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, 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 June 30,
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 JUNE 30,
1999 1998 *
ASSETS
CURRENT ASSETS:
Cash and Unrestricted Demand Deposits $ 47,747$ 54,229
Accounts and Notes Receivable, Less
Allowances of $-0- (1999 and 1998) 820,932 673,124
Inventories:
Raw Materials 2,199,393 1,820,531
Work in Process 532,324 451,686
Finished Goods 10,181,202 9,899,795
Deferred Income Tax Asset 517,085 239,453
Income Tax Refund Receivable 290,988 68,403
Prepaid Expenses and Other Current Assets 490,452 219,136
TOTAL CURRENT ASSETS 15,080,123 13,426,357
Real Estate Investment, at Cost 0 0
Property, Plant and Equipment, Less
Accumulated Depreciation of $13,792,075
(1999) and $13,154,653 (1998) 5,974,362 5,479,277
Deferred Charges and Other Assets 689,199 699,483
TOTAL ASSETS $ 21,743,684 $ 19,605,117
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes and Trade Acceptances Payable $ 5,410,80 $ 3,808,154
Current Portion of Long-Term Debt 1,114,939 1,023,009
Accounts Payable 3,421,101 4,173,393
Accrued Liabilities 856,323 554,757
Federal and State Income Taxes Payable 0 0
TOTAL CURRENT LIABILITIES 10,803,170 9,559,313
LONG-TERM DEBT, NET OF CURRENT PORTION 1,011,045 1,277,552
DEFERRED INCOME TAX LIABILITY 451,689 177,564
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 8,288,265 7,401,174
Less 63,551 (1999 and 1998) shares at cost
Held in Treasury ( 274,205)( 274,205)
Total Stockholders' Equity 9,477,779 8,590,688
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 21,743,684 $ 19,605,117
* Restated for Comparative Purposes
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
1999 1998 *
Net Sales $ 1,610,547 $ 988,517
Costs and Expenses:
Cost of Goods Sold 1,390,848 1,029,650
Selling, General and Administrative Expense 669,337 627,130
Depreciation and Amortization 202,362 185,282
Interest Expense - Long Term 47,802 54,508
Interest Expense - Short Term 40,336 58,169
Total Expenses 2,350,685 1,954,739
Earnings (Loss) from Operations ( 740,138) ( 966,222)
Other Income 20,592 11,468
Contribution of Land - Net of Tax Benefit 0 ( 523,422)
Gain (Loss) on Sale of Real Estate Investment 0 621,128
Gain (Loss) on Contribution 0 711,373
Earnings (Loss) Before Income Taxes ( 719,546) ( 145,675)
Provision for Income Taxes 0 0
Net Earnings (Loss) $( 719,546) $( 145,675)
Earnings (Loss) per Common Share $(1.39) $(0.28)
* Restated for Comparative Purposes
Page 3
PARADISE, INC. COMMISSION FILE NO. 0-3026
Item 1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED
JUNE 30
1999 1998 *
Net Sales $ 2,429,927 $ 2,314,891
Costs and Expenses:
Cost of Goods Sold 2,180,638 1,906,870
Selling, General and Administrative Expense 1,275,119 1,177,507
Depreciation and Amortization 381,656 365,549
Interest Expense - Long Term 92,183 109,300
Interest Expense - Short Term 40,336 58,169
Total Expenses 3,969,932 3,617,395
Earnings (Loss) from Operations (1,540,005) (1,302,504)
Other Income 37,914 36,951
Contribution of Land - Net of Tax Benefit 0 ( 523,422)
Gain (Loss) on Sale of Real Estate Investment 0 621,128
Gain (Loss) on Contribution 0 711,373
Earnings (Loss) Before Income Taxes (1,502,091) ( 456,474)
Provision for Income Taxes 0 0
Net Earnings (Loss) $(1,502,091) $( 456,474)
Earnings (Loss) per Common Share $(2.89) $(0.88)
* Restated for Comparative Purposes
Page 4
PARADISE, INC. COMMISSION FILE NO. 0-3026
Item1. Financial Statements (Continued)
(a) (1) CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30,
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,502,091) $( 456,474)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Depreciation and Amortization 381,656 365,549
Deferred Tax Benefit 0 ( 316,092)
Contribution of Land 0 840,000
Gain on Sale of Real Estate Investment 0 ( 551,707)
Gain on Contribution 0 ( 711,373)
Decrease (Increase) in:
Accounts Receivable ( 67,460) 1,308,391
Inventories (7,248,014) (8,656,499)
Income Tax Receivable 0 ( 67,085)
Prepaid Expenses ( 212,074) ( 106,631)
Increase (Decrease) in:
Accounts Payable 2,544,641 3,803,674
Accrued Expense ( 882,227) (1,308,384)
Income Taxes Payable 0 ( 100,916)
Net Cash Used in Operating Activities (6,985,569) (5,957,547)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate Investment 0 684,928
Purchase of Property and Equipment ( 926,884) ( 348,194)
Net Cash Provided by
(Used in) Investing Activities ( 926,884) 336,734
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt 825,000 0
Net Proceeds of Short-Term Debt 5,198,229 3,652,352
Principal Payments of Long-Term Debt ( 489,323) ( 509,158)
Dividends Paid ( 233,794) ( 129,887)
Increase in Other Assets ( 68,558) ( 154,273)
Net Cash Provided by
Financing Activities 5,231,554 2,859,034
Net Decrease in Cash (2,680,899) (2,761,779)
CASH AT BEGINNING OF PERIOD 2,728,646 2,816,008
CASH AT END OF PERIOD $ 47,747 $ 54,229
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES:
PROCEEDS OF LONG-TERM DEBT USED TO:
Purchase Equipment $ 0 $ 0
Page 5
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
As repeated in every interim financial statement, it is the opinion of
management that only an analysis of a full year's operation will yield a
meaningful measure of the Company's performance. The reason for this caveat
is that the sales in Paradise's core business, glace' (candied) fruit, are
extremely seasonal. These products are used primarily as ingredients for
Thanksgiving and Christmas holiday confections, and approximately 80% of
total annual sales in this segment of business are concentrated between
early September and late October each year.
