FORM 10-Q

______________

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

xQuarterly report pursuant to section 13 or 15(d) of the Securities Act of 1934.

For the quarterly period ended September 30, 2012

March 31, 2013

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 web site, if any, every Interactive data 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¨

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 companyx

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 as of November 14, 2012May 15, 2013 was 519,600 shares.

PARADISE, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2012

MARCH 31, 2013

INDEX

  PAGE
PART I.FINANCIAL INFORMATION 
   
 ITEM 1. 
   
 CONSOLIDATED BALANCE SHEETS: 
   
 Assets
   
 As of September 30, 2012March 31, 2013 (Unaudited), December 31, 20112012 and September 30, 2011March 31, 2012 (Unaudited)2
   
 Liabilities and Stockholders’ Equity
   
 As of September 30, 2012March 31, 2013 (Unaudited), December 31, 20112012 and September 30, 2011March 31, 2012 (Unaudited)3
   
 CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED): 
   
 For the three-month periods ended September 30,March 31, 2013 and 2012 and 20114
   
 For the nine-month periods ended September 30, 2012 and 20115
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED): 
   
 For the nine-monththree-month periods ended September 30,March 31, 2013 and 2012 and 201165
   
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)76 – 98
   
 ITEM 2. 
   
 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS109 – 1312
   
 ITEM 3. 
   
 QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK – N/A 1312
ITEM 4. 
   
 ITEM 4.CONTROLS AND PROCEDURES12
PART II.OTHER INFORMATION 
   
 CONTROLS AND PROCEDURESITEMS 1 – 6.13
   
PART II.OTHER INFORMATION
ITEMS 1 – 6.SIGNATURES14
SIGNATURES15


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, 
  2012  DECEMBER 31,  2011 
  (UNAUDITED)  2011  (UNAUDITED) 
          
ASSETS            
             
CURRENT ASSETS:            
             
Cash $78  $7,468,908  $95,564 
Accounts Receivable, Less, Allowances of $0 (09/30/12), $1,003,779 (12/31/11) and $0 (09/30/11)  8,087,910   2,579,362   6,461,091 
Inventories:            
Raw Materials  3,627,009   2,214,455   2,783,301 
Work in Process  390,446   558,899   370,161 
Finished Goods  7,645,579   3,423,163   6,368,290 
Deferred Income Tax Asset  234,912   234,912   225,942 
Income Tax Refund Receivable  -      221,446 
Prepaid Expenses and Other Current Assets  480,835   295,413   400,786 
             
Total Current Assets  20,466,769   16,775,112   16,926,581 
             
Property, Plant and Equipment, Less, Accumulated Depreciation of $18,860,033 (09/30/12), $18,505,964 (12/31/11) and $18,381,081 (09/30/11)  4,036,833   4,184,046   4,293,875 
Goodwill  413,280   413,280   413,280 
Customer Base and Non-Compete Agreement  471,219   565,632   597,104 
Other Assets  233,205   222,663   228,163 
             
TOTAL ASSETS $25,621,306  $22,160,733  $22,459,003 

 
 
AS OF
 
 
 
AS OF
 
 
 
MARCH 31,
 
AS OF
 
MARCH 31,
 
 
 
2013
 
DECEMBER 31,
 
2012
 
 
 
(UNAUDITED)
 
2012
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash
 
$
4,816,706
 
$
6,384,087
 
$
5,532,943
 
Accounts Receivable, Less, Allowances of $0
   (03/31/13),$1,562,556 (12/31/12) and $0 (03/31/12)
 
 
1,742,535
 
 
1,893,160
 
 
1,926,687
 
Inventories:
 
 
 
 
 
 
 
 
 
