FORM 10-K
Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [No Fee Required]
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 of incorporation) (IRS employer identification)
P.O. Box 1000, Humboldt, Kansas 66748-1000
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: 316-473-2225
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class: Capital Stock, par value $2.50 per share
Class B Capital Stock, par value $2.50 per share
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______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
The aggregate market value of the voting stock of the registrant held by non-
affiliates of the registrant computed by reference to the average bid and ask
prices of such shares on March 1, 1996, was $36,941,976.
As of March 1, 1996, the registrant had outstanding 2,179,469 shares of
Capital Stock, par value $2.50 per share, and 2,046,821 shares of Class B
Capital Stock, par value $2.50 per share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the
indicated parts of this report: (1) the registrant's annual report to
stockholders for the year ended December 31, 1995 - Parts I, II and IV of Form
10-K and (2) the registrant's definitive proxy statement prepared in
connection with the annual meeting of stockholders to be held on April 10,
1996 - Part III of Form 10-K.
<PAGE>
PART I
Item 1. Business.
Reference is hereby made to pages 4 and 5 of registrant's 1995
annual report to stockholders (filed herewith as Exhibit 13) for a description
of registrant's business, including information regarding industry segments.
Such information is hereby incorporated herein by reference. In addition,
registrant submits the following information:
The registrant did not introduce any new products nor begin to do
business in a new industry segment during 1995.
The registrant owns and operates a quarry located adjacent to the
Humboldt, Kansas plant which contains all essential raw materials presently
used by the registrant. This quarry contains reserves estimated to be
sufficient to maintain operations at the Humboldt plant's present capacity for
approximately 40 years.
The registrant's products are marketed under registered trademarks
using the name "MONARCH". The registrant's operations are not materially
dependent on any trademarks, franchises, patents or on any licenses relating
to the use thereof.
Due to inclement construction weather in the registrant's market
area during January, February and March, normally about 85% of the
registrant's sales occur in April through December.
It is necessary for the registrant to invest a significant portion
of its working capital in inventories. At December 31, 1995 the registrant
had inventories as follows:
<TABLE>
<S> <C>
Cement . . . . . . . . . . . . . . . $ 2,181,014
Work in process. . . . . . . . . . . 603,886
Fuel, gypsum and other materials . . 2,627,437
Operating and maintenance supplies . 5,465,850
Total. . . . . . . . . . . $10,878,187
</TABLE>
The registrant is heavily dependent upon the construction industry
and is directly affected by the level of activity in that industry. However,
no customer accounted for 10% or more of the registrant's consolidated net
revenue during 1995, 1994 or 1993.
Backlog of customers' orders is not a material factor in the
registrant's business.
The registrant has no contracts which are subject to renegotiation
of profits or termination thereof at the election of the government.
The manufacture and sale of cement and ready-mixed concrete are
extremely competitive enterprises. A number of producers, including several
nationwide manufacturers, compete for business with the registrant in its
market area. The registrant is not a significant factor in the nationwide
portland cement or ready-mixed concrete business but does constitute a
significant market factor for cement in its market area. Cement generally is
produced to meet standard specifications and there is little differentiation
between the products sold by the registrant and its competitors. Accordingly,
competition exists primarily in the areas of price and customer service.
The registrant did not spend a material amount in the last three
fiscal years on registrant sponsored research and development. However, the
registrant is a member of the Portland Cement Association which conducts
research for the cement industry.
Registrant has, during the past several years, made substantial
capital expenditures for pollution control equipment. The registrant also
incurs normal operating and maintenance expenditures in connection with its
pollution control equipment.
At December 31, 1995, the Company and its subsidiaries employed
approximately 440 hourly (production) employees and 115 salaried employees,
which included plant supervisory personnel, sales and executive staff.
All of the registrant's operations and sales are in one geographic
area.
Item 2. Properties.
The registrant's corporate offices and cement plant, including
equipment and raw materials are located at Humboldt, Kansas, approximately 110
miles southwest of Kansas City, Missouri. The registrant owns approximately
2,000 acres of land on which the Humboldt plant, offices and all essential raw
materials are located. Raw material reserves are estimated to be sufficient
to maintain operations at this plant's present capacity for approximately 40
years. The registrant believes that this plant and equipment are suitable and
adequate for its current level of operations. This plant has a present annual
capacity of 650,000 tons of cement.
The registrant also owns approximately 690 acres of land in
Des Moines, Iowa on which a formerly operated cement plant is located. Due
to its age and condition and other economic factors, the registrant
discontinued full-line production of cement at this plant in 1986 and began
transferring clinker produced in Humboldt, Kansas to the Des Moines site for
grinding into finished cement. During 1994, the registrant ceased the
grinding operations and converted this facility into a cement terminal. The
registrant is currently transferring finished cement produced in Humboldt,
Kansas to this terminal for distribution to its Iowa customers. The
registrant also owns, but is not currently operating, a rock quarry located
near Earlham, Iowa, approximately 30 miles west of Des Moines, Iowa.
The registrant owns various companies which sell ready-mixed
concrete, concrete products and sundry building materials in metropolitan
areas within the Humboldt cement production facility's primary market. In
management's opinion, these ready-mix facilities and equipment are suitable
and adequate for their current level of operations. Individual locations do
not have a material affect on the registrant's overall operations.
Item 3. Legal Proceedings.
The registrant was not a party to any material legal proceedings
during 1995.
Item 4. Submission of Matters to a Vote of Security Holders.
The registrant did not submit any matter to a vote of security
holders, through the solicitation of proxies or otherwise, during the fourth
quarter of 1995.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
Pursuant to General Instruction G(2) to Form 10-K, the information
required by this Item is incorporated herein by reference to the material
responsive to this Item on page 7 of the registrant's 1995 annual report to
stockholders.
Item 6. Selected Financial Data.
Pursuant to General Instruction G(2) to Form 10-K, the information
required by this Item is incorporated herein by reference to the material
responsive to this Item on page 2 of the registrant's 1995 annual report to
stockholders.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Pursuant to General Instruction G(2) to Form 10-K, the information
required by this Item is incorporated herein by reference to the material
responsive to this Item on pages 2 through 4 of the registrant's 1995 annual
report to stockholders.
Item 8. Financial Statements and Supplementary Data.
Pursuant to General Instruction G(2) to Form 10-K, the information
required by this Item is incorporated herein by reference to the material
responsive to this Item on pages 8 through 20 of the registrant's 1995 annual
report to stockholders.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
Pursuant to General Instruction G(3) to Form 10-K, the information
required by this Item is incorporated herein by reference to the material
responsive to this Item on pages 3 through 5 of the registrant's definitive
proxy statement prepared in connection with its 1996 annual meeting of
stockholders pursuant to Regulation 14A and previously filed with the
Commission.
Item 11. Executive Compensation.
