UNITED STATES LIME & MINERALS INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

----------

For the quarterly period ended JUNE 30, 2003

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ........ to ........

Commission file number is 000-4197

UNITED STATES LIME & MINERALS, INC.
-----------------------------------
(Exact name of registrant as specified in its charter)

TEXAS 75-0789226
---------------------------------- -----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

13800 MONTFORT DRIVE, SUITE 330, DALLAS, TX 75240
- -------------------------------------------- -----------------------------
(Address of principal executive offices) (Zip Code)

(972) 991-8400
-------------------------------
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes X No
----- ------

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

Yes No X
------ ------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of August 8, 2003, 5,799,845
shares of common stock, $0.10 par value, were outstanding.

Page 1 of 14

PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

Page 2 of 14

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

Page 3 of 14

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)

See accompanying notes to condensed consolidated financial statements.

Page 4 of 14

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Basis of Presentation

Presentation. The condensed consolidated financial statements included
herein have been prepared by the Company without independent audit. In the
opinion of the Company's management, all adjustments of a normal and
recurring nature necessary to present fairly the financial position,
results of operations and cash flows for the periods presented have been
made. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these condensed consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included in
the Company's Annual Report on Form 10-K for the period ended December 31,
2002. The results of operations for the three-month and six-month periods
ended June 30, 2003 are not necessarily indicative of operating results for
the full year.

Stock-based Compensation. The Company accounts for stock-based
compensation using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Stock-based compensation expense associated with option grants
was not recognized in the net income for the six-month periods ended June
30, 2003 and 2002, as all options granted have had exercise prices equal to
the market value of the underlying common stock on the dates of grant. The
following table illustrates the effect on net income and income per common
share if the Company had applied the fair-value-based recognition
provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," to stock-based employee
compensation:

Page 5 of 14

2. Embezzlement-Related Costs and Recoveries

On January 31, 2002, the Company announced that it had discovered that
an employee who had recently left the Company may have improperly diverted
Company funds without authorization. Trading in the Company's common stock
on the Nasdaq National Market(R) ("Nasdaq") was halted, and the Audit
Committee of the Company's Board of Directors retained outside counsel to
conduct a special investigation into the matter. The Audit Committee also
retained an independent accounting firm to review the Company's internal
controls and to make recommendations for improvement that the Company has
implemented. The Company also contacted the Securities and Exchange
Commission (the "SEC"), as well as criminal authorities, and cooperated
with the SEC, Nasdaq, and criminal authorities with respect to their
investigations into this matter.

The Company's former Vice President - Finance, Controller, Treasurer,
and Secretary, Larry Ohms (the "Former VP Finance"), over a period of four
years beginning in 1998, embezzled approximately $2,179,000 from the
Company. The Former VP Finance voluntarily resigned from the Company on
January 22, 2002, approximately one week before the Company discovered the
defalcations. The Former VP Finance has stated that no one else at the
Company was involved in perpetrating the embezzlements. From the results of
the special investigation and Mr. Ohms' testimony, the Company believes
this statement to be accurate. In 2002, Mr. Ohms pleaded guilty to one
count of wire fraud and one count of making a false statement to the SEC,
and on March 24, 2003 he was sentenced to a term in federal prison and
ordered to pay $2,179,000 in restitution to the Company.

On March 14, 2002, the Company received $500,000 in insurance proceeds
from the Company's insurance policies covering employee theft. The $500,000
was recorded on the Consolidated Balance Sheet at December 31, 2001 in
prepaid expenses and other assets, and recognized in the Consolidated
Statement of Operations in other income in the fourth quarter 2001. In
addition, the Company retained counsel for assistance in its efforts to
recover the embezzled funds from the Former VP Finance, and to pursue
possible civil actions on behalf of the Company against third parties. The
Company filed suit against the Former VP Finance and has obtained a
judgment against him, including compensatory and punitive damages. The
Former VP Finance has claimed not to have any funds.

