United States Lime & Minerals Inc 10-Q for FY2021 Q2
United States Lime & Minerals Inc (USLM)
About this 10-Q
United States Lime & Minerals Inc filed this 10-Q on July 30, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $49.16M
- up 30.9% from $37.55M a year earlier
- Net income
- $11.09M
- up 81.8% from net income of $6.1M a year earlier
- Diluted EPS
- $1.96
- up 81.5% from $1.08 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
UNITED STATES LIME & MINERALS, INC.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of | | (I.R.S. Employer |
incorporation or organization) | | Identification No.) |
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(Address of principal executive offices) | | (Zip Code) |
(
(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 |
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.
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).
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 | ☐ | | |
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
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: As of July 28, 2021,
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(Unaudited)
| | June 30, | | December 31, |
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| 2021 |
| 2020 |
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ASSETS | | | | | | | |
Current assets | | | | | | | |
Cash and cash equivalents | | $ | | | $ | | |
Trade receivables, net | |
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Inventories, net | |
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Prepaid expenses and other current assets | |
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Total current assets | |
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Property, plant and equipment | |
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Less accumulated depreciation and depletion | |
| ( | |
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Property, plant and equipment, net | |
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Operating lease right-of-use assets | | | | | | | |
Other assets, net | |
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Total assets | | $ | | | $ | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
Current liabilities | | | | | | | |
Accounts payable | | $ | | | $ | | |
Current portion of operating lease liabilities | | | | | | | |
Accrued expenses | |
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Total current liabilities | |
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Deferred tax liabilities, net | |
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Operating lease liabilities, excluding current portion | | | | | | | |
Other liabilities | |
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Total liabilities | |
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Stockholders’ equity | | | | | | | |
Common stock | |
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Additional paid-in capital | |
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Accumulated other comprehensive income | |
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Retained earnings | |
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Less treasury stock, at cost | |
| ( | |
| ( | |
Total stockholders’ equity | |
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Total liabilities and stockholders’ equity | | $ | | | $ | | |
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 June 30, | | Six Months Ended June 30, | | | ||||||||||||||||
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| 2021 | | 2020 | | 2021 | | 2020 | |
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Revenues | | $ | |
| % | $ | |
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Cost of revenues | | | | | | | | | | | | | | | | | | | | | | |
Labor and other operating expenses | |
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Depreciation, depletion and amortization | |
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Gross profit | |
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Selling, general and administrative expenses | |
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Operating profit | |
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Other expense (income) | | | | | | | | | | | | | | | | | | | | | | |
Interest expense | |
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Interest and other income, net | |
| ( | | ( | % |
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Income before income tax expense | |
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Income tax expense | |
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Net income | | $ | | | | % | $ | | | | % | $ | | | | % | $ | | | | % | |
Net income per share of common stock | | | | | | | | | | | | | | | | | | | | | | |
Basic | | $ | | | | | $ | | | | | $ | | | | | $ | | | | | |
Diluted | | $ | | | | | $ | | | | | $ | | | | | $ | | | | | |
See accompanying notes to condensed consolidated financial statements.
3
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(dollars in thousands)
(Unaudited)
| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
| | | | | | ||||||||
| | 2021 | | 2020 | | 2021 | | 2020 | | ||||
Net income |
| $ | |
| $ | |
| $ | |
| $ | |
|
Other comprehensive income | | | | | | | | | | | | | |
Mark to market of foreign exchange hedges, net of tax expense of $ | | | | | | | | | | | | | |
Total other comprehensive income | |
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| | |
| | |
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Comprehensive income | | $ | | | $ | | | $ | | | $ | | |
See accompanying notes to condensed consolidated financial statements.
4
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(dollars in thousands)
(Unaudited)
| | | | | | | | | | Accumulated | | | | | | | | | |
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| Common Stock | | Additional | | Other | | | | | | | | | |
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| Shares |
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| Paid-In |
| Comprehensive |
| Retained |
| Treasury |
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| | Outstanding | | Amount | | Capital | | Income | | Earnings | | Stock | | Total |
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Balances at December 31, 2020 |
| | | $ | | | $ | | | $ | — | | $ | | | $ | ( | | $ | | |
Stock options exercised |
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Stock-based compensation |
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Treasury shares purchased |
| ( | |
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| ( | |
| ( | |
Cash dividends paid | | — | |
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| ( | |
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| ( | |
Net income |
| — | | | — | | | — | | | — | | | | | | — | | | | |
Comprehensive income |
| — | |
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Balances at March 31, 2021 |
| | | $ | | | $ | | | $ | — | | $ | | | $ | ( | | $ | | |
Stock options exercised |
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Stock-based compensation |
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Treasury shares purchased |
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Cash dividends paid |
| — | |
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| ( | |
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| ( | |
Net income |
| — | | | — | | | — | | | — | | | | | | — | | | | |
Comprehensive income |
| — | |
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Balances at June 30, 2021 |
| | | $ | | | $ | | | $ | — | | $ | | | $ | ( | | $ | | |
| | | | | | | | | | Accumulated | | | | | | | | | |
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| | Common Stock | | Additional | | Other | | | | | | | | | |
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| Shares |
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| Paid-In |
| Comprehensive |
| Retained |
| Treasury |
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| | Outstanding | | Amount | | Capital | | (Loss) Income | | Earnings | | Stock | | Total |
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Balances at December 31, 2019 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | | |
Stock options exercised |
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| — | |
| — | |
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Stock-based compensation |
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Treasury shares purchased |
| ( | |
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| ( | |
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Cash dividends paid | | — | |
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| ( | |
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Net income |
| — | | | — | | | — | | | — | | | | | | — | | | | |
Mark to market of foreign exchange hedges, net of $ |
| — | |
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| ( | |
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Comprehensive (loss) income |
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Balances at March 31, 2020 |
| | | $ | | | $ | | | $ | ( | | $ | | | $ | ( | | $ | | |
Stock-based compensation |
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| — | |
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| — | |
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Treasury shares purchased |
| ( | |
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| ( | |
| ( | |
Cash dividends paid |
| — | |
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| ( | |
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| ( | |
Net income |
| — | | | — | | | — | | | — | | | | | | — | | | | |
Mark to market of foreign exchange hedges, net of $ |
| — | |
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| — | |
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Comprehensive income |
| — | |
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Balances at June 30, 2020 |
| | | $ | | | $ | | | $ | — | | $ | | | $ | ( | | $ | | |
See accompanying notes to condensed consolidated financial statements.
