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 June 30, 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 33563
(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 June 30,
----- ---------------------------
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 JUNE 30,
---------------
2005 2004
---- ----
ASSETS
------
CURRENT ASSETS:
Cash and Unrestricted
Demand Deposits $ 26,218 $ 18,592
Accounts and Notes
Receivable, Less
Allowances of $-0-
(2005 and 2004) 1,290,039 1,243,541
Inventories:
Raw Materials 2,848,917 2,689,997
Work in Process 412,916 551,029
Finished Goods 9,561,342 10,255,014
Deferred Income Tax Asset 277,970 305,983
Income Tax Refund
Receivable 365,485 453,470
Prepaid Expenses and Other
Current Assets 650,223 791,680
---------- ----------
TOTAL CURRENT ASSETS 15,433,110 16,309,306
Property, Plant and Equipment,
Less Accumulated Depreciation
of $14,295,866 (2005) and
$13,555,922 (2004) 5,786,164 5,646,604
Deferred Charges and Other
Assets 408,929 655,778
Goodwill 413,280 403,844
Intangible Asset - Net 82,000 123,000
---------- ----------
TOTAL ASSETS $ 22,123,483 $ 23,138,532
========== ==========
AS OF JUNE 30,
--------------
2005 2004
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes and Trade Acceptances
Payable $ 1,828,324 $ 2,673,840
Current Portion of Long-Term
Debt 255,459 252,497
Accounts Payable 3,250,546 2,644,741
Accrued Liabilities 833,871 1,132,629
Income Tax Payable 18,271
---------- ----------
Total Current Liabilities 6,168,200 6,721,978
LONG-TERM DEBT, NET OF CURRENT
PORTION 757,171 1,151,946
DEFERRED INCOME TAX LIABILITY 536,548 494,273
---------- ----------
Total Liabilities 7,461,919 8,368,197
---------- ----------
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 13,529,101 13,645,492
Unrealized Holding Gain (Loss)
on Securities ( 54,339 ) ( 61,959 )
Treasury Stock, at Cost,
63,744 Shares ( 276,919 ) ( 276,919 )
---------- ----------
Total Stockholders' Equity 14,661,564 14,770,335
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 22,123,483 $ 23,138,532
========== ==========
See Accompanying Notes to these Consolidated Financial
Statements (Unaudited).
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
-----------------------------------
FOR THE THREE MONTHS ENDED
--------------------------
JUNE 30
-------
2005 2004
---- ----
Net Sales $ 2,652,283 $ 2,077,380
--------- ---------
Costs and Expenses:
Cost of Goods Sold
(excluding Depreciation) 1,652,306 933,649
Selling, General and
Administrative Expense 973,627 863,895
Depreciation and Amortization 210,718 200,774
Interest Expense 14,913 18,719
--------- ---------
Total Costs and Expenses 2,851,564 2,017,037
--------- ---------
Income (Loss) from Operations ( 199,281 ) 60,343
Other Income 5,771 1,856
--------- ---------
Income (Loss) from Operations
Before Provision for Income
Taxes ( 193,510 ) 62,199
Provision for Income Taxes 0 0
--------- ---------
Net Income (Loss) $( 193,510 ) $ 62,199
========= =========
Net Income (Loss) per
Common Share $( .37 ) $ 0.12
==== ====
See Accompanying Notes to these Consolidated Financial
Statements (Unaudited).
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
-----------------------------------
FOR THE SIX MONTHS ENDED
------------------------
JUNE 30
-------
2005 2004
---- ----
Net Sales $ 5,102,183 $ 3,967,206
--------- ---------
Costs and Expenses:
Cost of Goods Sold
(excluding Depreciation) 3,623,576 2,484,865
Selling, General and
Administrative Expense 1,755,726 1,640,817
Depreciation and Amortization 428,313 390,741
Interest Expense 28,272 29,596
--------- ---------
Total Costs and Expenses 5,835,887 4,546,019
--------- ---------
Loss from Operations ( 733,704 ) ( 578,813 )
Other Income 15,563 4,199
--------- ---------
Loss from Operations Before
Provision for Income Taxes ( 718,141 ) ( 574,614 )
Provision for Income Taxes 0 0
--------- ---------
Net Loss $( 718,141 ) $( 574,614 )
========= =========
Net Loss per Common Share $( 1.38 ) $( 1.11 )
==== ====
See Accompanying Notes to these Consolidated Financial
Statements (Unaudited).
