[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

  [  ] 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Delaware
(State or other jurisdiction of
incorporation or organization)

03-0153200
(I.R.S. Employer
Identification No.)

PART I

FINANCIAL INFORMATION

PAGE NO.

Item 1.

Financial Statements

Consolidated Balance Sheets -
March 31, 2003 and December 21, 2002

4

Consolidated Statements of Operations -
Three Months Ended March 31, 2003 and 2002

5

Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2003 and 2002

6

Notes to Consolidated Financial Statements

7

Item 2.

Management's Discussion and Analysis of Financial Condition
and Results of Operations

11

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

22

22

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

23

23

Item 6.

Exhibits and Reports on Form 8-K

24

Signature

25

26

March 31,

December 31,

2003

2002

           ASSETS

Current Assets:

Cash and cash equivalents

$

            1,000

               6,185

Trade receivables, net

13,385

17,671

Inventories

23,076

21,654

Prepaid & refundable income taxes

2,054

213

Due from affiliates

3

—

Deferred tax assets

694

860

Other current assets

4,422

4,125

     Total current assets            

44,634

50,708

Property, plant and equipment, net

44,339

43,921

Cash surrender value of life insurance, net

742

766

Other intangible assets, net

Due from affiliates

81

81

Deferred tax assets

6,249

6,249

Intangible pension asset

1,136

1,136

Prearranged receivables

14,040

14,013

Cemetery property

6,018

6,056

Other

      Total assets

$

        120,185

        125,834

           LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Borrowings under lines of credit

$

            4,854

            4,386

Current installments of long-term debt

200

205

Current installments of deferred compensation

326

324

Trade payables

1,573

1,957

Accrued expenses

3,527

5,001

Due to Affiliates

9

Customer deposits

10,189

7,318

      Total current liabilities

20,669

19,200

Long-term debt, excluding current installments

12,819

12,832

Deferred compensation

4,704

4,649

Prearranged deferred revenue

21,661

21,846

Accrued pension cost

2,716

2,691

Accrued postretirement benefit cost

834

834

Other

1,242

1,136

      Total liabilities

64,645

63,188

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

      4,418,836  and 4,929,336  shares issued and outstanding

44

49

     Common Stock - Class B, $.01 par value;

      15,000,000 shares authorized

      2,756,395 and 2,756,395 shares issued and outstanding

28

28

  Additional paid-in capital

65,904

68,574

  Accumulated deficit

(8,323

)

(3,442

  Accumulated other comprehensive loss

(2,113

)

(2,563

    Total stockholders' equity

55,540

62,646

     Total liabilities and stockholders' equity

$

120,185

125,834

March 31,

2003

2002

Net Revenues:

    Quarrying

$

            2,897

$

            4,220

    Manufacturing

3,579

3,419

    Retailing

3,137

3,515

    Cemeteries

977

1,008

        Total net revenues

10,590

12,162

Gross Profit:

    Quarrying

(660

839

    Manufacturing

873

317

    Retailing

1,224

1,158

    Cemeteries

392

406

        Total gross profit

1,829

2,720

Selling, general and administrative expenses

8,104

7,454

        Loss from operations

(6,275

(4,734

Interest expense

149

175

        Loss before benefit for income taxes

(6,424

(4,909

Income tax benefit

(1,543

(1,184

        Net loss before cumulative effect of changes in accounting
        principles

$

             (4,881

$

             (3,725

        Cumulative effect of changes in accounting principles, net of
        tax effect of $5,459, (Note 2)

—

(28,710

        Net loss

$

          (4,881

)

$

        (32,435

Net loss per share - basic:

        Net loss before cumulative effect of changes in accounting
       principles

$

            (0.68

$

            (0.47

       Cumulative effect of changes in accounting principles

—

               (3.66

      Net loss per share - basic

$

            (0.68

$

            (4.13

Net loss per share - diluted:

         Net loss before cumulative effect of changes in accounting
         principles

$

            (0.68

$

            (0.47

        Cumulative effect of changes in accounting principles

(3.66

Net loss per share - diluted

$(0.68)

$(4.13)

Weighted average number of common shares outstanding - basic

7,186

7,847

Weighted average number of common shares outstanding - diluted

7,186

7,847

March 31,

2003

2002

Cash flows from operating activities:

     Net loss

$

           (4,881

)

$

         (32,435

)

     Adjustments to reconcile net income (loss) to net cash used in
     operating activities:

         Goodwill impairment

33,782

         Depreciation, depletion and amortization

943

761

         Cash surrender value of life insurance

24

62

         Deferred taxes

166

(5,352

     Changes in assets and liabilities:

         Decrease in trade receivables

4,286

2,105

         Decrease (increase) in prearranged receivables

(27

)

