-----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, eCQZR4yGfrA3EeRqqVpRK9SYd7m1Azof4IqYDqVUj7htrrMUNnlQwbo9kkAXdE+O wRK58je9mW0DW3/S12e34A== 0000020041-95-000006.txt : 19950612 0000020041-95-000006.hdr.sgml : 19950612 ACCESSION NUMBER: 0000020041-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950430 FILED AS OF DATE: 19950609 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: 95546245 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 ___April 30, 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 June 9, 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 - April 30, 1995 and July 31, 1994 1 & 2 of 12 Unaudited Condensed Consolidated Statements of Operations- Three Months Ended April 30, 1995 and 1994 3 of 12 Unaudited Condensed Consolidated Statements of Operations - Nine Months Ended April 30, 1995 and 1994 4 of 12 Unaudited Condensed Consolidated Statements of Cash Flows - Nine Months Ended April 30, 1995 and 1994 5 of 12 Unaudited Condensed Consolidated Statement of Stockholders' Equity - April 30, 1995 6 & 7 of 12 Notes to Unaudited Condensed Consolidated Financial Statements - April 30, 1995 8 & 9 of 12 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 & 11 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 April 30, July 31, 1995 1994 (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 4,488,301 $ 5,939,456 Receivables, principally trade, less allowances for doubtful accounts and discounts of $1,402,000 and $928,000 37,699,985 31,935,437 Inventories 61,000,711 45,543,048 Investments in marketable securities, at cost (market value of $9,124,000 and $25,649,000) 9,184,302 25,786,080 Prepaid expenses and other 4,361,339 3,466,246 Total current assets 116,734,638 112,670,267 Property, plant and equipment - at cost $ 100,510,204 $ 96,805,506 Less allowances for depreciation and amortization (45,663,226) 54,846,978 (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 26,618,666 29,367,430 Excess of cost over net assets acquired 5,919,420 6,070,268 $209,523,945 $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 April 30, July 31, 1995 1994 (Unaudited) (Note) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 11,949,255 $ 11,851,998 Accrued expenses 12,019,619 17,381,839 Income taxes 2,145,687 1,698,293 Total current liabilities 26,114,561 30,932,130 Long-term debt 110,529,482 110,427,265 Other non-current liabilities 4,784,706 4,743,855 Deferred income taxes 5,780,000 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 19,868,580 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 (1,262,784) (1,663,510) Unfunded pension losses (1,766,000) (1,766,000) Total stockholders' equity 62,315,196 58,261,692 $209,523,945 $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 April 30, 1995 1994 Revenues: Net sales $ 81,004,923 $61,467,118 Rentals from real estate 492,725 507,263 81,497,648 61,974,381 Cost and expenses: Cost of sales 57,681,664 41,307,351 Selling, general and administrative expenses 19,319,393 18,838,018 Expenses of real estate 395,488 450,083 77,396,545 60,595,452 Operating profit 4,101,103 1,378,929 Interest income 318,768 464,077 Interest expense (2,319,098) (2,206,533) Other income - net 111,148 27,731 Income/(loss) before income taxes 2,211,921 (335,796) Income taxes/(credit) 798,000 (66,000) Net income/(loss) $1,413,921 $ (269,796) Net income/(loss) per share: Primary $ .14 $ (.03) Fully diluted $ .12 $ (.03) See notes to unaudited condensed consolidated financial statements. 3 of 12 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Nine Months Ended April 30, 1995 1994 Revenues: Net sales $246,280,750 $194,511,125 Rentals from real estate 1,568,288 1,564,199 247,849,038 196,075,324 Cost and expense: Cost of sales 175,019,696 128,184,432 Selling, general and administrative expenses 59,720,487 59,956,235 Expenses of real estate 1,185,270 1,279,219 235,925,453 189,419,886 Operating profit 11,923,585 6,655,438 Interest income 798,661 820,207 Gain on sale of product line 13,208,393 Interest expense (6,888,703) (6,551,336) Other income(deductions) - net 169,234 (10,059) Income before income taxes 6,002,777 14,122,643 Income taxes 2,352,000 6,642,000 Net income $ 3,650,777 $7,480,643 Net income per share: Primary $ .35 $ .71 Fully diluted $ .33 $ .50 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 Nine Months Ended April 30, 1995 1994 Operating Activities: Net income $3,650,777 $7,480,643 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 4,152,454 4,716,573 Amortization of deferred compensation and deferred charges 3,488,895 3,308,321 Gain on sale of product line (13,208,393) Other, net (473,705) (696,433) Changes in operating assets and liabilities: (Increase) in accounts receivable (6,238,548) (1,204,455) (Increase) in inventory (15,457,663) (2,742,184) (Increase) decrease in prepaid expenses (2,552,093) (202,898) (Decrease) in accounts payable, accrued expenses and income taxes (1,822,569) (923,025) NET CASH (USED IN) OPERATING ACTIVITIES(15,252,452) (3,471,851) Investing Activities: Proceeds from sale and collection of principal of marketable securities 24,878,467 1,846,828 Purchases of marketable securities (7,476,689) (27,000,812) Purchases of property, plant and equipment (4,922,745) (3,520,816) Proceeds from sale of product line, net 38,109,205 Increase in assets held for sale (1,093,071) Proceeds from sale of property, plant and equipment 1,218,047 