FORM 10-Q
______________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
x | Quarterly report pursuant to section 13 or 15(d) of the Securities Act of 1934. |
For the quarterly period ended September 30, 2011
or
¨ | Transition report pursuant to section 13 or 15(d) of the Securities Act of 1934. |
Commission File No. 0-3026
__________________
PARADISE, INC.
________________
INCORPORATED IN FLORIDA
I.R.S. EMPLOYER IDENTIFICATION NO. 59-1007583
1200 DR. MARTIN LUTHER KING, JR. BLVD.,
PLANT CITY, FLORIDA 33563
(813) 752-1155
__________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesx No¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Webweb site, if any, every Interactive Datadata File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yesx No¨ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large accelerated filer | ¨ | Accelerated filer | ¨ | |
Non-accelerated filer | ¨ | Smaller reporting company | x |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes¨Nox
The number of shares outstanding of each of the issuer’s classes of common stock:stock as of May 15, 2012 was 519,600 shares.
Outstanding as of September 30, | ||||||||
Class | 2011 | 2010 | ||||||
Common Stock | ||||||||
$0.30 Par Value | 519,600 Shares |
PARADISE, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2011
INDEX
PAGE | ||
PART I. | FINANCIAL INFORMATION | |
ITEM 1. | ||
CONSOLIDATED BALANCE SHEETS: | ||
Assets | ||
As of | 2 | |
Liabilities and Stockholders’ Equity | ||
As of | 3 | |
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED): | ||
For the three-month periods ended | 4 | |
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED): | ||
For the | ||
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) | ||
ITEM 2. | ||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL | ||
CONDITION AND RESULTS OF OPERATIONS | ||
ITEM 3. | ||
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK – N/A | ||
ITEM 4. | ||
CONTROLS AND PROCEDURES | ||
PART II. | OTHER INFORMATION | |
ITEMS 1 – 6. | ||
SIGNATURES | 14 |
PARADISE, INC.
COMMISSION FILE NO. 0-3026
PART I.FINANCIAL INFORMATION
Item 1. Financial Statements
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF | AS OF | |||||||||||
SEPTEMBER 30, | AS OF | SEPTEMBER 30, | ||||||||||
2011 | DECEMBER 31, | 2010 | ||||||||||
(UNAUDITED) | 2010 | (UNAUDITED) | ||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash and Unrestricted Demand Deposits | $ | 95,564 | $ | 4,772,056 | $ | 789,042 | ||||||
Accounts Receivable, | ||||||||||||
Less, Allowances of $0 (09/30/11), $1,052,862 (12/31/10) and $0 (09/30/10) | 6,461,091 | 3,619,735 | 5,889,664 | |||||||||
Inventories: | ||||||||||||
Raw Materials | 2,783,301 | 1,961,627 | 2,847,415 | |||||||||
Work in Process | 370,161 | 864,689 | 380,540 | |||||||||
Finished Goods | 6,368,290 | 3,220,268 | 7,585,845 | |||||||||
Deferred Income Tax Asset | 225,942 | 225,942 | 279,545 | |||||||||
Income Tax Refund Receivable | 221,446 | - | 251,728 | |||||||||
Prepaid Expenses and Other Current Assets | 400,786 | 348,407 | 502,998 | |||||||||
Total Current Assets | 16,926,581 | 15,012,724 | 18,526,777 | |||||||||
Property, Plant and Equipment, Less, Accumulated Depreciation of $18,381,081 (09/30/11), $17,998,537 (12/31/10) and $17,861,158 (09/30/10) | 4,293,875 | 4,338,717 | 4,443,563 | |||||||||
Goodwill | 413,280 | 413,280 | 413,280 | |||||||||
Intangible Asset, Net | 597,104 | 691,517 | 722,988 | |||||||||
Other Assets | 228,163 | 183,609 | 193,131 | |||||||||
TOTAL ASSETS | $ | 22,459,003 | $ | 20,639,847 | $ | 24,299,739 |
