Annual Report (Form 10-K), fiscal year 1994

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 food service and private label coffees. The balance of the Company's business is derived from its 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 by lessening its dependence on Retail Coffee.
In December 1992, the Company acquired the stock of Cain's Coffee Co. ("Cain's") and certain trademarks related to that business. Cain's business consists primarily of sales of coffee and related products to Foodservice customers in parts of the Midwest and Southwest. 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 which are in the Eastern United States. 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 consolidated 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: (i) Expansion of its Retail Restaurant and Cafe division; (ii) 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; (iii) Increasing Retail Grocery Market shares for Chock full o' Nuts brand Cafe Blend, decaffeinated, instant and rich french roast coffees, which generate higher margins than ground roast, regular and economy blend coffees; and, (iv) Selectively pursuing new business development opportunities, as appropriate, which 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, 1994, 1993 and 1992:
				 Fiscal Years Ended July 31, 				 1994 1993 1992 				 (In Thousands)
Revenues Net Sales - Food Products $263,638 $251,641 $203,640 Rentals from Real Estate 2,060 1,876 1,205
Operating Profit/(Loss): Food Products (1) 10,389 11,532 (2) (1,688) (2) Real Estate Operations 317 (9) (783) 			
(1) See Note 6 of notes to consolidated financial statements regarding product line sold.
(2) Includes restructuring charges of $3,598,000 and $5,500,000 and officers' termination benefits of $818,000 and $1,974,000 in fiscal 1993 and 1992, respectively (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 1993 were approximately $5 billion. Approximately 35% of total United States coffee sales in 1993 were to Foodservice customers.
Foodservice Sales and Marketing In January 1985, the Company began marketing its coffee and allied products through Company sales personnel and independent food brokers to chain and independent restaurants, hospitals, airlines, schools, governmental institutions, vending and office coffee service operators and other institutional distributors ("Foodservice Customers"). In December 1986, the Company acquired Greenwich, which is a major 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 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.
Approximately 47% of sales are currently 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. 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 more consistent, better tasting finished brews 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, instant, a Cafe blend and rich french roast coffees as well as a ready to drink iced cappuccino product, called Chock o'ccino. Finally, 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 1994 the Company's coffee sales (other than Hillside) to Retail Customers accounted for approximately 47% 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 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 General Foods (Maxwell House, Yuban & Sanka coffees), Procter & Gamble (Folger's coffees) and The Nestle Company (Hills, MJB & 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 entered the business of operating retail cafes which offer specialty coffees, sandwiches, salads, bakery products, snacks, and other assorted food and beverage products. The cafe has an upscale motif, with woods and granite, and utilizes a quick-service format, at a moderate price structure.
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, 1994.
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.
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.



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, 1994, all of which premises the Company considers adequate for its present and anticipated needs.
PLANTS AND OTHER PROPERTIES 					 Approximate 					 Square Feet Whether 							of Owned 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 110,000 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 Mebane, North Carolina Real Estate Operation 138,000 Owned Queen Ann Plaza Restaurant Operation 250 Leased Norwell, 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.

Item 3. LEGAL PROCEEDINGS None
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF 	 SECURITY HOLDERS Not applicable.
	PART II
Item 5.

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.

Item 6. SELECTED FINANCIAL DATA
"Selected Financial Data" is incorporated herein by reference.
Item 7.

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.


Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this Item is submitted in a separate section of this report.
Item 9.

Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Not applicable.
	PART III
Item 10.



Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 				 and
Item 11.

Item 11. EXECUTIVE COMPENSATION 				 and
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 				 and
Item 13.

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, 1994 which is to be filed with the Commission.
	PART IV
Item 14.

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 herewith.
(b) By-laws, filed herewith.
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 herewith.
(b) Form of the Company's 8% Convertible Subordinated Debenture 		included in Exhibit 4(a) filed herewith.
(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 herewith.
(d) Indenture dated as of April 1, 1987 between the Company and 	 IBJ Schroder Bank and Trust Company filed herewith.
(e) Form of the Company's 7% Convertible Senior Subordinated 	 Debenture included in Exhibit 4(d) filed herewith.
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 herewith.
(b) Benefits protection trust with National Westminster Bank USA filed herewith.
(c) Resolution of the Board of Directors adopting severance policy filed herewith.
(d) Chock full o' Nuts Corporation Employees' Stock Ownership Plan dated December 16, 1988 filed as an exhibit to form 10-K for the fiscal year ended July 31, 1989 is incorporated herein by reference.
(e) Agreement with Leon Pordy, M.D. dated July 8, 1992 filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1992 is incorporated herein by reference.
(f) Stock purchase agreement dated October 16, 1992 by and between Chock full o' Nuts Corporation and Nestle' Beverage Corporation filed herewith.
(g) 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.
(h) 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.
(i) 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.
(j) 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.
(k) 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 10-K for the fiscal year ended July 31, 1990 is incorporated herein by reference.
(l) Standstill Agreement by and among Chock full o'Nuts Corporation and Steven Schulman and Leon Pordy, MD dated June 21, 1991 filed as an Exhibit to Form 10-K for the fiscal year ended July 31, 1991 is incorporated herein by reference.
(m) Form of restricted stock agreement dated January 2, 1988 with key employees (including certain officers and directors) filed herewith.
