SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JULY 31, 1995
OR
[] TRANSITION REPORT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-4183
CHOCK FULL O' NUTS CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-0697025
(State of Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
370 Lexington Avenue, New York, New York 10017
(Address of Principal Executive Offices) (Zip Code)
(212) 532-0300
(Registrant's Telephone Number, Including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title Of Each Class On Which Registered
Common Stock, par value $.25 per share New York Stock Exchange
8% Convertible Subordinated Debentures, American Stock Exchange
due September 15, 2006
7% Convertible Senior Subordinated Debentures, New York Stock Exchange
due April 1, 2012
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.Yes x No
Aggregate market value of the Common Stock ($.25 par value) held by
nonaffiliates of the registrant as of October 13 , 1995: $59,190,000
Number of Shares of Common Stock ($.25 par value) outstanding as of October
13, 1995: 10,736,000
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the annual proxy statement for the year ended July 31, 1995 are
incorporated by reference into Part III.
PART I
Item 1. BUSINESS
Item 101 (a) and (c) of Regulation S-K
The Company's primary business is the roasting, packing and marketing
of a broad range of regular and decaffeinated, ground roast, instant and
specialty coffees for the Foodservice and Retail Grocery Industries. These
products are sold regionally throughout the United States and Canada under
various well known trademarks, including Chock full o' Nuts, LaTouraine and
Cain's. Best known among its products is Chock full o' Nuts brand premium,
vacuum packed, all-method grind coffee. The Company is also one of the
largest marketers of foodservice and private label coffees. The balance of
the Company's business is derived from its developing Retail Restaurant and
Cafe Division (commencing in fiscal 1994) and from real estate operations.
Incorporated in 1932, for many years, the Company's primary business was the
operation of counter service restaurants, under the Chock full o' Nuts name.
In 1953, the Company expanded its business by marketing the coffee made
famous in its restaurants to consumers via supermarkets and other Retail
Grocery outlets. Impactful advertising, featuring the "Heavenly Coffee"
jingle, made Chock full o' Nuts brand premium coffee a market leader. In
1983, Management discontinued the Company's restaurant operations and
concentrated its efforts on the sale of coffee and related food products.
Since 1984, the Company's overall strategy has been to diversify within its
core areas of strength, thereby lessening its dependence on any single
business area.
In March 1994, the Company acquired all the assets and liabilities of a
company ("Quikava") whose menu features a full assortment of the most
popular specialty coffee beverages, plus a broad variety of freshly
prepared foods and snacks. Quikava's unique "double drive-thru" format
targets the consumer "on the go" and adds a new dimension to the concept
of take out foods and beverages. Quikava and the more traditionally
formatted Cafes, which conmenced operation in June 1994, represent a
renewed commitment to leverage the Company's restaurant heritage while
taking advantage of the growth of Speciality Coffees,"away from home",
where annual growth rates are significant.
In December 1992, the Company acquired the stock of Cain's Coffee Co.
("Cain's") and certain trademarks related to that business. Cain's
primary business is the direct sale and distribution of coffee and
related products under the Cain's label to Foodservice customers in
twelve states primarily West of the Mississippi. Cain's also sells
coffee and tea to Retail Grocery Customers, using a direct store
distribution system.
In November 1992, the Company acquired a controlling interest in a
partnership, which owns Dana Brown Private Brands, Inc., a company
which markets and sells private label coffee and tea products to
food retailers and distributors, located primarily in the Midwest.
In December 1986, the Company acquired Greenwich Mills Company
("Greenwich"). Established in 1912, Greenwich is a leading
manufacturer and supplier of coffee, tea and allied products
to Foodservice and private label customers. The majority of
their customers are located in markets East of the Mississippi.
Greenwich's best known trademark is LaTouraine.
In November 1993, the Company sold Hillside Coffee of California,
Inc., whose business consisted of roasting, packing, distributing
and marketing specialty coffee under the Hillside name, primarily
to supermarkets. See Note 6 of notes to conolidated financial
statements.
In July 1993, the Company sold its interest in Jimbo's Jumbos,
Incorporated ("JJI"). The business of JJI consisted primarily of
(1) shelling farmers' stock peanuts into commercial
and seed grades of raw peanuts for sale to commercial processors of
peanuts, seed dealers and farmers and (2) processing and packaging of
in-the-shell peanuts and nuts, and shelled peanuts and nuts, for sale
to supermarkets. See Note 5 of notes to consolidated financial
statements.
Corporate Management is currently focused on the following growth
initiatives: (1) Expansion of its developing Retail Restaurant and
Cafe Division; (2) Maximizing the Company's Foodservice franchise
by significantly broadening its customer base for Cain's, Chock full
o' Nuts and LaTouraine brand coffee, tea and allied products; (3)
Increasing Retail Grocery Market shares for such higher margin
products as Chock full o' Nuts brand Cafe Blend, decaffeinated,
instant and Rich French Roast coffees and (4) Selectively pursuing
new business development opportunities that will deliver
significant volume and profit growth.
The following table sets forth revenues and operating results from
continuing operations before interest and corporate expenses
attributable to the Company's food products sales and real estate
operations, for the fiscal years ended July 31, 1995, 1994 and 1993:
Fiscal Years Ended July 31,
1995 1994 1993
(In Thousands)
Revenues
Net Sales - Food Products $328,378 $263,638 $251,641
Rentals from Real Estate 2,061 2,060 1,876
Operating Profit:
Food Products (1) 15,552 10,389 11,532 (2)
Real Estate Operations 490 317 (9)
(1) See Note 6 of notes to consolidated financial statements regarding
product line sold.
(2) Includes restructuring charge of $3,598,000 and officers' termination
benefits of $818,000 (see Notes 11(c) and 11(d) of notes to consolidated
financial statements).
COFFEE AND RELATED PRODUCTS
Description of Coffee Market
According to certain available industry surveys and Company estimates,
total United States coffee sales by manufacturers in 1994 were
approximately $6 billion. Approximately 35% of total United States coffee
sales in 1994 were to Foodservice customers.
Foodservice Sales and Marketing
In January 1985, the Company began using Company sales personnel and
independent food brokers to market its coffee and allied products to
foodservice customers. These include chain and independent
restaurants, hospitals, airlines, schools, governmental institutions,
vending and office coffee service operators and other institutional
distributors. In December 1986, the Company acquired Greenwich, which
is a major direct sales and distribution supplier in the Eastern
United States of coffee, tea and allied products to Foodservice
Customers and private label customers. Greenwich's best-known
label is LaTouraine, which enjoys a reputation for high quality.
LaTouraine also distributes spices, international coffee mixes,
speciality coffees, whole bean and pod Espresso, hot chocolate,
iced and hot tea, powdered soft drinks, soup bases, and portion
controlled jams, jellies and condiments.
In December 1992, the Company acquired Cain's, which is a major supplier
in the Midwest and Southwest of products similar to those sold by
Greenwich and LaTouraine to Foodservice Customers.
In fiscal 1995, approximately 44% of sales were derived from processing
and marketing coffee and allied products for sale to Foodservice Customers.
Sales of coffee products to Foodservice Customers have traditionally been
less price-sensitive and depend more on the level of customer service
provided. They also tend to generate higher operating margins, due to
lower marketing and advertising expenses, than do sales of such products
to Retail Customers. In addition, the absence of competitors with a
dominant market position, makes the Company's pricing to Foodservice
Customers less susceptible, as compared to pricing to Retail Customers,
to changes in price in response to pricing actions of any single
competitor.
Retail Sales and Marketing
The Company currently sells most of its Retail Grocery coffee products to
supermarket chains, wholesalers and independent food outlets ("Retail
Customers") through independent food brokers. The Company's retail
products include coffees sold under the Chock full o' Nuts, Cain's and
Safari labels. The Company's best known product, Chock full o' Nuts
premium, vacuum packed, all-method grind coffee, is superior to most
competitors in being able to produce a more consistent, better tasting,
finished brew from a single, "all-method grind", regardless of the
coffee maker used. The Company also sells an "extended yield" coffee,
which produces more cups than equivalent quantities of standard yield
coffee. Additionally, the Company sells decaffeinated roast and ground
coffee, instant coffees, a premium quality Cafe blend and a Rich French
Roast coffee, as well as a ready-to-drink iced cappuccino product,
called Chock o'ccino.