5
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
| | Six Months Ended June 30, | | ||||
| | 2021 | | 2020 | | ||
OPERATING ACTIVITIES: |
| | |
| | |
|
Net income | | $ | | | $ | | |
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |
Depreciation, depletion and amortization | |
| | |
| | |
Amortization of deferred financing costs | |
| | |
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Deferred income taxes | |
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(Gain) loss on disposition of property, plant and equipment | |
| ( | |
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Stock-based compensation | |
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Changes in operating assets and liabilities: | | | | | | | |
Trade receivables, net | |
| ( | |
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Inventories, net | |
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| ( | |
Prepaid expenses and other current assets | |
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Other assets | |
| ( | |
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Accounts payable and accrued expenses | |
| ( | |
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Other liabilities | |
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Net cash provided by operating activities | |
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INVESTING ACTIVITIES: | | | | | | | |
Purchase of property, plant and equipment | |
| ( | |
| ( | |
Proceeds from sale of property, plant and equipment | |
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Net cash used in investing activities | |
| ( | |
| ( | |
FINANCING ACTIVITIES: | | | | | | | |
Cash dividends paid | | | ( | | | ( | |
Proceeds from exercise of stock options | |
| | |
| | |
Purchase of treasury shares | |
| ( | |
| ( | |
Net cash used in financing activities | |
| ( | |
| ( | |
Net increase in cash and cash equivalents | |
| | |
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Cash and cash equivalents at beginning of period | |
| | |
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Cash and cash equivalents at end of period | | $ | | | $ | | |
See accompanying notes to condensed consolidated financial statements.
6
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements included herein have been prepared by United States Lime & Minerals, Inc. (the “Company”) without independent audit. In the opinion of the Company’s management, all adjustments of a normal and recurring nature necessary to present fairly the financial position, results of operations, comprehensive income and cash flows for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the period ended December 31, 2020. The results of operations for the three- and six-month periods ended June 30, 2021 are not necessarily indicative of operating results for the full year.
On July 1, 2020, the Company acquired
2. Organization
The Company is a manufacturer of lime and limestone products, supplying primarily the construction (including highway, road and building contractors), industrial (including paper and glass manufacturers), metals (including steel producers), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), roof shingle manufacturers, agriculture (including poultry and cattle feed producers), and oil and gas services industries. The Company is headquartered in Dallas, Texas and operates lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Missouri, Oklahoma and Texas through its wholly owned subsidiaries, Arkansas Lime Company, Colorado Lime Company, Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair, ART Quarry TRS LLC (DBA Carthage Crushed Limestone) and U.S. Lime Company – Transportation. In addition, the Company, through its wholly owned subsidiary, U.S. Lime Company – O & G, LLC, has royalty and non-operated working interests in natural gas wells located in Johnson County, Texas, in the Barnett Shale Formation.
3. Accounting Policies
Revenue Recognition. The Company recognizes revenue for its lime and limestone operations when (i) a contract with the customer exists and the performance obligations are identified; (ii) the price has been established; and (iii) the performance obligations have been satisfied, which is generally upon shipment. The Company’s returns and allowances are minimal. Revenues include external freight billed to customers with related costs accounted for as fulfillment costs and included in cost of revenues. External freight billed to customers included in 2021 and 2020 revenues was $
The Company operates its lime and limestone operations within a single geographic region and derives all revenues from that segment from the sale of lime and limestone products. See Note 4 to the condensed consolidated financial statements for disaggregation of revenues by segment, which the Company believes best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
7
Accounts Receivable. The majority of the Company’s trade receivables are unsecured. Payment terms for all trade receivables are based on the underlying purchase orders, contracts or purchase agreements. The Company estimates credit losses relating to trade receivables based on an assessment of the current and forecasted probability of collection, historical trends, economic conditions and other significant events that may impact the collectability of accounts receivables. Due to the relatively homogenous nature of its trade receivables, the Company does not believe there is any meaningful asset-specific differences within its accounts receivable portfolio that would require the portfolio to be grouped below the consolidated level for review of credit losses. Credit losses relating to trade receivables have generally been within management expectations and historical trends. Uncollected trade receivables are charged-off when identified by management to be unrecoverable. The Company maintains an allowance for credit losses to reflect currently expected estimated losses resulting from the failure of customers to make required payments. See Note 7 to the condensed consolidated financial statements.
Leases. The Company determines if an arrangement is a lease at inception. When recording operating leases, the Company records a lease liability based on the net present value of the lease payments over the lease term, using the interest rate implicit in the lease, if known, or an incremental rate on a collateralized basis over a similar term and amount to the lease, and a corresponding right-of-use asset. Operating leases are included in operating lease right-of-use assets, current portion of operating lease liabilities and operating lease liabilities, excluding current portion, on the condensed consolidated balance sheets. Lease expense is recognized over the lease term on a straight-line basis. Lease terms include options to extend the lease when it is reasonably certain the Company will exercise the option. For leases with a term of twelve months or less, the Company does not record a right-of-use asset and a lease liability and records lease expense on a straight-line basis. See Note 10 to the condensed consolidated financial statements.
