UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2019~~2020


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

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

Commission file number is 000-04197

UNITED STATES LIME & MINERALS, INC.

(Exact name of registrant as specified in its charter)


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


5429 LBJ Freeway, Suite 230, Dallas, TX		75240
(Address of principal executive offices)		(Zip Code)

~~(972)~~ (972) 991-8400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.10 par value	USLM	The Nasdaq Stock Market LLC

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☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer ☒
Non-accelerated filer	☐	Smaller reporting company ☒
		Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date: As of July ~~31, 2019, 5,612,772~~30, 2020, 5,627,869 shares of common stock, $0.10 par value, were outstanding.

PART I. FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands)

(Unaudited)

June 30,

December 31,


2019

2018

ASSETS

Current assets

Cash and cash equivalents

$
73,672

$
67,218

Trade receivables, net

22,946

19,602

Inventories, net

12,329

12,846

Prepaid expenses and other current assets

1,351

1,692

Total current assets

110,298

101,358

    Property, plant and equipment

358,707

348,472

  Less accumulated depreciation and depletion

(212,079)

(205,708)

Property, plant and equipment, net

146,628

142,764

Operating lease right-of-use assets

4,054

—

Other assets, net

493

549

Total assets

$
261,473

$
244,671

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Accounts payable

$
4,952

$
4,570

Current portion of operating lease liabilities

1,465

—

Accrued expenses

3,025

3,393

Total current liabilities

9,442

7,963

Deferred tax liabilities, net

14,974

12,365

Operating lease liabilities, excluding current portion

2,547

—

Other liabilities

1,369

1,376

Total liabilities

28,332

21,704

Stockholders’ equity

Common stock

662

661

Additional paid-in capital

26,632

25,867

Accumulated other comprehensive loss

(8)

(13)

Retained earnings

260,212

250,568

Less treasury stock, at cost

(54,357)

(54,116)

Total stockholders’ equity

233,141

222,967

Total liabilities and stockholders’ equity

$
261,473

$
244,671


	June 30,		December 31,
	2020		2019
ASSETS
Current assets
Cash and cash equivalents	$	68,835	$	54,260
Trade receivables, net		21,192		22,948
Inventories, net		14,422		13,388
Prepaid expenses and other current assets		1,243		2,139
Total current assets		105,692		92,735
Property, plant and equipment		378,988		370,355
Less accumulated depreciation and depletion		(228,328)		(219,668)
Property, plant and equipment, net		150,660		150,687
Operating lease right-of-use assets		2,536		3,192
Other assets, net		382		423
Total assets	$	259,270	$	247,037
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	4,212	$	4,430
Current portion of operating lease liabilities		1,169		1,294
Accrued expenses		3,843		3,735
Total current liabilities		9,224		9,459
Deferred tax liabilities, net		19,692		17,218
Operating lease liabilities, excluding current portion		1,352		1,866
Other liabilities		1,383		1,362
Total liabilities		31,651		29,905
Stockholders’ equity
Common stock		664		663
Additional paid-in capital		28,386		27,464
Accumulated other comprehensive loss		—		(1)
Retained earnings		253,411		243,566
Less treasury stock, at cost		(54,842)		(54,560)
Total stockholders’ equity		227,619		217,132
Total liabilities and stockholders’ equity	$	259,270	$	247,037

See accompanying notes to condensed consolidated financial statements.

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per share data)

(Unaudited)

Three Months Ended June 30,

Six Months Ended  June 30,


2019

2018

2019

2018


Revenues















Lime and limestone operations

$
38,581

99.0
%
$
38,557

98.3
%
$
76,046

99.1
%
$
73,271

98.3
%

Natural gas interests

373

1.0
%

685

1.7
%

707

0.9
%

1,258

1.7
%

38,954

100.0
%

39,242

100.0
%

76,753

100.0
%

74,529

100.0
%

Cost of revenues

Labor and other operating expenses

25,002

64.2
%

25,317

64.5
%

50,040

65.2
%

49,390

66.3
%

Depreciation, depletion and amortization

4,225

10.8
%

4,288

11.0
%

8,293

10.7
%

8,465

11.4
%

29,227

75.0
%

29,605

75.5
%

58,333

75.9
%

57,855

77.6
%

Gross profit

9,727

25.0
%

9,637

24.5
%

18,420

24.1
%

16,674

22.4
%

Selling, general and administrative expenses

2,639

6.8
%

2,565

6.5
%

5,312

6.9
%

5,066

6.8
%

Operating profit

7,088

18.2
%

7,072

18.0
%

13,108

17.2
%

11,608

15.6
%

Other (income) expense

Interest expense

60

0.2
%

63

0.2
%

122

0.2
%

125

0.2
%

Interest and other income, net

(490)

(1.3)
%

(459)

(1.2)
%

(982)

(1.2)
%

(812)

(1.1)
%

(430)

(1.1)
%

(396)

(1.0)
%

(860)

(1.0)
%

(687)

(0.9)
%

Income before income tax expense

7,518

19.3
%

7,468

19.0
%

13,968

18.2
%

12,295

16.5
%

Income tax expense

1,485

3.8
%

830

2.1
%

2,807

3.7
%

1,395

1.9
%

Net income

$
6,033

15.5
%
$
6,638

16.9
%
$
11,161

14.5
%
$
10,900

14.6
%

Net income per share of common stock

Basic

$
1.07

$
1.19

$
1.99

$
1.95

Diluted

$
1.07

$
1.18

$
1.99

$
1.95


	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Revenues	$	37,547	100.0	%	$	38,954	100.0	%	$	75,987	100.0	%	$	76,753	100.0	%
Cost of revenues
Labor and other operating expenses		22,447	59.8	%		25,002	64.2	%		46,409	61.1	%		50,040	65.2	%
Depreciation, depletion and amortization		4,743	12.6	%		4,225	10.8	%		9,344	12.3	%		8,293	10.8	%
		27,190	72.4	%		29,227	75.0	%		55,753	73.4	%		58,333	76.0	%
Gross profit		10,357	27.6	%		9,727	25.0	%		20,234	26.6	%		18,420	24.0	%
Selling, general and administrative expenses		2,881	7.7	%		2,639	6.8	%		6,100	8.0	%		5,312	6.9	%
Operating profit		7,476	19.9	%		7,088	18.2	%		14,134	18.6	%		13,108	17.1	%
Other expense (income)
Interest expense		62	0.2	%		60	0.2	%		124	0.2	%		122	0.2	%
Interest and other income, net		(104)	(0.3)	%		(490)	(1.3)	%		(351)	(0.5)	%		(982)	(1.3)	%
		(42)	(0.1)	%		(430)	(1.1)	%		(227)	(0.3)	%		(860)	(1.1)	%
Income before income tax expense		7,518	20.0	%		7,518	19.3	%		14,361	18.9	%		13,968	18.2	%
Income tax expense		1,417	3.8	%		1,485	3.8	%		2,716	3.6	%		2,807	3.7	%
Net income	$	6,101	16.2	%	$	6,033	15.5	%	$	11,645	15.3	%	$	11,161	14.5	%
Net income per share of common stock
Basic	$	1.08			$	1.07			$	2.07			$	1.99
Diluted	$	1.08			$	1.07			$	2.07			$	1.99

See accompanying notes to condensed consolidated financial statements.

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(dollars in thousands)

(Unaudited)

Three Months Ended June 30,

Six Months Ended  June 30,

2019

2018

2019

2018

Net income

$
6,033

$
6,638

$
11,161

$
10,900

Other comprehensive income (loss)

Mark to market of foreign exchange hedges, net of tax (expense) benefit of $(7) and $(1) for the three months and six months ended June 30, 2019, respectively, and $17 and $27 for the three months and six months ended June 30, 2018, respectively

25

(55)

5

(89)

  Total other comprehensive income (loss)

25

(55)

5

(89)

Comprehensive income

$
6,058

$
6,583

$
11,166

$
10,811


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net income	$	6,101	$	6,033	$	11,645	$	11,161
Other comprehensive income
Mark to market of foreign exchange hedges, net of tax expense of $2 and $0 for the three months and six months ended June 30, 2020, respectively, and $7 and $1 for the three months and six months ended June 30, 2019, respectively		7		25		1		5
Total other comprehensive income		7		25		1		5
Comprehensive income	$	6,108	$	6,058	$	11,646	$	11,166

See accompanying notes to condensed consolidated financial statements.

