UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year Ended December 31, 1995
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
TELEPHONE NO. 813-752-1155
Securities Registered Under Section 12 (b) of the Exchange Act:
None
Securities Registered Under Section 12 (g) of the Exchange Act:
Name of Each Exchange
Title of Each Class On Which Registered
Common Stock,
$.30 Par Value 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, and
(2) has been subject to such filing requirements for the past 90 days.
Yes x No___
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclo-
sure will 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-KSB or any amendment to this
Form 10-KSB. Yes x No___
Issuer's revenues for its most recent fiscal year: $20,013,900
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant, $1,868,103 (as of January 31,
1996, bid price $6.75)
Class Outstanding at December 31, 1995
Common Stock,
$.30 Par Value 519,170 Shares
PARADISE, INC.
1995 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1. Description of Business I-1 - I-5
Item 2. Description of Property I-5 - I-6
Item 3. Legal Proceedings I - 6
Item 4. Submission of Matters to a Vote of
Security Holders I - 6
PART II
Item 5. Market for Common Equity and
Related Stockholder Matters II-1 - II-2
Item 6. Management's Discussion and Analysis or
Plan of Operation II-2 - II-6
Item 7. Financial Statements II-7 - II-28
Item 8. Changes In and Disagreements with Accountants
On Accounting and Financial Disclosure II - 29
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons, Compliance with Section 16(a) of
The Exchange Act III-1 - III-2
Item 10. Executive Compensation III-2 - III-4
Item 11. Security Ownership of Certain Beneficial Owners
And Management III-4 - III-5
Item 12. Certain Relationships and Related Transactions III - 6
Item 13. Exhibits and Reports on Form 8-K III-6 - III-7
SIGNATURES
PART I
Item 1. Description of Business
(a) Business Development
Paradise, Inc., was incorporated under the laws of the State of
Florida in September, 1961 as Canaveral Utilities and
Development Corporation. After the acquisition and merger of
several other assets, the Corporation was renamed Paradise Fruit
Company, Inc. in February, 1964, and the corporate name was
changed again to Paradise, Inc. during July, 1993. There have
been no bankruptcies, receiverships, or similar proceedings during
the corporation's history. There have been no material
reclassifications, mergers, consolidations, purchases or sales of a
significant amount of assets not in the ordinary course of business
during the past three years.
(b) The Company's operations are conducted through two business
segments. These segments, and the primary operations of each,
are as follows:
BUSINESS SEGMENT OPERATION
Candied Fruit Production of
candied fruit, a
basic fruitcake
ingredient, sold to
manufacturing
bakers, institutional
users, and retailers
for use in home
baking. Also, the
processing of
frozen strawberry
products, for sale to
commercial and
institutional users
such as preservers,
dairies, drink
manufacturers, etc.,
and the repackaging
and sale of edible
nuts.
Molded Plastics Production of
plastic containers
and other molded
plastics for sale to
various food
processors and
others.
I-1
Item 1. Description of Business (Continued)
The Company knows of no other manufacturer in the Western
Hemisphere whose sales of glace' (candied) fruit is equal to, or
even approaches, those of Paradise, Inc. While there are no
industry statistics published, from the generally reliable sources
available, management believes that Company brands account for
75-80% of all candied fruit sold in supermarkets and other grocery
outlets in the USA.
This marketing dominance was reinforced by the acquisition,
during 1994, of exclusive use of the customer lists, trademark and
rights for the sale of "Pennant Brand" candied fruit products at the
supermarket retail level. Through a newly formed, wholly-owned
subsidiary, these rights added more than $3.1 million to Company
net sales during 1995.
"Pennant Brand" glace' fruit products were formerly manufactured
and sold by a competitor, who maintained rights for the sale of
these products at the institutional level, and who has a preeminent
market share in the sale of both candied and maraschino cherries.
Total cost for these "Pennant" rights was a payment of 20% in
royalties on the net sales of that brand during 1994, and payment
of 5% in royalties of brand net sales during ensuing years.
In terms of candied fruit dollar sales, during 1995, approximately
23% were shipped to manufacturing bakers and other institutional
users, with the balance being sold through supermarkets and other
retail outlets for ultimate use in the home.
Sales to retail outlets are usually generated through registered food
brokers operating in exclusively franchised territories. This
method of distribution is widely accepted in the food industry
because of its efficiency and economy. Other fruit sales, and
almost all plastics sales, are made directly by the Company's own
personnel.
The principal raw materials used by the Company are fruits, fruit
peels, corn syrups, nut, both raw and roasted and salted, and
plastic resins. Most of these materials are readily accessible from
a number of competitive suppliers. The supply and prices may
fluctuate with growing and crop conditions, factors common to all
agricultural products. Edible nut pricing is particularly volatile,
and subject to typical commodity fluctuations based on supply,
demand, and future expectations. Feed stocks for some plastic
resins are petroleum related and may be subject to supply and
demand fluctuations in this market.
The trademarks "Paradise", "Dixie", "Mor-Fruit" and "Sun-Ripe"
are registered with the appropriate Federal and State authorities for
use on the Company's candied fruit. These registrations are kept
current, as required, and have a value in terms of customer
recognition. The Company is also licensed to use the trademarks
"White Swan", "Queen Anne", "Palm Beach", "Golden Crown,"
and "Pennant" in the sale of candied fruit.
I-2
Item 1. Description of Business (Continued)
The demand for fruit cake materials is highly seasonal, with over
86% of sales in these items occurring during the months of
September, October and November. However, in order to meet
delivery requirements during this relatively short period, the
Company must process candied fruit and peels for approximately
ten months during the year. Also, the Company must acquire the
fruits used as raw materials during their seasonal growing periods.
These factors result in large inventories, which require financing
to meet relatively large short-term working capital needs.
The packaging and sale of edible nuts began during 1993. The
Company's marketing strategy for these new products was to sell
edible nuts, particularly those used in home baking, in the same
type of packaging, and together with, candied fruit. It is
customary for most supermarkets to display all items related to
holiday baking in close proximity to one another.
While edible nuts are sold on a more year-round basis, given the
Company's selling strategy of combining nut with candied fruit,
this category is seasonal also. This factor becomes increasingly
significant as management attempts to coordinate buying and/or
positioning of nut deliveries at advantageous pricing, while filling
the anticipated needs for seasonally concentrated shipments to
customers. In certain varieties of nuts, there is as much as a ten
month interval between harvest and the time the Company
requires deliveries for packing and shipment. Sales in this
category totaled $352,742 during 1995.
Also during 1993, and through another wholly owned subsidiary,
the Company launched an enterprise for the growing and selling
of strawberries, both fresh and frozen. Plant City, Florida, the
location of the Company's manufacturing facilities and main
office, styles itself as the "The Winter Strawberry Capital"
because of the relatively large volume of fruit that is grown and
harvested locally, mostly from December through April of each
season. However, once competing fresh berries from the West
Coast of the USA begin finding their way to market, the price of
Florida fruit begins to diminish, and local growers had no other
market for their product.
Originally, management discerned a market niche to be exploited,
both for the Company and for local growers, by beginning to
freeze strawberries no longer competitive in the fresh fruit market,
and offer them for sale to commercial and institutional consumers
in the eastern U.S., where a distinct freight cost advantage existed.
After a modest start during 1993, sales aggregated more than $1.6
million during 1994. However, a number market conditions
changed, including the NAFTA international trade agreement.
This increased the volatility and the exposure to risk, so, during
1995, the Company produced only that for which they had firm
purchase commitments, and sales declined to almost $667,000
during the year.
Some molded plastics container demand is seasonal, by virtue of
the fact that a substantial portion of sales are made to packers of
food items and horticultural interests, with well defined growing
and/or harvest seasons.
