<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended April 2, 1994
__ 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: 0-1532
MARSH SUPERMARKETS, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-0918179
(State of Incorporation) (I.R.S. Employer
Identification No.)
9800 CROSSPOINT BOULEVARD
INDIANAPOLIS, INDIANA 46256-3350
(Address of principal executive offices) (Zip Code)
317-594-2100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock
Class B Common Stock
7% Convertible Subordinated Debentures, due 2003
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, and (2) has been subject to such filing
requirements for the past 90 days: Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in the definitive proxy statement incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K:
X
- - --
Aggregate market value of Class A Common Stock held by non-affiliates of the
Registrant as of June 1, 1994: $27,753,463. This calculation assumes all
shares of Common Stock beneficially held by officers and members of the Board
of Directors of the Registrant are owned by "affiliates", a status which each
of the officers and directors individually disclaims.
At June 1, 1994, there were 3,932,598 shares of Class A Common Stock and
4,509,404 shares of Class B Common Stock outstanding.
Portions of the annual shareholders report for the year ended April 2, 1994,
are incorporated by reference into Parts I and II.
Portions of the proxy statement for the annual shareholders' meeting to be held
August 2, 1994, are incorporated by reference into Part III.
<PAGE> 2
PART I
ITEM 1 BUSINESS
GENERAL
At April 2, 1994, Marsh Supermarkets, Inc. (the "Company" or "Marsh") operated
87 supermarkets and 177 Village Pantry convenience stores in central Indiana
and western Ohio. The Company believes Marsh supermarkets have one of the
largest market shares of supermarket chains operating in its market area and
Village Pantry has one of the largest market shares of convenience stores in
its market area. Marsh also owns and operates a specialized convenience store
distribution business which services its Village Pantry stores as well as over
1,300 unaffiliated convenience stores in an eight-state area.
SUPERMARKETS
At April 2, 1994, the Company operated 87 supermarkets, 74 in central Indiana
and 13 in western Ohio. The 35 stores in the Indianapolis metropolitan market
area constitute the Company's major market. The remaining supermarkets operate
in 35 other communities. Sales from supermarket operations represent
approximately 73% of the Company's fiscal 1994 consolidated sales and other
revenues.
The Company's supermarket merchandising strategy emphasizes service, quality
and convenient one-stop shopping at competitive prices. Of the Company's
supermarkets, 62 are open 24 hours a day, 16 are open until midnight, with the
remainder having various other schedules. All stores are open seven days a
week.
The Company believes a commitment to providing quality merchandise is an
important factor in maintaining and expanding its customer base. In recent
years, the Company has devoted a greater proportion of new and remodeled stores
to fresh, high quality perishables such as produce, delicatessen items, baked
goods, prepared foods, seafood and floral items. The Company believes fresh
produce is an important customer draw; therefore, it focuses on buying premium
quality produce worldwide. The geographic concentration of the supermarkets
enables the Company to deliver fresh items to its stores quickly and
frequently.
The Company's new and expanded large supermarket store format offers customers
convenient one-stop shopping. Its Marsh supermarkets feature an extended line
of traditional grocery store items as well as a broad array of service and
specialty departments such as delicatessens, bakeries, prepared foods, prime
cut meats, fresh seafood, floral and video rental. The Company features
nationally advertised and distributed merchandise and products under its own
trademarks, service marks and trade names. Service and specialty departments
included in Marsh supermarkets include delicatessens and prepared foods (87
stores), bakeries (87), prime cut service meat (58), fresh service seafood
(61), floral shops (57), imported cheese shops (46), salad bars (49), video
rental (85), and shoe repair (21). Twenty of the Company's supermarkets include
pharmacies in food and drug combination stores. To combat increasing
competition from other retail formats such as wholesale clubs, 46 of the
Company's supermarkets also include warehouse-type sections offering large size
and multi-pack products typically featured by wholesale clubs, priced
competitively with club prices. In addition, banks or savings institutions
operate branch facilities in 38 of the Company's stores.
The Company has expanded on its large supermarket store format with a new
generation superstore in excess of 75,000 square feet. The Company currently
operates three such stores and plans to build an additional one in Indianapolis
within the next year. Approximately one-third of the sales area in this type
of store is devoted to merchandising fresh, high quality perishable products,
with heavy emphasis on delicatessens/bakeries, prepared foods and produce. In
addition, up to approximately 5,000 square feet are devoted to the
warehouse-type merchandising of bulk club pack merchandise.
The Company has developed a smaller, low-price supermarket format with limited
service and specialty departments as an alternative to the large, full service
supermarket. The Company currently operates seven of its supermarkets under
this concept. The stores operate under the trade name LoBill. There is an
ongoing development program within its market area to construct new LoBill
stores and to remodel selected Marsh stores to the LoBill format. The Company
believes the LoBill format offers the opportunity to maximize its market area
by expanding into smaller communities that can be better served by that format,
and to appeal to the price motivated consumer in markets currently serviced by
traditional Marsh store.
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The Company's supermarkets range in size from 15,000 to 81,530 square
feet. The average size is approximately 35,400 square feet. The Company has an
ongoing development program of constructing larger Marsh stores within its
market area and remodeling, enlarging and replacing existing supermarkets.
Future development will continue to focus on a food and drug combination store
format of approximately 50,000 to 60,000 square feet, with superstores in excess
of 80,000 square feet in select locations. The Company believes a larger store
format enables it to offer a wider variety of products and expanded service and
specialty departments, thereby strengthening its competitive position. The
following summarizes the number of stores by size categories:
<TABLE>
<CAPTION>
Number
Square Feet of Stores
----------- ---------
<S> <C>
More than 70,000 . . . . . . . . . . . . . . . . . . . . . . . . 3
50,000 - 70,000 . . . . . . . . . . . . . . . . . . . . . . . . 7
40,000 - 49,999 . . . . . . . . . . . . . . . . . . . . . . . . 7
30,000 - 39,999 . . . . . . . . . . . . . . . . . . . . . . . . 36
20,000 - 29,999 . . . . . . . . . . . . . . . . . . . . . . . . 30
Less than 20,000 . . . . . . . . . . . . . . . . . . . . . . . . 4
--
87
==
</TABLE>
The Company advertises through various media, including circulars, newspapers,
radio and television. Printed circulars are used extensively on a weekly basis
to advertise featured items. The focus of the television campaign promotes a
quality and service image rather than specific products and prices. The
Indianapolis television market covers approximately 80% of the Company's
stores. Various sales enhancement promotional activities, including free
grocery and other programs designed to encourage repeat shoppers, are conducted
as an important part of the Company's merchandising strategy.
CONVENIENCE STORES
At April 2, 1994, the Company operated 177 convenience stores under the Village
Pantry trade name. These self-service stores offer a broad selection of
grocery, bakery, dairy and delicatessen items including freshly prepared food
products. Approximately 60% of the stores also offer petroleum products. Sales
from the convenience stores represented approximately 13% of the Company's
fiscal 1994 consolidated sales and other revenues. Cold beer, a high-volume
item typically found in convenience stores in other states, may only be sold
by package liquor stores in Indiana; accordingly, it is not sold in the
Company's Indiana convenience stores. All but eight of the convenience stores
are open 24 hours a day. The remainder close at either midnight or 11:00 p.m.
All stores are open seven days a week.
These stores offer fresh donuts and sandwiches prepared in the stores. The
Company has added higher margin food and beverage products, such as
store-prepared pizza (35 stores), broasted chicken (38 stores), self-service
fountain drinks, as well as sit-down eating areas in a number of stores. The
Company has an ongoing program of remodeling, upgrading and replacing existing
Village Pantry stores with particular emphasis on developing locations that
will yield a high volume of gasoline sales. New stores generally average
3,700-4,400 square feet, compared to 1,800-2,500 square feet for older stores.
The larger size accommodates the new food products. In constructing new, and
remodeling and expanding existing stores, the Company tailors the format to
each specific market, with heavy emphasis on food service in areas which the
Company believes to be less susceptible to intense competition from major fast
food operators, such as smaller towns and high density neighborhoods.
CONVENIENCE STORE DISTRIBUTING COMPANY ("CSDC")
CSDC, a wholly-owned subsidiary of the Company, serves Village Pantry stores
and over 1,300 unaffiliated stores in an eight-state area. CSDC distributes a
wide range of products typically sold in convenience stores, including
groceries, cigarette and other tobacco products, snack items, housewares and
health and beauty aids. Customers have the opportunity to order most product
lines in single units. CSDC owns a 187,000 square foot warehouse and
distribution facility in Richmond, Indiana, which the Company estimates
presently is operated at 70% of capacity. CSDC utilizes its own trucks and
drivers for its transportation needs. The CSDC sales staff of approximately 27
employees services existing customers and is actively soliciting new customers.
The CSDC wholesale operation accounted for approximately 14% of the Company's
fiscal 1994 consolidated sales and other revenues.
3
<PAGE> 4
SUPPLY AND DISTRIBUTION
The Company supplies its supermarkets from three Company-operated distribution
facilities. Dry grocery and frozen food products are distributed from a 409,000
square foot leased facility in Indianapolis. Produce and meat products are
distributed from a leased 128,000 square foot perishable products facility in
Yorktown, Indiana. Non-food products are distributed from 180,000 square feet
of the 388,000 square foot Company owned warehouse (and former corporate
headquarters facility) in Yorktown. In addition, the Company leases a 150,000
square foot warehouse for storage of forward purchases of merchandise and
seasonal items. Additional outside warehouse space is leased as needed to meet
seasonal demand.
The Company's distribution centers are modern and highly automated. Merchandise
is controlled through an on-line computerized buying and inventory control
system. The Company believes its distribution centers are adequate for its
needs for the foreseeable future without major additional capital investment.
The Company estimates its supermarket distribution centers presently are
operated at approximately 75% of capacity. Approximately 80% of the delivery
trips from distribution centers to supermarkets are 75 miles or less.
The Company believes centralized direct buying from major producers and growers
and its purchasing and distribution functions provide it with advantages
compared to purchasing from a third-party wholesaler. Direct buying,
centralized purchasing, and controlled distribution reduce merchandise cost by
allowing the Company to minimize purchases from wholesalers and distributors
and to take advantage of volume buying opportunities and forward purchases of
merchandise. Centralized purchasing and distribution promote a consistent
merchandising strategy throughout the Company's supermarkets. Rapid inventory
turnover at the warehouse permits the Company's stores to offer consistently
fresh, high-quality products. Through frequent deliveries to the stores, the
Company is able to reduce in-store stockroom space and increase square footage
available for retail selling.
Some products, principally bakery, dairy and beverage items, and snack foods
are delivered directly to the supermarkets and convenience stores by
distributors of national and regional brands.
CSDC supplies most grocery, produce, housewares, and health and beauty aid
products to the Company's convenience stores.
The Company operates a commissary to produce products sold through the
delicatessen departments of its supermarkets and convenience stores and to
third parties through CSDC. A Company owned greenhouse provides many of the
live potted plants sold in the supermarket floral departments.
The Company's supermarket transportation function is performed by Ruan
Transportation Management Systems ("Ruan"), an unaffiliated transportation
management and equipment leasing company. This service is provided under a
subcontract arrangement entered into on September 18, 1987 and extending to
September 18, 1994, with an automatic renewal for successive one year terms
unless canceled by Ruan or the Company at least sixty days prior to the
anniversary date, subject to early cancellation in stages under certain
conditions. Under the arrangement, Ruan employs the drivers, dispatchers and
maintenance personnel who perform the Company's distribution function. A
subsidiary of the Company leases most of its tractor/trailer fleet from Ruan
under long-term, full service leases.
MANAGEMENT INFORMATION SYSTEMS
All of the Company's supermarkets are equipped with electronic scanning
checkout systems. This minimizes item pricing, allows more efficient and
accurate checkout line operation, and provides product movement data for
merchandising decisions and other purposes.
The Company utilizes in-store micro-computers in the supermarkets to
automate various tasks, such as processing the receiving and billing of vendor
direct-store-delivered (DSD) merchandise at the store level, processing of
video rentals, processing pharmacy records in the 20 food and drug combination
stores, and time keeping for payroll processing. Future applications, currently
under development, include computer-assisted reordering and electronic
messaging.
All convenience stores are equipped with micro-computers which are utilized for
electronic transmission of accounting and merchandising data to headquarters,
electronic messaging and processing DSD merchandise receiving and billing.
4
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A point-of-sale electronic funds transfer and credit card system is in
place in 53 supermarkets. Through the use of a bank debit card, a customer can
authorize the immediate transfer of funds from the customer's account to the
Company at the point of purchase.
COMPETITION
The retail food industry is highly competitive. Marsh believes competitive
factors include quality of perishable products, service, price, location,
product variety, physical layout and design of store interior, ease of ingress
and egress to the store and minimal out-of-stock conditions. Marsh endeavors
to concentrate its efforts on all of these factors with special emphasis on
maintaining high quality store conditions, high quality perishable products,
expanded service and specialty departments, and competitive pricing.
The Company believes that it is one of the largest supermarket chains operating
in its market area. The Company's supermarkets are subject to competition from
local, regional and national supermarket chains, independent supermarkets, and
other retail formats, such as discount stores and wholesale clubs. The number
of competitors and degree of competition experienced by the Company's
supermarkets vary by location, with the Indianapolis metropolitan market
generally being subject to more price competition than the smaller markets.
In recent years, the principal supermarket chain competitors have been
The Kroger Co. and Super Valu Food Stores, Inc., operating in the Indianapolis
market through its "Cub Foods" stores. Meijer, Inc. currently operates two of
its large food and general merchandise combination stores in the Company's
market area in Ohio and recently opened two stores in the Indianapolis market
and has two other stores under construction that are scheduled to open during
the next twelve months.
The Company believes Village Pantry is one of the largest convenience store
chains operating in its market area. Its major competitors are petroleum
marketing companies which have been converting or expanding gasoline locations
to include convenience food operations. Major national convenience store chains
do not have a significant presence in the Company's marketing area. The Company
believes the principal competitive factor for convenience stores is location,
and it actively pursues the acquisition of attractive sites for replacing
existing stores and future development of new stores.
The Company believes the primary competitive factors in CSDC's wholesale
distribution business are pricing, timeliness and accuracy of deliveries.
CSDC's major competitors are McLane Company, Inc. and several regional
wholesale distributors.
