ROCK OF AGES CORP - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended October 2, 2004

o	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 incorporation or organization)	(I. R. S. Employer 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 ý Noo

Indicate by check mark whether the Registrant is an accelerated filer (as described in Rule 12b-2 of the Exchange Act). Yes o No ý

As of November 09, 2004, 4,694,800 shares of Class A Common Stock, par value $0.01 per share, and 2,700,596 shares of Class B Common Stock, par value $0.01 per share, of Rock of Ages Corporation were outstanding.

ROCK OF AGES CORPORATION

INDEX

Form 10-Q for the Quarterly Period
Ended October 2, 2004

PART I	FINANCIAL INFORMATION		PAGE NO.

Item 1.	Financial Statements (Unaudited)

		Consolidated Balance Sheets - October 2, 2004 and December 31, 2003	4

		Consolidated Statements of Operations - Three Months and Nine Months Ended October 2, 2004 and September 27, 2003	5

		Consolidated Statements of Cash Flows - Nine Months Ended October 2, 2004 and September 27, 2003	6

		Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		31

Item 4.	Controls and Procedures		31

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings		32

Item 5.	Other Information		33

Item 6.	Exhibits and Reports on Form 8-K		34

Signature			35

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 2, contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about our business or expected events based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Therefore, actual events, results or outcomes may differ materially from what is expressed or forecasted in such forward-looking statements. All statements other than statements of historical fact could be deemed forward-looking statements, and may include projections of revenue, gross profit, expenses, earnings or losses from operations or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. The risks, uncertainties and assumptions may include the challenge of continuing to build and grow Rock of Ages' retail distribution systems through strategic alliances with other death care professionals, retail acquisitions, independent retailers and new store openings; uncertainties involving quarry yields and demand for Rock of Ages' dimension stone; changes in demand for the Company's products; product mix; the timing of customer orders and deliveries; the impact of competitive products and pricing; the success of the Company's branding program; difficulties encountered in the integration process of newly acquired businesses; weather conditions; and other risks and uncertainties described herein, including, but not limited to the items discussed in "Risk Factors That May Affect Future Results" in Item 2 of this report, and that are otherwise described from time to time in Rock of Ages' reports filed with the Securities and Exchange Commission reports filed after this report.

We assume no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting such forward-looking statements.

PART I: FINANCIAL INFORMATION
Item 1: Financial Statement

ROCK OF AGES CORPORATION
CONSOLIDATED BALANCE SHEETS
($ in thousands)
(Unaudited)

		October 2,			December 31,
		2004			2003

ASSETS
Current Assets:
Cash and cash equivalents	$	4,220		$	3,227
Trade receivables, net		16,281			15,587
Inventories		23,139			21,152
Prepaid & refundable income taxes		1,457			409
Due from affiliates		261			216
Deferred tax assets		721			721
Note receivable		—			5,250
Other current assets		4,015			3,665
Assets held for sale		744			817

Total current assets		50,838			51,044

Property, plant and equipment, net		45,511			42,495
Cash surrender value of life insurance, net		728			728
Intangibles, net		571			438
Debt issuance costs, net		123			244
Due from affiliates		55			66
Deferred tax assets		5,236			5,236
Intangible pension asset		904			904
Long-term investments		4,159			501
Other		805			805

Total assets	$	108,930		$	102,461


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit	$	5,891		$	4,751
Current installments of long-term debt		40			38
Current installments of deferred compensation		327			327
Accounts payable		1,715			1,651
Accrued expenses		4,546			4,312
Customer deposits		10,520			7,104
Liabilities held for sale		---			17

Total current liabilities		23,039			18,200

Long-term debt, excluding current installments		16,296			12,794
Deferred compensation		6,493			5,999
Accrued pension cost		1,539			1,491
Accrued postretirement benefit costs		827			827
Deferred tax liability		109			107
Other		46			74

Total liabilities		48,349			39,492


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
4,694,800 and 4,442,668 shares issued and outstanding as of October 2, 2004 and December 31, 2003, respectively		47			44
Common Stock - Class B, $.01 par value;
15,000,000 shares authorized
2,700,596 and 2,756,395 shares issued and outstanding as of October 2, 2004 and December 31, 2003, respectively		27			28
Additional paid-in capital		66,415			65,878
Accumulated deficit		(5,210	)		(2,067	)
Accumulated other comprehensive loss		(698	)		(914	)

Total stockholders' equity		60,581			62,969

Total liabilities and stockholders' equity	$	108,930		$	102,461

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

4

ROCK OF AGES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
( in thousands except per share data)
(Unaudited)

		Three Months Ended						Nine Months Ended
		October 2,			September 27,			October 2,			September 27,
		2004			2003			2004			2003

Net Revenues:
Quarrying	$	8,050		$	7,710		$	22,037		$	18,724
Manufacturing		6,328			6,000			15,883			14,979
Retailing		9,077			9,434			25,731			25,122

Total net revenues		23,455			23,144			63,651			58,825

Gross Profit:
Quarrying		4,282			3,307			8,912			6,021
Manufacturing		1,759			1,890			4,435			4,206
Retailing		5,110			5,504			14,584			14,140

Total gross profit		11,151			10,701			27,931			24,367

Operating Expenses:
Selling, general and administrative expenses:
Quarrying		868			747			2,570			2,264
Manufacturing		934			952			2,743			2,690
Retailing		5,292			5,372			15,461			15,596
Corporate overhead		1,356			1,188			3,959			3,694

Total SG&A expenses		8,450			8,259			24,733			24,244
Adverse judgment and legal expenses		—			—			6,500			2,441

Total Operating Expenses		8,450			8,259			31,233			26,685

Income (loss) from continuing operations before interest and income taxes		2,701			2,442			(3,302	)		(2,318	)

Interest expense		194			148			454			458


Income (loss) from continuing operations before income taxes		2,507			2,294			(3,756	)		(2,776	)

Income tax expense (benefit)		1,166			1,335			(675)			(188)


Income (loss) from continuing operations		1,341			959			(3,081	)		(2,588	)
Discontinued operations, net of income taxes		(10	)		(47	)		(62	)		(29	)


Net income (loss)	$	1,331		$	912		$	(3,143	)	$	(2,617	)

Net income (loss) per share - basic:
Net income (loss) from continuing operations	$	0.18			0.13			(0.42	)		(0.36	)
Discontinued operations, net of income taxes		(0.00	)		(0.00	)		(0.01	)		(0.00	)


Net income (loss) per share	$	0.18			0.13			(0.43	)		(0.36	)


Net income (loss) per share - diluted
Net income (loss) from continuing operations	$	0.18		$	0.13		$	(0.42	)	$	(0.36	)
Discontinued operations, net of income taxes		(0.00	)		(0.00	)		(0.01	)		(0.00	)


Net income (loss) per share	$	0.18		$	0.13		$	(0.43	)	$	(0.36	)


Weighted average number of common shares outstanding - basic		7,386			7,177			7,293			7,179
Weighted average number of common shares outstanding - diluted		7,471			7,215			7,293			7,179

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ROCK OF AGES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)

		Nine Months Ended
		October 2,			September 27,
		2004			2003

Cash flows from operating activities:
Net loss	$	(3,143	)	$	(2,617	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation, depletion and amortization		2,818			2,691
Cash surrender value of life insurance		—			24
Deferred taxes		2			10
Changes in operating assets and liabilities:
Trade receivables, net		(668	)		365
Prearranged receivables		—			(452	)
Due from related parties		(34	)		(217	)
Inventories		(1,694	)		151
Cemetery property		—			48
Other assets		(350	)		(87	)
Trade payables, accrued expenses and income taxes payable		(771	)		(496	)
Customer deposits		3,308			1,900
Deferred compensation and pension		543			235
Prearranged deferred revenue		—			(56	)
Other liabilities		(28	)		197

Net cash provided by (used in) operating activities		(17	)		1,696


Cash flows from investing activities:
Purchases of property, plant and equipment		(5,458	)		(5,476	)
Purchases of long-term investments		(3,658	)		—
Proceeds from sale of assets		5,250			—
Acquisition, net of cash acquired		(477	)		—

