-----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, Sf9hA7RKHn8aSvY0gw4yHhzdify+BmtPF1TYvoVKtQe+BYE9mYawtAm0j6lC3ljs ZB1i2IPanKMbhqLisXZUfQ== 0000067517-99-000009.txt : 19990816 0000067517-99-000009.hdr.sgml : 19990816 ACCESSION NUMBER: 0000067517-99-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 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-Q SEC ACT: SEC FILE NUMBER: 000-02757 FILM NUMBER: 99687381 BUSINESS ADDRESS: STREET 1: P O BOX 1000 CITY: HUMBOLDT STATE: KS ZIP: 66748 BUSINESS PHONE: 3164732225 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 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 August 4, 1999 , the Registrant had outstanding 2,292,385 shares of Capital Stock, par value $2.50 per share and 1,860,609 shares of Class B Capital Stock, par value $2.50 per share. PART I. FINANCIAL INFORMATION NOTES TO THE SECURITIES AND EXCHANGE COMMISSION REPORT FORM 10-Q FOR THE QUARTER ENDED June 30, 1999 l. The condensed financial statements included herein have been prepared by the registrant, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the registrant believes that the disclosures are adequate to make the information presented not misleading. The accompanying financial statements reflect all adjustments that 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 4,159,039 and 4,204,332 in the second quarter of 1999 and 1998, respectively, and 4,166,717 and 4,207,726 in the first six 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 six months ended June 30, 1999 and 1998: 1999 1998 (In Thousands) Sales to Unaffiliated Customers- Industry: Segment A $19,858 $17,953 Segment B 26,508 25,625 Intersegment Sales- Industry: Segment A 3,518 3,624 Segment B 96 99 Operating Profit- Industry: Segment A 3,747 3,804 Segment B 699 898 Identifiable Assets- Industry: Segment A 39,124 37,081 Segment B 23,910 18,280 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. THE MONARCH CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JUNE 30, 1999 AND DECEMBER 31, 1998
ASSETS 1 9 9 9 1 9 9 8 CURRENT ASSETS: Cash and cash equivalents $ 3,692,205 $ 4,254,795 Short term investments, at cost which approximates market 11,748,702 19,622,255 Receivables, less allowances of $428,000 in 1999 and $412,000 in 1998 for doubtful accounts 13,027,437 10,762,210 Inventories, priced at cost which is not in excess of market- Cost determined by last-in, first-out method- Finished cement $ 3,431,663 $ 1,634,302 Work in process 2,077,593 1,703,942 Building products 1,292,967 1,184,358 Cost determined by first-in, first-out method- Fuel, gypsum, paper sacks and other 2,460,122 1,899,440 Cost determined by average method- Operating and maintenance supplies 8,147,995 7,082,948 Total inventories $17,410,340 $13,504,990 Refundable federal and state income taxes 12,941 14,051 Deferred income taxes 410,000 410,000 Prepaid expenses 310,052 45,284 Total current assets $46,611,677 $48,613,585 PROPERTY, PLANT AND EQUIPMENT, at cost, less accumulated depreciation and depletion of $81,641,481 in 1999 and $79,239,388 in 1998 32,286,148 29,372,287 DEFERRED INCOME TAXES 1,450,000 1,390,000 OTHER ASSETS 5,485,868 5,506,149 $85,833,693 $84,882,021 LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES: Accounts payable $ 5,602,929 $ 4,640,205 Accrued liabilities 2,452,739 4,063,922 Total current liabilities $ 8,055,668 $ 8,704,127 ACCRUED POSTRETIREMENT BENEFITS 9,486,796 9,620,253 ACCRUED PENSION EXPENSE 50,276 50,276 MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 2,425,994 2,371,601 STOCKHOLDERS' INVESTMENT: Capital stock, par value $2.50 per share- Authorized 10,000,000 shares, Issued 2,291,895 shares at 6-30-99 and 2,290,049 shares at 12-31-98 $ 5,729,738 $ 5,725,123 Class B capital stock, par value $2.50 per share-Authorized 10,000,000 shares, Issued 1,864,279 shares at 6-30-99 and 1,887,347 shares at 12-31-98 4,660,697 4,718,367 Retained Earnings 53,344,524 51,492,274 $63,734,959 $61,935,764 Plus: Unrealized holding gain 2,080,000 2,200,000 Total stockholders' investment $65,814,959 $64,135,764 $85,833,693 $84,882,021
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS For the Three Months and the Six Months Ended June 30, 1999 and 1998
