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 November 2, 1996 Commission File No.
1-6914
SUN CITY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
59-0950777
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification No.)
5545 N.W. 35 Ave. Fort Lauderdale, FL
33309
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code (954) 730-3333
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_____
PAGE
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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 February 3, 1996.
The results of operations for the nine month period ended
November 2, 1996, are not necessarily indicative of results to be
expected for the entire year ending February 1, 1997.
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SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
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November 2,
February 3,
ASSETS 1996 1996
CURRENT ASSETS:
Cash and equivalents $247,665 $760,885
Accounts and trade notes receivable,
less allowance for doubtful accounts
of approximately $306,000 and $186,000
in 1996 and 1995, respectively 5,432,231 6,779,193
Inventories 2,451,448 2,755,593
Notes receivable - current portion 15,855 14,816
Prepaid expenses 297,714 210,029
TOTAL CURRENT ASSETS 8,444,913 10,520,516
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 108,133 108,133
Buildings and improvements 490,418 438,077
Machinery and equipment 2,077,847 2,017,272
2,676,398 2,563,482
Less accumulated depreciation (1,289,353) (1,025,723)
1,387,045 1,537,759
Properties held for sale 504,231 596,318
Long-term notes receivable 93,914 105,930
Excess of purchase price over fair value
of net assets acquired 1,803,261 1,615,611
OTHER ASSETS 681,461 792,565
TOTAL $12,914,825 $15,168,699
<S> <C>
<C>
November 2, February 3,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996
CURRENT LIABILITIES:
Accounts payable $5,020,912 $5,318,812
Accrued expenses 375,308 563,584
Current portion of long-term debt 447,231 496,056
TOTAL CURRENT LIABILITIES 5,843,451 6,378,452
DEFERRED COMPENSATION PAYABLE 355,913 337,913
LONG-TERM DEBT 6,619,671 8,096,798
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value 3,000,000
shares authorized; 2,276,116 shared
issued in 1996 and 1995 227,612 227,612
Capital in excess of par value 1,041,721 1,070,286
Retained earnings 1,692,017 2,004,838
2,961,350 3,302,736
Less: Treasury stock at cost, 828,214
and 837,164 shares in 1996 and 1995,
respectively (2,653,560) (2,682,200)
Less: Receivable for common stock sold
to ESOP (212,000) (265,000)
TOTAL STOCKHOLDERS' EQUITY 95,790 355,536
TOTAL $12,914,825 $15,168,699
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SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
NINE MONTHS ENDED
THREE MONTHS ENDED
November 2, October 28,
November 2, October 28,
1996 1995 1996 1995
<S> <C> <C>
<C> <C>
Sales $50,595,997 $66,369,435
$16,063,150 $23,916,454
Costs and Expenses
Cost of goods sold 43,261,570 56,807,314
13,918,194 21,038,908
Operating expense 3,805,5186,749,491 1,308,957 2,282,699
Selling, general and
administrative expenses 3,118,414 3,486,999 968,334
1,387,496
Interest expense 655,626 806,372 237,585 265,490
Other (income), net 67,690 93,642 59,666 113,167
Total Cost and Expenses50,908,818 67,943,818
16,492,736 25,087,760
Earnings (Loss) From Operations
Before Income Taxes (312,821) (1,574,383) (429,586)
(1,171,306)
Provision For Income Taxes - (2,000) - -
Net Earnings (Loss) $(312 821) $(1,576,383)$(429,586)
$(1,171,306)
Earnings (Loss) Per Common and
Common Equivalent Share $ (.21) $(1.10) $ (.28)
$ (.81)
Earnings (Loss) Per Common Share
Assuming Full Dilution$ (.21) $(1.10) $ (.28) $ (.81)
PAGE
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SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS
ENDED
<S> <C>
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November 2, October
28,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996
1995
Net earnings $(312,821)
$(1,576,383)
Adjustments To Reconcile Net Earnings
