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 January 7, 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 January 7, 1995:
Class A Common Stock - 3,891,698 shares
Class B Common Stock - 4,476,079 shares
----------------
8,367,777 shares
================
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share amounts)
(Unaudited)
<CAPTION>
12 Weeks Ended 40 Weeks Ended
------------------------------- --------------------------------
January 7, January 1, January 7, January 1,
1995 1994 1995 1994
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Sales and other revenues $307,345 $291,191 $1,006,767 $951,147
Costs and expenses:
Cost of merchandise sold, including
warehousing and transportation 234,793 220,933 766,254 719,742
Selling, general and administrative 62,822 60,745 206,071 197,412
Depreciation and amortization 4,287 4,093 14,149 13,168
--------- --------- ---------- ----------
Operating profit 5,443 5,420 20,293 20,825
Interest and debt expense
amortization 2,971 2,982 10,138 9,944
--------- --------- ---------- ----------
Income before income taxes and
cumulative effect of changes
in accounting principles 2,472 2,438 10,155 10,881
Income taxes 722 870 3,639 4,075
--------- --------- ---------- ----------
Income before cumulative
effect of changes in accounting
principles 1,750 1,568 6,516 6,806
Cumulative effect of changes in
accounting principles (net of tax
benefits) Note B - - - 1,941
--------- --------- --------- ---------
Net income $ 1,750 $ 1,568 $ 6,516 $ 8,747
========= ========= ========= =========
Earnings per share
Per primary share outstanding:
Before cumulative effect of
accounting changes $ .21 $ .19 $ .77 $ .81
Cumulative effect of
accounting changes - - - .23
------- ------- ------ ------
Net income $ .21 $ .19 $ .77 $ 1.04
======= ======= ====== ======
Assuming full dilution:
Before cumulative effect of
accounting changes $ .20 $ .18 $ .74 $ .77
Cumulative effect of
accounting changes - - - .20
------- ------- ------ ------
Net income $ .20 $ .18 $ .74 $ .97
======= ======= ====== ======
Dividends per share $ .11 $ .11 $ .33 $ .33
======= ======= ====== ======
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<CAPTION>
January 7, April 2, January 1,
1995 1994 1994
(Unaudited) (Note 1) (Unaudited)
---------- ---------- -----------
<S> <C> <C> <C>
Assets
Current assets:
Cash and equivalents $ 16,500 $ 24,112 $ 24,603
Accounts receivable 19,216 16,247 16,893
Inventories, less LIFO reserve; January 7, 1995 -
$19,051; April 2, 1994 - $18,780;
January 1, 1994 - $19,637 84,844 87,806 81,902
Prepaid expenses 4,252 5,261 4,677
Deferred income taxes 3,391 2,399 1,958
--------- --------- ---------
Total current assets 128,203 135,825 130,033
Property and equipment, less allowances for
depreciation 217,627 214,238 212,508
Capitalized lease property, less amortization 6,795 7,439 9,621
Other assets 20,087 17,847 19,280
-------- -------- --------
Total Assets $372,712 $375,349 $371,442
======== ======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable to bank $ - $ 4,000 $ -
Accounts payable 51,073 50,370 46,091
Accrued liabilities 35,977 35,759 36,915
Current maturities of long-term liabilities 7,157 7,246 8,421
-------- -------- --------
Total current liabilities 94,207 97,375 91,427
Long-term liabilities:
Long-term debt 137,205 138,484 140,448
Capital lease obligations 9,413 10,334 10,714
-------- -------- --------
Total long-term liabilities 146,618 148,818 151,162
Deferred items:
Income taxes 12,397 12,583 13,240
Other 6,768 6,779 6,722
-------- -------- --------
Total deferred items 19,165 19,362 19,962
Shareholders' Equity:
Common stock, Classes A and B (Note 2) 24,013 24,013 24,013
Retained earnings 95,946 92,204 91,413
Cost of common stock in treasury ( 6,868) ( 6,070) ( 6,071)
Notes receivable - stock options ( 369) ( 353) ( 336)
Deferred cost - employee stock plan - - ( 128)
-------- -------- --------
Total shareholders' equity 112,722 109,794 108,891
-------- -------- --------
Total Liabilities and Shareholders' Equity $372,712 $375,349 $371,442
======== ======== ========
Note 1: The balance sheet at April 2, 1994 has been derived from the audited financial statements at that
date,but does not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
Note 2: Class A Common Stock and Class B Common Stock each have 15 million shares authorized. On January
7, 1995, April 2, 1994 and January 1, 1994, there were 3,891,698, 3,932,598 and 3,932,598 shares
of Class A Common Stock issued and outstanding and 4,476,079, 4,509,404 and 4,509,404 shares of
Class B Common Stock issued and outstanding, respectively.