However, in order to make timely deliveries during this short period of
peak demand, the Company must manufacture product throughout the year, and
build large inventories. This results in (i) the need for relatively large
borrowings to supply short-term working capital, and (ii) substantial
operating losses until well into the third quarter of the calendar year,
even during the most profitable years, as there is little income to offset
ongoing expenses.
Likewise, comparison of the current quarter with the quarter immediately
preceding yields little in the way of useful information, as operations are
materially different during each quarter, depending upon harvests and other
factors.
Therefore, discussion of the comparison of data contained in interim
reports is limited to the year to date as it relates to the similar period
during the prior year.
The First Six Months
The most obvious and material difference this year as compared to last
was the sale of the Company's real estate investment during June 1998. This
relatively complex, tax-advantaged transaction was reported in the June 30,
1998 financial statements as a one-time gain aggregating more than $800,000.
Since part of the transaction involved a donation, there is a residual tax
benefit carried forward to this and subsequent years.
Comparative sales for the period are up almost 5%, with the most
meaningful gain (11%) occurring in the plastics molding segment of business,
continuing a strategically planned growth begun during the prior year. There
was also a significant percentage improvement in brined pineapple sales by
the Company's Mexican subsidiary. However, the latter comprises only a very
small part of overall annual sales.
As to glace' (candied) fruit, which accounted for more than 85% of total
sales during 1998, sales-to-date represent only 3% of the total reported in
that segment at year-end. Given this relative magnitude, it is the opinion
of management that the small variations in the periods compared have little
value in analyzing performance.
Page 6
PARADISE, INC. COMMISSION FILE NO. 0-3026
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
The First Six Months (Continued)
As reported earlier, the rebuilding of a manufacturing area, begun in late
1998 and completed in April 1999, delayed the start-up of production
activities this year, as compared to last. That translated into lower
production to date and a smaller increase in inventory valuations. That is
the principal reason that the increase in costs of goods sold is
proportionately greater than the increase in sales. Other than higher raw
material costs for greater plastics sales, most other expenses in this
category were significantly lower. Management attributes this only to
timing differences, and does not forecast a continuation of this trend by
year-end.
Selling, general and administrative expenses increased approximately
11%, as compared to the similar period during the prior year, with the most
noteworthy added costs accruing in payroll, group insurance, and advertising
and promotion.
Depreciation and amortization changed little, consistent with changes in
depreciable fixed assets. Interest expense declined by more than 20%,
reflecting the continued liquidation of long-term debt, later borrowing for
inventory financing, and ongoing favorable rates.
Summary
The Company sustained a materially greater loss during the first six
months of 1999, as compared to the same period during the prior year. Of
course, the bulk of this was due to the non-operating, unusual and one-time
nature of the sale of assets, which occurred during June 1998. While the
operating loss to date is significant, it will be noted that income (loss)
from operations has improved since the end of the first fiscal quarter, when
compared to the similar periods during the prior year. Also, given the
small percentage of anticipated annual sales reported herein, it is the
opinion of management that it is far too early to forecast year-end results
with any degree of confidence.
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 6, 1999 PARADISE, INC.
s/ Melvin S. Gordon
Melvin S. Gordon, President
s/ Eugene L. Weiner
Eugene L. Weiner, Executive Vice
President, Secretary-Treasurer
Page 7
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<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> JUN-30-1999 JUN-30-1998
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<SECURITIES> $0 $0
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<INTEREST-EXPENSE> $132,519 $167,469
<INCOME-PRETAX> $(1,502,091) $(1,265,553)
<INCOME-TAX> $0 $0
<INCOME-CONTINUING> $(1,502,091) $(1,265,553)
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<EXTRAORDINARY> $0 $809,079
<CHANGES> $0 $0
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