10-Q 1 uslm-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ........ to ........  

Commission file number is 000-04197

UNITED STATES LIME & MINERALS, INC.

(Exact name of registrant as specified in its charter)

Texas

75-0789226

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

5429 LBJ Freeway, Suite 230, Dallas, TX

75240

(Address of principal executive offices)

(Zip Code)

(972) 991-8400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.10 par value

USLM

The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: As of April 26, 2022, 5,670,523 shares of common stock, $0.10 par value, were outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

(Unaudited)

March 31,

December 31,

    

2022

    

2021

    

ASSETS

Current assets

Cash and cash equivalents

$

100,864

$

105,355

Trade receivables, net

 

32,871

 

26,715

Inventories, net

 

16,540

 

15,116

Prepaid expenses and other current assets

 

2,491

 

3,244

Total current assets

 

152,766

 

150,430

Property, plant and equipment

 

424,087

 

413,561

Less accumulated depreciation and depletion

 

(255,934)

 

(251,389)

Property, plant and equipment, net

 

168,153

 

162,172

Operating lease right-of-use assets

3,386

3,144

Other assets, net

 

442

 

450

Total assets

$

324,747

$

316,196

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$

5,474

$

5,433

Current portion of operating lease liabilities

909

899

Accrued expenses

 

4,554

 

4,856

Total current liabilities

 

10,937

 

11,188

Deferred tax liabilities, net

 

23,493

 

23,055

Operating lease liabilities, excluding current portion

2,572

2,311

Other liabilities

 

1,439

 

1,436

Total liabilities

 

38,441

 

37,990

Stockholders’ equity

Common stock

 

669

 

669

Additional paid-in capital

 

32,425

 

31,774

Retained earnings

 

309,146

 

301,611

Less treasury stock, at cost

 

(55,934)

 

(55,848)

Total stockholders’ equity

 

286,306

 

278,206

Total liabilities and stockholders’ equity

$

324,747

$

316,196

See accompanying notes to condensed consolidated financial statements.

2

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(Unaudited)

Three Months Ended March 31,

   

2022

2021

    

Revenues

$

50,909

   

100.0

%

$

41,674

   

100.0

%

Cost of revenues

Labor and other operating expenses

31,259

61.4

24,593

59.0

%

Depreciation, depletion and amortization

 

5,183

10.2

%

 

5,276

12.7

%

 

36,442

71.6

 

29,869

71.7

%

Gross profit

 

14,467

28.4

 

11,805

28.3

%

Selling, general and administrative expenses

 

3,635

7.1

 

3,067

7.4

%

Operating profit

 

10,832

21.3

 

8,738

20.9

%

Other expense (income)

Interest expense

 

63

0.1

 

62

0.1

%

Interest and other income, net

 

(60)

(0.1)

 

(34)

(0.1)

%

 

3

 

28

%

Income before income tax expense

 

10,829

21.3

 

8,710

20.9

%

Income tax expense

 

2,161

4.3

 

1,679

4.0

%

Net income

$

8,668

17.0

$

7,031

16.9

%

Net income per share of common stock

Basic

$

1.53

$

1.24

Diluted

$

1.53

$

1.24

See accompanying notes to condensed consolidated financial statements.

3

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands)

(Unaudited)

 

Common Stock

Additional

 

    

Shares

    

    

Paid-In

    

Retained

    

Treasury

    

 

Outstanding

Amount

Capital

Earnings

Stock

Total

 

Balances at December 31, 2021

 

5,666,012

$

669

$

31,774

$

301,611

$

(55,848)

$

278,206

Stock-based compensation

 

2,823

 

 

651

 

 

 

651

Treasury shares purchased

 

(712)

 

 

 

 

(86)

 

(86)

Cash dividends paid

 

 

 

(1,133)

 

 

(1,133)

Net income

 

8,668

8,668

Balances at March 31, 2022

 

5,668,123

$

669

$

32,425

$

309,146

$

(55,934)

$

286,306

 

Common Stock

Additional

 

    

Shares

    

    

Paid-In

    

Retained

    

Treasury

    

 

Outstanding

Amount

Capital

Earnings

Stock

Total

 

Balances at December 31, 2020

 

5,648,084

$

666

$

29,457

$

268,186

$

(55,117)

$

243,192

Stock options exercised

 

3,310

 

 

 

 

 

Stock-based compensation

 

2,685

 

1

 

546

 

 

 

547

Treasury shares purchased

 

(743)

 

 

 

 

(95)

 

(95)

Cash dividends paid

 

 

 

(905)

 

 

(905)

Net income

 

7,031

7,031

Balances at March 31, 2021

 

5,653,336

$

667

$

30,003

$

274,312

$

(55,212)

$

249,770

See accompanying notes to condensed consolidated financial statements.

