-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HenkSjI27n5GGrqi4Id0SP7PMo6r8anQ6KSixqSVPajkXoID2fNnu+p2qg4cGws5 psZToOY6E6mzBG1DYeJBbA== 0000095302-96-000009.txt : 19960917 0000095302-96-000009.hdr.sgml : 19960917 ACCESSION NUMBER: 0000095302-96-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960803 FILED AS OF DATE: 19960916 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUN CITY INDUSTRIES INC CENTRAL INDEX KEY: 0000095302 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-GROCERIES & RELATED PRODUCTS [5140] IRS NUMBER: 590950777 STATE OF INCORPORATION: DE FISCAL YEAR END: 0203 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06914 FILM NUMBER: 96630678 BUSINESS ADDRESS: STREET 1: 5545 NW 35TH AVE STREET 2: DRAWER OFFICE BOX 8848 CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 BUSINESS PHONE: 9547303333 MAIL ADDRESS: STREET 1: P O BOX 8848 CITY: FT LAUDERDALE STATE: FL ZIP: 33310-8848 FORMER COMPANY: FORMER CONFORMED NAME: SUN CITY DAIRY PRODUCTS INC DATE OF NAME CHANGE: 19690727 10-Q 1 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 August 3, 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_____ 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 six month period ended August 3, 1996, are not necessarily indicative of results to be expected for the entire year ending February 1, 1997. SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS August 3, February 3, ASSETS 1996 1996 CURRENT ASSETS: Cash and equivalents $427,033 $760,885 Accounts and trade notes receivable, less allowance for doubtful accounts of approximately $276,000 and $186,000 in 1996 and 1995, respectively 4,268,171 6,779,193 Inventories 2,733,312 2,755,593 Notes receivable - current portion 14,908 14,816 Prepaid expenses 357,348 210,029 TOTAL CURRENT ASSETS 7,800,772 10,520,516 PROPERTY, PLANT AND EQUIPMENT: Land and improvements 108,133 108,133 Buildings and improvements 467,266 438,077 Machinery and equipment 2,100,526 2,017,272 2,675,925 2,563,482 Less accumulated depreciation (1,204,593) (1,025,723) 1,471,332 1,537,759 Properties held for sale 504,231 596,318 Long-term notes receivable 100,690 105,930 Excess of purchase price over fair value of net assets acquired 1,827,684 1,615,611 OTHER ASSETS 767,072 792,565 TOTAL $12,471,781 $15,168,699 August 3, February 3, LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996 CURRENT LIABILITIES: Accounts payable $4,135,704 $5,318,812 Accrued expenses 276,824 563,584 Current portion of long-term debt 439,196 496,056 TOTAL CURRENT LIABILITIES 4,851,724 6,378,452 DEFERRED COMPENSATION PAYABLE 349,913 337,913 LONG-TERM DEBT 6,744,768 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 2,121,603 2,004,838 3,390,936 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 525,376 355,536 TOTAL $12,471,781 $15,168,699 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS SIX MONTHS ENDED THREE MONTHS ENDED August 3, July 29, August 3, July 29, 1996 1995 1996 1995 Sales $34,532,847 $42,452,981 $15,177,943 $20,633,656 Costs and Expenses Cost of goods sold 29,343,376 35,768,406 12,931,538 17,530,164 Operating expenses 2,496,561 4,466,792 1,066,217 2,431,884 Selling, general and administrative expenses 2,150,080 2,099,503 964,029 903,385 Interest expense 418,041 540,882 201,784 279,226 Other (income), net 8,024 (19,525) 14,154 (9,114) Total Cost and Expenses 34,416,082 42,856,058 15,177,722 21,135,545 Earnings (Loss) From Operations Before Income Taxes 116,765 (403,077) 221 (501,889) Provision For Income Taxes - 2,000 - - Net Earnings (Loss) $ 116,765 $(405,077) $ 221 $(501,889) Earnings (Loss) Per Common and Common Equivalent Share $ .08 $( .28) - $( .35) Earnings (Loss) Per Common Share Assuming Full Dilution $ .08 $( .28) - $( .35) SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED August 3, July 29, CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995 Net earnings $ 116,765 $(405,077) Adjustments To Reconcile Net Earnings To Net Cash (Used In) Or Provided By Operating Activities: Depreciation 184,797 353,684 Amortization of excess of purchase price over fair market value of net assets acquired 83,213 34,711 Provision for losses on accounts receivable 118,980 126,822 Change in assets and liabilities: Decrease (increase) in trade accounts receivable 2,392,042 (1,233,449) (Decrease) increase in inventories 22,281 (676,692) (Increase) in prepaid expenses (147,319) (128,363) (Increase) in investment in joint venture - (9,250) (Increase) decrease in other assets (302,026) (255,593) (Decrease) increase in accounts payable (1,183,108)1,423,940 (Decrease) Increase in accrued expenses (286,760) 27,056 (Decrease) increase in income taxes payable - (6,000) Increase in deferred compensation payable 12,000 28,600 Total Adjustments 894,100 (314,534) Net Cash Provided By Or (Used In) Operating Activities $1,010,865 $(719,611) Cash Flows From Investing Activities: Capital expenditures 5,950 (277,398) Cash Provided By Or (Used In) Investing Activities 5,950 (277,398) Cash Flows From Financing Activities: Proceeds from notes payable 60,000 1,488,739 Repayments on notes receivable 5,148 7,697 Principal payments on notes payable (1,468,890) (1,359,417) Proceeds from subordinated debentures - 700,000 Proceeds from receivable from ESOP 53,000 53,000 Proceeds from excercise of options 75 - Net Cash (Used In) Or Provided By Financing Activities (1,350,667) 890,019 Net (Decrease) Increase In Cash and Equivalents (333,852) (106,990) Cash and Equivalents, Beginning of Year 760,885 453,608 Cash and Equivalents, End of Year $ 427,033 $ 346,618 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. RESULT OF OPERATIONS: FOR THE SIX MONTHS ENDED AUGUST 3, 1996 AND JULY 29, 1995 SALES: During the six months, consolidated sales decreased $7,920,134, down 18.7% compared to a year ago. Six Total Foodservice % of Egg % of Months Sales Division Total Division Total 1996 $34,532,847 $31,524,341 91.3% $2,991,008 8.7% 1995 42,452,981 28,792,481 67.8 13,560,501 31.9 Net change $(7,920,134) $2,731,860 23.5% $(10,569,493) (23.2%) Reasons: Amount Explanations Foodservice: Produce Co. $5,593,470 Increase due to the new produce division started June 19, 1995. Gulf Coast (2,631,987) Decrease due to a portion of Gulf Coast's business switched to warehouse and distribution servicing. All Others (229,623) Decrease due to generally lower unit sales. Net Increase $2,731,860 Eggs: Egg Marketing 606,852 Increase includes consulting and rent income which resulted from the sale of the three egg businesses in fiscal 1996. Egg Processing (11,176,345) Decrease results from the sale of the three egg processing divisions during fiscal 1996. Net Decrease $(10,569,493) COST OF GOODS SOLD: Cost of goods sold include product cost and freight in costs. During the six months, cost of goods sold decreased $6,425,030. 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 within the three egg operations. During the six months operating expenses decreased $1,970,231 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 up a net $50,577. The change reflects increases in the foodservice division primarily with 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 $122,841 during the first six months of fiscal 1997. This drop reflects a decrease in the average outstanding debt of $952,000 for the current period compared to the corresponding period 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 for the six months amounted to $116,765 as compared to a loss of $405,077 for the same period a year ago. Earnings per share totalled $.08 versus a loss of $.28 per share reported for the same period a year ago. Reasons: Amount Explanations Foodservice $120,710 Improved operating profits in 5 of the 7 operating units. Egg Marketing 170,231 Transition from a losing cyclical egg production-processing operation to a more consistant egg marketing division with added revenue from its consulting and rent income agreements. Headquarters Cost 181,364 Elimination of personnel and expenses associated with all prior egg operations plus a reduction in executive payroll and related costs at corporate headquarters. Interest Expense122,841 Savings related to reduced debt levels compared to the prior year. Other (73,304) Loss of commission income associated with the disposed egg businesses. Net Improvement$521,842 EARNINGS (LOSS) PER COMMON SHARE: August 3, July 29, Six Months Ended 1996 1995 Earnings per common and common equivalent share $ .08 $(.28) Earnings per common share assuming full dilution $ .08 $(.28) Average shares used in computation: Common equivalent shares 1,528,397 1,438,952 Fully diluted shares 1,743,781 1,654,336 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. 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 September 1, 1996 was in default and is 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 SECRUITIES (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: September 16, 1996 Malvin Avchen Malvin Avchen, C.E.O. Date: September 16, 1996 Syed Jafri Syed Jafri, Treasurer The financial statements for the six months ended August 3, 1996 and July 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. EX-27 2 ART. 5 FDS FOR 2ND QUARTER 10-Q WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SUN CITY INDUSTRIES, INC. FINANCIAL STATEMENTS F.P.E 08-03-96 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS FEB-01-1997 FEB-04-1996 AUG-03-1996 427,033 -0- 4,559,079 276,000 2,733,312 7,800,772 2,675,925 1,204,593 12,471,781 4,851,724 6,744,768 227,612 -0- -0- 297,764 12,471,781 34,532,847 34,532,847 31,839,937 34,416,082 2,576,145 118,980 418,041 116,765 -0- 116,765 -0- -0- -0- 116,765 .08 .08
-----END PRIVACY-ENHANCED MESSAGE-----