FORM 10 - QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) Quarterly report pursuant to section 13 or 15(d) of the Securities Act of
1934.
For the quarterly period ended March 31, 2005
or
( ) Transition report pursuant to section 13 or 15(d) of the Securities Act of
1934.
Commission File No. 0-3026
PARADISE, INC.
INCORPORATED IN FLORIDA
I.R.S. EMPLOYER 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 (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X ; No
--- ---.
The number of shares outstanding of each of the issuer's classes of common
Stock:
Class Outstanding as of March 31,
----- ---------------------------
2005 2004
---- ----
Common Stock
$0.30 Par Value 519,350 Shares 519,350 Shares
PARADISE, INC. COMMISSION FILE NO. 0-3026
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
---------------------------------
AS OF MARCH 31,
---------------
2005 2004
---- ----
ASSETS
------
CURRENT ASSETS:
Cash and Unrestricted
Demand Deposits $ 1,657,993 $ 1,512,897
Accounts and Notes
Receivable, Less
Allowances of $-0-
(2005 and 2004) 1,184,702 983,947
Inventories:
Raw Materials 2,952,222 1,916,649
Work in Process 11,889 10,986
Finished Goods 5,059,251 6,892,915
Deferred Income Tax Asset 277,970 305,983
Income Tax Refund
Receivable 365,485 452,537
Prepaid Expenses and Other
Current Assets 310,555 329,237
---------- ----------
TOTAL CURRENT ASSETS 11,820,067 12,405,151
Property, Plant and Equipment,
Less Accumulated Depreciation
of $14,103,617 (2005) and
$13,359,927 (2004) 5,842,717 5,509,413
Goodwill 413,280
Deferred Charges and Other
Assets 735,623 649,344
---------- ----------
TOTAL ASSETS $ 18,811,687 $ 18,563,908
========== ==========
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
AS OF MARCH 31,
---------------
2005 2004
---- ----
CURRENT LIABILITIES:
Notes and Trade Acceptances
Payable $ 201,827 $ 176,925
Current Portion of Long-Term
Debt 252,254 251,085
Accounts Payable 1,785,244 1,175,505
Accrued Liabilities 440,956 661,986
--------- ---------
TOTAL CURRENT LIABILITIES 2,680,281 2,265,501
LONG-TERM DEBT, NET OF CURRENT
PORTION 744,398 1,095,998
DEFERRED INCOME TAX LIABILITY 536,548 494,273
--------- ---------
TOTAL LIABILITIES 3,961,227 3,855,772
--------- ---------
STOCKHOLDERS' EQUITY:
Common Stock: $.30 Par Value,
2,000,000 Shares Authorized,
583,094 Shares Issued,
519,350 Shares Outstanding 174,928 174,928
Capital in Excess of Par Value 1,288,793 1,288,793
Retained Earnings 13,717,997 13,583,293
Unrealized Holding Gain (Loss)
on Securities ( 54,339 ) ( 61,959 )
Treasury Stock, at Cost,
63,744 Shares ( 276,919 ) ( 276,919 )
---------- ----------
Total Stockholders' Equity 14,850,460 14,708,136
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 18,811,687 $ 18,563,908
========== ==========
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
-----------------------------------
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 31
--------
2005 2004
---- ----
Net Sales $ 2,449,900 $ 1,889,826
--------- ---------
Costs and Expenses:
Cost of Goods Sold
(excluding Depreciation) 1,971,270 1,551,216
Selling, General and
Administrative Expense 782,099 776,922
Depreciation and Amortization 217,595 189,967
Interest Expense 13,359 10,877
--------- ---------
Total Costs and Expenses 2,984,323 2,528,982
--------- ---------
Loss from Operations ( 534,423 ) ( 639,156 )
Other Income 9,792 2,343
--------- ---------
Loss from Operations Before
Provision for Income Taxes ( 524,631 ) ( 636,813 )
Provision for Income Taxes 0 0
--------- ---------
Net Loss $( 524,631 ) $( 636,813 )
========= =========
Loss per Common Share $( 1.01 ) $( 1.23 )
==== ====
Dividend per Common Share $ .10
====
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
---------------------------------------
FOR THE THREE MONTHS ENDED
--------------------------
MARCH 31,
---------
2005 2004
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $( 524,631 ) $( 636,813 )
