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 June 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 August 5, 1997 , the Registrant had outstanding 2,269,868 shares
of Capital Stock, par value $2.50 per share and 1,945,846 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
June 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 second quarter of 1997 and 1996, respectively, and
4,216,006 and 4,226,504 in the first six months of 1997 and 1996,
respectively.
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--JUNE 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 $ 2,591,589 $ 3,242,245 Accounts and notes payable $ 4,721,215 $ 3,454,088
Short term investments, at cost Accrued liabilities 2,891,298 3,228,481
which approximates market 13,142,077 16,103,721 Total current liabilities $ 7,612,513 $ 6,682,569
Receivables, less allowances of
$523,000 in 1997 and $616,000 in
1996 for doubtful accounts 12,076,728 8,560,237
Inventories, priced at cost which ACCRUED POSTRETIREMENT BENEFITS 9,786,320 9,813,569
is not in excess of market-
Cost determined by last-in,
first-out method-
Finished cement $ 2,481,786 $ 1,274,235 ACCRUED PENSION EXPENSE 322,934 390,235
Work in process 203,692 174,807
Building products 1,361,625 1,168,402
Cost determined by first-in,
first-out method- MINORITY INTEREST IN CONSOLIDATED
Fuel, gypsum, paper sacks SUBSIDIARIES 1,890,400 2,181,297
and other 1,498,679 1,481,926
Cost determined by average method-
Operating and maintenance supplies 6,648,919 6,625,714
Total inventories $12,194,701 $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 2,267,918 shares
Prepaid expenses 152,150 25,442 at 6-30-97 and 2,230,936 shares
Total current assets $40,607,245 $39,417,462 at 12-31-96 $ 5,669,795 $ 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 $72,723,141 in 1997 1,947,796 shares at 6-30-97 and
and $71,678,195 in 1996 25,457,727 23,599,377 1,995,354 shares at 12-31-96 4,869,490 4,988,385
Retained earnings 40,323,462 38,039,014
DEFERRED INCOME TAXES 1,865,000 2,350,000 $50,862,747 $48,604,739
Plus: Unrealized holding gain 1,355,000 976,000
OTHER ASSETS 3,899,942 3,281,570 Total stockholders' investment $52,217,747 $49,580,739
$71,829,914 $68,648,409 $71,829,914 $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 Six Months Ended
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET SALES $25,524,530 $25,908,982 $41,414,537 $39,553,068
COST OF SALES 18,608,238 18,399,823 33,559,520 29,676,066
Gross profit from operations $ 6,916,292 $ 7,509,159 $ 7,855,017 $ 9,877,002
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,755,957 1,654,155 3,454,198 3,364,106
Income from operations 5,160,335 $ 5,855,004 $ 4,400,819 $ 6,512,896
OTHER INCOME (EXPENSE):
Interest income $ 184,887 $ 142,202 $ 369,205 $ 273,125
Other, net (21,851) (83,067) (68,464) (114,920)
$ 163,036 $ 59,135 $ 300,741 $ 158,205
Income before provision
for taxes on income $ 5,323,371 $ 5,914,139 $ 4,701,560 $ 6,671,101
PROVISION FOR TAXES ON INCOME 1,925,000 2,175,000 1,700,000 2,450,000
NET INCOME $ 3,398,371 $ 3,739,139 $ 3,001,560 $ 4,221,101
RETAINED EARNINGS, beg. of period 37,515,291 30,171,508 38,039,014 29,806,550
Less cash dividends 590,200 507,155 590,200 507,155
Less purchase and retirement
of treasury stock - - 126,912 117,004
RETAINED EARNINGS, end of period $40,323,462 $33,403,492 $40,323,462 $33,403,492
NET INCOME PER SHARE $.81 $.88 $.71 $1.00
CASH DIVIDENDS PER SHARE $.14 $.12 $.14 $.12
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Six Months Ended
June 30, June 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,001,560 $ 4,221,101
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and depletion 2,252,351 2,122,235
Gain on disposal of assets (581,893) (150,510)
Change in assets and liabilities net of
effects from purchase of subsidiaries:
Receivables, net (3,516,491) (3,060,196)
Inventories (1,469,617) (461,426)
Refundable federal and state income taxes 310,733 116,971
Prepaid expenses (126,708) (57,397)
Deferred income taxes, long-term 485,000 60,000
Long-term notes receivable 7,456 14,794
Accounts payable, notes payable and
accrued liabilities 2,111,824 1,109,217
Accrued postretirement benefits (27,249) (41,778)
Accrued pension expense (67,301) (67,853)
Minority interest in earnings of subsidiaries 339,014 305,166
Net cash provided by operating activities $ 2,718,679 $ 4,110,324
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $(3,635,904) $(2,897,284)
Net purchases and sales of subsidiaries' stock (1,029,410) -
Proceeds from disposals of property, plant
and equipment 692,932 334,212
Increase in other assets (250,000) (63,589)
(Increase) decrease in short term investments, net 2,961,644 (1,355,097)
Net cash used for investing activities $(1,260,738) $(3,981,758)
FINANCING ACTIVITIES:
Cash dividends $(1,772,080) $(1,523,024)
Subsidiaries' dividends paid to minority interest (173,746) (68,325)
Subsidiaries' purchase of treasury stock, net (9,419) -
Purchase of treasury stock (153,352) (149,504)
Net cash used for financing activities $(2,108,597) $(1,740,853)
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (650,656) $(1,612,287)
CASH AND CASH EQUIVALENTS, beginning of year 3,242,245 5,071,268
CASH AND CASH EQUIVALENTS, end of period $ 2,591,589 $ 3,458,981
Interest paid $4,556 $6,897
Income taxes paid $396,582 $1,466,295
</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
decreased during the first half of 1997 primarily due to funding increased
receivables and inventories, maintenance and capital expenditures.
Results of Operations
The registrant experienced insignificant changes in net sales during the
second quarter and the first six months of 1997 as compared to similar periods
in 1996. Demand for cement and ready-mixed concrete in the registrant's
market area was excellent during these periods and is expected to continue at
high levels for the balance of 1997.
Changes in cost of sales during the second quarter of 1997 as compared to
the second quarter of 1996 were immaterial. The 13% increase in cost of sales
for the first six months of 1997 as compared to the first six 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.
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
June 30, 1997.
(b) There were no reports required to be filed on Form 8-K during
the quarter April 1, 1997 to June 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 August 11, 1997 /s/ Jack R. Callahan
Jack R. Callahan
President
Date August 11, 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 JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,591,589
<SECURITIES> 13,142,077
<RECEIVABLES> 12,599,728
<ALLOWANCES> 523,000
<INVENTORY> 12,194,701
<CURRENT-ASSETS> 40,607,245
<PP&E> 98,180,868
<DEPRECIATION> 72,723,141
<TOTAL-ASSETS> 71,829,914
<CURRENT-LIABILITIES> 7,612,513
<BONDS> 0
0
0
<COMMON> 10,539,285
<OTHER-SE> 41,678,462
<TOTAL-LIABILITY-AND-EQUITY> 71,829,914
<SALES> 41,414,537
<TOTAL-REVENUES> 41,414,537
<CGS> 33,559,520
<TOTAL-COSTS> 33,559,520
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,701,560
<INCOME-TAX> 1,700,000
<INCOME-CONTINUING> 3,001,560
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,001,560
<EPS-PRIMARY> .71
<EPS-DILUTED> .71
</TABLE>
