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, 2024
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 29, 2024, 28,594,270 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,
2024
2023
ASSETS
Current assets
Cash and cash equivalents
$
255,022
187,964
Trade receivables, net
52,905
38,052
Inventories
27,783
24,313
Prepaid expenses and other current assets
2,749
4,640
Total current assets
338,459
254,969
Property, plant and equipment
483,108
469,598
Less accumulated depreciation and depletion
(305,318)
(289,803)
Property, plant and equipment, net
177,790
179,795
Operating lease right-of-use assets
4,964
5,273
Other assets, net
546
565
Total assets
521,759
440,602
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable
8,496
7,404
Current portion of operating lease liabilities
1,531
1,582
Accrued expenses
8,671
8,505
Total current liabilities
18,698
17,491
Deferred tax liabilities, net
23,834
24,659
Operating lease liabilities, excluding current portion
3,633
3,919
Other liabilities
1,380
1,429
Total liabilities
47,545
47,498
Stockholders’ equity
Common stock, $0.10 par value; 45,000,000 and 30,000,000 shares authorized at September 30, 2024 and December 31, 2023, respectively; 28,594,270 and 28,522,780 shares outstanding at September 30, 2024 and December 31, 2023, respectively
2,963
2,955
Additional paid-in capital
39,251
35,539
Retained earnings
490,061
412,499
Less treasury stock, at cost
(58,061)
(57,889)
Total stockholders’ equity
474,214
393,104
Total liabilities and stockholders’ equity
See accompanying notes to condensed consolidated financial statements.
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
Revenues
89,427
100.0
%
74,878
237,659
215,638
Cost of revenues
Labor and other operating expenses
40,282
45.0
40,827
54.5
111,222
46.8
118,796
55.1
Depreciation, depletion and amortization
6,032
6.8
5,896
7.9
17,895
7.5
17,564
8.1
46,314
51.8
46,723
62.4
129,117
54.3
136,360
63.2
Gross profit
43,113
48.2
28,155
37.6
108,542
45.7
79,278
36.8
Selling, general and administrative expenses
4,976
5.6
4,355
5.8
14,706
6.2
12,826
6.0
Operating profit
38,137
42.6
23,800
31.8
93,836
39.5
66,452
30.8
Other (income) expense, net
(3,061)
(3.5)
(2,197)
(2.9)
(8,387)
(5,529)
(2.6)
Income before income tax expense
41,198
46.1
25,997
34.7
102,223
43.0
71,981
33.4
Income tax expense
7,845
8.8
5,264
7.0
20,374
8.6
14,432
6.7
Net income
33,353
37.3
20,733
27.7
81,849
34.4
57,549
26.7
Net income per share of common stock
Basic
1.17
0.73
2.86
2.02
Diluted
1.16
2.85
3
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common Stock
Additional
Shares
Paid-In
Retained
Treasury
Outstanding
Amount
Capital
Earnings
Stock
Total
Balances at December 31, 2023
28,522,780
Stock options exercised
12,000
1
129
—
130
Stock-based compensation
14,785
1,240
1,241
Treasury shares purchased
(3,435)
(172)
Cash dividends paid
(1,426)
22,439
Balances at March 31, 2024
28,546,130
2,957
36,908
433,512
415,316
40,025
4
(4)
8,115
1,145
1,147
(1,431)
26,057
Balances at June 30, 2024
28,594,270
38,049
458,138
441,089
1,202
(1,430)
Balances at September 30, 2024
Balances at December 31, 2022
28,410,395
2,944
32,255
342,504
(56,615)
321,088
28,810
110
113
15,620
810
812
(3,230)
(98)
(1,137)
17,104
Balances at March 31, 2023
28,451,595
2,949
33,175
358,471
(56,713)
337,882
15,910
795
796
(1,139)
19,712
Balances at June 30, 2023
28,467,505
2,950
33,970
377,044
357,251
17,630
(2)
(135)
787
Balances at September 30, 2023
28,485,000
2,952
34,755
396,638
377,632
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES:
Adjustments to reconcile net income to net cash provided by operating activities:
18,125
17,783
Amortization of deferred financing costs
9
Deferred income taxes
(825)
(319)
Gain on disposition of property, plant and equipment
(46)
(85)
3,590
2,396
Changes in operating assets and liabilities:
(14,853)
(10,469)
(3,470)
(4,199)
1,891
1,185
Other assets
17
(159)
Accounts payable and accrued expenses
1,214
949
(80)
42
Net cash provided by operating activities
87,414
64,682
INVESTING ACTIVITIES:
Purchase of property, plant and equipment
(16,371)
(20,541)
Proceeds from sale of property, plant and equipment
344
2,180
Net cash used in investing activities
(16,027)
(18,361)
FINANCING ACTIVITIES:
(4,287)
(3,415)
Proceeds from exercise of stock options
