SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240-14a-12
THE MONARCH CEMENT COMPANY
(Name of Registrant as Specified In Its Charter)
______________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
______________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
______________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined):
______________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
______________________________________________________________________________
5) Total fee paid:
______________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
______________________________________________________________________________
2) Form, Schedule or Registration Statement No.:
______________________________________________________________________________
3) Filing Party:
______________________________________________________________________________
4) Date Filed:
______________________________________________________________________________
<Page>
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
(April 9, 2003)
The annual meeting of the stockholders of The Monarch Cement Company,
a Kansas corporation will be held Wednesday, April 9, 2003, at 2:00 in the
afternoon of that day, at the Company's corporate offices, Humboldt, Kansas,
to consider and act upon the following:
1. The election of four directors to serve until the
annual meeting of the stockholders of the Company
in 2006;
2. Any other business which may properly come before
the meeting;
3. Adjourning the meeting from time to time.
The Board of Directors has fixed the close of business on February 14,
2003 as the record date for the determination of the stockholders entitled to
notice of and to vote at the meeting. Only stockholders of record at that
time will be entitled to vote at the meeting, or any adjournment thereof.
The Board of Directors of the Company solicits you to sign, date and
return the enclosed proxy. Your proxy may be revoked at any time before it
is exercised.
THE MONARCH CEMENT COMPANY
Lyndell G. Mosley, CPA
Assistant Secretary
Humboldt, Kansas
March 17, 2003
<Page>
P R O X Y
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Walter H. Wulf, Jr., Robert M. Kissick and
Byron K. Radcliff as Proxies, each with the power to appoint his substitute,
and hereby authorizes them to represent and to vote all of the shares of
Capital Stock and Class B Capital Stock of The Monarch Cement Company held of
record by the undersigned on February 14, 2003 at the annual meeting of
stockholders to be held on April 9, 2003, or any adjournment or adjournments
thereof, as fully and with the same effect as the undersigned might or could
do if personally present, with respect to the following business proposed by
the Company to be conducted at the meeting:
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY to
below (except as marked vote for all
to the contrary below) [ ] nominees listed below [ ]
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE STRIKE A LINE THROUGH THE
NOMINEE'S NAME IN THE LIST BELOW.)
Byron J. Radcliff Michael R. Wachter Walter H. Wulf, Jr. Walter H. Wulf, III
2. In their discretion, the Proxies are authorized to vote upon
such other business as may properly come before the meeting.
A majority of said Proxies, or their substitutes, present and acting at
said meeting, or any adjournment thereof (or if only one be present and act,
that one) shall have and may exercise all of the powers of all of said
Proxies. This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE ABOVE-NAMED NOMINEES. The undersigned hereby
ratifies and confirms all that said Proxies, or any of them or their
substitutes, may lawfully do or cause to be done by virtue hereof and
acknowledges receipt of the notice of said meeting and the Proxy Statement
accompanying it.
PLEASE SIGN EXACTLY AS NAME APPEARS.
When shares are held by joint
tenants, both should sign. When
signing as attorney, as executor,
administrator, trustee or guardian,
please give full title as such. If
a corporation, please sign in full
corporate name by president or
other authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
_____________________________
Signature
Dated_________________, 2003. _____________________________
Signature if held jointly
Please mark, sign, date and return this proxy promptly using the enclosed
envelope.
<Page>
THE MONARCH CEMENT COMPANY
P.O. Box 1000
Humboldt, Kansas 66748-0900
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
(2:00 p.m., April 9, 2003)
GENERAL INFORMATION
The enclosed proxy is being solicited on behalf of the Board of Directors
of The Monarch Cement Company and all expenses of the solicitation will be
borne by the Company. In addition to solicitation by mail, a number of
regular employees may solicit proxies in person or by telephone. The Company
does not expect to pay any compensation for the solicitation of proxies. The
proxy may be revoked at any time before it is exercised by giving written
notice to the Secretary of the Company. The enclosed proxy and this Proxy
Statement were first sent or given to the holders of Monarch stock on or about
March 17, 2003.
The record date with respect to this solicitation is February 14, 2003
and only holders of Capital Stock and/or Class B Capital Stock of the Company
as of the close of business on that date are entitled to vote, either in
person or by proxy, at the meeting. At the close of business on that date
2,354,853 shares of Capital Stock and 1,672,105 shares of Class B Capital
Stock were issued and outstanding. Holders of Capital Stock are entitled to
one vote per share standing in their names on the record date. Holders of
Class B Capital Stock are entitled to ten votes per share standing in their
names on the record date.
Directors are elected by a plurality (a number greater than those cast
for any other candidates) of the votes cast, in person or by proxy, by the
stockholders entitled to vote at the annual meeting for that purpose. The
affirmative vote of the holders of a majority of the votes of the Company's
stock entitled to vote at the annual meeting is required for the approval of
such other matters as properly may come before the annual meeting or any
adjournment thereof.
