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, 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 June 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 I. FINANCIAL INFORMATION
Item 1. Financial Statements
(a) (1) CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30,
1998 1997
ASSETS
CURRENT ASSETS
Cash and Unrestricted Demand Deposits $ 54,229 $ 55,806
Accounts and Notes Receivable, Less
Allowances of $-0- (1998 and 1997) 673,124 1,067,777
Inventories:
Raw Materials 1,820,531 2,228,829
Work in Process 451,686 291,531
Finished Goods 9,899,795 7,969,800
Deferred Income Tax Asset 239,453 264,006
Income Tax Refund Receivable 68,403 13,875
Prepaid Expenses and Other Current Assets 353,178 371,996
TOTAL CURRENT ASSETS 13,560,399 12,263,620
Real Estate Investment, at Cost 0 261,848
Property, Plant and Equipment, Less
Accumulated Depreciation of $13,154,653
(1998) and $12,485,077 (1997) 5,479,278 5,610,199
Deferred Charges and Other Assets 565,440 432,747
TOTAL ASSETS $19,605,117 $18,568,414
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES,
Notes and Trade Acceptances Payable $ 3,808,154 $ 4,287,093
Current Portion of Long-Term Debt 1,023,009 957,992
Accounts Payable 4,173,393 3,068,516
Accrued Liabilities 554,757 908,532
Federal and State Income Taxes Payable 0 0
TOTAL CURRENT LIABILITIES 9,559,313 9,222,133
LONG-TERM DEBT, NET OF CURRENT PORTION 1,277,552 2,114,529
DEFERRED INCOME TAX LIABILITY 177,564 507,722
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 7,401,174 5,534,516
Less 63,551 (1998 and 1997) shares at cost
Held in Treasury ( 274,205) ( 274,205)
Total Stockholders' Equity 8,590,688 6,724,030
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $19,605,117 $18,568,414
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
JUNE 30,
1998 1997
Net Sales $ 988,517 $ 1,481,243
Costs and Expenses:
Cost of Goods Sold 1,029,650 1,130,834
Selling, General and Admin. Expense 557,223 672,102
Depreciation and Amortization 185,282 182,997
Interest Expense - Long Term 54,508 72,481
Interest Expense - Short Term 58,169 49,003
Total Expenses 1,884,832 2,107,417
Loss from Operations (896,315) (626,174)
Contribution of Land (840,000) 0
Gain on Sale of Real Estate Investment 551,707 0
Gain on Contribution 711,373 0
Other Income 11,468 9,778
Earnings (Loss) Before
Provision for Income Taxes ( 461,767) (616,396)
Provision for Income Taxes ( 316,092) 0
Net Earnings (Loss) $( 145,675) $(,616,396)
Earnings (Loss) per Common Share $(.28) $(2.47)
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,
1998 1997
Net Sales $ 2,314,891 $ 2,884,487
Cost s and Expenses:
Cost of Goods Sold 1,906,870 2,267,408
Selling, General and Admin Expense 1,107,600 1,260,261
Depreciation and amortization 365,549 359,772
Interest Expense - Long Term 109,300 149,559
Interest Expense - Short Term 58,169 51,091
Total Expenses 3,547,487 4,088,091
Loss from Operations (1,232,596) (1,203,604)
Contribution of Land (840,000) 0
Gain on Sale of Real Estate Investment 551,707 0
Gain on Contribution 711,373 0
Other Income 36,950 34,662
Earnings (Loss)
Before Provision for Income Taxes (772,566) (1,168,942)
Provision for Income Taxes (316,092) 0
Net Earnings (Loss) $(456,474) $(1,168,942)
Earnings (Loss) per Common Share $(.88) $(2.25)
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,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $( 456,474) $(1,168,942)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities
Depreciation and Amortization 365,549 359,772
Deferred Tax Benefit (316,092) 0
Contribution of Land 840,000 0
Gain on Sale of Real Estate Investment (551,707) 0
Gain on Contribution (711,373) 0
Decrease (Increase) in:
Accounts Receivable 1,308,391 440,188
Inventories (8,656,499) (6,450,314)
Income Tax Receivable ( 67,085) ( 13,043)
Prepaid Expenses ( 106,631) ( 31,855)
Increase (Decrease) in:
Accounts Payable 3,803,674 2,400,910
Accrued Expense ( 1,308,384) ( 693,838)
Income Taxes Payable ( 100,916) ( 176,958)
Net Cash Used in Operating Activities (5,957,547) (5,334,080)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of Real Estate Invest 684,928 0
Purchase of Property and Equipment ( 348,194) ( 520,746)
Net Cash Provided By (Used in)
Investing Activities 336,734 ( 520,746)
CASH FLOWS FROM FINANCING ACTIVITIES
Net Proceeds of Short-Term Debt 3,652,352 4,029,593
Principal Payments of Long-Term Debt ( 509,158) ( 395,391)
Dividends Paid ( 129,887) ( 51,954)
Increase in Other Assets ( 154,273) ( 98,545)
Net Cash Provided by Financing Activities 2,859,034 3,483,703
Net Decrease in Cash (2,761,779) (2,371,123)
CASH AT BEGINNING OF PERIOD 2,816,008 2,426,929
CASH AT END OF PERIOD $ 54,229 $ 55,806
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
PROCEEDS OF LONG-TERM DEBT USED TO:
Purchase Equipment $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
A material unusual event occurred during the second quarter of 1998. The
Company sold, to the St. John's River Water Management District, its
long-held environmentally sensitive real estate investment in Brevard
County, FL. Acquired nearly forty years ago and carried on the Balance
Sheet at its historical cost of $261,848, its original purpose was the
development of a lakefront residential community on the property, which
was composed of both uplands and wetlands.
