-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, kx806C8yk8/S+mK0/huS/P19cVh5vgk1xcdDbz4wECGSxAsPQN7/XsKTJBxWBmj9 RnE+nm4u+5G9zo+IZVOStQ== 0000928385-95-000133.txt : 19950516 0000928385-95-000133.hdr.sgml : 19950516 ACCESSION NUMBER: 0000928385-95-000133 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950128 FILED AS OF DATE: 19950515 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: 0131 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-06914 FILM NUMBER: 95539140 BUSINESS ADDRESS: STREET 1: 5545 NW 35TH AVE STREET 2: DRAWER OFFICE BOX 8848 CITY: FORT LAUDERDALE STATE: FL ZIP: 33309 BUSINESS PHONE: 3057303333 FORMER COMPANY: FORMER CONFORMED NAME: SUN CITY DAIRY PRODUCTS INC DATE OF NAME CHANGE: 19690727 10-K405 1 FORM 10-K405 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE X SECURITIES EXCHANGE ACT OF 1934 - ----- For the fiscal year ended January 28, 1995 OR TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OR THE SECURITIES EXCHANGE ACT OF 1934 - ----- Commission file number: 1-6914 Sun City Industries, Inc. (Exact name of registrant as specified in its charter) Delaware 59-0950777 (State or other jurisdiction of (IRS Employer ID.No.) incorporation or organization) 5545 N.W. 35th Avenue, Fort Lauderdale, Florida 33309 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code:(305) 730-3333 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of Each Class on which registered - ------------------- ------------------- Common Stock, American Stock Exchange Par value $.10 per share Securities registered pursuant to Section 12(g) of the Act: None 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 ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ----- 1 As of April 3, 1995, the aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant was $4,997,620 (the price at which the stock was sold at the close of business on April 3, 1995). For purposes of this calculation, shares of Common Stock held by directors, officers and stockholders whose ownership exceeds five percent of the Common Stock outstanding at January 28, 1995 were excluded from the number of shares held by non-affiliates. Exclusion of shares held by any person should not be construed to indicate that such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the registrant. As of April 3, 1995 there were 1,438,952 shares of the Registrant's $.10 par value Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE: The Registrant's definitive proxy statement for its 1995 Annual Meeting of Stockholders to be held on June 28, 1995 is incorporated by reference into Part III of this Form 10-K. Total Number of Pages: ______ Exhibit Index: Page No. ______ 2 PART I ------ ITEM 1 - Business -------- As a result of a 1990 Stock Redemption, a new Executive Management team took over operating control of Sun City Industries, Inc. (the "Company"). The Executive Team developed a business plan and began its implementation during fiscal year 1993. The plan concentrates the Company's efforts on the Company's foodservice operations where Management believes opportunities exist for growth through mergers and acquisitions as well as geographical and product line expansion. General Development of the Business - ----------------------------------- a) The Company was incorporated in Delaware in July 1961 as Sun City Dairy Products, Inc., successor to a business founded in 1949; the present name being adopted in May 1969 which has developed into a leading marketer of eggs, butter, cheese, poultry and related products through internal growth and acquisitions. In March 1969, the Company acquired Certified Poultry & Egg Co. for $240,000 in cash; Oak Crest Enterprises, Inc. and Oak Crest Hatcheries, Inc. for an aggregate of 80,000 shares of the Company's $.10 par value Common Stock . On November 6, 1970, the Company acquired Nearby Producers Egg & Poultry Marketing Corp. and Carlisle Poultry & Egg Associates, Inc. for $81,083 and 118,504 shares of the Company's $.10 par value Common Stock. On August 3, 1987, the Company acquired the inventory and certain other assets, including the trade name, from Hess Foods of Lancaster County, PA for $250,000. On February 4, 1991, the Company acquired the businesses of William F. O'Brien Inc. and Diversified Foods, Inc. of Fort Lauderdale, Florida for $490,200 in cash and the assumption of certain liabilities. On August 12, 1991, the Company acquired the business of Gilley's Sausage Co., Inc. of Winston, Georgia for $116,300 in cash and the assumption of certain liabilities. On December 6, 1993, the Company acquired the business and assets of Gulf Coast Food Distributors, Inc. for a total price of $1,701,222, payable in cash and notes. On February 27, 1995 the Company acquired the business and assets of Sheppard Distributors, Inc. of Auburndale, Florida. 3 Sheppard's assets totalled $1.8 million and had sales of $17.8 million for their recent fiscal year ended October 1, 1994. The cash investment was $1,350,000. b) The Company is engaged in the processing and marketing of shell eggs and in the foodservice division in which the Company distributes butter, eggs, cheese, poultry, and with the acquisition of Gulf Coast, has added produce, meats, seafood, groceries and paper goods. With the acquisition of Sheppard Distributors, Inc. the Company has expanded its seafood and meat lines. In the Egg Division, the Company's customers are national and regional supermarkets, local grocery and convenience stores and U.S. military installations and bases. In the Foodservice Division, the Company's customers are regional hotels, restaurants, schools, hospitals, prisons, caterers and cruise sship lines. The Company's lines of business include the sale of eggs (shell, frozen and pasteurized) butter, cheese (hard, soft, domestic and imported) poultry, sausage provisions, produce, meats, seafood and groceries. Other than eggs, no single line of business has accounted for more than 10% of the Company's total annual revenues, in any of the last three fiscal years. c) The business of the Company is conducted through its wholly-owned subsidiaries which are engaged principally in the business of processing and marketing shell eggs and the distribution of eggs, butter, cheese, poultry, sausage provisions, produce, meats, groceries and other products. Unless the context indicates otherwise, references to the Company in this Report include the Company's subsidiaries. 1) The Company purchases shell eggs from producers located in the states of Florida, Georgia, Maine, New York, North Carolina, Indiana, Illinois, Ohio, Pennsylvania, Maryland and South Carolina. Through its trained personnel, the Company inspects farms from which unprocessed eggs are purchased to ensure that the Company's quality control standards are complied with by the producers. The shell eggs purchased are then processed by the Company's plants located in the States of Virginia, North Carolina, and Pennsylvania. The shell eggs processed and purchased by the Company are sold to customers in the states of Connecticut, Delaware, Florida, Georgia, Maryland, Michigan, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Virginia, West Virginia and the District of Columbia. The Company's customers include national and regional supermarket chains, independent supermarkets, hospital, 4 hotels, restaurants, educational institutions, cruise ship lines, airline caterers, educational and government facilities. In Florida, New York, New Jersey, Pennsylvania, Georgia, Maryland and Washington, D.C. the Company sells butter, eggs, cheese, poultry and similar products. None of the products mentioned in this paragraph, except eggs, has represented more than 10.0% of the Company's consolidated sales in any of the last three fiscal years.
