<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934)
ALFA LEISURE, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
JOHNNIE R. CREAN
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Statement)
Common Stock, no par value
- --------------------------------------------------------------------------------
(Title of Class of Securities)
015394109
- --------------------------------------------------------------------------------
(CUSIP Number of Class of Securities)
Karen Nicolai Winnett, Esq.
Bruck & Perry
500 Newport Center Drive, Suite 700, Newport Beach, California 92660;
714/719-6000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of Person(s) Filing Statement)
This statement is filed in connection with (check the appropriate box):
a. [ ] The filing of solicitation materials or an information statement
subject to Regulation 14A [17 CFR 240.14a-1 to 240.14b-1], Regulation
14C [17 CFR 240.14c-1 to 240.14c-101] or Rule 13e-3(c)
[Section 240.13e-3(c)] under the Securities Exchange Act of 1934.
b. [ ] The filing of a registration statement under the Securities Act
of 1933.
c. [X] A tender offer.
d. [ ] None of the above.
Check the following box if the soliciting materials or information statement
referred to in checking box (a) are preliminary copies: [ ]
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
Transaction Amount of filing fee
<S> <C>
valuation * $357,132 $105.35
</TABLE>
* Transaction valuation calculated by multiplying the number of shares
proposed to be acquired (714,264 shares) times the amount of cash to
be paid for the shares ($.50 per share).
[X] Check box if any part of the filing fee is offset as
provided by Rule 0-11(a)(2) and identify the filing with
which the offsetting fee was previously paid. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
Amount Previously Paid: $105.35
Form or Registration Number: Schedule 14D-1
Filing Party: Johnnie R. Crean
Date Filed: April 30, 1998
<PAGE> 2
Cross Reference Sheet
The rule 13e-3 transaction covered by this filing involves a tender offer
subject to Regulation 14D. Certain information contained in the Schedule 14D-1
has been incorporated by reference in answer to certain Items of this Schedule
13E-3.
Schedule 13E-3 Item
Item 2. Identity and Background
Item 3. Past Contacts, Transactions or Negotiations
Item 5. Plans or Proposals of the User or Affiliate
Item 10. Interest in Securities of the Issuer
Item 11. Contracts, Arrangements or Understandings with Respect to the
Issuer's Securities
Location in Schedule 14D-1
Item 2. Identity and Background
Item 3.(a) Past Contacts, Transactions or Negotiations with the Subject
Company
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidder
Item 6. Interest in Securities of the Subject Company
Item 7. Contracts, Arrangements or Understandings or Relationships with
Respect to the Subject Company's Securities
2
<PAGE> 3
Item 1. Issuer and Class of Security Subject to the Transaction.
(a) Alfa Leisure, Inc. ("Company")
13501 5th Street
Chino, California 91710.
(b) The class of equity securities which is the subject of the Rule
13e-3 transaction is common stock, no par value ("Common Stock"). On April 28,
1998, the total number of outstanding shares of Common Stock was 3,039,872 and
the number of holders of record was approximately 400.
(c) The Common Stock is traded in the over-the-counter market, however,
there is currently no established public trading market for the shares and the
Common Stock has not been quoted in the National Quotation Bureau's "pink
sheets" during the past eight fiscal quarters.
(d) The Company has never declared or paid any dividends on its Common
Stock. Management does not expect that the Company will declare or pay any
dividends in the foreseeable future.
(e) Not applicable.
(f) No purchases of common stock of the Company have been made by the
Company or its affiliates since the commencement of the Company's second full
fiscal year preceding the date of this Schedule.
Item 2. Identity and Background.
Incorporated by reference to Item 2 (Identity and Background) of
Schedule 14D-1 dated April 30, 1998.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
(a) Incorporated by reference to Item 3(a) (Past Contacts, Transactions
or Negotiations with the Subject Company) of Schedule 14D-1 dated April 30,
1998.
(b) Incorporated by reference to Item 3(b) (Past Contacts, Transactions
or Negotiations with the Subject Company) of Schedule 14D-1 dated April 30,
1998.
Item 4. Terms of the Transaction.
(a) The purchaser is offering to purchase up to 714,264 shares of
common stock of the Company at $.50 per share, net to the Seller in cash, upon
the terms and conditions set forth in the Offer to Purchase and related Letter
of Transmittal attached to this Schedule as exhibits.
(b) There is no term or arrangement concerning the Rule 13e-3
transaction relating to any shareholder of the Company which is not identical to
that relating to the other holders of the common stock of the Company.
3
<PAGE> 4
Item 5. Plans or Proposals of the Issuer or Affiliate.
Incorporated by reference to Item 5 (Purpose of the Tender Offer and
Plans or Proposals of the Bidder) of Schedule 14D-1 dated April 30, 1998.
Item 6. Source and Amounts of Funds or Other Consideration.
(a) Incorporated by reference to Item 4(a) (Source and Amount of Funds
or Other Consideration) of Schedule 14D-1 dated April 30, 1998.
(b) Expenses estimated to be incurred in connection with the Rule 13e-3
transaction are itemized as follows:
<TABLE>
<S> <C>
Filing fees $ 105
Legal fees 2,000
Appraisal fees 5,000
Printing and mailing 3,000
Depositary fees 5,000
Miscellaneous 395
-------
$15,500
</TABLE>
All expenses will be paid by the Purchaser. The Company will not be responsible
for paying any of such expenses.
(c) Incorporated by reference to Item 4(b) (Source and Amount of Funds
or Other Consideration) of Schedule 14D-1 dated April 30, 1998.
(d) Not applicable.
Item 7. Purposes, Alternatives, Reasons and Effects.
