UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 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
TELEPHONE NO. (813) 752-1155
Securities Registered Under Section 12 (b) of the Exchange Act:
None
Securities Registered Under Section 12 (g) of the Exchange Act:
Name of Each Exchange
Title of Each Class On Which Registered
Common Stock,
$.30 Par Value None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and
(2) has been subject to such filing requirements for the past
90 days. Yes x No___
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge
, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. Yes x No___
Issuer's revenues for its most recent fiscal year: $21,544,325
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant, $4,575,306 (as of January 31, 2000
, bid price $15.50)
Class Outstanding at December 31, 1999
Common Stock,
$.30 Par Value 519,170 Shares
PARADISE, INC.
1999 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART I
Item 1. Description of Business I-1 - I-5
Item 2. Description of Property I-5 - I-6
Item 3. Legal Proceedings I - 6
Item 4. Submission of Matters to a Vote of
Security Holders I - 6
PART II
Item 5. Market for Common Equity and
Related Stockholder Matters II-1 - II-2
Item 6. Management's Discussion and Analysis or
Plan of Operation II-3 - II-8
Item 7. Financial Statements II-9 - II-30
Item 8. Changes In and Disagreements with Accountants
On Accounting and Financial Disclosure II - 31
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons, Compliance with Section 16(a) of
The Exchange Act III-1 - III-2
Item 10. Executive Compensation III-2 - III-4
Item 11. Security Ownership of Certain Beneficial Owners
And Management III-4 - III-5
Item 12. Certain Relationships and Related Transactions III - 6
Item 13. Exhibits and Reports on Form 8-K III-6 - III-7
SIGNATURES
PART I
Item 1. Description of Business
(a) Business Development
Paradise, Inc., was incorporated under the laws of the State of
Florida in September, 1961 as Canaveral Utilities and Development
Corporation. After the acquisition and merger of several other
assets, the Corporation was renamed Paradise Fruit Company, Inc. in
February, 1964, and the corporate name was changed again to
Paradise, Inc. during July, 1993. During 1998, the Company sold its
Real Estate Investment asset in a transaction further described in
"Management's Discussion and Analysis" in PART II, Item 6 of this
Annual Report. There have been no bankruptcies, receiverships, or
similar proceedings during the corporation's history. There have been
no material reclassifications, mergers, consolidations, purchases or
sales of a significant amount of assets not in the ordinary course of
business during the past three years, except as reported above.
(b) The Company's operations are conducted through two business
segments. These segments, and the primary operations of each, are
as follows:
BUSINESS SEGMENT OPERATION
Candied Fruit Production of candied fruit, a basic
fruitcake ingredient, sold to
manufacturing bakers, institutional
users, and retailers for use in home
baking. Also, during some years, but
not 1999, the processing of frozen
strawberry products for sale to
commercial and institutional users
such as preservers, dairies, drink
manufacturers, etc.
Molded Plastics Production of plastic containers, for
the Company's products, and other
molded plastics for sale to unaffiliated
customers.
For further segment information, refer to Note 11 in Part II, Item 7 of
this Annual Report.
I-1
Item 1. Description of Business (Continued)
The Company knows of no other manufacturer in the Western
Hemisphere whose sales of glace' (candied) fruit is equal to those of
Paradise, Inc. While there are no industry statistics published, from
the generally reliable sources available, management believes that
Company brands account for 75-80% of all candied fruit sold in
supermarkets and other grocery outlets in the USA.
In terms of candied fruit dollar sales, during 1999, approximately
20% were shipped to manufacturing bakers and other institutional
users, with the balance being sold through supermarkets and other
retail outlets for ultimate use in the home.
Sales to retail outlets are usually generated through registered food
brokers operating in exclusively franchised territories. This method
of distribution is widely accepted in the food industry because of its
efficiency and economy. Other fruit sales, and almost all plastics
sales, are made directly by the Company's own personnel.
The principal raw materials used by the Company are fruits, fruit
peels, corn syrups, nuts, both raw and roasted and salted, and plastic
resins. Most of these materials are readily accessible from a number
of competitive suppliers. The supply and prices may fluctuate with
growing and crop conditions, factors common to all agricultural
products. Edible nut pricing is particularly volatile, and subject to
typical commodity fluctuations based on supply, demand, and future
expectations. Feed stocks for some plastic resins are petroleum
related and may be subject to supply and demand fluctuations in this
market.
The trademarks "Paradise," "Dixie," "Mor-Fruit" and "Sun-Ripe" are
registered with the appropriate Federal and State authorities for use
on the Company's candied fruit. These registrations are kept current,
as required, and have a value in terms of customer recognition. The
Company is also licensed to use the trademarks "White Swan,"
"Queen Anne," "Palm Beach," "Golden Crown," and "Pennant" in
the sale of candied fruit.
The demand for fruit cake materials is highly seasonal, with over 86%
of sales in these items occurring during the months of September,
October and November. However, in order to meet delivery
requirements during this relatively short period, the Company must
process candied fruit and p eels for approximately ten months
during the year. Also, the Company must acquire the fruits used
as raw materials during their seasonal growing periods. These
factors I-2
Item 1. Description of Business (Continued)
result in large inventories, which require financing to meet
relatively large short-term working capital needs.
The packaging and sale of edible nuts began during 1993, but was
discontinued after 1998.
Also during 1993, and through another wholly owned subsidiary, the
Company launched an enterprise for the growing and selling of
strawberries, both fresh and frozen. Plant City, Florida, the
location of the Company's manufacturing facilities and main office,
styles itself as the "The Winter Strawberry Capital" because of the
relatively large volume of fruit that is grown and harvested
locally, mostly from December through April of each season.
However, once competing
fresh berries from the West Coast of the USA begin finding their way
to market, the price of Florida fruit begins to diminish, and local
growers had no other market for their product.
While there are significant freight cost advantages in the sale and
marketing of local strawberries to customers in the eastern U.S.,
growers and producers on the West Coast, from southern California
to Washington state, still dominate pricing and marketing
conditions. The Company estimates more than 90% of total U.S.
strawberry production is located in this area.
Therefore, Paradise limits its activities in this market to years
in which basic supply and demand statistics, such as West Coast
harvest predictions and frozen strawberry prior year inventory
carryovers, lead to a reasonable anticipation of profitability.
There were no strawberry operations during 1999 and 1998, and limited
sales during 1997.
Some molded plastics container demand is seasonal, by virtue of the
fact that a substantial portion of sales are made to packers of
food items and horticultural interests, with well defined growing
and/or harvest seasons.
In the opinion of management, the seasonal nature of some plastics
sales does not have a significant impact upon the working capital
requirements of the Company.
During the first three months of the year, the Company contracts with
certain commercial bakers for future delivery of quantities
representing a substantial portion of the sales of fruit cake
materials to institutional users. Deliveries against these
contracts are completed prior to the close of the fiscal year
ending December 31.
I-3
Item 1. Description of Business (Continued)
Many of the commercial bakers and other in stitutional accounts
face the same seasonal demands as the Company, and must
contend with similar short-term working capital needs.
The Company accommodates some of these customers with extended
payment terms of up to ninety days.
By the same token, many suppliers offer similar extended payment
terms to the Company.
It is a trade practice to allow some supermarket chains to return
candied fruit products that remain unsold at year-end, an option for
which they normally pay an up-charge. A provision for the estimated
losses on retail returns is included in the Company's financial
statements, for the year during which the sales are made, under
accrued expenses.
During 1999, the Company derived more than 17% of its
consolidated revenues from sales to the affiliated companies,
Wal-Mart Stores, Inc. and Sam's Club. These affiliated companies
are not related to Paradise, Inc. Sales to each of these
affiliates were made separately, and each is shipped a different
brand of fruit products, and is invoiced by a separate Paradise
subsidiary. In addition, slightly more than 5% of total
consolidated revenues were sold to Publix Supermarkets, Inc.
