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 May 4, 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>
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 three-month period ended May 4,
1996, are not necessarily indicative of results to be expected for
the entire year ending February 1, 1997.
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 4, February 3,
ASSETS 1996 1996
CURRENT ASSETS:
Cash and equivalents $458,858 $760,885
Accounts and trade notes receivable,
less allowance for doubtful accounts
of approximately $255,000 and $186,000
in 1996 and 1995, respectively 5,660,340 6,779,193
Inventories 3,259,559 2,755,593
Notes receivable - current portion 15,165 14,816
Prepaid expenses 360,098 210,029
TOTAL CURRENT ASSETS 9,754,020 10,520,516
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 108,133 108,133
Buildings and improvements 439,836 438,077
Machinery and equipment 2,038,160 2,017,272
2,586,129 2,563,482
Less accumulated depreciation (1,115,848) (1,025,723)
1,470,281 1,537,759
Properties held for sale 572,583 596,318
Long-term notes receivable 102,015 105,930
Excess of purchase price over fair value
of net assets acquired 1,597,984 1,615,611
OTHER ASSETS 799,078 792,565
TOTAL $14,295,961 $15,168,699
May 4, February 3,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996
CURRENT LIABILITIES:
Accounts payable $5,074,312 $5,318,812
Accrued expenses 639,910 563,584
Current portion of long-term debt 383,089 496,056
TOTAL CURRENT LIABILITIES 6,097,311 6,378,452
DEFERRED COMPENSATION PAYABLE 344,283 337,913
LONG-TERM DEBT 7,382,212 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 2,121,382 2,004,838
3,390,715 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 (265,000) (265,000)
TOTAL STOCKHOLDERS' EQUITY 472,155 355,536
TOTAL $14,295,961 $15,168,699
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
May 4, April 29,
1996 1995
Sales $19,301,698 $21,819,325
Costs and Expenses
Cost of goods sold 16,411,838 18,238,243
Operating expenses 1,377,138 2,034,907
Selling, general and administrative
expenses 1,186,051 1,196,118
Interest expense 216,257 261,656
Other (income), net (6,130) (10,411)
Total Cost and Expenses 19,185,154 21,720,513
Earnings From Operations
Before Income Taxes 116,544 98,812
Provision For Income Taxes -0- 2,000
Net Earnings $ 116,544 $ 96,812
Earnings Per Common and
Common Equivalent Share $ .08 $ .07
Earnings Per Common Share
Assuming Full Dilution $ .07 $ .07
<PAGE>
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
May 4, April 29,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
Net earnings $ 116,544 $ 96,812
Adjustments To Reconcile Net Earnings
To Net Cash (Used In) Or Provided By
Operating Activities:
Depreciation 93,611 171,702
Amortization of excess of purchase price
over fair market value of net assets
acquired 17,627 15,105
Provision for losses on accounts receivable 69,098 66,660
Change in assets and liabilities:
Decrease (increase) in accounts
and trade notes receivable 1,049,756 (641,886)
(Increase) decrease in inventories (503,966) (708,895)
(Increase) in prepaid expenses (150,069) (82,571)
(Increase) decrease in other assets (6,513) (414,801)
(Decrease) increase in accounts payable (244,500) (207,506)
Increase (Decrease) in accrued expenses 76,326 13,067
(Decrease) increase in income taxes payable -0- (6,000)
Increase in deferred compensation payable 6,370 28,600
Total Adjustments 407,740 (1,766,525)
Net Cash Provided By Or (Used In)
Operating Activities $ 524,284 $(1,669,713)
Cash Flows From Investing Activities:
Capital expenditures (2,399) (82,622)
Cash (Used In) Or Provided By
Investing Activities (2,399) (82,622)
Cash Flows From Financing Activities:
Proceeds from notes payable -0- 1,439,619
Repayments on notes receivable 3,566 3,249
Principal payments on notes payable (827,553) (390,581)
Proceeds from subordinated debentures -0- 700,000
Proceeds from receivable from ESOP -0- 53,000
Proceeds from exercise of options 75 -0-
Net Cash (Used In) Or Provided By
Financing Activities (823,912) 1,805,287
Net (Decrease) Increase In Cash
and Equivalents (302,027) 52,952
Cash and Equivalents, Beginning of Year 760,885 453,608
Cash and Equivalents, End of Year $ 458,858 $ 506,560
<PAGE>
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion provides information which management believes is
relevant to an assessment and understanding of the Company's operations and
financial condition. This discussion should be read in conjunction with
the financial statements.
COMPANY PROFILE:
Sun City Industries, Inc. (the "Company"), which began in 1949 as an egg
processing and marketing company, has now moved into the foodservice
marketing and distribution business 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 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
a major focus on the State of Florida.
