Business Context and Reporting Period
Company: United States Lime & Minerals, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and six months ended June 30, 1996
Business Overview: The company operates lime and mineral production facilities, including a plant in Arkansas. As of July 12, 1996, 3,921,853 shares of common stock were outstanding.
Key Financial Metrics
| Metric (in thousands) | Q2 1996 | Q2 1995 | YTD 1996 | YTD 1995 |
|---|---|---|---|---|
| Revenues | $11,583 | $11,458 | $20,106 | $20,107 |
| Gross Profit | $3,063 | $3,148 | $4,873 | $5,067 |
| Gross Margin | 26.4% | 27.5% | 24.2% | 25.2% |
| Operating Profit | $1,910 | $1,969 | $2,615 | $2,670 |
| Net Income | $1,471 | $1,440 | $1,974 | $1,866 |
| Diluted EPS | $0.36 | $0.00 | $0.49 | $0.00 |
| Cash from Operations (YTD) | $2,077 | $3,713 | ||
| Free Cash Flow (YTD) | ||||
| Total Debt (Current + Long-term) | $5,602 (as of June 30, 1996) | |||
| Cash and Equivalents | $541 (as of June 30, 1996) |
Material Changes vs. Prior Period
- Revenue Stability: Q2 revenue increased 1.1% to $11.6M, driven by a 4.3% price increase offsetting a 3.2% volume decline. YTD revenue remained flat compared to 1995.
- Margin Compression: Gross profit margins declined to 26.4% in Q2 (from 27.5%) and 24.2% YTD (from 25.2%) due to decreased production volumes.
- Operating Efficiency: SG&A expenses decreased 2.2% in Q2 and 5.8% YTD, primarily due to lower professional fees.
- Cash Flow Decline: Net cash provided by operating activities dropped significantly to $2.1M YTD from $3.7M in the prior year, attributed to increased current assets and reduced current liabilities.
- Capital Expenditures: Investing cash outflows were $2.95M YTD, consistent with the prior year's $3.11M.
Outlook, Risks, and Management Commentary
- Arkansas Kiln Project: Management decided to proceed with a new kiln at the Arkansas plant, estimated to cost $9-10 million. The project aims to expand the customer base and meet specific chemical needs.
- Regulatory Delay: Project progress has been slowed by state regulatory authorities requiring a new plant-wide permit. Management expects to secure this permit by the end of 1996.
- Financing: The new kiln will be financed through internally generated funds and/or alternative sources.
- Liquidity Management: The company utilizes a Revolver Loan facility to cover fluctuations in working capital.
- Unusual Items: "Other, net" income increased due to timber sales and lease royalties. Deferred costs of $353,000 related to a planned Q1 production shut-down are included in prepaid expenses.
Investor Verification Checklist
- Verify the timeline for securing the new plant-wide permit in Arkansas, as this is a critical path item for the $9-10M capital project.
- Monitor the trend in production volumes versus pricing power to determine if margin compression is a temporary volume issue or a structural shift.
- Assess the sustainability of the decline in operating cash flow ($2.1M vs $3.7M prior year) and its impact on funding the new kiln internally.
- Review the composition of "Other, net" income to ensure timber sales and royalties are not recurring enough to rely upon for future earnings guidance.