<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended October 28, 1995 Commission File No. 1-6914
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SUN CITY INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 59-0950777
------------------------------- ------------------
(state or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5545 N.W. 35 Ave. Fort Lauderdale, FL 33309
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (305) 730-3333
---------------
Same Name; Former Address-8600 Doral Blvd., #304, Miami, FL 33166
- ------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed 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
---- ----
FINANCIAL INFORMATION
- ---------------------
The consolidated financial statements included herein have been prepared by the
Company, without audit, according to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations.
The financial statements reflect, in the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to represent fairly
the financial position and results of operations as of and for the periods
indicated. The statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Annual Report on Form
10-K for the year ended January 28, 1995.
The results of operations for the nine-month period ended October 28, 1995, are
not necessarily indicative of results to be expected for the entire year ending
February 03, 1996.
<PAGE>
Management's Discussion and Analysis of Financial
- -------------------------------------------------
Condition and Results of Operations
- -----------------------------------
The following discussion provides information which management believes is
relevant to an assessment and understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with the
financial statements.
The Company, which began in 1949 as an egg processing and marketing company, is
now also a foodservice marketing and distribution company throughout much of the
eastern seaboard of the United States with a heavy concentration in Florida.
The Company intends to expand its market share through the development of
internal sales and the acquisition of related companies in the foodservice
distribution business.
The Company began its expansion as a foodservice distributor in 1990 and now
includes four distribution centers in Florida covering the Orlando-Disney World
area, the West Coast of Florida, the central Florida area and Southeast Florida
from Key West to West Palm Beach. In addition, the Company has distribution
operations that cover markets in Atlanta, GA, Baltimore, MD, Philadelphia, PA
and New Jersey.
The Company's customers include national and regional supermarkets, U.S.
military installations, hotels, restaurants, airline caterers, cruise ship
lines, schools and state facilities.
The Company's goal is to build a network of foodservice companies throughout the
heavily populated eastern seaboard of the United States with a major focus in
the State of Florida.
FOR THE NINE MONTHS ENDED OCTOBER 28, 1995 AND OCTOBER 29, 1994
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SALES:
During the nine months, consolidated sales increased $14,605,551 up 22.0%
compared to a year ago.
<TABLE>
<CAPTION>
TOTAL FOODSERVICE % OF EGG % OF
PERIOD SALES DIVISION TOTAL DIVISION TOTAL
- --------- ------------ ------------ ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
1995 $66,369,435 $46,342,011 69.8% $19,894,942 30.0%
1994 51,763,884 31,279,817 60.4% 20,281,120 39.2%
Net Change 14,605,551 15,062,194 (386,178)
Percent Change 22.0% 48.2% (1.9%)
</TABLE>
<TABLE>
<CAPTION>
DIVISION AMOUNT REASONS
- -------- ------- -------
<S> <C> <C>
Sheppard Foodservice $12,290,405 New division, began 2/27/95.
Sun City Produce 4,312,949 New Division, began 6/19/95.
Gulf Coast Foodservice 1,933,885 Unit Sales up 18.6%.
Certified Food Service, PA. (2,965,304) New Jersey Division closed
7/31/94.
Certified Food Service, GA. (437,215) Transferred divisions chain
store egg sales to Company's
Egg Division.
Egg Division (386,178) Sold Spring Grove, PA during
third quarter 1995.
All Other (142,991)
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$14,605,551
</TABLE>
COST OF SALES:
Cost of Sales include product cost, warehousing, distribution and egg processing
costs.
2
<PAGE>
During the nine months, the cost of sales rose $16,149,335 or 34.0%. This
increase reflects the higher costs incurred with the egg production joint
ventures; the increased cost of egg supply associated with the corresponding
decline in regular egg supply and the higher cost of operating due to the
inefficiencies associated with phasing out of egg operations. Additionally,
cost of sales associated with the newly acquired Sheppard Foodservice and new
start up division, Sun City Produce are generally higher as a percent of sales
than existing operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses as percentage of sales for 1995
and 1994 were 5.3% and 7.0%, respectively. Changes in the percentage
relationship of selling, general and administrative expenses to sales result
from an interplay of both direct costs associated with the operation of each
division as well as the home office administrative cost. During 1995 these
costs decreased due to marginal selling, general and administrative expenses
associated with the relatively high sales volume of the new Sheppard and Sun
City Produce subsidiaries. Management expects that as the Company's operations
become more foodservice oriented, future direct selling, general and
administrative expenses as a percentage of sales will reflect the levels
typically experienced in the foodservice industry.
