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, 2000
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,
2000 1999
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,
2000 1999 *
ASSETS
CURRENT ASSETS:
Cash and Unrestricted Demand Deposits $ 49,120$ 47,747
Accounts and Notes Receivable, Less
Allowances of $-0- (2000 and 1999) 881,876 820,932
Inventories:
Raw Materials 2,241,785 2,199,393
Work in Process 332,897 532,324
Finished Goods 11,574,827 10,181,202
Deferred Income Tax Asset 436,616 517,085
Income Tax Refund Receivable 64,925 290,988
Prepaid Expenses,Other Current Assets 612,956 490,452
TOTAL CURRENT ASSETS 16,195,002 15,080,123
Property, Plant and Equipment, Less
Accumulated Depreciation of $14,451,631
(2000) and $13,792,075 (1999) 5,839,849 5,974,362
Deferred Charges and Other Assets 693,430 689,1998
TOTAL ASSETS $ 22,728,281 $ 21,743,684
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes and Trade Acceptances Payable$ 4,825,761 $ 5,410,807
Current Portion of Long-Term Debt 274,597 1,114,939
Accounts Payable 4,747,387 3,308,602
Accrued Liabilities 836,519 856,323
Federal, State Income Taxes Payable 0 0
TOTAL CURRENT LIABILITIES 10,684,264 10,690,671
LONG-TERM DEBT, NET OF CURRENT PORTION 722,409 1,011,045
DEFERRED INCOME TAX LIABILITY 411,370 451,689
STOCKHOLDERS' EQUITY:
Common Stock: Auth; 2,000,000 shs. @ $.30
Par Value; Issued 582,721 (2000 and 1999) 174,926 174,926
Capital in Excess of Par Value 1,288,793 1,288,793
9,720,724 8,400,765
Less 63,551 (2000 and 1999) shares at cost
Held in Treasury ( 274,205)( 274,205)
Total Stockholders' Equity 10,910,238 9,590,279
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 22,728,281 $ 21,743,684
* 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
2000 1999 *
Net Sales $ 1,721,991 $ 1,610,547
Costs and Expenses:
Cost of Goods Sold 951,995 1,390,848
Selling, General and Admin.Exp 673,033 669,337
Depreciation and Amortization 166,799 202,362
Interest Expense - Long Term 24,011 68,324
Interest Expense - Short Term 114,850 23,218
Total Expenses 1,930,688 2,354,089
Earnings (Loss) from Operations ( 208,697) ( 743,542)
Other Income 20,990 20,592
Earnings (Loss) Before Income Taxes ( 187,707) ( 722,950)
Provision for Income Taxes 0 0
Net Earnings (Loss) $( 187,707) $( 722,950)
Earnings (Loss) per Common Share $(0.36) $(1.39)
* 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
2000 1999 *
Net Sales $ 3,106,975 $ 2,879,927
Costs and Expenses:
Cost of Goods Sold 2,396,026 2,518,139
Selling, General and Admin Expense 1,316,457 1,275,119
Depreciation and Amortization 336,432 381,656
Interest Expense - Long Term 52,167 109,300
Interest Expense - Short Term 114,850 23,218
Total Expenses 4,215,932 4,307,432
Earnings (Loss) from Operations (1,108,957) (1,427,505)
Other Income 38,312 37,914
Earnings (Loss) Before Income Taxes (1,070,646) (1,389,591)
Provision for Income Taxes 0 0
Net Earnings (Loss) $(1,070,646) $(1,389,591)
Earnings (Loss) per Common Share $(2.06) $(2.68)
* 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,
2000 1999 *
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(1,070,646) $(1,389,591)
Adjustments to Reconcile Net Loss to Net
Cash Used in Operating Activities:
Depreciation and Amortization 336,432 381,656
Decrease (Increase) in:
Accounts Receivable 1,798,906 ( 67,460)
Inventories (8,433,296) (7,248,014)
Income Tax Receivable 38,667 0
Prepaid Expenses ( 296,882) ( 212,074)
Increase (Decrease) in:
Accounts Payable 4,281,356 2,432,141
Accrued Expense ( 774,701) ( 882,227)
Income Taxes Payable ( 136,530) 0
246: Net Cash Used in Operating Activities (4,256,694) (6,985,569)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property and Equipment ( 381,219) ( 926,884)
Net Cash Used in Investing Activities ( 381,219) ( 926,884)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Long-Term Debt 0 825,000
Net Proceeds of Short-Term Debt 4,625,302 5,198,229
Principal Payments of Long-Term Debt ( 912,345) ( 489,323)
Dividends Paid ( 181,840) ( 233,794)
Increase in Other Assets ( 43,745) ( 68,558)
Net Cash Provided by Financing Activities 3,487,372 5,231,554
Net Decrease in Cash (1,150,541) (2,680,899)
CASH AT BEGINNING OF PERIOD 1,199,661 2,728,646
CASH AT END OF PERIOD $ 49,120 $ 47,747
SUPPLEMENTAL SCHEDULE OF NONCASH
FINANCING AND INVESTING ACTIVITIES:
PROCEEDS OF LONG-TERM DEBT USED TO:
Purchase Equipment $ 0 $ 0
* Restated for Comparative Purposes
Page 5
PARADISE, INC. COMMISSION FILE NO. 0-3026
Item1. 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 (2000 and 1999).
