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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 September 30, 2021

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 October 27, 2021, 5,658,467 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)

September 30,

December 31,

 

    

2021

    

2020

 

ASSETS

Current assets

Cash and cash equivalents

$

101,402

$

83,562

Trade receivables, net

 

29,242

 

22,979

Inventories, net

 

14,760

 

15,210

Prepaid expenses and other current assets

 

1,401

 

2,245

Total current assets

 

146,805

 

123,996

Property, plant and equipment

 

407,274

 

388,200

Less accumulated depreciation and depletion

 

(246,648)

 

(235,739)

Property, plant and equipment, net

 

160,626

 

152,461

Operating lease right-of-use assets

2,982

2,226

Other assets, net

 

495

 

415

Total assets

$

310,908

$

279,098

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$

5,712

$

4,592

Current portion of operating lease liabilities

903

1,187

Accrued expenses

 

5,243

 

5,809

Total current liabilities

 

11,858

 

11,588

Deferred tax liabilities, net

 

23,570

 

21,531

Operating lease liabilities, excluding current portion

2,116

1,030

Other liabilities

 

1,789

 

1,757

Total liabilities

 

39,333

 

35,906

Stockholders’ equity

Common stock

 

667

 

666

Additional paid-in capital

 

31,217

 

29,457

Accumulated other comprehensive income

 

 

Retained earnings

 

294,903

 

268,186

Less treasury stock, at cost

 

(55,212)

 

(55,117)

Total stockholders’ equity

 

271,575

 

243,192

Total liabilities and stockholders’ equity

$

310,908

$

279,098

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 September 30,

Nine Months Ended September 30,

   

2021

2020

2021

2020

    

Revenues

$

52,311

   

100.0

%

$

43,727

   

100.0

%

$

143,147

   

100.0

%

$

119,714

   

100.0

%

Cost of revenues

Labor and other operating expenses

 

29,981

57.3

24,665

56.4

81,774

57.1

71,074

59.4

%

Depreciation, depletion and amortization

 

4,989

9.6

 

4,880

11.2

%

 

15,432

10.8

%

 

14,224

11.9

%

 

34,970

66.9

 

29,545

67.6

 

97,206

67.9

 

85,298

71.3

%

Gross profit

 

17,341

33.1

 

14,182

32.4

 

45,941

32.1

 

34,416

28.7

%

Selling, general and administrative expenses

 

3,145

6.0

 

2,909

6.7

 

9,169

6.4

 

9,009

7.5

%

Operating profit

 

14,196

27.1

 

11,273

25.7

 

36,772

25.7

 

25,407

21.2

%

Other expense (income)

Interest expense

 

63

0.1

 

62

0.1

 

187

0.1

 

186

0.2

%

Interest and other income, net

 

(147)

(0.3)

 

(49)

(0.1)

 

(272)

(0.2)

 

(400)

(0.4)

%

 

(84)

(0.2)

 

13

0.0

 

(85)

(0.1)

 

(214)

(0.2)

%

Income before income tax expense

 

14,280

27.3

 

11,260

25.7

 

36,857

25.8

 

25,621

21.4

%

Income tax expense

 

2,972

5.7

 

1,936

4.4

 

7,425

5.2

 

4,652

3.9

%

Net income

$

11,308

21.6

$

9,324

21.3

$

29,432

20.6

$

20,969

17.5

%

Net income per share of common stock

Basic

$

2.00

$

1.66

$

5.20

$

3.73

Diluted

$

1.99

$

1.65

$

5.19

$

3.72

See accompanying notes to condensed consolidated financial statements.

3

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

2021

2020

Net income

    

$

11,308

    

$

9,324

    

$

29,432

    

$

20,969

    

Other comprehensive income

Mark to market of foreign exchange hedges

1

Total other comprehensive income

 

 

 

 

1

Comprehensive income

$

11,308

$

9,324

$

29,432

$

20,970

See accompanying notes to condensed consolidated financial statements.

