UNITED STATES LIME & MINERALS INC (USLM) FY 2021 MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

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 cyber-security incidents or ransomware attacks, utility disruptions, supply chain delays and disruptions, labor shortages and disruptions, or regulatory requirements; (v) volatile coal, petroleum coke, diesel, natural gas, electricity, transportation and freight 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) unanticipated delays or cost overruns in completing modernization and expansion and development projects; (vii) the Company’s ability to expand its lime and limestone 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; (viii) 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 on, particular industries, including oil and gas services, utility plants, steel, construction, and industrial, effects of governmental fiscal and budgetary constraints, including the level of highway construction and infrastructure funding, changes to tax laws, legislative impasses, extended governmental shutdowns, trade wars, tariffs, international incidents, including the Russian invasion of Ukraine, sanctions, economic and regulatory uncertainties under state governments and the United States Administration and Congress, Federal Reserve responses to inflationary concerns, including increased interest rates, and inability to continue to maintain or increase prices for the Company’s products, including passing through the increased costs and availability of transportation, energy, supplies, labor, and services; (ix) 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, and other ESG 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; (x) estimates of reserves and remaining lives of reserves; (xi) the ongoing impact of the novel coronavirus (“COVID-19”) pandemic and current or future variants of the COVID-19 virus 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, social distancing and mask guidelines, and vaccination mandates, on the Company’s financial condition, results of operations, cash flows, and competitive position; (xii) the impact of social or political unrest; (xiii) risks relating to mine safety and reclamation and remediation; and (xiv) 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 Quarterly Reports on Form 10-Q.

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OVERVIEW.

Set forth below is certain selected financial data for the five years ended December 31, 2021:

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General.

We have identified one reportable business segment based on the distinctness of our activities and products: Lime and Limestone Operations. All operations are in the United States. Operating profit from our Lime and Limestone Operations includes all of our selling, general and administrative costs. We do not allocate interest expense and interest and other income to our Lime and Limestone Operations.

On July 1, 2020, we acquired Carthage, a limestone mining and production company located in Carthage, Missouri, for $8.4 million cash. On February 9, 2022, we acquired Mill Creek, a dolomite mining and production company located in Mill Creek, Oklahoma, for $5.9 million cash, subject to adjustment. We believe that these acquisitions will complement our existing geographic footprint.

Our Other operations relate to our natural gas interests, consisting of royalty and non-operated working interests under an oil and gas lease and a drillsite agreement with two separate operators related to our Johnson County, Texas property, located in the Barnett Shale Formation, on which Texas Lime conducts its lime and limestone operations. In the fourth quarters 2020 and 2019, we recognized impairment charges of $1.6 million ($1.2 million, net of tax) and $0.9 million ($0.7 million, net of tax), respectively, related to our natural gas interests. The carrying values of the long-lived assets related to our natural gas interests were $1.5 million as of December 31, 2021. Based on current production and pricing estimates, we believe that the carrying value of these assets will be recoverable in future periods.

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Our revenues increased 17.8% in 2021 compared to 2020. Revenues from our Lime and Limestone Operations increased 17.3% in 2021, compared to 2020, primarily due to increased demand from our construction, steel, environmental, industrial, roofing, and agriculture customers. Revenues in 2021 were also favorably impacted by an increase in average selling prices for our lime and limestone products of 0.9%.

Our gross profit increased 24.5% in 2021 compared to 2020. Gross profit from our Lime and Limestone Operations in 2021 increased 22.2%, compared to 2020, primarily due to the increased revenues discussed above and increased operating efficiencies, partially offset by higher energy costs.

Our net income increased $8.8 million, or 31.3%, in 2021, compared to 2020. Net income per fully diluted share increased to $6.54 in 2021, compared to $5.00 in 2020.

Cash flows from operations enabled us to make $29.9 million of capital investments in 2021. It also enabled us to pay $3.6 million in dividends in 2021 and increase our cash balances to $105.4 million as of December 31, 2021, compared to $83.6 million as of December 31, 2020. As of December 31, 2021, we had no debt outstanding.

On January 31, 2022, we announced that our Board of Directors had declared an increased regular quarterly cash dividend of $0.20 per share. The dividend is payable on March 18, 2022 to shareholders of record on February 25, 2022.

Absent a significant acquisition opportunity arising during 2022, we anticipate funding our operating and capital needs, our quarterly cash dividend, and the Mill Creek acquisition from our cash balances on hand and cash flows from operations.

Lime and Limestone Operations.

