<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 September 30, 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.
------------------------------------------------
(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 September 30, 1995 was:
970,866 of Class A common stock
343,246 of Class B common stock
This report contains a total of 13 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>
September 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $27,074 $19,241
Marketable securities 17,371 19,700
Notes and accounts receivable, net 7,179 8,580
Inventories 9,263 10,665
Prepaid and other 1,848 2,181
--------- ---------
Total current assets 62,735 60,367
Notes and contracts receivable 57 1,366
Property for resale or sublease, at lower
of cost or market 1,578 1,539
Property, plant and equipment, at cost less
accumulated depreciation and amortization
of $24,213 and $22,713, respectively 29,388 26,225
Other assets 1,873 1,825
--------- ---------
Total assets $95,631 $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>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable, trade $9,261 $ 9,994
Other current liabilities 12,332 13,193
Current portion of long-term debt 574 674
--------- ---------
Total current liabilities 22,167 23,861
Long-term debt, including obligations under capital
leases of $4,271 and $4,541, respectively 6,042 6,465
Deferred income taxes 1,499 1,109
Other liabilities 2,616 2,051
--------- ---------
Total liabilities 32,324 33,486
--------- ---------
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 60,677 55,205
--------- ---------
67,060 61,589
Less: treasury stock, at cost 3,753 3,753
--------- ---------
Total stockholders' equity 63,307 57,836
--------- ---------
Total liabilities and stockholders' equity $95,631 $91,322
--------- ---------
--------- ---------
</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 Thirty-Nine Weeks Ended
------------------------ ---------------------------
September 30, October 1, September 30, October 1,
1995 1994 1995 1994
-------- --------- ------------ -----------
<S> <C> <C> <C> <C>
Sales $60,968 $59,702 $181,226 $184,478
Cost of sales 37,181 36,328 110,488 113,388
---------- ---------- ---------- ----------
Gross profit 23,787 23,374 70,738 71,090
Delivery, selling, general and administrative
expenses 21,656 22,021 64,504 65,278
---------- ---------- ---------- ----------
Operating income 2,131 1,353 6,234 5,812
Interest, dividend and other income
(expense), net 558 591 1,321 1,134
Net unrealized gain (loss) on marketable
securities 296 164 1,484 (1,140)
---------- ---------- ---------- ----------
Income before income taxes 2,985 2,108 9,039 5,806
Income tax provision 1,184 854 3,567 2,338
---------- ---------- ---------- ----------
Net income $1,801 $1,254 $5,472 $3,468
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per common share $1.37 $0.81 $4.16 $2.18
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average common shares
outstanding 1,314,112 1,557,880 1,314,112 1,594,442
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</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>
Thirty-Nine Weeks Ended
--------------------------------
September 30, October 1,
1995 1994
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $181,549 $184,844
Cash paid to suppliers and employees (171,696) (176,501)
Interest and dividends received 2,035 2,301
Interest paid (558) (767)
Income taxes paid (3,392) (1,828)
---------- ----------
Net cash provided by operating activities 7,938 8,049
---------- ----------
Cash flows from investing activities:
Capital expenditures (5,666) (5,415)
Sale of (investment in) marketable securities 3,516 (1,063)
Proceeds from sale of GPS 2,511 393
Proceeds from the sale of property, plant and
equipment, liquor licenses and leasehold interests 56 32
Payments received on notes from the sale of property,
plant and equipment and liquor licenses 2 19
---------- ----------
Net cash provided by (used in) investing activities 419 (6,034)
---------- ----------
Cash flows from financing activities:
Purchase and retirement of common stock (14,949)
Payments related to sale of discontinued operations (2,413)
Principal payments under capital lease obligations (382) (879)
Payment of loan from officer/director 1,000
Principal payments on long-term debt (142) (5,440)
---------- ----------
Net cash used in financing activities (524) (22,681)
---------- ----------
Net increase (decrease) in cash 7,833 (20,666)
Cash and cash equivalents at beginning of year 19,241 39,526
---------- ----------
Cash and cash equivalents at end of quarter $27,074 $18,860
---------- ----------
---------- ----------
</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>
Thirty-Nine Weeks Ended
---------------------------
September 30, October 1,
1995 1994
----------- ----------
<S> <C> <C>
Net income $5,472 $3,468
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,549 2,794
Unrealized (gain) loss on marketable securities (1,484) 1,140
Loss on sale of marketable securities 297 614
Provision for losses on accounts and notes receivable 96 97
Net (gain) loss from the sale of property, plant and equipment,
liquor licenses and early lease terminations (31) 3
Notes receivable from officer/director (1) (11)
Gain on sale of GPS (86) (93)
Change in assets and liabilities net of effects from noncash
investing and financing activities:
(Increase) decrease in assets:
Notes and accounts receivable 187 761
Inventories 1,402 125
Prepaid and other 333 (895)
Other assets (158) 207
Increase (decrease) in liabilities:
Accounts payable and other current liabilities (1,593) 668
Deferred income taxes 390 (337)
Other liabilities 565 (492)
---------- ----------
Net cash provided by operating activities $7,938 $8,049
---------- ----------
---------- ----------
</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 lower in the third quarter and
first nine months of 1995 compared to the same periods of 1994, which
calculation in part resulted in higher earnings per share in the third
quarter and first nine months of 1995 as compared to the same periods of
1994.
7
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THIRD QUARTER ANALYSIS
During the third quarter of 1995, the Company had net income of $1,801,000
compared to net income of $1,254,000 during the third quarter of 1994. Pretax
income was $2,985,000 for the third quarter of 1995 compared to pretax income
of $2,108,000 for the third quarter of 1994. During the third quarter of 1995,
the Company's operating income from its supermarket operations was $2,131,000
compared to operating income of $1,353,000 during the third quarter of 1994.