4

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands)

(Unaudited)

Accumulated

 

Common Stock

Additional

Other

 

    

Shares

    

    

Paid-In

    

Comprehensive

    

Retained

    

Treasury

    

 

Outstanding

Amount

Capital

Income

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

Comprehensive income

 

 

 

 

 

7,031

 

 

7,031

Balances at March 31, 2021

 

5,653,336

$

667

$

30,003

$

$

274,312

$

(55,212)

$

249,770

Stock options exercised

 

2,000

 

 

83

 

 

 

 

83

Stock-based compensation

 

3,145

 

 

571

 

 

 

 

571

Treasury shares purchased

 

 

 

 

 

 

 

Cash dividends paid

 

 

 

 

 

(904)

 

 

(904)

Net income

 

11,093

11,093

Comprehensive income

 

 

 

 

 

11,093

 

 

11,093

Balances at June 30, 2021

 

5,658,481

$

667

$

30,657

$

$

284,501

$

(55,212)

$

260,613

Stock options exercised

 

 

 

 

 

 

 

Stock-based compensation

 

(14)

 

 

560

 

 

 

 

560

Treasury shares purchased

 

 

 

 

 

 

 

Cash dividends paid

 

 

 

 

 

(906)

 

 

(906)

Net income

11,308

11,308

Comprehensive income

 

 

 

 

 

11,308

 

 

11,308

Balances at September 30, 2021

 

5,658,467

$

667

$

31,217

$

$

294,903

$

(55,212)

$

271,575

Accumulated

 

Common Stock

Additional

Other

 

    

Shares

    

    

Paid-In

    

Comprehensive

    

Retained

    

Treasury

    

 

Outstanding

Amount

Capital

(Loss) Income

Earnings

Stock

Total

 

Balances at December 31, 2019

 

5,622,826

$

663

$

27,464

$

(1)

$

243,566

$

(54,560)

$

217,132

Stock options exercised

 

2,000

 

 

81

 

 

 

 

81

Stock-based compensation

 

3,063

 

1

 

378

 

 

 

 

379

Treasury shares purchased

 

(704)

 

 

 

 

 

(64)

 

(64)

Cash dividends paid

 

 

 

 

(899)

 

 

(899)

Net income

 

5,544

5,544

Mark to market of foreign exchange hedges, net of $2 tax benefit

 

 

 

 

(6)

 

 

 

(6)

Comprehensive (loss) income

 

 

 

 

(6)

 

5,544

 

 

5,538

Balances at March 31, 2020

 

5,627,185

$

664

$

27,923

$

(7)

$

248,211

$

(54,624)

$

222,167

Stock-based compensation

 

3,143

 

 

463

 

 

 

 

463

Treasury shares purchased

 

(2,459)

 

 

 

 

 

(218)

 

(218)

Cash dividends paid

 

 

 

 

 

(901)

 

 

(901)

Net income

 

6,101

6,101

Mark to market of foreign exchange hedges, net of $2 tax expense

 

 

 

 

7

 

 

 

7

Comprehensive income

 

 

 

 

7

 

6,101

 

 

6,108

Balances at June 30, 2020

 

5,627,869

$

664

$

28,386

$

$

253,411

$

(54,842)

$

227,619

Stock options exercised

2,945

Stock-based compensation

 

(53)

 

 

502

 

 

 

 

502

Treasury shares purchased

Cash dividends paid

 

 

 

 

 

(901)

 

 

(901)

Net income

9,324

9,324

Comprehensive (loss) income

 

 

 

 

 

9,324

 

 

9,324

Balances at September 30, 2020

 

5,630,761

$

664

$

28,888

$

$

261,834

$

(54,842)

$

236,544

5

See accompanying notes to condensed consolidated financial statements.

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

Nine Months Ended September 30,

2021

2020

OPERATING ACTIVITIES:

    

    

    

Net income

$

29,432

$

20,969

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

Depreciation, depletion and amortization

 

15,632

 

14,391

Amortization of deferred financing costs

 

6

 

5

Deferred income taxes

 

2,049

 

4,369

Loss on sale of property, plant and equipment

 

41

 

144

Stock-based compensation

 

1,678

 

1,344

Changes in operating assets and liabilities:

Trade receivables, net

 

(6,263)

 

(758)

Inventories, net

 

450

 

(1,242)

Prepaid expenses and other current assets

 

844

 

289

Other assets

 

(86)

 

165

Accounts payable and accrued expenses

 

266

 

2,296

Other liabilities

 

78

 

(65)

Net cash provided by operating activities

 

44,127

 

41,907

INVESTING ACTIVITIES:

Purchase of property, plant and equipment

 

