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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 000-4197
 United States Lime & Minerals, Inc.
  Texas
    
    75-0789226(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 13800 Montfort Drive, Suite 330, Dallas, Texas
    
    75240(Address of principal executive offices)
    
    (Zip code)
   Title of Each Class
    
    Name of Each Exchange on
Which Registered
     Yes  o
    
    No  þ
  Yes  o
    
    No  þ
  Yes  þ
    
    No  o
 o
  o o þ
  Yes  o
    
    No  þ




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TABLE OF CONTENTS
 PAGEPART I
    
    
    1ITEM 1. BUSINESS
    
    
    1General
    
    
    1Business and Products
    
    
    1Product Sales
    
    
    1Order Backlog
    
    
    1Seasonality
    
    
    1Limestone Reserves
    
    
    2Mining
    
    
    2Plants and Facilities
    
    
    3Employees
    
    
    3Competition
    
    
    3Impact of Environmental Laws and Liabilities
    
    
    4ITEM 1A. RISK FACTORS
    
    
    5ITEM 1B. UNRESOLVED STAFF COMMENTS
    
    
    6ITEM 2. PROPERTIES
    
    
    6ITEM 3. LEGAL PROCEEDINGS
    
    
    6ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    6PART II
    
    
    6ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    6ITEM 6. SELECTED FINANCIAL DATA
    
    
    7ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSFORWARD-LOOKING STATEMENTS
    
    
    7OVERVIEW
    
    
    7RESTATEMENT OF REVENUES AND COST OF REVENUES
    
    
    9CRITICAL ACCOUNTING POLICIES
    
    
    9RESULTS OF OPERATIONS
    
    
    10FINANCIAL CONDITION
    
    
    11NEW ACCOUNTING PRONOUNCEMENTS
    
    
    16ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    17ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    18ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    40
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PAGEITEM 9A. CONTROLS AND PROCEDURES
    
    
    17ITEM 9B. OTHER INFORMATION
    
    
    40PART III
    
    
    40ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    40ITEM 11. EXECUTIVE COMPENSATION
    
    
    40ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    41ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    41ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    41PART IV
    
    
    41ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    41SIGNATURES
    
    
    45Stock Purchase AgreementSubsidiariesConsent of Independent Registered Public Accounting FirmConsent of Independent Registered Public Accounting FirmRule 13a-14(a)/15d-14(a) Certification by Chief Executive OfficerRule 13a-14(a)/15d-14(a) Certification by Chief Financial OfficerSection 1350 Certification by Chief Executive OfficerSection 1350 Certification by Chief Financial Officer
  iii




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PART I
 
 ITEM 1. BUSINESS .
 
 General.
  
 Business and Products.
  
 Product Sales.
    
 Order Backlog.
 
 Seasonality.
 - 1 -




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Limestone Reserves.
     
 Mining.
  - 2 -




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Plants and Facilities.
 .
   .
      
 Employees.
 
 Competition.
  - 3 -




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Impact of Environmental Laws and Liabilities .
  2 2 2 2 2 3
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ITEM 1A. RISK FACTORS.
 During the last few years, we have borrowed additional money to pay for our modernization and
expansion projects and the acquisitions of St. Clair and the Delta, Colorado facilities. Therefore
we have increased our total indebtedness compared to prior years.
    In the normal course of our business 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.
  We incur environmental compliance costs, including capital costs, 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 Environmental Laws, and we expect these cost and liabilities to continue to
increase.
   In order to maintain our competitive position, we need to continue to expand our operations
and production capacity and to sell the resulting increased production.
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The lime industry is highly regionalized and competitive.
  
 ITEM 1B. UNRESOLVED STAFF COMMENTS.
  
 ITEM 2. PROPERTIES.
  
 ITEM 3. LEGAL PROCEEDINGS.
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES.
 ®
   2005
    
    2004Market Price
    
    Market PriceLow
    
    High
    
    Low
    
    HighFirst Quarter
    
    $
    10.15
    
    
    $
    19.49
    
    
    $
    6.95
    
    
    $
    10.97Second Quarter
    
    $
    11.91
    
    
    $
    19.32
    
    
    $
    7.50
    
    
    $
    11.90Third Quarter
    
    $
    15.56
    
    
    $
    35.97
    
    
    $
    8.05
    
    
    $
    11.83Fourth Quarter
    
    $
    23.00
    
    
    $
    35.35
    
    
    $
    8.61
    
    
    $
    11.35
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ITEM 6. SELECTED FINANCIAL DATA.
 Years Ended December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001(dollars in thousands, except per share amounts)Operating resultsRevenues  2004 through 2001 as restated (1)
    
    $
    81,085
    
    
    
    71,231
    
    
    
    57,432
    
    
    
    49,976
    
    
    
    50,923Gross profit
    
    $
    19,366
    
    
    
    17,020
    
    
    
    13,062
    
    
    
    9,508
    
    
    
    10,465Operating profit
    
    $
    13,844
    
    
    
    11,980
    
    
    
    8,574
    
    
    
    5,539
    
    
    
    6,390Income before taxes
    
    $
    9,772
    
    
    
    7,713
    
    
    
    4,804
    
    
    
    671
    
    
    
    2,189Net income
    
    $
    7,948
    
    
    
    6,329
    
    
    
    3,860
    
    
    
    636
    
    
    
    1,773Net income per share of common stock:Basic
    
    $
    1.34
    
    
    
    1.08
    
    
    
    0.67
    
    
    
    0.11
    
    
    
    0.32Diluted
    
    $
    1.31
    
    
    
    1.07
    
    
    
    0.67
    
    
    
    0.11
    
    
    
    0.32
 As of December 31,2005
    
    
    2004
    
    
    2003
    
    
    2002
    
    
    2001Total assets
    
    $
    123,024
    (2)
    
    
    100,339
    
    
    
    99,500
    
    
    
    84,519
    
    
    
    89,409Long-term debt,
excluding current installments
    
    $
    51,667
    
    
    
    41,390
    
    
    
    47,886
    
    
    
    37,500
    
    
    
    40,833Stockholders equity per
outstanding common share
    
    $
    9.66
    
    
    
    8.25
    
    
    
    7.22
    
    
    
    6.60
    
    
    
    6.64Cash dividends per common share
    
    $
    
    
    
    
    
    
    
    
    0.05
    
    
    
    0.10
    
    
    
    0.10Employees
    
    
    292
    
    
    
    211
    
    
    
    201
    
    
    
    198
    
    
    
    200
 
 (1)
    
    Revenues for prior periods presented above have been restated to include external
freight billed to customers with related costs included in costs of revenues resulting
in no change in gross profit, operating profit or net income. Revenues for 2004,
2003, 2002 and 2001 have been increased for such external freight by $15,552, $12,176,
$10,814 and $11,170, respectively. See Managements Discussion and Analysis of
Financial Condition and Results of Operations-Restatement of Revenues and Cost of
Revenues, and Note 2 of Notes to Consolidated Financial Statements.(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
OPERATIONS.
 