Net cash used in investing activities		(4,343	)		(5,476	)


Cash flows from financing activities:
Net borrowings under lines of credit		1,140			628
Principal borrowings (repayments) on long-term debt		3,504			(110	)
Common stock repurchase		—			(2,603	)
Stock options exercised		976			33
Dividends paid on common stock		(438	)		(215	)
Financing fees paid		—			(5	)

Net cash provided by (used in) financing activities		5,182			(2,272	)


Effect of exchange rate changes on cash		171			676

Net increase (decrease) in cash and cash equivalents		993			(5,376	)


Cash and cash equivalents, beginning of period		3,227			6,185


Cash and cash equivalents, end of period	$	4,220		$	809


Supplemental cash flow information:
Cash paid during the period for:
Interest	$	455		$	458
Income Taxes	$	200		$	309
Acquisition:
Assets acquired	$	591		$	—
Liabilities assumed		113			—
Common stock issued		—			—

Cash paid		477			—
Less cash acquired		—			—
Net cash paid for acquisitions	$	477		$	—

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ROCK OF AGES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)	Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements are not included herein. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. Results of operations for the interim periods are not necessarily indicative of the results that may be expected for a full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report Form 10-K (SEC File No. 000-29464, filed March 30, 2004).

In this report, the terms" Company," "we," "us," or "our" mean Rock of Ages Corporation and all subsidiaries included in our consolidated financial statements.

The Company's fiscal year ends on December 31 and its fiscal quarters are the 13-week period ending on the Saturday nearest March 31, June 30 and September 30. As a result, the first and fourth quarter may be more or less than 13 weeks, by 1 to 6 days, which can affect comparability between periods.

The consolidated financial statements include all subsidiaries in which we have the ability to control operating and financial policies. Affiliated companies (20% to 50% ownership) are recorded in the consolidated financial statements using the equity method of accounting. Less-than-20%-owned companies are included in the consolidated financial statements at the cost of our investment.


(2)	Discontinued Operations

In December 2003, the Company decided to sell the Autumn Rose quarry in Mill Creek, Oklahoma. This decision represents a disposal of long-lived assets under Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Accordingly, results of this quarry have been classified as discontinued operations and prior periods have been restated to reflect this reclassification. These quarry assets are classified as "assets held for sale" in the current assets section of the consolidated balance sheets. For business reporting purposes, the Autumn Rose quarry was previously classified in the Quarrying segment. The sale was completed on November 9, 2004, for a total sale price of $750,000, see Footnote No. 13.

On December 17, 2003, the Company completed the sale of substantially all of the assets of Rock of Ages Kentucky Cemeteries, LLC. The decision was made to allow the Company to concentrate on its core businesses, quarrying, manufacturing and retailing, freeing up resources to pursue other growth strategies. The Company expects to continue to sell upright memorials in those cemeteries through its relationship with the buyer, Saber Management, LLC. The decision to sell this company represents a disposal of long-lived assets under SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Accordingly, results of this business have been classified as discontinued operations, and prior periods have been restated to reflect this reclassification. For business reporting purposes, Rock of Ages Kentucky Cemeteries was previously classified in the Cemeteries segment.

Operating results from the Autumn Rose Quarry and Rock of Ages Kentucky Cemeteries, LLC for the three and nine months ended October 2, 2004 and September 27, 2003 were as follows (in thousands):

		Three Months Ended						Nine Months Ended
		October 2,			September 27,			October 2,			September 27,
		2004			2003			2004			2003

Autumn Rose Quarry
Net revenues	$	—		$	71		$	35		$	203
Gross profit (loss)		(12	)		(64	)		(77	)		(116	)
Pretax loss		(12	)		(64	)		(77	)		(116	)
Income tax benefit		(2	)		(13	)		(15	)		(23	)
Net loss		(10	)		(51	)		(62	)		(93)

Rock of Ages Kentucky Cemeteries, LLC
Net revenues	$	—		$	896		$	—		$	2,926
Gross profit		—			259			—			1,069
Pretax income		—			5			—			80
Income tax expense		—			1			—			16
Net income		—			4			—			64

(3)	Stock Based Compensation

The Company has adopted the disclosure provisions of SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure" which is an amendment of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), and continues to apply Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock plans. If the Company had elected to recognize compensation cost for options granted under its stock plans based upon the fair value at the grant dates of such options, consistent with the method prescribed by SFAS No. 123, net income (loss) and earnings per share would have been changed to the pro forma amounts indicated below:

		Three Months Ended						Nine Months Ended
		October 2,			September 27,			October 2,			September 27,
		2004			2003			2004			2003

Net income (loss), as reported, in thousands	$	1,331		$	912		$	(3,143	)	$	(2,617	)
Deduct total stock-based employee compensation expense determined under fair value based method for all awards, net of taxes		(96	)		(139	)		(297	)		(416	)

Net income (loss), pro forma, in thousands	$	1,235		$	773		$	(3,440	)	$	(3,033	)


Net income (loss) per share, as reported	$	0.18		$	0.13		$	(0.43	)	$	(0.36	)
Net income (loss) per share, pro forma	$	0.17		$	0.11		$	(0.47	)	$	(0.42	)

Net income (loss) per share - assuming dilution, as reported	$	0.18		$	0.13		$	(0.43	)	$	(0.36	)
Net income (loss) per share - assuming dilution, pro forma	$	0.17		$	0.11		$	(0.47	)	$	(0.42	)

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 through the nine-month period ended October 2, 2004 was $5.40 using the Black-Scholes option-pricing model with the following weighted average assumptions: risk-free interest rate of 4.4%; dividend yield of 0%; expected volatility of .70%, and expected lives of six(6) years. Because changes in the subjective input assumptions can materially affect the fair value estimate, in the opinion of management, the existing models do not necessarily provide a reliable single value of its options and may not be representative of the future effects on reported net income (loss) or the future stock price of the Company. No stock options were granted in 2003.

(4)	Inventories

		($ in thousands)
		October 2,		December 31,
Inventories consist of the following:		2004		2003

Raw materials	$	11,363	$	9,976
Work-in-process		1,277		1,000
Finished goods and supplies		10,499		10,176

	$	23,139	$	21,152

(5)	Earnings Per Share

The following is a reconciliation of shares used in calculating basic and diluted earnings per share (in thousands):

	Three Months Ended		Nine Months Ended
	October 2,	September 27,	October 2,	September 27,
	2004	2003	2004	2003

Basic weighted average shares	7,386	7,177	7,293	7,179
Effect of dilutive stock options	85	38	—	—

Diluted weighted average shares	7,471	7,215	7,293	7,179

Options to purchase 454,000 and 502,499 shares of Class A common stock were outstanding at October 2, 2004 and September 27, 2003, respectively, but were not included in the computation of diluted earnings per share for the nine months ended October 2, 2004 and September 27, 2003 because the Company reported a loss and the effect would be anti-dilutive.

Options to purchase 25,000 shares of Class A common stock were outstanding at October 2, 2004 and September 27, 2003 but were not included in the computation of diluted earnings per share for the three and nine months ended October 2, 2004 and September 27, 2003 because the options' exercise price was greater than the average market price of the common shares.

(6)	Segment Information

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

The quarrying segment extracts rough dimension granite blocks from the ground and sells those blocks to both the manufacturing segment and to outside manufacturers, as well as to customers in Europe and Asia. The quarry segment SG&A for 2003 has been restated, as we decided in 2004, to reclassify our expenses associated with the Eurimex litigation (both the judgment and legal costs and related expenses) out of Quarry SG&A expenses into a separate category for the current and prior periods. We believe separating these costs provides a better understanding of our ongoing quarry operations. For the nine months ended September 27, 2003, Quarry SG&A was restated from $4,705,000 to $2,264,000.

The manufacturing segment's principal products are granite memorials used primarily in cemeteries, although it also manufactures some specialized granite products for industrial applications.