4

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

Three Months Ended March 31,

2022

2021

 

OPERATING ACTIVITIES:

    

    

    

 

Net income

$

8,668

$

7,031

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization

 

5,250

 

5,341

Amortization of deferred financing costs

 

2

 

2

Deferred income taxes

 

438

 

750

(Gain) loss on disposition of property, plant and equipment

 

(52)

 

3

Stock-based compensation

 

651

 

547

Changes in operating assets and liabilities:

Trade receivables, net

 

(5,678)

 

(978)

Inventories, net

 

(1,255)

 

(199)

Prepaid expenses and other current assets

 

992

 

(183)

Other assets

 

6

 

16

Accounts payable and accrued expenses

 

(988)

 

(719)

Other liabilities

 

25

 

11

Net cash provided by operating activities

 

8,059

 

11,622

INVESTING ACTIVITIES:

Purchase of property, plant and equipment

 

(5,517)

 

(4,543)

Acquisition of a business

(5,889)

Proceeds from sale of property, plant and equipment

 

75

 

10

Net cash used in investing activities

 

(11,331)

 

(4,533)

FINANCING ACTIVITIES:

Cash dividends paid

(1,133)

(905)

Purchase of treasury shares

 

(86)

 

(95)

Net cash used in financing activities

 

(1,219)

 

(1,000)

Net (decrease) increase in cash and cash equivalents

 

(4,491)

 

6,089

Cash and cash equivalents at beginning of period

 

105,355

 

83,562

Cash and cash equivalents at end of period

$

100,864

$

89,651

See accompanying notes to condensed consolidated financial statements.

5

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by United States Lime & Minerals, Inc. (the “Company”) without independent audit. In the opinion of the Company’s management, all adjustments of a normal and recurring nature necessary to present fairly the financial position, results of operations, comprehensive income and cash flows for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2021. The results of operations for the three-month period ended March 31, 2022 are not necessarily indicative of operating results for the full year.

2. Organization

The Company is a manufacturer of lime and limestone products, supplying primarily the construction (including highway, road and building contractors), industrial (including paper and glass manufacturers), metals (including steel producers), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), roof shingle manufacturers, agriculture (including poultry and cattle feed producers), and oil and gas services industries. The Company is headquartered in Dallas, Texas and operates lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Missouri, Oklahoma and Texas through its wholly owned subsidiaries, Arkansas Lime Company, ART Quarry TRS LLC (DBA Carthage Crushed Limestone), Colorado Lime Company, Mill Creek Dolomite, LLC (“Mill Creek”), Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair, and U.S. Lime Company – Transportation. In addition, the Company, through its wholly owned subsidiary, U.S. Lime Company – O & G, LLC, has royalty and non-operated working interests in natural gas wells located in Johnson County, Texas, in the Barnett Shale Formation.

On February 9, 2022, the Company acquired 100% of the equity interest of Mill Creek, a dolomite mining and production company located in Mill Creek, Oklahoma, for $5.9 million cash, subject to adjustment. Upon acquisition, Mill Creek’s assets and liabilities were recorded at fair value with $5.4 million of the purchase price preliminarily allocated to property, plant, and equipment. Mill Creek contributed $0.8 million to the Company’s revenues for the three-months ended March 31, 2022. The Company believes this acquisition will complement its existing geographic footprint.

