<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
PH GROUP, INC.
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(Exact name of Small Business Issuer as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
Ohio Commission File No. 0-8115 31-0737351
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(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
</TABLE>
2365 Scioto Harper Drive, Columbus, Ohio 43204
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(Address of principal executive offices)
Registrant's telephone number, including area code: (614) 279-8877
Not Applicable
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(Former name or former address, if changed since last report.)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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.
(1) YES X NO (2) YES X NO
--- --- --- ---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: 1,610,861 common shares, without par
value, outstanding as of October 31, 1998.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30
1998 DEC. 31
(UNAUDITED) 1997
ASSETS ----------- ------------
- ------
Current Assets
- --------------
<S> <C> <C>
Cash $ 9,888 $ 7,789
Accounts Receivable, net $ 3,438,316 $ 2,834,678
Inventories $ 3,095,541 $ 2,790,172
Deferred Income Taxes $ 150,500 $ 150,500
Other Current Assets $ 202,374 $ 193,798
----------- -----------
Total Current Assets $ 6,896,619 $ 5,976,937
----------- -----------
Property and Equipment, at cost
Office Equipment $ 731,404 $ 621,933
Manufacturing Equipment $ 1,102,627 $ 1,053,198
Leasehold Improvements $ 281,822 $ 265,564
Vehicles $ 166,180 $ 166,180
----------- -----------
$ 2,282,033 $ 2,106,875
Less: Accumulated Depreciation & Amortization $(1,287,827) $(1,112,086)
----------- -----------
Net Property and Equipment $ 994,206 $ 994,789
----------- -----------
Other Non-Current Assets
- ------------------------
Inventory, Longterm Portion $ 39,000 $ 39,000
Land Held for Investment $ 170,170 $ 169,720
Goodwill, net $ 717,412 $ 785,899
Deferred Income Taxes $ 50,100 $ 50,100
Other Noncurrent Assets $ 241,348 $ 278,132
----------- -----------
Total Other Non-Current Assets $ 1,218,030 $ 1,322,851
----------- -----------
TOTAL ASSETS $ 9,108,855 $ 8,294,577
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30
1998 DEC. 31
LIABILITIES (UNAUDITED) 1997
- ----------- ----------- ----------
<S> <C> <C>
Accounts Payable $ 2,305,695 $1,950,925
Bank Line of Credit $ 2,686,716 $ 457,049
Current Portion of Long-Term Debt $ 224,884 $ 750,658
Current Portion of Capital Lease Oblig $ 21,124 $ 19,175
Income Taxes Payable $ (153,386) $ 422,626
Accrued Expenses and Taxes $ 173,182 $ 485,635
Advance Billings $ 691,882 $1,722,235
----------- ----------
Total Current Liabilities $ 5,950,097 $5,808,303
----------- ----------
Noncurrent Liabilities, less any Current Portions:
Long-term Debt $ 1,127,185 $ 353,070
Capital Lease Obligations $ 7,669 $ 23,765
Deferred Compensation $ 18,750 $ 12,916
----------- ----------
Total Noncurrent Liabilities $ 1,153,604 $ 389,751
----------- ----------
Total Liabilities $ 7,103,701 $6,198,054
----------- ----------
Redeemable Common Stock $ 262,500 $ 312,500
----------- ----------
Shareholders' Equity
- --------------------
Common Stock, no par value, authorized
10,000,000 shares; issued and outstanding
1,517,111 in 1998 and 1,418,731 in 1997 at
stated value $ 12,176 $ 11,350
Additional Paid- In Capital $ 1,393,333 $1,292,051
Retained Earnings $ 337,614 $ 480,622
Treasury Shares $ (469) $ 0
----------- ----------
Total Shareholders' Equity $ 1,742,654 $1,784,023
TOTAL LIABILITIES AND EQUITY $ 9,108,855 $8,294,577
============================ =========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> 4
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1998 1997 1998 1997
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
NET SALES $ 3,077,179 $ 4,021,315 $ 10,463,199 $ 9,388,505
----------- ----------- ------------ -----------
