<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-4197
UNITED STATES LIME & MINERALS, INC.
(Exact name of Registrant as specified in its charter)
TEXAS 75-0789226
- ----------------------- ---------------------------------------
State of Incorporation (I.R.S. Employer Identification Number)
13800 MONTFORT DRIVE, SUITE 330, DALLAS, TEXAS 75240
- ---------------------------------------------- -------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972)-991-8400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of Each Exchange on
Which Registered
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $0.10 par value
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 by a check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [X]
The aggregate market value of Common Stock held by non-affiliates as of
February 25, 2000: $13,017,778.
Number of shares of Common Stock outstanding as of February 25, 2000:
3,981,664.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the Registrant's
definitive Proxy Statement to be filed for its 2000 Annual Meeting of
Shareholders. Part IV incorporates certain exhibits by reference from the
Registrant's previous filings.
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TABLE OF CONTENTS
<TABLE>
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PAGE
<S> <C>
PART I.....................................................................................................1
ITEM 1. BUSINESS.................................................................................1
General..................................................................................1
Business and Products....................................................................1
Product Sales............................................................................1
Order Backlog............................................................................1
Seasonality..............................................................................2
Limestone Reserves.......................................................................2
Mining...................................................................................2
Plants and Facilities....................................................................3
Employees................................................................................4
Competition..............................................................................4
Environmental Matters....................................................................4
Disposition of Assets....................................................................5
ITEM 2. PROPERTIES...............................................................................5
ITEM 3. LEGAL PROCEEDINGS........................................................................5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......................................5
PART II....................................................................................................5
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS......................................................................5
ITEM 6. SELECTED FINANCIAL DATA..................................................................6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................................7
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK..............................11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.............................................11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.....................................................12
PART III..................................................................................................12
PART IV...................................................................................................12
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K.............................................................................12
SIGNATURES..............................................................................15
</TABLE>
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UNITED STATES LIME & MINERALS, INC. - FORM 10-K
For the Year Ended December 31, 1999
PART I
ITEM 1. BUSINESS.
GENERAL. The business of United States Lime & Minerals, Inc. (the "Company"
or the "Registrant"), which was incorporated in 1950, is the production and sale
of lime and limestone products. The Company extracts high-quality limestone from
its quarries and processes it for sale as pulverized limestone, quicklime, and
hydrated lime. These operations were conducted throughout 1999 at two
wholly-owned subsidiaries of the Company: Arkansas Lime Company and Texas Lime
Company. In June 1999, a third wholly-owned subsidiary, Colorado Lime Company,
purchased the assets of Calco, Inc., a small producer of pulverized limestone
products located in Salida, Colorado. The Company sold substantially all of the
assets of its subsidiary, Corson Lime Company, on June 21, 1997, see "Business -
Disposition of Assets." References to the Company herein include references to
its subsidiaries.
The Company's principal corporate office is located at 13800 Montfort
Drive, Suite 330, Dallas, Texas 75240.
BUSINESS AND PRODUCTS. The Company extracts raw limestone and then
processes it for sale as pulverized limestone, quicklime, and hydrated lime.
Pulverized limestone, also referred to as ground calcium carbonate, is a dried
product ground to granular and finer sizes. Quicklime (calcium oxide) is
produced by heating limestone to very high temperatures in kilns in a process
called calcination. Hydrated lime (calcium hydroxide) is produced by reacting
quicklime with water in a controlled process to produce a dry, white powder.
Pulverized limestone is used primarily in the production of construction
materials such as asphalt paving and roofing shingles, as an additive to
agriculture feeds, as a soil enhancement, and for mine safety dust in coal
mining operations. Quicklime is used primarily in the manufacturing of paper
products, in sanitation and water filtering systems, in metal processing, and in
soil stabilization for highway and building construction. Hydrated lime is used
primarily in municipal sanitation and water treatment, in soil stabilization for
highway and building construction, in the production of chemicals, and in the
production of construction materials such as stucco, plaster and mortar.
PRODUCT SALES. In 1999, the Company sold the majority of its products in
the states of Arkansas, Colorado, Kansas, Louisiana, Mississippi, Missouri, New
Mexico, Oklahoma, Tennessee, and Texas. Sales are made primarily by the
Company's six sales employees who call on potential customers and solicit orders
which are generally made on a purchase-order basis. The Company also receives
orders in response to bids that it prepares and submits to potential customers.
Principal customers for the Company's lime and limestone products are
highway, street and parking lot contractors, chemical producers, paper
manufacturers, roofing shingle manufacturers, steel producers, glass
manufacturers, municipal sanitation and water treatment facilities, poultry and
cattle feed producers, governmental agencies, and electrical utility companies.
Approximately 700 customers accounted for the Company's sales of lime and
limestone products during the year ended December 31, 1999. No single customer
accounted for more than 10% of such sales. The Company is not subject to
significant customer risks as its customers are considerably diversified as to
geographic location and industrial concentration. However, given the nature of
the lime and limestone industry, the Company's profits are very sensitive to
changes in volume.
Lime and limestone products are transported by rail and truck to customers
generally within a radius of 400 miles of each of the Company's processing
plants. Sales of lime and limestone products are highest during the months of
March through November.
Substantially all of the Company's sales are made within the United States.
ORDER BACKLOG. The Company does not believe that backlog information
accurately reflects anticipated annual revenues or profitability from year to
year.
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SEASONALITY. The Company's sales have historically reflected seasonal
trends, with the largest percentage of total annual revenues being realized in
the second and third quarters. Lower seasonal demand normally results in reduced
shipments and revenues in the first and fourth quarters. Inclement weather
conditions generally have a negative impact on the demand for lime and limestone
products.
LIMESTONE RESERVES. The Company has two subsidiaries which currently
extract limestone from open-pit quarries, the Texas Lime Company is located 14
miles from Cleburne, Texas, and the Arkansas Lime Company is located near
Batesville, Arkansas. A third subsidiary, the Colorado Lime Company, owns
limestone resources at Monarch Pass located 15 miles west of Salida, Colorado.
No mining took place on this property in 1999, although existing crushed stone
stockpiles on the property were used to provide feedstock to the plant in Salida
acquired from Calco, Inc. Access to all locations is provided by paved roads.
Texas Lime Company operates upon a tract of land containing approximately
470 acres, including the Cleburne Quarry. In January 1999, the Company purchased
approximately 400 acres of additional land and now owns approximately 2,700
acres adjacent to the quarry. Both the quarry and the adjacent land contain
known high-quality limestone reserves in a bed averaging 28 feet in thickness,
with an overburden that ranges from 0 to 50 feet. The Company also has mineral
interests in approximately 560 acres of land adjacent to the northwest boundary
of the Company's property. The calculated reserves, as of January 31, 1999, were
approximately 44,000,000 tons of proven reserves and approximately 91,000,000
tons of probable reserves. Assuming the enhanced level of production following
the Texas modernization and expansion project is maintained, the Company
estimates that these reserves are sufficient to sustain operations for
approximately 100 years.
Arkansas Lime Company operates the Batesville Quarry and has lime and
limestone production facilities on a second site linked to the quarry by its own
light-gauge railroad. The active quarry operations cover approximately 725 acres
of land containing a known deposit of high-quality limestone. The average
thickness of the high-quality limestone deposit is approximately 70 feet, with
an average overburden thickness of 35 feet. The Company also owns approximately
325 additional acres containing additional high-quality limestone deposits
adjacent to the present quarry but separated from it by a public highway. The
average thickness of this second high-quality limestone deposit is approximately
55 feet, with an average overburden of 20 feet. The calculated reserves, as of
January 31, 1999, were approximately 23,500,000 tons of proven reserves plus an
additional 33,500,000 tons of probable reserves. Assuming the present level of
production is maintained, the Company estimates that reserves are sufficient to
sustain operations for approximately 100 years. However, this estimate is
reduced to 50 years assuming that the Arkansas facility reaches projected
production levels after the planned modernization and expansion.
Colorado Lime Company acquired the Monarch Pass Quarry in November 1995 and
has not carried out any mining on the property. A review of the potential
limestone resources has been completed by independent geologists. However, the
Company does not consider the cost of a drilling program to be economically
feasible at this time and, consequently, it is not possible to identify and
categorize reserves. The Monarch Pass Quarry, which had been operated for many
years until its closure in the early nineties, contains a mixture of limestone
types, including high-quality calcium limestone and dolomite. The Company
expects to utilize remaining crushed stone inventories to supply its processing
plant in nearby Salida. Developed quarry benches are available and will be mined
by contractors if the need arises.
MINING. The Company extracts limestone by the open-pit method at its
Arkansas and Texas quarries. Monarch Pass is also an open-pit quarry, but is not
being worked at this time. The open-pit method consists of removing any
overburden comprising soil, trees, and other substances, including inferior
limestone, and then extracting the exposed high-quality limestone. Open-pit
mining is generally less expensive than underground mining. The principal
disadvantage of the open-pit method is that operations are subject to inclement
weather. The limestone is extracted by drilling and blasting utilizing standard
mining equipment, which is Company-owned. After extraction, limestone is
crushed, screened, and ground in the case of pulverized limestone, or further
processed in kilns and hydrators in the case of quicklime and hydrated lime,
before shipment. The Company has no knowledge of any recent changes in the
physical quarrying conditions on any of its properties which have materially
affected its mining operations, and no such changes are anticipated.
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PLANTS AND FACILITIES. The Company produces lime and/or limestone products
at three plants:
Following the completion at the end of 1998 of a modernization and
expansion project at the Texas plant, the plant now has an annual capacity of
470,000 tons of quicklime from three rotary kilns. The plant has pulverized
limestone equipment which has a capacity to produce 700,000 tons of pulverized
limestone annually, depending on the product mix. The Texas project included the
installation of a new stone crushing and handling system, the addition of a
preheater to one of the existing kilns, additional storage, screening, and
shipping capacity, and a new support building housing a laboratory and
administrative and shop facilities. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources." In addition to the Cleburne plant, the Company owns a dormant plant
which is located near Blum, Texas on a tract of land covering approximately 40
acres. The Blum plant was acquired in 1989, and its kilns have not been operated
since that time; however, the plant's storage and shipment facilities are
currently being utilized.
