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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 March 30, 1996
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
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(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
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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 .
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The number of shares outstanding of the registrant's classes of common stock as
of March 30, 1996 was:
785,753 of Class A common stock
343,246 of Class B common stock
This report contains a total of 12 pages including exhibits.
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
A S S E T S
March 30, December 30,
1996 1995
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Current assets:
Cash and cash equivalents $ 4,172 $10,102
Marketable securities 21,476 20,160
Accounts and notes receivable, net 5,810 9,384
Inventories 10,297 10,172
Prepaid and other 2,949 2,646
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Total current assets 44,704 52,464
Notes receivable 55 57
Property for resale or sublease 1,457 1,461
Property, plant and equipment, at cost less
accumulated depreciation and amortization
of $25,339 and $24,398, respectively 38,864 33,458
Other assets 2,076 2,038
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Total assets $87,156 $89,478
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See Notes to Financial Statements
2
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PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
BALANCE SHEETS (Unaudited)
(In Thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 30, December 30,
1996 1995
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Current liabilities:
Accounts payable, trade $ 9,380 $11,345
Other current liabilities 11,732 11,335
Current portion of long-term debt 1,040 1,078
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Total current liabilities 22,152 23,758
Long-term debt, including obligations under capital
leases of $3,733 and $3,782, respectively 7,455 7,695
Deferred income taxes 1,360 1,583
Other liabilities 2,601 2,615
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Total liabilities 33,568 35,651
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Commitments and contingent liabilities
Stockholders' equity:
Class A common stock 281 283
Class B common stock 86 86
Capital surplus 5,695 5,718
Notes receivable from officer/director (369) (369)
Retained earnings 51,648 51,862
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57,341 57,580
Less: treasury stock, at cost 3,753 3,753
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Total stockholders' equity 53,588 53,827
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Total liabilities and stockholders' equity $87,156 $89,478
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See Notes to Financial Statements
3
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PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF OPERATIONS (Unaudited)
(In Thousands Except Per Share and Other Data)
Thirteen Weeks Ended
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March 30, April 1,
1996 1995
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Sales $60,616 $59,941
Cost of sales 36,970 36,732
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Gross profit 23,646 23,209
Delivery, selling, general and
administrative expenses 23,073 21,727
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Operating income 573 1,482
Interest, dividend and other income
(expense), net 379 92
Net unrealized gain (loss) on
marketable securities (713) 761
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Income before income taxes 239 2,335
Income tax provision 105 910
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Net income $ 134 $ 1,425
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Net income per common share $ .12 $ 1.08
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Weighted average common shares outstanding 1,133,141 1,314,112
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See Notes to Financial Statements
4
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PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)
Thirteen Weeks Ended
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March 30, April 1,
1996 1995
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Cash flows from operating activities:
Cash received from customers $ 61,589 $ 60,579
Cash paid to suppliers and employees (61,689) (58,668)
Interest and dividends received 404 629
Income taxes paid (250) (305)
Interest paid (172) (207)
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Net cash provided by operating activities (118) 2,028
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Cash flows from investing activities:
Capital expenditures (8,127) (1,085)
Property in escrow 2,664
Proceeds from the sale of property, plant and
equipment, liquor licenses and leasehold interests 2,239 6
Investment in marketable securities (1,938) 2,046
Proceeds from sale of GPS 2,500
Payments received on notes from the sale of property,
plant and equipment and liquor licenses 1
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Net cash provided by (used in) investing
activities (5,161) 3,467
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Cash flows from financing activities:
Purchase and retirement of stock (373)
Principal payments on long-term debt (187) (46)
Principal payments under capital lease obligations (91) (126)
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Net cash used in financing activities (651) (172)
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Net increase (decrease) in cash (5,930) 5,323
Cash at beginning of year 10,102 19,241
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Cash at end of quarter $ 4,172 $ 24,564
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See Notes to Financial Statements
5
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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:
Thirteen Weeks Ended
----------------------
March 30, April 1,
1996 1995
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Net income $ 134 $ 1,425
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 1,060 841
Unrealized (gain) loss on marketable securities 713 (761)
Net (gain) loss from the sale of property, plant
and equipment, liquor licenses and early lease
terminations (566) 2
(Gain) loss on sale of marketable securities (91) 493
Noncompete payment on sale of GPS (75)
Provision for losses on accounts and
notes receivable 33 26
Notes receivable from officer/director (1)
Change in assets and liabilities net of effects from
noncash investing and financing activities:
(Increase) decrease in assets:
Accounts and notes receivable 878 518
Inventories (125) 955
Prepaid expenses (303) (97)
Other assets (46) (8)
Increase (decrease) in liabilities:
Accounts payable and other current liabilities (1,568) (1,145)
Deferred income taxes (223) (236)
Other liabilities (14) 91
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Net cash provided by operating activities $ (118) $ 2,028
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See Notes to Financial Statements
6
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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. 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 certain 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 Company's purchase of 179,229
shares of its Class A common stock for $11,193,000 in 1995 and an additional
purchase of 5,884 shares for $373,000 in 1996, the weighted average number of
shares is reduced in the first quarter of 1996 compared to the first quarter
of 1995.
