**UNITED STATES****SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.  20549**

**FORM 10-Q**

(MarkOne) [**X**]    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934.             For the quarterly period ended**September 30,2008,** or

[   ]   Transition report pursuant to Section 13 or 15(d) of the SecuritiesExchange Act of 1934.          For the transition period from                                              to                                                               .Commission file number:  **0-2757**                                                                                        

| **THE MONARCH CEMENT COMPANY**(Exact name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          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| **KANSAS**(state or other jurisdiction of incorporation or      organization)  
** 48-0340590**(IRS employer identification no.)              
**P.O. BOX 1000, HUMBOLDT, KANSAS**(address of principal executive offices)
**66748-0900**(zip code)
 Registrant's telephone number, including area code: **(620) 473-2222**

                                                                                                                  (former name, former address and former fiscalyear, if changed since last report) 

    Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.  YES  **X**     NO       

    Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, a non-accelerated filer or asmaller reporting company. See the definitions of "large accelerated filer,""accelerated filer" and "smaller reporting company" in Rule 12b-2 of theExchange Act.                                                        

Large accelerated filer                 
Accelerated filer   X 
Non-accelerated filer            
(Do not check if a smaller reporting company)
Smaller reporting company           
Indicateby check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). YES          NO   X  

As of **October 28, 2008**, there were2,521,168 shares of Capital Stock, par value $2.50per share outstanding and 1,505,790 shares of Class B Capital Stock, par value$2.50 per share outstanding. 

PART I  -  FINANCIAL INFORMATION

The condensed consolidated financial statementsincluded in this report have been prepared by our Company without audit. Certaininformation and footnote disclosures normally included in financial statementsprepared in accordance with generally accepted accounting principles have beencondensed or omitted.  Our Company believes that the disclosures are adequate tomake the information presented not misleading.  The accompanying consolidatedfinancial statements reflect all adjustments that are, in the opinion ofmanagement, necessary for a fair statement of the results of operations for theinterim periods presented.  Those adjustments consist only of normal, recurringadjustments.  The condensed consolidated balance sheet of the Company as ofDecember 31, 2007 has been derived from the audited consolidated balance sheetof the Company as of that date.  These condensed consolidated financialstatements should be read in conjunction with the consolidated financialstatements and notes thereto included in our Company's most recent annual reporton Form 10‐K for 2007 filed with the Securities and Exchange Commission.  Theresults of operations for the period are not necessarily indicative of theresults to be expected for the full year.

