UNITED STATES LIME & MINERALS 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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, 2023

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 31, 2023, 5,699,974 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,

    

2023

    

2022

    

ASSETS

Current assets

Cash and cash equivalents

$

176,305

$

133,384

Trade receivables, net

 

44,061

 

33,592

Inventories, net

 

23,778

 

19,579

Prepaid expenses and other current assets

 

2,250

 

3,435

Total current assets

 

246,394

 

189,990

Property, plant and equipment

 

456,530

 

441,597

Less accumulated depreciation and depletion

 

(284,469)

 

(269,627)

Property, plant and equipment, net

 

172,061

 

171,970

Operating lease right-of-use assets

5,010

5,372

Other assets, net

 

590

 

440

Total assets

$

424,055

$

367,772

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$

8,070

$

7,725

Current portion of operating lease liabilities

1,494

1,411

Accrued expenses

 

6,438

 

6,401

Total current liabilities

 

16,002

 

15,537

Deferred tax liabilities, net

 

25,263

 

25,582

Operating lease liabilities, excluding current portion

3,740

4,129

Other liabilities

 

1,418

 

1,436

Total liabilities

 

46,423

 

46,684

Stockholders’ equity

Common stock

 

672

 

671

Additional paid-in capital

 

37,035

 

34,528

Retained earnings

 

396,638

 

342,504

Less treasury stock, at cost

 

(56,713)

 

(56,615)

Total stockholders’ equity

 

377,632

 

321,088

Total liabilities and stockholders’ equity

$

424,055

$

367,772

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,

   

2023

2022

2023

2022

 

Revenues

$

74,878

   

100.0

%

$

66,457

   

100.0

%

$

215,638

   

100.0

%

$

177,858

   

100.0

%

Cost of revenues

Labor and other operating expenses

 

40,827

54.5

38,221

57.5

118,796

55.1

108,018

60.7

%

Depreciation, depletion and amortization

 

5,896

7.9

 

5,646

8.5

%

 

17,564

8.1

%

 

16,302

9.2

%

 

46,723

62.4

 

43,867

66.0

 

136,360

63.2

 

124,320

69.9

%

Gross profit

 

28,155

37.6

 

22,590

34.0

 

79,278

36.8

 

53,538

30.1

%

Selling, general and administrative expenses

 

4,355

5.8

 

3,543

5.3

 

12,826

6.0

 

11,026

6.2

%

Operating profit

 

23,800

31.8

 

19,047

28.7

 

66,452

30.8

 

42,512

23.9

%

Other (income) expense, net

 

(2,197)

(2.9)

 

(514)

(0.8)

 

(5,529)

(2.6)

 

(625)

(0.4)

%

Income before income tax expense

 

25,997

34.7

 

19,561

29.5

 

71,981

33.4

 

43,137

24.3

%

Income tax expense

 

5,264

7.0

 

3,835

5.8

 

14,432

6.7

 

8,505

4.8

%

Net income

$

20,733

27.7

$

15,726

23.7

$

57,549

26.7

$

34,632

19.5

%

Net income per share of common stock

Basic

$

3.64

$

2.77

$

10.11

$

6.11

Diluted

$

3.63

$

2.77

$

10.09

$

6.10

See accompanying notes to condensed consolidated financial statements.

3

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands)

(Unaudited)

 

Common Stock

Additional

 

    

Shares

    

    

Paid-In

    

Retained

    

Treasury

    

 

Outstanding

Amount

Capital

Earnings

Stock

Total

 

Balances at December 31, 2022

 

5,682,079

$

671

$

34,528

$

342,504

$

(56,615)

$

321,088

Stock options exercised

 

5,762

 

1

 

112

 

 

 

113

Stock-based compensation

 

3,124

 

 

812

 

 

 

812

Treasury shares purchased

 

(646)

 

 

 

 

(98)

 

(98)

Cash dividends paid

 

 

 

(1,137)

 

 

(1,137)

Net income

 

17,104

17,104

Balances at March 31, 2023

 

5,690,319

$

672

$

35,452

$

358,471

$

(56,713)

$

337,882

Stock-based compensation

 