3. Accounting Policies

Revenue Recognition. The Company recognizes revenue for its lime and limestone operations when (i) a contract with the customer exists and the performance obligations are identified; (ii) the price has been established; and (iii) the performance obligations have been satisfied, which is generally upon shipment. The Company’s returns and allowances are minimal. Revenues include external freight billed to customers with related costs accounted for as fulfillment costs and included in cost of revenues. External freight billed to customers included in 2022 and 2021 revenues was $9.6 million and $7.8 million, respectively, which approximates the amount of external freight included in cost of revenues. Sales taxes billed to customers are not included in revenues. For its natural gas interests, the Company recognizes revenue in the month of production and delivery.

Accounts Receivable. The majority of the Company’s trade receivables are unsecured. Payment terms for all trade receivables are based on the underlying purchase orders, contracts or purchase agreements. The Company estimates credit losses relating to trade receivables based on an assessment of the current and forecasted probability of collection, historical trends, economic conditions and other significant events that may impact the collectability of accounts receivables. Due to the relatively homogenous nature of its trade receivables, the Company does not believe there is any meaningful asset-specific differences within its accounts receivable portfolio that would require the portfolio to be

6

grouped below the consolidated level for review of credit losses. Credit losses relating to trade receivables have generally been within management expectations and historical trends. Uncollected trade receivables are charged-off when identified by management to be unrecoverable. The Company maintains an allowance for credit losses to reflect currently expected estimated losses resulting from the failure of customers to make required payments.

Leases. The Company determines if an arrangement is a lease at inception. When recording operating leases, the Company records a lease liability based on the net present value of the lease payments over the lease term, using the interest rate implicit in the lease, if known, or an incremental rate on a collateralized basis over a similar term and amount to the lease, and a corresponding right-of-use asset. Operating leases are included in operating lease right-of-use assets, current portion of operating lease liabilities and operating lease liabilities, excluding current portion, on the condensed consolidated balance sheets. Lease expense is recognized over the lease term on a straight-line basis. Lease terms include options to extend the lease when it is reasonably certain the Company will exercise the option. For leases with a term of twelve months or less, the Company does not record a right-of-use asset and a lease liability and records lease expense on a straight-line basis. See Note 8 to the condensed consolidated financial statements.

4. Reportable Segment

The Company has identified one reportable segment based on the distinctness of the Company’s activities and products: lime and limestone operations. All operations are within a single region in the United States. In evaluating the operating results of the Company, management primarily reviews revenues, gross profit and operating profit from the lime and limestone operations. Operating profit from the Company’s lime and limestone operations includes all of its selling, general and administrative costs. The Company does not allocate interest expense and interest and other income (expense), net to its lime and limestone operations. Other revenues, gross profit and operating profit in the Company’s segment disclosures include the Company’s natural gas interests. Other identifiable assets include assets related to the Company’s natural gas interests, unallocated corporate assets and cash items.

Three Months Ended March 31,

Revenues

2022

2021

Lime and limestone operations

$

50,296

$

41,356

Other

 

613

 

318

Total revenues

$

50,909

$

41,674

Depreciation, depletion and amortization

Lime and limestone operations

$

5,039

$

5,137

Other

 

144

 

139

Total depreciation, depletion and amortization

$

5,183

$

5,276

Gross profit

Lime and limestone operations

$

14,197

$

11,804

Other

 

270

 

1

Total gross profit

$

14,467

$

11,805

Operating profit

Lime and limestone operations

$

10,562

$

8,737

Other

 

270

 

1

Total operating profit

$

10,832

$

8,738

Identifiable assets, at period end

Lime and limestone operations

$

218,522

$

191,419

Other

106,225

93,991

Total identifiable assets

$

324,747

$

285,410

Capital expenditures

Lime and limestone operations

$

5,517

$

4,543

Other

 

 

Total capital expenditures

$

5,517

$

4,543

7

5. Income Per Share of Common Stock

At March 31, 2022, the Company had 30,000,000 shares of common stock authorized and 5,668,123 shares outstanding.

The following table sets forth the computation of basic and diluted income per common share (in thousands, except per share amounts):

Three Months Ended March 31,

    

2022

    

2021

    

Net income for basic and diluted income per common share

$

8,668

$

7,031

Weighted-average shares for basic income per common share

 

5,667

 

5,651

Effect of dilutive securities:

Employee and director stock options(1)

 

10

 

13

Adjusted weighted-average shares and assumed exercises for diluted income per common share

 

5,677

 

5,664

Basic net income per common share

$

1.53

$

1.24

Diluted net income per common share

$

1.53

$

1.24

(1)Excludes 10 and 7 stock options for the three months ended March 31, 2022 and 2021, respectively, as anti-dilutive because the exercise price exceeded the average per share market price for the period.