A stockholder entitled to vote in the election of directors can withhold
authority to vote for all nominees for director or can withhold authority to
vote for certain nominees for director. "Broker non-votes" occur when a
broker indicates that it lacks authority to vote on a matter in the absence of
instructions from the beneficial owner. Broker non-votes are treated as
shares of the Company's stock as to which voting power has been withheld by
the respective beneficial holders and, therefore, as shares not entitled to
vote on the proposal as to which there is the broker non-vote.
To the knowledge of the Company, there are no special arrangements or
understandings between any of the directors and officers other than each of
them acting solely in their capacity as such.
ELECTION OF DIRECTORS AND RELATED INFORMATION
The Board of Directors is divided into three classes. Class I is
comprised of three directors and Classes II and III are each comprised of four
directors. At each annual meeting of stockholders, one class of directors is
elected for a three-year term.
<Page>
The four directors to be elected at the forthcoming annual meeting of
stockholders will serve as directors in Class II of the Board of Directors.
Their term of office will commence upon election and will continue until the
2006 annual meeting of stockholders and until their successors are elected and
qualified.
The Board of Directors has selected the nominees for directors. Shares
represented by a proxy given pursuant to this solicitation will be voted in
favor of the nominees listed below. Each nominee is at present a member of
Class II of the Board of Directors. If any of such nominees should
unexpectedly become unavailable for election, the shares represented by the
proxy will be voted for such substituted nominee or nominees as the Board of
Directors may name. Each of the nominees hereinafter named has indicated his
willingness to serve if elected and it is not anticipated that any of them
will become unavailable for election. The names of the nominees are as
follows:
Byron J. Radcliff Michael R. Wachter Walter H. Wulf, Jr. Walter H. Wulf, III
The Board of Directors recommends that you vote FOR the election of each
of the four nominees named above as directors in Class II of the Board of
Directors.
<Page>
<Table>
Information Concerning Nominees for Election to Board of Directors
and Directors Continuing in Office
Family relationship
Present position Principal occupation Director Term between
Name Age with Company last five years since expires Directors and Officers
NOMINEES
C L A S S II:
Byron J. Radcliff 46 Director Rancher 1976 2006 Son of Byron K. Radcliff,
Vice Chairman, Secretary, Treasurer
and Director
Michael R. Wachter 42 Director Civil Engineer and 1994 2006 None
Director of Operations,
Concrete Technology Corp.
(a precast/prestressed
concrete producer)
Tacoma, Washington
Walter H. Wulf, Jr. 58 Chairman Position with Company 1971 2006 Father of Walter H. Wulf, III,
of the Board, Director
President and
Director
Walter H. Wulf,III 29 Director Area Service Manager, 2001 2006 Son of Walter H. Wulf, Jr.,
General Motors Corporation Chairman of the Board,
President and Director
DIRECTORS CONTINUING IN OFFICE
C L A S S I:
David L. Deffner 52 Director Professor of Music, 1997 2005 None
American River College,
Sacramento, California
and Director of Music,
Davis Community Church
Davis, California
Gayle C. McMillen 53 Director Instrumental Music 1999 2005 None
Teacher, USD 305,
Salina, Kansas
Richard N. Nixon 61 Director Shareholder in law 1990 2005 None
firm of Stinson Morrison
Hecker LLP
Kansas City, MO
</Table>
<Page>
<Table>
Information Concerning Nominees for Election to Board of Directors
and Directors Continuing in Office (continued)
Family relationship
Present position Principal occupation Director Term between
Name Age with Company last five years since expires Directors and Officers
DIRECTORS CONTINUING IN OFFICE (continued)
C L A S S III:
Jack R. Callahan 71 Director President, The Monarch 1980 2004 None
Cement Company, until
retirement on 10-31-97
Ronald E. Callaway 67 Director Transport truck driver, 1990 2004 None
Agricultural Carriers,
Inc., Wichita, Kansas
until retirement on
6-30-97
Robert M. Kissick 66 Vice President Chairman, Hydraulic 1972 2004 None
and Director Power Systems, Inc.
(manufacturer of
construction equipment)
N. Kansas City, Missouri
Byron K. Radcliff 65 Vice Chairman, Owner/Manager, 1960 2004 Father of Byron J.
Secretary, Radcliff Ranch(9000 acres) Radcliff, Director
Treasurer and Dexter, Kansas
Director
There is no arrangement or understanding between any director and any other person pursuant to which such director was
selected as a director.
