UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2013
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 33563
TELEPHONE NO. (813) 752-1155
Securities Registered Under Section 12(b) of the Exchange Act:None
Securities Registered Under Section 12(g)12 (b) of the Exchange Act:
None
Securities Registered Under Section 12 (g) of the Exchange Act:
Title of Each Class
Common Stock,
$.30 Par Value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.YesAct. Yes o¨ Nox
Indicate by check mark if the registrant is not required to file pursuant to Section 13 or Section 15(d) of the Act.YesAct. Yes o¨ Nox
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.Yesdays. Yes xNoo¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K.Yes10-K. YesxNoo¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company, as defined in rule 12b-2 of the Exchange Act.
Large accelerated filer¨ Accelerated filer¨ Non-accelerated filer¨ Smaller reporting companyx
|
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).Yes. Yes x Noo¨
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $7,842,978$9,335,762 (as of June 30, 2013,2014, bid price $26.00)$29.78)
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Outstanding at March | ||
Common Stock, | ||
$.30 Par Value | 519,600 Shares |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).Yes. Yes o¨ Nox
i
Item 1. | Description of Business |
Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for purposes of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of customers, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of such terminology as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties.
(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. 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.
(b) | The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows: |
Candied Fruit | Production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, 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. |
Item 1. | Description of Business (Continued) |
For further segment information, refer to Note 8 in Part II, Item 8 of this Annual Report.
(c) | 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 a large majority of all candied fruit sold in supermarkets and other grocery outlets in the USA. |
In terms of candied fruit dollar sales, during 2013,2014, approximately 15%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.
The principal raw materials used by the Company are fruits, fruit peels, corn syrups 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. 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 85% 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 peels 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 result in large inventories, which require financing to meet relatively large short-term working capital needs.
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 that area.
Item 1. | Description of Business (Continued) |
Therefore, Paradise, Inc. 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.
In the plastics molding segment of business, sales to unaffiliated customers continue to strengthen. This trend began several years ago when management shifted its focus from the sale of high volume, low profit “generics” to higher technology value added custom applications.
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 several 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.
It is a trade practice to allow some supermarket chains to return unopened cases of candied fruit products that remain unsold at year-end, an option for which they normally pay a premium. A provision for the estimated losses on retail returns is included in the Company’s consolidated financial statements, for the year during which the sales are made.
With the continuing acquisitions, mergers and other consolidations in the supermarket industry, there is increasing concentration of candied fruit buying activity. During 2013,2014, the Company derived approximately 12.9%15.9% of its consolidated net sales from Wal-Mart Stores, Inc. This customer is not affiliated with Paradise, Inc. in any way, and has exclusive use of a Paradise-owned controlled brand. The loss of this customer would have a material adverse effect on operating earnings.
While there is no industry-wide data available, management estimates that the Company sold approximately 90%85% of all candied fruits and peels consumed in the U.S. during 2013.2014. The Company knows of two major competitors; however, it estimates that neither 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 size. 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 90% of the Company’s total plastics production at cost. During 2013,2014, the Company derived approximately 19.7%19.5% of its consolidated net sales from Aqua Cal, Inc.
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.
Item 1. | Description of Business (Continued) |
Given the above competitive criteria, it is the opinion of management that the Company is in a favorable position.
Over the 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, the redesign and rebuilding of one processing department in order to improve the control of 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 2013,2014, costs for this discharge approximated $250,000,$195,000, and management estimates that all expenses directly related to compliance with environmental regulations total well over $400,000$350,000 annually, which includes costs for permits, third party inspections and depreciation of installations.
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 |
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 production 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 weight scale existed on the property. Some of these facilities have been significantly updated, remodeled, and/or rebuilt and are used for the strawberry processing and some plastics molding operations. In 2006, Paradise, Inc. built a new 10,000 square foot building on this land. The building is primarily used for the production of custom vacuum forming products for its plastics customers.
The Company owns its plant facilities and other properties free and clear of any mortgage obligations.
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. | Mine Safety Disclosures |
None
I-5 |
Item 5. | Market for Common Equity and Related Stockholder Matters and Registrant Purchases of Equity Securities |
On August 22, 1997, the Securities and Exchange Commission issued new listing requirements for companies listed on the NASDAQ Small Cap Market. The requirements became effective on February 23, 1998. As of December 2013,2014, 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 | ||||||||||||||||
BID PRICES | High | Low | ||||||||||||||
High | Low | |||||||||||||||
2013 | ||||||||||||||||
2014 | ||||||||||||||||
First Quarter | 22.92 | 19.55 | 33.49 | 27.00 | ||||||||||||
Second Quarter | 26.49 | 20.50 | 31.00 | 26.20 | ||||||||||||
Third Quarter | 26.25 | 21.00 | 31.00 | 26.22 | ||||||||||||
Fourth Quarter | 30.00 | 24.50 | 27.00 | 20.50 | ||||||||||||
2012 | ||||||||||||||||
2013 | ||||||||||||||||
First Quarter | 18.00 | 14.60 | 22.92 | 19.55 | ||||||||||||
Second Quarter | 19.41 | 16.07 | 26.49 | 20.50 | ||||||||||||
Third Quarter | 18.01 | 17.00 | 26.25 | 21.00 | ||||||||||||
Fourth Quarter | 19.55 | 17.00 | 30.00 | 24.50 |
(b) | Approximate Number of Equity Security Holders |
As of March 14, 2014,31, 2015, 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 | 120 |
(c) | Dividend History and Policy |
Dividends have been declared and paid annually when warranted by profitability. On March 6, 2014,12, 2015, the Board of Directors declared dividends of $.11 per share to stockholders of record on April 11, 2014.10, 2015. Dividends paid to stockholders for 2014 were $.11 and for 2013 were $.15 and for 2012 were $.20.$.15.
II-1 |
Item 5. | Market for Common Equity and Related Stockholder Matters and Registrant Purchases of Equity Securities (Continued) |
(c) | Dividend History and Policy (Continued) |
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.
None
Item 6. | Selected Financial Data – none |
II-1
Item 7. | 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 (decrease) of such item as compared to the indicated prior period.
Relationship to | Period to Period | |||||||||||||||
Total Revenue | Increase (Decrease) | |||||||||||||||
Year Ended December 31, | Years Ended | |||||||||||||||
2014 | 2013 | 2014-2013 | 2013-2012 | |||||||||||||
NET SALES: | ||||||||||||||||
Candied Fruit | 65.8 | % | 65.3 | % | 6.5 | % | (9.2 | )% | ||||||||
Molded Plastics | 34.2 | 34.7 | 3.9 | (0.3 | ) | |||||||||||
Total Sales | 100.0 | 100.0 | 5.6 | (6.3 | ) | |||||||||||
Cost of Sales | 78.4 | 76.4 | 8.3 | (4.9 | ) | |||||||||||
Selling, General and | ||||||||||||||||
Administrative Expenses | 18.1 | 19.3 | (0.8 | ) | (0.4 | ) | ||||||||||
Amortization Expense | 0.6 | 0.6 | - | - | ||||||||||||
Interest Expense | - | - | (72.5 | ) | (15.2 | ) | ||||||||||
Total Expenses | 97.1 | 96.3 | (6.4 | ) | (4.0 | ) | ||||||||||
Income from Operations | 2.9 | 3.7 | (17.3 | ) | (42.3 | ) | ||||||||||
Other Income, Net | 0.2 | 1.5 | (85.2 | ) | 505.5 | |||||||||||
Income Before Provision for Income Taxes | 3.1 | 5.1 | (36.9 | ) | (21.9 | ) | ||||||||||
Provision for Income Taxes | 1.1 | 1.9 | (36.0 | ) | (21.6 | ) | ||||||||||
Net Income | 1.9 | % | 3.3 | % | (37.4 | )% | (22.0 | )% |
Relationship to Total Revenue Year Ended December 31, | Period to Period Increase (Decrease) Years Ended | |||||||||||||||
2013 | 2012 | 2013 – 2012 | 2012 – 2011 | |||||||||||||
NET SALES: | ||||||||||||||||
Candied Fruit | 65.6 | % | 67.7 | % | (9.3 | )% | 1.7 | % | ||||||||
Molded Plastics | 34.4 | 32.3 | (0.3 | ) | 7.1 | |||||||||||
Total Sales | 100.0 | 100.0 | (6.4 | ) | 3.4 | |||||||||||
Cost of Sales | 75.8 | 74.6 | (4.9 | ) | 5.0 | |||||||||||
Selling, General and Administrative Expenses | 20.0 | 18.9 | (1.2 | ) | 4.4 | |||||||||||
Amortization Expense | 0.6 | 0.6 | — | 0.3 | ||||||||||||
Interest Expense | — | — | (15.2 | ) | 8.3 | |||||||||||
Total Expenses | 96.4 | 94.1 | (4.2 | ) | 4.9 | |||||||||||
Income from Operations | 3.6 | 5.9 | (42.3 | ) | (16.1 | ) | ||||||||||
Other Income, Net | 1.5 | 0.2 | 505.5 | 100.0 | ||||||||||||
Income Before Provision for Income Taxes | 5.1 | 6.1 | (21.9 | ) | (18.7 | ) | ||||||||||
Provision for Income Taxes | 1.8 | 2.2 | (21.6 | ) | (18.7 | ) | ||||||||||
Net Income | 3.3 | % | 3.9 | % | (22.0 | )% | (18.7 | )% |
II-2 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
Liquidity
Management is not aware of any demands, commitments, events or uncertainties that will result in, or are reasonably likely to result in, a material increase or decrease in the Company’s liquidity. As discussed in footnote 4 of the Company’s consolidated financial statements, a line of credit is available to the Company to finance short-term working capital needs.
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.
Critical Accounting Policies and Estimates
The following discussion and analysis is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, and assets and liabilities during the periods reported. Estimates are used when accounting for certain items such as revenues, allowances for returns, early payment discounts, customer discounts, doubtful accounts, employee compensation programs, depreciation and amortization periods, taxes, inventory values, insurance programs, goodwill, other intangible assets and long-lived assets. We base our estimates on historical experience, where applicable and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions. We believe that the following critical accounting policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of all material intercompany accounts, transactions and profits.
