<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
X SECURITIES EXCHANGE ACT OF 1934
- -----
For the fiscal year ended January 28, 1995
OR
TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE
SECURITIES EXCHANGE ACT OF 1934
- -----
Commission file number: 1-6914
Sun City Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 59-0950777
(State or other jurisdiction of (IRS Employer ID.No.)
incorporation or organization)
5545 N.W. 35th Avenue, Fort Lauderdale, Florida 33309
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code:(305) 730-3333
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
- ------------------- -------------------
Common Stock, American Stock Exchange
Par value $.10 per share
Securities registered pursuant to Section 12(g) of the Act: None
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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
-----
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As of April 3, 1995, the aggregate market value of the Registrant's voting
stock held by non-affiliates of the Registrant was $4,997,620 (the price at
which the stock was sold at the close of business on April 3, 1995). For
purposes of this calculation, shares of Common Stock held by directors, officers
and stockholders whose ownership exceeds five percent of the Common Stock
outstanding at January 28, 1995 were excluded from the number of shares held by
non-affiliates. Exclusion of shares held by any person should not be construed
to indicate that such person possesses the power, direct or indirect, to direct
or cause the direction of the management or policies of the registrant or that
such person is controlled by or under common control with the registrant.
As of April 3, 1995 there were 1,438,952 shares of the Registrant's $.10 par
value Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
The Registrant's definitive proxy statement for its 1995 Annual Meeting of
Stockholders to be held on June 28, 1995 is incorporated by reference into Part
III of this Form 10-K.
Total Number of Pages: ______ Exhibit Index: Page No. ______
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PART I
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ITEM 1 - Business
--------
As a result of a 1990 Stock Redemption, a new Executive Management team
took over operating control of Sun City Industries, Inc. (the "Company").
The Executive Team developed a business plan and began its implementation
during fiscal year 1993. The plan concentrates the Company's efforts on the
Company's foodservice operations where Management believes opportunities
exist for growth through mergers and acquisitions as well as geographical
and product line expansion.
General Development of the Business
- -----------------------------------
a) The Company was incorporated in Delaware in July 1961 as Sun City Dairy
Products, Inc., successor to a business founded in 1949; the present name
being adopted in May 1969 which has developed into a leading marketer of
eggs, butter, cheese, poultry and related products through internal growth
and acquisitions.
In March 1969, the Company acquired Certified Poultry & Egg Co. for
$240,000 in cash; Oak Crest Enterprises, Inc. and Oak Crest Hatcheries,
Inc. for an aggregate of 80,000 shares of the Company's $.10 par value
Common Stock .
On November 6, 1970, the Company acquired Nearby Producers Egg & Poultry
Marketing Corp. and Carlisle Poultry & Egg Associates, Inc. for $81,083 and
118,504 shares of the Company's $.10 par value Common Stock.
On August 3, 1987, the Company acquired the inventory and certain other
assets, including the trade name, from Hess Foods of Lancaster County, PA
for $250,000.
On February 4, 1991, the Company acquired the businesses of William F.
O'Brien Inc. and Diversified Foods, Inc. of Fort Lauderdale, Florida for
$490,200 in cash and the assumption of certain liabilities.
On August 12, 1991, the Company acquired the business of Gilley's Sausage
Co., Inc. of Winston, Georgia for $116,300 in cash and the assumption of
certain liabilities.
On December 6, 1993, the Company acquired the business and assets of Gulf
Coast Food Distributors, Inc. for a total price of $1,701,222, payable in
cash and notes.
On February 27, 1995 the Company acquired the business and assets of
Sheppard Distributors, Inc. of Auburndale, Florida.
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Sheppard's assets totalled $1.8 million and had sales of $17.8 million for
their recent fiscal year ended October 1, 1994. The cash investment was
$1,350,000.
b) The Company is engaged in the processing and marketing of shell eggs and in
the foodservice division in which the Company distributes butter, eggs,
cheese, poultry, and with the acquisition of Gulf Coast, has added produce,
meats, seafood, groceries and paper goods. With the acquisition of Sheppard
Distributors, Inc. the Company has expanded its seafood and meat lines.
In the Egg Division, the Company's customers are national and regional
supermarkets, local grocery and convenience stores and U.S. military
installations and bases. In the Foodservice Division, the Company's
customers are regional hotels, restaurants, schools, hospitals, prisons,
caterers and cruise sship lines.
The Company's lines of business include the sale of eggs (shell, frozen and
pasteurized) butter, cheese (hard, soft, domestic and imported) poultry,
sausage provisions, produce, meats, seafood and groceries. Other than eggs,
no single line of business has accounted for more than 10% of the Company's
total annual revenues, in any of the last three fiscal years.
c) The business of the Company is conducted through its wholly-owned
subsidiaries which are engaged principally in the business of processing
and marketing shell eggs and the distribution of eggs, butter, cheese,
poultry, sausage provisions, produce, meats, groceries and other products.
Unless the context indicates otherwise, references to the Company in this
Report include the Company's subsidiaries.
1) The Company purchases shell eggs from producers located in the states
of Florida, Georgia, Maine, New York, North Carolina, Indiana,
Illinois, Ohio, Pennsylvania, Maryland and South Carolina. Through its
trained personnel, the Company inspects farms from which unprocessed
eggs are purchased to ensure that the Company's quality control
standards are complied with by the producers. The shell eggs purchased
are then processed by the Company's plants located in the States of
Virginia, North Carolina, and Pennsylvania.
The shell eggs processed and purchased by the Company are sold to
customers in the states of Connecticut, Delaware, Florida, Georgia,
Maryland, Michigan, New Jersey, New York, North Carolina, Pennsylvania,
South Carolina, Virginia, West Virginia and the District of Columbia.
The Company's customers include national and regional supermarket
chains, independent supermarkets, hospital,
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hotels, restaurants, educational institutions, cruise ship lines,
airline caterers, educational and government facilities.
In Florida, New York, New Jersey, Pennsylvania, Georgia, Maryland and
Washington, D.C. the Company sells butter, eggs, cheese, poultry and
similar products. None of the products mentioned in this paragraph,
except eggs, has represented more than 10.0% of the Company's
consolidated sales in any of the last three fiscal years.
<TABLE>
<CAPTION>
Sales 1/28/95 1/29/94 1/31/93
----- ------- ------- -------
<S> <C> <C> <C>
Egg Division 40.4% 47.9% 48.3%
Foodservice 59.2% 51.7% 51.0%
Other marketing .4% .4% .7%
</TABLE>
During the Company's fiscal years ended January 28, 1995 January 29,
1994, and January 31, 1993, the Company's shell egg sales accounted for
50%, 64% and 62% of its revenues, respectively. The Company processes a
substantial portion of all the shell eggs it purchases. Consequently
the Company does not determine, and is unable to approximate
meaningfully, the portion of its total shell egg income attributable to
the Company's shell egg processing and marketing operations.
2) Description of segments in development stages - None.
3) Sources and Availability of Raw Materials - The Company believes that
its relationships with its suppliers are good and that alternative
supplies of eggs are generally available. However, in order to realize
the maximum potential in its egg processing-marketing division during
fiscal 1993, the Company commenced a program of upgrading the quality
and quantity of its egg supply by making investments in various egg
producing joint ventures. Although the size of each investment varies
between 15% and 25%, the Company will receive 100% of the eggs produced
by these joint ventures. (See "Management's Discussion and Analysis -
Liquidity and Capital Resources"). The Company generally purchases its
shell eggs from a large number of producers including its joint
ventures, located in the general vicinity of the Company's processing
plants and distribution centers. During fiscal 1995 the Company
purchased 52.0% of the total eggs purchased from its own joint
ventures; and 10.5% from Braswell Milling in North Carolina. During
fiscal 1994 and 1993, respectively, the Company purchased 9.7% and
21.1% from Bowman Egg Farms; 13.2% and 21.1% from Braswell Milling and
10.9% and 12.0% from Agri-
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General. The remaining 37.5%, 38.7%, 45.9% of the eggs marketed by the
Company were purchased from a large number of other producers located
in the general vicinity of the Company's plants. For the fiscal years
1995, 1994 and 1993 no other single independent producer amounted to
more than 10% of the Company's egg purchases.
