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, 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
of incorporation or organization) identification 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, 1998 was:
Common Stock, without par value - 3,048,137 shares
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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
Condensed Consolidated Balance Sheets
as of July 31, 1998 and April 30, 1998 3
Condensed Consolidated Statements of Income
for the Three Months Ended July 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended July 31, 1998 and 1997 5
Notes to Condensed consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION 9
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Signature Page 10
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ALFA LEISURE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
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July 31, April 30,
(Unaudited)
---1998---- ---1998---
Current Assets:
Cash and cash equivalents $ 0 $ 410,671
Restricted cash 150,247 150,247
Accounts receivable 692,414 1,614,276
Inventories(Note 2) 1,442,290 1,415,794
Prepaid expenses and other current assets 29,535 139,623
Deferred tax asset 7,438 7,438
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Total Current Assets 2,321,924 3,738,049
Property, plant and equipment, net 1,520,355 1,300,407
Other assets and deposits 55,064 50,064
Deferred tax asset 470,403 470,403
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Total Assets $ 4,367,746 $ 5,558,923
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Bank overdraft $ 17,201 $ 0
Accounts payable 1,162,837 1,271,896
Accrued expenses 119,172 596,805
Accrued compensation 257,455 586,028
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Total Current Liabilities 1,556,665 2,454,729
Deferred income 8,200 8,200
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Total Liabilities 1,564,865 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 (559,236) (363,236)
Retained earnings 3,300,117 3,397,230
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Total Stockholders' Equity 2,802,881 3,095,994
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Total Liabilities and Stockholder's Equity $ 4,367,746 $ 5,558,923
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See accompanying notes to the condensed consolidated financial statements.
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ALFA LEISURE INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months
Ended July 31,
----1998--- ---1997---
Sales $ 8,024,182 $ 6,737,816
Cost of Sales 7,475,548 6,023,428
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Gross Profit 548,634 714,388
Operating Expenses:
Selling, General/Admin 710,258 600,185
Interest expense 501 26,793
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710,759 626,978
Income (loss) before income taxes (162,125) 87,410
Provision for income taxes (65,012) 35,085
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Net Income (loss) $ (97,113) $ 52,325
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Net Income (loss) per share - basic
and diluted $ (.03) $ .02
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Weighted average shares outstanding -
basic and diluted 3,048,137 3,048,137
See accompanying notes to the condensed consolidated financial statements.
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ALFA LEISURE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended July 31,
1998 1997
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Cash flows from operating activities:
Net income (loss) $ (97,113) $ 52,325
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 58,675 37,782
Changes in operating assets and Liabilities:
Accounts receivable 921,862 607,664
Inventories (26,496) (289,547)
Prepaid expense 110,088 (766)
Accounts payable (109,059) (456,292)
Accrued compensation (328,573) (116,671)
Accrued expenses (477,633) 73,406
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Net cash provided by (used in) operating activities 51,751 (92,099)
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Cash flows from investing activities:
Changes in other assets (5,000) 0
Changes in restricted cash 0 (170,332)
Acquisition of PP&E (278,623) (76,375)
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Net cash used in investing activities (283,623) (246,707)
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Cash flows from financing activities:
Increase in bank overdraft 17,201 0
Net advances to president (196,000) 11,488
Principal payments on credit line 0 0
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Net cash provided by (used in) financing activities (178,799) 11,488
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Net decrease in cash (410,671) (327,318)
Cash at beginning of period 410,671 393,182
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Cash at end of period $ 0 $ 65,864
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Supplemental cash flow disclosures:
Interest paid $ 501 $ 26,793
Income taxes paid 78,000 0
See accompanying notes to the condensed consolidated financial statements.
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ALFA LEISURE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998
1. Basis Of Presentation
The accompanying Condensed Consolidated Balance Sheets of ALFA LEISURE,
INC. ("Registrant") at July 31, 1998 and April 30, 1998, Condensed Consolidated
Statements of Income and Cash Flows for the three month periods ended July 31,
1998 and July 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 July 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:
July 31, 1998 April 30, 1998
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Raw materials $ 867,836 $ 869,762
Work in process 487,882 514,728
Finished products 86,572 31,304
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$1,442,290 $1,415,794
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ALFA LEISURE INC.
July 31,1998
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- AND RESULTS OF OPERATIONS
Results of Operation
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Sales increased 19.1% for the three months ended July 31, 1998 compared to
the same period of the previous year. This increase is attributable to an
increase in units shipped, as well as an increase in 1999 model prices compared
to 1998 model prices.
Cost of sales, expressed as a percentage of sales, was 93.2% in the three
months ended July 31, 1998 and 89.4% in the same period of the prior year. The
3.8% increase in fiscal year 1999 over fiscal year 1998 is broken down between
ongoing operations of .2% and a one time plant improvement investment of 3.6% of
sales. In July 1998 a three week plant shutdown was scheduled. During this
shutdown a plant improvement plan was implemented. This included facility
maintenance and the re-tooling of the main production line to improve production
efficiency, improve worker safety and increase production capacity. The cost of
this work totaled approximately $480,000. Approximately $195,000 in machinery
and equipment was capitalized and $285,000 in facility re-layout and clean up
was expensed. These changes should result in improved efficiencies and increased
production capacity in future periods.
Selling, General and Administrative expenses, expressed as a percentage of
sales, was 8.9% in the three months ended July 31, 1998 and 1997.
Liquidity and Capital Resources
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Cash decreased $410,671 during the three months ended July 31, 1998. This
was due primarily to the three week plant shutdown and improvement project.
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.
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Year 2000 Plan
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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 plans to convert
to a new operating and applications computer system prior to year 2000. Any new
system chosen will be year 2000 compliant. In the event that a new system is not
procured or implemented prior to year 2000, the Company will make the required
changes to its existing system to make it compliant. The Company believes the
cost of addressing this issue will not have a material adverse impact on the
Company's financial position. The Company plans to devote all resources required
to resolve any significant year 2000 issues in a timely 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, 1998.
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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: August 26, 1998
BY JOHNNIE R. CREAN
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Johnnie R. Crean
President
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EXHIBIT INDEX
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Exhibit
Number Description
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27 Financial Data Schedule