No other customer reached this threshold, but it should be noted
that recent acquisitions and merger targets of several very large
supermarket chains, i.e. Kroger and Albertsons, when consolidated
and taken together, could equal a total of 5% of revenues. However
, to date, these acquisitions have retained their original identity
and autonomy to the extent that they are sold,
shipped and invoiced separately.
While there is no industry-wide data available, management estimates
that the Company sold approximately 60-70% of all candied fruits
and peels consumed in the U.S. during 1999. The Company knows
of two major competitors; however, it estimates that none of these has
as large a share of the market as the Company's.
The molded plastics industry is very large and diverse, and
management has no reasonable estimate of its total si ze. Many
products produced by the Company are materials for its own use in
the packaging of candied fruits for sale at the retail level.
Outside sales represent approximately 70% of the Company's total
plastics production at cost, and, in terms of the overall market,
are insignificant.
I-4
Item 1. Description of Business (Continued)
In the above business segments, it is the opinion of management
that price, which is to include the cost of delivery, is the
largest single competitive factor, followed by product quality and
customer service.
Given the above competitive criteria, it is the opinion of management,
that the Company is in a favorable position.
During recent years, the Company has made capital investments of
over $1 million in order to comply with the growing body of
environmental regulations. These have included the building of
screening and pretreatment facilities for water effluent,
installation of devices for controlling the quality of air
emissions, and removing underground fuel storage tanks to approved
above ground locations.
All of these facilities are permitted by governmental authorities at
various levels, and are subjected to periodic testing as a
condition of permit maintenance and renewal. All required
permitting is currently in effect, and the Company is in full
compliance with all terms and conditions stated therein.
By local ordinance, it is required that all water effluent is metered,
tested and discharged into a municipal industrial waste treatment
plant.
During 1999, costs for this discharge exceeded $289,000, and
management estimates that all expenses directly related to compliance
with environmental regulations total well over $400,000 annually.
The Company employs between 140 and 275 people, depending upon
the season.
The Company conducts operations principally within the United
States. Foreign activities are not material.
Item 2. Description of Property
(a) Built in 1961, the plant is located in a modern industrial subdivision
at Plant City, Florida, approximately 20 miles east of the City of
Tampa. It is served by three railroad sidings, and has paved road
access to three major state and national highways. It has productive
and warehouse facilities of nearly 350,000 sq. ft.
During 1985, the Company acquired approximately 5.2 acres
immediately adjacent to, and to the West of, its main plant building.
Several buildings and a truck weigh t scale existed on the
property. Some of these facilities have been significantly updated
, remodeled,
I-5
Item 2. Description of Property (Continued)
and/or rebuilt and are used for the strawberry processing and some
plastics molding operations. Other facilities, in excess of the
Company's current needs, are leased to others.
The Company owns its plant facilities and other properties subject to
a secured note and real estate mortgages.
Because of the unique processing methods employed for candied fruit,
much of the equipment used by the Company is designed, built and
assembled by the Company's employees. The Company considers its
plant one of the most modern, automated plants in the industry. The
equipment consists of vats, dehydrators, tanks, giant evaporators,
carbon filter presses, syrup pumps and other scientifically designed
processing equipment. Finished retail packages are stored in
air-conditioned warehouses, if required.
Regarding molded plastic manufacturing, most equipment is normally
available from a number of competitive sources. The molds used for
specialized plastic products must be individually designed and
manufactured, requiring substantial investment, and are considered
proprietary.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security Holders
None
I-6
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
On August 22, 1997 the Securities and Exchange Commission issued
new listing requirements for companies listed on the NASDAQ Small
Cap Market. The new requirements became effective on February 23,
1998. As of March 2000, the Company had not met the listing criteria.
(a) The following table shows the range of closing bid prices for the
Company's Common Stock in the over-the-counter market for the
calendar quarters indicated. The quotations represent prices in the
over-the-counter market between dealers in securities, do not include
retail mark-up, mark-down, or commissions and do not necessarily
represent actual transactions.
BID PRICES
High Low
1999
First Quarter 17 1/4 15 1/2
Second Quarter 16 7/8 15 3/4
Third Quarter 16 3/4 15 3/4
Fourth Quarter 16 3/4 15 1/2
1998
First Quarter 19 13 1/4
Second Quarter 18 15
Third Quarter 18 15 1/4
Fourth Quarter 18 15 1/4
(b) Approximate Number of Equity Security Holders
As of December 31, 1999, the approximate number of holders of
record of each class of equity securities of the Registrant were:
NUMBER OF
TITLE OF CLASS HOLDERS OF RECORD
Common Stock, $.30 Par Value 219
II-1
Item 5. Market for Common Equity and Related Stockholder MatterS(Continued)
(c) Dividend History and Policy
The Company has declared dividends of $.35 (1999) and $.45 (1998)
and $.25 (1997). Dividends have been declared and paid annually,
only when warranted by profitability and permitted by lending
agreements.
The Company does not have a standard policy in regards to the
declaration and payment of dividends. Each year dividend payments,
if any, are determined upon consideration of the current
profitability, cash flow requirements, investment outlook and other
pertinent factors.
According to the covenants of a loan agreement, dated May 29, 1986,
amended several times thereafter, and in effect until June 8, 1995,
the declaration of dividends was specifically limited by certain
financial parameters. That agreement was modified in 1995, and
while still requiring the attainment of certain balance sheet
ratios, specific references to dividends were omitted.
II-2
Item 6. Management's Discussion and Analysis or Plan of Operation
Summary
The following tables set forth for the periods indicated (i) percentages
which certain items in the financial data bear to net sales of the Company
and (ii) percentage increase of such items as compared to the indicated
prior period.
RELATIONSHIP TO PERIOD TO PERIOD
TOTAL REVENUE INCREASE (DECREASE)
YEAR ENDED DECEMBER 31, YEARS ENDED
1999 1998 1997 1999-98 1998-97
NET SALES:
Candied Fruit and Nuts 83.5% 86.8% 86.7% -5.7% -0.1%
Molded Plastics 16.5 13.2 13.3 22.9 -0.8
100.0 100.0 100.0 -1.9 -0.2
Cost of Sales 66.0 65.3 64.5 -0.8 1.0
Selling, General and
Administrative Expense 19.4 19.2 20.3 -1.1 -5.4
Depreciation and
Amortization 4.0 4.1 4.1 -3.7 -2.0
Interest Expense 1.9 2.4 2.5 -22.2 -3.3
Earnings from Operations 8.7 9.0 8.6 -5.4 5.2
Material Infrequent Items:
Contribution of Land0.0 -3.8 0.0
Gain on Sale of Real
Estate Investment 0.0 2.8 0.0
Gain on Contributio 0.0 3.3 0.0
Other Income 0.0 0.4 0.3 -110.6 61.61
Earnings Before
Provision for Income
Taxes 8.7 11.7 8.9 -27.4 32.2
Provision for Income
Taxes 3.3 2.5 3.4 28.0 -24.9
Net Earnings 5.4% 9.2% 5.5% -42.6% 67.3%
(1) Liquidity
Management is not aware of any demands, commitments, events or
uncertainties that will result in, or are reasonable likely to
result in, a material increase or decrease in the Company's
liquidity. One trend to be noted is the Company's ability over the
past three years to materially decrease its short-term debt position
while maintaining a consistent level of inventory. As discussed in
footnote 4 of the Company's financial statements, a line of credit
is available to the Company to finance short-term working capital
needs.
II-3
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(2) Capital Resources
The Company does not have any material outstanding commitments
for capital expenditures. Management is not aware of any material
trends either favorable or unfavorable in the Company's capital
resources.
