-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PJGYy5CTdw6epIYrvS4RR0jqO4wL0xQtdv/skJbfJBlnhoTdqJiXsEpYtRYwoW23 IbHkJrVBBK2WOKXUe+ojIA== 0000912057-97-016925.txt : 19970513 0000912057-97-016925.hdr.sgml : 19970513 ACCESSION NUMBER: 0000912057-97-016925 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970329 FILED AS OF DATE: 19970512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARDEN GROUP INC CENTRAL INDEX KEY: 0000225051 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-GROCERY STORES [5411] IRS NUMBER: 953163136 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-09904 FILM NUMBER: 97601066 BUSINESS ADDRESS: STREET 1: 2020 S CENTRAL AVE CITY: COMPTON STATE: CA ZIP: 90220 BUSINESS PHONE: 3106382842 MAIL ADDRESS: STREET 1: PO BOX 2256 CITY: LOS ANGELES STATE: CA ZIP: 90051 FORMER COMPANY: FORMER CONFORMED NAME: TELAUTOGRAPH INC DATE OF NAME CHANGE: 19600201 10-Q 1 FORM 10-Q 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 29, 1997 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 March 29, 1997 was: 766,753 of Class A common stock 342,246 of Class B common stock This report contains a total of 14 pages including exhibits. 1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY BALANCE SHEETS (In Thousands) A S S E T S March 29, December 28, 1997 1996 ------------ ------------ Current assets: Cash and cash equivalents $ 5,734 $ 5,473 Marketable securities 23,567 21,356 Accounts and notes receivable, net 7,956 6,629 Inventories 9,790 10,728 Prepaid and other 1,398 3,102 ------------ ------------ Total current assets 48,445 47,288 Notes receivable 75 82 Property for resale or sublease 1,433 1,440 Property, plant and equipment, at cost, less accumulated depreciation and amortization of $26,670 and $25,667, respectively 39,353 39,875 Other assets 2,355 2,563 ------------ ------------ Total assets $91,661 $91,248 ------------ ------------ ------------ ------------ See Notes to Financial Statements 2 PART I. FINANCIAL INFORMATION, Continued ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY BALANCE SHEETS (In Thousands) LIABILITIES AND STOCKHOLDERS' EQUITY March 29, December 28, 1997 1996 ------------ ------------ Current liabilities: Accounts payable, trade $ 13,694 $11,357 Other current liabilities 11,831 11,816 Current portion of long-term debt 986 973 ------------ ------------ Total current liabilities 26,511 24,146 Long-term debt, including obligations under capital leases of $3,523 and $3,578, respectively 6,425 6,663 Deferred income taxes 1,694 2,160 Other liabilities 2,288 2,542 ------------ ------------ Total liabilities 36,918 35,511 ------------ ------------ Commitments and contingent liabilities Stockholders' equity: Class A common stock 276 276 Class B common stock 86 86 Capital surplus 5,617 5,617 Notes receivable from officer/director (295) (369) Unrealized loss on available-for-sale securities (158) Retained earnings 52,970 53,880 ------------ ------------ 58,496 59,490 Less: treasury stock, at cost 3,753 3,753 ------------ ------------ Total stockholders' equity 54,743 55,737 ------------ ------------ Total liabilities and stockholders' equity $91,661 $91,248 ------------ ------------ ------------ ------------ See Notes to Financial Statements 3 PART I. FINANCIAL INFORMATION, Continued ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY STATEMENTS OF OPERATIONS (In Thousands, Except Per Share and Other Data) Thirteen Weeks Ended March 29, March 30, 1997 1996 --------------- -------------- Sales $64,961 $60,616 Cost of sales 39,414 36,970 ------------ ----------- Gross profit 25,547 23,646 Delivery, selling, general and administrative expenses 22,815 23,073 ------------ ----------- Operating income 2,732 573 Interest, dividend and other income (expense), net 399 379 Net unrealized loss on trading securities (201) (713) ------------ ----------- Income from continuing operations before income taxes 2,930 239 Income tax provision 1,145 105 ------------ ----------- Income from continuing operations, net of income taxes 1,785 134 Loss from discontinued operations, net of income tax benefits of $1,577 (2,695) ------------ ----------- Net income (loss) $ (910) $ 134 ------------ ----------- ------------ ----------- Net income (loss) per common share: Income from continuing operations $1.61 $ .12 Loss from discontinued operations (2.43) ------------ ----------- Net income (loss) $ (.82) $ .12 ------------ ----------- ------------ ----------- Weighted average common shares outstanding 1,108,999 1,133,141 ------------ ----------- ------------ ----------- See Notes to Financial