-----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, UVhNPlleHsMlrp5aq+QbpaVn7JYp6868n8gB2uMQLdwPdrfhnHIduPyYWQfg2WiW DGNTJY8D7JfO62lfnBbfWw== 0000020041-96-000001.txt : 19960314 0000020041-96-000001.hdr.sgml : 19960314 ACCESSION NUMBER: 0000020041-96-000001 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960131 FILED AS OF DATE: 19960312 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: 96533747 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, 1996 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 15, 1996 - 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 - January 31, 1996 and July 31, 1995 1 & 2 of 11 Unaudited Condensed Consolidated Statements of Operations- Three Months Ended January 31, 1996 and 1995 3 of 11 Unaudited Condensed Consolidated Statements of Operations - Six Months Ended January 31, 1996 and 1995 4 of 11 Unaudited Condensed Consolidated Statements of Cash Flows - Three Months Ended January 31, 1996 and 1995 5 of 11 Unaudited Condensed Consolidated Statement of Stockholders' Equity - January 31, 1996 6 & 7 of 11 Notes to Unaudited Condensed Consolidated Financial Statements - January 31, 1996 8 of 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 of 11 PART II. OTHER INFORMATION Item 1. Legal Proceedings 10 of 11 Item 6. Exhibits and Reports on Form 8-K 10 of 11 Signatures 11 of 11 PART I. FINANCIAL INFORMATION CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS January 31, July 31, 1996 1995 (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 15,968,950 $ 8,386,620 Receivables, principally trade, less allowances for doubtful accounts and discounts of $1,269,000 and $1,251,000 38,685,925 37,703,214 Inventories 54,098,395 60,576,420 Investments in marketable securities, at cost (market value of $6,977,000 and $6,975,000) 6,971,604 6,972,928 Prepaid expenses and other 2,262,633 2,916,690 Total current assets 117,987,507 116,555,872 Property, plant and equipment - at cost $ 94,997,345 $ 91,038,726 Less allowances for depreciation and amortization (42,378,939) 52,618,406 (39,273,602) 51,765,124 Real estate held for sale or development, at cost 7,719,187 7,747,107 Other assets and deferred charges 25,083,922 25,099,333 Excess of cost over net assets acquired 5,768,573 5,869,138 $209,177,595 $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 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS January 31, July 31, 1996 1995 (Unaudited) (Note) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 17,640,150 $ 12,937,578 Accrued expenses 8,971,417 12,438,512 Income taxes 1,292,941 1,530,543 Total current liabilities 27,904,508 26,906,633 Long-term debt 106,069,790 106,568,896 Other non-current liabilities 1,525,585 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 20,743,053 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 (1,807,397) (1,619,804) Total stockholders' equity 66,521,712 64,936,687 $209,177,595 $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 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended January 31, 1996 1995 Revenues: Net sales $83,123,088 $91,704,240 Rentals from real estate 581,615 635,324 83,704,703 92,339,564 Cost and expenses: Cost of sales 60,643,914 66,479,636 Selling, general and administrative expenses 19,560,167 21,176,650 Expenses of real estate 382,871 511,929 80,586,952 88,168,215 Operating profit 3,117,751 4,171,349 Interest income 276,688 223,657 Interest expense (2,234,837) (2,256,682) Other income - net 410,105 55,311 Income before income taxes 1,569,707 2,193,635 Income taxes 624,000 899,000 Net income $ 945,707 $1,294,635 Net income per share Primary $ .09 $ .12 Fully diluted $ .09 $ .11 See notes to unaudited condensed consolidated financial statements. 3 of 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Six Months Ended January 31, 1996 1995 Revenues: Net sales $161,359,797 $165,275,827 Rentals from real estate 1,128,457 1,075,563 162,488,254 166,351,390 Cost and expenses: Cost of sales 117,871,291 117,338,032 Selling, general and administrative expenses 37,356,286 40,401,094 Expenses of real estate 751,427 789,782 155,979,004 158,528,908 Operating profit 6,509,250 7,822,482 Interest income 415,144 479,893 Interest expense (4,500,858) (4,569,605) Other income - net 489,083 58,086 Income before income taxes 2,912,619 3,790,856 Income taxes 1,140,000 1,554,000 Net income $1,772,619 $ 2,236,856 Net income per share Primary $ .17 $ .21 Fully Diluted $ .17 $ .20 See notes to unaudited condensed consolidated financial statements. 4 of 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended January 31, 1996 1995 Operating Activities: Net income $ 1,772,619 $ 2,236,856 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 3,105,337 2,853,399 Amortization of deferred compensation and deferred charges 2,384,927 2,331,102 Other, net (1,110,265) (57,816) Changes in operating assets and liabilities: (Increase)in accounts receivable (1,000,711) (8,809,125) Decrease/(increase)in inventory 6,478,025 (15,857,612) Decrease/(increase) in prepaid expenses 654,057 (737,485) Increase/(decrease) in accounts payable, accrued expenses and income taxes 997,875 (902,476) NET CASH PROVIDED BY/(USED IN)OPERATING ACTIVITIES 13,281,864 (18,943,057) Investing Activities: Proceeds from sale and collection of principal of marketable securities 23,769,058 21,313,249 Purchases of marketable securities (23,767,734) (7,476,689) Purchases of property, plant and equipment (4,700,033) (3,072,059) Proceeds from sale of property, plant and equipment 1,218,047 NET CASH (USED IN)/ PROVIDED BY INVESTING ACTIVITIES (4,698,709) 11,982,548 Financing Activities: Proceeds from long-term debt, net 5,339,192 Payments of long-term debt (499,106) Other (1,719) Loan to employees' stock ownership plan (500,000) NET CASH (USED IN)/ PROVIDED BY FINANCING ACTIVITIES (1,000,825) 5,339,192 Increase/(decrease)in Cash and Cash Equivalents 7,582,330 (1,621,317) Cash and cash equivalents at beginning of period 8,386,620 5,939,456 Cash and Cash Equivalents at End of Period $ 15,968,950 $ 4,318,139 See notes to unaudited condensed consolidated financial statements. 