FORM 10 - QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
Commission File No. 0-3026
PARADISE, INC.
INCORPORATED IN FLORIDA
IRS IDENTIFICATION NO. 59-1007583
1200 DR. MARTIN LUTHER KING, JR. BLVD.,
PLANT CITY, FLORIDA 33566
(813) 752-1155
"Indicate by check mark whether the registrant has filed all annual,
quarterly and other reports required to be filed with the Commission
within the past 90 days and in addition has filed the most recent
annual report required to be filed. Yes X No__."
"Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date."
Class Outstanding as of September 30,
Common Stock 1996 1995
$0.30 Par Value 519,170 Shares 519,170 Shares
Page 1
PARADISE, INC. COMMISSION FILE NO. 0-3026
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) (1) CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30,
1996 1995*
ASSETS
CURRENT ASSETS
Cash and Unrestricted Demand Deposits $ 32,569 $ 365,066
Accounts and Notes Receivable, Less
Allowances of $-0- (1996 and 1995) 7,129,438 7,564,018
Inventories:
Raw Materials 1,497,398 1,545,406
Work in Process 306,756 270,960
Finished Goods 7,158,994 6,661,468
Deferred Income Tax Asset 202,042 201,367
Income Tax Refund Receivable 0 99,914
Prepaid Expenses and Other Current Assets 395,708 723,026
TOTAL CURRENT ASSETS 16,722,905 17,431,225
Real Estate Investment, at Cost 261,848 261,848
Property, Plant and Equipment, Less
Accumulated Depreciation of $11,976,001
(1996) and $11,677,123 (1995) 5,620,854 5,407,285
Deferred Charges and Other Assets 325,690 238,061
TOTAL ASSETS $22,931,297 $23,338,419
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and Trade Acceptances Payable $ 7,268,063 $ 6,732,272
Current Portion of Long-Term Debt 920,558 882,235
Accounts Payable 2,897,539 3,251,185
Accrued Liabilities 990,924 1,219,674
Federal and State Income Taxes Payable 297,004 364,697
TOTAL CURRENT LIABILITIES 12,374,088 12,450,063
LONG-TERM DEBT, NET OF CURRENT PORTION 2,709,022 3,310,042
DEFERRED INCOME TAX LIABILITY 446,858 605,862
STOCKHOLDERS' EQUITY
Common Stock: Auth; 2,000,000 shs. @ $.30
Par Value; Issued 582,721 (1996 and 1995) 174,926 174,926
Capital in Excess of Par Value 1,288,793 1,288,793
Retained Earnings 6,211,815 5,782,938
Less 63,551 (1996 and 1995) shares at cost
Held in Treasury ( 274,205) ( 274,205)
Total Stockholders' Equity 7,401,329 6,972,452
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $22,931,297 $23,338,419
*Restated for Comparative PurposesPage 2
PARADISE, INC. COMMISSION FILE NO. 0-3026
ITEM 1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995*
Net Sales $9,163,889 $ 9,399,066
Costs and Expenses:
Cost of Goods Sold 5,380,686 5,380,356
Selling, General and Administrative Expense 1,174,477 1,254,217
Depreciation and Amortization 199,594 188,396
Interest Expense - Long Term 89,349 37,232
Interest Expense - Short Term 179,985 255,375
Total Expenses 7,024,091 7,115,566
Other Income 37,136 136,198
Earnings from Operations Before
Provision for Income Taxes 2,176,934 2,419,688
Provision for Income Taxes 203,139 364,697
Net Earnings $1,973,795 $2,054,991
Earnings per Common Share $3.80 $3.96
* Restated for Comparative Purposes
Page 3
PARADISE, INC. COMMISSION FILE NO. 0-3026
Item 1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995*
Net Sales $11,320,119 $11,774,110
Cost s and Expenses:
Cost of Goods Sold 7,492,454 7,534,372
Selling, General and Administrative Expense2,270,525 2,382,445
Depreciation and amortization 569,961 515,517
Interest Expense - Long Term 259,009 160,353
Interest Expense - Short Term 299,418 415,474
Total Expense 10,891,367 11,008,161
Other Income 79,097 145,792
Earnings from Operations
Before Provision for Income Taxes 507,849 911,741
Provision for Income Taxes 203,139 364,697
Net Earnings $ 304,710 $ 547,044
Earnings per Common Share $0.59 $1.05
*Restated for Comparative Purposes
Page 4
PARADISE, INC. COMMISSION FILE NO. 0-3026
