FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-2757
THE MONARCH CEMENT COMPANY
(Exact name of registrant as specified in its charter)
KANSAS 48-0340590
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 1000, HUMBOLDT, KANSAS 66748-1000
(Address of principal executive offices)
(Zip Code)
(316) 473-2225
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
As of May 10, 1999 , the Registrant had outstanding 2,290,895
shares of Capital Stock, par value $2.50 per share and 1,865,279 shares of
Class B Capital Stock, par value $2.50 per share.
<PAGE>
PART I. FINANCIAL INFORMATION
NOTES TO THE SECURITIES AND EXCHANGE COMMISSION
REPORT FORM 10-Q FOR THE QUARTER ENDED
March 31, 1999
1. 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, 1998.
3. Basic earnings 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
4,174,479 and 4,211,158 in the first three months of 1999 and 1998,
respectively.
4. The registrant groups its operations into two business segments -
Industry Segment A (cement manufacturing) and Industry Segment B (ready-
mixed concrete and sundry building materials). Following is condensed
information for each segment for the quarters ended March 31, 1999 and
1998:
1999 1998
(In Thousands)
Sales to Unaffiliated Customers-
Industry: Segment A $ 6,289 $ 5,109
Segment B 11,983 9,990
Intersegment Sales-
Industry: Segment A 1,477 1,307
Segment B 45 35
Operating Profit-
Industry: Segment A 850 128
Segment B (21) (468)
Identifiable Assets-
Industry: Segment A 36,344 30,823
Segment B 21,672 16,767
5. Certain statements under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere
in this Form 10-Q, constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks,
uncertainties, and other factors that may affect the actual results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others: general economic and
business conditions; competition; raw material and other operating costs;
costs of capital equipment; changes in business strategy or expansion
plans; and demand for the registrant's products.
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
<CAPTION>
ASSETS 1 9 9 9 1 9 9 8
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,743,927 $ 4,254,795
Short term investments, at cost which
approximates market 16,189,427 19,622,255
Receivables, less allowances of $423,000 in 1999
and $412,000 in 1998 for doubtful accounts 11,161,087 10,762,210
Inventories, priced at cost which is not in
excess of market-
Cost determined by last-in, first-out method-
Finished cement $ 5,362,284 $ 1,634,302
Work in process 988,034 1,703,942
Building products 1,255,943 1,184,358
Cost determined by first-in, first-out method-
Fuel, gypsum, paper sacks and other 2,094,209 1,899,440
Cost determined by average method-
Operating and maintenance supplies 7,395,780 7,082,948
Total inventories $17,096,250 $13,504,990
Refundable federal and state income taxes 14,051 14,051
Deferred income taxes 410,000 410,000
Prepaid expenses 196,957 45,284
Total current assets $47,811,699 $48,613,585
PROPERTY, PLANT AND EQUIPMENT, at cost, less
accumulated depreciation and depletion of
$80,336,352 in 1999 and $79,239,388 in 1998 29,561,157 29,372,287
DEFERRED INCOME TAXES 1,685,000 1,390,000
OTHER ASSETS 4,820,747 5,506,149
$83,878,603 $84,882,021
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts and notes payable $ 5,564,967 $ 4,640,205
Accrued liabilities 2,142,407 4,063,922
Total current liabilities $ 7,707,374 $ 8,704,127
ACCRUED POSTRETIREMENT BENEFITS 9,559,684 9,620,253
ACCRUED PENSION EXPENSE 50,276 50,276
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 2,464,688 2,371,601
STOCKHOLDERS' INVESTMENT:
Capital stock, par value $2.50 per share-
Authorized 10,000,000 shares, Issued
2,288,520 shares at 3-31-99 and
2,290,049 shares at 12-31-98 $ 5,721,300 $ 5,725,123
Class B capital stock, par value $2.50 per
share-Authorized 10,000,000 shares, Issued
1,881,376 shares at 3-31-99 and 1,887,347
shares at 12-31-98 4,703,440 4,718,367
Retained Earnings 51,941,841 51,492,274
$62,366,581 $61,935,764
Plus: Unrealized holding gain 1,730,000 2,200,000
Total stockholders' investment $64,096,581 $64,135,764
$83,878,603 $84,882,021
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
For the Three Months Ended March 31, 1999 and 1998
<CAPTION>
1999 1998
<S> <C> <C>
NET SALES $18,271,807 $15,098,857
COST OF SALES 15,694,795 13,766,503
Gross profit from operations $ 2,577,012 $ 1,332,354
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,748,161 1,671,896
Income (loss) from operations $ 828,851 $ (339,542)
OTHER INCOME (EXPENSE):
Interest income $ 187,082 $ 240,472
Other, net (102,460) 1,182
$ 84,622 $ 241,654
Income (loss) before taxes on income $ 913,473 $ (97,888)
PROVISION FOR (BENEFIT FROM) TAXES ON INCOME 335,000 (35000)
NET INCOME (LOSS) $ 578,473 $ (62,888)
RETAINED EARNINGS, beginning of period 51,492,274 45,486,139
Less purchase and retirement of treasury stock 128,906 178,400
RETAINED EARNINGS, end of period $51,941,841 $45,244,851
Basic earnings (loss) per share $.14 $(.01)
</TABLE>
<TABLE>
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the Three Months Ended March 31, 1999 and 1998
<CAPTION>
1999 1998
<S> <C> <C>
NET INCOME (LOSS) $578,473 $(62,888)
UNREALIZED APPRECIATION (DEPRECIATION) ON
AVAILABLE FOR SALE SECURITIES (Net of
deferred tax expense (benefit) of $(295,000)
and $250,000, for 1999 and 1998, respectively) (470,000) 430,000