SEASONALITY
Marsh's supermarket sales are subject to some seasonal fluctuation, as are
other retail food chains. Traditionally, higher sales occur during the third
quarter holiday season, and lower sales occur in the warm weather months of the
second quarter. Convenience store sales traditionally peak in the summer
months.
EMPLOYEES
The Company has approximately 11,300 employees, of whom approximately 6,800 are
employed on a part-time basis. All employees are non-union, with the exception
of the approximately 150 supermarket distribution facility employees who are
unionized under two three-year collective bargaining agreements which extend to
May, 1997. The Company considers its employee relations to be excellent.
REGULATORY MATTERS
As a retailer of alcoholic beverages and gasoline, the Company is subject to
federal, state and local statutes, ordinances and regulations concerning the
storage and sale of these products. Current environmental laws and regulations
require the removal or abandonment of underground storage tanks (UST's) at 26
Village Pantry locations prior to December, 1998. Earlier removal or
abandonment would be required in the event any of these UST's fail any leak
detection test, which the Company performs at least annually. All UST's at
these 26 locations passed the most recent leak detection tests in December
1993, which results were consistent with data from the Company's established
petroleum product inventory control program.
5
<PAGE> 6
In addition to the 26 sites, the Company is aware of the existence of
petroleum contamination at nine other Village Pantry locations and has commenced
remediation at each of these sites. The cost of remediation may vary
significantly depending on the extent, source and location of the contamination,
geological and hydrological conditions and other factors. The cost to remove or
abandon the remaining UST's at these nine locations and to remediate the
unknown contamination has been estimated at approximately $870,000. The Company
has charged this amount to earnings.
The Company currently estimates the maximum aggregate cost remaining to be
incurred in connection with compliance to existing environmental laws and
regulations applicable to owners and operators of UST's will not exceed
approximately $2.0 million through December 1998. This estimate of accrued or
potential compliance costs does not consider any potential recovery the Company
may receive from either the State of Indiana Underground Storage Tank Excess
Liability Fund, which reimburses owners and operators of UST's for a portion of
the costs incurred in connection with the remediation of soil and groundwater
contamination, or from third parties which may be responsible for all or part
of the contamination at one of the nine locations referenced above.
6
<PAGE> 7
ITEM 2 PROPERTIES
<TABLE>
The following table summarizes the per unit and aggregate size of the retail facilities operated by Marsh, together with an
indication of the age of the total square footage operated.
<CAPTION>
Footage Operated Per Store Average 0-5 Years 5-10 Years Over 10 Years
---------------- ----------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Supermarkets 3,077,000 35,400 41% 29% 30%
Convenience Stores 485,000 2,740 25 37 38
---------
3,562,000
=========
</TABLE>
<TABLE>
Owned and leased retail facilities are summarized as follows:
<CAPTION>
Convenience
Supermarkets Stores
------------ -------
<S> <C> <C>
Owned 32 121
Leased:
Fixed rentals 24 29
Fixed plus contingent rentals 31 27
-- ---
55 56
-- ---
87 177
== ===
Lease expirations:
Within five years 29 45
Five to ten years 17 7
Beyond ten years 9 4
-- ---
55 56
== ===
</TABLE>
Substantially all leases have one to four renewal options for periods of two to
five years each. The majority of leases provide for payment of property taxes,
maintenance and insurance by the Company. In addition, the Company is obligated
under leases for 18 closed stores, of which 11 were subleased at April 2, 1994.
The non-perishable grocery products warehouse in Indianapolis is leased with an
initial lease term expiring in 2000 and options available through 2014. The
facility, constructed in 1969, is located on a 44 acre site and has a total of
409,000 square feet, of which 382,000 are utilized for grocery warehousing
operations. The remainder consists of a catering commissary and office space.
A 128,000 square foot refrigerated perishable products handling facility in
Yorktown, Indiana, serves as the distribution center for meat, produce and
delicatessen items. The leased facility was completed in 1981.
Marsh owns an additional 388,000 square foot facility in Yorktown.
Approximately 180,000 square feet of this facility is used for the non-food
warehouse operation, approximately 21,000 square feet is used by the retail
maintenance department, and an additional 55,000 square feet of warehouse space
is leased to third parties. The portion of this facility formerly utilized for
the corporate offices currently is vacant.
The Company leases a 172,000 square foot warehouse in Indianapolis for storage
of forward purchases of merchandise and seasonal items.
The 160,000 square foot corporate headquarters in Indianapolis is owned by the
Company. This facility was completed and occupied in May 1991.
CSDC owns a 187,000 square foot warehouse and distribution facility in
Richmond, Indiana.
One supermarket and two warehouses (considered owned for purposes of the
foregoing analysis) are leased under equity lease arrangements pursuant to
which ownership is transferred to Marsh at the expiration of the lease term.
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ITEM 3 LEGAL PROCEEDINGS
There are no pending legal proceedings to which Marsh is a party which are
material to its business, financial condition or results of operations or which
would otherwise be required to be disclosed under this item.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year ended April 2, 1994.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by Item 10 with respect to the executive officers of the
Registrant is set forth below. Each officer has been elected for a term to
expire in August, 1994, or upon election of his successor by the Board of
Directors.
<TABLE>
<CAPTION>
NAME POSITION AGE FAMILY RELATIONSHIP
---- -------- --- -------------------
<S> <C> <C> <C>
DON E. MARSH Chairman of the Board, 56 Son of Garnet R. Marsh,
President and Chief brother of C. Alan Marsh and
Executive Officer of William L. Marsh
Mr. Don E. Marsh has held his current position as President and Chief Executive Officer of the Company for more than the
past five years. On May 2, 1991 he was elected Chairman of the Board of Directors, on which he has served as a member since 1959.
He has been employed by the Company in various supervisory and executive capacities since 1961.
- - -----------------------------------------------------------------------------------------------------------------------------------
C. ALAN MARSH Vice Chairman of the 52 Son of Garnet R. Marsh,
Board and Senior Vice brother of Don E. Marsh and
President - Corporate William L. Marsh
Development
Mr. C. Alan Marsh has held his current position since February 23, 1992. For more than five years prior thereto he served as
President and Chief Operating Officer, Marsh Village Pantries, Inc. He has been employed by the Company in various supervisory and
executive capacities since 1965.
- - -----------------------------------------------------------------------------------------------------------------------------------
P. LAWRENCE BUTT Vice President, Counsel 52 None
and Secretary
Mr. P. Lawrence Butt has held his current position for more than the past five years. He has been employed by the Company in various
executive capacities since 1977.
- - -----------------------------------------------------------------------------------------------------------------------------------
DOUGLAS W. Chief Financial Officer 50 None
DOUGHERTY
Mr. Douglas W. Dougherty has held his current position and been employed by the Company in this position since March 1994. Prior
experience includes senior financial executive positions with Hartmarx, Inc. from November 1990 to March 1994 and Lieberman
Enterprises from August 1988 to November 1990.
- - -----------------------------------------------------------------------------------------------------------------------------------
WILLIAM L. MARSH Vice President - General 50 Son of Garnet R. Marsh,
Manager, Property brother of Don E. Marsh and
Management C. Alan Marsh
Mr. William L. Marsh has held his current position for more than the past five years. On May 2, 1991 he was elected a director of
the Company. He has been employed by the Company in various supervisory and executive capacities since 1974.
- - -----------------------------------------------------------------------------------------------------------------------------------
RONALD R. WALICKI Executive Vice President, 56 None
Supermarket Division
Mr. Ronald R. Walicki has held his current position since February 8, 1994. Prior thereto, he served as President and Chief
Operating Officer of Marsh Village Pantries, Inc. since February 1992, and for more than five years thereto as Vice President -
General Manager, Supermarket Division. He has been employed by the Company in various supervisory and management positions since
1965.
</TABLE>
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<TABLE>
<CAPTION>
NAME POSITION AGE FAMILY RELATIONSHIP
---- -------- --- -------------------
<S> <C> <C> <C>
DAVID M. REDDEN President and Chief 46 None
Operating Officer
Marsh Village Pantry
Mr. David M. Redden has held his current position since February 8, 1994. Prior thereto, he served as Vice President - General
Manager, Supermarket Division since February 1992, and as Vice President - Warehousing and Transportation from April 1988 to
February 1992. He has been employed by the Company in various supervisory and management positions since 1969.
- - ---------------------------------------------------------------------------------------------------------------------------------
MICHAEL D. Director of Corporate 36 None
CASTLEBERRY Accounting
Mr. Michael D. Castleberry has held his current position since March 1991. Prior thereto, he served as Assistant Controller for
Fleming Inc., at its Fort Worth, Texas division from September 1990, and as Vice President - Finance for Falley's Food-4-Less (a
subsidiary of Food-4-Less, Inc.) from February 1988 to September 1990. From 1976 to February 1988 Mr. Castleberry was employed by
H.E. Butt Grocery Company in San Antonio, Texas, in various positions, the last of which was Assistant Controller.
- - ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY
HOLDER MATTERS
Information on Common Stock and Shareholder Matters on pages 15 and 34 of the
annual report to shareholders for the year ended April 2, 1994, is incorporated
herein by reference.
ITEM 6 SELECTED FINANCIAL DATA
Selected Financial Data on page 14 of the annual report to shareholders for the
year ended April 2, 1994, is incorporated herein by reference.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations on pages 16 through 19 of the annual report to shareholders for the
year ended April 2, 1994, is incorporated herein by reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements on pages 21 to 33 of the annual report to
shareholders for the year ended April 2, 1994, are incorporated herein by
reference.
Quarterly Financial Data on page 15 of the annual report to shareholders for
the year ended April 2, 1994, are incorporated herein by reference.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
In accordance with Instruction G(3), except as indicated in the following
sentence, the information called for by ITEMS 10, 11, 12 and 13 is incorporated
by reference from the Registrant's definitive proxy statement pursuant to
Regulation 14A, to be filed with the Commission not later than 120 days after
April 2, 1994, the end of the fiscal year covered by this report. As permitted
by instruction G(3) the information on executive officers called for by ITEM 10
is included in Part 1 of this Annual Report on Form 10-K.
11
<PAGE> 12
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following consolidated financial statements of Marsh
Supermarkets, Inc. and subsidiaries, included in the annual report
to shareholders for the year ended April 2, 1994, are incorporated
by reference in Item 8.
Consolidated Balance Sheets as of April 2, 1994 and March 27, 1993.
Consolidated Statements of Income for each of the three years in
the period ended April 2, 1994.
Consolidated Statements of Changes in Shareholders' Equity for
each of the three years in the period ended April 2, 1994.
Consolidated Statements of Cash Flows for each of the three years
in the period ended April 2, 1994.
Notes to Consolidated Financial Statements - April 2, 1994.
(2) The following consolidated financial statement schedules of Marsh
Supermarkets, Inc. and subsidiaries are included in Item 14(d):
Schedule II - Amounts Receivable from Related Parties,
Underwriters, Promoters and Employees
Other Than Related Parties.
Schedule V - Property, Plant and Equipment
Schedule VI - Accumulated Depreciation and Amortization of
Property, Plant and Equipment
Schedule IX - Short-term Borrowings
Schedule X - Supplementary Income Statement Information
Note: All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions, or are
inapplicable, and therefore have been omitted.
<TABLE>
(3) The following exhibits are included in Item 14(c):
<S> <C> <C>
Exhibit 3 (a) Restated Articles of Incorporation, as amended as of May 15, 1991 - Incorporated by reference to
Form 10-K for the year ended March 30, 1991.
(b) By-Laws as amended as of August 7, 1990 - Incorporated by reference to Form 10-Q for the quarter ended
January 5, 1991.
Exhibit 4 (a) Articles V, VI and VII of the Company's Restated Articles of Incorporation, as amended as of May 15,
1991 - Incorporated by reference to Form 10-K for the year ended March 30, 1991.
(b) Articles I and IV of the Company's By-laws, as amended as of August 7,1990 - Incorporated by reference
to Form 10-Q for the quarter ended January 5, 1991.
(c) Agreement of the Company to furnish a copy of any agreement relating to certain long-term debt and
leases to the Securities and Exchange Commission upon its request - Incorporated by reference to Form
10-K for the year ended March 27, 1987.
(d) Note Agreement dated as of May 1, 1988 for $25,000,000 9.48% Senior Notes due June 30, 2003 -
Incorporated by reference to Form 10-Q for the quarter ended June 25, 1988.
(e) Rights Agreement, dated as of August 1, 1989, between Marsh Supermarkets, Inc. and National City Bank,
as successor to Merchants National Bank and Trust Company of Indianapolis - Incorporated by reference
to Form 10-Q for the quarter ended October 14, 1989.
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<PAGE> 13
(f) Amendment No. 1 dated as of May 1, 1991, to Rights Agreement, dated as of August 1, 1989 -
Incorporated by reference to Form 10-K for the year ended March 30, 1991.
(g) Note Agreement dated as of October 15, 1992 for $35 million 8.54% Senior Notes, Series A, due December
31, 2007 and $15 million 8.13% Senior Notes, Series B, due December 31, 2004 - Incorporated by
reference to Registration Statement on Form S-2 (File No. 33-56738).
(h) Indenture dated as of February 15, 1993, between Marsh Supermarkets, Inc. and Society National Bank,
as Trustee, including form of Indenture - Incorporated by reference to Registration Statement on Form
S-2 (File No. 33-56738).
Exhibit 10 (a) Agreements between Ruan Leasing Company and Marsh Supermarkets, Inc., dated September 18, 1987 -
Incorporated by reference to Registration Statement on Form S-2 (File No. 33-17730).
(b) Lease Agreements relating to warehouse located at 333 South Franklin Road, Indianapolis, Indiana -
Incorporated by reference to Registration Statement on Form S-2 (File No. 33-17730).
Management Contracts and Compensatory Plans
(c) Marsh Supermarkets, Inc. 1987 Stock Option Plan - Incorporated by reference to Registration Statement
on Form S-8 (File No. 33-33427).
(d) Amendment to the Marsh Supermarkets, Inc. 1987 Stock Option Plan - Incorporated by reference by Proxy
Statement, dated March 22, 1991, for a special meeting of shareholders held May 1, 1991.
(e) Amended and Restated Employment and Severance Agreements dated December 3, 1992 - Incorporated by
reference to Registration Statement on Form S-2 (File No. 33-56738).
