Disclosure Statement Pursuant to the Pink Basic Disclosure Guidelines

The Monarch Cement Company

A Kansas Corporation

P.O Box 1000, Humboldt, Kansas

________________________________
620-473-2222
www.monarchcement.com
shareholder.relations@monarchcement.com
3241 – Cement, Hydraulic
3273 – Ready-Mixed Concrete

Annual Report

For the Period Ending: December 31, 2019

As of December 31, 2019, the number of shares outstanding of our Common Stock was: 2,646,859

As of December 31, 2019, the number of shares outstanding of our Class B Common Stock was: 1,213,930

As of December 31, 2018, the number of shares outstanding of our Common Stock was: 2,644,159

As of December 31, 2018, the number of shares outstanding of our Class B Common Stock was: 1,216,630

Indicate by check mark whether the company is a shell company (as defined in Rule 405 of the Securities Act of 1933 and
Rule 12b-2 of the Exchange Act of 1934):

Yes: No:

Indicate by check mark whether the company’s shell status has changed since the previous reporting period:

Yes: No:

Indicate by check mark whether a Change in Control of the company has occurred over this reporting period:

Yes: No:

1) Name of the issuer and its predecessors

In answering this item, please also provide any names used by predecessor entities in the past five years and the dates of
the name changes.

The Monarch Cement Company

Date and state (or jurisdiction) of incorporation (also describe any changes to incorporation since inception, if applicable)
Please also include the issuer’s current standing in its state of incorporation (e.g. active, default, inactive):

Monarch was organized as a corporation under the laws of the State of Kansas on July 29, 1913 and is currently active.

Has the issuer or any of its predecessors ever been in bankruptcy, receivership, or any similar proceeding in the past five
years?

Yes: No:
 2) Security Information

Trading symbol: MCEM

Exact title and class of securities outstanding: Capital Stock
CUSIP: 609031307
Par or stated value: $2.50
Total shares authorized: 10,000,000 as of December 31, 2019
Total shares outstanding: 2,646,859 as of December 31, 2019

Trading symbol: MCEM

Exact title and class of securities outstanding: Class B Capital Stock
CUSIP: 609031406
Par or stated value: $2.50
Total shares authorized: 10,000,000 as of December 31, 2019
Total shares outstanding: 1,213,930 as of December 31, 2019

Number of shares in the Public Float: 3,327,752 as of December 31, 2019

Total number of shareholders of record: 302 as of December 31, 2019

Transfer Agent

Name: The Monarch Cement Company

Phone: P.O. Box 1000
Email: Humboldt, KS 66748-0900

Is the Transfer Agent registered under the Exchange Act? Yes: No:

Describe any trading suspension orders issued by the SEC concerning the issuer or its predecessors:

None

List any stock split, stock dividend, recapitalization, merger, acquisition, spin-off, or reorganization either currently
anticipated or that occurred within the past 12 months:

None

3) Issuance History

A. Changes to the Number of Outstanding Shares

Pursuant to the provisions of Monarch's Articles of Incorporation governing the conversion of its Class B Capital Stock
into Capital Stock a total of 2,700 shares of Monarch's Capital Stock were issued in the year ended 2019 upon
conversion of an equal number of shares of Monarch's Class B Capital Stock. The following shares were converted
during the past three years as indicated below:

Number of
Opening Balance:
Shares
outstanding as of Capital: 2,607,705
01/01/2016
Class B: 1,253,084
Date of Transaction Number of Class of Securities Value Were the Individual/ Reason for Restric Exemptio
Transaction type (e.g. new Shares of shares Entity share issuance ted or n or
issuance, Issued (or shares issued at a Shares were (e.g. for cash or Unrestr Registrati
cancellation, cancelled) issued discount to issued to debt conversion) icted on Type?
shares returned ($/per market (entities OR Nature of as of
to treasury) share) price at the must have Services this
at time of individual Provided (if filing?
Issuan issuance? with voting / applicable)
ce (Yes/No) investment
control
disclosed).

2/29/16 Conversion 1,000 Class B to Capital

3/28/16 Conversion 1,500 Class B to Capital

5/25/16 Conversion 625 Class B to Capital

8/29/16 Conversion 600 Class B to Capital

1/6/17 Conversion 5,000 Class B to Capital

3/23/17 Conversion 50 Class B to Capital

8/23/17 Conversion 11,705 Class B to Capital

3/26/18 Conversion 1,135 Class B to Capital

5/5/18 Conversion 7,222 Class B to Capital

10/1/18 Conversion 3,650 Class B to Capital

12/14/18 Conversion 1,767 Class B to Capital

12/26/18 Conversion 2,200 Class B to Capital

6/19/19 Conversion 1,700 Class B to Capital

6/28/19 Conversion 1,000 Class B to Capital

Shares
Ending Balance:
Outstanding on
Capital: 2,646,859
12/31/2019:
Class B: 1,213,930

The Company received no payment in connection with the issuances of such shares. No underwriters were involved
with the issuance of such shares and no commissions were paid in connection with such issuances. There was no
advertisement or general solicitation made in connection with the issuance of such shares. Except as described
above, Monarch did not issue or sell any shares of its Capital Stock or Class B Capital Stock during the year ended
December 31, 2019.

B. Debt Securities, Including Promissory and Convertible Notes

The Company has a credit agreement with BOKF, NA dba Bank of Oklahoma which provides for a $15.0 million
revolving note maturing on December 31, 2021. As of December 31, 2019 and 2018, there was nothing borrowed
against the revolving loan.

4) Financial Statements

A. The following financial statements were prepared in accordance with:

U.S. GAAP
IFRS

B. The financial statements for this reporting period were prepared by:

The Monarch Cement Company

5) Issuer’s Business, Products and Services

A. Summarize the issuer’s business operations

The Monarch Cement Company (Monarch) manufactures and sells 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.

Subsidiaries of Monarch (which together with Monarch are referred to herein as the "Company") are engaged 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 delivered to the contractor.
Concrete products primarily include pre-formed components produced by the Company that are ready for use in the
construction of commercial buildings and institutional facilities.

B. Describe any subsidiaries, parents, or affiliated companies, if applicable, and a description of their business contact
information for the business, officers, directors, managers or control persons. Subsidiary information may be included
by reference

Subsidiaries of Monarch include: Beaver Lake Concrete, Inc., Capitol Concrete Products Co., Inc., City Wide
Construction Products Co., Concrete Enterprises, Inc., Concrete Materials, Inc., Dodge City Concrete, Inc., Hays
Ready-Mix, Inc., Joplin Concrete Company, Inc., Kansas Sand and Concrete, Inc., Kay Concrete Materials Co.,
Monarch Cement of Iowa, Inc., Salina Concrete Products, Inc., Springfield Ready Mix Co. and Tulsa Dynaspan, Inc.
These subsidiaries are 100% owned by Monarch and can be contacted through Monarch.

C. Describe the issuers’ principal products or services, and their markets

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; Fayetteville,
Arkansas and Tulsa, Oklahoma. Sales of cement are made primarily to contractors, ready-mixed concrete plants,
concrete products plants, building materials dealers and governmental agencies. Monarch cement is delivered either
in bulk or in paper bags and is sold under the "MONARCH" brand name. The cement is distributed both by truck and
rail, either common or private carrier.

Subsidiaries of Monarch sell ready-mixed concrete, concrete products and sundry building materials in Monarch's
primary market.

6) Issuer’s Facilities

The Company's corporate office and cement plant, including equipment and raw materials, are located at Humboldt,
Kansas, approximately 110 miles southwest of Kansas City, Missouri. The Company owns approximately 5,000 acres
of land on which the Humboldt plant, offices and all essential raw materials for the cement operations are located.
Construction completed in 2006 increased our cement plant's capacity allowing us to produce in excess of one million
tons of cement per year. Producing at that level, raw material reserves are estimated to be sufficient to maintain
operations at this plant for more than 50 years, although not all reserves are currently accessible under existing
governmental permits and approvals. The Company believes that this plant and equipment are suitable and adequate
for its current level of operations and provides for increases in market demand.

The Company also owns approximately 250 acres of land in Des Moines, Iowa on which it operates a cement
terminal. The Company transfers cement produced in Humboldt, Kansas to this terminal for distribution to Iowa
customers. The Company also owns a rock quarry located near Earlham, Iowa, approximately 30 miles west of
Des Moines, Iowa. Approximately 353 acres of this 400 acre tract have been quarried and the Company has
contracted with a third party to quarry and sell the remaining rock. This quarry operation does not have a material
effect on the Company's overall operations.
 The Company owns various companies which sell ready-mixed concrete, concrete products and sundry building
materials within the Humboldt cement plant's primary market. Various equipment and facility improvements in this line
of business ensure these plants are suitable and adequate for their current level of operations and provide for
increases in market demand. No single subsidiary's physical property is materially significant to the Company.

There are no material encumbrances on our properties.

7) Officers, Directors, and Control Persons

Name of Affiliation with Residential Address (City / Number Share Ownership Note
Officer/Director and Company (e.g. State Only) of shares type/class Percentage of
Control Person Officer/Director/Owner owned Class
of more than 5%) Outstanding

Walter H. Wulf, Jr. Officer/Director Humboldt, KS 173,102 Capital 6.54%

189,217 Class B 15.59%

Kent A. Webber Officer Chanute, KS 900 Capital *

Robert M. Kissick Officer/Director Leawood, KS 15,932 Capital *

39,903 Class B 3.28%

Tony D. Kasten Officer Chanute, KS 50 Capital *

Lisa J. Fontaine Officer Iola, KS 2,500 Capital *

Kenneth G. Miller Officer Humboldt, KS 600 Capital *

N. Joan Perez Officer Humboldt, KS 6,400 Capital *

Jack R. Callahan Director Grove, OK 1,000 Class B *

Mark A. Callaway Director Wichita, KS 100 Capital *

David L. Deffner Director Las Vegas, NV 12,913 Class B 1.06%

Gayle C. McMillen Director Salina, KS 69,220 Class B 5.69%

Byron J. Radcliff Director Steamboat Springs, CO 4,050 Capital *

1,000 Class B *

Robert K. Radcliff Director Chicago, IL 4,050 Capital *

Steve W. Sloan Director Pittsburg, KS 2,000 Capital *

Michael R. Director Kent, WA 1,600 Capital *

Wachter
600 Class B *

Walter H. Wulf, III Director Grand Rapids, MI 3,800 Capital *

4,100 Class B *

Paula D. Radcliff Owner of more Dexter, KS 199,760 Capital 7.55%

than 5%
211,960 Class B 17.42%

*Less than one percent.

