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, 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 September 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 SEPTEMBER 30,
1999 1998 *
ASSETS
CURRENT ASSETS:
Cash and Unrestricted Demand Deposits $ 61,956$ 14,868
Accounts and Notes Receivable, Less
Allowances of $-0- (1999 and 1998) 7,649,520 9,729,664
Inventories:
Raw Materials 1,682,325 1,610,657
Work in Process 531,213 487,575
Finished Goods 8,362,173 7,337,272
Deferred Income Tax Asset 517,085 239,453
Income Tax Refund Receivable 290,988 0
Prepaid Expenses and Other Current Assets 348,000 268,418
TOTAL CURRENT ASSETS 19,443,260 19,687,907
Property, Plant and Equipment, Less
Accumulated Depreciation of $13,986,907
(1999) and $13,334,948 (1998) 5,911,394 5,402,464
Deferred Charges and Other Assets 676,349 446,154
TOTAL ASSETS $ 26,031,003 $ 25,536,525
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes and Trade Acceptances Payable $ 8,303,556 $ 7,427,827
Current Portion of Long-Term Debt 1,114,776 1,027,169
Accounts Payable 2,461,288 2,960,331
Accrued Liabilities 1,047,347 1,004,151
Federal and State Income Taxes Payable 262,000 1,041,416
TOTAL CURRENT LIABILITIES 13,188,967 13,460,894
LONG-TERM DEBT, NET OF CURRENT PORTION 944,864 1,018,757
DEFERRED INCOME TAX LIABILITY 451,689 296,531
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 10,255,969 9,570,829
Less 63,551 (1999 and 1998) shares at cost
Held in Treasury ( 274,205)( 274,205)
Total Stockholders' Equity 11,445,483 10,760,343
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 26,031,003 $ 25,536,525
* 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
SEPTEMBER 30
1999 1998 *
Net Sales $ 9,439,028 $ 12,824,713
Costs and Expenses:
Cost of Goods Sold 5,566,483 7,782,576
Selling, General and Administrative Expense 1,243,844 1,936,872
Depreciation and Amortization 206,258 375,511
Interest Expense - Long Term 47,172 54,508
Interest Expense - Short Term 151,696 260,166
Total Expenses 7,215,453 10,409,633
Earnings from Operations 2,223,675 2,415,080
Other Income (Expense) ( 3,111) 29,092
Contribution of Land - Net of Tax Benefit ( 523,422)
Gain on Sale of Real Estate Investment 621,128
Gain on Contribution 711,373
Earnings Before Income Taxes 2,220,464 3,253,251
Provision for Income Taxes 262,000 1,229,272
Net Earnings $ 1,958,464 $ 2,023,979
Earnings per Common Share $ 3.77 $ 3.90
* 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 NINE MONTHS ENDED
SEPTEMBER 30
1999 1998 *
Net Sales $ 11,868,955 $ 14,151,087
Costs and Expenses:
Cost of Goods Sold 7,747,121 8,659,796
Selling, General and Administrative Expense 2,518,963 2,487,249
Depreciation and Amortization 587,914 555,778
Interest Expense - Long Term 139,354 109,300
Interest Expense - Short Term 192,032 260,166
Total Expenses 11,185,384 12,072,289
Earnings from Operations 683,571 2,078,798
Other Income 34,803 54,575
Contribution of Land - Net of Tax Benefit ( 523,422)
Gain on Sale of Real Estate Investment 621,128
Gain on Contribution 711,373
Earnings Before Income Taxes 718,374 2,942,452
Provision for Income Taxes 262,000 1,229,272
Net Earnings $ 456,374 $ 1,713,180
Earnings per Common Share $ 0.88 $ 3.30
* 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 NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998 *
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 456,374 $ 1,713,180
Adjustments to Reconcile Net Earnings to Net
Cash Used in Operating Activities:
Depreciation and Amortization 587,914 555,778
Deferred Tax Benefit ( 197,125 )
Contribution of Land 840,000
Gain on Sale of Real Estate ( 621,128 )
Gain on Contribution ( 711,373 )
Decrease (Increase) in:
Accounts Receivable ( 6,896,048 ) ( 7,748,149 )
Inventories ( 4,910,806 ) ( 5,919,991 )
Prepaid Expenses ( 69,513 ) ( 65,474 )
Increase (Decrease) in:
Accounts Payable 1,584,828 2,590,612
Accrued Expense ( 691,203 ) ( 854,012 )
Income Taxes Payable 262,000 940,500
Net Cash Used in
Operating Activities ( 9,676,454 ) ( 9,477,182 )
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Real Estate 754,349
Purchase of Property and Equipment ( 1,058,749 ) ( 451,674 )
Net Cash Provided by (Used in)
Investing Activities ( 1,058,749 ) 302,675
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds of Short-Term Debt 8,090,979 7,272,025
Proceeds from Issuance of Long-Term Debt 825,000
Principal Payments of Long-Term Debt ( 573,869 ) ( 763,794 )
Dividends Paid ( 233,794 ) ( 134,864 )
Increase in Other Assets ( 39,803 )
Net Cash Provided by
Financing Activities 8,068,513 6,373,367
Net Decrease in Cash ( 2,666,690 ) ( 2,801,140 )
CASH AT BEGINNING OF PERIOD 2,728,646 2,816,008
CASH AT END OF PERIOD $ 61,956 $ 14,868
* Restated for Comparative Purposes
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. That is because 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
mid-November 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 Nine 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 net sales for the period are down 16%. While sales in the
molded plastics segment of business have increased by 21%, net sales in the
glace' (candied) fruit segment have declined sharply.