(f) Severance Agreements, dated December 31, 1991 - Incorporated by reference to Registration Statement on
Form S-2 (File No. 33-56738).
(g) Marsh Supermarkets, Inc. 1980 Marsh Stock Plan - Incorporated by reference to Registration Statement
on Form S-8 (File No. 2-74859).
(h) Amendment to the Marsh Supermarkets, Inc. 1980 Marsh Stock Plan - Incorporated by reference to Proxy
Statement, dated March 22, 1991, for a special meeting of shareholders held May 1, 1991.
(i) Supplemental Retirement Plan of Marsh Supermarkets, Inc. and Subsidiaries - Incorporated by
reference to Registration Statement on Form S-2 (File No. 33-17730).
(j) Indemnification agreements - Incorporated by reference to Form 10-Q for the quarter ended January 6,
1990.
(k) Marsh Supermarkets, Inc. 1991 Employee Stock Incentive Plan - Incorporated by reference to Proxy
Statement, dated March 22, 1991, for a special meeting of shareholders held May 1, 1991.
(l) Marsh Supermarkets, Inc. Executive Life Insurance Plan - Incorporated by reference to Form 10-K for
the year ended March 30, 1991.
(m) Marsh Supermarkets, Inc. Executive Supplemental Long-Term Disability Plan - Incorporated by reference
to Form 10-K for the year ended March 30, 1991.
(n) Marsh Supermarkets, Inc. 1992 Stock Option Plan for Outside Directors - Incorporated by reference to
Proxy Statement, dated June 25, 1992, for the annual meeting of shareholders held August 4, 1992.
Exhibit 11 Statement re: Computation of Per Share Earnings
Exhibit 13 Annual Report to Shareholders (only portions specifically incorporated by reference are included herein)
Exhibit 21 Subsidiaries of the Registrant
Exhibit 23 Consent of Independent Auditors
</TABLE>
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by the Registrant during the
fourth quarter of its fiscal year ended April 2, 1994.
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into registrant's Registration Statements on Form S-8
Nos. 2-74859 (filed December 2, 1981), 33-33427 (filed February 12, 1990),
33-43817 (filed November 7, 1991), 33-56630 (filed December 31, 1992), 33-56624
(filed December 31, 1992) and 33-56626 (filed December 31, 1992).
13
<PAGE> 14
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
14
<PAGE> 15
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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.
MARSH SUPERMARKETS, INC.
June 24, 1994 By: /s/ Don E. Marsh
---------------------------
Don E. Marsh, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
June 24, 1994 /s/ Don E. Marsh
-------------------------------------
Don E. Marsh, President, Chief
Executive Officer and Director
June 24, 1994 /s/ Douglas W. Dougherty
-------------------------------------
Douglas W. Dougherty,
Chief Financial Officer
June 24, 1994 /s/ Michael D. Castleberry
-------------------------------------
Michael D. Castleberry,
Director-Corporate Accounting
June 24, 1994 /s/ C. Alan Marsh
-------------------------------------
C. Alan Marsh, Senior Vice President
Corporate Development and Director
June 24, 1994 /s/ Garnet R. Marsh
-------------------------------------
Garnet R. Marsh, Director
June 24, 1994 /s/ William L. Marsh
-------------------------------------
William L. Marsh, Vice President -
General Manager, Property
Management and Director
June 24, 1994 /s/ Jack E. Buckles
-------------------------------------
Jack E. Buckles, Director
June 24, 1994 /s/ Charles R. Clark
-------------------------------------
Charles R. Clark, Director
June 24, 1994 /s/ Stephen M. Huse
-------------------------------------
Stephen M. Huse, Director
June 24, 1994 /s/ James K. Risk, III
-------------------------------------
James K. Risk, III, Director
June 24, 1994 /s/ K. Clay Smith
-------------------------------------
K. Clay Smith, Director
15
<PAGE> 16
MARSH SUPERMARKETS, INC., AND SUBSIDIARIES
<TABLE>
Schedule II - Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other than Related Parties
(in thousands of dollars)
<CAPTION>
Balance Deductions Balance
---------------------
Beginning Amounts Amounts End of Period
-----------------
Name of Debtor of Period Additions Collected Written off Current Not Current
- - -------------- --------- --------- --------- ----------- ---------------------
<S> <C> <C> <C> <C>
YEAR ENDED MARCH 28, 1992
Fishers Station
Development Company $ - $ 268 $ 117 $ 151
===== ===== ===== =====
YEAR ENDED MARCH 27, 1993
Fishers Station
Development Company $ 151 $ 882 $ 414 $ 619
===== ===== ===== =====
YEAR ENDED April 2, 1994
Fishers Station
Development Company $ 619 $ 572 $ 689 $ 502
Don E. Marsh
Chairman, President, and CEO - 224 - 224
----- ----- ----- -----
Total $ 619 $ 796 $ 689 $ 726
===== ===== ===== =====
Amounts due from Fishers Station Development Company represent working capital
advances, due on demand, to a 25%-owned partnership.
Amount due from Don E. Marsh is a note receivable bearing interest at 6% per
annum, and payable in full on May 28, 1995. The note is collateralized by
shares of Marsh common stock.
</TABLE>
16
<PAGE> 17
MARSH SUPERMARKETS, INC. AND SUBSIDIARIES
<TABLE>
Schedule V - Property, Plant and Equipment
(in thousands of dollars)
<CAPTION>
Balance Other
Beginning Additions Changes Balance
of Period at Cost Retirements Add (Deduct) End of Period
--------- ------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Year Ended March 28, 1992:
Land $ 21,842 $ 3,129 $( 47) $ 703 (B) $ 25,627
Buildings 51,232 26,828 (D) ( 110) 1,237 79,187
Fixtures & Equipment 83,597 14,440 (3,864) 681 94,854
Leasehold Improvements 42,884 3,532 ( 135) - 46,281
Construction in Progress 19,676 (14,568) - ( 418) 4,690
-------- -------- ------- ------- --------
$219,231 $ 33,361 $(4,156) $ 2,203 $250,639
======== ======== ======= ======= ========
Capitalized Lease Property $ 30,343 $ - $(1,433) $ 2 $ 28,912
======== ======== ======= ======= ========
Year Ended March 27, 1993:
Land $ 25,627 $ 210 $( 2) $ 7,796 (B) $ 33,631
Buildings 79,187 9,151 - (2,768) (C) 85,570
Fixtures & Equipment 94,854 8,120 (1,700) (8,662) (C) 92,612
Leasehold Improvements 46,281 1,590 ( 393) (1,741) (C) 45,737
Construction in Progress 4,690 2,893 - ( 270) 7,313
-------- -------- ------- -------- --------
$250,639 $ 21,964 $(2,095) $ (5,645) $264,863
======== ======== ======= ======== ========
Capitalized Lease Property $ 28,912 $ - $ - $ (6,155) (C) $ 22,757
======== ======== ======= ======== ========
Year Ended April 2, 1994:
Land $ 33,631 $ 970 $( 16) $ 3,646 (B) $ 38,231
Buildings 85,570 24,948 ( 51) 2,325 (E) 112,792
Fixtures & Equipment 92,612 14,090 (1,242) (5,173) (C) 100,287
Leasehold Improvements 45,737 1,308 ( 72) (1,036) (C) 45,937
Construction in Progress 7,313 ( 5,019) - 1 2,295
-------- -------- ------- -------- --------
$264,863 $ 36,297 $(1,381) $( 237) 299,542
======== ======== ======= ======== ========
Capitalized Lease Property $ 22,757 $ - $( 87) $( 4,320) (E) $ 18,350
======== ======== ======= ======== ========
<FN>
(A) The rates used in providing for depreciation of property and equipment
and the amortization of capital lease assets are as follows:
Buildings 2.5% to 3%
Fixtures and Equipment 8.3% to 33.3%
Transportation Equipment 12.5% to 33.3%
Leasehold Improvements 2.125% to 16.67% or lease term if shorter
Capitalized Lease Property Term of lease or in accordance with above rates where lease transfers ownership
to Registrant at the end of the lease term.
(B) Transfer from land held for expansion.
(C) Principally elimination of fully-amortized costs.
(D) Includes approximately $12 million transferred from construction in
progress and approximately $5 million of new expenditures relating to
new corporate headquarters.
(E) Includes approximately $2.3 million transferred from capitalized lease
property, where ownership of two stores transferred to the Company at
the expiration of the lease term.
</TABLE>
17
<PAGE> 18
MARSH SUPERMARKETS, INC. AND SUBSIDIARIES
<TABLE>
Schedule VI - Accumulated Depreciation and Amortization
of Property, Plant and Equipment
(in thousands of dollars)
<CAPTION>
Balance Balance
Beginning Additions Other Changes End of
of Period at Cost Retirements Add (Deduct) Period
--------- ------- ----------- ------------ ------
<S> <C> <C> <C> <C> <C>
Year Ended March 28, 1992:
Buildings $10,539 $ 2,693 $( 33) $ 508 $13,707
Fixtures & Equipment 35,689 8,423 (2,253) 7 41,866
Leasehold Improvements 14,823 3,311 ( 20) - 18,114
------- ------- ------- -------- -------
$61,051 $14,427 $(2,306) $ 515 $73,687
======= ======= ======= ======== =======
Capitalized Lease Property $16,752 $ 1,575 $(1,022) $ 13 $17,318
======= ======= ======= ======== =======
Year Ended March 27, 1993:
Buildings $13,707 $ 2,993 $ - $ (2,861) $13,839
Fixtures & Equipment 41,866 9,014 (1,006) (8,643) 41,231
Leasehold Improvements 18,114 3,388 ( 242) (1,646) 19,614
------- ------- ------- -------- -------
$73,687 $15,395 $(1,248) $(13,150) $74,684
======= ======= ======= ======== =======
Capitalized Lease Property $17,318 $ 1,106 $ - $ (6,090) $12,334
======= ======= ======= ======== =======
Year Ended April 2, 1994:
Buildings $13,839 $ 3,586 $( 43) $ 910 $18,292
Fixtures & Equipment 41,231 10,191 (1,127) ( 5,222) 45,073
Leasehold Improvements 19,614 3,391 ( 30) ( 1,036) 21,939
------- ------- ------- -------- -------
$74,684 $17,168 $(1,200) $( 5,348) $85,304
======= ======= ======= ======== =======
Capitalized Lease Property $12,334 $ 1,037 $( 87) $( 2,373) $10,911
======= ======= ======= ======== =======
</TABLE>
18
<PAGE> 19
MARSH SUPERMARKETS, INC. AND SUBSIDIARIES
<TABLE>
Schedule IX - Short-term Borrowings
(in thousands of dollars)
<CAPTION>
Weighted
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
End of Interest During the During the During the
Period Rate Period Period (B) Period (C)
------ ---- ------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Year Ended March 28, 1992
Notes payable to banks (A) - - $8,500 $1,626 5.3%
Year Ended March 27, 1993
Notes payable to banks (A) - - $7,200 $ 776 3.7%
Year Ended April 2, 1994
Notes payable to banks (A) $4,000 - $5,000 $ 190 3.4%
<FN>
Note A - Represent borrowings under line of credit borrowing arrangements which
have no termination date, but are reviewed annually for renewal.
Note B - The average amount outstanding represents the weighte average balances
outstanding.
Note C - The weighted average interest rate during the period was calculated by
dividing total interest on short-term debt by the average amount
outstanding.
</TABLE>
19
<PAGE> 20
MARSH SUPERMARKETS, INC. AND SUBSIDIARIES
<TABLE>
Schedule X - Supplementary Income Statement Information
(in thousands of dollars)
<CAPTION>
Item Charged to Costs and Expenses
- - -------------------------- --------------------------------------------
Year Ended
--------------------------------------------
April 2, March 27, March 28,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Advertising costs $13,033 $ - $ -
<FN>
Note: Amounts for maintenance and repairs, amortization of intangible
assets, taxes other than payroll and income taxes, and royalties are
not presented as such amounts are less than 1% of consolidated sales
and revenues.
Advertising costs are not presented for years ended March 27, 1993
and March 28, 1992, as they were less than 1% of consolidated sales
and other revenues.
</TABLE>
20
<PAGE> 21
<TABLE>
<CAPTION>
Exhibit Index Page No.
------------- --------
<S> <C> <C>
Exhibit 3 (a) - Restated Articles of Incorporation, as amended as of May 15, 1991 - Incorporated by reference to Form 10-K for the
year ended March 30, 1991.
(b) - By-laws as amended as of August 7, 1990 -Incorporated by reference to Form 10-Q for the quarter ended January 5,
1991.
Exhibit 4 (a) - Articles V, VI and VII of the Company's Restated Articles of Incorporation, as amended as of May 15, 1991 -
Incorporated by reference to Form 10-K for the year ended March 30, 1991.
(b) - Articles I and IV of the Company's By-laws, as amended as of August 7, 1990 - Incorporated by reference to Form 10-
Q for the quarter ended January 5, 1991.
(c) - Agreement of the Company to furnish a copy of any agreement relating to certain long-term debt and leases to the
Securities and Exchange Commission upon its request - Incorporated by reference to Form 10-K for the year ended
March 27, 1987.
(d) - Note Agreement, dated as of May 1, 1988, for $25,000,000 9.48% Senior Notes due June 30, 2003 - Incorporated by
reference to Form 10-Q for the quarter ended June 25, 1988.
(e) - Rights Agreement, dated as of August 1, 1989, between Marsh Supermarkets, Inc. and National City Bank, as successor
to Merchants National Bank and Trust Company of Indianapolis - Incorporated by reference to Form 10-Q for the
quarter ended October 14, 1989.
(f) - Amendment No. 1, dated as of May 1, 1991, to Rights Agreement, dated as of August 1, 1989 - Incorporated by
reference to Form 10-K for the year ended March 30, 1991.
(g) - Note Agreement dated as of October 15, 1992 for $35 million 8.54% Senior Notes, Series A, due December 31, 2007 and
$15 million 8.13% Senior Notes, Series B, due December 31, 2004 - Incorporated by reference to Registration
Statement on Form S-2 (File No. 33-56738).
(h) - Indenture dated as of February 15, 1993 between Marsh Supermarkets, Inc. and Society National Bank, as Trustee,
including form of Indenture - Incorporated by reference to Registration Statement on Form S-2 (File No. 33-56738).
