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, 2020~~March 31, 2021


☐	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		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) 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 30, 2020,~~April 28, 2021, ~~5,627,869~~5,655,321 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,


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


	March 31,		December 31,
	2021		2020
ASSETS
Current assets
Cash and cash equivalents	$	89,651	$	83,562
Trade receivables, net		23,957		22,979
Inventories, net		15,409		15,210
Prepaid expenses and other current assets		2,428		2,245
Total current assets		131,445		123,996
Property, plant and equipment		392,631		388,200
Less accumulated depreciation and depletion		(240,993)		(235,739)
Property, plant and equipment, net		151,638		152,461
Operating lease right-of-use assets		1,929		2,226
Other assets, net		398		415
Total assets	$	285,410	$	279,098
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	5,675	$	4,592
Current portion of operating lease liabilities		1,073		1,187
Accrued expenses		3,995		5,809
Total current liabilities		10,743		11,588
Deferred tax liabilities, net		22,271		21,531
Operating lease liabilities, excluding current portion		858		1,030
Other liabilities		1,768		1,757
Total liabilities		35,640		35,906
Stockholders’ equity
Common stock		667		666
Additional paid-in capital		30,003		29,457
Accumulated other comprehensive loss		—		—
Retained earnings		274,312		268,186
Less treasury stock, at cost		(55,212)		(55,117)
Total stockholders’ equity		249,770		243,192
Total liabilities and stockholders’ equity	$	285,410	$	279,098

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,								Three Months Ended March 31,
	2020				2019				2020				2019				2021				2020
Revenues	$	37,547	100.0	%	$	38,954	100.0	%	$	75,987	100.0	%	$	76,753	100.0	%	$	41,674	100.0	%	$	38,440	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	%		24,593	59.0	%		23,962	62.3	%
Depreciation, depletion and amortization		4,743	12.6	%		4,225	10.8	%		9,344	12.3	%		8,293	10.8	%		5,276	12.7	%		4,601	12.0	%
		27,190	72.4	%		29,227	75.0	%		55,753	73.4	%		58,333	76.0	%		29,869	71.7	%		28,563	74.3	%
Gross profit		10,357	27.6	%		9,727	25.0	%		20,234	26.6	%		18,420	24.0	%		11,805	28.3	%		9,877	25.7	%
Selling, general and administrative expenses		2,881	7.7	%		2,639	6.8	%		6,100	8.0	%		5,312	6.9	%		3,067	7.4	%		3,219	8.4	%
Operating profit		7,476	19.9	%		7,088	18.2	%		14,134	18.6	%		13,108	17.1	%		8,738	20.9	%		6,658	17.3	%
Other expense (income)
Interest expense		62	0.2	%		60	0.2	%		124	0.2	%		122	0.2	%		62	0.1	%		62	0.2	%
Interest and other income, net		(104)	(0.3)	%		(490)	(1.3)	%		(351)	(0.5)	%		(982)	(1.3)	%		(34)	(0.1)	%		(247)	(0.7)	%
		(42)	(0.1)	%		(430)	(1.1)	%		(227)	(0.3)	%		(860)	(1.1)	%		28	0.0	%		(185)	(0.5)	%
Income before income tax expense		7,518	20.0	%		7,518	19.3	%		14,361	18.9	%		13,968	18.2	%		8,710	20.9	%		6,843	17.8	%
Income tax expense		1,417	3.8	%		1,485	3.8	%		2,716	3.6	%		2,807	3.7	%		1,679	4.0	%		1,299	3.4	%
Net income	$	6,101	16.2	%	$	6,033	15.5	%	$	11,645	15.3	%	$	11,161	14.5	%	$	7,031	16.9	%	$	5,544	14.4	%
Net income per share of common stock
Basic	$	1.08			$	1.07			$	2.07			$	1.99			$	1.24			$	0.99
Diluted	$	1.08			$	1.07			$	2.07			$	1.99			$	1.24			$	0.98

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 March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020
Net income	$	6,101	$	6,033	$	11,645	$	11,161	$	7,031	$	5,544
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
Other comprehensive loss
Mark to market of foreign exchange hedges, net of tax benefit of $2 for the 2020 period										—		(6)
Total other comprehensive loss										—		(6)
Comprehensive income	$	6,108	$	6,058	$	11,646	$	11,166	$	7,031	$	5,538

