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 June 30, 1996
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 August 9, 1996 , the Registrant had outstanding 2,217,473
shares of Capital Stock, par value $2.50 per share and 2,008,817 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
June 30, 1996
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, 1995.
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. The weighted average number of shares outstanding was 4,226,290
and 4,239,290 in the second quarter 1996 and 1995, respectively, and
4,226,504 and 4,239,290 in the first six months of 1996 and 1995,
respectively.
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--JUNE 30, 1996 AND DECEMBER 31, 1995
<CAPTION>
ASSETS LIABILITIES AND STOCKHOLDERS' INVESTMENT
1 9 9 6 1 9 9 5 1 9 9 6 1 9 9 5
<S> <C> <C> <S> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents, at cost Accounts and notes payable $ 3,470,563 $ 3,057,538
which approximates market $ 3,458,981 $ 5,071,268 Accrued liabilities 3,261,050 3,580,727
Short term investments, at cost Total current liabilities $ 6,731,613 $ 6,638,265
which approximates market 8,428,543 7,073,446
Receivables, less allowances of
$555,000 in 1996 and $538,000 in
1995 for doubtful accounts 11,195,965 8,135,769 ACCRUED POSTRETIREMENT BENEFITS 9,673,021 9,714,799
Inventories, priced at cost which
is not in excess of market-
Cost determined by last-in,
first-out method- ACCRUED PENSION EXPENSE 384,846 452,699
Finished cement $ 2,530,897 $ 2,181,014
Work in process 206,269 603,886
Building products 1,132,455 1,010,644
Cost determined by first-in, MINORITY INTEREST IN CONSOLIDATED
first-out method- SUBSIDIARIES 2,190,078 1,953,237
Fuel, gypsum, paper sacks
and other 1,530,697 1,616,793
Cost determined by average method-
Operating and maintenance supplies 5,939,295 5,465,850 STOCKHOLDERS' INVESTMENT:
Total inventories $11,339,613 $10,878,187 Capital stock, par value $2.50
Refundable federal and state per share-Authorized 10,000,000
income taxes - 116,971 shares, Issued 2,217,473 shares
Deferred income taxes 420,000 420,000 at 6-30-96 and 2,185,869 shares
Prepaid expenses 94,243 36,846 at 12-31-95 $ 5,543,682 $ 5,464,672
Total current assets $34,937,345 $31,732,487 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 2,008,817 shares at 6-30-96 and
and depletion of $69,836,266 in 1996 2,053,421 shares at 12-31-95 5,022,043 5,133,553
and $68,057,293 in 1995 23,114,374 22,517,810 Retained Earnings 33,403,492 29,806,550
$43,969,217 $40,404,775
DEFERRED INCOME TAXES 2,350,000 2,410,000 Plus: Unrealized holding gain 699,000 619,000
OTHER ASSETS 3,246,056 3,122,478 Total stockholders' investment $44,668,217 $41,023,775
$63,647,775 $59,782,775 $63,647,775 $59,782,775
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<CAPTION>
For the Three Months Ended For the Six Months Ended
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $25,908,982 $19,380,081 $39,553,068 $32,828,868
COST OF SALES 18,399,823 15,889,407 29,676,066 26,966,146
Gross profit from operations $ 7,509,159 $ 3,490,674 $ 9,877,002 $ 5,862,722
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,654,155 1,602,379 3,364,106 3,238,246
Income from operations 5,855,004 $ 1,888,295 $ 6,512,896 $ 2,624,476
OTHER INCOME (EXPENSE):
Interest income $ 142,202 $ 78,011 $ 273,125 $ 170,506
Other, net (83,067) (132,720) (114,920) (556,649)
$ 59,135 $ (54,709) $ 158,205 $ (386,143)
Income before provision
for taxes on income $ 5,914,139 $ 1,833,586 $ 6,671,101 $ 2,238,333
PROVISION FOR TAXES ON INCOME 2,175,000 735,000 2,450,000 900,000
NET INCOME $ 3,739,139 $ 1,098,586 $ 4,221,101 $ 1,338,333
RETAINED EARNINGS, beg. of period 30,171,508 24,321,360 29,806,550 24,081,613
Less cash dividends 507,155 466,322 507,155 466,322
Less purchase and retirement
of treasury stock - - 117,004 -
RETAINED EARNINGS, end of period $33,403,492 $24,953,624 $33,403,492 $24,953,624
NET INCOME PER SHARE $.88 $.26 $1.00 $.32
CASH DIVIDENDS PER SHARE $.12 $.11 $ .12 $.11
</TABLE>
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<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months Ended
June 30, June 30,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,221,101 $ 1,338,333
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 2,122,235 1,822,725
(Increase) decrease in long-term notes receivable 14,794 (57,084)
Gain on disposal of assets (150,510) (156,599)
Change in current assets and liabilities net
of effects from purchase of subsidiaries:
Increase in receivables, net (3,060,196) (3,549,480)
Increase in inventories (461,426) (3,644,300)
Decrease in refundable federal and state
income taxes 116,971 1,048,637