The Company and Greenwich roast, pack and market regular, decaffeinated
and instant coffees for sale by others under a variety of private labels.
In fiscal 1995 the Company's coffee sales to Retail Customers accounted
for approximately 48% of sales and represented approximately 4% of total
Retail Grocery coffee sales in the United States.
Chock full o' Nuts all-method grind coffee is sold in most major
metropolitan areas of the United States and in the provinces of
Ontario and Quebec, Canada. Sales are concentrated in the New
York metropolitan area, upstate New York, New England, Philadelphia,
Washington, D.C. and Florida. The Company believes that its
distinctive packaging design and one grind concept are important
factors in the marketing of its coffee products. Marketing a single
important factors in the marketing of its coffee products. Marketing
a single grind coffee has enabled the Company's all-method grind coffee
to be consistently one of the fastest moving items off supermarket
shelves in its core markets.
The sales of Cain's and Safari brand products are concentrated in the
Midwest and Southwest.
Suppliers and Manufacturing
The Company's coffee is primarily a blend of readily available Central and
South American coffees. The Company purchases approximately 100 million
pounds of green coffee beans annually. All such coffee is purchased from
approximately 25 importers located in New York City, New Orleans and Miami,
who assume the risk of delivering beans that meet the Company's quality
requirements at a guaranteed price. The Company generally buys its coffee
pursuant to contracts providing for delivery in 4 to 12 weeks and
supplements such contracts with purchases on the spot market. All
purchases are subject to inspection and approval by the United States Food
and Drug Administration.
Manufacturing activities for coffee and related products are presently
conducted at the following facilities:
Location Principal Use
Brooklyn, New York............Coffee Roasting Plant, Warehouse
St. Louis, Missouri...........Coffee Roasting Plant, Warehouse
Hialeah, Florida..............Coffee Roasting Plant, Warehouse
Rochester, New York...........Coffee Roasting Plant, Warehouse
Oklahoma City, Oklahoma.......Coffee Roasting Plant and Processing
Plant for Tea and Related Food
Products, Warehouse
Springfield, Missouri.........Processing Plant for Spices, Warehouse
All of the above facilities are owned, except the Rochester, New York
and Springfield, Missouri facilities, which are leased. The Company rents
executive office space in New York City and maintains warehousing facilities
in over forty-five locations throughout the United States. The Company
believes that it has sufficient production capacity to meet its current
and future needs.
Competition
The coffee business is highly competitive. The Company competes for Retail
Customers with a number of nationally and regionally established brands.
Its largest competitors are Kraft Foods (Maxwell House, Yuban and Sanka
coffees), Procter & Gamble (Folger's coffees) and The Nestle Company (Hills,
MJB and Chase & Sanborn coffees), with combined annual sales accounting for
approximately 80% of the United States coffee market. The profitability of
the Company's coffee sales to Retail Customers is largely dependent on
competitive pricing conditions. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations".
There are many competitors in the business of selling coffee to Foodservice
Customers. However, the Company believes that no single competitor's sales
constitute more than 15% of this market. Sales of coffee, tea and allied
products to Foodservice Customers have traditionally been less price-
sensitive and more dependent on the level of service provided to such
customers than sales of such products to Retail Customers. In addition,
the absence of direct competitors with a dominant market position has
traditionally made the Company's pricing to Foodservice Customers less
susceptible, as compared to pricing to Retail Customers, to changes in
price in response to pricing actions of any single competitor.
Retail Restaurant and Cafe Division
In June 1994, with the opening of a flagship store in Midtown Manhattan,
the Company began to develop the business of operating retail cafes which
offer moderately priced specialty coffees, sandwiches, salads, bakery
products, snacks, and other assorted food and beverage products. The cafe
has an upscale motif, featuring a rich wood and granite interior and
utilizes a quick-service format.
The Company has developed a number of formats for expansion of this retail
cafe concept, including the full cafe (2500 to 3500 square feet with seating
for 45-75), the mini-cafe (400-1000 square feet with limited seating), and
Chock Full O'Nuts EXPRESS-Osm (a modular kiosk of 150 square feet). The
Company intends to open additional locations utilizing the above formats,
in central business districts and high-volume public locations.
In March 1994, the Company acquired Quikava, Inc., an operator and
franchisor of double-drive thru buildings, which offer a variety of
specialty coffees, espresso-based drinks, baked goods, and snacks.
Quikava units are situated on major commuter thoroughfares and offer
quick-service of quality beverages and snacks. The Company intends to
develop additional Quikava units, both company-operated and franchised.
RESEARCH AND DEVELOPMENT
The Company invested a nominal amount in research and development for the
three years ended July 31, 1995.
EMPLOYEES
The Company employs approximately 1,150 employees, 15% of whom are
represented by labor unions. The Company believes that its relations
with both union and non-union employees are good.
REAL ESTATE OPERATIONS
The Company is both lessor and lessee on certain properties and an owner
of one property in New York City. Such properties had been part of the
Company's former restaurant operations. Additionally, the Company owns a
coffee roasting facility in Castroville, California which it leases to the
owner of Hillside Coffee of California, Inc.
OTHER MATTERS
Reference is made to Notes 2, 5 and 6 of notes to consolidated financial
statements with respect to the acquisition and disposition of certain
assets.
Item 101 (b) of Regulation S-K
Segment Information is incorporated herein by reference.
Item 101 (d) of Regulation S-K
All of the Company's operations are located in the United States.
Export sales are not significant.
Item 2. PROPERTIES
The Company leases certain premises which are under long-term leases
expiring on various dates through 2009 and certain of which contain
renewal options. Reference should be made to Note 7 of the notes to
consolidated financial statements for additional information about these
leases. The following table sets forth the location and certain information
with respect to the Company's plants and certain other properties as of
October 13, 1995, all of which premises the Company considers adequate for
its present and anticipated needs.
PLANTS AND OTHER PROPERTIES
Approximate Whether
Square Feet Owned
of Or
Location Principal Use Floor Space Leased (1)
Brooklyn, New York Coffee Roasting Plant,
Warehouse 55,000 Owned
St. Louis, Missouri Coffee Roasting Plant,
Warehouse 77,000 Owned
Secaucus, New Jersey Warehouse and Offices 104,000 Owned
Hialeah, Florida Coffee Roasting Plant,
Warehouse 50,000 Owned
Rochester, New York Coffee Roasting Plant,
Warehouse 50,000 Leased
Oklahoma City, Oklahoma Coffee Roasting Plant
and Processing Plant for
Tea and Related Food
Products, Warehouse 150,000 Owned
Springfield, Missouri Processing Plant for
Spices, Warehouse 30,000 Leased
574 Fifth Avenue Real Estate
New York, New York Operation 13,000 Leased
422 Madison Avenue Real Estate and Restaurant
New York, New York Operation 8,750 Leased
532 Madison Avenue Real Estate
New York, New York Operation 12,250 Leased
49 Broadway Real Estate
New York, New York Operation 12,000 Leased
1420 Broadway Real Estate
New York, New York Operation 6,750 Leased
370 Lexington Avenue Corporate
New York, New York Headquarters 11,000 Leased
Waverly Place corner
Green Street Real Estate
New York, New York Operation 2,500 Leased
336 Broadway Real Estate
New York, New York Operation 10,500 Owned
Castroville, California Real Estate 66,000 Owned
Operation
512 Seventh Avenue Restaurant Operation 2,500 Leased
New York, New York
1114 Avenue of the
Americas Restaruant Operation 2,800 Leased
New York, New York
43 West 42 Street Restaurant Operation 340 Leased
New York, New York
Chelsea Piers Restaurant Operation 4,300 Leased
Pier 61 Hudson River
New York, New York
Expo Design Center Restaurant Operation 3,000 Leased
Westbury, New York
Queen Ann Plaza Restaurant Operation 250 Leased
Norwell, Mass
Brown Avenue
Manchester,
New Hampshire Restaurant Operation 500 Leased
Natick Crossing Mall Restaurant Operation 1,500 Leased
Natick, Mass.
190 Old Derby Street Headquarters, Quikava 1,196 Leased
Hingham, Mass.