The retailing segment sells memorials and other granite products at various locations in sixteen states in the United States.

The other segment includes unallocated corporate overhead and the Eurimex adverse judgment and legal expenses.

Inter-segment revenues are accounted for as if the sales were to third parties and then eliminated in consolidation.

The following is the unaudited segment information for the three and nine-month periods ended October 2, 2004 and September 27, 2003 (in thousands):

Three-month period:

2004		Quarrying			Manufacturing			Retailing			Other			Total

Total net revenues	$	8,636		$	8,517		$	9,077		$	—		$	26,230
Inter-segment net revenues		(586	)		(2,189	)		—			—			(2,775	)


Net revenues		8,050			6,328			9,077			—			23,455

Total gross profit		4,531			1,657			4,963			—			11,151
Inter-segment gross profit		(249	)		102			147			—			—


Gross profit		4,282			1,759			5,110			—			11,151

Selling, general and administrative expenses		868			934			5,292			1,356			8,450
Adverse judgment and legal expenses		—			—			—			—			—

Total operating expenses		868			934			5,292			1,356			8,450


Income (loss) from continuing operations before interest and taxes	$	3,414		$	825		$	(182	)	$	(1,356	)	$	2,701


2003		Quarrying			Manufacturing			Retailing			Other			Total


Total net revenues	$	8,252		$	8,161		$	9,434		$	—		$	25,847
Inter-segment net revenues		(542	)		(2,161	)		—			—			(2,703	)


Net revenues		7,710			6,000			9,434			—			23,144

Total gross profit		3,555			1,783			5,363			—			10,701
Inter-segment gross profit		(248	)		107			141			—			—


Gross profit		3,307			1,890			5,504			—			10,701

Selling, general and administrative expenses		747			952			5,372			1,188			8,259
Adverse judgment and legal expenses		—			—			—			—			—

Total operating expenses		747			952			5,372			1,188			8,259


Income (loss) from continuing operations before interest and taxes	$	2,560		$	938		$	132		$	(1,188	)	$	2,442

Nine-month period:

2004		Quarrying			Manufacturing			Retailing			Other			Total


Total net revenues	$	24,160		$	22,121		$	25,731		$	—		$	72,012
Inter-segment net revenues		(2,123	)		(6,238	)		—			—			(8,361	)


Net Revenues		22,037			15,883			25,731			—			63,651

Total gross profit		9,492			4,423			14,016			—			27,931
Inter-segment gross profit		(580	)		12			568			—			—


Gross profit		8,912			4,435			14,584			—			27,931

Selling, general and administrative expenses		2,570			2,743			15,461			3,959			24,733
Adverse judgment and legal expenses		—			—			—			6,500			6,500

Total operating expenses		2,570			2,743			15,461			10,459			31,233


Income (loss) from continuing operations before interest and taxes	$	6,342		$	1,692		$	(877	)	$	(10,459	)	$	(3,302	)


2003		Quarrying			Manufacturing			Retailing			Other			Total


Total net revenues	$	20,114		$	21,559		$	25,122		$	—		$	66,795
Inter-segment net revenues		(1,390	)		(6,580	)		—			—			(7,970	)


Net revenues		18,724			14,979			25,122			—			58,825

Total gross profit		6,502			4,169			13,696			—			24,367
Inter-segment gross profit		(481	)		37			444			—			—


Gross profit		6,021			4,206			14,140			—			24,367

Selling, general and administrative expenses		2,264			2,690			15,596			3,694			24,244
Adverse judgment and legal expenses		—			—			—			2,441			2,441

Total operating expenses		2,264			2,690			15,596			6,135			26,685


Income (loss) from continuing operations before interest and taxes	$	3,757		$	1,516		$	(1,456	)	$	(6,135	)	$	(2,318	)

Net revenues by geographic area are as follows ($ in thousands):

		Three Months Ended				Nine Months Ended
		October 2,		September 27,		October 2,		September 27,
		2004		2003		2004		2003

Net revenues (1):
United States	$	20,731	$	20,910	$	56,971	$	53,474
Canada		2,610		2,159		6,135		5,087
Ukraine		114		75		545		264

Total net revenues	$	23,455	$	23,144	$	63,651	$	58,825

(1)	Net revenues are attributed to countries based on where product is produced.

(7)	Comprehensive Income (Loss)

Comprehensive income (loss) consists of net income and foreign currency translation adjustment. Comprehensive income (loss) for the three and nine month period ended October 2, 2004 and September 27, 2003 are as follows ($ in thousands):

		Three Months Ended					Nine Months Ended
		October 2,		September 27,			October 2,			September 27,
		2004		2003			2004			2003

Net income (loss)	$	1,331	$	912		$	(3,143	)	$	(2,617	)
Other comprehensive income (loss):
Foreign currency translation adjustment		434		(28	)		216			1,051


Comprehensive income (loss)	$	1,765	$	884		$	(2,927	)	$	(1,566	)

Accumulated other comprehensive income (loss) at October 2, 2004 and December 31, 2003 are comprised of the following ($ in thousands):

		Foreign Currency Translation Adjustment		Minimum Pension Liability Adjustment			Accumulated Other Comprehensive (Loss)

Balance at December 31, 2003	$	680	$	(1,594	)	$	(914	)
Changes in 2004		216		—			216


Balance at October 2, 2004	$	896	$	(1,594	)	$	(698	)

(8)	Components of Net Periodic Benefit Cost (in thousands)

		Three Months Ended October 2, 2004 and September 27, 2003

		NON-UNION PENSION BENEFITS						DEFERRED COMPENSATION BENEFITS				OTHER BENEFITS

		2004			2003			2004		2003		2004		2003

Service cost	$	156		$	133		$	43	$	47	$	5	$	5
Interest cost		320			318			79		79		28		28
Expected return on plan assets		(340	)		(303	)		0		0		0		0
Amortization of prior service costs		35			50			17		19		20		16
Amortization of net (gain) loss		29			49			0		0		0		0

Net periodic benefit cost	$	200		$	247		$	139	$	145	$	53	$	49

		Nine Months Ended October 2, 2004 and September 27, 2003

		NON-UNION PENSION BENEFITS						DEFERRED COMPENSATION BENEFITS				OTHER BENEFITS

		2004			2003			2004		2003		2004		2003

Service cost	$	468		$	399		$	129	$	141	$	15	$	15
Interest cost		960			954			237		237		84		84
Expected return on plan assets		(1,020	)		(909	)		0		0		0		0
Amortization of prior service costs		105			150			51		57		60		48
Amortization of net (gain) loss		87			147			0		0		0		0

Net periodic benefit cost	$	600		$	741		$	417	$	435	$	159	$	147

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2003, it expected to contribute $800,000 to the defined benefit pension plan during 2004. The contribution was made in full in April 2004.

(9)	Legal Proceeding

In April, 2001 our former distributor outside the United States, Eurimex S.A. (now known as Granite Stone Business International S.a.r.l.), initiated an arbitration proceeding against us in connection with our termination of the distribution agreement for our Salisbury Pink granite. Eurimex also claimed damages in connection with a distribution agreement for our Bethel White granite, which agreement expired by its terms in 1998. Pursuant to those agreements, the arbitration took place under the ICC rules.

On June 10, 2004, we announced the three-member ICC arbitral tribunal had awarded Granite Stone Business International approximately $5.4 million in damages, plus interest on the award estimated at $1.1 million. The award was made on the claim we had wrongfully terminated the Salisbury Pink distribution agreement. The tribunal ruled in our favor on the other four claims brought against us in the arbitration. We recorded a charge of $6.5 million for the adverse judgment during the three months ended July 3, 2004.

On April 22, 2003, Kurtz Monument Company filed a complaint against us alleging we breached certain terms of a sealed settlement agreement by engaging in conduct constituting commercial disparagement. Damages have not been specified. We believe this action by Kurtz Monument Company is without merit. We deny liability and will continue to vigorously defend claims made by Kurtz Monument Company.

