UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2016
Commission File No. 0-3026
PARADISE, INC.
INCORPORATED IN FLORIDA
IRS IDENTIFICATION NO. 59-1007583
1200 W. DR. MARTIN LUTHER KING, JR., BLVD.
PLANT CITY, FLORIDA 33563
TELEPHONE NO. (813) 752-1155
Securities Registered Under Section 12 (b) of the Exchange Act:
None
Securities Registered Under Section 12 (g) of the Exchange Act:
Title of Each Class
Common Stock,
$.30 Par Value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes x 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, as defined in rule 12b-2 of the Exchange Act.
| Large accelerated filer ¨ | Accelerated filer ¨ |
| Non-accelerated filer ¨ | Smaller reporting company x |
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $7,367,039 (as of June 30, 2016, bid price $23.50)
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at March 30, 2017 | |
| Common Stock, | ||
| $.30 Par Value | 519,600 Shares |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
PARADISE, INC.
2016 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
| Item 1. | Business |
Forward-Looking Statements
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact should be considered “forward-looking statements” for purposes of these provisions, including statements that include projections of, or expectations about, earnings, revenues or other financial items, statements about our plans and objectives for future operations, statements concerning proposed new products or services, statements regarding future economic conditions or performance, statements concerning our expectations regarding the attraction and retention of customers, statements about market risk and statements underlying any of the foregoing. In some cases, forward-looking statements can be identified by the use of such terminology as “may,” “will,” “expects,” “plans,” “anticipates,” “intends,” “believes,” “estimates,” “potential,” or “continue,” or the negative thereof or other similar words. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurance that such expectations or any of our forward-looking statements will prove to be correct. Actual results and developments are likely to be different from, and may be materially different from, those expressed or implied by our forward-looking statements. Forward-looking statements are subject to inherent risks and uncertainties.
| (a) | Business Development |
| Paradise, Inc. was incorporated under the laws of the State of Florida in September, 1961 as Canaveral Utilities and Development Corporation. After the acquisition and merger of several other assets, the Corporation was renamed Paradise Fruit Company, Inc. in February, 1964, and the corporate name was changed again to Paradise, Inc. during July, 1993. There have been no bankruptcies, receiverships, or similar proceedings during the corporation’s history. There have been no material reclassifications, mergers, consolidations, purchases or sales of a significant amount of assets not in the ordinary course of business during the past three years. |
| (b) | The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows: |
| Business Segment | Operation |
| Candied Fruit | Production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, the processing of frozen strawberry products for sale to commercial and institutional users such as preservers, dairies, drink manufacturers, etc. |
| Molded Plastics | Production of plastic containers for the Company’s products and other molded plastics for sale to unaffiliated customers. |
| I-1 |
| Item 1. | Business (Continued) |
For further segment information, refer to Note 8 in Part II, Item 8 of this Annual Report.
| (c) | The Company knows of no other manufacturer in the Western Hemisphere whose sales of glace’ (candied) fruit is equal to those of Paradise, Inc. While there are no industry statistics published, from the generally reliable sources available, management believes that Company brands account for a large majority of all candied fruit sold in supermarkets and other grocery outlets in the USA. |
In terms of candied fruit dollar sales, during 2016, approximately 20% were shipped to manufacturing bakers and other institutional users, with the balance being sold through supermarkets and other retail outlets for ultimate use in the home.
Sales to retail outlets are usually generated through registered food brokers operating in exclusively franchised territories. This method of distribution is widely accepted in the food industry because of its efficiency and economy.
The principal raw materials used by the Company are fruits, fruit peels, corn syrups and plastic resins. Most of these materials are readily accessible from a number of competitive suppliers. The supply and prices may fluctuate with growing and crop conditions, factors common to all agricultural products. Feed stocks for some plastic resins are petroleum related and may be subject to supply and demand fluctuations in this market.
The trademarks “Paradise”, “Dixie”, “Mor-Fruit” and “Sun-Ripe” are registered with the appropriate Federal and State authorities for use on the Company’s candied fruit. These registrations are kept current, as required, and have a value in terms of customer recognition. The Company is also licensed to use the trademarks “White Swan”, “Queen Anne”, “Palm Beach”, “Golden Crown,” and “Pennant” in the sale of candied fruit.
The demand for fruit cake materials is highly seasonal, with over 85% of sales in these items occurring during the months of September, October and November. However, in order to meet delivery requirements during this relatively short period, the Company must process candied fruit and peels for approximately ten months during the year. Also, the Company must acquire the fruits used as raw materials during their seasonal growing periods. These factors result in large inventories, which require financing to meet relatively large short-term working capital needs.
During 1993, and through another wholly owned subsidiary, the Company launched an enterprise for the growing and selling of strawberries, both fresh and frozen. Plant City, Florida, the location of the Company’s manufacturing facilities and main office, styles itself as the “The Winter Strawberry Capital” because of the relatively large volume of fruit that is grown and harvested locally, mostly from December through April of each season. However, once competing fresh berries from the West Coast of the USA begin finding their way to market, the price of Florida fruit begins to diminish, and local growers had no other market for their product.
While there are significant freight cost advantages in the sale and marketing of local strawberries to customers in the eastern U.S., growers and producers on the West Coast, from southern California to Washington State, still dominate pricing and marketing conditions. The Company estimates more than 90% of total U.S. strawberry production is located in that area.
| I-2 |
Item 1. Business (Continued)
Therefore, Paradise, Inc. limits its activities in this market to years in which basic supply and demand statistics, such as West Coast harvest predictions and frozen strawberry prior year inventory carryovers, lead to a reasonable anticipation of profitability.
In the molded plastics segment of business, sales to unaffiliated customers continue to strengthen. This trend began several years ago when management shifted its focus from the sale of high volume, low profit “generics” to higher technology value added custom applications.
Some molded plastics container demand is seasonal, by virtue of the fact that a substantial portion of sales are made to packers of food items and horticultural interests, with well defined growing and/or harvest seasons.
In the opinion of management, the seasonal nature of some plastics sales does not have a significant impact upon the working capital requirements of the Company.
During the first several months of the year, the Company contracts with certain commercial bakers for future delivery of quantities representing a substantial portion of the sales of fruit cake materials to institutional users. Deliveries against these contracts are completed prior to the close of the fiscal year ending December 31.
It is a trade practice to allow some supermarket chains to return unopened cases of candied fruit products that remain unsold at year-end, an option for which they normally pay a premium. A provision for the estimated losses on retail returns is included in the Company’s consolidated financial statements, for the year during which the sales are made.
With the continuing acquisitions, mergers and other consolidations in the supermarket industry, there is increasing concentration of candied fruit buying activity. During 2016, the Company derived 13.4% of its consolidated net sales from Wal-Mart Stores, Inc. This customer is not affiliated with Paradise, Inc. in any way. The loss of this customer would have a material adverse effect on operating earnings.
While there is no industry-wide data available, management estimates that the Company sold approximately 85% of all candied fruits and peels consumed in the U.S. during 2016. The Company knows of two major competitors; however, it estimates that neither of these has as large a share of the market as the Company’s.
The molded plastics industry is very large and diverse, and management has no reasonable estimate of its total size. Many products produced by the Company are materials for its own use in the packaging of candied fruits for sale at the retail level. Outside sales represent approximately 90% of the Company’s total plastics production at cost. During 2016, the Company derived 17.8% of its consolidated net sales from Aqua Cal, Inc. The loss of this customer would have a material adverse effect on operating earnings.
In the above business segments, it is the opinion of management that price, which is to include the cost of delivery, is the largest single competitive factor, followed by product quality and customer service.
| I-3 |
Item 1. Business (Continued)
Given the above competitive criteria, it is the opinion of management that the Company is in a favorable position.
Over the years, the Company has made capital investments of over $1 million in order to comply with the growing body of environmental regulations. These have included the building of screening and pretreatment facilities for water effluent, the redesign and rebuilding of one processing department in order to improve the control of the quality of air emissions, and removing underground fuel storage tanks to approved above ground locations. All of these facilities are permitted by governmental authorities at various levels, and are subjected to periodic testing as a condition of permit maintenance and renewal. All required permitting is currently in effect, and the Company is in full compliance with all terms and conditions stated therein.
By local ordinance, it is required that all water effluent is metered, tested and discharged into a municipal industrial waste treatment plant. During 2016, costs for this discharge approximated $210,000, and management estimates that all expenses directly related to compliance with environmental regulations total well over $275,000 annually, which includes costs for permits, third party inspections and depreciation of installations.
The Company employs between 130 and 195 people, depending upon the season.
The Company conducts operations principally within the United States. Foreign activities are not material.
Built in 1961, the plant is located in a modern industrial subdivision in Plant City, Florida, approximately 20 miles east of the City of Tampa. It is served by three railroad sidings, and has paved road access to three major state and national highways. It has production and warehouse facilities of nearly 350,000 square feet.
During 1985, the Company acquired approximately 5.2 acres immediately adjacent to, and to the west of, its main plant building. Several buildings and a truck weight scale existed on the property. Some of these facilities have been significantly updated, remodeled, and/or rebuilt and are used for the strawberry processing and some plastics molding operations. In 2006, Paradise, Inc. built a new 10,000 square foot building on this land. The building is primarily used for the production of custom vacuum forming parts for its plastics customers.
The Company owns its plant facilities and other properties free and clear of any mortgage obligations.
Because of the unique processing methods employed for candied fruit, much of the equipment used by the Company is designed, built and assembled by the Company’s employees. The Company considers its plant one of the most modern, automated plants in the industry. The equipment consists of vats, dehydrators, tanks, giant evaporators, carbon filter presses, syrup pumps and other scientifically designed processing equipment. Finished retail packages are stored in air-conditioned warehouses, if required.
Regarding molded plastic manufacturing, most equipment is normally available from a number of competitive sources. The molds used for specialized plastic products must be individually designed and manufactured, requiring substantial investment, and are considered proprietary.
| I-4 |
None
Item 4. Mine Safety Disclosures
Not Applicable
| I-5 |
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities
On August 22, 1997, the Securities and Exchange Commission issued new listing requirements for companies listed on the NASDAQ Small Cap Market. The requirements became effective on February 23, 1998. As of December 2016, the Company had not met the listing criteria. Paradise, Inc. is currently listed as PARF:OTCPK.
| (a) | The following table shows the range of closing bid prices for the Company’s Common Stock in the over-the-counter market for the calendar quarters indicated. The quotations represent prices in the over-the-counter market between dealers in securities, do not include retail mark-up, mark-down, or commissions and may not necessarily represent actual transactions. |
| BID PRICES | ||||||||
| High | Low | |||||||
| 2016 | ||||||||
| First Quarter | 29.00 | 22.85 | ||||||
| Second Quarter | 26.00 | 23.00 | ||||||
| Third Quarter | 28.83 | 25.35 | ||||||
| Fourth Quarter | 27.50 | 23.21 | ||||||
| 2015 | ||||||||
| First Quarter | 23.00 | 20.53 | ||||||
| Second Quarter | 26.00 | 21.15 | ||||||
| Third Quarter | 24.00 | 21.19 | ||||||
| Fourth Quarter | 23.50 | 21.49 | ||||||
| (b) | Approximate Number of Equity Security Holders |
As of March 30, 2017, the approximate number of holders of record of each class of equity securities of the Registrant were:
| NUMBER OF | |
| TITLE OF CLASS | HOLDERS OF RECORD |
| Common Stock, $.30 Par Value | 114 |
| (c) | Dividend History and Policy |
Dividends have been declared and paid annually when warranted by profitability. On March 2, 2017, the Board of Directors declared dividends of $0.25 per share to stockholders of record on April 13, 2017. Dividends paid to stockholders for 2016 were $0.15 per share and for 2015 were $0.11 per share.
| II-1 |
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities (Continued)
| (c) | Dividend History and Policy (Continued) |
The Company does not have a standard policy in regards to the declaration and payment of dividends. Each year dividend payments, if any, are determined upon consideration of the current profitability, cash flow requirements, investment outlook and other pertinent factors.
