United States Lime & Minerals, Inc. — Form 10-Q Summary
Business context and reporting period
Unaudited quarterly report for the three and nine months ended September 30, 2021, filed October 28, 2021. The company manufactures lime and limestone products for construction, industrial, metals, environmental, roofing, agriculture, and oil and gas customers. It operates in one reportable segment across the United States and also holds natural gas interests.
The July 2020 acquisition of Carthage Crushed Limestone contributed $7.4 million of revenue in the first nine months of 2021, compared with $2.3 million in the comparable 2020 period.
Key financial metrics
Amounts below are in thousands, except per-share data and percentages.
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenue | $52,311 | $43,727 | $143,147 | $119,714 |
| Gross profit | $17,341 | $14,182 | $45,941 | $34,416 |
| Gross margin | 33.1% | 32.4% | 32.1% | 28.7% |
| Operating profit | $14,196 | $11,273 | $36,772 | $25,407 |
| Operating margin | 27.1% | 25.7% | 25.7% | 21.2% |
| Net income | $11,308 | $9,324 | $29,432 | $20,969 |
| Diluted EPS | $1.99 | $1.65 | $5.19 | $3.72 |
- Net cash provided by operating activities was $44.1 million for the first nine months of 2021 versus $41.9 million in 2020.
- Capital expenditures were $23.7 million versus $13.6 million in the comparable period; 2021 spending included $9.8 million for the Love Hollow Quarry and related transportation infrastructure.
- Cash and cash equivalents increased to $101.4 million at September 30, 2021, from $83.6 million at December 31, 2020.
- The company had no debt outstanding and $0.4 million of letters of credit outstanding under its $75 million revolving facility. The facility includes a potential $50 million accordion feature and matures May 2, 2024.
- Total assets were $310.9 million and stockholders’ equity was $271.6 million at September 30, 2021.
- The company paid $2.7 million in dividends during the first nine months, or $0.16 per share in each quarter.
Material changes versus the prior comparable period
- Third-quarter revenue increased 19.6%; nine-month revenue increased 19.6%.
- Lime and limestone sales volume increased 18.5% in the third quarter and 17.1% for the first nine months. Average selling prices increased 0.5% and 1.6%, respectively.
- Management attributed revenue growth primarily to higher demand from construction, steel, industrial, environmental, roofing, and oil and gas customers, compared with pandemic-affected 2020 periods.
- Gross profit increased 22.3% in the third quarter and 33.5% for the first nine months, supported by higher revenue and operating efficiencies, partly offset by higher fuel costs.
- SG&A expense increased 8.1% in the third quarter and 1.8% for the first nine months, primarily reflecting higher personnel and stock-based compensation costs.
- Natural gas interests generated $0.6 million of third-quarter revenue and $1.3 million of nine-month revenue, compared with $0.3 million and $0.7 million, respectively, in 2020.
- Net income increased 21.3% in the third quarter and 40.4% for the first nine months.
Guidance, outlook, risks, contingencies, and unusual items
- No quantitative revenue or earnings guidance was provided. Management stated that cash on hand and operating cash flow should meet operating, capital, liquidity, and regular dividend needs for the near future, absent a significant acquisition.
- Management expects continued inflationary pressure and challenges involving fuel, inputs, labor, supplies, and services.
- COVID-19 variants, government mandates, labor availability, supply-chain disruptions, and increased operating costs could materially affect results.
- Other principal risks include volatile fuel and freight costs, transportation availability, project delays or cost overruns, demand and pricing pressure, competition, economic conditions, permitting and environmental requirements, mine safety, reserve estimates, climate-related events, cybersecurity incidents, and potential litigation or regulatory actions.
- The company had no material commitments for open purchase orders at September 30, 2021.
- The effective 2021 income tax rate was estimated at 20.1%, primarily reduced by statutory depletion deductions.
- On October 27, 2021, the board declared a $0.16-per-share quarterly dividend payable December 10, 2021.
- Management concluded that disclosure controls and procedures were effective, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether elevated sales volumes and post-pandemic demand remain sustainable across construction, steel, industrial, environmental, roofing, and oil and gas customers.
- The timing, scope, and returns of Love Hollow Quarry and other modernization, expansion, and development projects.
- The effect of fuel, freight, labor, supply, and other inflationary costs on future margins and the company’s ability to pass costs through to customers.
- COVID-19 mandates, labor shortages, supply-chain conditions, and any resulting operational disruptions.
- Available borrowing capacity, covenant compliance, and the company’s ability to fund capital projects, acquisitions, and dividends without incurring debt.
- Mine safety, permitting, environmental, reclamation, cybersecurity, litigation, and regulatory matters, including the detailed mine-safety disclosures in Exhibit 95.1.