Item 1.       Financial Statements

 
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSSeptember 30, 2008 and December 31, 2007ASSETS2 0 0 8    2 0 0 7     CURRENT ASSETS:(Unaudited)      Cash and cash equivalents       $     2,982,435 $     4,404,116     Receivables, less allowances of      $715,000 in 2008 and       $640,000 in 2007 for doubtful accounts           22,306,938 13,531,221     Inventories, priced at cost which is not in excess of      market-          Finished cement $     2,969,671 $     6,110,974           Work in process       158,597      2,569,641           Building products       5,076,604      4,518,379           Fuel, gypsum, paper sacks and other      6,521,199      4,606,447           Operating and maintenance supplies      10,760,327      9,759,949    Total inventories        $   25,486,398 $   27,565,390     Deferred income taxes              635,000      635,000     Prepaid expenses              591,867      248,380   Total current assets       $   52,002,638  **$   46,384,107 **PROPERTY, PLANT AND EQUIPMENT, at cost, less      accumulated depreciation and depletion of      $148,471,281    in 2008 and $140,661,628 in 2007           92,606,509 93,301,169  DEFERRED INCOME TAXES       15,241,534       13,155,534  INVESTMENTS, $2,119,175 in 2008 and $2,060,850 in      2007 carried                    at cost with the balance at fair market value13,288,338 13,468,319OTHER ASSETS     1,413,015       1,179,116            $ 174,552,034 **$ 167,488,245 **LIABILITIES AND STOCKHOLDERS' INVESTMENT CURRENT LIABILITIES:   Accounts payable $ 10,319,420  $     6,413,945     Current portion of advancing term loan      2,169,256  2,181,524     Accrued liabilities      7,640,234  6,749,711        Total current liabilities $  20,128,910          $   15,345,180  LONG-TERM DEBT     16,262,361       18,024,478  ACCRUED POSTRETIREMENT BENEFITS      28,380,726       27,206,515  ACCRUED PENSION EXPENSE       5,427,816         5,848,510       MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES      708,864         709,038       STOCKHOLDERS' INVESTMENT:            Capital stock, par value $2.50 per share, one vote per share -      Authorized 10,000,000 shares, Issued      2,521,168 shares      at 9/30/2008 and 2,510,708 shares at 12/31/2007 $    6,302,920   $     6,276,770     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 1,505,790      shares at 9/30/2008 and 1,516,250 shares at      12/31/2007      3,764,475        3,790,625          Retained earnings    104,843,460       98,488,627     Accumulated other comprehensive loss(11,267,498)      (8,201,498) Total stockholders' investment $ 103,643,357    $ 100,354,524           $ 174,552,034    $ 167,488,245  See notes to condensed consolidated      financial statementsTHE MONARCH CEMENT COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGSFor the Three Months and Nine Months Ended September 30, 2008 and 2007 (Unaudited)       
For the Three Months Ended
For the Nine Months EndedSept. 30, 2008   Sept. 30, 2007   Sept. 30, 2008Sept. 30, 2007   NET SALES  $  48,876,781 $ 44,404,159  $116,962,489  $108,707,478  COST OF SALES   36,074,978            32,797,073  
            93,876,580         
            84,032,598         Gross profit from      operations $   12,801,803          $ 11,607,086  
 $ 23,085,909         
 $ 24,674,880  SELLING, GENERAL AND   ADMINISTRATIVE EXPENSES     3,973,522              3,628,773  11,867,519         11,020,204         Income from operations $    8,828,281          $  7,978,313  
 $ 11,218,390         
 $ 13,654,676  OTHER INCOME (EXPENSE):  Interest income $         53,413   $       57,401  $     191,149  $     193,454    Interest expense(236,550)(455,529)
      (771,220)
      (1,479,791)        Gains on equity investments -               297,012         
-                   
2,410,698          Dividend income75,869                54,746               177,382         
141,520    Other, net         153,925                 2,472  591,533         686,544          $         46,657          $      (43,898)$      188,844         $   1,952,425           Income      before taxes on income $    8,874,938          $   7,934,415  
 $      11,407,234         
 $ 15,607,101  PROVISION FOR INCOME TAXES              2,470,000                      2,450,000  3,200,000         4,850,000  NET INCOME $    6,404,938          $   5,484,415   $   8,207,234          $ 10,757,101  RETAINED EARNINGS, beg. of period    99,364,723     91,184,698  
   98,488,627  
   86,797,943        Less cash dividends926,201         885,931  
             1,852,401         
             1,771,862  RETAINED EARNINGS, end of period $ 104,843,460          $ 95,783,182   $104,843,460         $ 95,783,182  Basic earnings per share $                  1.59          $                1.36   $                2.04         $               2.67  Cash dividends per share $                  0.23          $                0.22   $                0.46         $               0.44                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFor the Three Months and Nine Months Ended September 30, 2008 and      2007 (Unaudited)
For the Three Months Ended
For the Nine Months EndedSept. 30, 2008Sept. 30, 2007Sept. 30, 2008Sept. 30, 2007NET INCOME $  6,404,938   $  5,484,415   $   8,207,234   $ 10,757,101  UNREALIZED APPRECIATION (DEPRECIATION)     ON AVAILABLE FOR SALE SECURITIES (Net           of deferred tax expense (benefit) of $(524,000), ($804,000),      $(2,044,000),and $48,000, respectively)    (786,000)    (1,208,988)(3,066,000)72,698  LESS:  RECLASSIFICATION ADJUSTMENT FOR    REALIZED GAINS INCLUDED      IN   NET INCOME(net of deferred tax expense   of $-0-, $120,000, $-0-,and $964,000, respectively)    -            177,012  -         1,446,698  COMPREHENSIVE INCOME$  5,618,938  $  4,098,415   $ 5,141,234   $  9,383,101  See notes to condensed consolidated financial statementsTHE MONARCH CEMENT COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFor the Nine Months Ended September 30, 2008 and      2007 (Unaudited) 2008      2007     OPERATING ACTIVITIES:  Net income $  8,207,234    $  10,757,101    Adjustments to reconcile net income      to    net cash provided by operating activities:      Depreciation, depletion and amortization      8,830,955        8,791,339        Minority interest in losses      of subsidiaries               (174)               (124,511)      Deferred income taxes                     (42,000)                     (442)      Gain on disposal of assets        (216,899)        (468,784)      Realized gain on sale of      equity      investments                  -                                 (2,410,698)      Change in assets and liabilities:          Receivables, net             (8,775,717)        (4,616,376)          Inventories    2,305,770       (4,429,252)          Refundable income taxes        -                                739,574            Prepaid expenses             (343,487)             (340,197)          Other assets            105,413                    15,992            Accounts payable and accrued      liabilities      7,069,265        3,256,719            Accrued postretirement benefits              1,174,211               1,262,173            Accrued pension expense                (420,694)                (128,517)        Net cash      provided by operating activities $  17,893,877    $  12,304,121   INVESTING ACTIVITIES:     Acquisition of property, plant and equipment $  (6,899,507)  $  (5,955,849)  Proceeds from disposals of property, plant      and equipment              232,550                528,134    Payment for acquisition of business(2,319,934)       -          Payment for purchases of equity investments    (4,930,019)               (2,641,074)  Proceeds from disposals of equity      investments                        -         3,448,365    Purchases of subsidiaries' stock-                      (189,741)        Net cash      used for investing activities $ (13,916,910)  $  (4,810,165) FINANCING ACTIVITIES:   Decrease in line of credit, net$           -           $   (2,542,439)  Payments on bank loans             (1,532,394) (1,509,387)  Payments on other long-term debt               (241,991)                (164,349)  Cash dividends paid     (3,624,263) (3,463,184)        Net cash used for financing      activities $   (5,398,648)  $  (7,679,359) Net decrease in cash and cash equivalents $   (1,421,681) $     (185,403)Cash and Cash Equivalents, beginning of period      4,404,116         2,410,623  Cash and Cash Equivalents, end of period $     2,982,435    $    2,225,220   Interest paid, net of amount capitalized $             788,714  $    1,496,680  Income taxes paid, net of refunds $     1,790,000  $    2,991,280  Capital equipment additions included in      accounts payable $              44,680  $           707,736  See notes to condensed consolidated financial      statementsTHE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO THE CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008 and 2007 (Unaudited), and December 31, 2007
  -  For a summary of accounting policies, the readershould refer to Note 1 of the consolidated financial statements included in ourCompany's most recent annual report on Form 10‐K.
-    For the nine months ended September 30, 2008, we incurred a temporary LIFOliquidation gain due to reductions in finished cement and work in processinventory of $.8 million which we expect to be restored by the end of the year. The temporary LIFO liquidation gain has been deferred as a component of accruedliabilities.  We did not have any temporary LIFO liquidation gains during the ninemonths ended September 30, 2007. For the three months ended September 30, 2008,we incurred a temporary LIFO liquidation gain due to reductions in finishedcement and work in process inventory of $.8 million which we expect to berestored by the end of the year.  We did not have any temporary LIFOliquidation gains during the three months ended September 30, 2007.  

During the nine months ended September 30, 2008we incurred a permanent reduction in the LIFO layers of work in process andcement inventories in the amount of $.7 million.  The $.7 millionliquidation gain was recognized as a reduction of cost of sales. We did notrecognize any LIFO liquidation gains during the nine months ended September 30,2007. We did not incur any permanent reductions in the LIFO layers during thethree months ended September 30, 2008 or September 30, 2007. 
-  Basic earnings per share of capital stock has beencalculated based on the weighted average shares outstanding during each of thereporting periods.  The weighted average number of shares outstanding was4,026,958 in the third quarter of 2008 and 2007 and in the firstnine months of2008 and 2007.  The Company has no commonstock equivalents and therefore, does not report diluted earnings per share. 
-  Our Company groups itsoperations into two lines of business - Cement Business and Ready-Mixed ConcreteBusiness.  The "Cement  Business" refers to our manufacture and sale of cementand "Ready-Mixed Concrete Business" refers to our ready-mixed concrete, concreteproducts, precast concrete construction, and sundry building materials business.  Corporate assets for 2008  and 2007  include cash and cash equivalents,  deferred income taxes, investments and other assets. Following is information for each line for  the periods indicated:
 

