1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1996
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Commission File Number 1-12476
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SUN COAST INDUSTRIES, INC.
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(Exact name of Registrant)
Delaware #59-1952968
- ------------------------ ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
2700 South Westmoreland Ave., Dallas, TX 75233
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(Address of principal executive offices)
(214) 373-7864
-------------------------------
(Registrant's telephone number)
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 the number of shares outstanding of each of the issuers' classes of
common stock, as of November 6, 1996, the latest practicable date.
Class Outstanding at February 10, 1997
----- --------------------------------
Common stock $0.01 par value 4,104,229
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SUN COAST INDUSTRIES, INC.
INDEX
Part I. Financial Information
Item I - Financial Statements
Condensed Consolidated Balance Sheets --December 31, 1996
and June 30, 1996 3
Condensed Consolidated Statements of Income - Six Months
ended December 31, 1996 and 1995 5
Condensed Consolidated Statements of Income - Three Months
Ended December 31, 1996 and 1995 6
Condensed Consolidated Statements of Cash Flows -- Six
Months ended December 31, 1996 and 1995 7
Notes to Condensed Consolidated Financial Statements 8
Item II - Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Part II. Other Information
Items 1 through 6 16
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PART I. FINANCIAL INFORMATION
Item I. FINANCIAL STATEMENTS
SUN COAST INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
December 31,
1996 June 30,
(unaudited) 1996
----------- --------
ASSETS
Current assets:
Cash and cash equivalents $ 3,674 $ 1,787
Accounts receivable, net of allowance for
doubtful accounts of $77 and $77 7,014 8,483
Inventories 5,612 5,411
Other current assets 99 408
Deferred income taxes 478 205
Net assets of discontinued
operations 6,265 13,094
-------- --------
Total current assets 23,142 29,388
Property, plant and equipment, net of accumulated
depreciation of $22,578 and $20,295 21,154 23,113
Intangible assets 269 280
Other assets 2,023 1,352
-------- --------
Total assets $ 46,588 $ 54,133
======== ========
See accompanying notes to condensed consolidated financial statements.
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SUN COAST INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except par value)
December 31,
1996 June 30,
LIABILITIES AND STOCKHOLDERS' EQUITY (unaudited) 1996
---------- --------
Current liabilities:
Accounts payable $ 4,653 $ 5,275
Accrued expenses 3,400 2,678
Current portion
of long-term debt 15,451 26,157
-------- --------
Total current liabilities 23,504 34,110
Long-term debt 11,456 3,124
Deferred income taxes 1,854 2,055
-------- --------
Total liabilities 36,814 39,289
-------- --------
Stockholders' equity:
Common stock, $.01 par value; 40,000,000
shares authorized; 4,017,629 issued and
4,004,229 outstanding 40 40
Additional paid-in capital 11,342 11,339
Treasury stock (153) (153)
Retained earnings (deficit) (1,455) 3,618
-------- --------
Total stockholders' equity 9,774 14,844
-------- --------
Total liabilities and stockholders' equity $ 46,588 $ 54,133
======== ========
See accompanying notes to condensed consolidated financial statements.
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SUN COAST INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollars in thousands, except per share data)
Six Months Ended
December 31,
---------------------
1996 1995
------- --------
Sales $31,581 $ 27,520
Costs and expenses:
Cost of sales 25,248 22,824
Selling, general and administrative 4,220 3,661
Interest, net 985 749
------- --------
30,453 27,234
------- --------
Income from continuing operations
before provision for income taxes 1,128 286
Provision for income taxes (356) (127)
------- --------
Income from continuing
operations 772 159
Discontinued operations (Note 2)
Loss from discontinued
operations, net of income
taxes of $405 and $281,
respectively (819) (410)
Loss on disposal of discontinued
operations, net of income taxes
of $2,817 (5,025) --
------- --------
Net loss $(5,072) $ (251)
======= ========
Net income (loss) per common share:
Continuing operations $ 0.18 $ 0.04
Discontinued operations (1.40) (0.10)
------- --------
Net loss per common share $ (1.22) $ (0.06)
======= ========
See accompanying notes to condensed consolidated financial statements.