(a) The principal purpose of the Rule 13e-3 transaction is enable the
Purchaser to obtain a greater percentage of the ownership of the Company. The
Purchaser intends to continue the operations of the Company without significant
change. The tender offer is not expected to result in any change in the present
Board of Directors or management of the Company, as Purchaser is currently the
Company's principal shareholder and controls approximately 78.2% of the
outstanding shares of Common Stock.
(b) Not applicable.
(c) The Rule 13e-3 transaction was structured as a tender offer to give
each shareholder an independent opportunity to sell his or her shares for cash
or to continue as a minority shareholder of the Company. The Rule 13e-3
transaction is being undertaken at this time because of a lack of trading in the
Company's Common Stock and because the Company's financial performance during
the past few years makes the purchase of shares an attractive opportunity for
the Purchaser.
4
<PAGE> 5
(d) If all Shares being sought are tendered, the Purchaser will become
the sole shareholder of the Company. The Purchaser believes that he will be
benefitted by the tender offer because he will have the opportunity to increase
his percentage ownership in the Company.
The effects of the Rule 13e-3 transaction on an unaffiliated security
holder will be to force him or her to make a choice between selling his or her
shares now or continuing to hold his or her shares as a company with no trading
market for its shares. The transaction will have little effect on the liquidity
of shares of an unaffiliated security holder since there has been no reported
trading activity in the Company's Common Stock during the prior two years.
Item 8. Fairness of the Transaction.
(a) The Purchaser believes that the Rule 13e-3 transaction is fair to
unaffiliated security holders.
(b) In considering whether the Rule 13e-3 transaction is fair to
unaffiliated security holders, the Purchaser considered the lack of trading
market for the securities, historical market prices, and the report of William
R. Black who was engaged by the Purchaser to provide the Purchaser with an
opinion with respect to the fairness of the proposed offer price in the
transaction. In addition, the Purchaser has recently purchased 35,000 shares
from two shareholders who requested that Purchaser buy their shares. The
Purchaser paid a price of $.50 per share.
The price offered is less than the Company's net book value per share
and the Company's likely liquidation value. The Company's book value at January
31, 1998 was 2,061,732 or $.68 per share.
There is no trading market for the Company's shares. There has been no
published bid for the Company's shares since 1987. During 1986 to 1987
historical market prices ranged from $.0625 to $.125. At that time, the
Company's operations were profitable. Annual sales reached $18,503,398 for
fiscal year 1988. For fiscal year 1997, the Company's sales were $28,590,285 and
the Company reported net income of $329,544 or $.11 per share. For the first
nine months of fiscal year 1998, the Company's sales were $24,882,486 and the
Company reported net income of $430,187 or $.14 per share.
(c) The structure of the transaction does not require the approval of a
majority of the unaffiliated security holders. Each individual security holder
will make the decision whether or not to tender shares. There are approximately
400 shareholders of record.
(d) No unaffiliated representative has been retained by the directors
who are not employees of the Company to act on behalf of the unaffiliated
security holders for purposes of negotiating the terms of the tender offer or
preparing a report concerning the fairness of the transaction.
(e) No approval of the directors who are not employees of the Company
was sought with respect to the transaction.
(f) No offer of the type described in Instruction (viii) to Item 8(v)
has been received.
Item 9. Reports, Opinions, Appraisals and Certain Negotiations.
(a) The Purchaser has received an opinion from an outside party
relating to the fairness of the consideration to be offered to security holders
of the class of securities which is the subject of the Rule 13e-3 transaction.
5
<PAGE> 6
(b) The Purchaser retained William R. Black to provide an opinion with
respect to the fairness of the tender offer price from a financial point of view
to the unaffiliated shareholders. Mr. Black provides business valuation,
economic analysis, business forecasting and expert testimony services. Mr. Black
has been engaged in business valuations since 1984. Mr. Black was a partner in
Analytical Services which had previously rendered fairness opinions for the
Purchaser. Mr. Black was selected based on his familiarity with the Company, his
experience and the cost to obtain a fairness opinion.
No material relationship exists or is contemplated between (i) Mr.
Black and (ii) the Company or the Purchaser. The Purchaser has paid Mr. Black a
fee of $5,000 for his services in valuing the Company and providing his fairness
opinion. Purchaser determined the tender offer price of $.50 per share. Mr.
Black concluded that this price was in excess of the minimum price which Mr.
Black would have recommended.
In connection with rendering his opinion, Mr. Black reviewed and
analyzed the Company's audited financial statements for the periods ended April
30, 1992 through April 30, 1997; interim financial statements for the nine
months ended January 31, 1998; Securities and Exchange Commission Forms 10- K
filed by the Company for the fiscal years ended April 30, 1992 through 1997;
Securities and Exchange Commission Form 10-Q filed by the Company for the nine
months ended January 31, 1998; Articles of Incorporation and Bylaws; Riverside
County property tax assessment records and County Recorder's records. Mr. Black
also analyzed financial statements and other material regarding comparative
public companies, acquisition data for the recreational vehicle industry,
required rates of return on common stocks in general, material discussing the
economic outlook of the recreational vehicle industry and other material he
deemed appropriate. Mr. Black had previously toured the Company's facility and
interviewed the Company's management.
Based on his analysis, Mr. Black rendered his opinion that the proposed
cash offer for the outstanding common stock of Alfa Leisure, Inc. not held by
Purchaser, at a price of fifty cents ($.50) per share is fair from a financial
point of view to the shareholders of the Company.
(c) A copy of the opinion of Mr. Black is included in the Offer to
Purchase which will be provided to each Shareholder of the Company.
Item 10. Interest in Securities of the Issuer.
Incorporated by reference to Item 6 (Interest in Securities of the
Subject Company) of Schedule 14D-1 dated April 30, 1998.
Item 11. Contracts, Arrangements or Understandings with Respect to the Issuer's
Securities.