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													Accumulated
	Common Stock			Additional		Other								Common Stock			Additional		Other
	Shares			Paid-In		Comprehensive		Retained		Treasury				Shares			Paid-In		Comprehensive		Retained		Treasury
	Outstanding	Amount		Capital		(Loss) Income		Earnings		Stock		Total		Outstanding	Amount		Capital		Loss		Earnings		Stock		Total
Balances at December 31, 2019	5,622,826	$	663	$	27,464	$	(1)	$	243,566	$	(54,560)	$	217,132
Balances at December 31, 2020														5,648,084	$	666	$	29,457	$	—	$	268,186	$	(55,117)	$	243,192
Stock options exercised	2,000		—		81		—		—		—		81	3,310		—		—		—		—		—		—
Stock-based compensation	3,063		1		378		—		—		—		379	2,685		1		546		—		—		—		547
Treasury shares purchased	(704)		—		—		—		—		(64)		(64)	(743)		—		—		—		—		(95)		(95)
Cash dividends paid	—		—		—		—		(899)		—		(899)	—		—		—		—		(905)		—		(905)
Net income	—		—		—		—		5,544		—		5,544	—		—		—		—		7,031		—		7,031
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	—		—		—		—		7,031		—		7,031
Balances at June 30, 2020	5,627,869	$	664	$	28,386	$	—	$	253,411	$	(54,842)	$	227,619
Balances at March 31, 2021														5,653,336	$	667	$	30,003	$	—	$	274,312	$	(55,212)	$	249,770


						Accumulated													Accumulated
	Common Stock			Additional		Other								Common Stock			Additional		Other
	Shares			Paid-In		Comprehensive		Retained		Treasury				Shares			Paid-In		Comprehensive		Retained		Treasury
	Outstanding	Amount		Capital		(Loss) Income		Earnings		Stock		Total		Outstanding	Amount		Capital		Loss		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
Balances at December 31, 2019														5,622,826	$	663	$	27,464	$	(1)	$	243,566	$	(54,560)	$	217,132
Stock options exercised	2,000		—		75		—		—		—		75	2,000		—		81		—		—		—		81
Stock-based compensation	3,173		1		381		—		—		—		382	3,063		1		378		—		—		—		379
Treasury shares purchased	(2,361)		—		—		—		—		(189)		(189)	(704)		—		—		—		—		(64)		(64)
Cash dividends paid	—		—		—		—		(760)		—		(760)	—		—		—		—		(899)		—		(899)
Net income	—		—		—		—		6,033		—		6,033	—		—		—		—		5,544		—		5,544
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
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

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,

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


	Three Months Ended March 31,
	2021		2020
OPERATING ACTIVITIES:
Net income	$	7,031	$	5,544
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		5,341		4,655
Amortization of deferred financing costs		2		2
Deferred income taxes		750		990
Loss (gain) on disposition of property, plant and equipment		3		(13)
Stock-based compensation		547		379
Changes in operating assets and liabilities:
Trade receivables, net		(978)		(200)
Inventories, net		(199)		(146)
Prepaid expenses and other current assets		(183)		249
Other assets		16		14
Accounts payable and accrued expenses		(719)		21
Other liabilities		11		13
Net cash provided by operating activities		11,622		11,508
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(4,543)		(6,106)
Proceeds from sale of property, plant and equipment		10		16
Net cash used in investing activities		(4,533)		(6,090)
FINANCING ACTIVITIES:
Cash dividends paid		(905)		(899)
Proceeds from exercise of stock options		—		81
Purchase of treasury shares		(95)		(64)
Net cash used in financing activities		(1,000)		(882)
Net increase in cash and cash equivalents		6,089		4,536
Cash and cash equivalents at beginning of period		83,562		54,260
Cash and cash equivalents at end of period	$	89,651	$	58,796

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, ~~2019.~~2020. The results of operations for the ~~three-and six-month periods~~three-month period ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of operating results for the full year.

On July 1, 2020, the Company acquired 100% of the equity interest of Carthage Crushed Limestone (“Carthage”), a limestone mining and production company located in Carthage, Missouri, for $8.4 million cash, subject to adjustment for working capital balances acquired. Carthage produces aggregate and pulverized limestone products that are used primarily in the agricultural, construction, roofing, and industrial industries. Carthage contributed $2.2 million of revenues in the three-months ended March 31, 2021, which are included in the condensed consolidated statements of operations.