459

         Decrease (increase) in due from related parties

(12

)

25

         Increase in inventories

(1,422

)

(1,011

         Decrease (increase) in cemetery property

38

(56

         Increase in other assets

(384

)

(322

         Decrease in trade payables, accrued expenses and income

            taxes payable

(3,699

)

(2,414

         Increase in customer deposits

2,871

3,802

         Increase (decrease) in deferred compensation and pension

82

(6

         Decrease in prearranged deferred revenue

(185

)

(199

         Increase (decrease) in other liabilities

106

(89

         Net cash used in operating activities

(2,094

)

(888

Cash flows from investing activities:

     Purchases of property, plant and equipment

(1,147

)

(934

     Increase in intangibles

(5

)

     Proceeds from sale of assets

—

2,296

         Net cash provided by (used in) investing activities

(1,152

)

1,362

Cash flows from financing activities:

     Net borrowings (repayments) under lines of credit

468

(132

     Net stock option transactions

—

238

     Principal payments on long-term debt

                   (18

)

              (1,964

     Dividends paid on common stock

(71

)

—

        Net cash provided by (used in) financing activities

(2,224

)

(1,858

Effect of exchange rate changes on cash

285

(32

       Net decrease in cash and cash equivalents

(5,185

)

(1,416

Cash and cash equivalents, beginning of period

6,185

3,435

Cash and cash equivalents, end of period

$

            1,000

$

            2,019

Supplemental cash flow information:

     Cash paid during the quarter for:

          Interest

149

175

          Income taxes

155

208

Supplemental non-cash investing activities:

(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. 000-29464, filed March 31, 2003), and Form 10-K/A filed on April 3, 2003.

(2)

Accounting Changes

In December 2002, the Company changed its method of accounting for its granite block inventory from the first-in, first-out method to the specific annual average cost method. In accordance with generally accepted accounting principles, the Company implemented this change retroactively to January 1, 2002. The effect of the change in the first quarter of 2002 was to increase income by approximately $26,000. 

March 31,

March 31,

2003

2002

(4,881

(32,435

(5,019

(32,501

)

(0.70

)

(4.14

)

(0.70

(4.14

The fair value of each option grant is estimated on the date of the grant. The per share weighted average fair value of stock options granted during the first quarter of 2002 was $4.06 on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 3.9%; dividend yield of 0%; expected volatility of 61%, and expected lives of five (5) years, respectively. There were no stock options granted during the first quarter of 2003.

(4)

Inventories

($ in thousands)

Inventories consist of the following:

March 31,

December 31,

2003

2002

Raw materials

$

9,775

$

9,847

Work-in-process

1,421

1,421

Finished goods and supplies

11,880

10,386

$

          23,076

$

          21,654

(5)

Earnings Per Share

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for net loss for the three months ended March 31, 2003 and 2002:

($ in thousands except per share data)

Three Months Ended

March 31,

2003

2002

Numerator:

Net loss available to common shareholders used in basic and diluted earnings per share

$

(4,881

)

$

(32,435

Denominator:

  Denominator for basic earnings per share:

      Weighted average shares

7,186

7,847

   Effect of dilutive securities:

     Stock options

—

—

  Denominator for diluted earnings per share:

      Adjusted weighted average shares

             7,186

             7,847

Basic earnings (loss) per share

$

             (0.68

)

$

             (4.13

)

Diluted earnings (loss) per share

$

             (0.68

)

$

             (4.13

Options to purchase 322,500 shares of Class A common stock were outstanding at March 31, 2003, but were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

Options to purchase 674,166 shares of Class A common stock were outstanding at March 31, 2002, but were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

(6)

Segment Information

The Company is organized based on the products and services that it offers. Under this organizational structure, the Company operates in four segments: quarrying, manufacturing, retailing and cemeteries.

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.

The cemetery segment includes prearranged funeral and cemetery merchandise as well as maintenance of cemetery grounds funded through perpetual care funds.

Inter-segment revenues are accounted for as if the sales were to third parties.

The following is the unaudited segment information for the three-month periods ended March 31, 2003 and 2002 ($ in thousands):

Net revenues by geographic area are as follows:

($ in thousands)

Three Months Ended

March 31,

Net revenues (1):

2003

2002

United States

$

9,131

$

10,883

Canada

1,459

1,279

Total net revenues

$

10,590

$

12,162

(1)

Net revenues are attributed to countries based on where the product is produced.