 
Cement    Business
 
Ready-Mixed    Concrete Business
 
Adjustments    and Eliminations
 
Consolidated
**For the Three Months    Ended 9/30/08**
 
 
 
 
 
 
 
  Sales to unaffiliated    customers
$   23,898,613 
 
$ 24,978,168  
 
$          ‐             
 
$ 48,876,781     
  Intersegment sales    
4,788,475 
 
       1,079  
 
  (4,789,554)
 
‐        
        Total net sales
 $   28,687,088 
 
$ 24,979,247  
 
$  (4,789,554)
 
$ 48,876,781     
 
 
 
 
 
 
 
 
  Income from    operations 
$     8,220,387
 
 $         607,894  
 
 
 
$   8,828,281  
  Other income, net
 
 
 
 
 
 
46,657  
           Income before    income taxes
 
 
 
 
 
 
$   8,874,938  
  Capital Expenditures
$    1,201,958 
 
$         827,443     
 
 
 
$   2,029,401     
 
 
 
 
 
 
 
 
**For the Three Months    Ended 9/30/07**
 
 
 
 
 
 
 
  Sales to unaffiliated    customers
$  20,650,604  
 
$ 23,753,555     
 
$          ‐        
 
$  44,404,159  
  Intersegment sales    
4,364,836  
 
-         
 
(4,364,836)
 
      -         
** **          Total net sales
$  25,015,440  
 
$ 23,753,555     
 
$  (4,364,836)
 
 $ 44,404,159     
 
 
 
 
 
 
 
 
  Income from    operations 
$    7,090,156  
 
$      888,157  
 
 
 
$  7,978,313  
  Other income    (expense), net
 
 
 
 
 
 
(43,898)
        Income before    income taxes
 
 
 
 
 
 
$  7,934,415  
  Capital Expenditures
$    2,025,171  
 
$         488,584 
 
 
 
$  2,513,755  
 

 
Cement    Business
 
Ready-Mixed    Concrete Business
 
Adjustments    and Eliminations
 
Consolidated
**For the Nine Months    Ended 9/30/08**
 
 
 
 
 
 
 
  Sales to unaffiliated    customers
$   53,060,536 
 
$ 63,901,953  
 
$          ‐             
 
$ 116,962,489     
  Intersegment sales    
12,006,567 
 
          1,079  
 
  (12,007,646)
 
‐        
        Total net sales
 $   65,067,103 
 
$ 63,903,032  
 
$  (12,007,646)
 
$  116,962,489     
 
 
 
 
 
 
 
 
  Income (loss) from    operations 
$     11,539,045
 
 $    (320,655)
 
 
 
$  11,218,390  
  Other income, net
 
 
 
 
 
 
188,844  
           Income before    income taxes
 
 
 
 
 
 
$   11,407,234  
  Capital Expenditures
$    2,192,725  
 
$   5,743,533     
 
 
 
$    7,936,258     
 
 
 
 
 
 
 
 
**For the Nine Months    Ended 9/30/07**
 
 
 
 
 
 
 
  Sales to unaffiliated    customers
$  50,676,721  
 
$ 58,030,757     
 
$          ‐        
 
$  108,707,478  
  Intersegment sales    
10,606,279  
 
-         
 
(10,606,279)
 
-            
** **          Total net sales
$  61,283,000  
 
$ 58,030,757     
 
$  (10,606,279)
 
 $ 108,707,478     
 
 
 
 
 
 
 
 
  Income from    operations 
$   13,651,260  
 
$            3,416  
 
 
 
$    13,654,676  
  Other income, net
 
 
 
 
 
 
1,952,425  
        Income before    income taxes
 
 
 
 
 
 
$   15,607,101  
  Capital Expenditures
$    4,802,868  
 
$  1,699,189  
 
 
 
$    6,502,057                                                                                  
 
Cement    Business
 
Ready-Mixed    Concrete Business
      
 
Consolidated
**Balance as of 9/30/08**                                   Identifiable Assets
$  96,894,209       
  $ 44,097,503                 $ 140,991,712  Corporate Assets                                 33,560,322                                     $ 174,552,034  
**Balance as of 12/31/07**                                   Identifiable Assets
$  98,071,562       
  $ 36,574,598                $ 134,646,160  Corporate Assets                                 32,842,085                                     $ 167,488,245                                                             -  The following table presents the components of  net periodic pension and postretirement benefit costs allocated to Cost of  Sales and Selling, General and Administrative expenses for the nine months  ended September 30, 2008 and 2007: 
Pension Benefits 
Other Benefits 
2008     
2007     
2008 
2007Service cost$ 589,949   $ 319,371   $   367,193  $ 391,857Interest cost1,831,407        994,064        1,134,506 1,233,191Expected return on plan assets (2,143,163) (1,100,509)  - -             Amortization of prior service cost77,786        43,604         - -             Recognized net actuarial gain 130,938   133,357    - -             Unrecognized net loss -    -         723,942 617,121    Net periodic expense       $ 486,917   $ 389,887   $ 2,225,641 $ 2,242,169
The following table presents the components of net periodic costs for the threemonths ended September 30, 2008 and 2007:
 