</Table>
<Page>
<Table>
INFORMATION CONCERNING EXECUTIVE OFFICERS
Term of Family Relationship
Present Position Office Principal Occupation between
Name Age with Company Began Last Five Years Directors and Officers
Walter H. Wulf, Jr. 58 Chairman of the Board 2001 Position with Father of Walter H. Wulf, III
President 1997 Company Director
Director 1971
*Robert M. Kissick 66 Vice President 1980 See page 4 of None
Director 1972 this Proxy
Statement
*Byron K. Radcliff 65 Vice Chairman of Board 2001 See page 4 of Father of Byron J. Radcliff,
Secretary 1999 this Proxy Director
Treasurer 1976 Statement
Director 1960
Lyndell G. Mosley 72 Chief Financial 1972 Position with None
Officer and Assistant Company
Secretary-Treasurer
Debra P. Roe 47 Principal Accounting 1998 Position with None
Officer and Assistant Company
Secretary-Treasurer
Rick E. Rush 50 Vice President 2001 Position with None
Company
____________________
* Not active in the daily affairs of the Company.
There is no arrangement or understanding between any executive officer and any other person pursuant to which any of
such executive officers have been selected to their respective positions.
</Table>
<Page>
<Table>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth those known to the Company to be
beneficial owners of more than five percent of any class of the Company's
securities as of February 1, 2003:
Name and Address of Amount and Nature of Percent
Beneficial Owner Title of Class Beneficial Ownership of Class
Byron K. Radcliff Capital Stock 205,960 shares (a) 8.746%
P.O. Box 100 Class B Capital Stock 211,960 shares (b) 12.676%
Dexter, KS 67038
Walter H. Wulf, Jr. Capital Stock 173,102 shares (c) 7.351%
700 Wulf Drive Class B Capital Stock 177,942 shares (d) 10.642%
Humboldt, KS 66748
____________________
(a) Includes 200,515 shares owned individually; 2,495 shares owned jointly
with wife; and 2,950 shares owned by wife. Mr. Radcliff disclaims beneficial
ownership of the 2,950 shares owned by wife.
(b) Includes 207,715 shares owned individually; 2,495 shares owned jointly
with wife; and 1,750 shares owned by wife. Mr. Radcliff disclaims beneficial
ownership of the 1,750 shares owned by wife.
(c) Includes 8,310 shares held individually and 1,900 shares owned by wife.
In addition, Walter H. Wulf, Jr. is successor trustee of 75,000 shares under
three trusts for the respective benefit of Walter H. Wulf, Jr. and his two
sisters; manager of 40,300 shares held in Walter H. Wulf Company, LLC for the
benefit of Walter H. Wulf, Jr., his two sisters and their children; trustee of
4,000 shares held in the Walter H. Wulf and May L. Wulf Charitable Foundation;
and manager of 43,592 shares held in the Wulf General, LLC for the benefit of
Mr. Wulf and his two sisters. Mr. Wulf disclaims beneficial ownership of
1,900 shares owned by wife and 50,000 shares held by him as successor trustee
under two trusts for the respective benefit of Mr. Wulf's two sisters.
(d) Includes 12,950 shares held individually; 500 shares held jointly with
wife; and 1,900 shares owned by wife. In addition, Walter H. Wulf, Jr. is
successor trustee of 75,000 shares under three trusts for the respective
benefit of Walter H. Wulf, Jr. and his two sisters and manager of 87,592
shares held in the Wulf General, LLC for the benefit of Mr. Wulf and his two
sisters. Mr. Wulf disclaims beneficial ownership of 1,900 shares owned by
wife and 50,000 shares held by him as successor trustee under two trusts for
the respective benefit of Mr. Wulf's two sisters.
</Table>
<Table>
The security ownership of management as of February 1, 2003 is as
follows:
Amount and Nature of
Beneficial Ownership
Percent of Ownership
Number of Shares Class B
Class B Capital Capital
Beneficial Owner Capital Stock Capital Stock Stock Stock
Jack R. Callahan - 1,000 (1) - *
Ronald E. Callaway 12,636 13,337 * *
David L. Deffner 17,462 17,463 * 1.044%
Robert M. Kissick 39,403 (2) 39,903 (3) 1.673% 2.386%
Gayle C. McMillen 11,220 (4) 11,220 (4) * *
Richard N. Nixon 5,000 1,000 * *
Byron J. Radcliff 2,750 (5) 1,250 (5) * *
Byron K. Radcliff 205,960 (6) 211,960 (7) 8.746% 12.676%
Michael R. Wachter 250 250 * *
Walter H. Wulf, Jr. 173,102 (8) 177,942 (9) 7.351% 10.642%
Walter H. Wulf, III 3,700 3,700 * *
Lyndell G. Mosley 51,513 (10) 15,561 2.188% *
All directors and
officers as a group,
14 persons 524,221 495,411 22.261% 29.628%
___________________
*Less than 1%
Footnotes to Security Ownership of Certain Beneficial Owners and Management
( 1) Held jointly with spouse.
( 2) Includes 6,428 shares in trusts of which Robert M. Kissick is sole
trustee and 32,975 shares owned in wife's trust of which she is sole trustee.
Mr. Kissick disclaims beneficial ownership of 32,975 shares owned by wife's
trust.