4. Business Segment
The Company has identified
8
The following table sets forth operating results and certain other financial data for the Company’s lime and limestone operations segment and other (in thousands):
| Three Months Ended June 30, | | Six Months Ended June 30, | |||||||||
Revenues | | 2021 | | 2020 | | 2021 | | 2020 | ||||
Lime and limestone operations | | $ | | | $ | | $ | | | $ | ||
Other | |
| | |
| |
| | |
| ||
Total revenues | | $ | | | $ | | | $ | | | $ | |
Depreciation, depletion and amortization | | | | | | | | | | | | |
Lime and limestone operations | | $ | | | $ | | | $ | | | $ | |
Other | |
| | |
| | |
| | |
| |
Total depreciation, depletion and amortization | | $ | | | $ | | | $ | | | $ | |
Gross profit (loss) | | | | | | | | | | | | |
Lime and limestone operations | | $ | | | $ | | $ | | | $ | | |
Other | |
| | |
| ( | |
| | |
| ( |
Total gross profit | | $ | | | $ | | | $ | | | $ | |
Operating profit (loss) | | | | | | | | | | | | |
Lime and limestone operations | | $ | | | $ | | | $ | | | $ | |
Other | | | | |
| ( | |
| | |
| ( |
Total operating profit | | $ | | | $ | | | $ | | | $ | |
Identifiable assets, at period end | | | | | | | | | | | | |
Lime and limestone operations | | $ | | | $ | | $ | | | $ | | |
Other | |
| | |
| | | | | | | |
Total identifiable assets | | $ | | | $ | | | $ | | | $ | |
Capital expenditures | | | | | | | | | | | | |
Lime and limestone operations | | $ | | | $ | | $ | | | $ | | |
Other | |
| — | |
| — | |
| — | |
| — |
Total capital expenditures | | $ | | | $ | | | $ | | | $ | |
| | | | | | | | | | | | |
9
5. Income Per Share of Common Stock
On April 30, 2021, the shareholders approved an increase in the Company’s number of authorized shares of common stock from
The following table sets forth the computation of basic and diluted income per common share (in thousands, except per share amounts):
| | Three Months Ended June 30, | | Six Months Ended June 30, | | ||||||||
|
| 2021 |
| 2020 |
| 2021 |
| 2020 |
| ||||
Net income for basic and diluted income per common share | | $ | | | $ | | | $ | | | $ | | |
Weighted-average shares for basic income per common share | |
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Effect of dilutive securities: | | | | | | | | | | | | | |
Employee and director stock options(1) | |
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Adjusted weighted-average shares and assumed exercises for diluted income per common share | |
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Basic net income per common share | | $ | | | $ | | | $ | | | $ | | |
Diluted net income per common share | | $ | | | $ | | | $ | | | $ | | |
| (1) | Excludes |
6. Accumulated Other Comprehensive Income
The following table presents the components of comprehensive income (in thousands):
|
| Three Months Ended June 30, |
| Six Months Ended June 30, |
| ||||||||
| | 2021 | | 2020 | | 2021 | | 2020 | | ||||
Net income | | $ | | | $ | | | $ | | | $ | | |
Mark to market of foreign exchange hedges | | | — | | | | | | — | | | | |
Deferred income tax expense | |
| — | |
| ( | |
| — | |
| — | |
Comprehensive income | | $ | | | $ | | | $ | | | $ | | |
In May 2018, to hedge against potential losses due to changes in the Euro to U.S. Dollar exchange rates, the Company entered into foreign exchange hedges with a counterparty to the foreign exchange hedges to fix the exchange rates. The last of the foreign exchange hedges expired in April 2020. The foreign exchange hedges were effective as defined under applicable accounting rules. Therefore, changes in the fair value of the foreign exchange hedges were reflected in comprehensive income.
10
7. Trade Receivables, Net
Additions, adjustments, and write-offs to the Company’s allowance for credit losses for the six months ended June 30, 2021 and 2020 were as follows (in thousands):
| | June 30, | ||||
| | 2021 | | 2020 | ||
Beginning balance | | $ | | | $ | |
Additions | | | | | | |
Adjustments for expected credit loss factors | | | ( | | | — |
Write-offs | | | — | | | — |
Ending balance | | $ | | | $ | |
8. Inventories, Net
Inventories are valued principally at the lower of cost, determined using the average cost method, or market. Costs for raw materials and finished goods include materials, labor, and production overhead. Inventories, net consisted of the following (in thousands):
| | | | | | | |
| | June 30, | | December 31, | | ||
| | 2021 | | 2020 |
| ||
Lime and limestone inventories: |
| |
|
| |
| |
Raw materials | | $ | | | $ | | |
Finished goods | |
| | |
| | |
| | | | | | | |
Service parts inventories | |
| | |
| | |
| | $ | | | $ | | |
9. Banking Facilities and Debt
The Company’s credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 2019 and November 21, 2019, provides for a $
Interest rates on the Revolving Facility are, at the Company’s option, LIBOR (or a replacement rate as determined by the Lender and the Company) plus a margin of
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
11
As of June 30, 2021, the Company had
10. Leases
The Company has operating leases for the use of equipment, corporate office space, and some of its terminal and distribution facilities. The leases have remaining lease terms of 1 to
The components of lease costs for the three and six months ended June 30, 2021 and 2020 were as follows (in thousands):
| | | | Three Months Ended June 30, | | | Six Months Ended June 30, | ||||||||
| | Classification | 2021 | | 2020 | | | 2021 | | 2020 | |||||
Operating lease costs(1) | | Cost of revenues | | $ | | $ | | | $ | | | $ | | ||
Operating lease costs(1) | | Selling, general and administrative expenses | | | | | | |
| | |
| | ||
Rental revenues | | Interest and other income, net | | | ( | | | ( | | |
| ( | |
| ( |
Net operating lease costs | | | | $ | | | $ | | | | $ | | | $ | |
| (1) | Includes the costs of leases with a term of |
As of June 30, 2021, future minimum payments under operating leases that were either non-cancelable or subject to significant penalty upon cancellation, including future minimum payments under renewal options that the Company is reasonably certain to exercise, were as follows (in thousands):
| | | | |
2021 (excluding the six months ended June 30, 2021) | | $ | | |
2022 | | | | |
2023 | | | | |
2024 | | | | |
2025 | | | | |
Thereafter | | | | |
Total future minimum lease payments | | | | |
Less imputed interest | | | ( | |
Present value of lease liabilities | | $ | | |
Supplemental cash flow information pertaining to the Company’s leasing activity for the six months ended June 30, 2021 and 2020 is as follows (in thousands):
| | Six Months Ended June 30, | ||||
| | 2021 | | 2020 | ||
Cash payments for operating lease liabilities | | $ | | | $ | |
Right-of-use assets obtained in exchange for operating lease obligations | | $ | | | $ | |
12
11. Income Taxes
The Company has estimated that its effective income tax rate for 2021 will be
12. Dividends
On June 11, 2021, the Company paid $
13. Subsequent Event
On
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ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements. Any statements contained in this Report that are not statements of historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this Report, including without limitation statements relating to the Company’s plans, strategies, objectives, expectations, intentions, and adequacy of resources, are identified by such words as “will,” “could,” “should,” “would,” “believe,” “possible,” “potential,” “expect,” “intend,” “plan,” “schedule,” “estimate,” “anticipate” and “project.” The Company undertakes no obligation to publicly update or revise any forward-looking statements. The Company cautions that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations, including without limitation the following: (i) the Company’s plans, strategies, objectives, expectations, and intentions are subject to change at any time at the Company’s discretion; (ii) the Company’s plans and results of operations will be affected by its ability to maintain and increase its revenues and manage its growth; (iii) the Company’s ability to meet short-term and long-term liquidity demands, including meeting the Company’s operating and capital needs, including possible acquisitions and paying dividends, and conditions in the credit and equity markets, including the ability of the Company’s customers to meet their obligations; (iv) interruptions to operations and increased expenses at the Company’s facilities resulting from changes in mining methods or conditions, variability of chemical or physical properties of the Company’s limestone and its impact on process equipment and product quality, inclement weather conditions, natural disasters, accidents, IT systems failures or disruptions, including due to cyber-security incidents or ransomware attacks, utility disruptions, supply