-----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, KdTzD6D5SJO21vUcPGTkTrAVjWVIu2HHFx0qnqUUn1cdbK1FUPgXN0gHcf7g0FjP bqPu1rBnboDdjSZHONkXJw== 0000020041-96-000004.txt : 19961213 0000020041-96-000004.hdr.sgml : 19961213 ACCESSION NUMBER: 0000020041-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961031 FILED AS OF DATE: 19961212 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: 96679477 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, 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 December 12, 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 - October 31, 1996 and July 31, 1996 1 & 2 of 10 Unaudited Condensed Consolidated Statements of Operations- Three Months Ended October 31, 1996 and 1995 3 of 10 Unaudited Condensed Consolidated Statements of Cash Flows - Three Months Ended October 31, 1996 and 1995 4 of 10 Unaudited Condensed Consolidated Statement of Stockholders' Equity - October 31, 1996 5 & 6 of 10 Notes to Unaudited Condensed Consolidated Financial Statements - October 31, 1996 7 of 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 & 9 of 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings 9 of 10 Item 5. Other Information 9 of 10 Item 6. Exhibits and Reports on Form 8-K 9 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, 1996 1996 (Unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 24,002,989 $ 16,293,783 Receivables, principally trade, less allowances for doubtful accounts and discounts of $1,201,000 and $1,133,000 32,580,748 30,989,008 Inventories 53,138,734 59,637,802 Investments in marketable securities, at market (approximates cost) 159,593 128,099 Prepaid expenses and other 3,703,137 3,539,776 Total current assets 113,585,201 110,588,468 Property, plant and equipment - at cost $ 95,191,010 $ 93,683,328 Less allowances for depreciation and amortization (46,922,192) 48,268,818 (45,172,084) 48,511,244 Real estate held for development or sale, at cost 7,677,308 7,691,267 Other assets and deferred charges 25,202,085 26,976,132 Excess of cost over net assets acquired 5,617,725 5,668,008 $200,351,137 $199,435,119 Note: The balance sheet at July 31, 1996 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, 1996 1996 (Unaudited) (Note) LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable $ 12,937,623 $ 10,469,300 Accrued expenses 7,035,284 11,346,483 Income taxes 2,705,853 1,719,575 Total current liabilities 22,678,760 23,535,358 Long-term debt 105,424,891 105,235,468 Other non-current liabilities 1,591,081 1,586,231 Deferred income taxes 5,591,000 5,591,000 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 18,885,314 17,434,755 Cost of 475,522 shares in treasury (6,573,719) (6,573,719) Deferred compensation under stock bonus plan and employees' stock ownership plan (1,405,965) (1,533,749) Total stockholders' equity 65,065,405 63,487,062 $200,351,137 $199,435,119 Note: The balance sheet at July 31, 1996 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, 1996 1995 Revenues: Net sales $ 82,576,510 $ 77,372,279 Rentals from real estate 522,884 546,842 83,099,394 77,919,121 Cost and expenses: Cost of sales 59,155,200 55,783,931 Selling, general and administrative expenses 19,240,819 17,577,568 Expenses of real estate 424,298 368,556 78,820,317 73,730,055 Operating profit 4,279,077 4,189,066 Interest income 318,434 138,456 Interest expense (2,139,469) (2,266,021) Other income - net 16,518 78,978 Income before income taxes 2,474,560 2,140,479 Income taxes 1,024,000 787,000 Income from continuing operations 1,450,560 1,353,479 Discontinued operations, net of income tax credits of $271,000 526,567 Net income $1,450,560 $ 826,912 Income/(loss)per share: Primary: Continuing operations $ .14 $ .13 Discontinued operations (.05) Net income $ .14 $ .08 Fully diluted: Continuing operations $ .11 $ .11 Discontinued operations (.03) Net income $ .11 $ .08 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, 1996 1995 Operating Activities: Net income $ 1,450,560 $ 826,912 Adjustments to reconcile net income to net cash provided by/(used in) operating activities: Depreciation and amortization of property, plant and equipment 1,750,108 1,472,415 Amortization of deferred compensation and deferred charges 1,091,923 1,187,403 Other, net (201,948) (1,092,824) Changes in operating assets and liabilities: (Increase)/decrease in accounts receivable (1,659,740) 2,150,316 Decrease in inventory 6,499,068 3,132,918 (Increase)/(decrease) in prepaid expenses (163,361) 1,069,418 (Decrease) in accounts payable, accrued expenses and income taxes (856,598) (10,026,015) NET CASH PROVIDED BY/(USED IN)OPERATING ACTIVITIES 7,910,012 (1,279,457) Investing Activities: Proceeds from sale and collection of principal of marketable securities 9,980,349 Purchases of marketable securities (31,494) (11,939,661) Purchases of property, plant and equipment (1,507,682) (1,822,931) NET CASH(USED IN)INVESTING ACTIVITIES (1,539,176) (3,782,243) Financing Activities: Proceeds from long-term debt, net 189,423 1,918,097 Proceeds from co-packer 1,148,947 Loan to employees' stock ownership plan (500,000) NET CASH PROVIDED BY FINANCING ACTIVITIES 1,338,370 1,418,097 Increase/(decrease)in Cash and Cash Equivalents 7,709,206 (3,643,603) Cash and cash equivalents at beginning of period 16,293,783 8,386,620 Cash and Cash Equivalents at End of Period $24,002,989 $ 4,743,017 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, 1996 11,211 $2,803 476 $6,574 Net income Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization Balance at October 31, 1996 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, 1996 $1,534 $51,357 $17,435 Net income 1,450 Deferred