AS OF | AS OF | AS OF | ||||||||||
MARCH 31, | DECEMBER 31, | MARCH 31, | ||||||||||
2012 | 2011 | 2011 | ||||||||||
(UNAUDITED) | (UNAUDITED) | |||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash | $ | 5,532,943 | $ | 7,468,908 | $ | 4,464,427 | ||||||
Accounts Receivable, | ||||||||||||
Less, Allowances of $0 (03/31/12), | ||||||||||||
$1,003,779 (12/31/11) and $0 (03/31/11) | 1,926,687 | 2,579,362 | 2,043,199 | |||||||||
Inventories: | ||||||||||||
Raw Materials | 3,766,404 | 2,214,455 | 3,806,968 | |||||||||
Work in Process | 7,449 | 558,899 | 22,189 | |||||||||
Finished Goods | 4,951,215 | 3,423,163 | 4,445,682 | |||||||||
Deferred Income Tax Asset | 234,912 | 234,912 | 294,721 | |||||||||
Prepaid Expenses and Other Current Assets | 195,868 | 295,413 | 157,709 | |||||||||
Total Current Assets | 16,615,478 | 16,775,112 | 15,234,895 | |||||||||
Property, Plant and Equipment, | ||||||||||||
Less, Accumulated Depreciation of | ||||||||||||
$18,628,310 (03/31/12), $18,505,964 (12/31/11) | ||||||||||||
and $18,130,547 (03/31/11) | 4,072,874 | 4,184,046 | 4,280,263 | |||||||||
Goodwill | 413,280 | 413,280 | 413,280 | |||||||||
Customer Base and Non-Compete Agreement | 534,161 | 565,632 | 660,046 | |||||||||
Other Assets | 269,622 | 222,663 | 183,261 | |||||||||
TOTAL ASSETS | $ | 21,905,415 | $ | 22,160,733 | $ | 20,771,745 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
AS OF | AS OF | |||||||||||
SEPTEMBER 30, | AS OF | SEPTEMBER 30, | ||||||||||
2011 | DECEMBER 31, | 2010 | ||||||||||
(UNAUDITED) | 2010 | (UNAUDITED) | ||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Notes and Trade Acceptances Payable | $ | 1,118,364 | $ | 247,836 | $ | 4,337,184 | ||||||
Current Portion of Long-Term Debt | - | - | 4,475 | |||||||||
Accounts Payable | 980,953 | 304,657 | 432,872 | |||||||||
Accrued Liabilities | 755,553 | 1,235,523 | 815,132 | |||||||||
Income Taxes Payable | 363,382 | 152,009 | 246,987 | |||||||||
Total Current Liabilities | 3,218,252 | 1,940,025 | 5,836,650 | |||||||||
DEFERRED INCOME TAX LIABILITY | 147,354 | 147,354 | 209,478 | |||||||||
Total Liabilities | 3,365,606 | 2,087,379 | 6,046,128 | |||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Common Stock: $0.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued, 519,600 (09/30/11 and 12/31/10) and 519,350 (09/30/10) Shares Outstanding | 174,928 | 174,928 | 174,928 | |||||||||
Capital in Excess of Par Value | 1,288,793 | 1,288,793 | 1,288,793 | |||||||||
Retained Earnings | 18,184,140 | 17,643,211 | 17,348,054 | |||||||||
Accumulated Other Comprehensive Loss | (281,245 | ) | (281,245 | ) | (281,245 | ) | ||||||
Treasury Stock, at Cost, 63,494 (09/30/11 and 12/31/10) and 63,744 (09/30/10) Shares | (273,219 | ) | (273,219 | ) | (276,919 | ) | ||||||
Total Stockholders’ Equity | 19,093,397 | 18,552,468 | 18,253,611 | |||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 22,459,003 | $ | 20,639,847 | $ | 24,299,739 |
AS OF | AS OF | AS OF | ||||||||||
MARCH 31, | DECEMBER 31, | MARCH 31, | ||||||||||
2012 | 2011 | 2011 | ||||||||||
(UNAUDITED) | (UNAUDITED) | |||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||
Letter of Credit | $ | 631,230 | $ | 313,246 | $ | 861,853 | ||||||
Accounts Payable | 769,648 | 358,851 | 954,206 | |||||||||
Accrued Liabilities | 531,387 | 1,218,289 | 420,038 | |||||||||
Income Taxes Payable | 47,366 | 370,678 | - | |||||||||
Total Current Liabilities | 1,979,631 | 2,261,064 | 2,236,097 | |||||||||
DEFERRED INCOME TAX LIABILITY | 165,891 | 165,891 | 147,354 | |||||||||