 
Raw Materials and supplies
 
 
4,304,019
 
 
2,499,430
 
 
3,766,404
 
Work in Process
 
 
108,946
 
 
561,043
 
 
7,449
 
Finished Goods
 
 
6,978,282
 
 
5,795,906
 
 
4,951,215
 
Income Tax Receivable
 
 
150,219
 
 
225,794
 
 
-
 
Deferred Income Tax Asset
 
 
152,250
 
 
152,250
 
 
234,912
 
Prepaid Expenses and Other Current Assets
 
 
150,948
 
 
296,728
 
 
195,868
 
 
 
 
 
 
 
 
 
 
 
 
Total Current Assets
 
 
18,403,905
 
 
17,808,398
 
 
16,615,478
 
 
 
 
 
 
 
 
 
 
 
 
Property, Plant and Equipment, Less, Accumulated Depreciation
   of $18,569,676 (03/31/13), $18,454,410 (12/31/12)and
   $18,628,310 (03/31/12)
 
 
3,984,192
 
 
3,946,124
 
 
4,072,874
 
Goodwill
 
 
413,280
 
 
413,280
 
 
413,280
 
Customer Base and Non-Compete Agreement
 
 
408,276
 
 
439,747
 
 
534,161
 
Other Assets
 
 
253,477
 
 
281,935
 
 
269,622
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL ASSETS
 
$
23,463,130
 
$
22,889,484
 
$
21,905,415
 
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

  AS OF     AS OF 
  SEPTEMBER 30,  AS OF  SEPTEMBER 30, 
  2012  DECEMBER 31,  2011 
  (UNAUDITED)  2011  (UNAUDITED) 
          
LIABILITIES AND STOCKHOLDERS’ EQUITY            
             
CURRENT LIABILITIES:            
             
Short Term Debt $2,592,084  $313,246  $1,118,364 
Accounts Payable  1,261,334   358,851   980,953 
Accrued Liabilities  774,814   1,218,289   755,553 
Income Taxes Payable  187,777   370,678   363,382 
             
Total Current Liabilities  4,816,009   2,261,064   3,218,252 
             
DEFERRED INCOME TAX LIABILITY  165,891   165,891   147,354 
             
Total Liabilities  4,981,900   2,426,955   3,365,606 
             
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  19,730,149   18,824,521   18,184,140 
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  20,639,406   19,733,778   19,093,397 
             
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $25,621,306  $22,160,733  $22,459,003 

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

  FOR THE THREE MONTHS ENDED 
  SEPTEMBER 30, 
  2012  2011 
       
Net Sales $9,994,865  $9,446,944 
         
Costs and Expenses:        
Cost of Goods Sold  7,023,493   7,053,289 
Selling, General and Administrative Expense  1,199,859   1,154,877 
Amortization  35,971   35,971 
Interest Expense  3,304   8,344 
         
Total Costs and Expenses  8,262,627   8,252,481 
         
Income from Operations  1,732,238   1,194,463 
         
Other Loss  (35,771)  (23,906)
         
Income from Operations Before Provision for Income Taxes  1,696,467   1,170,557 
         
Provision for Income Taxes  644,654   444,813 
         
Net Income $1,051,813  $725,744 
         
Income per Common Share (Basic and Diluted) $2.02  $1.40 
         
Dividend per Common Share $0.00  $0.00 

2
 
 
AS OF
 
 
 
AS OF
 
 
 
MARCH 31,
 
AS OF
 
MARCH 31,
 
 
 
2013
 
DECEMBER 31,
 
2012
 
 
 
(UNAUDITED)
 
2012
 
(UNAUDITED)
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Short term debt
 
$
799,786
 
$
515,866
 
$
631,230
 
Accounts Payable
 
 
1,324,236
 
 
375,067
 
 
769,648
 
Accrued Liabilities
 
 
385,953
 
 
1,093,698
 
 
531,387
 
Income Taxes Payable
 
 
-
 
 
-
 
 
47,366
 
 
 
 
 
 
 
 
 
 
 
 
Total Current Liabilities
 
 
2,509,975
 
 
1,984,631
 
 
1,979,631
 
 
 
 
 
 
 
 
 
 
 
 
DEFERRED INCOME TAX LIABILITY
 
 
272,063
 
 
272,063
 
 
165,891
 
 
 