Incorporated by reference to Item 7 (Contracts, Arrangements,
Understandings or Relationships with Respect to the Subject Company's
Securities) of Schedule 14D-1 dated April 30, 1998.
Item 12. Present Intention and Recommendation of Certain Persons with Regard to
the Transaction.
(a) No executive officer, director or affiliate of the Company or any
person enumerated in instruction C of this statement will tender or sell
securities of the Company owned or held by such person.
6
<PAGE> 7
(b) None of the persons named in paragraph (a) of this item has made a
recommendation in support of or opposed to the Rule 13e-3 transaction.
Item 13. Other Provisions of the Transaction.
(a) No appraisal rights are provided under applicable state law or
under the Company's articles of incorporation in connection with the tender
offer. The Purchaser is not voluntarily offering appraisal rights to security
holders in connection with the Rule 13e-3 transaction.
(b) Unaffiliated security holders may obtain access to the corporate
files of the Company or the Purchaser (at the expense of the Purchaser) by
contacting the Purchaser.
(c) Not applicable.
Item 14. Financial Information.
(a) (1) Audited financial statements of the Company for the fiscal
years ended April 30, 1997 and 1996 required to be filed with the Company's most
recent annual report are attached hereto as Exhibit 14(a)(1).
(2) Unaudited balance sheets and comparative year-to-date income
statements and statements of cash flows required to be included in the Company's
most recent quarterly report are attached hereto as Exhibit 14(a)(2).
(3) Not applicable.
(4) The Company's book value per share as of April 30, 1997 and
January 31, 1998 was $.55 and $.68, respectively.
(b) Not applicable.
Item 15. Persons and Assets Employed, Retained or Utilized.
(a) It is anticipated that the Purchaser may utilize the Company's
facilities and administrative personnel to mail written materials and to respond
to Shareholder inquiries. The Purchaser intends to reimburse the Company for the
cost of any facilities or personnel utilized by the Purchaser.
(b) The Purchaser may retain agents who may contact holders of Shares
by mail, telephone, telex, telegraph and personal interview and may request
brokers, dealers and other nominee shareholders to forward the tender offer
materials to beneficial owners. If retained, these agents will be compensated
for services relating to the tender offer on an hourly basis and will be
reimbursed for certain out-of-pocket expenses.
The Purchaser will not pay any fees or commissions to any broker or
dealer or any other person for soliciting tenders of Shares pursuant to the
tender offer. Brokers, dealers, commercial banks and trust companies will be
reimbursed by the Purchaser for customary mailing and handling expenses incurred
by them in forwarding offering materials to their customers.
7
<PAGE> 8
Item 16. Additional Information.
Not applicable.
Item 17. Material to be Filed as Exhibits.
(a) Form Promissory Note incorporated by reference to Item 11(b)
(Material to be Filed as Exhibits) of Schedule 14D-1 dated April 30, 1998.
(b) Fairness opinion rendered by William R. Black is attached hereto as
Exhibit 17(b).
(c) Loan Agreement, Promissory Note, Security Agreement, UCC-1,
Assignment of Sublease, Certificate of Borrower, Guaranty, Pledge Agreement,
Escrow Letter, Lease Assignment and Stock Assignment Separate From Certificate
are incorporated by reference to Schedule 14D-1, Item 11(c) filed by Purchaser
on May 12, 1994.
(d) Offer to Purchase, Letter of Transmittal and Letter to Shareholders
from Purchaser are incorporated by reference to Schedule 14D-1, Item 11(a) dated
April 30, 1998.
(e) Not applicable.
(f) None.
8
<PAGE> 9
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: April 28, 1998
/s/ Johnnie R. Crean
------------------------------
JOHNNIE R. CREAN
9
<PAGE> 10
EXHIBIT INDEX
-------------
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
14(a)(1) Audited financial statements of the Company for the fiscal
years ended April 30, 1997 and 1996 required to be filed
with the Company's most recent annual report.
14(a)(2) Unaudited balance sheets and comparative year-to-date income
statements and statements of cash flows required to be
included in the Company's most recent quarterly report.
17(a) Form Promissory Note incorporated by reference to Item 11(b)
(Material to be Filed as Exhibits) of Schedule 14D-1 dated
April 30, 1998.
17(b) Fairness opinion rendered by William R. Black.
17(c) Loan Agreement, Promissory Note, Security Agreement, UCC-1,
Assignment of Sublease, Certificate of Borrower, Guaranty,
Pledge Agreement, Escrow Letter, Lease Assignment and Stock
Assignment Separate From Certificate are incorporated by
reference to Schedule 14D-1, Item 11(c) filed by Purchaser
on May 12, 1994.
17(d) Offer to Purchase, Letter of Transmittal and Letter to
Shareholders from Purchaser are incorporated by reference to
Schedule 14D-1, Item 11(a) dated April 30, 1998.
<PAGE> 1
REPORT OF INDEPENDENT ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Alfa Leisure, Inc.
We have audited the accompanying consolidated balance sheet of Alfa Leisure,
Inc. and subsidiary (the "Company") as of April 30, 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at April 30, 1997, and the
results of its operations and its cash flows for the year then ended in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Los Angeles, California
July 21, 1997
14(a)(1)-1
<PAGE> 2
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors
Alfa Leisure, Inc.