3,182

 

 

796

 

 

 

796

Cash dividends paid

 

 

 

 

(1,139)

 

 

(1,139)

Net income

 

19,712

19,712

Balances at June 30, 2023

 

5,693,501

$

672

$

36,248

$

377,044

$

(56,713)

$

357,251

Stock options exercised

 

3,526

 

 

 

 

 

Stock-based compensation

 

(27)

 

 

787

 

 

 

787

Cash dividends paid

 

 

 

 

(1,139)

 

 

(1,139)

Net income

20,733

20,733

Balances at September 30, 2023

 

5,697,000

$

672

$

37,035

$

396,638

$

(56,713)

$

377,632

 

Common Stock

Additional

 

    

Shares

    

    

Paid-In

    

Retained

    

Treasury

    

 

Outstanding

Amount

Capital

Earnings

Stock

Total

 

Balances at December 31, 2021

 

5,666,012

$

669

$

31,774

$

301,611

$

(55,848)

$

278,206

Stock-based compensation

 

2,823

 

 

651

 

 

 

651

Treasury shares purchased

 

(712)

 

 

 

 

(86)

 

(86)

Cash dividends paid

 

 

 

(1,133)

 

 

(1,133)

Net income

 

8,668

8,668

Balances at March 31, 2022

 

5,668,123

$

669

$

32,425

$

309,146

$

(55,934)

$

286,306

Stock options exercised

 

2,400

 

 

120

 

 

 

120

Stock-based compensation

 

3,087

 

 

640

 

 

 

640

Cash dividends paid

 

 

 

 

(1,134)

 

 

(1,134)

Net income

 

10,238

10,238

Balances at June 30, 2022

 

5,673,610

$

669

$

33,185

$

318,250

$

(55,934)

$

296,170

Stock-based compensation

 

(36)

 

 

641

 

 

 

641

Cash dividends paid

 

 

 

 

(1,135)

 

 

(1,135)

Net income

15,726

15,726

Balances at September 30, 2022

 

5,673,574

$

669

$

33,826

$

332,841

$

(55,934)

$

311,402

See accompanying notes to condensed consolidated financial statements.

4

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)

Nine Months Ended September 30,

2023

2022

OPERATING ACTIVITIES:

    

    

    

Net income

$

57,549

$

34,632

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

Depreciation, depletion and amortization

 

17,783

 

16,511

Amortization of deferred financing costs

 

9

 

2

Deferred income taxes

 

(319)

 

2,184

Gain on disposition of property, plant and equipment

 

(85)

 

(210)

Stock-based compensation

 

2,396

 

1,932

Changes in operating assets and liabilities:

Trade receivables, net

 

(10,469)

 

(12,405)

Inventories, net

 

(4,199)

 

(2,367)

Prepaid expenses and other current assets

 

1,185

 

1,082

Other assets

 

(159)

 

10

Accounts payable and accrued expenses

 

949

 

2,451

Other liabilities

 

42

 

96

Net cash provided by operating activities

 

64,682

 

43,918

INVESTING ACTIVITIES:

Purchase of property, plant and equipment

 

(20,541)

 

(18,120)

Acquisition of a business, net of cash acquired

(5,630)

Proceeds from sale of property, plant and equipment

 

2,180

 

504

Net cash used in investing activities

 

(18,361)

 

(23,246)

FINANCING ACTIVITIES:

Cash dividends paid

(3,415)

(3,402)

Proceeds from exercise of stock options

 

113

 

120

Purchase of treasury shares

 

(98)

 

(86)

Net cash used in financing activities

 

(3,400)

 

(3,368)

Net increase in cash and cash equivalents

 

42,921

 

17,304

Cash and cash equivalents at beginning of period

 

133,384

 

105,355

Cash and cash equivalents at end of period

$

176,305

$

122,659

See accompanying notes to condensed consolidated financial statements.

5

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by United States Lime & Minerals, Inc. (the “Company”) without independent audit. In the opinion of the Company’s management, all adjustments of a normal and recurring nature necessary to present fairly the financial position, results of operations, 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, 2022. The results of operations for the three- and nine-month periods ended September 30, 2023 are not necessarily indicative of operating results for the full year.

