10-Q 1 d15369e10vq.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended MARCH 31, 2004 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number is 000-4197 UNITED STATES LIME & MINERALS, INC. ----------------------------------- (Exact name of registrant as specified in its charter) TEXAS 75-0789226 ---------------------------------- ------------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 13800 MONTFORT DRIVE, SUITE 330, DALLAS, TX 75240 -------------------------------------------- ------------------------------ (Address of principal executive offices) (Zip Code) (972) 991-8400 -------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of May 10, 2004, 5,826,696 shares of common stock, $0.10 par value, were outstanding. PART I. FINANCIAL INFORMATION ITEM 1: FINANCIAL STATEMENTS UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of dollars) (Unaudited)
MARCH 31, DECEMBER 31, 2004 2003 --------- ------------ ASSETS Current assets: Cash and cash equivalents $ 2,259 6,375 Trade receivables, net 8,121 6,959 Inventories 4,719 4,609 Prepaid expenses and other current assets 447 721 --------- ------- Total current assets 15,546 18,664 Property, plant and equipment, at cost 131,613 126,638 Less accumulated depreciation (50,918) (49,371) --------- ------- Property, plant and equipment, net 80,695 77,267 Deferred tax assets, net 1,683 1,899 Other assets, net 1,605 1,670 --------- ------- Total assets $ 99,529 99,500 ========= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current installments of debt $ 3,333 3,333 Accounts payable-trade 3,535 3,369 Accrued expenses 2,065 2,053 --------- ------- Total current liabilities 8,933 8,755 Debt, excluding current installments 47,068 47,886 Other liabilities 711 899 --------- ------- Total liabilities 56,712 57,540 Stockholders' equity: Common stock 582 582 Additional paid-in capital 10,484 10,458 Accumulated other comprehensive loss (237) (237) Retained earnings 31,988 31,157 --------- ------- Total stockholders' equity 42,817 41,960 --------- ------- Total liabilities and stockholders' equity $ 99,529 99,500 ========= =======
See accompanying notes to condensed consolidated financial statements. Page 2 of 13 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands of dollars, except per share data) (Unaudited)
QUARTER ENDED MARCH 31, ------------------------------------------------------------ 2004 2003 ------------------------------------------------------------ REVENUES $ 12,075 100.0% $ 9,556 100.0% Cost of revenues: Labor and other operating expenses 7,042 58.3% 6,300 65.9% Depreciation, depletion and amortization 1,618 13.4% 1,507 15.8% -------- ----- -------- ----- 8,660 71.7% 7,807 81.7% -------- ----- -------- ----- GROSS PROFIT 3,415 28.3% 1,749 18.3% Selling, general and administrative expenses 1,188 9.8% 1,059 11.1% -------- ----- -------- ----- OPERATING PROFIT 2,227 18.4% 690 7.2% -------- ----- -------- ----- Other expenses (income): Interest expense 1,207 10.0% 1,021 10.7% Other (income), net (18) (0.1)% (12) (0.1)% -------- ----- -------- ----- 1,189 9.8% 1,009 10.6% -------- ----- -------- ----- INCOME (LOSS) BEFORE INCOME TAXES 1,038 8.6% (319) (3.3)% -------- ----- -------- ----- Income tax expense (benefit), net 208 1.7% (48) (0.5)% -------- ----- -------- ----- NET INCOME (LOSS) $ 830 6.9% $ (271) (2.8)% ======== ===== ======== ===== INCOME (LOSS) PER SHARE OF COMMON STOCK: Basic $ 0.14 $ (0.05) Diluted $ 0.14 $ (0.05)
See accompanying notes to condensed consolidated financial statements. Page 3 of 13 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands of dollars) (Unaudited)
MARCH 31, -------------------------- 2004 2003 --------- ------ OPERATING ACTIVITIES: Net income (loss) $ 830 (271) Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation, depletion and amortization 1,696 1,569 Amortization of financing costs 96 62 Amortization of debt discount 15 -- Accretion of repurchase liability - warrants 31 -- Deferred income taxes 217 -- Loss on disposal of assets 40 6 Changes in operating assets and liabilities: Trade receivables (1,162) (1,611) Inventories (110) 64 Prepaid expenses and other current assets 273 (29) Other assets (32) (20) Accounts payable and accrued expenses 1,457 1,176 Other liabilities (218) (10) --------- ------ Total adjustments 2,303 1,207 --------- ------ Net cash provided by operations $ 3,133 936 INVESTING ACTIVITIES: Purchase of property, plant and equipment $ (6,443) (1,798) --------- ------ Net cash used in investing activities $ (6,443) (1,798) FINANCING ACTIVITIES: Payment of common stock dividends $ -- (145) Proceeds from borrowings, net -- 2,201 Repayment of debt (833) (833) Proceeds from exercise of stock options 27 -- --------- ------ Net cash (used in) provided by financing activities $ (806) 1,223 --------- ------ Net (decrease) increase in cash and cash equivalents (4,116) 361 Cash and cash equivalents at beginning of period 6,375 226 --------- ------ Cash and cash equivalents at end of period $ 2,259 587 ========= ====== Supplemental cash flow information: Interest paid $ 1,110 959 Income taxes paid, net $ 50 --
