UNITED STATES LIME & MINERALS INC - Quarter Report: 2019 September (Form 10-Q)

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 September 30, 2019


☐	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 October 30, 2019, 5,612,772 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)


	September 30,		December 31,
	2019		2018
ASSETS
Current assets
Cash and cash equivalents	$	80,731	$	67,218
Trade receivables, net		23,180		19,602
Inventories, net		13,237		12,846
Prepaid expenses and other current assets		1,660		1,692
Total current assets		118,808		101,358
Property, plant and equipment		366,446		348,472
Less accumulated depreciation and depletion		(215,413)		(205,708)
Property, plant and equipment, net		151,033		142,764
Operating lease right-of-use assets		3,535		—
Other assets, net		457		549
Total assets	$	273,833	$	244,671
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	6,521	$	4,570
Current portion of operating lease liabilities		1,351		—
Accrued expenses		3,438		3,393
Total current liabilities		11,310		7,963
Deferred tax liabilities, net		16,354		12,365
Operating lease liabilities, excluding current portion		2,144		—
Other liabilities		1,356		1,376
Total liabilities		31,164		21,704
Stockholders’ equity
Common stock		662		661
Additional paid-in capital		27,045		25,867
Accumulated other comprehensive loss		(39)		(13)
Retained earnings		269,358		250,568
Less treasury stock, at cost		(54,357)		(54,116)
Total stockholders’ equity		242,669		222,967
Total liabilities and stockholders’ equity	$	273,833	$	244,671

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 September 30,								Nine Months Ended September 30,
	2019				2018				2019				2018
Revenues
Lime and limestone operations	$	43,265	99.3	%	$	34,713	98.4	%	$	119,311	99.2	%	$	107,984	98.3	%
Natural gas interests		294	0.7	%		559	1.6	%		1,001	0.8	%		1,817	1.7	%
		43,559	100.0	%		35,272	100.0	%		120,312	100.0	%		109,801	100.0	%
Cost of revenues
Labor and other operating expenses		25,887	59.4	%		23,687	67.2	%		75,927	63.1	%		73,077	66.5	%
Depreciation, depletion and amortization		4,189	9.6	%		4,389	12.4	%		12,482	10.4	%		12,854	11.7	%
		30,076	69.0	%		28,076	79.6	%		88,409	73.5	%		85,931	78.2	%
Gross profit		13,483	31.0	%		7,196	20.4	%		31,903	26.5	%		23,870	21.8	%
Selling, general and administrative expenses		2,928	6.8	%		2,790	7.9	%		8,240	6.8	%		7,856	7.2	%
Operating profit		10,555	24.2	%		4,406	12.5	%		23,663	19.7	%		16,014	14.6	%
Other (income) expense
Interest expense		61	0.1	%		66	0.2	%		183	0.2	%		191	0.2	%
Interest and other income, net		(477)	(1.1)	%		(495)	(1.4)	%		(1,459)	(1.2)	%		(1,307)	(1.2)	%
		(416)	(1.0)	%		(429)	(1.2)	%		(1,276)	(1.0)	%		(1,116)	(1.0)	%
Income before income tax expense		10,971	25.2	%		4,835	13.7	%		24,939	20.7	%		17,130	15.6	%
Income tax expense		1,069	2.5	%		281	0.8	%		3,876	3.2	%		1,676	1.5	%
Net income	$	9,902	22.7	%	$	4,554	12.9	%	$	21,063	17.5	%	$	15,454	14.1	%
Net income per share of common stock
Basic	$	1.76			$	0.81			$	3.75			$	2.76
Diluted	$	1.76			$	0.81			$	3.75			$	2.76

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 September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net income	$	9,902	$	4,554	$	21,063	$	15,454
Other comprehensive loss
Mark to market of foreign exchange hedges, net of tax benefit of $8 and $7 for the three months and nine months ended September 30, 2019, respectively, and $7 and $34 for the three months and nine months ended September 30, 2018, respectively		(31)		(24)		(26)		(113)
Total other comprehensive loss		(31)		(24)		(26)		(113)
Comprehensive income	$	9,871	$	4,530	$	21,037	$	15,341