( 3) Includes 6,428 shares in trusts of which Robert M. Kissick is sole
trustee and 33,475 shares owned in wife's trust of which she is sole trustee.
Mr. Kissick disclaims beneficial ownership of 33,475 shares owned by wife's
trust.
( 4) Held jointly with spouse.
( 5) Includes 250 shares owned by minor son of which Byron J. Radcliff is
custodian and as to which Mr. Radcliff disclaims beneficial ownership.
( 6) See Footnote (a) to preceding Table.
( 7) See Footnote (b) to preceding Table.
( 8) See Footnote (c) to preceding Table.
( 9) See Footnote (d) to preceding Table.
(10) Includes 18,213 shares held in a trust of which Lyndell G. Mosley is sole
trustee and 33,300 shares in wife=s trust of which she is sole trustee. Mr.
Mosley disclaims beneficial ownership of shares owned by wife's trust.
</Table>
EXECUTIVE COMPENSATION
The following table summarizes the total compensation of the Chief
Executive Officer and the Company's other executive officers whose total
compensation exceeded $100,000 for the fiscal year ended December 31, 2002, as
well as the total compensation paid to each such individual for the Company's
two previous fiscal years.
<Table>
SUMMARY COMPENSATION TABLE
Name and Annual Compensation
Principal Position Year (Salary) (Bonus)
Walter H. Wulf, Jr. 2002 $175,350 -0-
Chairman of the 2001 164,850 -0-
Board and President 2000 151,080 -0-
Lyndell G. Mosley 2002 $157,020 -0-
Chief Financial Officer 2001 154,920 -0-
and Assistant 2000 146,985 -0-
Secretary-Treasurer
</Table>
The officers who are directors receive a monthly salary and do not receive
additional compensation for attending Board of Directors' meetings. All other
directors receive $1,150 for attending each board meeting. Also, all
directors are reimbursed for their actual travel expenses incurred in
attending board meetings. However, if it is necessary to hold more than one
board meeting on the same date, or if the board meeting takes more than one
day, only $1,150 is paid.
The Board of Directors held three meetings during 2002. Each director
attended at least 75% of the aggregate of the total number of meetings of the
Board of Directors and all committees of the Board on which he served during
2002. The Board of Directors does not have a standing compensation or
nominating committee, or other committee performing similar functions.
Richard N. Nixon, director, is an attorney and, during 2002, was a
shareholder in the law firm of Stinson Morrison Hecker LLP, Kansas City,
Missouri. During 2002, the total legal fees and expenses paid by the Company
to Stinson Morrison Hecker did not exceed five percent of such law firm's
gross revenues for 2002.
DEFINED BENEFIT RETIREMENT PLAN
The retirement plan available to salaried employees, including the persons
named in the Summary Compensation Table above, is a defined benefit plan which
provides for fixed benefits, after a specific number of years of service, for
the remainder of the employee's life. The monthly retirement benefits are
computed by multiplying the employee's years of service by one and six-tenths
percent (1.6%) and multiplying this result by 1/60th of the employee's last
sixty calendar months of earnings or the employee's highest five consecutive
calendar years of earnings out of the last ten calendar years of service,
whichever is greater; however, the maximum retirement benefit is limited to
fifty percent (50%) of the average monthly earnings used in computing
retirement benefits. For the year 2002, the maximum annual compensation for
determining retirement benefits is $200,000. The normal retirement age at
which retirement plan benefits become payable is age 65.
The following table sets forth the estimated annual aggregate retirement
benefits at normal retirement for various classifications of earnings and
years of service.
<Table>
PENSION PLAN TABLE
Average
5 Years Years of Service
Earnings 15 20 25 30 35
$100,000 $24,000 $32,000 $40,000 $48,000 $50,000
125,000 30,000 40,000 50,000 60,000 62,500
150,000 36,000 48,000 60,000 72,000 75,000
175,000 42,000 56,000 70,000 84,000 87,500
200,000 48,000 64,000 80,000 96,000 100,000
225,000 48,000 64,000 80,000 96,000 100,000
250,000 48,000 64,000 80,000 96,000 100,000
</Table>
The earnings used for the purpose of determining the retirement plan
benefits consists of annual compensation (salary) of the type disclosed in the
Summary Compensation Table above. Pension benefits under the retirement plan
are not subject to any deduction for social security benefits or other offset
amounts.
The persons named in the Summary Compensation Table above have the
following years of credited service for pension benefits under the retirement
plan: Mr. Mosley, 44 years and Mr. Wulf, 31 years.
SEVERANCE PAY PLAN
On July 18, 1985 the Board of Directors of the Company adopted a
Severance Pay Plan for Salaried Employees (the "Plan"). The Plan is designed
to recognize the past service of long-standing salaried employees and reduce
their concerns, if any, if a change in control of the Company should occur.
