FORM 10-Q
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x | Quarterly report pursuant to section 13 or 15(d) of the Securities Act of 1934. |
For the quarterly period ended September 30, 2014March 31, 2015
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 company x
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 as of NovemberMay 14, 20142015 was 519,600 shares.
PARADISE, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2014MARCH 31, 2015
INDEX
PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
PART I. | FINANCIAL INFORMATION |
Item 1. | Financial Statements |
PARADISE, INC. AND SUBSIDIARIES
AS OF | AS OF | |||||||||||
SEPTEMBER 30, | AS OF | SEPTEMBER 30, | ||||||||||
2014 | DECEMBER 31, | 2013 | ||||||||||
(UNAUDITED) | 2013 | (UNAUDITED) | ||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash | $ | 304,858 | $ | 5,916,366 | $ | 301,648 | ||||||
Accounts Receivable, Less, Allowances of $0 (09/30/14), $897,546 (12/31/13) and $0 (09/30/13) | 5,571,292 | 2,369,321 | 7,361,779 | |||||||||
Inventories: | ||||||||||||
Raw Materials and Supplies | 3,313,793 | 1,971,689 | 3,253,143 | |||||||||
Work in Process | 169,078 | 993,061 | 313,891 | |||||||||
Finished Goods | 8,851,760 | 5,873,048 | 9,071,019 | |||||||||
Income Tax Receivable | 431,316 | 279,219 | 196,526 | |||||||||
Deferred Income Tax Asset | 330,198 | 330,198 | 152,250 | |||||||||
Prepaid Expenses and Other Current Assets | 487,413 | 304,812 | 480,522 | |||||||||
Total Current Assets | 19,459,708 | 18,037,714 | 21,130,778 | |||||||||
Property, Plant and Equipment, Less, Accumulated Depreciation of $17,742,407 (09/30/14), $17,410,823 (12/31/13) and $18,801,658 (09/30/13) | 3,564,448 | 3,816,928 | 3,838,876 | |||||||||
Goodwill | 413,280 | 413,280 | 413,280 | |||||||||
Customer Base and Non-Compete Agreement | 219,448 | 313,862 | 345,333 | |||||||||
Other Assets | 400,058 | 283,979 | 322,365 | |||||||||
TOTAL ASSETS | $ | 24,056,942 | $ | 22,865,763 | $ | 26,050,632 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED | ||||||||
SEPTEMBER 30, | ||||||||
2014 | 2013 | |||||||
Net Sales | $ | 8,020,058 | $ | 9,538,239 | ||||
Costs and Expenses: | ||||||||
Cost of Goods Sold | 6,728,146 | 6,756,355 | ||||||
Selling, General and Administrative Expense | 1,140,526 | 1,189,986 | ||||||
Amortization Expense | 35,971 | 35,971 | ||||||
Interest Expense | 1,520 | 6,002 | ||||||
Total Costs and Expenses | 7,906,163 | 7,988,314 | ||||||
Income from Operations | 113,895 | 1,549,925 | ||||||
Other (Expenses) Income | (29,980 | ) | 283,416 | |||||
Income from Operations Before Provision for Income Taxes | 83,915 | 1,833,341 | ||||||
Provision for Income Taxes | 33,566 | 676,244 | ||||||
Net Income | $ | 50,349 | $ | 1,157,097 | ||||
Income per Common Share (Basic and Diluted) | $ | 0.10 | $ | 2.23 | ||||
Dividend per Common Share | $ | 0.00 | $ | 0.00 |
AS OF MARCH 31, 2015 (UNAUDITED) | AS OF DECEMBER 31, 2014 | AS OF MARCH 31, 2014 (UNAUDITED | ||||||||||
ASSETS | ||||||||||||
CURRENT ASSETS: | ||||||||||||
Cash | $ | 6,236,530 | $ | 7,788,010 | $ | 5,422,923 | ||||||
Accounts Receivable, | ||||||||||||
Less, Allowances of $0 (03/31/15) $912,789 (12/31/14) and $0 (03/31/14) | 1,883,449 | 3,046,669 | 1,467,021 | |||||||||
Inventories: | ||||||||||||
Raw Materials and Supplies | 3,419,212 | 2,146,872 | 3,939,450 | |||||||||
Work in Process | 55,877 | 987,614 | 8,171 | |||||||||
Finished Goods | 5,553,245 | 4,350,423 | 6,650,341 | |||||||||
Income Tax Receivable | 390,931 | 78,277 | 387,129 | |||||||||