Sales 1/28/95 1/29/94 1/31/93 ----- ------- ------- ------- Egg Division 40.4% 47.9% 48.3% Foodservice 59.2% 51.7% 51.0% Other marketing .4% .4% .7%
During the Company's fiscal years ended January 28, 1995 January 29, 1994, and January 31, 1993, the Company's shell egg sales accounted for 50%, 64% and 62% of its revenues, respectively. The Company processes a substantial portion of all the shell eggs it purchases. Consequently the Company does not determine, and is unable to approximate meaningfully, the portion of its total shell egg income attributable to the Company's shell egg processing and marketing operations. 2) Description of segments in development stages - None. 3) Sources and Availability of Raw Materials - The Company believes that its relationships with its suppliers are good and that alternative supplies of eggs are generally available. However, in order to realize the maximum potential in its egg processing-marketing division during fiscal 1993, the Company commenced a program of upgrading the quality and quantity of its egg supply by making investments in various egg producing joint ventures. Although the size of each investment varies between 15% and 25%, the Company will receive 100% of the eggs produced by these joint ventures. (See "Management's Discussion and Analysis - Liquidity and Capital Resources"). The Company generally purchases its shell eggs from a large number of producers including its joint ventures, located in the general vicinity of the Company's processing plants and distribution centers. During fiscal 1995 the Company purchased 52.0% of the total eggs purchased from its own joint ventures; and 10.5% from Braswell Milling in North Carolina. During fiscal 1994 and 1993, respectively, the Company purchased 9.7% and 21.1% from Bowman Egg Farms; 13.2% and 21.1% from Braswell Milling and 10.9% and 12.0% from Agri- 5 General. The remaining 37.5%, 38.7%, 45.9% of the eggs marketed by the Company were purchased from a large number of other producers located in the general vicinity of the Company's plants. For the fiscal years 1995, 1994 and 1993 no other single independent producer amounted to more than 10% of the Company's egg purchases. 4) Patents, trademarks, licenses, franchises held - None. 5) There are no significant seasonal effects on the Company's consolidated business. 6) As a result of the Company's ability to turn its resale inventory 30 times during the fiscal year ended January 28, 1995 and maintain its outstanding average receivables at the thirty-two (32) day level, the Company's current need for additional working capital arises principally when egg markets experience sharp increases, as well as when unit sales expand during certain periods of the year. The Company does not maintain large amounts of inventory to meet customer requirements nor does it provide extended payment terms to its customers. 7) During the fiscal years ended January 28, 1995, January 29, 1994 and January 31, 1993, sales to the Company's major customer were 9.5%, 10.4% and 11.2% respectively of consolidated sales; and sales to the next leading customer were 4.2%, 4.6% and 4.8%, respectively, of consolidated sales. Although the Company's relationships with many of its major customers are long standing, the Company generally does not have contracts with its customers and, accordingly, such customers have no legal obligation to continue purchasing from the Company. The Company believes that its relationships with its customers are good and that the loss of one of its major customers would have only a temporary adverse effect on its business. During the fiscal year ended January 28, 1995, approximately 59.6% of Company's total sales were made to about 1,880 institutional customers located in the states of Florida, Georgia, Pennsylvania, New Jersey, New York, Washington D.C. and Maryland. During fiscal years ended January 29, 1994 and January 31, 1993, these sales amounted to 51% and 52%, respectively. 8) The Company has no backlog of orders. 9) Government contracts subject to renegotiation or termination - None. 6 10) The shell egg industry is both highly competitive and comprised of a large number of competing entities. The Company's management believes that the Company is a significant factor in shell egg marketing on the Eastern Seaboard. The Company's lines of business other than its shell egg line of business are also highly competitive industries comprised of a large number of competing entities. The Company's management does not believe that the Company is a significant factor in any of its nonshell egg lines of business. 11) The Company had no expenditures for research and development during the fiscal years ended January 28, 1995, January 29, 1994 and January 31, 1993. 12) The Company has not had to make any material expenditures in connection with compliance with environmental regulations. 13) During fiscal 1995 the Company (including its wholly-owned subsidiaries) had 310 employees. It had 282 and 374 employees at the end of fiscal years 1994 and 1993, respectively. d) Virtually all of the Company's sales have been domestic for the current and past two fiscal years. ITEM 2 - Description of Property -----------------------
Location Owner/Tenant Facilities -------- ------------ ---------- 1. Miami, Owner Plant complex comprising approximately 10,125 Florida sq. ft. of land and improvements. Currently, the facility is not being utilized and is being held for sale. 2. Hawthorne, Owner A 203 acre farm complex consisting of 25 Florida acres of lakefront property including three residences; one of 3,350 sq. ft. and two of 1,560 sq. ft. each; 4.85 acres comprising a 5,041 sq. ft. feed mill complex including storage tanks, a warehouse and its own offices; and a 15,400 sq. ft. refrigerated facility. During the first quarter of fiscal 1993 all operations were discontinued and the property was listed for sale.
7 3. Burgaw, Owner Plant complex comprising approximately North Carolina 18,300 sq. ft. of land and improvements of which 12,100 sq. ft. is for general operations, 5,200 sq. ft. is refrigeration, and 1,000 sq. ft. is office space. The Company was a tenant of Pender County Industrial Development Corporation under purchase option lease. During the 1993 fiscal year the debt on this facility was paid in full and as such title to the property was deeded over to the Company by the Pender County Industrial Development Corporation. This facility is adequate and being fully utilized. 4. Jarratt, Owner Plant complex comprising approximately Virginia 17,500 sq. ft. on 5.72 acres of land of which 12,000 sq. ft. is used for warehousing and distribution, 4,400 sq. ft. is refrigeration, and 1,100 sq. ft. is office space. This facility is adequate and being fully utilized. 5. Orlando, Tenant Plant complex comprising approximately 7,200 Florida sq. ft. of warehouse. The Company is a tenant at a monthly rental of $1,590 under a lease expiring on May 31, 1995. This facility is adequate and being fully utilized. 6. Spring Grove, Tenant Plant complex comprising approximately 26,000 Pennsylvania sq. ft. of processing plant, warehouse and offices. The company has a 15 year lease at a monthly rent of $7,500.00. This facility is adequate and being fully utilized. 7. New Holland, Tenant Plant complex comprising approximately 12,466 Pennsylvania sq. ft. of warehouse, coolers and offices. The Company is a tenant at a monthly rental of $3,405 under a lease expiring on August 31, 1995. This facility is adequate and being fully utilized.
8 8. Fort Lauderdale, Tenant Plant complex comprising 15,556 sq. ft. Florida including the Company's executive and administrative offices and its Certified Poultry & Egg Foodservice operations. The plant includes 5,000 sq. ft. of refrigerated space, 4,608 sq. ft of dry warehouse space and 5,942 sq. ft. of operations and administrative offices. The Company is a tenant, at a monthly rental of $8,146, under a lease expiring in May 31, 1999. This facility is adequate and is being fully utilized. 9. Atlanta, Owner Plant complex comprising approximately 5,000 Georgia sq. ft. of coolers, freezers and office space on 2.5 acres of land. This facility is adequate and is being fully utilized. 10. Port Richey, Tenant Plant complex comprising approximately 30,000 Florida sq. ft. of which 10,000 sq. ft. is refrigerated, 7,000 refrigerated dock area, 11,500 sq. ft. dry warehouse and 1,500 sq. ft. is office space. The Company is a tenant at a monthly rent of $5,600 until December 1994 and $9,000 a month until December 1996. This facility is adequate and being fully utilized.