Statements 4 PART I. FINANCIAL INFORMATION, Continued ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY STATEMENTS OF CASH FLOWS (In Thousands) Thirteen Weeks Ended March 29, March 30, 1997 1996 ------------ ------------ Cash flows from operating activities: Cash received from customers $65,440 $61,589 Cash paid to suppliers and employees (62,018) (61,689) Investment in trading securities (1,211) (1,938) Interest and dividends received 392 404 Interest paid (151) (172) Income taxes (paid)/refund 5 (250) ------------ ------------ Net cash provided by (used in) operating activities 2,457 (2,056) ------------ ------------ Cash flows from investing activities: Transfer to discontinued operations (207) Capital expenditures (784) (8,127) Property in escrow 2,664 Purchases of marketable securities (2,636) Sales of marketable securities 1,380 Proceeds from the sale of property, plant and equipment, liquor licenses and leasehold interests 146 2,239 Payments received on notes from the sale of property, plant and equipment and liquor licenses 56 1 ------------ ------------ Net cash provided by (used in) investing activities (2,045) (3,223) ------------ ------------ Cash flows from financing activities: Purchase and retirement of stock (373) Principal payments under capital lease obligations (50) (91) Principal payments on long-term debt (175) (187) Payment of loan from officer/director 74 ------------ ------------ Net cash used in financing activities (151) (651) ------------ ------------ Net increase (decrease) in cash 261 (5,930) Cash at beginning of year 5,473 10,102 ------------ ------------ Cash at end of quarter $5,734 $4,172 ------------ ------------ ------------ ------------ See Notes to Financial Statements 5 PART I. FINANCIAL INFORMATION, Continued ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY STATEMENTS OF CASH FLOWS (In Thousands) RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Thirteen Weeks Ended March 29, March 30, 1997 1996 ------------ ------------ Net income (loss) $ (910) $ 134 Adjustments to reconcile net income to net cash provided by operating activities: Loss from discontinued operations 2,695 Depreciation and amortization 1,233 1,060 Unrealized loss on trading securities 201 713 Provision for losses on accounts and notes receivable 30 33 Net gain from sale of property, plant and equipment, liquor licenses and early lease terminations (58) (566) Gain on sale of marketable securities (221) (91) Change in assets and liabilities net of effects from noncash investing and financing activities: (Increase) decrease in assets: Marketable securities (1,198) (1,938) Accounts and notes receivable 1,732 878 Inventories 938 (125) Prepaid expenses (46) (303) Other assets 200 (46) Increase (decrease) in liabilities: Accounts payable and other current liabilities (1,524) (1,568) Deferred income taxes (361) (223) Other liabilities (254) (14) ------------ ------------ Net cash provided by (used in) operating activities $2,457 $(2,056) ------------ ------------ ------------ ------------ See Notes to Financial Statements 6 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 for a fair presentation. 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 three months ended March 29, 1997 and March 30, 1996 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, consisting of normal, recurring accruals, 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 December 28, 1996 has been derived from audited financial statements, but does not include all disclosures required by GAAP. The results of operations for the three months ended March 29, 1997 are not necessarily indicative of the results to be expected for the full year ending January 3, 1998. Certain prior year amounts have been reclassified to conform to 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 shareholders' equity. 7 PART I. FINANCIAL INFORMATION, Continued NOTES TO FINANCIAL STATEMENTS, Continued
Unrealized Market Cost Gain (Loss) Value ---- ----------- ------ (in thousands) As of March 28, 1997: Trading securities: Fixed income securities $ 8,598 $ (247) $ 8,351 Mortgage-backed government securities 1,111 (26) 1,085 Collateralized mortgage obligations 365 (7) 358 ------- -------- ------- 10,074 (280) 9,794 Available-for-sale securities: Mutual funds 13,632 (90) 13,542 Equity securities 832 (601) 231 ------- -------- ------- 14,464 (691) 13,773 ------- -------- ------- Total $24,538 $ (971) $23,567 ------- -------- ------- ------- -------- ------- As of December 28, 1996: Trading securities: Mutual funds $10,997 $ 35 $11,032 Fixed income securities 7,707 (662) 7,045 Equity securities 1,413 114 1,527 Mortgage-backed government securities 1,419 7 1,426 Collateralized mortgage obligations 328 (2) 326 ------- -------- ------- Total $21,864 $ (508) $21,356 ------- -------- ------- ------- -------- -------