 FORWARD-LOOKING STATEMENTS.
  
 OVERVIEW.
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RESTATEMENT OF REVENUES AND COST OF REVENUES.
  
 CRITICAL ACCOUNTING POLICIES.
   Accounts receivable.
 Revenue recognition.
 Long-lived assets.
 Deferred tax assets.
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Environmental costs.
 Contingencies.
 Derivatives.
 Warrant share put liability.
 Pension plan.
 
 RESULTS OF OPERATIONS.
  Year Ended December 31,2005
    
    2004
    
    2003Revenues (1)
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of revenuesLabor and other operating expenses (1)
    
    
    (66.4
    )
    
    
    (65.7
    )
    
    
    (66.7
    )Depreciation, depletion and amortization
    
    
    (9.7
    )
    
    
    (10.4
    )
    
    
    (10.6
    )Gross profit
    
    
    23.9
    
    
    
    23.9
    
    
    
    22.7Selling, general and administrative expenses
    
    
    (6.9
    )
    
    
    (7.1
    )
    
    
    (7.8
    )Operating profit
    
    
    17.0
    
    
    
    16.8
    
    
    
    14.9Other (expense) income:Interest expense
    
    
    (5.1
    )
    
    
    (7.9
    )
    
    
    (8.0
    )Other, net
    
    
    0.1
    
    
    
    1.9
    
    
    
    1.4Income tax expense
    
    
    (2.2
    )
    
    
    (1.9
    )
    
    
    (1.6
    )Net income
    
    
    9.8
    %
    
    
    8.9
    %
    
    
    6.7
    %
 
 (1)
    
    Revenues for 2004 and 2003 have been restated to include external freight
billed to customers with related costs included in cost of revenues  labor and other
operating expenses resulting in no change in gross profit, operating profit or net
income. 2005 vs. 2004
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2004 vs. 2003
  - 11 -




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FINANCIAL CONDITION.
 Capital Requirements.
 Cash Flows From Operations.
 Banking Facilities and Debt
 - 12 -




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Capital Expenditures.
       - 15 -




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Contractual Obligations.
 Payments Due by Period (dollars in thousands)More thanContractual Obligations
    
    Total
    
    1 Year
    
    2-3 Years
    
    4-5 Years
    
    5 YearsLong-Term Debt, including current
installments
    
    $
    55,000
    
    
    
    3,333
    
    
    
    9,167
    
    
    
    9,167
    
    
    
    33,333Operating Leases(1)
    
    $
    2,425
    
    
    
    897
    
    
    
    1,079
    
    
    
    448
    
    
    
    Purchase Obligations(2)
    
    $
    19,000
    
    
    
    19,000
    
    
    
    
    
    
    
    
    
    
    
    Other Liabilities (3)
    
    $
    1,271
    
    
    
    297
    
    
    
    368
    
    
    
    144
    
    
    
    462Total
    
    $
    77,696
    
    
    
    23,527
    
    
    
    10,614
    
    
    
    9,759
    
    
    
    33,795
 
 (1)
    
    Includes approximately $2,362 for operating leases for mobile equipment,
railcars and corporate office lease.(2)
    
    Approximate amount of open equipment and construction orders for the
construction of a third kiln at our Arkansas plant. Approximately $176 of these obligations are
recorded on the Consolidated Balance Sheet at December 31, 2005 in current liabilities.(3)
    
    Does not include $427 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. (See Note 8 of Notes to Consolidated Financial
Statements.) Liquidity.
 Off-Balance Sheet Arrangements.
 
 NEW ACCOUNTING PRONOUNCEMENTS.
 Stock Options.
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Stripping Costs in the Mining Industry.
 Inventory Costs.
 
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
 COMMODITY PRICE RISK.
  INTEREST RATE RISK.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 Index to Consolidated Financial Statements.
 Reports of Independent Registered Public Accounting Firms
    
    
    19Consolidated Financial Statements:Consolidated Balance Sheets as of December 31, 2005 and 2004
    
    
    21Consolidated Statements of Income for the Years Ended December 31, 2005, 2004 and 2003
    
    
    22Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2005, 2004 and 2003
    
    
    23Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003
    
    
    24Notes to Consolidated Financial Statements
    
    
    25
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 - 19 -




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
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United States Lime & Minerals, Inc.
 
 Consolidated Balance Sheets
  December 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    1,312
    
    
    
    227Trade receivables, net
    
    
    11,360
    
    
    
    9,466Inventories
    
    
    7,705
    
    
    
    5,113Prepaid expenses and other assets
    
    
    1,617
    
    
    
    996Total current assets
    
    
    21,994
    
    
    
    15,802Property, plant and equipment:Mineral reserves and land
    
    
    10,367
    
    
    
    4,071Buildings and building improvements
    
    
    2,527
    
    
    
    1,724Machinery and equipment
    
    
    144,994
    
    
    
    130,565Furniture and fixtures
    
    
    1,192
    
    
    
    1,100Automotive equipment
    
    
    881
    
    
    
    662159,961
    
    
    
    138,122Less accumulated depreciation
    
    
    (60,660
    )
    
    
    (54,581
    )Property, plant and equipment, net
    
    
    99,301
    
    
    
    83,541Deferred tax assets, net
    
    
    290
    
    
    
    108Other assets, net
    
    
    1,439
    
    
    
    888Total assets
    
    $
    123,024
    
    
    
    100,339LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current installments of debt
    
    $
    3,333
    
    
    
    2,500Accounts payable
    
    
    4,522
    
    
    
    4,176Accrued expenses
    
    
    3,600
    
    
    
    2,993Total current liabilities
    
    
    11,455
    
    
    
    9,669Debt, excluding current installments
    
    
    51,667
    
    
    
    41,390Other liabilities
    
    
    1,681
    
    
    
    1,057Total liabilities
    
    
    64,803
    
    
    
    52,116Commitments and contingenciesStockholders 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; 6,013,784 and
5,845,338 shares issued and outstanding
at December 31, 2005 and 2004,
respectively
    
    
    601
    
    
    
    584Additional paid-in capital
    
    
    12,401
    
    
    
    10,516Accumulated other comprehensive loss
    
    
    (215
    )
    
    
    (363
    )Retained earnings
    
    
    45,434
    
    
    
    37,486Total stockholders equity
    
    
    58,221
    
    
    
    48,223Total liabilities and stockholders equity
    
    $
    123,024
    
    
    
    100,339
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United States Lime & Minerals, Inc.
 