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(dollars in thousands)

(Unaudited)


						Accumulated
	Common Stock			Additional		Other
	Shares			Paid-In		Comprehensive		Retained		Treasury
	Outstanding	Amount		Capital		(Loss) Income		Earnings		Stock		Total
Balances at December 31, 2019	5,622,826	$	663	$	27,464	$	(1)	$	243,566	$	(54,560)	$	217,132
Stock options exercised	2,000		—		81		—		—		—		81
Stock-based compensation	3,063		1		378		—		—		—		379
Treasury shares purchased	(704)		—		—		—		—		(64)		(64)
Cash dividends paid	—		—		—		—		(899)		—		(899)
Net income	—		—		—		—		5,544		—		5,544
Mark to market of foreign exchange hedges, net of $2 tax benefit	—		—		—		(6)		—		—		(6)
Comprehensive (loss) income	—		—		—		(6)		5,544		—		5,538
Balances at March 31, 2020	5,627,185	$	664	$	27,923	$	(7)	$	248,211	$	(54,624)	$	222,167
Stock-based compensation	3,143		—		463		—		—		—		463
Treasury shares purchased	(2,459)		—		—		—		—		(218)		(218)
Cash dividends paid	—		—		—		—		(901)		—		(901)
Net income	—		—		—		—		6,101		—		6,101
Mark to market of foreign exchange hedges, net of $2 tax expense	—		—		—		7		—		—		7
Comprehensive income	—		—		—		7		6,101		—		6,108
Balances at June 30, 2020	5,627,869	$	664	$	28,386	$	—	$	253,411	$	(54,842)	$	227,619


						Accumulated
	Common Stock			Additional		Other
	Shares			Paid-In		Comprehensive		Retained		Treasury
	Outstanding	Amount		Capital		(Loss) Income		Earnings		Stock		Total
Balances at December 31, 2018	5,607,401	$	661	$	25,867	$	(13)	$	250,568	$	(54,116)	$	222,967
Stock-based compensation	3,333		—		309		—		—		—		309
Treasury shares purchased	(753)		—		—		—		—		(52)		(52)
Cash dividends paid	—		—		—		—		(757)		—		(757)
Net income	—		—		—		—		5,128		—		5,128
Mark to market of foreign exchange hedges, net of $6 tax benefit	—		—		—		(20)		—		—		(20)
Comprehensive (loss) income	—		—		—		(20)		5,128		—		5,108
Balances at March 31, 2019	5,609,981	$	661	$	26,176	$	(33)	$	254,939	$	(54,168)	$	227,575
Stock options exercised	2,000		—		75		—		—		—		75
Stock-based compensation	3,173		1		381		—		—		—		382
Treasury shares purchased	(2,361)		—		—		—		—		(189)		(189)
Cash dividends paid	—		—		—		—		(760)		—		(760)
Net income	—		—		—		—		6,033		—		6,033
Mark to market of foreign exchange hedges, net of $7 tax expense	—		—		—		25		—		—		25
Comprehensive income	—		—		—		25		6,033		—		6,058
Balances at June 30, 2019	5,612,793	$	662	$	26,632	$	(8)	$	260,212	$	(54,357)	$	233,141

See accompanying notes to condensed consolidated financial statements.

Accumulated

Common Stock

Additional

Other


Shares



Paid-In

Comprehensive

Retained

Treasury


Outstanding

Amount

Capital

(Loss) Income

Earnings

Stock

Total

Balances at December 31, 2018

5,607,401

$
661

$
25,867

$
(13)

$
250,568

$
(54,116)

$
222,967

Stock-based compensation

3,333

—

309

—

—

—

309

Treasury shares purchased

(753)

—

—

—

—

(52)

(52)

Cash dividends paid

—

—

—

—

(757)

—

(757)

Net income

—

—

—

—

5,128

—

5,128

Mark to market of foreign exchange hedges, net of $6 tax benefit

—

—

—

(20)

—

—

(20)

Comprehensive (loss) income

—

—

—

(20)

5,128

—

5,108

Balances at March 31, 2019

5,609,981

661

26,176

(33)

254,939

(54,168)

227,575

Stock options exercised

2,000

—

75

—

—

—

75

Stock-based compensation

3,173

1

381

—

—

—

382

Treasury shares purchased

(2,361)

—

—

—

—

(189)

(189)

Cash dividends paid

—

—

—

—

(760)

—

(760)

Net income

—

—

—

—

6,033

—

6,033

Mark to market for foreign exchange hedges, net of $7 tax expense

—

—

—

25

—

—

25

Comprehensive income

—

—

—

25

6,033

—

6,058

Balances at June 30, 2019

5,612,793

$
662

$
26,632

$
(8)

$
260,212

$
(54,357)

$
233,141

Accumulated

Common Stock

Additional

Other


Shares



Paid-In

Comprehensive

Retained

Treasury


Outstanding

Amount

Capital

(Loss) Income

Earnings

Stock

Total

Balances at December 31, 2017

5,588,821

$
659

$
24,307

$
86

$
233,905

$
(53,705)

$
205,252

Stock options exercised

2,000

—

73

—

—

—

73

Stock-based compensation

2,733

—

316

—

—

—

316

Treasury shares purchased

(861)

—

—

—

—

(61)

(61)

Cash dividends paid

—

—

—

—

(755)

—

(755)

Net income

—

—

—

—

4,262

—

4,262

Mark to market of foreign exchange hedges, net of $10 tax benefit

—

—

—

(34)

—

—

(34)

Comprehensive (loss) income

—

—

—

(34)

4,262

—

4,228

Balances at March 31, 2018

5,592,693

659

24,696

52

237,412

(53,766)

209,053

Stock options exercised

3,200

—

—

—

—

—

—

Stock-based compensation

4,319

1

396

—

—

—

397

Treasury shares purchased

(2,262)

—

—

—

—

(190)

(190)

Cash dividends paid

—

—

—

—

(756)

—

(756)

Net income

—

—

—

—

6,638

—

6,638

Mark to market for foreign exchange hedges, net of $17 tax benefit

—

—

—

(55)

—

—

(55)

Comprehensive (loss) income

—

—

—

(55)

6,638

—

6,583

Balances at June 30, 2018

5,597,950

$
660

$
25,092

$
(3)

$
243,294

$
(53,956)

$
215,087

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(Unaudited)


	Six Months Ended June 30,
	2020		2019
OPERATING ACTIVITIES:
Net income	$	11,645	$	11,161
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		9,453		8,404
Amortization of deferred financing costs		2		6
Deferred income taxes		2,484		2,619
Loss on disposition of property, plant and equipment		239		97
Stock-based compensation		842		691
Changes in operating assets and liabilities:
Trade receivables, net		1,756		(3,344)
Inventories, net		(1,034)		517
Prepaid expenses and other current assets		896		341
Other assets		40		50
Accounts payable and accrued expenses		779		(452)
Other liabilities		27		(54)
Net cash provided by operating activities		27,129		20,036
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(10,599)		(12,360)
Proceeds from sale of property, plant and equipment		46		461
Net cash used in investing activities		(10,553)		(11,899)
FINANCING ACTIVITIES:
Cash dividends paid		(1,800)		(1,517)
Proceeds from exercise of stock options		81		75
Purchase of treasury shares		(282)		(241)
Net cash used in financing activities		(2,001)		(1,683)
Net increase in cash and cash equivalents		14,575		6,454
Cash and cash equivalents at beginning of period		54,260		67,218
Cash and cash equivalents at end of period	$	68,835	$	73,672

See accompanying notes to condensed consolidated financial statements.

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~

~~(dollars in thousands)~~

~~(Unaudited)~~

Six Months Ended  June 30,

2019

2018

OPERATING ACTIVITIES:





Net income

$
11,161

$
10,900

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation, depletion and amortization

8,404

8,572

Amortization of deferred financing costs

6

15

Deferred income taxes

2,619

1,157

Loss on disposition of property, plant and equipment

97

345

Stock-based compensation

691

713

Changes in operating assets and liabilities:

Trade receivables, net

(3,344)

(4,450)

Inventories, net

517

1,289

Prepaid expenses and other current assets

341

438

Other assets

50

93

Accounts payable and accrued expenses

(452)

(697)

Other liabilities

(54)

(145)

   Net cash provided by operating activities

20,036

18,230

INVESTING ACTIVITIES:

Purchase of property, plant and equipment

(12,360)

(19,378)

Proceeds from sale of property, plant and equipment

461

183

  Net cash used in investing activities

(11,899)

(19,195)

FINANCING ACTIVITIES:

Cash dividends paid

(1,517)

(1,511)

Proceeds from exercise of stock options

75

73

Purchase of treasury shares

(241)

(251)

Net cash used in financing activities

(1,683)

(1,689)

Net increase (decrease) in cash and cash equivalents

6,454

(2,654)

Cash and cash equivalents at beginning of period

67,218

85,000

Cash and cash equivalents at end of period

$
73,672

$
82,346

~~See accompanying notes to condensed consolidated financial statements.~~

~~UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES~~

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The condensed consolidated financial statements included herein have been prepared by United States Lime & Minerals, Inc. (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, comprehensive income and cash flows for the periods presented have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted. These condensed consolidated financial statements should 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, ~~2018.~~2019. The results of operations for the ~~three- and~~three-and six-month periods ended June 30, ~~2019~~2020 are not necessarily indicative of operating results for the full year.

2. Organization

The ~~Company is headquartered in Dallas, Texas, and operates through two business segments. Through its Lime and Limestone Operations, the~~ Company is a manufacturer of lime and limestone products, supplying primarily the construction (including highway, road and building contractors), industrial (including paper and glass manufacturers), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), metals (including steel producers), oil and gas services, roof shingle manufacturers and agriculture (including poultry and cattle feed producers) industries. The Company is headquartered in Dallas, Texas and operates lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Missouri, Oklahoma and Texas through its wholly owned subsidiaries, Arkansas Lime Company, Colorado Lime Company, Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair, ART Quarry TRS LLC (DBA Carthage Crushed Limestone) and U.S. Lime Company – Transportation. In addition, the Company, through its wholly owned subsidiary, U.S. Lime Company – O & G, LLC, has royalty and ~~non-operating~~non-operated working interests in natural gas wells located in Johnson County, Texas, in the Barnett Shale Formation.

During 2019, the Company’s natural gas interests did not reach any of the quantitative thresholds for a reportable segment, and the results from its natural gas interests are not expected to be of significance in future periods. The revenues, gross profit and operating profit of the natural gas interests are included in Other for reportable segment disclosures. Segment disclosures for the three- and six-month periods ended June 30, 2019 have been recast to be consistent with the presentation for the respective periods ended June 30, 2020.

