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United States Lime & Minerals Inc. Reports Operating Results (10-Q)

October 29, 2010 | About:
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10qk

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United States Lime & Minerals Inc. (USLM) filed Quarterly Report for the period ended 2010-09-30.

United States Lime & Minerals Inc. has a market cap of $255.7 million; its shares were traded at around $39.92 with a P/E ratio of 14.4 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.

Highlight of Business Operations:

Net cash provided by operating activities was $27.3 million in the nine months ended September 30, 2010, compared to $24.1 million in the comparable 2009 period, an increase of $3.2 million, or 13.1%. 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 nine months 2010, cash provided by operating activities was principally composed of $14.9 million net income, $9.9 million DD&A and $2.5 million deferred income taxes, compared to $10.6 million net income, $10.3 million DD&A and $1.6 million deferred income taxes in the first nine months 2009. The most significant changes in working capital in the first nine months 2010 was a net increase in inventories of $1.3 million and a $1.2 million decrease in prepaid expenses and other current assets. The increase in inventories was primarily for purchases of coal and petroleum coke, while the decrease in prepaid expenses and other current assets was primarily due to amortization of prepaid insurance. The most significant change in working capital items during the 2009 period was a net decrease in inventories of $2.2 million.

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 Companys mark-to-market of its interest rate hedges, at September 30, 2010 and December 31, 2009, resulted in liabilities of $4.7 million and $3.2 million, respectively, which are included in accrued expenses ($1.6 and $1.7 million, respectively) and other liabilities ($3.1 million and $1.5 million, respectively) on the Companys Condensed Consolidated Balance Sheets. The Company paid $429 thousand and $1,367 thousand in quarterly settlement payments pursuant to its hedges during the three- and nine-month periods ended September 30, 2010, respectively, compared to payments of $476 thousand and $1,288 thousand in the comparable prior year three- and nine-month periods, respectively. These payments were included in interest expense.

Revenues increased to $31.9 million in the third quarter 2010 from $31.6 million in the comparable prior year quarter, an increase of $256 thousand, or 0.8%. Revenues from the Companys Lime and Limestone Operations increased $587 thousand, or 2.0%, to $30.5 million in the third quarter 2010, compared to $29.9 million in the comparable 2009 quarter, while revenues from its Natural Gas Interests decreased $331 thousand, or 19.0%, to $1.4 million in the third quarter 2010 from $1.7 million in the comparable 2009 quarter. For the first nine months 2010, revenues increased to $103.4 million from $89.1 million in the comparable 2009 period, an increase of $14.3 million, or 16.1%. Revenues from the Companys Lime and Limestone Operations increased $14.1 million, or 16.7%, to $98.1 million in the first nine months 2010, compared to $84.0 million in the comparable 2009 period, while revenues from its Natural Gas Interests increased $281 thousand, or 5.6%, to $5.3 million in the first nine months 2010 from $5.0 million in the comparable 2009 period. The increase in lime and limestone revenues in the 2010 periods, compared to last years comparable periods, primarily resulted from increased sales volumes of the Companys lime products due to improved demand, principally from its steel customers in the first half 2010, and increased prices realized during the periods for the Companys lime and limestone products. These increases were partially offset by decreased PLS sales volumes in the third quarter 2010, compared to the third quarter 2009, due to reduced roof shingle demand in the Companys markets.

The Companys gross profit was $8.9 million for the third quarter 2010, compared to $8.6 million for the comparable 2009 quarter, an increase of $231 thousand, or 2.7%. Gross profit for the first nine months 2010 was $28.9 million, an increase of $7.3 million, or 33.5%, from $21.7 million for the first nine months 2009. Included in gross profit for the third quarter and first nine months 2010 were $7.9 million and $25.1 million, respectively, from the Companys Lime and Limestone Operations, compared to $7.5 million and $18.6 million, respectively, in the comparable 2009 periods. The improved gross profits and gross profit margins as a percentage of revenues for the Companys Lime and Limestone Operations in the third quarter and first nine months 2010, compared to the 2009 comparable periods, primarily resulted from the increased revenues, partially offset in the first nine months 2010 by costs incurred and accrued associated with the accident at St. Clair.

Gross profit from the Companys Natural Gas Interests declined to $936 thousand in the third quarter 2010 from $1.2 million in the prior year comparable quarter, primarily due to the decline in natural gas production volumes. For the first nine months 2010, gross profit from Natural Gas Interests increased to $3.8 million from $3.1 million in the comparable 2009 period, primarily due to the increase in prices compared to the comparable prior year period, partially offset by the decline in production volumes. Production volumes from the Companys Natural Gas Interests for the third quarter 2010 totaled 220 thousand MCF, sold at an average price of $6.41 per MCF, compared to 302 thousand MCF, sold at an average price of $5.84 per MCF, in the comparable 2009 quarter. Production volumes for the first nine months 2010 from Natural Gas Interests totaled 635 thousand MCF, sold at an average price of $7.76 per MCF, compared to the first nine months 2009 when 1.0 BCF was produced and sold at an average price of $4.99 per MCF.

Interest expense in the third quarter 2010 and 2009 was $707 thousand. Interest expense in the first nine months 2010 decreased to $2.0 million from $2.2 million in the first nine months 2009, a decrease of $161 thousand, or 7.4%. The decrease in interest expense in the first nine months 2010 primarily resulted from decreased average outstanding debt due to the repayment of $5.0 million of debt since September 30, 2009, partially offset by an increase in interest rates beginning in June 2010 resulting from the Amendment. Interest expense included payments of $429 thousand and $1.4 million that were made pursuant to the Companys interest rate hedges during the three- and nine-month periods ended September 30, 2010, respectively, compared to payments of $476 thousand and $1.3 million in the comparable prior year three- and nine-month periods, respectively.

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