2. Organization

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-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 and limestone operations when (i) a contract with the 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. The Company’s returns and allowances are minimal. 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 ~~2020~~each of the first quarters 2021 and ~~2019~~2020 revenues was $~~6.5~~7.8 million and ~~$7.1 million, for the respective three-month periods ended June 30, and $13.3 million and $13.9~~$6.9 million, ~~for the respective six-month periods ended June 30,~~respectively, 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, the Company recognizes revenue in the month of production and delivery.

The Company operates its lime and limestone operations within a single geographic region and derives all revenues from that segment from the sale of lime and limestone products. 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 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.

~~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 condensed consolidated balance ~~sheet.~~sheets. 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 10 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 (“FX”) 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 during the period.

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

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

4. Business Segment

The Company has identified 1 reportable segment based on the distinctness of the Company’s activities and products: lime and limestone operations. All operations are in the United States. In evaluating the operating results of the Company, management primarily reviews revenues, gross profit and 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 interest expense and interest and other income (expense), net to its 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 Other revenues, gross profit and operating profit ~~from~~in the Company’s segment disclosures include the Company’s natural gas ~~interests are included in Other for the Company’s reportable segment disclosures.~~interest. 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 lime and limestone operations segment and other (in thousands):~~

Three Months Ended June 30,

Six Months Ended June 30,

Revenues

2020

2019

2020

2019

Lime and limestone operations

$
37,362

$
38,581

$
75,576

$
76,046

Other

185

373

411

707

Total revenues

$
37,547

$
38,954

$
75,987

$
76,753

Depreciation, depletion and amortization

Lime and limestone operations

$
4,563

$
4,089

$
8,975

$
8,018

Other

180

136

369

275

Total depreciation, depletion and amortization

$
4,743

$
4,225

$
9,344

$
8,293

Gross profit (loss)

Lime and limestone operations

$
10,507

$
9,690

$
20,546

$
18,376

Other

(150)

37

(312)

44

Total gross profit

$
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

$
4,493

$
6,676

$
10,599

$
12,360

Other

—

—

—

—

Total capital expenditures

$
4,493

$
6,676

$
10,599

$
12,360

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


	Three Months Ended March 31,
Revenues	2021		2020
Lime and limestone operations	$	41,356	$	38,214
Other		318		226
Total revenues	$	41,674	$	38,440
Depreciation, depletion and amortization
Lime and limestone operations	$	5,137	$	4,413
Other		139		188
Total depreciation, depletion and amortization	$	5,276	$	4,601
Gross profit (loss)
Lime and limestone operations	$	11,804	$	10,039
Other		1		(162)
Total gross profit	$	11,805	$	9,877
Operating profit (loss)
Lime and limestone operations	$	8,737	$	6,820
Other		1		(162)
Total operating profit	$	8,738	$	6,658
Identifiable assets, at period end
Lime and limestone operations	$	191,419	$	186,702
Other		93,991		65,165
Total identifiable assets	$	285,410	$	251,867
Capital expenditures
Lime and limestone operations	$	4,543	$	6,106
Other		—		—
Total capital expenditures	$	4,543	$	6,106

5. Income Per Share of Common Stock

At March 31, 2021, the Company had 15,000,000 shares of common stock authorized and 5,653,336 shares outstanding. On April 30, 2021, shareholders will vote at the Company’s 2021 Annual Meeting of Shareholders on a proposal to increase the number of authorized shares of common stock to 30,000,000.

