UNITED STATES LIME & MINERALS, INC.
2008
Annual Report and Form 10-K
COMPANY PROFILE
United States Lime & Minerals, Inc., headquartered in Dallas, Texas, conducts its business through two segments,
Lime and Limestone Operations and Natural Gas Interests. The Lime and Limestone Operations manufacture lime and
limestone products, supplying primarily the construction, steel, municipal sanitation and water treatment, aluminum, paper,
glass, roof shingle and agriculture industries. The Lime and Limestone Operations primarily serve markets in the Central
United States. The Natural Gas Interests consist of royalty and non-operating working interests in natural gas wells located
on the Company’s Johnson County, Texas property, in the Barnett Shale Formation.
United States Lime & Minerals, Inc.’s common stock trades on the Nasdaq Global Market
®
under the symbol USLM.
SELECTED FINANCIAL DATA
(dollars in thousands, except per share amounts)
Operations data:
Lime and limestone revenues
Natural gas revenues
Total revenues
Gross profit
Operating profit
Interest expense
Net income (loss)
Diluted income (loss) per share
Weighted average shares
outstanding
Balance sheet data:
Working capital (deficit) (1)
Total assets
Total debt
Stockholders’ equity
Stockholders’ equity
per outstanding common share
Year Ended December 31,
2008
2007
2006
2005
2004
2003
2002
2001
2000
126,165
116,569
114,113
81,085
71,231
57,432
49,976
50,923
42,127
16,191
8,667
4,577
-
-
-
-
-
-
142,356
125,236
118,690
81,085
71,231
57,432
49,976
50,923
42,127
31,283 26,016
28,037
19,366
17,020
13,062
9,508
10,465
6,505
23,317 18,372
21,024
13,844
11,980
3,486
4,287
3,106
14,433
10,446
12,701
4,173
7,948
2.27
1.65
2.02
1.31
5,630
6,329
1.07
8,574
4,577
3,860
5,539
4,329
636
6,390
3,821
1,773
2,569
3,155
(635)
0.67
0.11
0.32
(0.16)
6,362,945
6,259,663
6,158,543
5,926,984
5,834,039 5,801,917
5,799,845
5,602,875
3,981,664
12,738
8,866
4,037
10,539
6,133
9,909
2,514
2,557 (7,745)
166,129
158,227
154,168
123,024 100,339
99,500
84,519
89,409
93,614
51,354
59,037
64,641
55,000
94,447 81,705
72,493
58,221
43,890
48,223
51,219
42,033
46,491
56,325
41,960
38,306
38,507
27,762
14.88
12.94
11.67
9.66
8.25
7.22
6.60
6.64
7.06
$
$
$
$
$
$
$
$
$
$
$
$
_____________________________
(1) Current assets minus current liabilities.
2009 ANNUAL MEETING OF SHAREHOLDERS
The 2009 Annual Meeting of Shareholders will be held at the Crown Plaza Suites, 7800 Alpha Road,
Dallas, Texas, 75240, on Friday, May 1, 2009, commencing at 10:00 a.m. CDT.
All shareholders are urged to attend. A formal Notice of the Annual Meeting, Proxy Statement, and
Proxy Card accompany this Annual Report and Form 10-K.
TO OUR SHAREHOLDERS:
Despite depressed economic conditions during most of 2008, our Company continued to grow as
revenues reached $142.4 million compared to $125.2 million in 2007, and net income increased to $14.4
million, an increase of $4.0 million, or 38.2%, compared to 2007.
Challenges and highlights during 2008 included:
Lime and Limestone Operations
• Reduced demand for our products in the construction markets
• Steel demand for our lime was strong during the first three quarters, but drastically
declined beginning in the last quarter 2008
• Achieved average price increases of approximately 7.5% compared to 2007
• Although Lime and Limestone revenues increased 8.2% over the previous year, gross
profit decreased $1.8 million (8.9%) to $18.2 million, primarily due to increased fuel,
electricity and transportation costs
• Expanded our slurry operations in the Dallas-Ft. Worth Metroplex by adding a third
location in Ft. Worth, Texas in December
Natural Gas Interests
• Fourteen new natural gas wells were completed as producing wells, bringing our total
producing wells to 30 at the end of 2008, resulting in gross profit of $13.1 million for
2008, a $7.0 million increase compared to 2007
• Average price per MCF of approximately $10.66 compared to $8.16 for 2007
• Production volumes and revenues increased 43.1% and 86.8% to 1.5 BCF and $16.2
million, respectively, compared to 2007
During 2008, our strong cash flow from operations enabled us to substantially develop a new
quarry at our Arkansas facilities, expand our slurry operations, fund the drilling of 14 natural gas wells
and repay $7.7 million of our debt.
* * *
The unprecedented slowdown in the U.S. economy continues to present challenges for our Lime
and Limestone Operations in 2009, but we are continuing to focus on increasing our prices. However, the
government’s stimulus package and the increasing reliance on toll roads may result in increased demand
for our lime and limestone products for highway construction and steel production.
Although our Natural Gas Interests will not have the same level of revenues and gross profit in
2009 due to the decline in natural gas prices compared to 2008 and expected declines in production rates,
we still expect significant cash flows from these interests.
We are grateful for the support of our dedicated employees and our loyal customers and
shareholders during this past year. We are committed to striving to improve the performance of our
Company and further enhance shareholder value in these difficult economic times.
Timothy W. Byrne
President and CEO
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
¥
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2008
n
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
OR
Commission File Number 000-4197
United States Lime & Minerals, Inc.
(Exact name of Registrant as specified in its charter)
Texas
(State or other jurisdiction of
incorporation or organization)
5429 LBJ Freeway,
Suite 230,
Dallas, Texas
(Address of principal executive offices)
75-0789226
(I.R.S. Employer
Identification Number)
75240
(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
Common Stock, $0.10 par value
The NASDAQ Stock Market LLC
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes n
No ¥
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Exchange
Act. Yes n
No ¥
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange
Act 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 ¥
No n
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 the Registrant’s knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. n
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act. (Check one):
Large accelerated filer n
Accelerated filer n
Non-accelerated filer ¥
Smaller reporting company n
(Do not check if a smaller reporting company)
Indicate by check mark whether the Registrant
is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes n
No ¥
The aggregate market value of Common Stock held by non-affiliates computed as of the last business day of the Registrant’s
quarter ended June 30, 2008: $65,916,219.
Number of shares of Common Stock outstanding as of March 4, 2009: 6,354,409.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the Registrant’s definitive Proxy Statement to be filed for its 2009 Annual
Meeting of Shareholders. Part IV incorporates certain exhibits by reference from the Registrant’s previous filings.
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TABLE OF CONTENTS
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
UNRESOLVED STAFF COMMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . .
PART II
ITEM 5.
ITEM 6.
ITEM 7.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES . . . . . . . . . . . . . .
SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. . . .
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . .
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9A(T). CONTROLS AND PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 9B.
ITEM 7A.
ITEM 8.
ITEM 9.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE . . . . . . .
EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . .
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PRINCIPAL ACCOUNTANT FEES AND SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . .
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . . . . . . . . . . . . . . . . . . . . .
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
PART IV
i
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PART I
ITEM 1. BUSINESS.
General.
United States Lime & Minerals, Inc. (the “Company,” the “Registrant,” “We” or “Our”), which was
incorporated in 1950, conducts its business through two segments, Lime and Limestone Operations and Natural
Gas Interests.
The Company’s principal corporate office is located at 5429 LBJ Freeway, Suite 230, Dallas, Texas 75240. The
Company’s telephone number is (972) 991-8400, and its internet address is www.uslm.com. The Company’s annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), as well as the Company’s definitive proxy statement filed pursuant to Section 14(a) of the
Exchange Act, are available free of charge on the Company’s website as soon as reasonably practicable after the
Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission (the
“SEC”).
Lime and Limestone Operations.
Business and Products. The Company, through its Lime and Limestone Operations, is a manufacturer of lime
and limestone products, supplying primarily the construction, steel, municipal sanitation and water treatment,
aluminum, paper, glass, roof shingle and agriculture industries. The Company is headquartered in Dallas, Texas and
operates lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Oklahoma and
Texas through its wholly owned subsidiaries, Arkansas Lime Company, Colorado Lime Company, Texas Lime
Company, U.S. Lime Company, U.S. Lime Company — Shreveport, U.S. Lime Company — St. Clair and
U.S. Lime Company — Transportation.
The Company extracts high-quality limestone from its open-pit and underground quarries and then processes it
for sale as pulverized limestone, quicklime, hydrated lime and lime slurry. Pulverized limestone (also referred to as
ground calcium carbonate) (“PLS”) 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. Lime slurry (milk of
lime) is a suspended solution of calcium hydroxide produced by mixing quicklime with water in a lime slaker.
PLS is used primarily in the production of construction materials such as roof shingles and asphalt paving, as
an additive to agriculture feeds, in the production of glass, as a soil enhancement and for mine safety dust in coal
mining operations. Quicklime is used primarily in metal processing, in the flue gas desulphurization process for
utilities, in soil stabilization for highway and building construction, in the manufacturing of paper products and in
sanitation and water treatment systems. 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. Lime slurry is used primarily in soil
stabilization for highway and building construction.
Product Sales.
In 2008, the Company sold most of its products in the states of Alabama, Arkansas, Colorado,
Florida, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Ohio, Oklahoma,
Pennsylvania, Tennessee, and Texas. Sales were made primarily by the Company’s nine sales employees who
call on current and 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 current and potential customers.
Principal customers for the Company’s lime and limestone products are highway, street and parking lot
contractors, steel producers, municipal sanitation and water treatment facilities, aluminum producers, paper
manufacturers, glass manufacturers, roof shingle manufacturers and poultry and cattle feed producers. During
2008, the strongest demand for the Company’s lime and limestone products was from steel producers and highway,
street and parking lot contractors and roof shingle manufacturers.
1
Approximately 900 customers accounted for the Company’s sales of lime and limestone products during 2008.
No single customer accounted for more than 10% of such sales. The Company is generally 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
sales volume and prices.
Lime and limestone products are transported by truck and rail to customers generally within a radius of
400 miles of each of the Company’s plants. 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.
Seasonality. The Company’s sales have historically reflected seasonal trends, with the largest percentage of
total annual shipments and 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 supplied to construction-related
customers, as well as on the Company’s open-pit mining operations.
Limestone Reserves. The Company’s limestone reserves contain at least 96% calcium carbonate (CaCO3).
The Company has two subsidiaries that extract limestone from open-pit quarries: Texas Lime Company (“Texas
Lime”), which is located near Cleburne, Texas, and Arkansas Lime Company (“Arkansas Lime”), which is located
near Batesville, Arkansas. U.S. Lime Company — St. Clair (“St. Clair”) extracts limestone from an underground
quarry located near Marble City, Oklahoma. Colorado Lime Company (“Colorado Lime”) owns property con-
taining limestone deposits at Monarch Pass, located 15 miles west of Salida, Colorado. No mining took place on the
Colorado property in 2008. Existing crushed stone stockpiles on the property were used to provide feedstock to the
Company’s plants in Salida and Delta, Colorado. Access to all properties is provided by paved roads and, in the case
of Arkansas Lime and St. Clair, also by rail.
Texas Lime operates upon a tract of land containing approximately 470 acres, including the Cleburne Quarry,
and 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. Texas Lime also has mineral interests in approximately 560 acres of land adjacent to the northwest
boundary of its property. The in-place reserves, as of December 31, 2008, were approximately 28.5 million tons of
proven reserves plus approximately 91.0 million tons of probable reserves. Assuming the current level of
production and recovery rate is maintained, the Company estimates that these reserves are sufficient to sustain
operations for approximately 75 years.
Arkansas Lime operates the Batesville Quarry and has hydrated lime and limestone production facilities on a
second site linked to the Quarry by its own standard-gauge railroad. The active quarry operations cover approx-
imately 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. Arkansas Lime
also owns approximately 325 additional acres containing high-quality limestone deposits adjacent to the 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 in-place reserves for the 1,050 acres, as of
December 31, 2008, were approximately 34.5 million tons of proven reserves. During 2008, the Company began to
develop the 325 acres adjacent to the Quarry by installing a bridge for traffic on the highway to allow transportation
of the limestone under the highway. The Company spent approximately $1.4 million for construction of the bridge
in 2008. Based on current estimates, the Company expects to incur approximately $1.0 million in the first half of
2009 to complete the the bridge. In addition, the Company paid approximately $2.7 million in 2008 primarily for
contract development work on the 325 acres, including the removal of the overburden from reserves totaling
approximately three years of limestone production requirements. During 2005, the Company acquired approx-
imately 2,500 acres of land in nearby Izard County, Arkansas. The in-place high-quality reserves, as of Decem-
ber 31, 2008, were approximately 150.0 million tons of proven reserves on these 2,500 acres. Assuming the current
level of production and recovery rate is maintained, the Company estimates that its reserves in Arkansas are
sufficient to sustain operations for more than 100 years.
2
St. Clair, acquired by the Company in December 2005, operates an underground quarry located on approx-
imately 700 acres it owns containing high-quality limestone deposits. It also has the right to mine the high-quality
limestone contained in approximately 1,500 adjacent acres pursuant to long-term mineral leases. The in-place
reserves, as of December 31, 2008, were approximately 19.9 million tons of probable reserves on the 700 acres
owned by St. Clair. Although limestone is being mined from the leased properties, the Company has not conducted a
drilling program to identify and categorize reserves on the 1,500 leased acres. Assuming the current level of
production and recovery rate is maintained, the Company estimates that the probable reserves on the 700 acres are
sufficient to sustain operations for approximately 25 years.
Colorado Lime 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 has not initiated a drilling program. Consequently, it is not possible to identify and categorize
reserves. The Monarch Pass Quarry, which had been operated for many years until the early 1990s, contains a
mixture of limestone types, including high-quality calcium limestone and dolomite. The Company expects to
continue to utilize remaining crushed stone stockpiles on the property to supply its plant in nearby Salida and its
Delta, Colorado facility.
Mining. The Company extracts limestone by the open-pit method at its Texas and Arkansas quarries.
Monarch Pass is also an open-pit quarry, but is not being mined 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. At its St. Clair underground
quarry, the Company mines limestone using room and pillar mining.
After extraction, limestone is crushed, screened and ground in the case of PLS, or further processed in kilns,
hydrators and slakers in the case of quicklime, hydrated lime and lime slurry, before shipment. The Company has no
knowledge of any recent changes in the physical quarrying conditions on any of its properties that have materially
affected its mining operations, and no such changes are anticipated.
Plants and Facilities. The Company processes lime and/or limestone products at five plants, four lime slurry
facilities and one terminal facility. All of its plants and facilities are accessible by paved roads, and in the case of
Arkansas Lime, St. Clair and the Shreveport terminal, also by rail.
The Cleburne, Texas plant has an annual capacity of approximately 470 thousand tons of quicklime from two
preheater rotary kilns. The plant also has PLS equipment, which, depending on the product mix, has the capacity to
produce approximately 1.0 million tons of PLS annually.
The Arkansas plant is situated at the Batesville Quarry and is accessible by paved roads and rail. The plant’s
PLS and hydrating facilities are situated on a tract of 290 acres located approximately two miles from the Batesville
Quarry, to which it is connected by a Company-owned, standard-gauge railroad. Utilizing three preheater rotary
kilns, this plant has an annual capacity of approximately 630 thousand tons of quicklime. The plant also has PLS
equipment, which, depending on the product mix, has the capacity to produce approximately 400 thousand tons of
PLS annually.
The St. Clair Marble City, Oklahoma plant has an annual capacity of approximately 180 thousand tons of
quicklime from two rotary kilns, one of which is not a preheater kiln. The plant also has PLS equipment, which has
the capacity to produce approximately 150 thousand tons of PLS annually.
The Company also maintains lime hydrating and bagging equipment at the Texas, Arkansas and Oklahoma
plants. Storage facilities for lime and 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 expected volumes of shipments. Equipment is maintained at each plant to load
trucks and, at the Arkansas and Oklahoma plants, to load railroad cars.
Colorado Lime operates a limestone drying, grinding and bagging facility, with an annual capacity of
approximately 50 thousand tons, on eight acres of land in Salida, Colorado. The property is leased from the Union
3
Pacific Railroad for a five-year term ending June 2009, with a renewal option for an additional five years. These
facilities also include a small rotary kiln, which is not permitted for operation and is presently dormant. A mobile
stone crushing and screening plant is also situated at the Monarch Pass Quarry to produce agricultural grade
limestone, with an annual capacity of approximately 40 thousand tons. In September 2005, Colorado Lime acquired
a new limestone grinding and bagging facility with an annual capacity of approximately 125 thousand tons, located
on approximately three and one-half acres of land in Delta, Colorado.
U.S. Lime Company uses quicklime to produce lime slurry and commenced operations in March 2004 to serve
the Greater Houston area construction market. In June 2006, U.S. Lime Company expanded by acquiring the assets
of a lime slurry operation with two lime slurry locations in the Dallas-Ft. Worth Metroplex and, in December 2008,
added a third facility in the Dallas-Ft. Worth Metroplex by acquiring the assets of a lime slurry operation in
Ft. Worth, Texas.
In January 2007, the Company established U.S. Lime Company — Transportation primarily to deliver lime
slurry produced by U.S. Lime Company to customers in the Dallas-Ft. Worth Metroplex.
U.S. Lime Company — Shreveport operates a distribution terminal in Shreveport, Louisiana, which is
connected to a railroad, to provide lime storage, hydrating and distribution capacity to service markets in Louisiana
and East Texas. This terminal began operations in December 2004.
The Company believes that its plants and facilities are adequately maintained and insured. See “Management’s
Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition.”
Employees. At December 31, 2008, the Company employed 307 persons, 35 of whom were engaged in
administrative and management activities and nine of whom were engaged in sales activities. Of the Company’s 263
production employees, 126 are covered by two collective bargaining agreements. The agreement for the Texas
facility expires in November 2011, and the agreement for the Arkansas facility expires in January 2011. The
Company believes that its employee relations are good.
Competition. The lime industry is highly regionalized and competitive, with quality, price, ability to meet
customer demand, proximity to customers, personal relationships and timeliness of deliveries being the prime
competitive factors. The Company’s competitors are predominantly private companies.
The lime industry is 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 and
facilities to be located close to markets, paved roads and railroad networks to enable cost-effective production and
distribution; 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 plants and facilities. These considerations
reinforce the premium value of operations having permitted, long-term, high-quality limestone reserves and good
locations relative to markets.
Lime producers tend to be concentrated on known limestone formations where competition takes place
principally on a regional basis. The industry as a whole has expanded its customer base and, while the steel industry
is still the largest market sector, it also counts environmental-related users, chemical users and other industrial users,
including pulp and paper producers and road builders, among its major customers.
There is a continuing trend of consolidation in the lime industry, with the three largest companies now
accounting for more than two-thirds of North American production 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 Texas and
Arkansas modernization and expansion projects, including the construction of the third kiln at Arkansas, and its
acquisitions of the St. Clair operations in Oklahoma and the lime slurry operations in Texas should allow the
Company to continue to remain competitive, protect its markets and position itself for the future. In addition, the
Company will continue to evaluate additional internal and external opportunities for expansion, as conditions
warrant or opportunities arise. The Company may have to revise its strategy or otherwise find ways to enhance the
value of the Company, including entering into strategic partnerships, mergers or other transactions.
4
Impact of Environmental Laws. The Company owns or controls large areas of land, upon which it operates
limestone quarries, lime plants and other facilities with inherent environmental responsibilities and environmental
compliance costs, including capital, maintenance and operating costs with respect to pollution control facilities, the cost
of ongoing monitoring programs, the cost of reclamation and remediation efforts and other similar costs and liabilities.