In the opinion of management, the seasonal nature of some
plastics sales does not have a significant impact upon the working
capital requirements of the Company.
I-3
Item 1. Description of Business (Continued)
During the first three months of the year, the Company does
contract with certain commercial bakers for future delivery of
quantities representing a substantial portion of the sales of fruit
cake materials to institutional users. Deliveries against these
contracts are completed prior to the close of the fiscal year ending
December 31.
Many of the commercial bakers and other institutional accounts
face the same seasonal demands as the Company, and must
contend with similar short-term working capital needs. The
Company accommodates some of these customers with extended
payment terms of up to ninety days.
By the same token, many suppliers offer similar extended payment
terms to the Company.
It is a trade practice to allow some supermarket chains to return
candied fruit products that remain unsold at year-end, an option
for which they normally pay an up-charge. A provision for the
estimated losses on retail returns is included in the Company's
financial statements, for the year during which the sales are made,
under accrued expenses.
During 1995, the Company sold nearly 9% of its consolidated
revenues to the affiliated companies, Wal-Mart Stores, Inc. and
Sam's Club. These affiliated companies are not related to
Paradise, Inc. Sales to each of these affiliates are made separately,
and each is shipped a different brand of fruit products and invoiced
by a separate Paradise subsidiary.
While there is no industry-wide data available, management
estimates that the Company sold approximately 60-70% of all
candied fruits and peels consumed in the U.S. during 1995. The
Company knows of two competitors; however, it estimates that
none of these has as large a share of the market as the Company's.
Edible nuts are packaged in a variety of ways by a large number
of suppliers, many of whom are major U.S. corporations.
Management is not able to estimate the total value of the market,
but is certain that the Company's share is extremely small.
The molded plastics industry is very large and diverse, and
management has no reasonable estimate of its total size. Many
products produced by the Company are materials for its own use
in the packaging of candied fruits for sale at the retail level.
Outside sales represent approximately 64% of the Company's total
plastics production at cost, and, in terms of the overall market, are
insignificant.
I-4
Item 1. Description of Business (Continued)
In the above business segments, it is the opinion of management
that price, which is to include the cost of delivery, is the largest
single competitive factor, followed by product quality and
customer service.
Given the above competitive criteria, it is the opinion of
management, that the Company is in a favorable position.
During the past 5-7 years, the Company has made capital
investments approaching $1 million in order to comply with the
growing body of environmental regulations. These have included
the building of screening and pretreatment facilities for water
effluent, installation of devices for controlling the quality of air
emissions, and removing underground fuel storage tanks to
approved above ground locations. All of these facilities are
permitted by governmental authorities at various levels, and are
subjected to periodic testing as a condition of permit maintenance
and renewal. All required permitting is currently in effect, and the
Company is in full compliance with all terms and conditions stated
therein.
By local ordinance, it is required that all water effluent is metered,
tested and discharged into a municipal industrial waste treatment
plant. During 1995, costs for this discharge exceeded $225,000,
and management estimates that all expenses directly related to
compliance with environmental regulations total well over
$275,000 annually.
The Company employs between 140 and 275 people, depending
upon the season.
The Company conducts operations principally within the United
States. Foreign activities are not material.
Item 2. Description of Property
(a) Built in 1961, the plant is located in a modern industrial
subdivision at Plant City, Florida, approximately 20 miles east of
the City of Tampa. It is served by three railroad sidings, and has
paved road access to three major state and national highways. It
has productive and warehouse facilities of nearly 350,000 sq. ft.
During 1985, the Company acquired approximately 5.2 acres
immediately adjacent to, and to the West of, its main plant
building. Several buildings and a truck weight scale existed on the
property. Some of these facilities have been significantly updated,
remodeled, and/or rebuilt and are being used for the strawberry
processing operation, begun in 1993. Other facilities, in excess of
the Company's current needs, are leased to others.
The Company owns its plant facilities and other properties subject
to a secured note and real estate mortgages.
I-5
Item 2. Description of Property (Continued)
Because of the unique processing methods employed for candied
fruit, much of the equipment used by the Company is designed,
built and assembled by the Company's employees. The Company
considers its plant one of the most modern, automated plants in the
industry. The equipment consists of vats, dehydrators, tanks, giant
evaporators, carbon filter presses, syrup pumps and other
scientifically designed processing equipment. Finished retail
packages are stored in air-conditioned warehouses, if required.
Regarding molded plastic manufacturing, most equipment is
normally available from a number of competitive sources. The
molds used for specialized plastic products must be individually
designed and manufactured, requiring substantial investment, and
are considered proprietary.
(b) Included in the balance sheet, carried as "Investment", is
approximately 4,785 acres of unimproved real estate in Brevard
County, Florida, shown at its cost of $261,848.
Because of a long-standing agreement with the U.S. Army Corp
of Engineers and the appropriate water management district of the
State of Florida, there were virtually no real estate taxes on this
property from the date of that agreement through 1988. During
1989 an assessment of taxes was declared by Brevard County,
Florida, a negotiated settlement of this assessment was reached
and paid during 1992, 1993 and 1994, and is included in the
Company's expenses during those years. The Company has
indicated that it would entertain any reasonable offers for the
purchase of this property, but, to date, no offers acceptable to the
Company have been made.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
I-6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) The following table shows the range of closing bid prices for the
Company's Common Stock in the over-the-counter market for the
calendar quarters indicated. The quotations represent prices in the
over-the-counter market between dealers in securities, do not
include retail mark-up, mark-down, or commissions and do not
necessarily represent actual transactions.
BID PRICES
High Low
1995
First Quarter 6 1/2 6 1/2
Second Quarter 6 1/2 6 1/2
Third Quarter 6 1/2 6 1/2
Fourth Quarter 6 3/4 6 1/2
1994
First Quarter 6 1/2 6
Second Quarter 6 6
Third Quarter 6 6
Fourth Quarter 6 1/2 6 1/2
(b) Approximate Number of Equity Security Holders
As of December 31, 1995, the approximate number of holders of
record of each class of equity securities of the Registrant were:
NUMBER OF
TITLE OF CLASS HOLDERS OF RECORD
Common Stock, $.30 Par Value 323
Dividend History and Policy
The Company has declared dividends of $.10 (1995) and $.00
(1994 and 1993). Dividends have been declared and paid
annually, when warranted by profitability and permitted by
lending agreements.
The Company does not have a standard policy in regards to the
declaration and payment of dividends. Each year dividend
payments, if any, are determined upon consideration of the current
profitability, cash flow requirements, investment outlook and other
pertinent factors.
II-1
Item 5. Market for Common Equity and Related Stockholder Matters
(Continued)
Dividend History and Policy (Continued)
Under the terms of a loan agreement dated May 29, 1986 as
amended on August 4, 1989, July 31, 1990, May 11, 1992, May
28, 1993, May 31, 1994 and amended and restated June 8, 1995,
declaration of dividends had been limited. For December 31,
1993 declaration of dividends were limited to the lesser of 20% of
net earnings or $150,000 provided that the Company had attained
certain minimum net worth levels as defined in the loan
agreement. For the year ended December 31, 1994, no dividends
could be declared. For the year ended December 31, 1995,
dividend restrictions were eliminated and a $.10 per share
dividend was declared.
Item 6. Management's Discussion and Analysis or Plan of Operation
Summary
The following tables set forth for the periods indicated (I)
percentages which certain items in the financial data bear to net
sales of the Company and (ii) percentage increase of such item as
compared to the indicated prior period.