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 re change 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 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, 1994 ------------------------------ 					Howard M. Leitner, 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, 1994 October 13, 1994 		 Norman E. Alexander Mark A. Alexander 		 Chairman of the Board Director
October 13, 1994 October 13, 1994 		Virgil Gladieux Martin J. Cullen 		Director Vice President and 							Director
October 13, 1994 October 13, 1994 		Stuart Z. Krinsly Marvin I. Haas 		Director Chief Executive Officer 							Vice Chairman of the 							Board and Chief 							Operating Officer
October 13, 1994 October 13, 1994 		Howard M. Leitner Henry Salzhauer 		President and Chief Director 		Financial Officer and 		Director
October 13, 1994 October 13, 1994 		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, 1994
	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 16 Consolidated Balance Sheets--July 31, 1994 and 1993 17 and 18 Consolidated Statements of Operations--Years Ended July 31, 1994, 1993 and 1992 19 Consolidated Statements of Cash Flows-- Years Ended July 31, 1994, 1993 and 1992 20 and 21 Consolidated Statements of Stockholders' Equity-- Years Ended July 31, 1994, 1993 and 1992 22 and 23 Notes to Consolidated Financial Statements 24 to 35
The following consolidated financial statement schedules of the registrant and its subsidiaries are included in Item 14(d): 								Page Schedule I--Marketable Securities 41 Schedule II--Amounts Receivable from Related Parties and 		Underwriters, Promoters, and Employees Other 		Than Related Parties 42 Schedule V--Property, Plant and Equipment 43 Schedule VI--Accumulated Depreciation and Amortization 		of Property, Plant and Equipment 44 Schedule VIII--Valuation and Qualifying Accounts 45 Schedule X--Supplementary Income Statement 		Information 46
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, 1994 and 1993, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1994. Our audits also included the financial statement schedules listed in the index at Item 14(a). These financial statements and schedules 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 required 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 satements. 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, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three year in the period ended July 31, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statment schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
As discussed in Note 4 to the consolidated financial statements, in 1994 the Company changed its method of accounting for income taxes.
ERNST & YOUNG LLP October 13, 1994
CONSOLIDATED BALANCE SHEETS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES July 31, 1994 and 1993
ASSETS 1994 1993
CURRENT ASSETS: Cash and cash equivalents $ 5,939,456 $ 5,469,159 Receivables, principally trade, less allowances for doubtful accounts and discounts of $928,000 and $1,081,000-- Notes 3 and 11(a) 31,935,437 25,319,816 Inventories--Notes 1 and 3 45,543,048 38,385,397 Net assets of product line sold -- Note 6 24,970,356
Investments in marketable securities, at cost (market value of $25,649,000) 25,786,080 Prepaid expenses and other -- Note 4 3,466,246 3,222,586 		TOTAL CURRENT ASSETS 112,670,267 97,367,314
PROPERTY, PLANT AND EQUIPMENT, at cost- Note 3: Land 3,754,639 3,754,639 Buildings and improvements 18,652,079 18,241,851 Leaseholds and leasehold improvements 1,795,326 842,011 Machinery and equipment 72,603,462 68,259,875 					 96,805,506 91,098,376 Less allowances for depreciation and amortization 41,510,772 35,502,700 					 55,294,734 55,595,676 REAL ESTATE HELD FOR SALE OR DEVELOPMENT, 	at cost 5,404,243 5,404,243
OTHER ASSETS AND DEFERRED CHARGES--Note 11(b) 29,367,430 31,040,452
EXCESS OF COST OVER NET ASSETS ACQUIRED, net --Notes 1 and 2 6,070,268 5,896,404 					 $208,806,942 $195,304,089
See notes to consolidated financial statements
CONSOLIDATED BALANCE SHEETS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES July 31, 1994 and 1993
						1994 1993
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 11,851,998 $ 10,804,095 Accrued expenses 17,381,839 13,605,564 Income taxes--Note 4 1,698,293 935,359 	 TOTAL CURRENT LIABILITIES 30,932,130 25,345,018
LONG-TERM DEBT -- Note 3 110,427,265 108,092,174
OTHER NON-CURRENT LIABILITIES-- Notes 9 and 11(c) 4,743,855 5,003,738
DEFERRED INCOME TAXES -- Note 4 4,442,000 3,878,000
STOCKHOLDERS' EQUITY--Notes 3, 8 and 9: Common stock, par value $.25 per share; Authorized 50,000,000 shares; 	Issued 10,898,130 and 10,592,264 	shares 2,724,533 2,648,066 Additional paid-in capital 49,322,585 47,255,836 Retained earnings 16,217,803 10,457,264 					 68,264,921 60,361,166
Deduct: Cost of 475,522 and 275,522 shares in treasury (6,573,719) (4,723,719) Deferred compensation under stock 	bonus plan and employees' stock 	ownership plan (1,663,510) (2,227,288) Unfunded pension losses (1,766,000) (425,000) 	 TOTAL STOCKHOLDERS' EQUITY 58,261,692 52,985,159
LEASES--Note 7 					 $208,806,942 $195,304,089
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years ended July 31, 1994, 1993 and 1992
					1994 1993 1992
Revenues: Net sales $263,638,453 $251,641,474 $203,640,151 Rentals from real estate 2,059,647 1,875,578 1,204,708 				 265,698,100 253,517,052 204,844,859 Costs and expenses: Cost of sales 175,664,343 157,206,889 143,643,978 Selling, general and administrative expenses 77,851,623 78,687,340 54,629,684 Expenses of real estate 1,742,462 1,884,106 1,987,573 Restructuring charge -- Note 11(c) 3,597,769 5,500,000 Officers' termination benefits -- Note 11(d) 817,535 1,974,000 				 255,258,428 242,193,639 207,735,235