Total Liabilities | 2,145,522 | 2,426,955 | 2,383,451 | |||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||
Common Stock: $0.30 Par Value, | ||||||||||||
2,000,000 Shares Authorized, | ||||||||||||
583,094 Shares Issued, | ||||||||||||
519,600 Shares Outstanding | 174,928 | 174,928 | 174,928 | |||||||||
Capital in Excess of Par Value | 1,288,793 | 1,288,793 | 1,288,793 | |||||||||
Retained Earnings | 18,850,636 | 18,824,521 | 17,479,037 | |||||||||
Accumulated Other Comprehensive Loss | (281,245 | ) | (281,245 | ) | (281,245 | ) | ||||||
Treasury Stock, at Cost, | ||||||||||||
63,494 Shares | (273,219 | ) | (273,219 | ) | (273,219 | ) | ||||||
Total Stockholders’ Equity | 19,759,893 | 19,733,778 | 18,388,294 | |||||||||
TOTAL LIABILITIES AND | ||||||||||||
STOCKHOLDERS’ EQUITY | $ | 21,905,415 | $ | 22,160,733 | $ | 20,771,745 |
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE THREE MONTHS ENDED | ||||||||
SEPTEMBER 30, | ||||||||
2011 | 2010 | |||||||
Net Sales | $ | 9,446,944 | $ | 8,391,798 | ||||
Costs and Expenses: | ||||||||
Cost of Goods Sold (excluding Depreciation) | 6,925,924 | 5,841,669 | ||||||
Selling, General and Administrative Expense | 1,154,877 | 1,042,035 | ||||||
Depreciation and Amortization | 163,336 | 173,780 | ||||||
Interest Expense | 8,344 | 22,712 | ||||||
Total Costs and Expenses | 8,252,481 | 7,080,196 | ||||||
Income from Operations | 1,194,463 | 1,311,602 | ||||||
Other Income (Loss) | (23,906 | ) | (762 | ) | ||||
Income from Operations Before Provision for Income Taxes | 1,170,557 | 1,310,840 | ||||||
Provision for Income Taxes | 444,813 | 498,119 | ||||||
Net Income | $ | 725,744 | $ | 812,721 | ||||
Income per Common Share | $ | 1.40 | $ | 1.56 |
FOR THE THREE MONTHS ENDED | ||||||||
MARCH 31, | ||||||||
2012 | 2011 | |||||||
Net Sales | $ | 3,268,870 | $ | 2,618,939 | ||||
Costs and Expenses: | ||||||||
Cost of Goods Sold | 2,287,495 | 2,112,351 | ||||||
Selling, General and Administrative Expense | 805,525 | 805,860 | ||||||
Amortization Expense | 35,971 | 35,790 | ||||||
Total Costs and Expenses | 3,128,991 | 2,954,001 | ||||||
Income (Loss) from Operations | 139,879 | (335,062 | ) | |||||
Other Income | 76,844 | 154,069 | ||||||
Income (Loss) Before Income Taxes | 216,723 | (180,993 | ) | |||||
Income Tax (Expense) Benefit | (86,688 | ) | 68,779 | |||||
Net Income (Loss) | $ | 130,035 | $ | (112,214 | ) | |||
Income (Loss) per Common Share (Basic and Diluted) | $ | 0.25 | $ | (0.22 | ) | |||
Dividend per Common Share | $ | 0.20 | $ | 0.10 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE NINE MONTHS ENDED | ||||||||
SEPTEMBER 30, | ||||||||
2011 | 2010 | |||||||
Net Sales | $ | 14,217,580 | $ | 13,118,276 | ||||
Costs and Expenses: | ||||||||
Cost of Goods Sold (excluding Depreciation) | 10,264,721 | 9,334,451 | ||||||
Selling, General and Administrative Expense | 2,666,303 | 2,602,380 | ||||||
Depreciation and Amortization | 496,638 | 535,590 | ||||||
Interest Expense | 8,344 | 25,847 | ||||||
Total Costs and Expenses | 13,436,006 | 12,498,268 | ||||||
Income from Operations | 781,574 | 620,008 | ||||||
Other Income | 174,695 | 29,958 | ||||||
Income from Operations Before Provision for Income Taxes | 956,269 | 649,966 | ||||||
Provision for Income Taxes | 363,383 | 246,987 | ||||||
Net Income | $ | 592,886 | $ | 402,979 | ||||
Income per Common Share | $ | 1.14 | $ | 0.78 | ||||
Dividend per Common Share | $ | 0.10 | $ | 0.05 |
FOR THE THREE MONTHS ENDED | ||||||||
MARCH 31, | ||||||||
2012 | 2011 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income (Loss) | $ | 130,035 | $ | (112,214 | ) | |||