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MARSH SUPERMARKETS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
40 Weeks Ended
-------------------------------
January 7, January 1,
1995 1994
---------- ----------
<S> <C> <C>
Operating activities
Net income $ 6,516 $ 8,747
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 14,149 13,168
Amortization of other assets 4,932 4,784
Changes in operating assets and liabilities 368 4,495
Other operating activities 525 558
Cumulative effect of accounting changes - ( 1,941)
-------- ---------
Net cash provided by operating activities 26,490 29,811
Investing activities
Net acquisition of property, equipment and land
for expansion ( 19,695) ( 38,423)
Other investing activities ( 4,437) ( 5,551)
--------- ---------
Net cash used for investing activities ( 24,132) ( 43,974)
Financing activities
Proceeds (payments) short-term borrowing, net
( 4,000) 4,000
Proceeds of long-term borrowing 4,000 -
Payments of long-term debt and capital leases ( 6,389) ( 4,390)
Proceeds of public stock offering - 836
Purchase of shares for treasury ( 798) -
Cash dividends paid ( 2,783) ( 2,778)
Other financing activities - 569
---------- ----------
Net cash used for financing activities ( 9,970) ( 1,763)
---------- ----------
Net decrease in cash and equivalents ( 7,612) ( 15,926)
Cash and equivalents at beginning of period 24,112 40,529
---------- ----------
Cash and equivalents at end of period $16,500 $24,603
======= =======
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE>
MARSH SUPERMARKETS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share amounts or as otherwise noted)
(Unaudited)
January 7, 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
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 2,
1994.
The Company's fiscal year ends on Saturday of the thirteenth week of each
calendar year. All references herein to "1995" and "1994" relate to the
fiscal years ending April 1, 1995 and April 2, 1994, respectively.
The condensed consolidated financial statements for the twelve and forty week
periods ended January 7, 1995 and January 1, 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.
Certain items were reclassified for the twelve and forty week periods ended
January 1, 1994 to conform with the basis of presentation used for the
comparable periods ended January 7, 1995.
Operating results for the twelve and forty week periods ended January 7, 1995
are not necessarily indicative of the results that may be expected for the
full fiscal year ending April 1, 1995.
Note B - Accounting Changes
Effective March 28, 1993, the Company adopted Statements of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and No. 109, "Accounting for Income Taxes". The
cumulative effect of these changes included in the financial statements for
the forty weeks ended January 1, 1994 was as follows:
<TABLE>
<CAPTION>
Income/(Expense)
----------------
<S> <C>
FASB Statement No. 106 $ (2,700)
Tax effect 1,005
---------
(1,695)
FASB Statement No. 109 3,636
---------
Cumulative effect of accounting changes $ 1,941
========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Conditionand
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 April 1, 1995.
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>
Third Quarter Year - to - Date
------------------------------------ --------------------------------------
Percent of Revenues Percent of Revenues
----------------------- Percent ------------------------ Percent
1995 1994 Change 1995 1994 Change
------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Sales and other revenues 100.0% 100.0% 5.5% 100.0% 100.0% 5.8%
Gross profit 23.6% 24.1% 3.3% 23.9% 24.3% 3.9%
Selling, general and administrative 20.4% 20.9% 3.4% 20.5% 20.7% 4.4%
Depreciation and amortization 1.4% 1.4% 4.7% 1.4% 1.4% 7.4%
Operating profit 1.8% 1.8% 0.4% 2.0% 2.2% (2.6%)
Interest and debt expense
amortization 1.0% 1.0% ( 0.4%) 1.0% 1.1% 2.0%
Income taxes 0.2% 0.3% (17.0%) 0.4% 0.4% (10.7%)
Income before changes in
accounting principles 0.6% 0.5% 11.6% 0.6% 0.7% (4.3%)
Changes in accounting principles - - - - 0.2% -
Net income 0.6% 0.5% 11.6% 0.6% 0.9% (25.5%)
</TABLE>
Sales and Other Revenues
------------------------
Consolidated sales and other revenues increased $16.2 million, or 5.5%, to
$307.3 million in the third quarter of 1995, compared to the same quarter of
1994. Approximately $10.4 million of the increase was from supermarket and
convenience store retail sales, $5.6 million from wholesale sales to non-
related parties by Convenience Store Distributing Company (CSDC), and $200,000
from ALLtimate Catering. Retail sales (excluding fuel sales) increased 3.8%,
principally as a result of stores opened in the last twelve months. Sales in
like-stores (open all weeks of comparable quarters) increased 0.9% from the
third quarter of 1994. Low rates of food price inflation and competitive
activity in the Indianapolis market continued to constrain like-store sales
growth. The increased revenue at CSDC resulted primarily from volume increases
from existing customers.