II-2
The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
II-3 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
Accounts Receivable and Revenue Recognition
Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against Accounts Receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories. Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 20132014 and 2012.2013. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms.
The Company recognizes revenue upon the shipment or delivery of goods, depending on the agreed upon terms with its customers.
Goodwill
Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended, December 31, 20132014 and 2012,2013, the Company determined that its goodwill was not impaired.
Identifiable Intangible Assets
Customer Base and Non-Compete Agreement
The customer base and non-compete agreement represents $1,258,000 of the fair value of these assets pursuant to the Company’s purchase during 2006 of an unrelated entity’s inventories, their customer list and a non-compete agreement for a period of ten years. The customer base and non-compete agreement are being amortized over ten years. Accumulated amortization at December 31, 20132014 and 20122013 totaled approximately $1,070,000 and $944,000, and $818,000, respectively.
Other Identifiable Intangible Assets
Identifiable intangible assets included in Other Assets consist of debt issueissuance costs.
Debt issueissuance costs at December 31, 20132014 and 2012,2013, net of accumulated amortization of approximately $9,000$27,000 and $27,000,$9,000, respectively, amounted to approximately $27,000$9,000 and $9,000,$27,000, respectively, and are amortized over the two year term of the agreement.
The Company’s identifiable intangible assets are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. During the years ended, December 31, 20132014 and 2012,2013, the Company determined that its identifiable intangible assets were not impaired.
II-4 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
Impact of Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers(Topic 606).The guidance in this update supersedes the revenue recognition requirements in Topic 605,Revenue Recognition,and most industry-specific guidance throughout Industry topics of the Codification. Additionally, this Update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts.In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles-Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We are currently evaluating the impact of adopting the guidance on our financial statements.
Except as noted above, the Company’s management does not believe that any recent codified pronouncements by the Financial Accounting Standards Board (“FASB”) (including its EITF), the AICPA or the Securities and Exchange Commission will have a material impact on the Company’s current or future consolidated financial statements.
II-3
TABLE OF CONTENTS2014 Compared to 2013
Results of Operations2013 Compared to 2012
Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 65.6%65.8% of consolidated net sales during the current twelve month reporting period ending December 31, 2014. Fruit segment net sales for 2014 increased $1,006,910 or 6.5% to $16,581,479 from $15,574,569 for the similar reporting period of 2013. Two major factors were responsible for this increase in glace’ fruit sales. First, additional orders were received and shipped of glace’ fruit sold in bulk quantities to large manufacturing bakers during the past year. Bulk fruit sales which represented 29% of total glace’ fruit sales were $4,805,747 for 2014 compared to $4,380,343 for 2013, an increase of $425,404. Secondly, additional purchase orders for retail glace’ fruit products sold to national and regional supermarkets were also received and shipped as a coordinated effort between Paradise, Inc.’s in-house sales force and the Company’s outside food broker network produced an increase of $581,506 in retail glace’ fruit sales during 2014 compared to 2013.
II-5 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
2014 Compared to 2013 (Continued)
Results of Operations (Continued)
Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc., represented 34.2% of consolidated net sales during 2014. Total plastics net sales increased 3.9% to $8,601,555 for the twelve months ending December 31, 2014 compared to $8,280,692 for the similar reporting period of December 31, 2013 as the recent trend for plastics products related to the housing market continued to offset a decline in sales of custom molding injection products. Paradise Plastics, Inc. is continuing to aggressively expand its plastics segment revenue, which includes sales to such diverse industries as medical supplies, food processing and aerospace. To assist in the effort, management made a financial and time commitment during the first half of 2014 to become ISO9001 compliant. The certification process which was completed in June of 2014, represents a series of standards, developed by the International Organization Standardization (ISO) for manufacturing companies and will be emphasized as we continue to seek new business opportunities going forward.
Consolidated cost of sales, as a percentage of net sales, increased 2.0% during the twelve months ending December 31, 2014 compared to the similar reporting period of 2013. Two factors contributing to this change are as follows. First, as mentioned above, Paradise, Inc.’s fruit segment experienced an increase in the sale of bulk glace’ fruit products. Historically, the profit margins from the sale of bulk fruit are less than what is realized from retail glace’ fruit sales. Secondly, the amount of raw fruit materials processed into finished glace’ inventory was approximately 800,000 pounds less during the Company’s production period, May – September, 2014, compared to the similar period of 2013. While variable expenses such as labor and utilities were favorably impacted by the decrease in production, expenses such as property insurance, depreciation and amortization of the Company’s property, plant and equipment which are relatively fixed, more than offset the positive effect of labor and utility expenses.
Selling, general and administrative expenses, decreased 0.7% for the twelve months ending December 31, 2014 compared to the similar reporting period of 2013. The main reason for this decrease was related to the reduction in travel expenses of the Company’s sales force as greater emphasis was placed on Paradise, Inc.’s network of outside food brokers. These brokers, located throughout the United States, can be at times a more cost effective approach to submitting marketing and promotional programs to Paradise, Inc.’s customers.
II-6 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
2014 Compared to 2013 (Continued)
Results of Operations (Continued)
Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2014 was $2,216 compared to $8,054 for December 31, 2013. Interest expense during 2014 is directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2014, the Company’s revolving line of credit balance was $0, its letters of credit balance was approximately $113,000 and all debt and loan covenants required by its primary lender were in full compliance. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%. Paradise, Inc.’s revolving line of credit is with a financial institution for a two year period maturing on June 23, 2015.
Other Significant Items
Other Income for the twelve months ended December 31, 2014 totaled $52,301 compared to $353,656 for the similar period for 2013. The reason for this decrease is related to the settlement of Paradise, Inc.’s claim filed with the Deepwater Horizon Economic and Property Program (the “Settlement Program”) arising out of damages suffered as a result of the Deepwater Horizon Incident. Upon review by the claims administrator of the Settlement Program and after a 30 day period in which BP Exploration & Production, Inc. could file a protest contesting this amount, a settlement check for $277,546 was awarded to Paradise, Inc. Funds were received on August 30, 2013 and this amount is reflected in Other Income on the Company’s Consolidated Statements of Income.
Accounts Receivable balance at December 31, 2014 was $3,046,669 compared to $2,369,321 at December 31, 2013. This represents an increase of $677,348 or 28.6%. The primary reason for this increase is attributable to timing as several large customers of glace’ retail fruit delayed their purchasing and subsequent receipt of product by as much as sixty days. Therefore, receipt of payment from these customers for product received transferred into the first quarter of 2015. As disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. During 2014, the Company did experience a slight increase in returns from customers which resulted in the allowance for returns of $912,789 compared to $897,546 against the accounts receivable balance at December 31, 2013.
II-7 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
2014 Compared to 2013 (Continued)
Other Significant Items (Continued)
Inventory at December 31, 2014, including the annual provision for estimated returns, totaled $7,484,909 compared to $8,837,798. This decrease represents $1,352,889 or a 15.3% reduction in ending inventory at December 31, 2014 compared to December 31, 2013. This decrease is directly related to the fact that Paradise, Inc. processed approximately 800,000 pounds less of raw fruit materials into higher priced finished glace’ fruit inventory for 2014 versus 2013.
The Company finances ongoing operations primarily with cash provided by our operating activities, which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2014 and December 31, 2013, the Company had $7,788,010 and $5,916,366, respectively, in cash. Additionally, a revolving line of credit facility is available with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus up to 50% of the Company’s eligible inventory. Up to $1,200,000 of the facility is available for issuance of import letters of credit. At December 31, 2014 and 2013, $112,879 and $0, respectively, was due for issued letters of credit under the facility and there were no outstanding advances at December 31, 2014 and 2013. Net cash provided by operating activities increased $1,424,156 for the twelve months ended December 31, 2014 as compared to December 31, 2013. The primary reasons for this increase are as follows: payments for the purchase of fruit segment inventory in 2014 were $1,363,484 less than 2013, income tax payments made during 2014 year were $604,483 less than 2013 and collections of accounts receivable decreased by $692,591 in 2014 as compared to 2013.
Summary
Paradise, Inc.’s consolidated net sales increased to $25,183,034 for 2014 compared to $23,855,261 for 2013. Net income after provision for income taxes was $489,566 or $0.94 earnings per share for 2014 compared to $781,960 or $1.50 earnings per share for 2013.
II-8 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
2013 Compared to 2012
Results of Operations
Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 65.3% of consolidated net sales during the current twelve month reporting period ending December 31, 2013. Fruit segment net sales for 2013 decreased 9.3%9.2% to $15,775,685$15,574,569 from $17,397,551$17,155,559 for the similar reporting period of 2012. A major reason for this decrease is the changing buying patterns of Paradise, Inc.’s retail customers who in the past would purchase glace’ fruit at their national or regional headquarters and are now directing the local store manager to decide how much product to carry and place on their store shelves. Paradise, Inc.’s sales managers along with support from its network of food brokers continues to work with local grocery managers to increase their awareness of glace’ fruit as a staple in their traditional holiday baking displays for Thanksgiving and Christmas.
Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc., represented 34.4%34.7% of consolidated net sales during 2013. Total plastics net sales decreased less than .3% to $8,280,692 for the twelve months ending December 31, 2013 compared to $8,304,752 for the similar reporting period of December 31, 2012 as increased demand for plastics products related to the housing market continued to offset a decline in sales of custom molding injection orders.
Consolidated cost of sales, as a percentage of net sales, increased 1.2%decreased 4.9% during the twelve months ending December 31, 2013 compared to the similar reporting period of 2012. There are two reasons for this increase.decrease. First, Paradise, Inc. received and processed approximately 2,800,000 less pounds of strawberries through its facilities during the first six months of 2013 compared to the similar period of 2012. Secondly, certain raw fruit material received from one of the Company’s suppliers, subject to specific size and quality requirements, before being processed and placed into inventory had a higher rejection rate than in the previous year. Thus, processing a smaller amount of raw fruit production over a relatively fixed level of factory overhead resulted in an increasea decrease of cost of sales for 2013 compared to 2012.
