**                                                                                             EXHIBIT 13 **

 

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                                                                                              March 16,2009

ANNUAL REPORT TO STOCKHOLDERS        

As we reflect  on the year 2008, we note with pride the milestone of our 100th year in  operation in what appears to be the beginning of one of the most challenging  periods in recent history.  Continual news of foreclosures, bankruptcies,  layoffs and the woes of Wall Street, along with the significant swings in  energy costs, challenge us daily to maintain our Company's solid foundation as  we embark on our next century of operations. 

A reduction  in cement sales, and accordingly ready-mix concrete sales, was projected by  the Portland Cement Association for 2008.  Thus far, the decrease appears to  have been more severe in other areas of the country than in most of our market  area.  Net sales for 2008 were $153.9 million compared to $146.8 million for  2007 largely due to increased sales of block, brick, retaining wall block and  pavers for commercial and institutional construction projects.  Improved farm  and oil prices and more traditional credit practices benefited rural areas,  such as Western Kansas, resulting in increased sales which helped offset the  decline in urban market areas that were affected by the slowdown in  residential construction. Higher material and delivery costs, largely the  result of higher energy costs, and lower production volumes in the early part  of the year, contributed to the increase in cost of sales resulting in a  decrease in gross profit from operations from $34.1 million in 2007 to $33.0  million in 2008.  Net income was further impacted by the recognition of a $4.2  million impairment loss on our equity investments in 2008 as compared to the  $2.5 million gain on the sale of equity investments realized in 2007.  Net  income for 2008 totaled $10.2 million compared to $15.2 million for 2007.

We continue  to be strong believers in investing capital in our facilities to operate more  efficiently and to better serve our customers.  The next major expenditure  planned for our facilities is the installation of an overland conveyor system  to facilitate transporting raw materials from our quarry operations to our  plant.  Current economic conditions may also provide opportunities to replace  or add to equipment at more favorable prices.  We anticipate capital  expenditures for 2009 will be higher than 2008 levels; however, we believe we  can finance these expenditures with a mixture of cash from operations and our  existing line of credit.

As we look  forward to this year's challenges and opportunities, we cannot stress enough  the importance of our many loyal customers, our devoted employees and our  steadfast stockholders.  Thank you for your continued support and confidence  in our Company.  Most importantly, we thank our Heavenly Father for His  blessings throughout the past 100 years and ask His continued support in  meeting the challenges and uncertainties we face in the current global  financial crisis.

We wish to  invite you, our stockholders, to attend Monarch's annual meeting to be held at  2:00 p.m. on April 8, 2009 in our corporate office at 449 1200 Street,  Humboldt, Kansas.  Thank you for your support throughout the years and God  Bless.
                                                                                                      WALTER H. WULF, JR.                                                                                                        President and Chairman of the Board
 
**THE MONARCH CEMENT COMPANY  AND SUBSIDIARIES**
**SELECTED FINANCIAL DATA**
**FOR  THE FIVE YEARS ENDED  DECEMBER 31, 2008**(Dollar amounts in thousands except per share data) 
 20082007200620052004
Net sales $ 153,886$ 146,770$ 154,213$ 141,320$ 145,077
Net income$   10,233$   15,234$  13,215$   9,658$   2,569
Net income per share$2.54$3.78$3.28$2.40$.64
Total assets $ 174,765$ 167,488$ 162,504$ 144,055$ 135,200
Long-Term debt obligations$   17,752$   20,206$  22,083$  24,087$  26,141
Cash dividends declared per share    $.92$.88$.84$.80$.80 
Stockholders' investment per share    $24.98$24.92$22.84$22.27$20.86
**DESCRIPTION OF THE BUSINESS**

The  Monarch Cement Company (Monarch) was organized as a corporation under the laws  of the State of Kansas in 1913.  Since its inception, Monarch has been engaged  in the manufacture and sale of portland cement.

The    manufacture of portland cement by Monarch involves the quarrying of clay and    limestone and the crushing, drying and blending of these raw materials into    the proper chemical ratio.  The raw materials are then heated in kilns to    2800o Fahrenheit at which time chemical reactions occur forming a    new compound called clinker.  After the addition of a small amount of    gypsum, the clinker is ground into a very fine powder that is known as    portland cement.  The term "portland cement" is not a brand name but is a    term that distinguishes cement manufactured by this chemical process from    natural cement, which is no longer widely used.  Portland cement is the    basic material used in the production of ready-mixed concrete that is used    in highway, bridge and building construction where strength and durability    are primary requirements. 

    Subsidiaries of Monarch (which together with Monarch are referred to    herewith as the "Company") are engaged in the ready-mixed concrete, concrete    products and sundry building materials business.  Ready-mixed concrete is    manufactured by combining aggregates with portland cement, water and    chemical admixtures in batch plants.  It is then loaded into mixer trucks    and mixed in transit to the construction site where it is delivered to the    contractor.  Concrete products primarily include pre-formed components    produced by the Company that are ready for use in the construction of    commercial buildings, institutional facilities and parking garages.

As    used herein, the "Cement Business" refers to our manufacture and sale of    cement and "Ready-Mixed Concrete Business" refers to our ready-mixed    concrete, concrete products and sundry building materials business.

1.

**LINES OF BUSINESS**

The  Company is engaged in two lines of business - Cement Business and Ready-Mixed  Concrete Business.

The    marketing area for Monarch's products, which is limited by the relatively    high cost of transporting cement, consists primarily of the State of Kansas,    the State of Iowa, southeast Nebraska, western Missouri, northwest Arkansas    and northern Oklahoma.  Included within this area are the metropolitan    markets of Des Moines, Iowa; Kansas City, Missouri; Springfield, Missouri;    Wichita, Kansas; Omaha, Nebraska; Lincoln, Nebraska; Fayetteville, Arkansas    and Tulsa, Oklahoma.  Sales of cement are made primarily to contractors,    ready-mixed concrete plants, concrete products plants, building materials    dealers and governmental agencies. Monarch cement is delivered either in    bulk or in paper bags and is sold under the "MONARCH" brand name. The cement    is distributed both by truck and rail, either common or private carrier.

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

The    following table sets forth for the Company's last three fiscal years the    percentage of total sales by the (1) Cement Business and (2) Ready-Mixed    Concrete Business:
 
Total    Sales 
December 31, 
2008         
2007         
2006Cement Business  45.3%         46.1%         47.2%        Ready-Mixed Concrete Business               54.7% 53.9% 52.8% 100.0%         100.0%         100.0%       
**MANAGEMENT'S DISCUSSION AND ANALYSISOF 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 Annual    Report, our Form 10-K report and our other reports filed with the Securities    and Exchange Commission constitute "forward-looking information".  Except    for historical information, the statements made in this report are    forward-looking statements that involve risks and uncertainties.  You can    identify these statements by forward-looking words such as "should",    "expect", "anticipate", "believe", "intend", "may", "hope", "forecast" or    similar words.  In particular, statements with respect to variations in    future demand for our products in our market area or the future activity of    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 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:

  2.

-  general economic and business conditions;-  competition;-  raw material and other operating costs;-  costs of capital equipment;-  changes in business strategy or expansion plans;  -  demand for our Company's products;-  cyclical and seasonal nature of our business;-  the affect of weather on our business;-  the affect of environmental and other government regulations;    -  the availability of credit at reasonable prices; and-  the affect of federal and state funding on demand for our products.  

**RESULTS OF OPERATIONS**

             Cement
Ready-Mixed 
         Business
   Concrete Business
    Consolidated**For the      Year Ended December 31, 2008 **Sales to unaffiliated customers  Income (loss) from operations       $    69,683,762      18,362,170        $    84,202,711        (1,607,168)       $   153,886,473      16,755,002**For the Year Ended December      31, 2007 **Sales to unaffiliated customers  Income (loss) from operations       $    67,693,603      19,226,467        $    79,075,956        (207,527)       $   146,769,559      19,018,940**For the Year Ended December      31, 2006 **Sales to unaffiliated customers  Income (loss) from operations $         72,858,017      20,952,199 $         81,354,611        (1,275,802) $   154,212,628      19,676,397
See Note 10  in the Notes to Consolidated Financial Statements for further discussion of  each of the Company's reportable operating lines of business.

**General**--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 out  customers' needs and to improve our production processes.  Improvements are  planned over the next few years to further enhance 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 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; however, by the third    quarter, 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.  The interim reductions in LIFO layers were replenished by year    end.

    Residential construction during 2008 slowed throughout our market area and    generally throughout the United States.  This downturn was offset somewhat    by commercial and institutional construction.  What seemed to begin as a    slowdown in the housing sector has now become a full-blown global financial    crisis.  Although our industry has benefited from relatively strong    non-residential construction activity, the continuing financial crisis in    which credit is scarce may exacerbate any normal cyclical downturn in which    non-residential construction lags residential construction.  A reduction in    cement sales, and accordingly ready-mix concrete sales, was projected by the    Portland Cement Association, but thus far the decrease has been more severe    in other areas of the country

3.

than in most of our market.     Within our market area the most severe downward impact occurred in northwest    Arkansas where, due to overbuilding and the tightening of the credit    markets, volume declined substantially. These decreases were partially    offset by increased volume in more rural areas, such as western Kansas,    where we benefited from improved farm and oil prices and more traditional    credit practices.  Sales of building materials, such as block, brick,    retaining wall block and pavers, also increased due primarily to their use    in commercial and institutional construction projects and to increased sales    efforts by a larger, more aggressive sales group.  In addition, cement sales    benefited from an increase in sales to paving contractors.

    During 2007, both the Cement Business and Ready-Mixed Concrete Business were    impacted by abnormally rainy weather, a longer period of cold weather and a    slowdown in residential construction as compared to 2006.  Volume decreases    resulting from these conditions, partially offset by increases in price,    resulted in a decrease in sales and net income from operations.  The price    increases play a key role in helping us keep pace with increases in the cost    of labor, raw materials, and transportation, and the expense of maintaining    state-of-the-art equipment in our capital intensive industry.

**2008 Compared to 2007-**-Consolidated net sales for the year ended    December 31, 2008 were approximately $153.9 million, an increase of $7.1    million as compared to the year ended December 31, 2007. Sales in our Cement    Business were higher by $2.0 million, while sales in our Ready-Mixed    Concrete business increased $5.1 million.  Cement Business sales increased    $1.6 million due to increased volume sold and increased $.4 million due to    price increases.  Sales in our Ready-Mixed Concrete Business improved $1.0    million due to increased sales in concrete and $4.5 million in other items    such as block, retaining wall, brick, pavers, sack products and other sundry    items.  Construction contract sales declined during 2008 by $.4 million.

    Consolidated cost of sales for the year 2008 were $8.3 million more than    cost of sales for the year 2007. Cost of sales in our Cement Business were    higher by $2.8 million, while cost of sales in our Ready-Mixed Concrete    Business were higher by $5.5 million.  Cement Business cost of sales    increased $1.0 million due to the 2.4% increase in volume sold and about    $1.8 million due to the reduction in volume produced during the first    quarter as discussed in "General" above.  Tons of cement produced in 2008    declined by 4.1%, as compared to 2007.  The increase in cost of sales in our    Ready-Mixed Concrete Business was primarily due to a combination of cost    increases in raw materials, production and delivery.  Raw materials,    including cement, rock, sand and sundry building materials purchased for    resale, increased $2.7 million primarily due to higher transportation    costs resulting from high fuel costs.  The remaining $2.8 million increase    related to production and delivery costs includes increased fuel, payroll,    depreciation, maintenance and fringe benefit related expenses.

    As a result of the above sales and cost of sales factors, our overall gross    profit rate for the year ended December 31, 2008 was 21.4% compared to 23.3%    for the year ended December 31, 2007.

    Selling, general and administrative expenses increased by 7.5% for the year    2008 as compared to the year 2007.  These costs are normally considered    fixed costs that do not vary significantly with changes in sales volume.     This increase is partially due to a $.1 million increase in bad debt    expenses related to the current economic conditions.  Additional sales staff    in our Ready-Mixed Concrete Business and the costs related to their    activities also contributed to the increase in selling expenses while    favorably impacting sales volumes.

    Interest expense decreased about $.9 million for the year 2008 as compared    to the year 2007 due to a decrease in interest rates and a decrease in    borrowings.  See Note 4, Line of Credit and Long-Term Debt, of Notes to    Consolidated Financial Statements for further discussion.  The Company    utilized these loans for capital improvements and temporary operating funds.     During 2008, there was a $4.2 million impairment loss recorded

4.

on equity    investments due to impairments that were other-than-temporary while the    Company realized a gain of approximately $2.5 million for the year 2007 from    the sale of equity investments. See Note 2, Investments, of Notes to    Consolidated Financial Statements for further discussion.