Pursuant to General Instruction G(3) to Form 10-K, the information
required by this Item is incorporated herein by reference to the material
responsive to this Item on pages 7 through 10 (except for the information set
forth under the heading "Board of Directors' Report on Executive Compensation"
which is expressly excluded from such incorporation) of the registrant's
definitive proxy statement prepared in connection with its 1996 annual meeting
of stockholders pursuant to regulation 14A and previously filed with the
Commission.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Pursuant to General Instruction G(3) to Form 10-K, the information
required by this Item is incorporated herein by reference to the material
responsive to this Item on pages 6 and 7 of the registrant's definitive proxy
statement prepared in connection with its 1996 annual meeting of stockholders
pursuant to Regulation 14A and previously filed with the Commission.
Item 13. Certain Relationships and Related Transactions.
Pursuant to General Instruction G(3) to Form 10-K, the information
required by this Item is incorporated herein by reference to the material
responsive to this Item on page 8 of the registrant's definitive proxy
statement prepared in connection with its 1996 annual meeting of stockholders
pursuant to Regulation 14A and previously filed with the Commission.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Financial Statements
The report of Independent Public Accountants; the Consolidated
Balance Sheets--December 31, 1995 and 1994; the Consolidated Statements of
Income for the Years Ended December 31, 1995, 1994 and 1993; the Consolidated
Statements of Stockholders' Investment for the Years Ended December 31, 1995,
1994 and 1993; the Consolidated Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993; and the Notes to Consolidated Financial
Statements are incorporated by reference in Item 8 to this report from the
registrant's 1995 annual report to stockholders at pages 8 through 20.
Supporting Schedules
Schedule II -- Valuation and Qualifying Accounts
All other schedules have been omitted because the required
information is shown in management's discussion and analysis of the financial
statements or notes thereto, because the amounts involved are not significant
or because the required subject matter is not present.
Exhibits
3(i) Articles of Incorporation. (Filed with the
registrant's annual report on Form 10-K for the
year ended December 31, 1994 (File No. 0-2757)
as Exhibit 3(i) and incorporated herein by
reference.)
3(ii) By-laws. (Filed with the registrant's annual report
on Form 10-K for the year ended December 31, 1994
(File No. 0-2757) as Exhibit 3(ii) and incorporated
herein by reference.)
10 Severance Pay Plan for Salaried Employees.* (Filed
with the registrant's annual report on Form 10-K
for the year ended December 31, 1985 (File No. 0-2757)
as Exhibit 10(f) and incorporated herein by reference.)
13 1995 Annual Report to Stockholders.
21 Subsidiaries of the Registrant. (Filed with the
registrant's annual report on Form 10-K for the year
ended December 31, 1994 (File No. 0-2757) as Exhibit 21
and incorporated herein by reference.)
27 Financial Data Schedule.
*Management contracts or compensatory plans or arrangements required
to be identified by Item 14(a)(3).
Form 8-K
There were no Form 8-K reports required to be filed during the last
quarter of 1995.
<PAGE>
S I G N A T U R E S
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Jack R. Callahan
Jack R. Callahan
President
Date: March 15, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By: /s/ Jack R. Callahan By: /s/ Byron K. Radcliff
Jack R. Callahan Byron K. Radcliff
President, Principal Executive Director
Officer and Director
Date: March 15, 1996 Date: March 15, 1996
By: /s/ Karl Callaway By: /s/ Walter H. Wulf, Jr.
Karl Callaway Walter H. Wulf, Jr.
Director Director
Date: March 15, 1996 Date: March 15, 1996
By: /s/ Robert M. Kissick By: /s/ Lyndell G. Mosley
Robert M. Kissick Lyndell G. Mosley, CPA
Director Assistant Secretary-Treasurer
(Principal Financial Officer)
Date: March 15, 1996 Date: March 15, 1996
By: /s/ Richard N. Nixon By: /s/ Debra P. Roe
Richard N. Nixon Debra P. Roe, CPA
Director Principal Accounting Officer
Date: March 15, 1996 Date: March 15, 1996
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in The Monarch Cement Company's
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 16, 1996. Our audit was made
for the purpose of forming an opinion on those statements taken as a whole.
The Schedule II is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Kansas City, Missouri,
February 16, 1996
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<CAPTION>
Additions
Balance at Charged to Deduction Balance
Beginning Costs and from at End
Description of Period Expenses Reserves of Period
(1)
<S> <C> <C> <C> <C>
For the Year Ended December 31, 1995:
Reserve for doubtful accounts $429,000 $204,000 $ 95,000 $538,000
For the Year Ended December 31, 1994:
Reserve for doubtful accounts $486,000 $414,000 $471,000 $429,000
For the Year Ended December 31, 1993:
Reserve for doubtful accounts $349,000 $307,000 $170,000 $486,000
<FN>
(1) Writeoff of uncollectible accounts, net of collections on accounts previously
written off.
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
3(i) Articles of Incorporation. (Filed with the
registrant's annual report on Form 10-K
for the year ended December 31, 1994
(File No. 0-2757) as Exhibit 3(i) and
incorporated herein by reference.)
3(ii) By-laws. (Filed with the registrant's
annual report on Form 10-K for the year
ended December 31, 1994 (File No. 0-2757)
as Exhibit 3(ii) and incorporated herein
by reference.)
10 Severance Pay Plan for Salaried Employees.
(Filed with the registrant's annual report
on Form 10-K for the year ended December 31,
1985 (File No. 0-2757) as Exhibit 10(f) and
incorporated herein by reference.)
13 1995 Annual Report to Stockholders.
21 Subsidiaries of the Registrant. (Filed
with the registrant's annual report on
Form 10-K for the year ended December 31,
1994 (File No. 0-2757) as Exhibit 21 and
incorporated herein by reference.)
27 Financial Data Schedule.
March 15, 1996
ANNUAL REPORT TO STOCKHOLDERS
We are pleased to report Monarch's 1995 consolidated net income totaled
$7,673,450 which represents a 92% increase over 1994. This increase in net
income can be attributed to an 11% increase in net sales combined with
reductions in per unit cost of cement sales. The Company completed a $4.5
million capital improvement program at its Humboldt cement plant in 1995.
These improvements allowed the company to increase cement production at a
reduced cost per ton produced and eliminated the need to purchase clinker and
cement from other market areas to meet the demand for our products. The
benefits from the increased production capabilities will continue to enhance
performance at all levels of production through operating efficiencies.
Demand for cement and ready-mixed concrete in the Company's market area
continues to follow favorable economic indicators. Public construction
continues to dominate demand as the country strives to rebuild its
infrastructure. Construction in the private sector, which reacted unfavorably
to higher interest rates in 1995, appears to be in a state of recovery with
the downward trend in interest rates.
We wish to acknowledge our Heavenly Father for the blessings bestowed on
us. We credit our success to our employees whose efforts allowed us to
complete major improvements to our production process with minimal
interruption and who continue to expend the additional effort necessary to
operate at full capacity over extended periods of time. We express our
appreciation to our customers for their loyalty and continued patronage. We
also wish to thank you, our stockholders, for your continued support and
invite you to attend your corporation's annual meeting to be held at 2:00 p.m.
on April 10, 1996, in the corporate office, Humboldt, Kansas.