Acquisition of business (467,288) NET CASH PROVIDED BY INVESTING ACTIVITIES 13,697,080 7,874,046 Financing Activities: Proceeds from long-term debt, net 104,217 Principal payments on long-term debt (905,906) Purchase of treasury stock (1,850,000) Other (56,746) NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES 104,217 (2,812,652) (Decrease)/increase in Cash and Cash Equivalents (1,451,155) 1,589,543 Cash and cash equivalents at beginning of period 5,939,456 5,469,159 Cash and Cash Equivalents at End of Period $4,488,301 $ 7,058,702 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 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 April 30, 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 3,651 Conversion of subordinated debentures 2 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization 401 _ Balance at April 30, 1995 $1,263 $1,766 $49,325 $19,869 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 April 30, 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 nine months ended April 30, 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 for the three months ended April 30, 1995 and 1994 and 10,423,000 and 10,503,000, respectively, for the nine months ended April 30, 1995 and 1994. The three and nine month periods ended April 30, 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 the net loss per share for the three months ended April 30, 1994. (C) Inventories are stated at the lower of cost (first-in, first-out) or market. The components of inventory consist of the following: April 30, July 31, 1995 1994 Finished goods $36,507,361 $24,684,609 Raw materials 20,980,382 16,889,428 Supplies 3,512,968 3,969,011 $61,000,711 $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 April 30, 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 collatera- lized 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 April 30, 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 $965,000. (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 consoli- dated 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 $19,538,000 or 32% and $51,770,000 or 27% for the three and nine months ended April 30, 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 (for the nine month period)of $9,557,000 of sales from Hillside (due to its disposition). Operating profits from food products were $4,004,000 and $11,541,000, increases of 203% and 81% for the three and nine months ended April 30, 1995, respectively, compared to $1,322,000 and $6,370,000 for the comparable periods of the prior year. The increases resulted primarily from increased gross profit margins partially offset in the nine month period by increased selling, general and administrative expenses and the loss of operating profits of $1,822,000 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 year. During the nine months ended April 30, 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 $1.50 per pound, approximately double the price since the beginning of May 1994, when coffee prices started to rise significantly. The Company consistently values its inventory and commitments at the lower of cost or market. Selling, general and administrative expenses increased primarily due to the Company's investment in its Cafe and Quikava operations, which are currently in the development stage, and increased advertising and payroll costs, partially offset by reduced coupon and brokerage costs in the nine month period. Net income was $1,414,000 or $.14 per share and $3,651,000 or $.35 per share for the three and nine months ended April 30, 1995, respectively, compared to a net loss of ($270,000) or ($.03) per share and $7,480,000 or $.71 per share for the comparable periods of the prior year. The difference in the three month period was primarily due to increased operating profits partially offset by increased income taxes. The difference in the nine month period was primarily due to increased operating profits, offset by increased income taxes on such operating profits and 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 period. Liquidity and Capital Resources As of April 30, 1995, working capital was approximately $91,000,000 and the ratio of current assets to current liabilities was approxi- mately 4.5 to 1. As of April 30, 1995, the Company had unused borrowing capacity of approximately $24 million under its credit facilities of $40 million with National Westminster Bank USA and Chemical Bank. 10 of 12 The Company plans on expanding its cafe and Quikava, company operated and franchised operations, which in total are currently operating in 12 locations. The sales of these operations, which are in the development stage, are not material to the Company's consolidated sales. 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 Signatures Purusant 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) June 9, 1995 _____________________________ Marvin I. Haas President and Chief Executive Officer June 9, 1995 _____________________________ Howard M. Leitner Senior Vice President and Chief Financial and Accounting Officer 12 of 12 EX-27 2
5 9-MOS JUL-31-1995 APR-30-1995 4488301 9184302 39101985 1402000 61000711 116734638 100510204 45663226 209523945 26114561 110529482 2724595 0 0 59590601 209523945 246280750 247849038 175019696 176204966 0 1829586 6888703 6002777 2352000 3650777 0 0 0 3650777 0.35 0.33
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