chain disruptions, labor shortages, or regulatory requirements; (v) volatile coal, petroleum coke, diesel, natural gas, electricity, transportation and freight costs and the consistent availability of trucks, truck drivers and rail cars to deliver the Company’s products to its customers and solid fuels to its plants on a timely basis at competitive prices; (vi) unanticipated delays or cost overruns in completing modernization and expansion and development projects; (vii) the Company’s ability to expand its lime and limestone operations through projects and acquisitions of businesses with related or similar operations, including the Carthage acquisition, and the Company’s ability to obtain any required financing for such projects and acquisitions, to integrate the projects and acquisitions into the Company’s overall operations, and to sell any resulting increased production at acceptable prices; (viii) inadequate demand and/or prices for the Company’s lime and limestone products due to increased competition from competitors, increasing competition for certain customer accounts, conditions in the U.S. economy, recessionary pressures in, and the impact of government policies on, particular industries, including oil and gas services, utility plants, steel, construction, and industrial, effects of governmental fiscal and budgetary constraints, including the level of highway construction and infrastructure funding, changes to tax law, legislative impasses, extended governmental shutdowns, trade wars, tariffs, economic and regulatory uncertainties under state governments and the United States Administration and Congress, Federal Reserve responses to inflationary concerns, and inability to continue to maintain or increase prices for the Company’s products, including passing through the increased costs of transportation, supplies, and services; (ix) ongoing and possible new regulations, investigations, enforcement actions and costs, legal expenses, penalties, fines, assessments, litigation, judgments and settlements, taxes and disruptions and limitations of operations, including those related to climate change, health and safety, human capital, diversity, and other environmental, social, governance, and sustainability considerations, and those that could impact the Company’s ability to continue or renew its operating permits or successfully secure new permits in connection with its modernization and expansion and development projects; (x) estimates of reserves and remaining lives of reserves; (xi) the ongoing impact of the novel coronavirus (“COVID-19”) pandemic and current or future variants of the COVID-19 virus and governmental responses thereto, including decreased demand, lower prices, tightened labor and other markets, and increased costs, and the risk of non-compliance with health and safety protocols, social distancing and mask guidelines, and vaccination recommendations, on the Company’s financial condition, results of operations, cash flows, and competitive position; (xii) the impact of social or political unrest; (xiii) risks relating to mine safety and reclamation and remediation; and (xiv) other risks and uncertainties set forth in this Report or indicated from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.
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Overview.
We have identified one reportable business segment based on the distinctness of our activities and products: lime and limestone operations. All of our operations are in the United States. Operating profit from our lime and limestone operations includes all of our selling, general and administrative costs. We do not allocate interest expense and interest and other income (expense), net to our lime and limestone operations.
Through our lime and limestone operations, we are a manufacturer of lime and limestone products, supplying primarily the construction (including highway, road and building contractors), industrial (including paper and glass manufacturers), metals (including steel producers), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), roof shingle manufacturers, agriculture (including poultry and cattle feed producers), and oil and gas services industries. We are headquartered in Dallas, Texas and operate lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Missouri, Oklahoma and Texas through our wholly owned subsidiaries, Arkansas Lime Company, Colorado Lime Company, Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair, ART Quarry TRS LLC (DBA Carthage Crushed Limestone) and U.S. Lime Company – Transportation. The lime and limestone operations represent our principal business.
On July 1, 2020, we acquired Carthage Crushed Limestone (“Carthage”), a limestone mining and production company located in Carthage, Missouri, for $8.4 million cash. Carthage provides aggregate and pulverized limestone products that are used primarily in the agriculture, roofing, construction, and industrial industries. Carthage contributed $2.5 million and $4.7 to our revenues for the three- and six-month periods ended June 30, 2021, respectively.
In addition to our lime and limestone operations, we hold natural gas interests through our wholly owned subsidiary, U.S. Lime Company – O & G, LLC. The revenues, gross profit and operating profit from our natural gas interests are included in Other for our reportable segment disclosures. Assets related to our natural gas interests, unallocated corporate assets, and cash items are included in Other identified assets.
Our lime and limestone revenues increased 30.5% and 19.2% in the second quarter and first six months 2021, respectively, compared to the second quarter and first six months 2020. In the second quarter 2020, the COVID-19 pandemic and related governmental restrictions on business activities resulted in a general economic slowdown, which disproportionately impacted certain industries that purchase our products, including oil and gas services, environmental, and steel. In addition to the limestone sales by Carthage to agriculture, roofing and construction customers, noted above, the increases in our lime and limestone revenues in the second quarter and first six months 2021 resulted primarily from increased sales to our construction, steel, roofing and environmental customers. In the second quarter 2021, we also saw demand from our oil and gas services customers increase compared to the second quarter 2020. Revenues in in the second quarter and first six months 2021 were also favorably impacted by increases in the average selling prices of 2.2% and 1.8%, respectively, for our lime and limestone products.
Our lime and limestone gross profit increased 58.8% and 38.7% in the second quarter and first six months 2021, respectively, compared to the second quarter and first six months 2020. The increases in gross profit in the 2021 periods, compared to the comparable 2020 periods, resulted primarily from the increased revenues discussed above and increased operating efficiencies.
Federal, state, and local governmental restrictions in response to the COVID-19 pandemic have generally been lifted or curtailed in recent months, which has continued to reduce the impact of the pandemic on general business activities in the markets for our lime and limestone products. In the locations where we operate, normal business activities have largely resumed. With the resumption of normal business activities, we are experiencing lower availability of labor and certain supplies and services and rising costs. Additionally, new variants of COVID-19 and the possibility of new wide-spread or localized outbreaks of the virus could have a material adverse effect on our financial condition, results of operations, cash flows and competitive position.
Looking ahead, we anticipate continued challenges in the availability and costs of labor and supplies and services for a period of time, while the broader economy adjusts to its reopened status, and we will continue to monitor the evolving COVID-19 situation and adjust our operations accordingly.
At our 2021 Annual Meeting of Shareholders, our shareholders approved an increase in the number of our authorized shares of common stock from 15,000,000 to 30,000,000. Possible uses of the additional authorized shares
15
include, without limitation, future stock splits, stock dividends, rights offerings, acquiring other companies, businesses or products in exchange for shares, attracting and retaining employees by the issuance of additional shares under our Amended and Restated 2001 Long-Term Incentive Plan and any future equity compensation plans, issuance of securities convertible into shares, and other transactions and corporate purposes which our Board of Directors deems to be in the best interests of us and our shareholders.
Liquidity and Capital Resources.