Respectfully yours,
/s/ Walter H. Wulf /s/ Jack R. Callahan
Walter H. Wulf Jack R. Callahan
Chairman of the Board President
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA
FOR THE FIVE YEARS ENDED DECEMBER 31, 1995
(Dollar amounts in thousands except per share data)
<CAPTION>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . $81,667 $73,646 $66,118 $58,281 $50,246
Net income before
cumulative effect of
accounting changes. . . . . $ 7,673 $ 3,998 $ 4,992 $ 3,200 $ 1,508
Net income per share before
cumulative effect of
accounting changes. . . . . $1.81 $.94 $1.18 $.74 $.35
Net income (loss) . . . . . . $ 7,673 $ 3,998 $ (88) $ 3,200 $ 1,508
Net income (loss) per share . $1.81 $.94 $(.02) $.74 $.35
Total assets. . . . . . . . . $59,783 $52,522 $49,863 $42,993 $41,797
Long-term obligations . . . . $ - $ - $ - $ - $ -
Cash dividends declared
per share . . . . . . . . . $.46 $.44 $.40 $.40 $.40
Stockholders' investment
per share . . . . . . . . . $9.68 $8.11 $7.68 $8.05 $7.60
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
At December 31, 1995, current assets of The Monarch Cement Company and
Subsidiaries (the Company) exceeded current liabilities by $25,094,222
resulting in a current ratio of 4.78 to 1. The Company's cash needs in 1995
were satisfied by cash generated from operations and internal funds. The
amount of cash and short term investments increased during 1995. The Company
does not currently have an established line of credit with a bank; however,
the Company believes its capital resources are adequate to meet its current
capital expenditure requirements and liquidity needs.
Capital Resources
During 1995, the Company invested $5,863,148 in property, plant and
equipment. These capital expenditures included completion of the
modifications to the two preheater kilns and the installation of the vibrating
grizzly, installation of a concrete laboratory and purchase of an x-ray
analyzer, loader, ready-mix trucks, rebar bending and shearing machine and
bulk tanker trailers.
The Company regularly has capital expenditures of $2,000,000 to
$2,500,000 per year in keeping its equipment and facilities in good operating
condition. It is expected that the Company's capital expenditures will exceed
$2,500,000 during 1996 as the Company continues to upgrade equipment to meet
the increased demand for its products. It is anticipated that the funds for
these projects will be provided from internal sources.
Results of Operations
1995 Compared to 1994. The Company experienced a substantial increase in
gross profit from operations during 1995 as compared to 1994. This
improvement was primarily due to changes within the cement segment of the
operation. There were insignificant changes in the ready-mixed concrete and
sundry building materials segment of the operation during 1995 as compared to
1994.
While sales volume and sales prices of cement increased moderately during
1995, cost of cement sales did not increase proportionately. By the beginning
of the third quarter of 1995, the modifications to the Company'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 Company to substantially reduce the amount of cement and clinker
purchased from other market areas during 1995 as compared to 1994. During
1994, the purchase of cement and clinker at prices above the Company's normal
production costs increased per unit cost of sales. By increasing production
and reducing purchases, the Company reduced its per unit cost of sales during
1995 as compared to 1994.
The Company's gross profit margin during 1995 was 24%, as compared to 18%
in 1994. The improved gross profit margin is attributable to operating
efficiencies achieved through higher sales volumes, reduction of costs
associated with producing versus purchasing cement and clinker, the $860,000
write-off of abandoned spare parts inventory in Des Moines in 1994 and a
moderate increase in the price of cement.
1994 Compared to 1993. The Company experienced moderate increases in
sales volumes and sales prices during 1994 as compared to 1993. Although
demand for cement and ready-mixed concrete was strong throughout 1994, the
Company was unable to substantially increase sales volumes due to production
capacity limitations. During 1994, the Company began modifying its production
equipment to increase cement production capabilities. In the meantime, the
Company purchased clinker and cement from other market areas in order to meet
its customers' demands for cement and ready-mixed concrete.
During 1994, the Company ceased all production activities at its
Des Moines, Iowa cement plant. Since 1986, clinker produced in Humboldt,
Kansas had been transferred to this plant for grinding into finished cement.
The Company is currently transferring finished cement produced in Humboldt,
Kansas to this plant for distribution to the Company's Iowa customers. Due to
the abandonment of these production facilities during 1994, the Company wrote-
off $860,000 of spare parts inventory related to obsolete equipment at this
facility. This write-off, along with the additional costs associated with
maintaining an adequate supply of product for our customers, were the main
causes of the Company's increase in cost of sales as a percentage of sales in
1994.
Inflation. Inflation directly affects the Company's operating costs.
The manufacture of cement requires the use of a significant amount of energy.
The price of energy, as well as the prices of the specialized replacement
parts and equipment the Company must continually purchase, tend to increase
directly with the rate of inflation causing manufacturing costs to increase.
These inflationary increases can be partially offset by increased production.
The manufacture of cement requires a significant investment in property, plant
and equipment and a trained work force to operate and maintain this equipment.
These costs do not materially vary with the level of production. As a result,
by operating at or near capacity, regardless of demand, companies can reduce
per unit production costs. The continual need to control production costs
encourages overproduction during periods of reduced demand.
Accounting Changes. Effective January 1, 1993, the Company implemented
the provisions of Financial Accounting Standard (FAS) No. 109, "Accounting for
Income Taxes". FAS 109 utilizes the liability method whereby deferred taxes
are determined based on the estimated future tax effects of differences
between the financial statement and tax bases of assets and liabilities given
the provisions of the enacted tax laws. The Company reported the entire
catch-up effect during 1993 resulting in a $400,000 increase in net income
during 1993.
The Company adopted Financial Accounting Standard (FAS) No. 106,
"Employer's Accounting for Postretirement Benefits other than Pensions" as of
January 1, 1993. This new standard requires that the expected cost of these
postretirement benefits be charged to expense during the years the employees
render service. The Company reported the entire transition obligation as of
January 1, 1993 of $9,130,000, net of deferred income tax benefit of
$3,650,000, as a $5,480,000 decrease in net income during 1993.
Effective January 1, 1994, the Company adopted Financial Accounting
Standard (FAS) No. 115, "Accounting for Certain Investments in Debt and Equity
Securities". The Company's short term investments consist of investments in
corporate commercial paper with maturities of six months or less and have been
classified as held-to-maturity. The amortized cost, which approximates market
value, is reflected in the balance sheet. Other assets includes equity
securities which have been classified as available-for-sale. Realized gains
are computed using the specific identification method. The equity investment
results for the years ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Fair value of investments $2,680,200 $2,358,400
Cost of investments 1,651,200 2,171,600
Fair value in excess of cost $1,029,000 $ 186,800
Unrealized gain recorded in equity $ 619,000 $ 111,800
Deferred income taxes 410,000 75,000
$1,029,000 $ 186,800
Proceeds from sale of securities $ 721,428 $ 240,823
Realized gains $ 110,089 $ 41,341
</TABLE>
DESCRIPTION OF THE BUSINESS
The Monarch Cement Company (Monarch) was organized as a corporation under
the laws of the State of Kansas in 1913 and has been principally engaged,
throughout its history, in the manufacture and sale of portland cement.
