Rock of Ages (ROAC) 10-Q 2006 Q3 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 July 1, 2006

 OR

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 that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesý No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer o Accelerated filer oNon-accelerated filer ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.)  Yes o No ý

As of August 11, 2006, 4,660,800 shares of Class A Common Stock, par value $0.01 per share, and 2,738,596 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 July 1, 2006

PART I	FINANCIAL INFORMATION		PAGE NO.
Item 1.	Financial Statements (Unaudited)
		Consolidated Balance Sheets -July 1, 2006 and December 31, 2005	4
		Consolidated Statements of Operations - Three Months and Six Months Ended July 1, 2006 and July 2, 2005	5
		Consolidated Statements of Cash Flows - Six Months Ended July 1, 2006 and July 2, 2005	6
		Notes to Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27
Item 4.	Controls and Procedures		27
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings		28
Item 1A.	Risk Factors		28
Item 4.	Submission of Matters to a Vote of Security Holders		28
Item 6.	Exhibits and Reports on Form 8-K		29
Signature			31
Exhibits			32

 2

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 restoring the profitability of Rock of Ages' retail operations; 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; weather conditions; and other risks and uncertainties described herein, including, but not limited to the items discussed in "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and in Part II, Item 1A of this report, and that are otherwise described from time to time in Rock of Ages' reports filed with the Securities and Exchange Commission.

 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.

3

PART I: FINANCIAL INFORMATION
Item 1: Financial Statements

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

		July 1,			December 31,
		2006			2005
ASSETS
Current Assets:
Cash and cash equivalents	$	2,135		$	2,824
Trade receivables, net		11,954			14,720
Inventories		24,363			24,478
Other current assets		1,548			2,686
Assets of discontinued operations – held for sale		282			—
Total current assets		40,282			44,708
Property, plant and equipment, net		47,969			49,634
Cash surrender value of life insurance, net		781			731
Goodwill		387			387
Other intangibles, net		548			598
Debt issuance costs, net		105			147
Due from affiliates		857			814
Intangible pension asset		574			574
Long-term investments		726			728
Other		205			291
Total assets	$	92,434		$	98,612
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit	$	11,142		$	10,499
Current installments of long-term debt		649			661
Current installments of deferred compensation		467			469
Trade  payables		1,749			2,006
Accrued expenses		3,997			3,443
Customer deposits		7,273			7,059
Total current liabilities		25,277			24,137
Long-term debt, excluding current installments		20,653			21,445
Salary continuation		6,068			6,070
Accrued pension cost		3,708			3,550
Accrued post-employment benefit cost		1,012			967
Deferred tax liability		74			70
Other		1,087			897
Total liabilities		57,879			57,136
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 4,660,800 shares issued and    outstanding as of July 1, 2006 and  December 31, 2005		47			47
Common Stock - Class B, $.01 par value;
15,000,000 shares authorized
2,738,596  shares issued and outstanding as of July 1, 2006 and      December 31, 2005		27			27
Additional paid-in capital		65,551			65,551
Accumulated deficit		(28,786	)		(21,431	)
Accumulated other comprehensive loss		(2,284	)		(2,718	)
Total stockholders' equity		34,555			41,476
Total liabilities and stockholders' equity	$	92,434		$	98,612

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						Six Months Ended
		��			July 2, 2005						July 2, 2005
		July 1, 2006			As Restated			July 1, 2006			As Restated
Net Revenues:
Quarry	$	7,041		$	6,722		$	10,797		$	10,938
Manufacturing		7,644			7,731			11,564			10,595
Retail		10,068			14,108			14,004			18,163
Total net revenues		24,753			28,561			36,365			39,696
Gross Profit:
Quarry		1,756			1,673			1,094			821
Manufacturing		2,369			2,626			3,003			2,825
Retail		5,559			7,831			7,152			9,660
Total gross profit		9,684			12,130			11,249			13,306
Operating Expenses:
Selling, general and administrative expenses:
Quarry		592			852			1,462			1,746
Manufacturing		912			1,276			2,136			2,483
Retail		4,569			6,771			9,137			12,858
Retail restructuring costs		1,686			—			1,686			—
Corporate overhead		1,289			1,429			2,601			2,795
Total SG&A expenses		9,048			10,328			17,022			19,882
Impairment of long-lived assets		100			—			100			—
Foreign exchange loss		16			—			16			—
Total operating expenses		9,164			10,328			17,138			19,882
Income (loss) from continuing   operations before interest expense   and income taxes		520			1,802			(5,889	)		(6,576	)
Interest expense		623			428			1,268			745
Income (loss) from continuing   operations before  income taxes		(103	)		1,374			(7,157	)		(7,321	)
Income tax expense		205			9,505			170			7,740
Loss from continuing operations		(308	)		(8,131	)		(7,327	)		(15,061	)
Discontinued operations, net of    income taxes		1			(13	)		(28	)		(38	)
Net loss	$	(307	)	$	(8,144	)	$	(7,355	)	$	(15,099	)
Net loss per share – basic and diluted:
Net loss from continuing       operations	$	(0.04	)	$	(1.10	)	$	(0.99	)	$	(2.04	)
Discontinued operations, net of        income taxes		0.00			0.00			0.00			0.00
Net loss per share	$	(0.04	)	$	(1.10	)	$	(0.99	)	$	(2.04	)
Weighted average number of common shares outstanding –    basic and diluted		7,399			7,399			7,399			7,398

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5

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

		Six Months Ended
		July 1,			July 2,
		2006			2005
Cash flows from operating activities:
Net loss	$	(7,355	)	$	(15,099	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on sale of assets		10			—
Depreciation, depletion and amortization		2,147			2,285
CSV of life insurance		(51	)		—
Deferred taxes		3			7,447
Changes in operating assets and liabilities, net of acquisitions:
Trade receivables, net		2,672			457
Due from related parties		(43	)		(35	)
Inventories		(133	)		(1,425	)
Other assets		1,200			807
Trade payables, accrued expenses and income taxes		248			256
Customer deposits		517			845
Deferred compensation and pension		199			465
Other liabilities		195			—
Net cash used in operating activities		(391	)		(3,997	)
Cash flows from investing activities:
Purchases of property, plant and equipment		(765	)		(4,315	)
Proceeds from sale of assets, net		363			—
Acquisitions, net of cash acquired		—			(4,135	)
Net cash used in investing activities		(402	)		(8,450	)
Cash flows from financing activities:
Net borrowings under line of credit		642			8,161
Principal payments on long-term debt		(804	)		(161	)
Borrowings on long-term debt		—			3,500
Stock options exercised		—			24
Dividends paid on common stock		—			(370	)
Net cash provided by (used in) financing activities		(162	)		11,154
Effect of exchange rate changes on cash		266			(209	)
Net decrease in cash and cash equivalents		(689	)		(1,502	)
Cash and cash equivalents, beginning of period		2,824			4,298
Cash and cash equivalents, end of period	$	2,135		$	2,796
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	1,286		$	730
Income taxes		224			506
Supplemental disclosure of non-cash investing and financing activities:
Acquisitions:
Assets acquired	$	—		$	4,356
Liabilities assumed		—			(221	)
Cash paid		—			4,135
Less cash acquired		—			—
Net cash paid for acquisitions	$	—		$	4,135

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 6

ROCK OF AGES CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

(1)	Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and notes required by generally accepted accounting principles for complete financial statements are not included herein. In the opinion of management, all adjustments of a normal recurring nature considered necessary for a fair presentation have been included. Results of operations for the interim periods are not necessarily indicative of the results that may be expected for a full year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K (SEC File No. 000-29464, filed April 17, 2006).
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. 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.