3. Accounting Policies

Revenue Recognition. The Company recognizes revenue for its ~~Lime~~lime and ~~Limestone Operations in accordance~~limestone operations when (i) a contract with the ~~terms of its purchase orders, contracts or purchase agreements,~~customer exists and the performance obligations are identified; (ii) the price has been established; and (iii) the performance obligations have been satisfied, which is generally upon ~~shipment, and when payment is considered probable.~~shipment. Revenues include external freight billed to customers with related costs accounted for as fulfillment costs and included in cost of revenues. The Company’s returns and allowances are minimal. External freight billed to customers included in ~~2019~~2020 and ~~2018~~2019 revenues was ~~$7.1~~$6.5 million and ~~$6.8~~$7.1 million, for the respective three-month periods ended June 30, and $13.3 million and $13.9 ~~and $12.7~~ million for the respective six-month periods ended June 30, which approximates the amount of external freight included in cost of revenues. Sales taxes billed to customers are not included in revenues. For its ~~Natural Gas Interests,~~natural gas interests, the Company recognizes revenue in the month of production and delivery.

The Company operates its ~~Lime~~lime and ~~Limestone Operations~~limestone operations within a single geographic region and derives all revenues from that segment from the sale of lime and limestone products. ~~Revenues from the Company’s Natural Gas Interests are from the Company’s royalty and non-operating working interest in Johnson County, Texas.~~ See Note 4 to the condensed consolidated financial statements for disaggregation of revenues by segment, which the Company believes best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Accounts Receivable. On January 1, 2020, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 replaces the incurred impairment methodology in previous GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The Company applied the amendments of ASU 2016-13 using a modified-retrospective approach, and as a result, amounts recorded prior to January 1, 2020 have not been retrospectively restated. The implementation of ASU 2016-13 did not have a material impact on the Company’s results of operation, financial position, or cash flows.

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. The Company estimates credit losses relating to trade receivables based on an assessment of the current and forecasted probability of collection, historical trends, economic conditions and other significant events that may impact the collectability of accounts receivables. Due to the relatively homogenous nature of its trade receivables, the Company does not believe there is any meaningful asset-specific differences within its accounts receivable portfolio that would require the portfolio to be grouped below the consolidated level for review of credit losses. Credit losses relating to trade receivables have generally been within management expectations and historical trends. Uncollected trade receivables are charged-off when identified by management to be unrecoverable. The Company maintains an allowance for ~~doubtful accounts~~credit losses to reflect currently expected estimated losses resulting from the failure of customers to make required payments. See Note 7 to the condensed consolidated financial statements.

~~Successful-Efforts Method Used for Natural Gas Interests.~~ The Company uses the successful-efforts method to account for oil and gas exploration and development expenditures. Under this method, drilling, completion and workover costs for successful exploratory wells and all development well costs are capitalized and depleted using the units-of-production method. Costs to drill exploratory wells that do not find proved reserves are expensed.

Comprehensive Income. Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Certain changes in assets and liabilities, such as mark-to-market gains or losses on foreign exchange derivative instruments designated as hedges, are reported as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income.

Leases. The Company determines if an arrangement is a lease at inception. When recording operating leases, the Company records a lease liability based on the net present value of the lease payments over the lease term, using the interest rate implicit in the lease, if known, or an incremental rate on a collateralized basis over a similar term and amount to the lease, and a corresponding right-of-use asset. Operating leases are included in operating lease right-of-use assets, current portion of operating lease liabilities and operating lease liabilities, excluding current portion, on the balance sheet. Lease expense is recognized over the lease term on a straight-line basis. Lease terms include options to extend the lease when it is reasonably certain the Company will exercise the option. For leases with a term of twelve months or less, the Company does not record a right-of-use asset and a lease liability and records lease expense on a straight-line basis. See Note 910 to the condensed consolidated financial statements.

Fair Values of Financial Instruments. Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.” The Company uses a three-tier fair value hierarchy, which classifies the inputs used in measuring fair values, in determining the fair value of its financial assets and liabilities. These tiers include: Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets; Level 2, defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. Specific inputs used to value the Company’s foreign exchange hedges were Euro to U.S. Dollar exchange rates for the expected future payment dates for the Company’s commitments denominated in Euros. The last of these foreign exchange hedges expired in April 2020. See Note 6 to the condensed consolidated financial statements. There were no changes in the methods and assumptions used in measuring fair ~~value.~~ value during the period.

The Company’s financial liabilities measured at fair value on a recurring basis at June 30, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, are summarized below (in thousands):

Significant Other

Observable Inputs

(Level 2)

June 30,

December 31,

June 30,

December 31,

2019

2018

2019

2018

Valuation Technique

Foreign exchange hedges

$
(11)

$
(16)

$
(11)

$
(16)

Cash flows approach

~~New Accounting Pronouncements.~~ In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (“ASU 2016-02”), “Leases,” which requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous guidance. For operating leases, a lessee is required to recognize at inception a right-of-use asset and a lease liability equal to the net present value of the lease payments, with lease expense recognized over the lease term on a straight-line basis. For leases with a term of twelve months or less, ASU 2016-02 allows a reporting entity to make an accounting policy election to not recognize a right-of-use asset and a lease liability, and to recognize lease expense on a straight-line basis. The Company adopted ASU 2016-02 at January 1, 2019, using the current-period adjustment method. Under the current-period adjustment method, a reporting entity continues to apply legacy guidance, including disclosure requirements, in the comparative periods presented in the year of adoption, recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, if any. Adoption of ASU 2016-02 resulted in an increase in assets of $3.9 million with corresponding liabilities of $3.9 million and no impact on retained earnings at January 1, 2019.

Significant Other

Observable Inputs

(Level 2)

June 30,

December 31,

June 30,

December 31,

2020

2019

2020

2019

Valuation Technique

Foreign exchange hedges

—

(1)

—

(1)

Cash flows approach

In August 2017, the FASB issued Accounting Standards Update No. 2017-12 (“ASU 2017-12”), “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This standard better aligns an entity’s risk management activities and financial reporting for hedging relationships and enhances the transparency and understandability of hedge results through improved disclosures. The Company adopted ASU 2017-12 at January 1, 2019. Adoption of ASU 2017-12 had no impact on the Company’s condensed consolidated financial statements.

4. Business Segment

4. ~~Business Segments~~

The Company has identified ~~two business segments~~1 reportable segment based on the distinctness of ~~their~~the Company’s activities and products: ~~Lime~~lime and ~~Limestone Operations and Natural Gas Interests.~~limestone operations. All operations are in the United States. In evaluating the operating results of the ~~Company’s segments,~~Company, management primarily reviews revenues, gross profit and ~~gross profit.~~operating profit from the lime and limestone operations. Operating profit from its lime and limestone operations includes all of the Company’s selling, general and administrative costs. The Company does not allocate ~~corporate overhead,~~ interest expense orand interest and other income (expense), net to its ~~business segments.~~lime and limestone operations.

During 2019, the Company’s natural gas interests did not reach any of the quantitative thresholds for a reportable segment, and the Company does not expect the results from its natural gas interests to be of significance in future periods. The revenues, gross profit and operating profit from the Company’s natural gas interests are included in Other for the Company’s reportable segment disclosures. Other identifiable assets include assets related to its natural gas interests, unallocated corporate assets and cash items. Segment disclosures for the three and six months ended June 30, 2019 have been recast to be consistent with the presentation for the three and six months ended June 30, 2020.

The following table sets forth operating results and certain other financial data for the Company’s ~~two business segments~~lime and limestone operations segment and other (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,

									Three Months Ended June 30,				Six Months Ended June 30,
Revenues	2019		2018		2019		2018		2020		2019		2020			2019
Lime and limestone operations	$	38,581	$	38,557	$	76,046	$	73,271	$	37,362	$	38,581	$	75,576		$	76,046
Natural gas interests		373		685		707		1,258
Other										185		373		411			707
Total revenues	$	38,954	$	39,242	$	76,753	$	74,529	$	37,547	$	38,954	$	75,987		$	76,753
Depreciation, depletion and amortization
Lime and limestone operations	$	4,089	$	4,129	$	8,018	$	8,141	$	4,563	$	4,089	$	8,975		$	8,018
Natural gas interests		136		159		275		324
Other										180		136		369			275
Total depreciation, depletion and amortization	$	4,225	$	4,288	$	8,293	$	8,465	$	4,743	$	4,225	$	9,344		$	8,293
Gross profit
Gross profit (loss)
Lime and limestone operations	$	9,690	$	9,327	$	18,376	$	16,120	$	10,507	$	9,690	$	20,546		$	18,376
Natural gas interests		37		310		44		554
Other										(150)		37		(312)			44
Total gross profit	$	9,727	$	9,637	$	18,420	$	16,674	$	10,357	$	9,727	$	20,234		$	18,420
Operating profit (loss)
Lime and limestone operations									$	7,626	$	7,051	$	14,446		$	13,064
Other										(150)		37		(312)			44
Total operating profit									$	7,476	$	7,088	$	14,134		$	13,108
Identifiable assets, at period end
Lime and limestone operations									$	184,397	$	179,780	$	184,397	$		179,780
Other										74,873		81,693		74,873			81,693
Total identifiable assets									$	259,270	$	261,473	$	259,270		$	261,473
Capital expenditures
Lime and limestone operations	$	6,676	$	5,333	$	12,360	$	19,378	$	4,493	$	6,676	$	10,599		$	12,360
Natural gas interests		—		—		—		—
Other										—		—		—			—
Total capital expenditures	$	6,676	$	5,333	$	12,360	$	19,378	$	4,493	$	6,676	$	10,599		$	12,360

5. 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):


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Net income for basic and diluted income per common share	$	6,101	$	6,033	$	11,645	$	11,161
Weighted-average shares for basic income per common share		5,629		5,614		5,627		5,612
Effect of dilutive securities:
Employee and director stock options⁽¹⁾		8		10		9		7
Adjusted weighted-average shares and assumed exercises for diluted income per common share		5,637		5,624		5,636		5,619
Basic net income per common share	$	1.08	$	1.07	$	2.07	$	1.99
Diluted net income per common share	$	1.08	$	1.07	$	2.07	$	1.99

Three Months Ended June 30,

Six Months Ended  June 30,


2019

2018

2019

2018

Net income for basic and diluted income per common share

$
6,033

$
6,638

$
11,161

$
10,900

Weighted-average shares for basic income per common share

5,614

5,595

5,612

5,593

Effect of dilutive securities:

Employee and director stock options(1)

10

8

7

8

Adjusted weighted-average shares and assumed exercises for diluted income per common share

5,624

5,603

5,619

5,601

Basic net income per common share

$
1.07

$
1.19

$
1.99

$
1.95

Diluted net income per common share

$
1.07

$
1.18

$
1.99

$
1.95

(1)

⁽¹⁾

Excludes 15 and 11 stock options for the three- and six-month 2020 periods, and 0 and 14 stock options for the three- and six-month 2019 ~~periods and 2 and 10 stock options for the three- and six-month 2018~~ periods, respectively, as anti-dilutive because the exercise price exceeded the average per share market price for the period.