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
---------------------------------------
FOR THE SIX MONTHS ENDED
------------------------
JUNE 30,
--------
2005 2004
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $( 718,141 ) $( 574,614 )
Adjustments to Reconcile Net
Loss to Net Cash Used in
Operating Activities:
Depreciation and Amortization 428,313 390,741
Decrease (Increase) in:
Accounts Receivable 370,172 531,440
Inventories ( 7,319,921 ) ( 6,933,962 )
Prepaid Expenses ( 197,928 ) ( 353,631 )
Other Assets 250,096 ( 8,812 )
Increase (Decrease) in:
Accounts Payable 3,032,816 2,203,335
Accrued Expense ( 301,863 ) ( 363,407 )
--------- ---------
Net Cash Used in
Operating Activities ( 4,456,456 ) ( 5,108,910 )
--------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of Property and
Equipment ( 460,590 ) ( 200,693 )
Cash Paid for Investment in
Subsidiary ( 731,481 )
--------- ---------
Net Cash Used in
Investing Activities ( 460,590 ) ( 932,174 )
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of
Long-Term Debt 800,000
Net Proceeds (Repayments) of
Short-Term Debt 1,783,108 2,399,435
Principal Payments of Long-Term
Debt ( 46,720 ) ( 127,518 )
Dividends Paid ( 51,935 ) ( 103,870 )
Loan Cost Payments ( 18,970 )
--------- ---------
Net Cash Provided by
Financing Activities 1,684,453 2,949,077
--------- ---------
Net Decrease in Cash ( 3,232,593 ) ( 3,092,007 )
CASH AT BEGINNING OF PERIOD 3,258,811 3,110,599
--------- ---------
CASH AT END OF PERIOD $ 26,218 $ 18,592
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest $ 28,272 $ 29,596
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Long-Term Debt Assumed or Issued for:
Covenant Not to Compete $ $ 123,000
========= =========
See Accompanying Notes to these Consolidated Financial
Statements (Unaudited).
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO 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 Income (Loss) per Share
--------------------------------------
Net income (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
---------------- ---------
Candied 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.
Six Months Six Months
Ended Ended
June 30, 2005 June 30, 2004
------------- -------------
Net Sales in Each Segment
-------------------------
Candied Fruit:
Sales to Unaffiliated Customers $ 777,345 $ 853,504
Molded Plastics:
Sales to Unaffiliated Customers 4,324,838 3,113,702
--------- ---------
Net Sales $ 5,102,183 $ 3,967,206
========= =========
For the six month period ended June 30, 2005 and 2004, sales of frozen
strawberry products totaled $108,352 and $240,380, 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.
Six Months Six Months
Ended Ended
June 30, 2005 June 30, 2004
------------- -------------
Identifiable Assets of Each
Segment are Listed Below
---------------------------
Candied Fruit $ 13,358,955 $ 14,896,498
Molded Plastics 5,716,578 4,739,737
---------- ----------
Identifiable Assets 19,075,533 19,636,235
General Corporate Assets 3,047,950 3,502,297
---------- ----------
Total Assets $ 22,123,483 $ 23,138,532
========== ==========
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
$887,081. 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
June 30, 2004
-------------
Net Sales $ 2,077,380
Net Income 62,199
Net Income per Share - Basic 0.12
Net Income per Share - Diluted 0.12
Six Months
Ended
June 30, 2004
-------------
Net Sales $ 4,263,784
Net Loss ( 557,413 )
Net Loss per Share - Basic ( 1.07 )
Net Loss per Share - Diluted ( 1.07 )
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 are utilized primarily as
ingredients for fruitcakes and other winter holiday confections, and
nearly 85% of the annual shipments in that segment of business are made
during an eight to ten week period, beginning in early September.
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
measure of the Company's performance.
Manufacturing activity varies greatly from quarter to quarter and from
year to year, depending on seasonal harvests and availability of raw
materials, anticipated orders and other factors. A comparison of the
current quarter with that immediately preceding 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 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.
