United States Lime & Minerals, Inc. — FY2022 Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended December 31, 2022, including fourth-quarter results. The Company manufactures lime and limestone products for construction, industrial, metals, environmental, roofing, agriculture, and oil and gas customers. Operations are primarily in Arkansas, Colorado, Louisiana, Missouri, Oklahoma, and Texas, with natural gas interests reported as “Other.”
The Company operates one reportable segment: Lime and Limestone Operations. It acquired Mill Creek Dolomite, LLC, an Oklahoma dolomite mining and production business, for $5.6 million on February 9, 2022.
Financial performance and liquidity
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $236.2 million | $189.3 million | +24.8% |
| Lime and limestone revenue | $233.4 million | $187.4 million | +24.6% |
| Gross profit | $70.3 million | $59.3 million | +18.7% |
| Operating profit | $54.8 million | $46.4 million | +18.0% |
| Net income | $45.4 million | $37.0 million | +22.6% |
| Diluted EPS | $8.00 | $6.54 | +22.3% |
| Operating cash flow | $64.4 million | $55.7 million | +15.6% |
| Cash and cash equivalents | $133.4 million | $105.4 million | +26.6% |
- Annual gross margin was 29.8%, compared with 31.3% in 2021; operating margin was 23.2%, compared with 24.5%; and net margin was 19.2%, compared with 19.6%.
- Lime and limestone sales volumes increased 14.0%, while average selling prices increased 10.6%. Growth was driven principally by construction, oil and gas services, and steel customers.
- Higher transportation, energy, labor, and supplies costs partly offset revenue growth. Energy costs increased substantially, and supply-chain delays continued.
- Capital expenditures were $26.8 million, including investments in Mill Creek, real property, and the Love Hollow Quarry. Total investing cash outflow was $31.2 million.
- The Company paid $4.5 million of dividends and repurchased $0.8 million of treasury shares. Dividends were $0.80 per share for 2022.
- The Company had no debt outstanding at year-end. Its revolving credit facility provided $75.0 million of capacity, subject to approximately $0.3 million of outstanding letters of credit, and matured May 2, 2024. Total contractual obligations were $32.2 million, including $22.4 million of purchase obligations.
Fourth-quarter results
| Metric | Q4 2022 | Q4 2021 |
|---|---|---|
| Total revenue | $58.3 million | $46.1 million |
| Gross profit | $16.8 million | $13.3 million |
| Net income | $10.8 million | $7.6 million |
| Diluted EPS | $1.90 | $1.34 |
The fourth quarter reflected continued year-over-year growth, although the filing does not provide a clear quarterly operating margin or cash-flow figure.
Material changes versus the prior comparable period
- Revenue growth reflected both higher volumes and pricing, with lime and limestone volumes up 14.0% and average prices up 10.6%.
- Gross profit grew more slowly than revenue because of inflationary production and distribution costs.
- Cash increased by approximately $28.0 million despite $31.2 million of investing outflows and $5.2 million of financing outflows.
- Mill Creek was acquired and contributed to the Company’s geographic footprint and production capacity.
- Love Hollow Quarry development advanced, including transportation infrastructure connecting the quarry to the Batesville plant.
- Mineral reserves for properties covered by the qualified-person estimates declined modestly to 233.1 million tons from 236.2 million tons, while measured and indicated resources declined to 419.5 million tons from 423.0 million tons.
- There was no impairment charge in 2022 or 2021; a $1.6 million impairment charge related to natural gas interests was recorded in 2020.
Guidance, outlook, risks, and unusual items
- Management expects normal recurring and re-equipping capital expenditures of approximately $20.0 million annually over the next several years. Absent a significant acquisition, it expects cash on hand and operating cash flow to fund operations, capital needs, and regular dividends.
- Management expects infrastructure funding, including Texas highway funding and the federal Infrastructure Investment and Jobs Act, to support construction demand, but the timing and amount of resulting demand remain uncertain.
- Key risks include cyclical demand from construction, steel, oil and gas, and utility customers; declining coal-fired utility demand; competition and pricing pressure; inflation; volatile energy, freight, diesel, and transportation costs; rail and truck availability; adverse weather; equipment failures; labor disruptions; and supply-chain interruptions.
- Environmental and permitting requirements could increase costs or restrict expansions. The Dallas-Fort Worth area was redesignated as severe ozone nonattainment in November 2022, and EPA proposed more stringent hazardous-air-pollutant standards for lime plants in January 2023.
- Climate-related regulation, greenhouse-gas limits, carbon taxes, emissions controls, and potential changes to water-use requirements could materially affect operations and capital spending.
- The Company faces mine-safety, reclamation, remediation, cybersecurity, pandemic, litigation, and acquisition-integration risks. Management reported no legal proceeding expected to have a material adverse effect.
- The Company accrued $1.6 million for asset retirement obligations and estimated annual related expenditures of approximately $0.1 million to $0.2 million during 2023–2027.
- A regular quarterly dividend of $0.20 per share was declared on February 3, 2023, payable March 17, 2023.
- Grant Thornton issued unqualified opinions on the financial statements and internal control over financial reporting; no critical audit matters were identified.
Most important facts for an investor to verify
- Whether higher selling prices and volumes can offset sustained energy, freight, labor, and materials inflation.
- The timing, cost, and expected returns of Mill Creek, Love Hollow, and other modernization or expansion projects.
- The renewal or replacement terms of the revolving credit facility, which was scheduled to mature May 2, 2024.
- The final requirements and capital costs arising from EPA lime-plant emissions proposals and other environmental regulations.
- The sustainability of construction, steel, oil and gas, and environmental demand, including the effect of declining coal-fired generation.
- The accuracy and remaining useful lives of reported limestone resources and reserves, particularly for properties without completed drilling programs.
- The Company’s ability to maintain its dividend and liquidity if acquisition spending, capital requirements, or working-capital needs increase.