 Consolidated Statements of Income
  Years Ended December 31,2005
    
    
    2004
    
    
    2003As Restated
    
    
    As RestatedRevenues
    
    $
    81,085
    
    
    
    71,231
    
    
    
    57,432Cost of revenues:Labor and other operating expenses
    
    
    53,838
    
    
    
    46,788
    
    
    
    38,267Depreciation, depletion and amortization
    
    
    7,881
    
    
    
    7,423
    
    
    
    6,10361,719
    
    
    
    54,211
    
    
    
    44,370Gross profit
    
    
    19,366
    
    
    
    17,020
    
    
    
    13,062Selling, general and administrative expenses
    
    
    5,522
    
    
    
    5,040
    
    
    
    4,488Operating profit
    
    
    13,844
    
    
    
    11,980
    
    
    
    8,574Other (income) expense:Interest expense
    
    
    4,173
    
    
    
    5,630
    
    
    
    4,577Other, net
    
    
    (101
    )
    
    
    (1,363
    )
    
    
    (807
    )4,072
    
    
    
    4,267
    
    
    
    3,770Income before income taxes
    
    
    9,772
    
    
    
    7,713
    
    
    
    4,804Income tax expense
    
    
    1,824
    
    
    
    1,384
    
    
    
    944Net income
    
    $
    7,948
    
    
    
    6,329
    
    
    
    3,860Net income per share of common stock:Basic
    
    $
    1.34
    
    
    
    1.08
    
    
    
    0.67Diluted
    
    $
    1.31
    
    
    
    1.07
    
    
    
    0.67
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United States Lime & Minerals, Inc.
 
 Consolidated Statements of Stockholders Equity
  Years Ended December 31, 2005, 2004 and 2003
 AccumulatedCommon Stock
    
    
    Additional
    
    
    OtherShares
    
    
    
    
    
    
    Paid-In
    
    
    Comprehensive
    
    
    RetainedOutstanding
    
    
    Amount
    
    
    Capital
    
    
    Income (Loss)
    
    
    Earnings
    
    
    TotalBalances at
December 31, 2002
    
    
    5,799,845
    
    
    $
    580
    
    
    
    10,392
    
    
    
    (254
    )
    
    
    27,588
    
    
    
    38,306Stock options exercised
    
    
    15,751
    
    
    
    2
    
    
    
    66
    
    
    
    
    
    
    
    
    
    
    
    68Common stock
dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (291
    )
    
    
    (291
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,860
    
    
    
    3,860Minimum pension
liability adjustment,
net of $11 tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    17Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,877Balances at
December 31, 2003
    
    
    5,815,596
    
    
    $
    582
    
    
    
    10,458
    
    
    
    (237
    )
    
    
    31,157
    
    
    
    41,960Stock options exercised
    
    
    29,742
    
    
    
    2
    
    
    
    58
    
    
    
    
    
    
    
    
    
    
    
    60Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,329
    
    
    
    6,329Minimum pension
liability adjustment,
net of $43 tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (69
    )
    
    
    
    
    
    
    (69
    )Mark to market of
interest rate hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (57
    )
    
    
    
    
    
    
    (57
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,203Balances at
December 31, 2004
    
    
    5,845,338
    
    
    $
    584
    
    
    
    10,516
    
    
    
    (363
    )
    
    
    37,486
    
    
    
    48,223Stock options exercised
including $125 tax
benefit
    
    
    137,829
    
    
    
    14
    
    
    
    551
    
    
    
    
    
    
    
    
    
    
    
    565Warrants exercised
    
    
    30,617
    
    
    
    3
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    Extinguishment of
warrant shares
repurchase obligation
    
    
    
    
    
    
    
    
    
    
    1,337
    
    
    
    
    
    
    
    
    
    
    
    1,337Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,948
    
    
    
    7,948Minimum pension
liability adjustment,
net of $54 tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (89
    )
    
    
    
    
    
    
    (89
    )Mark to market of
interest rate hedge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    237
    
    
    
    
    
    
    
    237Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,096Balances at
December 31, 2005
    
    
    6,013,784
    
    
    $
    601
    
    
    
    12,401
    
    
    
    (215
    )
    
    
    45,434
    
    
    
    58,221
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United States Lime & Minerals, Inc.
 
 Consolidated Statements of Cash Flows
  Years Ended December 31,2005
    
    
    2004
    
    
    2003OPERATING ACTIVITIES:Net income
    
    $
    7,948
    
    
    
    6,329
    
    
    
    3,860Adjustments to reconcile net income
to net cash provided by operations:Depreciation, depletion and amortization
    
    
    8,202
    
    
    
    7,697
    
    
    
    6,390Amortization of financing costs
    
    
    245
    
    
    
    1,101
    
    
    
    317Accretion of debt discount
    
    
    110
    
    
    
    171
    
    
    
    25Accretion of repurchase liability  warrant shares
    
    
    798
    
    
    
    210
    
    
    
    22Deferred income taxes
    
    
    (182
    )
    
    
    1,832
    
    
    
    449Loss on sale of assets
    
    
    61
    
    
    
    148
    
    
    
    48Changes in operating assets and liabilities, net of
acquisition of businesses:Trade receivables
    
    
    (43
    )
    
    
    (2,507
    )
    
    
    (1,757
    )Inventories
    
    
    (1,238
    )
    
    
    (377
    )
    
    
    173Prepaid expenses
    
    
    254
    
    
    
    (275
    )
    
    
    (459
    )Other assets
    
    
    (559
    )
    
    
    (49
    )
    
    
    (109
    )Accounts payable and accrued expenses
    
    
    915
    
    
    
    1,549
    
    
    
    718Tax benefit related to exercise of stock options
    
    
    125
    
    
    
    
    
    
    
    Other liabilities
    
    
    522
    
    
    
    (719
    )
    
    
    (156
    )Total adjustments
    
    
    9,210
    
    
    
    8,781
    
    
    
    5,661Net cash provided by operations
    
    $
    17,158
    
    
    
    15,110
    
    
    
    9,521INVESTING ACTIVITIES:Purchase of property, plant and equipment
    
    $
    (11,010
    )
    
    
    (13,608
    )
    
    
    (12,014
    )Acquisitions of businesses
    
    
    (16,932
    )
    
    
    
    
    
    
    Proceeds from sale of property, plant and equipment
    
    
    429
    
    
    
    60
    
    
    
    11Net cash used in investing activities
    
    $
    (27,513
    )
    
    
    (13,548
    )
    
    
    (12,003
    )FINANCING ACTIVITIES:Payment of common stock dividends
    
    $
    
    
    
    
    
    
    
    
    (291
    )(Repayments of) proceeds from revolving credit
facilities, net
    
    
    (7,825
    )
    
    
    7,825
    
    
    
    (1,263
    )Proceeds from term loans, net of $270 issuance costs in 2004
    
    
    27,700
    
    
    
    29,730
    
    
    
    Proceeds from subordinate debt, net of $550 issuance costs
    
    
    
    
    
    
    
    
    
    
    13,450Repayments of term loans
    
    
    (1,875
    )
    
    
    (38,325
    )
    
    
    (3,333
    )Repayment of subordinated debt
    
    
    (7,000
    )
    
    
    (7,000
    )
    
    
    Proceeds from exercise of stock options
    
    
    440
    
    
    
    60
    
    
    
    68Net cash provided by (used in) financing activities
    
    $
    11,440
    
    
    
    (7,710
    )
    
    
    8,631Net increase (decrease) in cash and cash equivalents
    
    $
    1,085
    
    
    
    (6,148
    )
    
    
    6,149Cash and cash equivalents at beginning of year
    
    
    227
    
    
    
    6,375
    
    
    
    226Cash and cash equivalents at end of year
    
    $
    1,312
    
    
    
    227
    
    
    
    6,375
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United States Lime & Minerals, Inc.
 