See accompanying notes to condensed consolidated financial statements. Page 4 of 13 UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) 1. Basis of Presentation Presentation. The condensed consolidated financial statements included herein have been prepared by the Company without independent audit. In the opinion of the Company's management, all adjustments of a normal and recurring nature necessary to present fairly the financial position, results of operations and cash flows for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the period ended December 31, 2003. The results of operations for the three-month period ended March 31, 2004 are not necessarily indicative of operating results for the full year. Stock-Based Compensation. The Company accounts for stock-based compensation using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Stock-based compensation expense associated with option grants was not recognized in the net income for the quarters ended March 31, 2004 and 2003, as all options granted have had exercise prices equal to the market value of the underlying common stock on the dates of grant. The following table illustrates the effect on net income and income per common share if the Company had applied the fair-value-based recognition provisions of Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation (in thousands, except per share amounts):
FOR THE THREE MONTHS ENDED MARCH 31, ---------------------- 2004 2003 ------- ------- Net income (loss) as reported $ 830 $ (271) ------- ------- Stock-based compensation expense determined under fair-value-based method for all awards, net of related tax effects (33) (3) ------- ------- Pro forma net income $ 797 $ (274) ======= ======= Basic and diluted income (loss) per common $ 0.14 $ (0.05) Share, as reported Pro forma basic and diluted income (loss) per common share $ 0.14 $ (0.05)
Page 5 of 13 2. Income (Loss) Per Share of Common Stock The following table sets forth the computation of basic and diluted income (loss) per common share:
QUARTER ENDED MARCH 31, 2004 2003 ---------- ---------- Numerator: Net income (loss) for basic income (loss) per common share $ 830 (271) Warrant interest adjustment 30 -- ---------- ---------- Net income (loss) for diluted income (loss) per common share $ 860 (271) ========== ========== Denominator: Denominator for basic income (loss) per common share - weighted-average shares 5,818,479 5,799,845 ---------- ---------- Effect of dilutive securities: Warrants 88,475 -- Employee stock options 72,572 -- ---------- ---------- Denominator for diluted income (loss per common share - adjusted weighted-average shares and assumed exercises 5,979,526 5,799,845 ========== ========== Basic and diluted income (loss) per common share $ 0.14 (0.05) ========== ==========
3. Inventories Inventories consisted of the following at: (In thousands)
MARCH 31, DECEMBER 31, 2004 2003 ---------- ----------- Lime and limestone inventories: Raw materials $ 1,722 $ 1,616 Finished goods 866 769 ---------- ---------- 2,588 2,385 Parts inventories 2,131 2,224 ---------- ---------- Total inventories $ 4,719 $ 4,609 ========== ==========
4. Banking Facilities and Other Debt On April 22, 1999, the Company entered into a 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 eight years, maturing on March 30, 2007, and requires monthly principal payments of $278,000, which began April 30, 2000, with a final principal payment of $26,944,000 on March 30, 2007, which equates to a 15-year amortization. The Company paid a fee equivalent to 2.50% of the Loan value to the placement agent. Page 6 of 13 The interest rate on the first $30,000,000 of the Loan is 8.875%. The subsequent installments bear interest from the date they were funded at 3.52% above the secondary market yield of the United States Treasury obligation maturing May 15, 2005. The blended rate for the additional $20,000,000 is 9.84%. 