2001
ANNUAL REPORT
THE
MONARCH
CEMENT COMPANY
Page>
March 15, 2002
ANNUAL REPORT TO STOCKHOLDERS
Demand for cement and ready-mixed concrete in 2001 continued to challenge
us to maximize production in order to meet the needs of our customers. Record
sales of $126 million exceeded last year's record sales by almost $7 million.
Although we completed a portion of our new construction in the last half of
2001, we have not yet fully realized the benefit of the added capacity and new
technology provided by these additions. Increased production from this
equipment in 2001 was offset by the downtime required to tie-in the existing
equipment with the new processes. As anticipated, additional man-hours were
needed to work with the equipment manufacturers to learn the new processes and
to meet guaranteed production levels. Cost of sales was adversely affected
during 2001 by the additional depreciation on this equipment, the extra
expenses that occurred as equipment was shut down to tie-in the new finish
mill, precalciner and clinker cooler and by additional labor expenses.
As we look ahead to 2002, demand within our market area varies by
location. Lower interest rates have helped to maintain the residential
market. The Kansas highway program is currently on target, even though the
state is facing serious budget shortfalls. As the Kansas legislature wrestles
with funding for other state programs, there is some speculation that money
may be diverted from the highway program to other areas. Other major
projects, including schools and detention facilities are also scheduled for
2002. Overall, the five-year forecast for cement sales continues to be
strong. We continue to monitor both current and long-term market conditions
as we consider timing of our future expansion plans. Preliminary work has
been completed on the second precalciner and clinker cooler and on designing a
coal mill system to feed the precalciners and reduce our dependence on natural
gas. We do not anticipate major construction to begin on these projects until
late 2002 with completion in 2003.
We want to express our appreciation to all our employees for their
efforts during the past year. Special recognition is due our cement
manufacturing employees at Humboldt, Kansas who continued to meet our
customers' needs while being both involved in and inconvenienced by the
expansion of our production facilities. We also recognize and thank our
customers for their contribution to our success through promoting the use of
our products. Their continued hard work in our market area and their
confidence in our products created the demand resulting in the record sales
reported for 2001. Most importantly, we thank our Heavenly Father, because
without his blessings and support, we would not have achieved the results
displayed in this report and could not meet the challenges of the years to
come.
We wish to invite you, our stockholders, to attend Monarch's annual
meeting to be held at 2:00 p.m. on April 10, 2002 in the corporate office,
Humboldt, Kansas. Thank you for your support throughout the years and God
Bless.
WALTER H. WULF, JR.
President and Chairman of the Board
<Page>
<Table>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA
FOR THE FIVE YEARS ENDED DECEMBER 31, 2001
(Dollar amounts in thousands except per share data)
<Caption>
2001 2000 1999 1998 1997
Net sales . . . . . . . . . $126,352 $119,362 $111,624 $101,548 $93,853
Net income. . . . . . . . . $ 8,151 $ 10,499 $ 9,654 $ 9,653 $10,103
Net income per share. . . . $2.01 $2.55 $2.32 $2.30 $2.40
Total assets. . . . . . . . $126,638 $ 96,102 $ 89,824 $ 84,868 $76,012
Long-term obligations . . . $ 19,900 $ - $ - $ - $ -
Cash dividends declared
per share . . . . . . . . $.80 $.78 $.74 $.68 $.60
Stockholders' investment
per share . . . . . . . . $19.63 $18.36 $16.75 $15.35 $13.68
</Table>
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 that 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 that is used in highway, bridge
and building construction where strength and durability are primary
requirements.
The Monarch Cement Company and Subsidiaries (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.
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 (1) by the manufacture and sale of
cement and (2) by the sale of ready-mixed concrete and sundry building
materials:
<Table>
<Caption>
Total Sales
December 31,
2001 2000 1999
Cement Manufacturing. . . . . . . 41.5% 41.6% 45.8%
Ready-Mixed Concrete and
Sundry Building Materials . . . 58.5% 58.4% 54.2%
100.0% 100.0% 100.0%
</Table>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity
At December 31, 2001, current assets of the Company exceeded current
liabilities by $18,488,416 resulting in a current ratio of 2.10 to 1. Our
current ratio decreased in 2001 as compared to prior years primarily due to
the utilization of cash, short-term investments and bank loans to fund
expansion projects at our Humboldt, Kansas cement manufacturing facility.
Cash, short-term investments and bank loans were also used for the purchase
and retirement of treasury stock and the payment of dividends. Dry, mild
weather during December 2001 significantly increased sales for the month as
compared to December 2000. With the increase in December sales came a
corresponding increase in receivables and decrease in finished cement, work in
process and building products inventories. We are able to meet our cash needs
primarily from a combination of operations and bank loans.
In January 2001, we entered into an unsecured credit commitment with a
bank. This commitment consists of a $30,000,000 advancing term loan maturing
December 31, 2005 and a $5,000,000 line of credit maturing December 31, 2002.
These loans each bear floating interest rates based on Chase Manhattan Bank
prime rate less 1.25%. The loan agreement contains a financial covenant
related to net worth which the Company was in compliance with at year-end. As
of December 31, 2001, we had borrowed $19,899,655 on the advancing term loan
and $5,000,000 on the line of credit leaving a balance available on the
advancing term loan of $10,100,345. The average daily interest rate we paid
during 2001 was 5.3%. At year-end, the applicable interest rate was 3.5%. We
have used these loans to help finance the expansion project currently underway
at our cement manufacturing facility. We anticipate that the line of credit
maturing December 31, 2002 will be paid using funds from operations or
additional bank financing. Our board of directors has given management the
authority to borrow an additional $15,000,000 for a maximum of $50,000,000.
These funds would be used to continue our expansion project, increasing our
production capacity to meet projected sales demand. Management anticipates
negotiating for an additional $15,000,000 in bank financing this year. We
will continue to evaluate market conditions, proposed capital expenditures and
the Company's cash resources as we finalize the timing of expansion projects
and loan requirements.
