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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13E-4
Issuer Tender Offer Statement
(Pursuant to Section 13(e)(1)
of the Securities Exchange Act of 1934)
ARDEN GROUP, INC.
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(Name of Issuer)
ARDEN GROUP, INC.
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(Name of Person(s) Filing Statement)
Class A Common Stock, par value $.25 per share
---------------------------------------------------------
(Title of Class of Securities)
039762 10 9
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(CUSIP Number of Class of Securities)
Ernest T. Klinger
Chief Financial Officer
Arden Group, Inc.
2020 South Central Avenue
Compton, California 90220
(310) 638-2842
with a copy to:
Irwin G. Barnet, Esq.
Sanders, Barnet, Goldman, Simons & Mosk,
A Professional Corporation
1901 Avenue of the Stars, Suite 850
Los Angeles, California 90067
(310) 553-8011
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(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications
on Behalf of the Person(s) Filing Statement)
August 17, 1994
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(Date Tender Offer First Published, Sent
or Given to Security Holders)
Calculation of Filing Fee
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Transaction Valuation* Amount of Filing Fee
$20,800,000 $4,160.00
<FN>
*Assumes purchase of 400,000 shares at $52.00 per share.
</TABLE>
[ ] Check box if any part of the fee is offset as provided by
Rule 0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
Amount Previously Paid: Not applicable
-------------------------------------------------------
Form or Registration No.: Not applicable
-----------------------------------------------------
Filing Party: Not applicable
-----------------------------------------------------------------
Date Filed: Not applicable
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Preliminary Note: Unless otherwise specified, all references in this
Issuer Tender Offer Statement to material incorporated by reference are to the
Offering Statement dated August 17, 1994 (the "Offering Statement") attached
hereto as Exhibit (a)(1).
ITEM 1. SECURITY AND ISSUER.
(a) The name of the issuer is Arden Group, Inc., a Delaware corporation
(the "Company"). The Company's principal executive office is located at 2020
South Central Avenue, Compton, California 90220.
(b) The Company is offering to purchase up to 400,000 shares of the issued
and outstanding shares of the Class A Common Stock, par value $.25 per share, of
the Company for cash at a rate of $52.00 per share (the "Offer"). If more than
400,000 shares of the Class A Common Stock are tendered, then the Company will
acquire 400,000 shares tendered on a pro rata basis from each tendering
stockholder (with adjustments to avoid purchases of fractional shares) according
to the number of shares of Class A Common Stock tendered by each tendering
stockholder. The Offer is not conditional upon any minimum number of shares
being tendered. As of the date hereof, there are 1,269,405 shares of the
Class A Common Stock issued and outstanding. Although the Company has been
advised that Bernard Briskin, Chairman of the Board, President and Chief
Executive Officer of the Company, will not participate in the Offer, the
Company does not know whether any of the other officers, directors or
affiliates of the Company will tender shares in the Offer. See "THE OFFER"
incorporated herein by reference.
(c) The principal market in which the Class A Common Stock is traded is
the NASDAQ National Market System. The range of the high and low sales prices
for the Class A Common Stock for each quarterly period during the last two
fiscal years ended January 1, 1994 and the current fiscal year through August
15, 1994, as reported by NASDAQ, is set forth in the Offering Statement under
the heading "PRICE RANGE OF COMMON STOCK," incorporated herein by reference.
(d) Not applicable.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OF OTHER CONSIDERATION.
(a) The information set forth under "THE OFFER - Funding of Tender Offer"
is incorporated herein by reference.
(b) Not applicable.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.
The information set forth under "THE OFFER - Purpose and Effects of the
Offer" is incorporated herein by reference.
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There are no plans or proposals which relate to or would result in any of
the events specified in (a) through (j).
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.
None.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
None.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
See "THE OFFER - Payment of Expenses" incorporated herein by reference.
ITEM 7. FINANCIAL INFORMATION.
(a) See "SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION"
incorporated herein by reference.
(b) See "SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION"
incorporated herein by reference.
ITEM 8. ADDITIONAL INFORMATION.
(a) None.
(b) None.
(c) None.
(d) None.
(e) The information set forth in the Offering Statement and the related
Letter of Transmittal attached hereto as Exhibit (a)(2) is incorporated herein
by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Form of Offering Statement, dated August 17, 1994.
(a)(2) Form of Letter of Transmittal together with Guidelines
for Certification of Taxpayer Identification Number
on Substitute Form W-9.
(a)(3) Form of Letter to Stockholders from Bernard
Briskin, Chairman of the Board, President and
Chief Executive Officer of the Company dated
August 17, 1994.
(a)(4) Form of letter to brokers, dealers, commercial
banks, trust companies and other nominees dated
August 17, 1994.
(a)(5) Form of letter to clients for use by brokers,
dealers, commercial banks, trust companies and
other nominees dated August 17, 1994.
(a)(6) Form of Press Release, dated August 17, 1994.
(b) None.
(c) None.
(d) None.
(e) None.
(f) None.
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(g)(1) Pages 27 to 58 of the Registrant's Annual Report on Form 10-K for
the Fiscal Year Ended January 1, 1994.
(g)(2) Registrant's Quarterly Report on Form 10-Q for the Quarter Ended
July 2, 1994.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Dated: August 17, 1994 ARDEN GROUP, INC.
By: Ernest T. Klinger
---------------------------
Ernest T. Klinger,
Vice President Finance and
Administration and Chief
Financial Officer
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EXHIBIT INDEX
TO
SCHEDULE 13E-4
Exhibit
No. Item
- ------- ----
(a)(1) Form of Offering Statement,
dated August 17, 1994.
(a)(2) Form of Letter of Transmittal together
with Guidelines for Certification
of Taxpayer Identification Number
on Substitute Form W-9.
(a)(3) Form of Letter to Stockholders
from Bernard Briskin, Chairman
of the Board, President and
Chief Executive Officer of the
Company dated August 17, 1994.
(a)(4) Form of letter to brokers, dealers,
commercial banks, trust companies
and other nominees dated August 17, 1994.
(a)(5) Form of letter to clients for use by
brokers, dealers, commercial banks, trust
companies and other nominees dated
August 17, 1994.
(a)(6) Form of Press Release, dated August 17, 1994.
(g)(1) Pages 27 to 58 of the Registrant's Annual
Report on Form 10-K for the Fiscal Year
Ended January 1, 1994.
(g)(2) Registrant's Quarterly Report on Form 10-Q
for the Quarter Ended July 2, 1994.
5
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OFFERING STATEMENT
ARDEN GROUP, INC.
OFFERS
TO PAY $52.00 IN CASH
FOR
EACH SHARE OF CLASS A COMMON STOCK TENDERED
UP TO A MAXIMUM OF 400,000 SHARES OF CLASS A COMMON STOCK
Arden Group, Inc. (the "Company") hereby offers to purchase, upon the terms
and conditions set forth herein and in the related Letter of Transmittal
accompanying this Offering Statement (which together constitute the "Offer"), up
to 400,000 shares of the issued and outstanding shares of the Class A Common
Stock, par value $.25 per share (the "Class A Common Stock"), of the Company for
cash at the rate of $52.00 per share. If more than 400,000 shares of Class A
Common Stock are tendered, then the Company will acquire 400,000 shares tendered
on a pro rata basis from each stockholder tendering (with adjustments to avoid
purchases of fractional shares) according to the number of shares of Class A
Common Stock tendered by each tendering stockholder. The Offer is not
conditional upon any minimum number of shares being tendered. The Company will
(subject to possible proration as discussed above) accept any and all shares of
Class A Common Stock validly tendered by and not withdrawn before the Expiration
Date (as defined herein). The Offer is subject to certain conditions. See
"Conditions of the Offer" below. The Company reserves the right to extend, amend
or terminate the Offer at any time on or prior to the Expiration Date.
Tenders may be withdrawn at any time prior to the Expiration Date. See "THE
OFFER -- Withdrawal Rights" below.
------------------------
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M.,
LOCAL TIME IN NEW YORK CITY,
ON THURSDAY, SEPTEMBER 15, 1994,
UNLESS THE OFFER IS EXTENDED BY THE COMPANY.
------------------------
Any stockholder desiring to tender all or any portion of such stockholder's
shares of Class A Common Stock should either (1) complete and sign the Letter of
Transmittal or a facsimile thereof in accordance with the instructions in the
Letter of Transmittal, mail or deliver it and any other required documents to
the Depositary, and deliver the certificates for shares of Class A Common Stock
to the Depositary along with the Letter of Transmittal or (2) request such
stockholder's broker, dealer, commercial bank, trust company or nominee to
effect the transaction for such stockholder. A stockholder whose shares of Class
A Common Stock are registered in the name of a broker, dealer, commercial bank,
trust company or nominee must contact such broker, dealer, commercial bank,
trust company or nominee if such stockholder desires to tender such shares of
Class A Common Stock. Any stockholder who desires to tender shares of Class A
Common Stock and whose certificates for such shares of Class A Common Stock are
not immediately available should tender such shares by following the procedures
for guaranteed delivery set forth in "THE OFFER -- How To Tender" herein.
------------------------
August 17, 1994
------------------------
STOCKHOLDERS WISHING TO RETAIN THE SHARES OF THE CLASS A COMMON STOCK
PRESENTLY HELD BY THEM NEED NOT DO ANYTHING IN RESPONSE TO THE OFFER.
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES OF THE
CLASS A COMMON STOCK. EACH STOCKHOLDER MUST MAKE HIS, HER OR ITS OWN DECISION
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
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NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER STOCKHOLDERS SHOULD TENDER SHARES PURSUANT TO THE OFFER.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THOSE CONTAINED HEREIN
OR IN THE LETTER OF TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY.
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY OF THE OFFER................................................................... 3
THE OFFER.............................................................................. 5
Terms of the Offer................................................................... 5
Purpose and Effects of the Offer..................................................... 5
Funding of Tender Offer.............................................................. 9
Certain Federal Income Tax Consequences.............................................. 9
Expiration and Extension of the Offer................................................ 10
Conditions of the Offer.............................................................. 10
How to Tender........................................................................ 12
Terms and Conditions of the Letter of Transmittal.................................... 13
Withdrawal Rights.................................................................... 14
Acceptance of Tenders................................................................ 14
Depositary........................................................................... 14
Solicitation of Tenders.............................................................. 14
Payment of Expenses.................................................................. 15
RECENT TRANSACTIONS IN COMMON STOCK.................................................... 15
PRICE RANGE OF COMMON STOCK............................................................ 15
BUSINESS AND RECENT DEVELOPMENTS....................................................... 16
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION.................................. 17
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION......................... 18
AVAILABLE INFORMATION.................................................................. 19
MISCELLANEOUS.......................................................................... 19
</TABLE>
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SUMMARY OF THE OFFER
THE FOLLOWING IS A SUMMARY OF CERTAIN TERMS OF THE OFFER. IT IS NOT INTENDED
TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION
PRESENTED HEREINAFTER. CAPITALIZED TERMS WHICH ARE NOT DEFINED IN THIS SUMMARY
ARE USED AS DEFINED ELSEWHERE IN THIS OFFERING STATEMENT.
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Expiration Date................... 5:00 P.M., local time in New York City, on September 15,
1994 unless extended by the Company.
Number of Shares.................. The Offer is not conditioned upon any minimum number of
shares being tendered. The Company is offering to
acquire up to a maximum of 400,000 shares of the Class A
Common Stock. If more than 400,000 shares of Class A
Common Stock are tendered, then the Company will acquire
400,000 shares tendered on a pro rata basis (with
adjustments to avoid purchases of fractional shares)
according to the number of shares tendered by each
tendering stockholder.
Purchase Price.................... $52.00 per share of Class A Common Stock.
Conditions of the Offer........... The Company's obligation to consummate the Offer is
subject to a number of conditions as set forth below
under the heading "THE OFFER -- Conditions of the
Offer."
Withdrawal Rights................. Tenders may be withdrawn at any time before the
Expiration Date.
How to Tender..................... Stockholders must determine whether they wish to tender
shares of Class A Common Stock in response to the Offer,
and if so, whether they wish to tender some or all of
their shares of Class A Common Stock. Stockholders who
elect to retain their shares of Class A Common Stock
need do nothing in response to the Offer. Stockholders
electing to tender shares of Class A Common Stock must
either (i) complete and sign the accompanying Letter of
Transmittal, have their signatures guaranteed (if
required) and forward the Letter of Transmittal with the
stock certificates representing their tendered shares of
Class A Common Stock and any other required documents to
the Depositary at one of the addresses set forth in the
Letter of Transmittal or (ii) request a broker,
commercial bank, trust company or other nominee to
effect the transaction for them. Holders of Class A
Common Stock registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must
contact such institution to tender their shares.
Questions regarding how to tender and requests for
information or additional copies of this Offering
Statement or of the Letter of Transmittal should be
directed to the Information Agent at the address or
telephone number set forth on the back cover of this
Offering Statement.
Depositary........................ City National Bank, Beverly Hills, California.
Acceptance of Tenders............. Subject to the terms and conditions of the Offer, shares
of Class A Common Stock validly tendered and not
withdrawn will be accepted on the Expiration Date. A
check in the full amount of the cash due will be mailed
by the Depositary as soon as practicable after
acceptance. Although the Company does not presently
intend to do so, if it modifies the terms of
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the Offer, such modified terms will be available with
respect to all shares of Class A Common Stock, whether
or not such shares have been tendered or accepted prior
to such modification.
Tax Consequences.................. The Company believes that either recognition of gain,
loss or dividend treatment may result for federal income
tax purposes on the receipt by a stockholder of cash
pursuant to the Offer. STOCKHOLDERS SHOULD CONSULT THEIR
TAX ADVISERS FOR ADVICE CONCERNING THE PARTICULAR TAX
CONSEQUENCES TO THEM OF TENDERING SHARES OF CLASS A
COMMON STOCK UNDER THE OFFER.
</TABLE>
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THE OFFER
TERMS OF THE OFFER
Arden Group, Inc., a Delaware corporation (the "Company"), whose principal
executive office is located at 2020 South Central Avenue, Compton, California
90220, hereby offers to acquire, upon the terms and conditions set forth herein
and in the accompanying Letter of Transmittal (which together constitute the
"Offer"), up to 400,000 shares of the issued and outstanding shares of the Class
A Common Stock, par value $.25 per share ("Class A Common Stock"), of the
Company in exchange for cash at the rate of $52.00 per share. If more than
400,000 shares are tendered, then the Company shall acquire 400,000 shares
tendered on a pro rata basis (with adjustments to avoid purchases of fractional
shares) according to the number of shares of Class A Common Stock tendered by
each stockholder tendering his, her or its shares in connection with the Offer.
Stockholders of the Company may elect, entirely in their own discretion, either
not to tender any shares of Class A Common Stock in response to the Offer or to
tender some or all of their shares of the Class A Common Stock. The Offer is not
conditional upon any minimum number of shares of the Class A Common Stock being
tendered.
If proration of shares tendered pursuant to the Offer is required, because
of the difficulty in determining the number of shares validly tendered
(including shares tendered by the guaranteed delivery procedure described
below), the Company does not expect that it would be able to announce the final
proration factor or to commence payment for any shares acquired pursuant to the
Offer until approximately seven NASDAQ National Market System trading days after
the Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Holders of
tendered shares may obtain such preliminary information from Beacon Hill
Partners, Inc. (the "Information Agent") and may also be able to obtain such
information from their brokers.
The Offer is subject to a number of conditions which are described below
under the heading "Conditions of the Offer."
Subject to the terms and conditions of the Offer, properly tendered shares
of Class A Common Stock will be accepted for purchase on the Expiration Date.
The term "Expiration Date" shall mean 5:00 P.M., local time in New York City, on
Thursday September 15, 1994, unless the Company, in its sole discretion, shall
have extended the period of time for which the Offer is open, in which event
"Expiration Date" shall mean the later date and time at which the Offer, as so
extended by the Company, shall expire. See "Expiration and Extension of the
Offer" for a description of the Company's right to extend the Offer.
The Company reserves the right to terminate the Offer upon the occurrence of
any of the conditions specified under "Conditions of the Offer" below or to
amend the Offer at any time on or prior to the Expiration Date.
As of the date of this Offering Statement, there are 1,269,405 shares of the
Class A Common Stock issued and outstanding. The 400,000 shares of Class A
Common Stock that the Company is offering to purchase represent approximately
32% of the outstanding shares of Class A Common Stock. The Class A Common Stock
is traded on the NASDAQ National Market System. See "PRICE RANGE OF COMMON
STOCK" below. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE
CLASS A COMMON STOCK.
PURPOSE AND EFFECTS OF THE OFFER
In September 1993, AMG Holdings, Inc. (formerly, Telautograph Corporation),
an indirect wholly owned subsidiary of the Company ("AMG Holdings"), sold
substantially all of its operating assets and certain of its liabilities related
to its communication equipment business to Danka Industries, Inc. ("Danka") for
cash. See "BUSINESS AND RECENT DEVELOPMENTS." As a result of that transaction,
the Company has had cash in excess of the needs of the present business of the
Company and has been investigating opportunities for the use of these funds. In
considering opportunities for the use of these funds, the Company determined
that a good investment for a portion of such funds would be a
5
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purchase of shares of the Class A Common Stock. The Offer is being made to
effectuate such purchase. The Offer will afford stockholders of the Company the
opportunity to dispose of shares of Class A Common Stock at a predetermined
price without the usual costs associated with a market sale and without any
discount which otherwise might have been incurred in a market sale on account of
the historically low volume of trading of the Class A Common Stock in the
over-the-counter market.
Each share of Class A Common Stock is entitled to one vote on all matters
which could properly be brought before a stockholder vote. The Company also has
authorized a Class B Common Stock, par value $.25 per share (the "Class B Common
Stock"), of which there are 343,316 shares issued and outstanding as of the date
of this Offering Statement, and a Serial Preferred Stock, of which no shares are
issued or outstanding. Each share of the Class B Common Stock is entitled to ten
votes per share on most matters which may be brought before the stockholders of
the Company. If at any time the number of shares of Class B Common Stock
outstanding as reflected in the Company's stock transfer books falls below 10%
of the aggregate number of the then issued and outstanding shares of the Class A
Common Stock, Class B Common Stock and the Serial Preferred Stock (if any), or
if at any time the then outstanding number of the shares of Class B Common Stock
issued in the original issuance thereof is less than 35% of the total number of
such shares originally issued, then in either such event all outstanding shares
of Class B Common Stock shall be converted, automatically and without further
action, into an equal number of shares of Class A Common Stock. After such an
automatic conversion, no further shares of Class B Common Stock may be issued,
and certificates formerly representing outstanding shares of Class B Common
Stock will be deemed to represent a like number of shares of Class A Common
Stock. Additionally, the holders of Class B Common Stock may convert
voluntarily, on a one-for-one basis, their shares into shares of the Class A
Common Stock. Class B Common Stock may be transferred only to certain permitted
transferees as specified in the Company's Restated Certificate of Incorporation.
Thus, to sell shares of the Class B Common Stock, such shares must first be
converted into Class A Common Stock.