compensation under stock bonus plan and employees' stock ownership plan: Amortization (128) Balance at October 31, 1996 $1,406 $51,357 $18,885 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, 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 months ended October 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, 1996. (B) Primary per share data is based on the weighted average number of common shares outstanding of 10,736,000 for the three months ended October 31, 1996 and 1995. Fully diluted per share data, assuming conversion of debentures, is based on 22,556,000 shares outstanding for the three months ended October 31, 1996 and 1995. (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, 1996 1996 Finished goods $32,868,186 $35,715,505 Raw materials 15,310,369 18,931,470 Supplies 4,960,179 4,990,827 $53,138,734 $59,637,802 (D) Under the Company's amended and restated revolving credit and term loan agreements (collectively the "Loan Agreements") with Fleet Bank, N.A. and The Chase Manhattan 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 (8.25% at October 31, 1996) 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, 1996) are to be repaid in December 1999. Outstanding loans under the revolving credit agreements 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 $933,000. 7 of 10 CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-Q constitute "forward-looking statements" within the meaning of the Reform Act. See Other Information Item 5. Operations The following is Management's discussion and analysis of certain significant factors that have affected the Company's continuing operations during the periods included in the accompanying unaudited condensed consolidated statements of operations. Net sales increased $5,204,000 or 7% for the three months ended October 31, 1996, compared to the comparable period of the prior year. The increase in net sales was due to a 34% increase in coffee pounds sold partially offset by a decrease in the average selling price of coffee. Operating profits from food products were $4,279,000, an increase of 2% for the three months ended October 31, 1996, compared to $4,189,000 for the comparable period of the prior year. The increase resulted primarily from increased gross margins partially offset by increased selling, general and administrative expenses. Increased gross margins were due to increased coffee pounds sold and a decrease in the average selling price of coffee less than the decrease in the average cost of green coffee. During the three months ended October 31, 1996 prices for green coffee ranged from a high of $1.36 to a low of $1.04 per pound. Selling, general and adminstrative expenses increased primarily due to increased advertising, brokerage and coupon costs and salaries. Income from continuing operations was $1,451,000 or $.14 per share for the three months ended October 31, 1996, compared to $1,353,000 or $.13 per share for the comparable period of the prior year. The difference was primarily due to increased operating profits, increased interest income and reduced interest expense, partially offset by increased income taxes The prior year also included a loss from discountinued operations of $527,000 or $.05 per share. Liquidity and Capital Resources As of October 31, 1996, working capital was approximately $91,000,000 and the ratio of current assets to current liabilities was approximately 5.0 to 1. As of October 31, 1996, the Company had unused borrowing capacity of approximately $29 million under its credit facilities of $40 million with Fleet Bank, N.A. and The Chase Manhattan Bank. The Company plans on expanding its Quikava, company operated and franchised operations, which in total are currently operating in 15 locations. The sales of these operations are not material to the Company's consolidated sales. Total Quikava store level operations are not currently profitable, primarily due to pre-opening expenses. In addition, Quikava headquarters' expenses in excess of $1,000,000 on an annual basis are not being absorbed. 8 of 10 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 5. Other Information Certain statements under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this Form 10-Q constitute "forward looking statements" within the meaning of the Reform Act. Such forward looking statements involve known risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, among others, the following: general economic and business conditions; competition; success of operating initiatives; development and operating costs; advertising and promotional efforts; brand awareness; the existence of or adherence to development schedules; the existence or absence of adverse publicity; availability, locations and terms of sites for Quikava outlets; changes in business strategy or development plans; quality of management; availability, terms and deployment of capital; business abilities and judgment of personnel; availability of qualified personnel; labor and employee benefit costs; changes in or the failure to comply with government regulations;construction costs and other factors. 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 12, 1996 Marvin I. Haas President and Chief Executive Officer December 12, 1996 Howard M. Leitner Senior Vice President Chief Financial and Accounting Officer 10 of 10 EX-27 2
5 3-MOS JUL-31-1997 OCT-31-1996 24002989 159593 33781748 1201000 53138734 113585201 95191010 46922192 200351137 22678760 105424891 0 0 2802767 62262638 200351137 82576510 83099394 59155200 78820317 0 557000 2139469 2474560 1024000 1450560 0 0 0 1450560 0.14 0.11
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