The Arkansas Lime production plant is situated on a tract of 290 acres
located approximately two miles from the Batesville Quarry to which it is
connected by a Company-owned light-gauge railroad. Utilizing six vertical kilns,
this plant has an annual capacity of 85,000 tons of quicklime. The plant has two
grinding systems which, depending on the product mix, have the capacity to
produce 700,000 tons of pulverized limestone annually.
Over the past decade, Arkansas Lime Company has lost various accounts due
to poor product quality and service from the vertical lime kilns which were
installed in the 1920's. The Company has commenced a modernization and expansion
of the Arkansas facility, to be completed in two phases, which is designed to
improve quality and service and enable Arkansas Lime Company to compete for new
accounts and accounts with former customers lost due to the quality and service
issues. Phase I includes the redevelopment of the quarry plant, rebuilding of
the railroad to standard U.S. gauge, establishment of an out-of-state terminal,
and installation of a rotary kiln with preheater, along with increased product
storage and loading capacity. Completion of this phase is planned for the third
quarter of 2000, and will provide a modern lime works with an annual capacity of
up to approximately 200,000 tons of quicklime. In July 1999, the Company
purchased a disused feed mill in Shreveport, Louisiana. This facility is
connected to the Kansas City Southern railroad and is being re-furbished during
Phase I to provide lime storage and distribution capacity to service markets in
Louisiana and East Texas. Phase II will further expand lime production capacity
at Arkansas to approximately 350,000 tons of quicklime by the installation of a
second kiln with additional storage capacity. Phase II is currently scheduled
for completion in the first half of 2001, although the Company could defer, or
cancel, this phase depending on factors such as market demand and availability
of financing. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Liquidity and Capital Resources."
The Company maintains lime hydrating equipment and limestone drying and
pulverizing equipment at both the Texas and Arkansas plants. Storage facilities
for lime and pulverized limestone products at each plant consist primarily of
cylindrical tanks, which are considered by the Company to be adequate to protect
its lime and limestone products and to provide an available supply for
customers' needs at the existing volume of shipments. Equipment is maintained at
each plant to load trucks, and at the Arkansas and Blum plants to load railroad
cars.
The Colorado Lime Company operates a limestone drying, grinding and bagging
facility, with an annual capacity of 60,000 tons, on 99 acres of land in Salida,
Colorado. The property is leased from the Union Pacific Railroad for a term of 5
years, commencing June 1999, with renewal options for a further 10 years. A rail
loading spur is available, although the Company does not currently ship any
products by rail. This plant's facilities also include a small rotary lime kiln
which is permitted for operation but presently dormant. A mobile stone crushing
and screening plant is situated in the Monarch Pass Quarry, producing
agricultural grade limestone, with an annual capacity of up to 40,000 tons.
The Company believes that its processing plants are adequately maintained
and insured. The Texas plant has recently been modernized and expanded, and the
Arkansas modernization and expansion project will replace the majority of the
old equipment at this facility. See "Managements Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."
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EMPLOYEES. The Company employed, at December 31, 1999, 205 persons, 29 of
whom are engaged in sales, administrative, and management activities. Of the
Company's 176 production employees, 135 are covered by two collective bargaining
agreements. Both agreements were renewed during 1999. The Arkansas facility
agreement expires in January 2002, and the Texas facility agreement expires in
November 2002. The Company considers that its relationships with all employees
are good.
COMPETITION. The lime industry is highly localized and competitive, with
quality, price, and proximity to customers being the prime competitive factors.
The Company's competitors are predominantly private companies.
In recent years, the demand for lime has been relatively strong, and price
levels have gradually increased in the major business sectors. The Company
believes that the Transportation Equity Act for the 21st Century, signed into
law in June 1998, will provide a continuing strong level of demand from the
highway construction sector over the next few years.
The lime industry is also characterized by high barriers to entry,
including: the scarcity of high-quality limestone deposits on which the required
zoning and permits for extraction can be obtained; the need for lime plants to
be located close to markets and railroad networks to enable cost-effective
production and distribution; recent clean air and anti-pollution legislation
which has made it more difficult to obtain permitting for new sources of
emissions such as lime kilns; and the high capital cost of the facilities. These
considerations reinforce the premium value of operations having permitted,
long-term, high-quality mineral reserves and good locations relative to markets.
Producers tend to be concentrated on known limestone formations where
competition takes place on a local basis. The industry as a whole has expanded
its customer base and, while the steel industry is still the largest market
sector, also counts pulp and paper producers and road builders among its major
customers. In recent years, the environmental-related uses for lime have been
expanding, including use in flue gas desulfurization and the treatment of both
waste and potable water.
There is a continuing trend of consolidation in the lime and limestone
industry, with the three largest lime companies now accounting for approximately
70% of North American lime capacity. In addition to the consolidations, and
often in conjunction with them, many lime producers have undergone modernization
and expansion projects to upgrade their processing equipment in an effort to
improve operating efficiency. The Company's modernization and expansion projects
should allow it to continue to remain competitive, protect its markets, and
position itself for the future. In addition, the Company will continue to
evaluate external opportunities for expansion. However, circumstances outside of
the control of the Company may require it to revise its strategy, or otherwise
find ways to enhance the value of the Company, including entering into strategic
partnerships, mergers, or other transactions.
ENVIRONMENTAL MATTERS. The Company owns or controls large areas of land
upon which it operates limestone quarries and their associated processing plants
with inherent environmental responsibilities. However, there is a low level of
environmental risk posed by the production of lime and limestone which are
benign and non-toxic to the environment.
The Company's operations are subject to various federal, state, and local
environmental laws and regulations, including the Clean Air Act, the Clean Water
Act, the Resource Conservation and Recovery Act, and the Comprehensive
Environmental Response, Compensation, and Liability Act, as well as the Toxic
Substances Control Act. The rate of change of such legislation has been rapid
over the last decade, and compliance can require significant expenditures. For
example, recent federal legislation required Texas Lime Company and Arkansas
Lime Company to apply for "Title V" renewable operating permits which have
significant on-going compliance monitoring costs. While the Company cannot be
certain that it will always be able to comply with changing requirements without
a material impact on its business, it is not aware of any such impending change.
In part in response to requirements of environmental regulatory agencies, the
Company incurred capital expenditures of approximately $200,000 in 1999 and
$197,000 in 1998 on environmental compliance and is planning to incur
approximately $150,000 in 2000 excluding major capital projects. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
In the judgment of management, forecastable expenditure requirements for
future environmental compliance are not of such dimension as to have a
materially adverse effect on the Company's financial condition, results of
operation, cash flows, or competitive position.
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The Company's recurring costs associated with managing and disposing of
potentially hazardous substances (such as fuels and lubricants used in
operations) and maintaining pollution control equipment amounted to
approximately $165,000 in 1999 and $167,000 in 1998. The Company has not been
named as a potentially responsible party in any superfund cleanup site.
DISPOSITION OF ASSETS. Effective June 21, 1997, Corson Lime Company, a
wholly owned subsidiary of the Company, ceased operations and sold substantially
all of its aggregate and lime assets for $8,231,000 in cash, including a
$376,000 note collected in October 1997. The proceeds, net of expenses,
generated by the sale were used to partially fund the Texas plant modernization
and expansion project. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note 7 of Notes to Consolidated
Financial Statements for discussions regarding the disposition.
ITEM 2. PROPERTIES.
Reference is made to Item 1 of this Report for a description of the
properties of the Company, and such description is hereby incorporated by
reference in answer to this Item 2. As discussed in Note 2 of Notes to
Consolidated Financial Statements, the Company's plant facilities and mineral
reserves are subject to encumbrances to secure the Company's loans.
ITEM 3. LEGAL PROCEEDINGS.
Information regarding legal proceedings is set forth in Note 6 of Notes to
Consolidated Financial Statements and is hereby incorporated by reference in
answer to this Item 3.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matters to a vote of security holders during
the fourth quarter 1999.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is quoted on the Nasdaq Stock Market(R) under
the symbol "USLM." As of February 25, 2000, the Company had 825 stockholders of
record.
As of February 25, 2000, the Company had 500,000 shares of $5.00 par value
preferred stock authorized, however, none had been issued.
The high and low sales prices for the Company's Common Stock for the
periods indicated, as well as dividends declared, were:
<TABLE>
<CAPTION>
1999 1998
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MARKET PRICE MARKET PRICE
------------------------ DIVIDENDS ------------------------ DIVIDENDS
LOW HIGH DECLARED LOW HIGH DECLARED
------------ ----------- --------------- ------------------------ ---------------
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First Quarter $ 6 1/4 $ 8 1/32 $ 0.025 $ 6 1/2 $ 9 $ 0.025
Second Quarter $ 6 1/2 $11 $ 0.025 $ 7 3/4 $ 9 1/8 $ 0.025
Third Quarter $ 5 5/8 $ 8 $ 0.025 $ 6 5/16 $ 8 3/4 $ 0.025
Fourth Quarter $ 6 $ 8 $ 0.025 $ 6 $ 8 $ 0.025
</TABLE>
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ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
(dollars in thousands, except per share amounts)
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Operating results
Revenues $ 31,537 28,769 32,404 40,159 41,419
============ ============ ============ ============ ============
Net income $ 2,533 2,929 3,096 a 2,602 4,260
============ ============ ============ ============ ============
Income per share of common stock
Basic earnings $ 0.64 0.74 0.79 0.67 1.11
============ ============ ============ ============ ============
Diluted earnings $ 0.64 0.74 0.78 0.66 1.11
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Total assets $ 77,688 51,090 33,520 31,319 29,793
Long-term debt,
excluding current installments $ 42,500 16,196 2,167 3,238 4,381
Stockholders' equity per
outstanding share $ 7.23 6.70 6.11 5.40 4.89
Cash dividends per share $ 0.10 0.10 0.10 0.10 0.075
Employees at year end 205 200 201 318 338
</TABLE>
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a. Includes a loss on sale of Corson Lime Company assets of $405, net of
related tax benefit ($506 gross), and the recognition of $2,300 in
previously reserved deferred tax assets.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations," and Notes to Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS.