(3) Results of Operations
1999 Compared to 1998
Absent the material and unusual transaction during 1998, in which
the Company sold its Real Estate Asset (as described fully in the
discussion of "1998 Compared to 1997" below), operations during
1999 closely tracked both of the preceding years in many respects.
In the comparison of 1999 to 1998, overall net sales decreased by
less than 2%. On a segment of business basis, candied fruit sales
declined by over 5.5%, while plastics sales increased nearly 23%.
In the fruit segment, gross sales remained fairly constant, the
difference in net sales being entirely due to an excess of returns of
merchandise sold during 1998, but received and credited during
1999. As disclosed in past filings, it is trade practice among
almost all sellers of "holiday" or seasonal merchandise to allow
for the return by buyers of unsold merchandise at the end of the
season. In addition, many supermarket chains have established
"reclamation centers," which have become profit centers within
themselves, and have added to the burden of most vendors. Also, it
has been disclosed previously that the Company sets aside certain
percentages of current sales as a provision for anticipated lost
profits on returns.
In plastics, sales to unaffiliated customers grew by nearly 23%, as
the Company continued to build its custom molding and value added
business, a focus begun several years ago when generic and other
low value items were removed from production. Management continues
to be optimistic about the growth potential of this segment.
In comparing the year just ended with the prior year, when
expressed as a proportion of sales, there was less than a 1%
variation in costs of goods sold; selling, general and
administrative expenses; depreciation and amortization; and
interest. In other words, there was little significant change in
the broad classifications of operating expenses. There were some
increases in hourly wage rates, salaries, group medical coverage,
the costs of some raw materials, and several other areas.
II-4
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(3) Results of Operations (Continued)
1999 Compared to 1998 (Continued)
There was, however, a material change in after-tax earnings. Of
the $859,000 or over 42% difference, almost $575,000 or nearly 29% was
directly attributable to the after-tax profits derived from the 1998
sale of the Real Estate Asset. Much of the balance of the
difference arose from the volume of 1998 sales returned during
1999, for which the provision for lost profits on returns was not
adequately reserved during 1998.
During 1999, management limited sales to customers with high returns
during the prior year. Indications, both at year-end and
subsequent to closing, are that returns of 1999 sales during the
year 2000 will be materially less, and that provisions made for
lost profits in the accompanying financial statements will be
adequate.
1998 Compared to 1997
The principal material difference in Company operations between
1998 and the prior year was the sale of the Real Estate Investment
asset. This item, previously carried on the balance sheet at its
cost of $261,848, was one of the original assets at the time of the
Company's incorporation during 1961. The property, located in
Brevard County, Florida, consisted of both highlands and wet lands,
both of which were environmentally sensitive. While originally
intended for residential development, the voluminous environmental
laws and regulations promulgated since its acquisition rendered the
land virtually developmentally useless, and with value only as an
environmental preserve.
Therefore, after several years of litigation and negotiation, the
property was transferred to the St. John's River Water Management
District (Fl.) in a transaction which included both the sale of
several parcels, and the contribution of others. As disclosed on the
income statements included herein, the net effect on pre-tax
earnings aggregated $492,502, in addition to certain income tax
benefits, both during the current year and up to four ensuing years.
The notes to the financial statements offer further specific
information.
II-5
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(3) Results of Operations (Continued)
1998 Compared to 1997 (Continued)
It should also be noted that inventories increased by $2.1 million.
This merchandise was acquired and/or produced in anticipation of a
significantly delayed start-up of 1999 processing, caused by major
remodeling of part of the production facilities, now underway, and
which includes improvements to mandated air emission quality
controls.
Perhaps one of the most widely discussed issues in business today
is the "Y2K Question". In that regard, all Paradise electronic
data programs have been audited by an independent information
systems specialist, and those requiring correction were modified.
Management considers the Company now to be Y2K compliant, but, of
course, the ultimate tests will take place when these systems are
interfaced with those modifications made by suppliers and customers.
The Company could also be adversely affected if other entities,
such as suppliers and customers, fail to remediate their own Y2K
issues. Management cannot reasonably estimate the impact of
unforseen or unresolved Y2K issues in advance of their occurrence,
nor provide assurance that Y2K issues will not have a material
adverse affect on the Company's business, results of operations and
financial condition. Management is currently evaluating the need
to develop a contingency plan.
There were no great changes in the Company's normal, every day
operations. Total sales were relatively flat, with a very small
reduction (less than .002). In the candied fruit segment of
business, some important new customers were added, but industry-
wide sales were adversely affected by the unusually warm holiday
season, which always seems to inhibit home baking of fruit cakes
and other confections.
In the plastics molding segment, sales were also flat, although
there were encouraging signs that projects under development
earlier in the year began to reach fruition during the fourth quarter.
Costs of goods increased by about 1%, with the most significant
factors being factory labor and governmentally mandated treatment
of water effluent and other wastes. There were also minimal increases
in most other expenses in this category.
II-6
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(3) Results of Operations (Continued)
1998 Compared to 1997 (Continued)
Other expenses declined: selling, general and administrative
expenses by 5.4%, with most accounts reported therein aggregating
moderate decreases as compared to the prior year. Depreciation
and amortization expenses were reduced by about 2%, as depreciable
assets were slightly reduced; and net interest expense declined by
3.3%, due to favorable rates throughout the year.
The result of these savings in operating expenses was an approximate
5% increase in pre-tax earnings from operations. Despite higher
earnings, income taxes were reduced, primarily as a benefit of the
real estate contribution, outlined above.
The combined, net after-tax consequence of all of the above was an
increase in earnings to $3.88 per share of Paradise common stock,
versus $2.32 per share during the prior year.
1997 Compared to 1996
Operating results improved materially from 1996 to 1997, continuing
an upward trend begun in 1994, and validating the Company's change
in focus, from the pursuit of increased sales to the concentration on
cost containment, profitability, and improving the balance sheet.
During 1996 and 1995, this shift in emphasis led to little growth,
and, in some cases, a decline in total sales, as the Company
trimmed unprofitable items and customers.
However, in the year just ended, total net sales increased by more
than $1.6 Million, or 8%. Over 95% of these increases took place
in the candied fruit segment of business, and were due mostly to
the addition of two major U.S. supermarket chains to the Company's
customer list. Sales in the molded plastics segment increased by
2%. In addition, the plastics segment produced nearly $1 Million,
as cost, in packaging for the fruit segment, significantly
contributing to the profitability of those products.
II-7
Item 6. Management's Discussion and Analysis or Plan of Operation (Continued)
(3) Results of Operations (Continued)
1997 Compared to 1996 (Continued)
Compared to the prior year, Costs of Sales were reduced to 64.5%
from 67.5% of net sales, reflecting lowered costs for corn
sweeteners, some fruit raw materials, casualty insurance, and
plastics resins. Some of these savings in purchases costs were
offset, however, by material increases in factory labor expenses,
mandated by the Federal minimum wage legislation, and other wage
increases generated by this mandate.
Also expressed as a percentage of sales, Selling, General and
Administrative expenses increased slightly (0.7%), reflecting costs
directly related to increased sales, as well as higher wages and
other costs related thereto. Depreciation and amortization
continued a downward trend, as the value of assets being
depreciated declined more than the value of newly acquired assets
increased.
Interest expense declined by nearly 18% as a result of favorable
prime rates, a modified agreement with the Company's principal
lender, and smaller interim working capital borrowings.
The operations, outlined briefly above, resulted in a 54%
increase in after-tax per share earnings, to $2.51 from $1.63,
satisfied all of the restrictive covenants of the existing loan
agreement, and led the directors to declare a dividend of $0.25
per share, as compared to $0.10 during the prior year.