(10)		Credit Facility

On July 9, 2004, we reduced our credit facility with CIT from a total of $50 million to a total of $30 million and eliminated a lending participant in the facility, allowing CIT to hold the entire facility. We decided to reduce the size of the facility rather than maintain the original line at the higher cost that would have been required as a result of the change in the lending group. The new facility consists of an acquisition term loan line of credit of up to $17.5 million and a revolving credit facility of up to another $12.5 million based on eligible accounts receivable, inventory and certain fixed assets. As of October 2, 2004, we had $16.0 million outstanding and $1.5 million available under the term loan line of credit and $5.9 million outstanding and $6.6 million available under the revolving credit facility. The agreement contains certain covenants for a minimum Operating Cash Flow to Debt Service Ratio and a limit on the Total Liabilities to Net Worth Ratio of the Company.


The facility requires the ratio of the sum of earnings before interest, taxes, depreciation and amortization (EBITDA) less taxes and capital expenditures to the sum of interest and scheduled debt repayments be at least 1.25 for any trailing twelve-month period at the end of a quarter. Primarily as a result of significant Eurimex expenses, we had received a waiver of this covenant until September 30, 2004, which required us to meet minimum interim EBITDA targets. As of July 3, 2004, we were in violation of this amended covenant solely as a result of the $6.5 million adverse judgment in the Eurimex case discussed above. We received a waiver on this covenant from CIT for the period ending July 3, 2004. The covenants in the new agreement in effect as of July 8, 2004 revert back to the original debt service coverage ratio described above, except all expenses associated with the Eurimex litigation (judgments and legal expenses) are excluded from the calculation of EBITDA as described above. As of October 2, 2004, the Company was in compliance with this covenant as our ratio was 2.29.

The facility also requires that the ratio of the Company's total liabilities to net worth not exceed 2.0. As of October 2, 2004, the Company was in compliance with this covenant as our total liabilities to net worth ratio was 0.80.

(11)	Dividends Paid

On February 19, 2004, the Board of Directors declared a dividend of $.02 per share of common stock, payable on March 30, 2004 to holders of record as of March 1, 2004.

On May 3, 2004, the Board of Directors declared a dividend of $.02 per share of common stock, payable on June 15, 2004 to holders of record as of May 15, 2004.

On July 29, 2004, the Board of Directors declared a dividend of $.02 per share of common stock, payable on September 15, 2004 to holders of record as of August 16, 2004.

(12)	Investment in FFS Holdings

In the second quarter of 2004, we made a $3.5 million investment in FFS Holdings, Inc., the new parent company of Forethought Financial Services, Inc., a leading provider of pre-need insurance currently marketed through funeral homes and cemeteries. The $3.5 million was paid out of the Company's term loan. The investment represents 6% of the total voting common equity and approximately 8% of the total common equity of FFS Holdings. FFS Holdings was formed to acquire the shares of Forethought by The Devlin Group, led by Robert M. Devlin, former Chairman and CEO of American General Corp. In addition to Mr. Devlin, The Devlin Group is composed of several senior insurance industry executives, including Douglas M. Schair, former Vice Chairman and Chief Investment Officer of Life Re Corporation. Mr. Schair, who is Vice Chairman and Chief Investment Officer of FFS Holdings and holds 16% of its voting shares, is also a member of the Board of Directors of Rock of Ages and holds 12% of its Class A common shares.

(13)	Subsequent Events

Dividends Declared

On October 28, 2004, the Board of Directors declared a dividend of $.02 per share of common stock, payable on December 15, 2004 to holders of record as of November 15, 2004.

Sale of Autumn Rose Quarry

The Company sold its Autumn Rose quarry located in Mill Creek, Oklahoma, on November 9, 2004 for a total sale price of $750,000, of which $150,000 will be payable in cash at the closing and $600,000 payable in kind through the supply of diamond tools and segments pursuant to a supply agreement.

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations

General

Rock of Ages is an integrated quarrier, manufacturer, distributor and retailer of granite and products manufactured from granite. During 2003, we had four business segments, quarrying, manufacturing, retail and cemeteries. The quarry division sells granite blocks to both the manufacturing division and to outside manufacturers, as well as to customers outside North America. The manufacturing division's principal products are 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. The cemetery division sold cemetery property and funeral and cemetery products and services both at the time of need and on a preneed basis. On December 17, 2003, we sold all of our cemetery properties and assets to Saber Management, LLC for $6,750,000, thereby exiting the cemetery business.

The operational results for the year-to-date were generally good in all segments but were significantly impacted by a $6.5 million adverse judgment against us in the Eurimex litigation relating to a contract dispute on the distribution of granite blocks from certain quarries (see Part II, Item 1, Legal Proceedings). Because of the significance of this judgment, we have reclassified those expenses associated with the Eurimex case (both the judgment and the legal costs) out of Quarry Sales General and Administrative (SG&A) to a separate line on the statement of operations for the current and prior periods. While this judgment is a significant sum, we believe we can continue to operate our current business units as well as grow in areas where we see opportunities.

In the second quarter of 2004, we made a $3.5 million investment in FFS Holdings, Inc., the new parent company of Forethought Financial Services, Inc., a leading provider of pre-need insurance currently marketed through funeral homes and cemeteries. The investment represents 6% of the total voting common equity and approximately 8% of the total common equity of FFS Holdings. FFS Holdings was formed to acquire the shares of Forethought by The Devlin Group, led by Robert M. Devlin, former Chairman and CEO of American General Corp. In addition to Mr. Devlin, The Devlin Group is composed of several senior insurance industry executives, including Douglas M. Schair, former Vice Chairman and Chief Investment Officer of Life Re Corporation. Mr. Schair, who is Vice Chairman and Chief Investment Officer of FFS Holdings and holds 18% of its voting shares, is also a member of the Board of Directors of Rock of Ages and holds 12% of its Class A common shares. We believe this relationship with Forethought will open up opportunities for both companies due to our mutual customer group and contacts within the funeral industry. Finally, the investors in FFS Holdings, Inc. have significant experience in and knowledge of the insurance industry, which we believe will lead to long-term growth in the value of this investment.

Our quarry division's third quarter had revenue that was slightly better than last year but had a significant improvement in gross profit and operating income primarily as a result of higher shipments in some of our more profitable quarries as well as a favorable adjustment to inventory valuation to reflect current quarry cost per foot. Year to date revenues and profits in the quarry group remain well ahead of last year, primarily as a result of a stronger first quarter this year and continued strong demand in most of our quarries. As noted above, we reclassified our expenses associated with the Eurimex litigation (both the judgment and legal costs and related expenses) out of Quarry Sales, General and Administrative (SG&A) expenses into a separate category for the current and prior periods. We believe separating these costs provides a better understanding of our ongoing quarry operations. SG&A for the quarry group was up slightly primarily as a result of increased travel required to support our overseas customers.

Our manufacturing division was unable to ship some mausoleums that were completed in the third quarter due to customer scheduling issues, which caused a slight decrease in revenue, however, improved sales in our Canadian memorials group and our industrial products group resulted in third quarter revenues slightly above last year. Gross profits were down slightly during the quarter due to the different mix of products shipped in the third quarter. SG&A costs have increased only slightly over last year for the year to date.

Results for our retail group in the third quarter fell behind the same period last year but remain ahead of last year for the year to date. The shortfall in revenue in the third quarter was a result of the combination of insufficient orders combined with an increase in orders not set, and therefore not recognized as revenue, over the same period last year. Our gross profit as a percentage of revenue remains where we expect it to be and our SG&A as a percentage of revenue increased as expected due to the additional resources being added to our retail group as part of our aggressive plan to grow that group. We remain committed to our retail growth strategy and added a new VP of Marketing and a VP of Wholesale Business Development in the third quarter and are aggressively pursuing programs that are focused on growing these businesses. We are in the process of rolling out our Outreach Program, which is a formal program designed to increase sales through funeral homes and cemeteries, either as a referral relationship or as a commissioned sale. We expect some of the initiatives that will be put in place to achieve growth in these businesses may result in lower short-term profits as we position ourselves for future growth.

