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 March 31, 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 03-0153200
- ------------------------------- ----------
(State or 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
--- ---
As of April 30, 2000, 4,374,706 shares of Class A Common Stock,
par value $0.01 per share, and 3,075,011 shares of Class B
Common Stock, par value $0.01 per share, of Rock of Ages
Corporation were outstanding.
<PAGE>
ROCK OF AGES CORPORATION
INDEX
-----
Form 10-Q for the Quarterly Period
Ended March 31, 2000
PART I FINANCIAL INFORMATION PAGE NO.
- ------ --------------------- --------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - 3
March 31, 2000 and December 31, 1999
Condensed Consolidated Statements of Operations - 4
Three Months Ended March 31, 2000 and 1999
Condensed Consolidated Statements of Cash Flows - 5
Three Months Ended March 31, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About 13
Market Risk
PART II OTHER INFORMATION
- ------- -----------------
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
2
<PAGE>
<TABLE>
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements
<CAPTION>
ROCK OF AGES CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)
March 31, December 31,
2000 1999
(Unaudited)
------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,793 $ 4,877
Trade receivables, net 13,026 14,128
Inventories 25,115 23,292
Prepaid & refundable income taxes 864 -
Due from affiliate 129 95
Deferred tax assets 156 156
Other current assets 2,797 2,251
------------ -----------
Total current assets 45,880 44,799
Property, plant and equipment, net 44,584 44,779
Cash surrender value of life
insurance, net 1,489 1,525
Intangibles, net 37,091 37,923
Deferred tax assets 817 721
Other 937 922
------------ -----------
Total assets $ 130,798 $ 130,669
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under lines of credit $ 13,535 $ 13,620
Current installments of long-term
debt 498 616
Trade payables 2,414 1,992
Accrued expenses 2,764 2,405
Due to related parties - 844
Customer deposits 10,366 7,201
------------ -----------
Total current liabilities 29,577 26,678
Long-term debt, excluding current
installments 12,557 12,620
Deferred compensation 3,483 3,658
Accrued pension 501 501
Accrued postretirement benefit costs 635 635
Other 354 196
------------ -----------
Total liabilities 47,107 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
4,345,580 and 4,328,171
shares issued and outstanding 43 43
Common Stock - Class B, $.01 par
value;
15,000,000 shares authorized
3,104,137 and 3,115,746 31 31
shares issued and outstanding
Additional paid-in capital 67,931 67,909
Retained earnings 15,884 18,577
Accumulated other comprehensive loss (198) (179)
------------ -----------
Total stockholders' equity 83,691 86,381
------------ -----------
Total liabilities and
stockholders' equity $ 130,798 $ 130,669
============ ===========
</TABLE>
**SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
<TABLE>
<CAPTION>
ROCK OF AGES CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands)
Three Months Ended
March 31,
--------------------------
2000 1999
------------ ------------
<S> <C> <C> <C> <C>
Net Revenues:
Quarrying $ 3,636 $ 3,574
Manufacturing 5,486 9,920
Retailing 5,111 4,024
------------ ------------
Total net revenues 14,233 17,518
Gross Profit:
Quarrying 669 626
Manufacturing 1,097 1,560
Retailing 2,757 2,104
----------- ------------
Total gross profit 4,523 4,290
Selling, general and administrative
expenses 7,593 6,386
------------ ------------
Loss from operations (3,070) (2,096)
Interest expense 567 483
------------ ------------
Loss before benefit for income taxes
and cumulative effect of
change in accounting principle (3,637) (2,579)
Income tax benefit (944) (717)
------------ ------------
Net loss before cumulative effect of
change in accounting principle (2,693) (1,862)
Cumulative effect in prior years of
change in accounting principle - (150)
------------ ------------
Net loss $ (2,693) $ (2,012)
============ ============
Per share information:
Net loss per share - basic
Net loss before cumulative effect of
change in accounting principle $ (0.36) $ (0.25)
Cumulative effect in prior years of
change in accounting principles - (0.02)
------------ -----------
Net loss $ (0.36) $ (0.27)
============ ===========
Net loss per share - diluted
Net loss before cumulative effect