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SUN COAST INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(dollars in thousands, except per share data)
Three Months Ended
December 31,
---------------------
1996 1995
------- --------
Sales $15,585 $ 13,311
Costs and expenses:
Cost of sales 12,533 11,079
Selling, general and administrative 2,228 1,767
Interest, net 488 360
------- --------
15,249 13,206
------- --------
Income from continuing operations
before provision for income taxes 336 105
Provision for income taxes (99) 31
------- --------
Income from continuing
operations 237 136
Discontinued operations (Note 2)
Loss from discontinued
operations, net of income taxes
of $260 and $171 respectively (474) (475)
Loss on disposal of discontinued
operations, net of income taxes
of $2,817 (5,025) --
------- --------
Net loss $(5,262) $ (339)
======= ========
Net income (loss) per common share:
Continuing operations $ 0.06 $ 0.03
Discontinued operations (1.37) (0.11)
------- --------
Net loss per common share $ (1.31) $ (0.08)
======= ========
See accompanying notes to condensed consolidated financial statements.
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SUN COAST INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
Six Months Ended
December 31,
-------------------
1996 1995
------ ------
Cash flows from operating activities:
Net loss $(5,072) $ (251)
Adjustments to reconcile net income to
net cash provided by (used in) operations:
Depreciation and amortization 2,969 2,840
Gain on sale of assets 165 --
Deferred income taxes (636) (103)
Loss from discontinued operations 4,821 --
Changes in assets and liabilities:
Accounts receivable 2,500 981
Inventories 602 1,744
Other current assets 360 63
Intangible and other assets (712) (117)
Accounts payable and accrued expenses 340 (541)
------- ------
Net cash provided by operations 5,337 4,616
------- ------
Cash flows from investing activities:
Capital expenditures (1,229) (2,641)
------- ------
Net cash used in investing activities (1,229) (2,641)
------- ------
Cash flows from financing activities:
Proceeds from long-term debt 0 458
Repayments of long-term debt (2,375) (2,450)
Issuance of Common Stock - (111)
------- ------
Net cash used in provided by financing activities (2,375) (2,103)
------- ------
Effect of exchange rate changes on cash (6) (146)
------- ------
Change in cash and cash equivalents 1,727 (274)
Cash and cash equivalents at beginning of period 1,947 1,173
------- ------
Cash and cash equivalents at end of period $ 3,674 $ 899
======= ======
See accompanying notes to condensed consolidated financial statements.
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SUN COAST INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company's (defined below) interim financial statements are unaudited
and should be read in conjunction with the consolidated financial
statements and notes thereto in its Form 10-K and Annual Report to
Stockholders for the year ended June 30, 1996.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments, consisting only of those of a normal
recurring nature, necessary for a fair statement of the results of
operations for the interim periods presented.
Description of Business
Sun Coast Industries, Inc. (the "Company") manufactures and sells melamine
and urea resins and compounds and, from these and other materials, molds
consumer products and commercial plastic products, including dinnerware,
drinkware and closures. The Chemical Division manufactures melamine and
urea resins and compounds, which it supplies to other manufacturers and
uses in producing its own consumer products and foodservice products. The
Closures Division manufactures linerless, foil or foam lined and
tamper-evident plastic closures and lids. These closures are used in the
U.S. for bottling and packaging of food, beverage, chemical and
pharmaceutical products. The Consumer Products and Foodservice Divisions,
which are being discontinued (see Note 2), manufacture compression molded
melamine dinnerware and injection molded plastic drinkware and other
houseware products, which the Company sells to American, Canadian and
Mexican retail and commercial markets.