 
 
 
 
 
 
 
 
 
Total Liabilities
 
 
2,782,038
 
 
2,256,694
 
 
2,145,522
 
 
 
 
 
 
 
 
 
 
 
 
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
 
 
19,490,590
 
 
19,442,288
 
 
18,569,391
 
Treasury Stock, at Cost, 63,494 Shares
 
 
(273,219)
 
 
(273,219)
 
 
(273,219)
 
 
 
 
 
 
 
 
 
 
 
 
Total Stockholders’ Equity
 
 
20,681,092
 
 
20,632,790
 
 
19,759,893
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
23,463,130
 
$
22,889,484
 
$
21,905,415
 
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

4

3

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

  FOR THE NINE MONTHS ENDED
SEPTEMBER 30,		 
  2012  2011 
       
Net Sales $15,848,256  $14,217,580 
         
Costs and Expenses:        
Cost of Goods Sold  11,325,394   10,653,906 
Selling, General and Administrative Expense  2,816,946   2,666,303 
Amortization  107,914   107,453 
Interest Expense  3,304   8,344 
         
Total Costs and Expenses  14,253,558   13,436,006 
         
Income from Operations  1,594,698   781,574 
         
Other Income  34,894   174,695 
         
Income from Operations Before Provision for Income Taxes  1,629,592   956,269 
         
Provision for Income Taxes  619,241   363,383 
         
Net Income $1,010,351  $592,886 
         
Income per Common Share (Basic and Diluted) $1.94  $1.14 
         
Dividend per Common Share $0.20  $0.10 

 
 
FOR THE THREE MONTHS ENDED
 
 
 
MARCH 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Net Sales
 
$
3,061,604
 
$
3,268,870
 
 
 
 
 
 
 
 
 
Costs and Expenses:
 
 
 
 
 
 
 
Cost of Goods Sold
 
 
2,040,555
 
 
2,287,495
 
Selling, General and Administrative Expense
 
 
884,858
 
 
805,525
 
Amortization Expense
 
 
35,971
 
 
35,971
 
 
 
 
 
 
 
 
 
Total Costs and Expenses
 
 
2,961,384
 
 
3,128,991
 
 
 
 
 
 
 
 
 
Income from Operations
 
 
100,220
 
 
139,879
 
 
 
 
 
 
 
 
 
Other Income
 
 
101,600
 
 
76,844
 
 
 
 
 
 
 
 
 
Income Before Income Taxes
 
 
201,820
 
 
216,723
 
 
 
 
 
 
 
 
 
Income Tax Expense
 
 
75,575
 
 
86,688
 
 
 
 
 
 
 
 
 
Net Income
 
$
126,245
 
$
130,035
 
 
 
 
 
 
 
 
 
Income per Common Share (Basic and Diluted)
 
$
0.24
 
$
0.25
 
 
 
 
 
 
 
 
 
Dividend per Common Share
 
$
0.15
 
$
0.20
 
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

5

4

PARADISE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

  FOR THE NINE MONTHS ENDED 
  SEPTEMBER 30, 
  2012  2011 
       
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net Income $1,010,351  $592,886 
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:        
Depreciation and Amortization  461,982   496,638 
Increase in:        
Accounts Receivable  (5,508,548)  (2,841,356)
Inventories  (5,466,517)  (3,475,169)
Prepaid Expenses  (185,422)  (52,379)
Other Assets  (24,847)  (57,589)
Income Tax Refund Receivable  -   (221,446)
Increase (Decrease) in:        
Accounts Payable  902,485   676,296 
Accrued Expense  (443,475)  (479,970)
Income Taxes Payable  (182,901)  211,373 
         
Net Cash Used in Operating Activities  (9,436,892)  (5,150,716)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Purchase of Property and Equipment  (206,856)  (344,344)
         
Net Cash Used in Investing Activities  (206,856)  (344,344)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Net Proceeds of Short-Term Debt  2,278,838   870,528 
Dividends Paid  (103,920)  (51,960)
         