The manufacture of portland cement by Monarch involves the quarrying of
clay and limestone and the crushing, drying and blending of these raw
materials into the proper chemical ratio. The raw materials are then heated
in kilns to 2800o Fahrenheit at which time chemical reactions occur forming a
new compound called clinker. After the addition of a small amount of gypsum,
the clinker is ground into a very fine powder which is known as portland
cement. The term "portland cement" is not a brand name but is a term that
distinguishes cement manufactured by this chemical process from natural
cement, which is no longer widely used. Portland cement is the basic material
used in the production of ready-mixed concrete which is used in highway,
bridge and building construction where strength and durability are primary
requirements.
The Company is also in the ready-mixed concrete, concrete products and
sundry building materials business. Ready-mixed concrete is manufactured by
combining aggregates with portland cement, water and chemical admixtures in
batch plants. It is then loaded into mixer trucks and mixed in transit to the
construction site where it is placed by the contractor.
The following table sets forth for the last three fiscal years the dollar
amount of sales to unaffiliated customers, intersegment sales, operating
profit and identifiable assets contributed by Industry Segment A (cement
manufacturing) and Industry Segment B (ready-mixed concrete and sundry
building materials):
<TABLE>
<CAPTION>
1995 1994 1993
(In Thousands)
<S> <C> <C> <C>
Sales to Unaffiliated Customers-
Industry: Segment A $33,081 $27,334 $24,004
Segment B 48,586 46,312 42,114
Intersegment Sales-
Industry: Segment A 10,038 8,920 8,177
Segment B 231 267 196
Operating Profit-
Industry: Segment A 9,870 3,339 5,060
Segment B 2,422 2,612 1,479
Identifiable Assets-
Industry: Segment A 27,373 23,451 21,135
Segment B 14,196 13,589 13,072
<FN>
All of the Company's operations and sales are in one geographic area.
</TABLE>
LINES OF BUSINESS
The Company is engaged in the manufacture and sale of the principal types
of portland cement and ready-mixed concrete and sundry building materials.
The portland cement products are sold under the "MONARCH" brand name.
The marketing area for Monarch's products, which is limited by the
relatively high cost of transporting cement, consists primarily of the State
of Kansas, the State of Iowa, southeast Nebraska, western Missouri, northwest
Arkansas and northern Oklahoma. Included within this area are the
metropolitan markets of Des Moines, Iowa; Kansas City, Missouri; Springfield,
Missouri; Wichita, Kansas; Omaha, Nebraska; Lincoln, Nebraska and Tulsa,
Oklahoma. Sales are made primarily to contractors, ready-mixed concrete
plants, concrete products plants, building materials dealers and governmental
agencies. Companies controlled by Monarch sell ready-mixed concrete, concrete
products and sundry building materials in metropolitan areas within Monarch's
primary market. Monarch cement is delivered either in bulk or in paper bags.
The cement is distributed both by truck and rail, either common or private
carrier.
The following table sets forth for the last three fiscal years of the
Company the percentage of total sales contributed (1) by the manufacture and
sale of portland cement and (2) by the sale of ready-mixed concrete and sundry
building materials:
<TABLE>
<CAPTION>
Total Sales
December 31,
1995 1994 1993
<S> <C> <C> <C>
Portland Cement . . . . . . . . . 40.5% 37.1% 36.3%
Ready-Mixed Concrete and
sundry building materials . . . 59.5% 62.9% 63.7%
100.0% 100.0% 100.0%
</TABLE>
<TABLE>
DIRECTORS AND OFFICERS
<CAPTION>
Present position
Name with Company Principal occupation
<S> <C> <C>
Walter H. Wulf Chairman of the Board Position with Company
and Director
Jack R. Callahan President Position with Company
and Director
Walter H. Wulf, Jr. Vice Chairman of Position with Company
the Board, Executive
Vice President and
Director
Robert M. Kissick Vice President President, Hydraulic Power
and Director Systems, Inc. (manufacturer
of construction equipment)
Karl Callaway Secretary Retired Farmer
and Director
Byron K. Radcliff Treasurer Manager, Radcliff Ranch
and Director
Ronald E. Callaway Director Transport truck driver,
Agricultural Carriers, Inc.
Donald L. Deffner Director Professor of Theology,
Concordia Seminary
Richard N. Nixon Director Shareholder in law firm of
Stinson, Mag & Fizzell, P.C.,
Kansas City, Missouri
Byron J. Radcliff Director Rancher
Michael R. Wachter Director Civil Engineer and Project
Manager, Concrete Technology
Corp. (a precast/prestressed
concrete producer)
Lyndell G. Mosley Assistant Secretary- Position with Company
Treasurer
</TABLE>
STOCK MARKET AND DIVIDEND DATA
On March 1, 1996, Monarch's stock was held by approximately 700 record
holders. Monarch is the transfer agent for Monarch's stock which is traded on
the over-the-counter market. Over-the-counter market quotations reflect
interdealer prices, without retail mark-up, mark-down or commission and may
not necessarily represent actual transactions. Following is a schedule of the
range of high and low bid quotations of Monarch's stock as reported by B.C.
Christopher, a Division of Fahnestock & Co. Inc., and dividends declared for
each quarter of its two latest fiscal years:
<TABLE>
<CAPTION>
Quarter Stock Bid Quotation Dividends
Ending Low High Declared
<S> <C> <C> <C>
3-31-94 7.50 9.87 -
6-30-94 10.00 12.00 .11
9-30-94 9.25 15.00 .11
12-31-94 10.00 15.00 .22*
3-31-95 10.00 14.25 -
6-30-95 12.87 14.25 .11
9-30-95 12.75 14.25 .11
12-31-95 11.50 13.75 .24*
<FN>
*Reflects declaration of two $.11 and two $.12 dividends payable in the first
quarter of 1995 and 1996, respectively.
</TABLE>
SECURITIES AND EXCHANGE FORM 10-K
Section 13 of the Securities and Exchange Act of 1934 requires the
Company to file an Annual Report on Form 10-K with the Securities and Exchange
Commission, presenting financial information concerning the operation of the
business for its latest fiscal years in greater detail than contained herein.
A COPY OF FORM 10-K WILL BE MAILED TO ANY STOCKHOLDER UPON RECEIPT OF
WRITTEN REQUEST ADDRESSED TO LYNDELL G. MOSLEY, ASSISTANT SECRETARY-TREASURER,
THE MONARCH CEMENT COMPANY, P.O. BOX 1000, HUMBOLDT, KANSAS 66748-1000.
<PAGE>
ARTHUR ANDERSEN LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
The Monarch Cement Company
We have audited the accompanying consolidated balance sheets of The Monarch
Cement Company (a Kansas corporation) and Subsidiaries as of December 31, 1995
and 1994, and the related consolidated statements of income, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The Monarch Cement Company
and Subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As explained in Note 1 to the financial statements, effective January 1, 1994,
the Company changed its method of accounting for certain investments in debt
and equity securities.