Exhibit 10-(a) - Agreements between Ruan Leasing Company and Marsh Supermarkets, Inc., dated September 18, 1987 - Incorporated by
reference to Registration Statement on Form S-2 (File No. 33-17730).
(b) - Lease Agreements relating to warehouse located at 333 South Franklin Road, Indianapolis, Indiana - Incorporated by
reference to Registration Statement on Form S-2 (File No. 33-17730).
Management Contracts and Compensatory Plans
(c) - Marsh Supermarkets, Inc. 1987 Stock Option Plan - Incorporated by reference to Registration Statement on Form S-8
(File No. 33-33427).
(d) - Amendment to the Marsh Supermarkets, Inc. 1987 Stock Option Plan - Incorporated by reference to Proxy Statement,
dated March 22, 1991, for a special meeting of shareholders held May 1, 1991.
(e) - Amended and Restated Employment and Severance Agreements, dated December 3, 1992 - Incorporated by reference to
Registration Statement on Form S-2 (File No. 33-56738).
(f) - Severance Agreements, dated December 31, 1991 - Incorporated by reference to Registration Statement on Form S-2
(File No. 33-56738).
(g) - Marsh Supermarkets, Inc. 1980 Marsh Stock Plan - Incorporated by reference to Registration Statement on Form S-8
(File No. 2-74859).
(h) - Amendment to the Marsh Supermarkets, Inc. 1980 Marsh Stock Plan - Incorporated by reference to Proxy Statement,
dated March 22, 1991, for a special meeting of shareholders held May 1, 1991.
(i) - Supplemental Retirement Plan of Marsh Supermarkets, Inc. and Subsidiaries - Incorporated by reference
to Registration Statement on Form S-2 (File No. 33-17730).
(j) - Indemnification agreements - Incorporated by reference to Form 10-Q for the quarter ended January 6,
1990.
(k) - Marsh Supermarkets, Inc. 1991 Employee Stock Incentive Plan - Incorporated by reference to Proxy
Statement, dated March 22, 1991, for a special meeting of shareholders held May 1, 1991.
(l) - Marsh Supermarkets, Inc. Executive Life Insurance Plan - Incorporated by reference to Form 10-K for
the year ended March 30, 1991.
(m) - Marsh Supermarkets, Inc. Executive Supplemental Long-Term Disability Plan - Incorporated by reference
to Form 10-K for the year ended March 30, 1991.
(n) - Marsh Supermarkets, Inc. 1992 Stock Option Plan for Outside Directors - Incorporated by reference in
Proxy Statement, dated June 25, 1992, for the annual meeting of shareholders held August 4, 1992.
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Exhibit Index Page No.
------------- ---------
<S> <C> <C>
Exhibit 11 - Statement re: Computation of Per Share Earnings 23
Exhibit 13 - Annual Report to Shareholders (only portions specifically incorporated by reference are
included herein) 24
Exhibit 21 - Subsidiaries of the Registrant 53
Exhibit 23 - Consent of Independent Auditors 54
</TABLE>
<PAGE> 1
<TABLE>
EXHIBIT 11 -STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(All amounts in thousands except per share amounts)
<CAPTION>
Year Ended
------------------------------------------
April 2, March 27, March 28,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Primary earnings per share:
Average shares outstanding 8,430 7,828 7,760
Net effect of dilutive stock options - based on the
Treasury Stock method using average market price 12 106 157
------- -------- -------
Total primary shares and equivalents 8,442 7,934 7,925
------- -------- -------
Income before cumulative effect of changes
in accounting principles $ 8,526 $ 9,828 $ 9,725
------- -------- -------
Per primary share amount $ 1.01 $ 1.24 $ 1.23
======= ======== =======
Net income $10,467 $ 9,828 $ 9,725
------- -------- -------
Per primary share amount $ 1.24 $ 1.24 $ 1.23
======= ======== =======
Fully diluted earnings per share:
- - ---------------------------------
Average shares outstanding 8,430 7,828 7,768
Net effect of dilutive stock options - based on the
Treasury Stock method using higher of
average market or last price 12 106 167
Assumed conversion of 7% convertible
subordinated debentures 1,290 68 -
------- --------- -------
Total shares and equivalents 9,732 8,002 7,935
------- --------- -------
Income before cumulative effect of changes
in accounting principles $ 8,526 $ 9,828 $ 9,725
Add 7% convertible subordinated debentures
interest, net of tax benefit 906 49 -
------- --------- -------
Total $ 9,432 $ 9,877 $ 9,725
------- --------- -------
Per fully diluted share amount $ 0.97 $ 1.23 $ 1.23
======= ========= =======
Net income $10,467 $ 9,828 $ 9,725
Add 7% convertible subordinated debentures
interest, net of tax benefit 906 49 -
-------
Total $11,373 $ 9,877 $ 9,725
------- --------- -------
Per fully diluted share amount $ 1.17 $ 1.23 $ 1.23
======= ========= =======
</TABLE>
<PAGE> 1
<TABLE>
EXHIBIT 13
PORTIONS OF ANNUAL REPORT TO SHAREHOLDER INCORPORATED BY REFERENCE
SELECTED FINANCIAL DATA (in thousands, except per share amounts)
<CAPTION>
As of and for the year ended April 2, 1994 March 27, 1993 March 28, 1992 March 30, 1991 March 31, 1990
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales and other revenues (a) $1,263,191 $1,170,398 $1,131,326 $1,092,823 $1,002,021
Income before income taxes and changes
in accounting principles (a) 13,517 15,569 15,268 20,005 16,709
Income before cumulative effect of changes
in accounting principles 8,526 9,828 9,725 12,793 10,723
Cumulative effect of accounting changes 1,941 - - - -
---------- ---------- ---------- ---------- ----------
Net income $ 10,467 $ 9,828 $ 9,725 $ 12,793 $ 10,723
========== ========== ========== ========== ==========
Net income per share, fully diluted (b) $ 1.17 $ 1.23 $ 1.23 $ 1.62 $ 1.38
Dividends declared per share .44 .44 .43 .39 .34
Total assets 375,349 352,511 305,031 273,324 237,225
Long-term liabilities 148,818 155,444 128,029 110, 328 89,002
<FN>
(a) State income taxes and depreciation expense have been reclassified to
conform with the 1994 presentation.
(b) 1994 and 1993 earnings per share reflect dilutive options and convertible
debentures issued in March 1993. 1992 and 1991 earnings per share reflect
dilutive options. For 1990, earnings per share are calculated on average
shares outstanding; dilution was deemed insignificant.
</TABLE>
<PAGE> 2
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA (unaudited)
(in thousands, except per share amounts)
<CAPTION>
1994 1993
Fourth Third Second First Fourth Third Second First
----------------------------------------- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and other revenues $312,044 $291,191 $375,189 $284,767 $269,826 $275,913 $355,193 $269,466
Gross profit 76,446 70,258 91,904 69,243 65,047 65,190 83,785 64,612
Selling, general and administrative 65,380 60,745 79,106 57,561 56,341 56,030 70,900 52,973
Depreciation and amortization 5,038 4,093 5,267 3,808 4,140 3,771 4,938 3,654
------- ------- ------- ------- ------- ------- ------- -------
Operating profit 6,028 5,420 7,531 7,874 4,566 5,389 7,947 7,985
Interest and debt expense amortization 3,392 2,982 4,016 2,946 2,429 2,271 3,207 2,411
------- ------- ------- ------- ------- ------- ------- -------
Income before income tax provision
and cumulative effect of changes in
accounting principles 2,636 2,438 3,515 4,928 2,137 3,118 4,740 5,574
Income taxes 916 870 1,382 1,823 964 1,264 1,517 1,996
------- ------- ------- ------- ------- ------- ------- -------
Income before cumulative effect of
changes in accounting principles 1,720 1,568 2,133 3,105 1,173 1,854 3,223 3,578
Cumulative effect of changes in
accounting principles - - - 1,941 - - - -
------- ------- ------- ------- ------- ------- ------- -------
Net income $ 1,720 $ 1,568 $ 2,133 $ 5,046 $ 1,173 $ 1,854 $ 3,223 $ 3,578
======= ======= ======= ======= ======= ======= ======= =======
EARNINGS PER SHARE-
Per primary share outstanding:
Before cumulative effect of
accounting changes $ .20 $ .19 $ .25 $ .37 $ .15 $ .24 $ .41 $ .45
Cumulative accounting changes - - - .23 - - - -
------- ------- ------- ------- ------- ------- ------- -------
Net income $ .20 $ .19 $ .25 $ .60 $ .15 $ .24 $ .41 $ .45
======= ======= ======= ======= ======= ======= ======= =======
Assuming full dilution:
Before cumulative effect of
accounting changes $ .20 $ .18 $ .25 $ .34 $ .15 $ .24 $ .41 $ .45
Cumulative accounting changes - - - .20 - - - -
------- ------- ------- ------- ------- ------- ------- -------
Net income $ .20 $ .18 $ .25 $ .54 $ .15 $ .24 $ .41 $ .45
======= ======= ======= ======= ======= ======= ======= =======
COMMON STOCK PRICES:
Class A- High $ 12.25 $ 12.75 $ 13.00 $ 14.75 $ 15.50 $ 15.25 $ 17.50 $ 18.00
Low 9.50 9.50 11.50 12.50 13.50 13.00 13.50 15.00
Class B- High 11.25 12.50 12.50 13.25 15.50 15.25 17.00 17.75
Low 9.50 9.50 11.00 11.75 12.25 12.75 13.50 14.50
CASH DIVIDEND:
Class A $ .11 $ .11 $ .11 $ .11 $ .11 $ .11 $ .11 $ .11
Class B .11 .11 .11 .11 .11 .11 .11 .11
<FN>
Cash dividends have been paid on the common stock during each quarter of the
past 34 years.
Quarterly earnings per share are based on weighted average shares outstanding
and dilutive effect of options and convertible securities outstanding for the
quarter. The sum of the quarters may not equal the full year income per share
amount.
The second quarter is 16 weeks, the first, third and fourth quarters are 12
weeks, except the 1994 fourth quarter which is 13 weeks.
Unusual or infrequently occurring items recognized in net income in the
quarterly results are as follows:
First quarter 1994:Includes changes in accounting methods related to adopting
FASB Statement No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions", and FASB Statement No. 109, "Accounting for Income
Taxes". The cumulative effect of the changes was a $1.9 million increase in
net income, or $.20 per fully diluted share.
Fourth quarter 1994: Adjustments to various loss reserves decreased net income
$.05 per fully diluted share.
Fourth quarter 1993: Adjustment to accrued incentive plan decreased net income
$.06 per fully diluted share.
</TABLE>
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth certain income statement components expressed as
a percentage of sales and other revenues and the year-to-year percentage
changes in such components:
<CAPTION>
Percentage of Revenues
Year Ended Percentage Change
April 2, March 27, March 28, 1994 1993
1994 1993 1992 vs. 1993 vs. 1992
---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C>
Sales and other revenues . . . . . . . . . . . 100.0% 100.0% 100.0% 7.9% 3.5%
Gross profit . . . . . . . . . . . . . . . . . 24.4 23.8 23.6 10.5 4.4
Selling, general and administrative . . . . . 20.8 20.2 19.9 11.2 5.0
Depreciation and amortization . . . . . . . . 1.4 1.4 1.4 10.3 3.1
Operating profit . . . . . . . . . . . . . . . 2.1 2.2 2.3 3.7 4.7
Interest and debt amortization
expense . . . . . . . . . . . . . . . . . . 1.1 0.9 0.9 29.2 (1.7)
Income before income taxes and
cumulative effect of changes in
accounting principles . . . . . . . . . . . 1.1 1.3 1.3 (13.2) 2.0
Income taxes . . . . . . . . . . . . . . . . . 0.4 0.5 0.5 (13.1) 3.6
Income before cumulative effect
of changes in accounting
principles . . . . . . . . . . . . . . . . 0.7 0.8 0.9 (13.2) 1.1
Cumulative effect of changes in
accounting principles . . . . . . . . . . . 0.2 - - - -
Net income . . . . . . . . . . . . . . . . . . 0.8 0.8 0.9 6.5 1.1
===== ===== =====
</TABLE>
SALES AND OTHER REVENUES
In 1994, a 53 week year, consolidated revenue increased $92.8 million, or 7.9%
from 1993, a 52 week year. Approximately $23.6 million, or 2%, of the 1994
revenue is attributable to the additional week. Sales of the supermarket,
convenience store retail (Village Pantry) and convenience store wholesale
distribution operations (CSDC) accounted for 73%, 13% and 14% respectively, of
consolidated revenue. Supermarket division sales increased 6.8%, accounting for
approximately $58 million of the $92.8 million consolidated increase in 1994
revenue. The supermarket increase was due principally to new stores. Sales by
CSDC increased approximately $26 million, or 16.8%, largely due to a 7.4%
increase in customers. Village Pantry sales increased by $6.9 million, or 4.7%.
Retail sales (excluding gasoline) in like-stores open all weeks of comparable
quarters, ignoring the 53rd week of 1994, declined 1.2% in 1994 from 1993,
compared to a decline of 1.9% in the prior year. From 1992 through the second
quarter of 1994, a weak economy adversely affected sales. In 1994, moderate
deflation in perishable food products and significant reductions in cigarette
prices by the manufacturers reduced reported sales, despite unit increases.
Further, 1993 and 1994 supermarket sales were adversely impacted by competitors
opening new stores, including conventional supermarkets, discount stores and
wholesale clubs. The like-store sales trend has improved after reaching a
negative 3.2% in the second quarter of 1993, ending with a .4% decrease in the
fourth quarter of 1994, compared to the comparable quarters of the prior year.
In 1993, compared to 1992, supermarkets and CSDC generated increased sales.
Village Pantry sales were off slightly due to operating fewer gasoline
locations.
With the recent improvements in the economy, return of moderate food price
inflation and the maturing of newly constructed stores, the Company anticipates
improvement in the like-store sales trend.
GROSS PROFIT
Gross profit is net of warehousing, transportation and promotional expenses.