Adjustments to Reconcile Net
Loss to Net Cash Used in
Operating Activities:
Depreciation and Amortization 217,594 189,967
Decrease (Increase) in:
Accounts Receivable 475,512 646,363
Inventories ( 2,520,108 ) ( 2,364,700 )
Prepaid Expenses 141,739 100,273
Other Assets ( 125 ) 2,400
Increase (Decrease) in:
Accounts Payable 1,567,514 783,914
Accrued Expense ( 751,691 ) ( 921,887 )
--------- ---------
Net Cash Used in
Operating Activities ( 1,394,196 ) ( 2,200,483 )
--------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of Property and
Equipment ( 300,535 ) ( 18,891 )
--------- ---------
Net Cash Used in
Investing Activities ( 300,535 ) ( 18,891 )
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of
Long-Term Debt 800,000
Net Proceeds (Repayments) of
Short-Term Debt 156,611 ( 97,480 )
Principal Payments of Long-Term
Debt ( 62,698 ) ( 61,878 )
Loan Cost Payments ( 18,970 )
--------- ---------
Net Cash Provided by
Financing Activities 93,913 621,672
--------- ---------
Net Decrease in Cash ( 1,600,818 ) ( 1,597,702 )
CASH AT BEGINNING OF PERIOD 3,258,811 3,110,599
--------- ---------
CASH AT END OF PERIOD $ 1,657,993 $ 1,512,897
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest $ 13,359 $ 10,877
========= =========
Noncash financing activity:
Dividends Declared $ 51,935 $ 0
========= =========
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
PARADISE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
--------------------------------------------
Note 1 Basis of Presentation
--------------------------------
The accompanying unaudited consolidated financial statements of
Paradise, Inc. (the "Company") have been prepared by the Company
in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include
all the information and footnotes required by generally accepted
accounting principles for annual financial statements.
The information furnished herein reflects all adjustments and accruals
that management believes is necessary to fairly state the operating
results for the respective periods. The notes to the financial
statements should be read in conjunction with the notes to the
consolidated financial statements contained in the Company's Form 10-KSB
for the year ended December 31, 2004. The Company's management believes
that the disclosures are sufficient for interim financial reporting
purposes.
Note 2 Net Loss per Share
--------------------------------------
Net loss per share, assuming no dilution, are based on the weighted
average number of shares outstanding during the period: 519,350
(2005 and 2004).
Note 3 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
---------------- ---------
Fruit Production of candied fruit, a basic
fruitcake ingredient, sold to
manufacturing bakers, institutional
users, and retailers for use in home
baking. Also, the processing of
frozen strawberry products, for sale
to commercial and institutional users
such as preservers, dairies, drink
manufacturers, etc.
Molded Plastics Production of plastics containers and
other molded plastics for sale to
various food processors and others.
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2004
-------------- --------------
Net Sales in Each Segment
-------------------------
Fruit:
Sales to Unaffiliated Customers $ 403,566 $ 598,690
Molded Plastics:
Sales to Unaffiliated Customers 2,046,334 1,291,136
--------- ---------
Net Sales $ 2,449,900 $ 1,889,826
========= =========
For the three month period ended March 31, 2005 and 2004, sales of
frozen strawberry products totaled $31,629 and $187,457, respectively.
The Company does not account for intersegment transfers as if the
transfers were to third parties.
The Company does not prepare operating profit or loss information on a
segment basis for internal use, until the end of each year. Due to the
seasonal nature of the fruit segment management believes that it is not
practical to prepare this information for interim reporting purposes.