The Plan provides that if employment of any "covered employee" is
terminated for any reason other than death or disability within 24 months
after a "change in control", such employee is entitled to receive severance
pay equal to the employee's monthly salary times the number of full years that
such employee has been employed by the Company. The amount of the severance
pay is subject to certain reductions where the employee is entitled to
certain retirement benefits under the Company's pension plan or where the
severance pay is not fully deductible by the Company for federal income tax
purposes. A "covered employee" is any full-time salaried employee who has
been employed for at least 10 years prior to the "change in control". A
"change in control" is any merger, consolidation or disposition of all or
substantially all of the assets of the Company or any acquisition by any
person or group of persons acting in concert who after such acquisition
would own more than 30% of the Company's outstanding voting stock. If there
had been a change in control and termination of employment on December 31,
2002, the following persons would have been entitled to receive severance pay
pursuant to the Plan as follows: Mr. Wulf, $444,000 and Mr. Mosley, $287,870.
The Plan also provides that any covered employee who, at the time of
termination, has been employed on a full-time basis for 20 years or more, is
entitled to receive the same life and health insurance generally made
available by the Company to retired employees. The Plan may be amended or
terminated by the affirmative vote of a least two-thirds of the members of the
full Board of Directors of the Company except that no amendment or termination
may adversely affect any right of a covered employee who is employed by the
Company at the time the Board of Directors has knowledge of any change in
control or a proposal for any change in control.
BOARD OF DIRECTORS' REPORT ON EXECUTIVE COMPENSATION
There currently is no compensation committee of the Board of Directors
(or committee performing equivalent functions). Accordingly, the Board of
Directors itself is responsible for the establishment of the general
compensation policies of the Company and the specific compensation for
executive officers. In carrying out this responsibility, however, the Board
of Directors requests and considers the recommendations of the Executive
Committee of the Board of Directors (consisting of Jack R. Callahan, Robert M.
Kissick, Byron K. Radcliff and Walter H. Wulf, Jr.).
Executive Compensation Policy
The Board of Directors believes that the compensation of its executive
officers, including Mr. Wulf, the Company's President and Chief Executive
Officer (CEO), should be influenced by the Company's long-term profitability.
However, the Board does not attempt to establish a direct correlation between
the Company's profitability and executive compensation.
Executive Officer Compensation
Each year, including 2002, the Executive Committee of the Board of
Directors makes its recommendations to the Board of Directors as to the
salaries for the Company's executive officers. These recommendations are
based on a salary adjustment percentage which the committee establishes to
serve as a guideline in setting the compensation for all salaried employees
of the Company. The determination of this salary adjustment is based on the
Executive Committee's assessment of the change in the cost of living and of
the Company's long-term profitability. The application of the salary
adjustment percentage to the salaries of the Company's salaried employees
results generally in the Company's executive officers as a group, including
the CEO, receiving the same percentage increase as the other salaried
employees of the Company. A subjective determination as to whether the
individual salaried employee is performing satisfactorily is also made. In
April 2002, upon the recommendation of the Executive Committee, the Board of
Directors approved an overall increase in compensation of four percent. These
increases are reflective of, although not directly tied to, the Company's
continued good performance in 2001.
Chief Executive Officer Compensation
The compensation of the Company's CEO is established by the Board of
Directors in the same way as compensation is established for the Company's
other executive officers. As indicated in the above discussion, the increase
in the CEO's salary, and that of the other executive officers, largely is
determined by the application of the salary adjustment percentage selected by
the Executive Committee to the CEO's salary. A subjective determination as to
whether the individual salaried employee is performing satisfactorily is also
made.
THE BOARD OF DIRECTORS:
Jack R. Callahan Ronald E. Callaway
David L. Deffner Robert M. Kissick
Gayle C. McMillen Richard N. Nixon
Byron J. Radcliff Byron K. Radcliff
Michael R. Wachter Walter H. Wulf, III
Walter H. Wulf, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No officer who is not also a director, and no other person, participated
in deliberations of the Board of Directors concerning executive officer
compensation. The members of the Board of Directors who are also executive
officers have no interlocking relationships with any other entity which are
required by the rules of the Securities and Exchange Commission to be reported
in this Proxy Statement.
COMPANY PERFORMANCE
The following performance graph shows a five-year comparison of
cumulative total returns for the Company, the S&P 500 composite index and an
index of peer companies selected by the Company.
<Table>
Comparison of Five Year Cumulative Total Return
Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
MONARCH CEMENT 100.00 104.01 97.61 88.61 98.26 96.34
S&P 500 Index 100.00 128.58 155.63 141.46 124.65 97.10
Peer Group 100.00 112.46 96.55 79.89 120.82 101.09
</Table>
<Table>
Annual Return Percentage
Years Ending
Dec-98 Dec-99 Dec-00 Dec-01 Dec-02
MONARCH CEMENT 4.01 -6.16 -9.22 10.89 -1.95
S&P 500 Index 28.58 21.04 -9.10 -11.89 -22.10
Peer Group 12.46 -14.15 -17.25 51.22 -16.33
</Table>
The cumulative total return on investment for each of the periods for the
Company, the S&P 500 and the peer group is based on the stock price or
composite index at January 1, 1998. The performance graph assumes that the
value of an investment in the Company's capital stock and each index was $100
at January 1, 1998 and that all dividends were reinvested. The information
presented in the performance graph is historical in nature and is not intended
to represent or guarantee future returns.