Expressed as a percentage of revenue, consolidated gross profit improved 0.6%,
from 23.8% in 1993, to 24.4% in 1994. From 1992 to 1993, gross profit improved
0.2%, from 23.6% to 23.8%. The 1994 improvement was due principally to
increased retail margins in the supermarket operation. The improved retail
margin is a function of increased emphasis on perishable and prepared foods
that traditionally yield higher gross margins, expanded product lines, improved
merchandising mixes in new and enlarged stores and increased trade discounts
from product procurement. Village Pantry and CSDC margins also improved.
In 1993, the gross profit improvement was principally due to improved grocery
and fuel margins in Village Pantry, and moderate improvements in supermarket
margins. CSDC margins remained consistent with the prior year.
The LIFO inventory adjustments increased gross profit by $1.3 million in 1994,
compared to a decrease of $135 thousand in 1993, and an increase of $300
thousand in 1992.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses, expressed as a percentage of
revenues, increased 0.6% from 20.2% in 1993 to 20.8% in 1994. This compares to
an increase of 0.3% of revenues in 1993. The negative like-store sales trend of
the past two years contributed to the upward expense trend expressed as a
percentage of revenues. Increased store labor and benefit costs
<PAGE> 4
associated with new stores represented the largest element of increase. Direct
wages, in like-stores, decreased slightly in each of 1993 and 1994. The fringe
benefit component increased due to higher health care and pension costs.
Management anticipates 1995 pension expense will increase approximately $300
thousand as result of a change in the discount rate. The concurrent change in
the assumed rate of future compensation increase is expected to offset
approximately $200 thousand of the increase. Rent and other occupancy expenses
have increased each year due to store expansion activity. Advertising expense
was substantially increased, to prepare for a major new competitor entering the
Indianapolis market in the first quarter of fiscal 1995. Advertising expense
decreased in 1993, after increasing in 1992, due to heavy promotion of the new
superstore format. Administrative wages increased in 1993 due to accruals for
management incentive plans. No executive bonus was earned for 1994.
In the fourth quarter of 1994, the Company announced an expense reduction plan.
The plan encompassed a reduction of approximately 70 non-retail positions and
changes to the Company automobile program. The staff reductions resulted from a
realignment of corporate headquarter responsibilities and improved warehousing
and transportation operating efficiencies. The warehouse and transportation
efficiencies relate to redesigning the physical layout of the Company's dry
grocery distribution center and the removal of an obsolete mechanized system.
These changes will reduce labor and maintenance expense while providing more
efficient space utilization. Additional savings resulted from the successful
implementation of new warehouse labor standards in the Company's perishable
products distribution center and the linkage of the standards to an employee
incentive program. The fourth quarter pre-tax charge for severance benefits
and other expenses related to the expense reduction plan was approximately $700
thousand. Most of this charge was offset by savings from the expense
reductions. Net annualized realizable savings from these changes are projected
to be $2.0 million on an after tax basis.
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization, expressed as a percentage of revenue, remained
constant at 1.4% for 1994, 1993 and 1992. Depreciation and amortization
increased over the last three years due primarily to opening new stores.
OPERATING PROFIT
Operating profit, expressed as a percentage of revenues, declined slightly to
2.1% in 1994 from 2.2% in 1993 and 2.3% in 1992. Improvements in gross profit
have been offset by increased selling, general and administrative expenses
discussed above.
INTEREST EXPENSE
Interest expense increased $3.0 million, or 29.3% in 1994, compared to 1993.
The increase is attributable to the Company's decision, at the end of the third
quarter of fiscal 1993, to replace $40 million of long-term floating rate bank
debt with $50 million of fixed rate unsecured senior notes. The new fixed rate
financing has a weighted average interest rate of 8.4%, compared to an average
rate of 4.2% on the floating rate bank debt. Additionally, the Company issued
$20 million of 7% convertible debentures during the fourth quarter of 1993.
In 1993, interest expense declined 1.7% from 1992. A slightly higher level of
interest incurred was offset by an increase in capitalized construction period
interest. As discussed above, the increased debt level at March 27, 1993,
compared to the prior year end, occurred late in fiscal 1993 and did not
proportionately increase interest expense for 1993. During the period of 1993
the floating rate bank debt was outstanding, the Company benefited from
interest rates lower than the rates that prevailed on such borrowings in 1992.
INCOME TAXES
The effective income tax rate was 36.9% in 1994 and 1993, and 36.3% in 1992.
The enactment of a retroactive federal rate increase in the current year was
largely negated by increased charitable contributions of inventory. The 1993
effective rate increased from 1992 due to reduced targeted jobs tax credits
with an offset from the favorable settlement of an IRS examination for fiscal
years 1989 and 1990. As discussed in Note G to the consolidated financial
statements, the Company adopted FASB Statement No. 109, "Accounting for Income
Taxes," in the first quarter of 1994. During 1994, the Company reclassified to
income tax expense certain state income taxes, for all years presented, that
were previously reported as a component of selling, general and administrative
expense. This reclassification enhances comparability to other companies.
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES
The Company provides certain health care benefits to early retirees. In the
first quarter of 1994, the Company adopted FASB Statement No. 106, "Employers
Accounting for Postretirement Benefits Other than Pensions", which requires the
accrual of the expected cost of such benefits over employees' years of service.
Previously, costs associated with these benefits were expensed when paid
(amounts were not material). The Company recognized a $1.7 million (net of tax
benefit) accrued benefit obligation as of the date of adoption. Future expense
is expected to be immaterial and closely match the expense previously recorded
on the "pay as you go" basis.
Also, in the first quarter of 1994, the Company adopted FASB Statement No. 109,
"Accounting for Income Taxes", which requires the Company to utilize the
liability method of accounting for income taxes. The cumulative effect of this
change increased net income by $3.6 million. See Note G to the consolidated
financial statements for a detailed analysis of the Company's income tax
accounts.
The net effect of the changes discussed above increased 1994 earnings by $1.9
million, or $.20 per fully diluted share.
NET INCOME
Throughout 1992, 1993 and the first half of 1994, earnings were negatively
impacted by the weak economy and increased competition. In 1994, the $1.0
million increase in operating profit was offset by a $3.0 million increase in
interest expense. In 1992, the Company first experienced the higher expense
associated with the new corporate headquarters building into which it relocated
in the first quarter of that year. Fiscal 1992 was also impacted by a number of
other factors, including: (1) a worsening economy, (2) a retail environment of
declining sales
<PAGE> 5
and intensified price competition, (3) heavy initial pre-opening, advertising,
promotional and operating expenses associated with the opening of a new
superstore, and (4) the charge-off of approximately $300 thousand of costs
incurred in connection with a withdrawn common stock offering. The effects of
adverse economic and competitive conditions in 1993 and 1992 were partially
offset by certain property and equipment gains approximating $450 thousand and
$750 thousand in the second quarter of 1993 and 1992, respectively.
In 1994, improved Village Pantry and CSDC earnings were offset by lower
earnings in supermarket operations, which primarily resulted from expenses
associated with opening an abnormally large number of new stores compared to
recent years. In 1993, improved Village Pantry earnings offset lower earnings
from supermarket operations and CSDC.
OTHER
In the retail food industry, changes in product cost are generally reflected in
higher or lower retail prices with gross margin percentages remaining
relatively stable. Periods of very moderate food price inflation or price
deflation tend to affect adversely operating results since revenues are reduced
while inflationary increases continue in certain expense categories. Through
the use of the LIFO inventory costing method, current costs are reflected in
the cost of merchandise sold.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL SPENDING
<TABLE>
Capital expenditures and major capital projects completed during the last three
years consisted of:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Capital expenditures (millions) $44.3 $26.2 $38.1
===== ===== =====
Projects completed
Supermarkets
New/acquired stores 6 4 1
Closed stores 3 0 1
Major remodels/expansions 2 1 3
Convenience stores
New/acquired stores 5 3 6
Closed stores 1 2 1
</TABLE>
In addition to store projects summarized above, 1992 capital expenditures
included a portion of the cost of the new corporate headquarters building,
which was completed and occupied in May 1991. All years include land
acquisitions for future store development.
<TABLE>
During 1994, the Company constructed the following:
<CAPTION>
STORE TYPE CATEGORY SQUARE FEET LOCATION OPENED
- - ---------- -------- ----------- -------- ------
<S> <C> <C> <C> <C>
Superstore New 80,270 Indianapolis, IN October 29, 1993
Supermarket New 53,633 Bloomington, IN October 31, 1993
Supermarket Replacement 54,213 Warsaw, IN May 21, 1993
Supermarket Replacement 59,815 Indianapolis IN June 6, 1993
Supermarket Replacement 59,849 Noblesville, IN November 9, 1993
Supermarket Remodel/Expansion 56,273 Indianapolis, IN March 28, 1994
LoBill New 32,502 Cincinnati, OH March 1, 1994
LoBill Conversion/Remodel 27,200 Cincinnati, OH November 17, 1993
Convenience New 4,460 Wabash, IN August 12, 1993
Convenience New 4,633 Fishers, IN August 26, 1993
Convenience New 4,528 Noblesville, IN September 30, 1993
Convenience New 1,600 Shelbyville, IN January 13, 1994
Convenience Replacement 4,460 Kokomo, IN August 19, 1993
</TABLE>
The projects listed above (net of stores closed) increased total selling area
square footage 9.7% in 1994. The Supermarket and Village Pantry divisions
increased selling area square footage 10.5% and 3.1%, respectively.
During 1993, the Company constructed an 81,000 square foot supermarket, two
27,000 square foot LoBill Supermarkets, and three Village Pantry stores (two
were replacement stores); acquired an existing 31,000 square foot supermarket,
and converted an older supermarket to the LoBill format. In 1993, total retail
square footage increased 6%.
For 1995, the Company plans to open two new supermarkets, a new LoBill, five
new convenience stores, and acquire several sites for future store development.
The cost of these projects and other routine capital commitments is projected
to be $35 million. Of this amount, $8 million will be funded through equipment
leasing, one supermarket will be leased, and the Company believes it can
finance the balance of this development program with current cash balances and
internally generated funds.
<PAGE> 6
The Company anticipates completion of most of these projects by November or
December 1994; however, the actual completion dates could be delayed.
The Company's plans with respect to store construction, expansion and
remodeling may be revised in light of changing conditions, such as competitive
influences, the ability to sucessfully negotiate site acquisitions or leases,
zoning limitations, and other governmental regulations. The timing of projects
is subject to normal construction and other delays. It is possible the projects
described above may not commence, others may be added, and a portion of the
planned expenditures with respect to projects commenced during the current
fiscal year may carry over to the subsequent fiscal year.
FINANCING AND LIQUIDITY
The Company's capital requirements have traditionally been financed through
internally generated funds, long-term borrowings and lease financings,
including capital and operating leases. In March 1993, the Company sold, in a
public offering, $20 million of convertible subordinated debentures and 569,900
shares of Class B Common Stock for aggregate net proceeds of approximately $26
million (these amounts include $2.5 million of debentures and 69,900 shares of
stock, issued in 1994, pursuant to underwriters' overallotment options). In
addition to the public offering, recent major financings include private
placements of long-term fixed rate debt of $23.0 million in fiscal 1991 and $50
million in December 1992. Of the long-term debt and capital lease obligations
at April 2, 1994, 97% is at fixed rates of interest averaging 8.9%, while 3% is
at fluctuating rates of interest averaging 4.3%.
The $16.4 million decrease in cash from March 27, 1993 to April 2, 1994, is
largely a function of capital expenditures, as previously discussed.
The Company's bank revolving credit agreements provide $45 million of
financing. Commitments for short-term bank borrowings provide an additional $15
million. At April 2, 1994, $4 million was outstanding on a short-term bank
borrowing.
The Company historically has financed expansion through long-term debt
placements and lease financings, including capital and operating leases. It
anticipates continued access to such financing sources. The Company's senior
note agreements preclude additional long-term borrowings if the Company's total
long-term liabilities, including capital lease obligations, would exceed 60% of
the Company's consolidated net tangible assets. Under the most restrictive of
these borrowing limitations, additional long-term borrowings are limited to
approximately $20 million as of April 2, 1994.
<PAGE> 7
REPORT OF MANAGEMENT ON RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Marsh Supermarkets, Inc. is responsible for the
preparation and integrity of the consolidated financial statements included in
this annual report. The financial statements were prepared in accordance with
generally accepted accounting principles and necessarily include some amounts
based on management's best estimates and judgment. All financial information
appearing in this annual report is consistent with that in the financial
statements.
The Company maintains a system of internal controls which is designed
to provide reasonable assurance, on a cost-effective basis, that assets are
safeguarded and transactions are properly authorized and recorded accurately in
the financial records. The Company believes its control system is enhanced by
its long-standing emphasis on conducting business in accordance with the
highest standards of conduct and ethics.
Independent auditors, Ernst & Young, have audited the accompanying
financial statements and their report is included herein. Their audits,
conducted in accordance with generally accepted auditing standards, included
review and evaluation of selected internal accounting controls for purposes of
designing their audit tests.
The Audit Committee of the Board of Directors meets periodically with
the independent auditors to discuss the scope and results of their audit work,
their assessment of internal controls, and the quality of financial reporting.
The independent auditors are engaged by the Board of Directors, upon
recommendation of the Audit Committee.
/s/ Don E. Marsh
---------------------------------------
Don E. Marsh
Chairman of the Board, President and
Chief Executive Officer
/s/ Douglas Dougherty
---------------------------------------
Douglas Dougherty
Chief Financial Officer
/s/ Michael D. Castleberry
---------------------------------------
Michael D. Castleberry
Director of Accounting
Chief Accounting Officer
- - --------------------------------------------------------------------------------
ERNST & YOUNG One Indiana Square Phone: (317) 681-7000
Suite 3400 Fax: (317) 681-7216
Indianapolis, Indiana 46204-2094
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of Marsh
Supermarkets, Inc.
We have audited the accompanying consolidated balance sheets of Marsh
Supermarkets, Inc. and subsidiaries as of April 2, 1994 and March 27, 1993, and
the related consolidated statements of income, changes in shareholders' equity
and cash flows for each of the three years in the period ended April 2, 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Marsh
Supermarkets, Inc. and subsidiaries at April 2, 1994 and March 27, 1993, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended April 2, 1994, in conformity with generally
accepted accounting principles.
As discussed in Note A to the consolidated financial statements, in
1994 the Company changed its methods of accounting for postretirement health
benefits and income taxes.
