<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - - - ----- EXCHANGE ACT OF 1934
For the quarterly period ended OCTOBER 1, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - - - ------ EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-9904
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ARDEN GROUP, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 95-3163136
- - - - ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2020 SOUTH CENTRAL AVENUE, COMPTON, CALIFORNIA 90220
- - - - ---------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 638-2842
---------------
No Change
- - - - --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
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 the filing
requirements for at least the past 90 days. Yes X No .
----- -----
The number of shares outstanding of the registrant's classes of common stock as
of October 1, 1994 was:
984,233 of Class A common stock
343,316 of Class B common stock
This report contains a total of 11 pages.
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
A S S E T S
<TABLE>
<CAPTION>
October 1, January 1,
1994 1994
------------ -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $18,860 $39,526
Marketable securities 22,347 23,038
Notes and accounts receivable, net 7,100 9,007
Inventories 9,636 10,902
Prepaid and other 1,974 1,040
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Total current assets 59,917 83,513
Notes and contracts receivable 1,824 459
Property for resale or sublease, at lower
of cost or market 1,650 1,877
Property, plant and equipment, at cost less
accumulated depreciation and amortization
of $24,047 and $29,615, respectively 25,622 24,867
Other assets 1,751 1,755
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Total assets $90,764 $112,471
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</TABLE>
See Notes to Financial Statements
2
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
October 1, January 1,
1994 1994
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $9,118 $13,221
Other current liabilities 12,124 12,242
Current portion of long-term debt 785 6,501
------------ ------------
Total current liabilities 22,027 31,964
Long-term debt, including obligations under capital
leases of $5,078 and $5,540, respectively 7,050 7,654
Deferred income taxes 1,744 1,926
Other liabilities 2,900 3,392
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Total liabilities 33,721 44,936
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Commitments and contingent liabilities
Stockholders' equity:
Class A common stock 331 402
Class B common stock 86 86
Capital surplus 6,465 7,571
Notes receivable from officer/director (513) (1,502)
Retained earnings 54,427 64,731
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60,796 71,288
Less: treasury stock, at cost 3,753 3,753
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Total stockholders' equity 57,043 67,535
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Total liabilities and stockholders' equity $90,764 $112,471
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</TABLE>
See Notes to Financial Statements
3
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Date)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
----------------------------------------------------------
October 1, October 2, October 1, October 2,
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $59,702 $61,719 $184,478 $183,849
Cost of sales 36,328 37,682 113,388 114,084
------------- ------------- ------------- -------------
Gross profit 23,374 24,037 71,090 69,765
Delivery, selling, general and administrative
expenses 22,021 22,139 65,278 64,779
------------- ------------- ------------- -------------
Operating income 1,353 1,898 5,812 4,986
Interest, dividend and other income
(expense), net 591 187 1,134 (125)
Net unrealized gain (loss) on marketable securities 164 (1,140)
------------- ------------- ------------- -------------
Income from continuing operations
before income taxes 2,108 2,085 5,806 4,861
Income tax provision 854 846 2,338 1,973
------------- ------------- ------------- -------------
Income from continuing operations
net of income taxes 1,254 1,239 3,468 2,888
Discontinued operations:
Income from operations (net of income
taxes of $688 and $1,365, respectively) 1,019 2,021
Gain on sale of certain Telautograph net assets
(net of income taxes of $1,304) 1,838 1,838
------------- ------------- ------------- -------------
Net income $1,254 $4,096 $3,468 $6,747
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------------- ------------- ------------- -------------
Income per common share (computed on
common shares outstanding):
Income from continuing operations $ .81 $ .77 $2.18 $1.79
Discontinued operations
Income from operations .63 1.25
Gain on sale of Telautograph 1.14 1.14
------------- ------------- ------------- -------------
Net income per common share $ .81 $2.54 $2.18 $4.18
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Weighted average common shares
outstanding 1,557,880 1,612,724 1,594,442 1,612,724
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</TABLE>
See Notes to Financial Statements
4
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOW (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
------------------------------------
October 1, October 2,
1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $184,844 $184,901