With respect to the election of directors, the holders of Class A Common
Stock, voting separately as a class, are entitled to elect 25% of the total
number of directors and, so long as the number of shares of Class B Common Stock
is not less than 12 1/2% of the total number of outstanding shares of Class A
Common Stock, Class B Common Stock and Serial Preferred Stock (if any), the
holders of Class B Common Stock, voting separately as a class, are entitled to
elect the remaining directors. If the number of outstanding shares of Class B
Common Stock is less than such 12 1/2%, then the holders of Class A Common Stock
and Class B Common Stock, voting together as a class (the Class B Common Stock
being entitled to ten votes per share), have the right to elect the remaining
directors. Because the Offer will result in a reduction in the number of
outstanding shares of Class A Common Stock, it is less likely following
consummation of the Offer that this provision granting the holders of Class A
Common Stock additional rights to vote as to the election of directors will
become operative.
As of the date of this Offering Statement, Bernard Briskin, the Chairman of
the Board, President and Chief Executive Officer of the Company ("Mr. Briskin"),
beneficially owns 149,087 shares of the Class A Common Stock, or approximately
11.7% of the shares of Class A Common Stock outstanding on that date, of which
54,199 shares are owned by the spouse of Mr. Briskin, 46,524 shares are held in
trust (of which Mr. Briskin is a trustee) for the benefit of Mr. Briskin, his
children and his mother, and 16,364 shares are held in the Company Stock Bonus
Plan of which City National Bank is the Trustee (the "Stock Bonus Plan") for the
account of Mr. Briskin. Mr. Briskin disclaims any beneficial ownership of the
shares of the Class A Common Stock owned by his spouse, shares voting and
investment power with respect to the shares held in the above-described trust
and denies having or sharing investment or voting power with respect to the
shares held for his account in the Stock Bonus Plan. Nothing herein should be
construed as an admission that Mr. Briskin is in fact the beneficial owner of
any of such shares. As of the date of this Offering Statement, Mr. Briskin
beneficially owns 340,624 shares of the Class B Common Stock, representing
approximately 99.2% of the shares of the Class B Common Stock outstanding as of
such date.
6
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As of July 31, 1994, an aggregate of 12,358 shares of Class A Common Stock,
or less than one percent of the issued and outstanding shares of Class A Common
Stock, were beneficially owned by officers and directors of the Company other
than Mr. Briskin and 321,904 shares of Class A Common Stock, or approximately
25.4% of the outstanding shares of Class A Common Stock on that date, were owned
by City National Bank, as Trustee under the Stock Bonus Plan. Any shares
acquired from officers and directors of the Company or City National Bank, as
Trustee under the Stock Bonus Plan, pursuant to the Offer will be acquired on
the same terms and conditions as all other shares. Although the Company has been
advised that Mr. Briskin will not tender any shares pursuant to the Offer, the
Company does not know whether any of the other officers, directors or affiliates
of the Company or City National Bank, acting in its capacity as Trustee under
the Stock Bonus Plan, will tender any of their shares pursuant to the Offer.
Although the Board of Directors believes that the Offer is in the best
interests of the Company, the Board recognizes that the Offer may have
disadvantageous consequences for some stockholders. Assuming that the maximum
number of shares of the Class A Common Stock are tendered and accepted, one
effect of the Offer will be to decrease the number of issued and outstanding
shares of the Class A Common Stock, thus concentrating the voting power of the
holders of the Class A Common Stock who do not tender their shares of Class A
Common Stock. Because each share of the Class B Common Stock is entitled to ten
votes per share, such tender also will further concentrate the voting power of
the holders of the Class B Common Stock, particularly that of Mr. Briskin, in
relation to the Class A Common Stock. Because of Mr. Briskin's current holdings,
it would be difficult for a third party to acquire a majority of the voting
power of the Company without his consent. As a result of such holdings, the
Company is a less attractive target for a takeover bid or a merger proposal, and
a successful proxy contest would be extremely difficult, or impossible, even if
such actions were favored by the Board of Directors and the stockholders of the
Company other than Mr. Briskin. Accordingly, stockholders may be deprived of an
opportunity to sell their shares at a premium over prevailing market prices,
since takeover bids frequently involve purchases of stock directly from
stockholders at such a premium price. Those seeking to acquire the Company
through a business combination must consult with Mr. Briskin, as the majority
holder of Class B Common Stock, in order to negotiate the terms of such a
business combination.
After the conclusion of the Offer and assuming that the maximum number of
shares of the Class A Common Stock are tendered and accepted, there may be an
adverse effect on the market price of the remaining outstanding shares of the
Class A Common Stock because the decrease in the number of outstanding shares of
the Class A Common Stock will result in further reducing the liquidity thereof.
Trading volume in the Class A Common Stock in the over-the-counter market has
been relatively small with no transactions being reported on certain days in the
National Market System of NASDAQ. Consummation of the Offer will result in a
reduction in the number of shares of Class A Common Stock in the public float
which may have the effect of making it more difficult for a holder of Class A
Common Stock to dispose of any significant number of shares of Class A Common
Stock in a market sale without incurring a discount because of the reduced
liquidity of the Class A Common Stock.
If the Class B Common Stock were to be automatically converted into shares
of the Class A Common Stock because such shares of Class B Common Stock
represent less than 10% of the aggregate number of the then issued and
outstanding Class A Common Stock, Class B Common Stock and Serial Preferred
Stock, if any (as described above), the voting power of the holders of Class B
Common Stock would be severely reduced. Because the Offer may result in less
shares of the Class A Common Stock being outstanding, there is a decreased
likelihood that the Class B Common Stock will be converted automatically. As the
Class B Common Stock may be converted voluntarily into a like number of shares
of the Class A Common Stock, the holders thereof may so convert a portion
thereof (so long as the number not converted is 35% or more of the total number
of such shares originally issued) to sell the same or to take advantage, to the
extent that shares are converted, of dividends then being paid on, or other
rights then being afforded to the holders of, the Class A Common Stock without
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sacrificing their ability to control the voting power of the Company. Any
conversion (without a sale of the converted shares) would increase the pool of
shares entitled to share in any such dividends or other rights.
Stockholders who tender their shares of Class A Common Stock for cash will
no longer have an equity interest in the Company and will not share in any
future earnings or growth of the Company, in the risks associated with achieving
any such earnings and growth or in the potential to realize greater value for
their shares of the Class A Common Stock through divestitures, strategic
acquisitions or other corporate opportunities that the Company may pursue in the
future. Other than a dividend paid in 1987 in connection with a previous issuer
tender offer, the Company has not paid dividends on the Common Stock since 1970,
and the Board of Directors has no present plans to initiate a policy of regular
or other dividends. Stockholders who do not tender their shares of Class A
Common Stock for cash will obtain a proportionate increase in their ownership
interest in the Company.
The shares of Class A Common Stock purchased for cash pursuant to the Offer
will be restored to the status of authorized but unissued shares of Class A
Common Stock. Such shares may be later issued by the Company pursuant to
resolution of the Board of Directors without further stockholder action (except
as may be required by law or the rules applicable to issuers of securities
traded on the NASDAQ National Market System). Such shares of Class A Common
Stock could be issued without stockholder approval for, among other things,
acquisitions of other businesses, the raising of additional capital for use in
the Company's business, stock dividends and the implementation of employee
benefit plans. The Company has no current plans to use the shares of Class A
Common Stock it may acquire pursuant to the Offer or any other authorized but
unissued shares of Class A Common Stock.
Under existing accounting rules, a company cannot account for the
acquisition of a business as a "pooling of interests" if the acquiring company
or the acquired business repurchased its outstanding shares during the prior two
years. The purchase of shares of Class A Common Stock pursuant to the Offer may
prevent the use of the "pooling of interests" for certain transactions involving
the Company, were they to occur within the following two years.
The Company does not believe that there is a reasonable likelihood that the
Class A Common Stock will be deregistered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or that the Company's
obligation to file periodic reports pursuant to Section 15(d) of the Exchange
Act will be suspended, as a result of the Offer. Although the Offer will result
in a reduction in the number of shares of Class A Common Stock in the public
float, the Company does not believe that the Offer will result in the Class A
Common Stock no longer qualifying for inclusion in the NASDAQ National Market
System or no longer being authorized to be quoted in the inter-dealer quotation
system of NASDAQ.
Although the Company does not have any current plans to acquire additional
shares of Class A Common Stock, the Company may in the future purchase shares of
Class A Common Stock (in addition to those purchased pursuant to the Offer) on
the open market, in privately negotiated transactions, through tender offers or
otherwise, in such amounts, at such prices and at such times as the Company may
determine. Rule 13e-4 under the Exchange Act generally prohibits the Company and
its affiliates from purchasing any shares of Class A Common Stock, other than
pursuant to the Offer, until at least ten business days after the Expiration
Date. The Company will not purchase any additional shares of Class A Common
Stock until at least ten business days after the Expiration Date. Any possible
future purchases by the Company will depend on many factors, including the
market price of the shares of Class A Common Stock, the Company's business and
financial position, alternative investment opportunities available to the
Company, the results of the Offer and general economic and market conditions.
Any of these possible purchases may be on the same terms as, or on terms more or
less favorable than, those of the Offer.
STOCKHOLDERS WHO WISH TO RETAIN THEIR SHARES OF CLASS A COMMON STOCK NEED DO
NOTHING IN RESPONSE TO THE OFFER.
8
<PAGE>
NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION TO
ANY STOCKHOLDER AS TO WHETHER TO TENDER OR REFRAIN FROM TENDERING SHARES OF
CLASS A COMMON STOCK. EACH STOCKHOLDER MUST MAKE HIS, HER OR ITS OWN DECISION
WHETHER TO TENDER SHARES AND, IF SO, HOW MANY SHARES TO TENDER.
FUNDING OF TENDER OFFER
If 400,000 shares of Class A Common Stock are acquired by the Company
pursuant to the Offer, the aggregate purchase price to the Company will be
$20,800,000. The Company intends to pay the aggregate purchase price for the
number of shares of Class A Common Stock being acquired pursuant to the Offer
from and out of its general funds. The Company does not expect to borrow any
amount for payment of the aggregate purchase price for such shares.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Set forth below is a discussion of certain federal income tax consequences
of the acquisition by the Company of shares of the Class A Common Stock for
$52.00 in cash per share pursuant to the Offer. The discussion does not purport
to address all aspects of federal taxation that may be relevant to particular
stockholders in light of their personal investment circumstances. Furthermore,
the discussion may not be applicable to certain types of stockholders subject to
special treatment under the federal income tax laws (for example, tax-exempt
organizations and nonresident alien individuals). Stockholders are advised to
consult their own tax advisers regarding the federal, state, local income and
other tax consequences of the Offer.
No gain or loss will be recognized by a stockholder who does not tender any
shares of Class A Common Stock. The tax basis and holding period of his, her or
its existing shares of the Class A Common Stock will remain unchanged.
The federal income tax consequences to a holder of Class A Common Stock who
sells all or part of his, her or its shares for cash pursuant to the Offer will
depend upon whether or not the receipt of the cash by such stockholder will be
treated as a dividend under Section 301 of the Internal Revenue Code of 1986, as
amended (the "Code"). If the receipt of the cash payment is not treated as a
dividend, then it will be treated as a sale or exchange, and gain or loss will
be recognized in an amount equal to the difference between (i) the sum of the
cash received and (ii) the tax basis of the shares of the Class A Common Stock
tendered; such gain or loss will be capital gain or loss if the Class A Common
Stock sold constitutes a capital asset in the hands of the tendering stockholder
as of the date of the sale pursuant to the Offer. Such capital gain or loss will
be long-term capital gain or loss if such stockholder held the shares for more
than one year.
Generally, the sale pursuant to the Offer will not be treated as a dividend
if either (i) after the consummation of the sale pursuant to the Offer the
stockholder no longer owns, directly or constructively, any shares of stock in
the Company (either Class A Common Stock or Class B Common Stock); (ii) the
ratio which the voting stock of the Company owned by the stockholder, directly
or constructively, immediately after the consummation of the sale pursuant to
the Offer bears to all of the Company's voting stock at such time is less than
80% of the ratio which such voting stock of the Company owned, directly or
constructively, by the stockholder immediately before the consummation of the
sale pursuant to the Offer bears to all of the voting stock of the Company at
such time, and the stockholder's direct or constructive ownership of the Class A
Common Stock and Class B Common Stock (determined by reference to fair market
value) after and before the consummation of the sale pursuant to the Offer also
meets such 80% requirement; or (iii) the consummation of the sale pursuant to
the Offer is "not essentially equivalent to a dividend." The test described in
(ii) above requires calculations which cannot be definitively made until after
the results of the Offer are known; and the test described in (iii) requires a
favorable determination of a factual issue. Accordingly, a stockholder can only
be certain of avoiding dividend treatment if such stockholder comes within (i)
above, which requires that the stockholder not only tender all shares owned
directly by him, her or it, but also that such stockholder is not deemed to
constructively own shares directly or constructively
9
<PAGE>
owned by someone else that are not tendered. The Code sets forth a very complex
set of rules pursuant to which shares owned by one person may be deemed to be
constructively owned by another person. Each stockholder is urged to consult
with his, her or its own tax adviser to determine the extent to which such rules
are applicable to his, her or its particular circumstances.
If the sale pursuant to the Offer with respect to the tendering stockholder
is taxable as a dividend, then the stockholder will be taxed on the amount
received as ordinary income up to an amount equal to such stockholder's
allocable share of the Company's (i) accumulated earnings and profits on the
date the Offer is consummated and (ii) the earnings and profits of the Company's
current taxable year computed as of the close of the taxable year of the sale
(without diminution by reason of any distributions made during the tax year and
without regard to the amount of the current earnings and profits at the time of
the exchange). Such allocable share is determined after taking into account all
other distributions to stockholders for the year which are taxable as dividends.
If the amount received exceeds the stockholder's allocable share of the current
or accumulated earnings and profits of the Company as described above, then such
excess amount will be applied to reduce such stockholder's aggregate adjusted
tax basis in his, her or its shares of Class A Common Stock tendered. The amount
received, if any, which is in excess of both the stockholder's share of the
earnings and profits and the adjusted tax basis in his, her or its shares of the
Class A Common Stock tendered will be treated as gain from the sale or exchange
of the shares, and the character of such gain will be the same as if the sale
were not treated as a dividend.
EXPIRATION AND EXTENSION OF THE OFFER
The Offer will expire at 5:00 P.M., local time in New York City, on
September 15, 1994, unless extended by the Company. During any extension of the
Offer, all shares of Class A Common Stock previously tendered pursuant to the
Offer will remain subject to the Offer (and to the withdrawal rights specified
herein) and may be accepted for purchase by the Company. The Offer may be
extended by oral or written notice from the Company to City National Bank (the
"Depositary") at any time or from time to time on or prior to the date then
fixed for the expiration of the Offer. Public announcement of any extension of
the Offer will be timely made by the Company, but unless otherwise required by
law or regulation, the Company shall not have any obligation to communicate such
public announcement other than by making it available to the Dow Jones News
Service.
CONDITIONS OF THE OFFER
Notwithstanding any other provisions of the Offer, or any extension of the
Offer, the Company will not be obligated to accept any properly tendered shares
of Class A Common Stock and may amend or terminate the Offer (by oral or written
notice to the Depositary and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by delivering a press
release to the Dow Jones News Service) if any material change occurs which is
likely to affect the Offer or the value or market price of the Class A Common
Stock, including, but not limited to, the following:
(a) there shall have been threatened or instituted or there shall be
pending any action or proceeding by any government or governmental,
regulatory or administrative agency or authority or tribunal or any other
person, domestic or foreign, or before any court, authority, agency or
tribunal that (i) challenges the acquisition of shares of the Class A Common
Stock pursuant to the Offer or otherwise in any manner relates to the Offer
or (ii) in the sole judgment of the Company, could materially and adversely
affect the business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries, taken as a whole, or
otherwise materially impair in any way the contemplated future conduct of
the business of the Company or any of its subsidiaries or materially impair
the Offer's contemplated benefits to the Company;
(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any legislative body, court, authority, agency
or tribunal which, in the Company's sole judgment, would or might directly
or indirectly (i) make the
10
<PAGE>
acceptance for payment of, or payment for, some or all of the shares of the
Class A Common Stock illegal or otherwise restrict or prohibit consummation
of the Offer, (ii) delay or restrict the ability of the Company, or render
the Company unable, to accept for payment or pay for some or all of the
shares of the Class A Common Stock tendered, (iii) materially impair the
contemplated benefits of the Offer to the Company or (iv) materially affect
the business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries, taken as a whole, or
otherwise materially impair in any way the contemplated future conduct of
the business of the Company or any of its subsidiaries;
(c) there shall occur any development in any pending action or
proceeding, which, in the sole judgment of the Company, would or might (i)
have an adverse effect on the business of the Company, (ii) prohibit,
restrict or delay consummation of the Offer or (iii) impair the contemplated
benefits of the Offer;
(d) there shall occur (i) any general suspension of, or limitation on
prices for, trading in securities, whether on the New York Stock Exchange,
or the NASDAQ National Market System or in the over-the-counter market, or
any of the foregoing (ii) any significant decrease in the market price of
the Class A Common Stock, (iii) any change in the general political, market,
economic or financial conditions in the United States or abroad that could
have a material adverse effect on the Company's business operations,
prospects or ability to obtain financing generally or the trading in the
Class A Common Stock, (iv) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or any
limitation on, or any event which in the sole judgment of the Company might
affect, the extension of credit by lending institutions in the United
States, (v) the commencement of a war, armed hostilities or other
international calamity directly or indirectly involving the United States or
(vi) in the case of any of the foregoing existing at the time of
commencement of the Offer, in the sole judgment of the Company, a material
acceleration or worsening thereof;
(e) there shall occur any change, or any development involving a
prospective change, which has had or may have a material adverse effect on
the business of the Company or on the Offer;
(f) there shall have occurred any decline in the Standard & Poor's
Composite 500 Stock Index (461.23 at the close of business on August 15,
1994) by an amount in excess of 15% measured from the close of business on
August 15, 1994; or
(g) (i) any person, entity or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) shall have acquired, or proposed to acquire,
beneficial ownership of more than 5% of the outstanding shares of Class A
Common Stock (other than a person, entity or group which had publicly
disclosed such ownership in a Schedule 13D or 13G (or an amendment thereto)
on file with the Securities and Exchange Commission (the "Commission") prior
to August 15, 1994), or any such person, entity or group that prior to
August 15, 1994 had filed such a Schedule with the Commission thereafter
shall have acquired or shall propose to acquire, whether through the
acquisition of stock, formation of a group, the grant of any option or
right, or otherwise, beneficial ownership of additional shares of Class A
Common Stock, (ii) any new group shall have been formed which beneficially
owns more than 5% of the outstanding shares of Class A Common Stock or (iii)
any person, entity or group shall have filed a Notification and Report Form
under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, or made a
public announcement reflecting an intent to acquire the Company or any of
its subsidiaries or any of their respective assets or securities.
The foregoing conditions are for the sole benefit of the Company and may be
waived by the Company, in whole or in part, in its sole discretion. Any
determination made by the Company concerning an event described or referred to
above will be final and binding on all parties to the Offer.
11
<PAGE>
HOW TO TENDER
Whether tendering shares in whole or in part pursuant to the Offer, a
stockholder may tender shares of Class A Common Stock in either of two ways: (i)
by properly completing and signing the accompanying Letter of Transmittal or a
duplicate copy thereof (all references in this Offering Statement to the Letter
of Transmittal shall be deemed to include a duplicate copy thereof) and
delivering the same, together with the certificates representing the shares of
Class A Common Stock being tendered, to the Depositary on or prior to the
Expiration Date; or (ii) by requesting a broker, dealer, bank, trust company or
other nominee to effect the transaction.