Selling, general and administrative expenses, as a percentage of net sales, increased 1.1%remained consistent with the prior years as increases in health care premiums were offset by savings related to professional fees during the twelve months ending December 31, 2013 compared to the similar reporting period of 2012. This increase is primarily related to the rising cost of the Company’s employee health insurance program. Management is working closely with its insurance consultant to ensure that as the Affordable Health Care Act is implemented, Paradise, Inc. will be in compliance with all applicable federal and state laws.
Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2013 was $8,054 compared to $9,493 for December 31, 2012. Interest expense during 2013 was directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2013, the Company’s revolving line of credit balance was $0 and all loan covenants required by its primary lender were in full compliance.
II-9 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
2013 Compared to 2012 (Continued)
Results of Operations (Continued)
As previously reported in the Company’s second quarter filing of this year, Paradise, Inc. renewed its revolving line of credit with a financial institution for a two year period maturing on June 23, 2015. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%.
II-4
Other Significant Items
During 2012, Paradise, Inc. filed a claim with the Deepwater Horizon Economic and Property Program (the “Settlement Program”) arising out of damages suffered as a result of the Deepwater Horizon Incident. Upon review by the claims administrator of the Settlement Program and after a 30 day period in which BP Exploration & Production, Inc. could file a protest contesting this amount, a settlement check for $277,546 was awarded to Paradise, Inc. Funds were received on August 30, 2013 and this amount is reflected in Other Income on the Company’s consolidated Statements of Income.
Accounts Receivable balance at December 31, 2013 was $2,369,321 compared to $1,893,160 at December 31, 2012. This represents an increase of $476,161 or 25.2%. The primary reason for this increase is attributable to the accounting for estimated product returns. As disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. During 2012, as previously reported, the Company did experience an increase in product returns from a long time customer which resulted in the allowance for product returns to total $1,562,566. For 2013, returns were in line with the Company’s historical average resulting in an allowance of $897,546 against the accounts receivable balance at December 31, 2013.
The Company finances ongoing operations primarily with cash provided by our operating activities which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2013 and December 31, 2012, the Company had $5,916,366 and $6,384,087, respectively, in cash. Additionally, a revolving line of credit with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus up to 50% of the Company’s eligible inventory, of which $0 was outstanding at December 31, 2013 and December 31, 2012. The line of credit agreement which was renewed in June 2013 expires in June 2015. Net cash provided by operating activities increased $1,487,244 for the twelve months ended December 31, 2013 as compared to December 31, 2012. The primary reasons for this increase are as follows: income tax payments made during 2013 year were $323,318 less than 2012 and payments for the purchase of inventory decreased $1,759,976.
II-10 |
Item 7. | Management’s Discussion and Analysis or Plan of Operation (Continued) |
2013 Compared to 2012 (Continued)
Summary
Paradise, Inc.’s consolidated net sales decreased to $24,056,377$23,855,261 for 2013 compared to $25,702,303$25,460,311 for 2012. Net income after provision for income taxes was $781,960 or $1.50 earnings per share for 2013 compared to $1,002,932 or $1.93 earnings per share for 2012.
Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 67.7% of consolidated net sales during the current twelve month reporting period ending December 31, 2012. Fruit segment net sales for 2012 increased 1.7% to $17,397,551 compared to $17,107,763 for the similar reporting period of 2011. Consolidation within the supermarket industry over the past twelve months, has limited in certain regions of the country, the number of opportunities available to the Company to market its glace’ fruit products. To counter this impact, the Company continues to aggressively promote sales of bulk fruit and recently dried fruit products which are not targeted to the supermarket industry. As to its dried fruit products, the Company promotes these products to such non-traditional customers as convenience stores, airports and over the internet on a year round basis.
II-11 |
Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc., represented 32.3% of consolidated net sales during 2012. Total plastics net sales increased 7.1% to $8,304,752 for the twelve months ending December 31, 2012 compared to $7,754,707 for the similar reporting period of December 31, 2011. This increase is two-fold. First, Paradise Plastics, Inc.’s net sales continued to increase to customers within the housing market. As reported in previous filings, the downturn in the economy during 2008 resulted in a decrease in purchase orders received and fulfilled by the Company. With the rebound in the housing
II-5
market over the past several years, Paradise Plastics, Inc. continued to benefit from this improvement with an uptick in orders related to this market. Secondly, the commitment to diversify to other industries such as military, medical and recreation continued to provide increased sales and growth during the past year.
Consolidated cost of goods sold, expressed as an overall percentage of net sales increased 1.2% for the twelve months ending December 31, 2012 compared to the similar reporting period for 2011. This increase was related to rising prices absorbed from raw fruit suppliers along with corresponding increases incurred for in-bound freight charges during 2012.
Selling, general and administrative expenses for the period ending December 31, 2012 increased 4.4% compared to the similar reporting period for 2011. This increase is primarily related to advertising expenses associated with the sale of its glace’ fruit products. During the past year, management spent additional funds to support inclusion of glace’ fruit items within baking center displays for various supermarket customers. This increased the visibility of the Company’s glace’ fruit products, which in past years, may have been placed on shelves set back from other traditional holiday baking items. From initial reports received from customers, management is pleased by the results these baking center displays had in increasing awareness of the Company’s glace’ fruit products. Participating in baking center displays will be a vital part of the Company’s marketing strategy going forward.
Interest expense for the twelve months ending December 31, 2012 totaled $9,493 compared to $8,764 for the similar reporting period of 2011. Interest expense during 2012 was directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2012, the Company’s revolving line of credit balance was $0 and all loan covenants required by its primary lender were in full compliance.
Other Significant Items
Other Income for the twelve months ended December 31, 2012 was $58,408 compared to $128,109 for the similar period of 2011. As mentioned in previous filings, on February 22, 2011, Paradise, Inc. received $150,000 from a former supplier to settle a dispute dating back to September, 2004. This amount is reflected as part of Other Income on the Company’s income statement during 2011. Other Income reflected in this account is primary related to fluctuations in the cash surrender value of insurance policies owned by the Company on behalf of two senior executives.
Accounts Receivable balance at December 31, 2012 was $1,893,160 compared to $2,579,362 at December 31, 2011. This change is a decrease of $686,202 or 26.6%. As disclosed in Note 1 under significant accounting policies, the company writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. In addition, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. For 2012, the Company did experience an increase in product returns from a long time customer which resulted in an increase in the allowance for returns by $558,777.
Inventory as of December 31, 2012 totaled $8,856,379 compared to $6,196,517 as of December 31, 2011. This increase of $2,659,862 was primarily driven by the Company’s need to procure a sufficient amount of raw fruit materials leading into its 2013 production season. As mentioned above, Paradise, Inc.’s. production season will commence as early as January in order to be ready to ship glace’ fruit products to customers in time for the holiday selling season beginning in mid-September of each year. Management is consistently reviewing economic, harvest and weather conditions throughout the year to see what effect changes to these factors will have on the future availability of the Company’s raw fruit materials. Based on the Company’s assessment of these issues during the first half of 2012, management increased the procurement of raw fruit materials during the third and fourth quarters of 2012. This increase in raw fruit inventory at December 31, 2012 will now provide the Company adequate inventory levels to commence its projected 2013 production needs.
The Company finances ongoing operations primarily with cash provided by our operating activities which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities,
II-6
existing cash, and a line of credit facility. At December 31, 2012 and December 31, 2011, the Company had $6,384,087 and $7,468,908, respectively, in cash. Additionally, a revolving line of credit with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus up to 50% of the Company’s eligible inventory, of which $0 was outstanding at December 31, 2012 and December 31, 2011. Net cash used in operating activities decreased $4,025,804 for the twelve months ended December 31, 2012. The primary reasons for this decrease are as follows; income tax payments made during 2012 year were $505,910 greater than 2011; payments for the purchase of inventory increased $2,113,834. These increases in cash outlays were partially offset by an increase in Accounts Receivable payments of $962,031 from Paradise, Inc.’s customers during 2012 compared to 2011.
Summary
Paradise, Inc.’s consolidated net sales increased to $25,702,303 for 2012 compared to $24,862,470 for 2011. Net income after provision for income taxes was $1,002,932 or $1.93 earnings per share for 2012 compared to $1,233,270 or $2.37 earnings per share for 2011.
II-7
To the Board of Directors of
Paradise, Inc.
We have audited the accompanying consolidated balance sheets of Paradise, Inc., and subsidiaries (“the Company”) as of December 31, 20132014 and 20122013 and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the years in the two year period ended December 31, 2013.2014. Paradise, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Paradise, Inc. and subsidiaries as of December 31, 20132014 and 2012,2013, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 20132014 in conformity with accounting principles generally accepted in the United States of America.