ITEM 3 - Legal Proceedings ----------------- There are no material pending legal proceedings (other than ordinary routine litigation incidental to the business) to which the Company or any of its subsidiaries is a party or of which any of their property is the subject. ITEM 4 - Submission of Matters for Vote of Security Holders -------------------------------------------------- There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report, through the solicitation of proxies or otherwise. 9 EXECUTIVE OFFICERS OF THE REGISTRANT The names and ages of the executive officers of the Company as of January 28, 1995:
Name Age Position and Date Commenced ---- --- --------------------------- Malvin Avchen 61 Chief Executive Officer since April 1990 Gustave Minkin 63 President and Secretary since April 1990 Saul Zalka 60 Chief Operating Officer since April 1990 Vance Weibley 58 Executive Vice President since April 1990 Syed Jafri 50 Treasurer since April 1990
Set forth below is a biographical description of each executive officer based on information supplied by them: Mr. Malvin Avchen served as Treasurer from 1969 to April 1990, and as a Director of the Company since 1972. Mr. Avchen has been a Certified Public Accountant since 1963 and is currently a member of the American Institute of C.P.A.'s and Florida Institute of C.P.A.'s. Mr. Gustave Minkin served as Vice President of Marketing from 1970 to April 1990, and as Director of the Company since 1972. Mr. Saul Zalka served as Vice President of Institutional operations from 1970 to April 1990 and as a Director of Company since 1981. Mr. Vance Weibley served as Vice President of Egg operations from 1971 to April 1990. Mr. Syed Jafri served as Controller from 1975 to present. 10 PART II ------- ITEM 5 - Market for Registrant's Common Stock and Related ------------------------------------------------ Stockholders' Matters --------------------- a) The Company's Common Stock is listed and traded on the American Stock Exchange under the ticker symbol SNI. The sales prices for the Common Stock for each full quarterly period within the two most recent fiscal years were as follows:
Fiscal 1995 Fiscal 1994 ------------------------------- ------------------------------- Cash Cash Quarter High Low Dividends Quarter High Low Dividends 1 $4.25 $2.88 None 1 $3.38 $3.00 None 2 4.75 2.88 None 2 3.13 2.63 None 3 6.50 3.75 None 3 2.88 2.63 None 4 6.88 5.13 None 4 2.94 2.63 None
b) There were approximately 192 stockholders of record on April 3, 1995. This total does not include stockholders listed with brokers or their agents in street name. c) As of April 3, 1995, both the high and low sales prices for the Common Stock were $5.00. 11 ITEM 6 - SELECTED FINANCIAL DATA ----------------------- SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES
Years Ended ----------------------------------------------------------------------- January 28, January 29, January 31, January 31, January 31, 1995 1994 1993 1992 1991 ----------- ----------- ----------- ----------- ----------- OPERATING RESULTS: Sales $69,351,205 $66,098,210 $61,255,226 $68,428,646 $70,543,418 Earnings (Loss) Before Income Taxes (74,078) 237,950 (270,301) 371,337(b) (370,961) Net (Loss) Earnings (82,078) 221,950 (333,001) 354,337(b) (352,761) Net (Loss) Earnings per share (a): Primary (.06) .15 (.23) .24(b) (.22) Fully Diluted (.06) .15 (.23) .22(b) (.22) Shares Used in Computation(a): Primary 1,437,165 1,477,260 1,435,633 1,467,493 1,580,228 Fully Diluted 1,437,165 1,505,000 1,435,633 1,580,420 1,580,228 BALANCE SHEET DATA AT YEAR END (c): Working capital 5,166,343 5,058,817 2,309,211 4,536,949 3,296,938 Working capital ratio 2.01 to 1 1.97 to 1 1.47 to 1 2.03 to 1 1.67 to 1 Total assets 16,287,880 14,011,244 10,852,814 12,494,872 10,602,375 Long-term obligations 8,111,882 5,400,235 2,880,291 4,821,238 2,818,767 Stockholders' equity 3,063,841 3,086,968 2,812,018 3,148,097 2,740,760 Net book value per common share (a) 2.13 2.15 1.96 2.19 1.91 Market price per common share (a) 5.125 2.88 4.13 4.13 2.42 Shares outstanding at year end (a) 1,438,952 1,435,702 1,435,702 1,435,652 1,435,689
(a) Adjusted to reflect 3 for 2 stock split on July 26, 1991. (b) Includes after tax non-recurring expense of $47,088 or $.03 per share. (c) There were no cash dividends paid during the five year period ended January 28, 1995 12 ITEM 7 - 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 and notes thereto appearing elsewhere herein. COMPANY PROFILE: Sun City Industries, Inc. (the "Company"), is a leader in the processing and marketing of eggs along the eastern seaboard of the U.S. The Company, which began in 1949 as an egg processing and marketing company, now provides foodservice marketing and distribution 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 four centers in Florida covering the Orlando, Disney World area, the West Coast of Florida, the center of Florida and Southeast Florida from Key West to West Palm Beach. In addition, the Company has operations that distribute to 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 and cruise ship 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. Years Ended January 28, 1995, January 29, 1994 and January 31, 1993 SALES: 13 Sales for the fiscal years 1993 through 1995 were as follows:
% Increase Year Sales (Decrease) ---- ----------- ------------ 1995 $69,351,205 4.9% 1994 66,098,210 7.9% 1993 61,255,226 (10.5%)
For the fiscal year ended January 28, 1995, consolidated sales increased $3.3 million or 4.9%. Sales rose $12.0 million as a result of reporting sales for Gulf Coast Foodservice for a full fiscal year versus two months of the prior year, offset by decreases of $4.4 million in egg division sales, reflecting a 5.5% drop in unit sales and a 6.6% decrease in average egg market prices. During fiscal 1995, the Company closed its New Jersey distribution center, eliminated that center's non-profitable customers and combined the remainder of their customer base with its New Holland, PA division, resulting in a $4.0 million decrease in consolidated sales. For the fiscal year ended January 29, 1994, consolidated sales amounted to $66.1 million, or 7.9% above the prior fiscal year. Increases of $2.8 million in the egg division, aided by stronger egg markets, and $2.0 in the foodservice division which included Gulf Coast Foodservice, Inc. for two months and modest growth in other areas being the key factors. For the fiscal year ended January 31, 1993, consolidated sales declined $7.2 million, or 10.5%, from the prior fiscal year. Of this amount, $5.2 million resulted from a 12.2% decrease in egg market prices which in turn resulted in lower egg selling prices. The remaining $2.0 million resulted from a decrease in unit sales which were impacted by negative economic conditions that existed during the second half of the fiscal year (see "NET EARNINGS"). COST OF SALES: Cost of sales include product cost, warehousing, distribution and egg processing costs. Cost of sales increased approximately 3.8% in fiscal 1995 and 8.5% in fiscal 1994. Cost of sales dropped 10.4% for fiscal 1993. These increases and decreases were generally in line with the increases and decreases in sales. The rate of change is influenced by the Company's overall customer and product mix shifting from primarily an egg company to that of a foodservice company but especially the effect of egg market prices which fluctuate significantly from year to year. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses as a percentage of sales for fiscal 1995, 1994 and 1993, were 6.8%, 5.9% and 7.2%, 14 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 fiscal 1995 these costs increased due to the additional selling, general and administrative expenses directly related to the new Gulf Coast 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 increase to those higher levels typically experienced in the foodservice industry. The decrease in selling, general & administrative for fiscal 1994 amounted to $542,447 or 12.2%. This reduction resulted from the Company's efforts initiated at the end of fiscal year 1993 to reduce home office administrative overhead which included executive salaries and the number of administrative personnel. The increase for fiscal 1993 was for the most part a direct result of the increased costs associated with the additional businesses acquired during fiscal 1992 while the Company's consolidated sales were decreasing. INTEREST EXPENSE: Interest expense increased $229,960 in fiscal 1995. The higher interest costs result from the debt associated with the Gulf Coast acquisition, fixed asset acquisitions which were financed, additional working capital requirements and a 1.5% increase in average interest rates experienced during 1995 versus 1994. Interest expense for fiscal 1994 rose $32,092 to $422,087 reflecting a slightly higher level of borrowing during most of the year. The increase was brought about with the Company's increased participation in its Joint Venture Program and two months of debt service associated with the new Gulf Coast Foodservice acquisition made in December 1993. During fiscal 1993 interest expense was $389,995, a decrease of $87,937 or 18.4% below fiscal 1992. This was the result of a reduction in the amount of debt as well as lower interest rates throughout most of the year. NON-RECURRING LOSSES: The Company incurred a net non-recurring loss of $28,239 for the fiscal year ended January 31, 1993. During fiscal 1993, the Company completed the sale of three properties for a gain of $724,000. This non-recurring gain was offset by certain non-recurring losses. The Company bought out two long-term employment contracts for a total cost of $501,000. Additionally, the Company closed some of its Hawthorne, Florida operations resulting in a 15 loss of $169,000. Losses of $82,000 were also incurred as a result of consolidating two foodservice operations into one South Florida location. 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 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 1995 tax return, it will have tax loss carryforwards of approximately $1,731,000 expiring in the years 2005 through 2008. NET EARNINGS: Net earnings decreased by $304,000. The operating profits of the Foodservice division, led by Gulf Coast Foodservice improved 63% over the previous year on a 23.2% increase in sales. However, these positive results were more than offset by the negative year experienced in our troubled egg division. During the year results from the egg production joint ventures turned negative and by year end the Company incurred losses of $105,000 and was forced to reduce carrying values of its joint venture investment by an additional $210,000. Coupled with these losses were a 30% decrease in results from the egg processing operations and higher interest rates. As a result of the benefits derived from the new egg production joint venture programs implemented during late fiscal 1993, the positive results as a consequence of the acquisition of Gulf Coast Foodservice in December 1993 and the reduced selling, general and administrative expense, the Company's net earnings improved $554,951 from a net loss of $333,001 in fiscal 1993 to a net profit of $221,950 in fiscal 1994. When the Company began fiscal 1993, management expected to repeat fiscal 1992's positive performance. Management was optimistic since it had just turned the Company around after three consecutive years of losses. However, during fiscal 1993 operating profits in the egg division declined 31%, directly related to poor egg supply (quantity, quality and price) and taken together with an 18% reduction in profits from the foodservice division (the result of difficulties experienced in the Company's South Florida operations; namely Hurricane Andrew, generally poor economic conditions in the South Florida foodservice industry as well as that of the customers served), the net loss amounted to $333,001 as compared to net earnings of $354,337 for the prior fiscal year. 16
EARNINGS (LOSS) PER COMMON SHARE: Fiscal Year 1995 1994 1993 - ------------------------------------------------------------------- (Loss) Earnings per common and common equivalent share ($.06) $ .15 $(.23) Average shares used in the computation 1,437,165 1,477,260 1,435,633
LIQUIDITY AND CAPITAL RESOURCES: The Company intends to expand its market share in the foodservice industry through the acquisition of small to mid-sized foodservice companies that have strong management teams, are situated in strategic locations and will enable the Company to expand its product lines. Additionally, the Company expects to increase sales through profitable internal growth. In order to accomplish this goal, the Company has 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 of either divesting or selling off its egg processing operations. If successful the Company will eliminate the cause of its reduced earnings and negative cash flow and permit itself the opportunity of increasing earnings and cash flow through the operation of its marketing and distribution businesses. During fiscal 1995 the Company: Completed the real estate joint venture in Spring Grove, PA whereby the Company began operation of its new egg processing plant, with a total investment in equipment and leasehold improvements of $800,000. Completed its first private placement offering by raising $700,000 in five year Senior Subordinated Convertible Debentures carrying a fixed 8% rate, convertible at $3.25 per share. Expanded its credit facility with its major lender from $6.5 million to $7.0 million. The credit facility is solely for the Company's increasing working capital needs. The Company's liquidity condition has been negatively impacted by the operations of its egg division. However, management is contemplating a program whereby it is considering changing the manner in which it will, in the future, operate its egg division. 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 17 and eliminate the negative results associated with its current operations. During fiscal 1994 the Company: Expanded its credit facility with its major lender from $5 million to $6.5 million and extended the term of the loan until March 30, 1998. Completed the acquisition of Gulf Coast Foodservice, Inc. for an initial cash payment of $796,895. Increased its investment in the egg production joint ventures by $498,000. Formed a real estate joint venture to construct a 26,000 square foot egg processing plant in Spring Grove, PA, where the Company will be the sole tenant under a 15 year lease. The Company has a 14.3% equity in the joint venture for which it has invested $50,000. Subsequent to year end: On February 10, 1995 the Company completed its second private placement offering by raising $700,000 in five year Senior Subordinated Convertible Debentures carrying a fixed 9% rate. The debentures are convertible at $5.125 per share, the then market price of the stock as of the date the transaction was completed. On February 22, 1995, the Company expanded its credit facility with its major lender from $7.0 million to $7.5 million in anticipation of the February 27, 1995 acquisition of Sheppard Distributors, Inc. COMMITMENTS: As of January 28, 1995, the Company had the no commitments for capital expenditures. ITEM 8 - Consolidated Financial Statements and Supplementary Data -------------------------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------
Page ---- Independent Auditors' Report 21 Consolidated Balance Sheets 22 Consolidated Statements of Operations 23 Consolidated Statements of Stockholders' Equity 24
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Page ---- Consolidated Statements of Cash Flows 25 Notes to Consolidated Financial Statements 28
All financial statement schedules are omitted because of the absence of the conditions under which they are required, or because all information required to be reported is included in the Consolidated Financial Statements or notes thereto. 19 INDEPENDENT AUDITORS' REPORT ---------------------------- Board of Directors and Stockholders Sun City Industries, Inc. and Subsidiaries Fort Lauderdale, Florida We have audited the accompanying consolidated balance sheets of Sun City Industries, Inc. and Subsidiaries as of January 28, 1995 and January 29, 1994, and the related statements of operations, stockholders' equity and cash flows for each of the three years in the period ended January 28, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Sun City Industries, Inc. and Subsidiaries as of January 28, 1995, and January 29, 1994, and the results of their operations and their cash flows for each of the three years in the period ended January 28, 1995, in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Fort Lauderdale, Florida May 10, 1995 20 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED BALANCE SHEETS ---------------------------