Net cash provided by operating activities was $27.4 million in the first six months 2021, compared to $27.1 million in the first six months 2020, an increase of $0.2 million, or 0.9%. 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 six months 2021, net cash provided by operating activities was principally composed of $18.1 million net income, $10.6 million DD&A, $1.8 million deferred income taxes, $1.1 million stock-based compensation, and a $4.1 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first six months 2021 included an increase of $4.5 million in trade receivables, net, due primarily from increased sales in the second quarter 2021 compared to the fourth quarter 2020, a decrease of $0.6 million in inventories, and a decrease of $0.6 million in accounts payable and accrued expenses. In the first six months 2020, net cash provided by operating activities was principally composed of $11.6 million net income, $9.5 million DD&A, $2.5 million deferred income taxes, $0.8 million stock-based compensation, and a $2.5 million increase from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first six months 2020 included a decrease of $1.8 million in trade receivables, net, due primarily from reduced revenues and favorable timing of collections in the second quarter, an increase of $1.0 million in inventories, and an increase of $0.8 million in accounts payable and accrued expenses, primarily from deferral of the payment of certain payroll taxes provided for under the CARES Act in the second quarter.
We had $17.8 million in capital expenditures in the first six months 2021, compared to $10.6 million in the first six months 2020. Capital expenditures in the first six months 2021 included $7.0 million of investment to develop our Love Hollow Quarry and improve the transportation infrastructure between the Love Hollow Quarry and our Arkansas Lime production facilities. Net cash used in financing activities was $1.8 million in the first six months 2021, compared to $2.0 million in the first six months 2020, consisting primarily of cash dividends paid in each period.
Cash and cash equivalents increased $7.8 million to $91.3 million at June 30, 2021, from $83.6 million at December 31, 2020.
We are not committed to any planned capital expenditures until actual orders are placed for equipment. As of June 30, 2021, we did not have any material commitments for open purchase orders.
Our credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 2019 and November 21, 2019, provides for a $75 million revolving credit facility (the “Revolving Facility”) and an incremental four-year accordion feature to borrow up to an additional $50 million on the same terms, subject to approval by the Lender or another lender selected by us. The credit agreement also provides for a $10 million letter of credit sublimit under the Revolving Facility. The Revolving Facility and any incremental loans mature on May 2, 2024.
Interest rates on the Revolving Facility are, at our option, LIBOR (or a replacement rate as determined by the Lender and the Company) plus a margin of 1.000% to 2.000%, or the Lender’s Prime Rate plus a margin of 0.000% to 1.000%; and a commitment fee range of 0.200% to 0.350% on the undrawn portion of the Revolving Facility. The Revolving Facility interest rate margins and commitment fee are determined quarterly in accordance with a pricing grid based upon our Cash Flow Leverage Ratio, defined as the ratio of our total funded senior indebtedness to earnings before interest, taxes, depreciation, depletion, amortization and stock-based compensation expense (“EBITDA”) for the 12 months ended on the last day of the most recent calendar quarter, plus pro forma EBITDA from any businesses acquired during the period. Pursuant to a security agreement, dated August 25, 2004, the Revolving Facility is secured by our existing and hereafter acquired tangible assets, intangible assets and real property. The maturity of the Revolving Facility and any incremental loans can be accelerated if any event of default, as defined under the credit agreement, occurs. Our maximum Cash Flow Leverage Ratio is 3.50 to 1.
We may pay dividends so long as we remain in compliance with the provisions of our credit agreement, and we may purchase, redeem or otherwise acquire shares of our common stock so long as our pro forma Cash Flow Leverage
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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 June 30, 2021, we had no debt outstanding and no draws on the Revolving Facility other than $0.4 million of letters of credit which count as draws against the available commitment under the Revolving Facility. We believe that, absent a significant acquisition, cash on hand and cash flows from operations will be sufficient to meet our operating needs, ongoing capital needs, including current and possible future modernization, expansion, and development projects, and liquidity needs and allow us to pay regular quarterly cash dividends for the near future.
Results of Operations.
Revenues in the second quarter 2021 were $49.2 million, compared to $37.5 million in the second quarter 2020, an increase of $11.6 million, or 30.9%. For the first six months 2021, revenues were $90.8 million, compared to $76.0 million in the first six months 2020, an increase of $14.8 million, or 19.5%. Revenues from our lime and limestone operations in the second quarter 2021 increased $11.4 million, or 30.5%, to $48.7 million from $37.4 million in the second quarter 2020. For the first six months 2021, revenues from our lime and limestone operations increased $14.5 million, or 19.2%, to $90.1 million, compared to $75.6 million in the first six months 2020. The increases in lime and limestone revenues in the second quarter and first six months 2021 were primarily due to increases in sales volumes of 28.3% and 17.4%, respectively, compared to the comparable 2020 periods, principally due to increased demand from our construction, steel, roofing and environmental customers. In the second quarter 2021, we also saw demand from our oil and gas services customers increase compared to the second quarter 2020. Revenues also included $0.4 million and $0.7 million from our natural gas interests in the second quarter and first six months 2021, respectively, compared to $0.2 million and $0.4 million in the comparable 2020 periods, respectively.
Gross profit was $16.8 million and $28.6 million in the second quarter and first six months 2021, respectively, compared to $10.4 million and $20.2 million in the comparable 2020 periods, increases of $6.4 million and $8.4 million, or 62.2% and 41.3%, respectively. Gross profit from our lime and limestone operations in the second quarter and first six months 2021 was $16.7 million and $28.5 million, respectively, compared to $10.5 million and $20.5 million in the comparable 2020 periods, increases of $6.2 million, or 58.8%, and $8.0 million, or 38.7%, respectively. The increases in gross profit in the 2021 periods, compared to the comparable 2020 periods, resulted primarily from the increased revenues discussed above and increased operating efficiencies. Gross profit also included $113 thousand and $94 thousand from our natural gas interests in the second quarter and first six months 2021, respectively, compared to losses of $150 thousand and $312 thousand in the second quarter and first six months 2020, respectively.
Selling, general and administrative (“SG&A”) expenses were $3.0 million in the second quarter 2021, compared to $2.9 million in the second quarter 2020, an increase of $0.1 million, or 2.6%. SG&A expenses were $6.0 million in the first six months 2021, compared to $6.1 million in the first six months 2020, a decrease of $0.1 million, or 1.2%. Increased personnel expenses, including stock-based compensation, during the 2021 periods were offset by the higher legal expenses in the 2020 periods related to the acquisition of Carthage.
Interest expense was $62 thousand in each of the second quarters 2021 and 2020, and $124 thousand in each of the first six months 2021 and 2020. We had no outstanding debt during any of the periods. Interest and other income, net was $0.1 million in each of the second quarter and first six months 2021, compared to $0.1 million and $0.4 million, respectively, in the comparable 2020 periods.