4) Patents, trademarks, licenses, franchises held - None.
5) There are no significant seasonal effects on the Company's consolidated
business.
6) As a result of the Company's ability to turn its resale inventory 30
times during the fiscal year ended January 28, 1995 and maintain its
outstanding average receivables at the thirty-two (32) day level, the
Company's current need for additional working capital arises
principally when egg markets experience sharp increases, as well as
when unit sales expand during certain periods of the year.
The Company does not maintain large amounts of inventory to meet
customer requirements nor does it provide extended payment terms to its
customers.
7) During the fiscal years ended January 28, 1995, January 29, 1994 and
January 31, 1993, sales to the Company's major customer were 9.5%,
10.4% and 11.2% respectively of consolidated sales; and sales to the
next leading customer were 4.2%, 4.6% and 4.8%, respectively, of
consolidated sales.
Although the Company's relationships with many of its major customers
are long standing, the Company generally does not have contracts with
its customers and, accordingly, such customers have no legal obligation
to continue purchasing from the Company. The Company believes that its
relationships with its customers are good and that the loss of one of
its major customers would have only a temporary adverse effect on its
business. During the fiscal year ended January 28, 1995, approximately
59.6% of Company's total sales were made to about 1,880 institutional
customers located in the states of Florida, Georgia, Pennsylvania, New
Jersey, New York, Washington D.C. and Maryland. During fiscal years
ended January 29, 1994 and January 31, 1993, these sales amounted to
51% and 52%, respectively.
8) The Company has no backlog of orders.
9) Government contracts subject to renegotiation or termination - None.
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10) The shell egg industry is both highly competitive and comprised of a
large number of competing entities. The Company's management believes
that the Company is a significant factor in shell egg marketing on the
Eastern Seaboard. The Company's lines of business other than its shell
egg line of business are also highly competitive industries comprised
of a large number of competing entities. The Company's management does
not believe that the Company is a significant factor in any of its
nonshell egg lines of business.
11) The Company had no expenditures for research and development during
the fiscal years ended January 28, 1995, January 29, 1994 and January
31, 1993.
12) The Company has not had to make any material expenditures in
connection with compliance with environmental regulations.
13) During fiscal 1995 the Company (including its wholly-owned
subsidiaries) had 310 employees. It had 282 and 374 employees at the
end of fiscal years 1994 and 1993, respectively.
d) Virtually all of the Company's sales have been domestic for the current and
past two fiscal years.
ITEM 2 - Description of Property
-----------------------
<TABLE>
<CAPTION>
Location Owner/Tenant Facilities
-------- ------------ ----------
<S> <C> <C>
1. Miami, Owner Plant complex comprising approximately 10,125
Florida sq. ft. of land and improvements. Currently,
the facility is not being utilized and is
being held for sale.
2. Hawthorne, Owner A 203 acre farm complex consisting of 25
Florida acres of lakefront property including three
residences; one of 3,350 sq. ft. and two of
1,560 sq. ft. each; 4.85 acres comprising a
5,041 sq. ft. feed mill complex including
storage tanks, a warehouse and its own
offices; and a 15,400 sq. ft. refrigerated
facility. During the first quarter of fiscal
1993 all operations were discontinued and the
property was listed for sale.
</TABLE>
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<TABLE>
<S> <C> <C>
3. Burgaw, Owner Plant complex comprising approximately
North Carolina 18,300 sq. ft. of land and improvements of
which 12,100 sq. ft. is for general
operations, 5,200 sq. ft. is refrigeration,
and 1,000 sq. ft. is office space. The
Company was a tenant of Pender County
Industrial Development Corporation under
purchase option lease. During the 1993 fiscal
year the debt on this facility was paid in
full and as such title to the property was
deeded over to the Company by the Pender
County Industrial Development Corporation.
This facility is adequate and being fully
utilized.
4. Jarratt, Owner Plant complex comprising approximately
Virginia 17,500 sq. ft. on 5.72 acres of land of
which 12,000 sq. ft. is used for warehousing
and distribution, 4,400 sq. ft. is
refrigeration, and 1,100 sq. ft. is office
space. This facility is adequate and being
fully utilized.
5. Orlando, Tenant Plant complex comprising approximately 7,200
Florida sq. ft. of warehouse. The Company is a
tenant at a monthly rental of $1,590 under
a lease expiring on May 31, 1995. This
facility is adequate and being fully
utilized.
6. Spring Grove, Tenant Plant complex comprising approximately 26,000
Pennsylvania sq. ft. of processing plant, warehouse and
offices. The company has a 15 year lease at a
monthly rent of $7,500.00. This facility is
adequate and being fully utilized.
7. New Holland, Tenant Plant complex comprising approximately 12,466
Pennsylvania sq. ft. of warehouse, coolers and offices.
The Company is a tenant at a monthly rental
of $3,405 under a lease expiring on August
31, 1995. This facility is adequate and being
fully utilized.
</TABLE>
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<TABLE>
<S> <C> <C>
8. Fort Lauderdale, Tenant Plant complex comprising 15,556 sq. ft.
Florida including the Company's executive and
administrative offices and its Certified
Poultry & Egg Foodservice operations. The
plant includes 5,000 sq. ft. of refrigerated
space, 4,608 sq. ft of dry warehouse space
and 5,942 sq. ft. of operations and
administrative offices. The Company is a
tenant, at a monthly rental of $8,146, under
a lease expiring in May 31, 1999. This
facility is adequate and is being fully
utilized.
9. Atlanta, Owner Plant complex comprising approximately 5,000
Georgia sq. ft. of coolers, freezers and office space
on 2.5 acres of land. This facility is
adequate and is being fully utilized.
10. Port Richey, Tenant Plant complex comprising approximately 30,000
Florida sq. ft. of which 10,000 sq. ft. is
refrigerated, 7,000 refrigerated dock area,
11,500 sq. ft. dry warehouse and 1,500 sq.
ft. is office space. The Company is a tenant
at a monthly rent of $5,600 until December
1994 and $9,000 a month until December 1996.
This facility is adequate and being fully
utilized.
</TABLE>
ITEM 3 - Legal Proceedings
-----------------
There are no material pending legal proceedings (other than ordinary routine
litigation incidental to the business) to which the Company or any of its
subsidiaries is a party or of which any of their property is the subject.
ITEM 4 - Submission of Matters for Vote of Security Holders
--------------------------------------------------
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report, through the solicitation of
proxies or otherwise.
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EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of the executive officers of the Company as of January
28, 1995:
<TABLE>
<CAPTION>
Name Age Position and Date Commenced
---- --- ---------------------------
<S> <C> <C>
Malvin Avchen 61 Chief Executive Officer since April 1990
Gustave Minkin 63 President and Secretary since April 1990
Saul Zalka 60 Chief Operating Officer since April 1990
Vance Weibley 58 Executive Vice President since April 1990
Syed Jafri 50 Treasurer since April 1990
</TABLE>
Set forth below is a biographical description of each executive officer
based on information supplied by them:
Mr. Malvin Avchen served as Treasurer from 1969 to April 1990, and as a
Director of the Company since 1972. Mr. Avchen has been a Certified Public
Accountant since 1963 and is currently a member of the American Institute of
C.P.A.'s and Florida Institute of C.P.A.'s.
Mr. Gustave Minkin served as Vice President of Marketing from 1970 to April
1990, and as Director of the Company since 1972.