(23,731)

 

(13,621)

Acquisition of a business

(8,392)

Proceeds from sale of property, plant and equipment

 

171

 

58

Net cash used in investing activities

 

(23,560)

 

(21,955)

FINANCING ACTIVITIES:

Cash dividends paid

(2,715)

(2,701)

Proceeds from exercise of stock options

 

83

 

81

Purchase of treasury shares

 

(95)

 

(282)

Net cash used in financing activities

 

(2,727)

 

(2,902)

Net increase in cash and cash equivalents

 

17,840

 

17,050

Cash and cash equivalents at beginning of period

 

83,562

 

54,260

Cash and cash equivalents at end of period

$

101,402

$

71,310

See accompanying notes to condensed consolidated financial statements.

6

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, 2020. The results of operations for the three- and nine -month periods ended September 30, 2021 are not necessarily indicative of operating results for the full year.

On July 1, 2020, the Company acquired 100% of the equity interest of Carthage Crushed Limestone (“Carthage”), a limestone mining and production company located in Carthage, Missouri, for $8.4 million cash. Carthage produces aggregate and pulverized limestone products that are used primarily in the agricultural, construction, roofing, and industrial industries. Carthage contributed $7.4 and $2.3 million of revenues in the nine -month periods ended September 30, 2021 and 2020, respectively, which are included in the condensed consolidated statements of operations.

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, Colorado Lime Company, Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair, ART Quarry TRS LLC (DBA Carthage Crushed Limestone) 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.

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 2021 and 2020 revenues was $9.5 million and $8.0 million, for the respective three-month periods ended September 30, and $26.0 million and $21.3 million for the respective nine-month periods ended September 30, 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.

The Company operates its lime and limestone operations within a single geographic region and derives all revenues from that segment from the sale of lime and limestone products. See Note 4 to the condensed consolidated financial statements for disaggregation of revenues by segment, which the Company believes best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

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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 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. Business 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 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 its lime and limestone operations includes all of the Company’s 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 its natural gas interests, unallocated corporate assets and cash items.

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The following table sets forth operating results and certain other financial data for the Company’s lime and limestone operations segment and other (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Revenues

2021

2020

2021

2020

Lime and limestone operations

$

51,749

$

43,473

$

141,847

$

119,049

Other

 

562

 

254

 

1,300

 

665

Total revenues

$

52,311

$

43,727

$

143,147

$

119,714

Depreciation, depletion and amortization

Lime and limestone operations

$

4,844

$

4,706

$

15,002

$

13,681

Other

 

145

 

174

 

430

 

543

Total depreciation, depletion and amortization

$

4,989

$

4,880

$

15,432

$

14,224

Gross profit (loss)

Lime and limestone operations

$

17,128

$

14,256

$

45,634

$

34,802

Other

 

213

 

(74)

 

307

 

(386)

Total gross profit

$

17,341

$

14,182

$

45,941

$

34,416

Operating profit (loss)

Lime and limestone operations

$

13,983

$

11,347

$

36,465

$

25,793

Other

213

 

(74)

 

307

 

(386)

Total operating profit

$

14,196

$

11,273

$

36,772

$

25,407

Identifiable assets, at period end

Lime and limestone operations

$

204,841

$

194,819

$

204,841

$

194,819

Other

 

106,067

 

76,888

106,067

76,888

Total identifiable assets

$

310,908

$

271,707

$

310,908

$

271,707

Capital expenditures

Lime and limestone operations

$

5,955

$

3,022

$

23,731

$

13,621

Other

 

 

 

 

Total capital expenditures

$

5,955

$

3,022

$

23,731

$

13,621

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5. Income Per Share of Common Stock

On April 30, 2021, the shareholders approved an increase in the Company’s number of authorized shares of common stock from 15,000,000 to 30,000,000. At September 30, 2021, the Company had 30,000,000 shares of common stock authorized and 5,658,467 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 September 30,

Nine Months Ended September 30,

    

2021

    

2020

    

2021

    

2020

    

Net income for basic and diluted income per common share

$

11,308

$

9,324

$

29,432

$

20,969

Weighted-average shares for basic income per common share

 

5,658

 

5,630

 

5,656

 

5,628

Effect of dilutive securities:

Employee and director stock options(1)

 

13

 

11

 

12

 

10

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

 

5,671

 

5,641

 

5,668

 

5,638

Basic net income per common share

$

2.00

$

1.66

$

5.20

$

3.73

Diluted net income per common share

$

1.99

$

1.65

$

5.19

$

3.72

(1) Excludes 0 and 7 stock options for the three- and nine month 2020 periods, respectively, as anti-dilutive because the exercise price exceeded the average per share market price for the period.

