<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to
_____________________
Commission File No.: 0-26276
R.H. PHILLIPS, INC.
-------------------
(Exact name of small business issuer in its charter)
California 68-0313739
- -------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
26836 County Road 12A, Esparto, California 95627
- -------------------------------------------------------------------
(Address of principal executive offices)
(530) 662-3215
- -------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the 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.
Yes X No
---- ----
Number of shares outstanding of each of the issuer's classes of
common equity as of July 31, 1998: 6,483,760
Transitional Small Business Disclosure Format: Yes No X
---- ----
This document consists of 15 pages, excluding exhibits. The
Exhibit Index is on page 15.
<PAGE> 2
R.H. PHILLIPS, INC.
INDEX
Part I. Financial Information (unaudited)
Item 1. Condensed Financial Statements ........................3
Balance Sheet .........................................4
Statements of Operations ..............................5
Statements of Cash Flows ..............................6
Notes to Condensed Financial Statements ...............7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations ......8
Part II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders .....................................13
Item 6. Exhibits and Reports on Form 8-K .....................13
Signatures ..........................................................14
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<PAGE> 4
<TABLE>
R.H. PHILLIPS, INC.
BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE INFORMATION AND REDEMPTION PROVISION)
(UNAUDITED)
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 217
Accounts receivable 3,125
Inventories 11,081
Deferred income taxes and prepaid expenses 685
-------
Total current assets 15,108
PROPERTY, PLANT, AND EQUIPMENT - net 31,121
OTHER ASSETS:
Note receivable from shareholders and
other affiliates 228
Deferred loan fees and other, net 469
-------
Total other assets 697
-------
TOTAL ASSETS $46,926
=======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 1,380
Accounts payable 1,203
Accrued liabilities 1,572
-------
Total current liabilities 4,155
LONG-TERM DEBT 19,124
DEFERRED INCOME TAXES 1,410
DEFERRED GAIN AND VINEYARD DEVELOPMENT COSTS 577
COMMITMENTS AND CONTINGENCIES --
REDEEMABLE PREFERRED STOCK,
redeemable at $5,000,000 4,532
SHAREHOLDERS' EQUITY:
Non-redeemable preferred stock, no par value,
4,500,000 shares authorized, none issued
and outstanding --
Common stock, no par value, 12,500,000
shares authorized, 6,483,760 shares
issued and outstanding 14,191
Additional paid-in capital 337
Retained earnings 2,600
-------
Total shareholders' equity 17,128
-------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $46,926
=======
</TABLE>
[FN]
See accompanying notes to financial statements
<PAGE> 5
<TABLE>
R.H. PHILLIPS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
(UNAUDITED)
<CAPTION> Six Months Ended Three Months Ended
June 30, June 30,
---------------- ------------------
1997 1998 1997 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET SALES $ 7,669 $ 9,654 $ 4,183 $ 5,666
COST OF SALES 4,455 4,941 2,343 2,941
--------- ---------- --------- ---------
GROSS PROFIT 3,214 4,713 1,840 2,725
SELLING EXPENSES 1,530 2,218 802 1,200
GENERAL AND ADMINISTRATIVE EXPENSES 464 485 241 223
--------- ---------- --------- ---------
OPERATING INCOME 1,220 2,010 797 1,302
INTEREST EXPENSE (472) (563) (249) (285)
OTHER INCOME (EXPENSE) - NET 6 82 (34) 34
--------- ---------- --------- ---------
INCOME BEFORE INCOME TAXES 754 1,529 514 1,051
PROVISION FOR INCOME TAXES (271) (615) (185) (423)
--------- ---------- --------- ---------
NET INCOME $ 483 $ 914 $ 329 $ 628