Recoveries are being recognized in the quarters in which the recoveries
are realized, and the costs of the Company's special investigation, the
Company's cooperation with the SEC, Nasdaq, and criminal authorities in
their investigations and the Company's ongoing recovery efforts are being
expensed as incurred. During the first half 2003, the Company recorded
recoveries of $776,000 ($0.13 per share), net of income taxes ($913,000
gross), and embezzlement-related costs of $158,000 ($0.03 per share), net
of income tax benefits ($186,000 gross), compared to embezzlement-related
costs of $498,000 ($0.09 per share), net of income tax benefits ($622,000
gross), in the first half 2002.

Page 6 of 14

3. Inventories

4. Banking Facilities and Other Debt

On April 22, 1999, the Company entered into a credit agreement with a
consortium of commercial banks for a $50,000,000 Senior Secured Term Loan
(the "Loan"). The Loan is repayable over a period of approximately eight
years, maturing on March 30, 2007, and requires monthly principal payments
of $278,000, which began April 30, 2000, with a final principal payment of
$26,944,000 on March 30, 2007, which equates to a 15-year amortization. The
Company paid a fee equivalent to 2.50% of the Loan value to the placement
agent.

The interest rate on the first $30,000,000 of the Loan is 8.875%. The
subsequent installments bear interest from the date they were funded at
3.52% above the secondary market yield of the United States Treasury
obligation maturing May 15, 2005. The blended rate for the additional
$20,000,000 is 9.84%.

The Loan is secured by a first lien on substantially all of the
Company's assets, with the exception of accounts receivable and inventories
which secure the Company's $5,000,000 revolving credit facility. The Loan
agreement contains covenants that restrict the incurrence of debt,
guaranties and liens, and places certain restrictions on the payment of
dividends and the sale of significant assets. The Company is also required
to meet minimum debt service coverage ratios on an ongoing basis and
maintain a minimum level of tangible net worth.

On January 31, 2003, the maturity of the Company's $5,000,000 revolving
credit facility was extended to July 31, 2003. From January 1, 2003 through
March 2, 2003, the revolving credit facility bore interest at LIBOR plus a
margin of 1.40% to 3.55%, in accordance with a defined rate spread based
upon the Company's then-current ratio of total funded debt to earnings
before interest, taxes, depreciation and amortization (EBITDA).

On March 3, 2003, the Company entered into a Loan and Security
Agreement with another bank for a $5,000,000 revolving credit facility to
replace the prior facility. In addition, the Company obtained a new
$2,000,000 equipment line of credit (available for financing or leasing
large mobile equipment used in its operations) from the same bank. The new
revolving credit facility is secured by the Company's accounts receivable
and inventories, provides for an interest rate of LIBOR plus 2.75%, and
matures on March 1, 2004. As of July 31, 2003, the Company's outstanding
balance on the revolving credit facility was $2,200,000. The outstanding
balance of the revolving credit facility was repaid in full on August 5,
2003 with proceeds from the private placement discussed below, and the Loan
and Security Agreement was amended to allow the revolving credit facility
to be increased to $6,000,000 at the Company's option. The average

Page 7 of 14

interest rate for the revolving credit facilities in the first half 2003
was 4.06%. As of July 31, 2003, the Company had entered into approximately
$700,000 of operating leases for mobile equipment under the $2,000,000
equipment line.

A summary of outstanding debt at the dates indicated is as follows:
(In thousands of dollars)

In April 2003, the Company engaged Frost Securities, Inc. ("Frost") to
advise it on possible financing alternatives for the Phase II expansion of
the Company's Arkansas facilities. Frost contacted potential sources of
financing and obtained several term sheet proposals for a subordinated debt
placement from outside investors. In conjunction with the review of the
proposals and further negotiations, Frost and the Company renewed
discussions with the Company's two largest shareholders and a third party
to determine whether they would be interested in the investment on terms
more favorable to the Company than those currently available from other
potential outside investors.

On August 5, 2003, the Company sold $14,000,000 of unsecured
Subordinated Notes (the "Sub Notes") in a private placement to three
entities, one of which is an affiliate of Inberdon Enterprises Ltd., the
Company's majority shareholder, and another of which is an affiliate of
Robert S. Beall, who owns approximately 11% of the Company's outstanding
shares. The Company believes that the terms of the private placement are
more favorable to the Company than the proposals previously received. Frost
provided an opinion to the Company's Board of Directors that, from a
financial point of view, the private placement was fair to the unaffiliated
holders of the Company's common stock in relation to other potential
subordinated debt transactions currently available to the Company.