Purchase of treasury shares
Net cash used in financing activities
(4,329)
(3,400)
Net increase in cash and cash equivalents
67,058
42,921
Cash and cash equivalents at beginning of period
133,384
Cash and cash equivalents at end of period
176,305
5
Notes to Condensed Consolidated Financial Statements
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, 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, 2023. The results of operations for the three- and nine-month periods ended September 30, 2024 are not necessarily indicative of operating results for the full year.
Recent Events. On May 2, 2024, the shareholders of the Company approved an increase in the Company’s number of authorized shares of common stock from 30,000,000 to 45,000,000. On July 12, 2024, the Company effected a 5-for-1 split of its common stock in the form of a stock dividend of four additional shares of common stock for each share outstanding to shareholders of record at the close of business on June 21, 2024 (the “Stock Split”). All share and per share information, including stock-based compensation, throughout this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the Stock Split. The shares of common stock retain a par value of $0.10 per share. Accordingly, an amount equal to the aggregate par value of the additional shares issued in the Stock Split was reclassified from additional paid-in capital to common stock for all periods presented.
The number and terms of stock-based compensation awards have been adjusted, in order to prevent dilution or enlargement of the rights of participants under the Company’s Amended and Restated 2001 Long-Term Incentive Plan, as Amended and Restated. The fair value of all outstanding awards immediately after the Stock Split did not change when compared to the fair value of such awards immediately prior to the Stock Split. In addition, there was no change to the vesting conditions or classification of any of the awards. No incremental compensation expense was recognized as a result of such adjustments.
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, oil and gas services, and agriculture (including poultry producers) 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, 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.
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 2024 and 2023 revenues was $12.3 million and $12.2 million, for the respective three-month periods ended September 30, and $34.5 million and $35.4
6
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.
Trade Receivables, Net. 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, and are generally fixed, short-term and do not contain a significant financing component. 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 are any meaningful asset-specific differences within its trade receivables 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.
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 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 the Company’s selling, general and administrative costs. The Company does not allocate interest income and expense and other expense to its lime and limestone operations. Other identifiable assets include assets related to the Company’s natural gas interests, unallocated corporate assets, and cash items.
7
Operating results and certain other financial data for the three- and nine-month periods ended September 30, 2024 and 2023 for the Company’s lime and limestone operations segment and other are as follows (in thousands):
Lime and limestone operations
89,212
74,582
236,936
214,808
Other
215
296
723
830
Total revenues
5,905
5,763
17,518
17,179
127
133
377
385
Total depreciation, depletion and amortization
Gross profit (loss)
43,179
28,160
108,690
79,339
(66)
(5)
(148)
(61)
Total gross profit
Operating profit (loss)
38,204
23,807
93,993
66,523
(67)
(7)
(157)
(71)
Total operating profit
Identifiable assets, at period end
263,214
244,039
258,545
180,016
Total identifiable assets
424,055
Capital expenditures
9,547
15,090
16,371
20,541
Total capital expenditures
8
5. Income and Dividends Per Share of Common Stock
At September 30, 2024, the Company had 45,000,000 shares of common stock authorized and 28,594,270 shares outstanding, after adjusting for the Stock Split.