========= ========== ========= =========
NET INCOME $ 483 $ 914 $ 329 $ 628
DIVIDENDS AND ACCRETION ON
REDEEMABLE PREFERRED STOCK (168) (170) (84) (85)
--------- ---------- --------- ---------
NET INCOME APPLICABLE TO
COMMON STOCK $ 315 $ 744 $ 245 $ 543
========= ========== ========= =========
NET INCOME PER SHARE -
BASIC AND DILUTED $ .05 $ .11 $ .04 $ .08
WEIGHTED AVERAGE COMMON
SHARES AND DILUTIVE POTENTIAL
SHARES OUTSTANDING:
- BASIC 6,254,399 6,483,760 6,420,322 6,483,760
- DILUTED 6,262,399 6,496,760 6,428,322 6,496,760
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE> 6
<TABLE>
R.H. PHILLIPS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION> Six Months Ended Three Months Ended
June 30, June 30,
----------------- ------------------
1997 1998 1997 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 483 $ 914 $ 329 $ 628
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 879 993 378 509
(Gain) loss on disposal of property,
plant and equipment 57 (11) 65 (6)
Net changes in assets and liabilities:
Accounts receivable 433 (318) (740) (383)
Inventories (228) (1,152) (239) (393)
Prepaid expenses (9) 160 13 58
Other assets 18 (49) 29 (13)
Accounts payable and accrued liabilities (978) 1,032 154 1,022
--------- --------- --------- ---------
Net cash provided by (used in)
operating activities 655 1,569 (11) 1,422
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (4,493) (3,190) (2,924) (2,179)
Proceeds from property, plant and equipment sold 10 14 2 9
--------- --------- --------- ---------
Net cash used in investing activities (4,483) (3,176) (2,922) (2,170)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of cash dividend (150) (150) -- --
Proceeds from long-term debt and notes payable 14,502 7,288 10,056 3,854
Principal payments on long-term debt and
notes payable (10,653) (5,104) (7,159) (2,807)
Payments for development of leased vineyards -- (315) -- (219)
Other financing activities 63 (4) 60 --
--------- --------- --------- ---------
Net cash provided by financing activities 3,762 1,715 2,957 828
--------- --------- --------- ---------
INCREASE (DECREASE) IN CASH (66) 108 24 80
CASH AT BEGINNING OF PERIOD 309 109 219 137
--------- --------- --------- ---------
CASH AT END OF PERIOD $ 243 $ 217 $ 243 $ 217
========= ========= ========= =========
OTHER CASH FLOW INFORMATION:
Interest paid (including capitalized interest of
$386 and $244 in 1997 and 1998, respectively) $ 707 $ 680 $ 377 $ 380
Income tax paid $ 549 $ 313 $ 301 $ 244
NONCASH TRANSACTIONS:
Issuance of notes payable to finance inventory,
property, plant and equipment purchased $ 82 $ 4 $ 32 $ --
Issuance of stock dividend $ 150 $ 150 $ -- $ --
Accretion of redeemable preferred stock $ 18 $ 20 $ 10 $ 10
Conversion of subordinated debt into
common stock $ 1,395 $ -- $ 1,395 $ --
</TABLE>
[FN]
See accompanying notes to financial statements.
<PAGE> 7
R.H. PHILLIPS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements as of June
30, 1998 and for each of the six and three month
periods ended June 30, 1997 and 1998 have been
prepared by R.H. Phillips, Inc. (the "Company")
without audit. In the opinion of management, the
financial statements include all adjustments (which
include only normal recurring entries) necessary for a
fair presentation. The operating results for the six and
three month periods ended June 30, 1997 and 1998 are
not necessarily indicative of the results which might be
realized for the full year.
Certain information and footnote disclosures
normally included in financial statements prepared in
accordance with generally accepted accounting
principles have been condensed or omitted. These
statements should be read in conjunction with the
financial statements and notes included in the
Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1997.
