<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10 - Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the quarter ended: Commission file number:
January 31, 1998 0-8624
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ALFA LEISURE, INC
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(Exact name of registrant as specified in its charter)
TEXAS 75-1309458
-------------------------------- ----------------------------
(State or other jurisdiction (IRS Employer identification
of incorporation or organization) number)
13501 "5th" Street, Chino, California 91710
---------------------------------------------
(Address of principal executive office)
(909) 628-5574
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
----- -----
Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES X NO
----- -----
The number of shares outstanding of each of the Registrant's classes of common
stock, as of January 31, 1998 was:
Common Stock, without par value - 3,048,137 shares
<PAGE> 2
ALFA LEISURE, INC.
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Index
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PART I. FINANCIAL INFORMATION Page
- ------- --------------------- ----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
as of January 31, 1998 and April 30, 1997
Condensed Consolidated Statements of Income 4
for the Three and Nine Months Ended
January 31, 1998 and 1997
Condensed Consolidated Statements of Cash Flows 5
for the Nine Months Ended January 31, 1998 and 1997
Notes to Condensed consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 8
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Signature Page 9
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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.
<PAGE> 4
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.
<PAGE> 5
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.
<PAGE> 6
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.
<PAGE> 7
ALFA LEISURE INC.
January 31, 1998
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operation
--------------------
Sales increased 12.7% for the three months ended January 31, 1998, and
26.4% for the nine months ended January 31, 1998 as compared to the same periods
of the previous year. This increase is attributable to increased volume from new
smaller models under 30' introduced during the year.
Cost of sales, expressed as a percentage of sales, was 86.2% in the
three months ended January 31, 1998 and 86.0% in the same period of the prior
year. A reduction in material purchase prices in 1998, of approximately $40,000,
was offset by write offs of slow moving and prototype inventory. Cost of sales,
expressed as a percentage of sales, decreased to 87.6% in the nine months ended
January 31, 1998 from 88.2% in the same period of the prior year. This decrease
resulted from a reduction in material purchase prices.
Selling, General and Administrative expenses, expressed as a percentage
of sales, was 10.4% in the three months ended January 31, 1998 and 10.0% in the
same period of the prior year. This increase resulted from increases in R&D.
Selling, General and Administrative expenses, expressed as a percentage of
sales, was 9.2% in the nine months ended January 31, 1998 from 10.7% in the same
period of the prior year. This decrease is primarily a result of increases in
cash discounts taken on trade payables, that the Company started to take in
1998.
Liquidity and Capital Resources
-------------------------------
Cash decreased $393,182 during the nine months ended January 31, 1998.
The line of credit with Merlin Financial, Inc. was paid off and the line of
credit with Wells Fargo Bank was opened. Over all the line of credit amount was
reduced $441,609. 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 seen in the balance sheet.
Capital expenditures during fiscal 1998 are expected to be primarily
for routine periodic replacement of existing plant and equipment. The Company
believes that it has sufficient available capacity to meet the demand for its
products in the foreseeable future. The Company meets its needs for working
capital and capital expenditures with internally generated funds and from the
lines of credit. The Company has been able to take discounts on trade payables
as a result of the Company's lines of credit and favorable credit terms with its
vendors.
The Company is confident of overall profitability in fiscal 1998 as a
result of dealer and consumer acceptance of the improved 1998 product lines,
resulting in increased sales activity. The Company currently has no significant
commitments for cash expenditures other than normal operations and debt service
during 1998.
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.
<PAGE> 8
PART II
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OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
-----------------
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
---------------------
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not Applicable.
ITEM 5. OTHER INFORMATION
-----------------
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
Not Applicable.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended
January 31, 1998.
<PAGE> 9
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ALFA LEISURE, INC.
a Texas Corporation
Dated: February 24, 1998
BY /s/ JOHNNIE R. CREAN
----------------------------------
Johnnie R. Crean
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JAN-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,409,696
<ALLOWANCES> 0
<INVENTORY> 1,559,908
<CURRENT-ASSETS> 3,136,334
<PP&E> 1,263,076
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,927,993
<CURRENT-LIABILITIES> 2,327,170
<BONDS> 0
0
0
<COMMON> 62,000
<OTHER-SE> 1,999,732
<TOTAL-LIABILITY-AND-EQUITY> 4,927,993
<SALES> 8,748,288
<TOTAL-REVENUES> 8,748,288
<CGS> 7,542,962
<TOTAL-COSTS> 8,615,238
<OTHER-EXPENSES> 932,134
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,255
<INCOME-PRETAX> 273,192
<INCOME-TAX> 140,142
<INCOME-CONTINUING> 273,192
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,050
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