Pension Benefits 
Other Benefits 
2008     
2007     
2008 
2007Service cost$ 248,352   $ 108,637   $ 109,560 $ 130,469Interest cost770,969        338,139   338,506 410,591Expected return on plan assets(902,210) (374,347) -              -             Amortization of prior service cost32,746        14,832   -              -             Recognized net actuarial gain 55,121   45,362   -              -             Unrecognized net loss-       -       216,004 205,470    Net periodic expense       $ 204,978   $ 132,623   $ 664,070 $ 746,530
Monarch expects to contribute approximately $1,490,000 to the pension fundin 2008.  As of September 30, 2008, we have contributed about $920,000 in 2008 andanticipate contributing an additional $570,000 to this plan in 2008 for a total of$1,490,000. The other benefits consist of postretirement benefits that areself-insured by Monarch and are paid out of Monarch's general assets.  Aspreviously disclosed in our financial statements for the year ended December 31,2007, Monarch expects to contribute approximately $1,650,000 to this plan in2008.  As of September 30, 2008, we have contributed about $1,050,000 in 2008 and anticipatecontributing an additional $600,000 to this plan in 2008 for a total of $1,650,000.
-  A Monarch subsidiary, Monarch  and three of its officers are involved in a lawsuit with the former officers  of that subsidiary and companies formed by those officers.  All claims against  Monarch, its subsidiary and officers have been dismissed by the court; on the  counterclaims asserted by Monarch and the subsidiary, summary judgment on  liability has been granted against the former officers.  For additional  information on this matter, see Item 1, Part II of this report on Form 10-Q. 
-  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 2004. 
-  As of September 30, 2008, the amount of accounts payable  related to property, plant and equipment was $44,680 compared to December 31,  2007 which was $546,085.
-  The Company adopted the provisions of  the Financial  Accounting Standards Board (FASB) SFAS No. 157, "Fair Value Measurements".  SFASNo. 157 establishes a single definition of fair value and a framework formeasuring fair value, sets out a fair value hierarchy to be used to classify thesource of information used in fair value measurements and requires newdisclosures of assets and liabilities measured at fair value based on theirlevel in the hierarchy.  The standard describes three levels of inputs that  may be used to measure fair value.  Level 1 uses quoted prices in active  markets for identical assets or liabilities.  Level 2 uses observable  inputs other than Level 1 prices, such as quoted prices for similar assets or  liabilities; quoted prices in active markets that are not active; or other  inputs that are observable or can be corroborated by observable market data  for substantially the full term of the assets or liabilities.  Level 3  uses unobservable inputs that are supported by little or no market activity  and that are significant to the fair value of the assets or liabilities.  SFAS No. 157 is effective on a prospective basis  for all fiscal years beginning after November 15, 2007 and interim periods  within those fiscal years.  In February 2008, the FASB issued Staff  Positions (FSP) No. 157-1 and No. 157-2 which partially deferthe effective date of SFAS No. 157 for one year for certain nonfinancial assetsand liabilities and remove certain leasing transactions from its scope.  TheCompany is evaluating the impact, if any, the adoption of these FSPs will have on  the Company's consolidated financial statements. 

 

The following table summarizes the bases used to measure certain assets at fair value on a recurring basis in the balance sheet:
               Fair Value Measurements at Reporting Date      Using:      Assets:
Balance      at      09/30/08 
Quoted Prices in Active Markets for Identical Assets      (Level 1) 
Significant Other Observable Inputs      (Level 2) 
Significant Unobservable Inputs      (Level 3)Available-for-sale securities$ 11,169,163 $ 11,169,163 $            -                   $            -                  Total$ 11,169,163 $ 11,169,163 $       -                   $       -                                Assets:
Balance      at      12/31/07                        Available-for-sale securities$ 11,407,469 $ 11,407,469 $            -                   $            -                  Total$ 11,407,469 $ 11,407,469 $       -                   $       -                  
The Company has no  liabilities in either year requiring remeasurement to fair value on a  recurring basis in the balance sheet.  The Company also has no assets or  liabilities in either year requiring remeasurement to fair value on a  non-recurring basis in the balance sheet.
-  Other, net contains  miscellaneous nonoperating income (expense) items other than interest income,  interest expense, gains on equity investments and dividend income.   Material items in other, net included income from oil properties of $379,714  and income from scrap sales of $167,225 for the first nine months of 2008.  Material items in other, net for the first nine months of 2007 included income  from oil properties of $293,116. For the three months ending September 30,  2008 and September 30, 2007, the material items in other, net included income  from oil properties of $172,342, and $118,795, respectively.
 
THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  
**FORWARD-LOOKING STATEMENTS**

       Certain statements under  the caption "Management's Discussion and Analysis of Financial Condition and  Results of Operations," and elsewhere in this Form 10-Q report filed with the  Securities and Exchange Commission, 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", "expect",  "anticipate", "believe", "intend", "may", "hope", "forecast" or similar  words.  In particular, statements with respect to variations in future demand  for our products in our market area or the future activity of federal and  state highway programs and other major construction projects, the timing, scope, cost and benefits of  our proposed and recently completed capital improvements and expansion plans,  including the resulting increase in production capacity, our forecasted cement  sales, the timing and source of funds for the repayment of our revolving line of credit,  our ability to pay dividends at the current level, our anticipated  expenditures for benefit plans, and our anticipated increase in solid fuels and electricity required to  operate our facilities and equipment are all forward-looking statements.  You  should be aware that forward-looking statements involve known and unknown  risks, uncertainties, and other factors that may affect the actual results,  performance or achievements expressed or implied by such forward-looking  statements. Such factors include, among others:
-    general  economic and business conditions; 
-    competition; 
-    raw  material and other operating costs; 
-    costs of  capital equipment; 
-    changes in  business strategy or expansion plans; 
-    demand for  our Company's products; 
-    cyclical  and seasonal nature of our business; 
-    the effect  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. 

**RESULTS OF OPERATIONS - CRITICAL ACCOUNTING POLICIES**

    Reference is made to the Management's Discussion  and Analysis of Financial Condition and Results of Operations - Accounting  Policies incorporated herein by reference to Item 7 of the Company's Annual  Report on Form 10-K for the year ended December 31, 2007 for accounting  policies which are considered by management to be critical to an understanding  of the Company's financial statements.

**RESULTS OF OPERATIONS - OVERVIEW**

    Our products are used in residential,  commercial and governmental construction.  In recent years, the Company  has spent substantial sums on major plant modifications designed to increase  our cement production capacity to meet our customers' needs and to improve our  production processes.  Improvements are planned over the next few years  to further improve our production processes, particularly in the handling and  processing of raw materials.

    Based on sales forecasts and inventory  levels at the beginning of 2008, the Company elected to reduce cement  production in the first quarter of 2008 and use that opportunity to undertake  major plant repairs and maintenance, largely using our own production  personnel.  In addition to this planned maintenance project, we have shut down  one kiln from time to time in order to coordinate production levels with  projected sales.  Initially these shutdowns adversely impacted our gross  profits since the ongoing costs of the cement plant, such as depreciation,  supplies and labor, were allocated to fewer units produced and expensed rather  than added to inventory.  Over time, these shutdowns combined with improved  sales volumes reduced inventory to the point of liquidating LIFO layers at  historical costs that were lower than our current production costs which  favorably impacted gross profits (see Footnote 2). The Company expects interim temporary reductions in  LIFO layers to be replenished by year end. 

