FORM 10 - QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1998
Commission File No. 0-3026
PARADISE, INC.
INCORPORATED IN FLORIDA
IRS IDENTIFICATION NO. 59-1007583
1200 DR. MARTIN LUTHER KING, JR. BLVD.
PLANT CITY, FLORIDA 33566
(813) 752-1155
"Indicate by check mark whether the registrant has filed all annual,
quarterly and other reports required to be filed with the Commission
within the past 90 days and in addition has filed the most recent annual
report required to be filed. Yes X No__."
"Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date."
Class Outstanding as of September 30,
1998 1997
Common Stock
$0.30 Par Value 519,170 Shares 519,170 Shares
Page 1
PARADISE, INC. COMMISSION FILE NO. 0-3026
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
(a) (1) CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30,
1998 1997
ASSETS
CURRENT ASSETS
Cash and Unrestricted Demand Deposits $ 14,868 $ 859,293
Accounts and Notes Receivable, Less
Allowances of $-0- (1998 and 1997) 9,729,664 7,444,688
Inventories:
Raw Materials 1,610,657 1,400,984
Work in Process 487,575 267,592
Finished Goods 7,337,272 6,905,084
Deferred Income Tax Asset 239,453 264,006
Prepaid Expenses and Other Current Assets 268,418 279,321
TOTAL CURRENT ASSETS 19,687,907 17,420,968
Real Estate Investment, at Cost 261,848
Property, Plant and Equipment, Less
Accumulated Depreciation of $13,334,948
(1998) and $12,688,767 (1997) 5,402,464 5,567,688
Deferred Charges and Other Assets 446,154 421,072
TOTAL ASSETS $ 25,536,525 $ 23,671,576
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and Trade Acceptances Payable $ 7,427,827 $ 6,744,531
Current Portion of Long-Term Debt 1,027,169 959,429
Accounts Payable 2,960,331 3,095,539
Accrued Liabilities 1,004,151 1,339,417
Federal and State Income Taxes Payable 1,041,416 495,480
TOTAL CURRENT LIABILITIES 13,460,894 12,634,396
LONG-TERM DEBT, NET OF CURRENT PORTION 1,018,757 1,873,703
DEFERRED INCOME TAX LIABILITY 296,531 507,722
STOCKHOLDERS' EQUITY:
Common Stock: Auth; 2,000,000 shs. @ $.30
Par Value; Issued 582,721 (1998 and 1997) 174,926 174,926
Capital in Excess of Par Value 1,288,793 1,288,793
Retained Earnings 9,570,829 7,466,241
Less 63,551 (1998 and 1997) shares at cost
held in Treasury ( 274,205) ( 274,205)
Total Stockholders' Equity 10,760,343 8,655,755
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 25,536,525 $ 23,671,576
Page 2
PARADISE, INC. COMMISSION FILE NO. 0-3026
ITEM 1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1998 1997
Net Sales $ 13,162,570 $ 9,332,654
Costs and Expenses:
Cost of Goods Sold 7,630,146 5,183,417
Selling, General and Admin. Expense 2,246,118 1,311,149
Depreciation and Amortization 370,496 193,626
Interest Expense - Long Term 212,036 67,644
Interest Expense - Short Term 44,754 158,365
Total Expenses 10,503,550 6,914,201
Earnings from Operations 2,659,020 2,418,453
Gain on Sale of Real Estate Investment 69,422
Other Income 43,108 21,794
Earnings Before Provision for Income Taxes 2,771,550 2,440,247
Provision for Income Taxes 912,694 508,522
Net Earnings $ 1,858,856 $1,931,725
Earnings per Common Share $3.58 $3.72
Page 3
PARADISE, INC. COMMISSION FILE NO. 0-3026
ITEM 1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
Net Sales $ 14,151,087 $12,217,141
Costs and Expenses:
Cost of Goods Sold 8,659,796 7,450,825
Selling, General and Admin. Expense 2,487,249 2,571,410
Depreciation and Amortization 555,778 553,398
Interest Expense - Long Term 266,544 217,203
Interest Expense - Short Term 102,922 209,456
Total Expenses 12,072,289 11,002,292
Earnings From Operations 2,078,798 1,214,849
Contribution of Land ( 840,000)
Gain on Sale of Real Estate Investment 621,128
Gain on Contribution 711,373
Other Income 54,576 56,456
Earnings Before Provision for Income Taxes 2,625,875 1,271,305
Provision for Income Taxes 912,694 508,522
Net Earnings $ 1,713,181 $ 762,783
Earnings per Common Share $3.30 $1.47
Page 4
PARADISE, INC. COMMISSION FILE NO. 0-3026
ITEM 1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 1,713,181 $ 762,783
Adjustments to Reconcile Net Earnings
to Net Cash Used in Operating Activities
Depreciation and Amortization 555,778 553,398
Deferred Tax Benefit ( 197,125)
Contribution of Land 840,000
Gain on Sale of Real Estate Investment ( 621,128)
Gain on Contribution ( 711,373)
Decrease (Increase) in:
Accounts Receivable (7,748,149) (5,936,723)
Inventories (5,919,991) (4,533,814)
Prepaid Expenses ( 65,474) 61,546
Increase (Decrease) in:
Accounts Payable 2,590,612 2,427,933
Accrued Expense ( 854,013) ( 262,953)
Income Taxes Payable 940,500 318,522
Net Cash Used in Operating Activities (9,477,182) (6,609,308)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment ( 451,674) ( 539,390)
Proceeds from Sale of Property & Equipment 754,349
Net Cash Provided by(Used in)
Investing Activities 302,675 ( 539,390)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds of Short-Term Debt 7,272,025 6,487,030
Principal Payments of Long-Term Debt ( 763,794) ( 774,132)
Dividends Paid ( 134,864) ( 51,954)
Increase in Other Assets ( 79,882)
Net Cash Provided by Financing Activ. 6,373,367 5,581,062
Net Decrease in Cash (2,801,140) (1,567,636)
CASH AT BEGINNING OF PERIOD 2,816,008 2,426,929
CASH AT END OF PERIOD $ 14,868 $ 859,293
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
Issuance of Long-Term Debt to Purchase Equip $0 $139,352
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
(1998 and 1997).