Mr. Saul Zalka served as Vice President of Institutional operations from
1970 to April 1990 and as a Director of Company since 1981.
Mr. Vance Weibley served as Vice President of Egg operations from 1971 to
April 1990.
Mr. Syed Jafri served as Controller from 1975 to present.
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PART II
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ITEM 5 - Market for Registrant's Common Stock and Related
------------------------------------------------
Stockholders' Matters
---------------------
a) The Company's Common Stock is listed and traded on the American Stock
Exchange under the ticker symbol SNI. The sales prices for the Common Stock
for each full quarterly period within the two most recent fiscal years were
as follows:
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1994
------------------------------- -------------------------------
Cash Cash
Quarter High Low Dividends Quarter High Low Dividends
<S> <C> <C> <C> <C> <C> <C> <C>
1 $4.25 $2.88 None 1 $3.38 $3.00 None
2 4.75 2.88 None 2 3.13 2.63 None
3 6.50 3.75 None 3 2.88 2.63 None
4 6.88 5.13 None 4 2.94 2.63 None
</TABLE>
b) There were approximately 192 stockholders of record on April 3, 1995. This
total does not include stockholders listed with brokers or their agents in
street name.
c) As of April 3, 1995, both the high and low sales prices for the Common
Stock were $5.00.
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ITEM 6 - SELECTED FINANCIAL DATA
-----------------------
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Years Ended
-----------------------------------------------------------------------
January 28, January 29, January 31, January 31, January 31,
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales $69,351,205 $66,098,210 $61,255,226 $68,428,646 $70,543,418
Earnings (Loss) Before
Income Taxes (74,078) 237,950 (270,301) 371,337(b) (370,961)
Net (Loss) Earnings (82,078) 221,950 (333,001) 354,337(b) (352,761)
Net (Loss) Earnings per
share (a):
Primary (.06) .15 (.23) .24(b) (.22)
Fully Diluted (.06) .15 (.23) .22(b) (.22)
Shares Used in
Computation(a):
Primary 1,437,165 1,477,260 1,435,633 1,467,493 1,580,228
Fully Diluted 1,437,165 1,505,000 1,435,633 1,580,420 1,580,228
BALANCE SHEET
DATA AT YEAR END (c):
Working capital 5,166,343 5,058,817 2,309,211 4,536,949 3,296,938
Working capital ratio 2.01 to 1 1.97 to 1 1.47 to 1 2.03 to 1 1.67 to 1
Total assets 16,287,880 14,011,244 10,852,814 12,494,872 10,602,375
Long-term obligations 8,111,882 5,400,235 2,880,291 4,821,238 2,818,767
Stockholders' equity 3,063,841 3,086,968 2,812,018 3,148,097 2,740,760
Net book value per common
share (a) 2.13 2.15 1.96 2.19 1.91
Market price per common
share (a) 5.125 2.88 4.13 4.13 2.42
Shares outstanding at year
end (a) 1,438,952 1,435,702 1,435,702 1,435,652 1,435,689
</TABLE>
(a) Adjusted to reflect 3 for 2 stock split on July 26, 1991.
(b) Includes after tax non-recurring expense of $47,088 or $.03 per share.
(c) There were no cash dividends paid during the five year period ended January
28, 1995
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ITEM 7 - 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 and notes thereto appearing elsewhere herein.
COMPANY PROFILE:
Sun City Industries, Inc. (the "Company"), is a leader in the processing and
marketing of eggs along the eastern seaboard of the U.S.
The Company, which began in 1949 as an egg processing and marketing company, now
provides foodservice marketing and distribution 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 internal sales growth and
the acquisition of related companies in the foodservice distribution business.
In 1990 the Company began its expansion as a foodservice distributor that now
includes four centers in Florida covering the Orlando, Disney World area, the
West Coast of Florida, the center of Florida and Southeast Florida from Key West
to West Palm Beach. In addition, the Company has operations that distribute to
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 and cruise ship
lines.
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 on
the State of Florida.
Years Ended January 28, 1995, January 29, 1994 and
January 31, 1993
SALES:
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Sales for the fiscal years 1993 through 1995 were as follows:
<TABLE>
<CAPTION>
% Increase
Year Sales (Decrease)
---- ----------- ------------
<S> <C> <C>
1995 $69,351,205 4.9%
1994 66,098,210 7.9%
1993 61,255,226 (10.5%)
</TABLE>
For the fiscal year ended January 28, 1995, consolidated sales increased $3.3
million or 4.9%. Sales rose $12.0 million as a result of reporting sales for
Gulf Coast Foodservice for a full fiscal year versus two months of the prior
year, offset by decreases of $4.4 million in egg division sales, reflecting a
5.5% drop in unit sales and a 6.6% decrease in average egg market prices.
During fiscal 1995, the Company closed its New Jersey distribution center,
eliminated that center's non-profitable customers and combined the remainder of
their customer base with its New Holland, PA division, resulting in a $4.0
million decrease in consolidated sales.
For the fiscal year ended January 29, 1994, consolidated sales amounted to $66.1
million, or 7.9% above the prior fiscal year. Increases of $2.8 million in the
egg division, aided by stronger egg markets, and $2.0 in the foodservice
division which included Gulf Coast Foodservice, Inc. for two months and modest
growth in other areas being the key factors.
For the fiscal year ended January 31, 1993, consolidated sales declined $7.2
million, or 10.5%, from the prior fiscal year. Of this amount, $5.2 million
resulted from a 12.2% decrease in egg market prices which in turn resulted in
lower egg selling prices. The remaining $2.0 million resulted from a decrease in
unit sales which were impacted by negative economic conditions that existed
during the second half of the fiscal year (see "NET EARNINGS").
COST OF SALES:
Cost of sales include product cost, warehousing, distribution and egg processing
costs. Cost of sales increased approximately 3.8% in fiscal 1995 and 8.5% in
fiscal 1994. Cost of sales dropped 10.4% for fiscal 1993. These increases and
decreases were generally in line with the increases and decreases in sales. The
rate of change is influenced by the Company's overall customer and product mix
shifting from primarily an egg company to that of a foodservice company but
especially the effect of egg market prices which fluctuate significantly from
year to year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses as a percentage of sales for fiscal
1995, 1994 and 1993, were 6.8%, 5.9% and 7.2%,
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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 fiscal 1995 these costs increased due to the
additional selling, general and administrative expenses directly related to the
new Gulf Coast subsidiary. 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 increase to those higher
levels typically experienced in the foodservice industry.
The decrease in selling, general & administrative for fiscal 1994 amounted to
$542,447 or 12.2%. This reduction resulted from the Company's efforts initiated
at the end of fiscal year 1993 to reduce home office administrative overhead
which included executive salaries and the number of administrative personnel.
The increase for fiscal 1993 was for the most part a direct result of the
increased costs associated with the additional businesses acquired during fiscal
1992 while the Company's consolidated sales were decreasing.
INTEREST EXPENSE:
Interest expense increased $229,960 in fiscal 1995. The higher interest costs
result from the debt associated with the Gulf Coast acquisition, fixed asset
acquisitions which were financed, additional working capital requirements and a
1.5% increase in average interest rates experienced during 1995 versus 1994.
Interest expense for fiscal 1994 rose $32,092 to $422,087 reflecting a slightly
higher level of borrowing during most of the year. The increase was brought
about with the Company's increased participation in its Joint Venture Program
and two months of debt service associated with the new Gulf Coast Foodservice
acquisition made in December 1993.
During fiscal 1993 interest expense was $389,995, a decrease of $87,937 or 18.4%
below fiscal 1992. This was the result of a reduction in the amount of debt as
well as lower interest rates throughout most of the year.
