<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 JUNE 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 July 31, 1997, 3,921,853
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>
JUNE 30, DECEMBER 31,
ASSETS 1997 1996
--------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 4,357 $ 1,000
Trade receivables 6,101 5,152
Inventories 2,706 5,054
Prepaid expenses and other assets 376 434
-------- --------
Total current assets 13,540 11,640
-------- --------
Property, plant and equipment at cost: 44,322 59,785
Less accumulated depreciation (30,161) (41,045)
-------- --------
Net property, plant and equipment 14,161 18,740
-------- --------
Other assets, net 2,308 939
-------- --------
Total assets $ 30,009 $ 31,319
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current installments of long-term debt $ 1,143 $ 1,143
Accounts payable-trade 1,681 3,117
Accrued expenses 1,106 1,941
-------- --------
Total current liabilities 3,930 6,201
Long-term debt, excluding current installments 2,667 3,238
Other liabilities 755 714
Stockholders' equity:
Common stock 529 529
Additional paid-in capital 15,311 15,311
Retained earnings 21,379 19,888
-------- --------
37,219 35,728
Less treasury stock at cost;
1,372,212 shares of common stock (14,562) (14,562)
-------- --------
Total stockholders' equity 22,657 21,166
-------- --------
Total liabilities and stockholders' equity $ 30,009 $ 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 INCOME
(In thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------------ ----------------- ----------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES $ 10,350 100.0% $ 11,583 100.0% $ 18,158 100.0% $ 20,106 100.0%
Cost of revenues:
Labor and other operating expenses 8,159 78.8% 7,549 65.2% 14,392 79.3% 13,421 66.8%
Depreciation, depletion and amortization 1,073 10.4% 971 8.4% 2,053 11.3% 1,812 9.0%
------------------ ----------------- ----------------- ------------------
9,232 89.2% 8,520 73.6% 16,445 90.6% 15,233 75.8%
------------------ ----------------- ----------------- ------------------
GROSS PROFIT 1,118 10.8% 3,063 26.4% 1,713 9.4% 4,873 24.2%
Selling, general and administrative expenses 1,154 11.1% 1,153 9.9% 2,270 12.5% 2,258 11.2%
------------------ ----------------- ----------------- ------------------
OPERATING PROFIT (36) -0.3% 1,910 16.5% (557) -3.1% 2,615 13.0%
------------------ ----------------- ----------------- ------------------
Other deductions (income):
Interest expense 168 1.6% 162 1.4% 301 1.7% 296 1.5%
Other, net (49) -0.5% (71) -0.6% (93) -0.5% (129) -0.6%
------------------ ----------------- ----------------- ------------------
119 1.1% 91 0.8% 208 1.1% 167 0.8%
------------------ ----------------- ----------------- ------------------
INCOME (LOSS) BEFORE INCOME TAXES (155) -1.5% 1,819 15.7% (765) -4.2% 2,448 12.2%
Federal and state income taxes (benefit) (2,331) -22.5% 348 3.0% (2,453) -13.5% 474 2.4%
------------------ ----------------- ----------------- ------------------
NET INCOME $ 2,176 21.0% $ 1,471 12.7% $ 1,688 9.3% $ 1,974 9.8%
======== ======== ======== ========
NET INCOME PER SHARE:
PRIMARY $ 0.55 $ 0.38 $ 0.43 $ 0.51
======== ======== ======== ========
FULLY DILUTED $ -- $ 0.36 $ -- $ 0.49
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consilidated 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>
SIX MONTHS ENDED
JUNE 30,
1997 1996
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,688 $ 1,974
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization 2,135 1,813
Deferred income tax benefit (2,300) --
Amortization of financing costs 50 50
Loss on sale of property, plant, and equipment 3 --
Loss on sale of Corson Lime Company assets 506 --
Current assets (net change) [1] (497) (2,247)
Other assets 229 (98)
Current liabilities (net change) [2] (2,355) 590
Other liabilities 41 (5)
------- -------
Net cash provided by (used in) operating activities (500) 2,077
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (3,218) (2,950)
Proceeds from sale of Corson Lime Company assets, net of expenses 7,838 --
Proceeds from sale of property, plant and equipment 5 --
------- -------
Net cash provided by (used in) investing activities 4,625 (2,950)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options -- 368
Payment of common stock dividends (196) (193)
Proceeds from borrowings of revolving credit facility 2,900 650
Payment of revolving credit facility (2,900) --
Principal payments of debt and lease obligations (572) (572)
------- -------
Net cash provided by (used in) financing activities (768) 253
------- -------
Net increase (decrease) in cash 3,357 (620)
Cash at beginning of period 1,000 1,161
------- -------
Cash at end of period $ 4,357 $ 541
======= =======
Supplemental cash flow information:
Interest paid $ 235 $ 227
======= =======
Income taxes paid $ 451 $ 531
======= =======
</TABLE>
[1] Exclusive of net change in cash.
[2] Exclusive of net change in debt and lease obligations.