Cash paid to suppliers and employees (176,501) (172,534)
Interest and dividends received 2,301 665
Interest paid (767) (893)
Income taxes paid (1,828) (1,539)
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Net cash provided by operating activities 8,049 10,600
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Cash flows from investing activities:
Proceeds from sale of certain net assets of Telautograph 37,588
Capital expenditures (5,415) (2,048)
Investment in marketable securities (1,063)
Proceeds from sale of GPS 393
Proceeds from the sale of property, plant and
equipment, liquor licenses and leasehold interests 32 107
Payments received on notes from the sale of property,
plant and equipment and liquor licenses 19 112
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Net cash provided by (used in) investing activities (6,034) 35,759
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Cash flows from financing activities:
Purchase and retirement of common stock (14,949)
Payments related to sale of discontinued operations (2,413)
Transfer to Telautograph Corporation (2,466)
Principal payments under capital lease obligations (879) (1,068)
Proceeds from equipment financing 549
Payment of loan from officer/director 1,000
Principal payments on long-term debt (5,440) (42)
--------------- ---------------
Net cash used in financing activities (22,681) (3,027)
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Net increase (decrease) in cash (20,666) 43,332
Cash at beginning of year 39,526 20,954
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Cash at end of quarter $18,860 $64,286
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</TABLE>
See Notes to Financial Statements
5
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOW (Unaudited)
(In Thousands)
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
----------------------------------
October 1, October 2,
1994 1993
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<S> <C> <C>
Net income $3,468 $6,757
Adjustments to reconcile net income to net cash provided by
operating activities:
Income from discontinued operations (3,859)
Depreciation and amortization 2,794 3,104
Unrealized loss on marketable securities 1,140
Provision for losses on accounts and notes receivable 97 148
Loss on sale of marketable securities 614
Net (gain) loss from the sale of property, plant and equipment,
liquor licenses and early lease terminations 3 (25)
Interest differential on note payable 19
Notes receivable from officer/director (11) (9)
Gain on sale of GPS (93)
Change in assets and liabilities net of effects from noncash
investing and financing activities:
(Increase) decrease in assets:
Notes and accounts receivable 761 986
Inventories 125 1,656
Prepaid expenses (895) (367)
Other assets 207 (226)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities 668 4,090
Deferred income taxes (337) (1,492)
Other liabilities (492) (182)
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Net cash provided by operating activities $8,049 $10,600
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</TABLE>
See Notes to Financial Statements
6
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
These financial statements reflect all adjustments which are, in the opinion of
management, necessary to a fair statement of the results of operations for the
periods presented.
1. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements of Arden Group, Inc. (the "Company")
include the accounts of the Company and its direct and indirect
subsidiaries except for Telautograph Corporation, an indirect wholly-owned
subsidiary of the Company, ("Telautograph") which was carried at equity in
net assets of discontinued operations through September 17, 1993 when the
communications business was sold. The activity of GPS Pool Supply, Inc.
("GPS") has been reclassified in the prior year Statements of Operations
and Statements of Cash Flows as a continuing operation because the
previously announced spin-off of the communication equipment business of
Telautograph and all the capital stock of GPS, a wholly-owned subsidiary of
Telautograph, to the stockholders of Arden was abandoned. Intercompany
balances and transactions are eliminated. On May 27, 1994, the Company
sold GPS (see Note 3). As a result, after the sale of GPS, the Company
operates exclusively in the supermarket business.
2. ARBITRATION AWARD:
As a result of an arbitration hearing in April 1994, the Company was
awarded $1,750,000 for parts inventory which was purchased by Danka
Industries, Inc. as part of the sale of the Company's communication
equipment business in 1993. The valuation of such inventory had been in
dispute. No amount with respect to this inventory had been included in the
1993 gain from the sale of such business. Expenses related to the
arbitration will be netted against the award. Additionally, there is a
second arbitration with regard to certain items on the closing balance
sheet of the communication equipment business which are being disputed.
The Company does not believe adjustments resulting from the second
arbitration, if any, will have a material adverse impact on its financial
position. However, due to the uncertainty of the outcome of this
arbitration, no income or expenses from the first arbitration has been
recognized in the 1994 financial statements of the Company.