2. COMPUTATION OF NET INCOME PER SHARE
The Company has adopted Statement of
Financial Accounting Standards No. 128, which
requires the presentation of basic and diluted net
income per share. Basic net income per share for the
six and three month periods ended June 30, 1997 and
1998 was computed using the weighted average
number of common shares outstanding during each
period. Diluted net income per share was computed
using the weighted average number of common shares
and dilutive potential common shares outstanding
during each period. Dilutive potential common shares
outstanding totaled 13,000 for the six and three month
periods ended June 30, 1998. Potential common
shares outstanding which could have a dilutive effect
in the future, but were anti-dilutive for the six and
three month periods ended June 30, 1998, total
2,745,563. Basic and diluted net income per share and
the weighted average number of common shares
outstanding for the six and three month periods ended
June 30, 1997 have been restated to reflect stock
dividends of 39,117 shares issued in September 1997
and 50,578 shares issued in March 1998.
3. RECENT PRONOUNCEMENTS
The Company has adopted Statement of
Financial Accounting Standards No. 130 (FASB 130),
which establishes standards for the reporting and
display of comprehensive income and its components.
Comprehensive income includes revenues, expenses,
gains and losses that are excluded from net income
under current accounting standards. Comprehensive
income and net income are the same for each of the six
and three month periods ending June 30, 1997 and
1998.
4. LONG-TERM DEBT
The Company obtained two long-term loans
totaling $560,000 during the six month period ended
June 30, 1998. The loans are payable to General
Electric Capital Corporation. One loan bears interest
at an annual rate of 7.73% and the other loan bears
interest at an annual rate of 7.68%. Principal and
interest are due in 60 monthly installments. Both loans
are collateralized by equipment.
<PAGE> 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
In reviewing the following management's
discussion and analysis, the reader should refer to the
historical financial statements of R.H. Phillips, Inc.
The discussion of the results and trends does not
necessarily imply that these results and trends will
continue. For the following discussion, a "case"
means a 9-liter case of wine. All numbers are
approximate.
Forward-Looking Statements
The Company provides in this report and
elsewhere from time to time forward-looking
statements regarding the Company, its products, the
wine business, and general business and economic
conditions. Examples of forward-looking statements
include projections regarding future expansion, trends
in the wine industry, sources of supply, costs of
production, profit margins, and availability and sources
of financing. The actual results of the Company may
vary due to a variety of factors, including the
following:
Availability of Future Financing. The
Company may continue to heavily depend upon its
ability to raise additional debt or equity financing for
its working capital and capital expansion needs. The
ability to raise financing is in turn dependent upon a
variety of factors, some of which are outside the
control of the Company. These factors include, but are
not limited to, interest rates, the availability of
financing sources, and general economic conditions.
If interest rates increase or other financing becomes
unavailable or more costly to obtain, the Company may
not be able to raise sufficient capital to supply its
needs.
Costs of Expansion. Management has based
its assumptions concerning the costs of expansion on
assumptions which it believes are reasonable.
However, there can be no assurance that the
Company's estimates will prove to be correct. If costs
are higher than anticipated, the Company may be
required to raise an even greater amount of financing
or reduce the rate of expansion.
Costs of Production. Statements with
respect to the general decline in the Company's cost of
production are based on management's assumptions
concerning the likely levels of future sales by the
Company, projected yields from the Company's
vineyards and the cost and availability of bulk wine and
grapes from the spot market. For example, if the
Company's sales increase at a faster rate than
anticipated or the Company's grape production is
lower than projected, the Company could be forced to
make additional purchases of grapes and wine on the
spot market. Management believes that such events
could increase the Company's costs of production.
Market Conditions. Assumptions as to the
desirability of expansion are based to a great extent on
management's beliefs concerning the current status of
and trends within the wine industry. Market conditions
in the wine industry have changed substantially from
time to time. To the extent market conditions change
substantially in the future, the rate at which the
Company deems it advisable to expand its vineyard and
winery facilities may be adjusted.
Other Factors. A variety of other factors
could affect the actual results of the Company. These
include changes in economic conditions, unexpected
adverse weather or growing conditions, reduction or
increases in consumer demand, changes in
governmental regulation concerning the production
and sale of wine, and increased competition from
foreign or domestic wine producers.
<PAGE> 9
Seasonality
The Company usually experiences substantial
seasonal fluctuations in revenue and expenditures.
