Rock of Ages Corporation

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Rock of Ages Corporation

772 Graniteville Road
Graniteville,
Vermont 05654
U.S.A.
Telephone: (802) 476-3121
Toll Free: (800) 875-7353
Fax: (802) 476-3110
Web site: www.rockofages.com

Public Company
Incorporated: 1885
Employees: 1,078
Sales: $96.52 million (1999)
Stock Exchanges: NASDAQ
Ticker Symbol: ROAC
NAIC: 327991 Cut Stone and Stone Product Manufacturing

Rock of Ages Corporation is an integrated quarrier, manufacturer, distributor, and retailer of granite and products manufactured from granite. The company owns and operates 13 active quarry properties and ten manufacturing and sawing facilities in North America, principally in Vermont, Georgia, and the Province of Quebec. The quarry division sells granite blocks to the manufacturing division and outside manufacturers as well as to distributors in Europe and Japan. The principal manufactured product is granite memorials, which the company’s sales force sells wholesale to approximately 2,100 independent memorial retailers in the United States and Canada. Rock of Ages is widely recognized for its personalized granite memorials and for the very large memorials it can produce. The retail division primarily sells granite, bronze, and marble memorials directly to consumers. Rock of Ages operates 100 company-owned, retail-sales outlets in 15 states. The company markets its memorials under four separate brand names: Rock of Ages Signature, Rock of Ages Sealmark, Golden Rule by Rock of Ages, and Stone Eternal by Rock of Ages. A seal bearing the Rock of Ages name is placed on each of the branded memorials, which are supported by a perpetual warranty. The company believes that its Rock of Ages trade-mark is one of the oldest and best-known brand names in the granite memorialization industry.

The Birth of Granite to the Birth of an Industry

According to the theories expressed in Rod Clarke’s Carved in Stone: A History of the Barre Granite Industry, the story of Rock of Ages granite goes back to shortly after the dawn of time, millions of years ago, when planet earth was “a swirling mass of gas and liquid hurtling through the cosmos.” The new planet shrank as it cooled, building up enormous pressure at its core and forming an’outer crust. During this process—in a complex succession of violent contractions—pent-up gasses and rocks rose to form the surface of the earth while the molten rock deep in the earth’s core continued to cool and solidify to form granite (igneous rock), marble (metamorphic rock) and sedimentary rock. Marbles of many kinds were created when pre-existing rocks underwent changes (that is, metamorphosed) brought on by intense heat and pressure. “The mountains of New England, born about 500 million years ago, were among the first to be formed,” wrote Clarke. Then during the Ice. Age, about 25,000 years ago, rain and the ice sheets wore off the higher points of the mountains and exposed the granite that had been formed possibly two billion years before.

Todd Paton, in his 1992 edition of The Rock of Ages Story, noted that the Massachusetts Institute of Technology estimated Rock of Ages granite to be approximately 340 million years old. He quoted geologists as estimating the deposit of Barre granite “to be four miles long, one to two miles wide, and ten miles deep.” Crystallized grains of granite—formed from the slow melting of the molten substance during the prehistoric period— assembled into the “interlocking network of crystals that gave Barre granite its hard, uniformly granular texture, capable of enduring centuries of exposure to the elements without crumbling,” Paton explained. Indeed, Barre granite was a hard, durable substance that had been exposed to the vicissitudes of New England weather for over 10,000 years without crumbling.

By the early decades of the 19th century, Wildersburgh, Vermont—as Barre was first called—had been permanently settled by emigrants from New Hampshire, Massachusetts, and Rhode Island. The granite outcroppings that the early settlers removed from their fields were manufactured into doorsteps, fence posts, and boundary markers. Robert Parker—a veteran of the Revolutionary War and of the War of 1812—settled in Barre in 1812 and, as a professional quarryman, was quick to recognize the economic potential of Barre granite; he opened the town’s first commercial quarrying and finishing business.