RELATIONSHIP TO PERIOD TO PERIOD
TOTAL REVENUE INCREASE (DECREASE)
YEAR ENDED DECEMBER 31, YEARS ENDED
1995 1994 1993 1995-94 1994-93
NET SALES:
Candied Fruit
and Nuts 88.1% 85.0% 78.8% - 5.6% 34.8%
Molded
Plastics 11.9 15.0 21.2 - 28.0 - 11.8
100.0 100.0 100.0 - 8.9 24.9
Cost of Sales 66.7 70.2 77.1 - 13.4 13.5
Selling, General
and Admini-
strative
Expense 20.6 20.5 19.9 - 8.6 28.6
Depreciation
and Amorti-
zation 4.0 3.8 4.9 - 6.0 - 2.3
Interest
Expense 3.7 3.4 3.8 - 2.5 11.5
Earnings
from
Operations 5.0 2.1 - 5.7 129.1 142.2
Other Income .8 .4 .9 61.2 - 38.7
Earnings
Before Pro-
vision for
Income
Taxes 5.8 2.5 - 4.8 117.4 159.6
Provision for
Income
Taxes 2.2 .9 2.1 138.6 151.9
Net Earnings 3.6% 1.6%- 2.7% 106.3% 167.7%
II-2
(1) Liquidity
Management is not aware of any demands, commitments, events or
uncertainties that will result in, or are reasonable likely to result in, a
material increase or decrease in the Company's liquidity. One trend to be
noted is the Company's ability over the past three years to materially
decrease its short-term debt position while maintaining a consistent level
of inventory. As discussed in footnote 4 of the Company's financial
statements, a line of credit is available to the Company to finance short-
term working capital needs.
(2) Capital Resources
The Company does not have any material outstanding commitments for
capital expenditures. Management is not aware of any material trends
either favorable or unfavorable in the Company's capital resources.
Item 6. Management's Discussion and Analysis or Plan of Operation
(Continued)
(3) Results of Operations
1995 Compared to 1994
1995 was a watershed year for Paradise, Inc; a year during which
a number of policies and directions were changed. During 1994,
the directors and management carefully assessed corporate
policies, objectives and operating procedures. They were
motivated by operating results during 1993, the only loss year in
the Company's then thirty-three year history.
After painstaking analysis, a new, or renewed, management
philosophy emerged. Simple in its goals and profound in its
effect, this new philosophy incorporated greater focus on core
products, elevating net cash flow objectives to a level almost equal
to profitability, making risk aversion one ofthe primary criteria in
planning growth strategies, and "right sizing" the balance sheet by
achieving a better balance between long and short term debt, and
improving the overall relationship between total liabilities and
equity.
The successful execution of these policies is amply demonstrated
by comparing the Company's 1995 Financial Statements with
those of the prior year, both of which are included as part of this
report.
II-3
Item 6. Management's Discussion and Analysis or Plan of Operation
(Continued)
(3) Results of Operations (Continued)
1995 Compared to 1994 (Continued)
Total sales declined by slightly more than $1.96 Million, or nearly
9%. However, almost all of this decrease was by design, asthe
Company withdrew from unprofitable markets that heretofore had
eroded profits from other operations and/or resulted in substantial
inventory write-downs. These markets include, but are not limited
to, the growing, processing and sale of fresh and frozen strawberry
products, the manufacture and sale ofsome injection molded
plastics, and the repackaging and sale of edible nuts.
In the strawberry market, there was an overabundance at harvest
and a carryover of frozen product in the very large growing areas
on the west coast of the U.S. Therefore, the Company produced
and sold only that for which it had confirmed purchase orders
from customers at the time of harvest. As to injected molded
plastics, at one time the Company generated nearly $1.5 Million
in profitable sales by manaufacturing the one-pint baskets used in
the distribution of fresh produce. Shrinking profits and the
substantial investment required for retooling to meet technological
advances resulted in abandonment of that market. And due to the
extreme volatilty of the commodity aspects of the edible nut
business the Company took a very conservative approach in the
marketing of these products.
Expressed as a percentage of sales, the costs of goods sold
declined to 66.7% during 1995, as compared to 70.2% a year
earlier. Significant expenses were saved in the withdrawal from
the markets, discussed above. Selling, general and administrative
expenses were reduced by approximately $387,000, in large part
due to the lower percentage paid in royalties on licensed sales.
Some of these reductions were offset by higher administrative and
sales salaries, and increased costs for brokerage, commissions,
freight and outside warhousing.
Depreciation and amortization were reduced by about 6%, as some
expiring schedules were not replaced by new investments. Interest
expense was reduced slightly, mostly due to lower rates on shor-term
borrowings. Other income inceased somewhat because the
Company sold some fully depreciated and obsolete plastics
molding equipment.
Net earnings more than doubled to $1.39 per share from $.67 per
share, due to the cost reductions and improved efficiencies
reported above.
II-4
Item 6. Management's Discussion and Analysis or Plan of Operation
(Continued)
(3) Results of Operations (Continued)
1994 Compared to 1993
Through acquisition of exclusive rights for the use of the
trademark and sales of a former competitor's candied fruit
products, growth in the new product lines introduced during 1993,
drastic reorganization of certain commodity buying policies, and
the institution of comprehensive cost containment measures, the
Company was able to improve income from operations by almost
$1.5 million.
Total sales increased by almost 25%, nearly all of which was
attributable to the newly added "Pennant Brand" candied fruit,
which accounted for about $3.2 million, and the increase in sales
of fresh and frozen strawberry products, which grew by
approximately $1.2 million.
The only segment of business in which sales declined was plastics,
which recorded a reduction of more than 12%. This was primarily
due to the Company's continuing withdrawal from the market for
one pine baskets for fresh strawberries, in which profitability has
been seriously eroded by the pricing of imports from Mexico, and
in which styles and configurations are in a state of change. To
maintain a level of sales reached two and three years ago, the
Company would be required to make material investments in new
tooling, which is not considered prudent at this time.
As a percentage of sales, costs of good sold were little more than
70%, as compared to the nearly 75% during 1993 (for the reasons
stated in "Management's Discussion" of 1993 operations).
Selling, general and administrative expenses increased by $1
million, but over $730,000 of that amount was due to 20%
royalties paid on "Pennant Brand" sales, discussed above, and the
balance of the increase was attributable to other expenses directly
related to increased sales. Administrative salaries and other
administrative expenses actually declined.
Interest expenses increased by nearly 13%, due both to a higher
premium-over-prime rate charged by the Company's lender, and
because of the continued escalation of the prime rate during the
year. The lender agreed, during 1994 negotiations for loan
renewal, that the premium-over-prime rate charged would be
reduced during 1995, providing that the Company complied with
certain covenants of the loan documents during the term of the
agreement. These conditions were satisfied. In addition,
inventories and carrying charges had been cut significantly and
short term borrowings had been reduced materially by year-end.
II-5
Item 6. Management's Discussion and Analysis or Plan of Operation
(Continued)
(3) Results of Operations (Continued)
1994 Compared to 1993 (Continued)
Depreciation and amortization was somewhat reduced, as
repayment of debt took priority over replacement of depreciated
capital assets. In that regard, the Consolidated Statement of Cash
Flows indicates payments of $577,000 in payment of principal of
long-term debt, and a repayment of more than $2.2 million in
short-term debt.
Year end statements reflect over $1.5 million of a "balloon" on a
term note, due in July, 1995 as part of the Current Portion of
Long-Term Debt. In events subsequent to closing, the Company
is negotiating with its current lender to refinance this "balloon".
It is obvious that new sales and effective cost containment have
produced a significant turnaround in the Company's profitability.
It should be noted here that the 20% royalties paid during 1994 on
the sale of "Pennant Brand" products will be reduced to 5% in
1995 and in subsequent years. It is, therefore, the opinion or
management that conditions leading to 1993's historic losses have
been corrected, and that current circumstances indicate growth and
profitability into the foreseeable future.