(2)	Restatement of Financial Statements
As previously reported in its 2005 Annual Report on Form 10-K, the Company has restated its consolidated financial statements for the quarter and six months ended July 2, 2005. The restatement reflects adjustments in the statement of operations related to the classification of shipping and handling costs in its quarry and manufacturing segments in order to be compliant with Emerging Issues Task Force ("EITF") Consensus No. 00-10, "Accounting for Shipping and Handling Fees and Costs." The Company's prior method of accounting for certain shipping and handling costs to deliver products to its customers' designated location was to include these costs as a deduction from net revenues. Such costs are now included in cost of sales. The impact of the restatement was to increase net sales and cost of sales by $996,000 and $1,718,000 from the previously reported amounts for the three-month and six-month periods ended July 2, 2005, respectively. The restatement had no impact on total gross profit, income from continuing operations, net income or earnings per share for the periods restated.
(3)	Discontinued Operations
On July 28, 2006, the Company signed a purchase and sale agreement for the sale of two of its Kershaw quarry properties and associated assets located in South Carolina.  The selling price for the two properties and assets is $1,050,000.  Upon consummation of the sale of the Kershaw properties, which is expected to occur late in the third quarter or early in the fourth quarter of 2006, the Company estimates that it will recognize a pre-tax gain of approximately $750,000. The decision to sell this quarry represents a disposal of long-lived assets under Statement of Financial Accounting Standards 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, the Kershaw quarry was previously classified in the quarry segment.
Operating results from the Kershaw quarry were as follows (in thousands):

		Three Months Ended					Six Months Ended
		July 1,		July 2,			July 1,			July 2,
		2006		2005			2006			2005
Net sales	$	147	$	117		$	269		$	174
Gross profit (loss)		1		(13	)		(28	)		(38	)
Pretax income (loss)		1		(13	)		(28	)		(38	)
Net income (loss)		1		(13	)		(28	)		(38	)

7

(4)	Stock-Based Compensation
On June 22, 2005, the stockholders approved the Rock of Ages Corporation 2005 Stock Plan (the "2005 Plan"). The 2005 Plan permits awards of stock options (including both incentive stock options and nonqualified stock options) and restricted stock. A maximum of 550,000 shares of Class A common stock may be issued under the 2005 Plan. The 2005 Plan is administered by the Compensation Committee, which has the authority to determine the recipients of awards under the 2005 Plan and, subject to the 2005 Plan, the terms and conditions of such awards. The 2005 Plan replaces the Rock of Ages Corporation 1994 Stock Plan (the "1994 Plan") which expired in November 2004. Although grants made under the 1994 Plan prior to its expiration remain outstanding, no further grants may be made under the 1994 Plan.
Under the terms of the Amended and Restated 1994 Stock Plan, 1,500,000 options were reserved for issuance to key employees and directors to purchase equivalent shares of common stock. The options granted prior to 1999 have a five-year term and vested at 20% per year, options granted in 1999 and 2000 have a four-year term and vested at 25% per year, options granted in 2002 have a 10 year term and vested at 20% per year after the first year and options granted in 2004 and 2005 have terms from one to five years and vested at various rates from 20% to 100% per year.
In the fourth quarter of 2005, the Company accelerated the vesting of all unvested stock options previously awarded to officers, directors and employees. The primary purpose of accelerating the vesting of these options was to reduce the Company's future reported compensation expense upon the adoption of SFAS 123R, "Share Based Payment" in the first quarter of 2006.  As a result, options to purchase approximately 333,600 shares of Class A common stock which would have vested over the next 48 months became immediately exercisable. Restrictions were imposed on any shares received through the exercise of accelerated options that prevent the sale of any of these shares prior to the original vesting date of the option.
The following tables set forth stock option activity for the periods ended July 1, 2006 and July 2, 2005 and information on outstanding and exercisable options at July 1, 2006:

	Six Months Ended
	July 1, 2006					July 2, 2005
	Number Of Options			Weighted Average Exercise Price		Number Of Options			Weighted Average Exercise Price
Outstanding at beginning of period	528,000		$	6.51		498,000		$	6.56
Granted	—			—		65,000			6.02
Exercised	—			—		(4,000	)		(5.98	)
Canceled	(55,000	)		(6.51	)	(15,000	)		(6.87	)
Outstanding at end of period	473,000		$	6.51		544,000		$	6.49
Exercisable at end of period	473,000					192,000
Weighted average remaining    contractual life	3.4 years

8

Exercise Price	Number of Options Outstanding And Exercisable	Weighted Average Remaining Contractual Life
$5.98	234,000	5.7 Years
$7.15	150,000	0.1 Years
$8.21	12,000	2.1 Years
$8.21	7,000	0.1 Years
$7.20	25,000	0.1 Years
$6.02	20,000	0.1 Years
$6.02	25,000	9.0 Years
	473,000

At July 1, 2006, the closing price of the Company's stock was less than the exercise price of the outstanding options, therefore there was no aggregate intrinsic value of outstanding options. The intrinsic value of options exercised during the first half of 2005 was $3,680.

Options are granted at the previous day's closing price of the Company's stock at the date of grant. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. The per share weighted average fair value of stock options granted throughout 2005 was $4.53 determined by using the following weighted average assumptions: risk-free interest rate of 3.9%; dividend yield of 1.67%; expected volatility of 109%, and expected life of seven (7) years. The expected volatility was measured using a weighted average of historical daily price changes of the Company's stock over a period that we think most likely represents future price changes. The expected life is the number of years that the Company estimates, based primarily on historical experience, that the options will be outstanding prior to exercise. There were no stock options granted in the first half of 2006. 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 the options and may not be representative of the future price of the Company’s stock.

In the first quarter of 2006, the Company adopted the provisions of SFAS No. 123R, which replaced SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), and superseded APB Opinion No. 25, "Accounting for Stock Issued to Employees." SFAS 123R requires that all share-based payments to employees, including grants of employee stock options, be recognized in the financial statements based on their fair values. Adoption by the Company of SFAS 123R on January 1, 2006 had no cumulative effect as of that date, nor any impact on the results of operations for the six months ended July 1, 2006.