For the forty weeks ended January 7, 1995, compared to the forty weeks ended
January 1, 1994, consolidated sales and other revenues increased $55.6
million, or 5.8%, to $1.01 billion. Approximately $42.3 million of the
increase was attributable to supermarket and convenience store retail sales,
$11.8 million to wholesale sales to non-related parties by CSDC, and $1.5
million to ALLtimate Catering. Retail sales (excluding fuel sales) increased
5.5%, primarily due to stores opened in the last twelve months. In addition,
like-store sales increased 0.4% from the comparable forty weeks of 1994. The
increased revenue at CSDC resulted from a 9.1% increase in the number of
unaffiliated stores serviced, as well as volume increases from existing
customers.
Gross Profit
------------
Gross profit is net of warehousing, transportation, and promotional expenses.
Gross profit increased $2.3 million from the comparable quarter of the prior
year. As a percentage of revenue, gross profit declined 0.5%. The decrease was
primarily attributable to lower margins in the Village Pantry and CSDC
divisions, partially offset by improvements in the Supermarket division. CSDC
gross profit, as a percentage of revenue, was impacted by pricing and
promotional reductions implemented by all major cigarette manufacturers during
the second and third quarters of 1994. The Company attributes lower gross
profit margins in the Village Pantry division to a disproportionate increase
in fuel sales, which have a lower profit margin than food products. The impact
of these developments was partially offset by increased emphasis on perishable
departments and improved merchandising mixes in new and recently enlarged
supermarkets.
For the forty weeks ended January 7, 1995, compared to the forty weeks ended
January 1, 1994, gross profit increased $9.1 million. As a percentage of
revenue, gross profit declined 0.4%. As discussed previously, the decrease was
primarily attributable to lower margins in Village Pantry and CSDC. Year-to-
date supermarket gross profit, as a percentage of revenue, was relatively
unchanged from the comparable period of the prior year.
Selling, General and Administrative Expenses
--------------------------------------------
Selling, general and administrative expenses increased $2.1 million, or 3.4%,
from the third quarter of 1994. As a percentage of revenue, these expenses
decreased to 20.4% as compared to 20.9% in the comparable quarter of 1994.
Reductions in corporate overhead of $300,000 were offset by $2.4 million in
increased selling expenses, primarily attributable to stores opened during the
last twelve months. Wage expense in like-stores increased 0.8% from the third
quarter of 1994.
For the forty weeks ended January 7, 1995, compared to the forty weeks ended
January 1, 1994, selling, general and administrative expenses increased $8.7
million, or 4.4%. As a percentage of revenue, the expense declined to 20.5%,
as compared to 20.7%. Reductions in corporate overhead of $2.2 million were
offset by $10.8 million in increased selling expenses primarily attributable
to stores opened in the last twelve months. Wage expense in like-stores
decreased 0.4% from the comparable period of 1994. As new stores mature, the
Company expects selling, general and administrative expense to continue to
decrease as a percentage of revenue.
Depreciation and Amortization Expense
-------------------------------------
Depreciation and amortization expense, as a percentage of revenues, was 1.4%
for the third quarter and forty weeks of 1995, and was unchanged from the
comparable periods of the prior year. The quarterly and year-to-date increases
of $200,000 and $1.0 million, respectively, were attributable to stores opened
in the last twelve months.