Shares of Class A Common Stock tendered pursuant to the Offer must be
endorsed or accompanied by stock powers or written instruments of transfer in
form satisfactory to the Company duly executed by the registered owner(s). If
shares are tendered by someone other than the registered holder thereof or by a
registered holder but such holder has requested that his, her or its check
and/or certificates representing shares of Class A Common Stock not being
tendered be mailed to or issued in the name of someone other than such
registered holder, the signature(s) thereon must be guaranteed by an Eligible
Institution (as defined below) that is also a member of a Medallion Program as
recognized by The Securities Transfer Association Inc.
THE METHOD OF DELIVERY OF THE CLASS A COMMON STOCK AND ALL OTHER DOCUMENTS
IS AT THE SOLE ELECTION AND RISK OF THE STOCKHOLDER. IF SUCH MATERIALS ARE SENT
BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE
USED, AND THAT PROPER INSURANCE BE OBTAINED.
For the convenience of stockholders whose stock certificates are not
immediately available, tenders may be made without the concurrent deposit of
stock certificates if made through a commercial bank or trust company having an
office in the United States or a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. (an "Eligible Institution"). In such cases, the Letter of
Transmittal must be received by the Depositary prior to the Expiration Date,
must contain a guarantee from an Eligible Institution that the tendered
certificates will be deposited within five business days after the date of
receipt of the Letter of Transmittal by the Depositary and, if possible, should
list the serial numbers of the tendered certificates. If a stockholder desires
to accept the Offer and time will not permit his, her or its Letter of
Transmittal to be received by the Company or to reach the Depositary before the
Expiration Date, his, her or its tender may be effected if the Depositary has
received prior to such date a letter (whether by facsimile or otherwise), telex
or telegram from an Eligible Institution setting forth the name of the tendering
stockholder and the number of shares tendered, stating that the tender is being
made thereby and guaranteeing that within five business days after the date of
receipt of such letter, telex or telegram by the Depositary, the stock
certificates, together with the Letter of Transmittal (and any other required
documents), will be deposited with the Depositary by such Eligible Institution.
Unless certificates being tendered by either of the above-described methods are
deposited with the Depositary within the time periods set forth above
(accompanied or preceded by a properly completed Letter of Transmittal), the
Company may, at its option, reject the tender.
A tender will be deemed to have been received by the Company as of the date
on which the Depositary receives the tendering stockholder's duly signed Letter
of Transmittal, accompanied by certificates or a guarantee of delivery, or a
letter, telex or telegram (as provided above) from an Eligible Institution,
together with all other required documents, as indicated in the Letter of
Transmittal. Payment of cash for shares of Class A Common Stock tendered
pursuant to a guarantee of delivery or a letter, telex or telegram (as provided
above) by an Eligible Institution will be made only against deposit of the
original Letter of Transmittal (and any other required documents) and the
tendered certificates.
12
<PAGE>
Any number of shares of Class A Common Stock of the Company may be tendered
by a stockholder. Tendering stockholders may tender fewer than all of the shares
represented by the certificates they hold, provided they appropriately indicate
that fact on the Letter of Transmittal accompanying the certificates for their
tendered shares of Class A Common Stock.
Any tendering stockholder or other payee who fails to complete fully and
sign the Substitute Form W-9 contained in the Letter of Transmittal may be
subject to required federal income tax withholding of 31% of the gross proceeds
paid to such stockholder or other payee pursuant to the Offer. See Instruction 9
to the Letter of Transmittal.
With respect to tenders of the Company's Class A Common Stock, the Company
reserves full discretion to determine whether the documentation is complete and
generally to determine all questions as to tenders, including the date of
receipt of a tender, the propriety of execution of any document, and other
questions as to the eligibility or acceptability of any tender. The Company
reserves the right to reject any tender not in proper form or to waive any
irregularities or conditions, and the Company's interpretation of the terms and
conditions of the Offer (including the instructions in the Letter of
Transmittal) will be final. None of the Company, the Depositary, the Information
Agent or any other person is or will be obligated to give notice of any defects
or irregularities in tenders and shall not incur any liability for failure to
give any such notice.
Shares shall not be deemed to have been duly tendered unless and until all
defects and irregularities have been cured or waived. Certificates for all
improperly tendered shares, as well as certificates representing the balance of
shares in excess of those tendered for exchange, will be returned (unless
irregularities and defects are timely cured or waived) without cost to the
tendering stockholder as soon as practicable after the Expiration Date.
It is a violation of Rule 14e-4 promulgated under the Exchange Act for a
person to tender shares for his or her own account unless the person so
tendering (a) has a net long position equal to or greater than the amount of (i)
the shares tendered or (ii) other securities immediately convertible into,
exercisable, or exchangeable for the amount of the shares tendered and will
acquire such shares for tender by conversion, exercise or exchange of such other
securities, and (b) will cause such shares to be delivered in accordance with
the terms of the Offer. Rule 14e-4 provides a similar restriction applicable to
the tender or guarantee of a tender on behalf of another person. The tender of
shares pursuant to any one of the procedures described above will constitute the
tendering stockholder's representation and warranty that (a) such stockholder
has a net long position in the shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act, and (b) the tender of such shares
complies with Rule 14e-4. The Company's acceptance for payment of shares
tendered pursuant to the Offer will constitute a binding agreement between the
Company and the tendering stockholder upon the terms and subject to the
conditions of the Offer.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal accompanying this Offering Statement includes the
following terms and conditions, which are part of the Offer. Additional copies
of the Letter of Transmittal may be obtained from the Information Agent at the
address or the telephone number set forth on the back cover of this Offering
Statement.
Shares of Class A Common Stock must be received by the Depositary with the
Letter of Transmittal and any other required documents by 5:00 P.M., local time
in New York City, on or prior to September 15, 1994, unless the Offer is
extended by the Company, or within the time periods set forth above in "How to
Tender" pursuant to a guarantee of delivery or letter, telex or telegram from an
Eligible Institution. The party tendering the shares (the "Transferor") assigns
and transfers those shares to the Company and irrevocably appoints the Company
as the Transferor's attorney-in-fact to cause the shares to be transferred. The
Transferor warrants that he, she or it has full power to tender those shares and
that the Company will acquire good title to the shares, free from all claims.
All
13
<PAGE>
authority conferred by the Transferor will survive the death or incapacity of
the Transferor. Signature(s) on the Letter of Transmittal will be required to be
guaranteed and endorsement(s) on the certificates being tendered will be
required as set forth above in "How to Tender." All questions as to the
validity, form, eligibility (including time of receipt and acceptances of shares
of Class A Common Stock tendered) will be determined by the Company, in its sole
discretion, and such determination will be final and binding. Unless waived by
the Company, irregularities and defects must be cured by the Expiration Date. In
most instances, the Company will pay all stock transfer taxes applicable to the
transfer and exchange of shares tendered.
WITHDRAWAL RIGHTS
All tenders may be withdrawn at any time on or prior to the Expiration Date.
To be effective, written notice of withdrawal must be timely received by the
Company, by writing to Ernest T. Klinger, Chief Financial Officer and Vice
President Finance and Administration, Arden Group, Inc., 2020 South Central
Avenue, Compton, California 90220, or by facsimile transmission to Mr. Klinger
at (310) 631-0950, or by delivering such notice to the Depositary at one of its
addresses set forth below under "Depositary" below. Any notice of withdrawal
should specify the person named in the Letter of Transmittal as having tendered
the number of shares of Class A Common Stock to be withdrawn and the name of the
registered holder of such shares. If the shares have been physically delivered
to the Depositary, the tendering stockholder should also submit the serial
number(s) shown on the particular certificate(s) to be withdrawn. The Depositary
will return the withdrawn shares as soon as practicable following receipt of
notice of withdrawal. All questions as to the validity, including time of
receipt, of notices of withdrawals will be determined by the Company, in its
sole discretion, and such determination will be final and binding on all
tendering stockholders.
ACCEPTANCE OF TENDERS
Subject to the terms and conditions of the Offer, shares of Class A Common
Stock tendered for purchase with a properly executed Letter of Transmittal and
all other required documentation, and not withdrawn, will be accepted on the
Expiration Date for payment in cash. Once so accepted for purchase, tendered
shares of Class A Common Stock cannot be withdrawn. Delivery of the cash due
will be made by the Depositary as soon as practicable after acceptance of the
tendered shares.
Although the Company does not presently intend to modify the terms of the
Offer, if it does so, such modified terms will be available with respect to all
shares of Class A Common Stock, whether or not such shares have been tendered
prior to such modification.
The acceptance by the Company of tendered shares pursuant to any one of the
procedures set forth above in "How to Tender" will constitute an agreement
between the tendering stockholder and the Company upon the terms and subject to
the conditions of the Offer.
DEPOSITARY
City National Bank has been appointed as the Depositary for the Offer.
Letters of Transmittal must be addressed and delivered to the Depositary as
follows:
<TABLE>
<CAPTION>
MAIL OR OVERNIGHT DELIVERY: HAND DELIVERY: FACSIMILE:
- ----------------------------- ----------------------------- -----------------------------
<S> <C> <C>
City National Bank City National Bank City National Bank
c/o CST Corporate Trust Department Beverly Hills, California
2 Broadway 120 South Spalding Drive (310) 550-5875
19th Floor Suite 408 or
New York, New York 10004 Beverly Hills, California New York, New York
90212 (212) 509-5150
</TABLE>
Delivery to other than the above addresses will not constitute valid
delivery.
SOLICITATION OF TENDERS
No person has been authorized to give any information or to make any
representations in connection with the Offer other than those contained in this
Offering Statement. If given or made,
14
<PAGE>
such information or representations should not be relied upon as having been
authorized by the Company. Neither the delivery of this Offering Statement nor
any purchase made hereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the respective dates as of which information is given herein. This Offering
Statement does not constitute an offer by the Company or any other person to
purchase, or a solicitation by the Company or any other person of an offer to
purchase, any securities other than the securities covered by this Offering
Statement, nor does it constitute an offer or solicitation of such securities by
the Company or any such other person in any jurisdiction in which, or to any
person to whom, it is unlawful to make any such offer or solicitation. The
Company does not intend to engage the services of any broker, dealer, salesman
or other person for soliciting tenders of Class A Common Stock in connection
with the Offer.
PAYMENT OF EXPENSES
The Company has retained Beacon Hill Partners, Inc. as Information Agent in
connection with the Offer. The Information Agent may contact stockholders by
mail, telephone, telex, telegraph and personal interviews, and may request
brokers, dealers and other nominee stockholders to forward materials relating to
the Offer to the beneficial owners. The Depositary and the Information Agent
will receive reasonable and customary compensation for their services in
connection with the Offer, will be reimbursed by the Company for their
reasonable out-of-pocket expenses and may be indemnified by the Company in
connection with certain liabilities and expenses in connection with the Offer.
The Company will reimburse brokers, dealers, commercial banks, trust
companies and other custodians, nominees and fiduciaries for customary handling
and mailing expenses incurred in forwarding copies of this Offering Statement
and related documents to the beneficial owners of shares of Class A Common Stock
held in their names. The Company will not pay any fees or commissions to any
broker, dealer or other person for soliciting tenders of shares of Class A
Common Stock pursuant to the Offer. No broker, dealer, commercial bank or trust
company has been authorized to act as the agent for the Company or the
Depositary for the purpose of the Offer.
RECENT TRANSACTIONS IN COMMON STOCK
No transactions in the Class A Common Stock were effected during the forty
business days preceding the date of this Offering Statement by the Company or
any subsidiary thereof, by any executive officer or director or controlling
person of any of the foregoing, or by any of their associates.
PRICE RANGE OF COMMON STOCK
The Company's Class A Common Stock is traded on the NASDAQ National Market
System. During the past two fiscal years and the current fiscal year through
August 15, 1994, the range of the high and low sales prices for the Company's
Class A Common Stock for each quarterly period, as reported by NASDAQ, was as
follows:
<TABLE>
<CAPTION>
FISCAL 1992: HIGH LOW
- ------------------------------------------------------------------ ----- -----
<S> <C> <C>
First Quarter..................................................... 49 39
Second Quarter.................................................... 42 28
Third Quarter..................................................... 32 27 1/4
Fourth Quarter.................................................... 37 1/2 27
<CAPTION>
FISCAL 1993:
- ------------------------------------------------------------------
<S> <C> <C>
First Quarter..................................................... 36 27
Second Quarter.................................................... 44 33
Third Quarter..................................................... 49 38
Fourth Quarter.................................................... 58 47
<CAPTION>
FISCAL 1994:
- ------------------------------------------------------------------
<S> <C> <C>
First Quarter..................................................... 54 44
Second Quarter.................................................... 51 38
Third Quarter (through August 15, 1994)........................... 48 32
</TABLE>
15
<PAGE>
As of July 2, 1994, there were issued and outstanding 1,269,405 shares of
the Class A Common Stock and 343,316 shares of the Class B Common Stock.
On August 15, 1994, there were no reported transactions for the Class A
Common Stock on the NASDAQ National Market System. On August 9, 1994, the last
day prior to August 15, 1994 that a transaction was reported, the reported
closing price was $45.00 per share. STOCKHOLDERS ARE URGED TO OBTAIN CURRENT
MARKET QUOTATIONS FOR SHARES OF THE CLASS A COMMON STOCK.
BUSINESS AND RECENT DEVELOPMENTS
The Company is a holding company which was incorporated under the laws of
the State of Delaware in 1977. The only operations in which the Company is
engaged are those conducted by its wholly owned subsidiary, Arden-Mayfair, Inc.
("Arden"), and Arden's wholly owned subsidiary, Gelson's Markets. Arden's
business is comprised of a food distribution business consisting of supermarkets
and related facilities operated by Gelson's Markets.
In May 1994, the Company sold all of the shares of the capital stock of its
indirect wholly owned subsidiary, GPS Pool Supply, Inc. ("GPS Pool Supply"), a
company engaged in the processing and distribution of chemicals and equipment
and supplies for the maintenance of swimming pools and the distribution of
related chemical products to the industrial markets, to Pioneer Chlor Alkali
Investments, Inc. The consideration for the purchase of the shares of the
capital stock of GPS Pool Supply consisted of a purchase price of approximately
$3,515,000, a substantial portion of which is represented by a promissory note,
plus additional consideration for a covenant not to compete, the amount of which
will be based on future sales until such time as the promissory note is paid in
full.
In September 1993, AMG Holdings (then, Telautograph Corporation) sold
substantially all of the operating assets related to its communication equipment
business to Danka for cash. The purchase price and gain from such sale of assets
by AMG Holdings are subject to adjustment after the resolution of certain
disputes that arose between AMG Holdings and Danka concerning the assets and
liabilities transferred to Danka. As a result of an arbitration hearing in April
1994, the Company was awarded $1,750,000 for parts inventory. 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 offset against the
award. There is a second arbitration proceeding pending with regard to certain
items in dispute concerning the sale to Danka, including disputes as to certain
items on the closing balance sheet of the business sold. The Company does not
believe that adjustments resulting from the second arbitration, if any, will
have a material adverse effect on the Company's financial position. Due,
however, to the uncertainty of the outcome of the second arbitration, no income
or expenses relating to the $1,750,000 award in the first arbitration has been
recognized in the financial statements of the Company for the twenty-six weeks
ended July 2, 1994.
Primarily as a result of such sale of assets by AMG Holdings to Danka, the
Company's cash position, including marketable securities, at July 2, 1994, the
end of the second fiscal quarter of fiscal 1994, was approximately $54,324,000.
Cash not required for the immediate needs of the Company has been temporarily
invested in high grade marketable securities. The Company is investigating
opportunities for the use of these funds not used to purchase Class A Common
Stock pursuant to the Offer. See "THE OFFER -- Purpose and Effects of the
Offer."
16
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following selected financial data for each of the twenty-six weeks ended
July 2, 1994 and July 3, 1993 (unaudited) are derived from the unaudited
consolidated financial statements of Arden Group, Inc. and subsidiaries set
forth in the Company's Quarterly Report on Form 10-Q for the quarter ended July
2, 1994. In the opinion of management, all adjustments considered necessary for
a fair statement of the results for the periods, which consisted only of normal
recurring accruals, have been made. Results for the twenty-six weeks are not
necessarily indicative of the results for the entire year. The following
selected financial data for each of the years ended January 1, 1994 and January
2, 1993 were derived from the audited consolidated financial statements of Arden
Group, Inc. and subsidiaries included in the Company's Annual Report on Form
10-K for the year ended January 1, 1994. The data should be read in conjunction
with, and is qualified in its entirety by reference to, such audited
consolidated financial statements and their related notes. The foregoing reports
may be obtained from the Commission or the Company in the manner specified under
"AVAILABLE INFORMATION" below.
<TABLE>
<CAPTION>
UNAUDITED TWENTY SIX WEEKS
---------------------------- FIFTY TWO FIFTY THREE
JULY 2, 1994 JULY 3, 1993 WEEKS 1993 WEEKS 1992
------------- ------------- ------------- -------------
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................................................ $ 124,776 $ 122,130 $ 246,912 $ 250,367
Income from continuing operations, net of income
taxes (1)........................................... 2,214 1,650 3,838 3,868
Income from discontinued operations, net of income
taxes (1)........................................... -- 1,001 2,836 615
Net income........................................... $ 2,214 $ 2,651 $ 6,674 $ 4,483
Earnings per share of common stock:
Income from continuing operations.................. $ 1.37 $ 1.02 $ 2.38 $ 2.40
Income from discontinued operations................ -- .62 1.76 .38
Net income......................................... $ 1.37 $ 1.64 $ 4.14 $ 2.78
Weighted average shares outstanding.................. 1,612,721 1,612,724 1,612,724 1,612,724
Ratio of earnings from continuing operations to fixed
charges (2)......................................... 2.17 1.92 2.03 1.92
BALANCE SHEET DATA (AT PERIOD END):
Total assets......................................... $ 104,600 $ 108,490 $ 112,471 $ 107,226
Cash and marketable securities....................... 54,324 24,749 62,564 20,954
Working capital...................................... 50,911 16,840 51,549 20,588
Total indebtedness................................... 33,858 44,972 44,936 46,353
Stockholders' equity................................. 70,742 63,518 67,535 60,873
Book value per common share.......................... 43.86 39.39 41.88 37.75
<FN>
NOTES TO SUMMARY HISTORICAL
CONSOLIDATED FINANCIAL INFORMATION
(1) In May 1994, the Company sold all of the outstanding shares of the capital
stock of GPS Pool Supply. See "BUSINESS AND RECENT DEVELOPMENTS" above. The
foregoing Summary Historical Consolidated Financial Information has not
been restated to exclude the operations of GPS Pool Supply.
(2) The ratios of earnings from continuing operations to fixed charges were
computed by dividing earnings from continuing operations before fixed
charges and income taxes by the fixed charges. Earnings consist of income
from continuing operations net of income taxes, to which has been added
fixed charges and income taxes. Fixed charges consist of interest expense
and minimum rent expense on noncancellable leases.
</TABLE>
17
<PAGE>
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following summary unaudited consolidated pro forma financial information
gives effect to the purchase of 400,000 shares of Class A Common Stock pursuant
to the Offer, based on certain assumptions described in the Notes to Summary
Unaudited Consolidated Pro Forma Financial Information. The pro forma income
statement data gives effect to the purchase of shares of Class A Common Stock
pursuant to the Offer as if it had occurred on January 2, 1994 and January 3,
1993. The summary unaudited consolidated pro forma financial information should
be read in conjunction with the summary consolidated historical financial
information and does not purport to be indicative of the results that would
actually have been obtained had the purchase of the shares of Class A Common
Stock pursuant to the Offer been completed at the dates indicated or the results
that may be obtained in the future.