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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):

September 30,

December 31,

2021

2020

 

Lime and limestone inventories:

    

    

    

    

Raw materials

$

2,905

$

4,279

Finished goods

 

2,787

 

2,866

5,692

7,145

Service parts inventories

 

9,068

 

8,065

$

14,760

$

15,210

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 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 September 30, 2021, the Company had no debt outstanding and no draws on the Revolving Facility other than $0.4 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 3 years at each of September 30, 2021 and December 31, 2020. Some operating leases include options to extend the leases for up to 5 years. The liability for the Company’s operating leases was discounted to present value using a weighted-average discount rate of 2.9% and 3.4% at September 30, 2021 and December 31, 2020, respectively.

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The components of lease costs for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

    

Classification

    

2021

    

2020

    

2021

    

2020

Operating lease costs(1)

Cost of revenues

$

444

$

374

$

1,279

$

1,214

Operating lease costs(1)

Selling, general and administrative expenses

64

68

 

196

 

182

Rental revenues

Interest and other income, net

(28)

(27)

 

(69)

 

(62)

Net operating lease costs

$

480

$

415

$

1,406

$

1,334

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

As of September 30, 2021, 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):

2021 (excluding the nine months ended September 30, 2021)

$

329

2022

793

2023

443

2024

436

2025

291

Thereafter

830

Total future minimum lease payments

3,122

Less imputed interest

(103)

Present value of lease liabilities

$

3,019

Supplemental cash flow information pertaining to the Company’s leasing activity for the nine months ended September 30, 2021 and 2020 is as follows (in thousands):

Nine Months Ended September 30,

2021

2020

Cash payments for operating lease liabilities

$

1,059

$

1,256

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

$

1,545

$

17

9. Income Taxes

The Company has estimated that its effective income tax rate for 2021 will be 20.1%. 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 September 10, 2021, the Company paid $0.9 million in cash dividends, based on a dividend of $0.16 per share of its common stock, to shareholders of record at the close of business on August 20, 2021. On June 11, 2021, the Company paid $0.9 million in cash dividends, based on a dividend of $0.16 per share of its common stock, to

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shareholders of record at the close of business on May 21, 2021. On March 12, 2021, the Company paid $0.9 million in cash dividends, based on a dividend of $0.16 per share of its common stock, to shareholders of record at the close of business on February 19, 2021.

11. Subsequent Event

On October 27, 2021, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.16 per share on the Company’s common stock. This dividend is payable on December 10, 2021 to shareholders of record at the close of business on November 19, 2021.

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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 disruptions, labor shortages, 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, including the Carthage acquisition, 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 law, legislative impasses, extended governmental shutdowns, trade wars, tariffs, economic and regulatory uncertainties under state governments and the United States Administration and Congress, Federal Reserve responses to inflationary concerns, and inability to continue to maintain or increase prices for the Company’s products, including passing through the increased costs and availability of transportation, 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 requirements, 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, 2020 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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Overview.

We have identified one reportable business segment based on the distinctness of our activities and products: lime and limestone operations. All of our operations are in the United States. Operating profit from our lime and limestone operations includes all of our selling, general and administrative costs. We do not allocate interest expense and interest and other income (expense), net to our lime and limestone operations.

Through our lime and limestone operations, 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, Colorado Lime Company, Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair, ART Quarry TRS LLC (DBA Carthage Crushed Limestone) and U.S. Lime Company – Transportation. The lime and limestone operations represent our principal business.

On July 1, 2020, we acquired Carthage Crushed Limestone (“Carthage”), a limestone mining and production company located in Carthage, Missouri, for $8.4 million cash. Carthage provides aggregate and pulverized limestone products that are used primarily in the agriculture, roofing, and construction industries. Carthage contributed $7.4 million to our revenues for the nine-months ended September 30, 2021 compared to $2.3 million for the nine-months ended September 30, 2020.

