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 June 30, 2000
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 03-015320
-------- ----------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification Number)
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
---- ----
As of June 30, 2000, 4,375,956 shares of Class A Common Stock,
par value $0.01 per share, and 3,075,011 shares of Class B
Common Stock, par value $0.01 per share, of Rock of Ages
Corporation were outstanding.
<PAGE>
ROCK OF AGES CORPORATION
INDEX
Form 10-Q for the Quarterly Period
Ended June 30, 2000
PART I FINANCIAL INFORMATION PAGE NO.
---------------------------- --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - 3
June 30, 2000 and December 31, 1999
Condensed Consolidated Statements of 4
Operations -
Three Months Ended and Six Months Ended
June 30, 2000 and 1999
Condensed Consolidated Statements of Cash 5
Flows -
Three Months Ended and Six Months Ended
June 30, 2000 and 1999
Notes to Condensed Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of 11
Financial Condition of Operations
Item 3. Quantitative and Qualitative Disclosures 15
About Market Risk
PART II OTHER INFORMATION
-------------------------
Item 4. Submission of Matters to a Vote of Security 15
Holders
Item 5. Exhibits and Reports on Form 8-K 16
Signature 17
2
<PAGE>
<TABLE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
<CAPTION>
ROCK OF AGES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
June 30, December 31,
2000 1999
(Unaudited)
----------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,821 $ 4,877
Trade receivables, net 13,828 14,128
Inventories 24,519 23,292
Prepaid & refundable income taxes 31 -
Due from affiliate 182 95
Deferred tax assets 156 156
Other current assets 3,084 2,251
----------- ------------
Total current assets 45,621 44,799
Property, plant and equipment, net 44,488 44,779
Cash surrender value of life 1,531 1,525
insurance, net
Intangibles, net 36,937 37,923
Deferred tax assets 721 721
Due from affiliates 268 -
Other 796 922
----------- ------------
Total assets $ 130,362 $ 130,669
=========== ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Borrowings under lines of credit $ 10,282 $ 13,620
Current installments of long-term
debt 491 616
Trade payables 1,736 1,992
Accrued expenses 4,546 2,405
Income taxes payable - 844
Customer deposits 9,026 7,201
----------- ------------
Total current liabilities 26,081 26,678
Long-term debt, excluding current
installments 12,490 12,620
Deferred compensation 3,531 3,658
Accrued pension 501 501
Accrued postretirement benefit costs 635 635
Other 340 196
----------- ------------
Total liabilities 43,578 44,288
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
4,375,956 and 4,328,171 shares
issued and outstanding 44 43
Common Stock - Class B, $.01 par
value;
15,000,000 shares authorized
3,075,011 and 3,115,746 shares
issued and outstanding 31 31
Additional paid-in capital 67,936 67,909
Retained earnings 19,096 18,577
Accumulated other comprehensive loss (323) (179)
----------- ------------
Total stockholders' equity 86,784 86,381
----------- ------------
Total liabilities and
stockholders' equity $ 130,362 $ 130,669
=========== ============
</TABLE>
**SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
ROCK OF AGES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Revenues:
Quarrying $ 6,716 $ 5,520 $ 10,353 $ 9,094
Manufacturing 7,359 11,508 12,845 21,427
Retailing 14,738 11,958 19,849 15,982
-------- -------- -------- --------
Total net
revenues 28,813 28,986 43,047 46,503
Gross Profit:
Quarrying 3,208 2,386 3,877 3,013
Manufacturing 2,250 2,922 3,347 4,482
Retailing 8,391 6,334 11,149 8,438
-------- -------- -------- -------
Total gross profit 13,849 11,642 18,373 15,933
Selling, general
and administrative
expenses 8,992 8,195 16,585 14,581
-------- -------- -------- -------
Income from
operations 4,857 3,447 1,788 1,352
Loss on sale of Keystone
assets - 723 - 723
Interest expense 544 506 1,111 989
-------- -------- -------- -------