Since that time, the ever-increasing stringency of environmental
regulations rendered such development virtually impossible and, at the
same time, materially eroded the commercial value of the asset. After
years of negotiation and litigation, an agreement was reached with SJWMD
to sell the uplands and donate the wetlands. The value of the donation,
established by independent appraisal, was $840,000, which has the
potential for significant tax benefits and for maximizing shareholder
value from the transaction.
In accordance with generally accepted accounting principles, the Company
has recorded both the gain on the sale of the land and the gain
resulting from the donation. Again according to generally accepted
accounting principles, the donation was recorded at the fair market
value of the property donated. The gain on the sale of the land reflects
the sale proceeds net of closing costs and an allocated portion of the
Company's basis in the land. The gain resulting from the donated land
reflects the fair market value of the donation net of the remaining
portion of the Company's basis in the land.
As to the normal and traditional operations of the Company, shareholders
are reminded of the seasonal nature of the Company's core business,
glace (candied) fruit, which is primarily an ingredient for Thanksgiving
and Christmas confections, and in which approximately 80% of annual
sales take place between early September and late October each year.
Therefore, it has been the frequently expressed opinion of management
that only the analysis of a full year's operations yields meaningful
conclusions.
In addition, timing differences between manufacturing cycles, fruit
harvests, and other factors render comparisons between quarters
unproductive. Therefore, periodic analysis by management is limited to
discussion of the current year-to-date relative to a like period during
the prior year.
While the selling season is short, purchasing and manufacturing
activities continue throughout the year, building inventories in order
to make timely shipments during periods of peak demand. Many months of
ongoing expenses with little income require relatively large amounts of
borrowed short-term working capital, and result in the accrual of
material losses during the early financial reporting periods.
Page 6
PARADISE, INC. COMMISSION FILE 0-3026
Total net sales for the first six months of 1998 of $2.3 Million
represents slightly more than 10% of total net sales during 1997, and is
about $570,000 less than the same period during the prior year. Nearly
half of this difference is in the sales by our Mexican subsidiary, which
processes and ships pineapple used as a raw material by both the
Company and some of its competitors. Only shipments to unaffiliated
users are recorded as sales, and these have declined, without potential
for recovery during the current year. Another 12% of the decrease in
sales was accounted for by frozen strawberry products no longer
manufactured. The balance of the decrease was in various fruit products,
and in the plastics segment of business. In the overall, however, these
differences are relatively small, and, in the opinion of management,
portend little.
As a percentage of sales, costs of goods sold increased somewhat, with
the largest single factor, by far, having been in factory payroll and
payroll taxes. Mostly forced by increased minimum wage requirements, and
the related upward thrust of all wage scales related thereto.
Selling, general and administrative expenses decreased by slightly more
than 12% while depreciation and amortization expenses changed very
little.
Interest expense declined by 16% because carryover cash flow from 1997
operations delayed the need for short-term working capital borrowings.
Total Income (Loss) Before Income Taxes improved significantly due to
the gain on the sale of the Company's real estate investment. Further
tax benefits are contingent on the Company's profitability during
subsequent years as IRS rules stipulate that the $840,000 donation,
discussed earlier, can be deducted only up to 10% of the Company's
pre-tax earnings, with the ensuing balances carried forward as a tax
benefit for five years.
As to operating results, management repeats its opinion that it is far
too early in the year to predict year-end performance with any degree of
certainty.
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, 1998 PARADISE, INC.
s/ Melvin S. Gordon
Melvin S. Gordon, President
s/ Eugene L. Weiner
Eugene L. Weiner, Executive Vice
President, Secretary-Treasurer
Page 7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> JUN-30-1998 JUN-30-1997
<CASH> $54,229 $55,806
<SECURITIES> $0 $0
<RECEIVABLES> $673,124 $1,067,777
<ALLOWANCES> $0 $0
<INVENTORY> $12,172,012 $10,490,160
<CURRENT-ASSETS> $13,560,399 $12,263,620
<PP&E> $18,633,931 $18,095,276
<DEPRECIATION> $13,154,653 $12,485,077
<TOTAL-ASSETS> $19,605,117 $18,568,414
<CURRENT-LIABILITIES> $9,559,313 $9,222,133
<BONDS> $2,300,561 $3,072,521
<COMMON> $174,926 $174,926
$0 $0
$0 $0
<OTHER-SE> $8,415,762 $6,549,104
<TOTAL-LIABILITY-AND-EQUITY> $19,605,117 $18,568,414
<SALES> $2,314,891 $2,884,487
<TOTAL-REVENUES> $3,614,921 $2,919,149
<CGS> $1,906,870 $2,267,408
<TOTAL-COSTS> $1,906,870 $2,267,408
<OTHER-EXPENSES> $365,549 $359,772
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $167,469 $200,650
<INCOME-PRETAX> $(772,566) $(1,168,942)
<INCOME-TAX> $(316,092) $0
<INCOME-CONTINUING> $(456,474) $(1,168,942)
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $(456,474) $(1,168,942)
<EPS-PRIMARY> $(.88) $(2.25)
<EPS-DILUTED> $(.88) $(2.25)
</TABLE>