6. Inventories, Net

Inventories are valued principally at the lower of cost, determined using the average cost method, or net realizable value. Costs for raw materials and finished goods include materials, labor, and production overhead. Inventories, net consisted of the following (in thousands):

March 31,

December 31,

2022

2021

 

Lime and limestone inventories:

    

    

    

    

Raw materials

$

3,685

$

3,232

Finished goods

 

3,150

 

2,677

6,835

5,909

Service parts inventories

 

9,705

 

9,207

$

16,540

$

15,116

7. Banking Facilities and Debt

The Company’s credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 2019 and November 21, 2019, provides for a $75 million revolving credit facility (the “Revolving Facility”) and an incremental four year accordion feature to borrow up to an additional $50 million on the same terms, subject to approval by the Lender or another lender selected by the Company. The credit agreement also provides for a $10 million letter of credit sublimit under the Revolving Facility. The Revolving Facility and any incremental loans mature on May 2, 2024.

Interest rates on the Revolving Facility are, at the Company’s option, LIBOR (or a replacement rate as determined by the Lender and the Company) plus a margin of 1.000% to 2.000%, or the Lender’s Prime Rate plus a margin of 0.000% to 1.000%, and a commitment fee range of 0.200% to 0.350% on the undrawn portion of the Revolving Facility. The Revolving Facility interest rate margins and commitment fee are determined quarterly in accordance with a pricing grid based upon the Company’s Cash Flow Leverage Ratio, defined as the ratio of the Company’s total funded senior indebtedness to earnings before interest, taxes, depreciation, depletion, amortization and stock-based compensation expense (“EBITDA”) for the 12 months ended on the last day of the most recent calendar quarter, plus pro forma EBITDA from any businesses acquired during the period. Pursuant to a security agreement, dated August 25, 2004, the Revolving Facility is secured by the Company’s existing and hereafter acquired tangible assets, intangible assets and real property. The maturity of the Revolving Facility and any incremental loans can be

8

accelerated if any event of default, as defined under the credit agreement, occurs. The Company’s maximum Cash Flow Leverage Ratio is 3.50 to 1.

The Company may pay dividends so long as it remains in compliance with the provisions of the Company’s credit agreement, and it may purchase, redeem or otherwise acquire shares of its common stock so long as its pro forma Cash Flow Leverage Ratio is less than 3.00 to 1.00 and no default or event of default exists or would exist after giving effect to such stock repurchase.

As of March 31, 2022, the Company had no debt outstanding and no draws on the Revolving Facility other than $0.3 million of letters of credit, which count as draws against the available commitment under the Revolving Facility.

8. Leases

The Company has operating leases for the use of equipment, corporate office space, and some of its terminal and distribution facilities. The leases have remaining lease terms of 1 to 7 years, with a weighted-average remaining lease term of 4 years at each of March 31, 2022 and December 31, 2021. Some operating leases include options to extend the leases for up to 5 years.

The components of lease costs for the three months ended March 31, 2022 and 2021 were as follows (in thousands):

Three Months Ended March 31,

Classification

2022

2021

Operating lease costs(1)

Cost of revenues

$

265

$

385

Operating lease costs(1)

Selling, general and administrative expenses

 

66

 

65

Rental revenues

Interest and other income, net

 

(32)

 

(21)

Net operating lease costs

$

299

$

429

(1)Includes the costs of leases with a term of 12 months or less.