Had we elected to recognize compensation cost in 2005 for all of the plans based upon the fair value at the grant dates for awards under those plans, consistent with the method prescribed by SFAS 123R, net loss and loss per share would have been as follows (in thousands, except per share data):

		Three Months Ended			Six Months Ended
		July 2, 2005			July 2, 2005
Net loss, as reported	$	(8,144	)	$	(15,099	)
Deduct total stock-based employee compensation expense determined under fair value based method for all awards		(143	)		(260	)
Net loss, pro forma	$	(8,287	)	$	(15,359	)
Net loss per share, as reported	$	(1.10	)	$	(2.04	)
Net loss per share, pro forma		(1.12	)		(2.08	)
Net loss per share - assuming dilution, as reported		(1.10	)		(2.04	)
Net loss per share - assuming dilution, pro forma		(1.12	)		(2.08	)

9

(5) Inventories

Inventories consist of the following (in thousands):		July 1,		December 31,
		2006		2005
Raw materials	$	12,556	$	12,989
Work-in-process		1,417		1,442
Finished goods and supplies		10,390		10,047
	$	24,363	$	24,478

(6)	Earnings (Loss)  Per Share
The following is a reconciliation of shares used in calculating basic and diluted earnings (loss) per share (in thousands):

	Three Months Ended		Six Months Ended
	July 1,	July 2,	July 1,	July 2,
	2006	2005	2006	2005
Basic weighted average shares	7,399	7,399	7,399	7,398
Effect of dilutive stock options	—	—	—	—
Diluted weighted average shares	7,399	7,399	7,399	7,398

Options to purchase 473,000 and 544,000 shares of Class A common stock were outstanding at July 1, 2006, and July 2, 2005, respectively, but were not included in the computation of diluted earnings per share because the effect would be anti-dilutive.

(7)	Segment Information
The Company is organized based on the products and services it offers to various customer groups. Under this organizational structure, the Company operates in three segments: quarry, manufacturing and retail.
The quarry segment extracts granite from the ground and sells it to our manufacturing segment and to outside manufacturers, including customers in Europe and China.  There was no single customer that represented more than 10% of accounts receivable at July 1, 2006 and one quarry customer that represented approximately 11% of accounts receivable at December 31, 2005.
The manufacturing segment's principal products are granite memorials and mausoleums used primarily in cemeteries, although it also manufactures some specialized granite products for industrial applications.
The retail segment engraves and sells memorials and other granite products at seventy-eight locations in sixteen states throughout the United States.
Also presented in the accompanying table of segment information in a separate column are unallocated corporate overhead, impairment of long-lived assets and foreign exchange losses. The Company reports the salaries and benefits of its chief executive officer, chief financial officer, general counsel and other finance and administrative employees, and expenses that are not directly attributable to a particular segment as corporate overhead.
Inter-segment revenues are recorded as if the sales were to third parties and eliminated in consolidation.

10

The following is the segment information for the three- and six-month periods ended July 1, 2006 and July 2, 2005 (as restated, see Note 2) (in thousands):

Three-month period:

2006		Quarry			Manufacturing			Retail			Corporate Overhead and Other			Total
Total net revenues	$	7,609		$	10,475		$	10,068		$	—		$	28,152
Inter-segment net revenues		(568	)		(2,831	)		—			—			(3,399	)
Net revenues		7,041			7,644			10,068			—			24,753
Total gross profit		1,848			2,305			5,531			—			9,684
Inter-segment gross profit		(92	)		64			28			—			—
Gross profit		1,756			2,369			5,559			—			9,684
Selling, general and administrative expenses		592			912			4,569			1,289			7,362
Retail restructuring costs		—			—			1,686			—			1,686
Impairment of long-lived assets		—			—			—			100			100
Foreign exchange loss		—			—			—			16			16
Total operating expenses		592			912			6,255			1,405			9,164
Income (loss) from continuing operations before interest and taxes	$	1,164		$	1,457		$	(696	)	$	(1,405	)	$	520
2005 (as restated)		Quarry			Manufacturing			Retail			Corporate Overhead and Other			Total
Total net revenues	$	7,717		$	11,085		$	14,108		$	—		$	32,910
Inter-segment net revenues		(995	)		(3,354	)		—			—			(4,349	)
Net revenues		6,722			7,731			14,108			—			28,561
Total gross profit		1,873			2,668			7,589			—			12,130
Inter-segment gross profit		(200	)		(42	)		242			—			—
Gross profit		1,673			2,626			7,831			—			12,130
Selling, general and administrative expenses		852			1,276			6,771			1,429			10,328
Income (loss) from continuing  operations before interest and taxes	$	821		$	1,350		$	1,060		$	(1,429	)	$	1,802

11

 Six-month period:

2006		Quarry			Manufacturing			Retail			Corporate Overhead and Other			Total
Total net revenues	$	11,837		$	15,734		$	14,004		$	—		$	41,575
Inter-segment net revenues		(1,040	)		(4,170	)		—			—			(5,210	)
Net revenues		10,797			11,564			14,004			—			36,365
Total gross profit		1,186			2,956			7,107			—			11,249
Inter-segment gross profit		(92	)		47			45			—			—
Gross profit		1,094			3,003			7,152			—			11,249
Selling, general and administrative expenses		1,462			2,136			9,137			2,601			15,336
Retail restructuring costs		—			—			1,686			—			1,686
Impairment of long-lived assets		—			—			—			100			100
Foreign exchange loss		—			—			—			16			16
Total operating expenses		1,462			2,136			10,823			2,717			17,138
Income (loss) from continuing operations before interest and taxes	$	(368	)	$	867		$	(3,671	)	$	(2,717	)	$	(5,889	)
2005 (as restated)		Quarry			Manufacturing			Retail			Corporate Overhead and Other			Total
Total net revenues	$	12,342		$	15,558		$	18,163		$	—		$	46,063
Inter-segment net revenues		(1,404	)		(4,963	)		—			—			(6,367	)
Net revenues		10,938			10,595			18,163			—			39,696
Total gross profit		1,025			2,989			9,292			—			13,306
Inter-segment gross profit		(204	)		(164	)		368			—			—
Gross profit		821			2,825			9,660			—			13,306
Selling, general and administrative expenses		1,746			2,483			12,858			2,795			19,882
Income (loss) from continuing  operations before interest and taxes	$	(925	)	$	342		$	(3,198	)	$	(2,795	)	$	(6,576	)

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

		Three Months Ended				Six Months Ended
		July 1, 2006		July 2, 2005		July 1, 2006		July 2, 2005
				(as restated)				(as restated)
Net revenues (1):
United States	$	21,809	$	25,612	$	32,330	$	35,558
Canada		2,895		2,816		3,902		3,831
Ukraine		49		133		133		307
Total net revenues	$	24,753	$	28,561	$	36,365	$	39,696

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

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

		July 1,		December 31,
		2006		2005
United States	$	44,388	$	45,798
Canada		3,521		3,761
Luxembourg		60		75
	$	47,969	$	49,634

(8)	Comprehensive Income (Loss)
Comprehensive income (loss) is as follows (in thousands):

		Three Months Ended						Six Months Ended
		July 1,			July 2,			July 1,			July 2,
		2006			2005			2006			2005
Net loss	$	(307	)	$	(8,144	)	$	(7,355	)	$	(15,099	)
Other comprehensive income loss:
Foreign currency translation      adjustment		493			(198	)		451			(337	)
Investment available for sale		17			—			(17	)		—
Comprehensive income (loss)	$	203		$	(8,342	)	$	(6,921	)	$	(15,436	)

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Comprehensive income (loss) consists of the following components (in thousands):

		Foreign Currency Translation Adjustment		Minimum Pension Liability Adjustment			Investment Available for Sale			Accumulated Other Comprehensive Loss
Balance at December 31, 2005	$	1,728	$	(4,618	)	$	172		$	(2,718	)
Changes in 2006		451		—			(17	)		434
Balance at July 1, 2006	$	2,179	$	(4,618	)	$	155		$	(2,284	)

