| Summary of Significant Accounting Policies | (1) Summary of Significant Accounting Policies (a) Organization and Presentation United States Lime & Minerals, Inc. (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), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), metals (including steel producers), oil and gas services, roof shingle manufacturers and agriculture (including poultry and cattle feed producers) 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. On July 1, 2020, the Company acquired 100% of the equity interest of ART Quarry TRS LLC, DBA Carthage Crushed Limestone (“Carthage”), a limestone mining and production company located in Carthage, Missouri, for $8.4 million cash, subject to adjustment for working capital balances acquired . Carthage produces aggregate and pulverized limestone products that are used primarily in the agricultural, construction, roofing, and industrial industries. Carthage’s assets and liabilities are included in the December 31, 2020 consolidated balance sheet at fair value, with $1.1 million of the purchase price allocated to accounts receivable, $0.4 million allocated to inventory, and $7.5 million allocated to property, plant and equipment, partially offset by $0.6 million of accounts payable and other liabilities assumed. Carthage contributed $4.6 million of revenues in the year ended December 31, 2020, which are included in the consolidated statement of operations. The Company believes this acquisition will complement its existing geographic footprint. During 2019, the Company’s natural gas interests did not reach any of the quantitative thresholds for a reportable segment, and the results from its natural gas interests are not expected to be of significance in future periods. The revenues, gross profit and operating profit of the natural gas interests are included in Other for reportable segment disclosures. Disclosures for 2018 have been recast to be consistent with the 2020 and 2019 presentation. (b) Principles of Consolidation The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. (c) Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates and judgments. (d) Statements of Cash Flows For purposes of reporting cash flows, the Company considers all bank deposits and highly liquid debt instruments, such as U.S. Treasury bills and notes, with maturities, at the time of purchase, of three months or less to be cash equivalents. Cash equivalents are carried at cost plus accrued interest, which approximates fair market value. Supplemental cash flow information is presented below: Years Ended December 31, 2020 2019 2018 Cash paid during the year for: Interest $ 152 $ 150 $ 179 Income taxes $ 975 $ 445 $ 331 (e) 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. Revenues include external freight billed to customers with related costs accounted for as fulfillment costs and included in cost of revenues. The Company’s returns and allowances are minimal. External freight billed to customers included in revenues was $28,373, $28,397 and $25,637 for 2020, 2019 and 2018, respectively, which approximates the amount of external freight included in cost of revenues. Sales taxes billed to customers are not included in revenues. For its natural gas interests, the Company recognizes revenue in the month of production and delivery. 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 11 for disaggregation of revenues by the Lime and Limestone Operations segment and Other, which the Company believes best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. (f) Fair Values of Financial Instruments Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values, in determining the fair value of its financial assets and liabilities. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities and; Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Specific inputs used to value the Company’s foreign exchange hedges were Euro to U.S. Dollar exchange rates for the expected future payment dates for the Company’s commitments denominated in Euros. The last of these foreign exchange hedges expired in April 2020. There were no changes in the methods and assumptions used in measuring fair value during the period. The carrying values of cash and cash equivalents, trade receivables, other current assets, accounts payable and accrued expenses approximate fair value due to the short maturity of these instruments. The Company’s foreign exchange hedges were carried at fair value at December 31, 2019. See Notes 1(p) and 5. Financial liabilities measured at fair value on a recurring basis are summarized below: Significant Other Observable Inputs (Level 2) December 31, December 31, 2019 2019 Valuation Technique Foreign exchange hedges $ (1) $ (1) Cash flows approach (g) Concentration of Credit Risk and Trade Receivables Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash and cash equivalents, trade receivables and derivative financial instruments. The Company places its cash and cash equivalents with high-credit quality financial institutions and in highly rated commercial paper or U.S. Treasury bills and notes with maturities, at the time of purchase, of three months or less. The Company places its derivative financial instruments with financial institutions and other firms that management believes have high credit ratings. The Company’s cash and cash equivalents at commercial banking institutions normally exceed federally insured limits. 