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 [No Fee Required]
For the fiscal year ended December 31, 1996
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 February 26, 1997, was $46,686,961.
As of February 26, 1997, the registrant had outstanding 2,228,216 shares of
Capital Stock, par value $2.50 per share, and 1,987,498 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, 1996 - 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 9, 1997
- - Part III of Form 10-K.
<PAGE>
PART I
Item 1. Business.
Reference is hereby made to pages 4 and 5 of registrant's 1996
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 1996.
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. The registrant's total reserves, including this
quarry and other property located near the plant, are 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, 1996 the registrant
had inventories as follows:
<TABLE>
<S> <C>
Cement . . . . . . . . . . . . . . . $ 1,274,235
Work in process. . . . . . . . . . . 174,807
Fuel, gypsum and other materials . . 2,650,328
Operating and maintenance supplies . 6,625,714
Total. . . . . . . . . . . $10,725,084
</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 1996, 1995 or 1994.
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, 1996, the Company and its subsidiaries employed
approximately 460 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 700,000 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 1996.
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 1996.
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 1996 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 1996 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 1996 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 19 of the registrant's 1996 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 1997 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 1997 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 1997 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 1997 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, 1996 and 1995; the Consolidated Statements of
Income for the Years Ended December 31, 1996, 1995 and 1994; the Consolidated
Statements of Stockholders' Investment for the Years Ended December 31, 1996,
1995 and 1994; the Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994; and the Notes to Consolidated Financial
Statements are incorporated by reference in Item 8 to this report from the
registrant's 1996 annual report to stockholders at pages 8 through 19.
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 1996 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 1996.
<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 14, 1997
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 14, 1997 Date: March 14, 1997
By: /s/ Karl Callaway By: /s/ Walter H. Wulf, Jr.
Karl Callaway Walter H. Wulf, Jr.
Director Director
Date: March 14, 1997 Date: March 14, 1997
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 14, 1997 Date: March 14, 1997
By: /s/ Richard N. Nixon By: /s/ Debra P. Roe
Richard N. Nixon Debra P. Roe, CPA
Director Principal Accounting Officer
Date: March 14, 1997 Date: March 14, 1997
<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 14, 1997. 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 14, 1997
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1996
<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, 1996:
Reserve for doubtful accounts $538,000 $278,000 $200,000 $616,000
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
<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 1996 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.
THE
MONARCH
CEMENT COMPANY.
HUMBOLDT, KANSAS
1996 ANNUAL REPORT
<PAGE>
March 14, 1997
ANNUAL REPORT TO STOCKHOLDERS
Consolidated net income for 1996 topped $10,000,000 for the first time in
Monarch's history. Additional cement sales in 1996 as compared to 1995
increased net sales by 6% while cost of sales increased only 3%. During 1996,
the Company capitalized on the 15% increase in clinker production capacity
realized from the $4.5 million capital improvement program completed at the
Company's Humboldt cement plant in 1995. By reducing per-ton production
costs, the Company increased gross profit from operations as a percent of
sales from 24% in 1995 to 26% in 1996.
Although we have not found an absolute consensus, there is some agreement
among forecasters that the 1997 United States construction markets will not
see the rate of growth that was experienced in 1996. Total U.S. based
construction forecasts for 1997 vary from slow growth, to no growth, to a
slight downturn in cement consumption when compared to 1996. The national
forecast is not a reflection of the Company's construction market. The
geographic area the Company serves continues to be driven by public
construction projects which consume large volumes of cement over relatively
short periods of time. Coupling these projects with a forecasted slight
downturn in private construction will have little effect on the total
consumption of the Company's products. Barring weather-related construction
delays, the Company's market will most likely find cement availability in
short supply during periods of peak use.
