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:
July 31, 1997 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
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(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
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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
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The number of shares outstanding of each of the Registrant's classes of common
stock, as of July 31, 1997 was:
Common Stock, without par value - 3,050,000 shares
2
ALFA LEISURE, INC.
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Index
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PART I. FINANCIAL INFORMATION Page
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Item 1. Financial Statements (unaudited)
Balance Sheets as of July 31, 1997 3
and April 30, 1997
Statements of Income for the Three 4
Months Ended July 31, 1997 and 1996
Statements of Cash Flows for the 5
Three Months Ended July 31, 1997 and 1996
Notes to Unaudited Financial Statements 6
Item 2 Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II. OTHER INFORMATION 9
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Signature Page 10
3
ALFA LEISURE, INC.
BALANCE SHEETS
(UNAUDITED)
ASSETS:
July 31, April 30,
---1997---- ---1997---
Current Assets:
Cash $ 65,864 $ 393,182
Restricted cash 319,683 149,350
Accounts receivable, trade 1,161,489 1,769,153
Inventories (Note 3) 1,589,188 1,299,641
Prepaid expense 151,323 150,559
Deferred tax asset - current 5,156 5,156
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Total current assets 3,292,703 3,767,041
Property, plant and equipment, net 1,141,748 1,103,154
Deposits 10,000 10,000
Deferred tax asset 526,240 526,240
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Total Assets $ 4,970,691 $ 5,406,435
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable, trade $ 1,462,693 $ 1,916,611
Accrued expenses 477,059 415,841
Accrued compensation 311,616 418,474
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Total current liabilities $ 2,251,368 $ 2,750,926
Line of credit 972,500 972,500
Deferred income 8,200 8,200
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Total Liabilities $ 3,232,068 $ 3,731,626
Commitments and contingencies:
Stockholders' equity:
Common stock, no par value; authorized
30,000,000 shares, issued and
outstanding 3,050,000 shares 62,000 62,000
Note receivable from President (428,304) (439,792)
Retained earnings 2,104,927 2,052,601
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Total stockholders' equity 1,738,623 1,674,809
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$ 4,970,691 $ 5,406,435
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See accompanying notes to the unaudited financial statements.
4
ALFA LEISURE INC.
STATEMENTS OF INCOME
(UNAUDITED)
Three Months
Ended July 31,
----1997--- ---1996---
Sales $ 6,737,816 $ 4,798,139
Cost of Sales 5,979,380 4,354,021
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Gross Profit 758,436 444,118
Expenses:
Selling, General and Administrative 644,233 648,148
Interest expense 26,793 51,859
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671,026 700,007
Income before income taxes 87,410 (255,889)
Provision for income taxes 35,085 29,828
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Net Income $ 52,325 $ (285,717)
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Net Income per share $ .02 $ (.09)
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See accompanying notes to the unaudited financial statements.
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ALFA LEISURE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended July 31,
1997 1996
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Cash flows from operating
activities: Net income (loss) $ 52,325 $ (285,717)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 37,782 38,284
(Inc)Dec in restricted cash (170,332) (719)
(Inc)Dec in accounts rec 607,664 1,006,667
(Inc)Dec in inventories (289,547) (919,706)
(Inc)Dec in prepaid expense (766) (19,449)
Inc (Dec)in accounts payable (456,292) 460,865
Inc (Dec)in accrued compensation (116,671) (274,140)
Inc (Dec)in accrued expenses 73,406 (34,722)
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Total adjustments (239,455) 257,090
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Net cash provided (used)
by operating activitie (68,927) (28,627)
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Cash flows from investing activities:
Acquisition of PP&E (76,375) (14,609)
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Net cash provided (used)
by investing activities (76,375) (14,609)
Cash flows from financing activities:
(Inc) Dec in Long Term N/R 11,488 -0-
Principal payments on credit line -0- (450,000)
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Net cash provided (used)
by financing activities 11,488 (450,000)
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Net increase (decrease) in cash (327,318) (493,236)
Cash at beginning of period 393,182 505,027
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Cash at end of period $ 65,864 $ 11,791
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Supplemental cash flow disclosures:
Interest paid $ 26,793 $ 51,859
Income taxes paid 0 30,254
See accompanying notes to the unaudited financial statements.