3. ARBITRATION AWARD: On March 28, 1997, the Company received notice of a decision rendered in the arbitration proceedings relating to the sale in 1993 of its communication equipment business to Danka Business Systems PLC. The arbitrators upheld Arden's claim for approximately $2,200,000 and awarded Danka on its counterclaims approximately $4,065,000. As a result of this decision, the Company paid Danka approximately $1,865,000 in April 1997. As the result of an earlier arbitration, Arden was awarded, in April 1994, $1,750,000. No income or expenses related to that award and no expenses related to the just completed arbitration were recognized in the 1994 and 1995 statements of operations of Arden. In 1996, arbitration costs which exceeded the first arbitration award were expensed as discontinued operations. The above arbitration decisions, the associated expenses and the resulting adjustments to the purchase price for the transaction resulted in the Company recognizing a loss, net of taxes, from discontinued operations of approximately $2,695,000 in the first quarter of fiscal 1997. 8 PART I. FINANCIAL INFORMATION, Continued NOTES TO FINANCIAL STATEMENTS, Continued The award of attorneys fees and costs incurred in both arbitrations is subject to further arbitration proceedings. The Company does not believe adjustments resulting from this arbitration will have a material adverse impact on its financial position. 4. EARNINGS PER SHARE: Net income per share is based on the weighted average number of common shares outstanding during the period. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share." SFAS No. 128 supersedes and simplifies the existing computational guidelines under Accounting Principles Board Opinion No. 15, "Earnings Per Share." It is effective for financial statements issued for periods ending after December 15, 1997. Among other changes, SFAS No. 128 eliminates the presentation of primary EPS and replaces it with basic EPS for which common stock equivalents are not considered in the computation. It also revises the computation of diluted EPS. It is not expected that the adoption of SFAS No. 128 will have a material impact on the earnings per share results reported by the Company under the Company's current capital structure. 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 1997, the Company had a net loss of ($910,000) compared to net income of $134,000 during the first quarter of 1996. As described below, included in 1997 was a $2,695,000 loss from discontinued operations. Pretax income from continuing operations was $2,930,000 for the first quarter of 1997 compared to pretax income of $239,000 for the first quarter of 1996. During the first quarter of 1997, the Company's operating income was $2,732,000 compared to operating income of $573,000 during the first quarter of 1996. Sales from the Company's 12 supermarkets in the greater Los Angeles area were $64,961,000 in the first quarter of 1997, an increase of 7.2% from the first quarter of 1996, when sales were $60,616,000. Chain wide same store sales for stores opened the entire quarter increased 5.3% in the first quarter of 1997 compared to the prior year, even though sales of certain stores have been negatively impacted by competitors opening new stores. The increase in same store sales is due to a number of factors including a more robust economy in Southern California, the effect of product pricing decisions, the positive impact of store remodel activity and the timing of Easter which fell in the first quarter of 1997 but in the second 9 PART I. FINANCIAL INFORMATION, Continued MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued quarter of 1996. The Calabasas store, opened in February 1996, has experienced higher sales and better expense controls in 1997 compared to the same period in 1996. The Company's gross profit from supermarket operations as a percentage of sales was 39.3% in the first quarter of 1997 compared to 39.0% in the same period of 1996. Union wage and benefit increases are taken into consideration on product pricing decisions. The sales mix in 1997 favored higher gross margin categories. Delivery, selling, general and administrative ("DSG&A") expenses for supermarket operations as a percentage of sales were 35.1% in the first quarter of 1997 compared to 38.1% the