The First Six Months
--------------------
Paradise Plastics, Inc.'s net sales, to unaffiliated customers,
increased 39% for the first six months of 2005 compared to the similar
period of 2004. This increase includes $691,048 in net sales from
Mastercraft Products Corporation compared to $240,727 recorded in the
prior year's six month report. As mentioned in a previous filing,
Paradise, Inc. acquired 100% of the outstanding shares of Mastercraft
Products Corporation on May 13, 2004. This Central Florida based
thermoformer sells plastics products to clients in the food, medical and
high-tech industries throughout the Southeastern United States. Growth
in this business segment has been related to the consistent ability to
provide high-tech engineered plastics products for its customers.
The First Six Months (Continued)
-------------------------------
Paradise, Inc.'s fruit segment net sales, which are highly seasonal,
decreased by 8.9% for the first six months of 2005 compared to the
similar period of 2004. Weather conditions surrounding the spring
harvest season for strawberries, delayed and then limited the
availability of frozen strawberry products processed on behalf of a
Central Florida distributor. However, with less than 5% of anticipated
fruit segment net sales recorded to date, no reasonable trend in sales
activity can be determined at this time.
Cost of sales, as a percentage of net sales, increased 8.4% compared to
the prior year's reporting period. Price increases absorbed from the
Company's suppliers of plastics raw materials, caused in part by rising
fuel cost has contributed to this increase. In addition, part-time
labor expense, which is highest during the glace' fruit production
period of May through November, has increase slightly, as the State of
Florida increased minimum wage, effective May 2, 2005.
Selling expenses increased 17% for the first six months of 2005 compared
to the similar period of 2004 based upon the following events. First,
the Company negotiated a settlement with a national food brokerage firm
to resolve a dispute regarding certain marketing expenses incurred on
behalf of Paradise, Inc. Secondly, due to changes in market conditions
and along with competitive price alternatives for the procurement of raw
fruit products, Paradise, Inc.terminated its minority interest in the
Company's Mexican based supplier of pineapple. Finally, Paradise, Inc.
incurred selling expenses with the Company's decision to terminate a joint
marketing agreement with a West Coast distributor of frozen strawberry
products. Expenses associated with these events totaled $129,636. This
amount was charged to operations during the second quarter of 2005. No
additional expenses regarding these events are anticipated in the
future.
General and administrative expenses increased 2.4% for the first six
months of 2005 compared to previous year's reporting period. Despite
several administrative employee retirements over the past year, increases
in pension plan contributions along with the premiums paid related to
the employer's share of health insurance have reduced the savings
achieved in this category.
Depreciation and amortization expenses increased 9.6% for the first six
months of 2005 compared to the similar period of 2004 as the Company
placed more than $425,000 in Plastics thermoforming equipment into
operations during the second half of 2004.
Interest expense decreased slightly over the previous year's six month
reporting period as improved cash flow from Paradise Plastics, Inc.
offset increases in the rate of interest charged by the Company's
primary lender on its revolving short-term working capital loan.
Summary
-------
Paradise, Inc.'s consolidated net sales, increased 29% for the first six
months of 2005 compared to the similar period of 2004. However, with an
8.4% increase in the cost of sales, combined with a one-time charge of
$129,636 to terminate several vendor agreements, Paradise, Inc.'s net
operating loss for the first six months of 2005 increased by $143,527
compared to the similar period of 2004.
Finally, with less than 25% of consolidated net sales activity generated
to date, management can not make any reasonable forecast as to the
Company's year end profit. Only a full year's accounting will yield any
meaningful results as to the Company's overall performance and
profitability.
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
The annual meeting of the shareholders of Paradise, Inc. was
held on May 26, 2005. The purpose of the meeting was to elect
five directors to hold office until the next annual meeting of
shareholders and to ratify the reappointment of Bella,
Hermida, Gillman, Hancock & Mueller as the Company's
independent certified public accountants for 2005.
The following is the results of the election of Directors:
Nominee Votes For Votes Withheld
------- --------- --------------
Melvin S. Gordon 440,906 35,152
Randy S. Gordon 440,906 35,152
Tracy W. Schulis 440,906 35,152
Mark H. Gordon 440,906 35,152
Eugene L. Weiner 415,906 60,927
The following is the results of the ratification of Bella,
Hermida, Gillman, Hancock & Mueller as the Company's
independent accountants for 2005:
For Against Abstain
----- ------- -------
448,803 1,400 25,855
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: August 16, 2005
-----------------------------
Melvin S. Gordon
Chief Executive Officer and Chairman
/s/ Jack M. Laskowitz Date: August 16, 2005
--------------------------------
Jack M. Laskowitz
Chief Financial Officer and Treasurer