<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 1, 1995
------------
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.
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(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
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(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 1, 1995 was:
970,866 of Class A common stock
343,246 of Class B common stock
This report contains a total of 14 pages including exhibits.
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
A S S E T S
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
1995 1994
------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $25,614 $19,241
Marketable securities 17,722 19,700
Notes and accounts receivable, net 6,880 8,580
Inventories 9,559 10,665
Prepaid and other 2,141 2,181
------- -------
Total current assets 61,916 60,367
Notes and contracts receivable 70 1,366
Property for resale or sublease, at lower
of cost or market 1,567 1,539
Property, plant and equipment, at cost less
accumulated depreciation and amortization
of $24,098 and $22,713, respectively 27,079 26,225
Other assets 1,832 1,825
------- -------
Total assets $92,464 $91,322
------- -------
------- -------
</TABLE>
See Notes to Financial Statements
2
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JULY 1, DECEMBER 31,
1995 1994
------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $ 9,026 $ 9,994
Other current liabilities 12,153 13,193
Current portion of long-term debt 623 674
------- -------
Total current liabilities 21,802 23,861
Long-term debt, including obligations under capital
leases of $4,346 and $4,541, respectively 6,169 6,465
Deferred income taxes 1,337 1,109
Other liabilities 1,650 2,051
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Total liabilities 30,958 33,486
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Commitments and contingent liabilities
Stockholders' equity:
Class A common stock 327 327
Class B common stock 86 86
Capital surplus 6,413 6,413
Notes receivable from officer/director (443) (442)
Retained earnings 58,876 55,205
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65,259 61,589
Less: treasury stock, at cost 3,753 3,753
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Total stockholders' equity 61,506 57,836
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Total liabilities and stockholders' equity $92,464 $91,322
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------- -------
</TABLE>
See Notes to Financial Statements
3
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Per Share and Other Data)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
--------------------- ----------------------
JULY 1, JULY 2, JULY 1, JULY 2,
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Sales $60,317 $61,625 $120,258 $124,776
Cost of sales 36,575 37,835 73,307 77,060
--------- --------- --------- ---------
Gross profit 23,742 23,790 46,951 47,716
Delivery, selling, general and administrative
expenses 21,121 20,915 42,848 43,257
--------- --------- --------- ---------
Operating income 2,621 2,875 4,103 4,459
Interest, dividend and other income
(expense), net 671 321 763 543
Net unrealized gain (loss) on marketable
securities 427 (411) 1,188 (1,304)
--------- --------- --------- ---------
Income before income taxes 3,719 2,785 6,054 3,698
Income tax provision 1,473 1,118 2,383 1,484
--------- --------- --------- ---------
Net income $2,246 $1,667 $3,671 $2,214
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income per common share $1.71 $1.03 $2.79 $1.37
--------- --------- --------- ---------
--------- --------- --------- ---------
Weighted average common shares
outstanding 1,314,112 1,612,721 1,314,112 1,612,721
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See Notes to Financial Statements
4
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
----------------------
JULY 1, JULY 2,
1995 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $120,881 $124,609
Cash paid to suppliers and employees (116,335) (118,950)
Interest and dividends received 1,329 1,456
Interest paid (353) (739)
Income taxes paid (1,665) (1,104)
-------- --------
Net cash provided by operating activities 3,857 5,272
-------- --------
Cash flows from investing activities:
Capital expenditures (2,497) (4,422)
Sale of (investment in) marketable securities 2,803 (11,179)
Proceeds from sale of GPS 2,511 (43)
Proceeds from the sale of property, plant and
equipment, liquor licenses and leasehold interests 45 22
Payments received on notes from the sale of property,
plant and equipment and liquor licenses 1 18
-------- --------
Net cash provided by (used in) investing activities 2,863 (15,604)
-------- --------
Cash flows from financing activities:
Payments related to sale of discontinued operations (2,413)
Principal payments under capital lease obligations (254) (621)
Payment of loan from officer/director 1,000
Principal payments on long-term debt (93) (5,397)
-------- --------
Net cash used in financing activities (347) (7,431)
-------- --------
Net increase (decrease) in cash 6,373 (17,763)
Cash and cash equivalents at beginning of year 19,241 39,526
-------- --------
Cash and cash equivalents at end of quarter $25,614 $21,763
-------- --------
-------- --------
</TABLE>
See Notes to Financial Statements
5
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
Reconciliation of net income to net cash provided by operating activities:
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
TWENTY-SIX WEEKS ENDED
----------------------
JULY 1, JULY 2,
1995 1994
------- -------
<S> <C> <C>
Net income $3,671 $2,214
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,679 1,938
Unrealized (gain) loss on marketable securities (1,188) 1,304
Loss on sale of marketable securities 363 352
Noncompete payment on sale of GPS (86)
Provision for losses on accounts and notes receivable 80 71
Net (gain) loss from the sale of property, plant and equipment,
liquor licenses and early lease terminations (35) 10
Notes receivable from officer/director (1) (7)
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 490 316
Inventories 1,106 80
Prepaid and other 40 (540)
Other assets (81) (48)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities (2,008) 437
Deferred income taxes (401) (386)
Other liabilities 228 (376)
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Net cash provided by operating activities $3,857 $5,272
-------- -------
-------- -------
</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.
Intercompany balances and transactions are eliminated. On May 27, 1994, the
Company sold GPS Pool Supply, Inc. ("GPS") and therefore, after that date,
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. 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 related to the first
arbitration and no expenses related to the second arbitration have been
recognized in the statements of operations of the Company.
3. NET INCOME PER SHARE:
Net income per share is based on the weighted average number of common shares
outstanding during the period. Due to the purchase of 298,612 shares of
Class A common stock in the third and fourth quarters of 1994, the weighted
average number of shares is reduced in the second quarter and first half of
1995 compared to the same periods of 1994, which calculation in part resulted
in higher earnings per share in the second quarter and first half of 1995 as
compared to the same periods of 1994.
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 1995, the Company had net income of $2,246,000
compared to net income of $1,667,000 during the second quarter of 1994.
Pretax income was $3,719,000 for the second quarter of
7
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
1995 compared to pretax income of $2,785,000 for the second quarter of 1994.
As described below, included in the second quarter of 1995 income is $427,000
of net unrealized gains related to marketable securities as compared to net
unrealized losses of $411,000 in the second quarter of 1994.
During the second quarter of 1995, the Company's operating income from its
supermarket operations was $2,621,000 compared to operating income of
$2,850,000 during the second quarter of 1994. Sales from the Company's 12
supermarkets in the greater Los Angeles area were $60,317,000 in the second
quarter of 1995, an increase of 1.6% from the second quarter of 1994, when
sales were $59,351,000. Much of the comparative second quarter sales
increase is attributable to the timing of the Passover/Easter holidays which
occurred in the second quarter in 1995 versus the first quarter in 1994.
However, sales have been negatively impacted by competitors opening new
stores within Gelson's trading areas. In November 1993, the Company
purchased a neighborhood shopping center in Calabasas, California and is
currently developing a new neighborhood shopping center on the site which
will include a Gelson's market scheduled to open in late 1995. The Company
has also secured an option to purchase a piece of real estate and signed two
long-term leases, with the intent to open three new Gelson's markets, subject
to the Company's due diligence, receipt of necessary entitlements and the
developer fulfilling certain conditions. The Company is continually
searching for additional store locations.
The Company's gross profit from supermarket operations as a percentage of
sales was 39.4% in the second quarter of 1995 compared to 39.0% in the same
period of 1994 due to a sales mix in 1995 favoring higher gross margin
categories.
