UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

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

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

 Registrant's telephone number, including area code:  (620) 473-2222

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

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

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

Large accelerated filer		Accelerated filer   X
Non-accelerated filer	(Do not check if a smaller reporting company)	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES           NO   X  

As of October 28, 2008, there were 2,521,168 shares of Capital Stock, par value $2.50 per share outstanding and 1,505,790 shares of Class B Capital Stock, par value $2.50 per share outstanding.

PART I  -  FINANCIAL INFORMATION

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

Item 1.       Financial Statements

 

THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, 2008 and December 31, 2007
ASSETS			2 0 0 8		2 0 0 7
CURRENT ASSETS:			(Unaudited)
Cash and cash equivalents			$     2,982,435		$     4,404,116
Receivables, less allowances of $715,000 in 2008 and
$640,000 in 2007 for doubtful accounts			22,306,938		13,531,221
Inventories, priced at cost which is not in excess of market-
Finished cement			$     2,969,671		$     6,110,974
Work in process			158,597		2,569,641
Building products			5,076,604		4,518,379
Fuel, gypsum, paper sacks and other			6,521,199		4,606,447
Operating and maintenance supplies			10,760,327		9,759,949
	Total inventories		$   25,486,398		$   27,565,390
Deferred income taxes			635,000		635,000
Prepaid expenses			591,867		248,380
	Total current assets		$   52,002,638		$   46,384,107
PROPERTY, PLANT AND EQUIPMENT, at cost, less
accumulated depreciation and depletion of $148,471,281
in 2008 and $140,661,628 in 2007			92,606,509		93,301,169
DEFERRED INCOME TAXES			15,241,534		13,155,534
INVESTMENTS, $2,119,175 in 2008 and $2,060,850 in 2007 carried
at cost with the balance at fair market value			13,288,338		13,468,319
OTHER ASSETS			1,413,015		1,179,116
			$ 174,552,034		$ 167,488,245
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Accounts payable			$ 10,319,420		$     6,413,945
Current portion of advancing term loan			2,169,256		2,181,524
Accrued liabilities			7,640,234		6,749,711
	Total current liabilities		$  20,128,910		$   15,345,180
LONG-TERM DEBT			16,262,361		18,024,478
ACCRUED POSTRETIREMENT BENEFITS			28,380,726		27,206,515
ACCRUED PENSION EXPENSE			5,427,816		5,848,510
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES			708,864		709,038
STOCKHOLDERS' INVESTMENT:
Capital stock, par value $2.50 per share, one vote per share -
Authorized 10,000,000 shares, Issued 2,521,168 shares
at 9/30/2008 and 2,510,708 shares at 12/31/2007			$    6,302,920		$     6,276,770
Class B capital stock, par value $2.50 per share, supervoting
rights of ten votes per share, restricted transferability,
convertible at all times into Capital Stock on a share-for-
share basis - Authorized 10,000,000 shares, Issued 1,505,790
shares at 9/30/2008 and 1,516,250 shares at 12/31/2007			3,764,475		3,790,625
Retained earnings			104,843,460		98,488,627
Accumulated other comprehensive loss			(11,267,498)		(8,201,498)
	Total stockholders' investment		$ 103,643,357		$ 100,354,524
			$ 174,552,034		$ 167,488,245
See notes to condensed consolidated financial statements

THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
For the Three Months and Nine Months Ended September 30, 2008 and 2007 (Unaudited)
			For the Three Months Ended				For the Nine Months Ended
			Sept. 30, 2008		Sept. 30, 2007		Sept. 30, 2008			Sept. 30, 2007
NET SALES			$  48,876,781		$ 44,404,159		$116,962,489			$108,707,478
COST OF SALES			36,074,978		32,797,073		93,876,580			84,032,598
Gross profit from operations			$   12,801,803		$ 11,607,086		$ 23,085,909			$ 24,674,880
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES			3,973,522		3,628,773		11,867,519			11,020,204
Income from operations			$    8,828,281		$  7,978,313		$ 11,218,390			$ 13,654,676
OTHER INCOME (EXPENSE):
Interest income			$         53,413		$       57,401		$     191,149			$     193,454
Interest expense			(236,550)		(455,529)		(771,220)			(1,479,791)
Gains on equity investments			-		297,012		-			2,410,698
Dividend income			75,869		54,746		177,382			141,520
Other, net			153,925		2,472		591,533			686,544
			$         46,657		$      (43,898)		$      188,844			$   1,952,425
Income before taxes on income			$    8,874,938		$   7,934,415		$ 11,407,234			$ 15,607,101
PROVISION FOR INCOME TAXES			2,470,000		2,450,000		3,200,000			4,850,000
NET INCOME			$    6,404,938		$   5,484,415		$   8,207,234			$ 10,757,101
RETAINED EARNINGS, beg. of period			99,364,723		91,184,698		98,488,627			86,797,943
Less cash dividends			926,201		885,931		1,852,401			1,771,862
RETAINED EARNINGS, end of period			$ 104,843,460		$ 95,783,182		$104,843,460			$ 95,783,182
Basic earnings per share			$             1.59		$           1.36		$           2.04			$          2.67
Cash dividends per share			$             0.23		$           0.22		$           0.46			$          0.44
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
For the Three Months and Nine Months Ended September 30, 2008 and 2007 (Unaudited)
			For the Three Months Ended				For the Nine Months Ended
			Sept. 30, 2008		Sept. 30, 2007		Sept. 30, 2008			Sept. 30, 2007
NET INCOME			$  6,404,938		$  5,484,415		$   8,207,234			$ 10,757,101
UNREALIZED APPRECIATION (DEPRECIATION)
ON AVAILABLE FOR SALE SECURITIES (Net
of deferred tax expense (benefit) of $(524,000), ($804,000),
$(2,044,000), and $48,000, respectively)			(786,000)		(1,208,988)		(3,066,000)			72,698
LESS:  RECLASSIFICATION ADJUSTMENT FOR
REALIZED GAINS INCLUDED IN
NET INCOME (net of deferred tax expense
of $-0-, $120,000, $-0-,and $964,000, respectively)			-		177,012		-			1,446,698
COMPREHENSIVE INCOME			$  5,618,938		$  4,098,415		$ 5,141,234			$  9,383,101
See notes to condensed consolidated financial statements

THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2008 and 2007 (Unaudited)
	2008		2007
OPERATING ACTIVITIES:
Net income	$  8,207,234		$  10,757,101
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization	8,830,955		8,791,339
Minority interest in losses of subsidiaries	(174)		(124,511)
Deferred income taxes	(42,000)		(442)
Gain on disposal of assets	(216,899)		(468,784)
Realized gain on sale of equity investments	-		(2,410,698)
Change in assets and liabilities:
Receivables, net	(8,775,717)		(4,616,376)
Inventories	2,305,770		(4,429,252)
Refundable income taxes	-		739,574
Prepaid expenses	(343,487)		(340,197)
Other assets	105,413		15,992
Accounts payable and accrued liabilities	7,069,265		3,256,719
Accrued postretirement benefits	1,174,211		1,262,173
Accrued pension expense	(420,694)		(128,517)
Net cash provided by operating activities	$  17,893,877		$  12,304,121
INVESTING ACTIVITIES:
Acquisition of property, plant and equipment	$  (6,899,507)		$  (5,955,849)
Proceeds from disposals of property, plant and equipment	232,550		528,134
Payment for acquisition of business	(2,319,934)		-
Payment for purchases of equity investments	(4,930,019)		(2,641,074)
Proceeds from disposals of equity investments	-		3,448,365
Purchases of subsidiaries' stock	-		(189,741)
Net cash used for investing activities	$ (13,916,910)		$  (4,810,165)
FINANCING ACTIVITIES:
Decrease in line of credit, net	$           -		$   (2,542,439)
Payments on bank loans	(1,532,394)		(1,509,387)
Payments on other long-term debt	(241,991)		(164,349)
Cash dividends paid	(3,624,263)		(3,463,184)
Net cash used for financing activities	$   (5,398,648)		$  (7,679,359)
Net decrease in cash and cash equivalents	$   (1,421,681)		$     (185,403)
Cash and Cash Equivalents, beginning of period	4,404,116		2,410,623
Cash and Cash Equivalents, end of period	$     2,982,435		$    2,225,220
Interest paid, net of amount capitalized	$        788,714		$    1,496,680
Income taxes paid, net of refunds	$     1,790,000		$    2,991,280
Capital equipment additions included in accounts payable	$         44,680		$      707,736
See notes to condensed consolidated financial statements

THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2008 and 2007 (Unaudited), and December 31, 2007

1. For a summary of accounting policies, the reader should refer to Note 1 of the consolidated financial statements included in our Company's most recent annual report on Form 10‑K.

2. For the nine months ended September 30, 2008, we incurred a temporary LIFO liquidation gain due to reductions in finished cement and work in process inventory of $.8 million which we expect to be restored by the end of the year.  The temporary LIFO liquidation gain has been deferred as a component of accrued liabilities.  We did not have any temporary LIFO liquidation gains during the nine months ended September 30, 2007. For the three months ended September 30, 2008, we incurred a temporary LIFO liquidation gain due to reductions in finished cement and work in process inventory of $.8 million which we expect to be restored by the end of the year.  We did not have any temporary LIFO liquidation gains during the three months ended September 30, 2007.

During the nine months ended September 30, 2008 we incurred a permanent reduction in the LIFO layers of work in process and cement inventories in the amount of $.7 million.  The $.7 million liquidation gain was recognized as a reduction of cost of sales. We did not recognize any LIFO liquidation gains during the nine months ended September 30, 2007. We did not incur any permanent reductions in the LIFO layers during the three months ended September 30, 2008 or September 30, 2007.

3. Basic earnings per share of capital stock has been calculated based on the weighted average shares outstanding during each of the reporting periods.  The weighted average number of shares outstanding was 4,026,958 in the third quarter of 2008 and 2007 and in the first nine months of 2008 and 2007.  The Company has no common stock equivalents and therefore, does not report diluted earnings per share.

4. Our Company groups its operations into two lines of business - Cement Business and Ready-Mixed Concrete Business.  The "Cement  Business" refers to our manufacture and sale of cement and "Ready-Mixed Concrete Business" refers to our ready-mixed concrete, concrete products, precast concrete construction, and sundry building materials business.  Corporate assets for 2008 and 2007 include cash and cash equivalents, deferred income taxes, investments and other assets. Following is information for each line for the periods indicated:

 

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

 

                                                           

4. The following table presents the components of net periodic pension and postretirement benefit costs allocated to Cost of Sales and Selling, General and Administrative expenses for the nine months ended September 30, 2008 and 2007:

The following table presents the components of net periodic costs for the three months ended September 30, 2008 and 2007:

Monarch expects to contribute approximately $1,490,000 to the pension fund in 2008.  As of September 30, 2008, we have contributed about $920,000 in 2008 and anticipate contributing an additional $570,000 to this plan in 2008 for a total of $1,490,000. The other benefits consist of postretirement benefits that are self-insured by Monarch and are paid out of Monarch's general assets.  As previously disclosed in our financial statements for the year ended December 31, 2007, Monarch expects to contribute approximately $1,650,000 to this plan in 2008.  As of September 30, 2008, we have contributed about $1,050,000 in 2008 and anticipate contributing an additional $600,000 to this plan in 2008 for a total of $1,650,000.

