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, 1998
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: 0-29464
ROCK OF AGES CORPORATION
(Exact name of Registrant as Specified in its Charter)
Delaware 03015320
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
772 Graniteville Road
Graniteville, Vermont 05654
(Address of principal executive offices) (Zip Code)
(802) 476-3121
(Registrant's telephone number, including area code)
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 than 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 ___
At November 11, 1998, 3,891,178 shares of Class A Common Stock, par value
$0.01 per share, and 3,489,957 shares of Class B Common Stock, par value
$0.01 per share, of Rock of Ages Corporation were outstanding.
- -------------------------
ROCK OF AGES CORPORATION
INDEX
Form 10-Q for the Quarterly Period
Ended September 30, 1998
PART I FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1998 and
December 31, 1997
Consolidated Statements of Operations - Three Months
Ended and the Nine Months Ended September 30, 1998 and 1997
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1998 and 1997
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signature
PART I: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
ROCK OF AGES CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands)
(Unaudited)
September 30, December 31,
1998 1997
------------- ------------
ASSETS $
Current assets:
Cash and cash equivalents 3,926 8,637
Trade receivables, net 15,545 12,857
Due from related parties 56
Inventories 24,028 16,104
Deferred tax assets 513 352
Other current assets 2,450 1,050
------------- ------------
Total current assets 46,518 39,000
Property, plant and equipment, net 39,269 36,436
Cash surrender value of life insurance,
net 1,257 1,176
Intangibles, net 25,844 15,596
Deferred tax assets 299 376
Investments in and advances to
affiliated company 131 131
Other assets 387 422
------------- ------------
Total assets $ 113,705 93,137
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under lines of credit $ 7,714 1,328
Current installments of long-term debt 384 384
Trade payables 3,503 2,101
Accrued expenses 4,867 3,012
Due to related parties 55
Income taxes payable 767 234
Deferred income 100 400
Customer deposits 7,003 2,708
------------- ------------
Total current liabilities 24,338 10,222
Long-term debt, excluding current
installments 917 975
Deferred compensation 4,152 3,527
Accrued postretirement benefit cost 528 528
------------- ------------
Total liabilities 29,935 15,252
Commitments
Stockholders' equity:
Preferred stock - $.01 par value;
2,500,000 shares authorized
No shares issued or outstanding
Common stock - Class A, $.01 par value;
30,000,000 shares authorized
3,891,178 and 3,800,641 shares
issued and outstanding, respectively 39 38
Common stock - Class B, $.01 par value;
15,000,000 shares authorized
3,489,957 and 3,487,957 shares issued
and outstanding 35 35
Additional paid-in capital 69,350 68,277
Retained earnings 14,772 9,662
Accumulated other comprehensive loss (426) (127)
------------- ------------
Total stockholders' equity 83,770 77,885
------------- ------------
Total liabilities and stockholders'
equity $ 113,705 93,137
============= ============
**SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ROCK OF AGES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
1998 1997 1998 1997
------------------- -------------------
<S> <C> <C> <C> <C>
Net Revenues:
Quarrying $ 4,787 3,559 13,757 9,048
Manufacturing 11,579 12,815 35,608 28,093
Retailing 5,640 10,767
------------------- -------------------
Total net revenues 22,006 16,374 60,132 37,141
Gross profit:
Quarrying 2,344 1,651 5,994 3,216
Manufacturing 3,274 2,755 8,820 6,395
Retailing 3,250 6,192
------------------- -------------------
Total gross profit 8,868 4,406 21,006 9,611
Selling, general and administrative expenses 5,407 2,776 13,949 7,104
------------------- -------------------
Income from operations 3,461 1,630 7,057 2,507
Interest expense 113 516 244 1,382
------------------- -------------------
Income before provision for income taxes 3,348 1,114 6,813 1,125
Income tax provision 594 281 1,703 284
------------------- -------------------
Net Income $ 2,754 833 5,110 841
Net income per share $ 0.37 0.22 0.70 0.23