Capital Resources
During 2001, the Company invested $43,585,245 in property, plant and
equipment. The Company regularly has capital expenditures of $10,000,000 to
$12,000,000 per year in keeping its equipment and facilities in good operating
condition. Due to recent and projected market demands, the Company has been
aggressively updating its equipment to improve efficiency and increase
capacity. As a result, the Company's 2001 expenditures exceeded the amount
normally spent on capital expenditures. The Company plans to continue its
modernization and expansion program during the year 2002 and future years.
During the last half of 2001, the Company began operating the new finish mill,
precalciner and clinker cooler. Preliminary work has been completed on the
second precalciner and clinker cooler and designing a new coal firing system
to fuel the precalciners. We anticipate work continuing on these projects
later in 2002 with completion in 2003. Upon completion, it is projected that
this expansion will allow the Company to produce in excess of one million tons
of cement per year, resulting in a 35% increase in cement production capacity.
The Company also expects to invest in other miscellaneous equipment and
facility improvements in both the cement and ready-mixed concrete segments in
2002. It is expected that the Company's capital expenditures will approximate
$25,000,000 during 2002 and will be funded with a mixture of cash from
operations and bank borrowings.
Results of Operations
<Table>
<Caption>
Ready-Mixed
Concrete
Cement and Sundry
Manu- Building
facturing Materials Consolidated
FOR THE YEAR ENDED DECEMBER 31, 2001:
Sales to unaffiliated customers $52,484,654 $73,867,012 $126,351,666
Income (loss) from operations 9,745,880 (541,712) 9,204,168
FOR THE YEAR ENDED DECEMBER 31, 2000:
Sales to unaffiliated customers $49,601,302 $69,760,428 $119,361,730
Income from operations 13,019,516 (1,765,148) 11,254,368
FOR THE YEAR ENDED DECEMBER 31, 1999:
Sales to unaffiliated customers $51,143,457 $60,480,291 $111,623,748
Income from operations 11,406,669 2,954,191 14,360,860
</Table>
General--Cement, ready-mixed concrete and sundry building materials are
used in residential, commercial and governmental construction. Although
overall demand for our products by each of these segments remains strong, it
varies within our market area. In some areas of our market, residential
construction is down while commercial and governmental needs are up. In other
areas, residential demand is up and commercial and governmental use is down.
Looking into 2002, we continue to see variations in demand within our market
area. Even with the much publicized economic slowdown, the decrease in
interest rates has helped to prevent sizeable drops in construction
activities, particularly in the residential market. The Kansas highway
program is currently on target, even though the state is facing serious budget
deficits. As the Kansas legislature wrestles with funding for other state
programs, there is some speculation that money may be diverted from the
highway program to other areas. We are also seeing more competitiveness in
pricing on highway construction projects for 2002. Other major construction
projects, including schools and detention facilities are also planned for 2002
in our market area. These projects, which use sizeable amounts of cement,
ready-mixed concrete and concrete products, contribute to the overall strong
demand for our products.
For the last five years, demand for cement in the Company's market has
been excellent. During this period, the Company sold the entire cement
production capacity of its Humboldt, Kansas plant. Plant modifications
completed in recent years increased the production capacity of the Humboldt
plant and improved its efficiency. These favorable market conditions and the
Company's increased production capacity are the primary factors that have led
to the Company's increased sales revenues in recent years. Profitability in
the year 2001 was adversely affected by additional expenses incurred in the
process of upgrading facilities and increased depreciation.
The Company's ready-mixed concrete operations experienced operating
losses during both 2001 and 2000 after increasing profitability during 1999.
During 2001, sales volume increases led to better utilization of manpower and
equipment reducing losses from operations. During 2000, the segment was
adversely affected by volume declines in some market areas, additional
expenses incurred in the process of upgrading facilities and weather delays
creating unusual expenses in the production and installation of concrete
products. The increased profitability in 1999 was primarily due to
improvements in ready-mixed concrete prices. Efficiencies realized through
increased sales volume also added to 1999's profitability. These factors vary
from local market to local market and from year to year, and no one factor or
local market accounts for a significant portion of the change in profitability
during the three-year period.
2001 Compared to 2000--Consolidated net sales for the year ended
December 31, 2001 were $126,351,666, an increase of $6,989,936 as compared to
the year ended December 31, 2000. Sales of cement were higher by $2,883,352
and sales of ready-mixed concrete and sundry building materials were higher by
$4,106,584. Sales of cement and ready-mixed concrete are significantly
affected by weather conditions in our market area. Wet weather in the latter
part of 2000 continued into the first part of 2001 slowing construction
projects and decreasing sales of both cement and ready-mixed concrete during
these periods. Mild, dry weather during the balance of 2001, allowed
construction projects to proceed at a rapid pace through year-end. As a
result, the Company's net sales for the last half of 2001 were 17.7% greater
than net sales for the last half of 2000 resulting in a 5.9% increase in net
sales for the year.
The gross profit rate for the year 2001 was 15.3% compared to 16.8% for
the year 2000. During 2001, the Company continued upgrading and expanding its
plant facilities. As projects neared completion, it was necessary to shut
down major pieces of equipment to complete the tie-ins from one production
process to the next. The resulting decrease in production and corresponding
increase in production costs, along with the additional depreciation relating
to this equipment, were the primary factors contributing to the decrease in
the gross profit rate. Higher sales volume of ready-mixed concrete and sundry
building materials during 2001 as compared to 2000 resulted in better
utilization of manpower and equipment and an improvement in this segment's
gross profit rate.
Selling, general, and administrative expenses increased 15.8% during the
year 2001 compared to the year 2000. These costs are normally considered
fixed costs that do not vary significantly with changes in sales volume.
However during 2001, the Company hired additional selling and administrative
personnel, primarily in the ready-mixed concrete and sundry building materials
segment. The resulting increases in payroll and health care costs contributed
to the overall increase in selling, general and administrative expenses,
although no single factor increased materially.
Interest income decreased $229,226 during 2001 as compared to the year
2000 primarily due to the reduction in short-term investments as the Company
utilized these funds for capital improvements.
"Other, net" decreased $1,068,440 for the year 2001 as compared to the
year 2000 primarily due to a reduction in the amount of gain realized on the
sale of other equity investments.