Sales volumes generally increase during the holiday
season, which causes a large percentage of sales to
occur during the last three months of each year. The
Company's expenditures fluctuate throughout the year
based on vineyard and winery activities. Expenditures
typically peak during the summer and early autumn.
Costs of Production
The Company realized above average yields
from its 1997 crop, primarily due to favorable growing
conditions and yields from new vineyards. The
increased 1997 grape tonnage reduced the cost per
gallon of wine produced from Company vineyards.
Consequently, management believes that the
Company's cost of goods will likely decline as the
1997 vintage is sold during 1998. The Company has
expanded the size of its vineyards to lessen its
dependence on outside sources of bulk wines and
grapes and further reduce its cost of goods. The
Company believes that the full benefit of the vineyard
expansion should continue to be realized over the next
several years as the vines mature.
Results of Operations
Net Sales
Net sales for the six month period ended June
30, 1998 were $9,654,000, a 26% increase over net
sales of $7,669,000 for the corresponding period of the
prior year. Net sales included sales of bulk wines and
other items of $503,000 for the six month period
ended June 30, 1998, compared to $413,000 for the
corresponding period in 1997. The increase in net
sales was primarily due to a greater proportion of sales
from higher priced super premium wines, and price
increases. These factors resulted in an average selling
price per case of $50.44 for the six month period
ended June 30, 1998, compared to $42.56 for the same
period in 1997. Higher sales volumes also contributed
to the increase in net sales. The Company sold
181,000 cases during the six month period ended June
30, 1998, compared to 170,000 in the corresponding
period of the prior year.
Gross profit
Gross profit was $4,713,000 for the six
month period ended June 30, 1998, a 47% increase
over $3,214,000 for the same period in 1997.
Excluding the sales of bulk wines and other items,
gross profit was $4,790,000 in 1998, compared to
$3,065,000 in 1997. Gross margins were 49% for the
six month period ended June 30, 1998, compared to
42% for the same period in 1997. Although the cost
per case decreased for the six month period ended June
30, 1998 compared to the prior year, the increase in
gross margins is primarily attributable to the higher
average selling price discussed above. The average
cost per case for the six month period ended June 30,
1998 was $24.04, compared to $24.59 for the same
period in 1997.
Selling Expenses
Selling expenses were $2,218,000, or 23% of
net sales, for the six month period ended June 30,
1998, an increase from $1,530,000, or 20% of net
sales, for the same period in 1997. The $688,000
increase is primarily due to increased sales promotion
and labor costs. As the Company executes its plan to
increase sales, selling expenses are expected to
continue to increase in the future. There can be no
assurance that sales will increase in the future.
<PAGE> 10
General and Administrative Expenses
General and administrative expenses were
$485,000, or 5% of net sales, for the six month period
ended June 30, 1998, compared to $464,000, or 6% of
net sales, for the same period in 1997. The $21,000
increase is primarily due to increased labor costs.
Interest Expense
Interest expense for the six month period
ended June 30, 1998 was $563,000, compared to
$472,000 for the same period in 1997. The Company
capitalized $244,000 of additional interest pertaining to
vineyard and winery development during the six month
period ended June 30, 1998, and $386,000 during the
same period in 1997. The Company had fewer
vineyards under development during the first six
months of 1998 than during the same period in 1997,
causing capitalized interest to decrease. The interest
is attributable to the Company's bank lines of credit
and other debt obligations.
Other Income (Expense)
Other income was $82,000 for the six month
period ended June 30, 1998, compared to $6,000 for
the same period in 1997. The income was primarily
from vineyard management fees, and was offset in
1997 by the removal of outdated facilities for plant
expansion.
Net Income
The Company generated net income of
$914,000 for the six month period ended June 30,
1998, compared to $483,000 for the same period in
1997. The $431,000 increase was primarily due to
higher gross profit, which was partially offset by
increased selling expenses.
Liquidity and Capital Resources
The Company has financed its working
capital and capital expansion needs through internally
generated funds, outside credit facilities, equity
financing, and the sale and leaseback of certain assets.