6. Accumulated Other Comprehensive Income

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


	Three Months Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018

									Three Months Ended June 30,				Six Months Ended June 30,
									2020		2019		2020		2019
Net income	$	6,033	$	6,638	$	11,161	$	10,900	$	6,101	$	6,033	$	11,645	$	11,161
Mark to market of foreign exchange hedges		32		(72)		6		(116)		9		32		1		6
Deferred income tax (expense) benefit		(7)		17		(1)		27
Deferred income tax expense										(2)		(7)		—		(1)
Comprehensive income	$	6,058	$	6,583	$	11,166	$	10,811	$	6,108	$	6,058	$	11,646	$	11,166

In ~~November 2016,~~May 2018, to hedge against potential losses due to changes in the Euro to U.S. Dollar exchange rates, the Company entered into foreign exchange (“FX”) hedges with Wells Fargo Bank, N.A. (“Wells Fargo”) as the counterparty to the FX hedges to fix the exchange ~~rates for 5.5 million Euros in connection with a contractual obligation related to~~rates. The last of the ~~St. Clair kiln project, of which~~ FX hedges ~~with respect to 0.4 million Euros remained outstanding at June 30, 2019. In May 2018, the Company entered into additional FX hedges with Wells Fargo to fix the exchange rate for 2.2 million Euros~~expired in connection with a contractual obligation related to the purchase and installation of equipment at Arkansas Lime Company, of which FX hedges with respect to 0.3 million Euros remained outstanding at June 30, 2019. At June 30, 2019 and December 31, 2018, the Company had total FX hedges fixing the exchange rates for 0.7 million Euros and 1.4 million Euros, respectively. The Company will be exposed to credit losses in the event of non-performance by the counterparty to the FX hedges.April 2020. The FX hedges ~~have been~~were effective as defined under applicable accounting rules. Therefore, changes in the fair value of the FX hedges ~~are~~were reflected in comprehensive income. Due to changes in the U.S. Dollar, compared to the Euro, the fair value of the hedges resulted in net liabilities of ~~$11 and $16~~$1 at ~~June 30, 2019 and~~ December 31, ~~2018, respectively,~~2019, which is included in accrued expenses.

7. Trade Receivables, Net

Additions (reductions) and write-offs to the Company’s allowance for credit losses for the six months ended June 30, 2020 and 2019 were as follows (in thousands):


	June 30,
	2020		2019
Beginning balance	$	361	$	430
Additions (reductions)		14		(10)
Write-offs		—		—
Ending balance	$	375	$	420

7. 8. Inventories, Net

Inventories are valued principally at the lower of cost, determined using the average cost method, or market. Costs for raw materials and finished goods include materials, labor, and production overhead. Inventories, net consisted of the following (in thousands):


	June 30,		December 31,
	2019		2018

					June 30,		December 31,
					2020		2019
Lime and limestone inventories:
Raw materials	$	4,096	$	4,693	$	4,961	$	4,546
Finished goods		1,994		2,153		1,815		1,954
		6,090		6,846
						6,776		6,500
Service parts inventories		6,239		6,000		7,646		6,888
	$	12,329	$	12,846
					$	14,422	$	13,388

8. 9. Banking Facilities and Debt

The Company’s credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 2019 and November 21, 2019, provides for a $75 million revolving credit facility (the “Revolving Facility”) and an incremental ~~four-year~~four year accordion feature to borrow up to an additional $50 million on the same terms, subject to approval by the Lender or another lender selected by the Company. The credit agreement also provides for a ~~$10~~$10 million letter of credit sublimit under the Revolving Facility. The Revolving Facility and any incremental loans mature on May 2, 2024.

Interest rates on the Revolving Facility are, at the Company’s option, LIBOR plus a margin of 1.000% to 2.000%, or the Lender’s Prime Rate plus a margin of 0.000% to 1.000%;, and a commitment fee range of 0.200% to 0.350% on the undrawn portion of the Revolving Facility. The Revolving Facility interest rate margins and commitment fee are determined quarterly in accordance with a pricing grid based upon the Company’s Cash Flow Leverage Ratio, defined as the ratio of the Company’s total funded senior indebtedness to earnings before interest, taxes, depreciation, depletion, amortization and stock-based compensation expense (“EBITDA”) for the 12 months ended on the last day of the most recent calendar quarter, plus pro forma EBITDA from any businesses acquired during the period. Pursuant to a security agreement, dated August 25, 2004, the Revolving Facility is secured by the Company’s existing and hereafter acquired tangible assets, intangible assets and real property. The maturity of the Revolving Facility and any incremental loans can be accelerated if any event of default, as defined under the credit agreement, occurs. The Company’s maximum Cash Flow Leverage Ratio is 3.50 to 1.

The Company may pay dividends so long as it remains in compliance with the provisions of the Company’s credit agreement, and it may purchase, redeem or otherwise acquire shares of its common stock so long as its pro forma Cash Flow Leverage Ratio is less than 3.00 to 1.00 and no default or event of default exists or would exist after giving effect to such stock repurchase.

As of June 30, ~~2019,~~2020, the Company had no0 debt outstanding and no draws on the Revolving Facility other than ~~$1.2~~$0.4 million of letters of credit, ~~including $0.8 million related to the St. Clair kiln project,~~ which count as draws against the available commitment under the Revolving Facility.

9. 10. Leases

The Company has operating leases for the use of equipment, corporate office space, and some of its terminal and distribution facilities. The leases have remaining lease terms of 01 to 87 years, with a weighted-average remaining lease term of 3 years at both June 30, ~~2019.~~2020 and December 31, 2019. Some operating leases include options to extend the leases for up to 5 ~~years. At January 1, 2019, upon implementation of ASU 2016-02, the~~years. The liability for the Company’s operating leases was discounted to present value using a weighted-average discount rate of 3.5%. at both June 30, 2020 and December 31, 2019. The components of lease costs for the ~~three-~~three and ~~six-months~~six months ended June 30, 2020 and 2019 were as follows (in thousands):


		Three Months Ended June 30,				Six Months Ended June 30,
	Classification	2020		2019		2020		2019
Operating lease costs ⁽¹⁾	Cost of revenues	$	455	$	555	$	840	$	1,040
Operating lease costs⁽¹⁾	Selling, general and administrative expenses		57		54		114		107
Rental revenues	Interest and other income, net		(8)		(13)		(35)		(25)
Net operating lease costs		$	504	$	596	$	919	$	1,122

Three Months Ended June 30,

Six Months Ended June 30,

Classification
2019

2019

Operating lease costs (1)
Cost of revenues

$
555

$
1,040

Operating lease costs
Selling, general and administrative expenses

54

107

Rental revenues
Other (income) expense

(13)

(25)

Net lease cost

$
596

$
1,122

⁽¹⁾	Includes the costs of leases with a term of 12 months or less.

~~(1)Includes the costs of leases with a term of 12 months or less.~~

As of June 30, ~~2019,~~2020, future minimum payments under operating leases that were either non-cancelable or subject to significant penalty upon cancellation, including future minimum payments under renewal options that the Company is reasonably certain to exercise, were as follows (in thousands):



2019 (excluding the six months ended June 30, 2019)	$	813
2020		1,388


2020 (excluding the six months ended June 30, 2020)			$	658
2021		1,124		1,077
2022		480		443
2023		187		189
2024				174
Thereafter		264		90
Total future minimum lease payments		4,256		2,631
Less imputed interest		(244)		(110)
Present value of lease liabilities	$	4,012	$	2,521

Supplemental cash flow information pertaining to the Company’s leasing activity for the six months ended June 30, 2020 and 2019 ~~was~~were as follows (in thousands):


	Six Months Ended June 30,
	2019

			Six Months Ended June 30,
			2020		2019
Cash payments for operating lease liabilities	$	950	$	821	$	950
Right-of-use assets obtained in exchange for operating lease obligations	$	857	$	53	$	857

~~10.~~ 11. Income Taxes

The Company has estimated that its effective income tax rate for ~~2019~~2020 will be ~~20.1%~~18.9%. The primary reason for the effective income tax 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. ~~In 2018, the effective income tax rate was further reduced from the federal statutory rate due to research and development tax credits associated with the construction of the St. Clair kiln project.~~

12. Dividends

~~11.~~ ~~Dividends~~

On June ~~14, 2019,~~12, 2020, the Company paid ~~$0.8~~$0.9 million in cash dividends, based on a dividend of ~~$0.135 (13.5 cents)~~$0.16 per share of its common stock, to shareholders of record at the close of business on May ~~24, 2019.~~22, 2020. On March ~~15, 2019,~~13, 2020, the Company paid ~~$0.8~~$0.9 million in cash dividends, based on a dividend of ~~$0.135 (13.5 cents)~~$0.16 per share onof its common stock, to shareholders of record at the close of business on February ~~22, 2019.~~21, 2020.