II-6
Item 7. Financial Statements
INDEPENDENT AUDITORS' REPORT
February 23, 1996
To The Board of Directors
and Shareholders of
Paradise, Inc.
Plant City, FL 33566
We have audited the accompanying consolidated balance sheets of Paradise, Inc.,
and subsidiaries as of December 3l, l995, 1994, and l993, and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the yearsthen ended. These financial statements are the responsibil
ty of the Company'smanagement. 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. Thosestandards 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Paradise, Inc.,
and subsidiaries as of December 3l, l995, 1994, and l993, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Respectfully submitted,
BELLA, HERMIDA, GILLMAN & COMPANY
Certified Public Accountants
Plant City, Florida
II-7
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
1995 1994 1993
CURRENT ASSETS:
Cash $ 2,723,443 $ 746,324 $ 673,854
Accounts Receivable, Net
of Allowance for Doubtful Accounts
of $ -0-
1,132,317 1,911,442 1,656,451
Inventories 4,105,497 3,804,268 5,187,470
Prepaid Expenses and Other
Current Assets 481,782 632,114 550,194
Deferred Income Tax Asset 202,041 200,173 177,254
Income Tax Refund Receivable 8,783 99,914
Total Current Assets 8,653,863 7,394,235 8,245,223
INVESTMENTS:
Real Estate, at Cost 261,848 261,848 261,848
PROPERTY, PLANT AND EQUIPMENT:
Net of Accumulated Depre-
ciation of $11,514,234
(1995), $11,304,633
(1994) and $10,581,885
(1993) 5,257,538 5,651,267 6,194,355
OTHER ASSETS 248,772 177,297 192,481
TOTAL ASSETS $14,422,021 $13,484,647 $14,893,907
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
1995 1994 1993
CURRENT LIABILITIES:
Short-Term Debt $ 388,306 $ 2,171,636 $ 4,404,476
Accounts Payable 748,998 577,040 374,336
Accrued Expenses 1,634,487 1,460,421 902,234
Dividends Payable 56,572 4,655 4,655
Accrued Taxes on Income 93,864
Current Portion of Long-Term
Debt 844,679 2,142,270 567,660
Total Current Liabilities 3,766,906 6,356,022 6,253,361
LONG-TERM DEBT, NET OF CURRENT
PORTION 3,017,881 98,658 2,250,981
DEFERRED INCOME TAX LIABILITY 540,723 604,668 314,728
Total Liabilities 7,325,510 7,059,348 8,819,070
STOCKHOLDERS' EQUITY:
Common Stock, $.30 Par Value,
2,000,000 Shares Authorized,
582,721 Shares Issued, 519,170
Shares Outstanding 174,816 174,816 174,816
Capital in Excess of Par Value 1,288,793 1,288,793 1,288,793
Retained Earnings 5,907,107 5,235,895 4,885,433
Less: Common Stock in Treasury,
at Cost, 63,551 Shares ( 274,205) ( 274,205) ( 274,205)
Total Stockholders' Equity 7,096,511 6,425,299 6,074,837
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $14,422,021 $13,484,647 $ 14,893,907
The Accompanying Notes are an Integral Part of These Financial Statements
II-9
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
1995 1994 1993
NET SALES $20,013,900 $21,976,182 $ 17,593,818
COSTS AND EXPENSES:
Cost of Goods Sold 13,309,577 15,419,318 13,137,550
Loss on Write-Down of Inventory to Market 44,445 7,885 450,596
Selling, General and Administrative
Expenses 4,116,155 4,503,412 3,500,727
Depreciation and Amortization 798,918 850,200 870,083
Interest Expense 736,613 755,303 677,515
Total Costs and Expenses 19,005,708 21,536,118 18,636,471
EARNINGS (LOSS) FROM OPERATIONS 1,008,192 440,064 ( 1,042,653)
OTHER INCOME, NET 148,205 91,948 149,974
EARNINGS (LOSS) BEFORE PROVISION FOR INCOME
TAXES AND CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 1,156,397 532,012 ( 892,679)
PROVISION FOR INCOME TAXES (BENEFIT) 433,268 181,550 ( 349,813)
EARNINGS (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 723,129 350,462 ( 542,866)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING FOR INCOME TAXES ( 25,113)
NET EARNINGS (LOSS) $ 723,129 $ 350,462 $( 517,753)
EARNINGS (LOSS) PER SHARE:
Primary Earnings (Loss) Per Share $ 1.39 $ .67 $(1.00)
Assuming Full Dilution $ 1.39 $ .67 $(1.00)
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
CAPITAL IN
COMMON EXCESS OF RETAINED TREASURY
STOCK PAR VALUE EARNINGS STOCK TOTAL
Balance, December 31,
1992 $174,816$1,288,793 $ 5,403,186 $(274,205) $ 6,592,590
Net Loss ( 517,753) ( 517,753)
Balance, December 31,
1993 174,816 1,288,793 4,885,433 (274,205) 6,074,837
Net Earnings 350,462 350,462
Balance, December 31,
1994 174,816 1,288,793 5,235,895 (274,205) 6,425,299
Cash Dividends
Declared, $.10 per
Share ( 51,917) ( 51,917)
Net Earnings 723,129 723,129
Balance, December 31,
1995 $174,816$1,288,793 $ 5,907,107 $(274,205) $ 7,096,511
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 3l,
1995 l994 l993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings (Loss) $ 723,129 $ 350,462 $( 517,753)
Adjustments to Reconcile Net Earnings (Loss)
to Net Cash Provided by (Used in)
Operating Activities:
Increase (Decrease) in Net Deferred
Income Tax Liability ( 63,945) 267,021 137,474
Depreciation and Amortization 798,918 850,200 870,083
Gain on Sale of Assets ( 67,888) ( 8,023) ( 4,281)
Decrease (Increase) in:
Accounts Receivable 779,115 ( 254,992) 51,015
Inventories ( 301,229) 1,383,201 ( 278,515)
Prepaid Expenses 150,351 ( 81,921) 5,266
Refund Receivable 91,131 ( 99,914)
Increase (Decrease) in:
Accounts Payable 171,958 202,704 ( 215,319)
Accrued Expenses 174,066 558,187 ( 383,004)
Accrued Taxes on Income 93,864 ( 910,297)
Net Cash Provided by (Used in) Operating
Activities 2,549,470 3,166,925 (1,245,331)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property, Plant and
Equipment ( 452,793) ( 274,521) ( 824,116)
Proceeds From Sale of Assets 165,532 10,000 9,425
Net Cash Used in Investing
Activities ( 287,261) ( 264,521) ( 814,691)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds (Repayments) of
Short-term Debt 216,670 (2,232,840) 2,894,215
Proceeds from Issuance of
Long-term Debt 136,932
Principal Payments on Long-term
Debt ( 515,300) ( 577,714) ( 681,612)
Dividends ( 51,917) ( 93,458)
Increase in Other Assets ( 71,475) ( 19,380) ( 17,896)
Net Cash Provided by (Used in) Financing
Activities ( 285,090) (2,829,934) 2,101,249
Net Increase in Cash 1,977,119 72,470 41,227
CASH, at Beginning of Year 746,324 673,854 632,627
CASH, at End of Year $ 2,723,443 $ 746,324 $ 673,854
II-12
PARADISE, INC.
AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31
1995 1994 1993
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash Paid During the Year for:
Interest $699,304 $ 713,644 $684,697
Income Taxes (Refund) $414,000 $( 78) $276,972
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Long-Term Debt Issued:
Equipment Purchases $ $ $22,529
Refinancing of Long-Term Debt $2,063,068
Refinancing of Short-Term Debt $2,000,000
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
The Accompanying Notes are an Integral Part of These Financial Statements
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
The preparation of 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE l: PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, after elimination of all material
inter-company transactions and profits.
