UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

For the quarterly period ended March 31, 2005

OR

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

Commission file number is 0-4197

UNITED STATES LIME & MINERALS, INC.

(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 þ       No o

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

     Yes o       No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of May 4, 2005, 5,876,638 shares of common stock, $0.10 par value, were outstanding.

Table of Contents

PART I. FINANCIAL INFORMATION

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

See accompanying notes to condensed consolidated financial statements.

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

See accompanying notes to condensed consolidated financial statements.

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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.

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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, 2004. The results of operations for the three-month period ended March 31, 2005 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 quarters ended March 31, 2005 and 2004, 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 (in thousands, except per share amounts):

          The Securities and Exchange Commission recently delayed the effective date for compliance with Statement of Financial Accounting Standards 123(R) “Share-Based Payments”, (“SFAS 123(R)”), which generally requires all share-based payments to employees and directors, including grants of employee stock options, to be recognized in the Company’s Consolidated Statements of Operations based on their fair values. The Company must now adopt SFAS 123(R) no later than January 1, 2006. The Company plans to adopt the provisions of SFAS 123(R) on January 1, 2006. The Company estimates that the adoption of SFAS 123(R), based on the outstanding unvested

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stock options at March 31, 2005, will not have a material effect on the Company’s financial condition, results of operations, cash flows or competitive position.

2. Income Per Share of Common Stock

     The following table sets forth the computation of basic and diluted income per common share (in thousands, except per share amounts):

3. Inventories

     Inventories consisted of the following at:

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4. Accumulated Other Comprehensive Income (Loss)

     The following table presents the components of comprehensive income (in thousands):

     Accumulated other comprehensive income (loss) consisted of the following at (in thousands):

5. Banking Facilities and Other Debt

     On August 25, 2004, the Company entered into a credit agreement with a new bank (the “Lender”) that includes a five-year $30,000,000 term loan (the “New Term Loan”), and a three-year $30,000,000 revolving credit facility (the “New Revolving Credit Facility”; together, the “New Credit Facility”). At the closing of the New Credit Facility, the Company borrowed $37,780,000 (the entire New Term Loan, and $7,780,000 on the New Revolving Credit Facility) to repay the outstanding balances, including a prepayment penalty, on the Company’s previous bank term loan and revolving credit facility. Pursuant to a security agreement, also dated August 25, 2004 (the “Security Agreement”), the New Term Loan and the New Revolving Credit Facility are collateralized by the Company’s and its subsidiaries’ existing and hereafter acquired tangible assets, intangible assets and real property. The Company paid the Lender an origination fee equal to 0.25% of the total amount committed under the New Credit Facility.

     The New Term Loan required a principal payment of $200,000 on September 30, 2004 and quarterly principal payments of $625,000 thereafter, which equates to a 12-year amortization, with a final principal payment of $17,925,000 due on August 25, 2009. Subject to continued compliance with financial covenants, the Company may make additional draws on the New Revolving Credit Facility, which matures August 25, 2007. The Lender may accelerate the maturity of the New Term Loan and the New Revolving Credit Facility if any event of default, as defined under the New Credit Facility, occurs.

     The New Term Loan and the New Revolving Credit Facility bear interest, at the Company’s option, at LIBOR plus a margin of 1.25% to 2.50%, or the Lender’s Prime Rate plus a margin of minus 0.50% to plus 0.50%. The margins are determined quarterly in accordance with a defined rate spread based upon the ratio of the Company’s average total funded senior indebtedness for the preceding four quarters to earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the twelve months ended on the last day of the most recent calendar quarter. The margins have been, and currently are, 1.75% for LIBOR and 0.0% for Prime Rate loans. In conjunction with the New Credit Facility, the Company entered into a hedge to fix the LIBOR rate for the New Term Loan at 3.87% through the maturity date, resulting in an interest rate of 5.62% for the New Term Loan based on the current margin of 1.75%. The hedges have been designated as cash flow hedges, and as such, changes in the fair market value are a component of stockholders’ equity. The Company is exposed to credit losses in the event of non-performance by the counterparty of these hedges. The fair market value of

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the hedges at March 31, 2005 was an asset of $533,000, which is included in Other assets, net on the March 31, 2005 Condensed Consolidated Balance Sheet.

