Business Context and Reporting Period
Company: United States Lime & Minerals, Inc.
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 1995
Business Overview: The Company extracts and processes limestone into aggregate, pulverized limestone, quicklime, and hydrated lime. Operations are conducted through three wholly-owned subsidiaries in Texas, Arkansas, and Pennsylvania. The Company serves construction, steel, paper, and municipal sanitation industries. Sales are seasonal, peaking in the second and third quarters.
Key Financial Metrics
| Metric (in thousands) | 1995 | 1994 |
|---|---|---|
| Revenues | $41,419 | $36,865 |
| Gross Profit | $10,847 | $7,629 |
| Operating Profit | $5,662 | $2,504 |
| Net Income | $4,260 | $1,916 |
| Earnings Per Share | $1.11 | $0.50 |
| Cash Flow from Operations | $7,943 | $5,408 |
| Total Assets | $29,793 | $27,397 |
| Total Debt (Bank) | $5,524 | $7,368 |
| Working Capital | $6,156 | $5,443 |
| Current Ratio | 2.01 | 1.96 |
Margins: Gross profit margin improved to 26% in 1995 from 20% in 1994. Net income margin from continuing operations was 10% in 1995 compared to 5% in 1994.
Material Changes vs. Prior Period
- Revenue Growth: Revenues increased 12.4% to $41.4 million, driven by a 12.0% increase in sales volume and a 0.4% increase in sales prices. Volume increased at all plants.
- Profitability: Net income surged 122.3% to $4.26 million. Gross profit increased 42.2% due to higher revenues, improved plant efficiencies, and lower amortization of costs in excess of net assets acquired.
- Debt Reduction: Total bank debt decreased by $1.84 million. The Revolving Credit facility was completely paid down in September 1995, reducing interest expense by $161,000.
- Capital Expenditures: Capital spending increased significantly to $4.85 million in 1995 from $2.68 million in 1994, fully funded by operating cash flow.
Outlook, Risks, and Management Commentary
- Capital Plan: Management expects to spend $15-25 million over the next several years to modernize plants, improve efficiency, and meet environmental requirements. A new kiln project at the Arkansas plant is planned, estimated to cost $9-10 million, pending regulatory permits expected by the end of 1996.
- Liquidity: The Company maintains a current ratio of 2.01. Management believes funds for future capital expenditures will be obtained through operations.
- Environmental Compliance: The Company incurred $220,000 in environmental capital expenditures in 1995 and plans to incur approximately $600,000 in 1996. Management does not anticipate material adverse effects from future environmental costs.
- Legal Contingencies: A settlement regarding a parcel of land sold in 1989 was largely resolved; the remaining promissory note from the buyer was fully repaid in the fourth quarter of 1995. No other material legal proceedings are expected to adversely affect the Company.
- Seasonality: Operations remain subject to seasonal trends, with lower demand and revenues typically occurring in the first quarter due to inclement weather.
Investor Verification Checklist
- Debt Covenants: Verify compliance with financial ratios and working capital requirements in the amended loan agreements (Term Loan and Revolving Credit).
- Arkansas Kiln Permit: Confirm the status of the new plant-wide permit required for the $9-10 million Arkansas kiln expansion, expected by end of 1996.
- Capital Expenditure Funding: Monitor cash flow generation to ensure it remains sufficient to fund the projected $15-25 million modernization program without requiring external financing.
- Union Contracts: Note that collective bargaining agreements for Texas and Arkansas facilities expire in late 1996, while the Pennsylvania facility expires in 1998.
- Customer Concentration: While no single customer exceeds 10% of sales, verify continued diversification given the Company's sensitivity to volume changes in the construction and steel sectors.