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

April 29, 2011 | About:
10qk

10qk

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United States Lime & Minerals Inc. (USLM) filed Quarterly Report for the period ended 2011-03-31.

United States Lime & Minerals Inc. has a market cap of $262.5 million; its shares were traded at around $40.98 with a P/E ratio of 14.6 and P/S ratio of 1.9. United States Lime & Minerals Inc. had an annual average earning growth of 22.5% over the past 10 years. GuruFocus rated United States Lime & Minerals Inc. the business predictability rank of 4-star.

Highlight of Business Operations:

Net cash provided by operating activities was $5.4 million in the first quarter 2011, compared to $5.9 million in the comparable 2010 period, a decrease of $432 thousand, or 7.4%. 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 2011 quarter, cash provided by operating activities was principally composed of net income of $4.8 million, DD&A of $3.4 million and deferred income taxes of $581 thousand, compared to $4.7 million of net income, $3.3 million of DD&A and $740 thousand of deferred income taxes in the first quarter 2010. The most significant changes in working capital in the 2011 quarter were net increases in trade receivables of $4.6 million and in accounts payable and accrued expenses of $482 thousand. The most significant changes in working capital in the 2010 quarter were net increases in trade receivables of $4.6 million and in accounts payable and accrued expenses of $930 thousand. The net increase in trade receivables in 2011 primarily resulted from increased revenues in the first quarter 2011 compared to the fourth quarter 2010, and the net increase in trade receivables in 2010 was primarily due to an increase in revenues in the first quarter 2010 compared to the fourth quarter 2009. The increase in accounts payable and accrued expenses for the 2011 quarter primarily related to the increase in production activity in the first quarter 2011 compared to the fourth quarter 2010. The increase in accounts payable and accrued expenses for the first quarter 2010 primarily related to increased income tax liability resulting from the $2.2 million increase in net income before income taxes in the first quarter 2010 compared to the fourth quarter 2009.

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 March 31, 2011 and December 31, 2010, resulted in liabilities of $3.3 million and $3.7 million, respectively, which are included in accrued expenses ($1.5 million and $1.5 million, respectively) and other liabilities ($1.8 million and $2.2 million, respectively) on the Companys Condensed Consolidated Balance Sheets. The Company paid $414 thousand and $476 thousand in the first quarters 2011 and 2010, respectively, in quarterly settlement payments pursuant to the hedges. These payments are included in interest expense on the Companys Condensed Consolidated Statements of Operations.

Revenues in the first quarter 2011 decreased to $33.1 million from $33.6 million in the prior year comparable quarter, a decrease of $549 thousand, or 1.6%. Revenues from the Companys Lime and Limestone Operations in the first quarter 2011 decreased $1.3 million, or 4.1%, to $30.2 million from $31.5 million in the comparable 2010 quarter, while revenues from the Companys Natural Gas Interests increased $257 thousand, or 15.9%, to $1.9 million from $1.6 million in the comparable 2010 quarter. The decrease in lime and limestone revenues in the first quarter 2011 as compared to last years comparable quarter primarily resulted from decreased sales volumes of the Companys lime and limestone products due to reduced demand principally from its steel and oil and gas services customers, partially offset by increased demand from the Companys highway construction customers and average product price increases of approximately 1.8%.

The Companys gross profit for the first quarter 2011 was $9.4 million, compared to $9.5 million for the comparable 2010 quarter, a decrease of $108 thousand, or 1.1%. Included in gross profit for the 2011 quarter was $7.5 million from the Companys Lime and Limestone Operations, compared to $7.9 million in the comparable 2010 quarter, a decrease of $365 thousand, or 4.6%. Gross profit margins for the Companys Lime and Limestone Operations were 25.0% and 25.1% in the first quarters 2011 and 2010, respectively.

Gross profit from the Companys Natural Gas Interests was $1.9 million in the first quarter 2011, compared to $1.6 million in the comparable 2010 quarter, an increase of $257 thousand, or 15.9%. Production volumes for the Companys Natural Gas Interests for the first quarter 2011 totaled 401 thousand MCF, sold at an average price of $7.15 per MCF. Production volumes in the comparable prior year quarter were 236 thousand MCF, sold at an average price of $9.03. The Companys natural gas contains liquids, for which prices normally follow crude oil prices. This accounts for the Companys average price per MCF exceeding natural gas prices.

The Company is exposed to changes in interest rates, primarily as a result of floating interest rates on the Revolving Facility. At March 31, 2011, the Company had $35.4 million of indebtedness outstanding under floating rate debt. The Company has entered into interest rate hedge agreements to swap floating rates for fixed LIBOR rates at 4.695%, plus the applicable margin, through maturity on the Term Loan balance of $22.5 million, 4.875%, plus the applicable margin, on $9.7 million of the Draw Term Loan balance and 5.50%, plus the applicable margin, on the $3.2 million of the Draw Term Loan balance. Thus the Company has entered into interest rate hedges on all $35.4 million of its outstanding indebtedness. There was no outstanding balance on the Revolving Facility subject to interest rate risk at March 31, 2011. Any future borrowings under the Revolving Facility would be subject to interest rate risk. See Note 8 of Notes to Condensed Consolidated Financial Statements.

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