<TABLE>
<CAPTION>
TWENTY SIX WEEKS JULY 2, 1994 FIFTY TWO WEEKS 1993
-------------------------------- --------------------------------
PRO FORMA PRO FORMA
UNAUDITED ASSUMING 400,000 ASSUMING 400,000
HISTORICAL SHARES ARE ACQUIRED HISTORICAL SHARES ARE ACQUIRED
----------- ------------------- ----------- -------------------
(IN THOUSANDS EXCEPT RATIOS AND PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales....................................... $ 124,776 $ 124,776 $ 246,912 $ 246,912
Income from continuing operations, net of
income taxes............................... 2,214 1,990 3,838 3,470
Income from discontinued operations, net of
income taxes............................... -- -- 2,836 2,836
Net income.................................. $ 2,214 $ 1,990 $ 6,674 $ 6,306
Earnings per share of common stock:
Income from continuing operations......... $ 1.37 $ 1.64 $ 2.38 $ 2.86
Income from discontinued operations....... -- -- 1.76 2.34
Net income................................ $ 1.37 $ 1.64 $ 4.14 $ 5.20
Weighted average shares
outstanding................................ 1,612,721 1,212,721 1,612,724 1,212,724
Ratio of earnings from continuing operations
to fixed charges (3)....................... 2.17 2.05 2.03 1.93
BALANCE SHEET DATA (AT PERIOD END):
Total assets................................ $ 104,600 $ 83,650 $ 112,471 $ 91,521
Cash and marketable securities.............. 54,324 33,374 62,564 41,614
Working capital............................. 50,911 29,961 51,549 30,599
Total indebtedness.......................... 33,858 33,858 44,936 44,936
Stockholders' equity........................ 70,742 49,792 67,535 46,585
Book value per common share................. 43.86 41.06 41.88 38.41
<FN>
NOTES TO SUMMARY UNAUDITED
CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(1) The information assumes that 400,000 shares of Class A Common Stock are
purchased at $52.00 per share with the purchase being financed out of
working capital. Such acquisitions were assumed to have occurred at the
beginning of the periods presented. The pro forma Income and Net income
amounts reflect a reduction in the amount of interest income earned on an
amount equal to the aggregate cash required to make such acquisitions.
There can be no assurance that the Company will purchase, pursuant to the
Offer, 400,000 shares of Class A Common Stock.
(2) Estimated expenses directly related to the Offer are charged against
additional paid-in capital.
(3) The ratios of earnings from continuing operations to fixed charges were
computed by dividing earnings from continuing operations before fixed
charges and incomes taxes by the fixed charges. Earnings consist of income
from continuing operations net of income taxes, to which has been added
fixed charges and income taxes. Fixed charges consist of interest expense
and minimum rent expense on noncancellable leases.
</TABLE>
18
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Commission relating to the Company's business and financial
condition. Pursuant to the regulations adopted by the Commission under the
Exchange Act, the Company has also filed with the Commission a Schedule 13E-4
Issuer Tender Offer Statement, furnishing certain additional information with
respect to the Offer. Such material may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at its regional offices located at
Kluczynski Federal Building, Suite 1400, 500 West Madison Avenue, Chicago,
Illinois 60661 and 7 World Trade Center, New York, New York 10058. Copies of
such material may also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Company's Schedule 13E-4 may not be available at the Commission's
regional offices.
Detailed information regarding the Company is available in the Company's
Annual Report on Form 10-K for the fiscal year ended January 1, 1994 and in the
Company's Quarterly Report on Form 10-Q for the quarter ended July 2, 1994 which
were filed with the Commission pursuant to Section 13 of the Exchange Act, and
in its definitive proxy materials for the Annual Meeting of Stockholders held on
June 28, 1994, filed with the Commission pursuant to Section 14 of the Exchange
Act. The Company will provide without charge to each person to whom this
Offering Statement is delivered, upon request of any such person, a copy of any
or all of the foregoing documents (not including, however, the exhibits to such
documents). Written or telephone requests should be directed to Ernest T.
Klinger, Chief Financial Officer and Vice President Finance and Administration,
Arden Group, Inc., 2020 South Central Avenue, Compton, California 90220 ((310)
638-2842).
MISCELLANEOUS
The Offer is not being made to, nor will the Company accept, tenders from
owners of shares of Class A Common Stock in any jurisdiction in which the Offer
or its acceptance would not be in compliance with the laws of such jurisdiction.
The Company is not aware of any jurisdiction where the making of the Offer or
the tender of shares of Class A Common Stock would not be in compliance with
applicable law. If the Company becomes aware of any jurisdiction where the
making of the Offer or the tender of shares of Class A Common Stock is not in
compliance with any applicable law, the Company will make a good faith effort to
comply with such law. If, after such good faith effort, the Company cannot
comply with such law, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of shares of Class A Common Stock
residing in such jurisdiction. In any jurisdiction in which the securities, blue
sky or other laws require the Offer to be made by a licensed broker or dealer,
the Offer will be deemed to be made on the Company's behalf by one or more
registered brokers or dealers licensed under the laws of such jurisdiction.
ARDEN GROUP, INC.
August 17, 1994
19
<PAGE>
Any questions or requests for assistance may be directed to the Information
Agent at the telephone number and address listed below. Requests for additional
copies of this Offering Statement, the Letter of Transmittal or other tender
offer materials may be directed to the Information Agent and such copies will be
furnished promptly at the Company's expense. Stockholders may also contact their
local broker, dealer, commercial bank or trust company for assistance concerning
the Offer.
INFORMATION AGENT:
Beacon Hill Partners, Inc.
90 Broad Street
New York, New York 10004
Attention: John G. Grau
For telephone inquiries:
(212) 742-1318
20
<PAGE>
LETTER OF TRANSMITTAL
TO ACCOMPANY SHARES OF CLASS A COMMON STOCK OF
ARDEN GROUP, INC.
TENDERED PURSUANT TO THE OFFERING STATEMENT
DATED AUGUST 17, 1994
(PLEASE READ THE INSTRUCTIONS CAREFULLY)
IMPORTANT: THIS LETTER OF TRANSMITTAL IS TO BE COMPLETED ONLY BY THOSE
STOCKHOLDERS WHO ARE TENDERING SHARES OF CLASS A COMMON STOCK IN RESPONSE TO THE
OFFER. STOCKHOLDERS WISHING TO RETAIN THE SHARES PRESENTLY HELD BY THEM NEED NOT
DO ANYTHING IN RESPONSE TO THE OFFER.
This Letter of Transmittal (or a facsimile hereof) and all other documents
and instruments required hereby should be sent or delivered to the Depositary at
one of the addresses set forth below. Tenders must be received by the Depositary
prior to 5:00 P.M. local time in New York City, on September 15, 1994, unless
the Offer is extended. All capitalized terms used and not otherwise defined
herein shall have the meaning therefor set forth in the Offering Statement.
<TABLE>
<CAPTION>
MAIL OR OVERNIGHT DELIVERY: HAND DELIVERY: FACSIMILE:
- ------------------------------ ------------------------------ ------------------------------
<S> <C> <C>
City National Bank City National Bank City National Bank
c/o CST Corporate Trust Department Beverly Hills, California
2 Broadway 120 South Spalding Drive (310) 550-5875
19th Floor Suite 408 or
New York, New York 10004 Beverly Hills, California New York, New York
90212 (212) 509-5150
</TABLE>
Gentlemen:
Pursuant to the terms and subject to the conditions of the Offer of Arden
Group, Inc. (the "Company") to holders of its Class A Common Stock, par value
$.25 per share (the "Class A Common Stock"), as set forth in the Offering
Statement dated August 17, 1994 (the "Offering Statement") and this Letter of
Transmittal (which together constitute the "Offer"), receipt of which are hereby
acknowledged, the signer of this Letter of Transmittal (the "Signer") hereby
accepts the Offer and tenders that number of shares of Class A Common Stock
listed in this Letter of Transmittal for cash at the rate of $52.00 for each and
every share tendered.
The Signer understands that if more than 400,000 shares are tendered in the
Offer, then the Company shall purchase 400,000 shares on a pro rata basis among
all stockholders tendering shares in the Offer according to the number of shares
of Class A Common Stock tendered by each.
Subject to the terms and conditions set forth in the Offering Statement and
in this Letter of Transmittal, the Signer hereby sells, assigns and transfers to
the Company all of the shares of Class A Common Stock that are being tendered
hereby and that are accepted by the Company for purchase and hereby irrevocably
constitutes and appoints the Company the true and lawful agent and
attorney-in-fact of the Signer with respect to such shares, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to cause the shares of Class A Common Stock tendered
and accepted to be transferred on the books of the Company and to exercise all
rights and privileges of ownership with respect thereto.
The Signer hereby represents that the Signer has full power and authority to
tender, exchange, sell, assign and transfer the shares tendered hereby and that
the Company will acquire absolute and unencumbered title thereto, free and clear
of all liens, restrictions, charges and encumbrances and not subject to any
adverse claim when the same are accepted by the Company. The Signer will, upon
request, execute and deliver any additional documents deemed by the Company to
be necessary or desirable to complete the sale, assignment and transfer of the
shares tendered hereby.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the Signer and any obligation of the Signer hereunder
shall be binding upon the heirs, personal representatives, successors and
assigns of the Signer.
<PAGE>
The undersigned understands that tenders of shares pursuant to any one of
the procedures described in the Offer and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer, including the undersigned's representation and warranty that (i) the
undersigned has a net long position in the shares being tendered within the
meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, and (ii) the tender of such shares complies with Rule 14e-4. The
Company's acceptance for payment of shares tendered pursuant to the Offer will
constitute a binding agreement between the Signer and the Company upon the terms
and subject to the conditions of the Offer.
The Signer recognizes that under certain circumstances set forth in the
Offering Statement, the Company may not be required to acquire any or all of the
shares tendered hereby. In such event, the Signer understands that a certificate
for any shares not acquired will be returned to the Signer at the address shown
in the Letter of Transmittal unless otherwise indicated in the box entitled
"Special Delivery Instructions."
IMPORTANT: THIS LETTER OF TRANSMITTAL MUST BE SIGNED BY EACH STOCKHOLDER
TENDERING SHARES OF CLASS A COMMON STOCK IN RESPONSE TO THE OFFER. SIGNATURE
GUARANTEES MAY BE REQUIRED FOR CERTAIN TENDERS OF CLASS A COMMON STOCK UNDER THE
OFFER. SEE INSTRUCTIONS 1 AND 5.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DESCRIPTION OF SHARES TENDERED
AND ELECTION TO TENDER IN OFFER
CERTIFICATE(S) TENDERED:
(ATTACH ADDITIONAL LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------
COLUMN 1 COLUMN 2 COLUMN 3 COLUMN 4
TOTAL NUMBER TOTAL NUMBER
OF SHARES OF SHARES
NAME AND ADDRESS OF CERTIFICATE REPRESENTED TENDERED
REGISTERED HOLDER NUMBER(S) BY IN OFFER
CERTIFICATE(S)
- ------------------------------------------------------------------------------------------------------------
(Please print name and address)
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
Signature guarantees may be required. See Instructions 1 and 5.
THE ONLY SHARES OF CLASS A COMMON STOCK WHICH SHALL BE DEEMED TENDERED IN THE OFFER ARE THOSE SHARES
DESCRIBED IN COLUMN 4 ABOVE.
- ------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<S> <C> <C>
COMPLETE IF APPLICABLE. SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 7 AND 8)
/ / Check here if this Letter of Transmittal and (To be completed ONLY if check or certificate(s) for
stock certificate(s) are being delivered shares of Class A Common Stock not tendered are to be
pursuant to a letter, telex, telegram or Letter sent to someone other than the Signer or to the
of Transmittal delivered prior to the date Signer at an address other than that shown under
hereof. "Description of Shares Tendered and Election to
/ / Check here if stock certificate(s) for the Tender in Offer.")
shares tendered by this Letter of Transmittal Mail check/certificates
are not being transmitted herewith, in which (circle as appropriate) to:
case the box below entitled "Guarantee of Name: -------------------------------------
Delivery" must be completed. (Please Print)
Address: -----------------------------------
--------------------------------------------
(Include Zip Code)
-------------------------------------------------------
(Tax Identification or Social Security Number)
</TABLE>
<TABLE>
<S> <C> <C>
GUARANTEE OF DELIVERY SPECIAL ISSUANCE INSTRUCTIONS
(TO BE USED ONLY IF CERTIFICATE(S) IS NOT TRANSMITTED (SEE INSTRUCTIONS 1, 5, 7 AND 8)
HEREWITH)
(SEE INSTRUCTION 2)
THE UNDERSIGNED (To be completed ONLY if check or certificate(s) for
- ------ A member of a registered national securities shares of Class A Common Stock not tendered are to be
exchange or the National Association of issued in the name of someone other than the
Securities Dealers, Inc. Signer.)
- ------ A commercial bank, savings and loan or trust Issue check/certificates
company having an office in the United States (circle as appropriate) to:
guarantees to deliver to the Depositary certificate(s) Name: -------------------------------------
for the shares of Class A Common Stock tendered by (Please Print)
this Letter of Transmittal in proper form for Address: -----------------------------------
transfer within five business days after the date of --------------------------------------------
receipt of this Letter of Transmittal. (Include Zip Code)
- -------------------------------------------- -------------------------------------------------------
(Firm -- Please Print) (Tax Identification or Social Security Number)
- -------------------------------------------------------
Address (including Area Code and Phone No.)
- -------------------------------------------------------
(Authorized Signature and Title) (Date)
</TABLE>
3
<PAGE>
IMPORTANT. SIGN HERE.
(NOTE: SIGNATURE(S) MUST BE GUARANTEED
IF REQUIRED BY INSTRUCTIONS 1 OR 5)
- -------------------------------------------------------
- -------------------------------------------------------
Signature(s) of Owner(s)
Dated: ----------------------------------------------
(Must be signed by registered holder(s) exactly as
name(s) appear(s) on stock certificate(s) or on a
security position listing or by person(s) authorized to
become registered holder(s) by certificate(s) and
documents transmitted herewith. If signature is by
trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity,
please set forth full title and see Instruction 5.)
Name(s) --------------------------------------------
----------------------------------------------------
(Please Print)
Capacity --------------------------------------------
Address ---------------------------------------------
----------------------------------------------------
----------------------------------------------------
(Include Zip Code)
Area Code and Telephone No. ------------------------
Tax Identification or
Social Security Number ------------------------------
(ALSO COMPLETE FORM W-9)
GUARANTEE OF SIGNATURES(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature --------------------------------
Name of Firm ---------------------------------------
Dated: ----------------------------------------------
4
<PAGE>
INSTRUCTIONS
(FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER)
1. GUARANTEE OF SIGNATURES. Signatures on Letters of Transmittal (or
facsimiles thereof) must be guaranteed by an Eligible Institution (as defined
below) that is also a member of a Medallion Program as recognized by The
Securities Transfer Association Inc. in cases where shares are tendered in the
Offer by someone other than the registered holder(s) of the tendered shares or
by a registered holder of shares who has completed either the box entitled
"Special Issuance Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. In order to
participate in the Offer and receive cash, a stockholder must properly complete
and duly execute (with signatures guaranteed if required by Instruction 1 or 5)
the Letter of Transmittal (or a duplicate copy thereof) and mail or deliver it,
together with the certificate(s) representing the shares of Class A Common Stock
to be tendered and any other required documents, to the Depositary. The
Depositary must receive the foregoing documents and instruments prior to the
Expiration Date of the Offer as defined in the Offering Statement (the
"Expiration Date").
Stockholders whose certificates are not immediately available may validly
tender shares if (a) the certificates representing the shares of Class A Common
Stock to be exchanged have been deposited with a commercial bank, savings and
loan or trust company having an office in the United States or a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. (an "Eligible Institution"), (b) a
properly completed and duly executed Letter of Transmittal (or a duplicate copy
thereof), with the box under the caption "Guarantee of Delivery" properly
completed and duly executed by such Eligible Institution, has been received by
the Depositary prior to the Expiration Date, and (c) the Depositary, in fact,
receives such certificates and any other required documents in proper form for
transfer within five business days after the date on which the Letter of
Transmittal (or copy) is received by the Depositary.
If a stockholder cannot deliver certificate(s) and all other required
documents to the Depositary prior to the Expiration Date, such stockholder may
validly tender shares if (a) a properly completed and duly executed Letter of
Transmittal (or a duplicate copy thereof), accompanied by the certificate(s)
representing the shares of Class A Common Stock to be tendered and any other
required documents, in proper form for transfer, has been deposited prior to the
Expiration Date with an Eligible Institution, (b) the Depositary has received
from such Eligible Institution, prior to the Expiration Date, a letter (whether
by facsimile or otherwise), telex or telegram setting forth the name of the
tendering stockholder, the number of shares tendered, the name in which the
shares are registered and the certificate number(s) of the certificate(s)
tendered and guaranteeing delivery of such Letter of Transmittal (or copy), such
certificate(s) and any other required documents (in which case, subject to
subsequent compliance with clause (c) below, the shares to which the letter (or
facsimile thereof), telex or telegram relates shall be deemed properly tendered
as of the date of receipt of the letter, telex or telegram) and (c) the
Depositary, in fact, receives such Letter of Transmittal (or copy), such
certificate(s) and such other required documents within five business days after
the date on which the letter (or facsimile thereof), telex or telegram is
received by the Depositary.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of shares of Class A Common Stock tendered will be
determined by the Company, in its sole discretion, and such determinations will
be final and binding. The Company reserves the right to reject any and all
tenders determined by it not to be in proper form or the acceptance for exchange
of which may, in the opinion of the Company's counsel, be unlawful. The
Company's interpretation of the terms and conditions of the Offer (including the
Letter of Transmittal and Instructions thereto) will also be final and binding.
The Company reserves the right (without any obligation to do so) to waive any
irregularities or defects in any tender. Unless waived by the Company,
irregularities and defects must be cured prior to the Expiration Date. The
Company and the Depositary are not under any duty to give notification of any
irregularities or defects and shall not incur any liability for failure to give
any such notification. Tenders will not be deemed to have been made until such
irregularities or defects have been cured or waived. Any tender (including the
Letter of Transmittal and stock certificates) that is not properly completed and
executed, and as to which irregularities or defects are not cured or waived,
will be returned by the Depositary to the tendering stockholder as soon as
practicable.
5
<PAGE>
The method of delivery of certificate(s) for Class A Common Stock and all
other documents is at the sole election and risk of each stockholder. If
delivery is by mail, it is recommended that registered mail, return receipt
requested, be used, and that proper insurance be obtained.
No alternative, conditional or contingent tenders will be accepted. All
tendering stockholders, by execution of this Letter of Transmittal, waive any
rights to receive any notice of the acceptance of their tender.
3. INADEQUATE SPACE. If the space provided herein is inadequate for
listing of stock certificates, the certificate numbers and the numbers of shares
may be listed on a separate schedule attached hereto.