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

 Components of net periodic benefit cost are as follows (in thousands):

		Three Months Ended July 1, 2006 and July 2, 2005
		NON-UNION PENSION BENEFITS						DEFERRED COMPENSATION BENEFITS				OTHER POST EMPLOYMENT BENEFITS
		July 1,			July 2,			July 1,		July 2,		July 1,		July 2,
		2006			2005			2006		2005		2006		2005
Service cost	$	129		$	182		$	—	$	3	$	6	$	4
Interest cost		342			326			78		76		29		30
Expected return on plan assets		(380	)		(356	)		—		—		—		—
Amortization of prior service costs		35			35			28		19		24		26
Amortization of net loss		71			49			—		—		—		—
Net periodic benefit cost	$	197		$	236		$	106	$	98	$	59	$	60

		Six Months Ended July 1, 2006 and July 2, 2005
		NON-UNION PENSION BENEFITS						DEFERRED COMPENSATION BENEFITS				OTHER POST EMPLOYMENT BENEFITS
		July 1,			July 2,			July 1,		July 2,		July 1,		July 2,
		2006			2005			2006		2005		2006		2005
Service cost	$	267		$	364		$	—	$	6	$	12	$	8
Interest cost		686			652			156		152		58		60
Expected return on plan assets		(761	)		(712	)		—		—		—		—
Amortization of prior service costs		70			70			56		38		48		52
Amortization of net loss		149			98			—		—		—		—
Net periodic benefit cost	$	411		$	472		$	212	$	196	$	118	$	120

During the fourth quarter of 2005, the Company concluded that it had been incorrectly accounting for its key employee deferred salary agreements as a defined benefit plan under SFAS No. 87 "Employers Accounting for Pension Plans" since 2002. After careful consideration of the plan and its operation, the Company concluded that it should be accounted for as a defined contribution plan. The effect of this error on prior years and the first half of 2006 was not significant and, accordingly, the financial statements have not been restated. The preceding tables have been adjusted to reflect this correction.

During the quarter ended July 1, 2006, the Company received from its actuaries revised estimates of net periodic pension costs for the non-union pension and has adjusted the expenses accordingly. This revision was attributable to more accurate census information reflecting staffing changes during the first half of the year.

The Company previously disclosed in its consolidated financial statements for the year ended December 31, 2005 it expected to contribute $945,000 to the defined benefit pension plan during 2006. As of July 1, 2006, $236,000 has been contributed; the Company expects to contribute $709,000 during the remainder of the year. 

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(10)	Recent Accounting Pronouncements
In July 2006, the FASB issued FIN 48, "Accounting for Uncertainty in Income Taxes—an Interpretation of FASB Statement No. 109, Accounting for Income Taxes". This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. This Interpretation is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the effect, if any, that the adoption of FIN 48 will have on our financial statements.
(11)	Credit Facility
We have a credit facility with The CIT Group – Business Credit and Chittenden Trust Company (the "Lenders") that expires in October 2007 and is secured by substantially all assets of the Company. The facility consists of an acquisition term loan line of credit of up to $30 million and a revolving credit facility of up to another $20 million based on eligible accounts receivable, inventory and certain fixed assets. As of July 1, 2006, we had $21 million outstanding and $9 million available under the term loan line of credit and $11.1 million outstanding and $8.9 million available under the revolving credit facility. The Lenders have placed a reserve of $2 million against the availability under the revolving credit facility with the Lenders retaining the right to over advance at their discretion.  Our loan agreement with the Lenders 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.
(12)	Acquisitions
In February 2005, we acquired McColly Memorials, a memorial retailer, with four locations in the Pittsburgh, Pennsylvania area, for a net purchase price of $554,000. The acquisition was accounted for by the purchase method of accounting. The assets acquired and liabilities assumed were recorded at estimated fair values. This resulted in $155,000 of goodwill, which was subsequently written off in the third quarter of 2005.
In February 2005, we acquired the Rockwell White quarry in Rockwell, North Carolina for a purchase price of $3.5 million. The acquisition was accounted for by the purchase method of accounting. The assets acquired and liabilities assumed were recorded at estimated fair values as determined by management based on information currently available and on current assumptions as to future operations. We evaluated the intangible assets and determined that the customer list had an estimated value of $310,000. The remaining excess of the purchase price over fair value acquired net assets of $387,000 was assigned to goodwill.
(13)	Valuation Allowance for Deferred Taxes Asset
At April 2, 2005, management believed it was more likely than not that the results of future operations would generate sufficient taxable income to realize the net U.S. deferred tax assets including a federal net operating loss carryover of $3,268,000. Accordingly, we recorded a total U.S. and Canadian tax benefit of $1,765,000 in the first quarter of 2005 resulting in a net deferred tax asset on the Company's books as of April 2, 2005 of $9.2 million. At the end of the second quarter of 2005, based on the level of taxable income and projections for future taxable income, the Company determined it was no longer more likely than not that it would generate the required taxable income to fully realize the benefit of the net U.S. deferred tax assets then on our books.  As such, we adjusted our valuation allowance against the deferred tax assets to fully reserve for the entire net U.S. deferred tax asset of $9.2 million then on our books. At the end of the second quarter of 2006, 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.

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 (14)  Goodwill

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 2006, we performed our annual assessment for the quarry unit. We calculated the fair value of the quarry unit based on estimated expected discounted future cash flows using the Company's weighted average cost of capital. We concluded that the quarry unit could support the goodwill of $387,000.
(15)	Retail Restructuring Costs
On May 5, 2006, Rick Wrabel, President and Chief Operating Officer of the Memorials Division, resigned from employment with the Company along with three other members of the management team. Richard Urbach, formerly Regional Vice President/Western Region, was appointed President and Chief Operating Officer of the Retail Division. In connection with this change, the Company recorded a charge of $1,686,000 for the severance packages for the management team and other positions that were eliminated in the transition. The cost of the severance packages and other costs related to the change in management have been presented separately in the Consolidated Statements of Operations as Retail Restructuring Costs.

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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 the second quarter 2006, we had three business segments:  quarry, manufacturing, and retail. The quarry division sells granite blocks to the manufacturing division and to outside domestic manufacturers, as well as to customers outside North America. The manufacturing division's principal product is granite memorials and mausoleums, 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.
Our quarry division had an improved second quarter of 2006 compared to the same period last year as a result of improved sales,  higher productivity and lower SG&A.  Shipments and gross margin were both up at our Bethel White quarry.  We saw improved margins at Salisbury Pink and Gardenia White quarries in North Carolina as well as our Barre quarry in Vermont, although shipments from these quarries in the quarter were down somewhat from the year ago quarter.  Responding to slower sales in 2005, we cut back production at the North Carolina quarries last year.  This improved our margins for the quarter at those quarries, but left us with less inventory to respond to improving demand.  We have seen an increase in scheduled inspections of blocks by our customers and anticipate further recovery of shipments in the balance of 2006 and have rehired a number of employees at these quarries.  We continue to aggressively market our products in the US and abroad and continue to take whatever cost cutting measures are necessary to adjust to market conditions.  For the second quarter of 2006, the quarry division posted operating income of $1.2 million, up 42% from the same quarter last year.
The manufacturing division had a good second quarter of 2006 despite a modest decline in revenues.  Lower sales of our higher-margin mausoleum and industrial products were largely offset by increased demand from our authorized retailers for traditional memorials.  We have decreased our general sales expenses, while maintaining the level of sales effort for the mausoleum and industrial products lines.  Operating income for our manufacturing division was up 8%, to $1.5 million, for the second quarter of 2006 compared with last year’s second quarter.
The second quarter of 2006 was marked by significant change in our retail segment.   Revenue and gross profit dollars were down compared with last year, partly explained by sales and closures of retail stores late in 2005 and in the second quarter of 2006 and a decline in our same-store revenues of $2.9 million. However, the gross margin was essentially unchanged from last year and met our 55% target.  We are pleased that our cost-cutting and productivity improvement efforts, begun late last year and still ongoing, showed a significant impact in the second quarter on retail SG&A expenses. Excluding restructuring costs of $1.7 million incurred in the second quarter of 2006, operating income for the second quarter of 2006 in our retail division would have been $990,000; this compares with $1.1 million for the same period last year before store sales and closures had occurred.