Cost of Goods Sold $ 2,532,450 $ 2,631,000 $ 7,631,278 $ 6,128,263
----------- ----------- ------------ -----------
Gross Margin $ 544,729 $ 1,390,315 $ 2,831,921 $ 3,260,242
Selling, General and
and Administrative Expense $ 865,892 $ 847,782 $ 2,885,859 $ 2,322,079
----------- ----------- ------------ -----------
Operating Income $ (321,163) $ 542,533 $ (53,938) $ 938,163
----------- ----------- ------------ -----------
Other Income (Expense)
Interest Income $ 1,205 $ 609 $ 5,467 $ 3,214
Interest(Expense) $ (67,146) $ (76,910) $ (180,083) $ (152,851)
Other $ 23,967 $ (33,480) $ 75,291 $ (25,086)
----------- ----------- ------------ -----------
Total Other Income (Expense) $ (41,974) $ (109,781) $ (99,325) $ (174,723)
----------- ----------- ------------ -----------
Income Before Income Taxes $ (363,137) $ 432,752 $ (153,263) $ 763,440
Provision for Taxes $ (75,400) $ 209,000 $ (10,400) $ 260,000
----------- ----------- ------------ -----------
NET INCOME(LOSS) $ (287,737) $ 223,752 $ (142,863) $ 503,440
- ---------------- =========== =========== ============ ===========
NET INCOME(LOSS) PER SHARE:
Basic $ (0.19) $ 0.16 $ (0.10) $ 0.36
=========== =========== ============ ===========
Diluted $ (0.18) $ 0.15 $ (0.09) $ 0.34
=========== =========== ============ ===========
Weighted Average Common Shares
Outstanding (1)
Basic 1,517,806 1,417,933 1,480,979 1,383,283
=========== =========== ============ ===========
Diluted 1,611,080 1,531,070 1,578,019 1,497,219
=========== =========== ============ ===========
</TABLE>
(1) Adjusted for stock split January 2, 1998
The accompanying notes are an integral part of the financial statements.
<PAGE> 5
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP, INC.
CONSOLIDATED CASHFLOW STATEMENT
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1998 1997
----------- -----------
<S> <C> <C>
Cash Flow From Operating Activities
Net Income $ (142,863) $ 503,440
Adjustments to Reconcile Net Income to Net Cash
Depreciation and Amortization $ 375,148 $ 231,689
Loss (Gain) on Sale of Property and Equipment $ 7,168 $ (8,118)
Changes in Certain Assets and Liabilities
(Increase) in Accounts Receivable $ (603,638) $(2,609,987)
(Increase) in Inventory $ (305,369) $(2,466,949)
(Increase) in Other Current Assets $ (8,576) $ (185,477)
Decrease (Increase) in Other Non Current Assets $ 36,784 $ (265,914)
Increase in Accounts Payable $ 354,770 $ 1,782,975
Increase (Decrease) in Income Taxes Payable $ (576,012) $ 178,691
Increase in Deferred Compensation $ 5,834 $ 11,458
(Decrease) in Accrued Exp and Taxes $ (312,463) $ (227,899)
Increase (Decrease) in Advanced Billings $(1,030,353) $ 2,163,151
----------- -----------
Net Cash Used In Operating Activities $(2,199,560) $ (892,940)
- ------------------------------------- ----------- -----------
Cash Flows from Investing Activities
Proceeds from Sale of Equipment $ 5,100 $ 148,438
Capital Expenditures for Property and Equipment $ (197,791) $ (208,978)
(Increase) in Other Long Term Assets $ (450) $ (412,702)
----------- -----------
Net Cash Used In Investing Activities $ (193,141) $ (473,242)
- ------------------------------------- ----------- -----------
Cash Flows from Financing Activities
Principal Payments of Debt Obligations $ (449,139) $ (48,528)
Change in Line of Credit, net $ 2,229,667 $ 665,200
Proceeds from Notes Payable $ 512,633 $ 600,000
Proceeds from issuance of Common Stock $ 101,639 $ 41,500
----------- -----------
Net Cash Provided By Financing Activities $ 2,394,800 $ 1,258,172
- ----------------------------------------- ----------- -----------
Net increase(Decrease) in Cash $ 2,099 $ (108,010)
Cash, Beginning of Period $ 7,789 $ 116,449
----------- -----------
CASH, END OF PERIOD $ 9,888 $ 8,439
- ------------------ =========== ===========
</TABLE>
PH Group, Inc. paid $ 172,083 in cash for interest in 1998 and $144,056 in 1997.
PH Group, Inc. paid $ 541,893 in cash for income taxes in 1998 and $89,559 in
1997.