2. Organization

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

On February 9, 2022, the Company acquired 100% of the equity interest of Mill Creek, a dolomite mining and production company located in Mill Creek, Oklahoma, for $5.6 million cash.

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 2023 and 2022 revenues was $12.2 million and $12.3 million, for the respective three-month periods ended September 30, and $35.4 million and 34.0 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. 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 is 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

6

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 and other (income) expense, net. Other identifiable assets include assets related to the Company’s natural gas interests, unallocated corporate assets, and cash items.

Operating results and certain other financial data for the three- and nine-month periods ended September 30, 2023 and 2022 for the Company’s lime and limestone operations segment and other are as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

Revenues

2023

2022

2023

2022

Lime and limestone operations

$

74,582

$

65,699

$

214,808

$

175,608

Other

 

296

 

758

 

830

 

2,250

Total revenues

$

74,878

$

66,457

$

215,638

$

177,858

Depreciation, depletion and amortization

Lime and limestone operations

$

5,763

$

5,513

$

17,179

$

15,882

Other

 

133

 

133

 

385

 

420

Total depreciation, depletion and amortization

$

5,896

$

5,646

$

17,564

$

16,302

Gross profit (loss)

Lime and limestone operations

$

28,160

$

22,166

$

79,339

$

52,338

Other

 

(5)

 

424

 

(61)

 

1,200

Total gross profit

$

28,155

$

22,590

$

79,278

$

53,538

Operating profit (loss)

Lime and limestone operations

$

23,807

$

18,626

$

66,523

$

41,321

Other

(7)

 

421

 

(71)

 

1,191

Total operating profit

$

23,800

$

19,047

$

66,452

$

42,512

Identifiable assets, at period end

Lime and limestone operations

$

244,039

$

228,797

$

244,039

$

228,797

Other

 

180,016

 

127,083

180,016

127,083

Total identifiable assets

$

424,055

$

355,880

$

424,055

$

355,880

Capital expenditures

Lime and limestone operations

$

15,090

$

6,635

$

20,541

$

18,120

Other

 

 

 

 

Total capital expenditures

$

15,090

$

6,635

$

20,541

$

18,120

7

5. Income and Dividends Per Share of Common Stock

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,

    

2023

    

2022

    

2023

    

2022

    

Net income for basic and diluted income per common share

$

20,733

$

15,726

$

57,549

$

34,632

Weighted-average shares for basic income per common share

 

5,696

 

5,674

 

5,691

 

5,671

Effect of dilutive securities:

Employee and director stock options(1)

 

16

 

6

 

14

 

8

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

 

5,712

 

5,680

 

5,705

 

5,679

Basic net income per common share

$

3.64

$

2.77

$

10.11

$

6.11

Diluted net income per common share

$

3.63

$

2.77

$

10.09

$

6.10

(1)Excludes 17 and 14 stock options for the three- and nine-month periods ended September 30, 2022, respectively, as anti-dilutive because the exercise price exceeded the average per share market price for the period. No stock options were excluded for the 2023 periods as anti-dilutive.

The Company paid $0.20 and $0.60 of cash dividends per share of common stock in each of the three- and nine-month periods ended September 30, 2023 and 2022, respectively.

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,

2023

2022

 

Lime and limestone inventories:

    

    

    

    

Raw materials

$

7,271

$

5,506

Finished goods

 

3,153

 

2,951

10,424

8,457

Service parts inventories

 

13,354

 

11,122

$

23,778

$

19,579

7. Banking Facilities and Debt

At September 30, 2023, the Company’s credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of August 3, 2023, provided 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 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

8

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, 2023, the Company had no debt outstanding and no draws on the Revolving Facility other than $0.3 million of letters of credit, which count as draws against the available commitment under the Revolving Facility.