NON-RECURRING LOSSES:
The Company incurred a net non-recurring loss of $28,239 for the fiscal year
ended January 31, 1993. During fiscal 1993, the Company completed the sale of
three properties for a gain of $724,000. This non-recurring gain was offset by
certain non-recurring losses. The Company bought out two long-term employment
contracts for a total cost of $501,000. Additionally, the Company closed some
of its Hawthorne, Florida operations resulting in a
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loss of $169,000. Losses of $82,000 were also incurred as a result of
consolidating two foodservice operations into one South Florida location.
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 carryforwards. 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 carryforwards of approximately $1,731,000 expiring in the years 2005
through 2008.
NET EARNINGS:
Net earnings decreased by $304,000. The operating profits of the Foodservice
division, led by Gulf Coast Foodservice improved 63% over the previous year on a
23.2% increase in sales. However, these positive results were more than offset
by the negative year experienced in our troubled egg division. During the year
results from the egg production joint ventures turned negative and by year end
the Company incurred losses of $105,000 and was forced to reduce carrying values
of its joint venture investment by an additional $210,000. Coupled with these
losses were a 30% decrease in results from the egg processing operations and
higher interest rates.
As a result of the benefits derived from the new egg production joint venture
programs implemented during late fiscal 1993, the positive results as a
consequence of the acquisition of Gulf Coast Foodservice in December 1993 and
the reduced selling, general and administrative expense, the Company's net
earnings improved $554,951 from a net loss of $333,001 in fiscal 1993 to a net
profit of $221,950 in fiscal 1994.
When the Company began fiscal 1993, management expected to repeat fiscal 1992's
positive performance. Management was optimistic since it had just turned the
Company around after three consecutive years of losses. However, during fiscal
1993 operating profits in the egg division declined 31%, directly related to
poor egg supply (quantity, quality and price) and taken together with an 18%
reduction in profits from the foodservice division (the result of difficulties
experienced in the Company's South Florida operations; namely Hurricane Andrew,
generally poor economic conditions in the South Florida foodservice industry as
well as that of the customers served), the net loss amounted to $333,001 as
compared to net earnings of $354,337 for the prior fiscal year.
16
<PAGE>
<TABLE>
<CAPTION>
EARNINGS (LOSS) PER COMMON SHARE:
Fiscal Year 1995 1994 1993
- -------------------------------------------------------------------
<S> <C> <C> <C>
(Loss) Earnings per common and
common equivalent share ($.06) $ .15 $(.23)
Average shares used in the
computation 1,437,165 1,477,260 1,435,633
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES:
The Company intends to expand its market share in the foodservice industry
through the acquisition of small to mid-sized foodservice companies that have
strong management teams, are situated in strategic locations and will enable the
Company to expand its product lines. Additionally, the Company expects to
increase sales through profitable internal growth.
In order to accomplish this goal, the Company has decided to create a program
with its egg division whereby it will continue its status as an egg marketing
entity but at the same time will begin to divest itself of its egg production
joint ventures and seek alternatives of either divesting or selling off its egg
processing operations. If successful the Company will eliminate the cause of its
reduced earnings and negative cash flow and permit itself the opportunity of
increasing earnings and cash flow through the operation of its marketing and
distribution businesses.
During fiscal 1995 the Company:
Completed the real estate joint venture in Spring Grove, PA whereby the Company
began operation of its new egg processing plant, with a total investment in
equipment and leasehold improvements of $800,000.
Completed its first private placement offering by raising $700,000 in five year
Senior Subordinated Convertible Debentures carrying a fixed 8% rate, convertible
at $3.25 per share.
Expanded its credit facility with its major lender from $6.5 million to $7.0
million. The credit facility is solely for the Company's increasing working
capital needs.
The Company's liquidity condition has been negatively impacted by the operations
of its egg division. However, management is contemplating a program whereby it
is considering 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
17
<PAGE>
and eliminate the negative results associated with its current operations.
During fiscal 1994 the Company:
Expanded its credit facility with its major lender from $5 million to $6.5
million and extended the term of the loan until March 30, 1998.
Completed the acquisition of Gulf Coast Foodservice, Inc. for an initial cash
payment of $796,895.
Increased its investment in the egg production joint ventures by $498,000.
Formed a real estate joint venture to construct a 26,000 square foot egg
processing plant in Spring Grove, PA, where the Company will be the sole tenant
under a 15 year lease. The Company has a 14.3% equity in the joint venture for
which it has invested $50,000.
Subsequent to year end:
On February 10, 1995 the Company completed its second private placement offering
by raising $700,000 in five year Senior Subordinated Convertible Debentures
carrying a fixed 9% rate. The debentures are convertible at $5.125 per share,
the then market price of the stock as of the date the transaction was completed.
On February 22, 1995, the Company expanded its credit facility with its major
lender from $7.0 million to $7.5 million in anticipation of the February 27,
1995 acquisition of Sheppard Distributors, Inc.
COMMITMENTS:
As of January 28, 1995, the Company had the no commitments for capital
expenditures.
ITEM 8 - Consolidated Financial Statements and Supplementary Data
--------------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report 21
Consolidated Balance Sheets 22
Consolidated Statements of Operations 23
Consolidated Statements of Stockholders' Equity 24
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Statements of Cash Flows 25
Notes to Consolidated Financial Statements 28
</TABLE>
All financial statement schedules are omitted because of the absence of the
conditions under which they are required, or because all information required to
be reported is included in the Consolidated Financial Statements or notes
thereto.
19
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors and Stockholders
Sun City Industries, Inc. and Subsidiaries
Fort Lauderdale, Florida
We have audited the accompanying consolidated balance sheets of Sun City
Industries, Inc. and Subsidiaries as of January 28, 1995 and January 29, 1994,
and the related statements of operations, stockholders' equity and cash flows
for each of the three years in the period ended January 28, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Sun City Industries, Inc. and
Subsidiaries as of January 28, 1995, and January 29, 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended January 28, 1995, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Fort Lauderdale, Florida
May 10, 1995
20
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
January 28, January 29, LIABILITIES AND January 28, January 29,
ASSETS 1995 1994 STOCKHOLDERS'EQUITY 1995 1994
- ------ ------------- ------------- -------------------- ------------ -------------
CURRENT ASSETS: CURRENT LIABILITIES:
<S> <C> <C> <C> <C> <C>
Cash and equivalents $ 453,608 $ 531,608 Accounts payable $3,850,901 $4,118,900
Accounts and trade notes Accrued expenses 495,244 507,714
receivable, less allow- Current portion of
ance for doubtful long-term debt
accounts of $178,600 and (Note D) 687,640 551,667
$178,800 in 1995 and Current portion of
1994, respectively capital lease(Note D) 62,805
(Note D) 6,053,550 6,285,576 Income taxes payable 8,000 16,000
Inventories (Note B and D) 2,645,785 2,345,759 ----------- -----------
Notes receivable- TOTAL CURRENT 5,104,590 5,194,281
current portion 13,545 12,384 LIABILITIES