We wish to acknowledge our Heavenly Father for the blessings bestowed on
us in achieving these unprecedented results. We credit our success to our
employees 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 9,
1997 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, 1996
(Dollar amounts in thousands except per share data)
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . $86,733 $81,667 $73,646 $66,118 $58,281
Net income before
cumulative effect of
accounting changes. . . . . $10,546 $ 7,673 $ 3,998 $ 4,992 $ 3,200
Net income per share before
cumulative effect of
accounting changes. . . . . $2.50 $1.81 $.94 $1.18 $.74
Net income (loss) . . . . . . $10,546 $ 7,673 $ 3,998 $ (88) $ 3,200
Net income (loss) per share . $2.50 $1.81 $.94 $(.02) $.74
Total assets. . . . . . . . . $68,648 $59,783 $52,522 $49,863 $42,993
Long-term obligations . . . . $ - $ - $ - $ - $ -
Cash dividends declared
per share . . . . . . . . . $.52 $.46 $.44 $.40 $.40
Stockholders' investment
per share . . . . . . . . . $11.73 $9.68 $8.11 $7.68 $8.05
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
At December 31, 1996, current assets of The Monarch Cement Company and
Subsidiaries (the Company) exceeded current liabilities by $32,734,893
resulting in a current ratio of 5.90 to 1. The Company's cash needs in 1996
were satisfied by cash generated from operations and internal funds. The
amount of cash and short term investments increased during 1996. 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 1996, the Company invested $6,017,716 in property, plant and
equipment. These capital expenditures included the installation of an impact
hammer, shell scanner and reject elevator, improvements to plant roads, a
maintenance shop addition and the purchase of two ready-mix batch plants,
ready-mix trucks, 50-ton dump trucks, a block machine, manlift, crane, loader
and bulk tanker trailers.
The Company regularly has capital expenditures of $3,000,000 to
$4,000,000 per year in keeping its equipment and facilities in good operating
condition. It is expected that the Company's capital expenditures will
approximate $4,000,000 during 1997 as the Company continues to upgrade
equipment. It is anticipated that the funds for these projects will be
provided from internal sources.
At the regular meeting of the Board of Directors held on December 13,
1996, the Board authorized management to purchase up to a maximum of 400,000
shares of Monarch stock in addition to those shares previously acquired and
retired. These purchases may be either Capital Stock or Class B Capital Stock
and are to be acquired on such terms and at such times as management considers
appropriate. Funds for these purchases would be provided from internal
sources.
Results of Operations
1996 Compared to 1995. Net sales of $86,732,555 for the year 1996
represents a 6% increase over 1995 net sales. This increase is primarily a
result of an increase in the volume of cement sold and a slight increase in
the price realized from these sales. Highway and bridge construction within
the Company's markets and an increase in residential building have continued
to create a high level of demand for cement.
The Company's cement segment has basically been in a sold-out position
for the last three years. In 1994, the Company began supplementing its
production through the purchase of clinker and cement from other market areas.
At the same time, the Company implemented plans to increase production
capacity primarily by modifying current equipment to take advantage of new
technology. As these improvements came on line, production increased allowing
the Company to eliminate the purchase of clinker and to substantially reduce
the purchase of cement. During 1996, the Company generated cost savings by
producing, as opposed to purchasing, clinker and cement; by improving
production efficiency with the recently modernized equipment; and by fully
utilizing this equipment. As a result, the Company experienced a 3% increase
in 1996 cost of sales as compared to the 6% increase in net sales and gross
profit from operations for the year 1996 improved to 26% of net sales as
compared to 24% for 1995.
The ready-mixed concrete and sundry building materials segment
experienced insignificant changes in net sales, cost of sales and gross profit
from operations for 1996 as compared to 1995. Although this segment accounts
for over 50% of net sales, it currently accounts for less than 20% of income
from operations. Competition within the various market areas served by the
ready-mixed concrete and sundry building materials segment creates a continual
challenge to balance sales prices against sales volume and to look for
additional ways to control costs in order to maintain an adequate profit
margin.
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 17%
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.
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.