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, 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
Stock options exercised	—		—		—		—		—		—		—
Stock-based compensation	(21)		—		413		—		—		—		413
Treasury shares purchased	—		—		—		—		—		—		—
Cash dividends paid	—		—		—		—		(756)		—		(756)
Net income	—		—		—		—		9,902		—		9,902
Mark to market for FX hedges, net of $8 tax benefit	—		—		—		(31)		—		—		(31)
Comprehensive (loss) income	—		—		—		(31)		9,902		—		9,871
Balances at September 30, 2019	5,612,772	$	662	$	27,045	$	(39)	$	269,358	$	(54,357)	$	242,669

UNITED STATES LIME & MINERALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY, Continued

(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, 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
Stock-based compensation	—		—		431		—		—		—		431
Cash dividends paid	—		—		—		—		(755)		—		(755)
Net income	—		—		—		—		4,554		—		4,554
Mark to market for foreign exchange hedges, net of $7 tax benefit	—		—		—		(24)		—		—		(24)
Comprehensive (loss) income	—		—		—		(24)		4,554		—		4,530
Balances at September 30, 2018	5,597,950	$	660	$	25,523	$	(27)	$	247,093	$	(53,956)	$	219,293

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)


	Nine Months Ended September 30,
	2019		2018
OPERATING ACTIVITIES:
Net income	$	21,063	$	15,454
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization		12,646		13,011
Amortization of deferred financing costs		7		23
Deferred income taxes		3,999		1,119
Loss on disposition of property, plant and equipment		628		466
Stock-based compensation		1,104		1,144
Changes in operating assets and liabilities:
Trade receivables, net		(3,578)		(1,900)
Inventories, net		(391)		358
Prepaid expenses and other current assets		32		670
Other assets		85		118
Accounts payable and accrued expenses		681		1,566
Other liabilities		(96)		(191)
Net cash provided by operating activities		36,180		31,838
INVESTING ACTIVITIES:
Purchase of property, plant and equipment		(20,423)		(31,687)
Proceeds from sale of property, plant and equipment		195		460
Net cash used in investing activities		(20,228)		(31,227)
FINANCING ACTIVITIES:
Cash dividends paid		(2,273)		(2,267)
Proceeds from exercise of stock options		75		73
Purchase of treasury shares		(241)		(251)
Net cash used in financing activities		(2,439)		(2,445)
Net increase (decrease) in cash and cash equivalents		13,513		(1,834)
Cash and cash equivalents at beginning of period		67,218		85,000
Cash and cash equivalents at end of period	$	80,731	$	83,166

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. The results of operations for the three- and nine-month periods ended September 30, 2019 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 operates lime and limestone plants and distribution facilities in Arkansas, Colorado, Louisiana, Oklahoma and Texas through its wholly owned subsidiaries, Arkansas Lime Company, Colorado Lime Company, Texas Lime Company, U.S. Lime Company, U.S. Lime Company – Shreveport, U.S. Lime Company – St. Clair 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 working interests in natural gas wells located in Johnson County, Texas, in the Barnett Shale Formation.

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. 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 and 2018 revenues was $7.8 million and $6.4 million, for the respective three-month periods, and $21.7 and $19.1 million, for the respective nine-month periods, 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. 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.

The majority of the Company’s trade receivables are unsecured. Payment terms for all trade receivables are based on the underlying purchase orders, contracts or purchase agreements. Credit losses relating to trade receivables 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 to reflect estimated losses resulting from the failure of customers to make required payments.

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 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 9 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. See Note 6 to the condensed consolidated financial statements. There were no changes in the methods and assumptions used in measuring fair value.

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


					Significant Other
					Observable Inputs
					(Level 2)
	September 30,		December 31,		September 30,		December 31,
	2019		2018		2019		2018		Valuation Technique
Foreign exchange hedges	$	(50)	$	(16)	$	(50)	$	(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.

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 Segments

The Company has identified two business segments based on the distinctness of their activities and products: Lime and Limestone Operations and Natural Gas Interests. All operations are in the United States. In evaluating the operating results of the Company’s segments, management primarily reviews revenues and gross profit. The Company does not allocate corporate overhead, interest expense or interest income to its business segments.