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,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
Net income for basic and diluted income per common share	$	6,101	$	6,033	$	11,645	$	11,161	$	7,031	$	5,544
Weighted-average shares for basic income per common share		5,629		5,614		5,627		5,612		5,651		5,624
Effect of dilutive securities:
Employee and director stock options⁽¹⁾		8		10		9		7		13		10
Adjusted weighted-average shares and assumed exercises for diluted income per common share		5,637		5,624		5,636		5,619		5,664		5,634
Basic net income per common share	$	1.08	$	1.07	$	2.07	$	1.99	$	1.24	$	0.99
Diluted net income per common share	$	1.08	$	1.07	$	2.07	$	1.99	$	1.24	$	0.98

(1)

Excludes 150 and 118 stock options for the ~~three-~~three months ended March 31, 2021 and ~~six-month~~ 2020, ~~periods, and 0 and 14 stock options for the three- and six-month 2019 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,				Three Months Ended March 31,
	2020		2019		2020		2019		2021		2020
Net income	$	6,101	$	6,033	$	11,645	$	11,161	$	7,031	$	5,544
Mark to market of foreign exchange hedges		9		32		1		6		—		(8)
Deferred income tax expense		(2)		(7)		—		(1)
Deferred income tax benefit										—		2
Comprehensive income	$	6,108	$	6,058	$	11,646	$	11,166	$	7,031	$	5,538

In 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”)~~FX hedges with ~~Wells Fargo Bank, N.A. (“Wells Fargo”) as the~~a counterparty to the FX hedges to fix the exchange rates. The last of the FX hedges expired in April 2020. The FX hedges were effective as defined under applicable accounting rules. Therefore, changes in the fair value of the FX hedges 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 $1 at December 31, 2019, which is included in accrued expenses.~~

7. Trade Receivables, Net

Additions, ~~(reductions)~~adjustments and write-offs to the Company’s allowance for credit losses for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (in thousands):


	June 30,				March 31,
	2020		2019		2021		2020
Beginning balance	$	361	$	430	$	398	$	361
Additions (reductions)		14		(10)
Additions						—		39
Adjustment for expected credit loss factors						(14)		—
Write-offs		—		—		—		—
Ending balance	$	375	$	420	$	384	$	400

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,		March 31,		December 31,
	2020		2019		2021		2020
Lime and limestone inventories:
Raw materials	$	4,961	$	4,546	$	4,495	$	4,279
Finished goods		1,815		1,954		2,713		2,866
		6,776		6,500		7,208		7,145
Service parts inventories		7,646		6,888		8,201		8,065
	$	14,422	$	13,388	$	15,409	$	15,210

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 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 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, 2020,~~March 31, 2021, the Company had 0 debt outstanding and no draws on the Revolving Facility other than $0.4 million of letters of credit, which count as draws against the available commitment under the Revolving Facility.

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 1 to 7 years, with a weighted-average remaining lease term of 32 years at ~~both June 30, 2020~~March 31, 2021 and3 at December 31, ~~2019~~2020. Some operating leases include options to extend the leases for up to 5 years. The liability for the Company’s operating leases was discounted to present value using a weighted-average discount rate of ~~3.5%~~3.4% at ~~both June 30, 2020~~each of March 31, 2021 and ~~December~~March 31, ~~2019.~~ 2020.

The components of lease costs for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows (in thousands):

Three Months Ended March 31,

Classification
2021

2020
Operating lease costs ⁽¹⁾

Cost of revenues

$
385

$
385
Operating lease costs⁽¹⁾

Selling, general and administrative expenses

65

56
Rental revenues

Interest and other income, net

(21)

(27)
Net operating lease costs

$
429

$
414

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

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

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

As of ~~June 30, 2020,~~March 31, 2021, 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):



2020 (excluding the six months ended June 30, 2020)	$	658
2021		1,077
2021 (excluding the three months ended March 31, 2021)			$	873
2022		443		590
2023		189		258
2024		174		186
2025				36
Thereafter		90		54
Total future minimum lease payments		2,631		1,997
Less imputed interest		(110)		(66)
Present value of lease liabilities	$	2,521	$	1,931

Supplemental cash flow information pertaining to the Company’s leasing activity for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019 were~~is as follows (in thousands):


	Six Months Ended June 30,				Three Months Ended March 31,
	2020		2019		2021		2020
Cash payments for operating lease liabilities	$	821	$	950	$	345	$	447
Right-of-use assets obtained in exchange for operating lease obligations	$	53	$	857	$	11	$	—

11. Income Taxes

The Company has estimated that its effective income tax rate for ~~2020~~2021 will be ~~18.9%~~19.3%. 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.

12. Dividends

On ~~June~~March 12, ~~2020,~~2021, the Company paid $0.9 million in cash dividends, based on a dividend of $0.16 per share of its common stock, to shareholders of record at the close of business on ~~May 22, 2020. On March 13, 2020, the Company paid~~ ~~$0.9 million in cash dividends, based on a dividend of $0.16~~ ~~per share of its common stock, to shareholders of record at the close of business on~~ February ~~21, 2020.~~19, 2021.