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>
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Sales to Unaffiliated Customers-
Industry: Segment A $36,838 $33,081 $27,334
Segment B 49,895 48,586 46,312
Intersegment Sales-
Industry: Segment A 10,764 10,038 8,920
Segment B 236 231 267
Operating Profit-
Industry: Segment A 13,665 9,870 3,339
Segment B 1,773 2,422 2,612
Identifiable Assets-
Industry: Segment A 27,254 27,373 23,451
Segment B 15,656 14,196 13,589
<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,
1996 1995 1994
<S> <C> <C> <C>
Portland Cement . . . . . . . . . 42.5% 40.5% 37.1%
Ready-Mixed Concrete and
sundry building materials . . . 57.5% 59.5% 62.9%
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 Chairman, 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 Director
of Operations, 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, 1997, 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>
3-31-95 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*
3-31-96 11.25 16.25 -
6-30-96 14.50 16.75 .12
9-30-96 14.62 15.62 .12
12-31-96 14.87 16.00 .28*
<FN>
*Reflects declaration of two $.12 and two $.14 dividends payable in the first
quarter of 1996 and 1997, 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, 1996
and 1995, and the related consolidated statements of income, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1996. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Kansas City, Missouri,
February 14, 1997
<PAGE>
TABLE
<PAGE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 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 $ 3,242,245 $ 5,071,268 Accounts payable $ 3,454,088 $ 2,987,692
Short term investments, at cost Notes payable - 69,846
which approximates market 16,103,721 7,073,446 Accrued liabilities-
Receivables, less allowances of Federal and state income taxes 565,489 1,015,351
$616,000 in 1996 and $538,000 in Dividends 1,181,880 1,015,869
1995 for doubtful accounts 8,560,237 8,135,769 Compensation 693,349 660,141
Inventories, priced at cost which Miscellaneous taxes 403,960 360,530
is not in excess of market- Other 383,803 528,836
Cost determined by last-in, Total current liabilities $ 6,682,569 $ 6,638,265
first-out method-
Finished cement $ 1,274,235 $ 2,181,014 ACCRUED POSTRETIREMENT BENEFITS 9,813,569 9,714,799
Work in process 174,807 603,886
Building products 1,168,402 1,010,644 ACCRUED PENSION EXPENSE 390,235 452,699
Cost determined by first-in,
first-out method- MINORITY INTEREST IN CONSOLIDATED
Fuel, gypsum, paper sacks SUBSIDIARIES 2,181,297 1,953,237
and other 1,481,926 1,616,793
Cost determined by average method- CONTINGENT LIABILITIES
Operating and maintenance supplies 6,625,714 5,465,850
Total inventories $10,725,084 $10,878,187 STOCKHOLDERS' INVESTMENT:
Capital Stock, par value $2.50
Refundable federal and state per share-Authorized 10,000,000
income taxes 310,733 116,971 shares, Issued 2,230,936 shares
Deferred income taxes 450,000 420,000 at December 31, 1996 and 2,185,869
Prepaid expenses 25,442 36,846 shares at December 31, 1995 $ 5,577,340 $ 5,464,672
Total current assets $39,417,462 $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 1,995,354 shares at December 31,
and depletion of $71,678,195 in 1996 1996 and 2,053,421 shares at
and $68,057,293 in 1995 23,599,377 22,517,810 December 31, 1995 4,988,385 5,133,553
Retained Earnings 38,039,014 29,806,550
DEFERRED INCOME TAXES 2,350,000 2,410,000 $48,604,739 $40,404,775
Plus: Unrealized holding gain 976,000 619,000
OTHER ASSETS 3,281,570 3,122,478 Total stockholders' investment $49,580,739 $41,023,775
$68,648,409 $59,782,775 $68,648,409 $59,782,775
<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, 1996, 1995 AND 1994
<CAPTION>
1 9 9 6 1 9 9 5 1 9 9 4
<S> <C> <C> <C>
Net Sales $86,732,555 $81,666,838 $73,645,650
Cost of Sales 64,095,481 62,159,712 60,994,434
Gross profit from operations $22,637,074 $19,507,126 $12,651,216
Selling, General and
Administrative Expenses 7,198,992 7,215,052 6,700,034