13. Subsequent Events

~~12.~~ ~~Subsequent Event~~

On July ~~31, 2019,~~1, 2020, the Company acquired Carthage Crushed Limestone, a limestone mining and production company located in Carthage, Missouri for $9 million cash, subject to adjustment.

On July 29, 2020, the Company’s Board of Directors declared a regular quarterly cash dividend of ~~$0.135 (13.5 cents)~~$0.16 per share on the Company’s common stock. This dividend is payable on September ~~13, 2019~~18, 2020 to shareholders of record at the close of business on August ~~23, 2019.~~28, 2020.

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

Forward-Looking Statements. Any statements contained in this Report that are not statements of historical fact are ~~forward‑looking~~forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. ~~Forward‑looking~~Forward-looking statements in this Report, including without limitation statements relating to the Company’s plans, strategies, objectives, expectations, intentions, and adequacy of resources, are identified by such words as “will,” “could,” “should,” “would,” “believe,” “possible,” “potential,” “expect,” “intend,” “plan,” “schedule,” “estimate,” “anticipate” and “project.” The Company undertakes no obligation to publicly update or revise any ~~forward‑looking~~forward-looking statements. The Company cautions that ~~forward‑looking~~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 at the Company’s discretion; (ii) the Company’s plans and results of operations will be affected by its ability to maintain and increase its revenues and manage its growth; (iii) the Company’s ability to meet ~~short‑term~~short-term and ~~long‑term~~long-term liquidity demands, including meeting the Company’s operating and capital needs, including ~~for modernization, expansion, and development projects and~~ possible acquisitions ~~repurchasing the Company’s common stock~~ and paying dividends, and conditions in the credit and equity markets, including the ability of the Company’s customers to meet their obligations; (iv) interruptions to operations and increased expenses at the Company’s facilities resulting from changes in mining methods or conditions, variability of chemical or physical properties of the Company’s limestone and its impact on process equipment and product quality, inclement weather conditions, natural disasters, accidents, IT systems failures or disruptions, including due to ~~cyber security~~cybersecurity incidents or regulatory requirements; (v) volatile coal, petroleum coke, diesel, natural gas, electricity, transportation and freight costs and the consistent availability of trucks, truck drivers and rail cars to deliver the Company’s products to its customers and solid fuels to its plants on a timely basis at competitive prices; (vi) unanticipated delays or cost overruns in completing modernization and expansion and development ~~projects, including the remaining improvements that are part of the Company’s St. Clair kiln project that is estimated to cost approximately $50 million in total;~~projects; (vii) the Company’s ability to expand its ~~Lime~~lime and ~~Limestone Operations~~limestone operations through ~~expansion~~ projects and acquisitions of businesses with related or similar operations, including ~~obtaining~~the Carthage Crushed Limestone acquisition, and the Company’s ability to obtain any required financing for such projects and acquisitions, and to sell any resulting increased production at acceptable prices; (viii) inadequate demand and/or prices for the Company’s lime and limestone products due to increased competition from competitors, increasing competition for certain customer accounts, conditions in the U.S. economy, recessionary pressures in, and the impact of government policies on, particular industries, including construction, steel, industrial and oil and gas services, reduced demand from utility plants, effects of governmental fiscal and budgetary ~~actions or~~ constraints, including the level of highway construction and infrastructure funding, ~~the impact of further~~ changes to ~~the corporate~~ tax ~~code,~~law, legislative impasses, extended governmental shutdowns, trade wars, tariffs, economic and regulatory uncertainties under state governments and the United States Administration and Congress, and inability to continue to maintain or increase prices for the Company’s products, including passing through the increased costs of transportation; (ix) uncertainties of prices and regulations with respect to the Company’s Natural Gas Interests, including the absence of drilling activities on the Company’s O & G Properties, any risks the Company may experience with the change in the operators of the wells drilled on the O & G Properties, inability to explore for new reserves, unitization of existing wells, declines in production rates and plugging and abandoning of existing wells; (x) ongoing and possible new regulations, investigations, enforcement actions and costs, legal expenses, penalties, fines, assessments, litigation, judgments and settlements, taxes and disruptions and limitations of operations, including those related to climate change and health and safety and those that could impact the Company’s ability to continue or renew its operating permits or successfully secure new permits in connection with its modernization and expansion and development projects; (xi) estimates of reserves and remaining lives of reserves; (xii) the potential impact of the coronavirus (“COVID-19”) pandemic, including decreased demand, lower prices, and ~~(xii)~~increased costs, and the risk of non-compliance with health and safety protocols and social distancing guidelines, on the Company’s financial condition, results of operations, cash flows, and competitive position; (xiii) the impact of social unrest; and (xiv) other risks and uncertainties set forth in this Report or indicated from time to time in the Company’s filings with the Securities and Exchange Commission (the “SEC”), including the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2018.~~2019 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Overview.

We ~~currently~~ have ~~two operating segments: Lime and Limestone Operations and Natural Gas Interests. Revenues and gross profit are~~identified one reportable business segment based on the ~~primary items utilized to evaluate the operating results~~distinctness of our ~~segments~~activities and products: lime and limestone operations. All operations are in the United States. Operating profit from our lime and limestone operations includes all of our selling, general and administrative costs. We do not allocate interest expense and interest and other income (expense), net to ~~allocate resources.~~

our lime and limestone operations.

Through our ~~Lime~~lime and ~~Limestone Operations,~~limestone operations, we are a manufacturer of lime and limestone products, supplying primarily the construction (including highway, road and building contractors), industrial (including paper and glass

manufacturers), environmental (including municipal sanitation and water treatment facilities and flue gas treatment processes), metals (including steel producers), ~~roof shingle manufacturers,~~ oil and gas services, roof shingle manufacturers and agriculture (including poultry and cattle feed producers) industries. We are headquartered in Dallas, Texas and operate lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Oklahoma and Texas through our wholly owned subsidiaries, Arkansas Lime Company, Colorado Lime Company, Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair, ART Quarry TRS LLC (DBA Carthage Crushed Limestone) and U.S. Lime Company – Transportation. The ~~Lime~~lime and ~~Limestone Operations~~limestone operations represent our principal business.

~~Our Natural Gas Interests are held in~~In addition to our lime and limestone operations, we hold natural gas interests through our wholly owned subsidiary, U.S. Lime Company – O & G, ~~LLC,~~LLC. In the fourth quarter of 2019, we determined our natural gas interests did not reach any of the quantitative thresholds for a reportable segment. The revenues, gross profit and ~~consist of royalty and non-operating working~~operating profit from our natural gas interests ~~under the O & G Lease with affiliated companies of Enervest, Ltd. and the Drillsite Agreement with XTO Energy, Inc.~~are included in Other for our reportable segment disclosures. Assets related to our ~~Johnson County, Texas property,~~natural gas interests, unallocated corporate assets, and cash items are included in Other identified assets. Segment disclosures for the three- and six-month periods ended June 30, 2019 have been recast to be consistent with the 2020 presentation for each respective period.

On July 1, 2020, we acquired 100% of the equity interest of Carthage Crushed Limestone, a limestone mining and production company located in ~~the Barnett Shale Formation, on which Texas Lime Company conducts its lime~~Carthage, Missouri, for $9 million cash, subject to adjustment. We believe that this acquisition will complement our existing geographic footprint.

Revenues decreased 3.6% and limestone operations. No new wells have been drilled or completed on the O & G Properties since 2011. We cannot predict if any additional wells will be drilled on the O & G Properties, or their results.

Revenues from our Lime and Limestone Operations were essentially flat in the second quarter and increased 3.8% in the first six months 2019, compared to last year’s comparable periods. In the second quarter 2019, sales volumes of our lime and limestone products decreased 1.8%, primarily because of decreased demand, principally from our construction customers, partially offset by increased demand from our environmental customers, compared to the second quarter 2018. In the first six months 2019, sales volumes for our lime and limestone products increased 2.3%, primarily because of increased demand from our environmental and steel customers, partially offset by decreased demand from our construction customers. Weather conditions, particularly in North Texas, interrupted construction projects during the second quarter 2019, which negatively impacted demand for our products in the second quarter 2019. Average prices realized for our lime and limestone products increased 1.8% and 1.5% for the second quarter and first six months 2019, respectively.

Gross profit from Lime and Limestone Operations increased 3.9% in the second quarter 2019 and 14.0% in the first six months 2019, compared to last year’s comparable periods. The increased gross profit from our Lime and Limestone Operations in the second quarter 2019, compared to the second quarter 2018, resulted primarily from increased average prices realized for our lime and limestone products, partially offset by decreased demand. The increased gross profit from our Lime and Limestone Operations in the first six months 2019, compared to the first six months 2018, resulted primarily from the increased revenues discussed above and decreased stripping costs that were more in line with historical patterns, compared to the first six months 2018.

