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, 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
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
disclosure 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: $22,008,437
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant, $3,716,710 (as of January 31,
1998, bid price $13.38)
Class Outstanding at December 31, 1997
Common Stock,
$.30 Par Value 519,170 Shares
PARADISE, INC.
1997 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-7
Item 7. Financial Statements II-8 - II-29
Item 8. Changes In and Disagreements with Accountants
On Accounting and Financial Disclosure II - 30
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,
for the Company's products, and
other molded plastics for sale
to unaffiliated customers.
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 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 position in the market 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 wholly-owned subsidiary,
these rights added $3.1 million to Company net sales during 1997.
"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 the following four
years, and the agreement is renewable at the option of the
Company for twenty years thereafter.
In terms of candied fruit dollar sales, during 1997, 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, nuts, 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. Net sales in
this category totaled $150,248 during 1997.
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 of 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.
During 1996 and 1997, there existed an industry-wide excess
carryover inventory of frozen product, which materially depressed
selling prices. Therefore, the Company elected to neither grow or
process strawberries during those years, and sell only that
inventory of frozen products which had been carried over from the
prior season. Sales totaled $71,000, during 1997.
I-3
Item 1. Description of Business (Continued)
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.
During the first three months of the year, the Company contracts
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 1997, the Company derived more than 11% of its consolidated
revenues from sales 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 were made
separately, and each is shipped a different brand of fruit products
, and is invoiced by a separate Paradise subsidiary. In addition,
slightly more than 5% of consolidated revenues were sales to
various divisions of Winn-Dixie Stores, Inc. In this case, also,
sales of a specific subsidiary brand to each of the divisions were
made individually, and shipments were made and invoiced accordingly.
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 1997. The Company
knows of two major competitors; however, it estimates that none of
these has as large a share of the market as the Company's.
I-4
Item 1. Description of Business (Continued)
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 70% of the Company's total
plastics production at cost, and, in terms of the overall market,
are insignificant.
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 recent 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 1997, costs for this discharge exceeded
$271,000, and management estimates that all expenses directly
related to compliance with environmental regulations total well
over $300,000 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.
I-5
Item 2. Description of Property (Continued)
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 used for the strawberry
processing and some plastics molding operations. 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.
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 had indicated that it
would entertain any reasonable offers for the purchase of this
property, and in events subsequent to December 31, 1997, has
reached tentative agreement for sale of the property for
approximately $870,000. The ultimate sale is contingent upon
several factors including an agreement as to the appraised value.
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
On August 22, 1997 the Securities and Exchange Commission issued
new listing requirements for companies listed on the NASDAQ Small
Cap Market. The new requirements became effective on February 23,
1998. As of March 1998 the Company had not met the listing
criteria.
(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
1997
First Quarter 9 1/2 7 1/2
Second Quarter 9 1/2 8 3/4
Third Quarter 11 1/4 9 1/2
Fourth Quarter 14 1/2 10 1/4
1996
First Quarter 8 3/4 7 3/8
Second Quarter 8 3/4 8 1/4
Third Quarter 8 1/2 8 1/4
Fourth Quarter 8 7 1/2
(b) Approximate Number of Equity Security Holders
As of December 31, 1997, 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 303
(c) Dividend History and Policy
The Company has declared dividends of $.25 (1997) and $.10 (1996)
and $.10 (1995). Dividends have been declared and paid annually,
only when warranted by profitability and permitted by lending
agreements.
II-1
Item 5. Market for Common Equity and Related Stockholder Matters (Continued)
(c) Dividend History and Policy (Continued)
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.
According to the covenants of a loan agreement, dated May 29, 1986,
amended several times thereafter, and in effect until June 8, 1995,
the declaration of dividends was specifically limited by certain
financial parameters. That agreement was modified in 1995, and
while still requiring the attainment of certain balance sheet
ratios, specific references to dividends were omitted.
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
1997 1996 1995 1996-95 1996-95
NET SALES:
Candied Fruit, Nuts 86.7% 85.9% 88.0% 9.0% - .7%
Molded Plastics 13.3 14.1 11.9 1.9 20.8
100.0 100.0 100.0 8.0 1.8
Cost of Sales 64.5 67.5 66.7 3.2 3.0
Selling, General and
Administrative Expens 20.3 19.6 20.6 11.6 - 3.0
Depreciation and Amorti-
zation 3.5 3.7 4.0 0.7 - 5.1
Interest Expense 2.5 3.3 3.7 - 17.8 - 9.1
Earnings from Operation 9.3 5.9 5.0 4.1 18.6
Other Income 0.3 0.9 0.8 68.6 24.7
Earnings Before Pro-
vision for Income
Taxes 9.5 6.8 5.8 51.8 19.4
II-2
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
Provision for Income
Taxes 3.6 2.6 2.2 48.8 22.8
Net Earnings 5.9% 4.2% 3.6% 53.7% 17.3%
(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.