The performance graph compares the performance of the Company with that
of the S&P 500 composite index and an index of peer companies in the Company's
industry in which the returns are weighted according to each company's market
capitalization. Companies in the peer group index are Lafarge North America
Inc., Lone Star Industries (acquired October 1999), Southdown Inc. (acquired
November 2000) and Texas Industries, Inc.
INDEPENDENT AUDITORS
The Company's Audit Committee of the Board of Directors has selected BKD
LLP ("BKD") to examine its accounts and the accounts of its subsidiaries for
the prior and current fiscal year. It is anticipated that no representative
of BKD will be present at the annual meeting of the stockholders and therefore
no one from BKD will make a statement or be available to answer questions
which may arise.
On May 15, 2002, the Company's management approved dismissal of Arthur
Andersen LLP ("Arthur Andersen") as its independent auditors and the
appointment of KPMG LLP ("KPMG") to serve as its independent auditors for the
year ending December 31, 2002. The change was effective May 15, 2002 and was
reported in a current report on a Form 8-K filed with the Securities Exchange
Commission ("Commission") on May 16, 2002. Although the decision to change
independent auditors was not recommended or approved by the Company's Board of
Directors, the Board of Directors ratified the decision to dismiss Arthur
Anderson at its regularly scheduled August 16, 2002 meeting.
Arthur Andersen's reports on the Company's consolidated financial
statements for the year ended December 31, 2001 and the subsequent quarter
ended March 31, 2002, did not contain an adverse opinion or disclaimer of
opinion, nor were such reports qualified or modified as to uncertainty, audit
scope or accounting principles.
During the years ended December 31, 2002 and 2001 and through the date
hereof, there were no disagreements with Arthur Andersen on any matter of
accounting principle or practice, financial statement disclosure, or auditing
scope or procedure which, if not resolved to Arthur Andersen's satisfaction
would have caused them to make reference to the subject matter of the
disagreement in connection with the audit reports on the Company's
consolidated financial statements for such years; and there were no reportable
events as defined in Item 304(a)(1)(v) of Regulation S-K of the Commission.
The Company provided Arthur Andersen with a copy of the foregoing disclosures.
As Exhibit 16 to its Form 8-K filed May 16, 2002, the Company included Arthur
Andersen's letter, dated May 15, 2002, stating its agreement with the above
statements.
During the years ended December 31, 2002 and 2001 and through the date
hereof, the Company did not consult KPMG with respect to the application of
accounting principles to a specified transaction, either completed or
proposed, or the type of audit opinion that might be rendered on the Company's
consolidated financial statements, or any other matters or reportable events
as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.
The Audit Committee of the Company has approved the appointment of BKD to
serve as its independent auditors for the year ending December 31, 2002. The
appointment of BKD was effective August 12, 2002 and was reported in a current
report on a Form 8-K filed with the Commission on August 12, 2002.
As stated above, management of the Company approved the appointment of
KPMG to serve as the Company's independent auditors for the year ending
December 31, 2002; however, the Company never engaged KPMG to perform the 2002
audit. The decision not to engage KPMG was not due to any disagreement with
KPMG on any matter of accounting principle or practice, financial statement
disclosure, or auditing scope or procedure and there were no reportable events
as defined in Item 304(a)(1)(v) of Regulation S-K. The Company provided KPMG
with a copy of the foregoing disclosures. As Exhibit 16 to its Form 8-K filed
August 12, 2002, the Company included a copy of KPMG's letter, dated August
12, 2002, stating its agreement with the above statements.
During the year ended December 31, 2001 and through August 12, 2002, the
Company did not consult BKD with respect to the application of accounting
principles to a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on the Company's consolidated
financial statements, or any other matters or reportable events as set forth
in Items 304(a)(2)(i) and (ii) of Regulation S-K.
Audit Fees
The aggregate fees billed by Arthur Anderson for professional services
rendered for the audit of the Company's financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001 and
for review of the Company's financial statements included in the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002 were
approximately $58,000.
The aggregate fees billed by BKD for professional services rendered for
the reviews of the financial statements included in the Company's Quarterly
Reports on Form 10-Q for the six-month and nine-month periods ended June 30,
2002 and September 30, 2002, respectively, were approximately $6,000.
All Other Fees
The aggregate fees billed by BKD for services rendered to the Company
other than the services described above under "Audit Fees" for the fiscal year
ended December 31, 2002 were approximately $14,000, which included fees and
expenses related to the audit of employee benefit plans, advice regarding the
accounting treatment of an acquisition and miscellaneous clerical matters.