2000 Compared to 1999--The Company's 2000 net sales and cost of sales
increased approximately 7% and 11%, respectively; however, gross profit from
operations decreased 8%.
Cement sales were excellent during both 2000 and 1999. Although this
segment experienced a decrease in net sales to unaffiliated companies,
increased production and lower production costs combined to substantially
reduce the cement segment cost of sales and increase its income from
operations by approximately 14%. During 2000, the Company once again
increased its level of clinker production, exceeding the previous record set
in 1999. In addition, the Company reduced its purchases of clinker from
foreign markets during 2000 as compared to 1999, further reducing the
segment's cost of sales and increasing its gross profit margin. Supplies and
maintenance costs also decreased compared to 1999 when costs were up due to
additional maintenance on equipment that had produced at maximum levels over
extended periods.
During these same periods, the Company's ready-mixed concrete and sundry
building materials segment increased its net sales by approximately 15%.
Expansion of this segment's operations to utilize its concrete products in
various construction projects provided the majority of the increase in net
sales. Expenses related to these construction projects also increased
production costs as a percent of sales. The net sales increase generated by
sales of additional concrete products was partially offset by decreases in
ready-mixed concrete sales volume in several market areas. As expected, those
market areas with declining sales experienced a reduction in gross profit due
to fixed costs being spread over fewer units. These factors, combined with
additional expenses incurred in the process of upgrading some of the Company's
ready-mixed concrete facilities and weather delays creating unusual expenses
in the production and installation of concrete products, resulted in a loss
from operations compared to income from operations in 1999.
Selling, general and administrative expenses increased 18% during 2000.
Overall increases in health care costs, liability insurance, legal and
professional expenses and payroll contributed to this increase.
The increase in "Other, net" during 2000 as compared to 1999 was due
primarily to the sale of investment securities and the allocation of net
losses of subsidiaries to minority interest.
Income taxes for the year 2000 decreased compared to 1999 due to an
increase in depletion as a percent of consolidated taxable income and a
reduction in state income taxes.
Accounting Policies--The critical accounting policies with respect to the
Company are those related to revenue recognition, inventories, property, plant
and equipment, and depreciation.
The Company records revenue from the sale of cement, ready-mixed concrete
and sundry building materials when the products are delivered to the customer.
Long-term construction contract revenues are recognized on the percentage-of-
completion method based on the costs incurred relative to total estimated
costs. Full provision is made for any anticipated losses. Billings for long-
term construction contracts are rendered monthly, including the amount of
retainage withheld by the customer until contract completion. Retainages are
included in accounts receivable and are generally due within one year.
Inventories of finished cement, work in process and building products are
recorded at the lower of cost or market on a last-in, first-out (LIFO) basis.
Under the average cost method of accounting (which approximates current cost),
these inventories would have been $1,980,000, $1,362,000 and $2,351,000 higher
than those reported at December 31, 2001, 2000 and 1999, 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.
Property, plant and equipment are stated at cost of acquisition or
construction. The Company capitalizes the cost of interest on borrowed funds
used to finance the construction of property, plant and equipment. During
2001 and 2000, the company capitalized approximately $927,000 and $-0-,
respectively, of interest expense related to current construction projects.
Expenditures for improvements that significantly increase the assets' useful
lives are capitalized while maintenance and repairs are charged to expense as
incurred.
Depreciation of property, plant and equipment is provided by charges to
operations over the estimated useful lives of the assets using primarily the
double-declining balance method. The double-declining balance method charges
depreciation expense to the income statement on an accelerated basis producing
current tax savings. One-half year of depreciation is charged for the year of
acquisition or disposition. Depletion rates for quarry lands are designed to
amortize the cost over the estimated recoverable reserves.
The Financial Accounting Standards Board (FASB) recently issued four new
accounting rules. Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations," effective July 1, 2001, SFAS No. 142, "Goodwill and
Other Intangible Assets," effective for the 2002 calendar year, and SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
effective for the 2002 calendar year, are not expected to have a material
effect on the Company's financial position or results of operations. The
Company has not yet assessed the impact, if any, of adopting SFAS No. 143,
"Accounting for Asset Retirement Obligations," effective for the 2003 calendar
year.
Forward-Looking Statements--Certain statements under the caption
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and elsewhere in this Annual Report and Form 10-K report filed
with the Securities and Exchange Commission, constitute "forward-looking
information". Except for historical information, the statements made in this
report are forward-looking statements that involve risks and uncertainties.
You can identify these statements by forward-looking words such as "should",
"expect", "anticipate", "believe", "intend", "may", "hope", "forecast" or
similar words. In particular, statements with respect to variations in future
demand for our products in our market area or the future activity of Kansas
highway programs and other major construction projects, the timing, scope,
cost and benefits of our proposed and recently completed capital improvements
and expansion plans, including the resulting increase in production capacity,
our forecasted cement sales, the timing and source of funds for the repayment
of our line of credit, the proposed increase in our bank financing and the
proposed use of loan proceeds, and our anticipated increase in solid fuels and
electricity required to operate our facilities and equipment are all forward-
looking statements. You should be aware that 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 our Company's products.
Market Risks--Market risks relating to the Company's operations result
primarily from changes in demand for our products. A significant increase in
interest rates could lead to a reduction in construction activities in both
the residential and commercial market. Budget shortfalls during economic
slowdowns could cause money to be diverted away from highway projects,
schools, detention facilities and other governmental construction projects.
Reduction in construction activity lowers the demand for cement, ready-mixed
concrete and sundry building materials. As demand decreases, competition to
retain sales volume could create downward pressure on sales prices. The
manufacture of cement requires a significant investment in property, plant and
equipment and a trained workforce 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.
Interest rates on the Company's bank loans are variable and are based on
the Chase Manhattan Bank prime rate less 1.25%.