Therefore, reporting is not required by generally accepted accounting
principles.
Three Months Three Months
Ended Ended
March 31, 2005 March 31, 2004
-------------- --------------
Identifiable Assets of Each
Segment are Listed Below
---------------------------
Fruit $ 8,959,877 $ 10,601,471
Molded Plastics 5,340,722 3,387,477
---------- ----------
Identifiable Assets 14,300,599 13,988,948
General Corporate Assets 4,511,088 4,574,960
---------- ----------
Total Assets $ 18,811,687 $ 18,563,908
========== ==========
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.
Note 4 Business Combination
---------------------------------
On May 13, 2004, the Company acquired 100 percent of the outstanding
shares of Mastercraft Products Corporation, for a total cost of
$894,417. The results of Mastercraft Products Corporation operations
have been included in the consolidated financial statements since April
1, 2004. Mastercraft Products Corporation manufactures and sells
custom plastic and related products. The acquisition was made to
increase the Company's customer base and add new products to the
Company's existing line of plastics goods. The source of funds for the
acquisition was a combination of the Company's available cash and loan
proceeds of $800,000.
The following (unaudited) pro forma consolidated results of operations
have been prepared as if the acquisition of Mastercraft Products
Corporation had occurred at January 1, 2004:
Three Months
Ended
March 31, 2004
--------------
Net Sales $ 2,186,404
Net Loss ( 619,612 )
Net Loss per Share - Basic ( 1.19 )
Net Loss per Share - Diluted ( 1.19 )
The pro forma information is presented for informational purposes only
and is not necessarily indicative of the results of operations that
actually would have been achieved had the acquisition been consummated
as of that time, nor is it intended to be a projection of future results.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
------------------------------------------------------------------------
Overview
--------
The Company's core business, glace' (candied) fruit, which accounted for
approximately 70% of total annual net sales during 2004, is highly
seasonal. That is because the products sold are utilized primarily as
ingredients for fruitcakes and other winter holiday confections, with
nearly 85% of the annual shipments beginning in September and running
through the middle of November of each year. However, in order to make
timely deliveries during this period of peak demand, Paradise, Inc. must
manufacture, package and store products throughout the year, building
large inventories and accruing expenses against which there is little
offsetting income. The recording of substantial losses is common well
into the fourth quarter, even during the most profitable years.
Therefore, it is the opinion of management that only a full year's
financial reporting will yield a meaningful measurement of the Company's
performance.
The Company's other business segment, Paradise Plastics, Inc., a wholly
owned subsidiary of Paradise, Inc., producing custom molding products,
does not have the extreme seasonal variations as experienced in the
fruit segment. This segment initially developed to provide in-house
packaging capabilities for the sale of glace' (candied) fruit products,
represented 30% of the Company's total consolidated annual net sales to
unaffiliated customers during the past year. Furthermore, Paradise,
Inc. still remains the only company in the glace' (candied) fruit
industry with its own in-house plastics packaging facility.
Manufacturing activity varies greatly from quarter to quarter and from
year to year, depending on seasonal harvests, availability of raw
materials, energy costs, anticipated orders and other factors. A
comparison with the immediately preceding quarter or the similar quarter
during the past year yields little useful information, so "Management's
Discussion" is confined to data from the current year-to-date as
compared to the like period during the preceding year.
The First Quarter
-----------------
Paradise Plastics, Inc. net sales to unaffiliated customers, excluding
net sales of approximately $345,000 by Mastercraft Products Corporation,
increased 32% during the first quarter of 2005 compared to the first
quarter of 2004. As disclosed in an earlier filing, Paradise, Inc.
acquired 100% of the outstanding stock of Mastercraft Products
Corporation, a Central Florida plastics thermoformer on May 13, 2004.
The primary reason for this increase has been the steady continuation of
providing both new and existing customers with additional products
uniquely designed and engineered to meet increasing high-tech plastics
requirements.