Comprehensive Income $108,473 $367,112
</TABLE>
<PAGE>
<TABLE>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 1999 and 1998
<CAPTION>
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 578,473 $ (62,888)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and depletion 1,286,491 1,227,463
Gain on disposal of assets (6,446) (19,536)
Change in assets and liabilities:
Receivables, net (398,877) 412,450
Inventories (3,591,260) (2,501,586)
Refundable federal and state income taxes - 11,564
Prepaid expenses (151,673) (138,684)
Deferred income taxes, long-term (295,000) 280,000
Long-term notes receivable - 1,250
Accounts payable, notes payable and
accrued liabilities 507,231 45,869
Accrued postretirement benefits (60,569) (5,339)
Minority interest in earnings of subsidiaries 93,087 36,045
Net cash used for operating activities $(2,038,543) $ (713,392)
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $(1,487,240) $(1,769,469)
Proceeds from disposals of property, plant
and equipment 18,325 24,700
(Increase) decrease in other assets 215,402 (389,238)
Decrease in short term investments, net 3,432,828 4,891,794
Net cash provided by investing activities $ 2,179,315 $ 2,757,787
FINANCING ACTIVITIES:
Cash dividends $(1,503,984) $(1,349,029)
Purchase of treasury stock (147,656) (203,400)
Net cash used for financing activities $(1,651,640) $(1,552,429)
Net increase (decrease) in cash and
cash equivalents $(1,510,868) $ 491,966
CASH AND CASH EQUIVALENTS, beginning of year 4,254,795 4,093,317
CASH AND CASH EQUIVALENTS, end of period $ 2,743,927 $ 4,585,283
Interest paid $321 $510
Income taxes paid $582,135 $74,698
</TABLE>
<PAGE>
THE MONARCH CEMENT COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY
The registrant's ability to generate cash adequate to meet its needs has
been derived primarily from operations and the maturity of short term
investments. Cash and short term investments decreased during the first
quarter of 1999 primarily due to funding increased inventories and capital
expenditures. The registrant generally produces additional inventory during
this quarter in anticipation of sales volume in excess of production
capabilities during the summer and early fall.
RESULTS OF OPERATIONS
Net sales for the first quarter of 1999 increased 21% as compared to the
first quarter of 1998 as a result of increases in the volume of cement and
ready-mixed concrete sold. During the first quarter of 1998, wet weather
interrupted construction projects causing a delay in the need for cement and
ready-mixed concrete. More favorable weather conditions during the first
quarter of 1999 allowed construction projects to proceed, increasing sales of
both cement and ready-mixed concrete. Demand for cement and ready-mixed
concrete in the registrant's market area was excellent during both the first
quarter of 1999 and the first quarter of 1998 and is expected to continue
during the balance of 1999.
While net sales increased 21% for the first quarter of 1999 as compared
to the first quarter of 1998, cost of sales increased only 14% resulting in a
60% increase in gross profit as a percent of sales. This increase in gross
profit as a percent of sales is a result of a reduction in maintenance costs
during the first quarter of 1999 as compared to the first quarter of 1998 and
an increase in production.
Even though the registrant entered the second quarter with higher levels
of inventories, to meet anticipated demand for cement during the coming peak
construction season, the registrant has negotiated the purchase of additional
clinker from foreign markets. Although these purchases will ikely reduce
future gross profits from operations as a percent of net sales, the additional
product will allow the registrant to meet the demand of its customer base in
both the cement and ready-mixed concrete markets.
SEASONALITY
The registrant's highest revenue and earnings historically occur in its
second and third fiscal quarters, April through September.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) There are no exhibits required to be filed for the quarter ended
March 31, 1999.
(b) There were no reports required to be filed on Form 8-K during
the quarter January 1, 1999 to March 31, 1999, inclusive, for
which this Form 10-Q is being filed.
S I G N A T U R E S
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE MONARCH CEMENT COMPANY
(Registrant)
Date May 12, 1999 /s/ Walter H. Wulf, Jr.
Walter H. Wulf, Jr.
President and
Vice Chairman of the Board
Date May 12, 1999 /s/ Lyndell G. Mosley
Lyndell G. Mosley, CPA
Chief Financial Officer and
Assistant Secretary-Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MONARCH
CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE
QUARTER ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,743,927
<SECURITIES> 16,189,427
<RECEIVABLES> 11,584,087
<ALLOWANCES> 423,000
<INVENTORY> 17,096,250
<CURRENT-ASSETS> 47,811,699
<PP&E> 109,897,509
<DEPRECIATION> 80,336,352
<TOTAL-ASSETS> 83,878,603
<CURRENT-LIABILITIES> 7,707,374
<BONDS> 0
0
0
<COMMON> 10,424,740
<OTHER-SE> 53,671,841
<TOTAL-LIABILITY-AND-EQUITY> 83,878,603
<SALES> 18,271,807
<TOTAL-REVENUES> 18,271,807
<CGS> 15,694,795
<TOTAL-COSTS> 15,694,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 913,473
<INCOME-TAX> 335,000
<INCOME-CONTINUING> 578,473
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 578,473
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