(1) -- No Company-leased premises are owned by any officer or director of
the Company. See
Note 7 of notes to the consolidated financial statements.
Item 3. LEGAL PROCEEDINGS
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND
RELATED SECURITY HOLDER MATTERS
"Common Share Prices" and related security holder matters are incorporated
herein by reference.
Item 6. SELECTED FINANCIAL DATA
"Selected Financial Data" is incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" is incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted in a separate section of this report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
and
Item 11. EXECUTIVE COMPENSATION
and
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
and
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted, per General Instruction G. The information required by Part III
shall be incorporated by reference from the Registrant's definitive proxy
statement pursuant to Regulation 14A for the fiscal year ended July 31,
1995 which is to be filed with the Commission.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) The response to this portion of Item 14 is submitted as a
separate section of this report.
(3) The response to this portion of Item 14 is submitted as a separate
section of this report (see below).
(b) Reports on Form 8-K:
None
(c) The response to this portion of Item 14 is submitted as a separate
section of this report (see below).
(d) The response to this portion of Item 14 is submitted as a separate
section of this report.
Pursuant to Regulation S-K Item 601, following is a list of Exhibits.
Exhibit 3 Articles of incorporation and by laws.
(a) Articles of incorporation filed as an Exhibit to Form
10-K for the fiscal year ended July 31, 1994 is incorporated herein
by reference.
(b) By-laws filed as an Exhibit to Form 10-K for the fiscal year
ended July 31, 1994 is incorporated herein by reference.
Exhibit 4 Instruments defining the rights of security holders, including
indentures.
(a) Indenture dated as of September 15, 1986 between the Company
and Manufacturers Hanover Trust Company ("Manufacturers") filed as an
Exhibit to Form 10-K for the fiscal year ended July 31, 1994 is
incorporated herein by reference.
(b) Form of the Company's 8% Convertible Subordinated Debenture
included in Exhibit 4(a) filed as an Exhibit to Form 10-K for the
fiscal year ended July 31, 1994 is incorporated herein by reference.
(c) Instrument of resignation, appointment and acceptance dated
August 9, 1993 among the Company, Manufacturers and Liberty Bank and
Trust Company of Oklahoma City filed as an Exhibit to Form 10-K for
the fiscal year ended July 31, 1994 is incorporated herein by
reference.
(d) Indenture dated as of April 1, 1987 between the Company and
IBJ Schroder Bank and Trust Company filed as an Exhibit to
Form 10-K for the fiscal year ended July 31, 1994 is
incorporated herein by reference.
(e) Form of the Company's 7% Convertible Senior Subordinated
Debenture included in Exhibit 4(d) filed as an Exhibit to Form
10-K for the fiscal year ended July 31, 1994 is incorporated
herein by reference.
Exhibit 9 Voting Trust Agreement, not applicable.
Exhibit 10 Material contracts
(a) Rights Agreement, dated as of December 30, 1987, with IBJ Schroder
Bank and Trust Company, as Rights Agent, the form of Rights Certificate
and Summary of Rights to Purchase Common Stock filed as an Exhibit to
Form 10-K for the fiscal year ended July 31, 1994 is incorporated herein
by reference.
(b) Benefits protection trust with National Westminster Bank USA filed
as an Exhibit to Form 10-K for the fiscal year ended July 31, 1994 is
incorporated herein by reference.
(c) Resolution of the Board of Directors adopting severance policy
filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1994
is incorporated herein by reference.
(d) Chock full o' Nuts Corporation Employees' Stock Ownership Plan
dated December 16, 1988 filed herein.
(e) Stock purchase agreement dated October 16, 1992 by and between
Chock full o' Nuts Corporation and Nestle' Beverage Corporation filed as
an Exhibit to Form 10-K for the fiscal year ended July 31, 1994 is
incorporated herein by reference.
(f) Amended and Restated Credit Agreement dated December 4, 1992 among
Chock full o' Nuts Corporation and its Subsidiaries and National
Westminster Bank USA and Chemical Bank filed as an Exhibit to Form 8-K
dated December 10, 1992 is incorporated herein by reference.
(g) Agreement and Plan of Merger by and among JJJ Acquisition Corp.,
Chock full o' Nuts Corporation and Jimbo's Jumbos, Incorporated dated
April 22, 1993 filed as an Exhibit to Form 8-K dated July 8, 1992 is
incorporated herein by reference.
(h) Agreement with Joseph Breslin dated August 5, 1993 filed as an
Exhibit to Form 10-K for the fiscal year ended July 31, 1993 is
incorporated herein by reference.
(i) Stock Purchase Agreement between Chock full o' Nuts Corporation,
Hillside Holding Corporation and Gourmet Coffees of America, Inc. dated
October 8, 1993 filed as an Exhibit to Form 10-K for the fiscal year
ended July 31, 1993 is incorporated herein by reference.
(j) Agreement dated November 7, 1989 by and between Chock full o'Nuts
Corporation and Tetley, Inc. for the purchase of Tetley's instant coffee
business filed as an Exhibit to Form 10K for the fiscal year ended July
31, 1990 is incorporated herein by reference.
(k) Standstill agreement by and among Chock full o'Nuts Corporation
and Steven Schulman and Leon Pordy, M.D. dated June 21, 1991 filed as
an Exhibit to Form 10K for the fiscal year ended July 31, 1991 is
incorporated herein by reference.
(l) Form of restricted stock agreement dated January 2, 1988 with
key employees (including certain officers and directors) filed as an
Exhibit to Form 10-K for the fiscal year ended July 31, 1994 is
incorportated herein by reference.
Exhibit 11 Statement re: Computation of Per Share Earnings
Exhibit 12 Statement re: Computation of ratios, not applicable.
Exhibit 13 Not applicable.
Exhibit 18 Letter rechange in accounting principles, not applicable.
Exhibit 21 Subsidiaries of the registrant.
Exhibit 22 Published report regarding matter submitted to vote of security
holders, not applicable.
Exhibit 23 Consent of experts and counsel, not applicable.
Exhibit 24 Power of attorney, not applicable.
Exhibit 27 Financial Data Schedule.
Exhibit 99 Additional exhibits, not applicable.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
CHOCK FULL O' NUTS CORPORATION
(Registrant)
October 13, 1995 /s/Howard M. Leitner
Howard M. Leitner, Vice President,
Chief Financial and Accounting
Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
October 13, 1995 /s/Norman E. Alexander October 13, 1995
Norman E. Alexander Mark A. Alexander
Chairman of the Board Director
October 13, 1995 October 13, 1995 /s/Martin J. Cullen
Virgil Gladieux Martin J. Cullen
Director Vice President and
Director
October 13, 1995 /s/Stuart Z. Krinsly October 13, 1995 /s/Marvin I. Haas
Stuart Z. Krinsly Marvin I. Haas
Director President and
Chief Executive
Officer
and Director
October 13, 1995 /s/Howard M. Leitner October 13, 1995
Howard M. Leitner Henry Salzhauer
Vice President and Director
Chief Financial Officer
and Director
October 13, 1995 /s/R. Scott Schafler October 13, 1995
R. Scott Schafler David S. Weil
Director Director
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2), (c) and (d)
LIST OF FINANCIAL STATEMENTS, SUPPLEMENTARY DATA
AND FINANCIAL STATEMENT SCHEDULES
CERTAIN EXHIBITS
YEAR ENDED JULY 31, 1995
CHOCK FULL O' NUTS CORPORATION
NEW YORK, NEW YORK
FORM 10-K--ITEM 14(a)(1) and (2)
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND SCHEDULES
The following consolidated financial statements of the Registrant and its
subsidiaries are included in Item 8:
Page
Report of Independent Auditors..................................... 17
Consolidated Balance Sheets--July 31, 1995 and 1994................ 18 and 19
Consolidated Statements of Operations--Years Ended
July 31, 1995, 1994 and 1993..................................... 20
Consolidated Statements of Cash Flows--
Years Ended July 31, 1995, 1994 and 1993......................... 21 and 22
Consolidated Statements of Stockholders' Equity--
Years Ended July 31, 1995, 1994 and 1993......................... 23 and 24
Notes to Consolidated Financial Statements......................... 25 to 35
The following consolidated financial statement schedule of the registrant
and its subsidiaries is included in Item 14(d):
Page
Schedule II -- Valuation and Qualifying Accounts................... 41
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore
have been omitted.