(3) Results of Operations
1997 Compared to 1996
Operating results improved materially from 1996 to 1997, continuing
an upward trend begun in 1994, and validating the Company's change
in focus, from the pursuit of increased sales to the concentration
on cost containment, profitability, and improving the balance sheet.
During 1996 and 1995, this shift in emphasis led to little growth,
and, in some cases, a decline in total sales, as the Company
trimmed unprofitable items and customers.
However, in the year just ended, total net sales increased by more
than $1.6 Million, or 8%. Over 95% of these increases took place
in the candied fruit segment of business, and were due mostly to
the addition of two major U.S. supermarket chains to the Company's
customer list. Sales in the molded plastics segment increased by
2%. In addition, the plastics segment produced nearly $1 Million,
as cost, in packaging for the fruit segment, significantly
contributing to the profitability of those products.
II-3
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(3) Results of Operations (Continued)
1997 Compared to 1996 (Continued)
Compared to the prior year, Costs of Sales were reduced to 64.5%
from 67.5% of net sales, reflecting lowered costs for corn
sweeteners, some fruit raw materials, casualty insurance, and
plastics resins. Some of these savings in purchases costs were
offset, however, by material increases in factory labor expenses,
mandated by the Federal minimum wage legislation, and other wage
increases generated by this mandate.
Also expressed as a percentage of sales, Selling, General and
Administrative expenses increased slightly (0.7%), reflecting costs
directly related to increased sales, as well as higher wages and
other costs related thereto. Depreciation and amortization
continued a downward trend, as the value of assets being
depreciated declined more than the value of newly acquired assets
increased.
Interest expense declined by nearly 18% as a result of favorable
prime rates, a modified agreement with the Company's principal
lender, and smaller interim working capital borrowings.
The operations, outlined briefly above, resulted in a 54% increase
in after-tax per share earnings, to $2.51 from $1.63, satisfied all
of the restrictive covenants of the existing loan agreement, and
led the directors to declare a dividend of $0.25 per share, as
compared to $0.10 during the prior year.
1996 Compared to 1995
Operating results during 1996 further validated changes in policy
and business strategies initiated during 1994, and in which focus
was shifted to concentration on core products, increasing net cash
flow, and aversion of risk in growth and expansion efforts.
These shifts in emphasis, while leading to greater profitability
and balance sheet stability, have also resulted in a slow growth,
and in some cases, a decline in total sales. However this slow
growth results from the continuation of the management mandated
reductions and/or eliminations in the sale of low profit or profit
eroding line items.
II-4
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(3) Results of Operations (Continued)
1996 Compared to 1995 (Continued)
During 1996, total sales in all business segments grew
approximately 2%. Sales in the Plastics segment grew by more than
20%, as newly acquired machinery and equipment was put into
production, and despite the elimination of some high volume,
but net loss, line items.
Sales in the Fruit segment of business declined nearly 1%, but this
does not reflect a reduction in sales of the Company's core product
line of glace' (candied) fruit sold through supermarkets. It was,
rather, a reduction of more than 50% in the sales of strawberry
products. Since there continued to be an industry wide oversupply
of frozen strawberry inventory carried over from the prior year,
the Company elected not to enter production during 1996, thereby
materially limiting product available for sale. Sales in the edible
nut category remained relatively unchanged.
Expressed as a percentage of sales, cost of sales increased by less
than 1%. This was due to a general inflation of the costs in
several categories, the reduction of costs in others, but none of
these were of a really significant nature. Again as a percentage
of sales, General and Administrative expenses declined slightly,
also as a result of increases and decreases in a variety of
expense line items, none of which would be considered noteworthy.
Interest expense was reduced by about 10%, reflecting both
improved rates granted by principal lender, and lower average
short-term monthly borrowings and a reduction of term debt.
Depreciation and amortization likewise decreased slightly, as the
value of expiring schedules exceeded the value of additions to
fixed assets.
The above operating results more than satisfied all of the
covenants of the loan agreement with the Company's major lender,
increased earnings by 17%, to $1.63 from $1.39 per share, and were
followed by a Director's resolution to pay a dividend of $0.10 per
share.
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.
II-5
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(3) Results of Operations (Continued)
1995 Compared to 1994 (Continued)
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 of the 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.
Total sales declined by slightly more than $1.96 Million, or nearly
9%. However, almost all of this decrease was by design, as the
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 of some 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 manufacturing 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 volatility 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
warehousing.