    The effective tax rates for years 2008 and 2007 were 21.0% and 28.1%,    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, domestic production activities deduction, minority interest in    consolidated income and valuation allowance.  During 2008, percentage    depletion decreased the effective tax rate by 10.2%.  During 2007,    percentage depletion reduced the effective tax rate by 6.0%.

**2007 Compared to 2006-**-Consolidated net sales for the year ended    December 31, 2007 were approximately $146.8 million, a decrease of $7.4    million as compared to the year ended December 31, 2006. Sales in our Cement    Business were lower by $5.1 million while sales in our Ready-Mixed Concrete    Business decreased $2.3 million.  Cement Business sales decreased $10.6    million due to decreased volume sold, which was partially offset by an    increase of $5.5 million due to price increases.  Sales in our Ready-Mixed    Concrete Business decreased primarily due to a $5.7 million decrease in    volume, which was partially offset by an increase in ready-mixed concrete    and other sundry building material sales of $3.4 million due to price    increases.

    Consolidated cost of sales for the year 2007 were $7.9 million less than    cost of sales for the year 2006. Cost of sales in our Cement Business was    lower by $4.1 million, while cost of sales in our Ready-Mixed Concrete    Business was lower by $3.8 million.  Cement Business cost of sales decreased    $6.6 million due to the 14.6% decrease in volume sold which was partially    offset by higher production costs primarily resulting from lower production    levels.  Ready-Mixed Concrete Business cost of sales decreased $2.1 million    due to the net effect of an 11.8% decrease in volume sold and increases in    costs for raw materials, including cement, rock, sand and sundry building    materials purchased for resale, due in large part to higher fuel prices; in    addition to the $1.7 million decrease in construction contract costs from    improved operation efficiencies.

    As a result of the above sales and cost of sales factors, our overall gross    profit rate for the year ended December 31, 2007 was 23.3% compared to 21.9%    for the year ended December 31, 2006.

    Selling, general and administrative expenses increased by 7.6% for the year    2007 as compared to the year 2006.  These costs are normally considered    fixed costs that do not vary significantly with changes in sales volume.     This increase is primarily due to expenses related to payroll and    postretirement expenses.  An increase in depreciation and amortization    related to the recently completed expansion of the Company's corporate    office also contributed to the increase.

    Sales of equity investments resulted in a gain of approximately $2.5 million    during 2007.  During 2006, there were no gains realized on equity investment    sales.

    The effective tax rates for years 2007 and 2006 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, domestic production activities deduction, minority interest in    consolidated income and valuation allowance.  During 2007, percentage    depletion decreased the effective tax rate by 6.0%.  During 2006, percentage    depletion reduced the effective tax rate by 6.8%.

**LIQUIDITY**

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

5.

Net    cash provided by operating activities totaled $24.0 million for 2008, a $1.7    million increase over the year 2007.  Net income decreased by $5.0 million    from 2007 to 2008.  There were no realized gains on sale of other    investments for 2008; however a $4.2 million non-cash adjustment for the    other-than-temporary loss on impairment of other investments was realized    while none was realized in 2007 or 2006.  See Note 2, Investments, of Notes    to Consolidated Financial Statements for further discussion.  Cash was also    provided by the increase in accounts payable and accrued liabilities which    increased by $2.0 million in 2008 primarily due to prepayments held on    account in accrued liabilities.  Cash used for operating activities includes    receivable increases of $2.0 million in 2008.

Net    cash provided by operating activities totaled $22.4 million for 2007.  Net    income increased by $2.0 million from 2006 to 2007 primarily due to the $2.5    million realized gain on the sale of equity investments. The non-cash    adjustment for depreciation, depletion and amortization increased by $.5    million from 2006 to 2007. This increase reflects the impact of certain    assets, mainly related to our cement production and the expansion of the    Company's corporate office, placed in service during 2005 and 2006.  The    realized gain on sale of other investments for 2007 is due to the sale of    available-for-sale equity securities.  Cash was provided by operating    activities when receivables decreased by $1.3 million during 2007.  Cash was    also provided when accounts payable and accrued liabilities increased by $.7    million primarily due to the timing of accounts payable.  Cash used for    operating activities includes $5.0 million for increased inventories.     Finished cement inventory increased due to greater volumes held in inventory    and to the higher cost of those inventories compared to 2006; fuel, gypsum,    paper sacks and other inventory increased primarily due to coal and    petroleum coke purchases exceeding amounts consumed in the production    process; and operating and maintenance supplies increased due to the    purchase of specialized repair parts that support the recently completed    production facility improvements.

Net    cash provided by operating activities totaled $18.2 million for 2006.  Net    income increased by $3.6 million from 2005 to 2006 primarily due to volume    and price increases in the Cement Business and Ready-Mixed Concrete    Business.  The non-cash adjustment for depreciation, depletion and    amortization increased by $.4 million from 2005 to 2006.  This increase    reflects the impact of certain assets, mainly related to our cement    production and the expansion of the Company's corporate office, placed in    service during 2005 and 2006.  Cash used for operating activities includes    receivable increases of $.6 million in 2006.  Cash used for operating    activities also includes $4.5 million for increased inventories, primarily    work in process and finished cement, resulting from increased production in    the Cement Business and $1.1 million from a decrease in accounts payable and    accrued liabilities due to the timing of accounts payable.

Net    cash used for investing activities totaled $19.2 million, $8.2 million, and    $21.8 million in 2008, 2007 and 2006, respectively.  The $11.0 million    increase in net cash used for investing activities from 2007 to 2008 is    primarily due to purchases of equity investments, the acquisition of a    business, and an increase in short-term investments for a total increase of    $7.5 million and the $4.7 million decline in proceeds from disposals of    equity investments.  The $13.6 million decrease in net cash used for    investing activities from 2006 to 2007 is principally due to a $9.8 million    decrease in acquisition of property, plant and equipment in the Cement    Business during 2007.

Net    cash provided by (used for) financing activities totaled $(6.1) million,    $(12.2) million, and $1.1 million for 2008, 2007 and 2006, respectively. The    differences were primarily due to changes in the line of credit balance. The    line of credit was used to cover operating expenses and for capital    expenditures.

In    December 2008, Monarch renewed and modified the loan agreement with its    current lender, Bank of Oklahoma, N.A., under similar terms as the prior    agreement. Monarch's current unsecured credit commitment 

6. 

consists of a $25.0 million    term loan maturing December 31, 2014 and a $15.0 million line of credit    maturing December 31, 2009. The term loan bears a floating interest rate    based on the lender's National Prime rate less .75% with a 3.00% interest    rate minimum or floor. The line of credit bears a floating interest rate    based on the lender's National Prime rate less 1.25% with a 2.50% interest    rate minimum or floor. The loan agreement contains a financial covenant    related to net worth which the Company was in compliance with at year end.     Prior to the renewal, interest on the Company's term loan was variable and    was based on the JP Morgan Chase prime rate less .75%.  Interest on the line    of credit varied with the lender's National Prime rate less 1.25% for 2008    and 1.00% for 2007.  As of December 31, 2008, we had borrowed $17.2 million    on the term loan and $0 on the line of credit leaving a balance available on    the line of credit of $15.0 million.  The annual weighted average interest    rate we paid on the term loan during 2008 and 2007 was 4.42% and 7.30%,    respectively.  The annual weighted average interest rate we paid on the line    of credit during 2008 and 2007 was 3.92% and 7.05%, respectively.  At year    end, the applicable interest rate was 3.25% on the term loan and 2.75% on    the line of credit.  See Note 4, Line of Credit and Long-Term Debt, of Notes    to Consolidated Financial Statements for further discussion.  The term loan    was used to help finance the expansion project at our cement manufacturing    facility.  The line of credit was used to cover operating expenses primarily    during the first half of the year when we build inventory due to the    seasonality of our business and for capital expenditures.  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.

    Contractual obligations at December 31, 2008, consisting of maturities on    long-term debt, estimated interest payments on debt, pension, postretirement    benefit obligations and open purchase orders are as follows:

2009
2010
2011
2012 
2013 
ThereafterLong-Term debt         
$         2,643,943         
$         3,015,371         
$  2,949,967         
$  3,021,282         
$  3,017,642         
$  3,103,754Interest payments                         594,287         479,446         367,666         261,561         162,063         62,788Pension          
1,880,000         
-                  
-                  
-                  -                  -         Postretirement benefit obligations
1,489,787
1,600,558
1,726,138
1,767,978
1,826,032
9,823,764Open purchase orders         
6,324,438         
4,096,784         
2,530,642          
-                  
-                  
-         
The    long-term debt obligation is based on current interest rates and assumes    that the term loan is paid off at maturity.

The    Company has been required to make a pension contribution each of the past    three years.  In 2008, 2007 and 2006, the Company contributed approximately    $1.4 million, $.7 million and $.6 million, respectively, to the pension    fund.  No estimates of required pension payments have been asked for or made    beyond 2009.  The decline in the bond and stock markets in 2008    significantly reduced the value of our pension funds at December 31, 2008.     Based on the pension laws currently in effect, the resulting increase in    minimum funding requirements could cause a negative impact to our liquidity.

Each    segment of the cement manufacturing process requires significant investment    in major pieces of equipment.  Once installed, this equipment, if properly    maintained, can function for many years.  Generally we spend several million    dollars each year on preventive maintenance and equipment repairs; however,    capital expenditures vary from year to year.  A piece of equipment that    costs $25-$30 million may remain in service for fifty years.  After a period    of time, this equipment may be modified to incorporate the latest    technology, increasing its efficiency and production capacity and extending    its useful life.  In the years Monarch invests in major equipment    replacements or enhancements, current operations do not generate enough cash    to pay for the improvements, requiring us to use our cash on hand or bank    financing.  As projects are completed, we reduce the 

7.

amount needed for major    capital expenditures, allowing us to pay off any outstanding bank loans and    accumulate cash for the next major plant improvement.

The    Company is installing a fuel handling system which is expected to be    completed in the third quarter of 2009 at a cost of approximately $4.0    million.  Projects in the planning and design phases include an overland    conveyor system to improve efficiencies in moving raw materials.  This    conveyor system and projects related thereto are expected to cost    approximately $15.0 million to $25.0 million depending on the exact    components of the project undertaken and the volatility of certain material    costs, particularly steel.  Management has the discretion to postpone    components of the project and the discretion to undertake part or the entire    project.  The overland conveyor system and projects related to it are    estimated to take twenty-four to thirty-six months to complete after the    first purchase order is issued, which is expected to occur in 2009.  We    anticipate capital expenditures for 2009 to be higher than 2008 levels, but    we do not anticipate the need for additional bank financing other than that    available under the existing 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.  Under the terms and    conditions of our loan agreement, the Company is required to maintain a    tangible net worth of $90 million and an adjusted tangible net worth, which    is tangible net worth before other comprehensive income, of $95 million.     The Company was in compliance with these requirements at year end.  The    minimum net worth requirements could impact the Company's ability to pay    dividends in the future.  Although dividends are declared at the Board's    discretion and could be impacted by the minimum net worth requirements of    the Company's loan agreement, we project future earnings will support the    continued payment of dividends at the current level.

**FINANCIAL CONDITION**

Total    assets as of December 31, 2008 were $174.8 million, an increase of $7.3    million since December 31, 2007 due primarily to increases in short-term    investments, receivables, inventories and deferred income taxes. Short-term    investments increased by $2.1 million as a result of sales during the latter    part of the year generating cash in excess of the amount needed to finance    current operations.  The $2.0 million increase in receivables is the result    of higher sales in December 2008 in comparison to sales in December 2007. Inventories increased by $.9 million. Fuel, gypsum, paper sacks and other    inventory increased primarily due to purchases of coal and petroleum coke    exceeding amounts consumed in the production process.  Operating and    maintenance supplies inventory increased due to purchases of specialized    repair supplies related to the recently completed construction in the    production facilities.  Management continually evaluates the lead time to    obtain repair parts which are critical to its cement operations in    determining which parts to keep in inventory. Deferred income taxes    increased $6.4 million primarily due to an increase in postretirement    liability, impairments to available-for-sale equity securities deemed    other-than-temporary, and a decrease in unrealized holding gains related to    equity investments.  Investments decreased primarily as a result of a    decrease in the fair market value of equity investments.

Other    accrued liabilities increased by $2.1 million in 2008 primarily due to    prepayments held on account. Indebtedness decreased about $2.5 million    during the year 2008 primarily as a result of payments on the bank loan with    cash provided by the Company's cement manufacturing operations.