8) Legal/Disciplinary History

A. Please identify whether any of the persons listed above have, in the past 10 years, been the subject of:

1. A conviction in a criminal proceeding or named as a defendant in a pending criminal proceeding (excluding

traffic violations and other minor offenses);

None

2. The entry of an order, judgment, or decree, not subsequently reversed, suspended or vacated, by a court of
competent jurisdiction that permanently or temporarily enjoined, barred, suspended or otherwise limited such
person’s involvement in any type of business, securities, commodities, or banking activities;

None

3. A finding or judgment by a court of competent jurisdiction (in a civil action), the Securities and Exchange
Commission, the Commodity Futures Trading Commission, or a state securities regulator of a violation of
federal or state securities or commodities law, which finding or judgment has not been reversed, suspended,
or vacated; or

None

4. The entry of an order by a self-regulatory organization that permanently or temporarily barred, suspended, or
otherwise limited such person’s involvement in any type of business or securities activities.

None

B. Describe briefly any material pending legal proceedings, other than ordinary routine litigation incidental to the
business, to which the issuer or any of its subsidiaries is a party or of which any of their property is the subject.
Include the name of the court or agency in which the proceedings are pending, the date instituted, the principal parties
thereto, a description of the factual basis alleged to underlie the proceeding and the relief sought. Include similar
information as to any such proceedings known to be contemplated by governmental authorities.

None

9) Third Party Providers

Securities Counsel

Firm: Stinson LLP

Address 1: 1201 Walnut Street, Suite 2900
Address 2: Kansas City, MO 64106-2150

Accountant or Auditor

Firm: BKD, LLP

Address 1: 1201 Walnut Street, Suite 1700
Address 2: Kansas City, MO 64106-2246
Phone: (816) 221-6300

Investor Relations Consultant

Firm: Stinson LLP

Address 1: 1201 Walnut Street, Suite 2900
Address 2: Kansas City, MO 64106-2150
10) Issuer Certification

Principal Executive Officer:

I, Walter H. Wulf, Jr. certify that:

1. I have reviewed this Annual Report of The Monarch Cement Company;

2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this disclosure statement; and

3. Based on my knowledge, the financial statements, and other financial information included or incorporated by
reference in this disclosure statement, fairly present in all material respects the financial condition, results of
operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.

March 16, 2020

/s/ Walter H. Wulf, Jr.

Chairman of the Board and
Chief Executive Officer
Principal Financial Officer:

I, Tony D. Kasten certify that:

1. I have reviewed this Annual Report of The Monarch Cement Company;

2. Based on my knowledge, this disclosure statement does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this disclosure statement; and

3. Based on my knowledge, the financial statements, and other financial information included or incorporated by
reference in this disclosure statement, fairly present in all material respects the financial condition, results of
operations and cash flows of the issuer as of, and for, the periods presented in this disclosure statement.

March 16, 2020

/s/ Tony D. Kasten

Chief Financial Officer
Secretary-Treasurer
 The Monarch Cement Company
Annual Report 2019

P.O. Box 1000 | Humboldt, Kansas 66748-0900

TO OUR SHAREHOLDERS

Mൺඋർඁ 16, 2020

The year 2019 went down in history as the second wettest of all time. Extreme flooding and
violent storms plagued many parts of the nation, including Kansas and most of the Midwest. Record
rainfalls delayed the construction season and wreaked havoc on the transportation of cement to
certain locations. Even though we experienced unfavorable weather most of the year, consolidated
sales only decreased 1.0% as compared to 2018.

Our leadership team is committed to improving our processes, controlling our costs and
maximizing our manufacturing efficiencies. During 2019, we invested over $16 million in updating
our plants and equipment, with approximately $8.2 million of that being invested in our cement
manufacturing facility in Humboldt. The technology currently being used in our operations is at the
forefront of the industry. We are passionate about new, yet proven, technologies that will make us
safer, more efficient and more profitable.

Elbert Hubbard once said, “One machine can do the work of fifty ordinary men. No machine
can do the work of one extraordinary man.”, and we couldn’t agree more. Our greatest assets are the
men and women who have dedicated their lives to The Monarch Cement Company. Several years
ago, we established a Health and Wellness program that was designed to create a culture centered
around improving the health and well-being of our employees. We have experienced a positive
impact from this program and continually seek ways to better the lives of our Monarch family, both at
work and home.

Speaking of family, after 42 years of service, Debra P. Roe retired in July. Mrs. Roe served
the last 16 years as our Chief Financial Officer. Throughout her tenure at Monarch, Mrs. Roe was the
epitome of Monarch--exemplifying quality, pride and commitment. She was deeply committed to the
Company and held great respect for the responsibilities of her office. We wish her the best in her
retirement.

With grateful appreciation for the continued support of our steadfast stockholders and the
blessings and support of our Heavenly Father, we remain committed to preserving our over 100-year
tradition of excellence. We continue to strive to manufacture the highest quality products in order to
remain the supplier of choice for our many loyal customers. As the glorious sunrise pictured on the
cover represents the beginning of a new day, we are confident the coming year will bring new
opportunities and continued success.

Wൺඅඍൾඋ H. Wඎඅൿ, Jඋ.

CEO and Chairman of the Board

PROUD OF OUR HERITAGE | PASSIONATE ABOUT OUR FUTURE

 2019 FINANCIAL RESULTS

in thousands, except per share data 2019 2018 2017 2016 2015
FOR THE YEAR
Net sales $ 172,094 $ 173,895 $ 168,080 $ 165,232 $ 147,900
Net income 33,114 16,035 21,703 21,160 18,252

PER SHARE INFORMATION

Basic earnings per share $ 8.58 $ 4.15 $ 5.62 $ 5.48 $ 4.72
Cash dividends declared per share 1.85 1.75 1.40 1.20 1.00
Stockholders’ equity per share 51.16 45.60 44.53 39.08 32.22

YEAR END POSITION

Total assets $ 235,973 $ 206,305 $ 204,282 $ 190,864 $ 182,014
Long-term debt obligations 721 1,415 2,093 35 4,342

Consolidated net sales for the year ended December 31, 2019 were approximately $172.1 million, a decrease of
$1.8 million as compared to the year ended December 31, 2018. Sales in our Cement Business were lower by
$2.0 million while sales in our Ready-Mixed Concrete Business were higher by $0.2 million. Cement Business sales
decreased $5.7 million due to a 6.2% decrease in volume sold and increased $3.7 million due to price increases.
Ready-mixed concrete sales decreased $1.3 million due to a 2.1% decrease in cubic yards sold and increased
$1.4 million due to price increases. Sales for brick, block, aggregates and other sundry items increased $0.1 million.

Consolidated cost of sales for 2019 were $3.2 million higher than cost of sales for 2018. Cost of sales in our Cement
Business increased $2.6 million and cost of sales in our Ready-Mixed Concrete Business increased $0.6 million.
Cement Business cost of sales decreased $3.4 million due to the 6.2% decrease in volume sold in addition to an
increase of $6.0 million due to additional production costs. Ready-Mixed Concrete Business cost of sales decreased
$1.2 million due to the 2.1% decrease in cubic yards of ready-mixed concrete sold and increased $1.5 million due to
increases in material, production and delivery costs. Cost of sales for brick, block, aggregates and other sundry items
increased $0.3 million.

As a result of the above sales and cost of sales factors, our overall gross profit rate for the year ended
December 31, 2019 was 23.6% compared to 26.3% for the year ended December 31, 2018. The Cement Business gross
profit rate decreased from 41.1% for 2018 to 36.8% for 2019. The gross profit rate for Ready-Mixed Concrete
Business decreased from 9.4% for 2018 to 8.9% for 2019.

Selling, general and administrative expenses decreased by $1.5 million for the year 2019 as compared to the year 2018
primarily due to the decrease in depreciation related to our corporate ERP system.

Unrealized gain (loss) on equity investments increased $30.6 million for the year ended December 31, 2019 compared
to the year ended December 31, 2018. Other, net contains miscellaneous non-operating income (expense) items
excluding interest income, interest expense, gains (losses) on sale of equity investments (in 2018 and 2017), pension
and postretirement benefit income, unrealized gains (losses) on equity investments (in 2019 and 2018), realized loss on
impairment of equity investments (in 2017) and dividend income.

The effective tax rates for 2019 and 2018 were 18.9% and 17.6%, respectively. The Company’s effective tax rate
differs from the federal and state statutory income tax rate primarily due to the effects of percentage depletion. During
2019 and 2018, percentage depletion decreased the effective tax rate by 2.5% and 5.0%, respectively.

Certain statements in this Annual Report constitute “forward-looking statements”. 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”, “anticipate”, “believe”, “intend”, “may”, “forecast” or similar
words. In particular, statements with respect to the timing, scope, cost and benefits of our proposed and recently completed capital improvements and expansion plans, including
potential fuel savings, projected installation costs and other cash needs, and our forecasted cement sales 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; demand for our Company’s products; cyclical and seasonal nature of our business; the affect weather has on our business; the effect of
environmental and other government regulation; and the effect of federal and state funding on demand for our products.
 Independent Auditor’s Report

Board of Directors and Stockholders

The Monarch Cement Company
Humboldt, Kansas

We have audited the accompanying consolidated financial statements of The Monarch Cement Company and
subsidiaries (the Company), which comprise the consolidated balance sheets as of December 31, 2019 and 2018, and
the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each
of the years in the three-year period ended December 31, 2019, and the related notes to the consolidated financial
statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the design,
implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated
financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United States of America.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the
assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal
control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the
financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 2019 in accordance with accounting
principles generally accepted in the United States of America.
Other Matter
Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements as a
whole. The 2019 financial results are presented for purposes of additional analysis and is not a required part of the
basic consolidated financial statements. Such information has not been subjected to the auditing procedures applied
in the audit of the basic consolidated financial statements and, accordingly, we do not express an opinion or provide
any assurance on it.