Net Cash Provided by Financing Activities  2,174,918   818,568 
         
NET DECREASE IN CASH  (7,468,830)  (4,676,492)
         
CASH, AT BEGINNING OF PERIOD  7,468,908   4,772,056 
         
CASH, AT END OF PERIOD $78  $95,564 
         
SUPPLEMENTAL CASH FLOW INFORMATION:        
Cash paid for:        
Interest $3,304  $8,344 
Income Tax  802,142   371,446 
         
Net Supplemental Cash Flows $805,446  $379,790 

 
 
FOR THE THREE MONTHS ENDED
 
 
 
MARCH 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
Net Income
 
$
126,245
 
$
130,035
 
Adjustments to Reconcile Net Income to Net Cash Used in Operating Activities:
 
 
 
 
 
 
 
Depreciation and Amortization
 
 
151,237
 
 
158,315
 
Decrease (Increase) in:
 
 
 
 
 
 
 
Accounts Receivable
 
 
150,625
 
 
652,675
 
Inventories
 
 
(2,534,868)
 
 
(2,528,551)
 
Prepaid Expenses and Other Current Assets
 
 
145,778
 
 
99,545
 
Income Tax Receivable
 
 
75,575
 
 
-
 
Other Assets
 
 
23,958
 
 
(51,459)
 
Increase (Decrease) in:
 
 
 
 
 
 
 
Accounts Payable
 
 
949,169
 
 
410,798
 
Accrued Liabilities
 
 
(785,685)
 
 
(790,822)
 
Income Taxes Payable
 
 
-
 
 
(323,312)
 
 
 
 
 
 
 
 
 
Net Cash Used in Operating Activities
 
 
(1,697,966)
 
 
(2,242,776)
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
Purchase of Property and Equipment
 
 
(153,335)
 
 
(11,173)
 
 
 
 
 
 
 
 
 
Net Cash Used in Investing Activities
 
 
(153,335)
 
 
(11,173)
 
 
 
 
 
 
 
 
 
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
Net Proceeds from Short term Debt
 
 
283,920
 
 
317,984
 
 
 
 
 
 
 
 
 
Net Cash Provided by Financing Activities
 
 
283,920
 
 
317,984
 
 
 
 
 
 
 
 
 
NET DECREASE IN CASH
 
 
(1,567,381)
 
 
(1,935,965)
 
 
 
 
 
 
 
 
 
CASH, AT BEGINNING OF PERIOD
 
 
6,384,087
 
 
7,468,908
 
 
 
 
 
 
 
 
 
CASH, AT END OF PERIOD
 
$
4,816,706
 
$
5,532,943
 
 
 
 
 
 
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
 
 
 
 
Cash paid for:
 
 
 
 
 
 
 
Income Tax
 
$
-
 
$
410,000
 
 
 
 
 
 
 
 
 
Noncash financing activity:
 
 
 
 
 
 
 
Dividends Declared
 
$
77,940
 
$
103,920
 
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)

6

5

PARADISE, INC. AND SUBSIDIARIES

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 only the adjustments and accruals of a normal recurring nature 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, 2011.2012. 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 ninethree months ended September 30, 2012March 31, 2013 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 financial statements of operations for the quarter ended September 30, 2011March 31, 2012 to conform to the classifications used for the quarter ended September 30, 2012.

March 31, 2013.

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 amendmentsCompany’s management does not believe 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 did not 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 did not have an impact on the Company’s consolidated financial statements or disclosures.

Otherany recent accountingcodified pronouncements issued by the FASBFinancial Accounting Standards Board (“FASB”) (including its EITF), the AICPA andor the Securities and Exchange Commission did not or are not believed by management towill have a material impact on the Company’s presentcurrent or future consolidated financial statements.


NOTE 3
INCOME PER COMMON SHARE

Basic and diluted incomeearnings per common share are based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600. There are no dilutive securities outstanding.