    During 2008, we adjusted the pension liability, resulting in an increase in    long-term accrued pension expense of $8.9 million and a decrease in    stockholders' investment of $5.7 million.  The change in liability was

    8.

primarily due to a loss on    plan assets during 2008 caused by the economic downturn.  We also adjusted    the postretirement liability, resulting in a decrease in accrued    postretirement expense of $1.0 million and an increase in stockholders'    investment of $1.5 million.  The increase in stockholders' investment was    due to a current year actuarial gain and amortization of actuarial losses.     Actuarial gains (losses) are a measure of the difference between actual    experience and that expected based upon the actuarial assumptions between    two measurement dates.  The gains (losses) are directly calculated and are    amortized over average expected future service, to the extent that such    gains (losses) are greater than 10% of the greater of the Accrued    Postretirement Benefit Obligation and the Plan's assets.

    Stockholders' investment increased .2% during 2008 as a result of net income    and the postretirement changes in comprehensive income, which was reduced by    dividends and the pension and unrealized holding gain changes in    comprehensive income. Basic earnings were $2.54 per share and dividends    declared were $.92 per share for the year 2008.

**CAPITAL RESOURCES**

The    Company historically invests $10 million to $12 million per year on capital    expenditures to keep its equipment and facilities in good operating    condition.  Capital expenditures during 2008 included expenditures to    improve efficiencies in moving raw materials in the Cement Business.  We    also invested in routine equipment purchases in both the Cement Business and    Ready-Mixed Concrete Business during 2008.  Property, plant and equipment    expenditures for 2008 totaled approximately $8.2 million, excluding the    amounts that are included in accounts payable.

The    Company is currently installing a fuel handling system which is expected    to be completed in the third quarter of 2009 at a cost of approximately $4.0    million.  Projects in the planning and design phases include an overland    conveyor system to improve efficiencies in moving raw materials.  This    conveyor system and projects related thereto are expected to cost    approximately $15.0 million to $25.0 million depending on the exact    components of the project undertaken and the volatility of certain material    costs, particularly steel.  Management has the discretion to postpone    components of the project and the discretion to undertake part or the entire    project. The overland conveyor system and projects related to it are    estimated to take twenty-four to thirty-six months to complete after the    first purchase order is issued, which is expected to occur in 2009.     The Company also plans to invest in other miscellaneous equipment    and facility improvements in both the Cement Business and Ready-Mixed    Concrete Business in 2009.  These expenditures are expected to reach    approximately $12.0 million during 2009 and will be funded with a mixture of    cash from 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.

**Accounting    Policies**--The critical accounting policies with respect to the Company    are those related to pension and postretirement benefits.             

    Monarch has defined benefit pension plans covering substantially all    permanent employees in the Cement Business.  Plans covering staff (salaried)    employees provide pension benefits that are based on years of service and    the employee's last sixty calendar months of earnings or the highest five    consecutive calendar years of earnings out of the last ten calendar years of    service, whichever is greater.  Plans covering production (hourly) employees    provide benefits of stated amounts for each year of service.  Generally,    Monarch's funding policy is to contribute annually an amount within the    minimum/maximum range of tax deductible contributions. Contributions are    intended to provide for benefits attributed to service to date and for those    expected to be earned in the future.  Monarch expects 2009 cash expenditures    for these plans to be approximately $1.9 million.

9.

    Monarch also provides other postretirement employee benefits including    health care and life insurance benefits to all retired employees who, as of    their retirement date, have completed ten or more years of credited service    under the pension plans.  These benefits are self-insured by Monarch and are    paid out of Monarch's general assets.  Monarch expects 2009 cash    expenditures for postretirement benefits to be approximately $1.6 million.

We    account for our pension plans in accordance with Financial Accounting    Standards Board (FASB) Statement No. 87, "Employers' Accounting for    Pensions" (FAS 87) and our postretirement benefits in accordance with FASB    Statement No. 106, "Employers' Accounting for Postretirement Benefits Other    Than Pensions" (FAS 106).  In addition, the Company adopted the provisions    of Statement of Financial Accounting Standards (SFAS) No. 158, "Employers'    Accounting for Defined Benefit Pension and Other Postretirement Plans, an    amendment of FASB Statements No. 87, 88, 106, and 132(R)" on December 31,    2006. FAS 87 and FAS 106 require us to make various estimates and    assumptions, including discount rates used to value liabilities, expected    rates of return on plan assets, salary increases, employee turnover rates,    anticipated employee mortality rates and expected future healthcare costs.     The estimates we used are based on our historical experience as well as    current facts and circumstances and are updated at least annually.  SFAS 158    require us to recognize the entire overfunded or underfunded status of our    defined benefit and postretirement plans as assets or liabilities in the    statement of financial position and to recognize changes, net of taxes, in    that funded status in the year in which the changes occur through    comprehensive income.

See    Note 14, Future Change in Accounting Principles, of Notes to Consolidated    Financial Statements for information concerning the accounting    pronouncements issued by the Financial Accounting Standards Board.

**Market    Risks--**Market risks relating to the Company's operations result    primarily from changes in demand for our products.  Construction activity,    particularly in the residential market, has been adversely impacted by the    global financial crisis even though interest rates are at historically low    levels.  A continuation of the financial crisis, including a scarcity of    credit, or a significant increase in interest rates could lead to a further    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. See Note 8,    Significant Estimates and Certain Concentrations, of Notes to Consolidated    Financial Statements for further discussion.

The    Company invests in equity investments which are subject to market    fluctuations.  The Company had $12.7 million of equity securities, primarily of    publicly traded entities, as of December 31, 2008.  The aggregate amount of    securities carried at cost, for which the Company has not elected the fair    value option, was $1.8 million as of December 31, 2008.  The remaining $10.9    million in equity 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.  Securities carried at cost are adjusted for    impairment, if conditions warrant.  Management estimates that its    publicly traded investments will generally be consistent with trends and    movements of the overall stock market 

10.
    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.     At December 31, 2008, the Company evaluated all of its equity investments for    impairment.  The results of those evaluations are discussed in Note    2, Investments, of Notes to Consolidated Financial Statements.

    Interest rates on the Company's term loan and line of credit are variable,    subject to interest rate minimums or floors, and are based on the lender's    National Prime rate less .75% and lender's National Prime rate less 1.25%,    respectively.  See Note 4, Line of Credit and Long-Term Debt, of Notes to    Consolidated Financial Statements.

**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.  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--**Regulation    of carbon dioxide emissions are currently being discussed by both state and    federal legislative bodies and regulators.  As part of the chemical process    involved in the production of portland cement, carbon dioxide is driven off    of raw materials.  Management is studying practices and technology which may    reduce or sequester carbon dioxide emissions.  The effect of environmental    regulations, and/or noncompliance thereof, may increase taxes, penalties,    and the cost of production, as well as require additional capital    expenditures for equipment.

   

**STOCK MARKET AND DIVIDEND DATA**

On    February 17, 2009, Monarch's stock was held by approximately 650 record    holders.  Monarch is the transfer agent for Monarch's stock which is traded    on the over-the-counter market under the trading symbol "MCEM.OB".     Over-the-counter market quotations reflect interdealer prices, without    retail mark-up, mark-down or commission and may not necessarily represent    actual transactions.  Following is a schedule of the range of the low and    high bid quotations for Monarch's stock as reported by Yahoo! at http://finance.yahoo.com/, and of the dividends declared on Monarch's    stock, for each quarter of our two latest fiscal years:

2008
2007
Price
Dividends
Price
DividendsQuarter         
Low  
High  
Declared 
Low  
High  
DeclaredFirst         $28.50$30.50 $  -    $29.00$35.50 $  -            Second $27.11$29.75 $.23 $30.55$32.01 $.22 Third $26.25$29.50 $        23 $27.85$32.40 $.22 Fourth$20.35$30.26$.46*$28.50$29.70$.44
*
*Reflects declaration of two $.23 and $.22 dividends payable in  the first quarter of 2009 and 2008, respectively. 
For    additional information concerning the Company's payment of dividends, see    "Management's Discussion and Analysis of Financial Condition and Results of    Operations - Liquidity".  In accordance with the Company's loan agreement,    it is required to maintain a minimum net worth which could impact the    payment of 

11.

future dividends.  See      Note 4, Line of Credit and Long-Term Debt, of Notes to Consolidated      Financial Statements.

The      following performance graph and table show a five-year comparison of      cumulative total returns for the Company, the S&P 500 composite index and      an index of a peer group of companies selected by the Company.

The      cumulative total return on investment for each of the periods for the      Company, the S&P 500 and the peer group is based on the stock price or      composite index at January 1, 2004.  The performance graph assumes that      the value of an investment in the Company's capital stock and each index      was $100 at January 1, 2004 and that all dividends were reinvested.  The      information presented in the performance graph is historical in nature and      is not intended to represent or guarantee future returns.
  
12/03
12/04
12/05
12/06
12/07
12/08
** **
** **
** **
** **
** **
** **
** ** Monarch Cement Company (The)100.00122.70131.84191.96180.89173.04S&P 500 100.00110.88116.33134.70142.1089.53Peer Group 100.00124.92158.62217.69215.1992.18
The performance graph compares the      performance of the Company with that of the S&P 500 composite index and an      index of a peer group of companies in the Company's industry in which the      returns are weighted according to each company's market capitalization.       The peer group consists of Cemex Sab De CV, Eagle Materials, Inc., Texas      Industries, Inc., Vulcan Materials Company, Lafarge S.A. and Ready Mix,      Inc.

12.

     

**MANAGEMENT'S REPORT ON INTERNAL    CONTROL OVER FINANCIAL    REPORTING**

       Management of the Company is responsible for establishing and maintaining      adequate internal control over financial reporting as defined in Rules      13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934.  The      Company's internal control over financial reporting is designed to provide      reasonable assurance regarding the reliability of financial reporting and      the preparation of financial statements for external purposes in      accordance with accounting principles generally accepted in the United      States of America (GAAP).  Internal control over financial reporting      includes those policies and procedures that (1) pertain to the maintenance      of records that, in reasonable detail, accurately and fairly reflect the      transactions and dispositions of our assets; (2) provide reasonable      assurance that transactions are recorded as necessary to permit      preparation of financial statements in accordance with GAAP, and that our      receipts and expenditures are being made only in accordance with      authorizations of our management and directors; and (3) provide reasonable      assurance regarding prevention or timely detection of unauthorized      acquisition, use or disposition of our assets that could have a material      effect on the financial statements.

      Because of its inherent limitations, internal control over financial      reporting may not prevent or detect misstatements.  A control system, no      matter how well conceived and operated, can provide only reasonable, not      absolute, assurance that the objectives of the control system are met.  No      evaluation of controls can provide absolute assurance that all control      issues and instances of fraud, if any, have been detected.  Also,      projections of any evaluation of effectiveness to future periods are      subject to the risk that controls may become inadequate because of changes      in conditions, or that the degree of compliance with the policies or      procedures may deteriorate.

As      required by Section 404 of the Sarbanes-Oxley Act of 2002, management      assessed the effectiveness of the Company's internal control over      financial reporting as of December 31, 2008.  In making this assessment,      management used the framework and criteria set forth by the Committee of      Sponsoring Organizations of the Treadway Commission (COSO) in *Internal      Control-Integrated Framework*.

      Based on our assessment and those criteria, management believes that the      Company maintained effective internal control over financial reporting as      of December 31, 2008.

The      effectiveness of the Company's internal control over financial reporting      as of December 31, 2008 has been audited by BKD,      LLP, an independent registered      public accounting firm, as stated in their report which is included      herein. 

 

                                                                                               THE MONARCH CEMENT    COMPANY

     

     

     

13.
 **Report    of Independent Registered Public Accounting Firm**

 

Audit Committee, Board of    Directors and Stockholders    The Monarch Cement Company    Humboldt, Kansas     

We have audited The Monarch    Cement Company's internal control over financial reporting as of December    31, 2008, based on criteria established in *Internal Control - Integrated    Framework issued by the Committee of Sponsoring Organizations of the    Treadway Commission (COSO)*.  The Company's management is responsible for    maintaining effective internal control over financial reporting and for its    assessment of the effectiveness of internal control over financial    reporting, included in the accompanying Management's Report on Internal    Control Over Financial Reporting.  Our responsibility is to express an    opinion on the Company's internal control over financial reporting based on    our audit.

We conducted our audit in    accordance with the standards of the Public Company Accounting Oversight    Board (United States).  Those standards require that we plan and perform the    audit to obtain reasonable assurance about whether effective internal    control over financial reporting was maintained in all material respects.     Our audit included obtaining an understanding of internal control over    financial reporting, assessing the risk that a material weakness exists and    testing and evaluating the design and operating effectiveness of internal    control based on the assessed risk.  Our audit also included performing such    other procedures as we considered necessary in the circumstances.  We    believe that our audit provides a reasonable basis for our opinion.