Operating Profit
----------------
Operating profit (earnings from continuing operations before interest and
taxes) was $5.4 million, or 1.8% of revenue, for the third quarters of 1995
and 1994. The $2.3 million improvement in gross profit and a $300,000
decrease in administrative expense were offset by increases of $2.4 million in
selling expense and $200,000 in depreciation.
For the forty weeks ended January 7, 1995, operating profit was $20.3 million,
a decrease of 2.6% from the comparable period of the prior year. As a
percentage of revenue, operating profit during the forty weeks of 1995 was
2.0%, compared to 2.2% for the comparable period of the prior year. The
$500,000 decrease consisted of $9.1 million additional gross profit and a $2.2
million decrease in administrative expense, offset by increases of $10.8
million in selling expense and $1.0 million in depreciation.
Interest Expense
----------------
Interest expense in the third quarter of 1995 was basically unchanged, both in
dollars and as a percentage of revenue, from the third quarter of 1994. Lower
principal balances resulted in a slightly reduced level of expense, but this
was offset by a reduction in capitalized construction interest. In the third
quarter of 1994, an expanded construction program resulted in increased
interest capitalization. The Company s 1995 construction program has been
more consistent with historical levels. The Company's average interest rate
increased to 8.8% for the third quarter of 1995, compared to 8.7% for the
same period of 1994.
For the forty weeks ended January 7, 1995, interest expense was $10.1 million,
or $200,000 more than the comparable quarter of 1994. As discussed previously,
lower principal balances resulted in a slightly reduced expense level, but
this was offset by a reduction in capitalized construction interest.
Income Taxes
------------
For the forty weeks ended January 7, 1995, the effective income tax rate was
35.8% compared to 37.5% for the comparable period of the prior year. The
effective rate decrease was due primarily to the cumulative effect of a
retroactive statutory federal tax increase in the second quarter of 1994, and
an increased level of Targeted Jobs Tax Credits in 1995.
Cumulative Effect of Changes in Accounting Principles
-----------------------------------------------------
In the first quarter of 1994, the Company adopted Statements of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" and No. 109, "Accounting for Income Taxes". The
cumulative effects of these changes (net of income tax benefits) increased net
income $1.9 million for the forty weeks ended January 1, 1994.
For the quarter ended January 7, 1995, income before the cumulative effect of
accounting changes was $1.7 million, or 0.6% of revenue, compared to $1.6
million, or 0.5% of revenue, for the same quarter of the prior year.
For the forty weeks ended January 7, 1995, income before the cumulative effect
of accounting changes was $6.5 million, or 0.6% of revenue, compared to $6.8
million, or 0.7% of revenue, for the comparable period of the prior year. The
4.3% decrease was the result of higher selling expense and additional
depreciation, partially offset by higher gross profit dollars and lower
administrative expense, as discussed previously.
Net Income
----------
Net income for the forty weeks ended January 7, 1995 was $6.5 million, or 0.6%
of revenue, compared to $8.7 million, or 0.9% of revenue, for the comparable
period of the prior year. Net income for 1994 includes the previously
discussed cumulative effect of changes in accounting principles (net of income
tax benefits).
Liquidity and Capital Resources
-------------------------------
The Company's capital requirements have traditionally been financed through
internally generated funds, long-term borrowings and lease financings,
including capital and operating leases.
During the third quarter of 1995, the following stores were opened or under
construction:
<TABLE>
<CAPTION>
Square
Store Type Category Feet Location Status
------------ ------------ ------ ---------------- ------------------
<C> <C> <C> <C> <C>
Superstore New 80,978 Fishers, IN Open
Superstore New 81,468 Lafayette, IN Under Construction*
Supermarket Replacement 60,397 Muncie, IN Under Construction*
Convenience Replacement 5,040 Indianapolis, IN Open
Convenience New 4,465 Kokomo, IN Open**
* To open in fiscal year 1996.
** Opened subsequent to January 7, 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
55,000 square foot replacement supermarket in Indianapolis, Indiana, (iii) a
new 32,500 square foot LoBill in Lebanon, Indiana, and (iv) the conversion of
two conventional supermarkets in Anderson, Indiana and one in Muncie, Indiana
to the LoBill Foods price impact format.