Long-lived assets by geographic area are as follows:

($ in thousands)

March 31,

December 31,

2003

2002

United States

$

41,658

$

41,686

Canada

2,681

2,235

$

44,339

$

43,921

(7)

Comprehensive Income

Comprehensive income (loss) consists of net income, cumulative translation adjustment, and a minimum pension liability adjustment. ($ in thousands)

Foreign
Currency
Items

Minimum
Pension
Liability
Adjustment

Accumulated
Other
Comprehensive
Income (Loss)

Balance at December 30, 2002

$

(756

)

$

(1,807

)

$

(2,563

Changes in 2003

450

—

450

Balance at March 31, 2003

$

(306

)

$

(1,807

)

$

(2,113

)

(8)

Stock Repurchase

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 Company also owns and operates cemeteries. 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, which are sold to owned and non-owned retail memorial stores and 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 and through certain cemeteries owned by the Company. The cemetery division sells cemetery property and funeral and cemetery products and services both at the time of need and on a preneed basis. Including these cemeteries, the Company sells its memorials through 100 owned retail outlets in fifteen states.

Critical Accounting Policies

Critical accounting policies are as follows: Revenue recognition, accounting for pensions, impairment of long-lived assets and valuation of deferred income taxes.

Revenue Recognition

The quarry division recognizes revenue from sales of granite blocks when the granite is shipped from the quarry site and provides for a  5% discount if payment is made within 30 days of purchase, except as described in the following paragraph.

The cemetery division records revenues on its products and services primarily when the product is delivered or the service is performed. However, preneed sales of cemetery lots are recognized as revenue when 20% of the total purchase price of the lot has been received from the customer. The cemetery division's recognition of revenue from preneed sales of cemetery services and merchandise is deferred until the period in which the services or merchandise is delivered. On the balance sheet, the full contract amount is included in prearranged deferred revenue, a liability. The corresponding receivable due from the customer is reflected in prearranged receivables, an asset, and the corresponding cash received from the customer is reflected part in prearranged receivables (for the portion placed in trust) and part in cash (for the portion the Company is allowed to retain). When the services or merchandise is delivered, the Company recognizes as revenue the full contract amount plus all trust earnings associated with that contract. The Company cannot predict when the existing contracts will mature but it is estimated that most contracts will have an average life of ten to fifteen years. The amount of prearranged deferred revenue was $21.7 million at March 31, 2003 and $21.8 million at December 31, 2002.

Accounting for Pensions

The Company provides defined benefit pension and other postretirement benefit plans for certain of its employees. Accounting for these plans requires the use of actuarial assumptions, including estimates of the expected long-term rate of return on assets and discount rates. In order to make informed assumptions, management relies on outside actuarial experts as well as public market data and general economic information. If changes in any of these assumptions occur, they may materially affect certain amounts reported on the Company's balance sheet. In particular, a decrease in the expected long-term rate of return on plan assets could result in an increase in the Company's pension liability and a charge to equity.

The following table sets forth certain consolidated historical operations data as a percentage of net revenues with the exception of quarrying, manufacturing, retailing and cemetery gross profit, selling, general and administrative expenses, and divisional income which are shown as a percentage of their respective revenues.

Three Months Ended

March 31,

2003

2002

Statement of Operations Data:

Net Revenues:

               Quarrying

27.4%

34.7%

               Manufacturing

33.8%

28.1%

                Retailing               

29.6%

28.9%

                Cemeteries

9.2%

8.3%

                    Total net revenues

100.0%

100.0%

Gross Profit:

                Quarrying

(22.8%

)

19.1%

                Manufacturing

24.4%

9.3%

               Retailing

39.0%

32.9%

                Cemeteries

40.2%

40.4%

                  Total gross profit

17.3%

22.1%

Selling, general & administrative expenses:

                Quarrying

45.9%

17.8%

               Manufacturing

23.4%

22.5%

               Retailing

138.4%

125.1%

               Cemeteries

35.7%

33.6%

                  Total SG&A expenses

64.8%

51.5%

Divisional income from operations:

               Quarrying

(68.7%

)

1.3%

               Manufacturing

1.0%

(13.2%

)

                Retailing

(99.4%

)

(92.2%

)

                Cemeteries

4.4%

6.7%

                  Total divisional income from
                    operations

(47.5%

)

(29.4%

)

Unallocated corporate administrative expense

11.8%

9.8%

       Income (loss) from operations

(59.3%

)

(39.2%

)

Interest expense

1.4%

1.4%

        Income (loss) before income taxes

(60.7%

)

(40.6%

)

Provision for income taxes

(14.6%

)

(9.8%

)

         Net income (loss) before cumulative
         effect of changes in accounting
         principles

(46.1%)

(30.8%)

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31, 2002

Revenues for the quarter ended March 31, 2003 decreased 12.9% to $10.6 million from $12.1 million for the quarter ended March 31, 2002.