To Net Cash (Used In) Or Provided By
Operating Activities:
Depreciation 272,937
518,744
Amortization of excess of purchase price
over fair market value of net assets
acquired 64,474
54,317
Change in assets and liabilities:
Decrease (increase) in trade
accounts receivable 1,347,062
(2,182,876)
Decrease (increase) in inventories 304,145
(1,206,845)
(Increase) in prepaid expenses (87,685)
(64,579)
Decrease in investment in joint venture -
527,000
(Increase) decrease in other assets (141,020)
(348,651)
(Decrease) increase in accounts payable (297,900)
3,144,041
(Decrease) Increase in accrued expenses (188,276)
(19,944)
(Decrease) increase in income taxes payable -
(6,000)
Increase in deferred compensation payable 18,000
85,800
Total Adjustments 1,291,737
501,007
Net Cash Provided By Or (Used In)
Operating Activities $978,916
$(1,075,376)
Cash Flows From Investing Activities:
Capital expenditures (30,236)
348,961
Cash (Used In) Or Provided By
Investing Activities (30,236)
348,961
Cash Flows From Financing Activities:
Principal payments on long-term debt (1,585,952)
(1,673,817)
Proceeds from long-term debt 60,000
1,488,739
Proceeds from receivable from ESOP 53,000
53,000
Proceeds from exercise of options 75
- -
Proceeds from notes receivable 10,977
11,117
Proceeds from subordinated debt -
700,000
Net Cash (Used In) Or Provided By
Financing Activities (1,461,900)
579,039
Net (Decrease) Increase In Cash
and Equivalents (513,220)
(147,376)
Cash and Equivalents, Beginning of Year 760,885
453,608
Cash and Equivalents, End of Year $ 247,665 $
306,232
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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.
COMPANY PROFILE:
Sun City Industries, Inc. (the "Company"), which began in 1949 as
an egg processing and marketing company, has now moved its focus
to
the foodservice marketing and distribution business throughout
parts of the eastern seaboard of the United States with a heavy
concentration in the State of 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 five centers in Florida covering
the
West Coast of Florida, Central Florida and Southeast Florida. In
addition, the Company has operations that distribute to markets
in
Atlanta, Georgia, Baltimore, Maryland, Philadelphia, Pennsylvania
and throughout New Jersey.
The Company's clientele includes hotels, restaurants, airline
caterers, country clubs and cruiseship lines.
The Company's goal is to build a network of foodservice companies
throughout the heavily populated eastern seaboard of the United
States with its major focus on the State of Florida.
RESULTS OF OPERATIONS:
FOR THE NINE MONTHS ENDED NOVEMBER 2, 1996 AND OCTOBER 28,
1995
SALES:
During the nine months, consolidated sales decreased $15,773,438,
down 23.8% compared to a year ago.
Nine Total Foodservice % of Egg % of
Months Sales Division Total Division Total
1996 $50,595,997 $46,135,183 91.2% $4,428,777 8.8%
1995 66,369,435 46,342,011 69.8 19,894,942 (30.0)
Net $(15,773,438) $ (206,828) $(15,466,165)
<PAGE>
Explanation:
Foodservice:
Decreased sales in Fort Lauderdale, Orlando, Gulf Coast and
Sheppard were $206,828 greater than sales increases in New
Jersey, Georgia and the Produce divisions.
Eggs:
The decrease in sales of $15,466,165 results directly from
the
disposition of the three egg processing operations in Spring
Grove, Pa., Jarratt, Va. and Burgaw, NC.
COST OF GOODS SOLD:
Cost of goods sold include product and freight-in costs.
During the nine months, cost of goods sold decreased $13,545,744.
This decrease was generally in line with the change in the
Company's business resulting from the sale and elimination of the
three egg processing divisions. The rate of change is influenced
by the Company's overall customer and product mix, as well as the
changes in market prices which fluctuate from year to year.
OPERATING EXPENSES:
Operating expenses include warehousing and distribution costs and
for the prior year the cost of processing for the three disposed
egg operations.