Inflation--Inflation directly affects the Company's operating costs. The
manufacture of cement requires the use of a significant amount of energy. The
Company burns primarily solid fuels, such as coal and petroleum coke, in its
preheater kilns. We do not anticipate a significant increase above the rate
of inflation in the cost of these solid fuels, or in the electricity required
to operate our cement manufacturing equipment. In 2001, the Company added a
precalciner to one of its kilns to increase production capacity. This
precalciner burns natural gas. Increases in natural gas prices exceeding the
rate of inflation, such as occurred in late 2000 and early 2001, create an
above average increase in manufacturing costs. As gas prices decreased, the
Company negotiated a set purchase price for the majority of its projected
natural gas needs. The Company has plans to add a coal firing system to its
precalciner kiln to reduce dependence on natural gas. 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.
STOCK MARKET AND DIVIDEND DATA
On March 1, 2002, 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 Yahoo!
at http://finance.yahoo.com/ for 2001 and Fahnestock & Co. Inc. for 2000, and
dividends declared for each quarter of its two latest fiscal years:
<Table>
<Caption>
2001 2000
Price Dividends Price Dividends
Quarter Low High Declared Low High Declared_
First $17.500 $17.875 $ - $17.625 $20.625 $ -
Second $17.750 $19.750 $.20 $16.500 $19.750 $.19
Third $18.850 $20.500 $.20 $17.125 $19.000 $.19
Fourth $18.300 $19.200 $.40* $17.500 $18.500 $.40*
<FN>
*Reflects declaration of two $.20 dividends payable in the first
quarter of 2002 and 2001.
</Table>
<Page>
ANDERSEN
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, 2001
and 2000, and the related consolidated statements of income, comprehensive
income, stockholders' investment and cash flows for each of the three years in
the period ended December 31, 2001. 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 auditing standards generally
accepted in the United States. 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, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Kansas City, Missouri,
February 22, 2002
<Page>
<Table>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 AND 2000
<Caption>
ASSETS 2 0 0 1 2 0 0 0
CURRENT ASSETS:
Cash and cash equivalents $ 3,224,861 $ 9,451,281
Short-term investments, at cost which
approximates market 164,073 2,543,286
Receivables, less allowances of $493,000 in 2001
and $375,000 in 2000 for doubtful accounts 13,262,283 8,430,945
Inventories, priced at cost which is not in
excess of market-
Cost determined by last-in, first-out method-
Finished cement $ 1,813,898 $ 3,675,351
Work in process 2,629,984 4,373,014
Building products 1,159,676 1,250,120
Cost determined by first-in, first-out method-
Fuel, gypsum, paper sacks and other 4,119,068 2,268,434
Cost determined by average method-
Operating and maintenance supplies 7,867,711 9,458,554
Total inventories $ 17,590,337 $21,025,473
Refundable federal and state income taxes 474,867 1,071,021
Deferred income taxes 505,000 415,000
Prepaid expenses 66,193 63,031
Total current assets $ 35,287,614 $43,000,037
PROPERTY, PLANT AND EQUIPMENT, at cost, less
accumulated depreciation and depletion of
$92,458,417 in 2001 and $83,666,552 in 2000 81,441,837 45,809,748
DEFERRED INCOME TAXES 2,305,000 2,430,000
OTHER ASSETS 7,603,212 4,862,955
$126,637,663 $96,102,740
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable $ 6,636,841 $ 5,452,004
Bank loan payable 5,000,000 -
Accrued liabilities-
Dividends 1,610,783 1,640,358
Compensation and benefits 2,344,263 2,007,394
Miscellaneous taxes 671,667 500,334
Other 535,644 448,933
Total current liabilities $ 16,799,198 $10,049,023
LONG-TERM DEBT 19,899,655 -
ACCRUED POSTRETIREMENT BENEFITS 8,442,462 8,397,620
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 2,453,827 2,346,663
STOCKHOLDERS' INVESTMENT:
Capital Stock, par value $2.50 per share, 1 vote
per share-Authorized 10,000,000 shares, Issued
2,303,362 shares at December 31, 2001 and
2,312,547 shares at December 31, 2000 $ 5,758,405 $ 5,781,368
Class B Capital Stock, par value $2.50 per share,
10 votes per share-Authorized 10,000,000 shares,
Issued 1,723,596 shares at December 31, 2001
and 1,788,349 shares at December 31, 2000 4,308,990 4,470,872
Retained Earnings 67,900,126 64,117,194
Accumulated other comprehensive income 1,075,000 940,000
Total stockholders' investment $ 79,042,521 $75,309,434
$126,637,663 $96,102,740
<FN>
The accompanying notes are an integral part of these consolidated balance sheets.
</Table>
<Page>
<Table>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Caption>
2 0 0 1 2 0 0 0 1 9 9 9
NET SALES $126,351,666 $119,361,730 $111,623,748
COST OF SALES 107,009,432 99,352,725 89,834,391
Gross profit from operations $ 19,342,234 $ 20,009,005 $ 21,789,357
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 10,138,066 8,754,637 7,428,497
Income from operations $ 9,204,168 $ 11,254,368 $ 14,360,860
OTHER INCOME (EXPENSE):
Interest income $ 653,888 $ 883,114 $ 1,028,727
Other, net 1,793,428 2,861,868 (435,158)
$ 2,447,316 $ 3,744,982 $ 593,569
INCOME BEFORE PROVISION FOR INCOME TAXES $ 11,651,484 $ 14,999,350 $ 14,954,429
PR0VISION FOR INCOME TAXES 3,500,000 4,500,000 5,300,000
NET INCOME $ 8,151,484 $ 10,499,350 $ 9,654,429
Basic earnings per share $2.01 $2.55 $2.32
<FN>
The accompanying notes are an integral part of these consolidated statements.
</Table>
<Table>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Caption>
2 0 0 1 2 0 0 0 1 9 9 9
NET INCOME $ 8,151,484 $ 10,499,350 $ 9,654,429
UNREALIZED APPRECIATION (DEPRECIATION)
ON AVAILABLE FOR SALE SECURITIES (Net
of deferred tax (benefit) expense of
$90,000, $(425,000) and $(400,000)
for 2001, 2000 and 1999, respectively) 135,000 (640,000) (620,000)
COMPREHENSIVE INCOME $ 8,286,484 $ 9,859,350 $ 9,034,429
<FN>
The accompanying notes are an integral part of these consolidated statements.