We have audited the accompanying consolidated balance sheet of Alfa Leisure,
Inc. as of April 30, 1996 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the two years in
the period ended April 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amount and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Alfa
Leisure, Inc. as of April 30, 1996, and the results of its operations and its
cash flows for each of the two years in the period ended April 30, 1996 in
conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Newport Beach, California
June 28, 1996
14(a)(1)-2
<PAGE> 3
ALFA LEISURE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
April 30,
----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Current Assets:
Cash $ 393,182 $ 505,027
Restricted cash 149,350 209,142
Accounts receivable 1,769,153 1,816,653
Inventories 1,299,641 1,694,798
Prepaid expenses and other current assets 150,559 85,621
Deferred tax asset - current 5,156 0
----------- -----------
Total Current Assets 3,767,041 4,311,241
Property, plant and equipment, net 1,103,154 1,136,691
Deposits 10,000 0
Deferred tax asset 526,240 540,270
----------- -----------
Total Assets $ 5,406,435 $ 5,988,202
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 1,916,611 $ 1,801,110
Accrued expenses 415,841 411,464
Accrued compensation 418,474 387,261
----------- -----------
Total Current Liabilities 2,750,926 2,599,835
Line of credit 972,500 1,997,500
Deferred income 8,200 8,200
----------- -----------
Total liabilities 3,731,626 4,605,535
Commitments and contingencies
Stockholders' equity:
Common stock, authorized 30,000,000 shares of
no par value; issued and outstanding
3,048,137 and 3,050,000 shares at
April 30, 1997 and April 30, 1996 respectively 62,000 62,000
Note receivable from President (439,792) (402,390)
Retained earnings 2,052,601 1,723,057
----------- -----------
Total Stockholders' equity 1,674,809 1,382,667
----------- -----------
Total liabilities and
stockholders' equity $ 5,406,435 $ 5,988,202
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
14(a)(1)-3
<PAGE> 4
ALFA LEISURE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
----------------
<TABLE>
<CAPTION>
For the Years Ended April 30,
----------------------------------------------
1997 1996 1995
----------- ------------ ----------
<S> <C> <C> <C>
Sales $28,590,285 $25,749,645 $27,348,921
Cost of Sales (including rent expense
to a related party of $156,780,
$143,724 and $143,724 for the year
ended April 30, 1997, 1996 and 1995,
respectively.) 24,951,677 22,762,110 23,914,366
----------- ----------- -----------
Gross Profit 3,638,608 2,987,535 3,434,555
Operating Expenses:
Selling, general and administrative 3,002,621 2,585,652 2,347,139
----------- ----------- -----------
Income from operations 635,987 401,883 1,087,416
Interest expense 197,411 257,593 152,528
----------- ----------- -----------
Income before income taxes 438,576 144,290 934,888
Provision (benefit) for income taxes 109,032 (520,384) 110,967
----------- ----------- -----------
Net income $ 329,544 $ 664,674 $ 823,921
=========== =========== ===========
Net income per share $ .11 $ .22 $ .27
=========== =========== ===========
Weighted average shares outstanding 3,050,000 3,050,000 3,050,000
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
14(a)(1)-4
<PAGE> 5
ALFA LEISURE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended April 30, 1997, 1996 and 1995
----------------
<TABLE>
<CAPTION>
Common Stock
---------------------- Note Receivable Retained
Shares Amount from President earnings
--------- -------- --------------- ----------
<S> <C> <C> <C> <C>
Balance April 30, 1994 3,050,000 $62,000 $ 234,462
Net advances to President $(363,377)
Net income 823,921
--------- ------- --------- ----------
Balance April 30, 1995 3,050,000 62,000 (363,377) 1,058,383
Net advances to President (39,013)
Net income 664,674
--------- ------- --------- ----------
Balance April 30, 1996 3,050,000 62,000 (402,390) 1,723,057
Net advances to President (37,402)
Net income 329,544
Cancellation of shares (1,863)
--------- ------- --------- ----------
Balance April 30, 1997 3,048,137 $62,000 $(439,792) $2,052,601
========= ======= ========= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
14(a)(1)-5
<PAGE> 6
ALFA LEISURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------
<TABLE>
<CAPTION>
For the Years Ended April 30,
---------------------------------------
1997 1996 1995
--------- --------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 329,544 $ 664,674 $ 823,921
--------- --------- ----------
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 128,887 129,947 106,374
Changes in operating assets and liabilities:
Deferred income taxes 8,874 (540,270)
Accounts receivable 47,500 (320,511) (961,807)
Inventories 395,157 706,871 (911,035)
Prepaids and other current assets (64,938) (25,977) 17,921
Accounts payable 115,501 (524,438) 1,042,424
Accrued compensation 31,213 82,327 (12,252)
Deferred income 8,200
Accrued expenses 4,377 (197,844) 153,923
--------- --------- ----------
Net cash provided by (used in)
operating activities 996,115 (25,221) 267,669
--------- --------- -----------
Cash flow from investing activities:
Acquisition of property, plant and
equipment (95,350) (133,104) (286,695)
Deposits (10,000)
Restricted cash 59,792 70,810 (59,806)
--------- --------- -----------
Net cash used in investing activities (45,558) (62,294) (346,501)
--------- --------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
14(a)(1)-6
<PAGE> 7
ALFA LEISURE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
----------------
<TABLE>
<CAPTION>
For the Years Ended April 30,
---------------------------------------
1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Cash flows from financing activities:
Principal payments on notes payable $ $ (943) $ (5,481)
Net advances to President (37,402) (39,013) (363,377)
Principal drawn on line of credit 300,000
Principal payments on line of credit (1,025,000) (200,000)
----------- --------- ---------
Net cash provided by (used in) financing
activities (1,062,402) 260,044 (568,858)
----------- --------- ---------
Net increase (decrease) in cash (111,845) 172,529 (647,690)
Cash at beginning of year 505,027 332,498 980,188
----------- --------- ---------
Cash at end of year $ 393,182 $ 505,027 $ 332,498
=========== ========= =========
Supplemental cash flow disclosures:
Interest paid $ 192,482 $ 246,970 $ 152,528
=========== ========= =========
Income taxes paid $ 111,490 $ 172,355 $ -0-
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
14(a)(1)-7
<PAGE> 8
ALFA LEISURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------
1. Summary of Significant Accounting Policies:
General:
The Company manufactures and sells recreational vehicles which are distributed
by independent dealers located throughout the United States but concentrated in
the western and southwestern portions of the United States.