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. Trade receivables are presented net of the related allowance for doubtful accounts, which totaled $398 and $361 at December 31, 2020 and 2019, respectively. Additions and write-offs to the Company’s allowance for doubtful accounts during the years ended December 31 are as follows: 2020 2019 Beginning balance $ 361 $ 430 Additions 60 102 Write-offs (23) (171) Ending balance $ 398 $ 361 (h) Inventories, Net Inventories are valued principally at the lower of cost, determined using the average cost method, or net realizable value. Costs for raw materials and finished goods include materials, labor and production overhead. A summary of inventories is as follows: December 31, December 31, 2020 2019 Lime and limestone inventories: Raw materials $ 4,279 $ 4,546 Finished goods 2,866 1,954 7,145 6,500 Service parts inventories 8,065 6,888 $ 15,210 $ 13,388 (i) Property, Plant and Equipment For major constructed assets, the capitalized cost includes the price paid by the Company for labor and materials plus interest and internal and external project management costs that are directly related to the constructed assets. Machinery and equipment at December 31, 2020 and 2019 included $6,308 and $16,813, respectively, of construction in progress for various capital projects. No interest costs were capitalized for the years ended December 31, 2020 and 2019. At December 31, 2020 and 2019, accounts payable and accrued expenses included $380 and $1,303, respectively, of capitalized costs. Depreciation of property, plant and equipment is being provided for by the straight-line method over estimated useful lives as follows: Buildings and building and leasehold improvements 3 - 25 years Machinery and equipment 2 - 30 years Furniture and fixtures 3 - 10 years Automotive equipment 3 - 10 years Maintenance and repairs are charged to expense as incurred; renewals and betterments are capitalized. When units of property are retired or otherwise disposed of, their cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is credited or charged to income. The Company expenses all exploration costs as incurred as well as costs incurred at an operating quarry or mine, other than capital expenditures and inventory. Costs to acquire mineral reserves or mineral interests are capitalized upon acquisition. Development costs incurred to develop new mineral reserves, to expand the capacity of a quarry or mine, or to develop quarry or mine areas substantially in advance of current production are capitalized once proven and probable reserves exist and can be economically produced. For each quarry or mine, capitalized costs to acquire and develop mineral reserves are depleted using the units-of-production method based on the proven and probable reserves for such quarry or mine. The Company reviews its long-lived assets for impairment and, when events or circumstances indicate the carrying amount of an asset may not be recoverable, the Company determines if impairment of value exists. If the estimated undiscounted future net cash flows are less than the carrying amount of the asset, an impairment exists, and an impairment loss must be calculated and recorded. If an impairment exists, the impairment loss is calculated based on the excess of the carrying amount of the asset over the asset’s fair value. Any impairment loss is treated as a permanent reduction in the carrying value of the asset. During 2020 and 2019, the Company recognized impairment charges of $1,550 and $930 to adjust the carrying value of certain long-lived assets related to its natural gas interests. Continuing low prices for natural gas and natural gas liquids have reduced the estimates for future economically feasible production from the Company’s drilled wells, resulting in the Company’s determination that the estimated fair value of its natural gas assets was less than their carrying value in each year. Fair value was determined as the present value of the estimated future cash flows of the natural gas interests. (j) Successful-Efforts Method Used for Natural Gas Interests The Company uses the successful-efforts method to account for oil and gas exploration and development expenditures. Under this method, drilling, completion and workover costs for successful exploratory wells and all development well costs are capitalized and depleted using the units-of-production method. Costs to drill exploratory wells that do not find proved reserves are expensed. (k) Asset Retirement Obligations The Company recognizes legal obligations for