II-6
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(3) Results of Operations (Continued)
1995 Compared to 1994 (Continued)
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
short-term borrowings. Other income increased 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-7
Item 7. Financial Statements
INDEPENDENT AUDITORS' REPORT
March 20, 1998
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, l997, 1996, and l995, and the
related consolidated statements of earnings, changes in stockholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, 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, l997, 1996, and l995, 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, HANCOCK & MUELLER
Certified Public Accountants
Plant City, Florida
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31
1997 1996 1995
CURRENT ASSETS:
Cash $ 2,816,008 $ 2,426,929 $ 2,723,443
Accounts Receivable, Net
of Allowance for Doubtful
Accounts of $ -0- 1,981,515 1,507,965 1,132,317
Inventories 3,515,513 4,039,846 4,105,497
Prepaid Expenses and Other
Current Assets 246,547 340,035 481,782
Deferred Income Tax Asset 239,453 264,006 202,041
Income Tax Refund Receivable 1,318 832 8,783
Total Current Assets 8,800,354 8,579,613 8,653,863
INVESTMENTS:
Real Estate, at Cost 261,848 261,848 261,848
PROPERTY, PLANT AND EQUIPMENT:
Net of Accumulated Depreciation of
$12,808,973 (1997), $12,145,174
(1996) and $11,514,234 (1995) 5,476,764 5,432,539 5,257,538
OTHER ASSETS 430,926 350,888 248,772
TOTAL ASSETS $14,969,892 $14,624,888 $14,422,021
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
1997 1996 1995
CURRENT LIABILITIES:
Short-Term Debt $ 155,802 $ 257,500 $ 388,306
Accounts Payable 369,719 667,606 748,998
Accrued Expenses 1,858,164 1,597,752 1,634,487
Dividends Payabl 134,864 56,572 56,572
Accrued Taxes on Income 100,916 196,422 113,328
Current Portion of Long-Term
Debt 1,019,412 931,748 844,679
Total Current Liabilities 3,638,877 3,707,600 3,786,370
LONG-TERM DEBT, NET OF CURRENT
PORTION 1,790,307 2,536,163 3,017,881
DEFERRED INCOME TAX LIABILITY 493,656 507,722 540,723
Total Liabilities 5,922,840 6,751,485 7,344,974
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 7,857,648 6,683,999 5,887,643
Less: Common Stock in Treasury,
at Cost, 63,551 Shares ( 274,205) ( 274,205) ( 274,205)
Total Stockholders' Equity 9,047,052 7,873,403 7,077,047
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 14,969,892 $ 14,624,888 $ 14,422,021
The Accompanying Notes are an Integral Part of These Financial Statements
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
1997 1996 1995
NET SALES $22,008,437 $20,377,066 $20,013,900
COSTS AND EXPENSES:
Cost of Goods Sold 14,201,307 13,735,235 13,309,577
Loss on Write-Down of Inventory 24,175 44,445
Selling, General and Administrative
Expenses 4,455,909 3,994,378 4,116,155
Depreciation and Amortization 763,929 758,286 798,918
Interest Expense 550,431 669,468 736,613
Total Costs and Expenses 19,971,576 19,181,542 19,005,708
EARNINGS FROM OPERATIONS 2,036,861 1,195,524 1,008,192
OTHER INCOME, NET 58,075 184,779 148,205
EARNINGS BEFORE PROVISION FOR INCOME
TAXES 2,094,936 1,380,303 1,156,397
PROVISION FOR INCOME TAXES 791,401 531,993 438,357
NET EARNINGS $ 1,303,535 $ 848,310 $ 718,040
EARNINGS PER SHARE:
Basic $ 2.51 $ 1.63 $ 1.38
Diluted $ 2.51 $ 1.63 $ 1.38
The Accompanying Notes are an Integral Part of These Financial Statements
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
CAPITAL IN
COMMON EXCESS OF RETAINED TREASURY
STOCK PAR VALUE EARNINGS STOCK TOTAL
Balance, December 31,
1994, as Previously
Reported $174,816 $ 1,288,793 $ 5,235,895 $(274,205) $ 6,425,299
Prior Period
Adjustment ( 14,375) ( 14,375)
Adjusted Balance of
Stockholders' Equity
at December 31,
1994 174,816 1,288,793 5,221,520 (274,205) 6,410,924
Cash Dividends
Declared, $.10 per
Share ( 51,917) ( 51,917)
Net Earnings 718,040 718,040
Balance, December 31,
1995 174,816 1,288,793 5,887,643 (274,205) 7,077,047
Cash Dividends
Declared, $.10 per
Share ( 51,954) ( 51,954)
Net Earnings 848,310 848,310
Balance, December 31,
1996 174,816 1,288,793 6,683,999 (274,205) 7,873,403
Cash Dividends
Declared, $.25 per
Share ( 129,886) ( 129,886)
Net Earnings 1,303,535 1,303,535
Balance, December 31,
1997 $174,816 $1,288,793 $ 7,857,648 $(274,205) $ 9,047,052
The Accompanying Notes are an Integral Part of These Financial Statements
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 3l,