Item 6. Selected Financial Data – not applicable
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Summary
The following tables set forth for the periods indicated (i) percentages which certain items in the financial data bear to net sales of the Company and (ii) percentage increase (decrease) of such item as compared to the indicated prior period.
| Relationship to | Period to Period | |||||||||||||||
| Total Revenue | Increase (Decrease) | |||||||||||||||
| Year Ended December 31, | Years Ended | |||||||||||||||
| 2016 | 2015 | 2016-2015 | 2015-2014 | |||||||||||||
| NET SALES: | ||||||||||||||||
| Candied Fruit | 68.7 | % | 68.3 | % | (1.5 | )% | (2.3 | )% | ||||||||
| Molded Plastics | 31.3 | 31.7 | (3.4 | ) | (12.4 | ) | ||||||||||
| Total Sales | 100.0 | 100.0 | (2.1 | ) | (5.8 | ) | ||||||||||
| Cost of Sales | 73.7 | 75.9 | (4.9 | ) | (8.8 | ) | ||||||||||
| Selling, General and Administrative Expenses | 18.4 | 20.2 | (10.8 | ) | 4.9 | |||||||||||
| Amortization Expense | 0.3 | 0.6 | (51.2 | ) | (2.8 | ) | ||||||||||
| Interest Expense | - | - | - | (100.0 | ) | |||||||||||
| Total Expenses | 92.4 | 96.7 | (6.4 | ) | (6.2 | ) | ||||||||||
| Income from Operations | 7.6 | 3.4 | 120.9 | 10.7 | ||||||||||||
| Other Income, Net | - | 0.1 | (78.2 | ) | (62.0 | ) | ||||||||||
| Income Before Provision for Income Taxes | 7.6 | 3.4 | 116.1 | 5.8 | ||||||||||||
| Provision for Income Taxes | 2.8 | 1.3 | 116.5 | 7.6 | ||||||||||||
| Net Income | 4.8 | % | 2.1 | % | 115.9 | % | 4.7 | % | ||||||||
| II-2 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Liquidity
Management is not aware of any demands, commitments, events or uncertainties that will result in, or are reasonably likely to result in, a material increase or decrease in the Company’s liquidity. As discussed in footnote 4 of the Company’s consolidated financial statements, a line of credit is available to the Company to finance short-term working capital needs.
Capital Resources
The Company does not have any material outstanding commitments for capital expenditures. Management is not aware of any material trends either favorable or unfavorable in the Company’s capital resources.
Critical Accounting Policies and Estimates
The following discussion and analysis is based upon our consolidated financial statements which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, and assets and liabilities during the periods reported. Estimates are used when accounting for certain items such as revenues, allowances for returns, early payment discounts, customer discounts, doubtful accounts, employee compensation programs, depreciation and amortization periods, taxes, inventory values, insurance programs, goodwill, other intangible assets and long-lived assets. We base our estimates on historical experience, where applicable and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from our estimates under different assumptions or conditions. We believe that the following critical accounting policies affect our more significant judgments and estimates used in preparation of our consolidated financial statements:
Fair Value of Financial Instruments
The aggregated net fair value estimates discussed in the Company’s consolidated financial statements are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
| II-3 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Critical Accounting Policies and Estimates (Continued)
Accounts Receivable
Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against accounts receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories. Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 2016 and 2015. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms.
Goodwill
Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended December 31, 2016 and 2015, the Company determined that its goodwill was not impaired.
Identifiable Intangible Assets
Customer Base and Non-Compete Agreement
The customer base and non-compete agreement represents $1,258,000 of the fair value of these assets pursuant to the Company’s purchase during 2006 of an unrelated entity’s inventories, their customer list and a non-compete agreement for a period of ten years. The customer base and non-compete agreement are being amortized over ten years. Accumulated amortization at December 31, 2016 and 2015 totaled approximately $1,258,000 and $1,196,000, respectively.
| II-4 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Impact of Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will be effective for the Company on January 1, 2018, which is the effective date for public companies. Early application is permitted as of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU No. 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which amends FASB ASU Topic 330, Inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value and eliminates the option that currently exists for measuring inventory at market value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonable predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This ASU should be applied prospectively with earlier application permitted. The Company does not anticipate the adoption of this ASU to have a material impact on the Company’s financial position or results of operations.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes. The ASU provides presentation requirements to classify deferred tax assets and liabilities as noncurrent in a classified balance sheet. The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for any interim and annual financial statements that have not yet been issued. The new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)(ASU 2016-02). Under ASU No. 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU No. 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU No. 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.
| II-5 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
Impact of Recently Issued Accounting Pronouncements (Continued)
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.
2016 Compared to 2015
Results of Operations
Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 68.7% of consolidated net sales during the current twelve month reporting period ending December 31, 2016. Fruit segment net sales for 2016 decreased 1.5% to $15,957,022 from $16,202,626 for the similar reporting period of 2015 as sales to several major customers were reduced by the number of holiday fruit ingredients ordered and placed into various holiday baking centers within their stores. As the challenges of Paradise, Inc.’s retail glace’ customers of limited space to promote the Company’s products have been well documented, Paradise, Inc.’s sales personnel have branched outside the traditional brick and mortar sites to sell its products. With improvements to the Company’s website over the past several years, consumers now have the opportunity to place orders online through our partnership with Amazon. Online sales of glace’ fruit ingredients, which represents a small portion of overall net sales, has experienced steady growth increasing 23.8% to $153,155 as of December 31, 2016 compared to $123,670 as of December 31, 2015. Online sales also offer a year round opportunity to sell fruit cake ingredients. This combined with promoting the use of fruit cake ingredients for non-traditional holiday baking ideas as shown on the Company’s web-site may add a new generation of customers and thus increased sales moving forward.
Paradise Plastics, Inc., (Paradise Plastics) a wholly owned company of Paradise, Inc. which accounted for 31.3% of total consolidated net sales to unaffiliated customers, had a decline in sales of 3.4% to $7,273,364 from $7,531,815 for the twelve months ended December 31, 2016 compared to December 31, 2015. The reason for this decline was due in part in sales to existing customers decreased at a faster pace than the ability to replace with new purchase orders or new accounts. As mentioned in previous filings, Paradise Plastics produces various types of custom molded plastics parts for its customers which are then assembled into finished products by its customers for sale to the end user. Thus, in many cases, continued production for these parts are based on their success achieved by the end user. However, in some cases, a change in production technique will have an impact on sales. As such, beginning during the first quarter of 2017, a long term plastics customer decided to transfer production of thermoformed parts away from Paradise Plastics to another supplier who is able to process these custom molding parts by injection molding. The major benefit to our customer is the ability to significantly lower their cost per part via injection molding. Paradise Plastics had offered to finance up to $3 million to construct a facility along with purchase of necessary injection molding equipment to retain this business, however the offer was declined. Therefore, based upon when the transfer of production from Paradise Plastics to the new injection molding supplier is completed, the potential loss of net sales could exceed $1 million in 2017. Correspondingly, the gross margin impact to Paradise Plastics after offsets for reductions in personnel and variable factory overhead will range from $150,000 to $200,000 during 2017. Paradise Plastics continues to receive purchase orders from this long term customer on many other custom molding parts and efforts to replace this loss of business are under way.
| II-6 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
2016 Compared to 2015 (Continued)
Results of Operations (Continued)
Consolidated cost of sales as a percentage of consolidated net sales decreased 2.2% for the twelve months of December 31, 2016 compared to the previous twelve months of 2015 as management re-started brining operations in January of 2016. As previously reported, with more than an adequate amount of brined peel in the Company’s inventory as of January 1, 2015, brining operations were postponed for 2015. Thus, after brining over 2.9 million lbs. of peel inventory during the first and second quarters of 2016, the allocation of this production over a relatively fixed amount of factory overhead resulted in the improvement in cost of sales as reported above.
Selling, general and administrative expenses decreased $515,173 or 10.8% for the twelve months ending December 31, 2016 compared to the similar reporting period of 2015. Reasons for this decrease are as follows: first, three senior employees, two within finance and administration and one sales executive retired during late 2015. The net savings which included the hiring of two new employees within finance and administration approximated $250,000 during 2016. Secondly, as disclosed in an 8K filing on August 22, 2016, Melvin. S. Gordon, Chairman and CEO began his leave of absence due to health reasons from the Company resulting in savings of $121,531 during the third and fourth quarters of 2016. Lastly, Paradise, Inc. made a management decision during 2015 to expense to operations a total of $165,401 in outstanding receivables and legal fees owed to the Company from a customer that ceased operations during the third quarter of 2015.
Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2016 and 2015 was $0. Interest expense when incurred is directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2016 and 2015, the Company’s revolving line of credit balance was $0, its letters of credit balance were $42,938 and $582,839, respectively, and all debt and loan covenants required by its primary lender were in full compliance. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%. Paradise, Inc.’s revolving line of credit is with a financial institution for a two year period maturing on July 31, 2017.
| II-7 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
2016 Compared to 2015 (Continued)
Other Significant Items
Accounts Receivable balance less allowances for sales returns at December 31, 2016 was $2,108,608 compared to $2,182,306 at December 31, 2015 as payments from the Company’s retail fruit products were relatively consistent with the timing of receipts with the prior year. As disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. At December 31, 2016, returns from customers resulted in the allowance for sales returns of $1,215,153 compared to $1,066,314 as of December 31, 2015.
The Company finances ongoing operations primarily with cash provided by our operating activities, which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2016 and December 31, 2015, outstanding letters of credit were $42,938 and $582,839, respectively. At December 31, 2016 and 2015, the Company had $9,240,638 and $8,791,938 respectively, in cash. Due to the seasonality of our business, cash on hand at December 31, 2016 of $9,240,638 is primarily committed for estimated 2017 purchase orders totaling more than $3.5 million of brined fruit. In addition, working capital needs for payroll and for fixed and variable factory overhead can exceed as much as $1,000,000 per month during the peak production months of June through September of each year.
Summary
Paradise, Inc.’s consolidated net sales decreased 2.1% for the twelve months of operations ending December 31, 2016 to $23,230,386 from $23,734,441 for the similar reporting period of 2015 as orders from several existing customers within the fruit and plastics segments slowed during 2016. However, with the need to produce additional fruit inventory to meet existing customer demand for the 2016 holiday selling season, the Company processed 2.9 million lbs. of orange peel. This additional processing of raw material into brined and finished goods fruit inventory allocated over a relatively fixed amount of factory overhead improved cost of sales as a percentage of sales by 2.2%. In addition, the Company achieved tremendous savings in Selling, General and Administrative (S, G&A) expenses of 10.8% as several senior sales and finance employees retired during late 2015. The improvements in cost of sales and S, G &A expenses more than offset the decline in sales during 2016 resulting in income before provision for income taxes of $1,768,368 compared to $818,274. After applying Provision for Income Taxes for 2016 and 2015 of $661,503 and $305,516, Net Income for 2016 was $1,106,865 compared to $512,758 for 2015. Earnings per Share at December 31, 2016 and 2015 were $2.13 and $0.99, respectively.
| II-8 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
2015 Compared to 2014
Results of Operations
Paradise, Inc. is the leading producer of glace’ fruit, a primary ingredient of fruit cakes sold to manufacturing bakers, institutional users and supermarkets for sale during the holiday seasons of Thanksgiving and Christmas. Paradise, Inc. consists of two business segments, fruit and plastics. Fruit segment net sales represented 68.3% of consolidated net sales during the current twelve month reporting period ending December 31, 2015. Fruit segment net sales for 2015 decreased 2.3% to $16,202,626 from $16,581,479 for the similar reporting period of 2014 as consolidation within the Supermarket industry over the past twelve months limited the number of outlets for the company to sell its glace’ fruit products. To offset the reduction in physical store locations, Paradise, Inc. has reached out through the internet to market and sell its products. During 2015, the Company sold via Amazon’s web-site glace’ fruit products totaling approximately $117,000 in net sales. Understanding this amount is less than .5% of overall fruit segment sales, it does represent a 19% increase in internet sales over 2014 and will in the future continue to be an integral part of Paradise, Inc.’s marketing effort to expand its sale of glace’ fruit.
Paradise Plastics, Inc., a wholly owned subsidiary of Paradise, Inc., represented 31.7% of consolidated net sales during 2015. Total plastics net sales decreased 12.4% to $7,531,815 for the twelve months ending December 31, 2015 compared to $8,601,555 for the similar reporting period of December 31, 2014. This decrease as first disclosed during the Company’s 2015 first quarter filing is directly attributable to a decision by a long term plastics customer within the housing market to transition production of a next generation injection molding part to their facility as of January 1, 2015. To counter this impact, Paradise Plastics, Inc. is continuing to aggressively market its plastics expertise to other industries such as medical supplies, food processing and aerospace. As mentioned in previous filings, the Company made a financial commitment during 2014 to become ISO9001 compliant. This certification process represents a series of standards, developed by the International Organization for Standardization (ISO) for manufacturing companies and will be emphasized as we continue to seek new business opportunities.