/s/ Arthur Andersen LLP
Kansas City, Missouri,
February 16, 1996
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1995 AND 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 payable $ 2,987,692 $ 3,700,499
which approximates market $ 5,071,268 $ 3,668,782 Notes payable 69,846 126,125
Short term investments, at cost Accrued liabilities-
which approximates market 7,073,446 5,358,751 Federal and state income taxes 1,015,351 513,780
Receivables, less allowances of Dividends 1,015,869 932,644
$538,000 in 1995 and $429,000 in Compensation 660,141 637,324
1994 for doubtful accounts 8,135,769 7,157,102 Miscellaneous taxes 360,530 313,966
Inventories, priced at cost which Other 528,836 479,499
is not in excess of market- Total current liabilities $ 6,638,265 $ 6,703,837
Cost determined by last-in,
first-out method- ACCRUED POSTRETIREMENT BENEFITS 9,714,799 9,602,239
Finished cement $ 2,181,014 $ 1,348,752
Work in process 603,886 258,465 ACCRUED PENSION EXPENSE 452,699 443,658
Building products 1,010,644 974,157
Cost determined by first-in, MINORITY INTEREST IN CONSOLIDATED
first-out method- SUBSIDIARIES 1,953,237 1,373,829
Fuel, gypsum, paper sacks
and other 1,616,793 1,382,900 CONTINGENT LIABILITIES
Cost determined by average method-
Operating and maintenance supplies 5,465,850 4,900,505 STOCKHOLDERS' INVESTMENT:
Total inventories $10,878,187 $ 8,864,779 Capital Stock, par value $2.50
per share-Authorized 10,000,000
Refundable federal and state shares, Issued 2,185,869 shares
income taxes 116,971 1,073,858 at December 31, 1995 and 2,156,026
Deferred income taxes 420,000 370,000 shares at December 31, 1994 $ 5,464,672 $ 5,390,065
Prepaid expenses 36,846 29,771 Class B Capital Stock, par value
Total current assets $31,732,487 $26,523,043 $2.50 per share-Authorized
10,000,000 shares, Issued
PROPERTY, PLANT AND EQUIPMENT, at 2,053,421 shares at December 31,
cost, less accumulated depreciation 1995 and 2,083,264 shares at
and depletion of $68,057,293 in 1995 December 31, 1994 5,133,553 5,208,160
and $64,459,510 in 1994 22,517,810 20,988,202 Retained Earnings 29,806,550 24,081,613
$40,404,775 $34,679,838
DEFERRED INCOME TAXES 2,410,000 2,420,000 Plus: Unrealized holding gain 619,000 111,800
Less: Excess pension liability - 393,214
OTHER ASSETS 3,122,478 2,590,742 Total stockholders' investment $41,023,775 $34,398,424
$59,782,775 $52,521,987 $59,782,775 $52,521,987
<FN>
The accompanying notes are an integral part of these consolidated balance sheets.
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
<S> <C> <C> <C>
Net Sales $81,666,838 $73,645,650 $66,118,278
Cost of Sales 62,159,712 60,994,434 52,726,913
Gross profit from operations $19,507,126 $12,651,216 $13,391,365
Selling, General and
Administrative Expenses 7,215,052 6,700,034 6,852,357
Income from operations $12,292,074 $ 5,951,182 $ 6,539,008
Other Income (Expense):
Interest income $ 460,930 $ 477,876 $ 323,000
Other, net (679,554) (55,675) 544,863
$ (218,624) $ 422,201 $ 867,863
Income before Provision for Income Taxes $12,073,450 $ 6,373,383 $ 7,406,871
Provision for Income Taxes 4,400,000 2,375,000 2,415,000
Income before Cumulative Effect of
Accounting Changes (Per share-$1.81
in 1995, $.94 in 1994 and $1.18 in 1993) $ 7,673,450 $ 3,998,383 $ 4,991,871
Cumulative Effect of Changes
in Accounting for:
Postretirement benefits other than pension,
less related income tax benefits of
$3,650,000 (Per share-$(1.29) in 1993) $ - $ - $(5,480,000)
Deferred income tax benefit (Per share-
$.09 in 1993) - - 400,000
$ - $ - $(5,080,000)
Net Income (Loss) (Per share-$1.81 in
1995, $.94 in 1994 and $(.02) in 1993) $ 7,673,450 $ 3,998,383 $ (88,129)
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
Unrealized Excess
Capital Stock Class B Capital Stock Retained Holding Pension Stockholders'
Shares Amount Shares Amount Earnings Gain Liability Investment
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 2,119,645 $5,299,112 - $ - $29,031,432 $ - $(232,587) $34,097,957
Net loss - - - - (88,129) - - (88,129)
Cash dividends ($.40 per share) - - - - (1,695,673) - - (1,695,673)
Excess pension liability - - - - - - 232,587 232,587
Balance at December 31, 1993 2,119,645 $5,299,112 - $ - $27,247,630 $ - $ - $32,546,742
Net income - - - - 3,998,383 - - 3,998,383
Cash dividends ($.44 per share) - - - - (1,865,287) - - (1,865,287)
Stock distribution - - 2,119,645 5,299,113 (5,299,113) - - -
Transfer of shares 36,381 90,953 (36,381) (90,953) - - - -
Unrealized holding gain - - - - - 111,800 - 111,800
Excess pension liability - - - - - - (393,214) (393,214)
Balance at December 31, 1994 2,156,026 $5,390,065 2,083,264 $5,208,160 $24,081,613 $ 111,800 $(393,214) $34,398,424
Net income - - - - 7,673,450 - - 7,673,450
Cash dividends ($.46 per share) - - - - (1,948,513) - - (1,948,513)
Transfer of shares 29,843 74,607 (29,843) (74,607) - - - -
Unrealized holding gain - - - - - 507,200 - 507,200
Excess pension liability - - - - - - 393,214 393,214
Balance at December 31, 1995 2,185,869 $5,464,672 2,053,421 $5,133,553 $29,806,550 $ 619,000 $ - $41,023,775
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1 9 9 5 1 9 9 4 1 9 9 3
<S> <C> <C> <C>
Operating Activities:
Net income (loss) $ 7,673,450 $ 3,998,383 $ (88,129)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Cumulative effect of accounting changes - - 5,080,000
Depreciation and depletion 4,241,360 3,697,020 3,249,516
(Increase) decrease in long-term notes receivable (42,290) - 3,557
(Gain) loss on disposal of assets (247,088) (260,307) 1,420
Gain on sale of other investments (110,089) (41,341) (458,601)
Change in current assets and liabilities, net
of effects from purchase of subsidiaries:
(Increase) decrease in receivables, net (978,667) 1,216,541 (2,412,932)
(Increase) decrease in inventories (2,013,408) (252,878) 474,391
(Increase) decrease in refundable federal
and state income taxes 956,887 (1,073,858) 243,112
(Increase) decrease in deferred income taxes (50,000) 34,000 (404,000)
(Increase) decrease in prepaid expenses (7,075) 1,144 (1,844)
Increase (decrease) in accounts payable,
notes payable and accrued liabilities (148,797) 302,309 1,134,960
(Increase) decrease in deferred income taxes 10,000 (64,000) 49,000
Increase in accrued postretirement expense 112,560 242,239 230,000
Increase (decrease) in accrued pension expense 402,255 (13,453) 73,598
Minority interest in earnings of subsidiaries 556,153 410,067 135,060
Net cash provided by operating activities $10,355,251 $ 8,195,866 $ 7,309,108
Investing Activities:
Acquisition of property, plant and equipment $(5,863,148) $(7,047,228) $(2,754,623)
Net purchases and sales of subsidiaries stock 226,573 (739,612) (50,761)
Proceeds from disposals of property, plant and equipment 349,703 289,260 39,104
Payment for purchases of stock investments, net (90,947) (1,547,507) (379,531)
Proceeds from disposals of stock investments 721,428 240,823 1,731,250
(Increase) decrease in other assets (513,073) (81,024) 14,706
(Increase) decrease in short term investments (1,714,695) 4,528,008 (3,228,749)
Net cash used for investing activities $(6,884,159) $(4,357,280) $(4,628,604)
Financing Activities:
Subsidiaries' dividends paid to minority interest $ (98,118) $ (55,180) $ (47,562)
Cash dividends (1,865,288) (1,780,501) (1,695,673)
Subsidiaries' purchase of treasury stock, net (105,200) - (313,542)
Net cash used for financing activities $(2,068,606) $(1,835,681) $(2,056,777)
Net Increase in Cash and Cash Equivalents $ 1,402,486 $ 2,002,905 $ 623,727
Cash and Cash Equivalents, beginning of year 3,668,782 1,665,877 1,042,150
Cash and Cash Equivalents, end of year $ 5,071,268 $ 3,668,782 $ 1,665,877
<FN>
The accompanying notes are an integral part of these consolidated statements.