5. A Monarch subsidiary, Monarch and three of its officers are involved in a lawsuit with the former officers of that subsidiary and companies formed by those officers.  All claims against Monarch, its subsidiary and officers have been dismissed by the court; on the counterclaims asserted by Monarch and the subsidiary, summary judgment on liability has been granted against the former officers.  For additional information on this matter, see Item 1, Part II of this report on Form 10-Q.

6. The Company or one of its subsidiaries files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions.  With few exceptions, the Company is no longer subject to U.S. Federal or state income tax examinations by tax authorities for years before 2004.

7. As of September 30, 2008, the amount of accounts payable related to property, plant and equipment was $44,680 compared to December 31, 2007 which was $546,085.

8. The Company adopted the provisions of  the Financial Accounting Standards Board (FASB) SFAS No. 157, "Fair Value Measurements".  SFAS No. 157 establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurements and requires new disclosures of assets and liabilities measured at fair value based on their level in the hierarchy.  The standard describes three levels of inputs that may be used to measure fair value.  Level 1 uses quoted prices in active markets for identical assets or liabilities.  Level 2 uses observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  Level 3 uses unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.  SFAS No. 157 is effective on a prospective basis for all fiscal years beginning after November 15, 2007 and interim periods within those fiscal years.  In February 2008, the FASB issued Staff Positions (FSP) No. 157-1 and No. 157-2 which partially defer the effective date of SFAS No. 157 for one year for certain nonfinancial assets and liabilities and remove certain leasing transactions from its scope.  The Company is evaluating the impact, if any, the adoption of these FSPs will have on the Company's consolidated financial statements.

 

The following table summarizes the bases used to measure certain assets at fair value on a recurring basis in the balance sheet:

			Fair Value Measurements at Reporting Date Using:
Assets:	Balance at 09/30/08			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Available-for-sale securities	$ 11,169,163			$ 11,169,163		$       -		$       -
Total	$ 11,169,163			$ 11,169,163		$       -		$       -
Assets:	Balance at 12/31/07
Available-for-sale securities	$ 11,407,469			$ 11,407,469		$       -		$       -
Total	$ 11,407,469			$ 11,407,469		$       -		$       -

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

9. Other, net contains miscellaneous nonoperating income (expense) items other than interest income, interest expense, gains on equity investments and dividend income.  Material items in other, net included income from oil properties of $379,714 and income from scrap sales of $167,225 for the first nine months of 2008. Material items in other, net for the first nine months of 2007 included income from oil properties of $293,116. For the three months ending September 30, 2008 and September 30, 2007, the material items in other, net included income from oil properties of $172,342, and $118,795, respectively.

 

THE MONARCH CEMENT COMPANY AND SUBSIDIARIES
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

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

• general economic and business conditions;

• competition;

• raw material and other operating costs;

• costs of capital equipment;

• changes in business strategy or expansion plans;

• demand for our Company's products;

• cyclical and seasonal nature of our business;

• the effect weather has on our business;

• the effect of environmental and other government regulation; and

• the effect of federal and state funding on demand for our products.

RESULTS OF OPERATIONS - CRITICAL ACCOUNTING POLICIES

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

RESULTS OF OPERATIONS - OVERVIEW

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

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

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

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

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

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

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

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

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

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

    The effective tax rates for the three months ended September 30, 2008 and 2007 were 27.9% and 30.9%, respectively.  The Company's effective tax rate differs from the federal and state statutory income tax rate primarily due to the effects of percentage depletion,  Federal domestic production activities deduction, minority interest in consolidated income and valuation allowance.  Taxes for the current year are estimated based on prior year effective tax rates.

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

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

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

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

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

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

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

    The effective tax rates for the nine months ended September 30, 2008 and 2007 were 28.1% and 31.1%, respectively.  The Company's effective tax rate differs from the federal and state statutory income tax rate primarily due to the effects of percentage depletion, Federal domestic production activities deduction, minority interest in consolidated income and valuation allowance.  Taxes for the current year are estimated based on prior year effective tax rates.