The most significant event in Barre’s budding granite industry was a contract won by Pliny Wheaton—who had opened a quarry on Cobble Hill—to furnish Barre granite for the pillars, foundation, window caps, sills, and cornices for Vermont’s new State House, completed in Montpelier in 1838. Despite this initial boost, however, the granite industry began to stagnate and then to decline because draft animals had to be gathered throughout the area to haul the chunks of granite. Rod Clarke related the story of “a massive granite block of fifty tons being moved from the ‘hill’ to the city on rollers at the rate of one mile a week.”

1875–54: Transportation, Influx of Workers, New Technologies, National Markets

The transportation of granite was partially solved in June 1875 when the last spike was driven to connect Barre to the Montpelier line of the Central Vermont Railroad. Quarrymen still had to haul granite blocks from Millstone Hill down to the Barre depot. The Montpelier and Wells River Railroad offered to build a spur between the main railroad line and Millstone Hill if Barre residents bought $40,000 worth of railroad stock to fund the project. The offer was quickly accepted and filled. The “Barre Quarries Spur” (also called the “Sky Route”) had a grade of 250 feet per mile from the Barre Terminus to the quarries on Millstone Hill. To solve the problem of running the rails from Barre to the Hill (1,025 feet above the town), the quarry line was built using smooth rails with switchbacks to circumvent gravity. This rail system, completed in 1888, remained in use until the 1950s, when it was replaced by trucking. The town and the granite industry were energized. News of what was going on in Barre reached master quarrymen and artisans in foreign lands.

By 1910 skilled sculptors, stonecutters, and other hopeful laborers had come from Canada, Scotland, Italy, Scandinavia, Spain, Greece, Ireland, and England—to name but a few of the emigrants’ home countries—to pursue the American Dream. Barre reached a population of over 12,000 people. Among the early newcomers was George Barron Milne, a visionary Scot gifted with keen business acumen. By 1885 he had saved enough money to buy a quarry of his own and in a few years partnered with another frugal quarry owner—Montpelier-born James M. Boutwell, a railroad engineer by trade—to form a new company. The two partners recognized the engineering skills of another Vermonter, Harvey W. Varnum, who had played a key role in diverting the river that ran through Barre and in developing many railroad lines in Vermont, thereby greatly improving traveling and business opportunities. In 1905, the three men founded Boutwell, Milne and Varnum Granite Company (BMV) and, according to historian Clarke, “concentrated on selling their stone to local manufacturers. But they quickly recognized the need for diversification and built a large, modern plant near their quarries.”

The coming of the railroad triggered the growth of the granite industry in Barre but “it was the advent of new labor-saving technologies that propelled the town headlong into the twentieth century; veteran quarry man, innovator and entrepreneur Emery L. Smith led the way,” Clarke wrote. As early as 1871, Smith was the first Barre quarry operator to set up a permanent derrick by anchoring it to trees and stones on Cobble Hill. He improved the derrick by installing a gearing system that doubled its capacity to five tons. Smith also pioneered the use of electric batteries to detonate explosive charges. He put the first steam drill to use in his quarry, adopted the pneumatic plug drill, and used compressed air for drilling. Furthermore, the coming of electricity to Barre in 1885 made possible the use of power-cutting and polishing lathes, surfacing equipment, and the first band saw for cutting stone.

In 1905 there were no fewer than 42 operating quarries in Barre, owned by about two dozen firms—a few large, many small. Clarke noted that as the Barre granite industry grew, so did the number of people dying from “the occupational disease silicosis, caused by breathing large quantities of free silica contained in granite dust.” A breakthrough did not occur until 1937 when dust and silicosis were put in check via $300,000 worth of ventilating equipment in 80 plants.

