FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] 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 0-2757
THE MONARCH CEMENT COMPANY
(Exact name of registrant as specified in its charter)
KANSAS 48-0340590
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 1000, HUMBOLDT, KANSAS 66748-1000
(Address of principal executive offices)
(Zip Code)
(316) 473-2225
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 X NO
As of November 4, 1995 , the Registrant had outstanding 2,182,039
shares of Capital Stock, par value $2.50 per share and 2,057,251 shares of
Class B Capital Stock, par value $2.50 per share.
<PAGE>
PART I. FINANCIAL INFORMATION
NOTES TO THE SECURITIES AND EXCHANGE COMMISSION
REPORT FORM 10-Q FOR THE QUARTER ENDED
September 30, 1995
l. The condensed financial statements included herein have been prepared by
the registrant, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
registrant believes that the disclosures are adequate to make the
information presented not misleading. The accompanying financial
statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of operations
for the interim periods presented. It is suggested that these condensed
financial statements be read in conjunction with the financial statements
and notes thereto included in the registrant's latest annual report on
Form 10-K.
2. For a summary of accounting policies, the reader should refer to Note 1
of the consolidated financial statements included in the registrant's
annual report on Form 10-K for the fiscal year ended December 31, 1994.
3. The net income per share of capital stock has been calculated based on
the weighted average shares outstanding during each of the reporting
periods after giving retroactive effect to a stock dividend of one share
of Class B capital stock for each share of Capital stock outstanding.
The weighted average number of shares outstanding was 4,239,290 in the
third quarter and the first nine months of 1995 and 1994.
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
<CAPTION>
ASSETS LIABILITIES AND STOCKHOLDERS' INVESTMENT
1 9 9 5 1 9 9 4 1 9 9 5 1 9 9 4
<S> <C> <C> <S> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents, at cost Accounts and notes payable $ 3,639,909 $ 3,826,624
which approximates market $ 4,499,051 $ 3,668,782 Accrued liabilities 3,489,278 2,877,213
Short term investments, at cost Total current liabilities $ 7,129,187 $ 6,703,837
which approximates market 1,875,388 5,358,751
Receivables, less allowances of
$466,000 in 1995 and $429,000 in
1994 for doubtful accounts 11,726,616 7,157,102 ACCRUED POSTRETIREMENT BENEFITS 9,591,382 9,602,239
Inventories, priced at cost which
is not in excess of market-
Cost determined by last-in,
first-out method- ACCRUED PENSION EXPENSE 531,583 443,658
Finished cement $ 2,010,044 $ 1,348,752
Work in process 408,457 258,465
Building products 1,120,205 974,157
Cost determined by first-in, MINORITY INTEREST IN CONSOLIDATED
first-out method- SUBSIDIARIES 1,867,253 1,373,829
Fuel, gypsum, paper sacks
and other 1,666,935 1,382,900
Cost determined by average method-
Operating and maintenance supplies 5,470,488 4,900,505 STOCKHOLDERS' INVESTMENT:
Total inventories $10,676,129 $ 8,864,779 Capital stock, par value $2.50
Refundable federal and state per share-Authorized 10,000,000
income taxes 25,221 1,073,858 shares, Issued 2,181,539 shares
Deferred income taxes 370,000 370,000 at 9-30-95 and 2,156,026 shares
Prepaid expenses 171,900 29,771 at 12-31-94 $ 5,453,847 $ 5,390,065
Total current assets $29,344,305 $26,523,043 Class B Capital stock, par value
$2.50 per share-Authorized
PROPERTY, PLANT AND EQUIPMENT, at 10,000,000 shares, Issued
cost, less accumulated depreciation 2,057,751 shares at 9-30-95 and
and depletion of $66,770,647 in 1995 2,083,264 shares at 12-31-94 5,144,378 5,208,160
and $64,459,510 in 1994 23,184,570 20,988,202 Retained Earnings 28,050,967 24,081,613
$38,649,192 $34,679,838