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 generally accepted accounting principles (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. Management has discussed the development, selection and disclosure of these estimates with the Audit Committee and our independent auditors. 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, valuation of deferred income taxes and accounting for pensions and other post-employment benefits.

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Revenue Recognition

Quarry Division

The granite we quarry is sold to outside customers and is used by our manufacturing group. Our quarry division recognizes revenue from sales of granite blocks to outside customers when the granite is shipped and invoiced 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 our 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 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 Division

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 or set in the cemetery, if we are responsible for the setting.  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 Division

Retail revenues are recorded when the finished monument is set in the cemetery.

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. 

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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. 

We assess impairment of goodwill in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other Intangible Assets." The provisions of SFAS No. 142 require that a two-step test be performed. First, the fair value of each reporting unit will be 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 connection with acquisitions, any excess of the purchase price over the fair value of net tangible assets is first applied to identifiable intangible assets, such as customer lists, with any excess assigned to goodwill. The goodwill on our balance sheet at July 1, 2006 and December 31, 2005 of $387,000 relates to the Rockwell quarry acquisition, which was completed in the first quarter of 2005.  In the first quarter of 2006 we performed our annual impairment analysis of this goodwill, calculating the fair value of the quarry unit based on estimated expected cash flows using the Company’s weighted average cost of capital.  We concluded that the quarry unit could support the goodwill of $387,000.

We have entered into arrangements whereby we have accepted promissory notes as partial or full payment for certain transactions, particularly the sale of operations. 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.  During the quarter ended July 1, 2006, we recorded an impairment charge of $100,000 to write off a promissory note related to the sale in 2001 of a manufacturing facility in Elberton, Georgia. 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

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not some portion or all of the current and deferred tax assets will not be realized. The ultimate realization of current and 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. This assessment is made each reporting period. At the end of the second quarter of 2005, based on the level of taxable income and projections for future taxable income, the Company believed it was no longer more likely than not that it would generate the required taxable income to fully realize the benefit of the net U.S. deferred tax assets.  As such, we adjusted our valuation allowance against the deferred tax assets to fully reserve for the entire net U.S. deferred tax asset. At the end of the second quarter of 2006, 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 in the future.

Accounting for pensions and other post-employment benefits

We provide defined benefit pension and other post-employment 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 2005 we decreased the discount rate used to determine our liability in the pension plan from 5.79% to 5.47% based on a bond matching model which uses data on individual high-quality corporate bonds and the timing and amount of the future benefit payments in our plan to develop a weighted discount rate specific to our plan. 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 further decrease in the expected long-term rate of return on plan assets or a decrease in discount rate could result in an increase in our pension liability and a charge to equity as well as increases in pension expenses over time.

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Results of Operations

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

	Three Months Ended				Six Months Ended
	July 1,		July 2,		July 1,		July 2,
	2006		2005		2006		2005
			As Restated				As Restated
Statement of Operations Data:
Net Revenues:
Quarry	28.4%		23.5%		29.7%		27.5%
Manufacturing	30.9%		27.1%		31.8%		26.7%
Retail	40.7%		49.4%		38.5%		45.8%
Total net revenues	100.0%		100.0%		100.0%		100.0%
Gross Profit:
Quarry	24.9%		24.9%		10.1%		7.5%
Manufacturing	31.0%		34.0%		26.0%		26.7%
Retail	55.2%		55.5%		51.1%		53.2%
Total gross profit	39.1%		42.5%		30.9%		33.5%
Operating Expenses:
Selling, general and administrative:
Quarry	8.4%		12.7%		13.5%		16.0%
Manufacturing	11.9%		16.5%		18.5%		23.4%
Retail	45.4%		48.0%		65.2%		70.8%
Retail restructuring costs	16.7%		—		12.0%		—
Corporate overhead	5.2%		5.0%		7.2%		7.0%
Total SG&A expenses	36.5%		36.2%		46.8%		50.1%
Impairment of long-lived assets	0.4%		—		0.3%		—
Foreign exchange (gain) loss	0.1%		—		—		—
Total operating expenses	37.0%		36.2%		47.1%		50.1%
Income (loss) from continuing operations before interest and income taxes	2.1%		6.3%		(16.2%	)	(16.6%	)
Interest expense	2.5%		1.5%		3.5%		1.9%
Income (loss) from continuing operations before income taxes	(0.4%	)	4.8%		(19.7%	)	(18.5%	)
Income tax expense	0.8%		33.3%		0.4%		19.5%
Income (loss) from continuing operations	(1.2%	)	(28.5%	)	(20.1%	)	(38.0%	)
Discontinued operations, net of income taxes	—		—		0.1%		—
Net income (loss)	(1.2%	)	(28.5%	)	(20.2%	)	(38.0%	)

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Three Months Ended July 1, 2006 Compared to Three Months Ended July 2, 2005

On a consolidated basis for all segments for the three-month period ended July 1, 2006, compared to the three month period ended July 2, 2005, revenue decreased 13.3%, gross profit decreased 20.2%, total operating expenses decreased 11.3% and total operating income decreased 71.1% for reasons discussed in detail in the segment analyses below.

Quarry Segment Analysis

Revenue in our quarry operations for the three-month period ended July 1, 2006 was up 4.7% from the three-month period ended July 2, 2005 as a result of increased shipments from our Bethel White and Pennsylvania quarries.  Our export shipments increased as a result of several factors including our customers’ existing inventory levels as well as increased demand for our stone from the Asian and European markets.

Gross profit dollars from our quarry operations for the three-month period ended July 1, 2006 increased 5.0% and gross profit as a percentage of revenue, at 24.9%, was the same as the three-month period ended July 2, 2005. The increase in gross profit dollars was the result of higher sales levels.

SG&A expenses in our quarry segment were down $260,000 for the three-month period ended July 1, 2006 compared to last year.  The reduction is due to lower salaries and benefits following the retirement of the former president of the quarry division and lower professional services fees associated with valuation studies conducted in 2005. 

Manufacturing Segment Analysis

Revenue in our manufacturing operations for the three-month period ended July 1, 2006 decreased a modest 1.1% from the three-month period ended July 2, 2005 as a result of lower levels of sales in our industrial products group, which more than offset an increase in shipments of memorials and mausoleums. Our backlog of mausoleum orders is down from last year at this time, when it included a $1.8 million mausoleum that was set during the second quarter of 2006.  We have experienced an increase in orders for typical memorial products but not for mausoleums from our authorized retailers compared to the same period last year. The backlog for industrial products is down $221,000 or 20.5% from a year ago.