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 June 30, 1997 are not necessarily indicative of what the
operating results for the full year will be.
2. Inventories
Inventories consist of the following at:
June 30, December 31,
1997 1996
------ ------
(In thousands of dollars)
[S] [C] [C]
Raw materials $ 500 $ 860
Finished goods 624 2,190
Service parts 1,582 2,004
------ ------
Total inventories $2,706 $5,054
====== ======
3. Loss on 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, and an additional
$376,000 for the final aggregate inventory, secured by a letter of
credit, to be paid within one hundred and twenty days. Corson retained
its accounts receivables, certain lime inventories and accounts
payable. The proceeds from the sale were 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 is included in labor and other operating expenses
in the accompanying condensed consolidated statements of income.
5
<PAGE> 6
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 has certain deferred tax assets which were previously
fully reserved by a valuation allowance in accordance with SFAS 109.
The unrecognized deferred tax assets relate 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 assets will not be realized. Statement 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 had been given to these deferred tax assets at December 31,
1996 due to the uncertainties related to their utilization.
As a result of the sale of assets of Corson Lime Company, the Company
has reviewed the deferred tax assets and concluded that the
uncertainties as to their realization have been favorably resolved, in
that the net operating loss carry overs are expected to be fully
utilized by the end of 1997; the unused general business credits by
the end of 1997 will be minimal; and the Company's future taxable
income, enhanced by the sale of Corson Lime Company, indicates future
utilization of the alternative minimum tax credit carry overs in the
upcoming years. The post-Corson Lime Company sale assessment as to the
ultimate realization of the deferred tax assets indicates that it is
more likely than not that the deferred tax assets will be realized.
As a result, the Company reduced the deferred tax assets valuation
allowance in the second quarter of 1997 by $2,300,000, recording
deferred tax assets of $2,300,000 in other assets, net, and
recognizing that amount during the quarter in federal and state income
taxes (benefit).
6
<PAGE> 7
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $500,000 for the six months ended
June 30, 1997, as compared to $2,077,000 provided by operating activities for
the six months ended June 30, 1996. The decrease in net cash provided by
operating activities was primarily attributable to the pay off of the current
liabilities of Corson Lime Company, as well as the increased spending on
capital expenditures in the first half of 1997 compared to the same period a
year ago.
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, and an additional $376,000 for the final aggregate
inventory, secured by a letter of credit.
The company used $2,900,000 of the net proceeds of the sale of Corson Lime
Company to pay down the outstanding balance on the Company's revolving credit
facility. As a result, the Company had cash of $4,357,000 and bank debt of
$3,810,000 at June 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 made $3,218,000 in capital expenditures in the first half of 1977,
compared to $2,950,000 for the same period last year. In addition to these
capital expenditures, the Company plans to undertake major modernization and
expansion projects at its Arkansas and Texas facilities.
The Company has for some time considered constructing 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. Recent 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, loadout, and storage
facilities at Arkansas are being evaluated in order to develop a comprehensive
modernization and expansion plan for this facility.
The work on the Texas modernization and expansion project is preceeding on time
and within budget. 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 storage, screening and shipping capacity, and a new support
building which will house a laboratory and administrative and shop facilities.
The planned Texas improvements will allow the Company to better serve its
customers by improving both 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 process. The additional storage will improve both
kiln utilization and the plant's ability to meet peek customer demand. The
storage and load-out facilities will also substantially reduce the amount of
time required for the loading of 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 still 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
RESULTS OF OPERATIONS
Revenues decreased from $11,583,000 in the second quarter of 1996 to
$10,350,000 in the second quarter of 1997, a decrease of $1,233,000 or 10.6%.
This decrease was partly a result of the sale of the Corson Lime Company assets
prior to the end of the quarter. Excluding Corson Lime Company, revenues for
the three months ended June 30, 1997 decreased by $698,000 or 8.6% from 1996,
resulting from a 7.5% decrease in sales volume and 1.1% decrease in prices.
Revenues for the six months ended June 30, 1997 were $18,158,000, a decrease of
$1,948,000 or 9.7% from the $20,106,000 reported for the six months ended June
30, 1996. Excluding Corson Lime Company, revenue for the six months ended June
30, 1997 decreased by $1,590,000 or 10.7% from 1996, resulting from a 9.5%
decrease in sales volume and a 1.2% decrease in prices.
The Company's gross profit was $1,118,000 in the second quarter of 1997,
compared to $3,063,000 in the second quarter of 1996, a 63.5% decrease. Gross
profit margin for the second quarter of 1997 decreased to 10.8%, from 26.4% in
1996. Gross profit was adversely impacted by the loss of $506,000 from the sale
of the Corson Lime Company assets which was included in labor and other
operating expenses. In addition, the lower gross profit and gross profit
margins were attributable to decreased production volumes in the second
quarter. Gross profit decreased to $1,713,000 for the first six months of 1997,
from $4,873,000 in the first six months of 1996, a 64.9% decrease. Gross profit
margin for the six months ended June 30, 1997 decreased to 9.4%, from 24.2.% in
1996. The loss on the sale of the Corson Lime Company assets and decreased
production volumes negatively impacted both gross profit and gross profit
margins. Although management was disappointed with the operating results for
the first half of 1997, it is now starting to see better operating results and
expects the second half to be an improvement over the first half. The markets
which are served by the Texas plant are very strong, and management is also
optimistic that the favorable signs it sees at Arkansas Lime will continue.