II-8
Item 7. Financial Statements
INDEPENDENT AUDITORS' REPORT
March 17, 2000
To The Board of Directors
and Shareholders of
Paradise, Inc.
Plant City, Florida
We have audited the accompanying consolidated balance sheets of Paradise,
Inc., and subsidiaries as of December 3l, l999, 1998 and l997, and the
related consolidated statements of earnings, changes in stockholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Paradise, Inc.,
and subsidiaries as of December 3l, l999, 1998 and l997, and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Respectfully submitted,
BELLA, HERMIDA, GILLMAN, HANCOCK & MUELLER
Certified Public Accountants
Plant City, Florida
II-9
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
DECEMBER 31,
1999 1998 1997
CURRENT ASSETS:
Cash $ 1,199,661 $ 2,728,646 $ 2,816,008
Accounts Receivable, Net of Allowance
for Doubtful Accounts of $ -0- 2,680,782 753,472 1,981,515
Inventories 5,716,213 5,664,905 3,515,513
Prepaid Expenses and Other Current
Assets 316,074 278,378 246,547
Deferred Income Tax Asset 436,616 517,084 239,453
Income Tax Refund Receivable 103,592 290,989 1,318
Total Current Assets 10,452,938 10,233,474 8,800,354
INVESTMENTS:
Real Estate, at Cost 261,848
PROPERTY, PLANT AND EQUIPMENT:
Net of Accumulated Depreciation of
$14,108,805 (1999), $13,384,647
(1998) and $12,808,973 (1997) 5,792,081 5,406,282 5,476,764
OTHER ASSETS 652,667 670,823 687,677
TOTAL ASSETS $ 16,897,686 $ 16,310,579 $ 15,226,643
The Accompanying Notes are an Integral Part of
These Consolidated Financial Statements
II-10
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31,
1999 1998 1997
CURRENT LIABILITIES:
Short-Term Debt $ 200,460 $ 212,578 $ 155,802
Accounts Payable 466,031 876,362 369,719
Accrued Expenses 1,606,242 1,733,572 1,858,164
Dividends Payable 186,818 238,772 134,864
Accrued Taxes on Income 136,530 178,051
Current Portion of Long-Term Debt 1,060,026 1,032,756 1,019,412
Total Current Liabilities 3,656,107 4,094,040 3,716,012
LONG-TERM DEBT,
NET OF CURRENT PORTION 849,325 757,551 1,790,307
DEFERRED INCOME TAX
LIABILITY 411,370 451,689 493,656
Total Liabilities 4,916,802 5,303,280 5,999,975
STOCKHOLDERS' EQUITY:
Common Stock, $.30 Par Value,
2,000,000 Shares Authorized,
582,721 Shares Issued, 519,170
Shares Outstanding 174,816 174,816 174,816
Capital in Excess of Par Value 1,288,793 1,288,793 1,288,793
Retained Earnings 10,791,480 9,817,895 8,037,264
Less: Common Stock in Treasury,
at Cost, 63,551 Shares 274,205 274,205 274,205
Total Stockholders' Equity 11,980,884 11,007,299 9,226,668
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 16,897,686 $ 16,310,579 $ 15,226,643
II-11
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
1999 1998 1997
NET SALES $ 21,544,323 $ 21,967,814 $ 22,008,437
COSTS AND EXPENSES:
Cost of Goods Sold 14,222,058 14,340,730 14,201,307
Selling, General and
Administrative Expenses 4,167,803 4,214,796 4,455,909
Depreciation and Amortization 863,274 895,936 914,332
Interest Expense 414,135 532,169 550,431
Total Costs and Expenses 19,667,270 19,983,631 20,121,979
EARNINGS FROM OPERATIONS 1,877,053 1,984,183 1,886,458
Contribution of Land ( 840,000 )
Gain on Sale of Real Estate Investment 621,128
Gain on Contribution 711,373
Other Income (Expense) - Net ( 9,949 ) 93,859 58,076
EARNINGS BEFORE PROVISION
FOR INCOME TAXES 1,867,104 2,570,543 1,944,534
PROVISION FOR INCOME TAXES 711,679 556,118 740,264
NET EARNINGS $ 1,155,425 $ 2,014,425 $ 1,204,270
EARNINGS PER SHARE:
Basic $ 2.23 $ 3.88 $ 2.31
Diluted $ 2.23 $ 3.88 $ 2.31
The Accompanying Notes are an Integral Part of
These Consolidated Financial Statements
II-12
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
CAPITAL IN
COMMON EXCESS OF RETAINED TREASURY
STOCK PAR VALUE EARNINGS STOCK TOTAL
Balance, December 31,
1996 $ 174,816 $ 1,288,793 $ 6,962,880 $(274,205) $ 8,152,284
Cash Dividends
Declared, $.25 per Share ( 129,886) ( 129,886)
Net Earnings 1,204,270 1,204,270
Balance, December 31,
1997 174,816 1,288,793 8,037,264 (274,205) 9,226,668
Cash Dividends
Declared, $.45 per Share ( 233,794) ( 233,794)
Net Earnings 2,014,425 2,014,425
Balance, December 31,
1998 174,816 1,288,793 9,817,895 (274,205) 11,007,299
Cash Dividends
Declared, $.35 per Share ( 181,840) ( 181,840)
Net Earnings 1,155,425 1,155,425
Balance, December 31,
1999 $ 174,816 $ 1,288,793 $10,791,480 $(274,205) $11,980,884
The Accompanying Notes are an Integral Part of
These Consolidated Financial Statements
II-13
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 3l,
1999 l998 l997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings $ 1,155,425 $ 2,014,425 $ 1,204,270
Adjustments to Reconcile Net Earnings
to Net Cash Provided by (Used in)
Operating Activities:
Increase (Decrease) in Net Deferred
Income Tax Liability 40,149 ( 319,598) 10,487
Depreciation and Amortization 863,274 895,936 914,332
Loss (Gain) on Sale of Assets 2,301 (1,449,807) 233
Charitable Contribution 840,000
Decrease (Increase) in:
Accounts Receivable (1,927,310) 1,228,043 ( 473,550)
Inventories ( 51,308) (2,149,392) 524,333
Prepaid Expenses ( 37,696) ( 31,831) 93,488
Refund Receivable 187,397 ( 289,671) ( 486)
Other Assets ( 87,677) ( 149,286) ( 95,678)
Increase (Decrease) in:
Accounts Payable ( 410,331) 506,741 ( 297,887)
Accrued Expenses ( 127,330) ( 124,592) 260,412
Accrued Taxes on Income 136,530 ( 178,051) ( 146,643)
Net Cash Provided by (Used in)
Operating Activities ( 256,576) 792,917 1,993,311
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Property, Plant and
Equipment (1,038,827) ( 654,024) ( 441,494)
Proceeds From Sale of Assets 2,000 887,517 68,600
Net Cash Provided by (Used in)
Investing Activities (1,036,827) 233,493 ( 372,894)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Proceeds (Repayments) of
Short-term Debt ( 12,118) 56,776 ( 101,698)
Proceeds from Issuance of Long-term Debt 825,000
Principal Payments on Long-term Debt ( 773,227) (1,019,412) (1,056,796)
Dividends ( 233,794) ( 129,886) ( 51,594)
Increase in Other Assets ( 41,443) ( 21,250) ( 21,250)
Net Cash Used in Financing
Activities ( 235,582) (1,113,772) (1,231,338)
NET INCREASE (DECREASE) IN CASH (1,528,985) ( 87,362) 389,079
CASH, at Beginning of Year 2,728,646 2,816,008 2,426,929
CASH, at End of Year $ 1,199,661 $ 2,728,646 $ 2,816,008
II-14
PARADISE, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31,
1999 l998 l997
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash Paid During the Year for:
Interest $ 421,844 $ 528,739 $ 573,379
Income Taxes $ 535,000 $ 1,103,545 $ 865,703
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Long-Term Debt Issued:
Equipment Purchases $ 67,271 $ 0 $ 398,604
DISCLOSURE OF ACCOUNTING POLICY:
For purposes of the Statements of Cash Flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents.
