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 3, 1997 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_____
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 1, 1997.
The results of operations for the three-month period ended May 3, 1997,
are not necessarily indicative of results to be expected for the entire year
ending January 31, 1998.
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 3, February 1,
ASSETS 1997 1997
CURRENT ASSETS:
Accounts and trade notes receivable,
less allowance for doubtful accounts
of approximately $526,000 and $460,000
in 1997 and 1996, respectively $5,508,379 $5,521,144
Inventories 2,248,623 2,334,987
Notes receivable - current portion 16,573 18,927
Prepaid expenses 237,053 218,838
TOTAL CURRENT ASSETS 8,010,628 8,093,896
PROPERTY, PLANT AND EQUIPMENT:
Land and improvements 108,133 108,133
Buildings and improvements 507,316 499,917
Machinery and equipment 2,303,103 2,243,175
2,918,552 2,851,225
Less accumulated depreciation (1,422,777) (1,319,437)
1,495,775 1,531,788
Properties held for sale 515,704 504,849
Long-term notes receivable 86,230 88,308
Excess of purchase price over fair value
of net assets acquired 1,758,711 1,780,836
OTHER ASSETS 455,271 447,340
TOTAL $12,322,319 $12,447,017
May 3, February 1,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1997
CURRENT LIABILITIES:
Cash Overdraft $ 427,482 $ 214,744
Accounts payable 4,976,137 5,003,332
Accrued expenses 784,843 734,354
Current portion of long-term debt 1,713,875 1,720,129
TOTAL CURRENT LIABILITIES 7,902,337 7,672,559
DEFERRED COMPENSATION PAYABLE 128,618 123,106
LONG-TERM DEBT 5,106,201 5,409,828
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value 3,000,000
shares authorized; 2,276,116 shared
issued in 1997 and 1996 227,612 227,612
Capital in excess of par value 1,041,721 1,041,721
Retained earnings 781,390 837,751
2,050,723 2,107,084
Less: Treasury stock at cost, 828,214
shares in 1997 and 1996, respectively (2,653,560) (2,653,560)
Less: Receivable for common stock sold
to ESOP (212,000) (212,000)
TOTAL STOCKHOLDERS' EQUITY (814,837) (758,476)
TOTAL $12,322,319 $12,447,017
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three Months Ended
May 3, May 4,
1997 1996
Sales $19,320,269 $19,301,698
Costs and Expenses
Cost of goods sold 16,642,874 16,411,838
Operating expenses 1,350,712 1,377,138
Selling, general and administrative
expenses 1,143,313 1,186,051
Interest expense 238,437 216,257
Other expense (income), net 1,294 (6,130)
Total Cost and Expenses 19,376,630 19,185,154
(Loss) Earnings From Operations
Before Income Taxes (56,361) 116,544
Provision For Income Taxes -0- -0-
Net (Loss) Earnings (56,361) 116,544
Net (Loss) Earnings Per Common Share $ (.04) $ .08
SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
May 3, May 4,
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
Net earnings $ (56,361) $ 116,544
Adjustments To Reconcile Net (Loss) Earnings
To Net Cash Provided By or (Used In)
Operating Activities:
Depreciation 103,339 93,611
Amortization of excess of purchase price
over fair market value of net assets
acquired 22,125 17,627
Provision for losses on accounts receivable 67,229 69,098
Change in assets and liabilities:
(Increase) decrease in accounts
and trade notes receivable (54,464) 1,049,756
Decrease (increase) in inventories 86,364 (503,966)
(Increase) in prepaid expenses (18,215) (150,069)
(Increase) decrease in other assets (7,931) (6,513)
(Decrease) increase in accounts payable(27,195) (244,500)
Increase (decrease) in accrued expenses 50,489 76,326
Increase in deferred compensation payable 5,512 6,370
Total Adjustments 227,253 407,740
Net Cash Provided By Or (Used In)
Operating Activities $ 170,892 $ 524,284
Cash Flows From Investing Activities:
Capital expenditures (78,181) (2,399)
Cash (Used In) Or Provided By
Investing Activities (78,181) (2,399)
Cash Flows From Financing Activities:
Repayments on notes receivable 4,432 3,566
Principal payments on notes payable (309,881) (827,553)
Proceeds from exercise of options -0- 75
Net Cash (Used In) Or Provided By
Financing Activities (305,449) (823,912)
Net (Decrease) Increase In Cash
and Equivalents (212,738) (302,027)
Cash and Equivalents, Beginning of Year (214,744) 760,885
Cash and Equivalents, End of Year $(427,482) $ 458,858
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.
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 current goal is to finalize its pending merger to take full
advantage of the broad based business that currently exists throughout
the heavily populated eastern seaboard of the United States.
RESULTS OF OPERATIONS:
FOR THE THREE MONTHS ENDED MAY 3, 1997 AND MAY 4, 1996
SALES:
During the three months, consolidated sales remained static compared to
a year ago.
Three Total Foodservice% of Egg % of
Months Sales Division Total Division Total
1997 $19,320,269 $17,762,546 91.9% $1,557,723 8.1%
1996 19,301,698 17,610,037 91.2 1,691,661 8.8
Net change $18,571 $152,509 $(133,938)
Explanation:
Foodservice:
Increased sales at the Produce and Sheppard were $152,509 greater
than sales decreases in the other foodservice divisions.
Eggs: The decrease in sales of $133,938 results primarily from lower
selling prices on 2 million dozens sold.