Consolidated cost of sales decreased, as a percentage of overall sales, approximately 8.8% during the twelve months ending December 31, 2015 compared to the similar reporting period of 2014. This overall percentage decrease was due to the need to process an additional 1.9 million lbs. of raw fruit materials into fruit in drum inventory during 2015. Delays in the shipment and receipt of certain raw fruit commodities from overseas suppliers during 2014 reduced the six month window of time needed to process these raw fruit commodities into fruit in drum inventory. Thus, the increase in the number of lbs. processed during the months of May through October, 2015 allocated over a relatively fixed amount of factory overhead for such major categories as labor, property insurance, maintenance and depreciation resulted in the driving factor to reduce overall cost of sales by 8.8%. Correspondingly, the increase of fruit in drum inventory resulted in a $694,760 increase in overall inventory at December 31, 2015 compared to December 31, 2014.
| II-9 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
2015 Compared to 2014 (Continued)
Results of Operations (Continued)
Selling, general and administrative expenses increased $225,168 or 4.9% for the twelve months ending December 31, 2015 compared to the similar reporting period of 2014. The main reason for this increase is related to the decision of Paradise, Inc.’s management to expense to current operations a total of $140,401 in outstanding receivables and inventory owed to Paradise Plastics, Inc. from a customer that ceased operations during the third quarter of 2015. All legal cost incurred in trying to recover any portion of this amount totaling approximately $25,000, has been expensed during 2015.
Paradise, Inc.’s interest expense on its revolving line of credit for the twelve months ended December 31, 2015 was $0 compared to $2,016 for December 31, 2014. Interest expense when incurred is directly related to cash advances received from the Company’s primary lender’s revolving line of credit as the Company needs to procure sizable amounts of inventory months in advance of its holiday selling season. As of December 31, 2015, the Company’s revolving line of credit balance was $0, its letters of credit balance was $582,839 and all debt and loan covenants required by its primary lender were in full compliance. Paradise, Inc.’s revolving line of credit has a maximum limit of $12,000,000 with a borrowing base of 80% of the Company’s eligible receivables plus the lesser of $6,000,000 or 50% of the Company’s eligible inventory from January through May of each year and 60% of eligible inventory from June to December of each year. This agreement is secured by all the assets of the Company and the agreement requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. Interest is payable monthly at the bank’s LIBOR rate plus 1.75%. Paradise, Inc.’s revolving line of credit is with a financial institution for a two year period maturing on July 31, 2017.
Other Significant Items
Accounts Receivable balance less allowances for sales returns at December 31, 2015 was $2,182,306 compared to $3,046,669 at December 31, 2014. This represents a decrease of $864,363 or 28.4%. The primary reason for this decrease is attributable to timing, as several large customers of Company’s retail fruit products made payments up to 60 days earlier in 2015 compared to the previous year. Furthermore, as disclosed in Note 1 under significant accounting policies, management provides for estimated product returns by applying an allowance against Accounts Receivable for the invoice amount of the return. During 2015, the Company did experience an increase in returns from customers as of December 31, 2015 which resulted in the allowance for sales returns of $1,066,314 compared to $912,789 as of December 31, 2014.
| II-10 |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)
2015 Compared to 2014 (Continued)
Other Significant Items (Continued)
The Company finances ongoing operations primarily with cash provided by our operating activities, which are seasonal in nature. The principal sources of liquidity are cash flows provided by operating activities, existing cash, and a line of credit facility. At December 31, 2015 and December 31, 2014, the Company had $8,791,938 and $7,788,010 respectively, in cash. Additionally, a revolving line of credit facility is available with a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus up to 50% of the Company’s eligible inventory. Up to $1,750,000 of the facility is available for issuance of import letters of credit. At December 31, 2015 and 2014, $582,839 and $112,879, respectively, was due for issued letters of credit under the facility and there were no outstanding advances at December 31, 2015 and 2014. Net cash increased $1,003,928 as net cash provided by operating and financing activities totaled $1,887,456, which was offset by $883,528 in investing activities.
Summary
Paradise, Inc.’s consolidated net sales decreased $1,448,593 to $23,734,441 for 2015 compared to $25,183,034 for 2014 primarily due to a decision by a long term plastics customer to bring production of certain thermoforming parts produced by Paradise Plastics, Inc. to their own facility. Offsetting this loss of net sales was a decrease in cost of sales of $1,744,841 as delays in the receipt of raw fruit materials during 2014 resulted in the processing of an additional 1.9 million lbs. of fruit in drum inventory during 2015. The combination of these two events along with the write off of $140,401 in accounts receivable and inventory related to a plastics customer during the third quarter of 2015 resulted in a slight increase in net income after provision for income taxes as of December 31, 2015 of $23,192. Net income after provision of income taxes as of December 31, 2015 was $512,758 or $0.99 earnings per share compared to $489,566 or $0.94 earnings per share as of December 31, 2014.
| II-11 |
Item 8. Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Paradise, Inc.
We have audited the accompanying consolidated balance sheets of Paradise, Inc., and subsidiaries (“the Company”) as of December 31, 2016 and 2015 and the related consolidated statements of income, changes in stockholders’ equity and cash flows for each of the years in the two year period ended December 31, 2016. Paradise, Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Paradise, Inc. and subsidiaries as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.
| /s/ Warren Averett, LLC | |
| Tampa, Florida | |
| March 31, 2017 |
| II-12 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
| DECEMBER 31, | ||||||||
| 2016 | 2015 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 9,240,638 | $ | 8,791,938 | ||||
| Accounts Receivable, Net of Allowance for Doubtful Accounts of $ -0- and Allowance for Returns of $1,215,153 (2016) and $1,066,314 (2015) | 2,108,608 | 2,182,306 | ||||||
| Inventories | 8,305,033 | 8,179,669 | ||||||
| Income Tax Receivable | - | 76,290 | ||||||
| Prepaid Expenses and Other Current Assets | 296,851 | 318,250 | ||||||
| Deferred Income Tax Asset | 243,099 | 241,834 | ||||||
| Total Current Assets | 20,194,229 | 19,790,287 | ||||||
| PROPERTY, PLANT AND EQUIPMENT: | ||||||||
| Net of Accumulated Depreciation of $18,650,822 (2016) and $18,294,592 (2015) | 4,162,636 | 3,924,480 | ||||||
| GOODWILL | 413,280 | 413,280 | ||||||
| CUSTOMER BASE AND NON-COMPETE AGREEMENT | - | 62,092 | ||||||
| OTHER ASSETS | 393,994 | 392,426 | ||||||
| TOTAL ASSETS | $ | 25,164,139 | $ | 24,582,565 | ||||
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
| II-13 |
LIABILITIES AND STOCKHOLDERS’ EQUITY
| DECEMBER 31, | ||||||||
| 2016 | 2015 | |||||||
| CURRENT LIABILITIES: | ||||||||
| Short-Term Debt | $ | 42,938 | $ | 582,839 | ||||
| Accounts Payable | 808,696 | 615,928 | ||||||
| Accrued Expenses | 689,177 | 843,851 | ||||||
| Total Current Liabilities | 1,540,811 | 2,042,618 | ||||||
| DEFERRED INCOME TAX LIABILITY | 369,581 | 315,125 | ||||||
| Total Liabilities | 1,910,392 | 2,357,743 | ||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Common Stock, $.30 Par Value, 2,000,000 Shares Authorized, 583,094 Shares Issued and 519,600 Shares Outstanding | 174,928 | 174,928 | ||||||
| Capital in Excess of Par Value | 1,288,793 | 1,288,793 | ||||||
| Retained Earnings | 22,063,245 | 21,034,320 | ||||||
| 23,526,966 | 22,498,041 | |||||||
| Less: Common Stock in Treasury, at Cost, 63,494 Shares | 273,219 | 273,219 | ||||||
| Total Stockholders’ Equity | 23,253,747 | 22,224,822 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 25,164,139 | $ | 24,582,565 | ||||
| II-14 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Income
| FOR THE YEARS ENDED | ||||||||
| DECEMBER 31, | ||||||||
| 2016 | 2015 | |||||||
| NET SALES | $ | 23,230,386 | $ | 23,734,441 | ||||
| COSTS AND EXPENSES: | ||||||||
| Cost of Goods Sold | 17,122,466 | 18,005,311 | ||||||
| Selling, General and Administrative Expenses | 4,275,683 | 4,790,856 | ||||||
| Amortization Expense | 68,203 | 139,885 | ||||||
| Total Costs and Expenses | 21,466,352 | 22,936,052 | ||||||
| INCOME FROM OPERATIONS | 1,764,034 | 798,389 | ||||||
| OTHER INCOME – NET | 4,334 | 19,885 | ||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 1,768,368 | 818,274 | ||||||
| PROVISION FOR INCOME TAXES | 661,503 | 305,516 | ||||||
| NET INCOME | $ | 1,106,865 | $ | 512,758 | ||||
| EARNINGS PER SHARE: | ||||||||
| Basic | $ | 2.13 | $ | 0.99 | ||||
| Diluted | $ | 2.13 | $ | 0.99 | ||||
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
| II-15 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended December 31, 2016 and 2015
| CAPITAL IN | ||||||||||||||||||||
| COMMON | EXCESS OF | RETAINED | TREASURY | |||||||||||||||||
| STOCK | PAR VALUE | EARNINGS | STOCK | TOTAL | ||||||||||||||||
| Balance, December 31, 2014 | $ | 174,928 | $ | 1,288,793 | $ | 20,578,718 | $ | (273,219 | ) | $ | 21,769,220 | |||||||||
| Cash Dividends Declared, $0.11 per Share | (57,156 | ) | (57,156 | ) | ||||||||||||||||
| Net Income | 512,758 | 512,758 | ||||||||||||||||||
| Balance, December 31, 2015 | 174,928 | 1,288,793 | 21,034,320 | (273,219 | ) | 22,224,822 | ||||||||||||||
| Cash Dividends Declared, $0.15 per Share | (77,940 | ) | (77,940 | ) | ||||||||||||||||
| Net Income | 1,106,865 | 1,106,865 | ||||||||||||||||||
| Balance, December 31, 2016 | $ | 174,928 | $ | 1,288,793 | $ | 22,063,245 | $ | (273,219 | ) | $ | 23,253,747 | |||||||||
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
| II-16 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
| FOR THE YEARS ENDED | ||||||||
| DECEMBER 31, | ||||||||
| 2016 | 2015 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income | $ | 1,106,865 | $ | 512,758 | ||||
| Adjustments to Reconcile Net Income to Net Cash | ||||||||
| Provided by Operating Activities: | ||||||||
| Provision for Sales Returns | 148,839 | 153,525 | ||||||
| Provision for Estimated Inventory Returns | (99,609 | ) | (132,227 | ) | ||||
| Provision for Deferred Income Taxes | 53,191 | 146,915 | ||||||
| Depreciation and Amortization | 460,673 | 579,604 | ||||||
| Decrease (Increase) in: | ||||||||
| Accounts Receivable | (75,141 | ) | 710,838 | |||||
| Inventories | (25,755 | ) | (562,533 | ) | ||||
| Prepaid Expenses and Other Current Assets | 20,115 | (11,299 | ) | |||||
| Income Tax Receivable | 77,574 | 1,987 | ||||||
| Other Assets | (16,354 | ) | 38,095 | |||||
| Increase (Decrease) in: | ||||||||
| Accounts Payable | 192,768 | 12,596 | ||||||
| Accrued Expenses | (154,674 | ) | 24,393 | |||||
| Net Cash Provided by Operating Activities | 1,688,492 | 1,474,652 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of Property, Plant and Equipment | (630,626 | ) | (890,370 | ) | ||||
| Change in Cash Surrender Value of Life Insurance | 8,675 | 6,842 | ||||||
| Net Cash Used in Investing Activities | (621,951 | ) | (883,528 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from Short-Term Debt | 323,626 | 1,738,557 | ||||||
| Dividends Paid | (77,940 | ) | (57,156 | ) | ||||
| Payments on Short-Term Debt | (863,527 | ) | (1,268,597 | ) | ||||
| Net Cash (Used) Provided by Financing Activities | (617,841 | ) | 412,804 | |||||
| II-17 |
PARADISE, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows (Continued)
| FOR THE YEARS ENDED | ||||||||
| DECEMBER 31, | ||||||||
| 2016 | 2015 | |||||||
| NET CHANGE IN CASH | 448,700 | 1,003,928 | ||||||
| CASH, at Beginning of Year | 8,791,938 | 7,788,010 | ||||||
| CASH, at End of Year | $ | 9,240,638 | $ | 8,791,938 | ||||
| SUPPLEMENTAL DISCLOSURES OF | ||||||||
| CASH FLOW INFORMATION: | ||||||||
| Cash Paid During the Year for: | ||||||||
| Income Taxes | $ | 718,046 | $ | 268,750 | ||||
The Accompanying Notes are an Integral Part of These Consolidated Financial Statements
| II-18 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
| NOTE 1: | SIGNIFICANT ACCOUNTING POLICIES |
Paradise, Inc. operations are conducted through two business segments, candied fruit and molded plastics. The primary operation of the fruit segment is production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, the processing of frozen strawberry products, for sale to commercial and institutional users such as preserves, dairies, drink manufacturers, etc. The molded plastics segment provides production of plastic containers for the Company’s products and other molded plastics for sale to unaffiliated customers. Substantially all of the Company’s customers are located in the United States of America.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of all material intercompany accounts, transactions and profits.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand.
| II-19 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Accounts Receivable and Revenue Recognition
Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against Accounts Receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories.
Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 2016 and 2015. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms.
The Company recognizes revenue upon the shipment or delivery of goods, depending on the agreed upon terms with its customers.
Inventories
Inventories are valued at the lower of cost (first-in, first-out) or market. Cost includes material, labor, factory overhead and depreciation.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Generally, the straight-line method is used in computing depreciation. Estimated useful lives of property, plant and equipment range from 3 – 40 years.
Expenditures which significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property, plant and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the
current earnings.
| II-20 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Goodwill
Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended, December 31, 2016 and 2015, the Company determined that its goodwill was not impaired.
Identifiable Intangible Assets
Customer Base and Non-Compete Agreement
The customer base and non-compete agreement represents $1,258,000 of the fair value of these assets pursuant to the Company’s purchase during 2006 of an unrelated entity’s inventories, their customer list and a non-compete agreement for a period of ten years. The customer base and non-compete agreement are being amortized over ten years.
Amortization expense of intangible assets subject to amortization for the years ended December 31, 2016 and 2015 was $68,203 and $139,885, respectively. Accumulated amortization as of December 31, 2016 and 2015 totaled $1,258,000 and $1,200,908, respectively.
Long-lived Assets
The Company’s long-lived assets other than goodwill are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. During the years ended, December 31, 2016 and 2015, the Company determined that its long-lived assets were not impaired.
Selling Expenses
The Company considers freight delivery costs to be selling expenses and has included $611,322 (2016) and $634,425 (2015) in selling, general and administrative expenses in the accompanying statements of income.
| II-21 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Employee Benefit Plan
The Company has a 401(k) retirement plan for all eligible employees. Eligibility requirements for employees are based on completing 1,000 hours of service by the end of the first twelve months of consecutive employment and being at least 21 years old. Employee contributions are voluntary and subject to Internal Revenue Service limitations. The Company provides a matching contribution subject to annual review of the Company’s financial performance. For the years ended December 31, 2016 and 2015, the Company incurred $21,691 and $29,223, respectively, in 401(k) expense.
Earnings Per Share
Basic and diluted earnings per common share are based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600 shares at December 31, 2016 and 2015. There are no dilutive securities outstanding at December 31, 2016 and 2015.
Impact of Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will be effective for the Company on January 1, 2018, which is the effective date for public companies. Early application is permitted as of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements.
| II-22 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2014
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Impact of Recently Issued Accounting Pronouncements (Continued)
In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which amends FASB ASU Topic 330, Inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value and eliminates the option that currently exists for measuring inventory at market value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonable predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This ASU should be applied prospectively with earlier application permitted. The Company does not anticipate the adoption of this ASU to have a material impact on the Company’s financial position or results of operations.
In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes. The ASU provides presentation requirements to classify deferred tax assets and liabilities as noncurrent in a classified balance sheet. The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for any interim and annual financial statements that have not yet been issued. The new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)(ASU 2016-02). Under ASU 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s 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.
| II-23 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 2: INVENTORIES
| 2016 | 2015 | |||||||
| Supplies | $ | 165,446 | $ | 161,258 | ||||
| Raw Materials | 5,254,103 | 5,114,439 | ||||||
| Work in Progress | 1,026,657 | 785,711 | ||||||
| Finished Goods | 1,858,827 | 2,118,261 | ||||||
| Total | $ | 8,305,033 | $ | 8,179,669 | ||||
Included in Finished Goods inventory are estimated returns related to the Provision for Sales Returns totaling $920,657 (2016) and $821,048 (2015).
Substantially all inventories are pledged as collateral for certain short-term obligations.
NOTE 3: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
| 2016 | 2015 | |||||||
| Land and Improvements | $ | 656,040 | $ | 656,040 | ||||
| Buildings and Improvements | 7,611,446 | 7,102,413 | ||||||
| Machinery and Equipment | 13,075,187 | 12,782,237 | ||||||
| Vehicles | 749,274 | 701,968 | ||||||
| Furniture and Fixtures | 721,511 | 723,912 | ||||||
| Construction in Progress | - | 252,502 | ||||||
| Total | 22,813,458 | 22,219,072 | ||||||
| Less: Accumulated Depreciation | 18,650,822 | 18,294,592 | ||||||
| NET | $ | 4,162,636 | $ | 3,924,480 | ||||
All of the real property, machinery and equipment are pledged as collateral for the Company’s short-term debt obligations.
Depreciation expense for the years ended December 31, 2016 and 2015 was $392,470 and $439,719, respectively.
| II-24 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 4: SHORT-TERM DEBT
| 2016 | 2015 | |||||||
| Letters of credit
and other short-term debt under a revolving line of credit with a bank. | $ | 42,938 | $ | 582,839 | ||||
| TOTAL | $ | 42,938 | $ | 582,839 | ||||
On July 31, 2015, Paradise, Inc. renewed its revolving line of credit with SunTrust Bank through July 31, 2017. This renewal provides for a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus the lessor of $6,000,000 or 50% of the Company’s eligible inventory from January 1 to May 31 and 60% from June 1 to December 31 of each year. Within this agreement are letters of credit with a limit of $1,750,000. The agreement is secured by all of the assets of the Company and requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. The Company was in compliance with these covenants at December 31, 2016. Interest is payable monthly at the bank’s LIBOR plus 1.75%.
NOTE 5: OPERATING LEASES
The Company leases certain automobiles and office equipment under operating leases ranging in length from thirty-six to sixty months. Lease payments charged to operations amounted to $84,330 (2016) and $90,195 (2015), respectively.
At December 31, 2016, future minimum payments required under leases with terms greater than one year are as follows:
| Years Ending | Operating | |||
| December 31, | Leases | |||
| 2017 | $ | 47,159 | ||
| 2018 | 27,539 | |||
| 2019 | 11,302 | |||
| Total Minimum Lease Payments | $ | 86,000 | ||
| II-25 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 6: ACCRUED EXPENSES
Accrued Expenses consisted of the following:
| 2016 | 2015 | |||||||
| Accrued Payroll and Bonuses | $ | 231,245 | $ | 274,064 | ||||
| Accrued Brokerage Payable | 230,432 | 173,580 | ||||||
| Other Accrued Expenses | - | 20,043 | ||||||
| Coupon Reimbursement | 60,000 | 60,446 | ||||||
| Accrued Credits Due to Customers | 167,500 | 128,410 | ||||||
| Income Taxes Payable | - | 187,308 | ||||||
| Total | $ | 689,177 | $ | 843,851 | ||||
NOTE 7: PROVISION FOR FEDERAL AND STATE INCOME TAXES
The Company’s provision for income taxes was as follows:
| 2016 | 2015 | |||||||
| Current Federal Taxes | $ | 522,999 | $ | 102,950 | ||||
| Current State Taxes | 85,313 | 55,651 | ||||||
| Current Provision | 608,312 | 158,601 | ||||||
| Deferred Federal Taxes | 48,060 | 132,743 | ||||||
| Deferred State Taxes | 5,131 | 14,172 | ||||||
| Deferred Provision | 53,191 | 146,915 | ||||||
| Total Provision | $ | 661,503 | $ | 305,516 | ||||
| II-26 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 7: PROVISION FOR FEDERAL AND STATE INCOME TAXES (CONTINUED)
The income tax provision differs from the amount of tax determined by applying the Federal statutory rate as follows:
| 2016 | 2015 | |||||||
| Statutory tax | $ | 601,245 | $ | 278,213 | ||||
| State income tax, net of federal tax | 64,192 | 29,703 | ||||||
| Nondeductible expenses | (23,774 | ) | (2,400 | ) | ||||
| Other | 19,840 | - | ||||||
| $ | 661,503 | $ | 305,516 | |||||
Net deferred tax assets and liabilities were comprised of the following:
| 2016 | 2015 | |||||||
| Current deferred tax assets (liabilities): | ||||||||
| Allowance for Sales Returns and Related Provision for Return of Finished Goods | $ | 110,819 | $ | 92,294 | ||||
| Inventory Valuation | 244,468 | 269,204 | ||||||
| Deferred Compensation Trust Expense | - | - | ||||||
| Prepaid Expenses | (112,188 | ) | (119,664 | ) | ||||
| Total deferred tax assets - current | $ | 243,099 | $ | 241,834 | ||||
| Non current deferred tax assets (liabilities): | ||||||||
| Tax over Book Depreciation and Amortization | $ | (369,581 | ) | $ | (315,125 | ) | ||
| Total deferred tax liabilities - noncurrent | $ | (369,581 | ) | $ | (315,125 | ) | ||
| Net deferred tax liability | $ | (126,482 | ) | $ | (73,291 | ) | ||
| II-27 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 7: PROVISION FOR FEDERAL AND STATE INCOME TAXES (CONTINUED)
The Company follows Accounting Standards Codification Topic 740, “Income Taxes” (“ASC Topic 740”). This standard provides interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the determination of the ultimate tax effects is uncertain. We record our tax provision based on current and future income taxes that will be due. In the determination of our provision, we have taken certain tax positions in the consideration of the effects of income and expenses that have been recognized and included in the accompanying consolidated financial statements that may or may not be recognized in the determination of current or future income taxes. We record a liability for these unrecognized tax benefits when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We review our liability for unrecognized tax benefits quarterly and adjust it in light of changing facts and circumstances, such as the outcome of tax audit.
As of December 31, 2016 and 2015, we do not expect that any of the tax positions taken by the Company, if challenged, would result in a significant tax liability.
| II-28 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 8: BUSINESS SEGMENT DATA
The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows:
| BUSINESS SEGMENT | OPERATION | |
| Candied Fruit | Production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, the processing of frozen strawberry products, for sale to commercial and institutional users such as preservers, dairies, drink manufacturers, etc. | |
| Molded Plastics | Production of plastics containers and other molded plastics for sale to various food processors and others. |
| YEAR ENDED | YEAR ENDED | |||||||
| 2016 | 2015 | |||||||
| NET SALES IN EACH SEGMENT | ||||||||
| Candied Fruit: Sales to Unaffiliated Customers | $ | 15,957,022 | $ | 16,202,626 | ||||
| Molded Plastics: Sales to Unaffiliated Customers | 7,273,364 | 7,531,815 | ||||||
| Net Sales | $ | 23,230,386 | $ | 23,734,441 | ||||
| II-29 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 8: BUSINESS SEGMENT DATA (CONTINUED)
| YEAR ENDED | YEAR ENDED | |||||||
| 2016 | 2015 | |||||||
| THE OPERATING PROFIT OF EACH SEGMENT IS LISTED BELOW | ||||||||
| Candied Fruit | $ | 4,763,316 | $ | 4,228,325 | ||||
| Molded Plastics | 1,276,401 | 1,360,920 | ||||||
| Operating Profit of Segments | 6,039,717 | 5,589,245 | ||||||
| General Corporate Expenses, Net | (4,234,000 | ) | (4,707,382 | ) | ||||
| General Corporate Depreciation and Amortization Expense | (41,683 | ) | (83,474 | ) | ||||
| Other Income | 4,334 | 19,885 | ||||||
| Income Before Provision for Income Taxes | $ | 1,768,368 | $ | 818,274 | ||||
Operating profit is composed of net sales, less direct costs and overhead costs associated with each segment. The candied fruit segment purchases items from the molded plastics segment at cost. These transactions are then eliminated during consolidation. Due to the high degree of integration between the segments of the Company, it is not practical to allocate general corporate expenses, interest, and other income between the various segments.
| YEAR ENDED | YEAR ENDED | |||||||
| 2016 | 2015 | |||||||
| Identifiable Assets of Each | ||||||||
| Segment are Listed Below: | ||||||||
| Candied Fruit | $ | 9,946,683 | $ | 9,161,755 | ||||
| Molded Plastics | 4,211,696 | 4,874,312 | ||||||
| Identifiable Assets | 14,158,379 | 14,036,067 | ||||||
| General Corporate Assets | 11,005,760 | 10,546,498 | ||||||
| Total Assets | $ | 25,164,139 | $ | 24,582,565 | ||||
| II-30 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 8: BUSINESS SEGMENT DATA (CONTINUED)
Included in Identifiable Assets of the Molded Plastics Segment is goodwill totaling $413,280 at both December 31, 2016 and 2015.
