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, 1997
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 10, 1997 , the Registrant had outstanding 2,290,071
shares of Capital Stock, par value $2.50 per share and 1,925,643 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, 1997
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, 1996.
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 4,215,714
and 4,226,290 in the third quarter 1997 and 1996, respectively, and
4,215,908 and 4,226,432 in the first nine months of 1997 and 1996,
respectively.
4. Certain statements under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere
in this Form 10-Q, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may affect the actual results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others: general economic and
business conditions; competition; raw material and other operating costs;
costs of capital equipment; changes in business strategy or expansion
plans; and demand for the registrant's products.
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<CAPTION>
ASSETS LIABILITIES AND STOCKHOLDERS' INVESTMENT
1 9 9 7 1 9 9 6 1 9 9 7 1 9 9 6
<S> <C> <C> <S> <C> <C>
CURRENT ASSETS: CURRENT LIABILITIES:
Cash and cash equivalents $ 3,492,644 $ 3,242,245 Accounts and notes payable $ 4,528,061 $ 3,454,088
Short term investments, at cost Accrued liabilities 3,314,152 3,228,481
which approximates market 18,027,377 16,103,721 Total current liabilities $ 7,842,213 $ 6,682,569
Receivables, less allowances of
$523,000 in 1997 and $616,000 in
1996 for doubtful accounts 12,741,034 8,560,237
Inventories, priced at cost which ACCRUED POSTRETIREMENT BENEFITS 9,765,982 9,813,569
is not in excess of market-
Cost determined by last-in,
first-out method-
Finished cement $ 640,448 $ 1,274,235 ACCRUED PENSION EXPENSE 343,616 390,235
Work in process 161,173 174,807
Building products 1,447,492 1,168,402
Cost determined by first-in,
first-out method- MINORITY INTEREST IN CONSOLIDATED
Fuel, gypsum, paper sacks SUBSIDIARIES 1,932,533 2,181,297
and other 1,584,813 1,481,926
Cost determined by average method-
Operating and maintenance supplies 6,954,960 6,625,714
Total inventories $10,788,886 $10,725,084 STOCKHOLDERS' INVESTMENT:
Refundable federal and state Capital stock, par value $2.50
income taxes - 310,733 per share-Authorized 10,000,000
Deferred income taxes 450,000 450,000 shares, Issued 2,276,011 shares
Prepaid expenses 286,482 25,442 at 9-30-97 and 2,230,936 shares
Total current assets $45,786,423 $39,417,462 at 12-31-96 $ 5,690,028 $ 5,577,340
Class B capital stock, par value
PROPERTY, PLANT AND EQUIPMENT, at $2.50 per share-Authorized
cost, less accumulated depreciation 10,000,000 shares, Issued
and depletion of $73,861,426 in 1997 1,939,703 shares at 9-30-97 and
and $71,678,195 in 1996 25,147,117 23,599,377 1,995,354 shares at 12-31-96 4,849,258 4,988,385
Retained earnings 44,445,648 38,039,014
DEFERRED INCOME TAXES 1,760,000 2,350,000 $54,984,934 $48,604,739
Plus: Unrealized holding gain 1,510,000 976,000
OTHER ASSETS 3,685,738 3,281,570 Total stockholders' investment $56,494,934 $49,580,739
$76,379,278 $68,648,409 $76,379,278 $68,648,409
</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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $27,431,041 $25,974,618 $68,845,578 $65,527,686
COST OF SALES 19,264,628 18,114,308 52,824,148 47,790,374
Gross profit from operations $ 8,166,413 $ 7,860,310 $16,021,430 $17,737,312
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,747,263 1,796,246 5,201,461 5,160,352
Income from operations $ 6,419,150 $ 6,064,064 $10,819,969 $12,576,960
OTHER INCOME (EXPENSE):
Interest income $ 281,981 $ 229,986 $ 651,186 $ 503,111
Other, net 811,255 (132,514) 742,791 (247,434)
$ 1,093,236 $ 97,472 $ 1,393,977 $ 255,677
Income before provision
for taxes on income $ 7,512,386 $ 6,161,536 $12,213,946 $12,832,637
PROVISION FOR TAXES ON INCOME 2,800,000 2,300,000 4,500,000 4,750,000
NET INCOME $ 4,712,386 $ 3,861,536 $ 7,713,946 $ 8,082,637
RETAINED EARNINGS, beg. of period 40,323,462 33,403,492 38,039,014 29,806,550
Less cash dividends 590,200 507,155 1,180,400 1,014,310
Less purchase and retirement
of treasury stock - - 126,912 117,004
RETAINED EARNINGS, end of period $44,445,648 $36,757,873 $44,445,648 $36,757,873
NET INCOME PER SHARE $1.12 $.91 $1.83 $1.91
CASH DIVIDENDS PER SHARE $ .14 $.12 $.28 $.24
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Nine Months Ended