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SUN COAST INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Cont'd)
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries, all of which are wholly-owned. All significant
intercompany balances and transactions have been eliminated in
consolidation. Certain amounts in previously issued financial statements
have been reclassified to conform with the current period financial
statement presentation. The preparation of consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
period. Actual results could differ from the estimates. Certain amounts
in previously issued financial statements have been reclassified to
conform with the current year financial statement presentation.
Inventories
Inventories are valued at the lower of cost or market, with cost
determined utilizing the first-in, first-out (FIFO) method.
Property, Plant and Equipment
Property, plant and equipment are carried at cost and depreciated using
the straight-line method over the estimated useful lives of the related
assets. Lives assigned to asset categories are 5 to 15 years for machinery
and equipment, 30 to 35 years for buildings and 5 years for molds.
Machinery and equipment under capital leases are stated at the present
value of minimum lease payments and amortized over 1 to 3 years. Renewals
and improvements that significantly add to the productive capacity or
extend the useful life of an asset are capitalized. Repairs and
maintenance are charged to expense as incurred.
Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the
expected periods to be benefited, ranging from 5 - 20 years. The Company
assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life
can be recovered through undiscounted future operating cash flows of the
acquired operation. The amount of goodwill impairment, if any, is measured
based on projected discounted future operating cash flows using a discount
rate reflecting the Company's average cost of funds. The assessment of the
recoverability of goodwill will be impacted if estimated future operating
cash flows are not achieved.
Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, on July 1, 1997. This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used
is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceed the fair value
of the assets. Assets to be disposed of are reported at the lower of the
carrying amount or fair value less costs to sell. Adoption of the
Statement did not have a material impact on the Company's financial
position, results of operations, or liquidity.
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SUN COAST INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Cont'd)
Advertising Costs
The Company expenses the costs of advertising as incurred, except for
direct-response advertising and catalog costs which are capitalized and
amortized over their expected periods of future benefit (generally six
months). Direct response advertising and catalog costs consist primarily
of printing and contract services for catalogs to market the Company's
products.
Income Taxes
Deferred income taxes are provided for temporary differences between
financial and tax reporting. Income taxes are provided for taxes currently
payable based on taxable income.
Environmental Costs
A liability for environmental assessments and/or cleanup is accrued when
it is probable a loss has been incurred and is estimable. No significant
liabilities were in existence at December 31, 1996 and June 30, 1996.
Net Income Per Common Share
Net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding during each period
after giving effect to stock options and warrants considered to be
dilutive common stock equivalents.
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SUN COAST INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1 - THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Cont'd)
Revenue Recognition
Sales are recognized when the product is shipped. Sales are shown net of
returns and allowances.
Research and Development
Research and development costs associated with new product development,
application and testing are expensed as incurred.
Statement of Cash Flows
For purposes of the statements of cash flows, the Company considers all
highly liquid investments with original maturities of three months or less
to be cash equivalents.
Foreign Currency Translation and Transactions
The Company's foreign subsidiary uses the local currency as the functional
currency. Translation gains or losses are included as a component of
stockholders' equity. Gains or losses from foreign currency transactions
are included in net income. There were no material gains or losses from
foreign currency translation or transactions prior to 1996. There was a
$69,000 translation loss and a $668,000 translation loss for the six
months ended December 31, 1996 and for fiscal 1996, respectively. There
were no material gains or losses from foreign currency transactions for
the six months ended December 31, 1996 and for fiscal 1996.
NOTE 2 - DISCONTINUED OPERATIONS
On December 6, 1996, the Company's Board of Directors adopted a formal plan
to dispose of its Foodservice and Consumer Products Tableware Divisions.
These divisions have been accounted for as discontinued operations in
accordance with APB 30, which among other provisions, requires the plan of
disposal to be carried out within one year. Management believes this is a
reasonable time period for the disposal. In February, the Company entered
into a letter of intent to sell its Foodservice Division and it has plans
underway to exit the Consumer Products Division.
Based on management's assumptions used in determining the estimated gain or
loss from the disposal of the tableware business, the Company recorded a
provision of $5.025 million, net of income taxes, for the loss on disposal
of the discontinued business in the quarter ended December 31, 1996.