RESULT OF OPERATIONS:
FOR THE QUARTERS ENDED MAY 4, 1996 AND APRIL 28, 1995
SALES:
During the first quarter, consolidated sales decreased $2,517,627, down
11.5% compared to a year ago.
First Total Foodservice% of Egg % of
Quarter Sales Division Total Division Total
1996 $19,301,698 $17,610,03791.2% $1,691,661 8.8%
1995 21,819,325 14,454,76566.2 7,296,010 33.4
Net change $(2,517,627) $3,155,272 25.0% $(5,604,349) (24.6%)
<PAGE>
Reasons:
Division Amount Explanations
Foodservice:
Produce Co. $3,480,201 New division started June 19, 1995.
Sheppard 932,935 Acquired February 27, 1995, three months
this year vs. two months a year ago.
Gulf Coast (1,471,668) Switched a portion of its business to
warehouse and distribution servicing.
All Others 213,804 Generally greater average sales prices.
Net Increase $3,155,272
Eggs:
Egg Marketing 458,286 Includes consulting and rent income
resulting from the sale of the three egg
businesses in fiscal 1996.
Egg Processing (6,062,635) Results from the sale of the three egg
processing divisions in fiscal 1996.
Net Decrease$(5,604,349)
COST OF GOODS SOLD:
Cost of goods sold include product cost and freight in costs.
During the first quarter, cost of goods sold decreased $1,826,405 or 10.0%.
This decrease was generally in line with the change in our 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 within the three egg operations.
During the first quarter operating expenses decreased $657,769 a drop of
32.3% reflecting the change in our business as compared to the first
quarter of the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
Selling, general and administrative expenses were down $10,067. The change
reflects:
Increase of the newly formed produce division $169,352
Increases in other foodservice divisions 63,330
Elimination of the three egg divisions (148,019)
Reduction in headquarters administrative costs (94,730)
Net Change $ (10,067)
<PAGE>
INTEREST EXPENSE:
Interest expense decreased by $45,399 during the first quarter of 1996.
This drop reflects a decrease in the average outstanding debt of $1.1
million for the current quarter compared to the corresponding quarter a
year earlier.
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 estimates that, after filing its fiscal 1996 tax return, it
will have tax loss carryforwards of approximately $4,700,000 expiring in
the years 2005 through 2009.
NET EARNINGS:
Net Earnings increased 20.4% from $96,812 to $116,544. Earnings per share
improved 14.3% to $.08 versus $.07 per share reported for the first quarter
a year ago.
Improvement in net earnings was due to contributions of the newly formed
Sun City Produce division and improved earnings of Sheppard Foodservice as
well as a drop in interest expense when compared to the first quarter the
year before.
EARNINGS PER COMMON SHARE:
May 4, April 29,
First Quarter Ended 1996 1995
Earnings per common and common
equivalent share $ .08 $ .07
Earnings per common share
assuming full dilution $ .07 $ .07
Average shares used in computation:
Common equivalent shares 1,531,092 1,438,952
Fully diluted shares 1,746,476 1,654,336
<PAGE>
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. 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 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.
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.
The ability of the Company to meet its long-term cash requirements is
dependent upon its ability to obtain and sustain sufficient cash flows from
operations supplemented as necessary by potential financings to the extent
obtainable.
<PAGE>
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: June 13, 1996 Malvin Avchen
Malvin Avchen, C.E.O.
DATE: June 13, 1996 Syed Jafri
Syed Jafri, Treasurer
The financial statements for the three months ended May 4, 1996
and April 29, 1995, 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>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM SUN CITY INDUSTRIES, INC. FINANCIAL STATEMENTS F.P.E.
5-04-96 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1997
<PERIOD-START> FEB-04-1996
<PERIOD-END> MAY-04-1996
<CASH> 458,858
<SECURITIES> 0
<RECEIVABLES> 5,930,505
<ALLOWANCES> 255,000
<INVENTORY> 3,259,559
<CURRENT-ASSETS> 9,754,020
<PP&E> 2,286,129
<DEPRECIATION> 1,115,848
<TOTAL-ASSETS> 14,295,961
<CURRENT-LIABILITIES> 6,097,311
<BONDS> 7,382,212
<COMMON> 227,612
0
0
<OTHER-SE> 244,543
<TOTAL-LIABILITY-AND-EQUITY> 14,295,961
<SALES> 19,301,698
<TOTAL-REVENUES> 19,301,698
<CGS> 17,788,976
<TOTAL-COSTS> 19,185,154
<OTHER-EXPENSES> 1,396,178
<LOSS-PROVISION> 59,397
<INTEREST-EXPENSE> 216,257
<INCOME-PRETAX> 116,544
<INCOME-TAX> 0
<INCOME-CONTINUING> 116,544
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 116,544
<EPS-PRIMARY> .08
<EPS-DILUTED> .07
</TABLE>
