FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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, 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 November 6, 1996 , the Registrant had outstanding 2,230,913
shares of Capital Stock, par value $2.50 per share and 1,995,377 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, 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 third quarter 1996 and 1995, respectively, and
4,226,432 and 4,239,290 in the first nine months of 1996 and 1995,
respectively.
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--SEPTEMBER 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 $ 3,549,103 $ 3,057,538
which approximates market $ 2,242,727 $ 5,071,268 Accrued liabilities 3,087,982 3,580,727
Short term investments, at cost Total current liabilities $ 6,637,085 $ 6,638,265
which approximates market 12,479,057 7,073,446
Receivables, less allowances of
$584,000 in 1996 and $538,000 in
1995 for doubtful accounts 11,169,015 8,135,769 ACCRUED POSTRETIREMENT BENEFITS 9,664,101 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 350,916 452,699
Finished cement $ 1,771,501 $ 2,181,014
Work in process 94,146 603,886
Building products 1,211,406 1,010,644
Cost determined by first-in, MINORITY INTEREST IN CONSOLIDATED
first-out method- SUBSIDIARIES 2,234,268 1,953,237
Fuel, gypsum, paper sacks
and other 1,669,115 1,616,793
Cost determined by average method-
Operating and maintenance supplies 6,062,710 5,465,850 STOCKHOLDERS' INVESTMENT:
Total inventories $10,808,878 $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 2,217,548 shares
Deferred income taxes 420,000 420,000 at 9-30-96 and 2,185,869 shares
Prepaid expenses 218,199 36,846 at 12-31-95 $ 5,543,870 $ 5,464,672
Total current assets $37,337,876 $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 2,008,742 shares at 9-30-96 and
and depletion of $70,645,011 in 1996 2,053,421 shares at 12-31-95 5,021,855 5,133,553
and $68,057,293 in 1995 23,987,791 22,517,810 Retained Earnings 36,757,873 29,806,550
$47,323,598 $40,404,775
DEFERRED INCOME TAXES 2,290,000 2,410,000 Plus: Unrealized holding gain 791,000 619,000
OTHER ASSETS 3,385,301 3,122,478 Total stockholders' investment $48,114,598 $41,023,775
$67,000,968 $59,782,775 $67,000,968 $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 Nine Months Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $25,974,618 $27,049,033 $65,527,686 $59,877,901
COST OF SALES 18,114,308 19,204,745 47,790,374 46,170,891
Gross profit from operations $ 7,860,310 $ 7,844,288 $17,737,312 $13,707,010
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,796,246 1,821,412 5,160,352 5,059,658
Income from operations $ 6,064,064 $ 6,022,876 $12,576,960 $ 8,647,352
OTHER INCOME (EXPENSE):
Interest income $ 229,986 $ 79,086 $ 503,111 $ 249,592
Other, net (132,514) (238,297) (247,434) (794,946)
$ 97,472 $ (159,211) $ 255,677 $ (545,354)
Income before provision
for taxes on income $ 6,161,536 $ 5,863,665 $12,832,637 $ 8,101,998
PROVISION FOR TAXES ON INCOME 2,300,000 2,300,000 4,750,000 3,200,000
NET INCOME $ 3,861,536 $ 3,563,665 $ 8,082,637 $ 4,901,998
RETAINED EARNINGS, beg. of period 33,403,492 24,953,624 29,806,550 24,081,613
Less cash dividends 507,155 466,322 1,014,310 932,644
Less purchase and retirement
of treasury stock - - 117,004 -
RETAINED EARNINGS, end of period $36,757,873 $28,050,967 $36,757,873 $28,050,967
NET INCOME PER SHARE $.91 $.84 $1.91 $1.16
CASH DIVIDENDS PER SHARE $.12 $.11 $.24 $.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,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 8,082,637 $ 4,901,998
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 3,323,730 2,805,533
(Increase) decrease in long-term notes receivable 24,830 (49,687)
Gain on disposal of assets (208,985) (157,099)
Change in current assets and liabilities net
of effects from purchase of subsidiaries:
Increase in receivables, net (3,033,246) (4,569,514)
(Increase) decrease in inventories 69,309 (1,811,350)
Decrease in refundable federal and state
income taxes 116,971 1,048,637
Increase in prepaid expenses (181,353) (142,129)
Increase in accounts payable, notes
payable and accrued liabilities 1,014,689 1,357,994
Increase in deferred income taxes 120,000 226,200
Decrease in postretirement benefits (50,698) (10,857)