1997 l996 l995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 1,303,535 $ 848,310 $ 718,040
Adjustments to Reconcile Net Earnings
to Net Cash Provided by Operating
Activities:
Increase (Decrease) in Net Deferred
Income Tax Liability 10,487 ( 94,966) ( 63,945)
Depreciation and Amortization 763,929 758,286 798,918
Prior Period Adjustment ( 14,375)
Loss (Gain) on Sale of Assets 233 ( 6,935) ( 67,888)
Decrease (Increase) in:
Accounts Receivable ( 473,550) ( 375,648) 779,115
Inventories 524,333 65,651 ( 301,229)
Prepaid Expenses 93,488 141,745 150,351
Refund Receivable ( 486) 7,951 91,131
Other Assets ( 95,677) ( 117,909)
Increase (Decrease) in:
Accounts Payable ( 297,887) ( 81,392) 171,958
Accrued Expenses 260,412 ( 36,735) 174,066
Accrued Taxes on Income ( 95,506) 83,094 113,328
Net Cash Provided by Operating
Activities 1,993,311 1,191,452 2,549,470
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment ( 441,494) ( 409,286) ( 452,793)
Proceeds From Sale of Assets 68,600 17,000 165,532
Net Cash Used in Investing
Activities ( 372,894) ( 392,286) ( 287,261)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds (Repayments) of
Short-term Debt ( 101,698) ( 130,806) 216,670
Proceeds of Long-term Debt 136,932
Principal Payments Long-term Debt (1,056,796) ( 891,670) (515,300)
Dividends ( 51,594) ( 51,954) ( 51,917)
Increase in Other Assets ( 21,250) ( 21,250) ( 71,475)
Net Cash Used in Financing
Activities (1,231,338) (1,095,680) (285,090)
Net Increase (Decrease) in Cash 389,079 ( 296,514) 1,977,119
CASH, at Beginning of Year 2,426,929 2,723,443 746,324
CASH, at End of Year $ 2,816,008 $ 2,426,929 $ 2,723,443
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
1997 l996 l995
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Year for:
Interest $573,379 $664,680 $ 699,304
Income Taxes $865,703 $535,914 $ 414,000
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Long-Term Debt Issued:
Equipment Purchases $398,604 $ 497,022 $
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, l997, 1996, AND 1995
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 intercompany transactions and profits.
NOTE 2: INVENTORIES
1997 1996 l995
Supplies $ 154,175 $ 104,448 $ 84,416
Raw Materials 804,213 799,289 877,943
Work in Progress 323,272 224,031 248,894
Finished Goods 2,233,853 2,912,078 2,894,244
TOTAL $3,515,513 $4,039,846 $4,105,497
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
1997 l996 l995
Land and Improvements $ 848,256 $ 830,806 $ 830,806
Buildings and Improvements 4,745,587 4,599,861 4,476,937
Machinery and Equipment 12,691,894 12,147,046 11,464,029
Total 18,285,737 17,577,713 16,771,772
Less: Accumulated
Depreciation 12,808,973 12,145,174 11,514,234
NET $ 5,476,764 $ 5,432,539 $ 5,257,538
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
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
1997 l996 1995
Trade acceptances, letters of credit
and other short-term debt. $155,802 $257,500 $199,696
Note payable, bank, collateralized
by equipment. 188,610
TOTAL $155,802 $257,500 $388,306
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
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
1997 AMOUNT INTEREST RATE
Average bank short-term borrowings
(monthly) $ 1,882,082 9.00%
Average aggregate short-term
borrowings (monthly) $ 3,649,960 6.38%
Maximum aggregate short-term
borrowings (at any month-end) $ 9,295,974
WEIGHTED AVERAGE
l996 AMOUNT INTEREST RATE
Average bank short-term borrowings
(monthly) $2,070,833 9.49%
Average aggregate short-term
borrowings (monthly) $3,938,713 7.34%
Maximum aggregate short-term
borrowings (at any month-end) $9,136,852
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
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996, AND 1995
NOTE 4: SHORT-TERM DEBT (CONTINUED)
Pursuant to a loan agreement, a bank has agreed to advance the Company
80% of the Company's eligible receivables and 50% of the Company's
eligible inventory. Interest is payable monthly and is computed at
prime plus 1/2%. Principal is due the earlier of on demand or May 31,
1998.
This agreement is subject to certain conditions which must be met for
the Company to continue borrowing including debt service coverage and
debt to equity ratios, a resting period provision, and other financial
covenants.
The amount available to be drawn down based on the available
collateral at December 31, 1997 was $2,831,732, at December 31, 1996,
was $2,848,704, and at December 31, 1995, was $2,551,335.