A company's internal control    over financial reporting is a process designed to provide reasonable    assurance regarding the reliability of financial reporting and the    preparation of financial statements for external purposes in accordance with    generally accepted accounting principles.  A company's internal control over    financial reporting includes those policies and procedures that (1) pertain    to the maintenance of records that, in reasonable detail, accurately and    fairly reflect the transactions and dispositions of the assets of the    company; (2) provide reasonable assurance that transactions are recorded as    necessary to permit preparation of financial statements in accordance with    generally accepted accounting principles, and that receipts and expenditures    of the company are being made only in accordance with authorizations of    management and directors of the company; and (3) provide reasonable    assurance regarding prevention or timely detection of unauthorized    acquisition, use or disposition of the company's assets that could have a    material effect on the financial statements.

Because of its inherent    limitations, internal control over financial reporting may not prevent or    detect misstatements.  Also, projections of any evaluation of effectiveness    to future periods are subject to the risk that controls may become    inadequate because of changes in conditions or that the degree of compliance    with the policies or procedures may deteriorate.

 

 

 

In our opinion, The MonarchCement Company maintained, in all material respects, effective internal controlover financial reporting as of December 31, 2008, based on criteria establishedin *Internal Control - Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission (COSO)*.

We have also audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the consolidated financial statements of The Monarch CementCompany and our report dated March 11, 2009 expressed an unqualified opinionthereon.

                                                                                   **BKD, LLP** 

Kansas City, MissouriMarch 11, 2009
 
 

 

 

 

 

 

 

 

 

 

 

2.

 

**Reportof Independent Registered Public Accounting Firm**

Audit Committee, Board ofDirectors and StockholdersThe Monarch Cement CompanyHumboldt, Kansas 

We have audited the accompanyingconsolidated balance sheets of The Monarch Cement Company as of December 31,2008 and 2007, and the related consolidated statements of income, stockholders'investment, comprehensive income and cash flows for each of the years in thethree-year period ended December 31, 2008.  The Company's management isresponsible for these financial statements.  Our responsibility is to express anopinion on these financial statements based on our audits.

We conducted our audits inaccordance with the standards of the Public Company Accounting Oversight Board(United States).  Those standards require that we plan and perform the audits toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement.  Our audits included examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management andevaluating the overall financial statement presentation.  We believe that ouraudits provide a reasonable basis for our opinion.

In our opinion, the consolidatedfinancial statements referred to above present fairly, in all material respects,the financial position of The Monarch Cement Company as of December 31, 2008 and2007, and the results of its operations and its cash flows for each of the yearsin the three-year period ended December 31, 2008, in conformity with accountingprinciples generally accepted in the United States of America.

As discussed in Note 1 to thefinancial statements, in 2008 the Company changed its method of accounting forfair value measurements in accordance with Statement of Financial AccountingStandards No. 157.

As discussed in Note 1 to thefinancial statements, in 2006 the Company changed its method of accounting forpension and other post-retirement benefits.

We also have audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), The Monarch Cement Company's internal control over financialreporting as of December 31, 2008, based on criteria established in *InternalControl - Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO)* and our report dated March11, 2009 expressed an unqualified opinion on the effectiveness of the Company'sinternal control over financial reporting.

                                                                                   **BKD, LLP**

Kansas City, MissouriMarch 11, 2009

 
 THE MONARCH CEMENT COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2008 AND 2007**ASSETS**2 0 0 8    2 0 0 7    CURRENT ASSETS:     Cash and cash    equivalents $        3,111,509  $        4,404,116            Short-term investments, at cost which approximates fair    value2,100,000   -                 Receivables, less allowances of    $788,000 in 2008  and                  $640,000 in 2007 for doubtful accounts15,499,638  13,531,221       Inventories, priced at cost which is not in excess of market-              Finished cement$     4,507,180  $     6,110,974             Work in process1,681,765  2,569,641             Building products5,069,230  4,518,379             Fuel, gypsum, paper sacks and other6,312,135  4,606,447             Operating and maintenance supplies10,943,746  9,759,949             Total inventories$   28,514,056  $   27,565,390       Refundable federal    and state income taxes27,102   -              Deferred income    taxes710,000  635,000       Prepaid expenses508,324  248,380  **                      Total current assets****$   50,470,629 ****$   46,384,107 ** PROPERTY, PLANT AND    EQUIPMENT, at cost, less accumulated            depreciation    and depletion of $151,055,752 in 2008 and    $140,661,628 in 200790,803,872  93,301,169  DEFERRED INCOME TAXES19,473,540  13,155,534  INVESTMENTS12,740,244  13,468,319  OTHER ASSETS1,276,364  1,179,116  **$ 174,764,649 ****$ 167,488,245 ****LIABILITIES AND STOCKHOLDERS' INVESTMENT**   CURRENT LIABILITIES:      Accounts payable$     6,308,873  $     6,413,945     Current portion of    term loan2,643,913  2,181,524     Accrued liabilities-         Dividends1,851,131  1,771,862        Compensation    and benefits 2,895,841  2,764,327        Federal and    state income taxes-            573,291        Miscellaneous    taxes845,830  816,839        Other2,960,892  823,392                    **   Total current liabilities****$  17,506,480 ****$   15,345,180 **LONG-TERM DEBT15,108,016   18,024,478  ACCRUED POSTRETIREMENT BENEFITS26,210,409  27,206,515  ACCRUED PENSION EXPENSE14,720,952  5,848,510  MINORITY INTEREST IN CONSOLIDATED    SUBSIDIARIES708,864  709,038  STOCKHOLDERS' INVESTMENT      Capital    Stock,    par value $2.50 per share, one vote per    share -              Authorized 10,000,000 shares, Issued 2,518,658 shares at          December 31,    2008 and 2,510,708 shares at December 31, 2007$     6,296,645  $     6,276,770     Class B Capital    Stock, par value $2.50 per share, ten    votes per          share - Authorized 10,000,000 shares, Issued    1,505,540 shares at          December 31, 2008 and 1,516,250 shares at December 31, 20073,763,850  3,790,625     Retained earnings104,958,556  98,488,627     Accumulated other comprehensive    loss  (14,509,123)  (8,201,498)**                     Total stockholders' investment****$ 100,509,928 ****$ 100,354,524 ** **$ 174,764,649 ****$ 167,488,245 ***See notes to consolidated financial statements*   
17.
 THE MONARCH    CEMENT    COMPANY AND    SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFOR THE    YEARS    ENDED    DECEMBER    31, 2008, 2007 AND    2006                                                       2008     2007     2006     NET SALES$  153,886,473  $  146,769,559  $  154,212,628  COST OF SALES 120,887,764  112,637,185  120,492,566  **          Gross profit from    operations****$    32,998,709 ****$    34,132,374 ****$    33,720,062 **SELLING, GENERAL AND      ADMINISTRATIVE EXPENSES16,243,707   15,113,434   14,043,665         **      Income from operations****$    16,755,002 ****$    19,018,940 ****$    19,676,397 **OTHERINCOME (EXPENSE)      Interest income$            175,895  $            184,541  $            307,359        Interest expense(917,218)(1,808,881)(1,911,830)   Loss on impairment of equity    investments(4,157,612)    -            -                  Gain on sale of equity investments    -            2,486,100  -                  Dividend income267,435  231,940  131,749        Other, net834,379  1,071,767  976,550  $    (3,797,121)$      2,165,467     $       (496,172)**INCOME BEFORE PROVISION FOR INCOME TAXES****$    12,957,881 ****$    21,184,407 ****$    19,180,225 **PROVISION FOR INCOME TAXES2,725,000  5,950,000  5,965,000  **NET INCOME****$    10,232,881 ****$    15,234,407 ****$    13,215,225 ****Basic earnings per share****$2.54 ****$3.78 ****$3.28 **      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND    2006    2008     2007     2006     **NET INCOME****$****    10,232,881 ****$    15,234,407 ****$    13,215,225 **UNREALIZED APPRECIATION (DEPRECIATION) ON    AVAILABLE FOR SALE SECURITIES    (Net of deferred        tax (benefit) expense of $(3,040,000), $(384,000) and $308,000      for 2008, 2007 and 2006,    respectively) (4,557,612)(579,900)462,000  RECLASSIFICATION ADJUSTMENT FOR   REALIZED (GAINS) LOSSES INCLUDED IN    NET INCOME (Net of deferred tax (benefit)    expense of $(1,664,000),       $996,000 and    $0 for 2008, 2007 and 2006, respectively)2,493,612  (1,490,100)-           MINIMUM PENSION LIABILITY (Net of deferred tax (benefit)         expense of    $(3,800,000), $(805,000) and $497,000    for     2008, 2007 and 2006, respectively)(5,705,931)(1,199,292)744,802     POSTRETIREMENT LIABILITY (Net of deferred tax (benefit)         expense of $975,000, $(20,000)    and     $0 for 2008,        2007 and 2006, respectively)1,462,306  (23,244)-            **COMPREHENSIVE INCOME****$    3,925,256 ****$    11,941,871 ****$    14,422,027 ***Seenotes to consolidated financial statements*
18. THE MONARCH    CEMENT    COMPANY AND    SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENTFOR THE    YEARS    ENDED    DECEMBER    31, 2008, 2007 AND    2006                                                     AccumulatedClass B Other Capital Capital RetainedTreasuryComprehensive Stockholders'StockStockEarningsStockIncome (Loss)Investment**Balance at January 1, 2006****$ 6,162,315 ****$ 3,905,080 ****$ 76,965,363 ****$      -        ****$  2,640,000 ****$ 89,672,758 **Net income-           -            13,215,225  -            -            13,215,225  Dividends declared              ($.84 per share)-            -             (3,382,645) -                 -             (3,382,645)Transfer of shares58,398  (58,398)-            -            -            -            Changein unrealized    appreciation on available-   for-sale securities-           -            -            -            462,000  462,000  Adjustment to recognize   minimum pension liability-           -            -            -            744,802  744,802  Adjustment to initially apply    FAS 158-pension liability-           -            -            -            (1,311,444)(1,311,444)Adjustment to initially apply    FAS 158-postretirement liability-           -            -            -            (7,444,320)(7,444,320)**Balance at December 31, 2006****$ 6,220,713 ****$ 3,846,682 ****$ 86,797,943 ****$      -        ****$ (4,908,962)****$ 91,956,376 **Net income-           -            15,234,407  -            -            15,234,407  Dividends declared-           -            (3,543,723)-            -            (3,543,723)      ($.88 per share)Transfer of shares56,057  (56,057)-            -            -            -            Changein unrealized    appreciation on available-   for-sale securities -           -            -            -            (2,070,000)(2,070,000)Adjustment to recognize   minimum pension liability-           -             -            -            (1,199,292)(1,199,292)Adjustment to recognize   postretirement liability-           -             -            -            (23,244)(23,244)**Balance at December 31, 2007****$ 6,276,770 ****$ 3,790,625 ****$ 98,488,627 ****$      -        ****$****(8,201,498)****$100,354,524 **Net income-           -            10,232,881  -            -            10,232,881  Dividends declared-           -            (3,703,531)-            -            (3,703,531)      ($.92 per share)Transfer of shares26,775  (26,775)-            -            -            -            Purchase of treasury stock -            -             -            (66,321)-            (66,321)Retirement of treasury stock(6,900)-            (59,421)66,321  -            -            Changein unrealized    appreciation on available-   for-sale securities -           -            -            -            (2,064,000)(2,064,000)Adjustment to recognize   minimum pension liability-           -             -            -            (5,705,931)(5,705,931)Adjustment to recognize   postretirement liability-           -             -            -            1,462,306  1,462,306  **Balance at December 31, 2008****$ 6,296,645 ****$ 3,763,850 ****$104,958,556 ****$      -        ****$(14,509,123)****$100,509,928 ***Seenotes to consolidated financial statements*
 19.
 THE MONARCH    CEMENT    COMPANY AND    SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE    YEARS    ENDED    DECEMBER    31, 2008, 2007 AND    2006                                                      2008   2007   2006   **OPERATING ACTIVITIES:**Net income$   10,232,881   $  15,234,407   $   13,215,225  Adjustments to reconcile net income to   netcash provided by operating activities:      Depreciation,    depletion and amortization12,270,723   11,848,894   11,312,741        Minority interest    in losses of subsidiaries(174)(124,338)(4,553)      Deferred income    taxes(2,192,006) (1,223,534) (559,000)      Gain on disposal    of assets(234,940)(574,879)(217,708)      Realized gain on    sale of other investments-            (2,486,100)-                  Realized loss on    impairment of other investments4,157,612  -            -                 Change in assets and liabilities:            Receivables, net     (1,968,417)1,264,260  (608,930)               Inventories(721,888)(4,987,312)(4,451,173)               Refundable income taxes(27,102)739,574  (739,574)               Prepaid expenses(259,944)36,219  (203,756)               Other assets 32,821   58,750   60,523                 Accounts payable and accrued liabilities2,033,813  679,334  (1,123,145)               Accrued postretirement benefits1,351,200  2,090,606  1,501,670              Accrued pension    expense(633,489)(195,995)63,416        Net cash provided    by operating activities$   24,041,090  $  22,359,886  $   18,245,736  **INVESTING ACTIVITIES:**Acquisition of property, plant and equipment$   (8,150,297)$  (9,624,187)$  (22,405,144)Proceeds from disposals of property, plant and    equipment 250,727   758,634   353,203  Payment for acquisition of business(2,319,934)-            -            Payment for purchases of equity investments(6,869,537)(3,819,431)(1,051,038)Proceeds from disposals of equity investments-            4,662,883  -            (Increase) decrease in short-term investments, net(2,100,000)-            1,500,000  Purchasesof subsidiaries' stock-            (189,741)(192,914)      Net cash used for    investing activities$ (19,189,041)$   (8,211,842)$  (21,795,893)**FINANCING ACTIVITIES:**Increase (decrease) in line of credit, net$               -         $  (6,397,667)$     6,397,667  Payment on bank loans(2,116,417)(2,067,630)(1,782,463)Payments on other long-term debt(337,656)(226,071)(222,146)Cash dividends paid (3,624,262)(3,463,183)(3,302,106)Subsidiaries' dividends paid to minority    interest-           -           (25,733)Purchase of treasury stock(66,321)-           -                 Net cash provided    by (used for) financing activities$   (6,144,656)$ (12,154,551)$     1,065,219  **Net increase (decrease) in cash and cash equivalents****$   (1,292,607)****$    1,993,493 ****$    (2,484,938)****Cash and Cash Equivalents, beginning of year****4,404,116 ****2,410,623 ****4,895,561 ****Cash and Cash Equivalents, end of year****$    3,111,509 ****$    4,404,116 ****$     2,410,623 ****Additional Cash Flow Information:**Interest paid, net of amount capitalized $       939,179  $    1,812,743  $     1,915,473  Income taxes paid, net of refunds$    5,500,016  $    5,868,647  $     7,271,924  Capital equipment additions included in accounts    payable$       221,914     $       546,085     $        164,847     *Seenotes to consolidated financial statements*
20.
 THE MONARCH    CEMENT    COMPANY AND    SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2008, 2007 AND    2006
(1)     **NATURE OF OPERATIONS AND  SUMMARY OF SIGNIFICANT  ACCOUNTING POLICIES**