The accompanying notes are an integral part of the financial statements.
<PAGE> 6
PART I - FINANCIAL INFORMATION
ITEM 1. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS.
Note 1. BASIS OF FINANCIAL PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles (GAAP) for interim
financial information and with the instructions to FORM 10-QSB and Item 310(b)
of Regulation SB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accounting policies followed by PH Group, Inc. (the Company), are set forth
in Note 2 to the financial statements in the Company's 1997 FORM 10-KSB.
In the opinion of management, the accompanying unaudited consolidated financial
statements reflect all adjustments which are necessary for a fair presentation
of the financial results. All such adjustments reflected in the interim
consolidated financial statements are considered to be of a normal and recurring
nature. The results of the operations for the three month and nine month periods
ended September 30, 1998 and 1997 are not necessarily indicative of the results
to be expected for the whole year. Accordingly, these financial statements
should be read in conjunction with the financial statements and notes thereto
contained in the Company's annual report on Form 10-KSB for year ended December
31, 1997.
Note 2. Inventories
Inventories are valued at the lower of cost (First in, first out basis) or
market. Composition of inventories at September 30, 1998 and December 31, 1997
were as follows.
September 30, 1998 Dec. 31, 1997
------------------ -------------
Raw Materials $ 393,937 $ 386,377
Work In Process 2,301,486 2,403,795
Finished Goods 400,118 0
Inventory included
in Current Assets $3,095,541 $2,790,172
---------- ----------
The Company has in stock certain items which are not expected to be utilized or
sold currently. Inventory of $39,000 shown on the balance sheet as a long-term
asset represents an estimate of this portion of total raw materials inventory.
Note 3. Comprehensive Income
PH Group, Inc. adopted Statement of Financial Accounting Standards ("SFAS") No.
130, "Reporting Comprehensive Income" in the first quarter of 1998.
Comprehensive income is a measurement of all changes in stockholders' equity
that result from transactions and other economic events other than transactions
with stockholders. PH Group, Inc. does not have any items of comprehensive
income other than net income(loss); therefore, total comprehensive income(loss)
amounted to ($287,737) and $223,752 for the three months ended September 30,
<PAGE> 7
1998 and 1997, respectively; total comprehensive income(loss) amounted to
($142,863) and $503,440 for the nine months ended September 30, 1998 and 1997,
respectively.
Note 4. Per Share Information
Net income per common share is computed based on the weighted average number of
shares of common stock and common stock equivalents (stock options) outstanding
during each period. In December 1997, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS No. 128 is
effective for financial statements for periods ending after December 15, 1997,
including interim periods, and requires restatement of prior periods.
Accordingly, all net income per share and weighted average common shares
outstanding data has been presented in accordance with SFAS No. 128 in the
accompanying consolidated financial statements. Under SFAS No. 128, the Company
is required to present basic earnings per share and diluted earnings per share.
Basic earnings per share excludes dilution and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted earnings per share is computed by
dividing income available to common stockholders by the diluted weighted average
number of common shares outstanding during the period, which includes the
dilutive potential common shares associated with outstanding stock options.
There are no adjustments to net income necessary in the calculation of basic and
diluted earnings per share. On January 2, 1998, a five-for-four stock split was
affected whereby one additional common share was issued for each four shares
outstanding to shareholders of record on December 15, 1997. Accordingly, per
share data and weighted average common shares outstanding for all periods
presented in the accompanying consolidated financial statements have been
retroactively adjusted for this split.
Note 5. Business Segments
In June 1997, the Financial Accounting Standard Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." This
Statement establishes standards to be utilized by public business enterprises in
reporting information about operating segments in annual financial statements
and requires reporting of selected information about operating segments in
interim financial reports to shareholders. It also establishes standards for
related disclosures regarding products and services, geographic areas and major
customers.
The Statement will be effective for the Company in 1998 and will require
comparative information for earlier years. Interim financial information will
not be required during the initial year of application; however, comparative
interim financial information will be required for interim periods in the second
year of application. Management has not yet completed its analysis of this
Statement as to its impact on the Company's financial disclosures.
Note 6. Recently Issued Financial Accounting Standards
Derivative Instruments and Computer Software Costs
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities," which revises
the accounting for derivative financial instruments. In March 1998, the American
Institute of Certified Public Accountants issued Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use," which revises the accounting for software development costs.