</Table>
<Page>
<Table>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Caption>
Accum-
Class B lated Other Stock-
Capital Capital Retained Treasury Comprehen- holders'
Stock Stock Earnings Stock sive Income Investment
Balance at 1/1/1999 $5,725,123 $4,718,367 $51,492,274 $ - $2,200,000 $64,135,764
Net income - - 9,654,429 - - 9,654,429
Dividends declared
($.74 per share) - - (3,066,148) - - (3,066,148)
Transfer of shares 101,277 (101,277) - - - -
Purchase of
treasury stock - - - (884,133) - (884,133)
Retirement of
treasury stock (112,205) - (771,928) 884,133 - -
Accumulated other
comprehensive loss - - - - (620,000) (620,000)
Balance at 12/31/1999 $5,714,195 $4,617,090 $57,308,627 $ - $1,580,000 $69,219,912
Net income - - 10,499,350 - - 10,499,350
Dividends declared
($.78 per share) - - (3,201,569) - - (3,201,569)
Transfer of shares 146,218 (146,218) - - - -
Purchase of
treasury stock - - - (568,259) - (568,259)
Retirement of
treasury stock (79,045) - (489,214) 568,259 - -
Accumulated other
comprehensive loss - - - - (640,000) (640,000)
Balance at 12/31/2000 $5,781,368 $4,470,872 $64,117,194 $ - $ 940,000 $75,309,434
Net income - - 8,151,484 - - 8,151,484
Dividends declared
($.80 per share) - - (3,219,800) - - (3,219,800)
Transfer of shares 161,882 (161,882) - - - -
Purchase of
treasury stock - - - (1,333,597) - (1,333,597)
Retirement of
treasury stock (184,845) - (1,148,752) 1,333,597 - -
Accumulated other
comprehensive income - - - - 135,000 135,000
Balance at 12/31/2001 $5,758,405 $4,308,990 $67,900,126 $ - $1,075,000 $79,042,521
<FN>
The accompanying notes are an integral part of these consolidated statements.
</Table>
<Page>
<Table>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
<Caption>
2 0 0 1 2 0 0 0 1 9 9 9
OPERATING ACTIVITIES:
Net income $ 8,151,484 $ 10,499,350 $ 9,654,429
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and depletion 9,454,167 6,754,783 6,025,901
Gain on disposal of assets (197,548) (63,379) (67,332)
Realized gain on sale of other investments (1,085,776) (2,382,261) -
Change in assets and liabilities:
Receivables, net (4,433,076) 1,419,400 674,824
Inventories 4,475,683 (3,635,333) (3,885,150)
Refundable federal and state income taxes 596,154 (1,071,021) -
Prepaid expenses 42,639 (28,176) 10,429
Deferred income taxes (270,000) (680,000) (365,000)
Other assets (31,813) 422,326 18,239
Accounts payable and accrued liabilities (267,649) 373,575 (286,002)
Accrued postretirement expense 338,752 163,874 (251,507)
Accrued pension expense (161,335) (175,159) (50,276)
Minority interest in earnings of subsidiaries (392,965) (408,744) 534,013
Net cash provided by operating activities $ 16,218,717 $ 11,189,235 $ 12,012,568
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $(43,585,245) $(18,627,165) $(10,847,723)
Proceeds from disposals of property,
plant and equipment 442,057 302,437 94,758
Payment for purchases of equity investments (2,356,088) (1,039,456) (733,336)
Proceeds from disposals of equity investments 1,401,137 3,263,100 -
Decrease in short-term investments, net 2,387,776 13,290,758 4,025,252
Net purchase of subsidiaries' stock (1,040,400) - -
Net cash used for investing activities $(42,750,763) $ (2,810,326) $ (7,461,049)
FINANCING ACTIVITIES:
Proceeds from bank loans $ 24,899,655 $ - $ -
Cash dividends paid (3,249,375) (3,131,709) (2,999,634)
Purchase of treasury stock (1,333,597) (9,828) (140,379)
Subsidiaries' dividends paid to minority interest (11,057) (568,259) (884,133)
Net cash provided by (used for) financing activities $ 20,305,626 $ (3,709,796) $ (4,024,146)
Net Increase (Decrease) in Cash and Cash Equivalents $ (6,226,420) $ 4,669,113 $ 527,373
Cash and Cash Equivalents, beginning of year 9,451,281 4,782,168 4,254,795
Cash and Cash Equivalents, end of year $ 3,224,861 $ 9,451,281 $ 4,782,168
<FN>
The accompanying notes are an integral part of these consolidated statements.
</Table>
<Page>
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2001, 2000 AND 1999
(1) SUMMARY OF ACCOUNTING POLICIES
(a) Description of Business--The Monarch Cement Company (Monarch) is
principally engaged in the manufacture and sale of portland cement. The
marketing area for Monarch's products consists primarily of the State of
Kansas, the State of Iowa, southeast Nebraska, western Missouri, northwest
Arkansas and northern Oklahoma. Sales are made primarily to contractors,
ready-mixed concrete plants, concrete products plants, building materials
dealers and governmental agencies. Companies controlled by Monarch sell
ready-mixed concrete, concrete products and sundry building materials in
metropolitan areas within Monarch's marketing area.
Monarch has direct control of certain operating companies that have
been deemed to be subsidiaries within the meaning of generally accepted
accounting principles and 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 (loss) have been recorded as reductions or increases
in other income in the accompanying statements of income. The minority
interests in net income (loss) were $(392,965), $(408,744) and $534,013 during
2001, 2000 and 1999, 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) Reclassifications--Certain reclassifications have been made to the
2000 and prior financial statements to conform with the current year
presentation.
(d) Inventories--Inventories of finished cement, work in process and
building products are recorded at the lower of cost or market on a last-in,
first-out (LIFO) basis. Under the average cost method of accounting (which
approximates current cost), these inventories would have been $1,980,000,
$1,362,000 and $2,351,000 higher than those reported at December 31, 2001,
2000 and 1999, 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 recorded at the average cost method.