OPERATING PROFIT/(LOSS)--Note 6 10,439,672 11,323,413 (2,890,376) Interest and dividend income 867,517 861,076 2,345,803 Interest expense (8,802,413) (10,228,159) (8,683,115) Gain on sale of product line -- Note 6 12,475,246 Gain on sales of marketable securities 455,558 919,603 Other income/ (deductions)-- Note 11(g) 775,292 (1,063) 71,343 INCOME/(LOSS) BEFORE INCOME TAXES 15,755,314 2,410,825 (8,236,742) Income taxes--Note 4: Current: Federal 6,742,000 1,648,000 (153,000) State and local 348,000 348,000 175,000 Deferred 781,000 (647,000) (2,437,000) 				 7,871,000 1,349,000 (2,415,000) INCOME/(LOSS) FROM CONTINUING 	OPERATIONS 7,884,314 1,061,825 (5,821,742)
Discontinued operations -- Note 5: Income from operations, net of income taxes of $1,339,000 and $2,012,000 1,103,029 1,909,720 Loss on disposition (3,171,240) 						 (2,068,211) 1,909,720
NET INCOME/(LOSS) $ 7,884,314 $ (1,006,386) $(3,912,022)
Earnings/(loss) per share--Note 1: Primary: Continuing operations $ .75 $ .10 $(.55) Discontinued operations (.20) .18 Net income/(loss) $ .75 $(.10) $(.37) Fully diluted: Continuing operations $ .56 $ .10 $(.55) Discontinued operations (.20) .18 Net income/(loss) $ .56 $(.10) $(.37)
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years Ended July 31, 1994, 1993 and 1992
					1994 1993 1992
Operating Activities - Continuing Operations: Net income/(loss) $ 7,884,314 $1,061,825 $(5,821,742) Adjustments to reconcile net income/(loss) to net cash provided by operating activities: Depreciation and amortization of property, plant and equipment 6,187,476 6,983,539 5,467,831 Amortization of deferred compensation and deferred charges 4,430,010 5,311,264 3,372,716 Restructuring charge 2,900,000 5,500,000 (Gain) on sales of marketable securities (455,558) (919,603) Deferred income taxes 781,000 (647,000) (2,437,000) Gain on sale of product line (12,475,246) Other, net (1,533,353) (2,844,800) (2,377,905) 			 Changes in operating assets and liabilities, net of effects from acquired companies: (Increase)in accounts 	 receivable (4,226,971) (307,577) (2,514,355) (Increase)/decrease in 	 inventory (7,151,651) (3,631,870) 2,416,342 Decrease in prepaid expenses 617,452 149,693 1,678,146 Increase in accounts 	 payable, accrued expenses and 	 income taxes 659,932 4,309,899 4,029,030 NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES (4,827,037) (1) 12,829,415 8,393,460 Investing Activities - Continuing Operations: Purchases of marketable securities (29,117,568) (275,591) (40,720,414) Proceeds from sale and collection of principal of marketable securities 3,331,488 23,595,522 41,770,674 Purchases of property, plant and equipment (5,680,956) (8,057,739) (8,436,695) 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 Dividend from discontinued operations 2,637,864 NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES 4,848,988 (7,840,085) (4,748,571)
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years Ended July 31, 1994, 1993 and 1992
FINANCING ACTIVITIES - CONTINUING OPERATIONS
Purchase of treasury stock (1,850,000) Principal payments of long-term debt (35,497,348) (2,486,335) Proceeds from long-term debt 2,355,091 36,578,345 Other (56,745) (2,400,459) NET CASH PROVIDED BY/ (USED IN) FINANCING ACTIVITIES 448,346 (1,319,462) (2,486,335) INCREASE IN CASH AND CASH EQUIVALENTS - CONTINUING OPERATIONS 470,297 3,669,868 1,158,554 Cash and cash equivalents at beginning of year - continuing operations 5,469,159 2,529,123 1,370,569 CASH AND CASH EQUIVALENTS AT END OF YEAR - CONTINUING OPERATIONS $5,939,456 $6,198,991 (2) $2,529,123
Supplemental Information
Cash paid during the year: 1994 1993 1992 Interest $8,103,742 $9,769,319 $8,335,165 Income taxes 5,129,630 $1,611,825 $ 968,499
(1) Net cash used in operating activities in 1994 is, 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, 1994, 1993 and 1992
						 Common Stock 					 Issued In Treasury 				 Shares Amount Shares Amount 						 In Thousands
Balance at July 31, 1991, as reported 9,846 $2,462 291 $4,981 Restatement due to adoption of FASB 109 Balance at July 31, 1991, as restated 9,846 2,462 291 4,981 Net (loss) 3% stock dividend 279 70 Conversion of debentures 67 16 Deferred compensation under stock bonus plan and employees' stock ownership plan: Issuance of shares (15) (257) Amortization Decrease in proportionate share of subsidiary's equity related to public offering of subsidiary's stock Other Reversal of unfunded pension losses 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
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES Years Ended July 31, 1994, 1993, and 1992 				 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, 1991,as reported $3,531 $217 $44,928 $21,430 Restatement due to adoption of FASB 109 1,646 Balance at July 31, 1991, as restated 3,531 217 44,928 19,784 Net (loss) (3,912) 3% stock dividend 1,849 (1,919) Conversion of debentures 553 Deferred compensation under stock bonus plan and employees' stock ownership plan: Issuance of shares 1,070 813 Amortization (1,512) Decrease in proportionate share of subsidiary's equity related to public offering of subsidiary's stock (4,406) Other 131 Reversal of unfunded pension losses (67) 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
See notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES July 31, 1994, 1993 and 1992
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned, except for one subsidiary Jimbo's Jumbos, Incorporated ("JJI") as to which the Company owned 73% and which was sold in July 1993 (see Note 5). Significant intercompany accounts and transactions have been eliminated in consolidation.