The Company’s operations are subject to various federal, state, and local laws and regulations relating to the
environment, health and safety, and other regulatory matters, including the Clear 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 (“Environmental Laws”). These Environmental Laws
grant the United States Environmental Protection Agency (the “EPA”) and state governmental agencies the
authority to promulgate regulations that could result in substantial expenditures on pollution control and waste
management. The Company has not been named as a potentially responsible party in any federal superfund cleanup
site or state-led cleanup site.
The rate of change of Environmental Laws has been rapid over the last decade, and compliance can require
significant expenditures. For example, federal legislation required the Company’s plants with operating kilns to
apply for “Title V” operating permits that have significant ongoing compliance monitoring costs. In addition to the
Title V permits, other environmental operating permits are required for the Company’s operations, and such permits
are subject to modification, renewal and revocation. In addition, raw materials and fuels used to manufacture lime
and calcium contain chemicals and compounds, such as trace metals, that may be classified as hazardous
substances.
In 2004, the EPA adopted a new National Ambient Air Quality Standard (“NAAQS”) for ozone. Pursuant to the
new standard, Johnson County, Texas, in which Texas Lime is located, is now identified as part of the Dallas-
Fort Worth (“DFW”) nonattainment area for ozone. Pursuant to the new standard, in 2007 the Texas Commission on
Environmental Quality adopted regulations to limit emissions of nitrogen oxides (“NOx”) from lime kilns located in
the DFW area that resulted in substantial expenditures on pollution control measures and emissions monitoring
systems. The Company spent approximately $690 thousand in 2008 on these systems. On March 1, 2009, Texas
Lime became subject to those standards.
The scientific and political attention concerning the existence and extent of climate change and the roll of
human activity in it have the potential to affect the Company’s operations. New legislation mandating specific near-
term and long-range reductions in greenhouse gas emissions is almost certain to be adopted as part of the
U.S. climate change policy. Although uncertain, the consequences of greenhouse gas reduction measures are
potentially significant, as the production of carbon dioxide is inherent in the manufacture of lime through the
calcination of limestone and combustion of fossil fuels. Passage of climate control legislation and other regulatory
initiatives by the Congress, states or the EPA that restrict or tax emissions of greenhouse gases could adversely
affect the Company. There is no assurance that a change in the law or regulations will not be adopted, such as the
imposition of a carbon tax, a cap and trade program requiring the Company to purchase carbon credits, or measures
that would require reductions in emissions, raw materials, fuel use or production rates, that would have a material
adverse effect on the Company’s financial condition, results of operations, cash flows and competitive position.
In part in response to requirements of environmental regulatory agencies, the Company incurred capital
expenditures related to environmental activities of approximately $1.0 million in each of 2008 and 2007, and $400
thousand in 2006. 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 $825 thousand, $770 thousand and $690 thousand in 2008, 2007 and 2006, respectively.
The Company recognizes legal reclamation and remediation obligations associated with the retirement of
long-lived assets at their fair value at the time the obligations are incurred (“Asset Retirement Obligations” or
“AROs”). Over time, the liability for AROs is recorded at its present value each period through accretion expense,
and the capitalized cost is amortized over the useful life of the related asset. Upon settlement of the liability, the
Company either settles the ARO for its recorded amount or recognizes a gain or loss. AROs are estimated based on
studies and the Company’s process knowledge and estimates and are discounted using an appropriate interest rate.
The AROs are adjusted when further information warrants an adjustment. The Company believes that its accrual of
$1.1 million for AROs at December 31, 2008 is reasonable.
5
Map of U.S. Lime & Minerals, Inc. Operations/Interests
CO
KS
MO
NM
OK
AR
MS
TX
LA
Corporate Headquarters
Texas Lime Company
Arkansas Lime Company
U.S. Lime Company – St. Clair
Colorado Lime Company
U.S. Lime Company
U.S. Lime Company – Shreveport
U.S. Lime – O & G LLC
Natural Gas Interests.
Interests. The Company, through its wholly owned subsidiary, U.S. Lime Company — O & G, LLC
(“U.S. Lime O & G”), has a 20% royalty interest and a 20% working interest, resulting in a 36% interest in
revenues, with respect to oil and gas rights on the Company’s approximately 3,800 acres of land located in Johnson
County, Texas, in the Barnett Shale Formation. These interests are derived from the Company’s May 2004 oil and
gas lease agreement (the “O & G Lease”) with EOG Resources, Inc. (“EOG”) with respect to oil and gas rights on its
Cleburne, Texas property, that will continue so long as EOG is continuously developing, or producing natural gas
from, the leased property as set forth in the Lease.
During the fourth quarter 2005, drilling of the first natural gas well under the O & G Lease was completed, and
natural gas production began in February 2006. As a result, the Company began reporting revenues and gross profit
from its Natural Gas Interests in the first quarter 2006.
In November 2006, through U.S. Lime O & G, the Company entered into a drillsite and production facility lease
agreement and subsurface easement (the “Drillsite Agreement”) with XTO Energy Inc. (“XTO”), which has an oil and
gas lease covering approximately 538 acres of land contiguous to the Company’s Johnson County, Texas property.
Pursuant to the Drillsite Agreement, the Company receives a 3% royalty interest and a 12.5% working interest,
resulting in a 12% revenue interest, in any wells drilled from two pad sites located on the Company’s property.
U.S. Lime O & G has no direct employees and is not the operator of any wells drilled on the properties subject
to either the O & G Lease or the Drillsite Agreement (the “O & G Properties”). The only decision that the Company
makes is whether to participate as a nonoperating working interest owner and pay its proportionate share of drilling,
completing, recompleting, working over and operating a well.
6
Regulation. Many aspects of the development, production, pricing and marketing of natural gas are regulated
by federal and state agencies. Legislation affecting the natural gas industry is under constant review for amendment
or expansion, which frequently increases the regulatory burden on affected members of the industry.
Oil and gas development and production operations are subject to various types of regulation at the federal,
state and local levels which may impact the Company’s working and royalty interests. Such regulation includes:
(cid:129) requiring permits for the drilling of wells;
(cid:129) numerous federal and state safety requirements;
(cid:129) environmental requirements;
(cid:129) property taxes and severance taxes; and
(cid:129) specific state and federal income tax provisions.
Customers and Pricing. The pricing of natural gas sales is primarily determined by supply and demand in the
marketplace and can fluctuate considerably. As the Company is not the operator, it has limited access to timely
information, involvement, and operational control over the volumes of natural gas produced and sold and the terms
and conditions on which such volumes are marketed and sold, all of which is controlled by the operators. Although
the Company has the right to take its production in kind, it currently has elected to have its natural gas production
marketed by the operators.
Drilling Activity. The Company participated as a royalty interest and working interest owner in the drilling of
eight gross natural gas wells under the O & G Lease that were completed as producing wells during 2008. In
addition, the Company participated in the drilling and completion of four gross wells under the O & G Lease that
started during 2007 and were either ready for completion or being drilled at December 31, 2007. The Company
participated as a royalty interest and working interest owner in the drilling of two gross wells under the Drillsite
Agreement during 2007 that were completed in 2008. The Company also participated in the drilling of two gross
wells during 2007 under the Drillsite Agreement, which were producing at December 31, 2007. During 2006, the
Company participated in eight gross natural gas wells under the O & G Lease that were drilled and completed as
producing wells in 2006. All of these wells are located in Johnson County, Texas.
Production Activity. The number of gross producing wells and production activity for the years ended
December 31, 2008, 2007 and 2006 are as follows:
2008
2007
2006
Gross producing wells
O & G Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Drillsite Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26
4
30
14
2
16
8
0
8
Natural gas production volume (BCF) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average sales price per MCF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cost of revenues per MCF(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.5
$10.66
$ 1.28
1.1
$8.16
$1.56
0.6
$7.61
$1.21
(1) Includes taxes other than income taxes.
Delivery Commitments. There are no delivery commitments for the Company’s natural gas production to
which U.S. Lime O & G is a party.
Natural Gas Reserves. The following table reflects the proved developed, proved undeveloped and total
proved reserves (all of which are located in Johnson County, Texas), future estimated net revenues and standardized
measure at December 31, 2008, 2007 and 2006. The reserves and future estimated net revenues are based on the
reports of the independent petroleum engineering consulting firm of DeGolyer and MacNaughton. Proved
developed reserves included 30, 16, and 8 producing wells at December 31, 2008, 2007 and 2006, respectively.
In addition, proved developed reserves also included four wells (two under the O & G Lease and two under the
7
Drillsite Agreement) that had been drilled at December 31, 2007, but had not yet begun production. Proved
undeveloped reserves represents reserves for seven potential wells yet to be drilled at December 31, 2008 and 12
such wells at December 31, 2007. The total number of wells ultimately drilled under the O & G Lease and the
Drillsite Agreement has not yet been determined, and could be more or less than the number that could be inferred
from the estimated number of wells included in proved undeveloped reserves due to, among other factors,
irregularities in formations and spacing decisions made by the operators. The Company’s proved reserves have not
been filed with, or included in, any reports to any federal agency, other than those filed with the SEC.
2008
2007
2006
Developed Undeveloped Total Developed Undeveloped
Total
Developed Undeveloped
Total
Proved natural gas reserves
(BCF). . . . . . . . . . . . . .
Proved natural gas liquids
(MBBLS) . . . . . . . . . . .
Future estimated net
12.0
0.4
4.4
0.2
16.4
0.6
9.7
—
8.3
—
18.0
—
5.4
—
2.5
—
7.9
—
revenues (in thousands) . .
$67,738
$22,252
$89,990 $57,871
$46,056
$103,927 $26,478
$9,775
$36,253
Standardized measure(1)
(in thousands) . . . . . . . .
$24,111
$ 6,608
$30,719 $20,520
$13,510
$ 34,030 $ 9,602
$3,012
$12,614
(1) This present value data should not be construed as representative of fair market value, since such data is based
upon projected cash flows, which do not provide for escalation or reduction of natural gas prices or for
escalation or reduction of expenses and capital costs. The reserve estimates as of December 31, 2008, 2007 and
2006 utilized gas prices per MCF at such dates of $7.06, $7.68 and $6.48, respectively.
Undeveloped Acreage. Since the Company is not the operator, it has limited information regarding unde-
veloped acreage and does not know how many acres the operators classify as undeveloped acreage, if any, or the
number of wells that will ultimately be drilled under either the O & G Lease or the Drillsite Agreement.
Glossary of Certain Oil and Gas Terms. The definitions set forth below shall apply to the indicated terms as
used in this Report. All volumes of natural gas referred to herein are stated at the legal pressure base of the state or
area where the reserves exist and at 60 degrees Fahrenheit and in most instances are rounded to the nearest major
multiple.
“BBLS” means a standard barrel containing 42 United States gallons.
“BCF” means one billion cubic feet under prescribed conditions of pressure and temperature and represents a
basic unit for measuring the production of natural gas.
“Depletion” means (i) the volume of hydrocarbons extracted from a formation over a given period of time,
(ii) the rate of hydrocarbon extraction over a given period of time expressed as a percentage of the reserves existing
at the beginning of such period, or (iii) the amount of cost basis at the beginning of a period attributable to the
volume of hydrocarbons extracted during such period.
“Formation” means a distinct geologic interval, sometimes referred to as the strata, which has characteristics
(such as permeability, porosity and hydrocarbon saturations) that distinguish it from surrounding intervals.
“Future estimated net revenues” means the result of applying current prices of oil and natural gas to future
estimated production from oil and natural gas proved reserves, reduced by future estimated expenditures, based on
current costs to be incurred, in developing and producing the proved reserves, excluding overhead.
“MBBLS” means one thousand BBLS.
“MCF” means one thousand cubic feet under prescribed conditions of pressure and temperature and represents
a basic unit for measuring the production of natural gas.
“Operator” means the individual or company responsible for the exploration, development, and production of
an oil or natural gas well or lease.
“Proved developed reserves” means reserves that can be expected to be recovered through existing wells with
existing equipment and operating methods. Additional oil and gas expected to be obtained through the application
8
of fluid injection or other improved recovery techniques for supplementing the natural forces and mechanisms of
primary recovery are included as “proved developed reserves” only after testing by a pilot project or after the
operation of an installed program has confirmed through production response that increased recovery will be
achieved.
“Proved reserves” means the estimated quantities of crude oil, natural gas, and natural gas liquids that
geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is
made. Prices include consideration of changes in existing prices provided only by contractual arrangements, but not
on escalations based upon future conditions.
(i) Reservoirs are considered proved if economic production is supported by either actual production or
conclusive formation test. The area of a reservoir considered proved includes (a) that portion delineated by
drilling and defined by gas-oil and/or oil-water contacts, if any; and (b) the immediately adjoining portions not
yet drilled, but which can be reasonably judged as economically productive on the basis of available geological
and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence
of hydrocarbons controls the lower proved limit of the reservoir.
(ii) Reserves that can be produced economically through application of improved recovery techniques
(such as fluid injection) are included in the “proved” classification when successful testing by a pilot project, or
the operation of an installed program in the reservoir, provides support for the engineering analysis on which
the project or program was based.
(iii) Estimates of proved reserves do not include the following: (a) oil that may become available from
known reservoirs but is classified separately as “indicated additional reserves”; (b) crude oil, natural gas, and
natural gas liquids, the recovery of which is subject to reasonable doubt because of uncertainty as to geology,
reservoir characteristics, or economic factors; (c) crude oil, natural gas, and natural gas liquids that may occur
in undrilled prospects; and (d) crude oil, natural gas, and natural gas liquids that may be recovered from oil
shales, coal, gilsonite and other such sources.
“Proved undeveloped reserves” means reserves that are expected to be recovered from new wells on
undeveloped acreage or from existing wells where a relatively major expenditure is required for recompletion.
Proved undeveloped reserves on undeveloped acreage is limited (i) to those drilling units offsetting productive units
that are reasonably certain of production when drilled and (ii) to other undrilled units where it can be demonstrated
with certainty that there is continuity of production from the existing productive formation.
“Royalty” means an interest in an oil and gas lease that gives the owner of the interest the right to receive a
portion of the production from the leased acreage (or of the proceeds of the sale thereof), but generally does not
require the owner to pay any portion of the costs of drilling or operating the wells on the leased acreage.
“Severance tax” means an amount of tax, surcharge or levy recovered by governmental agencies from the gross
proceeds of oil and natural gas sales. Production tax may be determined as a percentage of proceeds or as a specific
amount per volumetric unit of sales. Severance tax is usually withheld from the gross proceeds of oil and natural gas
sales by the first purchaser (e.g., pipeline or refinery) of production.
“Standardized measure of discounted future net cash flows” (also referred to as “standardized measure”)
means the value of future estimated net revenues to be generated from the production of proved reserves calculated
in accordance with SEC guidelines, net of estimated production and future development costs, using prices and
costs as of the date of estimation without future escalation, and estimated income taxes without giving effect to non-
property related expenses such as general and administrative expenses, debt service and depreciation, depletion and
amortization, and discounted using an annual discount rate of 10%.
“Undeveloped acreage” means lease acreage on which wells have not been drilled or completed to a point that
would permit the production of commercial quantities of oil and natural gas regardless of whether such acreage
contains proved reserves.
9
“Working interest” means a real property interest entitling the owner to receive a specified percentage of the
proceeds of the sale of oil and natural gas production or a percentage of the production, but requires the owner of the
working interest to bear the cost to explore for, develop and produce such oil and natural gas.
ITEM 1A. RISK FACTORS.
General.
Both of our business segments continue to be adversely impacted by recessionary economic conditions
in the U.S.
The unprecedented recessionary economic conditions in the United States have reduced demand for our lime
and limestone products and our natural gas. Our two largest lime customer industries, the construction and steel
industries, have reduced their purchase volumes due to the impact of the recession on their businesses.
The reduced demand for natural gas has also resulted in significantly decreased natural gas prices. In order for
us to maintain or increase our profitability, we must maintain or increase our revenues and improve cash flows and
continue to control our operational and selling, general and administrative expenses.
If we are unable to maintain our revenues and control our costs in these difficult economic times, our financial
condition, results of operations, cash flows and competitive position could be materially adversely affected.
The current financial crisis may adversely impact our financial condition and results of operations in
various ways.
The current financial crisis and related uncertainties in the global financial markets may adversely impact our
financial condition and results of operations in various ways, and we may face increased challenges if the current
economic conditions do not improve. Recent months have witnessed severe difficulties in the credit markets and
increased volatility in the equity markets, leading to a global recession and unprecedented calls for governmental
intervention. If the current economic conditions do not improve, it is possible that our customers may face financial
difficulties that could lead them to default on their obligations to us or seek bankruptcy protection.
As of December 31, 2008, our total consolidated bank debt was $51.4 million. Our bank indebtedness
represented approximately 36% of our total capitalization at December 31, 2008. As a result of our bank
indebtedness, a large portion of our cash flows from operations will be dedicated to the payment of principal
and interest on indebtedness. Our ability to service our debt and to comply with the financial and restrictive
covenants contained in our credit facilities is subject to financial, economic, competitive and other factors. Many of
these factors are beyond our control. In particular, our ability to service our debt will depend upon our ability to
maintain sufficient levels of revenues and cash flows from operations.
Although we believe that our cash on hand, funds generated from operations and remaining amounts available
under our $30 million revolving credit facility will be sufficient to meet our operating needs, ongoing capital needs
and debt service for 2009, if we did have to access the financial markets, as a result of the current financial crisis we
may not have the ability to raise the necessary capital.
Lime and Limestone Operations.
In the normal course of our Lime and Limestone Operations, we face various business and financial risks
that could have a material adverse effect on our financial position, results of operations, cash flows and
competitive position. Not all risks are foreseeable or within our ability to control.
These risks arise from factors including, but not limited to, fluctuating demand for lime and limestone
products, including as a result of downturns in the economy and steel, construction and housing industries, changes
in legislation and regulations, including those issued by the Mine Safety and Health Administration, our ability to
produce and store quantities of lime and limestone products sufficient in amount and quality to meet customer
demands, the success of our modernization and expansion strategies, including our ability to sell our increased lime
capacity at acceptable prices, our ability to execute our strategies and complete projects on time and within budget,
10
our ability to integrate, refurbish and/or improve acquired facilities, our access to capital, increasing costs,
especially fuel, electricity and transportation costs, inclement weather and the effects of seasonal trends.
We receive a significant portion of our coal and coke by rail, so the availability of sufficient solid fuels to run
our plants could be diminished significantly in the event of major rail disruptions. In addition, our freight costs to
deliver our lime and limestone products are high relative to the value of our products and have increased
significantly in recent years.
If we are unable to continue to pass along our increasing fuel, electricity, transportation and freight costs to our
customers, our financial condition, results of operations, cash flows and competitive position could be materially
adversely affected.
We incur environmental compliance costs, including capital, maintenance and operating costs, with
respect to pollution control facilities, the cost of ongoing monitoring programs, the cost of reclamation
and remediation efforts and other similar costs and liabilities relating to our compliance with Environ-
mental Laws, and we expect these costs and liabilities to continue to increase, including possible new
costs, taxes and limitations on operations.
The rate of change of Environmental Laws has been rapid over the last decade, and compliance can require
significant expenditures. We believe that our expenditure requirements for future environmental compliance,
including complying with the new NOx emissions limitations for our Texas Lime operations located in the DFW
nonattainment area for ozone, will continue to increase as operational and reporting standards increase. Discovery
of currently unknown conditions and unforeseen liabilities could require additional expenditures.
The potential regulation of greenhouse gas emissions remains an issue for the Company and other similar
manufacturing companies. Although no restrictions have yet been imposed under U.S. federal laws, new legislation
mandating specific near-term and long-range reductions in greenhouse gas emissions is almost certain to be adopted
as part of the U.S. climate change policy. The consequences of greenhouse gas emission reduction measures are
potentially significant, as the production of carbon dioxide, which is a greenhouse gas, is inherent in the
manufacture of lime through the calcination of limestone and combustion of fossil fuels. There is no assurance
that a change in the law or regulations will not be adopted, such as the imposition of a carbon tax, a cap and trade
program requiring the Company to purchase carbon credits, or measures that would require reductions in emissions,
raw materials, fuel use or production rates, that would have a material adverse effect on the Company’s financial
condition, results of operations, cash flows and competitive position.