NOTE 2: INVENTORIES
1995 1994 l993
Supplies $ 84,416 $ 85,040 $ 104,913
Raw Materials 877,943 978,961 1,368,662
Work in Progress 248,894 281,936 314,050
Finished Good 2,894,244 2,458,331 3,399,845
TOTAL $4,105,497 $3,804,268 $5,187,470
Inventories are valued at the lower of cost (first-in, first-out) or
market. Cost includes material, labor and factory overhead.
Substantially all inventories are pledged as collateral for certain
short-term obligations.
NOTE 3: PROPERTY, PLANT AND EQUIPMENT
1995 l994 l993
Land and Improvements $ 830,806 $ 825,006 $ 825,006
Buildings and Improvements 4,476,937 4,364,623 4,348,926
Machinery and Equipment 11,464,029 11,766,271 11,602,308
Total 16,771,772 16,955,900 16,776,240
Less: Accumulated
Depreciation 11,514,234 11,304,633 10,581,885
NET $ 5,257,538 $ 5,651,267 $ 6,194,355
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 3: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Property, plant and equipment are stated at cost. Generally, the
straightline method is used in computing depreciation. Estimated useful
lives of plant and equipment are:
Years
Buildings and Improvements 10-30
Machinery and Equipment 3-10
Expenditures which significantly increase values or extend useful lives
are capitalized. Expenditures for maintenance and repairs are charged
to expense as incurred. Upon sale or retirement of property, plant
and equipment, the cost and related accumulated depreciation are
eliminated from the respective accounts and the resulting gain or loss
is included in the current earnings.
All of the real property and machinery and equipment are pledged as
collateral for certain short-term and long-term obligations.
NOTE 4: SHORT-TERM DEBT
1995 l994 1993
Note payable, bank, collateralized by
accounts receivable, inventories,
and real and personal property. $ $2,125,000 $3,890,000
Trade acceptances, letters of credit
and other short-term debt. 199,696 46,636 514,476
Note payable, bank, collateralized
by equipment. 188,610
TOTAL $ 388,306 $2,171,636 $4,404,476
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 4: SHORT-TERM DEBT (CONTINUED)
The average monthly borrowings and weighted average interest rates
were determined by month-end balances. Non-interest bearing letters of
credit were included in the aggregate figures.
WEIGHTED AVERAGE
l995 AMOUNT INTEREST RATE
Average bank short-term borrowings
(monthly) $ 3,155,220 8.90%
Average aggregate short-term
borrowings (monthly) $ 4,798,769 7.69%
Maximum aggregate short-term
borrowings (at any month-end) $ 9,647,115
WEIGHTED AVERAGE
1994 AMOUNT INTEREST RATE
Average bank short-term borrowings
(monthly) $ 5,148,583 9.30%
Average aggregate short-term
borrowings (monthly) $ 6,447,638 8.19%
Maximum aggregate short-term
borrowings (at any month-end) $ 9,633,719
WEIGHTED AVERAGE
l993 AMOUNT INTEREST RATE
Average bank short-term borrowings
(monthly ) $ 4,753,148 7.37%
Average aggregate short-term
borrowings (monthly) $ 6,100,638 6.60%
Maximum aggregate short-term
borrowings (at any month-end) $11,193,067
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
NOTE 4: SHORT-TERM DEBT (CONTINUED)
Pursuant to an agreement of May 29, 1986, as amended on August 4, 1989,
July 31, 1990, May 11, 1992, May 28, 1993, May 31, 1994 and amended and
restated on June 8, 1995, a bank agreed to advance the Company 80% of the
Company's eligible receivables and 75% of the Company's eligible
inventory. Interest is payable monthly and is computed at prime plus
1%. Principal is due the earlier of on demand or May 31, 1996.
This agreement is subject to certain conditions which must be met for the
Company to continue borrowing including, among other things, maximum
annual capital expenditures, debt service coverage and debt to equity
ratios, and a resting period provision.
The amount available to be drawn down based on the available collateral
at December 31, 1995 was $2,551,335, at December 31, 1994, was
$1,538,770, and at December 31, 1993, was $1,164,931.
NOTE 5: LONG-TERM DEBT
1995 1994 1993
Prime plus 2% note, collateralized
by accounts receivable, inventories,
and real and personal property.
Monthly payments of $21,528 plus
interest. $ $1,959,028 $2,217,361
Prime plus 2% note, collateralized by
accounts receivable, inventories and
equipment. Monthly payments of $8,333
plus interest. 116,667 216,667
Prime plus 2% note, collateralized by
accounts receivable, inventories and
equipment. Monthly payments of
$8,073 plus interest. 32,300
Prime plus 2% note, collateralized
by accounts receivable, inventories
and equipment. Monthly payments of
$3,721 plus interest. 14,885 59,540
Prime plus 1% note, collateralized
by accounts receivable, inventories and
equipment. Monthly payments of $70,000
plus interest. 3,850,000
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
NOTE 5: LONG-TERM DEBT (CONTINUED)
1995 1994 1993
Prime plus 2% note, collateral-
ized by accounts receivable,
inventories and equipment.
Monthly payments of $5,341
plus interest. 133,522 197,612
Noninterest bearing obligation for
Covenant Not to Compete.
Monthly payment of $1,250. 23,750
Noninterest bearing obligation for
Covenant Not to Compete. Annual
payment of $1,000. 2,000
Noninterest bearing obligation for
equipment. Annual payment of
$30,000. 30,000
9.26% obligation under capital
lease. Monthly payments of $471,
including interest. 12,560 16,826 39,411
Total Debt 3,862,560 2,240,928 2,818,641
Less Current Portion 844,679 2,142,270 567,660
LONG-TERM DEBT $3,017,881 $ 98,658 $2,250,981
The aggregate principal amounts maturing in each of the five subsequent
years are:
1996 $ 844,679
1997 845,132
1998 842,749
1999 840,000
2000 490,000
Total $3,862,560
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 6: LEASES
The Company has certain equipment leases which are classified as capital
leases. At December 3l, l995, 1994, and 1993, the amount capitalized was
$22,529, $22,529, and $287,609, respectively, and the amount recognized
as an obligation was $12,560, $16,826, and $39,411, respectively, which
has been included in long-term debt shown in Note 5.
The Company leases automobiles under operating leases ranging in length
from thirty to sixty months. Lease payments charged to operations
amounted to $48,852 (1995), $52,446 (1994), and $50,998 (1993).
At December 31, 1995, future minimum payments required under leases with
terms greater than one year, and the present value of minimum capital
lease payments, were as follows:
OPERATING
YEARS ENDING DECEMBER 3l, CAPITAL LEASES LEASES
1996 $ 5,647 $ 40,871
1997 5,647 27,173
1998 2,824 24,548
Total Minimum Lease Payments 14,118 $ 92,592
Less Amount Representing Interest 1,558
PRESENT VALUE OF FUTURE MINIMUM
CAPITAL LEASE PAYMENTS $ 12,560
NOTE 7: ACCRUED EXPENSES
1995 l994 1993
Accrued Payroll and Bonuses $ 297,849 $ 124,310 $ 84,553
Accrued Brokerage Payable 328,281 286,545 210,976
Accrued Pension Cost (Note 188,502 286,683 166,219
Provision for Unrealized Profit
on Retail Returns 356,000 316,000 194,000
Accrued Royalties and Other 147,843 146,186 51,462
Accrued Credit Due to Customers 186,181 181,816 84,250
Accrued Insurance Payable 129,831 118,881 110,774
TOTAL $1,634,487 $1,460,421 $902,234
As a part of its normal sales policy, the Company allows some
customers to return unsold, retail packed, candied fruit after the
holiday season. A provision for the unrealized profit on these
estimated returns is shown above under "provision for unrealized
profit on retail returns".
