-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RqEokaOX4ZDCKdggplftf/lbjYbjZmZMjYsqOqyjCakN382XayV5mhTUqcAGDXSg /DY2VIj5UUflXzvse+xqUg== 0000020041-95-000009.txt : 19951218 0000020041-95-000009.hdr.sgml : 19951218 ACCESSION NUMBER: 0000020041-95-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951031 FILED AS OF DATE: 19951215 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: 95601895 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 ___October 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 December 12, 1995 - 10,735,546 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements Unaudited Condensed Consolidated Balance Sheets - October 31, 1995 and July 31, 1995 1 & 2 of 10 Unaudited Condensed Consolidated Statements of Operations- Three Months Ended October 31, 1995 and 1994 3 of 10 Unaudited Condensed Consolidated Statements of Cash Flows - Three Months Ended October 31, 1995 and 1994 4 of 10 Unaudited Condensed Consolidated Statement of Stockholders' Equity - October 31, 1995 5 & 6 of 10 Notes to Unaudited Condensed Consolidated Financial Statements - October 31, 1995 7 of 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 of 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 9 of 10 Item 6. Exhibits and Reports on Form 8-K 10 of 10 Signatures 10 of 10 PART I. FINANCIAL INFORMATION CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS October 31, July 31, 1995 1995 (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents 4,743,017 $ 8,386,620 Receivables, principally trade, less allowances for doubtful accounts and discounts of $1,181,000 and $1,251,000 35,622,898 37,703,214 Inventories 57,443,502 60,576,420 Investments in marketable securities, at cost (market value of $8,878,000 and $6,975,000) 8,932,240 6,972,928 Prepaid expenses and other 1,847,272 2,916,690 Total current assets 108,588,929 116,555,872 Property, plant and equipment - at cost $ 92,120,243 $ 91,038,726 Less allowances for depreciation and amortization (40,746,017) 51,374,226 (39,273,602) 51,765,124 Real estate held for sale or development, at cost 7,733,148 7,747,107 Other assets and deferred charges 25,914,000 25,099,333 Excess of cost over net assets acquired 5,818,855 5,869,138 $199,429,158 $207,036,574 Note: The balance sheet at July 31, 1995 has been derived from the audited financial statements at that date. See notes to unaudited condensed consolidated financial statements. 1 of 10 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS October 31, July 31, 1995 1995 (Unaudited) (Note) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 8,152,299 $ 12,937,578 Accrued expenses 7,916,832 12,438,512 Income taxes 811,487 1,530,543 Total current liabilities 16,880,618 26,906,633 Long-term debt 108,486,993 106,568,896 Other non-current liabilities 1,490,723 1,468,358 Deferred income taxes 7,156,000 7,156,000 Stockholders' equity: Common stock, par value $.25 per share; Authorized 50,000,000 shares: Issued 11,211,068 shares 2,802,767 2,802,767 Additional paid-in-capital 51,357,008 51,357,008 Retained earnings 19,797,347 18,970,435 Cost of 475,522 shares in treasury (6,573,719) (6,573,719) Deferred compensation under stock bonus plan and employees' stock ownership plan (1,968,579) (1,619,804) Total stockholders' equity 65,414,824 64,936,687 $199,429,158 $207,036,574 Note: The balance sheet at July 31, 1995 has been derived from the audited financial statements at that date. See notes to unaudited condensed consolidated financial statements. 2 of 10 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended October 31, 1995 1994 Revenues: Net sales $ 78,236,709 $73,571,587 Rentals from real estate 546,842 440,238 78,783,551 74,011,825 Cost and expenses: Cost of sales 57,227,377 50,858,396 Selling, general and administrative expenses 17,796,119 19,224,444 Expenses of real estate 368,556 277,853 75,392,052 70,360,693 Operating profit 3,391,499 3,651,132 Interest income 138,456 256,236 Interest expense (2,266,021) (2,312,923) Other income - net 78,978 2,776 Income before income taxes 1,342,912 1,597,221 Income taxes 516,000 655,000 Net income $ 826,912 $ 942,221 Net income per share $ .08 $ .09 See notes to unaudited condensed consolidated financial statements. 3 of 10 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended October 31, 1995 1994 Operating Activities: Net income $ 826,912 $ 942,221 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 1,472,415 1,430,450 Amortization of deferred compensation and deferred charges 1,187,403 1,109,755 Other, net (1,092,824) (216,681) Changes in operating assets and liabilities: Decrease/(increase)in accounts receivable 2,150,316 (4,124,040) Decrease/(increase)in inventory 3,132,918 (7,821,142) Decrease in prepaid expenses 1,069,418 270,288 (Decrease) in accounts payable, accrued expenses and income taxes (10,026,015) (3,249,370) NET CASH (USED IN) OPERATING ACTIVITIES (1,279,457) (11,658,519) Investing Activities: Proceeds from sale and collection of principal of marketable securities 9,980,349 7,830,089 Purchases of marketable securities (11,939,661) (2,715,571) Purchases of property, plant and equipment (1,822,931) (1,480,693) Proceeds from sale of property, plant and equipment 691,000 NET CASH (USED IN)/ PROVIDED BY INVESTING ACTIVITIES (3,782,243) 4,324,825 Financing Activities: Proceeds from long-term debt, net 1,918,097 4,874,433 Loan to employees' stock ownership plan (500,000) NET CASH PROVIDED BY FINANCING ACTIVITIES 1,418,097 4,874,433 (Decrease)in Cash and Cash Equivalents (3,643,603) (2,459,261) Cash and cash equivalents at beginning of period 8,386,620 5,939,456 Cash and Cash Equivalents at End of Period $4,743,017 $ 3,480,195 See notes to unaudited condensed consolidated financial statements. 