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**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549_______________ **

**FORM 10-K/AAMENDMENT NO. 1**

** **

**(MARK ONE)**

** x****   ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

** FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002. **

**OR**

** **

**o**   TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF         1934 **FOR THE TRANSITION PERIOD FROM________TO________
** COMMISSION FILE NO. 000-29464**

** ROCK OF AGES CORPORATION**(Exact name of registrant as specified in itscharter)_______________

 
**DELAWARE**(State or other jurisdiction of  incorporation or organization)
**030153200(I.R.S. Employer  Identification Number)
**772 GRANITEVILLE  ROAD  GRANITEVILLE, VERMONT**(Address of principal executive offices)

**05654**(Zip Code)

Registrant's telephone number, including areacode: **(802) 476-3121**

Securities registered pursuant to Section 12(b)of the Act:
**TITLE OF EACH CLASS**
**NAME OF EACH EXCHANGE  ON WHICH REGISTERED**

None

 

Securities registered pursuant to Section 12(g)of the Act:
CLASS A COMMON STOCK, PAR VALUE $0.01(Title of Class)
   Indicate by check mark whether the registrant (1)has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes xNo o
   Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of registrant's knowledge, indefinitive proxy or information statements incorporated by reference in PartIII of this Form 10-K or any amendment to this Form 10-K.  x

   Indicate by check mark whether the registrant is an acceleratedfiler (as defined in Rule 12b-2 of the Act.) Yes o No x

   Asof June 28, 2002, the aggregate market value of the registrant's voting stock(including Class B Common Stock, par value $.01 per share ("Class B CommonStock"), which is convertible on a share-for-share basis into Class A CommonStock, par value $.01 per share ("Class A Common Stock" and, together withClass B Common Stock, "Common Stock")), held by non-affiliates of theregistrant was $40,908,690. As of March21, 2003, there were outstanding 4,429,646 shares of Class A Common Stock and2,756,395 shares of Class B Common Stock.
**Explanatory Note**

ThisAmendment No. 1 to Rock of Ages Corporation Annual Report on Form 10-K for theyear ending December 31, 2002 is being filed solely for the purpose ofcorrecting certain clerical and typographical errors, and correcting the netincome adjusted for non-cash items amounts for 2002and 2001 in the *Cash Flow*discussion under "Liquidity and Capital Resources" in Item 7 - Management'sDiscussion and Analysis of Financial Condition and Results of Operations.

 

**TABLE OF CONTENTSPART I**

 
**PAGE**
ITEM 1.
BUSINESS 
2
ITEM 2.

PROPERTIES

7
ITEM 3.

LEGAL PROCEEDINGS

9

ITEM 4.

SUBMISSION OF MATTERS  TO A VOTE OF SECURITY HOLDERS

9

 

 

 

 

**PART  II**

 
         
ITEM 5.

MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

10

ITEM 6.

SELECTED FINANCIAL  DATA

11

ITEM 7.

MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS  

12

ITEM 7A.

QUANTITATIVE AND  QUALITATIVE DISCLOSURES ABOUT MARKET RISK

23

ITEM 8.

FINANCIAL STATEMENTS  AND SUPPLEMENTAL DATA

23

ITEM 9.

CHANGES IN AND  DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 

23

 

 

 

 

**PART  III**

 
         
ITEM 10.

DIRECTORS AND EXECUTIVE OFFICERS

24

ITEM 11.

EXECUTIVE COMPENSATION

26

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND  MANAGEMENT AND RELATED STOCKHOLDER MATTERS

30

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

32
ITEM 14.CONTROLS AND PROCEDURES
33
 

 

 

 
**PART IV**
 
         
ITEM 15.