We intend to comply with all Environmental Laws and believe that our accrual for environmental costs and
liabilities at December 31, 2008 is reasonable. Because many of the requirements are subjective and therefore not
quantifiable or presently determinable, or may be affected by additional legislation and rulemaking, it is not
possible to accurately predict the aggregate future costs and liabilities of environmental compliance and their effect
on our financial condition, results of operations, cash flows and competitive position.
In order to maintain our competitive position, we may need to continue to expand our operations and
production capacity, obtain financing for any such expansion at reasonable interest rates and acceptable
terms and sell the resulting increased production at acceptable prices.
We may undertake various capital projects and acquisitions. These would most likely require that we incur
additional debt, which may not be available to us at reasonable interest rates or on acceptable terms. Given current
and projected demand for lime and limestone products, we cannot guarantee that any such project or acquisition
would be successful, that we would be able to sell any resulting increased production at acceptable prices or that any
such sales would be profitable.
Although demand and prices for our lime and limestone products have been relatively strong in recent years,
we are unable to predict future demand and prices, especially given the current recessionary conditions, and cannot
provide any assurance that current levels of demand and prices will continue or that any future increases in demand
or price can be maintained.
11
The lime industry is highly regionalized and competitive.
Our competitors are predominately private companies. The primary competitive factors in the lime industry
are quality, price, ability to meet customer demand, proximity to customers, personal relationships and timeliness of
deliveries, with varying emphasis on these factors depending upon the specific product application. To the extent
that one or more of our competitors becomes more successful with respect to any key competitive factor, our
financial condition, results of operations, cash flows and competitive position could be materially adversely
affected.
Natural Gas Interests.
Historically, the markets for natural gas have been volatile and may continue to be volatile in the future.
Various factors that are beyond our control will affect the demand for and prices of natural gas, such as:
(cid:129) the worldwide and domestic supplies of natural gas;
(cid:129) the price and level of foreign imports;
(cid:129) the level of consumer and industrial demand;
(cid:129) the price and availability of alternative fuels;
(cid:129) the availability of pipeline capacity;
(cid:129) weather conditions;
(cid:129) domestic and foreign governmental regulations and taxes; and
(cid:129) the overall economic environment.
The natural gas industry is cyclical in nature and tends to reflect general economic conditions. The U.S. and
other world economies are in a recession which could last well into 2009 and beyond. The recession has led to
significant reductions in demand and pricing for our natural gas production, beginning in the second half 2008 and
continuing into 2009. In addition, lower natural gas prices may reduce the amount of natural gas that is economical
for our operators to develop and produce on the O & G Properties. Reduced prices and production could severely
reduce our revenues, gross profit and cash flows from our Natural Gas Interests and thus could have a material
adverse effect on our financial condition, results of operations and cash flows.
We do not control development and production operations on the O & G Properties, which could impact
our Natural Gas Interests.
As the owner of non-operating working interests and royalty interests, our ability to influence development of,
and production from, the O & G Properties is severely limited. All decisions related to development and production
on the O & G Properties will be made by the operators and may be influenced by factors beyond our control,
including but not limited to natural gas prices, interest rates, budgetary considerations and general industry and
economic conditions.
The occurrence of an operational risk or uncertainty that materially impacts the operations of the operators of
the O & G Properties could have a material adverse effect on the amount that we receive in connection with our
interests in production from our O & G Properties, which could have a material adverse effect on our financial
condition, results of operations and cash flows.
Our income is affected by development, production and other costs, some of which are outside of our
control.
The income that comes from our working interests, and to a lesser extent our royalty interests, is directly
affected by increases in development, production and other costs. Some of these costs are outside our control,
including costs of regulatory compliance and severance and other similar taxes. Other expenditures are dictated by
business necessity, such as drilling additional wells to increase recovery rates.
12
Our natural gas reserves are depleting assets, and we have no ability to explore for new reserves. In addi-
tion, our ability to increase our proved developed reserves is limited to any potential additional wells that
may be drilled by the operators on the O & G Properties.
Our revenues from our Natural Gas Interests depend in large part on the quantity of natural gas developed and
produced from the O & G Properties. Our producing wells will experience declines in production rates due to
depletion of their natural gas reserves. We have no ability to explore for new reserves. Any increases in our proved
developed reserves will come from the operators drilling additional wells on the O & G Properties. The timing and
number of potential additional wells, if any, depends on the market prices of natural gas and on other factors beyond
our control.
Drilling activities on the O & G Properties may not be productive, which could have an adverse effect on
our financial condition, results of operations and cash flows.
Drilling involves a wide variety of risks, including the risk that no commercially productive natural gas
reservoirs will be encountered. The cost of drilling, completing, recompleting, working over and operating wells is
often uncertain, and drilling operations may be delayed or canceled as a result of a variety of factors, including:
(cid:129) Pressure or irregularities in formations;
(cid:129) Equipment failures or accidents;
(cid:129) Unexpected drilling conditions;
(cid:129) Shortages or delays in the delivery of equipment; and
(cid:129) Adverse weather conditions
Future drilling activities, if any, recompletions or workovers on the O & G Properties may not be successful. If
these activities are unsuccessful, this failure could have an adverse effect on our financial condition, results of
operations and cash flows.
A natural disaster, accident or catastrophe could damage pipelines, gathering systems and other facilities
that service wells on the O & G Properties, which could substantially limit operations and adversely affect
our financial condition, results of operations, and cash flows.
If pipelines, gathering systems or other facilities that serve our O & G Properties are damaged by any natural
disaster, accident, catastrophe or other event, revenues from our Natural Gas Interests could be significantly
interrupted. Any event that interrupts the development, production, gathering or transportation of our natural gas, or
which causes us to share in significant expenditures not covered by insurance, could adversely impact our gross
profit from our Natural Gas Interests. We do not carry business interruption insurance on our Natural Gas Interests.
The O & G Properties are geographically concentrated, which could cause net proceeds to be impacted
by regional events.
The O & G Properties are all natural gas properties located exclusively in the Barnett Shale Formation.
Because of this geographic concentration, any regional events, including natural disasters, that increase costs,
reduce availability of equipment or supplies, reduce demand or limit production may impact our gross profit from
our Natural Gas Interests more than if the Properties were more geographically diversified.
The number of prospective natural gas purchasers and methods of delivery for our gas are also considerably
less than would otherwise exist from a more geographically diverse group of interests.
Governmental policies, laws and regulations could have an adverse impact on our O & G Properties and
business.
The O & G Properties and our business are subject to federal, state and local laws and regulations relating to the
oil and natural gas industry, as well as regulations relating to safety matters. These laws and regulations can have a
significant impact on production and costs of development and production.
13
Environmental costs and liabilities and changing environmental regulation could adversely affect our
financial condition, results of operations and cash flows.
As with other companies engaged in the ownership, development and production of natural gas, we always
expect to have some risk of exposure to environmental costs and liabilities. The costs associated with environmental
compliance or remediation could reduce the gross profits we would receive from our interests. The O & G Properties
are subject to extensive federal, state and local regulatory requirements relating to environmental affairs, health and
safety and waste management. Governmental authorities have the power to enforce compliance with applicable
regulations and permits, which could increase development and production costs on our O & G Properties and
adversely affect our cash flows. Third parties may also have the right to pursue legal actions to enforce compliance.
It is likely that expenditures in connection with environmental matters, as part of normal capital expenditure
programs, will affect our cash flows from the O & G Properties. Future environmental law developments, such as
stricter laws, regulations or enforcement policies, including legislation mandating specific near-term and long-
range reductions in greenhouse gas emissions, could significantly increase the costs of production from the O & G
Properties and adversely affect our financial condition, results of operations and cash flows.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not Applicable
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 3 of Notes to
Consolidated Financial Statements, the Company’s plants and facilities and reserves are subject to encumbrances to
secure the Company’s loans.
ITEM 3. LEGAL PROCEEDINGS.
Information regarding legal proceedings is set forth in Note 8 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 2008.
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
The Company’s Common Stock is listed on the Nasdaq Global Market» under the symbol “USLM.” As of
March 4, 2009, the Company had approximately 400 shareholders of record. The Company did not pay any
dividends during 2007 or 2008 and does not plan on paying dividends in 2009.
As of March 4, 2009, the Company had 500,000 shares of $5.00 par value preferred stock authorized; however,
none has been issued.
The low and high sales prices for the Company’s Common Stock for the periods indicated were:
First Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$28.02
$29.29
$33.90
$19.70
$34.70
$45.56
$43.99
$39.45
$29.09
$30.78
$31.21
$28.75
$33.00
$39.14
$39.21
$37.18
2008
2007
Low
High
Low
High
14
PERFORMANCE GRAPH
The graph below compares the cumulative five-year total shareholders’ return on the Company’s Common
Stock with the cumulative total return on The NASDAQ Market Index and a peer group consisting of Eagle
Materials, Inc., Monarch Cement Co., U.S. Concrete, Inc. and Martin Marietta Materials, Inc. The graph assumes
that the value of the investment in the Company’s Common Stock and each index was $100 on January 1, 2004, and
that all dividends have been reinvested.
COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN
AMONG U.S. LIME & MINERALS, INC.,
NASDAQ MARKET INDEX AND PEER GROUP INDEX
500
400
300
200
100
S
R
A
L
L
O
D
0
2003
2004
2005
2006
2007
2008
U.S. LIME & MINERALS, INC.
NASDAQ MARKET INDEX
PEER GROUP INDEX
ASSUMES $100 INVESTED ON JAN. 1, 2004
ASSUMES DIVIDENDS REINVESTED
U.S. LIME & MINERALS, INC.
100.00
168.15
392.15
446.67
449.63
354.81
PEER GROUP INDEX
100.00
130.02
185.41
228.99
254.50
177.15
NASDAQ MARKET INDEX
100.00
108.41
110.79
122.16
134.29
79.25
2003
2004
2005
2006
2007
2008
15
ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s 2001 Long-Term Incentive Plan and 1992 Stock Option Plan allow employees and directors to
pay the exercise price for stock options and the tax liability for the lapse of restrictions on restricted stock by
payment in cash and/or delivery of shares of the Company’s Common Stock to the Company. In the fourth quarter
2008, pursuant to these provisions, the Company received a total of 991 shares of its Common Stock for payment of
the tax liability for the lapse of restrictions on restricted stock. The 991 shares were valued at $23.49 per share, the
fair market value of one share of the Company’s Common Stock on the date that they were tendered to the Company.
ITEM 6. SELECTED FINANCIAL DATA.
2008
Years Ended December 31,
2007
2006
2005
2004
(Dollars in thousands, except per share amounts)
Operating results
Lime and limestone revenues . . . . . . . . . . . . . . . . . .
Natural gas revenues . . . . . . . . . . . . . . . . . . . . . . . .
$126,165
16,191
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes and cumulative effect of
change in accounting principle . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per share of common stock:
116,569
8,667
125,236
26,016
18,372
114,113
4,577
118,690
28,037
21,024
81,085
—
81,085
19,366
13,844
71,231
—
71,231
17,020
11,980
$142,356
$ 31,283
$ 23,317
$ 19,411
$ 14,433
14,339
10,446
18,140(1) 9,772
12,701(1) 7,948
7,713
6,329
Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
$
2.29
2.27
1.67
1.65
2.06
2.02
1.34
1.31
1.08
1.07
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Long-term debt, excluding current installments . . . . .
Stockholders’ equity per outstanding common
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends per common share . . . . . . . . . . . . . .
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008
As of December 31,
2006
2007
2005
2004
$166,129
$ 46,354
158,227
54,037
154,168
59,641
123,024(2) 100,339
41,390
51,667
$ 14.88
—
$
307
12.94
—
318
11.67
—
317
9.66
—
292
8.25
—
211
(1) The cumulative effect of change in accounting principle in 2006 for certain stripping costs was $550, net of
$190 income tax benefit.
(2) Includes the assets of St. Clair acquired on December 28, 2005.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
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,”
“would,” “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
limitation the following: (i) the Company’s plans, strategies, objectives,
expectations,
including without
16
expectations, and intentions are subject to change at any time at the Company’s discretion; (ii) the Company’s plans
and results of operations will be affected by its ability to maintain and manage its growth; (iii) the Company’s ability
to meet short-term and long-term liquidity demands, including servicing the Company’s debt, conditions in the
credit markets, volatility in the equity markets, and changes in interest rates on the Company’s debt, including the
ability of the counterparty to the Company’s interest rate hedges to meet its obligations; (iv) inclement weather
conditions; (v) increased fuel, electricity, transportation and freight costs; (vi) unanticipated delays, difficulties in
financing, or cost overruns in completing construction projects; (vii) the Company’s ability to expand its Lime and
Limestone Operations through acquisitions, including obtaining financing for such acquisitions, and to successfully
integrate acquired operations; (viii) inadequate demand and/or prices for the Company’s lime and limestone
products, including the additional lime production from the Company’s third kiln in Arkansas, due to the state of the
U.S. economy, recessionary pressures in particular industries, including construction and steel, and inability to
continue to increase prices for the Company’s products; (ix) the uncertainties of development, production and prices
with respect to the Company’s Natural Gas Interests, including reduced drilling activities pursuant to the
Company’s Lease Agreement and Drillsite Agreement, inability to explore for new reserves and declines in
production rates; (x) on-going and possible new environmental and other regulatory costs, taxes and limitations on
operations, including those related to climate change; and (xi) other risks and uncertainties set forth in this Report or
indicated from time to time in the Company’s filings with the SEC.
OVERVIEW.
General.
We have two business segments: Lime and Limestone Operations and Natural Gas Interests. Our Lime and
Limestone Operations represent our principal business. Our National Gas Interests consist of royalty and working
interests under the O & G Lease and the Drillsite Agreement with two separate operators related to our Johnson
County, Texas property, located in the Barnett Shale Formation, on which Texas Lime conducts its lime and
limestone operations. We reported our first revenues and gross profit from our Natural Gas Interests in the first
quarter 2006.
Management’s principal operational focus is on managing our Lime and Limestone Operations. We have little
control over the two operators that drill for and produce natural gas on our Johnson County property. Our principal
management decisions related to our Natural Gas Interests involve whether to participate as a working interest
owner by contributing our proportional costs for drilling proposed wells under the O & G Lease (20% working
interest at approximately $400 to $500 thousand cost per well to date) and the Drillsite Agreement (12.5% working
interest at approximately $300 thousand cost per well to date). While we intend to continue to participate in future
natural gas wells drilled on our O & G Properties, we are not in the business of drilling for or producing natural gas,
and have no personnel expert in that field.
We do not allocate our corporate overhead or interest costs to either of our segments.
Lime and Limestone Operations.
In our Lime and Limestone Operations, we produce and sell PLS, quicklime, hydrated lime and lime slurry.
The principal factors affecting our success are the level of demand and prices for our products and whether we are
able to maintain sufficient production levels and product quality while controlling costs.
Inclement weather conditions generally reduce the demand for lime and limestone products supplied to
construction-related customers that account for a significant amount of our revenues, as in the case of excessive
rainfall in Texas and Oklahoma during 2007. Inclement weather also interferes with our open-pit mining operations
and can disrupt our plant production, as in the case of winter ice storms in Texas.
Demand for our products in our market areas is also affected by general economic conditions, the pace of home
construction and the demand for steel, as well as the level of governmental and private funding for highway
construction. Continuing softness in the construction markets resulted in reduced demand for our lime and
limestone products during the last two years, including demand for our PLS, which declined primarily due to
reduced roof shingle demand in our markets. Demand from the steel industry was strong through the first three
17
quarters 2008, but drastically declined beginning in October 2008 due to a reduction in steel production, which has
continued into 2009.
In August 2005, President Bush signed the Safe, Accountable, Flexible, and Equitable Transportation Equity
Act (“SAFETEA”), which reauthorized the federal highway, public transportation, highway safety, and motor
carrier safety programs for fiscal years 2005 through 2009. SAFETEA provided nearly a 40% increase in funding
over the Transportation Equity Act for the 21st Century. In addition, we have seen an increase in the construction of
tollroads in Texas. Also, President Obama recently signed the American Recovery and Reinvestment Act of 2009,
which includes more than $48 billion for transportation projects such as road and bridge construction, mass transit
and high-speed rail. As a result, we believe that there may be an increased level of demand for lime and limestone
products used in highway construction for the next several years.
Our modernization and expansion projects in Texas and Arkansas, including the construction of a third kiln at
our Arkansas facilities that was completed in December 2006, our acquisitions of U.S. Lime Company — St. Clair,
our Delta, Colorado facilities and our Texas slurry operations have positioned us to meet the demand for high-
quality lime and limestone products in our markets, with our lime output capacity more than doubling since 2003. In
addition, our distribution terminal in Shreveport, Louisiana expanded our market area for this additional output. Our
modernization and expansion projects have also equipped us with up-to-date, fuel-efficient plant facilities, which
should result in lower production costs and greater operating efficiencies, thus enhancing our competitive position.
All of our kilns are fuel-efficient preheater kilns, except for one kiln at St. Clair. In order for our plants to operate at
peak efficiency, we must meet operational challenges that arise from time to time, including bringing new facilities
on line and refurbishing and/or improving recently acquired facilities, such as St. Clair, as well as operating existing
facilities efficiently. We also incur significant costs to remain in compliance with rapidly changing Environmental
Laws.
Our primary variable cost is energy. Energy costs continued to increased during 2008, with prices for coal and
coke delivered to the Company’s plants increasing approximately 21% compared to 2007. Fuel, electricity,
transportation and freight costs increased significantly during 2008. In addition, our freight costs to deliver our
products are high relative to the value of our products and have increased significantly in recent years. We have been
able to mitigate to some degree the adverse impact of these energy cost increases by varying the mixes of fuel used
in our kilns, and by passing on some of our increased costs to our customers through higher prices and/or surcharges
on certain products. We have not, to date, engaged in any significant hedging activity in an effort to control our
energy costs. We have, however, entered into forward purchase contracts for a portion of our natural gas
requirements for the winter months in order to provide greater predictability to this cost component, and we
may do so again in the future.
We financed our modernization and expansion projects and acquisitions through a combination of debt
financing, including the issuance in August 2003 of $14.0 million of unsecured subordinate notes, which have been
fully repaid, and from cash flows from operations. We financed our $14.0 million acquisition cost for the December
2005 St. Clair acquisition primarily from a new long-term loan. Given our level of debt, we must generate sufficient
cash flows to cover ongoing capital and debt service needs. Our revolving credit facility matures April 2, 2012, and
the remainder of our long-term debt becomes due in 2015.
As a result of our modernization and expansion projects and acquisitions, our yearly depreciation, depletion
and amortization expense included in cost of revenues increased from $6.1 million in 2003 to $13.0 million in 2008,
while our gross profit increased from $13.1 million to $31.3 million over the same period. Although our outstanding
debt is approximately the same at the end of 2008 as it was at the end of 2003, our interest expense, which was at
$4.6 million in 2003, has declined to $3.5 million in 2008. This is due to our improved financial condition, which
allowed us to refinance our bank debt beginning in 2004 to reduce our interest rates. Absent a significant acquisition
opportunity arising, we anticipate funding our capital requirements and paying down our debt further in 2009 from
our cash flows from operations.
