 7)
Items 2, 3, 4, and 5 of Part II are omitted from this report as
inapplicable.
-42-
<PAGE> 43
HECLA MINING COMPANY and SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HECLA MINING COMPANY
----------------------------------
(Registrant)
Date: May 5, 1999 By /s/ Arthur Brown
------------------------------------
Arthur Brown, Chairman, President
and Chief Executive Officer
Date: May 5, 1999 By /s/ Lewis E. Walde
-----------------------------------
Lewis E. Walde,
Assistant Controller
(Chief Accounting Officer)
-43-
<PAGE> 44
EXHIBIT INDEX
-------------
Exhibit
No. Description
- -------- ----------------------
12 Fixed Charge Coverage Ratio Calculation
13 First Quarter Report to Shareholders for the
quarter ended March 31, 1999, dated April 29,
1999
27 Financial Data Schedule
-44-
<PAGE> 1
Exhibit 12
HECLA MINING COMPANY
FIXED CHARGE COVERAGE RATIO CALCULATION
For the Three Months Ended March 31, 1999 and 1998
(In thousands, except ratios)
Three Months Three Months
1999 1998
------------ ------------
Income (loss) before income taxes
and cumulative effect of change in
accounting principle $ (49) $ 2,960
Add: Fixed Charges 3,267 3,133
Less: Capitalized Interest - - (271)
--------- ---------
Adjusted income before income taxes
and cumulative effect of change in
accounting principle $ 3,218 $ 5,822
========= =========
Fixed charges:
Preferred stock dividends $ 2,012 $ 2,012
Income tax effect on preferred
stock dividends - - 80
Interest portion of rentals 331 301
Interest expense 924 740
--------- ---------
Total fixed charges $ 3,267 $ 3,133
========= =========
Fixed Charge Ratio (a) 1.86
Inadequate coverage $ 49 $ - -
========= =========
Write-downs and other noncash charges:
DD&A(b) (mining activity) $ 6,052 $ 5,126
DD&A(b) (corporate) 92 94
Provision for closed operations
and environmental matters 267 59
--------- ---------
$ 6,411 $ 5,279
========= =========
(a) Earnings for period are inadequate to cover fixed charges.
(b)"DD&A" is an abbreviation for "depreciation, depletion
and amortization.
<PAGE> 1
[HECLA LOGO] Exhibit 13
99-07
HECLA OPERATIONS NEARLY BREAK EVEN IN FIRST QUARTER:
ACCOUNTING CHANGE AND DIVIDEND LEAD TO OVERALL LOSS
For the Period Ended March 31, 1999
For release: April 29, 1999
COEUR D'ALENE, IDAHO -- Hecla Mining Company (HL & HL-PrB:NYSE) today
reported that despite decreases in metals prices from the same period a year
ago, the company's operations nearly broke even during the first quarter of
1999. However, earnings were negatively impacted by a required change in
accounting principle to write off $1.4 million in previously capitalized start-
up costs at the Greens Creek mine. That, along with payment of the quarterly
dividend of $2 million to shareholders of preferred stock, brought the first
quarter loss applicable to common shareholders to $3.5 million, or 6 cents per
share. This compares to income of $0.8 million, or 2 cents per share, in the
first quarter of 1998. Last year's first quarter results included a
nonrecurring $1.8 million gain from the sale of property.
Arthur Brown, Hecla's chairman and chief executive officer, said, "Our
operations are doing well, and we continue to cut our costs of production during
this period of low metals prices. We also have some good prospects for the
future as we consider an acquisition in Venezuela and the possibility of
developing a new gold mine in Mexico."
METALS PRICES
All of Hecla's primary metals suffered a decrease in price during the first
quarter of 1999 compared to the same period a year ago. Gold was the least
affected, with a decrease of $7 per ounce, from an average of $294 per ounce in
the first quarter of 1998 to $287 per ounce in the first quarter of this year.
Silver's average price decreased 15%, from $6.24 per ounce in the first quarter
of 1998 to an average of $5.30 per ounce in the first quarter of this year. The
price of lead and zinc declined 6% and 7%, respectively, from the first quarter
of 1998 to the same period in 1999. In a quarter to quarter comparison, the
price of lead decreased from 24.3 cents per pound to 22.9 cents per pound, while
zinc dropped 3.2 cents to 45 cents per pound in the first quarter of 1999.