The following table sets forth selected financial information of the
Company expressed as a percentage of revenues for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
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<S> <C> <C> <C>
Revenues 100% 100% 100%
Cost of revenues
Labor and other operating expenses (58) (66) (73)
Depreciation, depletion and amortization (14) (10) (10)
---------- ---------- ----------
GROSS PROFIT 28 24 17
Selling, general and administrative expenses (11) (12) (14)
---------- ---------- ----------
OPERATING PROFIT 17 12 3
Other (expenses) income:
Interest expense (8) -- 1
Other, net 2 1 2
Federal and state income tax (expense) benefit (3) (3) 6
---------- ---------- ----------
NET INCOME 8% 10% 10%
========== ========== ==========
</TABLE>
1999 VS. 1998
Revenues increased to $31,537,000 in 1999 from $28,769,000 in 1998, an
increase of $2,768,000, or 9.6%. This increase was a result of a 6.9% increase
in sales volume and a 2.7% increase in sales prices. Revenues from the Colorado
Lime plant in the last six months of 1999 contributed to the increase, as did
the continued strong demand from the Texas market.
The Company's gross profit was $8,815,000 for 1999 compared to $7,061,000
for 1998, a 24.8%, or $1,754,000 increase. As a percentage of revenues, gross
profit margin increased to 28.0% in 1999 from 24.5% in 1998. Improving
production efficiencies at Texas Lime during the second half of 1999 contributed
to the increased gross profit margin.
Selling, general and administrative ("SGA") expenses decreased slightly to
$3,482,000 in 1999 from $3,489,000 in 1998. As a percentage of revenues, SGA
expenses decreased to 11.0% in 1999 from 12.1% in 1998.
Interest expense increased to $2,561,000 in 1999 from $26,000 in 1998. This
is a result of the Company's increased amount of debt. In addition, $962,000 of
interest costs associated with the modernization and expansion project at the
Texas facility were capitalized in 1998, while only $167,000 of interest costs
associated with the modernization and expansion project at the Arkansas facility
were capitalized in 1999.
The Company's net income for 1999 decreased $396,000, or 13.5%, to
$2,533,000 ($0.64 per share) in 1999 from $2,929,000 ($0.74 per share) in 1998.
Although operating profit in 1999 increased by $1,761,000, or 49.3%, net income
was negatively impacted by the increase in interest expense in 1999 as compared
to 1998.
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1998 VS. 1997
Revenues decreased from $32,404,000 in 1997 to $28,769,000 in 1998, a
decrease of $3,635,000 or 11.2%. The decrease in revenues resulted from the sale
of the assets of the Company's Corson Lime Company subsidiary in June 1997.
Excluding Corson, revenues increased by $1,268,000, or 4.6%, from 1997,
resulting from a 3.6% increase in sales volume and 1.0% increase in sales
prices. Demand remained strong in the Texas market during 1998, but sales at
Texas were negatively impacted by the inevitable production inefficiencies
caused by the extensive construction activities that took place at that facility
in 1998. Arkansas continued to be negatively impacted by production
inefficiencies at the facility resulting from the antiquated plant.
The Company's gross profit was $7,061,000 for 1998 compared to $5,419,000
for 1997, a 30.3%, or $1,642,000 increase. The 1998 gross profit was improved
principally by eliminating the high production costs at the Corson operations,
partially offset by higher fuel costs in the first half of 1998.
SG&A expenses decreased from $4,520,000 in 1997 to $3,489,000 in 1998, a
22.8% decrease. In 1997, SG&A was negatively impacted by a one-time severance
payment due to a former employee under an employment agreement and additional
professional consulting fees. SG&A expenses decreased as a percent of revenues
to 12.1% in 1998, from 13.9% in 1997.
Interest expense decreased by $342,000 in 1998 from 1997, as substantially
all interest costs were capitalized in connection with the modernization and
expansion project at the Texas facility.
The Company's net income for 1998 decreased $167,000, or 5.4%, from
$3,096,000 ($0.79 per share basic and $0.78 diluted) in 1997, to $2,929,000
($0.74 basic and diluted). This decrease is attributable principally to the
favorable impact in 1997 of recognizing $2,300,000 ($0.59 basic and $0.58
diluted) in previously reserved deferred tax assets, which was partially offset
by a loss of $405,000, net of tax benefit ($0.10 basic and diluted), on the sale
of the Corson assets.
FINANCIAL CONDITION.
LIQUIDITY AND CAPITAL RESOURCES. In 1999, cash flow from operations was
$2,208,000, a decrease of $3,226,000, or 59.4%, from 1998. The decrease was
principally related to an increase in inventories arising from the increased
capacity of the expanded Texas plant and the acquisition of Calco, Inc., the
costs associated with the financing agreement, and a reduction in accounts
payable due to final settlements of contractual costs relating to the Texas
project.
Capital expenditures for 1999 totaled $10,860,000, compared to $22,790,000
in 1998. Of the 1999 expenditures, approximately $5,700,000 related to the
modernization and expansion project at the Arkansas facility, while $17,394,000
of the 1998 expenditures related to the modernization and expansion project at
the Texas facility.
At December 31, 1999, the Company had cash or cash equivalents totaling
$18,021,000, compared with $688,000 at the end of 1998. The increased balance is
due to the draw down of a total of $45,000,000 during 1999 in accordance with
the pre-determined draw schedule contained in the Company's new term loan
agreement (See "Banking Facilities"). Of this total, approximately $20,000,000
was used to retire all then-existing debt on April 22, 1999, and $10,860,000 was
used for capital expenditures.
The Company completed the modernization and expansion project at the Texas
facility at the end of 1998 and, in November 1999, commenced a similar project
for the Arkansas facility. Excluding expenditures for the Company's planned
modernization and expansion project at Arkansas Lime, the Company expects to
spend approximately $2,000,000 to $3,000,000 per year over the next several
years. These expenditures are considered normal recurring capital and
re-equipping projects at the plant facilities to maintain or improve efficiency
and reduce costs.
The Texas project was completed at the end of 1998, although the customary
"de-bugging" of the new plant required a further six months. By the end of 1999,
this plant was demonstrating the improved efficiencies projected, and the year
ended with maximum product inventories ready to service the market which is
expected to expand further in 2000.
-8-
<PAGE> 11
During 1999, Texas Lime's sales of pulverized limestone to roofing
manufacturers declined, principally because of reliability problems with this
production equipment, the problems with which had not been fully resolved as a
part of the major project. This issue is being addressed in 2000 when a
duplication of this production line, costing approximately $1,250,000, will
provide for equipment redundancy.
The Arkansas modernization and expansion project commenced with ground
breaking in November 1999 and will be completed in two phases: Phase I will
cover the redevelopment of the quarry plant, rebuilding of the railroad to
standard U.S. gauge, establishment of an out-of-state terminal, and installation
of a rotary kiln with a preheater, along with increased product storage and
loading capacity. The financing for Phase I was secured in April 1999, and the
final operating air permit for this phase was received in September 1999,
enabling construction orders to be placed. Completion of Phase I is planned for
the third quarter of 2000.
Phase II of the Arkansas project will further expand the plant capacity
through the installation of a second kiln with additional storage capacity.
Although the Company could determine to defer, or cancel, Phase II depending
upon such factors as market demand and the availability of financing, it has
applied for an operating air permit and currently plans to complete Phase II in
the first half of 2001.
The Arkansas improvements should allow the Company to better serve its
customers by improving both product quality and customer service while
increasing the production capacity of quicklime and hydrated lime. With the
improvements, the Company expects to be in a better position to compete for
customers who currently cannot use the Company's lime in their processes due to
insufficient supply capability from the existing plant or quality constraints.
The rotary kiln will have lower operating costs and a greater capacity than the
six shaft kilns currently in use. In addition to increasing capacity, this kiln
will also be able to consistently produce high-quality lime for use by certain
manufacturing customers who currently do not buy lime from the Arkansas
facility. The storage, screening, and load-out facilities will also
substantially reduce the amount of time required for the loading of bulk
quicklime trucks and railcars. The modernization and expansion project will
increase both production and shipping capacity, will lower operating costs, and
will allow for a more efficient utilization of the work force.
Phase I of the Arkansas project is currently projected to cost
approximately $24,000,000. If Phase II proceeds on schedule, it is currently
estimated to cost approximately $9,500,000. The Company intends to finance the
Arkansas project through a combination of internally generated funds and its
banking facilities. There can be no assurance that sufficient funds will be
available to the Company to complete Phase II of the Arkansas project as
currently contemplated.
The Company is not contractually committed to any planned capital
expenditures until actual orders are placed for equipment or services. As of
December 31, 1999, the Company had liabilities for open equipment and
construction orders totaling approximately $14,000,000 related to the Arkansas
modernization and expansion project.
BANKING FACILITIES. On April 22, 1999, the Company entered into a new
credit agreement with a consortium of commercial banks for a $50,000,000 Senior
Secured Term Loan (the "Loan"). The Loan is repayable over a period of
approximately 8 years, maturing on March 30, 2007, and requires monthly
principal payments of $277,777.78 beginning April 30, 2000, with a final
principal payment of $26,944,444.26 on March 30, 2007, which equates to a
15-year amortization, assuming the final draw down of $5,000,000 on March 30,
2000 is completed.
The Company agreed to pay a fee equivalent to 2-1/2% of the Loan value to
the placement agent. The fee due on the first $30,000,000 advanced was paid on
closing, and the fee due on the remaining $20,000,000 was paid in September 1999
when the first installment of this portion was funded.