Critical Accounting Policies

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

Revenue Recognition

The Company records revenues from quarrying, manufacturing and retailing.

Quarry Division

The granite we quarry is sold both to outside customers and used by our manufacturing group. Our quarry division recognizes revenue from sales of granite blocks to outside customers when the granite is shipped from the quarry. We provide a 5% discount for domestic customers if payment is made within 30 days of purchase, except in the case of December terms described below. Sales to foreign customers are typically secured by a letter of credit.

At our Barre, Vermont quarries, we allow customers to purchase granite blocks and request that we store the blocks for them. Many of our customers do not have adequate storage space at their facilities and want to ensure an adequate supply of blocks, especially when the Barre quarries are closed from mid-December through mid-March because of weather. Our quarry division recognizes revenue from blocks purchased when the customer selects and identifies the block at the quarry site and the customer requests the block be stored, when they have significant business reasons to do so. At that time, the block is removed from inventory; the customer's name is printed on the block, and title and risk of ownership passes to the buyer. The customer is invoiced and normal payment terms apply, except in the case of December terms described below. Granite blocks owned by customers remain on our property for varying periods of time after title passes to the buyer. We retain a delivery obligation using our trucks. However, we consider the earnings process substantially complete because the cost of delivery service is inconsequential (less than 3%) in relation to the selling price. Further, under industry terms of trade, title passes and the payment obligation is established when the block is identified at the quarry.

Each December, we offer special December payment terms to our Barre quarries' customers. As noted above, from approximately mid-December to approximately mid-March, our Barre quarries are closed due to weather. During this time, the quarry customers' manufacturing plants remain open, and many prefer to ensure they own blocks of a size and quality selected by them prior to the quarries' closure. All blocks purchased in December are invoiced on or about December 31 and, at that time, the blocks are removed from inventory, the customer's name is printed on the blocks, and title and risk of ownership passes to the buyer. Payment terms are one-third of the invoice amount on January 15, one-third on February 15, and one-third on March 15. The program provides essentially the normal 30-day payment terms during the months when the Barre quarries are closed notwithstanding the customer purchases a three-month supply in December and makes payments over 90 days. Customers need not use these special December terms and may buy from inventory during the closure period on a first-come, first-served basis with the normal 30-day payment terms.

Manufacturing

Rock of Ages does not record a sale, nor do we record gross profit, at the time granite is transferred to the manufacturing division from our quarries. We record 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 our facilities. Manufacturing revenues related to internally transferred finished products to our owned retail outlets are recorded when ultimately sold at retail to an outside customer.

Retail

Retailing revenues are recorded when the finished monument is set in the cemetery. In certain instances, we may enter into an agreement with a customer providing for extended payments terms, generally up to two years from either the date of setting the memorial or, in certain instances, upon the settlement of an estate.

Impairment of long-lived assets

Our long-lived assets consist primarily of property and equipment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of such an asset may not be recoverable. Such events or circumstances include, but are not limited to, a significant decrease in the fair value of the underlying business or change in utilization of property and equipment.

Recoverability of the undepreciated cost of property and equipment is measured by comparison of the carrying amount to estimated future undiscounted net cash flows the assets are expected to generate. Those cash flows include an estimated terminal value based on a hypothetical sale at the end of its depreciation period. Estimating these cash flows and terminal values requires management to make judgments about the growth in demand for our services, sustainability of gross margins, and our ability to integrate acquired companies and achieve economies of scale. If assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the long-lived asset exceeds its fair value.

In December 2003, we decided to sell the Autumn Rose quarry in Mill Creek, Oklahoma. Accordingly, it is now classified as assets held for sale in the accompanying balance sheets. We have determined the carrying value of the quarry exceeded its fair value based on discussions with interested parties. As a result, we recognized an after-tax impairment charge of approximately $480,000 in the fourth quarter of 2003, which decreased the carrying value to our best estimate of the fair value of the quarry.

We have entered into arrangements whereby we accepted a promissory note as partial or full payment for certain transactions, particularly the sale of an operation. Such notes have varying terms with principal and interest paid to the Company over a period of generally not more than 5 years. While most notes are secured by an interest in real property and/or assets, management must make estimates and judgments as to the collectibility of such promissory notes. Such judgments depend on many factors including current and future economic conditions, the financial condition of the debtor as well as our estimate of the net realizable value of the security interest securing the note. We believe we have accurately assessed the collectibility of these assets, however, the above factors and other factors may cause our accounting estimates concerning the collectibility of the notes to change and future operating results could be materially impacted.

Valuation of deferred income taxes

As of October 2, 2004, we had net deferred tax assets of $5,848,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. We have recorded a valuation allowance of $4,130,000 against the alternative minimum tax credit carry-forwards and other deferred tax assets. Based upon the projections for future taxable income over the periods for which the deferred tax assets are deductible, we believe it is more likely than not we will realize the benefit of these unreserved net deferred tax assets. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

Contingencies

We are involved in various types of legal proceedings from time to time. Due to their nature, such legal proceedings involve inherent uncertainties and risks, including, but not limited to, court rulings, judgments, negotiations between affected parties and government action. Management, with the assistance of its outside advisors, assesses the probability of loss for such contingencies and accrues a liability and/or discloses the relevant circumstances, as appropriate.

As described in Part 2, Item 1-Legal Proceedings, we were involved in an ICC arbitration proceeding in which Eurimex, our former distributor outside the United States, brought claims against us alleging, among other things, breach of contract and violation of antitrust laws under the European Community Treaty. The three-member ICC arbitral tribunal awarded Eurimex approximately $5.4 million in damages, plus interest on the award estimated at $1.1 million. The award was made on the claim we had wrongfully terminated the Salisbury Pink distribution agreement. The tribunal ruled in our favor on the other four claims brought against us in the arbitration. We recorded a charge of $6.5 million for the adverse judgment during the three months ended July 3, 2004, and paid the judgment to Eurimex on August 6, 2004.

Accounting for pensions

We provide defined benefit pension and other postretirement benefit plans for certain of our employees. Accounting for these plans requires the use of actuarial assumptions including estimates on the expected long-term rate of return on assets and discount rates. In order to make informed assumptions, we rely on outside actuarial experts as well as public market data and general economic information. Any changes in one or more of these assumptions may materially affect certain amounts reported on our balance sheet. In particular, a decrease in the expected long-term rate of return on plan assets could result in an increase in our pension liability and a charge to equity as well as increases in pension expenses over time. See Note 8 of the Notes to Consolidated Financial Statements.

Results of Operations

The following table sets forth certain operations data as a percentage of net revenues with the exception of quarrying, manufacturing and retailing gross profit, and SG&A expenses, which are shown as a percentage of their respective revenues.

	Three Months Ended			Nine Months Ended
	October 2,	September 27,		October 2,		September 27,
	2004	2003		2004		2003

Statement of Operations Data:
Net Revenues:
Quarrying	34.3%	33.3%		34.6%		31.8%
Manufacturing	27.0%	25.9%		25.0%		25.5%
Retailing	38.7%	40.8%		40.4%		42.7%

Total net revenues	100.0%	100.0%		100.0%		100.0%

Gross Profit:
Quarrying	53.2%	42.9%		40.4%		32.2%
Manufacturing	27.8%	31.5%		27.9%		28.1%
Retailing	56.3%	58.3%		56.7%		56.3%

Total gross profit	47.5%	46.2%		43.9%		41.4%

Operating Expenses:
Selling, general and administrative:
Quarrying	10.8%	9.7%		11.7%		12.1%
Manufacturing	14.8%	15.9%		17.3%		18.0%
Retailing	58.3%	56.9%		60.1%		62.1%
Corporate Overhead	5.8%	5.1%		6.2%		6.3%

Total SG&A expenses	36.0%	35.7%		38.9%		41.2%
Adverse Judgment and legal expenses	0.0%	0.0%		10.2%		4.1%

Total operating expenses	36.0%	35.7%		49.1%		45.3%

Income (loss) from continuing operations before interest and income taxes	11.5%	10.6%		(5.2%	)	(3.9%	)

Interest expense	0.8%	0.6%		0.7%		0.8%


Income (loss) from continuing operations before income taxes	10.7%	9.9%		(5.9%	)	(4.7%	)

Provision for income taxes	5.0%	5.8%		(1.1%	)	(0.3%	)


Income (loss) from continuing operations	5.7%	4.1%		(4.8%	)	(4.4%	)

Discontinued operations, net of income taxes	0.0%	(0.2%	)	(0.1%	)	0.0%


Net income (loss)	5.7%	3.9%		(4.9%	)	(4.4%	)

Three Months Ended October 2, 2004 Compared to Three Months Ended September 27, 2003

On a consolidated basis for all segments for the three-month period ended October 2, 2004, compared to the same period in 2003, revenue increased 1.3%, gross profit increased 4.2% and total Sales, General and Administrative (SG&A) costs increased 2.3% for reasons discussed in detail in the segment analyses below.