/s/
/s/ Warren Averett, LLC
Tampa, Florida
March 27, 201431, 2015
II-12 |
II-8
AND SUBSIDIARIES
Consolidated Balance Sheets
ASSETS
DECEMBER 31, | ||||||||
2013 | 2012 | |||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 5,916,366 | $ | 6,384,087 | ||||
Accounts Receivable, Net of Allowance for Doubtful Accounts of $-0- and Allowance for Returns of $897,546 (2013) and $1,562,556 (2012) | 2,369,321 | 1,893,160 | ||||||
Inventories | 8,837,798 | 8,856,379 | ||||||
Income Tax Receivable | 279,219 | 225,794 | ||||||
Prepaid Expenses and Other Current Assets | 304,812 | 296,728 | ||||||
Deferred Income Tax Asset | 330,198 | 152,250 | ||||||
Total Current Assets | 18,037,714 | 17,808,398 | ||||||
PROPERTY, PLANT AND EQUIPMENT: | ||||||||
Net of Accumulated Depreciation of $17,410,823 (2013) and $18,454,410 (2012) | 3,816,928 | 3,946,124 | ||||||
GOODWILL | 413,280 | 413,280 | ||||||
CUSTOMER BASE AND NON-COMPETE AGREEMENT | 313,862 | 439,747 | ||||||
OTHER ASSETS | 283,979 | 281,935 | ||||||
TOTAL ASSETS | $ | 22,865,763 | $ | 22,889,484 |
DECEMBER 31, | ||||||||
2013 | 2012 | |||||||
CURRENT LIABILITIES: | ||||||||
Short-Term Debt | $ | — | $ | 515,866 | ||||
Accounts Payable | 308,319 | 375,067 | ||||||
Accrued Expenses | 923,540 | 1,093,698 | ||||||
Total Current Liabilities | 1,231,859 | 1,984,631 | ||||||
DEFERRED INCOME TAX LIABILITY | 297,094 | 272,063 | ||||||
Total Liabilities | 1,528,953 | 2,256,694 | ||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Common Stock, $.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued and 519,600 Shares Outstanding | 174,928 | 174,928 | ||||||
Capital in Excess of Par Value | 1,288,793 | 1,288,793 | ||||||
Retained Earnings | 20,146,308 | 19,442,288 | ||||||
21,610,029 | 20,906,009 | |||||||
Less: Common Stock in Treasury, at Cost, 63,494 Shares (2013 and 2012) | 273,219 | 273,219 | ||||||
Total Stockholders’ Equity | 21,336,810 | 20,632,790 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 22,865,763 | $ | 22,889,484 |
DECEMBER 31, | ||||||||
2014 | 2013 | |||||||
CURRENT ASSETS: | ||||||||
Cash | $ | 7,788,010 | $ | 5,916,366 | ||||
Accounts Receivable, Net of Allowance for Doubtful Accounts of $ -0- and Allowance for Returns of $912,789 (2014) and $897,546 (2013) | 3,046,669 | 2,369,321 | ||||||
Inventories | 7,484,909 | 8,837,798 | ||||||
Income Tax Receivable | 78,277 | 279,219 | ||||||
Prepaid Expenses and Other Current Assets | 306,951 | 304,812 | ||||||
Deferred Income Tax Asset | 277,291 | 330,198 | ||||||
Total Current Assets | 18,982,107 | 18,037,714 | ||||||
PROPERTY, PLANT AND EQUIPMENT: | ||||||||
Net of Accumulated Depreciation of $17,880,096 (2014) and $17,410,823 (2013) | 3,473,829 | 3,816,928 | ||||||
GOODWILL | 413,280 | 413,280 | ||||||
CUSTOMER BASE AND NON-COMPETE AGREEMENT | 187,977 | 313,862 | ||||||
OTHER ASSETS | 451,373 | 283,979 | ||||||
TOTAL ASSETS | $ | 23,508,566 | $ | 22,865,763 |
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
II-13 |
II-9
LIABILITIES AND STOCKHOLDERS’ EQUITY
DECEMBER 31, | ||||||||
2014 | 2013 | |||||||
CURRENT LIABILITIES: | ||||||||
Short-Term Debt | $ | 112,879 | $ | - | ||||
Accounts Payable | 603,342 | 308,319 | ||||||
Accrued Expenses | 819,458 | 923,540 | ||||||
Total Current Liabilities | 1,535,679 | 1,231,859 | ||||||
DEFERRED INCOME TAX LIABILITY | 203,667 | 297,094 | ||||||
Total Liabilities | 1,739,346 | 1,528,953 | ||||||
STOCKHOLDERS’ EQUITY: | ||||||||
Common Stock, $.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued and 519,600 Shares Outstanding | 174,928 | 174,928 | ||||||
Capital in Excess of Par Value | 1,288,793 | 1,288,793 | ||||||
Retained Earnings | 20,578,718 | 20,146,308 | ||||||
22,042,439 | 21,610,029 | |||||||
Less: Common Stock in Treasury, at Cost, 63,494 Shares | 273,219 | 273,219 | ||||||
Total Stockholders’ Equity | 21,769,220 | 21,336,810 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 23,508,566 | $ | 22,865,763 |
II-14 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
FOR THE YEARS ENDED DECEMBER 31, | ||||||||
2013 | 2012 | |||||||
NET SALES | $ | 24,056,377 | $ | 25,702,303 | ||||
COSTS AND EXPENSES: | ||||||||
Cost of Goods Sold | 18,231,584 | 19,178,541 | ||||||
Selling, General and Administrative Expenses | 4,801,409 | 4,860,697 | ||||||
Amortization Expense | 143,885 | 143,885 | ||||||
Interest Expense | 8,054 | 9,493 | ||||||
Total Costs and Expenses | 23,184,932 | 24,192,616 | ||||||
INCOME FROM OPERATIONS | 871,445 | 1,509,687 | ||||||
OTHER INCOME – NET | 353,656 | 58,408 | ||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,225,101 | 1,568,095 | ||||||
PROVISION FOR INCOME TAXES | 443,141 | 565,163 | ||||||
NET INCOME | $ | 781,960 | $ | 1,002,932 | ||||
EARNINGS PER SHARE: | ||||||||
Basic | $ | 1.50 | $ | 1.93 | ||||
Diluted | $ | 1.50 | $ | 1.93 |
FOR THE YEARS ENDED | ||||||||
DECEMBER 31, | ||||||||
2014 | 2013 | |||||||
NET SALES | $ | 25,183,034 | $ | 23,855,261 | ||||
COSTS AND EXPENSES: | ||||||||
Cost of Goods Sold | 19,750,152 | 18,231,584 | ||||||
Selling, General and Administrative Expenses | 4,565,688 | 4,600,293 | ||||||
Amortization Expense | 143,885 | 143,885 | ||||||
Interest Expense | 2,216 | 8,054 | ||||||
Total Costs and Expenses | 24,461,941 | 22,983,816 | ||||||
INCOME FROM OPERATIONS | 721,093 | 871,445 | ||||||
OTHER INCOME – NET | 52,301 | 353,656 | ||||||
INCOME BEFORE PROVISION FOR INCOME TAXES | 773,394 | 1,225,101 | ||||||
PROVISION FOR INCOME TAXES | 283,828 | 443,141 | ||||||
NET INCOME | $ | 489,566 | $ | 781,960 | ||||
EARNINGS PER SHARE: | ||||||||
Basic | $ | 0.94 | $ | 1.50 | ||||
Diluted | $ | 0.94 | $ | 1.50 |
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
II-15 |
II-10
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 20132014 and 20122013
COMMON STOCK | CAPITAL IN EXCESS OF PAR VALUE | RETAINED EARNINGS | TREASURY STOCK | TOTAL | ||||||||||||||||
Balance, December 31, 2011 | $ | 174,928 | $ | 1,288,793 | $ | 18,543,276 | $ | (273,219 | ) | $ | 19,733,778 | |||||||||
Cash Dividends Declared, $.20 per Share | (103,920 | ) | (103,920 | ) | ||||||||||||||||
Net Income | 1,002,932 | 1,002,932 | ||||||||||||||||||
Balance, December 31, 2012 | 174,928 | 1,288,793 | 19,442,288 | (273,219 | ) | 20,632,790 | ||||||||||||||
Cash Dividends Declared, $.15 per Share | (77,940 | ) | (77,940 | ) | ||||||||||||||||
Net Income | 781,960 | 781,960 | ||||||||||||||||||
Balance, December 31, 2013 | $ | 174,928 | $ | 1,288,793 | $ | 20,146,308 | $ | (273,219 | ) | $ | 21,336,810 |
CAPITAL IN | ||||||||||||||||||||
COMMON | EXCESS OF | RETAINED | TREASURY | |||||||||||||||||
STOCK | PAR VALUE | EARNINGS | STOCK | TOTAL | ||||||||||||||||
Balance, December 31, 2012 | $ | 174,928 | $ | 1,288,793 | $ | 19,442,288 | $ | (273,219 | ) | $ | 20,632,790 | |||||||||
Cash Dividends Declared, $.15 per Share | (77,940 | ) | (77,940 | ) | ||||||||||||||||
Net Income | 781,960 | 781,960 | ||||||||||||||||||
Balance, December 31, 2013 | 174,928 | 1,288,793 | 20,146,308 | (273,219 | ) | 21,336,810 | ||||||||||||||
Cash Dividends Declared, $.11 per Share | (57,156 | ) | (57,156 | ) | ||||||||||||||||
Net Income | 489,566 | 489,566 | ||||||||||||||||||
Balance, December 31, 2014 | $ | 174,928 | $ | 1,288,793 | $ | 20,578,718 | $ | (273,219 | ) | $ | 21,769,220 |
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
II-16 |
II-11
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
FOR THE YEARS ENDED | ||||||||
DECEMBER 31, | ||||||||
2014 | 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 489,566 | $ | 781,960 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||
Provision for Sales Returns | 15,243 | (665,010 | ) | |||||
Provision for Estimated Inventory Returns | (10,595 | ) | 487,879 | |||||
Provision for Deferred Income Taxes | (40,520 | ) | (152,917 | ) | ||||
Depreciation and Amortization | 623,502 | 603,977 | ||||||
Decrease (Increase) in: | ||||||||
Accounts Receivable | (692,591 | ) | 188,849 | |||||
Inventories | 1,363,484 | (469,298 | ) | |||||
Prepaid Expenses and Other Current Assets | (2,139 | ) | (8,084 | ) | ||||
Income Tax Receivable | 200,942 | (53,425 | ) | |||||
Other Assets | (213,784 | ) | 23,366 | |||||
Increase (Decrease) in: | ||||||||
Accounts Payable | 295,521 | (66,748 | ) | |||||
Accrued Expenses | (104,082 | ) | (170,158 | ) | ||||
Net Cash Provided by Operating Activities | 1,924,547 | 500,391 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of Property, Plant and Equipment | (137,020 | ) | (330,896 | ) | ||||
Change in Cash Surrender Value of Life Insurance | 28,394 | (43,410 | ) | |||||
Net Cash Used in Investing Activities | (108,626 | ) | (374,306 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net Proceeds from (Payments on) Short-Term Debt | 112,879 | (515,866 | ) | |||||
Dividends Paid | (57,156 | ) | (77,940 | ) | ||||
Net Cash Provided by (Used in) Financing Activities | 55,723 | (593,806 | ) |
FOR THE YEARS ENDED DECEMBER 31, | ||||||||
2013 | 2012 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 781,960 | $ | 1,002,932 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by (Used in) Operating Activities: | ||||||||
Provision for Sales Returns | (665,010 | ) | 558,777 | |||||
Provision for Estimated Inventory Returns | 487,879 | (430,588 | ) | |||||
Provision for Deferred Income Taxes | (152,917 | ) | 188,834 | |||||
Depreciation and Amortization | 603,977 | 613,120 | ||||||
Decrease (Increase) in: | ||||||||
Accounts Receivable | 188,849 | 127,425 | ||||||
Inventories | (469,298 | ) | (2,229,274 | ) | ||||
Prepaid Expenses and Other Current Assets | (8,084 | ) | (1,315 | ) | ||||
Income Tax Receivable | (53,425 | ) | (225,794 | ) | ||||
Other Assets | 23,366 | (111,919 | ) | |||||
Increase (Decrease) in: | ||||||||
Accounts Payable | (66,748 | ) | 16,218 | |||||
Accrued Expenses | (170,158 | ) | (124,591 | ) | ||||
Income Taxes Payable | — | (370,678 | ) | |||||