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


	Three Months Ended September 30,				Nine Months Ended September 30,
Revenues	2019		2018		2019		2018
Lime and limestone operations	$	43,265	$	34,713	$	119,311	$	107,984
Natural gas interests		294		559		1,001		1,817
Total revenues	$	43,559	$	35,272	$	120,312	$	109,801
Depreciation, depletion and amortization
Lime and limestone operations	$	4,056	$	4,234	$	12,074	$	12,375
Natural gas interests		133		155		408		479
Total depreciation, depletion and amortization	$	4,189	$	4,389	$	12,482	$	12,854
Gross profit
Lime and limestone operations	$	13,477	$	6,992	$	31,853	$	23,112
Natural gas interests		6		204		50		758
Total gross profit	$	13,483	$	7,196	$	31,903	$	23,870
Capital expenditures
Lime and limestone operations	$	8,063	$	12,309	$	20,423	$	31,687
Natural gas interests		—		—		—		—
Total capital expenditures	$	8,063	$	12,309	$	20,423	$	31,687

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 September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net income for basic and diluted income per common share	$	9,902	$	4,554	$	21,063	$	15,454
Weighted-average shares for basic income per common share		5,613		5,598		5,612		5,595
Effect of dilutive securities:
Employee and director stock options(1)		9		8		8		7
Adjusted weighted-average shares and assumed exercises for diluted income per common share		5,622		5,606		5,620		5,602
Basic net income per common share	$	1.76	$	0.81	$	3.75	$	2.76
Diluted net income per common share	$	1.76	$	0.81	$	3.75	$	2.76

⁽¹⁾

Excludes 0 and 9 stock options for the three- and nine-month 2019 periods and 2 and 7 stock options for the three- and nine-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 September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Net income	$	9,902	$	4,554	$	21,063	$	15,454
Mark to market of foreign exchange hedges		(39)		(31)		(33)		(147)
Deferred income tax benefit		8		7		7		34
Comprehensive income	$	9,871	$	4,530	$	21,037	$	15,341

In November 2016, 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 the St. Clair kiln project, of which FX hedges with respect to 0.4 million Euros remained outstanding at September 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 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 September 30, 2019. At September 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. The FX hedges have been effective as defined under applicable accounting rules. Therefore, changes in the fair value of the FX hedges are 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 $50 and $16 at September 30, 2019 and December 31, 2018, respectively, which is included in accrued expenses.

7. 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):


	September 30,		December 31,
	2019		2018
Lime and limestone inventories:
Raw materials	$	4,973	$	4,693
Finished goods		1,862		2,153
		6,835		6,846
Service parts inventories		6,402		6,000
	$	13,237	$	12,846

8. Banking Facilities and Debt

The Company’s credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 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 September 30, 2019, the Company had no debt outstanding and no draws on the Revolving Facility other than $1.2 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. 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 0 to 8 years, with a weighted-average remaining lease term of 3 years at September 30, 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 liability for the Company’s operating leases was discounted to present value using a weighted-average discount rate of 3.5%. The components of lease costs for the three- and nine-months ended September 30, 2019 were as follows (in thousands):


		Three Months Ended September 30,		Nine Months Ended September 30,
	Classification	2019		2019
Operating lease costs (1)	Cost of revenues	$	480	$	1,520
Operating lease costs	Selling, general and administrative expenses		67		184
Rental revenues	Other (income) expense		(20)		(45)
Net lease cost		$	527	$	1,659

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

As of September 30, 2019, 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 nine months ended September 30, 2019)	$	386
2020		1,330
2021		1,074
2022		461
2023		187
Thereafter		266
Total future minimum lease payments		3,704
Less imputed interest		(209)
Present value of lease liabilities	$	3,495

Supplemental cash flow information pertaining to the Company’s leasing activity for the nine months ended September 30, 2019 was as follows (in thousands):


	Nine Months Ended September 30,
	2019
Cash payments for operating lease liabilities	$	1,297
Right-of-use assets obtained in exchange for operating lease obligations	$	858

10. Income Taxes

The Company has estimated that its effective income tax rate for 2019 will be 15.5%. 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, and the effects of research and development tax credits.