of change in accounting principle $ (0.36) $ (0.25)
Cumulative effect in prior years
of change in accounting principle - (0.02)
------------ -----------
Net loss $ (0.36) $ (0.27)
============ ===========
Weighted average number of common
shares outstanding - basic 7,446 7,553
Weighted average number of common
shares outstanding - diluted 7,446 7,553
</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)
Three Months Ended
March 31,
-------------------------
2000 1999
------------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (2,693) $ (2,012)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation, depletion and
amortization 957 1,071
Loss on sale of assets - 36
Cash surrender value of life insurance 36 -
Cumulative effect of change in
accounting principles - (150)
Deferred taxes (95) (1)
Changes in assets and liabilities:
Decrease (increase) in trade receivables 1,102 (1,960)
Increase in due from related parties (33) (4)
Increase in inventories (1,833) (475)
Increase in other assets (561) (1,204)
Decrease in trade payables, accrued
expenses and income taxes payable (929) (1,203)
Increase in customer deposits 3,165 2,573
Increase (decrease)
in deferred compensation (175) 48
Increase in other liabilities 159 -
------------- -----------
Net cash used in operating
activities (901) (3,281)
Cash flows from investing activities:
Purchases of property, plant and
equipment (489) (1,361)
Increase in intangibles (192) (105)
Proceeds from sale of business unit 700 -
Acquisitions, net of cash
acquired (1) - (3,644)
------------- -----------
Net cash provided by (used in)
investing activities 19 (5,110)
Cash flows from financing activities:
Net borrowings under lines of credit (84) 6,948
Net stock option transactions 22 691
Principal payments on long-term debt (182) (441)
------------ -----------
Net cash provided by (used in)
financing activities (244) 7,198
Effect of exchange rate changes on
cash 42 113
------------ -----------
Net decrease in cash and cash
equivalents (1,084) (1,080)
Cash and cash equivalents, beginning
of period 4,877 4,701
Cash and cash equivalents, end of
period $ 3,793 $ 3,621
============= ===========
**SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) Acquisitions:
Assets acquired $ - $ 4,608
Liabilities assumed and issued - (411)
Common stock issued - (425)
------------ -----------
Cash paid - 3,771
Less cash acquired - (127)
------------ -----------
Net cash paid for acquisitions $ - $ 3,644
============ ===========
</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 March 31, December 31,
following at March 31, 2000 1999
2000 and December 31, 1999:
(Unaudited)
---------- ------------
<S> <C> <C> <C> <C>
Raw materials $ 9,596 $ 9,650
Work-in-process 2,473 1,704
Finished goods and supplies 13,046 11,938
-------------- ------------
$ 25,115 $ 23,292
============== ============
</TABLE>
<TABLE>
(3) Pro Forma Information
<CAPTION>
The following unaudited pro forma information has been prepared
assuming that the acquisitions during 1999 (refer to specifics in
the footnotes of Form 10-K 405 mentioned above) 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)
Three Months Ended
March 31,
------------------------
2000 1999
----------- -----------
<S> <C> <S> <C> <C>
Net revenues $ 14,233 $ 18,632
Net loss $ (2,693) $ (2,136)
Net loss per share - basic $ (0.36) $ (0.28)
Net loss per share -
diluted $ (0.36) $ (0.28)
</TABLE>
6
<PAGE>
<TABLE>
(4) Earnings Per Share
<CAPTION>
The following is a reconciliation of the numerators and
denominators of the basic and diluted earnings per share (EPS)
computations for net loss for the three months ended March 31,
2000 and 1999:
($ in thousands except
per share data)
(Unaudited)
Three Months Ended
March 31,
--------------------------
2000 1999
Numerator: ----------- -------------
<S> <C> <C> <C> <C>
Loss available to common
shareholders used in basic
and diluted earnings per
share $ (2,693) $ (2,012)
=========== =============
Denominator:
Denominator for basic
earnings per share:
Weighted average
shares 7,446 7,553
Effect of dilutive
securities:
Stock options - -
Denominator for diluted
earnings per share:
----------- -------------
Adjusted weighted
average shares $ 7,446 $ 7,553
=========== =============
Basic earnings per share $ (0.36) $ (0.27)
Diluted earnings per share $ (0.36) $ (0.27)
</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 effect would be anti-dilutive.
