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.
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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.
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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.
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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.
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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.
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(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
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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
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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
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