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 secure the Company's $6,000,000 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 ongoing basis and maintain a minimum level of tangible net worth. On March 3, 2003, the Company entered into a Loan and Security Agreement with another bank for a $5,000,000 revolving credit facility to replace a prior facility. In addition, the Company obtained a new $2,000,000 equipment line of credit (available for financing or leasing large mobile equipment used in its operations) from the same bank. The revolving credit facility is secured by the Company's accounts receivable and inventories, provides for an interest rate of LIBOR plus 2.75% and originally matured on March 1, 2004. On December 29, 2003, the Loan and Security Agreement was amended to increase the revolving credit facility to $6,000,000 and extend the maturity to April 1, 2005. As of March 31, 2004, the Company had no outstanding balance on the revolving credit facility. As of March 31, 2004, the Company had entered into approximately $1,100,000 of operating leases for mobile equipment under the $2,000,000 equipment line. In April 2003, the Company engaged Frost Securities, Inc. ("Frost") to advise it on possible financing alternatives for the Phase II expansion of the Company's Arkansas facilities. Frost contacted potential sources of financing and obtained several term sheet proposals for a subordinated debt placement from outside investors. In conjunction with the review of the proposals and further negotiations, Frost and the Company renewed discussions with the Company's two largest shareholders and a third party to determine whether they would be interested in the investment on terms more favorable to the Company than those then available from other potential outside investors. On August 5, 2003, the Company sold $14,000,000 of unsecured subordinated notes (the "Sub Notes") in a private placement under Section 4(2) of the Securities Act of 1933 to three accredited investors, one of which is an affiliate of Inberdon Enterprises Ltd., the Company's majority shareholder ("Inberdon"), and another of which is an affiliate of Robert S. Beall, who owns approximately 11% of the Company's outstanding shares. The Company believes that the terms of the private placement are more favorable to the Company than the proposals previously received. Frost provided an opinion to the Company's Board of Directors that, from a financial point of view, the private placement was fair to the unaffiliated holders of the Company's common stock in relation to other potential subordinated debt transactions then available to the Company. The Company paid Frost an aggregate of $381,000 for its advice, placement services and opinion. The net proceeds of approximately $13,450,000 from the private placement have primarily been used to fund the Phase II expansion of the Company's Arkansas facilities. Terms of the Sub Notes include: a maturity date of August 5, 2008, subject to acceleration upon a change in control; no mandatory principal payments prior to maturity; an interest rate of 14% (12% paid in cash and 2% paid in cash or in kind at the Company's option); and, except as discussed below, no optional prepayment prior to August 5, 2005 and a 4% prepayment penalty if repaid before maturity. The terms of the Sub Notes are identical to one another, except that the Sub Note for the affiliate of Inberdon does not prohibit prepayment prior to August 5, 2005 and does not require a prepayment penalty if repaid before maturity, resulting in a weighted average prepayment penalty of Page 7 of 13 approximately 2.4% if the Sub Notes are repaid before maturity. The Sub Notes include covenants similar to the covenants for the Loan. The private placement also included six-year detachable warrants, providing the Sub Note investors the right to purchase an aggregate of 162,000 shares of the Company's common stock, at 110% of the average closing price of one share of common stock for the trailing 30 trading days prior to closing, or $3.84. The fair value of the warrants was recorded as a reduction of the carrying value of the Sub Notes and is being accreted over the term of the Sub Notes, resulting in an effective annual interest rate of 14.44%. After August 5, 2008, or upon an earlier change in control, the investors may require the Company to repurchase any or all shares acquired through exercise of the warrants (the "Warrant Shares"). The repurchase price for each Warrant Share will equal the average closing price of one share of the Company's common stock for the 30 trading days preceding the date the Warrant Shares are put back to the Company. Changes in the repurchase price for each Warrant Share are accreted or decreted over the five-year period from the date of issuance to August 5, 2008. The investors are also entitled to certain registration rights for the resale of their Warrant Shares. As a result of negotiations with the Company's existing bank lenders, the Loan and the revolving credit facility were amended to approve the terms of the Sub Notes. As part of these amendments, the Company is prohibited from paying any dividends in cash through June 30, 2005 without the prior written consent of the bank lenders. A summary of outstanding debt follows: (In thousands)
MARCH 31, DECEMBER 31, 2004 2003 --------- ------------ Term loan $36,667 37,500 Sub Notes 13,734 13,719 Revolving credit facility -- -- ------- ------- Subtotal 50,401 51,219 Less current installments 3,333 3,333 ------- ------- Debt, excluding current installments $47,068 47,886 ======= =======