Upon execution of the Loan agreement, the first $30,000,000 was advanced,
of which approximately $20,000,000 was used to retire all existing bank loans,
with the balance to be used primarily for the modernization and expansion of the
Arkansas operations. Under the terms of the Loan agreement, the remaining
$20,000,000 of the Loan facility could be drawn down in four equal quarterly
installments beginning June 30, 1999, and ending March 30, 2000, and will be
used exclusively for the Arkansas project. Commencement of the draw down of the
quarterly installments was conditional upon the Company receiving an operating
air permit for Phase I of the Arkansas project by December 31, 1999. In
September 1999, the Company received the final operating air permit for Phase I,
and immediately placed construction orders. As a consequence of receiving this
permit, the Company drew down a further $10,000,000 during September, and a
further $5,000,000 during December, making a total of $45,000,000 advanced at
December 31, 1999, under the terms of the Loan.
-9-
<PAGE> 12
The interest rate on the first $30,000,000 of the Loan is 8.875%.
Subsequent installments bear interest from the date they are funded at 3.52%
above the secondary market yield of the United States Treasury obligation
maturing May 15, 2005. On September 24, 1999, the Company drew down $5,000,000,
bearing an interest rate of 9.54%. On September 30, 1999, the Company drew down
a further $5,000,000, bearing an interest rate of 9.35%. On December 31, 1999,
the Company drew down a further $5,000,000, bearing an interest rate of 9.94%.
In connection with the repayment of the prior term loan, the Company
terminated an interest rate protection agreement, which it had entered into with
its bank to modify the interest characteristics of $9,000,000 of its
then-outstanding term debt from a variable to a fixed rate (the "Swap
Agreement"). As a result of the termination of the Swap Agreement, the Company
was obligated to pay the bank a $102,000 termination payment, which was expensed
in the second quarter 1999 as an adjustment to interest expense.
As of April 22, 1999, the Company also entered into a second amendment of
its amended and restated loan and security agreement with the lead bank which
provides for a $4,000,000 revolving credit facility. The current agreement
contains essentially the same terms as the previous agreement and has a maturity
date of April 21, 2000. The revolving credit facility bears interest at LIBOR
plus 1.40%, which rate will increase in accordance with a defined rate spread
based upon the Company's then-current ratio of total funded debt to earnings
before interest, taxes, depreciation and amortization (EBITDA). At December 31,
1999, the Company had not drawn down any funds under the revolving credit
facility.
The Loan is secured by a first lien on substantially all of the Company's
assets, with the exception of accounts receivable and inventories which have
been used to secure the amended $4,000,000 revolving credit facility. The Loan
agreement contains covenants that restrict the incurrence of debt, guaranties
and liens, and places certain restrictions on the payment of dividends and the
sale of significant assets. The Company is also required to meet minimum debt
service coverage ratios on an on-going basis and maintain a minimum level of
tangible net worth.
As of December 31, 1999, the Company had approximately $45,000,000 in total
bank debt outstanding.
ENVIRONMENTAL MATTERS. The Company's operations are subject to various
environmental laws and regulations. In part in response to requirements of
environmental regulatory agencies, the Company incurred capital expenditures of
approximately $200,000 in 1999 and $197,000 in 1998. In the judgment of
management, forecastable environmental expenditure requirements for the future
are not of such dimension as to have a materially adverse effect on the
Company's financial condition, results of operations, cash flows, or competitive
position. See "Business--Environmental Matters."
YEAR 2000 COMPLIANCE. The Company was previously using certain customized
accounting software which was not Y2K compliant. To address this problem, the
Company selected a commercially available accounting software and completed the
installation and conversion in November 1999. The cost of this installation was
approximately $250,000.
There were no adverse impacts experienced by the Company or its major
customers and suppliers as a result of the new millennium. The Company will
continue to monitor the situation.
FORWARD-LOOKING STATEMENTS. Any statements contained in this Annual 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," "believe," "expect," "intend," "plan," "schedule," "estimate," and
"project." The Company undertakes no obligation to publicly update or revise any
forward-looking statements. Investors are cautioned 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 discretion of the Company; (ii) the
Company's plans and results of operations will be affected by the Company's
ability to manage its growth and modernization; and (iii) other risks and
uncertainties set forth below or indicated from time to time in the Company's
filings with the Securities and Exchange Commission.
-10-
<PAGE> 13
ADDITIONAL FACTORS.
EFFECTS OF LEVERAGE AND RESTRICTIONS IMPOSED BY TERMS OF THE COMPANY'S
INDEBTEDNESS. Following the closing of the Company's $50,000,000 term loan
facility, the Company is significantly more leveraged than it has been in the
recent past, and a substantial portion of its cash flows from operations will be
dedicated to the payment of principal and interest on indebtedness. As of
December 31, 1999, the Company's total consolidated indebtedness and total
stockholders' equity were $45,000,000 and $28,800,000, respectively, and total
indebtedness represented 61.0% of total capitalization. The Company may need to
obtain additional financing to complete the Arkansas project.
The ability of the Company to service its debt and to comply with the
financial and restrictive covenants contained in its loan agreements will depend
upon its future performance and business growth, including the Company's ability
to recapture the Arkansas Lime market, which, in turn, are subject to financial,
economic, competitive, and other factors, many of which are beyond the Company's
control.
PERMITTING CONDITIONS FOR THE ARKANSAS PLANT. In September 1999, the
Company received a Prevention of Significant Deterioration ("PSD") permit in
respect of Phase I of the modernization and expansion project for its Arkansas
facility. This permit covers air emissions generated at the facility and
contains stringent emission limits and performance criteria that the proposed
rotary lime kiln and plant must meet. Until the new plant is operational and has
demonstrated its ability to achieve compliance with the permit conditions, there
can be no assurance that additional capital will not be required, or operating
conditions imposed, in order to achieve compliance with the PSD permit.
A second PSD permit has been applied for in respect of the kiln to be
installed in Phase II of the project. There can be no guarantee that this permit
will be obtained or that it will contain achievable emission limits and
performance criteria.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
NONE
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.
<S> <C>
Report of Independent Auditors F1
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1999 and 1998 F2
Consolidated Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997 F3
Consolidated Statements of Stockholders' Equity for
the Years Ended December 31, 1999, 1998, and 1997 F4
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998 and 1997 F5
Notes to Consolidated Financial Statements F6
</TABLE>
-11-
<PAGE> 14
UNITED STATES LIME & MINERALS, INC. - FORM 10-K
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
United States Lime & Minerals, Inc.
We have audited the consolidated balance sheets of United States Lime &
Minerals, Inc. and subsidiaries as of December 31, 1999 and 1998, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of United
States Lime & Minerals, Inc. and subsidiaries as of December 31, 1999 and 1998,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Dallas, Texas
January 28, 2000
-F1-
<PAGE> 15
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
ASSETS NOTES 1999 1998
----- ---------- ----------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 18,021 688
Trade receivables, net 1 4,166 3,360
Inventories 1 4,266 3,154
Prepaid expenses and other assets 163 139
---------- ----------
Total current assets 26,616 7,341
Property, plant and equipment, at cost: 1
Land 3,366 2,991
Building and building improvements 1,940 1,820
Machinery and equipment 75,705 67,151
Furniture and fixtures 949 631
Automotive equipment 551 635
---------- ----------
82,511 73,228
Less accumulated depreciation (35,381) (32,152)
---------- ----------
Property, plant and equipment, net 47,130 41,076
Deferred tax asset, net 3 2,136 2,465
Other assets, net 1 1,806 208
---------- ----------
TOTAL ASSETS $ 77,688 51,090
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt 2 $ 2,500 2,643
Accounts payable - trade 1,953 3,668
Accrued expenses 1,580 1,666
---------- ----------
Total current liabilities 6,033 7,977
Long-term debt, excluding current installments 2 42,500 16,196
Other liabilities 358 253
---------- ----------
TOTAL LIABILITIES 48,891 24,426
Commitments and contingencies 6 -- --
Stockholders' equity: 2,4,5
Preferred stock, $5 par value;
authorized 500,000 shares; none issued -- --
Common stock, $0.10 par value; authorized
15,000,000 shares; issued 5,294,065 shares 529 529
Additional paid-in capital 14,819 14,866
Retained earnings 27,376 25,243
Less treasury stock at cost; 1,312,401 shares
and 1,316,876 shares of common stock (13,927) (13,974)
---------- ----------
Total stockholders' equity 28,797 26,664
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 77,688 51,090
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
-F2-
<PAGE> 16
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
NOTES 1999 1998 1997
----- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 31,537 28,769 32,404
Cost of revenues:
Labor and other operating expenses 18,295 18,920 23,548
Depreciation, depletion and amortization 4,427 2,788 3,437
---------- ---------- ----------
22,722 21,708 26,985
---------- ---------- ----------
GROSS PROFIT 8,815 7,061 5,419
Selling, general and administrative expenses 3,482 3,489 4,520
---------- ---------- ----------
OPERATING PROFIT 5,333 3,572 899
Other expenses (income):
Interest expense 2 2,561 26 368
Loss (gain) on sale of assets, net (18) 124 14
Other, net (587) (432) (477)
---------- ---------- ----------
1,956 (282) (95)
---------- ---------- ----------
INCOME BEFORE TAXES 3,377 3,854 994
Income tax expense (benefit), net 3 844 925 (2,102)
---------- ---------- ----------
NET INCOME $ 2,533 2,929 3,096
========== ========== ==========
INCOME PER SHARE OF COMMON STOCK: 1, 8
Basic earnings per common share $ 0.64 0.74 0.79
========== ========== ==========
Diluted earnings per common share $ 0.64 0.74 0.78
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements
-F3-
<PAGE> 17
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(dollars in thousands)
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
Common Stock Additional Retained Accumulated Comprehensive Treasury Total
-------------------- Paid-In Earnings Other Income Stock
Shares Amount Capital Comprehensive
Outstanding Income
--------- --------- --------- --------- --------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1996 3,921,853 $ 529 15,311 20,008 (120) -- (14,562) 21,166
Stock options exercised 30,000 -- (176) -- -- -- 319 143
Common stock dividends -- -- -- (394) -- -- -- (394)
Adjustments to reflect
minimum pension