The Accompanying Notes are an Integral Part of
These Consolidated Financial Statements
II-15
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE l: PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, after elimination of all
material intercompany transactions and profits.
NOTE 2: INVENTORIES
1999 1998 l997
Supplies $ 119,663 $ 190,065 $ 154,175
Raw Materials 1,020,612 795,304 804,213
Work in Progress 402,939 252,661 323,272
Finished Goods 4,172,999 4,426,875 2,233,853
TOTAL $ 5,716,213 $ 5,664,905 $ 3,515,513
Inventories are valued at the lower of cost (first-in, first-out)
or market. Cost includes material, labor and factory overhead.
Substantially all inventories are pledged as collateral for certain
short-term obligations.
NOTE 3: PROPERTY, PLANT AND EQUIPMENT
1999 l998 l997
Land and Improvements $ 856,040 $ 856,040 $ 848,256
Buildings and Improvements 5,738,010 4,899,991 4,745,587
Machinery and Equipment 13,306,836 13,034,898 12,691,894
Total 19,900,886 18,790,929 18,285,737
Less: Accumulated Depreciation 14,108,805 13,384,647 12,808,973
NET $ 5,792,081 $ 5,406,282 $ 5,476,764
II-16
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 3: PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
Property, plant and equipment are stated at cost. Generally, the
straight-line method is used in computing depreciation. Estimated
useful lives of plant and equipment are:
Years
Buildings and Improvements 10-30
Machinery and Equipment 3-10
Expenditures which significantly increase values or extend useful
lives are capitalized. Expenditures for maintenance and repairs are
charged to expense as incurred. Upon sale or retirement of property,
plant and equipment, the cost and related accumulated depreciation
are eliminated from the respective accounts and the resulting gain
or loss is included in the current earnings. Amortization is also
computed using the straight-line method over the estimated life of
the asset.
All of the real property and machinery and equipment are pledged as
collateral for certain short-term and long-term obligations.
NOTE 4: SHORT-TERM DEBT
1999 l998 1997
Trade acceptances, letters of credit
and other short-term debt. $ 200,460 $ 212,578 $ 155,802
TOTAL $ 200,460 $ 212,578 $ 155,802
II-17
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 4: SHORT-TERM DEBT (CONTINUED)
The average monthly borrowings and weighted average interest rates
were determined by month-end balances. Non-interest bearing letters
of credit were included in the aggregate figures.
WEIGHTED AVERAGE
l999 AMOUNT INTEREST RATE
Average bank short-term borrowings
(monthly) $ 2,517,482 8.30%
Average aggregate short-term
borrowings (monthly) $ 4,208,652 5.76%
Maximum aggregate short-term
borrowings (at any month-end) $ 10,003,392
WEIGHTED AVERAGE
1998 AMOUNT INTEREST RATE
Average bank short-term borrowings
(monthly) $ 1,925,000 8.09%
Average aggregate short-term
borrowings (monthly) $ 4,064,576 5.92%
Maximum aggregate short-term
borrowings (at any month-end) $ 10,020,449
WEIGHTED AVERAGE
l997 AMOUNT INTEREST RATE
Average bank short-term borrowings
(monthly) $ 1,882,082 9.00%
Average aggregate short-term
borrowings (monthly) $ 3,649,960 6.38%
Maximum aggregate short-term
borrowings (at any month-end) $ 9,295,974
II-18
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
NOTE 4: SHORT-TERM DEBT (CONTINUED)
Pursuant to a loan agreement, a bank has agreed to advance the
Company 80% of the Company's eligible receivables and 50% of the
Company's eligible inventory. Interest is payable monthly and is
computed at prime plus 1/2%. Principal is due the earlier of on
demand or May 31, 2000.
This agreement is subject to certain conditions which must be met
for the Company to continue borrowing, including debt service
coverage and debt to equity ratios, a resting period provision, and
other financial covenants.
The amount available to be drawn down based on the available
collateral at December 31, 1999 was $4,393,432, at December 31,
1998 was $3,218,216, and at December 31, 1997 was $2,831,732.
NOTE 5: LONG-TERM DEBT
1999 1998 1997
Two Prime plus 1% notes,
collateralized by accounts
receivable, inventories and
equipment. Monthly payments
of $76,875 plus interest. $ 1,516,291 $ 1,260,000 $ 2,100,000
Obligations under capital leases.
Monthly payments totaling $20,569
including interest at rates
ranging from 6.40% to 9.75%,
collateralized by equipment
and vehicles. 393,060 530,307 709,719
Total Debt 1,909,351 1,790,307 2,809,719
Less, Current Portion 1,060,026 1,032,756 1,019,412
LONG-TERM DEBT $ 849,325 $ 757,551 $ 1,790,307
The aggregate principal amounts maturing in each of the subsequent
years are:
2000 $ 1,060,026
2001 333,263
2002 262,483
2003 235,269
2004 18,310
Total $ 1,909,351
II-19
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 6: LEASES
The Company has certain equipment leases which are classified as
capital leases. At December 3l, l999, 1998 and 1997, the amount
capitalized was $1,009,636, $964,894 and $960,566, respectively,
and the accumulated amortization was $439,692 (1999), $334,254
(1998) and $213,643 (1997). The amount recognized as an obligation
was $393,060, $530,307 and $709,719, respectively, which has been
included in long-term debt shown in Note 5. Amortization expense
is included in depreciation.
The Company leases automobiles under operating leases ranging in
length from thirty to sixty months. Lease payments charged to
operations amounted to $61,419 (1999), $61,592 (1998) and $61,273
(1997).
At December 31, 1999, future minimum payments required under leases
with terms greater than one year, and the present value of minimum
capital lease payments, were as follows:
CAPITAL OPERATING
YEARS ENDING DECEMBER 3l, LEASES LEASES
2000 $ 235,440 $ 51,518
2001 133,098 35,829
2002 42,999 20,909
2003 15,805 4,892
Total Minimum Lease Payments 427,342 $ 113,148
Less, Amount Representing
Interest 34,282
PRESENT VALUE OF FUTURE MINIMUM
CAPITAL LEASE PAYMENTS $ 393,060
NOTE 7: ACCRUED EXPENSES
1999 l998 l997
Accrued Payroll and Bonuses $ 464,528 $ 383,285 $ 451,285
Accrued Brokerage Payable 263,722 323,895 303,398
Accrued Pension Cost (Note 8) 175,136 105,789 149,290
Provision for Unrealized Profit
on Retail Returns 354,000 512,000 419,000
Accrued Royalties and Other 34,505 42,007 200,768
Accrued Credit Due to Customers 234,896 265,715 258,852
Accrued Insurance Payable 79,455 100,881 75,571
TOTAL $1,606,242 $1,733,572 $1,858,164
As a part of its normal sales policy, the Company allows some
customers to return unsold, retail packed, candied fruit after the
holiday season. A provision for the unrealized profit on these
estimated returns is shown above under "provision for unrealized
profit on retail returns".
II-20
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 8: RETIREMENT PLAN
The Company and its subsidiaries have a defined benefit pension plan
covering all employees who become eligible for participation in the
plan on the semiannual date following one year of service (l,000 hours
worked) and the attainment of age 21. The total pension cost for
l999, 1998 and l997 was $156,012, $46,491 and $21,216, respectively,
which includes amortization of past service cost over 10 years. The
Company makes annual contributions to fund the plan equal to the
amounts deductible for Federal Income Tax purposes. The benefit
formula being used is known as the frozen initial liability cost
method. The plan's assets consist of both fixed income assets and
whole life insurance contracts. The plan has no significant
nonbenefit liabilities. During 1999, the plan was amended to
eliminate insured survivor benefits for new participants joining
the plan on or after December 1, 1999.