(a)      **Nature of  Operations--**The Monarch Cement Company (Monarch) is principally engaged in  the manufacture and sale of portland cement.  The marketing area for Monarch's  products consists primarily of the State of Kansas, the State of Iowa,  southeast Nebraska, western Missouri, northwest Arkansas and northern  Oklahoma.  Sales are made primarily to contractors, ready-mixed concrete  plants, concrete products plants, building materials dealers and governmental  agencies.  Companies controlled by Monarch sell ready-mixed concrete, concrete  products and sundry building materials in metropolitan areas within Monarch's  marketing area.            

(b)      **Principles of Consolidation--**Monarch has direct control of certain  operating companies that have been deemed to be subsidiaries within the  meaning of accounting principles generally accepted in the United States of  America and the rules and regulations of the Securities and Exchange  Commission.  Accordingly, the financial statements of such companies have been  consolidated with Monarch's financial statements.  All significant  intercompany transactions have been eliminated in consolidation. Minority  interests in net income (loss) have been recorded as reductions or increases  in other income in the accompanying statements of income. The minority  interests in net income (loss) were $(174), $(124,338) and $(4,553) during  2008, 2007 and 2006, respectively. 

(c)        **Use of Estimates--**The preparation of financial statements in  conformity with accounting principles generally accepted in the United States  of America requires management to make estimates and assumptions that affect  the reported amounts of assets and liabilities and disclosure of contingent  assets and liabilities at the date of the financial statements and the  reported amounts of revenues and expenses during the reporting period.  Actual  results could differ from those estimates.  

(d)        **Reclassifications--**Certain reclassifications have been made to the  2006 financial statements to conform to the current year presentation. These  reclassifications had no effect on net earnings. 

(e)      **Cash Equivalents--**The Company considers all liquid investments with  original maturities of three months or less to be cash equivalents.  At  December 31, 2008 and 2007, cash equivalents consisted primarily of money  market investments and repurchase agreements with various banks which are not  guaranteed by the FDIC.  The  financial institutions holding the Company's cash accounts are participating  in the FDIC's Transaction Account Guarantee Program.  Under that program,  through December 31, 2009, all noninterest-bearing transaction accounts are  fully guaranteed by the FDIC for the entire amount in the account.

 (f)      **Short-term Investments**--The Company has $2.1 million of short-term  investments in Bank of Oklahoma, N.A. certificates of deposit which mature in  less than one year.  Effective October 3, 2008, the FDIC's insurance limits  increased to $250,000.  The increase in federally insured limits is currently  set to expire December 31, 2009.  At December 31, 2008, the Company's account  exceeded federally insured limits by approximately $1.9 million.

(g)      **Investments**--Equity securities for which the Company has no immediate  plan to sell but that may be sold in the future are classified as available  for sale.  If the fair value of the equity security is readily determinable,  it is carried at fair value and unrealized gains and losses are recorded, net  of related income tax effects, in stockholders' investment.  Realized gains  and losses, based on the specifically identified cost of the

21. 
security, are included in net  income.  Equity securities whose fair value is not readily determinable are  carried at cost unless the Company is aware of significant adverse effects  which have impaired the investments.

(h)     **Receivables**--Accounts  receivables are stated at the amount billed to customers.  The Company  provides an allowance for doubtful accounts, which is based upon a review of  outstanding receivables, historical collection information and existing  economic conditions.  Accounts receivables are ordinarily due 30 days after  the issuance of the invoice.  Accounts past due are considered delinquent.   Delinquent receivables are written off based on individual credit evaluation  and specific circumstances of the customer.

(i)      **Inventories**--Inventories of finished cement and work in process are  recorded at the lower of cost or market on a last-in, first-out (LIFO) basis.   Total inventories reported under LIFO amounted to $6,188,945 and $8,680,615 as  of December 31, 2008 and 2007, respectively.  Under the average cost method of  accounting (which approximates current cost), these inventories would have  been $2,764,000, $1,896,000 and $2,084,000 higher than those reported at  December 31, 2008, 2007 and 2006, respectively.  The cost of manufactured  items includes all material, labor, factory overhead and production-related  administrative overhead required in their production.

We  incurred a permanent reduction in the LIFO layers of work in process and  cement inventories in the amount of $.3 million at December 31, 2008.  The $.3  million liquidation gain was recognized as a reduction of cost of sales.  We  did not incur any permanent reductions in the LIFO layers for the years ended  December 31, 2007 and 2006.

  Other inventories are purchased from outside suppliers.  Fuel and other  materials are priced by the first-in, first-out (FIFO) method while operating  and maintenance supplies are recorded using the average cost method.

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

(j)      **Property, Plant and Equipment**--Property, plant and equipment are stated  at cost of acquisition or construction.  The Company capitalizes the cost of  interest on borrowed funds used to finance the construction of property, plant  and equipment.  During 2008, 2007 and 2006, the Company capitalized  approximately $110,100, $161,000 and $236,100, respectively, of interest  expense related to current construction projects.

  As of December 31, 2008 and 2007, the amount of accounts payable related to  property, plant and equipment was $221,914 and $546,085, respectively.

  Depreciation of property, plant and equipment is provided by charges to  operations over the estimated useful lives of the assets using accelerated  methods.  The Company's buildings, machinery and equipment are depreciated  using double declining balance depreciation.  The Company switches to straight  line depreciation once it exceeds the amount computed under the double  declining balance method until the asset is fully depreciated.  The Company  does not depreciate construction in process.  Depletion rates for quarry lands  are designed to amortize the cost over the estimated recoverable reserves.   Expenditures for improvements that significantly increase the assets' useful  lives are capitalized while maintenance and repairs are charged to expense as  incurred.

22.
THE MONARCH      CEMENT      COMPANY AND      SUBSIDIARIESNOTES TO      CONSOLIDATED      FINANCIAL      STATEMENTSDECEMBER      31, 2008, 2007 AND      2006
(k)   **   Income Taxes**--Deferred tax assets and liabilities are  recognized for the tax effects of differences between the financial statement  and tax bases of assets and liabilities.  A valuation allowance is established  to reduce deferred tax assets if it is more likely than not that a deferred  tax asset will not be realized. 

(l)**     Revenue Recognition**--The  Company records revenue from the sale of cement, ready-mixed concrete,  concrete products and sundry building materials following delivery of the  products to customers. Concrete products are also sold through long-term  construction contracts.  Revenues for these contracts are recognized on the  percentage-of-completion method based on the costs incurred relative to total  estimated costs. Full provision is made for any anticipated losses.  Billings  for long-term construction contracts are rendered monthly, including the  amount of retainage withheld by the customer until contract completion.   Retainages are included in receivables and are generally due within one year.   In the event the Company receives advance payment on orders, we defer revenue  recognition until the product is delivered.

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

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

(o)     ** Other, net--**Other, net contains miscellaneous nonoperating income  (expense) items other than interest income, interest expense, gains (losses)  on equity investments and dividend income. Material items in other, net  include income from oil properties of $465,920, $502,762 and $523,470 for  2008, 2007 and 2006, respectively. 

(p)      **Earnings per Share**--Basic earnings per share is based on the weighted  average common shares outstanding during each year.  Diluted earnings per  share is based on the weighted average common and common equivalent shares  outstanding each year.  Monarch has no common stock equivalents and therefore  does not report diluted earnings per share.  The weighted average number of  shares outstanding was 4,026,694 in 2008 and 4,026,958 in 2007 and 2006. 

(q)      **Taxes Collected from Customers and Remitted to Governmental Authorities--**Taxes  collected from customers and remitted to governmental authorities are  presented in the accompanying consolidated statements of income on a net  basis.

(r)      **Self    Insurance**--The Company has elected to self-insure certain costs related  to employee and retiree health and accident benefits programs.  Costs  resulting from self-insured losses are charged to income when incurred.   Health and accident benefits provided to employees and retirees in the Cement  Business are totally self-insured.  Health benefits provided to employees in  the Ready-Mixed Concrete Business are also self-insured but are subject to a  $50,000 individual stop loss and an aggregate stop loss of 115% of expected  claims. 

(s)     **Issuance    and Repurchase of Stock**--The Company records the purchase of  subsidiaries' stock from minority shareholders as a reduction in the liability  for minority interest in consolidated subsidiaries on the
23.
  
balance sheet.  Any excess of  purchase price over net book value of the minority interest acquired is  evaluated to determine if the excess should be added to the value of its  property, plant and equipment, net of the deferred tax effect, recorded as  goodwill or recognized as a gain or loss.
(t)     ** Disclosure about Fair Value of Financial Instruments**--Fair value  is the estimated amount at which financial assets or liabilities could be  exchanged in a current transaction between willing parties, other than in a  forced or liquidation sale.  Cash and cash equivalents, short-term  investments, receivables, accounts payable and long-term debt have carrying  values that approximate fair values.  Investment fair values equal quoted  market prices, if available.  If quoted market prices are not available, fair  value is estimated based on quoted market prices of similar securities. If it  is not practicable to estimate the fair value of an investment, the investment  is recorded at cost and evaluated quarterly for events that may adversely  impact its fair value.
  In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for  Financial Assets and Financial Liabilities" which includes an amendment of  FASB Statement No. 115.  SFAS No. 159 permits an entity to choose, at  specified election dates, to measure eligible financial instruments and  certain other items at fair value (the "fair value option") that are not  currently required to be measured at fair value.  Most of the provisions of  the Statement apply only to entities that elect the fair value option.   However, the amendment to FASB Statement 115, "Accounting for Investments in  Debt and Equity Securities", applies to all entities with available-for-sale  and trading securities.  Upfront costs and fees related to items for which the  fair value option is elected shall be recognized in earnings as incurred and  not deferred.  An entity shall report unrealized gains and losses from fair  value changes on items for which the fair value option has been elected in  earnings at each subsequent reporting date.  SFAS No. 159 also establishes  presentation and disclosure requirements designed to facilitate comparisons  between entities that choose different measurement attributes for similar  types of assets and liabilities.  SFAS No. 159 is effective for financial  statements issued for fiscal years beginning after November 15, 2007.  At the  effective date an entity may elect the fair value option for eligible items  that exist at that date.  The entity shall report the effect of the first  remeasurement to fair value as a cumulative-effect adjustment to the opening  balance of retained earnings.  The Company has not elected the fair value  option for eligible items that existed at the January 1, 2008 effective date.