Adjustments to Reconcile Net Income (Loss) to Net Cash | ||||||||
Used in Operating Activities: | ||||||||
Depreciation and Amortization | 158,315 | 167,798 | ||||||
Provision for Deferred Income Taxes | - | (68,779 | ) | |||||
Decrease (Increase) in: | ||||||||
Accounts Receivable | 652,675 | 1,576,537 | ||||||
Inventories | (2,528,551 | ) | (2,228,255 | ) | ||||
Prepaid Expenses | 99,545 | 190,697 | ||||||
Other Assets | (51,459 | ) | (3,971 | ) | ||||
Increase (Decrease) in: | ||||||||
Accounts Payable | 410,798 | 649,551 | ||||||
Accrued Expense | (790,822 | ) | (867,446 | ) | ||||
Income Taxes Payable | (323,312 | ) | (152,009 | ) | ||||
Net Cash Used in Operating Activities | (2,242,776 | ) | (848,091 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of Property and Equipment | (11,173 | ) | (73,555 | ) | ||||
Net Cash Used in Investing Activities | (11,173 | ) | (73,555 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net Proceeds from Letter of Credit | 317,984 | 614,017 | ||||||
Net Cash Provided by Financing Activities | 317,984 | 614,017 | ||||||
NET DECREASE IN CASH | (1,935,965 | ) | (307,629 | ) | ||||
CASH, AT BEGINNING OF PERIOD | 7,468,908 | 4,772,056 | ||||||
CASH, AT END OF PERIOD | $ | 5,532,943 | $ | 4,464,427 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for: | ||||||||
Income Tax | $ | 410,000 | $ | 128,000 | ||||
Noncash financing activity: | ||||||||
Dividends Declared | $ | 103,920 | $ | 51,960 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
PARADISE, INC. AND SUBSIDIARIES
FOR THE NINE MONTHS ENDED | ||||||||
SEPTEMBER 30, | ||||||||
2011 | 2010 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Income | $ | 592,886 | $ | 402,979 | ||||
Adjustments to Reconcile Net Income to Net Cash | ||||||||
Used in Operating Activities: | ||||||||
Depreciation and Amortization | 496,638 | 535,590 | ||||||
Loss on the Sale of Marketable Equity Securities | - | 34,221 | ||||||
Decrease (Increase) in: | ||||||||
Accounts Receivable | (2,841,356 | ) | (4,099,758 | ) | ||||
Inventories | (3,475,169 | ) | (2,607,566 | ) | ||||
Prepaid Expenses | (52,379 | ) | (139,804 | ) | ||||
Other Assets | (57,589 | ) | (5,151 | ) | ||||
Income Tax Refund Receivable | (221,446 | ) | (251,728 | ) | ||||
Increase (Decrease) in: | ||||||||
Accounts Payable | 676,296 | (353,379 | ) | |||||
Accrued Expense | (479,970 | ) | (57,140 | ) | ||||
Income Taxes Payable | 211,373 | 209,957 | ||||||
Net Cash Used in Operating Activities | (5,150,716 | ) | (6,331,779 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of Property and Equipment | (344,344 | ) | (122,648 | ) | ||||
Proceeds from the Sale of Marketable Equity Securities | - | 111,350 | ||||||
Net Cash Used in Investing Activities | (344,344 | ) | (11,298 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net Proceeds of Short-Term Debt | 870,528 | 4,150,265 | ||||||
Principal Payments of Long-Term Debt | - | (7,241 | ) | |||||
Dividends Paid | (51,960 | ) | (25,968 | ) | ||||
Net Cash Provided by Financing Activities | 818,568 | 4,117,056 | ||||||
NET DECREASE IN CASH | (4,676,492 | ) | (2,226,021 | ) | ||||
CASH, AT BEGINNING OF PERIOD | 4,772,056 | 3,015,063 | ||||||
CASH, AT END OF PERIOD | $ | 95,564 | $ | 789,042 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 8,344 | $ | 25,847 | ||||
Income Tax | 371,446 | 276,663 | ||||||
Net Supplemental Cash Flows | $ | 379,790 | $ | 302,510 |
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 | BASIS OF PRESENTATION |
The accompanying unaudited consolidated financial statements of Paradise, Inc. (the “Company”) have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements.