As of March 31, 2022, future minimum payments under operating leases that were either non-cancelable or subject to significant penalty upon cancellation, including future minimum payments under renewal options that the Company is reasonably certain to exercise, were as follows (in thousands):

2022 (excluding the three months ended March 31, 2022)

$

792

2023

706

2024

684

2025

457

2026

456

Thereafter

533

Total future minimum lease payments

3,628

Less imputed interest

(147)

Present value of lease liabilities

$

3,481

Supplemental cash flow information pertaining to the Company’s leasing activity for the three months ended March 31, 2022 and 2021 is as follows (in thousands):

Three Months Ended March 31,

2022

2021

Cash payments for operating lease liabilities

$

349

$

345

Right-of-use assets obtained in exchange for operating lease obligations

$

492

$

11

9

9. Income Taxes

The Company has estimated that its effective income tax rate for 2022 will be 19.9%. The primary reason for the effective income tax rate being below the federal statutory rate is due to statutory depletion, which is allowed for income tax purposes and is a permanent difference between net income for financial reporting purposes and taxable income.

10. Dividends

On March 18, 2022, the Company paid $1.1 million in cash dividends, based on a dividend of $0.20 per share of its common stock, to shareholders of record at the close of business on February 25, 2022.

11. Subsequent Event

On April 27, 2022, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.20 per share on the Company’s common stock. This dividend is payable on June 17, 2022 to shareholders of record at the close of business on May 27, 2022.

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ITEM 2:     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements. Any statements contained in this Report that are not statements of historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this Report, including without limitation statements relating to the Company’s plans, strategies, objectives, expectations, intentions, and adequacy of resources, are identified by such words as “will,” “could,” “should,” “would,” “believe,” “possible,” “potential,” “expect,” “intend,” “plan,” “schedule,” “estimate,” “anticipate” and “project.” The Company undertakes no obligation to publicly update or revise any forward-looking statements. The Company cautions that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations, including without limitation the following: (i) the Company’s plans, strategies, objectives, expectations, and intentions are subject to change at any time at the Company’s discretion; (ii) the Company’s plans and results of operations will be affected by its ability to maintain and increase its revenues and manage its growth; (iii) the Company’s ability to meet short-term and long-term liquidity demands, including meeting the Company’s operating and capital needs, including possible acquisitions and paying dividends, and conditions in the credit and equity markets, including the ability of the Company’s customers to meet their obligations; (iv) interruptions to operations and increased expenses at the Company’s facilities resulting from changes in mining methods or conditions, variability of chemical or physical properties of the Company’s limestone and its impact on process equipment and product quality, inclement weather conditions, including more severe and frequent weather events resulting from climate change, natural disasters, accidents, IT systems failures or disruptions, including due to cyber-security incidents or ransomware attacks, utility disruptions, supply chain delays and disruptions, labor shortages and disruptions, or regulatory requirements; (v) volatile coal, petroleum coke, diesel, natural gas, electricity, transportation and freight costs and the consistent availability of trucks, truck drivers and rail cars to deliver the Company’s products to its customers and solid fuels to its plants on a timely basis at competitive prices; (vi) unanticipated delays or cost overruns in completing modernization and expansion and development projects; (vii) the Company’s ability to expand its lime and limestone operations through projects and acquisitions of businesses with related or similar operations and the Company’s ability to obtain any required financing for such projects and acquisitions, to integrate the projects and acquisitions into the Company’s overall operations, and to sell any resulting increased production at acceptable prices; (viii) inadequate demand and/or prices for the Company’s lime and limestone products due to increased competition from competitors, increasing competition for certain customer accounts, conditions in the U.S. economy, recessionary pressures in, and the impact of government policies on, particular industries, including oil and gas services, utility plants, steel, construction, and industrial, effects of governmental fiscal and budgetary constraints, including the level of highway construction and infrastructure funding, changes to tax laws, legislative impasses, extended governmental shutdowns, trade wars, tariffs, international incidents, including the Russian invasion of Ukraine, sanctions, economic and regulatory uncertainties under state governments and the United States Administration and Congress, inflation, Federal Reserve responses to inflationary concerns, including increased interest rates, and inability to continue to maintain or increase prices for the Company’s products, including passing through the increased costs and availability of transportation, energy, supplies, labor, and services; (ix) ongoing and possible new regulations, investigations, enforcement actions and costs, legal expenses, penalties, fines, assessments, litigation, judgments and settlements, taxes and disruptions and limitations of operations, including those related to climate change, health and safety, human capital, diversity, and other environmental, social, governance and sustainability considerations, and those that could impact the Company’s ability to continue or renew its operating permits or successfully secure new permits in connection with its modernization and expansion and development projects; (x) estimates of reserves and remaining lives of reserves; (xi) the ongoing impact of the novel coronavirus (“COVID-19”) pandemic and current or future variants of the COVID-19 virus and governmental responses thereto, including decreased demand, lower prices, tightened labor and other markets, and increased costs, and the risk of non-compliance with health and safety protocols, social distancing and mask guidelines, and vaccination mandates, on the Company’s financial condition, results of operations, cash flows, and competitive position; (xii) the impact of social or political unrest; (xiii) risks relating to mine safety and reclamation and remediation; and (xiv) other risks and uncertainties set forth in this Report or indicated from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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Overview.

