Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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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, including more severe and frequent weather events resulting from climate change, natural disasters, accidents, IT systems failures or disruptions, including due to cybersecurity threats and incidents, utility disruptions, supply chain delays and disruptions, labor shortages and disruptions, or regulatory requirements; (v) volatile coal, petroleum coke, diesel, natural gas, electricity, and transportation 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) the Company's ability to expand its operations through projects and acquisitions of businesses with related or similar operations 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; (vii) 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, including changes in immigration policy, on the overall economy and particular industries, including oil and gas services, utility plants, steel, construction, and industrial, moderation in areas of active growth, including data center construction, effects of governmental fiscal and budgetary constraints, including the level of highway construction and infrastructure funding, changes to tax laws, including the One Big Beautiful Bill Act (the "OBBBA"), legislative impasses, extended governmental shutdowns, reduced levels of government staffing, downgrades and defaults on U.S. government obligations, tariffs, trade wars, international conflicts and incidents, including in Ukraine, Venezuela, Columbia, Israel, Iran, and the broader Middle East, oil cartel production and supply actions, sanctions, economic and regulatory uncertainties under state governments and the United States Administration and Congress, inflation, recession, and other macroeconomic concerns, Federal Reserve responses to macroeconomic concerns and other pressures, including changes in interest rates, and inability to continue to maintain or increase prices for the Company's products, including passing through any increased costs of energy, labor, parts, and supplies, and changes in inflationary expectations; (viii) 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, inclusion, 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; (ix) estimates of resources and reserves and remaining lives of reserves; (x) the impact of potential pandemics, epidemics, or disease outbreaks, 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 and mandates, on the Company's financial condition, results of operations, cash flows, and competitive position; (xi) the impact of social or political unrest; (xii) risks relating to mine safety and reclamation and remediation; and (xiii) 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, 2024 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

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Overview.

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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), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), metals (including steel producers), roof shingle manufacturers, agriculture (including poultry 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, ART Quarry TRS LLC (DBA Carthage Crushed Limestone), Colorado Lime Company, Mill Creek Dolomite, LLC, Texas Lime Company, U.S. Lime Company, U.S. Lime Company-Shreveport, U.S. Lime Company-St. Clair, and U.S. Lime Company-Transportation.

Our revenues increased 14.1% and 19.8% in the third quarter and first nine months 2025, respectively, compared to the third quarter and first nine months 2024. Revenues increased in the third quarter 2025, compared to the third quarter 2024, primarily due to an 8.9% increase in sales volumes of our lime and limestone products, which was principally due to increased demand from our construction, environmental, and steel customers, partially offset by decreased demand from our oil and gas services customers, and a 5.1% increase in the average selling prices for our lime and limestone products. Revenues increased in the first nine months 2025, compared to the first nine months 2024, primarily due to a 13.3% increase in sales volumes of our lime and limestone products, which was principally due to increased demand from our construction, including for the construction of large data centers, environmental, and steel customers, partially offset by decreased demand from our oil and gas services customer, and a 6.6% increase in the average selling prices for our lime and limestone products. Looking ahead, we anticipate ongoing data center construction demand being partially offset by softer demand from some of the other industries that we serve.

Our gross profit increased 21.1% and 29.2% in the third quarter and first nine months 2025, respectively, compared to the third quarter and first nine months 2024. The increases in gross profit for the 2025 periods resulted primarily from the increases in revenues discussed above.

In 2024, we began construction on a new vertical kiln and related equipment and infrastructure at our Texas Lime Company plant. We estimate that the construction costs of the Texas kiln project will total approximately $65 million and be completed in 2026.

Liquidity and Capital Resources.

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Net cash provided by operating activities was $119.4 million in the first nine months 2025, compared to $87.4 million in the first nine months 2024, an increase of $32.0 million, or 36.6%. 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 nine months 2025, net cash provided by operating activities was principally composed of $103.7 million net income, $18.5 million DD&A, and $6.2 million stock-based compensation, partially offset by a $9.4 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2025 included increases of $15.3 million in trade receivables, net, due primarily to increased sales in the third quarter 2025 compared to the fourth quarter 2024, and $1.0 million in inventories, partially offset by a decrease of $2.3 million in prepaid expenses and other current assets and an increase of $4.5 million in accounts payable and accrued expenses. In the first nine months 2024, net cash provided by operating activities was principally composed of $81.8 million net income, $18.1 million DD&A, and $3.6 million stock-based compensation, partially offset by $0.8 million deferred income taxes and a $15.3 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2024 included an increase of $14.9 million in trade receivables, net, due primarily to increased sales in the third quarter 2024 compared to the fourth quarter 2023,and an increase of $3.5 million in inventories, partially offset by a decrease of $1.9 million in prepaid expenses and other current assets and an increase of $1.2 million in accounts payable and accrued expenses.