11. Dividends

On September 13, 2019, the Company paid $0.8 million in cash dividends, based on a dividend of $0.135 (13.5 cents) per share of its common stock, to shareholders of record at the close of business on August 23, 2019. On June 14, 2019, the Company paid $0.8 million in cash dividends, based on a dividend of $0.135 (13.5 cents) per share of its common stock, to shareholders of record at the close of business on May 24, 2019. On March 15, 2019, the Company paid $0.8 million in cash dividends, based on a dividend of $0.135 (13.5 cents) per share on its common stock, to shareholders of record at the close of business on February 22, 2019.

12. Subsequent Event

On October 30, 2019, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.135 (13.5 cents) per share on the Company’s common stock. This dividend is payable on December 13, 2019 to shareholders of record at the close of business on November 22, 2019.

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 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 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, expansion, and development projects; (vii) the Company’s ability to expand its Lime and Limestone Operations through expansion projects and acquisitions of businesses with related or similar operations, including obtaining 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 in or the reversal of recent changes to the corporate tax code, legislative impasses, 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; and (xii) 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.

Overview.

We currently have two operating segments: Lime and Limestone Operations and Natural Gas Interests. Revenues and gross profit are the primary items utilized to evaluate the operating results of our segments and to allocate resources.

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), roof shingle manufacturers, oil and gas services 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 and U.S. Lime Company – Transportation. The Lime and Limestone Operations represent our principal business.

Our Natural Gas Interests are held in our wholly owned subsidiary, U.S. Lime Company – O & G, LLC, and consist of royalty and non-operating working interests under the O & G Lease with affiliated companies of Enervest, Ltd. and the Drillsite Agreement with XTO Energy, Inc. related to our Johnson County, Texas property, located in the Barnett Shale Formation, on which Texas Lime Company conducts its lime 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 increased 24.6% and 10.5% in the third quarter and first nine months 2019, respectively, compared to last year’s comparable periods, primarily because of increased sales volumes of 21.8% and 8.9% in the third quarter and first nine months, respectively, for our lime and limestone products. The increase in our sales volumes in the third quarter and the first nine months 2019, compared to last year’s comparable periods, resulted primarily from increased demand from our construction and environmental customers, partially offset in the third quarter 2019 by decreased demand from our steel customers, compared to the third quarter 2018. Improved weather conditions in the third quarter 2019, compared to the third quarter 2018, contributed to the increase in demand from our construction customers in the 2019 period. Some of the demand from construction customers in the third quarter 2019 was from projects that had been delayed by adverse weather in the second quarter 2019. Average prices realized for our lime and limestone products increased 2.8% and 1.6% for the third quarter and first nine months 2019, respectively, compared to the comparable prior year periods.

Gross profit from Lime and Limestone Operations increased 92.7% and 37.8% in the third quarter and first nine months 2019, respectively, compared to last year’s comparable periods. The increased gross profit from our Lime and Limestone Operations in the third quarter and first nine months 2019, compared to the comparable 2018 periods, resulted primarily from the increased revenues discussed above, increased operating efficiencies associated with the new kiln at our St. Clair facility and decreased stripping costs that were more in line with historical patterns, compared to the 2018 periods.

Revenues from our Natural Gas Interests decreased 47.4% and 44.9% in the third quarter and first nine months 2019, respectively, compared to the comparable 2018 periods, resulting 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 97.1% and 93.4% in the third quarter and first nine months 2019, respectively, compared to the third quarter and first nine months 2018, primarily due to the decreased revenues discussed above.

In the third quarter 2019, the new vertical kiln at our St. Clair facility, which began producing commercially saleable quicklime in the second quarter 2019, continued producing well throughout the quarter. As a result, we removed our old kiln from service at St. Clair and recognized a loss of $0.2 million on disposal during the third quarter 2019 included in Cost of revenues on the Condensed Consolidated Statements of Operations.

In December 2015, we commenced a publicly announced share repurchase program to purchase 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. No shares have been repurchased under the program since the first quarter 2016.

