<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 24, 1995
Commission File Number 0-1532
MARSH SUPERMARKETS, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-0918179
(State or other jurisdiction of (IRS Employer
incorporation or organization) 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)
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 twelve
months and (2) has been subject to such filing requirements for at least the
past 90 days.
Number of shares outstanding of each of the issuer's classes of common
stock as of June 24, 1995:
Class A Common Stock - 3,851,898 shares
Class B Common Stock - 4,573,855 shares
---------
8,425,753 shares
=========
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended
----------------------
June 24, June 25,
-------- --------
1995 1994
---- ----
<S> <C> <C>
Sales and other revenues $319,587 $302,489
Costs and expenses:
Cost of merchandise sold, including
warehousing and transportation 240,861 229,892
-------- --------
Gross Profit 78,726 72,597
Selling, general and administrative 66,520 61,390
Depreciation and amortization 4,234 4,265
-------- --------
Operating profit 7,972 6,942
Interest and debt expense amortization 3,050 3,144
-------- --------
Income before income taxes 4,922 3,798
Income taxes 1,787 1,418
-------- --------
Net income $ 3,135 $ 2,380
======== ========
Earnings per common share:
Primary $ .37 $ .28
======== ========
Fully diluted $ .34 $ .27
======== ========
Dividends per share $ .11 $ .11
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 24, April 1, June 25,
-------- -------- --------
1995 1995 1994
---- ---- ----
(Unaudited) (Note A) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 8,923 $ 15,366 $ 24,543
Accounts receivable 22,893 18,186 18,124
Inventories, less LIFO reserve; June 24, 1995 - $18,986;
April 1, 1995 - $18,880; June 25, 1994 - $18,732 84,669 83,284 82,403
Prepaid expenses 4,117 4,694 3,912
Recoverable income taxes - 504 -
Deferred income taxes 3,914 3,810 2,437
--------- --------- ---------
Total current assets 124,516 125,844 131,419
Property and equipment, less allowances for depreciation 227,683 224,369 220,663
Other assets 28,181 28,360 16,631
--------- --------- ---------
$ 380,380 $ 378,573 $ 368,713
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to bank $ 3,976 $ 7,000 $ -
Accounts payable 51,657 48,871 48,267
Accrued liabilities 39,631 38,700 34,665
Current maturities of long-term liabilities 7,419 7,142 7,278
--------- --------- ---------
Total current liabilities 102,683 101,713 90,210
Long-term liabilities:
Long-term debt 133,264 133,939 138,132
Capital lease obligations 8,789 9,163 10,031
--------- --------- ---------
Total long-term liabilities 142,053 143,102 148,163
Deferred items:
Income taxes 12,445 12,531 12,653
Other 6,548 6,913 6,443
--------- --------- ---------
Total deferred items 18,993 19,444 19,096
Shareholders' Equity:
Common stock, Classes A and B (Note B) 24,784 24,526 24,013
Retained earnings 99,290 97,078 93,654
Cost of common stock in treasury ( 7,129) ( 6,978) ( 6,070)
Notes receivable - stock options ( 294) ( 312) ( 353)
--------- --------- ---------
Total shareholders' equity 116,651 114,314 111,244
$ 380,380 $ 378,573 $ 368,713
========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended
--------------------------
June 24, June 25,
---------- ----------
1995 1994
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,135 $ 2,380
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,234 4,265
Amortization of other assets 1,297 1,502
Changes in operating assets and liabilities ( 1,810) 1,433
Other operating activities ( 318) ( 282)
---------- ----------
Net cash provided by operating activities 6,538 9,298
INVESTING ACTIVITIES
Net acquisition of property, equipment and land
for expansion ( 7,151) ( 2,304)
Other investing activities ( 761) ( 912)
---------- ----------
Net cash used for investing activities ( 7,912) ( 3,216)
FINANCING ACTIVITIES
Proceeds (payments) short-term borrowing, net ( 3,024) ( 4,000)
Proceeds of long-term borrowing 6,000 -
Repayments of long-term debt and capital leases ( 6,772) ( 722)
Purchase of shares for treasury ( 349) -
Cash dividends paid ( 924) ( 929)
---------- ----------
Net cash used for financing activities ( 5,069) ( 5,651)
---------- ----------
Net increase (decrease) in cash and equivalents ( 6,443) 431
Cash and equivalents at beginning of period 15,366 24,112
---------- ----------
Cash and equivalents at end of period $ 8,923 $ 24,543
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts or as otherwise noted)
JUNE 24, 1995
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of Marsh
Supermarkets, Inc. and subsidiaries were prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q. Accordingly, they do not include all the
information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. This report should be read in conjunction with
the Company's Consolidated Financial Statements for the year ended April 1,
1995. The balance sheet at April 1, 1995, has been derived from the audited
financial statements at that date.