 Notes to Consolidated Financial Statements
  Years Ended December 31, 2005, 2004 and 2003
 (1)
    
    Summary of Significant Accounting Policies
 (a)
    
    OrganizationUnited States Lime & Minerals, Inc. (the Company) is a manufacturer of lime and
limestone products, supplying primarily the construction, steel, municipal
sanitation and water treatment, paper 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  Houston, U.S. Lime Company 
Shreveport and U.S. Lime Company  St. Clair.(b)
    
    Principles of ConsolidationThe consolidated financial statements include the accounts of the Company and its
subsidiaries. All material intercompany balances and transactions have been
eliminated.(c)
    
    Use of EstimatesThe 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 FlowsFor 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 31,2005
    
    
    2004
    
    
    2003Cash paid during the year for:Interest
    
    $
    3,020
    
    
    
    4,593
    
    
    
    4,507Income taxes
    
    $
    852
    
    
    
    165
    
    
    
    218
 (e)
    
    Revenue RecognitionThe Company recognizes revenue in accordance with the terms of its purchase orders,
contracts or purchase agreements, which are generally upon shipment, and when
payment is considered probable. Revenues include external freight billed to
customers with related costs in cost of revenues. (See Note 2.) The Companys
returns and allowances are minimal. External freight billed to customers included
in revenues was $16,902, $15,552 and $12,176 for 2005, 2004 and 2003, respectively,
which approximates the amount of external freight billed to customers included in
cost of revenues.(f)
    
    Fair Values of Financial InstrumentsThe 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 4 for discussion of debt fair values. The Companys gas
forward
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purchase contracts and interest rate hedges are carried at market value at
December 31, 2005 and 2004. See Notes 1(o) and 4.The holders of the Companys subordinated debt could require the Company to
repurchase any or all of the 162,000 shares that may be purchased upon exercise of
the Companys outstanding warrants at an exercise price of $3.84 per share.
Effective August 31, 2005, the holders of the warrants agreed to waive this right.
The repurchase price for each share was equal to the average closing price of one
share of the Companys common stock for the 30 trading days preceding the date the
shares were put back to the Company. At August 31, 2005, the fair value of the
warrant share put obligation was estimated to be $2,779, prior to the waiver based
on the $20.994 per share average closing price for the last 30 trading days ending
August 30, 2005. The fair value of the warrant share put liability was estimated
to be $1,126 at December 31, 2004 based on the $10.792 per share average closing
price for the last 30 trading days of 2004. The difference between the fair value
and the carrying value of the warrant share put liability was being accreted, and
the effect on fair value of future changes in the repurchase price for each share
was accreted or decreted, over the five-year period from the date of issuance to
August 5, 2008, resulting in an increase or decrease in interest expense.(g)
    
    Concentration of Credit Risk and Trade ReceivablesFinancial 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 Derivative Instruments and Hedging
Activities in Note 1(o) and Banking Facilities and Other Debt in Note 4.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. Trade receivables are presented net of the
related allowance for doubtful accounts, which totaled $312 and $310 at December
31, 2005 and 2004, respectively.(h)
    
    InventoriesInventories are valued principally at the lower of cost, determined using the
average cost method, or market. Costs for finished goods include materials, labor,
and production overhead.A summary of inventories is as follows:
 December 31,2005
    
    
    2004Lime and limestone inventories:Raw materials
    
    $
    3,177
    
    
    
    1,913Finished goods
    
    
    1,331
    
    
    
    7564,508
    
    
    
    2,669Service parts inventories
    
    
    3,197
    
    
    
    2,444$
    7,705
    
    
    
    5,113
 In December 2004, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 151, Inventory Costs, an
Amendment of ARB No. 43, Chapter 4 (SFAS 151). SFAS 151 requires abnormal
amounts of idle facility expense, freight, handling costs and wasted materials
(spoilage) to be recognized as current-period charges. SFAS 151 also requires that
the allocation of fixed production overhead to the cost of conversion be based on
the normal capacity of the production facilities. SFAS 151 is effective for fiscal
years beginning after June 15, 2005. The Company does not believe that
compliance with this new pronouncement will have a material effect on its financial
condition, results of operations, cash flows or competitive position.(i)
    
    Property, Plant and Equipment
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For major constructed assets, the capitalized cost includes the cash 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. Total
interest costs of $9, $445 and $308 were capitalized for the years ended December
31, 2005, 2004 and 2003, 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 yearsMachinery and equipment
    
    3 - 20 yearsFurniture and fixtures
    
    3 - 10 yearsAutomotive equipment
    
    3  -   8  years
 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
guidelines of Statement of Financial Accounting Standards 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, 2005, no events or circumstances have arisen which
would require the Company to record a provision for impairment of its long-lived
assets.(j)
    
    Asset Retirement ObligationsIn accordance with the guidelines of Statement of Financial Accounting Standards
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 that 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, 2005 and 2004, the Companys AROs included in other liabilities
were $1,079 and $500, respectively. An ARO of $618 was recorded upon the
acquisition of St. Clair (see Note 11), with no related asset. The remaining
related asset associated with the Companys AROs has been fully depreciated.
During 2005, the Company spent $39 on its AROs.The AROs were estimated based on studies, 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 $280 in 2006 and 2007 and $50 in years 2008
through 2010 relating to its AROs.(k)
    
    Other AssetsOther assets consist of the following:
 December 31,2005
    
    
    2004Deferred stripping costs
    
    $
    740
    
    
    
    435Intangible assets
    
    
    301
    
    
    
    Deferred financing costs
    
    
    218
    
    
    
    448Interest rate hedges
    
    
    180
    
    
    
    Other
    
    
    
    
    
    
    5$
    1,439
    
    
    
    888
 Through December 31, 2005, the Company capitalized certain stripping costs as
deferred stripping costs, all of which related to Arkansas Lime Company, which were
attributed to
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reserves that had been exposed and amortized using the
units-of-production method. Deferred financing costs are expensed over the life of
the debt.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 that 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 will expense $740
of previously capitalized deferred stripping costs in the first quarter 2006.(l)
    
    Environmental ExpendituresEnvironmental 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 when environmental assessments
and/or remedial efforts are probable, and the costs can be reasonably estimated.
Generally, the timing 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 $390 in 2005 and $410 in 2004.(m)
    
    Income Per Share of Common StockThe following table sets forth the computation of basic and diluted income per common share:
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Numerator:Net income for basic income
per common share
    