Net income per share - assuming dilution $ 0.35 0.19 0.64 0.20
Weighted average number of common shares
outstanding 7,377 3,763 7,339 3,591
Weighted average number of common shares
outstanding - assuming dilution 7,970 4,472 7,993 4,299
</TABLE>
**SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ROCK OF AGES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
Nine Months Ended
September 30,
----------------------
1998 1997
----------------------
Cash flows from operating activities:
Net income $ 5,110 841
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation, depletion and
amortization 2,477 1,509
Decrease (increase) in cash
surrender value 20 (19)
Loss (gain) on sale of property,
plant and equipment (15) 20
Deferred taxes (30) 27
Changes in assets and liabilities:
Increase in trade receivables (1,472) (1,653)
Increase in due to/from related
parties (111) (123)
Increase in inventories (3,948) (107)
Increase in other assets (513) (726)
Increase in trade payables, accrued
expenses and income taxes payable 1,611 141
Increase (decrease) in customer
deposits 1,019 (295)
Increase in deferred compensation 135 62
Decrease in deferred income (300) (300)
-------- --------
Net cash provided by (used in)
operating activities 3,983 (623)
Cash flows from investing activities:
Purchases of property, plant and equipment (2,819) (2,952)
Proceeds from sale of property, plant and
equipment 25 --
Increase in investments in and advances
to affiliated company -- (186)
Acquisitions, net of cash acquired (1) (11,427) 73
-------- --------
Net cash used in investing
activities (14,221) (3,065)
Cash flows from financing activities:
Net borrowings under lines of credit 6,385 5,073
Net stock option transactions (374)
Principal payments on long-term debt (223) (1,903)
-------- --------
Net cash provided by financing
activities 5,788 3,170
Effect of exchange rate changes on cash (261) (63)
-------- --------
Net decrease in cash and cash
equivalents (4,711) (581)
Cash and cash equivalents, beginning of period 8,637 763
Cash and cash equivalents, end of period $ 3,926 182
======== ========
(1) Acquisitions:
Assets acquired 19,560 5,751
Liabilities assumed and issued (6,109) (3,215)
Common stock issued (1,448) (2,536)
-------- --------
Cash paid 12,003 --
Less cash acquired 576 73
-------- --------
Net cash paid for (received from)
acquisitions 11,427 (73)
**SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
ROCK OF AGES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and notes required by generally accepted
accounting principles for complete financial statements are not included
herein. In the opinion of management, all adjustments of a normal recurring
nature considered necessary for a fair presentation have been included.
Results of operations for the interim periods are not necessarily
indicative of the results that may be expected for a full year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K (SEC File No.
0-29464, filed March 31, 1998).
(2) Inventories
($ in thousands)
Inventories consist of the following at (Unaudited)
September 30 1998 and December 31, 1997: September 30, December 31,
----------------------------
1998 1997
----------------------------
Raw materials $ 13,442 9,014
Work-in-process 2,401 2,262
Finished goods and supplies 8,185 4,828
----------------------------
$ 24,028 16,104
============================
(3) Pro Forma Information
During the three months ended June 30, 1998, the Company acquired four
retail monument companies having presence in Georgia, Iowa, Illinois,
Minnesota, Nebraska, Ohio and South Dakota. The Company paid a total of
$4,473,906 in cash and issued 83,899 shares of Class A Common Stock with a
then market value of approximately $1,349,980 for the acquired companies.
In addition, various employment, noncompetition and lease agreements were
entered into.
During the three months ended September 30, 1998, the Company acquired
seven additional retail monument companies having presence in Ohio, South
Dakota, Georgia, Iowa, and Minnesota. The Company paid a total of
$7,529,176 in cash and issued 6,638 shares of Class A Common Stock with a
then market value of approximately $97,496 for the acquired companies. In
addition, various employment, noncompetition and lease agreements were
entered into.