Gross profit dollars from the manufacturing group decreased 9.8% and gross profit as a percentage of manufacturing revenue decreased by 3.0 percentage points for the three-month period ended July 1, 2006 compared to the three-month period ended July 2, 2005. The decline in these measures was primarily attributable to the decreased proportion of shipments of industrial products from our Barre manufacturing plant since the industrial products line generally carries a higher gross margin than our typical memorial products.

SG&A costs for the three-month period ended July 1, 2006 for the manufacturing group decreased $364,000 compared to the three-month period ended July 2, 2005 primarily as a result of our decision late in 2005 to reduce our general sales staff.  Our investment in mausoleum and industrial products sales efforts is the same as last year.

Retail Segment Analysis

Revenue in our retail operations for the three-month period ended July 1, 2006 decreased 28.6%, or $4 million from the three-month period ended July 2, 2005.This decline is partly accounted for by the sale of our Georgia retail stores during the second quarter this year and by other store sales and closures late last year.  On a same-store basis, sales were $2.9 million or 22.2% lower in the second quarter of 2006.  Our order receipts in the second quarter of 2006 decreased $1.4 million or 14.5% from the same period last year, however our same-store backlog is down only 5.1% compared to the backlog balance at July 2, 2005.  We believe that the effects of the leadership transition had a negative impact on sales during the second quarter of 2006, which management believes will be temporary.

Gross profit dollars from the retail operations decreased 29.0% and gross profit as a percentage of revenue declined slightly from 55.5% to 55.2% compared to the same three-month period last year. The decline in gross profit dollars was a direct result of lower revenues.  We expect to maintain our gross margin as a percentage of revenue at the historical 55% level for the remainder of the year.

21

SG&A costs from our retail operations decreased 32.5% for the three-month period ended July 1, 2006 compared to last year, and SG&A costs as a percentage of retail revenue decreased 2.6 percentage points from the same period last year. The decrease in SG&A was primarily the result of actions taken late last year.  As we previously announced, we made significant changes in the leadership of our retail segment early in the second quarter of 2006.  Expenses associated with severance agreements and other restructuring charges amounted to $1.7 million, which is shown separately in the financial statements.  Rich Urbach, who now heads our retail division, is continuing to try to assure our cost structure in retail matches our revenue stream. 

Consolidated Items

Corporate overhead, consisting of operating costs not directly related to an operating segment, decreased $140,000 for the three-month period ended July 1, 2006 compared to the three-month period ended July 2, 2005 primarily due to lower accrued expenses for professional fees, including audit and legal.

In the three-month period ended July 1, 2005 we wrote off a note receivable of $100,000, which we determined was uncollectible.  This was the remaining balance associated with the 2001 sale of a manufacturing facility in Elberton, Georgia which we had financed.

Interest expense increased 45.6%, to $623,000 for the three-month period ended July 1, 2006 compared to the three-month period ended July 2, 2005 as a result of higher market interest rates and higher spreads charged on our credit facilities. The interest rates paid on our credit facility are tied to prime and LIBOR, both of which were approximately 200 basis points higher than for the same period in 2005.  In addition, the Lenders had imposed higher spreads totaling 75 basis points based on our ratio of Funded Debt to New Worth and covenant waivers granted in 2005.

Income tax expense was $205,000 for the three-month period ended July 1, 2006, compared to $9.5 million for the same three-month period in 2005.  The tax expense reported this year was for our Canadian subsidiary.  At the end of the second quarter of 2005, based on the level of taxable income and projections for future taxable income, the Company determined it was no longer more likely than not that it would generate the required taxable income to fully realize the benefit of the net U.S. deferred tax asset.  At the end of the second quarter of 2006, 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 the U.S. operations in the future.

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Six Months Ended July 1, 2006 Compared to Six Months Ended July 2, 2005

On a consolidated basis for all segments for the six-month period ended July 1, 2006, compared to the same six-month period in 2005, revenue decreased 8.4%, gross profit decreased 15.5%, total operating expenses decreased 13.8% and total operating loss decreased 10.4% for reasons discussed in detail in the segment analyses below.

Quarry Segment Analysis

Revenues in our quarry operations for the six-month period ended July 1, 2006 decreased a modest 1.3% from the six-month period ended July 2, 2005.  The improvement in sales, particularly sales to overseas customers, in the second quarter almost offset first quarter declines.

Gross profit dollars from our quarry operations for the six-month period ended July 1, 2006 increased 33.3% and gross profit as a percentage of revenue increased from 7.5% of revenue to 10.1% of revenue.  The increases in gross profit dollars and gross profit as a percentage of revenue were largely due to the performance of the Bethel quarry.  Margin improvements in Barre, Gardenia and Salisbury were partly offset by declines in sales in those quarries.

Manufacturing Segment Analysis

Revenue in our manufacturing operations for the six-month period ended July 1, 2006 increased 9.1% from the six-month period ended July 2, 2005 as a result of increased shipments of mausoleums and other memorial products, including the largest individual memorial the Company has manufactured to date – a $1.8 million mausoleum set during the second quarter of 2006.

Gross profit dollars from the manufacturing group increased 6.3% and gross profit as a percentage of manufacturing revenue decreased by 0.7 percentage points, to 26.0%, for the six-month period ended July 1, 2006 compared to the six-month period ended July 2, 2005. The increase in gross profit is a result of the higher volumes of memorial products, including the higher-margin mausoleum sales.

SG&A costs for the six-month period ended July 1, 2006 for the manufacturing group decreased $347,000 compared to the six-month period ended July 2, 2005 primarily as a result of our decision late in 2005 to reduce our general sales staff.  Our investment in mausoleum and industrial products sales efforts is the same as last year.

Retail Segment Analysis

Revenue in our retail operations for the six-month period ended July 1, 2006 decreased 22.9% from the six-month period ended July 2, 2005. This decline is partly accounted for by the sale of our Georgia retail stores during the second quarter this year and by other store sales and closures late last year.  On a same-store basis, sales were $2.7 million or 16.3% lower in the first six months of 2006. While we have no definitive explanation for the decline, we believe contributing factors might include the impact of staff changes late in 2005; leadership changes in the second quarter of 2006; higher fuel prices and their influence on discretionary spending; and fewer funerals as reported by large funeral home organizations.  Order receipts in the first half of 2006 decreased on a same-store basis $1.6 million or 9.6% from the same period last year.

Gross profit dollars from the retail operations decreased 26.0% and gross profit as a percentage of revenue decreased 2.1 percentage points, to 51.1%, compared to the same six-month period last year.  The significant improvement in gross margin in the second quarter of 2006 over the first quarter is primarily a result of price increases initiated on January 1, 2006 whereas most retail sales in the first quarter had been primarily ordered at the lower prices in effect during 2005 before the price increase went into effect.