3. SALE OF GPS POOL SUPPLY, INC.:
On May 27, 1994, the Company sold all of the outstanding shares of capital
stock of GPS to Pioneer Chlor Alkali Investments, Inc. ("Pioneer") for
approximately $3,515,000, of which a substantial portion is represented by
a promissory note of Pioneer. The promissory note is secured by the assets
of GPS and by a pledge of the GPS stock. In the second quarter of 1994,
the Company recognized a pretax gain on the sale of GPS stock, net of
related expenses, of $93,000.
In addition, until such time as the promissory note is paid in full, the
Company will receive additional consideration from Pioneer for a covenant
not to compete, the amount of which will be based on future sales of GPS.
The Company recorded approximately $126,000 of non-compete income from
Pioneer in the third quarter of 1994.
7
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PART I. FINANCIAL INFORMATION, Continued
4. CAPITAL STOCK:
In the third quarter of 1994, the Company offered to purchase up to 400,000
shares of its Class A common stock for $52 per share in cash. The offer
expired September 15, 1994 and the Company purchased the 285,172 shares of
Class A common stock tendered pursuant to the offer for an aggregate
purchase price of approximately $14,829,000. Prior to such purchase the
Company's common stock consisted of 1,269,405 shares of Class A common
stock and 343,316 shares of Class B common stock.
5. NET INCOME PER SHARE:
Net income per share is based on the weighted average number of common
shares outstanding during the period. Due to the purchase of Class A
shares in September 1994 (see Note 4) the weighted average number of shares
will be reduced in the future.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THIRD QUARTER ANALYSIS
During the third quarter of 1994, the Company had net income of $1,254,000
compared to net income of $4,096,000 during the third quarter of 1993. The
third quarter of 1993 included income of $2,857,000 from discontinued
operations. Pretax income from continuing operations was $2,108,000 for the
third quarter of 1994 compared to pretax income of $2,085,000 for the third
quarter of 1993.
During the third quarter of 1994, the Company's operating income from its
supermarket operations was $1,353,000 compared to operating income of $1,436,000
during the third quarter of 1993. Sales from the Company's 12 supermarkets in
the greater Los Angeles area were $59,702,000 in the third quarter of 1994, an
increase of 3.8% from the third quarter of 1993, when sales were $57,501,000.
The Company is currently planning to open a Gelson's Market in Calabasas,
California in the third quarter of 1995 and continues to look for additional
store locations.
The Company's gross profit from supermarket operations as a percentage of sales
was 39.2% in the third quarter of 1994 compared to 39.4% in the same period of
1993.
Delivery, selling, general and administrative ("DSG&A") expenses for supermarket
operations as a percentage of sales were 36.9% in both the third quarter of 1994
and the third quarter of 1993.
The swimming pool chemical processing and distribution operations, conducted by
GPS, was sold on May 27, 1994 and, therefore, the third quarter of 1994 does not
reflect any operating results. In the third quarter of 1993, GPS posted pretax
operating income of $462,000 on sales of $4,218,000.
8
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PART I. FINANCIAL INFORMATION, Continued
The Company's interest and dividend income was $781,000 in the third quarter of
1994 compared to $241,000 for the same period in 1993. This increase in
interest income was the result of an increased level of short-term investments
and marketable securities and an increase in earnings rates on investments.
In the third quarter of 1994, the market value of the Company's holdings in
marketable securities increased. The Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"), which became effective for fiscal years beginning
after December 15, 1993, requires that unrealized holding gains and losses for
certain marketable securities shall be included in the determination of net
income. As a result, net unrealized gains of $164,000 related to marketable
securities were recognized in the third quarter of 1994.
YEAR-TO-DATE ANALYSIS
During the first nine months of 1994, the Company had net income of $3,468,000
compared to net income of $6,747,000 for the first nine months of 1993. Net
income in 1993 included $3,859,000 from discontinued operations. Pretax income
from continuing operations was $5,806,000 for the first nine months of 1994
compared to pretax income of $4,861,000 for the same period of 1993.