Delivery, selling, general and administrative ("DSG&A") expenses for
supermarket operations as a percentage of sales were 35.0% in the second
quarter of 1995 compared to 34.2% the second quarter of 1994. In the second
quarter of 1995 the Company recognized contractual credits taken against
health and welfare payments due the retail clerks and meat cutters unions of
approximately $542,000 (versus $1,380,000 in 1994). The Company will
recognize approximately $450,000 in remaining health and welfare credits in
the third quarter of 1995 compared to $38,000 recognized in the third quarter
of 1994. Improved claims history resulted in lower workers' compensation
expense in 1995 compared to 1994.
The swimming pool chemical processing and distribution operations, conducted
by GPS, was sold on May 27, 1994; therefore, the second quarter of 1995 does
not reflect any GPS operating results. The second quarter of 1994 reflects a
GPS operating gain of $25,000 on sales of $2,274,000.
Interest and dividend income was $739,000 in the second quarter of 1995
compared to $885,000 for the same period in 1994. Decreased levels of
short-term investments were partially offset by an increase in earnings
rates.
Interest expense decreased to $177,000 in the second quarter of 1995 from
$344,000 in the second quarter of 1994. The Company paid off, at maturity,
the $634,000 balance of a mortgage in the first quarter of 1994 and the
$4,663,000 balance of another mortgage in the second quarter of 1994.
Other income (expense) includes realized gains (losses) on the sale of
marketable securities of $130,000 and ($285,000) in the second quarters of
1995 and 1994, respectively.
8
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
In the second quarter of 1995, the market value of the Company's holdings in
marketable securities increased. The Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115"), which became effective for fiscal years beginning
after December 15, 1993, requires that unrealized holding gains and losses
for certain marketable securities shall be included in the determination of
net income. As a result, net unrealized gains of $427,000 related to
marketable securities were reported in the second quarter of 1995 compared to
net unrealized losses of $411,000 in the second quarter of 1994.
YEAR-TO-DATE ANALYSIS
During the first six months of 1995, the Company had net income of
$3,671,000 compared to net income of $2,214,000 during the first six months
of 1994. Pretax income was $6,054,000 for the first six months of 1995
compared to pretax income of $3,698,000 for the first six months of 1994.
As described below, included in the first six months of 1995 income is
$1,188,000 of net unrealized gains related to marketable securities as
compared to net unrealized losses of $1,304,000 in the first six months of
1994.
During the first six months of 1995, the Company's operating income from its
supermarket operations was $4,103,000 compared to operating income of
$4,646,000 during the first six months of 1994. Sales from the Company's 12
supermarkets in the greater Los Angeles area were $120,258,000 in the first
six months of 1995, virtually unchanged from the first six months of 1994,
when sales were $120,164,000. Sales have been negatively impacted by
competitors opening new stores in Gelson's trading areas. In November 1993,
the Company purchased a neighborhood shopping center in Calabasas, California
and is currently developing a new neighborhood shopping center on the site
which will include a Gelson's market scheduled to open in late 1995. The
Company has also secured an option to purchase a parcel of real estate and
has signed two long-term leases, with the intent to open three new Gelson's
markets, subject to the Company's due diligence, receipt of necessary
entitlements and the developer fulfilling certain conditions. The Company is
continually searching for additional store locations.
The Company's gross profit from supermarket operations as a percentage of
sales was 39.0% in the first six months of 1995 compared to 38.8% in the same
period of 1994.
Delivery, selling, general and administrative ("DSG&A") expenses for
supermarket operations as a percentage of sales were 35.6% in the first six
months of 1995 compared to 34.9% the first six months of 1994. In the first
six months of 1994 the Company recorded a charge to operations of $1,300,000
to cover the estimated uninsured portion of losses related to the January 17,
1994 earthquake centered in Northridge, California. This increase in DSG&A
expense was partially offset by contractual credits taken in 1994 against
health and welfare payments due the retail clerks and meat cutters unions of
approximately $2,460,000 (versus credits of $542,000 in 1995). Improved
claims history resulted in lower workers' compensation expense in 1995
compared to 1994.
