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 March 31, 1999
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 March 31,
1999 1998
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 MARCH 31,
1999 1998
ASSETS
CURRENT ASSETS
Cash and Unrestricted Demand Deposits $ 68,914$ 416,016
Accounts and Notes Receivable, Less
Allowances of $-0- (1999 and 1998) 95,118 884,927
Inventories:
Raw Materials 2,163,589 1,809,160
Work in Process 0 270,403
Finished Goods 6,340,570 4,297,632
Deferred Income Tax Asset 517,085 239,453
Income Tax Refund Receivable 290,988 68,403
Prepaid Expenses and Other Current Assets 233,338 154,527
TOTAL CURRENT ASSETS 9,709,602 8,140,521
Real Estate Investment, at Cost 0 261,848
Property, Plant and Equipment, Less
Accumulated Depreciation of $13,601,636
(1999) and $12,979,305 (1998) 5,805,182 5,502,628
Deferred Charges and Other Assets 699,175 468,544
TOTAL ASSETS $16,213,959 $14,373,541
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and Trade Acceptances Payable $ 1,026,139 $ 137,268
Current Portion of Long-Term Debt 1,114,079 987,220
Accounts Payable 1,243,129 1,736,947
Accrued Liabilities 882,939 706,171
Federal and State Income Taxes Payable 0 0
TOTAL CURRENT LIABILITIES 4,266,286 3,567,606
LONG-TERM DEBT, NET OF CURRENT PORTION 1,295,254 1,575,916
DEFERRED INCOME TAX LIABILITY 451,689 493,656
STOCKHOLDERS' EQUITY
Common Stock: Auth; 2,000,000 shs. @ $.30
Par Value; Issued 582,721 (1999 and 1998) 174,926 174,926
Capital in Excess of Par Value 1,288,793 1,288,793
Retained Earnings 9,011,216 7,546,849
Less 63,551 (1999 and 1998) shares at cost
Held in Treasury ( 274,205)( 274,205)
Total Stockholders' Equity 10,200,730 8,736,363
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $16,213,959 $14,373,541
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
MARCH 31
1999 1998
Net Sales $ 819,380 $ 1,326,374
Costs and Expenses:
Cost of Goods Sold 789,790 877,220
Selling, General and Administrative Expense 605,782 550,377
Depreciation and Amortization 179,295 180,267
Interest Expense - Long Term 40,975 54,792
Interest Expense - Short Term 0 0
Total Expenses 1,615,842 1,662,656
Other Income 17,322 25,483
Earnings (Loss) from Operations
Before Provision for Income Taxes ( 779,140) ( 310,799)
Provision for Income Taxes 0 0
Net Earnings (Loss) $( 779,140) $( 310,799)
Earnings (Loss) per Common Share $(1.50) $(0.60)
Page 3
PARADISE, INC. COMMISSION FILE NO. 0-3026
Item1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings (Loss) $( 779,140) $( 310,799)
Adjustments to Reconcile Net Earnings (Loss) to Net
Cash Used in Operating Activities:
Depreciation and Amortization 179,295 180,254
Decrease (Increase) in:
Accounts Receivable 658,354 1,096,478
Inventories (2,839,254) (2,861,682)
Prepaid Expenses 45,040 44,698
Other Assets ( 39,281)
Increase (Decrease) in:
Income Tax Receivable ( 67,084)
Accounts Payable 339,338 1,369,228
Accrued Expense (1,089,405) (1,288,855)
Income Taxes Payable ( 100,916)
Net Cash Used in Operating Activities (3,525,053) (1,938,678)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment ( 567,266) ( 196,196)
Net Cash Used in Investing Activities( 567,266) ( 196,196)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds (Repayments) of Short-Term Debt 813,561 ( 18,534)
Principal Payments of Long-Term Debt ( 205,974) ( 246,584)
Proceeds from Issuance of Long-Term Debt 825,000 ( 0)
Net Cash Provided by (Used in)
Financing Activities 1,432,587 ( 265,118)
Net Decrease in Cash (2,659,732) (2,399,992)
CASH AT BEGINNING OF PERIOD 2,728,646 2,816,008
CASH AT END OF PERIOD $ 68,914 $ 416,016
Page 4
PARADISE, INC. COMMISSION FILE No. 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
(1999 and 1998).
(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
of glace' (candied) fruit, which includes all fruit-related operations and
accounted for nearly 87% of total net sales during 1998, 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 terms 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 Quarter
Total net sales were down in excess of $500,000 as compared to the first
three months during 1998. This decline occurred in the glace' fruit segment
of business, and represents returns and "reclamation" charges for
merchandise sold during 1998. As reported in numerous filings and financial
statements, it is industry practice to allow return-for-full credit of a
certain negotiated percentage of merchandise sold. It is Company practice to
estimate the magnitude of such charges, and establish a reserve for the
estimated gross profits lost. This amount is deducted from Company earnings
during the year that the sales are made.
Historically, cold weather during the Holiday Season encourages home baking.
The reverse is also true, and the relatively warm weather during late 1998
inhibited the sale of glace' fruit, a baking ingredient, industry-wide...and
beyond management estimates. This resulted in an inadequate reserve, as
reflected in the first quarter earnings statement.
Considering that only 6% of total annual sales during 1998 were made during
the first quarter, the overall impact of this development is not considered
to be of major significance.
In the plastics segment of business, sales were slightly higher (about 2.5%)
, and management is optimistic that there will be a continuing upward trend
in these products.
Costs of goods sold declined slightly, but not in proportion to the decline
in sales. This is because, as disclosed in earlier filings, an integral
part of the manufacturing facilities was being entirely remodeled, and there
was no fruit production during the first three months, while fixed factory
expenses continued. In a subsequent event, manufacturing resumed April 15,
1999.
Page 5
PARADISE, INC. COMMISSION FILE NO. 0-3026
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations(Continued)
The First Quarter (Continued)
In anticipation of this construction delay, a material overproduction of
inventory took place during late 1998, which resulted in current inventories
being considerably higher than at the same time last year.
Selling, general and administrative expenses increased moderately, with more
than 60% of the increase being accrued in advertising allowances credited to
customers, early in 1999, for extra promotions late during the 1998 selling
season. An estimate of these costs also was included in the provision for
lost gross profits, mentioned above, and charged to 1998 earnings. Net
interest expenses declined, mostly due to average term debt being lower
than that in the same period during the prior year, and to borrowing rates
continuing at favorable levels.
Summary
As a result of the above, the Company sustained a materially greater loss
during the period than during the first quarter of 1998. However, as
outlined above, only a very small percentage of the year's anticipated sales
activities has taken place to date, and, in the opinion of management, it is
far too early to discern any trends or to forecast year-end results with any
degree of accuracy.
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: May 10, 1999 PARADISE, INC.
s/ Melvin S. Gordon
Melvin S. Gordon, President
s/ Eugene L. Weiner
Eugene L. Weiner, Executive Vice
President, Secretary-Treasurer
Page 6
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<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> MAR-31-1999 MAR-31-1998
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<INTEREST-EXPENSE> $40,975 $54,792
<INCOME-PRETAX> $(779,140) $(310,799)
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