FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 May 14, 1997 , the Registrant had outstanding 2,233,646
shares of Capital Stock, par value $2.50 per share and 1,982,068 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
March 31, 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 4,216,302
and 4,226,719 in the first three months of 1997 and 1996, respectively.
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--MARCH 31, 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 $ 1,771,903 $ 3,242,245 Accounts and notes payable $ 4,873,236 $ 3,454,088
Short term investments, at cost Accrued liabilities 1,769,167 3,228,481
which approximates market 11,672,934 16,103,721 Total current liabilities $ 6,642,403 $ 6,682,569
Receivables, less allowances of
$620,000 in 1997 and $616,000 in
1996 for doubtful accounts 9,900,499 8,560,237 ACCRUED POSTRETIREMENT BENEFITS 9,825,558 9,813,569
Inventories, priced at cost which
is not in excess of market-
Cost determined by last-in,
first-out method- ACCRUED PENSION EXPENSE 390,235 390,235
Finished cement $ 3,444,547 $ 1,274,235
Work in process 97,685 174,807
Building products 1,276,094 1,168,402
Cost determined by first-in, MINORITY INTEREST IN CONSOLIDATED
first-out method- SUBSIDIARIES 1,836,730 2,181,297
Fuel, gypsum, paper sacks
and other 1,453,916 1,481,926
Cost determined by average method-
Operating and maintenance supplies 6,528,755 6,625,714 STOCKHOLDERS' INVESTMENT:
Total inventories $12,800,997 $10,725,084 Capital stock, par value $2.50
Refundable federal and state per share-Authorized 10,000,000
income taxes 535,733 310,733 shares, Issued 2,229,011 shares
Deferred income taxes 450,000 450,000 at 3-31-97 and 2,230,936 shares
Prepaid expenses 224,989 25,442 at 12-31-96 $ 5,572,527 $ 5,577,340
Total current assets $37,357,055 $39,417,462 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 1,986,703 shares at 3-31-97 and
and depletion of $72,074,539 in 1997 1,995,354 shares at 12-31-96 4,966,758 4,988,385
and $71,678,195 in 1996 24,979,669 23,599,377 Retained Earnings 37,515,291 38,039,014
$48,054,576 $48,604,739
DEFERRED INCOME TAXES 2,090,000 2,350,000 Plus: Unrealized holding gain 1,017,000 976,000
OTHER ASSETS 3,339,778 3,281,570 Total stockholders' investment $49,071,576 $49,580,739
$67,766,502 $68,648,409 $67,766,502 $68,648,409
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
<CAPTION>
For the Three Months Ended
March 31, March 31,
1997 1996
<S> <C> <C>
NET SALES $15,890,007 $13,644,086
COST OF SALES 14,951,282 11,276,243
Gross profit from operations $ 938,725 $ 2,367,843
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,698,241 1,709,951
Income (loss) from operations $ (759,516) $ 657,892
OTHER INCOME (EXPENSE):
Interest income $ 184,318 $ 130,923
Other, net (46,613) (31,853)
$ 137,705 $ 99,070
Income (loss) before provision
for taxes on income $ (621,811) $ 756,962
PROVISION FOR (BENEFIT FROM) TAXES ON INCOME (225,000) 275,000
NET INCOME (LOSS) (Per share-$(.09) in
1997 and $.11 in 1996) $ (396,811) $ 481,962
RETAINED EARNINGS, beg. of period 38,039,014 29,806,550
Less purchase and retirement of treasury stock 126,912 117,004
RETAINED EARNINGS, end of period $37,515,291 $30,171,508
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Three Months Ended
March 31, March 31,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ (396,811) $ 481,962
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 1,105,419 1,029,532
Gain on disposal of assets (438,254) (4,217)
Change in assets and liabilities, net of
effects from purchase of subsidiaries:
Receivables, net (1,340,262) 480,536
Inventories (2,075,913) (2,734,335)
Decrease in refundable federal and state
income taxes (225,000) -
Prepaid expenses (199,547) (176,766)
Deferred income taxes, long-term 260,000 60,000
Long-term notes receivable 6,206 7,397
Accounts payable, notes payable and
accrued liabilities 1,141,714 (201,455)
Accrued postretirement benefits 11,989 (19,184)
Accrued pension expense - (33,923)
Minority interest in earnings of subsidiaries 102,179 61,924
Net cash used for operating activities $(2,048,280) $(1,048,529)
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $(1,973,103) $(1,482,256)
Net purchases and sales of subsidiaries' stock (1,029,410) -
Proceeds from disposals of property, plant
and equipment 509,896 11,455
Increase in other assets (25,000) (63,559)
Decrease in short term investments, net 4,430,787 1,467,575
Net cash provided by (used for)
investing activities $ 1,913,170 $ (66,785)
FINANCING ACTIVITIES:
Cash dividends $(1,181,880) $(1,015,869)
Subsidiaries' dividends paid to minority interest - (29,266)
Purchase of treasury stock (153,352) (149,504)
Net cash used for financing activities $(1,335,232) $(1,194,639)
NET DECREASE IN CASH AND CASH EQUIVALENTS $(1,470,342) $(2,309,953)
CASH AND CASH EQUIVALENTS, beginning of year 3,242,245 5,071,268
CASH AND CASH EQUIVALENTS, end of period $ 1,771,903 $ 2,761,315
Interest paid $62 $3,746
Income taxes paid $111,289 $485,656
</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 and the maturity of short term
investments. Cash and short term investments decreased during the first
quarter of 1997 primarily due to funding increased inventories, maintenance
and capital expenditures. The registrant generally produces additional
inventory during this quarter in anticipation of sales volume in excess of
production capabilities during the summer and early fall.
Results of Operations
Net sales for the first quarter of 1997 increased 16% as compared to the
first quarter of 1996 as a result of increases in the volume of cement and
ready-mixed concrete sold. Demand for cement and ready-mixed concrete in the
registrant's market area was excellent during both the first quarter of 1997
and the first quarter of 1996 and is expected to continue during the balance
of 1997.
Although tons of cement sold during the first quarter of 1997 increased
7% as compared to the first quarter of 1996, cement production exceeded sales
thereby increasing the level of cement inventory. The registrant also
continued to purchase cement from other market areas to supplement its
production capabilities.
The 32% increase in cost of sales is the result of a significant
increase in maintenance costs during the first quarter of 1997 as compared to
the first quarter of 1996. 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 which should allow the registrant to
maximize production and reduce cost of sales as a percent of net sales during
the remainder of 1997.
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
March 31, 1997.
(b) There were no reports required to be filed on Form 8-K during
the quarter January 1, 1997 to March 31, 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 May 14, 1997 /s/ Jack R. Callahan
Jack R. Callahan
President
Date May 14, 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 MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1771903
<SECURITIES> 11672934
<RECEIVABLES> 10520499
<ALLOWANCES> 620000
<INVENTORY> 12800997
<CURRENT-ASSETS> 37357055
<PP&E> 97054208
<DEPRECIATION> 72074539
<TOTAL-ASSETS> 67766502
<CURRENT-LIABILITIES> 6642403
<BONDS> 0
0
0
<COMMON> 10539285
<OTHER-SE> 38532291
<TOTAL-LIABILITY-AND-EQUITY> 67766502
<SALES> 15890007
<TOTAL-REVENUES> 15890007
<CGS> 14951282
<TOTAL-COSTS> 14951282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (621811)
<INCOME-TAX> (225000)
<INCOME-CONTINUING> (396811)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (396811)
<EPS-PRIMARY> (.09)
<EPS-DILUTED> (.09)
</TABLE>