~~Revenues from our Natural Gas Interests decreased 45.5% and 43.8%~~1.0% in the second quarter and first six months 2019, respectively, compared to the comparable 2018 periods, resulting primarily from lower prices and decreased production volumes due to the normal declines in production rates on our 39 existing natural gas wells. Gross profit from our Natural Gas Interests decreased 88.1% and 92.1% in the second quarter and first six months 2019,2020, respectively, compared to the second quarter and first six months ~~2018,~~2019. Revenues from lime and limestone operations decreased 3.2% and 0.6% in the second quarter and first six months 2020, respectively, compared to the comparable 2019 periods. The decreases in lime and limestone revenues in the second quarter and first six months 2020 resulted primarily from decreased sales volumes of 7.5% and 4.8%, respectively, principally due to reduced demand from our oil and gas services, steel and environmental customers, partially offset by increased demand from our construction customers. The decreased sales volumes were also partially offset by increases in average prices realized for our lime and limestone products of 4.3% and 4.2% in the ~~decreased revenues discussed above.~~second quarter and first six months 2020, respectively, compared to the comparable 2019 periods.

InGross profit increased 6.5% and 9.8% in the second quarter and first six months 2020, respectively, compared to the second quarter and first six months 2019. The increases in gross profit in the 2020 periods, compared to the comparable 2019 periods, resulted primarily from lower fuel costs, and increased operating efficiencies associated, in part, with the new kiln at our St. Clair facility, which began producing commercially saleable quicklime in the second quarter 2019, our new vertical kiln at St. Clair began producing commercially saleable quicklime. The new kiln is part of a modernization project, which we estimate will cost a total of approximately $50 million. Throughpartially offset by the ~~end of~~decreased revenues described above and increased costs incurred in the second quarter 2020 associated with responding to the COVID-19 pandemic.

The emergence of ~~2019, we had incurred approximately $43.3 million~~COVID-19 in the United States in the first quarter 2020 has created significant volatility, uncertainty and economic disruption to the general business environment. Federal, state, and local governmental responses to the COVID-19 pandemic, which include restrictions requiring social distancing and restrictions on business activities and movement of people in the ~~project,~~markets for our lime and limestone products, began to take effect the last two weeks of ~~which $42.5 million had been paid~~March 2020. While many of these restrictions began to be lifted in ~~cash. By the end of~~ the second quarter ~~2019,~~2020, the easing of restrictions has subsequently been halted or reversed in much of our geographic footprint.

The pandemic and related restrictions on business activities have resulted in a general economic slowdown, which has disproportionately impacted certain industries that purchase our lime and limestone products, including environmental, oil and gas drilling, and steel. We expect a continued slowdown in economic activity as restrictions continue, or even expand, which we ~~had placed approximately 70%~~anticipate will have an adverse impact on the demand for our lime and limestone products. In addition, a continued economic slowdown may put downward pressure on the prices we are able to realize for our products. We will continue to focus on cost-cutting initiatives and ways to further increase operating efficiencies in an effort to mitigate some of the ~~total modernization project into service and began depreciating the cost~~effects of the ~~assets placed into service. We expect~~ongoing economic downturn, including decreased demand for our products and increases in costs.

As we continue to respond to these unprecedented times caused by the ~~remaining portion of~~COVID-19 pandemic, we have not wavered in our commitment to the ~~project will be completed in the second half 2019.~~

~~In December 2015, we commenced a publicly announced share repurchase program to purchase up to $10 million~~safety of our ~~common stock. In November 2018, we announced a 12-month extension of the repurchase program through November 2019 to repurchase up~~employees and individuals at our facilities that deliver lime and limestone products to the ~~$7.2 million~~essential businesses and communities that we serve. In addition to our standard health and safety protocols, we have implemented enhanced protocols at all of our ~~common stock remaining under the program. No shares have been repurchased under the program since the first quarter 2016.~~

locations, including at our newly acquired Carthage Crushed Limestone facility. These protocols include reduced access to facilities, screening of individuals on

all sites, and the enforcement of social distancing and other practices that are consistent with, or exceed, the guidelines of the Center for Disease Control and state and local authorities.

We ~~paid~~are an essential business and anticipate continuing to deliver lime and limestone products to all of the essential businesses we serve. Our lime and limestone products are used in the purification of drinking water, treatment of wastewater, and scrubbing of air emissions from incinerators, power plants, and industrial plants, as well as in the manufacture of paper and glass products. Our limestone is used in the production of animal feed and is also used in products that have been recognized as part of the Critical Infrastructure Sector, including steel and other metal products, and commercial, residential, and public works construction.

Future events or governmental responses to COVID-19 may impede or prevent our ability to operate at one or more of our manufacturing facilities or limit our ability to transport our products to our customers. For example, our lime and limestone products cannot be produced if all of our employees are required to work from home. Specialized and difficult to replace skill sets are also required in the production of our lime and limestone products. Should one or more of our facilities experience a ~~regular quarterly cash dividend~~COVID-19 outbreak requiring quarantining of ~~$0.135 (13.5 cents) per share~~employees possessing those skill sets, it would disrupt our ability to produce, sell, and deliver our lime and limestone products and could have a material adverse effect on our ~~common stock in the first two quarters 2019. On July 31, 2019, the Board~~financial condition, results of ~~Directors declared a regular quarterly~~operations, cash ~~dividend of $0.135 (13.5 cents) per share on our common stock. This dividend is payable on September 13, 2019 to shareholders of record at the close of business on August 23, 2019~~.flows, and competitive position.

Liquidity and Capital Resources.

Net cash provided by operating activities was $27.1 million in the first six months 2020, compared to $20.0 million in the first six months 2019, ~~compared to $18.2 million in the comparable 2018 period,~~ an increase of ~~$1.8~~$7.1 million, or ~~9.9%~~35.4%. Our net cash provided by operating activities is composed of net income, depreciation, depletion and amortization (“DD&A”), deferred income taxes, other ~~non‑cash~~non-cash items included in net income and changes in working capital. In the first six months 2020, net cash provided by operating activities was principally composed of $11.6 million net income, $9.5 million DD&A, $2.5 million deferred income taxes, $0.8 million stock-based compensation, and a $2.5 million increase from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first six months 2020 included a decrease of $1.8 million in trade receivables, net, due primarily from reduced revenues and favorable timing of collections in the second quarter, an increase of $1.0 million in inventories, an increase of $0.8 million in accounts payable and accrued expenses, primarily from deferral of the payment of certain payroll taxes provided for under the CARES Act in the second quarter, and a decrease of $0.9 million in prepaid expenses and other assets. In the first six months 2019, net cash provided by operating activities was principally composed of $11.2 million net income, $8.4 million DD&A, $2.6 million deferred income taxes, $0.7 million ~~stock‑based~~stock-based compensation, and a $2.9 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first six months 2019 included an increase of $3.3 million in trade receivables, net, and a decrease of $0.5 million in inventories, net. In the first six months 2018, net cash provided by operating activities was principally composed of $10.9 million net income, $8.6 million DD&A, $1.2 million deferred income taxes $0.7 million stock‑based compensation and a $3.5 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first six months 2018 included an increase of $4.5 million in trade receivables, net, a decrease of $1.3 million in inventories, net, and a decrease of $0.7 million in accounts payable and accrued expenses.

We had ~~$12.4~~$10.6 million in capital expenditures in the first six months ~~2019, including $3.8 million on the St. Clair kiln project,~~2020, compared to ~~$19.4~~$12.4 million in the first six months 2018, including $11.1 million on the St. Clair kiln project. As of June 30, 2019, we had incurred a total of $43.3 million on the St. Clair kiln project, of which $42.5 million had been paid in cash. We anticipate that most of the balance of the approximately $50 million total cost of the project will be incurred and paid by the end of 2019.

Net cash used in financing activities was ~~$1.7~~$2.0 million in ~~each of~~ the first six months 2020, compared to $1.7 million in the first six months 2019, ~~and 2018,~~ consisting primarily of cash dividends paid in each period.

Cash and cash equivalents increased ~~$6.5~~$14.6 million to ~~$73.7~~$68.8 million at June 30, ~~2019,~~2020, from ~~$67.2~~$54.3 million at December 31, ~~2018.~~ 2019.

We are not committed to any planned capital expenditures until actual orders are placed for equipment. As of June 30, 2020, we did not have any material commitments for open purchase orders. As previously discussed, on July 1, 2020, we acquired 100% of the equity interest of Carthage Crushed Limestone for $9 million cash, subject to adjustment.

Our credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 2019 and November 21, 2019, provides for a $75 million revolving credit facility (the “Revolving Facility”) and an incremental four-year accordion feature to borrow up to an additional $50 million on the same terms, subject to approval by the Lender or another lender selected by us. The credit agreement also provides for a $10 million letter of credit sublimit under the Revolving Facility. The Revolving Facility and any incremental loans mature on May 2, 2024.

Interest rates on the Revolving Facility are, at our option, LIBOR plus a margin of 1.000% to 2.000%, or the Lender’s Prime Rate plus a margin of 0.000% to 1.000%; and a commitment fee range of 0.200% to 0.350% on the undrawn portion of the Revolving Facility. The Revolving Facility interest rate margins and commitment fee are determined quarterly in accordance with a pricing grid based upon our Cash Flow Leverage Ratio, defined as the ratio of our total funded senior indebtedness to earnings before interest, taxes, depreciation, depletion, amortization and ~~stock-based~~stock-

based compensation expense (“EBITDA”) for the 12 months ended on the last day of the most recent calendar quarter, plus pro forma EBITDA from any businesses acquired during the period. Pursuant to a security agreement, dated August 25, 2004, the Revolving Facility is secured by our existing and hereafter acquired tangible assets, intangible assets and real property. The maturity of the Revolving Facility and any incremental loans can be accelerated if any event of default, as defined under the credit agreement, occurs. Our maximum Cash Flow Leverage Ratio is 3.50 to 1.

We may pay dividends so long as we remain in compliance with the provisions of our credit agreement, and we may purchase, redeem or otherwise acquire shares of our common stock so long as our pro forma Cash Flow Leverage Ratio is less than 3.00 to 1.00 and no default or event of default exists or would exist after giving effect to such stock repurchase.