Manufacturing revenues were $3.6 million for the quarter ended March 31, 2003 compared to $3.4 million for the quarter ended March 31, 2002. The increase was a result of revenue recognized on a large memorial for World War II as well as an increase in revenue from our industrial products group as a result of somewhat greater demand for those products.

Retailing revenues were $3.1 million for the quarter ended March 31, 2003 compared to $3.5 million for the quarter ended March 31, 2002. The decrease in revenue was due to unusually severe winter weather conditions in many areas which significantly affected our ability to set memorials in cemeteries and, we believe, the short-term demand for memorials as well. 

Cemetery revenues were $1.0 million for both the quarter ended March 31, 2003 and March 31, 2002.

Gross profit dollars for the quarter ended March 31, 2003 decreased 34% to $1.8 million from $2.7 million for the quarter ended March 31, 2002. Gross profit percentage decreased to 17.3% in 2003 from 22.1% in 2002.

Gross loss from quarrying was $660,000 or negative 22.8% of quarrying revenue for the quarter ended March 31, 2003 compared to gross profit of $839,000 or 19.1% of quarrying revenue for the quarter ended March 31, 2002. The decrease in gross profit dollars as well as the decrease in gross profit percentage was a result of unusually severe winter weather conditions, which decreased production. During 2002, the Company elected to change the method of valuing inventory in the quarry division from a First-In, First-Out method to a Specific Annual Average Cost method. The effect of the change in the first quarter of 2002 was to increase gross profit by $34,000.

Manufacturing gross profit was $873,000, or 24.4% of manufacturing revenue for the quarter ended March 31, 2003 compared to $317,000, or 9.3% of manufacturing revenue for the quarter ended March 31, 2002. The increase in gross margin percentage was a result of improved operations in our Barre manufacturing facility as well as a more favorable product mix in this facility, including a large memorial for World War II,compared to the same period in 2002 and an increase in gross margin percentage in our industrial products group.

Retailing gross profit was $1.2 million or 39% of retailing revenue for the quarter ended March 31, 2003 compared to $1.2 million or 33% of retailing revenue for the quarter ended March 31, 2002. The increase in percentage was largely attributable to a decrease in expenses associated with the closing of plant facilities within our retail group that took place throughout 2002 and contracting with suppliers for those goods and services.

Cemetery gross profit was $392,000, or 40.2% of cemetery revenue for the quarter ended March 31, 2003 compared to $406,000, or 40.4% of cemetery revenue for the quarter ended March 31, 2002, and thus was approximately consistent on a quarter-to-quarter basis.

Selling, general and administrative expenses for the quarter ended March 31, 2003 increased 8.0% to $8.1 million from $7.5 million for the quarter ended March 31, 2002. As a percentage of net revenues, these expenses for the quarter ended March 31, 2003 increased to 76.5% from 61.3% in the same period of 2002. The increase was primarily a result of increased legal expenses in the quarry segment as a result of the Eurimex arbitration proceeding (see Part II, Item 1, "Legal Proceedings").

Interest expense for the quarter ended March 31, 2003 decreased to $149,000 from $175,000 for the quarter ended March 31, 2002. This decrease was primarily due to lower interest rates under the Company's credit facilities.

Income tax expense as a percentage of earnings before taxes was 24% in the quarter ended March 31, 2003 and 2002. While the rate in the current period is equal to the rate in the same period last year, it is a decrease from the 27% tax rate the Company experienced in its 2002 fiscal year. The reason for the anticipated decrease in tax rates from 27% to 24% is the Company's anticipated ability to use state tax loss carry-forwards in its retail group as well as an increase in taxable income in the United States as compared to Canada which decreases our overall tax rate as a result of lower effective federal tax rates in the United States.

Liquidity and Capital Resources

Liquidity. The Company considers its 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 the commercial credit facilities described below. The Company's 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.

In January 2003, the Company repurchased 500,500 shares of its common stock for a total of $2,602,600 as part of its share buy back program. Since August 5, 2002, the Company has repurchased a total of 676,200 shares for $3,359,269 under the share buy back program. The shares have subsequently been retired. There remain 323,800 shares authorized to be purchased under the current repurchase program. The Company expects to continue to repurchase shares on an opportunistic basis determined by, among other things, current debt levels, anticipated uses of capital, the price of the stock and the general market conditions.

The Company made a payment to fund its defined benefit pension plan of $1.4 million in 2002, which was the maximum allowable deductible amount for tax purposes. Based on current market conditions and the related impact on the fair value of plan assets, additional funding of this extent may be warranted in the future and the Company believes it will be able to fund such contributions either from cash from operations or borrowing under its credit facilities.