In our Lime and Limestone Operations, we produce and sell PLS, aggregate, quicklime, hydrated lime and lime slurry. The principal factors affecting our success are the level of demand and prices for our products and whether we are able to maintain sufficient production levels and product quality while controlling costs.

Inclement weather conditions, such as winter ice and snow storms, cold weather, hurricanes, tornadoes and excessive rainfalls generally reduce the demand for lime and limestone products supplied to construction-related customers that account for a significant amount of our revenues. Inclement weather also interferes with our open-pit mining operations and can disrupt our plant production. In addition to weather, various maintenance, environmental, accident and other operational and construction issues can also disrupt our operations and increase our operating expenses.

Demand for our lime and limestone products in our market areas is also affected by general economic conditions, the pace of construction, the demand for steel, the level of oil and gas drilling in our markets, the level of governmental and private funding for highway construction and infrastructure, and utility plant usage of coal for power generation. Demand for our lime and limestone products from our construction, steel, environmental, industrial, roofing, and agriculture customers increased in 2021.

In 2020, the COVID-19 pandemic in the United States and related restrictions on business activities resulted in a general economic slowdown, which disproportionately impacted certain industries that purchase our products. We continue to monitor and assess the impact of the COVID-19 pandemic, including the emergence of new variants of the virus, implementation of new or enhanced pandemic-related restrictions, and the possibility of additional wide-spread or localized outbreaks of infections, any of which could have an adverse effect on our financial condition, results of operations, cash flows and competitive position.

Additionally, we are experiencing rising costs, especially energy and supplies costs, and supply chain delays and disruptions. If these issues persist, they could adversely affect our profitability in 2022. We are increasing the prices of our lime and limestone products in an effort to mitigate the impact of our increasing costs.

In 2014 and 2015, Texas approved two constitutional amendments authorizing a portion of oil and gas tax revenues to be deposited into the State Highway Fund, for certain other sales and use tax revenues to be directed to the State Highway Fund and, beginning in Texas’ fiscal 2020, for certain state motor vehicle sales and rental tax revenues to

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be directed to the State Highway Fund. In its fiscal 2021, Texas transferred approximately $3.8 billion of such tax revenues to the State Highway Fund from these two amendments, with over $18 billion transferred since 2015. In 2021, the United States Congress passed the Infrastructure Investment and Jobs Act, which is estimated to apportion approximately $26.9 billion to Texas for federal-aid highway programs. With these funding sources, we would expect to see strong continued demand from our construction customers, but the timing and amount of any increase in demand is uncertain and subject to weather, political, and other factors.

Our modernization and expansion and development projects and acquisitions in Texas, Arkansas, Oklahoma and Missouri and our Texas slurry operations have positioned us to meet the demand for high-quality lime and limestone products in our markets. Our modernization and expansion and development projects have also equipped us with up-to-date, fuel-efficient plant facilities, which have resulted in lower production costs and greater operating efficiencies, thus enhancing our competitive position. All of our rotary kilns are now fuel-efficient preheater kilns. The addition of the vertical kiln at St. Clair in 2019 further increased the fuel efficiency of our fleet of kilns.

For our plants to operate at peak efficiency, we must meet operational challenges that arise from time to time, including bringing new facilities on-line and refurbishing and/or improving acquired facilities, including the facilities acquired as a result of our recent acquisitions of Carthage and Mill Creek, as well as operating existing facilities efficiently. We also incur ongoing costs for maintenance and to remain in compliance with rapidly changing Environmental Laws and health and safety and other regulations.

Our primary variable cost is energy. Prices for coal, petroleum coke, diesel, natural gas, electricity, transportation and freight are volatile, and our energy costs have increased substantially in recent months. In addition, our freight costs, including diesel prices, to deliver our products can be high relative to the value of our products.

Historically, we have been able to mitigate to some degree the impact of volatile energy costs by varying the mixes of fuel used in our kilns, and by passing on some of any increase in costs to our customers, where possible, through higher prices and/or surcharges on certain products. In addition, as noted above, we put a more fuel-efficient kiln in service at St. Clair, and we continually look for other ways to better manage our energy costs at our plants. Finally, we have not engaged in any significant hedging activity in an effort to control our energy costs but may do so in the future.

We have financed our modernization and expansion and development projects and acquisitions through a combination of debt financing, which has now been repaid, and cash flows from operations. We must generate sufficient cash flows to cover ongoing capital requirements, including current and possible future modernization and expansion and development projects and acquisitions, or borrow sufficient funds to finance any shortfall in our liquidity needs.

