<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........ to ........
Commission file number is 0-4197
UNITED STATES LIME & MINERALS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
TEXAS 75-0789226
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12221 MERIT DRIVE, SUITE 500, DALLAS, TX 75251
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(972) 991-8400
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of October 22, 1997,
3,951,853 shares of common stock, $.10 par value, were outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 6,298 $ 1,000
Trade receivables, net 4,252 5,152
Inventories 2,612 5,054
Prepaid expenses and other assets 428 434
-------- --------
Total current assets 13,590 11,640
Property, plant and equipment at cost 46,333 59,785
Less: Accumulated depreciation (30,479) (41,045)
-------- --------
Property, plant and equipment, net 15,854 18,740
Other assets, net 2,222 939
-------- --------
Total assets $ 31,666 $ 31,319
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt $ 1,143 $ 1,143
Accounts payable-trade 2,656 3,117
Accrued expenses 1,228 1,941
-------- --------
Total current liabilities 5,027 6,201
Long-term debt, excluding current installments 2,381 3,238
Other liabilities 236 714
Stockholders' equity:
Common stock 529 529
Additional paid-in-capital 15,135 15,311
Retained earnings 22,601 19,888
-------- --------
38,265 35,728
Less treasury stock at cost; 1,342,212 and
1,372,212 shares of common stock, respectively (14,243) (14,562)
-------- --------
Total stockholders' equity 24,022 21,166
-------- --------
Total liabilities and stockholders' equity $ 31,666 $ 31,319
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 3
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------------ --------------------- --------------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ 7,725 100.0% $ 10,452 100.0% $ 25,883 100.0% $ 30,558 100.0%
Cost of revenues:
Labor & other operating expenses 4,533 59.5% 7,730 74.0% 18,929 73.3% 21,151 66.2%
Depreciation, depletion &
amortization 667 7.9% 832 8.0% 2,720 10.3% 2,644 8.7%
------- ----- -------- ----- -------- ----- -------- -----
5,204 67.4% 8,562 82.0% 21,649 83.6% 23,795 77.9%
------- ----- -------- ----- -------- ----- -------- -----
GROSS PROFIT 2,521 32.6% 1,890 18.1% 4,234 16.4% 6,763 22.1%
Selling, general & administrative
expenses 878 11.3% 1,091 10.4% 3,148 12.2% 3,349 10.9%
------- ----- -------- ----- -------- ----- -------- -----
OPERATING PROFIT 1,643 21.3% 799 7.7% 1,086 4.2% 3,414 11.2%
Other deductions (income):
Interest expense 71 0.9% 143 1.4% 372 1.4% 439 1.7%
Other, net (206) (2.6%) (37) (0.4%) (299) (1.1%) (166) (0.5%)
------- ----- -------- ----- -------- ----- -------- -----
(135) (1.7%) 106 1.0% 73 0.3% 274 0.9%
------- ----- -------- ----- -------- ----- -------- -----
INCOME BEFORE INCOME TAXES 1,778 23.0% 693 6.7% 1,013 3.9% 3,141 10.3%
------- ----- -------- ----- -------- ----- -------- -----
Federal and state income tax
expense (benefit) 457 5.9% 123 1.2% (1,996) (7.7%) 597 2.0%
------- ----- -------- ----- -------- ----- -------- -----
NET INCOME $ 1,321 17.1% $ 570 5.5% $ 3,009 11.6% $ 2,544 8.3%
======= ===== ======== ===== ======== ===== ======== =====
NET INCOME PER SHARE OF
COMMON STOCK $ 0.34 $ 0.15 $ 0.77 $ 0.66
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,009 $ 2,544
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion & amortization 2,831 2,771
Deferred income tax benefit (2,220) --
Amortization of financing costs 50 76
Loss (gain) on sale of property, plant & equipment 14 (68)
Loss on sale of Corson Lime Company 506 --
Current assets (net change)[1] 1,620 (746)
Other assets 9 --
Current liabilities (net change)[2] (1,174) 340
Other liabilities (478) (4)
------- -------
Net cash provided by operating activities 4,167 4,913
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (5,647) (4,708)
Proceeds from sale of Corson Lime Company assets, net of expenses 7,745 --
Proceeds from sale of property, plant and equipment 42 15
------- -------
Net cash provided by (used in) investing activities 2,140 (4,693)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 143 368
Payment of common stock dividends (295) (291)
Proceeds from borrowings on revolving credit facility 2,900 3,100
Payment of revolving credit facility (2,900) (3,100)
Principal payments of debt (857) (857)
------- -------
Net cash used in financing activities (1,009) (780)
------- -------
Net increase (decrease) in cash 5,298 (560)
Cash at beginning of period 1,000 1,161
------- -------
Cash at end of period $ 6,298 $ 601
======= =======
Supplemental cash flow information:
Interest paid $ 327 $ 348
======= =======
Income taxes paid $ 451 $ 689
======= =======
</TABLE>
[1] Exclusive of net change in cash.