Prepaid expenses 370,445 367,771 DEFERRED COMPENSATION
Investment in Joint PAYABLE (Note D) 444,160 329,760
Ventures 734,000 670,000
----------- ----------- LONG-TERM DEBT
TOTAL CURRENT ASSETS 10,270,933 10,213,098 (NoteD) 7,199,174 5,400,233
CAPITAL LEASE
PROPERTY, PLANT AND (Note D) 476,115
EQUIPMENT (Note D):
Land and Improvements 146,404 150,072 COMMITMENTS (Note F)
Buildings and Improvements 999,479 880,495 STOCKHOLDERS' EQUITY
Machinery and equipment 5,722,264 4,082,595 (Note G):
----------- ----------- Common stock, $.10 par
6,868,147 5,113,162 value 3,000,000 shares
authorized; 2,276,116
Less accumulated shares issued in 1995
depreciation 3,720,607 3,228,898 and 1994 227,612 227,612
----------- ----------- Capital in excess of
3,147,540 1,884,264 par value 1,070,286 1,070,286
Retained earnings 4,766,143 4,852,290
Properties held for ----------- -----------
sale 449,500 470,000 6,064,041 6,150,188
Long-term notes Less: Treasury stock
receivable 121,822 134,292 at cost, 837,164 and
Excess of purchase 840,414 shares in
price over fair 1995 and 1994, res-
assets acquired 1,240,501 450,053 pectively (2,682,200) (2,692,220)
value of net
Loan Receivable for
common stock sold to
OTHER ASSETS (Note C) 1,057,584 859,537 ESOP (Note K) (318,000) (371,000)
----------- ----------- ----------- -----------
Total Stockholders'
Equity 3,063,841 3,086,968
----------- -----------
TOTAL $16,287,880 $14,011,244 TOTAL $16,287,880 $14,011,244
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
January 28, January 29, January 31,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
SALES $69,351,205 $66,098,210 $61,255,226
COSTS AND EXPENSES:
Cost of sales 64,032,260 61,594,887 56,752,918
Selling, general and
administrative expenses 4,759,843 3,897,172 4,439,619
Interest expense 652,047 422,087 389,995
Other (income), net (18,867) (53,886) (85,244)
Non - recurring losses (Note H) 28,239
------------ ------------ ------------
TOTAL COSTS AND EXPENSES 69,425,283 65,860,260 61,525,527
(LOSS) EARNINGS FROM OPERATIONS
BEFORE INCOME TAXES (74,078) 237,950 (270,301)
PROVISION FOR INCOME TAXES (Note E): 8,000 16,000 62,700
------------ ------------ ------------
(LOSS) NET EARNINGS $ (82,078) $ 221,950 $ (333,001)
============ ============ ============
(LOSS) NET EARNINGS PER SHARE
(Note J):
(LOSS) EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ (.06) $ .15 $ (.23)
============ ============ ============
(LOSS) EARNINGS PER COMMON SHARE
ASSUMING FULL DILUTION $ (.06) $ .15 $ (.23)
============ ============ ============
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
<TABLE>
<CAPTION>
Common Stock Treasury Stock
------------------------------------ ------------------------------
Shares Capital in Retained Loan to
Outstanding Amount excess of par Earnings Shares Amount ESOP
----------- ------ ------------- -------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1992 2,276,116 $227,612 $1,070,286 $4,994,905 840,464 $2,667,706 $477,000
Purchase of Treasury Shares 16,000 74,001
Exercise of Stock Options (31,564) (16,050) (49,487)
Payment of ESOP loan (53,000)
Net Loss (333,001)
--------- -------- ---------- ---------- ------- ---------- --------
Balance, January 31, 1993 2,276,116 227,612 1,070,286 4,630,340 840,414 2,692,220 424,000
Payment of ESOP loan (53,000)
Net Income 221,950
--------- -------- ---------- ---------- ------- ---------- --------
Balance, January 29, 1994 2,276,116 227,612 1,070,286 4,852,290 840,414 2,692,220 371,000
Exercise of Stock Options (4,069) (3,250) (10,020)
Payment of ESOP loan (53,000)
Net Loss (82,078)
--------- -------- ---------- ---------- ------- ---------- --------
Balance, January 28, 1995 2,276,116 $227,612 $1,070,286 $4,766,143 837,164 $2,682,200 $318,000
========= ======== ========== ========== ======= ========== ========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
January 28, January 29, January 31,
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
(Loss) Net Earnings $ (82,078) $ 221,950 $ (333,001)
ADJUSTMENTS TO RECONCILE NET EARNINGS
(LOSS) TO NET CASH (USED IN) OR
PROVIDED BY OPERATING ACTIVITIES:
Depreciation 613,352 436,729 390,022
Amortization of excess of purchase
price over fair value of net assets
acquired 31,652 15,447 12,118
Provision for losses on accounts
receivable 123,549 18,456 126,622
(Gain) on sale of fixed assets (731,368)
Change in assets and liabilities
net of effects from acquisitions:
Decrease (increase) in accounts
and trade notes receivable 119,786 (973,071) 701,219
(Increase) decrease in
inventories (300,026) (85,586) 297,408
Decrease (Increase) in prepaid
expenses (2,674) (159,607) 23,398
Decrease in income tax refund
receivable 173,568
(Increase) in other assets (262,047) (362,910) (118,636)
(Decrease) increase in accounts
payable (611,577) (153,847) 93,568
(Decrease) increase in accrued
expenses (103,128) (6,602) (68,583)
(Decrease) increase in income
taxes payable (8,000) (24,412) 40,412
Increase in deferred compensation
payable 114,400 111,219 82,454
--------- ---------- ----------
TOTAL ADJUSTMENTS (284,713) (1,184,184) 1,022,202
NET CASH (USED IN) OR PROVIDED BY
OPERATING ACTIVITIES $(366,791) $ (962,234) $ 689,201
========= ========== ==========
</TABLE>
See notes to consolidated financial statements
24
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(CONTINUED)
<TABLE>
<CAPTION>
January 28, January 29, January 31,
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
NET CASH (USED IN) OR PROVIDED BY
OPERATING ACTIVITIES $(366,791) $(962,234) $ 689,201
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 52,523 810,381
Capital expenditures (949,100) (465,278) (558,233)
Payment for acquisitions (796,895)
--------- --------- ---------
NET CASH (USED IN) OR PROVIDED BY
INVESTING ACTIVITIES (949,100) (1,209,650) 252,148
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 762,479 2,396,677 287,500
Proceeds from subordinated debt 700,000
Repayments on notes receivable 100,474 7,848
Principal payments on notes payable (283,539) (463,183) (1,741,330)
Proceeds from loan receivable from 53,000 53,000 53,000
ESOP
Proceeds from exercise of options 5,951 17,923
Payment for purchase of treasury (74,001)
stock --------- --------- ---------
NET CASH PROVIDED BY OR (USED IN)
FINANCING ACTIVITIES 1,237,891 2,086,968 (1,449,060)
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH AND
EQUIVALENTS (78,000) (84,916) (507,711)
CASH AND EQUIVALENTS,
Beginning of year 531,608 616,524 1,124,235
CASH AND EQUIVALENTS, --------- --------- ---------
End of year $ 453,608 $ 531,608 $ 616,524
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for
Interest $ 652,047 $ 422,087 $ 383,167
========= ========= =========
Income taxes $ 17,000 $ 0 $ 20,756
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
25
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
(CONTINUED)
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
During fiscal 1995, the Company determined the final purchase price for the
business purchased in fiscal 1994. The Company signed a note payable in the
amount of $731,442 payable over the next five years.
During fiscal 1995, the Company entered into a capital lease agreement in the
amount of $555,374 for an egg processor.
During fiscal 1994, the Company purchased a business for cash and assumption of
liabilities as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $1,620,523
Cash paid (796,895)
----------
Assumption of liabilities $ 823,628
==========
</TABLE>
In addition, the Company agreed to pay the former Gulf Coast shareholders a
minimum of $200,000 based on the results of first year operations of the
acquired company. The amount will be determined during fiscal 1995 and paid
over a five-year period.
During 1993, the Company sold property for $200,000 as follows:
<TABLE>
<S> <C>
Sales price $ 200,000
Cash received (35,000)
----------
Mortgage receivable $ 165,000
==========
</TABLE>
See notes to consolidated financial statements.
A. Significant Accounting Policies:
--------------------------------
26
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
1) Principles of Consolidation - The financial statements include the accounts
of Sun City Industries, Inc. and its subsidiaries (the "Company"). All
material intercompany profits, transactions and balances have been
eliminated.
2) Cash and Equivalents - Cash and equivalents include cash on hand and short-
term investments purchased with a maturity of three months or less.
