-----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, aa/iWwZ3MmJny86IiXgiL2oDDT1plWEOZgiWR5FXUfiUTut3ZkgPDqTYggX7KM/+ C1gNdyOrtFYQz5g14cxRIg== 0000020041-94-000015.txt : 19941214 0000020041-94-000015.hdr.sgml : 19941214 ACCESSION NUMBER: 0000020041-94-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941031 FILED AS OF DATE: 19941213 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: 94564466 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, 1994 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, 1994 - 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 - October 31, 1994 and July 31, 1994 1 & 2 of 11 Unaudited Condensed Consolidated Statements of Operations- Three Months Ended October 31, 1994 and 1993 3 of 11 Unaudited Condensed Consolidated Statements of Cash Flows - Three Months Ended October 31, 1994 and 1993 4 of 11 Unaudited Condensed Consolidated Statement of Stockholders' Equity - October 31, 1994 5 & 6 of 11 Notes to Unaudited Condensed Consolidated Financial Statements - October 31, 1994 7 & 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 October 31, July 31, 1994 1994 (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 3,480,195 $ 5,939,456 Receivables, principally trade, less allowances for doubtful accounts and discounts of $954,000 and $928,000 36,483,477 31,935,437 Inventories 53,364,190 45,543,048 Investments in marketable securities, at cost (market value of $20,568,000 and $25,649,000) 20,671,562 25,786,080 Prepaid expenses and other 3,195,958 3,466,246 Total current assets 117,195,382 112,670,267 Property, plant and equipment - at cost $97,145,199 $ 96,805,506 Less allowances for depreciation and amortization (42,941,222) 54,203,977 (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 28,701,388 29,367,430 Excess of cost over net assets acquired 6,019,985 6,070,268 $211,524,975 $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 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS October 31, July 31, 1994 1994 (Unaudited) (Note) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 12,896,591 $ 11,851,998 Accrued expenses 13,298,372 17,381,839 Income taxes 1,487,797 1,698,293 Total current liabilities 27,682,760 30,932,130 Long-term debt, excluding current installments 115,299,698 110,427,265 Other non-current liabilities 4,760,218 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 17,160,024 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 (1,529,125) (1,663,510) Unfunded pension losses (1,766,000) (1,766,000) Total stockholders' equity 59,340,299 58,261,692 $211,524,975 $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 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended October 31, 1994 1993 Revenues: Net sales $73,571,587 $70,935,805 Rentals from real estate 440,238 482,924 74,011,825 71,418,729 Cost and expenses: Cost of sales 50,858,396 45,430,820 Selling, general and administrative expenses 19,224,444 22,587,207 Expenses of real estate 277,853 398,963 70,360,693 68,416,990 Operating profit 3,651,132 3,001,739 Interest income 256,236 25,030 Interest expense (2,312,923) (2,186,138) Other income - net 2,776 8,334 Income before income taxes 1,597,221 848,965 Income taxes 655,000 343,000 Net income $ 942,221 $ 505,965 Net income per share $ .09 $ .05 See notes to unaudited condensed consolidated financial statements. 3 of 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended October 31, 1994 1993 Operating Activities: Net income $ 942,221 $ 505,965 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 1,430,450 1,971,185 Amortization of deferred compensation and deferred charges 1,109,755 1,669,813 Other, net (216,681) (691,550) Changes in operating assets and liabilities: (Increase) in accounts receivable (4,124,040) (4,543,416) (Increase)/decrease in inventory (7,821,142) 3,317,008 Decrease in prepaid expenses 270,288 198,971 (Decrease) in accounts payable, accrued expenses and income taxes (3,249,370) (2,351,759) NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (11,658,519) 76,217 Investing Activities: Proceeds from sale and collection of principal of marketable securities 7,830,089 Purchases of marketable securities (2,715,571) (2,537) Purchases of property, plant and equipment (1,480,693) (1,267,540) Proceeds from sale of property, plant and equipment 691,000 NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES 4,324,825 (1,270,077) Financing Activities: Proceeds from long-term debt 4,874,433 86,230 Principal payments on long-term debt (4,299) Other _________ ( 50,106) NET CASH PROVIDED BY FINANCING ACTIVITIES 4,874,433 31,825 (Decrease) in Cash and Cash Equivalents (2,459,261) (1,162,035) Cash and cash equivalents at beginning of period 5,939,456 6,198,991 Cash and Cash Equivalents at End of Period $ 3,480,195 $ 5,036,956 See notes to unaudited condensed consolidated financial statements. 4 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, 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 October 31, 1994 10,898 $2,725 476 $6,574 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 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 942 Conversion of subordinated debentures 2 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization 135 _ Balance at October 31, 1994 $1,529 $1,766 $49,325 $ 17,160 See notes to unaudited condensed consoliated financial statements. 