The acquisitions have been accounted for under the purchase method. The
purchase price has been allocated to the assets acquired and liabilities
assumed based upon their respective fair market values, resulting in
approximately $10,592,000 of cost in excess of net assets acquired which
has been allocated to intangible assets, primarily names and reputations.
The following unaudited pro forma information has been prepared assuming
that the acquisitions during 1997 (refer to specifics in the footnotes of
Form 10-K mentioned above) and through September 30, 1998 occurred at the
beginning of the periods presented. The pro-forma information is presented
for information purposes only and is not necessarily indicative of what
would have occurred if the acquisitions had been made as of those dates.
($ in thousands except
per share data)
(Unaudited)
Nine Months Ended
September 30,
------------------------
1998 1997
------------------------
Net revenues $ 68,764 69,653
Net income $ 4,358 1,933
Net income per share $ 0.59 0.54
Net income per share - assuming dilution $ 0.55 0.45
(4) Comprehensive Income(Loss)
The Company adopted the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" on January 1, 1998.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. It includes all changes in equity
during a period except those resulting from investments by owners and
distributions to owners. This pronouncement requires that the accumulated
total of other comprehensive income be shown as a separate component of
stockholders' equity with additional disclosure of accumulated balances for
each classification within other comprehensive income in addition to the
reporting of total comprehensive income.
Accumulated other comprehensive loss, a component of stockholders' equity
previously titled "cumulative translation adjustment", consists solely of
foreign currency translation. The 1997 financial information herein has all
been restated for the reported periods to reflect the income tax benefit
related to other comprehensive loss. The components of total comprehensive
income(loss) are as follows:
($ in thousands)
(Unaudited)
Nine Months Ended
September 30,
--------------------
1998 1997
--------------------
Net income $ 5,110 841
Other comprehensive loss, before tax (568) (61)
Income tax benefit related to other
comprehensive loss 142 15
--------------------
Other comprehensive loss net of tax (426) (46)
Comprehensive income (loss) $ 4,684 795
====================
(5) Accounting Standards
"SOP 98-5, Reporting on the Costs of Start-Up Activities", will be
effective for periods beginning after December 15, 1998. Some or all of the
acquisition costs of approximately $250,000, which are included in
Intangibles, net on the balance sheet, may be considered start-up
activities as defined by the SOP. Management has not yet determined when it
will adopt the SOP or what the effect on the Company's financial statements
will be.
(6) Earnings Per Share
The following is a reconciliation of the numerators and denominators of the
basic and diluted earnings per share (EPS) computations for net income for
the three and nine month periods ended September 30, 1997 and 1998:
<TABLE>
<CAPTION>
($ in thousands except per share data)
(Unaudited)
Income Shares Per Share
(Numerator) (Denominator) Amount
--------------------------- ----------
<S> <C> <C> <C>
1998
- ----
Nine months ended September 30, 1998
Basic EPS
Net Income 5,110 7,339 .70
Effective of dilutive securities:
Stock options 654
Diluted EPS
Net income and assumed conversions 5,110 7,993 .64
Three months ended September 30, 1998
Basic EPS
Net Income 2,754 7,377 .37
Effective of dilutive securities:
Stock options 593
Diluted EPS
Net income and assumed conversions 2,754 7,970 .35
1997
- ----
Nine months ended September 30, 1997
Basic EPS
Net Income 841 3,591 .23
Effective of dilutive securities:
Stock options 708
Diluted EPS
Net income and assumed conversions 841 4,299 .20
Three months ended September 30, 1997
Basic EPS
Net Income 833 3,763 .22
Effective of dilutive securities:
Stock options 709
Diluted EPS
Net income and assumed conversions 833 4,472 .19
</TABLE>
Options to purchase 468,252 shares of Class A common stock at exercise
prices ranging from $14.063 to $18.50 per share were outstanding on
September 30, 1998 but were not included in the computation of diluted EPS
for 1998 because the option exercise prices were greater than the average
market price of the common shares. There were no options to purchase Class
A shares outstanding for the third quarter or nine months of 1998.