Increase in prepaid expenses (57,397) (42,453)
Increase in accounts payable, notes
payable and accrued liabilities 1,109,217 475,145
Increase in deferred income taxes 60,000 245,800
Increase (decrease) in postretirement benefits (41,778) 71,949
Increase (decrease) in accrued pension expense (67,853) 43,962
Minority interest in earnings of subsidiaries 305,166 194,875
Net cash provided by (used for)
operating activities $ 4,110,324 $(2,208,490)
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $(2,897,284) $(4,306,372)
Net sales of subsidiaries' stock - 226,573
Proceeds from disposals of property, plant
and equipment 334,212 213,959
Increase in other assets (63,589) (151,505)
(Increase) decrease in short term investments (1,355,097) 4,868,109
Net cash provided by (used for)
investing activities $(3,981,758) $ 850,764
FINANCING ACTIVITIES:
Cash dividends $(1,523,024) $(1,398,966)
Subsidiaries' dividends paid to minority interest (68,325) (98,118)
Subsidiaries' purchase of treasury stock - (105,200)
Purchase of treasury stock (149,504) -
Net cash used for financing activities $(1,740,853) $(1,602,284)
NET DECREASE IN CASH AND CASH EQUIVALENTS $(1,612,287) $(2,960,010)
CASH AND CASH EQUIVALENTS, beginning of year 5,071,268 3,668,782
CASH AND CASH EQUIVALENTS, end of period $ 3,458,981 $ 708,772
Interest paid $6,897 $1,436
Income taxes paid $1,466,295 $(143,675)
</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 half of 1996 primarily due to capital expenditures
and funding increased receivables.
Results of Operations
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 1996. During the second quarter of 1996 the registrant experienced
a 36% increase in the volume of cement sold as compared to the second quarter
of 1995. This increase in volume can be attributed to the continued high
demand for the registrant's products combined with weather conditions
conducive to construction. In comparison, extremely wet conditions prevailed
in the registrant's market area during the Spring of 1995 delaying many
construction projects until the third quarter of the year. Although the
registrant realized moderate increases in the sales prices of cement and
ready-mixed concrete, the increase in cement sales volume was the primary
factor contributing to the increases in net sales of 34% and 25% during the
second quarter and the first six months of 1996, respectively, as compared to
similar periods in 1995. During these same periods, the registrant's cost of
sales increased 15% and 10%, respectively, resulting in increases in gross
profit from operations of 115% and 68%, respectively.
During the first six months of 1996, the registrant spent approximately
$2,900,000 on capital expenditures in its continuing program to upgrade its
ready-mixed concrete and cement manufacturing equipment. The cement
manufacturing capital expenditure program, which was begun in 1994, was
designed to maximize the registrant's operating efficiencies through a
combination of new equipment and modifications to preexisting equipment. By
increasing the output of preexisting equipment, the registrant has been able
to reduce its per unit operating costs while increasing production capacity.
During 1995, other expense was adversely effected by the settlement of a
disputed contract requiring the purchase of a specified volume of rock for use
in the ready-mixed concrete produced by one of the registrant's subsidiaries.
This conflict was resolved during the first quarter of 1995 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.
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
June 30, 1996.
(b) There were no reports required to be filed on Form 8-K during
the quarter April 1, 1996 to June 30, 1996, 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 August 13, 1996 /s/ Jack R. Callahan
Jack R. Callahan
President
Date August 13, 1996 /s/ Lyndell G. Mosley
Lyndell G. Mosley, CPA
Assistant Secretary-Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MONARCH
CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE
QUARTER ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3458981
<SECURITIES> 8428543
<RECEIVABLES> 11750965
<ALLOWANCES> 555000
<INVENTORY> 11339613
<CURRENT-ASSETS> 34937345
<PP&E> 92950640
<DEPRECIATION> 69836266
<TOTAL-ASSETS> 63647775
<CURRENT-LIABILITIES> 6731613
<BONDS> 0
0
0
<COMMON> 10565725
<OTHER-SE> 34102492
<TOTAL-LIABILITY-AND-EQUITY> 63647775
<SALES> 39553068
<TOTAL-REVENUES> 39553068
<CGS> 29676066
<TOTAL-COSTS> 29676066
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6671101
<INCOME-TAX> 2450000
<INCOME-CONTINUING> 4221101
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4221101
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