SG&A costs from our retail operations decreased 28.9% for the six-month period ended July 1, 2006 compared to the six-month period ended July 2, 2005 and SG&A costs as a percentage of retail revenue decreased 5.6 percentage points from the same six-month period last year. The decrease in SG&A for the first half of 2006 was primarily the result of actions taken late last year.  As we previously announced, we made significant changes in the leadership of our retail segment early in the second quarter of 2006.  Expenses associated with severance agreements and other restructuring charges amounted to $1.7 million, which is shown separately in the financial statements.  Rich Urbach, who now heads our retail division, is continuing the effort to match our cost structure with our revenue stream.

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Consolidated Items

Corporate overhead decreased $194,000 for the six-month period ended July 1, 2006 compared to the six-month period ended July 2, 2005 due to lower professional services fees, including those relating to audit, legal and executive search.

In the second quarter of 2006 we wrote off a note receivable of $100,000, which we determined was uncollectible.  This was the remaining balance associated with the 2001 sale of a manufacturing facility in Elberton, Georgia which we had financed. 

Interest expense increased 70.2% to $1.3 million for the six-month period ended July 1, 2006 compared to the six-month period ended July 2, 2005 as a result of higher debt levels as well as higher interest rates and spreads on our credit facilities.

Income tax expense was $170,000 for the six-month period ended July 1, 2006, compared to $7.7 million for the same six-month period in 2005.  The tax expense reported this year was for our Canadian subsidiary.  At the end of the second quarter of 2005, based on the level of taxable income and projections for future taxable income, the Company determined it was no longer more likely than not that it would generate the required taxable income to fully realize the benefit of the net U.S. deferred tax asset. This resulted in a charge to tax expense of $9,194,000 in the second quarter of 2005.  This action did not affect the cash taxes paid by the Company.  At the end of the second quarter of 2006, 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 the U.S. operations in the future.

Liquidity and Capital Resources

Liquidity

We consider our liquidity to be adequate to meet our long- and short-term cash requirements to fund operations and pursue our strategic initiatives. Historically, we have met these requirements primarily from cash generated by operating activities and periodic borrowings under the commercial credit facilities described below.

Cash Flows

At July 1, 2006, we had cash and cash equivalents of $2.1 million and working capital of $15.0 million, compared to $2.8 million and $14.8 million, respectively, at July 2, 2005.  The levels of working capital are comparable.

Cash Flows from Operations. Net cash used in operating activities was $391,000 in the six-month period ended July 1, 2006 compared to $4.0 million in the same six-month period of 2005. Contributing to the decrease are the lower operating loss in 2006, the larger reduction in trade receivables and the larger reduction in other assets. 

Cash Flows from Investing Activities. Cash flows used in investing activities were $402,000 in the six-month period ended July 1, 2006. Cash used in investing activities comes from either borrowings under our credit facilities or from operations. Capital spending was $765,000, primarily the purchase of $600,000 of new grinding/polishing equipment in our manufacturing operations.  This was partly offset by the proceeds from the disposal of our retail operations in Georgia.  Cash used in investing activities in the same period in 2005 was $8.5 million.  Continued investment in our quarry, manufacturing, and retail operations, as well as $3.5 million to acquire the Rockwell quarry and approximately $600,000 to acquire the McColly retail unit accounted for this investment.

Cash Flows from Financing Activities. Net cash used in financing activities in the six-month period ended July 1, 2006 was $162,000, which consisted of repayments on the long-term debt partly offset by borrowings on our revolving line of credit.  This compares to $11.2 million provided by financing activities in the corresponding period of 2005, which consisted of borrowings under the line of credit of $8.2 million, net long-term debt borrowings of $3.3 million, and proceeds from stock options exercised of $24,000, less dividends paid on common stock of $370,000.

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Capital Resources

CIT Credit Facility

We have a credit facility with the CIT Group/Business Credit and Chittenden Trust Company (the "Lenders") that expires in October 2007 and is secured by substantially all assets of the Company. The facility consists of an acquisition term loan line of credit of up to $30.0 million and a revolving credit facility of up to another $20.0 million based on eligible accounts receivable, inventory and certain fixed assets.  As of July 1, 2006, we had $21 million outstanding and $9 million available under the term loan line of credit and $11.1 million outstanding and $8.9 million available under the revolving credit facility. The Lenders have placed a reserve of $2 million against the availability under the revolving credit facility with the Lenders retaining the right to over advance at their discretion.  Our loan agreement with the Lenders 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.

Minimum Operating Cash Flow to Debt Service Coverage Ratio. The facility requires the ratio of the sum of earnings before interest, taxes, depreciation and amortization (EBITDA) less taxes paid 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 arbitration expenses in 2004 and operating losses in 2004 and 2005, the Company has been in violation of this covenant and has received waivers and amendments of this covenant from our Lenders, which adjust the required covenant levels for the balance of 2006 and through the remaining term of the facility.  The Company was in compliance with the adjusted covenants at July 1, 2006 and expects to be in compliance with those adjusted covenants throughout the remaining term of the facility.

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 July 1, 2006, the Company was in compliance with this covenant as our total liabilities to net worth ratio was 1.67.

Interest Rates. We have a multi-tiered interest rate structure on our outstanding debt with the Lenders. We can elect the interest rate structure under the credit facility based on the prime rate or LIBOR for both the revolving credit facility and the term loan. The incremental rate above or below prime and above LIBOR is based on our Funded Debt to Net Worth Ratio. Based on this ratio, our current rates are 25 basis points higher than the lowest incremental rates currently available to us.  In addition, the incremental interest rates under our credit facility were increased by a total of 50 basis points during 2005 in connection with the amendments noted above.  Because the Company was in compliance with the terms of the amendments noted above, effective July 2, 2006 our rates were reduced by 25 basis points.  The rates in effect as of July1, 2006 were as follows:

		Amount	Formula	Effective Rate
Revolving Credit Facility	$	142,000	Prime + 0.25%	8.50%
Revolving Credit Facility		11.0 million	LIBOR + 2.25%	7.67%
Term Loans		40,000	Prime + .50%	8.75%
Term Loans		12.5 million	LIBOR +2.50%	7.64%
Term Loans		6.0 million	LIBOR +2.50%	7.61%
Term Loans		2.5 million	LIBOR +2.50%	7.77%

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Canadian Credit Facility

As of July 1, 2006, 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

Our contractual obligations have not changed materially since December 31, 2005, as disclosed in our annual report on Form 10-K.  Our primary need for capital will be to maintain and improve our quarry, manufacturing, and retail facilities. We have less than $2 million budgeted for capital expenditures in 2006.  We believe the combination of cash flow from operations and our credit facility will be sufficient to fund our operations for 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 primarily due to weather. Cemeteries in northern areas generally do not accept granite memorials during winter months when the ground is frozen because monuments cannot be properly set under those conditions. 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.

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Item 3.		Quantitative and Qualitative Disclosure About Market Risk
The Company has financial instruments that are subject to interest rate risk, principally debt obligations under its credit facilities. Historically, the Company has not experienced material gains or losses due to interest rate changes. Based on the Company's current variable rate debt obligations, the Company believes its exposure to interest rate risk is not material.
The Company is subject to foreign currency exchange rate risk primarily from the operations of its Canadian subsidiary. At July 1, 2006, the Canadian subsidiary had net assets of $10.3 million exposed to changes in the Canadian/ U.S. dollar exchange rate. Although fluctuations in this exchange rate have not been significant historically, the effect of the change in the exchange rate in the second quarter of 2006 was $493,000.
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 were effective in ensuring that information required to be disclosed by the Company in the report that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
	(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.  See the disclosure contained in "Risk Factors that May Affect Future Results" in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2005 for disclosure on the status of the Company's efforts to document and test its internal controls.