4. PARTIAL TENDERS. If fewer than all the shares evidenced by any
certificate submitted are to be tendered, fill in the number of shares which are
to be tendered in Column 4 of the box entitled "Description of Shares Tendered
and Election to Tender in Offer." New certificate(s) for the remainder of the
shares which are evidenced by your old certificate(s) will be sent to you,
unless otherwise provided in the appropriate box on the Letter of Transmittal,
as soon as practicable after the tender has been accepted. The only shares of
Class A Common Stock which shall be deemed tendered in the Offer are those
shares listed in Column 4 of the box entitled "Description of Shares Tendered
and Election to Tender in Offer."
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the
certificate(s) tendered hereby, the signature must correspond exactly with the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
If any certificates tendered hereby are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any tendered shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If shares are tendered in the Offer by someone other than the registered
holder, or the check in payment for tendered shares, or the certificate
representing the balance of any shares of Class A Common Stock not tendered or
accepted, is to be delivered to an address different from that appearing on the
Company's stock transfer books or to someone other than the Signer, the tendered
certificate(s) must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered owner or
owners appear on the certificate(s) or by his, her or its or their qualified
legal representatives, and the signatures on such certificate(s) or stock
powers, and on this Letter of Transmittal, must be guaranteed as described in
Instruction 1.
If this Letter of Transmittal or any certificate(s) or stock powers are
signed by trustees, executors, administrators, guardians or others acting in a
fiduciary capacity, in cases where such fiduciaries are not named as such on the
certificate(s), attorneys-in-fact, officers of corporation or others acting in a
representative capacity, such persons should so indicate when signing, and
proper evidence satisfactory to the Company of their authority so to act must be
submitted.
6. DELIVERY OF CHECK. Delivery of a check will be made as soon as
practicable after acceptance by the Company of shares of Class A Common Stock
tendered. Any check(s) will be issued in the name of the registered owner(s) of
the Class A Common Stock and mailed to him or her or them, unless otherwise
provided in the appropriate box in this Letter of Transmittal. In the case of
tenders by telegram, telex, facsimile or letter of guarantee, any check(s) will
not be delivered until the Letters of Transmittal, the certificate(s)
representing tendered shares relating to such guarantees and all other required
documents have been received by the Depositary.
7. STOCK TRANSFER TAXES. The Company will pay all stock transfer taxes, if
any, applicable to the transfer and sale to it of shares tendered and accepted
pursuant to the Offer. If, however, the issuance of a check is to be made in the
name of any person other than the registered holder, the amount of any stock
transfer taxes (whether imposed on the registered holder or such person) payable
on account of the transfer will be billed
6
<PAGE>
directly to the person(s) signing this Letter of Transmittal, and such amount
must be paid to the Company or the Depositary (or the transferee must establish
to the satisfaction of the Company that such taxes have been paid or need not be
paid) before a check will be issued.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
8. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the
purchase price of any shares of Class A Common Stock purchased is to be issued
in the name of, and/or any shares of Class A Common Stock not tendered or not
purchased are to be returned to, a person other than the person(s) signing this
Letter of Transmittal or if the check and/or any certificates for Class A Common
Stock not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to an address other than that
shown above in the box captioned "Description of Shares Tendered and Election to
Tender in Offer," then the boxes captioned "Special Issuance Instructions"
and/or "Special Delivery Instructions" on this Letter of Transmittal should be
completed.
9. SUBSTITUTE FORM W-9. A stockholder tendering in the Offer is required
to provide the Depositary with a correct Taxpayer Identification Number ("TIN")
on Substitute Form W-9, which is provided under "IMPORTANT TAX INFORMATION"
below, and to indicate that the stockholder is not subject to backup withholding
by signing the Substitute Form W-9. If the tendering stockholder is subject to
backup withholding, then item (2) of Part 2 of the Substitute Form W-9 should be
crossed out as therein instructed. Failure to provide the information on the
form may subject the tendering stockholder to a 31% federal income tax
withholding on the cash received in payment for shares of the Class A Common
Stock. The box in Part 3 of the form may be checked if the tendering stockholder
has not been issued a TIN and has applied for a number or intends to apply for a
number in the near future. If the box in Part 3 is checked and the Depositary is
not provided with a TIN by the time of payment, the Depositary will withhold 31%
on all payments made prior to the time a TIN is provided the Depositary. Foreign
stockholders should communicate with the Company or the Depositary regarding
applicable tax certification procedures.
10. REQUESTS FOR ADDITIONAL COPIES. Questions and requests for additional
copies of the Offering Statement and this Letter of Transmittal may be obtained
from the Information Agent at the address or telephone number therefor set forth
on the back cover of the Offering Statement.
IMPORTANT TAX INFORMATION
Under federal income tax law, a stockholder whose tendered shares of Class A
Common Stock are accepted for purchase is required to provide the Depositary
with his, her or its correct taxpayer identification number ("TIN") on
Substitute Form W-9 below and to certify that the TIN provided on Substitute
Form W-9 is correct (or that such stockholder is awaiting a TIN). If such
stockholder is an individual, the TIN is his or her social security number. If
the Depositary is not provided with the correct TIN, the Internal Revenue
Service may subject the stockholder or other payee to a $50 penalty. In
addition, payments that are made to such stockholder or other payee with respect
to Class A Common Stock purchased pursuant to the Offer may be subject to 31%
backup withholding.
A stockholder who does not have a TIN may check the box in Part 3 of the
Substitute Form W-9 if the stockholder has applied for a number or intends to
apply for a number in the near future. A stockholder who checks the box in Part
3 in lieu of furnishing his or her TIN should furnish the Depositary with his or
her TIN as soon as it is received. If the box in Part 3 is checked and the
Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all payments made prior to the time a TIN is provided the
Depositary.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to backup withholding. In order for a
foreign individual to qualify as an exempt recipient, that stockholder must
submit a statement, signed under penalties of perjury, attesting to that
individual's exempt status (Form W-8). Forms for such statements can be obtained
from the Depositary. Stockholders are urged to consult
7
<PAGE>
their own tax advisors to determine whether they are exempt from these backup
withholding and reporting requirements. See also the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
the gross proceeds payable to the stockholder pursuant to the Offer. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained.
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the tendered
shares. If such shares are registered in more than one name or not registered in
the name of the actual owner, consult the enclosed Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9 for additional
guidelines on which number to report.
<TABLE>
<S> <C> <C>
PART 1 -- PLEASE PROVIDE YOUR TIN Social Security Number
IN THE BOX AT RIGHT AND CERTIFY OR
---------------------------------
SUBSTITUTE BY SIGNING AND DATING BELOW Employer Identification Number
FORM W-9 PART 2 -- Certification -- Under penalties of perjury, I certify
that:
(1) The number shown on this form is my correct Taxpayer
Identification Number AND
(2) I am not subject to backup withholding either because I have
DEPARTMENT OF THE TREASURY not been notified by the Internal Revenue Service (IRS) that I am
subject to backup withholding as a result of failure to report
all interest or dividends, or the IRS has notified me that I am
no longer subject to backup withholding.
INTERNAL REVENUE SERVICE
PART 3 -- Awaiting TIN / /
Certification Instructions -- You must cross out item (2) above if you have been notified by the IRS
that you are subject to backup withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to backup withholding, do not
cross out item (2).
Signature ---------------------------------------------------------------------------------- Date
--------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE OR TO BE MADE TO YOU PURSUANT TO THE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
8
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYOR. Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payor.
<TABLE>
<CAPTION>
- -------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
- -------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor
account) is the only contributor,
the minor(1)
6. Account in the name of The ward, minor, or
guardian or committee incompetent person(3)
for a designated ward,
minor, or incompetent
person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust The actual owner(1)
account that is not a
legal or valid trust
under State law
- -------------------------------------------------------
- -------------------------------------------------------
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF --
<S> <C>
- -------------------------------------------------------
8. Sole proprietorship The owner(4)
account
9. A valid trust, estate, Legal entity (Do not
or pension trust furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated
in the account title)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
- -------------------------------------------------------
<FN>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the individual name of the owner but the business or "doing business as"
name may also be entered. Either the social security number or the employer
identification number may be used.
(5) List first and circle the name of the valid trust, estate, or pension trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
</TABLE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan ("IRA"), or a custodial account under 403(b)(7).
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- - A foreign government, or any political subdivision of a foreign government,
agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A dealer in securities or commodities required to register in the U.S. or a
possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - A trust exempt from tax under Section 644 or described in Section 4947.
- - An entity registered at all times during the tax year under the Investment
Company Act of 1940.
- - A foreign central bank of issue.
- - A middleman known in the investment community as a nominee or listed in the
most recent publication of the American Society of Corporate Secretaries,
Inc., Nominee List.
- - A futures commission merchant registered with the Commodity Futures Trading
Commission.
Payments of DIVIDENDS AND PATRONAGE DIVIDENDS not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S. and
that have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
Payments of INTEREST not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. NOTE: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payor's trade or business and you have not provided your
correct taxpayer identification number to the payor.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in Section 6049(b)(5) to nonresident aliens.
- - Payments on tax-free covenant bonds under Section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid by you.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYOR, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see Sections 6041, 6041A(a), 6042, 6044, 6045, 6049,
6050A, and 6050N, and the regulations thereunder.
PRIVACY ACT NOTICE--Section 6109 requires you to give taxpayer identification
numbers to payors who must file information returns with the IRS to report
interest, dividends, and certain other income paid to you, mortgage interest you
paid, the acquisition or abandonment of secured property, cancellation of debt,
or contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. Payors must be
given the numbers whether or not you are required to file tax returns. Payors
must generally withhold 31% of certain taxable payments to a payee who does not
furnish a taxpayer identification number to payor. Certain penalties may also
apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your correct taxpayer identification number to a requester, you are
subject to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS.--If the requester discloses or uses TINs in violation of
Federal law, the requester may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
A
ARDEN GROUP, INC. August 17, 1994
To Our Stockholders:
Arden Group, Inc. (the "Company") is offering to acquire up to an aggregate
of 400,000 shares of its Class A Common Stock for cash at the rate of $52.00 per
share (the "Offer"). If more than 400,000 shares of Class A Common Stock are
tendered pursuant to the Offer, the Company will acquire 400,000 shares tendered
on a pro rata basis from each stockholder tendering in the Offer (with
adjustments to avoid purchases of fractional shares) based on the number of
shares tendered by each stockholder. The Offer is not conditional upon any
minimum number of shares being tendered.
The Offer, including the purposes, effects, conditions, tax consequences and
advantages and disadvantages thereof and certain information concerning the
Company, are explained in the enclosed Offering Statement, Letter of Transmittal
and the Company's Form 10-Q for the fiscal quarter ended July 2, 1994.
Each stockholder of the Company may elect, in its, his or her sole
discretion, not to tender any shares or to tender some or all of its, his or her
shares.
The Offer has relative advantages and disadvantages and those advantages and
disadvantages may vary from stockholder to stockholder. As a consequence, each
stockholder is urged to examine carefully the enclosed Offering Statement,
Letter of Transmittal and Form 10-Q before making a decision with respect to the
Offer.
If you decide not to participate in the Offer, you do NOT need to take any
action.
If you decide to participate in the Offer, the instructions on how to tender
shares are explained in detail in the enclosed materials.
I have informed the Company that I do not intend to tender any shares in the
Offer. The Company does not know whether any of the other officers, directors or
affiliates of the Company will tender shares in the Offer. Neither the Company
nor its Board of Directors makes any recommendation to any stockholder as to
whether to tender or to refrain from tendering all or any shares in the Offer.
Very truly yours,
[SIG]
Bernard Briskin
Chairman of the Board,
President and Chief Executive Officer
<PAGE>
OFFER TO PURCHASE FOR CASH
400,000 SHARES OF CLASS A COMMON STOCK
OF
ARDEN GROUP, INC.
AT
$52.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 5:00 P.M., LOCAL TIME IN NEW YORK CITY,
ON SEPTEMBER 15, 1994, UNLESS THE OFFER IS EXTENDED.
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Arden Group, Inc., a Delaware corporation (the
"Company"), to act as Information Agent in connection with the Company's offer
to purchase up to 400,000 shares of Class A Common Stock, par value $.25 per
share (the "Class A Common Stock"), at a price of $52.00 per share, net to the
seller in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offering Statement, dated August 17, 1994 (the
"Offering Statement"), and in the related Letter of Transmittal (which together
constitute the "Offer") enclosed herewith. Holders of shares of Class A Common
Stock whose certificates for such shares (the "Share Certificates") are not
immediately available or who cannot deliver their Share Certificates and all
other required documents to City National Bank (the "Depositary") prior to the
Expiration Date (as defined in the Offering Statement), must tender their shares
of Class A Common Stock according to the guaranteed delivery procedures set
forth in the Offering Statement and Letter of Transmittal.
Please furnish copies of the enclosed materials to those of your clients for
whose accounts you hold shares of Class A Common Stock registered in your name
or in the name of your nominee.
The Offer is subject to the terms and conditions contained in the Offering
Statement. See the Offering Statement.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offering Statement, dated August 17, 1994.
2. Letter of Transmittal to tender shares of Class A Common Stock for
your use and for the information of your clients. Facsimile copies of the
Letter of Transmittal may be used to tender shares of Class A Common Stock.
3. A form of letter which may be sent to your clients for whose
accounts you hold shares of Class A Common Stock registered in your name or
in the name of your nominee, with space provided for obtaining such clients'
instructions with regard to the Offer.
4. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
5. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER, PRORATION PERIOD AND
WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., LOCAL TIME IN NEW YORK CITY, ON THURSDAY,
SEPTEMBER 15, 1994 UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal and any required signature guarantees, or other
required documents should be sent to the Depositary, and (ii) Share Certificates
representing the tendered shares of Class A Common Stock should be delivered to
the Depositary, all in accordance with the instructions set forth in the Letter
of Transmittal and the Offering Statement.
<PAGE>
If holders of shares of Class A Common Stock wish to tender, but it is
impracticable for them to forward their Share Certificates or other required
documents on or prior to the Expiration Date, a tender may be effected by
following the guaranteed delivery procedures specified in the Offering Statement
and Letter of Transmittal.
The Company will not pay any commissions or fees to any broker, dealer or
other person (other than the Depositary and the Information Agent, as described
in the Offering Statement) for soliciting tenders of shares of Class A Common
Stock pursuant to the Offer. The Company will, however, upon request, reimburse
you for customary clerical and mailing expenses incurred by you in forwarding
any of the enclosed materials to your clients. The Company will pay or cause to
be paid any stock transfer taxes payable on the transfer of shares of Class A
Common Stock to it, except as otherwise provided in Instruction 7 of the Letter
of Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed material may be obtained from, the
Information Agent at its address and telephone number set forth on the back
cover of the Offering Statement.
Very truly yours,
Beacon Hill Partners, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE COMPANY, THE DEPOSITARY OR THE INFORMATION
AGENT, OR ANY AFFILIATE OF ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO
MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF THEM IN CONNECTION WITH THE
OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
2
<PAGE>
OFFER TO PURCHASE FOR CASH
400,000 SHARES OF CLASS A COMMON STOCK
OF
ARDEN GROUP, INC.
AT
$52.00 PER SHARE
THE OFFER, PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 5:00 P.M., LOCAL TIME IN NEW YORK CITY,
ON SEPTEMBER 15, 1994, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offering Statement, dated August 17,
1994 (the "Offering Statement"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Arden Group, Inc., a
Delaware corporation (the "Company"), to purchase up to 400,000 shares of Class
A Common Stock, par value $.25 per share (the "Class A Common Stock"), of the
Company at a price of $52.00 per share, net to the seller in cash without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer. Holders of shares of Class A Common Stock whose certificates for such
shares (the "Share Certificates") are not immediately available or who cannot
deliver their Share Certificates and all other required documents to the
Depositary (as defined below) prior to the Expiration Date (as defined in the
Offering Statement), must tender their shares of Class A Common Stock according
to the guaranteed delivery procedures set forth in the Offering Statement and
Letter of Transmittal.
We are the holder of record of shares of Class A Common Stock held by us for
your account. A tender of such shares can be made only by us as the holder of
record and pursuant to your instructions. The Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender shares of
Class A Common Stock held by us for your account.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all shares of Class A Common Stock held by us for
your account pursuant to the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is $52.00 per share of Class A Common Stock net to
you in cash without interest thereon, upon the terms and subject to the
conditions set forth in the Offer.
2. The Offer is being made for 400,000 shares of Class A Common Stock.
3. The Offer is subject to the terms and conditions contained in the
Offering Statement. See the Offering Statement.
4. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 7 of the
Letter of Transmittal, stock transfer taxes on the purchase of shares of
Class A Common Stock by the Company pursuant to the Offer.
5. The Offer and withdrawal rights will expire at 5:00 P.M., local time
in New York City, on Thursday, September 15, 1994, unless the Offer is
extended.
6. Notwithstanding any other provisions of the Offer, payment for
shares of Class A Common Stock accepted for payment pursuant to the Offer
will in all cases be made only after timely receipt by City National Bank
(the "Depositary") of (a) certificates for such shares of Class A Common
Stock pursuant to the procedures set forth in the Offering Statement, (b)
the Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees, and (c) any other
documents required by the Letter of Transmittal. Accordingly, payment may
not be made to all tendering stockholders at the same time depending upon
when Share Certificates are actually received by the Depositary.
<PAGE>
If you wish to have us tender any or all of the shares of Class A Common
Stock held by us for your account, please so instruct us by completing,
executing, detaching and returning to us the instruction form set forth on the
next page of this letter. If you authorize the tender of your shares of Class A
Common Stock, all such shares will be tendered unless otherwise specified on the
next page of this letter. An envelope to return your instructions to us is
enclosed. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf prior to the expiration of the Offer.
The Offer is not being made (nor will tenders be accepted from or on behalf
of) holders of shares of Class A Common Stock residing in any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the securities, blue sky or other laws of such jurisdiction.
However, the Company may, in its discretion, take such action as it may deem
necessary to make the Offer in any jurisdiction and extend the Offer to holders
of shares of Class A Common Stock in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require the
Offer to be made by a licensed broker or dealer, the Offer will be deemed to be
made on behalf of the Company by one or more registered brokers or dealers that
are licensed under the laws of such jurisdiction.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFERING STATEMENT TO PURCHASE
FOR CASH 400,000 SHARES OF CLASS A COMMON STOCK
OF
ARDEN GROUP, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offering Statement dated August 17, 1994 and the related Letter of Transmittal
in connection with the offer by Arden Group, Inc., a Delaware corporation (the
"Company"), to purchase up to 400,000 shares of Class A Common Stock, par value
$.25 per share (the "Class A Common Stock"), of the Company at $52.00 per share
in cash.
This will instruct you to tender to the Company the number of shares of
Class A Common Stock indicated below (or if no number is indicated below, all
shares of Class A Common Stock) which are held by you for the account of the
undersigned, upon the terms and subject to the conditions set forth in the
Offer.
Number of shares of
Class A Common Stock to Be Tendered: ___________________ Shares
Date: ____________________________
SIGN HERE
Signature(s) ___________________________________________________________________
(Print Name(s)) ________________________________________________________________
(Print Address(es)) ____________________________________________________________
(Area Code and
Telephone Number(s)) ___________________________________________________________
(Taxpayer Identification or
Social Security Number(s)) _____________________________________________________
3
<PAGE>
ARDEN GROUP, INC.
<TABLE>
<S> <C> <C>
CONTACT: Ernest T. Klinger FULL NATIONAL and
Vice President & CFO FULL ANALYST WIRE
TELEPHONE: 310/638-2842
NASDAQ/NMS-ARDNA
</TABLE>
FOR IMMEDIATE RELEASE
LOS ANGELES, CA August 17, 1994 -- Arden Group, Inc. today announced a self
tender for up to 400,000 shares of its Class A Common Stock for cash at the rate
of $52.00 per share. The offer will commence on August 17, 1994 and expire at
5:00 p.m., local time in New York City, on September 15, 1994, unless the offer
is extended. The offer is not conditional upon any minimum number of shares
being tendered.