PRODUCTION & COSTS
During the first quarter of 1999, Hecla produced 1.8 million ounces of
silver at a total cash cost of $3.70 per ounce, primarily from the Lucky Friday
and Greens Creek mines. Also during the first quarter, the company produced
28,719 ounces of gold at a total cash cost of $169 per ounce.
OPERATIONS
Hecla holds a 29.73% interest in the Greens Creek mine near Juneau, Alaska,
a joint venture with Kennecott Greens Creek Mining Company. The silver mine
produced about 700,000 ounces of silver for Hecla's account at a total cash cost
of $1.87 per ounce and a total production cost of $4.33 per ounce. Last year's
first quarter total cash cost per ounce of silver was $3.55, and the total
production cost was $5.82 per ounce. Mining and milling costs both decreased
compared to the same period a year ago, and production of silver, gold, zinc and
lead all increased.
The Lucky Friday mine recovered from a temporary shutdown for secondary
shaft repair in early February to produce more than one million ounces of silver
at a total cash cost of $4.95 per ounce during the first quarter of
<PAGE> 2
1999, compared to $5.17 per ounce in the first quarter of 1998. The total
production cost per ounce for the first quarter was $5.91 compared to $6.11 in
the same period last year.
The Rosebud gold mine in northern Nevada produced 15,817 ounces of gold for
Hecla's account during the first quarter of this year, at a total cash cost of
$163 per ounce and a total production cost of $260 per ounce. Rosebud is a
50/50 joint venture with Newmont Mining Corp., with Hecla as operator.
Mining at the La Choya Unit in northern Mexico ceased at the end of last
year, but residual gold continues to be recovered from the heaps. La Choya
produced about 5,600 ounces of gold in the first quarter of the year at a total
cash cost of $189 per ounce and a total production cost of $296 per ounce. The
total production cost includes depreciation charges from the pit expansion work
completed in 1998.
Hecla's industrial minerals subsidiaries did well in the first quarter of
1999, increasing both sales and operating income compared to the same period
last year. Kentucky-Tennessee Clay Company, Hecla's clay subsidiary, and MWCA,
Inc., a lawn and garden products supplier, generated $2.7 million in operating
income in the first quarter of the year, compared to $2.1 million in the first
quarter of 1998.
NOCHE BUENA
Hecla continues its feasibility study for the Noche Buena gold project in
Mexico, located just south of the La Choya mine. After extensive fill-in
drilling to 35 meter centers on the core of the deposit, Hecla geologists and
independent consultants are studying assay results to determine the inferred
gold resource on the property. Previous work had indicated more than 250,000
ounces of gold resource. Meanwhile, step-out drilling to expand the deposit
continues to enlarge the resource by uncovering additional gold. On the
metallurgical side, five more column leach tests earlier this year have
confirmed a 76% recovery rate with ore crushed to 1 1/2 inches. The company is
currently involved in first-stage engineering design. Construction costs at
this time are estimated between $15 million and $20 million. The feasibility
study calls for utilizing as much equipment and personnel from the La Choya mine
as possible. At its meeting in May, Hecla's board of directors will be updated
on the progress of the feasibility study. The board is expected to make a
decision on whether to develop the deposit before the end of the third quarter.
EXPLORATION
At the Rosebud gold mine, six underground exploration holes have been
drilled so far in 1999 with positive results. Two of the holes, both located
near the existing deposit, contained a total of 20 narrow, gold ore-grade
intercepts ranging from .25 ounce per ton to 5 ounces per ton. One hole was
drilled about 50 feet below the current North and East ore zones and encountered
nine gold ore-grade intercepts. The other hole was drilled about 200 feet north
of the main Rosebud deposit, with 11 intercepts encountered. Hecla and its
joint-venture partner, Newmont Mining Corp., intend to continue a drilling
program in these areas. Other projects in Nevada include the Sunset gold
prospect, a high-grade underground target, where a program is currently being
developed to start drilling in May.
Exploration also continues on Hecla's gold property in Peru, called Alto
Dorado, which consists of five separate mineralized zones over 14,800 hectares.
Hecla is seeking a joint-venture partner to help explore this prospect. The
Cacique gold project in Chile has been dropped due to disappointing drilling
results.