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, 1994 1993
Finished goods $24,684,609 $24,657,182 Raw materials 16,889,428 9,139,425 Supplies 3,969,011 4,588,790 				$45,543,048 $38,385,397
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 $1,353,000 and $1,168,000 at July 31, 1994 and 1993, 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:10,482,000 in 1994, 10,567,000 in 1993 and 10,490,000 in 1992.
Fully diluted per share data, assuming conversion of debentures, is based on 21,960,000 common shares outstanding for the year ended July 31, 1994. Assumed conversion of debentures would have had an anti-dilutive effect for the years ended July 31, 1993 and 1992.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 2--ACQUISITIONS
On March 11, 1994, the Company acquired for approximately $467,000 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. Based on a preliminary allocation of the purchase price, 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 sheet at July 31, 1994) 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, 1991 are not material.
The following pro forma unaudited results of operations assume the acquisition of Cain's occurred at the beginning of fiscal 1992 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 1992 and 1993 include the pre-acquisition results of operations for Cain's for the year ended June 30, 1992 and the four months ended October 31, 1992.
Year Ended July 31 (in thousands, except per share) 1993 1992 Net sales $275,000 $269,325 Income/(loss) from continuing operations 1,269 (4,323) Income/(loss) from continuing operations per share .12 (.41) Net (loss) (799) (2,413) Net (loss) per share (.08) (.23)
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 					 1994 1993
7% Convertible senior subordinated debentures due 2012 $ 51,693,000 $ 51,713,000 8% Convertible subordinated debentures due 2006 43,268,000 43,268,000 Revolving credit and term loan 15,466,265 13,111,174 				 $110,427,265 $108,092,174
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 September 15, 1998, respectively. The debentures are convertible at the option of the debenture holders into shares of the Company's common stock at a price of $8.48 per share and $8.04 per share, respectively (subject to adjustment).
During the years ended July 31,1993 and 1992, $437,000 and $437,000 of 8% debentures were converted into 51,000 and 50,000 shares of common stock, respectively. During the years ended July 31,1994, 1993 and 1992, $20,000, $438,000 and $150,000 of 7% debentures were converted into 2,000, 49,000 and 17,000 shares of common stock, respectively. As of July 31, 1994, approximately 11,477,000 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 (7.25% at July 31, 1994) 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, 1994) 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, 1994, long-term debt matures as follows: $16,234,265 (year ending July 31, 1998), $3,750,000 (year ending July 31, 1999)and $90,443,000 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:
					 1994 1993 1992 Federal income tax provision/(credit) expected at the statutory rate $5,514,360 $ 819,681 $(2,800,492) 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 226,200 229,680 115,500 Amortization of excess of cost over 	net assets acquired 88,200 178,160 178,160 Other 321,026 121,479 91,832
					$7,871,000 $1,349,000 $(2,415,000) 	 Deferred tax liabilities and assets in thousands are comprised of the following at July 31, 							1994 1993 Net deferred non-current tax liabilities: Net difference between tax and book basis 	of property, plant and equipment $6,216 $6,465 Unfunded pension liabilities (931) Compensation under stock bonus plan and employees' stock ownership plan (358) (329) Restructuring charges (1,990) Other (485) (268) 						 $4,442 $3,878 Net deferred current tax assets: Restructuring charges $1,767 Net difference between tax and book 	 basis of inventory 410 $ 410 Officers' termination benefits 211 299 Allowance for doubtful accounts and discounts 400 400 Other (166) 424 Accrued cash bonus 233
						 $2,622 $1,766
In February 1992, the Financial Accounting Standards Board issued Statement No. 109, "Accounting for Income Taxes" ("FASB 109"). The Company adopted the new method of accounting for income taxes in the first quarter of its fiscal year ended July 31, 1994 and restated its fiscal 1993, 1992, 1991 and 1990 financial statements. The effect of adopting FASB 109 was to increase income from continuing operations by $147,000 in 1993 and 1992 and $12,000 in 1991 and 1990. The cumulative effect of adopting FASB 109 as of July 31, 1990, decreased the beginning balance of retained earning by $1,670,000.
Under FASB 109, 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. Prior to the adoption of FASB 109, income tax expense was determined using the deferred method. Deferred tax expense was based on items of income and expense that were reported in different years in the financial statements and tax returns and were measured at the tax rate in effect in the year the differences originated.
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 1992 Net sales $45,722,099 $55,033,125 Costs and expenses: Cost of sales 37,240,237 43,187,627 Selling, general and administrative expenses 5,413,440 7,363,184 						 42,653,677 50,550,811 Operating profit $ 3,068,422 $ 4,482,314
On December 13, 1991, JJI, a then wholly owned subsidiary, completed an initial public offering of 1,500,000 of its common shares at $6 a share. The transaction, together with 250,000 restricted common shares issued by JJI to its executive officers, reduced the Company's ownership interest to 73%. JJI realized net cash proceeds of approximately $8,000,000 from sale of shares, after underwriting discounts and commissions and expenses of the offering. The sales resulted in a decrease of $4,406,000 in the Company's proportionate share of JJI's equity, which amount was charged to additional paid-in capital.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
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 net assets and liabilities of Hillside were reflected as a current asset at July 31, 1993 reflecting the intended use of proceeds as short-term investments. 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 and 1992 included in the results of operations are as follows:
			 Period From 			 August 1, 1993 to July 31, July 31, 			 November 19, 1993 1993 1992 Net sales $9,556,000 $ 27,720,163 $ 25,594,869 Costs and expenses: Cost of sales 4,089,000 10,974,986 11,624,256 Selling, general and administrative expenses 3,288,000 11,240,716 9,418,619 				 7,377,000 22,215,702 21,042,875 Operating profit $2,179,000 $ 5,504,461 $ 4,551,994
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, 1994, the Company's obligation for future minimum rental payments, assuming the exercise of renewal options, aggregated $16,575,000. Payments required in the following five fiscal years amount to $4,188,000 (1995), $3,560,000 (1996), $2,058,000 (1997), $1,607,000 (1998) and $1,352,000 (1999). Rental expense charged to continuing operations under operating leases for the years ended July 31, 1994, 1993 and 1992 was $4,496,000, $1,797,000 and $2,517,000, respectively.