During the nine months operating expenses decreased $2,943,973
reflecting the Company's change in its business as compared to
the
same period of the prior year which included egg operating
expenses.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses were down a net
$368,858. The change reflects increases in the foodservice
division primarily due to the newly formed produce division
offset
by a combination of the elimination of the three egg operations
and
reduction in corporate headquarters costs.
INTEREST EXPENSE:
Interest expense decreased by a net $150,746 during the first
nine
months of fiscal 1997. This drop reflects a decrease of $186,000
due to a reduction in the average outstanding debt for the
current
period compared to the corresponding period a year earlier,
offset
by a $36,000 increase in interest expense related to greater
costs
associated with the default incurred with the Company's primary
lender which began at the beginning of the third quarter.
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INCOME TAXES:
The Company accounts for income taxes in accordance with SFAS
109,
under which 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, after filing its fiscal 1996 tax return, has a tax
loss carryforward of approximately $4,700,000 expiring in the
years
2005 through 2009.
NET EARNINGS (LOSS):
For the nine months the net loss amounted to $312,821 as compared
to a net loss of $1,576,383 for the same nine months a year ago.
The loss per share totalled $.21 versus a loss of $1.10 per share
reported for the same period a year ago.
Comparisons To The Prior Year:
Amount Explanations
Foodservice $(33,926) An unexpected loss in one of our
operating units offset improved
operating profits in 5 of the other
operating units.
Egg Marketing 713,265 Transition from a losing cyclical
egg
production-processing operation to a
more consistent egg marketing
company
with added revenue from its
consulting
and rent income agreements.
Headquarters Cost 472,035 Elimination of personnel and
expenses
associated with all prior egg
operations plus a reduction in
executive payroll and related costs
at
corporate headquarters.
Interest Expense 150,746 Savings related to reduced debt
levels
compared to the prior year.
All Other (38,558)
Net Improvement $1,263,562
<PAGE>
EARNINGS (LOSS) PER COMMON SHARE:
November 2, October 28,
Nine Months Ended 1996 1995
(Loss) per common and common
equivalent share $(.21) $(1.10)
(Loss) per common share
assuming full dilution $(.21) $(1.10)
Average shares used in computation:
Common equivalent shares 1,512,902 1,485,000
LIQUIDITY AND CAPITAL RESOURCES:
The fiscal 1996 loss has depleted substantially all of the
Company's capital. Management expects the Company to return to
profitability by focusing its efforts on developing the
foodservice
business and maintaining its small but profitable egg marketing
company. However, the strategy of expanding the Company's market
share in the foodservice industry through the acquisition of
small
to mid-sized foodservice distribution companies has been
curtailed
at this time as a result of the expanded losses and reduced
capital
incurred during fiscal 1996. The Company no longer has the
capital
to seek expansion through acquisitions. The Company has disposed
of its egg production and processing operations and has
instituted
efforts to reduce administrative expenses. Management will
concentrate its efforts on the existing foodservice business with
a goal to improve each operation and grow internally until it can
become profitable enough to seek other acquisitions. There can
be
no assurance, however, that management's efforts will ultimately
be
successful.
During fiscal 1996, the Company:
Disposed of property, plant and equipment and related joint
venture
investments relating to its Spring Grove, Pennsylvania, Burgaw,
North Carolina, and Jarratt, Virginia, egg production and
processing operations. This resulted in a reduction in fixed
assets and capital lease obligations of $1,543,663 and $503,031,
respectively.
Acquired Sheppard Distributors, Inc. of Auburndale, Florida for
$1,350,000. This resulted in goodwill of $450,000.
Surrendered certain key man life insurance policies, the net
proceeds of which were used to purchase new split dollar and paid
up deferred compensation policies.
Completed its second private placement offering by raising an
additional $700,000 in five year Senior Subordinated Convertible
Debentures carrying a fixed 9% interest rate, convertible at
$5.125
per share.
<PAGE>
Expanded its credit facility with its major lender from $7.0
million to $7.5 million. The credit facility is solely for the
Company's working capital needs.