The following table sets forth the computation of basic and diluted income per common share (in thousands, except per share amounts):
Net income for basic and diluted income per common share
Weighted-average shares for basic income per common share
28,594
28,480
28,574
28,455
Effect of dilutive securities:
Employee and director stock options(1)
80
109
70
Adjusted weighted-average shares and assumed exercises for diluted income per common share
28,727
28,560
28,683
28,525
Basic net income per common share
Diluted net income per common share
The Company paid $0.05 and $0.15 of cash dividends per share of common stock in the three- and nine-month periods ended September 30, 2024, respectively. The Company paid $0.04 and $0.12 of cash dividends per share of common stock in the three- and nine-month periods ended September 30, 2023, respectively.
6. Inventories
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 consisted of the following (in thousands):
Lime and limestone inventories:
Raw materials
8,808
7,834
Finished goods
3,052
3,107
11,860
10,941
Parts inventories
15,923
13,372
7. Banking Facilities and Debt
The Company’s credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of August 3, 2023, 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 August 3, 2028.
Interest rates on the Revolving Facility are, at the Company’s option, SOFR, plus a SOFR adjustment rate of 0.10%, 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 0.225% 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, 2024, the Company had no debt outstanding and no draws on the Revolving Facility other than $0.5 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 0 to 7 years, with a weighted-average remaining lease term of 4 years at both September 30, 2024 and December 31, 2023. Some operating leases include options to extend the leases for up to 5 years and are only considered in the lease terms if the Company is reasonably certain it will exercise the option to extend.
The components of lease costs for the three- and nine-month periods ended September 30, 2024 and 2023 were as follows (in thousands):
Classification
Operating lease costs(1)
700
823
1,948
2,400
76
51
229
131
Rental revenues
(47)
(129)
(269)
(357)
(13)
(23)
(74)
(59)
Net operating lease costs
716
722
1,834
2,115
As of September 30, 2024, 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):
2024 (excluding the nine months ended September 30, 2024)
468
2025
1,542
2026
1,456
2027
1,093
2028
508
Thereafter
599
Total future minimum lease payments
5,666
Less imputed interest
(502)
Present value of lease liabilities
5,164
10
Supplemental cash flow information pertaining to the Company’s leasing activity for the nine months ended September 30, 2024 and 2023 is as follows (in thousands):
Cash payments for lease liabilities included in operating cash flows
1,450
1,227
Right-of-use assets obtained in exchange for operating lease obligations
827
511
9. Income Taxes
The Company has estimated that its effective income tax rate for 2024 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 September 13, 2024, the Company paid $1.4 million in cash dividends, based on a dividend of $0.05 per share of its common stock, to shareholders of record at the close of business on August 23, 2024. On June 14, 2024, the Company paid $1.4 million in cash dividends, based on a dividend of $0.05 per share of its common stock, to shareholders of record at the close of business on May 24, 2024. On March 15, 2024, the Company paid $1.4 million in cash dividends, based on a dividend of $0.05 per share of its common stock, to shareholders of record at the close of business on February 23, 2024.
11. Subsequent Event
On October 30, 2024, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.05 per share on the Company’s common stock. This dividend is payable on December 13, 2024, to shareholders of record at the close of business on November 22, 2024.