As of July 31, 1994, future minimum rental payments due from tenants under sub-leases of retail facilities and related premises aggregated $12,659,000. Amounts receivable in the following five fiscal years amount to $1,870,000 (1995), $1,621,000 (1996), $1,403,000 (1997), $1,395,000 (1998) and $1,326,000 (1999).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
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 $24.85 (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 year ended July 31, 1994, non-qualified stock options for the purchase of 109,000 shares, at a price of $8.50 per share, were granted to key executives under the plan. At July 31, 1994, there were outstanding options for the aforementioned shares. On August 29, 1994, a non qualified stock option for the purchase of 250,000 shares, at a price of $5.75 per share, was granted to the Chief Executive Officer under the plan. Approximately 26,000 of such shares are subject to stockholder approval. 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.
Under the incentive compensation plan, as of July 31, 1994, 63,000 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, 1994, 224,000 shares were available under the plan.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
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, 1994 and total contributions charged to pension expense for the union-sponsored plans follows (in thousands):
							1994 1993 1992
Service cost-benefits earned 	during the year $1,471 $1,058 $ 897 Interest cost on projected benefit 	obligation 1,782 1,599 1,580 Actual return on plan assets (1,654) (1,600) (1,575) Net amortization and deferral 156 (4) (29) NET PENSION COST OF DEFINED PLANS 1,755 1,053 873 UNION-SPONSORED PLANS 422 505 1,397
TOTAL PENSION EXPENSE $2,177 $1,558 $2,270
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): 					 1994 1993 					 Plans Plan Plans 					 Whose Whose Whose 				 Accumulated Assets Exceed Accumulated 				 Benefits Accumulated Benefits 				 Exceed Assets Benefits Exceed Assets Actuarial present value of benefit obligations:
Vested benefit obligation $(21,780) $( 174) $(19,991) Accumulated benefit obligation $(22,124) $( 174) $(20,363) Projected benefit obligation $(24,320) $( 174) $(21,933)
Plan assets, consisting primarily of U.S. treasury notes, other U.S. agency issues, guaranteed insurance contracts and corporate obli- gations, at fair value 20,202 291 19,178
Projected benefit obligation (in excess of)/less than plan assets (4,118) 117 (2,755) Unrecognized prior service cost 395 449 Unrecognized net loss 5,884 36 4,537 Unrecognized net asset at August 1, 1987; net of amortization (745) (75) (757)
Adjustment required to recognize minimum liability (3,338) Net pension (liability) asset recognized in the consolidated balance sheet $ (1,922) $ 78 $ 1,474
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 8.25% and 4%, respectively, at July 31, 1994 and 1993. The expected long-term rate of return on plan assets was 8.5%, 8.5% and 9% in 1994, 1993 and 1992, 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. At July 31, 1994, this minimum pension liability was remeasured, as required by the Statement. As a result, the minimum pension liability was adjusted to $1,922,000; the related intangible asset was adjusted to $395,000; and the amount by which stockholders' equity had been reduced was adjusted to $1,766,000 (net of applicable deferred income taxes of $1,177,000 in 1994). The minimum pension liability at July 31, 1994 arises from an increase in pension fund liabilities due to the inclusion of Cain's employees in the Plan effective January 1, 1994 (see Note 2) and unrecognized net losses in periodic pension cost due to experience losses, Plan amendments, changes in actuarial assumptions regarding assumed returns on pension fund assets and related discounts of 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 continuing operations for the years ended July 31, 1994 and 1993:
						 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
INCOME/(LOSS) FROM CONTINUING 	OPERATIONS $ 506 $ 7,244(1) $ (270) $ 404
Per share: Primary $ .05 $ .69(1) $ (.03) $ .04
Fully diluted $ .05 $ .39 $ (.03) $ .04
					 Fiscal 1993 					 Three Months Ended 			 October 31 January 31 April 30 July 31 			 (Thousands of Dollars Except Per Share Data)
Net sales $50,373 $65,726 $67,668 $67,874
Gross profit $17,479 $24,395 $25,766 $26,795
INCOME/(LOSS) FROM CONTINUING 	OPERATIONS $ 705 $ 1,621 $ 488 $(1,752) (2)
Per share: Primary $ .07 $ .16 $ .05 $ (.18) (2)
Fully diluted $ .07 $ .12 $ .05 $ (.18) (2)
(1) Includes gain on sale of Hillside Coffee of California, Inc. of $7,068,000 ($.67 per share). See Note 6.
(2) Includes restructuring charge of $2,232,000 ($.21 per share) and officers' termination benefits of $507,000 ($.05 per share), each net of income tax benefit. See Notes 11(c) and (d).