   Residentialconstruction has slowed throughout our market area and generally throughout theUnited States.  This downturn has been offset somewhat by strong commercial andinstitutional construction.  A reduction in cement sales, and accordingly ready-mix concrete sales, was projected by the Portland Cement Association, butthe decrease is more severe in other areas of the country than inmost of our market.  Within our market area the most severe downward impact hasbeen felt in northwest Arkansas where, due to overbuilding and the tightening ofthe credit markets, volume has declined substantially.  These decreases werepartially offset by increased volume in more rural areas, such as westernKansas, where we have benefited from improved farm and oil prices.  Sales ofbuilding materials, such as block, brick, retaining wall block and pavers, havealso increased due primarily to their use in commercial and institutionalconstruction projects.  In addition, cement sales benefited from an increase insales to paving contractors.

**RESULTS OF OPERATIONS - THIRD QUARTER OF  2008 COMPARED TO THIRD QUARTER OF 2007**

    Consolidated net sales for the three  months ended September 30, 2008 increased by $4.5 million when compared to the  three months ended September 30, 2007.  Sales in our Cement Business were  higher by $3.3 million and sales in our Ready-Mixed Concrete Business were  higher by $1.2 million.  Cement Business sales increased $3.3 million due  to a 16.0% increase in volume sold. Ready-Mixed Concrete Business sales increased $1.4 million  due to price increases which were offset by volume decreases of $1.2 million  in ready-mix concrete  sales. Other sundry building  materials sales increased by $2.3 million while construction contract sales  declined by $1.3 million for the three months ended September  30, 2008 compared to the three months ended September 30, 2007.

    Consolidated cost of sales for the three  months ended September 30, 2008 increased by $3.3 million when compared to  the three months ended September 30, 2007.  Cost of sales in our Cement  Business was higher by $1.9 million and cost of sales in our Ready-Mixed  Concrete Business was higher by $1.4 million.  Cement Business cost of sales  increased $1.9 million due to the increase in volume sold. Ready-Mixed Concrete Business cost of sales increased $.8  million and $.5 million due to material cost increases and increased delivery  costs, respectively, for the three months ended September 30, 2008 over the  three months ended September 30, 2007.  The remaining $.1 million  increase is the net result of increased sales volume of other sundry building materials  offset by reductions in construction contract sales.

    As a result of the  above sales and cost of sales factors, our overall gross profit rate for the  three months ended September 30, 2008 was 26.2% versus 26.1% for the threemonths ended September 30, 2007.

    Selling, general, and administrative  expenses increased by 9.5% for the three months ended September 30, 2008  compared to the same period of 2007. These costs are normally considered fixed  costs that do not vary significantly with changes in volume.  This  increase is mainly due to an increase in personnel, primarily in the sales  departments of our Ready-Mixed Concrete Business, and the costs related to  their activities. 

    For the three months ended September 30, 2008,  there were no gains realized on equity investment sales as compared to the  same period in 2007 when the Company realized a gain of approximately $.3  million.

    Interest expense decreased about $.2million for the three months ended September 30, 2008 as compared to the three monthsended September 30, 2007due to a decrease in interest rates and a decrease in borrowings.  TheCompany utilized these loans for increases in receivables, capital improvements,increases in purchases of equity investments, and temporary operatingfunds.

    The effective tax rates for the three  months ended September 30, 2008 and 2007 were 27.9% and 30.9%, 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,   Federal domestic  production activities deduction, minority interest in consolidated income  and valuation allowance.  Taxes for the current year are estimated  based on prior year effective tax rates.

**RESULTS OF OPERATIONS - FIRST NINE MONTHS  OF 2008 COMPARED TO THE FIRST NINE MONTHS OF 2007**

    Consolidated net sales for the nine  months ended September 30, 2008, increased by $8.3 million when compared to the  nine months ended September 30, 2007.  Sales in our Cement Business were  higher by $2.4 million and sales in our Ready-Mixed Concrete Business were  higher by $5.9 million.  Cement Business sales increased $1.7 million due  to a 3.3% increase in volume sold and increased $.7 million due to price  increases.  The Ready-Mixed Concrete Business sales increased by  $3.6 million due to price  increases in the price per cubic yard of ready-mixed concrete which was offset  $1.2 million due to a 3.0% decrease in the volume of cubic yards of  ready-mixed concrete sold. The  remaining $3.5 million increase is primarily due to an increase in sales of other  items such as brick, block, and other sundry building materials.

    Consolidated cost of sales for the nine months  ended September 30, 2008, increased by $9.8 million when compared to the nine  months ended September 30, 2007.  Cost of sales in our Cement Business was  higher  by $4.3 million and cost of sales in our Ready-Mixed Concrete Business was  higher by $5.5 million.  Cement Business cost of sales increased  primarily due to the reduction in volume produced during the first quarter as  discussed in "Overview" above offset $.7 million due to the  permanent reduction in LIFO layers discussed in Footnote 2. Tons of cement produced in the first nine  months of 2008 declined by 8.1%, as compared to the first nine months of 2007. Ready-Mixed Concrete Business cost of sales  decreased $.7 million due to a 3.0%  decline in ready-mixed concrete cubic yards sold.  However, cost of sales  as a whole increased due to the $2.7 million increase in direct material costs  in ready-mixed concrete, the $1.3 million increase in delivery costs, with the  remaining increase primarily due to the increased sales volume for brick, block, and other sundry  building materials. 

    As a result of the  above sales and cost of sales factors, our overall gross profit rate for the  nine months ended September 30, 2008 was 19.7% versus 22.7% for the nine months  ended September 30, 2007.  The decline was primarily due to the CementBusiness which dropped from 37.7% gross profit in the first nine months endedSeptember 30, 2007 to 32.3% for the first nine months ended September 30, 2008.

    Selling, general, and administrative  expenses increased by 7.7% during the first nine months of 2008 compared to the  first nine months of 2007. These costs are normally considered fixed costs  that do not vary significantly with changes in volume.  This increase is  partially due to an increase in sales staff in our Ready-Mixed Concrete  Business and the costs related to their activities. In addition, fringe  benefit costs increased due to increased health insurance costs while legal  fees related to litigation declined. For additional information on legal  proceedings, see Item 1, Part II of this report on Form 10-Q.

    For the first nine months of 2008,  there were no gains realized on equity investment sales as compared to the  same period in 2007 when the Company realized a gain of approximately $2.4  million.