<PAGE> 3
At the Greens Creek silver mine, a $1.5 million underground and surface
exploration project is planned for 1999. An underground drilling program in the
200 South area continues to encounter ore-grade mineralization adjacent to the
current underground deposit. There is good potential for additions to the
proven and probable ore reserves from the 200 South area this year. A 1999
surface drilling program of 10,000 feet is planned for the land exchange area
surrounding the Greens Creek mine, along with geochemistry and geophysics work.
ASSET ACQUISITION/DIVESTMENT
On April 1, Hecla reported it had signed a letter of agreement to acquire
substantially all the assets of Monarch Resources Limited. Monarch's primary
assets are the 100% owned and operated La Camorra gold mine in Venezuela and the
Saladillo silver/gold exploration property in Mexico. The agreement is subject
to further due diligence by Hecla, as well as regulatory and Monarch shareholder
approval. Hecla has until May 10, 1999, to complete its full review and execute
a definitive purchase agreement, unless both parties agree to an extension of
the due diligence period. The sale price would be $15 million cash and $13
million of Hecla common shares. If a decision is made to acquire the assets,
Hecla intends to finance the majority of the cash portion of the purchase
through project-related debt that would be nonrecourse to Hecla.
Work continues on the sale of MWCA, Hecla's lawn and garden subsidiary.
The decision to sell this segment of the industrial minerals division was made
to provide a sharper focus on Hecla's primary mission of mining and processing
minerals. Several interested parties are currently conducting due diligence on
MWCA, and Hecla is targeting completion of the possible sale sometime during the
third quarter.
OTHER
Hecla's long-term debt increased by approximately $3 million from the end
of 1998 to $45.9 million at the end of the first quarter of 1999. Cash is
normally required during the first quarter to provide for the seasonal working
capital requirements of the industrial minerals division. The company
anticipates reducing its bank debt in the second half of the year.
The company renegotiated its $55 million bank credit agreement during the
first quarter of 1999, providing for more flexible financial covenants and
making capital more easily available in this low metals price environment.
Hecla Mining Company, headquartered in Coeur d'Alene, Idaho, is one of the
United States' best-known silver producers. The company also produces gold and
is a major supplier of ball clay, kaolin and other industrial minerals. Hecla's
operations are principally in the U.S. and Mexico.
Statements made which are not historical facts, such as anticipated
production, exploration results, costs or sales performance are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, and involve a number of risks and uncertainties that could cause actual
results to differ materially from those projected, anticipated, expected or
implied. These risks and uncertainties include, but are not limited to, metals
prices volatility, volatility of metals production, exploration project
uncertainties, industrial minerals market conditions and project development
risks. Refer to the company's Form 10-Q and 10-K reports for a more detailed
discussion of factors that may impact expected future results. Hecla undertakes
no obligation to publicly update or revise any forward-looking statements.
Hecla Mining Company news releases can be accessed on the
Internet at: http//www.hecla-mining.com
<PAGE> 4
HECLA MINING COMPANY
(dollars in thousands, except per share, per ounce and per pound amounts -
unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
---------------------------------
HIGHLIGHTS Mar. 31, 1999 Mar. 31, 1998
- ------------------------------------------------------------------------------------------------
FINANCIAL DATA
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Total revenue $ 42,354 $ 42,663
Gross profit 4,260 4,476
Net income (loss) (1,499) 2,847
Income (loss) applicable to common shareholders (3,511) 835
Basic and diluted income (loss) per common share (0.06) 0.02
Cash flow provided (used) by operating activities 622 (7,677)
- ------------------------------------------------------------------------------------------------
SALE OF PRODUCTS BY SEGMENT
- ------------------------------------------------------------------------------------------------