Item 1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995*
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 304,709 $ 547,045
Adjustments to Reconcile Net Earnings to Net
Cash Used in Operating Activities
Depreciation and Amortization 569,961 515,517
Gain on Sale of Assets ( 6,935) ( 102,500)
Decrease (Increase) in:
Accounts Receivable (5,997,121) (5,652,576)
Inventories (4,857,651) (4,673,566)
Prepaid Expenses 94,857 ( 90,912)
Increase (Decrease) in:
Accounts Payable 2,148,541 2,674,145
Accrued Expense ( 643,563) ( 245,402)
Income Taxes Payable 109,274 364,697
Net Cash Used in Operating Activities (8,277,928) (6,663,552)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment ( 406,451) ( 233,249)
Proceeds from Sale of Property and Equipment 6,935 102,500
Net Cash Used in Investing Activities ( 399,516) ( 130,749)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds of Short-Term Debt 6,879,757 6,560,636
Proceeds from Issuance of Long-Term Debt 0 325,542
Principal Payments of Long-Term Debt ( 730,002) ( 374,193)
Dividends Paid ( 56,572) 0
Increase in Other Assets ( 106,613) ( 98,942)
Net Cash Provided by Financing Activities 5,986,570 6,413,043
Net Decrease in Cash (2,690,874) ( 381,258)
CASH AT BEGINNING OF PERIOD 2,723,443 746,324
CASH AT END OF PERIOD $ 32,569 $ 365,066
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Issuance of Long-Term Debt to Purchase Equipment $ 497,022
*Restated for Comparative Purposes
Page 5
PARADISE, INC. COMMISSION FILE 0-3026
Item 1. Financial Statements (continued)
(g) Earnings per common share, assuming no dilution, are based on the
weighted average number of shares outstanding during the period: 519,170
(1996 and 1995).
(h) The foregoing information is unaudited, but, in the opinion of
management, includes all adjustments, consisting of normal accruals,
necessary for a fair presentation of the results for the period reported.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Background
As in the past, this analysis begins with the caveat that, in the opinion
of management, only a full year's accounting will yield an accurate
reporting of the Company's financial position and progress.
Paradise's principal segment of business is glace' (candied) fruit,
which is used primarily as an ingredient for Thanksgiving and Christmas
holiday fruit cakes and other confections. As such, 80% of the total
annual sales in this segment are concentrated between the second week in
September and the middle of November each year.
However, in order to meet demand during this relatively short period, the
Company must manufacture, pack and store product for ten to eleven
months prior to this shipping "season", which requires a proportionately
large amount of working capital, and for which ongoing expenses are
accrued with little offset from income. Therefore, it is not uncommon for
financial statements to reflect substantial losses well into the third
quarter.
Also, due to seasonal differences in operations, comparison of the current
quarter with the quarter immediately preceding offers little useful data
in assessing the Company's financial condition. Therefore, this
discussion is limited to a comparison of the first nine months of 1996
with the similar period during the preceding year.
Sales
The decline in total sales volume for the period was nearly 4%. Sales
in the strawberry segment of business were reduced in an amount almost
equal to this total decline, as the Company did not plant strawberry
crops in the autumn of 1995, and, therefore, had no new fresh or frozen
product to sell during 1996. The decision not to plant was made because
of industry-wide large carryover inventories of frozen product, and the
consequent depression of market prices. The relatively limited sales of
Paradise strawberries to date were from inventories existing at the
beginning of the year.
