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
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 12 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 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 and non-voting common equity held by
non-affiliates of the registrant computed by reference to the average bid and
ask prices of such shares on February 26, 1998, was $66,659,911.
As of February 26, 1998, the registrant had outstanding 2,287,611 shares of
Capital Stock, par value $2.50 per share, and 1,918,103 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, 1997 - 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 8, 1998
- - Part III of Form 10-K.
<PAGE>
PART I
Item 1. Business.
Reference is hereby made to pages 4 and 5 of registrant's 1997
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 1997.
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 30 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, 1997 the registrant
had inventories as follows:
<TABLE>
<S> <C>
Cement . . . . . . . . . . . . . . . $ 1,168,177
Work in process. . . . . . . . . . . 316,370
Fuel, gypsum and other materials . . 2,446,093
Operating and maintenance supplies . 7,375,598
Total. . . . . . . . . . . $11,306,238
</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 1997, 1996 or 1995.
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, 1997, the Company and its subsidiaries employed
approximately 470 hourly (production) employees and 110 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 30
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 1997.
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 1997.
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 1997 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 1997 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 1997 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 1997 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 1998 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 1998 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 1998 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 1998 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, 1997 and 1996; the Consolidated Statements of
Income for the Years Ended December 31, 1997, 1996 and 1995; the Consolidated
Statements of Stockholders' Investment for the Years Ended December 31, 1997,
1996 and 1995; the Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995; and the Notes to Consolidated Financial
Statements are incorporated by reference in Item 8 to this report from the
registrant's 1997 annual report to stockholders on 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 1997 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 1997.
<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/ Walter H. Wulf, Jr.
Walter H. Wulf, Jr.
President
Date: March 13, 1998
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
Director Director
Date: March 13, 1998 Date: March 13, 1998
By: /s/ Karl Callaway By: /s/ Walter H. Wulf, Jr.
Karl Callaway Walter H. Wulf, Jr.
Director President, Principal Executive
Officer and Director
Date: March 13, 1998 Date: March 13, 1998
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 13, 1998 Date: March 13, 1998
By: /s/ Richard N. Nixon By: /s/ Debra P. Roe
Richard N. Nixon Debra P. Roe, CPA
Director Principal Accounting Officer
Date: March 13, 1998 Date: March 13, 1998
<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 13, 1998. 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 13, 1998
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<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, 1997:
Reserve for doubtful accounts $616,000 $148,000 $287,000 $477,000
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
<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 1997 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
1997 ANNUAL REPORT
<PAGE>
March 13, 1998
ANNUAL REPORT TO STOCKHOLDERS
Consolidated net income for 1997 topped $10,000,000 for the second time
in Monarch's history. Sales increased 6% during 1997 primarily as a result of
a minor increase in sales prices. The Company performed significant major
maintenance on its three cement kilns, as well as other major pieces of
equipment during 1997. These maintenance costs, which were not completely
offset by the increase in sales price, caused gross margin to decrease from
26% in 1996 to 23% in 1997. Additional modifications to two of the Company's
cement kilns and expanded computerization of its cement manufacturing
processes are scheduled during 1998. These capital expenditures, as well as
other facility improvements and equipment purchases in both the cement and
ready-mixed concrete segments, are designed to increase the efficiency of the
overall organization.
The market outlook for 1998 is once again favorable. Although some
forecasts indicate a slight decrease in sales of cement to the private sector,
these decreases are expected to be offset by sales to the public sector. As a
result, the Company anticipates demand during the heaviest shipping months of
1998 will equal or exceed the supply of cement.
We wish to acknowledge our Heavenly Father for the blessings bestowed on
us in achieving the outstanding results as presented in this report. 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 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 8, 1998 in the corporate office, Humboldt, Kansas.
WALTER H. WULF WALTER H. WULF, JR.