Deferred Income Tax Asset | 277,291 | 277,291 | 330,198 | |||||||||
Prepaid Expenses and Other Current Assets | 169,431 | 306,951 | 225,966 | |||||||||
Total Current Assets | 17,985,966 | 18,982,107 | 18,431,199 | |||||||||
Property, Plant and Equipment, Less, Accumulated Depreciation of $17,983,131 (03/31/15), $17,880,096 (12/31/14) and $17,525,130 (03/31/14) | 3,815,270 | 3,473,829 | 3,725,073 | |||||||||
Goodwill | 413,280 | 413,280 | 413,280 | |||||||||
Customer Base and Non-Compete Agreement | 156,506 | 187,977 | 282,391 | |||||||||
Other Assets | 371,090 | 451,373 | 291,384 | |||||||||
TOTAL ASSETS | $ | 22,742,112 | $ | 23,508,566 | $ | 23,143,327 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE NINE MONTHS ENDED | FOR THE THREE MONTHS ENDED | |||||||||||||||
SEPTEMBER 30, | MARCH 31, | |||||||||||||||
2014 | 2013 | 2015 | 2014 | |||||||||||||
Net Sales | $ | 13,802,433 | $ | 15,315,053 | $ | 2,691,757 | $ | 3,063,072 | ||||||||
Costs and Expenses: | ||||||||||||||||
Cost of Goods Sold | 11,107,099 | 11,232,573 | 2,460,173 | 2,477,260 | ||||||||||||
Selling, General and Administrative Expense | 2,860,623 | 2,888,544 | 933,060 | 859,876 | ||||||||||||
Amortization Expense | 107,914 | 107,914 | 35,971 | 35,971 | ||||||||||||
Interest Expense | 1,520 | 6,002 | ||||||||||||||
Total Costs and Expenses | 14,077,156 | 14,235,033 | 3,429,204 | 3,373,107 | ||||||||||||
(Loss) Income from Operations | (274,723 | ) | 1,080,020 | |||||||||||||
Loss from Operations | (737,447 | ) | (310,035 | ) | ||||||||||||
Other Income | 6,981 | 322,227 | 18,313 | 40,262 | ||||||||||||
(Loss) Income from Operations Before Income Tax Benefit (Provision for Income Taxes) | (267,742 | ) | 1,402,237 | |||||||||||||
Loss Before Income Taxes | (719,134 | ) | (269,773 | ) | ||||||||||||
Income Tax Benefit (Provision for Income Taxes) | 107,097 | (512,427 | ) | |||||||||||||
Income Tax Benefit | 287,654 | 107,910 | ||||||||||||||
Net (Loss) Income | $ | (160,645 | ) | $ | 889,820 | |||||||||||
Net Loss | $ | (431,480 | ) | $ | (161,863 | ) | ||||||||||
(Loss) Income per Common Share (Basic and Diluted) | $ | (0.31 | ) | $ | 1.71 | |||||||||||
Loss per Common Share (Basic and Diluted) | $ | (0.83 | ) | $ | (0.31 | ) | ||||||||||
Dividend per Common Share | $ | 0.11 | $ | 0.15 | $ | 0.11 | $ | 0.11 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
4 |
PARADISE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS ENDED | ||||||||
MARCH 31, | ||||||||
2015 | 2014 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Loss | $ | (431,480 | ) | $ | (161,863 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash | ||||||||
Used in Operating Activities: | ||||||||
Depreciation and Amortization | 139,006 | 150,277 | ||||||
Decrease (Increase) in: | ||||||||
Accounts Receivable | 1,163,220 | 902,300 | ||||||
Inventories | (1,543,425 | ) | (1,760,164 | ) | ||||
Prepaid Expenses and Other Current Assets | 137,520 | 78,846 | ||||||
Income Tax Receivable | (312,654 | ) | (107,910 | ) | ||||
Other Assets | 75,783 | (11,907 | ) | |||||
Increase (Decrease) in: | ||||||||
Accounts Payable | 191,771 | 751,093 | ||||||
Accrued Liabilities | (626,590 | ) | (671,209 | ) | ||||
Net Cash Used in Operating Activities | (1,206,849 | ) | (830,537 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of Property and Equipment | (444,476 | ) | (22,451 | ) | ||||
Net Cash Used in Investing Activities | (444,476 | ) | (22,451 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net Proceeds from Short Term Debt | 99,845 | 359,545 | ||||||