13. Subsequent ~~Events~~Event

~~On July 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,~~April 28, 2021, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.16 per share on the Company’s common stock. This dividend is payable on ~~September 18, 2020~~June 11, 2021 to shareholders of record at the close of business on ~~August 28, 2020.~~May 21, 2021.

1312

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

Forward-Looking Statements. Any statements contained in this Report that are not statements of historical fact are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements in this Report, including without limitation statements relating to the Company’s plans, strategies, objectives, expectations, intentions, and adequacy of resources, are identified by such words as “will,” “could,” “should,” “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 statements. The Company cautions that forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from expectations, including without limitation the following: (i) the Company’s plans, strategies, objectives, expectations, and intentions are subject to change at any time 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 and long-term liquidity demands, including meeting the Company’s operating and capital needs, including possible acquisitions 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 ~~cybersecurity~~cyber-security incidents or ransomware attacks, utility disruptions, 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; (vii) the Company’s ability to expand its lime and limestone operations through projects and acquisitions of businesses with related or similar operations, including 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, steel, construction, and industrial, effects of governmental fiscal and budgetary constraints, including the level of highway construction and infrastructure funding, changes to tax 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) 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 other environmental, social, governance, and sustainability considerations, 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~~ongoing impact of the novel coronavirus (“COVID-19”) pandemic, including decreased demand, lower prices, and 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 or political unrest; (xiv) risks relating to mine safety, and ~~(xiv)~~reclamation and remediation; and (xv) 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, ~~2019~~2020 and subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Overview.

We have identified one reportable business segment based on the distinctness of our 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 our lime and limestone operations.

Through our lime and 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), 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, Missouri, 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 and limestone operations represent our principal business.

On July 1, 2020, we acquired Carthage Crushed Limestone (“Carthage”), a limestone mining and production company located in Carthage, Missouri, for $8.4 million cash, subject to adjustment for working capital balances acquired. Carthage provides aggregate and pulverized limestone products that are used primarily in the agricultural, construction, roofing, and industrial industries. Carthage contributed $2.2 million to our revenues for the three months ended March 31, 2021.

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. ~~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 operating profit from our natural gas interests are included in Other for our reportable segment disclosures. Assets related to our 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 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 1.0%~~increased 8.4% in the ~~second~~first quarter ~~and first six months 2020, respectively,~~2021, compared to the ~~second~~first quarter ~~and first six months 2019. Revenues from lime and limestone operations decreased 3.2% and 0.6% in the second quarter and first six months 2020, respectively, compared~~2020. Carthage contributed $2.2 million to the ~~comparable 2019 periods.~~Company’s revenues for the first quarter 2021. The ~~decreases~~increase in our lime and limestone revenues in the ~~second~~first quarter ~~and first six months 2020~~2021 resulted primarily ~~from decreased sales volumes of 7.5% and 4.8%, respectively, principally~~ due to ~~reduced~~the addition of limestone sales by Carthage to agriculture and roofing customers, and increased sales to the Company’s construction customers, partially offset by decreased demand from ~~our~~the Company’s oil and gas services ~~steel and environmental customers, partially offset by increased demand from our construction~~ customers. ~~The decreased sales volumes~~First quarter 2021 revenues were also ~~partially offset~~favorably impacted by increases in the average selling prices ~~realized~~ for our lime and limestone ~~products of 4.3% and 4.2% in the second quarter and first six months 2020, respectively, compared to the comparable 2019 periods.~~products.

Gross profit increased ~~6.5% and 9.8%~~19.5% in the ~~second~~first quarter ~~and first six months 2020, respectively,~~2021, compared to the ~~second~~first quarter ~~and first six months 2019.~~2020. The ~~increases~~increase in gross profit in the ~~2020 periods,~~first quarter 2021, 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, partially offset by the decreased revenues described above and increased costs incurred in the second quarter 2020 associated with responding to the COVID-19 pandemic.

~~The emergence of COVID-19 in the United States in~~ the first quarter 2020, ~~has created significant volatility, uncertainty~~ resulted primarily from the increased revenues discussed above and ~~economic disruption to the general business environment.~~ increased operating efficiencies.