Fruit segment net sales for the first quarter of 2005 decreased by 32.6%
compared to the first quarter of 2004, solely due to a timing
difference regarding the processing of strawberries into various
finished products for retail distribution by a Florida based strawberry
company. Weather conditions during the annual spring harvest season
delayed the receipt of strawberries from local farmers along with the
subsequent production and invoicing of a tolling charge by Paradise,
Inc. until April, 2005 compared to March, 2004.
Cost of sales as a percentage of net sales decreased less than 1.6% for
the first quarter of 2005 compared to 2004 as labor expenses associated
with the production of strawberry products were delayed until April,
2005. However, with uncertainty surrounding the increasing cost of fuel
along with an increase in Florida's minimum wage, effective May 2, 2005,
management anticipates cost of sales will trend higher during the
upcoming glace' (candied) fruit production period beginning in May,
2005.
Selling, general and administrative expenses increased less than 1% for
the first quarter of 2005 compared to the first quarter of 2004. While
the Company has benefited from several administrative employee
retirements over the past year, increases in pension plan contributions
along with increases to the Company's health care premiums have reduced,
for the most part, the savings achieved in this overall category.
Depreciation and amortization expenses increased by 14.5% for the first
quarter of 2005 compared to previous reporting period. The Company
found it necessary to purchase additional thermoforming equipment during
2004, in order to maintain production capabilities due to the steady
increase in volume, within the Plastics segment, over the past several
years.
Interest expense for the first quarter of 2005 remained in line with the
prior year's first quarter as interest rates charged on the Company's
long-term debt were consistent with the prior reporting period. There
were no borrowings on the Company's revolving short-term working capital
loan during the first quarter of 2005.
Summary
-------
Excluding net sales from Mastercraft Products Corporation during the
first quarter of 2005 of approximately $345,000, consolidated net
sales increased by more than 11% for the first quarter of 2005 compared
to 2004. Paradise Plastics, Inc.'s net sales to unaffiliated customers
contributed 81% of overall first quarter 2005 net sales, increased by
lmost 32% as demand for High-tech custom molding products continued to
expand.
Fruit segment net sales, highly seasonal as mentioned above, declined by
32.6% as weather conditions delayed the processing of strawberry
products until April, 2005 compared to March, 2004. However, with less
than 3% anticipated consolidated net sales of Paradise, Inc. earned as
of this reporting period, no reasonable estimate of a full year's
operating performance can be projected at this time.
ITEM 3. Controls and Procedures
-----------------------------------
The Company's Chief Executive Officer and Chief Financial Officer have,
within 90 days of the filing date of this quarterly report, evaluated the
Company's disclosure controls and procedures. Based on their evaluation,
the Company's Chief Executive Officer and Chief Financial Officer have
concluded that the Company's disclosure controls and procedures are effective
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods
specified in the applicable Securities and Exchange Commission rules and
forms. There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent
to the date of the most recent evaluation of these controls by the Company's
Chief Executive Officer and Chief Financial Officer. No significant
deficiencies or material weaknesses in the Company's internal controls were
identified therefore no corrective actions were taken.
PART II. OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings - N/A
Item 2. Changes in Securities - N/A
Item 3. Defaults Upon Senior Securities - N/A
Item 4. Submission of Matters to a Vote of Security Holders - N/A
Item 5. Other Information - N/A
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit
Number Description
------- -----------
31.1 Certification of Chief Executive Officer
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
32.1 Certification of the Chief Executive
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
32.2 Certification of the Chief Financial
Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
(b) Reports on Form 8-K.
None.
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.
PARADISE, INC.
A Florida Corporation
/s/ Melvin S. Gordon Date: May 13, 2005
-----------------------------
Melvin S. Gordon
Chief Executive Officer and Chairman
/s/ Jack M. Laskowitz Date: May 13, 2005
------------------------------
Jack M. Laskowitz
Chief Financial Officer and Treasurer