Income (loss)
before benefit for
income taxes
and cumulative
effect of change
in accounting
principle 4,313 2,218 677 (360)
Income tax expense 1,102 882 158 166
-------- -------- -------- -------
Net income
(loss) before
cumulative
effect of change
in accounting
principle $ 3,211 $ 1,336 $ 519 $ (526)
Cumulative
effect in prior
years of change
in accounting
principle (net of
taxes of $48) - - - (150)
-------- -------- -------- -------
Net income (loss) $ 3,211 $ 1,336 $ 519 $ (676)
======== ======== ======== =======
Per share
information:
Net income (loss)
per share - basic:
Net income (loss) before
cumulative effect
of change in
accounting
principle $ 0.43 $ 0.18 $ 0.07 $ (0.07)
Cumulative
effect in prior
years of
change in
accounting
principle - - - (0.02)
-------- -------- -------- -------
Net income
(loss) per share $ 0.43 $ 0.18 $ 0.07 $ (0.09)
Net income (loss) per
share - diluted:
Net income (loss)
before cumulative
effect of change
in accounting
principle $ 0.42 $ 0.17 $ 0.07 $ (0.07)
Cumulative
effect in prior
years of
change in
accounting
principle - - - (0.02)
--------- --------- -------- -------
Net income
(loss) $ 0.42 $ 0.17 $ 0.07 $ (0.09)
Weighted average
number of common
shares outstanding
- basic 7,451 7,604 7,449 7,579
Weighted average
number of common
shares outstanding
- diluted 7,575 7,940 7,574 7,579
</TABLE>
**SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
<TABLE>
<CAPTION>
ROCK OF AGES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
Six Months Ended
June 30,
------------------
2000 1999
--------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 519 $ (676)
Adjustments to reconcile net income
(loss) to net cash provided by operating
activities:
Depreciation, depletion and
amortization 2,196 2,324
Loss on sale of assets 32 752
Cash surrender value of life
insurance (6) -
Cumulative effect of change in
accounting principles - (150)
Deferred taxes - 1
Changes in assets and liabilities:
Decrease (increase) in trade
receivables 299 (2,722)
Increase in due from related parties (355) (53)
(Increase) decrease in inventories (1,206) 665
Increase in other assets (705) (656)
Increase in trade payables, accrued
expenses and income taxes payable 1,011 157
Increase in customer deposits 1,824 1,667
Increase (decrease) in deferred
compensation (127) 96
Increase in other liabilities 144 -
--------- -------
Net cash provided by operating
activities 3,626 1,405
Cash flows from investing activities:
Purchases of property, plant and
equipment (1,161) (2,501)
Increase in intangibles (441) (235)
Cash included in sale of subsidiary - (250)
Proceeds from sale of property,
plant and equipment 700 -
Acquisitions, net of cash acquired (1) (167) (5,991)
--------- -------
Net cash used in investing
activities (1,069) (8,977)
Cash flows from financing activities:
Net borrowings under lines of credit (3,338) 7,728
Net stock option transactions 26 700
Increase in debt issuance costs - (75)
Principal payments on long-term debt (255) (449)
--------- -------
Net cash provided by (used in)
financing activities (3,567) 7,904
Effect of exchange rate changes on
cash (46) 183
--------- -------
Net increase (decrease) in cash and
cash equivalents (1,056) 515
Cash and cash equivalents, beginning
of period 4,877 4,701
Cash and cash equivalents, end of
period $ 3,821 $ 5,216
========= =======
Supplemental cash flow information:
Cash paid during the year for:
Interest $ 1,119 $ 991
Income Taxes $ 886 $ 220
**SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
<S> <C> <C> <C>
(1) Acquisitions:
Assets acquired $ 167 $ 7,887
Liabilities assumed and issued - (937)
Common stock issued - (640)
--------- -------
Cash paid 167 6,310
Less cash acquired - (319)
--------- -------
Net cash paid for acquisitions $ 167 $ 5,991
========= =======
</TABLE>
5
<PAGE>
ROCK OF AGES CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
The accompanying unaudited condensed 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 Form 10-K 405 (SEC File
No. 000-29464, filed March 30, 2000).