Chairman of the Board President, Vice Chairman of the Board
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA
FOR THE FIVE YEARS ENDED DECEMBER 31, 1997
(Dollar amounts in thousands except per share data)
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales . . . . . . . . . . $91,820 $86,733 $81,667 $73,646 $66,118
Net income before
cumulative effect of
accounting changes. . . . . $10,103 $10,546 $ 7,673 $ 3,998 $ 4,992
Net income per share before
cumulative effect of
accounting changes. . . . . $2.40 $2.50 $1.81 $.94 $1.18
Net income (loss) . . . . . . $10,103 $10,546 $ 7,673 $ 3,998 $ (88)
Net income (loss) per share . $2.40 $2.50 $1.81 $.94 $(.02)
Total assets. . . . . . . . . $76,233 $68,648 $59,783 $52,522 $49,863
Long-term obligations . . . . $ - $ - $ - $ - $ -
Cash dividends declared
per share . . . . . . . . . $.60 $.52 $.46 $.44 $.40
Stockholders' investment
per share . . . . . . . . . $13.68 $11.73 $9.68 $8.11 $7.68
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
At December 31, 1997, current assets of The Monarch Cement Company and
Subsidiaries (the Company) exceeded current liabilities by $38,583,275
resulting in a current ratio of 7.04 to 1. The Company's cash needs in 1997
were satisfied by cash generated from operations and internal funds. The
amount of cash and short term investments increased during 1997. 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 1997, the Company invested $6,494,536 in property, plant and
equipment. The Company regularly has capital expenditures of $5,000,000 to
$6,000,000 per year in keeping its equipment and facilities in good operating
condition. The Company plans further improvements to two of its cement kilns,
additional computerization of its cement manufacturing processes and
miscellaneous equipment purchases and facility improvements in both the cement
and ready-mixed concrete segments in 1998. It is expected that the Company's
capital expenditures will approximate $10,000,000 during 1998 and 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 from time to time to purchase shares of
Monarch stock, up to a maximum amount of 400,000 shares. 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
General. For the last three years, demand for cement in the Company's
market has been excellent. During this period, the Company sold the entire
cement production capacity of its Humboldt plant. In the past, it has been
necessary for the Company to purchase cement and clinker from third parties to
supplement its supply and meet customer demand. By early 1995, however, the
Company completed plant modifications that increased the production capacity
of the Humboldt plant and improved its efficiency. The increased capacity
allowed the Company to meet the needs of its customers without significant
purchases of cement and clinker from third parties. These favorable market
conditions and the Company's increased production capacity are the primary
factors that have led to the Company's improved profitability.
The increased profitability of the Company's cement segment has been
offset somewhat by a decline in overall profitability of the Company's ready-
mixed concrete operations during the last three years. This segment has been
adversely affected by a slight decline in prices for ready-mixed concrete and
by increasing costs, including the cost of cement. These factors vary from
local market to local market and from year to year, and no one facotr or local
market accounts for the decline in profitability during the three-year period.
1997 Compared to 1996. The Company's 1997 net sales increased
approximately 6% as compared to 1996 due primarily to increased prices for
cement.
The 10% increase in cost of sales for 1997 as compared to 1996 is
primarily due to a significant increase in maintenance costs at the cement
plant in Humboldt. During the first quarter of 1997, the Company performed
significant preventive maintenance on each of its three cement kilns, as well
as other major pieces of equipment. Cost of sales also increased because of
increased volume and costs in the ready-mixed concrete and sundry building
materials segment, as mentioned above. As a result of these factors, the
Company's gross profit from operations for the year 1997 declined to 23% of
net sales as compared to 26% for 1996.
The increase in "Other, net" during 1997 as compared to 1996 was due
primarily to the sale of investment securities.
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 (as discussed above) and a
slight increase in the product prices.
As mentioned above, during 1996, the Company generated cost savings by
purchasing lesser amounts of clinker and cement from third parties, by
improving production efficiency through plant improvements and by fully
utilizing its expanded capacity. As a result, the Company experienced a 3%
increase in 1996 cost of sales as compared to the 6% increase in net sales.