    Interest expense decreased about $.7million for the first nine months of 2008 as compared to the first nine months of 2007 due toa decrease in interest rates and a decrease in borrowings.  The Companyutilized these loans for increases in receivables, capital improvements,increases in purchases of equity investments, and temporary operatingfunds.

    The effective tax rates for the nine  months ended September 30, 2008 and 2007 were 28.1% and 31.1%, 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, Federal domestic  production activities deduction, minority interest in consolidated income  and valuation allowance.  Taxes for the current year are estimated  based on prior year effective tax rates.  

** LIQUIDITY**

**   **  We are able to meet our cash needs primarily from a combination of operations  and bank loans.

   Net cash provided by operating activities totaled $17.9 million and $12.3million for the nine months ended September 30, 2008 and September 30, 2007,respectively.  This was an increase in cash provided of $5.6 million for2008 over the same period in 2007.  Net income decreased by $2.5 millionfrom 2007 to 2008 mainly due to the decline in the gross profit margin thatresulted primarily from the reduction in volume produced as discussed under"Overview" above and the $2.4 million decrease in realized gains on the sale ofequity investments. Accounts receivables consumed $8.8 and $4.6 million of cashin the first nine months of 2008 and 2007, respectively, primarily as a resultof increased sales in September as compared to December. Refundable federal and stateincome taxes receivable decreased during the first nine months of 2007 by$.7 million to provide cash while no change occurred for the same period of2008.  Inventories used less cash in 2008 than 2007 as a result of thedecision to reduce production as described under "Overview" above inconjunction withincreased sales volume for our cement segment.  As a result of thereduction, finished cement inventory decreased $3.1 million during the firstnine months of 2008 and work-in-process decreased $2.4 million while finishedcement increased $2.3 million and work-in-process decreased $.2 million duringthe first nine months of 2007. Less cash was used in the first nine months of2008 than 2007 due primarily to the $3.4 million increase in payables excluding property, plant and equipment acquisitions, a $1.4million increase in federal and state income tax liability, a $.7 millionincrease in miscellaneous tax liability and a $.6 million increase in accruedliabilities primarily due to the temporary LIFO liquidation(discussed inFootnote 2) during the first nine months of 2008 ascompared to a $1.7 million increase in payables excluding property, plant andequipment acquisitions and a $1.1 million increase in federal and state incometax liability for 2007. 

    Net cashused for investing activities totaled $13.9 million and $4.8 million for thefirst nine months of 2008 and 2007, respectively. The $9.1 million increase in net cash used for investingactivities during the first nine months of 2008 as compared to the same periodin 2007 is principally due to the increase in purchases of equity investments and theacquisition of a business while there was a $3.4 million decrease in proceeds fromdisposals of equity investments.  Payments for purchases of equityinvestments totaled $4.9 million and $2.6 million in 2008 and 2007, respectively.Proceeds from disposals totaled $3.4 million in 2007 while no investments weredisposed of in 2008. Payments for the acquisition of a business consisted of $.2million of inventory, $.6 million of other assets, and $1.5 million of property,plant and equipment in 2008.  There were no business acquisitions in 2007.   

   Net cash used for financing activities totaled $5.4 million and $7.7 million for the firstnine monthsending September 30, 2008 and September 30, 2007, respectively.  Thedifference is primarily due to the $2.5 million reduction in the revolvingline of credit in 2007.  The line of credit was used to cover increases inreceivables and equity investments, plus approximately $8.4 million and $6.0 millionfor cash expenditures on property, plant and equipment in 2008 and 2007,respectively. 

      In December 2007, we renewed and modified our revolving  line of credit with our current lender.  Our current credit facilities  consist of an unsecured $25 million advancing term loan maturing December 31,  2009 and a $15 million revolving line of credit maturing December 31, 2008.   The term loan bears a floating interest rate based on JP Morgan Chase prime  rate less .75% and the revolving line of credit bears a floating interest rate  based on lender's national prime rate less 1.25% for 2008.  The loan  agreement contains a financial covenant related to net worth which the Company  was in compliance with at the end of the third quarter of 2008.   The bank has  agreed to extend the term loan maturity to December 31, 2014 and the revolving  line of credit maturity to December 31, 2009 under similar terms as the  current loans.  We plan to finalize these agreements prior to year end. As of September 30, 2008, we  had borrowed $17.8 million on the advancing term loan and nothing on the  revolving line of credit, leaving a balance available on the revolving line of  credit of $15.0 million. The annual weighted average interest rate we paid on  the advancing term loan during the third quarter of 2008 and 2007 was 4.25%  and 7.43%, respectively, and for the first nine months of 2008 and 2007 was  4.69% and 7.48%, respectively. The annual weighted average interest rate we  paid on the revolving line of credit during the third quarter of 2008 and 2007  was 3.75% and 7.18%, respectively, and for the first nine months of 2008 and  2007 was 4.19% and 7.23%, respectively. As of September 30, 2008, the  applicable interest rate was 4.25% on the advancing term loan and 3.75% on the  revolving line of credit. The advancing term loan was used to help finance the  expansion project at our cement manufacturing facility.  The revolving  line of credit was used during the year to fund increases in receivables,  capital improvements, increases in purchases of equity investments, and  temporary operating expenses. Our board of directors has given management the  authority to borrow an additional $10 million for a maximum of $50 million. No  assurances can be given that we will be able to obtain this additional  borrowing on favorable terms, if at all. 

       Projects in the planning and design phases include improvements to our fuel  handling system and installation of an overland conveyor system to improve  efficiencies in moving raw materials.  The improvements to the fuel  handling system are expected to be completed in mid 2009 at a cost of  approximately $4.0 million.  Installation of the overland conveyor system  will take eighteen to twenty-four months to complete after  the purchase order is issued, which is  expected to occur in 2009.  We anticipate capital  expenditures for 2008 to be higher than 2007 levels, but we do not anticipate  the need for additional bank financing other than that available under our  existing revolving line of credit.   

   For several years the  Company has paid a $.20 per share dividend in January, March, June and  September.  Beginning with the April 2006 Board of Directors meeting, the Board elected to  increase these dividends to $.21 per share; at the April 2007 Board of  Directors meeting, the Board increased the dividend to $.22 per share; and at  the April 2008 Board of Directors meeting, the Board increased the dividend to  $.23 per share. Although  dividends are declared at the Board's discretion, we project future earnings  will support the continued payment of dividends at the current level.