1999 1998 1997
Change in Benefit Obligation:
Benefit Obligation at
Beginning of Year $ 3,107,332 $ 2,611,957 $ 2,129,059
Service Cost 124,933 100,633 76,933
Interest Cost 167,507 169,447 154,144
Actuarial (Gain) Loss ( 300,707 ) 386,709 393,703
Benefits Paid ( 2,134 ) ( 161,414 ) ( 141,882 )
Settlement Amount ( 919,243 ) 0 0
Benefit Obligation at
End of Year $ 2,177,688 $ 3,107,332 $ 2,611,957
Change in Plan Assets:
Fair Value of Plan Assets at
Beginning of Year $ 2,787,022 $ 2,650,088 $ 2,509,894
Actual Return on
Plan Assets 94,931 208,356 282,076
Employer Contributions 86,665 89,992 0
Benefits Paid ( 2,134 ) ( 161,414 ) ( 141,882 )
Settlement Amount ( 919,243 ) 0 0
Fair Value of Plan Assets
at End of Year $ 2,047,241 $ 2,787,022 $ 2,650,088
II-21
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 8: RETIREMENT PLAN (CONTINUED)
1999 1998 1997
Funded Status (Underfunded)
Overfunded $ ( 130,447 ) $ ( 320,310 ) $ 38,131
Unrecognized Net Actuarial
Loss 214,577 495,626 115,523
Unrecognized Transition
Obligation 30,800 45,749 60,698
Unrecognized Prior Service
Cost ( 290,066 ) ( 326,854 ) ( 363,642 )
Accrued Benefit Cost $ ( 175,136 ) $ ( 105,789 ) $( 149,290 )
The Net Periodic Benefit Cost for 1999, 1998 and 1997 included the
following components:
Service Cost $ 124,933 $ 100,633 $ 76,933
Interest Cost 167,507 169,447 154,144
Expected Return on
Plan Assets ( 221,489 ) ( 201,750 ) ( 188,022 )
Recognized Net Actuarial
Loss 16,333 0 0
Amortization of Transition
Obligation 14,949 14,949 14,949
Amortization of Prior Service
Cost ( 36,788 ) ( 36,788 ) ( 36,788 )
Loss on Settlement 90,567 0 0
Net Periodic Benefit $ 156,012 $ 46,491 $ 21,216
Weighted-Average Assumptions Used:
Discount Rate 6.50% 5.50% 6.50%
Expected Long-Term Rate
of Return 8.00% 8.00% 7.50%
Rate of Compensation Increase 4.05% 4.05% 4.58%
II-22
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 8: RETIREMENT PLAN (CONTINUED)
In amortizing prior service costs, a straight-line amortization of
the cost over the average remaining service period of employees
expected to receive benefits under the plan is used. A settlement
took place during 1999 as a result of a lump-sum cash payment.
The resulting recognized loss was $90,567.
NOTE 9: PROVISION FOR FEDERAL AND STATE INCOME TAXES
The provisions for income taxes are comprised of the following
amounts:
1999 1998 1997
CURRENT:
Federal $ 572,377 $ 722,181 $ 614,930
State 99,153 153,535 114,848
671,530 875,716 729,778
DEFERRED:
Federal 34,281 ( 272,886 ) 8,953
State 5,868 ( 46,712 ) 1,533
40,149 ( 319,598 ) 10,486
TOTAL PROVISION FOR
INCOME TAXES $ 711,679 $ 556,118 $ 740,264
A reconciliation of the differences between the effective income
tax rate and the statutory Federal income tax rate follows:
1999 1998 1997
Income Taxes Computed
at Statutory Rate $ 639,087 $ 491,020 $ 664,115
State Income Tax, Net of
Federal Income
Tax Benefit 69,314 70,503 76,812
Other, Net 3,278 ( 5,405 ) ( 663 )
PROVISION FOR INCOME
TAXES $ 711,679 $ 556,118 $ 740,264
EFFECTIVE TAX RATE 37.9% 27.1% 37.6%
II-23
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE l0: EARNINGS PER COMMON SHARE
Basic and diluted earnings per common share are based on the weighted
average number of shares outstanding and assumed to be outstanding
during the year (519,170 shares in 1999, 1998 and l997 for basic) and
(519,170 shares in 1999, 1998 and 1997 for diluted).
NOTE 11: BUSINESS SEGMENT DATA
The Company's operations are conducted through two business segments.
These segments, and the primary operations of each, are as follows:
BUSINESS SEGMENT OPERATION
Candied Fruit Production of candied fruit, a basic
fruitcake ingredient,sold to manufacturing
bakers, institutional users, and retailers
for use in home baking.
Molded Plastics Production of plastic containers and
other molded plastics for sale to various
food processors and others.
YEAR YEAR YEAR
NET SALES IN ENDED ENDED ENDED
EACH SEGMENT: 1999 l998 l997
Candied Fruit:
Sales to Unaffiliated
Customers $ 17,982,873 $ 19,070,109 $ 19,087,836
Molded Plastics:
Sales to Unaffiliated
Customers 3,561,450 2,897,705 2,920,601
NET SALES $ 21,544,323 $ 21,967,814 $ 22,008,437
II-24
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 11: BUSINESS SEGMENT DATA (CONTINUED)
YEAR YEAR YEAR
ENDED ENDED ENDED
1999 l998 l997
THE OPERATING PROFIT OF EACH SEGMENT IS LISTED BELOW:
Candied Fruit $ 5,587,176 $ 6,276,920 $ 6,563,879
Molded Plastics 1,072,379 732,690 420,505
OPERATING PROFIT OF
SEGMENTS 6,659,555 7,009,610 6,984,384
General Corporate Exp ( 4,368,367 ) ( 5,333,258 ) ( 4,547,495 )
Interest Expense ( 414,135 ) ( 532,169 ) ( 550,431 )
Other Income (Expense) ( 9,949 ) 1,426,360 58,076
EARNINGS BEFORE PROVISION
FOR INCOME TAXES $ 1,867,104 $ 2,570,543 $ 1,944,534
Operating profit is composed of net sales, less direct costs and
overhead costs associated with each segment. Due to the high degree of
integration between the segments of the Company, it is not practical to
allocate general corporate expenses, interest, and other income
between the various segments.
IDENTIFIABLE ASSETS YEAR YEAR YEAR
OF EACH SEGMENT ENDED ENDED ENDED
ARE LISTED BELOW: 1999 l998 l997
Candied Fruit $ 10,506,917 $ 8,358,923 $ 7,801,873
Molded Plastics 2,503,913 2,313,932 2,284,080
Identifiable Assets 13,010,830 10,672,855 10,085,953
General Corporate
Assets 3,886,856 5,637,724 5,140,690
TOTAL ASSETS $ 16,897,686 $16,310,579 $15,226,643
II-25
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
NOTE 11: BUSINESS SEGMENT DATA (CONTINUED)
Identifiable assets by segment are those assets that are principally
used in the operations of each segment. General corporate assets
are principally cash, land and buildings, and investments.