(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 operations 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, the
timing of customers' orders and other factors.
The Company's other segment of business, plastics molding,
accounted for approximately 16.5% of total
1999 sales. Therefore, most financial reporting is driven by the
fruit segment's operations, and the discussion
and comparison of data contained in interim reports is limited to
the year-to-date as it relates to the similar period
during the previous year.
The First Six Months
317: Total net sales increased nearly 8%, compared to the first half of
1999. Much of the increase took place in
the glace' fruit segment, and resulted from 30% reduction in credits,
issued for returns and "reclamation charges"
for merchandise sold during the prior year, but recorded during
the current period.
As disclosed in numerous previous filings, it is industry practice to
allow the return-for-credit of a negotiated
percentage of merchandise sold. It is Company practice to estimate
the magnitude of these returns and to
establish a reserve for the estimated gross profits to be lost. This
amount is deducted from Company earnings
during the year that the sales are made, and the reserve is charged
as returns are received early in the ensuing year.
During the 1998/1999 period, returns exceeded expectations, and
the reserve was not adequate. During
1999/2000, estimates were fairly consistent with actual returns.
In the plastics molding segment of business, sales continued their
upward trend with an increase of nearly
10%, as compared to the first six months of 1999. This validates
management's strategy of minimizing the
production of "generic" products and concentrating on custom
applications.
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)
Expressed as a percentage of sales, costs of goods sold
decreased significantly. However, during the first six
months of 1999, these costs were adversely affected by
adjustments to inventory valuations that were necessitated
by the excess returns mentioned above. During the period
reported herein, there were some increases in
manufacturing expenses; particularly labor, utilities and
casualty insurance.
Selling, general and administrative expenses increased by a
little more than 1%, with no noteworthy variation
in any item of expense. Interest expense increased as rates
spiral upward. It should be noted, however, that long-term debt
has declined more than $1.1 million during the past year,
and, all things being equal, future interest
costs will be almost entirely a function of short-term working
capital borrowings.
It should also be noted that the material increase in inventory
as of the reporting date is due to the provisions
of a strategic alliance co-packing agreement, wherein the Company
agreed to purchase the related inventory of
the alliance partner. This inventory will be used in the packing
of the partner's product line, for which the
Company has an exclusive, multi-year contract.
Summary
Since only approximately 14% of anticipated annual sales have
been made to date, it is the opinion of
management that it is far too early to forecast year-end results,
despite the encouraging mid-year earnings (loss)
improvement over the same period during the prior year.
Our Independent Accountants have reviewed our interim financial
information and their report, dated August 8, 2000 is included
herewith on Page 8.
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 10, 2000 PARADISE, INC.
s/ Melvin S. Gordon
Melvin S. Gordon, President
s/ Eugene L. Weiner
Eugene L. Weiner, Executive Vice
President, Secretary-Treasurer
Page 7
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
We have reviewed the accompanying Consolidated Balance Sheets,
Statements of Income and Cash Flows of
Paradise, Inc. and consolidated subsidiaries as of June 30, 2000
and 1999, and for the three-month and six-month
periods then ended. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards
established by the American Institute of Certified Public
Accountants. A review of interim financial information consists
principally of applying analytical procedures
to financial data and making inquiries of persons responsible for
financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying
financial statements for them to be in conformity with generally
accepted accounting principles.
BELLA, HERMIDA, GILLMAN, HANCOCK & MUELLER
Certified Public Accountants
August 8, 2000
Page 8