Consolidation:
The consolidated financial statements include the accounts of Alfa Leisure, Inc.
and its inactive, wholly owned subsidiary Brougham International, Inc.,
collectively the "Company."
Reclassifications:
Certain prior year amounts have been reclassified to conform with current year
presentation.
Accounting Periods:
The Company's fiscal year ends on the Sunday in April falling between the 17th
and the 23rd. Fiscal 1997 ended on April 20, 1997, fiscal 1996 ended on April
21, 1996 and fiscal 1995 ended on April 23, 1995. While the financial statements
reflect operations of the Company as of and for the periods ending on those
dates, they have been presented as if the Company's fiscal year ends on April 30
of each year to simplify the presentation.
Cash Equivalents and Restricted Cash:
Cash equivalents are highly liquid investments that are readily convertible into
known amounts of cash and have maturities at acquisition of three months or
less.
Restricted cash balances consist of funds held as collateral for repurchase
agreements with financial institutions that provide the financing agreements as
discussed in Note 6, and funds held as collateral for the Company to be bonded,
as required by various state agencies for licensing procedures. For purposes of
the statements of cash flows, these amounts are not considered cash equivalents.
Inventories:
Inventories are stated at the lower of cost (determined using the first-in,
first out method), or market.
Property, Plant and Equipment:
Property, plant and equipment are stated at cost. Depreciation and amortization
of property, plant and equipment are provided over the estimated useful lives of
the assets which range from three to twenty-eight years. Leasehold improvements
are amortized over the lives of the respective leases, or the service lives of
the improvements, whichever is shorter. Accelerated and straight-line methods of
depreciation are used for both financial reporting and income tax reporting
purposes. Upon sale or disposition of assets, any gain or loss is included in
the statement of operations.
14(a)(1)-8
<PAGE> 9
ALFA LEISURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
-------------
During 1997, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 121, Accounting for the impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of. Among other provisions, the statement
changed current accounting practices for the evaluation of impairment of
long-lived assets. The adoption did not have a material effect on the Company's
financial statements. The Company evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If the estimated future cash flows
(undiscounted and without interest charges) from the use of an asset are less
than the carrying value, the related asset would be written down to its
estimated fair value.
Normal repairs and maintenance are charged to expense as incurred whereas
significant improvements that materially increase values or extend useful lives
are capitalized and depreciated over the estimated useful lives of the related
assets.
Net Income per Share:
Net income per share is based upon 3,050,000 weighted average shares outstanding
for the years ended April 30, 1997, 1996 and 1995. Fully diluted earnings per
common share does not differ from that presented.
Income Taxes:
Deferred income taxes reflect the tax consequences in future years of (a)
differences between the tax bases of assets and liabilities and the
corresponding bases used for financial reporting purposes and (b) net operating
loss and tax credit carryforwards. A valuation allowance is recorded, if
necessary, to reduce net deferred income tax assets to the amount that more
likely than not will be recoverable.
Advertising Expenses:
Advertising costs are expenses when incurred. Advertising expense for the years
ended April 30, 1997, 1996 and 1995 were $86,762, $95,773 and $7,028
respectively.
Research and Development costs:
Research and development costs are expensed when incurred. Research and
Development expenses for the years ended April 30, 1997, 1996 and 1995 were
$176,760, $166,046 and $162,926 respectively.
Management Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from these estimates.
14(a)(1)-9
<PAGE> 10
ALFA LEISURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
-------------
Fair Value of Financial Instruments:
Statement of Financial Accounting Standards No. 107 (SFAS No. 107), Disclosures
about Fair Market Value of Financial Instruments, requires management to
disclose the estimated fair value of certain assets and liabilities defined by
SFAS No. 107 as financial instruments. The carrying amount of cash, restricted
cash, accounts receivable and accounts payable are carried at the approximate
fair values because of the short maturities of these instruments. Management
estimates that the fair value of the line of credit approximates carrying value
based upon the Company's effective borrowing rate for issuance of debt with
similar terms.
Concentration of Credit Risk:
Financial instruments that subject the Company to credit risk consist primarily
of accounts receivable. Concentration of credit risk with respect to accounts
receivable is generally diversified due to the number of entities composing the
Company's customer base and their geographic dispersion. The Company performs
ongoing credit evaluations of its customers for potential credit loss exposure.
Bad debt expense for the years ended April 30, 1997, 1996 and 1995 were not
material.
2. Inventories:
Inventories are stated as follows:
<TABLE>
<CAPTION>
April 30,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Raw materials $ 691,976 $ 964,528
Work in process 558,326 588,260
Finished products 49,339 142,010
---------- ----------
Total inventories $1,299,641 $1,694,798
========== ==========
</TABLE>
14(a)(1)-10
<PAGE> 11
ALFA LEISURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
-------------
3. Property, Plant and Equipment:
The major classes of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
Useful
Lives April 30,
------------- ---------------------------
1997 1996
----------- -----------
<S> <C> <C> <C>
Land $ 332,262 $ 332,262
Buildings 28 years 895,097 895,097
Machinery and equipment 2 to 7 years 802,920 775,421
Transportation equipment 5 years 189,055 165,236
Furniture & office equipment 3 to 5 years 299,323 256,744
Leasehold improvements 5 to 7 years 213,832 212,379
----------- -----------
2,732,489 2,637,139
Less: Accumulated depreciation
and amortization (1,629,335) (1,500,448)
----------- -----------
Net property, plant and equipment $ 1,103,154 $ 1,136,691
=========== ===========
</TABLE>
The Company has a manufacturing facility in Benton, Louisiana which the Company
is not currently using. The net book value of these premises is $364,551 and
$378,572 at April 30, 1997 and 1996 respectively. This facility has been leased
to a tenant beginning April 1, 1995 for five years at $4,100 per month.