We are not contractually committed to any planned capital expenditures until actual orders are placed for equipment. As of June 30, 2019, we did not have any material commitments for open purchase orders.

At June 30, ~~2019,~~2020, we had no debt outstanding and no draws on the Revolving Facility other than ~~$1.2~~$0.4 million of letters of credit ~~including $0.8 million related to the St. Clair kiln project,~~ which count as draws against the available commitment under the Revolving Facility. We believe that, absent a significant acquisition, cash on hand and cash flows from operations will be sufficient to meet our operating needs, ongoing capital needs, including current and possible future modernization, expansion, and development projects, ~~such as the modernization project at St. Clair,~~ and liquidity needs and allow us to ~~repurchase up to $7.2 million of our common stock remaining to be repurchased under our extended share repurchase program as well as~~ pay regular quarterly cash dividends for the near future. However, an extended period of severe economic disruption caused by the COVID-19 pandemic could negatively impact our cash flows from operations and our liquidity, although we have not experienced any material impacts on our cash flows from operations and liquidity to date.

Results of Operations.

Revenues in the second quarter ~~2019~~2020 were ~~$39.0~~$37.5 million, compared to ~~$39.2~~$39.0 million in the second quarter ~~2018,~~2019, a ~~decrease~~decline of ~~$0.3~~$1.4 million, or ~~0.7%~~3.6%. Revenues from our Lime and Limestone Operations in the second quarter 2019 and 2018 were $38.6 million in each period, while revenues from our Natural Gas Interests decreased $312 thousand, or 45.5%, to $373 thousand in the second quarter 2019 from $685 thousand in the second quarter 2018. InFor the first six months ~~2019,~~2020, revenues were ~~$76.8~~$76.0 million, compared to ~~$74.5~~$76.8 million ~~in the comparable 2018 period, an increase of $2.2 million, or 3.0%. Revenues from the Company’s Lime and Limestone Operations~~ in the first six months 2019, ~~increased $2.8~~a decrease of $0.8 million, or ~~3.8%, to $76.0 million from $73.3 million in the comparable 2018 period, and revenues~~1.0%. Revenues from our ~~Natural Gas Interests decreased $0.6 million, or 43.8%, to $0.7 million from $1.3 million in the comparable prior year period.~~

~~As discussed above, revenues from our Lime~~lime and ~~Limestone Operations~~limestone operations in the second quarter ~~2019 were essentially flat, compared~~2020 decreased $1.2 million, or 3.2%, to $37.4 million from $38.6 million in the second quarter ~~2018, due to~~2019. For the ~~decrease in sales volumes during the second quarter 2019, primarily because of decreased demand, principally~~first six months 2020, revenues from ~~our construction customers, offset by an increase in average prices realized for~~ our lime and limestone ~~products. The increase in lime and limestone revenues~~operations decreased $0.5 million, or 0.6%, to $75.6 million compared to $76.0 million in the first six months ~~2019, compared to~~2019. As discussed above, the ~~first six months 2018, resulted primarily~~decrease in revenues from ~~increased sales volumes and an increase in average prices realized for~~ our lime and limestone ~~products.~~

Production volumes from our Natural Gas Interests in the second quarter 2019 totaled 113 thousand MCF, sold at an average price of $3.29 per MCF, compared to 126 thousand MCF, sold at an average price of $5.42 per MCF, in the second quarter 2018. Production volumes in the first six months 2019 from Natural Gas Interests totaled 231 thousand MCF, sold at an average price of $3.06 per MCF, compared to the first six months 2018 when 256 thousand MCF was produced and sold at an average price of $4.91 per MCF. Our average prices per MCFoperations in the second quarter and first six months ~~2019 were lower than average prices for the comparable 2018 periods~~2020 was primarily due to ~~decreases~~decreased sales volumes of 7.5% and 4.8%, respectively, compared to the comparable 2019 periods, principally due to reduced demand from our environmental, oil and gas services and steel customers, partially offset by increased demand from our construction customers, which had been negatively impacted by increased rainfall in ~~market~~Texas in the second quarter 2019. Additionally, the reductions in sales volumes were partially offset by average increases in prices for our lime and limestone products in the second quarter and first six months 2020 of 4.3% and 4.2%, respectively, compared to the comparable 2019 periods. Revenues also included $0.2 million and $0.4 million from our natural gas interests in the second quarter and ~~natural gas liquids.~~first six months 2020, respectively, compared to $0.4 million and $0.7 million in the comparable 2019 periods, respectively.

Gross profit was ~~$9.7~~$10.4 million and $20.2 million in the second quarter ~~2019,~~and first six months 2020, respectively compared to ~~$9.6~~$9.7 million and $18.4 million in the comparable 2019 periods, increases of $0.6 million and $1.8 million, or 6.5% and 9.8%, respectively. Gross profit from our lime and limestone operations in the second quarter ~~2018, an increase of $0.1~~and first six months 2020 was $10.5 million ~~or 0.9%. Gross profit was~~and $20.5 million, respectively, compared to $9.7 million and $18.4 million in the ~~first six months~~comparable 2019 periods, increases of $0.8 million, or 8.4%, and $2.2 million, or 11.8%, respectively. The increases in gross profit in the 2020 periods, compared to ~~$16.7 million in~~ the comparable ~~2018 period, an increase of $1.7 million, or 10.5%.~~

~~Gross profit~~2019 periods, resulted primarily from lower fuel costs and increased operating efficiencies associated, in part, with the new kiln at our ~~Lime and Limestone Operations~~St. Clair facility, which began producing commercially saleable quicklime in the second quarter 2019, ~~was $9.7 million, an increase of $0.4 million, or 3.9%, from $9.3 million~~partially offset by the decreased revenues discussed above and increased costs incurred in the second quarter ~~2018. The increase in gross profit in the second quarter 2019, compared~~2020 associated with responding to the ~~second quarter 2018, resulted primarily from the increase in average prices discussed above, partially offset by decreased demand.~~COVID-19 pandemic. Gross profit also included the impact of losses from our ~~Lime and Limestone Operations in the first six months 2019 was $18.4 million, an increase~~natural gas interests of $2.3 million, or 14.0%, from $16.1 million in the comparable 2018 period. The increase in gross profit and gross profit margin in the first six months 2019, compared to the first six months 2018, resulted primarily from the increases in revenues as discussed above, as well as decreased stripping costs that were more in line with historical patterns, compared to the first six months 2018.

~~Gross profit from our Natural Gas Interests decreased to $37~~$150 thousand and ~~$44~~$312 thousand in the second quarter and first six months ~~2019,~~2020, respectively, ~~from $310~~compared to profits of $37 thousand and ~~$554~~$44 thousand in the comparable 2019 periods.

Selling, general and administrative expenses (“SG&A”) were $2.9 million and $6.1 million in the second quarter and first six months 2020, respectively, compared to $2.6 million and $5.3 million in the comparable 2019 periods. As a percentage of revenues, SG&A was 7.7% and 8.0% in the second quarter and first six months 2020, respectively, compared to 6.8% and 6.9% in the comparable 2019 periods. The increases in SG&A resulted primarily from increased

personnel expenses, including stock-based compensation, increased legal expenses, including acquisition-related legal fees, and increased COVID-19 pandemic costs incurred in the second quarter 2020.

Interest expense was $62 thousand and $124 thousand in the second quarter and first six months ~~2018,~~2020, respectively, compared to $60 thousand and $122 thousand in the comparable 2019 periods. We had no outstanding debt during any of the periods. Interest and other income, net was $0.1 million and $0.4 in the second quarter and first six months 2020, respectively, compared to $0.5 million and $1.0 million in the comparable 2019 periods, decreases of ~~$273 thousand,~~$0.4 million and $0.6 million, or ~~88.1%,~~78.8% and ~~$510 thousand, or 92.1%~~64.3%, respectively. The

decreases in ~~gross profit from our Natural Gas Interests~~interest income were due to reduced interest rates and lower average balances of cash and cash equivalents in the 2020 periods, compared to the comparable 2019 ~~periods resulted from the decreases in revenues discussed above.~~periods.

~~Selling, general and administrative expenses (“SG&A”) were $2.6~~Income tax expense was $1.4 million and ~~$5.3~~$2.7 million in the second quarter and first six months ~~2019,~~2020, respectively, compared to ~~$2.6~~$1.5 million and ~~$5.1~~$2.8 million in the comparable ~~2018 periods, respectively. As a percentage of revenues, SG&A was 6.8% and 6.9% in the second quarter and first six months~~ 2019 ~~respectively, compared to 6.5% and 6.8% in the second quarter and first six months 2018, respectively.~~

~~Interest expense was $60 thousand and $122 thousand in the second quarter and first six months 2019, respectively, compared to $63 thousand and $125 thousand in the comparable 2018~~ periods. We had no outstanding debt during either period. Interest and other income, net was $0.5 million income in each of the second quarters 2019 and 2018. For the first six months 2019, interest and other income, net increased $0.2 million to $1.0 million from $0.8 million, compared to the comparable 2018 period.

Income tax expense increased to $1.5 million in the second quarter 2019, compared to $0.8 million in the first quarter 2018, an increase of $0.7 million, or 78.9%. Income tax expense increased to $2.8 million in the first six months 2019, compared to $1.4 million in the first six months 2018, an increase of $1.4 million or 101.2%. The increases in income tax expense in the second quarter and first six months 2019 was due to research and development tax credits in the second quarter and first six months 2018 associated with the construction of the St. Clair kiln project. Our effective income tax rate for each of the ~~2019~~2020 and ~~2018~~2019 periods was reduced from the federal rate primarily 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. ~~Our~~Additionally, for the year ended December 31, 2019, our effective income tax rate ~~for the 2018 periods~~ was ~~further~~also reduced from the federal rate as a result of research and development tax credits. We do not expect a reduction in our income tax rate due to research and development tax credits ~~discussed above.~~in 2020.