This loss on disposal of discontinued operations resulted from the
estimated net loss on the sale of the Foodservice Division and estimated
net loss on the exit of the Consumer Products Division of approximately
$4.167 million, net of income taxes, as well as estimated operating losses
during the period required to dispose of the divisions of approximately
$858,000, net of income taxes. Sales of the divisions for the two months
and five months of fiscal 1997 prior to the December 6th Board's decision
to discontinue these operations were $3.007 million and $7.678 million,
respectively. Comparable sales for the three and six month periods ended
December 31, 1995 were $5.267 million and $10.431 million, respectively.
The net assets of discontinued operations are summarized as follows:
DECEMBER 31, JUNE 30,
1996 1996
------------ --------
($ in thousands)
Current assets $ 6,458 $ 8,484
Plant, property and equipment 5,729 5,598
Intangible & other assets 586 646
Current liabilities (408) (385)
Accrued expenses (460) (257)
Long term debt (1,000) (1,000)
Deferred taxes (556) (660)
Foreign Currency Translation 737 668
Provision for estimated loss
on disposal (4,821) -
--------- -------
Net assets of discontinued
operations $ 6,265 $13,094
========= =======
NOTE 3 - INVENTORIES
December 31,
1996 June 30,
(unaudited) 1996
------------ --------
(in thousands)
Raw Materials $ 3,238 $ 2,837
Work-in-process 183 328
Finished good 2,856 2,805
---------- --------
6,277 5,970
Obsolescence reserve (665) (559)
---------- --------
$ 5,612 $ 5,411
========== ========
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NOTE 4 - LONG TERM DEBT
December 31,
1996 June 30,
(unaudited) 1996
---------- --------
(in thousands)
Term Loan $ 4,963 $ 5,818
Revolving credit line 12,211 12,659
Capital expenditures term loan 7,341 8,437
Industrial development revenue bonds 2,100 2,175
Capitalized lease obligations 292 192
---------- --------
26,907 29,281
Current maturities on original
maturity schedule (3,240) (2,277)
Long term debt classified as current (12,211) (23,880)
---------- --------
$ 11,456 $ 3,124
========== ========
At December 31, 1996, the Company was not in compliance with two of its
loan covenants on its then existing credit facility: (1) The Company's
Tangible Net Worth (as defined in the credit facility) was below the
required minimum $14,650,000 and (2) the Company's Fixed Charge Coverage
Ratio (as defined in the Credit Facility) was below the required minimum of
1.3 to 1.0.
In January 1997, the Company refinanced its existing debt with a new
lender to provide a total credit facility of $30 million in borrowings
secured by substantially all the assets of the Company. The facility
provides for borrowings under three separate arrangements - (i) a term
loan in an aggregate principal amount of $10 million payable in monthly
installments through January 31, 2000. (ii) a second term loan in an
aggregate principal amount of $5 million payable in monthly installments
beginning January 1, 1998 through January 31, 2000, and (iii) a $15.0
million revolving loan, due January 31, 2000. As of January 31, 1997,
outstanding borrowings under the credit facility included $15 million
under the two term loans, and $8.1 million under the revolving credit
line. At January 31, 1997, based on the Company's borrowing formula
incremental borrowing availability was approximately $3.2 million under
the revolving credit line. The credit facility provides for the issuance
of up to $2.0 million of letters of credit, subject to the borrowing
availability under the revolving credit line. The loan agreement
contains various covenants, including maintaining certain financial ratios
and tests, limitation on the issuance of debt and the amount of capital
expenditures, capital leases, investments and dividends. The primary
financial covenants include quarter end calculations of leverage and
fixed charge coverage and a limitation on annual capital expenditures.
As the Company is currently in compliance with the loan covenants on its
new debt, the long term portions of the term loans previously classified as
a current liability have been reclassified to a long term liability on the
consolidated balance sheet at December 31, 1996.