[2] Exclusive of net change in current installments of debt.
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The condensed consolidated financial statements included herein have
been prepared by the Company without independent audit. In the opinion
of the Company's management, all adjustments of a normal and recurring
nature necessary to present fairly the financial position, results of
operations and cash flows for the periods presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the consolidated financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the
period ended December 31, 1996. The results of operations for the
periods ended September 30, 1997 are not necessarily indicative of
what the operating results for the full year will be.
2. Inventories
Inventories consisted of the following at:
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands of dollars) 1997 1996
------ ------
<S> <C> <C>
Raw materials $ 520 $ 860
Finished goods 536 2,190
Service parts 1,556 2,004
------ ------
Total inventories $2,612 $5,054
====== ======
</TABLE>
The decrease in inventories from December 31, 1996 to September 30,
1997 is largely attributable to the sale of substantively all of the
Corson Lime Company assets, as described in Note 3 below.
3. Sale of Corson Lime Company Assets
Effective June 21, 1997, Corson Lime Company, a wholly owned
subsidiary of the Company, sold substantially all of its aggregate and
lime assets for $7,855,000 in cash paid at closing, plus an additional
$376,000 for the final aggregate inventory, payable within one-hundred
and twenty days, secured by a letter of credit. Of the amount payable,
$350,000 had been collected as of September 30, 1997, and the
remainder was collected subsequent to the quarter end. A portion of
the proceeds from the sale was used to pay down the outstanding
balance under the Company's revolving credit facility of $2,900,000.
The sale resulted in a loss of $506,000 ($405,000 net of tax benefit),
which
5
<PAGE> 6
is included in labor and other operating expenses in the accompanying
condensed consolidated statements of operations.
As of June 21, 1997, Corson retained certain lime inventories and
approximately $2,073,000 of accounts receivables, net of reserve, of
which substantially all has been collected. The Company also retained,
and subsequently paid, approximately $1,431,000 in accounts payable.
In addition, the Company funded the current pension liability of
$496,000 related to the Company's former Corson employees.
The loss of $506,000 reflects the sale of property, plant and
equipment ($5,646,000), sale of certain inventories ($1,721,000),
write-off of deferred stripping costs ($652,000), write-off of
deferred maintenance costs ($233,000), write-off of intangible pension
costs ($138,000) and transaction costs ($347,000).
4. Income Taxes
As reported in the Company's consolidated financial statements and
notes contained in its Form 10-K for the year ended December 31, 1996,
the Company had a deferred tax asset which was previously fully
reserved by a valuation allowance in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("SFAS 109"). The unrecognized deferred tax asset related primarily to
net operating loss carry overs, general business credit carry overs,
and alternative minimum tax credit carry overs.
Generally, the provisions of SFAS 109 require deferred tax assets to
be reduced by a valuation allowance if, based on the weight of
available evidence, it is "more likely" than not that some portion or
all of the deferred tax asset will not be realized. SFAS 109 requires
an assessment of all available evidence, both positive and negative,
to determine the amount of any required valuation allowance. As
disclosed in the Company's financial statement footnotes, no benefit
was given to the deferred tax asset at December 31, 1996 due to
uncertainties related to its utilization.
As a result of the sale of the Corson assets, the Company reviewed the
deferred tax asset and concluded that the uncertainties as to its
realization had been favorably resolved, in that the net operating
loss carry overs and the general business credit carry overs are
expected to be fully utilized by the end of 1997. The Company's future
taxable income, enhanced by the sale of Corson, indicates future
utilization of the alternative minimum tax credit carry overs in the
upcoming years. The post-Corson sale assessment as to the ultimate
realization of the deferred tax asset indicates that it is more likely
than not that the deferred tax asset will be realized.
As a result, the Company reduced the deferred tax asset valuation
allowance in the second quarter of 1997 by $2,300,000, recording a
deferred tax asset of $2,300,000 in other assets, net, and recognizing
that amount during the second quarter in federal and state income tax
expense (benefit).
6
<PAGE> 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $4,167,000 for the nine months
ended September 30, 1997, as compared to $4,913,000 provided by operating
activities for the nine months ended September 30, 1996. The decrease in net
cash provided by operating activities was primarily attributable to lower
operating profits. This decrease was partially offset through the reduction of
working capital committed to the Corson operation after its sale.
The Company made $5,647,000 in capital expenditures in the first nine months of
1997, compared to $4,708,000 for the same period last year. The increased
capital expenditures were attributable to the major modernization and expansion
project at the Texas facility, as described below. In addition to these capital
expenditures, the Company expects to complete the modernization and expansion
project at its Texas facility and is considering a similar project at its
Arkansas facility, as described below.