EXHIBITS, FINANCIAL  STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

34

SIGNATURES

35
CERTIFICATIONS
36
INDEX TO CONSOLIDATED  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

38

 

**SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS**

Certain statements inthis Annual Report on Form 10-K, and other oral and written statements made bythe Company from time to time, are "forward-looking statements"within the meaning of Section 21E of the Securities Exchange Act of 1934 (the"Exchange Act"), asamended, including those that discuss strategies, goals, outlook or othernonhistorical matters, or projected or anticipated revenues, income, returns orother financial measures. These forward-looking statements are subject tonumerous risks and uncertainties that may cause actual results to differmaterially from those contained in such statements. These risks and uncertaintiesinclude the ability of the Company to continue to identify suitable retailacquisition candidates, to consummate additional retail acquisitions onacceptable terms and to successfully integrate the operations of such acquiredentities.

Other factors andassumptions that could generally cause the Company's actual results to differmaterially from those included in the forward-looking statements made hereininclude the effects of general economic conditions in the United States orabroad, changes in competitive market conditions, changes in the Company'sbusiness strategy or an inability of the Company to implement its growthstrategy due to unanticipated changes in general economic conditions, theCompany's ability to negotiate collective bargaining agreements, demand for the Company's products and thesufficiency of the Company's production capacity to meet future demand for itsproducts. Other factors and assumptions not identified above were also involvedin the derivation of the forward-looking statements contained in this AnnualReport on Form 10-K, and such other factors and the failure of such otherassumptions to be realized, may also cause actual results to differ materiallyfrom those projected. See "Risk Factors That May Affect Future Results" underItem 7 below. The Company assumes no obligation to update theseforward-looking statements to reflect actual results or changes in factors orassumptions affecting such forward-looking statements.

1

 

**PART I**

** **

**ITEM 1.  BUSINESS**

**GENERAL**

Rock of Ages Corporation("Rock of Ages" or the "Company") was founded in 1885 andis an integrated granite quarrier, manufacturer and retailer whose principalproduct is granite memorials used primarily in cemeteries. The Company believesthat it is the largest quarrier, manufacturer and retailer of finished granitememorials and granite blocks for memorial use in North America, based onrevenues. The Company owns and operates 11 active quarry properties and 6manufacturing and sawing facilities in North America, principally in Vermontand the Province of Quebec. The Company markets and distributes its memorialson a retail basis through approximately 99 Company-owned retail sales outlets(including sales outlets located at certain cemeteries owned by the Companylocated in the state of Kentucky) in the states indicated in Item 2 below. TheCompany also sells memorials wholesale to approximately 70 independentauthorized Rock of Ages retailers in the United States as well as approximately90 retailers in Canada. The Companymarkets its memorials at four quality and price points under four separatebrand names: *Signature, Sealmark, Golden Rule by Rock of Ages*and *Stone Eternal by Rock of Ages.* The Company also sells non-brandedmemorials. The Company believes the *Rock of Ages* trademark is one of the oldestand best-known brand names in the granite memorialization industry. The Companyactively promotes its brand names and places a seal bearing the brand name oneach branded memorial. All *Rock of Ages* branded memorials are supported by aperpetual warranty with varying levels of coverage depending on the brand.

*Rock of Ages, Signature, Sealmark, Golden Ruleby Rock of Ages, Stone Eternal by Rock of Ages, American Black, Barre Gray,Bethel White, Salisbury Pink,Gardenia White***and *Laurentian Pink*are trade names or trademarks ofthe Company. The Company relies on both registered and common law trademarks inthe U.S. to protect its trademark rights. 
As part of the Company's growth strategy to focus its resources on buildingand expanding its branded memorial retail distribution system and profitablequarry operations, and to increase the profitability of the Company'smanufacturing operations, the Company divested itself of 2 quarries and 2non-core manufacturing facilities in 2001. In January 2002, the Company alsosold its Lawson manufacturing facility in Barre, Vermont ("Lawson") for a totalsales price of $2,550,000 of which $2,300,000 was paid at closing and $250,000is payable pursuant to the terms of a promissory note delivered by the buyer atclosing.