Net Cash Provided by (Used in) Operating Activities | 500,391 | (986,853 | ) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of Property, Plant and Equipment | (330,896 | ) | (231,315 | ) | ||||
Change in Cash Surrender Value of Life Insurance | (43,410 | ) | 34,647 | |||||
Net Cash Used in Investing Activities | (374,306 | ) | (196,668 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net (Payments on) Proceeds from Short-Term Debt | (515,866 | ) | 202,620 | |||||
Dividends Paid | (77,940 | ) | (103,920 | ) | ||||
Net Cash (Used in) Provided by Financing Activities | (593,806 | ) | 98,700 | |||||
NET CHANGE IN CASH | (467,721 | ) | (1,084,821 | ) | ||||
CASH, at Beginning of Year | 6,384,087 | 7,468,908 | ||||||
CASH, at End of Year | $ | 5,916,366 | $ | 6,384,087 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash Paid During the Year for: | ||||||||
Interest | $ | 8,054 | $ | 9,493 | ||||
Income Taxes | $ | 649,483 | $ | 972,801 |
II-17 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
FOR THE YEARS ENDED | ||||||||
DECEMBER 31, | ||||||||
2014 | 2013 | |||||||
NET CHANGE IN CASH | 1,871,644 | (467,721 | ) | |||||
CASH, at Beginning of Year | 5,916,366 | 6,384,087 | ||||||
CASH, at End of Year | $ | 7,788,010 | $ | 5,916,366 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
Cash Paid During the Year for: | ||||||||
Interest | $ | 2,216 | $ | 8,054 | ||||
Income Taxes | $ | 45,000 | $ | 649,483 |
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
II-18 |
II-12
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 20132014 AND 20122013
NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES |
Paradise, Inc. operations are conducted through two business segments, candied fruit and molded plastics. The primary operations of the fruit segment is production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, the processing of frozen strawberry products, for sale to commercial and institutional users such as preserves, dairies, drink manufacturers, etc. The molding plastics segment provides production of plastic containers for the Company’s products and other molded plastics for sale to unaffiliated customers. Substantially all of the Company’s customers are located in the United States of America.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of all material intercompany accounts, transactions and profits.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
II-19 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Accounts Receivable and Revenue Recognition
Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against Accounts Receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories.
Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 20132014 and 2012.2013. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms.
The Company recognizes revenue upon the shipment or delivery of goods, depending on the agreed upon terms with its customers.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market. Cost includes material, labor, factory overhead and depreciation.
II-13
Property, plant and equipment are stated at cost. Generally, the straight-line method is used in computing depreciation. Estimated useful lives of property, plant and equipment are:
Buildings and Improvements | 10 | |||
Machinery and Equipment | 3 |
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.
II-20 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Goodwill
Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended, December 31, 20132014 and 2012,2013, the Company determined that its goodwill was not impaired.
Identifiable Intangible Assets
Customer Base and Non-Compete Agreement
The customer base and non-compete agreement represents $1,258,000 of the fair value of these assets pursuant to the Company’s purchase during 2006 of an unrelated entity’s inventories, their customer list and a non-compete agreement for a period of ten years. The customer base and non-compete agreement are being amortized over ten years.
Other Identifiable Intangible Assets
Identifiable intangible assets included in Other Assets consist of debt issueissuance costs.
Debt issue
Gross debt issuance costs, amounted to approximately $36,000 as of December 31, 20132014 and 2012,2013, and are amortized over the two year term of the agreement.
The Company’s identifiable intangible assets are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. During the years ended, December 31, 20132014 and 2012,2013, the Company determined that its identifiable intangible assets were not impaired.
Amortization expense of intangible assets subject to amortization for the years ended December 31, 2014 and 2013 and 2012 was $143,885 and $143,885, respectively.$143,885.
II-21 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Identifiable Intangible Assets (Continued)
Accumulated amortization for the same periodsas of December 31, 2014 and 2013 totaled $1,097,023 and $953,138, (2013) and $845,253 (2012), respectively.
Future amortization expense is anticipated to be as follows:
2014 | $ | 143,885 | ||
2015 | $ | 134,885 | ||
2016 | $ | 62,092 |
2015 | $ | 134,885 | ||
2016 | $ | 62,092 |
II-14
The Company considers freight delivery costs to be selling expenses and has included $668,862 (2014) and $586,578 (2013) and $590,485 (2012) in selling, general and administrative expenses in the accompanying statements of income.
Advertising Expenses
The Company expenses advertising costs in the year they are incurred. Advertising expenses totaled $233,764$7,029 (2014) and $32,648 (2013) and $260,898 (2012) and are included in selling, general and administrative expenses in the accompanying statements of income.
II-22 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Employee Benefit Plan
The Company has a 401(k) retirement plan for all eligible employees. Eligibility requirements for employees are based on completing 1,000 hours of service by the end of the first twelve months of consecutive employment and being at least 21 years old. Employee contributions are voluntary and subject to Internal Revenue Service limitations. The Company provides a matching contribution subject to annual review of the Company’s financial performance. For the years ended December 31, 20132014 and 2012,2013, the Company incurred $36,757$49,231 and $35,499,$36,757, respectively, in 401(k) expense.
Earnings Per Share
Basic and diluted earnings per common share are based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600 shares at December 31, 20132014 and 2012.2013. There are no dilutive securities outstanding at December 31, 20132014 and 2012.2013.
Reclassifications
Certain minor reclassifications have been made to the 20122013 consolidated financial statements in order to conform to the classifications used in 2013.2014.
Impact of Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers(Topic 606).The guidance in this update supersedes the revenue recognition requirements in Topic 605,Revenue Recognition,and most industry-specific guidance throughout Industry topics of the Codification. Additionally, this Update supersedes some cost guidance included in Subtopic 605-35, Revenue Recognition - Construction-Type and Production-Type Contracts.In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within the scope of Topic 350, Intangibles-Goodwill and Other) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. We are currently evaluating the impact of adopting the guidance on our financial statements.
II-23 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) |
Impact of Recently Issued Accounting Pronouncements (Continued)
Except as noted above, the Company’s management does not believe that any recent codified pronouncements by the Financial Accounting Standards Board (“FASB”) (including its EITF), the AICPA or the Securities and Exchange Commission will have a material impact on the Company’s current or future consolidated financial statements.
2013 | 2012 | |||||||
Supplies | $ | 164,962 | $ | 158,925 | ||||
Raw Materials | 1,806,727 | 2,340,505 | ||||||
Work in Progress | 993,061 | 561,043 | ||||||
Finished Goods | 5,873,048 | 5,795,906 | ||||||
Total | $ | 8,837,798 | $ | 8,856,379 |
NOTE 2: | INVENTORIES |
2014 | 2013 | |||||||
Supplies | $ | 168,275 | $ | 164,962 | ||||
Raw Materials | 1,923,235 | 1,806,727 | ||||||
Work in Progress | 987,614 | 993,061 | ||||||
Finished Goods | 4,405,785 | 5,873,048 | ||||||
Total | $ | 7,484,909 | $ | 8,837,798 |
Included in Finished Goods inventory are estimated returns related to the Provision for Sales Returns totaling $688,821 (2014) and $678,226 (2013) and $1,166,105 (2012).
Substantially all inventories are pledged as collateral for certain short-term obligations.
II-15
NOTE 3: | PROPERTY, PLANT AND EQUIPMENT |
Property, plant and equipment consisted of the following:
2014 | 2013 | |||||||
Land and Improvements | $ | 656,040 | $ | 656,040 | ||||
Buildings and Improvements | 7,095,184 | 7,048,114 | ||||||
Machinery and Equipment | 13,602,701 | 13,523,597 | ||||||
Total | 21,353,925 | 21,227,751 | ||||||
Less: Accumulated Depreciation | 17,880,096 | 17,410,823 | ||||||
NET | $ | 3,473,829 | $ | 3,816,928 |
2013 | 2012 | |||||||
Land and Improvements | $ | 656,040 | $ | 656,040 | ||||
Buildings and Improvements | 7,048,114 | 7,127,321 | ||||||
Machinery and Equipment | 13,523,597 | 14,617,173 | ||||||
Total | 21,227,751 | 22,400,534 | ||||||
Less: Accumulated Depreciation | 17,410,823 | 18,454,410 | ||||||
NET | $ | 3,816,928 | $ | 3,946,124 |
II-24 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 3: | PROPERTY, PLANT AND EQUIPMENT (CONTINUED) |
All of the real property, machinery and equipment are pledged as collateral for the Company’s short-term debt obligations.
Depreciation expense for the years ended December 31, 2014 and 2013 was $479,617 and 2012 was $460,092, and $469,235, respectively.