SOP98-1 will be effective for the Company for fiscal years beginning after
December 15, 1998, and SFAS No. 133 will be effective for all fiscal quarters of
fiscal years beginning after June 15,
<PAGE> 8
1999. Management has not yet completed its analysis of these Statements as to
their impact on the Company's financial statements and/or disclosures.
Note 7. Bank Covenants
At September 30, 1998, the Company is in violation of a debt covenant with the
bank. All borrowings under the bank line of credit are classified as a current
liability. The bank has indicated it will issue a waiver related to the covenant
violation.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO 1997
NET SALES
Third quarter revenues decreased by $944,000, to $3.1 million, or 23 percent
compared to 1997. The revenue decrease is a result of delays in shipping major
orders projected for the third quarter that will ship in the fourth quarter of
the year.
GROSS MARGIN
The Company's gross margin has decreased from 35 percent for the three months in
1997 to 18 percent for the same period in 1998. The major reason for the decline
in the third quarter gross margin was that the Company incurred higher than
projected manufacturing costs related to the additional cost of metric equipment
shipped overseas for special press orders received in 1997 and the first quarter
of 1998 that shipped in 1998.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, General and Administrative costs (SG&A) increased by two percent or
$18,000 for the third quarter of 1998 over the same period in 1997. Increased
salary expense due to the severance package offered to St. Lawrence employees
accounted for much of the increase. The Company expects to see a reduction in
its SG&A costs as a percent of sales when the closure of its Romulus plant is
complete and all operations have moved to Columbus.
INTEREST EXPENSE
Interest expense for the quarter decreased 13% versus the same period in 1997.
This was primarily due to favorable cash collections in July and a lower
borrowing rate negotiated at the end of the second quarter. The Company
increased its borrowings under its credit line at the end of the quarter, and
expects to see increased interest expense in the fourth quarter.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO 1997
NET SALES
Revenues for the first nine months of 1998 totaled $10.5 million, an 11.4
percent increase over the same period in 1997. The Company entered 1998 with a
$6.5 million backlog of orders which will ship in the current year, compared
with $2.9 million in 1997. This accounts for most of the increase in revenues.
At the end of the third quarter, the Company has a backlog in excess of $6.0
million. Approximately one half of the backlog is scheduled to be shipped during
the fourth quarter of 1998.
New orders for hydraulic presses are up 21 percent, however, orders for
injection molding machines are down 59 percent. 1998 sales of injection molding
machines was positively impacted by a $3.4 million order from one customer. The
Company may not replace this order
<PAGE> 9
with a similar size order in 1999. The Company believes that after discussions
with industry leaders and economic forecasts by the industry's trade
association, demand for its products will be reduced in 1999 when compared to
1998.
GROSS MARGIN
Gross Margin in 1998 has been severely impacted by the shipment of highly
specialized presses, and the additional costs associated with metric machines.
Many of these machines were research and development related projects using new
technology unique to a given customer. Material cost of shipments in the period
was 52 percent of sales compared to 41 percent for the same period in 1997. Our
cost projections on specialty machines were significantly below the actual
material, labor and engineering incurred in the manufacture of these products.
Labor as a percent of sales improved to 9.7 percent versus 10.1 percent in 1997.
This improvement is the result of current staffing of both facilities with
Columbus personnel, where the labor rate per hour is much less than the
comparable rates at the Company plant in Romulus. This rate improvement however
is eroded by the need to pay travel expenses of those employees sent to staff
Romulus. Additionally, the unique nature of the special orders has required more
hours to complete and rework these jobs when compared to our standard product
lines.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, General and Administrative expenses for the nine months ended September
30, 1998 have increased $563,000 or 19 percent over the comparable 1997 amount
primarily due to salary, commissions and travel expenses.
As a percent of sales, SG&A represents 27.6 percent in 1998 compared to 24.7
percent in 1997. Wages paid amounted to $173,000 more in 1998 than in the
comparable period in 1997. The Company has begun to see a decline in salary
expense as all work is transferred from the Romulus facility to Columbus, thus
eliminating duplicate positions at the two facilities. Further salary reductions
are expected in the last quarter of 1998.
Commissions paid to sales agents to date in 1998 are $104,000 greater than in
the same period of 1997. In addition, property and general liability insurance
expenses have increased $55,000, primarily due to the St. Lawrence facility.
Finally, travel expenses are $51,000 higher than the comparable period of 1997.
