ROAC Rock of Ages (VT) (MM)

(Mark One) 

T

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

o

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

PART I

FINANCIAL INFORMATION

PAGE NO.

Item 1.

Financial Statements

Consolidated Balance Sheets - April 4, 2009 (Unaudited) and December 31, 2008

4

Consolidated Statements of Operations (Unaudited) - Three Months Ended April 4, 2009 and March 29, 2008

5

Consolidated Statements of Cash Flows (Unaudited) - Three Months Ended April 4, 2009 and March 29, 2008

6

Notes to Unaudited Consolidated Financial Statements

7

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

17

Item 4.

Controls and Procedures

17

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

18

Item 1A.

Risk Factors

 18

Item 6.

Exhibits

19

Signature

20

April 4,

December 31,

ASSETS

2009

2008

Current assets:

Cash and cash equivalents

$

589

$

888

Trade receivables, net

8,018

13,314

Inventories

16,339

16,840

Other current assets

2,037

1,561

Assets held for sale

831

477

            Total current assets            

27,814

33,080

Property, plant and equipment, net

29,353

29,998

Cash surrender value of life insurance

132

132

Identified intangible assets, net

537

571

Goodwill

387

387

Long-term investments

49

25

Other long term assets

226

249

            Total assets

$

58,498

$

64,442

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Borrowings under line of credit

$

4,961

$

7,428

Current maturities of long-term debt

871

517

Trade payables

1,043

1,334

Accrued expenses

1,174

2,226

Salary continuation and other post-employment benefits

689

567

Customer deposits

908

454

            Total current liabilities

9,646

12,526

Long-term debt, excluding current installments

13,424

13,904

Salary continuation liability, net of current portion

5,205

5,382

Accrued pension cost

5,422

9,026

Deferred salary liability

1,544

1,523

Accrued other post-employment benefits, net of current portion

1,607

1,623

Deferred tax liabilities

27

27

            Total liabilities

36,875

44,011

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; 4,812,342   

         shares issued and outstanding as of April 4, 2009 and December 31, 2008

48

48

     Common stock - Class B, $.01 par value; 15,000,000 shares authorized; 2,603,721  

         shares issued and outstanding as of April 4, 2009 and December 31, 2008

26

26

     Additional paid-in capital

65,704

65,688

     Accumulated deficit

(38,321)

(35,548)

     Accumulated other comprehensive loss

(5,834)

(9,783)

            Total stockholders' equity

21,623

20,431

            Total liabilities and stockholders' equity

$

58,498

$

64,442

Three Months Ended

April 4,

March 29,

2009

2008

Cash flows from operating activities:

  Net loss

$

(2,774

)

$

(3,305)

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

      (Gain)/loss on sale of assets

(13

)

8

      Depreciation, depletion and amortization

598

625

      Stock compensation expense

15

4

    Changes in operating assets and liabilities:

      Trade receivables, net

5,287

1,000

      Inventories

458

299

      Other assets

(463

)

(153)

      Trade payables, accrued expenses and income taxes

(1,343

)

(1,146)

      Customer deposits

455

233

      Salary continuation and pension

347

1

      Other liabilities

21

59

      Net cash provided by (used in) operating activities

2,588

(2,375)

Cash flows from investing activities:

    Purchases of property, plant and equipment

(399

)

(422)

    Proceeds from sale of assets, net

118

-

    Proceeds from sale of retail division

-

7,717

    Purchase of intangible asset

-

(179)

       Net cash provided by (used in) investing activities

(281

)

7,116

Cash flows from financing activities:

   Net repayments under line of credit

(2,467

)

(862)

   Debt issuance costs

-

(24)

   Principal payments on long-term debt

(126

)

(4,644)

      Net cash used in financing activities

(2,593

)

(5,530)

Effect of exchange rate changes on cash

(13

)

(51)

     Net decrease in cash and cash equivalents

(299

)

(840)

Cash and cash equivalents, beginning of period

888

1,961

Cash and cash equivalents, end of period

$

589

$

1,121

Supplemental cash flow information:

   Cash paid during the period for:

             Interest

$

227

$

400

             Income taxes

121

149

 (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 accounting principles generally accepted in the United States of America ("US GAAP") 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. The Company has historically 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 conditions affecting operations in Vermont and Canada and the setting of memorials in cemeteries located in northern regions. For further information, refer to the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2008, filed on March 31, 2009 (SEC File No. 000-29464) (the "2008 Annual Report").