We are a manufacturer of lime and limestone products, supplying primarily the construction (including highway, road and building contractors), industrial (including paper and glass manufacturers), metals (including steel producers), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), roof shingle manufacturers, agriculture (including poultry and cattle feed producers), and oil and gas services industries. We are headquartered in Dallas, Texas and operate lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Missouri, Oklahoma and Texas through our wholly owned subsidiaries, Arkansas Lime Company, ART Quarry TRS LLC (DBA Carthage Crushed Limestone), Colorado Lime Company, Mill Creek Dolomite, LLC (“Mill Creek”), Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair, and U.S. Lime Company – Transportation.

We have identified one reportable segment based on the distinctness of our activities and products: lime and limestone operations. All operations are within a single geographic region in the United States.

In addition to our lime and limestone operations, we hold natural gas interests through our wholly owned subsidiary, U.S. Lime Company – O&G, LLC. The revenues, gross profit and operating profit from our natural gas interests are included in Other for our reportable segment disclosures. Assets related to our natural gas interest, unallocated corporate assets, and cash items are included in Other identified assets. We do not believe that our natural gas interests are material to the current or prior period.

On February 9, 2022, we acquired 100% of the equity interest of Mill Creek, a dolomite mining and production company located in Mill Creek, Oklahoma, for $5.9 million cash, subject to adjustment. Upon acquisition, Mill Creek’s assets and liabilities were recorded at fair value with $5.4 million of the purchase price preliminarily allocated to property, plant, and equipment. Mill Creek contributed $0.8 million to our revenues for the three-months ended March 31, 2022. We believe this acquisition will complement our existing geographic footprint.

Our revenues increased 22.2% in the first quarter 2022, compared to the first quarter 2021. The increase in our revenues in the first quarter 2022, compared to the first quarter 2021, resulted primarily from a 19.4% increase in sales volumes of our lime and limestone products, principally due to increased demand from our construction, industrial, environmental, and oil and gas customers. Revenues in in the first quarter 2022 were also favorably impacted by an increase of 2.2% in the average selling prices for our lime and limestone products. In February 2021, the Company’s operations were briefly curtailed by severe winter storms in the Southern United States which interrupted transportation, commerce, and utility services in the affected areas, including the delivery of electricity and natural gas to our plants.

Our gross profit increased 22.5% in the first quarter 2022, compared to the first quarter 2021. The increase in gross profit resulted primarily from the increased revenues discussed above, partially offset by increased production costs.

We continue to experience rising costs, particularly those associated with energy and transportation. Additionally, we are challenged by ongoing supply chain delays and disruptions which, if they persist, could adversely affect our profitability. We are continuing to increase the prices of our lime and limestone products in an effort to mitigate the effects of our increasing costs.

We paid an increased regular quarterly cash dividend of $0.20 per share on our common stock in the first quarter of 2022. On April 27, 2022, the Board of Directors declared a regular quarterly cash dividend of $0.20 per share on our common stock. The dividend is payable on June 17, 2022 to shareholders of record at the close of business on May 27, 2022.

Liquidity and Capital Resources.