The Company made a $3,000,000 principal prepayment on the Sub Notes on May 7, 2004. Pursuant to the terms of the Sub Notes, a $30,000 prepayment penalty was also paid on $1,500,000 of the principal prepayment. Page 8 of 13 ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS. Any statements contained in this Report that are not statements of historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this Report, including without limitation statements relating to the Company's plans, strategies, objectives, expectations, intentions, and adequacy of resources, are identified by such words as "will," "could," "should," "believe," "expect," "intend," "plan," "schedule," "estimate," "anticipate," and "project." The Company undertakes no obligation to publicly update or revise any forward-looking statements. The Company cautions that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations, including without limitation the following: (i) the Company's plans, strategies, objectives, expectations, and intentions are subject to change at any time in the Company's discretion; (ii) the Company's plans and results of operations will be affected by its ability to manage its growth; (iii) the Company's ability to meet short-term and long-term liquidity demands, including servicing the Company's debt; (iv) inclement weather conditions; (v) increased fuel costs; (vi) unanticipated delays or cost overruns in completing current or planned construction projects; (vii) reduced demand for the Company's products; and (viii) other risks and uncertainties set forth below or indicated from time to time in the Company's filings with the Securities and Exchange Commission, including the Company's Form 10-K for the fiscal year ended December 31, 2003. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations was $3,133,000 for the quarter ended March 31, 2004, compared to $936,000 for the quarter ended March 31, 2003. The $2,197,000 increase primarily resulted from $830,000 of net income in the 2004 period compared to a loss of $271,000 in the first quarter 2003, the effect of noncash charges to income and other changes in working capital. The Company invested $6,443,000 in capital expenditures in the first quarter 2004, $4,698,000 of which related to the Phase II expansion of the Company's Arkansas facilities, compared to $1,798,000 of capital expenditures in the same period last year. Net cash used by financing activities was $806,000 in the first quarter 2004, including $833,000 for repayment of debt. Financing activities provided $1,223,000 net cash in the first quarter 2003, primarily from $2,201,000 of draws on the Company's revolving credit facility, partially offset by $833,000 repayment of debt and $145,000 payment of cash dividends. On March 3, 2003, the Company entered into a Loan and Security Agreement with another bank for a $5,000,000 revolving credit facility to replace a prior facility. In addition, the Company obtained a new $2,000,000 equipment line of credit (available for financing or leasing large mobile equipment used in its operations) from the same bank. The revolving credit facility is secured by the Company's accounts receivable and inventories, provides for an interest rate of LIBOR plus 2.75% and originally matured on March 1, 2004. On December 29, 2003, the Loan and Security Agreement was amended to increase the revolving credit facility to $6,000,000 and extend the maturity to April 1, 2005. As of March 31, 2004, the Company had no outstanding balance on the revolving credit facility. As of March 31, 2004, the Company had entered into approximately $1,100,000 of operating leases for mobile equipment under the $2,000,000 equipment line. In April 2003, the Company engaged Frost Securities, Inc. ("Frost") to advise it on possible financing alternatives for the Phase II expansion of the Company's Arkansas facilities. Frost contacted potential sources of financing and obtained several term sheet proposals for a subordinated debt Page 9 of 13 placement from outside investors. In conjunction with the review of the proposals and further negotiations, Frost and the Company renewed discussions with the Company's two largest shareholders and a third party to determine whether they would be interested in the investment on terms more favorable to the Company than those then available from other potential outside investors. On August 5, 2003, the Company sold $14,000,000 of unsecured subordinated notes (the "Sub Notes") in a private placement under Section 4(2) of the Securities Act of 1933 to three accredited investors, one of which is an affiliate of Inberdon Enterprises Ltd., the Company's majority shareholder ("Inberdon"), and another of which is an affiliate of Robert S. Beall, who owns approximately 11% of the Company's outstanding shares. The Company believes