Gross profit from operations for the year 1996 improved to 26% of net sales as
compared to 24% for 1995.
Year 2000. As has been widely publicized, there is widespread concern in
the U.S. economy and elsewhere that computer systems using only two digits to
identify years may create problems when the year 2000 arrives. The Company
has assessed the key financial, informational and operational systems
regarding this concern. Management believes that the Company will not
encounter significant operational issues related to the year 2000 problem.
Furthermore, the financial impact of making required systems changes is not
expected to be material to the Company's consolidated financial position,
results of operations or cash flows.
Forward-Looking Statements. Certain statements under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and elsewhere in this Annual Report and Form 10-K report filed
with the Securities and Exchange Commission, 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 Company's products.
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.
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>
1997 1996 1995
(In Thousands)
<S> <C> <C> <C>
Sales to Unaffiliated Customers-
Industry: Segment A $39,539 $36,838 $33,081
Segment B 52,281 49,895 48,586
Intersegment Sales-
Industry: Segment A 8,868 10,764 10,038
Segment B 263 236 231
Operating Profit-
Industry: Segment A 12,943 13,665 9,870
Segment B 1,176 1,773 2,422
Identifiable Assets-
Industry: Segment A 28,425 27,254 27,373
Segment B 16,400 15,656 14,196
<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,
1997 1996 1995
<S> <C> <C> <C>
Portland Cement . . . . . . . . . 43.1% 42.5% 40.5%
Ready-Mixed Concrete and
sundry building materials . . . 56.9% 57.5% 59.5%
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
Walter H. Wulf, Jr. President, Vice Position with Company
Chairman of the Board
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
Jack R. Callahan Director Retired President, The
Monarch Cement Company
Ronald E. Callaway Director Transport truck driver,
Agricultural Carriers, Inc.
David L. Deffner Director Professor of Music, American
River College, Director of
Music, Davis Community Church
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 Project
Manager, 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 2, 1998, 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
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>
3-31-96 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*
3-31-97 15.00 17.50 -
6-30-97 17.50 20.00 .14
9-30-97 19.75 22.00 .14
12-31-97 20.50 25.00 .32*
<FN>
*Reflects declaration of two $.14 and two $.16 dividends payable in the first
quarter of 1997 and 1998, 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, 1997
and 1996, and the related consolidated statements of income, stockholders'
investment and cash flows for each of the three years in the period ended
December 31, 1997. 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, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
Kansas City, Missouri,
February 13, 1998
<PAGE>
TABLE
<PAGE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1997 AND 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 $ 4,093,317 $ 3,242,245 Accounts payable $ 3,518,686 $ 3,454,088
Short term investments, at cost Accrued liabilities-
which approximates market 20,930,123 16,103,721 Federal and state income taxes 274,450 565,489
Receivables, less allowances of Dividends 1,349,029 1,181,880
$447,000 in 1997 and $616,000 in Compensation 704,425 693,349