Initially, BVM was engaged in quarrying activities and sold its granite to manufacturers in Barre. In 1915, however, the company decided to enter national markets and turned to a Burlington advertising agency for advice on a more effective way of marketing granite. The result was the suggestion for using “Rock of Ages” as a trademark that emphasized the strength and durability of Barre granite. BMV published a small pamphlet with the picture of a monument praising the quality of Rock of Ages granite and changed the company’s name to Rock of Ages Corporation in 1925. As the years sped by, new technology made it relatively less expensive to quarry and transport granite, and demand for granite increased. For example, the 1930 introduction of detachable drill bits revolutionized the drilling process by allowing for the replacement of dull bits, thereby prolonging the life of drills. Furthermore, wet-drilling methods used in the quarries protected the workers’ lungs from granite dust.

Company Perspectives:

Our Company will prosper by providing our customers with the superior value, personal service and honest dealing that they have come to expect and deserve from all of us in the Rock of Ages Family.

In 1930 Rock of Ages acquired ten granite-manufacturing plants in Barre and began to compete with the approximately 125 monument manufacturers in that area. Then Rock of Ages launched a growth-by-acquisition strategy that led to its becoming the best-known name in the granite industry. Barre granite’s uniformity of crystal structure and unique proportions of quartz and feldspar made it unusually durable, moisture-resistant, and thermally stable. This granite was—and remained—eminently suitable for family memorials and monuments. The original Rock of Ages Quarry yielded a dark shade of gray granite ideally suited for monumental use. Through the 1940–86 acquisition of four other quarries in Barre, Rock of Ages created a five-quarry complex considered to be the largest granite quarry in the world. This complex included the E.L Smith quarry where Smith had pioneered many innovations that increased the productivity of granite and helped to keep quarrymen healthy. These quarries yielded both dark-gray and light-to-medium gray Barre granite. Acquisition of the Wells-Lamson Quarry and adjacent saw plant made Rock of Ages the owner of the oldest, continually operating quarry in the United States and established it as the only granite quarrier in Barre.

1955–97: Expansion and Reorganizations

In 1955, the company built the Rock of Ages Craftsman Center, at that time one of the largest and most modern granite-manufacturing plants in the world. In 1956 the company purchased the Ezra White granite firm and its patent rights to the Rosary cutting process. In 1957 the Bethel, Vermont-based quarry was reactivated to provide the white stone popular as building material in western Europe and highly prized by architects. The purchase of Iberville, Quebec-based Brodie’s Limited gave Rock of Ages access to pink granite; the acquisition of Beebe, Quebec-based Stanstead Granite Quarries Co., Ltd. made Rock of Ages the owner of one of the top manufacturers of granite. In 1984, the two Canadian companies were consoli-dated and renamed Rock of Ages Canada.

During 1969, Rock of Ages itself was purchased by Rhode-Island based Nortek, Inc., a mini-conglomerate with diversified holdings. That same year, Rock of Ages installed a custom-designed 160-foot steel derrick that allowed for the quarrying of rough granite blocks weighing over 150 tons. This was the first of many other steel derricks that replaced the wooden derricks then in use. Rock of Ages continued to upgrade its procedures; for example, use of the jet-channelling machine. The jet channeling torch used small, individual pipes to feed fuel oil and oxygen under pressure through a nozzle to create a channel in granite. A third pipe provided water as a cooling agent. When the flame of over 4,000 degrees Fahrenheit was placed near the granite to create a channel, about one-eighth inch of the granite surface expanded and flaked away, leaving a smooth face on the sides of the channel. This method, although expensive because of the cost of the oxygen and fuel oil, was efficient, flexible and the most cost-effective means of channeling and of obtaining a smooth face on the stone.

Sculptors, artists, and engravers produced many a work of art on memorials and on granite blocks used for other purposes. According to Nortek’s 7975 Annual Report, Rock of Ages “was particularly proud of the unique 27- by 30-foot bas-relief granite sculpture completed for installation on the facade of the giant Libby Dam in Montana.”

During 1977, harsh winter weather severely impacted Nortek subsidiary Rock of Ages’s quarrying operations but in 1979, Rock of Ages more than doubled its operating revenue to $3.7 million; net sales of $20.7 million were up 25 percent from 1978, according to an article published by the Boston Globe on April 20, 1980. Large investments in housing and construction, however, made Nortek vulnerable to higher prices for supplies and raw materials, rising wage levels, and other costs that severely impacted total net earnings. In 1984 Nortek sold Rock of Ages to Concord, New Hampshire-based Swenson Granite Company, Inc., a family-owned granite firm established by John Swenson in 1883, two years before the founding of Rock of Ages.