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 periods 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 first quarter of 2009 has 94 days versus 89 in 2008.

(2)

Stock-Based Compensation

The following tables set forth stock option activity for the periods ended April 4, 2009 and March 29, 2008 and information on outstanding and exercisable options at such dates:

Three Months Ended

April 4, 2009

March 29, 2008

Number
Of Options

Weighted
Average
Exercise Price

Number
Of Options

Weighted
Average
Exercise Price

Outstanding at beginning of period

324,000

$

4.06

196,000

$

6.11

   Granted

20,000

2.63

-

-

   Exercised

-

-

-

-

   Canceled

-

-

(25,000)

(5.98)

Outstanding at end of period

344,000

$

3.98

171,000

$

6.13

Exercisable at end of period

119,000

$

5.98

146,000

$ 

6.16

Weighted average remaining contractual life

7.1 years

4.4 years

At April 4, 2009, the closing price of the Company's stock was less than the weighted average exercise price of the outstanding options, therefore, there was no aggregate intrinsic value of outstanding options.

(3)

Inventories

Inventories consist of the following (in thousands):

April 4,

December 31,

2009

2008

Raw materials

$

10,297

$

11,610

Work-in-process

1,536

1,166

Finished goods and supplies

4,506

4,064

$

16,339

$

16,840

The finished goods and supplies inventory includes $2,062,000 of retail display inventory that is located at various retail locations and is consigned to PKDM Holdings Inc., the owner of the Company's former retail division. PKDM will be responsible for purchasing the inventory retained by the Company at its current book value, as it is sold, plus any inventory remaining after the tenth anniversary of the transaction, which was completed in January 2008.

 (4)

Earnings (Loss) Per Share

Options to purchase 344,000 and 171,000 shares of Class A common stock were outstanding at April 4, 2009 and March 29, 2008, respectively, but were not included in the computation of diluted earnings (loss) per share because the effect would have been anti-dilutive.

  (5)

Segment Information

The Company is organized based on the products and services it offers.  Until the time of the sale of the retail division in January 2008, Rock of Ages had three business segments: quarry, manufacturing and retail.  As of December 31, 2007 the retail division was classified as a discontinued operation. Under this organizational structure, the Company currently operates in two segments: quarry and manufacturing.

The quarry segment extracts granite from the ground and sells it to either the Company's manufacturing segment or to outside manufacturers, as well as to distributors in Europe and China. There were two quarry customers that represented approximately 38.9% of accounts receivable at April 4, 2009 and 46.1% of accounts receivable at December 31, 2008.  These receivables were backed by irrevocable letters of credit.

The manufacturing segment's principal products are granite memorials and mausoleums used primarily in cemeteries and, to a lesser extent, specialized granite products for industrial applications.

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

The following tables present unaudited segment information for the three month periods ended April 4, 2009 and March 29, 2008 (in thousands):

2009

Quarry

Manufacturing

Unallocated Corporate Overhead

Total

Total net revenues

$

3,416

$

2,814

$

-

$

6,,230

Inter-segment net revenues

(292

)

-

-

(292)

Net revenues

3,124

2,814

-

5,938

Total gross (loss) profit

(225

)

104

-

(121)

Inter-segment gross profit

-

-

-

-

Gross (loss) profit

(225

)

104

-

(121)

Selling, general and administrative expenses

547

968

1,041

2,556

Effect of pension curtailment

-

-

95

95

Loss from continuing operations before interest and taxes

$

(772

)

$

(864

)

$

(1,136

)

$

(2,772)

2008

Quarry

Manufacturing

Unallocated Corporate Overhead

Total

Total net revenues

$

5,262

$

3,721

$

-

$

8,983

Inter-segment net revenues

(593)

-

-

(593)

Net revenues

4,669

3,721

-

8,390

Total gross (loss) profit

(487)

353

-

(134)

Inter-segment gross profit

(3)

3

-

-

Gross (loss) profit

(490)

356

-

(134)

Selling, general and administrative expenses

609

1,006

1,287

2,902

Loss from continuing operations before interest and taxes

$

(1,099)

$

(650)

$

(1,287)

$

(3,036)

Net revenues by geographic area, based on shipping destination, for the three months ended April 4, 2009 and March 29, 2008 are as follows (in thousands):

Three Months Ended

April 4, 2009

March  29, 2008

Net revenues:

  China

$

845

$

1,813

  Italy

5

213

  Other foreign countries   (excluding Canada)