The Company's fiscal year ends on Saturday of the thirteenth week of each
calendar year. All references herein to "1996" and "1995" relate to the fiscal
years ending March 30, 1996 and April 1, 1995, respectively.
The condensed consolidated financial statements for the twelve week periods
ended June 24, 1995 and June 25, 1994, respectively, were not audited by
independent auditors. In the opinion of management, the statements reflect all
adjustments (consisting of normal recurring accruals) considered necessary to
present fairly, on a condensed basis, the financial position, results of
operations and cash flows for the periods presented.
Operating results, for the twelve week period ended June 24, 1995, are not
necessarily indicative of the results that may be expected for the full fiscal
year ending March 30, 1996.
NOTE B -- COMMON STOCK
Class A Common Stock and Class B Common Stock have 15 million shares authorized
each. On June 24, 1995, April 1, 1995 and June 25, 1994, there were
3,851,898, 3,877,723 and 3,932,598 shares of Class A Common Stock outstanding
and 4,573,855, 4,536,664 and 4,509,404 shares of Class B Common Stock
outstanding, respectively.
In June 1995, the Company authorized an increase in its previously announced
stock repurchase plan from $2 million to $4 million. Through June 24, 1995,
the Company repurchased 157,475 shares at a cost of $1.7 million. The Company
expects to purchase the remaining shares, from time to time in the open market,
at prices under $14 per share. The total number of shares affected by this plan
would represent approximately 4% of the common shares outstanding.
During the quarter ended June 24, 1995, the Company completed the acquisition
of Martz & Associates Food Services, Inc. Martz consists of three divisions;
corporate cafeteria management, machine vending, and catering. The purchase
price consisted of $1.0 million cash and the issuance of 43,416 shares of
Class B Common Stock.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Results of operations for interim periods do not necessarily reflect the
results that may be expected for the fiscal year ending March 30, 1996.
The following table sets forth certain income statement components, expressed
as a percentage of sales and other revenues, and the percentage change in such
components.
<TABLE>
<CAPTION>
First Quarter
----------------------------------
Percent of Revenues
------------------- Percent
1996 1995 Change
---- ---- ------
<S> <C> <C> <C>
Sales and other revenues 100.0% 100.0% 5.7%
Gross profit 24.6% 24.0% 8.4%
Selling, general and administrative 20.8% 20.3% 8.4%
Depreciation and amortization 1.3% 1.4% ( 0.7)%
Operating profit 2.5% 2.3% 14.8%
Interest and debt expense amortization 0.9% 1.0% ( 3.0%)
Income taxes 0.6% 0.5% 26.0%
Net income 1.0% 0.8% 31.7%
</TABLE>
SALES AND OTHER REVENUES
Consolidated sales and other revenues for the first quarter of 1996 increased
$17.1 million, or 5.7%, to $319.6 million from $302.5 million in the first
quarter of 1995. Approximately $8.9 million of the increase was from
supermarket and convenience store retail sales, $4.7 million from wholesale
sales to non-related parties by Convenience Store Distributing Company (CSDC),
and $2.9 million from the food services division. Retail revenues (excluding
fuel sales) increased 5.2%, to $284.2 million from $270.2 million in the
comparable period of the prior year. Sales in comparable stores (including
replacement stores and format conversions) increased 1.1% in the first quarter
of 1996, compared to the comparable quarter of 1995. Low rates of food price
inflation and intense competition in the Indianapolis market continued to
constrain comparable store sales growth. The increased revenue at CSDC resulted
primarily from volume increases from existing customers. The increased revenue
in the food services division was the result of the January 1995 acquisition of
Crystal Catering and the May 1995 acquisition of Martz and Associates Food
Services, Inc.
GROSS PROFIT
Gross profit is net of warehousing, transportation, and promotional expenses.
Gross profit for the first quarter of 1996 increased $6.1 million, or 8.4%, to
$78.7 million from $72.6 million in the comparable quarter of the prior year.