(u)      **Disclosure    about Defined Benefit Pension and Other Postretirement Plans--**The  Company adopted the provisions of Statement of Financial Accounting Standards  (SFAS) No. 158, "Employers' Accounting for Defined Benefit Pension and Other  Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106, and  132(R)" on December 31, 2006.  The most significant change was the requirement  for the Company to recognize the entire overfunded or underfunded status of  its defined benefit and postretirement plans as assets or liabilities in its  statement of financial position and to recognize changes, net of taxes, in  that funded status in the year in which the changes occur through  comprehensive income.

(2)      **INVESTMENTS**

Realized  gains (losses) are computed using the specific identification method.  The  Company adopted the provisions of the Financial Accounting Standards Board  (FASB) SFAS No. 157, "Fair Value Measurements". SFAS No. 157 establishes a  single definition of fair value and a framework for measuring fair value, sets  out a fair value hierarchy to be used to classify the source of information  used in fair value measurements and requires new disclosures of assets and  liabilities measured at fair value based on their level 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

24.
THE MONARCH      CEMENT      COMPANY AND      SUBSIDIARIESNOTES TO      CONSOLIDATED      FINANCIAL      STATEMENTSDECEMBER      31, 2008, 2007 AND      2006
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 defer the effective date of SFAS No. 157 for one year for  certain nonfinancial assets and liabilities and remove certain leasing  transactions from its scope.  The Company 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:
December 31, 2008                         
Balance     
Quoted Prices        in Active             Markets for            Identical Assets        (Level 1)       
Significant        Other              Observable        Inputs     (Level 2)    
Significant             Unobservable        Input                 (Level 3)      Assets:        Available-for-sale securities$         10,939,044$         10,939,044$                   -          $                   -          Total $           10,939,044 $           10,939,044 $                     -           $                     -          
December 31, 2007                        Assets:        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 has remeasured  to fair value on a non-recurring basis in the balance sheet a cost basis  investment (Level 2 measurement) due to other-than-temporary impairment as  discussed below.  The Company has no additional assets or liabilities in  either year requiring remeasurement to fair value on a non-recurring basis in  the balance sheet. 

The  following table shows the gross unrealized losses and fair value of the  Company's investments with unrealized losses that are not deemed to be  other-than-temporarily impaired, aggregated by investment category and length  of time that individual securities have been in a continuous unrealized loss  position at December 31, 2008:  Less than 12 Months  12 Months or Greater Total  Description of Securities  Fair          Value Unrealized          Losses Fair          Value Unrealized          Losses Fair          Value Unrealized          LossesMarketable equity securities $     816,872 $    157,786 $      -          $      -          $    816,872 $    157,786Investments in equity           securities carried at cost 1,434,500 223,100         -                 -          1,434,500 223,100Total $  2,251,372 $    380,886 $      -          $      -          
$  2,251,372 $    380,886
Due to an  adverse change in market conditions, the Company's investments in marketable  equity securities carried at fair value were evaluated for impairment by  comparing the specifically identified cost of each purchase to market price.   As a result of these evaluations, the Company identified $4.1 million in  other-than-temporary
25.

 
 
impairments in investments,  primarily in housing, oil and gas refinery and marketing, cement and related  industries; resulting in a recognized loss in earnings of equity investments.   The fair value of those impaired investments then became the new cost basis.   The Company also identified some specific purchases of marketable equity  securities that were not other-than-temporarily impaired resulting in the  recognition of unrealized losses (see table above).  These unrealized losses  relate to an investment in the common stock of a company in the oil and gas  refinery and marketing industry. The severity of the impairment (fair value is  approximately 6 percent less than cost) and the duration of the impairment  (less than 3 months) correlate with the weakening of the industry.  The  Company evaluated the near-term prospects of the issuer in relation to the  severity and duration of the impairment.  Based on that evaluation and the  Company's ability and intent to hold these investments for a reasonable period  of time sufficient for a forecasted recovery of fair value, the Company does  not consider those investments to be other-than-temporarily impaired at  December 31, 2008.

The  Company owns stock in two privately-owned companies accounted for by the cost  method; one in the brick industry and the other in the ethanol production  industry.  Due to an adverse change in market conditions, these investments  were evaluated for impairment based on average cost and specific  identification, respectively.  As a result of those evaluations, the Company  identified a $.1 million other-than-temporary impairment in the ethanol  industry investment resulting in a realized loss.  The fair value of this  investment, which was determined based on publicly available offers to buy or  sell approximate to the Company's fiscal year end, then became the new cost  basis.  The Company's evaluation also identified an unrealized loss on the  brick industry investment of $.2 million (see table above).  The severity of  the impairment (fair value is approximately 13% less than cost) and the  duration of the impairment (less than 3 months) correlate with the weak fourth  quarter 2008 performance within its industry.  Based on the Company's  evaluation through a discounted cash flow valuation of the investee and the  Company's ability and intent to hold the investment for a reasonable period of  time sufficient for a forecasted recovery of fair value, the Company does not  consider this investment to be other-than-temporarily impaired at December 31,  2008.  The aggregate cost after impairments of the Company's cost-method  investments totaled $1.8 million and $2.1 million at December 31, 2008 and  2007, respectively.

The  investment results for the years ended December 31, 2008, 2007 and 2006 are as  follows:
2008  
2007   
2006   Fair value of investments   $   12,740,244     $              13,468,319   $              15,275,669Cost of investments10,760,244   8,048,319 6,405,669   Net unrealized gains $                1,980,000  $                5,420,000$                8,870,000Unrealized gain (loss) recorded in equity         Investments carried at fair value $                1,411,000  $                3,252,000$                5,322,000   Investments carried at cost   (223,000)             -                             -                   Deferred income taxes 792,000  2,168,000  3,548,000  $     1,980,000         $                5,420,000$                8,870,000Proceeds from sale of securities $             -                    $     4,662,883$            -                    Realized gains  $             -                    $     2,486,100$            -                    Realized losses due to other-than-temporary        impairment of assets    $    (4,157,612) $            -                 $            -                    
(3)     **PROPERTY,    PLANT AND EQUIPMENT**

Property,  plant and equipment and their estimated useful lives at December 31, 2008 and  2007 consisted of:

26.
THE MONARCH      CEMENT      COMPANY      AND SUBSIDIARIESNOTES TO      CONSOLIDATED      FINANCIAL      STATEMENTSDECEMBER      31, 2008, 2007      AND 2006                Lives (Years)               2008             2007Quarry land $             2,004,549 $              1,806,742Other land 7,590,6727,653,479Buildings and improvements15 - 3929,623,89828,298,278Cement manufacturing equipment15 - 25117,160,400117,678,756Ancillary equipment5 - 1012,415,8098,763,102Ready-mix and concrete production          machinery and equipment5 - 1528,294,11725,948,721Transportation and mobile equipment3 -   7          38,895,51535,759,144Office machinery, equipment, furniture and          fixtures 3 - 10 2,139,774 1,987,196Construction in process3,734,8906,067,379$ 241,859,624$  233,962,797Less--Accumulated depreciation and          depletion151,055,752140,661,628$            90,803,872$             93,301,169
4)      **LINE OF    CREDIT AND LONG-TERM DEBT**

In December 2008, Monarch renewed and modified  the loan agreement with its current lender, Bank of Oklahoma, N.A., under  similar terms as the prior agreement. Monarch's current unsecured credit  commitment consists of a $25,000,000 term loan maturing December 31, 2014 and  a $15,000,000 line of credit maturing December 31, 2009. Interest on the line  of credit varies with the lender's National Prime rate less 1.25% with a 2.50%  interest rate minimum or floor. The loan agreement contains a financial  covenant related to net worth which the Company was in compliance with at year  end. The average outstanding balance of the line of credit during 2008 and  2007 was $3.3 million and $5.1 million, respectively.  At December 31, 2008  and 2007, there was $0 borrowed against the line of credit.    Interest on the  line of credit varies with the lender's National Prime rate less 1.25% for  2008 and 1.00% for 2007. The annual weighted average interest rate we paid on  the line of credit during 2008 and 2007 was 3.92% and 7.05%, respectively.   The applicable interest rate was 2.75% and 6.25% on December 31, 2008 and  2007, respectively, and is payable quarterly.
2008     2007     Note payable, bank (a) $   17,241,547 $   19,357,963Other510,382848,039  $          17,751,929 $   20,206,002Less current maturities 2,643,913 2,181,524  $   15,108,016   $   18,024,478  
(a)  Due        December 31, 2014; payable $794,926 quarterly including interest;                interest computed based on lender's National Prime rate less .75%        with a               3.00% interest rate minimum or floor subject to a financial        covenant related       to net worth which the Company was in compliance with at year end.
Aggregate annual maturities of long-term debt as of December 31, 2008 are:
2009 $  2,643,9132010 3,015,3712011 2,949,9672012 3,021,2822013 3,017,642Thereafter              3,103,754  $ 17,751,929  
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(5)     **INCOME  TAXES**

The components of the provision for federal and state income taxes in the  accompanying consolidated statements of income are as follows:
2008  2007  2006  Taxes currently payable$    4,917,000   $    7,174,000    $    6,524,000Deferred income taxes(2,192,000)(1,224,000)(559,000)            Income tax expense $    2,725,000  $    5,950,000  $    5,965,000
A      reconciliation of income tax expense      at the statutory rate to the Company's actual income tax expense is as      follows:
2008  2007  2006Computed at statutory rate (34%; over $10 million-35%)$  4,435,000   $  7,315,000   $  6,613,000Increase (decrease) resulting from:   State income taxes, net of federal tax benefit                          -                   360,000  412,000   Percentage depletion(1,328,000) (1,280,000) (1,309,000)   Valuation allowance(40,000)-                   530,000   Domestic production activities deduction(284,000)(375,000)(208,000)   Minority interest in consolidated income (loss)                -          (42,000)(2,000)   Other(58,000)(28,000)(71,000)            Provision    for income taxes$  2,725,000  $  5,950,000$  5,965,000
The tax effects of significant temporary differences relating to deferred    taxes shown on the balance sheets were:    
2008                                 2007      Current:   Allowance for doubtful accounts$        315,000           $        256,000              Accrued vacation 395,000   379,000        Net current deferred tax    assets$        710,000           $        635,000           Noncurrent:   Depreciation $        (76,000) $      (163,000)      Postretirement benefits11,109,000  11,544,000     Pension liability 5,891,000   2,347,000     Unrealized holding gains(792,000)(2,168,000)   Net  operating loss carryforwards 1,147,000   1,058,000     Impairment on investments1,663,045  -                     Other, net 531,495   537,534        Net long-term deferred tax    assets $    19,473,540   $    13,155,534  
Some of the Company's subsidiaries file    separate federal and/or state income tax returns which have resulted in net    operating loss carryforwards.  Deferred taxes resulting from net operating    loss carryforwards are included in the above table net of valuation    allowances.  The valuation allowance has been used to reduce the tax benefit    associated with the net operating loss carryforwards.  The provision for    income taxes and income tax liabilities recorded in the financial statements    include those separate calculations.  The following table presents the    expiration dates of the Company's operating loss carryforwards for tax    purposes as of December 31, 2008:

28.
THE        MONARCH        CEMENT        COMPANY AND        SUBSIDIARIESNOTES TO        CONSOLIDATED        FINANCIAL        STATEMENTSDECEMBER        31, 2008, 2007 AND        2006 
   Expiration      Date               
   Operating        Loss2024             $  90,0002025 463,0002026 439,0002027 19,0002028 136,000
In 2007, the Company adopted the provisions  of the Financial Accounting Standards Board (FASB) Interpretation No. 48,  "Accounting for Uncertainty in Income Taxes, an interpretation of FASB  Statement No. 109" (FIN 48).  FIN 48 clarifies the application of Statement  109 by defining a recognition threshold of "more likely than not" that the  position would be sustained upon examination before any part of the benefit of  that position be recognized in an enterprise's financial statements. It also  provides guidance on the measurement of the tax position. The adoption of FIN  48 had no material effect on the Company's financial position, operations or  cash flows. 

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 for years before 2005.

(6)     **POSTRETIREMENT    BENEFITS**

Monarch  provides certain postretirement health care and life insurance benefits to all  retired employees in the Cement Business who, as of their retirement date,  meet the eligibility requirements.  These benefits are self-insured by Monarch  and are paid out of Monarch's general assets.  Monarch expects 2009 cash  expenditures for this plan to be approximately $1,560,000 which is equal to  expected benefits and expenses.