The Company has made substantial capital
expenditures to expand its vineyards and winery
facilities to obtain production efficiencies. The
Company's cash flows from operations have not been
sufficient to satisfy all of the working capital and
capital expenditure requirements needed to keep pace
with its growth. Consequently, the Company has
depended upon debt, equity, and lease financing for its
working capital and capital expansion needs.
The Company had cash totaling $217,000 on
June 30, 1998, an increase from $109,000 on
December 31, 1997. Sources of cash during the six
month period ended June 30, 1998 included cash from
operations of $1,569,000 and proceeds from long-term
debt of $7,288,000. Cash used during that period
included $3,190,000 invested in property, plant and
equipment, $396,000 used to repay a note payable, and
$4,708,000 used to repay long-term debt.
Current assets increased by $1,712,000
during the six month period ended June 30, 1998,
primarily due to an increase in inventories from
$9,928,000 on December 31, 1997 to $11,081,000 on
June 30, 1998. The increase is primarily due to
inventoried crop costs pertaining to the 1998 harvest.
Current liabilities increased by $758,000 during the six
month period ended June 30, 1998, primarily due to
increases in accrued selling expenses and other accrued
liabilities. These factors
<PAGE> 11
caused net working capital to increase $954,000, from $9,999,000
on December 31, 1997 to $10,953,000 on June 30, 1998.
The Company has several long-term loans,
the largest of which was obtained from Metropolitan
Life Insurance Company ("Metropolitan"). The
Company has borrowed $11,000,000 from
Metropolitan, of which $10,700,000 was outstanding
at June 30, 1998. The unpaid principal under the loan
accrues interest at an annual rate of 7.79%, which
amount is subject to adjustment by Metropolitan every
three years, beginning on January 1, 2001. The
Company is required to make monthly principal
payments of $60,000 plus accrued interest. The loan
matures in January 2013.
The Company has a line of credit of
$10,000,000 with U.S. Bank of California ("U.S.
Bank") to finance its working capital requirements.
The line of credit is secured by accounts receivable,
inventory, the grape crop, and unencumbered farm
equipment, and matures in April 2000. The annual
interest rate on the line is either U.S. Bank's prime rate
or IBOR plus 150 basis points, at the Company's
option. The balance on the line at June 30, 1998 was
$6,105,000.
In addition to loans with Metropolitan and
U.S. Bank, the Company has several smaller loans,
which are generally secured by equipment, and capital
leases. The maturity dates range from July 1998 to
December 2003, and, excluding capital leases, the
interest rates range from 7.0% to 10.9%. The
balances due on these items totaled $3,699,000 at June
30, 1998.
In May 1997, the Company sold 371 acres of
land partially developed into vineyard to John
Hancock Mutual Life Insurance Company
("Hancock"). In connection with that transaction, the
Company now manages, operates and leases the land
and vineyards from a subtenant of Hancock, Farmland
Management Services, for a term that expires on
December 31, 2012. The Company received proceeds
of $5,384,000 from the sale. The lease, which is
accounted for as an operating lease, provides that the
Company will pay rent of $161,000 per calendar
quarter beginning in 1999.
In March 1996, the Company sold 500,000
shares of Senior Redeemable Preferred Stock (the
"Senior Preferred Stock") and warrants to purchase up
to 1,346,788 shares of Common Stock to Hancock.
The net proceeds the Company derived from the sale
of the Senior Preferred Stock and the warrants, after
payment of offering expenses, were $4,785,000. The
Senior Preferred Stock bears a cumulative annual
dividend of $1.20 per share, payable semiannually.
During the first four years after issuance, 50% of the
dividend is payable in cash and 50% of the dividend is
payable in shares of Common Stock at a price equal to
the lower of $4.00 or the average daily market price
over a period of 20 consecutive trading days before
the dividend payment date per share. The Company is
required to redeem one-third of the Senior Preferred
Stock eight years after issuance, and one-third in each
of the succeeding years at a price of $10.00 per share.
