-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, PyvLFhWJ2KBPvZzyi8mruV4QZ8DtevLY5SvGvcavAaUfYMp5diRySRBYTiG3aeqk UL6Z5ChrNmq+3Q1E3utx0Q== 0000020041-95-000005.txt : 19950615 0000020041-95-000005.hdr.sgml : 19950615 ACCESSION NUMBER: 0000020041-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950131 FILED AS OF DATE: 19950313 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHOCK FULL O NUTS CORP CENTRAL INDEX KEY: 0000020041 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 130697025 STATE OF INCORPORATION: NY FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04183 FILM NUMBER: 95520390 BUSINESS ADDRESS: STREET 1: 370 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2125320300 MAIL ADDRESS: STREET 1: 370 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended ___January 31, 1995 Commission File Number 1-4183 CHOCK FULL O' NUTS CORPORATION (Exact Name of Registrant As Specified In Its Charter) New York 13-0697025 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 370 Lexington Avenue, New York, N.Y. 10017 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code (212) 532-0300 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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No No. of Shares of Common Stock ($.25 par value) outstanding as of March 13, 1995 - 10,422,856 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Condensed Consolidated Balance Sheets - January 31, 1995 and July 31, 1994 1 & 2 of 12 Unaudited Condensed Consolidated Statements of Operations- Three Months Ended January 31, 1995 and 1994 3 of 12 Unaudited Condensed Consolidated Statements of Operations - Six Months Ended January 31, 1995 and 199 4 of 12 Unaudited Condensed Consolidated Statements of Cash Flows - Six Months Ended January 31, 1995 and 1994 5 of 12 Unaudited Condensed Consolidated Statement of Stockholders' Equity - January 31, 1995 6 & 7 of 12 Notes to Unaudited Condensed Consolidated Financial Statements - January 31, 1995 8 & 9 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 of 12 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 of 12 Item 6. Exhibits and Reports on Form 8-K 11 of 12 Signatures 12 of 12 PART I. FINANCIAL INFORMATION CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS January 31, July 31, 1995 1994 (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 4,318,139 $ 5,939,456 Receivables, principally trade, less allowances for doubtful accounts and discounts of $1,548,000 and $928,000 40,124,462 31,935,437 Inventories 61,400,660 45,543,048 Investments in marketable securities, at cost (market value of $12,612,000 and $25,649,000) 12,749,520 25,786,080 Prepaid expenses and other 4,203,731 3,466,246 Total current assets 122,796,512 112,670,267 Property, plant and equipment - at cost $98,659,518 $ 96,805,506 Less allowances for depreciation and amortization (44,364,171) 54,295,347 (41,510,772) 55,294,734 Real estate held for sale or development, at cost 5,404,243 5,404,243 Other assets and deferred charges 27,300,948 29,367,430 Excess of cost over net assets acquired 5,969,703 6,070,268 $215,766,753 $208,806,942 Note: The balance sheet at July 31, 1994 has been derived from the audited financial statements at that date. See notes to unaudited condensed consolidated financial statements. 1 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS January 31, July 31, 1995 1994 (Unaudited) (Note) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 13,662,410 $ 11,851,998 Accrued expenses 14,006,066 17,381,839 Income taxes 2,361,178 1,698,293 Total current liabilities 30,029,654 30,932,130 Long-term debt 115,764,457 110,427,265 Other non-current liabilities 4,761,930 4,743,855 Deferred income taxes 4,442,000 4,442,000 Stockholders' equity: Common stock, par value $.25 per share; Authorized 50,000,000 shares: Issued 10,898,378 and 10,898,130 shares 2,724,595 2,724,533 Additional paid-in-capital 49,324,524 49,322,585 Retained earnings 18,454,659 16,217,803 Cost of 475,522 shares in treasury (6,573,719) (6,573,719) Deferred compensation under stock bonus plan and employees' stock ownership plan (1,395,347) (1,663,510) Unfunded pension losses (1,766,000) (1,766,000) Total stockholders' equity 60,768,712 58,261,692 $215,766,753 $208,806,942 Note: The balance sheet at July 31, 1994 has been derived from the audited financial statements at that date. See notes to unaudited condensed consolidated financial statements. 