(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
Overview
Paradise, Inc. reports two major segments of business: (I) the core
business glace' (candied) fruit, which includes all fruit-related
operations and accounted for nearly 87% of total net sales during 1997,
and (ii) plastics, which represents the balance of sales, and includes
all injection molding and thermoforming operations, including the
manufacture of packaging for the Company's fruit products. Only sales
to unaffiliated customers are reported.
Sales in the glace' fruit segment are highly seasonal, with
approximately 80% of total annual sales made during the period from the
second week in September to early November each year. However, in order
to make timely deliveries of these seasonal orders, the Company must
manufacture product for approximately 10-11 months each year, building
large inventories and accruing expenses without significant offsetting
income, and requiring relatively large borrowings for short term
working capital.
It is for this reason that it is the opinion of management that
only a full year's accounting offers a reasonable basis for analysis of
financial performance. It is also the opinion of management that,
due to seasonal differences, the comparison of individual quarters is of
little or no value. Therefore, "Management's Discussion" is generally
limited to comparisons of the current year-to-date with the similar
period in the preceding year.
The First Nine Months
Total net sales are nearly 16% higher than for the same period
during 1997. While some of these increases are due to new customers, a
significant portion is due to shipments made to the same customers
earlier this year than last. It is not estimated that an increase of
this magnitude will be maintained through year-end. Sales to date in
the plastics segment of business have declined by about 5%, mostly
because of the elimination of some high volume, but low-or-no-profit
items offered for sale.
As a percentage of sales, costs of goods sold has remained
relatively unchanged, while selling, general and administrative expenses
, absent a large charitable contribution outlined below, have actually
decreased. Interest expense has been reduced by 13%, due to smaller
average borrowings and declining rates.
The results of the above are a modest increase in income from
operations. Since sales to date represent less than 65% of total 1997
sales, it is the opinion of management that it is far too early
to predict year-end results with any degree of certainty.
Page 6
PARADISE, INC. COMMISSION FILE 0-3026
Unusual Material Event
As disclosed at the end of the second quarter, the Company sold its
real estate investment of undeveloped, environmentally sensitive Florida
land to the St. John's River Water Management District. The transaction
involved both a cash sale and a tax beneficial charitable contribution,
the $840,000 value of which was established by an independent qualified
appraisal.
In accordance with generally accepted accounting principles, the
Company has recorded both the gain on the sale of land and the gain
resulting from the contribution, and the contribution was recorded at
the fair market value of the property contributed.
Income Taxes
The income tax benefit from the above mentioned contribution will
be governed by Internal Revenue Service rules, which limit the amount
which may be deducted in a given year, and allow a carry-forward of tax
benefits for a period of five years.
In another matter, subsequent to the Balance Sheet Date herein, the
Company agreed to a settlement with IRS of an issue, arising from a 1994
acquisition, which had been appealed. The Company paid an additional
$188,770 of income tax for the years 1994 and 1995 combined. The same
issue will result in the Company receiving refunds for the 1996 and 1997
tax years totaling $99,400, and provide tax deductible amortization
expenses through the year 1999, which will result in tax savings of an
additional $89,370.
Summary
The year-to-date has kept pace with the same period during the
prior year, with some improvement in both sales and operating earnings.
Given the seasonality factor, it is not possible to predict if this
trend will continue for the balance of the year. The gains from the
sale and contribution of the Company's real estate investment will
remain as recorded, but the related income tax consequences will be
contingent upon year-end operating income.
PART II. OTHER INFORMATION
None of the item numbers on captions are applicable to this report and
are, therefore, omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 11, 1998 PARADISE, INC.
Melvin S. Gordon, President
Eugene L. Weiner, Executive Vice
President, Secretary-Treasurer
Page 7
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<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> SEP-30-1998 SEP-30-1997
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