DEPRECIATION AND AMORTI- YEAR YEAR YEAR
ZATION EXPENSE OF EACH ENDED ENDED ENDED
SEGMENT IS LISTED BELOW: 1999 l998 l997
Candied Fruit $ 520,541 $ 559,846 $ 531,789
Molded Plastics 248,518 272,188 290,958
Segment Depreciation and
Amortization Expense 769,059 832,034 822,747
General Corporate Depreciation
and Amortization Expense 94,215 63,902 91,585
TOTAL DEPRECIATION AND
AMORTIZATION
EXPENSE $ 863,274 $ 895,936 $ 914,332
CAPITAL EXPENDITURES YEAR YEAR YEAR
OF EACH SEGMENT ARE ENDED ENDED ENDED
LISTED BELOW: 1999 l998 l997
Candied Fruit $ 915,626 $ 496,133 $ 342,256
Molded Plastics 97,381 116,285 229,108
Segment Capital
Expenditures 1,013,007 612,418 571,364
General Corporate
Capital Expenditures 93,093 41,606 122,712
TOTAL CAPITAL
EXPENDITURES $ 1,106,100 $ 654,024 $ 694,076
The Company conducts operations only within the United States.
Foreign sales are insignificant; primarily all sales are to domestic
companies.
II-26
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 12: MAJOR CUSTOMER
The Company derives more than 17% of its consolidated revenues from
sales to the affiliated companies Wal-Mart Stores, Inc. and Sam's
Club. These affiliated companies are not related to Paradise, Inc.
in any way. Sales to each of these affiliates are made separately,
and each is shipped a different brand of fruit products and invoiced
by a separate Paradise, Inc. subsidiary. The loss of sales to either
or both of these affiliated companies could have a material adverse
effect on operating earnings. In addition, slightly more than 5% of
consolidated revenues were sales to Publix Supermarkets, Inc.
NOTE 13: CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and
unsecured trade receivables. The Company's cash equivalents are
maintained with several financial institutions located in Florida.
Accounts at each institution are secured by the Federal Deposit
Insurance Corporation up to $100,000. Uninsured balances aggregate
to $1,303,738 at December 31, 1999. The Company grants credit to
customers, substantially all of whom are located in the United States.
The Company's ability to collect these receivables is dependent upon
economic conditions in the United States and the financial condition of
its customers.
NOTE 14: DEFERRED INCOME TAXES
The Company recognizes deferred tax assets and liabilities for
future tax consequences of events that have been previously
recognized in the Company's financial statements or tax returns.
The measurement of deferred tax assets and liabilities is based on
provisions of the enacted tax law; the effects of future changes in
tax laws or rates are not anticipated.
II-27
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 14: DEFERRED INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax assets and
liabilities at December 31, 1999, 1998 and 1997 were:
1999 1998 1997
Deferred Tax Assets resulting from:
Inventory Valuation $ 152,032 $ 114,212 $ 81,783
Book Provision for Loss
of Profits 133,210 192,666 157,670
Contribution Carryforward 151,374 210,206
Total Deferred Tax Assets 436,616 517,084 239,453
Deferred Tax Liabilities resulting from:
Tax over Book Depreciation 411,370 451,689 493,656
Total Deferred Tax
Liabilities 411,370 451,689 493,656
Net Deferred Tax
(Asset) Liability $ ( 25,246 ) $ ( 65,395 ) $ 254,203
The Net Deferred Tax (Asset) Liability
is reflected in the Balance Sheet
under these captions:
Deferred Tax Asset $ ( 436,616 ) $ (517,084 ) $( 239,453 )
Deferred Tax Liability 411,370 451,689 493,656
$ ( 25,246 ) $ ( 65,395 ) $ 254,203
NOTE 15: RESTATEMENT
The 1997 year presented in the financial statements was affected by
changes resulting from an Internal Revenue Service examination of
the Company's 1994 Federal Income tax return. The 1997 year has
been restated as a result of these changes. Earnings decreased
$150,403 and taxes decreased $51,137 with a decrease in earnings per
share of $.20.
II-28
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 3l, l999, 1998 AND 1997
NOTE 16: UNUSUAL MATERIAL EVENT
During 1998, the Company sold its investment real estate to the
St. John's River Water Management District in a transaction
involving both a cash sale and a charitable donation.
In accordance with generally accepted accounting principles,
the Company has recorded a gain on the sale of the land, a gain
resulting from the contribution and the contribution at fair market
value of the donated property. Fair market value was established by
an independent qualified appraisal.
NOTE 17: FAIR VALUE OF FINANCIAL INSTRUMENTS
All financial instruments are carried at amounts that approximate
estimated fair value. These financial instruments are cash,
accounts receivable, accounts payable, accrued expenses, short-term
debt, and long-term debt obligations.
II-29
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
NOTE 18: QUARTERLY FINANCIAL DATA (UNAUDITED)
Selected quarterly financial data is summarized as follows:
QUARTER ENDED
1999 March 31 June 30 September 30 December 31
NET SALES $ 819,380 $ 1,610,547 $ 9,439,028 $ 9,675,368
GROSS PROFIT 29,590 219,699 3,872,545 3,200,431
NET EARNINGS
(LOSS) ( 779,140 ) ( 719,546 ) 1,958,464 695,647
EARNINGS (LOSS)
PER COMMON
SHARE $(1.50) $(1.39) $3.77 $1.34
QUARTER ENDED
1998 March 31 June 30 September 30 December 31
NET SALES $ 1,326,374 $ 988,517 $ 13,162,570 $ 6,490,353
GROSS PROFIT 499,154 408,021 5,532,424 1,237,485
NET EARNINGS
( LOSS) ( 310,799 ) ( 145,675 ) 1,858,856 612,043
EARNINGS (LOSS)
PER COMMON
SHARE $(0.60) $(0.28) $3.58 $1.18
QUARTER ENDED
1997 March 31 June 30 September 30 December 31
NET SALES $ 1,403,244 $ 1,481,243 $ 9,332,654 $ 9,791,296
GROSS PROFIT 266,670 350,409 4,149,237 3,040,814
NET EARNINGS
(LOSS) ( 552,545 ) ( 616,396 ) 1,931,725 441,486
EARNINGS (LOSS)
PER COMMON
SHARE $(1.06) $(1.19) $3.71 $0.85
II-30
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
II-31
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16 (a) of the Exchange Act
(a) Directors of the Registrant
Melvin S. Gordon - President of the Registrant, 66 years old.
Term of office will expire at next
stockholders' meeting. Officer with
Registrant past 35 years.
Eugene L. Weiner - Director and Executive Vice-President,
Secretary and Treasurer of the Registrant,
68 years old. Term of office will expire at
next stockholders' meeting. Officer with
Registrant past 34 years.
Randy S. Gordon - Vice President for Plastics Sales of the
Registrant, 44 years old. Term of office
will expire at next stockholders' meeting.
Employee of Registrant past 21 years.
Tracy W. Schulis - Vice President for Fruit Sales of the
Registrant, 43 years old. Term of office will
expire at next stockholders' meeting.
Employee of Registrant past 20 years.
Mark H. Gordon - Vice President, Manager of Fruit
Manufacturing, 37 years old. Term of
office will expire at next stockholders'
meeting. Employee of Registrant past 14
years.
(a) Executive Officers of the Registrant
Melvin S. Gordon - President, 66 years old. Term of office will
expire at next annual directors' meeting.
Officer with Registrant past 35 years.
Eugene L. Weiner - Executive Vice-President, Secretary,
Treasurer, 68 years old. In charge of
operations. Term of office will expire at
next annual directors' meeting. Officer with
Registrant past 34 years.
III-1
Item 9. Directors and Executive Officers of the Registrant (Continued)
(b) Not Applicable
(c) Family Relationships
Melvin S. Gordon is first cousin by marriage to Eugene L. Weiner.
Melvin S. Gordon is the father of Randy S. Gordon and Mark H. Gordon
and the father-in-law of Tracy W. Schulis.
(d) Not Applicable
Item 10. Executive Compensation
(a) and (b) The following information is set forth with respect to all
remuneration paid or accrued by the Company and its subsidiaries
during the year ended December 31, 1999 to its officers and
directors as a group. Pursuant to regulation S-B Item 402 (a)(2)
(I) and (ii) the Company's five most highly paid executive
officers or directors, included in the group total, whose total
remuneration exceeds $100,000 are separately listed.