Quarry Segment Analysis

Revenues in our quarry operations for the three-month period ended October 2, 2004 were up 4.4% from the same period last year primarily as a result of increased shipments from our Bethel White and Gardenia White quarries to overseas customers. These increases were partially offset by a decrease in shipments from our Salisbury Pink quarry and Barre Gray quarry as a result of lower demand and/or the timing of purchases by our customers.

Gross profit dollars from our quarry operations for the three-month period ended October 2, 2004 increased 29.5% and gross profit as a percentage of revenue increased from 42.9% of revenue to 53.2% of revenue. The increases in gross profit dollars and gross profit as a percentage of revenue were largely a result of the increase in revenues discussed above and the improved operational efficiencies associated with such increases as well as a favorable adjustment to inventory valuation to reflect current quarry cost per foot.

SG&A costs in our quarry segment increased 16.2% for the three-month period ended October 2, 2004 however SG&A as a percentage of revenue was up just 1.1%. The increases were a result of numerous incrementally higher expenses but primarily a result of increased expenditures required to support and expand our export business.

Manufacturing Segment Analysis

Revenues in our manufacturing operations for the three-month period ended October 2, 2004 increased 5.5% from the same period last year as a result of increased shipments in our Canadian manufacturing operation as well as an increase in shipments from our industrial products division in Barre, VT. Our Barre, VT memorials manufacturing group saw a decrease in revenue largely due to the timing of shipment of some large memorials and mausoleums, however our backlog remains ahead of last year at this time. In addition, demand for surface plates and other precision granite products manufactured by our industrial products division has increased this year compared to last year and our backlog in that area is above last year’s levels.

Gross profit dollars from the manufacturing group decreased 6.9% and gross profit as a percentage of manufacturing revenue decreased by 3.7 percentage points for the three-month period ended October 2, 2004 compared to the same period last year. The decrease in both gross profit dollars and gross profit as a percentage of revenue was due to a decrease in shipments of higher margin products like large memorials and mausoleums from our Barre, VT manufacturing facility.

SG&A costs for the three-month period ended October 2, 2004 for the manufacturing group was essentially unchanged compared to the same period last year.

Retail Segment Analysis

Revenues in our retail operations for the three-month period ended October 2, 2004 decreased 3.8% from the same period last year primarily as a result of lower than expected order receipts across the retail segment. As of October 2, 2004, our total backlog of orders was up slightly over the same time last year.

Gross profit dollars from the retail operations decreased 7.2% and gross profit as a percentage of revenue decreased 2.0 percentage points compared to the same period last year. The decrease in gross profit dollars is a result of the decrease in revenues discussed above.

SG&A costs from our retail operations decreased 1.5% for the three-month period ended October 2, 2004 compared to last year and SG&A costs as a percentage of retail revenue increased 1.4 percentage points from the same period last year. The slight decrease in SG&A cost in dollars is a result of several small factors including a decrease in administrative costs as a result of cost cutting measures and the consolidation of some administrative functions. SG&A as a percentage of revenue increased primarily as a result of additional resources being applied to the aggressive growth of our memorials group. We expect expenditures in retail SG&A will continue to increase as we implement our growth initiatives. In addition, we expect additional expenses of approximately $500,000, largely in the fourth quarter of 2004, as we transition our sales force from commission to salary and commission expense is recognized on commission based orders that are completed as we also pay counselors a salary.

Consolidated Items

Unallocated Corporate overhead, consisting of operating costs not directly related to an operating segment, increased 14.1% for the three-month period ended October 2, 2004 compared to the same period last year primarily from expenses related to various executive searches.

Interest expense increased 31.1% for the three-month period ended October 2, 2004 compared to the same period last year as a result of the increase in debt associated with the payment of the Eurimex judgment as well as the investment in Forethought Financial Services as well as slightly higher interest rates on our credit facilities.

Our income tax rate in the third quarter was higher than expected in both 2004 and 2003 as a result of changes in the Company's projected annual income from the United State's operations. Projected earnings in the United States have been impacted by costs incurred as a result of the Eurimex litigation and settlement and a decline in the estimated operations of the retail segment.

Nine Months Ended October 2, 2004 Compared to Nine Months Ended September 27, 2003

On a consolidated basis for all segments for the nine-month period ended October 2, 2004, compared to the same period in 2003, revenue increased 8.2%, gross profit increased 14.6% and total SG&A costs, excluding the costs associated with the judgment and expenses in the Eurimex litigation, increased 2.0% from the same period last year for reasons discussed in detail in the segment analyses below.

Quarry Segment Analysis

Revenues in our quarry operations for the nine-month period ended October 2, 2004 were up 17.7% from the same period last year as a result of increased shipments from almost every active quarry. Major increases came from the Bethel White and Gardenia White quarries with smaller increases in the Barre Gray quarry and the Pennsylvania Black quarry.

Gross profit dollars from our quarry operations for the nine-month period ended October 2, 2004 increased 48.0% and gross profit as a percentage of revenue increased from 32.2% of revenue to 40.4% of revenue. The increases in gross profit dollars and gross profit as a percentage of revenue are largely a result of the increase in revenues discussed above and the improved operational efficiencies associated with such increases and/or improved yields in a quarry resulting in greater quantities of saleable stone.

SG&A costs in our quarry segment increased 13.5% for the nine-month period ended October 2, 2004. The increases were a result of numerous incrementally higher expenses but primarily a result of increased expenditures required to support and expand our export business.

Manufacturing Segment Analysis

Revenues in our manufacturing operations for the nine-month period ended October 2, 2004 increased 6.0% from the same period last year primarily as a result of increased shipments from our Canadian manufacturing operation as well as an increase in shipments from our industrial products division. The manufacturing group had $1.0 million in shipments for the World War II memorial last year compared to none this year so the increase in revenue shows a significant improvement.

Gross profit dollars from the manufacturing group increased 5.4% and gross profit as a percentage of manufacturing revenue was essentially unchanged for the nine-month period ended October 2, 2004 compared to the same period last year. The increase in gross profit is a result of increased revenue and the positive effect improved revenues have on reducing certain fixed costs as a percentage of revenue in our operations, as well as higher revenues from our industrial products division whose specialty products typically have above average gross margins.

SG&A costs for the nine-month period ended October 2, 2004 for the manufacturing group increased 2.0% compared to the same period last year primarily as a result of normal cost increases.

Retail Segment Analysis

Revenues in our retail operations for the nine-month period ended October 2, 2004 increased 2.4% from the same period last year primarily as a result of strong shipments in the first quarter of 2004 compared to the first quarter of 2003.

Gross profit dollars from the retail operations increased 3.1% and gross profit as a percentage of revenue increased 0.4 percentage points compared to the same period last year. The increase is primarily a result of the increased revenues in the nine-month period this year compared to last and improved gross margins in the first quarter of 2004 compared to the same period of 2003, which was the result of higher revenues in that period and the associated improvement in operational efficiencies.