As a percentage of sales and other revenues, gross profit improved 0.6% to
24.6%. The increase was primarily attributable to the food services division
acquisitions of Crystal Catering and Martz & Associates Food Services, Inc.,
and improvements in the Supermarket and CSDC divisions. Gross margin in the
Village Pantry decreased due to a disproportionate increase in fuel sales,
which have a lower gross margin than food products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the first quarter of 1996
increased $5.1 million, or 8.4%, to $66.5 million from $61.4 million in the
first quarter of 1995. As a percentage of sales and other revenues, selling,
general and administrative expenses in the first quarter of 1996 increased 0.5%
to 20.8% from 20.3% in the comparable quarter of 1995. The increase was
primarily attributable to increased selling expenses. Wage expenses in
like-stores increased 2.3% from the first quarter of 1995. This increase was
attributable to a tight labor market, brought on by a strong economy in the
Company's market area, resulting in a shift to a higher full- time employee
ratio, wage increases, and increased overtime levels.
6
<PAGE> 7
DEPRECIATION AND AMORTIZATION EXPENSE
Depreciation and amortization expense, as a percentage of sales and other
revenues, was 1.3% for the first quarter of 1996, and was virtually unchanged
from the comparable period of the prior year.
OPERATING PROFIT
Operating profit for the first quarter of 1996 increased $1.1 million, or
14.8%, to $8.0 from $6.9 million for the comparable quarter of 1995, and
increased as a percentage of sales and other revenues to 2.5% from 2.3% for the
comparable quarter of 1995. The $6.1 million improvement in gross profit was
partially offset by a $5.1 million increase in selling, general and
administrative expenses.
INTEREST EXPENSE
Interest expense in the first quarter of 1996 decreased $0.1 million from the
first quarter of 1995. The reduction resulted from lower principal balances and
a slightly increased level of capitalized construction interest.
INCOME TAXES
For the first quarter of 1996, the effective income tax rate was 36.3% compared
to 37.3% for the comparable quarter of the prior year. The effective rate
decrease was due primarily to additional state income tax provisions in the
comparable quarter of the prior year.
NET INCOME
Net income for the first quarter of 1996 increased $0.7 million, or 31.7%, to
$3.1 million from $2.4 million for the comparable quarter of the prior year. As
a percentage of sales and other revenues, net income increased to 1.0% in the
first quarter of 1996, from 0.8% in the comparable quarter of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures for the first quarter of 1996 amounted to $7.2 million.
During the first quarter of 1996, the major capital projects included the
following stores:
<TABLE>
<CAPTION>
Square
------
Store Type Category Feet Location Status
---------- -------- ---- -------- ------
<S> <C> <C> <C> <C>
Superstore New 81,468 Lafayette, IN Open *
Supermarket Replacement 60,397 Muncie, IN Open *
Supermarket New 57,294 Indianapolis, IN Under Construction
LoBill Conversion 37,778 Anderson, IN Open
LoBill Conversion 25,704 Anderson, IN Open
LoBill Conversion 26,800 Muncie, IN Open
Convenience New 4,624 Muncie, IN Open *
* Opened subsequent to June 24, 1995
</TABLE>
The Company is currently pursuing development of the following projects: (i) a
60,000 square foot replacement supermarket in Greenwood, Indiana, (ii) a 60,000
square foot replacement supermarket in Muncie, Indiana, (iii) an 80,000 square
foot replacement supermarket in Carmel, Indiana, (iv) a new 32,500 square foot
LoBill in Lebanon, Indiana, and (v) six additional Village Pantry stores.
Completion of the projects above, net of store closings, will add approximately
10% to retail square footage. The Company is also pursuing the acquisition of
several additional sites for future development. The estimated cost of these
projects in 1996, including routine capital expenditures, approximates $43
million. Of this amount, it is anticipated that equipment leasing will fund
approximately $11 million. The replacement supermarket in Muncie, Indiana will
be leased. The Company believes it can finance the balance of its planned
capital expenditures with internally generated funds.
The Company's plans with respect to store construction, expansion and
remodeling may be revised in light of changing conditions, such as competitive
influences, its ability to negotiate successfully site acquisitions or
7
<PAGE> 8
leases, zoning limitations and other governmental regulations. The timing of
projects is subject to normal construction and other delays.
The Company's revolving credit agreements provide for borrowings up to $35
million. No amounts were outstanding under these agreements at June 24, 1995.
The Company has additional commitments from various banks for up to $15 million
in short-term borrowings, at rates not greater than the prime rates of the
committed banks. Under these agreements $4.0 million was outstanding at June
24, 1995.
The Company's capital requirements are traditionally financed through
internally generated funds and long-term borrowings including lease financings.