<TABLE>
(2) Inventories
<CAPTION>
($ in thousands)
Inventories consist of the June 30, December 31,
following at June 30, 2000 1999
2000 and December 31, 1999: (Unaudited)
------------ ------------
<S> <C> <C> <C> <C>
Raw materials $ 10,483 $ 9,650
Work-in-process 2,232 1,704
Finished goods and supplies 11,804 11,938
------------ ------------
$ 24,519 $ 23,292
============ ============
</TABLE>
(3) Pro Forma Information
During the six months ended June 30, 2000, the Company acquired
one retail monument company. The Company paid a total of
$166,500 in cash.
The acquisition has been accounted for under the purchase
method. The purchase price has been allocated to the assets
acquired and liabilities assumed based upon their respective fair
market values, with no resulting goodwill.
The following unaudited pro forma information has been prepared
assuming that the acquisitions (refer to specifics in the
footnotes of Form 10-K 405 mentioned above) during 2000 and 1999
occurred at the beginning of the periods presented. The pro
forma information is presented for information purposes only and
is not necessarily indicative of what would have occurred if the
acquisitions had been made as of those dates.
<TABLE>
<CAPTION>
($ in thousands except
per share data)
(Unaudited)
Six Months Ended
June 30,
----------------
2000 1999
-------- -------
<S> <C> <C>
Net revenues $43,098 $47,722
Net income (loss) $ 520 $ (854)
Net income (loss) per share - basic $ 0.07 $ (0.11)
Net income (loss) per share - diluted $ 0.07 $ (0.11)
</TABLE>
6
(4) Earnings Per Share
<TABLE>
The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share (EPS)
computations for net income (loss) for the three and six month periods
ended June 30, 2000 and 1999:
<CAPTION>
(in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Numerator:
Income (loss)
available to common
shareholders
used in basic and
diluted earnings per
share $ 3,211 $ 1,336 $ 519 $ (676)
========== ======== ======== ========
Denominator:
Denominator for
basic earnings per
share:
Weighted
average shares 7,451 7,604 7,449 7,579
Effect of dilutive
securities:
Stock options 124 336 125 -
---------- ------- ------- --------
Denominator for
diluted earnings per
share:
Adjusted
weighted average shares 7,575 7,940 7,574 7,579
========== ======== ======== ========
Basic earnings per
share $ 0.43 $ 0.18 $ 0.07 $ (0.09)
Diluted earnings per
share $ 0.42 $ 0.17 $ 0.07 $ (0.09)
</TABLE>
Options to purchase 35,000 shares of Class A common stock ranging
from $12.375 to $13.688 per share were outstanding in 2000, but
were not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price
of the common shares.
(5) Segment Information
The Company is organized based on the products and services that
it offers. Under this organizational structure, the Company
operates in three segments: quarrying, manufacturing, and
retailing.
The quarrying segment extracts granite from the ground and sells
it to both the manufacturing segment and to outside
manufacturers, as well as to distributors in Europe and Japan.
The manufacturing segment's principal product is granite
memorials used primarily in cemeteries, although it also
manufactures some specialized granite products for industrial
applications.
The retailing segment engraves and sells memorials and other
granite products at various locations throughout the United
States.
Inter-segment revenues are accounted for as if the sales were to
third parties.