Income from operations $15,438,082 $12,292,074 $ 5,951,182
Other Income (Expense):
Interest income $ 792,065 $ 460,930 $ 477,876
Other, net 295,511 (679,554) (55,675)
$ 1,087,576 $ (218,624) $ 422,201
Income before Provision for Income Taxes $16,525,658 $12,073,450 $ 6,373,383
Provision for Income Taxes 5,980,000 4,400,000 2,375,000
Net Income (Per share-$2.50 in 1996,
$1.81 in 1995 and $.94 in 1994) $10,545,658 $ 7,673,450 $ 3,998,383
<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, 1996, 1995 AND 1994
<CAPTION>
Unrealized Excess Stock-
Capital Stock Class B Capital Stock Retained Treasury Stock Holding Pension holders'
Shares Amount Shares Amount Earnings Shares Amount Gain Liability Investment
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at 1-1-94 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 12-31-94 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 12-31-95 2,185,869 $5,464,672 2,053,421 $5,133,553 $29,806,550 - $ - $619,000 $ - $41,023,775
Net income - - - - 10,545,658 - - - - 10,545,658
Cash dividends
($.52 per share) - - - - (2,196,190) - - - - (2,196,190)
Transfer of shares 58,067 145,168 (58,067) (145,168) - - - - - -
Purchase of
treasury stock - - - - - (13,000) (149,504) - - (149,504)
Retirement of
treasury stock (13,000) (32,500) - - (117,004) 13,000 149,504 - - -
Unrealized holding
gain - - - - - - - 357,000 - 357,000
Balance at 12-31-96 2,230,936 $5,577,340 1,995,354 $4,988,385 $38,039,014 - $ - $976,000 $ - $49,580,739
<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, 1996, 1995 AND 1994
<CAPTION>
1 9 9 6 1 9 9 5 1 9 9 4
<S> <C> <C> <C>
Operating Activities:
Net income $10,545,658 $ 7,673,450 $ 3,998,383
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 4,702,070 4,241,360 3,697,020
Gain on disposal of assets (309,913) (247,088) (260,307)
Realized gain on sale of other investments (314,963) (110,089) (41,341)
Change in assets and liabilities, net of
effects from purchase of subsidiaries:
Receivables, net (424,468) (978,667) 1,216,541
Inventories 153,103 (2,013,408) (252,878)
Refundable federal and state income taxes (193,762) 956,887 (1,073,858)
Deferred income taxes, current (30,000) (50,000) 34,000
Prepaid expenses 11,404 (7,075) 1,144
Deferred income taxes, long-term 60,000 10,000 (64,000)
Long-term notes receivable 31,084 (42,290) -
Accounts payable, notes payable
and accrued liabilities (121,707) (148,797) 302,309
Accrued postretirement expense 98,770 112,560 242,239
Accrued pension expense (62,464) 402,255 (13,453)
Minority interest in earnings of subsidiaries 466,758 556,153 410,067
Net cash provided by operating activities $14,611,570 $10,355,251 $ 8,195,866
Investing Activities:
Acquisition of property, plant and equipment $(6,017,716) $(5,863,148) $(7,047,228)
Net purchases and sales of subsidiaries' stock - 226,573 (739,612)
Proceeds from disposals of property, plant and equipment 554,427 349,703 289,260
Payment for purchases of equity investments (160,762) (90,947) (1,547,507)
Proceeds from disposals of equity investments 877,379 721,428 240,823
Increase in other assets (245,265) (513,073) (81,024)
(Increase) decrease in short term investments, net (9,030,275) (1,714,695) 4,528,008
Net cash used for investing activities $(14,022,212) $(6,884,159) $(4,357,280)
Financing Activities:
Subsidiaries' dividends paid to minority interest $ (238,698) $ (98,118) $ (55,180)
Cash dividends (2,030,179) (1,865,288) (1,780,501)
Subsidiaries' purchase of treasury stock, net - (105,200) -
Purchase of treasury stock (149,504) - -
Net cash used for financing activities $ (2,418,381) $(2,068,606) $(1,835,681)
Net Increase in Cash and Cash Equivalents $ (1,829,023) $ 1,402,486 $ 2,002,905
Cash and Cash Equivalents, beginning of year 5,071,268 3,668,782 1,665,877
Cash and Cash Equivalents, end of year $ 3,242,245 $ 5,071,268 $ 3,668,782
<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, 1996, 1995 AND 1994
(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 $466,758, $556,153 and $410,067 during
1996, 1995 and 1994, respectively.