For us to maintain or increase our profitability in our Lime and Limestone Operations in the face of reduced demand from some of our customers, competitive pressures and increased costs, we must maintain or increase our customer base, improve our revenues and control our operational and selling, general and administrative expenses. To maintain or improve our gross profit margins, we are focusing on increasing our lime and limestone prices to offset our increased costs, which is a challenging task with increased competition from other lime and limestone producers. In addition, we will continue to explore ways to increase the operating efficiency of our mines, plants, and other facilities and expand our production capacity through acquisitions as conditions warrant or opportunities arise.

We continue to believe the enhanced efficiency and production capacity resulting from our modernization and expansion and development projects in Texas, Arkansas, and Oklahoma, our expanded slurry operations, our acquisitions, including the recent acquisitions of Carthage and Mill Creek, and the operational strategies we have implemented have allowed us to increase our efficiency, grow production capacity, improve product quality, better serve existing customers, attract new customers and control costs. To date, however, demand and prices for our lime and limestone products have not been sufficient to fully utilize our additional production capacity. In addition, there can be no assurance that our efficiency and production will not be adversely affected by weather, maintenance, environmental, accident, cyber-security and other operational and construction issues; that we can successfully invest in improvements to our existing facilities and acquisitions; that our results will not be adversely affected by increases in fuel, natural gas, electricity, transportation and freight costs, taxes or new environmental, health and safety or other regulatory

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requirements; or that, with increasing competition with other lime and limestone producers, our revenues, gross profit, net income and cash flows can be maintained or improved.

Other.

Revenues in 2021 included $1.9 million from our natural gas interests, compared to $1.0 million in 2020. Gross profit (loss) in 2021 included $0.6 million from our natural gas interests, compared to a loss of $(0.4) million in 2020.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES.

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities, at the date of our financial statements. Actual results may differ from these estimates and judgments under different assumptions or conditions and historical trends.

Critical accounting policies are defined as those that are reflective of significant management judgments and uncertainties and potentially result in materially different results under different assumptions and conditions. We believe the following critical accounting policies require the most significant management estimates and judgments used in the preparation of our consolidated financial statements.

Contingencies. We are party to proceedings, lawsuits and claims arising in the normal course of business relating to regulatory, labor, product and other matters. We are required to estimate the likelihood of any adverse judgments or outcomes with respect to these matters, as well as potential ranges of possible losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual matter, including coverage under our insurance policies. This determination may change in the future because of new information or developments.

Income taxes. We utilize the asset and liability approach in reporting our 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. We establish valuation allowances 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. We also assess individual tax positions to determine if they meet the criteria for some or all of the benefits of that position to be recognized in our financial statements and only recognize tax positions that meet the more-likely-than-not recognition threshold.

Environmental costs and liabilities. We record environmental accruals, including accrued reclamation costs, in other liabilities, based on studies and estimates, when it is probable we have incurred a reasonably estimable cost or liability. The accruals are adjusted when further information warrants an adjustment. Environmental expenditures that extend the life, increase the capacity or improve the safety or efficiency of Company-owned assets or are incurred to mitigate or prevent future possible environmental issues are capitalized. Other environmental costs are expensed when incurred.

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RESULTS OF OPERATIONS.

The following table sets forth certain financial information expressed as a percentage of revenues for the three years ended December 31, 2021:

2021 vs. 2020

Our revenues for 2021 increased to $189.3 million from $160.7 million in 2020, an increase of $28.6 million, or 17.8%. Revenues from our Lime and Limestone Operations in 2021 increased $27.7 million, or 17.3%, to $187.4 million from $159.7 million in 2020. The increase in revenues from our Lime and Limestone Operations was primarily due to a 16.4% increase in sales volumes of our lime and limestone products principally to our construction, steel, environmental, industrial, roofing, and agriculture customers. In 2020, the COVID-19 pandemic and related restrictions on business activities resulted in a general economic slowdown, which disproportionately impacted certain industries that purchase our lime and limestone products. In addition, we realized a 0.9% average increase in prices for our lime and limestone products in 2021, compared to 2020. Other revenues included $1.9 million and $1.0 million in 2021 and 2020, respectively, from our natural gas interests.

Our gross profit increased to $59.3 million for 2021 from $47.6 million for 2020, an increase of $11.7 million, or 24.5%. Gross profit from our Lime and Limestone Operations for 2021 was $58.7 million, compared to $48.0 million in 2020, an increase of $10.7 million, or 22.2%. The increase in gross profit in 2021, compared to 2020, resulted primarily from the increased revenues discussed above and increased operating efficiencies, partially offset by higher energy costs. Gross profit also included a $0.6 million profit in 2021 and a $(0.4) million loss in 2020 from our natural gas interests.

