**                                                                                             EXHIBIT 13**

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                                                                                                                                March 14,2008

ANNUAL REPORT TO STOCKHOLDERS        

Net  sales for 2007 were $146.8 million compared to $154.2 million for 2006.   A longer period of cold wet weather in the early part of the year and the  steady decline in the residential housing market reduced demand for cement and  ready-mixed concrete.  Price increases implemented in recent years helped  to offset the effects of the lower sales volume and improve our gross profit  margin from 21.9% to 23.3%. Gross profit from operations increased to $34.1  million in 2007 compared to $33.7 million in 2006.  The Company also  benefited from the sale of equity securities resulting in a realized gain of  $2.5 million.  Net income for 2007 totaled $15.2 million compared to  $13.2 million for 2006.

  According to the fall projections by the Portland Cement Association's (PCA)  leading economist, 2008 U.S. cement consumption will decrease an additional  1.8% as compared to 2007.  The PCA is anticipating the slump in the  residential market to continue during 2008 further decreasing the demand for  our products in this market segment.  However, other market segments,  including commercial construction and public spending in the form of roads,  bridges and airport construction, are anticipated to remain at or slightly  above 2007 levels, thus mitigating to a degree the effects of the residential  housing slump. 

In  recent years, the Company has spent substantial sums on major plant  modifications designed to increase our cement production capacity and to  improve our production processes.  Although no major changes were made in  2007, further improvements are planned for 2008 and 2009, primarily in the  handling and processing of raw materials.  We anticipate capital  expenditures for 2008 will be higher than 2007 levels; however, we believe we  can finance these expenditures with a mixture of cash from operations and our  existing line of credit.

As we  complete this year, we reflect back on the history of our Company.  The  original Monarch Portland Cement Company began production in 1908 and was  reorganized as The Monarch Cement Company in 1913.  In 2008, we celebrate  our 100th anniversary.  Without our many loyal customers, our  devoted employees and our steadfast stockholders, we would not have been able  to reach this milestone.  For your support and confidence in our Company,  we thank you.  Most importantly, we thank our Heavenly Father for His  blessings throughout the past 100 years and ask His continued support as we  embark on our next century of operations.  As part of our celebration, we  are planning an open house on May 31st and preparing a book detailing  Monarch's history.  If you are interested in attending the open house or  receiving a copy of this publication, please contact Linda Leonard at  1.800.362.0570 x175.

We wish to  invite you, our stockholders, to attend Monarch's annual meeting to be held at  2:00 p.m. on April 9, 2008 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

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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         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| **THE MONARCH CEMENT COMPANY  AND SUBSIDIARIES**
**SELECTED FINANCIAL DATA**
**FOR  THE FIVE YEARS ENDED  DECEMBER 31, 2007**(Dollar amounts in thousands except per share data) 
       2007      2006      2005      2004      2003Net      sales.......................................      $ 146,770      $ 154,213      $ 141,320      $ 145,077       $ 122,028Net income...................................      $   15,234      $  13,215      $   9,658      $   2,569      $   3,820Net income per share....................      $3.78      $3.28      $2.40      $.64      $.95Total assets...................................      $ 167,488      $ 162,504      $ 144,055      $ 135,200      $ 129,832Long-term obligations....................      $   20,206      $  22,083      $  24,087      $  26,141      $  23,048Cash dividends declared per share      $.88      $.84      $.80      $.80       $.80Stockholders' investment per share      $24.92      $22.84      $22.27      $20.86      $20.66
**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 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, 
2007         
2006         2005Cement Business  46.1%         47.2%         45.5%        Ready-Mixed Concrete Business               53.9% 52.8%        54.5% 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 effect of weather on our business;-  the effect of environmental and other government regulations; and-  the effect of federal and state funding on demand for our products.  

**RESULTS OF OPERATIONS**

Ready-Mixed 
Cement Business
   Concrete Business
    Consolidated**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
**For the Year Ended December  31, 2005 **Sales to unaffiliated customers  Income (loss) from operations
$         64,299,277      15,920,874$         77,020,651        (2,133,263)$   141,319,928      13,787,611
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 we experienced increased demand for our products.  The    combination of residential, commercial and governmental construction    activities resulted in the need for increased production to meet our    customers' needs.  In response to those needs, we have made, and continue to    make, investments in our plant and equipment to increase production and    improve efficiencies.  

    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.

During 2006, we    realized a substantial increase in net income due primarily to a combination    of increases in price in both the Cement Business and Ready-Mixed Concrete    Business, volume in the Cement Business and net sales of construction    contracts in the Ready-Mixed Concrete Business.  The improvements we made in    our plant and equipment allowed us to produce more cement to meet demand    which resulted in better utilization of our equipment and contributed to the    substantial improvements in operating profits.  During the    second half of the year, we began to experience the economic effects of the    higher interest rates, oil prices and inflation.  The reduction in economic    growth caused by these factors resulted in lower overall sales volumes of    ready-mixed concrete in the Ready-Mixed Concrete Business and reduced the    overall volume increase in the Cement Business.

3.

**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 reduced    the effective tax rate by 6.0%.  During 2006, percentage depletion    reduced the effective tax rate by 6.8%. 

**2006 Compared    to 2005-**-Consolidated net sales for the year ended December 31, 2006    were approximately $154.2 million, an increase of $12.9 million as compared    to the year ended December 31, 2005. Sales in our Cement Business were    higher by $8.6 million while sales in our Ready-Mixed Concrete business    increased $4.3 million.  Cement Business sales increased $1.6 million due to    increased volume sold and increased $7.0 million due to price increases.     Sales in our Ready-Mixed Concrete Business increased primarily due to a $4.6    million increase in construction contract sales, which was partially offset    by a decrease in ready-mixed concrete and other sundry building material    sales of $.3 million, of which $5.3 million was due to price increases and    $5.6 million was due to decreased volume. 

Consolidated cost    of sales for the year 2006 were $5.4 million more than cost of sales for the    year 2005. Cost of sales in our Cement Business was higher by $2.2 million    while cost of sales in our Ready-Mixed Concrete Business was higher by $3.2    million.  Cement Business cost of sales increased $1.1 million due to the 

4.

2.5% increase in volume sold and about $1.1 million due to increased supply    costs related to maintenance performed during 2006 and to an increase in    depreciation for new equipment coming online. The increase in cost of sales    in our Ready-Mixed Concrete Business was primarily due to a combination of    raw material price increases and an increase in construction contracts.  Raw    materials, including cement, rock, sand and sundry building materials    purchased for resale, increased $1.1 million due to increased raw material    prices and higher energy prices. The increase in construction contract net    sales resulted in a $1.4 million increase in construction related expenses.    The remaining $.7 million increase is primarily due to increased production    payroll 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, 2006 was 21.9% compared to 18.5% for the year ended    December 31, 2005.  