(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 $1,472,000, $1,396,000 and $1,463,000 higher than
those reported at December 31, 1996, 1995 and 1994, 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 4,226,397 in 1996 and
4,239,290 in 1995 and 1994.
(f) Investments--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, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Fair value of investments $2,876,000 $2,680,200
Cost of investments 1,250,000 1,651,200
Fair value in excess of cost $1,626,000 $1,029,000
Unrealized gain recorded in equity $ 976,000 $ 619,000
Deferred income taxes 650,000 410,000
$1,626,000 $1,029,000
Proceeds from sale of securities $ 877,380 $ 721,428
Realized gains $ 314,963 $ 110,089
</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>
1996 1995 1994
<S> <C> <C> <C>
Interest paid $ 13,392 $ 4,115 $ 2,542
Income taxes paid $6,833,624 $3,316,543 $4,158,015
</TABLE>
(2) INCOME TAXES:
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>
1996 1995 1994
<S> <C> <C> <C>
Provision for (benefit from)
federal taxes at statutory
rates-
Currently payable $5,854,000 $4,405,000 $2,277,000
Deferred (170,000) (300,000) (110,000)
State income taxes, net of
federal tax benefit 718,000 550,000 230,000
Percentage depletion (602,000) (487,000) (265,000)
Minority interest in
consolidated income 187,000 222,000 164,000
Other, net (7,000) 10,000 79,000
$5,980,000 $4,400,000 $2,375,000
</TABLE>
<TABLE>
The tax effect of significant temporary differences representing deferred
tax assets and (liabilities) are as follows:
<CAPTION>
1996 1995
<S> <C> <C>
Current:
Reserve for bad debts $ 245,000 $ 215,000
Vacation 205,000 205,000
Net current deferred tax assets $ 450,000 $ 420,000
Noncurrent:
Depreciation $ (953,000) $(1,148,000)
Postretirement benefits 3,925,000 3,886,000
Pension 19,000 73,000
Unrealized holding gains (650,000) (410,000)
Other, net 9,000 9,000
Net long-term deferred tax assets $ 2,350,000 $ 2,410,000
</TABLE>
(3) PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
Property, plant and equipment at December 31, 1996 and 1995 consisted of:
<CAPTION>
Depreciation
Lives (Years) 1996 1995
<S> <C> <C> <C>
Quarry lands $ 710,188 $ 710,188
Mill site and buildings 12 - 50 11,448,381 11,282,945
Machinery and equipment 5 - 25 63,239,341 60,838,275
Transportation equipment 3 - 12 17,046,844 15,280,248
Office furniture and fixtures 5 - 20 867,811 800,115
Office and other buildings 10 - 30 1,644,162 1,632,722
Construction in process 320,845 30,610
$95,277,572 $90,575,103
Less--Accumulated depreciation and depletion 71,678,195 68,057,293
$23,599,377 $22,517,810
</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, 1996, 1995 and
1994:
<CAPTION>
Humboldt Des Moines
FOR THE YEAR ENDED DECEMBER 31, 1996: Staff Production Production
<S> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefit obligation $ 10,219,295 $ 6,642,953 $ 2,804,797
Nonvested benefit obligation 200,965 182,824 14,925
Accumulated benefit obligation $ 10,420,260 $ 6,825,777 $ 2,819,722
Projected benefit obligation $(11,210,567) $(6,825,777) $(2,819,722)
Plan assets at fair value, primarily
listed stocks and U.S. government
obligations 12,122,237 7,950,431 3,036,743
Plan assets in excess of projected
benefit obligation $ 911,670 $ 1,124,654 $ 217,021
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions (1,253,122) (1,131,621) (411,303)
Prior service cost 73,777 368,507 -
Unrecognized net obligation (asset) at
December 31, 1996 due to initial
application of FAS Statement No. 87 67,187 (17,924) 4,535
(Accrued) prepaid pension expense $ (200,488) $ 343,616 $ (189,747)
Net pension cost (income) for 1996
included the following components:
Service cost-benefits earned during
the period $ 159,101 $ 81,993 $ 12,135
Interest cost on projected benefit
obligation 811,393 497,588 206,023
Actual return on plan assets (1,309,979) (861,379) (329,657)
Net amortization and deferral 319,322 208,549 69,198
Net pension expense $ (20,163) $ (73,249) $ (42,301)
FOR THE YEAR ENDED DECEMBER 31, 1995:
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)
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the assumed discount rate was 8.0%, 7.5% and 8.0% at the end of
1996, 1995 and 1994, respectively. The assumed rate of increase in future
compensation levels was 4.5% in 1996 and 1995 and 5% in 1994. The expected
long-term rate of return on assets was 9% for 1996, 1995 and 1994.