The information furnished herein reflects all adjustments and accruals that management believes is necessary to fairly state the operating results for the respective periods. The notes to the unaudited consolidated financial statements should be read in conjunction with the notes to the consolidated financial statements contained in the Company’s Form 10-K for the year ended December 31, 2010.2011. The Company’s management believes that the disclosures are sufficient for interim financial reporting purposes.
Consumer demand for glace’ fruit product is traditionally strongest during the Thanksgiving and Christmas season. Almost 80% of glace’ fruit product sales are recorded during an eight to ten week period beginning in mid September. Therefore, the operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the current year.
Certain minor reclassifications have been made to the consolidated unaudited statements of operations for the quarter ended March 31, 2011 to conform to the classifications used for the quarter ended March 31, 2012.
NOTE 2 | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS |
In May 2011, the FASB issued ASU 2011-04Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.The ASU expands ASC Topic 820’s existing disclosure requirements for fair value measurements and makes other amendments that could change how the fair value measurement guidance in ASC Topic 820 is applied. The ASU is effective for the Company for the interim and annual periods beginning after December 15, 2011. The adoption of this ASU isdid not expected to have an impact on the Company’s consolidated financial statements or disclosures.
In June 2011, the FASB issued ASU 2011-05Presentation of Comprehensive Income,which revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The ASU is effective for the Company for the interim and annual periods beginning after December 15, 2011. The adoption of this ASU isdid not expected to have an impact on the Company’s consolidated financial statements or disclosures.
Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
NOTE 3 | EARNINGS (LOSS) PER COMMON SHARE |
Basic and diluted earnings (loss) per common share assuming no dilution, isare based on the weighted average number of shares outstanding during the period: (519,600 asand assumed to be outstanding of September 30, 2011 and 519,350 as of September 30, 2010).
PARADISE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 | BUSINESS SEGMENT DATA |
The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows:
Business Segment | Operation |
Fruit | Production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, 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. |
September 30, | September 30, | |||||||
2011 | 2010 | |||||||
Net Sales in Each Segment | ||||||||
Fruit: | ||||||||
Sales to Unaffiliated Customers | $ | 8,700,855 | $ | 7,589,776 | ||||
Molded Plastics: | ||||||||
Sales to Unaffiliated Customers | 5,516,725 | 5,528,500 | ||||||
Net Sales | $ | 14,217,580 | $ | 13,118,276 |
March 31, | March 31, | |||||||
2012 | 2011 | |||||||
Net Sales in Each Segment | ||||||||
Fruit: | ||||||||
Sales to Unaffiliated Customers | $ | 876,809 | $ | 557,403 | ||||
Molded Plastics: | ||||||||
Sales to Unaffiliated Customers | 2,392,061 | 2,061,536 | ||||||
Net Sales | $ | 3,268,870 | $ | 2,618,939 |
For the ninethree month period ended September 30,March 31, 2012 and 2011, and 2010, sales of frozen strawberry products totaled $323,495$465,887 and $192,797,$293,421, respectively.