     The New Credit Facility and Security Agreement contain covenants that restrict the incurrence of debt, guaranties and liens, and place restrictions on investments and the sale of significant assets. The Company is also required to meet a minimum debt service coverage ratio and not exceed specified leverage ratios. The New Credit Facility provides that the Company may pay annual dividends, not to exceed $1,500,000, 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 New Credit Facility.

     As a result of entering into the New Credit Facility and borrowings thereunder, the Company repaid all of the $35,556,000 then-outstanding debt under its previous $50,000,000 Senior Secured Term Loan (the “Old Term Loan”) and terminated the associated credit agreement that had been entered into on April 22, 1999 with a consortium of commercial banks. The Old Term Loan was repayable over a period of approximately eight years, maturing on March 30, 2007, and required 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 equated to a 15-year amortization.

     The interest rate on the first $30,000,000 borrowed under the Old Term Loan was 8.875%. The subsequent installments bore 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 was 9.84%.

     The Company also terminated its previous $6,000,000 revolving credit facility and repaid the $1,750,000 then-outstanding principal balance. The revolving credit facility was secured by the Company’s accounts receivable and inventories, provided for an interest rate of LIBOR plus 2.75% and matured on April 1, 2005. In addition, the Company had a $2,000,000 equipment line of credit (available for financing or leasing large mobile equipment used in its operations) from the bank that had issued the revolving credit facility, of which approximately $566,000 of operating lease obligations remained at March 31, 2005.

     On August 5, 2003, the Company sold $14,000,000 of unsecured subordinated notes (the “Sub Notes”) in a private placement under Section 4(2) of the Securities Act of 1933 to three accredited investors, one of which is an affiliate of Inberdon Enterprises Ltd., the Company’s majority shareholder (“Inberdon”), and another of which is an affiliate of Robert S. Beall, who owns approximately 12% of the Company’s outstanding shares. The Company believes that the terms of the private placement were more favorable to the Company than the proposals previously received. Frost Securities, Inc. (“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 then available to the Company. The Company paid Frost an aggregate of $381,000 for its advice, placement services and opinion.

     The net proceeds of approximately $13,450,000 from the private placement were primarily 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 did not prohibit prepayment prior to August 5, 2005 and did 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

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before maturity. The Sub Notes require compliance with the Company’s other debt agreements and restrict the sale of significant assets.

     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. The fair value of the warrants was recorded as a reduction of the carrying value of the Sub Notes and is being accreted over the term of the Sub Notes, resulting in an effective annual interest rate of 14.44%. 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. Changes in the repurchase price for each Warrant Share are accreted or decreted to interest expense over the five-year period from the date of issuance to August 5, 2008, with the offset to interest expense. The investors are also entitled to certain registration rights for the resale of their Warrant Shares.

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

6. Income Taxes

     The Company has estimated that its effective income tax rate for 2005 will be approximately 20% on income before taxes. As in prior periods, the primary reason for the effective rate being below the federal statutory rate is due to statutory depletion which is allowed for income tax purposes and is a permanent difference between net income for financial reporting purposes and taxable income.

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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; (iii) the Company’s ability to meet short-term and long-term liquidity demands, including servicing the Company’s debt; (iv) inclement weather conditions; (v) increased fuel costs; (vi) unanticipated delays or cost overruns in completing 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, 2004.

Liquidity and Capital Resources

     Net cash provided by operations was $4,791,000 for the quarter ended March 31, 2005, compared to $3,133,000 for the quarter ended March 31, 2004. The $1,658,000 increase primarily resulted from a $665,000 increase in net income in the 2005 period compared to the first quarter 2004, the increase in non-cash expenses and other changes in working capital. The most significant increases in non-cash expenses in the 2005 quarter compared to 2004 were $264,000 of depreciation, depletion and amortization and $240,000 of non-cash interest expense, principally relating to the Company’s warrant share repurchase obligation.