2013 | 2012 | |||||||
Letters of credit and other short-term debt under a revolving line of credit with a bank. | $ | — | $ | 515,866 | ||||
TOTAL | $ | — | $ | 515,866 |
NOTE 4: | SHORT-TERM DEBT |
2014 | 2013 | |||||||
Letters of credit and other short-term debt under a revolving line of credit with a bank. | $ | 112,879 | $ | - | ||||
TOTAL | $ | 112,879 | $ | - |
The Company has a revolving loan agreement with a financial institution with a maximum limit of $12,000,000 and a borrowing limit of 80% of the Company’s eligible receivables plus the lessor of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all of the assets of the Company and matures on June 23, 2015. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%. (1.9% at December 31, 2014).
This agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property and improvement without bank approval. The Company was in compliance with these covenants at December 31, 20132014 and 2012.2013.
NOTE 5: | OPERATING LEASES |
The Company leases certain automobiles and office equipment under operating leases ranging in length from thirty-six to sixty months. Lease payments charged to operations amounted to $85,148 (2014) and $87,070 (2013) and $74,885 (2012), respectively.
II-25 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 5: | OPERATING LEASES (CONTINUED) |
At December 31, 2013,2014, future minimum payments required under leases with terms greater than one year are as follows:
Years Ending December 31, | Operating Leases | |||
2014 | $ | 57,567 | ||
2015 | 53,127 | |||
2016 | 27,475 | |||
2017 | 12,246 | |||
Total Minimum Lease Payments | $ | 150,415 |
Years Ending | Operating | |||
December 31, | Leases | |||
2015 | $ | 61,524 | ||
2016 | 35,574 | |||
2017 | 3,695 | |||
Total Minimum Lease Payments | $ | 100,793 |
II-16
NOTE 6: | ACCRUED EXPENSES |
Accrued Expenses consisted of the following:
2014 | 2013 | |||||||
Accrued Payroll and Bonuses | $ | 219,719 | $ | 486,399 | ||||
Accrued Brokerage Payable | 294,739 | 197,443 | ||||||
Other Accrued Expenses | 15,539 | 24,126 | ||||||
Coupon Reimbursement | 70,795 | 59,179 | ||||||
Accrued Credit Due to Customers | 132,329 | 132,892 | ||||||
Accrued Insurance Payable | 7,931 | 23,501 | ||||||
Income Taxes Payable | 78,406 | - | ||||||
Total | $ | 819,458 | $ | 923,540 |
2013 | 2012 | |||||||
Accrued Payroll and Bonuses | $ | 486,399 | $ | 400,471 | ||||
Accrued Brokerage Payable | 197,443 | 226,742 | ||||||
Other Accrued Expenses | 24,126 | 78,566 | ||||||
Coupon Reimbursement | 59,179 | 77,941 | ||||||
Accrued Credit Due to Customers | 132,892 | 260,288 | ||||||
Accrued Insurance Payable | 23,501 | 49,690 | ||||||
Total | $ | 923,540 | $ | 1,093,698 |
II-26 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 7: | PROVISION FOR FEDERAL AND STATE INCOME TAXES |
The provisions for income taxes are comprised of the following amounts:
2014 | 2013 | |||||||||||||||
2013 | 2012 | |||||||||||||||
Current: | ||||||||||||||||
Federal | $ | 534,180 | $ | 301,644 | $ | 276,941 | $ | 534,180 | ||||||||
State | 61,878 | 74,685 | 47,407 | 61,878 | ||||||||||||
596,058 | 376,329 | |||||||||||||||
324,348 | 596,058 | |||||||||||||||
Deferred: | ||||||||||||||||
Federal | (138,166 | ) | 170,618 | (36,611 | ) | (138,166 | ) | |||||||||
State | (14,751 | ) | 18,216 | (3,909 | ) | (14,751 | ) | |||||||||
(152,917 | ) | 188,834 | ||||||||||||||
(40,520 | ) | (152,917 | ) | |||||||||||||
Total Provision for Income Taxes | $ | 443,141 | $ | 565,163 | $ | 283,828 | $ | 443,141 |
A reconciliation of the differences between the tax provisions attributable to income from continuing operations and the tax provision at statutory Federal income tax rate follows:
2014 | 2013 | |||||||
Income Taxes Computed at Statutory Rate | $ | 262,954 | $ | 416,534 | ||||
State Income Tax, | ||||||||
Net of Federal Income Tax Benefit | 28,074 | 44,489 | ||||||
Other, Net | (7,200 | ) | (17,882 | ) | ||||
Provision for Income Taxes | $ | 283,828 | $ | 443,141 |
2013 | 2012 | |||||||
Income Taxes Computed at Statutory Rate | $ | 416,534 | $ | 533,152 | ||||
State Income Tax, Net of Federal Income Tax Benefit | 44,489 | 56,922 | ||||||
Other, Net | (17,882 | ) | (24,911 | ) | ||||
Provision for Income Taxes | $ | 443,141 | $ | 565,163 |
II-27 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 7: | PROVISION FOR FEDERAL AND STATE INCOME TAXES (CONTINUED) |
The Company recognizes deferred tax assets and liabilities for future tax consequences of events that have been previously recognized in the Company’s consolidated 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-17
Significant components of the Company’s deferred tax assets and liabilities at December 31, 20132014 and 20122013 were:
2014 | 2013 | |||||||
Deferred Tax Assets resulting from: | ||||||||
Inventory Valuation | $ | 193,012 | $ | 247,668 | ||||
Allowance for Sales Returns and Related Provision for Return of Finished Goods | 84,279 | 82,530 | ||||||
Total Deferred Tax Assets | 277,291 | 330,198 | ||||||
Deferred Tax Liabilities resulting from: | ||||||||
Tax over Book Depreciation | (203,667 | ) | (297,094 | ) | ||||
Net Deferred Tax Asset | $ | 73,624 | $ | 33,104 | ||||
The Net Deferred Tax Asset is reflected in the Balance Sheet under these captions: | ||||||||
Current Deferred Income Tax Asset | $ | 277,291 | $ | 330,198 | ||||
Long-Term Deferred Income Tax Liability | (203,667 | ) | (297,094 | ) | ||||
$ | 73,624 | $ | 33,104 |
2013 | 2012 | |||||||
Deferred Tax Assets resulting from: | ||||||||
Inventory Valuation | $ | 247,668 | $ | 3,065 | ||||
Allowance for Sales Returns and Related Provision for Return of Finished Goods | 82,530 | 149,185 | ||||||
Total Deferred Tax Assets | 330,198 | 152,250 | ||||||
Deferred Tax Liabilities resulting from: | ||||||||
Tax over Book Depreciation | (297,094 | ) | (272,063 | ) | ||||
Net Deferred Tax Asset (Liability) | $ | 33,104 | $ | (119,813 | ) | |||
The Net Deferred Tax Asset (Liability) is reflected in the Balance Sheet under these captions: | ||||||||
Current Deferred Income Tax Asset | $ | 330,198 | $ | 152,250 | ||||
Long-Term Deferred Income Tax Liability | (297,094 | ) | (272,063 | ) | ||||
$ | 33,104 | $ | (119,813 | ) |
II-28 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 7: | PROVISION FOR FEDERAL AND STATE INCOME TAXES (CONTINUED) |
The Company follows Accounting Standards Codification Topic 740, “Income Taxes” (“ASC Topic 740”). This standard provides interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the determination of the ultimate tax effects is uncertain. We record our tax provision based on current and future income taxes that will be due. In the determination of our provision, we have taken certain tax positions in the consideration of the effects of income and expenses that have been recognized and included in the accompanying consolidated financial statements that may or may not be recognized in the determination of current or future income taxes. We record a liability for these unrecognized tax benefits when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We review our liability for unrecognized tax benefits quarterly and adjust it in light of changing facts and circumstances, such as the outcome of tax audit. We are subject to income tax audits by the Internal Revenue Service and the State of Florida for the years 20102011 – 2012.2013.
As of December 31, 20132014 and 2012,2013, we do not expect that any of the tax positions taken by the Company for the tax periods open to audit, if challenged, would result in a significant tax liability.
II-29 |
II-18
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 20132014 AND 20122013
NOTE 8: | BUSINESS SEGMENT DATA |
The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows:
Candied Fruit | Production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, 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. |
YEAR ENDED | YEAR ENDED | |||||||
2014 | 2013 | |||||||
NET SALES IN EACH SEGMENT | ||||||||
Candied Fruit: | ||||||||
Sales to Unaffiliated Customers | $ | 16,581,479 | $ | 15,574,569 | ||||
Molded Plastics: | ||||||||
Sales to Unaffiliated Customers | 8,601,555 | 8,280,692 | ||||||
Net Sales | $ | 25,183,034 | $ | 23,855,261 |
II-30 |
YEAR ENDED 2013 | YEAR ENDED 2012 | |||||||
NET SALES IN EACH SEGMENT | ||||||||
Candied Fruit: | ||||||||
Sales to Unaffiliated Customers | $ | 15,775,685 | $ | 17,397,551 | ||||
Molded Plastics: | ||||||||
Sales to Unaffiliated Customers | 8,280,692 | 8,304,752 | ||||||
Net Sales | $ | 24,056,377 | $ | 25,702,303 |
PARADISE, INC.
YEAR ENDED 2013 | YEAR ENDED 2012 | |||||||
THE OPERATING PROFIT OF EACH SEGMENT IS LISTED BELOW | ||||||||
Candied Fruit | $ | 3,568,561 | $ | 4,267,788 | ||||
Molded Plastics | 2,112,347 | 2,112,089 | ||||||
Operating Profit of Segments | 5,680,908 | 6,379,877 | ||||||
General Corporate Expenses, Net | (4,746,053 | ) | (4,812,666 | ) | ||||
General Corporate Depreciation and Amortization Expense | (55,356 | ) | (48,031 | ) | ||||
Interest Expense | (8,054 | ) | (9,493 | ) | ||||
Other Income | 353,656 | 58,408 | ||||||
Income Before Provision for Income Taxes | $ | 1,225,101 | $ | 1,568,095 |
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 8: | BUSINESS SEGMENT DATA (CONTINUED) |
YEAR ENDED | YEAR ENDED | |||||||
2014 | 2013 | |||||||
THE OPERATING PROFIT OF EACH SEGMENT IS LISTED BELOW | ||||||||
Candied Fruit | $ | 3,150,602 | $ | 3,367,445 | ||||
Molded Plastics | 2,138,395 | 2,112,347 | ||||||
Operating Profit of Segments | 5,288,997 | 5,479,792 | ||||||
General Corporate Expenses, Net | (4,468,045 | ) | (4,544,937 | ) | ||||
General Corporate Depreciation and Amortization Expense | (97,643 | ) | (55,356 | ) | ||||
Interest Expense | (2,216 | ) | (8,054 | ) | ||||
Other Income | 52,301 | 353,656 | ||||||
Income Before Provision for Income Taxes | $ | 773,394 | $ | 1,225,101 |
Operating profit is composed of net sales, less direct costs and overhead costs associated with each segment. The candied fruit segment purchases items from the molded plastics segment at cost. These transactions are then eliminated during consolidation. 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.