Cash Flow. At March 31, 2003, the Company had cash, cash equivalents and marketable securities of $1.0 million and working capital of $24 million, compared to $2.0 million and $14.0 million, at March 31, 2002.

Capital Resources. 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 up to $30.0 million and a revolving credit facility of up to another $20.0 million based on eligible accounts receivable, inventory and certain fixed assets. As of March 31, 2003, the Company had $12.5 million outstanding and $17.5 million available under the term loan line of credit and $4.9 million outstanding and $15.1 million available under the revolving credit facility. The Company has a multi-tiered interest rate structure on its outstanding debt with CIT. As of March 31, 2003, the interest rate structure was as follows:

Amount

Formula

Effective Rate

Revolving Credit Facility

$     4.9 million

Prime - .50%

3.75%

Term Loans

     12.5 million

LIBOR + 1.75%

3.17%

As of March 31, 2003, the Company had $4.0 million CDN available and $0 outstanding under a demand revolving line of credit with the Royal Bank of Canada.

Total

Less than 1 Year

1-3 Years

4-5 Years

After 5 Years

(1)

The Company's primary need for capital will be to maintain and improve its manufacturing, quarrying, and retail facilities and to finance acquisitions as part of its growth strategy. The Company has approximately $5.0 million budgeted for capital expenditures in 2003.  The Company believes that the combination of cash flow from operations and its existing credit facilities, 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 second and 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.

Risk Factors That May Affect Future Results

The risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties not presently known to us or which are currently deemed immaterial may also impair our business, financial condition and results of operations. If any of these risks actually occur, our business, financial condition and results of operations could be materially adversely affected.

Our continued growth depends, at least in part, on acquisitions, which involve numerous risks that could negatively affect our earnings and financial condition.

Our ability to continue to grow depends in part upon the acquisition of additional companies. We cannot assure you that we will identify suitable acquisition candidates, or that we will be able to consummate transactions on acceptable terms. Further, even if we successfully acquire additional companies, we cannot assure you that we will be able to successfully integrate the operations of such companies with our own. We intend to finance acquisitions through a combination of available cash resources, bank borrowings, and, in appropriate circumstances, the issuance of equity and/or debt securities. Acquiring additional companies will have a significant effect on our financial position, and could cause substantial fluctuations in our quarterly and yearly operating results. Also, acquisitions may result in the recording of significant goodwill and intangible assets on the Company's financial statements, the write-off of which would reduce reported earnings at the point in time the goodwill is deemed impaired. With respect to retail acquisitions, goodwill impairment could be incurred at the closing of the acquisition.

Opening new stores is a component of our growth strategy and entails uncertainties and risks that could adversely affect our profitability.

Our ability to continue to grow our retail business will depend in part upon our ability to open new retail stores in selected locations. Our success in opening new retail stores will depend on our ability to identify suitable locations for opening new retail stores on acceptable terms, our ability to attract and retain competent management and sales personnel, and our ability to form strategic alliances and relationships with local funeral homes, cemeteries and other death care professionals, and our ability to attract customers to our new stores. It is unlikely that new retail stores that we open will generate significant profits in the early stages, and many new stores will lose money for the first few years of operation. Accordingly, opening new retail stores may adversely affect our business or profitability.

If we are unable to maintain our relationships with independent retailers, our sales may not continue to grow and could decline.

We have historically sold our granite memorials to consumers through independent retailers. Over the past five years, we have acquired 26 retailers with approximately 100 retail outlets in 15 states. However, we are still dependent in part on our independent retailers for the successful distribution of our products to the ultimate customer. We have no control over the independent retailers' operations, including such matters as retail price, advertising and marketing. Three important components of our growth strategy are to continue to acquire retailers, open new retail stores in selected markets and pursue strategic alliances with funeral homes, cemetery owners, and other death care professionals. Although we have taken steps to reduce conflicts between our owned retail stores and our independent retailers, the implementation of these elements of our strategy has in the past been, and may in the future be construed by some of our existing independent retailers as an effort to compete with them. In certain cases this has adversely affected their relationship with us and caused them to decrease or cease their purchases of our products. These issues may continue to arise as we pursue our growth strategy. In addition, the granite memorial retail industry is characterized by significant barriers to entry created by local heritage, community presence and tradition. Consequently, we have experienced, and may continue to experience difficulty replacing retailers or entering particular retail markets in the event of a loss of an independent retailer. We cannot assure you that we will be able to maintain our existing relationships or establish new relationships with independent retailers. Disruption in our relationships with independent retailers could impede our sales growth or cause sales to decline, which would adversely affect our business and financial results.

If we lose our key personnel, or are unable to attract and retain additional qualified personnel, our business could suffer.