75

90

925

2,116

  United States and Canada

5,013

6,274

Total net revenues

$

5,938

$

8,390

Net property, plant and equipment by geographic area are as follows (in thousands):

April 4, 2009

December 31, 2008

United States

$

26,620

$

27,144

Canada

2,733

2,854

$

29,353

$

29,998

Comprehensive Income (Loss)

Accumulated other comprehensive loss consists of the following components (in thousands)

Three Months Ended

April 4, 2009

March  29, 2008

Net loss

$

(2,774)

$

(3,305)  

Other comprehensive income (loss):

    Foreign currency translation adjustment

(97)

(284)

    Unrealized gain (loss) on investment in available for sale securities

26

(73)

    Pension related adjustment:

         Curtailment

1,503

-

         Pension liability adjustment, net of reclassification adjustment

2,517

85

 Comprehensive income (loss)

$

1,175

$

(3,577)

  (7)

Components of Net Periodic Benefit Cost

Components of net periodic benefit cost for the three months ended April 4, 2009 and March 29, 2008 are as follows (in thousands):

NON-UNION
PENSION BENEFITS

SALARY CONTINUATION BENEFITS

OTHER POST-EMPLOYMENT BENEFITS

April 4, 2009

March 29, 2008

April 4, 2009

March 29, 2008

April 4, 2009

March 29, 2008

Service cost

$

65

$

79

$

-

$

-

$

1

$

2

Interest cost

387

377

84

81

26

27

Expected return on plan assets

(318)

(420)

-

-

-

-

Amortization of prior service costs

32

35

28

14

12

10

Amortization of net actuarial loss

155

26

-

-

-

-

Effect of curtailment

95

-

-

- 

-

- 

Net periodic benefit cost

$

416

$

97

$

112

$

95

$

39

$

39

Effective March 31, 2009, the Company's defined benefit pension plan was amended by freezing membership and future benefits in the plan.  In accordance with SFAS No. 88, "Employers' Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits" we recognized additional pension expense of $95,000 as the effect of the pension curtailment in the first quarter. Additionally, the defined benefit pension plan has been preliminarily revalued as of the date of the curtailment. The estimated effect of the curtailment and re-measurement resulted in a decrease of the projected benefit obligation of $3.8 million and a decrease in the accumulated other comprehensive loss of $4.0 million. A discount rate of 7.36% was used in the March 31, 2009 preliminary revaluation.

The Company expects to contribute $750,000 to the defined benefit pension plan during 2009. No contribution was made during the quarter ended April 4, 2009.

(8)

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), "Business Combinations" ("SFAS No. 141(R)"). This statement improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. It establishes principles and requirements for how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. This statement is effective for fiscal years beginning after December 15, 2008. SFAS No. 141(R) will have an impact on accounting for business combinations once adopted, but the effect is dependent on acquisitions subsequent to that time.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities - an amendment of FASB No. 133". ("SFAS No. 161"). This statement amends SFAS No. 133 by requiring enhanced disclosures about an entity's derivative instruments and hedging activities, but does not change SFAS No. 133's scope or accounting. SFAS No. 161 requires increased qualitative, quantitative and credit-risk disclosures about the entity's derivative instruments and hedging activities. SFAS 161 is effective for fiscal years, and interim periods within those fiscal years, beginning after November 15, 2008, with earlier adoption permitted. The adoption of this standard did not have an effect on our financial position or results of operations.

In April 2008, the FASB issued FASB Staff Position 142-3, Determination of the Useful Life of Intangible Assets ("FSP FAS 142-3"), which amends the factors to be considered in renewal or extension assumptions used to determine the useful life of a recognized intangible asset.  FSP FAS 142-3 is effective for interim periods and fiscal years beginning after December 15, 2008.  We adopted FSP FAS 142-3 effective January 1, 2009. The adoption of this standard did not have an effect on our financial position or results of operations.

In June 2008, the FASB issued FSP Emerging Issues Task Force (EITF) No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities."  Under the FSP, unvested share-based payment awards that contain rights to receive nonforfeitable dividends (whether paid or unpaid) are participating securities, and should be included in the two-class method of computing EPS. The adoption of these standards did not have a material effect on our financial position or results of operations..