Selling, general and administrative expenses (“SG&A”) increased to $12.8 million for 2021, an increase of $0.7 million, or 5.5%, compared to $12.2 million for 2020. As a percentage of revenues, SG&A was 6.8% in 2021, compared to 7.6% in 2020. The increase in SG&A was primarily due to increased personnel expenses in 2021, compared to 2020.

In the fourth quarter 2020, we recognized an impairment charge of $1.6 million ($1.2 million, net of tax) to adjust the carrying values of the long-lived assets related to our natural gas interests.  At December 31, 2021, the long-lived assets related to our natural gas interests had a carrying value of $1.5 million.

Interest expense was $0.3 million in 2021, compared to $0.2 million in 2020. We had no outstanding debt during either 2021 or 2020.

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Interest and other income, net was $0.4 million in 2021, compared to $0.5 million in 2020.

Income tax expense was $9.5 million in 2021, for an effective rate of 20.4%, compared to $5.8 million in 2020, for an effective rate of 17.2%, an increase of $3.6 million, primarily due to the increase in income before taxes in 2021, compared to 2020. Our effective income tax rates for 2021 and 2020 were reduced from the statutory rate primarily due to statutory depletion in excess of cost depletion.

Net income increased to $37.0 million ($6.54 per share diluted) in 2021, compared to $28.2 million ($5.00 per share diluted) in 2020, an increase of $8.8 million, or 31.3%.

2020 vs. 2019

Our revenues for 2020 increased to $160.7 million from $158.3 million in 2019, an increase of $2.4 million, or 1.5%. Revenues from our Lime and Limestone Operations in 2020 increased $2.7 million, or 1.7%, to $159.7 million from $157.0 million in 2019. The increase in revenues from our Lime and Limestone Operations was primarily due to the addition of limestone sales by Carthage to agriculture and roofing customers and increased sales volumes of our lime and limestone products, principally to our construction customers, offset by decreased sales volumes to our oil and gas services, environmental and steel customers, resulting in an overall decrease in sales volumes of 1.9%. We realized a 3.6% average increase in prices for our lime and limestone products in 2020, compared to 2019. Other revenues included $1.0 million and $1.3 million in 2020 and 2019, respectively, from our natural gas interests.

Our gross profit increased to $47.6 million for 2020 from $41.7 million for 2019, an increase of $5.9 million, or 14.2%. Gross profit from our Lime and Limestone Operations for 2020 was $48.0 million, compared to $42.0 million in 2019, an increase of $5.9 million, or 14.1%. The increase in gross profit in 2020, compared to 2019, resulted primarily from increases in the average selling prices for the Company’s lime and limestone products, lower fuel costs and increased operating efficiencies associated, in part, with the kiln at the Company’s St. Clair facility, which began producing commercially saleable quicklime in the second quarter 2019, partially offset by increased costs incurred in the 2020 periods associated with responding to the COVID-19 pandemic. Gross profit also included the impact of a $(0.4) loss in each of 2020 and 2019 from our natural gas interests.

SG&A increased to $12.2 million for 2020, an increase of $0.7 million, or 5.8%, compared to $11.5 million for 2019. As a percentage of revenues, SG&A was 7.6% for 2020, compared to 7.3% in 2019. The increase in SG&A was primarily due to increased personnel expenses, including stock-based compensation which was principally due to higher prices for the Company’s common stock, and increased legal expenses and COVID-19 pandemic costs in the second quarter 2020.

In the fourth quarters 2020 and 2019, we recognized an impairment charge of $1.6 million ($1.2 million, net of tax) and $0.9 million ($0.7 million, net of tax), respectively. Low prices for natural gas and natural gas liquids had reduced the estimates for future economically feasible production, which impaired the recoverability of the assets as they approached the end of their useful lives.

Interest expense was $0.2 million in each of 2020 and 2019. We had no outstanding debt during either 2020 or 2019.

Interest and other income, net was $0.5 million in 2020, compared to $1.9 million in 2019. The decrease in interest and other income, net in 2020, compared to 2019, was primarily due to decreased interest rates received on cash and cash equivalents balances in 2020.

Income tax expense was $5.8 million in 2020, for an effective rate of 17.2%, compared to $4.8 million in 2019, for an effective rate of 15.7%, an increase of $1.0 million, primarily due to the increase in income before taxes in 2020, compared to 2019. Our effective income tax rates for 2020 and 2019 were reduced from the statutory rate primarily due to statutory depletion in excess of cost depletion. In addition, for 2019, our effective tax rate was reduced as a result of research and development tax credits.

