-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BodUjv6foMGvNuDhRUEOjzRJ6OYv86jmBBxgaHRkZjpSe1EgepGX+aYei31fj3+1 Wij8EMkaKI9ORS0+qAxRfg== 0000067517-97-000005.txt : 19970320 0000067517-97-000005.hdr.sgml : 19970320 ACCESSION NUMBER: 0000067517-97-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970318 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH CEMENT CO CENTRAL INDEX KEY: 0000067517 STANDARD INDUSTRIAL CLASSIFICATION: CONCRETE GYPSUM PLASTER PRODUCTS [3270] IRS NUMBER: 480340590 STATE OF INCORPORATION: KS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-02757 FILM NUMBER: 97558808 BUSINESS ADDRESS: STREET 1: P O BOX 1000 CITY: HUMBOLDT STATE: KS ZIP: 66748 BUSINESS PHONE: 3164732225 10-K 1 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. 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: 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
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. 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 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 THE MONARCH CEMENT COMPANY AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE THREE YEARS ENDED DECEMBER 31, 1996
Additions Balance at Charged to Deduction Balance Beginning Costs and from at End Description of Period Expenses Reserves of Period (1) 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 (1) Writeoff of uncollectible accounts, net of collections on accounts previously written off.
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. EX-13 2 THE MONARCH CEMENT COMPANY. HUMBOLDT, KANSAS 1996 ANNUAL REPORT 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 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)
1996 1995 1994 1993 1992 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
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):
1996 1995 1994 (In Thousands) 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 All of the Company's operations and sales are in one geographic area.
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:
Total Sales December 31, 1996 1995 1994 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%
DIRECTORS AND OFFICERS
Present position Name with Company Principal occupation 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
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:
Quarter Stock Bid Quotation Dividends Ending Low High Declared 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* *Reflects declaration of two $.12 and two $.14 dividends payable in the first quarter of 1996 and 1997, respectively.
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. 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 TABLE THE MONARCH CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS--DECEMBER 31, 1996 AND 1995 ASSETS LIABILITIES AND STOCKHOLDERS' INVESTMENT 1 9 9 6 1 9 9 5 1 9 9 6 1 9 9 5 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 The accompanying notes are an integral part of these consolidated balance sheets. THE MONARCH CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1 9 9 6 1 9 9 5 1 9 9 4 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 The accompanying notes are an integral part of these consolidated statements.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
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 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 The accompanying notes are an integral part of these consolidated statements.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1 9 9 6 1 9 9 5 1 9 9 4 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 The accompanying notes are an integral part of these consolidated statements.
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:
1996 1995 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
(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:
1996 1995 1994 Interest paid $ 13,392 $ 4,115 $ 2,542 Income taxes paid $6,833,624 $3,316,543 $4,158,015
(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:
1996 1995 1994 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
The tax effect of significant temporary differences representing deferred tax assets and (liabilities) are as follows:
1996 1995 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
(3) PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment at December 31, 1996 and 1995 consisted of:
Depreciation Lives (Years) 1996 1995 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
(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. 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:
Humboldt Des Moines FOR THE YEAR ENDED DECEMBER 31, 1996: Staff Production Production 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 Humboldt Des Moines FOR THE YEAR ENDED DECEMBER 31, 1994: Staff Production Production 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)
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:
Ready-Mixed Concrete Cement and Sundry Adjustments FOR THE YEAR ENDED Manu- Building and DECEMBER 31, 1996: facturing Materials Eliminations Consolidated 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
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. 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:
1996 1995 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
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. EX-27 3
5 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. 12-MOS DEC-31-1996 DEC-31-1996 3242245 16103721 9176237 616000 10725084 39417462 95277572 71678195 68648409 6682569 0 0 0 10565725 39015014 68648409 86732555 86732555 64095481 64095481 0 0 0 16525658 5980000 10545658 0 0 0 10545658 2.50 2.50
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