DEFERRED INCOME TAXES 2,193,800 2,420,000 Plus: Unrealized holding gain 451,800 111,800
Less: Excess pension liability 393,214 393,214
OTHER ASSETS 3,104,508 2,590,742 Total stockholders' investment $38,707,778 $34,398,424
$57,827,183 $52,521,987 $57,827,183 $52,521,987
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<CAPTION>
For the Three Months Ended For the Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $27,049,033 $20,214,042 $59,877,901 $54,238,902
COST OF SALES 19,204,745 15,507,078 46,170,891 42,874,546
Gross profit from operations $ 7,844,288 $ 4,706,964 $13,707,010 $11,364,356
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,821,412 1,728,009 5,059,658 4,893,559
Income from operations 6,022,876 $ 2,978,955 $ 8,647,352 $ 6,470,797
OTHER INCOME (EXPENSE):
Interest income $ 79,086 $ 169,666 $ 249,592 $ 371,249
Other, net (238,297) (101,492) (794,946) (37,308)
$ (159,211) $ 68,174 $ (545,354) $ 333,941
Income before provision
for taxes on income $ 5,863,665 $ 3,047,129 $ 8,101,998 $ 6,804,738
PROVISION FOR TAXES ON INCOME 2,300,000 1,000,000 3,200,000 2,500,000
NET INCOME $ 3,563,665 $ 2,047,129 $ 4,901,998 $ 4,304,738
RETAINED EARNINGS, beg. of period 24,953,624 23,739,804 24,081,613 27,247,630
Less stock dividends - - - 5,299,113
Less cash dividends 466,322 466,322 932,644 932,644
RETAINED EARNINGS, end of period $28,050,967 $25,320,611 $28,050,967 $25,320,611
NET INCOME PER SHARE $.84 $.48 $1.16 $1.02
CASH DIVIDENDS PER SHARE $.11 $.11 $.22 $.22
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Nine Months Ended
Sept. 30, Sept. 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,901,998 $ 4,304,738
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 2,805,533 2,532,759
Increase in long-term notes receivable (49,687) -
Gain on disposal of assets (157,099) (251,657)
Gain on sale of other investments - (41,341)
Change in current assets and liabilities net
of effects from purchase of subsidiaries:
Increase in receivables, net (4,569,514) (1,412,334)
Increase in inventories (1,811,350) (1,403,995)
Decrease in refundable federal and state
income taxes 1,048,637 -
Increase in prepaid expenses (142,129) (179,041)
Decrease in accounts payable, notes
payable and accrued liabilities 1,357,994 392,025
Increase in deferred income taxes 226,200 -
Increase (decrease) in postretirement benefits (10,857) 203,187
Increase (decrease) in accrued pension expense 87,925 (2,839)
Minority interest in earnings of subsidiaries 470,169 340,653
Net cash provided by operating activities $ 4,157,820 $ 4,482,155
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $(5,051,435) $(5,021,532)
Net sales (purchases) of subsidiaries stock 226,573 (554,613)
Proceeds from disposals of property, plant
and equipment 214,459 280,362
Payment for purchases of other investments, net - (956,413)
Proceeds from disposals of other investments - 240,823
(Increase) decrease in other assets (131,905) 2,616
Decrease in short term investments 3,483,363 3,094,638
Net cash used for investing activities $(1,258,945) $(2,914,119)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends $(1,865,288) $(1,780,502)
Subsidiaries' dividends paid to minority interest (98,118) (55,180)
Subsidiaries' purchase of treasury stock (105,200) -
Net cash used for financing activities $(2,068,606) $(1,835,682)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ 830,269 $ (267,646)
CASH AND CASH EQUIVALENTS, beginning of year 3,668,782 1,665,877
CASH AND CASH EQUIVALENTS, end of period $ 4,499,051 $ 1,398,231
Interest paid $4,100 $2,298
Income taxes paid $821,475 $2,947,991
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
The registrant's ability to generate cash adequate to meet its needs has
been derived primarily from operations. Cash and short term investments
decreased during the first nine months of 1995 primarily due to capital
expenditures and funding increased receivables and inventories.