Our operations and the implementation of our operating and growth strategies, such as integration of acquisitions and the opening of new retail stores, are management intensive. We are substantially dependent upon the abilities and continued efforts of Kurt M. Swenson, our Chairman, President and Chief Executive Officer, and other senior management. Our business is also dependent on our ability to continue to attract and retain a highly skilled retail, quarrying and manufacturing workforce, including sales managers and counselors, stone cutters, sand blasters, sculptors and other skilled artisans. The loss of the services of Mr. Swenson, other members of the Company's senior management or other highly skilled personnel could adversely affect our business and operating results.

We face intense competition and, if we are unable to compete successfully, we may be unable to increase our sales, which would adversely affect our business and profitability.

The dimension stone industry is highly competitive. The Company competes with other dimension stone quarriers, including quarriers of granite, marble, limestone, travertine and other natural stones. The Company also competes with manufacturers of so-called "engineered stone" as well as manufacturers of other building materials like concrete, aluminum, glass, wood and other materials. The Company competes with providers of these materials on the basis of price, availability of supply, end-user preference for certain colors, patterns or textures, and other factors.

The granite memorial industry is also highly competitive. The Company competes with other granite quarriers and manufacturers in the sale of granite blocks for memorial use on the basis of price, color, quality, geographic proximity, service, design availability, production capacity, availability of supply and delivery options. All of the Company's colors of granite are subject to competition from memorial grade granite blocks of similar color supplied by quarriers located throughout the world. There are approximately 140 manufacturers of granite memorials in North America. There are also manufacturers of granite memorials in India, South Africa, China and Portugal that sell finished memorials in North America.

The Company's quarrying and manufacturing competitors include both domestic and international companies, some of which may have greater financial, technical, manufacturing, marketing and other resources than the Company. Foreign competitors of the Company may have access to lower cost labor and better commercial deposits of memorial grade granite, and may be subject to less restrictive regulatory requirements than the Company. For example, companies in South Africa, India, China and Portugal also manufacture and export finished granite memorials into North America which compete with the Company's products.

The competition for retail sales of granite memorials faced by the Company's retail outlets is also intense and is based on price, quality, service, design availability and breadth of product line. Competitors include funeral home and cemetery owners, including consolidators, which have greater financial resources than the Company, as well as approximately 3,000 independent retailers of granite memorials located outside of cemeteries and funeral homes.

The sale of cemetery lots and related products is highly competitive. The competition is based upon price, geographic location, and the overall aesthetics, maintenance and upkeep of the cemetery. Competitors include churches and municipalities that own and operate cemeteries, and other cemetery owners, including consolidators, which may have greater financial resources than the Company.

We cannot assure you that domestic or foreign competition will not adversely impact our business.

Sales of our products are seasonal and may cause our quarterly operating results to fluctuate.

Historically, our operations have experienced certain seasonal patterns. Generally, our net sales are highest in the second or third quarter and lowest in the first quarter of each year due primarily to weather. Cemeteries in northern regions generally do not accept granite memorials during winter months when the ground is frozen because they cannot be properly set. We typically close certain of our Vermont and Canadian quarries during these months because of increased operating costs attributable to weather conditions. We have historically incurred an aggregate net loss during the first six months of each calendar year. Our operating results may vary materially from quarter to quarter due to, among other things, acquisitions, changes in product mix and limitations on the timing of price increases, making quarterly year-to-year comparisons less meaningful.

Our competitive position could be harmed if we are unable to protect our intellectual property rights.

We believe that our tradenames, trademarks, brands, designs and other intellectual property are of great value, and we rely on trademark, copyright and other proprietary rights laws to protect our rights to this valuable intellectual property. Third parties may in the future try to challenge our ownership of our intellectual property. In addition, our business is subject to the risk of third parties counterfeiting our products or infringing on our intellectual property rights. We may need to resort to litigation in the future to protect our intellectual property rights, which could result in substantial costs and diversion of resources. Our failure to protect our intellectual property rights, most notably, the Rock of Ages trademark, could have a material adverse effect on our business and competitive position.

The increasing trend toward cremation, and potential declines in memorialization for other reasons, may result in decreased sales of our products.

There is an increasing trend toward cremation in the United States. According to the Cremation Association of North America, or CANA, cremation was used in approximately 25% of the deaths in the United States in 2000, compared to approximately 17% in 1990, and CANA expects this rate to rise to approximately 40% by 2010. While we continue to believe that most families will choose to memorialize their loved-ones, regardless of whether they choose cremation over a traditional burial, to the extent increases in cremation rates result in decreases in memorialization rates, this decrease will result in a decline in our memorial sales, which would adversely affect our business and results of operations.