Net Cash Provided by Financing Activities | 99,845 | 359,545 | ||||||
NET DECREASE IN CASH | (1,551,480 | ) | (493,443 | ) | ||||
CASH, AT BEGINNING OF PERIOD | 7,788,010 | 5,916,366 | ||||||
CASH, AT END OF PERIOD | $ | 6,236,530 | $ | 5,422,923 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for: | ||||||||
Income Tax | $ | 25,000 | $ | - | ||||
Noncash financing activity: | ||||||||
Dividends Declared | $ | 57,156 | $ | 57,156 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
5 |
PARADISE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED | ||||||||
SEPTEMBER 30, | ||||||||
2014 | 2013 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net (Loss) Income | $ | (160,645 | ) | $ | 889,820 | |||
Adjustments to Reconcile Net (Loss) Income to Net Cash Used in Operating Activities: | ||||||||
Depreciation and Amortization | 449,842 | 455,162 | ||||||
(Increase) Decrease in: | ||||||||
Accounts Receivable | (3,201,971 | ) | (5,468,619 | ) | ||||
Inventories | (3,496,833 | ) | (3,781,674 | ) | ||||
Prepaid Expenses | (182,601 | ) | (183,794 | ) | ||||
Other Assets | (129,579 | ) | (53,933 | ) | ||||
Income Tax Receivable | (152,097 | ) | 29,268 | |||||
Increase (Decrease) in: | ||||||||
Accounts Payable | 428,551 | 492,086 | ||||||
Accrued Liabilities | (332,982 | ) | (299,542 | ) | ||||
Net Cash Used in Operating Activities | (6,778,315 | ) | (7,921,226 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Purchase of Property and Equipment | (89,448 | ) | (240,000 | ) | ||||
Net Cash Used in Investing Activities | (89,448 | ) | (240,000 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Net Proceeds from Short Term Debt | 1,313,411 | 2,156,727 | ||||||
Dividends Paid | (57,156 | ) | (77,940 | ) | ||||
Net Cash Provided by Financing Activities | 1,256,255 | 2,078,787 | ||||||
NET DECREASE IN CASH | (5,611,508 | ) | (6,082,439 | ) | ||||
CASH, AT BEGINNING OF PERIOD | 5,916,366 | 6,384,087 | ||||||
CASH, AT END OF PERIOD | $ | 304,858 | $ | 301,648 | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for: | ||||||||
Interest | $ | 1,520 | $ | 6,002 | ||||
Income Taxes | $ | 45,000 | $ | 483,159 |
See Accompanying Notes to these Consolidated Financial Statements (Unaudited)
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 allonly the adjustments and accruals of a normal recurring nature that management believes areis 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, 2013.2014. 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, 2014March 31, 2015 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 for the quarter ended September 30, 2013March 31, 2014 to conform to the classifications used for the quarter ended September 30, 2014.March 31, 2015.
NOTE 2 | 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, thisUpdate 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. On April 1, 2015, the FASB voted for a one-year deferral of the effective date of the new revenue recognition standard, ASU No. 2014-09. If these proposed changes are finalized, this standard would require public entities to apply the amendments in ASU No. 2014-09 for annual reporting beginning after December 15, 2017. Early adoption would be permitted as of the original effective date in ASU No. 2014-09, which is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted.2016. We are currently evaluating the impact of adopting the guidance on our consolidated financial statements.
Except as noted above, the Company’s management does not believe that 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.