In order for us to increase our profitability in our Lime and Limestone Operations in the face of our increased
fixed and variable costs, we must improve our revenues and cash flows and continue to control our operational and
selling, general and administrative expenses. Given reduced demand for our lime products, in the fourth quarter
2008 we began to take various steps to reduce our costs, including idling several of our kilns and reducing our
18
workforce. We will continue to look for ways to reduce our costs further in the face of ongoing reduced demand for
our products in 2009. We are also focusing on continuing to increase our lime and limestone prices to seek to offset
our increased costs and lowered sales volume, which is very challenging in these difficult economic times. In
addition, we will continue to explore ways to expand our operations and production capacity through additional
capital projects and acquisitions as conditions warrant or opportunities arise.
We believe that the enhanced production capacity resulting from our modernization and expansion efforts at
the Texas and Arkansas plants, including the third kiln at Arkansas, our acquisitions, and the operational strategies
that we have implemented have allowed us to increase production, improve product quality, better serve existing
customers, attract new customers and control our costs. There can be no assurance, however, that demand and prices
for our lime and limestone products will be sufficient to fully utilize our additional production capacity and cover
our additional depreciation and other fixed costs, that our production will not be adversely affected by weather-
related or other operational problems, that we can successfully invest in improvements to our existing facilities, that
our results will not be adversely affected by continued increases in fuel, electricity, transportation and freight costs
or new environmental requirements, or that our revenues, gross profit, net income and cash flows can be maintained.
Natural Gas Interests.
In 2004, we entered into the O & G Lease with respect to oil and gas rights on our Cleburne, Texas property,
located in the Barnett Shale Formation. Pursuant to the Lease, we received lease bonus payments totaling
$1.3 million and retained a 20% royalty interest in oil and gas produced from any successful wells drilled on
the leased property and an option to participate in any well drilled on the leased property as a 20% working interest
owner, resulting in a 36% interest in revenues with respect to those wells in which we elect to participate as a
working interest owner. In November 2006, we also entered into a Drillsite Agreement with XTO that has an oil and
gas lease covering approximately 538 acres of land contiguous to our Johnson County, Texas property. Pursuant to
this Agreement, we have a 3% royalty interest and an optional 12.5% working interest, resulting in a 12% interest in
revenues in any wells drilled from two padsites located on our property.
During 2008, our revenues from our Natural Gas Interests increased to $16.2 million, and our capital
expenditures totaled approximately $5.9 million, primarily for 12 wells completed under the O & G Lease and two
wells completed under the Drillsite Agreement. Our gross profit from 30 producing wells at December 31, 2008
totaled $13.1 million in 2008. After peaking in June 2008, natural gas prices declined precipitously during the
second half 2008 and have continued to decline in 2009.
We currently intend to participate in any additional wells drilled under either agreement, but cannot predict the
number of additional wells that ultimately will be drilled, if any, or their results. Based on discussions with the
operators, no new wells are currently planned to be drilled during 2009. Given the current reduced demand for
natural gas, which has resulted in lower natural gas prices, and expected declines in production rates, we anticipate
that we may experience lower revenues from our Natural Gas Interests in 2009 compared to 2008.
CRITICAL ACCOUNTING POLICIES.
The discussion and analysis of our financial condition and results of operations are based upon our
consolidated financial statements, which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities, at the date of our financial statements. Actual results may differ from
these estimates and judgments under different assumptions or conditions and historical trends.
Critical accounting policies are defined as those that are reflective of significant management judgments and
uncertainties and potentially result in materially different results under different assumptions and conditions. We
believe the following critical accounting policies require the most significant management estimates and judgments
used in the preparation of our consolidated financial statements.
Accounts receivable. We are required to estimate the collectability of our trade receivables. A considerable
amount of judgment is required in assessing the ultimate realization of these receivables and determining our
19
allowance for doubtful accounts. Uncollected trade receivables are charged-off when identified by management to
be unrecoverable. The majority of our trade receivables are unsecured. Payment terms for our trade receivables are
based on underlying purchase orders, contracts or purchase agreements. Credit losses relating to these receivables
consistently have been within management expectations and historical trends.
Revenue recognition. We recognize revenue for our Lime and Limestone Operations in accordance with the
terms of purchase orders, contracts or purchase agreements, which are upon shipment, and when payment is
considered probable. Revenues include external freight billed to customers with related costs included in cost of
revenues. Sales taxes billed to customers are not included in revenues. For our Natural Gas Interests, we recognize
revenue in the month of production and delivery.
Stripping costs in the mining industry. We expense stripping costs incurred after a quarry begins production
as costs of production. Stripping costs incurred prior to the time production begins from a quarry are capitalized and
amortized over the life of the quarry utilizing the units-of-production method.
Successful-efforts method for Natural Gas Interests. We use the successful-efforts method to account for
development expenditures related to our Natural Gas Interests. Under this method, drilling and completion costs of
development wells are capitalized and depleted using the units-of-production method. Costs to drill exploratory
wells, if any, that do not find proved reserves are expensed.
Natural gas reserve estimates. Proved reserves are estimated quantities of crude oil, natural gas and natural
gas liquids that geological and engineering data demonstrate with reasonable certainty to be recoverable in future
years from known reservoirs under existing economic and operating conditions. Proved developed reserves are
reserves that can be expected to be recovered through existing wells with existing equipment and operating
methods. Additional oil, gas and natural gas liquids expected to be obtained through the application of fluid
injection or other improved recovery techniques for supplementing the natural forces and mechanisms of primary
recovery are included as proved developed reserves only after testing by a pilot project or after the operation of an
installed program has confirmed through production response that increased recovery will be achieved. Proved
undeveloped reserves are reserves that are expected to be recovered from new wells on undeveloped acreage or from
existing wells where a relatively major expenditure is required for recompletion. Proved undeveloped reserves on
undrilled acreage is limited (i) to those drilling units offsetting productive units that are reasonably certain of
production when drilled and (ii) to other undeveloped units where it can be demonstrated with certainty that there is
continuity of production from the existing productive formation. We emphasize that the volume of reserves are
estimates that, by their nature, are subject to revision. The estimates are made using geological and reservoir data, as
well as production performance data. These estimates will be reviewed annually and revised, either upward or
downward, as warranted by additional performance data. If the estimates of proved reserves were to decline, the rate
at which we record depletion expense would increase.
Environmental costs and liabilities. We record environmental accruals in other liabilities, based on studies
and estimates, when it is probable that we have incurred a reasonably estimable cost or liability. The accruals are
adjusted when further information warrants an adjustment. Environmental expenditures that extend the life,
increase the capacity or improve the safety or efficiency of Company-owned assets or are incurred to mitigate or
prevent future possible environmental contamination are capitalized. Other environmental costs are expensed when
incurred.
Contingencies. We are party to proceedings, lawsuits and claims arising in the normal course of business
relating to regulatory, labor, product and other matters. We are required to estimate the likelihood of any adverse
judgments or outcomes with respect to these matters, as well as potential ranges of probable losses. A determination
of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual
issue, including coverage under our insurance policies. This determination may change in the future because of new
developments.
Derivatives. We record the fair value of our interest rate hedges on our balance sheet and include any changes
in fair value in other comprehensive income (loss). We determine fair value utilizing the cash flows valuation
technique.
20
Stock-based compensation. As required by Statement of Financial Accounting Standards (“SFAS”) No. 123
(revised 2004), “Share-Based Payments” (“SFAS 123(R)”), we expense all stock-based payments to employees and
directors, including grants of options and restricted stock, in our Consolidated Statements of Income based on their
fair values. We adopted the provisions of SFAS 123(R) on January 1, 2006 using the modified prospective method,
in which compensation cost is recognized ratably over the vesting period based on the requirements of SFAS 123(R)
for all stock-based awards granted after the adoption date and for all such awards granted prior to the adoption date
that were unvested on the adoption date.
RESULTS OF OPERATIONS.
The following table sets forth certain financial information expressed as a percentage of revenues for the
periods indicated:
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenues
Year Ended December 31,
2008
2006
2007
100.0% 100.0% 100.0%
Labor and other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation, depletion and amortization . . . . . . . . . . . . . . . . . . . . . . . .
(68.9)
(9.1)
Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative expenses . . . . . . . . . . . . . . . . . . . . . . .
Operating profit
Other (expense) income:
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
22.0
(5.6)
16.4
(2.5)
(0.3)
(3.5)
(69.2)
(10.0)
20.8
(6.1)
14.7
(3.4)
0.2
(3.1)
(68.2)
(8.2)
23.6
(5.9)
17.7
(2.6)
0.2
(4.1)
Net income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.1
8.4
11.2
Cumulative effect of change in accounting principle, net of income
tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(0.5)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.1%
8.4% 10.7%
2008 vs. 2007
Revenues for 2008 increased to $142.4 million from $125.2 million in 2007, an increase of $17.1 million, or
13.7%. Revenues from our Lime and Limestone Operations in 2008 increased $9.6 million, or 8.2%, to
$126.2 million in 2008 from $116.6 million in 2007. The increase in revenues from our Lime and Limestone
Operations was primarily due to average product price increases of approximately 7.5% in 2008, compared to 2007,
primarily offset by continuing reduced construction demand. Revenues from our Natural Gas Interests in 2008
increased $7.5 million, or 86.8%, to $16.2 million from $8.7 million in 2007. The increase in revenues from our
Natural Gas Interests resulted from a 30.6% increase in average price received per MCF and a 43.1% increase in
volume resulting from the addition of 14 new producing wells during 2008, partially offset by declines in production
rates on wells completed prior to 2008.
Our gross profit increased to $31.3 million for 2008 from $26.0 million for 2007, a increase of $5.3 million, or
20.2%. Gross profit from our Lime and Limestone Operations for 2008 was $18.2 million, compared to
$20.0 million in 2007, a decrease of $1.8 million, or 8.9%. Gross profit from our Lime and Limestone Operations
for 2008 was lower primarily due to increased fuel, electricity and transportation costs, partially offset by increased
revenues.
Gross profit for 2008 also included $13.1 million from our Natural Gas Interests, compared to $6.1 million in
2007, an increase of $7.0 million, or 116.1%. Production volumes for 2008 from our Natural Gas Interests in
21
30 wells totaled approximately 1.5 BCF, sold at an average price per MCF of approximately $10.66, compared to
2007 when approximately 1.1 BCF was produced and sold from 16 wells at an average price of approximately $8.16
per MCF.
Selling, general and administrative expenses (“SG&A”) increased to $8.0 million in 2008 from $7.6 million in
2007, an increase of $322 thousand, or 4.2%. As a percentage of revenues, SG&A decreased to 5.6% in 2008 from
6.1% in 2007. The increase in SG&A in 2008 was primarily attributable to increased personnel costs, including a
$32 thousand increase in stock-based compensation and increased insurance costs.
Interest expense in 2008 decreased to $3.5 million from $4.3 million in 2007, a decrease of $801 thousand, or
18.7%. The decrease in interest expense in 2008 primarily resulted from decreased average outstanding debt,
resulting from the repayment during 2008 of approximately $7.7 million of debt that was outstanding at
December 31, 2007.
Other, net decreased $674 thousand from income of $254 thousand in 2007 to expense of $420 thousand in
2008, primarily due to $358 thousand of expense associated with an attempted acquisition with respect to which we
were unable to reach satisfactory terms, and $200 thousand for damages to railcars and equipment at a trans-loading
facility in Galveston, Texas caused by Hurricane Ike.
Income tax expense increased to $5.0 million in 2008 from $3.9 million in 2007, an increase of $1.1 million, or
27.9%. The increase in income tax expense in 2008 compared to 2007 was primarily due to the increase in income
before taxes. The decrease in the effective tax rate from 27.1% in 2007 to 25.6% in 2008 was due to the income tax
benefit of the increased statutory depletion resulting from the increase in revenues from our Natural Gas Interests.
Net income increased to $14.4 million ($2.27 per share diluted) in 2008, compared to $10.4 million ($1.65 per
share diluted) in 2007, an increase of $4.0 million, or 38.2%.
2007 vs. 2006
Revenues for 2007 increased to $125.2 million from $118.7 million in 2006, an increase of $6.5 million, or
5.5%. Revenues from our Lime and Limestone Operations in 2007 increased $2.5 million, or 2.2%, to $116.6 mil-
lion in 2007 from $114.1 million in 2006. Revenues from our Natural Gas Interests in 2007 increased $4.1 million,
or 89.4%, to $8.7 million from $4.6 million in 2006.
The increase in revenues from our Lime and Limestone Operations was primarily due to average product price
increases of approximately 6.1% in 2007, compared to 2006, and increased lime slurry sales resulting from the
Company’s June 2006 acquisition of the assets of a lime slurry operation in the Dallas-Ft. Worth Metroplex. These
increases were partially offset by lower PLS sales volumes due to the continuing reduced demand for roof shingles,
which began in fourth quarter 2006, a slow-down in steel industry production, continuing weakness in the housing
construction markets and reduced construction demand for our lime products resulting from near record rainfalls in
both Texas and Oklahoma during the second quarter 2007.
Our gross profit decreased to $26.0 million for 2007 from $28.0 million for 2006, a decrease of $2.0 million, or
7.2%. Gross profit from our Lime and Limestone Operations for 2007 was $20.0 million, compared to $24.5 million
in 2006, a decrease of $4.5 million, or 18.4%. Gross profit for 2007 was lower primarily due to reduced PLS sales in
2007 compared to 2006 and increased energy costs, as well as additional deprecation, primarily for the third kiln
project in Arkansas, which was completed in the first quarter 2007.
Gross profit for 2007 also included $6.1 million from our Natural Gas Interests, compared to $3.5 million in
2006, an increase of $2.5 million, or 71.4%. Production volumes for 2007 from our Natural Gas Interests totaled
approximately 1.1 BCF, sold at an average price per MCF of approximately $8.16, compared to 2006 when
approximately 0.6 BCF was produced and sold at an average price of approximately $7.61 per MCF.
SG&A increased to $7.6 million in 2007 from $7.0 million in 2006, an increase of $631 thousand, or 9.0%. As a
percentage of revenues, SG&A increased to 6.1% in 2007 from 5.9% in 2006. The increases in SG&A in 2007 were
primarily attributable to increased employee compensation and benefits, professional fees, travel costs and office rent,
and the recognition of $200 thousand more of stock-based compensation in SG&A in 2007, compared to 2006.
22
Interest expense in 2007 increased to $4.3 million from $3.1 million in 2006, an increase of $1.2 million, or
38.0%. The increase in interest expense for 2007 compared to 2006 primarily resulted from the capitalization of
approximately $940 thousand of interest in 2006 as part of the construction of the Arkansas third kiln project,
compared to $130 thousand of interest capitalized in 2007, and increased average outstanding debt in the first three
quarters 2007. These increases were partially offset by reduced interest rates, resulting from the amendment of our
credit facilities in March 2007.
Income tax expense decreased to $3.9 million in 2007 from $4.9 million in 2006, a decrease of $996 thousand,
or 20.4%. The decrease in income tax expense in 2007 compared to 2006 was primarily due to the decrease in
income before taxes. The decrease in the effective tax rate from 28.4% in 2006 to 27.1% in 2007 was due to the
income tax benefit of the cumulative effect of change in accounting principle in 2006.
Net income decreased to $10.4 million ($1.65 per share diluted) in 2007, compared to $12.7 million ($2.02 per
share diluted) for 2006, a decrease of $2.3 million, or 17.8%. Net income for 2006 included a reduction of $550
thousand ($0.09 per share diluted) for the cumulative effect of a change in accounting principle, reflecting the write
off of deferred stripping costs ($740 thousand, less $190 thousand income tax benefit).
FINANCIAL CONDITION.
Capital Requirements. We require capital primarily for seasonal working capital needs, normal recurring
capital and re-equipping projects, modernization and expansion projects, drilling and completion of natural gas
wells and acquisitions. Our capital needs are met principally from cash flows from operations, our $30 million
revolving credit facility and our long-term debt.
We expect to spend $5.0 to $7.0 million per year over the next several years in our Lime and Limestone
Operations for normal recurring capital and re-equipping projects at our plants and facilities to maintain or improve
efficiency, ensure compliance with Environmental Laws and reduce costs. As of December 31, 2008, we had
contractual commitments of approximately $968 thousand for the completion of a highway bridge that is part of the
quarry development at our Arkansas facilities. With no new natural gas wells scheduled to be drilled in 2009, we
expect capital expenditures for our Natural Gas Interests will be substantially less than the 2008 level of $5.9 million.
Liquidity and Capital Resources. Net cash provided by operations was $25.8 million in 2008, compared to
$24.5 million in 2007, an increase of $1.3 million, or 5.2%. Our cash provided by operating activities is composed
of net income, depreciation, depletion and amortization (“DD&A”), other non-cash items included in net income
and changes in working capital. In 2008, cash provided by operating activities was principally composed of
$14.4 million net income, $13.5 million DD&A, $2.4 million deferred income taxes and $627 thousand of stock-
based compensation, partially offset by changes in working capital. The increase in 2008 compared to 2007 was
primarily the result of the $4.0 million increase in net income and a $1.2 million increase in DD&A and other non-
cash items. These were partially offset by a $2.0 million decrease in accounts payable and accrued expenses and
other liabilities in 2008, compared to an increase of $500 thousand in 2007, and a $2.4 million increase in
inventories in 2008 compared to a $1.3 million increase in 2007. The largest changes in working capital items in
2008 were the $2.4 million increase in inventories, the $2.0 million decrease in accounts payable and accrued
expenses and a $579 thousand increase in trade receivables. The most significant changes in working capital items
during 2007 were the $1.3 million increase in inventories and the $865 thousand increase in accounts payable and
accrued expenses.
Banking Facilities and Debt. On October 19, 2005, we entered into an amendment to our credit agreement (the
“2005 Amendment”) with a bank (the “Lender”) primarily to increase the loan commitments and extend the maturity
dates. As a result of the 2005 Amendment, our credit agreement now includes a ten-year $40.0 million term loan (the
“Term Loan”), a ten-year $20.0 million multiple draw term loan (the “Draw Term Loan”) and a five-year $30.0 million
revolving credit facility (the “Revolving Facility”) (collectively, the “Credit Facilities”). The proceeds from the Term
Loan were used primarily to repay the outstanding balances on the term loan and revolving credit facility under our
credit agreement prior to the 2005 Amendment. In December 2005, we drew down $15.0 million on the Draw Term
Loan primarily to acquire St. Clair. We drew down the remaining $5.0 million in the second quarter 2006, which was
primarily used to pay construction costs of the third kiln project at our Arkansas plant.
23
The Term Loan requires quarterly principal payments of $833 thousand, which began on March 31, 2006,
equating to a 12-year amortization, with a final principal payment of $7.4 million due on December 31, 2015. The
Draw Term Loan requires quarterly principal payments of $417 thousand, based on a 12-year amortization, which
began on March 31, 2007, with a final principal payment on December 31, 2015 equal to any remaining principal
then-outstanding. The Revolving Facility is scheduled to mature on April 2, 2012. The maturity of the Term Loan,
the Draw Term Loan and the Revolving Facility can be accelerated if any event of default, as defined under the
Credit Facilities, occurs.
The Credit Facilities bear interest, at our option, at either LIBOR plus a margin of 1.125% to 2.125%, or the
Lender’s Prime Rate plus a margin of minus 0.625% to plus 0.375%. The margins are determined quarterly in
accordance with a pricing grid based upon the ratio of our total funded senior indebtedness to earnings before
interest, taxes, depreciation, depletion and amortization (“EBITDA”) for the 12 months ended on the last day of the
most recent calendar quarter (the “Cash Flow Leverage Ratio”). Based on our Cash Flow Leverage Ratios for the
twelve months ended June 30, September 30 and December 31, 2008, since July 30, 2008 the LIBOR margin and
the Lender’s Prime Rate margin have been, and continue to be, 1.125% and minus 0.625%, respectively.
Through a hedge, we fixed LIBOR at 4.695% on the $40.0 million Term Loan for the period December 30,
2005 through its maturity date, resulting in an interest rate of 5.82% based on the current LIBOR margin of 1.125%.