(7) Subsequent Event
Subsequent to September 30, 1998, the Company acquired a quarry company for
approximately $5,000,000 in cash. The acquisition has been accounted for
under the purchase method. The purchase price will be allocated to the
assets acquired and liabilities assumed based upon their respective fair
market values.
The following unaudited pro forma information has been prepared assuming
that all the acquisitions during 1997 (refer to specifics in the footnotes
of Form 10-K mentioned above) and 1998 occurred at the beginning of the
periods presented. The pro forma information is presented for information
purposes only and is not necessarily indicative of what would have occurred
if the acquisitions had been made as of those dates.
($ in thousands except
per share data)
(Unaudited)
Nine Months Ended
September 30,
----------------------
1998 1997
----------------------
Net revenues $ 69,955 70,797
Net income $ 4,640 2,168
Net income per share $ 0.63 0.60
Net income per share - assuming dilution $ 0.58 0.50
Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
Rock of Ages Corporation (the "Company") is an integrated quarrier,
manufacturer, distributor and retailer of granite and products manufactured
from granite. The quarry division sells granite blocks both to the
manufacturing division and to outside manufacturers, as well as to
distributors in Europe and Japan. The manufacturing division's principal
product is granite memorials used primarily in cemeteries, although it also
manufactures some specialized granite products for industrial applications.
The retail division primarily sells granite memorials to the general
public.
In June 1997, the Company acquired the successor to Keystone
Memorials, Inc. ("Keystone"), and in October 1997, acquired Childs & Childs
Granite Company Inc. ("C&C"), granite memorial manufacturers located in
Elberton, Georgia. In connection with the Keystone and C&C acquisitions,
the Company acquired Southern Mausoleums, Inc. (collectively with C&C and
Keystone, the "Acquired Manufacturing Operations"). Also in connection with
the Keystone and C&C acquisitions, the Company acquired three granite
quarrying companies operating quarries located in Georgia, Pennsylvania,
North Carolina, South Carolina and Oklahoma (the "Acquired Quarrying
Operations"). In October 1997, the Company acquired the Keith Monument
Company and related companies that are engaged in the retail sales of
granite memorials to consumers in the State of Kentucky. In addition,
during the nine months ended September 30, 1998, the Company made eleven
more acquisitions of retail monument companies, expanding its retail
presence to locations in Georgia, Iowa, Illinois, Minnesota, Nebraska, Ohio
and South Dakota (the "Acquired Retailing Operations").
The following table sets forth certain operations data as a
percentage of net revenues with the exception of quarrying, manufacturing
and retailing gross profit, which are shown as a percentage of their
respective revenues.
Statement of Operations Data:
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
------------------------------------------------
Net Revenues:
Quarrying 21.8% 21.7% 22.9% 24.4%
Manufacturing 52.6% 78.3% 59.2% 75.6%
Retailing 25.6% 0.0% 17.9% 0.0%
------- ------- ------- ------
Total net revenues 100.0% 100.0% 100.0% 100.0%
------- ------- ------- ------
Gross Profit:
Quarrying 49.0% 46.4% 43.6% 35.5%
Manufacturing 28.3% 21.5% 24.8% 22.8%
Retailing 57.6% 0.0% 57.5% 0.0%
------- ------- ------- ------
Total gross profit 40.3% 26.9% 34.9% 25.9%
Selling, general &
administrative expenses 24.6% 16.9% 23.2% 19.1%
------- ------- ------- ------
Income from operations 15.7% 10.0% 11.7% 6.8%
Interest expense 0.5% 3.2% 0.4% 3.7%
------- ------- ------- ------
Income before provision
for income taxes 15.2% 6.8% 11.3% 3.1%
Provision for income taxes 2.7% 1.7% 2.8% 0.8%
------- ------- ------- ------
Net income 12.5% 5.1% 8.5% 2.3%
------- ------- ------- ------
Three Months Ended September 30, 1998 Compared to Three Months Ended
September 30, 1997
Revenues for the three months ended September 30, 1998 increased
34.4% to $22.0 million from $16.4 million for the three months ended
September 30, 1997. The quarrying division was responsible for $1.2 million
of this increase, all attributable to the Acquired Quarrying Operations.
