<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:
October 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
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(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 October 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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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page
- ------- --------------------- ----
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3
as of October 31, 1998 (Unaudited) and April 30, 1998
Unaudited Condensed Consolidated Statements of 4
Income for the Three and Six Months Ended
October 31, 1998 and 1997
Unaudited Condensed Consolidated Statements of 5
Cash Flows for the Six Months Ended
October 31, 1998 and 1997
Notes to Unaudited Condensed Consolidated Financial 6
Statements
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
</TABLE>
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<PAGE> 3
ALFA LEISURE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
<TABLE>
<CAPTION>
October 31, April 30,
(Unaudited)
---1998--- ---1998---
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 0 $ 410,671
Restricted cash 151,919 150,247
Accounts receivable 2,410,157 1,614,276
Inventories(Note 2) 1,647,053 1,415,794
Prepaid expenses and other current assets 47,185 139,623
Deferred tax asset 7,438 7,438
---------- ----------
Total Current Assets 4,263,752 3,738,049
Property, plant and equipment, net 1,593,600 1,300,407
Other assets and deposits 44,430 50,064
Deferred tax asset 470,403 470,403
---------- ----------
Total Assets $6,372,185 $5,558,923
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Bank overdraft $ 668,386 $ 0
Accounts payable 1,310,899 1,271,896
Accrued expenses 805,658 596,805
Accrued compensation 496,420 586,028
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Total Current Liabilities 3,281,363 2,454,729
Deferred income 8,200 8,200
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Total Liabilities 3,289,563 2,462,929
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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 (570,290) (363,236)
Retained earnings 3,590,912 3,397,230
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Total Stockholders' Equity 3,082,622 3,095,994
---------- ----------
Total Liabilities and Stockholder's Equity $6,372,185 $5,558,923
========== ==========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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<PAGE> 4
ALFA LEISURE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months
Ended October 31, Ended October 31,
---1998--- ---1997--- ---1998--- ---1997---
<S> <C> <C> <C> <C>
Sales $10,142,106 $9,396,382 $18,166,288 $16,134,198
Cost of Sales 8,839,738 8,226,187 16,315,286 14,249,615
----------- ---------- ----------- -----------
Gross Profit 1,302,368 1,170,195 1,851,002 1,884,583
Operating Expenses:
Selling, General/Admin. 816,899 788,741 1,527,157 1,388,926
Interest expense 0 23,881 501 50,674
----------- ---------- ----------- -----------
816,899 812,622 1,527,658 1,439,600
Income before income taxes 485,469 357,573 323,344 444,983
Provision for income taxes 194,673 112,761 129,661 147,846
----------- ---------- ----------- -----------
Net Income $ 290,796 $ 244,812 193,683 297,137
=========== ========== =========== ===========
Net Income per share - basic
and diluted $ .10 $.08 .06 .10
=========== ========== =========== ===========
Weighted average shares
outstanding -
basic and diluted 3,048,137 3,048,137 3,048,137 3,048,137
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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<PAGE> 5
ALFA LEISURE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended October 31,
1998 1997
---------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 193,683 $ 297,137
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 118,527 83,222
Changes in operating assets and Liabilities:
Accounts receivable (795,881) 881,585
Inventories (231,259) (467,997)
Prepaid expense 92,438 46,268
Accounts payable 39,003 (529,176)
Accrued compensation (89,608) 78,992
Accrued expenses 208,852 31,220
--------- ---------
Net cash provided by (used in) operating activities (464,245) 421,251
--------- ---------
Cash flows from investing activities:
Changes in restricted cash (1,672) (170,851)
Acquisition of PP&E (411,720) (228,120)
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Net cash used in investing activities (413,392) (398,971)
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Cash flows from financing activities:
Increase (Decrease) other assets 5,634 10,000
Increase in bank overdraft 668,386 0
Net advances to president (207,054) (114,712)
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Net cash provided by (used in) financing activities 466,966 (104,712)
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Net decrease in cash (410,671) (82,432)
Cash at beginning of period 410,671 393,182
--------- ---------
Cash at end of period $ 0 $ 310,750
========= =========
Supplemental cash flow disclosures:
Interest paid $ 501 $ 50,674
Income taxes paid 126,000 0
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
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<PAGE> 6
ALFA LEISURE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis Of Presentation
The accompanying Condensed Consolidated Balance Sheets of ALFA LEISURE,
INC. ("Registrant") at October 31, 1998 and April 30, 1998, Condensed
Consolidated Statements of Income and Cash Flows for the three month and six
month periods ended October 31, 1998 and October 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 October
31, 1998 is not necessarily indicative of the operating results for the entire
year. Financial statements for the year ended April 30, 1998 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>
October 31, 1998 April 30, 1998
---------------- --------------
<S> <C> <C>
Raw materials $ 1,070,554 $ 869,762
Work in process 489,200 514,728
Finished products 87,299 31,304
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$ 1,647,053 $ 1,415,794
=========== ===========
</TABLE>
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<PAGE> 7
ALFA LEISURE INC.