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 Nine Months (Continued)
The reasons for this are threefold: (1) returns of merchandise sold during
1998 materially exceeded expectations; (2) management imposed limits on
1999 shipments to customers making relatively large returns; and (3) timing
differences of some customers' orders, which were shipped during September
of last year, but are scheduled for shipment during October of the current year.
In the opinion of management, some of the lost sales will be regained. But,
given reasons (1) and (2) above, it is not likely that these differences will be
totally overcome, unless there are unusually strong reorders.
As to the plastics segment, sales continue to grow in the custom molded,
engineered plastics sector, a higher profit and more stable facet of the
industry. This sector requires higher technology both in equipment and
personnel, and is an area in which the Company has been concentrating its
efforts during recent years.
Costs of goods sold declined significantly, but not in a proportion equal to
the decline in sales. This is due, in large measure, to unit cost increases in
certain raw materials, a general factory wage increase, and charges against
inventory valuations caused by higher returns.
Selling, general and administrative expenses declined a little more than 1%,
reflecting lower sales commissions and other selling costs, and moderately
higher salary, group insurance, and professional services expenses. Much of the
latter accrued from an independent review, and the reprogramming and testing
of data processing facilities to ensure "Y2K" compliance. This work has been
completed and tested successfully.
Depreciation and amortization changed little, consistent with changes in
depreciable fixed assets. Interest expense declined by more than 10%,
reflecting the continued liquidation of long-term debt, later borrowing for
inventory financing, and ongoing favorable rates.
Summary
The Company sustained a significantly greater loss during the first nine
months of 1999, as compared to the same period during the prior year. Of
course, nearly $810,000, or $1.56 of the total difference in earnings of
$2.42 per share, was due to the non-operating, unusual and one-time nature
of the profits realized from the sale of assets, which occurred during June,
1998. The reduction in operating income, as compared to the first three
quarters of 1998, is attributed primarily to reduced sales and the expenses
related to unanticipated returns of 1998 sales.
Page 7
PARADISE, INC.
COMMISSION FILE NO. 0-3026
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued)
Summary (Continued)
As disclosed in a number of previous filings, at year-end, the Company
estimates returns on current year sales, and sets aside a reserve for profits
anticipated to be lost therefrom. To the extent that returns exceed these
estimates, profits in the ensuing year are eroded. Management reviews
customer orders carefully, and limits shipments to customers who have made
excessive returns during the prior year.
However, during 1998, having acquired several new customers, and with the
magnitude of mergers, etc. in the supermarket industry, management did not
have the comprehensive net sales history needed to make adequate forecasts.
In addition, an extremely warm autumn and early winter last year discouraged
holiday home baking, depressed sales to consumers, and resulted in larger
in-store returnable merchandise at holiday season's end.
Even if current selling trends are maintained, there is still a large and very
significant percentage of 1999 estimated sales to be made during the final
quarter. It is the opinion of management that these sales will result in
year-end operating earnings consistent with those produced within the past
several years. As mentioned above, there will be income tax benefits carried
forward from 1998 transactions.
PART II. OTHER INFORMATION
None of the item numbers on captions are applicable to this report and are,
therefore, omitted.
Page 8
PARADISE, INC.
COMMISSION FILE NO. 0-3026
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 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 9
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<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> SEP-30-1999 SEP-30-1998
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