SG&A costs from our retail operations decreased 0.9% for the nine-month period ended October 2, 2004 compared to last year and SG&A costs as a percentage of retail revenue decreased 2.0 percentage points from the same period last year. The decrease in SG&A costs is primarily a result of a decrease in administrative costs associated with the consolidation of some administrative functions. We expect expenditures in retail SG&A will increase as we implement our growth initiatives, including additional expense of approximately $500,000, largely in the fourth quarter of 2004, as we transition our sales force from commission to salary and commission expense is recognized on commission based orders that are completed as we also pay counselors a salary.

Consolidated Items

Unallocated Corporate overhead increased 7.2% for the nine-month period ended October 2, 2004 compared to the same period last year primarily from expenses related to various executive searches as well as normal cost increases.

Expenses associated with the Eurimex legal case, including the judgment and any legal or other related expenses, were $6.5 million in the nine-month period ended October 2, 2004 which consisted of a judgment of $5.4 million plus accrued interest from October 2000 which totaled approximately $1.1 million. This compares to expenses in the same period of 2003 of $2.4 million, which consisted entirely of legal and other related expenses. The Company does not expect any additional expenses as a result of these proceedings.

Interest expense was essentially unchanged for the nine-month period ended October 2, 2004 compared to the same period last year.

Income tax benefit as a percentage of the net loss from continuing operations before taxes, for the nine-month period ended October 2, 2004 was 18.0%. The tax provision was determined by applying the Company's tax rate in Canada and the U.S. on the actual pretax earnings in each respective jurisdiction. Income tax benefit as a percentage of the net loss from continuing operations before taxes, for the nine-month period ended September 27, 2003 was 6.8%.

Liquidity and Capital Resources

We consider our liquidity to be adequate to meet our long and short-term cash requirements to fund operations and pursue our growth strategy. Historically, we have met these requirements primarily from cash generated by operating activities and periodic borrowings under the commercial credit facilities described below. We anticipate there may be future acquisitions as we pursue our growth strategy that may require us to return to a $50 million credit facility compared to our existing $30 million credit facility.

In January 2003, we repurchased 500,500 shares of our common stock for a total of $2,602,600 as part of our share buy back program. Upon completion of this transaction, we had repurchased a total of 676,200 shares for $3,359,269 under the share buy back program. All shares have subsequently been retired. There remain 323,800 shares authorized to be purchased, under the current repurchase program. We will continue to repurchase shares on an opportunistic basis determined by, among other things, current debt levels, covenants of our lenders, anticipated uses of capital, the price of the stock and the general market conditions.

In 2003, the funded status of our defined benefit pension plan improved by approximately $1.2 million primarily as a result of payments to fund the plan of $1.0 million in 2003. We have historically contributed between $800,000 and $1.0 million per year and expect to make annual contributions in this range, which, we believe, we will be able to fund either from cash from operations or borrowing under our credit facilities. We made our annual 2004 contribution of $800,000 to our pension plan in April 2004.

Cash Flow. At October 2, 2004, the Company had cash and cash equivalents of $4.2 million and working capital of $27.8 million, compared to $800,000 and $28.8 million, at September 27, 2003. The decrease in working capital is primarily the result of the increase in short-term obligations and to a lesser extent the increase in borrowings under the line of credit to fund the Eurimex judgment.

For the nine-month period ended October 2, 2004, net cash used in operating activities was $17,000, which consisted primarily of the net loss of $3.1 million offset by the non-cash charges for depreciation and cash provided primarily by an increase in customer deposits less cash used primarily as a result of an increase in receivables and inventories and a decrease in payables. This compares to cash provided by operating activities for the period ended September 27, 2003 of $1.7 million, which consisted primarily of the net loss of $2.6 million offset by the non-cash charges for depreciation, and an increase in customer deposits.

Net cash used in investing activities was $4.3 million in the nine-month period ended October 2, 2004 as a result of proceeds from the sale of the cemeteries of $5.2 million less capital purchases of $5.5 million and purchases of long-term investments of $3.7 million, compared to $5.5 million used in investing activities in the corresponding period of 2003 as a result of capital purchases.

Net cash provided by financing activities in the nine-month period ended October 2, 2004 was $5.2 million, which consisted primarily of borrowings under the line of credit and long-term debt of $4.6 million, and proceeds from stock purchases resulting from stock options exercised of $976,000 less dividends paid on common stock of $438,000. This compares to $2.3 million used in the financing activities in the corresponding period of 2003, which consisted primarily of repurchases of stock under the Company's stock repurchase program of $2.6 million and dividends paid on common stock of $215,000 less increased borrowing under the line of credit of $600,000.

Capital Resources. We have a credit facility with the CIT Group/Business Credit ("CIT") that expires in October 2007. On July 9, 2004, we reduced our credit facility with CIT from a total of $50 million to a total of $30 million and eliminated a lending participant in the facility, allowing CIT to hold the entire facility. We decided to reduce the size of the facility rather than maintain the original line at the higher cost that would have been required as a result of the change in the lending group. The new facility consists of an acquisition term loan line of credit of up to $17.5 million and a revolving credit facility of up to another $12.5 million based on eligible accounts receivable, inventory and certain fixed assets. As of October 2, 2004, we had $16.0 million outstanding and $1.5 million available under the term loan line of credit and $5.9 outstanding and $6.6 million available under the revolving credit facility. On August 6, 2004 we paid the $6.5 million Eurimex judgment out of our revolving credit facility. Our loan agreement with CIT places restrictions on our ability to, among other things, sell assets, participate in mergers, incur debt, pay dividends, repurchase stock, and make investments or guarantees. The agreement also contains certain covenants for a minimum Operating Cash Flow to Debt Service Ratio and a limit on the Total Liabilities to Net Worth Ratio of the Company as described below.

Debt Service Coverage Ratio. The facility requires the ratio of the sum of earnings before interest, taxes, depreciation and amortization (EBITDA) less taxes and capital expenditures to the sum of interest and scheduled debt repayments be at least 1.25 for any trailing twelve-month period at the end of a quarter. Primarily as a result of significant Eurimex expenses, we had received a waiver of this covenant until September 30, 2004, which required us to meet minimum interim EBITDA targets. As of July 3, 2004, we were in violation of this amended covenant solely as a result of the $6.5 million adverse judgment in the Eurimex case discussed above. We received a waiver on this covenant from CIT for the period ending July 3, 2004. The covenants in the new agreement in effect as of July 8, 2004 revert back to the original debt service coverage ratio described above, except all expenses associated with the Eurimex litigation (judgments and legal expenses) are excluded from the calculation of EBITDA as described above. As of October 2, 2004, the Company was in compliance with this covenant as our ratio was 2.29.

Total Liabilities to Net Worth Ratio. The facility also requires the ratio of the Company's total liabilities to net worth not exceed 2.0. As of October 2, 2004, the Company was in compliance with this covenant as our total liabilities to net worth
ratio was 0.80.

We have a multi-tiered interest rate structure on our outstanding debt with CIT. As of October 2, 2004, the interest rate structure was as follows:

	Amount	Formula	Effective Rate

Revolving Credit Facility	$ 5.9 million	Prime - .50%	4.25%
Term Loans	3.5 million	LIBOR + 1.75%	3.45%
Term Loans	12.5 million	LIBOR + 1.75%	3.07%

The Company can elect the interest rate structure for the Revolver and/or the Term Loan under the credit facility based on the prime rate or LIBOR.

The incremental rate above or below prime and above LIBOR is based on the Company's Funded Debt to Net Worth Ratio.

As of October 2, 2004, the Company had $4.0 million CDN available and $0 outstanding under a demand revolving line of credit with the Royal Bank of Canada.

Contractual Obligations - ($ in thousands)

Contractual Cash Obligations		Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years

Long-Term Debt (1)	$	16,335	$	40	$	42	$	16,023	$	230
Operating Leases (2)		2,502		798		1,125		554		25
Purchase Obligations (3)		11,250		2,250		4,500		4,500		—

Total Obligations	$	30,087	$	3,088	$	5,667	$	21,077	$	255

(1)	Long-Term Debt consists of various notes payable for general business use and strategic acquisitions, the repayment, of which, is expected to be funded from a combination of cash flow from operations and its existing credit facility.