     The Company invested $4,326,000 in capital expenditures in the first quarter 2005, compared to $6,443,000 of capital expenditures in the same period last year. Approximately $1,795,000 of the 2005 capital expenditures, most of which were accrued at December 31, 2004, related to the refurbishing of the Shreveport terminal and the installation of a new kiln baghouse at the Company’s Texas facilities. Approximately $4,698,000 of the 2004 capital expenditures related to the Phase II expansion of the Company’s Arkansas facilities.

     Net cash used by financing activities was $486,000 in the 2005 quarter, including $634,000 for repayment of debt, compared to $806,000 in the 2004 quarter, including $833,000 for repayment of debt.

     On August 25, 2004, the Company entered into a credit agreement with a new bank (the “Lender”) that includes a five-year $30,000,000 term loan (the “New Term Loan”), and a three-year $30,000,000 revolving credit facility (the “New Revolving Credit Facility”; together, the “New Credit Facility”). At the closing of the New Credit Facility, the Company borrowed $37,780,000 (the entire New Term Loan, and $7,780,000 on the New Revolving Credit Facility) to repay the outstanding balances, including a prepayment penalty, on the Company’s previous bank term loan and revolving credit facility. Pursuant to a security agreement, also dated August 25, 2004 (the “Security Agreement”), the New Term Loan and the New Revolving Credit Facility are collateralized by the Company’s and its subsidiaries’ existing and hereafter acquired tangible assets, intangible assets and real property. The

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Company paid the Lender an origination fee equal to 0.25% of the total amount committed under the New Credit Facility.

     The New Term Loan required a principal payment of $200,000 on September 30, 2004 and quarterly principal payments of $625,000 thereafter, which equates to a 12-year amortization, with a final principal payment of $17,925,000 due on August 25, 2009. Subject to continued compliance with financial covenants, the Company may make additional draws on the New Revolving Credit Facility, which matures August 25, 2007. The Lender may accelerate the maturity of the New Term Loan and the New Revolving Credit Facility if any event of default, as defined under the New Credit Facility, occurs.

     The New Term Loan and the New Revolving Credit Facility bear interest, at the Company’s option, at LIBOR plus a margin of 1.25% to 2.50%, or the Lender’s Prime Rate plus a margin of minus 0.50% to plus 0.50%. The margins are determined quarterly in accordance with a defined rate spread based upon the ratio of the Company’s average total funded senior indebtedness for the preceding four quarters to earnings before interest, taxes, depreciation, depletion and amortization (EBITDA) for the twelve months ended on the last day of the most recent calendar quarter. The margins have been, and currently are, 1.75% for LIBOR and 0.0% for Prime Rate loans. In conjunction with the New Credit Facility, the Company entered into a hedge to fix the LIBOR rate for the New Term Loan at 3.87% through the maturity date, resulting in an interest rate of 5.62% for the New Term Loan based on the current margin of 1.75%. The hedges have been designated as cash flow hedges, and as such, changes in the fair market value are a component of stockholders’ equity. The Company is exposed to credit losses in the event of non-performance by the counterparty of these hedges. The fair market value of the hedges at Marches 31, 2005 was an asset of $533,000, which is included in Other assets, net on the March 31, 2005 Condensed Consolidated Balance Sheet.

     The New Credit Facility and Security Agreement contain covenants that restrict the incurrence of debt, guaranties and liens, and place restrictions on investments and the sale of significant assets. The Company is also required to meet a minimum debt service coverage ratio and not exceed specified leverage ratios. The New Credit Facility provides that the Company may pay annual dividends, not to exceed $1,500,000, 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 New Credit Facility.

     As a result of entering into the New Credit Facility and borrowings thereunder, the Company repaid all of the $35,556,000 then-outstanding debt under its previous $50,000,000 Senior Secured Term Loan (the “Old Term Loan”) and terminated the associated credit agreement that had been entered into on April 22, 1999 with a consortium of commercial banks. The Old Term Loan was repayable over a period of approximately eight years, maturing on March 30, 2007, and required 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 equated to a 15-year amortization.

     The interest rate on the first $30,000,000 borrowed under the Old Term Loan was 8.875%. The subsequent installments bore 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 was 9.84%.

