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 June 30, 1997
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 June 30,
1997 1996 Common Stock
$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 JUNE 30,
1997 1996*
ASSETS
CURRENT ASSETS
Cash and Unrestricted Demand Deposits $ 55,806 $ 18,059
Accounts and Notes Receivable, Less
Allowances of $-0- (1997 and 1996) 1,067,777 695,026
Inventories:
Raw Materials 2,228,829 2,125,382
Work in Process 291,531 300,301
Finished Goods 7,969,800 8,563,747
Deferred Income Tax Asset 264,006 202,042
Income Tax Refund Receivable 13,875
Prepaid Expenses and Other Current Assets 371,996 563,202
TOTAL CURRENT ASSETS 12,263,620 12,467,758
Real Estate Investment, at Cost 261,848 261,848
Property, Plant and Equipment, Less
Accumulated Depreciation of $12,485,077
(1997) and $11,869,232 (1996) 5,610,199 5,706,814
Deferred Charges and Other Assets 432,747 335,276
TOTAL ASSETS $18,568,414 $18,771,696
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and Trade Acceptances Payable $ 4,287,093 $ 4,502,053
Current Portion of Long-Term Debt 957,992 918,584
Accounts Payable 3,068,516 3,884,747
Accrued Liabilities 908,532 672,700
Federal and State Income Taxes Payable 0 0
TOTAL CURRENT LIABILITIES 9,222,133 9,978,084
LONG-TERM DEBT, NET OF CURRENT PORTION 2,114,529 2,942,083
DEFERRED INCOME TAX LIABILITY 507,722 446,858
STOCKHOLDERS' EQUITY
Common Stock: Auth; 2,000,000 shs. @ $.30
Par Value; Issued 582,721 (1997 and 1996) 174,926 174,926
Capital in Excess of Par Value 1,288,793 1,288,793
Retained Earnings 5,534,516 4,215,157
Less 63,551 (1997 and 1996) shares at cost
Held in Treasury ( 274,205) ( 274,205)
Total Stockholders' Equity 6,724,030 5,404,671
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $18,568,414 $18,771,696
*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
JUNE 30,
1997 1996*
Net Sales $ 1,481,243 $ 981,179
Costs and Expenses:
Cost of Goods Sold 1,130,834 1,350,159
Selling, General and Admin. Expense 672,102 532,620
Depreciation and Amortization 182,997 195,165
Interest Expense - Long Term 72,481 86,309
Interest Expense - Short Term 49,003 119,433
Total Expenses 2,107,417 2,283,686
Other Income 9,778 19,749
Earnings (Loss) from Operations Before
Provision for Income Taxes ( 616,396) (1,282,758)
Provision for Income Taxes 0 0
Net Earnings (Loss) $( 616,396) $(1,282,758)
Earnings (Loss) per Common Share $(1.19) $(2.47)
* 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 SIX MONTHS ENDED
JUNE 30,
1997 1996*
Net Sales $ 2,884,487 $ 2,156,230
Costs and Expenses:
Cost of Goods Sold 2,267,408 2,125,678
Selling, General and Admin Expense 1,260,261 1,105,003
Depreciation and amortization 359,772 370,367
Interest Expense - Long Term 149,559 169,660
Interest Expense - Short Term 51,091 119,433
Total Expense 4,088,091 3,890,141
Other Income 34,662 41.961
Earnings (Loss) from Operations
Before Provision for Income Taxes (1,168,942) (1,691,950)
Provision for Income Taxes 0 0
Net Earnings (Loss) $(1,168,942) $(1,691,950)
Earnings (Loss) per Common Share $(2.25) $(3.26)
*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 SIX MONTHS ENDED
JUNE 30,
1997 1996*
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $(1,168,942) $(1,691,950)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities
Depreciation and Amortization 359,772 370,367
Decrease (Increase) in:
Accounts Receivable 440,188 437,291
Inventories (6,450,314) (6,883,933)
Income Tax Receivable ( 13,043)
Prepaid Expenses ( 31,855) ( 72,635)
Increase (Decrease) in:
Accounts Payable 2,400,910 3,135,749
Accrued Expense ( 693,838) (1,055,652)
Income Taxes Payable ( 176,958) ( 93,865)
Net Cash Used in Operating Activities (5,334,080) (5,854,628)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Property and Equipment ( 520,746) ( 302,751)
Net Cash Used in Investing Activities ( 520,746) ( 302,751)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds of Short-Term Debt 4,029,593 4,113,747
Principal Payments of Long-Term Debt ( 395,391) ( 498,915)
Dividends Paid ( 51,954) ( 56,572)
Increase in Other Assets ( 98,545) ( 106.265)
Net Cash Provided by Financing Activitie 3,483,703 3,451,995
Net Decrease in Cash (2,371,123) (2,705,384)
CASH AT BEGINNING OF PERIOD 2,426,929 2,723,443
CASH AT END OF PERIOD $ 55,806 $ 18,059
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
PROCEEDS OF LONG-TERM DEBT USED TO:
Purchase Equipment $139,352 $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
(1997 and 1996).