7
<TABLE>
The following is the unaudited segment information for the three
and six month periods ended June 30, 2000 and 1999 (in
thousands):
<CAPTION>
Six month period:
2000 Quarrying Manufacturing Retailing Total
--------- ------------- --------- --------
<S> <C> <C> <C> <C> <C>
Total net revenues $ 12,206 $ 16,918 $ 19,849 $ 48,973
Inter-segment net
revenues 1,853 4,073 - 5,926
--------- ------------- --------- --------
Net revenues 10,353 12,845 19,849 43,047
Total gross profit 4,571 3,071 10,731 18,373
Inter-segment gross
profit 694 (276) (418) -
--------- ------------- --------- -------
Gross profit 3,877 3,347 11,149 18,373
Selling, general and
administrative
expenses 2,085 3,302 11,198 16,585
--------- ------------- -------- -------
Income (loss) from
operations 1,792 45 (49) 1,788
========= ============= ======== =======
1999 Quarrying Manufacturing Retailing Total
--------- ------------- --------- --------
<S> <C> <C> <C> <C> <C>
Total net revenues $ 12,500 $ 24,711 $ 15,982 $ 53,193
Inter-segment net
revenues 3,406 3,284 - 6,690
--------- ------------- --------- --------
Net revenues 9,094 21,427 15,982 46,503
Total gross profit 4,108 3,482 8,343 15,933
Inter-segment gross
profit 1,095 (1,000) (95) -
--------- ------------- --------- -------
Gross profit 3,013 4,482 8,438 15,933
Selling, general and
administrative
expenses 2,590 3,333 8,658 14,581
--------- ------------- --------- -------
Income (loss) from
operations $ 423 $ 1,149 $ (220) $ 1,352
========= ============= ========= =======
</TABLE>
8
<PAGE>
<TABLE>
Three month period:
<CAPTION>
2000 Quarrying Manufacturing Retailing Total
--------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total net revenues $ 7,861 $ 9,740 $ 14,738 $ 32,339
Inter-segment net
revenues 1,145 2,381 - 3,526
--------- ------------- ---------- ----------
Net revenues 6,716 7,359 14,738 28,813
Total gross profit 3,772 1,991 8,086 13,849
Inter-segment gross
profit 564 (259) (305) -
--------- ------------- ---------- ---------
Gross profit 3,208 2,250 8,391 13,849
Selling, general and
administrative
expenses 1,262 1,810 5,920 8,992
--------- ------------- ---------- ---------
Income (loss)
from operations 1,946 440 2,471 4,857
========= ============= ========== =========
1999 Quarrying Manufacturing Retailing Total
--------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Total net revenues $ 7,517 $ 13,447 $ 11,958 $ 32,922
Inter-segment net
revenues 1,997 1,939 - 3,936
--------- ------------- ---------- ---------
Net revenues 5,520 11,508 11,958 28,986
Total gross profit 3,284 2,120 6,238 11,642
Inter-segment gross
profit 898 (802) (96) -
--------- ------------- ---------- ---------
Gross profit 2,386 2,922 6,334 11,642
Selling, general and
administrative
expenses 1,416 1,693 5,086 8,195
--------- ------------- ---------- ---------
Income from
operations 970 1,229 1,248 3,447
</TABLE> ========= ============= ========== =========
9
<PAGE>
<TABLE>
Net revenues by geographic area is as follows:
<CAPTION>
($ in thousands) ($ in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
Net revenues (1): 2000 1999 2000 1999
------------------ -----------------
<S> <C> <C> <C> <C>
United States $ 26,354 $ 25,828 $ 39,068 $ 41,587
Canada 2,459 3,158 3,979 4,916
-------- -------- -------- --------
Total net revenues $ 28,813 $ 28,986 $ 43,047 $ 46,503
======== ======== ======== ========
</TABLE>
(1) Net revenues are attributed to countries based on where
product is produced.
<TABLE>
Long-lived assets by geographic area is as follows:
<CAPTION>
($ in thousands)
June 30, December 31,
2000 1999
Long-lived assets: (Unaudited)
-----------------------------
<S> <C> <C>
United States $ 42,591 $ 42,798
Canada 1,765 1,976
Japan 132 5
--------- ---------
$ 44,488 $ 44,779
========= =========
</TABLE>
(6) Significant Event
On March 31, 2000, the Company sold the burial vault business of
Rock of Ages Memorials, Inc. for $700,000. Sales for the three
month periods ending March 31, 2000 and 1999 amounted to $270,628
and $297,015, respectively.