7

6

PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(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, 
  2012  2011 
       
Net Sales in Each Segment        
         
Fruit:        
Sales to Unaffiliated Customers $9,646,744  $8,700,855 
         
Molded Plastics:        
Sales to Unaffiliated Customers  6,201,512   5,516,725 
         
Net Sales $15,848,256  $14,217,580 

For the nine month period ended September 30, 2012 and 2011, sales of frozen strawberry products totaled $521,952 and $323,495, respectively.

 
 
March 31,
 
March 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Net Sales in Each Segment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fruit:
 
 
 
 
 
 
 
Sales to Unaffiliated Customers
 
$
824,737
 
$
876,809
 
 
 
 
 
 
 
 
 
Molded Plastics:
 
 
 
 
 
 
 
Sales to Unaffiliated Customers
 
 
2,236,867
 
 
2,392,061
 
 
 
 
 
 
 
 
 
Net Sales
 
$
3,061,604
 
$
3,268,870
 
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.

8

7
PARADISE, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

NOTE 4
BUSINESS SEGMENT DATA (CONTINUED)

  September 30,  September 30, 
  2012  2011 
       
Identifiable Assets of Each Segment are Listed Below:        
         
Fruit $19,310,400  $15,379,816 
         
Molded Plastics  4,629,462   5,106,533 
         
Identifiable Assets  23,939,862   20,486,349 
         
General Corporate Assets  1,681,444   1,972,654 
         
Total Assets $25,621,306  $22,459,003 

 
 
March 31,
 
March 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Identifiable Assets of Each Segment are Listed Below:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fruit
 
$
11,667,364
 
$
9,739,581
 
 
 
 
 
 
 
 
 
Molded Plastics
 
 
5,605,977
 
 
5,182,183
 
 
 
 
 
 
 
 
 
Identifiable Assets
 
 
17,273,341
 
 
14,921,764
 
 
 
 
 
 
 
 
 
General Corporate Assets
 
 
6,189,789
 
 
6,983,651
 
 
 
 
 
 
 
 
 
Total Assets
 
$
23,463,130
 
$
21,905,415
 
Identifiable assets by segment are those assets that are principally used in the operations of each segment. General corporate assets are principally cash and land and buildings.


NOTE 5
SUBSEQUENT EVENTS
OTHER ISSUES

Subsequent to September 30,

During 2012, the Company filed a settlement claim against BP Exploration & Production, Inc. and BP America Production Company (“BP”). The claim is subject to review by a claims board as well as a protest period by BP.  An amount has not been recorded in the Company’s consolidated financial statements due to the inherent uncertainty in the claims process.

8

PARADISE, INC.COMMISSION FILE NO. 0-3026

PART I.FINANCIAL INFORMATION

PART I.FINANCIAL INFORMATION
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward–Looking Statements

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 68.9%67.7% of total net sales for the previous year of 2011.during 2012. 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. 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 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 meaningful forecasts 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. producesproducing custom molding products, is 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.

9
PARADISE, INC.COMMISSION FILE NO. 0-3026

PART I. FINANCIAL INFORMATION

PART I.FINANCIAL INFORMATION
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

The First Nine MonthsQuarter

Paradise, Inc.’s fruit segment net sales were $824,737 for the first nine monthsquarter of 2012 increased 10.9% to $9,646,7442013 compared to $8,700,855 for the similar nine months reporting period of 2011. This increase is due to timing differences in the receipt of customers’ orders and the corresponding shipping dates for delivery of the Company’s retail glace’ fruit products. Paradise, Inc. recognizes net sales based upon the date of shipment to its customers. For the quarter under review, the increase of 10.9% is directly related to the increase in shipment of retail glace’ fruit orders to several customers in September, 2012 compared to September, 2011. Paradise, Inc.’s management has consistently disclosed that interim filings are not reliable financial indicators of year-end performance. Only a full year’s accounting will provide the necessary financial information to determine the Company’s overall success.