Identifiable assets by segment are those assets that are principally used in the operations of each segment. General corporate assets are principally cash, land and buildings.
| YEAR ENDED | YEAR ENDED | |||||||
| 2016 | 2015 | |||||||
| Depreciation and Amortization Expense of Each Segment are Listed Below: | ||||||||
| Candied Fruit | $ | 268,124 | $ | 349,656 | ||||
| Molded Plastics | 150,866 | 146,474 | ||||||
| Segment Depreciation and Amortization Expense | 418,990 | 496,130 | ||||||
| General Corporate Depreciation and Amortization Expense | 41,683 | 83,474 | ||||||
| Total Depreciation and Amortization Expense | $ | 460,673 | $ | 579,604 | ||||
| YEAR ENDED | YEAR ENDED | |||||||
| 2016 | 2015 | |||||||
| Capital Expenditures of Each Segment are Listed Below: | ||||||||
| Candied Fruit | $ | 270,117 | $ | 361,572 | ||||
| Molded Plastics | 278,970 | 387,780 | ||||||
| Segment Capital Expenditures | 549,087 | 749,352 | ||||||
| General Corporate Capital Expenditures | 81,539 | 141,018 | ||||||
| Total Capital Expenditures | $ | 630,626 | $ | 890,370 | ||||
The Company conducts operations only within the United States. Foreign sales are insignificant; primarily all sales are to domestic companies.
| II-31 |
PARADISE, INC.
AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2016 AND 2015
NOTE 9: MAJOR CUSTOMERS
During 2016, the Company derived 13.4% and 17.8% of its consolidated revenues from Wal-Mart Stores, Inc. and Aqua Cal, Inc., respectively. During 2015, the Company derived approximately 14.4% and 16.4% of its consolidated revenues from Wal-Mart Stores, Inc. and Aqua Cal, Inc., respectively. As of December 31, 2016 and 2015, Wal-Mart Stores, Inc.’s accounts receivable balance represented 56.0% and 75.9% of total accounts receivable before allowance for returns, respectively, and Aqua Cal, Inc.’s accounts receivable balance represented 12.5% and 14.5% of total accounts receivable at December 31, 2016 and 2015, respectively.
NOTE 10: MAJOR VENDORS
During 2016 and 2015, the Company purchased 48% and 44% of its inventory from three suppliers. At December 31, 2016, amounts owed to these suppliers is 38% of total accounts payable. At December 31, 2015, the Company did not have any amounts owed to these suppliers.
NOTE 11: CONCENTRATION OF CREDIT RISK
Cash is maintained at a major financial institution and, at times, balances may exceed federally insured limits. The Company’s deposits in excess of federally insured limits at December 31, 2016 and 2015 were approximately $8,794,000 and $8,593,000, respectively.
NOTE 12: SUBSEQUENT EVENT
On March 2, 2017, Paradise, Inc. declared a regular dividend of $0.25 per share to stockholders of record on April 13, 2017.
| II-32 |
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Not applicable.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of our year ended December 31, 2016 pursuant to Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of our year ended December 31, 2016, our disclosure controls and procedures were effective.
The term “disclosure controls and procedures,” as defined under the Exchange Act, means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 2016 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f). Our management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2016. Management’s evaluation was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Our internal control over financial reporting includes those policies and procedures that:
| II-33 |
Item 9A. Controls and Procedures (Continued)
Management’s Annual Report on Internal Control over Financial Reporting (Continued)
| (1) | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; |
| (2) | provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and board of directors; and |
| (3) | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on our consolidated financial statements. |
Because of its inherent limitations, internal control over financial reporting determined to be effective can provide only reasonable assurance with respect to financial statement preparation and may not prevent or detect all misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that, as of the end of our year ended December 31, 2016, our internal control over financial reporting was effective.
Management’s Annual Report on Internal Control Over Financial Reporting does not include an attestation report from the Company’s registered public accounting firm Warren Averett, LLC.
Important Considerations
The effectiveness of our disclosure and procedures and our internal control over financial reporting is subject to various inherent limitations, include cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error, and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may become inadequate because of changes in conditions and the risk that the degree of compliance with policies or procedures may deteriorate over time. Because of these limitations, there can be no assurance that any system of disclosure controls and procedures or internal control over financial reporting will be successful in preventing all errors or fraud or in making all material information known in a timely manner to the appropriate levels of management.
Not applicable.
| II-34 |
Item 10. Directors and Executive Officers of the Registrant
| Directors of the Registrant | ||
| Melvin S. Gordon – | Chairman and Director of the Registrant, 83 years old. | |
| Term of office will expire at next stockholders’ meeting. | ||
| Officer with Registrant past 52 years. | ||
| Eugene L. Weiner – | Vice-President of the Registrant, 85 years old. | |
| Term of office will expire at next stockholders’ meeting. | ||
| Officer with Registrant past 51 years. | ||
| Randy S. Gordon – | CEO and President of the Registrant, 61 years old. | |
| Term of office will expire at next stockholders’ meeting. | ||
| Employee or officer of Registrant past 38 years. | ||
| Tracy W. Schulis – | Senior Vice-President and Secretary of the Registrant, | |
| 59 years old. Term of office will expire at next stockholders’ | ||
| meeting. Employee or officer of Registrant past 37 years. | ||
| Mark H. Gordon – | Executive Vice-President of the Registrant, 54 years old. | |
| Term of office will expire at next stockholders’ meeting. | ||
| Employee or Officer of Registrant past 31 years. | ||
| Executive Officers of the Registrant | ||
| Randy S. Gordon – | CEO and President, 61 years old. | |
| Term of office will expire at next annual directors’ meeting. | ||
| Employee or officer of Registrant past 38 years. | ||
| Eugene L. Weiner – | Vice-President, 85 years old. | |
| Term of office will expire at next annual directors’ meeting. | ||
| Officer with Registrant past 51 years. | ||
| Tracy W. Schulis – | Senior Vice-President and Secretary, 59 years old. | |
| Term of office will expire at next annual directors’ meeting. | ||
| Employee or officer of Registrant past 37 years. | ||
| Mark H. Gordon – | Executive Vice-President, 54 years old. | |
| Term of office will expire at next annual directors’ meeting. | ||
| Employee or Officer of Registrant past 31 years. | ||
| Jack M. Laskowitz – | CFO and Treasurer, 60 years old. | |
| Term of office will expire at next annual directors’ meeting. | ||
| Employee or officer with Registrant past 16 years. | ||
| III-1 |
Item 10. Directors and Executive Officers of the Registrant (Continued)
Family Relationships
Melvin S. Gordon is the father of Randy S. Gordon and Mark H. Gordon.
Audit Committee Financial Expert
Rules adopted by the Securities and Exchange Commission (the “SEC”) to implement sections of the Sarbanes-Oxley Act of 2002 (the “Act”) require disclosure of whether the Company has an audit committee financial expert on its audit committee. The Company has not formally designated an audit committee; however, the Act stipulates that if no such committee exists, then the audit committee is the entire board of directors.
The Company’s Board of Directors has determined that Eugene L. Weiner, is “an audit committee financial expert”. Eugene L. Weiner is a Director and also a Vice-President of the Company and therefore is not independent of management.
Code of Business Conduct and Ethics
The Company has adopted a Code of Business Conduct and Ethics that applies to all executive officers, directors and employees of the Company. The Code of Business Conduct and Ethics is attached as an exhibit to this Annual Report on Form 10-K.
| III-2 |
Item 11. Executive Compensation
(a) and (b) The following summary compensation table sets forth all remuneration paid or accrued by the Company and its subsidiaries for the years ended December 31, 2016 and 2015 to its Chief Executive Officer and the four other highest paid executive officers whose total remuneration exceeded $100,000.
COMPENSATION
| ALL OTHER | ||||||||||||||||
| NAME AND PRINCIPAL | COMPENSATION | |||||||||||||||
| POSITION | YEAR | SALARY | BONUS | ( 1 and 2 ) | ||||||||||||
| Melvin S. Gordon, | ||||||||||||||||
| Chairman and Director | 2016 | $ | 181,316 | $ | - | $ | 5,065 | |||||||||
| 2015 | 253,701 | 48,940 | 5,271 | |||||||||||||
| Randy S. Gordon, | ||||||||||||||||
| President and Chief Executive Officer | 2016 | 209,464 | 62,421 | 30,763 | ||||||||||||
| 2015 | 202,070 | 47,000 | 30,778 | |||||||||||||
| Mark H. Gordon, | ||||||||||||||||
| Executive Vice-President | 2016 | 202,070 | 55,746 | 30,190 | ||||||||||||
| 2015 | 202,070 | 43,358 | 28,043 | |||||||||||||
| Tracy W. Schulis, | ||||||||||||||||
| Senior Vice-President and Secretary | 2016 | 202,070 | 65,043 | 45,624 | ||||||||||||
| 2015 | 202,070 | 51,340 | 45,628 | |||||||||||||
| Jack M. Laskowitz, | ||||||||||||||||
| Chief Financial Officer | 2016 | 130,936 | 34,498 | 14,712 | ||||||||||||
| 2015 | 130,936 | 27,413 | 14,691 | |||||||||||||
NOTES TO THE ABOVE TABLE
| 1. | Includes personal use of Company automobiles and PS-58 costs. |
| 2. | All Other Compensation includes life insurance premiums paid on behalf of the officers in accordance with the Company’s 162 bonus plan along with matching contributions provided for by the Company’s 401(k) Retirement Savings Plan. |
| III-3 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
| (a) | The following table sets forth as of December 31, 2016, information concerning the beneficial ownership of the common stock of the Company by the persons who own, are known by the company to own, or who the Company has been advised have filed with the S.E.C. declarations of beneficial ownership, of more than 5% of the outstanding common stock. |
| AMOUNT & NATURE | ||||||||||||
| NAME AND ADDRESS OF | TITLE OF | OF BENEFICIAL | PERCENT | |||||||||
| BENEFICIAL OWNER | CLASS | OWNERSHIP (1) | OF CLASS | |||||||||
| Melvin S. Gordon | Common | |||||||||||
| 2611 Bayshore Blvd. | ||||||||||||
| Tampa, Florida | 192,742 | (1) | 37.1 | % | ||||||||
| TOTAL | 192,742 | 37.1 | % | |||||||||
| Salvatore Muoio | Common | |||||||||||
| c/o S. Muoio & Co. LLC | ||||||||||||
| 509 Madison Ave. Suite 406 | ||||||||||||
| New York, NY 10022 | 40,740 | (2) | 7.8 | % | ||||||||
| TOTAL | 40,740 | 7.8 | % | |||||||||
| (1) | Includes 141,760 shares owned by the Helen A. Weaner Family Partnership, Ltd., Mr. Melvin S. Gordon, sole trustee. |
| (2) | The nature of the beneficial ownership for all shares is sole voting and investment power. |
| III-4 |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters (Continued)
| (b) | Beneficial ownership of common stock held by all directors and officers of the Company as a group: |
| AMOUNT & NATURE | ||||||||||||
| TITLE OF | OF BENEFICIAL | PERCENT | ||||||||||
| CLASS | OWNERSHIP (1) | OF CLASS | ||||||||||
| Directors and Officers as a Group | Common | 206,109 | 39.7 | % | ||||||||
| Melvin S. Gordon | Common | 192,742 | (2) | 37.1 | % | |||||||
| Eugene L. Weiner | Common | 307 | - | |||||||||
| Randy S. Gordon | Common | 7,400 | 1.4 | |||||||||
| Tracy W. Schulis | Common | 2,060 | 0.4 | |||||||||
| Mark H. Gordon | Common | 3,600 | 0.7 | |||||||||
| (1) | The nature of the beneficial ownership for all shares is sole voting and investment power. |
| (2) | Includes 141,760 shares owned by the Helen A. Weaner Family Partnership, Ltd., Mr. Melvin S. Gordon, sole trustee. |
| (c) | The Company knows of no contractual arrangements which may at a subsequent date result in a change in control of the Company. |
| III-5 |
Item 13. Certain Relationships and Related Transactions
None
Item 14. Principal Accountant Fees and Services
Audit Fees
The aggregate fees billed for professional services rendered by Warren Averett, LLC for the audits of the Company’s annual consolidated financial statements and review of consolidated financial statements included in the Company’s Form 10-K and Forms 10-Q for fiscal years 2016 and 2015 were $147,470 and $149,500, respectively. At the time of this filing, not all audit fees had been billed for the 2016 fiscal year.