3) Inventories - All inventories are stated at the lower of cost (first-in,
first-out method) or market.
4) Investment in Joint Ventures - Investments in the Company's egg producing
joint ventures are recorded at cost. Amounts received as distributions of
the operations of these joint ventures are recorded as recoveries of such
cost. Any gains from the final settlement of these joint ventures are
recorded only after all cost is recovered; any losses are accrued at the
time such losses are reasonably estimatible. These joint ventures generally
have lives of approximately two years.
5) Property, Plant and Equipment - Property, plant and equipment are stated at
cost. Depreciation is computed principally on the straight-line method over
the estimated useful lives of the assets as follows:
Land improvements 10 to 20 years
Buildings 17 to 33 1/3 years
Building improvements 3 to 20 years
Machinery and equipment 3 to 20 years
6) Excess of Purchase Price over Fair Value of Net Assets Acquired - The
excess of the purchase price over the fair value of the tangible and
identifiable net assets acquired is being amortized over periods from
twenty to twenty-five years using the straight-line method.
7) Income Taxes - The Company recognizes certain income and expenses in
different periods for financial reporting and income tax purposes.
During fiscal 1994, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes, effective
February 1, 1993. Previously, the Company
27
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
had accounted for income taxes based on Statement of Financial Standards
No. 96. Adoption of SFAS 109 had no effect on the Company's fiscal 1994
operations or financial position.
8) Change in Accounting Period - During 1994 the Company changed its
accounting period from a year ending January 31 to 13 four week accounting
periods ending on the Saturday nearest to January 31.
9) Reclassification in Prior Period Statements - Certain reclassifications of
prior period amounts have been made to conform with the current reporting
presentation.
B. Inventories:
------------
The major components of inventory are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Butter, dairy and related products $2,173,292 $1,923,792
Eggs and packaging materials 455,168 396,290
Layer flocks, feed and miscellaneous 17,325 25,677
---------- ----------
Total $2,645,785 $2,345,759
========== ==========
</TABLE>
28
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
C. Other Assets:
-------------
Other assets consist of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Officers' Life Insurance $ 620,155 $475,940
Organizational Costs 125,420 147,477
Non-compete Costs 30,061 40,088
Recoverable Deposits 29,335 30,604
Prepaid Lease Costs 28,586 35,183
Other 224,027 130,245
---------- --------
Total $1,057,584 $859,537
========== ========
</TABLE>
The Company pays the premiums on certain life insurance policies that insure the
lives of key executives and are payable to the officer's designated
beneficiaries in the event of their deaths. The policies, with total face amount
of $1,660,000 have been assigned to the Company to the extent necessary to repay
all premiums. The above officers' life insurance is net of a $300,000 loan
against the policies.
D. Debt and Capital Leases:
------------------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
$6,500,000 line of credit; expires
March 1998. Collateralized by the
Company's accounts receivable,
inventory and machinery and
equipment; interest at 2.25% over
prime (10.75% at January 28, 1995). $5,480,000 $4,966,666
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Mortgage note payable, interest at
9.5%. Due in April 1995,
collateralized by property with
a carrying value of approximately
</TABLE>
29
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
<TABLE>
<S> <C> <C>
$408,000 at January 28, 1995. 262,500 337,500
Notes payable, interest at 9.5%. Due
in installments through October 1997.
Collateralized by machinery and
leasehold improvements with a carrying
value of approximately $200,000 at
January 28, 1995. 150,084 195,969
Notes payable to former Gulf Coast
shareholders interest at 7.75%. Due
in equal installments over the next
five years. 931,442 200,000
Notes payable, interest at 8.0%.
Due in installments through
December 1996. Collateralized by
computer system with a carrying
value of $30,000 at January 28, 1995. 28,055 -
Notes payable, bearing interest
between 7.2% and 8.77%. Due in
installments through April 1998.
Collateralized by trucks with
a carrying value of $205,000
at January 28, 1995. 194,337 107,580
Notes payable, interest at prime
lending rate plus 1.5% (10.0% at
January 28, 1995). Due in
installments through December 1998.
Collateralized by machinery and
equipment with a carrying value of
$75,000 at January 28, 1995. 45,011 59,525
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Notes payable, bearing interest at
7% to 9.5%. Due in installments
through December 1995. Collateralized
by layer flocks with a carrying value
of $150,000. 95,385 84,662
Five year, Senior Subordinated
Convertible Debentures, interest
at 8%. Convertible into common
stock at $3.25 per share. 700,000 -
</TABLE>
30
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
<TABLE>
<S> <C> <C>
---------- ----------
Total debt 7,886,814 5,951,902
Less current portion 687,640 551,667
---------- ----------
Total long-term debt $7,199,174 $5,400,235
========== ==========
</TABLE>
The above mortgage and line of credit contain certain restrictive covenants, the
more significant of which require the Company to maintain certain minimum
levels of working capital, net worth and net tangible assets. During fiscal
1994, the line of credit facility was expanded from $5 million to $6.5 million
and the term was extended to March 30, 1998.
The aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
Fiscal year ending
------------------
<S> <C>
1996 687,640
1997 385,962
1998 241,093
1999 5,682,169
2000 and thereafter 889,950
----------
Total $7,886,814
==========
</TABLE>
The Company has a commitment under a capitalized lease obligation relating to
certain egg processing equipment. Future minimum lease payments under the
capitalized lease are summarized below. The interest rate impicit in the lease
commitment is 9%.
<TABLE>
<CAPTION>
Fiscal year ending
------------------
<S> <C>
1996 $108,926
1997 108,926
1998 108,926
1999 108,926
2000 108,926
Thereafter 63,540
--------
Total minimum lease payments 608,171
Less amount representing interest (69,251)
--------
Total obligation under
capital lease 538,920
Less current maturities (62,805)
--------
Long-term obligation under
capitalized lease $476,115
========
</TABLE>
31
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
E. 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 carryforwards. A
valuation allowance is recognized to reduce net deferred tax assets to the
amounts that are more likely than not to be realized.
The deferred tax balance at January 28, 1995 consisted of:
<TABLE>
<CAPTION>
Assets Liabilities Total
------ ----------- -----
<S> <C> <C> <C>
Excess tax amortization for
non-compete agreement $117,900 $117,900
Tax loss carryforwards 588,700 588,700
Accelerated depreciation for
tax purposes (174,300) (174,300)
Allowance for bad debts 60,800 60,800
Capitalization for tax
purposes of inventory related
costs 46,600 46,600
Deferred compensation 151,000 151,000
Investment in Joint Ventures (58,900) (58,900)
Other (2,200) (2,200)
Less: Valuation allowance (729,600) (729,600)
Total $235,400 ($235,400) $0
========= ========== =========
</TABLE>
The deferred tax balance at January 29, 1994 consisted of:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Excess tax amortization for
non-compete agreement $124,700 - $124,700
Tax loss carryforwards 626,100 - 626,100
</TABLE>
32
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Accelerated depreciation
for tax purposes - $(166,400) $(166,400)
Allowance for bad debts 60,800 - 60,800
Capitalization for tax purposes
of inventory related costs 28,700 - 28,700
Deferred compensation 112,100 - 112,100
Less: Valuation allowance (786,000) - (786,000)
-------- --------- ---------
Total $166,400 $(166,400) $ 0
======== ========= =========
</TABLE>
The valuation allowance as of January 28, 1995 and January 29, 1994 was $729,600
and $786,000, respectively.