</TABLE>
<PAGE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF ACCOUNTING POLICIES:
(a) Description of Business--The Monarch Cement Company (Monarch) has
been principally engaged, throughout its history, in the manufacture and sale
of portland cement. Monarch is also in the ready-mixed concrete, concrete
products and sundry building materials business through its subsidiaries.
Monarch has direct control of certain operating companies which have been
deemed to be subsidiaries within the meaning of the rules and regulations of
the Securities and Exchange Commission. Accordingly, the financial statements
of such companies have been consolidated with Monarch's financial statements.
All significant intercompany transactions have been eliminated in
consolidation. Minority interests in net income have been recorded as
reductions in other income in the accompanying statements of income. The
minority interests in net income were $556,153, $410,067 and $135,060 during
1995, 1994 and 1993.
(b) Use of Estimates--The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(c) Inventories--Inventories of finished cement, work in process and
building products are priced by the last-in, first-out (LIFO) method. Under
the average cost method of accounting (which approximates current cost), these
inventories would have been $1,396,000, $1,463,000 and $1,246,000 higher than
those reported at December 31, 1995, 1994 and 1993, respectively. Income of
$6,000, $20,000 and $13,000 was realized from the liquidation of LIFO
inventories in 1995, 1994 and 1993, respectively. The cost of manufactured
items includes all material, labor, factory overhead and production-related
administrative overhead required in their production.
Other inventories are purchased from outside suppliers. Fuel and other
materials are priced by the first-in, first-out (FIFO) method while operating
and maintenance supplies are priced by the average cost method.
(d) Property, Plant and Equipment--Depreciation of property, plant and
equipment is provided by charges to operations over the estimated useful lives
of the assets using primarily the declining balance method. Depletion rates
for quarry lands are designed to amortize the cost over the estimated
recoverable reserves. Expenditures for improvements which significantly
increase the assets' useful lives are capitalized while maintenance and
repairs are charged to expense as incurred.
(e) Net Income per Capital Share--Net income per share of capital stock
has been calculated based on the weighted average shares outstanding during
each of the three years. The weighted average number of shares after giving
retroactive effect to a stock distribution of one share of Class B Capital
Stock for each share of Capital Stock outstanding was 4,239,290 in 1995, 1994
and 1993.
(f) Investments--Effective January 1, 1994, The Monarch Cement Company
and Subsidiaries (the Company) adopted Financial Accounting Standard (FAS) No.
115, "Accounting for Certain Investments in Debt and Equity Securities". The
Company's short term investments consist of corporate commercial paper with
maturities of six months or less and have been classified as held-to-maturity.
The amortized cost, which approximates market value, is reflected in the
balance sheet. Other assets includes equity securities which have been
classified as available-for-sale. Realized gains are computed using the
specific identification method. The equity investment results for the years
ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Fair value of investments $2,680,200 $2,358,400
Cost of investments 1,651,200 2,171,600
Fair value in excess of cost $1,029,000 $ 186,800
Unrealized gain recorded in equity $ 619,000 $ 111,800
Deferred income taxes 410,000 75,000
$1,029,000 $ 186,800
Proceeds from sale of securities $ 721,428 $ 240,823
Realized gains $ 110,089 $ 41,341
</TABLE>
(g) Statements of Cash Flows--The Company considers overnight cash
investments to be cash equivalents. All other highly liquid short term
investments, generally with an original maturity of six months or less, are
considered short term investments. Interest and income taxes paid during each
of the three years for the period ended December 31, are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Interest paid $ 4,115 $ 2,542 $ 2,709
Income taxes paid $3,316,543 $4,158,015 $1,886,630
</TABLE>
(2) INCOME TAXES:
Effective January 1, 1993, the Company implemented the provisions of
Financial Accounting Standard (FAS) No. 109, "Accounting for Income Taxes".
FAS 109 utilizes the liability method whereby deferred taxes are determined
based on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities given the provisions of the
enacted tax laws. The Company reported the entire catch-up effect during 1993
resulting in a $400,000 increase in net income during 1993.
The provision for federal and state income taxes in the accompanying
consolidated statements of income differs from the amount computed at the
federal statutory income tax rate as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Provision for (benefit from) federal
taxes at statutory rates-
Currently payable $4,405,000 $2,277,000 $2,860,000
Deferred (300,000) (110,000) (355,000)
State income taxes, net of federal
tax benefit 550,000 230,000 318,000
Percentage depletion (487,000) (265,000) (263,000)
Utilization of net operating losses - - (140,000)
Minority interest in consolidated
income 222,000 164,000 54,000
Other, net 10,000 79,000 (59,000)
$4,400,000 $2,375,000 $2,415,000
</TABLE>
<TABLE>
The tax effect of significant temporary differences representing deferred
tax assets and (liabilities) are as follows:
<CAPTION>
1995 1994
<S> <C> <C>
Current:
Reserve for bad debts $ 215,000 $ 171,000
Vacation 205,000 199,000
Net current deferred tax assets $ 420,000 $ 370,000
Noncurrent:
Depreciation $(1,148,000) $(1,376,000)
Postretirement benefits 3,886,000 3,841,000
Pension 73,000 20,000
Unrealized holding gains (410,000) (75,000)
Other, net 9,000 10,000
Net long-term deferred tax assets $ 2,410,000 $ 2,420,000
</TABLE>
The Company did not record any valuation allowances against deferred tax
assets at December 31, 1995 or 1994 as it is more likely than not that the
benefits will be realized in future years.