Our net income was $6.1 million ($1.08 per share diluted) in the second quarter 2020, compared to net income of $6.0 million ($1.07 per share diluted) in the ~~second~~first quarter 2019, ~~compared to net income~~an increase of ~~$6.6 million ($1.18 per share diluted) in the second quarter 2018, a decrease of $0.6~~$0.1 million, or ~~9.1%~~1.1%. Net income in the first six months ~~2019~~2020 was ~~$11.2~~$11.6 million ($~~1.99~~2.07 per share diluted), an increase of ~~$0.3~~$0.5 million, or ~~2.4%~~4.3%, compared to net income of ~~$10.9~~$11.2 million ($~~1.95~~1.99 per share diluted) in the first six months ~~2018.~~2019.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk.

We could be exposed to changes in interest rates, primarily as a result of floating interest rates on the Revolving Facility. There was no outstanding balance on the Revolving Facility subject to interest rate risk at June 30, ~~2019.~~2020. Any future borrowings under the Revolving Facility would be subject to interest rate risk. See Note 89 of Notes to Condensed Consolidated Financial Statements.

Foreign Exchange Risk.

~~At June 30, 2019,~~Prior to April 2020, we had contracts related to the purchase and installation of equipment that ~~require~~required future payments ~~totaling 0.7 million Euros. We have~~in Euros and entered into foreign exchange hedges ~~fixing~~to fix our U.S. Dollar liability ~~at $0.8 million. We could be exposed to changes~~for these contracts. The last of these foreign exchange hedges expired in ~~the Euro to U.S. Dollar exchange rates for obligations not effectively fixed by the hedges.~~April 2020. See Note 6 of Notes to Condensed Consolidated Financial Statements.

ITEM 4: CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Report. Based upon that evaluation, the CEO and CFO concluded that our disclosure controls and procedures as of the end of the period covered by this Report were effective.

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

PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors set forth in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, other than the additional risk factor provided

below, which is an update to the risk factor included in Part II, Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020. Please refer to that section of our Form 10-K for disclosures regarding what we believe are the more significant risks and uncertainties related to our business.

Our financial condition, results of operations, cash flows, and competitive position could be materially adversely impacted by the COVID-19 pandemic. The extent to which COVID-19, and measures taken in response thereto, could materially adversely affect our financial condition, results of operations, cash flows, and competitive position will depend on future developments, which are highly uncertain and cannot be predicted, including the scope and duration of the pandemic and actions taken by governmental authorities to contain the business, financial, and economic impact of the pandemic.

While we are continuing to execute our business continuity plans in response to the COVID-19 pandemic, there is the potential for increased disruptions to our lime and limestone business and operations from the pandemic. Federal, state, and local governmental responses to the COVID-19 pandemic, which include restrictions requiring social distancing and restrictions on business activities and movement of people in the markets for our lime and limestone products, began to take effect the last two weeks of March 2020. While many of these restrictions began to be lifted in the second quarter 2020, the easing of restrictions has subsequently been halted or reversed in many our market areas. The pandemic and related restrictions on business activities have resulted in a general economic slowdown, which is has impacted certain industries that purchase our products, including environmental, oil and gas drilling, and steel. We expect a continued slowdown in economic activity as restrictions continue, or even expand, which we anticipate will have an adverse impact on the demand for our lime and limestone products and increase our costs. In addition, a continued economic slowdown may put downward pressure on the prices we are able to realize for our products.

The continued impact of COVID-19 may limit our ability to produce, sell and deliver our lime and limestone products to our customers; cause key management and plant-level employees not to be available to us; result in plant shutdowns due to contagion, in which case we may not be able to shift production to our other plants; cause disruptions to our supply chain as it relates to our suppliers and other vendors, as well as disrupt the supply chains of our customers; impede our ability to maintain and repair our plants and equipment; negatively impact our modernization, expansion, and development plans; as well as adversely impact demand and prices for our lime and limestone products and increase our costs. Although we cannot predict future developments, which are highly uncertain, including the scope and duration of the pandemic and actions taken by governmental authorities to contain the impact of the pandemic, COVID-19 could have a material adverse effect on our financial condition, results of operations, cash flows, and competitive position.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In December 2015, we commenced a publicly announced share repurchase program to repurchase up to $10 million of our common stock. In November 2018, we announced a 12-month extension of the repurchase program through November 2019 to repurchase up to the $7.2 million of our common stock remaining under the program. We did not repurchase any shares pursuant to this program in the second quarter 2019.

~~In addition, our~~Our Amended and Restated 2001 ~~Long-Term~~Long-Term Incentive Plan allows employees and directors to pay the exercise price for stock options and the tax withholding liability upon the lapse of restrictions on restricted stock by payment in cash and/or delivery of shares of common stock. In the second quarter ~~2019,~~2020, pursuant to these provisions, we repurchased ~~2,361~~2,459 shares at a price of ~~$80.00~~$84.44 per share, the fair market value of one share of our common stock on the date that they were tendered for payment of tax withholding liability upon the lapse of restrictions on restricted stock.

ITEM 4: MINE SAFETY DISCLOSURES

Under Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of SEC Regulation S‑S-K, each operator of a coal or other mine is required to include disclosures regarding certain mine safety results in its periodic reports filed with the SEC. The operation of our quarries, underground mine and plants is subject to regulation by the federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977. The required information regarding certain mining safety and health matters, broken down by mining complex, for the quarter ended June 30, ~~2019~~2020 is presented in Exhibit 95.1 to this Report.

We believe we are responsible to employees to provide a safe and healthy workplace environment. We seek to accomplish this by: training employees in safe work practices; openly communicating with employees; following safety standards and establishing and improving safe work practices; involving employees in safety processes; and recording, reporting and investigating accidents, incidents and losses to avoid reoccurrence.

Following passage of the Mine Improvement and New Emergency Response Act of 2006, MSHA significantly increased the enforcement of mining safety and health standards on all aspects of mining operations. There has also been an increase in the dollar penalties assessed for citations and orders issued in recent years.

ITEM 6: EXHIBITS

The Exhibit Index set forth below is incorporated by reference in response to this Item.

EXHIBIT INDEX


EXHIBIT
~~EXHIBIT~~NUMBER		DESCRIPTION
~~NUMBER~~		~~DESCRIPTION~~
~~10.1~~		Eighth Amendment to the Credit Agreement, dated as of May 2, 2019, among United States Lime & Minerals, Inc., each lender from time to time a party thereto, and Wells Fargo Bank, N.A., as administrative agent.

31.1		Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer.

31.2		Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer.

32.1		Section 1350 Certification by the Chief Executive Officer.

32.2		Section 1350 Certification by the Chief Financial Officer.

95.1		Mine Safety Disclosures.

101 104		Interactive Data ~~Files.~~Files (formatted as Inline XBRL). Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

SIGNATURES

~~SIGNATURES~~

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


	UNITED STATES LIME & MINERALS, INC.


~~August 2, 2019~~July 31, 2020	By:	/s/ Timothy W. Byrne
		Timothy W. Byrne
		President and Chief Executive Officer
		(Principal Executive Officer)


~~August 2, 2019~~July 31, 2020	By:	/s/ Michael L. Wiedemer
		Michael L. Wiedemer
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)


						Accumulated
	Common Stock			Additional		Other
	Shares			Paid-In		Comprehensive		Retained		Treasury
	Outstanding	Amount		Capital		(Loss) Income		Earnings		Stock		Total
Balances at December 31, 2018	5,607,401	$	661	$	25,867	$	(13)	$	250,568	$	(54,116)	$	222,967
Stock-based compensation	3,333		—		309		—		—		—		309
Treasury shares purchased	(753)		—		—		—		—		(52)		(52)
Cash dividends paid	—		—		—		—		(757)		—		(757)
Net income	—		—		—		—		5,128		—		5,128
Mark to market of foreign exchange hedges, net of $6 tax benefit	—		—		—		(20)		—		—		(20)
Comprehensive (loss) income	—		—		—		(20)		5,128		—		5,108
Balances at March 31, 2019	5,609,981		661		26,176		(33)		254,939		(54,168)		227,575
Stock options exercised	2,000		—		75		—		—		—		75
Stock-based compensation	3,173		1		381		—		—		—		382
Treasury shares purchased	(2,361)		—		—		—		—		(189)		(189)
Cash dividends paid	—		—		—		—		(760)		—		(760)
Net income	—		—		—		—		6,033		—		6,033
Mark to market for foreign exchange hedges, net of $7 tax expense	—		—		—		25		—		—		25
Comprehensive income	—		—		—		25		6,033		—		6,058
Balances at June 30, 2019	5,612,793	$	662	$	26,632	$	(8)	$	260,212	$	(54,357)	$	233,141


					Significant Other
					Observable Inputs
					(Level 2)
	June 30,		December 31,		June 30,		December 31,
	2019		2018		2019		2018		Valuation Technique
Foreign exchange hedges	$	(11)	$	(16)	$	(11)	$	(16)	Cash flows approach


		Three Months Ended June 30,		Six Months Ended June 30,
	Classification	2019		2019
Operating lease costs (1)	Cost of revenues	$	555	$	1,040
Operating lease costs	Selling, general and administrative expenses		54		107
Rental revenues	Other (income) expense		(13)		(25)
Net lease cost		$	596	$	1,122