reclamation and remediation associated with the retirement of long- lived assets at their fair value at the time the obligations are incurred (“AROs”). Over time, the liability for AROs is recorded at its present value each period through accretion expense, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the Company either settles the AROs for the recorded amount or recognizes a gain or loss. The Company’s AROs of $1,520 and $1,482 as of December 31, 2020 and 2019, respectively, are included in Other liabilities and Accrued expenses on the Company’s Consolidated Balance Sheets. As of December 31, 2020, assets, net of accumulated depreciation, associated with the Company’s AROs totaled $775 . During 2020 and 2019, the Company spent $52 and $93, respectively, on its AROs, and recognized accretion expense of $90, $86 and $84 in 2020, 2019 and 2018, respectively, on its AROs. The AROs were estimated based on studies and the Company’s process knowledge and estimates and are discounted using a credit adjusted risk-free interest rate. The AROs are adjusted when further information warrants an adjustment. The Company estimates annual expenditures of approximately $100 to $200 per year in years 2021 through 2025 relating to its AROs. (l) Accrued Expenses Accrued expenses consist of the following: December 31, 2020 2019 Personnel related expenses $ 2,340 $ 1,925 Income taxes 990 — Other taxes 985 914 Other 1,494 896 $ 5,809 $ 3,735 (m) Environmental Expenditures Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded at their present value when environmental assessments and/or remedial efforts are probable, and the costs can be reasonably estimated. Generally, the timing of these accruals will coincide with completion of a feasibility study or the Company’s commitment to a formal plan of action. The Company incurred capital expenditures related to environmental matters of $730 in 2020, $1,156 in 2019 and $1,152 in 2018. (n) Income and Dividends Per Share of Common Stock The following table sets forth the computation of basic and diluted income per common share: Years Ended December 31, 2020 2019 2018 Net income for basic and diluted income per common share $ 28,223 $ 26,056 $ 19,685 Weighted-average shares for basic income per common share 5,629,425 5,612,048 5,595,384 Effect of dilutive securities: Employee and director stock options (1) 10,438 9,090 6,993 Adjusted weighted-average shares and assumed exercises for diluted income per common share 5,639,863 5,621,138 5,602,377 Basic net income per common share $ 5.01 $ 4.64 $ 3.52 Diluted net income per common share $ 5.00 $ 4.64 $ 3.51 (1) Excludes 5,550, 8,700 and 9,900 stock options in 2020, 2019 and 2018, respectively, as antidilutive because the exercise price exceeded the average per share market price for the periods presented. The Company paid $0.64, $5.89 and $0.54 of cash dividends per share of common stock in 2020, 2019 and 2018, respectively. The cash dividends for 2019 included a special dividend of $5.35 per share paid in 2019. (o) Stock-Based Compensation The Company expenses all stock-based payments to employees and directors, including grants of stock options and restricted stock, in the Company’s Consolidated Statements of Income based on their fair values. Compensation cost is recognized on a straight-line basis over the vesting period. (p) Derivative Instruments and Hedging Activities Every derivative instrument is recorded on the Company’s Consolidated Balance Sheets as either an asset or liability measured at its fair value. Changes in the derivative’s fair value are recognized currently in earnings unless specific hedge accounting criteria are met. If the derivative is designated as a cash flow hedge, changes in fair value are recognized in comprehensive income or loss until the hedged item is recognized in earnings. The Company estimated fair value utilizing the cash flows valuation technique. The fair values of derivative contracts that expire in less than one year are recognized as current assets or liabilities. Those that expire in more than one year are recognized as long-term assets or liabilities. See Notes 1(f) and 5. (q) Income Taxes The Company utilizes the asset and liability approach in its reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income tax related interest and penalties are included in income tax expense. The Company also assesses individual tax positions to determine if they meet the criteria for some or all of the benefits of that position to be recognized in the Company’s financial statements. The Company only recognizes tax positions that meet the more-likely-than-not recognition threshold. (r) Comprehensive Income Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as mark-to-market gains or losses of interest rate and foreign exchange hedges, are reported as a separate component of the stockholders’ equity section of the balance sheet. Such items, along with net income, are components of comprehensive income. See Notes 1(p) and 5. |