Income tax expense was $2.8 million and $4.5 million in the second quarter and first six months 2021, respectively, compared to $1.4 million and $2.7 million, respectively, in the comparable 2020 periods. Our effective income tax rate was reduced from the federal rate primarily due to statutory depletion, which is allowed for income tax purposes and is a permanent difference between net income for financial reporting purposes and taxable income.
Our net income was $11.1 million ($1.96 per share diluted) in the second quarter 2021, compared to net income of $6.1 million ($1.08 per share diluted) in the second quarter 2020, an increase of $5.0 million, or 81.8%. Net income in the first six months 2021 was $18.1 million ($3.20 per share diluted), an increase of $6.5 million, or 55.6%, compared to net income of $11.6 million ($2.07 per share diluted) in the first six months 2020.
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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 June 30, 2021. Any future borrowings under the Revolving Facility would be subject to interest rate risk. See Note 9 of Notes to Condensed Consolidated Financial Statements.
ITEM 4: CONTROLS AND PROCEDURES
Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures as of the end of the period covered by this Report were effective.
No change in our internal control over financial reporting occurred during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Our Amended and Restated 2001 Long-Term Incentive Plan allows employees and directors to pay the exercise price for stock options and the tax withholding liability upon the lapse of restrictions on restricted stock by payment in cash and/or delivery of shares of common stock. There were no repurchases in the second quarter 2021 pursuant to these provisions or otherwise.
ITEM 4: MINE SAFETY DISCLOSURES
Under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of SEC Regulation S-K, each operator of a coal or other mine is required to include disclosures regarding certain mine safety results in its periodic reports filed with the SEC. The operation of our quarries, underground mine and plants is subject to regulation by the federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977. The required information regarding certain mining safety and health matters, broken down by mining complex, for the quarter ended June 30, 2021 is presented in Exhibit 95.1 to this Report.
We believe we are responsible to employees to provide a safe and healthy workplace environment. We seek to accomplish this by: training employees in safe work practices; openly communicating with employees; following safety standards and establishing and improving safe work practices; involving employees in safety processes; and recording, reporting and investigating accidents, incidents and losses to avoid reoccurrence.
Following passage of the Mine Improvement and New Emergency Response Act of 2006, MSHA significantly increased the enforcement of mining safety and health standards on all aspects of mining operations. There has also been an increase in the dollar penalties assessed for citations and orders issued in recent years.
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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 | | |
| | |
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 | | |
| | |
32.2 | | |
| | |
95.1 | | |
| | |
101 | | Interactive Data Files (formatted as Inline XBRL). |
| | |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
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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. | |
| | |
| | |
July 30, 2021 | By: | /s/ Timothy W. Byrne |
| | Timothy W. Byrne |
| | President and Chief Executive Officer |
| | (Principal Executive Officer) |
| | |
| | |
July 30, 2021 | By: | /s/ Michael L. Wiedemer |
| | Michael L. Wiedemer |
| | Vice President and Chief Financial Officer |
| | (Principal Financial and Accounting Officer) |
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Exhibit 3.1
RESTATED ARTICLES OF INCORPORATION
OF United States Lime & Minerals, Inc., as amended
First:
The name of this corporation is United States Lime & Minerals, Inc.
Second:
The purposes for which the corporation is organized are to mine, produce, process and sell minerals of every kind and to buy, sell, and deal in personal property, real property and services subject to Part Four of the Texas Miscellaneous Corporation Laws Act.
Third:
The street address of the registered office of the corporation is 1999 Bryan St., Ste. 900, Dallas, Texas 75201-3136, and the name of its registered agent at such address is CT Corporation System.
Fourth:
The period of duration of the corporation is perpetual.
Fifth:
The number of directors of the corporation shall be as fixed by the bylaws but shall not be less than three.
Sixth:
The aggregate number of shares which the corporation shall have authority to issue is Thirty Million Five Hundred Thousand (30,500,000) divided into: one class of Thirty Million (30,000,000) shares of Common Stock, $.10 par value each, and one class of Five Hundred Thousand (500,000) shares of Preferred Stock, $5.00 par value each, which may be divided into and issued in Series as follows:
6.1The Board of Directors is authorized, from time to time, to divide the Preferred Stock into Series, to designate each Series, to fix and determine separately for each Series any one or more of the following relative rights and preferences, and to issue shares of any Series then or previously designated, fixed and determined:
(A) the rate of dividend;
(B) the price at and the terms and conditions on which shares may be redeemed;
(C) the amount payable upon shares in event of involuntary liquidation;
(D) the amount payable upon shares in event of voluntary liquidation;
(E) sinking fund provisions (if any) for the redemption or purchase of shares;
(F) the terms and conditions on which shares may be converted if the shares of any Series are issued with the privilege of conversion; and
(G) voting rights (including the number of votes per share, the matters on which the shares can vote, and the contingencies which make the voting rights effective).
6.2All shares of Common Stock shall have identical rights with each other. Except as provided in this Article Sixth, all shares of Preferred Stock shall have preferences, limitations, and relative rights identical with each other. Except as otherwise expressly provided by laws, shares of Preferred Stock shall have only the preferences and relative rights expressly stated in this Article Sixth.
6.3(a)The Preferred Stock at the time outstanding shall be entitled to receive, when and as declared by the Board of Directors, out of any funds legally available therefor, dividends at the rate fixed by the Board of Directors (pursuant to paragraph 6.1 above), and no more, payable at the date or dates fixed by the Board of Directors.
6.3(b)Dividends on Preferred Stock shall be cumulative from date of issue. Cumulations of dividends shall not bear interest.
6.3(c)No dividend shall be declared or paid on Common Stock (other than a dividend payable in common stock of the corporation), and no Common Stock shall be purchased by the corporation, unless full dividends on outstanding Preferred Stock for all past dividend periods and for the current dividend period shall have been declared and paid.
6.3(d)No dividend shall be declared on any Series of Preferred Stock: (1) for any dividend period unless all dividends cumulated for all prior dividend periods shall have been declared or shall then be declared at the same time upon all Preferred Stock then outstanding; or (2) unless a dividend for the same period shall be declared at the same time upon all Preferred Stock then outstanding in like proportion to the dividend rate then declared.