     The Company also terminated its previous $6,000,000 revolving credit facility and repaid the $1,750,000 then-outstanding principal balance. The revolving credit facility was secured by the Company’s accounts receivable and inventories, provided for an interest rate of LIBOR plus 2.75% and matured on April 1, 2005. In addition, the Company had a $2,000,000 equipment line of credit (available for financing or leasing large mobile equipment used in its operations) from the bank that had issued the revolving credit facility, of which approximately $566,000 of operating lease obligations remained at March 31, 2005.

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     On August 5, 2003, the Company sold $14,000,000 of unsecured subordinated notes (the “Sub Notes”) in a private placement under Section 4(2) of the Securities Act of 1933 to three accredited investors, one of which is an affiliate of Inberdon Enterprises Ltd., the Company’s majority shareholder (“Inberdon”), and another of which is an affiliate of Robert S. Beall, who owns approximately 12% of the Company’s outstanding shares. The Company believes that the terms of the private placement were more favorable to the Company than the proposals previously received. Frost Securities, Inc. (“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 then available to the Company. The Company paid Frost an aggregate of $381,000 for its advice, placement services and opinion.

     The net proceeds of approximately $13,450,000 from the private placement were primarily 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 did not prohibit prepayment prior to August 5, 2005 and did 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 require compliance with the Company’s other debt agreements and restrict the sale of significant assets.

     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. The fair value of the warrants was recorded as a reduction of the carrying value of the Sub Notes and is being accreted over the term of the Sub Notes, resulting in an effective annual interest rate of 14.44%. 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. Changes in the repurchase price for each Warrant Share are accreted or decreted to interest expense over the five-year period from the date of issuance to August 5, 2008, with the offset to interest expense. The investors are also entitled to certain registration rights for the resale of their Warrant Shares.

     The first of two phases of the Arkansas modernization and expansion project began in the fourth quarter 1999. 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 Company completed Phase I in the second quarter 2001.

     The Arkansas Phase II expansion doubled the plant’s quicklime production capacity through the installation of a second preheater rotary kiln and additional kiln-run storage capacity substantially identical to the kiln system built in Phase I. Construction of the second kiln system commenced in the third quarter 2003 and was completed with lime production from the new kiln beginning in late February 2004. Phase II also included refurbishing the 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.

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     The Company is not contractually committed to any planned capital expenditures until actual orders are placed for equipment. As of March 31, 2005, the Company had no material open orders.

     The Company made principal prepayments on the Sub Notes totaling $7,000,000 during 2004, including full prepayment of the Sub Note held by the affiliate of Inberdon. As of March 31, 2005, the Company had $43,264,000 in total debt outstanding.

Results of Operations

     Revenues increased to $15,466,000 in the first quarter 2005, the highest first quarter revenues in the Company’s history, from $12,075,000 in the first quarter 2004, an increase of $3,391,000, or 28.1%. The increase in revenues for the first quarter 2005 compared to the comparable 2004 quarter was primarily due to increased lime sales resulting from lime production from the new kiln at the Company’s Arkansas plant, which came on line in late February 2004, and price increases on the Company’s products of approximately 8.5%, on average, in the 2005 quarter compared to the 2004 quarter. Due in part to temporary lime shortages, principally in the states east of the Arkansas plant, the Company has sold substantially all of the increased lime production at Arkansas. These shortages were primarily due to increased consumption of lime for steel-related uses and the closing of three lime plants in the Midwest in 2003.

     The Company’s gross profit was $4,389,000 for the first quarter 2005, compared to $3,415,000 for the first quarter 2004, an increase of $974,000, or 28.5%. Gross profit increased in the 2005 quarter compared to the 2004 quarter primarily due to the increased lime sales volume and price increases. The Company historically has lower gross profit margins in the first quarter due to winter maintenance programs at its Arkansas and Texas plants, as well as reduced construction related demand for lime and limestone products.

     Selling, general and administrative expenses (“SG&A”) increased by $212,000, or 17.8%, to $1,400,000 in the first quarter 2005, compared to $1,188,000 in the first quarter 2004, principally as a result of increased employee compensation and benefits and an increase in professional fees, primarily for compliance with the Sarbanes-Oxley Act of 2002 and associated regulatory requirements. As a percentage of sales, SG&A declined to 9.1% in the first quarter 2005 from 9.9% in the comparable 2004 quarter.