/s/ Ernst & Young
Indianapolis, Indiana
June 9, 1994
<PAGE> 8
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
<CAPTION>
YEAR ENDED April 2, 1994 March 27, 1993 March 28, 1992
- - ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales and other revenues . . . . . . . . . . . . . . . . . . . . $1,263,191 $1,170,398 $1,131,326
Cost of merchandise sold, including
warehousing and transportation . . . . . . . . . . . . . . . 955,340 891,764 864,487
---------- ---------- ----------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . 307,851 278,634 266,839
Selling, general and administrative . . . . . . . . . . . . . . . 262,792 236,244 225,071
Depreciation and amortization . . . . . . . . . . . . . . . . . . 18,206 16,503 16,002
---------- ---------- ----------
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . 26,853 25,887 25,766
Interest and debt expense
amortization-Note C . . . . . . . . . . . . . . . . . . . . 13,336 10,318 10,498
---------- ---------- ----------
Income before income taxes and cumulative
effect of changes in accounting
principles . . . . . . . . . . . . . . . . . . . . . . . . . 13,517 15,569 15,268
Income taxes-Note G . . . . . . . . . . . . . . . . . . . . . . . 4,991 5,741 5,543
---------- ---------- ----------
Income before cumulative effect of changes
in accounting principles . . . . . . . . . . . . . . . . . . 8,526 9,828 9,725
Cumulative effect of changes in accounting
principles (net of tax benefits)-
Notes F and G . . . . . . . . . . . . . . . . . . . . . . . 1,941 - -
---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,467 $ 9,828 $ 9,725
========== ========== ==========
EARNINGS PER SHARE:
Primary
- - -------
Before cumulative effect of changes in
accounting principles . . . . . . . . . . . . . . . . . . . $ 1.01 $ 1.24 $ 1.23
Cumulative effect of accounting changes . . . . . . . . . . . . . .23 - -
---------- ---------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.24 $ 1.24 $ 1.23
========== ========== ==========
Fully diluted
- - -------------
Before cumulative effect of changes in
accounting principles . . . . . . . . . . . . . . . . . . . $ .97 $ 1.23 $ 1.23
Cumulative effect of accounting changes . . . . . . . . . . . . . .20 - -
---------- --------- ----------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.17 $ 1.23 $ 1.23
========== ========= ==========
Dividends per share . . . . . . . . . . . . . . . . . . . . . . . $ .44 $ .44 $ .43
========== ========= ==========
- - ---------------------------------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 9
<TABLE>
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
ASSETS April 2, 1994 March 27, 1993
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . . . $ 24,112 $ 40,529
Accounts receivable, less allowances of
$612 in 1994, and $308 in 1993 . . . . . . . . . . . . . . . . . 16,247 14,723
Inventories -Note B . . . . . . . . . . . . . . . . . . . . . . . 87,806 74,891
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 5,159 6,511
Recoverable income taxes . . . . . . . . . . . . . . . . . . . . . 102 -
Deferred income taxes -Note G . . . . . . . . . . . . . . . . . . 2,399 -
-------- --------
TOTAL CURRENT ASSETS . . . . . . . . . . . . . . . . . . . 135,825 136,654
Property and Equipment -Note C
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,231 33,630
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,792 85,570
Fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . 100,287 92,612
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . 45,937 45,737
Construction in progress . . . . . . . . . . . . . . . . . . . . . 2,295 7,314
-------- --------
299,542 264,863
Allowances for depreciation and amortization . . . . . . . . . . . 85,304 74,684
-------- --------
TOTAL PROPERTY AND EQUIPMENT . . . . . . . . . . . . . . . 214,238 190,179
Capitalized lease property, less amortization - Note D . . . . . . . 7,439 10,424
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,847 15,254
-------- --------
$375,349 $352,511
======== ========
- - -----------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 10
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
(in thousands)
<CAPTION>
April 2, 1994 March 27, 1993
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Notes payable to banks . . . . . . . . . . . . . . . . . . . . . . . . $ 4,000 $ -
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,370 37,281
Employee compensation . . . . . . . . . . . . . . . . . . . . . . . . 9,634 9,498
State and local taxes . . . . . . . . . . . . . . . . . . . . . . . . 10,128 9,713
Other accounts payable and accrued expenses . . . . . . . . . . . . . 15,068 13,045
Incomes taxes -Note G . . . . . . . . . . . . . . . . . . . . . . . . - 2,337
Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . 929 921
Current maturities of long-term liabilities . . . . . . . . . . . . . 7,246 4,529
-------- --------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . 97,375 77,324
Long-Term Liabilities
Long-term debt -Note C . . . . . . . . . . . . . . . . . . . . . . . . 138,484 143,988
Obligations under capital leases-Note D . . . . . . . . . . . . . . . 10,334 11,456
-------- --------
TOTAL LONG-TERM LIABILITIES . . . . . . . . . . . . . . . . . . 148,818 155,444
Deferred Items
Income taxes -Note G . . . . . . . . . . . . . . . . . . . . . . . . . 12,583 13,141
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,779 5,063
-------- --------
TOTAL DEFERRED ITEMS . . . . . . . . . . . . . . . . . . . . . 19,362 18,204
Shareholders' Equity -Notes C and H
Series A Junior Participating Cumulative Preferred Stock:
Authorized: 5,000,000 shares
Issued: None
Class A Common Stock, no par value:
Authorized: 15,000,000 shares
Issued: 1994 - 4,695,253; 1993 -
4,695,258 shares . . . . . . . . . . . . . . . . . . . . . . . . . 8,552 8,394
Class B Common Stock, no par value:
Authorized: 15,000,000 shares
Issued: 1994 - 5,265,158; 1993 -
5,195,258 shares . . . . . . . . . . . . . . . . . . . . . . . . . 15,461 14,487
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 92,204 85,451
Cost of Common Stock in treasury
Class A: 1994 - 762,655, 1993 - 799,530 shares . . . . . . . . . . ( 3,058) ( 3,206)
Class B: 1994 - 755,754, 1993 - 787,567 shares . . . . . . . . . . ( 3,012) ( 3,139)
Notes receivable-stock options . . . . . . . . . . . . . . . . . . . . ( 353) -
Deferred cost-employee stock plan . . . . . . . . . . . . . . . . . . - ( 448)
-------- --------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . . . . . . . . . . 109,794 101,539
-------- --------
$375,349 $352,511
======== ========
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 11
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
Class A Class B Cost of
Common Common Retained Stock in
Stock Stock Earnings Treasury Other Total
<S> <C> <C> <C> <C> <C> <C>
Balance at March 30, 1991 . . . . . . . . . $ 16,640 $ - $ 72,755 $ (6,490) $(1,170) $ 81,735
Recapitalization-Note H . . . . . . . . . ( 8,319) 8,319 ( 12) ( 12)
Net income . . . . . . . . . . . . . . . 9,725 9,725
Cash dividends declared . . . . . . . . . ( 3,341) ( 3,341)
Exercise of stock options . . . . . . . . 25 64 75 164
Amortization of deferred
cost-employee stock plan . . . . . . . . 313 313
-------- ------- -------- --------- -------- ---------
Balance at March 28, 1992 . . . . . . . . . 8,346 8,383 79,127 ( 6,415) ( 857) 88,584
Net income . . . . . . . . . . . . . . . 9,828 9,828
Cash dividends declared . . . . . . . . . ( 3,504) ( 3,504)
Public offering of 500,000
shares . . . . . . . . . . . . . . . . . 6,016 6,016
Exercise of stock options . . . . . . . . 48 34 76 158
Amortization of deferred
cost-employee stock plan . . . . . . . . 409 409
Other . . . . . . . . . . . . . . . . . . 54 ( 6) 48
-------- ------- -------- --------- --------- ---------
Balance at March 27, 1993 . . . . . . . . . 8,394 14,487 85,451 ( 6,345) ( 448) 101,539
Net income . . . . . . . . . . . . . . . 10,467 10,467)
Cash dividends declared . . . . . . . . . ( 3,714) ( 3,714)
Public offering of 69,900
shares . . . . . . . . . . . . . . . . . 837 837
Exercise of stock options . . . . . . . . 158 137 275 570
Notes receivable-stock options . . . . . ( 353) ( 353)
Amortization of deferred
cost-employee stock plan . . . . . . . . 448 448
-------- ------- -------- --------- --------- ---------
Balance at April 2, 1994 . . . . . . . . . $ 8,552 $15,461 $ 92,204 $ (6,070) $( 353) $ 109,794
======== ======= ======== ========= ========= =========
- - -------------------------------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 12
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
YEAR ENDED April 2, 1994 March 27, 1993 March 28, 1992
- - ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . $ 10,467 $ 9,828 $ 9,725
Adjustments to reconcile net income to net cash
provided by operating activites:
Depreciation and amortization . . . . . . . . . . . 18,206 16,503 16,002
Amortization of other assets . . . . . . . . . . . 6,370 4,802 4,017
Increase (decrease) in deferred income . . . . . . ( 661) 2,649 ( 435)
Increase (decrease) in deferred income taxes . . . 544 61 ( 433)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . ( 1,459) ( 3,477) ( 44)
Inventories . . . . . . . . . . . . . . . . . . ( 12,915) 501 (6,803)
Prepaid expenses . . . . . . . . . . . . . . . 1,250 ( 3,904) 1,462
Accounts payable and accrued expenses . . . . . 14,461 6,418 7,666
Cumulative effect of accounting changes . . . . . ( 1,941) - -
Other operating activities . . . . . . . . . . . . 1,961 690 746
-------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . . 36,283 34,071 31,903
INVESTING ACTIVITIES
Acquistion of property, equipment and land for
expansion . . . . . . . . . . . . . . . . . . . . . . ( 44,322) (26,221) (38,070)
Disposition of property and equipment . . . . . . . . . 126 1,322 1,534
Other investing activities, principally acquistion
of rental video tapes . . . . . . . . . . . . . . . . ( 5,941) ( 4,652) ( 5,230)
-------- -------- --------
NET CASH USED FOR INVESTING ACTIVITIES . . . . . . ( 50,137) (29,551) (41,766)
FINANCING ACTIVITIES
Proceeds of short-term borrowings . . . . . . . . . . . 4,000 - -
Proceeds of long-term borrowings . . . . . . . . . . . . 4,000 90,278 40,000
Payments of long-term borrowings and captial leases . . ( 7,909) (66,226) (22,241)
Proceeds of public offering of Class B Common Stock . . 837 6,016 -
Cash dividends paid . . . . . . . . . . . . . . . . . . ( 3,707) ( 3,439) ( 3,261)
Other financing activities . . . . . . . . . . . . . . . 216 206 150
-------- -------- --------
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES . . . . . . . . . . . . . . . ( 2,563) 26,835 14,648
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS . . . . . . ( 16,417) 31,355 4,785
Cash and equivalents at beginning of year . . . . . . . 40,529 9,174 4,389
-------- -------- --------
CASH AND EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . $ 24,112 $ 40,529 $ 9,174
======== ======== ========
- - -------------------------------------------------------------------------------------------------------
<FN>
See Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts or as otherwise noted)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies followed in preparation of the consolidated
financial statements are:
FISCAL YEAR
The Company's fiscal year ends on the Saturday of the thirteenth week of the
calendar year. All references herein to "1994", "1993" and "1992" relate to the
fiscal years ended April 2, 1994, March 27, 1993, and March 28, 1992,
respectively. Fiscal year 1994 includes 53 weeks, compared with 52 weeks in
each of the two preceding fiscal years.
PRINCIPLES OF CONSOLIDATION AND BUSINESS SEGMENT REPORTING
The consolidated financial statements include the accounts of the Company and
all subsidiaries. Significant intercompany accounts and transactions have been
eliminated. The Company is principally involved in a single significant
business segment, the distribution and retail sale of food and related products
through supermarkets and convenience stores.
CASH AND EQUIVALENTS
Cash equivalents consist of highly liquid investments, with a maturity of three
months or less when purchased. The balance sheet carrying amount approximates
fair value of these assets.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined by
the last-in, first-out (LIFO) method for the principal components of
inventories, and by the first-in, first-out (FIFO) method for the remainder
(see Note B).
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. For financial reporting purposes,
depreciation is computed by the straight-line method over the estimated useful
lives of the assets. For income tax purposes, accelerated methods and statutory
lives are used.
CAPITALIZED LEASE PROPERTY
Capitalized lease assets are amortized by the straight-line method over the
term of the lease or in accordance with practices established for similar owned
assets in instances where the lease transfers ownership to the Company by the
end of the lease term. Amortization expense is included with depreciation
expense.
COSTS OF OPENING STORES
Non-capital expenditures associated with opening new stores are expensed as
incurred.
EXCISE TAXES
Sales and cost of merchandise sold include state and federal excise taxes on
tobacco, gasoline and alcohol products of approximately $72 million, $62
million and $54 million in 1994, 1993 and 1992, respectively.
RECLASSIFICATIONS
Depreciation and amortization expense and state income taxes previously
included in selling, general and administrative expenses have been reclassified
to depreciation and amortization and income taxes, respectively. Prior periods
have been reclassified.
EARNINGS PER SHARE
Earnings per share are presented on a "primary" and "fully diluted" basis.
Primary shares are based on the weighted average number of common shares
outstanding plus the share equivalent effect of dilutive stock options. Fully
diluted earnings per share assumes the dilutive effect of stock options and the
conversion of convertible debentures. The Company is required to report fully
diluted earnings per share in 1994. The 1993 and 1992 earnings per share are
presented on a fully diluted basis for comparability.
ADVERTISING COSTS
The Company capitalizes certain costs of advertising (primarily television
commercial production costs) and amortizes these costs over the period the
advertising is expected to be used. In the first quarter of fiscal 1996, the
Company will be required to adopt AICPA Statement of Position No. 93-7,
"Reporting on Advertising Costs". This Statement generally requires all costs
of advertising be expensed in the period incurred or the first time the
advertising takes place. The Company is evaluating the impact of this Statement
and does not anticipate that adoption will be material to the results of
operations or financial position.