2 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended January 31, 1995 1994 Revenues: Net sales $91,704,240 $62,108,202 Rentals from real estate 635,324 574,012 92,339,564 62,682,214 Cost and expenses: Cost of sales 66,479,636 41,446,261 Selling, general and administrative expenses 21,176,650 18,531,010 Expenses of real estate 511,929 430,173 88,168,215 60,407,444 Operating profit 4,171,349 2,274,770 Interest income 223,657 331,100 Gain on sale of product line 13,208,393 Interest expense (2,256,682) (2,158,665) Other income(deductions) - net 55,311 (46,124) Income before income taxes 2,193,635 13,609,474 Income taxes 899,000 6,365,000 Net income $1,294,635 $7,244,474 Net income per share: Primary $.12 $.69 Fully diluted $.12 $.39 See notes to unaudited condensed consolidated financial statements. 3 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended January 31, 1995 1994 Revenues: Net sales $165,275,827 $133,044,007 Rentals from real estate 1,075,563 1,056,936 166,351,390 134,100,943 Cost and expense: Cost of sales 117,338,032 86,877,081 Selling, general and administrative expenses 40,401,094 41,118,217 Expenses of real estate 789,782 829,136 158,528,908 128,824,434 Operating profit 7,822,482 5,276,509 Interest and dividend income 479,893 356,130 Gain on sale of product line 13,208,393 Interest expense (4,569,605) (4,344,803) Other income(deductions) - net 58,086 (37,790) Income before income taxes 3,790,856 14,458,439 Income taxes 1,554,000 6,708,000 Net income $ 2,236,856 $ 7,750,439 Net income per share: Primary $.21 $.74 Fully diluted $.21 $.44 See notes to unaudited condensed consolidated financial statements. 4 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended January 31, 1995 1994 Operating Activities: Net income $ 2,236,856 $ 7,750,439 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 2,853,399 3,148,990 Amortization of deferred compensation and deferred charges 2,331,102 2,208,914 Gain on sale of product line (13,208,393) Other, net (57,816) (235,366) Changes in operating assets and liabilities: (Increase) in accounts receivable (8,809,025) (244,250) (Increase) in inventory (15,857,612) (1,424,595) (Increase) decrease in prepaid expenses (737,485) 679,635 (Decrease) in accounts payable, accrued expenses and income taxes (902,476) (437,032) NET CASH (USED IN) OPERATING ACTIVITIES (18,943,057) (1,761,658) Investing Activities: Proceeds from sale and collection of principal of marketable securities 21,313,249 1,238,076 Purchases of marketable securities (7,476,689) (25,670,708) Purchases of property, plant and equipment (3,072,059) (2,163,976) Proceeds from sale of product line 38,144,205 Increase in assets held for sale (1,093,071) Proceeds from sale of property, plant and equipment 1,218,047 NET CASH PROVIDED BY INVESTING ACTIVITIES 11,982,548 10,454,546 Financing Activities: Proceeds from long-term debt 5,339,192 Principal payments on long-term debt (1,546,533) Purchase of treasury stock (1,850,000) Other _________ ( 50,106) NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES 5,339,192 (3,446,639) Increase in Cash and Cash Equivalents (1,621,317) 5,246,249 Cash and cash equivalents at beginning of period 5,939,456 5,469,159 Cash and Cash Equivalents at End of Period $ 4,318,139 $10,715,408 See notes to unaudited condensed consolidated financial statements. 5 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Common Issued In Treasury Shares Amount Shares Amount In Thousands Balance at July 31, 1994 10,898 $2,725 476 $6,574 Net income Conversion of subordinated debentures - - Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization _____ ______ ____ ______ Balance at January 31, 1995 10,898 $2,725 476 $6,574 See notes to unaudited condensed consolidated financial statements. 6 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Deferred Compensation Under Stock Bonus Plan and Unfunded Additional Employees' Stock Pension Paid-In Retained Ownership Plan Losses Capital Earnings In Thousands Balance at July 31, 1994 $1,664 $1,766 $49,323 $16,218 Net income 2,237 Conversion of subordinated debentures 2 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization 269 Balance at January 31, 1995 $1,395 $1,766 $49,325 $18,455 See notes to unaudited condensed consoliated financial statements. 7 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1995 (A) The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended January 31, 1995 and 1994 are not necessarily indicative of the results that may be expected for a full fiscal year. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended July 31, 1994. (B) Primary per share data are based on the weighted average number of common shares outstanding of 10,423,000 and 10,462,000, respectively, for the three months ended January 31, 1995 and 1994 and 10,423,000 and 10,545,000, respectively for the six months ended January 31, 1995 and 1994. The three and six month periods ended January 31, 1994 have been retroactively adjusted for a 3% stock dividend distributed in July 1994. Assumed conversion of debentures would have had an anti- dilutive effect on net income per share for the three and six months ended January 31, 1995. (C) Inventories are stated at the lower of cost (first-in, first-out) or market. The components of inventory consist of the following: January 31, July 31, 1995 1994 Finished goods $30,980,644 $24,684,609 Raw materials 26,912,976 16,889,428 Supplies 3,507,040 3,969,011 $61,400,660 $45,543,048 (D) Under the Company's amended and restated revolving credit and term loan agreements (collectively the "Loan Agreements") with National Westminster Bank USA and Chemical Bank (the "Banks"), the Company may, from time to time, borrow funds from the Banks, provided that the total principal amount of all such loans outstanding at any time may not exceed $40,000,000. Interest (9% at January 31, 1995) on all such loans is equal to prime rate, subject to adjustment based on the level of loans outstanding. Outstanding borrowings under the Loan Agreements may not exceed certain percentages of and are collateralized by, among other things, the trade accounts receivable and inventories, and substantially all of the machinery and equipment and real estate of the Company and its subsidiaries. All loans made under the term loan agreement ($10,000,000 at January 31, 1995) are to be repaid in December 1997. Pursuant to the terms of the Loan Agreements, the Company and its subsidiaries, among other things, must maintain a minimum net worth and meet ratio tests for liabilities to net worth and coverage of fixed charges and interest, all as defined. The Loan Agreements also provide, among other things, for restrictions on dividends (except for stock dividends) and require repayment of outstanding loans with excess cash flow, as defined. 8 of 12 (E) Prepaid expenses and other on the unaudited condensed consolidated balance sheets includes deferred income taxes of $1,766,000. (F) In October 1993, the Company and Gourmet Coffees of America, Inc. ("GCA") entered into an agreement to sell Hillside Coffee of California, Inc. ("Hillside") to GCA. Pursuant to the agreement, which was consummated on November 19, 1993 (the second quarter of fiscal 1994), the Company received (a) $38,500,000 in cash and (b) shares of stock representing approximately one-half of one percent of the equity of GCA. The operating profits of Hillside, before intercompany charges, for the period from August 1, 1993 to November 19, 1993, included in the results of operations, in thousands, are as follows: Net sales $ 9,557 Costs and expenses: Cost of sales 4,169 Selling, general and administrative expenses 3,566 7,735 Operating profit $ 1,822 9 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operations The following is Management's discussion and analysis of certain significant factors that have affected the Company's operations during the periods included in the accompanying unaudited condensed consolidated statements of operations. In October 1993, the Company and Gourmet Coffees of America, Inc. ("GCA") entered into an agreement to sell Hillside Coffee of California, Inc. ("Hillside") to GCA. Pursuant to the agreement, which was consummated on November 19, 1993 (the second quarter of fiscal 1994), the Company received (a) $38,500,000 in cash and (b) shares of stock representing approximately one-half of one percent of the equity of GCA. Net sales increased $29,596,000 or 48% and $32,232,000 or 24% for the three and six months ended January 31, 1995, respectively, compared to the comparable periods of the prior year. The increase in net sales was due to an increase in the average selling price of coffee, partially offset by a decrease in coffee pounds sold and the loss (primarily for the six month period) of $9,557,000 of sales from Hillside (due to its disposition). Operating profits from food products were $4,048,000 and $7,537,000 increases of 90% and 49% for the three and six months ended January 31, 1995, respectively compared to $2,131,000 and $5,049,000, for the comparable periods of the prior year. The increases resulted primarily from increased gross profit margins partially offset by increased selling, general and administrative expenses and the loss of operating profits of $636,000(second quarter) and $1,822,000 (six months) from Hillside (due to its disposition). Increased gross margins were due to an increase in the average selling price of coffee greater than the increase in the average cost of green coffee, partially offset by decreased coffee pounds sold. The price of green coffee has been volatile over the last ten months. During the six months ended January 31, 1995 prices ranged from a low of $1.44 per pound to a high of $2.31 per pound. Currently coffee is trading at around $1.80 per pound, more than double the price since the beginning of May 1994. The Company consistently