Selling, general and administrative expenses (SG&A) remained almost constant at
$1,154,000 in the second quarter of 1997, compared to $1,153,000 in the second
quarter of 1996. SG&A as a percentage of sales increased to 11.1%, from 9.9% a
year earlier. SG&A increased by $12,000 or 0.5%, in the first six months of
1997, compared to 1996, and as a percentage of sales increased to 12.5%, from
11.2%.
Interest expense increased both in the second quarter and first six months of
1997 over 1996 by $6,000 and $5,000, respectively. This increase was due
primarily to increased borrowings under the revolving loan facility in the
first half of 1997.
Other, net decreased by $22,000 in the second quarter of 1997, compared to the
second quarter of 1996. Other, net decreased by $36,000 in the first six months
of 1997, as compared to the first six months of 1996.
Income taxes were impacted by the reduction in the deferred tax assets
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 $2,176,000 ($0.55 per share) during the
second quarter of 1997, compared to net income of $1,471,000 ($0.38 per
share/$0.36 fully diluted) during the second quarter of 1996. For the first six
months of 1997, the Company recorded net income of $1,688,000 ($0.43 per
share), compared to net income of $1,974,000 ($0.51 per share/$0.49 fully
diluted) in the first six months of 1996. During the second quarter of 1997,
net income was unfavorably impacted by the loss (net of tax benefits) on the
sale of the Corson Lime Company assets of $405,000 ($0.10 per share) and
favorably impacted by the recognition of previously reserved deferred tax
assets of $2,300,000 ($0.59 per share).
8
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders was held on May 16, 1997 in Dallas,
Texas. The table below shows the one proposal submitted to
Shareholders in the Company's Proxy Statement dated April 8, 1997, and
the results of the Shareholder vote:
Election of Directors
<TABLE>
<CAPTION>
FOR WITHHELD
--- --------
<S> <C> <C>
John J. Brown 3,299,911 7,828
Timothy W. Byrne 3,300,911 6,828
Antoine M. Doumet 3,299,911 7,828
Wallace G. Irmscher 3,300,911 6,828
Robert F. Kizer 3,300,911 6,828
Edward A. Odishaw 3,300,911 6,828
</TABLE>
There were no broker non-votes.
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:
The Company filed no Reports on Form 8-K during the quarter ended
June 30, 1997. 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, to Highway Materials, Inc.
9
<PAGE> 10
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.
August 5, 1997 By:/s/ Robert F. Kizer
---------------------------------
Robert F. Kizer
President and Chief Executive
Officer
August 5, 1997 By:/s/ Timothy W. Byrne
---------------------------------
Timothy W. Byrne
Senior Vice President
and Chief Financial Officer
<PAGE> 11
UNITED STATES LIME & MINERALS, INC.
Quarterly Report on Form 10-Q
Quarter Ended
June 30, 1997
Index to Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- ----------------------------------------------
<S> <C>
11 Statement re computation of per share earnings
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION
OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 2,176,000 1,471,000 1,688,000 1,974,000
=========== ========= ========= =========
Net income per share: (1)
Primary $ 0.55 0.38 0.43 0.51
=========== ========= ========= =========
Fully diluted $ -- 0.36 -- 0.49
=========== ========= ========= =========
Weighted average
shares outstanding: (1)
Primary 3,921,853 3,872,073 3,921,853 3,859,097
=========== ========= ========= =========
Fully diluted -- 4,031,202 -- 4,018,225
=========== ========= ========= =========
</TABLE>
(1) The Company is showing both primary and fully diluted earnings per share
for the second quarter and first half of 1996. These calculations, required
under generally accepted accounting principles, reflect the effects of in
the market prices for the Company's shares in determining the dilution
resulting from the assumed exercise of the Company's employee stock
options.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 4,357
<SECURITIES> 0
<RECEIVABLES> 6,101
<ALLOWANCES> 0
<INVENTORY> 2,706
<CURRENT-ASSETS> 13,540
<PP&E> 44,322
<DEPRECIATION> 30,161
<TOTAL-ASSETS> 30,009
<CURRENT-LIABILITIES> 3,930
<BONDS> 0
0
0
<COMMON> 529
<OTHER-SE> 22,128
<TOTAL-LIABILITY-AND-EQUITY> 30,009
<SALES> 10,350
<TOTAL-REVENUES> 10,350
<CGS> 9,232
<TOTAL-COSTS> 9,232
<OTHER-EXPENSES> 1,105
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 168
<INCOME-PRETAX> (155)
<INCOME-TAX> (2,331)
<INCOME-CONTINUING> 2,176
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,176
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0
</TABLE>