Paradise Plastics, Inc.’s net sales to unaffiliated customers during the first nine months of 2012 increased 12.4% to $6,201,512 from $5,516,725$876,809 for the similar reporting period of 2011. This increase is primarily related2012, representing a 5.9% decrease. The primary reason for this decrease was a shortage of labor with regard to two long term customers, who have receivedgathering strawberries from a greater demandlocal distributor for their productsdelivery to Paradise, Inc.’s facilities. For a negotiated fee, i.e. tolling charge, Paradise, Inc. will receive and process fresh strawberries through its facilities on behalf of this distributor. With the shortage in available labor during the first three quartersquarter of 20122013, tolling charges earned as of March 31, 2013 were $195,763 compared to $465,887 as of March 31, 2012. Paradise, Inc.’s other fruit segment sales during the first quarter of 2013 primarily comprised of bulk fruit orders received and shipped to supermarkets and manufacturing bakeries leading up to and through the traditional Easter holiday season. Gross sales of bulk fruit orders received and shipped as of March 31, 2013 increased to $619,739 compared to $543,773 as of March 31, 2012.

Paradise Plastics, Inc.’s sales to unaffiliated customers for the first quarter of 2013 were $2,236,867 compared to $2,392,061 for the similar reporting period of September, 2011. The2012, representing a 6.5% decrease. Plastics businesssales to existing long-term customers within the commercial and home construction industry continued to increase offsetting a slight decline in injection molding customer orders received and shipped during the first quarter of 2013. However, with recent first quarter 2013 capital improvements to various production assets within the Plastics operations, management is also continuingconfident these enhancements will provide increased capabilities to make inroads in expanding its base of business to include such diverse industrieshandle more efficiently existing customer orders as medical supplies, food processing and aerospace. Sales to these customers continue to help offset the loss of business related to the housing market showdown starting back in late 2008.

well as new orders moving forward.

Consolidated cost of sales as a percentage of net sales decreased 3.4% duringfor the first nine monthsquarter of 20122013 compared to the similar reporting period of 2011.2012. This decrease is primarily related to the earlier shipmentneed to fulfill several new customer orders during the first quarter of higher margin retail2013. Increased production of glace’ fruit productsover a relatively fixed level of overhead during the thirdfirst quarter of 20122013 will yield a lower percentage of cost of sales. However, with more than ninety percent (90%) of the Company’s glace’ annual production cycle yet to commence, it is too early to project or forecast any realistic changes in cost of sales for 2013. Only after factoring in such items as fluctuations in energy cost over the next six months and possible changes to labor cost associated with the implementation of the Affordable Heath Care Act, will management be able to report any meaningful information related to cost of sales.
Selling, general & administrative expenses totaled $884,858 for the first quarter of 2013 compared to $805,525 for the similar reporting period of 2011. It is management’s belief when2012 primary as the current year’s shipment of all seasonal products are completed, cost ofCompany’s sales will be in line with 2011’s cost of sales percentage.

Selling, generalforce increased its commitments to attend various plastics and administrative expenses for the first nine months of 2012 increased 5.6% compared to the previous year’s reporting period of 2011. The increase in expenses such as advertising, brokerage and freight out expenses can be directly attributable to the growth reflected above in net sales for Paradise, Inc.’s fruit and plastics segmentfood trade shows during the first nine monthsquarter of 2012.

Paradise, Inc.’s interest expense on its revolving line of credit for the nine months ended September 30, 2012 was $3,304 compared to $8,344 for September 30, 2011. As reported in previous filings, Paradise, Inc. renewed its revolving line of credit on June 30, 2011 for a two year period. Terms of the renewal are similar to the previous agreement. 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 up to 60% of the Company’s eligible inventory. Interest is payable monthly at the bank’s LIBOR rate plus 1.9% or a floor rate of 3%, whichever is greater.

Other Significant Items

2013.