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
State:
Current $8,000 $17,000 $62,700
------ ------- -------
Total $8,000 $17,000 $62,700
====== ======= =======
</TABLE>
Reconciliations of the effective income tax rates to the U.S. statutory rates
are summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Statutory rate (34.0%) 34.0% (34.0)%
(Increase) reduction in
valuation allowance 26.0 (34.8)
Net operating loss
carryovers 39.7
Amortization of excess of
purchase price over fair
value of net assets
acquired 10.2 (2.8) 1.9
State income taxes 7.1 4.4 15.3
Other 1.5 0.3 0.3
------ ------ ------
Total 10.8% 6.7% 23.2%
====== ====== ======
</TABLE>
33
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
The Company estimates that, after filing its 1995 tax return, it will have tax
loss carryforwards of approximately $1,731,000 expiring in the years 2005
through 2008.
34
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
F. Commitments:
------------
Lease Commitments - Aggregate minimum rental commitments relating to operating
leases at January 28, 1995 are $3,893,511. Minimum annual rentals are payable as
follows:
<TABLE>
<CAPTION>
Delivery
Buildings and other
Fiscal Years ending and land equipment Total
- ------------------- --------- --------- -----
<S> <C> <C> <C>
1996 $323,672 $528,700 $852,372
1997 277,752 434,731 712,483
1998 187,752 365,097 552,849
1999 187,752 266,935 454,687
2000 997,752 323,368 1,321,120
---------- ---------- ----------
Total $1,974,680 $1,918,831 $3,893,511
========== ========== ==========
</TABLE>
The above amounts include rentals under renewal options where management
contemplates, with a high degree of assurance, that the option will be
exercised. Lease terms require, in certain instances, that the Company pay
property taxes, insurance, mileage charges and maintenance cost on the leased
property. Rent expense for the years ended January 28, 1995, January 29, 1994
and January 31, 1993 was $917,422, $912,773 and $1,050,650, respectively,
excluding mileage charges and other executory costs. These expenses are
included in selling, administrative, and general expenses in the accompanying
consolidated statements of operations.
G. Stockholders' Equity:
---------------------
1) 1982 Stock Option Plan -
In June 1982, the stockholders approved an incentive stock option plan for
officers, directors, and key employees. Under the plan, options for 262,500
common shares may be granted to purchase common shares at no less than 100%
of the fair market value at date of grant. Options terminate, except to a
limited extent, in the event of retirement, disability, death of the
optionee or termination of employment. As of January 28, 1995, January 29,
1994 and January 31, 1993, 262,500 shares of common stock were reserved
under the plan.
Options granted under the plan are exercisable at various amounts per share
and become exercisable at the rate of 20%
35
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
each year beginning one year after date of grant and expire ten years after
date of grant.
Activity relating to this option plan is summarized as follows:
<TABLE>
<CAPTION>
Price per
Shares Share
------ ---------
<S> <C> <C>
Outstanding at January 31, 1992 256,500
Exercised
Canceled
Outstanding at January 31, 1993
Granted
Exercised
Canceled
Outstanding at January 29, 1994
Granted
Exercised
Canceled
Outstanding at January 28, 1995
</TABLE>
At January 28, 1995, options for 166,300 shares were exercisable.
2) 1994 Stock Option Plan -
In June 1994, the stockholders approved another incentive stock option plan
for officers, directors, and key employees. Under the plan, options for
225,000 common shares may be granted to purchase common shares at no less
than 100% of the fair market value at date of grant. Options terminate,
except to a limited extent, in the event of retirement, disability, death
of the optionee or termination of employment.
Options granted under the plan are exercisable at various amounts per share
and become exercisable at the rate of 20% each year beginning one year
after date of grant and expire ten years after date of grant.
36
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
As of January 28, 1995, 225,000 shares of common stock were reserved under
the plan; 75,000 options were granted at $3.875 per common share with a
grant date of June 23, 1994. During fiscal 1995 no options were canceled or
exercisable.
H. Non-Recurring Losses:
---------------------
The Company incurred a net non-recurring loss of $28,239 for the fiscal
year ended January 31, 1993. The Company completed the sale of three
properties for a gain of $724,000. This non-recurring gain was offset by
the following non-recurring losses:
The Company bought out two long-term employment contracts for a total of
$501,000. Additionally, the Company closed its Hawthorne, Florida
operations resulting in a loss of $169,000. Losses of $82,000 were also
incurred as a result of streamlining two foodservice operations into one
South Florida location.
I. Acquisitions:
-------------
Effective December 6, 1993 the Company acquired substantially all the
assets and liabilities of Gulf Coast Food Distributors, Inc. ("Gulf Coast")
which was accounted for by the purchase method of accounting. Gulf Coast is
a foodservice company serving a broad range of customers. Product lines
include produce, meats, seafood, dairy, groceries and paper products. The
initial purchase price consisted of the acquisition of $1,620,523 in assets
payable $796,895 in cash and the assumption of $823,628 in liabilities. The
results of operations of Gulf Coast are included in the consolidated
statements of operations from the date of acquisition.
The following unaudited pro-forma consolidated results of operations give
effect to the acquisition of Gulf Coast as though it had occurred on
February 1, 1992:
<TABLE>
<CAPTION>
Fiscal Years Ended 1994 1993
- --------------------------------------------------------------
<S> <C> <C>
Sales and operating revenues $77,206,693 $74,549,849
Net earnings (loss) $ 282,737 ($314,055)
Earnings (loss) per share:
Primary $ .19 ($.22)
Fully Diluted $ .19 ($.22)
</TABLE>
37
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
The unaudited pro-forma information is not necessarily indicative of
results of operations that would have occurred had the purchase been made
at February 1, 1992, or of future results of operations of the Company.
The initial purchase price was funded through borrowings under the
Company's revolving credit and term loan agreement. The Company was
obligated to pay an additional amount to the sellers determined at a rate
of $2 for every $1 of the first year's pre-tax profits of Gulf Coast during
the period ended December 3, 1994, such additional consideration being
subject to a minimum of $200,000 and a maximum of $700,000. Further
additional consideration above the amount of $700,000 is provided for, at
an amount of $1 for every $1 of the first year's pre-tax profits of Gulf
Coast in excess of $350,000. Based on adjusted earnings, the Company was
required to pay an additional sum of $931,442 which will be paid over five
years (see note D). The excess of the purchase price over the fair value of
the tangible and identifiable intangible net assets acquired is being
amortized over a period of twenty-five years using the straight-line
method.
J. Net (Loss) Earnings Per Share:
------------------------------
Net (loss) earnings per common share and common equivalent share is based
on the treasury stock method computed by dividing net (loss) earnings by
the weighted average number of common shares outstanding including common
stock equivalents for dilutive stock options and average market prices.
The average shares used in calculating net (loss) income per common share
were 1,437,165, 1,477,260 and 1,435,633 for years ending January 28, 1995,
January 29, 1994 and January 31, 1993, respectively.
Common stock equivalents were excluded from the calculation of net loss per
shares for the years ending January 28, 1995 and January 31, 1993 because
the effect would have been antidilutive.
K. Employee Benefit Plans:
-----------------------
The Company has established an Employee Stock Ownership Plan ("ESOP") to
acquire share of the Company's stock for the
38
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
future benefit of its employees. The ESOP covers all permanent employees
who satisfied the age and length of service requirements. The Company
contributes, at the discretion of the Board of Directors a portion of its
net earnings annually. During each of the fiscal years 1995, 1994 and 1993,
the Company contributed $120,000 to the plan. During fiscal 1991, the
Company sold 187,500 shares of its common stock to the ESOP for $531,125
financed with a ten year $530,000 term loan with interest at 2.75% over
prime.
L. Segment Reporting and Significant Customers:
--------------------------------------------
The Company is principally engaged in the business of distributing basic
food products. Revenues from the Company's customers, which includes
national and regional supermarket chains and various United States military
installations, were as follows for the three fiscal years:
<TABLE>
<CAPTION>
Sales 1995 1994 1993
----- ---- ---- ----
<S> <C> <C> <C>
Egg division 40.4% 47.9% 48.3%
Foodservice 59.2 51.7 51.0
Other marketing .4 .4 .7
</TABLE>
During fiscal years ended January 28, 1995, January 29, 1994 and January
31, 1993, sales to the Company's major customer were 9.0%, 10.4% and 11.2%
respectively, of consolidated sales.