6.4In event of dissolution, liquidation, or winding up of the corporation (whether voluntary or involuntary), after payment or provision for payment of debts but before any distribution to the holders of Common Stock, the holders of each Series of Preferred Stock then outstanding shall be entitled to receive the amount fixed by the Board of Directors (pursuant to paragraph 6.1 above) plus a sum equal to all cumulated but unpaid dividends (whether or not earned or declared) to the date fixed for distribution, and no more. All remaining assets shall be distributed pro rata among the holders of Common Stock. If the assets distributable among the holders of Preferred Stock are insufficient to permit full payment to them, the entire assets shall be distributed among the holders of the Preferred Stock in proportion to their respective liquidation preferences. None of the following events is a dissolution, liquidation, or winding up within the meaning of this
paragraph: consolidation, merger, or reorganization of the corporation with any other corporation or corporations, sale of all or substantially all of the assets of the corporation, or any purchase or redemption by the corporation of any of its outstanding shares.
6.5(a)All or any part of any one or more Series of Preferred Stock may be redeemed at any time or times at the option of the corporation, by resolution of the Board of Directors, in accordance with the terms and conditions of this Article Sixth and those fixed by the Board of Directors (pursuant to paragraph 6.1 above). The corporation may redeem shares of any one or more Series without redeeming shares of any other Series. If less than all of the shares of any Series are to be redeemed, the shares of the Series to be redeemed shall be selected ratably or by lot or by any other equitable method determined by the Board of Directors.
6.5(b)Notice shall be given to the holders of shares to be redeemed, either personally or by mail, not less than twenty (20) nor more than fifty (50) days before the date fixed for redemption.
6.5(c)Redeemed shares shall be paid in cash or property or rights (including securities of this corporation or another corporation), the amount fixed by the Board of Directors (pursuant to paragraph 6.1 above) plus a sum equal to all cumulated but unpaid dividends (whether or not earned or declared) to the date fixed for redemption, and no more.
6.5(d)On or before the date fixed for redemption, the corporation may provide for payment of a sum sufficient to redeem the shares called for redemption either (1) by setting aside the sum, separate from its other funds, in trust for the benefit of the holders of the shares to be redeemed, or (2) by depositing such sum in a bank or trust company (either
one in Texas having capital and surplus of at least ten million dollars ($10,000,000) according to its latest statement of condition, or one anywhere in the United States duly appointed and acting as transfer agent of the corporation] as a trust fund, with irrevocable instructions and authority to the bank or trust company to give or complete the notice of redemption and to pay, on or after the date fixed for redemption, the redemption price on surrender of their respective share certificates. The holders may be evidenced by a list certified by the corporation (by its president or a vice president and by its secretary or an assistant secretary) or by its transfer agent. If the corporation so provides for payment, then from and after the date fixed for redemption: (a) the shares shall be deemed to be redeemed, (b) dividends thereon shall cease to accrue, (c) such setting aside or deposit shall be deemed to constitute full payment for the shares, (d) the shares shall no longer be deemed to be outstanding, (e) the holders thereof shall cease to be shareholders with respect to such shares, and (f) the holders shall have no rights with respect thereto except the right to receive (without interest) their proportionate shares of the funds so set aside or deposited upon surrender of their respective certificates, and any right to convert such shares which may exist. Any interest accrued on funds so set aside or deposited shall belong to the corporation. If the holders of the shares do not, within six (6) years after such deposit, claim any amount so deposited for redemption thereof, the bank or trust company shall upon demand pay over to the corporation the balance of the funds so deposited, and the bank or trust company shall thereupon be relieved of all responsibility to such holders.
6.5(e)Shares of Preferred Stock which are redeemed shall be cancelled and shall be restored to the status of authorized but unissued shares.
6.6Except as specified in paragraph 6.3(c) nothing herein shall limit the right of the corporation to purchase any of its outstanding shares in accordance with law, by public or private transaction.
6.7Except as fixed by the Board of Directors (pursuant to paragraph 6.1 above), and except as otherwise expressly provided by law, all voting power shall be in the Common Stock and none in the Preferred Stock. Where Preferred Stock as a class has voting power, all series of Preferred Stock shall be a single class. The affirmative vote of the holders of a majority of the outstanding shares of the Preferred Stock shall be sufficient for any action which requires the vote or concurrence of such class.
6.8No holder of any stock of the corporation shall be entitled as a matter of right to purchase or subscribe for any part of any stock of the corporation, presently authorized or of any additional stock of any class to be issued by reason of any increase of the authorized stock of the corporation or of any bonds, certificates of indebtedness, debentures or other securities convertible into stock of the corporation, but any stock presently authorized or any such additional authorized issue of new stock or of securities convertible into stock may be issued and disposed of by the Board of Directors to such persons, firms, corporations or associations for such consideration and upon such terms and in such manner as the Board of Directors may in their discretion determine without offering any thereof on the same terms or on any terms to the shareholders then of record or to any class of shareholders.
6.9The corporation shall be entitled to treat the person in whose name any share, right or option is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to or interest in such share, right or option
on the part of any other person, whether or not the corporation shall have notice thereof, save as may be expressly provided by the laws of the State of Texas.
6.10A director shall be fully protected in relying in good faith upon the books of account of the corporation or statements prepared by any of its officials as to the value and amount of the assets, liabilities and/or net profits of the corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid.
6.11Without action by the shareholders, a share of stock may be issued by the corporation from time to time for such consideration as may be fixed from time to time by the Board of Directors thereof, and any and all such shares so issued, the full consideration for which has been paid or delivered, shall be deemed fully paid stock and not liable to any further call or assessment thereon; and the holder of such shares shall not be liable for any further call or assessment thereon, or for any other payment thereon.
Seventh:
Cumulative voting in the election of directors is prohibited.
Eighth:
The power and authority to alter, amend, repeal, or adopt Bylaws of the corporation is expressly delegated by the stockholders to the Board of Directors.
Ninth:
A director of the Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for acts or omissions in such director’s capacity as a director except for liability (i) for a breach of a director’s duty of loyalty to the Corporation or its shareholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) for a transaction from which a director received an improper benefit, whether or not the benefit resulted from an action taken within the scope of the director’s office; (iv) for acts or omissions for which liability of a director is expressly provided by statute; or (v) for an act related to an unlawful stock repurchase or payment of a dividend.