Effective December 30, 2005, we also entered into a hedge that fixed LIBOR at 4.875% on the $15.0 million then-
outstanding on the Draw Term Loan through its maturity date, resulting in an interest rate of 6.00% based on the
current LIBOR margin of 1.125%. Effective June 30, 2006, we entered into a third hedge that fixed LIBOR at 5.50%
on the remaining $5.0 million of the Draw Term Loan through its maturity date, resulting in an interest rate of
6.625% based on the current LIBOR margin of 1.125%. We designated all of the hedges as cash flow hedges, and as
such, changes in their fair market value will be included in other comprehensive income (loss). The hedges have
been effective. We will be exposed to credit losses in the event of non-performance by the counterparty, Wells Fargo
Bank, N.A., to the hedges. We marked our interest rate hedges to fair value at December 31, 2008 utilizing the cash
flows valuation technique, resulting in a liability of $5.4 million due to interest rate declines. We paid $634 thousand
in 2008 and received $290 thousand and $314 thousand during 2007 and 2006, respectively, in quarterly settlement
payments pursuant to our hedges which were included in interest expense.
Pursuant to a security agreement dated August 25, 2004 (the “Security Agreement”), the Credit Facilities are
secured by our existing and hereafter acquired tangible assets, intangible assets and real property. The Credit
Facilities and Security Agreement contain covenants that restrict the incurrence of debt, guarantees and liens and
place restrictions on capital investments and the sale of significant assets. The Company is also required to meet a
minimum debt service coverage ratio. The Credit Facilities provide that we may pay annual dividends, not to exceed
$1.5 million, so long as after such payment, we remain solvent and the payment does not cause or result in any
default or event of default as defined under the Credit Facilities.
On August 5, 2003, in a private placement, we sold $14.0 million of subordinated notes (the “Sub Notes”),
which have been fully repaid. The private placement also included six-year detachable warrants, providing the Sub
Note investors the right to purchase an aggregate 162,000 shares of our 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 last of the
warrants were exercised in 2006.
During 2008, we paid down approximately $7.7 million, or 13.0%, of the $59.0 million in total principal
amount of debt outstanding as of December 31, 2007, resulting in $51.4 million of total principal amount of debt
outstanding as of December 31, 2008, consisting of $30.0 million, $16.7 million and $4.7 million outstanding on the
Term Loan, Draw Term Loan and Revolving Facility, respectively. We also had $322 thousand of letters of credit
issued at December 31, 2008.
Capital Expenditures. We have made a substantial amount of capital investments over the past four years,
including the construction of the third kiln project at the Company’s Arkansas facilities (which began in the third
quarter 2005 and was completed in first quarter 2007), the acquisition of U.S. Lime Company — St. Clair in
December 2005, the acquisition of additional lime slurry operations in June 2006 and December 2008, the
acquisition of a new limestone grinding and bagging facility in Delta, Colorado in September 2005, the 2008 quarry
development in Arkansas and the drilling and completion of 30 natural gas wells in late 2005 through 2008.
24
Investing activities in 2008 totaled $18.3 million, compared to $18.2 million in 2007. Investments in 2008
included approximately $5.9 million for drilling and completion costs for the Company’s working interests in
natural gas wells, $4.1 million for quarry development in Arkansas and $2.5 million for acquisition of the assets and
business of a lime slurry operation in Ft. Worth, Texas.
Investments in 2007 included approximately $5.5 million for the third kiln project at Arkansas and approx-
imately $4.4 million for drilling and completion costs for the Company’s working interests in natural gas wells.
Contractual Obligations. The following table sets forth our contractual obligations as of December 31, 2008
(in thousands):
Payments Due by Period
Contractual Obligations
Total
1 Year
2-3 Years
4-5 Years
Long-term debt, including current
installments . . . . . . . . . . . . . . . . . . . . . . . . $46,354
Operating leases(1) . . . . . . . . . . . . . . . . . . . . $ 5,770
Limestone mineral leases. . . . . . . . . . . . . . . . $ 1,219
Purchase obligations(2) . . . . . . . . . . . . . . . . . $ 1,723
Other liabilities(3)(4) . . . . . . . . . . . . . . . . . . . $ 1,127
5,000
2,035
78
1,723
137
10,000
2,442
146
—
346
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $56,193
8,973
12,934
14,687
683
136
—
361
15,867
More than
5 Years
16,667
610
859
—
283
18,419
(1) Represents operating leases for mobile equipment, railcars and corporate office space that are either non-
cancelable or subject to significant penalty upon cancellation.
(2) Approximately $968 thousand of these obligations are to complete a highway bridge as part of the quarry
development at our Arkansas facilities.
(3) Does not include $418 thousand unfunded projected benefit obligation for a defined benefit pension plan.
Future required contributions, if any, are subject to actuarial assumptions and future earnings on plan assets.
The Company plans to make a contribution of $333 thousand to the plan in 2009. See Note 6 of Notes to
Consolidated Financial Statements.
(4) Does not include $5.4 million mark-to-market liability for the Company’s interest rate hedges.
Liquidity. At December 31, 2008, we had drawn $4.7 million on our $30 million Revolving Facility. We
believe that cash on hand, funds generated from operations and remaining amounts available under the Revolving
Facility will be sufficient to meet our operating needs, ongoing capital needs and debt service for 2009.
Additionally, with our cash flows from our Lime and Limestone Operations and Natural Gas Interests and
remaining amounts available from our $30.0 million Revolving Facility, we believe we will have sufficient capital
resources to meet our liquidity needs for the near future.
Off-Balance Sheet Arrangements. We do not utilize off-balance sheet financing arrangements; however, we
lease some of our equipment used in our operations under non-cancelable operating lease agreements and have
various limestone mineral leases. As of December 31, 2008, the total future lease payments under our various
operating and mineral leases totaled $5.8 million and $1.2 million, respectively, and are due in payments as
summarized in the table above.
25
NEW ACCOUNTING PRONOUNCEMENTS.
Fair Value Accounting.
In September 2006, the Financial Accounting Standards Board (the “FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”).
SFAS 157 created a single definition of fair value, along with a conceptual framework to measure fair value.
SFAS 157 defines fair value as “the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date.” SFAS 157 requires the Company to
apply valuation techniques that (1) place greater reliance on observable inputs and less reliance on unobservable
inputs and (2) are consistent with the market approach, the income approach, and/or the cost approach. SFAS 157
also requires the Company to include enhanced disclosures of fair value measurements in its financial statements.
SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and for
interim periods that fall within those fiscal years. On February 12, 2008, the FASB Staff issued FASB Staff Position
(“FSP”) No. 157-2 that delayed for one year the effective date of SFAS 157 for most nonfinancial assets and
nonfinancial liabilities. Provisions of the statement are to be applied prospectively except in limited situations.
SFAS 157 was adopted by the Company on January 1, 2008 for financial assets and liabilities and had no effect on
the Company’s financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement No. 115” (“SFAS 159”), which allows measurement at
fair value of eligible financial assets and liabilities that are not otherwise measured at fair value. SFAS 159 also
establishes presentation and disclosure requirements designed to draw comparison between the different mea-
surement attributes that the Company elects for similar types of assets and liabilities. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. SFAS 159 was adopted by the Company on January 1, 2008 and had no
effect on the Company’s financial statements.
Business Combinations.
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”
(“SFAS 141(R)”). SFAS 141(R) expands the definition of transactions and events that qualify as business
combinations; requires that the full value of acquired assets and liabilities, including contingent liabilities, be
recorded at the fair value determined on the acquisition date and changes thereafter in valuation to be reflected in
revenue, not goodwill; changes the recognition timing for valuation; and requires acquisition costs to be expensed as
incurred. This provision will change the Company’s accounting for acquisitions after January 1, 2009.
Hedging Activities.
In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative
Instruments and Hedging Activities” (“SFAS 161”), which amends SFAS No. 133 “Accounting for Derivative
Instruments and Hedging Activities,” and expands disclosures to include information about the fair value of
derivatives, related credit risks and a company’s strategies and objectives for using derivatives. SFAS 161 is
effective for fiscal periods beginning on or after November 15, 2008. SFAS 161 was adopted by the Company on
January 1, 2009 and will have no effect on the Company’s financial statements.
Intangible Assets Lives.
In April 2008, the FASB Staff issued FSP No. 142-3, “Determination of the Useful
Life of Intangible Assets” (“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a recognized intangible asset under
SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). The intent of FSP 142-3 is to improve
the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected
cash flows used to measure the fair value of the asset under SFAS 141(R) and other applicable accounting literature.
FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008 and must
be applied prospectively to intangible assets acquired after the effective date. FSP 142-3 was adopted by the
Company on January 1, 2009 and will have no effect on the Company’s financial statements.
Accounting Principles.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and
the framework for selecting the principles used in the preparation of financial statements of nongovernmental
entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy).
SFAS 162 will become effective 60 days following SEC approval of Public Company Accounting Oversight Board
amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted
26
Accounting Principles.” The adoption of SFAS 162 will have no effect on the Company’s consolidated financial
statements.
Pension and Postretirement Benefit Plans. On December 30, 2008, the FASB Staff issued FSP No. 132(R)-1,
“Employers’ Disclosure about Post Retirement Benefit Plan Assets” (“FSP 132(R)-1”). FSP 132(R)-1 requires
greater transparency in an employer’s disclosures about plan assets of a defined benefit pension or other
postretirement plan. FSP 132(R)-1 requires employers to consider the following objectives in providing more
detailed disclosures about plan assets: (1) how investment decisions are made, (2) the major categories of plan
assets, (3) the inputs and valuation techniques used to measure fair values of plan assets, (4) the effect on fair value
measurements using level 3 measurements on changes in plan assets for the period, and (5) significant concen-
trations of risk within plan assets. FSP 132(R)-1 is effective for fiscal years ending after December 15, 2009. The
Company will adopt FSP 132(R)-1 effective January 1, 2010, and is currently determining the effect, if any, this
pronouncement will have on its financial statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
COMMODITY PRICE RISK.
We are exposed to commodity price risk related to the price volatility of natural gas utilized at our plants. From
time to time, we enter into forward purchase contracts for the delivery of a portion of our natural gas requirements.
At December 31, 2008, we had committed to purchase 12,700 MMBTU per month for January 2009 at a price of
$6.98 per MMBTU. As of December 31, 2008, the market price for deliveries in January 2009 was approximately
$6.14. We recorded a mark-to-market adjustment resulting in a increase of approximately $11 thousand in labor and
other operating expenses at December 31, 2008.
INTEREST RATE RISK.
We are exposed to changes in interest rates, primarily as a result of floating interest rates on our Term Loan,
Draw Term Loan and Revolving Facility. At December 31, 2008, we had $51.4 million of indebtedness outstanding
under floating rate debt. We have entered into interest rate swap agreements to swap floating rates for fixed rates at
4.695%, plus the applicable LIBOR margin, through maturity on the Term Loan balance of $30 million, and 4.875%
and 5.50% on $12.5 million and $4.2 million, respectively, plus the applicable LIBOR margin, through maturity on
the $20.0 million Draw Term Loan balance. Our $4.7 million borrowings, at December 31, 2008, under the
Revolving Facility are subject to interest rate risk. Assuming no additional borrowings or repayments on the
Revolving Facility, a 100 basis point increase in interest rates would result in an increase in interest expense and a
decrease in income before taxes of approximately $47 thousand per year. This amount has been estimated by
calculating the impact of such hypothetical interest rate increase on our non-hedged, floating rate debt of
$4.7 million outstanding under the Revolving Facility at December 31, 2008 and assuming it remains outstanding
over the next 12 months. Additional borrowings under the Revolving Facility would increase this estimate. See
Note 3 of Notes to Consolidated Financial Statements.
27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Index to Consolidated Financial Statements.
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2008 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006 . . . . . . . . 31
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2008, 2007 and
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Consolidated Statements of Cash Flows for the Years Ended December 30, 2008, 2007 and 2006 . . . . . 33
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
28
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
United States Lime & Minerals, Inc.
We have audited the accompanying consolidated balance sheets of United States Lime & Minerals, Inc. and
subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’
equity and cash flows for each of the three years in the period ended December 31, 2008. These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board
(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. The Company is not required to have, nor were
we engaged to perform, an audit of the Company’s internal control over financial reporting. Our audit included
consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that 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 financial position of United States Lime & Minerals, Inc. and subsidiaries as of December 31, 2008 and 2007,
and the results of their operations and their cash flows for each of the three years in the period ended December 31,
2008, in conformity with accounting principles generally accepted in the United States of America.
Dallas, Texas
March 5, 2009
/s/ GRANT THORNTON LLP
29
United States Lime & Minerals, Inc.
Consolidated Balance Sheets
December 31,
2007
2008
(Dollars in thousands,
except per share data)
Current assets:
ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Trade receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
836
14,492
12,297
1,336
28,961
Property, plant and equipment:
Mineral reserves and land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proved natural gas properties, successful-efforts method . . . . . . . . . . . . . . . . . . . . .
Buildings and building and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automotive equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less accumulated depreciation and depletion . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15,040
13,794
3,322
184,526
826
1,557
219,065
(82,501)
Other assets, net
Property, plant and equipment, net
136,564
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
604
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $166,129
$
1,079
13,210
9,887
1,155
25,331
10,595
7,834
3,170
189,819
1,227
1,456
214,101
(81,950)
132,151
745
$158,227
Current liabilities:
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current installments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt, excluding current installments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,000
6,972
4,251
16,223
46,354
5,417
3,688
71,682
$
5,000
7,980
3,485
16,465
54,037
2,740
3,280
76,522
Commitments and contingencies (Note 8)
Stockholders’ equity:
Preferred stock, $5.00 par value; authorized 500,000 shares; none issued or
outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common stock, $0.10 par value; authorized 15,000,000 shares; 6,352,556 and
6,317,401 shares issued at December 31, 2008 and 2007, respectively . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less treasury stock at cost, 4,470 and 1,982 shares at December 31, 2008 and 2007,
respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
94,447
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $166,129
635
14,853
(3,911)
83,014
(144)
632
14,200
(1,641)
68,581
(67)
81,705
$158,227
The accompanying notes are an integral part of these consolidated financial statements.
30
United States Lime & Minerals, Inc.
Consolidated Statements of Income
2008
Years Ended December 31,
2007
(Dollars in thousands, except per share
amounts)
2006
Revenues
Lime and limestone operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$126,165
16,191
$116,569
8,667
$114,113
4,577
142,356
125,236
118,690
Cost of revenues:
Labor and other operating expenses
Lime and limestone operations . . . . . . . . . . . . . . . . . . . . . . . . . .
Natural gas interests. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation, depletion and amortization . . . . . . . . . . . . . . . . . . . . .
96,097
1,941
13,035
111,073
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31,283
Selling, general and administrative expenses, including depreciation and
amortization expense of $440, $417 and $374 in 2008, 2007 and 2006,
respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,966
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,317
85,095
1,661
12,464
99,220
26,016
80,158
725
9,770
90,653
28,037
7,644
18,372
7,013
21,024
Other expense (income):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,486
420
3,906
4,287
(254)
4,033
3,106
(222)
2,884
Income before income taxes and cumulative effect of change in
accounting principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19,411
4,978
14,339
3,893
18,140
4,889
Income before cumulative effect of change in accounting
principle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14,433
10,446
13,251
Cumulative effect of change in accounting principle, net of $190 income
tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
(550)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 14,433
$ 10,446
$ 12,701
Net income per share of common stock:
Basic before cumulative effect of change in accounting principle . . .
Cumulative effect of change in accounting principle . . . . . . . . . . . . .
Diluted before cumulative effect of change in accounting principle . .
Cumulative effect of change in accounting principle . . . . . . . . . . . . .
$
$
$
$
2.29
—
2.29
2.27
—
2.27
$
$
$
$
1.67
—
1.67
1.65
—
1.65
$
$
$
$
2.15
(0.09)
2.06
2.11
(0.09)
2.02
The accompanying notes are an integral part of these consolidated financial statements.
31
United States Lime & Minerals, Inc.
Consolidated Statements of Stockholders’ Equity
Years Ended December 31, 2008, 2007 and 2006
Balances at January 1, 2006 . . . . . . . . . . .
Stock options exercised, including $113
tax benefit . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . .
Warrants exercised . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment, net
of $40 tax expense . . . . . . . . . . . . . . .
Mark to market of interest rate hedge . . . .
Comprehensive income . . . . . . . . . . . . . .
Balances at December 31, 2006 . . . . . . . . .
Stock options exercised, including $58 tax
benefit . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . .
Treasury shares purchased . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment, net
of $13 tax expense . . . . . . . . . . . . . . .
Mark to market of interest rate hedge . . . .
Comprehensive (loss) income . . . . . . . . .
Balances at December 31, 2007 . . . . . . . . .
Stock options exercised, including $4 tax
benefit . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . .
Treasury shares purchased . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . .
Minimum pension liability adjustment, net
of $95 tax benefit . . . . . . . . . . . . . . . .
Mark to market of interest rate hedge, net
of $1,952 cumulative tax benefit . . . . . .
Comprehensive (loss) income . . . . . . . . .
Common Stock
Shares
Outstanding Amount
Additional
Paid-In
Capital
Accumulated
Other
Comprehensive
(Loss) Income
(Dollars in thousands)
Retained
Earnings
Treasury
Stock
Total
6,013,784
$601
$12,401
$ (215)
$45,434
$ — $58,221
69,200
—
127,286
—
—
—
—
7
—
13
—
—
—
—
238
395
476
—
—
—
—
6,210,270
621
13,510
82,081
25,050
(1,982)
—
—
—
—
8
3
—
—
—
—
—
98
592
—
—
—
—
—
6,315,419
632
14,200
16,455
18,700
(2,488)
—
—
—
—
1
2
—
—
—
—
—
28
625
—
—
—
—
—
—
—
—
—
43
399
442
227
—
—
—
—
22
(1,890)
(1,868)
(1,641)
—
—
—
—
(166)
(2,104)
(2,270)
—
—
—
12,701
—
—
12,701
58,135
—
—
—
10,446
—
—
10,446
68,581
—
—
—
14,433
245
—
395
—
—
489
— 12,701
—
—
43
399
— 13,143
— 72,493
106
—
595
—
(67)
(67)
— 10,446
—
—
—
22
(1,890)
8,578
(67)
81,705
29
—
627
—
(77)
(77)
— 14,433
—
—
—
—
(166)
(2,104)
14,433
— 12,163
Balances at December 31, 2008 . . . . . . . . .
6,348,086
$635
$14,853
$(3,911)
$83,014
$(144)
$94,447
The accompanying notes are an integral part of these consolidated financial statements
32
United States Lime & Minerals, Inc.
Consolidated Statements of Cash Flows
2008
Years Ended December 31,
2007
(Dollars in thousands)
2006
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,433
$ 10,446
$ 12,701
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation, depletion and amortization . . . . . . . . . . . . . . . . . .
Amortization of financing costs . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on sale of property, plant and equipment . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities, net of the effects of
acquisitions of businesses:
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,475
22
2,360
33
627
(579)
(2,398)
(181)
(90)
(401)
(1,545)
12,881
22
1,806
41
595
(208)
(1,311)
(242)
(51)
865
(371)
10,144
23
1,823
45
395
(1,642)
(871)
704
192
2,274
88
Net cash provided by operating activities . . . . . . . . . . . . . . . . . .
25,756
24,473
25,876
INVESTING ACTIVITIES:
Purchase of property, plant and equipment . . . . . . . . . . . . . . . . . . . . .
Acquisitions of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sale of property, plant and equipment . . . . . . . . . . . . .
(15,760)
(2,529)
11
(18,227)
—
56
(35,552)
(1,856)
17
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . .
(18,278)
(18,171)
(37,391)
FINANCING ACTIVITIES:
(Repayments of) proceeds from revolving credit facilities, net
. . . . . .