    $
    7,948
    
    
    
    6,329
    
    
    
    3,860Warrant interest adjustment
    
    
    
    
    
    
    21
    
    
    
    22Net income for diluted income per
common share
    
    $
    7,948
    
    
    
    6,350
    
    
    
    3,882Denominator:Denominator for basic net income per
common share  weighted-average
shares
    
    
    5,926,984
    
    
    
    5,834,039
    
    
    
    5,801,917Effect of dilutive securities:Warrants
    
    
    28,358
    
    
    
    23,703
    
    
    
    10,752Employee stock options
    
    
    128,726
    
    
    
    75,276
    
    
    
    12,438Denominator for diluted net income per
common share  adjusted weighted-
average shares and assumed exercises
    
    
    6,084,068
    
    
    
    5,933,018
    
    
    
    5,825,107Basic net income per common share
    
    $
    1.34
    
    
    
    1.08
    
    
    
    0.67Diluted net income per common share
    
    $
    1.31
    
    
    
    1.07
    
    
    
    0.67
 (n)
    
    Stock OptionsThe Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25), in accounting for its
employee and director stock options. Under APB 25, if the exercise price of the
employees or directors stock option equals or exceeds the market price of the
underlying stock on the date of grant, no compensation expense is recognized.
Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123), requires companies that elect to apply the
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provisions of APB 25 to provide pro forma disclosures for employee stock-based compensation
awards as if the fair-value-based method defined in SFAS 123 had been applied. See
Note 9.The following table illustrates the effect on net income and net income per share
of common stock if the Company had applied the fair value recognition provisions of
SFAS 123 instead of APB 25s intrinsic value method to account for stock-based
employee and director compensation:
 Year Ended December 31,2005
    
    
    2004
    
    
    2003Net income as reported
    
    $
    7,948
    
    
    
    6,329
    
    
    
    3,860Pro forma stock-based employee and director
compensation expense, net of income taxes,
under the fair value method
    
    $
    (466
    )
    
    
    (170
    )
    
    
    (61
    )Pro forma net income
    
    $
    7,482
    
    
    
    6,159
    
    
    
    3,799Basic net income per common share, as reported
    
    $
    1.34
    
    
    
    1.08
    
    
    
    0.67Diluted net income per common share, as
reported
    
    $
    1.31
    
    
    
    1.07
    
    
    
    0.67Pro forma basic net income per common share
    
    $
    1.26
    
    
    
    1.06
    
    
    
    0.65Pro forma diluted net income per common share
    
    $
    1.23
    
    
    
    1.04
    
    
    
    0.65
 The fair value for these options was estimated at the date of grant using the
Black-Scholes option valuation model, with the following weighted average
assumptions for the 2005, 2004 and 2003 grants: risk-free interest rates of 3.39%
to 4.39% in 2005, 1.94% to 3.23% in 2004 and 2.00% in 2003; a dividend yield of 0%;
and a volatility factor of .472 to .610 in 2005, .456 to .469 in 2004 and 0.310 in
2003. In addition, the fair value of these options was estimated based on an
expected life of three years.On December 16, 2004, the FASB issued Statement of Financial Accounting Standards
123(R) Share-Based Payments (SFAS 123(R)), which is a revision of SFAS 123.
SFAS 123(R) supersedes APB 25 and amends Statement of Accounting Standards No. 95,
Statement of Cash Flows. Generally, the approach in SFAS 123(R) is similar to
the approach described in SFAS 123. However, SFAS 123(R) will require all
share-based payments to employees and directors, including grants of stock options,
to be recognized in the Companys Consolidated Statements of Income based on their
fair values. Pro forma disclosure will no longer be an alternative.SFAS 123(R) must be adopted for fiscal years beginning after June 15, 2005 and
permits public companies to adopt its requirements using one of two methods:(1) A modified prospective method, in which compensation cost is recognized
beginning with the effective date based on the requirements of SFAS 123(R) for all
share-based payments granted after the adoption date and based on the requirements
of SFAS 123 for all awards granted prior to the effective date of SFAS 123(R) that
remain unvested on the adoption date.(2)  A modified retrospective method, which includes the requirements of the
modified prospective method described above, but also permits entities to restate
either all prior periods presented or prior interim periods of the year of adoption
based on the amounts previously recognized under SFAS 123 for purposes of pro
forma disclosures.The Company has adopted the provisions of SFAS 123(R) on January 1, 2006 using the
modified prospective method.As permitted by SFAS 123 and noted above, the Company currently accounts
for share-based payments using the intrinsic value method prescribed by APB 25
and related interpretations. As such, the Company generally has not recognized
compensation expenses associated with stock options. Accordingly, the adoption of
SFAS 123(R)s fair value method could have an adverse impact on the Companys
future results of operations, although it will have no material impact on the
Companys overall financial condition. Had the Company adopted SFAS 123(R) in prior
periods, the impact would have approximated the impact of
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SFAS 123 as described in
the pro forma net income and earnings per share disclosures above. The Company
estimates that the adoption of SFAS 123(R), based on the outstanding unvested stock
options at December 31, 2005, will result in an additional compensation expense in
2006 of $162, net of income tax benefit.(o)
    
    Derivative Instruments and Hedging ActivitiesThe Company follows Statement of Financial Accounting Standards 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
based on quotes obtained from the counterparties to the derivative contract. 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 Note 4.From time to time, the Company has entered into forward purchase contracts for the
delivery of a portion of the natural gas requirements of its plants. All such
contracts are recorded on the balance sheet at their respective fair values. The
Company is exposed to credit losses in the event of non-performance by the
counterparties of its financial instruments. Collateral or other security to
support financial instruments subject to credit risk is not required, but
management monitors the credit standing of the counterparties. The Company has
elected not to designate these forward purchase contracts as hedges for accounting
purposes. The costs of natural gas delivered under these contracts is included in
labor and other operating expenses during the month of delivery.As of December 31, 2005, the Company had a commitment to purchase 35 MMBTU in
January 2006 at $9.49 per MMBTU. The market price in dollars for delivery in
January 2006, as of December 31, 2005, was $11.225 per MMBTU. Accordingly, the
Company recorded a mark-to-market adjustment, resulting in a $61 decrease in labor
and other operating expenses at December 31, 2005, which is included in other
current assets on the balance sheet. The Company had a commitment to purchase
20MMBTU in January 2005 at $6.49 per MMBTU. The market price in dollars for
delivery in January 2005 as of December 31, 2004 was $6.213 per MMBTU.
Accordingly, the Company recorded a mark-to-market adjustment, resulting in a $5
increase in labor and other operating expenses at December 31, 2004, which is
included in accrued expenses on the balance sheet. As of December 31, 2003, the
Company had commitments to purchase, under two forward purchase contracts, a total
of 20MMBTU per month for the months of January, February and March 2004. The
delivery prices in dollars for these volumes averaged $5.20 per MMBTU. The market
prices in dollars for deliveries in these months as of December 31, 2003 were $6.15
per MMBTU for January deliveries, $6.19 per MMBTU for February deliveries and $6.00
per MMBTU for March deliveries. Accordingly, the Company recorded a mark-to-market
adjustment, resulting in a $55 reduction of labor and other operating expenses at
December 31, 2003.(p)
    