EXHIBIT 31.1
RULE 13a-14(a)/15d-14(a) CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER
I, Timothy W. Byrne, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of United States Lime & Minerals, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: July 30, 2021 | /s/ Timothy W. Byrne |
| Timothy W. Byrne |
| President and Chief Executive Officer |
EXHIBIT 31.2
RULE 13a-14(a)/15d-14(a) CERTIFICATION BY THE CHIEF FINANCIAL OFFICER
I, Michael L. Wiedemer, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of United States Lime & Minerals, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: July 30, 2021 | /s/ Michael L. Wiedemer |
| Michael L. Wiedemer |
| Vice President and Chief Financial Officer |
EXHIBIT 32.1
SECTION 1350 CERTIFICATION BY THE CHIEF EXECUTIVE OFFICER
I, Timothy W. Byrne, Chief Executive Officer of United States Lime & Minerals, Inc. (the “Company”), hereby certify that, to my knowledge:
(1) | The Company’s periodic report on Form 10-Q for the quarterly period ended June 30, 2021 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: July 30, 2021 | /s/ Timothy W. Byrne |
| Timothy W. Byrne |
| President and Chief Executive Officer |
EXHIBIT 32.2
SECTION 1350 CERTIFICATION BY THE CHIEF FINANCIAL OFFICER
I, Michael L. Wiedemer, Chief Financial Officer of United States Lime & Minerals, Inc. (the “Company”), hereby certify that, to my knowledge:
(1) | The Company’s periodic report on Form 10-Q for the quarterly period ended June 30, 2021 (the “Form 10-Q”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: July 30, 2021 | /s/ Michael L. Wiedemer |
| Michael L. Wiedemer |
| Vice President and Chief Financial Officer |
EXHIBIT 95.1
MINE SAFETY DISCLOSURES
The following disclosures are provided pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of SEC Regulation S-K, which require certain disclosures by companies required to file periodic reports under the Securities Exchange Act of 1934, as amended, that operate mines regulated under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”).
The Mine Act has been construed as authorizing MSHA to issue citations and orders pursuant to the legal doctrine of strict liability, or liability without fault. If, in the opinion of an MSHA inspector, a condition that violates the Mine Act or regulations promulgated pursuant to it exists, then a citation or order will be issued regardless of whether the operator had any knowledge of, or fault in, the existence of that condition. Many of the Mine Act standards include one or more subjective elements, so that issuance of a citation or order often depends on the opinions or experience of the MSHA inspector involved and the frequency and severity of citations and orders will vary from inspector to inspector.
Whenever MSHA believes that a violation of the Mine Act, any health or safety standard, or any regulation has occurred, it may issue a citation or order which describes the violation and fixes a time within which the operator must abate the violation. In some situations, such as when MSHA believes that conditions pose a hazard to miners, MSHA may issue an order requiring cessation of operations, or removal of miners from the area of the mine, affected by the condition until the hazards are corrected. Whenever MSHA issues a citation or order, it has authority to propose a civil penalty or fine, as a result of the violation, that the operator is ordered to pay.
The table that follows reflects citations, orders, violations and proposed assessments issued to the Company by MSHA during the quarter ended June 30, 2021 and all pending legal actions as of June 30, 2021. Due to timing and other factors, the data may not agree with the mine data retrieval system maintained by MSHA. The proposed assessments for the quarter ended June 30, 2021 were taken from the MSHA system as of July 28, 2021.
Additional information follows about MSHA references used in the table:
| ● | Section 104(a) Citations: The total number of citations received from MSHA under section 104(a) of the Mine Act for alleged violations of health or safety standards that could significantly and substantially contribute to a serious injury if left unabated. |
| ● | Section 104(b) Orders: The total number of orders issued by MSHA under section 104(b) of the Mine Act, which represents a failure to abate a citation under section 104(a) within the period of time prescribed by MSHA. This results in an order of immediate withdrawal from the area of the mine affected by the condition until MSHA determines that the violation has been abated. |
| ● | Section 104(d) Citations and Orders: The total number of citations and orders issued by MSHA under section 104(d) of the Mine Act for unwarrantable failure to comply with mandatory health or safety standards. |
| ● | Section 110(b)(2) Violations: The total number of flagrant violations issued by MSHA under section 110(b)(2) of the Mine Act. |
| ● | Section 107(a) Orders: The total number of orders issued by MSHA under section 107(a) of the Mine Act for situations in which MSHA determined an imminent danger existed. |
Citations and orders can be contested before the Federal Mine Safety and Health Review Commission (the “Commission”), and as part of that process, are often reduced in severity and amount, and are sometimes dismissed. The Commission is an independent adjudicative agency that provides administrative trial and appellate review of legal disputes arising under the Mine Act. These cases may involve, among other questions, challenges by operators to citations, orders and penalties they have received from MSHA, or complaints of discrimination by miners under section 105 of the Mine Act.
1
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| Section |
| |
| |
| |
| |
| |
|
| | | | | | 104(d) | | | | | | Proposed | | | | |
|
| | Section | | Section | | Citations | | Section | | Section | | MSHA | | | | Pending |
|
| | 104 S & S | | 104(b) | | and | | 110(b)(2) | | 107(a) | | Assessments(2) | | | | Legal |
|
Mine(1) | | Citations | | Orders | | Orders | | Violations | | Orders | | ($ in thousands) | | Fatalities | | Actions(3) |
|
Texas Lime Company |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |
Arkansas Lime Company | | | | | | | | | | | | | | | | | |
Plant |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |
Limedale Quarry |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |
U.S. Lime Company—St. Clair |
| — |
| — |
| — |
| — |
| — |
| 0.5 |
| — |
| — | |
Carthage Crushed Limestone | | 1 | | — | | — | | — | | — | | 0.5 | | — | | — | |
Colorado Lime Company | | | | | | | | | | | | | | | | | |
Monarch Quarry |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |
Delta Plant |
| — |
| — |
| — |
| — |
| — |
| — |
| — |
| — | |
| (1) | The definition of a mine under section 3 of the Mine Act includes the mine, as well as other items used in, or to be used in, or resulting from, the work of extracting and processing limestone, such as roads, land, structures, facilities, equipment, machines, tools, kilns, and other property. These other items associated with a single mine have been aggregated in the totals for that mine. |
| (2) | The proposed MSHA assessments issued during the reporting period do not necessarily relate to the citations or orders issued by MSHA during the reporting period or to any pending contests reported above. |
| (3) | Includes any pending legal actions before the Commission involving such mine as of June 30, 2021. Any pending legal actions were initiated by the Company. The pending legal actions may relate to the citations or orders issued by MSHA during the reporting period or to citations or orders issued in prior periods. Due to timing and other factors, the data may not agree with the mine data retrieval system maintained by MSHA. There were no legal actions resolved or instituted during the reporting period. |
Pattern or Potential Pattern of Violations. During the quarter ended June 30, 2021, none of the mines operated by the Company received written notice from MSHA of either (a) a pattern of violations of mandatory health or safety standards that are of such nature as could have significantly and substantially contributed to mine health or safety hazards under section 104(e) of the Mine Act or (b) the potential to have such a pattern.
2