The manufacturing division reported a decrease of $1.2 million in revenues.
Precision products revenues were down $1.5 million from the 1997 period.
Monumental revenues increased by $300,000. The Acquired Retailing
Operations contributed an increase of $5.6 million of revenues for the
quarter over the 1997 period.
Gross profit for the three months ended September 30, 1998 increased
100.0% to $8.8 million from $4.4 million for the three months ended
September 30, 1997. The gross profit percentage increased to 40.3% for the
1998 period from 26.9% for the 1997 period. This increase was primarily
attributable to the introduction of the retailing activities that realize
significantly higher margins.
The quarrying gross profit increased $.7 million to $2.4 million for
the 1998 period from $1.7 million for the 1997 period. The quarrying gross
profit percentage increased to 49.0% for the 1998 period from 46.4% for the
1997 period. Gross profit from existing quarry operations increased $.3
million over the 1997 period. Gross profit from the Acquired Quarrying
Operations increased $.4 million over the 1997 period, due primarily to
continued strong results from the Salisbury quarry, offset by weaker
results from the Pennsylvania quarry.
Manufacturing gross profit increased $.5 million to $3.3 million for
the 1998 period from $2.8 million for the 1997 period. The manufacturing
gross profit percentage increased to 28.3% for the 1998 period from 21.5%
for the 1997 period. These increases were the result of stronger
performance from the monumental product line at the Barre, Vermont and
Beebe, Quebec plants.
The Acquired Retailing Operations contributed $3.2 million of gross
profits, and realized a gross profit percentage of 57.6% for the 1998
period. The Company had no retail operations for the 1997 period.
Selling, general and administrative expenses ("SGA expenses") for
the three months ended September 30,1998 increased 94.7% to $5.4 million
from $2.8 million for the three months ended September 30, 1997. As a
percentage of net revenues, SGA expenses for the 1998 period increased to
24.6% from 16.9% in the 1997 period. The Acquired Retailing Operations
primarily caused this increase. In addition, professional services and
insurance costs have increased as a result of becoming a public company.
Interest expense for the three months ended September 30, 1998
decreased to $113,000 from $516,000 for the three months ended September
30, 1997. This decrease was the result of the retirement of all existing
bank debt, with the exception of a revolving line of credit with the Royal
Bank of Canada, with the net proceeds of the Company's initial public
offering (the "IPO") in October 1997. During the 1998 period, the Company's
$50 million credit line established following the Company's IPO was used to
borrow $6.9 million as of September 30, 1998 to fund acquisitions.
Nine Months Ended September 30, 1998 Compared to Nine Months Ended
September 30, 1997
Revenues for the nine month period ended September 30, 1998
increased 61.9% to $60.1 million from $37.1 million for the nine months
ended September 30, 1997. Quarrying revenues increased $4.7 million, of
which $4.0 million was from Acquired Quarrying Operations. The remaining
$.7 million increase in quarrying revenues was generated by existing
quarrying operations. Manufacturing revenues increased $7.5 million for the
period. Acquired Manufacturing Operations revenues increased by $9.2
million, which was offset by a decrease of $1.7 million in existing
operations, attributable entirely to the press roll market. The Acquired
Retailing Operations contributed an increase of $10.8 million of revenues
for the period.
Gross profit for the nine months ended September 30, 1998 increased
119.0% to $21.0 million from $9.6 million for the nine months ended
September 30, 1997. Gross profit from existing quarrying operations
increased $.9 million and gross profit from Acquired Quarrying Operations
increased $1.9 million, for a total increase of $2.8 million. The quarry
gross margin percentage increased to 43.6% for the 1998 period from 35.5%
for the 1997 period. This was due to the inclusion of the Acquired
Quarrying Operations plus higher productivity experienced at the existing
quarrying operations.