The Audit Committee has considered whether the provision of non-audit
services is compatible with maintaining the independence of BKD LLP.
See "Audit Committee Report".
Audit Committee Report
The Company's Audit Committee of the Board of Directors (the "committee")
operates under a written charter approved by the committee and adopted by the
Company's Board of Directors. The committee's charter is attached to this
proxy statement as Appendix A. The member of the committee is independent as
defined in Rule 4200(a)(15) of the National Association of Securities Dealers'
listing standards.
In fulfilling its responsibilities, the committee reviewed and discussed
The Monarch Cement Company's audited financial statements for the fiscal year
ended December 31, 2002 with the Company's management and independent
auditors, BKD LLP ("BKD").
The committee also discussed with BKD, its independent auditors, the
matters required to be discussed by Statement on Auditing Standards No. 61,
"Communication with Audit Committees." In addition, the committee received the
written disclosures and the letter from the independent auditors required by
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees," and discussed with the independent auditors their
independence in relation to us and the Company's management. The committee
also considered the non-audit services provided to it by the independent
auditors and concluded that such services were compatible with maintaining
their independence.
Based upon the reviews and discussions referred to above, the committee
has recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002 to be filed with the Securities and
Exchange Commission.
Submitted by the Audit Committee
/s/ Jack R. Callahan
Jack R. Callahan
DEADLINE FOR STOCKHOLDER PROPOSALS
No stockholder proposal will be included in the Company's proxy statement
and form of proxy relating to the annual meeting of stockholders to be held on
April 14, 2004 which is not received by the Company at P.O. Box 1000,
Humboldt, Kansas 66748-0900 on or before November 15, 2003.
Stockholders who intend to present a proposal at the 2004 annual meeting
without inclusion of such proposal in the proxy materials are required to
provide notice to us no later than January 15, 2004.
FINANCIAL STATEMENTS
The annual report of the Company containing financial statements for the
year ended December 31, 2002 is enclosed with the Proxy Statement.
OTHER BUSINESS
The proxy solicited confers discretionary authority with respect to the
voting of the shares represented thereby on any other business that may
properly come before the meeting. However, the Board of Directors has no
knowledge of any other business which will be presented at the meeting and
does not itself intend to present any such other business.
SECTION 16(a) BENEFICIAL OWNERSHIP
REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
generally requires the Company's directors and executive officers, and persons
who own more than 10% of a class of the Company's equity securities, to file
with the Securities and Exchange Commission initial reports of ownership and
reports of changes in ownership in the Company's capital stock and other
equity securities. Securities and Exchange Commission regulations require
directors, executive officers and greater than 10% shareholders to furnish the
Company with copies of all Section 16(a) reports they file. To the Company's
knowledge, based solely on review of copies of such reports and written
representations that no other reports were required, during the year ended
December 31, 2002, all Section 16(a) filing requirements applicable to its
directors, executive officers and greater than 10% shareholders were complied
with.
<Page>
APPENDIX A
CHARTER OF THE
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS OF
THE MONARCH CEMENT COMPANY
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: (i) the
financial reports and other financial information provided by the Corporation
to any governmental body or the public; (ii) the Corporation's systems of
internal controls regarding finance, accounting, legal compliance and ethics
that management and the Board have established; and (iii) the Corporation's
auditing, accounting and financial reporting processes generally. Consistent
with this function, the Audit Committee should encourage continuous
improvement of, and should foster adherence to, the Corporation's policies,
procedures and practices at all levels. The Audit Committee's primary duties
and responsibilities are to:
1. Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
2. Select and engage the services of the Corporation's independent
accountants.
3. Review and appraise the audit efforts of the Corporation's
independent accountants.
4. Provide an open avenue of communication among the independent
accountants, financial and senior management and the Board of
Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter. These
responsibilities are in addition to those duties set out for a member of the
Board of Directors.
II. COMPOSITION
The Audit Committee shall be comprised of one or more directors as determined
by the Board, each of whom shall be independent directors. Members of the
Audit Committee shall be considered independent if they: (i) do not, other
than in their capacity as a member of the Audit Committee, the Board or other
Board committee, accept any consulting, advisory or other compensatory fee
from the Corporation; (ii) are not affiliated persons of the Corporation or
any of its subsidiaries; and (iii) have no relationship to the Corporation
that reasonably may be regarded as interfering with the exercise of their
independence from management and the Corporation. Examples of such
relationships include:
a director being employed by the Corporation or any of
its affiliates for the current year or any of the past
three years;
a director who accepts any compensation from the
Corporation or any of its affiliates during the
previous fiscal year, other than compensation for
service as a member of the Audit Committee, the Board
or other Board committee;
a director being a member of the immediate family of
an individual who is, or has been in any of the past
three years, employed by the Corporation or any of its
affiliates as an executive officer. "Immediate family
member" includes a person's spouse, parents, children,
siblings, mother-in-law, father-in-law, brother-in-
law, sister-in-law, son-in-law, daughter-in-law, and
anyone who resides in such person's home;
a director who is a partner in, or a controlling
shareholder or an executive officer of, any for-profit
business organization to which the Corporation made,
or from which the Corporation received, payments
(other than those arising solely from investments in
the Corporation's securities) in any of the past three
years (other than such payments as are of a de minimis
amount and are permitted by applicable law);
a director being employed as an executive of another
entity where any of the Corporation's executives
serves on that entity's compensation committee.