M. Subsequent Event:
-----------------
On February 27, 1995 the Company acquired the business and assets of
Sheppard Distributors, Inc. ("Sheppard") of Auburndale, Florida for a
purchase price of $900,000 together with an assumption $861,698 of
designated liabilities.
A down payment of $1,350,000 was made at closing, subject to adjustment. An
additional purchase price component is to be determined based on a multiple
of pre-tax net profits of the acquired business during the three years
after the acquisition, payable in annual increments of twenty-five percent
of the recomputed net aggregate price at the end of the first and second
years after closing, fifty percent of the recomputed net aggregate price at
the end of the third year after closing and the balance payable one year
after the final computation, secured by fixed assets and guaranteed by the
39
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
Company. Sheppard's assets totalled $1.8 million with annual sales totaling
$17.8 million during their fiscal year ended October 1, 1994.
40
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993
-----------------------------------------------------------------
The following unaudited pro-forma consolidated results of operations give
effect to the acquisition of Sheppard as though it had occurred on
February 1, 1993:
<TABLE>
<CAPTION>
Fiscal Years Ended 1995 1994
-------------------------------------------------------------
<S> <C> <C>
Sales and operating revenues $87,145,637 $82,844,261
Net earnings $77,078 $444,905
Earnings per share:
Primary $.05 $.30
Fully Diluted $.05 $.30
</TABLE>
The unaudited pro-forma information is not necessarily indicative of
results of operations that would have occurred had the purchase been made
at February 1, 1993, or of future results of operations of the Company.
On April 6, 1995 the Company completed its second private placement
offering by raising $700,000 in five year Senior Subordinated Convertible
Debentures carrying a fixed rate of 9%. The debentures are convertible into
common stock at $5.125 per share.
41
<PAGE>
ITEM 9 - Changes in and Disagreements with Accountants on
------------------------------------------------
Accounting and Financial Disclosures
------------------------------------
None.
PART III
--------
Pursuant to General Instruction G (3) of Form 10-K, the information called
for by Items 10,11,12, and 13 of this Part III is hereby incorporated by
reference from the Registrant's definitive proxy statement relating to
Registrant's Annual Meeting of Stockholders to be held on June 24, 1993
(hereinafter referred to as the "Proxy Statement"). The aforementioned
information shall be set forth under the following captions in the Proxy
Statement:
ITEM 10 - Directors and Executive Officers of the Registrant
--------------------------------------------------
See "Election of Directors", "Nominees; Current Board Members" "Executive
Officers", and "Compliance with Section 16(a) of the Exchange Act".
ITEM 11 - Executive Compensation
----------------------
See "Executive Compensation and Other Information: and "Information
Concerning the Board of Directors and its Committees - Directors' Compensation".
ITEM 12 - Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
See "Certain Information as to Security Ownership", "Security Ownership of
Management", and "Outstanding Stock and Voting at the Meeting".
ITEM 13 - Certain Relationships and Related Transactions
----------------------------------------------
See "Certain Relationships and Related Transactions".
42
<PAGE>
PART IV
-------
ITEM 14a - Exhibits, Financial Schedules and Reports on Form 8-K
-----------------------------------------------------
The following documents are filed with, and as part of, this Annual Report
on Form 10-K.
(1) Consolidated Financial Statements
The Index to the consolidated financial statements has been
included as part of Item 8 hereof.
(2) Exhibits
(a) See Exhibits Index below.
EXHIBITS INDEX
--------------
No.(3) Articles of Incorporation and By-laws.
There have been no changes in the articles of incorporation or by-law
since our filing with the Securities and Exchange Commission,
Washington, D.C. under the Securities Act of 1933 in the June 1966
registration statement, 2-24901.
No.(4) Instruments defining the rights of security holders, including
indentures.
There are no obligations in existence that would require disclosure of
such instruments.
No.(9) Voting trust agreement.
No.(10) Material contracts.
During the current year, there were no material contracts.
No.(11) Statement re: Computation of per share earnings.
Included in our 1995 Annual Report on Form 10-K, pages 13 and 18, and
page 40 (note J) as filed with the Securities and Exchange Commission.
No.(12) Statement re: Computation of ratios.
The Company has no requirement for the reporting of such ratios.
43
<PAGE>
No.(13) Annual report to security holders, Form 10-Q or quarterly report to
security holders.
All such reports have been filed with the Securities and Exchange
Commission, Washington, D.C. for all periods, including the year ended
January 28, 1995.
No.(16) Letter re: Changes in certifying accountant.
There have been no letters regarding change in certifying accountant.
No.(18) Letter re: Change in Accounting Principles.
There have been no changes in accounting principles.
No.(19) Previously Unfiled Documents.
There are no unfiled documents.
No.(22) Subsidiaries of the Registrant.
Filed as Exhibit number 1, Form 8, Amendment number 2, fiscal year
ended January 31, 1986.
No.(23) Published report regarding matters submitted to vote of security
holders.
All such reports requiring vote by security holders are filed with the
Securities and Exchange Commission, including in our Annual Proxy for security
holders.
At the last annual meeting of security holders, the vote was for the
election of the Board of Directors and appointment of Auditors, both
of which were uncontested.
44
<PAGE>
No.(24) Consents of Experts and Counsel.
All such consents have been filed with the Securities and Exchange
Commissions as follows:
Auditors: Each Annual Report, Form 10-K and the Registration
Statements of June 1966 and February 1972.
Counsel: Included in the Registration Statements of June 1966 and
February 1972.
No.(25) Power of Attorney.
Power of attorney has not been used in any filing with the Securities
and Exchange Commission.
No.(28) Additional Exhibits.
There are no additional exhibits to be filed.
No.(29) Information from reports furnished to state insurance regulatory
authorities.
There are no such reports required to be filed.
ITEM 14b - Reports on Form 8-K
-------------------
On February 27, 1995 the registrant filed Form 8-K for the acquisition of
the business assets of Sheppard Distributors, Inc.
45
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, Sun City Industries, Inc. has duly caused this report to be signed
on its behalf by the undersized, thereunto duly authorized.
May 12, 1995 _______________________
Malvin Avchen
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ------------------ ----------------------- --------------
<S> <C> <C>
Chief Executive Officer May 12, 1995
- ------------------ and Director
Malvin Avchen
President and Director May 12, 1995
- ------------------
Gustave Minkin
Treasurer and Controller May 12, 1995
- ------------------
Syed Jafri
Chief Operating Officer May 12, 1995
- ------------------ and Director
Saul Zalka
</TABLE>
46
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-START> JAN-30-1994
<PERIOD-END> JAN-28-1995
<CASH> 453,608
<SECURITIES> 0
<RECEIVABLES> 6,245,715
<ALLOWANCES> 178,620
<INVENTORY> 2,645,785
<CURRENT-ASSETS> 10,270,933
<PP&E> 6,868,147
<DEPRECIATION> 3,720,607
<TOTAL-ASSETS> 16,287,880
<CURRENT-LIABILITIES> 5,104,590
<BONDS> 7,199,174
<COMMON> 227,612
0
0
<OTHER-SE> 2,836,229
<TOTAL-LIABILITY-AND-EQUITY> 16,287,880
<SALES> 69,351,205
<TOTAL-REVENUES> 69,351,205
<CGS> 64,032,260
<TOTAL-COSTS> 69,425,283
<OTHER-EXPENSES> 5,393,023
<LOSS-PROVISION> 123,549
<INTEREST-EXPENSE> 652,047
<INCOME-PRETAX> (74,078)
<INCOME-TAX> 8,000
<INCOME-CONTINUING> (82,078)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (82,078)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