In December 2008, the FASB issued FASB Staff Position ("FSP") FAS No. 132(R)-1, "Employer's Disclosures about Postretirement Benefit Plan Assets." This FSP amends SFAS No. 132(R), "Employers' Disclosures about Pensions and Other Postretirement Benefits - An Amendment of FASB Statements No. 87, 88, and 106" to require more detailed disclosures about plan assets of a defined benefit pension or other postretirement plan, including investment strategies; major categories of plan assets; concentrations of risk within plan assets; inputs and valuation techniques used to measure the fair value of plan assets; and the effect of fair-value measurements using significant unobservable inputs on changes in plan assets for the period. FSP 132(R)-1 is effective for fiscal years ending after December 15, 2009, with earlier application permitted. We do not expect the adoption of this standard to have a material effect on our financial position or results of operations.

In April 2009, the FASB issued FSP FAS 157-4, "Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly".  SFAS No. 157-4 provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, ("SFAS 157"), when the volume and level of activity for the asset or liability have significantly decreased. SFAS 157 is effective for non-financial assets and liabilities for year ends beginning on or after November 15, 2008. The adoption of this standard did not have a material effect on our financial position or results of operations.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of Financial Instruments" amends FASB Statement No. 107, "Disclosures about Fair Value of Financial Instruments", to require disclosures about fair value of financial instruments in interim as well as in annual financial statements.  This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in all financial statements.  This FSP is effective for interim reporting periods ending after June 15, 2009. We are currently evaluating the effect, if any, that the adoption of FAS 107-1 and APB 28-1 may have on our financial statements.

(9)

Credit Facility

In October 2007, the company entered into a new credit facility with its existing lenders, the CIT Group/Business Credit and Chittenden Trust Company (the "Lenders") that will expire in October 2012 and is secured by substantially all assets of the Company located in the United States.  The credit facility consists of an acquisition term loan line of credit of up to $30.0 million and a revolving credit facility of up to another $20.0 million based on eligible accounts receivable, inventory and certain fixed assets. Amounts outstanding were $4,961,000 and $13,991,000 as of April 4, 2009 and $9,637,000 and $14,356,000 as of March 29, 2008 on the revolving credit facility and the term loan line of credit, respectively. Availability under the revolving credit facility was $8,650,000 as of April 4, 2009. The credit facility financing agreement places restrictions on our ability to, among other things, sell assets, participate in mergers, incur debt, pay dividends, make capital expenditures, repurchase stock and make investments or guarantees, without pre-approval by the Lenders. Due to the non-cash impairment charges on the write-down of inventory and the corporate building we were in violation of the fixed charge coverage ratio covenant described below at December 31, 2008. We received a waiver of this covenant from the Lenders and amended the agreement as of March 30, 2009.

Repayment Terms. As the aggregate unpaid principal balance of the outstanding term loan is less than $17,500,000, quarterly principal payments are no longer required. The principal balance is payable in full on the expiration date of the facility in October 2012.  The Company does have the right to make voluntary pre-payments on the term loan. The revolving credit facility is paid down daily with all proceeds received by the Company.

The Company is required to repay its term loan to the extent it sells certain assets collateralizing the loan. Accordingly, the Company has classified a portion of the term loan as a current liability based on the estimated proceeds of fixed assets classified as held for sale. The current maturities of long-term debt at December 31, 2008 have been adjusted from the amount previously presented to correct for the misclassification of the term loan related to assets held for sale at that date.

Minimum Fixed Charge Coverage Ratio . The facility requires the ratio of the sum of earnings before interest, taxes, depreciation and amortization (EBITDA), to the sum of income taxes paid, capital expenditures, interest and scheduled debt repayments be at least 1.10 for the trailing twelve-month period at the end of each quarter. The Company was in compliance with this covenant at April 4, 2009.

Total Liabilities to Net Worth Ratio. The credit facility also requires that the ratio of our total liabilities to net worth (the "Leverage Ratio") not exceed 2.25 for the first two quarters of 2009 and 2.00 for the remainder of the term of the loan. The Leverage Ratio excludes from the calculation the change in tangible net worth directly resulting from the Company's compliance with SFAS No. 158 of $6.0 million. In relevant part, SFAS No. 158 required us to place on our books certain unrecognized and unfunded retirement liabilities beginning December 31, 2006.  As of April 4, 2009, we were in compliance with the Leverage Ratio covenant.

(10)

Income Taxes

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2005 or Canadian tax authorities for years before 2003.

Income tax benefits in the first quarters of 2009 and 2008 result solely from losses at our Canadian subsidiary. Tax benefits are calculated based on the estimated annual effective Canadian tax rate of 31% for 2009 and 2008.  