(3) PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
Property, plant and equipment at December 31, 1995 and 1994 consisted of:
<CAPTION>
Depreciation
Lives (Years) 1995 1994
<S> <C> <C> <C>
Quarry lands $ 710,188 $ 667,838
Mill site and buildings 12 - 50 11,282,945 11,172,285
Machinery and equipment 5 - 25 60,838,275 54,901,479
Transportation equipment 3 - 12 15,280,248 14,319,374
Office furniture and fixtures 5 - 20 800,115 763,093
Office and other buildings 10 - 30 1,632,722 1,497,458
Construction in process 30,610 2,126,185
$90,575,103 $85,447,712
Less--Accumulated depreciation and depletion 68,057,293 64,459,510
$22,517,810 $20,988,202
</TABLE>
(4) PENSION PLANS:
Monarch has defined benefit pension plans covering substantially all
permanent employees. Plans covering staff (salaried) employees provide
pension benefits that are based on years of service and the employee's last
sixty calendar months of earnings or the highest five consecutive calendar
years of earnings out of the last ten calendar years of service, whichever is
greater. Plans covering production (hourly) employees provide benefits of
stated amounts for each year of service. Generally, Monarch's funding policy
is to contribute annually the maximum amount that can be deducted for federal
income tax purposes. Contributions are intended to provide for benefits
attributed to service to date and for those expected to be earned in the
future.
<TABLE>
The following tables set forth the plans' funded status and amounts
recognized in the Company's balance sheets at December 31, 1995, 1994 and
1993:
<CAPTION>
Humboldt Des Moines
FOR THE YEAR ENDED DECEMBER 31, 1995: Staff Production Production
<S> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefit obligation $ 10,025,749 $ 6,785,340 $ 2,821,089
Nonvested benefit obligation 137,186 196,304 20,978
Accumulated benefit obligation $ 10,162,935 $ 6,981,644 $ 2,842,067
Projected benefit obligation $(10,882,232) $(6,981,644) $(2,842,067)
Plan assets at fair value, primarily
listed stocks and U.S. government
obligations 11,580,708 7,697,191 2,972,667
Plan assets in excess of projected
benefit obligation $ 698,476 $ 715,547 $ 130,600
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions (999,752) (819,628) (368,090)
Prior service cost - 396,854 -
Unrecognized net obligation (asset) at
December 31, 1995 due to initial
application of FAS Statement No. 87 80,625 (22,406) 5,442
(Accrued) prepaid pension expense $ (220,651) $ 270,367 $ (232,048)
Net pension cost (income) for 1995
included the following components:
Service cost-benefits earned during
the period $ 129,060 $ 73,788 $ 15,613
Interest cost on projected benefit
obligation 795,516 517,675 211,160
Actual return on plan assets (2,441,742) (1,636,137) (633,241)
Net amortization and deferral 1,600,739 1,087,222 412,235
Net pension expense $ 83,573 $ 42,548 $ 5,767
<PAGE>
<CAPTION>
Humboldt Des Moines
FOR THE YEAR ENDED DECEMBER 31, 1994: Staff Production Production
<S> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefit obligation $ 9,052,837 $ 6,596,524 $ 2,641,836
Nonvested benefit obligation 154,323 161,537 33,092
Accumulated benefit obligation $ 9,207,160 $ 6,758,061 $ 2,674,928
Projected benefit obligation $(9,808,826) $(6,758,061) $(2,674,928)
Plan assets at fair value, primarily
listed stocks and U.S. government
obligations 9,839,708 6,677,762 2,589,358
Plan assets in excess of (less than)
projected benefit obligation $ 30,882 $ (80,299) $ (85,570)
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions (262,023) (5,099) (147,060)
Prior service cost - 425,201 -
Unrecognized net obligation (asset) at
December 31, 1994 due to initial
application of FAS Statement No. 87 94,063 (26,888) 6,349
Adjustment to recognize minimum
required liability - (393,214) -
Accrued pension expense $ (137,078) $ (80,299) $ (226,281)
Net pension cost (income) for 1994
included the following components:
Service cost-benefits earned during
the period $ 232,875 $ 83,708 $ 27,995
Interest cost on projected benefit
obligation 727,869 505,116 198,101
Actual return on plan assets 229,762 157,599 60,957
Net amortization and deferral (1,151,220) (776,970) (309,245)
Net pension (income) expense $ 39,286 $ (30,547) $ (22,192)
<PAGE>
<CAPTION>
Humboldt Des Moines
FOR THE YEAR ENDED DECEMBER 31, 1993: Staff Production Production
<S> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefit obligation $ 9,130,744 $ 7,134,667 $ 3,041,037
Nonvested benefit obligation 278,826 108,697 5,138
Accumulated benefit obligation $ 9,409,570 $ 7,243,364 $ 3,046,175
Projected benefit obligation $(10,332,438) $(7,243,364) $(3,046,175)
Plan assets at fair value, primarily
listed stocks and U.S. government
obligations 10,696,348 7,465,682 2,877,461
Plan assets in excess of (less than)
projected benefit obligation $ 363,910 $ 222,318 $ (168,714)
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions (569,203) (362,128) (87,015)
Prior service cost - 453,548 -
Unrecognized net obligation (asset) at
December 31, 1993 due to initial
application of FAS Statement No. 87 107,501 (31,370) 7,256
(Accrued) prepaid pension expense $ (97,792) $ 282,368 $ (248,473)
Net pension cost (income) for 1993
included the following components:
Service cost-benefits earned during
the period $ 130,734 $ 60,864 $ 14,371
Interest cost on projected benefit
obligation 741,749 525,339 251,463
Actual return on plan assets (1,621,772) (1,239,221) (471,286)
Net amortization and deferral 789,260 646,479 245,618
Net pension (income) expense $ 39,971 $ (6,539) $ 40,166
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the assumed discount rate was 7.5%, 8.0% and 7.0% at the end of
1995, 1994 and 1993, respectively. The assumed rate of increase in future
compensation levels was 4.5% in 1995 and 1993 and 5% in 1994. The expected
long-term rate of return on assets was 9% for 1995, 1994 and 1993.
(5) CONTINGENT LIABILITIES:
According to various agreements with certain minority stockholders,
under specified circumstances, the Company is obligated to acquire such
shares, if requested to do so, at a previously established value ($1,942,533
at December 31, 1995).
(6) STOCK DISTRIBUTION:
On April 25, 1994, a stock split was effected whereby one share of
Class B Capital Stock was issued for each currently outstanding share of
Capital Stock. The total par value of the new shares ($5,299,113) was
transferred from retained earnings to the capital stock account. Class B
Capital Stock has supervoting rights of ten votes per share and restricted
transferability. Class B Capital Stock is convertible at all times into
Capital Stock, which is freely transferable, on a share-for-share basis.
Capital Stock has only one vote per share.
