<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended October 2, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------ EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-9904
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ARDEN GROUP, INC.
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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
- ---------------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 638-2842
----------------------
NO CHANGE
- ------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
the filing requirements for at least the past 90 days. Yes X No
----- -----
The number of shares outstanding of the registrant's classes of common stock
as of October 2, 1999 was:
2,216,488 of Class A common stock
1,368,984 of Class B common stock
This report contains a total of 16 pages including exhibits.
1
<PAGE>
PART I. FINANCIAL INFORMATION
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
-----------------------------------------------------------
BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS October 2, 1999 January 2, 1999
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash $ 11,690 $ 13,647
Marketable securities 19,123 19,524
Accounts and notes receivable, net 5,268 5,454
Inventories 11,336 10,796
Other current assets 2,470 1,865
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Total current assets 49,887 51,286
Property for resale or sublease 1,271 1,326
Property, plant and equipment, at cost, less accumulated depreciation
and amortization of $37,492 and $33,489, respectively 46,623 37,759
Other assets 2,923 2,755
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Total assets $ 100,704 $ 93,126
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Accounts payable, trade $ 12,580 $ 11,407
Other current liabilities 11,975 12,825
Current portion of long-term debt 1,330 1,307
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Total current liabilities 25,885 25,539
Long-term debt 5,323 6,369
Deferred income taxes 1,298 1,556
Other liabilities 1,398 1,304
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Total liabilities 33,904 34,768
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Commitments and contingent liabilities
Stockholders' equity:
Common stock, Class A 894 894
Common stock, Class B 342 342
Capital surplus 3,866 3,866
Notes receivable from officer/director (215) (215)
Unrealized gain (loss) on available-for-sale securities (293) 393
Retained earnings 65,959 56,831
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70,553 62,111
Less, treasury stock, at cost 3,753 3,753
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Total stockholders' equity 66,800 58,358
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Total liabilities and stockholders' equity $ 100,704 $ 93,126
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
2
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
-------------------------------------------------------
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
(In Thousands, Except Share and Per Share Data)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------- -------------------------
October 2, October 3, October 2, October 3,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Sales $ 79,172 $ 74,120 $ 234,986 $ 217,276
Cost of sales 46,581 43,746 139,192 129,080
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Gross profit 32,591 30,374 95,794 88,196
Delivery, selling, general and administrative expenses 28,851 25,767 82,846 76,338
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 3,740 4,607 12,948 11,858
Interest and dividend income 367 327 1,092 919
Other income (expense), net (8) 10 (97) (5)
Interest expense (153) (182) (474) (572)
- ----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 3,946 4,762 13,469 12,200
Income tax provision 1,608 1,908 4,341 4,869
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Net income $ 2,338 $ 2,854 $ 9,128 $ 7,331
----------- ----------- ----------- -----------
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Other comprehensive income (loss), net of tax:
Unrealized gain (loss) from available-for-sale securities:
Unrealized holding gains (losses) arising during
the period (482) (176) (798) 76
Reclassification adjustment for gains (losses)
included in net income 112 66
- ----------------------------------------------------------------------------------------------------------------------------
Net unrealized gain (loss), net of income tax expense
(benefits) of $(332) and $(467) for 1999 and $(110)
and $103 for 1998, respectively (482) (176) (686) 142
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Comprehensive income $ 1,856 $ 2,678 $ 8,442 $ 7,473
=========== =========== =========== ===========
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Basic net income per common share:
Net income $ .65 $ .80 $ 2.55 $ 2.04
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Weighted average common shares outstanding 3,585,472 3,585,472 3,585,472 3,585,472
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
3
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
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STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
(In Thousands)
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Thirty-Nine Weeks Ended
-------------------------------------
October 2, 1999 October 3, 1998
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<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 235,931 $ 217,439
Cash paid to suppliers and employees (216,617) (203,545)
Interest and dividends received 1,093 907
Interest paid (521) (585)
Income taxes paid (6,886) (4,837)
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Net cash provided by operating activities 13,000 9,379
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Cash flows from investing activities:
Capital expenditures (13,115) (3,239)
Purchases of available-for-sale securities (3,484) (3,463)
Sales of available-for-sale securities 2,658 250
Proceeds from the sale of property, plant and