Gold operations $ 6,391 $ 9,255
Silver operations 12,569 10,122
Industrial minerals 22,698 20,752
---------- ----------
Total sales $ 41,658 $ 40,129
- ------------------------------------------------------------------------------------------------
GROSS PROFIT BY SEGMENT
- ------------------------------------------------------------------------------------------------
Gold operations $ 619 $ 2,005
Silver operations 895 333
Industrial minerals 2,746 2,138
---------- ----------
Total gross profit $ 4,260 $ 4,476
OTHER DATA
- ------------------------------------------------------------------------------------------------
EBITDA BY SEGMENT(1)
- ------------------------------------------------------------------------------------------------
Gold operations $ 2,700 $ 3,632
Silver operations 3,539 2,504
Industrial minerals 4,073 3,464
---------- ----------
Total EBITDA $ 10,312 $ 9,600
- ------------------------------------------------------------------------------------------------
PRODUCTION SUMMARY - TOTALS
- ------------------------------------------------------------------------------------------------
Gold - Ounces 28,719 35,554
Silver - Ounces 1,773,892 1,530,407
Lead - Tons 8,278 8,107
Zinc - Tons 6,132 4,255
Industrial minerals - Tons shipped 290,746
282,201
Average cost per ounce of gold produced:
Cash operating costs ($/oz.) 156 160
Total cash costs ($/oz.) 169 171
Total production costs ($/oz.) 269 225
Average cost per ounce of silver produced:
Cash operating costs ($/oz.) 3.70 4.47
Total cash costs ($/oz.) 3.70 4.47
Total production costs ($/oz.) 5.27 5.98
- ------------------------------------------------------------------------------------------------
AVERAGE METAL PRICES
- ------------------------------------------------------------------------------------------------
Gold - Realized ($/oz.) 299 299
Gold - London Final ($/oz.) 287 294
Silver - Handy & Harman ($/oz.) 5.30 6.24
Lead - LME Cash (cents/pound) 22.9 24.3
Zinc - LME Cash (cents/pound) 45.0 48.2
(1) EBITDA represents earnings before interest, income taxes, depreciation,
depletion, amortization and items classified as other operating expenses not
occurring at the operating sites. The company believes EBITDA is helpful in
understanding cash flow generated from operations that is available for income
taxes, debt service, capital expenditures, and other nonsite operating expenses.
</TABLE>
<PAGE> 5
HECLA MINING COMPANY
Consolidated Statements of Operations and Comprehensive Income (Loss)
(dollars and shares in thousands, except per share amounts - unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
-------------------------------
Mar. 31, 1999 Mar. 31, 1998
------------- -------------
<S> <C> <C>
Sales of products $ 41,658 $ 40,129
---------- ----------
Cost of sales and other direct production costs 31,346 30,527
Depreciation, depletion and amortization 6,052 5,126
---------- ----------
37,398 35,653
---------- ----------
Gross profit 4,260 4,476
---------- ----------
Other operating expenses:
General and administrative 2,011 2,141
Exploration 1,162 816
Depreciation and amortization 92 94
Provision for closed operations and environmental matters 267 59
---------- ----------
3,532 3,110
---------- ----------
Income from operations 728 1,366
---------- ----------
Other income (expense):
Interest and other income 696 2,534
Miscellaneous expense (549) (557)
Gain on investments - - 86
Interest expense:
Total interest cost (924) (740)
Less amount capitalized - - 271
---------- ----------
(777) 1,594
---------- ----------
Income (loss) before income taxes and cumulative
effect of change in accounting principle (49) 2,960
Income tax provision (65) (113)
---------- ----------
Income (loss) before cumulative effect of change in
accounting principle (114) 2,847
Cumulative effect of change in accounting principle (1,385) - -
---------- ----------
Net income (loss) (1,499) 2,847
Preferred stock dividends (2,012) (2,012)
---------- ----------
Income (loss) applicable to common shareholders (3,511) 835
---------- ----------
Other comprehensive income (loss), net of tax:
Unrealized gain (loss) on securities 17 (19)
---------- ----------
Other comprehensive income (loss) 17 (19)
---------- ----------
Comprehensive income (loss) $ (3,494) $ 816
========== ==========
Basic and diluted income (loss) per common share before
cumulative effect of change in accounting principle $ (0.04) $ 0.02
Cumulative effect of change in accounting principle (0.02) - -