Proceeds from term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Repayments of term loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercise of stock options and warrants . . . . . . . . . . . . .
Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefits related to exercise of stock options . . . . . . . . . . . . . . . . .
(2,683)
—
(5,000)
29
(77)
10
(605)
—
(5,000)
106
(67)
58
7,974
5,000
(3,333)
734
—
113
Net cash (used in) provided by financing activities . . . . . . . . . . .
(7,721)
(5,508)
10,488
Net (decrease) increase in cash and cash equivalents . . . . . . . . . .
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . .
(243)
1,079
794
285
(1,027)
1,312
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . $
836
$ 1,079
$
285
The accompanying notes are an integral part of these consolidated financial statements.
33
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
Years Ended December 31, 2008, 2007 and 2006
(1) Summary of Significant Accounting Policies
(a) Organization
United States Lime & Minerals, Inc. (the “Company”) is a manufacturer of lime and limestone products,
supplying primarily the construction, steel, municipal sanitation and water treatment, aluminum, paper, glass, roof
shingle and agriculture industries. The Company is headquartered in Dallas, Texas and operates lime and limestone
plants and distribution facilities in Arkansas, Colorado, Louisiana, Oklahoma and Texas through its wholly owned
subsidiaries, Arkansas Lime Company, Colorado Lime Company, Texas Lime Company, U.S. Lime Company,
U.S. Lime Company — Shreveport, U.S. Lime Company — St. Clair and U.S. Lime Company — Transportation.
In addition, the Company, through its wholly owned subsidiary, U.S. Lime Company — O & G, LLC, has royalty
and non-operating working interests in natural gas wells located in Johnson County, Texas, in the Barnett Shale
Formation.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-
company balances and transactions have been eliminated.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and judgments that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ from those estimates and judgments.
(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 maturities, at the time of purchase, 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:
Year Ended December 31,
2007
2006
2008
Cash paid during the year for:
Interest, net of $0, $130 and $940 capitalized in 2008, 2007 and
2006, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,426
$4,265
$3,048
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,954
$3,893
$2,933
(e) Revenue Recognition
The Company recognizes revenue for its lime and limestone operations in accordance with the terms of its
purchase orders, contracts or purchase agreements, which are upon shipment, and when payment is considered
probable. Revenues include external freight billed to customers with related costs in cost of revenues. The
Company’s returns and allowances are minimal. External freight billed to customers included in revenues was
$28,523, $25,411 and $26,479 for 2008, 2007 and 2006, respectively, which approximates the amount of external
freight billed to customers included in cost of revenues. Sales taxes billed to customers are not included in revenues.
For its natural gas interests, the Company recognizes revenue in the month of production and delivery.
34
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
(f) Fair Values of Financial Instruments
In September 2006, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial
Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 created a single
definition of fair value, along with a conceptual framework to measure fair value. SFAS 157 defines fair value as
“the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.” SFAS 157 requires the Company to apply valuation techniques that
(1) place greater reliance on observable inputs and less reliance on unobservable inputs and (2) are consistent with
the market approach, the income approach, and/or the cost approach. SFAS 157 also requires the Company to
include enhanced disclosures of fair value measurements in its financial statements. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods that fall
within those fiscal years. SFAS 157 was adopted by the Company on January 1, 2008 and had no effect on the
Company’s financial statements.
The carrying values of cash and cash equivalents, trade receivables, other current assets, accounts payable and
accrued expenses approximate fair value due to the short maturity of these instruments. See Note 3 for discussion of
debt fair values, which also approximate carrying values. The Company’s interest rate hedges are carried at fair
value at December 31, 2008 and 2007. See Notes 1(p) and 3. Financial liabilities measured at fair value on a
recurring basis are summarized below:
Interest rate swap
December 31, 2008
Fair Value Measurements as of December 31, 2008
Quoted Prices in
Active Markets for
Identical Assets
(Liabilities)
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant Other
Unobservable
Inputs
(Level 3)
liabilities . . . . . . . . . .
$(5,367)
—
(5,367)
—
Valuation
Technique
Cash flows
approach
(g) Concentration of Credit Risk and Trade Receivables
Financial instruments that potentially subject the Company to a concentration of credit risk consist principally
of cash and cash equivalents, trade receivables and derivative financial instruments. The Company places its cash
and cash equivalents with high credit quality financial institutions and its derivative financial instruments with
financial institutions and other firms that management believes have high credit ratings. For a discussion of the
credit risks associated with the Company’s derivative financial instruments, see Notes 1(p) and 3.
The majority of the Company’s trade receivables are unsecured. Payment terms for all trade receivables are
based on the underlying purchase orders, contracts or purchase agreements. Credit losses relating to trade
receivables consistently have been within management expectations and historical trends. Uncollected trade
receivables are charged-off when identified by management to be unrecoverable. Trade receivables are presented
net of the related allowance for doubtful accounts, which totaled $326 and $350 at December 31, 2008 and 2007,
respectively. Additions and write-offs to the Company’s allowance for doubtful accounts during the years ended
December 31 are as follows:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$350
12
(36)
$366
7
(23)
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$326
$350
2008
2007
35
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
(h)
Inventories
Inventories are valued principally at the lower of cost, determined using the average cost method, or market.
Costs for finished goods and raw materials include materials, labor and production overhead. A summary of
inventories is as follows:
December 31,
2008
2007
Lime and limestone inventories:
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 5,314
1,956
Service parts inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,270
5,027
$3,978
1,437
5,415
4,472
$12,297
$9,887
(i) Property, Plant and Equipment
For major constructed assets, the capitalized cost includes the price paid by the Company for labor and
materials plus interest and internal and external project management costs that are directly related to the constructed
assets. Machinery and equipment at December 31, 2008 and 2007 included approximately $1,776 and $1,793,
respectively, of construction in progress for various capital projects. Mineral reserves and land included $4,227 of
quarry development costs incurred through December 31, 2008. Total interest costs of $0 and $130 were capitalized
for the years ended December 31, 2008 and 2007, respectively. Depreciation of property, plant and equipment is
being provided for by the straight-line method over estimated useful lives as follows:
Buildings and building improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 20 years
Machinery and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 20 years
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 - 10 years
3 - 8 years
Automotive equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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-lived assets for impairment in accordance with the provisions of SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). SFAS 144 requires that, when
events or circumstances indicate that the carrying amount of an asset may not be recoverable, the Company should
determine if impairment of value exists. If the estimated undiscounted future net cash flows are less than the
carrying amount of the asset, an impairment exists, and an impairment loss must be calculated and recorded. If an
impairment exists, the impairment loss is calculated based on the excess of the carrying amount of the asset over the
asset’s fair value. Any impairment loss is treated as a permanent reduction in the carrying value of the asset.
Through December 31, 2008, no events or circumstances arose which would require the Company to record a
provision for impairment of its long-lived assets.
(j) Successful-Efforts Method Used for Natural Gas Interests
The Company uses the successful-efforts method to account for oil and gas exploration and development
expenditures. Under this method, drilling and completion costs for successful exploratory wells and all develop-
ment well costs are capitalized and depleted using the units-of-production method. Costs to drill exploratory wells
that do not find proved reserves are expensed.
36
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
(k) Asset Retirement Obligations
In accordance with the guidelines of SFAS No. 143, “Accounting for Asset Retirement Obligations,” the
Company recognizes legal obligations for reclamation and remediation associated with the retirement of long-lived
assets at their fair value at the time the obligations are incurred (“AROs”). Over time, the liability for AROs is
recorded at its present value each period through accretion expense, and the capitalized cost is depreciated over the
useful life of the related asset. Upon settlement of the liability, the Company either settles the AROs for the recorded
amount or recognizes a gain or loss. As of December 31, 2008 and 2007, the Company’s AROs included in other
liabilities were $1,145 and $1,007, respectively, including $41 and $22 AROs for its Natural Gas Interests at
December 31, 2008 and 2007, respectively. Only $41 of assets associated with the Company’s AROs are not fully
depreciated. During 2008 and 2007, the Company spent $30 and $44, and recognized accretion expense of $41 and
$39, respectively, on its AROs.
The AROs were estimated based on studies and the Company’s process knowledge and estimates, and are
discounted using an appropriate interest rate. The AROs are adjusted when further information warrants an
adjustment. The Company estimates annual expenditures of approximately $50 to $100 in years 2009 through 2013
relating to its AROs.
(l) Other Assets
Other assets consist of the following:
Intangible assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2008
2007
$368
151
85
$604
$573
172
—
$745
Deferred financing costs are expensed over the life of the related debt.
Intangible assets are amortized over their expected useful lives. Amortization expense for these assets totaled
$209, $203 and $125 for the years ended December 31, 2008, 2007 and 2006, respectively. Accumulated
amortization at December 31, 2008 and 2007 that was netted against the intangible assets was $580 and $371,
respectively. The Company estimates annual amortization expense for intangibles of approximately $209 in 2009,
$133 in 2010, $18 in 2011 and $8 in 2012.
Through December 31, 2005, the Company capitalized certain stripping costs as deferred stripping costs that
were included in other assets, all of which related to Arkansas Lime Company, which were attributed to reserves
that had been exposed and amortized using the units-of-production method. The FASB Emerging Issues Task Force
(“EITF”) reached a consensus that stripping costs incurred after a mine begins production are costs of production
and therefore should be accounted for as a component of inventory costs (EITF Issue No. 04-6). The EITF stated the
new required accounting for stripping costs would be effective for years beginning after December 15, 2005, with
early adoption permitted. As a result of adopting the new standard, the Company wrote off the $740 of previously
capitalized deferred stripping costs in the first quarter 2006.
(m) 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 at their present value when environmental
assessments and/or remedial efforts are probable, and the costs can be reasonably estimated. Generally, the timing
37
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
of these accruals will coincide with completion of a feasibility study or the Company’s commitment to a formal plan
of action.
In part in response to requirements of environmental regulatory agencies, the Company incurred capital
expenditures related to environmental matters of approximately $1,000 in 2008, $1,040 in 2007 and $400 in 2006.
(n)
Income Per Share of Common Stock
The following table sets forth the computation of basic and diluted income per common share:
Year Ended December 31,
2007
2006
2008
Net income for basic and diluted income per common
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
14,433
$
10,446
$
12,701
Weighted-average shares for basic income per common
share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6,305,164
6,259,663
6,158,543
Effect of dilutive securities:
Restricted shares of stock . . . . . . . . . . . . . . . . . . . . .
Employee and director stock options(1) . . . . . . . . . . .
25,959
31,822
14,625
58,414
—
126,368
Adjusted weighted-average shares and assumed exercises
for diluted income per common share . . . . . . . . . . . . . .
6,362,945
6,332,702
6,284,911
Basic net income per common share . . . . . . . . . . . . . . . $
Diluted net income per common share . . . . . . . . . . . . . $
2.29
2.27
$
$
1.67
1.65
$
$
2.06
2.02
(1) Excludes 53,250, 10,000 and 8,000 stock options in 2008, 2007 and 2006, respectively, because they were
antidilutive.
(o) Stock-Based Compensation
As required by SFAS No. 123 (revised 2004), “Share-Based Payments” (“SFAS 123(R)”), the Company
expenses all stock-based payments to employees and directors, including grants of stock options and restricted
stock, in the Company’s Consolidated Statements of Income based on their fair values. The Company adopted the
provisions of SFAS 123(R) on January 1, 2006 using the modified prospective method, in which compensation cost
is recognized ratably over the vesting period based on the requirements of SFAS 123(R) for all stock-based awards
granted after the adoption date and for all such awards granted prior to the adoption date that were unvested on the
adoption date.
(p) Derivative Instruments and Hedging Activities
The Company follows SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities, as
amended” (“SFAS 133”), which requires that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded on the balance sheet as either an asset or liability measured at its fair
value. SFAS 133 requires that changes in the derivative’s fair value be recognized currently in earnings unless
specific hedge accounting criteria are met. The Company estimates fair value utilizing the cash flows valuation
technique. The fair value of derivative contracts that expire in less than one year are recognized as current assets or
liabilities. Those that expire in more than one year are recognized as long-term assets or liabilities. Derivative
financial instruments that are not accounted for as hedges are adjusted to fair value through income. If the derivative
is designated as a cash flow hedge, changes in fair value are recognized in other comprehensive income (loss) until
the hedged item is recognized in earnings. See Notes 3 and 4.
38
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
(q)
Income Taxes
The Company utilizes the asset and liability approach in its reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount more likely than not to be realized. Income
tax related interest and penalties are included in income tax expense.
In July 2006, the FASB issued FASB Interpretation 48, “Accounting for Uncertainty in Income Taxes: an
interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48, which clarifies SFAS No. 109, “Accounting for
Income Taxes” (“SFAS 109”), establishes the criterion that an individual tax position has to meet for some or all of
the benefits of that position to be recognized in the Company’s financial statements. On initial application, FIN 48
applied to all tax positions for which the statute of limitations remained open. Only tax positions that meet the more-
likely-than-not recognition threshold are recognized. FIN 48 is effective for fiscal years beginning after Decem-
ber 15, 2006, and was adopted by the Company on January 1, 2007. The adoption of FIN 48 had no effect on the
Company’s financial statements.
(r) Comprehensive Income (Loss)
The Company follows SFAS No. 130, “Reporting Comprehensive Income,” which provides standards for
reporting and displaying comprehensive income (loss). See Notes 3, 4 and 6.
(2) New Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157
created a single definition of fair value, along with a conceptual framework to measure fair value. SFAS 157 defines
fair value as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date.” SFAS 157 requires the Company to apply valuation
techniques that (1) place greater reliance on observable inputs and less reliance on unobservable inputs and (2) are
consistent with the market approach, the income approach, and/or the cost approach. SFAS 157 also requires the
Company to include enhanced disclosures of fair value measurements in its financial statements. SFAS 157 is
effective for financial statements issued for fiscal years beginning after November 15, 2007, and for interim periods
that fall within those fiscal years. On February 12, 2008, the FASB Staff issued FASB Staff Position (“FSP”)
No. 157-2 that delayed for one year the effective date of SFAS 157 for most nonfinancial assets and nonfinancial
liabilities. Provisions of the statement are to be applied prospectively except in limited situations. SFAS 157 was
adopted by the Company on January 1, 2008 for financial assets and liabilities and had no effect on the Company’s
financial statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement No. 115” (“SFAS 159”), which allows measurement at
fair value of eligible financial assets and liabilities that are not otherwise measured at fair value. SFAS 159 also
establishes presentation and disclosure requirements designed to draw comparison between the different mea-
surement attributes that the Company elects for similar types of assets and liabilities. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. SFAS 159 was adopted by the Company on January 1, 2008 and had no
effect on the Company’s financial statements.
In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations” (“SFAS 141(R)”).
SFAS 141(R) expands the definition of transactions and events that qualify as business combinations; requires
that the full value of acquired assets and liabilities, including contingent liabilities, be recorded at the fair value
determined on the acquisition date and changes thereafter in valuation to be reflected in revenue, not goodwill;
39
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
changes the recognition timing for valuation; and requires acquisition costs to be expensed as incurred. This
provision will change the Company’s accounting for acquisitions after January 1, 2009.
In March 2008, the FASB issued SFAS No. 161, “Disclosures About Derivative Instruments and Hedging
Activities” (“SFAS 161”), which amends SFAS No. 133, “Accounting for Derivative Instruments and Hedging
Activities,” and expands disclosures to include information about the fair value of derivatives, related credit risks
and a company’s strategies and objectives for using derivatives. SFAS 161 is effective for fiscal periods beginning
on or after November 15, 2008. SFAS 161 was adopted by the Company on January 1, 2009 and will have no effect
on the Company’s financial statements.
In April 2008, the FASB Staff issued FSP No. 142-3, “Determination of the Useful Life of Intangible Assets”
(“FSP 142-3”). FSP 142-3 amends the factors that should be considered in developing renewal or extension
assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and
Other Intangible Assets” (“SFAS 142”). The intent of FSP 142-3 is to improve the consistency between the useful
life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair
value of the asset under SFAS 141(R) and other applicable accounting literature. FSP 142-3 is effective for financial
statements issued for fiscal years beginning after December 15, 2008 and must be applied prospectively to
intangible assets acquired after the effective date. FSP 142-3 was adopted by the Company on January 1, 2009 and
will have no effect on the Company’s financial statements.
In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles”
(“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the
principles used in the preparation of financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (the GAAP hierarchy). SFAS 162 will become effective
60 days following Securities and Exchange Commission (“SEC”) approval of Public Company Accounting
Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles.” The adoption of SFAS 162 will have no effect on the Company’s consolidated
financial statements.
On December 30, 2008, the FASB Staff issued FSP No. 132(R)-1, “Employers’ Disclosure about Post
Retirement Benefit Plan Assets” (“FSP 132(R)-1”). FSP 132(R)-1 requires greater transparency in an employer’s
disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP 132(R)-1 requires
employers to consider the following objectives in providing more detailed disclosures about plan assets: (1) how
investment decisions are made, (2) the major categories of plan assets, (3) the inputs and valuation techniques used
to measure fair values of plan assets, (4) the effect on fair value measurements using level 3 measurements on
changes in plan assets for the period, and (5) significant concentrations of risk within plan assets. FSP 132(R)-1 is
effective for fiscal years ending after December 15, 2009. The Company will adopt FSP 132(R)-1 effective
January 1, 2010, and is currently determining the effect, if any, this pronouncement will have on its financial
statements.
(3) Banking Facilities and Other Debt
On October 19, 2005, the Company entered into an amendment to its credit agreement (the “2005 Amend-
ment”) with a bank (the “Lender”) primarily to increase the loan commitments and extend the maturity dates. As a
result of the 2005 Amendment, the Company’s credit agreement now includes a ten-year $40,000 term loan (the
“Term Loan”), a ten-year $20,000 multiple draw term loan (the “Draw Term Loan”) and a five-year $30,000
revolving credit facility (the “Revolving Facility”) (collectively, the “Credit Facilities”). The proceeds from the
Term Loan were used primarily to repay the outstanding balances on the term loan and revolving credit facility
under the credit agreement prior to the 2005 Amendment. In December 2005, the Company drew down $15,000 on
the Draw Term Loan primarily to acquire U.S. Lime Company — St. Clair. The Company drew down the remaining
$5,000 in the second quarter 2006, which was primarily used to pay construction costs of the third kiln at the
40
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
Company’s Arkansas plant. The Company had $322 worth of letters of credit issued and $4,687 outstanding on the
Revolving Facility at December 31, 2008.
The Term Loan requires quarterly principal payments of $833, which began on March 31, 2006, equating to a
12-year amortization, with a final principal payment of $7,500 due on December 31, 2015. The Draw Term Loan
requires quarterly principal payments of $417, based on a 12-year amortization, which began on March 31, 2007,
with a final principal payment on December 31, 2015 equal to any remaining principal then-outstanding. The
Revolving Facility is scheduled to mature on April 2, 2012. The maturity of the Term Loan, the Draw Term Loan
and the Revolving Facility can be accelerated if any event of default, as defined under the Credit Facilities, occurs.
The Credit Facilities bear interest, at the Company’s option, at either LIBOR plus a margin of 1.125% to
2.125%, or the Lender’s Prime Rate plus a margin of minus 0.625% to plus 0.375%. The margins are determined
quarterly in accordance with a pricing grid based upon the ratio of the Company’s total funded senior indebtedness
to earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) for the 12 months ended on
the last day of the most recent calendar quarter (the “Cash Flow Leverage Ratio”). Based on the Company’s Cash
Flow Leverage Ratios for the twelve months ended June 30, September 30 and December 31, 2008, since July 30,
2008 the LIBOR margin and the Lender’s Prime Rate margin have been, and continue to be, 1.125% and minus
0.625%, respectively.