8. Leases

The Company has operating leases for the use of equipment, corporate office space, and some of its terminal and distribution facilities. The leases have remaining lease terms of 0 to 6 years, with a weighted-average remaining lease term of 4 and 3 years at September 30, 2023 and December 31, 2022, respectively. 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 months ended September 30, 2023 and 2022 were as follows (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

     

Classification

     

2023

     

2022

     

2023

     

2022

Operating lease costs(1)

Cost of revenues

$

823

$

606

$

2,400

$

1,746

Operating lease costs(1)

Selling, general and administrative expenses

51

70

 

131

 

210

Rental revenues

Revenues

(129)

(133)

(357)

(310)

Rental revenues

Other (income) expense, net

(23)

(10)

 

(59)

 

(52)

Net operating lease costs

$

722

$

533

$

2,115

$

1,594

(1)Includes the costs of leases with a term of one year or less.

As of September 30, 2023, 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):

2023 (excluding the nine months ended September 30, 2023)

$

412

2024

1,579

2025

1,290

2026

1,193

2027

779

Thereafter

267

Total future minimum lease payments

5,520

Less imputed interest

(285)

Present value of lease liabilities

$

5,235

9

Supplemental cash flow information pertaining to the Company’s leasing activity for the nine months ended September 30, 2023 and 2022 is as follows (in thousands):

Nine Months Ended September 30,

2023

2022

Cash payments for lease liabilities included in operating cash flows

$

1,227

$

1,065

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

$

511

$

1,767

9. Income Taxes

The Company has estimated that its effective income tax rate for 2023 will be 20.0%. 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 15, 2023, the Company paid $1.1 million in cash dividends, based on a dividend rate of $0.20 per share of its common stock, to shareholders of record at the close of business on August 25, 2023. On June 16, 2023, the Company paid $1.1 million in cash dividends, based on a dividend rate of $0.20 per share of its common stock, to shareholders of record at the close of business on May 26, 2023. On March 17, 2023, the Company paid $1.1 million in cash dividends, based on a dividend of $0.20 per share of its common stock, to shareholders of record at the close of business on February 24, 2023.

11. Subsequent Event

On October 31, 2023, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.20 per share on the Company’s common stock. This dividend is payable on December 15, 2023, to shareholders of record at the close of business on November 24, 2023.

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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 costs 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 incidents or ransomware attacks, utility disruptions, supply chain delays and disruptions, labor shortages, disputes, 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, including the impact of new or proposed additional rail regulations; (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 concerns and pressures in, and the impact of government policies and/or borrowing rates on, particular industries, including oil and gas services, utility plants, steel, construction, and industrial, effects of governmental fiscal and budgetary constraints, including the level and pace of highway construction and infrastructure funding, changes to tax laws, legislative impasses, governmental shutdowns, trade wars, tariffs, international incidents, including conflicts in Ukraine and the Middle East, oil cartel production and supply actions, sanctions, economic and regulatory uncertainties under state governments and the United States Administration and Congress, inflation, Federal Reserve responses to inflationary concerns, including increased interest rates, and inability to continue to maintain or increase prices for the Company’s products, including passing through the increased costs of energy, parts and supplies, labor, transportation, and services; (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 and acquisitions; (ix) estimates of reserves and remaining lives of reserves; (x) the impact of future potential global pandemics and governmental responses thereto, including decreased demand, lower prices, tightened labor and other markets, supply chain delays and disruptions, and increased costs, and the risk of non-compliance with health and safety protocols, social distancing and mask guidelines, and vaccination mandates, on the Company’s financial condition, results of operations, cash flows, and competitive position; (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, 2022 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

11

Overview.

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

We have identified one reportable segment based on the distinctness of our activities and products: lime and limestone operations. All operations are 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.

On February 9, 2022, we acquired 100% of the equity interest of Mill Creek, a dolomite mining and production company located in Mill Creek, Oklahoma, for $5.6 million cash. Mill Creek contributed $1.2 million and $1.3 million to our revenues for the three months ended September 30, 2023 and 2022, respectively, and $3.5 million and $3.1 million to our revenues for the nine months ended September 30, 2023 and 2022, respectively.

In November 2022, we received objective evidence that a majority of the bargaining unit employees at our Arkansas facilities no longer supported union representation, and, accordingly, we withdrew recognition of the union. In June 2023, as part of a settlement with the National Labors Relations Board, we reinstated recognition of the union and are negotiating a new collective bargaining agreement with the union representing our Arkansas employees.