Manufacturing gross profit increased $2.4 million, of which $1.8
million was from Acquired Manufacturing Operations. Existing operations
reported an increase of $.6 million comprised of an increase in the
monumental product line of $1.0 million, offset by a decrease of $.4
million in precision products. The manufacturing gross margin percentage
increased to 24.8% for the 1998 period from 22.8% for the 1997 period. This
increase was the result of higher operating margins in the monumental line.
The Acquired Retailing Operations contributed $6.2 million of gross
profit, and realized a gross profit percentage of 57.5%, for the 1998 nine
month period. The Company owned no retail operations in the comparable 1997
period. The Company is in the process of remerchandising and consolidating
certain functions in the Acquired Retailing Operations in an effort to
improve performance.
Selling, general and administrative expenses for the nine months
ended September 30, 1998 increased 96.3% to $13.9 million from $7.1 million
for the nine months ended September 30, 1997. Existing operations accounted
for $.3 million of the increase consisting of higher professional services
and insurance costs plus a one time non-recurring pension charge. Acquired
operations resulted in an increase of another $6.8 million. As a percentage
of net revenues, selling, general and administrative expenses for the 1998
period increased to 23.2% from 19.1% for the 1997 period. This increase is
primarily attributable to the introduction of retailing activities that
have a higher level of selling, general and administrative expenses.
Interest expense for the nine months ended September 30, 1998
decreased to $244,000 from $1.4 million for the nine months ended September
30, 1997. This decrease was the result of lower debt levels as a result of
the retirement of all existing bank debt, with the exception of a revolving
line of credit with the Royal Bank of Canada, with the net proceeds of the
IPO.
Income taxes as a percent of earnings before taxes decreased to
25.0% for the nine months ended September 30, 1998 from 25.2% for the nine
months ended September 30, 1997. This effective rate is a decrease from the
32.0% rate used as of the six months ended June 30, 1998. This decrease is
the result of a higher than anticipated annual depletion allowance and the
utilization of an alternative minimum tax credit carry forward (the "tax
credit") that has been accumulating for several years as the Company paid
federal taxes in excess of statutory rates due to the alternative minimum
tax. The tax credit is utilized as earnings exceed alternative minimum tax
levels.
Liquidity and Capital Resources
The Company considers liquidity to be adequate to meet its long and
short-term cash requirements. Historically the Company has met these
requirements primarily from cash generated by operating activities and
periodic borrowings under commercial credit facilities. The Company's
recent and pending acquisitions have increased its requirements for
external sources of liquidity, and the Company anticipates that this trend
will continue as it continues to implement its growth strategy.
For the nine months ended September 30, 1998, net cash provided by
operating activities was $4.0 million. This was primarily the result of net
income of $5.1 million, non-cash expenses of $2.5 million, and an increase
of current payables and accrued expenses of $2.6 million offset by
increases in trade receivables of $1.5 million and inventories of $3.9
million. Net cash used in investing activities was $14.2 million. This was
the result of purchases of property, plant and equipment of $2.8 million
and acquisition requirements of $11.4 million. Net cash provided by
financing activities was $5.8 million, primarily net borrowings under lines
of credit.
The Company has a credit facility with the CIT Group/Business Credit
("CIT"). The facility consists of an acquisition term loan line of credit
of $25 million and a revolving credit facility of up to another $25 million
based on eligible accounts receivable and inventory. As of September 30,
1998, the Company had $6.9 million outstanding and $7.9 million available
under the revolving credit facility. The interest rate under these credit
lines as of such date was 8.00% based on a formula of prime less .50%. As
of September 30, 1998, the Company also had $.9 million outstanding and
$1.5 million available under a demand revolving line of credit with the
Royal Bank of Canada. The interest rate on this facility as of such date
was 8.00% based on a formula of Canadian prime plus .75%. The Company's
primary need for capital will be to finance acquisitions as part of its
growth strategy and to maintain and improve its manufacturing, quarrying
and retailing facilities. The Company has $3.0 million budgeted for capital
expenditures for its quarry and manufacturing facilities in 1998. The
Company believes that the combination of cash flow from operations, its
existing credit facilities, and cash on hand will be sufficient to fund its
operations for at least the next twelve months.