  Monarch uses a December 31 measurement date for the plans.  At December 31,  2008 and 2007, the current portion of the accrued benefit cost of  approximately $1,560,000 and $1,650,000, respectively, is recorded in  compensation and benefits.  Information about the plans' funded status and  postretirement cost follows:
2008      2007      Change in benefit obligation       Beginning of year $     28,856,515  $     26,722,665      Service cost473,443   536,236      Interest cost1,611,513  1,656,793      Actuarial (gain) loss(1,734,298) 1,100,463      Benefits and expenses paid*(1,436,764)(1,159,642)    Benefit obligation at end of year$     27,770,409   $     28,856,515  Change in fair value of plan assets       Beginning of year $              -                 $              -                     Employer contributions*1,436,764   1,159,642      Benefits paid and expenses*(1,436,764)(1,159,642)    Fair value of plan asset at end of year$              -                  $              -                 *Amounts are net of $72,165 retiree prescription drug        subsidy received during the 2008 fiscal year.Funded status = year-end benefit liability $    (27,770,409) $    (28,856,515)
29.
         
Amounts recognized in the balance sheets consist of:2008      2007      Current liability$      (1,560,000) $      (1,650,000)Noncurrent liability(26,210,409)(27,206,515)Net amount recognized$    (27,770,409) $    (28,856,515)
Other amounts recognized in the balance sheets:
 Accumulated other comprehensive income$      (6,005,258)$      (7,467,564)
Other changes in plan assets and benefit obligations recognized in other    comprehensive income:
Current year actuarial (gain) loss$      (1,734,298) $       1,100,463         Amortization of actuarial loss(703,008)(1,057,219)Total recognized in other comprehensive income$      (2,437,306) $                   43,244  
  Estimated amounts that will be amortized from accumulated other comprehensive  income into net periodic postretirement benefit cost in 2009 include an  actuarial loss of $632,000.

  (Accrued) Prepaid Expense represents the accumulated difference between actual  contributions and actual expenses from past years.  It is updated from the  prior year as follows:
(Accrued) prepaid postretirement benefit cost as of        December 31, 2007$    (16,408,951)2008 net periodic postretirement benefit cost2,787,964  2008 contributions
1,508,929  Retiree Drug Subsidy
72,165(Accrued) prepaid postretirement benefit cost as of        December 31, 2008
$    (17,760,151)
    The assumed annual rate of increase in the per capita cost of covered health    care benefits was 10% for 2008, 2007 and 2006.  This trend rate is    assumed to decrease in future years, 1% per year to an ultimate annual rate    of 5%.  Following are the components of net periodic benefit cost:2008   2007   2006   Components of net periodic benefit cost           Service cost$     473,443$     536,236$     526,652      Interest cost1,611,513 1,656,793 1,495,069      Recognized net loss703,0081,057,219886,732      Net    periodic benefit cost$  2,787,964 $  3,250,248 $  2,908,453                           Weighted-average assumptions as of December 31           Discount rate- benefit    obligation6.00%6.00%5.75%      Discount rate- postretirement    cost6.00% 5.75% 5.75%
  Assumed health care cost trend rates have a significant effect on the amounts  reported for the health care plans.  A one-percentage-point change in assumed  health care cost trend rates would have the following effects:
  1% Increase 1% DecreaseEffect on interest and service cost$         335,886$        (271,057)Effect on postretirement benefit obligation3,715,118 (3,086,828)
  On December 8, 2003, the Medicare Prescription Drug Improvement Modernization  Act of 2003 (the Act) was signed into law.   The Act introduces a prescription  drug benefit under Medicare Part D, as well as a federal subsidy of sponsors  of retiree health care benefit plans that provide benefits at least  actuarially equivalent to

30.
THE        MONARCH        CEMENT        COMPANY AND        SUBSIDIARIESNOTES TO        CONSOLIDATED        FINANCIAL        STATEMENTSDECEMBER        31, 2008, 2007 AND        2006
Medicare    Part D.  The Company has concluded that the benefits provided to most of our    retirees are actuarially equivalent to Medicare Part D under the Act.

As of  December 31, 2008, the following benefit payments (net of employee  contributions) are expected to be paid:
      Gross            Subsidy           Receipts               Net              2009     $  1,559,512 $   69,725 $  1,489,78720101,675,035 74,477 1,600,55820111,805,121 78,983 1,726,13820121,850,27882,3001,767,97820131,911,611    85,579 1,826,0322014-201810,315,839 492,075 9,823,764
(7)     **PENSION PLANS**

Monarch  has noncontributory defined benefit pension plans covering substantially all  employees in the Cement Business who meet the eligibility requirements.   Monarch's funding policy is to contribute annually an amount within the  minimum/maximum range of tax deductible contributions.  Monarch expects to  contribute approximately $1,880,000 to the plans in 2009.

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

2008
2007Change        in benefit obligation            Benefit obligation at beginning of year$    31,718,049  $    30,699,393                  Service cost 580,046   569,753           Interest cost 1,878,251  1,768,711           Actuarial (gain) loss 35,237   (344,574)         Plan amendment-        876,119           Benefits paid and expenses(1,866,816) (1,851,353)         Benefit obligation at end of year$    32,344,767  $    31,718,049  Change        in plan assets         Fair value of plan assets at beginning of year$    25,869,539  $    26,659,180           Actual return on plan assets(7,806,635)395,469           Employer contribution1,427,727  666,243           Benefits paid and expenses(1,866,816)(1,851,353)         Fair value of plan assets at end of year $    17,623,815   $    25,869,539  Funded status,        end of year         Fair value of plan assets$    17,623,815  $    25,869,539                 Benefits obligation32,344,767   31,718,049                 Funded status$   (14,720,952)$    (5,848,510)
  Amounts recognized in the balance sheets consist of:
Current liability$                    -           $                  -           Noncurrent liability(14,720,952)(5,848,510)Net amount recognized$   (14,720,952) $   (5,848,510)
31.
     
Amountsrecognized in accumulated other comprehensive income not yet recognized ascomponents of net periodic benefit cost consist of:
 2008 2007Net actuarial loss$     15,014,314$       5,372,546Prior service cost1,137,5511,273,388 $     16,151,865 $       6,645,934
Other changes in plan assets and benefit obligations recognized in othercomprehensive income:           
Current year actuarial loss$       9,838,021       $       1,329,751       Amortization of actuarial loss(196,253)(126,455)Current year prior service loss-          876,119  Amortization of prior service cost(135,837)(75,123)Total recognized in other comprehensive income$       9,505,931        $       2,004,292       
Estimated amounts that will be amortized from accumulated other comprehensiveincome into net periodic pension cost in 2009:
Actuarial loss$       1,018,000       Prior service cost134,000  Total to be amortized in 2009$       1,152,000       
The weighted average assumptions used to determine net pension cost and benefitobligations as of December 31 are as follows:
2008  2007  2006  Discount rate - benefit obligation6.00%6.00%5.75%Discount rate - pension cost6.00%5.75%5.75%Expected return on plan assets8.00%8.00%8.00%Rate of compensation increase (Staff plan only)4.50%4.50%4.50%
The following table presents the components of net periodic pension cost as ofDecember 31, 2008, 2007 and 2006:2008  2007  2006  Service cost $               580,046    $               569,753    $               550,235  Interest cost 1,878,251  1,768,711  1,712,643  Expected return on plan assets(1,996,149) (2,069,794) (1,896,034)Amortization of prior service cost135,837  75,123  75,123  Recognized net actuarial gain196,253   126,455   229,757  Net periodic pension expense$               794,238  $               470,248  $               671,724  
The Company hasestimated the long-term rate of return on plan assets based primarily onhistorical returns on plan assets as well as current facts and circumstances.

Planassets are held bya trustee bank.  A fund manager has been retained to make all investmentdecisions within guidelines specified by Monarch.  The guidelines permitinvestment in both equities and fixed income securities including common stocks,corporate bonds and debentures and U.S. Government securities. Asset allocationis primarily based on a strategy to provide stable earnings while stillpermitting the plan to recognize potentially higher returns through investmentin equity securities.  The target asset allocation percentages for 2008 and 2007are as follows:

32.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2008, 2007 AND 2006Equities       60%Fixed Income 40%
 The Planallows a 5% fluctuation before assets are re-balanced.  During periods ofextreme market volatility, the fluctuation may exceed 5% before re-balancing iscomplete.  At December 31, 2008 and 2007, plan assets by category were asfollows:20082007Equities54% 59%Debt securities41%40%Other5% 1%
Thefollowing benefit payments are expected to be paid as of December 31, 2008:
2009 $       2,009,6352010 1,983,1862011 2,062,5152012                2,116,0172013               2,193,3422014-2018  11,892,512
TheCompany has defined contribution plans covering substantially all permanentemployees of the Ready-Mixed Concrete Business.  These plans allow the Company,at its discretion, to match the employee's contributions.  For the 2008, 2007and 2006 plan years, the Company matched 25% of the first 6% of the employee'scompensation up to a maximum match of $2,500.  The Company contributed $64,028,$65,752 and $58,922 to these plans for the years 2008, 2007 and 2006,respectively.  The Company expects to contribute $70,000 to these plans in 2009.

(8)    **SIGNIFICANT ESTIMATES AND CERTAINCONCENTRATIONS**

Accordingto various agreements with certain minority stockholders of subsidiaries, underspecified circumstances, the Company is obligated to acquire certain minorityshares, if requested to do so, at a value that approximates the minorityinterest on the Balance Sheet.

A Monarchsubsidiary and Monarch are involved in a lawsuit with the former officers ofthat subsidiary and companies formed by those officers.  All claims againstMonarch, its subsidiary and officers have been dismissed by the court; on thecounterclaims asserted by Monarch and the subsidiary, summary judgment onliability has been granted against the former officers.

Thirty-sixpercent (36%) of the Company's employees are covered by various collectivebargaining agreements.  Approximately 25% of those union employees (9% of ourtotal employees) are covered by a contract that expires in 2009.  The Companybelieves it has a good working relationship with its employees and has beensuccessful in negotiating multi-year union contracts without work stoppages.

The Companyhas a noncontributory defined benefit pension plan and a postretirement healthcare plan that provide certain postretirement benefits to eligible employees. The benefit obligation is the actuarial present value of all benefits attributedto services rendered prior to the valuation date based on the Entry AgeActuarial Cost Method and the Projected Unit Credit Actuarial Cost Method,respectively.  It is reasonably possible that events could occur that wouldchange the estimated amount of these liabilities materially in the near term.

33.
     
The currenteconomic environment presents manufacturers with unprecedented circumstances andchallenges, which in some cases have resulted in large declines in the fairvalue of investments and other assets, declines in the volume of    business, constraints on liquidity and difficulty obtaining financing.  The    financial statements have been prepared using values and information    currently available to the Company.

Currenteconomic and financial market conditions could adversely affect our results ofoperations in future periods.  The current instability in the financial marketsmay make it difficult for certain of our customers to obtain financing, whichmay significantly impact the volume of future sales which could have an adverseimpact on the Company's future operating results.

In addition,given the volatility of current economic conditions, the values of assets andliabilities recorded in the financial statements could change rapidly, resultingin material future adjustments in investment values (including defined benefitpension plan investments), allowances for accounts, net realizable value ofinventory, and realization of deferred tax assets that could negatively impactthe Company's ability to meet debt covenants or maintain sufficient liquidity.

(9)     **STOCKHOLDERS' INVESTMENT**

CapitalStock and Class B Capital Stock have the same rights except as follows:  Class BCapital Stock has voting rights of ten votes per share and restrictedtransferability; Class B Capital Stock is convertible at all times into CapitalStock on a share-for-share basis; and Capital Stock has one vote per share andis freely transferable.

(10)   **LINES OF BUSINESS**

The Companygroups its operations into two lines of business - Cement Business andReady-Mixed Concrete Business.  The Company's business lines are separatebusiness units that offer different products. The accounting policies for eachline are the same as those described in the summary of significant accountingpolicies. Corporate assets include for 2008: cash and cash equivalents,short-term investments, refundable federal and state income taxes, deferredincome taxes, investments and other assets; for 2007:  cash and cashequivalents, deferred income taxes, investments and other assets; and for 2006: cash and cash equivalents, refundable federal and state income taxes, deferredincome taxes, investments and other assets.