    Income TaxesThe 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 bases 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 expected to be realized.(p)
    
    Comprehensive Income (Loss)The Company follows Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (SFAS 130), which provides standards for reporting and
displaying
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comprehensive income. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other events
from non-owner sources. See Notes 4, 5 and 8.
 (2)
    
    Restatement of Revenues and Cost of Revenues
  (3)
    
    Embezzlement Matter
   (4)
    
    Banking Facilities and Other Debt
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December 31,
    
    
    December 31,2005
    
    
    2004Term Loans
    
    
    40,000
    
    
    
    29,175Draw Term Loan
    
    
    15,000
    
    
    
    Sub Notes
    
    
    
    
    
    
    7,000Discount on Sub Notes
    
    
    
    
    
    
    (110
    )Revolving Credit Facility
    
    
    
    
    
    
    7,825Subtotal
    
    
    55,000
    
    
    
    43,890Less current installments
    
    
    3,333
    
    
    
    2,500Debt,
excluding current installments
    
    $
    51,667
    
    
    
    41,390
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Total
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter$55,000
    
    
    3,333
    
    
    
    4,583
    
    
    
    4,584
    
    
    
    4,583
    
    
    
    4,584
    
    
    
    33,333
 (5)
    
    Accumulated Other Comprehensive Loss
  (6)
    
    Income Taxes
  2005
    
    
    2004
    
    
    2003Current income tax expense (benefit)
    
    $
    1,952
    
    
    
    (448
    )
    
    
    495Deferred income tax (benefit) expense
    
    
    (128
    )
    
    
    1,832
    
    
    
    449Income tax expense
    
    $
    1,824
    
    
    
    1,384
    
    
    
    944
  2005
    
    
    2004
    
    
    2003Percent
    
    
    
    
    
    
    Percent
    
    
    
    
    
    
    Percentof pretax
    
    
    
    
    
    
    of pretax
    
    
    
    
    
    
    of pretaxAmount
    
    
    Income
    
    
    Amount
    
    
    income
    
    
    Amount
    
    
    IncomeIncome taxes computed at
the federal statutory rate
    
    $
    3,322
    
    
    
    34.0
    %
    
    $
    2,622
    
    
    
    34.0
    %
    
    $
    1,634
    
    
    
    34.0
    %(Reduction) increase in
taxes resulting from:Statutory depletion in
excess of cost depletion
    
    
    (1,053
    )
    
    
    (10.8
    )
    
    
    (946
    )
    
    
    (12.3
    )
    
    
    (764
    )
    
    
    (15.9
    )State income taxes, net of
federal income tax benefit
    
    
    92
    
    
    
    1.0
    
    
    
    95
    
    
    
    1.2
    
    
    
    73
    
    
    
    1.5Recognition of previously
reserved deferred tax
assets
    
    
    (1,002
    )
    
    
    (10.3
    )
    
    
    (218
    )
    
    
    (2.8
    )
    
    
    (50
    )
    
    
    (1.0
    )Interest expense for warrant
share put liability
    
    
    343
    
    
    
    3.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    122
    
    
    
    1.3
    
    
    
    (169
    )
    
    
    (2.2
    )
    
    
    51
    
    
    
    1.0Income tax expense
    
    $
    1,824
    
    
    
    18.7
    
    
    $
    1,384
    
    
    
    17.9
    %
    
    $
    944
    
    
    
    19.6
    %
     - 34 -




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##### Table of Contents



(7)
    
    Oil and Gas Lease
    (8)
    
    Employee Retirement Plans
    2005
    
    2004Equity securities and funds
    
    
    61.6
    %
    
    
    58.7
    %Institutional bond funds
    
    
    36.4
    
    
    
    39.8Cash and cash equivalents
    
    
    2.0
    
    
    
    1.5100.0
    %
    
    
    100.0
    %
  - 35 -




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##### Table of Contents



2005
    
    
    2004Change in projected benefit obligation:Projected benefit obligation at beginning
of year
    
    $
    1,702
    
    
    
    1,589Interest cost
    
    
    102
    
    
    
    106Actuarial loss
    
    
    125
    
    
    
    124Benefits paid
    
    
    (114
    )
    
    
    (117
    )Projected benefit obligation at end of
year
    
    $
    1,815
    
    
    
    1,702Change in plan assets:Fair value of plan assets at beginning
of year
    
    $
    1,432
    
    
    
    1,252Employer contribution
    
    
    18
    
    
    
    212Actual gain on plan assets
    
    
    52
    
    
    
    85Benefits paid
    
    
    (114
    )
    
    
    (117
    )Fair value of plan assets at end of year
    
    $
    1,388
    
    
    
    1,432Underfunded status
    
    $
    (427
    )
    
    
    (270
    )Accumulated benefit obligation
    
    $
    1,815
    
    
    
    1,702
  2005
    
    2004Accrued benefit cost
    
    $
    427
    
    
    
    270
  2005
    
    2004Discount rate
    
    
    5.75
    %
    
    
    6.25
    %Expected long-term return on plan assets
    
    
    7.75
    %
    
    
    8.25
    %
  Year Ended December 31,2005
    
    
    2004
    
    
    2003Interest cost
    
    $
    102
    
    
    
    106
    
    
    
    111Expected return on plan assets
    
    
    (114
    )
    
    
    (110
    )
    
    
    (96
    )Amortization of net actuarial loss
    
    
    44
    
    
    
    38
    
    
    
    37Net periodic benefit cost
    
    $
    32
    
    
    
    34
    
    
    
    52
   (9)
    
    Stock Option Plans
   - 36 -




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##### Table of Contents



2005
    
    
    2004
    
    
    2003Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageOptions
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise Price
    
    
    Options
    
    
    Exercise PriceOutstanding at beginning of year
    
    
    379,000
    
    
    $
    7.21
    
    
    
    319,500
    
    
    $
    5.62
    
    
    
    225,000
    
    
    $
    6.55Granted
    
    
    77,500
    
    
    
    20.73
    
    
    
    106,000
    
    
    
    9.32
    
    
    
    114,500
    
    
    
    3.65Exercised
    
    
    (164,800
    )
    
    
    6.21
    
    
    
    (46,000
    )
    
    
    5.04
    
    
    
    (20,000
    )
    
    
    4.75Forfeited
    
    
    (13,500
    )
    
    
    21.80
    
    
    
    (500
    )
    
    
    7.00
    
    
    
    
    
    
    
    Outstanding at end of year
    
    
    278,200
    
    
    $
    11.97
    
    
    
    379,000
    
    
    $
    7.21
    
    
    
    319,500
    
    
    $
    5.62Exercisable at end of year
    
    
    182,756
    
    
    $
    10.22
    
    
    
    225,857
    
    
    $
    6.69
    
    
    
    213,000
    
    
    $
    6.59Weighted average fair value of
options granted during the year
    
    
    
    
    
    $
    8.42
    
    
    
    
    
    
    $
    3.15
    
    
    
    
    
    
    $
    0.86Weighted average remaining
contractual life in years
    
    
    
    
    
    
    7.36
    
    
    
    
    
    
    
    6.53
    
    
    
    
    
    
    
    6.58
  Outstanding
    
    ExercisableRange of
    
    Weighted Avg. Remaining
    
    Number of
    
    Weighted Avg.
    