first quarter of 1996. DSG&A activity in 1997 reflects an improvement in labor efficiency at the stores, improved purchasing methods of store services and supplies and lower workers' compensation costs. The higher expense in 1996 is due, in part, to preopening expense, promotional costs and higher than expected operating costs associated with the Gelson's market in Calabasas which opened in February 1996. Additionally, in 1996, certain costs relating to the sublease of the former AMG Holdings headquarters facility were expensed. Included in 1996 DSG&A is a gain of $584,000 relating to the property sale of a former Mayfair market. Interest and dividend income was $375,000 in the first quarter of 1997 compared to $487,000 for the same period in 1996 due to decreased levels of investments and a decrease in earnings rates. Interest expense was $172,000 in the first quarter of 1997 compared to $188,000 in the first quarter of 1996. Other income (expense) includes realized gains on the sale of marketable securities of $208,000 and $91,000 in the first quarters of 1997 and 1996, respectively. In the first quarter of 1997, the market value of the Company's holdings in trading securities decreased. 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 trading securities shall be included in the determination of net income. As a result, net unrealized losses of $201,000 related to marketable securities occurred in the first quarter of 1997 compared to net unrealized losses of $713,000 in the first quarter of 1996. Unrealized losses in the first quarter of 1997 on securities deemed to be available for sale were $158,000 (net of income tax benefits of $105,000) and were recorded as a separate component of shareholders' equity. See Footnote 2 of Notes to Financial Statements. The loss on discontinued operations of $2,695,000 (net of income tax benefits of $1,577,000) resulted from a decision in an arbitration proceeding relating to the sale in 1993 of the Company's communication equipment business and is reflected on the financial statements as an adjustment to the purchase price. See Footnote 3 of Notes to Financial Statements. 10 PART I. FINANCIAL INFORMATION, Continued MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, Continued CAPITAL EXPENDITURES/LIQUIDITY In 1996, the Company purchased a site for a potential Gelson's Market in Santa Barbara, California. The Company has leased the Santa Barbara property on a short term lease (18 months) to maximize its return on the property on an interim basis while it analyzes its ultimate use. In 1995, the Company entered into long-term leases to open two new Gelson's markets. The Northridge site is expected to open in 1997. The opening of Gelson's markets on each of these sites is subject to, among other things, the Company's due diligence, receipt of necessary governmental approvals and the developers fulfilling certain conditions. The Company plans to utilize cash-on-hand (including marketable securities) and cash flow from operations to fund capital expenditures in 1997. Additionally, the Company has a term loan line of credit totaling $10,000,000 to finance store fixtures and equipment. At the end of the first quarter of 1997 the outstanding balance from the 1995 borrowing on the line was $2,062,500. The Company also has two revolving lines of credit totaling $12,000,000. There were no borrowings or outstanding balances against either of the revolving lines during the first quarter of 1997. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not applicable. 11 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: The Company filed a Form 8-K on April 4, 1997. The Form 8-K reported under Item 5 "Other Events," disclosing the decision rendered in the arbitration proceedings between the Company and Danka Business Systems PLC ("Danka") relating to the sale in 1993 of the communication equipment business of the Company to Danka. 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 May 12, 1997 ERNEST T. KLINGER ------------------------ ------------------------------ Ernest T. Klinger Vice President Finance and Administration and Chief Financial Officer (Authorized Signatory) 12 ARDEN GROUP, INC. AND CONSOLIDATED SUBSIDIARY INDEX TO EXHIBITS EXHIBIT 27. Financial Data Schedules. 13 EX-27 2 EXHIBIT 27 - FDS
5 1,000 3-MOS JAN-03-1998 DEC-29-1996 MAR-29-1997 5,734 23,567 8,869 713 9,790 48,445 66,023 26,670 91,661 26,511 6,425 0 0 362 54,381 91,661 64,961 64,961 39,414 39,414 22,785 30 172 2,930 1,145 1,785 (2,695) 0 0 (910) (.82) (.82)
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