Arden Group, Inc. currently operates 12 Gelson's and Mayfair supermarkets in
Southern California.
Post Office Box 2256, Los Angeles, California 90051, (310) 638-2842
2020 South Central Avenue, Compton, California 90220, FAX: (310) 631-0950
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
INDEX TO FINANCIAL STATEMENTS, SUPPORTING SCHEDULES
AND SUPPLEMENTAL DATA
_______________
Page
Report of Independent Accountants.............................................28
Financial Statements:
Balance Sheets, January 1, 1994 and January 2, 1993........................29
Statements of Operations for fiscal years 1993, 1992 and 1991..............31
Statements of Stockholders' Equity for fiscal years 1993, 1992 and 1991....32
Statements of Cash Flows for fiscal years 1993, 1992 and 1991..............33
Notes to Financial Statements..............................................35
The financial statements include the Registrant's
subsidiary (Arden-Mayfair,Inc.) and the subsidiaries of
Arden-Mayfair, Inc.
Selected Quarterly Financial Data.............................................49
Financial Statement Schedules:
I Marketable Securities - Other Investments.............................50
II Amounts Receivable from Related Parties and Underwriters,.............51
Promoters, and Employees Other than Related Parties
for the fiscal years ended January 1, 1994, January 2,
1993 and December 28, 1991
V Property, Plant and Equipment for the fiscal years ended..............52
January 1, 1994, January 2, 1993 and December 28, 1991
VI Accumulated Depreciation, Depletion and Amortization of...............55
Property, Plant and Equipment for the fiscal years
ended January 1, 1994, January 2, 1993 and December
28, 1991
VIII Valuation and Qualifying Accounts and Reserves for the................58
fiscal years ended January 1, 1994, January 2, 1993 and
December 28, 1991
Schedules other than those listed above are omitted because of the absence of
the conditions under which they are required.
27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
------------
To the Stockholders of
Arden Group, Inc.
We have audited the consolidated financial statements and the financial
statement schedules of Arden Group, Inc. and its subsidiary listed in the index
on page 27 of this Form 10-K. These financial statements and financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Arden Group, Inc.
and its subsidiary at January 1, 1994 and January 2, 1993, and the consolidated
results of their operations and their cash flows for each of the three fiscal
years in the period ended January 1, 1994 in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedules referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information required to be included therein.
COOPERS & LYBRAND
Los Angeles, California
March 25, 1994
28
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
BALANCE SHEETS
(In Thousands, Except Per Share Data)
A S S E T S
<TABLE>
<CAPTION>
January 1, 1994 January 2, 1993
--------------- ---------------
<S> <C> <C>
Current assets:
Cash $ 39,526 $ 20,954
Marketable securities 23,038
Notes and accounts receivable, net 9,007 9,571
Inventories 10,902 11,885
Prepaid expenses 1,040 1,822
-------- --------
Total current assets 83,513 44,232
Notes and contracts receivable 459 1,123
Net assets of discontinued operations 36,175
Property for resale or sublease, at lower
of cost or market 1,877 1,333
Property, plant and equipment, at cost, less
accumulated depreciation and amortization 24,867 22,540
Other assets 1,755 1,823
-------- --------
Total assets $ 112,471 $ 107,226
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
January 1, 1994 January 2, 1993
--------------- ---------------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $ 13,221 $ 11,030
Other current liabilities 12,242 11,163
Current portion of long-term debt 6,501 1,451
-------- --------
Total current liabilities 31,964 23,644
Long-term debt 7,654 13,161
Deferred income taxes 1,926 4,762
Other liabilities 3,392 4,786
-------- --------
Total liabilities 44,936 46,353
-------- --------
Commitments and contingent liabilities
Stockholders' equity:
Common stock, Class A, $.25 par value;
1,608,708 and 3,484,070 shares issued,
respectively, including 339,300 and
2,214,762 treasury shares, respectively 402 871
Common stock, Class B, $.25 par value;
343,316 and 343,416 shares issued
and outstanding, respectively 86 86
Capital surplus 7,571 14,845
Notes receivable from officer/director (1,502) (1,490)
Retained earnings 64,731 67,416
-------- --------
71,288 81,728
Less, treasury stock, at cost 3,753 20,855
-------- --------
Total stockholders' equity 67,535 60,873
Total liabilities and
stockholders' equity $ 112,471 $ 107,226
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
Fifty-Two Fifty-Three Fifty-Two
Weeks Weeks Weeks
----------- ----------- -----------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Sales $ 246,912 $ 250,367 $ 250,643
Cost of sales 152,762 156,573 156,538
-------- -------- --------
Gross profit 94,150 93,794 94,105
Delivery, selling, general and administrative
expenses 87,739 86,011 89,867
-------- -------- --------
Operating income 6,411 7,783 4,238
Interest and dividend income 1,404 879 2,012
Other income (expense), net 89 132 (160)
Interest expense (1,486) (2,224) (4,127)
-------- ------- ---------
Income for continuing operations,
before income taxes 6,461 6,527 1,963
Income tax provision 2,623 2,659 788
-------- -------- --------
Income from continuing operations,
net of income taxes 3,838 3,868 1,175
Discontinued operations:
Income (loss) from operations, net of income
tax expense (benefits) of $1,496, $433
and $(915), respectively 2,216 615 (1,409)
Gain on sale of Telqutograph net assets
(net of income taxes of $424) 620
-------- -------- ---------
Net income (loss) $ 6,674 $ 4,483 $ (234)
======== ======== =========
Income per common share (computed on weighted
average common and common equivalent shares
outstanding):
Income from continuing operations $ 2.38 $ 2.40 $ .73
Income (loss) from discontinued operations 1.76 .38 (.88)
-------- -------- --------
Net income (loss) $ 4.14 $ 2.78 $ (.15)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
STATEMENTS OF STOCKHOLDERS' EQUITY
(In Thousands)
<TABLE>
<CAPTION>
Fifty-Two Fifty-Three Fifty-Two
Weeks Weeks Weeks
----------- ----------- -----------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Common stock, Class A:
Balance, beginning of year $ 871 $ 871 $ 846
Retirement of treasury stock
(1,875,462 shares) (469)
Exercise of stock option (100,000 shares) 25
-------- -------- --------
Balance, end of year $ 402 $ 871 $ 871
-------- -------- --------
Common stock, Class B:
Balance, beginning and end of year $ 86 $ 86 $ 86
-------- -------- --------
Capital surplus:
Balance, beginning of year $ 14,845 $ 14,845 $ 14,058
Retirement of treasury stock (7,274)
Exercise of stock option (100,000 shares) 787
-------- -------- --------
Balance, end of year $ 7,571 $ 14,845 $ 14,845
Notes receivable from officer/director:
Balance, beginning of year $ (1,490) $ (478) $ (468)
Loan to officer/director (1,000)
Amortization of present value discount (12) (12) (10)
-------- -------- --------
Balance, end of year $ (1,502) $ (1,490) $ (478)
-------- -------- --------
Retained earnings:
Balance, beginning of year $ 67,416 $ 62,933 $ 63,167
Net income (loss) for the year 6,674 4,483 (234)
Retirement of treasury stock (9,359)
-------- -------- --------
Balance, end of year $ 64,731 $ 67,416 $ 62,933
-------- -------- --------
Stockholders' equity before treasury stock $ 71,288 $ 81,728 $ 78,257
Cost of treasury stock 3,753 20,855 20,855
-------- -------- --------
Total stockholders' equity $ 67,535 $ 60,873 $ 57,402
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Fifty-Two Fifty-Three Fifty-Two
Weeks Weeks Weeks
----------- ----------- -----------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 248,654 $ 250,852 $ 251,080
Cash paid to suppliers and employees (235,732) (239,263) (244,519)
Interest received 1,168 1,048 2,071
Interest paid (1,586) 2,609) (3,922)
Income taxes (paid) refunded (3,895) 480 (2,216)
--------- --------- ---------
Net cash provided by operating activities 8,609 10,508 2,494
--------- --------- ---------
Cash flows from investing activities:
Proceeds from the sale of Telautograph 45,425
Proceeds from the sale of property, plant and
equipment, liquor licenses and leasehold
interests 109 357 133
Payments received on notes from the sale of
property, plant and equipment and liquor
licenses 25 163 285
Capital expenditures (6,406) (2,450) (3,745)
Investment in marketable securities (23,038)
--------- --------- ---------
Net cash (used) provided in investing
activities 16,253 (2,068) (3,327)
--------- --------- ---------
Cash flows from financing activities:
Principal payments under capital lease
obligations (1,418) (1,425) (1,622)
Principal payments on long-term debt (86) (24) (7)
Proceeds from equipment financing 1,021
Loan to officer/director (1,000)
Retirement of 13% debentures (19,342)
Redemption of serial preferred stock
Exercise of stock option 812
Transfer from/(to) discontinued operations (5,807) 3,803 3,643
--------- --------- ---------
Net cash provided (used) in financing
activities (6,290) (17,988) 2,826
--------- --------- ---------
Net increase (decrease) in cash 18,572 (9,548) 1,993
Cash at beginning of year 20,954 30,502 28,509
--------- --------- ---------
Cash at end of year $ 39,526 $ 20,954 $ 30,502
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
33
<PAGE>
RECONCILITATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
<TABLE>
<CAPTION>
Fifty-Two Fifty-Three Fifty-Two
Weeks Weeks Weeks
----------- ----------- -----------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Net (loss) income $ 6,674 $ 4,483 $ (234)
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss (income) from discontinued operations (2,836) (615) 1,409
Depreciation and amortization 4,176 4,153 4,242
Provision for losses on accounts and
notes receivable 560 190 370
Net (gain) loss from the sale of property,
plant and equipment, liquor licenses
and early lease terminations (25) (577) (90)
Net proceeds from sale of investment
securities
Interest differential on note payable 26 23 20
Note receivable from officer/director (12) (12) (10)
Original issue discount amortization -
13% debentures 695 77
Change in assets and liabilities net of
effects from noncash investment and
financing activities:
(Increase) decrease in assets:
Notes and accounts receivable 879 3,271 (2,526)
Inventories 983 820 (219)
Prepaid expenses 80 97 (550)
Other assets (545) 822 22
Increase (decrease) in liabilities:
Accounts payable and other current
liabilities 1,101 (1,361) (168)
Deferred income taxes (1,394) (59) 2,145
Other liabilities (1,058) (1,422) (1,994)
-------- -------- --------
$ 8,609 $ 10,508 $ 2,494
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
NOTES TO FINANCIAL STATEMENTS
------------------------
1. Accounting Policies:
The principle business of Arden Group, Inc. ("the Company") is the
operation of supermarkets conducted through its indirect subsidiary
Gelson's Markets. Secondarily, the Company distributes swimming pool
chemicals and supplies through its indirect subsidiary GPS Pool Supply,
Inc. ("GPS").
The following is a summary of significant accounting policies followed in
the preparation of these financial statements.
BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company and subsidiary 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"), now known as AMG Holdings, Inc. ("AMG Holdings"),
which was carried at equity in net assets of discontinued operations
through September 17, 1993 when the communications business was sold. The
consolidated financial statements have been retroactively restated to
present GPS 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.
FISCAL YEAR
The Company operates on a fiscal year ending on the Saturday closest to
December 31. Fiscal years for the financial statements included herein
ended on January 1, 1994, January 2, 1993 and December 28, 1991.
CASH AND CASH EQUIVALENTS
The Statements of Cash Flows classify changes in cash or cash equivalents
(short-term, highly liquid investments readily convertible into cash with
an original maturity of three months or less) according to operating,
investing or financing activities. The Company places its temporary cash
investments with high-credit, quality financial institutions and, by
policy, limits the amount of credit exposure to any one financial
institution.
MARKETABLE SECURITIES
Marketable securities consist of fixed-income securities having maturities
of up to three years, preferred stock and convertible preferred stock, and
mortgage backed government securities.
35
<PAGE>
Marketable securities are stated at cost, which approximates market value.
By policy, the Company invests only in high-grade marketable securities.
INVENTORIES
The cost of supermarket nonperishable inventories is determined by the
retail inventory method using last-in, first-out (LIFO) method, which is
lower than market. Perishable supermarket and other inventories are valued
at the lower of cost (first-in/first-out, or average) or Market.
PROPERTY FOR RESALE OR SUBLEASE
It is the Company's policy to make available for sale or sublease property
considered by management as excess and no longer necessary for the
operations of the Company. The aggregate carrying values of such owned
property and property and equipment under capital leases are periodically
reviewed and adjusted downward to market, when appropriate.
PROPERTY, PLANT AND EQUIPMENT
Owned property, plant and equipment is valued at cost. Depreciation is
provided on the straight-line method at rates based on the estimated useful
lives of individual assets or classes of assets. Improvements to leased
properties or fixtures are amortized over the estimated useful life or
period of lease, whichever is shorter.
Leased property meeting certain criteria is capitalized and the present
value of the related lease payments is recorded as a liability.
Amortization of capitalized leased assets is computed on the straight-line
method over the term of the lease.
Normal repairs and maintenance are expensed as incurred. Expenditures which
materially increase values, change capacities or extend useful lives are
capitalized. Replacements are capitalized and the property, plant and
equipment accounts are relieved of the items being replaced. The related
costs and accumulated reserves for depreciation of disposed assets are
eliminated and any gain or loss on disposition is included in income.
INCOME TAXES
Effective January 3, 1993, the Company changed its method of accounting for
income taxes by adopting the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
The new statement supersedes the Company's previous accounting practice of
accounting for income taxes under Accounting Principles Board Opinion No.
11, "Accounting for Income Taxes" ("APB 11"). Under APB 11, deferred income
taxes were provided in recognition of timing differences in reporting
certain items of income and expense for income tax and financial statement
purposes (principally capitalization of costs of inventory, depreciation,
lease costs, valuation and self-insurance reserves and gain on debenture
exchanges). Under SFAS
36
<PAGE>
109, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse. The adoption of this statement did not
have a material effect on either the Company's results of operations or
financial position.
NET INCOME PER SHARE
Net income per share is based on the weighted average number of common
shares outstanding during the period. The difference between primary and
fully diluted net income per share is not material.
2. Marketable Securities:
<TABLE>
<CAPTION>
---------------------------------------------------------------------
(in thousands) January 1, 1994
---------------------------------------------------------------------
<S> <C>
Fixed income securities $ 10,182
Preferred and convertible preferred stock 9,878
Mortgage backed government securities 2,978
-------
$ 23,038
=======
3. Notes and Accounts Receivable:
---------------------------------------------------------------------------
(in thousands) January 1, 1994 January 2, 1993
---------------------------------------------------------------------------
<S> <C> <C>
Accounts receivable, trade $ 6,871 $ 7,952
Notes and contracts receivable 731 590
Income taxes receivable 583 169
Other accounts receivable 1,461 1,214
------- -------
9,646 9,925
Less: Allowance for doubtful notes
and accounts receivable (639) (354)
------- -------
$ 9,007 $ 9,571
======= =======
</TABLE>
The provision for doubtful notes and accounts receivable in 1993, 1992 and
1991 was approximately $560,000, $190,000 and $370,000, respectively.
4. Inventories:
Inventories valued by the LIFO method ($8,910,000 in 1993, $9,433,000 in
1992 and $10,521,000 in 1991) would have been $2,116,000, $2,121,000 and
$2,150,000 higher at January 1, 1994, January 2, 1993, and December 28,
1991, respectively, if they had been stated at the lower of FIFO cost or
market. The effect on
37
<PAGE>
net income and income per share in 1993 and 1992 was an increase of
approximately $6,000 (no change per share) and $17,000 ($.01 per share),
respectively, and in 1991, a decrease of $159,000 ($.10 per share).
5. Property, Plant, Equipment and Accumulated Depreciation:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
(in thousands) January 1, 1994 January 2, 1993
--------------------------------------------------------------------------
<S> <C> <C>
Land $ 4,111 $ 2,763
Buildings 5,481 3,853
Store fixtures and office equipment 8,914 8,199
Delivery equipment 2,525 2,436
Machinery and equipment 6,157 6,144
Leaseholds and improvements to
leased property 19,600 16,152
Assets under capital leases 7,686 10,167
Assets not placed in service 8 44
------- -------
54,482 49,758
Accumulated depreciation and
amortization (29,615) (27,218)
------- -------
$ 24,867 $ 22,540
======= =======
6. Other Current Liabilities:
--------------------------------------------------------------------------
(in thousands) January 1, 1994 January 2, 1993
--------------------------------------------------------------------------
<S> <C> <C>
Compensated absences $ 2,564 $ 2,367
Taxes (including taxes collected
from others of $1,000 and $1,166,
respectively) 2,188 1,798
Workers' compensation insurance 1,961 1,811
Payroll 925 652
Interest 205 32
Other 4,399 4,203
------- -------
$ 12,242 $ 11,163
======= =======
</TABLE>
38
<PAGE>
7. Long-Term Debt:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
Current Non-Current
--------------------- ---------------------
January 1, January 2, January 1, January 2,
(in thousands) 1994 1993 1994 1993
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Notes and contracts payable $ 5,486 $ 33 $ 801 $ 5,293
Obligations under capital
leases 1,015 1,418 5,540 6,555
7% Subordinated income
debentures due
September 1, 2014 1,313 1,313
------- ------- ------- -------
$ 6,501 $ 1,451 $ 7,654 $ 13,161
======= ======= ======= =======
</TABLE>
At January 1, 1994, the approximate principal payments
required on long-term debt for each year are as follows
(in thousands):
1994 1995 1996 1997 1998 Subsequent
---- ---- ---- ---- ---- ----------
$6,501 $ 738 $ 598 $ 475 $ 468 $ 5,375
During 1993 the Company entered into a loan agreement for a credit facility
with a bank establishing a revolving line of credit in the amount of
$9,000,000 with a standby letter of credit subfacility in the amount of
$5,000,000. Major provisions of the agreement include certain minimum
requirements as to the Company's equity, working capital and debt-to-equity
relationships.
The Company has a revolving line of credit with another bank in the amount
of $3,000,000. There were no amounts borrowed under the revolving lines of
credit in 1993 or 1992.
Notes and contracts payable: This caption includes $5,309,000 for mortgages
on two Company-owned properties. Interest rates are 9% and 9-1/4%,
respectively. The obligations, which are collateralized by the related
property, had a net book value of $3,934,000 at January 1, 1994. In
February 1994, the Company paid $634,000 to satisfy the outstanding debt on
one of its properties. In 1993, the Company financed $1,021,000 of
supermarket equipment with five year, fully amortized notes bearing an
average interest rate of 7.5%. The obligations are collateralized by the
equipment. The balance of the equipment notes at January 1, 1994 was
$978,000.
Debentures: The indenture relating to the 7% (6% prior to November 7, 1978)
subordinated income debentures ("7% Debentures"), due September 1, 2014,
provides for interest payable semiannually on March 1 and September 1 to
the extent that current annual net income (consolidated net income before
income taxes and interest accrued on the 7% Debentures) is sufficient
therefor, or at the discretion of the Company, out of available retained
earnings. No accrued interest was in arrears as of January 1, 1994.