1996 for doubtful accounts 7,972,699 8,560,237 Miscellaneous taxes 342,454 403,960
Inventories, priced at cost which Other 194,051 383,803
is not in excess of market- Total current liabilities $ 6,383,095 $ 6,682,569
Cost determined by last-in,
first-out method- ACCRUED POSTRETIREMENT BENEFITS 9,838,905 9,813,569
Finished cement $ 1,168,177 $ 1,274,235
Work in process 316,370 174,807 ACCRUED PENSION EXPENSE 321,184 390,235
Building products 1,127,182 1,168,402
Cost determined by first-in, MINORITY INTEREST IN CONSOLIDATED
first-out method- SUBSIDIARIES 2,004,424 2,181,297
Fuel, gypsum, paper sacks
and other 1,318,911 1,481,926 CONTINGENT LIABILITIES
Cost determined by average method-
Operating and maintenance supplies 7,375,598 6,625,714 STOCKHOLDERS' INVESTMENT:
Total inventories $11,306,238 $10,725,084 Capital Stock, par value $2.50
Refundable federal and state per share-Authorized 10,000,000
income taxes 221,072 310,733 shares, Issued 2,292,891 shares
Deferred income taxes 415,000 450,000 at December 31, 1997 and 2,230,936
Prepaid expenses 27,921 25,442 shares at December 31, 1996 $ 5,732,227 $ 5,577,340
Total current assets $44,966,370 $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 1,922,823 shares at December 31,
and depletion of $74,556,421 in 1997 1997 and 1,995,354 shares at
and $71,678,195 in 1996 25,517,772 23,599,377 December 31, 1996 4,807,058 4,988,385
Retained Earnings 45,486,139 38,039,014
DEFERRED INCOME TAXES 1,810,000 2,350,000 $56,025,424 $48,604,739
Plus: Unrealized holding gain 1,660,000 976,000
OTHER ASSETS 3,938,890 3,281,570 Total stockholders' investment $57,685,424 $49,580,739
$76,233,032 $68,648,409 $76,233,032 $68,648,409
<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, 1997, 1996 AND 1995
<CAPTION>
1 9 9 7 1 9 9 6 1 9 9 5
<S> <C> <C> <C>
Net Sales $91,819,836 $86,732,555 $81,666,838
Cost of Sales 70,781,950 64,095,481 62,159,712
Gross profit from operations $21,037,886 $22,637,074 $19,507,126
Selling, General and
Administrative Expenses 6,919,368 7,198,992 7,215,052
Income from operations $14,118,518 $15,438,082 $12,292,074
Other Income (Expense):
Interest income $ 1,057,501 $ 792,065 $ 460,930
Other, net 727,446 295,511 (679,554)
$ 1,784,947 $ 1,087,576 $ (218,624)
Income before Provision for Income Taxes $15,903,465 $16,525,658 $12,073,450
Provision for Income Taxes 5,800,000 5,980,000 4,400,000
Net Income (Basic earnings per share-$2.40
in 1997, $2.50 in 1996 and $1.81 in 1995) $10,103,465 $10,545,658 $ 7,673,450
<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, 1997, 1996 AND 1995
<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 1-1-95 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 $ - $49,580,739
Net income - - - - 10,103,465 - - - - 10,103,465
Cash dividends
($.60 per share) - - - - (2,529,428) - - - - (2,529,428)
Transfer of shares 72,531 181,327 (72,531) (181,327) - - - - - -
Purchase of
treasury stock - - - - - (10,576) (153,352) - - (153,352)
Retirement of
treasury stock (10,576) (26,440) - - (126,912) 10,576 153,352 - - -
Unrealized holding
gain - - - - - - - 684,000 - 684,000
Balance at 12-31-97 2,292,891 $5,732,227 1,922,823 $4,807,058 $45,486,139 - $ - $1,660,000 $ - $57,685,424
<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, 1997, 1996 AND 1995
<CAPTION>
1 9 9 7 1 9 9 6 1 9 9 5
<S> <C> <C> <C>
Operating Activities:
Net income $10,103,465 $10,545,658 $ 7,673,450
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 4,991,992 4,702,070 4,241,360
Gain on disposal of assets (246,799) (263,133) (162,220)
Realized gain on sale of other investments (840,820) (314,963) (110,089)