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 interests, unallocated corporate assets, and cash items are included in Other identified assets.

Our lime and limestone revenues increased 19.0% and 19.2% in the third quarter and first nine months 2021, respectively, compared to the third quarter and first nine months 2020. In the second and third quarters 2020, the COVID-19 pandemic and related governmental restrictions on business activities resulted in a general economic slowdown, which disproportionately impacted certain industries that purchase our products, including oil and gas services, environmental, and steel. The increase in lime and limestone revenues in the third quarter 2021, compared to the third quarter 2020, resulted primarily from increased sales to our construction, steel, industrial, environmental, and oil and gas customers. Including the added Carthage revenues, the increase in lime and limestone revenues in the first nine months 2021, compared to the first nine months 2020, resulted primarily from increased sales to our construction, steel, environmental, and roofing customers. Revenues in in the third quarter and first nine months 2021 were also favorably impacted by increases of 0.5% and 1.6%, respectively, in the average selling prices for our lime and limestone products.

Our lime and limestone gross profit increased 20.1% and 31.1% in the third quarter and first nine months 2021, respectively, compared to the third quarter and first nine months 2020. The increases in gross profit in the 2021 periods, compared to the comparable 2020 periods, resulted primarily from the increased revenues discussed above and increased operating efficiencies, partially offset by higher fuel costs, including solid fuels, natural gas, and diesel.

Federal responses to the COVID-19 pandemic, including mandates that employers with 100 or more employees require vaccination or weekly virus testing, have been announced and are in the process of final rule implementation. We are assessing the impact of these federal requirements, as well as their intersection with state requirements in the locations in which we operate. Implementation of new pandemic related requirements, new variants of the virus and the possibility of new wide-spread or localized outbreaks of the virus could have a material adverse effect on our financial condition, results of operations, cash flows and competitive position. Additionally, we continue to experience lower availability of labor and certain supplies and services and rising costs as the economy adjusts to a post-pandemic environment.

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Looking ahead, we anticipate continued inflationary pressures and challenges in the availability and costs of fuel and many of our inputs while the broader economy adjusts to its reopened status. We will continue to monitor the evolving COVID-19 situation and adjust our operations as necessary.

Liquidity and Capital Resources.

Net cash provided by operating activities was $44.1million in the first nine months 2021, compared to $41.9 million in the first nine months 2020, an increase of $2.2 million, or 5.3%. 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 nine months 2021, net cash provided by operating activities was principally composed of $29.4 million net income, $15.6 million DD&A, $2.0 million deferred income taxes, $1.7 million stock-based compensation, and a $4.7 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2021 included an increase of $6.3 million in trade receivables, net, due primarily from increased sales in the third quarter 2021 compared to the fourth quarter 2020, a decrease of $0.8 million in prepaid expenses and other assets, and a decrease of $0.5 million in inventories. In the first nine months 2020, net cash provided by operating activities was principally composed of $21.0 million net income, $14.4 million DD&A, $4.4 million deferred income taxes, $1.3 million stock-based compensation, and a $0.7 million increase from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2020 included an increase of $0.8 million in trade receivables, net, an increase of $1.2 million in inventories, and an increase of $2.3 million in accounts payable and accrued expenses, primarily due to timing of payments on certain capital projects and the deferral of the payment of certain payroll taxes provided for under the CARES Act in the second and third quarters.

We had $23.7 million in capital expenditures in the first nine months 2021, compared to $22.0 million in the first nine months 2020, which included $8.4 million for the acquisition of Carthage. Capital expenditures in the first nine months 2021 included $9.8 million of investment to develop our Love Hollow Quarry and improve the transportation infrastructure between the Love Hollow Quarry and our Arkansas Lime production facilities. Net cash used in financing activities was $2.7 million in the first nine months 2021, compared to $2.9 million in the first nine months 2020, consisting primarily of cash dividends paid in each period.

Cash and cash equivalents increased $17.8 million to $101.4 million at September 30, 2021, from $83.6 million at December 31, 2020.

We are not committed to any planned capital expenditures until actual orders are placed for equipment. As of September 30, 2021, 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.