liability -- -- -- -- 139 139 -- 139
Net income -- -- -- 3,096 -- 3,096 -- 3,096
---------
Comprehensive Income -- -- -- -- -- 3,235 -- --
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCE AT DECEMBER 31, 1997 3,951,853 $ 529 15,135 22,710 19 -- (14,243) 24,150
Stock options exercised 25,336 -- (269) -- -- -- 269 --
Common stock dividends -- -- -- (396) -- -- -- (396)
Adjustments to reflect
minimum pension
liability -- -- -- -- (19) (19) -- (19)
Net income -- -- -- 2,929 -- 2,929 -- 2,929
---------
Comprehensive Income -- -- -- -- -- 2,910 -- --
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1998 3,977,189 $ 529 14,866 25,243 -- -- (13,974) 26,664
Stock options exercised 4,475 -- (47) -- -- -- 47 --
Common stock dividends -- -- -- (400) -- -- -- (400)
Adjustments to reflect
minimum pension
liability -- -- -- -- -- -- -- --
Net income -- -- -- 2,533 -- 2,533 -- 2,533
---------
Comprehensive Income -- -- -- -- -- 2,533 -- --
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1999 3,981,664 $ 529 14,819 27,376 -- -- (13,927) 28,797
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements
-F4-
<PAGE> 18
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,533 2,929 3,096
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation, depletion and amortization 4,600 2,925 3,503
Amortization of financing costs 145 -- 50
Deferred income taxes (benefit) 329 72 (2,537)
Loss (gain) on sale of assets (18) 124 14
Loss on sale of Corson Lime Company assets -- -- 506
Changes in assets and liabilities:
(Increase) / decrease in trade receivables (806) 264 1,528
(Increase) / decrease in inventories (1,112) (153) 332
(Increase) / decrease in prepaid expenses (24) (28) (19)
(Increase) / decrease in other assets (1,743) (154) 292
Increase / (decrease) in accounts payable
and accrued expenses (1,801) (697) 973
Increase / (decrease) in other liabilities 105 152 (474)
----------- ----------- -----------
Total adjustments
(325) 2,505 4,168
----------- ----------- -----------
Net cash provided by operations $ 2,208 5,434 7,264
INVESTING ACTIVITIES:
Purchase of property, plant and equipment $ (10,860) (22,790) (11,872)
Proceeds from sale of Corson Lime Company
assets, net of expenses -- -- 7,745
Proceeds from sale of property, plant and
equipment 224 71 44
----------- ----------- -----------
Net cash used in investing activities $ (10,636) (22,719) (4,083)
FINANCING ACTIVITIES:
Proceeds from exercise of stock options $ -- -- 143
Payment of common stock dividends (400) (396) (394)
Proceeds from borrowings 47,000 16,357 2,900
Repayments of debt (20,839) (756) (4,043)
Repayment of pension fund liability -- (19) --
----------- ----------- -----------
Net cash provided by (used in) financing
activities $ 25,761 15,186 (1,394)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 17,333 (2,099) 1,787
Cash and cash equivalents at beginning of period 688 2,787 1,000
----------- ----------- -----------
Cash and cash equivalents at end of period $ 18,021 688 2,787
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
-F5-
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
(1) Summary of Significant Accounting Policies
(a) Organization
The Company is a manufacturer of lime and limestone products supplying
primarily the steel, paper, agriculture, municipal sanitation and
water treatment, and construction industries. The Company is
headquartered in Dallas, Texas and operates lime and limestone plants
in Arkansas, Colorado and Texas through its wholly owned subsidiaries,
Arkansas Lime Company, Colorado Lime Company and Texas Lime Company,
respectively. Through June 21, 1997, the Company also operated in
Pennsylvania through a wholly owned subsidiary, Corson Lime Company
(see Note 7 of Notes to Consolidated Financial Statements).
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All material intercompany balances and
transactions have been eliminated.
(c) Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could
differ from those estimates.
(d) Statements of Cash Flows
For purposes of reporting cash flows, the Company considers all
certificates of deposit and highly-liquid debt instruments, such as
U.S. treasury bills and notes, with original maturities of three
months or less to be cash equivalents. Cash equivalents are carried at
cost plus accrued interest, which approximates fair market value.
Supplemental cash flow information is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid during the period for:
Interest (net of amounts capitalized) $ 3,544 900 321
========== ========== ==========
Income taxes $ 470 439 654
========== ========== ==========
</TABLE>
(e) Trade Receivables
Trade receivables are presented net of the related allowance for
doubtful accounts, which totaled $93 and $52 at December 31, 1999 and
1998, respectively.
-F6-
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(f) Inventories
Inventories are valued principally at the lower of cost, determined
using the average cost method, or market. Costs include materials,
labor, and production overhead.
A summary of inventories is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Lime and limestone inventories:
Raw materials $ 1,499 927
Finished goods 955 671
---------- ----------
2,454 1,598
Service parts inventories 1,812 1,556
---------- ----------
$ 4,266 3,154
========== ==========
</TABLE>
(g) Property, Plant and Equipment
For constructed assets, the capitalized cost includes the cash price
paid by the Company for labor and materials plus interest and project
management costs that are directly related to the constructed assets.
Total interest costs of $167, $962 and $85 were capitalized for the
years ended December 31, 1999, 1998 and 1997. Depreciation of
property, plant and equipment is being provided for by the
straight-line and declining-balance methods over estimated useful
lives as follows:
Buildings and building improvements 3 - 40 years
Machinery and equipment 3 - 20 years
Furniture and fixtures 3 - 10 years
Automotive equipment 3 - 8 years
Maintenance and repairs are charged to expense as incurred; renewals
and betterments are capitalized. When units of property are retired or
otherwise disposed of, their cost and related accumulated depreciation
are removed from the accounts, and any resulting gain or loss is
credited or charged to income.
The Company reviews its long-term assets for impairment in accordance
with the guidelines of Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires
that, when changes in circumstances indicate that the carrying amount
of an asset may not be recoverable, the Company should determine if
impairment of value exists. Impairment is measured as the amount by
which the carrying amount of the assets exceeds the expected future
undiscounted cash flows from the use and eventual disposal of the
assets under review. Any write-downs are treated as a permanent
reduction in the carrying value of the assets.
-F7-
<PAGE> 21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(h) Other Assets
Other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Deferred stripping costs $ -- 56
Deferred financing costs 1,781 152
Goodwill 25 --
---------- ----------
$ 1,806 208
========== ==========
</TABLE>
Deferred stripping costs, all of which related to Arkansas Lime
Company, were amortized by the straight-line method over 12 months in
1999. Deferred financing costs are expensed over the shorter of the
life of the debt or expected life of the loan using the straight-line
method. Goodwill related to the purchase of Colorado Lime Company is
being amortized by the straight-line method over 84 months.
(i) Environmental Expenditures
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an
existing condition caused by past operations, and which do not
contribute to current or future revenue generation, are expensed.
Liabilities are recorded when environmental assessments and/or
remedial efforts are probable, and the costs can be reasonably
estimated. Generally, the timing of these accruals will coincide with
completion of a feasibility study or the Company's commitment to a
formal plan of action.
(j) Stock Options
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), in
accounting for its employee stock options. Under APB 25, if the
exercise price of an employee's stock options equals or exceeds the
market price of the underlying stock on the date of grant, no
compensation expense is recognized. The Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"), in 1996. SFAS 123 requires companies that
elect to continue applying the provisions of APB 25 to provide pro
forma disclosures for employee stock compensation awards as if the
fair-value-based method defined in SFAS 123 had been applied. See Note
5 of Notes to Consolidated Financial Statements.
(k) Earnings Per Share of Common Stock
Effective December 31, 1997, Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128"), was implemented
by the Company. SFAS 128 requires the presentation of basic and
diluted earnings per share for all periods presented.
-F8-
<PAGE> 22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(2) Banking Facilities
On April 22, 1999, the Company entered into a new credit agreement
with a consortium of commercial banks for a $50,000 Senior Secured
Term Loan (the "Loan"). The Loan is repayable over a period of
approximately 8 years, maturing on March 30, 2007, and requires
monthly principal payments of $278 beginning April 30, 2000, with a
final principal payment of $26,944 on March 30, 2007, which equates to
a 15-year amortization, assuming the final draw down of $5,000 on
March 30, 2000 is completed.
The Company agreed to pay a fee equivalent to 2-1/2% of the Loan value
to the placement agent. The fee due on the first $30,000 advanced was
paid on closing, and the fee due on the remaining $20,000 was paid in
September 1999 when the first installment of this portion was funded.
Upon execution of the Loan agreement, the first $30,000 was advanced,
of which approximately $20,000 was used to retire all existing bank
loans, with the balance to be used primarily for the modernization and
expansion of the Arkansas operations. Under the terms of the Loan
agreement, the remaining $20,000 of the Loan facility could be drawn
down in four equal quarterly installments beginning June 30, 1999, and
ending March 30, 2000, and will be used exclusively for the Arkansas
project. Commencement of the draw down of the quarterly installments
was conditional upon the Company receiving an operating air permit for
Phase I of the Arkansas project by December 31, 1999. In September
1999, the Company received the final operating air permit for Phase I,
and immediately placed construction orders. As a consequence of
receiving this permit, the Company drew down a further $10,000 during
September, and a further $5,000 during December, making a total of
$45,000 advanced at December 31, 1999, under the terms of the Loan.
The interest rate on the first $30,000 of the Loan is 8.875%.
Subsequent installments bear interest from the date they are funded at
3.52% above the secondary market yield of the United States Treasury
obligation maturing May 15, 2005. On September 24, 1999, the Company
drew down $5,000, bearing an interest rate of 9.54%. On September 30,
1999, the Company drew down a further $5,000, bearing an interest rate
of 9.35%. On December 31, 1999, the Company drew down a further
$5,000, bearing an interest rate of 9.94%.
In connection with the repayment of the prior term loan, the Company
terminated an interest rate protection agreement, which it had entered
into with its bank to modify the interest characteristics of $9,000 of
its then-outstanding term debt from a variable to a fixed rate (the
"Swap Agreement"). As a result of the termination of the Swap
Agreement, the Company was obligated to pay the bank a $102
termination payment, which was expensed in the second quarter 1999 as
an adjustment to interest expense.