39
<PAGE>
In December 1991, the Company elected to redeem at face value all of the
issued and outstanding 13% debentures on March 2, 1992. The transaction
resulted in the write-off of the remaining debt discount of $682,383 at
March 2, 1992.
8. Capital Stock:
Class A Common Stock: The Company is authorized to issue 5,000,000 shares
of Class A common stock, par value $.25 per share. At January 1, 1994 and
January 2, 1993, shares issued were 1,608,708 and 3,484,070, respectively,
including 339,300 and 2,214,762 treasury shares, respectively. The Class A
common stock has one vote per share on all matters on which stockholders
are entitled to vote or consent.
Class B Common Stock: The Company is authorized to issue 500,000 shares of
Class B common stock, par value $.25 per share. At each of January 1, 1994
and January 2, 1993 there were 343,316 and 343,416 shares, respectively,
issued and outstanding. The Class B common stock has ten votes per share on
virtually all matters on which shareholders are entitled to vote or
consent. Transfer of Class B common stock is restricted to other Class B
stockholders and certain other classes of transferees. Class B common stock
is convertible, at the option of the holder into Class A common stock on a
share-for-share basis. The Class B common stock is also automatically
converted into Class A common stock under certain circumstances, including
upon the transfer of such stock to a transferee other than another Class B
stockholder and certain other classes of transferees. The number of shares
of Class B common stock converted to Class A common stock were 84 shares in
1991, none in 1992 and 100 shares in 1993. Cash or property dividends on
Class B common stock are restricted to an amount equal to 90% of any
dividend paid on Class A common stock.
9. Retirement Plans:
The Company contributes to multi-employer union pension plans administered
by various trustees. Contributions to these plans are based upon negotiated
wage contracts. These plans may be deemed to be defined benefit plans.
Information relating to accumulated benefits and fund assets as they may be
allocable to the Company at January 1, 1994 is not available. The Company's
total union pension expense for all plans for 1993, 1992 and 1991 amounted
to $1,696,000, $455,000 and $295,000, respectively.
The Company has a noncontributory, trusteed stock bonus plan which is
qualified under Section 401 of the Internal Revenue Code of 1986, as
amended. All nonunion employees over 18 years of age who complete 1,000
hours of service within the year ending on the anniversary date of
employment are eligible to become participating employees in the plan.
Contributions to the plan for any fiscal year, as determined by the Board
of Directors, are discretionary, but in no event will they exceed 15% of
the annual aggregate salaries of those employees eligible for participation
in the plan. Contributions must be invested in the Company's Class A common
stock with excess cash being invested in certain
40
<PAGE>
government backed securities. Contributions to the plan are allocated among
eligible participants in the proportions of their salaries to the salaries
of all participants. No contribution was accrued for the plan in 1993.
Contributions accrued for the plan in 1992 and 1991 were $383,000 and
$373,000, respectively.
Effective January 1, 1992, the Company's Board adopted the Arden Group,
Inc. 401(k) Retirement Savings Plan (the "Company Savings Plan"). All
non-union employees of the Company and its subsidiaries (except employees
of Telautograph) who have attained the age of 18 and have completed at
least one year of service with any of such companies are entitled to
participate in the Company Savings Plan. The Company Savings Plan provides
that, with certain limitations, a participating employee may elect to
contribute up to 15% of such employee's annual compensation to the Company
Savings Plan on a tax-deferred basis, subject to a limitation that the
annual elective contribution may not exceed an annual indexed dollar limit
determined pursuant to the Internal Revenue Code ($8,994 in 1993). Annual
matching contributions are made by the Company in a discretionary amount as
determined by the Company each year for those participants whose annualized
gross earnings for the previous year were $45,000 or less, and such
matching contribution was $10,000 in 1993 and $9,000 in 1992. An additional
$329,000 was accrued in 1993 to be contributed to the plan in early 1994.
Due to the sale of the communication equipment business, in December 1993
the Telautograph Defined Benefit Retirement Income Plan ("the Plan") which
covered certain eligible nonunion former employees of Telautograph was
terminated and all of the assets of the Plan were distributed to the
participants. Plan participants were given the choice of receiving
distribution in the form of a lump sum payment with a rollover option or an
annuity to begin at retirement age (as defined by the Plan). The Plan was
fully funded at the termination date.
41
<PAGE>
10. Income Taxes:
Income (loss) before income taxes and the related income tax expense
(benefit) are as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before income tax:
Continuing operations $ 6,461 $ 6,527 $ 1,963
Discontinued operations:
Income from operations 3,712 1,048 (2,324)
Gain on sale of Telautograph net assets 1,044
------- ------- -------
Total $ 11,217 $ 7,575 $ (361)
======= ======= =======
Income tax expense (benefit):
Continuing operations $ 2,623 $ 2,659 $ 788
Discontinued operations:
Income from operations 1,496 433 (915)
Sale of Telautograph net assets 424
------- ------- -------
Total $ 4,543 $ 3,092 $ (127)
======= ======= =======
The composition of federal and state income tax expense (benefit)
is as follows:
<CAPTION>
------------------------------------------------------------------------------------------
(in thousands) 1993 1992 1991
------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current
Federal $ 4,761 $ 1,608 $ 129
State 1,311 514 60
------- ------- -------
Total $ 6,072 $ 2,122 $ 189
Deferred
Federal (1,604) 508 (1,104)
State 75 462 788
------- ------- -------
Total (1,529) 970 (316)
------- ------- -------
Total income tax expense (benefit) $ 4,543 $ 3,092 $ (127)
======= ======= =======
</TABLE>
42
<PAGE>
At January 1, 1994 the Company's deferred income taxes liabilities
(assets) were attributable to the following:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
(in thousands)
---------------------------------------------------------------------------
<S> <C>
Deferred tax liabilities
Deferred gain on debenture exchange $ 4,715
Property leased under capital leases, net
of accumulated depreciation 2,012
Other 291
-------
Deferred tax liabilities 7,018
Deferred tax assets
Debt under capital leases (2,631)
Book accruals not recognized for tax
until paid (1,128)
Excess of book over tax depreciation (582)
State tax expense recognized in current period
for books but in following year for tax (301)
Bad debt allowance not deductible for tax
until year of write-off (256)
Other (194)
-------
Deferred tax assets (5,092)
-------
Deferred income taxes, net $ 1,926
=======
</TABLE>
Reconciliation of the statutory federal rate and effective rate is
as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
1993 1992 1991
(in thousands except ----------- ----------- -----------
percentage amounts) Amount Rate Amount Rate Amount Rate
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax at statutory
rate $ 3,814 34.0% $ 2,576 34.0% $ (123) 34.0%
State income taxes, net of
federal tax benefits 729 6.5% 516 6.8% (4) 1.2%
------------- ------------- -------------
$ 4,543 40.5% $ 3,092 40.8% $ (127) 35.2%
============= ============= =============
</TABLE>
43
<PAGE>
11. Fourth Quarter Adjustments:
In December 1993, the Board of Directors awarded a special bonus of
$1,912,000 to an officer/director related to the sale of the Company's
communication equipment business. The bonus expense reduced the gain on the
sale of the business.
12. Leases:
The principal kinds of property leased by the Company and its subsidiaries
are supermarket buildings, fixtures and delivery equipment. The most
significant obligations assumed under the lease terms, other than rental
payments, are the upkeep of the facilities, insurance and property taxes.
Most supermarket leases contain contingent rental provisions based on sales
volume.
All leases and subleases with an initial term greater than one year are
accounted for under Statement of Financial Accounting Standards No. 13,
"Accounting for Leases". These leases are classified as either capital
leases, operating leases or subleases, as appropriate.
Assets Under Capital Leases: Assets under capital leases are capitalized
using interest rates appropriate at the inception of each lease. Contingent
rents associated with capital leases in 1993, 1992 and 1991 were $167,000,
$170,000 and $288,000, respectively, and accordingly have been charged to
expense as incurred. Following is an analysis of assets under capital
leases:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
(in thousands) January 1, 1994 January 2, 1993
---------------------------------------------------------------------------
<S> <C> <C>
Buildings $ 4,353 $ 5,097
Equipment 3,333 5,070
------- -------
7,686 10,167
Accumulated amortization (5,052) (6,331)
------- -------
$ 2,634 $ 3,836
======= =======
</TABLE>
44
<PAGE>
Future minimum lease payments for the above assets under capital leases at
January 1, 1994 are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
(in thousands)
--------------------------------------------------------------------------
<S> <C>
1994 $ 1,648
1995 1,127
1996 931
1997 762
1998 762
Remainder 6,352
-------
Total minimum obligations 11,582
Executory costs (86)
-------
Net minimum obligations 11,496
Interest (4,941)
-------
Present value of net minimum obligations 6,555
Current portions (1,016)
-------
Long-term obligations at January 1, 1994 $ 5,539
=======
</TABLE>
Executory costs include such items as property taxes and insurance.
Operating Leases and Subleases: Future minimum lease payments for all
noncancelable operating leases having a remaining term in excess of one
year at January 1, 1994 are as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
Deduct Net
Sublease Rental
(in thousands) Commitments Rentals Commitments
--------------------------------------------------------------------------
<S> <C> <C> <C>
1994 $ 2,889 $ 651 $ 2,238
1995 2,629 554 2,075
1996 2,343 335 2,008
1997 2,133 294 1,839
1998 2,079 235 1,844
Remainder 16,754 1,671 15,083
-------- -------- --------
$ 28,827 $ 3,740 $ 25,087
======== ======== ========
</TABLE>
45
<PAGE>
Rent expense under operating leases is as follows:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
(in thousands) 1993 1992 1991
---------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum rent $ 4,803 $ 4,856 $ 5,235
Contingent rent 1,274 1,172 924
-------- -------- --------
6,077 6,028 6,159
Sublease rentals (1,330) (1,412) (1,672)
-------- -------- --------
$ 4,747 $ 4,616 $ 4,487
======== ======== ========
</TABLE>
13. Related Party Transactions:
A former director of the Company is associated with a law firm that
rendered various legal services for the Company. The Company and its
subsidiaries paid the firm approximately $166,000, $717,000 and $797,000
during 1993, 1992 and 1991, respectively, for legal services.
At January 1, 1994, the Company held three notes receivable for a total of
$1,516,250 from an officer/director of the Company. Two notes arose from
transactions in 1979 and 1980 whereby the Company loaned the
officer/director money to purchase an aggregate of 200,000 shares of the
Company's Class A common stock at the then fair market value. These notes,
one of which bears interest at the rate of 6% per annum and the other of
which bears interest at rates ranging from a minimum of 6% to a maximum of
9%, are due in full on January 1, 1995. A third loan for $1,000,000 was
made to the officer/director in 1992 and related to his exercise in 1991 of
100,000 shares of the Company's Class A common stock which were granted to
him under a stock option. The note relating to the loan made in 1992 is due
on January 1, 1995 and bears interest at 6% per annum. All three loans are
collateralized by 180,000 shares of Class B common stock. The amount of the
receivable is shown on the balance sheets as a reduction in equity, and
reflects the above amount discounted for the difference between the face
value interest rate and the market rate at the transaction dates. In
December 1993, the Board of Directors awarded a special bonus of $1,912,000
to the officer/director related to the sale of the Company's communication
equipment business. The net proceeds of this bonus were used to repay the
$1,000,000 loan in early 1994.
14. Commitments and Contingent Liabilities:
The Company has an employment agreement with a key executive officer which
expires on January 1, 1995. In addition to a base salary, the agreement
provides for a bonus based on pre-tax earnings. No maximum compensation
limit exists. The compensation expensed in 1993, 1992 and 1991 was
$3,012,000, $577,000 and $437,000, respectively.
46
<PAGE>
The Company is contingently liable as a guarantor of certain leases which
it has either assigned or subleased. Any liability arising as a result of
these guarantees would have no significant effect on either the Company's
results of operations or consolidated financial position of the Company.
The Company or its subsidiaries are defendants in a number of cases
currently in litigation, being vigorously defended, in which the complaints
pray for monetary damages. As of the date hereof, no estimate of potential
liability, if any, is possible. Based upon current information, management,
after consultation with legal counsel defending the Company's interests in
the cases, believes the ultimate disposition thereof will have no material
effect upon either the Company's results of operations or the consolidated
financial position.
15. Disposition of Assets of Discontinued Operations:
Pursuant to an Asset Purchase Agreement dated September 1, 1993 (the "Asset
Purchase Agreement"), by and among Telautograph, the Company and Danka
Industries, Inc. (the "Purchaser") and Danka Business Systems PLC
("Danka"), on September 17, 1993 Telautograph (now known as AMG Holdings)
sold its communication equipment business and substantially all the
operating assets and certain liabilities of such business to the Purchaser,
a wholly-owned indirect subsidiary of Danka for a cash purchase price of
approximately $45,780,000 (which includes $1,000,000 received for a
covenant not-to-compete), subject to certain post-closing adjustments. In
1993 AMG Holdings booked a gain related to the sale of approximately
$620,000, net of income taxes of $424,000.
The purchase price and the gain are subject to adjustment after resolution
of disputes which have arisen between AMG Holdings and Danka concerning the
assets and liabilities transferred to the Purchaser. A disagreement
concerning the valuation of certain parts inventory is currently the
subject of arbitration. Telautograph has claimed approximately $4,000,000
for such inventory and the Purchaser has contended that nothing should be
paid. No amount with respect to this inventory has been included in the
purchase price described above or in the gain. Additionally, there will be
an arbitration with regard to certain items on the closing balance sheet
which are being disputed. The Company does not believe adjustments, if any,
will have a material adverse impact on its financial results or financial
position.
In connection with the transaction, the Purchaser paid severance payments
to various employees of Telautograph. Included among these payments was a
payment of $100,000 to the Vice President Finance and Administration and
Chief Financial Officer of the Company, on account of his past services to
Telautograph.
Excluded from the assets sold were, among other items, all the capital
stock of GPS, cash and cash equivalents, investments in the Class A common
stock of the Company, the real property lease at 8700 Bellanca, Los
Angeles, California and intercompany accounts.
47
<PAGE>
As a result of the consummation of this transaction, the previously
announced spin-off of the communication equipment business of Telautograph
and all the capital stock of GPS to the stockholders of the Company was
abandoned.
The results of operations for the communication equipment business of AMG
Holdings has been presented separately as discontinued operations and the
book value of the Company's net assets in such business is disclosed on the
balance sheet on January 2, 1993.
Summarized financial information of the Company's communication equipment
business follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
1993 1992
(in thousands) (37 Weeks) (53 Weeks)
-----------------------------------------------------------------------
<S> <C> <C>
Revenue $ 51,492 $ 68,833
Costs and expenses 47,780 67,785
-------- --------
Income before taxes 3,712 1,048
Income tax expense 1,496 433
-------- --------
Income from operations--discontinued
operations $ 2,216 $ 615
======== ========
</TABLE>
The increase in income in 1993 compared to 1992 is primarily attributable
to a reduction of general and administrative expenses at Telautograph's
headquarters office and a $550,000 favorable adjustment to income to
correct an overaccrual in pension liability.
The components of the gain on sale of the communication equipment business
follows:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
(in thousands)
-----------------------------------------------------------------------
<S> <C>
Cash proceeds $ 45,780
Less: Net assets sold (at net book value) (39,604)
Costs associated with the sale (5,132)
Related income tax expense (424)
--------
Gain on sale of discontinued operations $ 620
========
</TABLE>
16. Subsequent Event:
On January 17, 1994, a number of the Company's stores suffered product and
property damage from an earthquake. Although the exact amount of the cost
is not yet determinable, the Company estimates the pretax expense, net of
insurance proceeds, to be approximately $1,500,000.
48
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Discontinued Operations
----------------------------------------------
Continuing Operations Operations Net Gain On Sale
---------------------------------------------- ---------------------- ----------------------
Income Income Income Net Net Income
Gross Income (Loss) Income (Loss) Per Income (Loss)
Quarter Sales Profit (Loss) Per Share (Loss) Per Share Income Share (Loss) Per Share
- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1991
First $ 62,629 $ 23,172 $ 735 $ .46 $ 485 $ .30 $ $ $ 1,220 $ .76
Second 63,268 23,694 1,006 .62 321 .20 1327 .82
Third 62,784 23,604 1,096 .68 (4) 1092 .68
Fourth 61,962 23,635 (1,662) (1.03) (2,211) (1.37) (3,873) (2.40)
1992
First $ 60,382 $ 22,319 $ (376) $ (.23) $ (394) $ (.25) $ $ $ (770) $ (.48)
Second 62,093 23,120 934 .58 512 .32 1,446 .90
Third 62,114 23,530 1,139 .71 214 .13 1,353 .84
Fourth 65,778 24,825 2,171 1.35 283 .17 2,454 1.52
1993
First $ 60,261 $ 22,267 $ 596 $ .37 $ 475 $ .29 $ 1,071 $ .66
Second 61,869 23,481 1,053 .65 526 .33 1,579 .98
Third 61,719 24,037 1,239 .71 1,019 .63 1,838 1.14 4,096 2.54
Fourth 63,063 24,385 950 .59 196 .12 (1,218) (.75) (72) (.04)
</TABLE>
49
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
For the fiscal year ended January 1, 1994
(In Thousands, Except Number of Shares)
<TABLE>
<CAPTION>
Amount at Which
Each Portfolio of
Number of Shares or Market Value Equity Security Issues
Units--Principal of Each Issue and Each Other Security
Name of Issuer and Amount of Bonds Cost of Each at Balance Issue Carried in the
Title of Each Issue and Notes Issue Sheet Date Balance Sheet
- ----------------------------- ------------------- ------------ -------------- -----------------------
<S> <C> <C> <C> <C>
United States government
and its agencies $ 2,766 (1) $ 2,978 $ 2,940 $ 2,978
Preferred stock:
Chemical Banking - Series C 100,000 (2) 1,223 1,200 1,223
Other 15,500 (2) 1,560 1,551 1,560
Convertible preferred stock:
Citicorp - Series 15 200,000 (2) 3,960 3,975 3,960
Tenneco, Inc. - Series A 40,000 (2) 1,665 1,675 1,665
Other 30,000 (2) 1,470 1,438 1,470
Fixed income funds:
Pimco - Short Term Fund 506,351 (2) 5,058 5,064 5,058
Pimco - Low Duration Fund 496,574 (2) 5,124 5,075 5,124
-------- -------- --------
$ 23,038 $ 22,918 $ 23,038
======== ======== ========
<FN>
- ---------------
(1) Principal amount.
(2) Number of shares.
</TABLE>
50
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(In Thousands)
<TABLE>
<CAPTION>
Deductions
Balance at -------------------------- Balance at End of Period
Beginning Amounts Amounts ------------------------
Name of Debtor of Period Additions Collected Written-Off Current Not Current
- ----------------------------------- ---------- ------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ended January 1, 1994:
Bernard Briskin (1) $ 1,490 $ 12 (2) $ 1,502
Fiscal Year Ended January 2, 1993:
Bernard Briskin (1) $ 478 $ 1,000 $ 1,490
12 (2)
Fiscal Year Ended December 28, 1991:
Bernard Briskin (1) $ 468 $ 10 (2) $ 478
<FN>
- ----------------
(1) Two notes receivable due January 1, 1995 plus a new note in 1992
maturing on same date. See Note 12 of Notes to Financial Statements.
(2) Amortization of present value discount.