Selling, general and administrative expenses    increased by 13.3% for the year 2006 as compared to the year 2005.  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 Sarbanes Oxley compliance efforts. Payroll also increased during    2006 as compared to 2005 due to an increase in management personnel    responsible for construction contracts.  Early in the first quarter of 2005,    the departure of management personnel responsible for construction contracts    reduced our administrative costs.  These personnel have been replaced. An    increase in health and accident expenses as well as other insurance expenses    has also contributed to the increase.

    Interest expense increased about $.4 million for the year 2006 as compared    to the year 2005 due to an increase in interest rates and an increase in    borrowings.  The Company utilized these loans for capital improvements    and temporary operating funds.  During 2006, there were no gains    realized on equity investment sales as compared to 2005 where the Company    realized a gain of approximately $.4 million.  "Other, net" increased    approximately $.5 million for the year 2006 as compared to the year 2005    primarily due to an increase in net oil property income.

The effective tax    rates for years 2006 and 2005 were 31.1% and 29.1%, 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 2006, percentage depletion    decreased the effective tax rate by 6.8%.  During 2005, percentage    depletion reduced the effective tax rate by 6.7%.

**LIQUIDITY**

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

Net cash provided by operatingactivities 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, 

5.

gypsum, paper sacks and other inventory increased primarily due to coal andpetroleum coke purchases exceeding amounts consumed in the production process;and operating and maintenance supplies increased due to the purchase ofspecialized repair parts that support the recently completed production facilityimprovements.

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 volumeand price increases in the Cement Business and Ready-Mixed Concrete Business. The non-cash adjustment for depreciation, depletion and amortization increasedby $.4 million from 2005 to 2006.  This increase reflects the impact ofcertain assets, mainly related to our cement production and the expansion of theCompany's corporate office, placed in service during 2005 and 2006.  Cashused for operating activities includes receivable increases of $.6 million in2006.  Cash used for operating activities also includes $4.5 million forincreased inventories, primarily work in process and finished cement, resultingfrom increased production in the Cement Business and $1.1 million from adecrease in accounts payable and accrued liabilities due to the timing ofaccounts payable. 

Net cash provided by operating activities totaled $20.8 million for 2005. The realized gain on sale of other investments for 2005 is due to the sale ofavailable-for-sale equity securities.  Cash used for operating activitiesincludes receivable increases of $.7 million in 2005.  Cash was providedduring 2005 when accounts payable and accrued liabilities increased by $2.0million primarily due to the timing of accounts payable which includedmaintenance projects near the end of 2005.

Net cash used for investing activities totaled $8.2 million, $21.8 million and$14.6 million in 2007, 2006 and 2005, respectively.  The $7.2 millionincrease in net cash used for investing activities from 2005 to 2006 isprincipally due to an increase in acquisition of property, plant and equipmentin the Cement Business during 2006.  Cash was also used for purchases ofequity investments totaling $3.8 million and $1.1 million in 2007 and 2006,respectively.  Cash was provided from the disposals of equity investmentstotaling $4.7 million and $1.2 million in 2007 and 2005, respectively. Maturity of short-term investments, net for 2006 was $1.5 million compared topurchases of short-term investments, net in 2005 of $1.5 million.

Net cash provided by (used for) financing activities totaled $(12.2) million,$1.1 million and $(6.3) million for 2007, 2006 and 2005, respectively, and wereprimarily the result of bank loan and line of credit balances.  These loanswere used to finance the expansion of our cement manufacturing facility and tocover operating expenses.* *

    In December 2007, we renewed and modified our line of credit with our    current lender. Our current unsecured credit commitment consists of a $25    million advancing term loan maturing December 31, 2009 and a $15 million    line of credit maturing December 31, 2008.  The term loan bears a floating    interest rate based on JP Morgan Chase prime rate less .75% and the line of    credit bears a floating interest rate based on lender's national prime rate    less 1.25% for 2008.  The loan agreement contains a financial covenant related to net    worth which the Company was in compliance with at year end.  As of    December 31, 2007, we had borrowed $19.4 million on the advancing term loan    and $0 on the line of credit leaving a balance available on the    line of credit of $15 million.  The annual weighted average interest rate    we paid on the advancing term loan during 2007 and 2006 was 7.3% and 7.2%,    respectively. The annual weighted average interest rate we paid on the line    of credit during 2007 and 2006 was 7.1% and 7.0%, respectively.  At year    end, the applicable interest rate was 6.50% on the advancing term loan and    6.25% on the line of credit.  The advancing 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 

6. 

    capital expenditures.  Our board of directors has given    management the authority to borrow an additional $10 million for a maximum    of $50 million. 

    Contractual obligations at December 31, 2007, consisting of maturities on    long-term debt, line of credit, estimated interest payments on debt,    pension, postretirement benefit obligations and open purchase orders are as    follows:
20082009201020112012 ThereafterLong-term debt$         2,181,524$         17,514,101$          278,289$    121,491$  99,753$      10,844Interest payments           1,453,7761,265,1148,188-                -         -         Pension 1,339,000
-         
-         
-         -         -         Postretirement benefit obligations1,647,6401,729,1651,828,0411,884,8091,889,63910,292,460Open purchase orders8,380,526
852,764
-         
-         
-         
-         
The    long-term debt obligation is based on current interest rates and assumes    that the advancing term loan is paid off at maturity.

    The    Company has been required to make a pension contribution in each of the past    three years.  In 2007, 2006 and 2005, the Company contributed approximately    $.7 million, $.6    million and $.6 million, respectively, to the pension fund.  No estimates of    required pension payments have been asked for or made beyond 2008.

    Each segment of the cement manufacturing process requires significant    investment in major pieces of equipment.  Once installed, this equipment, if    properly maintained, functions 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 amount needed for major capital expenditures, allowing us to pay off any    outstanding bank loans and accumulate cash for the next major plant    improvement.

    During 2007, the Company began modifications to a portion of its raw    material handling system with completion expected in the first quarter of    2008 at a total cost of approximately $4.0 million.  Other projects in    the planning and design phases include improvements to our fuel handling    system and installation of an overland conveyor system to improve    efficiencies in moving raw materials.  The improvements to the fuel    handling system are expected to be completed in late 2008 or early 2009 at a    cost of approximately $4.0 million.  Installation of the overland    conveyor system will take eighteen to twenty-four months to complete after    the purchase order is issued.

    We anticipate capital expenditures for 2008 to be higher than 2007 levels,    but we do not anticipate the need for additional bank financing other than    that available under existing lines 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 and at the April 2007 Board of    Directors meeting, the Board increased the dividend to $.22 per share.  Although dividends are declared    at the Board's discretion and could be impacted by the minimum net worth 

7.