Kansas City, Missouri

March 16, 2020
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2019 AND 2018

ASSETS 2019 2018

CURRENT ASSETS:
Cash and cash equivalents $ 24,145,075 $ 14,091,461
Receivables, less allowances of $553,000 in 2019 and
$517,000 in 2018 for doubtful accounts 18,936,456 18,336,656
Inventories, priced at cost which is not in excess of market-
Finished cement $ 5,695,174 $ 6,847,051
Work in process 5,547,238 5,254,574
Building products 3,302,796 3,862,503
Fuel, gypsum, paper sacks and other 7,807,792 4,972,444
Operating and maintenance supplies 18,457,749 16,108,266
Total inventories $ 40,810,749 $ 37,044,838
Refundable federal and state income taxes - 1,265,747
Prepaid expenses 1,572,406 609,884
Total current assets $ 85,464,686 $ 71,348,586
PROPERTY, PLANT AND EQUIPMENT, at cost, less
accumulated depreciation and depletion of $261,831,399
in 2019 and $247,734,083 in 2018 88,032,868 88,389,107
DEFERRED INCOME TAXES 1,612,206 3,232,597
INVESTMENTS 46,249,126 29,529,434
INVESTMENTS IN AFFILIATES 9,532,763 8,647,806
OTHER ASSETS 5,080,852 5,157,721
$ 235,972,501 $ 206,305,251

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable $ 5,691,918 $ 6,790,467
Current portion of other long-term debt 750,000 750,000
Accrued liabilities
Dividends 1,930,845 1,544,316
Compensation and benefits 2,990,988 2,959,651
Federal and state income taxes 3,589,518 -
Miscellaneous taxes 757,538 741,220
Other 1,101,845 608,077
Total current liabilities $ 16,812,652 $ 13,393,731
LONG-TERM DEBT 721,154 1,414,571
ACCRUED POSTRETIREMENT BENEFITS 15,289,436 13,766,649
ACCRUED PENSION EXPENSE 5,640,823 1,677,728
STOCKHOLDERS’ EQUITY
Capital stock, par value $2.50 per share, one vote per share -
Authorized 10,000,000 shares, Issued and Outstanding 2,646,859
shares at 12/31/2019 and 2,644,159 shares at 12/31/2018 $ 6,617,148 $ 6,610,398
Class B capital stock, par value $2.50 per share, supervoting
rights of ten votes per share, restricted transferability,
convertible at all times into Capital Stock on a share-for-share
basis - Authorized 10,000,000 shares, Issued and Outstanding
1,213,930 shares at 12/31/2019 and 1,216,630 shares at 12/31/2018 3,034,825 3,041,575
Additional paid-in capital 2,485,125 2,485,125
Retained earnings 204,924,373 178,952,905
Accumulated other comprehensive loss (19,553,035) (15,037,431)
TOTAL STOCKHOLDERS’ EQUITY $ 197,508,436 $ 176,052,572
$ 235,972,501 $ 206,305,251

See accompanying Notes to the Consolidated Financial Statements

3.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

2019 2018 2017

NET SALES $ 172,093,557 $ 173,895,344 $ 168,079,763
COST OF SALES 131,476,545 128,232,590 120,840,491
Gross profit from operations $ 40,617,012 $ 45,662,754 $ 47,239,272
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 18,712,781 20,165,055 22,434,337
Income from operations $ 21,904,231 $ 25,497,699 $ 24,804,935
OTHER INCOME (EXPENSE)
Interest income $ 377,920 $ 250,640 $ 155,110
Interest expense (251) (9,646) (28,694)
Gain on sale of equity investments - 3,979,574 165,212
Unrealized gain (loss) on equity investments 15,130,000 (15,490,000) -
Dividend income 668,691 655,788 600,142
Pension and Postretirement benefits 841,535 2,754,490 2,283,955
Other, net 762,910 593,401 565,257
$ 17,780,805 $ (7,265,753) $ 3,740,982
Income before income taxes $ 39,685,036 $ 18,231,946 $ 28,545,917
PROVISION FOR INCOME TAXES 7,505,000 3,210,000 7,695,000
Equity in affiliate earnings, net of tax 933,892 1,012,799 852,343

NET INCOME $ 33,113,928 $ 16,034,745 $ 21,703,260

Basic earnings per share $ 8.58 $ 4.15 $ 5.62

See accompanying Notes to the Consolidated Financial Statements

4.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

2019 2018 2017

NET INCOME $ 33,113,928 $ 16,034,745 $ 21,703,260
OTHER COMPREHENSIVE INCOME (LOSS),
net of deferred tax

UNREALIZED APPRECIATION ON AVAILABLE-

FOR-SALE SECURITIES (Net of deferred tax expense
of $-0-, $-0- and $2,576,000, for 2019, 2018 and 2017,
respectively) - - 3,859,212

RECLASSIFICATION ADJUSTMENT FOR SALE OF

SECURITIES INCLUDED IN NET INCOME (Net of
deferred tax expense of $-0-, $-0- and $68,000, for
2019, 2018 and 2017, respectively) - - (97,212)

PENSION AND POSTRETIREMENT, CURRENT YEAR

ACTUARIAL LOSS (Net of deferred tax benefit
of $(1,566,000), $(1,492,000) and $(1,960,000), for
2019, 2018 and 2017, respectively) (4,457,062) (4,241,691) (2,944,577)

PENSION AND POSTRETIREMENT, CURRENT YEAR

PRIOR SERVICE CREDIT (LOSS) (Net of deferred tax
(benefit) expense of $(3,000), $-0- and $3,251,000, for
2019, 2018 and 2017, respectively) (8,860) - 4,876,949

AMORTIZATION OF PENSION AND POSTRETIREMENT

PRIOR SERVICE COST (Net of deferred tax expense of
$615,000, $795,000 and $1,246,000, for 2019, 2018 and
2017, respectively) (1,745,303) (2,269,377) (1,878,373)

AMORTIZATION OF PENSION AND POSTRETIREMENT

LOSS (Net of deferred tax benefit of $(595,000), $(488,000)
and $(604,000), for 2019, 2018 and 2017, respectively) 1,695,621 1,379,891 903,717

OTHER COMPREHENSIVE INCOME (LOSS),

net of deferred tax $ (4,515,604) $ (5,131,177) $ 4,719,716
COMPREHENSIVE INCOME $ 28,598,324 $ 10,903,568 $ 26,422,976

See accompanying Notes to the Consolidated Financial Statements

5.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

Company Stockholders
Accumulated Other
Additional Comprehensive
Class B Paid-In Retained Treasury Income (Loss),
Capital Stock Capital Stock Capital Earnings Stock Net of Tax Total
BALANCE
JANUARY 1, 2017 $ 6,528,575 $ 3,123,398 $ 2,485,125 $ 134,210,386 $ - $ 4,540,030 $ 150,887,514
Reclassification of stranded tax
effect due to TCJA - - - (2,005,000) - 2,005,000 -
Net income - - - 21,703,260 - - 21,703,260
Dividends declared ($1.40 per share) - - - (5,405,105) - - (5,405,105)
Transfer of shares 41,888 (41,888) - - - - -
Change in unrealized appreciation
on available-for-sale securities - - - - - 3,859,212 3,859,212
Reclassification adjustment for
sale of securities in net income - - - - - (97,212) (97,212)
Pension and Postretirement
current year prior service credit - - - - - 4,876,949 4,876,949
Pension and Postretirement current
year actuarial loss - - - - - (2,944,577) (2,944,577)
Amortization of Pension and
Postretirement prior service cost - - - - - (1,878,373) (1,878,373)
Amortization of Pension and
Postretirement loss - - - - - 903,717 903,717
BALANCE
DECEMBER 31, 2017 $ 6,570,463 $ 3,081,510 $ 2,485,125 $ 148,503,541 $ - $ 11,264,746 $ 171,905,385
Reclassification of net unrealized
gain on equity investments
at December 31, 2017 - - - 21,171,000 - (21,171,000) -
Net income - - - 16,034,745 - - 16,034,745
Dividends declared ($1.75 per share) - - - (6,756,381) - - (6,756,381)
Transfer of shares 39,935 (39,935) - - - - -
Pension and Postretirement current
year actuarial loss - - - - - (4,241,691) (4,241,691)
Amortization of Pension and
Postretirement prior service cost - - - - - (2,269,377) (2,269,377)
Amortization of Pension and
Postretirement loss - - - - - 1,379,891 1,379,891
BALANCE
DECEMBER 31, 2018 $ 6,610,398 $ 3,041,575 $ 2,485,125 $ 178,952,905 $ - $ (15,037,431) $ 176,052,572
Net income - - - 33,113,928 - - 33,113,928
Dividends declared ($1.85 per share) - - - (7,142,460) - - (7,142,460)
Transfer of shares 6,750 (6,750) - - - - -
Pension and Postretirement current
year actuarial loss - - - - - (4,457,062) (4,457,062)
Pension and Postretirement
current year prior service loss - - - - - (8,860) (8,860)
Amortization of Pension and
Postretirement prior service cost - - - - - (1,745,303) (1,745,303)
Amortization of Pension and
Postretirement loss - - - - - 1,695,621 1,695,621
BALANCE
DECEMBER 31, 2019 $ 6,617,148 $ 3,034,825 $ 2,485,125 $ 204,924,373 $ - $ (19,553,035) $ 197,508,436

See accompanying Notes to the Consolidated Financial Statements

6.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2018 AND 2017

2019 2018 2017

OPERATING ACTIVITIES:
Net income $ 33,113,928 $ 16,034,745 $ 21,703,260
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 16,767,803 16,748,567 14,828,892
Income from equity method investments, net of dividends (872,797) (960,464) (810,071)
(Increase) decrease in long-term notes receivable 50,518 (117,184) -
Deferred income taxes 3,209,391 (1,813,552) 774,768
Gain on disposal of assets (177,496) (79,892) (822,980)
Realized gain on sale of equity investments - (3,979,574) (165,212)
Unrealized holding (gain) loss on equity investments (15,130,000) 15,490,000 -
Postretirement benefits and pension expense (606,722) (6,183,210) (6,593,923)
Change in assets and liabilities:
Receivables, net (599,800) (2,599,877) 122,513
Inventories (3,765,911) (3,126,353) (560,741)
Income taxes refundable/payable 4,855,265 195,238 (314,004)
Prepaid expenses (962,522) (152,182) 513,604
Other assets 14,524 (236,116) 9,378
Accounts payable and accrued liabilities (472,378) (2,623,693) 4,413,744
Net cash provided by operating activities $ 35,423,803 $ 26,596,453 $ 33,099,228