(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
<PAGE>
<TABLE>
The following is the unaudited segment information for the three months
ended March 31, 2000 and 1999 (in thousands):
<CAPTION>
2000 Quarrying Manufacturing Retailing Total
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total net revenues $ 4,345 $ 7,179 $ 5,111 $ 16,635
Inter-segment net
revenues (709) (1,693) - (2,402)
----------- ------------- ----------- -----------
Net revenues 3,636 5,486 5,111 14,233
Total gross profit 799 1,080 2,757 4,636
Inter-segment gross
profit (130) 17 - (113)
----------- ------------- ----------- -----------
Gross profit 669 1,097 2,757 4,523
Selling, general and
administrative
expenses 823 1,492 5,278 7,593
----------- ------------- ---------- -----------
Loss from operations $ (154) $ (395) $ (2,521) $ (3,070)
=========== ============== =========== ===========
1999 Quarrying Manufacturing Retailing Total
----------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total net revenues $ 4,983 $ 11,264 $ 4,024 $ 20,271
Inter-segment net
revenues 1,409 1,344 - 2,753
----------- ------------- ----------- ----------
Net revenues 3,574 9,920 4,024 17,518
Total gross profit 824 1,362 2,104 4,290
Inter-segment gross
profit 198 (198) - -
----------- ------------- ----------- ----------
Gross profit 626 1,560 2,104 4,290
Selling, general and
administrative expenses 1,174 1,640 3,572 6,358
----------- ------------- ----------- ----------
Loss from operations $ (548) $ (80)$ (1,468) $ (2,096)
=========== ============= =========== ==========
</TABLE>
<TABLE>
Net revenues by geographic area is as follows:
<CAPTION>
($ in thousands)
(Unaudited)
Three Months Ended
March 31,
------------------------
Net revenues (1): 2000 1999
------------ -----------
<S> <C> <C> <C> <C>
United States $ 12,714 $ 15,759
Canada 1,519 1,759
------------ -----------
Total net revenues $ 14,233 $ 17,518
============ ===========
</TABLE>
(1) Net revenues are attributed to countries based on where
product is produced.
8
<PAGE>
<TABLE>
Long-lived assets by geographic area is as follows:
<CAPTION>
March 31, December 31,
2000 1999
Long-lived assets: (Unaudited)
----------- ------------
<S> <C> <C> <C> <C>
United States $ 42,721 $ 42,798
Canada 1,858 1,976
Japan 5 5
----------- ------------
$ 44,584 $ 44,779
=========== ============
</TABLE>
<TABLE>
(6) Comprehensive Income
<CAPTION>
Comprehensive loss is as follows:
($ in thousands)
(Unaudited)
Three Months Ended
March 31,
---------------------------
2000 1999
------------- -------------
<S> <C> <C> <C> <C>
Net Loss $ (2,693) $ (2,012)
Cumulative translation
adjustment (18) (113)
------------ -------------
Comprehensive loss $ (2,711) $ (1,899)
============ =============
</TABLE>
9
<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 that will be a companion stone for the Company's
Bethel White Quarry ("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 three months ended March
31, 2000, the Company made no further acquisitions of monument
retailers.
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.
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.
10
<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
March 31,
2000 1999
---------- ---------
<S> <C> <C>
Statement of Operations Data:
Net Revenues:
Quarrying 25.6% 20.4%
Manufacturing 38.5% 56.6%
Retailing 35.9% 23.0%
---------- --------
Total net revenues 100.0% 100.0%
<S> <C> <C>
Gross Profit:
Quarrying 18.4% 17.5%
Manufacturing 20.0% 15.7%
Retailing 53.9% 52.3%
--------- --------
Total gross profit 31.8% 24.5%
<S> <C> <C>
Selling, general & administrative
expenses 53.4% 36.5%
Loss from operations (21.6%) (12.0%)
Interest expense 4.0% 2.8%
Loss before income tax benefit and
cumulative change in
accounting principle (25.5%) (14.7%)
Income tax benefit 6.6% 4.1%
Loss before cumulative effect of
change in accounting principle (18.9%) (10.6%)
Cumulative effect in prior years of
change in accounting principle - 0.9%
Net Loss (18.9%) (11.5%)
</TABLE>
11
<PAGE>
Three Months Ended March 31, 2000 Compared to Three Months Ended
March 31, 1999
Revenues for the three months ended March 31,2000 decreased $3.3
million, or 18.8%, to $14.2 million from $17.5 million for the
three months ended March 31, 1999. This decrease was primarily
attributable to lower manufacturing revenues as a result of (i)
the Keystone sale; (ii) increased shipments from our
manufacturing plants to our owned retail partners and (iii) lower
revenues from press roll operations. These decreases were
partially offset by increased retailing revenues caused both by
increased aggregate revenues from retailers owned during both
periods and by revenues from the 1999 Retail Acquisitions not
owned during all of the 1999 period. The Company's retailing net
revenues increased to 35.9% of total net revenues in the 2000
period from 23.0% in the 1999 period as a result of these
acquisitions and the Keystone Sale.