(e) Property, Plant and Equipment-Property, plant and equipment are stated
at cost of acquisition or construction. The Company capitalizes the cost of
interest on borrowed funds used to finance the construction of property, plant
and equipment. During 2001 and 2000, the Company capitalized approximately
$927,000 and $-0-, respectively, of interest expense related to current
construction projects.
Depreciation of property, plant and equipment is provided by charges
to operations over the estimated useful lives of the assets using primarily
the double-declining balance method. One-half year of depreciation is charged
for the year of acquisition or disposition. Depletion rates for quarry lands
are designed to amortize the cost over the estimated recoverable reserves.
Expenditures for improvements that significantly increase the assets' useful
lives are capitalized while maintenance and repairs are charged to expense as
incurred.
(f) Revenue Recognition--Revenue is earned and recorded when persuasive
evidence of an arrangement exists, delivery has occurred or services have been
rendered, the seller's price to the buyer is fixed or determinable, and
collectibility is reasonably assured. Accordingly, the Company records
revenue from the sale of cement, ready-mixed concrete and sundry building
materials when the products are delivered to the customer. Long-term
construction contract revenues are recognized on the percentage-of-completion
method based on the costs incurred relative to total estimated costs. Full
provision is made for any anticipated losses. Billings for long-term
construction contracts are rendered monthly, including the amount of retainage
withheld by the customer until contract completion. Retainages are included
in accounts receivable and are generally due within one year.
(g) Earnings per Share--Basic earnings per share is based on the weighted
average common shares outstanding during each year. Dilutive earnings per
share is based on the weighted average common and common equivalent shares
outstanding each year. Monarch has no common stock equivalents and therefore,
does not report dilutive earnings per share. The weighted average number of
shares outstanding was 4,049,165 in 2001, 4,113,984 in 2000 and 4,154,426 in
1999.
(h) Comprehensive Income--Comprehensive income is composed of two subsets;
net income and other comprehensive income. Included in other comprehensive
income for the Company is unrealized appreciation (depreciation) for
securities classified as available-for-sale, net of deferred income tax.
(i) Statements of Cash Flows--The Company considers overnight cash
investments to be cash equivalents. All other highly liquid short-term
investments, generally with an original maturity of six months or less, are
considered short-term investments. Interest and income taxes paid during each
of the three years for the period ended December 31, are as follows:
<Table>
<Caption>
2001 2000 1999
Interest paid, net of
amount capitalized $ 54,657 $ 7,076 $ 1,313
Income taxes paid $3,253,490 $5,935,016 $6,094,546
</Table>
(2) PROPERTY, PLANT AND EQUIPMENT
<Table>
Property, plant and equipment at December 31, 2001 and 2000 consisted of:
<Caption>
Depreciation
Lives (Years) 2001 2000
Quarry lands $ 1,220,514 $ 1,220,514
Mill site and buildings 12 - 50 21,038,888 18,922,096
Machinery and equipment 5 - 25 113,600,330 70,561,855
Transportation equipment 3 - 12 26,460,459 24,261,907
Office furniture and fixtures 5 - 20 1,117,183 925,516
Office and other buildings 10 - 30 3,315,132 2,751,097
Construction in process 7,147,748 10,833,315
$173,900,254 $129,476,300
Less--Accumulated depreciation and depletion 92,458,417 83,666,552
$ 81,441,837 $ 45,809,748
</Table>
(3) 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, 2001, 2000 and 1999 are as follows:
<Table>
<Caption>
2001 2000 1999
Fair value of investments $5,965,000 $3,700,000 $4,605,000
Cost of investments 4,175,000 2,135,000 1,975,000
Fair value in excess of cost $1,790,000 $1,565,000 $2,630,000
Unrealized gain recorded in equity $1,075,000 $ 940,000 $1,580,000
Deferred income taxes 715,000 625,000 1,050,000
$1,790,000 $1,565,000 $2,630,000
Proceeds from sale of securities $1,401,137 $3,263,100 $ -
Realized gains $1,085,776 $2,382,261 $ -
</Table>
(4) INCOME TAXES
The components of the provision for federal and state income taxes in the
accompanying consolidated statements of income are as follows:
<Table>
<Caption>
2001 2000 1999
Current provision for income tax:
Federal $3,535,000 $4,425,000 $4,435,000
State 325,000 330,000 830,000
$3,860,000 $4,755,000 $5,265,000
Deferred provision for income tax:
Federal $ (270,000) $ (135,000) $ 30,000
State (90,000) (120,000) 5,000
$ (360,000) $ (255,000) $ 35,000
Provision for income taxes $3,500,000 $4,500,000 $5,300,000
</Table>
The provision for federal and state income taxes in the accompanying
consolidated statements of income differs from the amount computed at the
federal statutory income tax rate as follows:
<Table>
<Caption>
2001 2000 1999
Provision for federal taxes
at statutory rates $3,974,000 $5,150,000 $5,134,000
State income taxes, net of
federal tax benefit 153,000 137,000 543,000
Percentage depletion (505,000) (697,000) (591,000)
Minority interest in
consolidated income (loss) (157,000) (163,000) 214,000
Other, net 35,000 73,000 -
Provision for income taxes $3,500,000 $4,500,000 $5,300,000
</Table>
The tax effect of significant temporary differences representing deferred
tax assets and (liabilities) are as follows:
<Table>
<Caption>
2001 2000
Current:
Reserve for bad debts $ 195,000 $ 150,000
Vacation 280,000 265,000
Other, net 30,000 -
Net current deferred tax assets $ 505,000 $ 415,000
Noncurrent:
Depreciation $ (540,000) $ (450,000)
Postretirement benefits 3,950,000 3,815,000
Pension (470,000) (405,000)
Unrealized holding gains (715,000) (625,000)
Other, net 80,000 95,000
Net long-term deferred tax assets $ 2,305,000 $ 2,430,000
</Table>
(5) LONG-TERM DEBT
In January 2001, Monarch entered into an unsecured credit commitment with
a bank. This commitment consists of a $30,000,000 advancing term loan
maturing December 31, 2005 and a $5,000,000 line of credit maturing
December 31, 2002. These loans each bear interest rates based on Chase
Manhattan Bank prime rate less 1.25%. The loan agreement contains a financial
covenant related to net worth which the Company was in compliance with at
year-end. As of December 31, 2001, the Company had borrowed $19,899,655 on
the advancing term loan and $5,000,000 on the line of credit leaving a balance
available on the advancing term loan of $10,100,345. The average daily
interest rate paid by the Company during 2001 was 5.3%. At year-end, the
applicable interest rate was 3.5%.