(2)	Operating Leases are principally for real estate and are expected to be funded from cash flow from operations.

(3)	The purchase obligation is a supply agreement with Adams Granite Co. The Company has agreed to purchase a minimum of $2,250,000 (+/- 10%) of monuments from Adams Granite each year for a term of seven years with various stipulations as to variations from the "minimum order" and pricing agreements, and is expected to be funded from cash flow from operations. The remaining term of the agreement is until December 2008.

Our primary need for capital will be to maintain and improve our manufacturing, quarrying, and retail facilities and to finance acquisitions as part of our growth strategy. We have approximately $6.0 million budgeted for capital expenditures in 2004. We believe the combination of cash flow from operations and our existing credit facility will be sufficient to fund our operations for at least the next twelve months.

Seasonality

Historically, the Company's operations have experienced certain seasonal patterns. Generally our net sales have been highest in the second or 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, we typically close certain of our Vermont and Canadian quarries during these months because of increased operating costs attributable to adverse weather conditions. As a result, we have 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 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 our ability to form relationships with funeral directors; cemeteries and other death care providers.

Our ability to continue to grow our retail business depends in part on our ability to develop referral relationships with funeral homes, cemeteries and other death care professionals. We cannot assure you we will be able to successfully form these relationships in all of the areas in which we have retail businesses. In certain areas, we may be unable to form such relationships where our stores are in direct competition with funeral homes and cemeteries that sell granite memorials.

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 we will identify suitable acquisition candidates, or we will be able to consummate transactions on acceptable terms. Further, even if we successfully acquire additional companies, we cannot assure you 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.

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 authorized independent retailers throughout North America. Over the past seven years, we have acquired 28 retailers with multiple retail outlets in 16 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. Four important components of our growth strategy are to continue to acquire retailers, open new retail stores in selected markets, add independently owned authorized retailers, 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 will continue to arise as we pursue our growth strategy. In addition, significant barriers to entry created by local heritage, community presence and tradition characterize the granite memorial retail industry. 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 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.

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 new retail stores 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 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. We compete with other dimension stone quarriers, including quarriers of granite, marble, limestone, travertine and other natural stones. We also compete with manufacturers of so-called "engineered stone" as well as manufacturers of other building materials like concrete, aluminum, glass, wood and other materials. We compete 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. We compete 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 capability, availability of supply and delivery options. All of our 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.

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

The competition for retail sales of granite memorials faced by our 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 we do, as well as approximately 3,000 independent retailers of granite memorials located outside of cemeteries and funeral homes.

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

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 28% of the deaths in the United States in 2002, compared to approximately 24% in 1998, and CANA expects this rate to rise to approximately 36% by 2010. While we continue to believe many families will choose to permanently 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 will adversely affect our business and results of operations.

Our business is also subject to the risk 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 general memorialization rates or the willingness of cemeteries to accept granite memorials declines, this decline could adversely affect 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 the months of January and February because of increased operating costs attributable to weather conditions. We have historically incurred an aggregate net loss during the first three 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 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.

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 saleable 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 28% of our revenues in fiscal 2003 from sales to customers outside the United States, with approximately 8% of revenues in fiscal 2003 from sales in Canada by the Company's Canadian subsidiary. Foreign sales are subject to numerous risks, including currency conversion risks, limitations (including taxes) on the repatriation 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 are subject to decline as a result of general economic downturns, or as a result of uncertainties regarding current and future economic conditions that generally affect such industries. We cannot assure you 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 64% 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, and 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.

No-Call Legislation may adversely affect our retail marketing efforts.

Our retail stores and sales counselors are subject to the so-called "No-Call" laws, which allow consumers to place their telephone number on a "no-call" list maintained by various states and the federal government. At present, there are "No-Call" laws in a majority of states in which we do business and the federal "No-Call" law went into effect in the Fall of 2003. Counselors are unable to make telephone calls to any consumer whose number has been placed on the applicable no-call list, subject to certain limited exceptions. Making telephone calls to introduce the Company and set appointments has been an important part of marketing our retail products and services. While we are taking steps to decrease our reliance on telephone marketing calls, compliance with the "No-Call" laws could adversely affect our retail 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 the stockholders may remove directors from office only for cause and by a supermajority vote; provide 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 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. Based on the October 2, 2004 outstanding borrowings under the credit facility, of $21.9 million, the impact of a 1% increase in the interest rates would be approximately $219,000 a year. The impact to the consolidated financial statements is immaterial to our consolidated financial position, results of operations and cash flows.

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) Disclosure Controls and Procedures. The Company's management, with the participation of the Company's Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(c) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. Based on such evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company's disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports it files or submits under the Exchange Act.

	(b) Internal Control Over Financial Reporting. There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II		OTHER INFORMATION

Item 1.		Legal Proceedings

We are a party to legal proceedings that arise from time to time in the ordinary course of our business. While the outcome of these ordinary course proceedings cannot be predicted with certainty, we do not expect them to have a material adverse effect on our business or financial condition. In addition, we were a party to the litigation described below.

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 us alleging that we breached certain terms of a sealed settlement agreement by engaging in conduct constituting commercial disparagement. Damages have not been specified. We believe this action by Kurtz Monument Company is without merit. We deny liability and will continue to vigorously defend claims made by Kurtz Monument Company.

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 us against all contingencies, management believes that its insurance protection is reasonable in view of the nature and scope of our operations.

Item 5.	Other Information

Holders of 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 October 28, 2004, the Board of Directors declared a dividend of $.02 per share of common stock, payable on December 15, 2004 to holders of record as of November 15, 2004.

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.

	4	Specimen Certificate representing the Class A Common Stock incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-1 (Registration No. 333-33685) filed with the Securities and Exchange Commission on August 15, 1997and declared effective on October 20, 1997.

	31.1	Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	31.2	Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

	32.2	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 July 6, 2004, the Registrant filed a report on Form 8-K pursuant to Item 5. (Other Events and Required FD Disclosure) and Item 7. (Financial Statements and Exhibits) to report it had completed the previously announced investment of $3.5 million in FFS Holdings, Inc., a new parent company of Forethought Financial Services, Inc., a leading provider of pre-need insurance currently marketed through funeral homes and cemeteries. The investment includes voting and non-voting common shares, and represents approximately 6% of the voting common equity and approximately 8% of the total common equity of FFS Holdings.

	On July 30, 2004, the Registrant filed a report on Form 8-K pursuant to Item 5. (Other Events and Required FD Disclosure) and Item 12. (Results of Operations and Financial Condition) to report the board of directors had declared a quarterly cash dividend of $0.02 per share payable on September 15, 2004 to shareholders of record at the close of business on August 16, 2004. The Registrant also announced its financial results for the quarter ended July 3, 2004.

	On August 6, 2004, the Registrant filed a report on Form 8-K pursuant to Item 5. (Other Events and Required FD Disclosure) and Item 7. (Financial Statements and Exhibits) to report it had acquired Crone Monument Company, a retailer of granite memorials with sales locations in Memphis and Jackson, Tennessee for $460,000. The Registrant also reported it had paid in full the previously announced $6.5 million arbitration award to Granite Stone Business International (formerly known as Eurimex), and the parties had exchanged mutual releases for all claims up to the date of the release including those brought in the arbitration.

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: November 15, 2004	By: /s/ Douglas S. Goldsmith Douglas S. Goldsmith Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial and Accounting Officer)

Exhibit Index

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.

4	Specimen Certificate representing the Class A Common Stock incorporated by reference to Exhibit 4 to the Company's Registration Statement on Form S-1 (Registration No. 333-33685) filed with the Securities and Exchange Commission on August 15, 1997and declared effective on October 20, 1997.

31.1	Certification of CEO pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of CFO pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

INDEX

Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Managements Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosure About Market Risk
Controls and Procedures
Legal Proceedings
Other Information
Exhibits and Reports on Form 8-K
Signature
Exhibit Index