<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 July 29, 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
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(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
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Same Name; Former Address-8600 Doral Blvd., #304, Miami, FL 33166
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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
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<PAGE>
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 six-month period ended July 29, 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
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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, most of 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 SIX MONTHS ENDED JULY 29 , 1995 AND JULY 30, 1994
SALES:
During the six months, consolidated sales increased $7,432,399 up 21.2% 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 $42,452,981 $28,792,481 67.8% $13,560,501 31.9%
1994 35,020,582 21,361,007 61.0% 13,519,237 38.6%
Net change $ 7,432,399 $ 7,431,474 6.8% 41,264 (6.7%)
Percent Change 21.2% 34.8%
</TABLE>
<TABLE>
<CAPTION>
Division Amount Reasons
----------------------------- ----------- ------------
<S> <C> <C>
Sheppard Foodservice $ 8,019,238 New division began 2/27/95.
Gulf Coast Foodservice 1,280,830 Unit Sales up 18.5%.
Sun City Produce 1,153,545 New Division, began 6/19/95.
Certified Food Service,PA. (2,372,363) New Jersey Division closed.
Certified Food Service, GA. (450,876) Transferred egg sales to Sun City Marketing in
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
GA.
All Other (197,975) Unit sales down.
</TABLE>
COST OF SALES:
Cost of Sales include product cost, warehousing, distribution and egg processing
costs.
During the first six months, cost of sales rose $8,093,772 or 25.2%. This
increase was generally in line with increases in sales. The rate of change is
influenced by the Company's overall customer and product mix, as well as the
changes in egg market prices which fluctuate significantly from year to year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses as percentage of sales for 1995
and 1994 were 5.0% and 6.9%, 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 new Sheppard 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 reflect the
levels typically experienced in the foodservice industry.
INTEREST EXPENSE:
Interest expense increased $254,088 during the first six months of 1995. Of
this increase $154,000 results directly from debt associated with the Sheppard
and Gulf Coast acquisitions with the balance arising from increased borrowing
and an effective 29.5% increase in short term interest rates on its primary line
of credit, compared to 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 $1,731,000 expiring in the years 2005
through 2008.
NET EARNINGS:
During the first six months the Company incurred a net loss of $405,077 versus a
profit of $172,889 for the same period the year before. Contributing to the
loss was a $305,000 decrease in operating profit in the egg division, losses of
$114,000 in the egg production joint ventures and an increase of $254,000 in
interest expense which offset the improvements made by the newly acquired
foodservice divisions. Contributing to the reduction in egg division operating
profits was a decline in available egg supply arising when the company began to
divest of it's egg production joint ventures, forcing the company to replace
this supply at higher costs, creating lower gross profit margins and resulting
in reduced profits.
<PAGE>
(LOSS) EARNINGS PER COMMON SHARE:
<TABLE>
<CAPTION>
Six Months Ended July , 1995 1994
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<S> <C> <C>
(Loss) earnings per common and
common equivalent share ($.28) $.12
Average shares used in the
computation 1,438,952 1,503,525
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES:
The Company now intends to consolidate its market share in the foodservice
industry through it's 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 had 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 in the operation of its egg processing
operations. Progress in this regard is expected sometime during the third
quarter.
During the Six Months ended July 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 now into a program whereby it will
be changing the manner in which it will, in the future, operate its egg
business. 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 egg operations.
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
ONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JULY 29 JANUARY 28
1995 1995
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<S> <C> <C>
Cash and equivalents $ 346,618 $ 453,608
Accounts and trade notes
receivable, less allowance for
doubtful accounts of $305,422
and $178,600, respectively 7,160,177 6,053,550
Inventories 3,322,477 2,645,785
Notes Receivable-current portion 14,166 13,545
Prepaid Expenses 498,807 370,445
Investment in Joint Ventures 743,250 734,000
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TOTAL CURRENT ASSETS 12,085,495 10,270,933
PROPERTY, PLANT AND EQUIPMENT:
Land and Improvements 153,082 146,404
Buildings and Improvements 1,023,681 999,479
Machinery and equipment 5,662,969 5,722,264
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6,839,732 6,868,147
Less accumulated depreciation 3,712,444 3,720,607
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3,127,288 3,147,540
Properties held for sale 393,466 449,500
Long-term notes receivable 113,505 121,822
Excess of purchase price over fair value
of net assets acquired 1,655,790 1,240,501
OTHER ASSETS 863,177 1,057,584