Net cash provided by operating activities was $8.1 million in the first quarter 2022, compared to $11.6 million in the first quarter 2021, a decrease of $3.6 million, or 30.7%. Our net cash provided by operating activities is composed of net income, depreciation, depletion and amortization (“DD&A”), deferred income taxes, stock-based compensation, other non-cash items included in net income and changes in working capital. In the first quarter 2022, net cash provided by operating activities was principally composed of $8.7 million net income, $5.3 million DD&A, $0.4 million deferred income taxes, $0.7 million stock-based compensation, and a $6.9 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first quarter 2022 included an increase of $5.7 million in

12

trade receivables, net, due primarily from increased sales in the first quarter 2022 compared to the fourth quarter 2021, an increase of $1.3 million in inventories, a $1.0 million decrease in accounts payable and accrued expenses, and a decrease of $1.0 million in prepaid expenses and other current assets. In the first quarter 2021, net cash provided by operating activities was principally composed of $7.0 million net income, $5.3 million DD&A, $0.8 million deferred income taxes, $0.5 million stock-based compensation, and a $2.1 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first quarter 2021 included an increase of $1.0 million in trade receivables, net, and a decrease of $0.7 million in accounts payable and accrued expenses.

We had $11.4 million in capital expenditures in the first quarter 2022, including $5.9 million for the acquisition of Mill Creek, compared to $4.5 million in the first quarter 2021. Net cash used in financing activities was $1.2 million in the first quarter 2022, compared to $1.0 million in the first quarter 2021, consisting primarily of cash dividends paid in each period.

Cash and cash equivalents decreased $4.5 million to $100.9 million at March 31, 2022 from $105.4 million at December 31, 2021.

We are not committed to any planned capital expenditures until actual orders are placed for equipment. As of March 31, 2022, we did not have any material commitments for open purchase orders.

Our credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 2019 and November 21, 2019, provides for a $75 million revolving credit facility (the “Revolving Facility”) and an incremental four-year accordion feature to borrow up to an additional $50 million on the same terms, subject to approval by the Lender or another lender selected by us. The credit agreement also provides for a $10 million letter of credit sublimit under the Revolving Facility. The Revolving Facility and any incremental loans mature on May 2, 2024.

Interest rates on the Revolving Facility are, at our option, LIBOR (or a replacement rate as determined by the Lender and the Company) plus a margin of 1.000% to 2.000%, or the Lender’s Prime Rate plus a margin of 0.000% to 1.000%; and a commitment fee range of 0.200% to 0.350% on the undrawn portion of the Revolving Facility. The Revolving Facility interest rate margins and commitment fee are determined quarterly in accordance with a pricing grid based upon our Cash Flow Leverage Ratio, defined as the ratio of our total funded senior indebtedness to earnings before interest, taxes, depreciation, depletion, amortization and stock-based compensation expense (“EBITDA”) for the 12 months ended on the last day of the most recent calendar quarter, plus pro forma EBITDA from any businesses acquired during the period. Pursuant to a security agreement, dated August 25, 2004, the Revolving Facility is secured by our existing and hereafter acquired tangible assets, intangible assets and real property. The maturity of the Revolving Facility and any incremental loans can be accelerated if any event of default, as defined under the credit agreement, occurs. Our maximum Cash Flow Leverage Ratio is 3.50 to 1.

We may pay dividends so long as we remain in compliance with the provisions of our credit agreement, and we may purchase, redeem or otherwise acquire shares of our common stock so long as our pro forma Cash Flow Leverage Ratio is less than 3.00 to 1.00 and no default or event of default exists or would exist after giving effect to such stock repurchase.

At March 31, 2022, we had no debt outstanding and no draws on the Revolving Facility other than $0.3 million of letters of credit, which count as draws against the available commitment under the Revolving Facility. We believe that, absent a significant acquisition, cash on hand and cash flows from operations will be sufficient to meet our operating needs, ongoing capital needs, including current and possible future modernization, expansion, and development projects, and liquidity needs and allow us to pay regular quarterly cash dividends for the near future.

Results of Operations.

Revenues in the first quarter 2022 were $50.9 million, compared to $41.7 million in the first quarter 2021, an increase of $9.2 million, or 22.2%. Revenues from our lime and limestone operation were $50.3 million in the first quarter 2022, compared to $41.4 million in the first quarter 2021, an increase of $8.9 million, or 21.6%. The increase in revenues in the first quarter were primarily due to an increase in sales volumes of our lime and limestone products, compared to the first quarter 2021, principally due to increased demand from our construction, industrial, environmental, and oil and gas customers.