    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, 2007 were $167.5 million, an increase of $5.0    million since December 31, 2006.  The decrease in receivables is due to the    collection of past due accounts and decreased December sales. 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 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 primarily due to increases in postretirement and    pension liabilities and decreases 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.

    Accounts payable increased during 2007 primarily due to capital expenditures    that were still outstanding payables at the end of 2007. 

    Indebtedness decreased about $8.3 million during the year 2007 primarily as    a result of cash provided by the Company's cement manufacturing operations    used to decrease bank loan and line of    credit balances.

    During 2007, we adjusted the pension liability, resulting in an increase in    long-term accrued pension expense of $1.8 million and a decrease in    stockholders' investment of $1.2 million.  The change in liability was    primarily due to a lower return on plan assets during 2007 as compared to    2006.  We also adjusted the postretirement liability, resulting in an    increase in accrued postretirement expense of $1.9 million.

    Stockholders' investment increased 9.1% during 2007 as a result of net    income, which was reduced by dividends and the pension, postretirement, and    unrealized holding gain changes in comprehensive income. Basic earnings were    $3.78 per share and dividends declared were $.88 per share for the year    2007.

**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 2007 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 2007.  Property, plant and equipment    expenditures for 2007 totaled approximately $9.6 million excluding the    amounts that are included in accounts payable.   

    During 2007, the Company began modifying a portion of its raw material    handling system to allow for an increased supply of raw materials.     Completion is anticipated in early 2008 at a total cost of approximately    $4.0 million.  The Company was also heavily involved in the planning and    design phases for two future capital expenditure projects in the Cement    Business.  These projects include improvements to our fuel handling system    and installation of an overland conveyor system to improve efficiencies in    moving raw materials.  The improvements to the fuel handling system are    expected to be completed in late 2008 or early 2009 at a cost of    approximately $4.0 million.  Installation of the overland conveyor system is    anticipated to take eighteen to

    8.

twenty-four months to complete after the purchase    order is issued.  The Company also plans to invest in other miscellaneous    equipment and facility improvements in both the Cement Business and    Ready-Mixed Concrete Business in 2008. It is expected that the Company's    capital expenditures will approximate $15 million during 2008    and will be funded with a    mixture of cash from operations and temporary bank loans.  We    anticipate the need for additional bank financing will not exceed the    amount available through our existing 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 2008 cash expenditures    for these plans to be approximately $1.3 million. 

    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 2008 cash    expenditures for this plan 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 13, 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.  A significant increase in interest rates could    lead to a reduction in construction activities in both the residential and    commercial market.  Budget shortfalls during economic slowdowns could cause    money to be diverted away from highway projects, schools, detention    facilities and other governmental construction projects.  Reduction in    construction activity lowers the demand for cement, ready-mixed concrete,    concrete products and sundry building materials.  As demand decreases,    competition to retain sales volume could create downward pressure on sales    prices.  The manufacture of cement requires a significant investment in

9.

property, plant and equipment    and a trained workforce to operate and maintain this equipment.  These costs    do not materially vary with the level of production.  As a result, by    operating at or near capacity, regardless of demand, companies can reduce    per unit production costs.  The continual need to control production costs    encourages overproduction during periods of reduced demand.

    Interest rates on the Company's advancing term loan and line of credit are    variable and are based on the JP Morgan Chase prime rate less .75% and    lender's national prime rate less 1.25%, respectively.

**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 regulation may    increase taxes, penalties, and the cost of production, as well as require    additional capital expenditures for equipment.

   

**STOCK MARKET AND DIVIDEND DATA**

On    March 1, 2008, 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 low and high    bid quotations as reported by Yahoo! at http://finance.yahoo.com/, and dividends declared for each quarter of    our two latest fiscal years:

 

2007
2006
Price
Dividends
Price
DividendsQuarter         
Low  
High  
Declared 
Low  
High  
DeclaredFirst         $29.00$35.50 $  -      $23.15$29.00 $  -     Second $30.55$32.01 $.22           $26.00$30.00 $.21          Third $27.85$32.40 $.22           $25.10$29.50 $.21          Fourth$28.50$29.70$.44*$27.52$33.00$.42*
*Reflects declaration of two    $.22 and $.21 dividends payable in the first  quarter of 2008 and 2007, 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 future dividends.  See Note 4, Line of Credit and Long-term    Debt, of Notes to Consolidated Financial Statements. 

10.
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 two peer groups 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 two peer groups is based on the stock price or    composite index at January 1, 2003.  The performance graph assumes that the    value of an investment in the Company's capital stock and each index was    $100 at January 1, 2003 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.

     
  12/0212/0312/0412/0512/0612/07
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 Monarch Cement Company (The)100.00113.34139.07149.44217.57205.03S&P 500 100.00128.68142.69149.70173.34182.87New Peer Group 100.00126.33156.13196.71267.19261.12Old Peer Group 100.00125.50156.57197.15268.65265.73
11.

The performance graph compares the    performance of the Company with that of the S&P 500 composite index and an    index of two peer groups of companies in the Company's industry in which the    returns are weighted according to each company's market capitalization.  The    new peer group consists of Cemex Sab De CV, Eagle Materials, Inc., Texas    Industries, Inc., Vulcan Materials Company, Lafarge S.A. and Ready Mix, Inc.     The only difference between the old and new peer groups is that Vulcan    Materials Company was substituted for Florida Rock Industries Inc. in the    new peer group because Florida Rock Industries Inc.'s shares were acquired    by Vulcan Materials Company.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

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, 2007.  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, 2007. 

The    effectiveness of the Company's internal control over financial reporting as    of December 31, 2007 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.
 