INVESTING ACTIVITIES:
Acquisition of property, plant and equipment $ (16,500,321) $ (17,730,701) $ (18,913,388)
Proceeds from disposals of property, plant and equipment 249,312 228,990 868,509
Payment for acquisition of business, net of cash acquired - (3,550,214) -
Payment for purchases of equity investments (1,589,692) (6,628,799) (2,424,073)
Proceeds from disposals of equity investments - 6,937,312 616,274
Payment for acquisition of equity method investments (12,160) (89,680) -
Net cash used for investing activities $ (17,852,861) $ (20,833,092) $ (19,852,678)

FINANCING ACTIVITIES:
Payments on bank loans $ - $ - $ (4,285,714)
Payments on other long-term debt (693,417) (678,574) (22,787)
Cash dividends paid (6,755,931) (6,563,341) (5,212,066)
Purchase of capital stock (67,980) (243,660) (30,120)
Net cash used for financing activities $ (7,517,328) $ (7,485,575) $ (9,550,687)

Net increase (decrease) in cash and cash equivalents $ 10,053,614 $ (1,722,214) $ 3,695,863
Cash and Cash Equivalents, beginning of year 14,091,461 15,813,675 12,117,812
Cash and Cash Equivalents, end of year $ 24,145,075 $ 14,091,461 $ 15,813,675

Supplemental disclosures:
Interest paid, net of amount capitalized $ 252 $ 9,646 $ 28,694
Income taxes paid 1,425,000 4,825,000 7,300,000
Income tax refund 1,983,980 - 67,016
Capital equipment additions included in accounts
payable and accrued liabilities 275,751 304,519 119,370
Capital stock repurchases included in accrued liabilities 15,900 83,880 327,540
Dividends payable included in accrued liabilities 1,930,845 1,544,316 1,351,276

See accompanying Notes to the Consolidated Financial Statements

7.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Nature of Operations--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. Subsidiaries of Monarch (which together with Monarch are referred to herein as the
“Company”) sell ready-mixed concrete, concrete products and sundry building materials within Monarch’s marketing
area.

b) Principles of Consolidation--Monarch has direct control of certain operating companies that have
been deemed to be subsidiaries within the meaning of accounting principles generally accepted in the United States of
America. Accordingly, the financial statements of such companies have been consolidated with Monarch’s financial
statements. All significant intercompany transactions have been eliminated in consolidation.

We use the equity method to account for investments in companies if the investment provides the ability to
exercise significant influence, but not control, over operating and financial policies of the companies in which we
invest. Investments accounted for under the equity method are recorded initially at cost and subsequently adjusted for
our share of the net income or loss and cash contributions and distributions to or from these entities. Our proportionate
share of the net income or loss of these companies is included in consolidated net income.

c) Use of Estimates--The preparation of financial statements in conformity with accounting principles

generally accepted in the United States of America 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.

d) Cash Equivalents--The Company considers all liquid investments with original maturities of three
months or less which we do not intend to roll over beyond three months to be cash equivalents. At December 31, 2019
and 2018, cash equivalents consisted primarily of money market investments and repurchase agreements with various
banks.

The Federal Deposit Insurance Corporation’s (FDIC) standard maximum deposit insurance amount fully
guarantees all deposit accounts up to $250,000. At times, cash in banks may be in excess of the FDIC limits. At
December 31, 2019, the Company had $18.4 million in overnight investment accounts (including money market
mutual funds – Level 1) that were not covered by FDIC’s general deposit insurance in addition to $7.5 million in
general deposits that exceeded FDIC limits. The investment accounts assets are normally 80% invested in U.S.
Treasury securities and repurchase agreements for those securities. We have not experienced any losses in our accounts
due to exceeding FDIC insurance limits or lack of FDIC coverage.

e) Investments--Equity securities for which the Company has no immediate plan to sell but that may be
sold in the future are classified as available for sale. Beginning in 2018, our equity securities are carried at fair value
and unrealized gains and losses, are recorded in net income. Realized gains and losses, based on the specifically
identified cost of the security, are included in net income. Equity method investments are recorded initially at cost and
subsequently adjusted for our share of the net income or loss and cash contributions or distributions to or from these
entities. Our equity method investment involves an entity for which it is not practical to determine fair value.

f) Receivables--Accounts receivable are stated at the amount billed to customers. The Company
provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical
collection information and existing economic conditions. Accounts receivable are ordinarily due 30 days after the
issuance of the invoice. Accounts past due are considered delinquent. Delinquent receivables are written off based on
individual credit evaluation and specific circumstances of the customer.
8.
 At December 31, 2019, the Company had no customers that comprised more than ten percent (10%) of total
outstanding accounts receivable. At December 31, 2018, the Company had one customer that comprised approximately
eleven percent (11%) of total outstanding accounts receivable.

g) Inventories--Inventories of finished cement and work in process are recorded at the lower of cost or
market on a last-in, first-out (LIFO) basis. Total inventories reported under LIFO amounted to $11.2 million and
$12.1 million as of December 31, 2019 and 2018, respectively. Under the average cost method of accounting (which
approximates current cost), these inventories would have been $2.3 million, $1.5 million and $2.2 million higher than
those reported at December 31, 2019, 2018 and 2017, respectively. The cost of manufactured items includes all
material, labor, factory overhead and production-related administrative overhead required in their production.

We incurred a permanent reduction in the LIFO layers of work in process resulting in liquidation gains of $0.3
million for 2019. The liquidation gains were recognized as reductions of cost of sales. We did not incur any material
liquidation gains in the LIFO layers for 2018 or 2017.

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 using the average cost method.

Inventories of fuel, gypsum, paper sacks and other are used in the manufacture of cement. The operating and
maintenance supplies consist primarily of spare parts for our cement manufacturing equipment.

h) 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. The Company did not capitalize any interest in 2019 or 2018. During 2017, the
Company capitalized approximately $34,700 of interest expense related to current construction projects.

The Company records depreciation, depletion and amortization related to manufacturing operations in Cost of
Sales; those related to general operations are recorded in Selling, General and Administrative Expenses; and those
related to non-operational activities are in Other, net on the Consolidated Statements of Income. The approximate
amounts included in each line item as of December 31, 2019, 2018 and 2017 are as follows:

2019 2018 2017

Cost of Sales $ 15,300,000 $ 14,400,000 $ 12,900,000
Selling, General and Administrative Expenses 1,300,000 1,900,000 1,700,000
Other, net 200,000 400,000 200,000
Total $ 16,800,000 $ 16,700,000 $ 14,800,000

Depreciation of property, plant and equipment is provided by charges to operations over the estimated useful
lives of the assets using accelerated methods. The majority of the Company’s buildings, machinery and equipment are
depreciated using 200% (double) declining balance depreciation. Some of the assets used in the Cement Business
manufacturing process are depreciated using 150% declining balance depreciation. The Company switches to straight
line depreciation once it exceeds the amount computed under the declining balance method being used until the asset is
fully depreciated. The Company does not depreciate construction in process. 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.

The Company continually evaluates whether events or changes in circumstances have occurred that would
indicate that the carrying amount of long-lived assets may not be recoverable. An impairment loss would be recognized
and the asset cost would be adjusted to fair value when undiscounted estimated future cash flows expected to result
from the use of the asset and its eventual disposition is less than its carrying amount. The impairment loss would be the
amount by which the carrying amount of a long-lived asset exceeds its fair value. Various factors that the Company
considers in its review include changes in expected use of the assets, changes in technology, changes in operating
9.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

performance and changes in expected future cash flows. No asset impairment was recognized during the years ended
December 31, 2019, 2018 and 2017.

i) Leases--On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842), electing the
package of practical expedients permitted within the new standard. After evaluating each of its lease arrangements the
Company has determined the standard will not materially impact our results of operations or liquidity.

j) Income Taxes--Deferred tax assets and liabilities are recognized for the tax effects of differences
between the financial statement and tax bases of assets and liabilities. A valuation allowance is established to reduce
deferred tax assets if it is more likely than not that a deferred tax asset will not be realized. The Company uses the
specific identification (or portfolio) method for reclassifying material stranded tax effects in accumulated other
comprehensive income (AOCI) to earnings.

The Company elected to apply the provisions of ASU 2018-02, Income Statement - Reporting Comprehensive
Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. As a
result, the Company reclassified $2.0 million from AOCI to retained earnings in December of 2017.

k) Revenue Recognition--There have been no changes to the amount or timing of our revenue
recognition as a result of our adoption of ASU 2014-09, Revenue from Contracts with Customers, which the Company
adopted in 2018 using the modified retrospective transition approach. The Company records revenue from the sale of
cement, ready-mixed concrete, concrete products and sundry building materials following delivery of the products to
customers, which is the point in time when the Company’s performance obligation with the customer is satisfied. In the
event the Company receives advance payment on orders, we defer revenue recognition until the product is delivered.
See Note 11 “Lines of Business” for the Company’s revenue disaggregated by segment for 2019, 2018 and 2017.

l) Cost of Sales--The Company considers all production and shipping costs, (gain) loss on disposal of
operating assets, inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs and
internal transfer costs as cost of sales.

m) Selling, General and Administrative Expenses--Selling, general and administrative expenses consist
of sales personnel salaries and expenses, promotional costs, accounting and IT personnel salaries and expenses,
director and administrative officer salaries and expenses, legal and professional expenses and other expenses related to
overall corporate costs.

n) Other, net--Other, net contains miscellaneous nonoperating income (expense) items excluding interest
income, interest expense, gains (losses) on sale of equity investments, pension and postretirement benefit income,
unrealized gains (losses) on equity investments (in 2019 and 2018), realized loss on impairment of equity investments
(in 2017) and dividend income.

o) Earnings per Share--Basic earnings per share is based on the weighted average common shares
outstanding during each year. Diluted earnings per share are based on the weighted average common and common
equivalent shares outstanding each year. Monarch has no common stock equivalents and therefore does not report
diluted earnings per share. The weighted average number of shares outstanding was 3,860,789 in 2019, 2018 and 2017.

p) Taxes Collected from Customers and Remitted to Governmental Authorities--Taxes collected

from customers and remitted to governmental authorities are presented in the accompanying consolidated statements of
income on a net basis.

q) Self Insurance--The Company has elected to self-insure certain costs related to employee and retiree
health and accident benefits programs. Costs resulting from self-insured losses are charged to income when
incurred. Health benefits provided to employees in the Ready-Mixed Concrete Business and health and accident
benefits provided to employees in the Cement Business are totally self-insured but are subject to an individual stop loss
10.
of $100,000 and $200,000 for the Ready-Mixed Concrete Business and the Cement Business, respectively, with an
aggregate stop loss of 120% for both lines of business.

r) Disclosure about Fair Value of Financial Instruments--Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. Cash and cash equivalents, receivables, accounts payable and short and long-term debt have
carrying values that approximate fair values. Investment fair values equal quoted market prices, if available. If quoted
market prices are not available, fair value is estimated based on quoted market prices of similar securities.

s) Intangibles - Goodwill and Other--Goodwill represents the excess of cost over the fair value of net
assets of businesses acquired. Goodwill acquired in a purchase business combination is not amortized, but is tested for
impairment on an annual basis. The Company performed a qualitative assessment of its goodwill during the fourth
quarter of 2019 and determined that its goodwill is not impaired and therefore no impairment was required.