All Other Fees
Fees billed by Warren Averett, LLC for other products and services provided during the years ended December 31, 2016 and 2015 were approximately $26,200 and $10,000, respectively.
The Company has not formally designated an audit committee and as a result, the entire board of directors performs the duties of an audit committee. It’s the Board’s policy to pre-approve all services provided by our auditors.
| III-6 |
Item 15. Exhibits and Financial Statement Schedules
Exhibit (3) – Articles of Incorporation and By-Laws (Incorporated by reference from Exhibits to Paradise, Inc.’s Annual Report on Form 10-KSB for the year ended December 31, 1993, filed on March 31, 1994)
Exhibit (11) – Statement Re: Computation of Per Share Earnings (Incorporated by reference from Exhibits to page II-22 of this Form 10-K)
Exhibit (31.1) – Certification of Chief Executive Officer pursuant to Rule 13a-14(a) (filed herewith)
Exhibit (31.2) – Certification of Chief Financial Officer pursuant to Rule 13a-14(a) (filed herewith)
Exhibit (32.1) – Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 (filed herewith)
Exhibit (32.2) – Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350 (filed herewith)
Exhibit (EX-101.INS) – XBRL Instance Document
Exhibit (EX-101.SCH) – XBRL Taxonomy Extension Schema
Exhibit (EX-101.CAL) – XBRL Taxonomy Extension Calculation Linkbase
Exhibit (EX-101.DEF) – XBRL Taxonomy Extension Definition Linkbase
Exhibit (EX-101.LAB) – XBRL Taxonomy Extension Label Linkbase
Exhibit (EX-101.PRE) – XBRL Taxonomy Extension Presentation Linkbase
| III-7 |
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| March 31, 2017 | PARADISE, INC. |
| Date | |
| /s/ Randy S. Gordon | |
| Randy S. Gordon | |
| President and Chief Executive Officer |
In accordance with the Exchange Act this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
| /s/ Melvin S. Gordon | Chairman and Director | March 31, 2017 | ||
| Melvin S. Gordon | Date | |||
| /s/ Eugene L. Weiner | Vice-President | March 31, 2017 | ||
| Eugene L. Weiner | and Director | Date | ||
| /s/ Randy S. Gordon | CEO, President and Director | March 31, 2017 | ||
| Randy S. Gordon | Date | |||
| /s/ Tracy W. Schulis | Senior Vice-President, | March 31, 2017 | ||
| Tracy W. Schulis | Secretary and Director | Date | ||
| /s/ Mark H. Gordon | Executive Vice-President | March 31, 2017 | ||
| Mark H. Gordon | and Director | Date | ||
| /s/ Jack M. Laskowitz | CFO and Treasurer | March 31, 2017 | ||
| Jack M. Laskowitz | Date |
| III-8 |
Exhibit 31.1
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
I, Randy S. Gordon, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Paradise, Inc. |
| 2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
| 3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Randy S. Gordon | |
| Randy S. Gordon | |
| President and Chief Executive Officer | Date: March 31, 2017 |
Exhibit 31.2
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
I, Jack M. Laskowitz, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Paradise, Inc. |
| 2. | Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; |
| 3. | Based on my knowledge, the consolidated financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Jack M. Laskowitz | |
| Jack M. Laskowitz | |
| Chief Financial Officer and Treasurer | Date: March 31, 2017 |
Exhibit 32.1
Certification of CEO Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Paradise, Inc. on Form 10-K for the period ending December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Randy S. Gordon, as Chief Executive Officer of Paradise, Inc., certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Paradise, Inc. |
| /s/ Randy S. Gordon | |
| Randy S. Gordon | |
| President and Chief Executive Officer | Date: March 31, 2017 |
Exhibit 32.2
Certification of CFO Pursuant to 18 U.S.C. Section 1350
as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of Paradise, Inc. on Form 10-K for the period ending December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jack M. Laskowitz, as Chief Financial Officer of Paradise, Inc., certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of Paradise, Inc. |
| /s/ Jack M. Laskowitz | |
| Jack M. Laskowitz | |
| Chief Financial Officer and Treasurer | Date: March 31, 2017 |
Document And Entity Information - USD ($) |
12 Months Ended | ||
|---|---|---|---|
Dec. 31, 2016 |
Mar. 30, 2017 |
Jun. 30, 2016 |
|
| Document Information [Line Items] | |||
| Document Type | 10-K | ||
| Amendment Flag | false | ||
| Document Period End Date | Dec. 31, 2016 | ||
| Document Fiscal Year Focus | 2016 | ||
| Document Fiscal Period Focus | FY | ||
| Entity Registrant Name | PARADISE INC | ||
| Entity Central Index Key | 0000076149 | ||
| Current Fiscal Year End Date | --12-31 | ||
| Entity Well-known Seasoned Issuer | No | ||
| Entity Voluntary Filers | No | ||
| Entity Current Reporting Status | Yes | ||
| Entity Filer Category | Smaller Reporting Company | ||
| Entity Public Float | $ 7,367,039 | ||
| Trading Symbol | PARF | ||
| Entity Common Stock, Shares Outstanding | 519,600 |
Consolidated Balance Sheets [Parenthetical] - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Allowance for Doubtful Accounts (in dollars) | $ 0 | $ 0 |
| Allowance For Returns | 1,215,153 | 1,066,314 |
| Accumulated depreciation (in dollars) | $ 18,650,822 | $ 18,294,592 |
| Common stock, par value (in dollars per share) | $ 0.30 | $ 0.30 |
| Common stock, shares authorized | 2,000,000 | 2,000,000 |
| Common stock, shares issued | 583,094 | 583,094 |
| Common stock, shares outstanding | 519,600 | 519,600 |
| Treasury stock, shares | 63,494 | 63,494 |
Consolidated Statements of Income - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| NET SALES | $ 23,230,386 | $ 23,734,441 |
| COSTS AND EXPENSES: | ||
| Cost of Goods Sold | 17,122,466 | 18,005,311 |
| Selling, General and Administrative Expenses | 4,275,683 | 4,790,856 |
| Amortization Expense | 68,203 | 139,885 |
| Total Costs and Expenses | 21,466,352 | 22,936,052 |
| INCOME FROM OPERATIONS | 1,764,034 | 798,389 |
| OTHER INCOME - NET | 4,334 | 19,885 |
| INCOME BEFORE PROVISION FOR INCOME TAXES | 1,768,368 | 818,274 |
| PROVISION FOR INCOME TAXES | 661,503 | 305,516 |
| NET INCOME | $ 1,106,865 | $ 512,758 |
| EARNINGS PER SHARE: | ||
| Basic (in dollars per share) | $ 2.13 | $ 0.99 |
| Diluted (in dollars per share) | $ 2.13 | $ 0.99 |
Consolidated Statements of Changes in Stockholders' Equity - USD ($) |
Total |
Common Stock [Member] |
Capital In Excess Of Par Value [Member] |
Retained Earnings [Member] |
Treasury Stock [Member] |
|---|---|---|---|---|---|
| Balance at Dec. 31, 2014 | $ 21,769,220 | $ 174,928 | $ 1,288,793 | $ 20,578,718 | $ (273,219) |
| Cash Dividends | (57,156) | (57,156) | |||
| Net Income | 512,758 | 512,758 | |||
| Balance at Dec. 31, 2015 | 22,224,822 | 174,928 | 1,288,793 | 21,034,320 | (273,219) |
| Cash Dividends | (77,940) | (77,940) | |||
| Net Income | 1,106,865 | 1,106,865 | |||
| Balance at Dec. 31, 2016 | $ 23,253,747 | $ 174,928 | $ 1,288,793 | $ 22,063,245 | $ (273,219) |
Consolidated Statements of Changes in Stockholders' Equity [Parenthetical] - $ / shares |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Cash Dividend Declared (in dollars per share) | $ 0.15 | $ 0.11 |
SIGNIFICANT ACCOUNTING POLICIES |
12 Months Ended | ||||
|---|---|---|---|---|---|
Dec. 31, 2016 | |||||
| Accounting Policies [Abstract] | |||||
| Significant Accounting Policies [Text Block] |
Paradise, Inc. operations are conducted through two business segments, candied fruit and molded plastics. The primary operation of the fruit segment is production of candied fruit, a basic fruitcake ingredient, sold to manufacturing bakers, institutional users, and retailers for use in home baking. Also, based on market conditions, the processing of frozen strawberry products, for sale to commercial and institutional users such as preserves, dairies, drink manufacturers, etc. The molded plastics segment provides production of plastic containers for the Company’s products and other molded plastics for sale to unaffiliated customers. Substantially all of the Company’s customers are located in the United States of America. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of all material intercompany accounts, transactions and profits. Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. Accounts Receivable and Revenue Recognition Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against Accounts Receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories. Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 2016 and 2015. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms. The Company recognizes revenue upon the shipment or delivery of goods, depending on the agreed upon terms with its customers. Inventories Inventories are valued at the lower of cost (first-in, first-out) or market. Cost includes material, labor, factory overhead and depreciation. Property, Plant and Equipment Property, plant and equipment are stated at cost. Generally, the straight-line method is used in computing depreciation. Estimated useful lives of property, plant and equipment range from 3 – 40 years. Expenditures which significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property, plant and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the current earnings. Goodwill Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended, December 31, 2016 and 2015, the Company determined that its goodwill was not impaired. Identifiable Intangible Assets Customer Base and Non-Compete Agreement The customer base and non-compete agreement represents $1,258,000 of the fair value of these assets pursuant to the Company’s purchase during 2006 of an unrelated entity’s inventories, their customer list and a non-compete agreement for a period of ten years. The customer base and non-compete agreement are being amortized over ten years. Amortization expense of intangible assets subject to amortization for the years ended December 31, 2016 and 2015 was $68,203 and $139,885, respectively. Accumulated amortization as of December 31, 2016 and 2015 totaled $1,258,000 and $1,200,908, respectively. Long-lived Assets The Company’s long-lived assets other than goodwill are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. During the years ended, December 31, 2016 and 2015, the Company determined that its long-lived assets were not impaired. Selling Expenses The Company considers freight delivery costs to be selling expenses and has included $611,322 (2016) and $634,425 (2015) in selling, general and administrative expenses in the accompanying statements of income. Employee Benefit Plan The Company has a 401(k) retirement plan for all eligible employees. Eligibility requirements for employees are based on completing 1,000 hours of service by the end of the first twelve months of consecutive employment and being at least 21 years old. Employee contributions are voluntary and subject to Internal Revenue Service limitations. The Company provides a matching contribution subject to annual review of the Company’s financial performance. For the years ended December 31, 2016 and 2015, the Company incurred $21,691 and $29,223, respectively, in 401(k) expense. Earnings Per Share Basic and diluted earnings per common share are based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600 shares at December 31, 2016 and 2015. There are no dilutive securities outstanding at December 31, 2016 and 2015. Impact of Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will be effective for the Company on January 1, 2018, which is the effective date for public companies. Early application is permitted as of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements. In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which amends FASB ASU Topic 330, Inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value and eliminates the option that currently exists for measuring inventory at market value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonable predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This ASU should be applied prospectively with earlier application permitted. The Company does not anticipate the adoption of this ASU to have a material impact on the Company’s financial position or results of operations. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes. The ASU provides presentation requirements to classify deferred tax assets and liabilities as noncurrent in a classified balance sheet. The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for any interim and annual financial statements that have not yet been issued. The new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)(ASU 2016-02). Under ASU 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s 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. |
INVENTORIES |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Text Block] | NOTE 2: INVENTORIES
Included in Finished Goods inventory are estimated returns related to the Provision for Sales Returns totaling $920,657 (2016) and $821,048 (2015). Substantially all inventories are pledged as collateral for certain short-term obligations. |
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PROPERTY, PLANT AND EQUIPMENT |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment Disclosure [Text Block] | NOTE 3: PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following:
All of the real property, machinery and equipment are pledged as collateral for the Company’s short-term debt obligations. Depreciation expense for the years ended December 31, 2016 and 2015 was $392,470 and $439,719, respectively. |
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SHORT-TERM DEBT |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
| Short-term Debt [Text Block] | NOTE 4: SHORT-TERM DEBT