During the first nine months of 1994, the Company's operating income from its
supermarket operations was $5,999,000 compared to operating income of $4,518,000
during the first nine months of 1993. Sales from the Company's 12 supermarkets
in the greater Los Angeles area were $179,866,000 in the first nine months of
1994, an increase of 3.7% from the first nine months of 1993, when sales were
$173,410,000.
The Company's gross profit from supermarket operations as a percentage of sales
was 38.9% in the first nine months of 1994 compared to 38.5% in the same period
of 1993. Union wage and benefit cost increases was one of the factors which
contributed to an overall increase in product pricing.
Delivery, selling, general and administrative ("DSG&A") expenses for supermarket
operations as a percentage of supermarket sales were 35.6% in the first nine
months of 1994, compared to 35.9% in the same period of 1993. In 1994, the
Company recognized contractual credits against health and welfare payments due
the retail clerks and meat cutters unions of approximately $2,500,000. No such
credits were recognized in the first nine months of 1993. The decrease in DSG&A
due to the health and welfare credits is partially offset by a charge to
operations of $1,300,000 in the first quarter of 1994 to cover the estimated
uninsured portion of losses related to the January 17, 1994 earthquake centered
in Northridge, California.
The swimming pool chemical processing and distribution operations, conducted by
GPS, posted an operating loss of $187,000 on sales of $4,612,000 prior to the
sale of GPS on May 27, 1994. A pretax gain of $93,000 on the sale of GPS stock
is recorded as other income. This compares to a thirty-nine week operating
income of $468,000 on sales of $10,439,000 in the first nine months of 1993.
The Company's interest and dividend income was $2,342,000 in the first nine
months of 1994 compared to $709,000 for the same period in 1993. This increase
in interest income was the result of an increased level of short-term
investments and marketable securities and an increase in earnings rates on
investments.
9
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PART I. FINANCIAL INFORMATION, Continued
In the first nine months of 1994, the market value of the Company's holdings in
marketable securities declined. Pursuant to SFAS 115, net unrealized losses of
$1,140,000 related to marketable securities were recognized in the first nine
months of 1994.
CAPITAL EXPENDITURES/LIQUIDITY
In the first quarter of 1994, the Company used approximately $3,000,000 of cash
on hand to purchase the properties upon which two existing Mayfair markets are
located. Additionally, the Company paid off at maturity the $634,000 balance of
the mortgage on its headquarters facility in Compton. In the second quarter of
1994, the Company used approximately $4,663,000 of cash on hand to pay off, at
maturity, the balance of the mortgage on its Pacific Palisades Gelson's
location.
In September 1994, the Company used approximately $14,829,000 to purchase
285,172 shares of its Class A Common Stock pursuant to a self tender offer.
There have been no significant changes in the Company's capital expenditures
plan and no material changes in the utilization of the Company's lines of
credit.
10
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PART II. OTHER INFORMATION
ITEMS 1. THROUGH 5.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 Financial Date Schedules
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements 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.
ARDEN GROUP, INC.
-----------------------------------------
Registrant
Date November 15, 1994 ERNEST T. KLINGER
------------------------- -----------------------------------------
Ernest T. Klinger
Vice President Finance and Administration
and Chief Financial Officer
(Authorized Signatory)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> OCT-01-1994
<CASH> 18,860
<SECURITIES> 22,347
<RECEIVABLES> 7,597
<ALLOWANCES> 497
<INVENTORY> 9,636
<CURRENT-ASSETS> 59,917
<PP&E> 49,669
<DEPRECIATION> 24,047
<TOTAL-ASSETS> 90,764
<CURRENT-LIABILITIES> 22,027
<BONDS> 7,050
<COMMON> 417
0
0
<OTHER-SE> 56,626
<TOTAL-LIABILITY-AND-EQUITY> 90,764
<SALES> 184,478
<TOTAL-REVENUES> 184,478
<CGS> 113,388
<TOTAL-COSTS> 113,388
<OTHER-EXPENSES> 65,181
<LOSS-PROVISION> 97
<INTEREST-EXPENSE> 758
<INCOME-PRETAX> 5,806
<INCOME-TAX> 2,338
<INCOME-CONTINUING> 3,468
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,468
<EPS-PRIMARY> 2.18
<EPS-DILUTED> 2.18
</TABLE>