NOTE 5: LONG-TERM DEBT
1997 1996 1995
Prime plus 1% note, collateralized
by accounts receivable, inventories and
equipment. Monthly payments of $70,000
plus interest. $2,100,000 $3,010,000 $3,850,000
Obligations under capital leases. Monthly
payments totaling $19,722 including
interest at rates ranging from 6.40%
to 9.75%, collateralized by equipment
and vehicles. 709,719 457,911 12,560
Total Debt 2,809,719 3,467,911 3,862,560
Less Current Portion 1,019,412 931,748 844,679
LONG-TERM DEBT $1,790,307 $2,536,163 $3,017,881
The aggregate principal amounts maturing in each of the five
subsequent years are:
1998 $1,019,412
1999 1,032,756
2000 618,056
2001 111,316
2002 28,179
Total $2,809,719
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
NOTE 6: LEASES
The Company has certain equipment leases which are classified as
capital leases. At December 3l, l997, 1996, and 1995, the amount
capitalized was $960,566, $519,551, and $22,529, respectively, and the
accumulated amortization was $213,643 (1997), $62,229 (1996) and
$11,264 (1995). The amount recognized as an obligation was $709,719,
$457,911, and $12,560, respectively, which has been included in
long-term debt shown in Note 5. Amortization expense is included in
depreciation.
The Company leases automobiles under operating leases ranging in
length from thirty to sixty months. Lease payments charged to
operations amounted to $61,273 (1997), $56,645 (1996), and $48,852
(1995).
At December 31, 1997, 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
1998 $233,846 $ 53,493
1999 231,022 34,624
2000 219,635 7,858
2001 117,293
2002 27,193
Total Minimum Lease Payments 828,989 $ 95,975
Less Amount Representing Interest 119,270
PRESENT VALUE OF FUTURE MINIMUM
CAPITAL LEASE PAYMENTS $709,719
NOTE 7: ACCRUED EXPENSES
1997 l996 l995
Accrued Payroll and Bonuses $ 451,285 $ 321,719 $ 297,849
Accrued Brokerage Payable 303,398 319,720 328,281
Accrued Pension Cost (Note 8) 149,290 128,074 188,502
Provision for Unrealized Profit
on Retail Returns 419,000 435,000 356,000
Accrued Royalties and Other 200,768 95,999 147,843
Accrued Credit Due to Customers 258,852 180,030 186,181
Accrued Insurance Payable 75,571 117,210 129,831
TOTAL $1,858,164 $1,597,752 $1,634,487
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, l997, 1996, AND 1995
NOTE 8: RETIREMENT PLAN
The Company and its subsidiaries have a defined benefit pension plan cover-
ing 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 l997, 1996, and l995 was
$21,216, $17,846, and $20,318, 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 1997, 1996 and 1995 included the following components:
1997 1996 1995
Service Cost - Benefits Earned
During the Period $ 76,933 $ 87,319 $ 75,040
Interest Cost on Projected
Benefit Obligation 154,144 188,549 178,703
Actual Return on Plan Assets (282,076) (253,416) (450,255)
Net Amortization and Deferral 72,215 ( 4,606) 216,830
Net Periodic Pension Cost $ 21,216 $ 17,846 $ 20,318
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated financial statements at
December 31, 1997, 1996 and 1995:
Actuarial present value of benefit obligations:
1997 1996 1995
Accumulated Benefit Obligation,
Including Vested Benefits of
$2,006,620, $1,675,359, and
$2,524,011, respectively $2,115,197 $1,770,738 $2,624,116
Projected Benefit Obligation for
Service Rendered to Date $(2,611,957) $(2,129,059) $(3,029,472)
Plan Assets at Fair Value 2,650,088 2,509,894 3,161,796
Plan Assets in Excess of Projected
Benefit Obligation 38,131 380,835 132,324
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
NOTE 8: RETIREMENT PLAN (CONTINUED)
Unrecognized Net (Gain) Loss From
Past Experience Different From
That Assumed and Effects of
Changes in Assumptions 115,523 ( 184,126) 25,796
Prior Service Cost ( 363,642) ( 400,430) ( 437,218)
Unrecognized Net Obligation at
October 1, 1987, Amortized Over
15 Years, Net of Amortization 60,698 75,647 90,596
Accrued Pension Cost Included
in Accrued Expenses $( 149,290) $( 128,074) $( 188,502)
The following economic assumptions are used:
1997 1996 1995
Weighted Average Discount Rate 6.50% 7.25% 6.25%
Rate of Increase in Future Salary 4.58% 4.66% 4.62%
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. A settlement took place
during 1996 as a result of a lump-sum cash payment. The resulting
recognized gain was $78,274.