Gross profit for the three months ended March 31, 2000 increased
$233,000 or 5.4%, to $4.5 million from $4.3 million for the three
months ended March 31, 1999. This increase was attributable to
the absolute and relative increases in retailing net revenues
during the 2000 period as described above. The Company's
retailing operations historically have experienced a higher gross
profit percentage than either quarrying or manufacturing. The increase
in gross profit dollars from retail was partially offset by a
decrease in manufacturing gross profit dollars as a result of the
manufacturing revenue decline described above. The Company's
overall gross profit percentage increased to 31.8% for the 2000
period from 24.5% for the 1999 period. These increases were
attributable to improved profitability at the Company's
manufacturing operations and to the relative increase in
retailing as a percentage of the Company's revenues.
Quarrying gross profit increased $43,000, or 6.8%, to $669,000
for the 2000 period from $626,000 for the 1999 period. The
quarrying gross profit percentage increased to 18.4% from 17.5%
for the 1999 period. These increases were primarily attributable
to improved profitability at the Company's Stanstead and
Pennsylvania quarries.
Manufacturing gross profit decreased $463,000, or 29.7%, to $1.1
million for the 2000 period from $1.6 million for the 1999
period. This decrease was attributable to the decline in
manufacturing revenues described above and to decreased
profitability at SMI. The manufacturing gross profit percentage
increased to 20.0% from 15.7% for the 1999 period. This increase
was primarily attributable to improved profitability at the
Company's Barre monumental operations, which was partially offset
by a decline in profitability at SMI and in press rolls.
Retailing gross profit increased $653,000, or 31.0%, to
$2.8 million for the 2000 period from $2.1 million for the 1999
period. This increase was primarily attributable to the increase
in retail revenues described above. The retailing gross profit
percentage increased to 53.9% from 52.3% for the 1999 period.
This increase was primarily due to increased profitability at
Keith relative to the 1999 period.
Selling, general and administrative expenses ("SGA expenses")
increased $1.2 million, or 18.9%, to $7.6 million from $6.4
million for the 1999 period. As a percentage of net revenues,
SGA expenses increased to 53.4% for the 2000 period from 36.5%
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 $84,000, or 17.4%, to $567,000 from
$483,000 for the 1999 period. This increase was caused by
increased borrowings under the Company's credit facilities to
support its retail acquisition strategy.
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 and pending 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 three months ended March 31, 2000, net cash used in
operating activities was $901,000. This was primarily
caused by the net loss and an increase in inventories which were
partially offset by a decrease in receivables and an increase in
customer deposits. Net cash provided by investing activities was
$19,000. This was mostly due to capital expenditures, which were
offset by cash realized from the sale a of a burial vault business.
Net cash used in financing activities was $244,000 primarily due to
scheduled debt repayments.
12
<PAGE>
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 March 31, 2000 the revolving credit facility had
$13.5 million outstanding and the term loan facility had $12
million outstanding. Given the covenants contained in that
agreement, the Company's effective incremental credit
availability as of that date was approximately $12 million. The
interest rate on the revolving facility and term loan as of such date
was 8.25% based on a formula of prime less .50%. As of March 31, 2000,
the Company also had $2.4 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 7.5% based on a formula of Canadian
prime plus .75%. The Company is in the process of negotiating a revised
and expanded credit facility with a group of lenders. The Company's primary
need for capital will be to finance acquisitions of monument retailers as
part of its growth strategy and to maintain and improve its existing
manufacturing, quarrying and retailing facilities. The Company
has $3.0 million budgeted for capital expenditures in 2000. 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.
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.
13
<PAGE>
Item 6. 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
Registrant'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 reference to Exhibit
3.2 to the Company'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 March 31, 2000.
14
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: May 12, 2000 By:/s/ John L. Forney
------------------
John L. Forney
Vice President,
Chief Financial Officer
and Treasurer
15
<PAGE>
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