INTEREST EXPENSE:
Interest expense increased $348,446 during the first nine months of 1995. Of
this increase $240,000 results directly from debt associated with the Sheppard
and Gulf Coast acquisitions with the balance arising from an effective 21%
increase in short term interest rates during the nine months as compared to the
same period a year earlier.
INCOME TAXES:
During Fiscal 1994, the Company adopted SFAS 109, Accounting for Income Taxes,
effective February 1, 1993. Under SFAS 109, deferred tax liabilities are
recognized for future taxable amounts and deferred tax assets are recognized for
future deductions and operating loss carry forwards. A valuation allowance is
recognized to reduce net deferred tax assets to the amounts that are more likely
than not to be realized.
The Company estimates that, after filing its 1995 tax return, it will have tax
loss carry forwards of approximately $2,208,000 expiring in the years 2005
through 2008.
3
<PAGE>
NET EARNINGS:
During the first nine months the Company incurred a total net loss of $1,576,383
versus a profit of $259,106 for the same period the year before. Contributing
to the loss was a $1,225,000 turnaround in the egg division profits going from a
$800,000 profit last year to a $425,000 loss this year. Reasons for the decline
were:
<TABLE>
<CAPTION>
<S> <C> <C>
Joint venture losses $ 476,000
Reduced profits resulting
from the decline in egg
supply, lower volume and
the closing of Spring
Grove 607,000
Loss on disposition of
Spring Grove 155,000
Increased interest costs 348,000
(LOSS) EARNINGS PER COMMON SHARE:
Nine Months Ended October: 1995 1994
- -------------------------------------- --------- ----------
(Loss) earnings per common and
common equivalent share ($1.10) $ .17
Average shares used in the
computation 1,438,952 1,525,350
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES:
The Company now intends to consolidate its market share in the foodservice
industry through its recent acquisitions and newly developed produce division.
These companies have strong management teams and are situated in strategic
locations that will enable the Company to expand its product lines and increase
sales through internal growth.
In order to accomplish this goal, the Company has developed a program to divest
itself of its egg production joint ventures and sell or lease its egg processing
operations while continuing its base strength as an egg marketing entity.
During the third quarter the Company completed its first sale, that of the
Spring Grove, Pennsylvania location whereby it disposed of certain business
assets comprising a major portion of its egg production joint venture
investments and a portion of its egg processing business. Nearby Eggs, Inc., a
Pennsylvania subsidiary of the Company, sold its operating assets, consisting
primarily of inventory, equipment and goodwill, to Hillandale Farms East, Inc.,
a Pennsylvania corporation and subleased its egg processing facility in Spring
Grove, Pennsylvania to Hillandale. The Company will be released from the prime
lease after the four-year sublease expires. The sale price was approximately
$351,000, paid at closing and the buyer's assumption of certain designated
liabilities relating to leased egg processing equipment and transportation
equipment.
4
<PAGE>
Nearby Eggs, Inc. retained its accounts receivables and trade account payables.
Affiliate Sun City Marketing Corp. entered into a Consulting Agreement with the
buyer, to provide certain egg marketing services after the closing for a four
year period.
At the same time, another affiliate, Nearby Producers Egg and Poultry Marketing
Corp. sold to R.D. Bowman and Sons, Inc., a Maryland corporation, its interests
in various egg production joint ventures, for a purchase price approximately
equal to applicable liabilities.
The Company is currently involved in negotiations for the sale of its remaining
egg processing businesses in North Carolina and Virginia and the final unit of
its egg production joint ventures in North Carolina. If these transactions are
successfully completed, the Company will have made a transition in its egg
operations from that of an egg processor-distributor to exclusively that of an
egg marketing entity.
During the Nine Months Ended October 28, 1995:
Created the Sun City Produce division which is a unit that services the many
produce distributors and retailers in South Florida.
Completed the acquisition of Sheppard Foodservice, Inc. in February, 1995 for an
initial cash payment of $1,350,000.