(6) 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.
Following is a reconciliation of benefit obligations and funded status as
of December 31, 2001 and 2000:
<Table>
<Caption>
2001 2000
Reconciliation of benefit obligation
Accumulated postretirement benefit
obligation at beginning of year $ 12,927,454 $ 9,298,360
Service cost 156,561 108,040
Interest cost 942,509 895,420
Actuarial (gain) loss (241,538) 3,532,357
Benefits and expenses paid (730,524) (906,723)
Accumulated postretirement benefit
obligation at end of year $ 13,054,462 $ 12,927,454
Funded status $(13,054,462) $(12,927,454)
Unrecognized actuarial loss 3,183,091 3,394,834
Accrued benefit cost $ (9,871,371) $ (9,532,620)
</Table>
The assumed annual rate of increase in the per capita cost of covered
health care benefits was 7% for 2001 and 2000 and 4% for 1999. This trend rate
is assumed to decrease in future years, 1% per year to an ultimate annual rate
of 4%.
<Table>
<Caption>
2001 2000 1999
Components of net periodic benefit cost
Service cost $ 156,561 $ 108,040 $ 99,410
Interest cost 942,509 895,420 697,195
Unrecognized net loss 137,776 67,136 -
Net periodic benefit cost $1,236,846 $1,070,596 $ 796,605
Weighted-average assumptions
as of December 31
Discount rate 7.00% 7.50% 8.00%
</Table>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change in
assumed health care cost trend rates would have the following effects:
<Table>
<Caption>
1% Increase 1% Decrease
Effect on net periodic benefit cost $ 239,080 $ (107,877)
Effect on postretirement benefit obligation 1,699,450 (1,184,805)
</Table>
(7) 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 assets of the plans are primarily equities, bonds and government
securities.
Following is a reconciliation of benefit obligations, plan assets and
funded status as of December 31, 2001 and 2000:
<Table>
<Caption>
2001 2000
Reconciliation of projected benefit obligation
Projected benefit obligation at
beginning of year $21,987,472 $20,989,864
Service cost 315,833 293,441
Interest cost 1,621,900 1,617,150
Actuarial loss 1,246,060 734,549
Benefits paid and expenses (1,706,144) (1,647,532)
Projected benefit obligation at end of year $23,465,121 $21,987,472
Reconciliation of fair value of plan assets
Fair value of plan assets at beginning of year $24,783,229 $24,096,707
Actual return on plan assets 1,841,206 2,334,054
Benefits paid and expenses (1,706,144) (1,647,532)
Fair value of plan assets at end of year $24,918,291 $24,783,229
Funded status $ 1,453,170 $ 2,795,757
Unrecognized net actuarial loss (685,055) (2,250,731)
Unrecognized transitional obligation - 14,342
Unrecognized prior service cost 412,570 459,982
Prepaid benefit cost $ 1,180,685 $ 1,019,350
</Table>
The following table presents the components of net periodic pension cost
as of December 31, 2001, 2000 and 1999:
<Table>
<Caption>
2001 2000 1999
Service cost $ 315,833 $ 293,441 $ 342,594
Interest cost 1,621,900 1,617,150 1,559,670
Expected return on plan assets (2,155,386) (2,095,648) (2,245,751)
Amortization of transitional obligation 14,342 9,867 9,863
Amortization of prior service cost 47,412 47,412 45,130
Recognized net actuarial gain (5,436) (47,381) (31,967)
Net periodic pension (income) $ (161,335) $ (175,159) $ (320,461)
</Table>
The weighted average assumptions used to determine net pension cost and
benefit obligations as of December 31 are as follows:
<Table>
<Caption>
2001 2000 1999
Discount rate 7.00% 7.50% 8.00%
Expected return on plan assets 9.00% 9.00% 9.00%
Rate of compensation increase (Staff plan only) 4.50% 4.50% 4.50%
</Table>
The Company has defined contribution plans covering substantially all
permanent employees of the ready-mixed concrete and sundry building materials
segment. These plans allow the Company, at its discretion, to match the
employee's contributions. For the 2001 and 2000 plan years, the Company
matched 25% of the first 6% of the employee's compensation up to a maximum
match of $2,500. The Company contributed $75,570 and $67,240 to these plans
for the years 2001 and 2000, respectively.
(8) COMMITMENTS AND CONTINGENCIES
According to various agreements with certain minority stockholders of
subsidiaries, under specified circumstances, the Company is obligated to
acquire certain minority shares, if requested to do so, at a value that
approximates the minority interest on the Balance Sheet.
(9) STOCKHOLDERS' INVESTMENT
Capital Stock and Class B Capital Stock have the same rights except as
follows: Class B Capital Stock has supervoting rights of ten votes per share
and restricted transferability; Class B Capital Stock is convertible at all
times into Capital Stock on a share-for-share basis; and Capital Stock has
only one vote per share and is freely transferable.
(10) BUSINESS SEGMENTS
The Company groups its operations into two business segments - cement
manufacturing and the sale of ready-mixed concrete and sundry building
materials. The Company's business segments are separate business units that
offer different products. The accounting policies for each segment are the
same as those described in the summary of significant accounting policies.