In 2005, the Company adjusted its valuation allowance to fully reserve for the entire net U.S. deferred tax asset. At each subsequent period, including at the end of the first quarter of 2009, we reached a similar conclusion, therefore we have continued to fully reserve for the entire net U.S. deferred tax asset. We will continue to assess the valuation allowance on a regular basis and may reduce the valuation allowance if and/or when the Company has taxable income from its U.S. operations.

As of April 4, 2009 and December 31, 2008, the Company had no liability under the provisions of FIN 48.

(11)

Discontinued Operations

In January 2008, the Company completed the sale of the retail division for $8,000,000 in cash less closing costs of $283,000.  

Operating results from the retail division for the portion of the quarter ended March 29, 2008 during which it was owned by the Company, were as follows (in thousands):

Net sales

$    $

421

Gross loss

(116)

Pretax loss

(119)

Interest allocated

23

   Net loss

$

(142)

(12)

Intangible Assets and Goodwill

In the first quarter of 2008 the Company completed the acquisition of the customer list of a former competitor for $375,000 CDN. This was accounted for in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets" and, accordingly, was capitalized and is being amortized on a straight-line basis over the estimated useful life of five years. Amortization expense of $18,750 CDN and $12,500 CDN was recorded in the first quarter of 2009 and 2008, respectively.  Amortization expense is estimated to equal $75,000 CDN per year for the next four years.

We assess impairment of goodwill in accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible Assets." The provisions of SFAS No. 142 require a two-step test be performed. First, the fair value of each reporting unit is compared to its carrying value. If the fair value exceeds the carrying value, goodwill is not impaired and no further testing is performed. If the carrying value exceeds the fair value, then the implied fair value of the reporting unit's goodwill must be determined and compared to the carrying value of the goodwill. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, then an impairment loss equal to the difference will be recorded.  In the first quarter of 2009, we performed our annual assessment for the quarry reporting unit. We calculated the fair value of the quarry reporting unit based on the estimated expected discounted future cash flows. Based on this analysis we concluded that there was no indication of impairment as of April 4, 2009, although there can be no assurance that goodwill will not become impaired in future periods.

(13)

Fair Value Measurements

Effective January 1, 2009, the Company adopted SFAS 157 for its non-financial assets and non-financial liabilities.  Effective January 1, 2008, the Company adopted SFAS 157 for its financial assets and liabilities. SFAS 157 establishes a new framework for measuring fair value and expands disclosure requirements. SFAS 157 defines fair value as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants.  The adoption of SFAS 157 did not have a material impact on our fair value measurements.

SFAS 157's valuation techniques are based on observable or unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. These two types of inputs have created the following fair value hierarchy:

• Level 1-  Quoted prices for identical instruments in active markets. 

• Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which significant value drivers are observable.

• Level 3 - Valuations derived from valuation techniques in which significant value drivers are unobservable.

Investment securities are carried at fair value using level one inputs. The Company owns 1,000,000 shares of Family Memorials, Inc. a company that is publicly traded on the Toronto Stock Exchange. At April 3, 2009, the stock traded at $.06 per share which falls within the Level 1 fair value hierarchy in its entirety.

(14)

Subsequent Events

On April 17, 2009, Rock of Ages Canada, ("ROA Canada"), a wholly owned subsidiary of the Company signed an Asset Purchase Agreement and completed the purchase of the real and personal property comprising the Polycor Stanstead Quarry, located in Stanstead, Quebec, Canada from Carrieres Polycor, Inc. ("Polycor").  The purchase price for the quarry, building and inventory was $1.3 million CDN. This purchase was funded by ROA Canada's line of credit with the Royal Bank of Canada. In connection with the purchase, Polycor entered into an agreement that limits Polycor from owning or operating a quarry similar to the Stanstead Gray quarry within fifty kilometers of Stanstead, Quebec.  This agreement also prohibits Polycor from soliciting ROA Canada's customers for sales of gray granite. In connection with the purchase, ROA Canada entered into a 30 year supply agreement with Polycor, whereby ROA Canada must supply Polycor with standard blocks not to exceed 300 cubic meters (or 10,594 cubic feet) a month at ROA Canada's best price offered to other quarry customers less a 10% discount on first grade granite if paid within thirty days.  ROA Canada also assumed the remaining three years of supply agreements with two unrelated granite manufacturers.