Completed its second private placement offering by raising $700,000 in five year
Senior Subordinated Convertible Debentures carrying a fixed 9% rate, convertible
at $5.125 per share.
Expanded its credit facility with its major lender from $7.0 million to $7.5
million. The credit facility is primarily for the Company's increasing working
capital needs, including that associated with new acquisitions.
The Company's liquidity condition has been negatively impacted by the operations
of its egg division. However, management is engaged in a program whereby it is
changing the manner in which it will, in the future, operate its egg division.
If successful, the Company would eliminate its focus on egg processing and egg
production joint ventures to that of being an egg marketing entity and as a
result should reduce its debt load and eliminate the negative results associated
with its current operations.
5
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
OCTOBER 28, JANUARY 28,
ASSETS 1995 1995
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<S> <C> <C>
Cash and equivalents $ 306,232 $ 453,608
Accounts and trade notes
receivable, less allowance for
doubtful accounts of $326,679
and $178,600, respectively 8,236,426 6,053,550
Inventories 3,852,630 2,645,785
Notes Receivable-current portion 14,487 13,545
Prepaid Expenses 435,024 370,445
Investment in Joint Ventures 207,000 734,000
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TOTAL CURRENT ASSETS 13,051,799 10,270,933
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PROPERTY, PLANT AND EQUIPMENT:
Land and Improvements 146,404 146,404
Buildings and Improvements 974,846 999,479
Machinery and equipment 4,663,078 5,722,264
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5,784,328 6,868,147
Less accumulated depreciation 3,443,729 3,720,607
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2,340,599 3,147,540
Properties held for sale 388,736 449,500
Long-term notes receivable 109,766 121,822
Excess of purchase price over fair
value of net assets acquired 1,636,184 1,240,501
OTHER ASSETS 956,235 1,057,584
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TOTAL $18,483,319 $16,287,880
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------
CURRENT LIABILITIES:
Accounts payable 6,994,942 $ 3,850,901
Accrued expenses 475,300 495,244
Current portion of long-term debt 417,112 687,640
Current portion of capital lease - 62,805
Income taxes payable 2,000 8,000
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TOTAL CURRENT LIABILITIES 7,889,354 5,104,590
DEFERRED COMPENSATION PAYABLE 529,960 444,160
LONG-TERM DEBT 8,523,544 7,199,174
CAPITAL LEASE - 476,115
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value 3,000,000
shares authorized; 2,276,116 shares issued,
respectively in 1995 and 1994 227,612 227,612
Capital in excess of par value 1,070,286 1,070,286
Retained earnings 3,189,763 4,766,143
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4,487,661 6,064,041
Less: Treasury stock at cost, 837,164 and
840,414 shares in 1995 and 1994,
respectively (2,682,200) (2,682,200)
Loan Receivable for common stock sold
to ESOP (265,000) (318,000)
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Total Stockholders' Equity 1,540,461 3,063,841
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TOTAL $18,483,319 $16,287,880
=========== ===========
</TABLE>
6
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
-------------------------- -------------------------
Oct. 28, Oct. 29, Oct. 28, Oct. 29,
1995 1994 1995 1994
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Sales $66,369,435 $51,763,884 $23,916,454 $16,743,302
Costs and Expenses
Cost of Sales 63,556,805 47,407,470 23,321,607 15,266,044
Selling, general and
administrative expenses 3,486,999 3,652,838 1,387,496 1,224,895
Interest expense 806,372 457,926 265,490 171,132
Other (income), net 93,642 (24,246) 113,167 (8,486)
----------- ----------- ----------- -----------
Total Costs and Expenses 67,943,818 51,493,988 25,087,760 16,653,585
----------- ----------- ----------- -----------
Earnings From Operation
Before Income Taxes (1,574,383) 269,896 (1,171,306) 89,717
Provision For Income Taxes (2,000) (10,790) - (3,500)
----------- ----------- ----------- -----------
Net Earnings (1,576,383) 259,106 (1,171,306) 86,217