Federal, state, and local governmental ~~responses~~restrictions in response to the COVID-19 pandemic ~~which include restrictions requiring social distancing and restrictions on~~have continued to impact general business activities ~~and movement of people~~ in the markets for our lime and limestone ~~products, began to take~~products. While vaccination programs are having a positive 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 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 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 someresumption of ~~the effects of the ongoing economic downturn, including decreased demand for our products and increases in costs.~~

~~As we continue to respond to these unprecedented times caused by~~normal business activities, the COVID-19 pandemic ~~we have not wavered in our commitment to the safety of our employees~~is ongoing, and ~~individuals at our facilities that deliver lime~~its magnitude and ~~limestone products to the essential businesses~~continuing effects remain uncertain, and communities that we serve. In addition to our standard health and safety protocols, we have implemented enhanced protocols at all of our 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 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 COVID-19 outbreak requiring quarantining of 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 financial condition, results of operations, cash flows and competitive position.

In February 2021, the southern United States experienced severe winter storms which interrupted transportation, commerce, and utility services in the affected areas, including the delivery of electricity and natural gas to our plants. While our operations were briefly curtailed, our plants did not sustain any significant damage from the storms.

At our upcoming 2021 Annual Meeting of Shareholders, shareholders will vote on a proposal to increase the number of authorized shares of common stock from 15,000,000 to 30,000,000. If the proposal is approved by the shareholders, possible uses of the additional shares of common stock include, without limitation, future stock splits, stock dividends, rights offerings, acquiring other companies, businesses or products in exchange for shares of common stock, attracting and retaining employees by the issuance of additional securities under our Amended and Restated 2001 Long-Term Incentive Plan and any future equity compensation plans, issuance of securities underlying shares convertible into common stock, and other transactions and corporate purposes for which the board deems it in the best interests of the Company and its shareholders.

Liquidity and Capital Resources.

Net cash provided by operating activities was ~~$27.1~~$11.6 million in the first ~~six months 2020,~~quarter 2021, compared to ~~$20.0~~$11.5 million in the first ~~six months 2019,~~quarter 2020, an increase of ~~$7.1~~$0.1 million, or ~~35.4%~~1.0%. Our net cash provided by operating activities is composed of net income, depreciation, depletion and amortization (“DD&A”), deferred income taxes, other non-cash items included in net income and changes in working capital.In the first ~~six months 2020,~~quarter 2021, net cash provided by operating

activities was principally composed of ~~$11.6~~$7.0 million net income, ~~$9.5~~$5.3 million DD&A, ~~$2.5~~$0.8 million deferred income taxes, ~~$0.8~~$0.5 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 compensation, and a $2.9$2.1 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first ~~six months 2019~~quarter 2021 included an increase of ~~$3.3~~$1.0 million in trade receivables, net, and a decrease of ~~$0.5~~$0.7 million in ~~inventories, net.~~accounts payable and accrued expenses. In the first quarter 2020, net cash provided by operating activities was principally composed of $5.5 million net income, $4.7 million DD&A, $1.0 million deferred income taxes, $0.4 million stock-based compensation, and a $49 thousand decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first quarter 2020 included an increase of $0.2 million in trade receivables, net, and a decrease of $0.2 million in prepaid expenses and other assets.

We had ~~$10.6~~$4.5 million in capital expenditures in the first ~~six months 2020,~~quarter 2021, compared to ~~$12.4~~$6.1 million in the first ~~six months 2019.~~quarter 2020. Net cash used in financing activities was ~~$2.0~~$1.0 million in the first ~~six months 2020,~~quarter 2021, compared to ~~$1.7~~$0.9 million in the first ~~six months 2019,~~quarter 2020, consisting primarily of cash dividends paid in each period.

Cash and cash equivalents increased ~~$14.6~~$6.1 million to ~~$68.8~~$89.7 million at ~~June 30, 2020,~~March 31, 2021, from ~~$54.3~~$83.6 million at December 31, ~~2019.~~2020.