We had $42.8 million in capital expenditures in the first nine months 2025, compared to $16.4 million in the first nine months 2024. Capital expenditures in the first nine months 2025 included $20.8 million related to the Texas kiln project. Net cash used in financing activities was $5.4 million in the first nine months 2025, compared to $4.3 million in the first nine months 2024, consisting primarily of cash dividends paid in each period.

Cash and cash equivalents increased $71.5 million to $349.5 million at September 30, 2025 from $278.0 million at December 31, 2024.

We are not committed to any planned capital expenditures until actual orders are placed for equipment. As of September 30, 2025, we were committed to $28.8 million of open purchase orders related to the Texas kiln project. We did not have any other material commitments for open purchase orders. As of September 30, 2025, we had incurred a total of $24.8 million on the Texas kiln project, of which $22.1 million had been paid in cash.

Our credit agreement with Wells Fargo Bank, N.A. (the "Lender"), as amended as of August 3, 2023, 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 August 3, 2028.

Interest rates on the Revolving Facility are, at our option, SOFR, plus a SOFR adjustment rate of 0.10%, 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 0.225% 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 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 September 30, 2025, we had no debt outstanding and no draws on the Revolving Facility other than $4.7 million of letters of credit, principally related to the Texas kiln project, 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.

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Results of Operations.

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Revenues in the third quarter 2025 were $102.0 million, compared to $89.4 million in the third quarter 2024, an increase of $12.6 million, or 14.1%. For the first nine months 2025, revenues were $284.8 million, compared to $237.7 million in the first nine months 2024, an increase of $47.1 million, or 19.8%. The increases in our revenues in the third quarter and first nine months 2025, compared to the comparable 2024 periods, resulted from increased sales volumes of our lime and limestone products, principally due to increased demand from our construction, environmental, and steel customers, partially offset by decreased demand from our oil and gas services customers, and an increase in the average selling prices for our lime and limestone products.

Gross profit was $52.2 million in the third quarter 2025, compared to $43.1 million in the third quarter 2024, an increase of $9.1 million, or 21.1%. Gross profit was $140.2 million in the first nine months 2025, compared to $108.5 million in the first nine months 2024, an increase of $31.7 million, or 29.2%. The increases in gross profit in the third quarter and first nine months 2025, compared to the comparable 2024 periods, resulted primarily from the increased revenues discussed above.

Selling, general, and administrative ("SG&A") expenses were $5.9 million in the third quarter 2025, compared to $5.0 million in the third quarter 2024, an increase of $1.0 million, or 19.1%. SG&A expenses were $18.4 million in the first nine months 2025, compared to $14.7 million in the first nine months 2024, an increase of $3.7 million, or

25.0%. The increases in SG&A expenses in the 2025 periods, compared to the comparable 2024 periods, were primarily due to increased personnel expenses, including stock-based compensation.

Other (income) expense, net was $3.4 million income in the third quarter 2025 and $9.6 million income in the first nine months 2025, compared to $3.1 million income in the third quarter 2024 and $8.4 million income in the first nine months 2024. The increases of $0.4 million and $1.2 million in other (income) expense, net during the 2025 periods, compared to the comparable 2024 periods, were primarily due to interest earned on higher average balances of our cash and cash equivalents.

Income tax expense was $10.9 million and $27.7 million in the third quarter and first nine months 2025, respectively, compared to $7.8 million and $20.4 million in the third quarter and first nine months 2024, respectively. The increases in income tax expense in the 2025 periods, compared to the comparable 2024 periods, were due to the increases in income before taxes.

On July 4, 2025, the OBBBA was signed into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017, including 100% bonus depreciation. The OBBBA did not have a material impact on our effective income tax rate for 2025, but it did reduce our cash tax outflows for the remainder of 2025 from what they would have been under the previous federal tax law.

Our net income was $38.8 million ($1.35 per share diluted) in the third quarter 2025, compared to net income of $33.4 million ($1.16 per share diluted) in the third quarter 2024, an increase of $5.4 million, or 16.3%. For the first nine months 2025, our net income was $103.7 million ($3.61 per share diluted), compared to $81.8 million ($2.85 per share diluted) for the first nine months 2024, an increase of $21.9 million, or 26.7%.

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