COST OF GOODS SOLD:
Cost of goods sold include product cost and freight in costs.
During the three months, cost of goods sold increased $231,036. This
increase was generally in line with changes in the Company's business
and the extremely negative impact on costs at the Gulf Coast division.
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.
During the three months operating expenses decreased $26,426 reflecting
minor changes in the Company's business as compared to the same period
of the prior year.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:
During the three months, selling, general and administrative expenses
were down $42,738. The change reflects minor changes in all divisions.
INTEREST EXPENSE:
Interest expense increased by $22,180 during the first three months. This
increase reflects a 2% greater cost for borrowing, offset by reduced
borrowing levels of approximately $900,000, incurred with the Company's
primary lender.
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 1997 tax return, it will
have tax loss carryforwards of approximately $5,500,000 expiring in the years
2009 through 2012.
NET (LOSS) EARNINGS:
For the three months the net loss amounted to $56,361 as compared to net
earnings of $116,544 for the same three months a year ago. The loss per
share is $.04 versus a profit of $.08 per share reported for the same period
a year ago.
Comparisons To The Prior Year:
Explanations
Foodservice $(141,000) The impact of a 23% decline in first quarter
sales at Gulf Coast resulted in a loss
of $43,000
compared to a profit of $60,000 for
the same
period a year ago. The remainder
of $38,000
results from a small net decline in
all other
foodservice operations.
Egg Marketing (15,000) The small decrease of $15,000 results from a
decline of 65,000 units sold and
reduced levels
of consulting income.
Interest Expense (22,000) Interest expense increased due to higher rates
in the first quarter compared to a
year ago.
All Other 5,000
Net Difference $(173,000)
(LOSS) EARNINGS PER COMMON SHARE:
May 3, May 4,
Three Months Ended 1997 1996
(Loss) earnings per common share $(.04) $ .08
Average shares used in the computation: 1,447,902 1,531,092
LIQUIDITY AND CAPITAL RESOURCES:
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown
in the accompanying financial statements, during the years ended
February 1, 1997 and February 3, 1996, the Company incurred net
losses of $1,167,087 and $2,761,305, respectively, and as of
February 1, 1997 the Company had a stockholders' deficit of
$758,476. These factors among others may indicate that the Company
will be unable to continue as a going concern for a reasonable period of
time.
The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. As described
in Note F of Form 10K for fiscal 1997, the Company is not in
compliance with several provisions of its line of credit agreement
and the lender has placed significant operating and financing restrictions
on the Company pursuant to a forbearance agreement. The Company's
continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis,
to comply with the terms and covenants of its financing agreements,
to obtain additional financing or refinancing as may be required, and
ultimately to attain successful operations. Management is continuing
its efforts to obtain additional funds from investors so that the Company
can meet its obligations and sustain operations.
There can be no assurance, however, that management's efforts will
ultimately be successful.
During fiscal 1997, The Company:
Was placed in default by its major lender as a result of over- advances
the lender made to the Company which were not secured by assets of
the Company. As a result of the default, the Company's stated interest
rate on this debt increased from 2.25% over the prime rate in fiscal
1996 to 4.25% over the prime rate in fiscal 1997.
On December 16, 1996, signed a Forbearance Agreement which
extends the existing line of credit until March 30, 1998, agrees to a
repayment schedule that permits the Company to operate and fund
its business under certain limitations and conditions and provides the
lender additional collateral in the form of its North Carolina and
Virginia real estate.
Failed to make its regular semi-annual interest payments on the
Senior Subordinated Convertible Debentures. Although the Company
is in monetary default, its Bondholders have not indicated they will
place the Company in default. On the contrary, the Bondholders
are cooperating with the Company in the Company's attempt to raise
additional capital through a direct investment or through a qualified
merger partner.
Did not fully satisfy the American Stock Exchange's guidelines for
continued listing. Accordingly, there can be no assurance that the
listing will be continued.
On May 20, 1997, mortgaged the Hawthorne, Florida property for
$251,500 and signed an option agreement to sell its New Jersey
operations if certain conditions were not met.
On May 29, 1997, the Company announced that it had entered into
preliminary merger discussions with a privately owned Miami based
specialty seafood producer and distributor SeaSpecialties Inc. If
the merger were to be consummated, the combination would create
a food processing and distribution entity with sales in excess of $100
million per year.
Although a definitive merger agreement has yet to be signed, both
SeaSpecialties Inc., and Sun City have indicated that discussions
are progressing. If the merger should be consummated, Mr. Oxenberg,
Chairman and C.E.O. of SeaSpecialties, in a stock for stock transaction,
will own a majority of the stock and SeaSpecialties Inc. will assume
control of the combined company.
If a definitive merger agreement is signed within the next few weeks
the merger will be subject to approval of the shareholders of both
Companies and holders of the Sun City's convertible bonds. It is
anticipated that if consummated the transaction will close during
late summer this year.
COMMITMENTS:
As of February 1, 1997, the Company had no commitments for
capital expenditures.
8-K FILING:
On August 7, 1996, From 8-K was filed with the Securities and
Exchange Commission and the American Stock Exchange.
SALES OF UNREGISTERED SECURITIES (DEBT OR EQUITY):
None
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 17, 1997 Malvin Avchen
Malvin Avchen, C.E.O.
DATE: June 17, 1997 Syed Jafri
Syed Jafri, Treasurer
The financial statements for the three months ended May 3,
1997 and May 4, 1996, 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.