<TABLE>
(7) Comprehensive Income
<CAPTION>
Comprehensive income (loss) is as follows:
($ in thousands) ($ in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-----------------------------------------
2000 1999 2000 1999
-----------------------------------------
<S> <C> <C> <C> <C> <C>
Net income (loss) $ 3,211 $ 1,336 $ 519 $ (676)
Cumulative
translation
adjustment 54 119 (144) 232
-------- ------- ------ -------
Comprehensive
income (loss) $ 3,265 $ 1,455 $ 375 $ (444)
======== ======= ======= =======
</TABLE>
10
<PAGE>
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
This Form 10-Q contains certain "forward-looking" statements
within the meaning of Section 21E of the Securities and Exchange
Act of 1934, as amended, including but not limited to those that
discuss strategies, goals, outlook or other non-historical
matters, or projected or anticipated revenues, income, returns or
other financial measures. These forward-looking statements are
subject to numerous risks and uncertainties that may cause actual
results to differ materially from those contained in or indicated
by such statements, including but not limited to the ability of
the Company to continue to identify suitable acquisition
candidates, to consummate additional retail acquisitions on
acceptable terms and to successfully integrate the operations of
such acquired entities, demand for the Company's products, as
well as general economic, competitive, key employee and other
factors described in the Company's Annual Report on Form 10-K or
other filings with the Securities and Exchange Commission. The
Company assumes no obligation to update these forward-looking
statements to reflect actual results or changes in factors or
assumptions affecting such forward-looking statements.
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 directly to consumers.
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 in Elberton, Georgia. In connection with the
Keystone and C&C acquisitions, the Company acquired Southern
Mausoleums, Inc. ("SMI" and, together with C&C and Keystone, the
"Elberton 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 "Quarry Companies"). In November 1998, the Company
acquired another quarry company in North Carolina which produces
a white granite ("Gardenia" and, together with the Quarry
Companies, the "Acquired Quarry Operations"). In October 1997,
the Company acquired the Keith Monument Company and related
companies which are engaged in the retailing of granite memorials
to consumers in the State of Kentucky ("Keith"). In 1998, the
Company made acquisitions of thirteen additional retail monument
companies (the "1998 Retail Acquisitions"), thereby expanding its
retail presence to locations in Georgia, Iowa, Illinois,
Minnesota, Nebraska, Ohio, South Dakota, Wisconsin, Pennsylvania
and New Jersey. In 1999, the Company acquired an additional
thirteen monument retailers (the "1999 Retail Acquisitions"),
thereby bringing its total owned retail distribution base to 97
outlets in fifteen states. During the six months ended June 30,
2000, the Company acquired one additional monument retailer.
In May 1999, the Company sold certain Keystone assets back to the
original owners from whom it had purchased them in June 1997 (the
"Keystone Sale"). In exchange for these assets, the Company
received 263,441 shares of its Class B stock held by the Keystone
owners. These shares were then retired. In connection with this
transaction, the company recognized a loss on disposal of assets
of approximately $723,000, or $.09 per diluted share, in the
three months and six months ended June 30, 1999. This
nonrecurring charge had no impact on the Company's tax liability
or cash position.
The Company records revenues from quarrying, manufacturing and
retailing. The granite quarried by the Company is sold both to
outside customers and used by the Company's manufacturing
division. The Company records revenue and gross profit related to
the sale of granite sold to an outside customer either when the
granite is shipped or when the customer selects and identifies
the blocks at the quarry site. The Company does not record a
sale, nor does the Company record gross profit, at the time
granite is transferred to the Company's manufacturing division.
The Company records revenue and gross profit related to
internally transferred granite only after the granite is
manufactured into a finished product and sold to an outside
customer. Manufacturing revenues related to outside customers are
recorded when the finished product is shipped from Company
facilities. Manufacturing revenues related to internally
transferred finished products are recorded when ultimately sold
at retail to an outside customer. Retailing revenues are recorded
when the finished monument is placed in the cemetery.
11
<PAGE>
<TABLE>
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.