The Company does not account for intersegment transfers as if the transfers were to third parties.
The Company does not prepare operating profit or loss information on a segment basis for internal use, until the end of each year. Due to the seasonal nature of the fruit segment, management believes that it is not practical to prepare this information for interim reporting purposes. Therefore, reporting is not required by accounting principles generally accepted in the United States of America.
PARADISE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
September 30, | September 30, | |||||||
2011 | 2010 | |||||||
Identifiable Assets of Each Segment are Listed Below: | ||||||||
Fruit | $ | 15,379,816 | $ | 16,619,139 | ||||
Molded Plastics | 5,106,533 | 4,932,116 | ||||||
Identifiable Assets | 20,486,349 | 21,551,255 | ||||||
General Corporate Assets | 1,972,654 | 2,748,484 | ||||||
Total Assets | $ | 22,459,003 | $ | 24,299,739 |
NOTE 4 | BUSINESS SEGMENT DATA (CONTINUED) |
March 31, | March 31, | |||||||
2012 | 2011 | |||||||
Identifiable Assets of Each Segment | ||||||||
are Listed Below: | ||||||||
Fruit | $ | 9,739,581 | $ | 9,797,282 | ||||
Molded Plastics | 5,182,183 | 5,144,684 | ||||||
Identifiable Assets | 14,921,764 | 14,941,966 | ||||||
General Corporate Assets | 6,983,651 | 5,829,779 | ||||||
Total Assets | $ | 21,905,415 | $ | 20,771,745 |
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.
PARADISE, INC.
COMMISSION FILE NO. 0-3026
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Forward–Looking Statements
This Quarterly Report on Form 10-Q 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 the purpose 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”, “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.
Overview
Paradise, Inc.’s main business segment, glace’ fruit, a prime ingredient of fruitcakes and other holiday confections, represented 68.1%68.9% of total net sales during 2010.2011. These products are sold to manufacturing bakers, institutional users, supermarkets and other retailers throughout the country. Consumer demand for glace’ fruit product is traditionally strongest during the Thanksgiving and Christmas season. Historically,Almost 80% of glace’ fruit product sales are recorded from theduring an eight to ten weeksweek period beginning in mid September.
Since the majority of the Company’s customers require delivery of glace’ candied fruit products during this relatively short period of time, Paradise, Inc. must operate at consistent levels of production from as early as January through the middle of November of each year in order to meet peak demand.demands. Furthermore, the Company must make substantial borrowings of short-term working capital to cover the cost of raw materials, factory overhead and labor expense associated with production for inventory. This combination of building and financing inventories during the year, without the opportunity to record any significant fruit product income, results in the generation of operating losses well into the third quarter of each year. Therefore, it is the opinion of management that any meaningful forecastforecasts of annual net sales or profit levels require analysis of a full year’s operations.
In addition, comparison of current quarterly results to the preceding quarter produces an incomplete picture on the Company’s performance due to year-to-year changes in production schedules, seasonal harvests and availability of raw materials, and in the timing of customer orders and shipments. Thus, the discussion of information presented within this report is focused on the review of the Company’s current year-to-date results as compared to the similar period last year.
Paradise, Inc.’s other business segment, Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc., produces producing custom molding products, that areis not subject to the seasonality of the glace’ fruit business. This segment represents all injection molding and thermoforming operations, including the packaging for the Company’s fruit products. Only sales to unaffiliated customers are reported.
PARADISE, INC.