We are not committed to any planned capital expenditures until actual orders are placed for equipment. As of ~~June 30, 2020,~~March 31, 2021, we ~~did not have any material~~had commitments for open purchase ~~orders. As previously discussed, on July 1, 2020, we acquired 100%~~orders totaling $5.0 million for the purchase of ~~the equity interest of Carthage Crushed Limestone for $9 million cash, subject to adjustment.~~capital equipment.

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.

At ~~June 30, 2020,~~March 31, 2021, we had no debt outstanding and no draws on the Revolving Facility other than $0.4 million of letters of credit 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, and liquidity needs and allow us to 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~~first quarter ~~2020~~2021 were ~~$37.5~~$41.7 million, compared to ~~$39.0 million in the second quarter 2019, a decline of $1.4 million, or 3.6%. For the first six months 2020, revenues were $76.0 million, compared to $76.8~~$38.4 million in the first ~~six months 2019, a decrease~~quarter 2020, an increase of ~~$0.8~~$3.2 million, or ~~1.0%~~8.4%. Revenues from our lime and limestone operations in the ~~second~~first quarter ~~2020 decreased $1.2~~2021 increased $3.1 million, or ~~3.2%~~8.2%, to ~~$37.4~~$41.4 million from ~~$38.6 million in the second quarter 2019. For the first six months 2020, revenues from our lime and limestone operations decreased $0.5 million, or 0.6%, to $75.6 million compared to $76.0~~$38.2 million in the first ~~six months 2019. As discussed above, the decrease~~quarter 2020. The increase in ~~revenues from our~~ lime and limestone ~~operations~~revenues in the ~~second~~first quarter ~~and first six months 2020 was~~2021 resulted primarily ~~due to decreased~~from a 6.8% increase in sales volumes of ~~7.5%~~the Company’s lime and ~~4.8%, respectively, compared to the comparable 2019 periods, principally due to reduced demand from our environmental, oil~~limestone products discussed above and ~~gas services and steel customers, partially offset by increased demand from our construction customers, which had been negatively impacted by increased rainfall in Texas~~a 1.4% increase in the ~~second quarter 2019. Additionally, the reductions in sales volumes were partially offset by~~ average ~~increases in~~selling 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.~~products. Revenues also included $0.3 million and $0.2 million in the first quarters 2021 and ~~$0.4 million~~2020, respectively, from our natural gas ~~interests in the second quarter and first six months 2020, respectively, compared to $0.4 million and $0.7 million in the comparable 2019 periods, respectively.~~interests.

Gross profit was ~~$10.4 million and $20.2~~$11.8 million in the ~~second~~first quarter ~~and first six months 2020, respectively~~2021 compared to ~~$9.7 million and $18.4~~$9.9 million in the ~~comparable 2019 periods, increases~~first quarter 2020, an increase of ~~$0.6 million and $1.8~~$1.9 million, or ~~6.5% and 9.8%, respectively.~~19.5%. Gross profit from our lime and limestone operations in the ~~second~~first quarter ~~and first six months 2020~~2021 was ~~$10.5~~$11.8 million, ~~and $20.5 million, respectively,~~ compared to ~~$9.7 million and $18.4~~$10.0 million in the ~~comparable 2019 periods, increases~~first quarter 2020, an increase of ~~$0.8~~$1.8 million, or ~~8.4%, and $2.2 million, or 11.8%, respectively.~~17.6%. The ~~increases~~increase in gross profit in ~~the 2020 periods,~~2021, compared to ~~the comparable 2019 periods,~~2020, resulted primarily from ~~lower fuel costs and~~the 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, partially offset by the decreased revenues discussed above and increased ~~costs incurred in the second quarter 2020 associated with responding to the COVID-19 pandemic.~~operating efficiencies. Gross profit ~~also included the impact of losses~~ from our natural gas interests ~~of $150 thousand and $312 thousand~~was essentially break even in the ~~second~~first quarter ~~and first six months 2020, respectively,~~2021, compared to ~~profits of $37 thousand and $44 thousand~~a $0.2 million loss in ~~the comparable 2019 periods.~~2020.