(7) SEGMENTS OF BUSINESS:
<TABLE>
<CAPTION>
Ready-Mixed
Concrete
Cement and Sundry Adjustments
FOR THE YEAR ENDED Manu- Building and
DECEMBER 31, 1995: facturing Materials Eliminations Consolidated
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers $33,080,508 $48,586,330 $ - $81,666,838
Intersegment sales 10,037,591 231,041 (10,268,632) -
Total net sales $43,118,099 $48,817,371 $(10,268,632) $81,666,838
Income from operations $ 9,870,468 $ 2,421,606 $12,292,074
Other income, net (218,624)
Income before income taxes $12,073,450
Identifiable assets at
December 31, 1995 $27,372,332 $14,196,280 $41,568,612
Corporate assets 18,214,163
Total assets at
December 31, 1995 $59,782,775
FOR THE YEAR ENDED
DECEMBER 31, 1994:
Sales to unaffiliated
customers $27,333,613 $46,312,037 $ - $73,645,650
Intersegment sales 8,919,667 267,523 (9,187,190) -
Total net sales $36,253,280 $46,579,560 $(9,187,190) $73,645,650
Income from operations $ 3,339,160 $ 2,612,022 $ 5,951,182
Other income, net 422,201
Income before income taxes $ 6,373,383
Identifiable assets at
December 31, 1994 $23,450,484 $13,589,370 $37,039,854
Corporate assets 15,482,133
Total assets at
December 31, 1994 $52,521,987
<PAGE>
<CAPTION>
Ready-Mixed
Concrete
Cement and Sundry Adjustments
FOR THE YEAR ENDED Manu- Building and
DECEMBER 31, 1993: facturing Materials Eliminations Consolidated
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers $24,004,324 $42,113,954 $ - $66,118,278
Intersegment sales 8,177,516 195,744 (8,373,260) -
Total net sales $32,181,840 $42,309,698 $(8,373,260) $66,118,278
Income from operations $ 5,059,722 $ 1,479,286 $ 6,539,008
Other income, net 867,863
Income before income taxes $ 7,406,871
Identifiable assets at
December 31, 1993 $21,134,737 $13,072,749 $34,207,486
Corporate assets 15,655,332
Total assets at
December 31, 1993 $49,862,818
</TABLE>
The Company operates principally in two industries, the manufacture of
portland cement and the sale of ready-mixed concrete and sundry building
materials. Total sales by industry before adjustments and eliminations
includes both sales to unaffiliated customers, as reported in the Company's
consolidated statements of income and retained earnings, and intersegment
sales which are accounted for by the same method as all other sales. Sales by
industry are made primarily to ready-mixed concrete plants and contractors,
for use in highways, airports, dams, housing, commercial buildings and other
construction. Receivables are generally collected within thirty to sixty days
of the sale, but are occasionally delayed until completion of the project.
The Company's bad debt write-offs are generally less than .5% of net sales.
Income from operations is total net sales less operating expenses. In
computing income from operations, none of the following items have been added
or deducted: general corporate income and expenses, interest expense and
income taxes. Also, no amounts have been excluded for corporate
administrative expense because the amounts which cannot be identified by
industry are not significant. Depreciation for cement manufacturing and
ready-mixed concrete, respectively, were $2,081,196 and $2,149,729 in 1995;
$1,687,532 and $1,999,053 in 1994 and $1,594,093 and $1,644,988 in 1993.
Capital expenditures for cement manufacturing and ready-mixed concrete,
respectively, including capital assets of businesses acquired were $3,754,435
and $2,108,713 in 1995; $4,152,827 and $2,894,401 in 1994 and $1,083,436 and
$1,671,187 in 1993. Identifiable assets by industry are those assets that are
used in the Company's operations in each industry.
During 1995, 1994 and 1993, there were no sales to any one customer in
excess of 10% of consolidated net sales.
(8) POSTRETIREMENT BENEFITS:
Monarch provides certain postretirement health care, accident and life
insurance benefits to all retired employees who, as of their retirement date,
have completed ten or more years of credited service under the pension plans.
These benefits are self-insured by Monarch and are paid out of Monarch's
general assets.
Monarch adopted Financial Accounting Standard (FAS) No. 106, "Employer's
Accounting for Postretirement Benefits other than Pensions" as of January 1,
1993. This new standard requires that the expected cost of these
postretirement benefits be charged to expense during the years the employees
render service. Monarch reported the entire transition obligation as of
January 1, 1993 of $9,130,000, net of deferred income tax benefit of
$3,650,000, as a $5,480,000 decrease in net income during 1993.
<TABLE>
The following table sets forth the plans' combined funded status
reconciled with the amount shown in the Company's balance sheets as of
December 31, 1995 and 1994:
<CAPTION>
1995 1994
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 7,825,000 $ 8,374,000
Other fully-eligible participants 561,000 867,000
Other active participants 2,126,000 1,955,000
Total benefit obligation $10,512,000 $11,196,000
Unrecognized net loss from differences
between past experience and that assumed (797,000) (1,594,000)
Accrued postretirement liability $ 9,715,000 $ 9,602,000
Net periodic postretirement benefit cost
included the following components:
Service cost $ 126,000 $ 88,000
Interest cost 872,000 845,000
Unrecognized net loss 38,000 68,000
Net periodic postretirement benefit cost $1,036,000 $1,001,000
</TABLE>
The assumed annual rate of increase in the per capita cost of covered
health care benefits was 8%, 9% and 10% for 1995, 1994 and 1993, respectively.
This rate is assumed to decrease 1% per year to an ultimate rate of 4%.
Increasing the assumed health care cost trend rates by one percentage point
each year would increase the accumulated postretirement benefit obligation as
of December 31, 1995 by $1,163,067 and would result in an increase in net
periodic postretirement benefit cost of $103,616.
A weighted average discount rate of 7.5% and 8% at December 31, 1995 and
1994, respectively, was used to determine the accumulated postretirement
benefit obligation.
(9) NEW PRONOUNCEMENTS:
The Financial Accounting Standard Board has issued Financial Accounting
Standard No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of", which must be adopted no later than
1996. This standard provides a framework for evaluating the realizability of
the Company's investments in long-lived assets. At this time, the Company
does not anticipate adoption of the standard will have a material impact on
its results of operations or financial position. The Financial Accounting
Standards Board also issued Financial Accounting Standard No. 123, "Accounting
for Stock Based Compensation". Adoption of this standard is required in 1996.
The Company has no stock-based compensation plans and as such, will not be
impacted by the standard.
<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 YEAR
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 5071268
<SECURITIES> 7073446
<RECEIVABLES> 8673769
<ALLOWANCES> 538000
<INVENTORY> 10878187
<CURRENT-ASSETS> 31732487
<PP&E> 90575103
<DEPRECIATION> 68057293
<TOTAL-ASSETS> 59782775
<CURRENT-LIABILITIES> 6638265
<BONDS> 0
0
0
<COMMON> 10598225
<OTHER-SE> 30425550
<TOTAL-LIABILITY-AND-EQUITY> 59782775
<SALES> 81666838
<TOTAL-REVENUES> 81666838
<CGS> 62159712
<TOTAL-COSTS> 62159712
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12073450
<INCOME-TAX> 4400000
<INCOME-CONTINUING> 7673450
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7673450
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.81
</TABLE>