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 8: RETIREMENT PLAN
The Company and its subsidiaries have a defined benefit pension plan
covering all employees who become eligible for participation in the
plan on the semiannual date following one year of service (l,000 hours
worked) and the attainment of age 21. The total pension cost for l995,
1994, and l993 was $20,318, $120,464, and $202,182, respectively, which
includes amortization of past service cost over 10 years. The Company
makes annual contributions to fund the plan equal to the amounts
deductible for Federal Income Tax purposes. The benefit formula being
used is known as the frozen initial liability cost method. The plan's
assets consist of both fixed income assets and whole life insurance
contracts. The plan has no significant nonbenefit liabilities.
Net pension cost for 1995, 1994 and 1993 included the following
components:
1995 1994 1993
Service Cost - Benefits Earned
During the Period $ 75,040 $ 174,990 $ 199,840
Interest Cost on Projected
Benefit Obligation 178,703 181,433 188,846
Actual Return on Plan Assets (450,255) 261,708 (323,437)
Net Amortization and Deferral 216,830 (497,667) 136,933
Net Periodic Pension Cost $ 20,318 $ 120,464 $ 202,182
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated financial statements at December
31, 1995, 1994 and 1993:
Actuarial present value of benefit obligations:
1995 1994 1993
Accumulated Benefit Obligation,
Including Vested Benefits of
$2,524,011, $2,001,269, and
$2,273,993, respectively $2,624,116 $2,095,655 $2,449,489
Projected Benefit Obligation for
Service Rendered to Date $(3,029,472) $(2,466,978) $(3,197,365)
Plan Assets at Fair Value 3,161,796 2,737,723 3,025,078
(Projected Benefit Obligation in
Excess of Plan Assets) Plan Assets
in Excess of Projected Benefit
Obligation 132,324 270,745 ( 172,287)
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 8: RETIREMENT PLAN (CONTINUED)
Unrecognized Net (Gain) Loss From
Past Experience Different From
That Assumed and Effects of
Changes in Assumptions 25,796 ( 188,967) 164,671
Prior Service Cost ( 437,218) ( 474,006) ( 279,097)
Unrecognized Net Obligation at
October 1, 1987, Amortized Over
15 Years, Net of Amortization 90,596 105,545 120,494
Accrued Pension Cost Included
in Accrued Expenses $( 188,502) $( 286,683) $( 166,219)
The following economic assumptions are used:
1995 1994 1993
Weighted Average Discount Rate 6.25% 7.25% 5.75%
Rate of Increase in Future Compensation 4.62% 4.66% 5.50%
Expected Long-Term Rate of Return 7.50% 7.50% 7.50%
In amortizing prior service costs, a straight-line amortization of the
cost over the average remaining service period of employees expected to
receive benefits under the plan is used.
NOTE 9: PROVISION FOR FEDERAL AND STATE INCOME TAXES
The provisions for income taxes are comprised of the following amounts:
YEAR ENDED DECEMBER 31
1995 1994 1993
CURRENT:
Federal $ 460,864 $ 230,086 $
State 38,217
499,081 230,086
DEFERRED:
Federal ( 69,987 250,856 (290,137)
State 4,174 16,165 ( 59,676)
( 65,813) 267,021 (349,813)
REFUND FROM NOL CARRYBACK (315,557)
TOTAL PROVISION FOR INCOME
TAXES (BENEFIT) $ 433,268 $ 181,550 $(349,813)
II-21
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 9: PROVISION FOR FEDERAL AND STATE INCOME TAXES
(CONTINUED)
A reconciliation of the differences between the effective income tax rate
and the statutory Federal income tax rate follows:
YEAR ENDED DECEMBER 31
1995 1994 1993
Income Taxes Computed at Statutory
Rate $393,175 $180,884 $(303,512)
State Income Tax, Net of Federal
Income Tax Benefit 27,978 ( 40,095)
Other, Net 12,115 666 ( 6,206)
PROVISION FOR INCOME TAXES $433,268 $181,550 $(349,813)
EFFECTIVE TAX RATE 37.5% 34.1% (39.2)%
NOTE l0: EARNINGS PER COMMON SHARE
Primary and fully diluted earnings per common share are based on the
weighted average number of shares outstanding and assumed to be
outstanding during the year (519,170 shares in 1995, 519,508 shares in
l994 and 520,093 shares in l993 for primary) and (519,170 shares in 1995,
519,747 shares in 1994 and 520,093 shares in 1993 for fully diluted).
Refer to note 12 for discussion of stock options.
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 11: BUSINESS SEGMENT DATA
The Company's operations are conducted through four business
segments. These segments, and the primary operations of each, are as
follows:
BUSINESS SEGMENT OPERATION
Candied Fruit Production of candied fruit, a
basicfruitcake ingredient, sold to
manufacturing bakers,
institutional users, and retailers
for use in home baking.
Molded Plastics Production of plastic containers
and other molded plastics for sale
to various food processors and
others.
*Edible Nuts Packaging and distribution of
bulk and retail packaged edible
nuts.
*Frozen Strawberry Products Growing and processing of
and Fresh Strawberries strawberries and frozen
strawberry products for
preservers, dairies and drink
manufacturers.
* For purposes of segment disclosure for 1995, edible nuts and
strawberry product information will be included in candied fruit.
YEAR ENDED YEAR ENDED YEAR ENDED
NET SALES IN EACH SEGMENT 1995 l994 l993
Candied Fruit:
Sales to Unaffiliated Customers $17,641,613 $16,441,601 $12,855,026
Molded Plastics:
Sales to Unaffiliated Customers 2,372,287 3,294 ,672 3,735,713
Edible Nuts:
Sales to Unaffiliated Customers 615,079 601,277
Strawberry Products:
Sales to Unaffiliated Customer 1,624,830 401,802
NET SALES $20,013,900 $21,976,182 $17,593,818
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 11: BUSINESS SEGMENT DATA (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED
1995 l994 l993
THE OPERATING PROFIT OF
EACH SEGMENT IS LISTED BELOW
Candied Fruit $ 5,354,892 $ 5,179,973 $ 3,087,765
Molded Plastics 602,056 382,885 642,326
Edible Nuts 4,444 ( 583,161)
Strawberry Products 222,453 74,116
OPERATING PROFIT OF SEGMENTS 5,956,948 5,789,755 3,221,046
General Corporate Expenses, Net (4,212,143) (4,594,388) (3,586,184)
Interest Expense ( 736,613) ( 755,303) ( 677,515)
Other Income 148,205 91,948 149,974
EARNINGS (LOSS) BEFORE PROVISION
FOR INCOME TAXES $ 1,156,397 $ 532,012 $( 892,679)
Operating profit is composed of net sales, less direct costs and overhead
costs associated with each segment. Due to the high degree of integration
between the segments of the Company, it is not practical to allocate general
corporate expenses, interest, and other income between the various segments.
IDENTIFIABLE ASSETS OF EACH YEAR ENDED YEAR ENDED YEAR ENDED
SEGMENT ARE LISTED BELOW 1995 l994 l993
Candied Fruit $ 7,002,360 $ 7,401,801 $ 8,115,678
Molded Plastics 2,361,566 2,355,067 2,986,927
Edible Nuts 40,145 174,070
Strawberry Products 716,653 794,532
Identifiable Assets 9,363,926 10,513,666 12,071,207
General Corporate Assets 5,058,095 2,970,981 2,822,700
TOTAL ASSETS $14,422,021 $13,484,647 $14,893,907
II-24
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
NOTE 11: BUSINESS SEGMENT DATA (CONTINUED)
Identifiable assets by segment are those assets that are principally
used in the operations of each segment. General corporate assets are
principally cash, land and building, and investments.