equipment, liquor licenses and leasehold
interests 7 3,163
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (13,934) (3,289)
- -----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Principal payments on long-term debt (833) (953)
Principal payments under capital lease obligations (190) (170)
Purchase of Company debentures (23)
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Net cash used in financing activities (1,023) (1,146)
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Net increase (decrease) in cash (1,957) 4,944
Cash at beginning of period 13,647 7,099
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Cash at end of period $ 11,690 $ 12,043
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
4
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
STATEMENTS OF CASHFLOWS, Continued
<TABLE>
<CAPTION>
(In Thousands)
- -----------------------------------------------------------------------------------------------------------------------
Thirty-Nine Weeks Ended
-------------------------------------
October 2, 1999 October 3, 1998
- -----------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 9,128 $ 7,331
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 4,217 4,221
Provision for losses on accounts and
notes receivable 68 69
Deferred income taxes (258) (105)
Net (gain) loss from the disposal of property, plant
and equipment 68 (459)
Realized loss on marketable securities, net 74 1
Gain on purchase of 7% debentures (2)
Change in assets and liabilities net of effects from investment and
financing activities:
(Increase) decrease in assets:
Accounts and notes receivable 142 416
Inventories (540) 1,289
Other current assets (605) (628)
Other assets (202) (17)
Increase (decrease) in liabilities:
Accounts payable and other accrued expenses 347 (2,575)
Other liabilities 561 (162)
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Net cash provided by operating activities $ 13,000 $ 9,379
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>
5
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY
-----------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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.
The accompanying consolidated financial statements for the quarter and
nine months ended October 2, 1999 and October 3, 1998 have been prepared
in accordance with generally accepted accounting principles ("GAAP").
These financial statements have not been audited by independent public
accountants but include all adjustments which, in the opinion of
management of the Company, are necessary for a fair presentation of the
financial position and the results of operations for the periods
presented. The accompanying consolidated balance sheet as of January 2,
1999 has been derived from audited financial statements and, accordingly,
does not include all disclosures required by GAAP as permitted by interim
reporting requirements. The results of operations for the quarter and nine
months ended October 2, 1999 are not necessarily indicative of the results
to be expected for the full year ending January 1, 2000.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
2. MARKETABLE SECURITIES
Management determines the appropriate classification of its investments in
marketable securities at the time of purchase and reevaluates such
determination at each balance sheet date. Securities that are bought and
held principally for the purpose of selling them in the near term are
classified as trading securities and unrealized holding gains and losses
are included in earnings. Debt securities for which the Company does not
have the intent or ability to hold to maturity and equity securities are
classified as available-for-sale. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of stockholders' equity.
3. NET INCOME PER COMMON SHARE
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings
Per Share," was adopted in the fourth quarter of 1997 and supersedes the
Company's previous standards for computing net income per share under
Accounting Principles Board Opinion No. 15. The new standard requires dual
presentation of net income per common share and net income per common
share assuming dilution on the face of the income statement. Basic net
income per share is computed by dividing the net income attributable to
common stockholders by the weighted average number of common shares
outstanding during the period. The Company does not have any dilutive
shares for the periods presented in the statements of operations and
comprehensive income. The financial statements present basic net income
per share.
6
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
NOTES TO FINANCIAL STATEMENTS, Continued
4. COMPREHENSIVE INCOME
SFAS No. 130, "Reporting Comprehensive Income," was adopted during the
first quarter of 1998. The standard establishes guidelines for the
reporting and display of comprehensive income and its components in
financial statements. Comprehensive income includes unrealized gains and
losses on debt and equity securities classified as available-for-sale that
are currently presented as a component of stockholders' equity.
5. SEGMENT INFORMATION
In fiscal year 1998, the Company adopted SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information." The standard requires
that companies disclose "operating segments" based on the way management
disaggregates the company for making internal operating decisions. The
Company operates exclusively in the supermarket business in the Southern
California area. Consequently, SFAS No. 131 does not result in any
additional reporting requirements for the Company.
6. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement requires that all derivative instruments be recorded on the
balance sheet at their fair value. Changes in the fair value of
derivatives will be recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
The new rules will be effective the first quarter of 2001. The Company
does not believe that the new standard will have a material impact on its
financial statements.