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------
2000 1999 2000 1999
---------------------------------------
<S> <C> <C> <C> <C>
Statement of Operations
Data:
Net Revenues:
Quarrying 23.3% 19.0% 24.1% 19.6%
Manufacturing 25.5% 39.7% 29.8% 46.1%
Retailing 51.1% 41.3% 46.2% 34.3%
-------- -------- -------- --------
Total net revenues 100.0% 100.0% 100.0% 100.0%
Gross Profit:
Quarrying 47.8% 43.2% 37.4% 33.1%
Manufacturing 30.6% 25.4% 26.1% 20.9%
Retailing 56.9% 53.0% 56.2% 52.8%
--------- -------- --------- --------
Total gross profit 48.1% 40.2% 42.7% 34.3%
Selling, general &
administrative expenses 31.2% 28.3% 38.5% 31.4%
Income from operations 16.9% 11.9% 4.2% 2.9%
Interest expense 1.9% 1.7% 2.6% 2.1%
Loss on disposal of
assets - 2.5% - 1.6%
Income (loss) before
income taxes and
cumulative effect of
change in accounting
principle 15.0% 7.6% 1.6% (0.8%)
Income taxes 3.8% 3.0% 0.4% 0.4%
Income (loss) before
cumulative effect of
change in accounting
principle 11.1% 4.6% 1.2% (1.1%)
Cumulative effect in
prior years of change in
accounting principle - - - (0.3%) )
Net Income (loss) 11.1% 4.6% 1.2% (1.5%)
========= ======== ======= =======
</TABLE>
12
<PAGE>
Three Months Ended June 30, 2000 Compared to Three Months Ended
June 30, 1999
Revenues for the three months ended June 30, 2000 decreased
$172,000, or .6%, to $28.8 million from $29.0 million for the
three months ended June 30, 1999. This decrease was primarily
attributable to a decline in manufacturing revenues which was
offset by increases in quarrying and retailing revenues. The
Company's retailing net revenues increased to 51.1% of total net
revenues in the 2000 period from 41.3% in the 1999 period as a
result of the Company's retail acquisitions.
Gross profit for the three months ended June 30, 2000 increased
$2.2 million or 19.0% , to $13.8 million from $11.6 million for
the three months ended June 30, 1999. The gross profit
percentage increased to 48.1% for the 2000 period from 40.2% for
the 1999 period. This increase was attributable to the absolute
and relative increases in retailing net revenues during the 2000
period as described above, and to improved performance in all
three of the Company's segments relative to the 1999 period.
Quarrying gross profit increased $823,000, or 34.5%, to $3.2
million for the 2000 period from $2.4 million for the 1999
period. The quarrying gross profit percentage increased to 47.8%
from 43.2% for the 1999 period. These increases were primarily
attributable to improved profitability at most of the Company's
quarries.
Manufacturing gross profit decreased $671,000, or 23.0%, to $2.3
million for the 2000 period from $2.9 million for the 1999
period. The manufacturing gross profit percentage increased to
30.6% from 25.4% for the 1999 period. The decrease in gross
profit dollars was caused by a decline in outside shipments by
the manufacturing division which was offset by improved
profitability on those shipments, especially at the Company's
Barre monumental operations.
Retailing gross profit increased $2.1 million, or 32.4%, to $8.4
million for the 2000 period from $6.3 million for the 1999
period. This increase was attributable to improved profitability
at the 1998 Retail Acquisitions and to profit contributions from
the 1999 Retail Acquisitions, most of which the Company did not
own during the 1999 period. The retailing gross profit
percentage increased to 56.9% from 53.0% for the 1999 period.
This increase was mainly caused by improved profitability at the
1998 Retail Acquisitions.
Selling, general and administrative expenses ("SGA expenses")
increased $797,000, or 9.7%, to $9.0 million from $8.2 million
for the 1999 period. As a percentage of net revenues, SGA
expenses increased to 31.2% for the 2000 period from 28.3% for
the 1999 period. These increases were primarily attributable to
SGA expenses of the 1999 Retail Acquisitions which the Company
did not own during all of the 1999 period.