January 28, January 29, LIABILITIES AND January 28, January 29, ASSETS 1995 1994 STOCKHOLDERS'EQUITY 1995 1994 - ------ ------------- ------------- -------------------- ------------ ------------- CURRENT ASSETS: CURRENT LIABILITIES: Cash and equivalents $ 453,608 $ 531,608 Accounts payable $3,850,901 $4,118,900 Accounts and trade notes Accrued expenses 495,244 507,714 receivable, less allow- Current portion of ance for doubtful long-term debt accounts of $178,600 and (Note D) 687,640 551,667 $178,800 in 1995 and Current portion of 1994, respectively capital lease(Note D) 62,805 (Note D) 6,053,550 6,285,576 Income taxes payable 8,000 16,000 Inventories (Note B and D) 2,645,785 2,345,759 ----------- ----------- Notes receivable- TOTAL CURRENT 5,104,590 5,194,281 current portion 13,545 12,384 LIABILITIES Prepaid expenses 370,445 367,771 DEFERRED COMPENSATION Investment in Joint PAYABLE (Note D) 444,160 329,760 Ventures 734,000 670,000 ----------- ----------- LONG-TERM DEBT TOTAL CURRENT ASSETS 10,270,933 10,213,098 (NoteD) 7,199,174 5,400,233 CAPITAL LEASE PROPERTY, PLANT AND (Note D) 476,115 EQUIPMENT (Note D): Land and Improvements 146,404 150,072 COMMITMENTS (Note F) Buildings and Improvements 999,479 880,495 STOCKHOLDERS' EQUITY Machinery and equipment 5,722,264 4,082,595 (Note G): ----------- ----------- Common stock, $.10 par 6,868,147 5,113,162 value 3,000,000 shares authorized; 2,276,116 Less accumulated shares issued in 1995 depreciation 3,720,607 3,228,898 and 1994 227,612 227,612 ----------- ----------- Capital in excess of 3,147,540 1,884,264 par value 1,070,286 1,070,286 Retained earnings 4,766,143 4,852,290 Properties held for ----------- ----------- sale 449,500 470,000 6,064,041 6,150,188 Long-term notes Less: Treasury stock receivable 121,822 134,292 at cost, 837,164 and Excess of purchase 840,414 shares in price over fair 1995 and 1994, res- assets acquired 1,240,501 450,053 pectively (2,682,200) (2,692,220) value of net Loan Receivable for common stock sold to OTHER ASSETS (Note C) 1,057,584 859,537 ESOP (Note K) (318,000) (371,000) ----------- ----------- ----------- ----------- Total Stockholders' Equity 3,063,841 3,086,968 ----------- ----------- TOTAL $16,287,880 $14,011,244 TOTAL $16,287,880 $14,011,244 =========== =========== =========== ===========
See notes to consolidated financial statements. 21 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED STATEMENTS OF OPERATIONS -------------------------------------
January 28, January 29, January 31, 1995 1994 1993 -------- -------- -------- SALES $69,351,205 $66,098,210 $61,255,226 COSTS AND EXPENSES: Cost of sales 64,032,260 61,594,887 56,752,918 Selling, general and administrative expenses 4,759,843 3,897,172 4,439,619 Interest expense 652,047 422,087 389,995 Other (income), net (18,867) (53,886) (85,244) Non - recurring losses (Note H) 28,239 ------------ ------------ ------------ TOTAL COSTS AND EXPENSES 69,425,283 65,860,260 61,525,527 (LOSS) EARNINGS FROM OPERATIONS BEFORE INCOME TAXES (74,078) 237,950 (270,301) PROVISION FOR INCOME TAXES (Note E): 8,000 16,000 62,700 ------------ ------------ ------------ (LOSS) NET EARNINGS $ (82,078) $ 221,950 $ (333,001) ============ ============ ============ (LOSS) NET EARNINGS PER SHARE (Note J): (LOSS) EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ (.06) $ .15 $ (.23) ============ ============ ============ (LOSS) EARNINGS PER COMMON SHARE ASSUMING FULL DILUTION $ (.06) $ .15 $ (.23) ============ ============ ============
See notes to consolidated financial statements. 22 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY -----------------------------------------------
Common Stock Treasury Stock ------------------------------------ ------------------------------ Shares Capital in Retained Loan to Outstanding Amount excess of par Earnings Shares Amount ESOP ----------- ------ ------------- -------- ------ ------ ------- Balance, January 31, 1992 2,276,116 $227,612 $1,070,286 $4,994,905 840,464 $2,667,706 $477,000 Purchase of Treasury Shares 16,000 74,001 Exercise of Stock Options (31,564) (16,050) (49,487) Payment of ESOP loan (53,000) Net Loss (333,001) --------- -------- ---------- ---------- ------- ---------- -------- Balance, January 31, 1993 2,276,116 227,612 1,070,286 4,630,340 840,414 2,692,220 424,000 Payment of ESOP loan (53,000) Net Income 221,950 --------- -------- ---------- ---------- ------- ---------- -------- Balance, January 29, 1994 2,276,116 227,612 1,070,286 4,852,290 840,414 2,692,220 371,000 Exercise of Stock Options (4,069) (3,250) (10,020) Payment of ESOP loan (53,000) Net Loss (82,078) --------- -------- ---------- ---------- ------- ---------- -------- Balance, January 28, 1995 2,276,116 $227,612 $1,070,286 $4,766,143 837,164 $2,682,200 $318,000 ========= ======== ========== ========== ======= ========== ========
See notes to consolidated financial statements. 23 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS -------------------------------------
January 28, January 29, January 31, 1995 1994 1993 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: (Loss) Net Earnings $ (82,078) $ 221,950 $ (333,001) ADJUSTMENTS TO RECONCILE NET EARNINGS (LOSS) TO NET CASH (USED IN) OR PROVIDED BY OPERATING ACTIVITIES: Depreciation 613,352 436,729 390,022 Amortization of excess of purchase price over fair value of net assets acquired 31,652 15,447 12,118 Provision for losses on accounts receivable 123,549 18,456 126,622 (Gain) on sale of fixed assets (731,368) Change in assets and liabilities net of effects from acquisitions: Decrease (increase) in accounts and trade notes receivable 119,786 (973,071) 701,219 (Increase) decrease in inventories (300,026) (85,586) 297,408 Decrease (Increase) in prepaid expenses (2,674) (159,607) 23,398 Decrease in income tax refund receivable 173,568 (Increase) in other assets (262,047) (362,910) (118,636) (Decrease) increase in accounts payable (611,577) (153,847) 93,568 (Decrease) increase in accrued expenses (103,128) (6,602) (68,583) (Decrease) increase in income taxes payable (8,000) (24,412) 40,412 Increase in deferred compensation payable 114,400 111,219 82,454 --------- ---------- ---------- TOTAL ADJUSTMENTS (284,713) (1,184,184) 1,022,202 NET CASH (USED IN) OR PROVIDED BY OPERATING ACTIVITIES $(366,791) $ (962,234) $ 689,201 ========= ========== ==========
See notes to consolidated financial statements 24 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ CONSOLIDATED STATEMENTS OF CASH FLOWS ------------------------------------- (CONTINUED)
January 28, January 29, January 31, 1995 1994 1993 ------ ------ ------ NET CASH (USED IN) OR PROVIDED BY OPERATING ACTIVITIES $(366,791) $(962,234) $ 689,201 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of fixed assets 52,523 810,381 Capital expenditures (949,100) (465,278) (558,233) Payment for acquisitions (796,895) --------- --------- --------- NET CASH (USED IN) OR PROVIDED BY INVESTING ACTIVITIES (949,100) (1,209,650) 252,148 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 762,479 2,396,677 287,500 Proceeds from subordinated debt 700,000 Repayments on notes receivable 100,474 7,848 Principal payments on notes payable (283,539) (463,183) (1,741,330) Proceeds from loan receivable from 53,000 53,000 53,000 ESOP Proceeds from exercise of options 5,951 17,923 Payment for purchase of treasury (74,001) stock --------- --------- --------- NET CASH PROVIDED BY OR (USED IN) FINANCING ACTIVITIES 1,237,891 2,086,968 (1,449,060) --------- --------- --------- NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS (78,000) (84,916) (507,711) CASH AND EQUIVALENTS, Beginning of year 531,608 616,524 1,124,235 CASH AND EQUIVALENTS, --------- --------- --------- End of year $ 453,608 $ 531,608 $ 616,524 ========= ========= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the year for Interest $ 652,047 $ 422,087 $ 383,167 ========= ========= ========= Income taxes $ 17,000 $ 0 $ 20,756 ========= ========= =========