Research and Development expense to in 1998 of $47,000 relate to new product
design and development. There were no similar expenses in 1997.
INTEREST EXPENSE
Interest expense for the nine months ended September 30, 1998 is 17.8 percent
greater than the same period in 1997. The specialty nature of many of the large
jobs manufactured have required more cash investment and added to the increased
amount of time that it takes to convert the order to cash. This has led to
increased borrowing against the credit line, and higher resulting interest
expense. The Company did not have St. Lawrence acquisition interest expense
through the first five months in 1997.
INCOME TAXES
For the three and nine months ended September 30,1998 a net income tax benefit
has been recognized due to the net loss incurred for the periods.
<PAGE> 10
LIQUIDITY AND CAPITAL RESOURCES
Net worth has decreased in the nine months ended September 30, 1998 by $41,000
to $1,743,000. This is a decrease of two percent compared to 1997. Working
capital increased to $947,000 or 10.4 percent of total assets. For the year
ended 1997, working capital was at $169,000 which represented 2.0 percent of
total assets. Inventories increased from 1997 year end levels by $305,000 to
$3,135,000. A major portion of our inventory continues to be the specialty
machines, having longer production cycles. The Company has created a special
press group (SPG) which will be responsible for the quoting, engineering, and
overall completion of the specialty type orders. These machines have the
potential to be highly profitable, but have been misquoted by the company this
past year. The SPG will be managed by experienced personnel, creating an
additional level of quality control on these types of jobs. The inventory
build-up has caused the outstanding balance on the line of credit to increase to
$2,687,000. Accounts receivable for the period have increased by $261,000, due
primarily to longer than average collection period from certain major customers.
In September 1998 the Company entered into a lease-purchase agreement with
Parker Industrial, L.L.C. to construct a new office/manufacturing complex at the
City Gate Business Park, Columbus, Ohio. The building shall encompass
approximately 40,750 rentable square feet, with a lease term of fifteen years.
The expected completion date of the new facility is July 1, 1999.
It is expected that adequate borrowings will continue to be made available under
secured bank lines of credit to meet any short term cash requirements not
otherwise met by cash generated from operations or additional equity capital.
YEAR 2000 READINESS
The Year 2000 ("Y2K") issue refers to a condition in computer software where a
two-digit field rather than a four-digit field is used to distinguish a calendar
year. Unless corrected, date-sensitive software may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in system failures
or miscalculations causing disruptions to various activities and operations.
Such uncorrected condition could significantly interfere with the conduct of the
Company's business, could result in disruption of its operations and could
subject it to potentially significant legal liabilities. The Company has
conducted an assessment of the Y2K issue and the potential effect it will have
on the Company and its business. The Company is preparing a formal plan for
dealing with the Y2K issue. The Company has taken initiative in three general
areas: information technology and communication systems, non-information
technologies systems, and third party issues.
INFORMATION TECHNOLOGY AND COMMUNICATION SYSTEMS
In 1998 the Company has upgraded the computer network used throughout the
organization. This has included a new client server, new desktop computers, and
upgrades and enhancements to those machines not replaced. Upgraded, Y2K
compliant versions of most software packages have been obtained. These include
the Visual Manufacturing, the company's application system, Novelle network
software, Microsoft Office, Auto CAD, and Parametric Technology Corp.'s Pro E.
In addition, the outside payroll provider and mailing system have been upgraded
to be in compliance.
Current areas of noncompliance include the company fixed asset system software,
and the banking communication system software. An upgraded telecommunications
system is currently being negotiated. Other equipment such as fax machines and
copy machines may not be in compliance. The Company expects to have these
systems in compliance by the end of the first quarter, 1999.
<PAGE> 11
NON-INFORMATION TECHNOLOGIES SYSTEMS
The Company has internal non-information technology systems comprised primarily
of building security systems that need to be assessed for compliance. The
Company expects to have the assessment completed by March, 1999 and remediation
is expected to be completed by June 1999.
THIRD PARTIES
The Company has third party relationships with key raw materials suppliers and
outside processors. The Company is in an ongoing effort with these and key
suppliers of outsourced services including, but not limited to stock transfer,
debt servicing, payroll, banking, and benefit programs. The Company is engaged
in ongoing evaluations with these third parties' Y2K readiness; while
simultaneously advising them of the Company's readiness.