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
Net income in the third quarter of 1999 decreased 18.1% to $2,338,000
compared to $2,854,000 during the third quarter of 1998. Operating income was
$3,740,000 in the third quarter of 1999 compared to $4,607,000 in the third
quarter of 1998.
Sales from the Company's 14 supermarkets (all of which are located in
Southern California) were $79,172,000 in the third quarter of 1999. This
represents an increase of 6.8% over the third quarter of 1998, when sales
were $74,120,000. Same store sales increased 3.5% in 1999 compared to the
prior year. Sales continue to increase as the result of a more robust economy
in Southern California and the positive impact of store remodel activity. In
addition, the Company opened a new store in Sherman Oaks, California in late
August 1999. The new store has generated positive consumer response and sales
have met management's projections. Finally, the Northridge store which opened
in November 1997, continues to experience sales increases. Although
management is encouraged by the sales improvement since the Northridge store
opened, sales are still below their original projections. Management expects
sales to continue to improve as new tenants are added and existing tenants in
the shopping center become more established. However, the occurrence of these
events does not guarantee that sales at Northridge will increase to
originally anticipated levels. The foregoing statements concerning the
Northridge store are forward-looking statements and actual future sales are
dependent on a number of factors which may or may not occur including, among
others, the timing and occupancy of the other tenants' spaces, the nature and
success of the other tenants' businesses, the timing and completion of the
other tenants' storefronts and competition from other supermarkets in the
trade area.
The Company's gross profit as a percent of sales was relatively unchanged at
41.2% in the third quarter of 1999 compared to 41.0% in the same period of
1998. Delivery, selling, general and administrative ("DSG&A") expenses as a
percent of sales were 36.4% in the third quarter of 1999 compared to 34.8% in
the third quarter of 1998. DSG&A expense increased as the result of
preopening expenses incurred in connection with the opening of the new
Sherman Oaks store, as described above. In addition, the Company incurred
approximately $165,000 of expense in the third quarter related to making the
Company's systems and equipment Year 2000 compliant. The third quarter of
1998 also reflects a $150,000 credit to partially reverse an environmental
remediation reserve which was eventually paid for by third parties.
Interest and dividend income was $367,000 in the third quarter of 1999
compared to $327,000 for the same period in 1998 primarily due to higher
average levels of interest bearing investments in 1999.
Interest expense was $153,000 in the third quarter of 1999 compared to
$182,000 in the third quarter of 1998 due to lower average levels of fixture
financing debt.
8
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" requires that unrealized holding gains and losses for
available-for-sale securities be included as a component of stockholders'
equity. Unrealized losses on available-for-sale securities were $482,000 (net
of income tax benefits of $332,000) in the third quarter of 1999 compared to
unrealized losses of $176,000 (net of income tax benefits of $110,000) in the
third quarter of 1998.
YEAR-TO-DATE ANALYSIS
During the first nine months of 1999, net income increased 24.5% to
$9,128,000 compared to $7,331,000 during the first nine months of 1998.
Operating income was $12,948,000 for the first nine months of 1999 compared
to $11,858,000 in the same period of the prior year.
Sales from the Company's 14 supermarkets (all of which are located in
Southern California) were $234,986,000 in the first nine months of 1999. This
represents an increase of 8.2% over the first nine months of 1998 when sales
were $217,276,000. Same store sales increased 7.0% in 1999 compared to the
prior year. Sales continue to increase as the result of a more robust economy
in Southern California and the positive impact of store remodel activity. In
addition, the Company opened a new store in Sherman Oaks, California in late
August 1999. The new store has generated positive consumer response and sales
have met management's projections. Finally, the Northridge store which opened
in November 1997, continues to experience sales increases. Although
management is encouraged by the sales improvement since the Northridge store
opened, sales are still below their original projections. Management expects
sales to continue to improve as new tenants are added and existing tenants in
the shopping center become more established. However, the occurrence of these
events does not guarantee that sales at Northridge will increase to
originally anticipated levels. The foregoing statements concerning the
Northridge store are forward-looking statements and actual future sales are
dependent on a number of factors which may or may not occur including, among
others, the timing and occupancy of the other tenants' spaces, the nature and
success of the other tenants' businesses, the timing and completion of the
other tenants' storefronts and competition from other supermarkets in the
trade area.