DEPRECIATION AND AMORTIZATION
EXPENSE OF EACH SEGMENT IS YEAR ENDED YEAR ENDED YEAR ENDED
LISTED BELOW 1995 l994 l993
Candied Fruit $472,691 $486,876 $481,726
Molded Plastics 280,278 291,535 325,524
Edible Nuts
Strawberry Products 15,381 11,946
Segment Depreciation and
Amortization Expense 752,969 793,792 819,196
General Corporate Depreciation
and Amortization Expense 45,949 56,408 50,887
TOTAL DEPRECIATION AND
AMORTIZATION EXPENSE $798,918 $850,200 $870,083
CAPITAL EXPENDITURES OF EACH YEAR ENDED YEAR ENDED YEAR ENDED
SEGMENT ARE LISTED BELOW 1995 l994 l993
Candied Fruit $292,460 $117,082 $565,483
Molded Plastics 130,959 107,640 131,986
Edible Nuts
Strawberry Products 32,040 71,660
Segment Capital Expenditures 23,419 256,762 769,129
General Corporate Capital
Expenditures 29,374 17,759 77,516
TOTAL CAPITAL EXPENDITURES $452,793 $274,521 $846,645
The Company conducts operations only within the United States. Foreign
sales are insignificant; primarily all sales are to domestic
companies.
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 12: STOCK OPTION
On August 23, 1990, the Company granted to a member of the Board of
Directors an option to purchase 5,000 shares of the Company's common
stock. The option was exercisable at any time over a five year period at
$5.75 per share, the market bid price on the date the option was
granted. This stock option expired on August 23, 1995 without being
exercised.
NOTE 13: DIVIDEND RESTRICTION
Under the terms of a loan agreement dated May 29, 1986, as amended
August 4, 1989, July 31, 1990, May 11, 1992, May 28, 1993, May 31,
1994, and amended and restated on June 8, 1995, declaration of dividends
had been limited. For December 31, 1993 dividends were limited to the
lesser of 20% of net earnings, or $150,000, provided that the Company
attained certain minimum net worth levels as defined in the loan
agreement. For December 31, 1994, no dividends could be declared. A
$.10 per share dividend was declared for December 31, 1995 as dividend
restrictions were eliminated.
NOTE 14: MAJOR CUSTOMER
The Company sells more than 9% of its consolidated revenues to the affil-
iated companies Wal-Mart Stores, Inc. and Sam's Club. These affiliated
companies are not related to Paradise, Inc. in any way. Sales to each of
these affiliates are made separately, and each is shipped a different
brand of fruit products and invoiced by a separate Paradise, Inc.
subsidiary. The loss of sales to either or both of these affiliated
companies could, and in fact did, have a material adverse effect on
operating earnings. During 1993 Wal-Mart Stores, Inc. did not offer
glace fruit products to its customers. Glace fruit products were
offered in 1995 and 1994.
NOTE 15: CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash equivalents and
unsecured trade receivables. The Company's cash equivalents are
maintained with several financial institutions located in Florida.
Accounts at each institution are secured by the Federal Deposit Insurance
Corporation up to $100,000. Uninsured balances aggregate to $2,433,821
at December 31, 1995. The Company grants credit to customers,
substantially all of whom are located in the United States. The
Company's ability to collect these receivables is dependent upon
economic conditions in the United States and the financial condition of
its customers.
II-26
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l995, 1994, AND 1993
NOTE 16: INCOME TAXES
The Company has adopted Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" (FAS 109). Under the
provisions of FAS 109, an entity recognizes deferred tax assets and
liabilities for future tax consequences of events that have been
previously recognized in the Company's financial statements or tax
returns. The measurement of deferred tax assets and liabilities is
based on provisions of the enacted tax law; the effects of future
changes in tax laws or rates are not anticipated.
Under FAS 109, measurement is computed using applicable current tax
rates (34% for Federal 1995 and 5.5% for State 1995). Adoption of FAS
109 did not have a material effect on the Company's consolidated
financial statements. Prior years' financial statements have not been
restated.
As of December 31, 1994, the Company had a net tax operating loss
(NOL) carryforward of approximately $278,000 available to offset its
1995 State income tax liability.
Significant components of the Company's deferred tax assets and
liabilities at December 31, 1995, 1994 and 1993 were:
1995 1994 1993
Deferred Tax Assets resulting from:
Net Operating Loss Carryforward $ $ 10,075 $337,992
Inventory Valuation 67,482 71,187 107,564
Book Provision for Loss of Profits 133,963 118,911 69,690
Other 596 1,194 1,791
Total Deferred Tax Assets 202,041 201,367 517,037
Deferred Tax Liabilities Resulting from:
Tax over Book Depreciation 540,723 605,862 654,511
Total Deferred Tax Liabilities 540,723 605,862 654,511
Net Deferred Tax Liability $ 338,682 $ 404,495 $137,474
The Net Deferred Tax Liability is
Reflected in the Balance Sheet Under
These Captions:
Deferred Income Tax Asset $(202,041) $(200,173) $(177,254)
Deferred Income Tax Liability 540,723 604,668 314,728
$ 338,682 $ 404,495 $ 137,474
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994, AND 1993
NOTE 17: QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data is summarized as follows:
QUARTER ENDED
1995 March 31 June 30 September 30 December 31
NET SALES $1,256,491 $1,118,553 $9,399,067 $8,239,789
GROSS PROFI 464,602 195,313 4,018,711 2,025,697
NET EARNINGS (LOSS) (316,880)(1,153,857) 1,945,926 247,940
EARNINGS PER COMMON
SHARE (LOSS) $ (0.61) $ (2.22) $3.74 $0.48
QUARTER ENDED
1994 March 31 June 30 September 30 December 31
NET SALES $ 2,328,496 $ 1,896,208 $9,587,673 $ 8,163,805
GROSS PROFIT 516,908 193,443 4,105,504 1,733,124
NET EARNINGS (LOSS) ( 438,600) ( 771,529) 1,616,865 ( 56,274)
EARNINGS (LOSS)
PER COMMON SHARE $( .84) $(1.49) $3.10 $ .67
QUARTER ENDED
1993 March 31 June 30 September 30 December 31
NET SALES $ 1,294,855 $ 1,785,308 $6,851,683 $ 7,661,972
GROSS PROFIT 245,402 283,772 2,505,966 970,532
NET EARNINGS
(LOSS) ( 603,515) ( 771,367) 1,092,689 ( 235,560)
EARNINGS (LOSS)
PER COMMON SHARE $(1.16) $(1.49) $2.09 $( .44)
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
II-29
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16 (a) of the Exchange Act
(a) Directors of the Registrant
Frank A. Weaner - Chairman of the Board of Directors of
Registrant, 87 years old. Term of
office will expire at next
stockholders' meeting.
Officer with the Registrant
for past 34 years except for
period during 1972 and
1973 when he served as a
management consultant to
the Registrant.
Melvin S. Gordon - President of the Registrant, 62
years old. Term of office will
expire at next stockholders'
meeting. Officer with
Registrant past 31 years.
Eugene L. Weiner - Director and Executive Vice-President,
Secretary and
Treasurer of the Registrant, 64
years old. Term of office will
expire at next stockholders'
meeting. Officer with
Registrant past 30 years.
S.D. Fuller - Director, 87 years old. Term
of office expired on June 14,
1995. Investment Banker,
S.D. Fuller & Co.