As of April 22, 1999, the Company also entered into a second amendment
of its amended and restated loan and security agreement with the lead
bank which provides for a $4,000 revolving credit facility. The
current agreement contains essentially the same terms as the previous
agreement and has a maturity date of April 21, 2000. The revolving
credit facility bears interest at LIBOR plus 1.40%, which rate will
increase in accordance with a defined rate spread based upon the
Company's then-current ratio of total funded debt to earnings before
interest, taxes, depreciation and amortization (EBITDA). At December
31, 1999, the Company had not drawn down any funds under the revolving
credit facility.
The Loan is secured by a first lien on substantially all of the
Company's assets, with the exception of accounts receivable and
inventories which have been used to secure the amended $4,000
revolving credit facility. The Loan agreement contains covenants that
restrict the incurrence of debt, guaranties and liens, and places
certain restrictions on the payment of dividends and the sale of
significant assets. The Company is also required to meet minimum debt
service coverage ratios on an on-going basis and maintain a minimum
level of tangible net worth.
As of December 31, 1999, the Company had approximately $45,000 in
total bank debt outstanding.
-F9-
<PAGE> 23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
A summary of long-term debt is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1999 1998
----------- -----------
<S> <C> <C>
Term loan $ 45,000 17,839
Revolving credit facility -- 1,000
----------- -----------
Subtotal 45,000 18,839
Less current installments 2,500 2,643
----------- -----------
Long-term debt, excluding current installments $ 42,500 16,196
=========== ===========
</TABLE>
Amounts payable on the long-term debt outstanding as of December 31,
1999 to be paid in 2000 and thereafter are: 2000 = $2,500; 2001 =
$3,333; 2002 = $3,333; 2003 = $3,334; 2004 = $3,333; 2005 = $3,333;
2006 = $3,334; 2007 = $22,500. The carrying amount of the Company's
long-term debt approximates its fair value.
(3) Income Taxes
Income tax expense (benefit), net for the years ended December 31,
1999, 1998, and 1997 was as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Current income tax expense $ 591 853 435
Deferred income tax expense (benefit) 253 72 (237)
---------- ---------- ----------
Income tax expense 844 925 198
Recognition of previously reserved
deferred tax assets -- -- (2,300)
---------- ---------- ----------
Income tax expense (benefit), net $ 844 925 (2,102)
========== ========== ==========
</TABLE>
A reconciliation of income taxes computed at the federal statutory
rate to income tax expense (benefit), net for the years ended December
31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------- -------------------- --------------------
Percent Percent Percent
of pretax of pretax of pretax
Amount income Amount income Amount income
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income taxes computed at
the federal statutory rate $ 1,148 34.0% 1,310 34.0% 338 34.0%
Increase (reductions) in taxes
resulting from:
Recognition of previously
reserved deferred tax assets -- -- -- -- (2,300) (231.4)
General business credit
carryforwards -- -- -- -- -- --
Statutory depletion in
excess of cost depletion (509) (15.0) (439) (11.0) (431) (43.4)
State income taxes, net of
federal income tax benefit 125 3.7 39 1.0 191 19.2
Other 80 2.3 15 -- 100 10.1
-------- -------- -------- -------- -------- --------
Income tax expense (benefit), net $ 844 25.0% 925 24.0% (2,102) (211.5)%
======== ======== ======== ======== ======== ========
</TABLE>
-F10-
<PAGE> 24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
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 deferred tax assets which were 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 assets related primarily
to net operating loss carryforwards, general business credit
carryforwards, and alternative minimum tax credit carryforwards.
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. SFAS 109 requires
an assessment of all available evidence, both positive and negative,
to determine the amount of any required valuation allowance. No
benefit was given to the deferred tax assets at December 31, 1996 due
to uncertainties related to their utilization.
As a result of the sale of the Corson Lime Company assets (see Note 7
of Notes to Consolidated Financial Statements), the Company reviewed
the deferred tax assets and concluded that the uncertainties as to
their realization had been favorably resolved, in that the net
operating loss carryforwards and the general business credit
carryforwards were expected to be fully utilized. The Company's future
taxable income, enhanced by the sale of the Corson assets, indicated
future utilization of the alternative minimum tax credit carryforwards
in the future. The post-Corson sale assessment as to the ultimate
realization of the deferred tax assets indicated that it is more
likely than not that the deferred tax assets would be realized.
As a result, the Company reduced the deferred tax assets' valuation
allowance in the second quarter of 1997 by $2,300, recording the
deferred tax assets and recognizing that amount in federal and state
income tax expense (benefit), net.
At December 31, 1999, the Company had deferred tax liabilities of $938
and deferred tax assets of $3,074. The temporary differences related
to the deferred tax liabilities are comprised of depreciation,
depletion and other accelerated tax-deductible items. The principal
temporary difference related to the deferred tax assets was the
alternative minimum tax credit carryforward of $2,863.
At December 31, 1998, the Company had deferred tax liabilities of $637
and deferred tax assets of $3,102. The principal temporary difference
related to the deferred tax liabilities was depreciation of $402. The
principal temporary differences related to the deferred tax assets was
the alternative minimum tax credit carryforward of $2,854.
(4) Employee Retirement Plans
The Company had a noncontributory defined benefit pension plan that
covered substantially all union employees previously employed by its
wholly-owned subsidiary, Corson Lime Company. Benefits for the Corson
Lime Union Pension Plan (the "Corson Plan") were based on certain
multiples of years of service. In June 1997, the Company sold
substantially all of the assets of Corson Lime Company to an unrelated
third party. In connection with the sale of the assets, the Company
resolved that all active participants in the Corson Plan as of July
31, 1997 would be fully vested and that no employee would be admitted
to the Corson Plan after July 31, 1997. The Company further resolved
that all benefit accruals under the Corson Plan would cease as of July
31, 1997. There was no material impact on the net assets of the Corson
Plan as of December 31, 1997 as a result of the freezing of the Plan.
In conjunction with the freezing of the Corson Plan, the Company
determined that it was in its best interest to fully fund the Corson
Plan so as to minimize any future impact on the Company's results of
operations. The 1997 contribution of $607 was intended to provide for
all benefits earned for the participants' vested benefits under the
Corson Plan. In 1998, the Company made a final payment of $19 to fully
fund the Plan. The Company did not make payments into the Plan in
1999.
-F11-
<PAGE> 25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
The Company also has a contributory retirement (401(k)) savings plan
for nonunion employees. The Company contributions to the plan were $51
during 1999, $50 during 1998 and $46 during 1997. The Company has
contributory retirement (401(k)) savings plans for union employees of
Arkansas Lime Company and Texas Lime Company. The Company
contributions to these plans were $21 in 1999, $20 in 1998 and $13 in
1997. In December 1986, the Company purchased 1,550,000 shares of its
outstanding common stock, accounted for as treasury stock in the
consolidated balance sheets, for $10.50 per share. Subsequent to that
purchase, 300,000 shares, after stock split, were sold to the Employee
Stock Ownership Plan ("ESOP") for $8.20 per share. The ESOP covered
substantially all full-time nonunion employees and was designed to
invest primarily in the Company's common stock. Effective July 31,
1999, the Company merged the ESOP into the 401(k) savings plan for
nonunion employees. Contributions to the ESOP had been at the option
of the Company, which did not make contributions during 1999, 1998 or
1997.
(5) Stock Option Plan
The Company has a stock option plan under which options for shares of
common stock may be granted to key employees. The options expire ten
years from the date of grant and generally become exercisable after
the expiration of one year from the grant date. On April 30, 1999,
shareholders approved an increase of 100,000 in the maximum number of
shares available under the plan. As of December 31, 1999, the number
of shares remaining available for future grant under this plan was
36,000.
A summary of the Company's stock option activity and related
information for the years ended December 31, 1999, 1998, and 1997 is
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------------------- ----------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of 154,000 $ 7.32 187,210 $ 6.90 252,210 $ 6.83
year
Granted 75,000 7.95 62,500 7.00 -- --
Exercised (40,000)(a) 7.78 (92,210)(a) 6.27 (30,000) 4.75
Forfeited -- -- (3,500) 7.00 (35,000) 8.25
-------- -------- -------- -------- -------- --------
Outstanding at end of year 189,000 7.47 154,000 7.32 187,210 6.90
======== ======== ======== ======== ======== ========
Exercisable at end of year 114,000 7.15 95,000 6.90 187,210 6.90
======== ======== ======== ======== ======== ========
Weighted average fair value of
options granted during the
year $ 2.09 $ 1.84 $ --
======== ======== ========
Weighted average remaining
contractual life in years 7.60 7.00 7.12
======== ======== ========
</TABLE>
- --------------------
(a) In connection with the exercise of stock options in 1999 and 1998,
certain option holders exchanged shares, and treasury stock was used
in part or total to satisfy the exercise of such options.
The following table summarizes information about options outstanding at
December 31, 1999:
<TABLE>
<CAPTION>
Weighted Average Remaining
Exercise Price Contractual Life (Years) Number of Shares
---------------- ------------------------------ ----------------
<S> <C> <C>
$ 4.75 3.96 20,000
$ 8.25 5.96 50,000
$ 7.00 8.14 44,000
$ 7.625 9.67 10,000
$ 8.00 9.96 65,000
Total: 7.83 189,000
</TABLE>
-F12-
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
SFAS 123 requires the disclosure of pro forma net income and income
per share of common stock information computed as if the Company had
accounted for its employee stock options granted subsequent to
December 31, 1994 under the fair-value-based method set forth in SFAS
123. The fair value for these options was estimated at the date of
grant using the Black-Scholes option valuation model with the
following weighted average assumptions for the 1999, 1998, and 1997
grants: a risk-free interest rate of 6%; a dividend yield of 2%; and a
volatility factor of 0.34. In addition, the fair value of these
options was estimated based on an expected life of three years.