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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.
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 1A.	Risk Factors
There have been no material changes to the risk factors previously disclosed in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2005.

Item 4.	Submission of Matters to a Vote of Security Holders
The Company held its annual meeting of stockholders on June 22, 2006 (the "Annual Meeting"), to elect two Class III directors and to ratify the selection of Grant Thornton LLP as the Company's registered public accounting firm for the 2006 fiscal year.
Richard C. Kimball and Kurt M. Swenson were elected to serve as Class III directors for a three-year term expiring at the annual meeting of stockholders in 2009 and until their successors are duly elected and qualified. James L. Fox and Charles M. Waite continue to serve as Class I directors for a term expiring at the annual meeting of stockholders in 2007 and until their successors are duly elected and qualified. Pamela G. Sheiffer and Frederick E. Webster Jr. continue to serve as Class II directors for a term expiring at the annual meeting of stockholders in 2008 and until their successors are duly elected and qualified.
The following table sets forth the number of votes cast for, against or withheld, as well as the number of abstentions, as to the election of each of Richard C. Kimball and Kurt M. Swenson and the ratification of the selection of Grant Thornton LLP as the Company's independent auditors of the 2006 fiscal year.

	Votes For	Votes Withheld/ Votes Against	Abstentions
Election of
Richard C. Kimball	6,823,784	97,535	—
Kurt M. Swenson	6,823,284	98,035	—
Grant Thornton LLP	6,908,396	11,963	960

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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.
	10.1	Form of Collective Bargaining Agreement dated April 29, 2006 by and between Rock of Ages Corporation – Quarries Division and the United Steelworkers of America, AFL-CIO-CLC on behalf of Amalgamated Local #4.
	10.2	Form of Collective Bargaining Agreement dated April 29, 2006 by and between Rock of Ages Corporation – Quarries Division and the United Steelworkers of America, AFL-CIO-CLC on behalf of Amalgamated Local #4.
	10.3	Amendment No. 1 to Employment Agreement of Nancy Rowden Brock dated April 10, 2006.
	10.4	Amendment No. 2 to Employment Agreement of Peter A. Friberg dated April 20, 2006.
	10.5	Amendment to Salary Continuation Agreement of Peter A. Friberg dated April 20, 2006.
	10.6	Amendment No. 1 to Employment Agreement of Kurt M. Swenson dated April 20, 2006.
	10.7	Amendment to Salary Continuation Agreement of Kurt M. Swenson dated April 20, 2006.
	10.8	Employment of Agreement of Douglas S. Goldsmith dated June 16, 2006 (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 16, 2006)
	10.9	Employment of Agreement of Michael B. Tule dated June 16, 2006 (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 16, 2006)
	10.10	Purchase and Sale Agreement dated July 28, 2006 by and between Rock of Ages Corporation, Carolina Quarries, Inc. and New England Stone Industries, LLC.
	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.

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(b)	Reports Submitted on Form 8-K:
	On April 10, 2006, the Registrant filed a report on Form 8-K pursuant to Item 4.02(a) (Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review) to report it would be reclassifying freight charges and that it intended to reflect the reclassification of the freight charges in the Company's Annual Report on Form 10-K for the year ended December 31, 2005.
	On April 27, 2006, the Registrant filed a report on Form 8-K pursuant to Item 7.01 (Regulation FD Disclosure) to report it had issued a press release announcing it would be reporting results for the First Quarter ended April 1, 2006 and a conference call had been scheduled for May 9, 2006.
	On May 1, 2006, the Registrant filed a report on Form 8-K pursuant to Item 1.01 (Entry Into a Material Definitive Agreement) to report it had 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.
	On May 9, 2006, the Registrant filed a report on Form 8-K pursuant to Item 2.02 (Results of Operations and Financial Conditions), Item 5.02 (Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers), Item 8.01 (Other events) and Item 9.01 (Financial Statements and Exhibits) to report it had issued a press release announcing financial results for the first quarter ended April 1, 2006. The Registrant also reported the resignation of Rick Wrabel, President and Chief Operating Officer of the Memorials Division. The Registrant also reported it had issued a press release announcing the appointment of Richard Urbach as President and Chief Operating Officer of the Memorials Division.
	On May 26, 2006, the Registrant filed a report on Form 8-K pursuant to Item 1.01 (Entry Into a Material Definitive Agreement), Item 1.02 (Amendment or Termination of a Material Definitive Agreement) and Item 9.01 (Financial Statements and Exhibits) to report on May 23, 2006 ,the Company had entered into resignation and severance agreements with Rick Wrabel President and Chief Operating Officer of the Memorials Division and Caryn A. Crump, Senior Vice President/Marketing of the Memorials Division. The Registrant also reported on May 24, 2006 the Company entered into an Amendment of Richard Urbach's employment agreement. The Registrant also reported the employment agreements of Rick Wrabel, Caryn A. Crump and three other individuals were terminated effective June 5, 2006.
	On June 16, 2006, the Registrant filed a report on Form 8-K pursuant to Item 1.01 (Entry Into a Material Definitive Agreement) and Item 9.01 (Financial Statements and Exhibits) to announce on June 16, 2006, the Company entered into an employment agreement with Douglas S. Goldsmith, President and Chief Operating Officer of the Quarries Division and Michael B. Tule, Senior Vice President, General Counsel and Secretary.

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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: August 14, 2006	By: /s/ Nancy Rowden Brock        Nancy Rowden Brock        Senior Vice President, Chief Financial Officer        and Treasurer         (Duly Authorized Officer and Principal Financial and Accounting Officer)

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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.
10.1	Form of Collective Bargaining Agreement dated April 29, 2006 by and between Rock of Ages Corporation – Quarries Division and the United Steelworkers of America, AFL-CIO-CLC on behalf of Amalgamated Local #4.
10.2	Form of Collective Bargaining Agreement dated April 29, 2006 by and between Rock of Ages Corporation – Quarries Division and the United Steelworkers of America, AFL-CIO-CLC on behalf of Amalgamated Local #4.
10.3	Amendment No. 1 to Employment Agreement of Nancy Rowden Brock dated April 10, 2006.
10.4	Amendment No. 2 to Employment Agreement of Peter A. Friberg dated April 20, 2006.
10.5	Amendment to Salary Continuation Agreement of Peter A. Friberg dated April 20, 2006.
10.6	Amendment No. 1 to Employment Agreement of Kurt M. Swenson dated April 20, 2006.
10.7	Amendment to Salary Continuation of Kurt M. Swenson dated April 20, 2006.
10.8	Employment of Agreement of Douglas S. Goldsmith dated June 16, 2006 (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 16, 2006)
10.9	Employment of Agreement of Michael B. Tule dated June 16, 2006 (incorporated herein by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 16, 2006)
10.10	Purchase and Sale Agreement dated July 28, 2006 by and between Rock of Ages Corporation, Carolina Quarries, Inc. and New England Stone Industries, LLC.
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.

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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
Risk Factors
Submission of Matters to a Vote of Security Holders
Exhibits and Reports on Form 8-K
SIGNATURE