Completion of the projects above and those completed in the first twenty-eight
weeks of 1995, net of store closings, will add approximately 6.0% 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 1995, including routine capital expenditures, approximates $36 million. Of
this amount, it is anticipated that equipment leasing will fund approximately
$12 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
leases, zoning limitations and other governmental regulations. The timing of
projects is subject to normal construction and other delays. It is possible
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.
Since January 1, 1994, the Company's inventories have increased $3.0 million.
The majority of this increase was at new and larger replacement retail stores.
This increase was financed by internally generated funds and trade payables.
The Company's revolving credit agreements provide for borrowings up to $35
million, of which $4 million was utilized at January 7, 1995. Additionally,
the Company has commitments from various banks for short-term borrowings up to
$5 million at rates equal to, or below, the prime rates of the committed
banks.
Of the total long-term debt and capital lease obligations outstanding at
January 7, 1995, fixed rate obligations comprised 95% at an average interest
rate of 8.8%. The remaining 5% are at variable rates averaging 6.7%.
The Company anticipates that it will continue to have access to its historical
financing sources such as long-term debt placements and leases, including
capital and operating leases for its expansion activities. The Company's
senior note agreements preclude additional long-term borrowings if total long-
term liabilities, including capital lease obligations, would exceed 60% of
consolidated net tangible assets. Under the most restrictive covenant in these
agreements, the Company may incur approximately $28 million of additional
long-term borrowings.
<PAGE>
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 10(a) - Employment contracts, dated January 1, 1995,
between each of Jack Bayt and Demetrio Bayt and
ALLtimate Catering, LLC.
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.
<PAGE>
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.
February 17, 1995 By: /s/ Douglas W. Dougherty
----------------------------------------
Douglas W. Dougherty
Vice President, Chief Financial Officer,
and Treasurer
February 17, 1995 By: /s/ Michael D. Castleberry
----------------------------------------
Michael D. Castleberry
Chief Accounting Officer,
Assistant Treasurer, and
Director of Corporate Accounting
<PAGE>
Exhibit Index Page Number
Exhibit 10(a) - Employment contracts, dated January 1, 1995,
between each of Jack Bayt and Demetrio Bayt and
ALLtimate Catering, LLC
Exhibit 11 - Statement Re: Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule for the quarter for which
this report is filed.
EXHIBIT 10 (a)
EMPLOYMENT CONTRACT
THIS AGREEMENT ("Agreement"), made and entered into this 1st day of
January, 1995, by and between Alltimate Catering, LLC, an Indiana limited
liability company with its principal office at 9800 Crosspoint Boulevard,
Indianapolis, Indiana 46256-3350 ("Alltimate"), and Demetrio Bayt, an
individual over the age of eighteen years of Indianapolis, Indiana ("Bayt").
W I T N E S S E T H
WHEREAS, Alltimate has purchased the catering business previously
owned and operated by Bayt (the "Business") pursuant to a certain Asset
Purchase Agreement, dated as of January 1, 1995 (the "Purchase Agreement");
and
WHEREAS, Alltimate and Bayt acknowledge and agree that Alltimate's
retention of Bayt's talents and future services was a material consideration
in connection with Alltimate's decision to acquire the Business and is
essential to Alltimate's future success because of Bayt's extensive
experience and expertise in the food catering business; and
WHEREAS, Bayt desires to be employed by Alltimate in the executive
capacity described below;
NOW, THEREFORE, in consideration of the premises and in
consideration of the terms, conditions and covenants hereinafter set forth,
Alltimate and Bayt agree as follows:
1. EMPLOYMENT. Alltimate hereby employs Bayt as of the Closing
Date (as defined in the Purchase Agreement) for the Term (hereinafter
defined) on the terms and covenants and subject to the conditions set forth
in this Agreement to perform the services as Executive Vice President of
Alltimate, and Bayt agrees to and accepts such employment, subject to the
general supervision of the President and Chief Operating Officer of Alltimate
and the Chief Executive Officer of Alltimate's parent company, Marsh
Supermarkets, Inc. ("Marsh") and pursuant to the orders, advice and direction
of the Board of Directors of Marsh. Bayt agrees to perform all duties
customarily performed by the executive vice presidents of other operating
divisions of Marsh and of similar businesses as that engaged in by Alltimate,
and shall also perform such other and unrelated duties consistent with the
responsibilities of his position as may be assigned to him by the Chief
Executive Officer or Board of Directors of Marsh. During the Term, Alltimate
shall not have the right to terminate Bayt except for fraud or embezzlement
under applicable law, gross dereliction of his duties hereunder (after
notice and opportunity to cure) or his conviction of any crime in connection
with his employment with Alltimate or any of its affiliated companies
(hereinafter referred to as "Cause"), and Bayt shall be entitled to all of
the benefits and payments to be made and provided by Alltimate under this
Agreement at all times during the Term except as otherwise provided in
paragraph 5 hereof.