On April 25, 2009, the Company concluded negotiations on new collective bargaining agreements with the two unions representing the production workforce in its quarries and manufacturing plants located in Barre, Vermont. Accordingly, effective April 25, 2009 the Company entered into three separate collective bargaining agreements: A two year agreement with the United Steelworkers covering part of the production workforce in its manufacturing plant in Barre, Vermont; a two year agreement with the Granite Cutters Association covering the remainder of the production workforce in the Company's manufacturing plant in Barre, Vermont; and a three year agreement with the United Steelworkers covering its production workforce in its Vermont quarries. The three year quarry agreement commences on April 25, 2009 and expires on April 27, 2012, and the manufacturing agreements commence on April 25, 2009 and expire on April 29, 2011. Pursuant to the agreements, wages for quarry workers remain the same in year one and increase $0.50 per hour in years two and three, and wages for manufacturing plant workers remain the same in year one and increase $0.50 per hour in year two.  The workers agreed to a modest increase in their share of health insurance premiums beginning in 2010 and the quarry worker's partner in productivity bonus plan will now be capped at the nine year average of $4,500 per person.

(15)

Assets Held For Sale

As of April 4, 2009 the Company held various assets for sale, which were no longer being used in production, totaling $831,000 compared with $477,000 at December 31, 2008.  These assets have been classified as current assets held for sale.  The estimated sales prices for the assets are expected to exceed the carrying values therefore no impairments were recognized.  Accordingly, $831,000 has been reclassified from the term loan to current maturities of long term debt since the company is required to apply the proceeds from the sale of these assets, when they are sold, against the term loan.

 Item 2.

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

Overview

Rock of Ages is an integrated quarrier and manufacturer of granite and products manufactured from granite. During the first quarter of 2009, we had two business segments:  quarry and manufacturing. The quarry division sells granite blocks to the manufacturing division and to outside manufacturers, as well as to customers outside North America. The manufacturing division's principal products are granite memorials and mausoleums used primarily in cemeteries. It also manufactures specialized granite products for industrial applications.

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 under those conditions. In addition, we either close or reduce the operations 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 significant net loss during the first three months of each calendar year.

In the first quarter of 2009 revenues in our quarry division decreased 33% from the same period last year. We feel the decrease was in part, a timing issue as the quarry shipments in the first and fourth quarters of 2008 were unusually strong. However, even with the decrease in revenue, the gross loss decreased 54% from the same period last year.  SG&A expenses decreased 10% due to staffing reductions and other cost cutting measures. The quarry operating loss was 30% lower than the same period last year.

Revenue in our manufacturing division was $907,000 lower in the first quarter of 2009 from the same period last year. The reduction in manufacturing shipments is due to a lower beginning backlog to start the year. As a result the gross profit for the first quarter of 2009 was $250,000 lower than the same period last year. SG&A expenses were comparable with last year. The manufacturing operating loss was $214,000 higher than last year's first quarter.

Critical Accounting Policies

General

Management's Discussion and Analysis of Financial Condition and Results of Operations is based upon our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.

Our critical accounting policies are as follows:  revenue recognition, impairment of long-lived assets and long-term investments, valuation of deferred tax assets, accounting for pensions and other post-employment benefits and excess inventory. There have been no material changes in the Company's critical accounting policies or changes in the methodology applied by management for critical accounting policies from what was previously disclosed in our most recent Form 10-K.

Three Months Ended

April 4, 2009

March 29, 2008

Net Revenues:

                Quarry

52.6%

55.6%

                Manufacturing

47.4%

44.4%

                    Total net revenues

100.0%

100.0%

Gross Profit (Loss):

                Quarry

(7.2%

)

(10.5%

)

                Manufacturing

3.7%

9.6%

                     Total gross profit (loss)

(2.0%

)

(1.6%

)

Selling, general and administrative expenses:

                Quarry

17.5%

13.0%

                Manufacturing

34.4%

27.0%

                Corporate overhead

17.5%

15.3%

                Effect of pension curtailment

1.6%

-

                      Total SG&A expenses

44.6%

34.6%

Loss from continuing operations before interest and income taxes

(46.6%

)

(36.2%

)

Other income, net

(1.5%

)

(0.8%

)

Interest expense

3.5%

4.3%

Loss from continuing operations before income taxes

(48.6%

)

(39.7%

)

Income tax benefit

(1.9%

)

(2.0%

)

Loss from continuing operations

(46.7%

)

(37.7%

)

Discontinued operations

-

(1.7%

)