ACCOUNTING CHANGES
Effective March 28, 1993, the Company adopted FASB Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions" and
FASB Statement No. 109, "Accounting for Income Taxes". The cumulative effect
of these changes was $1.9 million, net of tax, as follows:
<TABLE>
<CAPTION>
Income/ Per Share
(Expense) Fully Diluted
--------- -------------
<S> <C> <C>
FASB Statement No. 106 . . . $(2,700)
Tax effect . . . . . . . . . 1,005
-------
(1,695) $(.17)
FASB Statement No. 109 . . . 3,636 .37
------- -----
Cumulative effect of
accounting changes . . . . . $ 1,941 $ .20
======= =====
</TABLE>
NOTE B - INVENTORIES
Inventories valued by the last-in, first-out (LIFO) method represented
approximately 86% of consolidated inventories at April 2, 1994 and March 27,
1993. Current inventory cost exceeded the carrying amount of LIFO inventories
by $18.8 million at April 2, 1994, and $20.1 million at March 27, 1993.
<PAGE> 14
NOTE C - DEBT ARRANGEMENTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Notes payable to insurance companies:
8.54% senior notes . . . . . . . . . . . . . . . . . . . . . . $ 35,000 $ 35,000
8.13% senior notes . . . . . . . . . . . . . . . . . . . . . . 15,000 15,000
9.48% senior notes . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000
10.05% notes . . . . . . . . . . . . . . . . . . . . . . . . . 20,775 21,344
9.05% notes . . . . . . . . . . . . . . . . . . . . . . . . . 21,508 22,031
7% convertible subordinated debentures . . . . . . . . . . . . . 20,000 17,500
Economic development bond . . . . . . . . . . . . . . . . . . . . 2,333 2,432
5.1% (average rate) mortgage notes, due in installments
through 1999 . . . . . . . . . . . . . . . . . . . . . . . . . 4,861 7,711
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 826
Less current maturities . . . . . . . . . . . . . . . . . . . . . ( 5,993) ( 2,856)
-------- --------
$138,484 $143,988
======== ========
</TABLE>
The 8.54% senior unsecured notes are payable in installments of $3.5 million
due each December 31st from 1998 to 2007.
The 8.13% senior unsecured notes are payable in installments of $1.4 million
due each December 31st from 1994 to 2004.
The 9.48% senior unsecured notes are payable in installments of $2.5 million
due each June 30th from 1994 to 2003.
The 10.05% notes are payable in monthly installments (principal and interest)
of $220 thousand through 2009.
The 9.05% notes are payable in quarterly installments (principal and interest)
of $625 thousand through 2011. In 2000, the Company or lender may initiate an
interest rate renegotiation or require retirement of the notes.
The 7% convertible subordinated debentures mature February 15, 2003, and are
convertible at the holder's option at any time into Class B Common Stock at a
conversion price of $15.50 per share. They are redeemable at the Company's
option beginning February 15, 1996, at declining prices starting at 103.5% of
principal amount in 1996. The debentures are subordinated to all present and
future senior indebtedness.
The economic development bond bears interest at 8.25%, and is due in monthly
installments of $25 thousand (principal and interest) through 2006.
At April 2, 1994, the carrying amount of long-term debt, including current
maturities, was $144.5 million. The estimated fair value, determined using a
discounted cash flow method and estimated current incremental borrowing rates
for similar types of borrowing arrangements, exceeds the carrying amount by
$700 thousand.
Real estate with a net carrying amount of approximately $52 million is pledged
as collateral to the 10.05% notes, the 9.05% notes, the economic development
bond and the mortgage notes.
Several of the Company's loan agreements require maintenance of minimum
working capital, as well as limitations on cash dividends, purchases of its
common stock, future indebtedness, lease obligations, investments and
disposition of assets. Under the most restrictive covenant, retained earnings
available for payment of dividends was approximately $19 million at April 2,
1994.
The Company's revolving credit agreements permit borrowings up to $45 million.
On August 1 of each year, either the Company or the banks may elect not to
renew the arrangements, in which event, revolving credit borrowings would
convert on the following July 31, to term loans payable in twenty quarterly
installments. Interest is based on various money market rates selected by the
Company at the time of borrowing. The Company pays a commitment fee of 1/4% on
unused amounts.
The Company has commitments from various banks for short-term borrowings of up
to $15 million at rates at or below the prime rates of the committed banks, of
which $4 million was utilized at April 2, 1994.
- - --------------------------------------------------------------------------------
<TABLE>
The aggregate principal payments of long-term debt outstanding at April 2, 1994,
for the succeeding five fiscal years and thereafter are:
<S> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,993
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,850
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,906
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,962
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,626
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . 111,140
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Interest consisted of:
Long-term debt . . . . . . . . . . . . . . . . . . . . $11,960 $ 8,554 $ 8,556
Capital lease obligations . . . . . . . . . . . . . . . 1,376 1,682 1,836
Other . . . . . . . . . . . . . . . . . . . . . . . . . - 82 106
------- ------- -------
Total interest expense . . . . . . . . . . . . . . $13,336 $10,318 $10,498
======= ======= =======
Interest capitalized . . . . . . . . . . . . . . . . . . . . $ 1,257 $ 1,263 $ 849
======= ======= =======
Cash payments for interest . . . . . . . . . . . . . . . . . $14,383 $10,509 $11,185
======= ======= =======
</TABLE>
<PAGE> 15
NOTE D - LEASES
Of the Company's 264 retail stores, 111 are under commercial lease agreements
providing for initial terms generally from 15 to 20 years with options to
extend the initial term up to an additional 20 years. In addition, one
supermarket and two warehouses are leased under equity lease arrangements where
ownership is transferred to the Company at lease expiration (net carrying
amount at April 2, 1994 included in capitalized lease property - $3.5 million).
The Company also leases a portion of its transportation and store equipment for
periods from five to eight years, plus renewal and purchase options.
- - --------------------------------------------------------------------------------
<TABLE>
Capitalized lease property consisted of:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Store facilities . . . . . . . . . . . . . . . . . . . . . . . . $14,424 $17,325
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . - 817
Warehouses . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,926 4,615
------- -------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . 18,350 22,757
Less amortization . . . . . . . . . . . . . . . . . . . . . . . 10,911 12,333
------- -------
Cash payments for interest . . . . . . . . . . . . . . . . . . . . $ 7,439 $10,424
======= =======
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
Future minimum lease payments under capital and operating leases with terms in
excess of one year, and the present value of capital lease obligations at April
2, 1994 were as follows:
<CAPTION>
Capital Leases Operating Leases
-------------- ----------------
<S> <C> <C>
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,522 $14,685
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,449 13,072
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,936 11,513
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,414 10,558
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,145 10,054
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,185 28,526
------- -------
17,651 $88,408
Less: =======
Estimated executory costs . . . . . . . . . . . . . . . . . . . . 130
Amounts representing interest . . . . . . . . . . . . . . . . . . 5,934
-------
Present value of net minimum lease payments . . . . . . . . . . . . $11,587
=======
</TABLE>
Minimum annual lease payments will be reduced by $3.2 million from future
sublease rentals due over the terms of the subleases arrangements.
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Rental expense consisted of:
Minimum rentals . . . . . . . . . . . . . . . . . . . . . . . $19,225 $17,733 $16,005
Contingent rentals . . . . . . . . . . . . . . . . . . . . . . 151 166 178
Sublease rental income . . . . . . . . . . . . . . . . . . . . ( 1,814) ( 1,828) ( 1,416)
------- ------- -------
Minimum rentals . . . . . . . . . . . . . . . . . . . . . . . . . $17,562 $16,071 $14,767
======= ======= =======
</TABLE>
<PAGE> 16
NOTE E - RETIREMENT PLANS
The Company has a defined benefit pension plan which covers the majority of its
non-union (retail and administrative) employees and a supplemental retirement
plan. The current benefit formula, under both plans, is based upon years of
service and the highest consecutive four years of earnings during the last ten
years worked. The benefits under both plans are the same; however, the
supplemental retirement plan takes into consideration compensation in excess of
amounts that can be recognized under the defined benefit pension plan. For the
defined benefit plan, the Company's funding policy is consistent with federal
laws and regulations. No contributions have been required in recent years.
Funding in the approximate amount of $2.6 million will be required in fiscal
1995 with respect to the 1994 and 1995 plan years. Contributions are intended
to provide for benefits attributed to service to date and those expected to be
earned in the future. Plan assets consist principally of listed stocks and
corporate and government notes and bonds, and 92,675 shares each of Class A
and Class B Common Stock of the Company with a market value of $1.9 million at
April 2, 1994. The supplemental retirement plan is unfunded.
- - --------------------------------------------------------------------------------
<TABLE>
The funded status of the plans and amounts recognized in the consolidated
balance sheets at April 2, 1994 and March 27, 1993 were as follows:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,391 $23,116
Nonvested benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 3,082 2,409
------- -------
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . 29,473 25,525
Effect of projected future salary increases . . . . . . . . . . . . . . . 6,389 6,415
------- -------
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . 35,862 31,940
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . 27,574 27,773
------- -------
Funded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 8,288) (4,167)
Unrecognized net loss from past experience
different from that assumed . . . . . . . . . . . . . . . . . . . . . 10,044 7,910
Unrecognized net asset at March 29, 1987 . . . . . . . . . . . . . . . . . ( 2,601) (2,933)
Unrecognized prior service benefit . . . . . . . . . . . . . . . . . . . . ( 418) ( 468)
------- -------
Prepaid (accrued) pension cost . . . . . . . . . . . . . . . . . . . . . . $(1,263) $ 342
======= =======
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
The components of net pension expense included the following:
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during the year . . . . . . . . . . . . $1,663 $1,438 $1,245
Interest cost on projected benefit obligation . . . . . . . . . . . 2,645 2,409 2,184
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . (1,392) (1,944) (1,626)
Net amortization and deferral . . . . . . . . . . . . . . . . . . . (1,311) (1,881) (1,262)
------ ------ ------
Net pension expense . . . . . . . . . . . . . . . . . . . . . . . . $1,605 $1,022 $ 541
====== ====== ======
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
The following actuarial assumptions were used to compute net pension expense
and funded status of the plans:
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.0% 8.5% 9.0%
Rate of increase in compensation levels . . . . . . . . . . . . . . 3.5 4.0 4.0
Expected long-term rate of return on assets . . . . . . . . . . . . 10.0 10.0 10.0
</TABLE>
- - --------------------------------------------------------------------------------
The change in discount rate increased the projected benefit obligation by
approximately $2.4 million. The change in the rate of increase in compensation
levels decreased the projected benefit obligation by $1.1 million.
The Company participates in a multi-employer plan which provides defined
benefits to its union employees. Company expense for this plan (in thousands),
amounted to $534, $473 and $470 in 1994, 1993 and 1992, respectively.
Effective January 1, 1993, the Company established the Marsh Supermarkets, Inc.
401(k) plan, increasing the number of defined contribution savings plans to
two. These plans allow 401(k) contributions covering employees who work a
minimum of 1,000 hours per year, are age 21 or older and elect to participate.
The purpose of the plans is to provide additional financial security during
retirement by providing employees an incentive to make tax advantaged
contributions to a savings plan on a regular basis. Company expense for the
plans (in millions) was $1.1, $0.5 and $0.3, in 1994, 1993 and 1992,
respectively.
<PAGE> 17
NOTE F - POSTRETIREMENT HEALTH BENEFITS
The Company provides certain health care benefits for its non-union retirees
and their eligible spouses. The plans are contributory with retiree
contributions adjusted annually and certain other cost sharing features such as
deductibles and coinsurance. Eligibility for these benefits is generally
limited to retirees, who are at least age 55 and less than age 65, with ten or
more years of vested service. Spousal coverage is optional and continues for
the lesser of five years after retirement or until the spouse reaches age 65.
Benefits generally cease after reaching age 65, since the retiree (spouse) is
generally eligible for Medicare.
Prior to 1994, these benefits were expensed when paid (amounts were not
material). Effective March 28, 1993, the Company adopted FASB Statement No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions",
which requires the expected cost of such benefits to be accrued over the
employees' years of service. The Company elected to recognize the entire
unaccrued benefit obligation as of the date of adoption. As a result of the
adoption, the Company recorded an accumulated postretirement benefit obligation
of $2.7 million, before taxes, for active employees and retirees as of March
28, 1993.
- - -------------------------------------------------------------------------------
<TABLE>
The funded status and amounts recognized in the consolidated balance sheet at
April 2, 1994 and March 28, 1993 for the Company's contributory defined
benefit postretirement plans were as follows:
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Accumulated postretirement benefit obligation:
Current retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,234 $ 1,170
Fully eligible active plan participants . . . . . . . . . . . . . . . . 1,272 1,110
Other active plan participants. . . . . . . . . . . . . . . . . . . . . 535 420
------- -------
Total benefit obligation . . . . . . . . . . . . . . . . . . . . . . 3,041 2,700
Unrecognized loss . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 145) -
------- -------
Accrued postretirement benefit cost . . . . . . . . . . . . . . . . . . $ 2,896 $ 2,700
======= =======
- - -------------------------------------------------------------------------------
1994
----
Net postretirement benefit cost includes the following components:
Service cost of benefits earned during the year . . . . . . . . . . . . $ 64
Interest cost on liability . . . . . . . . . . . . . . . . . . . . . . 201
------
Service cost of benefits earned during the year . . . . . . . . . . . . $ 265
======
- - -------------------------------------------------------------------------------
</TABLE>
For measurement purposes, the weighted average discount rate used in
determining the accumulated postretirement benefit obligation and related
expense was 8.0% and 8.5% for 1994 and 1993, respectively. This change in
discount rate increased the projected benefit obligation by approximately $145
thousand. The Company's assumed health care cost trend rate is 11% for
1995, decreasing gradually to 5% by fiscal year 2002 and thereafter. If these
trend rates were increased by one percentage point each year, the accumulated
postretirement benefit obligation and expense would have increased by
approximately 4%.
<PAGE> 18
NOTE G - INCOME TAXES
The Company adopted FASB Statement No. 109, "Accounting for Income Taxes",
effective March 28, 1993. The adoption resulted in a cumulative effect
adjustment which increased 1994 net income by $3.6 million.
Under the liability method of accounting for income taxes prescribed by FASB
Statement No. 109, deferred tax assets and liabilities are based on differences
between financial reporting and tax basis of assets and liabilities, measured
using enacted tax
rates and laws expected to be in effect when the differences reverse. Prior to
the adoption of FASB Statement No. 109, income tax expense was determined by
the deferred method. Deferred income tax expense was based on items of income
and expense, reported in different years in the financial statements and tax
returns, measured at tax rates in effect in the year the differences
originated. As permitted by FASB Statement No. 109, the Company elected not to
restate the financial statements of any prior years.