11
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 cybersecurity threats and incidents, utility disruptions, supply chain delays and disruptions, labor shortages and disruptions, or regulatory requirements; (v) volatile coal, petroleum coke, diesel, natural gas, electricity, and transportation 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) 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; (vii) 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, downgrades and defaults on U.S. government obligations, trade wars, tariffs, international incidents, including conflicts in Ukraine, Israel, and the broader Middle East, oil cartel production and supply actions, sanctions, economic and regulatory uncertainties under state governments and the United States Administration and Congress, inflation, recession, and other macroeconomic concerns, Federal Reserve responses to macroeconomic concerns, including the effect of changing interest rates, and inability to continue to maintain or increase prices for the Company’s products, including passing through any increased costs of energy, labor, parts and supplies, and changes in inflationary expectations; (viii) 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; (ix) estimates of resources and reserves and remaining lives of reserves; (x) the impact of potential global pandemics, epidemics, or disease outbreaks, 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 and mandates, on the Company’s financial condition, results of operations, cash flows, and competitive position; (xi) the impact of social or political unrest; (xii) risks relating to mine safety and reclamation and remediation; and (xiii) 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, 2023 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
12
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, oil and gas services, and agriculture (including poultry producers) 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, 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 in the United States. Our other operations consists of natural gas interests through our wholly owned subsidiary, U.S. Lime Company-O&G, LLC. Assets related to our natural gas interests, 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 periods.
Our revenues increased 19.4% and 10.2% in the third quarter and first nine months 2024, respectively, compared to the third quarter and first nine months 2023. Revenues from our lime and limestone operations increased 19.6% in the third quarter 2024, compared to the third quarter 2023, due to a 14.2% increase in the average selling prices for our lime and limestone products and a 5.4% increase in sales volumes of our lime and limestone products, which was principally due to increased demand from our construction and roof shingle customers. Revenues from our lime and limestone operations increased 10.3% in the first nine months 2024, compared to the first nine months 2023, due to a 14.3% increase in the average selling prices for our lime and limestone products, partially offset by a 4.0% decrease in sales volumes of our lime and limestone products, principally due to decreased demand from our construction customers, which was partially offset by increased demand from our industrial and roof shingle customers. While overall demand from our construction customers is down for the first nine months 2024, compared to the first nine months 2023, construction demand improved in the third quarter 2024 as weather conditions in the South-Central United States returned to a more normal pattern compared to the heavier than usual rainfalls that we experienced in the first half 2024.
Our gross profit increased 53.1% and 36.9% in the third quarter and first nine months 2024, respectively, compared to the third quarter and first nine months 2023. Gross profit from our lime and limestone operations increased 53.3% and 37.0% in the third quarter and first nine months 2024, respectively, compared to the third quarter and first nine months 2023. The increases in gross profit resulted primarily from the increases in revenues discussed above and decreases in operating expenses, somewhat attributed to lower natural gas prices and optimizing fuel blends on our kilns.
On May 2, 2024, our shareholders approved an increase in the number of authorized shares of our common stock from 30,000,000 to 45,000,000. On July 12, 2024, we effected a 5-for-1 split of our common stock, in the form of a stock dividend of four additional shares of common stock for each share outstanding to shareholders of record at the close of business on June 21, 2024 (the “Stock Split”). All share and per share information, including stock-based compensation, throughout this Quarterly Report on Form 10-Q has been retroactively adjusted to reflect the Stock Split. The shares of common stock retain a par value of $0.10 per share.
Liquidity and Capital Resources.
Net cash provided by operating activities was $87.4 million in the first nine months 2024, compared to $64.7 million in the first nine months 2023, an increase of $22.7 million, or 35.1%. 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 2024, net cash provided by operating activities was principally composed of $81.8 million net income, $18.1 million DD&A, and $3.6 million stock-based compensation, partially offset by $0.8 million deferred income taxes and a $15.3 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2024 included an increase of $14.9 million in trade receivables, net, due primarily to increased sales in the third quarter 2024 compared to the fourth quarter 2023, and an increase of $3.5 million in inventories, partially offset by a decrease of $1.9 million in prepaid expenses and other current assets and an increase of $1.2 million in accounts payable and accrued expenses. In the first nine months 2023, net cash provided by operating activities was principally
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composed of $57.5 million net income, $17.8 million DD&A, and $2.4 million stock-based compensation, partially offset by $0.3 million deferred income taxes and a $12.6 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2023 included an increase of $10.5 million in trade receivables, net, due primarily to increased sales in the third quarter 2023 compared to the fourth quarter 2022, and an increase of $4.2 million in inventories, partially offset by a decrease of $1.2 million in prepaid expenses and other current assets and an increase of $0.9 in accounts payable and accrued expenses.