Also as part of its growth strategy, the Company has engaged in variousstrategic acquisitions. From 1998 to 2000, the Company acquired 26 retailmonument companies, expanding its retail presence to 15 states. In January 2001,the Company acquired 16 cemeteryproperties and 1 memorial retailer located in the state of Kentucky. During thesecond quarter of 2002, the Company acquired a 1/3 equity interest in VIKA Ltd.,a Ukrainian closed joint stock company that owns rights to quarry stone knownas "Galactic Blue" on certain property located in Zhytomir, Ukraine, for apurchase price of $475,000. In connection with the share purchase, the Companyacquired exclusive rights to sell the output of the Galactic Blue quarry.

The Company hasoperations in four business segments: Quarrying, Manufacturing, Retailing andCemeteries. Included within the business segments are operations that areunincorporated divisions of Rock of Ages and others that are separatelyincorporated subsidiaries. Financial information by business segment andgeographic area is incorporated herein by reference to note 14 to theConsolidated Financial Statements of the Company. In addition, informationregarding the revenues of each business segment is incorporated herein byreference to Item 7 "Management's Discussion and Analysis of FinancialCondition and Results of Operations." Risks attendant to foreign operationsare also incorporated herein by reference to "Management's Discussion andAnalysis of Financial Condition and Results of Operations-Risk Factors that MayAffect Future Results" in Item 7. Additional information regardingeach business segment and Rock of Ages in general is set forth below and on theCompany's website at www.rockofages.com. The information provided on theCompany's website is not incorporated by reference into this Annual Report onForm 10-K and should not be considered part of this report.

**GROWTH STRATEGY**

The Company seeks toexpand the scope and profitability of its operations through a growth strategythat focuses on forward vertical integration into retailing, thereby enablingthe Company to move closer to the ultimate customer. The principal elements ofthe growth strategy include the following:

2
- Expansion ofCompany-Owned Retail Network. The Company anticipates that it will continue toexpand its Company-owned retail network by selectively acquiring independentgranite memorial retailers and by opening new retail stores in selected marketsin North America. By expanding its Company-owned retail network, the Companybelieves that it will capture the higher gross margins (relative to quarrying andmanufacturing gross margins) that have historically existed at the retail level. Where appropriate, the Company may alsoacquire cemetery properties that have the potential of expanding sales of itsgranite memorials.

 
- Increased Emphasison Independent Authorized Dealers. The Company seeks to  expand where appropriate its base of independent authorized Rock of Agesretailers that are current or potential customers of the Company in furtheranceof its efforts to build an integrated retail network consisting ofCompany-owned and independent authorized Rock of Ages retail outlets that sellthe Company's brands.
 
- Brand Enhancement.The Company believes that the Rock of Ages brand is one of the best-known brandnames in the memorial industry. The Company will, as a partof building its integrated network of Company-owned and independent retailers, continue to  promote the Rock of Ages brandand other proprietary brands sold at its Company-owned retail outlets andindependent authorized Rock of Ages dealers.
 Strategic Allianceswith Funeral Homes and Cemeteries. The Company has formed and anticipates thatit will continue to pursue strategic alliances with funeral home and cemeteryowners to sell granite memorials in cooperation withthem, in order to increase both pre-need and at-need sales of granitememorials.

 SelectedAcquisitions of Quarries. While the Company owns or controls many of the highestquality granite quarries in North America, the Company will continue to explorethe possibility of acquiring selected granite quarriers in North America andinternationally to assure that it will continue to have the colors and gradesof granites sought by retail purchasers of granite memorials in North America,as well as granites for other uses.

 Other Product LineEnhancements. The Company intends to continue to expand and enhance itsmemorial product lines in color, design and style. The Company's objective isto provide a full range of memorials available at various price ranges.

**PRODUCTS**

The Company's principalproducts may be classified into three general product lines: granite quarryproducts, manufactured granite products and non-granite memorials and cemeteryproducts. Theprincipal raw material for both granite product lines is natural granite as itcomes from the ground with the primary difference between the product linesbeing the extent of the processing or manufacturing of the granite. Non-granitememorials and cemeteryproducts include burial lots, community mausoleum niches, lawn crypts, vaults,bronze markers and related services. For each ofthe last three years, from 2002 to 2000, revenues derived from the sale of granite quarry productshave accounted for 32%, 27% and 25%, respectively, of consolidated revenues while revenuesderived from the sale of manufactured granite products have accounted for 63%,69% and 75%, respectively, of consolidated revenues. In each of the last three years, revenuesattributable to the sale of non-granite memorials and cemetery products accounted for less than6% ofconsolidated revenues.