The net proceeds from the private placement will be used to fund the
Phase II expansion of the Company's Arkansas facilities. Terms of the Sub
Notes include: a maturity date of August 5, 2008, subject to acceleration
upon a change in control; no mandatory principal payments prior to
maturity; an interest rate of 14% (12% paid in cash and 2% paid in cash or
in kind at the Company's option); and, except as discussed below, no
optional prepayment prior to August 5, 2005 and a 4% prepayment penalty if
repaid before maturity. The terms of the Sub Notes are identical to one
another, except that the Sub Note for the affiliate of Inberdon Enterprises
Ltd. does not prohibit prepayment prior to August 5, 2005 and does not
require a prepayment penalty if repaid before maturity, resulting in a
weighted average prepayment penalty of approximately 2.4% if the Sub Notes
are repaid before maturity. The Sub Notes include covenants similar to the
covenants for the Loan.

The private placement also included six-year detachable warrants,
providing the Sub Note investors the right to purchase an aggregate of
162,000 shares of the Company's common stock, at 110% of the average
closing price of one share of common stock for the trailing 30 trading days

Page 8 of 14

prior to closing, or $3.84. After August 5, 2008, or upon an earlier change
in control, the investors may require the Company to repurchase any or all
shares acquired through exercise of the warrants (the "Warrant Shares").
The repurchase price for each Warrant Share will equal the average closing
price of one share of the Company's common stock for the 30 trading days
preceding the date the Warrant Shares are put back to the Company. The
investors are also entitled to certain registration rights for the resale
of their Warrant Shares.

As a result of certain negotiations with the Company's existing bank
lenders, the Loan and the revolving credit facility were amended to approve
the terms of the Sub Notes. As part of these amendments, the Company is
prohibited from paying any dividends in cash through June 30, 2005 without
the prior written consent of the bank lenders.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

FORWARD-LOOKING STATEMENTS. Any statements contained in this Report that are not
statements of historical fact are forward-looking statements as defined in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements in
this Report, including without limitation statements relating to the Company's
plans, strategies, objectives, expectations, intentions, and adequacy of
resources, are identified by such words as "will," "could," "should," "believe,"
"expect," "intend," "plan," "schedule," "estimate," "anticipate," and "project."
The Company undertakes no obligation to publicly update or revise any
forward-looking statements. The Company cautions that forward-looking statements
involve risks and uncertainties that could cause actual results to differ
materially from expectations, including without limitation the following: (i)
the Company's plans, strategies, objectives, expectations, and intentions are
subject to change at any time in the Company's discretion; (ii) the Company's
plans and results of operations will be affected by its ability to manage its
growth and modernization; (iii) the Company's ability to meet short-term and
long-term liquidity demands; (iv) inclement weather conditions; (v) increased
fuel costs; (vi) unanticipated delays or additional cost overruns in completing
current or planned construction projects; (vii) reduced demand for the Company's
products; and (viii) other risks and uncertainties set forth below or indicated
from time to time in the Company's filings with the Securities and Exchange
Commission, including the Company's Form 10-K for the fiscal year ended December
31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operations was $2,335,000 for the six months ended
June 30, 2003, compared to $3,032,000 for the six months ended June 30, 2002.
The $697,000 decrease was the result of changes in working capital, partially
offset by the $1,495,000 increase in net income in the 2003 period compared to
the same period in 2002. The most significant working capital change was a
$746,000 increase in prepaid expenses and other current assets in the first six
months 2003, primarily due to the accrual of $813,000 of embezzlement-related
recoveries, compared to a $633,000 decrease in the comparable 2002 period. The
decrease in 2002 primarily resulted from the Company's receipt of the $500,000
in insurance proceeds from insurance policies covering employee theft. Also, in
the 2002 period, reduced production due to operational problems at the Company's
Texas plant was the primary reason for the additional $805,000 reduction in
inventories compared to 2003.

The Company invested $2,395,000 in capital expenditures in the first six
months 2003, compared to $2,132,000 in the same period last year.