NOTE 9: PROVISION FOR FEDERAL AND STATE INCOME TAXES
The provisions for income taxes are comprised of the following amounts:
YEAR ENDED DECEMBER 31
1997 1996 1995
CURRENT:
Federal $666,067 $535,824 $ 465,953
State 114,848 91,135 38,217
780,915 626,959 504,170
DEFERRED:
Federal 8,953 ( 81,086) ( 69,987)
State 1,533 ( 13,880) 4,174
10,486 ( 94,966) ( 65,813)
TOTAL PROVISION FOR INCOME
TAXES $791,401 $531,993 $ 438,357
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
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
1997 1996 1995
Income Taxes Computed at Statutory
Rate $715,252 $469,302 $393,175
State Income Tax, Net of Federal
Income Tax Benefit 76,812 50,987 28,469
Other, Net ( 663) 11,704 16,713
PROVISION FOR INCOME TAXES $791,401 $531,993 $438,357
EFFECTIVE TAX RATE 37.6% 38.5% 37.9%
NOTE l0: EARNINGS PER COMMON SHARE
Basic and 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 1997, l996 and l995 for basic) and
(519,170 shares in 1997, 1996 and 1995 for diluted).
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
NOTE 11: BUSINESS SEGMENT DATA
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.
Molded Plastics Production of plastic containers
and other molded plastics for
sale to various food processors
and others.
YEAR ENDED YEAR ENDED YEAR ENDED
NET SALES IN EACH SEGMENT 1997 l996 l995
Candied Fruit:
Sales to Unaffiliated Customers $19,087,836 $17,511,519 $17,641,613
Molded Plastics:
Sales to Unaffiliated Customers 2,920,601 2,865,547 2,372,287
NET SALES $22,008,437 $20,377,066 $20,013,900
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
NOTE 11: BUSINESS SEGMENT DATA (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED
1997 l996 l995
THE OPERATING PROFIT OF
EACH SEGMENT IS LISTED BELOW
Candied Fruit $ 6,714,281 $ 5,457,526 $ 5,354,892
Molded Plastics 420,505 516,733 602,056
OPERATING PROFIT OF SEGMENTS 7,134,786 5,974,259 5,956,948
General Corporate Expenses, Net (4,547,494) (4,109,267) (4,212,143)
Interest Expense ( 550,431) ( 669,468) ( 736,613)
Other Income 58,075 184,779 148,205
EARNINGS BEFORE PROVISION
FOR INCOME TAXES $ 2,094,936 $ 1,380,303 $ 1,156,397
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 1997 l996 l995
Candied Fruit $ 7,545,122 $ 6,991,752 $ 7,002,360
Molded Plastics 2,284,080 2,871,027 2,361,566
Identifiable Assets 9,829,202 9,862,779 9,363,926
General Corporate Assets 5,140,690 4,762,109 5,058,095
TOTAL ASSETS $14,969,892 $14,624,888 $14,422,021
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996, AND 1995
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 1997 l996 l995
Candied Fruit $381,386 $382,796 $472,691
Molded Plastics 290,958 297,644 280,278
Segment Depreciation and
Amortization Expense 672,344 680,440 752,969
General Corporate Depreciation
and Amortization Expense 91,585 77,846 45,949
TOTAL DEPRECIATION AND
AMORTIZATION EXPENSE $763,929 $758,286 $798,918
CAPITAL EXPENDITURES OF EACH YEAR ENDED YEAR ENDED YEAR ENDED
SEGMENT ARE LISTED BELOW 1997 l996 l995
Candied Fruit $342,256 $278,409 $292,460
Molded Plastics 229,108 592,328 130,959
Segment Capital Expenditures 571,364 870,737 423,419
General Corporate Capital
Expenditures 122,712 42,974 29,374
TOTAL CAPITAL EXPENDITURES $694,076 $913,711 $452,793
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, l997, 1996, AND 1995
NOTE 12: MAJOR CUSTOMER
The Company derives more than 11% of its consolidated revenues from
sales to the affiliated 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 have a material adverse effect on operating earnings. In
addition, slightly more than 5% of consolidated revenues were sales to
various divisions of Winn-Dixie Stores, Inc. In this case, also, sales
of a specific subsidiary brand to each of the divisions were made
individually, and shipments were made and invoiced accordingly.
NOTE 13: 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 $3,320,766
at December 31, 1997. 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.
NOTE 14: DEFERRED INCOME TAXES
The Company 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.