Through a hedge, the Company has fixed LIBOR at 4.695% on the $40,000 Term Loan for the period
December 30, 2005 through its maturity date, resulting in an interest rate of 5.82% based on the current LIBOR
margin of 1.125%. Effective December 30, 2005, the Company also entered into a hedge that fixed LIBOR at
4.875% on the $15,000 then-outstanding on the Draw Term Loan through its maturity date, resulting in an interest
rate of 6.00% based on the current LIBOR margin of 1.125%. Effective June 30, 2006, the Company entered into a
third hedge that fixed LIBOR at 5.50% on the remaining $5,000 of the Draw Term Loan through its maturity date,
resulting in an interest rate of 6.625% based on the current LIBOR margin of 1.125%. The Company designated all
of the hedges as cash flow hedges, and as such, changes in their fair market value will be included in other
comprehensive income (loss). The hedges have been effective. The Company will be exposed to credit losses in the
event of non-performance by the counterparty, Wells Fargo Bank, N.A., to the hedges. The Company marked its
interest rate hedges to market at December 31, 2008 and 2007, resulting in a liability of $5.4 million and
$1.3 million, respectively, due to interest rate declines, that are included in accrued expenses and other liabilities on
the Company’s balance sheets. The Company paid $634 in 2008 and received $290 and $314 during 2007 and 2006,
respectively, in quarterly settlement payments pursuant to its hedges which were reflected in interest expense.
Pursuant to a security agreement dated August 25, 2004 (the “Security Agreement”), the Credit Facilities are
secured by the Company’s existing and hereafter acquired tangible assets, intangible assets and real property. The
Credit Facilities and Security Agreement contain covenants that restrict the incurrence of debt, guarantees and liens
and place restrictions on capital investments and the sale of significant assets. The Company is also required to meet
a minimum debt service coverage ratio. The Credit Facilities provide that the Company may pay annual dividends,
not to exceed $1,500, so long as after such payment, the Company remains solvent and the payment does not cause
or result in any default or event of default as defined under the Credit Facilities.
On August 5, 2003, the Company, in a private placement, sold $14.0 million of subordinated notes (the “Sub
Notes”), which have been fully repaid. 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 our 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
investors are also entitled to certain registration rights for the resale of their warrant shares. The last of the warrants
were exercised in 2006 as follows:
a) In February 2006, Credit Trust S.A.L. (“Credit Trust”), an affiliate of Inberdon Enterprises Ltd, the
Company’s majority shareholder, exercised for cash its warrant to acquire 63,643 shares of common stock. The
41
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
exercise price was $3.84 per share of common stock, and Credit Trust paid the Company $244. The Company
issued 63,643 shares of common stock to Credit Trust.
b) In February 2006, ABB Finance Inc. exercised for cash its warrant to acquire 63,643 shares of
common stock. The exercise price was $3.84 per share of common stock, and ABB Finance Inc. paid the
Company $244. The Company issued 63,643 shares of common stock to ABB Finance Inc.
A summary of outstanding debt at the dates indicated is as follows:
Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Draw Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revolving Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less current installments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2008
December 31,
2007
$30,000
16,667
4,687
51,354
5,000
$33,333
18,334
7,370
59,037
5,000
Debt, excluding current installments . . . . . . . . . . . . . . . . . . . . . . . . . . .
$46,354
$54,037
As the Company’s debt bears interest at floating rates, the Company estimates that the carrying values of its
debt at December 31, 2008 and 2007 approximate fair value.
Principal amounts payable on the Company’s long-term debt outstanding as of December 31, 2008 are as
follows:
Total
$46,354
2009
$5,000
2010
$5,000
2011
$5,000
2012
$9,687
2013
$5,000
Thereafter
$16,667
(4) Accumulated Other Comprehensive Loss
The $3,911 and $1,641 accumulated other comprehensive loss at December 31, 2008 and 2007, respectively,
included $3,415 and $1,311, respectively, for the mark-to-market adjustment for the Company’s interest rate
hedges, and $496 and $330, respectively, for unfunded projected benefit obligations for the Company’s defined
benefit pension plan. See Notes 1(p), 1(r), 3 and 6.
(5)
Income Taxes
Income tax expense for the years ended December 31 is as follows:
Current income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,618
2,360
Deferred income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$2,087
1,806
$3,066
1,823
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,978
$3,893
$4,889
2008
2007
2006
42
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
A reconciliation of income taxes computed at the federal statutory rate to income tax expense for the years
ended December 31 is as follows:
2008
2007
2006
Percent of
pretax
income
Amount
Percent
of pretax
income
Percent
of pretax
income
Amount
Amount
Income taxes computed at the federal statutory
rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,794
(Reduction) increase in taxes resulting from:
Statutory depletion in excess of cost
35.0% $ 5,019
35.0% $ 6,090
35.0%
depletion . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,378)
(12.2)
(1,538)
(10.7)
(1,556)
(8.9)
Income tax benefit on cumulative effect of
change in accounting principle . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . .
State income taxes, net of federal income tax
—
—
benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
424
Recognition of previously reserved deferred
—
—
2.2
—
—
309
—
—
2.1
190
138
117
1.4
0.8
0.7
tax assets . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
138
Income tax expense . . . . . . . . . . . . . . . . . . . . . . $ 4,978
—
—
103
0.6
25.6% $ 3,893
(97)
—
7
0.7
27.1% $ 4,889
(0.6)
0.0
28.4%
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.
A summary of the Company’s deferred tax liabilities and assets is as follows:
Deferred tax liabilities
Lime and limestone property, plant & equipment . . . . . . . . . . . . . . . .
Natural gas interests drilling costs & equipment
. . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets
Alternative minimum tax credit carryforwards . . . . . . . . . . . . . . . . . .
Minimum pension liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value liability of interest rate hedges . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31,
2008
December 31,
2007
$ 11,575
3,706
171
15,452
(8,914)
(285)
(1,952)
(613)
(11,764)
$ 9,195
2,018
180
11,393
(7,356)
(190)
(567)
(8,113)
Deferred tax liabilities, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 3,688
$ 3,280
The Company had no federal net operating loss carryforwards at December 31, 2008. At December 31, 2008,
the Company had determined that, because of its recent income history and expectations of income in the future, its
deferred tax assets were fully realizable.
43
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
(6) Employee Retirement Plans
The Company has a noncontributory defined benefit pension plan (the “Corson Plan”) that covers substantially
all union employees previously employed by its wholly-owned subsidiary, Corson Lime Company. In 1997, the
Company sold substantially all of the assets of Corson Lime Company, and all benefits for participants in the Corson
Plan were frozen. During 1997 and 1998, the Company made contributions to the Corson Plan that were intended to
fully fund the benefits earned by the participants. The Company made no contributions to the Corson Plan from
1999 through 2002. In recent years, significant declines in the financial markets have unfavorably impacted plan
asset values, resulting in an unfunded projected benefit obligation of $418 and $134 at December 31, 2008 and
2007, respectively. The Company recorded other comprehensive loss of $166, net of $95 tax benefit, and
comprehensive income of $22, net of $13 tax expense, for the years ended December 31, 2008 and 2007,
respectively. The Company made no contribution to the Corson Plan in 2008, a contribution of $230 in 2007 and
anticipates making a contribution of $333 in 2009.
In consultation with the investment advisor for the Corson Plan, the administrative committee, consisting of
management employees appointed by the Company’s Board of Directors, establishes the investment objective for
the Corson Plan’s assets. The investment advisor makes all specific investment decisions. The Company estimates
that the average future long-term rate of return for the Corson Plan assets to be 7.75% based on an asset allocation
policy of 50% to 70% to common equities, with the remainder allocated to fixed income securities. The Company’s
long-term rate of return estimate is based on past performance of equity and fixed income securities and the Corson
Plan’s asset allocations.
The following table sets forth the asset allocation for the Corson Plan at at December 31, 2008 and
November 30, 2007 (the “Measurement Dates”):
2008
2007
Equity securities and funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Institutional bond funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
40.4% 55.4%
49.9
9.7
37.0
7.6
100.0% 100.0%
44
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
The following table sets forth the funded status of the Corson Plan accrued pension benefits at the
Measurement Dates:
2008
2007
Change in projected benefit obligation:
Projected benefit obligation at beginning of year . . . . . . . . . . . . . . . . . . . . . . . $1,729
104
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(206)
Actuarial loss on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(117)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,757
97
(10)
(115)
Projected benefit obligation at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,510
$1,729
Change in plan assets:
Fair value of plan assets at beginning of year. . . . . . . . . . . . . . . . . . . . . . . . . . $1,595
—
Employer contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(386)
Actual (loss) gain on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(117)
Benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$1,391
230
89
(115)
Fair value of plan assets at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,092
$1,595
Underfunded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (418)
$ (134)
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,510
$1,729
The net liability recognized in the Consolidated Balance Sheets at December 31 consists of the following:
2008
2007
Accrued benefit cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$418
$134
The weighted average assumptions used in the measurement of the Corson Plan benefit obligation at the
Measurement Dates are as follows:
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected long-term return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.00% 5.75%
7.75% 7.75%
The following table provides the components of the Corson Plan net periodic benefit cost:
2008
2007
Year Ended December 31,
2008
2006
2007
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of net actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 104
(133)
53
$ 97
(114)
50
$ 101
(104)
53
Net periodic benefit cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 24_
$ 33
$ 50
The Company expects benefit payments of $118 in 2009, $120 in 2010, $120 in 2011, $116 in 2012, $116 in
2013 and $515 for years 2014-2017.
The Company has a contributory retirement (401(k)) savings plan for nonunion employees. Company
contributions to the plan were $83 during 2008, $86 during 2007 and $89 during 2006. The Company also 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 $54 in 2008, $56 in 2007 and $46 in 2006.
45
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
(7) Stock-Based Compensation
On April 27, 2001, the Company implemented the 2001 Long-Term Incentive Plan (the “2001 Plan”) that
replaced the 1992 Stock Option Plan, as Amended and Restated (the “1992 Plan”). In addition to stock options, the
2001 Plan, unlike the 1992 Plan, provides for the grant of stock appreciation rights, restricted stock, deferred stock
and other stock-based awards to officers and employees. The 2001 Plan also makes directors and consultants
eligible for grants of stock options and other awards. The 1992 Plan only provided for grants to key employees. As a
result of the adoption of the 2001 Plan, no further grants will be made under the 1992 Plan, but the terms of the 1992
Plan will continue to govern options that remain outstanding under the 1992 Plan.
The number of shares of common stock that may be subject to outstanding awards granted under the 2001 Plan
(determined immediately after the grant of any award) may not exceed 475,000. In addition, no individual may
receive awards in any one calendar year relating to more than 100,000 shares of common stock. The stock options
under both the 2001 Plan and 1992 Plan expire ten years from the date of grant and generally become exercisable, or
vest, over a period of zero to three years from the grant date.
The Company recognizes compensation cost ratably over the vesting period for all stock-based awards granted
after January 1, 2006 and all such awards granted prior to January 1, 2006 that were unvested as of that date. Upon
the exercise of stock options, the Company issues common stock from its non-issued authorized shares that have
been reserved for issuance pursuant to the 2001 Plan and the 1992 Plan.
During 2006, the Company began issuing shares of restricted stock in addition to stock options from its non-
issued authorized shares that have been reserved for issuance pursuant to the 2001 Plan. The restricted stock will
vest over periods of one-half to five years.
As of December 31, 2008, the number of shares of common stock remaining available for future grant as either
stock options or restricted stock under the 2001 Plan was 55,166.
The Company recorded $627, $595 and $395 for stock-based compensation expense related to stock options
and shares of restricted stock for 2008, 2007 and 2006, respectively. The amounts included in cost of revenues were
$127, $88 and $101 and in selling, general and administrative expenses were $500, $507 and $294 for 2008, 2007
and 2006, respectively.
A summary of the Company’s stock option and restricted stock activity and related information for the year
ended December 31, 2008 and certain other information for the years ended December 31, 2008, 2007 and 2006 are
as follows:
Weighted
Average
Exercise
Price
Stock
Options
Aggregate
Intrinsic
Value
Restricted
Stock
Weighted
Average
Grant-Date
Fair Value
Outstanding (stock options); non-vested (restricted
stock) at December 31, 2007 . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised (stock options); vested (restricted
134,573
9,500
$19.86
26.60
$1,373
—
15,450
18,700
stock) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(36,500)
(666)
23.82
20.57
—
—
(12,333)
(300)
$30.37
29.52
31.20
32.50
Outstanding (stock options); non-vested (restricted
stock) at December 31, 2008 . . . . . . . . . . . . . . .
106,907
$19.95
$ 742
21,517
$29.12
Exercisable at December 31, 2008 . . . . . . . . . . . . .
100,435
$17.03
$ 742
n/a
n/a
46
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
Weighted average fair value of stock options granted during the year . . .
$7.48
$11.28
$12.65
Weighted average remaining contractual life in years . . . . . . . . . . . . . . .
6.75
7.49
7.02
Total value of stock options vested during the year . . . . . . . . . . . . . . . .
Total intrinsic value of stock options exercised during the year . . . . . . . .
Total fair value of restricted stock vested during the year . . . . . . . . . . . .
$ 158
$ 599
$ 469
$ 220
$2,868
$ 375
$ 395
$2,200
—
2008
2007
2006
The total compensation cost not yet recognized for non-vested stock options at December 31, 2008 was
approximately $7, which will be recognized over the weighted average of 0.08 years. The total compensation cost
not yet recognized for restricted stock at December 31, 2008 was approximately $572, which will be recognized
over the weighted average of 1.66 years.
The following table summarizes information about stock options outstanding at December 31, 2008:
Range of Exercise
Prices
$ 3.26 - 8.56 . . . . . . . . . . . . . . . .
$13.16 - 13.31 . . . . . . . . . . . . . . . .
$23.95 - 27.98 . . . . . . . . . . . . . . . .
$30.15 - 36.53 . . . . . . . . . . . . . . . .
Weighted Avg. Remaining
Contractual Life (Yrs.)
Outstanding
Exercisable
4.92
6.14
7.90
8.20
6.75
4.92
6.14
8.16
8.20
6.73
Outstanding
Exercisable
Number of
Shares
30,657
22,333
26,917
27,000
106,907
Weighted
Avg.
Exercise
Price
$ 7.59
$13.19
$26.86
$32.69
$19.95
Number of
Shares
30,657
22,333
20,445
27,000
100,435
Weighted
Avg.
Exercise
Price
$ 7.59
$13.19
$26.50
$32.69
$17.03
The fair value for the stock options was estimated at the date of grant using a lattice-based option valuation
model, with the following weighted average assumptions for the 2008, 2007 and 2006 grants: risk-free interest rates
of 1.07% to 2.69% in 2008, 3.35% to 4.60% in 2007 and 4.64% to 4.89% in 2006; a dividend yield of 0%; and a
volatility factor of .365 to .456 in 2008 and .476 to .497 in 2007, and .455 to .608 in 2006. In addition, the fair value
of these options was estimated based on an expected life of three years. The fair value of restricted stock is based on
the closing per share price of the Company’s common stock on the date of issuance.
(8) Commitments and Contingencies
The Company leases some of the equipment used in its operations under operating leases. Generally, the leases
are for periods varying from one to five years and are renewable at the option of the Company. The Company also
has a lease for corporate office space. Total lease and rent expense was $2,154 for 2008, $1,804 for 2007, and $1,970
for 2006. As of December 31, 2008, future minimum payments under operating leases that were either non-
cancelable or subject to significant penalty upon cancellation were $2,035 for 2009, $1,587 for 2010, $855 for 2011,
$446 for 2012, $237 for 2013, and $610 thereafter.
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, cash flows or competitive position.
The Company is not contractually committed to any planned capital expenditures until actual orders are placed
for equipment or services. At December 31, 2008, the Company had approximately $968 for open equipment and
construction orders related to the highway bridge project that is part of the quarry development at the Company’s
Arkansas facilities and approximately $494 included in accounts payable and accrued expenses related to capital
expenditures incurred late in the year.
47
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
(9) Business Segments
The Company has identified two business segments based on the distinctness of their activities: lime and
limestone operations and natural gas interests. All operations are in the United States. In evaluating the operating
results of the Company’s segments, management primarily reviews revenues and gross profit. The Company does
not allocate corporate overhead or interest costs to its business segments.
Operating results and certain other financial data for the years ended December 31, 2008, 2007 and 2006 for
the Company’s two business segments are as follows:
2008
2007
2006
Revenues
Lime and limestone operations . . . . . . . . . . . . . . . . . . . . . . . $126,165
16,191
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$116,569
8,667
$114,113
4,577
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $142,356
$125,236
$118,690
Depreciation, depletion and amortization
Lime and limestone operations . . . . . . . . . . . . . . . . . . . . . . . $ 11,889
1,146
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 11,522
942
$
9,443
327
Total depreciation, depletion and amortization . . . . . . . . . . $ 13,035
$ 12,464
$
9,770
Gross profit
Lime and limestone operations . . . . . . . . . . . . . . . . . . . . . . . $ 18,178
13,105
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 19,952
6,064
$ 24,512
3,525
Total gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,283
$ 26,016
$ 28,037
Identifiable assets, at year end
Lime and limestone operations . . . . . . . . . . . . . . . . . . . . . . . $149,058
13,417
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,654
Unallocated corporate assets and cash items . . . . . . . . . . . . .
$147,443
8,087
2,697
$146,912
3,990
3,266
Total identifiable assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $166,129
$158,227
$154,168
Capital expenditures
Lime and limestone operations . . . . . . . . . . . . . . . . . . . . . . . $
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,846
5,914
$ 13,809
4,418
$ 34,266
3,142
Total capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,760
$ 18,227
$ 37,408
(10) Acquisitions
In December 2008, the Company acquired the assets of a lime slurry operation in Ft. Worth, Texas for
approximately $2,654, including approximately $715 for accounts receivable and inventory. $125 of the purchase
price was held back subject to possible purchase price adjustment upon final settlement of the value of the accounts
receivable and inventory purchased. In June 2006, the Company acquired the assets of a lime slurry operation with
two locations in the Dallas-Ft. Worth Metroplex for approximately $1,644. Prior to these acquisitions, the
Company’s only slurry facilities were located in Houston, Texas.
48
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
(11) Supplementary Financial Information for Oil and Gas Producing Activities
Results of Operations from Oil and Gas Producing Activities
The Company’s natural gas interests consist of royalty and working interests in wells drilled on the Company’s
approximately 3,800 acres of land located in Johnson County, Texas in the Barnett Shale Formation. The Company
also has royalty and working interests in wells drilled from drillsites on the Company’s property under a lease
covering approximately 538 acres of land contiguous to the Company’s Johnson County, Texas property. The
following sets forth certain information with respect to the Company’s results of operations and costs incurred for its
natural gas interests for the years ended December 31, 2008, 2007 and 2006:
2008
2007
2006
Results of Operations
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,191
1,940
Production and operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,146
Depreciation and depletion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of operations before income taxes . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13,105
4,056
$8,667
1,661
942
6,064
1,773
$4,577
725
327
3,525
1,101
Results of operations (excluding corporate overhead and interest
costs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,049
$4,291
$2,424
Costs Incurred
Development costs incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,938
—
Exploration costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
Capitalized asset retirement costs . . . . . . . . . . . . . . . . . . . . . . . . . . $
—
Property acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$4,039
—
21
—
$
$3,422
—
9
—
$
Capitalized Costs as of December 31,
Natural gas properties — proved . . . . . . . . . . . . . . . . . . . . . . . . . . $13,748
2,413
Less: accumulated depreciation and depletion . . . . . . . . . . . . . . . . .
$7,813
1,269
$3,774
327
Net capitalized costs for natural gas properties . . . . . . . . . . . . . . . . $11,335
$6,544
$3,447
Unaudited Oil and Natural Gas Reserve and Standardized Measure Information
The independent petroleum engineering firm of DeGolyer and MacNaughton has been retained by the
Company to estimate its proved natural gas reserves as of December 31, 2008. No events have occurred since
December 31, 2008 that would have a material effect on the estimated proved reserves.