A parcel of land held by the Company with a book value of $332,000 has been
pledged as collateral for a personal borrowing of the Company's President of
$184,000. Such land was acquired by the Company in 1989 from the Company's
President subject to existing debt which is structured on an interest only
basis.
14(a)(1)-11
<PAGE> 12
ALFA LEISURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
-------------
4. Line of Credit:
In April 1992, the Company entered into a line of credit agreement with a
maximum amount of $2,000,000, of which $972,500 and $1,997,500 were
outstanding at April 30, 1997 and 1996 respectively. Interest is at Bank of
America's prime rate plus 1%, an effective rate of 9.5% at April 30, 1997 and
1996. The line of credit is payable within 90 days of any written demand by the
lender, however, the Company has received written representation from the lender
that it will not make a demand for principal payment through the end of fiscal
1998. Accordingly, this obligation has been classified as noncurrent in the
consolidated balance sheet at April 30, 1997.
Substantially all the assets of the Company are pledged as collateral for the
line of credit. The Company's President has personally guaranteed the line of
credit and has assigned his rights under the lease for the Company's principal
manufacturing facility as additional collateral.
5. Income Taxes:
The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
For the Years Ended April 30,
------------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Current:
State $ 117,906 $ 18,023 $ 89,616
Federal -0- 1,863 21,351
Deferred:
State 14,736 (52,069) -0-
Federal (23,610) (488,201) -0-
--------- --------- --------
Totals $ 109,032 $(520,384) $110,967
========= ========= ========
</TABLE>
The reconciliation of the effective tax rates and U.S. Statutory tax rates are
as follows:
<TABLE>
<CAPTION>
For the Years Ended April 30,
-------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Tax provision at statutory rate $ 149,116 $ 49,059 $ 317,862
Decrease in the valuation allowance (129,996) (546,973) (263,588)
State taxes, net of federal benefit 87,544 (22,470) 59,147
Other 2,368 (2,454)
--------- --------- ---------
$ 109,032 $(520,384) $ 110,967
========= ========= =========
</TABLE>
14(a)(1)-12
<PAGE> 13
ALFA LEISURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
-------------
The net operating loss carryforward for federal income tax purposes at April 30,
1997 was approximately $1,830,000. This carryforward expires in various fiscal
years from 1998 through 2008. There was no state net operating loss carryforward
at April 30, 1997.
As of April 30, 1997, the Company had approximately $30,089 of available tax
credit carryforwards comprised of investment tax credits of $3,022 and
alternative minimum tax credits of $27,067. The investment tax credit
carryforwards expire in fiscal year 1998. The alternative minimum tax credits
have an indefinite carryforward period. In addition, the Company had
approximately $85,354 of federal contribution carryforwards expiring in fiscal
years from 2000 to 2001.
The components of the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
For the Years Ended
April 30,
------------------------
1997 1996
----------- ---------
<S> <C> <C>
Net operating loss carryforwards $ 622,447 $ 750,307
Depreciation 118,353 127,100
State taxes (17,319) 6,128
Accrued liabilities 115,259 97,626
Charitable contributions 29,020 29,020
Tax credits 30,089 30,089
Valuation allowance (370,004) (500,000)
Deferred income 3,551 -0-
--------- ---------
$ 531,396 $ 540,270
========= =========
</TABLE>
6. Commitments and Contingencies:
Operating Leases:
The Company leases its manufacturing facilities and executive offices under
agreements classified as operating leases. The leases require fixed monthly
payments. One of the Company's manufacturing facilities is leased for $12,932
per month from a Corporation owned by the Company's President. The Company
entered into this five year operating lease effective February 1, 1997 and is
obligated under its terms through January 31, 2002. A second lease was renewed,
with an unrelated party, on another of the Company's facilities effective March
1, 1997 at an annual lease rate of $42,000. This lease expires June 1, 2001.
Future minimum lease payments on these leases at April 30, 1997 are as follows:
<TABLE>
<CAPTION>
Year ended April 30,
--------------------
<S> <C>
1998 $197,184
1999 197,184
2000 197,184
2001 197,184
2002 119,888
--------
$908,624
========
</TABLE>
14(a)(1)-13
<PAGE> 14
ALFA LEISURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
-------------
Rent expense for the years ended April 30, 1997, 1996 and 1995 was $195,576,
$185,724 and $185,724 respectively of which $156,780, $143,724 and $143,724
respectively, was paid to the Company's President.
Financing Arrangements:
The Company is contingently liable under the terms of the repurchase agreements
established with financing institutions to provide inventory financing for
dealers of the Company's products. Vehicles with a maximum sales value of
approximately $8.7 million and $7.4 million at April 30, 1997 and 1996,
respectively were subject to conditions of existing repurchase agreements.. The
risk of loss under these agreements is spread over many dealers and financing
institutions and is reduced by the resale value of any products that may be
repurchased. The Company has historically experienced no significant losses
under these agreements.
Warranty Reserve:
The Company provides a warranty against defects in materials and workmanship for
one year following the date of sale. Estimated costs of product warranties
relating to sales during the year have been accrued and charged to operations
during the year the products were sold. The Company has included $213,201 of
accrued warranty costs in accrued expenses at April 30, 1997 and 1996.
Litigation:
The Company is involved in several routine litigation matters incidental to its
business. Such litigation matters, when ultimately determined, will not, in the
opinion of management, have a material effect on the financial position or the
results of operations of the Company.