Our business is also subject to the risk that memorialization rates may decline over time for other reasons. Certain cemeteries have in the past and may in the future limit the use of granite memorials as a memorialization option. To the extent that general memorialization rates or the willingness of cemeteries to accept granite memorials declines, this decline could adversely affect our business.

Our business is subject to a number of operating risks that are difficult to predict and manage.

Our quarry and manufacturing operations are subject to numerous risks and hazards inherent in those industries, including among others, unanticipated surface or underground conditions, varying memorial grade granite recovery rates due to natural cracks and other imperfections in granite quarries, equipment failures, accidents and worker injuries, labor issues, weather conditions and events, unanticipated transportation costs and price fluctuations. As a result, actual costs and expenditures, production quantities and delivery dates, as well as revenues, may differ materially from those anticipated, which could adversely affect our operating results.

Our international operations may expose us to a number of risks related to conducting business in foreign countries.

We derived approximately 23% of our revenues in fiscal 2002 from sales outside the United States, with approximately 9% of revenues in fiscal 2002 from sales in Canada by the Company's Canadian subsidiaries. In prior years such percentage represented by international sales has been higher. Foreign sales are subject to numerous risks, including currency conversion risks, limitations (including taxes) on the reparation of earnings, slower and more difficult accounts receivable collection and greater complication and expense in complying with foreign laws.

Sales of our ancillary products are cyclical, which may adversely affect our operating results.

The markets for our industrial precision products, which include machine base and surface plates that are utilized in the automotive, aeronautic, computer, machine tool, optical, precision grinding and inspection industries, and granite press rolls used in the manufacture of paper, are subject to substantial cyclical variations. Sales of these products have declined significantly as a result of the recent economic downturn and may continue to decline upon a further or sustained downturn, or as a result of uncertainties regarding current and future economic conditions that generally affect, such industries. We cannot assure you that changes in the industries to which we sell our precision products will not adversely affect our operating results.

Existing stockholders are able to exercise significant control over us.

Kurt M. Swenson and his brother, Kevin C. Swenson, collectively have approximately 63% of the total voting power of all outstanding shares of our common stock, and will therefore be in a position to control the outcome of most corporate actions requiring stockholder approval, including the election of directors and the approval of transactions involving a change in control of the Company.

We may incur substantial costs to comply with government regulations.

Our quarry and manufacturing operations are subject to substantial regulation by federal and state governmental statutes and agencies, including the federal Occupational Safety and Health Act, the Mine Safety and Health Administration and similar state and Canadian authorities. Our operations are also subject to extensive laws, and regulations administered by the United States Environmental Protection Agency and similar state and Canadian authorities, for the protection of the environment, including but not limited to those relating to air and water quality, solid and hazardous waste handling and disposal. These laws and regulations may require parties to fund remedial action or to pay damages regardless of fault. Environmental laws and regulations may also impose liability with respect to divested or terminated operations even if the operations were divested or terminated many years ago. In addition, current and future environmental or occupational health and safety laws, regulations or regulatory interpretations may require significant expenditures for compliance, which could require us to modify or curtail our operations. We cannot predict the effect of such laws, regulations or regulatory interpretations on our business, financial condition or results of operations. While we expect to be able to continue to comply with existing environmental and occupational health and safety laws and regulations, any material non-compliance could adversely affect our business and results of operations.

Provisions of our corporate organizational documents and Delaware law could delay or prevent a change in control of the Company, even if it would be beneficial to our stockholders.

Certain provisions contained in our Certificate of Incorporation and By-laws:

• grant ten votes per share to each share of Class B Common Stock;

• divide the Board of Directors into three classes, each of which will have a different three-year term;

• provide that the stockholders may remove directors from office only for cause and by a supermajority vote;

• provide that special meetings of the stockholders may be called only by the Board of Directors or certain Company officers and not by stockholders;

• establish certain advance notice procedures for nomination of candidates for election as directors and for stockholder proposals to be considered at annual stockholders' meetings;

• authorize the issuance of preferred stock. Accordingly, the Board of Directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights that could materially adversely affect the voting power or other rights of, or be dilutive to, the holders of our Common Stock.

Certain of these provisions may have the effect of discouraging, delaying or preventing a change in control or unsolicited acquisition proposals that a stockholder may consider favorable. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit or delay large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us.

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.

Item 4.

  Controls and Procedures

(a)  Evaluation of Disclosure Controls and Procedures.  The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act) as of a date within 90 days prior to the filing date of this Quarterly Report on Form 10-Q (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's reports filed or submitted under the Exchange Act.