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Item II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Three Months Ended December 31, 1996, Compared to the Three Months
Ended December 31, 1995 for Continuing Operations
Sales for the three months ended December 31, 1996, increased $2,274,000
or 17.1%, when compared to the same period in 1995. Closure Division's
sales increased 10.7% due to increased market share. Chemical Division's
sales increased 23.4% due to increased customer demand.
Cost of sales as a percentage of net sales decreased to 80.4% from 83.2%.
The improvement in gross margin was primarily the result of stabilized raw
material prices and efficiencies gained from increased sales volume.
Selling, general and administrative expense ("SG&A") increased $461,000
to 14.30% of sales for the three months ended December 31, 1996 as
compared to 13.3% of sales for the three months ended December 31, 1995.
This increase is the result of certain expenses related to the refinancing
of bank debt and costs related to review of various strategic alternatives.
Interest expense has increased $128,000 for the three months ended
December 31, 1996 compared to the three months ended December 31, 1995
due to an increase in interest rates.
Net income from continuing operations increased $101,000 from the
comparable prior fiscal period primarily due to the increased sales
volumes.
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Item II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Six Months Ended December 31, 1996, Compared to the Six Months
Ended December 31, 1995 for Continuing Operations
Sales for the six months ended December 31, 1996, increased $4,061,000
or 14.8%, when compared to the same period in 1995. Closure Division's
sales increased 11.4% and Chemical Division's sales increased 18.0% both
due to increased customer demand.
Cost of sales as a percentage of net sales decreased to 79.9% from 82.9%.
This improvement in gross margin was due primarily to the increased
volume.
Selling, general and administrative expense ("SG&A") increased $559,000.
However, as a percent of sales, it remained fairly constant at 13.4% of
sales for the six months ended December 31, 1996 as compared to 13.3% of
sales for the six months ended December 31, 1995.
Interest expense has increased $236,000 for the six months ended
December 31, 1996 compared to the six months ended December 31, 1995
due to an increase in interest rates.
Net income from continuing operations increased $613,000 from the
comparable prior fiscal period primarily due to increased sales volumes.
Discontinued Operations
On December 6, 1996, the Company's Board of Directors adopted a formal plan
to dispose of its Foodservice and Consumer Products Tableware Divisions.
These divisions have been accounted for as discontinued operations in
accordance with APB 30, which among other provisions, requires the plan of
disposal to be carried out within one year. Management believes this is a
reasonable time period for the disposal. In February, the Company entered
into a letter of intent to sell its Foodservice Division and it has plans
underway to exit the Consumer Products Division.
Based on management's assumptions used in determining the estimated gain or
loss from the disposal of the tableware business, the Company recorded a
provision of $5.025 million, net of income taxes, for the loss on disposal
of the discontinued business in the quarter ended December 31, 1996.
This loss on disposal of discontinued operations resulted from the
estimated net loss on the sale of the Foodservice Division and estimated
net loss on the exit of the Consumer Products Division of approximately
$4.167 million, net of income taxes, as well as estimated operating losses
during the period required to dispose of the divisions of approximately
$858,000, net of income taxes.
Sales of the divisions for the two months and five months of fiscal 1997
prior to the December 6th Board's decision to discontinue these
operations were $3.007 million and $7.678 million, respectively.
Comparable sales for the three and six month periods ended December 31,
1995 were $5.267 million and $10.431 million, respectively. The Consumer
Products and Foodservice Divisions' sales decreased 20.6% and 15.7% for
the three month and six month periods ended December 31, 1996 as compared
to the prior year comparable periods. These sales decreases were a result
of competitive pressures and the downturn in the respective markets. The
lower sales volumes also resulted in decreased gross margins for these
tableware divisions as fixed costs could not be fully absorbed.
Liquidity and Capital Resources
Management reviews the Company's working capital, accounts receivable and
relationship of debt to equity on a continuing basis. The Company's growth
has been financed through long-term debt financing and cash generated from
operations. During the six months ended December 31, 1996, the Company
decreased net borrowings by $2,375,000. Cash flow from operations generated
$5.3 million.