The Company's gross profit as a percent of sales was relatively unchanged at
40.8% in the first nine months of 1999 compared to 40.6% in the same period
of 1998. DSG&A expenses as a percent of sales were 35.3% in the first nine
months of 1999 compared to 35.1% in the first nine months of 1998. DSG&A
expenses increased as the result of preopening expenses incurred in
connection with the opening of the new Sherman Oaks store, as described
above. In addition, the Company incurred approximately $385,000 of expense
related to making the Company's systems and equipment Year 2000 compliant.
These higher costs were partially mitigated by lower expenses as a percent of
sales for the Northridge store and lower union pension contributions in 1999
compared to 1998.
9
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued
Interest and dividend income was $1,092,000 in the first nine months of 1999
compared to $919,000 for the same period in 1998 primarily due to higher
average levels of interest bearing investments in 1999 partially offset by
lower average rates of return.
Interest expense was $474,000 in the first nine months of 1999 compared to
$572,000 in the first nine months of 1998 due to lower average levels of
fixture financing debt.
Other income (expense), net includes losses realized on investments in
marketable securities of $74,000 and $1,000 in the first nine months of 1999
and 1998, respectively.
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," requires that unrealized holding gains and losses for
available-for-sale securities be included as a component of stockholders'
equity. Unrealized losses on available-for-sale securities were $686,000 (net
of income tax benefits of $467,000) compared to an unrealized gain of
$142,000 (net of income tax expense of $103,000) in the first nine months of
1999 and 1998, respectively.
The Company's California income tax returns from 1986 through 1989 were
examined by the California Franchise Tax Board and tax assessments were
rendered against the Company. The proposed assessments were appealed by the
Company. During the second quarter of 1999, the Company received final
notices from the California Franchise Tax Board indicating that all proposed
assessments for the years under review have been withdrawn. As a result, the
Company recognized a reduction of the current year's income tax provision and
an increase in net income of approximately $1,100,000 in the second quarter
of 1999.
CAPITAL EXPENDITURES/LIQUIDITY
The Company plans to utilize cash-on-hand (including marketable securities)
and cash flow from operations to fund capital expenditures in 1999.
Additionally, the Company has a term loan line of credit totaling $10,000,000
to finance store fixtures, equipment and leasehold improvements. At the end
of the third quarter of 1999, the outstanding borrowing on the line was
$2,267,000. The Company drew down an additional $4,750,000 on the term loan
line of credit in October 1999.
The Company also has two revolving lines of credit totaling $12,000,000.
There were no outstanding balances against either of the revolving lines as
of October 2, 1999.
In June 1999, the Company completed the acquisition of a leasehold interest
in an existing supermarket located in Sherman Oaks, California. The Company
extensively remodeled the store and opened a new Gelson's Market at this
location in August 1999. Customer response has been satisfactory.
10
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued
In September 1999, the Company acquired another leasehold interest in an
existing store in Santa Barbara, California. After some minor remodeling
work, the store was opened in late October 1999. The Company plans to perform
additional remodeling while the store is open.
In July 1999, the Company entered into a lease for a Gelson's Market in a new
shopping center to be built in Irvine, California. We currently expect the
market to open in the year 2000. In the second quarter of 1998, the Company
executed a long-term lease agreement with a developer to build a new Gelson's
Market in Beverly Hills, California. The development and actual openings of
these markets are subject to, among other things, necessary governmental
approvals and the developers fulfilling certain conditions.
YEAR 2000 ISSUE
The Year 2000 ("Y2K") readiness issue arises from the inability of
information systems, and other time and date sensitive products, equipment
and systems, to properly recognize and process date-sensitive information
resulting in system failures or miscalculations. The Company has made an
assessment of the impact of the Y2K issue on its internal operations and has
developed a plan to minimize any potential business interruption. The plan
categorizes the key areas affected by the Y2K issue as follows: information
technology ("IT") systems, non-IT systems, vendors and customers.
The Company's review of its IT systems (hardware and software) indicated the
need for modification, and in some cases, replacement of applications,
operating systems and hardware. The Company believes that all of its IT
systems are in compliance and have been tested. The Company anticipates that
all of the IT systems required to be replaced at the stores will be installed
prior to the end of the year.