Goodwill is approximately $4.8 million and $4.8 million at December 31, 2019 and 2018, respectively, and is
included in Other, Assets.

(2) FAIR VALUE

Realized gains (losses) on equity investments are computed using the specific identification method. Fair value
is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date.

Cash and cash equivalents, receivables, accounts payable and short and long-term debt have carrying values
that approximate fair values. The Company’s valuation techniques used to measure the fair value of its marketable
equity securities were derived from quoted prices in active markets for identical assets. Equity investments that do not
have readily determinable market prices were remeasured to fair value upon the occurrence of an observable price
change.

The Company has no liabilities at either date requiring remeasurement to fair value on a recurring basis in the
balance sheet. The Company has no additional assets or liabilities at either date requiring remeasurement to fair value
on a non-recurring basis in the balance sheet.

(3) INVESTMENTS

Equity Investments

The Company adopted ASU 2016-01, Financial Instruments, in the first quarter of 2018 and recorded a $21.2
million cumulative effect adjustment to retained earnings as of January 1, 2018 to implement the standard. Beginning
in 2018, the Company is recognizing gross unrealized gains and losses on their investments in net income. The
following table shows the gross unrealized gains (losses) recorded in the income statement aggregated by investment
category at:
December 31, 2019 December 31, 2018
Cement industry $ 6,325,000 $ (6,800,000)
General building materials industry 7,430,000 (6,120,000)
Oil & gas refining and marketing industry 700,000 (2,380,000)
Residential construction industry 675,000 (190,000)
Total $ 15,130,000 $ (15,490,000)

11.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

The Company’s equity investments are measured using quoted prices in active markets for identical assets
(Level 1). The following table shows the fair value of the Company’s investments aggregated by investment category
at:
December 31, 2019 December 31, 2018
Cement industry $ 17,654,275 $ 11,261,206
General building materials industry 18,517,571 10,886,212
Oil & gas refining and marketing industry 7,823,000 6,384,000
Residential construction industry 2,254,280 998,016
Total $ 46,249,126 $ 29,529,434

Equity Method Investments

The Company owns common stock of GFI, a privately-owned company in the brick industry. The Company
has determined that it has the ability to exercise significant influence, but not control, over the operating and financial
policies of GFI. Consequently, the equity method of accounting is used for the investment.

Pertinent information about the Company’s investment in GFI is as follows:

2019 2018 2017

Carrying value $ 9,532,763 $ 8,647,806 $ 7,597,662
Ownership percentage 32.46% 32.41% 32.04%
Cash dividends received $ 61,095 $ 52,335 $ 42,271
Undistributed earnings 4,747,845 3,813,953 2,801,154
Difference between carrying amount and
the underlying equity in net assets* (93,524) (44,589) (81,933)
Equity in earnings 933,892 1,012,799 852,343

* The difference between carrying amount and the underlying equity in net assets is in a memo account allocated
to goodwill.

During 2019, 2018 and 2017, the Company purchased $0.9 million, $0.8 million and $1.4 million,
respectively, of brick from GFI in arm’s length transactions in the normal course of business for resale to third parties.
The Company eliminated intra-entity profits or losses for its proportionate share of GFI’s common stock for inventory
still remaining with the Company until such profits or losses were realized in transactions with third parties. Amounts
due to GFI for Company purchases were not significant at December 31, 2019 and 2018.

The Company’s equity method investment is reviewed for impairment on a periodic basis or if an event occurs
or circumstances change that indicate the carrying amount may be impaired. This assessment is based on a review of
the investment’s performance and a review of indicators of impairment to determine if there is evidence of a loss in
value of the investment. Factors the Company considers include:

 Absence of the Company’s ability to recover the carrying amount;

 Inability of the equity affiliate to sustain an earnings capacity which would justify the carrying amount of the
investment; and
 Significant litigation, bankruptcy or other events that could impact recoverability.

For an equity investment with impairment indicators, the Company measures fair value on the basis of discounted cash
flows or other appropriate valuation methods. If it is probable that the Company will not recover the carrying amount
of its investment, the impairment is recorded in earnings, and the equity investment balance is reduced to its fair value
accordingly. After review, the Company does not consider its equity method investment, for which fair value
approximates carrying value, to be impaired at December 31, 2019 or 2018.

12.
(4) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment and their estimated useful lives at December 31, 2019 and 2018 consisted of:

Lives (Years) 2019 2018

Quarry land $ 2,004,549 $ 2,004,549
Other land 9,904,633 8,909,048
Buildings and improvements 15 – 39 33,838,648 33,587,995
Cement manufacturing equipment 15 – 25 159,691,727 157,754,746
Ancillary equipment 5 – 10 14,564,001 14,890,961
Ready-mix and concrete production
machinery and equipment 5 – 15 41,259,672 39,791,790
Transportation and mobile equipment 3–7 60,266,627 56,109,828
Office machinery, equipment,
furniture and fixtures 3 – 10 8,145,454 7,799,063
Construction in process 20,188,956 15,275,210
$ 349,864,267 $ 336,123,190
Less: Accumulated depreciation and depletion 261,831,399 247,734,083
$ 88,032,868 $ 88,389,107

(5) REVOLVING LOAN AND LONG-TERM DEBT

On December 31, 2018, the Company entered into a new credit agreement with its current lender, BOKF, NA
dba Bank of Oklahoma (Bank of Oklahoma), which amended and restated its revolving loan. The Company’s current
agreement provides for a $15.0 million revolving loan maturing on December 31, 2021. Interest rates on the
Company’s revolving loan are variable and based on the rate of interest regularly published by the Wall Street Journal
and designated as the U.S. Prime Rate (hereto referred to as the WSJ prime rate) less 1.50% with a 1.50% interest rate
minimum or floor. Interest rates on the Company’s term loan were variable and based on the WSJ prime rate less
1.25% with a 1.75% interest rate minimum or floor. The agreement requires the Company to pledge its investment
account, receivable accounts and inventory to Bank of Oklahoma as collateral for the revolving loan. The Company is
obligated to maintain at least $12.0 million in its pledged investment account. The carrying value of receivables,
inventory and the investment account pledged as collateral was $18.9 million, $40.8 million and $32.3 million,
respectively as of December 31, 2019. The agreement also contains financial covenants requiring the Company, as of
the end of any fiscal quarter, to maintain a minimum tangible net worth before accumulated other comprehensive
income (loss) of $95.0 million and a minimum tangible net worth after accumulated other comprehensive income
(loss) of $85.0 million. The Company was in compliance with these requirements at year end.

As of December 31, 2019 and 2018, there was nothing borrowed against the revolving loan.

At December 31, 2019 and 2018, other long-term debt in the table below is comprised of $1.5 million and $2.2
million, respectively, related to the settlement of the Pensmore lawsuit.

2019 2018
Other $ 1,471,154 $ 2,164,571
Less current maturity of long-term debt 750,000 750,000
Total long-term debt $ 721,154 $ 1,414,571

Aggregate annual maturities of long-term debt as of December 31, 2019 are:

2020 $ 750,000
2021 721,154
$ 1,471,154

13.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

(6) INCOME TAXES

The components of the provision for federal and state income taxes in the accompanying consolidated
statements of income are as follows:
2019 2018 2017
Taxes currently payable $ 4,296,000 $ 5,024,000 $ 6,920,000
Deferred income taxes 3,209,000 (1,814,000) 775,000
Provision for income taxes $ 7,505,000 $ 3,210,000 $ 7,695,000

A reconciliation of income tax expense at the statutory rate to the Company’s actual income tax expense is as
follows:

2019 2018 2017

Computed at statutory rate
(2019 and 2018-21%; 2017-34%, over $10 million-35%) $ 8,334,000 $ 3,829,000 $ 9,891,000
Increase (decrease) resulting from:
State income taxes, net of federal
tax benefit 1,086,000 632,000 564,000
Percentage depletion (716,000) (970,000) (1,399,000)
Valuation allowance (215,000) - -
Domestic production activities deduction - - (491,000)
Current year tax credits (995,000) (40,000) (50,000)
Dividends received deduction (79,000) (76,000) (159,000)
Change in deferred tax rate - - (620,000)
Other 90,000 (165,000) (41,000)
Provision for income taxes $ 7,505,000 $ 3,210,000 $ 7,695,000

The tax effects of significant temporary differences relating to deferred taxes, net of valuation allowances, on
the balance sheets were:
2019 2018
Allowance for doubtful accounts $ 144,000 $ 134,000
Accrued vacation 362,000 361,000
Depreciation (161,000) (258,000)
Postretirement benefits 3,944,000 3,445,000
Pension liability 1,630,000 598,000
Unrealized holding gains (7,350,000) (3,410,000)
Tax carryforwards 2,286,000 1,283,000
Settlement of lawsuit 382,000 563,000
Impairment on investments 215,000 215,000
Other, net 160,206 301,597
Net deferred tax assets* $ 1,612,206 $ 3,232,597

*Net of valuation allowance of $1,315,000 and $1,643,000 for 2019 and 2018, respectively.