The Black-Scholes options valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including
expected stock price volatility.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion the existing models do
not necessarily provide a reliable single measure of the fair value of
its employee stock options. In addition, because SFAS 123 is
applicable only to options granted subsequent to December 31, 1994,
the pro forma information does not reflect the pro forma effect of all
previous stock option grants of the Company, and thus the pro forma
information is not necessarily indicative of future amounts.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the expected life of the options.
The Company's pro forma information follows:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ---------- ---------
<S> <C> <C> <C>
Pro forma net income $ 2,472 2,811 3,035
Pro forma earnings per share:
Basic earnings per share $ 0.62 0.71 0.77
Diluted earnings per share $ 0.62 0.71 0.77
</TABLE>
(6) Commitments and Contingencies
The Company leases some of the equipment used in its operations.
Generally, the leases are for periods varying from one to five years
and are renewable at the option of the Company. Total rent expense was
$78 for 1999, $185 for 1998, and $280 for 1997. As of December 31,
1999, future minimum payments under noncancelable operating leases are
$87 per year through 2008, and $44 for 2009.
The Company is party to lawsuits and claims arising in the normal
course of business, none of which, in the opinion of management, is
expected to have a material adverse effect on the Company's financial
condition, results of operation, or cash flows.
The Company is not contractually committed to any planned capital
expenditures until actual orders are placed for equipment or services.
As of December 31, 1999, the Company had liabilities for open
equipment and construction orders totaling approximately $14,000
related to the Arkansas modernization and expansion project.
(7) 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 $8,231 in cash, including a $376 note collected in
October 1997. 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. The remainder of the proceeds was used to
partially fund the Texas plant's modernization and expansion project.
The sale resulted in a loss of $506 ($405 net of tax benefit), which
is included in labor and other operating expenses in the accompanying
consolidated statements of operations.
-F13-
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
(8) Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Numerator:
Net income for basic and diluted
earnings per common share $ 2,533 2,929 3,096
============ ============ ============
Denominator:
Denominator for basic earnings per
common share - weighted-average shares 3,979,988 3,967,247 3,929,579
Effect of dilutive securities:
Employee stock options 1,187 3,755 15,928
------------ ------------ ------------
Denominator for diluted earnings per common
share - adjusted weighted-average shares
and assumed conversions 3,981,175 3,971,002 3,945,507
============ ============ ============
Basic earnings per common share $ 0.64 0.74 0.79
============ ============ ============
Diluted earnings per common share $ 0.64 0.74 0.78
============ ============ ============
</TABLE>
(9) Summary of Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
1999
---------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 6,931 7,613 9,268 7,725
--------------- --------------- --------------- ---------------
Gross profit 1,877 2,032 2,896 2,010
--------------- --------------- --------------- ---------------
Net income 458 444 1,113 518
=============== =============== =============== ===============
Net income per common share:
Basic earnings per share $ 0.12 0.11 0.28 0.13
=============== =============== =============== ===============
Diluted earnings per share $ 0.12 0.11 0.28 0.13
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues $ 6,469 8,016 7,423 6,861
--------------- --------------- --------------- ---------------
Gross profit 1,276 2,169 1,819 1,797
--------------- --------------- --------------- ---------------
Net income 303 1,063 776 787
=============== =============== =============== ===============
Net income per common share:
Basic earnings per share $ 0.08 0.27 0.19 0.20
=============== =============== =============== ===============
Diluted earnings per share $ 0.08 0.27 0.19 0.20
=============== =============== =============== ===============
</TABLE>
-F14-
<PAGE> 28
UNITED STATES LIME & MINERALS, INC. - FORM 10-K
For the Year Ended December 31, 1999
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
NONE
PART III
The information required in response to Items 10, 11, 12 and 13 is hereby
incorporated by reference to the information under the captions "Election of
Directors," "Executive Officers of the Company Who Are Not Also Directors,"
"Executive Compensation," "Voting Securities and Principal Shareholders" and
"Shareholdings of Company Directors and Executive Officers" in the definitive
Proxy Statement for the Company's 2000 Annual Meeting of Shareholders. The
Company anticipates that it will file the definitive Proxy Statement with the
Securities and Exchange Commission on or before April 30, 2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. The following financial statements are included in Item 8:
Report of Independent Auditors
Consolidated Financial Statements:
Consolidated Balance Sheets as of December, 31, 1999 and 1998;
Consolidated Statements of Income for the Years
Ended December 31, 1999, 1998, and 1997;
Consolidated Statements of Stockholders' Equity for the Years
Ended December, 31, 1999, 1998, and 1997;
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1999, 1998, and 1997; and Notes to
Consolidated Financial Statements.
2. All financial statement schedules are omitted because they are not
applicable, or are immaterial, or the required information is
presented in the consolidated financial statements or the related
notes.
-12-
<PAGE> 29
UNITED STATES LIME & MINERALS, INC. - FORM 10-K
For the Year Ended December 31, 1999
3. The following documents are filed with or incorporated by reference
into this Report:
3(a) Articles of Amendment to the Articles of Incorporation of
Scottish Heritable, Inc. dated January 25th, 1994 (incorporated
by reference to Exhibit 3(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, File
Number 0-4197).
3(b) Restated Articles of Incorporation of the Company (incorporated
by reference to Exhibit 3(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, File
number 0-4197).
3(c) Composite Copy of Bylaws of the Company, as currently in effect
(incorporated by reference to Exhibit 3(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991, File Number 0-4197).
10(a) Amendment No. Three to United States Lime & Minerals, Inc.
Employee Stock Ownership Plan, effective July 31, 1999.
10(b) United States Lime & Minerals, Inc. 401(k) Profit Sharing Plan
effective August 1, 1983, as amended and restated effective
January 1, 1997 (incorporated by reference to Exhibit 10(c) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, File Number 0-4197).
10(c) Arkansas Lime Company Bargaining Unit 401(k) Plan effective as of
January 1, 1998 (incorporated by reference to Exhibit 10(m) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, File Number 0-4197). 10(d) Texas Lime
Company Bargaining Unit 401(k) Plan, effective as of January 1,
1992 (incorporated by reference to Exhibit 19(f) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June, 30,
1992, File Number 0-4197).
10(e) Executive Retention Agreement dated as of June 10, 1992 between
the Company and Timothy W. Byrne (incorporated by reference to
Exhibit 19(b) to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992, File Number 0-4197).
10(f) Employment Agreement between the Company and Timothy W. Byrne
(incorporated by reference to Exhibit 19(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1992, File Number 0-4197).
10(g) United States Lime & Minerals, Inc. 1992 Stock Option Plan, as
Amended and Restated (incorporated by reference to Exhibit 10(c)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999, File Number 0-4197).
10(h) Employment Agreement dated as of September 27, 1993 between the
Company and Robert F. Kizer (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, File Number 0-4197).
10(i) Consulting Agreement dated April 18, 1996 between the Company and
Wallace G. Irmscher (incorporated by reference to Exhibit 10(t)
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, File Number 0-4197).
10(j) Amendment to the Texas Lime Company Bargaining Unit 401(k) Plan
dated January 1, 1992, effective November 9, 1997 (incorporated
by reference to Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, File
Number 0-4197).
10(k) Asset Purchase Agreement among Corson Lime Company, United States
Lime & Minerals, Inc., and Highway Materials, Inc., dated as of
April 22, 1997 (incorporated by reference to Exhibit 2 to the
Company's Current Report on Form 8-K dated June 21, 1997, File
Number 0-4197).
-13-
<PAGE> 30
UNITED STATES LIME & MINERALS, INC. - FORM 10-K
For the Year Ended December 31, 1999
10(l) Amended and Restated Loan and Security Agreement dated December
30, 1997 among United States Lime & Minerals, Inc., Arkansas Lime
Company and Texas Lime Company and CoreStates Bank, N.A.
(incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File Number 0-4197).
10(m) First Amendment to Amended and Restated Loan and Security
Agreement dated August 31, 1998 among United States Lime &
Minerals, Inc., Arkansas Lime Company and Texas Lime Company and
First Union National Bank (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September, 30, 1998, File Number 0-4197).
10(n) International Swap Dealers Association Master Agreement dated as
of April 3, 1998 among CoreStates Bank, N.A. and the Company
(incorporated by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998, File Number 0-4197).
10(o) Employment Agreement dated as of October 11, 1989 between the
Company and Billy R. Hughes (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, File Number 0-4197).
10(p) Mutual Release Agreement dated as of February 27, 1998 between
the Company and Robert F. Kizer (incorporated by reference to
Exhibit 10(n) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, File Number 0-4197).
10(q) Employment Agreement dated as of April 17, 1997 between the
Company and Johnney G. Bowers (incorporated by reference to
Exhibit 10(o) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, File Number 0-4197).
10(r) Employment Agreement dated as of December 1, 1998 between the
Company and Herbert G.A. Wilson (incorporated by reference to
Exhibit 10(r) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, File Number 0-4197).
10(s) Credit Agreement dated April 22, 1999 among United States Lime &
Minerals, Inc., Arkansas Lime Company, Texas Lime Company, the
Lenders who are, or may become, a party to this Agreement, and
First Union National Bank (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, File Number 0-4197).
10(t) Second Amendment to Amended and Restated Loan and Security
Agreement dated as of April 22, 1999 among United States Lime &
Minerals, Inc., Arkansas Lime Company, Texas Lime Company, and
First Union National Bank (incorporated by reference to Exhibit
10(b) to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, File Number 0-4197).
21 Subsidiaries of the Company.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
- --------------
Exhibits 10(a) through 10(j), and 10(o) through 10(r) are management
contracts or compensatory plans or arrangements required to be filed as
exhibits.
(b) The Company did not file any Current Reports on Form 8-K during the
fourth quarter of 1999.