YEAR ENDED | YEAR ENDED | |||||||
2014 | 2013 | |||||||
Identifiable Assets of Each Segment are Listed Below: | ||||||||
Candied Fruit | $ | 9,289,619 | $ | 10,303,650 | ||||
Molded Plastics | 4,719,576 | 4,615,521 | ||||||
Identifiable Assets | 13,922,189 | 14,919,171 | ||||||
General Corporate Assets | 9,499,371 | 7,946,592 | ||||||
Total Assets | $ | 23,508,566 | $ | 22,865,763 |
YEAR ENDED 2013 | YEAR ENDED 2012 | |||||||
Identifiable Assets of Each Segment are Listed Below: | ||||||||
Candied Fruit | $ | 10,303,650 | $ | 10,443,925 | ||||
Molded Plastics | 4,615,521 | 4,354,603 | ||||||
Identifiable Assets | 14,919,171 | 14,798,528 | ||||||
General Corporate Assets | 7,946,592 | 8,090,956 | ||||||
Total Assets | $ | 22,865,763 | $ | 22,889,484 |
II-31 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 8: | BUSINESS SEGMENT DATA (CONTINUED) |
Included in Identifiable Assets of the Molded Plastics Segment is goodwill totaling $413,280 at both December 31, 20132014 and 2012.2013.
II-19
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.
YEAR ENDED | YEAR ENDED | |||||||||||||||
2014 | 2013 | |||||||||||||||
YEAR ENDED 2013 | YEAR ENDED 2012 | |||||||||||||||
Depreciation and Amortization Expense of Each Segment are Listed Below: | ||||||||||||||||
Candied Fruit | $ | 374,382 | $ | 401,862 | $ | 370,970 | $ | 374,382 | ||||||||
Molded Plastics | 174,239 | 163,227 | 154,959 | 174,239 | ||||||||||||
Segment Depreciation and Amortization Expense | 548,621 | 565,089 | 525,859 | 548,621 | ||||||||||||
General Corporate Depreciation and Amortization Expense | 55,356 | 48,031 | 97,643 | 55,356 | ||||||||||||
Total Depreciation and Amortization Expense | $ | 603,977 | $ | 613,120 | $ | 623,502 | $ | 603,977 |
YEAR ENDED | YEAR ENDED | |||||||||||||||
2014 | 2013 | |||||||||||||||
YEAR ENDED 2013 | YEAR ENDED 2012 | |||||||||||||||
Capital Expenditures of Each Segment are Listed Below: | ||||||||||||||||
Candied Fruit | $ | 62,840 | $ | 182,792 | $ | 59,630 | $ | 62,840 | ||||||||
Molded Plastics | 193,924 | 48,523 | 77,390 | 193,924 | ||||||||||||
Segment Capital Expenditures | 256,764 | 231,315 | 137,020 | 256,764 | ||||||||||||
General Corporate Capital Expenditures | 74,132 | — | - | 74,132 | ||||||||||||
Total Capital Expenditures | $ | 330,896 | $ | 231,315 | $ | 137,020 | $ | 330,896 |
The Company conducts operations only within the United States. Foreign sales are insignificant; primarily all sales are to domestic companies.
II-32 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2014 AND 2013
NOTE 9: | MAJOR CUSTOMERS |
During 2013,2014, the Company derived approximately 12.9%15.9% and 19.7%19.5% of its consolidated revenues from Wal-Mart Stores, Inc. and Aqua Cal, Inc., respectively. During 2012,2013, the Company derived 16%approximately 12.9% and 13%19.7% of its consolidated revenue from Wal-Mart Stores, Inc. and Aqua Cal, Inc., respectively. As of December 31, 20132014 and 2012,2013, Wal-Mart Stores, Inc.’s accounts receivable balance represented 79.4%80.9% and 56%79.4% of total accounts receivable before allowance for returns, respectively, and Aqua Cal, Inc.’s accounts receivable balance represented 19.4%15.5% and 12%19.4% of total accounts receivable at December 31, 2014 and 2013, and 2012, respectively.
NOTE 10: | MAJOR VENDORS |
During 20132014 and 2012,2013, the Company purchased 11%28% and 11%, respectively, of its inventory from two and one supplier (Oregon Cherry Growers).suppliers, respectively. As of December 31, 20132014 and 2012,2013, the Company did not have any amounts owed to this supplier.these suppliers.
NOTE 11: | CONCENTRATION OF CREDIT RISK |
Cash is maintained at a major financial institution and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. The Company’s cash balances of $6,384,087 were fully insured at December 31, 2012 due to a temporary federal program in effect through December 31, 2012. Under the program, there was no limit to the amount of insurance for eligible accounts, including non-interest bearing accounts. Beginning 2013, insurance coverage reverted back to $250,000 per depositor at each financial institution. The Company’s deposits in excess of federally insured limits at December 31, 2014 and 2013 approximated $5,666,000.were approximately $7,615,000 and $5,763,000, respectively.
II-20
NOTE 12: | OTHER INCOME |
During 2012, Paradise, Inc. filed a claim with the Deepwater Horizon Economic and Property Program (the “Settlement Program”) arising out of damages suffered as a result of the Deepwater Horizon Incident. Upon review by the claims administrator of the Settlement Program and after a 30 day period in which BP Exploration & Production, Inc. could file a protest contesting this amount, a settlement check for $277,546 was awarded to Paradise, Inc. Funds were received on August 30, 2013 and this amount is reflected in Other Income on the Company’s consolidated2013 Consolidated Statements of Income.
NOTE 13: | SUBSEQUENT EVENT |
On March 6, 2014,12, 2015, Paradise, Inc. declared a regular dividend of $.11 per share to stockholders of record at April 11, 2014.10, 2015.
II-33 |
II-21
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
As previously reported in Form 8-K dated January 8, 2013, the Registrant (the “Company”) has been advised that, effective January 1, 2013, Pender Newkirk & Company LLP (“Pender Newkirk”) has discontinued its audit practice and that the partners and employees of Pender Newkirk have joined the firm of Warren Averett, LLC. Warren Averett, LLC will serve as the Company’s principal independent auditing firm. The decision to retain Warren Averett, LLC as the Company’s principal independent auditing firm has been approved by the Company’s Board of Directors (and Audit Committee).Not applicable.
Item 9A. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of our year ended December 31, 20132014 pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of our year ended December 31, 2013,2014, our disclosure controls and procedures were effective.
The term “disclosure controls and procedures,” as defined under the Exchange Act, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 20132014 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management, under the supervision and with the participation of our President and Chief Executive Officer and our Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2013.2014. Management’s evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal Control — IntegratedControl-Integrated Framework.Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that:
II-34 |
Item 9A. | Controls and Procedures (Continued) |
Management’s Annual Report on Internal Control over Financial Reporting (Continued)
(1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; |
(2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and |
(3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements. |
II-22
Because of its inherent limitations, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of our year ended December 31, 2013,2014, our internal control over financial reporting was effective.
Management’s Annual Report on Internal Control Over Financial Reporting does not include an attestation report from the Company’s registered public accounting firm Warren Averett, LLC.
Important Considerations
The effectiveness of our disclosure and procedures and our internal control over financial reporting is subject to various inherent limitations, include cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.
None
Item 9B. | Other Information |
II-23
TABLE OF CONTENTSNot applicable.
Item 10. | Directors, Executive Officers and Corporate Governance |
Directors of the Registrant | ||
Melvin S. Gordon | – | CEO, Chairman and Director of the Registrant, |
Term of office will expire at next stockholders’ meeting. | ||
Officer with Registrant past | ||
Eugene L. Weiner | – | Vice-President of the Registrant, |
Term of office will expire at next stockholders’ meeting. | ||
Officer with Registrant past | ||
Randy S. Gordon | – | President of the Registrant, |
Term of office will expire at next stockholders’ meeting. | ||
Employee or officer of Registrant past 36 years. | ||
Tracy W. Schulis – | Senior Vice-President and Secretary of the Registrant, | |
57 years old. Term of office will expire at next stockholders’ | ||
meeting. Employee or officer of Registrant past 35 years. | ||
Executive Vice-President | ||
Term of office will expire at next stockholders’ meeting. | ||
Employee or Officer of Registrant past |
Executive Officers of the Registrant | ||
Melvin S. Gordon | – | CEO, Chairman and Director, |
Term of office will expire at next annual directors’ meeting. | ||
Officer with Registrant past | ||
Eugene L. Weiner | Vice-President, 83 years old. | |
Term of office will expire at next annual directors’ meeting. | ||
Officer with Registrant past | ||
Randy S. Gordon | President, 59 years old. | |
Term of office will expire at next annual directors’ meeting. | ||
Employee or officer of Registrant past 36 years. | ||
Tracy W. Schulis – | Senior Vice-President and Secretary, 57 years old. | |
Term of office will expire at next annual directors’ meeting. | ||
Employee or officer of Registrant past 35 years. | ||
Mark H. Gordon – | Executive Vice-President, 52 years old. | |
Term of office will expire at next annual directors’ meeting. | ||
Employee or | ||
CFO and Treasurer, 58 years old. | ||
Term of office will expire at next annual directors’ meeting. | ||
Employee or officer with Registrant past |
III-1 |
Mr. Weiner relinquished his duties as COO, CFO, Treasurer and Secretary of the Company as of June 30, 2002. Mr. Weiner remains a Director and Vice President, concentrating on corporate development.