Interest expense increased $38,000, or 7.5%, to $544,000 from
$506,00 for the 1999 period. This increase was caused by
increased borrowings under the Company's credit facilities to
support its retail acquisition strategy.
The Company's effective tax rate decreased to 25.6% due to the
nontaxable sale of Keystone assets.
13
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Six Months Ended June 30, 2000 Compared to Three Months Ended
June 30, 1999
Revenues for the six months ended June 30, 2000 decreased $3.5
million, or 7.4%, to $43.0 million from $46.5 million for the six
months ended June 30, 1999. This decrease was caused by an $8.6
million decline in reported manufacturing revenues which was
partially offset by increases in both quarrying and retailing
revenues. The Company's retailing net revenues increased to 46.2%
of total net revenues in the 2000 period from 34.4% in the 1999
period.
Gross profit for the six months ended June 30, 2000 increased
$2.4 million or 15.3% , to $18.4 million from $15.9 million for
the six months ended June 30, 1999. The gross profit percentage
increased to 42.7% for the 2000 period from 34.3% for the 1999
period. This increase was caused by improved profitability in
all three of the Company's segments, and to the relative increase
in retailing revenues (which historically have a higher gross
margin percentage than the Company's other two segments)
described above.
Quarrying gross profit increased $864,000, or 28.7%, to $3.9
million for the 2000 period from $3.0 million for the 1999
period. The quarrying gross profit percentage increased to 37.4%
from 33.1% for the 1999 period. These increases were caused by
improved results at most of the Company's quarries and lower
shipments to the Company's manufacturing division.
Manufacturing gross profit decreased $1.1 million, or 25.3%, to
$3.3 million for the 2000 period from $4.5 million for the 1999
period. The manufacturing gross profit percentage increased to
26.1% from 20.9% for the 1999 period. These results were caused
by the decline in manufacturing revenues described above and an
increase in profitability at the Company's Barre monumental
operations.
Retailing gross profit increased $2.7 million, or 32.1%, to $11.1
million for the 2000 period from $8.4 million for the 1999
period. This increase was attributable to improved results from
the 1998 Retail Acquisitions and profit contributions from the
1999 Retail Acquisitions, most of which the Company did not own
during the 1999 period. The retailing gross profit percentage
increased to 56.2% from 52.8% for the 1999 period. This increase
was caused primarily by improved profitability at the 1998 Retail
Acquisitions.
Selling, general and administrative expenses ("SGA expenses")
increased $2.0 million, or 13.7%, to $16.6 million from $14.6
million for the 1999 period. As a percentage of net revenues,
SGA expenses increased to 38.5% for the 2000 period from 31.4%
for the 1999 period. These increases were primarily attributable
to SGA expenses of the 1999 Retail Acquisitions which the Company
did not own during all of the 1999 period.
Interest expense increased $122,000, or 12.3%, to $1.1 million
from $989,000 for the 1999 period. This increase was caused by
increased borrowings under the Company's credit facilities to
support its retail acquisition strategy.
The Company's effective tax rate decreased to 23.4% due to the
nontaxable sale of Keystone assets.
Liquidity and Capital Resources
The Company considers liquidity to be its ability 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 acquisitions have
increased its requirements for external sources of liquidity, and
the Company anticipates that this trend will continue as it
further implements its growth strategy.
For the six months ended June 30, 2000, net cash provided by
operating activities was $3.6 million compared to $1.4 million
for the 1999 period. This increase was primarily due to higher
net income and an increase in payables during the 2000 period
which was partially offset by inventory decreases in the 1999
period. Net cash used in investing activities was $1.1 million
compared to $9.0 million in the 1999 period. This decrease was
primarily due to lower levels of acquisitions during the 2000
period. Net cash provided by (used in) financing activities was
$(3.6 million), compared to $7.9 million for the 1999 period.
This was primarily caused by a decline in acquisition activity in
the 2000 period.