Ernst & Young LLP
Report of Independent Auditors
The Board of Directors and Stockholders
Chock Full o'Nuts Corporation
New York, NY
We have audited the accompanying consolidated balance sheets of Chock Full
o'Nuts Corporation and subsidiaries as of July 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity, and
cash flows for each of the three years in the period ended July 31, 1995.
Our audits also included the financial statement schedule listed in the
index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Chock Full o'Nuts Corporation and subsidiaries at July 31, 1995
and 1994, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended July 31, 1995 in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
New York, NY
October 5, 1995
CONSOLIDATED BALANCE SHEETS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
July 31, 1995 and 1994
ASSETS 1995 1994
CURRENT ASSETS:
Cash and cash equivalents $ 8,386,620 $5,939,456
Receivables, principally trade, less
allowances for doubtful accounts and
discounts of $1,251,000 and $928,000--
Notes 3 and 11(a) 37,703,214 31,935,437
Inventories--Notes 1 and 3 60,576,420 45,543,048
Investments in marketable securities,
at cost (market value of $6,975,000) 6,972,928 25,786,080
Prepaid expenses and other -- Note 4 2,916,690 3,466,246
TOTAL CURRENT ASSETS 116,555,872 112,670,267
PROPERTY, PLANT AND EQUIPMENT, at cost-
Note 3:
Land 3,114,889 3,754,639
Buildings and improvements 14,457,466 18,652,07
Leaseholds and leasehold improvements 2,443,678 1,795,326
Machinery and equipment 71,022,693 72,603,462
91,038,726 96,805,506
Less allowances for depreciation and
amortization 39,273,602 41,510,772
51,765,124 55,294,734
REAL ESTATE HELD FOR SALE OR DEVELOPMENT,
at cost - Note 3 7,747,107 5,404,243
OTHER ASSETS AND DEFERRED CHARGES, net--Note 11(b) 25,099,333 29,367,430
EXCESS OF COST OVER NET ASSETS
ACQUIRED, net --Notes 1 and 2 5,869,138 6,070,268
$207,036,574 $208,806,942
See notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
July 31, 1995 and 1994
1995 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 12,937,578 $ 11,851,998
Accrued expenses 12,438,512 17,381,839
Income taxes--Note 4 1,530,543 1,698,293
TOTAL CURRENT LIABILITIES 26,906,633 30,932,130
LONG-TERM DEBT -- Note 3 106,568,896 110,427,265
OTHER NON-CURRENT LIABILITIES--
Notes 9 and 11(c) 1,468,358 4,743,855
DEFERRED INCOME TAXES -- Note 4 7,156,000 4,442,000
STOCKHOLDERS' EQUITY--Notes 3, 8 and 9:
Common stock, par value $.25 per share;
Authorized 50,000,000 shares;
Issued 11,211,068 and 10,898,130
shares 2,802,767 2,724,533
Additional paid-in capital 51,357,008 49,322,585
Retained earnings 18,970,435 16,217,803
73,130,210 68,264,921
Deduct:
Cost of 475,522 shares in treasury (6,573,719) (6,573,719)
Deferred compensation under stock
bonus plan and employees' stock
ownership plan (1,619,804) (1,663,510)
Unfunded pension losses (1,766,000)
TOTAL STOCKHOLDERS' EQUITY 64,936,687 58,261,692
LEASES--Note 7 ___________
$207,036,574 $208,806,942
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years ended July 31, 1995, 1994 and 1993
1995 1994 1993
Revenues:
Net sales $328,377,727 $263,638,453 $251,641,474
Rentals from real estate 2,061,015 2,059,647 1,875,578
330,438,742 265,698,100 253,517,052
Costs and expenses:
Cost of sales 235,146,454 175,664,343 157,206,889
Selling, general and
administrative expenses 78,101,749 77,851,623 78,687,340
Expenses of real estate 1,571,090 1,742,462 1,884,106
Restructuring charge -- Note 11(c) 3,597,769
Officer's termination benefits
-- Note 11 (d) ___________ 817,535
314,819,293 255,258,428 242,193,639
OPERATING PROFIT--Note 6 15,619,449 10,439,672 11,323,413
Interest and dividend income 903,887 867,517 861,076
Interest expense (9,191,495) (8,802,413) (10,228,159)
Gain on sale of product line -- Note 6 12,475,246
Gain on sales of marketable securities 455,558
Other income/(deductions)-- Note 11(f)532,447 775,292 (1,063)
INCOME BEFORE INCOME TAXES 7,864,288 15,755,314 2,410,825
Income taxes--Note 4:
Current:
Federal 2,267,000 6,742,000 1,648,000
State and local 161,000 348,000 348,000
Deferred 573,000 781,000 (647,000)
3,001,000 7,871,000 1,349,000
INCOME FROM CONTINUING
OPERATIONS 4,863,288 7,884,314 1,061,825
Discontinued operations -- Note 5:
Income from operations, net of income
taxes of $1,339,000 1,103,029
Loss on disposition (3,171,240)
(2,068,211)
NET INCOME/(LOSS) $4,863,288 $7,884,314 $(1,006,386)
Earnings/(loss) per share--Note 1:
Primary:
Continuing operations $.45 $ .73 $ .10
Discontinued operations (.19)
Net income/(loss) $.45 $.73 $(.09)
Fully diluted:
Continuing operations $.42 $.54 $ .10
Discontinued operations ____ (.19)
Net income/(loss) $.42 $.54 $(.09)
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years Ended July 31, 1995, 1994 and 1993
1995 1994 1993
Operating Activities - Continuing Operations:
Net income $4,863,288 $ 7,884,314 $ 1,061,825
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization of
property, plant and equipment 6,006,989 6,187,476 6,983,539
Amortization of deferred compensation
and deferred charges 4,646,287 4,430,010 5,311,264
Restructuring charge 2,900,000
(Gain) on sale of property,plant
and equipment (589,137)
(Gain) on sales of marketable securities (455,558)
Deferred income taxes 573,000 781,000 (647,000)
Gain on sale of product line (12,475,246)
Other, net 1,850 (1,533,353) (2,844,800)
Changes in operating assets and
liabilities, net of effects from
acquired companies:
(Increase)in accounts receivable (6,090,777) (4,226,971) (307,577)
(Increase) in inventory (15,033,372) (7,151,651) (3,631,870)
(Increase)/decrease in prepaid
expenses (1,481,444) 617,452 149,693
(Decrease)/increase in accounts
payable,
accrued expenses and income
taxes (780,497) 659,932 4,309,899
__________ __________ __________
NET CASH (USED IN)/PROVIDED BY OPERATING
ACTIVITIES (7,883,813) (4,827,037)(1)12,829,415
Investing Activities - Continuing Operations:
Purchases of marketable securities (11,473,787) (29,117,568) (275,591)
Proceeds from sale and collection of
principal of marketable securities 31,086,939 3,331,488 23,595,522
Purchases of property, plant and
equipment (9,004,570) (5,680,956) (8,057,739)
Acquisition of businesses (473,788)(56,019,777)
Proceeds from sale of product line 38,055,704
Increase in net assets of product line sold (1,265,892)
Sale of business 32,917,500
Proceeds from sale of property, plant and
equipment 4,078,764 _________
NET CASH PROVIDED BY/(USED IN)
INVESTING ACTIVITIES 14,687,346 4,848,988 (7,840,085)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years Ended July 31, 1995, 1994 and 1993
FINANCING ACTIVITIES - Continuing Operations:
Loan to employees' stock ownership plan (500,000)
Purchase of treasury stock (1,850,000)
Principal payments of long-term
debt (3,856,369) (35,497,348)
Proceeds from long-term debt 2,355,091 36,578,345
Other (56,745) (2,400,459)
NET CASH (USED IN)/PROVIDED BY
FINANCING ACTIVITIES (4,356,369) 448,346 (1,319,462)
INCREASE IN CASH AND CASH
EQUIVALENTS - CONTINUING OPERATIONS 2,447,164 470,297 3,669,868
Cash and cash equivalents at beginning
of year - continuing operations 5,939,456 5,469,159 2,529,123
CASH AND CASH EQUIVALENTS AT END OF YEAR
- - CONTINUING OPERATIONS $8,386,620 $5,939,456 $6,198,991(2)
Supplemental Information
Cash paid during the year: 1995 1994 1993
Interest $8,532,841 $8,103,742 $9,769,319
Income taxes 1,080,706 5,129,630 1,611,825
(1) Net cash used in operating activities in 1994 is, in large part, due
to income taxes of approximately $6,000,000 related to the gain on sale of
product line. Under FASB Statement No. 95, "Statement of Cash Flows", the
pre-tax gain on sale of the product line was deducted in arriving at cash
flow from operating activities but the related income taxes were not similarly
treated.