(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 ($2,267,997 at December
31, 1996). In January 1997, the Company acquired shares pursuant to one of
these agreements requiring payment of $794,410.
(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, 1996: facturing Materials Eliminations Consolidated
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers $36,838,233 $49,894,323 $ - $86,732,555
Intersegment sales 10,764,176 235,795 (10,999,971) -
Total net sales $47,602,409 $50,130,118 $(10,999,971) $86,732,555
Income from operations $13,665,251 $ 1,772,831 $15,438,082
Other income, net 1,087,576
Income before income taxes $16,525,658
Identifiable assets at
December 31, 1996 $27,253,943 $15,656,197 $42,910,140
Corporate assets 25,738,269
Total assets at
December 31, 1996 $68,648,409
FOR THE YEAR ENDED
DECEMBER 31, 1995:
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
</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, was $2,570,085 and $2,121,550 in 1996;
$2,081,196 and $2,149,729 in 1995 and $1,687,532 and $1,999,053 in 1994.
Capital expenditures for cement manufacturing and ready-mixed concrete,
respectively, including capital assets of businesses acquired were $2,448,248
and $3,569,468 in 1996; $3,754,435 and $2,108,713 in 1995 and $4,152,827 and
$2,894,401 in 1994. Identifiable assets by industry are those assets that are
used in the Company's operations in each industry.
During 1996, 1995 and 1994, 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.
<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, 1996 and 1995:
<CAPTION>
1996 1995
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 7,837,000 $ 7,825,000
Other fully-eligible participants 447,000 561,000
Other active participants 2,474,000 2,126,000
Total benefit obligation $10,758,000 $10,512,000
Unrecognized net loss from differences
between past experience and that assumed (944,000) (797,000)
Accrued postretirement liability $ 9,814,000 $ 9,715,000
Net periodic postretirement benefit cost
included the following components:
Service cost $ 133,000 $ 126,000
Interest cost 766,000 872,000
Unrecognized net loss - 38,000
Net periodic postretirement benefit cost $ 899,000 $1,036,000
</TABLE>
The assumed annual rate of increase in the per capita cost of covered
health care benefits was 7%, 8% and 9% for 1996, 1995 and 1994, 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, 1996 by $998,000 and would result in an increase in net
periodic postretirement benefit cost of $103,000.
A weighted average discount rate of 7.5% at December 31, 1996 and 1995 was
used to determine the accumulated postretirement benefit obligation.
<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, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3242245
<SECURITIES> 16103721
<RECEIVABLES> 9176237
<ALLOWANCES> 616000
<INVENTORY> 10725084
<CURRENT-ASSETS> 39417462
<PP&E> 95277572
<DEPRECIATION> 71678195
<TOTAL-ASSETS> 68648409
<CURRENT-LIABILITIES> 6682569
<BONDS> 0
0
0
<COMMON> 10565725
<OTHER-SE> 39015014
<TOTAL-LIABILITY-AND-EQUITY> 68648409
<SALES> 86732555
<TOTAL-REVENUES> 86732555
<CGS> 64095481
<TOTAL-COSTS> 64095481
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16525658
<INCOME-TAX> 5980000
<INCOME-CONTINUING> 10545658
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10545658
<EPS-PRIMARY> 2.50
<EPS-DILUTED> 2.50
</TABLE>