Other Significant Items
Other Income for the nine months ended September 30, 2012 was $34,894first quarter of 2013 totaled $101,600 compared to $174,695$76,844 for the nine months ended September 30, 2011. Assimilar reporting period of 2012. Other income is periodic sales of recycled plastics materials along with increases in the cash surrender value of two insurance policies owned by the company on behalf of two senior executives.
Inventory as of March 31, 2013 was $11,391,247 compared to $8,725,068 representing an increase of $2,666,179. This increase is twofold; first, as reported in the Company’s December 31, 2012 annual filing, Paradise, Inc. experienced an increase in returns of retail glace’ fruit from a long-term customer. Management provided an estimated impact for products returned by applying an allowance against accounts receivables for the invoiced price of these returns and a provision to recognize a related estimate of finished goods returns was added to inventory at December 31, 2012. Secondly, shipments from suppliers of raw fruit commodities, which may fluctuate based upon many factors common to agricultural products, were received in greater quantity during the first quarter of 2013 compared to the similar period of 2012.
Short term debt and Accounts Payable combined balances as of March 31, 2013 totaled $2,124,022 compared to $1,262,460 for the similar reporting period for 2012. This increase is directly related to the earlier receipt of various raw fruit inventory 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. All legal expenses incurred by Paradise, Inc. as a result of this settlement have been paid.

above paragraph.
10
PARADISE, INC.COMMISSION FILE NO. 0-3026

PART I. FINANCIAL INFORMATION

PART I.FINANCIAL INFORMATION
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Other Significant Items (Continued)

Inventory as of September 30, 2012 totaled $11,663,034 compared to $9,521,752 as of September 30, 2011.

This increase of $2,141,282 is primarily driven by the Company’s need to procure a sufficient amount of raw fruit materials heading into 2013. As mentioned above, Paradise, Inc.’s production period 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 to see what effect changes to these factors will have on the future availability of the Company’s raw materials. Based on its current review of these factors, management has taken appropriate steps to increase the procurement of raw fruit materials during the third quarter of 2012. This will ensure that sufficient raw materials will be on hand as we transition into the 2013 production period.

Paradise, Inc. finances

Other Significant Items (Continued)
We finance our ongoing operations primarily with cash provided by our operating activities which are seasonal in nature.activities. Our principal sources of liquidity are our cash flows provided by operating activities, our existing cash, and a line of credit facility. At September 30, 2012March 31, 2013 and December 31, 2011,2012, we had $78$4.8 million and $7,468,908,$6.4 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 up to 60%50% of the Company’s eligible inventory from January 1 to May 31 and 60% from June 1 to December 31 of each year, of which $2,083,209$0 was outstanding at September 30, 2012March 31, 2013 and $0 at December 31, 2011.2012. Within this agreement, there are letters of credit with a limit of $1,200,000, of which $508,875$799,786 was outstanding at September 30, 2012March 31, 2013 and $313,246$515,866 at December 31, 2011.2012. The line of credit agreement expires in June 2013. Net cash used in operating activities increaseddecreased from $5,150,716$2,242,776 for the nine monthsquarter ended September 30, 2011 comparedMarch 31, 2012 to $9,436,892$1,697,964 for the nine monthsquarter ended September 30, 2012.March 31, 2013. The primary reasons for this increasedecrease are as follows; income tax payments made during the first nine months for 2012quarter of 2013 were $430,696 greater$410,000 less than the first nine monthsquarter of 2011; payments for the purchase of inventory increased $1,991,348 and2012; Accounts Receivable payments received from Paradise, Inc.’s customers during the first nine monthsquarter of 20122013 were $2,667,192$502,050 less than the similar reporting period of 2011.

Summary

2012. Lastly, net cash provided by financing activities decreased from $317,984 for the quarter ended March 31, 2012 to $283,920 for the quarter ended March 31, 2013 due to timing of payments on letters of credit.