Net income increased to $28.2 million ($5.00 per share diluted) in 2020, compared to $26.1 million ($4.64 per share diluted) in 2019, an increase of $2.2 million, or 8.3%.

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Summary of Quarterly Financial Data

(dollars in thousands except per share amounts)

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FINANCIAL CONDITION.

Capital Requirements. We require capital primarily for normal recurring capital and re-equipping projects, modernization and expansion and development projects and acquisitions. Our capital needs are expected to be met principally from cash on hand, cash flows from operations and our $75.0 million revolving credit facility.

We expect to spend approximately $14.0 million per year over the next several years in our Lime and Limestone Operations for normal recurring capital and re-equipping projects at our plants and facilities to maintain or improve efficiency, ensure compliance with Environmental Laws, meet customer needs and reduce costs. As of December 31, 2021, we had $2.2 million in open orders for equipment and construction contracts for our Lime and Limestone Operations.

Liquidity and Capital Resources. Net cash provided by operating activities was $55.7 million in 2021, compared to $58.6 million in 2020, a decrease of $2.9 million, or 4.9%. Our net cash provided by operating activities is composed of net income, depreciation, depletion and amortization (“DD&A”), other non-cash items included in net income and changes in working capital. In 2021, net cash provided by operating activities was principally composed of $37.0 million net income, $20.9 million DD&A, $1.5 million increase in deferred income taxes, $2.2 million stock-based compensation, partially offset by a $6.0 million decrease from changes in working capital. In 2021, the changes in working capital were principally composed of a $3.7 million increase in trade receivables, net, primarily as a result of increased sales in the fourth quarter 2021, compared to the fourth quarter 2020, a $1.4 million decrease in accounts payable, accrued expense and other liabilities, and a $1.0 million increase in prepaid expenses and other assets. In 2020,

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net cash provided by operating activities was principally composed of $28.2 million net income, $19.6 million DD&A, $4.3 million increase in deferred income taxes, $1.6 million impairment of long-lived assets, $1.9 million stock-based compensation, and a $2.5 million increase from changes in working capital. In 2020, the changes in working capital were principally composed of a $2.9 million increase in accounts payable, accrued expense and other liabilities, and a $1.1 million decrease in trade receivables, net, partially offset by a $1.4 million increase in inventories.

Net cash used in investing activities was $29.6 million for 2021, compared to $25.2 million for 2020. Net cash used in investing activities for 2021 included $14.0 million for development of the Love Hollow Quarry and its connection to the Batesville plant and $2.3 million for other real property purchases. Net cash used in investing activities in 2020 included $8.4 million for the acquisition of Carthage and $17.1 million for the purchase of property, plant and equipment, including $2.7 million for the Carthage facility and $2.1 million for specialized equipment at the Batesville Quarry. The balance of net cash used in investing activities in 2021 and 2020 was primarily for normal recurring capital and re-equipping projects at our plants and facilities.

Net cash used in financing activities primarily consisted of $3.6 million for dividend payments and $0.7 million to repurchase shares of our common stock in 2021, compared to $3.6 million for dividend payments and $0.6 million to repurchase shares of our common stock in 2020.

Our cash and cash equivalents at December 31, 2021 increased to $105.4 million from $83.6 million at December 31, 2020.

Banking Facilities and Debt. Our credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 2019 and November 21, 2019, 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 May 2, 2024.

Interest rates on the Revolving Facility are, at our option, LIBOR 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 0.200% 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 the Company’s 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 the Company’s 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 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.

We had no debt outstanding as of December 31, 2021 or 2020. We had $0.3 million of letters of credit issued under the Revolving Facility as of December 31, 2021, which count as draws against the available commitment under the Revolving Facility.

Common Stock Buybacks. We spent $0.7 million, $0.6 million and $0.4 million in 2021, 2020 and 2019, respectively, to repurchase treasury shares tendered for payment of the exercise price for stock options and the tax withholding liability upon the lapse of restrictions on restricted stock.

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Contractual Obligations. The following table sets forth our contractual obligations as of December 31, 2021 (in thousands):

Absent a significant acquisition, we believe that cash on hand and cash flows from operations will be sufficient to meet our operating needs, ongoing capital needs, including our current and possible future modernization and expansion and development projects, and liquidity needs and allow us to pay our regular cash dividends for the near future.

Off-Balance Sheet Arrangements. We do not utilize off-balance sheet financing arrangements.