We had $16.4 million in capital expenditures in the first nine months 2024, compared to $20.5 million in the first nine months 2023. Net cash used in financing activities was $4.3 million in the first nine months 2024, compared to $3.4 million in the first nine months 2023, consisting primarily of cash dividends paid in each period.
Cash and cash equivalents increased $67.0 million to $255.0 million at September 30, 2024 from $188.0 million at December 31, 2023.
We are not committed to any planned capital expenditures until actual orders are placed for equipment. As of September 30, 2024, we did not have any material commitments for open purchase orders. In September 2024, we received the necessary permit to construct a new vertical kiln at our Texas Lime Company facility. We estimate the construction costs of the new kiln and related equipment and infrastructure will total approximately $65 million. We intend to fund this modernization and development project at our Texas Lime Company facility through cash on hand and cash flows from operations.
Our credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of August 3, 2023, 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 August 3, 2028.
Interest rates on the Revolving Facility are, at our option, SOFR, plus a SOFR adjustment rate of 0.10%, 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 0.225% 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 September 30, 2024, we had no debt outstanding and no draws on the Revolving Facility other than $0.5 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 2024 were $89.4 million, compared to $74.9 million in the third quarter 2023, an increase of $14.5 million, or 19.4%. Revenues from our lime and limestone operations were $89.2 million in the third quarter 2024, compared to $74.6 million in the third quarter 2023, an increase of $14.6 million, or 19.6%. The increase in our revenues in the third quarter 2024, compared to the third quarter 2023, resulted from an increase in the average selling prices for our lime and limestone products and increased sales volumes of our lime and limestone products, principally due to increased demand from our construction and roof shingle customers.
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For the first nine months 2024, revenues were $237.7 million, compared to $215.6 million in the first nine months 2023, an increase of $22.0 million, or 10.2%. For the first nine months 2024, our lime and limestone revenues were $236.9 million, compared to $214.8 million in the first nine months 2023, an increase of $22.1 million, or 10.3%. The increase in our revenues in the first nine months 2024, compared to the first nine months 2023, resulted from an increase in the average selling prices for our lime and limestone products, partially offset by decreased sales volumes of our lime and limestone products, principally due to decreased demand from our construction customers, offset in part by increased demand from our industrial and roof shingle customers.
Gross profit was $43.1 million in the third quarter 2024, compared to $28.2 million in the third quarter 2023, an increase of $15.0 million, or 53.1%. Gross profit from our lime and limestone operations in the third quarter 2024 was $43.2 million, compared to $28.2 million in the third quarter 2023, an increase of $15.0 million, or 53.3%. The increase in gross profit in the third quarter 2024, compared to the third quarter 2023, resulted primarily from the increased revenues discussed above and a decrease in operating expenses, somewhat attributed to lower natural gas prices and optimizing fuel blends on our kilns.
Gross profit was $108.5 million in the first nine months 2024, compared to $79.3 million in the first nine months 2023, an increase of $29.3 million, or 36.9%. Gross profit from our lime and limestone operations in the first nine months 2024 was $108.7 million, compared to $79.3 million in the first nine months 2023, an increase of $29.4 million, or 37.0%. The increase in gross profit in the first nine months 2024, compared to the first nine months 2023, resulted primarily from the increased revenues discussed above and a decrease in operating expenses, somewhat attributed to lower natural gas prices and optimizing fuel blends on our kilns.
Selling, general and administrative (“SG&A”) expenses were $5.0 million in the third quarter 2024, compared to $4.4 million in the third quarter 2023, an increase of $0.6 million, or 14.3%. SG&A expenses were $14.7 million in the first nine months 2024, compared to $12.8 million in the first nine months 2023, an increase of $1.9 million, or 14.7%. The increases in SG&A expenses in the 2024 periods, compared to the comparable 2023 periods, were primarily due to increased personnel expenses, including stock-based compensation.