We paid a regular quarterly cash dividend of $0.135 (13.5 cents) per share on our common stock in each of the first three quarters 2019. On October 30, 2019, the Board of Directors declared a regular quarterly cash dividend of

$0.135 (13.5 cents) per share on our common stock. This dividend is payable on December 13, 2019 to shareholders of record at the close of business on November 22, 2019.

Liquidity and Capital Resources.

Net cash provided by operating activities was $36.2 million in the first nine months 2019, compared to $31.8 million in the comparable 2018 period, an increase of $4.3 million, or 13.6%. 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 nine months 2019, net cash provided by operating activities was principally composed of $21.1 million net income, $12.6 million DD&A, $4.0 million deferred income taxes, $1.1 million stock‑based compensation and a $3.3 million decrease from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2019 included an increase of $3.6 million in trade receivables, net, and an increase of $0.7 million in accounts payable and accrued expenses. In the first nine months 2018, net cash provided by operating activities was principally composed of $15.5 million net income, $13.0 million DD&A, $1.1 million deferred income taxes, $1.1 million stock‑based compensation and a $0.6 million increase from changes in operating assets and liabilities. Changes in operating assets and liabilities in the first nine months 2018 included an increase of $1.9 million in trade receivables, net, a decrease of $0.7 million in prepaid expenses and other current assets and an increase of $1.6 million in accounts payable and accrued expenses.

We had $20.4 million in capital expenditures in the first nine months 2019, including $3.9 million on the St. Clair kiln project, compared to $31.7 million in the first nine months 2018, including $17.5 million on the St. Clair kiln project. As of September 30, 2019, we had incurred a total of $44.1 million on the St. Clair kiln project, of which $43.4 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 the first half of 2020.

Net cash used in financing activities was $2.4 million in each of the first nine months 2019 and 2018, consisting primarily of cash dividends paid in each period.

Cash and cash equivalents increased $13.5 million to $80.7 million at September 30, 2019, from $67.2 million at December 31, 2018.

Our credit agreement with Wells Fargo Bank, N.A. (the “Lender”), as amended as of May 2, 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 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 committed to any planned capital expenditures until actual orders are placed for equipment. As of September 30, 2019, we did not have any material commitments for open purchase orders.

At September 30, 2019, we had no debt outstanding and no draws on the Revolving Facility other than $1.2 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, final payments on 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.

Results of Operations.

Revenues in the third quarter 2019 were $43.6 million, compared to $35.3 million in the third quarter 2018, an increase of $8.3 million, or 23.5%. Revenues from our Lime and Limestone Operations in the third quarter 2019 increased $8.6 million, or 24.6%, to $43.3 million from $34.7 million in the third quarter 2018, while revenues from our Natural Gas Interests decreased $265 thousand, or 47.4%, to $294 thousand in the third quarter 2019 from $559 thousand in the third quarter 2018. In the first nine months 2019, revenues were $120.3 million, compared to $109.8 million in the comparable 2018 period, an increase of $10.5 million, or 9.6%. Revenues from the Company’s Lime and Limestone Operations in the first nine months 2019 increased $11.3 million, or 10.5%, to $119.3 million from $108.0 million in the comparable 2018 period, and revenues from our Natural Gas Interests decreased $0.8 million, or 44.9%, to $1.0 million from $1.8 million in the comparable prior year period.

As discussed above, the increase in lime and limestone revenues in the third quarter and first nine months 2019, compared to the comparable 2018 periods, resulted principally from increased demand, primarily from our construction and environmental customers, and an increase in average prices realized for our lime and limestone products, partially offset in the third quarter 2019 by decreased demand from our steel customers.

Production volumes from our Natural Gas Interests in the third quarter 2019 totaled 113 thousand MCF, sold at an average price of $2.61 per MCF, compared to 123 thousand MCF, sold at an average price of $4.53 per MCF, in the third quarter 2018. Production volumes in the first nine months 2019 from Natural Gas Interests totaled 344 thousand MCF, sold at an average price of $2.91 per MCF, compared to the first nine months 2018 when 380 thousand MCF was produced and sold at an average price of $4.78 per MCF. Our average prices per MCF in the third quarter and first nine months 2019 were lower than average prices for the comparable 2018 periods due to decreases in market prices for natural gas and natural gas liquids.