Employment Agreement:
The Company has an annual employment agreement with its President that expires
on December 31, 1997. The agreement automatically extends for additional annual
periods unless canceled by either party before October 31. The agreement
provides for a fixed annual salary subject to an annual cost of living
adjustment. Such salary amounted to $253,332, $226,404 and $227,604 in the
fiscal years ended April 30, 1997, 1996 and 1995, respectively.
In addition, the agreement provides for a bonus in an amount equal to 10% of
pretax income before accrual for amounts to be paid by the Company under its
management bonus plan. The agreement also provides for the right of the
Company's President to purchase each year up to two travel trailers manufactured
by the Company for an amount equal to the Company's cost. No trailers were
purchased in fiscal 1997, 1996 or 1995.
Under a bonus program for salaried employees, which includes the President,
bonus expense was recognized in the amounts of $241,459, $235,315 and
$368,401, in fiscal 1997, 1996 and 1995, respectively.
14(a)(1)-14
<PAGE> 15
ALFA LEISURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, (Continued)
-------------
7. Stock Options:
A total of 300,000 shares is reserved for issuance under the Company's 1997
incentive stock option plan for officers and directors. No options were issued
or outstanding nor had any been exercised during the fiscal years ended April
30, 1997, 1996 or 1995.
8. Note Receivable from President
At April 30, 1997 and 1996, the Company had a note receivable and additional
advances due from its President and major stockholder amounting to $439,792 and
$402,390 respectively. The note and additional advances bear interest at 9%.
Such advances have been classified as a contra-equity item on the April 30, 1997
and 1996 consolidated balance sheet.
14(a)(1)-15
<PAGE> 1
EXHIBIT 14(a)(2)
ALFA LEISURE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS:
<TABLE>
<CAPTION>
January 31, April 30,
(Unaudited)
---1998---- ---1997---
<S> <C> <C>
Current Assets:
Cash $ 0 $ 393,182
Restricted cash 163,917 149,350
Accounts receivable 1,409,696 1,769,153
Inventories(Note 2) 1,559,908 1,299,641
Other current assets 0 150,559
Deferred tax asset 5,156 5,156
---------- ----------
Total current assets 3,138,677 3,767,041
Property, plant and equipment, net 1,263,076 1,103,154
Deposits 0 10,000
Deferred tax asset 526,240 526,240
---------- ----------
Total Assets $4,927,993 $5,406,435
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Bank overdraft $ 259,604 $ 0
Accounts payable 1,353,999 1,916,611
Accrued expenses 531,984 415,841
Accrued compensation 179,240 418,474
Other current liabilities 2,343 0
---------- ----------
Total current liabilities 2,327,170 2,750,926
Line of credit 530,891 972,500
Deferred income 8,200 8,200
---------- ----------
Total Liabilities 2,866,261 3,731,626
---------- ----------
Stockholders' equity:
Common stock, no par value; authorized
30,000,000 shares, issued and
outstanding 3,048,137 shares 62,000 62,000
Note receivable from President (483,056) (439,792)
Retained earnings 2,482,788 2,052,601
---------- ----------
Total stockholders' equity 2,061,732 1,674,809
---------- ----------
$4,927,993 $5,406,435
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
14(a)(2)-1
<PAGE> 2
ALFA LEISURE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended January 31, Ended January 31,
---1998--- ---1997--- ----1998--- ----1997---
<S> <C> <C> <C> <C>
Sales $8,748,288 $7,762,813 $24,882,486 $19,687,748
Cost of Sales 7,542,962 6,674,047 21,792,577 17,358,749
---------- ---------- ----------- -----------
Gross Profit 1,205,326 1,088,766 3,089,909 2,328,999
Operating Expenses:
Selling, General/Admin. 905,879 777,008 2,294,805 2,111,075
Interest expense 26,255 35,535 76,929 135,780
---------- ---------- ----------- -----------
932,134 812,543 2,371,734 2,246,855
Income before
income taxes 273,192 276,223 718,175 82,144
Provision for
income taxes 140,142 1,457 287,988 75,238
---------- ---------- ----------- -----------
Net Income $ 133,050 $ 274,766 $ 430,187 $ 6,906
========== ========== =========== ===========
Net Income
per share $ .04 $ .09 $ .14 $ .00
========== ========== =========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
14(a)(2)-2
<PAGE> 3
ALFA LEISURE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended January 31,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 430,187 $ 6,906
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 126,137 104,337
Changes in operating assets and Liabilities:
Accounts receivable 359,457 (287,361)
Inventories (260,267) 90,732
Prepaid expense 150,559 22,917
Accounts payable (562,612) 301,461
Accrued compensation (239,234) (105,286)
Accrued expenses 118,486 (16,515)
--------- ---------
Total changes (433,611) 5,948
--------- ---------
Net cash provided by operating activities 122,713 117,191
Cash flows from investing activities:
Changes in other assets 10,000 0
Changes in restricted cash (14,567) 10,179
Acquisition of PP&E (286,059) (94,728)
--------- ---------
Net cash used in investing activities (290,626) (84,549)
Cash flows from financing activities:
Increase in bank overdraft 259,604 0
Net advances to president (43,264) 0
Principal payments on credit line (441,609) (450,000)
--------- ---------
Net cash used in financing activities (225,269) (450,000)
--------- ---------
Net decrease in cash (393,182) (417,358)
Cash at beginning of period 393,182 505,027
--------- ---------
Cash at end of period $ 0 $ 87,669
========= =========
Supplemental cash flow disclosures:
Interest paid $ 76,929 $ 135,780
Income taxes paid 27,129 82,971
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
14(a)(2)-3
<PAGE> 4
ALFA LEISURE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1998
1. Basis Of Presentation
The accompanying Condensed Consolidated Balance Sheets of ALFA LEISURE,
INC.("Registrant") at January 31, 1998 and April 30, 1997, Condensed
Consolidated Statements of Income for the three month and nine month periods
ended January 31, 1998 and January 31, 1997 and Condensed Consolidated
Statements of Cash Flows for the nine month periods ended January 31, 1998 and
January 31, 1997 are unaudited, but include all adjustments, consisting only of
normal recurring adjustments, which management considers necessary for a fair
presentation of Registrant's financial condition and results of operations in
accordance with generally accepted accounting principles. The information for
the three month period ended January 31, 1998 is not necessarily indicative of
the operating results for the entire year. Financial statements for the year
ended April 30, 1997 are available for a full discussion of Registrant's
organization and background and for a summary of its significant accounting
policies.