There were differences in other business segments as well. Sales in the
molded plastics segment increased by more than 13%, as the Company's
strategy of discontinuing the manufacture of high-volume, low-profit
items in exchange for higher technology, higher profit products began to
show positive results. Overall net sales of candied fruit products
decreased by about 2% for two principal reasons: (i) timing differences
in the shipping dates for the same customers from 1995 to 1996, and (ii)
higher than anticipated returns of 1995 holiday merchandise, which, in
turn, reduced 1996 sales in a greater magnitude than similar
transactions during the prior year.
Page 6
PARADISE, INC. COMMISSION FILE 0-3026
Since the quarter ends at the very peak of seasonal shipments, a timing
difference of only one working day during the month of September can
result in several hundreds of thousands of dollars of difference in
sales volume for that month and for the third quarter. (As an example,
in subsequent events, the sales volume for the first invoicing day in
October, 1996 exceeded the first invoicing day in October, 1995 by more
than $900,000).
As reported in numerous filings, the Company offers to certain customers
the privilege to return a certain percentage of purchases, for which a
premium is paid. At year-end, the estimated loss in gross profits on
these returns is calculated and reserved, so that returns of prior year
sales will have little impact on the subsequent year's profits. During
1996, returns exceeded estimates, eroding current year sales and income.
These excess returns were generated by a very few customers, who have
attempted to make return policies and practices at the store level into
"profit centers" in and of themselves. As a consequence, Paradise
management has initiated a comprehensive system of reviewing each order
as it is received, and limiting each customer's shipments to a level
that approximates the prior year's net sales, plus a margin for
reasonable growth.
Expenses
Expressed as a percentage of sales, cost of goods sold increased by
about 2%, reflecting increased expenses for (i) several raw materials,
ingredients and supplies; (ii) for government-mandated water effluent
treatment; (iii) a general increase in factory labor expense, driven by
new minimum wage legislation; (iv) costs related to handling the returns
mentioned above; and (v) several other miscellaneous items.
Depreciation and amortization escalated by about 10%, due to some
required capital refurbishment of buildings, and the purchase of new
plastics molding machine to provide more economical packaging for the
Company's own products, and to provide capacity for new demand in this
business segment.
Selling, general and administrative expenses declined by nearly 5%, with
reductions in many line items in this category being offset somewhat by
increases in payroll, royalty expense, warehousing, and several other
miscellaneous expenses.
Total interest expense declined slightly, with the differences in
"long-term" and "short-term" classifications being caused by the
restructuring of Company debt during mid-year 1995.
Income
Other income was reduced materially because the sale of some fully
depreciated equipment during 1995 provided a large share of such income
accrued for that period. Similar sales have not taken place to date
during the current year.
For many of the reasons stated above, after-tax earnings have been
reduced from $1.05 to $.59 per share for the nine months reported
herein. However, only approximately 55% of the anticipated annual
sales have been made to date, with the balance to be made in the fourth
quarter. It remains the opinion of management, therefore, that it would
be premature to predict year-end results at this time.
Page 7
PARADISE, INC. COMMISSION FILE NO. 0-3026
PART II. OTHER INFORMATION
None of the item numbers on captions are applicable to this report and
are, therefore, omitted.
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.
Date: November 10, 1996 PARADISE, INC.
Melvin S. Gordon, President
Eugene L. Weiner, Executive
Vice President, Secretary-Treasurer
Page 8
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<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> $32,569 $365,066
<SECURITIES> $0 $0
<RECEIVABLES> $7,129,438 $7,564,018
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<INVENTORY> $8,963,148 $8,477,834
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<DEPRECIATION> $11,976,001 $11,677,123
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<CURRENT-LIABILITIES> $12,374,088 $12,450,063
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<COMMON> $174,926 $174,926
$0 $0
$0 $0
<OTHER-SE> $7,226,403 $7,147,378
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<CGS> $7,492,454 $7,534,372
<TOTAL-COSTS> $7,492,454 $7,534,372
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<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $558,427 $575,827
<INCOME-PRETAX> $507,849 $911,741
<INCOME-TAX> $203,139 $364,697
<INCOME-CONTINUING> $304,710 $547,044
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $304,710 $547,044
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