*Granite Quarry Products.* The principal quarry product sold by the Companyis granite blocks, the raw material of the dimension granite industry. Theseblocks are extracted from quarries in various sizes through a drilling,blasting and wire sawing process in the quarry. The range of block sizes islarge, but most manufacturers of granite memorials and other products generallyrequire minimum dimensions of height, width and length to maximize theefficiency of their block sawing equipment in meeting the required dimensions ofthe finished product. Granite blocks are normally sold in heights from2'6" to 5', widths of 3' to 5', and lengths from 7' to 10'. These blockstypically weigh between 20 and 30 tons.

Granite differs fromdeposit to deposit by color, grade and/or quality. Rock of Ages quarriesand sells blocks of (i)*Barre Gray*granite from its Barre, Vermont quarryand gray granite from its Stanstead,Quebec quarry, (ii) black granite from its *American Black* quarry inPennsylvania, (iii) pink granites from its *Laurentian Pink* quarry in Quebec andits *Salisbury Pink*quarry in North Carolina, (iv) white granites from its*Bethel White* quarry in Vermont and its *Gardenia White* quarry in North Carolina,(v) brownish red granite from its *Autumn Rose* quarry in Oklahoma and (vi)grayish pink  granites from its *Kershaw* and*Coral Gray*quarries in SouthCarolina.

TheCompany sells granite blocks for memorial, building and other uses. While eachof the quarries owned by the Company sells granite for memorial use and forbuilding use, the output of the *Bethel White* quarry, the *Gardenia White* quarry,and the *Salisbury Pink*quarry are primarily sold and used for buildinggranite use outside North America and the output of the other quarries isprimarily used for memorial use in North America. 

3

Granite blocks sold bythe Company both in and outside North America are sold by a quarry sales force. The Company'squarry sales force markets and advertises its granite blocks in various tradepublications and by attending various trade shows worldwide. Outside ofNorth America, the Company's quarry sales force generally sells directly  to thecustomer orto independentdistributors who buy blocks from the Company and resell them. This includesRock of Ages Asia, a 50% Company-owned corporation.

Other quarry productsinclude waste pieces not of a shape or size suitable for manufacturing whichare sold for riprap for embankments, bridges or piers, and for other uses. Invarious quarries, the Company has arrangements with crusher operators whooperate on or near the Company's quarries and sell crushed stone. The revenuesand profits of these operations are not material. The Company has no marketingand advertising programs for these other quarry products.

*Manufactured Products*. The principal manufactured product of Rock ofAges is granite memorials, which are sold to retailers of granite memorials,including Company-owned outlets, and substantially all of which are placed incemeteries in remembrance of the life of a person or persons. The memorialssold by the Company encompass a wide range of granites, including graniteblocks purchased from others, as well as a wide array of sizes, styles andshapes ranging from small, inexpensive markers set flush to the ground, to veryelaborate and expensive personal mausoleums of larger sizes available atvarious price ranges. The broad classifications of granite memorials used bythe industry are generally markers, hickeys, slants, standard uprights, estateuprights, pre-assembled mausoleums and conventional mausoleums. From time totime memorial retailers or others order granite products such as benches, stepsand other products that may or may not be for cemetery use. These areclassified by the Company as memorial sales. The Company also sells public andcivic memorials both at wholesale and direct to the customer.

The Company is widelyrecognized for the personalized granite memorials it produces and the verylarge memorials it can produce. It has made memorials as large as thirty-five feetin length from one block of granite, including a full size granite replica of aMercedes Benz automobile.

The Company's granitememorials are sold to retailers by the Company's memorial sales force thatregularly speaks with customers by phone and makes personal visits tocustomers. The Company provides various point of sale materials to its ownedand independent authorized Rock of Ages dealers, and also advertises invarious trade publications.