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ALFA LEISURE, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
July 31, 1997
1. Accounting Policies
The accompanying Balance Sheets of ALFA LEISURE, INC.("Registrant") at July
31, 1997 and April 30, 1997 and the Statements of Income and Cash Flows for the
three month periods ended July 31, 1997 and July 31, 1996 are unaudited, but
include all adjustments, consisting only of normal recurring accruals, 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 July 31,
1997 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. Earnings Per Share
Net income per share is based upon the weighted average number of shares
outstanding during the periods presented. The weighted average shares
outstanding during the nine months ended July 31, 1997 and 1996 were 3,050,000.
3. Inventories
Inventories are summarized as follows:
July 31, 1997 April 30, 1997
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Raw materials $ 792,684 $ 691,977
Work in process 678,180 558,326
Finished products 118,324 49,339
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$1,589,188 $1,299,642
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ALFA LEISURE, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
January 31, 1997
(Continued)
4. Commitments and Contingencies:
Financing Arrangements:
Registrant is contingently liable at July 31, 1997 under the terms of
repurchase agreements which have been established with financing institutions to
provide inventory financing for dealers of Registrant's products. The risk of
loss under these agreements is spread over numerous dealers and financing
institutions and is reduced by the resale value of any products which may
require repurchase. Registrant has historically experienced no significant
losses under these agreements.
5. Income Taxes:
The provision for income taxes for the three month period ended July 31,
1997 includes prior year adjustments.
6. Financial Condition:
At July 31, 1997 Stockholders' Equity of $ 1,738,622 and favorable credit
terms extended by vendors continues to play a major role in determining the
adequacy of funds generated internally. Management is confident in its ability
to maintain profitability and believes internally generated funds along with an
available line of credit provide adequate resources to meet its needs.
7. Line of Credit:
The Company has a line of credit set at $2,000,000 bearing interest at Bank
of America's prime rate plus 1%. Interest is payable monthly. Although the line
of credit is payable within 90 days of any written demand by the lender, the
lender has given assurances that no demand will be made for principal payments
during the next twelve months. Accordingly, this obligation has been classified
as noncurrent in the balance sheets at July 31, 1997 and April 30, 1997.
Substantially all 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.
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ALFA LEISURE INC.
July 31,1997
Item 2. Management's Discussion and Analysis of Financial Condition
- ------- and Results of Operations
Results of Operation
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Sales increased 42.7% for the quarter ended July 31, 1997 as compared to
the same quarter of the previous year. Sales unit volume increased 51.0% over
the three month period of 1996. This increase is attributable to improved
product innovations and associated volume increases from new model year
introductions during the quarter.
Cost of sales, expressed as a percentage of sales, decreased to 86.4% in
the quarter ended July 31, 1997 from 94.3% in the same quarter of the prior
year. This decrease resulted from slight reductions in material and warranty
costs from the respective three month period of the prior year. Quarter to
quarter cost reductions as a percentage of sales further improved the gross
margin primarily as a result of an approximate 3% reduction in variable overhead
costs.
Selling, General and Administrative expenses increased approximately 11.9%
for the quarter ended July 31, 1997 as compared to the corresponding period in
1996. Significant increases occurred in advertising, promotion and dealer
development expenses for the three month period compared to the same period of
the prior year with slightly offsetting reductions in salaries and travel
expenses.
Liquidity and Capital Resources
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Capital expenditures during fiscal 1997 are expected to be primarily for
routine periodic replacement of existing plant and equipment. Registrant
believes that it has sufficient available capacity to meet the demand for its
products in the foreseeable future.
Registrant meets its needs for working capital and capital expenditures
with internally generated funds and from a line of credit. Registrant has been
able to take discounts on trade payables as a result of Registrant's line of
credit and favorable credit terms with its vendors.
Registrant is confident of overall profitability in fiscal 1997 as a result
of dealer and consumer acceptance of the improved 1998 product line resulting in
increased sales activity. In addition, Registrant currently has no significant
commitments for cash expenditures other than normal operations and debt service
during 1997. The favorable credit terms extended by vendors continues to play a
key role in determining the adequacy of funds available to conduct operations in
an efficient manner.
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PART II
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OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
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Not Applicable.
ITEM 2. CHANGES IN SECURITIES
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Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
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Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Not Applicable.
ITEM 5. OTHER INFORMATION
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Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) Exhibits
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27. Financial Data Schedule
(b) Reports on Form 8-K
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No reports on Form 8-K were filed during the quarter ended July
31, 1997.
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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: September 24, 1997
BY /s/ JOHNNIE R. CREAN
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Johnnie R. Crean
President