 THE MONARCH CEMENT COMPANY AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSDECEMBER 31, 2007 AND 2006**ASSETS**2 0 0 7    2 0 0 6    CURRENT ASSETS:     Cash and cash    equivalents $        4,404,116  $        2,410,623       Receivables, less allowances of    $640,000 in 2007  and                  $641,000 in 2006 for doubtful accounts13,531,221  14,795,481       Inventories, priced at cost which is not in excess of market-              Finished cement$     6,110,974  $        3,988,211             Work in process2,569,641  2,753,095             Building products4,518,379  3,693,636             Fuel, gypsum, paper sacks and other4,606,447  3,465,194             Operating and maintenance supplies9,759,949  8,677,942             Total inventories$   27,565,390  $   22,578,078       Refundable federal    and state income taxes -          739,574       Deferred income    taxes635,000  670,000       Prepaid expenses248,380  284,599  **                      Total current assets****$   46,384,107 ****$   41,478,355 **PROPERTY, PLANT AND    EQUIPMENT, at cost, less accumulated              depreciation and depletion of $140,661,628 in 2007      and    $131,120,295 in 200693,301,169  95,112,389  DEFERRED INCOME TAXES13,155,534  9,692,000  INVESTMENTS13,468,319  15,275,669  OTHER ASSETS1,179,116  945,429  **$ 167,488,245 ****$ 162,503,842 ****LIABILITIES AND STOCKHOLDERS' INVESTMENT**   CURRENT LIABILITIES:      Accounts payable$    6,413,945  $        5,579,416     Line of credit payable-            6,397,667     Current portion of advancing    term loan2,181,524  2,027,377     Accrued liabilities-         Dividends1,771,862  1,691,322        Compensation    and benefits 2,764,327  2,622,684        Federal and    state income taxes573,291  -                 Miscellaneous    taxes816,839  704,594        Other823,392  1,083,402                    **   Total current liabilities****$  15,345,180 ****$   20,106,462 **LONG-TERM DEBT18,024,478   20,055,010  ACCRUED POSTRETIREMENT BENEFITS27,206,515  25,322,665  ACCRUED PENSION EXPENSE5,848,510  4,040,213  MINORITY INTEREST IN CONSOLIDATED    SUBSIDIARIES709,038  1,023,116  STOCKHOLDERS' INVESTMENT      Capital    Stock,    par value $2.50 per share, one vote per    share ‐              Authorized 10,000,000 shares, Issued 2,510,708 shares at             December 31,    2007 and 2,488,285 shares at December 31, 2006$    6,276,770  $        6,220,713  Class B Capital    Stock, par value $2.50 per share, ten    votes per          share - Authorized 10,000,000 shares, Issued    1,516,250 shares at                December 31, 2007 and 1,538,673 shares at December 31, 20063,790,625  3,846,682     Retained earnings98,488,627  86,797,943     Accumulated other comprehensive    income (loss)  (8,201,498)  (4,908,962)**                     Total stockholders' investment****$ 100,354,524 ****$   91,956,376 **    *See notes to consolidated financial statements*   
17.
 THE MONARCH CEMENT COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFOR THE    YEARS    ENDED    DECEMBER    31, 2007, 2006 AND    2005                                                       2007     2006     2005     NET SALES$  146,769,559  $  154,212,628  $  141,319,928        COST OF SALES 112,637,185  120,492,566  115,137,868  **          Gross profit from    operations****$    34,132,374 ****$    33,720,062 ****$    26,182,060 **      SELLING, GENERAL AND      ADMINISTRATIVE EXPENSES15,113,434   14,043,665   12,394,449         **      Income from operations****$    19,018,940 ****$    19,676,397 ****$    13,787,611 **OTHERINCOME (EXPENSE)      Interest income$            184,541  $            307,359  $         418,290        Interest expense(1,808,881)(1,911,830)(1,507,267)       Gains on equity investments2,486,100      -         384,376         Dividend income231,940  131,749  104,941        Other, net1,071,767  976,550  430,418  $       2,165,467  $       (496,172)$       (169,242)**INCOME BEFORE PROVISION FOR INCOME TAXES****$    21,184,407 ****$    19,180,225 ****$    13,618,369 **PROVISION FOR INCOME TAXES5,950,000  5,965,000  3,960,000  **NET INCOME****$      15,234,407 ****$      13,215,225 ****$      9,658,369 ****Basic earnings per share****$3.78 ****$3.28 ****$2.40 **      CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMEFOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005    2007     2006     2005     **NET INCOME****$      15,234,407 ****$     13,215,225 ****$     9,658,369 **UNREALIZED APPRECIATION (DEPRECIATION) ON    AVAILABLE FOR SALE SECURITIES (Net of deferred     tax(benefit) expense of $(384,000),    $308,000 and $395,000    for 2007, 2006 and 2005,    respectively) (579,900)462,000  589,376  RECLASSIFICATION ADJUSTMENT FOR   REALIZED (GAINS) LOSSES INCLUDED IN    NET INCOME (Net of deferred tax (benefit)    expense of $996,000,        $0,    and$155,000 for 2007, 2006 and 2005, respectively)(1,490,100)-           (229,376)MINIMUM PENSION LIABILITY (Net of deferred tax (benefit)         expense of  $(805,000), $497,000    and $(760,000) for     2007, 2006 and 2005, respectively)(1,199,292)744,802  (1,140,000)POSTRETIREMENT LIABILITY (Net of deferred tax (benefit)         expense of $(20,000),     $0 and $0 for 2007,     2006 and 2005, respectively)(23,244)-            -            **COMPREHENSIVE INCOME****$     11,941,871 ****$     14,422,027 ****$     8,878,369 ***Seenotes to consolidated financial statements*
18.
 THE MONARCH CEMENT COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENTFOR THE    YEARS    ENDED    DECEMBER    31, 2007, 2006 AND    2005                                                     AccumulatedClass B Other Capital Capital RetainedComprehensive Stockholders'StockStockEarningsIncome (Loss)Investment**Balance at January 1, 200****5****$  6,015,493 ****$  4,051,902 ****$  70,528,560 ****$  3,420,000 ****$   84,015,955 **Net income**-       ****-        **9,658,369  **-        **9,658,369  Dividends declared   ($.80 per share)**-       ****-        **(3,221,566)**-        **(3,221,566)Transfer of shares146,822  (146,822)-         **-        **-         Changein unrealized    appreciation on available-   for-sale securities-        -         -         360,000  360,000  Adjustment to recognize   minimum pension liability-        -         -         (1,140,000)(1,140,000)**Balance at December 31, 2005****$  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                                        ($.84 per share)-             -          (3,382,645) -              (3,382,645)Transfer of shares58,398  (58,398)-         -         -         Changein unrealized    appreciation on available-   for-sale securities-        -         -         462,000  462,000  Adjustment to recognize   minimum pension liability-        -         -         744,802  744,802  Adjustment to initially apply    FAS 158-pension liability-        -         -         (1,311,444)(1,311,444)Adjustment to initially apply    FAS 158-post-retirement liability-        -         -         (7,444,320)(7,444,320)**Balance at December 31, 2006****$  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)          ($.88 per share)Transfer of shares56,057  (56,057)-         -         -         Changein unrealized    appreciation on available-   for-sale securities -        -         -         (2,070,000)(2,070,000)Adjustment to recognize   minimum pension liability-        -          -         (1,199,292)(1,199,292)Adjustment to recognize   post-retirement liability-        -          -         (23,244)(23,244)**Balance at December 31, 2007****$  6,276,770 ****$  3,790,625 ****$  98,488,627 ****$  (8,201,498)****$ 100,354,524 ***Seenotes to consolidated financial statements*
 19.
 THE MONARCH CEMENT COMPANY AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE    YEARS    ENDED    DECEMBER    31, 2007, 2006 AND    2005                                                          2007   2006   2005   **OPERATING ACTIVITIES:**Net income$   15,234,407   $   13,215,225   $     9,658,369  Adjustments to reconcile net income to   netcash provided by operating activities:      Depreciation,    depletion and amortization11,848,894   11,312,741   10,923,917        Minority interest    in earnings (losses) of subsidiaries(124,338)(4,553)63,587        Deferred income    taxes(1,223,534) (559,000) (1,760,000)      Gain on disposal    of assets(574,879)(217,708)(226,420)      Realized gain on    sale of other investments(2,486,100)-            (384,376)     Change in assets and liabilities:            Receivables, net  1,264,260  (608,930)(662,735)               Inventories(4,987,312)(4,451,173)(178,663)               Refundable income taxes739,574  (739,574) 812,807                 Prepaid expenses36,219  (203,756)89,393                 Other assets 58,750   60,523   41,984                 Accounts payable and accrued liabilities679,334  (1,123,145)1,976,883                 Accrued postretirement benefits2,090,606  1,501,670  1,438,636              Accrued pension    expense(195,995)63,416  (1,016,872)      Net cash provided    by operating activities$   22,359,886  $   18,245,736  $   20,776,510  **INVESTING ACTIVITIES:**Acquisition of property, plant and equipment$  (9,624,187)$  (22,405,144)$  (14,380,650)Proceeds from disposals of property, plant and    equipment 758,634   353,203   505,809  Payment for purchases of equity investments(3,819,431)(1,051,038)-        Proceeds from disposals of equity investments4,662,883  -            1,150,246  (Increase) decrease in short-term investments, net-            1,500,000  (1,500,000)Purchasesof subsidiaries' stock(189,741)(192,914)(398,752)      Net cash used for    investing activities$  (8,211,842)$  (21,795,893)$  (14,623,347)**FINANCING ACTIVITIES:**Increase (decrease) in line of credit, net$  (6,397,667)$    6,397,667  $      (981,667)Payment on bank loans(2,067,630)(1,782,463)(1,791,944)Payments on other long-term debt(226,070)(222,146)(261,678)Cash dividends paid (3,463,183)(3,302,106)(3,221,566)Subsidiaries' dividends paid to minority    interest-        (25,733)-               Net cash provided    by (used for) financing activities$  (12,154,550)$    1,065,219  $    (6,256,855)**Net increase (decrease) in cash and cash equivalents****$    1,993,493 ****$   (2,484,938)****$       (103,692)****Cash and Cash Equivalents, beginning of year****2,410,623 ****4,895,561 ****4,999,253 ****Cash and Cash Equivalents, end of year****$    4,404,116 ****$     2,410,623 ****$     4,895,561 ****Additional Cash Flow Information:**Interest paid, net of amount capitalized $    1,812,743  $     1,915,473  $     1,512,196  Income taxes paid, net of refunds$    5,868,647  $     7,271,924  $     4,876,767  Capital equipment additions included in accounts    payable$       546,085  $        164,847  $     2,037,838  *Seenotes to consolidated financial statements*
20.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2007, 2006 AND 2005
  (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 $(124,338), $(4,553) and $63,587 during    2007, 2006 and 2005, 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 and prior 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, 2007 and 2006, cash equivalents consisted    primarily of money market investments and repurchase agreements with various    banks.  From time to time, the Company's cash accounts exceed federally    insured limits.