Our revenues increased 12.7% and 21.2% in the third quarter and first nine months 2023, respectively, compared to the third quarter and first nine months 2022. Revenues from our lime and limestone operations increased 13.5% in the third quarter 2023, compared to the third quarter 2022, due to a 17.5% 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, steel, and industrial customers, partially offset by increased demand from our environmental and roofing customers. Revenues from our lime and limestone operations increased 22.3% in the first nine months 2023, compared to the first nine months 2022, due to a 22.3% increase in the average selling prices for our lime and limestone products. Our sales volumes of lime and limestone products were essentially flat for the first nine months 2023, compared to the first nine months 2022, principally due to increased demand from our environmental and oil and gas services customers, offset by decreased demand from our steel, industrial, and construction customers. Looking ahead, we anticipate continued weak demand in some of our key markets as everyone deals with the impact of continuing inflation, higher interest rates, and increasingly uncertain geo-political situations.

Our gross profit increased 24.6% and 48.1% in the third quarter and first nine months 2023, respectively, compared to the third quarter and first nine months 2022. Gross profit from our lime and limestone operations increased 27.0% and 51.6% in the third quarter and first nine months 2023, respectively, compared to the third quarter and first nine months 2022. The increases in gross profit in the periods resulted primarily from the increased revenues discussed above, partially offset by increased production costs, principally from higher energy, parts and supplies, and labor costs.

Liquidity and Capital Resources.

Net cash provided by operating activities was $64.7 million in the first nine months 2023, compared to $43.9 million in the first nine months 2022, an increase of $20.8 million, or 47.3%. 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 2023, net cash provided by operating activities was principally 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

12

the third quarter 2023 compared to the fourth quarter 2022, and an increase of $4.2 million in inventories, net, 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. In the first nine months 2022, net cash provided by operating activities was principally composed of $34.6 million net income, $16.5 million DD&A, $2.2 million deferred income taxes, $1.9 million stock-based compensation, and a $11.1 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2022 included an increase of $12.4 million in trade receivables, net, due primarily from increased sales in the third quarter 2022 compared to the fourth quarter 2021, an increase of $2.4 million in inventories, net, partially offset by a decrease of $1.1 million in prepaid expenses and other current assets and a $2.5 million increase in accounts payable and accrued expenses.

We had $20.5 million in capital expenditures in the first nine months 2023, compared to $23.8 million in the first nine months 2022, which included $5.6 million for the acquisition of Mill Creek. Net cash used in financing activities was $3.4 million in each of the first nine months 2023 and 2022, consisting primarily of cash dividends paid in each period.

Cash and cash equivalents increased $42.9 million to $176.3 million at September 30, 2023 from $133.4 million at December 31, 2022.

We are not committed to any planned capital expenditures until actual orders are placed for equipment. As of September 30, 2023, we did not have any material commitments for open purchase orders.

At September 30, 2023, 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 provided 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, 2023, we had no debt outstanding and no draws on the Revolving Facility other than $0.3 million of letters of credit, which count as draws against the available commitment under the Revolving Facility. We believe that, absent a significant acquisition, cash on hand and cash flows from operations will be sufficient to meet our operating needs, ongoing capital needs, including current and possible future modernization, expansion, and development projects, and liquidity needs and allow us to pay regular quarterly cash dividends for the near future.

Results of Operations.

Revenues in the third quarter 2023 were $74.9 million, compared to $66.5 million in the third quarter 2022, an increase of $8.4 million, or 12.7%. For the first nine months 2023, revenues were $215.6 million, compared to $177.9 million in the first nine months 2022, an increase of $37.8 million, or 21.2%. Revenues from our lime and limestone operations were $74.6 million in the third quarter 2023, compared to $65.7 million in the third quarter 2022, an increase of $8.9 million, or 13.5%. For the first nine months 2023, our lime and limestone revenues were $214.8 million, compared to $175.6 million in the first nine months 2022, an increase of $39.2 million, or 22.3%. The increase in our

13

lime and limestone revenues in the third quarter 2023 resulted from the increases in the average selling prices for our lime and limestone products, partially offset by the decreased sales volumes of our lime and limestone products, principally due to decreased demand from our construction, steel, and industrial customers, partially offset by increased demand from our environmental and roofing customers. The increase in our lime and limestone revenues in the first nine months 2023 resulted from increases in the average selling prices for our lime and limestone products. Sales volumes of our lime and limestone products were essentially flat for the first nine months 2023, compared to the first nine months 2022, principally due to increased demand from our environmental and oil and gas services customers, offset by decreased demand from our steel, industrial, and construction customers.