The Company alsomanufactures certain precision granite products, which are made along withmemorials at the Company's Barre, Vermont plant. These products include surfaceplates, machine bases, bases for coordinate measuring devices, press rolls and other productsmanufactured to exacting dimensions. These products are sold to themanufacturers of precision measuring devices or end users. Precision productsare sold by a precision products sales force that phones or visits customers.The Company also advertises its precision products in various trade publicationsand provides printed sales materials to prospective customers.

*Retail Products*. The Company's retail division markets and sells granite, bronze andmarble memorials primarily to consumers. The Company currently owns andoperates approximately 99 retail outlets in 15 states. The granite memorialssold at retail include a wide variety of sizes, styles and shapes. The Companysources memorials from its own plants and a number of additional manufacturersin North America and elsewhere in the world. The Company's retail operations utilize a retail sales forcethat markets and sells memorials through phone calls and direct meetings withcustomers in their homes and at retail sales offices. The Company advertisesand promotes retail sales through direct mail material, yellow page listingsand newspaper advertising. The Company's retail sales outlets are positioned tosell branded and unbranded memorials at all price points and qualities.

*Cemetery Products.* The Company's cemetery division markets andsells cemetery lots and funeral services such as grave openings and closings.The cemetery division also markets and sells cemetery merchandise such asvaults, bronze markers and niches in community mausoleums at some of itscemeteries. The cemetery division has opened sections in some of its cemeteriesthat allow the placement of upright granite memorials. Sales of upright granitememorials are handled either by cemetery sales personnel who have been trainedto sell such memorials, or by sales personnel from a nearby Company-ownedretail store. Revenue from sales of upright granite memorials is recognized inthe retail products segment.

**MANUFACTURING AND RAW MATERIALS**

The Company quarries andmanufactures granite in the United States and Canada at the locations detailedin Item 2 "Properties." TheCompany also out-sources the manufacturing of certain memorial productspursuant to supply agreements with other manufacturers.  There were noplants acquired or material additions to plants in 2002. Management believesthat the Company's manufacturing and quarrying capacity, together with itsmanufacturing outsourcing arrangements, is generally sufficient to meetanticipated production requirements for the foreseeable future.

4

The most significant rawmaterial used by the Company in its manufacturing operations is granite blocksprimarily from the Company's quarries. The Company has an adequate supply fromits quarries to supply its manufacturing operations. The Company also purchasescertain colors of granite, primarily red and black, from other quarriers. TheCompany believes there is an adequate supply of memorial granite available fromits quarries and quarries owned by others for the foreseeable future.

Significant suppliesused by the Company in its manufacturing operations include industrial diamondsegments for saw blades and wires, drill steel, drill bits and abrasives. Thereare a number of sources for these supplies at competitive prices.

The Company had manufacturingbacklogs of $10.6 million as of December 31, 2002 and $11.5 million as ofDecember 31, 2001. These backlogs occurred in the normal course of business.The Company does not have a material backlog in its quarrying operations. TheCompany had retail backlogs of $11.1 million as of December 31, 2002 and $10.5million as of December 31, 2001. The Company expects that substantially all ofthe backlog orders will be filled during the 2003 fiscal year.

The Company does notnormally maintain a significant inventory of finished manufactured products inanticipation of future orders in its manufacturing operations. The Company doesmaintain a significant inventory of memorials for display and delivery purposesat its retail operations. Approximately 75% of the Company's manufacturedproduct orders and retail orders are delivered within two to twelve weeks, asis customary in the granite memorial industry. The delivery time depends on thesize and complexity of the memorial. The Company does accumulate inventory ofgranite blocks from September through December in preparation for the wintermonths when its northern quarries are inactive.

Because the Company'sBarre quarries are closed from mid-December through mid-March, in December eachyear the Company provides special 90-day payment terms at these quarries forall blocks purchased in the month of December. Customers' manufacturing plantsgenerally remain open during most of this period, and most customers prefer toassure they own blocks of a size and quality selected by them prior to thequarryclosure. All blocks purchased from the Company's Barre quarries in December ondeferred payment terms are invoiced on or about December 31 and removed fromthe Company's inventory with title passing to the buyer. 