---------- ----------
Basic and diluted income (loss) per common share $ (0.06) $ 0.02
Weighted average number of common shares outstanding 55,201 55,095
========== ==========
</TABLE>
<PAGE> 6
HECLA MINING COMPANY
Consolidated Balance Sheets
(dollars and shares in thousands - unaudited)
<TABLE>
<CAPTION>
Mar. 31, 1999 Dec. 31, 1998
- -------------------------------------------------------------------------------------
ASSETS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,470 $ 2,480
Accounts and notes receivable 34,157 25,919
Income tax refund receivable 19 1,087
Inventories 21,787 22,757
Other current assets 879 1,251
---------- ----------
Total current assets 60,312 53,494
Investments 2,453 3,406
Restricted investments 6,327 6,331
Properties, plants and equipment, net 172,609 178,168
Other noncurrent assets 10,924 10,663
---------- ----------
Total assets $ 252,625 $ 252,062
========== ==========
- -------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 13,005 $ 12,172
Accrued payroll and related benefits 3,233 2,852
Preferred stock dividends payable 2,012 2,012
Accrued taxes 999 772
Accrued reclamation and closure costs 6,106 6,537
---------- ----------
Total current liabilities 25,355 24,345
Deferred income taxes 300 300
Long-term debt 45,919 42,923
Accrued reclamation and closure costs 22,066 23,216
Other noncurrent liabilities 9,793 9,542
---------- ----------
Total liabilities 103,433 100,326
---------- ----------
- -------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------------
Preferred stock 575 575
Common stock 13,864 13,792
Capital surplus 375,395 374,017
Accumulated deficit (234,004) (230,493)
Accumulated other comprehensive loss (5,252) (5,269)
Stock held by grantor trust (500) - -
Treasury stock (886) (886)
---------- ----------
Total shareholders' equity 149,192 151,736
---------- ----------
Total liabilities and shareholders' equity $ 252,625 $ 252,062
========== ==========
Common shares outstanding at end of period 55,393 55,105
========== ==========
</TABLE>
<PAGE> 7
HECLA MINING COMPANY
Consolidated Statements of Cash Flows
(dollars in thousands - unaudited)
<TABLE>
<CAPTION>
First Quarter Ended
------------------------------
Mar. 31, 1999 Mar. 31, 1998
- --------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
- --------------------------------------------------------------------------------------------------
<S> <C> <C>
Net income (loss) $ (1,499) $ 2,847
Noncash elements included in net income (loss):
Depreciation, depletion and amortization 6,144 5,220
Cumulative effect of change in accounting principle 1,385 - -
Gain on disposition of properties, plants and equipment (87) (1,737)
Gain on investments - - (86)
Provision for reclamation and closure costs 168 133
Change in:
Accounts and notes receivable (8,238) (12,328)
Income tax refund receivable 1,068 223
Inventories 1,072 (961)
Other current and noncurrent assets 166 (2,493)
Accounts payable and accrued expenses 833 344
Accrued payroll and related benefits 381 674
Accrued taxes 227 381
Accrued reclamation and other noncurrent liabilities (998) 106
---------- ----------
- -
Net cash provided (used) by operating activities 622 (7,677)
---------- ----------
- -
- --------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
- --------------------------------------------------------------------------------------------------
Additions to properties, plants and equipment (2,158) (4,239)
Proceeds from disposition of properties, plants and equipment 203 2,676
Proceeds from sale of investments - - 86
Decrease (increase) in restricted investments 4 (708)
Purchase of investments and change in cash surrender
value of life insurance 45 (221)
Other, net (85) (223)
---------- ----------
- -
Net cash used by investing activities (1,991) (2,629)
---------- ----------
- -
- --------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
- --------------------------------------------------------------------------------------------------
Issuance of common stock, net of offering costs 450 2
Dividends on preferred stock (2,012) (2,012)
Borrowings, net of repayments, against cash
surrender value of life insurance 925 (99)
Borrowing on long-term debt 8,500 19,500
Repayment on long-term debt (5,504) (5,502)
---------- ----------
- -
Net cash provided by financing activities 2,359 11,889
---------- ----------
- -
Net increase in cash and cash equivalents 990 1,583
Cash and cash equivalents at beginning of period 2,480 3,794
---------- ----------