 (f)        **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 security, are included in net income.  Equity    securities whose fair value is not readily determinable are carried at cost.     The aggregate carrying amount of securities carried at cost in investments    was $2.1 million and $1.9 million for 2007 and 2006, respectively.  The    Company is not aware of any events or changes in circumstances that occurred    during 2007 that had a significant adverse effect on the fair value of the    investments carried at cost.  

     (g)     **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. 

21.THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2007, 2006 AND 2005
    (h)        **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 $8,680,615    and $6,741,306 as of December 31, 2007 and 2006, respectively.  Under    the average cost method of accounting (which approximates current cost),    these inventories would have been $1,896,000, $2,084,000 and $1,837,000    higher than those reported at December 31, 2007, 2006 and 2005,    respectively.  The cost of manufactured items includes all material,    labor, factory overhead and production-related administrative overhead    required in their production.  

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

 (i)     **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 2007, 2006 and 2005, the Company capitalized    approximately $161,000, $236,100 and $53,700, respectively, of interest    expense related to current construction projects.  

As of December 31, 2007 and 2006, the amount of  accounts payable related toproperty, plant and equipment was $546,085 and $164,847, 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.

(j)     **   Income Taxes**--Deferred    tax assets and liabilities are recognized for the tax effects of differences    between the financial statement and tax bases of assets and liabilities.  A    valuation allowance is established to reduce deferred tax assets if it is    more likely than not that a deferred tax asset will not be realized. 

(k)**     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.

(l)     **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.

22.
 
(m)     **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.

(n)    ** Other, net--**Other, net contains miscellaneous nonoperating income    (expense) items other than interest income, interest expense, gains on    equity investments and dividend income.  Material items in other, net    include income from oil properties of $502,762, $523,470 and $243,471 for    2007, 2006, and 2005, respectively.     

(o)        **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 4,026,958 in 2007, 2006 and 2005.

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

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

(r)     **Issuance    and Repurchase of Stock**--The Company records the purchase of subsidiaries' stock from minorityshareholders as a reduction in the liability for minority interest in    consolidated subsidiaries on the balance sheet.  Any excess of purchase priceover net book value of the minority interest acquired is evaluated to determineif 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 orloss.    
(s)       ** 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, receivables,    accounts payable, bank loans 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.
    (t)     **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. 