7
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PART I. FINANCIAL INFORMATION, Continued
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
FIRST QUARTER ANALYSIS
During the first quarter of 1996, the Company had net income of $134,000
compared to net income of $1,425,000 during the first quarter of 1995. Pretax
income was $239,000 for the first quarter of 1996 compared to pretax income of
$2,335,000 for the first quarter of 1995. As described below, included in the
first quarter of 1996 income is $713,000 of net unrealized losses related to
marketable securities as compared to net unrealized gains of $761,000 in the
first quarter of 1995.
During the first quarter of 1996, the Company's operating income was $573,000
compared to operating income of $1,482,000 during the first quarter of 1995.
Sales from the Company's 12 supermarkets in the greater Los Angeles area were
$60,616,000 in the first quarter of 1996, an increase of 1.1% from the first
quarter of 1995, when sales were $59,941,000. The first quarter of 1995
included sales of a Mayfair Market in West Hollywood which was closed in October
1995. In January 1996, the Company opened a shopping center it developed in
Calabasas, California which includes a Gelson's market and spaces for additional
tenants. Opening sales of the Calabasas market have not met original
projections. One factor adversely affecting sales is the high vacancy at the
center. Although the Company has entered into leases for most of the tenant
spaces, many of them were not occupied during the first quarter. It is
anticipated that sales will improve as the other tenants commence business.
Although same store sales increased .9% in the first quarter of 1995 compared to
the prior year, sales have been negatively impacted by competitors opening new
stores.
In January 1996, the Company purchased a site for a Gelson's Market in Santa
Barbara. The Company has also signed two long-term leases to open new Gelson's
markets subject to the Company's due diligence, receipt of necessary
entitlements and the developer fulfilling certain conditions.
The Company's gross profit from supermarket operations as a percentage of sales
was 39.0% in the first quarter of 1996 compared to 38.7% in the same period of
1995.
Delivery, selling, general and administrative ("DSG&A") expenses for supermarket
operations as a percentage of sales were 38.1% in the first quarter of 1996
compared to 36.2% the first quarter of 1995. The increase in 1996 is primarily
due to preopening expenses, promotional costs and other operating costs
associated with opening the new Gelson's market in Calabasas. Additionally,
certain costs relating to the sublease of the former AMG Holdings headquarters
facility (effective April 1996) were expensed in the first quarter of 1996. In
each case, the majority of these costs are of a nonrecurring nature.
Depreciation expense increased in the first quarter of 1996 compared to the same
period in 1995 due to an increase in real estate and remodel expenditures during
the past year. Included in 1996 DSG&A is a gain of $584,000 relating to the
property sale of a former Mayfair market located in West Hollywood, California.
8
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PART I. FINANCIAL INFORMATION, Continued
Interest and dividend income was $487,000 in the first quarter of 1996 compared
to $688,000 for the same period in 1995 due primarily to decreased levels of
short-term investments.
Interest expense was $188,000 in the first quarter of 1996 compared to $184,000
in the first quarter of 1995.
Other income (expense) includes realized gains (losses) on the sale of
marketable securities of $91,000 and ($493,000) in the first quarters of 1996
and 1995, respectively.
In the first quarter of 1996, the market value of the Company's holdings in
marketable securities decreased. The Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS 115") requires that unrealized holding gains and losses for
certain marketable securities shall be included in the determination of net
income. As a result, the Company experienced net unrealized losses of $713,000
related to marketable securities in the first quarter of 1996 compared to net
unrealized gains of $761,000 in the first quarter of 1995.
CAPITAL EXPENDITURES/LIQUIDITY
The Company plans to utilize its lines of credit, cash-on-hand (including
marketable securities) and cash flow from operations to fund capital
expenditures in 1996. In May 1996, the Company borrowed $3,000,000 against its
revolving line of credit to meet short term working capital needs.
9
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PART II. OTHER INFORMATION
ITEMS 1. THROUGH 5.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedules
(b) Reports on Form 8-K:
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ARDEN GROUP, INC.
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Registrant
Date May 14, 1996 ERNEST T. KLINGER
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Ernest T. Klinger
Vice President Finance and Administration
and Chief Financial Officer
(Authorized Signatory)
10
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ARDEN GROUP, INC.
AND CONSOLIDATED SUBSIDIARY
INDEX TO EXHIBITS
EXHIBIT
27. Financial Data Schedules.
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 4,172
<SECURITIES> 21,476
<RECEIVABLES> 6,544
<ALLOWANCES> 734
<INVENTORY> 10,297
<CURRENT-ASSETS> 44,704
<PP&E> 64,203
<DEPRECIATION> 25,339
<TOTAL-ASSETS> 87,156
<CURRENT-LIABILITIES> 22,152
<BONDS> 7,455
0
0
<COMMON> 367
<OTHER-SE> 53,221
<TOTAL-LIABILITY-AND-EQUITY> 87,156
<SALES> 60,616
<TOTAL-REVENUES> 60,616
<CGS> 36,970
<TOTAL-COSTS> 36,970
<OTHER-EXPENSES> 23,040
<LOSS-PROVISION> 33
<INTEREST-EXPENSE> 188
<INCOME-PRETAX> 239
<INCOME-TAX> 105
<INCOME-CONTINUING> 134
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