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TOTAL $18,238,721 $16,287,880
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Accounts payable $ 5,274,841 $ 3,850,901
Accrued expenses 522,300 495,244
Current portion of long-term debt 541,357 687,640
Current portion of capital lease 62,805 62,805
Income taxes payable 2,000 8,000
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TOTAL CURRENT LIABILITIES 6,403,303 5,104,590
DEFERRED COMPENSATION PAYABLE 472,760 444,160
LONG-TERM DEBT 8,205,470 7,199,174
CAPITAL LEASE 445,424 476,115
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 4,361,066 4,766,143
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5,658,964 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 2,711,764 3,063,841
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TOTAL $18,238,721 $16,287,880
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</TABLE>
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
------------------------------- ------------------------------
July 29 July 30 July 29 July 30
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $42,452,981 $35,020,582 $20,633,656 $15,349,194
Costs and Expenses
Cost of Sales 40,235,198 32,141,426 19,962,048 13,940,866
Selling, general and administrative expenses 2,099,503 2,427,943 903,385 1,173,205
Interest expense 540,882 286,794 279,226 152,337
Other (income), net (19,525) (15,760) (9,114) (6,595)
------------ ------------ ------------ ------------
Total Costs and Expenses 42,856,058 34,840,403 21,135,545 15,259,813
------------ ------------ ------------ ------------
Earning From Operations Before Income Taxes $ (403,077) $ 180,179 $ (501,889) $ 89,381
Provisions For Income Taxes 2,000 7,290 -- 3,140
------------ ------------ ------------ ------------
Net Earnings (405,077) 172,889 (501,889) 86,241
------------ ------------ ------------ ------------
Earnings Per Common and
Common Equivalent Share ($ .28) $ .12 ($ .35) $ .06
Earnings Per Common Share
Assuming Full Dilution ($ .28) $ .11 ($ .35) $ .06
</TABLE>
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Six Months Ended
July 29 July 30
1995 1994
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Earnings ($405,077) $ 172,889
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Adjustments To Reconcile Net Earnings
To Net Cash (Used In) Or Provided By
Operating Activities:
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Depreciation 353,684 240,137
Amortization of excess of purchase price
over fair market value of net assets acquired 34,711 15,066
Provisions for losses on accounts receivable 126,822 81,307
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Change in assets and liabilities:
(Increase) decrease in accounts
and trade notes receivable (1,233,449) 1,524,642
(Increase) decrease in inventories (676,692) 286,643
(Increase) in prepaid expenses (128,363) (117,997)
(Increase) in investment in joint venture (9,250) (194,000)
(Increase) decrease in other assets (255,593) (386,800)
(Decrease) increase in accounts payable 1,423,940 (1,978,871)
Increase in accrued expenses 27,056 566,867
(Decrease) increase in income taxes payable (6,000) (8,710)
Increase in deferred compensation payable 28,600 57,200
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Total Adjustments (314,534) 85,484
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Net Cash (Used In) Or Provided By
Operating Activities (719,611) 258,373
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Cash Flow From Investing Activities:
Capital Expenditures (277,398) (220,809)
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Net Cash (Used In) Investing Activities: (277,398) (220,809)
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Cash Flows From Financing Activities:
Proceeds from notes payable 1,488,739 732,744
Repayments on notes receivable 7,697
Principal payments on notes payable (1,359,417) (803,935)
Proceeds from subordinated debt 700,000 --
Proceeds from loan receivable from ESOP 53,000 53,000
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Net Cash Provided By Or (Used In)
Financing Activities 890,019 (18,191)
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Net Increase (Decrease) In Cash
and Equivalents (106,990) 19,373
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Cash and Equivalents, Beginning of Year 453,608 531,608
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Cash and Equivalents, End of Year $ 346,618 $ 550,981
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</TABLE>
<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: 09-12-95 Malvin Avchen
------------------------ -------------------------
Malvin Avchen, C.E.O.
DATE: 09-12-95 Syed Jafri
------------------------ -------------------------
Syed Jafri, Treasurer
The financial statements for the six months ended July 29, 1995 and July 30,
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.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUN CITY
INDUSTRIES, INC. FINANCIAL STATEMENTS F.P.E. 07-29-95 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> FEB-03-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> JUL-29-1995
<CASH> 346,618
<SECURITIES> 0
<RECEIVABLES> 7,160,177
<ALLOWANCES> 305,422
<INVENTORY> 3,322,477
<CURRENT-ASSETS> 12,085,495
<PP&E> 6,839,732
<DEPRECIATION> 3,712,444
<TOTAL-ASSETS> 18,238,721
<CURRENT-LIABILITIES> 6,403,303
<BONDS> 9,123,654
<COMMON> 227,612
0
0
<OTHER-SE> 2,484,152
<TOTAL-LIABILITY-AND-EQUITY> 18,238,721
<SALES> 42,452,981
<TOTAL-REVENUES> 42,452,981
<CGS> 40,235,198
<TOTAL-COSTS> 42,856,058
<OTHER-EXPENSES> 2,620,860
<LOSS-PROVISION> 121,091
<INTEREST-EXPENSE> 540,882
<INCOME-PRETAX> (403,077)
<INCOME-TAX> 2,000
<INCOME-CONTINUING> (405,077)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (405,077)
<EPS-PRIMARY> (.28)
<EPS-DILUTED> (.28)
</TABLE>