Change in assets and liabilities, net of
effects from purchase of subsidiaries:
Receivables, net 587,538 (424,468) (978,667)
Inventories (581,154) 153,103 (2,013,408)
Refundable federal and state income taxes 89,661 (193,762) 956,887
Deferred income taxes, current 35,000 (30,000) (50,000)
Prepaid expenses (2,479) 11,404 (7,075)
Deferred income taxes, long-term 540,000 60,000 10,000
Long-term notes receivable 11,956 31,084 (42,290)
Accounts payable, notes payable
and accrued liabilities (466,623) (121,707) (148,797)
Accrued postretirement expense 25,336 98,770 112,560
Accrued pension expense (69,051) (62,464) 402,255
Minority interest in earnings of subsidiaries 453,039 466,758 556,153
Net cash provided by operating activities $14,631,061 $ 14,658,350 $10,440,119
Investing Activities:
Acquisition of property, plant and equipment $(6,494,536) $ (6,017,716) $(5,863,148)
Net purchases of subsidiaries' stock (1,029,410) - 226,573
Proceeds from disposals of property, plant and equipment 419,956 507,647 264,835
Payment for purchases of equity investments - (160,762) (90,947)
Proceeds from disposals of equity investments 1,366,291 877,379 721,428
Increase in other assets (517,091) (245,265) (513,073)
(Increase) decrease in short term investments, net (4,826,402) (9,030,275) (1,714,695)
Net cash used for investing activities $(11,081,192) $(14,068,992) $(6,969,027)
Financing Activities:
Subsidiaries' dividends paid to minority interest $ (173,746) $ (238,698) $ (98,118)
Cash dividends (2,362,279) (2,030,179) (1,865,288)
Subsidiaries' purchase of treasury stock (9,420) - (105,200)
Purchase of treasury stock (153,352) (149,504) -
Net cash used for financing activities $ (2,698,797) $(2,418,381) $(2,068,606)
Net Increase (Decrease) in Cash and Cash Equivalents $ 851,072 $(1,829,023) $ 1,402,486
Cash and Cash Equivalents, beginning of year 3,242,245 5,071,268 3,668,782
Cash and Cash Equivalents, end of year $ 4,093,317 $ 3,242,245 $ 5,071,268
<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, 1997, 1996 AND 1995
(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. The marketing area for Monarch's products consists primarily
of the State of Kansas, the State of Iowa, southeast Nebraska, western
Missouri, northwest Arkansas and northern 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 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 $453,039, $466,758 and $556,153 during
1997, 1996 and 1995, 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 $1,763,000, $1,472,000 and $1,396,000 higher than
those reported at December 31, 1997, 1996 and 1995, 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 outstanding
was 4,215,859 in 1997, 4,226,397 in 1996 and 4,239,290 in 1995.
(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, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Fair value of investments $3,485,000 $2,876,000 $2,680,200
Cost of investments 725,000 1,250,000 1,651,200
Fair value in excess of cost $2,760,000 $1,626,000 $1,029,000
Unrealized gain recorded in equity $1,660,000 $ 976,000 $ 619,000
Deferred income taxes 1,100,000 650,000 410,000
$2,760,000 $1,626,000 $1,029,000
Proceeds from sale of securities $1,366,291 $ 877,380 $ 721,428
Realized gains $ 840,820 $ 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>
1997 1996 1995
<S> <C> <C> <C>
Interest paid $ 4,279 $ 13,392 $ 4,115
Income taxes paid $6,111,378 $6,833,624 $3,316,543
</TABLE>
(h) Reclassifications--Minor reclassifications have been made to the 1996
and 1995 Statements of Cash Flows to conform with the 1997 classifications.