(2) Includes $729,832 of cash and cash equivalents included in net assets of
product line sold.
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years Ended July 31, 1995, 1994 and 1993
Common Stock
Issued In Treasury
Shares Amount Shares Amount
In Thousands
Balance at July 31, 1992 10,192 $2,548 276 $4,724
Net (loss)
3% stock dividend 300 75
Conversion of debentures 100 25
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization
Other
Increase in unfunded pension losses _____ _____
Balance at July 31, 1993 10,592 2,648 276 4,724
Net income
3% stock dividend 303 76
Conversion of debentures 3 1
Purchase of treasury stock 200 1,850
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization
Increase in unfunded pension losses ______ ___ ______
Balance at July 31, 1994 10,898 2,725 476 $6,574
Net income
3% stock dividend 313 78
Conversion of debentures
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization
Loan to employees' stock ownership
plan
Decrease in unfunded pension losses _____
Balance at July 31, 1995 11,211 $2,803 476 $6,574
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Years Ended July 31, 1995, 1994, and 1993
Deferred
Compensation
Under Stock
Bonus Plan
and Employees' Unfunded Additional
Stock Ownership Pension Paid-In Retained
Plan Losses Capital Earnings
In Thousands
Balance at July 31, 1992 $3,089 $150 $43,868 $13,953
Net (loss) (1,006)
3% stock dividend 2,415 (2,490)
Conversion of debentures 825
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization (862)
Other 148
Increase in unfunded pension losses 275 ______
Balance at July 31, 1993 2,227 425 47,256 10,457
Net income 7,884
3% stock dividend 2,048 (2,123)
Conversion of debentures 19
Purchase of treasury stock
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization (563)
Increase in unfunded pension losses 1,341
Balance at July 31, 1994 1,664 1,766 49,323 16,218
Net income 4,863
3% stock dividend 2,032 (2,111)
Conversion of debentures 2
Deferred compensation under stock
bonus plan and employees' stock
ownership plan:
Amortization (544)
Loan to employees' stock
ownership plan 500
Decrease in unfunded pension losses (1,766)
Balance at July 31, 1995 $1,620 $ - $51,357 $18,970
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
July 31, 1995, 1994 and 1993
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Fiscal year: During fiscal 1995, the Company elected to use a year ending
on the Friday closest to July 31. Fiscal years are designated as ending
July 31 for convenience of reference.
Principles of Consolidation: The consolidated financial statements include
the accounts of the Company and its subsidiaries. Significant intercompany
accounts and transactions have been eliminated in consolidation.
Receivables - Concentration of Credit Risk: The Company's primary business
is the roasting, packing and marketing of a broad range of regular and
decaffeinated, ground roast, instant and specialty coffees for the
Foodservice and Retail Grocery Industries. These products are sold
regionally throughout the United States and Canada. The Company performs
periodic credit evaluations of its customers' financial condition and
generally does not require collateral. Credit losses relating to customers
consistently have been within management's expectations.
Cash Equivalents: The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash
equivalents.
Inventories: Inventories are stated at the lower of cost (first-in,
first-out) or market and consist of:
July 31, 1995 1994
Finished goods $37,194,809 $24,684,609
Raw materials 19,928,214 16,889,428
Supplies 3,453,397 3,969,011
$60,576,420 $45,543,048
Property, Plant and Equipment: Depreciation and amortization of property,
plant and equipment are computed by the straight-line method for financial
reporting purposes and by accelerated methods for income tax purposes.
Pre-opening Costs: Retail restaurant and cafe pre-opening costs are charged
to operations as incurred.
Excess of Cost over Net Assets Acquired: Excess of cost over net assets
acquired is being amortized on a straight-line basis over periods of 40
and 15 years. Accumulated amortization amounted to $1,554,000 and
$1,353,000 at July 31, 1995 and 1994, respectively.
Other Intangibles: Other intangibles consist principally of trademarks,
covenants not to compete and customer lists. Such items are being amortized
on a straight-line basis over periods of 40, 5 and 7.5 years, respectively.
Per Share Data: Primary per share data is based on the following weighted
average number of common shares outstanding during each year retroactively
adjusted for stock dividends:10,736,000 in 1995, 10,797,000 in 1994 and
10,884,000 in 1993.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Fully diluted per share data, assuming conversion of debentures, is based on
22,557,000 and 22,619,000 common shares outstanding for the years ended July
31, 1995 and 1994. Assumed conversion of debentures would have had an
anti-dilutive effect for the year ended July 31, 1993.
NOTE 2--ACQUISITIONS
On March 11, 1994, the Company acquired, for approximately $467,000 in cash,
all the operating assets and liabilities of a company engaged in the
commercial franchising and operation of drive-through food service
establishments primarily engaged in the sale of gourmet coffee complimented
by fresh bakery goods, sandwiches and ancillary products. The acquisition
is being accounted for as a purchase. The excess of cost over net assets
acquired (approximately $360,000) is being amortized over a period of 15
years using the straight-line method. The pro forma effects on the Company's
operations as if this business had been acquired on August 1, 1992 are not
material.
In December 1992, the Company acquired the stock of Cain's Coffee Co.
("Cains") and certain trademarks related to that business from Nestle'
Beverage Company and an affiliate for approximately $52,000,000 in cash.
Cain's business consists primarily of sales of coffee and related products
to food service customers in parts of the Midwest and Southwest. In
connection with the acquisition, which has been accounted for as a purchase
transaction, the Company acquired assets with a fair value of approximately
$55,750,000 (including trademarks, covenant not to compete and customer list
of $20,900,000, included in other assets and deferred charges on the
consolidated balance sheets) and assumed liabilities of approximately
$3,750,000. The Company used the proceeds (approximately $20,500,000)
from the sale of a substantial portion of its marketable securities to
finance a portion of the purchase price and financed the remainder through
additional borrowings from its banks.
In November 1992, the Company acquired a controlling interest in a
partnership which owns Dana Brown Private Brands, Inc., a company which
markets and sells coffee and tea products, servicing food retailers and
distributors located primarily in the Midwest. The purchase price was
$2,000,000, plus approximately $2,500,000 for the cost of inventory.
The pro forma effects on the Company's operations as if this business had
been acquired on August 1, 1992 are not material.
The following pro forma unaudited results of operations assume the
acquisition of Cain's occurred at the beginning of fiscal 1993 and gives
effect to certain adjustments, including depreciation of property, plant
and equipment, amortization of intangibles and interest expense, resulting
from the acquisition and related financing. Amounts for 1993 include the
pre-acquisition results of operations for Cain's for the four months ended
October 31, 1992.
Year Ended July 31 1993
Net sales $275,000,000
Income from continuing operations 1,269,000
Income from continuing operations per share .12
Net (loss) (799,000)
Net (loss) per share (.07)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 3--LONG TERM DEBT
Long-term debt consists of the following:
July 31
1995 1994
7% Convertible senior subordinated
debentures due 2012 $ 51,693,000 $ 51,693,000
8% Convertible subordinated debentures
due 2006 43,266,000 43,268,000
Revolving credit and term loan 11,609,896 15,466,265
___________
$106,568,896 $110,427,265
The 7% and 8% debentures require annual sinking fund payments of $3,000,000
and $3,750,000, respectively, which after giving effect to previous
conversions and redemptions, commence April 1, 2000 and March 15, 1998,
respectively, and provide for balloon payments of $18,000,000 and $12,500,000
on April 1, 2012 and September 15, 2006, respectively. The debentures are
convertible at the option of the debenture holders into shares of the Company's
common stock at a price of $8.23 per share and $7.81 per share, respectively
(subject to adjustment).