In accordance with SFAS No. 69, “Disclosures About Oil and Gas Producing Activities,” and SEC rules and
regulations, the following information is presented with regard to the gas reserves, all of which are proved and
located in the United States. These rules require inclusion, as a supplement to the basic financial statements, of a
standardized measure of discounted future net cash flows relating to proved gas reserves. The standardized measure,
in management’s opinion, should be examined with caution. The basis for these disclosures are independent
petroleum engineers’ reserve studies, which contain imprecise estimates of quantities and rates of production of
reserves. Revision of estimates can have a significant impact on the results. Also, development and production
improvement costs in one year may significantly change previous estimates of proved reserves and their valuation.
Values of unproved properties and anticipated future price and cost increases or decreases are not considered.
Therefore, the standardized measure is not necessarily a “best estimate” of the fair value of gas properties or of
future net cash flows.
49
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
In calculating the future net cash flows for its royalty and working interests in the table below, the Company
applied current prices of natural gas ($7.08, $7.68 and $6.48 per MCF at December 31, 2008, 2007 and 2006,
respectively) to the expected future production of such reserves, less estimated future expenditures (based on
current costs) to be incurred in developing and producing them.
Unaudited Summary of Changes in Proved Reserves
Natural Gas
(BCF)
2008
Natural Gas
Liquids
(MBBLS)
2008
Natural Gas
(BCF)
2007
Natural Gas
(BCF)
2006
Proved reserves — beginning of year . . . . . . .
Revisions of previous estimates . . . . . . . . . . .
Extensions and discoveries . . . . . . . . . . . . . . .
Production . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proved reserves — end of year . . . . . . . . . . . .
Proved developed reserves — end of year . . . .
18.0
(2.3)
2.2
(1.5)
16.4
12.0
—
—
0.6
—
0.6
0.4
7.9
0.2
11.0
(1.1)
18.0
9.7
—
—
8.5
(0.6)
7.9
5.4
Unaudited Standardized Measure of Discounted Future Net Cash Flows
2008
2007
2006
Future estimated gross revenues . . . . . . . . . . . . . . . . . . . . . . . .
Future estimated production and development costs . . . . . . . . . .
$128,485
(38,495)
$137,848
(33,921)
$ 51,018
(14,765)
Future estimated net revenues . . . . . . . . . . . . . . . . . . . . . . . . . .
Future estimated income tax expense . . . . . . . . . . . . . . . . . . . . .
Future estimated net cash flows . . . . . . . . . . . . . . . . . . . . . . . . .
10% annual discount for estimated timing of cash flows . . . . . .
89,990
(25,759)
64,231
(33,512)
103,927
(30,320)
73,607
(39,577)
36,253
(10,718)
25,535
(12,921)
Standardized measure of discounted future estimated net
cash flows. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 30,719
$ 34,030
$ 12,614
Unaudited Changes in Standardized Measure of Discounted Future Net Cash Flows
2008
2007
2006
Standardized measure — beginning of year . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in sales prices and production costs . . . . . . . . . . . . . . . . . . . . . .
Sales of natural gas produced, net of production costs . . . . . . . . . . . . . . . . .
Extensions and discoveries, net of related costs . . . . . . . . . . . . . . . . . . . . . .
Future development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change due to changes in quantity estimates . . . . . . . . . . . . . . . . . . . . .
Previously estimated development costs incurred . . . . . . . . . . . . . . . . . . . . .
Net change in income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accretion of discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Timing of production of reserves and other . . . . . . . . . . . . . . . . . . . . . . . . .
$ 34,030
(11,600)
(5,174)
9,212
(3,216)
2,259
4,800
1,698
3,747
(5,037)
$12,614
5,584
(5,649)
31,590
(4,373)
600
3,523
(8,724)
1,561
(2,696)
$ —
—
(3,852)
18,445
(1,979)
—
—
—
—
—
Standardized measure — end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 30,719
$34,030
$12,614
50
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
Unaudited Oil and Gas Reserve Reporting Requirements.
In December 2008, the SEC announced that it had approved revisions designed to modernize the oil and gas
company reserve reporting requirements. The most significant amendments to the requirements include the
following:
(cid:129) Commodity Prices — Economic producibility of reserves and discounted cash flows will be based on a
12-month average commodity price unless contractual arrangements designate the price to be used.
(cid:129) Disclosure of Unproved Reserves — Probable and possible reserves may be disclosed separately on a
voluntary basis.
(cid:129) Proved Undeveloped Reserve Guidelines — Reserves may be classified as proved undeveloped if there is a
high degree of confidence that the quantities will be recovered.
(cid:129) Reserve Estimation Using New Technologies — Reserves may be estimated through the use of reliable
technology in addition to flow tests and production history.
The rules are effective for fiscal years ending on or after December 31, 2009, and early adoption is not
permitted. The Company is currently evaluating the new rules and assessing the impact that they will have on its
reported oil and gas reserves. The SEC is coordinating with the FASB to obtain the revisions necessary to
SFAS No. 19, “Financial Accounting and Reporting by Oil and Gas Producing Companies, and SFAS No. 69,
“Disclosures about Oil and Gas Producing Activities,” to provide consistency with the new rules. In the event that
consistency is not achieved in time for companies to comply with the new rules, the SEC will consider delaying the
compliance date. The Company is assessing the impact that these rules may have on the Company’s financial
statements.
(12) Summary of Quarterly Financial Data (unaudited)
March 31,
June 30,
2008
September 30,
December 31,
Revenues
Lime and limestone operations . . . . . . . . . . . . . . . . . .
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . .
$30,581
2,654
$36,420
4,763
Gross profit
Lime and limestone operations . . . . . . . . . . . . . . . . . .
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic income per common share. . . . . . . . . . . . . . . . . . .
Diluted income per common share . . . . . . . . . . . . . . . . .
$33,235
$41,183
$ 4,591
2,174
$ 6,765
$ 2,843
0.45
$
0.45
$
$ 7,134
4,030
$11,164
$ 6,057
$ 0.96
$ 0.95
$33,602
5,324
$38,926
$ 4,613
4,325
$ 8,938
$ 4,475
$ 0.71
$ 0.70
$25,562
3,450
$29,012
$ 1,840
2,576
$ 4,416
$ 1,058
$ 0.17
$ 0.17
51
United States Lime & Minerals, Inc.
Notes to Consolidated Financial Statements — (Continued)
March 31,
June 30,
2007
September 30,
December 31,
Revenues
Lime and limestone operations . . . . . . . . . . . . . . . . . .
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . .
$27,607
1,833
$29,822
2,387
Gross profit
Lime and limestone operations . . . . . . . . . . . . . . . . . .
Natural gas interests . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic income per common share. . . . . . . . . . . . . . . . . . .
Diluted income per common share . . . . . . . . . . . . . . . . .
$29,440
$32,209
$ 4,268
1,354
$ 5,622
$ 2,059
0.33
$
0.33
$
$ 5,610
1,583
$ 7,193
$ 3,167
$ 0.51
$ 0.50
$31,074
1,871
$32,945
$ 5,950
1,321
$ 7,271
$ 3,182
$ 0.51
$ 0.50
$28,066
2,576
$30,642
$ 4,124
1,806
$ 5,930
$ 2,038
$ 0.32
$ 0.32
52
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
ITEM 9A(T). CONTROLS AND PROCEDURES.
Evaluation of disclosure 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 of
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.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of the Company is responsible for establishing and maintaining adequate internal control
over financial reporting. The Company’s internal control over financial reporting is a process designed under the
supervision of the Company’s CEO and CFO to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of the Company’s financial statements for external purposes in accordance with
generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. All internal control systems, no matter how well designed, have inherent limitations. Therefore,
even those systems determined to be effective can provide only reasonable assurances with respect to financial
statement preparation and presentation. Additionally, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
As of December 31, 2008, management assessed the effectiveness of the Company’s internal control over
financial reporting based on the criteria for effective internal control over financial reporting established in “Internal
Control — Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). Based on the assessment, management determined that the Company maintained
effective internal control over financial reporting as of December 31, 2008, based on the COSO criteria.
This annual report does not include an attestation report of the Company’s independent registered public
accounting firm regarding internal control over financial reporting. Management’s report was not subject to
attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the SEC
that permit the Company to provide only management’s report in the annual report.
Changes in internal control over financial reporting. 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.
ITEM 9B. OTHER INFORMATION.
Not Applicable
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information appearing under “Election of Directors,” “Nominees for Director,” “Executive Officers Who
Are Not Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” in
the definitive Proxy Statement for the Company’s 2009 Annual Meeting of Shareholders (the “2009 Proxy
Statement”) is hereby incorporated by reference in answer to this Item 10. The Company anticipates that it will file
the 2009 Proxy Statement with the SEC on or before April 15, 2009.
53
ITEM 11. EXECUTIVE COMPENSATION.
The information appearing under “Executive Compensation” and “Compensation of Directors” in the 2009
Proxy Statement is hereby incorporated by reference in answer to this Item 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.
The information appearing under “Voting Securities and Principal Shareholders,” “Shareholdings of Company
Directors and Executive Officers” and “Executive Compensation” in the 2009 Proxy Statement is hereby
incorporated by reference in answer to this Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
The information appearing under “Voting Securities and Principal Shareholders” and “Corporate Governance”
in the 2009 Proxy Statement is hereby incorporated by reference in answer to this Item 13.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
The information appearing under “Independent Auditors” in the 2009 Proxy Statement is hereby incorporated
by reference in answer to this Item 14.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) 1. The following financial statements are included in Item 8:
Report of Independent Registered Public Accounting Firm
Consolidated Financial Statements:
Consolidated Balance Sheets as of December, 31, 2008 and 2007;
Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006;
Consolidated Statements of Stockholders’ Equity for the Years Ended December, 31, 2008, 2007 and
2006;
Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006; 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.
3. The following documents are filed with or incorporated by reference into this Report:
3.1
3.2
3.3
Articles of Amendment to the Articles of Incorporation of Scottish Heritable, Inc. dated as of January 25,
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 000-4197).
Restated Articles of Incorporation of the Company dated as of May 14, 1990 (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 000-4197).
Composite Copy of Bylaws of the Company dated as of December 31, 1991 (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 000-4197).
54
10.1
10.2
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 000-4197).
United States Lime & Minerals, Inc. 2001 Long-Term Incentive Plan (incorporated by reference to
Exhibit B to the Company’s definitive Proxy Statement for its Annual Meeting of Shareholders held on
April 27, 2001, File Number 000-4197).
10.2.1 Form of stock option grant agreement under the United States Lime & Minerals, Inc. 2001 Long-Term
Incentive Plan (incorporated by reference to Exhibit 10.2.1 to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2006, File Number 000-4197).
10.2.2 Form of restricted stock grant agreement under the United States Lime & Minerals, Inc. 2001 Long-Term
Incentive Plan (incorporated by reference to Exhibit 10.2.2 to the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2006, File Number 000-4197).
Employment Agreement dated as of October 11, 1989 between the Company and Bill 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 000-4197).
10.3
10.4
10.3.1 Amendment No. 1 dated as of February 1, 2008 to Employment Agreement dated as of October 11, 1989
between the Company and Bill R. Hughes (incorporated by reference to Exhibit 10.3.1 to the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2007, File Number 000-4197).
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 000-4197).
Employment Agreement dated as December 8, 2000 between the Company and Timothy W. Byrne
(incorporated by reference to Exhibit 10(s) to the Company’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, File Number 000-4197).
10.5
10.5.1 Amended and Restated Employment Agreement dated as of May 2, 2003 between the Company and
Timothy W. Byrne (incorporated by reference to Exhibit 10.8.1 to the Company’s Annual Report on
Form 10-K for the fiscal year ended December 31, 2003, File Number 000-4197).
10.5.2 Amendment No. 1 dated as of December 29, 2006 to Amended and Restated Employment Agreement
dated as of May 2, 2003 between the Company and Timothy W. Byrne. (Incorporated by reference to
Exhibit 10.7.2 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2006, File Number 000-4197).
10.5.3 Employment Agreement effective as of January 1, 2009 between United States Lime & Minerals, Inc. and
Timothy W. Byrne, including Cash Performance Bonus Award Agreement dated as of January 1, 2009
between United States Lime and Minerals, Inc. and Timothy W. Byrne, set forth as Exhibit A thereto
(incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated
December 19, 2008, File Number 000-4197).
Note and Warrant Purchase Agreement dated as of August 5, 2003 by and among United States Lime &
Minerals, Inc. and Credit Trust S.A.L., ABB Finance Limited and R.S. Beall Capital Partners, LP
(incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2003, File Number 000-4197).
10.6
10.7
10.8
10.9
Form of 14% Subordinated PIK Note due 2008 (incorporated by reference to Exhibit 10.2 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File Number 000-4197).
Form of Common Stock Purchase Warrant (incorporated by reference to Exhibit 10.3 to the Company’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2003, File Number 000-4197).
Registration Rights Agreement dated as of August 5, 2003 by and among United States Lime & Minerals,
Inc. and Credit Trust S.A.L., ABB Finance Limited and R.S. Beall Capital Partners, LP (incorporated by
reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2003, File Number 000-4197).
55
10.10 Oil and Gas Lease Agreement dated as of May 28, 2004 between Texas Lime Company and EOG
Resources, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004, File Number 000-4197).
10.11 Credit Agreement dated as of August 25, 2004 among United States Lime & Minerals, Inc., each Lender
from time to time a party thereto, and Wells Fargo Bank, N.A., as Administrative Agent, Swing Line
Lender and L/C Issuer (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated August 31, 2004, File Number 000-4197).
Security Agreement dated as of August 25, 2004 among United States Lime & Minerals, Inc., Arkansas
Lime Company, Colorado Lime Company, Texas Lime Company and U. S. Lime Company — Houston, in
favor of Wells Fargo Bank, N. A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to the
Company’s Current Report on Form 8-K dated August 31, 2004, File Number 000-4197).
10.12
10.13
10.14
10.15
Stock Purchase Agreement dated as of December 28, 2005 by and among Oglebay Norton Company, O-N
Minerals Company, O-N Minerals (Lime) Company and Unite States Lime & Minerals, Inc. (Incorporated
by reference to Exhibit 10.28 to the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2005, File Number 000-4197).
Second Amendment to Credit Agreement dated as of October 19, 2005 among United States Lime &
Minerals, Inc., each Lender from time to time a party thereto, and Wells Fargo Bank, N.A., as
Administrative Agent (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on
Form 8-K dated October 20, 2005, File Number 000-4197).
Termination Agreement effective October 14, 2005 entered into by and between United States Lime &
Minerals, Inc. and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K dated October 20, 2005, File Number 000-4197).
10.16 Amended and Restated Confirmation dated October 14, 2005 entered into by and between United States
Lime & Minerals, Inc. and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.3 to the
Company’s Current Report on Form 8-K dated October 20, 2005, File Number 000-4197).
10.17
Third Amendment to Credit Agreement dated as of March 30, 2007 among United States Lime &
Minerals, Inc., each Lender from time to time a party thereto, and Wells Fargo Bank, N.A., as
Administrative Agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K dated March 30, 2007, File Number 000-4197).
21.1
23.1
23.2
31.1
31.2
32.1
32.2
Subsidiaries of the Company.
Consent of Independent Registered Public Accounting Firm.
Consent of Independent Petroleum Engineers.
Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer.
Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer.
Section 1350 Certification by Chief Executive Officer.
Section 1350 Certification by Chief Financial Officer.
Exhibits 10.1, 10.2, 10.2.1, 10.2.2 and 10.3 through 10.5.3 are management contracts or compensatory plans or
arrangements required to be filed as exhibits.
56
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.
SIGNATURES
UNITED STATES LIME & MINERALS, INC.
By: /s/ TIMOTHY W. BYRNE
Timothy W. Byrne,
President and Chief Executive Officer
Date: March 5, 2009
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: March 5, 2009
By: /s/ Timothy W. Byrne
Timothy W. Byrne, President, Chief
Executive Officer, and Director (Principal
Executive Officer)
Date: March 5, 2009
By: /s/ M. Michael Owens
Date: March 5, 2009
Date: March 5, 2009
Date: March 5, 2009
Date: March 5, 2009
M. Michael Owens, Vice President and
Chief Financial Officer (Principal
Financial and Accounting Officer)
By: /s/ Edward A. Odishaw
Edward A. Odishaw, Director
By: /s/ Antoine M. Doumet
Antoine M. Doumet, Director and
Chairman of the Board
By: /s/ Wallace G. Irmscher
Wallace G. Irmscher, Director
By: /s/ Richard W. Cardin
Richard W. Cardin, Director
57
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DIRECTORY
DIRECTORS
EXECUTIVE OFFICERS
TRANSFER AGENT
AND REGISTRAR
Timothy W. Byrne (1)
President and Chief Executive Officer,
United States Lime & Minerals, Inc.
Richard W. Cardin (2,3)
Retired Partner,
Arthur Andersen LLP
Antoine M. Doumet (1,3,4)
Chairman,
United States Lime & Minerals, Inc.
Private businessman and investor
Wallace G. Irmscher (2,3,4)
Retired Consultant
Edward A. Odishaw (1,2,3,4)
Vice Chairman,
United States Lime & Minerals, Inc.
Chairman, Austpro Energy Corporation
(1) Executive Committee
(2) Audit Committee
(3) Nominating and Corporate
Governance Committee
(4) Compensation Committee
OPERATING SUBSIDIARIES
Arkansas Lime Company
P.O. Box 2356
Batesville, AR 72503
Tel: (870) 793 -2301
Fax: (870) 793 -9305
Timothy W. Byrne
President and Chief Executive Officer
M. Michael Owens
Vice President and Chief Financial
Officer
Computershare Investor Services
Dallas, Texas
Tel: (972) 943-8780
Fax: (972) 943-8823
INDEPENDENT AUDITORS
Grant Thornton LLP
Dallas, Texas
STOCK TRADED
The Nasdaq Global Market
Symbol: USLM
COUNSEL
Morgan, Lewis & Bockius LLP
Washington, D.C.
Thompson & Knight, LLP
Dallas, Texas
Russell W. Riggs
Vice President – Production
David P. Leymeister
Vice President – Sales & Marketing
CORPORATE OFFICE
5429 LBJ Freeway, Suite 230
Dallas, Texas 75240
Tel.: (972) 991-8400
Fax: (972) 385-1340
E-mail: uslime@uslm.com
Website: www.uslm.com
U.S. Lime Company & U.S. Lime
Colorado Lime Company
1468 Hwy. 50 Company - Transportation
Delta, CO 81416
Tel: (970) 874-8300
Fax: (970) 874-8366
P.O. Box 1845
League City, TX 77573
Tel: (713) 987-5463
Fax: (713) 987-5465
Texas Lime Company P.O. Box 1044
Salida, CO 81201
P.O. Box 851
Tel: (719) 539-3525
Cleburne, TX 76033
Tel: (817) 641-4433
Fax: (719) 539-7272
Fax: (817) 556-0905
5429 LBJ Freeway, Suite 230
Dallas, TX 75240
Tel: (972) 991-5690
Fax: (940) 365- 1230
U.S. Lime Company – St. Clair U.S. Lime Company – Shreveport U.S. Lime Company – O & G, LLC
P.O. Box 160 P.O. Box 6771
Marble City, OK 74945 Shreveport, LA 71136
Tel: (918) 775-4466 Tel: (318) 865- 9655
Fax: (318) 865- 9659
Fax: (918) 775-4467
5429 LBJ Freeway, Suite 230
Dallas, TX 75240
Tel: (972) 991- 8400
Fax: (972) 385- 1805
UNITED STATES LIME & MINERALS, INC.
5429 LBJ FREEWAY SUITE 230 DALLAS TEXAS 75240 WWW.USLM.COM