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Gross profit was $14.5 million in the first quarter 2022, compared to $11.8 million in the first quarter 2021, an increase of $2.6 million, or 22.5%. Gross profit from our lime and limestone operations in the first quarter 2022 was $14.2 million, compared to $11.8 million in the first quarter 2021, an increase of $2.4 million, or 20.3%. The increase in gross profit in the first quarter 2022, compared to the first quarter 2021 periods, resulted primarily from the increased revenues discussed above, partially offset by increased production costs.

Selling, general and administrative (“SG&A”) expenses were $3.6 million in the first quarter 2022, compared to $3.1 million in the first quarter 2021, an increase of $0.6 million, or 18.5%. The increase in SG&A expenses was primarily due to increased personnel expenses.

Interest expense was $63 thousand in the first quarter 2022, compared to $62 thousand in the first quarter 2021. We had no outstanding debt during any of the periods. Interest and other income, net was $60 thousand in the first quarter 2022, compared to $34 thousand in the first quarter 2021.

Income tax expense was $2.2 million in the first quarter 2022, compared to $1.7 million in the first quarter 2021. Our effective income tax rate was reduced from the federal rate primarily due to statutory depletion, which is allowed for income tax purposes and is a permanent difference between net income for financial reporting purposes and taxable income.

Our net income was $8.7 million ($1.53 per share diluted) in the first quarter 2021, compared to net income of $7.0 million ($1.24 per share diluted) in the first quarter 2021, an increase of $1.6 million, or 23.3%.

ITEM 3:     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk.

We could be exposed to changes in interest rates, primarily as a result of floating interest rates on the Revolving Facility. There was no outstanding balance on the Revolving Facility subject to interest rate risk at March 31, 2022. Any future borrowings under the Revolving Facility would be subject to interest rate risk. See Note 7 of Notes to Condensed Consolidated Financial Statements.

ITEM 4:     CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures as of the end of the period covered by this Report were effective.

No change in our internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.     OTHER INFORMATION

ITEM 2:     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Our Amended and Restated 2001 Long-Term Incentive Plan allows employees and directors to pay the exercise price for stock options and the tax withholding liability upon the lapse of restrictions on restricted stock by payment in cash and/or delivery of shares of common stock.  In the first quarter 2022, pursuant to these provisions, we purchased 712 shares at a price of $119.77, the fair market value of one share of our common stock on the date they were tendered for payment of tax withholding liability upon the lapse of restrictions on restricted stock.

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ITEM 4:    MINE SAFETY DISCLOSURES

Under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of SEC Regulation S-K, each operator of a coal or other mine is required to include disclosures regarding certain mine safety results in its periodic reports filed with the SEC. The operation of our quarries, underground mine and plants is subject to regulation by the federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977. The required information regarding certain mining safety and health matters, broken down by mining complex, for the quarter ended March 31, 2022 is presented in Exhibit 95.1 to this Report.

We believe we are responsible to employees to provide a safe and healthy workplace environment. We seek to accomplish this by: training employees in safe work practices; openly communicating with employees; following safety standards and establishing and improving safe work practices; involving employees in safety processes; and recording, reporting and investigating accidents, incidents and losses to avoid reoccurrence.

Following passage of the Mine Improvement and New Emergency Response Act of 2006, MSHA significantly increased the enforcement of mining safety and health standards on all aspects of mining operations. There has also been an increase in the dollar penalties assessed for citations and orders issued in recent years.

ITEM 6:    EXHIBITS

The Exhibit Index set forth below is incorporated by reference in response to this Item.

EXHIBIT INDEX

EXHIBIT

NUMBER

    

DESCRIPTION

31.1

Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer.

31.2

Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer.

32.1

Section 1350 Certification by the Chief Executive Officer.

32.2

Section 1350 Certification by the Chief Financial Officer.

95.1

Mine Safety Disclosures.

101

Interactive Data Files (formatted as Inline XBRL).

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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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.

UNITED STATES LIME & MINERALS, INC.

April 28, 2022

By:

/s/ Timothy W. Byrne

Timothy W. Byrne

President and Chief Executive Officer

(Principal Executive Officer)

April 28, 2022

By:

/s/ Michael L. Wiedemer

Michael L. Wiedemer

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

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