Randy S. Gordon - Vice President for Plastics Sales
of the Registrant, 40 years old.
Term of office will expire at
next stockholders' meeting.
Employee of Registrant past 17
years.
Tracy W. Schulis - Vice President for Fruit Sales of
the Registrant, 39 years old.
Term of office will expire at
next stockholders' meeting.
Employee of Registrant past 16
years.
Mark H. Gordon - Vice President, Manager of Fruit
Manufacturing. 33 years old.
Term of office will expire at
next stockholders' meeting.
Employee of Registrant past 10
years.
(a) Executive Officers of the Registrant
Frank A. Weaner - Chairman of the Board of
Directors, 87 years old. Term of
office will expire at next annual
directors' meeting. Officer with
the Registrant for past 34 years
except for period during 1972
and 1973 when he served as a
management consultant to the
Registrant.
Melvin S. Gordon - President, 62 years old. Term of
office will expire at next annual
directors' meeting. Officer with
Registrant past 31 years.
Eugene L. Weiner - Executive Vice-President,
Secretary, Treasurer, 64 years
old. In charge of operations.
Term of office will expire at
next annual directors' meeting.
Officer with Registrant past 30
years.
III-1
Item 9. Directors and Executive Officers of the Registrant (Continued)
(b) Not Applicable
Family Relationships
Melvin S. Gordon is son-in-law to Frank A. Weaner, Parent of
Registrant.
Frank A. Weaner, Parent of Registrant, is uncle to Eugene L.
Weiner.
Melvin S. Gordon is first cousin by marriage to Eugene L.
Weiner.
Melvin S. Gordon is the father of Randy S. Gordon and Mark
H. Gordon and the father-in-law of Tracy W. Schulis.
(d) Not Applicable
Item 10. Executive Compensation
(a) and (b) The following information is set forth with respect to all
remuneration paid or accrued by the Company and its
subsidiaries during the year ended December 31, 1995 to its
officers and directors as a group. Pursuant to regulation S-B Item
402 (a)(2)(I) and (ii) the Company's six most highly paid
executive officers or directors, included in the group total, whose
total remuneration exceeds $100,000 are separately listed.
III-2
Item 10. Executive Compensation (Continued)
COMPENSATION
SALARIES, FEES,
NAME OF INDIVIDUAL DIRECTORS' FEES, ESTIMATED
AND CAPACITY COMMISSIONS AND ANNUAL BENEFITS
IN WHICH SERVED BONUSES (1) (2) PAYABLE (3) (6)
All Directors and
Officers as a Group
(7 Persons) $1,230,150
Frank A. Weaner,
Chairman of the
Board and Director $ 302,599 (4) (5)
Melvin S. Gordon,
President and
Director $ 294,266 $66,972
Eugene L. Weiner,
Executive Vice-
President and
Director $ 263,384 $64,716
Randy S. Gordon,
Vice-President
and Director $ 128,549 $51,084
Tracy W. Schulis,
Vice-President
and Director $ 122,343 $50,676
Mark H. Gordon,
Vice-President
and Director $ 109,010 $47,844
NOTES TO THE ABOVE TABLE
1. Personal benefits consist of charges for the personal use of
Company automobiles and PS-58 Costs.
2. A deferred compensation plan was approved by The Board of
Directors during 1995 to be funded beginning in 1996.
3. These amounts are computed actuarially according to the
Retirement Plan of the Company assuming certain facts as
follows: a) that the participant remains in the service of the
Company until his normal retirement date at age 65; b) that the
participant's earnings increase 4.62% annually during the
remainder of his service until retirement age subject to the
maximum annual compensation limits established by law; and
c) that the plan be continued without substantial modification.
4. Includes $21,600 paid to Mr. Weaner for monthly rental on
that part of his home used by Mr. Weaner as an office.
5. Withdrew from the retirement plan during the year ended
December 31, 1984.
6. As of the latest available actuarial valuation date.
III-3
Item 10. Executive compensation (Continued)
S.D. Fuller, who resigned for health reasons in June, 1995,
received an annual director's fee of $10,000 plus reimbursement
of any travel expenses incurred in conjunction with the Board of
Directors meetings. In recognition of his 30 years of service, he
was awarded an annual stipend of $10,000 for five years, or
until his demise.
(d) Options, Warrants, or Rights
On August 23, 1990, the Company granted to Director Fuller an
option to purchase 5,000 shares of the Company's treasury
stock. The option is exersiable at any time over a five year
period at $5.75 per share, the bid price on the date the option
was granted. This option expired August 23, 1995 without
being exercised.
(e) Long-Term Incentive Plan Awards Table
Not Applicable
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) The following table sets forth as of December 31, 1995,
information concerning the beneficial ownership of the common
stock of the Company by the persons who own, are known by
the company to own, or who the Company has been advised
have filed with the S.E.C. declarations of beneficial ownership,
of more than 5% of the outstanding common stock.
AMOUNT & NATURE
NAME AND ADDRESS OF TITLE OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER CLASS OWNERSHIP (1) OF CLASS
Frank A. Weaner Common
4901 Lyford Cay Road
Tampa, Florida Stock 146,460 28.2%
Melvin S. Gordon Common
13603 Waterfall Way
Tampa, Florida Stock 60,892 11.7
TOTAL 207,352 39.9%
III-4
Item 11. Security Ownership of Certain Beneficial Owners and
Management (Continued)
(b) Beneficial ownership of common stock held by all directors and
officers of the Company as a group:
AMOUNT
AND NATURE
TITLE OF OF BENEFICIAL PERCENT
CLASS OWNERSHIP (1) OF CLASS
Directors and
Officers
As a Group Common 242,414 46.7
Frank A. Weaner Common 146,460 28.2
Melvin S. Gordon Common 60,892 11.7
Eugene L. Weiner Common 19,300 3.7
Randy S. Gordon Common 6,104 1.2
Tracy W. Schulis Common 4,571 .9
Mark H. Gordon Common 4,062 .8
Stephen D. Fuller Common 1,025 .2
(1) The nature of the beneficial
ownership for all shares is sole
voting and investment power.
The Company knows of no contractual arrangements which
may at a subsequent date result in a change in control of the
Company.
Item 12. Certain Relationships and Related Transactions
None
III-5
Item 13. Exhibits and Reports on Form 8-K
PAGE
(a) Exhibit (3) - Articles of
Incorporation
and By-Laws Incorporated
By Reference
Exhibit (11) - Statement Re:
Computation of Per
Share Earnings II -22
Exhibit (21) - Subsidiaries
of the Small Business
Issuer III - 7
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
the year ended December 31, 1995.
III-6
Item 13. Exhibit 21 - Subsidiaries of the Small Business Issuer
STATE OF
INCORPORATION
Fruit Traders, Inc. Florida
White Swan Products, Inc. Florida
Sun-Ripe Fruit Products, Inc. Florida
F.T. Properties, Inc. Florida
Paradise Growers, Inc. Florida
Pennant Fruit Products, Inc. Florida
III-7
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
__________________________ PARADISE, INC.
Date
Melvin S. Gordon
President
In accordance with the Exchange Act this report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.
s/ Frank A. Weaner Chairman of the Board ___________
Frank A. Weaner Principal Executive Officer Date
s/ Melvin S. Gordon President and Director ___________
Melvin S. Gordon Date
s/ Eugene L. Weiner Executive Vice President
Eugene L. Weiner And Director-Principal
Financial and Account-
ing Officer __________
Date
s/ Randy S. Gordon Vice President and
Randy S. Gordon Director ___________
Date
s/ Tracy W. Schulis Vice President and
Tracy W. Schulis Director __________
Date
s/ Mark H. Gordon Vice President and
Mark H. Gordon Director __________
Date
