Business Context and Reporting Period
Company: United States Lime & Minerals, Inc.
Filing Type: Form 10-Q (Quarterly Report)
Period Ended: September 30, 1996
Business Overview: The company produces and sells lime and aggregates. Operations include facilities in Arkansas and Texas. As of October 17, 1996, 3,921,853 shares of common stock were outstanding.
Key Financial Metrics
| Metric | Q3 1996 | Q3 1995 | 9 Months 1996 | 9 Months 1995 |
|---|---|---|---|---|
| Revenues | $10,452,000 | $11,106,000 | $30,558,000 | $31,213,000 |
| Gross Profit | $1,890,000 | $2,912,000 | $6,763,000 | $7,979,000 |
| Gross Margin | 18.1% | 26.2% | 22.1% | 25.6% |
| Operating Profit | $799,000 | $1,871,000 | $3,414,000 | $4,541,000 |
| Net Income | $570,000 | $1,535,000 | $2,544,000 | $3,401,000 |
| Diluted EPS | $0.15 | $0.40 | $0.66 | $0.89 |
| Cash from Operations (9mo) | $4,913,000 | $5,822,000 | ||
| Free Cash Flow (9mo) | ||||
| Total Debt (Current + Long-term) | $4,667,000 (Sep 30, 1996) | |||
| Cash & Equivalents | $601,000 (Sep 30, 1996) |
Material Changes vs. Prior Period
- Revenue Decline: Q3 revenue fell 5.9% year-over-year due to an 8.8% drop in sales volume, partially offset by a 2.9% price increase. Nine-month revenue decreased 2.1%.
- Profitability Compression: Gross profit margins contracted significantly, dropping from 26.2% to 18.1% in Q3. This was driven by decreased production volumes and higher depreciation costs.
- Net Income Drop: Q3 net income decreased 62.9% to $570,000. Nine-month net income fell 25.2% to $2,544,000.
- Operating Issues: Results were adversely impacted by operating problems at the Corson Lime Company subsidiary.
- Capital Expenditures: Cash used in investing activities increased to $4,693,000 for the nine months ended Sep 30, 1996, compared to $3,837,000 in the prior year period.
Outlook, Risks, and Management Commentary
- New Kiln Project: The company is proceeding with a new kiln at the Arkansas plant, expected to cost $9-10 million. This project aims to expand the customer base and meet specific chemical needs.
- Regulatory Delays: Project progress was slowed by state regulatory requirements to obtain a new plant-wide permit. Management expects the permit within six months.
- Financing: The new kiln will be financed through internally generated funds and/or alternative financing sources.
- Deferred Costs: $142,000 in deferred costs related to a planned aggregates production shut-down in Q1 1996 are included in prepaid expenses and will be absorbed into inventory.
- Corson Lime Review: Management is reviewing options to improve the operational situation at Corson Lime Company.
Investor Verification Checklist
- Verify the timeline for securing the new plant-wide permit in Arkansas and its impact on the $9-10 million kiln project schedule.
- Assess the specific nature of the "operating problems" at Corson Lime Company and the effectiveness of management's proposed remediation options.
- Monitor the sustainability of the 2.9% price increase given the 8.8% decline in sales volume.
- Review the company's ability to fund the new kiln project internally without significantly increasing leverage, given the current debt levels.
- Confirm the absorption of the $142,000 in deferred costs into inventory and its impact on future cost of goods sold.