Effective June 21, 1997, Corson, a wholly-owned subsidiary of the Company, sold
substantially all of its aggregate and lime assets for $7,855,000 in cash paid
at closing, plus an additional $376,000 for the final aggregate inventory,
payable within one-hundred and twenty days, secured by a letter of credit. Of
the amount payable, $350,000 had been collected as of September 30, 1997 and
the remainder was collected subsequent to the quarter end.
The Company used $2,900,000 of the net proceeds from the sale of Corson to pay
down the outstanding balance on the Company's revolving credit facility. As a
result, the Company had cash of $6,298,000 and bank debt of $3,524,000 at
September 30, 1997. The Company has not elected to pay down its term debt based
on the need for these funds in the near term to pay for its planned
modernization and expansion projects.
The Company is continuing to make good progress with the modernization and
expansion project at the Texas plant. The plans include the installation of a
new stone crushing and stone handling system, the addition of a pre-heater to
one of the existing kilns, additional screening, storage and shipping capacity,
and a new support building that will house laboratory, administrative and shop
facilities. The planned Texas improvements will allow the Company to better
serve its customers through improved quality and service. With the
improvements, the Company will be in a position to compete for customers who
currently cannot use the Company's lime in their processes. The additional
storage will improve both kiln utilization and the plant's ability to meet peek
customer demand. The improved load-out facilities will also substantially
reduce the amount of time required to load bulk quicklime trucks. The
pre-heater addition to a current kiln will reduce fuel consumption and will
also increase the plant's quicklime capacity by approximately 25%. These
improvements will result in lower operating costs and in more efficient
utilization of the work force. The cost of the Texas modernization and
expansion project is expected to be approximately $20,000,000. The project is
subject to obtaining various permits. This project will be financed from a
combination of internally generated funds and banking facilities.
7
<PAGE> 8
The Company has also been considering the construction of a new kiln at the
Arkansas plant. As part of this process, a new plant-wide permit was obtained
in order to be in position to build the new kiln. Firm bid proposals indicated
that the cost of the new kiln had increased substantially from the preliminary
cost estimates supplied from the vendors. Management determined to again review
in detail the various kiln processing systems that can be employed at Arkansas.
In addition, the crushing, handling, load-out, and storage facilities at
Arkansas are being evaluated in order to develop a comprehensive modernization
and expansion plan for this facility.
RESULTS OF OPERATIONS
Results in the third quarter were improved by strong sales from the Texas plant
and the elimination of the Corson Lime operation. The demand for lime in the
markets served by the Texas plant is strong and appears to be in balance with
the supply of lime. The Texas plant is currently running its lime operations at
capacity. Conversely, in the markets served by the Arkansas plant, there is an
abundant supply of lime and this plant is running at less than capacity.
Sales of ground calcium carbonate, in the form of pulverized limestone ("GCC"),
from both the Texas and Arkansas plants are down due to slow sales to the
roofing industry. The other markets for GCC have remained strong with stable
prices. The Company is continuing to develop new outlets for these products.
Revenues decreased from $10,452,000 in the third quarter of 1996 to $7,725,000
in the third quarter of 1997, a decrease of $2,727,000, or 26.1%. This decrease
was the result of the sale of the Corson assets in the second quarter.
Excluding Corson, revenues for the three months ended September 30, 1997
increased by $619,000, or 8.7%, from 1996, resulting from a 9.7% increase in
sales volume which was partially offset by a 1.0% decrease in prices. Revenues
for the nine months ended September 30, 1997 were $25,883,000, a decrease of
$4,675,000, or 15.3%, from the $30,558,000 reported for the nine months ended
September 30, 1996. Excluding Corson, revenues for the nine months ended
September 30, 1997 decreased by $971,000, or 4.4%, from 1996, resulting from a
3.3% decrease in sales volume and a 1.1% decrease in prices.
The Company's gross profit was $2,521,000 in the third quarter of 1997,
compared to $1,890,000 in the third quarter of 1996, a 33.4% increase. Gross
profit margin as a percentage of revenues for the third quarter of 1997
increased to 32.6% from 18.1% in 1996. The improved gross profit and gross
profit margins were largely attributable to eliminating the high production
costs at the Corson facility as well as increased volume in the third quarter
at Texas. Gross profit decreased to $4,234,000 for the first nine months of
1997, from $6,763,000 in the first nine months of 1996, a 37.4% decrease. Gross
profit margin for the nine months ended September 30, 1997 decreased to 16.4%,
from 22.1% in 1996. Year to date gross profit was adversely impacted by the
loss of $506,000 from the sale of the Corson assets which was included in labor
and other operating expenses, as well as decreased year to date volume.