-14-
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 25, 2000 By: \s\ Herbert G.A. Wilson
----------------------------------
Herbert G.A. Wilson, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: February 25, 2000 By: \s\ Herbert G.A. Wilson
----------------------------------
Herbert G.A. Wilson, President,
Chief Executive Officer, and
Director (Principal Executive
Officer)
Date: February 25, 2000 By: \s\ Larry T. Ohms
----------------------------------
Larry T. Ohms, Vice President of
Finance, Company Secretary and
Corporate Controller (Principal
Financial and Accounting Officer)
Date: February 25, 2000 By: \s\ Edward A. Odishaw
----------------------------------
Edward A. Odishaw, Director and
Chairman of the Board
Date: February 25, 2000 By: \s\ Antoine M. Doumet
----------------------------------
Antoine M. Doumet, Director and
Vice Chairman of the Board
Date: February 25, 2000 By: \s\ John J. Brown
----------------------------------
John J. Brown, Director
Date: February 25, 2000 By: \s\ Wallace G. Irmscher
----------------------------------
Wallace G. Irmscher, Director
Date: February 25, 2000 By: \s\ Richard W. Cardin
----------------------------------
Richard W. Cardin, Director
Date: February 25, 2000 By: \s\ Timothy W. Byrne
----------------------------------
Timothy W. Byrne, Director
-15-
<PAGE> 32
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3(a) Articles of Amendment to the Articles of Incorporation of
Scottish Heritable, Inc. dated January 25th, 1994 (incorporated
by reference to Exhibit 3(a) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, File
Number 0-4197).
3(b) Restated Articles of Incorporation of the Company (incorporated
by reference to Exhibit 3(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, File
number 0-4197).
3(c) Composite Copy of Bylaws of the Company, as currently in effect
(incorporated by reference to Exhibit 3(b) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1991, File Number 0-4197).
10(a) Amendment No. Three to United States Lime & Minerals, Inc.
Employee Stock Ownership Plan, effective July 31, 1999.
10(b) United States Lime & Minerals, Inc. 401(k) Profit Sharing Plan
effective August 1, 1983, as amended and restated effective
January 1, 1997 (incorporated by reference to Exhibit 10(c) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, File Number 0-4197).
10(c) Arkansas Lime Company Bargaining Unit 401(k) Plan effective as of
January 1, 1998 (incorporated by reference to Exhibit 10(m) to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1997, File Number 0-4197). 10(d) Texas Lime
Company Bargaining Unit 401(k) Plan, effective as of January 1,
1992 (incorporated by reference to Exhibit 19(f) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June, 30,
1992, File Number 0-4197).
10(e) Executive Retention Agreement dated as of June 10, 1992 between
the Company and Timothy W. Byrne (incorporated by reference to
Exhibit 19(b) to the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1992, File Number 0-4197).
10(f) Employment Agreement between the Company and Timothy W. Byrne
(incorporated by reference to Exhibit 19(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1992, File Number 0-4197).
10(g) United States Lime & Minerals, Inc. 1992 Stock Option Plan, as
Amended and Restated (incorporated by reference to Exhibit 10(c)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999, File Number 0-4197).
10(h) Employment Agreement dated as of September 27, 1993 between the
Company and Robert F. Kizer (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, File Number 0-4197).
10(i) Consulting Agreement dated April 18, 1996 between the Company and
Wallace G. Irmscher (incorporated by reference to Exhibit 10(t)
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996, File Number 0-4197).
10(j) Amendment to the Texas Lime Company Bargaining Unit 401(k) Plan
dated January 1, 1992, effective November 9, 1997 (incorporated
by reference to Exhibit 10(j) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1997, File
Number 0-4197).
10(k) Asset Purchase Agreement among Corson Lime Company, United States
Lime & Minerals, Inc., and Highway Materials, Inc., dated as of
April 22, 1997 (incorporated by reference to Exhibit 2 to the
Company's Current Report on Form 8-K dated June 21, 1997, File
Number 0-4197).
</TABLE>
<PAGE> 33
<TABLE>
<S> <C>
10(l) Amended and Restated Loan and Security Agreement dated December
30, 1997 among United States Lime & Minerals, Inc., Arkansas Lime
Company and Texas Lime Company and CoreStates Bank, N.A.
(incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1997, File Number 0-4197).
10(m) First Amendment to Amended and Restated Loan and Security
Agreement dated August 31, 1998 among United States Lime &
Minerals, Inc., Arkansas Lime Company and Texas Lime Company and
First Union National Bank (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September, 30, 1998, File Number 0-4197).
10(n) International Swap Dealers Association Master Agreement dated as
of April 3, 1998 among CoreStates Bank, N.A. and the Company
(incorporated by reference to Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998, File Number 0-4197).
10(o) Employment Agreement dated as of October 11, 1989 between the
Company and Billy R. Hughes (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999, File Number 0-4197).
10(p) Mutual Release Agreement dated as of February 27, 1998 between
the Company and Robert F. Kizer (incorporated by reference to
Exhibit 10(n) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, File Number 0-4197).
10(q) Employment Agreement dated as of April 17, 1997 between the
Company and Johnney G. Bowers (incorporated by reference to
Exhibit 10(o) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997, File Number 0-4197).
10(r) Employment Agreement dated as of December 1, 1998 between the
Company and Herbert G.A. Wilson (incorporated by reference to
Exhibit 10(r) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998, File Number 0-4197).
10(s) Credit Agreement dated April 22, 1999 among United States Lime &
Minerals, Inc., Arkansas Lime Company, Texas Lime Company, the
Lenders who are, or may become, a party to this Agreement, and
First Union National Bank (incorporated by reference to Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, File Number 0-4197).
10(t) Second Amendment to Amended and Restated Loan and Security
Agreement dated as of April 22, 1999 among United States Lime &
Minerals, Inc., Arkansas Lime Company, Texas Lime Company, and
First Union National Bank (incorporated by reference to Exhibit
10(b) to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1999, File Number 0-4197).
21 Subsidiaries of the Company.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
</TABLE>
- --------------
Exhibits 10(a) through 10(j), and 10(o) through 10(r) are management
contracts or compensatory plans or arrangements required to be filed as
exhibits.
(b) The Company did not file any Current Reports on Form 8-K during the
fourth quarter of 1999.
<PAGE> 1
Exhibit 10(a)
THIRD AMENDMENT TO THE
UNITED STATES LIME & MINERALS, INC.
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, United States Lime & Minerals, Inc. (the "Corporation") amended and
restated the United States Lime & Minerals, Inc. Employee Stock Ownership
generally effective as of August 1, 1989 (the "Plan"); and
WHEREAS, the Corporation desires to amend the Plan in order to freeze
participation and benefits, merge the Plan with the United States Lime &
Minerals, Inc. 401(k) Profit Sharing Plan (the "401(k) Plan") and comply with
certain changes in the Internal Revenue Code; and
NOW, THEREFORE, pursuant to the powers reserved in Sections 10.01 and 10.03 of
the Plan, the Corporation does hereby amend the Plan effective as of July 31,
1999, unless another date is specified, as follows:
I.
Section 1.01 of the Plan is amended by the addition of the following paragraph
thereto:
"Notwithstanding anything to the contrary contained herein, in order to
effectuate the Plan merger with the 401(k) Plan, participation and
benefits shall be frozen as of the close of business on July 31, 1999.
The Plan shall be merged with the 401(k) Plan as of the close of
business on July 31, 1999 and assets shall be transferred as soon as
administratively possible thereafter."
II.
Effective August 1, 1999, Section 3.01 is hereby deleted in its entirety and the
following inserted in its stead:
"Section 3.01 Eligibility Requirements.
Except for Employees described in Section 3.02, all Employees shall be
eligible to participate in the Plan. Notwithstanding the preceding
sentence, no Employee shall be eligible to participate under the Plan
on and after the close of business July 31, 1999."
<PAGE> 2
III.
Effective August 1, 1998, Sections 4.07(c), 6.02, 6.03, 6.08 are amended by
deleting all references to $3,500 therein and replacing such references with
$5,000. The requirement that the benefit may not at any time have exceeded
$3,500 shall not apply to the $5,000 adjusted limit.
IV.
Effective August 1, 1998, Section 6.08 of the Plan is amended by the addition of
the following language at the end of the first paragraph:
"The commencement of benefits for a distribution may be less than 30
days after the receipt of the written explanation of benefit and
rollover options provided: (A) the Participant has been provided with
information that clearly indicates that the Participant has at least 30
days to consider the election; (B) the Participant is permitted to
revoke any affirmative distribution election at least until the annuity
starting date, or if later, at any time prior to the expiration of the
7 day period that begins the day after the explanation is provided to
the Participant; and (C) the annuity starting date is the date after
the date that the written explanation was provided to the Participant."
* * * * * * * *
IN WITNESS WHEREOF, the Corporation has caused this instrument to be executed as
of this _________ day of ____________________________, 1999.
UNITED STATES LIME & MINERALS, INC.
By:
----------------------------------
Title:
-------------------------------
2
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Arkansas Lime Company, an Arkansas Corporation
Texas Lime Company, a Texas Corporation
Colorado Lime Company, a Colorado Corporation
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-58311) pertaining to the United States Lime & Minerals, Inc.
1992 Stock Option Plan, as amended, of our report dated January 28, 2000, with
respect to the consolidated financial statements of United States Lime &
Minerals, Inc. and subsidiaries included in this Annual Report of Form 10-K
for the year ended December 31, 1999.
/s/ ERNST & YOUNG LLP
Dallas, Texas
March 1, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 18,021
<SECURITIES> 0
<RECEIVABLES> 4,166
<ALLOWANCES> 0
<INVENTORY> 4,266
<CURRENT-ASSETS> 26,616
<PP&E> 82,511
<DEPRECIATION> 35,381
<TOTAL-ASSETS> 77,688
<CURRENT-LIABILITIES> 6,033
<BONDS> 0
0
0
<COMMON> 529
<OTHER-SE> 28,268
<TOTAL-LIABILITY-AND-EQUITY> 77,688
<SALES> 31,537
<TOTAL-REVENUES> 31,537
<CGS> 22,722
<TOTAL-COSTS> 22,722
<OTHER-EXPENSES> 3,482
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,561
<INCOME-PRETAX> 3,377
<INCOME-TAX> 844
<INCOME-CONTINUING> 2,533
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,533
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.64
</TABLE>