Page 9 of 14

Net cash provided by financing activities was $244,000 in the first six
months 2003, primarily from $2,201,000 of draws on the Company's revolving
credit facility, partially offset by $1,667,000 repayment of debt and $290,000
payment of cash dividends. Financing activities used $709,000 net cash in the
first six months 2002, primarily for $2,166,000 repayment of debt and $293,000
payment of cash dividends, partially offset by $1,750,000 of draws on the
Company's revolving credit facility.

On March 3, 2003, the Company entered into a Loan and Security Agreement
with another bank for a new $5,000,000 revolving credit facility to replace the
prior facility. In addition, the Company obtained a new $2,000,000 equipment
line of credit (available for financing or leasing large mobile equipment used
in its operations) from the same bank. The new revolving credit facility is
secured by the Company's accounts receivable and inventories, provides for an
interest rate of LIBOR plus 2.75%, and matures on March 1, 2004. As of July 31,
2003, the Company's outstanding balance on the revolving credit facility was
$2,200,000. The outstanding balance of the revolving credit facility was repaid
in full on August 5, 2003 with proceeds from the private placement discussed
below, and the Loan and Security Agreement was amended to allow the revolving
credit facility to be increased to $6,000,000 at the Company's option. The
average interest rate for the revolving credit facilities in the first half 2003
was 4.06%. As of July 31, 2003, the Company had entered into approximately
$700,000 of operating leases for mobile equipment under the new $2,000,000
equipment line. The Company believes that funds generated from operations,
amounts available under the revolving credit facility and funds from the private
placement will be sufficient to meet the Company's liquidity and ongoing capital
needs for the year and to complete the Arkansas Phase II expansion project.

In April 2003, the Company engaged Frost Securities, Inc. ("Frost") to
advise it on possible financing alternatives for the Phase II expansion of the
Company's Arkansas facilities. Frost contacted potential sources of financing
and obtained several term sheet proposals for a subordinated debt placement from
outside investors. In conjunction with the review of the proposals and further
negotiations, Frost and the Company renewed discussions with the Company's two
largest shareholders and a third party to determine whether they would be
interested in the investment on terms more favorable to the Company than those
currently available from other potential outside investors.

On August 5, 2003, the Company sold $14,000,000 of unsecured Subordinated
Notes (the "Sub Notes") in a private placement to three entities, one of which
is an affiliate of Inberdon Enterprises Ltd., the Company's majority
shareholder, and another of which is an affiliate of Robert S. Beall, who owns
approximately 11% of the Company's outstanding shares. The Company believes that
the terms of the private placement are more favorable to the Company than the
proposals previously received. Frost provided an opinion to the Company's Board
of Directors that, from a financial point of view, the private placement was
fair to the unaffiliated holders of the Company's common stock in relation to
other potential subordinated debt transactions currently available to the
Company.

The net proceeds from the private placement will be used to fund the Phase
II expansion of the Company's Arkansas facilities. Terms of the Sub Notes
include: a maturity date of August 5, 2008, subject to acceleration upon a
change in control; no mandatory principal payments prior to maturity; an
interest rate of 14% (12% paid in cash and 2% paid in cash or in kind at the
Company's option); and, except as discussed below, no optional prepayment prior
to August 5, 2005 and a 4% prepayment penalty if repaid before maturity. The
terms of the Sub Notes are identical to one another, except that the Sub Note
for the affiliate of Inberdon Enterprises Ltd. does not prohibit prepayment
prior to August 5, 2005 and does not require a prepayment penalty if repaid
before maturity, resulting in a weighted average prepayment penalty of
approximately 2.4% if the Sub Notes are repaid before maturity. The Sub Notes
include covenants similar to the covenants for the Loan.

Page 10 of 14

The private placement also included six-year detachable warrants, providing
the Sub Note investors the right to purchase an aggregate of 162,000 shares of
the Company's common stock, at 110% of the average closing price of one share of
common stock for the trailing 30 trading days prior to closing, or $3.84. After
August 5, 2008, or upon an earlier change in control, the investors may require
the Company to repurchase any or all shares acquired through exercise of the
warrants (the "Warrant Shares"). The repurchase price for each Warrant Share
will equal the average closing price of one share of the Company's common stock
for the 30 trading days preceding the date the Warrant Shares are put back to
the Company. The investors are also entitled to certain registration rights for
the resale of their Warrant Shares.