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
NOTE 14: DEFERRED INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1997, 1996 and 1995 were:
1997 1996 1995
Deferred Tax Assets resulting from:
Inventory Valuation $ 81,783 $100,315 $ 67,482
Book Provision for Loss of Profits 157,670 163,691 133,963
Other 596
Total Deferred Tax Assets 239,453 264,006 202,041
Deferred Tax Liabilities Resulting from:
Tax over Book Depreciation 493,656 507,722 540,723
Total Deferred Tax Liabilities 493,656 507,722 540,723
Net Deferred Tax Liability $254,203 $243,716 $ 338,682
The Net Deferred Tax Liability is
Reflected in the Balance Sheet Under
These Captions:
Deferred Income Tax Asset $(239,453) $(264,006) $(202,041)
Deferred Income Tax Liability 493,656 507,722 540,723
$ 254,203 $243,716 $ 338,682
NOTE 15: PRIOR PERIOD ADJUSTMENT
The Company has recorded a prior period adjustment for a tax increase
resulting from an Internal Revenue Service examination of the Company's
1994 Federal Income tax return. The amount recorded represents the
actual assessed income tax increase.
The Company's 1995 Federal Income tax return was also examined,
resulting in a tax increase of $5,089. Since the years affected are
presented in the financial statements, the accounts affected by the tax
increase have been restated. As a result of the restatement, 1995 Net
Earnings decreased by $5,089 and earnings per share decreased by $.01.
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l997, 1996, AND 1995
NOTE 16: CONTINGENT LOSS
In the process of auditing the Company's 1994 and 1995 tax returns, the
Internal Revenue Service has taken a position contrary to the Company in
regard to royalty expense. The issue is currently being considered by an
appeals office of the Internal Revenue Service. In the event that the
matter is resolved against the Company, additional Federal income taxes
of approximately $254,000 would be assessed.
NOTE 17: SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company has tentatively reached an
agreement for the sale of certain real estate holdings for approximately
$870,000. The real estate is reflected on the balance sheet at its
historical cost of $261,848. The ultimate sale is contingent upon
several factors including an agreement as to the appraised value of the
real estate. On August 22, 1997 the Securities and Exchange Commission
issued new listing requirements for companies listed on the NASDAQ Small
Cap Market. The new requirements became effective on February 23, 1998.
As of March, 1998 the Company had not met the new listing criteria.
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
NOTE 18: QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data is summarized as follows:
QUARTER ENDED
1997 March 31 June 30 September 30 December 31
NET SALES $ 1,403,244 $ 1,481,243 $9,332,654 $9,791,296
GROSS PROFIT 266,670 350,409 4,149,237 3,040,814
NET EARNINGS
(LOSS) ( 552,545) ( 616,396) 1,931,725 540,751
EARNINGS (LOSS)
PER COMMON SHARE $(1.06) $(1.19) $3.71 $1.04
QUARTER ENDED
1996 March 31 June 30 September 30 December 31
NET SALES $ 1,175,051 $ 981,179 $9,163,889 $9,056,947
GROSS PROFIT 390,577 ( 346,115) 3,783,203 2,814,166
NET EARNINGS
(LOSS) ( 409,191) ( 1,259,892) 1,973,795 543,598
EARNINGS (LOSS)
PER COMMON SHARE $( .79) $(2.43) $3.79 $1.05
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 PROFIT 464,602 195,313 4,018,711 2,025,697
NET EARNINGS
(LOSS) ( 316,880) (1,153,857) 1,945,926 247,940
EARNINGS (LOSS)
PER COMMON SHARE $(0.61) $(2.22) $3.74 $0.48
II-29
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
II-30
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, deceased. Officer with the
Registrant for past 36 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, 64 years
old. Term of office will expire at
next stockholders' meeting. Officer
with Registrant past 33 years.
Eugene L. Weiner - Director and Executive Vice-President,
Secretary and Treasurer of the Registrant,
66 years old. Term of office will expire at
next stockholders' meeting. Officer with
Registrant past 32 years.
Randy S. Gordon - Vice President for Plastics Sales of
the Registrant, 42 years old. Term
of office will expire at next
stockholders' meeting. Employee of
Registrant past 19 years.
Tracy W. Schulis - Vice President for Fruit Sales of the
Registrant, 41 years old. Term of
office will expire at next
stockholders' meeting. Employee of
Registrant past 18 years.
Mark H. Gordon - Vice President, Manager of Fruit
Manufacturing. 35 years old. Term
of office will expire at next
stockholders' meeting. Employee of
Registrant past 12 years.
(a) Executive Officers of the Registrant
Frank A. Weaner - Chairman of the Board of Directors,
deceased. Officer with the Registrant
for past 36 years except for period
during 1972 and 1973 when he
served as a management consultant
to the Registrant.
Melvin S. Gordon - President, 64 years old. Term of
office will expire at next annual
directors' meeting. Officer with
Registrant past 33 years.
Eugene L. Weiner - Executive Vice-President, Secretary,
Treasurer, 66 years old. In charge of
operations. Term of office will
expire at next annual directors'
meeting. Officer with Registrant
past 32 years.