As a subsidiary of Swenson Granite, Rock of Ages acquired quarries in other states and expanded its production of granite headstones. In 1988 Rock of Ages built a 24,00 square-foot facility in Barre and produced precision granite press rolls and large machine bases. By 1991, Rock of Ages was the only granite quarrier in Barre and had purchased an interest in 14 Canadian quarries, a granite manufacturing plant in Quebec, and 14 granite quarries in the state of Georgia. In 1997, the company owned and operated 13 active quarries and 12 manufacturing and sawing facilities in North America, principally in Vermont, Georgia and the Province of Quebec. Rock of Ages marketed and distributed its memorials on a wholesale basis to some 1,835 independent memorial retailers in the United States and Canada, including approximately 495 independent authorized Rock of Ages retailers that were the primary outlet for the company’s branded memorials.

1997–2000: Entry into Retailing

Rock of Ages estimated that in North America 80 percent or more of all granite memorials were manufactured in Barre, Vermont; Beebe, Quebec; Elverton, Georgia; and the “Northwest” (an area encompassing Milbank, South Dakota; Cold Spring, Minnesota, and Wassau, Wisconsin), Rock of Ages continued to implement its growth strategy through acquisition of additional quarries and major granite manufacturing companies in these regions. In June 1997, Rock of Ages entered into a definitive agreement to acquire Childs & Childs Granite Co., the second-largest manufacturer of granite memorials in Georgia. Then in July, Rock of Ages made its first significant entry into memorial retailing by entering into an agreement to acquire Keith Monument Co. and its affiliated companies; Keith, an authorized Rock of Ages dealer for over 50 years, was one of the largest retailers of granite memorials in the United States.

Key Dates:

1820s:: Robert Parker opens Vermont’s first commercial quarrying and finishing business in Barre.
1885:: Emigrant George B. Milne opens his own quarry in Barre.
1888:: Completion of the railroad’s “Barre Quarries Spur” energizes the granite industry; emigrants flock to Barre to pursue the American dream.
1905:: Milne and two partners found Boutwell, Milne and Varnum Granite Company (BMV).
1915:: BMV adopts Rock of Ages as its trademark and expands into national markets.
1930:: Rock of Ages launches a growth-by-acquisition strategy and begins to manufacture granite.
1955:: Company builds Craftsman Center, one of the largest granite-manufacturing plants in the world.
1969:: Nortek, Inc. acquires Rock of Ages.
1984:: Nortek sells Rock of Ages to Swenson Granite Company.
1977:: Merger of Rock of Ages and Swenson results in a reorganized Rock of Ages Corporation; company goes public and adds retailing to its operations.
2000:: Company completes reorganization as a vertically integrated company.

On August 13, 1997, Rock of Ages entered into a merger and reorganization agreement with Swenson Granite, whereby the name Rock of Ages Corporation was retained as the name of the company and Kurt M. Swenson, a fourth-generation descendant of John Swenson, became Rock of Ages’s President and CEO. The reorganized company went public in October 1997 and was traded on NASDAQ under the symbol ROAC. Some $19 million of the proceeds from Rock of Ages’ initial public offering (IPO) went to the purchase of Childs & Childs and of Keith Monument and their affiliated companies. John E. Keith, a principal owner and the president of Keith Monument, was retained to head Rock of Ages’s expansion into retailing by means of other acquisitions and through strategic alliances with funeral home and cemetery owners.

For fiscal 1997, Rock of Ages posted sales of $54.21 million and net income of $2.65 million, compared to 1996’s sales of $44.67 million and net income of $1.91 million.

