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United States Lime & Minerals Inc. has a market cap of $263.7 million; its shares were traded at around $41.21 with a P/E ratio of 17 and P/S ratio of 2.2. United States Lime & Minerals Inc. had an annual average earning growth of 26.3% over the past 10 years. GuruFocus rated United States Lime & Minerals Inc. the business predictability rank of 3-star.USLM is in the portfolios of Columbia Wanger of Columbia Wanger Asset Management, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:Net cash provided by operating activities was $15.6 million in the six months ended June 30, 2010, compared to $11.7 million in the comparable 2009 period, an increase of $3.9 million, or 32.9%. Net cash provided by operating activities is composed of net income, depreciation, depletion and amortization (“DD&A”), deferred income taxes and other non-cash items included in net income, and changes in working capital. In the first half 2010, cash provided by operating activities was principally composed of $10.3 million net income, $6.6 million DD&A and $1.8 million deferred income taxes, compared to $6.1 million net income, $6.9 million DD&A and $1.2 million deferred income taxes in the first half 2009. The most significant changes in working capital in the first half 2010 were net increases in trade receivables and accounts payable and accrued expenses of $5.4 million and $900 thousand, respectively, and a $1.1 million decrease in prepaid expenses and other current assets. The most significant changes in working capital items in the first half 2009 were net increase in trade receivables of $1.3 million and net decreases in accounts payable and accrued expenses, inventories and other liabilities of $1.9 million, $1.3 million and $1.0 million, respectively. The net increases in trade receivables in the 2010 and 2009 periods primarily resulted from an increase in revenues in the second quarters 2010 and 2009, compared to the fourth quarters 2009 and 2008, respectively.
The hedges have been effective as defined under applicable accounting rules. Therefore, changes in fair value of the interest rate hedges are reflected in comprehensive income (loss). The Company will be exposed to credit losses in the event of non-performance by the counterparty to the hedges. Due to interest rate declines, the Company’s mark-to-market of its interest rate hedges at June 30, 2010 and December 31, 2009, resulted in liabilities of $4.2 million and $3.2 million, respectively, which are included in accrued expenses ($1.6 and $1.7 million, respectively) and other liabilities ($2.6 million and $1.5 million, respectively) on the Company’s Condensed Consolidated Balance Sheets. The Company paid $462 thousand and $938 thousand in quarterly settlement payments pursuant to its hedges during the three- and six-month periods ended June 30, 2010, respectively, compared to payments of $416 thousand and $811 thousand in the comparable prior year three- and six-month periods, respectively. These payments were included in interest expense.
Revenues in the second quarter 2010 increased to $37.9 million from $29.1 million in the comparable prior year quarter, an increase of $8.8 million, or 30.2%. Revenues from the Company’s Lime and Limestone Operations in the second quarter 2010 increased $8.5 million, or 30.8%, to $36.2 million from $27.6 million in the comparable 2009 quarter, while revenues from its Natural Gas Interests increased $278 thousand, or 18.6%, to $1.8 million from $1.5 million in the comparable prior year quarter. For the six months ended June 30, 2010, revenues increased to $71.5 million from $57.4 million in the comparable 2009 period, an increase of $14.1 million, or 24.5%. Revenues from the Company’s Lime and Limestone Operations in the first six months 2010 increased $13.5 million, or 24.9%, to $67.6 million from $54.2 million in the comparable 2009 period, while revenues from its Natural Gas Interests increased $612 thousand, or 18.6%, to $3.9 million from $3.3 million in the comparable prior year period. The increase in lime and limestone revenues in the 2010 periods as compared to last year’s comparable periods primarily resulted from increased sales volumes of the Company’s lime products due to improved demand, principally from its steel customers, and increased prices realized during the periods for the Company’s lime and limestone products.
The Company’s gross profit was $10.6 million for the second quarter 2010, compared to $6.8 million in the comparable 2009 quarter, an increase of $3.7 million, or 55.0%. Gross profit for the first six months 2010 was $20.1 million, an increase of $7.0 million, or 54.0%, from $13.0 million in the first six months 2009. Included in gross profit for the second quarter and first half 2010 were $9.3 million and $17.2 million, respectively, from the Company’s Lime and Limestone Operations, compared to $5.9 million and $11.1 million, respectively, in the comparable 2009 periods. The improved gross profits and gross profit margins as a percentage of revenues for the Company’s Lime and Limestone Operations in the second quarter and first half of 2010, compared to the 2009 comparable periods, primarily resulted from the increased revenues and operating efficiencies, partially offset by costs incurred and accrued as a result of the accident at St. Clair.
Gross profit from the Company’s natural gas interests increased to $1.3 million and $2.9 million for the second quarter and first half 2010, respectively, from $863 thousand and $1.9 million, respectively, in the comparable 2009 periods, primarily due to the increase in prices for natural gas liquids, compared to the comparable prior year periods, and, for the second quarter 2010, increased natural gas prices compared to the 2009 quarter, partially offset by reduced production volumes. Production volumes from the Company’s Natural Gas Interests for the second quarter 2010 totaled 229 thousand MCF from 30 wells, sold at an average price of $7.75 per MCF, compared to 343 thousand MCF from 30 wells, sold at an average price of $4.73 per MCF, in the comparable 2009 quarter. Production volumes for the first half 2010 from Natural Gas Interests totaled 465 thousand MCF at an average price of $8.40 per MCF, compared to the first half 2009 when 707 thousand MCF was produced and sold at an average price of $5.24 per MCF. The unitization of 11 natural gas wells during the first half 2009 resulted in retroactive net adjustments of approximately $125 thousand and $375 thousand that reduced gross profit for the second quarter and first half 2009, respectively.
Interest expense in the second quarter 2010 decreased $65 thousand, or 8.9%, to $666 thousand from $731 thousand in the second quarter 2009. Interest expense in the first six months 2010 decreased to $1.3 million from $1.5 million in the first six months 2009, a decrease of $161 thousand, or 10.9%. The decrease in interest expense in the 2010 periods primarily resulted from decreased average outstanding debt due to the repayment of $10 million of debt since June 30, 2009, partially offset by an increase in interest rates for June 2010 resulting from the Amendment. Interest expense included payments of $462 thousand and $938 thousand that were made pursuant to the Company’s interest rate hedges during the three- and six-month periods ended June 30, 2010, respectively, compared to payments of $416 thousand and $811 thousand in the comparable prior year three- and six-month periods, respectively.
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