On July 31, 2015, Paradise, Inc. renewed its revolving line of credit with SunTrust Bank through July 31, 2017. This renewal provides for a maximum limit of $12 million and a borrowing limit of 80% of the Company’s eligible receivables plus the lessor of $6,000,000 or 50% of the Company’s eligible inventory from January 1 to May 31 and 60% from June 1 to December 31 of each year. Within this agreement are letters of credit with a limit of $1,750,000. The agreement is secured by all of the assets of the Company and requires that certain conditions are met for the Company to continue borrowing, including debt service coverage and debt to equity ratios and other financial covenants including an agreement not to encumber a mortgage on the property without bank approval. The Company was in compliance with these covenants at December 31, 2016. Interest is payable monthly at the bank’s LIBOR plus 1.75%. |
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OPERATING LEASES |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||
| Leases, Operating [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
| Operating Leases of Lessor Disclosure [Text Block] | NOTE 5: OPERATING LEASES The Company leases certain automobiles and office equipment under operating leases ranging in length from thirty-six to sixty months. Lease payments charged to operations amounted to $84,330 (2016) and $90,195 (2015), respectively. At December 31, 2016, future minimum payments required under leases with terms greater than one year are as follows:
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ACCRUED EXPENSES |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Liabilities Disclosure [Text Block] | NOTE 6: ACCRUED EXPENSES Accrued Expenses consisted of the following:
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PROVISION FOR FEDERAL AND STATE INCOME TAXES |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Text Block] | NOTE 7: PROVISION FOR FEDERAL AND STATE INCOME TAXES The Company’s provision for income taxes was as follows:
The income tax provision differs from the amount of tax determined by applying the Federal statutory rate as follows:
Net deferred tax assets and liabilities were comprised of the following:
The Company follows Accounting Standards Codification Topic 740, “Income Taxes” (“ASC Topic 740”). This standard provides interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the determination of the ultimate tax effects is uncertain. We record our tax provision based on current and future income taxes that will be due. In the determination of our provision, we have taken certain tax positions in the consideration of the effects of income and expenses that have been recognized and included in the accompanying consolidated financial statements that may or may not be recognized in the determination of current or future income taxes. We record a liability for these unrecognized tax benefits when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We review our liability for unrecognized tax benefits quarterly and adjust it in light of changing facts and circumstances, such as the outcome of tax audit. As of December 31, 2016 and 2015, we do not expect that any of the tax positions taken by the Company, if challenged, would result in a significant tax liability. |
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BUSINESS SEGMENT DATA |
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| Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting Disclosure [Text Block] | NOTE 8: BUSINESS SEGMENT DATA The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows:
Operating profit is composed of net sales, less direct costs and overhead costs associated with each segment. The candied fruit segment purchases items from the molded plastics segment at cost. These transactions are then eliminated during consolidation. Due to the high degree of integration between the segments of the Company, it is not practical to allocate general corporate expenses, interest, and other income between the various segments.
Included in Identifiable Assets of the Molded Plastics Segment is goodwill totaling $413,280 at both December 31, 2016 and 2015. 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.
The Company conducts operations only within the United States. Foreign sales are insignificant; primarily all sales are to domestic companies. |
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MAJOR CUSTOMERS |
12 Months Ended | |
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Dec. 31, 2016 | ||
| Major Customers [Abstract] | ||
| Major Customers [Text Block] | NOTE 9: MAJOR CUSTOMERS During 2016, the Company derived 13.4% and 17.8% of its consolidated revenues from Wal-Mart Stores, Inc. and Aqua Cal, Inc., respectively. During 2015, the Company derived approximately 14.4% and 16.4% of its consolidated revenues from Wal-Mart Stores, Inc. and Aqua Cal, Inc., respectively. As of December 31, 2016 and 2015, Wal-Mart Stores, Inc.’s accounts receivable balance represented 56.0% and 75.9% of total accounts receivable before allowance for returns, respectively, and Aqua Cal, Inc.’s accounts receivable balance represented 12.5% and 14.5% of total accounts receivable at December 31, 2016 and 2015, respectively. |
MAJOR VENDORS |
12 Months Ended | |
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Dec. 31, 2016 | ||
| Major Vendors [Abstract] | ||
| Major Vendors [Text Block] | NOTE 10: MAJOR VENDORS During 2016 and 2015, the Company purchased 48% and 44% of its inventory from three suppliers. At December 31, 2016, amounts owed to these suppliers is 38% of total accounts payable. At December 31, 2015, the Company did not have any amounts owed to these suppliers. |
CONCENTRATION OF CREDIT RISK |
12 Months Ended | |
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Dec. 31, 2016 | ||
| Risks and Uncertainties [Abstract] | ||
| Concentration Risk Uninsured Deposits [Text Block] | NOTE 11: CONCENTRATION OF CREDIT RISK Cash is maintained at a major financial institution and, at times, balances may exceed federally insured limits. The Company’s deposits in excess of federally insured limits at December 31, 2016 and 2015 were approximately $8,794,000 and $8,593,000, respectively. |
SUBSEQUENT EVENT |
12 Months Ended | |
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Dec. 31, 2016 | ||
| Subsequent Events [Abstract] | ||
| Subsequent Events [Text Block] | NOTE 12: SUBSEQUENT EVENT On March 2, 2017, Paradise, Inc. declared a regular dividend of $0.25 per share to stockholders of record on April 13, 2017. |
SIGNIFICANT ACCOUNTING POLICIES (Policies) |
12 Months Ended | |
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Dec. 31, 2016 | ||
| Accounting Policies [Abstract] | ||
| Consolidation, Policy [Policy Text Block] | Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of all material intercompany accounts, transactions and profits. |
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| Use of Estimates, Policy [Policy Text Block] | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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| Fair Value of Financial Instruments, Policy [Policy Text Block] | Fair Value of Financial Instruments The aggregated net fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values. These financial instruments include cash, receivables, payables, accrued expenses and short-term borrowings. Fair values were assumed to approximate carrying values for these financial instruments since they are short-term in nature and their carrying amounts approximate fair values or they are receivable or payable on demand. |
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| Accounts Receivable And Revenue Recognition Policy [Text Block] | Accounts Receivable and Revenue Recognition Management reviews subsequent collections on accounts receivable and writes off all year-end balances that are not deemed collectible by the time the consolidated financial statements are issued. Additionally, management has provided for estimated product returns by applying an allowance against Accounts Receivable for the invoiced price of the returns. A provision to recognize a related estimate of finished goods returns has been added to inventories. Management considers the remaining accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts has been established as of December 31, 2016 and 2015. If accounts become uncollectible, they will be charged to operations when that determination is made. The Company does not have a policy to charge interest on past due amounts. Accounts Receivable are considered past due based on invoice terms. The Company recognizes revenue upon the shipment or delivery of goods, depending on the agreed upon terms with its customers. |
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| Inventory, Policy [Policy Text Block] | Inventories Inventories are valued at the lower of cost (first-in, first-out) or market. Cost includes material, labor, factory overhead and depreciation. |
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| Property, Plant and Equipment, Policy [Policy Text Block] | Property, Plant and Equipment Property, plant and equipment are stated at cost. Generally, the straight-line method is used in computing depreciation. Estimated useful lives of property, plant and equipment range from 3 – 40 years. Expenditures which significantly increase values or extend useful lives are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Upon sale or retirement of property, plant and equipment, the cost and related accumulated depreciation are eliminated from the respective accounts and the resulting gain or loss is included in the current earnings. |
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| Goodwill and Intangible Assets, Goodwill, Policy [Policy Text Block] | Goodwill Goodwill totaling $413,280 represents the excess purchase price over the fair value of the net assets acquired in the acquisition of Mastercraft Products Corporation. These costs are reviewed for impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that goodwill may be impaired. During the years ended, December 31, 2016 and 2015, the Company determined that its goodwill was not impaired. |
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| Intangible Assets, Finite-Lived, Policy [Policy Text Block] | Identifiable Intangible Assets Customer Base and Non-Compete Agreement The customer base and non-compete agreement represents $1,258,000 of the fair value of these assets pursuant to the Company’s purchase during 2006 of an unrelated entity’s inventories, their customer list and a non-compete agreement for a period of ten years. The customer base and non-compete agreement are being amortized over ten years. Amortization expense of intangible assets subject to amortization for the years ended December 31, 2016 and 2015 was $68,203 and $139,885, respectively. Accumulated amortization as of December 31, 2016 and 2015 totaled $1,258,000 and $1,200,908, respectively. Long-lived Assets The Company’s long-lived assets other than goodwill are reviewed for potential impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. During the years ended, December 31, 2016 and 2015, the Company determined that its long-lived assets were not impaired. |
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| Selling, General and Administrative Expenses, Policy [Policy Text Block] | Selling Expenses The Company considers freight delivery costs to be selling expenses and has included $611,322 (2016) and $634,425 (2015) in selling, general and administrative expenses in the accompanying statements of income. |
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| Postemployment Benefit Plans, Policy [Policy Text Block] | Employee Benefit Plan The Company has a 401(k) retirement plan for all eligible employees. Eligibility requirements for employees are based on completing 1,000 hours of service by the end of the first twelve months of consecutive employment and being at least 21 years old. Employee contributions are voluntary and subject to Internal Revenue Service limitations. The Company provides a matching contribution subject to annual review of the Company’s financial performance. For the years ended December 31, 2016 and 2015, the Company incurred $21,691 and $29,223, respectively, in 401(k) expense. |
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| Earnings Per Share, Policy [Policy Text Block] | Earnings Per Share Basic and diluted earnings per common share are based on the weighted average number of shares outstanding and assumed to be outstanding of 519,600 shares at December 31, 2016 and 2015. There are no dilutive securities outstanding at December 31, 2016 and 2015. |
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| New Accounting Pronouncements, Policy [Policy Text Block] | Impact of Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will be effective for the Company on January 1, 2018, which is the effective date for public companies. Early application is permitted as of January 1, 2017. The standard permits the use of either the retrospective or cumulative effect transition method. The Company is evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures. The Company has not yet selected a transition method nor has it determined the effect of the standard on its consolidated financial statements. In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which amends FASB ASU Topic 330, Inventory. This ASU requires entities to measure inventory at the lower of cost or net realizable value and eliminates the option that currently exists for measuring inventory at market value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonable predictable costs of completion, disposal, and transportation. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This ASU should be applied prospectively with earlier application permitted. The Company does not anticipate the adoption of this ASU to have a material impact on the Company’s financial position or results of operations. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes, which simplifies the presentation of deferred income taxes. The ASU provides presentation requirements to classify deferred tax assets and liabilities as noncurrent in a classified balance sheet. The standard is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for any interim and annual financial statements that have not yet been issued. The new guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The Company does not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842)(ASU 2016-02). Under ASU 2016-2, an entity will be required to recognize right-of-use assets and lease liabilities on its balance sheet and disclose key information about leasing arrangements. ASU 2016-02 offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases. For public companies, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period, and requires a modified retrospective adoption, with early adoption permitted. The Company does not expect the adoption of this standard to have a material impact on the Company’s 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. |