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, 1994 and 1993 amount to $3,242,000 and $964,000, respectively. See Note 11(c).
b. Other assets and deferred charges consist of (in thousands):
July 31, 1994 1993
Deferred financing costs (1) $ 4,065 $ 4,665 Non-compete agreements 6,170 7,862 Trademarks 4,793 4,923 Customer lists 6,972 8,126 Real estate and equipment held for rental, at cost net of accumulated depreciation and amortization of $1,654 and $1,628 617 643 Other 6,750 4,821 						 $29,367 $31,040 				 (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 and 1992 of $3,598,000 and $5,500,000, respectively, to provide for the estimated cost of consolidating and closing certain production facilities. Such charge consists primarily in fiscal 1993 of accrued expenses (of which $2,100,000 is included in current liabilities at July 31, 1993 and $800,000, in addition to the amount provided in fiscal 1992, is included in other non-current liabilities at such date) and in fiscal 1992 of a loss of $3,272,000 on the write-down of machinery and equipment and certain other assets and accrued expenses of $2,228,000 (included in other non current liabilities at July 31, 1992) related to closing such facilities. The Company expects the restructuring to be completed during fiscal 1995. The after tax charge for such restructuring was $2,232,000 ($.21 per share) in fiscal 1993 and $3,630,000 ($.35 per share) in fiscal 1992. As of July 31, 1994, the balance of these accrued expenses is included in current liabilities in the amount of $4,726,000.
In connection with closing a business and termination of a pension plan the Company has recorded a liability for an underfunded pension plan of approximately $1,500,000 and 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, 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 and July 1992, respectively, Joseph Breslin and Dr. Leon Pordy, then Chairman of the Board and Chief Executive Officer terminated their employment with the Company. In connection therewith, $818,000 and $1,974,000, respectively, was charged to operations in the fourth quarter of fiscal 1993 and 1992 for compensation benefits (including 5,714 and 200,000 restricted shares of the Company's common stock which became subject to accelerated vesting) to which Joseph Breslin and Dr. Pordy were entitled as a result of their terminations. The after-tax charge for such benefits was $507,000 ($.05 per share) and $1,303,000 ($.12 per share), respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
NOTE 11--OTHER ITEMS--Continued
e. In December 1990, The Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" ("FASB 106") which was adopted in fiscal 1994. The Company does not provide postretirement benefits other than pensions to its employees and, accordingly, FASB 106 does not have a material effect on the Company's financial condition or results of operations.
f. The Company believes that the fair value of its 7% and 8% convertible subordinated debentures approximates $42,905,000 and $40,239,000, respectively, as indicated by the public trading prices of such debt.
g. 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 1994, 1993 and 1992 may be found on page 40 and is incorporated herein.
SELECTED FINANCIAL DATA (1) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
					 YEAR ENDED JULY 31 			1994 1993 1992 1991 1990 		 (Dollar Amounts in Thousands, Except Per Share Amounts)
Net sales $263,638 $251,641 $203,640 $200,037 $196,393 Income/(loss) from continuing operations 7,884 1,062 (5,822) 1,380 1,173 Working capital 81,738 72,022 45,027(2) 44,947(2) 70,482 Working capital ratio 3.6 to 1 3.8 to 1 3.2 to 1 3.9 to 1 4.7 to 1 Total assets 208,807 195,304 184,648 183,260 170,896 Long-term debt 110,427 108,092 107,053 108,862 106,097 Stockholders' equity 58,262 52,985 52,406 58,445 43,352 Per common share (3): Income/(loss) from continuing operations .75 .10 (.55) .15 .13 Stock dividends declared 3% 3% 3% 3% 3% Stockholders' equity 5.59 4.99 4.98 5.60 4.59 				
(1) Restated to reflect discontinued operations (see Note 5 of notes to consolidated financial statements).
(2) Does not include $23,053 in 1992 and $23,184 in 1991 of marketable securities classified as non current.
(3) 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
On October 8, 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 and approximately $25,000,000 of the proceeds have been invested in short term marketable securities. 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 Foodservice 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 two years 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 $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 $.75 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 $.59 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.
Net sales increased $48,001,000 or 24% for the year ended July 31, 1993 compared to the prior year. The increase in net sales was due to the business of Cains and Dana Brown (which generated net sales of $51,014,000 in the year ended July 31, 1993) and increased coffee pounds sold, partially offset by a decrease in the average selling price of coffee.
For the year ended July 31, 1993, operating profits from food products, before deducting restructuring charges and officer's termination benefits, were $15,948,000 or an increase of 176% from the prior year. The increases resulted primarily from increased gross margins, partially offset by increases in selling, general and administrative expenses for operations included in both fiscal 1993 and 1992, and the operations of Cain's and Dana Brown. Increased gross margins were due to an increase in coffee pounds sold and a decrease in average cost of green coffee greater than the decrease in the average selling price of coffee. Selling, general and administrative expenses increased primarily due to greater advertising, promotion, coupon and delivery costs, partially offset by decreased compensation costs and professional fees.
The Company has provided in 1993 for the estimated cost ($3,598,000) of consolidating and closing certain production facilities. The charges consist primarily of accrued expenses and a loss on the write down of certain assets related to the restructing. Operations have also been charged for compensation benefits ($818,000) relating to the termination of employment of the Company's former Chairman of the Board and Chief Executive Officer.
Income from continuing operations was $1,062,000 or $.10 per share for the year ended July 31, 1993 compared to a loss of ($5,822,000) or ($.55) per share for the prior year. The primary reasons for the difference are the increased operating profits from food products operations, partially offset by increased interest expense and reduced investment income, as well as the loss from real estate operations in fiscal 1992 and the provision for income taxes in fiscal 1993 versus the income tax credit in fiscal 1992.
In recent years, inflation has been relatively low and has not had a significant impact on the Company's sales or profitability. The effect of specific price inflation on inventory and related cost of sales is generally not significant because of rapid inventory turnover for coffee.
LIQUIDITY AND CAPITAL RESOURCES
As of July 31, 1994, working capital was approximately $81,738,000 and the ratio of current assets to current liabilities was 3.6 to 1.