During the years ended July 31,1995 and 1993, $2,000 and $437,000 of 8%
debentures were converted into 248 and 51,000 shares of common stock,
respectively. During the years ended July 31,1994 and 1993, $20,000 and
$438,000 of 7% debentures were converted into 2,000 and 49,000 shares of
common stock, respectively. As of July 31, 1995, approximately 11,821,000
common shares are reserved for issuance upon conversion of debentures
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
(8.75% at July 31, 1995) on all such loans is equal to the 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 July 31, 1995) are to be repaid in
December 1997. Outstanding loans under the revolving credit agreements 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 requires repayment of outstanding loans with excess cash flow,
as defined.
As of July 31, 1995, long-term debt matures as follows: $12,269,896 (year
ending July 31, 1998), $3,750,000 (year ending July 31, 1999), $4,443,000
(year ending July 31, 2000) and $86,000,000 thereafter.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 4--INCOME TAXES
The provision for income taxes for continuing operations differs from the
expected Federal income tax for the reasons shown in the following table:
1995 1994 1993
Federal income tax provision
expected at the statutory rate $2,673,858 $5,514,360 $ 819,681
Effect on Federal income tax of:
Difference between tax and book
basis of product line sold 1,721,214
State and local income taxes,
net of Federal income tax
benefit 106,260 226,200 229,680
Amortization of excess of cost over
net assets acquired 68,000 88,200 178,160
Other 152,882 321,026 121,479
$3,001,000 $7,871,000 $1,349,000
Deferred tax liabilities and assets are comprised of the following at July
31,
1995 1994
Net deferred non-current tax liabilities:
Net difference between tax and book basis
of property, plant and equipment $7,668,000 $6,216,000
Unfunded pension liabilities 250,000 (931,000)
Compensation under stock bonus plan and
employees' stock ownership plan (332,000) (358,000)
Other (430,000) (485,000)
$7,156,000 $4,442,000
Net deferred current tax assets:
Restructuring charges $ 130,000 $1,767,000
Net difference between tax and book
basis of inventory 317,000 410,000
Officers' termination benefits 91,000 211,000
Allowance for doubtful accounts and
discounts 343,000 400,000
Other 45,000 (166,000)
Accrued cash bonus 190,000
Payment of underfunded pension plan (525,000)
$ 591,000 $2,622,000
Under the Financial Accounting Standards Board Statement No. 109, "Accounting
for Income Taxes", the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 5--DISCONTINUED OPERATIONS
In April 1993, the Company and Jimbo's Jumbos, Incorporated ("JJI") entered
into an agreement and plan of merger to merge JJI with and into JJJ
Acquisition Corp. (a company controlled by John W. Kluge and his affiliates).
Pursuant to the merger, which was consummated on July 8, 1993, the Company,
as well as all other stockholders of JJI, received $6.93 per share for each
share owned. The proceeds ($32,917,500) were used to reduce outstanding bank
debt incurred for the acquisition of Cain's (see Note 2). A loss of
$3,171,000 was incurred in connection with the sale and was charged to
discontinued operations for the year ended July 31, 1993. The business of
JJI consisted primarily of (1) shelling farmers' stock peanuts into
commercial and seed grades of raw peanuts for sale to commercial processors
of peanuts, seed dealers and farmers and (2) processing and packaging of
in-shell peanuts and nuts, and shelled peanuts and nuts, for sale to
supermarkets.
The Company restated its financial statements to present the operating results
of JJI as a discontinued operation.
Operating profits from discontinued operations were as follows:
1993
Net sales $45,722,099
Costs and expenses:
Cost of sales 37,240,237
Selling, general and administrative expenses 5,413,440
42,653,677
Operating profit $ 3,068,422
NOTE 6--PRODUCT LINE SOLD
In October 1993, the Company and Gourmet Coffees of America ("GCA") entered
into an agreement to sell Hillside Coffee of California, Inc. ("Hillside")
to GCA. Hillside's business consisted of roasting, packing, distributing and
marketing specialty coffee to supermarkets. Pursuant to the agreement which
was consummated on November 19, 1993, the Company received (a) $38,500,000
and (b) shares of stock representing approximately one-half of one percent
of the equity of GCA. The Company recorded an approximate $6,200,000 after
tax gain upon consummation of the sale. The operating profits of Hillside,
before intercompany management charges, for the period August 1, 1993 to
November 19, 1993 and fiscal 1993 included in the results of operations are
as follows:
Period From
August 1, 1993 to July 31,
November 19, 1993 1993
Net sales $9,556,000 $ 27,720,163
Costs and expenses:
Cost of sales 4,089,000 10,974,986
Selling, general and administrative
expenses 3,288,000 11,240,716
7,377,000 22,215,702
Operating profit $2,179,000 $ 5,504,461
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 7 -- LEASES
The Company and subsidiaries lease manufacturing plants, warehouses, office
space and restaurant locations and related premises. Leases which provide
for payment of property taxes, utilities and certain other expenses, expire
on various dates through 2009 and contain renewal options. As of July 31,
1995, the Company's obligation for future minimum rental payments, assuming
the exercise of renewal options, aggregated $15,897,000. Payments required
in the following five fiscal years amount to $3,698,000 (1996), $2,972,000
(1997), $2,308,000 (1998), $2,307,000 (1999) and $1,334,000 (2000). Rental
expense charged to continuing operations under operating leases for the years
ended July 31, 1995, 1994 and 1993 was $4,893,000, $4,496,000 and $1,797,000,
respectively.
As of July 31, 1995, future minimum rental payments due from tenants under
sub-leases of retail facilities and related premises aggregated $10,790,000.
Amounts receivable in the following five fiscal years amount to $1,621,000
(1996), $1,403,000 (1997), $1,395,000 (1998), $1,326,000 (1999) and
$1,058,000 (2000).
NOTE 8 -- STOCKHOLDERS' EQUITY
A non-contributory employee stock ownership plan ("ESOP") has been
established to acquire shares of the Company's common stock for the benefit
of all eligible employees. The Company has made loans to the ESOP to be
repaid in equal annual installments over 8 years with interest primarily at
9% and 10%. Deferred compensation equal to the loans has been recorded as a
reduction of stockholders' equity representing the Company's prepayment of
future compensation expense. As the Company makes annual contributions to
the ESOP, these contributions will be used to repay the loans to the Company,
together with accrued interest. As the loans are repaid, common stock is
allocated to ESOP participants and deferred compensation is reduced by the
amount of the principal payment on the loans.
The Company has a Warrant Dividend Plan which provides for distribution to
shareholders of a right to purchase one share of the Company's common stock
currently for $24.13 (subject to anti-dilution adjustments) as a dividend on
each of the Company's outstanding common shares. These rights are not
currently exercisable and will only become exercisable upon the happening of
certain events. Under certain circumstances, the rights entitle the holders
to receive, upon payment of the then current exercise price of the right,
that number of shares of Company common stock having a market value of two
times the then current exercise price of the right. The rights will expire
on December 30, 1997 and are redeemable at $.05 per right at any time prior
to the occurrence of certain events.
The Company's incentive compensation plan provides, among other things,
for incentive or non-qualified stock options, stock appreciation rights,
performance units, restricted stock and incentive bonus awards. During
the years ended July 31, 1995 and 1994, respectively, non-qualified stock
options for the purchase of 250,000 and 109,000 shares, at prices of $5.75
and $8.50 per share, were granted to key executives under the plan. During
the year ended July 31, 1995 options to purchase 8,500 shares were
forefeited. At July 31, 1995, there were outstanding options for 350,500
shares. The 1995 options were granted to the Chief Executive Officer.
Options granted are exercisable at the fair market value at date of grant
and, subject to termination of employment, expire ten years from the date
of grant, are non-transferable other than on death, and are exercisable in
three equal annual installments commencing three years from date of grant.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 8--STOCKHOLDERS EQUITY--continued
Under the incentive compensation plan, as of July 31, 1995, 47,000 common
shares are outstanding which were issued to key executives in 1987 and 1988.