October 31, 1998
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operation
--------------------
Sales increased 7.9% for the three months ended October 31, 1998 compared
to the same period of the previous year, and 12.6% for the six months ended
October 31, 1998 compared to the same period of the previous year. These
increases are attributable to an increase in units shipped.
Cost of sales, expressed as a percentage of sales, was 87.2% in the three
months ended October 31, 1998 and 87.5% in the same period of the prior year.
Cost of sales, expressed as a percentage of sales, was 89.8% in the six months
ended October 31, 1998 and 88.3% in the same period of the prior year. The
increase in fiscal year 1999 over fiscal year 1998 is due to the one time plant
improvement investment made in the first quarter of fiscal 1999.
Selling, General and Administrative expenses, expressed as a percentage of
sales, was 8.1% in the three months ended October 31, 1998 and 8.4% in the same
period of the prior year. Selling, General and Administrative expenses,
expressed as a percentage of sales, was 8.4% in the six months ended October 31,
1998 and 8.6% in the same period of the prior year.
Liquidity and Capital Resources
-------------------------------
Cash decreased $410,671 during the six months ended October 31, 1998. This
was due primarily to an increase in accounts receivable. This increase was
caused by a larger than usual shipment volume in the last week of the quarter.
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 1999 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 1999 as a
result of dealer and consumer acceptance of the improved 1999 product lines,
resulting in strong sales activity. The Company currently has no significant
commitments for cash expenditures other than normal operations and debt service
during 1999.
Year 2000 Plan
--------------
The Company is working to resolve the potential impact of the year 2000 on
its business processes and the ability of the Company's computerized information
systems to accurately process information that may be date sensitive. The
Company began its risk assessment in fiscal 1998. The Company purchased a new
operating and applications computer system in November 1998.
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<PAGE> 8
Year 2000 Plan (continued)
--------------------------
The new system chosen is year 2000 compliant. The Company plans to implement the
new system prior to year 2000. The cost of this implementation should not have a
material impact on the Company's financial position. The Company believes that
compliance of its customers and vendors will not have a material effect on the
Company's operations.
PART II
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OTHER INFORMATION
-----------------
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
---------------------------------------------------
Not Applicable.
ITEM 5. OTHER INFORMATION
-----------------
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
--------
27. Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended
October 31, 1998.
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<PAGE> 9
SIGNATURE
---------
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: December 1, 1998
BY JOHNNIE R. CREAN
---------------------------------
Johnnie R. Crean
President
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<PAGE> 10
EXHIBIT INDEX
-------------
EXHIBIT
INDEX DESCRIPTION
- ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> OCT-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,410,157
<ALLOWANCES> 0
<INVENTORY> 1,647,053
<CURRENT-ASSETS> 4,263,752
<PP&E> 1,593,600
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,372,185
<CURRENT-LIABILITIES> 3,281,363
<BONDS> 0
0
0
<COMMON> 62,000
<OTHER-SE> 3,020,622
<TOTAL-LIABILITY-AND-EQUITY> 6,372,185
<SALES> 10,142,106
<TOTAL-REVENUES> 10,142,106
<CGS> 8,839,738
<TOTAL-COSTS> 9,851,310
<OTHER-EXPENSES> 816,899
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 485,469
<INCOME-TAX> 194,673
<INCOME-CONTINUING> 290,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 290,796
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