The swimming pool chemical processing and distribution operations, conducted
by GPS, was sold on May 27, 1994; therefore, the first six months of 1995
does not reflect any GPS operating results. The first six months of 1994
reflects a GPS operating loss of $187,000 on sales of $4,612,000.
9
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
Interest and dividend income was $1,427,000 in the first six months of 1995
compared to $1,561,000 for the same period in 1994. Decreased levels of
short-term investments were partially offset by an increase in earnings
rates.
Interest expense decreased to $361,000 in the first six months of 1995 from
$704,000 in the first six months of 1994. The Company paid off, at maturity,
the $634,000 balance of a mortgage in the first quarter of 1994 and the
$4,663,000 balance of another mortgage in the second quarter of 1994.
Other income (expense) includes realized losses on the sale of marketable
securities of $363,000 and $352,000 in the first six months of 1995 and 1994,
respectively.
In the first six months of 1995, the market value of the Company's holdings
in marketable securities increased. As a result, net unrealized gains of
$1,188,000 related to marketable securities were reported in the first six
months of 1995 compared to net unrealized losses of $1,304,000 in the first
six months of 1994.
CAPITAL EXPENDITURES/LIQUIDITY
The Company plans to utilize cash-on-hand (including marketable securities)
and cash flow from operations to fund capital expenditures in 1995. There
have been no material changes in the utilization of the Company's lines of
credit.
In March 1995, the $2,425,000 outstanding balance of the promissory note due
the Company by the purchaser of GPS Pool Supply, Inc. was paid in full.
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 27, 1995.
(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. One management nominee was elected by Class A shareholders and
two management nominees were elected by Class B stockholders. They are as
follows:
<TABLE>
<CAPTION>
VOTES
---------
<S> <C>
Class A: Daniel Lembark
For 911,106
Against 0
Abstain 1,351
Class B: Bernard Briskin - For 3,420,640
John G. Danhakl - For 3,420,640
</TABLE>
There were no votes against or abstaining on Class B stock.
Continuing directors whose terms of office do not expire until 1996 or 1997
are:
Robert A. Davidow Frederick A. Schnell
Stuart A. Krieger Ben Winters
(c) 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 1995 fiscal year was approved by
the following vote:
<TABLE>
<CAPTION>
CLASS A STOCK CLASS B STOCK
------------- -------------
<S> <C> <C>
For 910,681 3,420,640
Against 616 0
Abstain 1,160 0
</TABLE>
Broker non-votes were 150 shares of Class A stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
11
<PAGE>
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 11, 1995 ERNEST T. KLINGER
----------------------- -----------------------------------------
Ernest T. Klinger
Vice President Finance and Administration
and Chief Financial Officer
(Authorized Signatory)
12
<PAGE>
ARDEN GROUP, INC.
and consolidated subsidiary
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
EXHIBIT
-------
<C> <S>
27. Financial Data Schedule.
</TABLE>
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUL-01-1995
<CASH> 25,614
<SECURITIES> 17,722
<RECEIVABLES> 7,609
<ALLOWANCES> 729
<INVENTORY> 9,559
<CURRENT-ASSETS> 61,916
<PP&E> 51,177
<DEPRECIATION> 24,098
<TOTAL-ASSETS> 92,464
<CURRENT-LIABILITIES> 21,802
<BONDS> 6,169
<COMMON> 413
0
0
<OTHER-SE> 61,093
<TOTAL-LIABILITY-AND-EQUITY> 92,464
<SALES> 120,258
<TOTAL-REVENUES> 120,258
<CGS> 73,307
<TOTAL-COSTS> 73,307
<OTHER-EXPENSES> 42,768
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 361
<INCOME-PRETAX> 6,054
<INCOME-TAX> 2,383
<INCOME-CONTINUING> 3,671
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,671
<EPS-PRIMARY> 2.79
<EPS-DILUTED> 2.79
</TABLE>