One director who is not an independent director (as defined above) and is not
a current employee or an immediate family member of such employee may be
appointed to the Audit Committee, if such appointment otherwise would be
permitted by applicable regulation or exemptive action of the Securities and
Exchange Commission ("SEC") (and of any national securities exchange or
automated securities quotation system on which the Corporation's common stock
may be traded).
All members of the Committee shall be capable of reading and understanding
fundamental financial statements, including a company's balance sheet, income
statement and cash flow statement or will be able to do so within a reasonable
period of time after his or her appointment to the Committee. If reasonably
practicable, at least one member of the Committee shall have past employment
experience in accounting or finance, requisite professional certification in
accounting or any other experience or background which results in the
individual's financial sophistication, including being or having been a chief
executive officer, chief financial officer or other senior officer with
financial oversight responsibilities. Committee members may enhance their
familiarity with finance and accounting by participating in educational
programs conducted by the Corporation or an outside consultant. The members
of the Committee shall be elected by the Board at the annual organizational
meeting of the Board or until their successors shall be duly elected and
qualified. Unless a Chair is elected by the full Board, the members of the
Committee may designate a Chair by majority vote of the full Committee
membership.
III. MEETINGS
The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. As part of its job to foster open communication, the
Committee should meet at least annually with management and the independent
accountants in separate executive sessions to discuss any matters that the
Committee or each of these groups believe should be discussed privately. In
addition, the Committee or at least its Chair should meet with the independent
accountants and management quarterly to review the Corporation's financials
consistent with Section IV.2 below.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review and if necessary, update this Charter at least annually.
2. Review the Corporation's annual financial statements and any other
periodic financial reports, including but not limited to any Form 10-Q's,
submitted to the SEC, including any certification, report, opinion or review
rendered by the independent accountants thereunder.
3. Review any reports from the Corporation's independent accountants
regarding internal controls.
Independent Accountants
4. Select the Corporation's independent accountants, after considering their
independence and effectiveness, and approve the fees and other compensation to
be paid to the independent accountants. On at least an annual basis, the
Committee should review and discuss with the accountants all significant
relationships the accountants have with the Corporation to determine the
accountants' independence.
5. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances warrant.
6. At least annually consult with the independent accountants out of the
presence of management about internal controls and the fullness and accuracy
of the Corporation's financial statements.
Financial Reporting Processes
7. In consultation with the independent accountants, review the integrity of
the Corporation's financial reporting processes, both internal and external.
8. Consider the independent accountants' judgments about the quality and
appropriateness of the Corporation's accounting principles as applied to its
financial reporting. The consideration should include a discussion with the
independent accountants which should include such issues as the clarity of the
Corporation's disclosures and degree of aggressiveness or conservatism of its
accounting principles and underlying estimates and other significant decisions
made by management in preparing the financial disclosures.
9. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the
independent accountants or management.
Process Improvement
10. In conjunction with the Audit Committee's review of quarterly financial
reports, the Audit Committee shall, promptly upon its request, be provided
information from each of management and/or the independent accountants
regarding any significant management judgments or significant adjustments made
in preparation of the financial statements and the view of each as to
appropriateness of such judgments and adjustments.
11. Following completion of the annual audit, review separately with each of
management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on the
scope of work or access to required information.
12. Review any significant disagreement among management and the independent
accountants related to the preparation of the financial statements.
13. Review with the independent accountants and management the extent to
which changes or improvements in financial or accounting practices, as
approved by the Audit Committee, have been implemented. (This review should
be conducted at an appropriate time subsequent to implementation of changes or
improvements, as decided by the Committee.)
14. Review or authorize the review of any matters within the Audit
Committee's scope of responsibilities. The Committee shall have the power to
retain independent counsel, accountants, or others to assist it in the conduct
of any such review.
Ethical and Legal Compliance
15. Establish procedures for (a) the receipt, retention and treatment of
complaints received by the Corporation regarding accounting, internal
accounting controls or auditing matters and (b) the confidential, anonymous
submission by employees of the Corporation of concerns regarding questionable
accounting or auditing matters.
16. Review, with the Corporation's counsel, legal compliance matters
including corporate securities trading policies.
17. Review, with the Corporation's counsel, any legal matter that could have
a significant impact on the Corporation's financial statements.
18. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board deems
necessary or appropriate.