Some of the Company’s subsidiaries file separate state income tax returns resulting in net operating loss
carryforwards. In addition, some subsidiaries separately filed federal income tax returns in prior years which also
resulted in net operating loss carryforwards. The provision for income taxes and income tax liabilities recorded in the
financial statements include those separate calculations. The deferred taxes resulting from these and other tax
carryforwards are included in the above table net of valuation allowances. The valuation allowance has been used to
reduce the tax benefit associated with the tax carryforwards. The following table presents the expiration dates of the
Company’s carryforwards, net of valuation allowances, for tax purposes as of December 31, 2019:

14.
 Tax
Expiration Date Carryforwards
2024 $ 3,000
2025 132,000
2026 12,000
2029 183,000
2032 348,000
2033 571,000
2034 38,000
2035 998,000
$ 2,285,000

The Company uses a recognition threshold of “more likely than not” that a tax position would be sustained
upon examination before any part of the benefit of that position is recognized in the Company’s financial statements.

The Company, or one of its subsidiaries, files income tax returns in the U.S. Federal jurisdiction and various
state jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal or state income tax
examinations by tax authorities for years before 2016. The Company believes it is not subject to any significant tax
risk. The Company does not have any accrued interest or penalties associated with any unrecognized tax benefits, nor
were any significant interest expenses recognized during the years ended December 31, 2019, 2018 and 2017.

(7) PENSION AND OTHER POSTRETIREMENT BENEFITS

In March 2017, the Financial Accounting Standards Board (FASB) issued ASU 2017-07, Improving the
Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which changes the
presentation of the net periodic benefit cost in the income statement. Employers will present the service cost
component of net periodic benefit cost in the same income statement line items as other employee compensation costs.
The other components of net benefit cost will be included in nonoperating expense. A practical expedient is provided
that permits entities to use the components of cost disclosed in prior years as a basis for the retrospective application of
the new income statement presentation. The adoption of this standard, including the practical expedient, did not have a
material impact on our consolidated financial statements. For the year ended December 31, 2017, the Company
reclassified $(1.8) million and $(0.5) million from cost of sales and selling, general and administrative (income)
expenses, respectively, to nonoperating income.

Postretirement Benefits

Monarch provides certain postretirement health and life insurance benefits to all retired employees in the
Cement Business who, as of their retirement date, meet the eligibility requirements. These benefits are self-insured by
Monarch and are paid out of Monarch’s general assets. Monarch expects 2020 cash expenditures for this plan to be
approximately $968,000 which is equal to the net expected benefit payments for the year. In 2017, we initiated a
change in our postretirement benefits for our Cement Business staff employees from a defined benefit to a defined
contribution structure. The change was effective January 1, 2018.

Monarch uses a December 31 measurement date for the plans. At December 31, 2019 and 2018, the current
portion of the accrued benefit cost of approximately $968,000 and $956,000, respectively, is recorded in compensation
and benefits. Information about the plans’ funded status and postretirement cost follows:

15.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

2019 2018
Change in benefit obligation:
Beginning of year $ 14,722,649 $ 15,751,631
Service cost 218,113 235,568
Interest cost 580,690 545,879
Actuarial (gain)/loss 1,534,530 (971,954)
Benefits paid* (798,546) (838,475)
Benefit obligation at end of year $ 16,257,436 $ 14,722,649

Change in fair value of plan assets:

Beginning of year $ - $ -
Employer contributions* 798,546 838,475
Benefits paid* (798,546) (838,475)
Fair value of plan asset at end of year $ - $ -

Weighted Average Assumptions used to determine

benefit obligations:
Discount rate 3.00% 4.00%
Trend rate N/A N/A

Funded status, end of year:

Fair value of plan assets $ - $ -
Benefit obligations (16,257,436) (14,722,649)
Funded status = year-end benefit liability $ (16,257,436) $ (14,722,649)

*Amounts are net of retiree prescription drug subsidy received during the fiscal year.

Accrued Postretirement Benefits represents the accumulated difference between actual contributions and actual
expenses from past years. It is updated from the prior year as follows:

2019 2018
A. Accrued postretirement benefits at beginning of year $ (17,679,506) $ (20,323,984)
B. Net periodic postretirement benefit income (1,235,205) (1,806,003)
C. Employer contributions 798,546 856,619
D. Retiree drug subsidy - 18,144
E. Accrued postretirement benefits at end of year $ (15,645,755) $ (17,679,506)
(A) - (B) + (C) - (D)

Following are the components of net periodic benefit cost:

2019 2018 2017

Components of net periodic benefit cost:
Service cost $ 218,113 $ 235,568 $ 493,532
Interest cost 580,690 545,879 877,968
Amortization of prior service cost (2,431,958) (3,136,032) (3,215,800)
Recognized net actuarial loss 397,950 548,582 423,727
Net periodic benefit income $ (1,235,205) $ (1,806,003) $ (1,420,573)

Weighted Average Assumptions used to determine

net periodic postretirement benefit cost:
Discount rate 4.00% 3.50% 4.00%
Trend rate N/A N/A 7.0% for
fiscal 2017
decreasing
0.5%/yr to 5.0%

16.
 Amounts recognized in the balance sheets consist of:

2019 2018
Current liability $ (968,000) $ (956,000)
Noncurrent liability (15,289,436) (13,766,649)
Net amount recognized $ (16,257,436) $ (14,722,649)

Amounts recognized in accumulated other comprehensive income consist of:

2019 2018
Net actuarial loss $ 7,090,608 $ 5,954,028
Prior service credit (6,478,927) (8,910,885)
$ 611,681 $ (2,956,857)

Other changes in benefit obligations recognized in other comprehensive income:

2019 2018 2017
Current year actuarial (gain)/loss $ 1,534,530 $ (971,954) $ 1,537,807
Amortization of actuarial loss (397,950) (548,582) (423,727)
Current year prior service credit - - (8,127,949)
Amortization of prior service credit 2,431,958 3,136,032 3,215,800
Total recognized in other comprehensive income $ 3,568,538 $ 1,615,496 $ (3,798,069)

Estimated amounts that will be amortized from accumulated other comprehensive income into net periodic
postretirement benefit cost in 2020:

Actuarial loss $ 480,000

Prior service cost (2,431,958)
Total $ (1,951,958)

The amortization schedule for prior service costs is as follows:

12/31/2019
Date Initial Initial Outstanding Annual
Description Established Amount Period Balance Amortization
Change in Benefit Structure 12/31/2015 $ (4,952,676) 5.70 years $ (1,477,112) $ (868,891)
12/31/2017 (8,127,949) 5.20 years (5,001,815) (1,563,067)
$ (6,478,927) $ (2,431,958)

ASC Topic 715 requires the disclosure of the impact on certain items of a percentage point increase and
decrease in the medical trend rates. Since there is no trend in assumption in 2019, this has no impact on the 2019
service cost and interest cost, or the accumulated postretirement benefit obligation at December 31, 2019.

The accumulated postretirement benefit obligation as of December 31, 2019 is shown below:

HRA Plan Provisions $ 16,257,436

Expected benefit payments and expenses shown separately for the next five fiscal years and in the aggregate
for the subsequent five-year period are presented below:

December 31, 2020 $ 968,273

December 31, 2021 962,173
December 31, 2022 947,910
December 31, 2023 928,736
December 31, 2024 915,859
Five fiscal years ending December 31, 2029 4,646,747

17.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

Pension Plans

Monarch has noncontributory defined benefit pension plans covering substantially all employees in the
Cement Business who meet the eligibility requirements. Monarch’s funding policy is to contribute annually an amount
within the minimum/maximum range of tax deductible contributions. In 2020, there are no minimum expected
contributions to the plans. In 2019, we initiated a soft freeze in our defined benefit pension for our Cement Business
staff and production employees closing them to new entrants. The change was effective January 1, 2020. In addition to
the soft freeze, all Cement business staff and production employees hired after December 31, 2019 will have the option
to participate in a new defined contribution plan. These plans allow the Company, at its discretion, to match the
employee’s contributions based on certain formulas dictated in the respective Plan Documents.

Monarch uses a December 31 measurement date for the plans. Information about the plans’ funded status and
pension cost follows:

2019 2018
Change in benefit obligation:
Benefit obligation at beginning of year $ 52,847,698 $ 55,300,128
Service cost 1,098,246 1,174,186
Interest cost 2,131,247 1,937,797
Actuarial (gain)/loss 7,371,698 (3,045,065)
Plan amendment 11,860 -
Benefits paid (2,676,727) (2,519,348)
Benefit obligation at end of year $ 60,784,022 $ 52,847,698

2019 2018
Change in plan assets:
Fair value of plan assets at beginning of year $ 51,169,970 $ 55,398,348
Actual return on plan assets 6,366,956 (5,709,030)
Employer contributions 283,000 4,000,000
Benefits paid (2,676,727) (2,519,348)
Fair value of plan assets at end of year $ 55,143,199 $ 51,169,970

Funded status, end of year:

Fair value of plan assets $ 55,143,199 $ 51,169,970
Benefit obligation 60,784,022 52,847,698
Funded status = pension liability, end of year $ (5,640,823) $ (1,677,728)

The actuarial formula used to calculate the projected benefit obligation takes into account future increases in
pension contributions that would take place as the employees’ salaries increase. The accumulated benefit obligation
uses an actuarial formula to calculate the projected benefit obligation which assumes that the employees cease to work
for the Company at the time the estimation is made. The plans’ accumulated benefit obligation follows:

2019 2018
Accumulated benefit obligation, end of year $ 57,864,442 $ 50,757,374

Amounts recognized in the balance sheets consist of:

2019 2018
Noncurrent asset $ - $ -
Noncurrent liability (5,640,823) (1,677,728)
Net amount recognized $ (5,640,823) $ (1,677,728)

Amounts recognized in accumulated other comprehensive income not yet recognized as components of net
periodic benefit cost consist of:

18.
 2019 2018
Net actuarial loss $ 26,606,652 $ 24,010,791
Prior service cost 128,702 188,497
$ 26,735,354 $ 24,199,288
Less: Deferred tax 6,950,000 6,290,000
Additional pension liability, net of deferred tax $ 19,785,354 $ 17,909,288

Other changes in plan assets and benefit obligations recognized in other comprehensive income:

2019 2018 2017

Current year actuarial loss $ 4,488,532 $ 6,705,645 $ 3,366,770
Amortization of actuarial loss (1,892,671) (1,319,309) (1,083,990)
Current year prior service loss 11,860 - -
Amortization of prior service cost (71,655) (71,655) (91,427)
$ 2,536,066 $ 5,314,681 $ 2,191,353
Less: Deferred tax (660,000) (1,380,000) (1,770,000)
Minimum pension liability, net of deferred tax $ 3,196,066 $ 6,694,681 $ 3,961,353

Estimated amounts that will be amortized from accumulated other comprehensive income into net periodic
pension cost in 2020:
Actuarial loss $ 2,093,000
Prior service cost 65,000
Total to be amortized $ 2,158,000

The amortization schedule for prior service costs is as follows:

12/31/2019 2019
Established Initial Initial Outstanding Amortization
Description Dec. 31 of: Amount Period Balance Amount
Unrecognized Prior Service Cost 2007* $ 876,119 13.41 years $ 78,641 $ 65,333
2009 55,026 12.50 years 11,006 4,402
2015 21,393 11.14 years 13,713 1,920
2019 25,342 9.21 years 25,342 -
$ 128,702 $ 71,655

* The negative plan amendment impact in 2019 partially offset the existing prior service cost bases.