These shares are subject to restricted stock agreements which provide that
the shares will vest ratably over periods through 2001. Such shares are
subject, upon the occurrence of certain events, to either forfeiture or
accelerated vesting. The fair value of the shares on the dates of issuance
is being charged to operations as compensation during the period the
restrictions remain in effect. At July 31, 1995, 137,000 shares were
available under the plan.
NOTE 9--PENSION PLANS
The Company has non-contributory defined benefit pension plans covering all
employees who have completed one year of service, have attained age twenty
and one-half and are not covered by union-sponsored plans. The benefits are
based on years of service and the employee's compensation during the last
60 months of employment. The pension plans are funded to accumulate
sufficient assets to provide for accrued benefits. In addition,
contributions are made to multi-employer plans which provide defined
benefits to union employees.
A summary of the components of net periodic pension cost for the defined
benefit plans for the three years ended July 31, 1995 and total
contributions charged to pension expense for the union-sponsored plans
follows (in thousands):
1995 1994 1993
Service cost-benefits earned
during the year $1,813 $1,471 $1,058
Interest cost on projected benefit
obligation 1,961 1,782 1,599
Actual return on plan assets (1,723) (1,654) (1,600)
Net amortization and deferral 253 156 (4)
NET PENSION COST OF DEFINED BENEFIT
PLANS 2,304 1,755 1,053
UNION-SPONSORED PLANS 287 422 505
TOTAL PENSION EXPENSE $2,591 $2,177 $1,558
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 9--PENSION PLANS--Continued
The following table sets forth the funded status and amounts recognized in
the consolidated balance sheet at July 31, for the defined benefit pension
plans (in thousands):
1995 1995 1994
Plan Whose Assets Plans Whose Accumulated
Exceed Accumulated Benefits Exceed Assets
Actuarial present value of
benefit obligations:
Vested benefit obligation $(20,659) $(2,306) $(21,780)
Accumulated benefit
obligation $(20,973) $(2,309) $(22,124)
Projected benefit
obligation $(23,075) $(2,309) $(24,320)
Plan assets, consisting
primarily of U.S. treasury
notes, other U.S. agency
issues, guaranteed insurance
contracts and corporate obli-
gations, at fair value 21,056 2,046 20,202
Projected benefit obligation
(in excess of)plan assets (2,019) (263) (4,118)
Unrecognized prior service cost 270 124 395
Unrecognized net loss 4,414 39 5,884
Unrecognized net asset at
August 1, 1987; net of amortization (593) (65) (745)
Adjustment required to recognize
minimum liability (3,338)
Net pension asset(liability)
recognized in the consolidated
balance sheet $2,072 $(165) $(1,922)
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 8.0% and 4% and 8.25% and 4%, respectively,
at July 31, 1995 and 1994. The expected long-term rate of return on plan
assets was 8.0%, 8.5% and 8.5% in 1995, 1994 and 1993, respectively.
Provisions of FASB Statement No. 87 (the Statement) require the Company,
under certain circumstances, to record a minimum pension liability relating
to unfunded accumulated benefit obligations, establish an intangible asset
relating thereto and reduce stockholders' equity, net of future tax benefits.
During fiscal 1995, minimum pension liability recorded in prior years related
to this matter was eliminated due to the current relationship of plan assets
and accumulated benefit obligations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 10--QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of the unaudited quarterly results of operations
for the years ended July 31, 1995 and 1994:
Fiscal 1995
Three Months Ended
October 31 January 31 April 30 July 31
(Thousands of Dollars Except Per Share Data)
Net sales $73,572 $91,704 $81,005 $82,097
Gross profit $22,713 $25,225 $23,323 $21,970
NET INCOME $ 942 $ 1,295 $ 1,414 $ 1,213
Per share:
Primary $ .09 $ .12 $ .13 $ .11
Fully diluted $ .09 $ .11 $ .11 $ .11
Fiscal 1994
Three Months Ended
October 31 January 31 April 30 July 31
(Thousands of Dollars Except Per Share Data)
Net sales $70,936 $62,108 $61,467 $69,127
Gross profit $25,505 $20,662 $20,160 $21,647
NET INCOME/(LOSS) $ 506 $ 7,244(1) $ (270) $ 404(2)
Per share:
Primary $ .05 $ .67(1) $ (.03) $ .04(2)
Fully diluted $ .05 $ .37 $ (.03) $ .04
(1) Includes gain on sale of Hillside Coffee of California, Inc. of
$7,068,000 ($.65 per share). See Note 6.
(2) Includes reduction of aforementioned gain of $844,000 ($.08 per share).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 11--OTHER ITEMS
a. Receivables other than trade at July 31, 1995 and 1994 amount to
$2,656,000 and $3,242,000, respectively. See Note 11(c).
b. Other assets and deferred charges consist of (in thousands):
July 31, 1995 1994
Deferred financing costs (1) $3,412 $ 4,065
Non-compete agreements 4,468 6,170
Trademarks 4,667 4,793
Customer lists 5,819 6,972
Real estate and equipment held for rental, at
cost net of accumulated depreciation and
amortization of $705 and $1,654 677 617
Other 6,056 6,750
$25,099 $29,367
(1) Being amortized over the terms of the related indebtedness (see Note 3).
c. The Company recorded a charge in the fourth quarter of fiscal 1993
of $3,598,000 to provide for the estimated cost of consolidating and closing
certain production facilities. Such charge consisted primarily of accrued
expenses related to closing such facilities. The Company substantially
completed the restructuring during fiscal 1995. The after tax charge for
such restructuring was $2,232,000 ($.21 per share) in fiscal 1993.
In connection with closing a business and termination of a pension plan the
Company has paid a liability for an underfunded pension plan of approximately
$1,500,000 and recorded a similar amount receivable from the previous owner
of such business pursuant to the acquisition agreement. The previous owner
of the business is contesting the liability to the Company. The Company,
based upon its interpretation of the acquisition agreement and after
consultation with counsel, believes the previous owner of the business is
responsible for an amount approximating the underfunded pension liability
and has commenced litigation seeking such amount.
d. In August 1993 Joseph Breslin then Chairman of the Board and Chief
Executive Officer terminated his employment with the Company. In connection
therewith, $818,000 was charged to operations in the fourth quarter of fiscal
1993 for compensation benefits (including 5,714 restricted shares of the
Company's common stock which became subject to accelerated vesting) to which
he was entitled as a result of his termination. The after-tax charge for
such benefits was $507,000 ($.05 per share).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 11--OTHER ITEMS--Continued
e. The Company believes that the fair value of its 7% and 8%
convertible subordinated debentures approximates $49,625,000 and
$43,266,000, respectively, as indicated by the public trading prices of
such debt.
f. In fiscal 1995, other income includes $589,000 from the sale of a
former manufacturing plant. In fiscal 1994, other income includes $700,000
from the sale of the Company's private label tea and drink mix business.
NOTE 12 -- INDUSTRY SEGMENT INFORMATION
The Company's financial information by industry segment for 1995, 1994 and
1993 may be found on page 39 and is incorporated herein.
SELECTED FINANCIAL DATA
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
YEAR ENDED JULY 31
1995 1994 1993 1992 1991
(Dollar Amounts in Thousands, Except Per Share Amounts)
Net sales $328,378 $263,638 $251,641 $203,640 $200,037
Income/(loss) from
continuing operations 4,863 7,884 1,062 (5,822) 1,380
Working capital 89,649 81,738 72,022 45,027(1) 44,947(1)
Working capital ratio 4.3 to 1 3.6 to 1 3.8 to 1 3.2 to 1 3.9 to 1
Total assets 207,037 208,807 195,304 184,648 183,260
Long-term debt 106,569 110,427 108,092 107,053 108,862
Stockholders' equity 64,937 58,262 52,985 52,406 58,445
Per common share (2):
Income/(loss) from
continuing operations .45 .73 .10 (.56) .14
Stock dividends declared 3% 3% 3% 3% 3%
Stockholders' equity 6.05 5.43 4.84 4.84 5.43
(1) Does not include $23,053 in 1992 and $23,184 in 1991 of marketable
securities classified as non current.