</TABLE>
51
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
For the fiscal year ended January 1, 1994
(In Thousands)
<TABLE>
<CAPTION>
Principal Balance at
Depreciation Beginning Additions Retirements Other Changes Balance at
Classification Rates (%) of Year at Cost or Sales Add (Deduct) End of Year
- ------------------------------ ------------------ ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Land $ 2,763 $ 1,348 $ 4,111
Buildings 5 to 6-2/3 3,853 1,628 5,481
Store fixtures and office
equipment 12-1/2 to 33-1/3 8,199 1,800 $ 1,079 $ (6) (1) 8,914
Delivery equipment 33-1/3 2,436 278 320 11 (1) 2,525
120 (2)
Machinery and Equipment 12-1/2 to 33-1/3 6,144 376 355 (8) (1) 6,157
Improvements to leased property 5 to 12-1/2 16,152 1,012 3 (1) 19,600
2,433 (2)
Assets under capital lease 3-1/3 to 20 10,167 2,481 7,686
Assets not placed-in-service 44 (36) 8
-------- -------- -------- -------- --------
$ 49,758 $ 6,406 (3) $ 4,235 $ 2,553 $ 54,482
======== ======== ======== ======== ========
<FN>
- -------------
(1) Transfers.
(2) Transferred from affiliate.
(3) Amounts include only routine replacements and additional facilities.
All were acquired for cash except assets under capital leases, which
were leased.
</TABLE>
52
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
For the fiscal year ended January 2, 1993
(In Thousands)
<TABLE>
<CAPTION>
Principal Balance at
Depreciation Beginning Additions Retirements Other Changes Balance at
Classification Rates (%) of Year at Cost or Sales Add (Deduct) End of Year
- ------------------------------ ------------------ ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Land $ 2,763 $ 2,763
Buildings 5 to 6-2/3 3,853 3,853
Store fixtures and office
equipment 12-1/2 to 33-1/3 7,863 $ 1,175 $ 1,016 $ 177 (1) 8,199
Delivery equipment 33-1/3 2,311 322 183 (14) (2) 2,436
Machinery and equipment 12-1/2 to 33-1/3 6,499 526 913 32 (1) 6,144
Improvements to leased property 5 to 12-1/2 16,594 426 659 (209) (1) 16,152
Assets under capital leases 3-1/3 to 20 10,626 38 (421) (3) 10,167
Assets not placed-in-service 44 44
-------- -------- -------- -------- --------
$ 50,553 $ 2,449 (4) $ 2,809 $ (435) $ 49,758
======== ======== ======== ======== ========
<FN>
- ---------------
(1) Transfers.
(2) Transferred to affiliate.
(3) Transferred to property for sublease.
(4) Amounts include only routine replacements and additional facilities.
All were acquired for cash except assets under capital leases,
which were leased.
</TABLE>
53
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
For the fiscal year ended December 28, 1991
(In Thousands)
<TABLE>
<CAPTION>
Principal Balance at
Depreciation Beginning Additions Retirements Other Changes Balance at
Classification Rates (%) of Year at Cost or Sales Add (Deduct) End of Year
- ------------------------------ ------------------ ----------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Land $ 2,363 $ 400 $ 2,763
Buildings 5 to 6-2/3 3,853 3,853
Store fixtures and office
equipment 12-1/2 to 33-1/3 7,283 727 $ 153 $ 6 (1) 7,863
Delivery equipment 33-1/3 2,360 129 178 2,311
Machinery and equipment 12-1/2 to 33-1/3 5,839 666 (6) (1) 6,499
Improvements to leased property 5 to 12-1/2 14,873 1,744 23 16,594
Assets under capital leases 3-1/3 to 20 11,007 882 1,263 10,626
Assets not placed-in-service 41 3 44
-------- -------- -------- -------- --------
$ 47,619 $ 4,551 (2) $ 1,617 $ 0 $ 50,553
======== ======== ======== ======== ========
<FN>
- ---------------
(1) Transfers.
(2) Amounts include only routine replacements and additional facilities.
All were acquired for cash except assets under capital leases, which
were leased.
</TABLE>
54
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
For the fiscal year ended January 1, 1994
(In Thousands)
<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Retirements Other Changes Balance at
Description of Year Expenses or Sales Add (Deduct) End of Year
- ------------------------------ ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Buildings $ 1,629 $ 213 $ 1,842
Store fixtures and office
equipment 5,087 747 $ 1,046 $ (5) (1) 4,783
Delivery equipment 2,063 252 294 2 (1) 2,141
118 (2)
Machinery and equipment 4,433 621 329 1 (1) 4,726
Improvements to leased property 7,675 1,074 2 (1) 11,071
2,320 (2)
Assets under capital leases 6,331 1,203 2,482 5,052
-------- -------- -------- -------- --------
$ 27,218 $ 4,110 $ 4,151 $ 2,438 $ 29,615
======== ======== ======== ======== ========
<FN>
- ---------------------
(1) Transfers.
(2) Transferred from affiliate.
</TABLE>
55
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
For the fiscal year ended January 2, 1993
(In Thousands)
<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Retirements Other Changes Balance at
Description of Year Expenses or Sales Add (Deduct) End of Year
- ------------------------------ ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Buildings $ 1,430 $ 199 $ 1,629
Store fixtures and office
equipment 5,309 642 $ 878 $ 14 (1) 5,087
Delivery equipment 1,969 273 165 (14) (2) 2,063
Machinery and equipment 4,667 649 907 24 (1) 4,433
Improvements to leased property 7,270 1,084 641 (38) (1) 7,675
Assets under capital leases 5,490 1,229 29 (359) (3) 6,331
-------- -------- -------- -------- --------
$ 26,135 $ 4,076 $ 2,620 $ (373) $ 27,218
======== ======== ======== ======== ========
<FN>
- ------------------------
(1) Transfers.
(2) Transferred to affiliate.
(3) Transferred to property for sublease.
</TABLE>
56
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
For the fiscal year ended December 28, 1991
(In Thousands)
<TABLE>
<CAPTION>
Balance at Charged to
Beginning Costs and Retirements Other Changes Balance at
Description of Year Expenses or Sales Add (Deduct) End of Year
- ------------------------------ ------------ ----------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Buildings $ 1,230 $ 200 $ 1,430
Store fixtures and office
equipment 4,823 634 $ 148 5,309
Delivery equipment 1,883 247 161 1,969
Machinery and equipment 4,065 602 4,667
Improvements to leased property 6,226 1,058 14 7,270
Assets under capital leases 5,427 1,326 1,263 5,490
-------- -------- -------- -------- --------
$ 23,654 $ 4,067 $ 1,586 $ 0 $ 26,135
======== ======== ======== ======== ========
</TABLE>
57
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND
RESERVES
(In Thousands)
<TABLE>
<CAPTION>
Additions Charged to
Balance at --------------------------
Beginning Other Balance at
Description of Year Expenses Accounts Deductions End of Year
- ------------------------------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended January 1, 1994:
Allowance for doubtful notes and
accounts receivable (1) $ 354 $ 560 $ 275 (2) $ 639
Fiscal Year Ended January 2, 1993:
Allowance for doubtful notes and
accounts receivable (1) $ 256 $ 190 $ 92 (2) $ 354
Fiscal Year Ended December 28, 1991:
Allowance for doubtful notes and
accounts receivable (1) $ 610 $ 370 $ 724 (2) $ 256
<FN>
- ------------------------
(1) These reserves are deducted from the related items in the balance sheet.
(2) Specific items charged to qualifying accounts and reserves.
</TABLE>
58
<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 JULY 2, 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
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 July 2, 1994 was:
1,269,405 of Class A common stock
343,316 of Class B common stock
This report contains a total of 12 pages.
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
A S S E T S
July 2, January 1,
1994 1994
---------------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $21,763 $39,526
Marketable securities 32,561 23,038
Notes and accounts receivable, net 7,203 9,007
Inventories 9,681 10,902
Prepaid and other 1,619 1,040
------------- ----------
Total current assets 72,827 83,513
Notes and contracts receivable 2,629 459
Property for resale or sublease, at
lower of cost or market 1,926 1,877
Property, plant and equipment, at cost less
accumulated depreciation and amortization
of $24,042 and $29,615, respectively 25,467 24,867
Other assets 1,751 1,755
------------- ----------
Total assets $104,600 $112,471
------------- ----------
------------- ----------
</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
July 2, January 1,
1994 1994
--------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $8,872 $13,221
Other current liabilities 12,139 12,242
Current portion of long-term debt 905 6,501
------------- -----------
Total current liabilities 21,916 31,964
Long-term debt, including obligations
under capital leases of $5,212
and $5,540, respectively 7,232 7,654
Deferred income taxes 1,704 1,926
Other liabilities 3,006 3,392
------------- -----------
Total liabilities 33,858 44,936
------------- -----------
Commitments and contingent
liabilities
Stockholders' equity:
Class A common stock 402 402
Class B common stock 86 86
Capital surplus 7,571 7,571
Notes receivable from
officer/director (509) (1,502)
Retained earnings 66,945 64,731
------------- -----------
74,495 71,288
Less: treasury stock, at cost 3,753 3,753
------------- -----------
Total stockholders' equity 70,742 67,535
------------- -----------
Total liabilities and
stockholders' equity $104,600 $112,471
------------- -----------
------------- -----------
</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 Twenty-Six Weeks Ended
-------------------- ----------------------
July 2, July 3, July 2, July 3,
1994 1993 1994 1993
-------------------- ---------------------
<S> <C> <C> <C> <C>
Sales $61,625 $61,869 $124,776 $122,130
Cost of sales 37,835 38,388 77,060 76,402
-------- -------- --------- --------
Gross profit 23,790 23,481 47,716 45,728
Delivery, selling,
general and
administrative expenses 20,915 21,561 43,257 42,640
-------- -------- --------- --------
Operating income 2,875 1,920 4,459 3,088
Interest, dividend and
other income (expense), net 321 (148) 543 (311)
Net unrealized loss on marketable
securities (411) (1,304)
-------- -------- --------- --------
Income from continuing
operations before
income taxes 2,785 1,772 3,698 2,777
Income tax provision 1,118 718 1,484 1,127
-------- -------- --------- --------
Income from continuing
operations
(net of income taxes) 1,667 1,054 2,214 1,650
Discontinued operations:
Income from operations (net of
income taxes of $356 and $677,
respectively) 525 1,001
-------- -------- --------- --------
Net income $1,667 $1,579 $2,214 $2,651
-------- -------- --------- --------
-------- -------- --------- --------
Income per common share
(computed on common shares
outstanding):
Income from continuing
operations $1.03 $ .65 $1.37 $1.02
Income from discontinued
operations .33 .62
-------- ------- --------- --------
Net income $1.03 $ .98 $1.37 $1.64
-------- ------- --------- --------
-------- ------- --------- --------
</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>
Twenty-Six Weeks Ended
-------------------------------
July 2, July 3,
1994 1993
--------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $124,609 $123,061
Cash paid to suppliers and employees (118,950) (116,850)
Interest and dividends received 1,456 417
Interest paid (739) (649)
Income taxes paid (1,104) (1,295)
--------------- ------------
Net cash provided by operating activities 5,272 4,684
--------------- ------------
Cash flows from investing activities:
Capital expenditures (4,422) (1,196)
Investment in marketable securities (11,179)
Proceeds from the sale of property,
plant and equipment, liquor
licenses and leasehold interests 22 90
Payments received on notes from the
sale of property, plant and
equipment and liquor licenses 18 3
--------------- ------------
Net cash used in investing activities (15,561) (1,103)
--------------- ------------
Cash flows from financing activities:
Payments related to sale of
discontinued operations (2,413)
Transfer from Telautograph Corporation 958
Principal payments under capital
lease obligations (621) (723)
Payment of loan from officer/director 1,000
Principal payments on long-term debt (5,397) (21)
Net cash from sale of GPS (43)
--------------- ------------
Net cash provided by (used in)
financing activities (7,474) 214
--------------- ------------
Net increase (decrease) in cash (17,763) 3,795
Cash at beginning of year 39,526 20,954
--------------- ------------
Cash at end of quarter $21,763 $24,749
=============== ============
</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>
Twenty-Six Weeks Ended
---------------------------------
July 2, July 3,
1994 1993
------------- --------------
<S> <C> <C>
Net income $2,214 $2,651
Adjustments to reconcile net income to
net cash provided by operating
activities:
Income from discontinued operations (1,001)
Depreciation and amortization 1,938 2,062
Unrealized loss on marketable securities 1,304
Provision for losses on accounts and
notes receivable 71 104
Loss on sale of marketable securities 352
Net (gain) loss from the sale of property,
plant and equipment, liquor licenses
and early lease terminations 10 (43)
Interest differential on note payable 12
Notes receivable from officer/director (7) (6)
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 316 1,031
Inventories 80 1,447
Prepaid expenses (540) (610)
Other assets (48) (130)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities 437 635
Deferred income taxes (386) (1,187)
Other liabilities (376) (281)
----------- -----------
Net cash provided by operating activities $5,272 $4,684
----------- -----------
----------- -----------
</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 the
capital stock of GPS to Pioneer Chlor Alkali Investments, Inc. ("Pioneer")
for approximately $3,515,000, 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.
7
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
SECOND QUARTER ANALYSIS
During the second quarter of 1994, the Company had net income of $1,667,000
compared to net income of $1,579,000 during the second quarter of 1993. Pretax
income from continuing operations was $2,785,000 for the second quarter of 1994
compared to pretax income of $1,772,000 for the second quarter of 1993.
During the second quarter of 1994, the Company's operating income from its
Gelson's and Mayfair Markets operations was $2,850,000 compared to operating
income of $1,559,000 during the second quarter of 1993. A significant part of
the increase is due to health and welfare credits explained below. Sales from
the Company's 12 supermarkets in the greater Los Angeles area were $59,351,000
in the second quarter of 1994, an increase of 2.4% from the second quarter of
1993, when sales were $57,970,000. The second quarter 1994 comparative sales
increase was lower than that of the first quarter 1994 (5.0%) due partially to
the timing of Easter and Passover observances which occurred near the end of the
first quarter in 1994 versus the second quarter in 1993.
The Company's gross profit from market operations as a percentage of sales was
39.0% in the second quarter of 1994 compared to 38.4% 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 market
operations were $20,325,000 in the second quarter of 1994 compared to
$20,699,000 in the second quarter of 1993. Expenses as a percentage of sales
were 34.2% in the second quarter of 1994, compared to 35.7% in the same period
of 1993. In the second quarter 1994, the Company recognized contractual credits
against health and welfare payments due the retail clerks and meat cutters
unions of approximately $1,380,000. No such credits were recognized in the
second quarter of 1993. The remaining credits to be earned are not material on
future earnings. The decrease in DSG&A due to the health and welfare credits is
partially offset by increased payroll and payroll related expense.
The swimming pool chemical processing and distribution operations, conducted by
GPS, posted an eight week operating income of $25,000 in the second quarter of
1994 on sales of $2,274,000. In the second quarter of 1993, GPS posted a
thirteen week operating income of $361,000 on sales of $3,899,000. GPS was sold
on May 27, 1994. A pretax gain of $93,000 on the sale of GPS stock is recorded
as other income.
The Company's interest and dividend income was $885,000 in the second quarter of
1994 compared to $244,000 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 interest rates.
8
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
In the second quarter of 1994, the market value of the Company's holdings in
marketable securities declined. The Statement of Financial Accounting Standards
No. 115, (Accounting for Certain Investments in Debt and Equity Securities),
which became effective for fiscal years beginning after December 16, 1993,
requires that unrealized holding gains and losses for certain marketable
securities shall be included in the determination of net income. As a result,
unrealized losses of $411,000 related to marketable securities were recognized
in the second quarter of 1994.
YEAR-TO-DATE ANALYSIS
During the first six months of 1994, the Company had net income of $2,214,000
compared to net income of $2,651,000 for the first six months of 1993. Pretax
income from continuing operations was $3,698,000 for the first six months of
1994 compared to pretax income of $2,777,000 for the same period of 1993.
During the first six months of 1994, the Company's operating income from its
Gelson's and Mayfair Markets operations was $4,646,000 compared to operating
income of $3,082,000 during the first six months of 1993. Sales from the
Company's 12 supermarkets in the greater Los Angeles area were $120,164,000 in
the first six months of 1994, an increase of 3.7% from the first six months of
1993, when sales were $115,909,000.
The Company's gross profit from market operations as a percentage of sales was
38.8% in the first six months of 1994 compared to 38.0% 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 market
operations were $41,994,000 in the first six months of 1994 compared to
$40,990,000 in the first six months of 1993. Expenses as a percentage of sales
were 34.9% in the first six months of 1994, compared to 35.4% 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
$2,460,000. No such credits were recognized in the first six months of 1993.
The remaining credits to be earned are not material on future earnings. 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 a twenty-one week operating loss of $187,000 in first six months of
1994 on sales of $4,612,000 compared to a twenty-six week operating income of
$6,000 on sales of $6,221,000 in the first six months of 1993. GPS was sold on
May 27, 1994. A pretax gain of $93,000 on the sale of GPS stock is recorded as
other income.
The Company's interest and dividend income was $1,561,000 in the first six
months of 1994 compared to $468,000 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 interest rates.
9
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
In the first six months of 1994, the market value of the Company's holdings in
marketable securities declined. The Statement of Financial Accounting Standards
No. 115, (Accounting for Certain Investments in Debt and Equity Securities),
which became effective for fiscal years beginning after December 16, 1993,
requires that unrealized holding gains and losses for certain marketable
securities shall be included in the determination of net income. As a result,
unrealized losses of $1,304,000 related to marketable securities were recognized
in the first six 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.
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
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders was held on June 28, 1994.
(b) Proxies for the meeting were solicited pursuant to Regulation 14A under
the Securities Exchange Act of 1934. There was no solicitation in
opposition to management's nominees for directors as listed in the Proxy
Statement. All management nominees were elected by Class B stockholders.
They are as follows:
<TABLE>
<CAPTION>
Votes For
---------
<S> <C>
Stuart A. Krieger 3,421,840
Ben Winters 3,421,840
</TABLE>
There were no votes against or abstaining.
Continuing directors whose terms of office do not expire until 1995 or 1996
are:
<TABLE>
<S> <C>
Bernard Briskin Curtis H. Palmer
Robert A. Davidow Frederick A. Schnell
Daniel Lembark
</TABLE>
(c) At the meeting, the provision of the Amendment to the Employment Agreement
between the Registrant and Bernard Briskin, President and Chief Executive
Officer of Registreant, providing for annual bonuses equal to certain
specified percentages of the pretax profits of the Registrant for each
fiscal year was approved by the following vote:
<TABLE>
<CAPTION>
Class A Stock Class B Stock
------------- -------------
<S> <C> <C>
For 1,102,406 3,408,050
Against 72,942 90
Abstain 5,112 13,700
</TABLE>
Broker non-votes were 5,237.
Also at the meeting, the selection of Coopers & Lybrand, independent
certified public accountants, to audit the books, records and accounts of
the Company and its consolidated subsidiaries for the 1994 fiscal year was
approved by the following vote:
<TABLE>
<CAPTION>
Class A Stock Class B Stock
------------- -------------
<S> <C> <C>
For 1,175,402 3,421,840
Against 875 0
Abstain 4,183 0
</TABLE>
Broker non-votes were 5,237.
11
<PAGE>
PART II. OTHER INFORMATION, Continued
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
None
(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 August 15, 1994 ERNEST T. KLINGER
------------------ ----------------------------------
Ernest T. Klinger
Vice President Finance and Administration
and Chief Financial Officer
Authorized Signatory)
12