Item 10. | Directors, Executive Officers and Corporate Governance (Continued) |
Family Relationships
Melvin S. Gordon is a 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.
III-1
Rules recently adopted by the Securities and Exchange Commission (the “SEC”) to implement sections of the Sarbanes-Oxley Act of 2002 (the “Act”) require disclosure of whether the Company has an audit committee financial expert on its audit committee. The Company has not formally designated an audit committee; however, the Act stipulates that if no such committee exists, then the audit committee is the entire board of directors.
The Company’s Board of Directors has determined that Eugene L. Weiner, is “an audit committee financial expert”. Eugene L. Weiner is a Director and also a Vice-President of the Company and therefore is not independent of management.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to all executive officers, directors and employees of the Company. The Code of Business Conduct and Ethics is attached as an exhibit to this Annual Report on Form 10-K.
(a) and (b)
III-2 |
Item 11. | Executive Compensation |
(a) and (b) | The following summary compensation table sets forth all remuneration paid or accrued by the Company and its subsidiaries for the years ended December 31, 2014 and 2013 |
COMPENSATION | ||||||||||||||
ALL OTHER | ||||||||||||||
NAME AND PRINCIPAL | COMPENSATION | |||||||||||||
POSITION | YEAR | SALARY | BONUS | (1 and 2) | ||||||||||
Melvin S. Gordon, | ||||||||||||||
Chief Exec. Officer | 2014 | $ | 318,968 | $ | 42,217 | $ | 5,574 | |||||||
2013 | 318,968 | 70,236 | 5,151 | |||||||||||
Randy S. Gordon, | ||||||||||||||
President | 2014 | 202,070 | 41,037 | 29,884 | ||||||||||
2013 | 202,070 | 65,481 | 29,330 | |||||||||||
Tracy W. Schulis, | ||||||||||||||
Senior Vice-President and Secretary | 2014 | 202,070 | 45,041 | 44,756 | ||||||||||
2013 | 202,070 | 70,657 | 44,237 | |||||||||||
Mark H. Gordon, | ||||||||||||||
Executive Vice-President | 2014 | 202,070 | 37,677 | 17,668 | ||||||||||
2013 | 202,070 | 61,137 | 16,973 | |||||||||||
Jack M. Laskowitz, | ||||||||||||||
Chief Financial Officer | 2014 | 112,121 | 18,763 | 14,190 | ||||||||||
2013 | 112,121 | 30,343 | 13,871 |
COMPENSATION | ALL OTHER COMPENSATION (1 and 2) | |||||||||||||||
NAME AND PRINCIPAL POSITION | YEAR | SALARY | BONUS | |||||||||||||
Melvin S. Gordon, Chief Exec. Officer | 2013 | $ | 318,968 | $ | 70,236 | $ | 5,151 | |||||||||
2012 | 318,968 | 100,435 | 4,973 | |||||||||||||
Randy S. Gordon, President | 2013 | 202,070 | 65,481 | 29,330 | ||||||||||||
2012 | 202,070 | 89,444 | 29,360 | |||||||||||||
Tracy W. Schulis, Senior Vice-President and Secretary | 2013 | 202,070 | 70,657 | 44,237 | ||||||||||||
2012 | 202,070 | 94,620 | 43,881 | |||||||||||||
Mark H. Gordon, Executive Vice-President | 2013 | 202,070 | 61,137 | 16,973 | ||||||||||||
2012 | 202,070 | 85,100 | 17,308 | |||||||||||||
Jack M. Laskowitz, Chief Financial Officer | 2013 | 112,121 | 30,343 | 13,871 | ||||||||||||
2012 | 112,121 | 41,960 | 13,766 |
1. | Includes personal use of Company automobiles and PS-58 costs. |
2. | All Other Compensation includes life insurance premiums paid on behalf of the officers in accordance with the Company’s 162 bonus plan along with matching contributions provided for by the Company’s 401(k) Retirement Savings Plan. |
III-3 |
III-2
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
(a) | The following table sets forth as of December 31, |
NAME AND ADDRESS OF BENEFICIAL OWNER | TITLE OF CLASS | AMOUNT & NATURE OF BENEFICIAL OWNERSHIP(1) | PERCENT OF CLASS | |||||||||
Melvin S. Gordon 2611 Bayshore Blvd. Tampa, Florida | Common | 192,742 | (1) | 37.1 | % | |||||||
TOTAL | 192,742 | 37.1 | % |
AMOUNT & NATURE | ||||||||||
NAME AND ADDRESS OF | TITLE OF | OF BENEFICIAL | PERCENT | |||||||
BENEFICIAL OWNER | CLASS | OWNERSHIP (1) | OF CLASS | |||||||
Melvin S. Gordon | Common | |||||||||
2611 Bayshore Blvd. | ||||||||||
Tampa, Florida | 192,742 | (1) | 37.1 | % | ||||||
TOTAL | 192,742 | 37.1 | % |
(1) | Includes 141,760 shares owned by the Helen A. Weaner Family Partnership, Ltd., Mr. Melvin S. Gordon, sole trustee. |
(b) | Beneficial ownership of common stock held by all directors and officers of the Company as a group: |
AMOUNT & NATURE | ||||||||||
TITLE OF | OF BENEFICIAL | PERCENT | ||||||||
CLASS | OWNERSHIP (1) | OF CLASS | ||||||||
Directors and Officers as a Group | Common | 206,109 | 39.7 | % | ||||||
Melvin S. Gordon | Common | 192,742 | (2) | 37.1 | % | |||||
Eugene L. Weiner | Common | 307 | 0 | |||||||
Randy S. Gordon | Common | 7,400 | 1.4 | |||||||
Tracy W. Schulis | Common | 2,060 | 0.4 | |||||||
Mark H. Gordon | Common | 3,600 | 0.7 |
TITLE OF CLASS | AMOUNT & NATURE OF BENEFICIAL OWNERSHIP(1) | PERCENT OF CLASS | ||||||||||
Directors and Officers as a Group | Common | 217,947 | 41.9 | % | ||||||||
Melvin S. Gordon | Common | 192,742 | (2) | 37.1 | % | |||||||
Eugene L. Weiner | Common | 307 | 0 | |||||||||
Randy S. Gordon | Common | 7,400 | 1.4 | |||||||||
Tracy W. Schulis | Common | 8,648 | 1.7 | |||||||||
Mark H. Gordon | Common | 8,600 | 1.7 | |||||||||
Jack M. Laskowitz | Common | 250 | 0 |
(1) | The nature of the beneficial ownership for all shares is sole voting and investment power. |
(2) | Includes 141,760 shares owned by the Helen A. Weaner Family Partnership, Ltd., Mr. Melvin S. Gordon, sole trustee. |
(c) | The Company knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company. |
III-4 |
Item 13. | Certain Relationships, Related Transactions and Director Independence |
None
Item 14. | Principal Accountant Fees and Services |
Audit Fees
The aggregate fees billed for professional services rendered by Warren Averett, LLC for the audits of the Company’s annual consolidated financial statements and review of consolidated financial statements included in the Company’s Forms 10-Q for fiscal years 2014 and 2013 were $134,597 and 2012 were $151,448, and $132,528, respectively. At the time of this filing, not all audit fees had been billed for the 20132014 fiscal year.
All Other Fees
During 2013 and 2012, Warren Averett, LLC provided assistance with a claim that the Company filed under the court-approved Deepwater Horizon Economic and Property Damages Settlement. Fees billed for these services were $0 and $24,758 for the years ended December 31, 2013 and 2012, respectively.
There were no other fees billed by Warren Averett, LLC for other products and services provided during the years ended December 31, 20132014 and 2012.2013.
The Company has not formally designated an audit committee and as a result, the entire board of directors performs the duties of an audit committee. It’s the Board’s policy to pre-approve all services provided by our auditors.
III-3
Item 15.Exhibits and Financial Statement Schedules
Item 15. | Exhibits and Financial Statement Schedules |
Exhibit (3) – Articles of Incorporation and By-Laws (Incorporated by reference from Exhibits to Paradise, Inc.’s Annual Report on Form 10-KSB for the year ended December 31, 1993, filed on March 31, 1994)
Exhibit (11) – Statement Re: Computation of Per Share Earnings (Incorporated by reference from Exhibits to page II-10 of this Form 10-K)
Exhibit (31.1) – Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith)
Exhibit (31.2) – Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith)
Exhibit (32.1) – Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (filed herewith)
Exhibit (32.2) – Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith)
101.INS XBRL Instance Document (filed herewith).
101.SCH XBRL Taxonomy Schema (filed herewith).
101.CAL XBRL Taxonomy Extension Calculation Linkbase (filed herewith).
101.DEF XBRL Taxonomy Extension Definition Linkbase (filed herewith).
101.LAB XBRL Taxonomy Extension Label Linkbase (filed herewith).
101.PRE XBRL Taxonomy Extension Presentation Linkbase (filed herewith).
III-5 |
III-4
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
March | PARADISE, INC. | |
Date | ||
/s/ Melvin S. Gordon | ||
Melvin S. Gordon | ||
CEO, Chairman and Director |
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 | CEO, Chairman | March 31, 2015 | ||
Melvin S. Gordon | and Director | Date | ||
/s/ Eugene L. Weiner | Vice-President | March 31, 2015 | ||
Eugene L. Weiner | Date | |||
/s/ Randy S. Gordon | President and Director | March 31, 2015 | ||
Randy S. Gordon | Date | |||
/s/ Tracy W. Schulis | Senior Vice-President, | March 31, 2015 | ||
Tracy W. Schulis | Secretary and Director | Date | ||
/s/ Mark H. Gordon | Executive Vice-President | March 31, 2015 | ||
Mark H. Gordon | and Director | Date | ||
/s/ Jack M. Laskowitz | CFO and Treasurer | March 31, 2015 | ||
Jack M. Laskowitz | Date |
III-6 |
III-5