(2) Per share data has been retroactively adjusted for a 3% stock dividend
in July of each year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
RESULTS 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 Company received (a) $38,500,000 in cash and
(b) 75,000 shares of stock representing approximately one-half of one
percent of the equity of GCA. A pre-tax gain of approximately $12,475,000
was recorded on the sale. Hillside's business consisted of roasting,
packing, distributing and marketing specialty coffee to supermarkets.
In December 1992, the Company acquired the stock of Cain's Coffee Co.
("Cains") and certain trademarks related to that business from Nestle'
Beverage Co. and an affiliate for $52,000,000 in cash. The business of
Cains consists primarily of sales of coffee and related products to Food
service customers in parts of the Midwest and Southwest.
In November 1992, the Company acquired a controlling interest in a
partnership which owns Dana Brown Private Brands, Inc. ("Dana Brown"), a
company which markets and sells coffee and tea products, servicing food
retailers and distributors located primarily in the Midwest. The purchase
price was $2,000,000, plus approximately $2,500,000 for the cost of
inventory.
In July 1993, the Company consummated the sale of its interest in Jimbo's
Jumbos, Incorporated ("JJI"). The Company has presented the operating
results of JJI as a discontinued operation in the consolidated financial
statements for the year ended July 31, 1993.
The discussion and analysis that follows relates solely to continuing
operations of the Company, including those of specialty coffee (see Note 6
of notes to consolidated financial statements).
Net sales increased $64,739,000 or 24.6% for the year ended July 31, 1995,
compared to 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 $9,557,000 of sales from
Hillside (due to its disposition).
Operating profits from food products were $15,552,000 an increase of 50% for
the year ended July 31, 1995, compared to $10,389,000 for the prior year.
The increase resulted primarily from increased gross profit margins partially
offset by increased selling, general and administrative expenses and the loss
of operating profits of $2,179,000 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 during the year ended July 31, 1995 and green coffee prices
ranged from a low of $1.21 per pound to a high of $2.31 per pound. 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 are currently not
profitable, and increased advertising and payroll costs, partially offset by
reduced coupon costs.
Net income was $4,863,000 or $.45 per share for the year ended July 31, 1995,
compared to $7,884,000 or $.73 per share for the prior year. The difference
was primarily due to increased operating profits, offset by increased income
taxes on such operating profits and the gain on sale of Hillside Coffee of
California, Inc. (the Company's specialty coffee product line) of $6,224,000
after income taxes or $.58 per share in the prior year.
Net sales increased $11,997,000 or 4.8% for the year ended July 31, 1994,
compared to the prior year. The increase in net sales was primarily due to
sales of Cains and Dana Brown (both acquired in the second quarter of the
prior fiscal year)and increased selling prices on operations included in
both the current and prior year, partially offset by the loss of sales from
Hillside (due to its disposition) and reduced coffee pounds sold in
operations included in both the current and the prior year. Cain's and
Dana Brown were accounted for as purchases, and, therefore, were not included
prior to their respective dates of acquisition.
Operating profits from food products were $10,389,000, a decrease of 35% for
the year ended July 31, 1994, compared to $15,948,000 for the prior year
before deducting restructuring charges and officer's termination benefits.
The decrease in operating profits resulted primarily from decreased gross
margins in operations included in both the current and prior year and
reduced operating profits from Hillside (due to its disposition), partially
offset by the operations of Cain's (included for the entire period for the
current year) and reduced selling, general and adminstrative expenses for
operations included in both the current and prior year. The reduced gross
margins were attributable to the inability to increase selling prices (due
to competition) commensurate with the increased costs of coffee and a
decrease in coffee pounds sold. Selling, general and administrative expenses
decreased due to reduced advertising, brokerage and payroll costs.
Income from continuing operations was $7,884,000 or $.73 per share, compared
to $1,062,000 or $.10 per share for the prior year. The difference was
primarily due to the gain on sale of Hillside Coffee of California, Inc.
(the Company's specialty coffee product line) in fiscal 1994 of $6,224,000
after tax effect or $.58 per share, the restructuring charges and officer's
termination benefits in fiscal 1993 aggregating $2,737,000 after tax effect
or $.27 per share and reduced interest expense, partially offset by decreased
operating profits from food products and reduced income taxes on the income
excluding the gain on sale in fiscal 1994 and the aforementioned unusual
charges in fiscal 1993.
General inflation has been relatively low for the last several years;
however, green coffee prices have changed significantly during fiscal 1994
and 1995. While the Company manages its inventory to have rapid turnover,
the changes in green coffee prices have impacted the company's gross profit
percentage.
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1995, working capital was approximately $89,650,000 and the
ratio of current assets to current liabilities was 4.3 to 1.
As of July 31, 1995, the Company had unused borrowing capacity of
approximately $28 million under its credit facilities of $40 million with
National Westminster Bank USA and Chemical Bank (see Note 3 of notes to
consolidated financial statements).
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. The Company believes that its cash flow from operations, its
marketable securities and cash equivalents and its amended and restated
revolving credit andterm loan agreements with its Banks provide sufficient
liquidity to meet its working capital, expansion and capital requirements.
SEGMENT INFORMATION
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
Year Ended July 31
1995 1994 1993
(Amounts in Thousands)
Net sales - food products $328,378 $263,638 $ 251,641
Rental revenues $ 2,061 $ 2,060 $ 1,876
Operating profit/(loss):
Food products $ 15,552 $ 10,389 $ 11,532(1)
Real estate 490 317 (9)
Eliminations (423) (266) (200)
$15,619 $ 10,440 $ 11,323
Identifiable assets:
Food products $169,380 $153,751 $ 170,287
Real estate 9,564 9,913 7,356
Corporate 28,093 45,143 17,661
$207,037 $208,807 $ 195,304
Depreciation and amortization:
Food products $ 5,804 $ 6,133 $ 6,925
Corporate 203 55 59
$ 6,007 $ 6,188 $ 6,984
Capital expenditures:
Food products $ 8,991 $ 5,643 $ 7,887
Corporate 14 38 171
$ 9,005 $ 5,681 $ 8,058
(1) Includes restructuring charge of $3,598,000 and officer's termination
benefits of $818,000.
The food products segment is engaged in the (a) roasting, packing and marketing
of regular, instant, decaffeinated and specialty coffees and (b) packing and
marketing of regular and decaffeinated tea for sale to retail, Foodservice
and private label customers. Additionally, other related food products are
marketed and sold to Foodservice customers. See Notes 5 and 6. Operations
of real estate represent rental and other income principally from the
Company's former restaurant facilities.
All of the Company's operations are located in the United States. Export sales
are not significant.
Identifiable assets under the caption "Corporate" include cash and cash
equivalents, investments in marketable securities and short-term investments
of $15,360,000 (1995), $31,726,000 (1994) and $5,469,000 (1993).
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
COMMON SHARE PRICES
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol CHF. The Company has approximately 14,000 shareholders of record as
of October 15, 1995.
1995 1994
High Low High Low
1st Quarter 6 1/4 5 1/8 9 5/8 7 1/8
2nd Quarter 6 1/4 5 1/4 10 1/4 7 1/2
3rd Quarter 6 5/8 5 3/8 8 3/8 6 7/8
4th Quarter 7 6 3/8 7 3/8 5 5/8
The Company distributed a 3% stock dividend on July 27, 1995,and July 29, 1994.
The Pursuant to certain provisions of a revolving credit and term loan
agreement, the Company may not declare or pay any dividend (except for stock
dividends).
Item 14 (d)
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
SCHEDULE II- VALUATION AND QUALIFYING ACCOUNTS
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Balance
Beginning Costs and at End
Description of Period Expenses Other Deductions(1) of Period
Year ended July 31,
1995:
Allowance for doubtful
accounts and discounts $ 928,000 $2,597,705 $2,274,705 $1,251,000
Year ended July,
1994:
Allowance for doubtful
accounts and discounts $1,081,000 $1,940,779 $ 24,664 $2,118,443 $ 928,000
Year ended July 31,
1993:
Allowance for doubtful
accounts and discounts $1,043,000 $1,787,000 $142,000(2)$1,891,000 $1,081,000
(1) Discounts taken by customers and uncollectible accounts written-off,
net of recoveries.
(2) Net addition due to acquisition of Cain's Coffee Co. and reclassification
to net assets held for sale.