Although the operating results for the first nine months of 1997 were
disappointing, the improved results for the third quarter may be a promising
indicator of continued improvements in the fourth quarter.
Selling, general and administrative expenses ("SG&A") decreased by $213,000, or
19.5%, to $878,000 in the third quarter of 1997, as compared to $1,091,000 in
the third quarter of 1996. SG&A as a percentage of sales increased to 11.3%,
from 10.4% a year earlier. SG&A decreased
8
<PAGE> 9
by $201,000, or 6.0%, in the first nine months of 1997, compared to 1996, and
as a percentage of sales increased to 12.2% from 10.9%.
Interest expense decreased both in the third quarter and first nine months of
1997 over 1996 by $72,000 and $67,000, respectively. This decrease was the
result of paying down the outstanding balance of the revolving credit facility
in June 1997.
Other, net, increased by $169,000 in the third quarter of 1997, compared to the
third quarter of 1996. Other, net increased by $133,000 in the first nine
months of 1997, as compared to the first nine months of 1996. This increase is
primarily due to increased interest income due to increased cash reserves in
the third quarter, certain royalty income on stone sales from the Blum facility
and the sale of certain Texas assets.
Income tax expense (benefit) was impacted by the reduction in the deferred tax
asset valuation allowance which produced a corresponding income tax benefit of
$2,300,000 recorded in the second quarter of 1997. See Note 4 of notes to
condensed consolidated financial statements for a more detailed explanation of
this adjustment.
The Company reported net income of $1,321,000 ($0.34 per share) during the
third quarter of 1997, compared to net income of $570,000 ($0.15 per share)
during the third quarter of 1996. Net income for the third quarter was
favorably impacted by the elimination of high production costs at Corson and
increased volume at the Texas plant. For the first nine months of 1997, the
Company reported net income of $3,009,000 ($0.77 per share), compared to net
income of $2,544,000 ($0.66 per share) in the first nine months of 1996. During
the first nine months of 1997, net income was unfavorably impacted by the loss
(net of the tax benefit) on the sale of the Corson assets of $405,000 ($0.10
per share) and favorably impacted by the recognition of a previously reserved
deferred tax asset of $2,300,000 ($0.59 per share).
9
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PART II. OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
11 Statement re computation of per share earnings
27 Financial Data Schedule
b. Reports on Form 8-K:
On July 3, 1997, the Company filed a Current Report on Form
8-K reporting under Items 2 and 7 the sale, effective June
21, 1997, of substantially all of the aggregate and lime
assets of Corson Lime Company, a wholly owned subsidiary of
the Company.
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATES LIME & MINERALS, INC.
October 23, 1997 By: /s/ Robert F. Kizer
--------------------------------
Robert F. Kizer
President and Chief Executive
Officer
October 23, 1997 By: /s/ Timothy W. Byrne
--------------------------------
Timothy W. Byrne
Senior Vice President
and Chief Financial Officer
11
<PAGE> 12
SIGNATURES
UNITED STATES LIME & MINERALS, INC.
Quarterly Report on Form 10-Q
Quarter Ended
September 30, 1997
Index to Exhibits
Exhibit No. Exhibit
- ----------- -------
11 Statement re computation of per share earnings
27 Financial Data Schedule
E-1
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION
OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $1,321,000 $ 570,000 $3,009,000 $2,544,000
---------- ---------- ---------- ----------
Net income per share $ 0.34 $ 0.15 $ 0.77 $ 0.66
---------- ---------- ---------- ----------
Weighted average
shares outstanding 3,922,512 3,921,853 3,922,073 3,880,168
---------- ---------- ---------- ----------
</TABLE>
Note: Outstanding stock options are excluded from the computation as
the effective dilution in earnings per share data is less than 3%.
E-2
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 6,298
<SECURITIES> 0
<RECEIVABLES> 4,252
<ALLOWANCES> 0
<INVENTORY> 2,612
<CURRENT-ASSETS> 13,590
<PP&E> 46,333
<DEPRECIATION> (30,479)
<TOTAL-ASSETS> 31,666
<CURRENT-LIABILITIES> 5,027
<BONDS> 0
0
0
<COMMON> 529
<OTHER-SE> 23,493
<TOTAL-LIABILITY-AND-EQUITY> 31,666
<SALES> 7,725
<TOTAL-REVENUES> 7,725
<CGS> 5,204
<TOTAL-COSTS> 5,204
<OTHER-EXPENSES> 672
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 71
<INCOME-PRETAX> 1,778
<INCOME-TAX> 457
<INCOME-CONTINUING> 1,321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,321
<EPS-PRIMARY> 0.34
<EPS-DILUTED> 0.34
</TABLE>