III-1
Item 9. Directors and Executive Officers of the Registrant (Continued)
(b) Not Applicable
(c) 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, 1997 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 PROJECTED
AND CAPACITY COMMISSIONS AND ANNUAL BENEFITS
IN WHICH SERVED BONUSES (1) PAYABLE (3) (7)
All Directors and
Officers as a Group
(6 Persons) $1,583,813
Frank A. Weaner,
Chairman of the
Board and Director $ 285,217 (4)(5) (6)
Melvin S. Gordon,
President and
Director $ 423,906 (2) $66,960
Eugene L. Weiner,
Executive Vice-
President and
Director $ 384,202 (2) (8)
Randy S. Gordon,
Vice-President
and Director $ 169,479 $50,544
Tracy W. Schulis,
Vice-President
and Director $ 169,479 $48,528
Mark H. Gordon,
Vice-President
and Director $ 151,529 $42,984
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.
III-3
Item 10. Executive Compensation (Continued)
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 4.50% 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 $16,200 paid to Mr. Weaner for monthly rental on
that part of his home used by Mr. Weaner as an office
through September 30, 1997.
5. Deceased, September 30, 1997.
6. Withdrew from the retirement plan during the year ended
December 31, 1984.
7. As of the latest available actuarial valuation date.
8. Received a lump-sum distribution in 1996.
S.D. Fuller, who resigned for health reasons in June, 1995,
in recognition of his 30 years of service, was awarded an
annual stipend of $10,000 for five years, or until his demise.
C (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, 1997,
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.
III-4
Item 11. Security Ownership of Certain Beneficial Owners and Management
(Continued)
AMOUNT & NATURE
NAME AND ADDRESS OF TITLE OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER CLASS OWNERSHIP (1) OF CLASS
Estate of
Frank A. Weaner Common
c/o Melvin Gordon
2611 Bayshore Blvd.
Tampa, Florida Stock 129,060 24.8%
Melvin S. Gordon Common
2611 Bayshore Blvd.
Tampa, Florida Stock 60,892 11.7
TOTAL 189,952 36.5%
(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 223,989 43.1
Estate of
Frank A. Weaner Common 129,060 24.8
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
(1) The nature of the beneficial ownership for all shares is sole
voting and investment power.
C The Company knows of no contractual arrangements which
may at a subsequent date result in a change in control of the
Company.
III-5
Item 12. Certain Relationships and Related Transactions
None
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, 1997.
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
Mor-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.
March 27, 1998 PARADISE, INC.
Date
s/Melvin S. Gordon
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/ Melvin S. Gordon President and Director March 27,1998
Melvin S. Gordon Date
s/ Eugene L. Weiner Executive Vice President
Eugene L. Weiner And Director-Principal
Financial and Account-
ing Officer March 27, 1998
Date
s/ Randy S. Gordon Vice President and
Randy S. Gordon Director March 27, 1998
Date
s/ Tracy W. Schulis Vice President and
Tracy W. Schulis Director March 27 ,1998
Date
s/ Mark H. Gordon Vice President and
Mark H. Gordon Director March 27, 1998
Date
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.
March 27, 1998 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.
President and Director March 27, 1998
Melvin S. Gordon Date
Executive Vice President
Eugene L. Weiner And Director-Principal
Financial and Account-
ing Officer March 27, 1998
Date
Vice President and
Randy S. Gordon Director March 27, 1998
Date
Vice President and
Tracy W. Schulis Director March 27 ,1998
Date
Vice President and
Mark H. Gordon Director March 27, 1998
Date
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> $2,816,008 $2,426,929
<SECURITIES> $0 $0
<RECEIVABLES> $1,981,515 $1,507,965
<ALLOWANCES> $0 $0
<INVENTORY> $3,515,513 $4,039,846
<CURRENT-ASSETS> $8,800,354 $8,579,613
<PP&E> $18,285,737 $17,577,713
<DEPRECIATION> $12,808,973 $12,145,174
<TOTAL-ASSETS> $14,969,892 $14,624,888
<CURRENT-LIABILITIES> $3,638,877 $3,707,600
<BONDS> $2,809,719 $3,467,911
<COMMON> $174,816 $174,816
$0 $0
$0 $0
<OTHER-SE> $8,872,236 $7,698,587
<TOTAL-LIABILITY-AND-EQUITY> $14,969,892 $14,624,888
<SALES> $22,008,437 $20,377,066
<TOTAL-REVENUES> $22,066,512 $20,561,845
<CGS> $14,201,307 $13,759,410
<TOTAL-COSTS> $14,201,307 $13,759,410
<OTHER-EXPENSES> $763,929 $758,286
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $550,431 $669,468
<INCOME-PRETAX> $2,094,936 $1,380,303
<INCOME-TAX> $791,401 $531,993
<INCOME-CONTINUING> $1,303,535 $848,310
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $1,303,535 $848,310
<EPS-PRIMARY> $2.51 $1.63
<EPS-DILUTED> $2.51 $1.63
</TABLE>