(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
The Company's primary segment of business, glace' (candied) fruit, a
Thanksgiving and Christmas holiday confection which accounted for
approximately 88% of total sales during 1996 is extremely seasonal, with
about 80% of sales in this segment being made in a 10 - 12 week period
during the late third quarter and early fourth quarter each year.
Therefore, as stated in all interim financial statements, it is the
opinion of management that only a full year's reporting offers a
reliable basis for the analysis of operating results.
In order to satisfy demand during this relatively short period, the
Company begins building inventories early in the year. Also, harvest
cycles for some of the fruits used as raw materials require that the
Company position supplies eighteen months, or more, prior to their use.
All of these factors dictate the need to borrow relatively large amounts
of interim working capital, and, since there is very little income to
offset ongoing expenses, operating losses are accrued well
into the third quarter, even during years of relatively high earnings.
For these same reasons, the magnitude of operations varies materially
from one quarter to the next, and, in the opinion of management,
analysis of the comparison between quarters is not productive.
Therefore, this discussion is limited to comparing the current
year-to-date with a like period during the prior year.
Total net sales during the first half of 1997 were approximately 19%
higher than those in the first half of 1996, but, while giving cause for
optimism, this is deemed not necessarily to be indicative of an annual
trend for two reasons:
(1) Much of the net increase was due to a reduction in returns of
prior year sales during the quarter. It has been a long-standing
industry practice to allow certain customers to return a percentage of
purchases after the holiday season. However, during recent years a
number of supermarket chains have begun abusing this privilege by
converting returns and "reclamations" into profit centers, in and of
themselves. During 1996, Paradise limited orders for merchandise to
the prior year's net sales, plus a reasonable margin for growth. The
result of this policy during the current year was a reduction in returns
of approximately 25%.
(2) Total net sales during the quarter represent only 14% of total
1995 annual sales, a ratio fairly consistent with most prior years.
Further, most of the sales to date were not in the higher-margin candied
fruit sales.
Page 6
PARADISE, INC. COMMISSION FILE 0-3026
Due to a continuing surplus of frozen inventory on the West Coast, the
Company again elected not to process strawberries during the Florida
harvest season (mid-December through mid-April), and, therefore, had
little product available for sale.
Sales in the plastics segment of business continued to improve, with a
more than 19% increase as compared to the first six months during 1996.
After several years of pruning unprofitable sales and redirecting
efforts toward higher technology products, it is the opinion of
management that the plastics division is in a much improved strategic
position for profitable growth.
Expressed as a percentage of sales, costs of goods sold declined. Some
of this reduction can be attributed to lower handling charges and
inventory adjustments related to smaller merchandise returns, as
outlined above. However, like sales, costs to date represent only a
fraction of the total costs anticipated for the year. Management
forecasts some cost increases, especially in factory labor expenses
(stimulated by two minimum wage increases), and mandated environmental
protection measures.
Comparatively speaking, selling, general and administrative expenses
increased about 13% over a wide range of line items, including payroll,
brokerage, freight, warehousing, legal and audit, and pension fund
accruals. Depreciation and amortization remained relatively stable.
Net interest expense to date was approximately 30% lower, reflecting
smaller average interim working capital borrowings and improved rates,
as well as a decline in total term debt of more than 20%.
Earnings (losses) improved significantly as compared to the first half
of 1996. However, with more than 86% of anticipated annual sales yet to
be made, management issues its often repeated caveat: It is far too
early in the year to predict annual performance with any degree of
certainty.
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: August 5, 1997 PARADISE, INC.
s/ Melvin S. Gordon
Melvin S. Gordon, President
s/ Eugene L. Weiner
Eugene L. Weiner, Executive Vice
President, Secretary-Treasurer
Page 8
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<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> JUN-30-1997 JUN-30-1996
<CASH> $55,806 $18,059
<SECURITIES> $0 $0
<RECEIVABLES> $1,067,777 $695,026
<ALLOWANCES> $0 $0
<INVENTORY> $10,490,160 $10,989,430
<CURRENT-ASSETS> $12,263,620 $12,467,758
<PP&E> $18,095,276 $17,576,046
<DEPRECIATION> $12,485,077 $11,869,232
<TOTAL-ASSETS> $18,568,414 $18,771,696
<CURRENT-LIABILITIES> $9,222,133 $9,978,084
<BONDS> $3,072,521 $3,860,667
<COMMON> $174,926 $174,926
$0 $0
$0 $0
<OTHER-SE> $6,549,104 $5,229,745
<TOTAL-LIABILITY-AND-EQUITY> $18,568,414 $18,771,696
<SALES> $2,884,487 $2,156,230
<TOTAL-REVENUES> $2,919,149 $2,198,191
<CGS> $2,267,408 $2,125,678
<TOTAL-COSTS> $2,267,408 $2,125,678
<OTHER-EXPENSES> $359,772 $370,367
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $200,650 $289,093
<INCOME-PRETAX> $(1,168,942) $(1,691,950)
<INCOME-TAX> $0 $0
<INCOME-CONTINUING> $(1,168,942) $(1,691,950)
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $(1,168,942) $(1,691,950)
<EPS-PRIMARY> $(2.25) $(3.26)
<EPS-DILUTED> $(2.25) $(3.26)
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