- -
Cash and cash equivalents at end of period $ 3,470 $ 5,377
========== ==========
</TABLE>
<PAGE> 8
HECLA MINING COMPANY
Production Data
<TABLE>
<CAPTION>
First Quarter Ended
-------------------------------
Mar. 31, 1999 Mar. 31, 1998
- -------------------------------------------------------------------------------------
LUCKY FRIDAY UNIT
- -------------------------------------------------------------------------------------
<S> <C> <C>
Tons of ore milled 71,610 57,222
Days of operation 76 63
Mining cost per ton $44.51 $41.37
Milling cost per ton $7.38 $8.39
Ore grade milled - Silver (oz./ton) 15.21 15.33
Silver produced (oz.) 1,021,277 836,130
Lead produced (tons) 6,237 6,695
Zinc produced (tons) 677 681
Average cost per ounce of silver produced:
Cash operating costs $4.95 $5.17
Total cash costs $4.95 $5.17
Total production costs $5.91 $6.11
- -------------------------------------------------------------------------------------
GREENS CREEK (Reflects Hecla's 29.73% share)
- -------------------------------------------------------------------------------------
Tons of ore milled 42,049 36,397
Days of operation 90 90
Mining cost per ton $30.93 $32.60
Milling cost per ton $21.03 $22.53
Ore grade milled - Silver (oz./ton) 22.48 22.44
Silver produced (oz.) 699,264 630,510
Gold produced (oz.) 6,988 3,993
Lead produced (tons) 2,041 1,412
Zinc produced (tons) 5,455 3,574
Average cost per ounce of silver produced:
Cash operating costs $1.87 $3.55
Total cash costs $1.87 $3.55
Total production costs $4.33 $5.82
- -------------------------------------------------------------------------------------
ROSEBUD UNIT (Reflects Hecla's 50% share)
- -------------------------------------------------------------------------------------
Tons of ore mined 35,598 39,495
Tons of ore milled 35,760 38,567
Days of operation 90 90
Mining cost per ton $31.94 $28.57
Milling cost per ton $16.41 $10.66
Ore grade milled - Gold (oz./ton) 0.472 0.450
Ore grade milled - Silver (oz./ton) 2.62 3.34
Gold produced (oz.) 15,817 16,589
Silver produced (oz.) 52,728 61,937
Average cost per ounce of gold produced:
Cash operating costs $144 $137
Total cash costs $163 $155
Total production costs $260 $253
</TABLE>
<PAGE> 9
HECLA MINING COMPANY
Production Data (cont.)
<TABLE>
<CAPTION>
First Quarter Ended
--------------------------------
Mar. 31, 1999 Mar. 31, 1998
- --------------------------------------------------------------------------------------
LA CHOYA UNIT (1)
- --------------------------------------------------------------------------------------
<S> <C> <C>
Tons of ore processed - - 732,243
Days of operation - - 90
Mining cost per ton - - $1.78
Ore grade crushed - Gold (oz./ton) - - 0.018
Gold produced (oz.) 5,563 13,407
Silver produced (oz.) 591 1,508
Average cost per ounce of gold produced:
Cash operating costs $189 $189
Total cash costs $189 $190
Total production costs $296 $190
- --------------------------------------------------------------------------------------
OTHER
- --------------------------------------------------------------------------------------
Gold produced (oz.) 351 1,565
Silver produced (oz.) 32 322
(1) The La Choya mine completed mining in December 1998.
</TABLE>
CAPITAL EXPENDITURES
(dollars in thousands)
First Quarter Ended
-------------------------------
Mar. 31, 1999 Mar. 31, 1998
------------- -------------
Lucky Friday $ 50 $ 2,434
Greens Creek (29.73%*) 656 633
Rosebud (50%*) 50 9
La Choya - - 384
Noche Buena 1,047 - -
Industrial minerals 342 491
Capitalized interest - - 271
Other 13 17
--------- ---------
Total capitalized $ 2,158 $ 4,239
========= =========
*Hecla's share
HEDGED POSITIONS
As of March 31, 1999
Silver: 2,350,000 ounces hedged @ average price of $5.71
Gold: 3,000 ounces hedged @ average price of $353.50
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,470
<SECURITIES> 0
<RECEIVABLES> 34,157
<ALLOWANCES> 0
<INVENTORY> 21,787
<CURRENT-ASSETS> 60,312
<PP&E> 382,009
<DEPRECIATION> (209,400)
<TOTAL-ASSETS> 252,625
<CURRENT-LIABILITIES> 25,355
<BONDS> 9,800
0
575
<COMMON> 13,864
<OTHER-SE> 134,753
<TOTAL-LIABILITY-AND-EQUITY> 252,625
<SALES> 41,658
<TOTAL-REVENUES> 42,354
<CGS> 31,346
<TOTAL-COSTS> 37,398
<OTHER-EXPENSES> 3,532
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 924
<INCOME-PRETAX> (49)
<INCOME-TAX> 65
<INCOME-CONTINUING> (114)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (1,385)
<NET-INCOME> (1,499)
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
</TABLE>