Because the Company's Y2K compliance is dependent upon key third parties also
being Y2K compliant on a timely basis, there can be no guarantee that the
Company's efforts will prevent a material adverse impact on its results of
operations, financial conditions and cash flows. The possible consequences to
the Company not being fully Y2K compliant include temporary plant closings,
delays in the delivery of finished products, delays in the receipt of key
ingredients and supplies, invoice and collection errors, and financing issues,
including payroll. These consequences could have a material adverse impact on
the Company's results of operations, financial condition and cash flows if the
Company is unable to conduct its business in the ordinary course.
The Company currently estimates that the aggregate cost of its Y2K efforts
should not exceed $50,000, of which $43,000 has already been expended for
hardware and software upgrades. The Company believes that such costs will not
have a material impact on results of operations, financial condition or cash
flows. Due to the nature of the Company's efforts, actual costs may vary from
these estimates and there are no guarantees regarding the timing or efficiency
of completion.
CONTINGENCY PLANS
The Company intends to deal with contingency planning during the second fiscal
quarter of 1999, after results of the assessment and remediation in progress
have been ascertained. The Company cannot currently estimate the cost, if any,
associated with contingency planning efforts that may be necessary to complete
the Y2K efforts.
REGARDING "FORWARD-LOOKING" STATEMENTS
The foregoing outlook contains forward-looking statements that are based on
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from current expectations due to a number
of factors, including general economics; competitive factors and pricing
pressures; shifts in market demand; the performance and needs of industries
served by the Company's business; actual future costs of operating expenses such
as material, wages and benefits; actual cost of continuing investments in
technology; the availability of capital to finance possible growth; the ability
of management to implement Company strategy of acquisitions and process
improvements; and the risks described from time to time in the Company's SEC
reports.
<PAGE> 12
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
(a) As discussed in the Company's Proxy Statement for the 1998 Annual Meeting of
Shareholders, any qualified shareholder of the Company who intends to submit a
proposal to the Company at the 1999 Annual Meeting of Shareholders (the "1999
Annual Meeting") must submit such proposal to the Company not later than
December 10, 1998 to be considered for inclusion in the Company's Proxy
Statement and form of Proxy (the "Proxy Materials") relating to that meeting. If
a shareholder intends to present a proposal at the 1999 Annual Meeting of
Shareholders, but has not sought the inclusion of such proposal in the Company's
Proxy Materials, such proposal must be received by the Company prior to February
23, 1999 or the Company's management proxies for the 1999 Annual Meeting will be
entitled to use their discretionary voting authority should such proposal then
be raised, without any discussion of the matter in the Company's Proxy
Materials.
ITEM 6. EXHIBITS AND REPORTS
(a) List of Exhibits
(27) Financial Data Schedule (filed electronically)
(b) Reports on From 8-K
On July 24, 1998 a Form 8-K was filed, the result of a
change in registrant's certifying accountant.
On August 10, 1998 a Form 8-K was filed, the result of a
change in registrant's certifying accountant, accompanied by
letter, dated July 29,1998, from former independent
accountant.
SIGNATURES
IN ACCORDANCE WITH THE REQUIREMENTS OF THE EXCHANGE ACT, THE REGISTRANT HAS
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.
PH GROUP, INC.,
AN OHIO CORPORATION
DATE: NOVEMBER 12, 1998 BY: /s/ CHARLES T. SHERMAN
---------------------- ----------------------
CHARLES T. SHERMAN
PRESIDENT
<PAGE> 13
EXHIBIT INDEX
Exhibit Number Description Page #
-------------- ----------- ------
27 Financial Data Schedule Filed electronically
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 9,888
<SECURITIES> 0
<RECEIVABLES> 3,445,316
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<DEPRECIATION> (1,287,827)
<TOTAL-ASSETS> 9,108,855
<CURRENT-LIABILITIES> 5,950,097
<BONDS> 1,134,854
0
0
<COMMON> 12,176
<OTHER-SE> 1,730,478
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<SALES> 10,463,199
<TOTAL-REVENUES> 10,463,199
<CGS> 7,631,278
<TOTAL-COSTS> 7,631,278
<OTHER-EXPENSES> (75,291)
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<INTEREST-EXPENSE> 180,083
<INCOME-PRETAX> (153,263)
<INCOME-TAX> (10,400)
<INCOME-CONTINUING> (142,863)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (142,863)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.09)
</TABLE>