(2) PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
Property, plant and equipment at December 31, 1997 and 1996 consisted of:
<CAPTION>
Depreciation
Lives (Years) 1997 1996
<S> <C> <C> <C>
Quarry lands $ 710,188 $ 710,188
Mill site and buildings 12 - 50 12,059,599 11,448,381
Machinery and equipment 5 - 25 65,626,862 63,239,341
Transportation equipment 3 - 12 18,289,567 17,046,844
Office furniture and fixtures 5 - 20 922,607 867,811
Office and other buildings 10 - 30 1,869,848 1,644,162
Construction in process 595,522 320,845
$100,074,193 $95,277,572
Less--Accumulated depreciation and depletion 74,556,421 71,678,195
$ 25,517,772 $23,599,377
</TABLE>
(3) 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>
1997 1996 1995
<S> <C> <C> <C>
Provision for (benefit from)
federal taxes at statutory
rates-
Currently payable $5,551,000 $5,854,000 $4,405,000
Deferred (85,000) (170,000) (300,000)
State income taxes, net of
federal tax benefit 724,000 718,000 550,000
Percentage depletion (568,000) (602,000) (487,000)
Minority interest in
consolidated income 181,000 187,000 222,000
Other, net (3,000) (7,000) 10,000
$5,800,000 $5,980,000 $4,400,000
</TABLE>
<TABLE>
The tax effect of significant temporary differences representing deferred
tax assets and (liabilities) are as follows:
<CAPTION>
1997 1996
<S> <C> <C>
Current:
Reserve for bad debts $ 190,000 $ 245,000
Vacation 225,000 205,000
Net current deferred tax assets $ 415,000 $ 450,000
Noncurrent:
Depreciation $(1,004,000) $ (953,000)
Postretirement benefits 3,935,000 3,925,000
Pension (35,000) 19,000
Unrealized holding gains (1,100,000) (650,000)
Other, net 14,000 9,000
Net long-term deferred tax assets $ 1,810,000 $ 2,350,000
</TABLE>
(4) 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, 1997 and 1996:
<CAPTION>
1997 1996
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees $ 7,974,000 $ 7,837,000
Other fully-eligible participants 438,000 447,000
Other active participants 3,011,000 2,474,000
Total benefit obligation $11,423,000 $10,758,000
Unrecognized net loss from differences
between past experience and that assumed (1,584,000) (944,000)
Accrued postretirement liability $ 9,839,000 $ 9,814,000
Net periodic postretirement benefit cost
included the following components:
Service cost $ 144,000 $ 133,000
Interest cost 786,000 766,000
Net periodic postretirement benefit cost $ 930,000 $ 899,000
</TABLE>
The assumed annual rate of increase in the per capita cost of covered
health care benefits was 6%, 7% and 8% for 1997, 1996 and 1995, 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, 1997 by $1,087,000 and would result in an increase in net
periodic postretirement benefit cost of $103,000.
A weighted average discount rate of 7% and 7.5% at December 31, 1997 and
1996, respectively, was used to determine the accumulated postretirement
benefit obligation.
(5) 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, 1997, 1996 and
1995:
<CAPTION>
Humboldt Des Moines
FOR THE YEAR ENDED DECEMBER 31, 1997: Staff Production Production
<S> <C> <C> <C>
Actuarial present value of benefit
obligation:
Vested benefit obligation $ 10,966,810 $ 7,165,451 $ 2,931,473
Nonvested benefit obligation 263,504 263,113 17,685
Accumulated benefit obligation $ 11,230,314 $ 7,428,564 $ 2,949,158
Projected benefit obligation $(12,166,615) $(7,428,564) $(2,949,158)
Plan assets at fair value, primarily
listed stocks and U.S. government
obligations 13,543,421 8,749,140 3,295,130
Plan assets in excess of projected
benefit obligation $ 1,376,806 $ 1,320,576 $ 345,972
Unrecognized net gain from past
experience different from that assumed
and effects of changes in assumptions (1,676,177) (1,391,123) (492,406)
Prior service cost 67,244 492,695 -
Unrecognized net obligation (asset) at
December 31, 1997 due to initial
application of FAS Statement No. 87 53,749 (13,442) 3,628
(Accrued) prepaid pension expense $ (178,378) $ 408,706 $ (142,806)
Net pension cost (income) for 1997
included the following components:
Service cost-benefits earned during
the period $ 181,552 $ 91,800 $ 10,018
Interest cost on projected benefit
obligation 835,217 513,874 207,134
Actual return on plan assets (2,138,110) (1,398,880) (533,505)
Net amortization and deferral 1,099,231 728,116 269,412
Net pension income $ (22,110) $ (65,090) $ (46,941)
<PAGE>
<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 income $ (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
</TABLE>
In determining the actuarial present value of the projected benefit
obligation, the assumed discount rate was 7.0%, 8.0% and 7.5% at the end of
1997, 1996 and 1995, respectively. The assumed rate of increase in future
compensation levels was 4.5% in 1997, 1996 and 1995. The expected long-term
rate of return on assets was 9% for 1997, 1996 and 1995.