PARADISE, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3 |
Basic and diluted (loss) incomeloss per common share isare based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600. There are no dilutive securities outstanding.
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. |
Three months ended | Three months ended | March 31, | March 31, | |||||||||||||
September 30, | September 30, | 2015 | 2014 | |||||||||||||
2014 | 2013 | |||||||||||||||
Net Sales in Each Segment | ||||||||||||||||
Fruit: | ||||||||||||||||
Sales to Unaffiliated Customers | $ | 6,314,382 | $ | 7,884,362 | $ | 1,004,288 | $ | 780,930 | ||||||||
Molded Plastics: | ||||||||||||||||
Sales to Unaffiliated Customers | 1,705,676 | 1,653,877 | 1,687,469 | 2,282,142 | ||||||||||||
Net Sales | $ | 8,020,058 | $ | 9,538,239 | $ | 2,691,757 | $ | 3,063,072 | ||||||||
Nine months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2014 | 2013 | |||||||||||||||
Net Sales in Each Segment | ||||||||||||||||
Fruit: | ||||||||||||||||
Sales to Unaffiliated Customers | $ | 7,584,972 | $ | 9,099,865 | ||||||||||||
Molded Plastics: | ||||||||||||||||
Sales to Unaffiliated Customers | 6,217,461 | 6,215,188 | ||||||||||||||
Net Sales | $ | 13,802,433 | $ | 15,315,053 |
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)
NOTE 4 | BUSINESS SEGMENT DATA (CONTINUED) |
September 30, | September 30, | March 31, | March 31, | |||||||||||||
2014 | 2013 | 2015 | 2014 | |||||||||||||
Identifiable Assets of Each Segment are Listed Below: | ||||||||||||||||
Fruit | $ | 16,988,637 | $ | 19,589,588 | $ | 9,230,689 | $ | 10,919,669 | ||||||||
Molded Plastics | 4,565,580 | 4,404,647 | 5,404,949 | 4,888,865 | ||||||||||||
Identifiable Assets | 21,554,217 | 23,994,235 | 14,635,638 | 15,808,534 | ||||||||||||
General Corporate Assets | 2,502,725 | 2,056,397 | 8,106,474 | 7,334,793 | ||||||||||||
Total Assets | $ | 24,056,942 | $ | 26,050,632 | $ | 22,742,112 | $ | 23,143,327 |
Identifiable assets by segment are those assets that are principally used in the operations of each segment. General corporate assets are principally cash, prepaid expenses, other current assets, land and income tax assets.
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 |
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 65.6%65.8% of total net sales for the previous year of 2013.during 2014. 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 for a period ofduring 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.
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 MonthsQuarter
Paradise, Inc.’s fruit segment net sales for the first nine monthsquarter of 2014 decreased 16.6% to $7,584,9722015 totaled $1,004,288 compared to $9,099,865net sales of $780,930 for the similar nine month reporting period of 2013. This decrease is due to timing differences in the receipt of customers’ orders and the corresponding shipping dates2014 representing a 28.6% increase. The fruit segment has two primary products for delivery of the Company’s retail glace’ fruit products. Specifically, several major customers delayed their opening orders into October of 2014 as compared to September, 2013. As Paradise, Inc. recognizes net sales upon receipt of its products by its customers, revenue associated with merchandise shipped and received by its customers in October will result in net sales being earned in the fourth quarter of 2014. Paradise, Inc.’s management has consistently disclosed that interim filings are not reliable financial indicators of year-end performance. Factors such as weather conditions, product placement on supermarket shelves along with customer demand will have a direct impact on the seasonal holiday sales of glace’ fruit. 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 customerssale during the first ninequarter of the year. The main product is glace’ fruit sold in bulk quantities and shipped to manufacturing bakeries and select supermarkets for the traditional Easter holiday season. Net sales orders received and shipped for bulk glace’ fruit products during the first three months of 2015 were $508,223 compared to $469,630 for the similar reporting period of 2014, remained consistent asrepresenting an increase of 8.2%. The other product for sale in the first quarter is finished strawberry items produced exclusively for a local distributor during a short period of time beginning in early March and running through mid April. As in previous years, Paradise, Inc., based on a negotiated price (i.e. tolling fee) will receive and process fresh strawberries though its production facilities on behalf of this distributor. With favorable weather conditions present during the first quarter ending March 31, 2015, sales increased to $496,065 from $311,300 compared to the similar reporting period of 2013. Net2014.