23.
 THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2007, 2006 AND 2005
(2)     **INVESTMENTS**

Realized gains are computed using the          specific identification method.  The investment results          for the years ended December 31, 2007, 2006 and 2005 are as follows:
2007   2006   2005   Fair value of investments  $              13,468,319   $              15,275,669   $              13,454,631Cost of investments 8,048,319 6,405,669 5,354,631   Gross unrealized gains$                5,420,000$                8,870,000$                8,100,000Unrealized gain recorded in equity                                            $                3,252,000$                5,322,000$                4,860,000Deferred income taxes  2,168,000  3,548,000  3,240,000$                5,420,000$                8,870,000$                8,100,000Proceeds from sale of securities$     4,662,883$            -                    $                1,150,246Realized gains $     2,486,100$            -                    $                   384,376
(3)     **PROPERTY,    PLANT AND EQUIPMENT**

 Property, plant and  equipment and their estimated useful lives at December 31, 2007 and 2006 consisted of:Lives (Years)20072006     Quarry land $              1,806,742 $              1,806,742Other land           7,653,4796,398,271Buildings and improvements15 - 3928,298,27827,465,736Cement manufacturing equipment15 - 25117,678,756115,825,331Ancillary equipment5 - 108,763,1028,533,824Ready-mix and concrete production          machinery and equipment5 - 1525,948,72124,124,853Transportation and mobile equipment3 -   7  35,759,14435,953,687Office machinery, equipment, furniture and          fixtures           3 - 10           1,987,196           1,794,977Construction in process6,067,3794,329,263$  233,962,797$  226,232,684Less--Accumulated depreciation and          depletion140,661,628131,120,295$            93,301,169$            95,112,389
4)     **LINE OF    CREDIT AND LONG-TERM DEBT**

In December 2007, Monarch renewed and modified its line of credit with a    bank.  Monarch's current unsecured credit commitment consists of a    $25,000,000 advancing term loan maturing December 31, 2009 and a $15,000,000    line of credit maturing December 31, 2008.  The average outstanding    balance of the line of credit during 2007 and 2006 was $5.1 million and $6.1    million, respectively.  At December 31, 2007 and 2006,    there was $0 and $6,397,667, respectively, borrowed against the line of    credit.  This line contains a financial covenant related to net worth which    the Company was in compliance with at year end.  Interest on the line of    credit varies with the lender's National Prime rate less 1.00% for 2007 and    2006. The annual weighted average interest rate we paid on the line of    credit during 2007 and 2006 was 7.1% and 7.0%, respectively.  The applicable interest rate was 6.25% and 7.25% on December 31, 2007    and 2006, respectively, and is payable quarterly.

24.
            2007     2006     Note payable, bank (a)     $   19,357,963 $   21,425,593Other     848,039 656,794          $     20,206,002         $     22,082,387Less current maturities      2,181,524      2,027,377          $   18,024,478       $   20,055,010       (a)  Due December 31, 2009; payable $899,717 quarterly    including interest;    interest computed based on JP Morgan Chase prime rate less .75% subject to a    financial covenant related to net worth which the Company was in compliance    with at year end.
Aggregate annual maturities of long-term debt as of December 31, 2007 are:            
2008$  2,181,524200917,514,1012010278,2892011 121,491201299,753Thereafter10,844 $20,206,002  
(5)     **INCOME TAXES**

The components of    the provision for federal and state income taxes in the accompanying    consolidated statements of income are as follows:
 
2007  2006  2005   Taxes currently payable$     7,174,000    $     6,524,000 $     5,720,000Deferred income taxes(1,224,000)(559,000)(1,760,000)        Income tax expense    $      5,950,000  $     5,965,000$     3,960,000          A  reconciliation of income tax expense at the statutory rate to the Company's  actual income tax expense is as follows:2007  20062005   Computed at statutory rate (34%; over $10 million-35%)$     7,315,000   $     6,613,000 $     4,659,000Increase (decrease) resulting from:   State income taxes, net of federal tax benefit    360,000  412,000149,000   Percentage depletion (1,280,000) (1,309,000) (913,000)   Valuation allowance-             530,000220,000   Domestic production activities deduction(375,000)(208,000)(147,000)   Minority interest in consolidated income (loss)(42,000)(2,000)22,000   Other(28,000)(71,000)(30,000)            Provision    for income taxes$     5,950,000$     5,965,000$     3,960,000
The tax effects of significant temporary differences relating to deferred    taxes shown on the balance sheets were:    

25.

 
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2007, 2006 AND 2005 2007      2006      Current:   Allowance for doubtful accounts $        256,000          $        256,000            Accrued vacation 379,000   414,000        Net current deferred tax    assets $        635,000          $        670,000              Noncurrent:       Depreciation $      (163,000) $      (743,000)      Postretirement benefits 11,544,000   10,687,000     Pension liability 2,347,000   1,855,000     Unrealized holding gains (2,168,000) (3,548,000)   Net  operating loss carryforwards 1,058,000   1,040,000     Other, net 537,534   401,000        Net long-term deferred tax    assets $     13,155,534   $     9,692,000  
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 operatingloss carryforwards for tax purposes as of December 31, 2007:

   Expiration      Date                   
   Operating        Loss2024          $  138,0002025       467,0002026 435,0002027 18,000
  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 2004.

(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 2008 cash expenditures for this plan to be approximately    $1,650,000 which is equal to expected benefits and expenses.

Monarch uses a    December 31 measurement date for the plans.  At December 31, 2007 and 2006,    the current portion of the accrued benefit cost of approximately $1,650,000    and $1,400,000, respectively, is recorded in compensation and benefits.     Information about the plans' funded status and postretirement cost follows:

26.
   2007             2006      Change in benefit obligation       Beginning of year $     26,722,665         $     24,117,734      Service cost536,236         526,652      Interest cost1,656,793         1,495,069      Actuarial loss1,100,463         1,989,993      Benefits and expenses paid(1,159,642)       (1,406,783)    Benefit obligation at end of year$     28,856,515         $     26,722,665      Change in fair value of plan assets       Beginning of year $               -                          $               -                     Employer contributions1,159,642           1,406,783      Benefits paid and expenses(1,159,642)         (1,406,783)    Fair value of plan asset at end of year$               -                          $               -                     Funded status = year-end benefit liability $    (28,856,515)         $    (26,722,665)
    Amounts recognized in the balance sheets consist of:
Current liability$      (1,650,000)         $      (1,400,000)Noncurrent liability(27,206,515)         (25,322,665)Net amount recognized$    (28,856,515)         $    (26,722,665)
    Other amounts recognized in the balance sheets:
 Accumulated other comprehensive income$      (7,467,564)         $      (7,444,320)
    Other changes in plan assets and benefit obligations recognized in other    comprehensive income:
Current year actuarial loss$       1,100,463                  N/AAmortization of actuarial loss(1,057,219)         N/ATotal recognized in other comprehensive income$                   43,244           N/A
    Estimated amounts that will be amortized from accumulated other    comprehensive income into net periodic postretirement benefit cost in 2008    include an actuarial loss of $864,785.

    (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, 2006   $    (14,318,345)2007 net periodic postretirement benefit cost(3,250,248)2007 contributions
1,159,642  (Accrued) prepaid postretirement benefit cost as of        December 31, 2007
$    (16,408,951)
The assumed annual    rate of increase in the per capita cost of covered health care benefits was    10% for 2007, 10% for 2006,and 9% for 2005.  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:

27.