Increase (decrease) in accrued pension expense (101,783) 87,925
Minority interest in earnings of subsidiaries 519,729 470,169
Net cash provided by operating activities $ 9,695,830 $ 4,157,820
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $ (4,983,052) $(5,051,435)
Net sales of subsidiaries' stock - 226,573
Proceeds from disposals of property, plant
and equipment 406,152 214,459
Increase in other assets (123,479) (131,905)
(Increase) decrease in short term investments (5,405,611) 3,483,363
Net cash used for investing activities $(10,105,990) $(1,258,945)
FINANCING ACTIVITIES:
Cash dividends $ (2,030,179) $(1,865,288)
Subsidiaries' dividends paid to minority interest (238,698) (98,118)
Subsidiaries' purchase of treasury stock - (105,200)
Purchase of treasury stock (149,504) -
Net cash used for financing activities $ (2,418,381) $(2,068,606)
NET (INCREASE) DECREASE IN CASH AND
CASH EQUIVALENTS $ (2,828,541) $ 830,269
CASH AND CASH EQUIVALENTS, beginning of year 5,071,268 3,668,782
CASH AND CASH EQUIVALENTS, end of period $ 2,242,727 $ 4,499,051
Interest paid $13,149 $4,100
Income taxes paid $4,263,676 $821,475
</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
increased during the first nine months of 1996 as a result of cash generated
by operations in excess of the amount utilized for capital expenditures and
dividends.
Results of Operations
The registrant has experienced excellent demand for its products in its
markets in 1995 and 1996, although poor weather conditions have had an impact
on reporting periods. Sales volumes for the first six months of 1995 were
adversely affected by poor construction weather. In the third quarter of
1995, sales improved due not only to improved weather conditions, but also due
to pent-up demand created by the prior adverse weather. By contrast,
construction weather during the first nine months of 1996 has been generally
favorable throughout the period. As a result, although the registrant
experienced insignificant changes in net sales, cost of sales and gross profit
from operations during the third quarter of 1996, as compared to the third
quarter of 1995, the registrant realized substantial increases in these items
for the first nine months of 1996 as compared to the first nine months of
1995. Moderate increases in the sales prices of cement and ready-mixed
concrete along with a 9.1% increase in cement sales volume combined to produce
the 9.4% increase in net sales during the first nine months of 1996 as
compared to the first nine months of 1995. During these same periods, the
registrant's cost of sales declined as a percentage of sales by 4.2% resulting
in an increase in gross profit from operations of 29.4%. The improvement in
gross profit from operations as a percentage of sales is primarily
attributable to the spreading of fixed production costs over a larger sales
volume.
During the first nine months of 1996, the registrant spent approximately
$4,980,000 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.
Demand for cement and ready-mixed concrete in the registrant's market
area is expected to continue at high levels for the balance of 1996 unless
adverse weather conditions delay construction projects into 1997.
During 1995, other expense was adversely affected 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
September 30, 1996.
(b) There were no reports required to be filed on Form 8-K during
the quarter July 1, 1996 to September 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 November 13, 1996 /s/ Jack R. Callahan
Jack R. Callahan
President
Date November 13, 1996 /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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,242,727
<SECURITIES> 12,479,057
<RECEIVABLES> 11,753,015
<ALLOWANCES> 584,000
<INVENTORY> 10,808,878
<CURRENT-ASSETS> 37,337,876
<PP&E> 94,632,802
<DEPRECIATION> 70,645,011
<TOTAL-ASSETS> 67,000,968
<CURRENT-LIABILITIES> 6,637,085
<BONDS> 0
0
0
<COMMON> 10,565,725
<OTHER-SE> 37,548,873
<TOTAL-LIABILITY-AND-EQUITY> 67,000,968
<SALES> 65,527,686
<TOTAL-REVENUES> 65,527,686
<CGS> 47,790,374
<TOTAL-COSTS> 47,790,374
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12,832,637
<INCOME-TAX> 4,750,000
<INCOME-CONTINUING> 8,082,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,082,637
<EPS-PRIMARY> 1.91
<EPS-DILUTED> 1.91
</TABLE>