Capital expenditures for the six months ended December 31, 1996 were
$1,229,000. Anticipated future capital additions should approximate less
than $4 million for the remainder of fiscal 1997, including approximately
$2 million for the purchase, in January 1997, of a second facility to
expand capacity in the Closures Division in Florida.
In January 1997, the Company refinanced its existing debt with a new lender
to provide a total credit facility of $30 million in borrowings secured by
substantially all the assets of the Company. The facility provides for
borrowings under three separate arrangements - (i) a term loan in an
aggregate principal amount of $10 million payable in monthly installments
through January 31, 2000, (ii) a second term loan in an aggregate
14
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15
principle amount of $5 million payable in monthly installments beginning
January 1, 1998 through January 31, 2000, and (iii) a $15.0 million
revolving loan, due January 31, 2000. As of January 31, 1997, outstanding
borrowings under the credit facility included $15 million under the two
term loans and $8.1 million under the revolving credit line. At January
31, 1997, based on the Company's borrowing formula incremental borrowing
availability was approximately $3.2 million under the revolving credit
line. The credit facility provides for the issuance of up to $2.0 million
of letters of credit, subject to the borrowing availability under the
revolving credit line. The loan agreement contains various covenants,
including maintaining certain financial ratios and tests, limitation on the
issuance of debt and the amount of capital expenditures, capital leases,
investments and dividends. The primary financial covenants include quarter
end calculations of leverage and fixed charge coverage and a limitation on
annual capital expenditures.
The Company's plan to discontinue its Tableware business should not have an
overall material impact on liquidity. Certain cash proceeds will be
received from the sale of its Foodservice Division and there will be
offsetting cash needs related to severance, relocation and other costs of
discontinuing the Consumer Products Division. The majority of costs related
to the discontinuation of the Tableware business are non-cash.
Currency risks related to the Company's Mexican subsidiary are minimal
except for translation losses as disclosed in Footnote 1. Monetary
transactions not in the subsidiary's functional currency are settled in the
currency of origin thus hedging any exposure to exchange rates.
Disclosures Regarding Forward-Looking Statements
This report on Form 10-Q includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included in this Form
10-Q, including, without limitation, statements contained in this
"Management's Discussion and Analysis of Financial Condition and Result of
Operations" regarding the Company's financing alternatives, financial
position, business strategy, plans and objectives of management of the
Company for future operations, and industry conditions, are
forward-looking statements. Although the Company believes that the
expectations reflected in any such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to
have been correct. Any forward-looking statements herein are subject to
certain risks and uncertainties in the Company's business, including but
not limited to, the intense competition in its markets, its recent
experience of increasing raw material prices, the absence of assurance of
strategic and financing alternatives, Mexican currency fluctuations and
its reliance on certain key customers; all of which may be beyond the
control of the Company. Any one or more of these factors could cause
actual results to differ materially from those expressed in any forward-
looking statement. All subsequent written and oral forward-looking
statements attributable to the Company or person acting on its behalf are
expressly qualified in their entirety by the cautionary statements
disclosed in this paragraph and otherwise in this report.
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SUN COAST INDUSTRIES, INC.
SEPTEMBER 30, 1996
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None.
Item 2 - Changes in Securities
None.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
Item 6 - Exhibits and Reports in Form 8K
(a) Exhibits:
10.1 Financing Agreement between the Company and The CIT
Group/Business Credit, Inc. dated January 31, 1997.
27 Financial Data Schedule
16
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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 Coast Industries, Inc.
------------------------------------------------------
Registrant
2/14/97 By:
- -------- --------------------------------------------------
Date Eddie Lesok, Chief Executive Officer and President
2/14/97 By:
- -------- --------------------------------------------------
Date Cynthia R. Morris, CFO, Secretary and Treasurer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 - Finance Agreement
27 - Financial Data Schedule