 
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2007, 2006 AND 2005 2007   2006   2005    Components of net periodic benefit cost           Service cost536,236 $     526,652 $     459,788      Interest cost1,656,793 1,495,069 1,446,965      Recognized net loss1,057,219 886,732 724,099      Net    periodic benefit cost$  3,250,248 $  2,908,453 $  2,630,852      Weighted-average assumptions as of December 31           Discount rate- benefit    obligation6.00% 5.75% 5.75%      Discount rate- postretirement    cost5.75% 5.75% 6.00%
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$         371,557$        (297,466)Effect on postretirement benefit obligation3,849,795 (3,193,239)
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 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, 2007. the following benefit payments (net of employee    contributions) are expected to be paid:
      Gross             Subsidy             Receipts        Net               2008     $  1,647,640 $   68,537 $  1,579,10320091,729,165 71,666 1,657,49920101,828,041 75,119 1,752,92220111,884,80976,6541,808,15520121,889,639    78,926 1,810,7132013-201710,292,460 450,109 9,842,351
(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 $1,339,000 to the plans in 2008. 

Monarch uses a December 31 measurement date for the plans. Information about the plans' funded status and pension cost follows:
28.
 20072006         Change in    benefit obligation                           Benefit obligation at beginning of year$      30,699,393   $     29,708,998                  Service cost 569,753   550,235               Interest cost 1,768,711   1,712,643                  Actuarial (gain) loss (344,574) 513,643               Plan amendment876,119       -                     Benefits paid and expenses(1,851,353) (1,786,126)                Benefit obligation at end of year$      31,718,049   $      30,699,393                           Change in plan assets                           Fair value of plan assets at beginning of year$      26,659,180   $      24,468,209                  Actual return on plan assets395,469   3,368,789                  Employer contribution666,243   608,308                  Benefits paid and expenses(1,851,353) (1,786,126)             Fair    value of plan assets at end of year $      25,869,539    $     26,659,180                          Funded status, end    of year                Fair value of plan assets$      25,869,539   $      26,659,180                    Benefits obligation31,718,049   30,699,393                    Funded status$      (5,848,510) $      (4,040,213)
  Amounts recognized in the balance sheets consist of:
 Current liability$                 -           $                  -           Noncurrent liability(5,848,510) (4,040,213)Net amount recognized$      (5,848,510) $      (4,040,213)
Amounts recognized in accumulated other comprehensive income not yet recognizedas components of net periodic benefit cost consist of:
 Net actuarial loss$       5,372,546$       4,169,250Prior service cost1,273,388 472,392     $       6,645,934 $       4,641,642
Other changes in plan assets and benefit obligations recognized in othercomprehensive income:           
 Current year actuarial loss$       1,329,751  N/AAmortization of actuarial loss(126,455) N/ACurrent year prior service loss876,119   N/AAmortization of prior service cost(75,123) N/ATotal recognized in other comprehensive income$       2,004,292   N/A
Estimated amounts that will be amortized from accumulated other comprehensiveincome into net periodic pension cost in 2008:
 Actuarial loss$       179,546  Prior service cost132,029        Total to be amortized in 2008$       311,575        
  The weighted average  assumptions used to determine net pension cost and benefit obligations as of  December 31 are as follows:

29.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2007, 2006 AND 20052007  2006  2005   Discount rate - benefit obligation6.00%5.75%5.75%Discount rate - pension cost5.75%5.75%6.00%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 of December 31, 2007, 2006 and 2005: 2007       2006       2005   Service cost $             569,753        $             550,235        $             512,671  Interest cost 1,768,711       1,712,643       1,681,656  Expected return on plan assets(2,069,794)     (1,896,034)     (1,873,733)Amortization of prior service cost75,123       75,123       75,123  Recognized net actuarial gain126,455       229,757       98,121  Net periodic pension expense$             470,248  $             671,724  $             493,838  
  The Company has    estimated the long-term rate of return on plan assets based primarily on    historical returns on plan assets as well as current facts and    circumstances. 

  Plan assets    are held by a trustee bank.  A fund manager has been retained to make all    investment decisions within guidelines specified by Monarch.  The guidelines    permit investment in both equities and fixed income securities including    common stocks, corporate bonds and debentures and U.S. Government    securities.  Asset allocation is primarily based on a strategy to provide    stable earnings while still permitting the plan to recognize potentially    higher returns through investment in equity securities.  The target asset    allocation percentages for 2007 and 2006 are as follows:
Equities 
60%Fixed Income          
40%
  The Plan allows a 5% fluctuation    before assets are re-balanced.  At December 31, 2007 and 2006, plan assets    by category were as follows:
 2007         2006Equities59%         62%Debt securities40%         33%Other1%         5%
  The following benefit payments are expected to be paid as of    December 31,    2007:
2008         $  2,046,3552009 2,003,6572010 1,975,0942011 2,048,7692012            2,102,7592013-2017   11,438,579
  The Company has    defined contribution plans covering substantially all permanent employees of    the Ready‐Mixed Concrete Business.  These plans allow the Company, at its    discretion, to match the employee's contributions.  For the 2007, 2006 and    2005 plan years, the Company matched 25% of the first 6% of the employee's    compensation up to a maximum match of $2,500.  The Company contributed    $65,752, $58,922, and $95,302 to these plans for the years 2007, 2006 and    2005, respectively.  The Company expects to contribute $75,000 to these    plans in 2008.

30.
 
(8)     **SIGNIFICANT ESTIMATES ANDCERTAINCONCENTRATIONS**

  According to various  agreements with certain minority stockholders of subsidiaries, under specified  circumstances, the Company is obligated to acquire certain minority shares, if  requested to do so, at a value that approximates the minority interest on the  Balance Sheet. 

  A Monarch subsidiary and  Monarch is involved in a lawsuit with the former  officers of that subsidiary and companies formed by those officers.  We  are pursuing judgment against the former officers and  their companies.  We plan to vigorously pursue this case.  There are  no claims remaining against Monarch or its subsidiary.

Thirty-eight percent  (38%) of the Company's employees are covered by various collective bargaining  agreements.  None of the Company's agreements expire in 2008.  The Company believes it has a good working relationship with its employees and  has been successful in negotiating multiyear union contracts without work  stoppages. 

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

(9)     **STOCKHOLDERS'  INVESTMENT**

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

  (10)   **LINES OF BUSINESS**

  The Company groups its  operations into two lines of business - Cement Business and Ready-Mixed  Concrete Business.  The Company's business lines are separate business units  that offer different products. The accounting policies for each line are the  same as those described in the summary of significant accounting policies. Corporate assets for  2007 include cash and cash equivalents, deferred income taxes, and investments  and other assets;  for 2006 include cash and cash equivalents, refundable federaland state income taxes, deferred income taxes, and investments and other assets; and  for 2005 include cash and cash equivalents, short-term investments, deferred  income taxes, and investments and other assets.  