2. TERM. The term of this Agreement (the "Term") shall commence on
January 1, 1995 and shall terminate at the end of the fifth Fiscal Year (as
defined in the Purchase Agreement). All accrued rights, including any right
to a Bonus, shall survive the Term and the termination of Bayt's employment.
3. SALARY. Alltimate shall pay to Bayt an annual salary during the
Term of One Hundred Fifteen Thousand and 00/100 Dollars ($115,000.00),
payable in thirteen (13) periodic installments at the same time other members
of Marsh's senior management are paid (the "Salary"). During the Term, the
Salary may be increased by the Salary Committee of the Board of Directors of
Marsh, but shall not be subject to any decrease, except as provided in
paragraph 5 hereof.
4. BONUS Within sixty (60) days after the end of each Fiscal Year
during the Term, Alltimate shall pay to Bayt an incentive bonus equal to
twelve and one-half percent (12.5%) of the amount, if any, by which Buyer's
Earnings (as defined in the Purchase Agreement) in such Fiscal Year exceeds
Base Earnings (as defined in the Purchase Agreement) (the "Bonus"), except as
hereinafter provided in paragraph 5 hereof. Except as otherwise provided in
paragraph 5 hereof, in the event Bayt is not an employee of Alltimate or any
of its affiliates at the end of any Fiscal Year during the Term, the Bonus
for that Fiscal Year and any successive Fiscal Year during the Term shall be
equal to the greater of (a) the Bonus calculated for that Fiscal Year
prorated to the date of Bayt's termination or (b) the amount of the Bonus
paid to Bayt for the last full Fiscal Year during which Bayt was employed by
Alltimate.
5. ADJUSTMENTS TO COMPENSATION Notwithstanding anything contained
in paragraphs 3 or 4 of this Agreement to the contrary, (A) the Salary or any
Bonus to be paid to Bayt in or with respect to the third Fiscal Year pursuant
to this Agreement shall be reduced by the amount, if any, by which the sum of
the Bonuses paid or to be paid to Bayt with respect to the first three (3)
Fiscal Years exceed twelve and one-half percent (12.5%) of the amount by
which Cumulative Earnings (as defined in the Purchase Agreement) exceed
Cumulative Base Earnings (as defined in the Purchase Agreement), and (B) in
the event Bayt (i) is terminated for Cause or (ii) voluntarily resigns his
employment with Alltimate, he shall not be entitled to (a) a Bonus with
respect to the Fiscal Year in which any such termination or voluntary
resignation occurs or any Fiscal Year subsequent thereto, or (b) to a Salary
for any period subsequent to the date of any such termination or voluntary
resignation or in any Fiscal Year subsequent thereto.
6. BENEFITS. Bayt shall be eligible to participate in the same
fringe benefit plans upon the same terms and conditions and to the extent now
or hereafter generally made available by Marsh to its executive officers.
Benefits which Marsh currently makes available to its executive officers are
set forth on "Exhibit A" (the "Benefits"). To the extent that participation
in any such plan is not possible for causes beyond Alltimate's reasonable
control, Alltimate shall make available to Bayt substantially similar
benefits on the same terms and conditions as Marsh has made available to its
similarly situated executive officers.
7. BEST EFFORTS. Alltimate and Bayt acknowledge and agree that
Bayt's services for the Term are contemplated in and an integral part of the
Purchase Agreement. Therefore, Bayt covenants and agrees that he will at all
times while employed by Alltimate faithfully, diligently, and to the best
efforts of his ability, experience and talents, perform all of the duties
that may be required of and from him pursuant to the express and implicit
terms of this Agreement. Such duties shall be rendered at such place or
places as Alltimate or Marsh shall in good faith require or as the interests,
needs, business or opportunity of Alltimate shall reasonably require.