Selling, general and administrative expenses (“SG&A”) were ~~$2.9 million and $6.1~~$3.1 million in the ~~second~~first quarter ~~and first six months 2020, respectively,~~2021, compared to ~~$2.6 million and $5.3~~$3.2 million in the ~~comparable 2019 periods.~~first quarter 2020. As a percentage of revenues, SG&A was ~~7.7%~~7.4% and ~~8.0%~~8.4% in the ~~second quarter~~first quarters 2021 and ~~first six months~~ 2020, ~~respectively, compared~~respectively. The decrease in SG&A was primarily due to ~~6.8% and 6.9%~~legal expenses associated with the acquisition of Carthage in the ~~comparable 2019 periods. The increases~~first quarter 2020 and lower travel cost in ~~SG&A resulted primarily from~~the first quarter 2021, partially offset by increased

~~personnel expenses, including~~ stock-based compensation ~~increased legal expenses, including acquisition-related legal fees, and increased COVID-19 pandemic costs incurred in~~which was principally due to higher prices for the ~~second quarter 2020.~~Company’s common stock.

Interest expense was $62 thousand in each of the first quarters 2021 and ~~$124 thousand in the second quarter and first six months 2020, respectively, compared to $60 thousand and $122 thousand in the comparable 2019 periods.~~2020. We had no outstanding debt during ~~any of the periods.~~either period. Interest and other income, net was ~~$0.1 million and $0.4~~$34 thousand in the ~~second~~first quarter ~~and first six months 2020, respectively,~~2021, compared to ~~$0.5 million and $1.0 million~~$247 thousand in the ~~comparable 2019 periods, decreases~~first quarter 2020, a decrease of ~~$0.4 million and $0.6 million, or 78.8% and 64.3%, respectively.~~$213 thousand. The ~~decreases~~decrease in interest income ~~were~~was due to reduced interest rates ~~and lower average balances of cash and cash equivalents~~ in the ~~2020 periods,~~first quarter 2021, compared to the ~~comparable 2019 periods.~~first quarter 2020.

Income tax expense was ~~$1.4 million and $2.7~~$1.7 million in the ~~second quarter and~~ first ~~six months 2020, respectively,~~quarters 2021, compared to ~~$1.5 million and $2.8~~$1.3 million in the ~~comparable 2019 periods.~~first quarter 2020, an increase of $0.4 million, or 29.3%. Our effective income tax rate ~~for each of~~was 19.3% and 19.0% in the ~~2020~~first quarters 2021 and ~~2019 periods~~20120, respectively. Our effective income tax rate 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. Additionally, for the year ended December 31, 2019, our effective income tax rate was 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 in 2020.

Our net income was ~~$6.1~~$7.0 million ($~~1.08 per share diluted) in the second quarter 2020, compared to net income of $6.0 million ($1.07~~1.24 per share diluted) in the first quarter ~~2019, an increase of $0.1 million, or 1.1%. Net income in the first six months 2020 was $11.6 million ($2.07 per share diluted), an increase of $0.5 million, or 4.3%,~~2021, compared to net income of ~~$11.2~~$5.5 million ($~~1.99~~0.98 per share diluted) in the first ~~six months 2019.~~quarter 2020, an increase of $1.5 million, or 26.8%.

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, 2020.~~March 31, 2021. Any future borrowings under the Revolving Facility would be subject to interest rate risk. See Note 9 of Notes to Condensed Consolidated Financial Statements.

~~Foreign Exchange Risk.~~

Prior to April 2020, we had contracts related to the purchase and installation of equipment that required future payments in Euros and entered into foreign exchange hedges to fix our U.S. Dollar liability for these contracts. The last of these foreign exchange hedges expired in 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

Our Amended and Restated 2001 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~~first quarter ~~2020,~~2021, pursuant to these provisions, we repurchased ~~2,459~~743 shares at a price of ~~$84.44~~$129.21 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-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, 2020~~March 31, 2021 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
NUMBER		DESCRIPTION



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

2017

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.


~~July 31, 2020~~April 29, 2021	By:	/s/ Timothy W. Byrne
		Timothy W. Byrne
		President and Chief Executive Officer
		(Principal Executive Officer)


~~July 31, 2020~~April 29, 2021	By:	/s/ Michael L. Wiedemer
		Michael L. Wiedemer
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

2118


		Three Months Ended March 31,
	Classification	2021		2020
Operating lease costs ⁽¹⁾	Cost of revenues	$	385	$	385
Operating lease costs⁽¹⁾	Selling, general and administrative expenses		65		56
Rental revenues	Interest and other income, net		(21)		(27)
Net operating lease costs		$	429	$	414