COMMISSION FILE NO. 0-3026
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
The First Nine Months
Paradise, Inc.’s fruit segment net sales increased 14.6% compared to the similar reporting period last year, primarily due to timing differences in the receipt of customer orders and corresponding shipping dates for delivery of the Company’s retail glace’ fruit products. Paradise, Inc. recognizes revenue based upon shipment of goods to its customers. Changes in shipping dates requested by retail glace’ customers between interim reporting dates will lead to fluctuations in net sales. Paradise, Inc. has been consistent in previous filings to disclose that interim filings are not reliable indicators of year-end results. The Company must wait until all orders and re-orders for glace’ fruit products leading up and through the holiday season have been fulfilled before any determination of profitability is ascertained.
Paradise Plastics, Inc.’s sales to unaffiliated customers for the first quarter of 2011 remained consistent with2012 increased to $2,392,061 compared to $2,061,536 for the similar reporting period for 2010of 2011, representing a 16.0% increase. Plastics sales continued to improve as increased orders from industries as diverse as medical supplies, food processing and aerospace offset decreases in plastics orders received from industries relatedand shipped to existing long-term customers within the housing market.
Consolidated cost of sales as a percentage of net sales increased 1.0% during the first nine months of 2011 compared to the similar reporting period for 2010 as increases in the cost of raw fruit commodities and freight-in expenses absorbed from the Paradise, Inc.’s suppliers outpaced the Company’s ability to past these increases to its customers. Inventory as of September 30, 2011 decreased $1,292,048 compared to inventory levels as of September 30, 2010. This continues a trend in the Company’s effort to reduce its overall inventory position as Paradise, Inc. finances the majority of its raw materials with short-term borrowing from its revolving line of credit. For the nine months ended September 30, 2011, interest expense incurred related to inventory purchases equaled $8,344 compared to $25,847 for the similar reporting period for 2010.
Selling, general & administrative expenses totaled $805,525 for the first quarter of 2012 compared to $805,860 for the similar reporting period of 2011 as increases in cost to attend various trade shows were offset by decreases in expenses related to professional fees for legal and audit services.
Other Significant Items
Other Income for the first quarter of 2012 totaled $76,844 and was primarily related to sales of recycled plastics materials. In comparison, for the similar reporting period of 2011, Other Income totaled $154,069. This amount, as previously filed in the Company’s first quarter filing for 2011, was related to the receipt of $150,000 from a former supplier to settle a disagreement dating back to September, 2004. All legal expenses incurred by Paradise, Inc. to settle this matter were paid during the past twelve months exceededfirst quarter of 2011.
Inventory as of March 31, 2012 was $8,725,068 compared to $8,274,839 representing an increase of $450,229 or 5.4% and is primarily due to a timing difference as the amountreceipt of new assets placed into service.
PARADISE, INC.
COMMISSION FILE NO. 0-3026
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Other Significant Items (Continued)
We finance our ongoing operations primarily with cash provided by our operating activities. Our principal sources of liquidity are our cash flows provided by operating activities, our existing cash, and a line of credit facility. At March 31, 2012 and December 31, 2011, we had $5.5 million and $7.5 million, respectively, in cash. Additionally, we have 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 50% of the Company’s eligible inventory, of which $631,230 and $313,246 was outstanding at March 31, 2012 and December 31, 2011, respectively. The line of credit agreement expires in June 2013. Net cash used in operating activities decreased from $848,091 for the quarter ended March 31, 2011 to $2,242,776 for the quarter ended March 31, 2012. The primary reasons for this decrease are as follows; income tax payments made during the first quarter of 2012 were $280,000 greater than the first quarter of 2011; payments for the purchase of inventory increased $300,296 and the timing of Accounts Receivable payments received from Paradise, Inc.’s customers during the first quarter of 2012 were $925,365 less than the similar reporting period of 2011. Net cash provided by financing activities decreased from $614,017 for the quarter ended March 31, 2011 to $317,984 for the quarter ended March 31, 2012. This change is primarily due to timing of pineapple purchases.