8. OTHER EMPLOYMENT At all times while employed by Alltimate, Bayt
shall devote all of his time, attention, knowledge and skills solely to the
business and interest of Alltimate, and Alltimate shall be entitled to all of
the benefits, profits or other issues arising from or incident to all work,
services and advice of Bayt. During the Term, Bayt shall not be interested,
directly or indirectly, in any manner, as partner, officer, director,
shareholder, advisor, employee, agent, consultant or any other capacity in
any other business similar to Alltimate's food or vending business.
9. RECOMMENDATIONS. Bayt shall make available to Alltimate all
information related to Alltimate food and vending business of which Bayt
shall have any knowledge and shall make all suggestions and recommendations
that he reasonably believes will be beneficial to Alltimate.
10. CONFIDENTIALITY. Bayt shall not at any time or in any manner,
either directly or indirectly, divulge, disclose or communicate to any
person, firm, corporation or other entity in any manner whatsoever any
information which is not known or publicly available concerning any matters
affecting or relating to the business of Alltimate or its parent and
affiliated companies, including without limitation any of its customers,
prices, profits, sales or any other non-public information concerning the
business of Alltimate or its parent and affiliated companies, the manner of
their operations, their plans and processes, or other data without regard to
whether all of the above stated matters will be deemed confidential, material
or important, Alltimate and Bayt specifically and expressly stipulating that
as between them such non-public information is important, material and
confidential and gravely affect the effective and successful conduct of the
business of Alltimate, Marsh and its affiliated companies, their goodwill,
and that any material breach of the terms of this paragraph shall be a
material breach of this Agreement. The foregoing terms and conditions shall
survive the Term for a period of two (2) years.
11. COVENANT NOT TO COMPETE. Bayt agrees that during the Term and
for a period of one (1) year thereafter, Bayt will not, within a seventy-five
mile radius of each location at which Alltimate is then conducting business,
directly or indirectly engage in any food catering business or businesses
except on behalf of Alltimate. The phrase "directly or indirectly engaging
in any food catering business or businesses" shall include, but not be
limited to, engaging in such business as an owner, partner, investor,
manager, shareholder, consultant, advisor, member, employee or agent of any
person, firm, corporation or other entity engaged in such business or being
interested directly or indirectly in any such business conducted by any
person, firm, corporation or other entity; provided, however, this paragraph
shall not prohibit ownership of securities of any publicly traded company.
12. REMEDIES Bayt agrees that in the event Bayt violates or
breaches the covenant not to compete set forth in paragraph 11, Bayt shall
pay as liquidated damages to Alltimate the sum of Two Thousand Five Hundred
Dollars ($2,500.00) per day for each day or part thereof that any such
violation or breach continues. Bayt and Alltimate agree that and recognize
that damages in the event of any breach or violation of this covenant by Bayt
or his voluntary resignation would be difficult or impossible to ascertain
though great and irreparable, and that this Agreement with respect to
liquidated damages shall in no event disentitle Alltimate to injunctive
relief in the event of any breach or violation by Bayt of the covenant not to
compete.
13. ENTIRE AGREEMENT. This Agreement contains the complete
agreement and understanding between the parties with regard Alltimate's
employment of Bayt and supersedes all prior and other agreements,
understandings, representations, or statements regarding the subject matter
hereof. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective representatives, successors and assigns.
IN WITNESS WHEREOF, Alltimate and Bayt have executed this Agreement
as of the date first above written.
ALLTIMATE:
ALLTIMATE CATERING, LLC
By: Marsh Supermarkets, Inc., Chief Operating
Officer
By: ____________________________________
Don E. Marsh, Chairman of the Board,
President and Chief Executive Officer
Attest: ___________________________
P. Lawrence Butt, Secretary
BAYT:
___________________________
Demetrio Bayt
<PAGE>
EXHIBIT A
CURRENT FRINGE BENEFITS
Bayt shall be eligible to participate in the following fringe
benefit plans upon the same terms and subject to the same conditions and to
the extent currently made available to members of the senior management of
Marsh:
1. Medical benefits plan;
2. Employees' Pension Plan of Marsh Supermarkets, Inc. and
Subsidiaries;
3. Marsh Supermarkets, Inc. 401-k Plan;
4. Marsh Supermarkets, Inc. Flexible Benefit (Section 125) Plan;
5. Executive Life Insurance Plan;
6. Supplemental Retirement Plan;
7. Short Term Disability Plan;
8. Long Term Disability Plan;
9. Marsh Supermarkets, Inc. Accidental Death and Disability Plan;
and
10. Marsh Supermarkets, Inc. Group Life Insurance Plan.
Bayt shall not be entitled to participate in the Management
Incentive Plan with respect to any Fiscal Year during the Term.