Gross profit was $13.5 million in the third quarter 2019, compared to $7.2 million in the third quarter 2018, an increase of $6.3 million, or 87.4%. Gross profit was $31.9 million in the first nine months 2019, compared to $23.9 million in the comparable 2018 period, an increase of $8.0 million, or 33.7%.

Gross profit from our Lime and Limestone Operations in the third quarter 2019 was $13.5 million, an increase of $6.5 million, or 92.7%, from $7.0 million in the third quarter 2018. Gross profit from our Lime and Limestone Operations in the first nine months 2019 was $31.9 million, an increase of $8.7 million, or 37.8%, from $23.1 million in the comparable 2018 period. As discussed above, the increases in gross profit in the 2019 periods, compared to comparable 2018 periods, resulted primarily from increases in revenues, increased operating efficiencies associated with the new kiln at our St. Clair facility and decreased stripping costs that were more in line with historical patterns, compared to the comparable 2018 periods.

Gross profit from our Natural Gas Interests decreased to $6 thousand and $50 thousand in the third quarter and first nine months 2019, respectively, from $204 thousand and $758 thousand in the third quarter and first nine months 2018, respectively, decreases of $198 thousand, or 97.1%, and $708 thousand, or 93.4%, respectively. The decreases in gross profit from our Natural Gas Interests in the 2019 periods resulted from the decreases in revenues discussed above.

Selling, general and administrative expenses (“SG&A”) were $2.9 million and $8.2 million in the third quarter and first nine months 2019, respectively, compared to $2.8 million and $7.9 million in the comparable 2018 periods, respectively. As a percentage of revenues, SG&A was 6.8% in each of the third quarter and first nine months 2019, compared to 7.9% and 7.2% in the third quarter and first nine months 2018, respectively.

Interest expense was $61 thousand and $183 thousand in the third quarter and first nine months 2019, respectively, compared to $66 thousand and $191 thousand in the comparable 2018 periods, respectively. We had no outstanding debt during either period. Interest and other income, net was $0.5 million income in each of the third quarters 2019 and 2018. Interest and other income, net increased to $1.5 million in the first nine months 2019, compared to $1.3 million in the first nine months 2018, primarily due to higher average interest rate yields on our cash balances, compared to the 2018 period.

Income tax expense increased to $1.1 million in the third quarter 2019, compared to $0.3 million in the third quarter 2018, an increase of $0.8 million, or 280.4%. Income tax expense increased to $3.9 million in the first nine months 2019, compared to $1.7 million in the first nine months 2018, an increase of $2.2 million or 131.3%. During the third quarter 2019, we evaluated applicable projects and increased our estimated research and development tax credits which resulted in a reduction of our estimated 2019 effective income tax rate compared to our estimated 2019 effective rate at June 30, 2019. Our effective income tax rate for each of the 2019 and 2018 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, and the effect of research and development tax credits discussed above.

Our net income was $9.9 million ($1.76 per share diluted) in the third quarter 2019, compared to net income of $4.6 million ($0.81 per share diluted) in the third quarter 2018, an increase of $5.3 million, or 117.4%. Net income in the first nine months 2019 was $21.1 million ($3.75 per share diluted), an increase of $5.6 million, or 36.3%, compared to net income of $15.5 million ($2.76 per share diluted) in the first nine months 2018.

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 September 30, 2019. Any future borrowings under the Revolving Facility would be subject to interest rate risk. See Note 8 of Notes to Condensed Consolidated Financial Statements.

Foreign Exchange Risk.

At September 30, 2019, we had contracts related to the purchase and installation of equipment that require future payments totaling 0.7 million Euros. We have entered into foreign exchange hedges fixing our U.S. Dollar liability at $0.8 million. We could be exposed to changes in the Euro to U.S. Dollar exchange rates for obligations not effectively fixed by the hedges. 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 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 third quarter 2019.

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 September 30, 2019 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		Interactive Data Files.

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.


November 1, 2019	By:	/s/ Timothy W. Byrne
		Timothy W. Byrne
		President and Chief Executive Officer
		(Principal Executive Officer)


November 1, 2019	By:	/s/ Michael L. Wiedemer
		Michael L. Wiedemer
		Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)