**FINANCIAL  CONDITION**

      Total assets as of September 30, 2008 were $174.6  million, an increase of $7.1 million since December 31, 2007.   Receivables increased approximately $8.8 million since December 31, 2007.   Such an increase is common during the first nine months of the year due to the  seasonality of our business (see Seasonality below). Deferred income tax asset  increased $2.1 million primarily due to a reduction in deferred income tax  liability resulting from the $3.1 million decrease in net unrealized  holding gains related to equity investments. Inventories decreased by $2.1  million primarily due to lower cement production early in the year  in  combination with increased cement sales volumes discussed in "Overview" above.

      Accounts payable increased $3.9 million as of September 30, 2008  compared to December 31, 2007 primarily due to the expenses related to  increased sales volume in September over December.  Accrued postretirement benefits  liability increased $1.2 million since December  31, 2007 due to net periodic benefit cost in excess of contributions. Indebtedness decreased $1.8 million during the first  nine months of 2008 primarily as a result of utilizing cash provided by  operations to reduce our bank loans.

**CAPITAL  RESOURCES**

    The Company  regularly invests in miscellaneous equipment and facility improvements in both  the Cement Business and Ready-Mixed Concrete Business.  Capital expenditures  during the first nine months of 2008 included expenditures to improve efficienciesin moving raw materials. We also invested in routine  equipment purchases during 2008, primarily in the Ready-Mixed Concrete Business.

    The Company is heavily involved in the planning anddesign phases for two future capital expenditure projects in the CementBusiness.  These projects include improvements to our fuel handling systemand installation of an overland conveyor system to improve efficiencies inmoving raw materials. The improvements to the fuel handling system are expectedto be completed in mid 2009 at a cost of approximately $4.0million.  Installation of the overland conveyor system is anticipated totake eighteen to twenty-four months to complete after thepurchase order isissued,  which is expected to occur in 2009.  TheCompany also plans to invest in other miscellaneous equipment and facilityimprovements in both the Cement Business and Ready-Mixed Concrete Business in2008.  During the first nine months of 2008, the Company's cash expenditures forproperty, plant and equipment totaled approximately $8.4 million, excluding theamounts that are included in accounts payable. These expendituresare expected toreach approximately $10.0 million during 2008 and will be funded with a mixture of cashfrom operations and temporary bank loans. We  do not anticipate the need for additional bank financing beyond the amount  available through our existing revolving line of credit.

**MARKET RISK**     

      Market risks  relating to the Company's operations result primarily from changes in demand  for our products.  A significant increase in interest rates could lead to  a reduction in construction activities in both the residential and commercial  market.  Budget shortfalls during economic slowdowns could cause money to  be diverted away from highway projects, schools, detention facilities and  other governmental construction projects.  Reduction in construction  activity lowers the demand for cement, ready-mixed concrete, concrete products  and sundry building materials.  As demand decreases, competition to  retain sales volume could create downward pressure on sales prices.  The  manufacture of cement requires a significant investment in property, plant and  equipment and a trained workforce to operate and maintain this equipment.  These costs do not materially vary with the level of production.  As a  result, by operating at or near capacity, regardless of demand, companies can  reduce per unit production costs.  The continual need to control  production costs encourages overproduction during periods of reduced demand.

**INFLATION**

      Inflation directly affects the Company's operating costs.   The manufacture of cement requires the use of a significant amount of energy.   The Company burns primarily solid fuels, such as coal and petroleum coke, and  to a lesser extent natural gas, in its kilns.  Increases above the rate  of inflation in the cost of these solid fuels, natural gas, or in the  electricity required to operate our cement manufacturing equipment could  adversely affect our operating profits.  We anticipate an  increase in our fuel cost in 2009 as a result of the expiration of a five year coal contract at  the end of 2008.  Prices of the specialized replacement  parts and equipment the Company must continually purchase tend to increase  directly with the rate of inflation causing manufacturing costs to increase. 

**ENVIRONMENTAL REGULATIONS**

    Regulationof carbon dioxide emissions are currently being discussed by both state andfederal legislative bodies and regulators.  As part of the chemical processinvolved in the production of portland cement, carbon dioxide is driven offraw materials.  While management is studying practices and technology which mayreduce or sequester carbon dioxide emissions, the current state of technologyhas yet to provide a solution.  The effect of regulation mayincrease taxes, penalties, and the cost of production, as well as requireadditional capital expenditures for equipment.

**SEASONALITY**

    Portland cement is the basic material used in  the production of ready-mixed concrete that is used in highway, bridge and  building construction.  These construction activities are seasonal in nature.   During winter months when the ground is frozen, groundwork preparation cannot  be completed.  Cold temperatures affect concrete set-time, strength and  durability, limiting its use in winter months.  Dry ground conditions are also  required for construction activities to proceed.  During the summer, winds and  warmer temperatures tend to dry the ground quicker creating fewer delays in  construction projects.

    Variations in weather conditions from  year-to-year significantly affect the demand for our products during any  particular quarter; however, our Company's highest revenue and earnings  historically occur in its second and third fiscal quarters, April through  September.

 

Item 3.        Quantitative and Qualitative Disclosures  about Market Risk

      The Company owns $13.3 million of equity securities,  primarily of publicly traded entities, as of September 30, 2008.  The  aggregate amount of securities carried at cost, for which the Company has not  elected the fair value option, was $2.1 million as of September 30, 2008. The  balance of these investments, which are stated at fair market value, are not  hedged and are exposed to the risk of changing market prices.  The  Company classifies all securities as "available-for-sale" for accounting  purposes and marks them to market on the balance sheet at the end of each  period unless they are securities for which the Company has not elected the  fair value option.  Management estimates that its publicly traded  investments will generally be consistent with trends and movements of the  overall stock market excluding any unusual situations.  An immediate 10%  change in the market price of our equity securities would have a $.7 million  effect on comprehensive income.  Although the  stock market has shown extreme volatility in the first nine months of 2008,  the Company has determined that it has not, at this time, incurred an  impairment loss on its equity investments that is other than temporary.  These  assets are classified as available for sale; however, the Company plans to  hold these securities indefinitely and has the ability to do so.   The Company is not aware of any events or changes in circumstances that  occurred during the first nine months of 2008 that had a significant adverse effect  on the fair value of the investments carried at cost.