Summary
Paradise, Inc.’s consolidated net sales increased 8.4% for the first ninethree months of 2011ended March 31, 2012 totaled $3,268,870 compared to $2,618,939 for the similar reporting period of 2011, representing an increase of $649,931. This increase is the result of the following three factors. First, tolling fees earned for 2010the processing of various strawberry products on behalf of a local Florida distributor increased $172,466. Secondly, gross bulk fruit sales to manufacturing bakeries and supermarkets increased $81,135 and thirdly, plastics sales continued to rebound from the recent downturn in the housing market increased $330,525. However, as timing differences resultedmentioned in a greater amountall previous first quarter filings, with less than 5% of purchase orders received and shipped foranticipated annual glace’ fruit orders from existing long term customers during September, 2011 compared to October, 2010. However, with more than 80% of Paradise, Inc.’s annual fruit segment net sales scheduledyet to commence in mid September and continue throughoutbe realized as of the fourth quarterdate of 2011,this filing, no meaningfulreasonable estimate or forecast of consolidated financial analysisperformance may be developed fromdetermined at this interim filing. As stated in previous interim filings, only a full year’s reporting will provide the necessary information to determine the Company’s profitability.
Critical Accounting Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make assessments, estimates and assumptions that affect the amounts reported in the consolidated financial statements. We evaluate the accounting policies and estimates used to prepare the consolidated financial statements on an ongoing basis. Critical accounting estimates are those that require management’s most difficult, complex, or subjective judgments and have the most potential to impact our financial position and operating results. For a detailed discussion of our critical accounting estimates, see our Annual Report on Form 10-K for the year ended December 31, 2010.2011. There have been no material changes to our critical accounting estimates during the ninethree months ended September 30, 2011.March 31, 2012.
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PARADISE, INC.
COMMISSION FILE NO. 0-3026
PART I. | FINANCIAL INFORMATION |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued) |
Recently Issued Accounting Pronouncements
In May 2011, the FASB issued new guidance that expands existing disclosure requirements for fair value measurements and makes other amendments that could change how the fair value measurement guidance is applied. The guidance is effective for us for the interim and annual periods beginning after December 15, 2011. The adoption of this guidance isdid not expected to have an impact on our operations.
In June 2011, the FASB issued new guidance that revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The guidance is effective for us for the interim and annual periods beginning after December 15, 2011. The adoption of this guidance isdid not expected to have an impact on our operations.
We do not believe that other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the Securities and Exchange Commission will have a material impact on the Company’s present or future consolidated financial statements.
Item 4. | Controls and Procedures |
The Company’s Chief Executive Officer and Chief Financial Officer have, within 90 days of the filing date of this quarterly report, evaluated the Company’s disclosure controls and procedures. Based on their evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded, as of September 30, 2011,March 31, 2012, that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the applicable Securities and Exchange Commission rules and forms. During the year ended December 31, 2010, the Company identified a weakness in internal control over the timing of issuing credit memos for products returned into inventory. Procedures were established during the nine monthsquarter ended September 30,March 31, 2011 to ensure the timeliness of issuing credit memos when products are returned. There were no other changes in the Company’s internal controls over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. The most recent evaluation of these controls by the Company’s Chief Executive Officer and Chief Financial Officer did not identify any additional deficiencies or weaknesses in the Company’s internal controls over financial reporting; therefore, no corrective actions were taken.
PARADISE, INC.
COMMISSION FILE NO. 0-3026
OTHER INFORMATION |
Item 1. | Legal Proceedings – N/A |
Item 1A. | Risk Factors – N/A |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds – N/A |
Item 3. | Defaults Upon Senior Securities – N/A |
Item 4. | Mine Safety Disclosures – N/A |
Item 5. | Other Information – N/A |
Exhibits and Reports on Form 8-K |
(a) | Exhibits |
Exhibit Number | Description |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
(b) | Reports on Form 8-K. |
None.
PARADISE, INC.
COMMISSION FILE NO. 0-3026
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
PARADISE, INC. | ||||
A Florida Corporation | ||||
/s/ Melvin S. Gordon | Date: | |||
Melvin S. Gordon | ||||
Chief Executive Officer and Chairman | ||||
/s/ Jack M. Laskowitz | Date: | |||
Jack M. Laskowitz | ||||
Chief Financial Officer and Treasurer |
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