As of February 3, 1996, the Company did not meet the minimum net
worth requirement required by its lending arrangement. The
Company
has obtained a waiver from the creditor regarding this covenant
through March 31, 1997. In conjunction with the granting of this
waiver, the lender increased the interest rate on the line of
credit by an additional quarter of one percent.
On August 7, 1996 the Company had been notified by the lender
under
its principal credit facility that it had borrowed $1.2 million
in
excess of the lender's formula of the applicable borrowing base
limitations and that, therefore, certain technical events of
default had occurred under its credit facility. As a result, and
until the events of default have been cured, the rate of interest
payable on the then outstanding balance of $4.6 million has
increased from prime plus 2.50% to prime plus 4.25%. The amount
of
the overadvance which has already been reduced by $504,000 to
$678,000, should be significantly reduced during the third and
fourth quarters ended February 1, 1997 as a result of increased
seasonal sales, the possible sale of certain real estate held by
the Company as property held for sale, as well as from the
collection of what the lender classifies as ineligible accounts.
The Company and its lender have both come to an accommodation in
principle subject to the execution of a definitive agreement
wherein the lender will continue to provide the Company with its
working capital requirements as called for under the existing
borrowing formula. The Company believes that based on this
arrangement and the fact that sales have already begun to
increase,
it will have sufficient working capital to meet its day to day
obligations.
In addition to the lender providing cash for operations, the
Company believes it will require additional financing to meet
other
obligations and capital needs.
On August 1, 1996, the Company failed to make its semi-annual
interest payment on its Senior Convertible Bonds and on November
2,
1996 was in default and in arrearage on such obligation totalling
$59,500.
The Company is currently investigating the availability of
additional or substitute financing, as well as a capital
investment
to satisfy its capital needs. If, however, the Company is not
successful in obtaining an investment or such financing, the
Company may seek other remedies to address any liquidity problems
that may arise in the future.
8-K FILING:
On August 7, 1996, Form 8-K was filed with the Securities and
Exchange Commission and the American Stock Exchange.
SALES OF UNREGISTERED SECURITIES (DEBT OR EQUITY):
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registratnt has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
SUN CITY
INDUSTRIES, INC.
REGISTRANT
Date: December 17, 1996 Malvin Avchen
Malvin Avchen,
C.E.O.
Date: December 17, 1996 Syed Jafri
Syed Jafri,
Treasurer
The financial statements for the nine months ended November 2,
1996 and October 28, 1995, respectively, are unaudited but are
prepared in conformity with accounting principles used at our
last fiscal year end and include alladjustments which the Company
considers necessary for a fair presentation.
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM SUN CITY INDUSTRIES, INC. FINANCIAL
STATEMENTS F.P.E. 11-02-96 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> NOV-02-1996
<CASH> 247,665
<SECURITIES> -0-
<RECEIVABLES> 5,754,086
<ALLOWANCES> 306,000
<INVENTORY> 2,451,448
<CURRENT-ASSETS> 8,444,913
<PP&E> 2,676,398
<DEPRECIATION> 1,289,353
<TOTAL-ASSETS> 12,914,825
<CURRENT-LIABILITIES> 5,843,451
<BONDS> 6,619,671
<COMMON> 227,619
-0-
-0-
<OTHER-SE> (131,822)
<TOTAL-LIABILITY-AND-EQUITY> 12,914,825
<SALES> 50,595,997
<TOTAL-REVENUES> 50,595,997
<CGS> 47,067,088
<TOTAL-COSTS> 50,908,818
<OTHER-EXPENSES> 3,841,730
<LOSS-PROVISION> 132,570
<INTEREST-EXPENSE> 655,626
<INCOME-PRETAX> (312,821)
<INCOME-TAX> -0-
<INCOME-CONTINUING> (312,821)
<DISCONTINUED> -0-
<EXTRAORDINARY> -0-
<CHANGES> -0-
<NET-INCOME> (312,821)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