Summary
Paradise, Inc.’s consolidated net sales increased $1,630,676 representing an increase of 11.5% for the first ninethree months of 2012ended March 31, 2013 totaled $3,061,604 compared to $3,268,870 for the similar reporting period of 2011. This increase is twofold: First, timing differences in the receipt2012, representing a decrease of purchase orders received and related shipping dates from fruit customers resulting in additional fruit segment income for the first nine months of 2012 of $945,889. Secondly, Paradise Plastics, Inc.’s demand for product from several long time customers resulted in plastics net sales increasing $684,748 for the first nine months of 2012.

6.3%. However, as mentioned and disclosed in all previous interimfirst quarter filings, duewith less than 5% of anticipated annual glace’ fruit net sales yet to the highly seasonal naturebe realized as of the Company’s primary product, glace’ fruit,date of this filing, no meaningfulreasonable estimate or forecast of consolidated financial analysisperformance may be developed from Paradise, Inc.’s interim reporting results. Only a full year’s accounting of revenue and expenses will provide the necessary information to determine the Company’s financial performance.

determined at this time.
PARADISE, INC.COMMISSION FILE NO. 0-3026Critical Accounting Estimates

PART I. FINANCIAL INFORMATION

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

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, 2011.2012. There have been no material changes to our critical accounting estimates during the ninethree months ended September 30, 2012.

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. March 31, 2013.

11
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
The guidance is effective for us for the interim and annual periods beginning after December 15, 2011. The adoption of this guidance did not have an impact on us.

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 did not have an impact on us.

We doCompany’s management does not believe that otherany recent accountingcodified pronouncements issued by the FASBFinancial Accounting Standards Board (“FASB”) (including its EITF), the AICPA andor the Securities and Exchange Commission will have a material impact on the Company’s presentcurrent or future consolidated financial statements.

Item 3.Quantitative and Qualitative Disclosure and Market Risk – N/A

Item 4.Controls and Procedures

The Company’s

As of March 31, 2013, our 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 Officerprocedures, and Chief Financial Officerthey have concluded as of September 30, 2012, that the Company’swe maintain effective disclosure controls and procedures. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2013.
Disclosure controls and procedures are effectivemean the methods designed to ensure that information that the Company is required to be disclosed bydisclose in the Company in reports that it files or submits underwith the Securities and Exchange Act of 1934Commission is recorded, processed, summarized and reported within the time periods specified in the applicable Securitiesrequired. Our controls 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 months ended September 30, 2011procedures are designed to ensure that all information required to be disclosed is accumulated and communicated to our management to allow timely decisions regarding disclosure. Our controls and procedures are also designed to provide reasonable assurance of the timelinessreliability of issuing credit memos when products are returned. There were no other changes in the Company’s internal controls overour financial reporting and accurate recording of our financial transactions.
A control system, however well designed and operated, can provide only reasonable, not absolute, assurance that occurred during the period covered by this report that have materially affected, orcontrol system’s objectives will be met. There are reasonably likely to materially affect, our internalinherent limitations in all control over financial reporting. The most recentsystems, and no evaluation of these controls bycan provide absolute assurance that all control gaps or instances of fraud have been detected. These inherent limitations include the Company’s Chief Executive Officerrealities that the judgments in decision-making can be faulty, and Chief Financial Officer did not identify any additional deficienciesthat simple errors or weaknesses in the Company’s internal controls over financial reporting; therefore, no corrective actions were taken.

mistakes can occur.
12
PARADISE, INC.COMMISSION FILE NO. 0-3026

PART II.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
  
Item 6.Exhibits and Reports on Form 8-K

(a)Exhibits

 

Exhibit

Number

(a)		DescriptionExhibits
Exhibit
NumberDescription
   
 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.

13
PARADISE, INC.(b)Reports on Form 8-K.COMMISSION FILE NO. 0-3026

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: November 14, 2012May 15, 2013
 Melvin S. Gordon  
 Chief Executive Officer and Chairman  
    
 /s/ Jack M. Laskowitz Date: November 14, 2012May 15, 2013
 Jack M. Laskowitz  
 Chief Financial Officer and Treasurer  

15

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