The Company has invested in substantial
improvements to its winery facility and vineyards over
the past several years, and plans to continue the
expansion. The Company invested $1,888,000 in
building improvements, tanks, barrels and other winery
equipment during the six month period ended June 30,
1998, and plans to invest an additional $1,488,000
during the remainder of the year. The Company also
plans to build a tasting room during 1998 at an
estimated cost of $600,000. Additional winery
expansion projects are anticipated for the future to
handle the increased production from the Company's
recently planted vineyards. The Company invested
$1,223,000 in farm equipment and the continued
development of recently planted vineyards during the
six month period ended June 30, 1998, and plans to
invest an additional $1,409,000 during the remainder
of the year. The Company is funding 1998 capital
projects with internally generated funds and additional
debt.
<PAGE> 12
Phylloxera infestation may have a negative
impact on the Company's future grape production.
Phylloxera is a root louse which feeds on grape roots,
causing reduced production and eventual vine death.
Of the Company's 1,561 acres of vineyard, 187 acres
have root stock which is not resistant to Phylloxera.
Management estimates these vineyards will be
commercially productive until 2004, which is
substantially less than the twenty-five year life
generally estimated for vineyards without Phylloxera.
The Company has incurred additional expenses
because of Phylloxera, including increased
depreciation and maintenance expense. The Company
is in the process of replacing the majority of
Phylloxera-infested and non-resistant vines with
rootstock believed to be resistant to Phylloxera.
<PAGE> 13
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Company held its 1998 Annual Meeting of
Shareholders on May 21, 1998 at the Company's
winery. A total of 4,421,098 shares, or approximately
68% of the outstanding shares of Common Stock,
were present or represented at the meeting.
The following persons were elected to the
Board of Directors of the Corporation, each of whom
was an existing director of the Corporation at that
time: John E. Giguiere, Karl. E. Giguiere, Lane C.
Giguiere, R. Ken Coit and Victor L. Motto. No other
persons were nominated for election to the Board of
Directors. The number of shares voting in favor of
and against each nominee is set forth below:
<TABLE>
<CAPTION>
Director Votes for Votes against
<S> <C> <C>
John E. Giguiere 4,408,828 12,270
Karl E. Giguiere 4,410,228 10,870
Lane C. Giguiere 4,409,728 11,370
R. Ken Coit 4,409,728 11,370
Victor L. Motto 4,410,228 10,870
</TABLE>
The shareholders also voted to reappoint
KPMG Peat Marwick LLP ("KPMG") as the
Company's independent auditors. A total of
4,377,961 votes were cast in favor of the
reappointment of KPMG, 7,750 votes were cast
against the reappointment, and 35,387 votes abstained.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused
this report to the signed on its behalf by the
undersigned, thereunto duly authorized.
R.H. PHILLIPS, INC.
(Registrant)
Date: August 12, 1998
By //s//John E. Giguiere
_________________________________
John E. Giguiere, Co-President
Co-Chief Executive Officer
By //s//Michael J. Motroni
__________________________________
Michael J. Motroni, Chief Financial Officer
Principal Financial Officer
<PAGE> 15
EXHIBIT INDEX
Exhibit No. Description
27.1 Financial Data Schedules
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE JUNE 30, 1998 BALANCE SHEET, STATEMENTS OF OPERATIONS
AND STATEMENTS OF CASH FLOWS, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<S> <C>
<CASH> 217
<SECURITIES> 0
<RECEIVABLES> 3,168
<ALLOWANCES> 43
<INVENTORY> 11,081
<CURRENT-ASSETS> 15,108
<PP&E> 38,065
<DEPRECIATION> 6,944
<TOTAL-ASSETS> 46,926
<CURRENT-LIABILITIES> 4,155
<BONDS> 21,111
<COMMON> 14,191
4,532
0
<OTHER-SE> 2,937
<TOTAL-LIABILITY-AND-EQUITY> 46,926
<SALES> 9,654
<TOTAL-REVENUES> 9,654
<CGS> 4,941
<TOTAL-COSTS> 4,941
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 563
<INCOME-PRETAX> 1,529
<INCOME-TAX> 615
<INCOME-CONTINUING> 914
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 914
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