INVENTORIES (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventory, Current [Table Text Block] |
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PROPERTY, PLANT AND EQUIPMENT (Tables) |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Table Text Block] | Property, plant and equipment consisted of the following:
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SHORT-TERM DEBT (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
| Schedule of Short-term Debt [Table Text Block] |
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OPERATING LEASES (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||
| Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block] | At December 31, 2016, future minimum payments required under leases with terms greater than one year are as follows:
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ACCRUED EXPENSES (Tables) |
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accrued Liabilities [Table Text Block] | Accrued Expenses consisted of the following:
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PROVISION FOR FEDERAL AND STATE INCOME TAXES (Tables) |
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| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Components of Income Tax Expense (Benefit) [Table Text Block] | The Company’s provision for income taxes was as follows:
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| Schedule of Effective Income Tax Rate Reconciliation [Table Text Block] | The income tax provision differs from the amount of tax determined by applying the Federal statutory rate as follows:
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| Schedule of Deferred Tax Assets and Liabilities [Table Text Block] | Net deferred tax assets and liabilities were comprised of the following:
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BUSINESS SEGMENT DATA (Tables) |
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| Schedule of Segment Reporting Information, by Segment [Table Text Block] | The Company’s operations are conducted through two business segments. These segments, and the primary operations of each, are as follows:
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| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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| Schedule of Segment Reporting Information, by Segment [Table Text Block] |
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SIGNIFICANT ACCOUNTING POLICIES (Details Textual) - USD ($) |
12 Months Ended | ||
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Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2006 |
|
| Goodwill | $ 413,280 | $ 413,280 | |
| Amortization of Intangible Assets | 68,203 | 139,885 | |
| Finite-Lived Intangible Assets, Accumulated Amortization | 1,258,000 | 1,200,908 | |
| Freight Costs | 611,322 | 634,425 | |
| Defined Contribution Plan, Employer Discretionary Contribution Amount | $ 21,691 | $ 29,223 | |
| Weighted Average Number of Shares Outstanding, Basic | 519,600 | 519,600 | |
| Employee Benefit Plan Eligibility Requirements | Eligibility requirements for employees are based on completing 1,000 hours of service by the end of the first twelve months of consecutive employment and being at least 21 years old. | ||
| Customer Base and Non Compete Agreement [Member] | |||
| Finite-lived Intangible Assets, Fair Value Disclosure | $ 1,258,000 | ||
| Minimum [Member] | |||
| Property, Plant and Equipment, Estimated Useful Lives | 3 years | ||
| Maximum [Member] | |||
| Property, Plant and Equipment, Estimated Useful Lives | 40 years | ||
INVENTORIES (Details) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Inventory [Line Items] | ||
| Supplies | $ 165,446 | $ 161,258 |
| Raw Materials | 5,254,103 | 5,114,439 |
| Work in Progress | 1,026,657 | 785,711 |
| Finished Goods | 1,858,827 | 2,118,261 |
| Total | $ 8,305,033 | $ 8,179,669 |
INVENTORIES (Details Textual) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Estimated Returns In Finished Goods Inventory | $ 920,657 | $ 821,048 |
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Land and Improvements | $ 656,040 | $ 656,040 |
| Buildings and Improvements | 7,611,446 | 7,102,413 |
| Machinery and Equipment | 13,075,187 | 12,782,237 |
| Vehicles | 749,274 | 701,968 |
| Furniture and Fixtures | 721,511 | 723,912 |
| Construction in Progress | 0 | 252,502 |
| Total | 22,813,458 | 22,219,072 |
| Less: Accumulated Depreciation | 18,650,822 | 18,294,592 |
| NET | $ 4,162,636 | $ 3,924,480 |
PROPERTY, PLANT AND EQUIPMENT (Details Textual) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Depreciation | $ 392,470 | $ 439,719 |
SHORT-TERM DEBT (Details) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Short-term Debt [Line Items] | ||
| Short-term Debt, Total | $ 42,938 | $ 582,839 |
| Revolving Credit Facility [Member] | ||
| Short-term Debt [Line Items] | ||
| Short-term Debt, Total | $ 42,938 | $ 582,839 |
SHORT-TERM DEBT (Details Textual) - Revolving Credit Facility [Member] - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Jul. 31, 2015 |
|
| Debt Instrument, Interest Rate Terms | LIBOR plus 1.75% | |
| Revolving Loan Agreement Borrowing Limit Description | a borrowing limit of 80% of the Company’s eligible receivables plus the lessor of $6,000,000 or 50% of the Company’s eligible inventory from January 1 to May 31 and 60% from June 1 to December 31 of each year. | |
| Line of Credit Facility, Maximum Borrowing Capacity | $ 12,000,000 | |
| Line of Credit Facility, Current Borrowing Capacity | $ 1,750,000 |
OPERATING LEASES (Details) |
Dec. 31, 2016
USD ($)
|
|---|---|
| 2017 | $ 47,159 |
| 2018 | 27,539 |
| 2019 | 11,302 |
| Total Minimum Lease Payments | $ 86,000 |
OPERATING LEASES (Details Textual) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Operating Leases, Rent Expense | $ 84,330 | $ 90,195 |
ACCRUED EXPENSES (Details) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Schedule Of Accrued Expenses [Line Items] | ||
| Accrued Payroll and Bonuses | $ 231,245 | $ 274,064 |
| Accrued Brokerage Payable | 230,432 | 173,580 |
| Other Accrued Expenses | 0 | 20,043 |
| Coupon Reimbursement | 60,000 | 60,446 |
| Accrued Credit Due to Customers | 167,500 | 128,410 |
| Income Taxes Payable | 0 | 187,308 |
| Total | $ 689,177 | $ 843,851 |
PROVISION FOR FEDERAL AND STATE INCOME TAXES (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Current: | ||
| Federal Taxes | $ 522,999 | $ 102,950 |
| State Taxes | 85,313 | 55,651 |
| Current Provision | 608,312 | 158,601 |
| Deferred: | ||
| Federal Taxes | 48,060 | 132,743 |
| State Taxes | 5,131 | 14,172 |
| Deferred Provision | 53,191 | 146,915 |
| Total Provision | $ 661,503 | $ 305,516 |
PROVISION FOR FEDERAL AND STATE INCOME TAXES (Details 1) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Statutory tax | $ 601,245 | $ 278,213 |
| State income tax, net of federal tax | 64,192 | 29,703 |
| Nondeductible expenses | (23,774) | (2,400) |
| Other | 19,840 | 0 |
| Total Provision | $ 661,503 | $ 305,516 |
PROVISION FOR FEDERAL AND STATE INCOME TAXES (Details 2) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Current deferred tax assets (liabilities): | ||
| Allowance for Sales Returns and Related Provision for Return of Finished Goods | $ 110,819 | $ 92,294 |
| Inventory Valuation | 244,468 | 269,204 |
| Deferred Compensation Trust Expense | 0 | 0 |
| Prepaid Expenses | (112,188) | (119,664) |
| Total deferred tax assets - current | 243,099 | 241,834 |
| Non current deferred tax assets (liabilities): | ||
| Tax over Book Depreciation and Amortization | (369,581) | (315,125) |
| Total deferred tax liabilities - noncurrent | (369,581) | (315,125) |
| The Net Deferred Tax (Liability )Asset is reflected in the Balance Sheet under these captions: | ||
| Net deferred tax liability | $ (126,482) | $ (73,291) |
BUSINESS SEGMENT DATA (Details) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Business Combination Segment Allocation [Line Items] | ||
| Sales to Unaffiliated Customers | $ 23,230,386 | $ 23,734,441 |
| Candied Fruit [Member] | ||
| Business Combination Segment Allocation [Line Items] | ||
| Sales to Unaffiliated Customers | 15,957,022 | 16,202,626 |
| Molded Plastics [Member] | ||
| Business Combination Segment Allocation [Line Items] | ||
| Sales to Unaffiliated Customers | $ 7,273,364 | $ 7,531,815 |
BUSINESS SEGMENT DATA (Details 1) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Business Combination Segment Allocation [Line Items] | ||
| Operating Profit of Segments | $ 6,039,717 | $ 5,589,245 |
| General Corporate Expenses, Net | (4,234,000) | (4,707,382) |
| General Corporate Depreciation and Amortization Expense | (41,683) | (83,474) |
| Other Income | 4,334 | 19,885 |
| Income Before Provision for Income Taxes | 1,768,368 | 818,274 |
| Candied Fruit [Member] | ||
| Business Combination Segment Allocation [Line Items] | ||
| Operating Profit of Segments | 4,763,316 | 4,228,325 |
| Molded Plastics [Member] | ||
| Business Combination Segment Allocation [Line Items] | ||
| Operating Profit of Segments | $ 1,276,401 | $ 1,360,920 |
BUSINESS SEGMENT DATA (Details 2) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Business Combination Segment Allocation [Line Items] | ||
| Total Assets | $ 25,164,139 | $ 24,582,565 |
| Candied Fruit [Member] | ||
| Business Combination Segment Allocation [Line Items] | ||
| Total Assets | 9,946,683 | 9,161,755 |
| Molded Plastics [Member] | ||
| Business Combination Segment Allocation [Line Items] | ||
| Total Assets | 4,211,696 | 4,874,312 |
| Identifiable Assets [Member] | ||
| Business Combination Segment Allocation [Line Items] | ||
| Total Assets | 14,158,379 | 14,036,067 |
| General Corporate Assets [Member] | ||
| Business Combination Segment Allocation [Line Items] | ||
| Total Assets | $ 11,005,760 | $ 10,546,498 |
BUSINESS SEGMENT DATA (Details 3) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Depreciation and Amortization Expense of Each Segment are Listed Below: | ||
| Segment Depreciation and Amortization Expense | $ 418,990 | $ 496,130 |
| General Corporate Depreciation and Amortization Expense | 41,683 | 83,474 |
| Total Depreciation and Amortization Expense | 460,673 | 579,604 |
| Candied Fruit [Member] | ||
| Depreciation and Amortization Expense of Each Segment are Listed Below: | ||
| Segment Depreciation and Amortization Expense | 268,124 | 349,656 |
| Molded Plastics [Member] | ||
| Depreciation and Amortization Expense of Each Segment are Listed Below: | ||
| Segment Depreciation and Amortization Expense | $ 150,866 | $ 146,474 |
BUSINESS SEGMENT DATA (Details 4) - USD ($) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Capital Expenditures of Each Segment are Listed Below: | ||
| Segment Capital Expenditures | $ 549,087 | $ 749,352 |
| General Corporate Capital Expenditures | 81,539 | 141,018 |
| Total Capital Expenditures | 630,626 | 890,370 |
| Candied Fruit [Member] | ||
| Capital Expenditures of Each Segment are Listed Below: | ||
| Segment Capital Expenditures | 270,117 | 361,572 |
| Molded Plastics [Member] | ||
| Capital Expenditures of Each Segment are Listed Below: | ||
| Segment Capital Expenditures | $ 278,970 | $ 387,780 |
BUSINESS SEGMENT DATA (Details Textual) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Business Combination Segment Allocation [Line Items] | ||
| Goodwill | $ 413,280 | $ 413,280 |
MAJOR CUSTOMERS (Details Textual) |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| WalMart Stores [Member] | ||
| Revenue, Major Customer [Line Items] | ||
| Concentration Risk, Percentage | 13.40% | 14.40% |
| Entity Wide Accounts Receivable Major Customer Percentage | 56.00% | 75.90% |
| Aqua Cal [Member] | ||
| Revenue, Major Customer [Line Items] | ||
| Concentration Risk, Percentage | 17.80% | 16.40% |
| Entity Wide Accounts Receivable Major Customer Percentage | 12.50% | 14.50% |
MAJOR VENDORS (Details Textual) - Supplier Concentration Risk [Member] |
12 Months Ended | |
|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
| Cost of Goods, Total [Member] | ||
| Major Vendor [Line Items] | ||
| Concentration Risk, Percentage | 48.00% | 44.00% |
| Total Accounts Payable [Member] | ||
| Major Vendor [Line Items] | ||
| Concentration Risk, Percentage | 38.00% | |
CONCENTRATION OF CREDIT RISK (Details Textual) - USD ($) |
Dec. 31, 2016 |
Dec. 31, 2015 |
|---|---|---|
| Ceded Credit Risk [Line Items] | ||
| Cash, Uninsured Amount | $ 8,794,000 | $ 8,593,000 |
SUBSEQUENT EVENT (Details Textual) - Subsequent Event [Member] |
Mar. 02, 2017
$ / shares
|
|---|---|
| Dividends Payable, Date Declared | Mar. 02, 2017 |
| Dividends Payable, Amount Per Share | $ 0.25 |
| Dividends Payable, Date of Record | Apr. 13, 2017 |
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