Paradise Plastics, Inc., a wholly owned company of Paradise, Inc., which accounted for 34.2% of total net sales to unaffiliated customers for the nineprevious year, generated net sales of $1,687,469 for the three months ended September 30, 2014 were $6,217,461March 31, 2015 compared to $6,215,188$2,228,142 for the nine months ended September 30 2013.similar reporting period of 2014. This consistent leveldecline represents a decrease of $540,673 or 24.3%. The primary reason for this decrease was a decision by a long term plastics customer to transition production of a next generation injection molding part to their facilities as of January 1, 2015. During the first quarter of 2015, Paradise Plastics, Inc. placed into service over $325,000 of production equipment in order to process sales overorders received from existing and new clients. While encouraged with these sales orders along with the past twelve months is based upon an increase in sales of housing related custom molding products which continuesproduction capabilities, no determination can be made as to how much revenue will be generated to offset recent lossesthe decrease in sales noted above. Specifically, sales orders are commitments for production for a period of sales of injection molding plastics parts reported30 to 90 days. Only after the second half of 2013. In an effortinitial feedback from customers as to further expand the company’s business base into such areas as medical supplies, food processing and aerospace customers, management has made a financial commitment during the first half of 2014success new products have with their target market will Paradise, Inc. have enough information to become ISO9001 compliant. The certification process completed during the second quarter of 2014, represents a series of standards, developed by the International Organization Standardization (ISO) for manufacturing companies anddetermine if these orders will be emphasized as we continue to seek new business opportunities.renewed.
Consolidated cost of sales as a percentage of net sales increased 7.2% during10.5% for the first nine monthsquarter of 20142015 compared to the similar reporting period of 2013.2014. The primary reason for this increase was the need to employ consistent levels of labor as the plastics segment transitioned from an existing client’s custom molding product, into a new production line, which involved the purchase of approximately $325,000 of production assets as mentioned in the above paragraph. It is directly relatedimportant to the timing of shipments ofnote, glace’ fruit, to its customers. As reported above, shipmentsthe main driver for costing analysis, does not commence production until May or June of retail glace’ fruit were delayed by several major customers untileach year. Thus, as mentioned in all previous quarterly filings, the fourth quarteronly meaningful comparison regarding changes or trends in cost of 2014. Conversely, an increase in lower margin bulk fruit orders, of approximately 15%, were shipped and received by Paradise, Inc.’s long-time customers in September, 2014 compared to October, 2013.sales can only be determined after the entire production cycle is complete.
Selling, general and& administrative expenses increased 8.5% to $933,060 for the first nine monthsquarter of 2014 remained consistent2015 compared to $859,876 for the previous year’ssimilar reporting period of 2013 (i.e.: $2.86 million vs. $2.88 million) as increases in employee related health care cost have been offset by reductions in2014. This increase is attributable to the Company’s decision to increase its in-house sales force along with incurring additional travel advertisingexpenses to attend several new trade shows to promote its fruit and professional fees.plastics products.
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 (Continued)Other Significant Items
Paradise, Inc. financesOther Income for the first quarter of 2015 totaled $18,313 compared to $40,262 for the similar reporting period of 2014. Other income is periodic sales of recycled plastics materials along with changes in the cash surrender value of two insurance policies owned by the company on behalf of two senior executives.
Inventory as of March 31, 2015 was $9,028,334 compared to $10,589,791 as of March 31, 2014 representing a decrease of $1,561,457 or 14.7% as shipments from suppliers of raw fruit commodities, which may fluctuate based upon many factors common to agricultural products, were received in lesser quantities during the first quarter of 2015. Management is consistently reviewing weather and market conditions as to its suppliers to determine if inventory levels are sufficient for the upcoming selling season. Thus, it should be noted that as of the date of this filing, the Company believes it has sufficient inventory to fulfill all of its production needs for 2015.