Followingis information for each line for the years ended December 31, 2008, 2007 and2006:
 
Cement    Business Ready-MixedConcrete Business Adjustmentsand Eliminations Consolidated**For the Year Ended    December 31, 2008**         Sales to unaffiliated customers$        69,683,762 $        84,202,711   $                 -           $   153,886,473       Intersegment sales15,873,001 1,079      (15,874,080) -                        Total net sales     $     85,556,763     $     84,203,790   $   (15,874,080) $   153,886,473    Income (loss) from    operations     $     18,362,170      $     (1,607,168)   $        16,755,002    Other income (loss), net      (3,797,121)           Income before income taxes          $     12,957,881    Identifiable assets at December 31,    2008    $     94,620,462     $     40,705,428     $   135,325,890    Corporate assets      39,438,759                Total assets at December 31, 2008          $   174,764,649  
34.
 THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2008, 2007 AND 2006 
    Cement    Business Ready-MixedConcrete Business Adjustmentsand Eliminations Consolidated**For the Year Ended    December 31, 200****7**         Sales to unaffiliated customers$        67,693,603 $        79,075,956   $                 -           $   146,769,559       Intersegment sales14,688,880  -              (14,688,880) -                        Total net sales     $     82,382,483     $     79,075,956       $    (14,688,880)     $   146,769,559    Income (loss) from    operations     $     19,226,467      $        (207,527)   $        19,018,940    Other income, net      2,165,467             Income before income taxes          $     21,184,407    Identifiable assets at December 31,    2007    $     98,071,562     $     36,574,598     $   134,646,160    Corporate assets      32,842,085                Total assets at December 31, 2007          $   167,488,245          **For the Year Ended    December 31, 200****6**  Sales to unaffiliated customers$        72,858,017 $        81,354,611   $                 -           $   154,212,628    Intersegment sales 13,112,128 915    (13,113,043)  -                    Total net sales     $     85,970,145     $     81,355,526       $    (13,113,043)     $   154,212,628    Income (loss) from    operations     $     20,952,199      $     (1,275,802)   $        19,676,397    Other income (loss), net      (496,172)             Income before income taxes          $    19,180,225    Identifiable assets at December 31,    2006    $     98,342,645     $     34,427,902     $   132,770,547    Corporate assets      29,733,295             Total assets at December 31, 2006          $   162,503,842  
Total sales by line of business before adjustments and eliminations include both sales to unaffiliated customers (as reported in the Company's consolidated statements of income, comprehensive income and stockholders' investment) and intersegment sales.  Intersegment sales are accounted for by the same method as sales to unaffiliated customers.

Incomefrom operations is total net sales less operating expenses.  In computing incomefrom operations, none of the following items have been added or deducted: general corporate income and expenses; interest expense; and income taxes. Depreciation and depletion for the Cement Business and Ready-Mixed ConcreteBusiness, respectively, was:  $7,622,714 and $4,235,088 in 2008, $7,652,896 and$3,992,003 in 2007 and $6,390,491 and $4,721,130 in 2006.  Capital expendituresfor the Cement Business and Ready-Mixed Concrete Business, respectively, were: $2,932,393 and $4,893,733 in 2008, $6,768,627 and $3,236,798 in 2007 and$16,570,909 and $3,961,244 in 2006.  Identifiable assets by line of business arethose assets that are used in the Company's operations in each industry.

During2008, 2007 and 2006, there were no sales to any one customer in excess of 10% ofconsolidated net sales.

  (11)   **SUBSEQUENT EVENTS**

Subsequent to yearend, the fair value of the Company's investment in equity securities declined byapproximately 28%.

35.
     
  (12)   **QUARTERLY FINANCIAL  INFORMATION**(Unaudited)

 **2008**
**First Quarter**
 
**Second Quarter**
 
**Third Quarter**
 
**FourthQuarter**
Net sales
$  25,089,226       
$  42,996,482      
$  48,876,781     
$ 36,923,984Gross profit from operations1,280,323       9,003,783     12,801,803     
9,912,800Income (loss) from operations    (2,613,876)     5,003,985     8,828,281     
5,536,612Net income (loss)  (1,802,052)      3,604,348     6,404,938     
2,025,647Basic earnings (loss) per share$(.45)     $.90     $1.59     
    $.50                                
 **2007**     
      
      
      
Net sales
$  24,212,360       
$  40,090,959      
$  44,404,159     
$ 38,062,081Gross profit from operations3,734,480       9,333,314     11,607,086     
9,457,494Income (loss) from operations    (113,958)     5,790,321     7,978,313     
5,364,264Net income  630,233      4,642,453     5,484,415     
4,477,306Basic earnings per share$.16     $1.15     $1.36     
    $1.11
  As a result of new information available, and the length of time and amount of  unrealized loss on our equity investments, we recorded a $4.2 million  other-than-temporary impairment adjustment in the fourth quarter of 2008.  We  had no significant fourth quarter adjustments in 2007.

  (13)   **OTHER COMPREHENSIVE INCOME**

  Accumulated other  comprehensive income (loss) included in the balance sheet at December 31 is as  follows:
     
2007     
Change     
2008Unrealized appreciation on available-for-sale securities$    3,252,000       $  (2,064,000)     $    1,188,000  Pension liability adjustment (3,985,934)     (5,705,931)     (9,691,865)Postretirement liability adjustment(7,467,564)     1,462,306       (6,005,258)     $  (8,201,498)     $  (6,307,625)     $ (14,509,123)                                   
2006     
Change     
2007Unrealized appreciation on available-for-sale securities$    5,322,000       $  (2,070,000)     $    3,252,000  Pension liability adjustment (2,786,642)     (1,199,292)     (3,985,934)Postretirement liability adjustment(7,444,320)     (23,244)     (7,467,564)     $  (4,908,962)     $  (3,292,536)     $  (8,201,498)
  (14)   **FUTURE CHANGE IN ACCOUNTING  PRINCIPLES**

    The Financial  Accounting Standards Board (FASB) has issued the following new accounting  pronouncements. 

In December 2007, the FASB issued SFAS No. 141R (revised 2007), "BusinessCombinations", which replaced SFAS 141. SFAS No. 141R retains the fundamental requirementsof SFAS 141, but revises certain principles, including the definition of abusiness combination, the recognition and measurement of assets acquired andliabilities assumed in a business combination, the accounting for goodwill, andfinancial statement disclosure.  SFAS No. 141R is effective for annual periodsbeginning after December 15, 2008.  The effective date for the Company isJanuary 1, 2009 and is applicable to business combinations that occur on orafter this 

36.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2008, 2007 AND 2006
date.  The Company is evaluatingthe impact, if any, the adoption of this Statement will have on the Company'sconsolidated financial statements.

InSeptember 2006, the FASB issued 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.  SFAS No. 157 is effective on a prospective basis forall fiscal years beginning after November 15, 2007 and interim periods withinthose fiscal years.  The statement was effective January 1, 2008 for theCompany's consolidated financial statements for 2008 and beyond.  Those assetsand liabilities measured at fair value under SFAS No. 157 in the first quarterof 2008 did not have a material impact on our consolidated financial statements.In accordance with FSP 157-2, we will measure the remaining assets andliabilities beginning the first quarter of 2009. We do not expect the adoptionof SFAS No. 157, as amended by FSP 157-2, will have a material impact on ourconsolidated financial statements.  In October 2008, the FASB issued FSP No. FAS157-3, "Determining the Fair Value of a Financial Asset When the Market for ThatAsset Is Not Active".  This FSP provides additional guidance regarding theapplication of SFAS No. 157, "Fair Value Measurements," in an inactive marketand illustrates how an entity would determine fair value when the market for afinancial asset is not active.  FSP FAS 157-3 is effective immediately uponissuance and applies to prior periods for which financial statements have notbeen issued.  We adopted the provisions of FSP FAS 157-3 as of December 31,2008.  The adoption of this standard did not have a material impact on ourconsolidated financial statements.

InDecember 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests inConsolidated Financial Statements, an amendment of ARB No. 51", whichestablishes new accounting and reporting standards for financial informationprovided on noncontrolling interests (NCIs), previously referred to as minorityinterests, in partially owned consolidated subsidiaries and the loss of controlof subsidiaries.  Certain provisions of this standard indicate, among otherthings, that NCIs be treated as a separate component of equity, separate fromthe parent's equity; that increases and decreases in the parent's ownershipinterest that leave control intact be treated as equity transactions, ratherthan as step acquisitions or dilution gains or losses; and that losses of apartially owned consolidated subsidiary be allocated to the NCI even when suchallocation might result in a deficit balance.  This standard also requireschanges to certain presentation and disclosure requirements.  This Statement iseffective for fiscal years, and interim periods within those fiscal years,beginning on or after December 15, 2008.  Earlier adoption is prohibited.  Forthe Company, SFAS No. 160 is effective beginning January 1, 2009. The provisionsof the standard are to be applied to all NCIs prospectively, except for thepresentation and disclosure requirements, which are to be appliedretrospectively to all periods presented.  The Company does not expect theadoption of SFAS No. 160 will have a material impact on our consolidatedfinancial statements.

InMarch 2008, the FASB issued SFAS No. 161, "Disclosures about DerivativeInstruments and Hedging Activities, an amendment of FASB Statement No. 133". FASB Statement No. 133,Accounting for Derivative Instruments and Hedging Activities, establishes, amongother things, the disclosure requirements for derivative instruments and forhedging activities.  This statement amends the disclosure requirements of SFAS133 to provide an enhanced understanding of how and why derivative instrumentsare used, how they are accounted for and their effect on an entity's financialcondition, performance and cash flows.  SFAS 161 is effective for financialstatements issued for fiscal years and interim periods beginning afterNovember 15, 2008.  For the Company, SFAS No. 161 is effective beginningJanuary 1, 2009.  Since the Company does not participate in hedging activitiesand does not use derivative instruments, the Company does not expect theadoption of this standard to require any additional disclosures or to have animpact on our consolidated financial statements.

37.
     
  In May 2008, the FASBissued SFAS No. 162, "The Hierarchy of Generally Accepted AccountingPrinciples".  This standard identifies the sources of accounting principles andthe framework for selecting the principles to be used in the preparation offinancial statements of nongovernmental entities that are presented inconformity with generally accepted accounting principles (GAAP) in the UnitedStates (the GAAP hierarchy). SFAS 162 is effective 60 days following the SEC'sapproval of the Public Company Accounting Oversight Board amendments to AUSection 411, "The Meaning of 'Present Fairly in Conformity with GenerallyAccepted Accounting Principles '".  We adopted the provisions of SFAS 162 as ofDecember 31, 2008.  Since the standard applies only to establishing hierarchy,it did not have a material impact on our consolidated financial statements.

 

 

 

 

 

 

 

 

 

 

 

 

 

 
 
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**CORPORATE INFORMATION**          **CORPORATE OFFICE****DIRECTORS**449 1200 StreetJack R. CallahanP.O. Box 1000             Retired President, The Monarch Cement CompanyHumboldt, KS 66748Ronald E. CallawayPhone: (620) 473-2222          Retired    feed yard managerFax: (620) 473-2447David L. Deffner           Director of Music, Davis Community Church**AUDITORS**Robert M. KissickBKD, LLP          Chairman, Hydraulic Power Systems, Inc.Kansas City, MissouriGayle C. McMillen                  Adjunct Professor, Kansas Wesleyan University**ANNUAL MEETING**Richard N. NixonThe annual meeting of the stockholders of          Partner in law firm of Stinson Morrison Hecker    LLPThe Monarch Cement Company is held theByron J. Radcliffsecond Wednesday in April of each year at the          RancherCompany's corporate offices.Byron K. Radcliff               Owner/Manager, Radcliff Ranch**TRANSFER AGENT AND REGISTRAR**Michael R. WachterThe Monarch Cement Company             Vice President, Civil Engineer and Director ofP.O. Box 1000             Operations, Concrete Technology Corp.Humboldt, KS 66748-0900Walter H. Wulf, Jr.shareholder.relations@monarchcement.com          President and Chairman of the Board     Walter H. Wulf, III**STOCK TRADING INFORMATION**             District Sales Manager, General Motors CorporationTrading Symbol: MCEM     Over-the-Counter Market               **INVESTOR RELATIONS**     Inquiries may be directed to Debra P. Roe,    **OFFICERS**Chief Financial Officer and Assistant Secretary-Walter H. Wulf, Jr.Treasurer, at the corporate address shown above.          President and Chairman of the Board     *Byron K. Radcliff**FORM 10-K**          Vice Chairman of the Board, Secretary and    Treasurer**The Company's Annual Report on Form 10-K, as***Robert M. Kissick**filed with the Securities and Exchange    Commission, **          Vice President**is available upon request by writing to Debra P.    Roe**Rick E. Rush**at the corporate address shown above.  The    Form**          Vice President**10-K, without exhibits, will be provided at no**Debra P. Roe**charge, and also is available on the    Company's**          Chief Financial Officer and              **website, http://www.monarchcement.com.**             Assistant Secretary-Treasurer     Lisa J. FontaineThe Company's financial information is also    available          Assistant Secretaryfrom the SEC at their EDGAR internet address,Harvey D. Buckleyhttp://www.sec.gov.          Vice President -    Cement Manufacturing     N. Joan Perez**ETHICS POLICY**          Vice President - SalesThe Company's ethics policy is available on the    About     Us link of the Company's website,*Not actively involved in the daily affairs of    the Company.**http://www.monarchcement.com.**