As of July 31, 1994, the Company had unused borrowing capacity of approximately $24 million under its credit facilities of $40 million with National Westminster Bank USA and Chemical Bank (see Note 3 of notes to consolidated financial statements).
The Company received proceeds from the sale of Hillside, after applicable income taxes, of approximately $30,000,000 (see Note 6 of notes to consolidated financial statements) which will be used for working capital, expansion of the Retail Restaurant and Cafe division and other business purposes.
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.
The Company does not have any material commitments for capital expenditures or environmental matters.
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, 1994.
					 1994 1993
				 High Low High Low
1st Quarter 9 5/8 7 1/8 7 7/8 6 3/4 2nd Quarter 10 1/4 7 1/2 10 1/4 6 3/4 3rd Quarter 8 3/8 6 7/8 10 8 3/8 4th Quarter 7 3/8 5 5/8 9 3/4 7 3/4
The Company distributed a 3% stock dividend on July 29, 1994 and July 30, 1993.
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).
SEGMENT INFORMATION CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES
					 Year Ended July 31 				 1994 1993 1992 					 (Amounts in Thousands)
Net sales - food products $263,638 $ 251,641 $203,640
Rental revenues $ 2,060 $ 1,876 $ 1,205
Operating profit/(loss): Food products $ 10,389 $ 11,532(1) $ (1,688)(1) Real estate 317 (9) (783) Eliminations (266) (200) (419) 				$ 10,440 $ 11,323 $ (2,890)
Identifiable assets: Food products $153,751 $ 170,287 $105,692 Real estate 9,913 7,356 7,268 Corporate 45,143 17,661 71,688 				$208,807 $ 195,304 $184,648
Depreciation and amortization: Food products $ 6,077 $ 6,901 $ 5,377 Real estate 56 24 34 Corporate 55 59 57 				$ 6,188 $ 6,984 $ 5,468
Capital expenditures: Food products $ 5,643 $ 7,887 $ 8,397 Corporate 38 171 40 				$ 5,681 $ 8,058 $ 8,437
				
(1) Includes restructuring charge in fiscal 1993 and 1992, respectively, of $3,598,000 and $5,500,000 and officer's termination benefits in fiscal 1993 and 1992, respectively, of $818,000 and $1,974,000.
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 $31,726,000 (1994), $5,469,000 (1993) and $25,883,000 (1992).
Item 14 (d)
CHOCK FULL O'NUTS CORPORATION AND SUBISIDIARIES SCHEDULE 1 -- MARKETABLE SECURITIES
Column A Column B Column C Column D Column E Issuer and Title Balance of Each Issue Principal Market Sheet 			Amount Cost Value Amount Year Ended July 31, 1994:
U.S. Government and U.S. Government agency Obligations $18,534,000 $18,548,374 $18,499,552 $18,548,374
Toyota Mtr Cr Corp 5,000,000 5,035,816 5,018,150 5,035,816 Quebec Prov CDA Deb 1,000,000 1,011,288 1,007,260 1,011,288 Corporate Bonds and other 276,000 190,602 124,152 190,602 Commercial Paper 1,000,000 1,000,000 1,000,000 1,000,000 		 $25,810,000 $25,786,080 $25,649,114 $25,786,080
Item 14 (d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
Column A Column B Column C Column D Column E 		 Balance at (1) (2) (1) (2) 		 Beginning of Amounts Amounts Not Name of Debtor Period Additions Collected Written Off Current Current
Year ended July 31, 1994: Amount receivable Dennis Duke $28,655 $28,655
Year ended July 31, 1993: Amount receivable Dennis Duke $130,233 $101,578 $ 28,655
Year ended July 31, 1992: Amount receivable Dennis Duke $220,233 $ 90,000 $130,233
Item 14(d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F 		 Balance at Other Changes Balance 		 Beginning Additions at Add at End Classification of Period Cost Retirements (Deduct) of Period
Year Ended July 31, 1994:
Land $ 3,754,639 $3,754,639 Buildings and improvements 18,241,851 $207,373 $202,855 (e) 18,652,079 Leaseholds and lease- 6,931 (f) hold improvements 842,011 823,873 $12,489 135,000 (a) 1,795,326 Machinery and equip- 30,000 (a) ment 68,259,875 4,649,710 133,268 (202,855)(e) 72,603,462 		 $91,098,376 $5,680,956 $145,757 $171,931 $96,805,506
Year Ended July 31, 1993:
Land $ 3,419,639 $ 335,000 (b) $3,754,639 Buildings and 1,965,000 (b) improvements 15,283,858 $368,322(b) 624,671 (e) 18,241,851 Leaseholds and 194,000 (b) leasehold (59,844)(e) improvements 1,026,443 750,884(b) $ 33,254 (1,036,218)(g) 842,011 Machinery 18,028,541 (b) and (9,893,939)(g) equipment 55,012,991 6,938,533(b) 1,261,424 (564,827)(e) 68,259,875
		 $74,742,931 $8,057,739 $1,294,678 $9,592,384 $91,098,376
Year Ended July 31, 1992:
Land $ 3,119,639 $ 300,000 $ 3,419,639 Buildings and improvements 13,066,097 2,242,342(b) $ 24,581 15,283,858 Leaseholds and lease- hold improvements 1,013,434 13,009 1,026,443 Machinery and equip- $ 9,348 (f) ment 44,835,129 5,920,116(b) 132,602 4,381,000 (d) 55,012,991
		$62,034,299 $8,475,467 $157,183 $4,390,348 $74,742,931
(a) Acquisition of drive - through food service establishments. (b) Acquisition of Cain's Coffee Company, Inc. (c) Principally additions to coffee manufacturing plants. (d) Acquisition of Hillside Coffee of California, Inc., including in 	1992 final allocation purchase price. (e) Reclassifications. (f) Reclassification from/(to) Other Assets. (g) Reclassification to net assets of product line held for sale.