(b) Changes in Internal Controls.  Since the Evaluation Date, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect such controls.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

The Company is a party to legal proceedings that arise from time to time in the ordinary course of its business. While the outcome of these proceedings cannot be predicted with certainty, management does not expect these matters to have a material adverse effect on the Company. In addition, the Company is involved in the arbitration proceeding described below and is a defendant in the lawsuit described below.

Granite Stone Business International Sarl (f/k/a Eurimex SA) (Luxembourg) vs Rock of Ages Corporation (USA) ICC Arbitration 11502/KGA/MS. On April 18, 2001 the Company received a Request for Arbitration ("Request") from its former distributor outside the United States, Eurimex S. A. (now known as Granite Stone Business International), in connection with the termination by the Company of the distribution agreement for the Company's Salisbury Pink granite. Eurimex has also claimed damages in connection with a distribution agreement for the Company's Bethel White granite, which agreement expired by its terms in 1998. Pursuant to those agreements, the arbitration will take place under the International Chamber of Commerce rules and will be held in Luxembourg.

The Request includes claims by Eurimex that the Company wrongfully terminated the Salisbury Pink and Bethel White agreements. The Request also alleges that the Company violated antitrust laws under the European Community Treaty and United States antitrust laws. In the Request, Eurimex alleged that it suffered damages in excess of $30 million, and that it would seek to have such damages trebled under U.S. antitrust laws. In subsequent pre-hearing submissions, however, Eurimex asserted damages of approximately $25.3 million, plus interest, "moral" damages, attorneys' fees and costs.

The Company denies all of Eurimex's allegations and further states that it believes that Eurimex has engaged in improper or unlawful tying practices in the sale of the Company's products. The Company has answered Eurimex's Request and has brought certain counterclaims against Eurimex, including a claim for frivolous action. A preliminary scheduling conference was held on October 2, 2001 and both arbitral and subject matter jurisdictional issues were briefed. A second hearing on further procedural issues and jurisdiction was held on March 13, 2002. On July 1, 2002, the arbitral tribunal rendered a decision on the arbitral jurisdictional issues and found that it has arbitral jurisdiction over all of the claims brought by Eurimex. The tribunal deferred ruling on whether it would have subject matter jurisdiction over the claimant's U.S. antitrust law claims. The parties have completed the discovery process, and submitted pre-hearing submissions setting out their respective positions. On March 11, 2003, after the Company had filed its First Pre-Hearing Submission, Eurimex withdrew all of its U.S. antitrust law claims. A hearing on the merits of the dispute is scheduled to be held in May 2003.

 The Company denies liability and will continue to vigorously defend the claims made by Eurimex. However, if the arbitral tribunal were to decided in favor of Eurimex, and award substantial damages, the Company's business and financial condition would likely be materially adversely affected.

The Company carries insurance with coverages that it believes to be customary in its industry. Although there can be no assurance that such insurance will be sufficient to protect the Company against all contingencies, management believes that its insurance protection is reasonable in view of the nature and scope of the Company's operations.

Kurtz Monument Company (Pennsylvania) v. Rock of Ages Corporation (Delaware) Case No. 03-510 U.S. District Court for the Western District of Pennsylvania. On April 22, 2003, Kurtz Monument Company filed a complaint against the Company alleging that the Company breached certain terms of a sealed settlement agreement by engaging in conduct constituting commercial disparagement. Damages have not been specified. The Company believes this action by Kurtz Monument Company is without merit. The Company denies liability and will continue to vigorously defend claims made by Kurtz Monument Company.

Item 5.

Other Information

Holders of the Common Stock are entitled to receive such dividends as may be legally declared by the board of directors and, in the event of dissolution and liquidation, to receive the net assets of the Company remaining after payment of all liabilities, in proportion to their respective holdings. On February 17, 2003, the Board of Directors declared a dividend of $.01 per share of common stock, payable on March 28, 2003 to holders of record as of February 28, 2003. On May 9, 2003, the Board of Directors declared a dividend of $.01 per share of common stock, payable on June 15, 2003 to holders of record as of May 15, 2003.

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 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 reference to Exhibit 3.2 to the Company's Quarterly Report on Form 10-Q for the quarterly period ended March 31.1999.

99.1

Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.2

Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)

Reports Submitted on Form 8-K:

On January 6, 2003, the Registrant filed a report on Form 8-K to report that it had repurchased 500,500 shares of its common stock in a single transaction.

ROCK OF AGES CORPORATION

Dated: May 15, 2003

By:/s/ Douglas S. Goldsmith
Douglas S. Goldsmith
Vice President, Chief Financial Officer
and Treasurer

I, Kurt M. Swenson, Chief Executive Officer of Rock of Ages Corporation, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of Rock of Ages Corporation;