Payment terms areone-third of the invoice amount on January 15, one-third on February 15, andone-third on March 15. This program provides essentially the normal 30-daypayment terms during the months when the Barre quarries are closed,notwithstanding the customer's purchase of a 3-month supply in December.Customers need not use these terms and may buy from inventory during theclosure period on a first come first served basis with normal 30-day terms.

**RESEARCH ANDDEVELOPMENT**

The Company does nothave a research and development department for any of its products. The Companyregularly conducts market research, as well as research on new product designsand on equipment to improve the Company's technology. These activities are notseparately accounted for as research, and the Company had no expendituresclassified for financial reporting purposes as research in 2000, 2001 or 2002.

**COMPETITION**

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

The granite memorialindustry is also highly competitive. The Company competes with other granitequarriers and manufacturers in the sale of granite blocks for memorial use onthe basis of price, color, quality, geographic proximity, service, designavailability, production capability,  availability of supply and deliveryoptions. All of the Company's colors of granite are subject to competition frommemorial grade granite blocks of similar color supplied by quarriers locatedthroughout the world. There are approximately 140 manufacturers of granitememorials in North America. There are also manufacturers of granite memorials inIndia, South Africa, China and Portugal that sell finished memorials in NorthAmerica. 

The Company's quarrying and manufacturing competitors include both domesticand international companies, some of which may have greater financial,technical, manufacturing, marketing and other resources than the Company.Foreign competitors of the Company may have access to lower costlabor and better commercial deposits of memorial grade granite, and may besubject to less restrictive regulatory requirements than the Company. Forexample, companiesin South Africa, India, China and Portugal manufacture and export finishedgranite memorials into North America which compete with the Company's products.

5

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

The sale of cemetery lots and related products is highly competitive. Thecompetition is based upon price, geographic locations, and the overallaesthetics, maintenance and upkeep of the cemetery. Competitors include churchesand municipalities that own and operate cemeteries, and other cemetery owners,including consolidators, which may have greater financial resources than theCompany.

**PATENTS, TRADEMARKS ANDLICENSES**

The Company holds anumber of domestic and foreign patents, trademarks and copyrights, includingthe original registered trademark "Rock of Ages" which the Companyfirst registered in 1913. The Company believes the loss of a single patent,trademark or copyright, other than the "Rock of Ages" trademark,would not have a material adverse effect on the Company's business, financialcondition or results of operations. See "Risk Factors." 

**EMPLOYEES**

As of December 31, 2002,the Company had approximately 860 employees. 

The Company's collective bargaining agreements with the Granite CuttersAssociation and the United Steelworkers of America, respectively, which togetherrepresent approximately 178 of the Company's employees, expire on April 25,2003.  The Company is in the process of renegotiating the collectivebargaining agreements.

The Company believes that its relations with its employees are generally good.

**SEASONALITY**

Historically, theCompany's operations have experienced certain seasonal patterns. Generally, theCompany's net sales are highest in the second or third quarter and lowest in the firstquarter of each year due primarily to weather. See Item 7 "Management'sDiscussion and Analysis of Financial Conditions and Results of Operations on Seasonality."

**REGULATION AND ENVIRONMENTAL COMPLIANCE**

TheCompany's quarry and manufacturing operations are subject to substantialregulation by federal and state governmental statutes and agencies, includingOSHA, the Mine Safety and Health Administration and similar state and Canadianauthorities. The Company's operations are also subject to extensive laws, andregulations administered by the EPA and similar state and Canadian authoritiesfor the protection of the environment, including those relating to air andwater quality, and solid and hazardous waste handling and disposal. These lawsand regulations may require the Company to fund remedial action or to paydamages regardless of fault. Environmental laws and regulations may also imposeliability with respect to divested or terminated operations even if theoperations were divested or terminated many years ago. In addition, current andfuture environmental or occupational health and safety laws, regulations orregulatory interpretations may require significant expenditures for compliancewhich could require the Company to modify its operations. The Company cannotpredict the effect of such laws, regulations or regulatory interpretations onits business, financial condition or results of operations. The Company expectsto be able to continue to comply, in all material respects, with existing lawsand regulations.