Sales from the Company's 12 supermarkets in the greater Los Angeles area were
$60,968,000 in the third quarter of 1995, an increase of 2.1% from the third
quarter of 1994, when sales were $59,702,000. 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
early 1996. 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. In October 1995, the
Company closed a Mayfair Market located in West Hollywood, California and
entered into a long-term lease with a tenant.
The Company's gross profit from supermarket operations as a percentage of sales
was 39.0% in the third quarter of 1995 compared to 39.2% in the same period of
1994.
Delivery, selling, general and administrative ("DSG&A") expenses for supermarket
operations as a percentage of sales were 35.5% in the third quarter of 1995
compared to 36.9% the third quarter of 1994. In the third quarter of 1995 the
Company recognized contractual credits against health and welfare payments due
the retail clerks and meat cutters unions of approximately $424,000 (versus
$38,000 in 1994). Improved claims history resulted in lower workers'
compensation expense in 1995 compared to 1994.
Interest and dividend income was $686,000 in the third quarter of 1995 compared
to $781,000 for the same period in 1994. Decreased levels of short-term
investments were partially offset by an increase in earnings rates.
Interest expense was $183,000 in the third quarter of 1995 compared to $54,000
in the third quarter of 1994.
Other income (expense) includes realized gains (losses) on the sale of
marketable securities of $66,000 and ($262,000) in the third quarters of 1995
and 1994, respectively.
8
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
In the third 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 $296,000 related to marketable
securities were reported in the third quarter of 1995 compared to net unrealized
gains of $164,000 in the third quarter of 1994.
YEAR-TO-DATE ANALYSIS
During the first nine months of 1995, the Company had net income of $5,472,000
compared to net income of $3,468,000 during the first nine months of 1994.
Pretax income was $9,039,000 for the first nine months of 1995 compared to
pretax income of $5,806,000 for the first nine months of 1994. During the first
nine months of 1995, the Company's operating income from its supermarket
operations was $6,234,000 compared to operating income of $5,999,000 during the
first nine months of 1994. As described below, included in the first nine
months of 1995 income is $1,484,000 of net unrealized gains related to
marketable securities as compared to net unrealized losses of $1,140,000 in the
first nine months of 1994.
Sales from the Company's 12 supermarkets in the greater Los Angeles area were
$181,226,000 in the first nine months of 1995, an increase of 0.8% from the
first nine months of 1994, when sales were $179,866,000. 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
early 1996. 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. In October 1995, the
Company closed a Mayfair Market located in West Hollywood, California and
entered into a long-term lease with a tenant.
The Company's gross profit from supermarket operations as a percentage of sales
was 39.0% in the first nine months of 1995 compared to 38.9% 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% for both the first nine months of
1995 and 1994, respectively. In the first quarter 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. Additionally, in 1994 the Company recognized contractual credits
against health and welfare payments due the retail clerks and meat cutters
unions of approximately $2,500,000 (versus credits of $966,000 in 1995).
Improved claims history resulted in lower workers' compensation expense in 1995
compared to 1994.
9
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
The swimming pool chemical processing and distribution operations, conducted by
GPS, posted an operating loss of $187,000 on sales of $4,612,000 prior to the
sale of GPS on May 27, 1994; therefore, the first nine months of 1995 does not
reflect any GPS operating results.
Interest and dividend income was $2,113,000 in the first nine months of 1995
compared to $2,342,000 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 $544,000 in the first nine months of 1995 from
$758,000 in the first nine months of 1994. The Company paid off, at maturity, a
$634,000 balance of a mortgage in the first quarter of 1994 and a $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 $297,000 and $614,000 in the first nine months of 1995 and 1994,
respectively.
In the first nine months of 1995, the market value of the Company's holdings in
marketable securities increased. As a result, net unrealized gains of
$1,484,000 related to marketable securities were reported in the first nine
months of 1995 compared to net unrealized losses of $1,140,000 in the first nine
months of 1994.
CAPITAL EXPENDITURES/LIQUIDITY
The Company plans to utilize cash-on-hand (including marketable securities), a
fixture financing line of credit 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
ITEMS 1. THROUGH 5.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
None
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARDEN GROUP, INC.
------------------------------
Registrant
Date November 10, 1995 ERNEST T. KLINGER
----------------------- -------------------------------
Ernest T. Klinger
Vice President Finance and Administration
and Chief Financial Officer
(Authorized Signatory)
11
<PAGE>
ARDEN GROUP, INC.
AND CONSOLIDATED SUBSIDIARY
INDEX TO EXHIBITS
EXHIBIT
27. Financial Data Schedule.
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 27,074
<SECURITIES> 17,371
<RECEIVABLES> 7,898
<ALLOWANCES> 719
<INVENTORY> 9,263
<CURRENT-ASSETS> 62,735
<PP&E> 53,601
<DEPRECIATION> 24,213
<TOTAL-ASSETS> 95,631
<CURRENT-LIABILITIES> 22,167
<BONDS> 6,042
<COMMON> 413
0
0
<OTHER-SE> 62,894
<TOTAL-LIABILITY-AND-EQUITY> 95,613
<SALES> 181,226
<TOTAL-REVENUES> 181,226
<CGS> 110,488
<TOTAL-COSTS> 110,488
<OTHER-EXPENSES> 64,408
<LOSS-PROVISION> 96
<INTEREST-EXPENSE> 544
<INCOME-PRETAX> 9,039
<INCOME-TAX> 3,567
<INCOME-CONTINUING> 5,472
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,472
<EPS-PRIMARY> 4.16
<EPS-DILUTED> 4.16
</TABLE>