See notes to consolidated financial statements. 25 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- (CONTINUED) SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES During fiscal 1995, the Company determined the final purchase price for the business purchased in fiscal 1994. The Company signed a note payable in the amount of $731,442 payable over the next five years. During fiscal 1995, the Company entered into a capital lease agreement in the amount of $555,374 for an egg processor. During fiscal 1994, the Company purchased a business for cash and assumption of liabilities as follows: Fair value of assets acquired $1,620,523 Cash paid (796,895) ---------- Assumption of liabilities $ 823,628 ==========
In addition, the Company agreed to pay the former Gulf Coast shareholders a minimum of $200,000 based on the results of first year operations of the acquired company. The amount will be determined during fiscal 1995 and paid over a five-year period. During 1993, the Company sold property for $200,000 as follows: Sales price $ 200,000 Cash received (35,000) ---------- Mortgage receivable $ 165,000 ==========
See notes to consolidated financial statements. A. Significant Accounting Policies: -------------------------------- 26 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- 1) Principles of Consolidation - The financial statements include the accounts of Sun City Industries, Inc. and its subsidiaries (the "Company"). All material intercompany profits, transactions and balances have been eliminated. 2) Cash and Equivalents - Cash and equivalents include cash on hand and short- term investments purchased with a maturity of three months or less. 3) Inventories - All inventories are stated at the lower of cost (first-in, first-out method) or market. 4) Investment in Joint Ventures - Investments in the Company's egg producing joint ventures are recorded at cost. Amounts received as distributions of the operations of these joint ventures are recorded as recoveries of such cost. Any gains from the final settlement of these joint ventures are recorded only after all cost is recovered; any losses are accrued at the time such losses are reasonably estimatible. These joint ventures generally have lives of approximately two years. 5) Property, Plant and Equipment - Property, plant and equipment are stated at cost. Depreciation is computed principally on the straight-line method over the estimated useful lives of the assets as follows: Land improvements 10 to 20 years Buildings 17 to 33 1/3 years Building improvements 3 to 20 years Machinery and equipment 3 to 20 years 6) Excess of Purchase Price over Fair Value of Net Assets Acquired - The excess of the purchase price over the fair value of the tangible and identifiable net assets acquired is being amortized over periods from twenty to twenty-five years using the straight-line method. 7) Income Taxes - The Company recognizes certain income and expenses in different periods for financial reporting and income tax purposes. During fiscal 1994, the Company adopted Statement of Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes, effective February 1, 1993. Previously, the Company 27 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- had accounted for income taxes based on Statement of Financial Standards No. 96. Adoption of SFAS 109 had no effect on the Company's fiscal 1994 operations or financial position. 8) Change in Accounting Period - During 1994 the Company changed its accounting period from a year ending January 31 to 13 four week accounting periods ending on the Saturday nearest to January 31. 9) Reclassification in Prior Period Statements - Certain reclassifications of prior period amounts have been made to conform with the current reporting presentation. B. Inventories: ------------ The major components of inventory are as follows:
1995 1994 ---------- ---------- Butter, dairy and related products $2,173,292 $1,923,792 Eggs and packaging materials 455,168 396,290 Layer flocks, feed and miscellaneous 17,325 25,677 ---------- ---------- Total $2,645,785 $2,345,759 ========== ==========
28 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- C. Other Assets: ------------- Other assets consist of the following:
1995 1994 ---------- --------- Officers' Life Insurance $ 620,155 $475,940 Organizational Costs 125,420 147,477 Non-compete Costs 30,061 40,088 Recoverable Deposits 29,335 30,604 Prepaid Lease Costs 28,586 35,183 Other 224,027 130,245 ---------- -------- Total $1,057,584 $859,537 ========== ========
The Company pays the premiums on certain life insurance policies that insure the lives of key executives and are payable to the officer's designated beneficiaries in the event of their deaths. The policies, with total face amount of $1,660,000 have been assigned to the Company to the extent necessary to repay all premiums. The above officers' life insurance is net of a $300,000 loan against the policies. D. Debt and Capital Leases: ------------------------ Long-term debt consists of the following:
1995 1994 ---------- ---------- $6,500,000 line of credit; expires March 1998. Collateralized by the Company's accounts receivable, inventory and machinery and equipment; interest at 2.25% over prime (10.75% at January 28, 1995). $5,480,000 $4,966,666 1995 1994 ---------- ---------- Mortgage note payable, interest at 9.5%. Due in April 1995, collateralized by property with a carrying value of approximately
29 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- $408,000 at January 28, 1995. 262,500 337,500 Notes payable, interest at 9.5%. Due in installments through October 1997. Collateralized by machinery and leasehold improvements with a carrying value of approximately $200,000 at January 28, 1995. 150,084 195,969 Notes payable to former Gulf Coast shareholders interest at 7.75%. Due in equal installments over the next five years. 931,442 200,000 Notes payable, interest at 8.0%. Due in installments through December 1996. Collateralized by computer system with a carrying value of $30,000 at January 28, 1995. 28,055 - Notes payable, bearing interest between 7.2% and 8.77%. Due in installments through April 1998. Collateralized by trucks with a carrying value of $205,000 at January 28, 1995. 194,337 107,580 Notes payable, interest at prime lending rate plus 1.5% (10.0% at January 28, 1995). Due in installments through December 1998. Collateralized by machinery and equipment with a carrying value of $75,000 at January 28, 1995. 45,011 59,525
1995 1994 ---------- ---------- Notes payable, bearing interest at 7% to 9.5%. Due in installments through December 1995. Collateralized by layer flocks with a carrying value of $150,000. 95,385 84,662 Five year, Senior Subordinated Convertible Debentures, interest at 8%. Convertible into common stock at $3.25 per share. 700,000 -
30 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- ---------- ---------- Total debt 7,886,814 5,951,902 Less current portion 687,640 551,667 ---------- ---------- Total long-term debt $7,199,174 $5,400,235 ========== ==========
The above mortgage and line of credit contain certain restrictive covenants, the more significant of which require the Company to maintain certain minimum levels of working capital, net worth and net tangible assets. During fiscal 1994, the line of credit facility was expanded from $5 million to $6.5 million and the term was extended to March 30, 1998. The aggregate maturities of long-term debt are as follows:
Fiscal year ending ------------------ 1996 687,640 1997 385,962 1998 241,093 1999 5,682,169 2000 and thereafter 889,950 ---------- Total $7,886,814 ==========
The Company has a commitment under a capitalized lease obligation relating to certain egg processing equipment. Future minimum lease payments under the capitalized lease are summarized below. The interest rate impicit in the lease commitment is 9%.