The Y2K issue could have an impact on non-IT systems (personal property) that
are not directly connected with the Company's computer systems, such as
physical facilities including store equipment, security systems and
utilities. Although these issues are more difficult to identify and resolve,
the Company is actively engaged in identifying the areas concerning its
products and services as well as its physical locations. As these areas are
identified, management is formulating the necessary actions to ensure minimal
disruption, if any, to its business processes.
The Company continues to assess the Y2K readiness of its key suppliers and
business partners in an effort to ensure the adequacy of product, supplies
and resources. This includes a review of and direct communication with the
majority of its product vendors and key suppliers. Based on the responses
which we have received from many product vendors and key suppliers, the
Company is taking the steps necessary to minimize the effect, if any, on its
operations.
11
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued
The Company has determined that, due to the nature of its business, the
readiness of its customers is not within its control. Third party readiness
(financial institutions) may affect the customers' ability to purchase the
Company's products. The Company is not investigating this issue and the
impact is highly uncertain.
Costs incurred and expensed in addressing the Y2K issue have been
approximately $560,000 and are being funded through operating cash flows.
Based on current information, costs to complete the final adjustments are not
expected to be material to the Company's consolidated financial position and
results of operations. Some of the equipment and other personal property that
the Company is currently replacing is in the normal course of business and
would have been replaced even though it may be part of the Y2K analysis.
Management does not believe the costs associated with bringing the non-IT
systems and equipment into compliance will have a material negative impact on
the Company's financial position and results of operations.
The Company does not believe its business will be interrupted due to Y2K
issues, however, this conclusion is based on the assumption that certain
product vendors, utilities and financial institutions will be able to provide
uninterrupted service. In a worst case scenario, the Company believes the
stores could still remain open even if these services were not available,
although the revenue volume could be affected. To allow the stores to
continue to function, the Company has arranged for generators to serve as
backup if the power fails. In addition, the Company's ability to process
transactions through its registers and accept debit and credit card
transactions would be impaired if financial institutions and intermediaries
cannot operate normally. However, the lack of this service would not preclude
the store(s) from operating. Finally, since the timing of a potential Y2K
problem would occur immediately after the holidays, and therefore, after the
Company's busiest time of year, any decline in revenue or other impact on
operations would be reduced.
The foregoing statements relative to the Y2K issue are forward-looking
statements and actual compliance may be affected by a number of factors which
include the timing and compliance by the Company's outside vendors and
suppliers (including its banking relations). The Company may be adversely
affected if its vendors and service providers (including its banking
relations) are unable to fully correct any Y2K problems they may have. This
disclosure is a Year 2000 Readiness Disclosure under the Year 2000
Information and Readiness Disclosure Act, enacted by the 105th Congress on
October 19, 1998.
12
<PAGE>
PART I. FINANCIAL INFORMATION, Continued
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, Continued
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates on debt.
The Company's exposure to interest rate risk relates to its $9,000,000 and
$3,000,000 revolving lines of credit. Borrowings under the agreements bear
interest at the bank's reference rate or the bank's adjusted LIBOR rate plus
.9%. There were no borrowings outstanding under either agreement during the
third quarter of 1999. A hypothetical 1% interest rate change would not have
a material impact on the Company's financial position and results of
operations.
A change in market prices also exposes the Company to market risk related to
its investments in marketable securities. At October 2, 1999 the Company held
$19,123,000 in marketable securities. A hypothetical 10% drop in the market
value of these investments would result in a $1,912,000 unrealized loss and a
corresponding decrease in the fair value of these instruments. This
hypothetical drop would not affect cash flow and would not have an impact on
net income until the Company sold the investments.
13
<PAGE>
PART II. OTHER INFORMATION
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.
-------------------------------------
Registrant
Date November 11, 1999 BERNARD BRISKIN
------------------------------- --------------------------------------
Bernard Briskin
President and Chief Executive Officer
(Authorized Signatory
and Principal Financial Officer)
14
<PAGE>
ARDEN GROUP, INC.
AND CONSOLIDATED SUBSIDIARY
INDEX TO EXHIBITS
EXHIBIT
- -------
27. Financial Data Schedules.
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JUL-04-1999
<PERIOD-END> OCT-02-1999
<CASH> 11,690
<SECURITIES> 19,123
<RECEIVABLES> 5,793
<ALLOWANCES> 525
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0
0
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</TABLE>