The Company has credit facilities pursuant to a financing
agreement with the CIT Group/Business Credit ("CIT"). The
agreement provides for an acquisition term loan line of credit of
$25 million and a revolving credit facility of another $25
million. As of June 30, 2000 the revolving credit facility had
$10.3 million outstanding and the term loan facility had $12.0
million outstanding. Given the covenants contained in that
agreement, the Company's effective incremental credit
availability as of that date was approximately $18 million. The
interest rate on the revolving facility and term loan as of such
date was 9.0% based on a formula of prime less 50 basis points.
14
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As of June 30,2000, the Company also had $2.4 million available
and non outstanding under a demand revolving line of credit with
the Royal Bank of Canada.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.
Recent Accounting Pronouncements
In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44 "Accounting for Certain Transactions involving
Stock Compensation - an Interpretation of APB No. 25." The Company
has assessed that there is no material impact of the interpretation
on the consolidated financial statements.
Seasonality
Historically, the Company's operations have experienced certain
seasonal patterns. Generally the Company's net sales have been
highest in the third quarter and lowest in the first quarter of
each year due primarily to weather. Cemeteries in northern areas
generally do not accept granite memorials during winter months
when the ground is frozen because they cannot be properly set. In
addition, the Company typically closes certain of its Vermont and
Canadian quarries during these months because of increased
operating costs attributable to adverse weather conditions. As a
result, the Company has historically incurred a net loss during
the first three months of each calendar year.
Inflation
The Company believes that the relatively moderate rates of
inflation experienced in recent years have not had a significant
effect on its results of operations.
Item 3: Quantitative and Qualitative Disclosure About Market Risk
The Company has financial instruments that are subject to
interest rate risk, principally debt obligations under its credit
facilities. Historically, the Company has not experienced
material gains or losses due to interest rate changes. Based on
the Company's current variable rate debt obligations, the Company
believes its exposure to interest rate risk is not material.
The Company is subject to foreign currency exchange rate risk
primarily from the operations of its Canadian subsidiary. Based
on the size of this subsidiary and the Company's corresponding
exposure to changes in the Canadian/U.S. dollar exchange rate,
the Company does not consider its market exposure relating to
currency exchange to be material.
PART II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on June 16,
2000 (the "Annual Meeting"), to elect three Class III directors
and to ratify the selection of KPMG LLP as the Company's
independent auditors for the 2000 fiscal year.
Each of Jon M. Gregory, Richard C. Kimball and Kurt M. Swenson
was elected to serve as a Class III director for a three year
term expiring at the annual meeting of stockholders in 2003 and
until their successors are duly elected and qualified.
15
<PAGE>
<TABLE>
The following table sets forth the number of votes cast for,
against or withheld, as well as the number of abstentions and
broker non-votes, as to the election of each of Jon M. Gregory,
Richard C. Kimball and Kurt M. Swenson and the ratification of
the selection of KPMG LLP as the Company's independent auditors
for the 2000 fiscal year.
<CAPTION>
Votes Votes
For Against/ Abstentions Broker
Votes Non-
Withheld votes
-------------------------------------------------
<S> <C> <C> <C> <S> <C>
Election of
Jon M. Gregory 6,032,754 378,883 - 1,038,080
Richard C. Kimball 6,032,754 378,883 - 1,038,080
Kurt M. Swenson 6,032,754 378,883 - 1,038,080
KPMG LLP 6,296,658 5,000 109,979 1,038,080
</TABLE>
Item 5. Exhibits and Reports on Form 8-K
(a) Exhibits
Number Exhibits
3.1 Amended and Restated Certificate of Incorporation
of the Registrant 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.
3.2 Amended and Restated By-Laws of the Registrant (as
amended through April 6, 1999) incorporated by
referenced to Exhibit 3.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarterly
period ended March 31.1999.
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, 2000.
16
<PAGE>
- - - (0.3%
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 hereunto duly authorized.
ROCK OF AGES CORPORATION
Dated: August 10, 2000 By:/s/John L. Forney
-----------------
John L. Forney
Vice President, Chief
Financial Officer
and Treasurer
17
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