5 of 11 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 January 31, 1996 11,211 $2,803 476 $6,574 See notes to unaudited condensed consolidated financial statements. 6 of 11 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 1,773 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization (313) Loan to employees' stock ownership plan 500 Balance at January 31, 1996 $1,807 $51,357 $20,743 See notes to unaudited condensed consoliated financial statements. 7 of 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS January 31, 1996 (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, 1996 and 1995 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 and six months ended January 31, 1996 and 1995. The three and six month periods ended January 31, 1995 have been retroactively adjusted for a 3% stock dividend distributed in July 1995. Assumed conversion of debentures would have had an anti-dilutive effect on the net income per share for the three and six months ended January 31, 1996. (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, 1996 1995 Finished goods $33,718,466 $37,194,809 Raw materials 16,680,488 19,928,214 Supplies 3,699,441 3,453,397 $54,098,395 $60,576,420 (D) Under the Company's amended and restated revolving credit and term loan agreements (collectively the "Loan Agreements") with Natwest Bank N.A. 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 through December 31, 1996 may not exceed $40,000,000 and after such date may not exceed $20,000,000. Interest (8.75% at January 31, 1996) on all such loans is equal to prime rate, subject to adjustment based on the level of loans outstand ing. 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, 1996) are to be repaid in December 1999. 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. (E) Prepaid expenses and other on the unaudited condensed consolidated balance sheets includes deferred income taxes of $591,000. (F) Other income - net for the three and six months ended January 31, 1996 includes a gain on sale of real estate of $460,000. 8 of 11 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 consoli- dated statements of operations. Net sales decreased $8,581,000 or 9% and $3,916,000 or 2% for the three and six months ended January 31, 1996, respectively, compared to the comparable period of the prior year. The decrease in net sales was due to a decrease in the average selling price of coffee partially offset by an increase in coffee pounds sold. Operating profits from food products were $2,919,000 and $6,132,000, decreases of 28% and 19% for the three and six months ended January 31, 1996, respectively, compared to $4,048,000 and $7,537,000 for the comparable periods of the prior year. The decreases 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 off set by increased coffee pounds sold. During the six months ended January 31, 1996 prices for green coffee ranged from a high of $1.54 per pound to a low of $ .91 per pound. Selling, general and adminis- trative expenses decreased primarily due to reduced advertising and payroll costs. Net income was $946,000 or $.09 and $1,773,000 or $.17 per share for the three and six months ended January 31, 1996, respectively, com- pared to $1,295,000 or $.12 per share and $2,237,000 or $.21 per share for the comparable periods of the prior year. The difference was primarily due to decreased operating profits, partially offset by a gain on sale of real estate of $460,000 and decreased income taxes. Liquidity and Capital Resources As of January 31, 1996, working capital was approximately $90,000,000 and the ratio of current assets to current liabilities was approxi- mately 4.2 to 1. As of January 31, 1996, the Company had unused borrowing capacity of approximately $29 million under its credit facilities of $40 million with Natwest Bank N.A. and Chemical Bank. 9 of 11 The Company has been establishing its Cafe and Quikava retail operations. To date, the sales of these operations are not material to the Company's consolidated sales. The Company plans on expanding the Cafe and Quikava company operated and franchised operations, which in total are opera- ting in 20 locations and are currently not profitable at store level. In addition, the Company incurs headquarters expenses for these operations which approximate $2,000,000 on an annual basis. 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 10 of 11 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 8, 1996 Marvin I. Haas President and Chief Executive Officer March 8, 1996 Howard M. Leitner Senior Vice President and Chief Financial and Accounting Officer 11 of 11 EX-27 2
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