Sept. 30, Sept. 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 7,713,946 $ 8,082,637
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 3,515,267 3,323,730
Gain on disposal of assets (633,308) (208,985)
Realized gain on sale of other investments (840,797) -
Change in assets and liabilities net of
effects from purchase of subsidiaries:
Receivables, net (4,180,797) (3,033,246)
Inventories (63,802) 69,309
Refundable federal and state income taxes 310,733 116,971
Prepaid expenses (261,040) (181,353)
Deferred income taxes, long-term 590,000 120,000
Long-term notes receivable 8,706 24,830
Accounts payable, notes payable and
accrued liabilities 2,341,524 1,014,689
Accrued postretirement benefits (47,587) (50,698)
Accrued pension expense (46,619) (101,783)
Minority interest in earnings of subsidiaries 381,147 519,729
Net cash provided by operating activities $ 8,787,373 $ 9,695,830
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $(4,638,275) $ (4,983,052)
Net purchases and sales of subsidiaries' stock (1,029,410) -
Proceeds from disposals of property, plant
and equipment 795,998 406,152
Proceeds from disposals of equity investments 1,366,267 -
Increase in other assets (409,102) (123,479)
Increase in short term investments, net (1,923,656) (5,405,611)
Net cash used for investing activities $(5,838,178) $(10,105,990)
FINANCING ACTIVITIES:
Cash dividends $(2,362,280) $ (2,030,179)
Subsidiaries' dividends paid to minority interest (173,746) (238,698)
Subsidiaries' purchase of treasury stock (9,419) -
Purchase of treasury stock (153,351) (149,504)
Net cash used for financing activities $(2,698,796) $ (2,418,381)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 250,399 $ (2,828,541)
CASH AND CASH EQUIVALENTS, beginning of year 3,242,245 5,071,268
CASH AND CASH EQUIVALENTS, end of period $ 3,492,644 $ 2,242,727
Interest paid $3,874 $13,149
Income taxes paid $2,875,322 $4,263,676
</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 1997 as a result of cash generated
by operations in excess of the amount utilized for capital expenditures and
dividends.
Results of Operations
The registrant experienced an approximate 5% increase in net sales during
the third quarter and the first nine months of 1997 as compared to similar
periods in 1996 due primarily to an increase in prices. Demand for cement and
ready-mixed concrete in the registrant's market area was excellent during
these periods.
Changes in cost of sales during the third quarter of 1997 as compared to
the third quarter of 1996 were immaterial. The 10% increase in cost of sales
for the first nine months of 1997 as compared to the first nine months of 1996
can be attributed to a significant increase in maintenance costs during the
first quarter of 1997. Cement plants require a large capital investment in
machinery and equipment. In order to minimize the amount of lost production
and to avoid production downtime during the prime shipping season, the
registrant periodically shuts down these major pieces of equipment for
maintenance. During the first quarter of 1997, the registrant performed
significant preventative maintenance on each of its three cement kilns, as
well as other major pieces of equipment. This maintenance was substantially
completed by the end of the first quarter.
Other, net increased approximately one million dollars during the third
quarter and the first nine months of 1997 as compared to similar periods in
1996 due primarily to the sale of investment securities.
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, 1997.
(b) There were no reports required to be filed on Form 8-K during
the quarter July 1, 1997 to September 30, 1997, 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, 1997 /s/ Walter H. Wulf, Jr.
Walter H. Wulf, Jr.
President
Date November 13, 1997 /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 SEPTERMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 3492644
<SECURITIES> 18027377
<RECEIVABLES> 13264034
<ALLOWANCES> 523000
<INVENTORY> 10788886
<CURRENT-ASSETS> 45786423
<PP&E> 99008543
<DEPRECIATION> 73861426
<TOTAL-ASSETS> 76379278
<CURRENT-LIABILITIES> 7842213
<BONDS> 0
0
0
<COMMON> 10539286
<OTHER-SE> 45955648
<TOTAL-LIABILITY-AND-EQUITY> 76379278
<SALES> 68845578
<TOTAL-REVENUES> 68845578
<CGS> 52824148
<TOTAL-COSTS> 52824148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 12213946
<INCOME-TAX> 4500000
<INCOME-CONTINUING> 7713946
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7713946
<EPS-PRIMARY> 1.83
<EPS-DILUTED> 1.83
</TABLE>