As a result of certain negotiations with the Company's existing bank
lenders, the Loan and the revolving credit facility were amended to approve the
terms of the Sub Notes. As part of these amendments, the Company is prohibited
from paying any dividends in cash through June 30, 2005 without the prior
written consent of the bank lenders.

The Arkansas modernization and expansion project commenced with ground
breaking in November 1999 and was scheduled to be completed in two phases. Phase
I involved the redevelopment of the quarry plant, rebuilding of the railroad to
standard gauge, the purchase of a facility to establish an out-of-state terminal
in Shreveport, Louisiana, the installation of a rotary kiln with preheater and
increased product storage and loading capacity. The kiln in Phase I produced its
first lime in the fourth quarter 2000. The Company completed Phase I in the
second quarter 2001.

The total cost of Phase I was approximately $33,000,000. The $33,000,000
includes approximately $1,800,000 of costs associated with the pre-building of
certain facilities for Phase II of the Arkansas project and the purchase of, but
not all of the improvements to, the out-of-state terminal in Shreveport,
Louisiana.

The Company is financing the Phase II expansion principally through the
August 5, 2003 private placement of $14,000,000 of the Sub Debt. The Phase II
expansion will double the Arkansas plant's quicklime production capacity through
the installation of a second kiln system substantially identical to the kiln
system built in Phase I. The plans for Phase II currently include the completion
of the out-of-state terminal in Shreveport, Louisiana for distribution of the
Company's products. The estimated additional cost to complete Phase II is
approximately $16,000,000. The Company plans to commence construction of the
second kiln system in the third quarter 2003.

The Company is not contractually committed to any planned capital
expenditures until actual orders are placed for equipment. As of June 30, 2003,
the Company had no material open orders.

As of August 5, 2003, the Company had approximately $52,600,000 in total
debt outstanding, including the $14,000,000 of Sub Notes.

RESULTS OF OPERATIONS

Revenues increased to $11,529,000 in the second quarter 2003 from
$10,961,000 in the second quarter 2002, an increase of $568,000, or 5.2%. In the
first half 2003, revenues increased $1,147,000 to $21,085,000 from $19,938,000
in the first half 2002, an increase of 5.8%. The increases in revenues for the
second quarter and first half 2003 primarily resulted from increased pulverized
limestone ("PLS") sales at the Company's Texas plant and revenues from natural
gas surcharges discussed below.

The Company's gross profit was $3,459,000 for the second quarter 2003,
compared to $2,981,000 for the second quarter 2002, a 16.0% increase. Compared
to the 2002 quarter, gross profit margin as a percentage of revenues and gross
profit increased in the 2003 quarter primarily due to the increase in

Page 11 of 14

PLS sales volume and reduced lime production during the second quarter 2002 at
the Company's Texas plant caused by several operational problems.

For the first half 2003, the Company's gross profit was $5,208,000,
compared to $4,818,000 for the comparable 2002 period, a 8.1% increase. Gross
profit margin as a percentage of revenues and gross profit increased in the
first half 2003, compared to the same period last year, primarily due to the
increase in PLS sales volume and reduced lime production during the second
quarter 2002 at the Company's Texas plant. These improvements were partially
offset in 2003 by increased natural gas costs and a winter ice storm in Texas
that caused the loss of approximately two days of sales and a natural gas
curtailment to the Company's Texas plant that resulted in reduced production
levels during the first quarter 2003. The total negative price variance for
natural gas in the first half 2003 was approximately $600,000 compared to the
first half last year, partially offset by natural gas surcharges on PLS products
implemented by the Company in early March 2003. Since that time, the surcharges
have offset most of the increased natural gas costs.

Although natural gas prices have declined from their highs during the
first quarter 2003, they continue to exceed 2002 price levels. The Company
expects natural gas prices to remain higher than in the previous year.
Therefore, the Company intends to continue the natural gas surcharges on PLS
products in a continued effort to offset most of the increased costs.