Depreciation and amortization are based on the following estimated useful lives: 							 Life Years Buildings and improvements 33 to 40 Leaseholds and leasehold improvements 15 to 50 Machinery and equipment 5 to 20
Item 14 (d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION 	 OF PROPERTY PLANT AND EQUIPMENT
Column A Column B Column C Column D Column E Column F 		 Balance at Other Changes Balance 		 Beginning Additions at Add at End Classification of Period Cost Retirements (Deduct) of Period
Year Ended July 31, 1994:
Buildings and improvements $ 3,529,865 $605,249 $ 4,135,114 Leaseholds and lease-hold improvements 248,066 93,017 $12,489 $2,225 (b) 330,819 Machinery and equipment 31,724,769 5,489,210 169,140 37,044,839 		$35,502,700 $6,187,476 $181,629 $2,225 $41,510,772
Year Ended July 31, 1993:
Buildings and improvements $ 2,964,120 $ 565,745 $3,529,865 Leaseholds and lease- $ (20,471)(d) hold improvements 210,207 120,800 $ 31,495 (30,975)(a) 248,066 Machinery and equip- 30,975 (a) ment 28,971,199 6,296,994 945,680 (2,628,719)(d) 31,724,769
		$32,145,526 $6,983,539 $977,175 $(2,649,190) $35,502,700
Year Ended July 31, 1992:
Buildings and improvements $ 2,475,510 $ 488,610 $2,964,120 Leaseholds and lease-hold improvements 139,877 67,077 $3,253 (a) 210,207 Machinery 4,671 (b) and (3,253)(a) equipment 21,460,308 4,877,884 $118,411 2,750,000 (c) 28,971,199 		$24,075,695 $5,433,571 $118,411 $2,754,671 $32,145,526 		 (a) Reclassifications. (b) Reclassifications from/(to) Other Assets. (c) Write-down of machinery and equipment included in restructuring charge (see Note 11(c) of notes to consolidated financial statements). (d) Reclassification to net assets of product line held for sale.
Item 14(d) CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE VIII-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, 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
Year ended July 31, 1992: Allowance for doubtful accounts and discounts $1,088,000 $4,288,000 $4,333,000 $1,043,000
(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.
Item 14(d)
CHOCK FULL O' NUTS CORPORATION AND SUBSIDIARIES SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
	Column A Column B
							 Charged to 							 Costs and 	 Item Expenses
Year ended July 31, 1994: Advertising $4,099,533
Depreciation and amortization of intangible assets $3,159,448
Maintenance and repairs $3,100,763
Year ended July 31, 1993: Advertising $5,361,972
Depreciation and amortization of intangible assets $4,544,096
Maintenance and repairs $2,662,914
Year ended July 31, 1992: Advertising $2,717,467
Depreciation and amortization of intangible assets $2,770,988
Items not presented are either not applicable or less than 1% of net sales.
EXHIBIT 11 - STATMENT RE: COMPUTATION OF PER SHARE EARNINGS
						YEAR ENDED JULY 31, 				 1994 1993 1994 					 (AMOUNTS IN THOUSANDS, 						EXCEPT PER SHARE DATA) PRIMARY AVERAGE SHARES OUTSTANDING 10,482 10,567 10,490 INCOME/(LOSS) FROM CONTINUING OPERATIONS $7,884 $1,062 ($5,822) NET INCOME/(LOSS) $7,884 ($1,006) ($3,912) PER SHARE AMOUNTS: INCOME/(LOSS) FROM CONTINUING OPERATIONS $0.75 $0.10 ($0.56) NET INCOME/(LOSS) $0.75 ($0.10) ($0.37)
FULLY DILUTED AVERAGE SHARES OUTSTANDING 10,482 10,567 10,490 ASSUMED CONVERSION OF CONVERTIBLE DEBENTURES 11,478 11,206 11,277 TOTAL 21,960 21,773 21,767 INCOME/(LOSS) FROM CONTINUING OPERATIONS $7,884 $1,062 $(5,822) ADD CONVERTIBLE DEBENTURES INTEREST AND AMORTIZATION OF DEFERRED CHARGES, NET OF INCOME TAXES 4,373 4,796 4,755 TOTAL $12,257 $5,858 $(1,067) NET INCOME/(LOSS) $7,884 ($1,006) ($3,912) ADD CONVERTIBLE DEBENTURES INTEREST AND AMORTIZATION OF DEFERRED CHARGES, NET OF INCOME TAXES 4,373 4,796 4,755 TOTAL $12,257 $3,790 $843
PER SHARE AMOUNTS: INCOME/(LOSS) FROM CONTINUING OPERATIONS $0.56 $0.27 ($0.05) NET INCOME $0.56 $0.17 $0.04
EXHIBIT 21 - SUBSIDIARIES OF THE REGISTRANT As of October 13, 1994, the Company had directly and indirectly the following active subsidiaries, all of which are included in the Company's consolidated financial statements furnished herewith:
Subsidiaries of Chock full o'Nuts Corporation Hillside Holding Corporation Delaware 100% Chock Realty Corporation California 100% Chock Coffeemaker Acquisition, Inc. New York 100% CFN of New York, Inc. New York 100% Cain's Coffee Co. Delaware 100% Cain's Holding Company Delaware 100% DB Private Brands, Inc. Missouri 100% Quikava, Inc. Massachusetts 100%