values its inventory and commitments at the lower of cost or market. Selling, general and administrative expenses increased primarily due to increased advertising, promotion and payroll costs, partially offset by reduced coupon and brokerage costs in the six month period. Net income was $1,295,000 or $.12 per share and $2,237,000 or $.21 per share for the three and six months ended January 31, 1995, respectively, compared to $7,244,000 or $.69 per share and $7,750,000 or $.74 per share for the comparable periods of the prior year. The difference was primarily due to the reported gain on sale of Hillside Coffee of California, Inc. (the Company's specialty coffee product line) of $7,068,000 after income taxes or $.67 per share in the prior year comparable periods and increased income taxes (due to increased income before taxes other than on the aforemented gain in the three and six months ended January 31, 1994), partially offset by increased operating profits in the current fiscal year. Liquidity and Capital Resources As of January 31, 1995, working capital was approximately $92,750,000 and the ratio of current assets to current liabilities was approximately 4 to 1. As of January 31, 1995, the Company had unused borrowing capacity of approximately $18 million under its credit facilities of $40 million with National Westminster Bank USA and Chemical Bank. The Company plans on expanding its cafe and Quikava owned and franchised operations, which in total are currently operating in 10 locations. The sales of these operations, which are in the development stage, are not material to the Company's consolidated sales. 10 of 12 As a result of the rise in price of green coffee, the Company has financed increased inventories and receivables through the sale of marketable securities and increased borrowings under its credit facilities. The Company believes that its cash flow from operations and its amended and restated revolving credit and term loan agreements with its Banks provide sufficient liquidity to meet its working capital, expansion and capital requirements. Part 2. Other Information Item 1. Legal Proceedings - None Item 6. Exhibits and Reports on Form 8-K a) Exhibits - Financial Data Schedule - Exhibit 27 - see below b) Reports on Form 8-K - none 11 of 12 Appendix A to item 601 (c) of Regulation S-K (Article 5 of Regulation S-X Chock full o'Nuts Corporation and Subsidiaries) Item Number Item Description Amount 5-02 (1) Cash and cash items $4,318,139 5-02 (2) Marketable securities $12,749,520 5-02 (3) (a) (1)Notes and accounts receivable - trade $41,672,462 5-02 (4) Allowances for doubtful accounts $1,548,000 5-02 (6) Inventory $61,400,660 5-02 (9) Total current assets $122,796,512 5-02 (13) Property, plant and equipment $98,659,518 5-02 (14) Accumulated depreciation $44,364,171 5-02 (18) Total assets $215,766,753 5-02 (21) Total current liabilities $30,029,654 5-02 (22) Bonds, mortgages and similar debt $115,764,457 5-02 (28) Preferred stock - mandatory redemption - 0 - 5-02 (29) Preferred stock - no mandatory redemption - 0 - 5-02 (30) Common stock $2,724,595 5-02 (31) Other stockholders' equity $58,044,117 5-02 (32) Total liabilities and stockholders' equity $215,766,753 5-03 (b) 1 (a) Net sales of tangible products $165,275,827 5-03 (b) 1 Total revenues $166,351,390 5-03 (b) 2 (a) Cost of tangible goods sold $117,338,032 5-03 (b) 2 Total costs and expenses applicable to sales and revenues $118,127,814 5-03 (b) 3 Other costs and expenses - 0 - 5-03 (b) 5 Provision for doubtful accounts and notes $1,391,478 5-03 (b) (8) Interest and amortization of debt $4,569,605 5-03 (b) (10) Income before taxes and other items $3,790,856 5-03 (b) (11) Income tax expense $1,554,000 5-03 (b) (14) Income/loss continuing operations $2,236,856 5-03 (b) (15) Discontinued operations - 0 - 5-03 (b) (17) Extraordinary items - 0 - 5-03 (b) (18) Cumulative effect - changes in accounting principles - 0 - 5-03 (b) (19) Net income or loss $2,236,856 5-03 (b) (20) Earnings per share - primary $.21 5-03 (b) (20) Earnings per share - fully diluted $.21 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant duly caused this Report of Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. CHOCK FULL O' NUTS CORPORATION (Registrant) March 13, 1995 Marvin I. Haas President and Chief Executive Officer March 13, 1995 Howard M. Leitner Senior Vice President and Chief Financial and Accounting Officer 12 of 12 ?? EX-27 2
5 3-MOS JUL-31-1995 JAN-31-1995 4318139 12749520 41672462 1548000 61400660 122796512 98659518 44364171 215766753 30029654 115764457 2724595 0 0 58044117 215766753 165275827 166351390 117338032 118127814 0 1391478 4569605 3790856 1554000 2236856 0 0 0 2236856 0.21 0.21
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