4 of 10 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Common Stock Issued In Treasury Shares Amount Shares Amount In Thousands Balance at July 31, 1995 11,211 $2,803 476 $6,574 Net income Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization Loan to employees' stock ownership plan Balance at October 31, 1995 11,211 $2,803 476 $6,574 See notes to unaudited condensed consolidated financial statements. 5 of 10 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY Deferred Compensation Under Stock Bonus Plan and Additional Employees' Stock Paid-In Retained Ownership Plan Capital Earnings In Thousands Balance at July 31, 1995 $1,620 $51,357 $18,970 Net income 827 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization (151) Loan to employees' stock ownership plan 500 Balance at October 31, 1995 $1,969 $51,357 $19,797 See notes to unaudited condensed consoliated financial statements. 6 of 10 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 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 re- curring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended October 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, 1995. (B) Primary per share data are based on the weighted average number of common shares outstanding of 10,736,000 for the three months ended October 31, 1995 and 1994. The three month period ended October 31, 1994 has been retroactively adjusted for a 3% stock dividend distri- buted in July 1995. Assumed conversion of debentures would have had an anti-dilutive effect on the net income per share for the three months ended October 31, 1995 and 1994. (C) Inventories are stated at the lower of cost (first-in, first-out) or market. The components of inventory consist of the following: October 31, July 31, 1995 1995 Finished goods $32,456,815 $37,194,809 Raw materials 21,571,017 19,928,214 Supplies 3,415,670 3,453,397 $57,443,502 $60,576,420 (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 (8.75% at October 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 collateral- ized 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 October 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 liabil- ities 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. (E) Prepaid expenses and other on the unaudited condensed consolidated balance sheets includes deferred income taxes of $591,000. 7 of 10 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. Net sales increased $4,665,000 or 6% for the three months ended October 31, 1995, compared to the comparable period of the prior year. The increase in net sales was due to an increase in coffee pounds sold, partially offset by a decrease in the average selling price of coffee. Operating profits from food products were $3,213,000 a decrease of 8% for the three months ended October 31, 1995, compared to $3,489,000 for the comparable period of the prior year. The decrease resulted primarily from decreased gross profit margins partially offset by decreased selling, general and administrative expenses. Decreased gross margins were due to a decrease in the average selling price of coffee greater than the decrease in the average cost of green coffee, partially offset by increased coffee pounds sold. During the three months ended October 31, 1995 prices for green coffee ranged from a high of $1.54 per pound to a low of $1.14 per pound. Selling, general and administrative expenses decreased primarily due to reduced advertising, coupon and payroll costs. Net income was $827,000 or $.08 per share for the three months ended October 31, 1995 compared to $942,000 or $.09 per share for the comparable period of the prior year. The difference was primarily due to decreased operating profits and reduced interest income (due to reduced amounts of marketable securities), partially offset by decreased income taxes. Liquidity and Capital Resources As of October 31, 1995, working capital was approximately $92,000,000 and the ratio of current assets to current liabilities was approxi- mately 6.4 to 1. As of October 31, 1995, the Company had unused borrowing capacity of approximately $26 million under its credit facilities of $40 million with National Westminster Bank USA and Chemical Bank. 8 of 10 The Company plans on expanding its cafe and Quikava, company operated and franchised operations, which in total are operating in 12 locations and are currently not profitable. The sales of these operations, which are in the development stage, are not material to the Company's consolidated sales. 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 II. 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 9 of 10 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) December 15, 1995 Marvin I. Haas President and Chief Executive Officer December 15, 1995 Howard M. Leitner Senior Vice President and Chief Financial and Accounting Officer 10 of 10 EX-27 2
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