Following is information for each segment for the years ended December 31,
2001, 2000 and 1999:
<Table>
<Caption>
Ready-Mixed
Concrete
Cement and Sundry Adjustments
FOR THE YEAR ENDED Manu- Building and
DECEMBER 31, 2001: facturing Materials Eliminations Consolidated
Sales to unaffiliated
customers $52,484,654 $73,867,012 $ - $126,351,666
Intersegment sales 9,701,435 66,201 (9,767,636) -
Total net sales $62,186,089 $73,933,213 $ (9,767,636) $126,351,666
Income (loss) from operations $ 9,745,880 $ (541,712) $ 9,204,168
Other income, net 2,447,316
Income before income taxes $ 11,651,484
Identifiable assets at
December 31, 2001 $79,454,009 $32,905,909 $112,359,918
Corporate assets 14,277,745
Total assets at
December 31, 2001 $126,637,663
FOR THE YEAR ENDED
DECEMBER 31, 2000:
Sales to unaffiliated
customers $49,601,302 $69,760,428 $ - $119,361,730
Intersegment sales 9,265,934 5,192 (9,271,126) -
Total net sales $58,867,236 $69,765,620 $ (9,271,126) $119,361,730
Income (loss) from operations $13,019,516 $(1,765,148) $ 11,254,368
Other income, net 3,744,982
Income before income taxes $ 14,999,350
Identifiable assets at
December 31, 2000 $47,123,981 $28,205,216 $ 75,329,197
Corporate assets 20,773,543
Total assets at
December 31, 2000 $ 96,102,740
FOR THE YEAR ENDED
DECEMBER 31, 1999:
Sales to unaffiliated
customers $51,143,457 $60,480,291 $ - $111,623,748
Intersegment sales 7,690,066 697,177 (8,387,243) -
Total net sales $58,833,523 $61,177,468 $ (8,387,243) $111,623,748
Income from operations $11,406,669 $ 2,954,191 $ 14,360,860
Other income, net 593,569
Income before income taxes $ 14,954,429
Identifiable assets at
December 31, 1999 $36,252,363 $25,189,660 $ 61,442,023
Corporate assets 28,549,358
Total assets at
December 31, 1999 $ 89,991,381
</Table>
Total sales by segment before adjustments and eliminations includes both
sales to unaffiliated customers (as reported in the Company's consolidated
statements of income, comprehensive income and stockholders' investment) and
intersegment sales. Intersegment sales are accounted for by the same method
as sales to unaffiliated customers.
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. Depreciation and depletion for cement manufacturing and
ready-mixed concrete, respectively, was: $4,325,197 and $5,128,970 in 2001;
$2,571,183 and $4,183,600 in 2000; and $2,951,294 and $3,074,607 in 1999.
Capital expenditures for cement manufacturing and ready-mixed concrete,
respectively, including capital assets of businesses acquired were:
$39,174,379 and $4,410,866 in 2001; $11,051,905 and $7,575,260 in 2000; and
$2,749,880 and $8,097,843 in 1999. Identifiable assets by segment are those
assets that are used in the Company's operations in each industry.
During 2001, 2000 and 1999, there were no sales to any one customer in
excess of 10% of consolidated net sales.
(11) Quarterly Financial Information (Unaudited)
<Table>
<Caption>
First Second Third Fourth
Quarter Quarter Quarter Quarter
2001
Net sales $20,335,027 $33,746,878 $39,618,762 $32,650,999
Income (loss) from
operations (592,355) 3,398,416 4,492,050 1,906,057
Net income (loss) (155,649) 2,263,192 3,354,934 2,689,007
Basic earnings (loss)
per share $(.04) $.56 $.83 $.66
2000
Net sales $22,862,034 $35,105,445 $38,413,341 $22,980,910
Income (loss) from
operations 1,575,353 5,280,529 5,545,759 (1,147,273)
Net income 1,066,777 3,472,159 3,739,286 2,221,128
Basic earnings per share $.26 $.84 $.91 $.54
</Table>
<Page>
CORPORATE INFORMATION
CORPORATE OFFICE DIRECTORS
449 1200 Street Jack R. Callahan
P.O. Box 1000 Retired President, The Monarch
Humboldt, KS 66748 Cement Company
Phone: (620) 473-2222
Fax: (620) 473-2447 Ronald E. Callaway
Retired transport truck driver
Agricultural Carriers, Inc.
AUDITORS
Arthur Andersen LLP David L. Deffner
Kansas City, Missouri Professor of Music, American
River College
ANNUAL MEETING Robert M. Kissick
The annual meeting of the Chairman, Hydraulic Power Systems, Inc.
stockholders of The Monarch
Cement Company is held the Gayle C. McMillen
second Wednesday in April of Music Instructor, Salina School
each year at the Company's District
corporate offices.
Richard N. Nixon
Shareholder in law firm of Stinson,
TRANSFER AGENT AND REGISTRAR Mag & Fizzell, P.C.
The Monarch Cement Company
P.O. Box 1000 Byron J. Radcliff
Humboldt, KS 66748-0900 Rancher
Byron K. Radcliff
STOCK TRADING INFORMATION Owner/Manager, Radcliff Ranch
Trading Symbol: MCEM
Over-the-Counter Market Michael R. Wachter
Civil Engineer and Director of
Operations, Concrete Technology Corp.
INVESTOR RELATIONS
Inquiries may be directed to Walter H. Wulf, Jr.
Lyndell G. Mosley, Chief Financial President and Chairman of the Board
Officer and Assistant Secretary-
Treasurer, at the corporate Walter H. Wulf, III
address shown above. Area Service Manager,
General Motors Corporation
FORM 10-K Officers
The Company's Annual Report on Walter H. Wulf, Jr.
Form 10-K, as filed with the President and Chairman of the Board
Securities and Exchange Commission,
is available without charge upon *Byron K. Radcliff
written request to Lyndell G. Vice Chairman of the Board,
Mosley at the above corporate Secretary and Treasurer
office address.
*Robert M. Kissick
The Company's financial Vice President
information is also available
from the SEC at their EDGAR Rick E. Rush
internet address Vice President
(http://www.sec.gov).
Lyndell G. Mosley
Chief Financial Officer and
Assistant Secretary-Treasurer
Debra P. Roe
Principal Accounting Officer and
Assistant Secretary-Treasurer
Lisa J. Fontaine
Assistant Secretary
*Not active in the daily affairs
of the Company.