Gross profit was $28.2 million in the third quarter 2023, compared to $22.6 million in the third quarter 2022, an increase of $5.6 million, or 24.6%. Gross profit from our lime and limestone operations in the third quarter 2023 was $28.2 million, compared to $22.2 million in the third quarter 2022, an increase of $6.0 million, or 27.0%. The increase in lime and limestone gross profit in the third quarter 2023, compared to the third quarter 2022, resulted primarily from the increased revenues discussed above, partially offset by increased production costs, principally from higher energy, parts and supplies, and labor costs.

Gross profit was $79.3 million in the first nine months 2023, compared to $53.5 million in the first nine months 2022, an increase of $25.7 million, or 48.1%. Gross profit from our lime and limestone operations in the first nine months 2023 was $79.3 million, compared to $52.3 million in the first nine months 2022, an increase of $27.0 million, or 51.6%. The increase in gross profit in the first nine months 2023, compared to the first nine months 2022, resulted primarily from the increased revenues discussed above, partially offset by the increased production costs.

Selling, general and administrative (“SG&A”) expenses were $4.4 million in the third quarter 2023, compared to $3.5 million in the third quarter 2022, an increase of $0.8 million, or 22.9%. SG&A expenses were $12.8 million in the first nine months 2023, compared to $11.0 million in the first nine months 2022, an increase of $1.8 million, or 16.3%. The increases in SG&A expenses in the 2023 periods, compared to the comparable 2022 periods, were primarily due to increased personnel expense.

We had no outstanding debt during any of the periods. Other (income) expense, net was $2.2 million and $5.5 million in the third quarter and first nine months 2023, respectively, compared to $0.5 million and $0.6 million in the comparable 2022 periods. The increases of $1.7 million and $4.9 million in income, respectively, in other (income) expense, net during the 2023 periods, compared to the comparable 2022 periods, were primarily due to higher interest rates on higher average balances in our cash and cash equivalents.

Income tax expense was $5.3 million and $14.4 million in the third quarter and first nine months 2023, compared to $3.8 million and $8.5 million in the comparable 2022 periods. The increases in income tax expense in 2023 periods, compared to the comparable 2022 periods, were due to the increases in income before taxes.

Our net income was $20.7 million ($3.63 per share diluted) in the third quarter 2023, compared to net income of $15.7 million ($2.77 per share diluted) in the third quarter 2022, an increase of $5.0 million, or 31.8%. For the first nine months 2023, our net income was $57.5 million ($10.09 per share diluted), compared to $34.6 million ($6.10 per share diluted) in the first nine months 2022, an increase of $22.9 million, or 66.2%.

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, 2023. 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

14

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, USE OF PROCEEDS, AND ISSUER PURCHASE OF EQUITY SECURITES

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 2023 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, 2023 is presented in Exhibit 95.1 to this Report.

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

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

ITEM 6:    EXHIBITS

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

EXHIBIT INDEX

EXHIBIT

NUMBER

    

DESCRIPTION

10.1

Tenth Amendment to the Credit Agreement, dated as of August 3, 2023, among United States Lime & Minerals, Inc., each lender from time to time a party thereto, and Wells Fargo, N.A., as administrative agent.

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.

15

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).

16

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.

November 2, 2023

By:

/s/ Timothy W. Byrne

Timothy W. Byrne

President and Chief Executive Officer

(Principal Executive Officer)

November 2, 2023

By:

/s/ Michael L. Wiedemer

Michael L. Wiedemer

Vice President and Chief Financial Officer

(Principal Financial and Accounting Officer)

17