Of the total long-term debt and capital lease obligations at June 24, 1995, 98%
are at fixed rates of interest averaging 8.9%, while the remaining 2% are at
variable rates of interest averaging 7.1%.
The Company anticipates continued access to its historical financing sources
such as long-term debt placements and leases, including capital and operating
leases for its expansion activities; however, the Company's Senior Notes
prohibit 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 $25.8 million as of June 24, 1995. The Senior Notes also prohibit
the Company from entering into any operating leases having an original term
greater than three years, unless consolidated income available for fixed
charges, as defined in the Senior Note agreements, exceeds 150% of fixed
charges in three of the four most recently completed fiscal years. As of April
1, 1995, consolidated income available for fixed charges exceeded 150% of fixed
charges in two of the four most recently completed fiscal years. Accordingly,
pursuant to the terms of the Senior Notes, the Company will not be able to
enter into any lease with a term in excess of three years in 1996.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults upon Senior Securities or Rights of Holders Thereof
Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
Exhibit 11-- Statement Re: Computation of Earnings Per Share
Exhibit 27-- Financial Data Schedule for the quarter for which
this report is filed.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for
which this report is filed.
8
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MARSH SUPERMARKETS, INC.
August 4, 1995 By: /s/ Douglas W. Dougherty
----------------------------------------
Douglas W. Dougherty
Vice President, Chief Financial Officer
and Treasurer
August 4, 1995 By: /s/ Michael D. Castleberry
---------------------------------------
Michael D. Castleberry
Chief Accounting Officer,
Assistant Treasurer and
Director of Corporate Accounting
<PAGE> 10
Exhibit Index Page Number
------------- -----------
Exhibit 11 Statement Re: Computation of Earnings Per Share 11
Exhibit 27 Financial Data Schedule (SEC use only) 12
10
<PAGE> 1
EXHIBIT 11 -- STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
12 Weeks Ended
------------------------
June 24, June 25,
-------- --------
1995 1994
---- ----
<S> <C> <C>
PRIMARY
Weighted average shares outstanding 8,416,051 8,442,002
Net effect of dilutive stock options -
based on the treasury stock method 10,041 103
--------- ---------
Total 8,426,092 8,442,105
========= =========
Net income $3,135,445 $2,379,889
========= =========
Per share amount $.37 $.28
=== ===
FULLY DILUTED
Weighted average shares outstanding 8,416,051 8,442,002
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 18,462 245
Assumed conversion of 7% convertible
subordinated debentures issued
March 5, 1993 1,290,323 1,290,323
--------- ---------
Total 9,724,836 9,732,570
========= =========
Net income $3,135,445 $2,379,889
Add 7% convertible subordinated
debenture interest, net of tax effect 208,100 204,699
--------- ---------
$3,343,545 $2,584,588
========= =========
Per share amount $.34 $.27
=== ===
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-Q FOR THE PERIOD ENDED JUNE 24, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-30-1995
<PERIOD-END> JUN-24-1995
<CASH> 8,923
<SECURITIES> 0
<RECEIVABLES> 22,893
<ALLOWANCES> 0
<INVENTORY> 84,669
<CURRENT-ASSETS> 124,516
<PP&E> 328,294
<DEPRECIATION> 100,611
<TOTAL-ASSETS> 380,380
<CURRENT-LIABILITIES> 102,683
<BONDS> 142,053
<COMMON> 8,425,753<F1>
0
0
<OTHER-SE> 98,996
<TOTAL-LIABILITY-AND-EQUITY> 380,380
<SALES> 319,587
<TOTAL-REVENUES> 319,587
<CGS> 240,861
<TOTAL-COSTS> 307,381<F2>
<OTHER-EXPENSES> 4,234
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,050
<INCOME-PRETAX> 4,922
<INCOME-TAX> 1,787
<INCOME-CONTINUING> 3,135
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,135
<EPS-PRIMARY> $0.37<F3>
<EPS-DILUTED> $0.34<F3>
<FN>
<F1>NUMBER OF CLASS A AND CLASS B SHARES OUTSTANDING, MULTIPLIER IS 1
<F2>INCLUDES (i) $240,861 OF COST OF GOODS SOLD (ITEM 5-03)(b)2(a) OF REGULATION
S-X) AND (ii) $66,500 OF SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (ITEM
5-03(b)4 OF REGULATION S-X).
<F3>MULTIPLIER IS 1 FOR PER SHARE DATA.
</FN>
</TABLE>