(6) 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 value which approximates the minority interest on the
Balance Sheet.
Various claims and legal actions are pending against the Company. In
management's opinion, the resolution of these matters will not materially
impact the Company's financial condition or results of operations.
(7) STOCKHOLDERS' INVESTMENT:
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 on a share-for-share basis. Capital Stock has only one
vote per share and is freely transferable.
(8) SEGMENTS OF BUSINESS:
<TABLE>
<CAPTION>
Ready-Mixed
Concrete
Cement and Sundry Adjustments
FOR THE YEAR ENDED Manu- Building and
DECEMBER 31, 1997: facturing Materials Eliminations Consolidated
<S> <C> <C> <C> <C>
Sales to unaffiliated
customers $39,538,659 $52,281,177 $ - $91,819,836
Intersegment sales 8,867,866 263,503 (9,131,369) -
Total net sales $48,406,525 $52,544,680 $ (9,131,369) $91,819,836
Income from operations $12,942,513 $ 1,176,005 $14,118,518
Other income, net 1,784,947
Income before income taxes $15,903,465
Identifiable assets at
December 31, 1997 $28,424,449 $16,400,181 $44,824,630
Corporate assets 31,408,402
Total assets at
December 31, 1997 $76,233,032
FOR THE YEAR ENDED
DECEMBER 31, 1996:
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
<PAGE>
<CAPTION>
Ready-Mixed
Concrete
Cement and Sundry Adjustments
FOR THE YEAR ENDED Manu- Building and
DECEMBER 31, 1995: facturing Materials Eliminations Consolidated
<S> <C> <C> <C> <C>
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
</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 stockholders' investment, 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 $2,666,994 and $2,318,654 in 1997;
$2,570,085 and $2,121,550 in 1996 and $2,081,196 and $2,149,729 in 1995.
Capital expenditures for cement manufacturing and ready-mixed concrete,
respectively, including capital assets of businesses acquired were $3,245,853
and $3,248,683 in 1997; $2,448,248 and $3,569,468 in 1996 and $3,754,435 and
$2,108,713 in 1995. Identifiable assets by industry are those assets that are
used in the Company's operations in each industry.
During 1997, 1996 and 1995, there were no sales to any one customer in
excess of 10% of consolidated net sales.
(9) EARNINGS PER SHARE:
In February, 1997 the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 128, (SFAS 128) "Earnings Per
Share", effective for periods ending after December 15, 1997, requiring
presentation of basic and diluted earnings per share. SFAS 128 supersedes
Accounting Principles Board Opinion (APB) No. 15 and related pronouncements
and replaces the computations of primary and fully diluted earnings per share
(EPS) with basic and diluted EPS respectively. Basic earnings per share is
based upon the weighted average common shares outstanding during each year.
Dilutive earnings per share is based upon the weighted average common and
common equivalent shares outstanding during each year. Monarch has no common
stock equivalents. There is no effect of this accounting change on previously
reported earnings per share.
<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, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,093,317
<SECURITIES> 20,930,123
<RECEIVABLES> 8,419,699
<ALLOWANCES> 447,000
<INVENTORY> 11,306,238
<CURRENT-ASSETS> 44,966,370
<PP&E> 100,074,193
<DEPRECIATION> 74,556,421
<TOTAL-ASSETS> 76,233,032
<CURRENT-LIABILITIES> 6,383,095
<BONDS> 0
0
0
<COMMON> 10,539,285
<OTHER-SE> 47,146,139
<TOTAL-LIABILITY-AND-EQUITY> 76,233,032
<SALES> 91,819,836
<TOTAL-REVENUES> 91,819,836
<CGS> 70,781,950
<TOTAL-COSTS> 70,781,950
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 15,903,465
<INCOME-TAX> 5,800,000
<INCOME-CONTINUING> 10,103,465
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,103,465
<EPS-PRIMARY> 2.40
<EPS-DILUTED> 2.40
</TABLE>