6

**ITEM 2. PROPERTIES**
The Company owns the following quarry and manufacturingproperties: 

**PROPERTY**

**FUNCTION**

**VERMONT**

Barre

     Quarry Properties

          E. L. Smith Quarry

Quarrying  of dimensional Barre Gray granite blocks

          Adam-Pirie Quarry

Quarrying  of dimensional Barre Gray granite blocks

     Manufacturing Properties

          Rock of Ages  Manufacturing Plant
Manufacturing of memorials
          Press Roll Production  Plant
Manufacturing of granite  press rolls
          Rock of Ages Saw  Plant #1
Slabbing of granite blocks
Bethel

     Quarry Properties

          Bethel Quarry

Quarrying of dimensional  Bethel White granite blocks
**CANADA**Stanstead, Quebec      Quarry Properties           Stanstead Quarry Quarrying of dimensional  Stanstead Gray granite blocks Guenette, Quebec      Quarry Properties           Laurentian Quarry Quarrying of dimensional  Laurentian Rose granite blocks Beebe Plain, Quebec      Manufacturing Properties           Rock of Ages  Manufacturing Plant  Manufacturing of memorials          Adru Manufacturing Plant Manufacturing of memorials **PENNSYLVANIA**St. Peters      Quarry Properties 
          American Black Quarry

Quarrying of dimensional  American Black granite blocks
     Manufacturing Properties 
          Saw Plant

Slabbing of granite blocks

**NORTH CAROLINA**

Salisbury

     Quarry Properties

          Salisbury Pink Quarry

Quarrying of dimensional  Salisbury Pink granite blocks

Rockwell

     Quarry Properties

          Gardenia White Quarry

Quarrying of dimensional  Gardenia White granite blocks

**OKLAHOMA**

Mill Creek

     Quarry Properties

          Autumn Rose Quarry

Quarrying of dimensional  Autumn Rose granite blocks

**SOUTH CAROLINA**

Kershaw County

     Quarry Properties

          Kershaw Quarry

Quarrying of dimensional  Kershaw granite blocks

Lancaster County

     Quarry Properties

          Coral Gray Quarry

Quarrying of dimensional  Coral Gray granite blocks

7

In addition, the Companyowns or operates 99 retail sales outlets and 4 associated sand blasting facilities in thestates of Georgia, Iowa, Illinois, Minnesota, Connecticut, Massachusetts, RhodeIsland, Nebraska, New Jersey, Pennsylvania, Ohio, South Dakota, Kentucky, WestVirginia andWisconsin. In certain cases, the Company leases, under customary leasearrangements, the land or other real estate associated with these outlets andfacilities. The Company also owns 13 cemeteries in Kentucky. The Companybelieves that these facilities are suitable and adequate for its present andanticipated near-term needs.

The following table sets forth certain information relating to the Company'squarry properties. Each of the quarries listed below: (i) is an open-pit quarry;(ii) contains granite that is suitable for extraction as dimension granite formemorial or other use; (iii) is serviced by electricity provided by localutility companies (other than the Bethel quarry which is serviced by internalgenerators); and (iv) has adequate and modern extraction and other equipment.The Company presently has no exploration plans. Each of the quarries listedbelow is owned by the Company (other than the Kershaw quarry, which is leasedwith 37 years remaining on the lease). As described in Item 1, the Company ownsa 1/3 interest in VIKA, Ltd., which owns the Galactic Blue quarry in Zhytomir, Ukraine. However, the Company does not directly or indirectlyoperate the quarry. The Galactic Blue quarry does not currently produce granitein commercial quantities and the Company does not expect the quarry to achievecommercial production quantities in 2003. Accordingly, the Company does notconsider this property to be currently significant or material to its business.

 

**QUARRY**
**APPROXIMATE******