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At September 30, 2021, we had no debt outstanding and no draws on the Revolving Facility other than $0.4 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 third quarter 2021 were $52.3 million, compared to $43.7 million in the third quarter 2020, an increase of $8.6 million, or 19.6%. For the first nine months 2021, revenues were $143.1 million, compared to $119.7 million in the first nine months 2020, an increase of $23.4 million, or 19.6%. Revenues from our lime and limestone operations in the third quarter 2021 increased $8.3 million, or 19.0%, to $51.7 million from $43.5 million in the third quarter 2020. For the first nine months 2021, revenues from our lime and limestone operations increased $22.8 million, or 19.2%, to $141.8 million, compared to $119.0 million in the first nine months 2020. The increase in lime and limestone revenues in the third quarter were primarily due to an 18.5% increase in sales volume, compared to the third quarter 2020, principally due to increased demand from our construction, steel, industrial, environmental, and oil and gas customers. In addition to the added Carthage revenues, the increase in lime and limestone revenues in the first nine months 2021, compared to the first nine months 2020, resulted primarily from increased sales volume of 17.1% principally due to increased demand from our construction, steel, environmental, and roofing customers. Revenues also included $0.6 million and $1.3 million from our natural gas interests in the third quarter and first nine months 2021, respectively, compared to $0.3 million and $0.7 million in the comparable 2020 periods, respectively.

Gross profit was $17.3 million and $45.9 million in the third quarter and first nine months 2021, respectively, compared to $14.2 million and $34.4 million in the comparable 2020 periods, increases of $3.2 million and $11.5 million, or 22.3% and 33.5%, respectively. Gross profit from our lime and limestone operations in the third quarter and first nine months 2021 was $17.1 million and $45.6 million, respectively, compared to $14.3 million and $34.8 million in the comparable 2020 periods, increases of $2.9 million, or 20.1%, and $10.8 million, or 31.1%, respectively. The increases in gross profit in the 2021 periods, compared to the comparable 2020 periods, resulted primarily from the increased revenues discussed above and increased operating efficiencies, partially offset by higher fuel costs. Gross profit also included $213 thousand and $307 thousand from our natural gas interests in the third quarter and first nine months 2021, respectively, compared to losses of $74 thousand and $386 thousand in the third quarter and first nine months 2020, respectively.

Selling, general and administrative (“SG&A”) expenses were $3.1 million in the third quarter 2021, compared to $2.9 million in the third quarter 2020, an increase of $0.2 million, or 8.1%. SG&A expenses were $9.2 million in the first nine months 2021, compared to $9.0 million in the first nine months 2020, an increase of $0.2 million, or 1.8%. The increase in SG&A expenses in the third quarter 2021, compared to the third quarter 2020, was primarily due to increased personnel expenses, including stock-based compensation. In the first nine months 2021, compared to the first nine months 2020, the increased personnel expenses were partially offset by lower legal expenses in the first nine months 2020, compared to higher legal expenses in the first nine months 2020, which were largely related to the acquisition of Carthage in the first nine months 2020.

Interest expense was $63 thousand in the third quarter 2021, compared to $62 thousand in the third quarter 2020, and $187 thousand in the first nine months 2021, compared to $186 thousand in the first nine months 2020. We had no outstanding debt during any of the periods. Interest and other income, net was $147 thousand and $272 thousand in the third quarter and first nine months 2021, respectively, compared to $49 thousand and $400 thousand, respectively, in the comparable 2020 periods.

Income tax expense was $3.0 million and $7.4 million in the third quarter and first nine months 2021, respectively, compared to $1.9 million and $4.7 million, respectively, in the comparable 2020 periods. 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 $11.3 million ($1.99 per share diluted) in the third quarter 2021, compared to net income of $9.3 million ($1.65 per share diluted) in the third quarter 2020, an increase of $2.0 million, or 21.3%. Net income in the first nine months 2021 was $29.4 million ($5.19 per share diluted), an increase of $8.5 million, or 40.4%, compared to net income of $21.0 million ($3.72 per share diluted) in the first nine months 2020.

17

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 September 30, 2021. 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.   There were no repurchases in the third quarter 2021 pursuant to these provisions or otherwise.

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 September 30, 2021 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.

18

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).

19

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.

October 28, 2021

By:

/s/ Timothy W. Byrne

Timothy W. Byrne

President and Chief Executive Officer

(Principal Executive Officer)

October 28, 2021

By:

/s/ Michael L. Wiedemer

Michael L. Wiedemer

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

20

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