Registrant's fiscal year ends on the last Sunday in April and its
fiscal quarters are measured in increments of thirteen (13) week periods
beginning on the day following the last Sunday in April. While the financial
statements reflect operations of Registrant as of, and/or for the periods ending
on the last Sunday in April, and the thirteen (13) week periods measured
therefrom, they have been presented as if Registrant's fiscal year ends on April
30 in order to simplify the presentation.
2. Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
January 31, 1998 April 30, 1997
---------------- --------------
<S> <C> <C>
Raw materials $ 716,794 $ 691,976
Work in process 621,079 558,326
Finished products 222,035 49,339
---------- ----------
$1,559,908 $1,299,641
========== ==========
</TABLE>
3. Line of credit:
In January 1998 the Company opened a line of credit set at $1,000,000
with Wells Fargo Bank. The line of credit bears interest at Wells Fargo Bank's
prime rate plus 1%. Interest is payable monthly. All terms and conditions of the
existing Merlin Financial, Inc. line of credit remain the same. The Company will
draw against the Merlin Financial, Inc. line of credit only after the Wells
Fargo Bank line of credit is fully used.
Substantially all assets of the Company are pledged as collateral for
the lines of credit, first to Wells Fargo Bank, and secondly to Merlin
Financial, Inc..
The Company runs a zero balance checking account. Funds are borrowed or
invested daily for cash flow purposes. This will result in a daily bank
overdraft, as shown on the balance sheet.
14(a)(2)-4
<PAGE> 1
EXHIBIT 17(b)
WILLIAM R. BLACK
25800 COMMERCENTRE DRIVE, LAKE FOREST, CALIFORNIA 92630
-------------------------
TELEPHONE (714) 595-7900
FACSIMILE (714) 595-7913
March 31, 1998
Mr. Johnnie Crean
Alfa Leisure, Inc.
13501 Fifth Street
Chino, California 91710
Dear Mr. Crean:
I, William R. Black, was retained by Johnnie Crean to express an
opinion as to the fairness, from a financial point of view, to the common stock
shareholders of Alfa Leisure, Inc. (the "Shareholders") of a price of fifty
cents ($0.50) per share to be paid to the Shareholders pursuant to a proposed
transaction, whereby all the outstanding stock of Alfa Leisure, Inc. not owned
by Mr. Johnnie Crean may be acquired.
My principal business is the valuation of businesses and business
interests, including both privately held companies and publicly traded
companies, for all purposes, including mergers and acquisitions, divestitures,
public offerings, gift and estate taxes, Employee Stock Ownership Plans,
corporate and partnership recapitalizations, dissolutions and other objectives.
Neither I nor any individual involved in this valuation and opinion
have any present or contemplated future interest in Alfa Leisure, Inc. or any
interest which might tend to prevent making a fair and unbiased appraisal, or
expressing a fair, independent and objective opinion. The fees paid to me for
preparation are in no way contingent upon any action or event resulting from the
opinions, conclusions or from the use of this opinion letter.
In arriving at this opinion, I considered the nature of the business
and the history of the enterprise, the economic outlook in general, the outlook
for the recreational vehicle industry in particular, the company's earnings and
cash flow for the last five years, the outlook for future earnings, the earnings
capacity and dividend paying capacity of the company, the book value of the
stock, the financial condition of the business, whether the enterprise has
goodwill or other intangible value, sales of the stock and the size of the
blocks being valued, and prices at which other publicly traded companies in
related lines of business are selling both on a minority and a control basis.
Specific documents relied upon in arriving at this opinion included
audited financial statements for the periods ended April 30, 1992 through April
30, 1997; interim financial statements for the nine months ended January 31,
1998; Securities and Exchange Commission Forms 10-K filed by the company for the
fiscal years ended April 30, 1992 through April 30, 1997; Securities and
Exchange Commission Form 10-Q filed by the company for the fiscal quarter ended
January 31, 1998; company Articles of Incorporation and Bylaws; Riverside county
property tax assessment records; and County Recorder's
17(b)-1
<PAGE> 2
Mr. Johnnie Crean
Alfa Leisure, Inc.
March 31, 1998
Page 2
records. I also analyzed financial statements and other material regarding
comparative public companies, acquisition data for the recreational vehicle
industry, required rates of return on common stocks in general, material
discussing the economic outlook of the recreational vehicle industry and other
such material as was deemed appropriate.
In rendering this opinion, I relied, without independent verification,
on the accuracy, completeness and fairness of all financial and other
information that was publicly available or that was furnished by the company.
Based on the analysis of the factors deemed relevant in conformance
with professional appraisal standards, it is my opinion that the proposed cash
offer for the outstanding common stock of Alfa Leisure, Inc. not held by Mr.
Johnnie Crean at a price of fifty cents ($0.50) per share is fair from a
financial point of view to the Shareholders of Alfa Leisure, Inc.
Very truly yours,
William R. Black
17(b)-2