In order to continue building a fully vertically-integrated organization, in 1998 Rock of Ages acquired 13 memorial retailers with 40 locations in eight states and additional quarries. Rock of Ages reported fiscal 1998 as an outstanding year: net sales rose to $82.75 million and net income to $7.24 million. The principal product from quarries was granite blocks of various colors: gray, black, gray, pink, white, brownish red, and grayish pink. The blocks were sold for memorials, building and other uses. Granite pieces not of a shape or size for manufacturing were sold as rip rap for embankments, bridges, or piers—among other uses—or crushed for sale as crushed stone. Rock of Ages’ principal manufactured product was granite memorials sold to retailers of granite memorials. These memorials—whether markers, hickeys, slants, standard uprights or mausoleums—were placed in cemeteries. Some retailers sold other granite products, such as benches and steps, that were not necessarily placed in cemeteries. Other manufactured products included precision granite items, such as surface plates, machine bases, coordinate measuring devices, and other products manufactured to exacting dimensions. The company’s retail division marketed and sold granite, bronze, and marble memorials.

Also in 1998, analysts started to take note of Rock of Ages. Referring to the company as the “leader in the tombstone business,” Business Week reported that several asset management firms—including Wellington Management, Goldman Sachs, and Fidelity—were acquiring shares in Rock of Ages. Writer Gene Marcial noted that Rock of Ages had a virtual lock on its industry and thus was well positioned to withstand market fluctuations.

In 1999 the retail division of memorials reported a loss of $2 million before taxes. The loss was attributed, in part, to a gradual growth in the number of families that chose cremation as an alternative to traditional methods of burial and installation of headstones. According to a source from the Cremation Association of North America (CANA), cremations represented approximately 22 percent of the United States burial market in 1996, compared to approximately ten percent in 1980; CANA expected this rate to rise to 29 percent by 2010.

In the company’s 1999 Annual Report, Chairman/CEO Kurt Swenson explained that consolidation of retail operations had taken longer than expected. Furthermore, Swenson commented that it was necessary “to completely re-brand the company with the addition of 300 product lines, new warranties, all new pointof-sale materials, new retail price books, advertising and other support materials.” During fiscal 1999, Rock of Ages acquired 15 companies. Swenson remained upbeat when he commented on the total financial situation of the 1999 fiscal year: “Being part of a fully vertically integrated memorial business— quarrying, manufacturing and retailing—was truly a record change for everyone in our company … and it took time to adjust,” he emphasized.

By the end of fiscal 1999 Rock of Ages had completed the formation of its new business strategy as a fully integrated granite company. Pricing problems had been corrected in manufacturing operations. “The quarry team delivered record revenue and earnings that enabled us to earn a profit… despite the growth-related problems in our manufacturing and retail operations,” Swenson reported. The poor earnings performance was offset by the highest cash flow from operations in the company’s history: over $9 million or $1.17 per share, compared to about $3.7 million or $0.46 per share in 1998 when the company reported earnings of $0.91 per share.

At the end of the third quarter of 2000, Rock of Ages’s total debt had declined 21 percent to $21.11 million from $26.86 million at year-end 1999. Improvements in quarrying and retail operations boded well for a fourth quarter in which earnings were expected to increase about 50 percent. Thus, at the beginning of a new millennium, a reorganized Rock of Ages Corpo-ration was ready not only to experience a profitable fourth quarter but also to reach its goal of providing its customers “with superior value, personal service, and honest dealing for years to come.”

Principal Subsidiaries

Associated Memorials Inc.; Autumn Rose Quarry, Inc.; Carolina Quarries, Inc.; Childs & Childs Granite Company Inc.; Childs & Childs Trucking Co., Inc.; Kabushiki Kaisha Rock of Ages Asia (Japan; 50%); Keith Monuments Company LLC; Keystone & Childs Inc.; Pennsylvania Granite Corp.; Rock of Ages Canada, Inc. (Canada); Rock of Ages International Corp. (Japan); Rock of Ages International, Ltd. (Virgin Islands); Rock of Ages Memorials Inc.; Sioux Falls Monument Co.