<PAGE>
The Employment Contract with Jack Bayt is in the same form as the foregoing
except for the name of the employee.
<TABLE>
Exhibit 11 - Statement Re: Computation of Earnings Per Share
<CAPTION>
(Unaudited) 12 Weeks Ended 40 Weeks Ended
------------------------ ------------------------
January 7, January 1, January 7, January 1,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary
Weighted average shares outstanding 8,385,809 8,442,002 8,423,222 8,425,614
Net effect of dilutive stock options -
based on the treasury stock method 6,689 3,287 6,190 15,869
---------- ---------- ---------- ----------
Total 8,392,498 8,445,289 8,429,412 8,441,483
========= ========= ========= =========
Net income before cumulative effect of
changes in accounting principles $1,750,000 $1,568,000 $6,516,000 $6,806,000
========== ========== ========== ==========
Per share amount $.21 $.19 $.77 $,81
==== ==== ==== ====
Net income $1,750,000 $1,568,000 $6,516,000 $8,747,000
========== ========== ========== ==========
Per share amount $.21 $.19 $.77 $1.04
==== ==== ==== =====
Fully diluted
Weighted average shares outstanding 8,385,809 8,442,002 8,423,222 8,425,614
Net effect of dilutive stock options -
based on the treasury stock method
using average market price 6,689 3,287 6,317 14,293
Assumed conversion of 7% convertible
subordinated debentures issued March 5,
1993 1,290,323 1,290,323 1,290,323 1,290,323
--------- --------- --------- ---------
Total 9,682,821 9,735,612 9,719,862 9,730,230
========= ========= ========= =========
Net income before cumulative effect of
changes in accounting principles $1,750,000 $1,568,000 $6,516,000 $6,806,000
Add 7% convertible subordinated debenture
interest, net of tax effect 231,000 210,000 698,000 681,000
---------- ---------- ---------- ----------
$1,981,000 $1,778,000 $7,214,000 $7,487,000
========== ========== ========== ==========
Per share amount $.20 $.18 $.74 $.77
==== ==== ==== ====
Net Income $1,750,000 $1,568,000 $6,516,000 $8,747,000
Add 7% convertible subordinated debenture
interest, net of tax effect 231,000 210,000 698,000 681,000
---------- ---------- ---------- ----------
$1,981,000 $1,778,000 $7,214,000 $9,428,000
========== ========== ========== ==========
Per share amount $.20 $.18 $.74 $.97
==== ==== ==== ====
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-Q FOR THE PERIOD ENDED JANUARY 7, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS AND THE NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-01-1995
<PERIOD-END> JAN-07-1995
<CASH> 16,500
<SECURITIES> 0
<RECEIVABLES> 19,216
<ALLOWANCES> 0
<INVENTORY> 84,844
<CURRENT-ASSETS> 128,203
<PP&E> 310,693
<DEPRECIATION> 93,066
<TOTAL-ASSETS> 372,712
<CURRENT-LIABILITIES> 94,207
<BONDS> 146,618
<COMMON> 17,145<F1>
0
0
<OTHER-SE> 94,752
<TOTAL-LIABILITY-AND-EQUITY> 372,712
<SALES> 307,345
<TOTAL-REVENUES> 307,345
<CGS> 234,793
<TOTAL-COSTS> 297,615<F2>
<OTHER-EXPENSES> 4,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,971
<INCOME-PRETAX> 2,472
<INCOME-TAX> 722
<INCOME-CONTINUING> 1,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,750
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
<FN>
<F1>Number od Class A and Class B shares outstanding.
<F2>Includes (i) $234,793 of Cost of Goods Sold (Item 5-03(b)2(a) of Regulation
S-X) and (ii) $62,822 of Selling, General and Administrative Expenses (Item
5-03(b)4 of Regulation S-X).
</FN>
</TABLE>