Other (income) expense, net was $3.1 million income in the third quarter 2024 and $8.4 million income in the first nine months 2024, compared to $2.2 million income in the third quarter 2023 and $5.5 million income in the first nine months 2023. The increases of $0.9 million and $2.9 million in other (income) expense, net during the 2024 periods, compared to the comparable 2023 periods, were primarily due to interest earned on higher average balances in our cash and cash equivalents.
Income tax expense was $7.8 million and $20.4 million in the third quarter and first nine months 2024, compared to $5.3 million and $14.4 million in the comparable 2023 periods. The increases in income tax expense in the 2024 periods, compared to the comparable 2023 periods, were due to the increases in income before taxes.
Our net income was $33.4 million ($1.16 per share diluted) in the third quarter 2024, compared to net income of $20.7 million ($0.73 per share diluted) in the third quarter 2023, an increase of $12.6 million, or 60.9%. For the first nine months 2024, our net income was $81.8 million ($2.85 per share diluted), compared to $57.5 million ($2.02 per share diluted) in the first nine months 2023, an increase of $24.3 million, or 42.2%.
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.
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PART II. OTHER INFORMATION
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Our Amended and Restated 2001 Long-Term Incentive Plan, as Amended and Restated 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 2024 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, 2024 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 5: OTHER INFORMATION
On October 30, 2024, the Company’s Board of Directors (the “Board”) amended Section 2 of Article Three of the Company’s Amended and Restated Bylaws to increase the size of the Board from five to seven directors.
On October 30, 2024, the Board appointed Lila R. Weirich and Jon A. Wolkenstein as directors, effective November 1, 2024. The Board determined that both Ms. Weirich and Mr. Wolkenstein are independent directors as that term is defined by the Nasdaq listing rules and the rules of the SEC under the Securities Exchange Act of 1934, as amended. The Board anticipates Ms. Weirich will be named to the Nominating and Corporate Governance Committee and Mr. Wolkenstein will be named to the Audit Committee.
As non-employee directors, Ms. Weirich and Mr. Wolkenstein will receive cash and equity compensation paid by the Company in the same manner as the Company’s other non-employee directors, including pro rata compensation from the effective date of their appointments to the Board.
The following table sets forth the current compensation schedule for the Company’s non-employee directors:
Annual Retainer
20,000
Daily Meeting or Per Diem Fee
1,500
Telephonic Meeting Fee
1,000
Additional Annual Retainers:
Audit Committee Chairman
10,000
Compensation Committee Chairman
5,000
The non-employee directors are also granted annually, at their option, either 3,000 shares of restricted stock or 9,000 stock options under the Company’s Amended and Restated 2001 Long-Term Incentive Plan, as Amended and Restated. The shares of restricted stock vest six months from the grant date. The options are granted at the closing per share market price of the Company’s common stock on the date of the grant and vest immediately.
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ITEM 6: EXHIBITS
The Exhibit Index set forth below is incorporated by reference in response to this Item.
EXHIBIT INDEX
EXHIBIT
NUMBER
DESCRIPTION
3.1
Amended and Restated Bylaws of United States Lime & Minerals, Inc. as of October 30, 2024.
10.1
Employment Agreement effective as of January 1, 2025, with certain amendments effective as of August 1, 2024, between United States Lime & Minerals, Inc. and Timothy W. Byrne, including Cash Performance Bonus Award Agreement dated as of January 1, 2025 between United States Lime & Minerals, Inc. and Timothy W. Byrne, set forth as Exhibit A thereto (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2024).
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).
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.
October 31, 2024
By:
/s/ Timothy W. Byrne
Timothy W. Byrne
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Michael L. Wiedemer
Michael L. Wiedemer
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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