Cumulative employer contributions in excess of net periodic pension cost are as follows:

2019 2018
A. Cumulative balance at beginning of year $ 22,521,560 $ 18,982,827
B. Net periodic pension cost 1,710,029 461,267
C. Contributions 283,000 4,000,000
D. Cumulative balance at end of year $ 21,094,531 $ 22,521,560
(A) - (B) + (C)

The weighted average assumptions used to determine net pension cost and benefit obligations as of
December 31, 2019, 2018 and 2017 are as follows:
2019 2018 2017
Benefit obligation:
Discount rate 3.00% 4.00% 3.50%
Expected return on plan assets 6.75% 7.00% 7.50%
Rate of compensation increase (Staff plan only) 3.50% 3.50% 3.50%
Pension cost:
Discount rate 4.00% 3.50% 4.00%
Expected return on plan assets 7.00% 7.50% 7.50%
Rate of compensation increase (Staff plan only) 3.50% 3.50% 3.50%

19.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

The following table presents the components of net periodic pension cost as of December 31, 2019, 2018 and
2017:
2019 2018 2017
Service cost $ 1,098,246 $ 1,174,186 $ 1,039,006
Interest cost 2,131,247 1,937,797 2,048,385
Expected return on plan assets (3,483,790) (4,041,680) (3,593,652)
Amortization of prior service cost 71,655 71,655 91,427
Recognized net actuarial loss 1,892,671 1,319,309 1,083,990
Net periodic pension expense $ 1,710,029 $ 461,267 $ 669,156

The Company has estimated the long-term rate of return on plan assets based primarily on historical returns on
plan assets as well as current facts and circumstances.

Plan assets are held by a trustee bank. A fund manager has been retained to make investment decisions within
guidelines specified by Monarch. The guidelines permit investment in both equities and fixed income securities
including common stocks, corporate bonds and debentures and U.S. Government securities. An investment committee
appointed by the Board also invests a portion of the funds in equity securities. Asset allocation is primarily based on a
strategy to provide stable earnings through investing in interest-generating or fixed income investments while still
permitting the plan to recognize potentially higher returns through investments in equity securities. Focusing on
balancing the risks and rewards of each broad asset class, the percentage of allocation between fixed income and
equity investments for 2019 and 2018 are as follows:
Equities 60%
Fixed Income 40%

The pension investment guidelines strive for diversification of equity securities among the various market
sectors and do not permit participation in higher risk investment strategies involving hedging activities and the use of
derivative instruments.

The plan allows a 5% fluctuation before assets are rebalanced. During periods of extreme market volatility,
the fluctuation may exceed 5% before rebalancing is complete. At December 31, 2019 and 2018, plan assets by
category were as follows:
2019 2018
Equities 56% 54%
Debt Securities 37% 37%
Other 7% 9%

Following is a description of the valuation methodologies used for pension plan assets measured at fair value
on a recurring basis and recognized in the accompanying balance sheets, as well as the general classification of
pension plan assets pursuant to the valuation hierarchy.

Fair value prices for all securities in the pension plan portfolio are provided by our trustee bank which utilizes
an internationally recognized independent pricing service. Where quoted market prices are available in an active
market, plan assets are classified within Level 1 of the valuation hierarchy. Level 1 plan assets include equity securities
which were priced at the market close. Level 2 assets have observable inputs other than Level 1 prices. Plan assets are
classified within Level 3 of the hierarchy when relevant observable inputs for a security are not available.

We have established control procedures in which we independently assess the pricing obtained from the trustee
bank which utilizes the pricing service. These internal processes include obtaining and reviewing available reports on
controls at the trustee bank and pricing service, evaluating the prices for reasonableness given market changes,
investigating anomalies and confirming determinations through discussions with the trustee bank.

20.
 The fair value of Monarch’s pension plan assets by asset category at December 31, 2019 and 2018 are as
follows:
Fair Value Measurements Using:
Quoted Prices
in Active Significant Significant
Markets for Observable Unobservable
Identical Assets Inputs Inputs
2019 Total (Level 1) (Level 2) (Level 3)
Cash and cash equivalents $ 3,936,771 $ 3,936,771 $ - $ -
Equity securities:
Consumer discretion 3,424,605 3,424,605 - -
Consumer staples 3,167,667 3,167,667 - -
Energy 4,062,728 4,062,728 - -
Financials 4,297,279 4,297,279 - -
Healthcare 1,836,061 1,836,061 - -
Industrials 2,210,474 2,210,474 - -
Information technology 2,580,942 2,580,942 - -
Materials 2,779,050 2,779,050 - -
Miscellaneous 653,743 653,743 - -
Real Estate 1,968,863 1,968,863 - -
Telecommunication 2,570,833 2,570,833 - -
Utilities 1,870,426 1,870,426 - -
Fixed income securities:
Intermediate Duration Fund 19,756,433 19,756,433 - -
Strategic Income Fund 27,324 27,324 - -
Total $ 55,143,199 $ 55,143,199 $ - $ -

2018
Cash and cash equivalents $ 4,426,674 $ 4,426,674 $ - $ -
Equity securities:
Consumer discretion 2,219,980 2,219,980 - -
Consumer staples 2,208,988 2,208,988 - -
Energy 4,083,086 4,083,086 - -
Financials 3,055,197 3,055,197 - -
Healthcare 2,049,162 2,049,162 - -
Industrials 1,959,111 1,959,111 - -
Information technology 2,555,238 2,555,238 - -
Materials 3,240,063 3,240,063 - -
Miscellaneous 616,691 616,691 - -
Real Estate 1,714,263 1,714,263 - -
Telecommunication 2,570,448 2,570,448 - -
Utilities 1,206,227 1,206,227 - -
Fixed income securities:
Intermediate Duration Fund 18,937,658 18,937,658 - -
Strategic Income Fund 327,184 327,184 - -
Total $ 51,169,970 $ 51,169,970 $ - $ -

The plans’ expected benefit payments as of December 31, 2019, shown separately for the next five fiscal years
and in the aggregate for the subsequent five-year period, are presented below:

2020 $ 3,285,476
2021 3,295,117
2022 3,311,589
2023 3,323,433
2024 3,297,247
Five fiscal years ending
December 31, 2029 16,998,170

21.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

The Company has defined contribution plans covering substantially all permanent employees of the Ready-
Mixed Concrete Business. These plans allow the Company, at its discretion, to match the employee’s contributions.
The Company contributed $177,869, $109,894 and $62,534 to these plans for the years 2019, 2018 and 2017,
respectively. The Company expects to contribute approximately $183,000 to these plans in 2020.

The Company contributes to multiemployer defined benefit pension plans under the terms of collective
bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer
plans are different from single-employer plans in the following aspects:

a) Assets contributed to the multiemployer plan by one employer may be used to provide benefits to
employees of other participating employers.

b) If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be
borne by the remaining participating employers.

c) If the Company chooses to stop participating in one of its multiemployer plans, the Company may be
required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

The Company’s participation in these plans for the annual period ended December 31, 2019, is outlined in the
table below. The Company considers only one plan it contributes to under collective bargaining agreements to be
significant. The “EIN/Pension Plan Number” column provides the plan’s Employer Identification Number (EIN) and
the three-digit plan number, if applicable. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone
status available in 2019 and 2018 is for the plan’s year-end at December 31, 2018 and 2017, respectively. The zone
status is based on information that the Company received from the plan and is certified by the plan’s actuary. Among
other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80%
funded and plans in the green zone are at least 80% funded. The “FIP/RP Status Pending/Implemented” column
indicates plans for which a financial improvement plan (FIP) or rehabilitation plan (RP) is either pending or has been
implemented. The last column lists the expiration dates of the collective bargaining agreements to which the plan is
subject. There have been no significant changes that affect the comparability of 2019, 2018 and 2017 contributions.

Pension
Protection
Act Zone Expiration
Status Contributions by Company Date of
FIP/RP Status Collective
EIN/Pension Plan Pending/ Surcharge Bargaining
Pension Fund Number 2019 2018 Implemented 2019 2018 2017 Imposed Agreement
Central States,
Southeast &
Southwest Areas 3/31/2022 &
Pension Plan 36-6044243/001 Red Red Yes $383,281 $375,918 $347,590 Yes 4/30/2022 (a)
Other Funds 122,049 117,585 49,936
$ 505,330 $ 493,503 $ 397,526

(a)
The Company is party to two collective bargaining agreements that require contributions to Central States, Southeast &
Southwest Areas Pension Plan. In 2019, 31% of the Company's contributions were required by a collective bargaining
agreement that expires 3/31/2022 and 69% were required by an agreement that expires 04/30/2022.

The Company was not listed in any of its multiemployer plans’ Forms 5500 as providing more than 5% of the
total contributions. Forms 5500 were not available for the plan year ending in 2019.

22.
(8) RECLASSIFICATION OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the reclassifications out of accumulated other comprehensive income (loss) for
the periods indicated and the affected line item in the statements where net income is presented:

Reclassification for 2019 2018 2017

Net periodic pension and postretirement costs in:
Other, net $ 69,682 $ 1,196,486 $ 1,616,656
Tax expense (20,000) (307,000) (642,000)
Net of tax $ 49,682 $ 889,486 $ 974,656

Unrealized net gains on available-for-sale securities in:

Gain on sale of equity investments $ - $ - $ 165,212
Tax expense - - (68,000)
Net of tax $ - $ - $ 97,212

Reclassifications, net of tax $ 49,682 $ 889,486 $ 1,071,868

See Note 7, “Pension and Other Postretirement Benefits”, for discussion of pension and postretirement amounts yet to
be reclassed in accumulated other comprehensive income.