For the Three Months Ended For the Six Months Ended June 30, June 30, June 30, June 30, 1999 1998 1999 1998 NET SALES $28,094,077 $28,478,765 $46,365,884 $43,577,622 COST OF SALES 22,687,983 21,799,909 38,382,778 35,566,412 Gross profit from operations $ 5,406,094 $ 6,678,856 $ 7,983,106 $ 8,011,210 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 1,788,707 1,637,717 3,536,868 3,309,613 Income from operations 3,617,387 $ 5,041,139 $ 4,446,238 $ 4,701,597 OTHER INCOME (EXPENSE): Interest income $ 206,716 $ 258,959 $ 393,798 $ 499,431 Other, net (78,465) (219,105) (180,925) (217,923) $ 128,251 $ 39,854 $ 212,873 $ 281,508 Income before taxes on income $ 3,745,638 $ 5,080,993 $ 4,659,111 $ 4,983,105 PROVISION FOR TAXES ON INCOME 1,365,000 1,835,000 1,700,000 1,800,000 NET INCOME $ 2,380,638 $ 3,245,993 $ 2,959,111 $ 3,183,105 RETAINED EARNINGS, beg. of period 51,941,841 45,244,851 51,492,274 45,486,139 Less cash dividends 748,111 672,618 748,111 672,618 Less purchase and retirement of treasury stock 229,844 40,700 358,750 219,100 RETAINED EARNINGS, end of period $53,344,524 $47,777,526 $53,344,524 $47,777,526 BASIC EARNINGS PER SHARE $.57 $.77 $.71 $.76 CASH DIVIDENDS PER SHARE $.18 $.16 $.18 $.16
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME For the Six Months Ended June 30, 1999 and 1998
1999 1998 NET INCOME $ 2,959,111 $ 3,183,105 UNREALIZED APPRECIATION (DEPRECIATION) ON AVAILABLE FOR SALE SECURITIES (Net of deferred tax expense (benefit) of $(70,000) and $300,000, for 1999 and 1998, respectively) (110,000) 455,000 COMPREHENSIVE INCOME $ 2,849,111 $ 3,638,105
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1999 and 1998
1999 1998 OPERATING ACTIVITIES: Net income $ 2,959,111 $ 3,183,105 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and depletion 2,727,590 2,550,519 Gain on disposal of assets (10,404) (34,603) Change in assets and liabilities net of effects from purchase of subsidiaries: Receivables, net (2,265,227) (4,539,428) Inventories (3,905,350) (3,433,819) Refundable federal and state income taxes 1,110 221,072 Prepaid expenses (264,768) (128,958) Deferred income taxes, long-term (60,000) 300,000 Long-term notes receivable - 1,250 Accounts payable, notes payable and accrued liabilities 855,525 2,567,037 Accrued postretirement benefits (133,457) (2,912) Minority interest in earnings of subsidiaries 194,772 270,754 Net cash provided by operating activities $ 98,902 $ 954,017 INVESTING ACTIVITIES: Acquisition of property, plant and equipment $(5,665,605) $(5,029,397) Proceeds from disposals of property, plant and equipment 34,558 79,626 Increase in other assets (99,719) (736,952) Decrease in short term investments, net 7,873,553 8,256,991 Net cash provided by investing activities $ 2,142,787 $ 2,570,268 FINANCING ACTIVITIES: Cash dividends $(2,252,095) $(2,021,647) Subsidiaries' dividends paid to minority interest (140,379) (42,000) Purchase of treasury stock (411,805) (248,725) Net cash used for financing activities $(2,804,279) $(2,312,372) Net increase (decrease) in cash and cash equivalents $ (562,590) $ 1,211,913 CASH AND CASH EQUIVALENTS, beginning of year 4,254,795 4,093,317 CASH AND CASH EQUIVALENTS, end of period $ 3,692,205 $ 5,305,230 Interest paid $1,313 $1,517 Income taxes paid $1,501,886 $170,670
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES 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 half of 1999 primarily due to funding increased receivables and inventories, capital expenditures and dividends. The registrant generally produces additional inventory during the early part of the year in anticipation of sales volume in excess of production capabilities during the summer and early fall. RESULTS OF OPERATIONS Net sales and cost of sales for the first six months of 1999 increased 6% and 8% respectively, as compared to the first six months of 1998. These increases were primarily due to increases in the volume of cement and ready- mixed concrete sold during the first quarter of 1999. 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 as compared to the first quarter of 1998 allowed construction projects to proceed, increasing sales of both cement and ready-mixed concrete. During the second quarter of 1999, additional maintenance on the cement kilns increased the registrant's cost of sales as compared to the second quarter of 1998. While cost of sales increased, net sales remained steady resulting in a decrease in gross profit from operations. Demand for cement and ready-mixed concrete in the registrant's market area was excellent during both the second quarter of 1999 and the second quarter of 1998 and is expected to continue during the balance of 1999. During 1998 and 1999, the registrant purchased additional clinker from foreign markets to meet anticipated