----------- ----------- ----------- -----------
Earnings Per Common and
Common Equivalent Share $ (1.10) $ .17 $ ( .81) $ .06
Earnings Per Common Share
Assuming Full Dilution $ (1.10) $ .17 $ ( .81) $ .06
</TABLE>
7
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCT. 28, OCT. 29,
1995 1994
---------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Earnings $(1,576,383) 259,106
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Adjustments To Reconcile Net Earnings
To Net Cash (Used In) Or Provided By
Operating Activities:
Depreciation 518,744 371,679
Amortization of purchase price
over fair market value of net asset acquired 54,317 23,359
Provisions for losses on accounts receivable 148,079 86,646
----------- ----------
Change in assets and liabilities:
(Increase) decrease in accounts
and trade notes receivable (2,330,955) 635,782
(Increase) decrease in inventories (1,206,845) 42,142
(Increase) in prepaid expenses (64,579) (93,997)
Decrease (Increase) in investment in joint venture 527,000 (291,840)
(Increase) decrease in other assets (348,651) (210,255)
Increase (Decrease) in accounts payable 3,144,041 (1,746,860)
Increase (Decrease) in accrued expenses (19,944) 1,411,552
(Decrease) increase in income taxes payable (6,000) (5,210)
Increase in deferred compensation payable 85,800 85,800
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Total Adjustments 501,007 308,798
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Net Cash (Used In) Or Provided By
Operating Activities (1,075,376) 567,904
----------- ----------
Cash Flow From Investing Activities:
Capital Expenditures 348,961 (1,115,739)
----------- ----------
Net Cash (Used In) Investing Activities: 348,961 (1,115,739)
----------- ----------
Cash Flows From Financing Activities:
Principal payments on long term debt (1,673,817) (914,490)
Proceeds from long term debt 1,488,739 1,407,744
Proceeds from loan receivable from ESOP 53,000 53,000
Proceeds from exercise of options - 3,899
Proceeds from notes receivable 11,117 -
Proceeds from subordinated debt 700,000 224
----------- ----------
Net Cash Provided By Or (Used In)
Financing Activities 579,039 550,377
----------- ----------
Net Increase (Decrease) In Cash
and Equivalents (147,376) 2,542
----------- ----------
Cash and Equivalents, Beginning of Year 453,608 531,608
----------- ----------
Cash and Equivalents, End of Year 306,232 534,150
----------- ----------
</TABLE>
8
<PAGE>
Sun City Industries, Inc. and Subsidiaries
SALES OF UNREGISTERED SECURITIES (DEBT OR EQUITY)
- -------------------------------------------------
On February 10, 1995 the Company completed a private placement offering by
raising $700,000 in five year Senior Subordinated Convertible Debentures
carrying a fixed rate of 9%. The debentures are convertible in common stock at
$5.12 per share.
SIGNATURES
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.
SUN CITY INDUSTRIES, INC.
-------------------------
REGISTRANT
DATE: Malvin Avchen
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Malvin Avchen, C.E.O.
DATE: Syed Jafri
--------------------- --------------------------
Syed Jafri, Treasurer
The financial statements for the nine months ended october 28, 1995 and October
29, 1994, respectively, are unaudited but are prepared in conformity with
accounting principles used at our last fiscal year end and include all
adjustments which the Company considers necessary for a fair presentation.
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Sun City
Industries, Inc. Financial Statements fiscal period ended 07-29-95 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> OCT-28-1995
<CASH> 306,232
<SECURITIES> 0
<RECEIVABLES> 8,236,426
<ALLOWANCES> 326,679
<INVENTORY> 3,852,630
<CURRENT-ASSETS> 13,051,799
<PP&E> 5,784,328
<DEPRECIATION> 3,443,729
<TOTAL-ASSETS> 18,483,319
<CURRENT-LIABILITIES> 7,889,354
<BONDS> 9,053,504
<COMMON> 227,612
0
0
<OTHER-SE> 1,312,849
<TOTAL-LIABILITY-AND-EQUITY> 18,483,319
<SALES> 66,369,435
<TOTAL-REVENUES> 66,369,435
<CGS> 63,556,805
<TOTAL-COSTS> 67,943,818
<OTHER-EXPENSES> 4,387,013
<LOSS-PROVISION> 148,079
<INTEREST-EXPENSE> 806,372
<INCOME-PRETAX> (1,574,383)
<INCOME-TAX> 2,000
<INCOME-CONTINUING> (1,576,383)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,576,383)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