6 of 11 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 31, 1994 (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 months ended October 31, 1994 and 1993 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 10,422,826 and 10,620,642 respectively, for the three months ended October 31, 1994 and 1993. The three month period ended October 31, 1993 has 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 months ended October 31, 1994 and 1993. (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, 1994 1994 Finished goods $27,404,521 $24,684,609 Raw materials 22,490,099 16,889,428 Supplies 3,469,570 3,969,011 $53,364,190 $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 (7.75% at October 31, 1994) 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 October 31, 1994) 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. 7 of 11 (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 three months ended October 31, 1993, included in the results of operations are as follows: October 31, 1993 Net sales $ 8,112 Cost and expenses: Cost of sales 4,149 Selling, general and administrative expenses 2,777 6,926 Operating profit $ 1,186 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 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 $2,636,000 or 4% for the three months ended October 31, 1994 compared to the comparable period 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 of $8,112,000 of sales from Hillside (due to its disposition). Operating profits from food products were $3,489,000 an increase of 20% for the three months ended October 31, 1994 compared to $2,918,000 for the comparable period of the prior year. The increase resulted primarily from increased gross profit margins and reduced selling, general and administrative expenses, partially offset by the loss of operating profits of $1,186,000 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 seven months. During the quarter ended October 31, 1994 prices ranged from a low of $1.77 per pound to a high of $2.31 per pound. Currently coffee is trading at around $1.60 per pound, approximately 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 decreased primarily due to reduced coupon, brokerage and delivery costs. Income from continuing operations was $942,000 or $.09 per share for the three months ended October 31, 1994 compared to $506,000 or $.05 per share for the comparable period of the prior year. The difference was primarily due to increased operating income and increased interest income (due to investments in marketable securities), partially offset by increased interest expense (due to increased indebtedness and interest rates) and increased income taxes (due to increased income before taxes). Liquidity and Capital Resources As of October 31, 1994, working capital was approximately $90,000,000 and the ratio of current assets to current liabilities was approximately 4.2 to 1. As of October 31, 1994, the Company had unused borrowing capacity of approximately $20 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 9 locations. The sales of these operations 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. 9 of 11 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 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 $3,480,195 5-02 (2) Marketable securities $20,671,562 5-02 (3) (a) (1) Notes and accounts receivable - trade $37,437.477 5-02 (4) Allowances for doubtful accounts $954,000 5-02 (6) Inventory $53,364,190 5-02 (9) Total current assets $117,195,382 5-02 (13) Property, plant and equipment $98,286,199 5-02 (14) Accumulated depreciation $44,082,222 5-02 (18) Total assets $211,524,975 5-02 (21) Total current liabilities $27,682,760 5-02 (22) Bonds, mortgages and similar debt $115,299,698 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 $56,615,704 5-02 (32) Total liabilities and stockholders' equity $211,524,975 5-03 (b) 1 (a) Net sales of tangible products $73,571,587 5-03 (b) 1 Total revenues $74,011,825 5-03 (b) 2 (a) Cost of tangible goods sold $50,858,396 5-03 (b) 2 Total costs and expenses applicable to sales and revenues $51,136,249 5-03 (b) 3 Other costs and expenses - 0 - 5-03 (b) 5 Provision for doubtful accounts and notes $522,178 5-03 (b) (8) Interest and amortization of debt $2,312,923 5-03 (b) (10) Income before taxes and other items $1,597,221 5-03 (b) (11) Income tax expense $655,000 5-03 (b) (14) Income/loss continuing operations $942,221 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 $942,221 5-03 (b) (20) Earnings per share - primary $.09 5-03 (b) (20) Earnings per share - fully diluted $.09 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) December 12, 1994 Marvin I. Haas Vice Chairman of the Board and Chief Executive Officer December 12, 1994 Howard M. Leitner President and Chief Financial and Accounting Officer 11 of 11 ?? -----END PRIVACY-ENHANCED MESSAGE-----