demand for cement. Although these purchases reduce gross profits from operations as a percent of net sales, the additional product allows 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. YEAR 2000 As has been widely publicized, there is widespread concern in the U.S. economy and elsewhere that computer systems and applications, including those imbedded in equipment and facilities, that use only two digits to identify years may create problems when the year 2000 arrives. Any of the registrant's computer systems or plant equipment systems that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculation, causing a disruption of operations. The registrant has completed its assessment of Year 2000 issues relative to information technology (IT) and non-IT computer hardware, software, and operating systems. The registrant primarily relied upon a qualified and experienced external resource to inventory, test for Year 2000 compliance, and prepare detailed recommended solutions on any non-compliant hardware or software systems. The recommended solutions have been presented to and assessed by the registrant's Year 2000 management team and it has been determined that the costs of addressing the Year 2000 compliance issues will not be material to the registrant's business, operations or financial condition. This assessment was based upon the fact that at December 31, 1998, 93% of the registrant's computer hardware was Year 2000 compliant, 86% of its operating systems were compliant and 86% of its computer software was compliant. Through a combination of equipment replacement and periodic software updates, the registrant expects to have all significant systems in compliance by the year 2000. Replacements of non-compliant hardware systems with new systems are being capitalized and amortized over the life of the new systems. The cost of annual software maintenance agreements, which include Year 2000 compliant upgrades, are being expensed as incurred. The registrant's primary accounting and management information systems were Year 2000 compliant at the end of 1998. The registrant does not anticipate any material disruptions in its operations as a result of any failure by the registrant to be in compliance. The registrant is dependent upon numerous third parties including customers, electrical power and fuel suppliers, financial institutions and other significant suppliers. Since no single customer accounts for more than 10% of the registrant's total sales, the registrant is not canvassing its customers as to their Year 2000 compliance. The registrant does intend to inquire of third parties (primarily financial institutions and significant suppliers) and seek guidance as to their state of readiness. However, there can be no assurance that the registrant can avoid disruptions of supplies and services from its suppliers, or purchases by its major customers, in the event that these entities encounter unforeseen Year 2000 problems, any of which could have a material adverse effect on the registrant's business, operations or financial condition. The registrant is not aware of any material risks associated with these other entities. The registrant is in the process of developing a contingency plan that would be designed to mitigate, in part, the impact on its business of certain Year 2000 problems. This plan, however, cannot cover all eventualities, such as a power outage. The registrant expects this plan to be in place by the end of 1999. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) There are no exhibits required to be filed for the quarter ended June 30, 1999. (b) There were no reports required to be filed on Form 8-K during the quarter April 1, 1999 to June 30, 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 August 12, 1999 /s/ Walter H. Wulf, Jr. Walter H. Wulf, Jr. President and Vice Chairman of the Board Date August 12, 1999 /s/ Lyndell G. Mosley Lyndell G. Mosley, CPA Chief Financial Officer and Assistant Secretary-Treasurer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MONARCH CEMENT COMPANY AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTER ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1999 JUN-30-1999 3,692,205 11,748,702 13,455,437 428,000 17,410,340 46,611,677 113,927,629 81,641,481 85,833,693 8,055,668 0 0 0 10,390,435 55,424,524 85,833,693 46,365,884 46,365,884 38,382,778 38,382,778 0 0 0 4,659,111 1,700,000 2,959,111 0 0 0 2,959,111 .71 .71
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