Results of Operations
Adverse weather conditions, which prevailed throughout the registrant's
market area during the first six months of 1995, cleared during the third
quarter of 1995. As construction projects resumed, sales of cement and ready-
mixed concrete increased. By the end of the third quarter of 1995, the
registrant's year-to-date net sales surpassed its net sales for the first nine
months of 1994 by 10%. Net sales for the third quarter of 1995 alone were 34%
greater than 1994 third quarter net sales. These increases in net sales were
the result of an increase in the volume of cement sold along with moderate
increases in the price of cement and ready-mixed concrete sold.
By the beginning of the third quarter of 1995, the modifications to the
registrant's two preheater kilns and the installation of the vibrating grizzly
were substantially complete. These improvements increased the plant's
production capacity and allowed the registrant to eliminate the purchase of
cement and to substantially reduce the purchase of clinker from other market
areas. These cement and clinker purchases, which began in June and September
of 1994, respectively, were at prices above the registrant's production costs
and increased per unit cost of sales primarily during the last quarter of 1994
and the first half of 1995.
Operating efficiencies achieved through higher sales volumes, reduction
of costs associated with producing versus purchasing cement and clinker and a
moderate increase in the price of cement and ready-mixed concrete combined to
increase gross profit from operations 67% and 21% for the third quarter and
first nine months of 1995 as compared to similar periods in 1994. The
registrant's gross profit margin during the third quarter of 1995 was 29%,
which was 25% higher than its gross profit margin for the third quarter of
1994.
Demand for cement and ready-mixed concrete in the registrant's market
area has been excellent and is expected to continue at high levels for the
balance of 1995 or until adverse weather returns. The registrant believes its
inventory levels and production capabilities are adequate to fulfill its
customers needs.
The increase in other expense was primarily due to the settlement of a
disputed contract during the first quarter of 1995 requiring the purchase of a
specified volume of rock for use in ready-mixed concrete produced by one of
the registrant's subsidiaries. This conflict was resolved with the payment of
$265,000 plus $39,000 interest.
Seasonality
The registrant's highest revenue and earnings historically occur in its
second and third fiscal quarters, April through September.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) There are no exhibits required to be filed for the quarter ended
September 30, 1995.
(b) There were no reports required to be filed on Form 8-K during
the quarter July 1, 1995 to September 30, 1995, inclusive, for
which this Form 10-Q is being filed.
S I G N A T U R E S
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.
THE MONARCH CEMENT COMPANY
(Registrant)
Date November 9, 1995 /s/ Jack R. Callahan
Jack R. Callahan
President
Date November 9, 1995 /s/ Lyndell G. Mosley
Lyndell G. Mosley, CPA
Assistant Secretary-Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MONARCH
CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE
QUARTER ENDED SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 4499051
<SECURITIES> 1875388
<RECEIVABLES> 12192616
<ALLOWANCES> 466000
<INVENTORY> 10676129
<CURRENT-ASSETS> 29344305
<PP&E> 89955217
<DEPRECIATION> 66770647
<TOTAL-ASSETS> 57827183
<CURRENT-LIABILITIES> 7129187
<BONDS> 0
<COMMON> 10598225
0
0
<OTHER-SE> 28109553
<TOTAL-LIABILITY-AND-EQUITY> 57827183
<SALES> 59877901
<TOTAL-REVENUES> 59877901
<CGS> 46170891
<TOTAL-COSTS> 46170891
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8101998
<INCOME-TAX> 3200000
<INCOME-CONTINUING> 4901998
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4901998
<EPS-PRIMARY> 1.16
<EPS-DILUTED> 1.16
</TABLE>