    Number of
    
    Weighted Avg.Exercise Prices
    
    Contractual Life (Years)
    
    Shares
    
    Exercise Price
    
    Shares
    
    Exercise Price$  3.26 - $  3.85
    
    
    7.23
    
    
    
    63,000
    
    
    $
    3.55
    
    
    
    43,500
    
    
    $
    3.40$  7.00  - $  8.56
    
    
    5.76
    
    
    
    117,700
    
    
    $
    8.06
    
    
    
    75,033
    
    
    $
    7.81$11.35 - $13.31
    
    
    9.08
    
    
    
    65,000
    
    
    $
    12.34
    
    
    
    38,000
    
    
    $
    11.76$26.47 - $28.08
    
    
    9.97
    
    
    
    32,500
    
    
    $
    26.59
    
    
    
    26,223
    
    
    $
    26.47278,200
    
    
    
    
    
    
    
    182,756
 (10)
    
    Commitments and Contingencies
     - 37 -




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##### Table of Contents



(11)
    
    Acquisitions
    Cash
    
    $
    14,000Estimated working capital adjustment
    
    
    (821
    )Transaction costs
    
    
    323Total purchase price to be allocated
    
    $
    13,502
  Current assets, including accounts receivable and inventories
    
    $
    3,259Property, plant and equipment
    
    
    11,632Current liabilities, including accounts payable and accrued
Expenses
    
    
    (771
    )Reclamation liability
    
    
    (618
    )Total purchase price allocated
    
    $
    13,502
    2005
    
    2004Unaudited
    
    UnauditedRevenues
    
    $
    97,423
    
    
    
    85,906Operating profit
    
    $
    13,156
    
    
    
    11,318Net Income (loss)
    
    $
    6,904
    
    
    
    5,302Income per share of common stock:Basic
    
    $
    1.16
    
    
    
    0.90Diluted
    
    $
    1.14
    
    
    
    0.90
 (12)
    
    Subsequent Events (unaudited)
 - 38 -




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##### Table of Contents



(a) Exercises of WarrantsOn February 3, 2006, Credit Trust S.A.L., an affiliate of Inberdon, exercised for cash
its Warrant to acquire 63,643 shares of the Companys common stock, par value $0.10 per
share (the Common Stock). The 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 pursuant to Section 4(2) of the Securities Act of 1933.On February 13, 2006, ABB Finance Inc. exercised for cash its Warrant to acquire 63,643
shares of the 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. pursuant to Section 4(2) of the Securities Act of 1933.(b)  Oil and Gas LeaseIn addition to a 20% royalty interest, the Company elected in January 2006 and March 2006
to participate as a 20% working interest owner in the second and third wells and the fourth
well, respectively, to be drilled under the Companys oil and gas lease. (See Note 7.)
Estimated drilling and completion costs for the 20% working interest are approximately $450
per well. The second and third wells have been completed with gas production scheduled to
begin shortly.(13)
    
    Summary of Quarterly Financial Data (unaudited)
 2005March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Revenues  as restated (1)
    
    $
    19,772
    
    
    
    21,375
    
    
    
    20,064
    
    
    
    19,875Gross profit
    
    
    4,389
    
    
    
    5,764
    
    
    
    5,281
    
    
    
    3,932Net income
    
    $
    1,495
    
    
    
    2,909
    
    
    
    1,943
    
    
    
    1,601Basic income
per common share
    
    $
    0.26
    
    
    
    0.49
    
    
    
    0.33
    
    
    
    0.27Diluted income
per common share
    
    $
    0.25
    
    
    
    0.49
    
    
    
    0.31
    
    
    
    0.26
 
 (1)
    
    Revenues for the quarters ended March 31, June 30 and September 30,
2005 have been restated to include External Freight of $4,306, $4,251 and $4,160, respectively.
(See Note 2.) 2004March 31,
    
    
    June 30,
    
    
    September 30,
    
    
    December 31,Revenues  as restated (1)
    
    $
    15,234
    
    
    
    18,621
    
    
    
    20,187
    
    
    
    17,189Gross profit
    
    
    3,415
    
    
    
    4,605
    
    
    
    5,159
    
    
    
    3,841Net income
    
    $
    830
    
    
    
    2,452
    (2)
    
    
    1,730
    
    
    
    1,317Basic income
per common share
    
    $
    0.14
    
    
    
    0.42
    
    
    
    0.30
    
    
    
    0.23Diluted income
per common share
    
    $
    0.14
    
    
    
    0.42
    
    
    
    0.29
    
    
    
    0.22
 
 (1)
    
    Revenues for the quarters ended March 31, June 30, September 30 and December
31, 2004 have been restated to include External Freight billed to customers of $3,159, $3,869,
$4,417 and $4,107, respectively. (See Note 2.)(2)
    
    Includes an oil gas lease bonus payment of $1,192 ($954, or $0.16
per diluted share, net of income taxes). - 39 -




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##### Table of Contents



ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
  
 ITEM 9A.
    
    CONTROLS AND PROCEDURES.
     
 ITEM 9B.
    
    OTHER INFORMATION.
  
 PART III
 
 ITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION.
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
  
 ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
  - 40 -




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##### Table of Contents



ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES.
  
 PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
 (a)
    
    
    1.
    
    
    The following financial statements are included in Item 8:Reports of Independent Registered Public Accounting FirmsConsolidated Financial Statements:Consolidated Balance Sheets as of December, 31, 2005 and 2004;Consolidated Statements of Income for the Years Ended December 31, 2005,
2004 and 2003;Consolidated Statements of Stockholders Equity for the Years Ended
December, 31, 2005, 2004 and 2003;Consolidated Statements of Cash Flows for the Years Ended December 31,
2005, 2004 and 2003; andNotes 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
    
    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).3.2
    
    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).3.3
    
    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).10.1
    
    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).10.2
    
    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).10.3
    
    Loan and Security Agreement dated December 30, 1997 among
United States Lime & Minerals, Inc., Arkansas Lime Company and Texas Lime
Company and CoreStates Bank, N.A. (incorporated by reference to Exhibit
10(l) to the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, File Number 000-4197).10.4
    