Short term debt and Accounts Payable combined balances as of March 31, 2015 totaled $1,007,847 compared to $1,418,965 for the similar reporting period for 2014. These two accounts are directly related to the lesser amount of inventory on hand at March 31, 2015 as referenced in the preceding paragraph.
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, 2014March 31, 2015 and December 31, 2013,2014, we had $304,858$6.2 million and $5,916,366,$7.8 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 $1,086,412$0 was outstanding at September 30, 2014March 31, 2015 and $0 at December 31, 2013.2014. Within this agreement, there are letters of credit with a limit of $1,200,000, of which $226,999$212,724 was outstanding at September 30, 2014March 31, 2015 and $0$112,879 at December 31, 2013.2014. The line of credit agreement expires inon June 23, 2015. Net cash decreased by $5,611,508 for the nine months ended September 30, 2014 compared to $6,082,439 for the nine months ended September 30, 2013. The primary reason for this change was income tax payments made during the first nine months for 2014 were $438,159 less than the first nine months of 2013.
Summary
Paradise, Inc.’s consolidated net sales decreased to $13,802,433 for the first ninethree months ended March 31, 2015 totaled $2,691,757 compared to $3,063,072 for the similar reporting period of 2014, comparedrepresenting a decrease of 12.1%. This decrease is specifically attributable to $15,315,053 forthe plastics segment, as a planned change to a next generation injection molding part was brought in-house by a major customer during the first nine monthsquarter of 2013. This decrease as mentioned above is primarily timing in nature as several existing2015. However, with more than 90% of the year’s anticipated glace’ fruit customers deferring their retail glace’ fruit orderssales yet to the beginning of the fourthoccur, no reasonable forecast or trend can be ascertained from first quarter of 2014 compared to the third quarter of 2013. Thus, as2015 results. As mentioned and disclosed in all previous interim filings, due to the highly seasonal nature of the Company’s primary product, glace’ fruit, no meaningful financial analysis shouldperformance can only be developed from Paradise, Inc.’s interim reporting results. Onlydetermined after a full year’s accounting of revenue and expenses will provide the necessary information to determine the Company’s financial performance.operation has been completed.
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, 2013.2014. There have been no material changes to our critical accounting estimates during the ninethree months ended September 30, 2014.March 31, 2015.
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 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09,Revenue from Contracts with Customers(Topic (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, thisUpdate 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. On April 1, 2015, the FASB voted for a one-year deferral of the effective date of the new revenue recognition standard, ASU No. 2014-09. If these proposed changes are finalized, this standard would require public entities to apply the amendments in ASU No. 2014-09 for annual reporting beginning after December 15, 2017. Early adoption would be permitted as of the original effective date in ASU No. 2014-09, which is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted.2016. We are currently evaluating the impact of adopting the guidance on our consolidated financial statements.
Except as noted above, the Company’s management does not believe that 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.
Item 3. | Quantitative and Qualitative Disclosure and Market Risk – N/A |
Item 4. | Controls and Procedures |
As of September 30, 2014,March 31, 2015, our Chief Executive Officer and Chief Financial Officer have evaluated the Company’s disclosure controls and procedures, and they have concluded that we maintain effective disclosure controls and procedures. There were no changes in our internal control over financial reporting during the nine monthsquarter ended September 30, 2014.March 31, 2015.
Disclosure controls and procedures mean the methods designed to ensure that information that the Company is required to disclose in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time periods required. Our controls and procedures 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 reliability of our 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 the control system’s objectives will be met. There are inherent limitations in all control systems, and no evaluation of controls can provide absolute assurance that all control gaps or instances of fraud have been detected. These inherent limitations include the realities that the judgments in decision-making can be faulty, and that simple errors or mistakes can occur.
PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
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 | |
EX-101.INS | XBRL Instance Document | |
EX-101.SCH | XBRL Taxonomy Extension Schema | |
EX-101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
EX-101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
EX-101.LAB | XBRL Taxonomy Extension Label Linkbase | |
EX-101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
PARADISE, INC. | COMMISSION FILE NO. 0-3026 |
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 |