    Following is information  for each line for the years ended December 31, 2007, 2006 and 2005:

31.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2007, 2006 AND 2005 
Cement    Business Ready-Mixed    Concrete    Business Adjustments    and    Eliminations Consolidated**For the Year Ended December    31, 200****7**         Sales to unaffiliated    customers$        67,693,603 $        79,075,956   $                 ‐           $      146,759,559    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, 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  **For the Year Ended December    31, 2005**         Sales to unaffiliated    customers$        64,299,277 $        77,020,651   $                         ‐   $      141,319,928    Intersegment sales 13,536,287 10,091   (13,546,378) ‐  ** **      Total net sales$        77,835,564 $        77,030,742   $       (13,546,378)  $      141,319,928    Income (loss) from    operations $        15,920,874 $        (2,133,263)   $        13,787,611    Other income, net      (169,242)           Income before income taxes      $        13,618,369    Identifiable assets at    December 31, 2005$        82,405,866 $        35,803,776     $      118,209,642    Corporate assets      25,845,274             Total assets at December 31, 2005      $      144,054,916  
  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.

  Income from operations  is total net sales less operating expenses.  In computing income from  operations, none of the following items have been added or deducted:  general  corporate income and expenses; interest expense; and income taxes.   Depreciation and depletion for the Cement Business and Ready‐Mixed Concrete  Business, respectively, was:  $7,652,896 and $3,992,003 in 2007, $6,390,491 and $4,721,130 in 2006,  and $5,297,531  and $5,373,466 in 2005.  Capital  expenditures for the Cement Business and Ready‐Mixed Concrete Business,  respectively, were:  $6,768,627 and $3,236,798 in 2007, $16,570,909 and $3,961,244 in 2006,  and $13,008,188 and  $3,410,300 in 2005. Identifiable assets  by line of business are those assets that are used in the Company's operations  in each industry. 

32.
 
  During 2007, 2006 and  2005, there were no sales to any one customer in excess of 10% of consolidated  net sales.

  (11)   **QUARTERLY FINANCIAL  INFORMATION**(Unaudited)

 **2007**
**First Quarter**
 
**Second Quarter**
 
**Third Quarter**
 
**FourthQuarter**
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                                        
 **2006**
**First Quarter**
 
**Second Quarter**
 
**Third Quarter**
 
**FourthQuarter**
Net sales
$  31,211,502     
$  43,570,624      
$  44,200,862     
$35,229,640Gross profit from operations4,847,546     11,565,985     10,746,133     6,560,398Income from operations    1,414,000     8,146,873     7,039,546     3,075,978Net income1,007,268       5,491,290     4,859,486     1,857,181Basic earnings per share$.25     $1.36     $1.21     $.46                                        
  (12)   **OTHER COMPREHENSIVE INCOME**

  Accumulated other  comprehensive income (loss) included in the balance sheet at December 31 is as  follows:
     
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)                                      
2005     
Change        
2006Unrealized appreciation on available-                            for-sale securities$    4,860,000       $       462,000       $    5,322,000  Minimum pension liability
(2,220,000)     
744,802            Adoption of FAS 158-pension liability          (1,311,444)     (2,786,642)Adoption of FAS 158-postretirement liability    -            (7,444,320)     (7,444,320)     $    2,640,000       $  (7,548,962)     $  (4,908,962)
  (13)   **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. 141 (revised 2007), "Business  Combinations", which replaced SFAS 141. SFAS No. 141R retains the fundamental  requirements of SFAS 141, but revises certain principles, including the  definition of a business combination, the recognition and measurement of  assets acquired and liabilities assumed in a business combination, the  accounting for goodwill, and financial statement disclosure.  SFAS No. 141R is  effective for annual periods beginning after December 15, 2008.  The effective 

33.
THE MONARCH CEMENT COMPANY AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSDECEMBER 31, 2007, 2006 AND 2005
    date for the Company    is January 1, 2009 and is applicable to business combinations that occur on    or after this date.  The Company is evaluating the impact, if any, the    adoption of this Statement will have on the Company's consolidated financial    statements. 

In September 2006, theFASB 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 periodswithin those fiscal years.  The Company is evaluating the impact, if any, ofthis statement, effective January 1, 2008 for the Company, on the Company'sconsolidated financial statements for 2008 and beyond.  In February 2008, theFASB issued Staff Positions (FSP) No. 157-1 and No. 157-2 which partially deferthe effective date of SFAS No. 157 for one year for certain nonfinancial assetsand liabilities and remove certain leasing transactions from its scope.  TheCompany is evaluating the impact, if any, the adoption of this FSP will have onthe Company's consolidated financial statements. 

In February 2007, the FASBissued SFAS No. 159, "The Fair Value Option for Financial Assets and FinancialLiabilities" which includes an amendment of FASB Statement No. 115.  SFASNo. 159 permits an entity to choose, at specified election dates, to measureeligible financial instruments and certain other items at fair value (the "fairvalue 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 thefair value option.  However, the amendment to FASB Statement 115, "Accountingfor Investments in Debt and Equity Securities", applies to all entities withavailable-for-sale and trading securities.  Upfront costs and fees related toitems for which the fair value option is elected shall be recognized in earningsas incurred and not deferred.  An entity shall report unrealized gainsand losses from fair value changes on items for which the fair value option hasbeen elected in earnings at each subsequent reporting date.  SFAS No. 159 alsoestablishes presentation and disclosure requirements designed to facilitatecomparisons between entities that choose different measurement attributes forsimilar types of assets and liabilities.  SFAS No. 159 is effective forfinancial statements issued for fiscal years beginning after November 15, 2007. At the effective date an entity may elect the fair value option for eligibleitems that exist at that date.  The entity shall report the effect of the firstremeasurement to fair value as a cumulative-effect adjustment to the openingbalance of retained earnings.  The Company has not elected the fair value optionfor eligible items that existed at the January 1, 2008effective date.   

In December 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

34.
 
disclosure requirements, which are to be applied retrospectively to all periodspresented.  The Company is currently evaluating the future impacts anddisclosures of this standard.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35.

 
**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               Music Coordinator, Trinity United Methodist    Church**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 through the SEC**          Chief Financial Officer and Assistant             **Filings link of the Company's website,**             Secretary-Treasure**http://www.monarchcement.com.**Lisa J. Fontaine              Assistant SecretaryThe Company's financial information is also    available Harvey D. Buckleyfrom the SEC at their EDGAR internet address,          Vice President -    Cement Manufacturinghttp://www.sec.gov.N. Joan Perez               Vice President - Sales**ETHICS POLICY***Not actively involved in the daily affairs of    the Company.The Company's ethics policy is available on the    About     Us link of the Company's website,     **http://www.monarchcement.com.**      |