that the terms of the private placement are more favorable to the Company than the proposals previously received. Frost provided an opinion to the Company's Board of Directors that, from a financial point of view, the private placement was fair to the unaffiliated holders of the Company's common stock in relation to other potential subordinated debt transactions then available to the Company. The Company paid Frost an aggregate of $381,000 for its advice, placement services and opinion. The net proceeds of approximately $13,450,000 from the private placement have primarily been used to fund the Phase II expansion of the Company's Arkansas facilities. Terms of the Sub Notes include: a maturity date of August 5, 2008, subject to acceleration upon a change in control; no mandatory principal payments prior to maturity; an interest rate of 14% (12% paid in cash and 2% paid in cash or in kind at the Company's option); and, except as discussed below, no optional prepayment prior to August 5, 2005 and a 4% prepayment penalty if repaid before maturity. The terms of the Sub Notes are identical to one another, except that the Sub Note for the affiliate of Inberdon does not prohibit prepayment prior to August 5, 2005 and does not require a prepayment penalty if repaid before maturity, resulting in a weighted average prepayment penalty of approximately 2.4% if the Sub Notes are repaid before maturity. The Sub Notes include covenants similar to the covenants for the Loan. The private placement also included six-year detachable warrants, providing the Sub Note investors the right to purchase an aggregate of 162,000 shares of the Company's common stock, at 110% of the average closing price of one share of common stock for the trailing 30 trading days prior to closing, or $3.84. The fair value of the warrants was recorded as a reduction of the carrying value of the Sub Notes and is being accreted over the term of the Sub Notes, resulting in an effective annual interest rate of 14.44%. After August 5, 2008, or upon an earlier change in control, the investors may require the Company to repurchase any or all shares acquired through exercise of the warrants (the "Warrant Shares"). The repurchase price for each Warrant Share will equal the average closing price of one share of the Company's common stock for the 30 trading days preceding the date the Warrant Shares are put back to the Company. Changes in the repurchase price for each Warrant Share are accreted or decreted over the five-year period from the date of issuance to August 5, 2008. The investors are also entitled to certain registration rights for the resale of their Warrant Shares. As a result of certain negotiations with the Company's existing bank lenders, the Loan and the revolving credit facility were amended to approve the terms of the Sub Notes. As part of these amendments, the Company is prohibited from paying any dividends in cash through June 30, 2005 without the prior written consent of the bank lenders. The Arkansas modernization and expansion project began in the fourth quarter 1999 and was expected to be completed in two phases. Phase I involved the redevelopment of the quarry plant, rebuilding of the railroad to standard gauge, the purchase of a facility to establish an out-of-state terminal in Shreveport, Louisiana, the installation of a rotary kiln with preheater and increased product storage and loading capacity. We completed Phase I in the second quarter 2001. The total cost of Phase I of the Arkansas project was approximately $33,000,000. The $33,000,000 included approximately $1,800,000 of costs associated with the pre-building of certain Page 10 of 13 facilities for Phase II of the project and the purchase of, but not all of the improvements to, the out-of-state terminal in Shreveport, Louisiana. The Phase II expansion has doubled the Arkansas plant's quicklime production capacity through the installation of a second preheater rotary kiln and additional storage capacity substantially identical to the kiln system built in Phase I. Construction of the second kiln system commenced in the third quarter 2003 and was timely completed with lime production from the new kiln beginning in late February 2004. The plans for Phase II also include the rehabilitation of the distribution terminal in Shreveport, Louisiana, currently expected to be completed in 2004. The estimated total cost to complete Phase II is approximately $16,000,000, of which approximately $13,200,000 has been spent through March 31, 2004. The Company is financing the completion of the Phase II expansion principally through cash flows from operations. In March 2004, the Company incorporated a new Texas subsidiary, U. S. Lime - Houston ("Houston"), to conduct lime slurry operations in Houston, Texas. Houston had minimal activity in March 2004. The Company is not contractually