III-2
Item 10. Executive Compensation (Continued)
COMPENSATION
SALARIES, FEES,
NAME OF INDIVIDUAL DIRECTORS' FEES, ESTIMATED PROJECTED
AND CAPACITY COMMISSIONS AND ANNUAL BENEFITS
IN WHICH SERVED BONUSES (1) PAYABLE (3) (4)
All Directors and
Officers as a Group
(5 Persons)
Melvin S. Gordon,
President and
Director $ 410,611 (2) (6)
Eugene L. Weiner,
Executive Vice-
President and
Director $ 366,401 (2) (5)
Randy S. Gordon,
Vice-President
and Director $ 208,240 $ 65,025
Tracy W. Schulis,
Vice-President
and Director $ 208,261 $ 65,025
Mark H. Gordon,
Vice-President
and Director $ 207,656 $ 65,025
NOTES TO THE ABOVE TABLE
1. Personal benefits consist of charges for the personal use of
Company automobiles and PS-58 Costs.
2. A deferred compensation plan was approved by The Board of Directors
during 1995 to be funded beginning in 1996. Funding continued
until 1998, but was discontinued during 1999.
III-3
Item 10. Executive Compensation (Continued)
3. These amounts are computed actuarially according to the Retirement
Plan of the Company assuming certain facts as follows: a) that the
participant remains in the service of the Company until his normal
retirement date at age 65; b) that the participant's earnings increase
4.50% annually during the remainder of his service until retirement
age subject to the maximum annual compensation limits established
by law; and c) that the plan be continued without substantial
modification.
4. As of the latest available actuarial valuation date.
5. Received a lump-sum distribution in 1996.
6. Received a lump-sum distribution in 1999.
S.D. Fuller, who resigned for health reasons in June, 1995, in
recognition of his 30 years of service, was awarded an annual stipend
of $10,000 for five years, or until his demise.
C (d) Options, Warrants, or Rights
Not applicable
(e) Long-Term Incentive Plan Awards Table
Not Applicable
Item 11. Security Ownership of Certain Beneficial Owners and Management
(a) The following table sets forth as of December 31, 1999, information
concerning the beneficial ownership of the common stock of the Company
by the persons who own, are known by the Company to own,or who the
Company has been advised have filed with the S.E.C. declarations
of beneficial ownership, of more than 5% of the outstanding common
stock.
III-4
Item 11. Security Ownership of Certain Beneficial Owners and Management
(Continued)
AMOUNT & NATURE
NAME AND ADDRESS OF TITLE OF OF BENEFICIAL PERCENT
BENEFICIAL OWNER CLASS OWNERSHIP (1) OF CLASS
Estate of
Frank A. Weaner
c/o Melvin Gordon
2611 Bayshore Blvd. Common
Tampa, Florida Stock 129,060 24.8%
Melvin S. Gordon
2611 Bayshore Blvd. Common
Tampa, Florida Stock 60,892 11.7
TOTAL 189,952 36.5%
(b) Beneficial ownership of common stock held by all directors and
officers of the Company as a group:
AMOUNT AND NATURE
TITLE OF OF BENEFICIAL PERCENT
CLASS OWNERSHIP (1) OF CLASS
Directors and
Officers
As a Group Common 223,989 43.1
Estate of
Frank A. Weaner Common 129,060 24.8
Melvin S. Gordon Common 60,892 11.7
Eugene L. Weiner Common 19,300 3.7
Randy S. Gordon Common 6,104 1.2
Tracy W. Schulis Common 4,571 .9
Mark H. Gordon Common 4,062 .8
(1) The nature of the beneficial ownership for all shares is sole
voting and investment power.
(c) The Company knows of no contractual arrangements which may at a
subsequent date result in a change in control of the Company.
III-5
Item 12. Certain Relationships and Related Transactions
None
Item 13. Exhibits and Reports on Form 8-K
PAGE
(a) Exhibit (3) - Articles of Incorporation and By-Laws Incorporated
By Reference
Exhibit (11) - Statement Re: Computation of Per
Share Earnings II - 22
Exhibit (21) - Subsidiaries of the Small Business
Issuer III - 7
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the
year ended December 31, 1999.
III-6
Item 13. Exhibit 21 - Subsidiaries of the Small Business Issuer
STATE OF
INCORPORATION
Fruit Traders, Inc. Florida
White Swan Products, Inc. Florida
Sun-Ripe Fruit Products, Inc. Florida
F.T. Properties, Inc. Florida
Paradise Growers, Inc. Florida
Pennant Fruit Products, Inc. Florida
Mor-Fruit Products, Inc. Florida
III-7
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
March 27, 2000 PARADISE, INC.
Date
s/Melvin S. Gordon
Melvin S. Gordon
President
In accordance with the Exchange Act this report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the
dates indicated.
s/ Melvin S. Gordon President and Director March 27, 2000
Melvin S. Gordon Date
s/ Eugene L. Weiner Executive Vice President
Eugene L. Weiner and Director-Principal
Financial and Account-
ing Officer March 27, 2000
Date
s/ Randy S. Gordon Vice President and
Randy S. Gordon Director March 27, 2000
Date
s/ Tracy W. Schulis Vice President and
Tracy W. Schulis Director March 27, 2000
Date
s/ Mark H. Gordon Vice President and
Mark H. Gordon Director March 27, 2000
Date
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.
March 27, 1999 PARADISE, INC.
Date
___________________________
Melvin S. Gordon
President
In accordance with the Exchange Act this report has been signed below by the
following persons on behalf of the Registrant in the capacities and on the
dates indicated.
President and Director March 27, 2000
Melvin S. Gordon Date
Executive Vice President
Eugene L. Weiner and Director-Principal
Financial and Account-
ing Officer March 27, 2000
Date
Vice President and
Randy S. Gordon Director March 27, 2000
Date
Vice President and
Tracy W. Schulis Director March 27, 2000
Date
Vice President and
Mark H. Gordon Director March 27, 2000
Date
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> $1,199,661 $2,728,646
<SECURITIES> $0 $0
<RECEIVABLES> $2,680,782 $753,472
<ALLOWANCES> $0 $0
<INVENTORY> $5,716,213 $5,664,905
<CURRENT-ASSETS> $10,452,938 $10,233,474
<PP&E> $19,900,886 $18,790,929
<DEPRECIATION> $14,108,805 $13,384,647
<TOTAL-ASSETS> $16,897,686 $16,310,579
<CURRENT-LIABILITIES> $3,656,107 $4,049,040
<BONDS> $1,909,351 $1,790,307
<COMMON> $174,816 $174,816
$0 $0
$0 $0
<OTHER-SE> $11,806,068 $10,832,483
<TOTAL-LIABILITY-AND-EQUITY> $16,897,686 $16,310,579
<SALES> $21,544,323 $21,967,814
<TOTAL-REVENUES> $21,544,323 $23,394,174
<CGS> $14,222,058 $14,340,730
<TOTAL-COSTS> $14,222,058 $14,340,730
<OTHER-EXPENSES> $863,274 $895,936
<LOSS-PROVISION> $0 $0
<INTEREST-EXPENSE> $414,135 $532,169
<INCOME-PRETAX> $1,867,104 $2,570,543
<INCOME-TAX> $711,679 $556,118
<INCOME-CONTINUING> $1,155,425 $2,014,425
<DISCONTINUED> $0 $0
<EXTRAORDINARY> $0 $0
<CHANGES> $0 $0
<NET-INCOME> $1,155,425 $2,014,425
<EPS-BASIC> $2.23 $3.88
<EPS-DILUTED> $2.23 $3.88
</TABLE>