Fiscal year ending ------------------ 1996 $108,926 1997 108,926 1998 108,926 1999 108,926 2000 108,926 Thereafter 63,540 -------- Total minimum lease payments 608,171 Less amount representing interest (69,251) -------- Total obligation under capital lease 538,920 Less current maturities (62,805) -------- Long-term obligation under capitalized lease $476,115 ========
31 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- E. 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 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 deferred tax balance at January 28, 1995 consisted of:
Assets Liabilities Total ------ ----------- ----- Excess tax amortization for non-compete agreement $117,900 $117,900 Tax loss carryforwards 588,700 588,700 Accelerated depreciation for tax purposes (174,300) (174,300) Allowance for bad debts 60,800 60,800 Capitalization for tax purposes of inventory related costs 46,600 46,600 Deferred compensation 151,000 151,000 Investment in Joint Ventures (58,900) (58,900) Other (2,200) (2,200) Less: Valuation allowance (729,600) (729,600) Total $235,400 ($235,400) $0 ========= ========== =========
The deferred tax balance at January 29, 1994 consisted of:
Excess tax amortization for non-compete agreement $124,700 - $124,700 Tax loss carryforwards 626,100 - 626,100
32 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- Accelerated depreciation for tax purposes - $(166,400) $(166,400) Allowance for bad debts 60,800 - 60,800 Capitalization for tax purposes of inventory related costs 28,700 - 28,700 Deferred compensation 112,100 - 112,100 Less: Valuation allowance (786,000) - (786,000) -------- --------- --------- Total $166,400 $(166,400) $ 0 ======== ========= =========
The valuation allowance as of January 28, 1995 and January 29, 1994 was $729,600 and $786,000, respectively. The provision for income taxes is comprised of the following:
1995 1994 1993 --------- -------- --------- State: Current $8,000 $17,000 $62,700 ------ ------- ------- Total $8,000 $17,000 $62,700 ====== ======= =======
Reconciliations of the effective income tax rates to the U.S. statutory rates are summarized as follows:
1995 1994 1993 ------ ------ ------ Statutory rate (34.0%) 34.0% (34.0)% (Increase) reduction in valuation allowance 26.0 (34.8) Net operating loss carryovers 39.7 Amortization of excess of purchase price over fair value of net assets acquired 10.2 (2.8) 1.9 State income taxes 7.1 4.4 15.3 Other 1.5 0.3 0.3 ------ ------ ------ Total 10.8% 6.7% 23.2% ====== ====== ======
33 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- The Company estimates that, after filing its 1995 tax return, it will have tax loss carryforwards of approximately $1,731,000 expiring in the years 2005 through 2008. 34 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- F. Commitments: ------------ Lease Commitments - Aggregate minimum rental commitments relating to operating leases at January 28, 1995 are $3,893,511. Minimum annual rentals are payable as follows:
Delivery Buildings and other Fiscal Years ending and land equipment Total - ------------------- --------- --------- ----- 1996 $323,672 $528,700 $852,372 1997 277,752 434,731 712,483 1998 187,752 365,097 552,849 1999 187,752 266,935 454,687 2000 997,752 323,368 1,321,120 ---------- ---------- ---------- Total $1,974,680 $1,918,831 $3,893,511 ========== ========== ==========
The above amounts include rentals under renewal options where management contemplates, with a high degree of assurance, that the option will be exercised. Lease terms require, in certain instances, that the Company pay property taxes, insurance, mileage charges and maintenance cost on the leased property. Rent expense for the years ended January 28, 1995, January 29, 1994 and January 31, 1993 was $917,422, $912,773 and $1,050,650, respectively, excluding mileage charges and other executory costs. These expenses are included in selling, administrative, and general expenses in the accompanying consolidated statements of operations. G. Stockholders' Equity: --------------------- 1) 1982 Stock Option Plan - In June 1982, the stockholders approved an incentive stock option plan for officers, directors, and key employees. Under the plan, options for 262,500 common shares may be granted to purchase common shares at no less than 100% of the fair market value at date of grant. Options terminate, except to a limited extent, in the event of retirement, disability, death of the optionee or termination of employment. As of January 28, 1995, January 29, 1994 and January 31, 1993, 262,500 shares of common stock were reserved under the plan. Options granted under the plan are exercisable at various amounts per share and become exercisable at the rate of 20% 35 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- each year beginning one year after date of grant and expire ten years after date of grant. Activity relating to this option plan is summarized as follows:
Price per Shares Share ------ --------- Outstanding at January 31, 1992 256,500 Exercised Canceled Outstanding at January 31, 1993 Granted Exercised Canceled Outstanding at January 29, 1994 Granted Exercised Canceled Outstanding at January 28, 1995
At January 28, 1995, options for 166,300 shares were exercisable. 2) 1994 Stock Option Plan - In June 1994, the stockholders approved another incentive stock option plan for officers, directors, and key employees. Under the plan, options for 225,000 common shares may be granted to purchase common shares at no less than 100% of the fair market value at date of grant. Options terminate, except to a limited extent, in the event of retirement, disability, death of the optionee or termination of employment. Options granted under the plan are exercisable at various amounts per share and become exercisable at the rate of 20% each year beginning one year after date of grant and expire ten years after date of grant. 36 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- As of January 28, 1995, 225,000 shares of common stock were reserved under the plan; 75,000 options were granted at $3.875 per common share with a grant date of June 23, 1994. During fiscal 1995 no options were canceled or exercisable. H. Non-Recurring Losses: --------------------- The Company incurred a net non-recurring loss of $28,239 for the fiscal year ended January 31, 1993. The Company completed the sale of three properties for a gain of $724,000. This non-recurring gain was offset by the following non-recurring losses: The Company bought out two long-term employment contracts for a total of $501,000. Additionally, the Company closed its Hawthorne, Florida operations resulting in a loss of $169,000. Losses of $82,000 were also incurred as a result of streamlining two foodservice operations into one South Florida location. I. Acquisitions: ------------- Effective December 6, 1993 the Company acquired substantially all the assets and liabilities of Gulf Coast Food Distributors, Inc. ("Gulf Coast") which was accounted for by the purchase method of accounting. Gulf Coast is a foodservice company serving a broad range of customers. Product lines include produce, meats, seafood, dairy, groceries and paper products. The initial purchase price consisted of the acquisition of $1,620,523 in assets payable $796,895 in cash and the assumption of $823,628 in liabilities. The results of operations of Gulf Coast are included in the consolidated statements of operations from the date of acquisition. The following unaudited pro-forma consolidated results of operations give effect to the acquisition of Gulf Coast as though it had occurred on February 1, 1992:
Fiscal Years Ended 1994 1993 - -------------------------------------------------------------- Sales and operating revenues $77,206,693 $74,549,849 Net earnings (loss) $ 282,737 ($314,055) Earnings (loss) per share: Primary $ .19 ($.22) Fully Diluted $ .19 ($.22)
37 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- The unaudited pro-forma information is not necessarily indicative of results of operations that would have occurred had the purchase been made at February 1, 1992, or of future results of operations of the Company. The initial purchase price was funded through borrowings under the Company's revolving credit and term loan agreement. The Company was obligated to pay an additional amount to the sellers determined at a rate of $2 for every $1 of the first year's pre-tax profits of Gulf Coast during the period ended December 3, 1994, such additional consideration being subject to a minimum of $200,000 and a maximum of $700,000. Further additional consideration above the amount of $700,000 is provided for, at an amount of $1 for every $1 of the first year's pre-tax profits of Gulf Coast in excess of $350,000. Based on adjusted earnings, the Company was required to pay an additional sum of $931,442 which will be paid over five years (see note D). The excess of the purchase price over the fair value of the tangible and identifiable intangible net assets acquired is being amortized over a period of twenty-five years using the straight-line method. J. Net (Loss) Earnings Per Share: ------------------------------ Net (loss) earnings per common share and common equivalent share is based on the treasury stock method computed by dividing net (loss) earnings by the weighted average number of common shares outstanding including common stock equivalents for dilutive stock options and average market prices. The average shares used in calculating net (loss) income per common share were 1,437,165, 1,477,260 and 1,435,633 for years ending January 28, 1995, January 29, 1994 and January 31, 1993, respectively. Common stock equivalents were excluded from the calculation of net loss per shares for the years ending January 28, 1995 and January 31, 1993 because the effect would have been antidilutive. K. Employee Benefit Plans: ----------------------- The Company has established an Employee Stock Ownership Plan ("ESOP") to acquire share of the Company's stock for the 38 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- future benefit of its employees. The ESOP covers all permanent employees who satisfied the age and length of service requirements. The Company contributes, at the discretion of the Board of Directors a portion of its net earnings annually. During each of the fiscal years 1995, 1994 and 1993, the Company contributed $120,000 to the plan. During fiscal 1991, the Company sold 187,500 shares of its common stock to the ESOP for $531,125 financed with a ten year $530,000 term loan with interest at 2.75% over prime. L. Segment Reporting and Significant Customers: -------------------------------------------- The Company is principally engaged in the business of distributing basic food products. Revenues from the Company's customers, which includes national and regional supermarket chains and various United States military installations, were as follows for the three fiscal years:
Sales 1995 1994 1993 ----- ---- ---- ---- Egg division 40.4% 47.9% 48.3% Foodservice 59.2 51.7 51.0 Other marketing .4 .4 .7
During fiscal years ended January 28, 1995, January 29, 1994 and January 31, 1993, sales to the Company's major customer were 9.0%, 10.4% and 11.2% respectively, of consolidated sales. M. Subsequent Event: ----------------- On February 27, 1995 the Company acquired the business and assets of Sheppard Distributors, Inc. ("Sheppard") of Auburndale, Florida for a purchase price of $900,000 together with an assumption $861,698 of designated liabilities. A down payment of $1,350,000 was made at closing, subject to adjustment. An additional purchase price component is to be determined based on a multiple of pre-tax net profits of the acquired business during the three years after the acquisition, payable in annual increments of twenty-five percent of the recomputed net aggregate price at the end of the first and second years after closing, fifty percent of the recomputed net aggregate price at the end of the third year after closing and the balance payable one year after the final computation, secured by fixed assets and guaranteed by the 39 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- Company. Sheppard's assets totalled $1.8 million with annual sales totaling $17.8 million during their fiscal year ended October 1, 1994. 40 SUN CITY INDUSTRIES, INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ YEARS ENDED JANUARY 28, 1995, JANUARY 29, 1994 & JANUARY 31, 1993 ----------------------------------------------------------------- The following unaudited pro-forma consolidated results of operations give effect to the acquisition of Sheppard as though it had occurred on February 1, 1993:
Fiscal Years Ended 1995 1994 ------------------------------------------------------------- Sales and operating revenues $87,145,637 $82,844,261 Net earnings $77,078 $444,905 Earnings per share: Primary $.05 $.30 Fully Diluted $.05 $.30
The unaudited pro-forma information is not necessarily indicative of results of operations that would have occurred had the purchase been made at February 1, 1993, or of future results of operations of the Company. On April 6, 1995 the Company completed its second private placement offering by raising $700,000 in five year Senior Subordinated Convertible Debentures carrying a fixed rate of 9%. The debentures are convertible into common stock at $5.125 per share. 41 ITEM 9 - Changes in and Disagreements with Accountants on ------------------------------------------------ Accounting and Financial Disclosures ------------------------------------ None. PART III -------- Pursuant to General Instruction G (3) of Form 10-K, the information called for by Items 10,11,12, and 13 of this Part III is hereby incorporated by reference from the Registrant's definitive proxy statement relating to Registrant's Annual Meeting of Stockholders to be held on June 24, 1993 (hereinafter referred to as the "Proxy Statement"). The aforementioned information shall be set forth under the following captions in the Proxy Statement: ITEM 10 - Directors and Executive Officers of the Registrant -------------------------------------------------- See "Election of Directors", "Nominees; Current Board Members" "Executive Officers", and "Compliance with Section 16(a) of the Exchange Act". ITEM 11 - Executive Compensation ---------------------- See "Executive Compensation and Other Information: and "Information Concerning the Board of Directors and its Committees - Directors' Compensation". ITEM 12 - Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- See "Certain Information as to Security Ownership", "Security Ownership of Management", and "Outstanding Stock and Voting at the Meeting". ITEM 13 - Certain Relationships and Related Transactions ---------------------------------------------- See "Certain Relationships and Related Transactions". 42 PART IV ------- ITEM 14a - Exhibits, Financial Schedules and Reports on Form 8-K ----------------------------------------------------- The following documents are filed with, and as part of, this Annual Report on Form 10-K. (1) Consolidated Financial Statements The Index to the consolidated financial statements has been included as part of Item 8 hereof. (2) Exhibits (a) See Exhibits Index below. EXHIBITS INDEX -------------- No.(3) Articles of Incorporation and By-laws. There have been no changes in the articles of incorporation or by-law since our filing with the Securities and Exchange Commission, Washington, D.C. under the Securities Act of 1933 in the June 1966 registration statement, 2-24901. No.(4) Instruments defining the rights of security holders, including indentures. There are no obligations in existence that would require disclosure of such instruments. No.(9) Voting trust agreement. No.(10) Material contracts. During the current year, there were no material contracts. No.(11) Statement re: Computation of per share earnings. Included in our 1995 Annual Report on Form 10-K, pages 13 and 18, and page 40 (note J) as filed with the Securities and Exchange Commission. No.(12) Statement re: Computation of ratios. The Company has no requirement for the reporting of such ratios. 43 No.(13) Annual report to security holders, Form 10-Q or quarterly report to security holders. All such reports have been filed with the Securities and Exchange Commission, Washington, D.C. for all periods, including the year ended January 28, 1995. No.(16) Letter re: Changes in certifying accountant. There have been no letters regarding change in certifying accountant. No.(18) Letter re: Change in Accounting Principles. There have been no changes in accounting principles. No.(19) Previously Unfiled Documents. There are no unfiled documents. No.(22) Subsidiaries of the Registrant. Filed as Exhibit number 1, Form 8, Amendment number 2, fiscal year ended January 31, 1986. No.(23) Published report regarding matters submitted to vote of security holders. All such reports requiring vote by security holders are filed with the Securities and Exchange Commission, including in our Annual Proxy for security holders. At the last annual meeting of security holders, the vote was for the election of the Board of Directors and appointment of Auditors, both of which were uncontested. 44 No.(24) Consents of Experts and Counsel. All such consents have been filed with the Securities and Exchange Commissions as follows: Auditors: Each Annual Report, Form 10-K and the Registration Statements of June 1966 and February 1972. Counsel: Included in the Registration Statements of June 1966 and February 1972. No.(25) Power of Attorney. Power of attorney has not been used in any filing with the Securities and Exchange Commission. No.(28) Additional Exhibits. There are no additional exhibits to be filed. No.(29) Information from reports furnished to state insurance regulatory authorities. There are no such reports required to be filed. ITEM 14b - Reports on Form 8-K ------------------- On February 27, 1995 the registrant filed Form 8-K for the acquisition of the business assets of Sheppard Distributors, Inc. 45 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, Sun City Industries, Inc. has duly caused this report to be signed on its behalf by the undersized, thereunto duly authorized. May 12, 1995 _______________________ Malvin Avchen Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature Title Date - ------------------ ----------------------- -------------- Chief Executive Officer May 12, 1995 - ------------------ and Director Malvin Avchen President and Director May 12, 1995 - ------------------ Gustave Minkin Treasurer and Controller May 12, 1995 - ------------------ Syed Jafri Chief Operating Officer May 12, 1995 - ------------------ and Director Saul Zalka
46 EX-27 2 EXHIBIT 27
5 YEAR JAN-28-1995 JAN-30-1994 JAN-28-1995 453,608 0 6,245,715 178,620 2,645,785 10,270,933 6,868,147 3,720,607 16,287,880 5,104,590 7,199,174 227,612 0 0 2,836,229 16,287,880 69,351,205 69,351,205 64,032,260 69,425,283 5,393,023 123,549 652,047 (74,078) 8,000 (82,078) 0 0 0 (82,078) (.06) (.06)
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