Selling, general and administrative expenses ("SG&A") decreased by
$28,000, or 2.7%, to $987,000 in the second quarter 2003, as compared to
$1,015,000 in the second quarter 2002. As a percentage of sales, SG&A declined
to 8.6% in the second quarter 2003 from 9.3% in the 2002 quarter. SG&A increased
by $74,000, or 3.7%, to $2,047,000 in the first six months 2003, as compared to
$1,973,000 in the comparable 2002 period. As a percentage of sales, SG&A
declined to 9.7% in the first six months 2003 from 9.9% in 2002.

Interest expense in the second quarter 2003 decreased $64,000, or 5.8%, to
$1,038,000, compared to $1,102,000 in the second quarter 2002. Interest expense
in the first six months 2003 decreased $155,000, or 7.0%, to $2,060,000,
compared to $2,215,000 in the first six months 2002. The decrease in interest
expense in 2003 primarily resulted from $3,333,000 in repayments on the Loan
over the last 12 months.

Other, net was $699,000 income in the second quarter 2003, as compared to
$195,000 expense in the second quarter 2002. Other, net in the 2003 quarter
consisted of interest, other income and $813,000 of embezzlement-related
recoveries, partially offset by $105,000 of embezzlement-related costs. In the
second quarter 2002, $247,000 of embezzlement-related costs was the primary
other expense, partially offset by interest and other income.

Other, net was $711,000 income in the first six months 2003, as compared to
$573,000 expense in the comparable 2002 period. Other, net in the 2003 period
consisted of interest, other income and $913,000 of embezzlement-related
recoveries, partially offset by $186,000 of embezzlement-related costs. In the
first half 2002, $622,000 of embezzlement-related costs was the primary other
expense, partially offset by interest and other income.

The Company's net income increased $1,297,000 to $1,813,000 ($0.31 per
share) during the second quarter 2003, compared to net income of $516,000 ($0.09
per share) during the second quarter 2002.

Page 12 of 14

For the first six months 2003, the Company reported net income of
$1,541,000 ($0.27 per share), an increase of $1,495,000 compared to net income
of $46,000 ($0.01 per share) during the comparable 2002 period.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Not Applicable.

ITEM 4: CONTROLS AND PROCEDURES

The Company's management, with the participation of the Company's Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), evaluated the
effectiveness the Company's disclosure controls and procedures as of the end of
the period covered by this report. Based on that evaluation, the CEO and CFO
concluded that the Company's disclosure controls and procedures as of the end of
the period covered by this report were effective.

No change in the Company's internal control over financial reporting
occurred during the Company's most recent fiscal quarter that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

PART II. OTHER INFORMATION

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Annual Meeting of Shareholders was held May 2, 2003 in Dallas, Texas.
The table below shows the proposal submitted to shareholders in the Company's
Proxy Statement, dated April 4, 2003.

Election of Directors

ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K

a. Exhibits:

10.1 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.

10.2 Form of 14% Subordinated PIK Note Due 2008.

10.3 Form of Common Stock Purchase Warrant.

Page 13 of 14

10.4 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.

10.5 Third Amendment to Credit Agreement dated as of August 5, 2003
among United States Lime & Minerals, Inc., Arkansas Lime Company,
Texas Lime Company, the Lenders who are, or may become, a party
to this Agreement, and National City Bank.

10.6 First Amendment to Loan and Security Agreement, dated August 5,
2003, among United States Lime & Minerals, Inc., Texas Lime
Company, Arkansas Lime Company and National City Bank.

31.1 Section 302 Certification by the Chief Executive Officer.

31.2 Section 302 Certification by the Chief Financial Officer.

32.1 Section 906 Certification by the Chief Executive Officer .

32.2 Section 906 Certification by the Chief Financial Officer.

b. Reports on Form 8-K: None

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

UNITED STATES LIME & MINERALS, INC.

August 13, 2003 By: /s/ Timothy W. Byrne
-------------------------------------
Timothy W. Byrne
President and Chief Executive Officer
(Principal Executive Officer)

August 13, 2003 By: /s/ M. Michael Owens
-------------------------------------
M. Michael Owens
Vice President and Chief Financial
Officer
(Principal Financial and Accounting
Officer)

Page 14 of 14

UNITED STATES LIME & MINERALS, INC.

Quarterly Report on Form 10-Q
Quarter Ended
June 30, 2003

Index to Exhibits