Year 2000 Update
Steps to address Year 2000 issues in the Company's information
technology systems (ITS) began in April 1997 and have progressed through
implementation for approximately 80% of ITS at the Barre, Vermont
operations with the remaining 20% to be completed by December 31, 1998. The
Elberton, Georgia operations are currently in the process of being
integrated with Barre ITS, a process that is expected to be complete by the
first quarter of 1999. The Canadian M&Q operations will be integrated with
the Barre system immediately thereafter. The ITS of the newly acquired
retail outlets will be 100% 2000 compliant through newly purchased software
and a tie-in to the Barre, Vermont financial portion of ITS which is also
currently 2000 compliant. This ITS installation is expected to be complete
by March 31, 1999 in currently owned retail outlets. Non-ITS Year 2000
issues (HVAC systems, machine controls, etc.) have been assessed and are
not a significant risk. The Company has also assessed reliance on third
party suppliers and determined that most relationships do not have a high
level of importance and, where a relationship is important, no Year 2000
issues exist.
Costs to address and attain 2000 compliance have not been and are
not expected to be extraordinary. Rock of Ages does not believe the failure
or oversight of any part of the Year 2000 compliance plan would have a
material impact on operations and has no contingency plan in view of the
fact it expects to be 2000 compliant by December 31, 1998 in its Barre,
Vermont M&Q ITS system and to tie in all its other M&Q locations to that
system in the first half of 1999 and to install the new 2000 compliant
retail ITS in the same time frame.
Item 3: Quantitative and Qualitative Disclosure About Market Risk
The Company currently does not invest excess funds in derivative
financial instruments or other market rate sensitive instruments for the
purpose of managing its foreign currency exchange rate risk or for any
other purpose.
PART II: OTHER INFORMATION
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number Exhibits
------ --------
3(i) Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No.
333-33685) filed with the Securities and Exchange Commission
on August 15, 1997 and declared effective on October 20,
1997)
3(iii) By-Laws of the Company (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-1
(File No. 333-33685) filed with the Securities and Exchange
Commission on August 15, 1997 and declared effective on
October 20, 1997)
11 Statement re computation of per share earnings
27 Financial Data Schedule
(b) Reports Submitted on Form 8-K:
The Registrant did not file any reports on Form 8-K during the quarter
ended June 30, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
ROCK OF AGES CORPORATION
Dated: November 12, 1998 By: /s/ George R. Anderson
------------------------------------
George R. Anderson
Vice President, Chief Financial
Officer and Treasurer
Exhibit Index
Exhibits
3(i) Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No. 333-
33685) filed with the Securities and Exchange Commission on
August 15, 1997 and declared effective on October 20, 1997)
3(iii) By-Laws of the Company (incorporated by reference to
Exhibit 3.2 to the Company's Registration Statement on
Form S-1 (File No. 333-33685) filed with the Securities
and Exchange Commission on August 15, 1997 and declared
effective on October 20, 1997)
11 Statement re computation of per share earnings
27 Financial Data Schedule
EXHIBIT 11
Statement Regarding Computation of Net Earnings Per Share
(Unaudited)
Net income per share, or basic earnings per share, is computed by
dividing earnings available for common shares by the weighted
average number of common shares outstanding during each year. Net
income per share assuming dilution, or diluted earnings per share,
is computed by dividing earnings available for common shares by the
weighted average number of common shares outstanding during each
year, adjusted to include the additional number of common shares
that would have been outstanding if the dilutive potential common
shares had been issued. Potential common shares are not included in
the diluted earnings per share calculations where the effect of
their inclusion would be antidilutive.
See also footnote 6 to the financial statements included in Part I.
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