     Interest expense in the first quarter 2005 decreased $69,000, or 5.7%, to $1,138,000, compared to $1,207,000 in the first quarter 2004. The decrease in interest expense in the 2005 quarter primarily resulted from the Company’s August 2004 debt refinancing and the $7,300,000 of net repayments of debt over the last 12 months. These reductions were partially offset by a $347,000 charge to interest in the 2005 quarter for the mark-to-market adjustment on the Company’s Warrant Share put liability that resulted from an increase in the per share average closing price of the Company’s common stock for the last 30 trading days ending on March 31, 2005 to $16.455 from $10.792 for the last 30 trading days ending on December 31, 2004, compared to a $31,000 charge in the comparable 2004 quarter. Also, approximately $303,000 of interest was capitalized in the first quarter 2004 as part of the Arkansas Phase II expansion project.

     Income tax expense increased to $374,000 in the first quarter 2005 from $208,000 in the first quarter 2004, an increase of $166,000, or 79.8%.

     The Company’s net income was $1,495,000 ($0.25 per share) during the first quarter 2005, compared to net income of $830,000 ($0.14 per share) during the first quarter 2004, an increase of $665,000, or 80.1%. The first quarter 2005 net income was the highest in the Company’s history.

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Interest Rate Risk

     The Company is exposed to changes in interest rates, primarily as a result of floating interest rates on the New Term Loan and New Revolving Credit Facility. Because the Sub Notes bear a fixed rate of interest, changes in interest rates do not subject the Company to changes in future interest expense with this borrowing.

     At March 31, 2005, the Company had $36,367,000 of indebtedness outstanding under floating rate debt. The Company has entered into interest rate swap agreements to swap floating rates for fixed rates at 3.87%, plus the applicable margin, through maturity on the New Term Loan balance of $28,550,000, leaving the $7,817,000 New Revolving Credit Facility balance subject to interest rate risk at March 31, 2005. Assuming no additional borrowings or repayments on the New Revolving Credit 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 $78,000 per year. This amount has been estimated by calculating the impact of such hypothetical interest rate increase on the Company’s non-hedged, floating rate debt of $7,817,000 outstanding under the New Revolving Credit Facility at March 31, 2005 and assuming it remains outstanding over the next twelve months. Additional borrowings under the New Revolving Credit Facility would increase this estimate. (See Note 5 of Notes to Condensed Consolidated Financial Statements.)

Warrant Share Repurchase Obligation

     After August 5, 2008, or upon an earlier change of control, the Sub Note investors may require the Company to repurchase any or all of the 162,000 Warrant Shares that they may purchase by exercising the Company’s outstanding warrants. The repurchase price for each warrant share is equal to 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. At March 31, 2005, the fair value of the Warrant Share put liability was estimated to be $2,044,000 based on the $16.455 per share average closing price of the Company’s common stock for the last 30 trading days ending on March 31, 2005, compared to $1,126,000 at December 31, 2004, based on the $10.792 per share closing price for the last 30 trading days ending on December 31, 2004. The March 31, 2005 carrying value for this liability was $885,000, compared to $539,000 at December 31, 2004. The difference between the fair value and the carrying value of the Warrant Share put liability is being accreted, and the effect on fair value of future changes in the repurchase price for each share are accreted or decreted, to interest expense over the five-year period from the date of issuance to August 5, 2008. Thereafter, the Warrant Share put liability will be marked-to-market, with any adjustment increasing or decreasing interest expense. (See Note 5 of Notes to Condensed Consolidated Financial Statements.)

     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.

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PART II. OTHER INFORMATION

The Company’s 2001 Long-Term Incentive Plan (the “2001 Plan”) and 1992 Stock Option Plan allow employees and directors to exercise stock options by payment in cash and/or delivery of shares of the Company’s common stock. In February 2005, pursuant to this provision, the Company received 1,200 shares of its common stock in payment to exercise stock options under the 2001 Plan. The 1,200 shares were valued at $15.05 per share, the fair market value of one share of the Company’s common stock on the date they were tendered to the Company.

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.

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UNITED STATES LIME & MINERALS, INC.

Quarterly Report on Form 10-Q
Quarter Ended
March 31, 2005

Index to Exhibits