      The Company also has $17.8 million of bank loans  as of September 30, 2008.  Interest rates on the Company's advancing term loan and  revolving line of credit are variable and are based on the JP Morgan Chase prime rate  less .75% and lender's national prime rate less 1.25%, respectively.  The bank has agreed to extend the term loan maturity to December 31, 2014 and  the revolving line of credit maturity to December 31, 2009 under similar terms  as the current loans.  We plan to finalize these agreements prior to year end.

Item 4.          Controls and Procedures 

    The Company maintains disclosure controls and  procedures (as defined in Rules 13a-5(e) and 15d-15(e) under the Exchange Act)  that are designed to ensure that information required to be disclosed in the  Company's reports under the Exchange Act is recorded, processed, summarized  and reported within the time periods specified in the rules and forms of the  Securities and Exchange Commission, and that such information is accumulated  and communicated to the Company's management, including its President and  Chief Financial Officer, as appropriate, to allow timely decisions regarding  required disclosures.  Any controls and procedures, no matter how well  designed and operated, can provide only reasonable assurance of achieving the  desired control objectives.

    As of the end of the period covered by this  report, an evaluation was carried out by the Company's management, including  its President and Chairman of the Board of Directors and Chief Financial  Officer, of the effectiveness of its disclosure controls and procedures (as  defined in Rules 13a-5(e) under the Securities Exchange Act of 1934).  Based  upon that evaluation, the Company's President and Chairman of the Board of  Directors and Chief Financial Officer concluded that these disclosure controls  and procedures were effective as of the end of the period covered by this  report.

    There were no changes in our internal control  over financial reporting that occurred during the quarter ended September 30, 2008  that materially affected, or are reasonably likely to materially affect, our  internal control over financial reporting. 

  PART  II.   OTHER INFORMATION

Item 1.        Legal Proceedings

    The Company and Tulsa Dynaspan, Inc. ("TDI")  a subsidiary of the Company, are defendants in a case brought by David Markle,  Richard Evilsizer, and five other named plaintiffs, filed in the District  Court of Tulsa County, Oklahoma, on December 29, 2004 and amended on January  19, 2005, January 6, 2006, August 18, 2006, and January 12, 2007. Prior to the  August 18, 2006 amendment, Plaintiffs dismissed claims they had previously  asserted for defamation and various business torts, derivative claims brought  on behalf of the Company, and claims to ownership of an invention relating to  parking garage construction. Markle and Evilsizer remain as Plaintiffs; the  five other original Plaintiffs remain in the action only as counterclaim  defendants. Plaintiffs seek an award of actual and exemplary damages from the  Company, one of its directors and four of TDI's directors for alleged breach  of fiduciary duties owed to TDI, based upon derivative and breach of contract  claims. The Company has asserted a counterclaim based upon breach of contract  against Markle and TDI has asserted counterclaims based upon breach of  fiduciary duty, misappropriation, violations of the Computer Fraud and Abuse  Act and the Oklahoma Trade Secrets Act, unjust enrichment, and various  business torts against all of the original plaintiffs. Plaintiffs also seek an  order from the Court that the Company purchase Plaintiffs' shares of TDI stock  for fair value. On April 10, 2007, the Court heard arguments on various  motions and subsequently entered the following orders: Monarch and the  individual directors' motion for summary judgment dismissing all of  Plaintiffs' claims was granted; Monarch's motion for summary judgment on its  pre-termination competition claim against Markle was granted; TDI's motion for  summary judgment against Plaintiffs for unjust enrichment and breach of  fiduciary duty was granted; Markle's motion for partial summary judgment on  the non-compete agreement executed by the parties was denied.  Additional  hearings to establish TDI's and Monarch's damages will be necessary; all of  Plaintiffs' claims have now been dismissed.  Because of the failure of certain  plaintiffs to participate in a pretrial conference the proceedings are now  bifurcated.  Markle and Evilsizer have filed bankruptcy.  Complaints to  collect damages from Markle and Evilsizer have been filed in the  Bankruptcy courts.  A hearing on actual and punitive damages against Parking  Builders, GBS and ENCO was held on February 1, 2008.  On February 29, 2008,  TDI was awarded $3,117,574 in actual damages and an additional $3,117,574 in  punitive damages against GBS and ENCO; TDI was awarded $1,614,720 in actual  damages and an additional $1,614,720 in punitive damages against Parking  Builders.  No assurances can be given as to the collectability of these damage  awards.  TDI has settled its claims against Martin and Bobbitt.

Item 6.        Exhibits

31.1  Certificate of the President and Chairman of the Board pursuant to  Section 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.

31.2  Certificate of the Chief Financial Officer pursuant to Section  13a‐14(a)/15d‐14(a) of the Securities Exchange Act of 1934.

32.1  18 U.S.C. Section 1350 Certificate of the President and Chairman of the  Board dated November 7, 2008.

32.2  18 U.S.C. Section 1350 Certificate of the Chief Financial Officer dated  November 7, 2008.

   

   

  

   

  S I G N A T U R E S

  Pursuant to the  requirements of the Securities Exchange Act of 1934, the registrant has duly  caused this report to be signed on its behalf by the undersigned thereunto  duly authorized.

   

  The Monarch Cement Company                                                                                                 (Registrant)

  Date      November 7, 2008                                      /s/ Walter H. Wulf, Jr.             

  Walter H. Wulf, Jr.                                                                                 President and                                                                                  Chairman of the Board

   

  Date      November 7, 2008                                       /s/ Debra P. Roe                     

  Debra P. Roe, CPA                                                                                 Chief Financial Officer  and                                                                                           Assistant  Secretary‐Treasurer

   

  

  EXHIBIT INDEX

   

   

   Exhibit   Number                                                         Description                                   

  31.1                             Certificate of the President and Chairman of  the                                              Board pursuant to Section 13a-14(a)/15d-14(a)                                              of the Securities Exchange Act of 1934.

  31.2                            Certificate of the Chief Financial Officer  pursuant                                             to Section 13a-14(a)/15d-14(a) of the                                              Securities Exchange Act of 1934.

  32.1                           18 U.S.C. Section  1350 Certificate of the President                                             and Chairman of the Board dated November 7, 2008.

  32.2                           18 U.S.C. Section  1350 Certificate of the                                              Chief Financial Officer dated November 7, 2008. |