committed to any planned capital expenditures until actual orders are placed for equipment. As of March 31, 2004, the Company had no material open orders. The Company made a $3,000,000 principal prepayment on the Sub Notes on May 7, 2004. Pursuant to the terms of the Sub Notes, a $30,000 prepayment penalty was also paid on $1,500,000 of the principal prepayment. As of the date of this report, the Company has $47,128,000 in total debt outstanding. RESULTS OF OPERATIONS Revenues increased to $12,075,000 in the first quarter 2004 from $9,556,000 in the first quarter 2003, an increase of $2,519,000, or 26.4%. The increase in revenues for the first quarter 2004 compared to the 2003 quarter was primarily due to increased lime sales resulting from lime production from the new kiln at the Company's Arkansas plant which came on line in late February. Due in part to temporary lime shortages, principally in the states east of the Arkansas plant, the Company has sold most of the increased lime production at Arkansas during the quarter. These shortages were primarily due to increased consumption of lime for steel-related uses, closing of three lime plants in the Midwest and production difficulties at some competitors' plants. In addition, production at Texas during the first quarter 2003 was adversely affected by a winter ice storm and a natural gas curtailment. The Company's gross profit was $3,415,000 for the first quarter 2004, compared to $1,749,000 for the first quarter 2003, a 95.3% increase. Gross profit margin as a percentage of revenues and gross profit increased in the 2004 quarter compared to the 2003 quarter. These increases were primarily due to the increased lime sales volume, with prices remaining firm. Selling, general and administrative expenses ("SG&A") increased by $129,000, or 12.2%, to $1,188,000 in the first quarter 2004, compared to $1,059,000 in the first quarter 2003, principally as a result of increased employee wages and benefits, insurance costs and an increase on allowance for bad debts. As a percentage of sales, SG&A declined to 9.8% in the first quarter 2004 from 11.1% in the comparable 2003 quarter. Interest expense in the first quarter 2004 increased $186,000, or 18.2%, to $1,207,000, compared to $1,021,000 in the first quarter 2003. The increase in interest expense in the 2004 quarter primarily resulted from the private placement of the Sub Notes, partially offset by $3,333,000 in repayments on the Loan over the last 12 months. Approximately $303,000 of interest was capitalized in the first quarter 2004 as part of the Arkansas Phase II expansion project. Page 11 of 13 Other, net was $18,000 income in the first quarter 2004, compared to $12,000 income in the first quarter 2003. During the first quarter 2003, the Company recorded embezzlement-related recoveries of $81,000, net of income tax benefits ($100,000 gross), and embezzlement-related costs of $69,000, net of income tax benefits ($81,000 gross). The Company's net income was $830,000 ($0.14 per basic and diluted share) during the first quarter 2004, compared to a net loss of $271,000 ($0.05 per basic and diluted share) during the first quarter 2003. ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not Applicable. ITEM 4: CONTROLS AND PROCEDURES The Company's management, with the participation of the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), evaluated the effectiveness the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the CEO and CFO concluded that the Company's disclosure controls and procedures as of the end of the period covered by this report were effective. No change in the Company's internal control over financial reporting occurred during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 31.1 Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer. 31.2 Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer. 32.1 Section 1350 Certification by the Chief Executive Officer. 32.2 Section 1350 Certification by the Chief Financial Officer. (b) Reports on Form 8-K: None Page 12 of 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED STATES LIME & MINERALS, INC. May 11, 2004 By: /s/ Timothy W. Byrne --------------------------------------------- Timothy W. Byrne President and Chief Executive Officer Principal Executive Officer) May 11, 2004 By: /s/ M. Michael Owens --------------------------------------------- M. Michael Owens Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) Page 13 of 13 UNITED STATES LIME & MINERALS, INC. Quarterly Report on Form 10-Q Quarter Ended March 31, 2004 Index to Exhibits
EXHIBIT NUMBER DESCRIPTION ------- ------------ 31.1 Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer. 31.2 Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer. 32.1 Section 1350 Certification by the Chief Executive Officer. 32.2 Section 1350 Certification by the Chief Financial Officer.