(9) SIGNIFICANT ESTIMATES AND CERTAIN CONCENTRATIONS

Thirty nine percent (39%) of the Company’s employees are covered by various collective bargaining
agreements. One of the union contracts expire in 2020. The Company believes it has a good working relationship with
its employees and has been successful in negotiating multi-year union contracts without work stoppages.

The Company has noncontributory defined benefit pension plans and defined contribution postretirement
health plans that provide certain postretirement benefits to eligible employees. The benefit obligation is the actuarial
present value of all benefits attributed to services rendered prior to the valuation date based on the Entry Age Actuarial
Cost Method and the Projected Unit Credit Actuarial Cost Method, respectively. It is reasonably possible that events
could occur that would change the estimated amount of these liabilities materially in the near term. The financial
statements have been prepared using values and information currently available to the Company.

Economic and financial market conditions could adversely affect our results of operations in future periods.
Instability in the financial markets may make it difficult for certain of our customers to obtain financing, which may
significantly impact the volume of future sales and adversely impact the Company’s future operating results.

In addition, volatility of economic conditions could rapidly change the values of assets and liabilities recorded
in the financial statements, resulting in material future adjustments in investment values (including defined benefit
pension plan investments), allowances for accounts, net realizable value of inventory and realization of deferred tax
assets that could negatively impact the Company’s ability to meet debt covenants or maintain sufficient liquidity.

The Company is subject to claims and lawsuits that arise primarily in the ordinary course of business. The
Current portion of other long-term debt and Long-term debt in the accompanying balance sheet includes $0.8 million
and $0.7 million, respectively, related to the settlement of a lawsuit on July 18, 2017.

The Company invests in various equity securities which are exposed to market risks. Due to the level of risk
associated with certain equity securities, it is at least reasonably possible that changes in the values of equity securities
will occur in the near term and that those changes could materially affect the amounts reported in the accompanying
balance sheet.

23.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

(10) STOCKHOLDERS’ EQUITY

Capital Stock and Class B Capital Stock have the same rights except as follows: Class B Capital Stock
has voting 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 one vote per share and is freely transferable.

(11) LINES OF BUSINESS

The Company groups its operations into two lines of business - Cement Business and Ready-Mixed Concrete
Business. The Company’s business lines are separate business units that offer different products. The accounting
policies for each line are the same as those described in the summary of significant accounting policies. Corporate
assets include cash and cash equivalents, investments and other assets for 2019, 2018 and 2017. Corporate assets also
include deferred income taxes for 2019 and 2018 and refundable federal and state income taxes in 2018 and 2017.

Following is information for each line for the years ended December 31, 2019, 2018 and 2017:

Ready-Mixed Adjustments
Cement Concrete and
Business Business Eliminations Consolidated
For the Year Ended December 31, 2019
Sales to unaffiliated customers $ 90,518,219 $ 81,575,338 $ - $ 172,093,557
Intersegment sales 16,759,568 464,746 (17,224,314) -
Total net sales $ 107,277,787 $ 82,040,084 $ (17,224,314) $ 172,093,557
Income (loss) from operations $ 23,007,171 $ (1,102,940) $ 21,904,231
Other income, net 17,780,805
Income before income taxes $ 39,685,036
Identifiable assets at December 31, 2019 $ 105,735,516 $ 43,616,963 $ 149,352,479
Corporate assets 86,620,022
Total assets at December 31, 2019 $ 235,972,501

For the Year Ended December 31, 2018

Sales to unaffiliated customers $ 92,533,075 $ 81,362,269 $ - $ 173,895,344
Intersegment sales 16,624,186 400,363 (17,024,549) -
Total net sales $ 109,157,261 $ 81,762,632 $ (17,024,549) $ 173,895,344
Income (loss) from operations $ 26,622,873 $ (1,125,174) $ 25,497,699
Other loss, net (7,265,753)
Income before income taxes $ 18,231,946
Identifiable assets at December 31, 2018 $ 100,031,269 $ 44,349,216 $ 144,380,485
Corporate assets 61,924,766
Total assets at December 31, 2018 $ 206,305,251

For the Year Ended December 31, 2017

Sales to unaffiliated customers $ 86,976,259 $ 81,103,504 $ - $ 168,079,763
Intersegment sales 16,582,968 93,495 (16,676,463) -
Total net sales $ 103,559,227 $ 81,196,999 $ (16,676,463) $ 168,079,763
Income from operations $ 22,294,807 $ 2,510,128 $ 24,804,935
Other income, net 3,740,982
Income before income taxes $ 28,545,917
Identifiable assets at December 31, 2017 $ 96,387,430 $ 38,878,667 $ 135,266,097
Corporate assets 69,015,652
Total assets at December 31, 2017 $ 204,281,749

24.
 Total sales by line of business before adjustments and eliminations include both sales to unaffiliated customers
(as reported in the Company’s consolidated statements of income, comprehensive income and stockholders’ equity)
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 the Cement Business and Ready-Mixed Concrete Business, respectively,
was approximately: $8.6 million and $8.1 million in 2019; $9.3 million and $7.4 million in 2018; and $8.5 million and
$6.3 million in 2017. Capital expenditures for the Cement Business and Ready-Mixed Concrete Business, respectively,
were: $8.6 million and $7.9 million in 2019; $9.0 million and $9.6 million in 2018; $11.6 million and $7.3 million in
2017. Identifiable assets by line of business are those assets that are used in the Company’s operations in each industry.

During 2019, 2018 and 2017, there were no sales to any one customer in excess of 10% of consolidated
net sales.

(12) OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes the changes in each component of accumulated other comprehensive income
(loss), net of estimated tax:
2018 Change 2019
Unrealized appreciation on available-for-sale securities $ - $ - $ -
Pension liability adjustment (17,909,288) (1,876,066) (19,785,354)
Postretirement liability adjustment 2,871,857 (2,639,538) 232,319
$ (15,037,431) $ (4,515,604) $ (19,553,035)

2017 Change 2018

Unrealized appreciation on available-for-sale securities* $ 21,171,000 $ (21,171,000) $ -
Pension liability adjustment (13,974,607) (3,934,681) (17,909,288)
Postretirement liability adjustment 4,068,353 (1,196,496) 2,871,857
$ 11,264,746 $ (26,302,177) $ (15,037,431)

* Beginning January 1, 2018, unrealized appreciation on available-for-sale securities is recognized in net income. See Note 3,
“Investments”.

(13) ACQUISITIONS

Hays Ready-Mix, Inc.

On February 9, 2018, the Company purchased all of the common stock of Hays Ready-Mix, Inc. and the
ready-mix concrete assets of a related business located in Great Bend and Larned, Kansas. The combined business is
included in our Ready-Mixed Concrete Business, and was acquired primarily to obtain additional markets and to
improve manufacturing efficiencies. The consideration for acquiring Hays Ready-Mix stock and related assets totaled
$2.6 million.

In accordance with Accounting Standards Codification (ASC) 805, the Company determined the assets and
liabilities acquired constituted a business and applied purchase accounting to the assets acquired and the liabilities
assumed. Since Hays Ready-Mix is not a substantial subsidiary, pro forma information is not provided for the
combined entity. The following table summarizes the consideration paid for acquisition of the assets acquired and the
liabilities assumed at the acquisition date as well as the fair value at the acquisition date:

25.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019, 2018 AND 2017

Consideration:
Cash paid, gross $ 2,592,589

Fair Value of assets acquired and liabilities assumed:

Assets
Cash $ 7,079
Accounts receivable 196,395
Property, plant and equipment 1,037,000
Goodwill 2,127,376

Liabilities
Accounts payable (456,459)
Short-term debt (16,942)
Accrued liabilities (201,860)
Deferred taxes (100,000)
Total: $ 2,592,589

Neosho Concrete Products Company

On March 31, 2018, the Company purchased the ready-mix concrete assets of Neosho Concrete Products
Company, which is included in our Ready-Mixed Concrete Business, primarily to obtain additional markets and to
improve manufacturing efficiencies. The consideration for acquiring these assets totaled $0.9 million.

26.
 CORPORATE INFORMATION

DIRECTORS OFFICERS

Jack R. Callahan Walter H. Wulf, Jr.

CEO and Chairman of the Board
Mark A. Callaway
Kent A. Webber
David L. Deffner President
Robert M. Kissick *Robert M. Kissick
Vice Chairman of the Board and Vice President
Gayle C. McMillen
Tony D. Kasten
Byron J. Radcliff Chief Financial Officer and
Secretary-Treasurer
Robert K. Radcliff
Lisa J. Fontaine
Steve W. Sloan Assistant Secretary
Michael R. Wachter Kenneth G. Miller
Vice President - Cement Manufacturing
Walter H. Wulf, Jr.
N. Joan Perez
Walter H. Wulf, III
Vice President - Sales

*Not actively involved in the daily affairs of the Company

SHAREHOLDER INFORMATION

CORPORATE OFFICE TRANSFER AGENT AND REGISTRAR

449 1200 Street The Monarch Cement Company
P.O. Box 1000 P.O. Box 1000
Humboldt, KS 66748 Humboldt, KS 66748-0900
Phone: (620) 473-2222 shareholder.relations@monarchcement.com
Fax: (620) 473-2447
STOCK TRADING INFORMATION
AUDITORS Trading Symbol: MCEM
BKD, LLP Over-the-Counter (OTC) Market
Kansas City, Missouri
INVESTOR RELATIONS
ANNUAL MEETING Inquiries may be directed to Tony D. Kasten,
The annual meeting of the stockholders of Chief Financial Officer and Secretary-Treasurer,
The Monarch Cement Company is held the at the corporate address shown above.
second Wednesday in April of each year at the
Company’s corporate offices. FINANCIAL INFORMATION
The Company’s financial statements are
available on the Company’s website,
http://www.monarchcement.com
and on the OTC Market’s website,
https://www.otcmarkets.com.
 The Monarch Cement Company
Annual Report 2019

P.O. Box 1000 | Humboldt, Kansas 66748-0900