    First Amendment to Amended and Restated Loan and Security
Agreement dated August 31, 1998 among United States Lime & Minerals, Inc.,
Arkansas Lime Company and Texas Lime Company and First Union National Bank
(incorporated by reference to Exhibit 10(a) to the Companys Quarterly
Report on Form 10-Q for the quarter ended September, 30, 1998, File Number
000-4197).
 - 41 -




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##### Table of Contents



10.5
    
    Employment Agreement dated as of October 11, 1989 between
the Company and Billy 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).10.6
    
    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).10.7
    
    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).10.7.1
    
    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).10.8
    
    Credit Agreement dated April 22, 1999 among United States
Lime & Minerals, Inc., Arkansas Lime Company, Texas Lime Company, the
Lenders who are, or may become, a party to the Agreement, and First Union
National Bank (incorporated by reference to Exhibit 10(a) to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, File
Number 000-4197).10.9
    
    Second Amendment to Amended and Restated Loan and
Security Agreement dated as of April 22, 1999 among United States Lime &
Minerals, Inc., Arkansas Lime Company, Texas Lime Company, and First Union
National Bank (incorporated by reference to Exhibit 10(b) to the Companys
Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, File
Number 000-4197).10.10
    
    Letter Agreement dated as of May 31, 2000 among United
States Lime & Minerals, Inc., Arkansas Lime Company, Texas Lime Company and
First Union National Bank (incorporated by reference to Exhibit 10 to the
Companys Quarterly Report on Form 10-Q for the quarter ended June 30, 2000,
File Number 000-4197).10.11
    
    Third Amendment to Amended and Restated Loan and
Security Agreement dated as of April 26, 2001 among United States Lime &
Minerals, Inc., Arkansas Lime Company, Texas Lime Company, and First Union
National Bank (incorporated by reference to Exhibit 10 to the Companys
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, File
Number 000-4197).10.12
    
    Fourth Amendment to Amended and Restated Loan and
Security Agreement dated as of December 31, 2001 among United States Lime &
Minerals, Inc., Arkansas Lime Company, Texas Lime Company, and First Union
National Bank (incorporated by reference to Exhibit 10(u) to the Companys
Annual Report on Form 10-K for the fiscal year ended December 31, 2001, File
Number 000-4197).10.13
    
    First Amendment to Credit Agreement dated as of December
27, 2000 among United States Lime & Minerals, Inc., Arkansas Lime Company,
Texas Lime Company, the Lenders who are, or may become, a party to the
Agreement, and First Union National Bank (incorporated by reference to the
Companys Current Report on Form 8-K dated January 18, 2001, File Number
000-4197).10.14
    
    Second Amended and Restated Note dated April 26, 2001
among United States Lime & Minerals, Inc., Arkansas Lime Company, Texas Lime
Company, the Lenders who are, or may become, a party to the Agreement, and
First Union National Bank (incorporated by reference to Exhibit 10(x) to the
Companys Annual Report on Form 10-K for the fiscal year ended December 31,
2002, File Number 000-4197).10.15
    
    Fifth Amendment to Amended and Restated Loan and
Security Agreement dated as of May 31, 2002 among United States Lime &
Minerals, Inc., Arkansas Lime
 - 42 -




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##### Table of Contents



Company, Texas Lime Company and Wachovia Bank,
f/k/a First Union National Bank (incorporated by reference to Exhibit 10 to
the Companys Quarterly Report on Form 10-Q for the quarter ended June 30,
2002, File Number 000-4197).10.16
    
    Sixth Amendment to Amended and Restated Loan and
Security Agreement dated as of January 31, 2003 among United States Lime &
Minerals, Inc., Arkansas Lime Company, Texas Lime Company and Wachovia Bank.
(incorporated by reference to Exhibit 10(s) to the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 2002, File Number
000-4197).10.17
    
    Loan and Security Agreement dated March 3, 2003 among
United States Lime & Minerals, Inc., Texas Lime Company, Arkansas Lime
Company and National City Bank (incorporated by reference to Exhibit 10(t)
to the Companys Annual Report on Form 10-K for the fiscal year ended
December 31, 2002, File Number 000-4197).10.18
    
    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).10.19
    
    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).10.20
    
    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).10.21
    
    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).10.22
    
    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 the
Agreement, and National City Bank (incorporated by reference to Exhibit 10.5
to the Companys Quarterly Report on Form 10-Q for the quarter ended June
30, 2003, File Number 000-4197).10.23
    
    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 (incorporated by
reference to Exhibit 10.6 to the Companys Quarterly Report on Form 10-Q for
the quarter ended June 30, 2003, File Number 000-4197).10.24
    
    Second Amendment to Loan and Security Agreement dated as
of December 29, 2003 among United States Lime & Minerals, Inc., Texas Lime
Company, Arkansas Lime Company and National City Bank (incorporated by
reference to Exhibit 10.26 to the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, File Number 000-4197).10.25
    
    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).10.26
    
    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).
 - 43 -




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##### Table of Contents



10.27
    
    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).10.28
    
    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.10.29
    
    Schedule of Non-Employee Director Compensation
(incorporated by reference to Exhibit 10.1 to the Companys Current Report
on Form 8-K dated August 24, 2005, File Number 000-4197).10.30
    
    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).10.31
    
    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 August 24, 2005, File Number 000-4197).10.32
    
    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 August 24, 2005, File Number
000-4197).21
    
    Subsidiaries of the Company.23.1
    
    Consent of Independent Registered Public Accounting Firm.23.2
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    Rule 13a-14(a)/15d-14(a)Certification by Chief Executive Officer.31.2
    
    Rule 13a-14(a)/15d-14(a)Certification by Chief Financial Officer.32.1
    
    Section 1350 Certification by Chief Executive Officer.32.2
    
    Section 1350 Certification by Chief Financial Officer.
 
 Exhibits 10.1, 10.2, 10.5 through 10.7.1 and 10.29 are management contracts or compensatory
plans or arrangements required to be filed as exhibits. - 44 -




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##### Table of Contents



SIGNATURES
  UNITED STATES LIME & MINERALS, INC.
 Date: March 13, 2006
    
    By:
    
    \s\ Timothy W. ByrneTimothy W. Byrne, President andChief Executive Officer
  Date: March 13, 2006
    
    By:
    
    \s\ Timothy W. ByrneTimothy W. Byrne, President,Chief Executive Officer, and Director(Principal Executive Officer)Date: March 13, 2006
    
    By:
    
    \s\ M. Michael OwensM. Michael Owens, Vice Presidentand Chief Financial Officer(Principal Financial and Accounting Officer)Date: March 13, 2006
    
    By:
    
    \s\ Edward A. OdishawEdward A. Odishaw, DirectorDate: March 13, 2006
    
    By:
    
    \s\ Antoine M. DoumetAntoine M. Doumet, Director andChairman of the BoardDate: March 13, 2006
    
    By:
    
    \s\ Wallace G. IrmscherWallace G. Irmscher, DirectorDate: March 13, 2006
    
    By:
    
    \s\ Richard W. CardinRichard W. Cardin, Director
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