- - -------------------------------------------------------------------------------
<TABLE>
Following are the components of deferred tax assets and liabilities:
<CAPTION>
April 2, March 27,
1994 1993
---- ----
<S> <C> <C>
Deferred tax assets:
Self insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . $ 1,327 $ 1,117
Merchandising allowances . . . . . . . . . . . . . . . . . . . . . . . 102 944
Compensation and benefit accruals . . . . . . . . . . . . . . . . . . . 2,019 677
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 504
Federal tax benefit for deferred state taxes . . . . . . . . . . . . . 449 452
Targeted jobs tax credit carryforward . . . . . . . . . . . . . . . . . 157 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 442
-------- --------
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . $ 4,773 $ 4,136
-------- --------
Deferred tax liabilities:
Property and equipment, including leased property . . . . . . . . . . . $(12,136) $(11,223)
Prepaid employee benefits . . . . . . . . . . . . . . . . . . . . . . . ( 669) ( 1,730)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 568) -
State income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . ( 1,309) ( 1,329)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 275) ( 496)
-------- --------
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . $(14,957) $(14,778)
-------- --------
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . $(10,184) $(10,642)
======== ========
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Income tax expense (credit) consisted of the following:
Current
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,805 $ 4,734 $ 5,029
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 730 946 947
Deferred
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 525) 61 ( 433)
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 19) - -
-------- -------- --------
Interest capitalized . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,991 $ 5,741 $ 5,543
======== ======== ========
Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,922 $ 6,080 $ 4,939
======== ======== ========
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1992
----
<S> <C>
The 1992 deferred income tax provision relates to the following:
Employee benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(754)
Vendor allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569
Self insurance reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (436)
Pension expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (185)
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174
-----
$(433)
=====
</TABLE>
<PAGE> 19
NOTE G- INCOME TAXES (continued)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
A reconciliation of the effective income tax rate is as follows:
Federal statutory income tax rate . . . . . . . . . . . . . . . . . . . . 35.0% 34.0% 34.0%
State and local taxes, net of federal tax benefit . . . . . . . . . . . . 3.4 4.0 4.1
New jobs tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . ( .5) ( .7) ( 1.3)
Inventory contributions . . . . . . . . . . . . . . . . . . . . . . . . . ( 1.6) ( .3) ( .8)
Federal income tax rate increase . . . . . . . . . . . . . . . . . . . . . .6 - -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - ( .1) .3
---- ---- ----
Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . 36.9% 36.9% 36.3%
==== ==== ====
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE H - SHAREHOLDERS' EQUITY AND EMPLOYEE STOCK PLANS
COMMON STOCK RECAPITALIZATION
Following shareholder approval on May 1, 1991, the Company made the following
changes in common stock as of May 15, 1991:
- a one-for-two reverse split of existing common stock
- reclassification of existing common stock as Class A
Common Stock
- distribution of a stock dividend of one share of newly
authorized Class B Common Stock for each share of
Class A Common Stock.
As a result, approximately 7.8 million shares of previously outstanding common
stock were replaced by approximately 3.9 million shares each of Class A and
Class B (fractional shares were redeemed for cash).
Class A Common Stock has one vote per share; Class B is non-voting except with
respect to certain matters affecting the rights and preferences of that class.
Each class is entitled to equal per share dividends and equal per share
consideration in any merger, consolidation or liquidation of the Company. A
person who, subsequent to May 15, 1991, acquires 10% or more of outstanding
Class A Common Stock without acquiring a like percentage of Class B Common
Stock must make a public tender offer to acquire additional Class B Common
Stock. Failure to do so results in suspension of the voting rights of the Class
A Common Stock held by such person.
- - ------------------------------------------------------------------------------
<TABLE>
STOCK OPTION PLANS AND SHARES RESERVED
Option activity under the 1987 and 1991 plans is summarized below. In connection with the common stock recapitalization,
outstanding stock options were divided equally between Class A and Class B stock.
<CAPTION>
Shares
Option ------
Price% Class A Class B
----- ------- -------
<S> <C> <C> <C>
1992
Outstanding at March 30, 1991 . . . . . . . . . . . . . . . . . . . . . . $10.63-13.81 367,775 -
Recapitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (183,887) 183,887
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.50-15.94 2,000 180,000
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.63-12.75 ( 1,126) ( 1,124)
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.75 ( 112) ( 113)
------- -------
Outstanding at March 28, 1992 . . . . . . . . . . . . . . . . . . . . . . 10.63-15.94 184,650 362,650
1993
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.50-13.81 ( 600) ( 1,900)
------- -------
Outstanding at March 27, 1993 . . . . . . . . . . . . . . . . . . . . . . 10.63-15.94 184,050 360,750
1994
Cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.63-13.81 ( 15,400) ( 25,700)
------- -------
Outstanding at April 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . 10.63-15.94 168,650 335,050
======= =======
</TABLE>
Grants prior to 1992 were made under the 1987 Stock Option Plan at prices equal
to 85% of market value at date of grant. They are exercisable pro-rata over a
four year period and expire 10 years from date of grant. At April 2, 1994, 1987
Plan options for 299,575 shares were exercisable. No further grants may be made
under the 1987 Plan.
On May 1, 1991, shareholders approved the 1991 Employee Stock Incentive Plan
under which 300,000 shares of common stock, in any combination of Class A and
Class B, were reserved for the grant of stock options, stock appreciation
rights, restricted stock, deferred stock, stock purchase rights, and/or other
stock-based awards. The 1992 grants made under this plan represent
non-qualified options, substantially all granted at market value at date of
grant. They become exercisable pro-rata over a four year period beginning one
year from date of grant. At April 2, 1994, 85,200 shares were exercisable.
Certain key employees held exercisable options (granted under an expired 1980
plan) to acquire 36,876 shares of Class A and 31,813 shares of Class B Common
Stock at $8.28 per share. The options expired on May 31, 1993. Options were
exercised as follows: 1994 - 36,876 Class A and 31,813 Class B shares; 1993 -
11,250 Class A and 7,875 Class B shares; 1992 - 4,187 Class A and 12,624 Class
B shares.
<PAGE> 20
NOTE H- SHAREHOLDERS' EQUITY AND EMPLOYEE
STOCK PLANS (continued)
The Company presently holds notes receivable totaling $353 thousand from five
officers and employees of the Company. These notes arose when the Company
loaned the officers and employees money to exercise the stock options mentioned
above. These notes, which bear interest at the rate of 6% per annum, are due on
May 28, 1995, and are collateralized by the shares. The amount of the
receivable is shown on the balance sheet as a reduction of equity.
At the 1992 Annual Meeting, shareholders approved the 1992 Stock Option Plan
for Outside Directors under which 50,000 shares of Class B Common Stock were
reserved for the grant of stock options and restricted stock to non-employee
directors.
Options were granted for 4,500 shares on August 4, 1992 ($15.50 per share) and
3,000 shares on August 3, 1993 ($11.75 per share). Options were granted at fair
market value at date of grant, and 3,000 shares of restricted stock have also
been issued. The options become exercisable and restrictions lapse in equal
installments on the date of each of the two Annual Meetings following the date
of grant.
As of April 2, 1994, a total of 1,290,323 shares of Class B Common Stock were
reserved for conversion of debentures and 129,250 shares in any combination of
Class A and Class B are reserved for future awards under the 1991 Employee
Stock Incentive Plan.
- - ------------------------------------------------------------------------------
<TABLE>
CHANGES IN SHARES OUTSTANDING
There were no changes in shares issued during the three years ended April 2, 1994, except for the recapitalization in 1991 and the
1993 public offering. Changes in treasury shares were as follows:
<CAPTION>
Class A Class B
------- -------
<S> <C> <C>
Balance at March 30, 1991 . . . . . . . . . . . . . . . . . . . . . . . . 1,628,367 -
Recapitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . ( 814,183) 814,183
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . ( 5,313) ( 13,748)
--------- ---------
Balance at March 28, 1992 . . . . . . . . . . . . . . . . . . . . . . . . 808,871 800,435
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . ( 11,250) ( 7,875)
Issuance of restricted shares . . . . . . . . . . . . . . . . . . . . . - ( 3,000)
Acquisition (issuance) of shares . . . . . . . . . . . . . . . . . . . 1,910 ( 1,993)
--------- ---------
Balance at March 27, 1993 . . . . . . . . . . . . . . . . . . . . . . . . 799,531 787,567
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . ( 36,876) ( 31,813)
--------- ---------
Balance at April 2, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . 762,655 755,754
========= =========
- - ------------------------------------------------------------------------------
</TABLE>
MARSH EQUITY OWNERSHIP PLAN
The Marsh Equity Ownership Plan is an employee stock ownership plan in which
retail and administrative employees meeting minimum age and service
requirements participate. In 1988 and 1987, the Company sold a total of
238,508 shares of common stock to the Plan for a total of $2.7 million and, in
connection therewith, re-loaned to the Plan such portion of a bank loan and
undertook to make future contributions to the Plan sufficient to enable it to
meet its debt service requirements. The $2.7 million cost was amortized to
expense over a period ending in 1994.
SHAREHOLDER RIGHTS PLAN
Under the 1989 Shareholder Rights Plan, preferred stock purchase rights
(Rights) were distributed as a dividend at the rate of one Right for each
common share held. Each Right entitles a shareholder to buy one one-hundredth
of a newly-issued share of Series A Junior Participating Cumulative Preferred
Stock of the Company at an exercise price of $65. The Rights will be
exercisable only if a person or group acquires beneficial ownership of 20% or
more of either class of the Company's common stock or commences a tender or
exchange offer upon consummation of which such person or group would
beneficially own 20% or more of either class of the Company's common stock. If
any person becomes the beneficial owner of 20% or more of either class of the
Company's common stock, or if a 20% or more shareholder engages in certain
self-dealing transactions or a merger transaction with the Company in which the
Company is the surviving corporation and its common shares are not changed or
converted, then each Right not owned by such person or related parties will
entitle its holder to purchase, at the Right's then current exercise price,
shares of common stock (or, in certain circumstances as determined by the
Board, cash, property or other securities of the Company) having a value of
twice the Right's exercise price. In addition, if the Company is involved in a
merger or other business combination in which its common stock is changed or
converted, or sells 50% or more of its assets or earning power to another
person, each Right will entitle its holder to purchase, at the Right's then
current exercise price, common shares of such other person having a value of
twice the Right's exercise price. The Company is entitled to redeem the Rights
at $.01 per Right at any time until the 15th day following public announcement
that a 20% position has been acquired. The Rights will expire on July 31,
1999.
<PAGE> 21
SHAREHOLDER INFORMATION
STOCK LISTING
Both classes of common stock trade on the NASDAQ National Market System under
the symbols MARSA (Class A Common Stock) and MARSB(Class B Common Stock). As of
April 2, 1994, the following firms were acting as market makers:
A.G. Edwards & Sons, Inc. Mayer & Schweitzer, Inc.
City Securities Corporation McDonald & Co. Securities, Inc.
Goldman, Sachs & Co. Raffensperger, Hughes & Co., Inc.
Herzog, Heine, Geduld, Inc. Robinson Humphrey Co., Inc.
Howard, Weil, Labouisse, Friedrichs, Inc. Sherwood Securities Corp.
J.J.B. Hilliard, W.L. Lyons, Inc. Troster Singer Corp.
Kemper Securities, Inc.
At April 2, 1994, there were 3,936 record holders of Class A
Common Stock and 4,236 record holders of Class B Common
Stock, for a composite total of 4,524 holders of Marsh common stock.
<PAGE> 1
<TABLE>
EXHIBIT 21
MARSH SUPERMARKETS, INC. AND SUBSIDIARIES
SUBSIDIARIES OF THE REGISTRANT
<CAPTION>
State of Name under which Business
Name as Specified Incorporation Done if Different from
in Charter or Organization Name Specified in Charter
---------- --------------- -------------------------
<S> <C> <C>
Marsh Drugs, Inc. Indiana
Marsh Village Pantries, Inc. Indiana Village Pantry
Mundy Realty, Inc. Indiana
Mar Properties, Inc. Indiana
Marlease, Inc. Indiana
Marsh International, Inc. Indiana
Maraines Greenery, Inc. Indiana
Ron-Michael, Inc. Indiana
Convenience Store
Distributing Company Ohio CSDC
Marsh P.Q., Inc. Indiana
S.C.T., Inc. Indiana
North Marion Development Corp. Indiana
C. E. Publishing, Inc. Indiana
Contract Transport, Inc. Indiana
Alltimate Catering, LLC Indiana
</TABLE>
<PAGE> 1
ERNST & YOUNG One Indiana Square Phone: (317) 681-7000
Suite 3400 Fax: (317) 681-7216
Indianapolis, Indiana 46204-2094
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Marsh Supermarkets, Inc. of our report dated June 9, 1994, included in the
1994 Annual Report to Shareholders of Marsh Supermarkets, Inc.
Our audits also included the financial statement schedules of Marsh
Supermarkets, Inc. listed in Item 14(a). These schedules are the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits. In our opinion, the financial statement
schedules referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
We also consent to the incorporation by reference in Registration Statement
Number 2-74859 on Form S-8 of the 1980 Marsh Stock Plan dated December 2, 1981,
Registration Statement Number 33-33427 on Form S-8 of the Marsh Supermarkets,
Inc. 1987 Stock Option Plan, dated February 12, 1990, Registration Statement
Number 33-43817 on Form S-8 of the Marsh Employees' Monthly Stock Investment
Plan - 1977, dated November 7, 1991, Registration Statement Number 33-56630 on
Form S-8 of the 1991 Employee Stock Incentive Plan, dated December 31, 1992,
Registration Statement Number 33-56624 on Form S-8 of the 1992 Stock Option
Plan for Outside Directors, dated December 31, 1992 and Registration
Statement Number 33-56626 on Form S-8 of the Marsh Supermarkets, Inc. 401(k)
Plan, dated December 31, 1992, of our report dated June 9, 1994, with respect
to the consolidated financial statements incorporated herein by reference, and
our report included in the preceding paragraph with respect to the financial
statement schedules included in this Annual Report (Form 10-K) of Marsh
Supermarkets, Inc.
June 24, 1994
/s/ Ernst & Young
